John Heugle CEO Michael Wachsler-Markowitsch CFO

Listing Memorandum dated 15 July 2011
Listing of 2,706,840 ordinary no par value bearer shares of austriamicrosystems AG
This listing memorandum (the "Listing Memorandum") relates to the listing of 2,706,840 ordinary no par value bearer shares
(the "New Shares") of austriamicrosystems AG, having its registered office at Schloss Premstätten, Tobelbader Strasse 30,
8141 Unterpremstätten, Austria, registered with the companies register under FN 34109 k (the "Company" and, including its
subsidiaries, the "AMS-Group") according to the Main Standard of the SIX Swiss Exchange, Zurich, Switzerland (the "SIX
Swiss Exchange") (the "Listing").
Issue of the
New Shares
Placement of the
New Shares
Issue Price
Share Capital
Form of New Shares
Risks
Selling Restrictions
Lock-up
Dividend Entitlement
Listing /
Admission to Trading
Swiss Security Number /
ISIN /Ticker /
Common Code
Notifications /
Amendments
or Changes
The 2,706,840 New Shares were issued pursuant to a final resolution dated 7 July 2011 of the
Company's Management Board as well as a final resolution dated 7 July 2011 of the ad hoccommittee of the Company's Supervisory Board to issue new shares of the Company out of
existing authorized capital that is based on the respective authorization granted by the annual
general meeting of the Company on 26 May 2011.
The 2,706,840 New Shares were privately placed with Twilight S, LLC, a limited liability company
organized under the laws of Delaware ("Stock Holdco"), and owned by certain shareholders of
Texas Advanced Optoelectronic Solutions, Inc., a Nevada corporation having its registered office
at 1001 Klein Road, Suite 300, Plano Texas 75074, United States of America ("TAOS" and,
including its subsidiaries, the "TAOS-Group"). The private placement took place in the context
of the acquisition of 100% of the shares of TAOS by the Company (the "Transaction").
A portion of the New Shares are held by Wells Fargo Bank, National Association, a national
banking association in the United States of America (the "Escrow Agent"), which New Shares
will be available to satisfy indemnification claims by the Company.
The subscription rights of the Shareholders were excluded.
The New Shares were issued for an issue price of EUR 37.9843 per New Share, which is approximately USD 55.3925 per New Share or CHF 46.60 per New Share (one New Share for
approximately 2.16 shares of TAOS (the "TAOS-Shares")).
After the Transaction, the Company's statutory ordinary share capital is divided into 13,753,092
ordinary no par value bearer shares (nennbetragslose, auf den Inhaber lautende Stückaktien)
with a calculated nominal value of EUR 2.4224 per share (the "Shares"). As of the date hereof,
the Company's statutory ordinary share capital amounts to nominally EUR 33,315,872.49.
The New Shares are represented by a permanent global share certificate. Shareholders do not
have the right to request the printing and/or delivery of individual share certificates. Clearing
occurs through SIX SIS Ltd, Olten, Switzerland ("SIX SIS"). The New Shares are registered as
book-entry securities (Bucheffekten) with SIX SIS.
Regarding the risks in connection with the Shares, see section "Risk Factors".
The Shares are subject to certain selling restrictions as further described in the paragraph "Selling Restrictions".
The New Shares are subject to a lock-up as further described in section "Transaction – Support
and Lock-up Agreements".
Holders of the New Shares will be entitled to receive dividends declared, if any, by the Company
for the business year ending 31 December 2011, and for all subsequent business years.
An application for the Listing and admission to trading of the New Shares according to the Main
Standard of the SIX Swiss Exchange was made to, and approval was granted by, the SIX Swiss
Exchange. The Listing of the New Shares will become effective, and trading in such New Shares
will commence, on 15 July 2011.
1'808'109 / AT0000920863 / AMS / 019114198
Any notices containing or announcing amendments or changes to this Listing Memorandum will
be announced through the electronic media and, if required, published in electronic form on the
website of the SIX Swiss Exchange (<http://www.six-exchange-regulation.com>). Changes so
notified will be deemed to constitute an amendment or supplement of this Listing Memorandum.
This Listing Memorandum has been prepared solely for use in connection with the Listing of the New Shares on the
SIX Swiss Exchange according to the Main Standard. This Listing Memorandum does not constitute a prospectus
within the meaning of articles 652a or 1156 of the Swiss Code of Obligations (Schweizerisches Obligationenrecht).
Further, this Listing Memorandum neither constitutes a prospectus in connection with a public offering pursuant to
section 7 of the Austrian Capital Markets Act (Österreichisches Kapitalmarktgesetz), as amended, nor a prospectus in
connection with the listing of shares in Austria pursuant to section 74 of the Austrian Stock Exchange Act (Österreichisches Börsegesetz), as amended, nor does it constitute a communication to the general public in any form whatsoever that contains adequate information on the terms and conditions of an offering, and on the securities or investment themselves, that gives potential investors a basis on which to reach an informed decision on the purchase or
subscription to securities pursuant to sections 1 et seq. of the Austrian Capital Markets Act. This Listing Memorandum
may not be used for, or in connection with, and does not constitute, an offer to acquire, convert or subscribe for any
Shares, or a solicitation of an offer to acquire, convert or subscribe for any Shares.
1/88
John Heugle
CEO
Michael Wachsler-Markowitsch
CFO
Important Notices
This Listing Memorandum has been prepared solely for the use in connection with the Listing of the
New Shares according to the Main Standard of the SIX Swiss Exchange.
This Listing Memorandum does not constitute a prospectus under article 652a or 1156 of the Swiss
Code of Obligations, but only a listing memorandum pursuant to articles 27 et seq. of the Listing Rules
dated 1 April 2011 (the "Listing Rules") of the SIX Swiss Exchange, Zurich, Switzerland (the "SIX
Swiss Exchange"). Further, this Listing Memorandum neither constitutes a prospectus in connection
with a public offering pursuant to section 7 of the Austrian Capital Markets Act, as amended, nor a
prospectus in connection with the listing of shares in Austria pursuant to section 74 of the Austrian
Stock Exchange Act, as amended, nor does it constitute a communication to the general public in any
form whatsoever that contains adequate information on the terms and conditions of an offering, and on
the securities or investment themselves, that gives potential investors a basis on which to reach an
informed decision on the purchase or subscription to securities pursuant to sections 1 et seq. of the
Austrian Capital Markets Act.
This Listing Memorandum may not be used for, or in connection with, and does not constitute, an offer
to acquire, convert or subscribe for any Shares, or a solicitation of an offer to acquire, convert or subscribe for any Shares.
This Listing Memorandum may not be sent to any person in the United States of America, nor should
this document be forwarded to any such person.
No Shares or any other securities have been marketed to, nor are any available for purchase or exchange (in whole or in part) by the public in Austria, Switzerland, the United States of America or
elsewhere in connection with the trading or listing of the New Shares on the SIX Swiss Exchange. This
Listing Memorandum does not constitute nor does it form part of any offer or invitation to buy, sell,
exchange or otherwise dispose of, or issue, or any solicitation of any offer to sell or issue, exchange or
otherwise dispose of, buy or subscribe for, any securities, nor does it constitute investment, legal, tax,
accountancy or other advice or a recommendation with respect to such securities, nor does it constitute the solicitation of any vote or approval in any jurisdiction, nor shall there be any offer or sale of
securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the applicable securities laws of any such jurisdiction (or under exemption
from such requirements). This Listing Memorandum does not constitute a prospectus or a prospectus
equivalent document under Directive 2003/71/EC of the European Parliament.
Each potential investor in Shares should consider the merits and risks involved in making an investment decision. Investors in Shares are not to construe the contents of this Listing Memorandum as
legal, business or tax advice, and they should inform themselves inter alia as to the risk factors (described in detail in the section "Risk Factors" of this Listing Memorandum), the possible tax consequences, the legal requirements that they might encounter under the laws of the countries of their
citizenship, residence or domicile and that might be relevant to the purchasing, holding or disposal of
Shares. The Company is not making any representation to any investor regarding the legality of an
investment by such investor under appropriate legal investment or similar laws. No person is or has
been authorized to give any information or make any representation in connection with the Listing
other than as contained in this Listing Memorandum, and, if given or made, any other information or
representation must not be relied upon as having been authorized by the Company.
Except as otherwise indicated, this Listing Memorandum refers to the date hereof, and any information
contained in a document incorporated by reference herein is current only as of the date of such document. The delivery of this Listing Memorandum shall, under no circumstances, create any implication
that there has been no change in the affairs of the Company since the date hereof or that the information contained herein is correct as of any time subsequent to its date. Any significant new factor or
2/88
material inaccuracy related to the information included in this Listing Memorandum which is capable of
affecting the assessment of the New Shares and which arises or is noted between the time this Listing
Memorandum has been approved by the SIX Swiss Exchange and the first trading day or, as the case
may be, the time when trading on the SIX Swiss Exchange begins, shall be mentioned in a supplement to this Listing Memorandum.
Except as otherwise set forth explicitly in this Listing Memorandum, no representation or warranty,
express or implied, is made by the Company or any of its affiliates or advisors as to the accuracy or
completeness of the information set forth herein, and nothing contained in this Listing Memorandum is,
or shall be relied upon as a promise or representation, whether as to the past or the future.
Unless expressly incorporated by reference herein, information on the Company's website, any website directly or indirectly linked to the Company's website or any website mentioned in (or in any of the
documents incorporated by reference into) this Listing Memorandum does not constitute in any way
part of this Listing Memorandum and is not incorporated by reference into this Listing Memorandum,
and investors should not rely on any such information in making their decision to invest in the Shares.
Any investment in the Shares is highly speculative, involves a high degree of risk and should be considered only by investors who are prepared to bear the economic risks of such investment and are
able to withstand a total loss of their investment. See section "Risk Factors" of this Listing Memorandum for a discussion of certain risk factors. In making an investment decision, prospective investors
must rely (and will be deemed to have relied) solely on their own independent examination of the
Company and the contents of this Listing Memorandum, including the merits and risks involved.
The distribution of this Listing Memorandum is restricted by law in certain jurisdictions (see "Selling
Restrictions"). Persons into whose possession this Listing Memorandum may come are required by
the Company to inform themselves about and to observe any such restrictions. The Company does
not accept any legal responsibility for any violation by any person, whether or not a prospective purchaser of Shares, of any such restrictions. Persons in possession of this Listing Memorandum are
required to inform themselves of and observe such restrictions.
Neither the Company nor any of its representatives is making any representation to any prospective
purchaser of Shares hereby regarding the legality of an investment by such prospective purchaser or
purchase under appropriate legal investment or similar laws. Each investor should consult with his
own advisors as to the legal, tax, business, financial and related aspects of the purchase of the
Shares.
Any resale or other transfer, or attempted resale or other transfer of Shares, made other than in compliance with the above-stated restrictions shall not be recognized by the Company.
Forward-looking Statements
This Listing Memorandum and the documents that are incorporated by reference into this Listing Memorandum include forward-looking statements. Words such as "expect", "estimate", "project", "budget", "forecast", "anticipate", "intend", "plan", "may", "will", "could", "should", "believes", "predicts", "potential", "continue" and similar expressions are intended to identify such forward-looking statements.
All statements other than statements of historical fact are statements that could be deemed forwardlooking statements. For example, forward-looking statements include the AMS-Group's and the TAOSGroup's (together, the "Group") expectations with respect to future financial or business performance,
statements of the plans, strategies or objectives of management for future operations, statements
concerning synergies, efficiencies, overhead savings, costs and charges and capitalization and anticipated financial effects of the Transaction and related transactions, statements concerning proposed
new products, services or developments, statements concerning the timing of the completion of the
3/88
Transaction and related transactions, any statement of belief, and any statement of assumption underlying any of the foregoing.
These forward-looking statements involve significant risks and uncertainties that could cause actual
results to differ materially from expected results. Most of these factors are outside the Group's control
and are difficult to predict. Factors that may cause these differences include the possibility that the
expected synergies, efficiencies, overhead savings and anticipated financial effects will not be realized, or will not be realized within the expected time period, due to, among other things: (a) prevailing
economic, market and business conditions affecting the Group; (b) changes in technology and customer demand; (c) changes in debt, equity and securities markets; (d) cost and availability of capital,
including interest rates; and (e) other factors listed in this Listing Memorandum under "Risk Factors".
The Group cautions that the foregoing list of factors is not exclusive. All subsequent written and oral
forward-looking statements concerning the Group, the Transaction, the related transactions or other
matters and attributable to the Group or any person acting on their behalf are expressly qualified in
their entirety by the cautionary statements above. The Group does not undertake any obligation to
update any forward-looking statement, whether written or oral, relating to the matters discussed in this
Listing Memorandum except to the extent required by the applicable Austrian and Swiss laws. Certain
of the risks and uncertainties may cause actual results to be materially different from projected results
contained in forward-looking statements in this Listing Memorandum and in other disclosures.
Selling Restrictions
The following paragraphs contain Selling Restrictions for the European Economic Area, Austria, Switzerland and the United States of America.
European Economic Area
The Company has represented and agreed that the New Shares have not been and will not be offered, sold or publicly promoted or advertised by it in any Member State of the European Economic
Area (the "EEA") which has implemented the Prospectus Directive (each, a "Relevant Member
State") other than in compliance with the Prospectus Directive or any other laws applicable in the EEA
governing the issue, offering and sale of securities.
No action has been taken, or will be taken, in any Relevant Member State to permit an offer to the
public of any of the New Shares in that Relevant Member State. Accordingly, the New Shares have
not been and will not be offered and will not be allocated to any person in the EEA other than:
(i)
to legal entities which are authorized or regulated to operate in the financial markets or, if not
so authorized or regulated, whose corporate purpose is solely to invest in securities;
(ii)
to any legal entity which has two or more of (1) an average of at least 250 employees during
the last financial year; (2) a total balance sheet of more than EUR 43 million; and (3) an annual
net turnover of more than EUR 50 million as shown in its last annual or consolidated accounts;
(iii)
to fewer than 100 or, if the Relevant Member State has implemented the relevant provision of
the 2010 Prospectus Directive Amending Directive, 150, natural or legal persons (other than
qualified investors as defined in the Prospectus Directive) as permitted under the Prospectus
Directive; or
(iv)
in any other circumstances falling within article 3(2) of the Prospectus Directive,
provided that no such offer of New Shares shall result in a requirement for the publication by the Company of a prospectus pursuant to article 3 of the Prospectus Directive.
4/88
For the purposes of this provision, the expression "an offer to the public" in relation to any New Shares
in any Relevant Member State means the communication in any form and by any means of sufficient
information on the terms of the offer and any New Shares to be offered so as to enable an investor to
decide to purchase any New Shares, as the same may be varied in that Member State by any measure implementing the Prospectus Directive in that Member State and the expression "Prospectus
Directive" means Directive 2003/71/EC (and amendments thereto, including the 2010 Prospectus
Directive Amending Directive, to the extent implemented in the Relevant Member State), and includes
any relevant implementing measure in each Relevant Member State. The expression "2010 Prospectus Directive Amending Directive" means Directive 2010/73/EU.
Federal Republic of Austria
The Listing of the New Shares does not constitute a public offering in the Federal Republic of Austria.
The New Shares may only be acquired in accordance with the provisions of the Austrian Capital Markets Act, as amended, and any other applicable Austrian law. No application has been made under
Austrian law to publicly market the New Shares in or out of the Federal Republic of Austria. The New
Shares are not registered or authorized for distribution under the Capital Markets Act and accordingly
may not be, and are not being, offered or advertised publicly or by public promotion.
Switzerland
The New Shares may not be publicly offered, distributed or redistributed on a professional basis in or
from Switzerland, and neither this Listing Memorandum nor any other solicitation for investments in the
New Shares may be communicated or distributed in Switzerland in any way that could constitute a
public offering within the meaning of articles 652a or 1156 of the Swiss Code of Obligations.
United States of America
The New Shares have not been and will not be registered under the U.S. Securities Act of 1933 or
with any securities regulatory authority of any state or other jurisdiction in the United States of America, and may not be offered, sold, pledged or otherwise transferred except pursuant to an exemption
from, or in a transaction not subject to, the registration requirements of the U.S. Securities Act and in
compliance with any applicable state securities laws.
Neither the U.S. Securities and Exchange Commission, any state securities commission nor any other
regulatory authority, has approved or disapproved the securities nor have any of the foregoing authorities passed upon or endorsed the merits of this offering or the accuracy or adequacy of this Listing
Memorandum. Any representation to the contrary is a criminal offense in the United States of America.
General Restrictions
This Listing Memorandum may not be used for, or in connection with, and does not constitute an offer
to sell, or a solicitation of an offer to buy, any Shares. Investors of New Shares shall primarily rely on
information contained in the annual and semi-annual reports of the Issuer. The distribution of this Listing Memorandum and the offering or sale of the New Shares in certain jurisdictions is restricted by
law. This Listing Memorandum may not be used for, or in connection with, and does not constitute,
any offer to, or solicitation by, anyone in any jurisdiction in which it is unlawful to make such an offer or
solicitation. Persons into whose possession this Listing Memorandum may come are required by the
Company to inform themselves about and to observe such restrictions. The Company does not accept
any responsibility for any violation by any person, whether or not it is a prospective purchaser of the
New Shares, of any such restrictions.
5/88
Accounting Principles
The financial information of the Company contained in this Listing Memorandum is prepared in accordance with IFRS. The financial information of TAOS contained in this Listing Memorandum is prepared
in accordance with US-GAAP.
6/88
TABLE OF CONTENTS
1
Summary .......................................................................................................................................8
2
Transaction ................................................................................................................................ 11
3
Risk Factors ............................................................................................................................... 21
4
Industry Overview ..................................................................................................................... 38
5
Description of the Group .......................................................................................................... 44
6
Capitalization and Indebtedness ............................................................................................. 54
7
Supervisory Board and Management Board .......................................................................... 55
8
Shareholders and Related Party Transactions ...................................................................... 64
9
Description of the Share Capital and the Shares ................................................................... 67
10
Information on the Issue of the New Shares .......................................................................... 72
11
SIX Swiss Exchange ................................................................................................................. 74
12
Taxation ...................................................................................................................................... 77
13
Additional Information .............................................................................................................. 83
14
Glossary of Defined Terms....................................................................................................... 85
15
Financial Information ................................................................................................................ 88
7/88
1
SUMMARY
Transaction
The Transaction consisted of the acquisition of 100% of the shares (including
all common shares for or into which series A and series B preferred shares,
warrants and vested options were exercised or converted; the "TAOSShares") of TAOS by the Company. The Transaction was completed through
a series of exchanges, as further described below, among TAOS, the shareholders of TAOS (the "TAOS-Shareholders"), certain special purpose vehicles formed to effect the transaction and the Company, whereby (a) the
2,706,840 New Shares were privately placed with Stock Holdco, owned by 53
TAOS–Shareholders (the "Principal TAOS-Shareholders"), and (b) the
TAOS-Shareholders and unvested option holders received or will receive,
directly or indirectly, a total consideration of approximately USD 319.9 million
in the aggregate, consisting of cash, treasury shares and the New Shares,
subject to an escrow, in the amount of approximately USD 23.238 million, plus
the right to a proportionate share of an earn-out of up to USD 10 million (the
"Earn-out"). As a result of the Transaction, TAOS became a wholly-owned
subsidiary of the Company. For further details, see section "Transaction" of
this Listing Memorandum.
Issue of the
New Shares
The 2,706,840 New Shares were issued pursuant to a final resolution dated
7 July 2011 of the Company's Management Board as well as a final resolution
dated 7 July 2011 of the ad hoc-committee of the Company's Supervisory
Board to issue new shares of the Company out of existing authorized capital
that is based on the respective authorization granted by the annual general
meeting of the Company on 26 May 2011.
Placement of the
New Shares
The 2,706,840 New Shares were privately placed with Stock Holdco, and
owned by certain TAOS-Shareholders. The private placement took place in the
context of the acquisition of 100% of the TAOS-Shares by the Company. A
portion of the New Shares is held by the Escrow Agent, which New Shares will
be available to satisfy indemnification claims by the Company.
The subscription rights of the Shareholders were excluded.
Issue Price
The New Shares were issued for an issue price of EUR 37.9843 per New
Share, which is approximately USD 55.3925 per New Share or CHF 46.60 per
New Share (one New Share for approximately 2.16 TAOS-Shares).
Share Capital
After the Transaction, the Company's statutory ordinary share capital is divided
into 13,753,092 ordinary no par value bearer shares (nennbetragslose, auf
den Inhaber lautende Stückaktien) with a calculated nominal value of
EUR 2.4224 per Share. As of the date hereof, the Company's statutory ordinary share capital amounts to nominally EUR 33,315,872.49.
Form of New Shares
The New Shares are represented by a permanent global share certificate.
Shareholders do not have the right to request the printing and/or delivery of
individual share certificates. Clearing occurs through SIX SIS. The New
Shares are registered as book-entry securities (Bucheffekten) with SIX SIS.
Risks
Regarding the risks in connection with the Shares, see section "Risk Factors".
8/88
Selling Restrictions
The Shares are subject to certain selling restrictions as further described in the
paragraph "Selling Restrictions".
Lock-up
The New Shares are subject to a lock-up as further described in section
"Transaction – Support and Lock-up Agreements".
Dividend Entitlement
Holders of the New Shares will be entitled to receive dividends declared, if
any, by the Company for the business year ending 31 December 2011, and for
all subsequent business years.
Group's Business
The AMS-Group designs, develops and manufactures high performance analog and analog-intensive mixed-signal semiconductor products. The AMSGroup sells a broad range of highly integrated standard products, standard
linear integrated circuits ("ICs"), and application specific integrated circuits
("ASICs") to diversified end markets including the consumer and communications, industry, and medical and automotive markets. The AMS-Group focuses
on applications that benefit from achieving low system power consumption
and/or high signal sensitivity combined with high feature integration and programmability. The AMS-Group has 30 years of experience in developing IC
solutions for its customers and it has developed an extensive world-class
library of intellectual property. The AMS-Group sells its products to more than
300 customers in these markets and enjoys relationships with leading players
and has been selling products to many of them for over ten years. The AMSGroup is an IDM, which means that it combines its manufacturing process
capabilities with its design, test and product engineering expertise to optimize
analog product performance. This integration allows the AMS-Group to quickly
deliver innovative high-performance products. The AMS-Group also offers a
foundry capability based on certain of its specialty process technologies to
third party IC developers.
The TAOS-Group develops, manufactures, and markets optoelectronic products with an aim at redefining optoelectronic solutions to provide cost and
performance advantages by creating and managing technology. The TAOSGroup designs and manufactures digital and analog light-sensing solutions
that deliver increased system integration, design flexibility, and functionality to
a wide range of products in the consumer, computer, industrial, medical, and
automotive markets. The TAOS-Group's integrated ambient light-sensing and
proximity detection solutions enable “green” displays by reducing system
power consumption.
Listing / Admission
to Trading
An application for the Listing and admission to trading of the New Shares
according to the Main Standard of the SIX Swiss Exchange was made to, and
approval was granted by, the SIX Swiss Exchange. The Listing of the New
Shares will become effective, and trading in such New Shares will commence,
on 15 July 2011.
Swiss Security Number / ISIN / Ticker /
Common Code
1'808'109 / AT0000920863 / AMS / 019114198
9/88
Notifications /
Amendments or
Changes
Any notices containing or announcing amendments or changes to this Listing
Memorandum will be announced through the electronic media and, if required,
published in electronic form on the website of the SIX Swiss Exchange
(<http://www.six-exchange-regulation.com>). Changes so notified will be
deemed to constitute an amendment or supplement of this Listing Memorandum.
For a description of all defined terms, please refer to section "Glossary of Defined Terms".
10/88
2
TRANSACTION
2.1
Acquisition of TAOS
The New Shares were issued in connection with the acquisition of 100% of the shares (including all common shares for or into which TAOS series A and series B preferred shares,
warrants and vested options were exercised or converted; the "TAOS-Shares") of Texas
Advanced Optoelectronic Solutions, Inc., a Nevada corporation having its registered office at
1001 Klein Road, Suite 300, Plano Texas 75074, United States of America ("TAOS" and, including its subsidiaries, the "TAOS-Group") by austriamicrosystems AG, having its registered office at Schloss Premstätten, Tobelbader Strasse 30, 8141 Unterpremstätten, Austria
(the "Company" and, including its subsidiaries, the "AMS-Group") (the "Transaction").
2.2
TAOS
TAOS was founded in 1998 and is an innovator in the area of optoelectronic solutions. TAOS
has previously had a close working relationship with the Company as a customer using its
high performance analog process technology.
TAOS’ devices combine precision mixed-signal functionality with photo-detectors on the
same integrated circuit to produce products with performance and cost advantages over
conventional solutions. TAOS’ intelligent opto sensors simplify the measurement and analogto-digital conversion of light, and are designed to reduce the need for signal conditioning or
pre-processing circuitry in light-centric systems. TAOS’ light sensing solutions improve system performance and reduce design-cycle time giving designers the flexibility and performance they require at an attractive system cost.
TAOS began to experience rapid growth in 2007 when certain manufacturers of mobile telephone handsets began to incorporate light sensing semiconductors into their products in order to manage the backlighting of the display and for other functions. TAOS developed several products for this market that have been sold to major manufacturers and others.
TAOS is headquartered in Plano, Texas, United States of America and employs approximately 73 people. Through its subsidiaries, TAOS maintains offices located in Seoul, Republic of Korea, Grand Cayman, Cayman Islands, and Bayreuth, Germany, and maintains
sales and distribution representatives across the world.
2.3
Rationale for the Acquisition of TAOS
In reaching its decision to approve the Transaction, the members of the Supervisory Board
of the Company consulted with the members of the Management Board of the Company as
well as its financial and legal advisors and considered a number of factors, including:
·
its knowledge of the intellectual property, businesses, operations, financial condition,
earnings and prospects, individually and collectively, of the AMS-Group and the
TAOS-Group;
·
its views on the valuation of, and strategic opportunities for, the AMS-Group on a
stand-alone basis as compared to the prospects of enhanced value of the combined
entities in the future;
·
the complementary know-how, cultures and strengths of the AMS-Group and the
TAOS-Group and its belief that the combined enterprise would be financially stronger
than either of the individual groups;
11/88
·
its belief that the TAOS-Group’s products and know-how would result in a combined
enterprise that would be well positioned to serve the AMS-Group’s existing customers;
·
its assessment of the likelihood that the Transaction would be completed in a timely
manner and that management would be able to successfully integrate and operate the
businesses of the combined enterprise after the Transaction;
·
the financial analyses presented by PwC Transaction Services Wirtschaftsprüfung
GmbH, Vienna, Austria ("PwC"), to the effect that, as of the date of such analysis, the
transaction exchange ratio was fair to the Shareholders of the Company, from a financial point of view;
·
the regulatory and other approvals required in connection with the Transaction and the
likelihood such approvals would be received in a timely manner and without unacceptable conditions;
·
the terms and conditions of the Agreement and the agreements contemplated by the
Agreement, including the form and amount of the consideration and the representations, warranties, covenants, conditions to closing and termination rights contained in
those agreements;
·
the relative ownership interests of the Shareholders of the Company and the TAOSShareholders in the combined Company immediately following the Transaction, based
on the Shares of the Company and the TAOS-Shares outstanding at approximately
the time the Agreement was executed; and
·
the uncertainties related to the integration of TAOS’ business and the risks of diverting
management’s attention to the assimilation of operations and personnel of TAOS.
The foregoing discussion of the factors considered by the Supervisory Board is not intended
to be exhaustive, but, rather, includes the material factors considered by the Supervisory
Board. In reaching its decision to approve the Transaction, the Supervisory Board did not
quantify or assign any relative weights to the factors considered and individual directors may
have given different weights to different factors. The Supervisory Board considered all these
factors as a whole, including discussions with and questioning of the management of the
Company and the Company's advisors, and the Supervisory Board overall considered the
factors to be favorable to and to support its determination. The Supervisory Board also engaged PwC as a financial advisor in connection with the Transaction and considered PwC’s
experience and its analyses of the financial terms of the Transaction.
2.4
Basic Transaction Structure
2.4.1
Overview
The Transaction was completed through a series of exchanges, as further described below,
between TAOS, the shareholders of TAOS (the "TAOS-Shareholders"), certain special
purpose vehicles formed to effect the transaction and the Company, whereby (a) the New
Shares have been privately placed with Twilight S, LLC, a limited liability company organized
under the laws of Delaware ("Stock Holdco") owned by 53 TAOS–Shareholders (the
"Principal TAOS-Shareholders"), and (b) the TAOS-Shareholders and unvested option
holders received or will receive, directly or indirectly, a total consideration of approximately
USD 319.9 million in the aggregate, consisting of cash, treasury shares and the New Shares,
subject to an escrow, held by Wells Fargo Bank, National Association (the "Escrow Agent")
in its capacity as escrow agent for the Transaction, in the amount of approximately
12/88
USD 23.238 million, plus the right to a proportionate share of an earn-out of up to USD 10
million.
As a result of the Transaction, TAOS became a wholly-owned subsidiary of the Company.
2.4.2
Agreement and Plan of Exchange
On 15 June 2011 the Company, TAOS, Twilight C, LLC, a limited liability company organized
under the laws of Delaware ("Cash Holdco") owned by the Principal TAOS-Shareholders,
Stock Holdco and Kirk S. Laney, CEO of TAOS, as a representative of certain TAOSShareholders, entered into an agreement and plan of exchange dated 15 June 2011 (the
"Agreement"), according to which the Company agreed to purchase from the TAOSShareholders, the TAOS-Shares and issue unvested options for Company treasury shares to
unvested option holders. Technically, each TAOS-Share was exchanged in a series of steps,
as described below (see "Transaction – Basic Transaction Structure – Exchanges") for cash
and/or New Shares.
The total consideration for the TAOS-Shares amounts to USD 319.9 million (the "Purchase
Price"), which was or will be paid as follows:
2.4.3
(i)
USD 159.9 million in the form of cash (the "Cash Consideration"); and
(ii)
USD 160 million in the form of New Shares and treasury shares.
Earn-out
The Agreement provides for an additional amount of up to USD 10 million in cash or shares
to be paid by the Company to the TAOS-Shareholders if TAOS’ 2011 calendar year revenues from the sale of its products and the sale of such products by the AMS-Group (less
amounts of certain uncollectible accounts), as set forth in its audited 2011 financial statements are greater than or equal to USD 146 million (the "Earn-out").
2.4.4
Escrow
To secure the TAOS-Shareholders' indemnification obligations according to the Agreement,
approximately USD 23.238 million of the Purchase Price was placed in an escrow to provide
for payment of indemnifiable losses that may be suffered by the Company and certain of its
affiliates. The amount in escrow represents approximately 7.5% of the Purchase Price. The
escrow is comprised of USD 13.943 million in Shares (251,709 New Shares) and USD 9.295
million in cash. The amount of transaction consideration each TAOS-Shareholder received in
the Transaction was reduced by the amount of its proportionate share of the escrow. The
Escrow Agent holds the escrow funds pursuant to an escrow agreement.
The Escrow Agent will release 50% of the escrow funds not subject to outstanding indemnification claims 30 days after the Company receives TAOS’ audited financial statements for the
financial year 2011. The Escrow Agent will release all but USD 5 million of the remaining escrow funds not subject to outstanding indemnification claims 30 days after the Company
receives TAOS’ audited financial statements for the financial year 2012. The remaining
USD 5 million will be held in escrow to secure the TAOS-Shareholders' obligation to reimburse the Company if TAOS incurs a loss as a result of certain international tax structure positions. The remaining USD 5 million will be released 30 days after the Company receives
TAOS’ audited financial statements for the financial year 2015 if there are no covered tax
losses at that time, although the TAOS-Shareholders will still be responsible for potential tax
claims.
13/88
Furthermore, USD 500,000 of the Purchase Price was retained by Kirk S. Laney as the representative of the TAOS-Shareholders in connection with his duties under the Agreement,
including negotiating and settling indemnification claims. Any unused portion of this amount
will be paid out pro rata to the TAOS-Shareholders over time.
2.4.5
Representative
Kirk S. Laney will act as a representative of the TAOS-Shareholder. He will have broad powers and complete discretion to make decisions for the TAOS-Shareholders in connection
with the Transaction. He will also be responsible for handling any indemnification claims, and
will be permitted to defend claims at the TAOS-Shareholders' expense, or to settle claims
and allow the release of the escrow funds to the Company. As representative, Kirk S. Laney
will not be liable to the TAOS-Shareholders unless he acts in bad faith and the TAOSShareholders will indemnify him for any losses he incurs in his capacity as shareholders' representative.
2.4.6
Exchanges
The execution of the Transaction (the "Closing") consisted of three steps (the "Exchanges"):
On 14 July 2011, the Company made a payment of cash in exchange for the contribution of
the TAOS-Shares held by Cash Holdco (the "Cash Holdco Exchange").
After the Cash Holdco Exchange, Stock Holdco contributed the TAOS-Shares held by Stock
Holdco to the Company in exchange for 2,706,840 New Shares pursuant to a contribution in
kind agreement under the laws of Austria dated 7 July 2011 (the "Statutory Contribution
Agreement") (the "Stock Holdco Exchange").
Finally, after the Cash Holdco Exchange and the Stock Holdco Exchange, TAOS and the
Company executed an exchange under the laws of Nevada, pursuant to which the remaining
TAOS-Shares held by the TAOS-Shareholders other than those with perfected appraisal
rights according to Nevada law, were exchanged for a total amount of USD 19.744 million
(the "Statutory Exchange"). In this regard, the Company and TAOS caused articles of exchange meeting the requirements of section 92A.200 of the Nevada Corporations Code to
be properly executed and filed with the Secretary of State of the State of Nevada.
2.4.7
Reorganization
In order to effect the Transaction in compliance with applicable federal and state securities
laws of the United States, and due to applicable laws of Austria, the Transaction was structured in a way that, prior to the Exchanges: (a) each holder of more than 10,000 TAOSShares contributed a portion of such holder’s TAOS-Shares in excess of 10,000 TAOSShares to Stock Holdco for exchange in the Stock Holdco Exchange, and (b) each holder of
more than 21,851 TAOS-Shares contributed all of such holder’s TAOS-Shares in excess of
such threshold number to Cash Holdco and Stock Holdco (approximately 1.025 shares were
contributed to Cash Holdco for each share contributed to Stock Holdco in excess of the first
11,851 TAOS-Shares contributed to Stock Holdco by each such holder) to be included in the
Cash Holdco Exchange and Stock Holdco Exchange, respectively.
All other TAOS-Shares held by each TAOS-Shareholder (i.e. the lesser of (i) all TAOSShares held by the respective TAOS-Shareholder, or (ii) 10,000 TAOS-Shares) were exchanged with the Company for cash in the Statutory Exchange.
14/88
2.4.8
Transfer of the New Shares to the former TAOS-Shareholders
The transfer of the New Shares from Stock Holdco to the former TAOS-Shareholders is managed by Credit Suisse AG, Zurich, Switzerland, pursuant to an agreement, which has been
entered into separately to the Agreement.
2.4.9
Treatment of Holders of Unvested Options
Each person who holds an unvested option to purchase TAOS-Shares will receive a right to
purchase shares of the Company instead of TAOS-Shares, for the same aggregate exercise
price and with the same vesting schedule. The holder must, however, consent to this treatment. Otherwise, the holder’s unvested options will terminate. An adjustment will be made to
reflect the conversion of the TAOS-Shares to Shares of the Company similar to the exchange rate used in the Transaction. Accordingly, a holder of an unvested TAOS option will
be entitled to receive one Share of the Company upon exercise of the substituted Company
option for approximately 2.16 TAOS-Shares the holder would have received upon exercise
of the TAOS option. The exact ratio may change depending on the circumstances. The aggregate exercise price for the unvested options will not change, however, and adjustment will
be made to the per share exercise price to correspond to the change in the number of
shares. The right to acquire Shares of the Company will be subject to terms similar to the
TAOS stock option plan and will continue to vest in accordance with current terms.
2.4.10
Employee Incentives
In order to incentivize employees, all TAOS-Shareholders who were employed by TAOS at
the date of the Closing received (in the aggregate) options to acquire up to 223,376 New
Shares.
The options are subject to the new stock option plan 2011 (see section "Supervisory Board
and Management Board – Securities and Option Rights – SOP 2011") that was approved by
the Supervisory Board on 9 July 2011. The exercise price for the options was set in the
range of USD 0.00 to USD 19.81 for unvested options. The vested options will have a strike
price equal to the average trading price of the Company's Shares on the SIX Swiss Exchange during the thirty day period immediately after the grant.
2.5
Support and Lock-up Agreements
In connection with the execution of the Agreement, certain TAOS-Shareholders entered into
support and lockup agreements with the Company. Pursuant to the support and lockup
agreements, the applicable TAOS-Shareholders have agreed to (i) approve and support the
Transactions, including voting in favor of the Agreement and the Transactions at a special
meeting of the TAOS-Shareholders held on 1 July 2011, (ii) appoint Kirk S. Laney as representative to handle and decide all matters related to indemnification claims and the escrow,
(iii) make certain representations and warranties, (iv) not publicly announce the Transactions, (v) handle any dispute in Delaware courts or by arbitration; and (vi) waive their right to
a jury trial.
In addition, the support and lockup agreements contain certain restrictions on the trading of
the New Shares, namely, to the extent a TAOS-Shareholder receives any Shares in the
Company in the transaction, it agrees not to trade, directly or indirect through a hedge or
other method specified more specifically in each support and lockup agreement, any Shares
in the Company during the periods and to the extent provided below:
15/88
(i)
for a period of six months following the Closing (the "Lock-up Period"), no holder of
New Shares is allowed to trade or transfer any of the New Shares acquired in the
Transaction;
(ii)
during each three month period following the Lock-up Period, each TAOSShareholder, other than the founding shareholders of TAOS, is permitted to trade and
transfer (on a non-cumulative basis) up to 25% of the New Shares acquired by such
TAOS-Shareholder in the Transaction (such 25% measured by the number of New
Shares received by the TAOS-Shareholder or for which such TAOS-Shareholder may
be entitled to as a result of a distribution from Stock Holdco or from the escrow account);
(iii)
during each three month period following the Lock-up Period, each founding shareholder of TAOS is permitted to trade or transfer (on a non-cumulative basis) up to 20%
of the New Shares acquired by such founding shareholder of TAOS in the Transaction
(the 20% measured by the number of Shares of the Company received by each founding shareholder of TAOS or for which a founding shareholder of TAOS may be entitled
to as a result of a distribution from Stock Holdco or from the escrow account); and
(iv)
from and after the two year anniversary of the Closing of the Transaction, there are no
further restrictions on trades and transfers of the New Shares acquired by the TAOSShareholders in the Transaction.
For the duration of the whole period described above, each TAOS-Shareholder authorized
the Company to enforce the restrictions set forth above by instructing any applicable financial institution or transfer agent to prohibit the unauthorized transfer of any New Shares. In
addition, each TAOS-Shareholder is required to use commercially reasonable efforts during
the periods above to effect any transfer in a manner that minimizes the impact on the Company's stock trading price and complies with capital markets rules including all regulations
regarding insider trading.
2.6
Changes to Management Board and Supervisory Board
So far, no changes have been made with regard to the constitution of the Supervisory Board
or the Management Board pursuant to the Transaction.
The Agreement provides for the Company to use commercially reasonable efforts to take all
reasonably necessary and appropriate actions (including, calling and holding an extraordinary shareholders’ meeting within 45 days after Closing) to nominate Jacob Jacobsson and
Gerald Rogers, or two other representatives of TAOS, reasonably acceptable to the Company, to Supervisory Board positions. The Agreement contemplates various methods to appoint the representatives of TAOS to the Supervisory Board, though Austrian law prohibits
the Management Board from formally nominating persons to the Supervisory Board or making formal proposals to shareholders regarding a nominee. Binding resolutions regarding
these issues as well as possible amendments of the Company's Articles of Association regarding the election and removal of Supervisory Board members will be decided at an extraordinary general meeting to be held after Closing.
2.7
Debt Financing
In order to pay the Cash Consideration, the Company has entered into a loan agreement
with UniCredit Bank Austria AG (the "Lender") dated 4 July 2011 (the "Date of the Facility
Agreement") with regard to a loan (the "Loan") amounting to USD 86 million (the "Facility
Agreement"). Pursuant to the Facility Agreement, the Loan comprises of two senior secured
term loan facilities, a bridging facility with a facility amount of USD 43 million and a term loan
16/88
facility backed by the Export Financing Scheme (EFS) of Oesterreichische Kontrollbank AG
("OeKB") with a facility amount of USD 43 million.
The Loan is secured with a first ranking pledge over all acquired TAOS-Shares as well as
with a partial guaranty by OeKB. The Facility Agreement is subject to cancellation by the
Lender under certain conditions such as a change of control relating to TAOS and its group
companies.
2.8
Capital Increase and Issuance of New Shares
The Capital Increase (as defined below) of the Company and the issuance of the New
Shares consisted of the following main steps:
2.8.1
Resolution of the Annual General Meeting as regards the Authorized Capital
Prior to the Capital Increase (as defined below), the Company's statutory ordinary share capital amounted to nominally EUR 26,758,748.01, divided into 11,046,252 shares.
On 26 May 2011 the annual general meeting of the Company resolved to authorize the
Management Board with the consent of the Supervisory Board in accordance with article 169
of the Austrian Stock Corporation Act (Österreichisches Aktiengesetz, AktG) to increase the
share capital until 26 May 2016 by an additional EUR 13,349,218.40 by issuing up to
5,510,677 shares in one or several tranches to be issued for contribution in cash or in kind
and to determine the issue price, the conditions of issue and further particulars of the Capital
Increase (as defined below) in mutual agreement with the Supervisory Board.
2.8.2
Exclusion of Subscription Rights
In that same resolution dated 26 May 2011, the annual general meeting authorized the Management Board to exclude the right of subscription of shareholders of the Company
("Shareholders"), subject to the approval of the Supervisory Board, if the Capital Increase
(as defined below) is made against a contribution in kind, i.e. if shares are issued for the
purpose of acquiring companies, business operations, operating divisions or shares in one or
several companies in Austria and abroad.
2.8.3
Resolution of the Management Board and the Supervisory Board on the Exercise of the Authorization granted by the Annual General Meeting on 26 May 2011
On 16 June 2011 the Management Board passed a framework resolution to exercise the authorization granted by the annual general meeting on 26 May 2011 by increasing the share
capital of the Company to up to EUR 6,558,551.30 through the issuance of up to 2,707,429
New Shares against contribution in kind of up to 5,875,121 TAOS-Shares held by Stock
Holdco for an issue price (Ausgabepreis) of EUR 37.9843 per New Share, which is approximately USD 55.3925 per New Share or which is approximately CHF 46.60 per New Share
(the "Capital Increase") excluding the subscription rights of Shareholders (the "Management Board Framework Resolution").
With regard to the exclusion of the subscription rights of Shareholders, the Management
Board issued a written report pursuant to article 153 paragraph 4 in connection with article 171 paragraph 1 of the Austrian Stock Corporation Act, which was published in the
"Wiener
Zeitung"
and
shortly
thereafter
on
the
Company's
website
(<http://www.austriamicrosystems.com>) on 18 June 2011.
On 4 July 2011 the Supervisory Board approved and adopted the Management Board
Framework Resolution and authorized the Management Board to determine the final number
of New Shares to be issued to Stock Holdco in the Capital Increase and all other aspects in
17/88
connection with the Capital Increase, such final resolution to be approved by an ad hoc
committee of the Supervisory Board in the form of a circular resolution (the "Supervisory
Board Framework Resolution").
On 7 July 2011 the Management Board approved and adopted the Supervisory Board
Framework Resolution and thereby resolved on the execution of the Capital Increase from
EUR 26,758,748.01 to EUR 33,315,872.49 through the issuance of 2,706,840 New Shares
against contribution in kind of 5,854,335.72 TAOS-Shares held by Stock Holdco for an issue
price (Ausgabepreis) of EUR 37.9843 per New Share (the "Final Management Board Resolution").
On 7 July 2011 the ad hoc-committee of the Supervisory Board approved and adopted the
Final Management Board Resolution.
2.8.4
Contribution in Kind
Pursuant to the Statutory Contribution Agreement, Stock Holdco was required to contribute
in kind to the Company all TAOS-Shares held by Stock Holdco (the "Contribution in
Kind"), in consideration for which Stock Holdco became entitled to receive 2,706,840 New
Shares to be issued as a result of the Capital Increase. The subscription form (Zeichnungsschein) pursuant to which Stock Holdco irrevocably committed to subscribe for
2,706,840 New Shares was signed on 7 July 2011.
The exchange ratio for the Contribution in Kind was provided for in the Agreement at one
New Share for approximately 2.16 TAOS-Shares held by Stock Holdco. The issue price
(Ausgabebetrag) was set at EUR 37.9843. In total, Stock Holdco contributed 5,854,335.72
TAOS-Shares held by Stock Holdco and in exchange received 2,706,840 (subject to the escrow as described in the section "Transaction – Basic Transaction Structure – Escrow") New
Shares.
PwC Österreich GmbH Wirtschaftsprüfungsgesellschaft, Erdbergstrasse 200, 1030 Vienna,
Austria, as independent auditor issued an audit report on 7 July 2011 regarding the value of
the Contribution in Kind and stating that the value of the Contribution in Kind is at least equal
to the issue price of the New Shares.
2.8.5
Registration of the Capital Increase
On 14 July 2011 the Capital Increase was registered with the Austrian Companies Register
(Firmenregister Österreich) and the statutory ordinary share capital was increased from
EUR 26,758,748.01 to EUR 33,315,872.49 through the issuance of 2,706,840 New Shares.
The New Shares represent 19.68% of the Company's total outstanding Shares.
2.8.6
Authorization to purchase Own Shares
In addition to the authorized capital, the annual general meeting of 26 May 2011 authorized
the Management Board to acquire Shares of the Company. The authorization applies for a
period of 30 months from the day on which the resolution was adopted, i.e. until
26 November 2013. The face value (acquisition price) of the Shares to be acquired must not
be less than CHF 1.00 and should not exceed the average, unweighted closing rate of the
past ten trading days by more than 30%. Up to 10% of the share capital of the Company
may be acquired and held as treasury shares. The Company may acquire said own shares
either on or outside of the stock exchange.
18/88
In particular, the annual general meeting granted the authorization for:
(a)
using treasury shares to deliver Shares upon exercise of stock options by employees,
executives and members of the Management Board of the Company or companies of
the Group (the "Group Companies");
(b)
using treasury shares to deliver Shares to holders of convertible bonds in the event of
conversion;
(c)
using treasury shares as a consideration for the acquisition of companies, business
operations, operating divisions or shares in one or several companies in Austria and
abroad;
(d)
reducing the ordinary capital of the Company by cancelling Shares as defined in article 65 paragraph 1 sub-paragraph 8 last sentence of the Austrian Stock Corporation
Act without the need of any further resolution to be passed by the annual general
meeting. The Supervisory Board is authorized to pass a resolution on amendments of
the Company's articles of association (the "Articles of Association"; Satzung) resulting from cancelling Shares;
(e)
selling treasury shares according to article 65 paragraph 1b of the Austrian Stock Corporation Act any time via the stock exchange or public offer or any other permissible
way; also off-exchange, with the approval of the Supervisory Board, with the Management Board also being entitled to decide on the exclusion of the general buying
option. The Supervisory Board is thereby authorized to adopt resolutions on amendments of the Articles of Association resulting from cancelling Shares.
The authorization granted by the annual general meeting to the Management Board and the
Supervisory Board, respectively, may serve to service the option rights to persons who hold
unvested options as well as to employees of TAOS.
As of the date hereof, the Company's statutory ordinary share capital amounts to nominally
EUR 33,315,872.49, divided into 13,753,092 Shares.
2.8.7
Extraordinary General Meeting
As required by the Agreement, an extraordinary general meeting of Shareholders shall be
held within 45 days after Closing and is planned to be held on 25 August 2011. At the extraordinary general meeting, the shareholders shall decide on the following:
(i)
the increase of the number of Supervisory Board members from nine to twelve;
(ii)
the amendment of the Articles of Association with regard to the majority necessary to
dismiss Supervisory Board members, such majority to be changed from simple majority to a majority of 75%; and
(iii)
the election of new members of the Supervisory Board, whereby the Supervisory
Board shall propose to elect Gerald Rogers and Jacob Jacobsson.
19/88
2.9
Listing of the New Shares on the SIX Swiss Exchange
Application was made for the New Shares to be listed and admitted to trading on the SIX
Swiss Exchange according to the Main Standard. The Listing of the New Shares will become
effective, and trading in such New Shares will commence, on 15 July 2011.
The securities identification numbers for New Shares are as follows:
20/88
Ticker Symbol
AMS
Swiss Security Number (Valorennummer)
1,808,109
ISIN
AT0000920863
3
RISK FACTORS
The AMS-Group's and the TAOS-Group's (together, the "Group") business, financial condition and results from operations could be materially harmed by each of the risks described
below. The market price of the Shares following the Listing of the New Shares may decline
as a result of each of these risks. The risks described herein are not the only ones the Group
faces. Additional risks and uncertainties not presently known to the Group or risks that it currently believes are immaterial could also impair its business. The order of presentation of the
risk factors below is not intended to be an indication of the probability of their occurrence or
of their potential effect on the Group's business.
3.1
Business-related Risks
The Group's future growth and competitiveness depend upon its ability to develop
and market new and enhanced products in a timely manner.
The Group's industry and the market for its products are subject to rapid technological
change, evolving industry standards and changes in customer demand, in particular in the
consumer and communications industry where product cycles tend to be relatively short. The
Group's future success depends on its ability to anticipate the needs of its customers and to
develop new or enhanced products that address those needs. The development of new
and/or enhanced products often involves significant costs for research and development and
capital expenditures. The Group may be unable to recoup its investments if its product introductions are ultimately less successful than anticipated, which in turn may lead to writedowns of the Group's inventory. Also, the Group's competitors may be more successful in
creating new and innovative products and technologies, and it may not be able to access
leading-edge process technologies or to license or otherwise obtain the technologies required by its customers. If it is unable to continue manufacturing technologically advanced
products on a cost-effective basis, its business, financial condition and results of operations
could be harmed.
The Group's continued success depends on growth in the end-user markets that use
its products.
The Group's future growth and continued success will, to a large degree, depend on the
growth of the industries and end-user markets that use its analog semiconductor and mixedsignal products, in particular the consumer and communications, industry, medical and automotive markets that it targets, as well as the end-user markets of the customers for the
Group's full-service foundry. The factors and risks affecting these markets, which are beyond
the Group's control, include:
·
the ability of the Group's customers to rapidly respond to changing technologies and
evolving customer demands;
·
the risk that the Group's customers’ products are commercially unsuccessful or become obsolete;
·
the risk that the Group's customers’ products may be defective or may not function as
expected, which could result in reputational damage to the Group;
·
any decline in consumer spending; and
·
general worldwide financial and economic conditions.
Furthermore, some of the industries that use the Group's products are highly cyclical, in particular the consumer and communications and electronics industries. Any downturn or con-
21/88
tinued pricing pressure in these industries could harm the Group's business, financial condition and results of operations.
The Group depends on original equipment manufacturers to design the Group's products into their equipment. A design win from a customer does not guarantee future
sales to that customer.
The Group's products are not sold directly to the end user but are components of other products. As a result, the Group relies on original equipment manufacturers ("OEMs") to select
its products from among alternative offerings to be designed into their equipment. If an OEM
designs another supplier’s integrated circuits ("ICs") into one of its product platforms, it will
be more difficult for the Group to achieve future design wins with that OEM’s product platform because changing suppliers involves significant cost, time, effort and risk. Moreover,
achieving a design win with a customer does not ensure that the Group will receive significant revenues from that customer. Even after a design win, the customer is not always obligated to purchase the Group's products, but may choose to ramp down the Group's products
if, for example, its own products are not commercially successful. Therefore, although the
Group may be required to put significant investment and resources into research and development, pre-production and engineering qualifications, it may be unable to achieve design
wins or to convert design wins into actual sales.
The average selling prices of the Group's products could decrease rapidly, which
could lead to reduced gross margins and sales.
The prices of semiconductors like those developed and sold by the Group typically decline
over the lifecycle of a product. If the Group is unable to offset any such reductions in its average selling prices, revenues may decline and the Group's operating results may be
harmed. To maintain the Group's existing levels of gross margins, the Group will need to
continuously develop and introduce new products and reduce the manufacturing costs of its
existing products. Any failure to do so could harm the Group's business, financial condition
and results of operations.
The Group's ASICs customers may cease to finance a large degree of the research
and development costs for the products it designs for them.
Customers that purchase the Group's application specific integrated circuits ("ASICs"),
which are products that the Group tailors to individual customer specifications, typically
agree to reimburse the Group for a significant portion of the Group's research and development costs for particular products that the Group designs and manufactures for them. However, there is no assurance that the Group's customers will continue to agree to such reimbursements in the future. If, in that event, the Group is unable to recoup its research and development costs through an increase in the prices for its products, its business, financial
condition and results from operations could be harmed.
Difficulty in forecasting customer demand accurately may result in over- or underutilization of the Group's manufacturing capacity.
The Group makes significant decisions based on its estimates of customer requirements;
such decisions include determining the levels of business that it will seek and accept the level of production schedules, procurement commitments, personnel needs and other resource
requirements. The commitments of most of the Group's customers are short-term, and the
Group's customers may cancel their orders, change production quantities or delay production for various reasons, all of which would reduce the Group's ability to estimate accurately
future customer requirements. Customers may occasionally require rapid increases in production which may challenge the Group's resources and reduce its margins. The Group may
22/88
not always have sufficient capacity to meet increases in customer demand. Conversely, rapid reductions in customer orders (for example as a result of a downturn in the semiconductor
industry) may cause the Group's manufacturing facilities to be underutilized and may lead to
reduced gross margins and operating income. If the Group underestimates its costs at the
time of pricing, the Group's business, financial condition and results of operations could be
harmed.
A significant portion of the Group's revenues comes from a relatively limited number
of customers.
The Group expects that a relatively small number of high volume customers will account for
a significant portion of its capacity utilization over the near and mid-term. Sales to the
Group's ten largest customers accounted for approximately 58% of its revenues in 2010 and
approximately 15% percent of its total revenues for 2010 were attributable to the Group's
single largest customer. In addition, the significance of its customers by sales volume has
fluctuated. If a major customer ceases to purchase products and services from the Group at
current levels, or at all, the Group's business, financial condition and results from operations
could be harmed.
As a result of the Group's relatively fixed cost structure, its margins may decline significantly if the Group experiences a decline in customer orders.
Any significant reduction in customer demand for the Group's products could result in overcapacities and/or underutilization of its wafer fabrication facilities. Because many of the
Group's costs and operating expenses are relatively fixed, a reduction in customer demand
could have a significant adverse effect on the Group's gross margins and operating income
and could cause a decrease in the Group's order backlog.
The Group operates highly complex manufacturing facilities and any manufacturing
interruptions or reduced yields could harm the Group's business.
The manufacturing of the Group's semiconductor products requires highly complex manufacturing facilities and precise production processes in a tightly controlled clean room environment. For example the Group’s 200 millimeter wafer manufacturing facility went into operation in 2002, and over the years may face difficulties in procuring needed spare parts to
maintain its equipment. Therefore, there is a risk of malfunction. Any difficulties in the production process such as minute impurities, for example the slightest defects in the masks
used to print circuits on wafers, or other malfunctioning production factors may cause a substantial percentage of wafers to be impaired or non-functional and therefore to be rejected.
The Group may also experience problems in achieving acceptable yields in the manufacture
of semiconductors, in particular in connection with the manufacturing of new products, the introduction of new production processes or the expansion of the Group's manufacturing capacities. Any interruption in the Group's production could result in a failure to achieve acceptable yields at the Group's wafer production facilities which in turn could harm the
Group's business, financial condition and results of operations.
The Group's products may contain defects that could expose the Group to warranty
and product liability claims.
The products manufactured by the Group are integrated into complex electronic systems.
Faults or functional defects in the products produced by the Group may have a direct or indirect effect on the property, health or life of third parties. The Group is not in a position to reduce or exclude its liability with respect to consumers or third parties in sales agreements.
Products that leave the Group undergo several qualified checks regarding quality and function. In spite of quality and environmental control systems product defects may occur and
23/88
possibly only show up after installation and use of the finished products. Any such defects, in
particular to the extent they are discovered only after the Group's products have been incorporated into the end products of its customers, could result in service, warranty or insurance
costs or in product or third party liability claims against the Group, adverse publicity, and loss
of revenues and market share. Such defects could therefore harm the Group's business, financial condition and results of operations.
The Group may be unable to protect its proprietary technology adequately.
The Group intends to continue to file patent applications and to seek other intellectual property protection when appropriate to protect its proprietary technology. However, the process
of seeking patent protection is time consuming and expensive and requires the publication of
the relevant invention. The Group cannot ensure that its efforts to protect its intellectual
property will prove to be effective and, in particular, that patents will issue from the Group's
pending or future applications or that, if patents issue, the claims allowed under each patent
will be sufficient to deter or prohibit others from marketing similar products. There is no assurance that any patents issued to the Group will not be challenged, invalidated or circumvented, or that the rights granted under each patent will provide the Group with a competitive
advantage. Furthermore, certain technologies the Group uses in its business are protected
by patents of third parties. In these cases, the Group is required to obtain licenses from such
third parties to have access to those technologies.
Intellectual property litigation that might be brought against the Group in the future
could significantly harm the Group's business.
The semiconductor industry is characterized by cross-licensing and frequent litigation regarding patent and other intellectual property rights, and the Group may be subject to these
types of legal claims. Litigation is subject to inherent uncertainties and unfavorable rulings
could occur. An unfavorable ruling could include monetary damages or, in cases for which
injunctive relief is sought, an injunction prohibiting the Group from manufacturing or selling
one or more products or applications, precluding particular business practices, or requiring
other remedies, such as compulsory licensing of intellectual property. If the Group were to
receive an unfavorable ruling in a matter, the Group's business, financial condition and results of operations could be harmed.
There are currently two procedures pending in which the Group is involved as party, which
are described in detail in section "Description of the Group – Legal Proceedings".
The Group faces certain litigation risks apart from those resulting from patent infringement.
The Group is involved in legal proceedings in Austria and elsewhere (including in the United
States of America), which arise in the ordinary course of its business. While it is generally
not possible to predict the outcome of any pending or threatened proceedings, the Group
does not believe that any of the legal proceedings it is involved in, including the litigation outlined above, could materially harm its business, financial condition or results from operations.
The Group depends on successful alliances and outsourcing relationships in particular with regard to assembly and packaging of its products.
The Group has entered into various alliances with other semiconductor manufacturers to
supplement manufacturing capacity and to gain access to more advanced process technologies. If the Group experiences problems in its relationships with its alliance partners, the
Group may face a shortage of finished products available for sale.
24/88
Furthermore, most of the Group's products are assembled in packages prior to shipment.
The packaging of semiconductors is a complex process requiring, among other things, a
high degree of technical skill and advanced equipment. The Group outsources its semiconductor packaging to subcontractors, most of which are located in the Asia Pacific region. It
depends on these subcontractors to package its devices with acceptable quality and yield levels.
If any of the abovementioned partners, subcontractors or suppliers or if other of the Group's
partners experience yield problems or delivery delays, which are not uncommon in the
Group's industry, or are unable to produce parts and materials that meet the Group's specifications with acceptable yields, the Group's business, financial condition and results of operations could be harmed.
The Group depends on the successful procurement of materials, components and
equipment for its manufacturing processes.
The Group uses a wide range of parts and materials in the manufacturing process (including
testing and assembly) for its analog and mixed-signal products and foundry services, including silicon, processing chemicals and gases, precious metals and electronic and mechanical
components. These materials and components are procured from domestic and foreign
sources and original equipment manufacturers. However, the Group may face difficulties in
supply due to unforeseen shortages, natural disasters, political or economic crises or other
events. There is no certainty that the Group would, in such a case, be able to identify alternative sources of supply for these materials and components, that any suppliers the Group
does identify could or would provide materials and components of quality comparable to that
of its current suppliers, or that such suppliers would be able to supply the Group in a timely
manner and/or on favorable terms.
The Group depends on its key personnel.
The Group's success depends to a large extent on the continued services of the Company's
CEO, John A. Heugle, the other members of the Company's executive committee and its
other key managers and skilled personnel, particularly its analog and mixed-signal designers. In addition, the Group considers that its ability to service its customers’ needs and to
have an advantage over its competitors is facilitated by the Group's direct sales force and
skilled field application engineers. There is intense competition for qualified personnel in the
semiconductor industry, and talented analog and mixed-signal designers and internationally
experienced sales people are scarce. Although the Group's key employees are generally
employed pursuant to employment agreements, the Group cannot ensure that it will retain its
key executives and employees. The loss of the services of the Group's key employees or its
failure to continue to be able to recruit skilled personnel could have a significant adverse impact on its ability to develop and market new products, which in turn could harm the Group's
business, financial condition and results of operations.
The Group may incur costs to engage in future acquisitions of businesses or technologies and the anticipated benefits of such acquisitions may never be realized.
The Group may explore acquisition opportunities with regard to companies or technologies.
The successful integration of an acquired company depends on a series of factors and no
assurance can be given that the expected benefits from any such acquisitions would in fact
be realized or that such acquisitions will lead to an improvement in the Group's sales or results. In particular, the Group may not be able to integrate acquired businesses or technologies into its existing business at the initially budgeted costs or at all, and expected synergies
may not be achieved. Moreover, integrating and consolidating the acquired operations, per-
25/88
sonnel and technologies requires the dedication of management resources that may distract
attention from the Group's day-to-day business and may disrupt key operating activities.
If the Group is unable to obtain additional capital on commercially acceptable terms,
the Group's business may be harmed.
The Group's continued development and marketing of new products relies on an increasing
number of personnel in research and development, support, sales and marketing which requires a significant commitment of capital. As a result, the Group may be required, or could
elect, to seek additional funding. In addition, if the market for the Group's products develops
at a slower pace than anticipated, or if it fails to establish market share and increase revenues, the Group may incur significant operating losses and utilize significant amounts of capital. In the event the Group is required to raise additional funds, it may not be able to do so
on favorable terms, or at all. If the Group cannot raise funds on acceptable terms, the Group
may not be able to develop or enhance its products, take advantage of future opportunities
or respond to competitive pressures or unanticipated requirements. Any inability by the
Group to raise additional capital when required may delay its product development efforts
and could seriously harm the Group's business, financial position and results of operation.
3.2
Industry-related Risks
Current worldwide economic conditions may adversely affect the Group's business,
operating results and financial condition.
Current uncertainty in global economic conditions poses a risk to the overall global economy
since consumers and businesses may defer purchases in response to tighter credit and
negative financial news, which could negatively affect product demand and other related
matters. The Group's business depends on the overall demand for display management
technology, and in particular, for smartphones and other products that may incorporate the
Group's technology now or in the future. The purchase of these products generally is discretionary. The incorporation of the Group's technology into these products may require a significant commitment of capital and other resources. Weak economic conditions in the market
for the products that incorporate the Group's technology would likely adversely impact the
Group's business, operating results and financial condition in a number of ways, including
longer sales cycles, lower prices for the Group's products, reduced unit sales, increased risk
of excess inventories and increased risk in the collectability of accounts receivable from its
customers. The Group's customers and suppliers also may face credit and debt issues which
could have an adverse effect on their operations.
The current turmoil in Japan with regard to the nuclear catastrophe of Fukushima and
the great damages occurred in the course of the earthquake in March 2011 may adversely affect the Group's business, operating results and financial condition.
Although the Group does not have any production activities in Japan, the Group might be
impacted by lack of supply of critical material from its suppliers who maintain production facilities in Japan. Furthermore, the Group's customers may be impacted by other critical suppliers not being able to deliver due to the consequences of the earthquake. The Group has
approximately eight employees based in Japan who mainly belong to the sales as well as
the application teams. All the Group's wafer production, test and assembly partner facilities
are located outside of Japan. Therefore, the Group does not expect an immediate impact on
its wafer production, assembly and test services from the recent events in Japan. The Group
has established a task force to evaluate the supply chain situation and it maintains a continued and intense contact with its suppliers, customers and supply chain partners to assess
and verify any potential impact on its supply chain. Nevertheless, in particular with regard to
26/88
the Group's fast growing customer base in Japan, the turmoil in Japan could harm its business, financial condition and results of operations.
Some of the Group's receivables may not be collectible and several of the Group's
customers may become insolvent.
The Group bears the risk that receivables may not be collectible and that the Group's customers may become insolvent, which could harm the Group's business, financial condition
and results of operations.
In the light of an incline of economic growth in the post crises era, the Group faces
exposure to increasing interest rates.
The possible fluctuation in the value of financial instruments due to changes in market interest rates arises in relation to medium and long-term receivables and payables (especially
borrowings). The Group's treasury policy allows that part of the interest rate risk is reduced
by fixed-interest borrowings.
A significant portion of the Group's sales is denominated in U.S. dollars while the
Group's costs are primarily denominated in Euro, therefore exchange rate fluctuations
may harm the Group's business.
The Group reports its financial statements in Euro. However, the Group derives a significant
portion of its sales outside the countries of the Euro-zone, and therefore generates revenues
in currencies other than the Euro, typically in U.S. dollars, which exposes the Group to risks
from currency fluctuations. Although the Group procures most of the raw materials, components and equipment that it uses in manufacturing from suppliers in the United States of
America or in countries that have linked their currency to the U.S. dollar, most of its personnel costs, overhead and other production costs are denominated in Euro. Within the Group,
cash flow streams in the same currency are offset or netted. In order to hedge the receivables positions, the Group employs derivative financial instruments to a certain extent.
These instruments mainly involve forward exchange transactions, interest and currency options, and interest and currency swaps. Nevertheless, the Group is particularly exposed to
fluctuations in the U.S. dollar/Euro exchange rate. If the value of the U.S. dollar or of a currency linked to the U.S. dollar decreases in relation to the Euro, the Group's sales and profit
margins from foreign transactions will also decrease. Unfavorable developments in the U.S.
dollar/Euro exchange rate could therefore harm the Group's business, financial condition and
results of operations.
Operating in the international market place exposes the Group to a number of additional risks.
Approximately 60% of the Group's revenues in 2010 were derived from customers outside
Europe, in particular from the Asia Pacific region and North America. The Group expects that
a significant portion of its revenues and profits will continue to come from international customers for the foreseeable future. This international diversification of the Group's business
exposes it to a number of risks that the Group would not otherwise face, including different
legal and taxation systems, political uncertainty and potential conflicts, difficulties in collecting accounts receivable, natural disasters and difficulty in enforcing or adequately protecting
the Group's intellectual property. For example, the Group faces uncertainties relating to the
Japanese economy, including elasticity of customer demand and supply disruptions, resulting from the recent natural disasters that could affect the Group's business. The Group cannot ensure that these risks will not materially harm its business, financial condition and results of operations.
27/88
Compliance with environmental laws could result in substantial costs to the Group.
The Group uses a large number of hazardous and other regulated substances, chemicals
and materials in its manufacturing processes, and is therefore subject to risks of accidental
spills or other sources of contamination which could result in environmental pollution and injury of personnel or third parties. As a consequence thereof, the Group could be faced with
liability claims and civil or criminal fines. In addition, increasingly stringent environmental
regulation restricts the amount and types of pollutants that can be released into the environment from the Group's operations. The Group has incurred and will in the future incur costs
to comply with these regulations. Any significant regulatory changes or increased public attention to the impact of semiconductor operations on the environment that result in more
stringent regulations could further increase the Group's costs or require changes in the way
the Group makes its products. Although the Group cannot anticipate the scope and timing of
future costs of such compliance with environmental laws, any significant contamination or
any significant changes in current environmental rules and legislation could harm the
Group's business, financial condition and results of operations.
The Group has received certain subsidies and tax benefits from Austrian governmental authorities that might be subject to repeal. Whether subsidies will be available to
the Group in the future is affected by factors that may be out of the Group's control.
A government grant is initially recognized in the balance sheet when there is reasonably high
assurance that it will be received and that the Group will comply with the underlying conditions. The Group expects to apply for subsidies and grants from Austrian governmental authorities in the future. The Group's ability to attract such subsidies and grants will depend on,
among other things, the nature and scope of the Group's research and development
projects, changes in governmental policies and budgetary allocations and the Group's ability
to comply with and satisfy any conditions that relate to such subsidies or grants. As a result,
the Group cannot ensure that further subsidies or grants will be available. If further subsidies
and grants are not available to the Group, the Group's business, financial condition and results of operations could be adversely affected.
The Group competes in a highly cyclical market.
The semiconductor industry is highly cyclical, and the Group's ability to respond to downturns is limited. The semiconductor industry has at various times experienced significant
economic downturns characterized by production overcapacity, rapid erosion of average selling prices, reduced revenues and reduced demand for semiconductors and electronic systems that use semiconductor products. The semiconductor industry continues to experience
the effects of the severe downturn in the course of the economic and financial crisis which
began in 2008. While the Group believes that the market for analog/mixed-signal semiconductor products, which it primarily targets, has been less significantly affected by this most
recent downturn than the overall semiconductor industry, future downturns in the semiconductor industry may lead to excess production capacity or asset impairment or restructuring
charges, any of which could have a significant negative impact on the Group's business, financial condition and results of operations.
Competition in the semiconductor industry is intense, may intensify and could result
in increased downward pricing pressure, reduced margins and the loss of market
share.
The semiconductor industry includes a large number of competitors, a number of which have
achieved substantial market shares. Many of the Group's competitors have substantially
greater market share, marketing power and manufacturing and research and development
28/88
resources than the Group. The Group also competes with emerging companies that are attempting to sell their products in specialized markets. The Group expects to continue to experience competitive pressures in its markets from existing competitors as well as from new
entrants. In recent years, many of the Group's competitors have substantially expanded their
manufacturing capacities. Should the overall demand for semiconductor products decrease
as it has during the recent downturn, this increased capacity could lead to a substantial pricing pressure, which could adversely affect the Group's business, financial condition and results of operations.
3.3
Capital Market-related Risks
The Company's Share price following the Listing of the New Shares may be volatile.
As a result of the high volatility in the securities markets in general and of share prices of
semiconductor manufacturers in particular, the Company's Share price following the Listing
of the New Shares may be highly volatile. Factors that may affect the Company's Share
price, which may be beyond its control, include developments that affect the Group's financial results, fluctuations in the Group's quarterly and annual financial results, market expectations about the valuation and adequate capitalization of industrial companies in general and
semiconductor manufacturers in particular, investors’ assessments as well as changes in the
valuation of other industrial companies, sales of Shares by Shareholders, potential litigation
or regulatory action involving the Group or industry sectors influencing the Group's business,
public announcements regarding insolvencies or similar restructuring measures, securities or
industry analysts' reports, speculation of the press or investment community, and investigations with respect to the accounting practices of other industrial companies. Furthermore, the
New Shares issued in connection with the Transaction may depress the market price of the
Shares.
Investing in the Shares will expose shareholders to an inherent currency exchange
rate risk.
Because the Shares are listed on the SIX Swiss Exchange, the trading currency for the
Shares is denominated in Swiss francs. However, the majority of the Group's revenues and
costs are denominated in Euro, and the Euro is the Company's reporting currency. Investing
in the Shares will therefore expose investors to fluctuations in the Swiss franc/Euro exchange rate. Assuming other factors remain equal, if the value of the Swiss franc increases
in relation to the Euro, the market price of the Shares will tend to decrease.
Future sales or the possibility or perception of a substantial number of new shares
could cause the market price of the Shares to fall.
Following the Listing of the New Shares, the Company will have 13,753,092 Shares issued
and outstanding. Sales or the possibility of sales of substantial numbers of the Company's
Shares in the public or private market by the Company's existing Shareholders could have
an adverse effect on the market trading price of the Shares. While the TAOS-Shareholders
have agreed to certain restrictions on the offer, sale, pledge or disposal of the Shares for
various limited periods of time following the Listing, upon the expiration of these lock-up arrangements a large number of additional existing Shares will be eligible for sale. Furthermore, these lock-up arrangements are subject to certain exceptions and at any time or from
time to time, without notice, all or any portion of the Shares subject to these lock-up arrangements may be released.
29/88
Investors in the United States of America may be unable to participate in future rights
offerings.
Under applicable Austrian stock corporation law, the Company must offer subscription rights
to existing Shareholders on a pro-rata basis when new shares, securities convertible into
Shares or other similar securities are issued, unless the general meeting of shareholders
specifically authorizes the Company to issue new capital without granting subscription rights.
For reasons relating to applicable United States securities laws and/or other factors, investors in the United States of America may not be able to participate in rights offerings or other
issues of the Company's securities where subscription rights apply and may consequently
experience a dilution of their holding as a result.
Austrian and Swiss anti-takeover laws may not apply to the Company, which could
decrease the value of the Shares
Because the Company is incorporated in Austria and governed by Austrian law but its
Shares are listed on the SIX Swiss Exchange, the Company believes that certain Austrian
and Swiss corporate, takeover and securities laws mandating the disclosure of certain
shareholding levels and requiring a person whose shareholdings in a listed company exceed
a certain threshold to make a mandatory takeover offer for that company’s listed shares will
not apply. As a consequence, in the case of a change of control in the Company, an acquirer
may not be required to pay, or may pay only selectively to some Shareholders, a control
premium, which is often paid in the context of such takeover offers, with respect to the
Shares.
If securities or industry analysts do not continue to publish research or reports about
the Company's business, the price of the Shares and trading volume could decline.
The trading market for the Company's Shares will depend on the research and reports that
industry or securities analysts publish about the Company or its business. The Company
does not have any control over these analysts. If one or more of the analysts who cover the
Company downgrade the Shares, the price of the Shares would likely decline. If one or more
of these analysts cease coverage of the Company or fail to regularly publish reports on the
Company, the Company could loose visibility in the financial markets, which in turn could
cause the price of the Shares or the trading volume to decline.
The current market for the Shares is weak and a liquid market for the Shares may fail
to develop on the SIX Swiss Exchange.
The Company cannot predict the extent to which investor interest will lead to the development of an active and liquid market in the Shares on the SIX Swiss Exchange. The failure of
an active and liquid market to develop could affect an investor's ability to sell his or her
Shares, or depress the market price of the Shares on the SIX Swiss Exchange.
3.4
Risks related to the Transaction and TAOS
The Company and TAOS may not realize all the anticipated benefits of the Transaction.
There is no assurance that the Company and TAOS will successfully combine and integrate
operations of their separate companies and achieve their commercial objectives. Expected
cost synergies may not develop and other assumptions relevant for the determination of the
compensation may prove to be incorrect. Moreover, normal integration difficulties, or the absence of additional growth, may be seen in the capital markets as a failure of the Transaction, which may have a material adverse effect on the Company's Share price.
30/88
The integration of the TAOS-Group into the AMS-Group poses numerous organizational, legal, financial, cultural and resource challenges, all of which include risks. The integration
may also result in indirect costs by diverting attention of management and employees from
business and therefore increase administration costs and expenses. The failure to manage
these integration challenges may have a negative impact on the Group's results of operations, financial condition or business prospects.
The difficulties of combining the operations of the companies include, among others:
·
maintaining employee morale and retaining key employees;
·
preserving important strategic and customer relationships;
·
unanticipated issues in integrating information, communications and other systems;
·
consolidating corporate and administrative infrastructures and eliminating duplicative
operations;
·
coordinating marketing functions;
·
unanticipated incompatibility of logistics, marketing and administration methods;
·
integrating the business cultures of both companies; and
·
coordinating geographically separate organizations.
In addition, even if the operations of the AMS-Group and the TAOS-Group are integrated
successfully, the combined Group may not fully realize the expected benefits of the Transaction, including synergies, cost savings, sales or growth opportunities. These benefits may not
be achieved within the anticipated time frame, or at all. As a result, the Company and TAOS
do not assure that the combination of the AMS-Group and the TAOS-Group will result in the
realization of the full benefits anticipated from the Transaction.
The Transaction may result in material tax consequences.
Tax matters are complicated and the tax consequences of the Transaction will depend on
Shareholders' individual circumstances. Shareholders should consult their tax advisor to determine the specific tax consequences of the Transaction. For additional information on
Swiss and Austrian taxation, see "Taxation".
The Company has incurred significant debt in order to finance the Transaction.
The Transaction was financed in part by a loan amounting to USD 86 million granted to the
Company by UniCredit Bank Austria AG under the Facility Agreement. Pursuant to the Facility Agreement, the Loan comprises of two senior secured term loan facilities, a bridging facility with a facility amount of USD 43 million and a term loan facility backed by the Export Financing Scheme (EFS) of OeKB with a facility amount of USD 43 million. The Loan is secured by a first-ranking pledge over the acquired TAOS-Shares and by a partial guaranty by
OeKB. The Facility Agreement is subject to cancellation by the Lender under certain conditions such as a change of control relating to TAOS and its subsidiaries. The Loan will be carried as debt on the Company's consolidated balance sheet and will require ongoing debt
service in the form of interest payments and the repayment of the principal out of the Group's
cash flow over several years. This represents a significant increase in interest payments
over pre-transaction levels of the AMS-Group. Unless the Group significantly reduces costs
or achieves increased sales beyond the aggregate revenues of the Group, the increase in interest expenses and the repayment of principal will reduce the profitability of the Group and
the cash available for the payment of dividends.
31/88
If the terms and conditions of the transaction are not fully and correctly described in
various Austrian documents, third parties could challenge the transactions and invalidate them in whole or in part.
Austrian law requires that the terms and conditions of transactions involving a contribution of
property in kind, such as the TAOS-Shares, to an Austrian corporation in exchange for newly
issued shares, such as the New Shares, be properly described in those documents which
are to be filed with the Austrian court of competent jurisdiction. If the transactions contemplated by the Agreement are not properly described in such documents, after the transactions are completed third parties could challenge them, for example, by claiming that they violate certain Austrian statutory corporate rules and corporate law principles, and seeking to
have the transactions held invalid in whole or in part. If successful, such actions could limit or
eliminate certain rights or remedies of the parties but primarily of Stock Holdco and Cash
Holdco under the Agreement, or subject Stock Holdco to liability for the USD 160 million issue price for the New Shares it received against the contributed TAOS stock being returned
to Stock Holdco. Such events would adversely affect the Group.
Furthermore, the transaction structure is novel and Austrian law does not generally provide
that persons acquiring shares from an Austrian corporation have a contract claim for breach
of representation that may occur in connection with the transactions. To the extent applicable, Austrian law could be applied to limit or eliminate these claims against the Company.
The pro forma financial information included in this Listing Memorandum is preliminary and the combined Group's actual financial position and results of operations
may differ significantly and adversely from the pro forma amounts included in this
Listing Memorandum.
Because of the proximity of this Listing Memorandum to the date of the execution of the
Agreement, the process of valuing the TAOS-Group’s tangible and intangible assets and liabilities, as well as evaluating the TAOS-Group’s accounting policies for consistency with the
AMS-Group’s accounting policies is still in the very preliminary stages. Material revisions to
current estimates could be necessary as the valuation process and accounting policy review
are finalized.
The unaudited pro forma financial information contained in this Listing Memorandum is not
necessarily indicative of the results that actually would have been achieved had the Transaction been completed at the beginning of the period indicated or that may be achieved in the
future. The Group provides no assurances as to how the operations and assets of both the
AMS-Group and the TAOS-Group would have been run if they had been combined during
the period indicated, or how they will be run in the future, which, together with other factors,
could have a significant adverse effect on the business, financial condition and results of operations of the Group.
TAOS' operating results may vary, and past growth is not a guarantee of future operating results.
Past growth is no guarantee that TAOS' quarterly and annual operating results will continue
to grow. TAOS' operating results could vary significantly in the future. A number of factors,
many of which are beyond TAOS' control, may cause its operating results to vary, including:
32/88
·
TAOS' ability to respond effectively to competitive pricing pressures;
·
TAOS' ability to establish or increase market acceptance of TAOS' technology and
products;
·
market acceptance of products and systems incorporating TAOS' technology and en-
hancements to its products on a timely basis;
·
TAOS' success in supporting its products;
·
unfavorable changes in the prices, delivery and availability of the components used to
manufacture TAOS' products, in particular wafer fabrication capacity;
·
the size and timing of orders for TAOS' products, which may vary depending on the
season and the contractual terms of the orders;
·
deferrals of customer orders in anticipation of new products, services or product enhancements introduced by TAOS or its competitors; and
·
TAOS' ability to maintain production volumes for its products.
TAOS' future projected budgets and commitments are based in part on its expectations of future sales. If TAOS' sales do not meet expectations, its operating results may suffer. Any of
the above factors could harm TAOS' business, financial condition and results of operations.
TAOS' sales cycles are long, making future performance uncertain.
The sales cycle for TAOS' display management products includes identification of decision
makers within the customers’ organizations, development of an understanding of customerspecific performance and economic issues, convincing the customer of the benefits of TAOS'
products offered, and negotiation of purchase orders. Customers who purchase TAOS' display management products must commit a significant amount of capital and other resources.
TAOS' customers must consider budgetary constraints, comply with internal procedures for
approving such expenditures and complete whatever testing is necessary for them to integrate new technologies that will impact their products. Customer delays can lengthen the
sales cycles resulting in a delay in realizing revenue.
TAOS must effectively manage its growth.
Failure to manage TAOS' growth effectively could adversely affect TAOS' operations. TAOS
plans to expand its sales and marketing efforts to target new products to incorporate its display management technology. TAOS may also increase the number and diversity of its
products in the future and the number of locations from which it manufactures and sells.
TAOS' ability to manage its planned growth will depend substantially on its ability to sell additional products into the market, maintain adequate capital resources for working capital and
successfully hire, train and motivate additional employees, including technical personnel.
Any increase in expenditures in anticipation of future orders that do not materialize would
adversely affect its profitability.
TAOS’s market is highly competitive and many of TAOS’ competitors have substantially greater resources than TAOS does.
Many of TAOS competitors and potential competitors have a broader worldwide presence,
significantly greater financial, technical, marketing and other resources, greater name recognition, and a larger installed base of customers than TAOS has. Some competitors may become more aggressive with their prices, payment terms and issuance of contractual implementation terms or guarantees. In order to be successful in the future, TAOS must continue
to develop innovative technological solutions and respond promptly and effectively to technological change and competitors’ innovations. TAOS may also have to lower prices or offer
other favorable terms. TAOS’ competitors may be able to respond more quickly to new or
emerging technologies and changes in customer requirements or devote greater resources
to the development, promotion and sale of their products.
33/88
The future demand for TAOS' products depends in large part on growth of the markets
that incorporate its display management products. If these markets do not grow as
anticipated, TAOS' revenues and ability to achieve or maintain profitability could be
harmed.
The future demand for TAOS' products depends in a large part on growth of the markets that
incorporate its display management products and capital spending within such markets. Currently, the majority of TAOS' revenue is attributable to the sale of TAOS' products in smartphones. A decline in the demand for smartphones or for other products in which its technology may be incorporated, or any substantial decrease or delay in capital spending patterns
could negatively affect its operating results and financial condition.
Products TAOS manufactures may contain design or manufacturing defects, which
could result in customer claims and warranty expense.
Any defect in the products TAOS manufactures, whether caused by a design or manufacturing error, may result in returns, claims, delayed shipments to customers or reduced or cancelled customer orders. If these defects occur, TAOS will incur additional costs and if in large
quantity or too frequent, TAOS may sustain loss of business, loss of reputation and may incur liability. TAOS generally provides a warranty that TAOS’ products will conform to its written specifications for a period of two years from the date of shipment.
If TAOS is unable to adapt to rapid changes in technology and in the markets for its
products, TAOS’ future operating results may decrease.
The markets in which TAOS sells and seeks to sell its products are characterized by rapid
change as a result of the development of new technologies, evolving industry standards, and
frequent new product introductions. If TAOS fails to anticipate the changing needs of its customers or fails to develop and integrate advances to its core technologies or new technologies, TAOS’ customers may not continue to place orders with it and TAOS’ operating results
may decrease.
TAOS currently relies on a small number of customers for the majority of its revenues,
and the loss of any one of these customers, or a significant loss, reduction or rescheduling of orders from any of these customers, could have a material adverse effect on
its business, results of operations and financial condition.
TAOS' two largest customers combined accounted for approximately 77% of its total sales in
2010. TAOS' future success depends in part upon existing customers continuing to purchase
its products. Fluctuations in demand from such customers could negatively impact TAOS' results. Unanticipated demand fluctuations could have a negative impact on its revenues and
business and an adverse effect on its results of operations and financial condition.
In addition, its dependence on a small number of major customers exposes TAOS to numerous other risks, including:
34/88
·
reductions in a single customer’s forecasts and demand could result in excess inventories;
·
TAOS' customers may have purchasing leverage over TAOS to influence sales terms
including pricing, payment terms and product delivery schedules; and
·
concentration of accounts receivable credit risk, which could affect TAOS liquidity and
financial condition if one of TAOS' major customers declared bankruptcy or delayed
payment of TAOS' receivables.
All of TAOS' sales are made on a purchase order basis and, although such purchase orders
often extend for a year, it does not have long-term purchase contracts with its customers. In
addition, under the terms of the purchase orders, customers may change delivery dates. Rescheduling of customer orders or the failure of existing customers to place additional orders
with TAOS could result in the delay or loss of anticipated sales without allowing TAOS sufficient time to reduce, or delay the incurrence of, its corresponding inventory and operating
expenses. In addition, changes in forecasts or the timing of orders from these or other customers expose TAOS to the risks of inventory shortages or excess inventory and in turn,
could cause its operating results to fluctuate.
TAOS’ success depends on its ability to retain its existing management and technical
team and to recruit and retain qualified technical, sales and marketing and management personnel.
The Group's future growth and success will depend in a large part on its ability to retain
TAOS' existing management and technical team and to recruit and retain qualified technical,
sales and marketing and management personnel. Competition for qualified employees in
TAOS’ industry is at times intense. The loss of any of these key personnel or the Group's inability to attract and retain these key employees to operate and expand its business could
adversely affect the Group's operations.
TAOS outsources to a limited number of manufacturers, which could delay delivery of
products, decrease quality or increase costs.
TAOS outsources manufacturing, assembly and test of its products. Outsourcing involves
certain risks, including the potential lack of adequate capacity and reduced control over delivery schedules, manufacturing yield, quality and costs. In the event that any of TAOS’ manufacturers were to become unable or unwilling to continue to manufacture or test TAOS’ products in the required volumes, TAOS would have to identify and qualify acceptable replacements. Finding replacements could take time and TAOS cannot be sure that additional
sources would be available to it on a timely basis. Any delay or increase in costs in the assembly and testing of products by third-party manufacturers could seriously harm the
Group's business, financial condition and results of operations.
TAOS’s international operations exposes it to risks that could harm its business, financial condition and results of operations.
TAOS’ efforts are subject to a variety of risks associated with conducting business internationally, any of which could affect its business, financial condition and results of operations.
These risks include:
·
tariffs, duties, price controls or other restrictions on foreign currencies or trade barriers, such as import or export licensing imposed by foreign countries, especially on
technology;
·
potential adverse tax consequences, including restrictions on repatriation of cash or
earnings;
·
fluctuations in foreign currency exchange rates, which could make TAOS’ products
relatively more expensive in foreign markets; and
·
the threat of international conflicts.
35/88
If TAOS’ international tax structure was successfully challenged, it could be subject to
tax-related liabilities.
TAOS maintains business operations in multiple countries and is subject to taxation in multiple jurisdictions. Although TAOS believes that it reports and pays all international and national taxes properly, if any jurisdiction successfully challenged such structure, it could be
subject to tax-related liabilities in excess of the reserves shown in its financial statements. As
of 31 December 2010, TAOS has USD 10.213 million of reserves related to uncertain tax
positions for these international tax structuring matters.
Any failure by TAOS to protect its intellectual property could harm TAOS’ business,
financial condition and results of operations.
TAOS’ success depends, to a certain extent, upon its proprietary technology. TAOS currently
relies on a combination of patent, trade secret, and trademark law, together with nondisclosure and invention assignment agreements, to establish and protect the proprietary
rights in the technology used in its products. However, there is no guarantee that these will
provide commercially significant protection of TAOS’ technology. In addition, other individuals or companies may independently develop substantially equivalent proprietary information
not covered by the patents to which TAOS owns rights, may obtain access to TAOS’ knowhow or may claim to have issued patents that prevent the sale of one or more of TAOS’
products. Also, it may be possible for third parties to obtain and use TAOS’ proprietary information without TAOS’ authorization. Further, the laws of some countries may not adequately protect TAOS’ intellectual property or such protection may be uncertain. TAOS’ success also depends on trade secrets that cannot be patented and are difficult to protect. If
TAOS fails to protect its proprietary information effectively, or if third parties use TAOS’ proprietary technology without authorization, the Group's competitive position and business will
suffer.
A decrease in the market price for TAOS’ products could substantially harm the
Group's business.
TAOS believes that the current and expected market price over the next several years for
TAOS products is favorable in comparison to its costs. However, the market price could be
reduced to levels that are lower than currently anticipated. A change of this nature could decrease the Group's net income, cause it to incur net losses or even force it to cease its current operations.
TAOS has entered into transactions with certain affiliates of the holders of TAOS series A preferred shares and TAOS series B preferred shares.
TAOS’ stocking representative for Taiwan and China, Optosensor/Fuchance, is an affiliate of
Rich Power Management Limited, the holder of TAOS series A preferred shares and one of
the holders of TAOS series B preferred shares, and Kenny Wang, one of TAOS’ directors.
Optosensor/Fuchance has accounted for USD 3,790,664.23, USD 11,597,895.68 and
USD 55,412,012.04 in revenues to TAOS in 2008, 2009 and 2010, respectively, which did
not result in any fees to Optosensor/Fuchance in the same periods.
TAOS’ stocking representative for Singapore, Thailand, Philippines and India, Seamax, is an
affiliate of Limelight Ventures Ltd., one of the holders of TAOS series B preferred shares.
Seamax has accounted for USD 260,850.20, USD 920,112.48 and USD 1,952,307.65 in
revenues to TAOS in 2008, 2009 and 2010, respectively. Commissions of USD 11,067.23,
USD 4,052.00 and USD 3,584.76 were paid to Seamax in the same periods.
36/88
There is a risk that the interests of the above named Shareholders, who are also business
partners of the Group, are not necessarily identical to the interests of the other Shareholders
of the Company.
Failure to Achieve the Commercial Objectives
The Company has paid a significant compensation in cash for the TAOS-Shares, but there is
no assurance that the acquisition of the TAOS-Group will achieve its commercial objectives.
The Company believes the consideration is justified amongst others because of the additional growth and cost savings it expects to achieve by combining the operations of the
TAOS-Group and the AMS-Group. Expected cost synergies may not develop and other assumptions relevant for the determination of the compensation may prove to be incorrect.
Moreover, normal integration difficulties, or the absence of additional growth, may be seen in
the capital markets as a failure of the acquisition, which may have a material adverse effect
on the Company's share price.
The integration of TAOS-Group into the AMS-Group poses, as all large integration projects,
numerous organizational, legal, financial, cultural and resource challenges, all of which include risks. The management of these risks will determine the success of the integration
project and influence the extent to which the results of the integration meet expectations.
The integration may also result in indirect costs by diverting attention of management and
employees from business and therefore increase administration costs and expenses. The
failure to manage these integration challenges may have a negative impact on the Group's
results of operations, financial condition or business prospects.
Contingent or Other Liabilities of the TAOS-Group
Although under the terms of the Agreement Stock Holdco and Cash Holdco have given certain representations and warranties and indemnifications regarding the TAOS-Group in the
Company's favor and the Company has conducted a due diligence investigation in connection with the Transaction, liabilities associated with the business of the TAOS-Group (such
as project development, pension funding obligations, tax liabilities, etc.) may be substantial
and exceed the amount of liabilities the Company has anticipated. Also, the Company's ability to recover any amounts under those representations, warranties and indemnities is subject to certain minimum thresholds, deductibles and time limitations. The Company may thereby incur losses or the matters giving rise to the losses may not be recoverable against the
warranties or indemnities. Any liabilities arising out of the acquisition of the TAOS-Group
may negatively impact the Company's business, results of operations and financial condition.
TAOS-Shareholders hold a considerable stake in the Company
The Transaction resulted in the TAOS-Shareholders holding a considerable stake of the voting rights in the Company. Consequently, they could have a certain influence on the business activity of the Company, in particular with regard to matters on which the general meeting has to decide.
37/88
4
INDUSTRY OVERVIEW
4.1
General
The Group designs, develops and manufactures high performance analog and analogintensive mixed-signal semiconductor products, as further described in section "Description
of the Group – Business Activities". Semiconductors serve as fundamental building blocks in
a broad range of electronic products. Over time, semiconductor suppliers have offered a
wealth of new products with more advanced performance and higher integration of functions
to drive the development of the electronics industry. Semiconductors have traditionally
played a critical role in the computing and communications markets and have also become
indispensable in many other markets, including the automotive, industry and medical markets. Semiconductors can generally be categorized as performing either analog or digital
functions. Analog ICs manage and interpret real world signals such as sound, light, motion,
temperature, magnetic fields, radio waves or electrical current and are therefore an essential
part of any electronic system in order to make analog information accessible to digital applications and vice versa. The functions of analog ICs are used in electronic devices for three
main categories of applications:
·
managing and improving the power consumption of devices, which is especially critical
for long battery life in portable electronics;
·
controlling and driving output devices such as video displays, audio speakers, lightemitting diodes ("LEDs"), motor controllers, and radio transmitters; and
·
detecting and interpreting input signals from sensors so they can be processed by digital control circuitry, for example in silicon microphones, automotive safety systems,
electronic measuring equipment and medical imaging systems.
Advances in digital technology through miniaturization and increased processing power have
led to ever increasing electronic content in many products and in a broadening array of applications. Because digital devices typically require analog ICs to convert signals to and from
the real world, as well as for power management, the increasing adoption and complexity of
digital technology has created opportunities for analog ICs at a rate comparable to the
growth of digital device usage.
4.2
Underlying Industry Trends
We believe that the following powerful trends are driving global demand for high performance analog ICs:
38/88
·
continuous demand for smaller, lighter and more power-efficient portable electronic
devices, particularly in consumer, communications, infotainment and medical/personal
care applications;
·
growing use of digital technology and additional features in consumer electronics
products, such as digital cameras, video and audio devices and tablet PCs;
·
increasing pervasiveness of wireless communications;
·
growing demand for sensors and sensor interfaces in electronic applications;
·
regulatory and consumer demand for sophisticated safety, environmental and comfort
systems, particularly in automobiles; and
·
increasing reliance on real-time data, including the internet.
Underlying all of these trends is a growing demand for systems with greater IC integration,
including integration of analog and digital functions to provide higher reliability and lower system costs. The reduced IC size resulting from component integration enables manufacturers
to decrease cost, develop new form factors and manufacture products with a lower power
consumption. This integration is particularly important for products and applications such as
mobile phones, smartphones and digital lifestyle devices; lighting management for portable
devices; high accuracy measuring and signal conversion in industrial and medical systems;
and safety and security functions for automobiles. Manufacturers of electronic systems are
therefore increasingly seeking IC suppliers who can provide specialized, integrated analog
solutions and related design expertise for their products.
4.3
Industry and Technology Characteristics
The analog semiconductor industry can be distinguished from the digital semiconductor industry in various respects. One important difference lies in the degree of standardization of
design tools and manufacturing processes. Digital IC design is generally highly automated
through the use of electronic design automation software programs which are available from
various independent companies. In addition, digital designs are generally less dependent on
the specific manufacturing processes used to fabricate ICs. This is different from analog IC
design and fabrication, where the design is generally more complex and must specifically
take into consideration the exact process parameters of the fabrication process that is used.
The Company believes that this design complexity limits the ability of high performance analog IC companies to separate design and manufacturing functions. Furthermore, analog design engineers typically require longer industry experience and more familiarity with a specific manufacturing process technology to gain the highest levels of expertise than is typically
the case for digital design engineers; analog designers are therefore in relatively short
supply.
The fundamental principles and design characteristics of analog technology differ significantly from those of digital technology. Digital ICs are defined and designed to process signals in
two states, generally described as "0" or "1", and the voltages and currents in a digital IC are
reduced to the minimum needed to determine a "0" or "1" state. The performance of a digital
IC is often specified by its “clock rate” measured in megahertz or gigahertz, or millions or billions of cycles per second. Digital ICs, which provide high-speed computation and logic functions, generally rely on increasingly small geometry manufacturing processes to achieve
faster speeds and cost-effectiveness. The design and manufacturing of advanced digital ICs
involves the integration of millions of elementary circuits (transistors) on a single device and
is accomplished by means of automated logic synthesis and layout generation. Line widths
are used in the semiconductor industry to describe manufacturing technology, and in digital
ICs line width reductions to the current state of the art levels of 55 and 40 nanometers (billionths of a meter) have significantly driven up the cost of digital IC fabrication facilities
("fabs").
Analog ICs are not binary but instead are designed to precisely and accurately control voltages and currents so that they mimic the behavior of real world signals. In many applications, an analog IC must handle high voltages ranging from five to 90 volts in order to interface with output displays or motors in contrast to digital ICs, where performance is enhanced
by smaller line widths and lower voltages. Analog performance is related to the precision of
the analog signal, which is more a function of the design and process control than of process
line width. Thus shrinking line widths will not lead to performance improvements and area
reductions in analog circuits to the same extent as in pure digital ICs. While digital circuit
manufacturing requires significant investments to stay on the leading edge, analog perfor-
39/88
mance primarily relies upon scarce process and product engineering expertise and specialist
circuit simulation techniques. The current state-of-the-art line widths for analog-intensive ICs
requiring specialty processes such as high voltage, silicon germanium or radio frequency are
0.35 μm (millionth of a meter) and 0.18 μm. While analog ICs require greater expertise and
process characterization than digital ICs, the cost of the required manufacturing equipment is
generally meaningfully lower than the costs required for state of the art digital IC manufacturing equipment.
4.4
Industry Challenges
The challenges faced by the analog and mixed-signal IC industry include:
40/88
·
Optimized integration of analog and digital technologies. The integration of analog and digital technologies in one IC presents significant challenges. Design of high
performance analog solutions requires broad analog and certain digital capabilities including engineers with both analog and digital circuit design expertise and compatible
analog and mixed-signal manufacturing process technology. Due to the complexity of
integrating analog designs and the long periods of training required to develop analog
IC engineers, design talent is relatively scarce.
·
Growing demand for superior technical performance. There is increasing customer demand for improved performance of analog ICs for applications such as power
management for longer battery life, lower noise for higher sensor sensitivity, high voltage for advanced applications such as display drivers, and low-power radio frequency
for short-range communications. These trends represent ongoing challenges for increasing the performance of both the design and manufacture of analog ICs.
·
Joint optimization of design and manufacturing. There are significant technical interdependencies between the design and the production of analog ICs. The design
and manufacturing processes of high performance analog ICs need to be closely
linked with each other. Small differences in process technology from one manufacturer
to the next can cause significant electrical performance differences in identically designed parts. Integrated device manufacturers ("IDMs") have in-house production capabilities to optimize the design of high performance analog ICs.
·
Faster time-to-market and low cost. Increasing cost and time-to-market pressures
as well as rising complexity in analog design are leading many manufacturers to seek
specialized analog component suppliers that quickly and cost effectively design and
manufacture highly integrated, complex products. This demand is particularly acute in
the consumer and communications electronics markets where manufacturers differentiate themselves through new product introductions and often sell to price sensitive
end-markets.
·
Maintaining long-term partnerships. In the automotive, medical and industry markets in particular, but also for certain communications products, the product development and qualification process is typically very long for products that have to meet critical safety, security and reliability requirements, including regulatory requirements.
This process forces semiconductor component suppliers to expend significant time
and resources on product development well ahead of volume shipments of their products. Product volumes are sometimes relatively small and long product lifecycles in
automotive, medical and industry applications in many cases require manufacturing
support for more than ten years. Only certain specialist IDMs are generally willing to
commit design and manufacturing capacity for small-volume complex analog products
over long product lifecycles. The challenge for customers is to find long-term suppliers
to avoid the need for a new supplier, which can be costly and disruptive due to the difficulties of transferring and qualifying analog processes and new production sites.
4.5
Product Categories
Analog ICs are generally divided into the product categories standard products and ASICs:
Standard products: standard products integrate multiple analog as well as in some cases
digital functions into a single IC in a manner similar to ASICs. However, analog standard
products address certain pre-identified market applications, as opposed to ASICs, which are
exclusively designed pursuant to customer specifications. Standard products can therefore
be offered as standard solutions to multiple customers. Standard products are generally the
preferred choice of customers in markets that require more frequent adaption and evolution
of electronic systems to changing market requirements and customer demands such as in
the consumer and communications markets, or who require immediate availability, such as
for new product introductions by OEMs and original design manufacturers ("ODMs"), or who
do not have the required expertise to specify ASICs, and for smaller unit volume products for
which the cost of ASICs development may be prohibitive. Standard products are often offered with programmable features. These products allow the input/output parameters of integrated analog circuits to be adjusted by external controllers via standard interfaces. For example, lighting management ICs for mobile phones can be modified to meet the customer’s
requirements of various lighting effects through downloading of different analog parameters
to a programmable analog standard product, allowing enhanced customer flexibility and
functionality.
Standard linear ICs are standard products that perform specific analog functions such as
amplification, voltage and signal conversion, and can be designed to high performance specifications. Standard linear ICs include low dropout regulators, amplifiers, voltage regulators
and analog-digital/digital-analog converters. In some cases, the function of an integrated
standard product or ASIC can be replicated with numerous different standard linear ICs. This
approach is frequently used for prototypes or for a low unit volume product or where the size
of the product is not a crucial parameter. Quite often, standard linear ICs are used in the
same product that also uses standard products or ASICs in order to perform additional functions in an optimized manner.
ASICs: ASICs are semiconductors that are designed for a specific customer’s application,
often with the customer paying for a substantial portion of the ASIC development costs. Analog ASICs generally integrate multiple analog and a certain degree of digital functions into a
single IC design that is optimized for a combination of customized functionality, size, power
consumption, and total cost for a specific product designed by an OEM. ASICs are primarily
used in high volume electronic products where custom development costs can be spread
over a large number of units or in applications where customers have very distinctive specification requirements and also want to protect the intellectual property of the combination of
functions in the ASIC design. Examples are medical products such as imaging systems like
computer tomography or digital X-ray systems, industrial products such as dedicated industrial sensors or motor controllers, and automotive products such as electronic stability program sensor interfaces. In order to meet certain customer demands for modifying ASICs to
provide certain special functions or parameters in selected situations, ASICs also include
programmable features.
41/88
4.6
Manufacturing Processes
Process technologies comprise a set of individual process steps to manufacture ICs on silicon wafers in semiconductor fabs. These process steps are combined with a set of design
rules, electrical specifications and recommendations for the designer to enable the fabrication of high yielding products. Process technologies can generally be divided into standard
processes and specialty processes.
4.7
Standard Processes
Digital complementary metal oxide semiconductors ("CMOS") and certain analog CMOS
processes are generally referred to as standard process technologies. Digital CMOS is the
most widely used process technology today, since the majority of high volume products have
been designed in the digital domain. Digital CMOS require less power than other process
technologies (such as bipolar), allows for a dense placement of digital circuits and typically
enables an easy shrink path to benefit from feature size reductions. Standard analog
processes have features that make them suitable for the design of low-frequency analog and
building blocks such as data converters and voltage regulators. Although there is significant
variation in analog performance throughout the industry, these processes in general enable
the fabrication of the same basic devices.
4.8
Specialty Processes
Specialty fabrication processes for the manufacture of advanced high performance analog
ICs include high voltage CMOS, radio frequency ("RF") CMOS, bipolar complementary metal oxide semiconductors ("BiCMOS") and silicon germanium ("SiGe") and BiCMOS. Most
specialty processes are based on CMOS – with features added that are designed to obtain
superior frequency, power, feature and cost characteristics. Products made by applying
these specialty processes are typically more complex to manufacture than products made
using standard CMOS process technologies. In order to provide high performance analog
products, processes must be optimized towards their respective application area. Designs in
specialty processes usually cannot be transferred without significant engineering efforts to
redesign for the specific characteristics of a different specialty process, making it more difficult for customers to switch fabs. Certain applications in the communications, lighting management and video display as well as the industrial, medical and computing markets provide
significant growth opportunities for these specialty processes.
The principal features of the key specialty processes include:
42/88
·
High Voltage CMOS. High Voltage CMOS technology combines analog and digital
signal and data processing with the capability to withstand high voltages from five to
120 volts, and sometimes also to switch high currents. With these features, systemson-a-chip for applications in specific application areas (such as motor controllers, sensor interfaces, bus controllers) can be implemented at very competitive cost levels.
High Voltage CMOS typically targets the industry and automotive markets as well as
consumer electronics.
·
RF CMOS. RF CMOS technology comprises certain process features and RF modeling capabilities for a wide set of devices (transistors, coils/inductors, capacitors, wiring
structures). RF CMOS is typically used to design highly integrated wireless transceivers for technologies such as RFID, and RF applications in automobiles.
·
BiCMOS. BiCMOS technology has become a widely adopted RF technology because
it combines bipolar attributes of high speed with higher density and lower power digital
CMOS functions. In comparison with RF CMOS, at the same technology mode BiCMOS has the advantage of higher operating speed at even lower current.
·
SiGe-BiCMOS. SiGe-BiCMOS technology requires certain additional process steps
including the deposition of a thin layer of silicon germanium in the area of the bipolar
transistors. Using SiGe-BiCMOS, it is possible to achieve switching speeds comparable to those of CMOS processes that are two generations smaller in line width. For
example, 0.35 μm SiGe-BiCMOS achieves switching speeds comparable to 0.18/0.13
μm RF CMOS, but at significantly lower manufacturing costs.
·
MEMS. Micro-electromechanical systems ("MEMS") technologies are specialty technologies combining micro-mechanical and conventional electronic structures on one
chip. Products fabricated using one of these technologies usually cannot be transferred to other MEMS technologies, as the technology setup is typically unique. MEMS
technologies are used to fabricate sensors such as membranes for silicon microphones or acceleration sensors for accelerometers for airbag deployment or electronic
stability control systems.
·
TSV. Through-silicon via ("TSV") is a vertical electrical connection (via) passing completely through a silicon wafer or die. TSVs are a high performance technique to
create 3D integrated circuits, compared to alternatives such as package-on-package.
3D integrated circuits enable higher functionality at same footprint. In addition, critical
electrical paths through the device can be drastically shortened, leading to improved
performance. While TSV technology is typically used to stack dynamic random access
memory (DRAM) and microprocessors, the Group has focused on combing sensing
devices with analog CMOS integrated circuits for medical and industrial applications.
43/88
5
DESCRIPTION OF THE GROUP
5.1
General Information
5.1.1
Name, Registered Office, Location
The name of the Company is austriamicrosystems AG. The Group's headquarters, the registered office and principal place of business of the Company are at Unterpremstätten near
Graz, Austria, and the business address is Schloss Premstätten, Tobelbader Strasse 30,
8141 Unterpremstätten, Austria.
5.1.2
Incorporation, Duration
The Company was incorporated on 13 November 1981 as a limited liability company according to Austrian law under the name Austria Mikrosysteme International Gesellschaft m.b.H.
On 23 December 1992, the Company was converted into an Austrian stock corporation.
Since August 2001, the corporate name of the Company is austriamicrosystems AG.
5.1.3
System of Law, Legal Form
The Company is a stock corporation (Aktiengesellschaft) incorporated and existing under the
laws of the Federal Republic of Austria. The Shares are listed on the SIX Swiss Exchange
according to the Main Standard. Because of the listing of its Shares on the SIX Swiss Exchange, the Company is subject to the rules and regulations of the SIX Swiss Exchange.
5.1.4
Purpose
Pursuant to section 2 of the Company's Articles of Association, the statutory business purpose of the Company is to design, manufacture and sell electronic products, in particular integrated circuits (microsystems) and other microelectronic products, to render services related thereto, to trade in such products and to arrange such trades, as well as to purchase
the relevant machines and tools for production.
5.1.5
Register
The Company is registered with the commercial register at the Country Court for Civil Matters of Graz (Firmenbuch des Landesgerichts für Zivilrechtssachen Graz) in Austria under
the registration number FN 34109 k.
5.2
Business Activities
5.2.1
Business Activities of the AMS-Group
The AMS-Group designs, develops and manufactures high performance analog and analogintensive mixed-signal semiconductor products. Through its global sales team, the AMSGroup sells a broad range of highly integrated standard products, standard linear ICs, and
ASICs to diversified end markets including the consumer and communications, industry,
medical, and automotive markets. The AMS-Group focuses on applications that benefit from
achieving low system power consumption and/or high signal sensitivity combined with high
feature integration and programmability.
The AMS-Group has 30 years of experience in developing IC solutions for its customers and
has developed an extensive world-class library of intellectual property. The AMS-Group focuses on the following key markets and applications where it has identified an increasing
demand for high volume, high performance analog and mixed-signal ICs, and where it be-
44/88
lieves its intellectual property library and design expertise gives it a significant competitive
advantage:
·
Consumer and communications products, including consumer electronics and mobile infotainment devices, such as mobile phones, smartphones, LCD TVs and monitors, MEMS silicon microphones, notebooks, PCs and tablet PCs; these products and
applications utilize the AMS-Group's power management, lighting management and
sensor and sensor interface functionalities;
·
medical applications, including medical imaging systems, such as computer tomography, digital X-ray systems, ultrasound systems and mammography equipment, and
personal healthcare devices, such as glucose meters, insulin pens and heart rate
monitors; these products and applications primarily utilize the AMS-Group's sensor
and sensor interface functionalities;
·
industry applications, such as various sensor interfaces, position measurement sensors and motor drivers and controllers; these products and applications primarily utilize the AMS-Group's sensor and sensor interface functionalities; and
·
automotive products, including contactless sensor applications, such as electronic
gas pedals, ESP stability control systems, and battery power management; these
products and applications utilize the AMS-Group's power management and sensor
and sensor interface functionalities.
The AMS-Group sells its products to more than 300 customers in these markets and enjoys
relationships with leading players and has been selling products to many of them for over ten
years.
The AMS-Group is an IDM, which means that it combines its manufacturing process capabilities with its design, test and product engineering expertise to optimize analog product performance. This integration allows the AMS-Group to quickly deliver innovative highperformance products. In 2002, it started production at its eight-inch (200 millimeter) wafer
manufacturing facility, or fab, which is equipped with standard 0.8 μm, 0.6 μm and 0.35 μm
CMOS base process technology that the AMS-Group is entitled to use under a technology
transfer and manufacturing agreement with Taiwan Semiconductor Manufacturing Company
("TSMC"). In addition, the AMS-Group has specialty process technologies, especially for
high voltage and silicon germanium, or SiGe, processes. The AMS-Group also has long-term
relationships with TSMC and International Business Machines Corporation ("IBM"), which
act as manufacturing partners providing additional production capacity for certain of the
AMS-Group's products.
The AMS-Group also offers a foundry capability based on certain of its specialty process
technologies to third party IC developers. The foundry services are marketed as a complementary limited-size activity to the AMS-Group's product business with customers seeking its
foundry services because of the AMS-Group's specialty process capabilities. The AMSGroup's foundry customers include leading semiconductor and sensor vendors. Even though
some of the AMS-Group's foundry customers are direct competitors of its products business,
they continue to rely on its specialty manufacturing processes.
5.2.2
Business Activities of the TAOS-Group
The TAOS-Group, develops, manufactures, and markets optoelectronic products with an aim
at redefining optoelectronic solutions to provide cost and performance advantages by creating and managing technology. Optoelectronics are among the fastest growing semiconductor
product segments, and are making significant advances into many markets. The push for
45/88
energy efficiency across the entire industry has led to new developments and applications
for LEDs, image sensors, and other light controlling products.
The optoelectronic market segments currently of particular importance to the TAOS-Group
are cell phones, computers and televisions.
The TAOS-Group designs and manufactures digital and analog light-sensing solutions that
deliver increased system integration, design flexibility, and functionality to a wide range of
products in the consumer, computer, industrial, medical, and automotive markets. The
TAOS-Group's integrated ambient light-sensing and proximity detection solutions enable
“green” displays by reducing system power consumption. The TAOS-Group's product family
of display management light sensing solutions includes:
46/88
·
Ambient Light Sensor ("ALS") combines broadband photodiode (350 nm to 1100
nm) with visible lightblocking photodiode in a single complementary metal-oxidesemiconductor (CMOS) integrated circuit. ALS can be used in any general application
where a high-resolution light sensor is required using a two-wire digital interface. This
family of devices is ideal for use with notebooks, tablets, flat-panel televisions, cell
phones, and digital cameras. Other applications include street light control, security
lighting, sunlight harvesting, machine vision, and automotive instrumentation clusters.
·
ALS & Proximity Detection family of devices provides both ALS and proximity detection when coupled with an external infrared light emitting diode (IR LED). While the
ALS approximates human eye response to light intensity under a variety of lighting
conditions and through a variety of attenuation materials, the proximity detection allows a large dynamic range of operation for use in short distance detection behind
dark glass, such as in a cell phone or for longer distance measurements. The TAOSGroup launched the first ALS & Proximity Detection member, TSL2771, in March
2010.
·
Light-to-Digital Converters combine a broadband photodiode (350 nm to 1100 nm)
with a visible lightblocking photodiode in a single CMOS integrated circuit. This family
of devices is ideal for use with notebooks, tablets, flat-panel televisions and many other applications.
·
Color Sensors (Integrated Color Light-to-Voltage Sensors) combine a photodiode,
color filter and transimpedance amplifier on a single die. The output is then fed to an
analog-to-digital converter (ADC) for digital processing. These devices are ideal for
applications, such as colorimetry, printing process control, display color correction,
and selectively ambient light detection or rejection.
·
Light-to-Frequency ("LTF") sensor performs the functions of light sensing, signal
conditioning and analog-to-digital conversion in a single monolithic integrated chip.
The LTF device converts light intensity to a digital format for a direct interface to a microcontroller. LTF converters are designed for applications such as ambient light measurement, light absorption/reflection in products such as white goods, photographic
equipment, colorimetry, chemical analyzers and display contrast controls or any system requiring a wide dynamic range and/or high resolution digital measurement of light
intensity.
·
Light-to-Voltage ("LTV") solutions combine a photodiode and transimpedance amplifier on a single monolithic integrated chip. These devices cover a wide range of
speed and responsivity options across different spectral responses to span a variety of
applications to measure ambient light, light absorption or reflection, and as an infrared
data receiver in light controls, printers, light curtains or remote controllers.
·
Linear Sensor Arrays consist of a linear array of integrating photosensing pixels that
measure incident light over a user-defined exposure time and generate a voltage or
digital output, which represents the light exposure at each pixel. These are used in
applications, including contact image sensing, optical character recognition (OCR),
edge detection and object measurement in products such as copiers, document scanners, and spectroscopy.
The lighting management technology of the AMS-Group is considered complementary to the
opto sensor capabilities of the TAOS-Group.
5.3
Group Structure
In addition to the principal place of business in Unterpremstätten near Graz, Austria, the
Group has product design centers in Switzerland, Italy, Spain and India as well as testing facilities in the Philippines.
The Group's global sales offices are located throughout Asia Pacific, Europe and North
America, namely in Korea, Japan, China (Shanghai, Suzhou and Shenzhen), India, Hong
Kong, Taiwan, Singapore, Germany, France, UK, Finland, Sweden, Italy, Switzerland and
multiple locations in the United States of America, i.e. in North Carolina, California and Texas. The Group has only active unlisted subsidiaries (apart from Austria Mikro Systeme International Ltd. in Hong Kong, which is dormant); there are no listed subsidiaries.
The following table describes the Group Companies:
Group company
Registered office
austriamicrosystems
Germany GmbH
austriamicrosystems
Switzerland AG
austriamicrosystems
France S.à.r.l.
Austriamicrosystems
Italy S.r.l.
austriamicrosystems
United Kingdom Ltd.
Austriamicrosystems
USA, Inc.
austriamicrosystems
Japan Co., Ltd.
austriamicrosystems
(Philippines) Inc.
austriamicrosystems India
Private Ltd.
Austriamicrosystems
Spain SL
Munich
(Germany)
Rapperswil-Jona
(Switzerland)
Vincennes
(France)
Milan
(Italy)
Launceston
(United Kingdom)
San Jose
(USA)
Tokyo
(Japan)
City of Calamba
(Philippines)
Hyderabad
(India)
Valencia
(Spain)
County of Kent
(United Kingdom)
Seoul
(Republic of Korea)
Hong Kong
(China)
Plano
(USA)
Seoul
(Republic of Korea)
Aspern Investment Inc.
Austriamicrosystems
Korea, Ltd.
Austria Mikro Systeme
International Ltd.
Texas Advanced Optoelectronic Solutions, Inc.
Texas Advanced Optoelectronic Solutions Korea, Ltd.
Equity (in EUR
thousands)
Percentage of
shares held
438
100%
349
100%
-85
100%
356
100%
127
100%
600
100%
151
100%
1,804
100%
130
100%
25
100%
964
100%
166
100%
1
100%
-4,696
100%
268
100%
1
2
47/88
Group company
TAOS International, Inc.
TAOS Germany GmbH
1
Registered office
George Town
(Cayman Islands)
Bayreuth
(Germany)
Equity (in EUR
thousands)
Percentage of
shares held
45,076
100%
2
39
100%
2
Not-consolidated as this is a dormant Group Company.
² Indirectly owned 100% subsidiaries of the Company.
5.4
Net Sales Revenues
5.4.1
Consolidated Net Sales Revenues of the AMS-Group (excluding the TAOS-Group)
Net Turnover for the Financial Years 2008 – 2010
In thousands of EUR (except earnings
per share which are in EUR)
Revenues
Cost of sales
Gross profit
Research and development
Selling, general and administrative
Other operating income
Other operating expense
Results from investments in associates
Results from operations
Finance income
Finance expenses
Net financing result
Result before tax
Income tax result
Net result
Basic earnings per share in EUR
Diluted earnings per share in EUR
1
2010
209,419
-109,158
100,261
-42,363
-37,640
7,962
-1,001
-134
27,085
1,411
-5,090
-3,679
23,406
-299
23,107
2.25
2.21
2009
1, 2
137,166
-89,799
47,367
-40,096
-32,141
7,452
-891
-735
-19,044
3,314
-2,171
1,143
-17,901
1,236
-16,665
-1.57
-1.57
2008
1, 2
184,699
-91,246
93,453
-43,584
-30,595
7,457
-1,311
-402
25,018
1,250
-13,718
-12,468
12,550
-270
12,281
1.13
1.12
The accounting principles for presenting foreign currency transactions have been changed – please refer to page
F-20 of this Listing Memorandum (Notes to the 2010 Financial Statements of the AMS-Group).
2
The accounting principles for presenting actuarial gains / losses from employee benefits have been changed –
please refer to page F-21 of this Listing Memorandum (Notes to the 2010 Financial Statements of the AMS-Group).
48/88
Net Sales Revenues by Segments for the Financial Years 2008 – 2010
2010
In thousands of
EUR
Revenues
from external customers
Results from
operations
Segment
assets
1
2009
2008
Products
Foundry
Total
Products
Foundry
Total
Products
Foundry
Total
179,810
29,609
209,419
113,574
23,592
137,166
155,701
28,997
184,699
25,253
6,248
31,5011
-1,252
4,780
3,528
23,441
4,999
28,440
32,351
4,449
36,7991
27,831
4,536
32,367
38,270
4,800
43,069
Regarding a reconciliation of segments results to income statement and a reconciliation of segment assets to total
assets refer to the Company's Consolidated Financial Statement, see page F-33 and page F-34 of this Listing Memorandum (Notes to the 2010 Financial Statements of the AMS-Group).
Net Sales Revenues by Geographical Segments for the Financial Years 2008 – 2010
In thousands of EUR
EMEA
Americas
Asia / Pacific
Total
5.4.2
2010
2009
2008
101,256
27,993
80,170
209,419
75,500
19,036
42,631
137,166
121,148
22,000
41,550
184,698
Pro forma Net Sales Revenues of the Group (including the TAOS-Group)
The tables below show the net sales revenues of the Group for the year 2010 based on unaudited pro forma combined financial information for the Group which was prepared solely
for the purpose of this Listing Memorandum in line with the requirements of the SIX Swiss
Exchange's "Directive on the Presentation of a Complex Financial History in the Listing
Prospectus" (DCFH). For further information, please refer to the section "Financial Information", pages F-3 to F-9 of this Listing Memorandum.
Net Sales Revenues for the Financial Year 2010
In thousands of EUR (except earnings per share
which are in EUR)
2010
Revenues
Cost of sales
Gross profit
267,679
-139,551
128,128
Research and development
Selling, general and administrative
Other operating income
Other operating expense
Result from investments in associates
Result from operations
-44,619
-50,132
7,962
-1,173
-134
40,032
Finance income
Finance expenses
Net financing result
1,419
-7,461
-6,042
49/88
In thousands of EUR (except earnings per share
which are in EUR)
2010
Result before tax
33,990
Income tax result
Net result
-3,921
30,069
Basic earnings per share in EUR
2.28
Net Sales Revenues by Segments for the Financial Year 2010
In thousands of EUR
Revenues from external customers
Results from operations
Segment assets
2010
Products
241,157
38,200
263,302
Foundry
26,522
6,248
4,449
Total
267,679
44,448
267,751
Net Sales Revenues by Geographical Segments for the Financial Year 2010
In thousands of EUR
EMEA
Americas
Asia / Pacific
Total
5.5
2010
102,837
26,414
138,428
267,679
Location and Real Estate
The Group's corporate headquarters and manufacturing facilities are located at Schloss
Premstätten in the village of Unterpremstätten near Graz, Austria. All of the Group's facilities
at or adjacent to its headquarters are owned by the Group.
The Group owns land in Unterpremstätten with a total surface area of 187,790 m², of which
24,400 m² constitute the total building area. The testing area consists of 1,825 m² and the
eight-inch wafer fab consists of 9,700 m², of which 3,900 m² are production area (i.e. a clean
room area).
The Group's various sales offices around the world are generally leased.
TAOS, a major Group Company, leases a approximately 20,000 square foot facility for its
headquarters in Plano, Texas, United States of America.
The Group believes that its facilities are adequate for its business both currently and for the
foreseeable future.
5.6
Intellectual Property
The Group relies on a combination of patents, copyrights, trademarks, trade secrets and documented know-how to protect its intellectual property. As of the date of this Listing Memorandum the Group had 288 patents and 437 pending patent applications in countries includ-
50/88
ing Germany, China, United States, Italy, United Kingdom, Taiwan, Hong Kong, Switzerland,
Austria, France, Spain, Korea and Japan.
The Group will continue to seek patent and other intellectual property protection for its proprietary technology where appropriate. The Group also has other proprietary technologies in
relation to which it deliberately has not sought, and in the future may decide not to seek, patent protection for competitive reasons.
The Group's Technical Board is responsible for managing its patent and know-how application process, with the objective of further increasing its intellectual property portfolio. The
Group closely benchmarks its patent position against those of its peers. The Group's patents
are primarily based on circuit designs and process technologies in the fields of Hall devices,
MEMS processes, high performance analog devices, BiCMOS processes, radio-frequency
transceivers, high voltage technology and optical sensors. The Group's most important copyrights include those with respect to its design HIT-Kits that assist it in designing its ICs. In
addition to the Group's own proprietary technology, it relies on certain license and technology transfer relationships, in particular with TSMC and IBM.
Under a technology transfer and manufacturing agreement, TSMC has granted the Group
the right to use its standard 0.35 μm base process technology on a non-exclusive basis. The
agreement limits the amount of wafers the Group can manufacture in-house using TSMC’s
process technology per calendar quarter; however, the Group believes that the agreement
provides sufficient capacity to satisfy the Group's manufacturing needs both for its own product needs and for its foundry customers in the foreseeable future. The agreement with TSMC
further provides for technical cooperation on improvements and process derivatives of the
transferred technology.
The Group's license agreement with IBM provides a non-exclusive worldwide license of
IBM’s entire portfolio of more than 60,000 semiconductor patents including manufacturing
rights to the 0.18 μm CMOS and jointly developed high voltage process.
The Group Company TAOS holds seven granted patents and has filed nine patent applications. TAOS is in the process of developing additional intellectual property. The eventual value of its IP and in-process research and development will depend upon the growth and maturation of the overall market for its products. The value of the intellectual property also depends upon any competing technologies that have been developed or are in development
that may be superior to the solutions provided by TAOS.
5.7
Research and Development
The Group's technology in the design and manufacturing of high performance analog ICs is
based on research and development activities of over more than 25 years. The Group continues to invest in research and development. Research and development expenses reached
approximately EUR 44.6 million in 2010 (EUR 42.1 million in 2009; EUR 45.1 million in
2008).
Research and development activities primarily consists of product development and the ongoing focus on specialty variants of CMOS and HV processes for HV and high-frequency,
high performance analog applications. In doing so, the improvement and continued refinement of advanced manufacturing processes supports the ongoing development of innovative
products and leading technologies. Consequently, the systematic implementation of the
Group's platform and derivative methodology allowed a substantial number of new standard
products introduced in 2010.
51/88
The development partnership with IBM for a novel 0.18 μm HV CMOS process technology
was successfully completed in 2010. The process technology is now available at the Group’s
manufacturing partner IBM.
On average, the number of employees in research and development was 307 in 2010 (314
in 2009; 327 in 2008). The research findings again allowed filing a number of international
patents as well as the publication of numerous papers in international specialist journals and
at trade conferences in 2010.
5.8
Legal Proceedings
On 17 December 2010, the Federal Patent Court (Bundespatentgericht) in Munich, Germany, ruled against the Group in a first-instance verdict in the patent infringement lawsuit
against Melexis N.V. / SA, Belgium and its German subsidiary Melexis GmbH, which related
to an action of nullity against the Group's patent regarding magnetic field encoder products
(European patent EP 0 916 074 B1). The Federal Patent Court ruled that the European patent EP 0 916 074 B1, covering magnetic field encoder products, which is exclusively held by
the Group, is not patentable. The Group has appealed the first-instance decision of the Federal Patent Court at the Federal Supreme Court (Bundesgerichtshof) in Karlsruhe, Germany.
Further hearings on the above proceedings are expected, including possible appeals.
Further, TAOS is involved in court proceeding with regard to patent infringements. In late
2008, TAOS filed a suit against Intersil Corporation, Milpitas, California, United States of
America, alleging a patent infringement. The case is currently pending in the Eastern District
of Texas, Sherman Division. Intersil Corporation is seeking to invalidate certain of the
Group's patents.
Apart from these proceedings no other court, arbitral or administrative proceedings that are
material to the Group's assets and liabilities or profits and losses are pending or, to the
knowledge of the Management Board, threatened.
5.9
Employees
On average, the AMS-Group had 1,119 employees in 2010 (1,087 in 2009; 1,129 in 2008) of
which 846 (850 in 2009; 895 in 2008) worked at the premises in Unterpremstätten.
The consolidated pro forma number of employees of the Group (including the TAOS-Group)
as at 31 December 2010 was 1,189. As at the date of this Listing Memorandum the Group
has approximately 1,204 employees (85 employees of TAOS are included in this figure).
5.10
Investments
5.10.1
Investments made
Due to the global financial crisis in 2008, the Group made no major investments in the financial years 2008, 2009 and 2010, other than investments in securities in the ordinary course
of business. Further, there have been no material capital expenditures and investments in
equipment in the financial years 2008, 2009 and 2010.
However, during the business year 2010, an existing 30% investment in FlipChip Holdings
LLC, Phoenix, Arizona, United States of America, was increased to 33.5% (carrying amount
as per 31 December 2010: EUR 2.8 million), which is accounted using the equity method.
Further, the existing investment in New Scale Technologies, Inc., Victor, New York, United
States of America, was increased to 32.3% (carrying amount as per 31 December 2010:
EUR 3.7 million), which is also accounted using the equity method.
52/88
5.10.2
Current Investments
In the context of the Transaction, the Group acquired 100% of the TAOS-Shares for a total
consideration of USD 319.9 million partially provided in cash and partially provided in the
form of the New Shares as outlined in section "Transaction" above.
5.10.3
Investments already approved
At present, there are no material future investments that have already been firmly decided
upon by the Management Board or the Supervisory Board, respectively, and for which legally
binding undertakings have been entered into.
5.11
Recent Developments
On 26 May 2011 the annual general meeting of the Company took place and resolved besides the typical items discussed at annual general meetings, such as appropriation of the
balance sheet profit for the financial year 2010 or the discharge of the members of the Management and the Supervisory Board, on the creation of new authorized capital, including the
authority to exclude the subscription rights of the shareholders of the Company (see section
"Transaction – Capital Increase and Issuance of New Shares").
Further, in the course of the Transaction the Group issued the New Shares and acquired
100% of the TAOS-Shares using the New Shares as a partial consideration.
5.12
No Material Adverse Change
Other than disclosed in this Listing Memorandum, there have been no material adverse
changes that have occurred in the Company's assets and liabilities, financial position and
profits and losses since the close of the last financial year on 31 December 2010 (also see
section "Financial Information").
53/88
6
CAPITALIZATION AND INDEBTEDNESS
This financial information has been derived from the Company’s reporting package as at
30 April 2011 and is unaudited.
The tables below do not, and do not purport to, illustrate the impact of the acquisition of
TAOS. For such information, please see section “Financial Information - Unaudited pro forma Financial Information for the Financial Year 2010” of this Listing Memorandum.
As of the date of this Listing Memorandum, there have been no changes to the information
set forth in the tables below, other than (i) as a result of ongoing normal operating activities,
such as changes in the cash and cash equivalents and results of operations of the Company; (ii) as otherwise discussed in this Listing Memorandum, including, without limitation, the
changes due to the Transaction (see section "Transaction" of this Listing Memorandum); and
(iii) any changes that would not have a material adverse effect on the Company.
The table below sets forth the total amount of current and non-current liabilities for the Company as of 30 April 2011.
In thousands of EUR
1
54/88
30 April 2011
Cash and cash equivalents
41,282
Interest-bearing loans and borrowings
Trade liabilities
Provisions
Other liabilities
Total current liabilities
Interest-bearing loans and borrowings
Employee benefits
Deferred government grants
Total non-current liabilities
1
Total liabilities
15,930
13,511
13,698
14,183
57,322
29,232
12,813
228
42,273
99,595
Shareholders' equity
Issued capital
Additional paid-in capital
Treasury shares
Other reserves
Retained earnings
Total shareholders´ equity and reserves
Total liabilities and shareholders´ equity
26,813
103,592
-16,799
14
85,588
199,208
298,803
All liabilities are neither secured nor guaranteed.
7
SUPERVISORY BOARD AND MANAGEMENT BOARD
7.1
In General
The statutory corporate bodies of the Company are the Management Board (Vorstand), the
Supervisory Board (Aufsichtsrat) and the general meeting of the Shareholders (Hauptversammlung). The respective rights and responsibilities of these bodies are set forth in the
Austrian Stock Corporation Act, the Company's Articles of Association and the rules of procedure for the Management Board and the Supervisory Board (Geschäftsordnung). The
Management Board and the Supervisory Board work independently from each other, and no
individual can be a member of both, the Management Board and the Supervisory Board at
the same time.
According to the applicable Austrian law and the Articles of Association, the Management
Board is responsible for managing the Company's day-to-day business. Furthermore, it
represents the Company with respect to third parties.
The Supervisory Board monitors and advises the Management Board and is responsible for
the appointment and removal of the members of the Management Board. Furthermore, the
Supervisory Board represents the Company in transactions between a member of the Management Board and the Company. Generally, the Supervisory Board is not entitled to assume management functions and to make decisions regarding the Company's management
or to intervene in such decisions. However, according to the Articles of Association and the
rules of procedure for the Management Board, the Management Board must obtain prior approval of the Supervisory Board for certain transactions and the Supervisory Board is entitled
to make additional transactions or decisions of the Management Board subject to its approval. The members of the Management Board and of the Supervisory Board must exercise
their duties with the diligence of a prudent businessman. In order to observe this standard of
diligence, the members of the Management Board and of the Supervisory Board have to
consider various factors, in particular the interests of the Company and its shareholders and
employees.
The Agreement provides for the Company to use commercially reasonable efforts to take all
reasonably necessary and appropriate actions (including, calling and holding an extraordinary general meeting of Shareholders within 45 days after Closing) to nominate Jacob Jacobsson and Gerald Rogers, or two other representatives of TAOS, reasonably acceptable
to the Company, to Supervisory Board positions. The Agreement contemplates various methods to appoint the representatives of TAOS to the Supervisory Board, though Austrian law
prohibits the Management Board from formally nominating persons to the Supervisory Board
or making formal proposals to shareholders regarding a nominee. Binding resolutions regarding these issues as well as possible amendments of the Company's Articles of Association regarding the election and removal of Supervisory Board members will be decided at an
extraordinary general meeting to be held after Closing.
7.2
Supervisory Board
7.2.1
General
Pursuant to the Articles of Association and article 110 of the Austrian Labor Constitutional
Act (Arbeitsverfassungsgesetz), the Supervisory Board consists of at least three shareholder
representatives, who are elected by the shareholders at the general meeting in accordance
with the provisions of the Austrian Stock Corporation Act as well as two employee repre-
55/88
sentatives, who are delegated by the Company's employees’ council. The Supervisory Board
may, pursuant to the Articles of Association, not consist of more than nine members in total.
Currently, the Company's Supervisory Board consists of nine members: six shareholder representatives and three employee representatives. The Austrian Labor Constitutional Act stipulates that the employees’ council may appoint one member for each two Supervisory
Board members elected at the shareholders meeting, and — in case of an uneven number of
elected members — another employees’ council member. These employees’ council members have substantially the same rights and obligations as the other members of the Supervisory Board. Should the employees’ council fail to fill some or all of their allotted seats on
the Supervisory Board, these seats will remain vacant. The employees’ council members of
the Supervisory Board can only be removed by the employees’ council itself. Any employees’ council member of the Supervisory Board who ceases for any reason to be a member of the employees’ council will also lose his or her position on the Supervisory Board. Unlike the members of the Supervisory Board elected by the shareholders’ meeting, the members appointed by the employees’ council are employees of the Company.
The members of the Supervisory Board are generally elected for a fixed term which, under
Austrian law, expires at the end of the annual general meeting in the fourth financial year after the year in which the relevant Supervisory Board member was elected. Supervisory
Board members may be re-elected.
In accordance with the Articles of Association, the Supervisory Board of the Company has
adopted rules of procedure for itself, as amended on 17 February 2006. Under these rules,
unless otherwise provided by law, resolutions of the Supervisory Board are passed by simple
majority of the votes cast. In case of a deadlock, the chairman of the Supervisory Board shall
cast the deciding vote. Austrian law provides that a minimum of three members of the Supervisory Board must be present in order to pass a resolution. The Supervisory Board meets
at least four times a year.
The Supervisory Board has the following four committees:
·
Staff Committee
The staff committee is responsible for negotiating and passing resolutions on the relationship between the Company and the members of the Management Board except
resolutions on appointments and dismissals of members of the Management Board.
The members of this committee are Dipl. Ing. Guido Klestil (chairman), Prof. Dr. Siegfried Selberherr and Johann C. Eitner.
·
Financial Audit Committee
The financial audit committee is, amongst other things, in charge of examining the annual financial statements, the management report and the proposal on the appropriation of profits, preparing the reports to be submitted to the annual general meeting and
discussing the audit report with the auditor. The members of this committee are Mag.
Hans Jörg Kaltenbrunner (chairman), Dipl. Ing. Guido Klestil and Johann C. Eitner.
·
Nomination Committee
The nomination committee is responsible for preparing proposals to the Supervisory
Board regarding appointments to executive positions that become available on the
Management Board, strategies for succession planning and proposals to the annual
general meeting regarding appointments to positions that become available on the
Supervisory Board. The members of this committee are Dipl. Ing. Guido Klestil (chair-
56/88
man), Prof. Dr. Siegfried Selberherr, Mag. Hans Jörg Kaltenbrunner and Johann C.
Eitner.
·
Emergency Committee
The emergency committee was formed as part of the implementation of Rule 39 of the
Austrian Corporate Governance Code (Österreichischer Corporate Governance Kodex), compliance with which is sought by the Company on a voluntary basis with certain exceptions as set forth in the Company's Financial Statements. The emergency
committee is set up to discuss the affairs of the Supervisory Board in cases of imminent danger and, if the situation absolutely requires it, to decide on them. The members of this committee are Dipl. Ing. Guido Klestil (chairman), Prof. Dr. Siegfried Selberherr, Mag. Hans Jörg Kaltenbrunner and Ing. Mag. Günter Kneffel.
7.2.2
Members
Dipl. Ing. Guido Klestil is the chairman of the Supervisory Board. He was born in 1941 and
is an Austrian citizen. He has been the chairman of the Supervisory Board of the Company
since 1988. He was re-elected in 2009 and his current term of office lasts until 2014. Dipl.
Ing. Klestil studied communications engineering and held, during his almost 40-year career,
management positions in major international companies in the electrical and electronics industry. He was the General Manager of ITT Austria GmbH, General Manager of Alcatel Austria Aktiengesellschaft and a member of the Management Board of Austrian Industries AG.
Prof. Dr. Siegfried Selberherr is a vice chairman of the Supervisory Board. He was born in
1955 and is an Austrian citizen. He has been a member of the Supervisory Board of the
Company since March 2001 and vice chairman since July 2001. He was re-elected in 2009
and his current term of office lasts until 2014. Prof. Dr. Selberherr earned a doctorate in electrical science, has been a full professor at the Institute of Microelectronics at Vienna University of Technology since 1988 and was the Dean of the Faculty of Electrical Engineering and
Information Technology from 1998 to 2005. Prof. Dr. Selberherr is internationally recognized
for his research in microelectronics, particularly in the field of technology computer-aided design (TCAD), and advises several international semiconductor companies.
Mag. Hans Jörg Kaltenbrunner was born in 1957. He is an Austrian citizen. He has been a
member of the Supervisory Board of the Company since 2009. He is currently vice chairman.
His current term of office lasts until 2014. Having studied at Vienna University of Business
and Economics, Mag. Kaltenbrunner began his professional career at the Trade Delegation
in Taipei, Taiwan, as deputy trade delegate for Austria from 1985 to 1994. He assumed
management positions in the area of international commerce at the Hong Kong office and in
asset management at Creditanstalt-Bankverein. Mag. Kaltenbrunner was appointed to the
management boards of RHI AG and Austria Mikro Systeme AG and has served as a member of the management and supervisory boards of international industrial companies.
Dipl. Wirtsch. Ing. Klaus Iffland was born in 1956. He is a German citizen and has been a
member of the Supervisory Board of the Company since March 2006. He was re-elected in
2009 and his current term of office lasts until 2014. Having graduated in mechanical engineering and business administration, Dipl. Wirtsch. Ing. Iffland held executive positions at
Audi AG in production, development and purchasing, and was head of purchasing at Audi
AG. Since 2002 he has held executive positions at Magna International Inc., a leading
worldwide automotive supplier, first as a member of the management board of Magna Steyr
Fahrzeugtechnik AG, then as President of Intier Automotive Europe and Magna Closures,
VP Purchasing at Magna International Europe and VP Procurement & Supply at Magna
Steyr.
57/88
Dipl. Kfm. Michael Grimm was born in 1960. He is a German citizen. He has been a member of the Supervisory Board of the Company since 2009 and his current term of office lasts
until 2014. Dipl. Kfm. Grimm studied management at the University of Frankfurt and then
worked as a tax consultant and auditor at Arthur Andersen Wirtschaftsprüfungsgesellschaft,
lately as a partner and head of the Leipzig office. From 1997 until 2001 he was at Hoechst
AG with responsibility for group accounts and was involved in the transformation of Hoechst
AG into Aventis. From 2002 until 2005 Dipl. Kfm. Grimm was director of finance, accounting
and investments at Grohe Water Technology AG & Co. KG, then Managing Director of Triton
Beteiligungsberatung GmbH, an investment company with holdings in medium-size companies in Germany and Sweden. He is currently the CFO of Heidenhain GmbH which is a customer of the Group.
Dr. Kurt Berger was born in 1966. He is an Austrian citizen. He has been a member of the
Supervisory Board of the Company since 2009 and his current term of office lasts until 2014.
Having studied law in Graz, Dr. Berger was an assistant professor and member of teaching
staff at Vienna University of Business and Economics. In 1996 he was awarded a doctorate
by Vienna University. Since 1999, Dr. Berger has worked as an attorney at the firm of Berger
Ettel & Partner in Vienna focusing on company law and associated capital market law, corporate transactions, acquisitions, funding and business law.
Johann C. Eitner is an employee representative on the Supervisory Board. He was born in
1957 and he is an Austrian citizen. He has been a member of the Supervisory Board of the
Company since July 1994. His last delegation was in 2010 and his current term of office lasts
until 2014. Further, he has been chairman of the workers’ council and employee representative on the Supervisory Board since 1994. During his more than 35-year career, Johann C.
Eitner has been employed as an electrician in various positions and, since 1984, as supervisor in the mask lithography department of the Company. He was trained as an electrician.
Ing. Mag. Günter Kneffel is an employee representative on the Supervisory Board. He was
born in 1968 and he is an Austrian citizen. He has been a member of the Supervisory Board
of the Company since March 1999. His last delegation was in 2011 and his current term of
office lasts until 2015. Since 1999, he has been chairman of the employee council and employee representative on the Supervisory Board. After completing his studies in RF Engineering and Electronics, Ing. Mag. Günter Kneffel gained more than 15 years of professional
experience as a process engineer for photolithography and graduated in law in 2010 (Magister der Rechtswissenschaften).
Dipl. Ing. Kurt Layer is employee representative on the Supervisory Board. He was born in
1953 and he is an Austrian citizen. He has been member of the Supervisory Board since
2009. His last delegation was in 2011 and his current term of office lasts until 2015. He has
been member of the Employee Council since 1984. Dipl. Ing. Layer studied Electrical Engineering at Graz University of Technology and received a degree in Medical Electronics. Dipl.
Ing. Layer has worked for more than 25 years with the Company in areas including Design,
Quality and Research & Development.
58/88
7.2.3
Positions held by the Members of the Supervisory Board in the last five years
The members of the Supervisory Board of the Company have been, during the last five
years, or currently are, members of the administrative, management or supervisory bodies
under company law, or partners, of the following listed and major companies:
Name of the Supervisory Board member
Name of the relevant company/partnership
Position held during the
last five years
Position still
held
Dipl. Ing. Guido Klestil
VIENNA INSURANCE GROUP AG
Wiener Versicherung Gruppe
Andlinger & Company
Member of the supervisory
board
Partner
No
MAGNA STEYR Fahrzeugtechnik
AG
Austria Email Aktiengesellschaft
Member of the management board
Member of the supervisory
board
Member of the supervisory
board
Vice chairman of the
supervisory board
Mag. Hans Jörg Kaltenbrunner
Dipl. Wirtsch. Ing.
Klaus Iffland
Dr. Kurt Berger
Waagner-Biro Aktiengesellschaft
Binder & CO AG
7.2.4
Yes
No
No
Yes
Yes
Business Address of the Members of the Supervisory Board
The business address of the members of the Supervisory Board is Schloss Premstätten, Tobelbader Strasse 30, 8141 Unterpremstätten, Austria.
7.2.5
Negative Statement relating to Legal Proceedings and Convictions
There have been no convictions against any members of the Supervisory Board, for major or
minor finance or business-related crimes in the last five years. Further, there have been no
legal proceedings against any members of the Supervisory Board by statutory or regulatory
authorities (including designated professional associations) that are ongoing or have been
concluded with a sanction.
7.3
Management Board
7.3.1
General
Under Austrian law, the members of the Management Board are appointed by the Supervisory Board for renewable terms of up to five years. Under the Articles of Association, the
Management Board must be composed of one, two, three or four members. The Supervisory
Board determines the number of managing directors and deputy managing directors, if any.
The Company's Management Board currently consists of two members; in the event of a
dead lock, the chairman casts the deciding vote.
The Supervisory Board has adopted rules of procedure for the Management Board, as
amended on 18 December 2009.
The Company is legally represented by (i) the two members of the Management Board acting jointly, (ii) by one member of the Management Board acting jointly with a company officer
with statutory commercial power of attorney (Prokurist), or (iii) by two company officers with
statutory commercial power of attorney (Prokuristen) acting jointly within the framework of
their statutory power.
59/88
7.3.2
Members
John A. Heugle, MSc, was born in 1958. He is a U.S. citizen. He has been chairman of the
Management Board of the Company since April 2002. His contract term expires in 2013.
During his almost 30-year career, John Heugle worked in Europe, the United States of America and Asia. He has held a series of management positions in companies in the electronics
and telecommunications sectors, such as Molex Inc., Stocko Metallwarenfabriken GmbH and
Krone AG. John Heugle studied Metallurgical Engineering at the University of Oklahoma
(Bachelor of Science) and Materials Science at Northwestern University (Master of Science)
in the United States of America.
Mag. Michael Wachsler-Markowitsch was born in 1968. He is an Austrian citizen. He has
been member of the Management Board of the Company since February 2004. His contract
term expires in 2013. He has been with the Company since 2001, holding the position of
Chief Financial Officer since 2003. During his 20-year career, Michael WachslerMarkowitsch was CFO of Ahead Communications AG, Vienna, Austria, and worked as a
consultant and auditor for international mandates at KPMG Austria WirtschaftsprüfungsgmbH, Vienna, Austria. He has extensive experience in accounting, corporate finance and tax consultancy. Michael Wachsler-Markowitsch studied Business Administration at Vienna University of Business and Economics (Magister degree) and founded Dynaconsult GmbH, Vienna, Austria, an IT consulting firm, during the same period. He is member of the Management Board of the Styrian Federation of Industry, Graz, Austria and heads
the representative body for the electrical and electronics industries at the Styrian Chamber of
Commerce, Graz, Austria.
7.3.3
Positions held by the Members of the Management Board
Apart from the management functions in the Company, the Management Board members of
the Company have not pursued any material management functions in other companies over
the past five years.
7.3.4
Business Address of the Members of the Management Board
The business address of the members of the Management Board is Schloss Premstätten,
Tobelbader Strasse 30, 8141 Unterpremstätten, Austria.
7.3.5
Negative Statement relating to Legal Proceedings and Convictions
There have been no convictions against any members of the Management Board, for major
or minor finance or business-related crimes in the last five years. Further, there have been
no legal proceedings against any members of the Management Board by statutory or regulatory authorities (including designated professional associations) that are ongoing or have
been concluded with a sanction.
7.4
Ownership of Shares and Option Rights in the Company
The following tables show the number of Shares and option rights held by individual members of the Supervisory Board as well as the Management Board of the Company. The applicable percentage ownership is based on 13,753,092 Shares of the Company outstanding
as a result of the Capital Increase in connection with the Transaction.
60/88
7.4.1
Shareholdings and Option Rights of the Supervisory Board
Dipl.-Ing. Guido Klestil, chairman
Prof. Dr. Siegfried Selberherr, vice chairman
Mag. Hans Jörg Kaltenbrunner, vice chairman
Dipl. Wirtsch. Ing. Klaus Iffland, member
Dipl. Kfm. Michael Grimm, member
Dr. Kurt Berger, member
Johannes C. Eitner, member
Ing. Mag. Günter Kneffel, member
Dipl. Ing. Kurt Layer, member
Total
1
No. of Shares
Voting Rights (%)
14,580
15,000
1,000
100
40
30,720
0.106
0.109
0.007
0.001
0.000
0.223
The number of Shares refers to the number of Shares held as of the date hereof. No options are held by the mem-
bers of the Supervisory Board as of the date hereof.
DR. JOHANNES HEIDENHAIN GmbH, of which Dipl. Kfm. Michael Grimm is Chief Financial
Officer, holds 365,000 Shares of the Company.
7.4.2
Shareholdings and Option Rights of the Management Board
No. of Shares
John A. Heugle, chairman
Mag. Michael WachslerMarkowitsch, member
Total
1
Voting Rights (%)
Options
108,000
0.785
54,300
3
0.605
26,950
191,173
1.390
81,250
83,173
2
1
The number of Shares refers to the number of Shares held as of the date hereof.
2
This number of options refers to the vested options under the SOP 2005 (as defined below) and the SOP 2009 (as
defined below) respectively. During the business year 2010, 20,000 options for Shares of the Company were
awarded to John A. Heugle and 10,000 were allocated to Mag. Michael Wachsler-Markowitsch, both under the
terms and conditions of SOP 2009. Through 31 December 2010, John A. Heugle exercised 5,250 option rights under the SOP 2009 and Mag. Michael Wachsler-Markowitsch did not exercise any option rights.
3
This number includes 2,318 Shares owned by Mag. Michael Wachsler-Markowitsch's wife, which Shares Mag. Mi-
chael Wachsler-Markowitsch may be deemed to beneficially own.
7.5
Securities and Option Rights
The Company has implemented the following stock option plans:
7.5.1
SOP 2002
On 31 October 2002, the Shareholders of the Company approved a stock option plan for senior executives and key staff members (i.e. certain employees involved in the preparation of
the Company's Initial Public Offering in 2004) of the AMS-Group ("SOP 2002"). From 2002
to 2005, 200,790 options were issued at an exercise price of EUR 6.00 (EUR 18.00 prior to
the share split executed in 2004 at a ratio of 1:3) per Share. One option entitles the bearer to
purchase one Share in the Company. 33% of the options can be exercised on the first day of
grant at the earliest, 33% can be exercised one year later at the earliest and 34% can be exercised two years later at the earliest. The last possible exercise date is 1 January 2012. In
2006, the Company exercised an existing option by repurchasing 174,375 of its treasury
61/88
shares at EUR 6.00 per share to cover its obligation under SOP 2002. As a result, the exercising of options from SOP 2002 neither leads to an increase in the total number of shares
issued nor does it cause a dilution of equity. In 2010, 9,694 repurchased own shares of the
Company were transferred to employees or executives of the Company as a result of options
being exercised.
7.5.2
SOP 2005
On 22 April 2005, the Shareholders of the Company approved a stock option plan for staff
members, senior executives and the Management Board of the AMS-Group ("SOP 2005").
The SOP 2005 provides for the issue of a total of 990,000 options over a period of four
years. According to the conditions of SOP 2005, options forfeited back to the Company may
be re-issued until the end of the plan period. In 2010, 19,500 options were granted, consequentially, a total of 903,816 options have been granted (after deduction of forfeited options).
One option entitles the bearer to buy one Share in the Company. 20% of the options issued
can be exercised one year after issue at the earliest and the remainder in 20% installments
each further year after issue at the earliest. The last possible exercise date is 30 June 2015.
The options’ strike price is calculated from the average market price of the Company's share
over the three months prior to granting of the stock options, minus a discount of 25%.
To fund the options issued, the annual general meeting of the Company of 19 May 2005 authorized the Management Board to increase the share capital by EUR 2,398,203.53 by issuing 990,000 no par value bearer shares for cash to provide cover for the SOP 2005 whereby the subscription rights of existing shareholders of the Company were excluded (conditional capital).
7.5.3
SOP 2009
In 2009, the SOP 2009 for staff members and senior executives of the AMS-Group was approved by the Management Board and the Supervisory Board, under the terms of which,
over a period of four years a total not exceeding 1,100,000 options on no par value shares of
the Company may be granted, corresponding to around 8% of the Company’s outstanding
Shares as of the date hereof ("SOP 2009"). Every option granted entitles the participant to
purchase a Share in the Company. Exercise of the options will be possible annually to the
extent of 25% on the days of the first, second, third and fourth anniversaries of granting, i.e.
in four equal tranches. The preferential price of the options is calculated from the average
stock market price over the three months prior to granting of the stock options. All options
granted must be exercised by 30 June 2017. In 2010, 262,122 stock options were distributed
from SOP 2009.
7.5.4
SOP 2011
With regard to the Transaction, vested and unvested options of TAOS employee shareholders relating to shares in TAOS under TAOS' 2010 equity incentive plan shall be substituted
with corresponding options to Company shares. This shall be effected by the adoption of the
stock option plan 2011 ("SOP 2011"). In this regard, the Management Board has published
a report on 24 June 2011 pursuant to article 95 paragraph 6 in conjunction with section 159
paragraph 3 fig. 2 of the Austrian Stock Corporation Act relating to the number of options,
the exercise price, the due date and the transferability of the options under the SOP 2011.
Pursuant to the SOP 2011, the Company has, with regard to TAOS employees holding unvested options, issued options to purchase up to 181,900 Shares and, with regard to the
TAOS employees holding vested options, issued options to purchase up to 52,810 Shares.
62/88
With regard to the unvested options of TAOS employees, the exercise price for the options
was set in the range of USD 0.00 and USD 19.81. The vested options will have a strike price
equal to the average trading price of the Company's Shares on the SIX Swiss Exchange during the thirty day period immediately after the grant.
The Supervisory Board approved the SOP 2011 on 9 July 2011 and authorized the SOP
committee of the Supervisory Board to resolve on certain conditions of the issue of the options pursuant to the SOP 2011 and to issue the options pursuant to the SOP 2011.
7.6
Employee Participation Program
The Company has implemented the following employee participation programmes:
·
SOP 2002;
·
SOP 2005;
·
SOP 2009;
·
SOP 2011.
For a detailed description of each employee participation programme, please refer to section
"Supervisory Board and Management Board – Securities and Option Rights" above.
7.7
Statutory and Group Auditor
The existing auditing mandate was assumed by KPMG Wirtschaftsprüfungs- und Steuerberatungs GmbH, Porzellangasse 51, 1090 Vienna, Austria, in 2005. Its election as auditor for
the year 2010 was confirmed at the annual general meeting of the Company on 6 May 2010.
The responsible auditor for the year 2010 is Mag. Dr. Johannes Bauer who assumed the
mandate in 2010. KPMG Wirtschaftsprüfungs- und Steuerberatungs GmbH was reelected as
auditor at the annual general meeting 2011.
Unqualified audit opinions have been issued for the Company's statutory annual financial
statements, prepared in accordance with Austrian generally accepted accounting principles,
and its annual consolidated financial statements, prepared in accordance with IFRS, for the
years 2008, 2009 and 2010 included elsewhere in this Listing Memorandum.
BKD, LLP, 14241 Dallas Parkway Suite 1100 Dallas, Texas 75254-2961, United States of
America, an independent registered public accounting firm, has audited the consolidated financial statements of TAOS as of and for the years ended 31 December 2009 and 2010.
KBA Group, LLP, whose place of business was at 14241 Dallas Parkway, Suite 200, Dallas,
Texas 75254, United States of America, audited the consolidated financial statements as of
and for the year ended 31 December 2008. The partners of KBA Group, LLP, joined BKD,
LLP, effective 1 June 2009.
Unqualified audit opinions have been issued for TAOS' annual financial statements, prepared in accordance with United States generally accepted accounting principles, and its
annual consolidated financial statements, prepared in accordance with US GAAP, for the
years 2009 and 2010 included elsewhere in this Listing Memorandum.
63/88
8
SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
8.1
Major Shareholders
The Company is not in a position to disclose its major shareholders, other than disclosed in
this Listing Memorandum (i) for the members of the Supervisory Board as well as the Management Board (see section "Supervisory Board and Management Board – Ownership of
Shares and Options Rights in the Company"), and (ii) for certain former TAOS-Shareholders
(see in this section below) for the following reasons:
Under article 20 of the Swiss Federal Act on Stock Exchange and Securities Trading dated
24 March 1995, as amended ("SESTA") and the Ordinance of the Swiss Financial Market
Supervisory Authority on Stock Exchanges and Securities Trading, any person who, directly,
indirectly or in concert with third parties, acquires or sells for its own account shares or purchases or sells rights relating to shares, in a company incorporated in Switzerland whose
equity securities are listed in whole or in part in Switzerland and thereby reaches, exceeds or
1⁄3
2⁄3
falls below the thresholds of 3%, 5%, 10%, 15%, 20%, 25%, 33 %, 50% or 66 % of the
voting rights in such company, whether or not the voting rights can be exercised, must notify
the company and the SIX Swiss Exchange of such acquisition or disposal in writing within
four trading days.
However, as the Company is not incorporated in Switzerland, no such obligation exists for
major shareholders of the Company. Consequently, no such information is available to the
Company.
Further, under article 91 paragraph 1 of the Austrian Stock Exchange Act dated 8 November
1989, as amended, if persons, directly or indirectly acquire or sell the shares of an issuer
whose shares are admitted to trading on a regulated market, they shall be under the obligation to immediately, but at the latest two trading days later, inform the Austrian Financial
Market Authority, the exchange operating company and the issuer of the share of voting
rights held after the completion of the acquisition or sale, if, as a consequence, their proportion of voting rights reaches, exceeds or falls below 5%, 10%, 15%, 20%, 25%, 30%, 35%,
40%, 45%, 50%, 75% and 90%.
However, as the Shares are not admitted to trading on a regulated market pursuant to
Title III of Directive 2004/39/EEC, no such obligation exists for major shareholders of the
Company. Consequently, no such information is available to the Company.
In addition, the Company has issued bearer shares and it does, consequently, not have a
register of shareholders. Lacking such information, the Company does not have information
on major shareholders or significant groups of shareholders and their shareholdings, either.
For the sake of completeness, it has to be mentioned that, in some cases, the Company has
in the past obtained individual and informal notices of certain shareholdings, which, however,
may not be up to date and complete.
As a result of the Transaction, the Company is aware of the following shareholdings in the
Company:
53 former TAOS-Shareholders directly or indirectly hold an aggregate amount of 2,706,840
Shares, representing 19.7% of the voting rights in the Company (calculated on the basis of
the statutory ordinary share capital). As set out in the section "Transaction – Support and
Lock-up Agreements", which describes the arrangements applicable to all former TAOSShareholders who received New Shares in the Transaction, these 53 former TAOSShareholders have entered into lock-up agreements with Cash Holdco, Stock Holdco and
64/88
the Company pursuant to which they are not allowed to transfer and trade the Shares as follows:
(i)
for a period of six months until 14 January 2012 (the "Lock-up Period"), none of the
53 holders of New Shares will be allowed to trade or transfer any of the New Shares
acquired in the Transaction;
(ii)
during each three month period following the Lock-up Period, the six founding TAOSShareholders, who directly or indirectly hold an aggregate amount of 1,372,746
Shares, representing 10.0% of the voting rights in the Company (calculated on the basis of the statutory ordinary share capital), are permitted to trade or transfer (on a noncumulative basis) up to 20% of the New Shares acquired by each founding shareholder of TAOS in the Transaction;
(iii)
during each three month period following the Lock-up Period, the 47 remaining TAOSShareholders who received New Shares in the Transaction and who directly or indirectly hold an aggregate amount of 1,334,094 Shares, representing 9.7% of the voting
rights in the Company (calculated on the basis of the statutory ordinary share capital),
are permitted to trade and transfer (on a non-cumulative basis) up to 25% of the New
Shares acquired by such TAOS-Shareholder in the Transaction; and
(iv)
from and after the two year anniversary of the Closing of the Transaction (14 July
2013), there are no further restrictions on trades and transfers of the New Shares acquired by the TAOS-Shareholders in the Transaction.
Kirk S. Laney acts as the representative of those shareholders.
On an individual basis, no former TAOS-Shareholder other than Kirk S. Laney directly or indirectly holds more than 3% of the Shares following the Transaction. Kirk S. Laney, 75093
Plano, Texas, United States of America, holds 458,482 Shares corresponding to 3.3% of the
voting rights in the Company (calculated on the basis of the statutory ordinary share capital).
8.2
Own Equity Securities
As of the date hereof the Company has in total repurchased 880,719 Shares, i.e. 6.4% of the
issued Shares after the Capital Increase, with a nominal value of EUR 2,133,478 in total.
The Company's previous share repurchase scheme was adopted at the annual general
meeting on 2 April 2009. In 2010, 400,195 Shares, for a purchase price of EUR 8,522,434.55
(approximately EUR 969,437 nominal value) and in 2011, 122,449 Shares for a purchase
price of EUR 4,400,841.69 (approximately EUR 296,624 nominal value) were bought back
under the share repurchase scheme. These shares are held as short-term securities in the
treasury and are primarily designated to cover the SOP 2009 that will end in 2017, the SOP
2011 to cover former unvested TAOS options and, eventually, parts of the Earn-out (see
section "Transaction – Basic Transaction Structure – Earn-out").
The annual general meeting of 26 May 2011 additionally authorized the Management Board
to acquire Shares of the Company. Please see section "Transaction – Capital Increase and
Issuance of New Shares – Authorization to purchase Own Shares" for more details.
8.3
Related Party Transactions
Persons related to the Management Board held 2,318 Shares and no options of the Company as per 31 December 2010.
65/88
Apart from this, the Company has not executed any related party transactions that may have
a material effect on the business, financial condition and results from operations of the Company.
8.4
Cross-shareholdings
No cross-shareholdings exist on the date of this Listing Memorandum.
8.5
Public Purchase Offers
Since the Company is an Austrian corporation listed in Switzerland, the regulations of the
SESTA regarding public takeover obligations do not apply. Furthermore, the regulations of
Austrian takeover law relating to offer obligations do not apply to the Company, either. The
Articles of Association of the Company do not contain any provisions regarding offer obligations.
66/88
9
DESCRIPTION OF THE SHARE CAPITAL AND THE SHARES
9.1
Capital Structure
9.1.1
Issued Capital
As of 31 December 2010, the Company's statutory ordinary share capital amounted to nominally EUR 26,758,748.01, divided into 11,046,252 no par value bearer shares with a calculated nominal value of EUR 2.4224 per share.
On the date of this Listing Memorandum the Company's statutory ordinary share capital
amounts to nominally EUR 33,315,872.49, divided into 13,753,092 Shares.
On the date of this Listing Memorandum, the Company's actual ordinary share capital is
EUR 33,370,413.45, divided into 13,775,607 Shares. This figure takes into account that certain holders of options to acquire Shares of the Company have exercised their options which
is, however, in accordance with Austrian law, not yet reflected in the commercial register and
in the Company's Articles of Association (see section "Description of the Share Capital and
the Shares – Capital Structure – Conditional Capital").
9.1.2
Authorized Capital
The annual general meeting of 26 May 2011 decided to create an authorized capital (genehmigtes Kapital) in the amount of EUR 13,349,218.40. Accordingly the Management
Board has been authorized, with the consent of the Supervisory Board, to increase the share
capital of the Company by an additional EUR 13,349,218.40 by issuing up to 5,510,677 new
no par value bearer shares by 26 May 2016 in one or several tranches to be issued for contribution in cash or in kind and to determine the issue price, the conditions of issue and further particulars of the Capital Increase in mutual agreement with the Supervisory Board.
With regard to the New Shares issued in the course of the exercise of the authorized capital
for purposes of financing the Transaction, please see section "Transaction - Capital Increase
and Issuance of New Shares". With regard to the exclusion of the subscription rights of the
Company's existing shareholders, please see section "Transaction – Capital Increase and
Issuance of New Shares – Exclusion of Subscription Rights".
As a consequence of the Capital Increase and the issue of the New Shares, as of the date
hereof, the authorized capital amounts to EUR 6,792,093.91.
9.1.3
Conditional Capital
In May 2005, the annual general meeting of the Company authorized the Management
Board to increase the share capital by up to EUR 2,398,203.53 by issuing up to 990,000 new
no par value bearer shares for cash to provide cover for stock options granted to staff members and senior executives in the Company and the Group Companies, excluding the subscription rights of existing shareholders. The terms of issue are based on the provisions of
the stock option plan approved on 22 April 2005 (SOP 2005; see section "Supervisory Board
and Management Board – Securities and Option Rights – SOP 2005"). As of the date hereof,
68,767 Shares have been issued in compliance with the SOP 2005. A corresponding increase in the ordinary share capital in the amount of 22,515 Shares of the issued 68,767
Shares has not yet been registered in the commercial register and reflected in the Company's Articles of Association. In accordance with Austrian law, this will take place later in 2011.
On the date of this Listing Memorandum, the actual conditional capital (bedingtes Kapital) of
the Company is EUR 2,343,662.57.
67/88
9.2
Clearing Codes
The Swiss Security Number (Valorennummer) of the Shares is 1'808'109, the ISIN is
AT0000920863 and the SIX Swiss Exchange Ticker Symbol is AMS. The Common Code is
019114198.
9.3
Type of Shares and Certification
On the date of this Listing Memorandum, no unit or profit-sharing certificates exist.
9.4
Dividends and Dividend Policy
9.4.1
Declaration of Dividends
Within the first five months of each financial year, the Management Board is required to prepare the financial statements and a report in respect of the previous financial year for presentation to the Supervisory Board, together with a recommendation in respect of dividends.
The Supervisory Board must examine the annual financial statements and the recommendation in respect of dividends and report on them to the Shareholders at the annual general
meeting. If the Supervisory Board approves the annual financial statements, they become final and binding unless the Management Board and the Supervisory Board decide that they
should be approved by the annual general meeting. The Shareholders at the annual general
meeting resolve on the distribution of the profits drawn in the last business year. The Shareholders may – in deviation from the recommendation of the Management Board – refuse to
distribute the profit in whole or in part. Any adjustments in the annual financial statements
necessitated by such a resolution must be adopted by the Management Board.
9.4.2
Dividend Policy
Shareholders generally are entitled to receive dividends in proportion to the calculated nominal value of their Shares in the Company's registered share capital. Each year, the Management Board proposes a certain dividend based on the annual profits of the Company to
the annual general meeting. Currently, the Management Board aims to distribute 25% of
each year's annual profits as dividends.
9.4.3
Restrictions relating to Dividend Payments
Subject to the Austrian capital maintenance rules (Verbot der Einlagenrückgewähr) pursuant
to article 52 et seq. Austrian Stock Corporation Act, there are no restrictions relating to the
payment of dividends.
9.4.4
Payment of Dividends
Notice of the dividends to be paid and of the appointment of the paying agent for this purpose must be published in the newspaper "Wiener Zeitung". Unless otherwise resolved by
the Shareholders, according to the Company's Articles of Association, dividends become
due and payable ten days after the annual general meeting was held at which they were approved. Dividends not claimed by Shareholders within three years after they are payable are
forfeited and retained in favor of the Company's statutory reserve.
No dividends have been declared by the annual general meeting for the financial years 2008
and 2009. Since the Company returned to profit in 2010, the Management Board has proposed a dividend of EUR 0.52 per Share for the year 2010, which was approved unanimously by the annual general meeting of 26 May 2011 and paid out to the shareholders of the
Company in June 2011.
68/88
The Company will maintain a paying agent in Switzerland for as long as its Shares are listed
on the SIX Swiss Exchange. The Company's paying agent in Switzerland is currently Bank
Vontobel AG, Gotthardstrasse 43, 8002 Zurich, Switzerland.
9.5
Voting Rights
All Shareholders of the Company hold common bearer shares. Each Share entitles its bearer
to one vote at the general meeting. Neither Austrian statutory law nor the Company's Articles
of Association provide for any limitation on the number of Shares for which a vote can be
cast at the general meeting or restrict the right of non-resident or foreign Shareholders to
hold Shares or to exercise the voting rights associated with the Shares.
Voting by proxy is only possible with a written power of attorney which remains with the
Company. The resolutions passed by the general meeting require the majority of the votes
cast (simple majority) insofar as the Austrian Stock Corporation Act or the articles of association do not foresee a larger majority or additional requirements (article 121 paragraph 2 of
the Austrian Stock Corporation Act). The Company's Articles of Association do not call for a
higher number of votes than those required by the Austrian Stock Corporation Act.
9.6
Subscription Rights
Shareholders have statutory subscription rights upon any increase of the registered share
capital. Such rights may be excluded with a majority of 75% of the votes cast at a shareholders’ meeting or, in case of authorized capital, pursuant to an authorization of the shareholders’ meeting, by the Management Board subject to the approval of the Supervisory Board.
Save as qualified below, any exclusion of subscription rights requires justification. The Management Board has to prepare a report explaining the reasons for an intended exclusion of
the subscription rights. The subscription rights may generally be excluded and replaced with
intermediary subscription rights (the "Intermediary Subscription Rights") if new shares are
issued to an underwriter who offers those shares to the existing shareholders. Subscription
rights may be transferred by agreement and, if applicable, delivery of a coupon evidencing
such rights. In certain cases where the shares to which such subscription rights relate are
deposited with a clearing system, the rights may be transferred in accordance with the rules
of such clearing system.
The exercise of subscription rights may be limited to a period of not less than two weeks.
Subscription rights lapse if not exercised within the prescribed period. The Company's Management Board is required to publish notice of the exercise price and of the commencement
and duration of the exercise period in the newspaper "Wiener Zeitung". Subscription rights
must be exercised by submitting a duly executed subscription certificate. In the case of Intermediary Subscription Rights, subscription rights are exercised by notice thereof to the underwriter.
9.7
Rights in the Event of Dissolution
The dissolution of the Company requires a majority of at least 75% of the votes cast at a
shareholder's meeting. If the Company is dissolved, any assets remaining after repayment of
the outstanding debts and supplementary capital will be distributed on a pro-rata basis to the
shareholders.
69/88
9.8
Transfer of Shares and Restrictions of Voting Rights; Lock-up Agreements
There are no transfer restrictions with regard to the Shares. For more details on the lock-up
relating to the New Shares, please see section "Transaction – Support and Lock-up Agreements" above.
9.9
Conversion and Option Rights, Bonds, Loans and Contingent Liabilities
As described in the section "Supervisory Board and Management Board – Securities and
Option Rights" above the Company has at present issued several stock option plans (SOP
2002, SOP 2005 and SOP 2009).
Please see section "Transaction - Basic Transaction Structure – Treatment of Holders of Unvested Options" above for further application of the terms and conditions of SOP 2009.
The Company has not issued any bonds.
As of 31 December 2010 the Company had EUR 47,777,146 (thereof USD 13,970,500 and
CHF 5,647,085) unsecured outstanding loans with maturity dates ranging from 1 April 2012
to 31 December 2015 and bearing interest at rates ranging between EURIBOR +0.65% and
+0.75% and LIBOR +1.25% per annum. With respect to some of the unsecured loans, interest accrues on outstanding balances at fixed rates ranging between 2.0% and 2.5%. Please
see section "Capitalization and Indebtedness" for more information on the Group's loans.
Please see section "Transaction – Debt Financing" for more information on the most recent
debt financing of the Company in connection with the Cash Consideration relating to the
Transaction.
9.10
Shareholders' Meeting
Pursuant to the Austrian Stock Corporation Act, the annual general meeting is convened by
the Management Board or the Supervisory Board. In accordance with the Company’s Articles of Association, the annual general meeting shall be convened at least 28 days and in
the case of an extraordinary general meeting, 21 days, prior to the selected date. The convocation is published in the "Wiener Zeitung" and announced in "Finanz & Wirtschaft". In
compliance with the Austrian Stock Corporation Act, the agenda proposed for the annual
general meeting is published in connection with the convocation of the said meeting. A
shareholder or a group of shareholders holding at least 5% of the share capital during at
least three months before the application may demand the convocation of a general meeting.
The general meeting takes place at the registered seat of the Company in Unterpremstätten,
Austria or in any capital city of an Austrian federal state. Shareholders cannot introduce new
agenda items in general meetings (except for the proposal of a resolution on a special audit,
which can always be introduced during a general meeting even without due notification).
Shareholders holding at least 5% of the share capital during the period of three months before introducing new agenda items may introduce such new agenda items within a 21-day
period in the case of annual general meetings and a 19-day period in the case of extraordinary general meetings.
According to the Articles of Association, the shareholders of deposited shares have to prove
that they held the shares on a record-date, i.e. the tenth day before the day of the general
meeting by a deposit certificate from the respective depository (Depotbestätigung). Such
evidence must be received by the Company, at the address specified in the notice announcing the general meeting, at least three business days before the general meeting. The depository may be a credit institution having its registered seat in a member state of the European
70/88
Economic Area or a full member of the OECD. The Company only has bearer shares outstanding and does therefore not keep a share register.
At the annual general meeting, resolutions are passed concerning the allocation and distribution of profits, the release of the members of the Management Board and the Supervisory
Board from their responsibility for the past business year, the appointment of auditors, the
election of members of the Supervisory Board and, if requested by the Management Board
and the Supervisory Board, the approval of the financial statements.
Neither the Austrian Stock Corporation Act nor the Company's Articles of Association require
a minimum participation of Shareholders at the general meeting in order to adopt valid resolutions. According to the Austrian Stock Corporation Act, a majority of 75 percent of the votes
cast at a shareholders’ meeting is required for various matters, including:
·
capital reductions;
·
the creation of authorized or conditional capital;
·
the dissolution;
·
the merger into or with another company;
·
split-off or split-up as well as the transfer of the Company's entire assets; and
·
a change in the legal form.
As to certain other matters that normally require a three-quarter majority, the Company has
made use of the possibility under the Austrian Stock Corporation Act to provide for a simple
majority in its Articles of Association, including, inter alia, with regard to capital increases
(other than authorized and conditional capital), amendments of its Articles of Association
(except for the Company's corporate purpose), issuance of convertible securities and profit
participation rights and removal of Supervisory Board members in certain circumstances.
9.11
Special Provisions
According to the Austrian Stock Corporation Act, companies have the possibility to provide in
their articles of association that certain items are decided upon by the general meeting with a
simple majority of the votes cast instead of a three-quarter majority of the votes cast. The
Company has made use of the possibility in its Articles of Association (please see section
"Description of the Share Capital and the Shares – Shareholders' Meeting" above). The respective items where the Company has made use of this possibility are capital increases
(other than authorized and conditional capital), amendments of the Company's Articles of
Association (except for the Company's corporate purpose), issuance of convertible securities
and profit participation rights and removal of Supervisory Board members in certain circumstances.
For a list of several resolutions requiring a simple majority instead of a qualified majority,
please see section "Description of the Share Capital and the Shares – Shareholders' Meeting". For a description of the proposed changes to the Articles of Association as a result of
the extraordinary general meeting which is likely to be held on or about 25 August 2011, see
section "Transaction – Capital Increase and Issuance of New Shares - Extraordinary General
Meeting".
71/88
10
INFORMATION ON THE ISSUE OF THE NEW SHARES
10.1
Legal Foundation
Please see section "Transaction – Capital Increase and Issuance of New Shares" for details.
10.2
Nature of the Issue
The subscription rights of the existing shareholders of the Company to subscribe New
Shares have been excluded as all of the New Shares have been subscribed by Stock Holdco
and were privately placed with Stock Holdco.
10.3
Number, Type and Par Value of Securities
The New Shares are no par value ordinary bearer shares (nennbetragslose, auf den Inhaber
lautende Stückaktien) of the Company with a calculated nominal value of EUR 2.4224 each.
10.4
New Securities from Capital Transaction
For further details regarding the creation of the New Shares and the transaction relating thereto, please see section "Transaction" above.
10.5
Rights
The rights of the Shareholders of the New Shares are identical to those of the shares existing prior to the Transaction. For further information, see sections "Description of the Share
Capital and the Shares". These are, in particular, the following rights.
10.5.1
Voting Rights
The voting rights of the New Shares are identical to those of the shares existing prior to the
Transaction. For further information on the voting rights of the Shares, see section "Description of the Share Capital and the Shares - Voting Rights".
10.5.2
Subscription Rights
The subscription rights of the Shareholders of New Shares are identical those of the shares
existing prior to the Transaction. For a detailed description thereof, please see section "Description of the Share Capital and the Shares – Subscription Rights".
10.5.3
Rights in the Event of Liquidation
The rights of the Shareholders of New Shares in the event of liquidation of the Company are
identical to those of the shares existing prior to the Transaction. For a detailed description
thereof, please see section "Description of the Share Capital and the Shares – Rights in the
Event of Dissolution".
10.6
Dividends
Holders of the New Shares will be entitled to receive dividends declared, if any, by the Company for the business year ending 31 December 2011, and for all subsequent business
years.
10.7
Transfer and Trade Restrictions
For more details on the lock-up relating to the New Shares, please see section "Transaction
- Support and Lock-up Agreements" above.
72/88
10.8
International Issue
As described in section "Transaction – Basic Transaction Structure", the New Shares were
privately placed with Stock Holdco. The issue of the New Shares will not be placed simultaneously on other domestic and foreign markets and no individual tranches of the issue will
be reserved for one or more other markets.
10.9
Public Purchase or Exchange Offers
There are neither any public purchase or exchange offers made by third parties for the Company's securities, nor any public exchange offers made by the Company for the securities of
another company.
10.10
Form of Securities
The New Shares are Shares of the Company's share capital.
Pursuant to the Company's Articles of Association and Austrian law, the New Shares are
represented by one permanent global share certificate (Globalurkunde). The permanent
global share certificate has been deposited with SIX SIS Ltd, Olten, Switzerland ("SIX SIS"),
through which clearing occurs. The New Shares will be registered as book-entry securities
(Bucheffekten) with SIX SIS in accordance with the provisions of the Swiss Federal Intermediated Securities Act (Bundesgesetz über die Bucheffekten).
The right of the Shareholders to receive individual share certificates for their New Shares is
excluded pursuant to the Company's Articles of Association.
According to Austrian law, legal title to shares and all rights arising thereof can be transferred by way of agreement and legal delivery (Titel und rechtliche Übergabe) or, in case the
shares are deposited with a clearing system, in accordance with the relevant rules governing
the respective clearing system.
In accordance with the rules governing SIX SIS, the New Shares and all rights arising thereof will be transferred pursuant to the Swiss Federal Intermediated Securities Act. To the
extent that the Swiss Federal Intermediated Securities Act is applicable, the transfer of bookentry securities from one account holder to another requires (1) a transfer order of the disposing account holder to its intermediary; and (2) the credit entry of the respective bookentry securities to the acquirer's account. Such credit entry serves as proof of ownership of
the acquirer.
10.11
Net Proceeds
As the New Shares shall be issued in exchange for the Contribution in Kind, there are no net
proceeds. Please see the section "Transaction - Basic Transaction Structure" for further information.
73/88
11
SIX SWISS EXCHANGE
11.1
Main Standard of the SIX Swiss Exchange
The SIX Swiss Exchange was founded in 1993 as the successor to the local stock exchanges in Zurich, Basel and Geneva. Full electronic trading in foreign equities and derivatives began in December 1995. In August 1996, the SIX Swiss Exchange introduced full
electronic trading in Swiss equities, derivatives and bonds. In 2010, the turnover on the SIX
Swiss Exchange and on Scoach Switzerland was CHF 1,190.5 billion. A listing according to
the Main Standard of the SIX Swiss Exchange requires, inter alia, that (i) the articles of association of the issuer comply with applicable law, (ii) the operating and financial track record
of the issuer extends over a period of at least three years, (iii) the issuer appoints auditors
fulfilling the requirements pursuant to articles 7 and 8 of the Federal Act on the Admission
and Supervision of Auditors, (iv) the issuer’s equity capital amounts to at least CHF 25 million, (v) the total market value of the issuer’s initial public offering amounts to a minimum of
CHF 25 million, (vi) the securities must have been validly issued at the time of listing, and
(vii) 25 percent of the issuer’s outstanding share capital be placed in public hands. As of
30 June 2011, 214 issuers were listed according to the Main Standard of the SIX Swiss Exchange.
11.2
General Rules on Securities Trading
Trading on the SIX Swiss Exchange occurs through a fully integrated trading system covering the entire process from trade order through settlement. Trading begins each business
day at 9:00 am CET and continues until 5:20 pm CET, at which time the closing auction
starts and continues until 5:30 pm CET (with a random close of trading within two minutes).
After the close of exchange trading, new orders can be entered or deleted until 10:00 pm
CET. From 6:00 am CET new entries and inquires can be made until 9:00 am CET. The system is not available between 10:00 pm and 6:00 am CET. For the opening phase (starting at
9:00 am CET), the system closes the order book and starts opening procedures; it establishes the opening prices and determines orders to be executed according to the matching rules.
Closing auctions are held to determine the daily closing price for all equity securities traded
on the SIX Swiss Exchange. At the start of the closing auction (shortly before the close of
trading), the status of all equity order books changes from permanent trading to auction. The
auction itself consists of a pre-opening period and the actual auction according to rules that
are similar to the opening procedure.
Transactions take place through the automatic matching of orders. Each valid order of at
least a round lot is entered and listed according to the price limit. A round lot is expected to
consist of one share. In general, market orders (orders placed at a best price) are executed
first, followed by limit orders (orders placed at a price limit), provided that if several orders
are listed at the same price, they are executed according to the time of entry. The SIX Swiss
Exchange may provide for a duty to trade on the SIX Swiss Exchange in individual market
segments. This duty obliges the participant, during trading hours, to execute orders on order
book only. There shall be no duty to trade on the SIX Swiss Exchange for equity securities
traded in the Blue Chip Shares segment. The duty to trade on the SIX Swiss Exchange for
Mid-/Small-Cap equity shares shall not apply to (i) orders with a market price of
CHF 200,000 or more; (ii) collective orders, if the market price of the order is CHF 1,000,000
or more or (iii) portfolio orders. Members of the SIX Swiss Exchange must observe the principle of best execution for any "on-exchange, off-order book transaction" off-exchange transaction during the trading period. Transactions in shares effected by or through members of
the SIX Swiss Exchange are subject to a stock exchange levy. This levy includes the report-
74/88
ing fee and is payable per trade and participant. The fee is defined individually for each trading segment.
Banks and broker-dealers doing business in Switzerland are required to report all transactions in listed securities traded on the SIX Swiss Exchange. For transactions effected via the
exchange system, reporting occurs automatically. If a participant conducts an off-order-book
trade, it must be reported immediately, but no later than three minutes after such trade.
Transaction information is collected, processed and immediately distributed by the SIX Swiss
Exchange. Transactions outside trading hours must be reported no later than prior to the
opening on the next following trading day. The SIX Swiss Exchange distributes a comprehensive range of information through various publications, including in particular the Swiss
Market Feed. The Swiss Market Feed supplies SIX Swiss Exchange data in real time to all
subscribers as well as to other information providers such as the Investdata System of SIX
Telekurs and Reuters.
A quotation may be suspended by the SIX Swiss Exchange if large price fluctuations are observed, or if important, price-sensitive information is about to be disclosed, or in other situations that might endanger fair and orderly trading. Surveillance and monitoring is the responsibility of the SIX Swiss Exchange as the organizer of the market. The aim of such selfregulation is to ensure fair trading and an orderly market.
11.3
Clearing, Payment and Settlement
Clearing and settlement of securities traded on the SIX Swiss Exchange is made through
SIX SIS.
Exchange transactions are usually settled on a T+3 basis, meaning that delivery against
payment of exchange transactions occurs three working days after the trade date.
11.4
Corporate Governance Directive
The Directive on Information Relating to Corporate Governance of 29 October 2008 of the
SIX Swiss Exchange (the "DCG") came into force on 1 July 2009. It applies to annual reports of issuers of equity securities listed on the SIX Swiss Exchange. The DCG generally
requires issuers to disclose important information on the management and control mechanisms at the highest corporate level or to give specific reasons why this information is not disclosed.
11.5
Management Transactions
The Directive on Disclosure of Management Transactions of the SIX Swiss Exchange of
1 April 2011 (the "DMT") applies to issuers whose primary listing is on the SIX Swiss Exchange. The DMT requires issuers to ensure that members of their board of directors and
senior management disclose transactions they have made in the securities of their own
company.
According to the DMT, the respective individual must disclose any such transaction to the issuer. The issuer must forward that information to the SIX Swiss Exchange. The members of
the Supervisory Board and the members of the Management Board are therefore required to
disclose all transactions they have made in securities of the Company. All such transactions
without threshold are subsequently published on a no name basis on the website of the SIX
Swiss Exchange.
75/88
11.6
Foreign Investment and Exchange Control Regulations in Switzerland
Other than in connection with government sanctions imposed on certain persons from the
former Republic of Yugoslavia, the Republic of Iraq, Iran, Lebanon, Liberia, Lybia, Ivory
Coast, Sudan, the Democratic Republic of Congo, Myanmar (Burma), Syria, Zimbabwe, Belarus, North Korea, Somalia, the Republic of Guinea, Eritrea, persons and organizations with
connections to Osama bin Laden, the "Al-Qaeda" group or the Taliban and certain persons
in connection with the assassination of Rafiq Hariri, there are currently no government laws,
decrees or regulations in Switzerland that restrict the export or import of capital, including,
but not limited to, Swiss foreign exchange controls on the payment of dividends, interest or
liquidation proceeds, if any, to non-resident holders of the Shares.
76/88
12
TAXATION
12.1
Taxation in Switzerland
The following summary does not purport to be a comprehensive description of all the tax
consequences of the acquisition, ownership and disposal of the New Shares, and does not
take into account the specific circumstances of any particular holder. The summary is based
on a residence and effective management of the Company outside Switzerland and Liechtenstein. The summary is based, as applicable, on the tax laws, regulations, decrees, rulings, income tax conventions (treaties), administrative practice and judicial decisions of Switzerland as in effect on the date of this summary which are subject to change (or subject to
changes in interpretations), possibly with retrospective effect. This is not a complete analysis
of the potential tax effects relevant to owning New Shares, nor does the following summary
take into account or discuss the tax laws of any jurisdiction other than Switzerland. It also
does not take into account investors’ individual circumstances. This summary does not
purport to be a legal opinion or to address all tax aspects that may be relevant to a holder of
New Shares. Holders are advised to consult their own tax adviser in light of their particular
circumstances as to the Swiss and foreign tax laws, tax regulations and regulatory practices
that could be relevant for them in connection with the New Shares. Tax consequences may
differ according to the provisions of different double taxation treaties and the investor’s particular circumstances. The statements and discussion of Swiss taxes set out below are of a
general nature and do not relate to persons in the business of buying and selling shares or
other securities.
12.1.1
Federal Withholding Tax
Dividend payments and similar cash or in-kind distributions on the New Shares are not subject to Swiss federal withholding tax (Verrechnungssteuer).
12.1.2
Federal, Cantonal and Communal Income Taxes and Wealth Tax
Individuals who are Swiss residents for tax purposes and hold New Shares as part of their
private assets (Privatvermögen) are required to include dividend payments and similar cash
or in-kind distributions or liquidating distributions in excess of the repayment of the nominal
amount and capital contribution reserves in terms of Swiss tax law (Kapitaleinlageprinzip) in
their personal income tax return and are liable to federal, cantonal and communal income tax
on any net taxable income for the relevant tax period. Their capital gains resulting from the
sale of New Shares are generally not subject to income tax and their capital losses are not
deductible for income tax purposes. In case such individuals are qualified as professional
securities dealers (Wertschriftenhändler) for income tax purposes, their share sale proceeds
may be recharacterized into taxable investment income. Furthermore, upon a repurchase of
New Shares by the Company, the portion of the repurchase price in excess of the nominal
amount and capital contribution reserves in terms of Swiss tax law may be classified as taxable investment income if the New Shares are repurchased for a capital reduction.
Individuals who are Swiss residents for tax purposes and hold New Shares as part of their
business assets (Geschäftsvermögen) and legal entities who are Swiss residents for tax
purposes and non-resident taxpayers that hold New Shares in connection with the conduct
of a trade or business in Switzerland through a permanent establishment or fixed place of
business situated in Switzerland, who receive dividend payments and similar cash or in-kind
distributions or liquidating distributions or realize a capital gain or loss on the disposition of
New Shares have to include such distributions, gains or losses in their income statement for
the relevant tax period (Buchwertprinzip) and are liable to federal, cantonal and communal
77/88
individual or corporate income tax, as the case may be, on any net taxable earnings for such
tax period. The same tax treatment applies to Swiss resident individuals who, for income tax
purposes, are classified as "professional securities dealers" for reasons of, inter alia, frequent dealing and debt-financed purchases so that the New Shares are qualified as business assets. Swiss resident corporate taxpayers, and foreign corporate taxpayers which hold
New Shares in connection with the conduct of a trade or business in Switzerland through a
permanent establishment, may qualify for participation relief (Beteiligungsabzug) in respect
of dividends received and capital gains (Gestehungskostenprinzip), if their holding of New
Shares is considered substantial for tax purposes.
Any holder of New Shares who is not a Swiss resident for tax purposes and who during the
current taxation year has not engaged in a trade or business in Switzerland through a permanent establishment or fixed place of business and who is not subject to taxation in Switzerland for any other reason will generally not be liable to any federal, cantonal or communal
income tax on dividend payments and similar cash or in-kind distributions or liquidating distributions or on a realized gain on the sale of New Shares. Such a holder will also not be liable to any cantonal/communal wealth tax on the New Shares.
12.1.3
Gift and Inheritance Taxes
The transfer of New Shares may be subject to cantonal and/or communal gift, estate or inheritance taxes if the donor is, or the deceased was, resident for tax purposes in a canton levying such taxes.
12.1.4
Federal Stamp Taxes
The issuance of shares on the primary market is neither subject to federal issuance stamp
tax (Emissionsabgabe), nor subject to federal stamp turnover tax (Umsatzabgabe).
The transfer of shares in the secondary market is generally subject to federal stamp turnover
tax (Umsatzabgabe) where a bank or a securities dealer in Switzerland or Liechtenstein as
defined in the Federal Stamp Tax Act acts as an intermediary or is a party to the sale of New
Shares currently at a rate of 0.3 percent (full rate for foreign shares) of the price paid for the
New Shares.
12.2
Taxation in Austria
The following summary does not purport to be a comprehensive description of all the tax
consequences of the acquisition, ownership and disposal of the New Shares, and does not
take into account the specific circumstances of any particular Shareholder. The summary is
based on a residence and effective management of the Company in Austria. The summary is
based, as applicable, on the tax laws, regulations, decrees, rulings, income tax conventions
(treaties), administrative practice and judicial decisions of Austria as in effect on the date of
this summary which are subject to change (or subject to changes in interpretations), possibly
with retrospective effect. This is not a complete analysis of the potential tax effects relevant
to owning New Shares, nor does the following summary take into account or discuss the tax
laws of any jurisdiction other than Austria. It also does not take into account investors’ individual circumstances. This summary does not purport to be a legal opinion or to address all
tax aspects that may be relevant to a Shareholder of New Shares. Shareholders are advised
to consult their own tax adviser in light of their particular circumstances as to the Austrian
and foreign tax laws, tax regulations and regulatory practices that could be relevant for them
in connection with the New Shares. Tax consequences may differ according to the provisions of different double taxation treaties and the investor’s particular circumstances. The
78/88
statements and discussion of Austrian taxes set out below are of a general nature and do not
relate to persons in the business of buying and selling shares or other securities.
12.2.1
Taxation of Dividends
(a)
Austrian Residents
Dividends paid by an Austrian stock corporation to its shareholders are subject to a 25%
domestic withholding tax ("WHT"; Kapitalertragsteuer). The WHT is withheld by the company paying the dividend.
For Austrian resident individuals, the personal income tax on dividends is deemed settled by
way of the WHT ("final taxation"; Endbesteuerung) so that the respective dividend income
does not have to be included in the shareholder’s income tax return. Alternatively, the individual shareholder may declare the dividends in his income tax return in which case dividends paid until 30 September 2011 are taxed at one-half of the average personal income
tax rate whereas dividends paid after 30 September 2011 are taxed at the shareholder’s
regular progressive personal income tax rates. The Austrian WHT will be credited against
the shareholder’s personal income tax liability and any exceeding amount is refunded. Expenses, including interest expenses, relating to the dividends are not tax deductible.
For Austrian resident corporations, Austrian dividend distributions are exempt from Austrian
corporate income tax and the WHT is credited against the corporate income tax liability of
the shareholder and any exceeding amount is refunded. No WHT has to be withheld in case
dividends are paid until 30 September 2011 to a corporate shareholder holding directly at
least 25% of the share capital or after 30 September 2011 to a corporate shareholder holding at least 10% of the share capital. Expenses in connection with tax exempt dividend income are generally not tax deductible, except for interest expenses connected with the acquisition of shares (certain restrictions apply).
(b)
Non-Austrian Residents
For non-Austrian residents, dividend distributions are in principle also subject to the 25%
domestic Austrian WHT. However, the Austrian WHT is in many cases reduced according to
tax treaties applicable between Austria and the country of residence of the recipient. To date
Austria has entered into tax treaties with more than 80 countries. Most of the Austrian tax
treaties are based on the OECD Model Convention and in many cases the respective tax
treaties reduce the WHT on dividends to 15% or even further in case of qualified participations (the tax treaty with the United States e.g. provides for a general reduction of the Austrian WHT to 15% and in case of a direct ownership by a corporation of at least 10% of the
share capital and voting rights to 5%).
Corporate shareholders resident either in a Member State of the European Union or in a
State of the European Economic Area ("EEA") with which comprehensive mutual assistance
in tax administration and tax enforcement exists are further entitled to a refund of the Austrian dividend WHT which is not eliminated under the applicable tax treaty, if and to the extent the shareholder provides evidence that in his country of residence no tax credit for such
WHT is granted.
The Austrian WHT on dividends paid to a corporate shareholder qualifying under the EU
Parent Subsidiary Directive is reduced to zero if the shareholder holds at least 10% of the
share capital for an uninterrupted period of at least one year.
79/88
12.2.2
Taxation of Capital Gains
(a)
Austrian Residents
For Austrian resident individuals, capital gains realized on the sale or other disposal of New
Shares until 30 September 2011 are subject to personal income tax at progressive rates as
such disposal is effected within one year after their acquisition (deemed "speculative transaction"). Such capital gains derived from shareholdings held as private assets are not taxable, if they do not exceed EUR 440 per calendar year. Losses from speculative transactions
derived from shareholdings held as private assets can only be offset against capital gains
from other speculative transactions in the same calendar year (i.e. they can neither be offset
against other taxable income nor carried forward). Losses from speculative transactions derived from shareholdings held as business assets can be offset against other income in the
same calendar year according to general rules and any exceeding amount can be carried
forward.
For capital gains realized on the sale or other disposal of New Shares after 30 September
2011, the following tax regime applies: Any capital gains realized on the New Shares qualify
as investment income (Einkünfte aus Kapitalvermögen) irrespective of the size of the shareholding and the holding period. Such capital gains are subject to income tax at a special rate
of 25%. The tax basis is calculated as the difference between the sale proceeds and the acquisition costs. Expenses incurred in connection with capital gains are not tax deductible.
Capital gains are subject to a 25% WHT, if the capital gain is settled by a domestic securities
depository (depotführende Stelle) or by a paying agent (auszahlende Stelle) which is an Austrian bank or the Austrian branch of a EU resident bank or investment firm. In such case the
personal income tax on capital gains is deemed settled by way of the WHT for individuals
holding the New Shares as private assets (provided the shareholder has evidenced the related acquisition costs to the securities depository) so that the respective capital gains do not
have to be included in the shareholder’s income tax return.
With effect as of 1 October 2011, withdrawals (Entnahmen) and other transfers of shares
from a shareholder’s securities account are deemed a disposal unless certain requirements
are met (e.g. in case of a transfer to a securities account owned by the same taxpayer or in
case of a transfer without consideration to a securities account of another taxpayer).
In case there is no domestic securities depository and paying agent, capital gains are not
subject to Austrian WHT. In such case the capital gains have to be included in the shareholder’s income tax return and are subject to a special 25% income tax rate.
In case the regular personal income tax rate is lower than 25%, a shareholder may opt for a
regular taxation of capital gains from New Shares at the shareholder’s regular progressive
personal income tax rates. Expenses incurred in connection with capital gains are not tax
deductible.
Losses from the sale of New Shares held as private assets may only be offset against certain other investment income (excluding e.g. interest income from bank deposits) realized in
the same calendar year by filing an income tax return (i.e. such losses can neither be offset
against any other taxable income nor carried forward).
Capital gains derived from New Shares held by individuals as business assets are also subject to the special 25% WHT with effect as of 1 October 2011. Although such capital gains
have to be included in the income tax return, the 25% tax rate is applicable. Losses from a
write-down or sale of shares held as business assets must primarily be set off against capital
80/88
gains from financial instruments and only half of the remaining loss may be set off against
other business income or carried forward.
The tax regime outlined above also applies with effect as of 1 October 2011 to capital gains
realized on a sale or other disposal of shares in the Company which were acquired after
31 December 2010. Capital gains related to shares in the Company which were acquired until 31 December 2010 are not subject to Austrian WHT and are only taxable, if the disposal of
such shares in the Company is either effected within one year of their acquisition (deemed
"speculative transaction") or if the shareholder has held at any time within the last five years
preceding the sale directly or indirectly at least 1% of the Issuer’s capital (deemed "qualified
shareholding") or if such shares in the Company qualify as business assets. With respect to
the applicable tax rates and the WHT obligations related to such shares in the Company,
Austrian law provides for specific (transitional) provisions.
For Austrian resident corporations, capital gains realized on the disposal of New Shares are
generally subject to corporate income tax at the standard rate of 25%. Austrian resident corporations might claim an exemption from the Austrian WHT on capital gains applicable with
effect as of 1 October 2011.
In case Austria loses its right to tax with respect to taxable shareholdings (e.g. in case of a
transfer of the shareholder’s tax residency), a deemed capital gain taxation is triggered on
the difference between the acquisition costs and the fair value of the shareholding ("exit
taxation"). Taxation of such capital gains might be deferred in case of the transfer of the
shareholder’s tax residency to another EU Member State or to an eligible EEA Member
State. The deferred tax is only levied upon the subsequent actual disposal of the shareholding within ten years.
(b)
Non-Austrian residents
For non-Austrian residents, capital gains on the sale of New Shares are only taxable in Austria, if the shareholder holds a qualified shareholding (i.e. if the shareholder has held at any
time within the last five years preceding the sale directly or indirectly at least 1% of the Issuer’s capital). Such capital gains are in general not subject to Austrian WHT but have to be
declared by way of an income tax return. However, Austria loses its right to tax such capital
gains under most of its tax treaties (including the tax treaties with Germany, the United Kingdom and the United States of America).
12.2.3
Proposed amendments to the Austrian tax regime according to a recent draft bill
On 31 May 2011 the Austrian Ministry of Finance published a new draft bill according to
which various amendments to the existing Austrian tax regime as outlined above are proposed ("Regierungsvorlage zum Abgabenänderungsgesetz 2011"). According to the proposed amendments, certain provisions will not become effective as of 1 October 2011 as
outlined above. Instead, it is proposed that they will enter into force from 1 April 2012 onwards. Further, certain transitional provisions are modified. The proposed amendments are
still subject to discussion and therefore it is presently not clear if and to what extent the proposed amendments will eventually enter into force.
12.2.4
Other Taxes
There are in general no transfer taxes, registration taxes or similar taxes payable in Austria
by shareholders due to the acquisition, ownership or disposal of New Shares.
81/88
The Austrian inheritance and gift tax was abolished with effect as of 1 August 2008. However, gifts must be notified to the tax authorities (certain exemptions apply e.g. with respect to
gifts that do not exceed certain thresholds).
The issuance of the New Shares is subject to a 1% Austrian capital transfer tax (Gesellschaftsteuer; certain exemptions apply e.g. in case of reorganizations). The tax is payable by
the issuing company.
82/88
13
ADDITIONAL INFORMATION
13.1
Share Price Development
The Shares of the Company are listed according to the Main Standard of the SIX Swiss Exchange. During the last three years as well as for a part of 2011, the highest prices and the
lowest prices for each year and the closing prices at the end of each year were as follows:
Year
2008
2009
2010
1,2
2011
Highest Price
(in CHF)
55.50
24.60
46.00
50.05
1
These prices refer to the calendar year 2011 until 8 July 2011.
2
This information has been provided by the Company.
3
Lowest Price
2
(in CHF)
10.70
6.73
22.75
39.50
Closing Price
3
(in CHF)
12.60
22.65
44.75
44.60
This information has been obtained from the website of SIX Swiss Exchange (<http://www.six-swiss-
exchange.com>).
13.2
Representative
Schellenberg Wittmer, Löwenstrasse 19, 8001 Zurich, Switzerland, being recognized as a
representative by the admission board of the SIX Swiss Exchange according to article 43 of
the Listing Rules, has filed on behalf of the Company an application for the listing of the New
Shares according to the Main Standard of the SIX Swiss Exchange.
13.3
Paying Agent
As long as the Shares are listed on the SIX Swiss Exchange, the Company will maintain a
principal paying agent (Hauptzahlstelle) in Switzerland. The Company's paying agent in
Switzerland is currently Bank Vontobel AG, Gotthardstrasse 43, 8002 Zurich, Switzerland.
13.4
Information Policy
The Company's Articles of Association as well as the Company's annual reports and quarterly reports for the past three years are available at the offices of austriamicrosystems AG, Tobelbader
Strasse 30,
8141
Unterpremstätten,
Austria
(telephone
number
+43 3136 500 5255;
fax
number:
+43 3136 500 5420;
e-mail:
[email protected]), during regular business hours and are available for download on <http://www.austriamicrosystems.com>.
Copies of this Listing Memorandum are available free of charge at the offices of austriamicrosystems AG, Tobelbader Strasse 30, 8141 Unterpremstätten, Austria (telephone number
+43 3136 500 5255;
fax
number:
+43 3136 500 5420;
e-mail:
[email protected]) during regular business hours.
13.5
Notices
According to the Company's Articles of Association, notices to Shareholders are validly
made in accordance with Austrian statutory law (article 18 of the Austrian Stock Corporation
Act). Insofar as and for as long as publication is a statutory requirement, notices are validly
made by publication in the "Wiener Zeitung".
83/88
Any notices containing or announcing amendments or changes to the terms of the Listing or
to this Listing Memorandum will be announced through the electronic media, and, if required,
published on the website of the SIX Swiss Exchange (<http://www.six-exchangeregulation.com>) in accordance with the Listing Rules. Notices will also be published in
Swiss newspapers to the extent required by the Listing Rules.
13.6
Responsibility for this Listing Memorandum
austriamicrosystems AG, having its registered office at Schloss Premstätten, Tobelbader
Strasse 30, 8141 Unterpremstätten, Austria, assumes responsibility for the completeness
and accuracy of this Listing Memorandum pursuant to section 4 of Scheme A of Annex I to
the Listing Rules. The Company declares that the information in this Listing Memorandum is
correct to the best of its knowledge and that no material facts or circumstances have been
omitted.
84/88
14
GLOSSARY OF DEFINED TERMS
Agreement
ALS
AMS-Group
Articles of Association
ASICs
Austria
Austrian Capital
Markets Act
Austrian Stock
Corporation Act
Austrian Stock
Exchange Act
BiCMOS
Capital Increase
Cash Consideration
Cash Holdco
Cash Holdco
Exchange
CHF
Closing
CMOS
Company
Contribution in Kind
DCG
DMT
Earn-out
EEA
EMEA
Escrow Agent
EUR
Fabs
means the agreement and plan of exchange dated 15 June 2011 by
which the Company has purchased from the TAOS-Shareholdersall of
the equity securities of TAOS.
means ambient light sensors.
means the Company including its subsidiaries.
means the Company's articles of association (Satzung), as amended.
means application specific integrated circuits.
means the Republic of Austria.
means the Austrian Capital Markets Act (Österreichisches Kapitalmarktgesetz), as amended.
means Austrian Stock Corporation Act (Österreichisches Aktiengesetz,
AktG), as amended.
means the Austrian Stock Exchange Act (Österreichisches Börsegesetz),
as amended.
means bipolar complementary metal oxide semiconductors.
means the increase of the statutory ordinary share capital of the Company from EUR 26,758,748.01 to EUR 33,315,872.49 through the issuance
of 2,706,840 New Shares against contribution in kind of 5,854,335.72
TAOS-Shares for a per share issue price (Ausgabepreis) of
EUR 37.9843.
means the part of the Purchase Price in the form of cash amounting to
USD 159.9 million.
means Twilight C, LLC, a limited liability company organized under the
laws of Delaware.
means the payment of cash by the Company in exchange for the TAOS
shares held by Cash Holdco.
means the lawful currency of Switzerland.
means the closing of the Transaction on 14 July 2011.
means complimentary metal oxide semiconductors.
means austriamicrosystems AG, Schloss Premstätten, Tobelbader
Strasse 30, 8141 Unterpremstätten, Austria.
means the contribution in kind of all of TAOS Shares held by Stock Holdco to the Company, in consideration for which Stock Holdco became
entitled to receive 2,706,840 New Shares to be issued as a result of the
Capital Increase.
means Directive on Information Relating to Corporate Governance of
29 October 2008 of the SIX Swiss Exchange.
means the Directive on Disclosure of Management Transactions of the
SIX Swiss Exchange of 1 April 2011.
has the meaning given to it in section "Transaction – Basic Transaction
Structure – Earn-out".
means the European Economic Area.
means Europe, the Middle East and Africa.
means Wells Fargo Bank, National Association, a national banking association in the United States of America.
means the lawful currency of the Member States of the European Communities that have adopted the Euro as its lawful currency in accordance
with legislation of the European Community relating to the Economic and
Monetary Union.
means digital IC fabrication facilities.
85/88
Facility Agreement
Final Management
Board Resolution
Group
Group Companies
IBM
ICs
IDMs
LEDs
Lender
Listing
Listing Memorandum
Listing Rules
Loan
Lock-up Period
LTF
LTV
Management
Board Framework
Resolution
MEMS
New Shares
ODMs
OeKB
OEMs
Principal TAOSShareholders
Prospectus Directive
Purchase Price
PwC
Relevant Member
State
RF
SESTA
Shareholders
Shares
SiGe
SIX SIS
SIX Swiss Exchange
86/88
means the loan agreement between the Company, as borrower, and
UniCredit Bank Austria AG, as lender, of 4 July 2011 with regard to a
loan amounting to USD 86 million.
means the resolution of the Management Board of the Company passed
on 7 July 2011.
means the AMS-Group together with the TAOS-Group.
means the companies of the Group.
means International Business Machines Corporation.
means integrated circuits.
means integrated device manufacturers.
means light-emitting diodes.
means UniCredit Bank Austria AG.
means the listing the New Shares of the Company according to the Main
Standard of the SIX Swiss Exchange.
means this listing memorandum dated 15 July 2011.
means the Listing Rules of the SIX Swiss Exchange dated 1 April 2011.
means the loan amounting to USD 86 million granted to the Company by
the Lender.
means the period of six months following the Closing during which all of
the Shares acquired in the Transaction are non-transferable.
means light-to-frequency.
means light-to-voltage.
means the resolution of the Management Board of the Company passed
on 16 June 2011.
means micro-electromechanical systems.
means 2,706,840 no par value bearer shares, issued by the Company in
the context of the Capital Increase.
means original design manufacturers.
means Oesterreichische Kontrolbank AG.
means original equipment manufacturers.
has the meaning given to it in section "Transaction – Basic Transaction
Structure – Overview".
means Directive 2003/71/EC and amendments thereto, including the
2010 Prospectus Directive Amending Directive.
means the total consideration for which all TAOS-Shares are purchased
from the TAOS-Shareholdersby the Company, namely USD 319.9 million.
means PwC Transaction Services Wirtschaftsprüfung GmbH, Vienna,
Austria.
means the Member States of the European Economic Area which have
implemented the Prospectus Directive.
means radio frequency.
means the Swiss Federal Act on Stock Exchange and Securities Trading
dated 24 March 1995, as amended.
means the shareholders of the Company.
means the ordinary no par value bearer shares (nennbetragslose auf
Inhaber lautende Stückaktien) with a calculated nominal value of
EUR 2.4224 per share of the Company.
means silicon germanium.
means SIX SIS Ltd, Olten, Switzerland.
means SIX Swiss Exchange Ltd, Zurich, Switzerland.
SOP 2002
SOP 2005
SOP 2009
SOP 2011
Statutory Contribution
Agreement
Statutory Exchange
Stock Holdco
Stock Holdco
Exchange
Supervisory Board
Framework
Resolution
Swiss Code
of Obligations
Swiss Federal
Intermediated
Securities Act
TAOS
TAOS-Group
TAOS-Shareholders
TAOS-Shares
Transaction
TSMC
TSV
USD
2010 Prospectus
Directive Amending
Directive
has the meaning given to it in section "Supervisory Board and Management Board – Securities and Option Rights – SOP 2002".
has the meaning given to it in section "Supervisory Board and Management Board – Securities and Option Rights – SOP 2005".
has the meaning given to it in section "Supervisory Board and Management Board – Securities and Option Rights – SOP 2009".
has the meaning given to it in section "Supervisory Board and Management Board – Securities and Option Rights – SOP 2011".
means the contribution in kind agreement pursuant to Austrian law dated
7 July 2011 by which the TAOS-Shares were contributed to the Company in exchange for New Shares.
has the meaning given to it in section "Transaction – Basic Transaction
Structure - Exchanges".
means Twilight S, LLC, a limited liability company organized under the
laws of Delaware.
means the issuance of New Shares by the Company in exchange for the
contribution in kind of the TAOS-Shares.
means the resolution of the Supervisory Board of the Company passed
on 4 July 2011.
means the Swiss Code of Obligations (Schweizerisches Obligationenrecht), as amended.
means the Swiss Federal Intermediated Securities Act (Bundesgesetz
über die Bucheffekten), as amended.
means Texas Advanced Optoelectronic Solutions Inc., 1001 Klein Road,
Suite 300, Plano, Texas 75074, United States of America.
means TAOS together with its subsidiaries.
means the shareholders of TAOS who sold their shares in TAOS to the
Company pursuant to the Agreement.
means 100% of the shares (including all common shares for or into
which TAOS preferred shares, warrants and vested options were exercised or converted) in TAOS.
has the meaning given to it in section "Transaction – Acquisition of
TAOS".
means Taiwan Semiconductor Manufacturing Company.
means through-silicon via.
means the lawful currency of the United States of America.
means Directive 2010/73/EU.
87/88
15
88/88
FINANCIAL INFORMATION
Unaudited pro forma Financial Information for the Financial Year 2010
F-2
Pro forma Balance Sheet
F-4
Pro forma Income Statement
F-5
Notes to the unaudited pro forma Financial Information
F-6
Auditor's Report on the Review of the pro forma Financial Information
F-10
Consolidated Financial Statements of the Company for the Financial
Year 2010 (including information on the preceding financial year 2009)
F-12
Consolidated Income Statement
F-13
Consolidated Statement of Comprehensive Income
F-14
Consolidated Balance Sheet
F-15
Consolidated Statement of Cash-flows
F-16
Consolidated Statement of Changes in Shareholders' Equity
F-17
Notes to the Consolidated Financial Statements
F-18
Auditor's Report of the Consolidated Financial Statements
F-65
Consolidated Financial Statements of the Company for the Financial
Year 2009 (including information on the preceding financial year 2008)
F-67
Consolidated Income Statement
F-68
Consolidated Statement of Comprehensive Income
F-68
Consolidated Balance Sheet
F-69
Consolidated Statement of Cash-flows
F-70
Consolidated Statement of Changes in Shareholders' Equity
F-71
Notes to the Consolidated Financial Statements
F-72
Auditor's Report of the Consolidated Financial Statements
F-112
Consolidated Financial Statements of TAOS for the Financial Year 2010
(including information on the preceding financial year 2009)
F-114
Auditor's Report of the Consolidated Financial Statements
F-117
Consolidated Balance Sheet
F-118
Consolidated Income Statement
F-119
Consolidated Statement of Changes in Shareholders' Equity
F-120
Consolidated Statement of Cash-flows
F-121
Notes to the Consolidated Financial Statements
F-122
14. FINANCIAL INFORMATION
F-1
Pro forma Financial Information
for the Financial Year 2010
F-2
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
Basis of Preparation of the unaudited Pro Forma Combined Financial Information
The following unaudited pro forma combined financial information for austriamicrosystems AG ("AMS"
or the "Company") was prepared solely for the purpose of this Listing Memorandum in line with the
requirements of the SIX Swiss Exchange's "Directive on the Presentation of a Complex Financial
History in the Listing Prospectus" ("DCFH").
The unaudited pro forma combined financial information includes a pro forma combined balance sheet
as at 31 December 2010, a pro forma combined income statement for the year ended 31 December
2010, a pro forma calculation of earnings per share and explanatory notes. It gives effect to the
acquisition (the "Acquisition") of 100% of the shares in Texas Advanced Optoelectronic Solutions,
Inc. ("TAOS"), as if such Acquisition had already been completed on 1 January 2010.
The unaudited pro forma combined financial information has been compiled from the following
sources:
·
·
the audited consolidated financial statements as at and for the year ended 31 December 2010
of AMS prepared in accordance with IFRS; and
the audited consolidated financial statements as at and for the year ended 31 December 2010
of TAOS prepared in accordance with US-GAAP.
The unaudited pro forma adjustments are based on current available information and management
assumptions made in the explanatory notes to the unaudited pro forma combined financial information
that we believe to be reasonable.
The unaudited pro forma combined financial information is for illustrative purposes only. It should not
be taken as indicative of the future consolidated results of operations or financial position. The actual
results may differ significantly from those reflected in the unaudited pro forma combined financial
information for a number of reasons, including but not limited to, differences between the assumptions
used to prepare the unaudited pro forma combined financial information and actual amounts.
The unaudited pro forma combined financial information has been prepared assuming the TAOS
Acquisition was already completed on 1 January 2010. The acquisition method of accounting requires
the purchase consideration to be allocated to the underlying tangible and intangible assets acquired
and liabilities assumed based on their respective fair values as at the acquisition date, with any excess
purchase consideration allocated to goodwill. The allocation of the purchase consideration reflected in
the unaudited pro forma combined financial information is provisional only and is based upon
management’s internally developed estimates of the fair values of assets acquired and liabilities
assumed. This allocation of the purchase consideration depends upon certain estimates and
assumptions, all of which are preliminary and have been made solely for the purpose of developing
the unaudited pro forma combined financial information. The appraisals necessary to finalize the
required allocation of the purchase consideration will be based on the fair values as at the actual
closing date of the Acquisition. The final allocation may be different than that reflected in the pro forma
allocation and those differences may be material.
The unaudited pro forma combined income statement does not include adjustments for (i) any
revenue or cost saving synergies that may be achievable subsequent to the completion of the
Acquisition; or (ii) the impact of nonrecurring items directly related to the Acquisition.
The unaudited pro forma combined financial information should be read in conjunction with the
sections "Summary", "Transaction" and "Risk Factors" of this Listing Memorandum and all of the
historical financial statements and the notes thereto included in this Listing Memorandum. The
F-3
unaudited pro forma combined financial information is not an indicator for the future economic
development, nor does it give a true and fair view of (present fairly, in all material respects) the
financial position of the combined financial information and of the results of its operations for the year
ended 31 December 2010 in accordance with IFRS.
Unaudited Pro Forma Combined Balance Sheet as at 31 December 2010
in thousands of EUR
Accounting
standard
and policy
conforming
The Elimination Pro forma
Historical Historical adjustment
Financing Acquisition Adjustments combined
TAOS (see note 1) (see note 2) (see note 3) (see note 4)
group
AMS
Assets
Cash and cash equivalents
Financial assets
Trade receivables
Inventories
Other receivables and assets
Total current assets
23.042
21.198
33.007
46.740
8.284
132.270
15.651
1.503
7.635
10.155
248
35.192
Property, plant and equipment
Intangible assets and Goodwill
Investments in associates
Deferred tax assets
Other long-term assets
Total non-current assets
110.943
4.432
6.443
31.768
5.928
159.514
4.444
0
0
92
632
5.168
0
0
Total assets
291.784
40.360
0
94.119
Liabilities and shareholders´ equity
Liabilities
Interest-bearing loans and borrowings
Trade liabilities
Provisions
Other liabilities
Total current liabilities
7.011
15.660
11.707
12.610
46.987
0
3.073
3.657
85
6.815
Interest-bearing loans and borrowings
Employee benefits
Deferred government grants
Tax provision
Deferred tax liability
Other long term liabilities
Total non-current liabilities
40.766
12.483
528
0
0
0
53.777
0
0
0
7.703
0
87
7.790
Shareholders´ equity
Issued capital
Additional paid-in capital
Treasury Shares
Other reserves
Retained earnings
Total shareholders´equity and reserves
26.759
102.624
-15.276
672
76.240
191.019
3.826
2.108
-11
-94
19.926
25.755
0
0
Total liabilities and shareholders´equity
291.784
40.360
0
F-4
0
94.119
-110.276
94.119
-110.276
22.536
22.701
40.642
56.895
8.532
20.787
1.996
10.141
13.488
329
0
151.305
46.741
206.748
0
115.387
211.180
6.443
31.860
6.560
371.430
5.902
0
0
122
839
6.863
96.472
0
522.735
53.604
0
45.225
18.733
11.883
15.558
91.398
0
4.081
4.857
113
9.051
0
101.352
12.483
528
7.703
17.208
87
139.361
0
0
0
10.231
0
116
10.347
5.082
2.800
-15
-20
26.359
34.206
53.604
206.748
38.214
-3.481
3.481
0
-618
37.596
0
60.586
0
17.208
0
Historical
TAOS *
in
thousand
of US $
60.586
17.208
7.513
102.832
-110.345
-4.063
-4.063
-3.826
-2.108
110.356
94
-25.252
79.264
0
34.272
205.456
-15.276
672
66.851
291.975
94.119
96.472
0
522.735
Unaudited Pro Forma Combined income statement for the year ended 31 December
2010
in thousands of EUR
Revenues
Cost of sales
Gross profit
Research and development
Selling, general and administrative
Other operating income
Other operating expenses
Result from investments in associates
Result from operations
Finance income
Finance expenses
Net financing result
Income tax result
Net result
Accounting
standard
and policy
conforming
The Elimination Pro forma
Historical Historical adjustment
Financing Acquisition Adjustments combined
TAOS (see note 1) (see note 2) (see note 3) (see note 4)
group
AMS
209.419
-109.158
100.261
61.347
-25.286
36.061
-42.363
-37.640
7.962
-1.001
-134
27.085
-2.256
-12.545
0
0
0
21.260
1.411
-5.090
-3.679
0
0
-8.194
-8.194
-119
0
-119
8
-19
-11
0
-2.352
-2.352
0
-299
-7.108
0
618
2.868
23.107
14.141
0
-1.853
-5.326
-8.194
Unaudited Pro Forma earnings per share as at 31 December 2010
in EUR
Earnings per share (basic)
Pro forma
Historical combined
AMS
group
2,25
F-5
-3.087
3.087
0
267.679
-139.551
128.128
81.020
-33.395
47.625
0
-44.619
-50.132
7.962
-1.173
-134
40.032
-2.979
-16.568
0
0
0
28.078
0
1.419
-7.461
-6.042
11
-25
-14
-3.921
-9.387
30.069
18.677
53
-53
2,28
Historical
TAOS *
in
thousand
of US $
0
Notes to the unaudited Pro Forma Combined Financial Information
Historical AMS
The historical financial information of AMS is derived from the audited consolidated financial
statements as at and for the year ended 31 December 2010 prepared in accordance with IFRS on
which KPMG Wirtschaftsprüfungs- und Steuerberatungs GmbH, Porzellangasse 51, Vienna, Austria
issued an unqualified Audit Opinion included by way of reference in this Listing Memorandum.
Historical TAOS
The historical financial information of TAOS is derived from the audited consolidated financial
statements as at and for the year ended 31 December 2010 prepared in accordance with US-GAAP
on which BKD LLP, CPAs & advisors issued an unqualified audit opinion included by way of reference
in this Listing Memorandum.
The historical TAOS audited financial statements as at and for the year ended 31 December 2010
were presented in USD and were translated into EUR for the purpose of preparing this unaudited pro
forma combined financial information. The following exchange rates have been used in the translation:
Balance Sheet (closing rate):
1.32820 EUR/USD
Income Statement (average rate) EUR/USD: 1.32069 EUR/USD
Note 1: Accounting Standard and Accounting Policy Conforming Adjustments
In case that adjustments have an impact on the calculation of income taxes, taxes have been
recalculated by applying the tax rate of 35% for TAOS. Therefore, income taxes and deferred tax have
been adjusted.
a. Potential other adjustments not taken into account in the pro forma combined financial information
Due to materiality considerations, no adjustments have been included in the unaudited pro forma
combined financial information for the accounting standard adjustments – IFRS adoption regarding
employee stock option plan, as the TAOS 2000 Equity Incentive Plan (the 2000 Plan) is based on the
Black-Scholes option valuation model with underlying detailed assumptions. We refer to the audited
consolidated financial statements of TAOS as at and for the year ended 31 December 2010 included
in this Listing Memorandum for further details.
Furthermore, whereas TAOS uses the first–in, first–out (FIFO) method for inventory valuation
purposes, AMS applies the moving average price principle. From the information available and the
extent of work performed, no adjustment for the unaudited pro forma combined financial information is
necessary due to the fact that TAOS is mainly providing an assembling service whereas AMS´
business is based on production.
We did not also make any adjustments in respect of the unrecognized tax provision due to the change
from the US GAAP method "cumulative probability model" to the IFRS "single-best-outcome/mostlikely outcome method
F-6
b. Reclassifications
For the purpose of this unaudited combined pro forma financial information, the following line items of
the historical audited financial statements as at and for the year ended 31 December 2010 of TAOS
have been reclassified to conform with AMS presentation format:
(i)
Accrued liabilities vs. Provisions: an amount of EUR 3,481,000 has been reclassified from
provisions to current liabilities due to compensation, commission, tax and other current
liabilities.
(ii)
Bank / credit service charges: an amount of EUR 53,000 has been reclassified from selling,
general and administrative to other operating expenses.
This reclassification has no impact on the equity or net profit of TAOS prior to the adjustments
described above.
Note 2: Financing
AMS intends to fund the Acquisition and associated costs as follows:
Issuance of the New Shares
For the purpose of the unaudited pro forma combined financial information and at the time of its
preparation, it is assumed that 3,005,000 New Shares will be issued at the share price of EUR 36.72
and equity will thus be increased by EUR 110,345,000 resulting in an increase of share capital by
EUR 7,513,000 and of other reserves by EUR 102,831,000. It is furthermore expected, that the net
proceeds of EUR 110,345,000• will not be reduced by any issuing related costs.
Loan agreement and other financing
A loan commitment of USD 116,000,000 (EUR 80,000,000) was entered into for a four year basis with
an average margin of approx. 212 bps over the 1-3 months US interbank rate. The loan amount was
split into current and non-current parts based on payback assumptions. This loan triggers a total
arrangement fee of approx 0.9% of the facility amount (which is accrued during the payback period of
the financing loan and offset with the outstanding financing liabilities). Remaining financing amount
was assumed to be covered by available operating cash and unused line of credit. Total interest
expense for the financing of the Acquisition of EUR 2,352,000 for FY10 is included in the unaudited
pro forma combined financial information. Except those expenses stated, no additional finance costs
have been presented in the unaudited pro forma combined income statement.
Income taxes have been recalculated by applying the tax rate of 25% for AMS. Therefore, income
taxes and tax provisions have been adjusted.
Estimated direct transaction costs are mainly paid to valuation experts, tax consultants, auditors,
lawyers, banks as well as for official decisions (shareholders´ meeting). In the unaudited pro forma
combined financial information those costs with an amount of approx. 1.0% of the total purchase
consideration has been deducted from available cash. The impact of lost interest income has been
considered as immaterial. Transaction costs do not affect profit and loss of the unaudited pro forma
combined financial information, as they are assumed to have been incurred prior to the Acquisition
and therefore are reflected in Retained Earnings.
F-7
Note 3: The Acquisition
According to the International Financial Reporting Standard (“IFRS”) 3 “Business Combinations”, all
business combinations are to be accounted for exclusively by the purchase method. Under purchase
accounting, all assets acquired as well as liabilities and contingent liabilities assumed should be stated
on the consolidated financial statements at fair value.
IFRS 3 requires that intangible assets be recognized as assets apart from goodwill if they meet one of
two criteria, (1) the contractual legal criterion, or (2) the separability criterion.
The excess of the cost of an acquired entity over the net of the amounts assigned to assets acquired
and liabilities and contingent liabilities assumed is referred to as goodwill.
The unaudited pro forma combined financial information reflects the implications of the preliminary
purchase accounting as required by IFRS 3. It should be noted that the purchase price allocation is
preliminary only, consequently the identification of intangible assets, the final fair values of the
acquired net assets, the estimated useful lives and the resulting goodwill may be materially different to
the results presented here.
In the course of the preliminary purchase price allocation, contractual customer relationships and
technology (intellectual property such as patents as well as unpatented technology) were identified as
central intangible assets for TAOS’ business. In addition to the above described items, no further
assets or liabilities with material fair value adjustments were identified during the preliminary analysis.
As AMS had only limited insight into the relevant information of TAOS, the preliminary purchase price
allocation is based on the purchase accounting of recent comparable transactions in the
semiconductor industry (“benchmark method”). According to the AMS management and considering
the publicly available information, around 26% of the excess purchase price can be allocated to the
identifiable intangible assets, which amounts to EUR 57,400,000. Based on the described approach a
high level assessment of commercial (especially product lifecycle) and legal data (especially patent
documents) showed that an average remaining useful life of seven years for technology and
customer relationships (fair value weighted) can be expected. Because the estimated useful lives, final
fair values of net assets, etc. may be materially different to the results presented in this Listing
Memorandum, the earnings impact may be materially different as well.
The related deferred tax liability on the fair value adjustment amounts to EUR 20,100,000 based on a
tax rate of 35% for TAOS. The table below summarizes the determination of the remaining goodwill:
According to the information available when preparing the unaudited pro forma combined financial
information, the total consideration transferred for the acquisition of 100% of the TAOS-Shares
amounts to USD 319,900,000. For the purpose of the purchase price allocation, an exchange rate of
1.45 EUR/USD was applied.
Provisional purchase price allocation related to the Acquisition:
Purchase of shares in TAOS – series A & B against cash
Purchase of shares in TAOS against 3,005,000 New Shares will be
issued at the share price of EUR 36.72 (as assumed)
Total consideration transferred for 100% acquisition in TAOS
IFRS book value of net assets of TAOS as at 31 December 2010
Excess of purchase consideration over net assets to be acquired
Provisional fair value adjustment intangible assets
Tax effect on recognition of intangible assets
Estimated goodwill arising on acquisition
F-8
EUR million
110.3
110.3
220.6
25.7
194.9
57.4
20.1
157.6
In order to assess the impact of the purchase accounting on the unaudited pro forma combined
financial information for year-end 2010, it was assumed that the intangible assets identified in the
preliminary purchase price allocation are amortized over an average remaining useful life of seven
years. Consequently an additional amortization expense of EUR 8,194,000 and the related release of
deferred tax liabilities of EUR 2,868,000 are reflected in the unaudited pro forma combined financial
information. Because of the described high level analysis of the preliminary purchase price accounting
significant changes in the impact on the combined financial information might occur after the final
results of the PPA study are available.
Furthermore due to the purchase accounting the equity of TAOS has been eliminated in the unaudited
pro forma combined financial information.
The results of the above provisional purchase price allocation are accounted for as at 1 January 2010
as if the Transaction had been completed beginning 2010. According to IFRS 3, goodwill is not
amortized but shall be tested for impairment in accordance with IAS 36. In the course of the
preparation of this unaudited pro forma combined financial information, it should, however, be noted
that goodwill and identified intangible assets have not been tested for impairment, as it is assumed
that no impairment was necessary or no triggering events occurred.
Within one year after AMS obtained full control of TAOS, the final purchase price allocation including a
thorough identification and valuation of intangible assets will be performed according to IFRS3.
Consequently the final results in all belongings, such as identification valuation, may change
significantly in comparison to the preliminary figures as shown in the unaudited combined financial
information.
Note 4: Elimination Adjustments
The consolidation of income and expenses between AMS and TAOS is considered with an amount of
EUR 3,087,000 in the unaudited pro forma combined financial information.
An elimination of intercompany profit and loss has not been considered in the unaudited pro forma
combined financial information, as the amount is not significant.
No adjustment was necessary regarding the elimination of intercompany receivables/payables
because no open receivable or payables existed between TAOS and AMS at the year ended
31 December 2010.
Earnings per Share
The pro forma weight average number of Shares outstanding during the year has been based on the
total of the weight average number of Shares outstanding as disclosed in the audited financial
statements as at and for the year ended 31 December 2010, adjusted by the 3,005,000 New Shares
assumed to be issued in the context of the Acquisition.
F-9
F-10
F-11
Consolidated
Financial
Statements of AMS
13. FINANCIAL
INFORMATION
for the Financial Year 2010
F-12
Consolidated Income Statement
acc. to IFRS from January 1, 2010 until December 31, 2010
in thousands of EUR (except earnings per share which are in EUR)
Revenues
Note
1
2010
20091) 2)
adjusted
209,419
137,166
Cost of sales
-109,158
-89,799
Gross profit
100,261
47,367
Research and development
-42,363
-40,096
Selling, general and administrative
-37,640
-32,141
Other operating income
2
7,962
7,452
Other operating expense
3
-1,001
-891
-134
-735
27,085
-19,044
Result from investments in associates
Result from operations
Finance income
4
1,411
3,314
Finance expenses
4
-5,090
-2,171
Net financing result
-3,679
1,143
Result before tax
23,406
-17,901
Income tax result
5
Net result
-299
1,236
23,107
-16,665
Basic earnings per share in EUR
22
2.25
-1.57
Diluted earnings per share in EUR
22
2.21
-1.57
1) The accounting principles for presenting foreign currency transactions have been changed – please refer to pt. (c) (i) in the
Notes on the Financial Statements.
2) The accounting principles for presenting actuarial gains / losses from employee benefits have been changed – please refer to
pt. (c) (ii) in the Notes on the Financial Statements.
68
F-13
Consolidated Statement of Comprehensive Income
acc. to IFRS from January 1, 2010 until December 31, 2010
in thousands of EUR
Note
Net result
Actuarial gains and losses from employee benefits
2010
20091) 2)
adjusted
23,107
-16,665
-443
-1,339
Exchange differences on translating foreign operations
631
-100
Other comprehensive income
188
-1,438
23,295
-18,103
Total comprehensive income
F-14
69
Consolidated Balance Sheet
acc. to IFRS as of December 31, 2010
in thousands of EUR
Note
Dec. 31, 2010
Dec. 31, 20091) 2)
adjusted
Assets
Cash and cash equivalents
6
23,042
26,726
Financial assets
12
21,198
15,486
Trade receivables
7
33,007
27,246
Inventories
8
46,740
48,417
Other receivables and assets
9
8,284
5,183
132,270
123,057
Total current assets
Property, plant and equipment
10
110,943
118,694
Intangible assets
11
4,432
5,550
Investments in associates
13
6,443
5,481
Deferred tax assets
14
31,768
31,191
Other long-term assets
15
5,928
4,264
Total non-current assets
159,514
165,180
Total assets
291,784
288,237
Liabilities and shareholders‘ equity
Liabilities
Interest-bearing loans and borrowings
16
Trade liabilities
Provisions
17
Other liabilities
19
Total current liabilities
7,011
14,946
15,660
14,270
11,707
9,086
12,610
10,405
46,987
48,707
Interest-bearing loans and borrowings
16
40,766
53,001
Employee benefits
20
12,483
10,854
Deferred government grants
18
528
1,428
Other long term liabilities
19
0
631
53,777
65,915
Total non-current liabilities
Shareholders‘ equity
Issued capital
21
26,759
26,698
Additional paid-in capital
21
102,624
100,638
Treasury shares
21
-15,276
-7,339
Other reserves (translation adjustment)
21
672
41
76,240
53,577
Total shareholders‘ equity and reserves
191,019
173,615
Total liabilities and shareholders‘ equity
291,784
288,237
Retained earnings
70
F-15
Consolidated Statement of Cash-flows
acc. to IFRS from January 1, 2010 until December 31, 2010
in thousands of EUR
Note
2010
20091) 2)
adjusted
Operating activities
Result before tax
Depreciation (net of government grants)
Changes in employee benefits
23,406
-17,901
10, 11
22,872
22,273
20
1,629
2,090
Expense from stock option plan (acc. to IFRS 2)
Changes in other long-term liabilities
Result from sale of plant and equipment
2
Result from investments in associates
Net financing result
Changes in assets
Changes in short-term operating liabilities and provisions
Tax payments
1,801
2,346
-1,531
-1,080
-341
-8
134
735
3,679
-1,143
-9,251
18,482
3,474
-5,289
-184
-231
45,688
20,274
Acquisition of intangibles, property, plant and equipment
-13,169
-10,305
Acquisition of financial investments
-14,663
-17,877
Cash flows from operating activities
Investing activities
Proceeds from sale of plant and equipment
Proceeds from the sale of investments
Interest received
Cash flows from investing activities
365
166
8,229
4,000
845
1,145
-18,393
-22,871
Financing activities
Proceeds from borrowings
Repayment of debt
Acquisition of treasury shares
Sale of treasury shares
Interest paid
Expenses from financial instruments
Changes resulting from capital increase
Cash flows from financing activities
13,582
31,401
-34,635
-25,273
-8,522
-3,057
525
1,353
-1,369
-1,513
-803
-438
245
0
-30,979
2,472
Change in cash and cash equivalents
-3,684
-125
Cash and cash equivalents at January 1
26,726
26,851
Cash and cash equivalents at December 31
23,042
26,726
F-16
71
Consolidated Statement of Changes
in Shareholders’ Equity
acc. to IFRS as of December 31, 2010
in thousands of EUR
Issued
capital
Additional
paid-in
capital
Total equity as of January 1, 2009
Treasury
shares
Translation
adjustment
Retained
earnings2)
Total
shareholders‘
equity
26,698
98,292
-5,635
141
71,580
191,076
Net result adjusted2)
0
0
0
0
-16,665
-16,665
Actuarial gains / losses adjusted2)
0
0
0
0
-1,339
-1,339
Translation adjustment
0
0
0
-100
0
-100
Comprehensive income
0
0
0
-100
-18,004
-18,103
Share based payments
0
2,346
0
0
0
2,346
Capital increase
0
0
0
0
0
0
Purchase of treasury shares
0
0
-3,057
0
0
-3,057
Sale of treasury shares
0
0
1,353
0
0
1,353
26,698
100,638
-7,339
41
53,577
173,616
Net result
0
0
0
0
23,107
23,107
Actuarial gains / losses adjusted2)
0
0
0
0
-443
-443
Translation adjustment
0
0
0
631
0
631
Comprehensive income
0
0
0
631
22,664
23,295
Share based payments
0
1,986
0
0
0
1,986
60
0
0
0
0
60
Purchase of treasury shares
0
0
-8,522
0
0
-8,522
Sale of treasury shares
0
0
585
0
0
585
26,759
102,624
-15,276
672
76,240
191,019
Total equity as of
December 31, 2009
Capital increase
Total equity as of
December 31, 2010
An amount of EUR -334 thousand (2009: EUR -99 thousand) recognized within translation adjustment is related to the currency translation of investments at equity.
72
F-17
Notes to the Consolidated Financial Statements
Significant accounting policies
austriamicrosystems AG („the Company“) is
a company located in 8141 Unterpremstätten,
Austria. The Company is a global leader in the
design, manufacture and sale of high performance analog and analog intensive mixed signal
integrated circuits tailored to meet specific customer applications. The consolidated financial
statements for the year ended December 31,
2010 represent the parent company austria­
microsystems AG and its subsidiaries (together
referred to as the „Group“).
On February 4, 2011 the consolidated financial
statements as per December 31, 2010 were
completed and released to the supervisory board
for approval. The consolidated financial statements were approved by the supervisory board
on February 28, 2011.
(a) Statement of compliance
The consolidated financial statements comply
with International Financial Reporting Standards
as issued by the International Accounting Standards Board (IASB) and all obligatory Interpretations as issued by the International Financial
Interpretations Committee. Furthermore these
consolidated financial statements are in accordStandard
ance with the International Financial Reporting Standards as to be applied in the European
Union.
The following new or amended standards and interpretations have been applied for the first time
during the business year:
Content
Effective date3)
New standards and interpretations
IFRIC 17
Distributions of Non-cash Assets to Owners
July 1, 2009/
November 1, 2009
IFRIC 18
Transfers of Assets from Customers
July 1, 2009/
November 1, 2009
IFRS 3 (2008)
Business Combinations
July 1, 2009
IAS 27 (2008)
Consolidated and Separate Financial Statements
July 1, 2009
Revised standards
Amendments to standards and interpreations
IFRS 2
Group Cash-settled Share-based Payment Transactions
January 1, 2010
IAS 39
Eligible Hedged Items
July 1, 2009
all standards
Improvements to IFRSs 2009
January 1, 2010
3) The IFRS are to be applied for business years that begin on or after the effective date according to the respective EU regulation.
In case of two dates the earlier date indicates the effective date according to the publication of the International Accounting
Standards Board.
F-18
73
The material changes based on the first time
application of IFRS 3 (2008) – Business Combinations – are, that the option to recognize the
non-controlling interest at fair value (Full Goodwill Method) has been amended to the standard
text, acquisition costs shall not be capitalized
but shall be accounted for as expenses, no adjustment of Fair Value after subsequent adjustment of the purchase price and if a business
combination is achieved in stages a remeasurement has to be done. The first time application
of IFRS 3 (2008) did not substantially change the
presentation of the financial statements. The
Full Goodwill Method is not applied.
According to IAS 27 (2008) – Consolidated and
Separate Financial Statements – non-controlling
interests are presented in the consolidated
statement of financial position within equity. Any
difference between the amount by which the
non-controlling interests are adjusted and the
fair value of the consideration paid or received
shall be recognized directly in equity and atStandard
tributed to the owners of the parent. The first
time application of this amended standard has
no material effect on the financial position of the
group.
The improvements of IFRS 2009 affect necessary, but not urgent changes for 12 standards
and interpretations. These changes have no
material effect on the financial position of the
group.
The first time application of the remaining
standards that have to be applied for the first
time during the business year 2010 did not
substantially change the presentation of the
financial statements.
The following new or amended standards and
interpretations have been published by the International Accountings Standards Board and are
endorsed by the EU respectively, but application
has not yet been mandatory for the business
year:
Content
Effective date4)
New standards and interpretations
IFRS 9
Financial Instruments
January 1, 20135)
IFRIC 19
Extinguishing Financial Liabilities with Equity Instruments
July 1, 20104)
Related Party Disclosures
January 1, 20114)
Revised standards
IAS 24 (2009)
Amendments to standards and interpreations
IFRS 7
Reclassification of Financial Assets
July 1, 20115)
IAS 12
Deferred Tax: Recovery of Underlying Assets
January 1, 20125)
IAS 32
Classification of Rights Issues
February 1, 20104)
IFRIC 14
Prepayments of a Minimum Funding Requirement
January 1, 20114)
all standards
Improvements to IFRSs 2010
January 1, 20114)
4) Effective date according to the respective EU regulation.
5) Not yet adopted by EU; effective date according to the publication of the International Accounting Standards Board.
74
F-19
No premature application of the mentioned
changes or amendments of standards and
interpretations is made. The management is already evaluating the effect of these changes and
amendments of standards on the consolidated
financial statements. A premature application is
not planned.
(b) Basis of preparation
The consolidated financial statements have been
prepared on the historical cost basis except for
the following material items in the statement of
financial positions: Derivative financial instruments are stated at their value, investments and
securities are stated at their fair value.
The financial statements are presented in EUR
and rounded to the nearest thousand. The use
of automated calculation systems may lead
to rounding differences in totals of rounded
amounts and percentages.
(c) Changes in accounting policy
(i) austriamicrosystems uses derivative financial
instruments to hedge negative effects from currency fluctuations. The criteria for the application of IAS 39 are not fulfilled. The presentation
of results from currency fluctuations of the fair
value of such derivative financial instruments
is not stipulated under IFRS. Until the business
year 2009 such results were presented as part of
the result from operations.
Beginning with 2010 the management of
­austriamicrosystems has decided to present
the results from changes of the fair value of
foreign currency hedging instruments as part
of the net financing cost. The management is
convinced that this presentation shows the effect
of currency fluctuations more clearly, because
the hedging instruments cannot be designated
to a specific transaction. Moreover, currency
fluctuations are also hedged by means of foreign
currency debt whose results from currency fluctuations have already been presented as part of
the financing cost. As required by IAS 8 the prior
year comparative information has been adjusted
accordingly.
The described change in accounting policy
results in the following changes in the profit and
loss statement:
in thousands of EUR
2010
2009
Selling, general and administrative
-462
-1,782
Result from operations
-462
-1,782
Finance income
462
1,782
Net financial result
462
1,782
0
0
Total
F-20
75
(ii) In addition the management decided to recognize actuarial gains and losses from e
­ mployee
benefits in equity acc. to IAS 19.93A.
The ­described change in accounting policy
results in the following changes in the profit and
loss statement:
in thousands of EUR
2010
2009
Cost of sales
216
455
Selling, general and administrative
203
469
Research and development
172
415
Result from operations
591
1,339
0
0
Income statement
Balance sheet
Retained earnings
In all following tables the respective changes
of the accounting policy that have an impact on
previous year’s figures are indicated with num-
bers 1) and 2) as also indicated in the Income
Statement.
(d) Basis of consolidation
(i) Subsidiaries
Subsidiaries are all operative enterprises controlled by the Company. Control exists when the
Company has the power, directly or indirectly,
to govern the financial and operating policies
of an enterprise so as to obtain benefits from
its activities. The financial statements of the
subsidiaries are included in the consolidated
financial statements from the date that control
commences until the date that control ceases.
(ii) Transactions eliminated on consolidation
Intra-group balances and transactions, and any
results from intra-group transactions, are eliminated in preparing the consolidated financial
statements. Unrealized losses are eliminated
in an identical manner as unrealized gains, but
only to the extent that there is no evidence of
impairment.
76
(iii) Investments in associates
Investments in associates are accounted using
the equity method if the company has a significant influence on the investee (associate) and if
this is material to present a true and fair view
of the financial statements. For investments in
associates the same equity consolidation principles apply as for subsidiaries. Local accounting
policies remain applied if the deviations are not
material.
During the business year 2010 the existing 30%
investment in FlipChip Holdings LLC, Phoenix,
Arizona (USA), has been increased by 3.5% (carrying amount as per Dec. 31, 2010: EUR 2,790
thousand; 2009: EUR 2,508 thousand), which is
accounted using the equity method.
In addition the existing investment in New Scale
Technologies, Inc., Victor, New York (USA) has
been increased by acquisition to 32.3% (carrying
amount as per Dec. 31, 2010: EUR 3,653 thousand; 2009: EUR 2,973 thousand).
F-21
(e) Foreign currency
(ii) Financial statements of economic independent foreign entities
The functional currency of the entities domiciled outside the EUR zone is their respective
domestic currency. Accordingly, the assets and
liabilities of these entities are translated into
EUR at the average foreign exchange rates at
the balance sheet date. Revenues and expenses
of foreign entities are translated into EUR at
the average foreign exchange rates of the year.
Translation differences are recognized directly
within the other comprehensive income.
(i) Foreign currency transactions
The functional currency of the Company is
the EUR. Transactions in foreign currencies
are translated into EUR at the average foreign
exchange rate at the date of the transaction.
Monetary assets and liabilities denominated
in foreign currencies at the balance sheet date
are translated into EUR at the foreign exchange
rate at that date and provided by the ECB.
Foreign exchange rate differences are recognized in the income statement amounting to
EUR 426 ­thousand in 2010 and amounting to
EUR 1,782 thousand in 2009.
(f) Derivative financial instruments and hedging instruments
The Group uses interest rate swaps, cross currency swaps, options and forward exchange contracts to hedge its exposure to foreign exchange
and interest rate risks arising from operational,
financing and investment activities and to optimize the financial result.
Derivative financial instruments are initially recognized at cost (equals fair value). Subsequent
to initial recognition, derivative financial instruments are stated at fair value.
The fair value of such derivative financial instruments is the estimated amount that the Group
would receive or pay to settle such derivative
financial instruments at the balance sheet date,
taking into account current interest rates, foreign exchange rates and the current credit risk
of such derivative financial instruments counter parties. The fair value of forward exchange
contracts is their quoted market price at the
balance sheet date.
(g) Hedging
As not all of the criteria for hedge accounting
outlined in IAS 39 are met, all changes in the
fair value of derivative financial instruments are
recognized in the income statement.
(h) Property, plant and equipment
(i) Owned assets
Items of property, plant and equipment are
stated at cost less accumulated depreciation
(see below) and impairment losses (refer to accounting policy (m)) and net of related govern-
ment grants. The cost of self-constructed assets
includes the cost of materials, direct labor,
directly attributable proportion of production
overheads and borrowing costs for qualified
assets.
F-22
77
(ii) Leased assets
Leases in terms of which the Group assumes
substantially all the risks and rewards of ownership are classified as finance leases. Plant and
equipment acquired by way of finance leases
is stated at an amount equal to the lower of its
fair value and the present value of the minimum
lease payments at the inception of the lease,
less accumulated depreciation (see below) and
impairment losses (refer to accounting policy
(m)). Lease payments are accounted for in accordance with accounting policy (t).
the future economic benefits associated with the
item of property, plant and equipment increases.
All other expenditures are recognized in the
income statement as an expense when incurred.
(iii) Subsequent expenditures
Expenditure incurred to replace a component of
an item of property, plant and/or equipment that
is accounted for separately, including inspection and overhaul costs, are capitalized. Other
subsequent expenditures are capitalized only if
4 – 12 years
4 – 10 years
(iv) Depreciation
Depreciation is charged to the income statement on a straight-line basis over the estimated
useful life of the assets. Land is not depreciated.
The estimated useful life is as follows:
Buildings
Plants, technical equipment
and machines
Other equipment
15 –33 years
Due to the application of the cost of sales
method the annual depreciation is distributed
over all cost positions.
(i) Intangible assets
78
(i) Research and development
Expenditures on research activities, expecting to
gain new scientific or technical knowledge and
understanding, are expensed as incurred and
are recognized as expenses for research and
development.
(iii) Subsequent expenditures
Subsequent expenditures for capitalized intangible assets are capitalized only when the future
economic benefits embodied in the specific
asset to which it relates increases. All other
expenditures are expensed when incurred.
Expenditures on development activities, whereby
research findings are applied to a plan or design for the production of new or substantially
improved products and processes, are capitalized if the product or process is technically and
commercially feasible and the Group has sufficient resources to complete development. The
company has not capitalized any expenditures on
research and development activities.
(ii) Intangible assets acquired by the Group
Intangible assets, which are acquired by the
Group, are stated at cost less accumulated
amortization (see below) and impairment losses
(refer to accounting policy (m)).
(iv) Amortization
Amortization is charged to the income statement
on a straight-line basis over the estimated useful economic life of the assets. The estimated
useful life is as follows:
Patents and licenses
5 years
Due to the application of the cost of sales
method the annual depreciation is distributed
over all cost positions. All intangible assets have
a limited useful economic life.
F-23
(j) Investments in securities and in associates
Investments in securities held by the Group and
classified as available-for-sale are stated at fair
value, with any resultant gain or loss recognized
in other operating income (equity). Investments
in securities held for trading whose performance
is continuously monitored are stated at fair value
with any resultant gain or loss recognized in
the profit and loss statement. Held-to-maturity
investments are stated at cost less accumulated
depreciation with any resultant gain or loss recognized in the income statement. The fair value
of investments held for trading and investments
available-for-sale is their quoted bid price at the
balance sheet date. Investments in securities
are recorded at the transaction date. During the
business year 2010 financial assets have been
designated at fair value through profit and loss
which are monitored and controlled by the management on the basis of their fair value.
As per December 31, 2010 the Group holds only
investments in securities which are recognized
at fair value through profit and loss. The investment in Austria Mikro Systeme International Ltd.
which is not consolidated due to non-materiality
is recorded under the available-for-sale category
and is measured at amortized cost due to nonmateriality.
Investments in associates are accounted in
consolidated financial statements using the
equity method. The share of profits/losses of an
associate and fair value adjustments for depreciable assets are recognized within the operating
result.
(k) Trade and other receivables
Trade and other receivables are initially stated at
fair value at their transaction date and subse-
quently stated at cost less impairment losses
(refer to accounting policy (m)).
(l) Inventories
Inventories are stated at the lower of cost and
net realizable value. Net realizable value is the
estimated selling price in the ordinary course of
business, less the estimated costs of completion
and selling expense.
The cost of inventories is based on the moving
average price principle and includes expenditures incurred in their acquisition as well as
bringing them to their existing location and condition. For manufactured inventories and work in
progress, cost includes an appropriate share of
overhead based on normal operating capacity.
(m) Cash and cash equivalents
Cash and cash equivalents comprise cash
­balances and call deposits at banks.
F-24
79
(n) Impairment
The carrying amounts of the Group‘s assets,
other than inventories (refer to accounting policy
(k)) and deferred tax assets (refer to accounting
policy (u)), 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 is determined.
For intangible assets that are not yet available
for use and intangible assets with an unlimited
useful economic life, the recoverable amount
is estimated at each balance sheet date. An
impairment loss is recognized whenever the
carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. The
recoverable amount is recorded through profit
and loss.
The impairment loss is recognized as provision
for depreciation. If the group can be sure that
the impairment loss cannot be recovered the
provision for depreciation is then booked directly
against the asset.
(i) Calculation of recoverable amount
The recoverable amount of the Group‘s financial assets is calculated as the present value of
expected future cash flows.
The recoverable amount of other assets is the
higher value of their fair value less transaction
costs and value in use. 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 rates of the
time value of money and the risks specific to the
asset. For an asset that does not generate cash
inflows largely independent of those from other
assets, the recoverable amount is determined
for the cash-generating unit to which the asset
belongs.
(ii) Reversals of impairment
An impairment loss on available-for-sale investments or receivables is reversed if the subsequent increase in the recoverable amount can
be related objectively to an event occurring after
the impairment loss was recognized. In respect
to other assets, an impairment loss is reversed
if there has been a change in the estimates used
to determine the recoverable amount.
An impairment loss is only reversed to the extent
that the asset‘s carrying amount does not exceed the carrying amount that would have been
determined, net of depreciation or amortization,
if no impairment loss had been recognized.
(o) Dividends
Dividends are recognized as a liability in the
period in which they are resolved.
(p) Interest-bearing borrowings
Interest-bearing borrowings are initially recognized at cost, less attributable transaction costs.
Subsequent to initial recognition, interest-bearing borrowings are stated at amortized cost with
80
any difference between cost and redemption
value being recognized in the income statement
over the borrowing period on an effective interest basis.
F-25
(q) Employee benefits
(i) Defined benefit plans
According to Austrian labor regulations, employees who joined the Company prior to December
31, 2002, are entitled to receive severance payments – depending on the job tenure – equal to
a multiple of their monthly compensation, which
comprises fixed plus variable amounts such as
overtime and bonus payments. Maximum severance is equal to a multiple of twelve times the
eligible monthly compensation.
months salary, depending on the number of
years of service. The amount recognized as a
liability from this compensation is measured
using the projected unit credit method. Actuarial
assumptions are identical to those applied for
defined benefit plans. All actuarial gains and
losses are recognized immediately. Actuarial
gains and losses are recognized in equity acc.
to IAS 19.93 A – see also pt. (c) Changes of accounting policy.
The obligation for such severance payments
is measured using the projected unit credit
method. The discount rate is the yield at the balance sheet date on AAA credit-rated bonds that
have maturity dates approximating the terms of
the Group’s obligations. All actuarial gains and
losses are recognized immediately. Actuarial
gains and losses are recognized in equity acc.
to IAS 19.93 A – see also pt. (c) Changes of accounting policy.
(iv) Stock Option Plan
In 2002 the supervisory board approved a Stock
Option Plan (“SOP 2002”) for the purposes of
providing 142,500 stock options to key employees. The maximum number of Options for
issuance was later reduced to 76,500. After
the share split in 2004 (1:3) this number now
is 229,500. One Option entitles the holder to
receive one share of the Company at a strike
price of EUR 6.00 (EUR 18.00 before share split)
per share. On the first day of issue 33 % of the
Options may be exercised, 33 % one year later
and 34 % after two years.
(ii) Defined contribution plans
For all employees who entered into an employment contract after December 31, 2002, the
Company is obliged to contribute 1.53% of their
monthly remuneration to an employee benefit
fund. There is no additional obligation for the
Company. Therefore, this plan constitutes a
defined contribution plan. Contributions are recognized as an expense in the income statement
as incurred. These amounts are paid in cash to
authorities; the company’s obligations are therefore fully funded.
(iii) Other long-term employee benefits
All employees are eligible for long-term service
benefits. Under this plan, eligible employees
receive a cash payment after a specified service period. This payment equals one to three
Due to the resolution of the SOP 2002 before
coming into force of IFRS 2 the plan is not subject to this standard.
The purpose of the SOP 2002 was the increase
of motivation of key people in connection with
the economic situation of the Company in
2002 and the intended IPO. The Company has
concluded an agreement with its major shareholder (former parent), AMS Holding S.à.r.l.,
under which the issued Options are provided to
the Company at the strike price. In 2006 these
shares were bought by the Company for a strike
price of EUR 6.00 to cover the obligations from
SOP 2002.
F-26
81
The shareholders approved a further Stock
Option Plan (SOP 2005) in the annual general
meeting on May 19, 2005.
Within the SOP 2005 a total of 990,000 Options of
no-par-value shares may be issued over 4 years.
This reflects 9% of the issued capital at the time
of approval. The SOP 2005 is administered by
the SOP Committee. The Committee may define
terms for allocation and exercise of the Options. It
is envisaged to grant the Options during a 4-yearprogram. One Option entitles the holder to receive
one no-par-value share of austriamicrosystems
AG. The Options may be exercised during each
of the next succeeding five years on the first,
second, third, fourth and fifth anniversary of the
grant date to the maximum extent of 20% of the
total number of shares covered thereby (vesting
period). The strike price for each tranche will be
defined based on a 3‑month‑average price of the
austriamicrosystems share prior to the grant date
with a further 25% discount taken from that price.
All granted options under the SOP 2005 must be
exercised prior to June 30, 2015. According to the
SOP 2005 options reverted to the company can be
issued again until the end of the term.
In 2010, 19,500 Options (SOP 2005) were granted
to one employee of the company (2009: 20,000
Options to two employees and one executive).
The granted options (SOP 2005) were options
that reverted to the company. Differently to the
years 2005 to 2008, no 25% discount from the
3‑month‑average price of the share prior to the
issue date has been granted.
The main basis data of the granted options according to the Stock Option Plan 2005 structures as
­follows:
Valuation of Options (weighted average)
Market price at granting
Term of options
Risk-free interest rate
Expected volatility
Present value of Option
Other disbursement criteria, e.g. inclusion of a
market condition for the validation of the present
value, are not applicable.
The shareholders approved a further Stock
Option Plan (SOP 2009) in the annual general
meeting on April 2, 2009.
Within the SOP 2009 a total of up to 1,100,000
Options of no-par-value shares may be issued
over 4 years. This reflects 10% of the actual
issued capital. The SOP 2009 is administered
by the SOP Committee. The Committee may
define terms for allocation and exercise of the
82
2010
2009
in EUR
28.08
8.52
in years
5
6
in %
0.5
1.3
in %
30.72
28.91
in EUR
3.53
1.12
Options. It is envisaged to grant the Options
during a 4-year program. One Option entitles
the holder to receive one no-par-value share of
austria­microsystems AG. The Options may be
exercised during each of the next succeeding
four years on the first, second, third and fourth
anniversary of the grant date to the maximum
extent of 25% of the total number of shares
covered thereby (vesting period). The strike price
for each tranche will be defined based on the
3‑month‑average price of the austriamicro­
systems share prior to the grant date. All
granted options under the SOP 2009 must be
exercised prior to June 30, 2017.
F-27
The main basis data of the granted options according to the Stock Option Plan 2009 structures as
follows:
Valuation of Options (weighted average)
Market price at granting
Term of options
2010
2009
in EUR
28.21
8.66
in years
7
8
Risk-free interest rate
in %
0.5
1.3
Expected volatility
in %
30.72
28.91
in EUR
3.58
1.13
Present value of Option
Other disbursement criteria, e.g. inclusion of a
market condition for the validation of the present
value, are not applicable.
In 2010 262,122 options (SOP 2009) were granted
to 468 employees and executives of the company
(2009: 236,030 options to 428 employees and
executives of the company).
The options granted to the employees of
­austriamicrosystems according to the Stock
Option Plan 2005 and 2009 were measured with
the present value at granting. The so determined
value of the Options will be spread over the
period until vesting.
The Options were measured based on the BlackScholes option-pricing model. The interpretation
of market information necessary for the estimation of market values also requires a certain
degree of subjective judgement. The expected
volatilities were extrapolated from the historical stock-exchange price of the austriamicro­
systems share (source: Bloomberg). This can
result in a difference between the figures shown
here and values subsequently realized on the
marketplace.
F-28
83
The Options developed in the fiscal years 2010 and 2009 as follows:
SOP 2009
Options
2010
2009
Weighted average
exercise price
(in EUR)
Weighted average
exercise price
(in EUR)
Options
Outstanding at the beginning of
the period
235,940
7.83
0
-
Granted during the period
262,122
27.94
236,030
7.83
Forfeited during the period
11,538
14.92
90
7.68
Exercised during the period
19,019
7.68
0
-
0
-
0
-
Outstanding at the end of the
period
467,505
18.94
235,940
7.83
Exercisable at the end of the
period
38,081
7.90
0
-
Expired during the period
Weighted average share price at
the date of exercise (in EUR)
28.64
-
Range of exercise prices (in EUR)
7.68
-
to June 30, 2017
to June 30, 2017
Remaining contractual life
SOP 2005
Outstanding at the beginning of
the period
2009
Options
Options
Weighted average
exercise price
(in EUR)
28.10
887,447
27.59
937,761
Granted during the period
19,500
27.92
20,000
7.68
Forfeited during the period
24,486
28.80
70,314
28.80
Exercised during the period
24,897
19.07
0
-
0
-
0
-
Outstanding at the end of the
period
857,564
27.81
887,447
27.59
Exercisable at the end of the
period
548,761
28.82
472,249
28.88
Expired during the period
Weighted average share price at
the date of exercise (in EUR)
Range of exercise prices (in EUR)
Remaining contractual life
84
2010
Weighted average
exercise price
(in EUR)
27.98
-
7.68 – 34.25
-
to June 30, 2015
to June 30, 2015
F-29
SOP 2002
2010
2009
Options
Weighted average
­exercise price (in
EUR)
Options
Weighted average
­exercise price (in
EUR)
51,893
6.00
75,893
6.00
Granted during the period
0
-
0
-
Forfeited during the period
0
-
24,000
6.00
9,694
6.00
0
-
0
-
0
-
Outstanding at the end of the
period
42,199
6.00
51,893
6.00
Exercisable at the end of the
period
42,199
6.00
51,893
6.00
Outstanding at the beginning of
the period
Exercised during the period
Expired during the period
Weighted average share price at
the date of exercise (in EUR)
20.67
-
Range of exercise prices (in EUR)
6.00
-
to January 1, 2012
to January 1, 2012
Remaining contractual life
(r) Provisions
A provision is recognized on the balance sheet
when the Group has a 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. If the effect is
material, provisions are determined by discounting the expected future cash flows at a pre-tax
rate that reflects current market assessments of
the time value of money and, where appropriate,
the risks specific to the liability.
warranty claim is received from a customer. The
amount recognized is the best estimate of the
expenditure required to settle the claim based
on historical experience.
(ii) Onerous contracts
A provision for onerous contracts is recognized
when the expected benefits to be derived by the
Group from a contract are lower than the un­
avoidable cost of meeting its obligations under
the contract. (i) Warranties
A provision for warranties is recognized when a
(s) Trade and other payables
Trade and other payables are stated at compounded historical cost.
F-30
85
(t) Revenue
(i) Goods sold and services rendered
Revenue from the sale of goods is recognized in
the income statement when the significant risks
and rewards of ownership have been transferred
to the buyer. Revenue from services rendered is
recognized in the income statement in proportion to the stage of completion of the transaction
at the balance sheet date. The stage of completion is assessed by reference to surveys of work
performed. No revenue is recognized if there are
significant uncertainties regarding recovery of
the consideration due, associated costs or the
possible return of goods.
For certain sales transactions, the buyer requests the Company to delay physical delivery
of the goods sold (“Bill and hold sales”). In such
cases, revenue is recognized if the following
applies: the buyer takes title to the goods, it is
probable that delivery will be made, the item is
on hand, identified and ready for delivery, the
buyer specifically acknowledges the deferred
delivery instructions and the usual payment
terms apply.
(ii) Government grants
A government grant is initially recognized in the
balance sheet when there is reasonably high
assurance that it will be received and that the
Group will comply with the underlying conditions. Grants that compensate for expenses
incurred are recognized as gain in the income
statement on a systematic basis in the same
periods in which the expenses are incurred.
Grants that compensate for the cost of an asset
are deducted from the initial cost of an asset and
recognized in the income statement as reduced
depreciation on a systematic basis over the useful life of the asset.
In 2002, the Austrian Government introduced
a specific grant (valid until 2004) based on the
increase of capital expenditures made during
a business year in comparison to the average
investments of the three previous years. This
grant was paid in 2003 through a credit to the
Company’s income tax account and is presented
on the balance sheet as deferred income. The
recognition of this income as other operating
income is according to the related depreciation
and impairment charges, if any, of the underlying capital expenditures. (u) Expense
(i) Operating lease payments
Payments made under operating leases are recognized in the income statement in the period
they occur.
(ii) Net financing cost
Net financing costs comprise interest payable on
borrowings, interest receivable on funds invested
and dividend income, foreign exchange gains
and losses, and gains and losses on derivative
financial instruments related to financing activities.
86
Interest income is recognized in the income
statement as it accrues, taking into account the
asset‘s effective yield. Dividend income is recognized in the income statement on the date that
the dividend is declared.
All interest and other costs incurred in connection with borrowings are expensed as incurred
as part of net financing cost. The interest
expense component of finance lease payments
is recognized in the income statement using the
effective interest method.
F-31
(v) Income tax
Income tax on the profit for the year comprises
current and deferred tax. Income tax is recognized in the income statement except to the
extent that it relates to items recognized directly
to equity, in this case it is recognized in equity.
Current tax is the expected tax payable on taxable income for the year, using tax rates enacted
at the balance sheet date.
Deferred tax is accounted for using the balance
sheet liability method, providing for temporary
differences between the carrying amounts of
assets and liabilities for IFRS financial reporting purposes and the amounts used for tax
purposes as well as for tax assets existing at
the balance sheet date. Deferred tax assets and
liabilities for temporary differences relating to
investments in subsidiaries to the extent that
they will probably not reverse in the foresee-
able future are not recognized. The amount of
deferred tax provided is based on the expected
manner of realization or settlement of the carrying amount of assets and liabilities, using tax
rates enacted or substantially enacted at the
balance sheet date.
A deferred tax asset is recognized only to the extent that it is probable that future taxable profits
will be available against which the unused tax
losses and credits can be utilized. Deferred tax
assets are recognized to the extent - according
to the actual business plan - that a realization
of the tax benefit is probable during the next five
years.
Under current Austrian corporate tax law, tax
losses can be carried forward for an unlimited
period of time.
F-32
87
1 Segment reporting and revenues
Segment information is presented on the basis
of the internal reporting structure for the segments “Products” and “Foundry” and determined according to valuation and accounting
regulations of the IFRS. The Segment “Products”
comprises the development and distribution of
analog Integrated Circuits (“ICs”). The segment’s
customers are mainly in the Communications,
Industrial, Medical and Automotive markets. In
the “Foundry” segment the company reports the
contract manufacturing of analog/mixed signal
ICs based on its customers’ designs.
The geographic segments are structured by
the three regions in which sales occur: “EMEA”
(Europe, Middle East and Africa), “Americas”
and “Asia/Pacific”. In presenting information on
the basis of geographical segments, segment
revenue is based on the geographical billing
location of customers.
The segment measure “Result from operations”
consists of gross profit, expenses for research
and development, expenses for selling, general
and administrative as well as other operating
income and expenses.
The segment assets in principle comprise the
allocatable assets, i.e. customer receivables as
well as segment specific tangible and intangible assets. The reconciliations comprise items
which by definition are not part of the segments.
Segment capital expenditure is the total cost
incurred (net of government grants) during the
period to acquire segment assets that are expected to be used for more than one period.
Business segments
in thousands of EUR
Revenues from external customers
2010
2009
Products
Foundry
Total
Products
Foundry
Total
137,166
179,810
29,609
209,419
113,574
23,592
Result from operations
25,253
6,248
31,501
-1,252
4,780
3,528
Segment assets
32,351
4,449
36,799
27,831
4,536
32,367
Reconciliation of segments results to income statement
in thousands of EUR
Result from operations per segment reporting
Result from investments in associates
20091)
31,501
3,528
-134
-735
4,880
5,014
Unallocated corporate costs
-9,162
-26,851
Result from operations
27,085
-19,044
Subsidies for research and development
88
2010
Financial result
-3,679
1,143
Result before tax
23,406
-17,901
F-33
Reconciliation of segment assets to total assets
in thousands of EUR
2010
2009
Assets per segment reporting
36,799
32,367
Property, plant and equipment
107,893
115,368
Inventories
46,740
48,417
Cash, cash equivalents and short-term investments
44,240
42,211
Deferred tax asset
31,768
31,191
Investments in associates
6,443
5,481
Intangible assets
3,232
3,780
Other assets
14,670
9,422
291,784
288,237
Revenues per geographical segments
in thousands of EUR
EMEA
Americas
Asia/Pacific
2010
2009
101,256
75,500
27,993
19,036
80,170
42,631
209,419
137,166
Long-term assets per geographical segments
in thousands of EUR
2010
2009
114,290
123,186
Philippines
737
718
Other countries
348
339
115,375
124,244
Austria
Revenues by operation
in thousands of EUR
Revenues from production
Revenues from research and development projects
2010
2009
196,816
122,855
12,603
14,311
209,419
137,166
The sales volume with one single customer does not exceed 10% of the company’s total revenues.
F-34
89
2 Other operating income
in thousands of EUR
Government grants related to R&D expenses
Amortization of government grants related to assets
Insurance refunds
2010
2009
6,291
6,225
900
900
21
22
Gain from disposal of assets
350
8
Other
400
297
7,962
7,452
in thousands of EUR
2010
2009
Allowance for bad debts
-856
-796
Expenses for monetary transactions
-110
-95
3 Other operating expense
Other
-35
0
-1,001
-891
4 Net financing cost
in thousands of EUR
2010
20091)
-2,201
-1,989
Interest income
948
1,041
Exchange differences
462
1,782
-151
0
1
0
-983
42
-1,173
0
Interest expense
Securities held for sale
Revaluation to fair value
Result from sale
Loans
Revaluation to fair value
Result from sale
Derivative financial instruments
Revaluation to fair value
Expenses from financial instruments
90
F-35
-583
449
0
-182
-3,679
1,143
5 Income tax
Recognized in the income statement:
in thousands of EUR
2010
2009
Current tax
Current year
Under/(over) provided in prior years
-851
-169
-25
1,077
-876
908
Deferred tax
Change in temporary differences
-1,457
5,162
2,034
-4,834
577
328
-299
1,236
2010
20091)2)
Result before tax
23,406
-17,901
Income tax using the domestic corporation tax rate (25%)
-5,958
4,475
Change in capitalized tax losses carried forward
Total income tax result in income statement
Reconciliation of effective tax expense:
in thousands of EUR
Effect of tax rates in foreign jurisdictions
Non-deductible expenses / tax exempt income
Tax incentives (mainly for R&D)
Corporate tax
Current year result for which no deferred tax asset was recognized
Effect of first time recognition of tax benefits
Change in temporary differences
Change in capitalized tax losses carried forward
Under/(over) provided in prior years
7
2
975
264
1,123
1,067
-701
-21
3,703
-6,003
0
47
-1,457
5,162
2,034
-4,834
-25
1,077
-299
1,236
2010
2009
0
0
148
0
148
0
Deferred tax credit recognized directly in equity:
in thousands of EUR
Relating to changes in accounting policy
Relating to net loss not recognized in income statement
F-36
91
Deferred tax assets are recognized for all temporary differences and tax losses carry forwards
only to the extent that it is probable that future
taxable profit will be available within a foresee-
able period. Therefore approximately EUR 17,595
thousand (2009: EUR 21,845 thousand) are not
recognized in the balance sheet. 6 Cash and cash equivalents
in thousands of EUR
2010
2009
Bank deposits
23,035
26,714
Cash on hand
7
12
23,042
26,726
7 Trade receivables, net
in thousands of EUR
Trade receivables gross
Allowance for bad debt
2010
2009
33,924
27,949
-917
-702
33,007
27,246
Allowance for bad debt developed as follows:
In thousands of EUR
2010
2009
Balance at the beginning of the period
702
310
Consumptions during the year
-30
0
Reversals during the year
-5
0
Additions during the year
250
392
Balance at the end of the period
917
702
2010
2009
14,809
14,834
3,223
3,317
Trade receivables by regions:
in thousands of EUR
Region
EMEA
Americas
Asia/Pacific
14,974
9,095
33,007
27,246
Concentration of credit risks
On the balance sheet date of December 31, 2010
no trade receivable attributable to a single customer exceeded 5% of all trade receivables.
92
In the previous year no trade receivable attributable to a single customer exceeded 5% of all
trade receivables.
F-37
Ageing analysis for trade receivables:
in thousands of EUR
Receivables more than 30 days overdue
and not impaired
2010
Receivables
gross
2009
Impairment
Receivables
gross
Impairment
1,690
0
2,173
0
Receivables more than 30 day overdue
and impaired
917
917
952
702
Receivables not overdue or less than 30
days overdue and not impaired
31,317
0
24,823
0
Total trade receivables not adjusted
33,924
917
27,949
702
The impairment for “Receivables more than 30
days overdue and impaired” comprises a collective impairment assessment amounting to
EUR 180 thousand (2009: EUR 180 thousand).
For not overdue receivables not collected before
the balance sheet date and which were not impaired, no evidence for a possible bad debt loss
was existent at the balance sheet date.
8 Inventories
in thousands of EUR
2010
2009
Unfinished goods
28,921
31,560
Finished goods
12,232
13,100
Raw materials and supplies
2,607
1,906
Work in progress
2,979
1,851
46,740
48,417
Inventories stated at net realizable value were
EUR 8,161 thousand as per December 31, 2010
and EUR 12,997 thousand as per December 31,
2009 respectively.
The valuation allowance from inventories
amounts to EUR 10,432 thousand as of December 31, 2010 and to EUR 11,308 thousand as of
December 31, 2009 respectively.
The amount of inventories recognized as an expense amounts to EUR 53,213 thousand in 2010
and EUR 31,735 thousand in 2009 respectively.
Since the result of work in progress (research
and development contracts) cannot be estimated
reliably, all costs incurred are recognized as
R&D expenses. Accruals for onerous contracts
are being made if necessary.
F-38
93
9 Other receivables and assets
in thousands of EUR
2010
2009
Government grants related to R&D expenses
4,718
2,395
Derivative financial instruments at fair value
236
235
Financial assets
Other
934
583
5,887
3,213
1,602
1,336
Prepaid expenses
338
403
Deferred interests
456
230
2,396
1,969
8,284
5,183
Non-financial assets
Amounts due from tax authorities
Total other receivables and assets
All other receivables and assets are neither overdue nor impaired. For details to derivative financial
instruments please refer to pt. 23.
10 Property, plant and equipment
Land and
buildings
Plant and
equipment
Fixtures
and
equipment
Under construction
Government
grants
Total
70,665
327,407
22,637
3,603
-28,677
395,635
0
0
254
0
0
254
Additions
241
9,236
1,239
1,668
0
12,384
Transfers
0
3,565
25
-3,590
0
0
Disposals
0
-3,394
-7,644
0
409
-10,629
70,906
336,814
16,510
1,681
-28,268
397,643
42,047
238,204
18,768
0
-22,077
276,941
0
0
133
0
0
133
1,572
18,557
1,457
0
-1,380
20,206
0
-3,365
-7,619
0
405
-10,579
43,619
253,396
12,738
0
-23,052
286,701
At January 1, 2010
28,619
89,203
3,869
3,603
-6,600
118,694
At December 31, 2010
27,287
83,418
3,772
1,681
-5,216
110,943
in thousands of EUR
Cost
Balance at January 1, 2010
Currency translation differences
Balance at December 31, 2010
Depreciation and impairment losses
Balance at January 1, 2010
Currency translation differences
Depreciation
Disposals
Balance at December 31, 2010
Carrying amount
94
F-39
Land and
buildings
Plant and
equipment
Fixtures
and
equipment
Under construction
Government
grants
Total
Cost
Balance at January 1, 2009
70,665
321,476
21,744
1,343
-28,677
386,551
Currency translation differences
0
0
16
0
0
16
Additions
0
5,596
974
3,603
0
10,173
Transfers
0
910
67
-1,343
0
-367
Disposals
0
-575
-164
0
0
-739
70,665
327.407
22,637
3,603
-28,677
395,635
40,477
220,740
17,452
0
-20,688
257,981
0
0
5
0
0
5
1,569
17,880
1,405
0
-1,390
19,465
Balance at December 31, 2009
Depreciation and impairment losses
Balance at January 1, 2009
Currency translation differences
Depreciation
Disposals
0
-416
-94
0
0
-510
42,047
238,204
18,768
0
-22,077
276,941
At January 1, 2009
30,188
100,736
4,292
1,343
-7,990
128,570
At December 31, 2009
28,619
89,203
3,869
3,603
-6,600
118,694
Balance at December 31, 2009
Carrying amount
As of December 31, 2010, commitments for
the acquisition of property, plant and equipment EUR 4,586 thousand (2009: EUR 894
thousand) and intangible assets amounted to
EUR 360 thousand (2009: EUR 89 thousand).
For the government grants recognized certain
conditions such as evidence of the actual costs
incurred and a future minimum number of employees apply.
F-40
95
11 Intangible assets
No internally generated intangible assets exist.
in thousands of EUR
Patents & licenses
In development
Total
Cost
Balance at January 1, 2010
44,572
88
44,660
Additions
1,216
333
1,549
Disposals
-960
0
-960
44,828
421
45,249
39,111
0
39,111
2,666
0
2,666
Balance at December 31, 2010
Amortization and impairment losses
Balance at January 1, 2010
Amortization
Disposals
Balance at December 31, 2010
-960
0
-960
40,817
0
40,817
Carrying amount
At January 1, 2010
5,461
88
5,550
At December 31, 2010
4,011
421
4,432
Patents & licenses
In development
Total
Cost
Balance at January 1, 2009
42,160
1.126
43,286
Additions
919
88
1,008
Transfers
1,492
-1,126
367
44,572
88
44,660
36,303
0
36,303
2,808
0
2,808
39,111
0
39,111
At January 1, 2009
5,858
1,126
6,983
At December 31, 2009
5,461
88
5,550
Balance at December 31, 2009
Amortization and impairment losses
Balance at January 1, 2009
Amortization
Balance at December 31, 2009
Carrying amount
96
F-41
12 Investments and securities
in thousands of EUR
2010
2009
1
1
1
1
Non-current investments
Shares in affiliated companies
Current investments
Investment funds designated as at fair value through profit and loss
Current investments are government backed
corporate bonds issued by banks. Maturity dates
21,198
15,486
21,198
15,486
are October 27, 2011; December 2, 2011 and
January 23, 2012.
13 Investments at equity
Balance
Dec. 31, 2009
Additions
NewScale Technologies, Inc.
2,973
FlipChip Holdings LLC
2,508
5,481
in thousands of EUR
Translation
adjustment
Result
Balance
Dec. 31, 2010
573
334
-228
3,653
0
188
94
2,790
573
522
-134
6,443
Summary of financial information for associated companies:
in thousands of EUR
2010
NewScale
Technologies,
Inc.
FlipChip
­Holdings LLC
Sep. 30, 2010
32.3%
Assets
2,819
10,270
Liabilities
1,116
Equity
1,703
Reporting date
Ownership
2009
NewScale
Technologies,
Inc.
FlipChip
­Holdings LLC
Sep. 30, 2010
Sep. 30, 2009
Sep. 30, 2009
33.5%
25%
30%
13,089
2,640
9,069
11,709
6,851
7,967
911
6,335
7,246
3,419
5,122
1,729
2,733
4,462
Total
Total
The figures above are not adjusted for the percentage of owenership held by the group.
During the business year 2010 the existing
investment in FlipChip Holdings LLC, Phoenix,
Arizona (USA), has been increased to 33.5% due
to a restructuring with the shareholders. Based
on its patented Wafer-Level Packaging (WL-CSP)
technology, FlipChip Holdings LLC researches
and produces high-end packaging technologies.
In addition the existing investment in New Scale
Technologies, Inc., Victor, New York (USA),
has been increased by acquisition of shares to
32.3%. New Scale Technologies, Inc. creates
disruptively small motion systems. Based on its
patented micro-motor technology, New Scale
Technlogy, Inc. invents, manufactures and sells
miniature ultrasonic motors and integrated
positioning systems.
The pro rata result 2010 (EUR 143 thousand)
(2009: EUR 121 thousand) has been recorded in
the balance sheet as per December 31, 2010.
F-42
97
14 Deferred tax assets
Deferred tax assets are attributable to the following items:
in thousands of EUR
Intangible assets, property, plant and equipment
Other long-term assets
2010
2009
2,962
3,905
-122
0
Trade receivables and other assets
-74
-855
Employee benefits
-67
2,102
64
-2
Liabilities
Provisions
Tax value of loss carry-forwards and write down of investments
In Austria tax loss carry forwards do not expire.
Tax losses carried forward can be offset with a
maximum of 75% of the current taxable income.
0
0
29,005
26,041
31,768
31,191
Based on the business plan and the related
tax planning of the Company it is probable that
deferred tax assets recognised in the balance
sheet are recovered within the next years.
15 Other long-term assets
Other long-term assets are mainly related to
licensing prepayments. Also included is an option for the purchase of another 9.4% of shares
of New Scale Technology, Inc., Victor, New York
(USA) (EUR 68 thousand). As the value of this
option cannot be measured reliably at the balance sheet date due to uncertainties during the
start-up phase, no measurement at fair value
has been made.
16 Interest-bearing loans and borrowings
in thousands of EUR
2010
2009
Non-current liabilities
Bank loans
40,766
53,001
40,766
53,001
Current liabilities
Current portion of bank loans
98
F-43
7,011
14,946
7,011
14,946
Terms and debt repayment schedule 2010
in thousands of EUR
Total
1 year or less
2-5 years
More than 5 years
R & D loans
EUR – fixed rate loans
8,652
1,739
6,913
0
EUR – floating rate loans
4,668
2,568
2,100
0
CHF – floating rate loans
4,539
2,185
2,353
0
Unsecured bank facilities
EUR – floating rate
19,400
0
19,400
0
USD – floating rate
10,518
518
10,000
0
47,777
7,011
40,766
0
Total
1 year or less
2-5 years
More than 5 years
Terms and debt repayment schedule 2009
in thousands of EUR
R & D loans
EUR – fixed rate loans
6,160
882
5,278
0
EUR – floating rate loans
6,394
2,800
3,594
0
CHF – floating rate loans
5,207
1,077
4,130
0
EUR – floating rate
40,000
10,000
30,000
0
USD – floating rate
10,187
187
10,000
0
67,948
14,946
53,001
0
Unsecured bank facilities
The bank loans are secured as follows:
in thousands of EUR
2010
2009
Registered mortgages on land
0
0
Assignment of debt
0
0
17 Provisions
Warranties
Onerous
contracts
Other personnel provisions
Other
Balance at January 1, 2010
0
7,407
1,300
379
9,086
Provisions made during the year
0
5,294
5,492
780
11,565
in thousands of EUR
Total
Provisions used during the year
0
-6,338
-1,102
-301
-7,741
Provisions reversed during the year
0
-1,069
-135
0
-1,204
Balance at December 31, 2010
0
5,294
5,554
858
11,707
F-44
99
Warranties
Onerous
contracts
Other personnel provisions
Other
Total
826
7,467
1,226
1,615
11,133
0
7,407
1,250
375
9,032
Provisions used during the year
-200
-5,446
-910
-467
-7,023
Provisions reversed during the year
-626
-2,020
-267
-1,144
-4,057
0
7,407
1,300
379
9,086
Balance at January 1, 2009
Provisions made during the year
Balance at December 31, 2009
Warranties
A provision for warranties is recognized when a
warranty claim is received from a customer. Onerous contracts
Provisions for onerous contracts are set up
when the expected benefits to be derived by
the Group from a contract are lower than the
unavoidable cost of meeting its obligations
under the contract. The amount recognized as of
December 31, 2010, EUR 5,294 thousand (2009:
EUR 7,407 thousand), relates to several engineering contracts. Other personnel provisions
Provisions for other personnel costs include
profit sharing and bonuses payable within twelve
months after the respective balance sheet date
and sales incentives for current employees.
Other provisions
Other provisions represent a provision for corporate taxes amounting to EUR 500 thousand
(2009: 0) mainly and provisions for outstanding
invoices amounting to EUR 230 thousand (2009:
EUR 132 thousand).
18 Deferred government grants
In 2004, in connection with the construction
of the wafermanufacturing facility Fab B, the
Company obtained a government grant. This
grant awards the Company for the increase in
capital expenditure over those of the previous
years. The grant is accounted for as deferred in-
100
come and recognized as other operating income
in line with the average depreciation charge
for the underlying assets. The income recognized in 2010 amounted to EUR 900 thousand
(2009: EUR 900 thousand).
F-45
19 Other liabilities
in thousands of EUR
Current
Non-current
2010
2009
2010
Employee related liabilities
1,731
1,618
0
0
Liabilities from license agreements
1,207
1,364
0
0
755
172
0
0
Derivative financial instruments
Liabilities from operating leasing
agreement
Financial liabilities
2009
314
228
631
631
4,007
3,793
631
631
Accrued vacation days
3,184
2,834
0
0
Deferred income
2,869
2,008
0
0
Liabilities against tax authorities
1,343
954
0
0
963
816
0
0
Accrued expenses
Other
244
411
0
0
8,603
6,612
0
0
12,610
10,405
631
631
Non-financial liabilities
Total other liabilities
20 Employee benefits
Movements in the net liability recognized in the balance sheet:
in thousands of EUR
2010
20092)
Severance
payments
Long service
benefits
Severance
payments
Long service
benefits
Present value of obligation (DBO) January 1
9,522
1,332
7,975
1,233
Expense recognized in the income statement
1,288
174
862
166
527
64
1,239
100
Actuarial gains / losses recognized in comprehensive income
Payments during the year
Present value of obligation (DBO) December 31
-365
-59
-555
-167
10,972
1,511
9,522
1,332
The value of the obligation is not financed by a fund.
Expense recognized in the income statement:
in thousands of EUR
2010
20092)
Severance
­payments
Long service
benefits
Current service cost
862
108
459
99
Interest cost
425
66
403
67
1,288
174
862
166
F-46
Severance
­payments
Long service
benefits
101
The expense is recognized in the following line items in the income statement:
in thousands of EUR
2010
20092)
Severance
­payments
Long service
benefits
Severance
­payments
Long service
benefits
470
64
293
57
Cost of sales
Selling, general and administrative
expenses
442
60
302
58
Research and development
376
51
267
52
1,288
174
862
166
Principal actuarial assumptions at the balance sheet date:
2010
2009
Discount rate at December 31
4.70%
5.10%
Future salary increases
2.70%
2.70%
Fluctuation < 40 years of age
10%
10%
Fluctuation > 40 years of age
6%
7%
Retirement age - women
56.5-60
56.5-60
Retirement age - men
61.5-65
61.5-65
The average number of employees was 1,119 in
2010 and 1,087 in 2009. Expenses for the severance payment fund were EUR 221 thousand
(2009: EUR 211 thousand).
The total personnel expense ­amounted
to EUR 77,611 thousand in 2010 and
EUR 67,430 ­thousand in 2009. In 2010 the
amount shown includes EUR 1,801 thousand
(2009: EUR 2,346 thousand) for the SOP 2005
and SOP 2009.
Historical information:
in thousands of EUR
Present value of obligation (DBO)
December 31
for severance payments
Present value of obligation (DBO)
December 31
for long service benefits
2010
2009
2008
2007
2006
10,972
9,522
7,975
7,829
7,637
1,511
1,332
1,233
1,290
1,069
12,483
10,854
9,208
9,119
8,706
21 Shareholders‘ equity
Share capital and share premium:
in thousands of EUR
Share capital
Additional paid-in capital
102
F-47
2010
2009
26,759
26,698
102,624
100,638
129,383
127,336
In April 2004, the general meeting resolved a
share split of 1:3, resulting in a share capital
of EUR 21,801,850.25 divided into 9,000,000
shares. In May 2004 the capital was increased
by 2,000,000 shares up to 11,000,000 shares,
resulting in a share capital of EUR 26,646,705.86
and an increase of additional paid-in capital
(share premium) of EUR 37,399,281.40 (premium
on capital stock minus transaction cost of the
capital increase). All shares have no notional par
value and are fully paid-in. Since May 2004, the
Company’s shares are listed on the SIX Swiss
Exchange.
In May 2005, the executive board has been
authorized to increase the share capital from
EUR 26,646,705.86 by EUR 2,398,203.53 to
EUR 29,044,909.39 by issuing 990,000 shares.
This represented 9% of the issued share capital
at the time of approval. Purpose of this capital
increase was the grant of Stock Options to employees of the Company.
Based on this authorization 46,252 shares
have been issued between 2006 and 2010.
This led to an increase of the share capital by
EUR 112,042.14 to EUR 26,758,748,01.
In the annual general meeting on March 29,
2006, the executive board was authorized
to increase the share capital up to a total of
EUR 10,925,024.00 by issuing 4,510,000 shares.
Price and conditions for any increase are subject
to supervisory board approval.
In 2006, 174,375 treasury shares at a price of
EUR 6.00 per share were acquired by the company exercising an option privilege in order to fulfill
the obligations deriving from SOP 2002. Thereof
9,694 shares (2009: none) were transferred to
employees of the company in 2010. In total the
number of treasury shares amounted to 859,630
per the end of the year (2009: 488,148).
During the course of the financial year 2010 the
company issued 24,897 (2009: none) shares in
order to meet its obligations with respect to the
execution of stock options regarding the stock
option plans (SOP 2005 and SOP 2009).
The holders of ordinary shares are entitled to
receive dividends based on the distributable net
income („Bilanzgewinn“) presented in the separate financial statements of the parent company
compiled in accordance with the Austrian Commercial Code (UGB) and as declared by shareholders‘ resolution and are entitled to one vote
per share at general meetings of the Company.
All shares rank equally with regard to the Company‘s residual assets.
The position Other reserves comprises all foreign
exchange differences arising from the translation
of the financial statements of foreign entities.
Management of equity
The economic equity matches equity as shown in
the Company’s balance sheet. The management
board’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. Amongst other financial ratios
the management board monitors equity ratio
and return on equity. For establishing adequate
capital resources, dividend payments and share
buy-backs are considered appropriate.These
goals have not changed during the business year
2010. None of the group companies are subject
to certain capital requirements.
Long-term goal of the company is to maintain a
balance between profitability and liquidity. For
this purpose a yearly return on equity of 25-30%
(2010: 12%; 2009: -10%), a return on assets of
15-20 % (2010: 10%; 2009: -5%) and an average
net liquidity of 0.3x-0.5x revenues (2010: -0.02;
2009: -0.19) should be achieved.
F-48
103
22 Earnings per share
Basic earnings per share
The calculation of basic earnings per share is based on the net profit attributable to ordinary shareholders.
Net result attributable to ordinary shareholders:
in EUR
2010
20091)
Net profit for the year
23,106,868
-16,665,866
Weighted average number of shares outstanding
10,171,304
10,635,525
2.25
-1.57
10,454,177
10,635,525
2.21
-1.57
Earnings per share (basic)
Weighted average number of shares diluted shares
Earnings per share (diluted)
The options granted according to the SOP 2005
and SOP 2009 will dilute in general. The dilution only occurs if the strike price is below the
average stock-exchange price. Considering the
requirements to be fulfilled by the employees
during the vesting period of SOP 2005 and SOP
2009 a dilution will occur. Going forward the
SOP 2002 will be covered by treasury shares
therefore a marginal dilution could exist. In 2009,
considering the dilution, a reduction of the loss
per share occured. Therefore according to the
regulations in IAS 33 no dilution has to be considered for SOPs 2002, 2005 and 2009.
2010
2009
10,533,207
10,672,039
371,482
138,832
Reconciliation of ordinary shares
Outstanding shares as of January 1
Purchase and sale of treasury shares
Capital increase regarding stock option plan 2005
Outstanding shares as of December 31
104
F-49
24,897
0
10,186,622
10,533,207
23 Financial instruments derivative financial instruments in the balance
sheet.
Exposure to credit, interest rate and currency
risks arise in the normal course of the Group’s
business. Derivative financial instruments are
used to reduce exposure to fluctuations in foreign exchange rates and interest rates.
All transactions related to derivative financial
instruments are carried out centrally by the
Group’s treasury department. In connection
with these financial instruments, the Company
utilizes advisory services from national and
international financial institutions.
Credit risk
According to the Management’s credit policy
the exposure to credit risk is continuously
monitored. Credit evaluations are performed
on all customers applying for a certain term of
payment.
According to the Company‘s treasury and risk
management policy, investments are allowed
in liquid securities only, and solely with counter parties that have a credit rating equal to or
better than the Group. Transactions involving
derivative financial instruments are with counter
parties with high credit ratings and with whom
the Group has a signed netting agreement.
At the balance sheet date there were no significant concentrations of credit risk. The maximum
exposure to credit risk is represented by the carrying amount of each financial asset, including
Interest rate risk
Interest rate risk – the possible fluctuations in
value of financial instruments and changes in
future cash flows – arises in relation to medium and long-term receivables and payables
(especially borrowings). austriamicrosystems’
treasury policy ensures that part of the cash flow
risk is reduced by fixed-interest borrowings. On
the liability side, 18% (2009: 9%) of all amounts
owed to financial institutions are at fixed rates.
Of the remaining borrowings on a floating rate
basis (82% (2009: 91%)), 97% (2009: 61%) will
be repaid over the next two years. The remaining floating rate borrowings are checked on a
continuing basis with regard to the interest rate
risk. On the asset side, the interest rate risks are
primarily with time deposits that are tied to the
market interest rate.
Foreign currency risk
Foreign currency risks result from the Group’s
extensive buying and selling of products outside
of the EUR zone. As a result, significant and frequent cash flows from operating activities (e.g.
trade receivables and payables) denominated in
foreign currencies are hedged. These hedges
concern primarily transactions in US dollar.
In order to avoid currency risk, the Company
regularly utilizes forward currency contracts,
F-50
105
Liquidity risk
Liquidity risk is the risk for the Company not to
be able to fulfill its financial obligations on maturity. The management’s approach is to assure
sufficient liquidity for the Company under ordinary and extraordinary conditions. The management constantly monitors the cash demand and
optimizes the cash-flow. Detailed planning occurs for a period of 12 months in which also due
payables and extraordinary circumstances as far
as foreseeable are considered. Additionally the
company has unused credit lines available.
option contracts as well as interest swaps.
Transaction risk is calculated for each foreign
currency and takes into account significant foreign currency receivables and payables as well
as highly probable purchase commitments.
As per December 31, 2010 and December 31, 2009 respectively, austriamicrosystems
holds foreign currency forwards, options and
swaps to minimize its foreign currency exposure
with respect of trade receivables, trade payables
and forecasted purchase commitments.
Summary of financial instruments recorded on the balance sheet as per Dec. 31, 2010:
in thousands of EUR
Available
for sale
Held for
trading
Designa- Loans and
ted at fair
receiv­
value
ables
Cash
Short-term financial assets
Carrying
amount
Fair
value
Cash and cash equivalents
0
0
0
0
23,042
23,042
23,042
Financial assets
0
0
21,198
0
0
21,198
21,198
Trade receivables
0
0
0
33,007
0
33,007
33,007
Other receivables and assets
0
236
0
5,162
0
5,398
5,398
Long-term financial assets
Other long-term financial assets
in thousands of EUR
1
68
4,086
296
0
4,451
4,451
1
304
25,284
38,465
23,042
87,096
87,096
At amortized cost
Carrying
­amount
Fair
value
Held for trading
Short-term financial liabilities
Interest bearing loans and
­borrowings
0
7,011
7,011
6,918
Trade payables
0
15,660
15,660
15,660
Other liabilities
755
3,252
4,007
4,007
Long-term financial liabilities
106
Interest bearing loans and
­borrowings
0
40,766
40,766
Other long-term liabilities
0
0
0
0
755
66,689
67,444
66,812
F-51
40,227
Summary of financial instruments recorded on the balance sheet as per Dec. 31, 2009:
Designa- Loans and
ted at fair
receivavalue
bles
Available
for sale
Held for
trading
Cash and cash equivalents
0
0
0
Financial assets
0
0
Trade receivables
0
0
Other receivables and assets
0
235
in thousands of EUR
Cash
Carrying
amount
Fair
value
0
26,726
26,726
26,726
15,486
0
0
15,486
15,486
0
27,246
0
27,246
27,246
0
2,395
0
2,630
2,630
Short-term financial assets
Long-term financial assets
Other long-term financial assets
1
68
4,195
0
0
4,264
4,264
1
303
19,681
29,641
26,726
76,352
76,352
Held for trading
At amortized cost
Carrying
amount
Fair
value
Interest bearing loans and
b­orrowings
0
14,946
14,946
14,850
Trade payables
0
14,270
14,270
14,270
Other liabilities
172
3,210
3,382
3,382
in thousands of EUR
Short-term financial liabilities
Long-term financial liabilities
Interest bearing loans and
­borrowings
0
Other long-term liabilities
F-52
53,001
53,001
52,659
0
631
631
631
172
86,058
86,230
85,792
107
The fair value calculations are based on the respective cash flows discounted on the balance sheet
date with interest rates applicable to similar financial instruments.
2010
in thousands of EUR
Level 1
Level 2
Level 3
Total
Short-term financial assets
Financial assets
21,198
0
0
21,198
0
236
0
236
Other receivables and assets
Long-term financial assets
Financial assets
0
4,086
0
4,086
21,198
4,322
0
25,520
Short-term financial liabilities
Other liabilities
2009
in thousands of EUR
0
755
0
755
0
755
0
755
Level 1
Level 2
Level 3
Total
Short-term financial assets
Financial assets
15,486
0
0
15,486
0
235
0
235
Other receivables and assets
Long-term financial assets
Financial assets
0
4,195
0
4,195
15,486
4,430
0
19,916
Short-term financial liabilities
Other liabilities
Financial instruments designated at fair value
are measured at their respective market value.
The valuation of financial instruments held for
trading is based on valuations done by the external contractors.
As per year-end 2010 the interest swaps shown
under derivative financial instruments is a
USD interest-rate swap with a nominal value
of USD 13,000 thousand and a EUR interest-rate
108
0
172
0
172
0
172
0
172
swap with a nominal value of EUR 10,000 thousand. For the USD interest-rate swap austria­
microsystems pays a fixed rate of 2.57% and
gets the 3M-USD Libor with a maturity date of
April 29, 2014. For the EUR interest-rate swap the
Company pays a fixed rate of 2.73% and gets the
3M-EUR Libor with a maturity of April 29, 2014.
The remaining term of the other derivative financial instruments is less than one year.
F-53
Net gains and losses from financial instruments:
2010
in thousands of EUR
Result from valuation
Foreign currency
­valuation
Result from divestment
-151
1
108
Financial assets
At fair value through profit & loss held
for trading
Designated as at fair value through
profit & loss
0
0
0
Loans and receivables
0
109
780
-151
109
888
-583
0
0
Financial liabilities
At fair value through profit & loss held
for trading
At amortized costs (other financial
liabilities)
2009
in thousands of EUR
0
-767
-1,923
-583
-767
-1,923
Result from valuation
Foreign currency
­valuation
Result from divestment
50
81
482
Financial assets
At fair value through profit & loss held
for trading
Designated as at fair value through
profit & loss
0
0
190
Loans and receivables
0
485
-487
50
566
185
-129
0
-525
Financial liabilities
At fair value through profit & loss held
for trading
At amortized costs (other financial
liabilities)
0
-258
1,641
-129
-258
1,116
Interest and dividends were not included in the tables above.
Interest income and interest expenses
Interest income and expenses from financial assets which are valued at fair value and are not affecting net income are as follows:
in thousands of EUR
Interest income
Interest expenses
F-54
2010
20091)
948
2,823
-2,201
-1,989
109
Effective interest rates and liquidity analysis
The following are the contractual maturities of
financial liabilities including interest payments
2010
in thousands of EUR
and the effective interest rates at the balance
sheet date.
Interest
rate
Carrying
amount
Expected
cash flow
0-1 year
2-5 years
More than
5 years
EUR – fixed rate loans
2.17%
8,652
9,091
1,911
7,180
0
EUR – floating rate loans
1.57%
4,668
4,747
2,626
2,121
0
CHF – floating rate loans
0.77%
4.539
4,583
2,209
2,374
0
EUR – floating rate loan
1.77%
19,400
19,870
362
19,508
0
USD – floating rate loan
1.65%
10,518
10,738
675
10,063
0
EUR – fixed rate
367
374
178
197
0
USD – fixed rate
387
406
214
192
0
48,532
49,809
8,174
41,635
0
Interest
rate
Carrying
amount
Expected
cash flow
0-1 year
2-5 years
More than
5 years
EUR – fixed rate loans
2.34%
6,160
6,472
1,014
5,458
0
EUR – floating rate loans
1.43%
6,394
6,520
2,868
3,651
0
CHF – floating rate loans
1.07%
5,207
5,322
1,121
4,201
0
EUR – floating rate loan
2.66%
40,000
41,841
10,919
30,922
0
USD – floating rate loan
2.35%
10,187
10,479
408
10,071
0
EUR – fixed rate
172
178
193
-16
0
USD – fixed rate
0
-29
188
-217
0
68,120
70,782
16,711
54,071
0
R & D loans
Unsecured bank facilities
Interest swaps
2009
in thousands of EUR
R & D loans
Unsecured bank facilities
Interest swaps
110
F-55
Risk of change of interest rates
At the balance sheet date the interest bearing financial instruments carry the following values:
in thousands of EUR
2010
2009
Financial assets
Fixed rate financial instruments
21,198
15,486
Floating rate financial instruments
0
0
Interest rate swaps
0
0
Financial liabilities
Fixed rate loans
8,652
6,160
Floating rate loans
39,125
61,788
Interest rate swaps
755
172
Fair value sensitivity analysis for fixed rate instruments
that all other variables, in particular currency
rates, remain constant. This analysis is performed on the same basis for 2009.
A change of 100 basis points (bp) in interest
rates at the reporting date would have increased
(decreased) equity and profit or loss by the
amounts shown below. This analysis assumes
2010
in thousands of EUR
Profit & loss statement
Equity
100 bp increase
100 bp decrease
100 bp increase
100 bp decrease
-111
114
0
0
Financial assets
Fixed rate financial instruments
2009
in thousands of EUR
Profit & loss statement
Equity
100 bp increase
100 bp decrease
100 bp increase
100 bp decrease
-280
301
0
0
Financial assets
Fixed rate financial instruments
Cash flow sensitivity analysis for variable rate instruments
A change of 100 basis points (bp) in interest
rates at the reporting date would have increased
(decreased) equity and profit or loss by the
amounts shown below. This analysis assumes
that all other variables, in particular currency
rates, remain constant. This analysis is performed on the same basis for 2009.
F-56
111
2010
in thousands of EUR
Profit & loss statement
100 bp increase
100 bp decrease
Equity
100 bp increase
100 bp decrease
Financial assets
Variable rate financial instruments
0
0
0
0
Interest rate swaps
0
0
0
0
Financial liabilities
Floating rate loans
-499
499
0
0
Interest rate swaps
722
-648
0
0
100 bp increase
100 bp decrease
2009
in thousands of EUR
Profit & loss statement
100 bp increase
100 bp decrease
Equity
Financial assets
Variable rate financial instruments
0
0
0
0
302
-431
0
0
Floating rate loans
-1,003
1,003
0
0
Interest rate swaps
350
-414
0
0
Interest rate swaps
Financial liabilities
Foreign currency risk
The company’s exposure to foreign currency risk was as follows based on notional amounts:
2010
in thousands of
USD
CHF
28,508
-27
0
Trade liabilities and other liabilities
-11,116
-10
-5,768
Interest bearing loans
-13,971
-5,647
0
3,422
-5,685
-5,768
Trade receivables and other receivables
Currency options
Net foreign currency risk
112
JPY
-10,000
0
0
-10,000
0
0
-6,578
-5,685
-5,768
F-57
2009
in thousands of
USD
CHF
Trade receivables and other receivables
23,026
-27
0
Trade liabilities and other liabilities
-6,863
-5
-31,989
Interest bearing loans
Currency options
Net foreign currency risk
JPY
-14,570
-7,752
0
1,593
-7,784
-31,989
-15,500
0
0
-15,500
0
0
-13,907
-7,784
-31,989
Sensitivity analysis
and profit loss by the amounts shown below.
The effects shown in equity also comprise the
effects shown in profit and loss.
A 10 percent strengthening/weakening of the
EUR against the following currencies on December 31 would have increased (decreased) equity
2010
in thousands of EUR
Profit & loss
10% increase
10% decrease
Equity
10% increase
10% decrease
USD
379
-395
379
-395
CHF
413
-505
413
-505
JPY
5
-6
5
-6
10% increase
10% decrease
10% increase
10% decrease
USD
612
-96
0
0
CHF
475
-581
0
0
JPY
22
-27
0
0
2009
in thousands of EUR
Profit & loss
This analysis assumes that all other variables,
in particular interest rates, remain constant.
Equity
The analysis is performed on the same basis for
2009.
The following FX exchange rates were used during the business year:
Annual average exchange rate
Period end exchange rate
2010
2009
2010
2009
USD
1.3207
1.3963
1.3362
1.4406
CHF
1.3700
1.5076
1.2504
1.4836
JPY
115.26
130.63
108.65
133.16
F-58
113
24 Operating leases
Leases as lessee
Non-cancellable operating lease rentals are payable as follows:
In thousands of EUR
2010
2009
Less than one year
5,110
4,765
Between one and five years
1,212
5,850
More than five years
0
0
6,322
10,615
leasing contract for semiconductor equipment
is in force. Lease payments are adapted annually to reflect market rentals. None of the leases
includes contingent rentals. The expenses for
operating lease amounted to EUR 5,581 thousand in 2010 (2009: EUR 4,843 thousand).
Some of the Group‘s subsidiaries lease office
space. In addition, the Group leases the “gas
farm” as well as automobiles under operating
leases. The lease agreements typically run for
an initial period of four to ten years, typically
including an option for the lessee to renew the
lease after that date. Since January 1, 2007 a
25 Contingencies
The preparation of the consolidated financial
statements according to IFRS requires discretionary decisions and business assumptions by
management concerning future developments,
thus materially determining the method and
value of assets and liabilities, the disclosure of
other obligations at the balance sheet date and
the resulting earnings and expenditures within
the year.
Within the following assumptions there exist
risks which could lead to changes in the value
of assets or liabilities during the following fiscal
year:
114
- the valuation of provisions for severance payments and long service benefits is made using
assumptions concerning the discount rate,
retirement age, fluctuations and future salary
increases.
- the application of deferred tax assets is under
the assumption that taxable income will be
available to take advantage of existing tax loss
carry forwards in the future.
- the impairment test of the tangible fixed assets is based on forecasted future cash-flows
in the years to come utilizing an industry and
company related discount rate.
F-59
26 Related parties
Identity of related parties
The Company has a related party relationship with:
- the Company‘s Executive Officers (CEO, CFO)
- the members of the Company‘s Supervisory Board (Aufsichtsrat)
- associated companies
- the not consolidated affiliated company Austria Mikro Systeme International Ltd.
As of December 31, 2010 and December 31, 2009 respectively, the remuneration for the management board was as follows:
CEO
Remuneration (in thousands of EUR)
CFO
Management board total
2010
2009
2010
2009
2010
2009
Salary, not variable
399
357
249
220
648
577
Salary, variable
330
165
231
116
561
281
71
24
35
10
106
34
7
7
7
7
14
14
2
2
1
1
3
3
Salary
Options
Options (value at allocation)
Non cash benefit
Car
Expense for precautionary measures
Contribution to accident insurance
The Company recorded an amount of
EUR 208 thousand for the accrual for s­ everance
payments (2009: EUR 73 ­thousand).
During the business year 20,000 call options
(2009: 21,000) for the CEO, 10,000 (2009: 9,000)
for the CFO and 30,000 (2009: 30,000) call
options of SOP 2009 for the management
board as a whole were allocated during the
year. The strike price amounts to EUR 27.92
(2009: EUR 7.68).
For conditions and valuations of the call options
for shares of austriamicrosystems AG based on
the SOP 2005 and SOP 2009 please refer to point
(p) (iv).
Persons related to the management board held
2,318 shares and no options of austriamicrosystems AG as per December 31, 2010 and
4,960 shares and no options as per December 31,2009, respectively.
F-60
115
The remuneration of the company‘s Supervisory
board amounted to EUR 339 thousand (2009:
EUR 237 thousand). All remunerations were
or are be paid directly by the Company. The
Company has no consulting agreements with
members of their Supervisory Board and the
Company‘s known shareholders.
The Company’s Executive Officers hold 191,355
shares and call options for the purchase
of 169,750 shares as of December 31, 2010
(191,355 shares and call options for the purchase of 145,000 shares as of December 31,
2009).
The breakdown for the individual members of the Supervisory Board for the year 2010 is as follows:
Name
Directors’ gross
remuneration
fixed
Function
Number of
shares held as
per Dec. 31
Number of
options held as
per Dec. 31
in thousands of EUR
Dipl. Ing. Guido Klestil
Chairman
85
34,280
0
Prof. Dr. Siegfried Selberherr
Vice chairman
63
15,000
0
Mag. Hans Jörg Kaltenbrunner
Vice chairman
61
0
0
Dr. Kurt Berger
Member
42
0
0
Michael Grimm
Member
41
0
0
Dipl. Wirtsch. Ing. Klaus Iffland
Member
42
1,000
0
Johann Eitner
Employee representative
2
0
0
Ing. Mag. Günter Kneffel
Employee representative
1
0
0
Dipl. Ing. Kurt Layer
Employee representative
The shown remunerations show the amounts
actually paid during the business year. The
remuneration for the business year 2010 will
be determined at the general meeting on
May 26, 2011. 116
1
40
0
339
50,320
0
No person related to the supervisory board held
shares or options of austriamicrosystems AG as
of December 31, 2010.
F-61
The breakdown for the individual members of the Supervisory Board for the year 2009 is as follows:
Name
Function
Directors’ gross
remuneration
fixed
Number of
shares held as
per Dec. 31
Number of
options held as
per Dec. 31
in thousands of EUR
Dipl. Ing. Guido Klestil
Chairman
83
34,280
0
Vice chairman
63
15,000
0
Mag. Hans Jörg Kaltenbrunner
Vice chairman
(since April 2, 2009)
1
0
0
Dr. Kurt Berger
Member
(since April 2, 2009)
2
0
0
Dr. Felix Ehrat
Member
(until April 2, 2009)
41
X
0
Michael Grimm
Member
(since April 2, 2009)
1
0
0
Member
42
1,000
0
Johann Eitner
Employee representative
2
0
0
Ing. Mag. Günter Kneffel
Employee representative
2
0
0
Dipl. Ing. Kurt Layer
Employee representative
(since April 2, 2009)
Prof. Dr. Siegfried Selberherr
Dipl. Wirtsch. Ing. Klaus Iffland
1
40
0
237
50,320
0
There are no unsettled financial liabilities between members of the supervisory board or the
board of directors and austriamicrosystems.
No person related to the supervisory board held
shares or options of austriamicrosystems AG as
of December 31, 2009.
Related party transactions
in thousands of EUR
Transaction value for the year ended
Dec. 31
Balance outstanding as at
Dec. 31
2010
2009
2010
2009
6
207
0
87
55
0
-15
0
New Scale Technologies, Inc., Victor, New York (USA)
Sale of goods and services
Purchased services
Identity of associated companies
New Scale Technologies, Inc., Victor, New York (USA): Creates disruptively small motion systems.
Based on its patented micro-motor technology, New Scale Technlogy, Inc. invents, manufactures and
sells miniature ultrasonic motors and integrated positioning systems.
Flip Chip Holdings LLC, Phoenix, Arizona (USA): Based on its patented Wafer-Level Packaging (WLCSP) technology, FlipChip Holdings LLC, researches and produces high-end packaging technologies.
F-62
117
27 Remuneration for the auditors
The expense for the auditor’s remuneration
for the audit of the finacial statements and
­annual consolidated financial statements 2010
­ mounted to EUR 98,000.00. For other consula
tancy services EUR 8,368.55 have been expensed.
28 Group enterprises
Accounting method
Country of
­incorporation
2010
2009
fully consolidated
France
100%
100%
austriamicrosystems Germany GmbH
fully consolidated
Germany
100%
100%
austriamicrosystems Italy S.r.l.
fully consolidated
Italy
100%
100%
100%
austriamicrosystems France S.à.r.l.
Ownership interest
austriamicrosystems Switzerland AG
fully consolidated
Switzerland
100%
austriamicrosystems (United Kingdom), Ltd.
fully consolidated
U. K.
100%
100%
austriamicrosystems Spain SL
fully consolidated
Spain
100%
100%
austriamicrosystems USA, Inc.
fully consolidated
USA
100%
100%
austriamicrosystems Japan Co., Ltd.
fully consolidated
Japan
100%
100%
austriamicrosystems (India), Pvt. Ltd.
fully consolidated
India
100%
100%
austriamicrosystems (Philippines) Inc.
fully consolidated
Philippines
100%
100%
Aspern Investment Inc.
fully consolidated
USA
100%
100%
austriamicrosystems Korea, Ltd.
fully consolidated
Korea
100%
-
at cost
China
100%
100%
Austria Mikro Systeme International Ltd.
The Group enterprise accounted for at cost has ceased operations and is not material individually
and on an aggregated basis.
118
F-63
29 Events after the balance sheet date
No transactions had significant effect on austriamicrosystems’ financial position, assets or earnings
after the closing of the fiscal year.
Unterpremstätten, February 4, 2011
John A. Heugle
CEO
Michael Wachsler-Markowitsch
CFO
F-64
119
Independent Auditor’s Report
Report on the consolidated financial statements
We have audited the accompanying consolidated
financial statements of austriamicrosystems
AG, Unterpremstätten, for the year period from
1 January 2010 to 31 December 2010. These
consolidated financial statements comprise the
consolidated balance sheet as at 31 December
2010, and the consolidated income statement/
consolidated statement of comprehensive income, the consolidated cash flow statement and
consolidated statement of changes in equity for
the year ended 31 December 2010 and a summary of significant accounting policies and other
explanatory notes.
Management’s responsibility for the consolidated financial statements and
­accounting system
The Company’s management is responsible for
the group accounting system and for the preparation and fair presentation of these consolidated financial statements in accordance with
the International Financial Reporting Standards
(IFRSs) as issued by the International Accounting Standard Board (IASB) and in accordance
with the International Financial Reporting
Standards (IFRSs) as adopted by the EU. This
responsibility includes: designing, implementing and maintaining internal control relevant
to the preparation and fair presentation of the
consolidated financial statements that are free
from material misstatement, whether due to
fraud or error; selecting and applying appropriate accounting policies; and making accounting
estimates that are reasonable in the circumstances.
Auditor’s responsibility and description of type and scope of the statutory audit
Our responsibility is to express an opinion on
these consolidated financial statements based
on our audit. We conducted our audit in accordance with laws and regulations applicable
in Austria and Austrian Standards on Auditing,
as well as in accordance with International
Standards on Auditing, issued by the International Auditing and Assurance Standards Board
(IAASB) of the International Federation of Accountants (IFAC). Those standards require that
we comply with professional guidelines and that
we plan and perform the audit to obtain reasonable assurance about whether the consolidated
financial statements are free from material
misstatement.
An audit involves performing procedures to
obtain audit evidence about the amounts and
disclosures in the consolidated financial statements. The procedures selected depend on the
120
auditor’s judgment, including the assessment
of the risks of material misstatement of the
consolidated financial statements, whether due
to fraud or error. In making those risk assessments, the auditor considers internal control
relevant to the entity’s preparation and fair presentation of the consolidated financial statements
in order to design audit procedures that are
appropriate in the circumstances, but not for the
purpose of expressing an opinion on the effectiveness of the group’s internal control. An audit
also includes evaluating the appropriateness of
accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have
obtained is sufficient and appropriate to provide
a basis for our audit opinion.
F-65
Opinion
Our audit did not give rise to any objections. In
our opinion, which is based on the results of
our audit, the consolidated financial statements
comply with legal requirements and give a true
and fair view of the financial position of the
group as of 31 December 2010 and its financial
performance and its cash flows for the year from
1 January 2010 to 31 December 2010 in accordance with the International Financial Reporting
Standards (IFRSs) as issued by the International
Accounting Standard Board (IASB) and in accordance with the International Financial Reporting Standards (IFRSs) as adopted by the EU.
Report on other legal requirements (Group Management Report)
Pursuant to statutory provisions, the management report for the Group is to be audited as to
whether it is consistent with the consolidated
financial statements and as to whether the other
disclosures are not misleading with respect to
the Company’s position. The auditor’s report
also has to contain a statement as to whether
the management report of the Group is consistent with the consolidated financial statements.
In our opinion, the management report for the
Group is consistent with the consolidated financial statements.
Vienna, February 4, 2011
KPMG
Wirtschaftsprüfungs- und Steuerberatungs GmbH
signed by:
Dr. Johannes Bauer
Austrian Chartered Accountant
This report is a translation of the original report
in German, which is solely valid.
Publication of the consolidated financial statements together with our auditor's opinion may
Mag. Yann Georg Hansa
Austrian Chartered Accountant
only be made if the consolidated financial statements and the group management report are
identical with the audited version attached to
this report. Section 281 Section 2 UGB (Austrian
Commercial Code) applies.
F-66
121
Consolidated Financial Statements of AMS
for the Financial Year 2009
F-67
I Consolidated Income Statement acc. to IFRS
for the year ended December 31, 2009 compared to previous years’ figures
in thousands of EUR
(except earnings per share, which are in EUR)
Revenues
Note
2009
2008
1
137,166
184,699
Cost of sales
-90,254
-91,246
Gross profit
46,912
93,453
Research and development
-40,511
-43,584
Selling, general and administrative
-30,828
-30,595
Other operating income
2
7,452
7,457
Other operating expense
3
-891
-1,311
Result from investments in associates
Result from operations
-735
-402
-18,600
25,018
Finance income
4
1,532
1,250
Finance expenses
4
-2,171
-13,718
-639
-12,468
-19,239
12,550
Net financing result
Result before tax
Income tax result
5
Net result
1,236
-270
-18,003
12,281
Basic Earnings per Share
22
-1.69
1.13
Diluted Earnings per Share
22
-1.69
1.12
Statement of comprehensive income
in thousands of EUR
Note
2009
2008
-18,003
12,281
Exchange differences on translating foreign operations
-100
245
Other comprehensive income
-100
245
Total comprehensive income
-18,103
12,526
Net result
F-68
68
II Consolidated Balance Sheet acc. to IFRS
as of December 31, 2009 compared to previous years’ figures
in thousands of EUR
Note
Dec. 31, 2009
Dec. 31, 2008
26,851
Assets
Cash and cash equivalents
6
26,726
Short-term investments
12
15,486
3,810
Trade receivables
7
27,246
37,049
Inventories
8
48,417
63,043
Other receivables and assets
9
5,183
3,427
123,057
134,179
Total current assets
Property, plant and equipment
10
118,694
128,570
Intangible assets
11
5,550
6,983
Investments in associates
13
5,481
3,866
Deferred tax assets
14
31,191
30,863
Other long-term assets
15
4,264
2,931
Total non-current assets
165,180
173,213
Total assets
288,237
307,392
Liabilities and shareholders‘ equity
x
x
Liabilities
Interest-bearing loans and borrowings
x
16
Trade liabilities
14,946
25,823
14,270
18,097
Provisions
17
9,086
11,133
Other liabilities
19
10,405
12,872
48,707
67,925
Total current liabilities
Interest-bearing loans and borrowings
16
53,001
36,042
Employee benefits
20
10,854
9,208
Deferred government grants
18
1,428
2,328
Other long term liabilities
19
631
812
65,915
48,391
Total non-current liabilities
Shareholders' equity
Issued capital
21
26,698
26,698
Additional paid-in capital
21
100,638
98,292
Treasury Shares
21
-7,339
-5,635
Translation adjustment
21
41
141
Retained earnings
53,577
71,580
Total shareholders' equity and reserves
173,615
191,076
Total liabilities and shareholders' equity
288,237
307,392
F-69
69
III Consolidated Statement of Cash Flows acc. to IFRS
for the year ended December 31, 2009 compared to previous years’ figures
in thousands of EUR
Note
Operating activities
2009
2008
-19,239
12,550
10, 11
22,273
22,785
20
1,646
89
2,346
2,708
-1,080
-908
-8
0
x
x
Result before tax
Depreciation (net of government grants)
Changes in employee benefits
Expense from stock option plan (acc. to IFRS 2)
Changes in other long-term liabilities
Result from sale of plant and equipment
2
Result from investments in associates
735
402
Net financing result
639
12,468
Changes in assets
18,482
6,187
Changes in short-term operating liabilities and provisions
-5,289
-8,725
Tax payments
x
-231
-27
Cash flows from operating activities
x
20,274
47,528
Investing activities
x
Acquisition of intangibles, property, plant and equipment
-10,305
-14,414
Acquisition of financial investments
-17,877
-4,063
x
Proceeds from sale of plant and equipment
Proceeds from the sale of investments
Interest received
Cash flows from investing activities
Financing activities
166
0
4,000
75
1,145
1,213
-22,871
-17,189
31,401
33,362
-25,273
-21,575
x
x
Proceeds from borrowings
Repayment of debt
Repayment of finance lease liabilities
Acquisition of treasury shares
Sale of treasury shares
Interest paid
Expenses from financial instruments
Dividends paid
0
-509
-3,057
-5,008
1,353
0
-1,513
-2,287
-438
-10,265
0
-16,362
Changes resulting from capital increase
0
16
Cash flows from financing activities
2,472
-22,627
Change in cash and cash equivalents
-125
7,713
Cash and cash equivalents at January 1
x
26,851
19,138
Cash and cash equivalents at December 31
x
26,726
26,851
F-70
70
IV Consolidated Statement of Changes in Shareholders’ Equity acc. to IFRS
for the year ended December 31, 2009 compared to previous years’ figures
in thousands of EUR
Issued
capital
Total equity as of January 1, 2008
Additional
paid-in
capital
Treasury
shares
Translation
adjustment
Retained
earnings
Total
shareholders’
equity
26,697
95,570
-703
-104
75,664
197,124
Net result
0
0
0
0
12,281
12,281
Other comprehensive income
0
0
0
245
-3
242
Share-based payments
0
2,708
0
0
0
2,708
Dividends paid
0
0
0
0
-16,362
-16,362
Capital Increase
2
14
0
0
0
16
Purchase of treasury shares
0
0
-5,008
0
0
-5,008
Sale of treasury shares
0
0
75
0
0
75
26,698
98,292
-5,635
141
71,580
191,076
Net result
0
0
0
0
-18,003
-18,003
Other comprehensive income
0
0
0
-100
0
-100
Share-based payments
0
2,346
0
0
0
2,346
Purchase of treasury shares
0
0
-3,057
0
0
-3,057
Total equity as of December 31, 2008
Sale of treasury shares
Total equity as of December 31, 2009
0
0
1,353
0
0
1,353
26,698
100,638
-7,339
41
53,577
173,615
An amount of EUR -99 thousand (2008: EUR 204 thousand) recognized within translation adjustment is related to the currency translation of investments
at equity.
F-71
71
V Notes to the Consolidated Financial Statements acc. to IFRS
as of and for the year ended December 31, 2009
Significant accounting policies
austriamicrosystems AG („the Company“) is a company located in 8141 Unterpremstätten, Austria. The Company is a global leader in the design,
manufacture and sale of high performance analog and analog intensive mixed signal integrated circuits tailored to meet specific customer applications.
The consolidated financial statements for the year ended December 31, 2009 represent the parent company austriamicrosystems AG and its subsidiaries
(together referred to as the „Group“).
On February 3, 2010 the consolidated financial statements 2009 were completed and released to the supervisory board for approval.
(a) Statement of compliances
The consolidated financial statements comply with International Financial Reporting Standards as issued by the International Accounting Standards Board
(IASB) and all obligatory Interpretations as issued by the International Financial Interpretations Committee. Furthermore these consolidated financial
statements are in accordance with the International Financial Reporting Standards as to be applied in the European Union.
The following new or amended standards and interpretations have been applied for the first time during the business year:
Standard
Content
Effective date1
New standards and interpretations
IFRS 8
Operating Segments
January 1, 2009
IFRIC 12
Service Concession Arrangements
January 1, 2008/March 30, 2009
IFRIC 13
Customer Loyalty Programmes
January 1, 2009
IFRIC 15
Agreements for the Construction of Real Estate
January 1, 2009/January 1, 2010
IFRIC 16
Hedges of a Net Investment in a Foreign Operation
October 1, 2008/July 1, 2009
Revised standards
IAS 1 (2007)
Presentation of Financial Statements
January 1, 2009
IAS 23 (2007)
Borrowing Costs
January 1,2009
Amendments to standards and interpreations
IAS 1, IAS 32
Puttable Financial Instruments and Obligations Arising on Liquidation
January 1, 2009
IAS 39, IFRS 7
Reclassification of Financial Assets
July 1, 2008
Reassessment of Embedded Derivatives
January 1, 2009
IAS 39, IFRIC 9
IFRS 2
Vesting Conditions and Cancellations
January 1, 2009
IFRS 7
Improvements to IFRSs
January 1, 2009
all Standards
Improvements to IFRSs 2008
January 1, 2009
1
The IFRS are to be applied for business years that begin on or after the effective date according to the respective EU regulation. In case of two dates the earlier date
indicates the effective date according to the publication of the International Accounting Standards Board.
T he application of IAS 23 rev. 2008, in which the option to recognize borrowing costs for qualified assets in profit and loss has been deleted, did not lead
to substantial changes for the recognition of borrowing costs for austriamicrosystems AG.
The amendment to IAS 1 and IFRS 7 changed the presentation of financial statements and extended the notes to the financial statements.
Due to the first time application of IFRS 8 the segments are identified differently to previous year. The first application of the remaining standards that
have to be applied for the first time during 2009 did not substantially change the presentation of the financial statements.
F-72
72
V Notes to the Consolidated Financial Statements acc. to IFRS
as of and for the year ended December 31, 2009
The following new or amended standards and interpretations have been published by the International Accountings Standards Board and are endorsed
by the EU respectively, but application has not yet been mandatory for the business year.
Effective date1
Standard
Content
New standards and interpretations
IAS 27 (2008)
Consolidated and Separate Financial Statements
IFRS 3 (2008)
Business Combinations
IFRIC 17
Distributions of Non-cash Assets to Owners
IFRIC 18
Transfers of Assets from Customers
July 1, 2009
July 1, 2009
November 1, 2009
November 1, 2009
Amendments to standards
IAS 32
Classification of Rights Issues
IAS 39
Eligible Hedged Items
January 1, 2011
July 1, 2009
1
The IFRS are to be applied for business years that begin on or after the effective date according to the respective EU regulation. In case of two dates the earlier date
indicates the effective date according to the publication of the International Accounting Standards Board.
e do not expect that the new accounting standards will have a substantial influence on the presentation of financial statements of
W
austriamicrosystems AG.
(b) Basis of preparation
The financial statements are presented in EUR and rounded to the nearest thousand. The use of automated calculation systems may lead to rounding
differences in totals of rounded amounts and percentages. They are prepared on a historical cost basis except for derivative financial instruments,
investments and securities, which are stated at their fair value.
(c) Basis of consolidation
(i) Subsidiaries
Subsidiaries are all operative enterprises controlled by the Company. Control exists when the Company has the power, directly or indirectly, to govern the
financial and operating policies of an enterprise so as to obtain benefits from its activities. The financial statements of the subsidiaries are included in the
consolidated financial statements from the date that control commences until the date that control ceases.
(ii) Transactions eliminated on consolidation
Intra-group balances and transactions, and any results from intra-group transactions, are eliminated in preparing the consolidated financial statements.
Unrealized losses are eliminated in an identical manner as unrealized gains, but only to the extent that there is no evidence of impairment.
(iii) Investments in associates
Investments in associates are accounted using the equity method if the company has a significant influence on the investee (associate) and if this is
material to present a true and fair view of the financial statements. For investments in associates the same equity consolidation principles apply as for
subsidiaries. Local accounting policies remain applied if the deviations are not material.
During the business year 2009 a 30% share of FlipChip Holdings LLC, Arizona, was acquired (carrying amount as per December 31, 2009:
EUR 2,508 thousand), and is accounted using the equity method.
F-73
73
V Notes to the Consolidated Financial Statements acc. to IFRS
as of and for the year ended December 31, 2009
(d) Foreign currency
(i) Foreign currency transactions
The functional currency of the Company is the EUR. Transactions in foreign currencies are translated into EUR at the foreign exchange rate at the date
of the transaction. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated into EUR at the foreign
exchange rate at that date and provided from the ECB. Foreign exchange differences are recognized in the income statement amounting to EUR 1,782
thousand in 2009 and amounting to EUR 3,313 thousand in 2008.
(ii) Financial statements of economic independent foreign entities
The functional currency of the entities domiciled outside the euro zone is their respective domestic currency. Accordingly, the assets and liabilities of
these entities are translated into EUR at the average foreign exchange rates at the balance sheet date. Revenues and expense of foreign entities are
translated into EUR at the average foreign exchange rates of the year. Translation differences are recognized directly within the other comprehensive
income.
(e) Derivative financial instruments and hedging instruments
The Group uses interest rate swaps, cross currency swaps, options and forward exchange contracts to hedge its exposure to foreign exchange and
interest rate risks arising from operational, financing and investment activities and to optimize the financial result.
Derivative financial instruments are initially recognized at cost (equals fair value). Subsequent to initial recognition, derivative financial instruments are
stated at fair value.
The fair value of such derivative financial instruments is the estimated amount that the Group would receive or pay to settle such derivative financial
instruments at the balance sheet date, taking into account current interest rates, foreign exchange rates and the current credit risk of such derivative
financial instruments counter parties. The fair value of forward exchange contracts is their quoted market price at the balance sheet date.
(f) Hedging
As not all of the criteria for hedge accounting outlined in IAS 39 are met, all changes in the fair value of derivative financial instruments are recognized in
the income statement.
(g) Property, plant and equipment
(i) Owned assets
Items of property, plant and equipment are stated at cost less accumulated depreciation (see below) and impairment losses (refer to accounting policy
(m)) and net of related government grants. The cost of self-constructed assets includes the cost of materials, direct labor and directly attributable
proportion of production overheads.
(ii) Leased assets
Leases in terms of which the Group assumes substantially all the risks and rewards of ownership are classified as finance leases. Plant and equipment
acquired by way of finance leases is stated at an amount equal to the lower of its fair value and the present value of the minimum lease payments at the
inception of the lease, less accumulated depreciation (see below) and impairment losses (refer to accounting policy (m)). Lease payments are accounted
for in accordance with accounting policy (t).
(iii) Subsequent expenditures
Expenditures incurred to replace a component of an item of property, plant and/or equipment that are accounted for separately, including inspection and
overhaul costs, are capitalized. Other subsequent expenditures are capitalized only if the future economic benefits associated with the item of property,
plant and equipment increases. All other expenditures are recognized in the income statement as an expense when incurred.
F-74
74
V Notes to the Consolidated Financial Statements acc. to IFRS
as of and for the year ended December 31, 2009
(iv) Depreciation
Depreciation is charged to the income statement on a straight-line basis over the estimated useful life of the assets. Land is not depreciated. The
estimated useful life is as follows:
Buildings
15 – 33 years
Plants, technical equipment and machines
4 – 12 years
Other equipment
4 – 10 years
Due to the application of the cost of sales method the annual depreciation is distributed over all cost positions.
(h) Intangible assets
(i) Research and development
Expenditures on research activities, expecting to gain new scientific or technical knowledge and understanding, are expensed as incurred and are
recognized as expenses for Research and Development.
Expenditures on development activities, whereby research findings are applied to a plan or design for the production of new or substantially improved
products and processes, are capitalized if the product or process is technically and commercially feasible and the Group has sufficient resources to
complete development. The company has not capitalized any expenditure on research and development activities.
(ii) Intangible assets acquired by the Group
Intangible assets, which are acquired by the Group, are stated at cost less accumulated amortization (see below) and impairment losses (refer to
accounting policy (m)).
(iii) Subsequent expenditures
Subsequent expenditures for capitalized intangible assets are capitalized only when the future economic benefits embodied in the specific asset to which
it relates increases. All other expenditures are expensed when incurred.
(iv) Amortization
Amortization is charged to the income statement on a straight-line basis over the estimated useful economic life of the assets. The estimated useful life
is from 3 – 10 years. Due to the application of the cost of sales method the annual depreciation is distributed over all cost positions. All intangible assets
have a limited useful economic life.
(i) Investments in securities and in associates
Investments in securities held by the Group and classified as available-for-sale are stated at fair value, with any resultant gain or loss recognized in
other operating income (equity). Investments in securities held for trading whose performance is continuously monitored are stated at fair value with any
resultant gain or loss recognized in the profit and loss statement. Held-to-maturity-investments are stated at cost less accumulated depreciation with any
resultant gain or loss recognized in the income statement. The fair value of investments held for trading and investments available-for-sale is their quoted
bid price at the balance sheet date. Investments in securities are recorded at the transaction date. During the business year 2009 financial assets have
been designated at fair value through profit and loss which are monitored and controlled by the management on the basis of their fair value.
As per December 31, 2009 the group holds only investments in securities which are recognized at fair value through profit and loss.
Investments in associates are accounted in consolidated financial statements using the equity method. The share of profits/losses of an associate and
fair value adjustments for depreciable assets are recognized within the operating result.
F-75
75
V Notes to the Consolidated Financial Statements acc. to IFRS
as of and for the year ended December 31, 2009
(j)
Trade and other receivables
Trade and other receivables are initially stated at fair value at their transaction date and subsequently stated at cost less impairment losses (refer to
accounting policy (m)).
(k) Inventories
Inventories are stated at the lower of cost and net realizable value. Net realizable value is the estimated selling price in the ordinary course of business,
less the estimated costs of completion and selling expense.
The cost of inventories is based on the moving average price principle and includes expenditures incurred in their acquisition as well as bringing them to
their existing location and condition. For manufactured inventories and work in progress, cost includes an appropriate share of overhead based on normal
operating capacity.
(l) Cash and cash equivalents
Cash and cash equivalents comprise cash balances and call deposits at banks.
(m) Impairment
The carrying amounts of the Group‘s assets, other than inventories (refer to accounting policy (k)) and deferred tax assets (refer to accounting policy (u)),
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 is determined. For intangible assets that are not yet available for use and intangible assets with an unlimited useful economic life, the recoverable amount is estimated at each balance sheet date. An impairment loss is recognized whenever the carrying amount of an asset or its cash-generating
unit exceeds its recoverable amount. The recoverable amount is recorded through profit and loss.
(i) Calculation of recoverable amount
The recoverable amount of the Group‘s financial assets is calculated as the present value of expected future cash flows.
The recoverable amount of other assets is the higher value of their fair value less transaction costs and value in use. 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 rates of the time value of
money and the risks specific to the asset. For an asset that does not generate cash inflows largely independent of those from other assets, the
recoverable amount is determined for the cash-generating unit to which the asset belongs.
(ii) Reversals of impairment
An impairment loss on available-for-sale investments or receivables is reversed if the subsequent increase in the recoverable amount can be related
objectively to an event occurring after the impairment loss was recognized. In respect to other assets, an impairment loss is reversed if there has been
a change in the estimates used to determine the recoverable amount.
An impairment loss is only reversed to the extent that the asset‘s carrying amount does not exceed the carrying amount that would have been
determined, net of depreciation or amortization, if no impairment loss had been recognized.
(n) Dividends
Dividends are recognized as a liability in the period in which they are resolved.
(o) Interest-bearing borrowings
Interest-bearing borrowings are initially recognized at cost, less attributable transaction costs. Subsequent to initial recognition, interest-bearing
borrowings are stated at amortized cost with any difference between cost and redemption value being recognized in the income statement over the
borrowing period on an effective interest basis.
F-76
76
V Notes to the Consolidated Financial Statements acc. to IFRS
as of and for the year ended December 31, 2009
(p) Employee benefits
(i) Defined benefit plans
According to Austrian labor regulations, employees who joined the Company prior to December 31, 2002, are entitled to receive severance payments
– depending on the job tenure - equal to a multiple of their monthly compensation, which comprises fixed plus variable amounts such as overtime and
bonus payments. Maximum severance is equal to a multiple of twelve times the eligible monthly compensation.
The obligation for such severance payments is measured using the projected unit credit method. The discount rate is the yield at the balance sheet date
on AAA credit-rated bonds that have maturity dates approximating the terms of the Group‘s obligations. All actuarial gains and losses are recognized
immediately.
(ii) Defined contribution plans
For all employees who entered into an employment contract after December 31, 2002, the Company is obliged to contribute 1.53% of their monthly
remuneration to an employee benefit fund. There is no additional obligation for the Company. Therefore, this plan constitutes a defined contribution plan.
Contributions are recognized as an expense in the income statement as incurred. These amounts are paid in cash to authorities; the company’s
obligations are therefore fully funded.
(iii) Other long-term employee benefits
All employees are eligible for long-term service benefits. Under this plan, eligible employees receive a cash payment after a specified service period. This
payment equals one to three months salary, depending on the number of years of service. The amount recognized as a liability from this compensation
is measured using the projected unit credit method. Actuarial assumptions are identical to those applied for defined benefit plans. All actuarial gains and
losses are recognized immediately.
(iv) Stock Option Plan
In 2002 the Supervisory Board approved a Stock Option Plan (“SOP 2002”) for the purposes of providing 142,500 stock options to key employees. The
maximum number of options for issuance was later reduced to 76,500. After the share split in 2004 (1:3) this number now is 229,500. One option
entitles the holder to receive one share of the Company at a strike price of EUR 6 (EUR 18 before share split) per share. On the first day of issue 33 % of
the options may be exercised, 33 % one year later and 34 % after two years.
Due to the resolution of the SOP 2002 before the coming into force of IFRS 2, the plan is not subject to this standard.
The purpose of the SOP 2002 was to increase the motivation of key people in connection with the economic situation of the Company in 2002 and the
intended IPO. The Company has concluded an agreement with its major shareholder (former parent), AMS Holding S.à.r.l., under which the issued options
are provided to the Company at the strike price. In 2006 these shares were bought by the Company for a strike price of EUR 6 to cover the obligations
from SOP 2002.
The shareholders approved a further Stock Option Plan (SOP 2005) at the Annual General Meeting on May 19, 2005.
Within the SOP 2005 a total of 990,000 options of no-par-value shares may be issued over 4 years. This reflects 9% of the issued capital at the time
of approval. The SOP 2005 is administered by the SOP Committee. The Committee may define terms for allocation and exercise of the options. It is
envisaged to grant the options during a 4-year-program. One option entitles the holder to receive one no-par-value share of austriamicrosystems AG. The
options may be exercised during each of the next succeeding five years on the first, second, third, fourth and fifth anniversary of the grant date to the
maximum extent of twenty percent (20%) of the total number of shares covered thereby (vesting period). The strike price for each tranche will be defined
based on a 3 month average price of the austriamicrosystems share prior to the grant date with a further 25% discount taken from that price. All granted
options under the SOP 2005 must be exercised prior to June 30, 2015. According to the SOP 2005 options reverted to the company can be issued
again until the end of the term.
F-77
77
V Notes to the Consolidated Financial Statements acc. to IFRS
as of and for the year ended December 31, 2009
In 2009 20,000 options (SOP 2005) were granted to two employees and executives of the company respectively (2008: 273,588 options to 452 employees).
The granted options (SOP 2005) were options that reverted to the company. Unlike previous years, no 25% discount from the 3 month average price of the
share prior to the issue date has been granted.
The main basis data of the granted options according to the Stock Option Plan 2005 structures as follows:
Valuation of Options (weighted average)
Market price at granting
in EUR
Term of options
Risk-free interest rate
Expected volatility
Present value of Option
2009
2008
8.52
23.81
in years
6
7
in %
1.3
3.92
in %
28.91
28.15
in EUR
1.12
4.31
Other disbursement criteria, e.g. inclusion of a market condition for the validation of the present value, are not applicable.
The shareholders approved a further Stock Option Plan (SOP 2009) at the Annual General Meeting on April 2, 2009.
Within the SOP 2009 a total of up to 1,100,000 options of no-par-value shares may be issued over 4 years. This reflects 10% of the actual issued capital.
The SOP 2009 is administered by the SOP Committee. The Committee may define terms for allocation and exercise of the options. It is envisaged to grant the
options during a 4-year-program. One option entitles the holder to receive one no-par-value share of austriamicrosystems AG. The options may be exercised
during each of the next succeeding four years on the first, second, third and fourth anniversary of the grant date to the maximum extent of 25% of the total
number of shares covered thereby (vesting period). The strike price for each tranche will be defined based on a 3 month average price of the austriamicrosystems share prior to the grant date. All granted options under the SOP 2009 must be exercised prior to June 30, 2017.
The main basis data of the granted options according to the Stock Option Plan 2009 structures as follows:
Valuation of options (weighted average)
2009
Market price at granting
in EUR
Term of options
Risk-free interest rate
Expected volatility
Present value of Option
F-78
78
8.66
in years
8
in %
1.3
in %
28.91
in EUR
1.13
V Notes to the Consolidated Financial Statements acc. to IFRS
as of and for the year ended December 31, 2009
Other disbursement criteria, e.g. inclusion of a market condition for the validation of the present value, are not applicable.
In 2009 236,030 options (SOP 2009) were granted to 428 employees
The options granted to the employees of austriamicrosystems according to the Stock Option Plan 2005 and 2009 were measured with the present value at
granting. The so determined value of the options will be spread over the period until vesting.
The options were measured based on the Black-Scholes option-pricing model. The interpretation of market information necessary for the estimation of
market values also requires a certain degree of subjective judgment. The expected volatilities were extrapolated from the historical stock-exchange price of
the austriamicrosystems share (source: Bloomberg). This can result in a difference between the figures shown here and values subsequently realized on the
marketplace.
The options developed in the fiscal years 2009 and 2008 as follows:
SOP 2009
2009
Options
Outstanding at the beginning of the period
2008
Weighted average
exercise price (in EUR)
Options
Weighted average
exercise price (in EUR)
0
-
-
-
Granted during the period
236,030
7.83
-
-
Forfeited during the period
90
7.68
-
-
Exercised during the period
0
-
-
-
0
-
-
-
Outstanding at the end of the period
Expired during the period
235,940
7.83
-
-
Exercisable at the end of the period
0
-
-
-
Weighted average share price at the date of
exercise (in EUR)
-
-
-
Range of exercise prices (in EUR)
-
-
-
to June 30, 2017
-
-
Remaining contractual life
F-79
79
V Notes to the Consolidated Financial Statements acc. to IFRS
as of and for the year ended December 31, 2009
SOP 2005
2009
Options
Outstanding at the beginning of the period
2008
Weighted average
exercise price (in EUR)
Options
Weighted average
exercise price (in EUR)
937,761
28.10
692,933
26.82
Granted during the period
20,000
7.68
273,588
18.45
Forfeited during the period
70,314
28.80
27,990
29.42
Exercised during the period
0
-
770
21.51
Expired during the period
0
-
0
-
Outstanding at the end of the period
887,447
27.59
937,761
28.10
Exercisable at the end of the period
472,249
28.88
269,931
29.47
Weighted average share price at the date of
exercise (in EUR)
-
24.25
Range of exercise prices (in EUR)
-
11.65 – 38.43
to June 30, 2015
to June 30, 2015
Remaining contractual life
SOP 2002
2009
Outstanding at the beginning of the period
2008
Options
Weighted average
exercise price (in EUR)
Options
Weighted average
exercise price (in EUR)
75,893
6.00
88,393
6.00
Granted during the period
0
-
0
Forfeited during the period
24,000
-
6.00
0
-
Exercised during the period
0
-
12,500
Expired during the period
0
-
0
6.00
-
Outstanding at the end of the period
51,893
6.00
75,893
6.00
Exercisable at the end of the period
51,893
6.00
75,893
6.00
Weighted average share price at the date of
exercise (in EUR)
-
Range of exercise prices (in EUR)
-
Remaining contractual life
21.93
6.00
to January 1, 2012
F-80
to January 1, 2012
80
V Notes to the Consolidated Financial Statements acc. to IFRS
as of and for the year ended December 31, 2009
(q) Provisions
A provision is recognized on the balance sheet when the Group has a 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. If the effect is material, provisions are determined by discounting the expected
future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the
liability.
(i) Warranties
A provision for warranties is recognized when a warranty claim is received from a customer. The amount recognized is the best estimate of the
expenditure required to settle the claim based on historical experience.
(ii) Onerous contracts
A provision for onerous contracts is recognized when the expected benefits to be derived by the Group from a contract are lower than the unavoidable
cost of meeting its obligations under the contract.
(r)
(s)
(i)
Trade and other payables
Trade and other payables are stated at compounded historical cost.
Revenue
Goods sold and services rendered
Revenue from the sale of goods is recognized in the income statement when the significant risks and rewards of ownership have been transferred to
the buyer. Revenue from services rendered is recognized in the income statement in proportion to the stage of completion of the transaction at the
balance sheet date. The stage of completion is assessed by reference to surveys of work performed. No revenue is recognized if there are significant
uncertainties regarding recovery of the consideration due, associated costs or the possible return of goods.
For certain sales transactions, the buyer requests the Company to delay physical delivery of the goods sold („Bill and hold Sales“). In such cases, revenue
is recognized if the following applies: the buyer takes title to the goods, it is probable that delivery will be made, the item is on hand, identified and ready
for delivery, the buyer specifically acknowledges the deferred delivery instructions and the usual payment terms apply.
(ii) Government grants
A government grant is initially recognized in the balance sheet when there is reasonably high assurance that it will be received and that the Group will
comply with the underlying conditions. Grants that compensate for expenses incurred are recognized as gain in the income statement on a systematic
basis in the same periods in which the expenses are incurred. Grants that compensate for the cost of an asset are deducted from the initial cost of an
asset and recognized in the income statement as reduced depreciation on a systematic basis over the useful life of the asset.
In 2002, the Austrian Government introduced a specific grant (valid until 2004) based on the increase of capital expenditures made during a business
year in comparison to the average investments of the three previous years. This grant was paid in 2003 through a credit to the Company‘s income tax
account and is presented on the balance sheet as deferred income. The recognition of this income as other operating income is according to the related
depreciation and impairment charges, if any, of the underlying capital expenditures.
(t) Expense
(i) Operating lease payments
Payments made under operating leases are recognized in the income statement in the period they occur.
F-81
81
V Notes to the Consolidated Financial Statements acc. to IFRS
as of and for the year ended December 31, 2009
(ii) Net financing cost
Net financing costs comprise interest payable on borrowings, interest receivable on funds invested and dividend income, foreign exchange gains and
losses, and gains and losses on derivative financial instruments related to financing activities.
Interest income is recognized in the income statement as it accrues, taking into account the asset‘s effective yield. Dividend income is recognized in the
income statement on the date that the dividend is declared.
All interest and other costs incurred in connection with borrowings are expensed as incurred as part of net financing cost. The interest expense component of finance lease payments is recognized in the income statement using the effective interest method.
(u) Income tax
Income tax on the profit for the year comprises current and deferred tax. Income tax is recognized in the income statement except to the extent that it
relates to items recognized directly to equity, in this case it is recognized in equity.
Current tax is the expected tax payable on taxable income for the year, using tax rates enacted at the balance sheet date.
Deferred tax is accounted for using the balance sheet liability method, providing for temporary differences between the carrying amounts of assets
and liabilities for IFRS financial reporting purposes and the amounts used for tax purposes as well as for tax assets existing at the balance sheet date.
Deferred tax assets and liabilities for temporary differences relating to investments in subsidiaries to the extent that they will probably not reverse in the
foreseeable future are not recognized. The amount of deferred tax provided is based on the expected manner of realization or settlement of the carrying
amount of assets and liabilities, using tax rates enacted or substantially enacted at the balance sheet date.
A deferred tax asset is recognized only to the extent that it is probable that future taxable profits will be available against which the unused tax losses
and credits can be utilized. Deferred tax assets are recognized to the extent - according to the actual business plan - that a realization of the tax benefit
is probable during the next five years. Under current Austrian corporate tax law tax losses can be carried forward for an unlimited period of time.
F-82
82
V Notes to the Consolidated Financial Statements acc. to IFRS
as of and for the year ended December 31, 2009
1 Segment reporting and revenues
Segment information is presented on the basis of the internal reporting structure for the segments “Products” and “Foundry” and determined according to
valuation and accounting regulations of the IFRS. The Segment “Products” comprises the development and distribution of analog Integrated Circuits (“ICs”).
The segment’s customers are mainly in the Communications, Industrial, Medical and Automotive markets. In the “Foundry” segment we report the contract
manufacturing of analog/mixed signal ICs based on our customers’ designs.
The geographic segments are structured by the three regions in which sales occur: “EMEA” (Europe, Middle East and Africa), “Americas”, and “Asia/Pacific”.
In presenting information on the basis of geographical segments, segment revenue is based on the geographical billing location of customers.
Differently from previous years - due to the first application of IFRS 8 - the segment “Foundry” (in previous periods “Foundry & Other”) contains no
unallocated cost and income items, reflecting the internal reporting structure. Unallocated income and expense items are shown in the respective
reconciliations of segment measures to the interim financial statements from fiscal year 2009 onwards. In addition, process development costs are
allocated to the operating segments based on usage (in previous periods these were allocated to “Foundry & Other”). According to the internal reporting
structure, the production areas do not represent a separate segment. The services rendered by these areas to the segments are therefore not shown as
intersegment revenues which is different from previous years. The comparable amounts for previous periods have been adjusted accordingly.
The segment measure “Result from operations” consists of gross profit, expenses for research and development, expenses for selling, general & administrative
as well as other operating income and expenses.
The segment assets in principle comprise the allocatable assets, i.e. customer receivables as well as segment specific tangible and intangible assets. The
reconciliations comprise items which by definition are not part of the segments.
Segment capital expenditure is the total cost incurred (net of government grants) during the period to acquire segment assets that are expected to be used for
more than one period.
Business Segments
2009
in thousands of EUR
Products
Foundry
Revenues from external customers
113,574
23,592
Result from operations
-1,252
Segment Assets
27,831
2008
Total
Products
Foundry
137,166
155,701
28,997
184,699
4,780
3,528
23,441
4,999
28,440
4,536
32,367
38,270
4,800
43,069
F-83
83
Total
V Notes to the Consolidated Financial Statements acc. to IFRS
as of and for the year ended December 31, 2009
Reconciliation of segments results to income statement
in thousands of EUR
2009
2008
Result from operations per segment reporting
3,528
28,440
Result from investments in associates
-735
-402
Currency gains in operating result
1,782
3,313
Subsidies for research and development
5,014
4,623
Unallocated corporate costs
-28,189
-10,956
Result from operations
-18,600
25,018
-639
-12,468
-19,239
12,550
Financial result
Result before tax
Reconciliation of segment assets to total assets
in thousands of EUR
2009
2008
Assets per segment reporting
32,367
43,069
Property, plant and equipment
115,368
124,584
Inventories
48,417
63,043
Cash, cash equivalents and short-term investments
42,211
30,661
Deferred tax asset
31,191
30,863
Intangible assets
3,780
5,179
Investments in associates
5,481
3,866
Other assets
9,422
6,127
Total assets
288,237
307,392
Revenues per geographical segments
in thousands of EUR
2009
2008
EMEA
75,500
121,148
Americas
19,036
22,000
Asia/Pacific
42,631
41,550
137,166
184,699
Total
F-84
84
V Notes to the Consolidated Financial Statements acc. to IFRS
as of and for the year ended December 31, 2009
Revenues by operation
in thousands of EUR
Revenues from production
Revenues from research and development projects
2009
2008
122,855
172,821
14,311
11,878
137,166
184,699
The sales volume with one single customer does not exceed 10% of the company’s total revenues.
2
Other operating income
in thousands of EUR
2009
2008
Government grants related to R&D expenses
6,225
6,109
900
900
0
49
22
33
Amortization of government grants related to assets
Reversal of bad debt reserve
Insurance refunds
Gain from disposal of assets
Other
3
8
0
297
367
7,452
7,457
Other operating expense
in thousands of EUR
2009
2008
Allowance for bad debts
-796
-1,134
Expenses for monetary transactions
F-85
85
-95
-177
-891
-1,311
V Notes to the Consolidated Financial Statements acc. to IFRS
as of and for the year ended December 31, 2009
4
Net financing cost
in thousands of EUR
2009
2008
Interest expense
-1,989
-2,286
Interest income
1,041
1,250
42
-589
Loans
Revaluation to fair value
Derivative financial instruments:
Revaluation to fair value
Loss from settlement of derivative financial instruments
5
449
-577
-182
-10,265
-639
-12,468
2009
2008
-169
-160
Income tax
Recognized in the income statement
in thousands of EUR
Current tax
Current year
Under/(over) provided in prior years
1,077
-20
908
-180
5,162
-3,728
Deferred tax
Origination and reversal of temporary differences
Effect for unrecognized current year losses
Effect of first time recognition of tax benefits
Total income tax result in income statement
F-86
86
-4,834
0
0
3,638
328
-90
1,236
-270
V Notes to the Consolidated Financial Statements acc. to IFRS
as of and for the year ended December 31, 2009
Reconciliation of effective tax expense
in thousands of EUR
Result before tax
Income tax using the domestic corporation tax rate (25%)
Effect of tax rates in foreign jurisdictions
Non-deductible expenses / tax benefits
Tax incentives (mainly for R&D)
2009
2008
-19,239
12,550
4,810
-3,138
2
-23
-44
-56
1,067
993
47
3,638
Effect of not recognized tax losses
-5,723
-1,664
Under/(over) provided in prior years
1,077
-20
1,236
-270
Effect of first time recognition of tax benefits
Deferred tax assets are recognized for all temporary differences and tax losses carry forwards only to the extent that it is probable that future taxable profit will
be available within a foreseeable period. Therefore EUR 21,845 thousand (2008: EUR 16,000 thousand) are not recognized in the balance sheet.
6
Cash and cash equivalents
in thousands of EUR
Bank deposits
Cash on hand
7
2009
2008
26,714
26,844
12
7
26,726
26,851
Trade receivables, net
in thousands of EUR
Trade receivables gross
Allowance for bad debt
F-87
87
2009
2008
27,949
37,359
-702
-310
27,246
37,049
V Notes to the Consolidated Financial Statements acc. to IFRS
as of and for the year ended December 31, 2009
Allowance for bad debt developed as follows:
in thousands of EUR
Balance at the beginning of the period
2009
2008
310
259
Consumptions during the year
0
-2
Reversals during the year
0
-47
Additions during the year
392
100
Balance at the end of the period
702
310
2009
2008
14,834
22,744
3,317
3,206
9,095
11,098
27,246
37,049
Trade receivables by regions
in thousands of EUR
Region
EMEA
Americas
Asia/Pacific
Total
Concentration of credit risks On the balance date of Dec. 31, 2009 no trade receivable attributable to a single customer exceeded 5% of all trade receivables.
In the previous year no trade receivable attributable to a single customer exceeded 5% of all trade receivables.
Ageing analysis for trade receivables
2009
in thousands of EUR
Receivables more than 30 days overdue and not impaired
Receivables more than 30 day overdue and impaired
Receivables
Gross
2008
Impairment
2,173
24,823
Total trade receivables not adjusted
27,949
Impairment
5,345
952
Receivables not overdue or less than 30 days overdue and not
impaired
Receivables
Gross
702
310
310
31,703
702
37,359
310
The impairment for “receivables more than 30 days overdue and impaired” comprises a collective impairment assessment amounting to EUR 180 thousand
(2008: EUR 180 thousand). For not overdue receivables not collected before the balance sheet date and which were not impaired, no evidence for a possible
bad debt loss was existent at the balance sheet date.
F-88
88
V Notes to the Consolidated Financial Statements acc. to IFRS
as of and for the year ended December 31, 2009
8
Inventories
2009
2008
Unfinished goods
31,560
40,386
Finished goods
in thousands of EUR
13,100
15,117
Raw materials and supplies
1,906
5,969
Work in progress
1,851
1,570
48,417
63,043
Inventories stated at net realizable value were EUR 12,997 thousand as per December 31, 2009 and EUR 3,565 thousand as per December 31, 2008
respectively. The valuation allowance from inventories amounts to EUR 11,308 thousand as of December 31, 2009 and to EUR 8,053 thousand as of
December 31, 2008 respectively.
The amount of inventories recognized as an expense amounts to EUR 31,735 thousand in 2009 and EUR 48,583 thousand in 2008 respectively.
Since the result of work in progress (research and development contracts) cannot be estimated reliably, all costs incurred are recognized as R&D expenses.
Accruals for onerous contracts are being made if necessary.
9
Other receivables and assets
in thousands of EUR
2009
2008
Government grants related to R&D expenses
2,395
1,452
Amounts due from tax authorities
1,336
602
Prepaid expenses
403
602
Derivative financial instruments at fair value
235
154
Deferred interests
230
212
Other
583
405
5,183
3,427
All other receivables and assets are neither overdue nor impaired. For details to derivative financial instruments please refer to Pt. 23.
F-89
89
V Notes to the Consolidated Financial Statements acc. to IFRS
as of and for the year ended December 31, 2009
10 Property, plant and equipment
in thousands of EUR
Cost
Balance at January 1, 2009
Land
and buildings
Plant
and
equipment
Fixtures
and
equipment
Under
construction
Government
grants
Total
386,551
70,665
321,476
21,744
1,343
-28,677
Currency translation differences
0
0
16
0
0
16
Additions
0
5,596
974
3,603
0
10,173
Transfers
0
910
67
-1,343
0
-367
Disposals
0
-575
-164
0
0
-739
Balance at December 31, 2009
70,665
327,407
22,637
3,603
-28,677
395,635
Depreciation and impairment losses
Balance at January 1, 2009
40,477
220,740
17,452
0
-20,688
257,981
0
0
5
0
0
5
1,569
17,880
1,405
0
-1,390
19,465
0
0
0
0
0
0
Currency translation differences
Depreciation
Transfers
Disposals
0
-416
-94
0
0
-510
42,047
238,204
18,768
0
-22,077
276,941
At January 1, 2009
30,188
100,736
4,292
1,343
-7,990
128,570
At December 31, 2009
28,619
89,203
3,869
3,603
-6,600
118,694
Cost
Balance at January 1, 2008
70,220
309,434
23,883
3,676
-28,807
378,405
0
0
-39
0
0
-39
Additions
411
9,522
1,930
222
0
12,085
Transfers
35
2,520
0
-2,554
0
0
Disposals
0
0
-4,030
0
130
-3,899
Balance at December 31, 2008
70,665
321,476
21,744
1,343
-28,677
386,551
Depreciation and impairment losses
Balance at January 1, 2008
38,916
202,595
20,073
0
-19,391
242,194
0
0
-4
0
0
-4
1,561
18,144
1,406
0
-1,427
19,685
Balance at December 31, 2009
Carrying amount
Currency translation differences
Currency translation differences
Depreciation
Disposals
0
0
-4,024
0
130
-3,893
40,477
220,740
17,452
0
-20,688
257,981
At January 1, 2008
31,303
106,839
3,809
3,676
-9,417
136,211
At December 31, 2008
30,188
100,736
4,292
1,343
-7,990
128,570
Balance at December 31, 2008
Carrying amount
As of December 31, 2009, commitments for the acquisition of property, plant and equipment and intangible assets amounted to EUR 4,131 thousand
(2008: EUR 7,081 thousand). For the government grants recognized certain conditions such as evidence of the actual costs incurred and a future minimum
number of employees apply.
F-90
90
V Notes to the Consolidated Financial Statements acc. to IFRS
as of and for the year ended December 31, 2009
11 Intangible assets
in thousands of EUR
Cost
Balance at January 1, 2009
Patents & licenses
In development
42,160
Total
1,126
43,286
1,008
Additions
919
88
Transfers
1,492
-1,126
367
Balance at December 31, 2009
44,572
88
44,660
Amortization and impairment losses
Balance at January 1, 2009
36,303
0
36,303
Amortization
2,808
0
2,808
39,111
0
39,111
At January 1, 2009
5,858
1,126
6,983
At December 31, 2009
5,461
88
5,550
Balance at December 31, 2009
Carrying amount
No internally generated intangible assets exist.
Cost
Balance at January 1, 2008
40,557
1,285
41,842
Additions
1,259
185
1,444
Transfers
344
-344
0
Balance at December 31, 2008
42,160
1,126
43,286
Amortization and impairment losses
Balance at January 1, 2008
33,202
0
33,202
3,100
0
3,100
36,303
0
36,303
At January 1, 2008
7,355
1,285
8,640
At December 31, 2008
5,858
1,126
6,983
Amortization charge for the year
Balance at December 31, 2008
Carrying amount
F-91
91
V Notes to the Consolidated Financial Statements acc. to IFRS
as of and for the year ended December 31, 2009
12 Investments and securities
2009
2008
1
1
1
1
15,486
3,810
15,486
3,810
in thousands of EUR
Non-current investments
Shares in affiliated companies
Current investments
Investment funds designated as at fair value through profit and loss
Current investments are government-backed corporate bonds issued by banks. Maturity dates are October 27, 2011; December 2, 2011 and January 23,
2012.
13 Investments in associates
in thousands of EUR
NewScale Technologies Inc.
FlipChip Holdings LLC
Balance
Dec. 31, 2008
Additions
Translation
adjustment
Result
Balance
Dec. 31, 2009
3,866
0
-96
-796
2,974
0
2,450
-3
61
2,508
3,866
2,450
-99
-735
5,481
During the business year 2009 a 30% share of FlipChip Holdings LLC, Arizona, was acquired. Based on its patented Wafer-Level Packaging (WL-CSP)
Technology, FlipChip Holdings LLC, Arizona, researches and produces high end packaging technologies. The purchase prices of EUR 3,500 thousand
comprises an existing patent portfolio which has been valued at EUR 1,300 thousand based on an evaluation of patent attorney, which is depreciated over a
period of 5 years. (2009: EUR 61 thousand). The pro rata result 2009 (EUR 121 thousand) has been recorded in the balance sheet as per December 31, 2009.
F-92
92
V Notes to the Consolidated Financial Statements acc. to IFRS
as of and for the year ended December 31, 2009
14 Deferred tax assets
Deferred tax assets are attributable to the following items:
in thousands of EUR
2009
2008
Intangible assets, property, plant and equipment
3,905
-1,280
Trade receivables and other assets
Employee benefits
Liabilities
Provisions
Tax value of loss carry-forwards and write down of investments
-855
74
2,102
1,702
-2
-484
0
137
26,041
30,715
31,191
30,863
In Austria tax loss carry forwards do not expire under tax legislation currently in force. Tax losses carried forward can be offset with a maximum of 75% of the
current taxable income.
Based on the business plan and the related tax planning of the Company it is probable that deferred tax assets recognized in the balance sheet are recovered
within the next years.
15 Other long term assets
Other long term assets are mainly related to licensing prepayments. Also included is an option for the purchase of another 9.4% of shares of New Scale
Technology Inc., New York (EUR 68 thousand). As the value of this option cannot be measured reliably at the balance sheet date due to uncertainties during the
start-up phase, no measurement at fair value has been made.
16 Interest-bearing loans and borrowings
in thousands of EUR
2009
2008
53,001
36,042
53,001
36,042
14,946
25,823
14,946
25,823
Non-current liabilities
Secured and unsecured bank loans
Current liabilities
Current portion of secured bank loans
In 2008 a revolving export financing credit amounting to EUR 9,000 thousand guaranteed by the Austrian government was included.
F-93
93
V Notes to the Consolidated Financial Statements acc. to IFRS
as of and for the year ended December 31, 2009
Terms and debt repayment schedule
in thousands of EUR
Total
1 year or less
2-5 years
More than 5 years
2009
Capital investment loans
EUR – fixed rate loans
0
0
0
0
R & D loans
EUR – fixed rate loans
6,160
882
5,278
0
EUR – floating rate loans
6,394
2,800
3,594
0
CHF – floating rate loans
5,207
1,077
4,130
0
0
0
0
0
EUR – floating rate
40,000
10,000
30,000
0
USD – floating rate
10,187
187
10,000
0
67,948
14,946
53,001
0
1,453
1,453
0
0
Export loan
EUR – floating rate loan
Unsecured bank facilities
2008
Capital investment loans
EUR – fixed rate loans
R & D loans
EUR – fixed rate loans
6,960
2,201
4,759
0
EUR – floating rate loans
5,863
2,580
3,283
0
CHF – floating rate loans
8,589
589
8,000
0
9,000
9,000
0
0
30,000
10,000
20,000
0
Export loan
EUR – floating rate loan
Unsecured bank facilities
EUR – floating rate
USD – floating rate
0
0
0
0
61,865
25,823
36,042
0
The bank loans are secured as follows:
in thousands of EUR
2009
2008
Registered mortgages on land
0
0
Assignment of debt
0
10,800
F-94
94
V Notes to the Consolidated Financial Statements acc. to IFRS
as of and for the year ended December 31, 2009
17 Provisions
in thousands of EUR
Balance at January 1, 2009
Warranties
Onerous
contracts
Other personnel
provisions
Other
Total
7,467
1,226
1,615
11,133
826
Provisions made during the year
0
7,407
1,250
375
9,032
Provisions used during the year
-200
-5,446
-910
-467
-7,023
Provisions reversed during the year
-626
-2,020
-267
-1,144
-4,057
0
7,407
1,300
379
9,086
13,900
Balance at December 31, 2009
Balance at January 1, 2008
826
9,381
2,019
1,673
Provisions made during the year
0
7,466
1,229
486
9,181
Provisions used during the year
0
-7,114
-1,459
-542
-9,116
0
-2,267
-563
-2
-2,832
826
7,467
1,226
1,615
11,133
Provisions reversed during the year
Balance at December 31, 2008
Warranties
A provision for warranties is recognized when a warranty claim is received from a customer.
Onerous contracts
Provisions for onerous contracts are set up when the expected benefits to be derived by the Group from a contract are lower than the unavoidable cost of
meeting its obligations under the contract. The amount recognized as of December 31, 2009 EUR 7,407 thousand and 2008 (EUR 7,467 thousand) relates to
several engineering contracts.
Other personnel provisions
Provisions for other personnel costs include profit sharing and bonuses payable within twelve months after the respective balance sheet date and sales
incentives for current employees.
Other provisions
Other provisions represent mainly provisions for outstanding invoices amounting to EUR 132 thousand (2008: EUR 444 thousand).
18 Deferred government grants
In 2004, in connection with the construction of the wafer manufacturing Fab B, the Company obtained a government grant. This grant awards the Company for
the increase in capital expenditure over those of the previous years. The grant is accounted for as deferred income and recognized as other operating income
in line with the average depreciation charge for the underlying assets. The income recognized in 2009 (2008) amounted to EUR 900 thousand (2008: EUR 900
thousand).
F-95
95
V Notes to the Consolidated Financial Statements acc. to IFRS
as of and for the year ended December 31, 2009
19 Other liabilities
Current
Non current
in thousands of EUR
2009
2008
2009
Accrued vacation days
2,834
4,694
0
2008
0
Deferred income
2,008
1,433
0
0
Employee related liabilities
1,618
1,722
0
0
Liabilities from license agreements
1,364
1,590
0
0
Liabilities against tax authorities
954
858
0
0
Accrued expenses
816
1,551
0
0
812
Liabilities from operating leasing agreement
228
221
631
Derivative financial instruments
172
568
0
0
Other
411
235
0
0
10,405
12,872
631
812
Severance
payments
Long-service
benefits
Severance
payments
Long-service
benefits
Present value of obligation (DBO)
January 1
7,975
1,233
7,829
1,290
Expense recognized in the income statement
2,101
266
450
77
-555
-167
-304
-134
9,522
1,332
7,975
1,233
Long-service
benefits
Severance
payments
20 Employee benefits
Movements in the net liability recognized in the balance sheet:
2009
in thousands of EUR
Payments during the year
Present value of obligation (DBO)
December 31
2008
The value of obligation is not financed by a fund.
Expense recognized in the income statement
2009
in thousands of EUR
Severance
payments
2008
Long-service
benefits
Current service cost
459
99
489
97
Interest cost
403
67
389
68
1,239
100
-427
-87
2,101
266
450
77
Actuarial loss/gain
F-96
96
V Notes to the Consolidated Financial Statements acc. to IFRS
as of and for the year ended December 31, 2009
The expense is recognized in the following line items in the income statement:
2009
Severance
payments
in thousands of EUR
2008
Long-service
benefits
Severance
payments
Long-service
benefits
Cost of sales
714
91
166
29
Selling, general and administrative expenses
736
93
144
25
Research and development expenses
651
83
139
24
2,101
266
450
77
Principal actuarial assumptions at the balance sheet date (expressed as weighted averages):
2009
2008
5.10%
5.75%
Future salary increases
2.7%
2.7%
Fluctuation < 40 years of age
10%
10%
Fluctuation > 40 years of age
7%
8%
Retirement age – women
56.5-60
56.5-60
Retirement age – men
61.5-65
61.5-65
Discount rate at December 31
The total personnel expense amounted to EUR 67,430 thousand in 2009 and EUR 71,707 thousand in 2008. In 2009 the amount shown includes
EUR 2,346 thousand (2008: EUR 2,708 thousand) for the SOP 2005 and SOP 2009.
The average number of employees was 1,087 in 2009 and 1,129 in 2008.
Historical Information
in thousands of EUR
Present value of obligation (DBO) December 31
for severance payments
Present value of obligation (DBO) December 31
for long service benefits
2009
2008
2007
2006
2005
9,522
7,975
7,829
7,637
7,464
1,332
1,233
1,290
1,069
1,014
10,854
9,208
9,119
8,706
8,478
F-97
97
V Notes to the Consolidated Financial Statements acc. to IFRS
as of and for the year ended December 31, 2009
21 Shareholders‘ equity
Share capital and share premium
in thousands of EUR
Share capital
Additional paid-in capital
2009
2008
26,698
26,698
100,638
98,292
127,336
124,991
In April 2004, the Annual General Meeting resolved a share split of 1:3, resulting in a share capital of EUR 21,801,850.25 divided into 9,000,000 shares. In
May 2004 the capital was increased by 2,000,000 shares up to 11,000,000 shares, resulting in a share capital of EUR 26,646,705.86 and an increase of
additional paid-in capital (share premium) of EUR 37,399,281.40 (premium on capital stock minus transaction cost of the capital increase). All shares have no
notional par value and are fully paid-in. Since May 2004, the Company’s shares are listed on the SIX Swiss Exchange, Zurich, Switzerland.
In May 2005, the executive board was authorized to increase the share capital from EUR 26,646,705.86 by EUR 2,398,203.53 to EUR 29,044,909.39 by
issuing 990,000 shares. This represented 9% of the issued share capital at the time of approval. Purpose of this capital increase was the grant of Stock
Options to employees of the Company.
Based on this authorization 21,355 shares have been issued between 2006 and 2009. This led to an increase of the share capital by EUR 51,730.95 to
EUR 26,698,436.81.
At the Annual General Meeting on March 29, 2006 the Management Board was authorized to increase share capital up to a total of EUR 10,925,024.00 by
issuing 4,510,000 shares. Price and conditions for any increase are subject to Supervisory Board approval.
In 2006 174,375 treasury shares at a price of EUR 6 per share were acquired by the company exercising an option privilege in order to fulfill the obligations
deriving from SOP 2002. Of these no shares (2008: 12,500) were transferred to employees and executives of the company in 2009.
During the course of the financial year 2009 the company issued no shares (2008: 770 shares) in order to meet its obligations with respect to the execution of
stock options regarding the stock option plans (SOP 2005 and SOP 2009).
The holders of ordinary shares are entitled to receive dividends based on the distributable net income (“Bilanzgewinn”) presented in the separate financial
statements of the parent company compiled in accordance with the Austrian Commercial Code (UGB) and as declared by shareholders’ resolution and are
entitled to one vote per share at general meetings of the Company. All shares rank equally with regard to the Company’s residual assets.
The translation reserve comprises all foreign exchange differences arising from the translation of the financial statements of foreign entities.
Management of Equity
The economic equity matches equity as shown in the Company’s balance sheet. The Management Board’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. Amongst other financial ratios the Management Board
monitors equity ratio and return on equity. For establishing adequate capital resources, dividend payments and share buy-backs are considered appropriate.
These aims have not changed during the business year of 2009. None of the group companies are subject to certain capital requirements.
F-98
98
V Notes to the Consolidated Financial Statements acc. to IFRS
as of and for the year ended December 31, 2009
22 Earnings per share
Basic earnings per share
The calculation of basic earnings per share is based on the net profit attributable to ordinary shareholders.
Net result attributable to ordinary shareholders
In EUR
2009
2008
Net result for the year
-18,002,998.82
12,280,949.10
Weighted average number of shares outstanding
10,635,525
10,861,458
Earnings per share (basic)
-1.69
1.13
Earnings per share (diluted)
-1.69
1.12
The options granted according to the SOP 2005 and SOP 2009 will dilute in general. The dilution only occurs if the strike price is below the average
stock-exchange price. Considering the requirements to be fulfilled by the employees during the vesting period of SOP 2005 and SOP 2009 there will be no
dilution for options that are not exercisable on December 31st, 2009. Going forward the SOP 2002 will be covered by treasury shares so a marginal dilution
could exist. In 2009 considering the dilution a reduction of the loss per share occurs. Therefore according to the regulations in IAS 33 no dilution has to be
considered for SOPs 2002, 2005 and 2009.
Reconciliation of ordinary shares
in pieces
Outstanding shares as of January 1
Purchase and sale of treasury shares
2009
2008
10,672,039
10,903,482
-138,832
-232,213
Capital increase regarding stock option plan 2005
Outstanding shares as of December 31
0
770
10,533,207
10,672,039
F-99
99
V Notes to the Consolidated Financial Statements acc. to IFRS
as of and for the year ended December 31, 2009
23 Financial instruments
Exposure to credit, interest rate and currency risks arise in the normal course of the Group’s business. Derivative financial instruments are used to reduce
exposure to fluctuations in foreign exchange rates and interest rates.
All transactions related to derivative financial instruments are carried out centrally by the Group’s treasury department. In connection with these financial
instruments, the Company utilizes advisory services from national and international financial institutions.
Credit risk
According to the Management’s credit policy the exposure to credit risk is continuously monitored. Credit evaluations are performed on all customers applying
for a certain term of payment.
According to the Company‘s treasury and risk management policy, investments are allowed in liquid securities only, and solely with counter parties having a
credit rating equal to or better than the Group. Transactions involving derivative financial instruments are with counter parties with high credit ratings and with
whom the Group has a signed netting agreement.
At the balance sheet date there were no significant concentrations of credit risk. The maximum exposure to credit risk is represented by the carrying amount of
each financial asset, including derivative financial instruments in the balance sheet.
Interest rate risk
Interest rate risk – the possible fluctuations in value of financial instruments and changes in future cash flows – arises in relation to medium and long-term
receivables and payables (especially borrowings). austriamicrosystems’ treasury policy ensures that part of the cash flow risk is reduced by fixed-interest
borrowings. On the liability side, 9% (2008: 14%) of all amounts owed to financial institutions are at fixed rates. Of the remaining borrowings on a floating rate
basis (91% (2008: 86%)), 61% (2008: 31%) will be repaid over the next two years. The remaining floating rate borrowings are checked on a continuing basis
with regard to the interest rate risk. On the asset side, the interest rate risks are primarily with time deposits that are tied to the market interest rate.
Foreign currency risk
Foreign currency risks result from the Group´s extensive buying and selling of products outside of the Euro-zone. As a result, significant and frequent cash
flows from operating activities (e.g. trade receivables and payables) denominated in foreign currencies are hedged. These hedges concern primarily
transactions in USD.
In order to avoid currency risk, the Company regularly utilizes forward currency contracts, option contracts as well as interest swaps. Transaction risk is
calculated for each foreign currency and takes into account significant foreign currency receivables and payables as well as highly probable purchase
commitments.
As per December 31, 2009 and December 31, 2008 respectively, austriamicrosystems holds foreign currency forwards, options and swaps to minimize its
foreign currency exposure with respect to trade receivables, trade payables and forecasted purchase commitments.
Liquidity risk
Liquidity risk is the risk for the Company not to be able to fulfill its financial obligations on maturity. The management’s approach is to assure sufficient liquidity
for the Company under ordinary and extraordinary conditions. The management monitors constantly the cash demand and optimizes the cash flow. Detailed
planning occurs for a period of 12 months in which also due payables and extraordinary circumstances as far as foreseeable are considered. Additionally the
company has unused credit lines available.
F-100
100
V Notes to the Consolidated Financial Statements acc. to IFRS
as of and for the year ended December 31, 2009
Summary of financial instruments recorded on the balance sheet:
2009
in thousands of EUR
2008
Nominal
value
Carrying
amount
Fair value
Nominal
value
Carrying
amount
Fair value
Financial assets
Short term financial investments
Designated at fair value through
profit & loss
Fixed rate financial instrument
EUR
15,000
15,486
15,486
0
0
0
Floating rate financial instruments
EUR
0
0
0
4,000
3,810
3,810
15,486
15,486
3,810
3,810
At fair value through profit & loss held
for trading
Interest rate swap
USD
13,000
0
0
0
0
0
Foreign currency option
USD
15,500
235
235
34,000
154
154
235
235
154
154
Financial liabilites
Other financial liabilities
At amortized costs
Capital investment loans
Fixed rate loan
EUR
0
0
0
1,453
1,453
1,453
Fixed rate loan
EUR
6,160
6,160
6,111
6,960
6,960
6,764
Floating rate loan
EUR
6,394
6,394
6,243
5,863
5,863
5,863
Floating rate loan
CHF
7,752
5,207
5,092
12,764
8,589
8,589
EUR
0
0
0
9,000
9,000
9,000
Floating rate
EUR
40,000
40,000
39,889
30,000
30,000
30,000
Floating rate
USD
14,570
10,187
10,174
0
0
0
67,948
67,509
61,865
61,669
172
172
568
568
R&D loans
Export loans
Floating rate loan
Unsecured bank facilities
At fair value through profit & loss held
for trading
Interest rate swap
EUR
10,000
10,000
The fair value calculations are based on the respective cash flows discounted on the balance sheet date with interest rates applicable to similar financial
instruments.
Financial Instruments held for trading and available for sale are measured at their respective market value. The valuation of derivative financial instruments is
based on valuations done by the external contractors.
The interest swaps shown under derivative financial instruments is a USD-interest-rate swap with a nominal value of USD 13,000 thousand and a
EUR-interest-rate swap with a nominal value of EUR 10,000 thousand. For the USD-interest-rate swap austriamicrosystems pays a fixed rate of 2.57% and
gets the three 3M-USD-Libor with a maturity date of April 29, 2014. For the EUR-interest-rate swap the company pays a fixed rate of 2.73% and gets the
3M-Euribor with a maturity of April 29, 2014. The remaining term of the other derivative financial instruments is less than one year.
F-101
101
V Notes to the Consolidated Financial Statements acc. to IFRS
as of and for the year ended December 31, 2009
Net gains and losses from financial instruments
in thousands of EUR
Result from Valuation
Foreign currency
valuation
Result from devestment
2009
Financial assets
At fair value through profit & loss held for trading
50
81
482
Designated as at fair value through profit & loss
0
0
190
Loans and receivables
0
485
-487
Financial liabilities
At fair value through profit & loss held for trading
-129
0
-525
0
-258
1,641
At fair value through profit & loss held for trading
-29
154
192
Designated as at fair value through profit & loss
-158
0
0
0
146
1,613
690
0
-10,265
0
-444
0
At amortized costs (other financial liabilities)
2008
Financial assets
Loans and receivables
Financial liabilities
At fair value through profit & loss held for trading
At amortized costs (other financial liabilities)
Interest and dividends were not included in the tables above.
Interest income and interest expenses
Interest income and expenses from financial assets which are valued at fair value and are not affecting net income are as follows:
in thousands of EUR
2009
2008
Interest income
1,041
1,250
-1,989
-2,286
Interest expenses
F-102
102
V Notes to the Consolidated Financial Statements acc. to IFRS
as of and for the year ended December 31, 2009
Effective interest rates and liquidity analysis
The following are the contractual maturities of financial liabilities including interest payments and the effective interest rates at the balance sheet date.
Carrying
amount
Expected
cash flow
0-1 year
2-5 years
More than
5 years
0.00%
0
0
0
0
0
EUR – Fixed rate loans
2.34%
6,160
6,472
1,014
5,458
0
EUR – Floating rate loans
1.43%
6,394
6,520
2,868
3,651
0
CHF – Floating rate loans
1.07%
5,207
5,322
1,121
4,201
0
0.00%
0
0
0
0
0
EUR – Floating rate loan
2.66%
40,000
41,841
10,919
30,922
0
USD – Floating rate loan
2.35%
10,187
10,479
408
10,071
0
67,948
70,634
16,330
54,303
0
3.40%
1,453
1,453
1,453
0
0
EUR – Fixed rate loans
2.30%
6,960
7,303
2,325
4,978
0
EUR – Floating rate loans
3.31%
5,863
6,154
2,744
3,410
0
CHF – Floating rate loans
1.85%
8,589
9,026
725
8,301
0
3.29%
9,000
9,292
9,292
0
0
EUR – Floating rate loan
2.14%
30,000
31,409
10,632
20,777
0
USD – Floating rate loan
0.00%
0
0
0
0
0
61,865
64,636
27,172
37,465
0
in thousands of EUR
Interest rate
2009
Capital investment loans
EUR – Fixed rate loans
R & D loans
Export loan
EUR – Floating rate loan
Bank overdrafts
2008
Capital investment loans
EUR – Fixed rate loans
R & D loans
Export loan
EUR – Floating rate loan
Bank overdrafts
F-103
103
V Notes to the Consolidated Financial Statements acc. to IFRS
as of and for the year ended December 31, 2009
Risk of change of interest rates
At the balance sheet date the interest bearing financial instruments carry the following values:
in thousands of EUR
2009
2008
Financial assets
15,486
0
Floating rate financial instruments
Fixed rate financial instruments
0
3,810
Interest rate swaps
0
0
Financial liabilities
Fixed rate loans
6,160
8,413
Floating rate loans
61,788
53,452
Interest rate swaps
172
568
Fair value sensitivity analysis for fixed rate instruments
A change of 100 basis points (bp) in interest rates at the reporting date would have increased (decreased) equity and profit or loss by the amounts shown
below. This analysis assumes that all other variables, in particular currency rates, remain constant. This analysis is performed on the same basis for 2008.
Profit & loss statement
in thousands of EUR
100 bp increase
Equity
100 bp decrease
100 bp increase
100 bp decrease
2009
Financial assets
Fixed rate financial instruments
-280
301
0
0
0
0
0
0
2008
Financial assets
Fixed rate financial instruments
F-104
104
V Notes to the Consolidated Financial Statements acc. to IFRS
as of and for the year ended December 31, 2009
Cash flow sensitivity analysis for variable rate instruments.
A change of 100 basis points (bp) in interest rates at the reporting date would have increased (decreased) equity and profit or loss by the amounts shown
below. This analysis assumes that all other variables, in particular currency rates, remain constant. This analysis is performed on the same basis for 2008.
Profit & loss statement
in thousands of EUR
100 bp increase
Equity
100 bp decrease
100 bp increase
100 bp decrease
2009
Financial assets
Variable rate financial instruments
0
0
0
0
302
-431
0
0
Floating rate loans
-1,003
1,003
0
0
Interest rate swaps
350
-414
0
0
180
0
0
0
0
0
0
0
Floating rate loans
-1,083
1,083
0
0
Interest rate swaps
-1,021
563
0
0
Interest rate swaps
Financial liabilities
2008
Financial assets
Variable rate financial instruments
Interest rate swaps
Financial liabilities
F-105
105
V Notes to the Consolidated Financial Statements acc. to IFRS
as of and for the year ended December 31, 2009
Foreign currency risk
The company’s exposure to foreign currency risk was as follows based on notional amounts:
In thousands of
USD
CHF
JPY
2009
Trade receivables and other receivables
23,026
-27
0
Trade liabilities and other liabilities
-6,863
-5
-31,989
Interest bearing loans
Currency options
Net foreign currency risk
-14,570
-7,752
0
1,593
-7,784
-31,989
-15,500
0
0
-15,500
0
0
-13,907
-7,784
-31,989
2008
Trade receivables and other receivables
Trade liabilities and other liabilities
22,664
0
0
-11,032
-309
-30,692
Interest bearing loans
Currency options
Net foreign currency risk
0
-12,764
0
11,631
-13,073
-30,692
-34,000
0
0
-34,000
0
0
-22,369
-13,073
-30,692
F-106
106
V Notes to the Consolidated Financial Statements acc. to IFRS
as of and for the year ended December 31, 2009
Sensitivity analysis
A 10 percent strengthening/weakening of the EUR against the following currencies at December 31 would have increased (decreased) equity and profit loss by
the amounts shown below.
Profit & loss
in thousands of EUR
10% increase
Equity
10% decrease
10% increase
10% decrease
2009
USD
612
-96
0
0
CHF
475
-581
0
0
JPY
22
-27
0
0
2008
USD
-879
991
0
0
CHF
795
-971
0
0
JPY
22
-27
0
0
This analysis assumes that all other variables, in particular interest rates, remain constant. The analysis is performed on the same basis for 2008.
The following FX exchange rates were used during the business year:
Annual average exchange rate
USD
CHF
JPY
Period end exchange rate
2009
2008
2009
2008
1.3963
1.4726
1.4406
1.3973
1.5076
1.5786
130.63
151.53
1.4836
1.4958
133.16
126.69
24 Operating leases
Leases as lessee
Non-cancelable operating lease rentals are payable as follows:
in thousands of EUR
2009
2008
Less than one year
4,765
5,032
Between one and five years
5,850
10,633
0
0
10,615
15,665
More than five years
F-107
107
V Notes to the Consolidated Financial Statements acc. to IFRS
as of and for the year ended December 31, 2009
Some of the Group’s subsidiaries lease office space. In addition, the Group leases the “gas farm” as well as automobiles under operating leases. The lease
agreements typically run for an initial period of four to ten years, typically including an option for the lessee to renew the lease after that date. Since January 1,
2007 a leasing contract for semiconductor equipment is in force. Lease payments are adapted annually to reflect market rentals. None of the leases includes
contingent rentals. The expenses for operating lease amounted to EUR 4,843 thousand in 2009 (2008: EUR 5,094 thousand).
25 Contingencies
The preparation of the consolidated financial statements according to IFRS requires discretionary decisions and business assumptions by management concerning future developments, thus materially determining the method and value of assets and liabilities, the disclosure of other obligations at the balance sheet
date and the resulting earnings and expenditures within the year.
Within the following assumptions there exist risks which could lead to changes in the value of assets or liabilities during the following fiscal year:
– the valuation of provisions for severance payments and long service benefits is made using assumptions concerning the discount rate, retirement age,
fluctuations and future salary increases.
– the application of deferred tax assets is under the assumption that taxable income will be available to take advantage of existing tax loss carry forwards in
the future.
– the impairment test of the tangible fixed assets is based on forecasted future cash flows in the years to come utilizing an industry and company related
discount rate.
26 Related parties
Identity of related parties
The Company has a related party relationship with:
– the Company’s Executive Officers (CEO, CFO)
– the members of the Company’s Supervisory Board (Aufsichtsrat)
– associated companies
Remuneration of the Company’s Executive Officers amounted to EUR 577 thousand (2008: EUR 576 thousand). The Company recorded an amount of
EUR 281 thousand for the accrual of variable salaries (2008: EUR 0) and an amount of EUR 73 thousand (2008: EUR 73 thousand) for the accrual for
severance payments. Moreover, the board of directors received call options for shares of austriamicrosystems AG with a calculated value at the allocation
date of EUR 34 thousand (2008: EUR 139 thousand).
The remuneration of the company’s Supervisory board amounted to EUR 237 thousand (2008: EUR 229 thousand). All remunerations were or are be paid
directly by the Company. The Company has no consulting agreements with members of their Supervisory Board and the Company’s known shareholder.
The Company’s Executive Officers hold 191,355 shares and call options for the purchase of 145,000 shares as of December 31, 2009 (110,478 shares and
call options for the purchase of 115,000 shares as of December 31, 2008).
During the business year 2008 the Company purchased 80,355 shares from the board of directors member Mag. Michael Wachsler-Markowitsch for the price
of chf 25.50 per share. The purchase price has been derived from the actual stock-market price at the date of the purchase. In consequence of a decision
of the supervisory board the transaction has been rescinded for the price of chf 25.50 per share in October 2009. All regulations according to the SIX Swiss
Exchange and Austrian law concerning necessary announcements have been obeyed. The proceeds have been settled on the date of the purchase.
F-108
108
V Notes to the Consolidated Financial Statements acc. to IFRS
as of and for the year ended December 31, 2009
The breakdown for the individual members of the supervisory board for the year 2009 is as follows
Directors’ gross
remuneration
fixed
in EUR thousand
Number of
shares held
as per Dec. 31
Number of
options held
as per Dec. 31
Name
Function
DI Guido Klestil
Chairman
83
34,280
0
Prof. Dr. Siegfried Selberherr
Vice chairman
63
15,000
0
Mag. Hans Jörg Kaltenbrunner
Vice chairman (since April 2, 2009)
1
0
0
Dr. Kurt Berger
Member (since April 2, 2009)
2
0
0
Dr. Felix Ehrat
Member (until April 2, 2009)
41
X
0
Michael Grimm
Member (since April 2, 2009)
1
0
0
Dipl. Wirtsch. Ing. Klaus Iffland
Member
42
1,000
0
Johann Eitner
Board representative
2
0
0
Ing. Günter Kneffel
Board representative
2
0
0
DI Kurt Layer
Board representative (since April 2, 2009)
1
40
0
237
50,320
0
The shown remunerations show the amounts actually paid during the business year. The remuneration for the business year 2009 will be determined at the
Annual General Meeting on May 6, 2010.
No person related to the supervisory board held shares or options of austriamicrosystems AG as of December 31, 2009.
The breakdown for the individual members of the supervisory board is as follows as of December 31, 2008
Directors’ gross
remuneration
fixed
in EUR thousand
Number of
shares held
as per Dec. 31
Number of
options held
as per Dec. 31
Name
Function
DI Guido Klestil
Chairman
82
24,780
0
Prof. Dr. Siegfried Selberherr
Vice chairman
63
15,000
0
Dr. Felix Ehrat
Member
41
7,203
0
Dipl. Wirtsch. Ing. Klaus Iffland
Member
41
560
0
Johann Eitner
Board representative
1
0
0
Ing. Günter Kneffel
Board representative
1
0
0
229
47,543
0
No person related to the supervisory board held shares or options of austriamicrosystems AG as of December 31, 2008.
F-109
109
V Notes to the Consolidated Financial Statements acc. to IFRS
as of and for the year ended December 31, 2009
As of December 31, 2009 and December 31, 2008 respectively, the remuneration for the board of directors was as follows:
Remuneration
CEO
in EUR thousand
CFO
Board of directors total
2009
2008
2009
2008
2009
2008
Salary, not variable
357
357
220
219
577
576
Salary, variable
165
0
116
0
281
0
24
93
10
46
34
139
7
7
7
7
14
14
2
2
1
1
3
3
Salary
Options
Options (value at allocation)
Non cash benefit
Car
Expense for precautionary measures
Contribution to accident insurance
Regarding the stock option plans SOP 2009 (2008: SOP 2005), 21,000 call options (2008: 20,000) for the CEO, 9,000 for the CFO (2008: 10,000)
and 30,000 (2008: 30,000) call options for the board of directors as a whole were allocated during the year. The strike price amounts to EUR 7.68
(2008: EUR 19.04). For conditions and valuations of the call options for shares of austriamicrosystems AG based on the SOP 2005 and SOP 2009 please refer
to point (p) (iv).
Persons related to the board of directors held 4,960 shares and no options of austriamicrosystems AG as per December 31, 2009 and December 31, 2008,
respectively.
There are no unsettled financial liabilities between members of the supervisory board or the board of directors and austriamicrosystems.
Associated companies
New Scale Technologies Inc., New York, creates disruptively small motion systems. Based on its patented micro-motor technology, New Scale Technlogy Inc.
invents, manufactures and sells miniature ultrasonic motors and integrated positioning systems.
During the business year 2009 a 30% share of FlipChip Holdings LLC, Arizona, was acquired. Based on its patented Wafer-Level Packaging (WL-CSP)
Technology, FlipChip Holdings LLC, Arizona, researches and produces high-end packaging technologies.
During the business year also a production license was acquired which has been recorded within the intangible assets.
27 Remuneration for the auditors
The expense for the auditor’s remuneration for the audit of the financial statements and annual consolidated financial statements 2009 amounted to
EUR 91,000. For other consultancy services EUR 4,080 have been expensed.
F-110
110
V Notes to the Consolidated Financial Statements acc. to IFRS
as of and for the year ended December 31, 2009
28 Group enterprises
Ownership interest
Accounting method
Country of
incorporations
2009
2008
austriamicrosystems France S.à.r.l.
fully consolidated
France
100%
100%
austriamicrosystems Germany GmbH
fully consolidated
Germany
100%
100%
austriamicrosystems Italy S.r.l.
fully consolidated
Italy
100%
100%
austriamicrosystems Switzerland AG
fully consolidated
Switzerland
100%
100%
austriamicrosystems (United Kingdom), Ltd.
fully consolidated
U. K.
100%
100%
austriamicrosystems Spain SL
fully consolidated
Spain
100%
100%
austriamicrosystems USA, Inc.
fully consolidated
USA
100%
100%
austriamicrosystems Japan Co., Ltd.
fully consolidated
Japan
100%
100%
austriamicrosystems (India), Pvt. Ltd.
fully consolidated
India
100%
100%
austriamicrosystems (Philippines), Inc.
fully consolidated
Philippines
100%
100%
Aspern Investment Inc.
fully consolidated
USA
100%
-
Austria Mikro Systeme International Ltd.
at cost
China
100%
100%
The Group enterprise accounted for at cost has ceased operations and is not material individually and on an aggregated basis.
The purchased 30% share of FlipChip Holdings LLC, Arizona, is accounted for using the equity method.
29 Events after the balance sheet date
No transactions had a significant effect on austriamicrosystems’ financial position, assets or earnings after the closing of the fiscal year.
Unterpremstätten, February 3, 2010
John A. Heugle
CEO
Michael Wachsler-Markowitsch
CFO
F-111
111
Independent Auditor’s Report
Report on the Consolidated Financial Statements
We have audited the accompanying consolidated financial statements of austriamicrosystems AG, Unterpremstätten, for the reporting
period from 1 January 2009 to 31 December 2009. These consolidated financial statements comprise the balance sheet as at
31 December 2009, and the income statement, cash flow statement and statement of changes in equity for the year then ended, and
the notes.
Management’s Responsibility for the Consolidated Financial Statements and Accounting System
Management is responsible for the accounting system and for the preparation and fair presentation of these consolidated financial
statements in accordance with the International Financial Reporting Standards (IFRSs) as issued by the International Accounting
Standard Board (IASB) and in accordance with the International Financial Reporting Standards (IFRSs) as adopted by the EU. This
responsibility includes: designing, implementing and maintaining internal control as management determines is necessary to enable
the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error; selecting
and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.
Auditor’s Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in
accordance with laws and regulations applicable in Austria and Austrian Standards on Auditing and International Standards on Auditing, issued by the International Auditing and Assurance Standards Board (IAASB) of the International Federation of Accountants (IFAC).
Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial
statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers
internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design
audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of
the group’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness
of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
F-112
112
Opinion
Our audit did not give rise to any objections. In our opinion, which is based on the results of our audit, the consolidated financial
statements comply with legal requirements and present fairly, in all material respects, the financial position of the group as at
31 December 2009 and its financial performance for the period from 1 January 2009 to 31 December 2009 in accordance with the
International Financial Reporting Standards (IFRSs) as issued by the International Accounting Standard Board (IASB) and in accordance
with the International Financial Reporting Standards (IFRSs) as adopted by the EU.
Report on Other Legal Requirements (Group Management report)
Austrian legal requirements require us to verify whether the group management report is consistent with the financial statements
and whether the other disclosures made in the group management report do not give rise to misconception of the position of the
group. The auditor’s report should also include a statement whether the group management report is consistent with the consolidated
financial statements.
In our opinion, the group management report is consistent with the consolidated financial statements.
Vienna, February 3, 2010
KPMG
Wirtschaftsprüfungs- und Steuerberatungs GmbH
Mag. Helmut Kerschbaumer
ppa Dr. Günther Hirschböck
Austrian Chartered Accountant
Austrian Chartered Accountant
This report is a translation of the original report in German, which is solely valid. Publication of the consolidated financial statements together with our auditor’s
opinion may only be made if the consolidated financial statements and the group management report are identical with the audited version attached to this report.
Paragraph 281 Section 2 UGB applies.
F-113
113
Consolidated Financial Statements of
TAOS for the Financial Year 2010
F-114
Texas Advanced Optoelectronic Solutions, Inc.
Accountants’ Report and Consolidated Financial Statements
December 31, 2010 and 2009
F-115
Texas Advanced Optoelectronic Solutions, Inc.
December 31, 2010 and 2009
Contents
Independent Accountants’ Report ...................................................................................................... 1
Consolidated Financial Statements
Balance Sheets................................................................................................................................................. 2
Statements of Income ...................................................................................................................................... 3
Statements of Changes in Stockholders’ Equity.............................................................................................. 4
Statements of Cash Flows ............................................................................................................................... 5
Notes to Financial Statements ......................................................................................................................... 6
F-116
Independent Accountants’ Report
Board of Directors of
Texas Advanced Optoelectronic Solutions, Inc.
Dallas, Texas
We have audited the accompanying consolidated balance sheets of Texas Advanced Optoelectronic Solutions, Inc.
(the “Company”) as of December 31, 2010 and 2009, and the related consolidated statements of income, changes in
stockholders’ equity and cash flows for the years then ended. These financial statements are the responsibility of the
Company’s management. Our responsibility is to express an opinion on these financial statements based on our
audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States of America.
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the
financial position of Texas Advanced Optoelectronic Solutions, Inc. as of December 31, 2010 and 2009, and the
results of its operations and its cash flows for the years then ended, in conformity with accounting principles
generally accepted in the United States of America.
As discussed in Note 8, on January 1, 2009, the Company changed its method of accounting for income taxes.
May 26, 2011
F-117
Texas Advanced Optoelectronic Solutions, Inc.
Consolidated Balance Sheets
December 31, 2010 and 2009
Assets
2010
Current Assets
Cash and cash equivalents
Available–for–sale securities
Accounts receivable, net
Inventories, net
Deferred income taxes
Other current assets
$ 20,786,741
1,996,084
10,141,436
13,487,827
220,607
107,931
2009
$
9,560,456
5,869,151
4,948,268
5,042
Total current assets
46,740,626
20,382,917
Property and Equipment, Net
Deferred Income Taxes
Deposits and Other Assets
5,902,018
121,852
839,015
2,145,360
271,641
234,265
$ 53,603,511
$ 23,034,183
$
$
Total assets
Liabilities and Stockholders’ Equity
Current Liabilities
Line of credit
Accounts payable
Accrued liabilities
Income taxes payable
Current maturities of capital lease obligations
Total current liabilities
Other Long–term Liabilities
Unrecognized Tax Benefits
Total liabilities
Stockholders’ Equity
Series A convertible preferred stock, $.01 par value;
1,000,000 shares authorized and outstanding
(liquidation preference $2,000,000)
Series B convertible preferred stock, $.01 par value; 3,000,000
shares authorized and 1,875,000 outstanding
(liquidation preference $3,000,000)
Common stock, $.01 par value; 25,000,000 shares authorized,
8,207,262 and 7,700,139 shares issued, respectively
Additional paid–in capital
Treasury stock, 100,000 shares at cost
Accumulated other comprehensive loss
Retained earnings
Total stockholders’ equity
Total liabilities and stockholders’ equity
See Notes to Consolidated Financial Statements
F-118
4,081,387
4,856,637
113,390
-
1,000,000
2,388,166
2,941,330
16,767
58,164
9,051,414
6,404,427
116,006
10,231,000
45,110
1,254,000
19,398,420
7,703,537
2,000,041
2,000,041
3,000,000
3,000,000
82,073
2,799,801
(15,400)
(20,308)
26,358,884
77,001
2,456,629
(15,400)
(19,014)
7,831,389
34,205,091
15,330,646
$ 53,603,511
$ 23,034,183
2
Texas Advanced Optoelectronic Solutions, Inc.
Consolidated Statements of Income
Years Ended December 31, 2010 and 2009
2010
2009
$ 81,020,255
$ 40,366,557
Cost of Goods Sold
33,394,768
20,925,891
Gross Profit
47,625,487
19,440,666
Operating Expenses
Sales and marketing
Research and development
General and administrative
5,558,163
2,979,184
11,010,047
3,590,538
2,878,130
7,337,694
Total operating expenses
19,547,394
13,806,362
Income from operations
28,078,093
5,634,304
Revenues
Other Income (Expense)
Interest income
Interest expense
Total other expense, net
Net income before income taxes
3,002
(274,957)
(13,843)
(271,955)
28,064,250
5,362,349
9,386,755
Income Tax Expense (Benefit)
Net income
See Notes to Consolidated Financial Statements
10,974
(24,817)
$ 18,677,495
F-119
(252,144)
$
5,614,493
3
5,072
82,073
507,123
8,207,262
77,001
7,700,139
-
1,533
-
153,344
-
-
-
-
75,468
-
$
$
-
7,546,795
Common Stock
Shares
Amount
1,000,000
-
-
-
1,000,000
-
-
-
Amount
$ 2,000,041
-
-
-
2,000,041
-
-
-
$ 2,000,041
Series A
1,000,000
Shares
1,875,000
-
-
-
1,875,000
-
-
-
Amount
$ 3,000,000
-
-
-
3,000,000
-
-
-
$ 3,000,000
Series B
1,875,000
Shares
Convertible Preferred Stock
$ 2,799,801
109,709
233,463
-
-
2,456,629
24,638
146,889
-
-
$ 2,285,102
Additional
Paid–in
Capital
$ 26,358,884
(150,000)
-
-
18,677,495
-
7,831,389
-
5,614,493
-
(1,199,000)
$ 3,415,896
Retained
Earnings
Consolidated Statements of Changes in Stockholders’ Equity
Years Ended December 31, 2010 and 2009
Texas Advanced Optoelectronic Solutions, Inc.
See Notes to Consolidated Financial Statements
Balance, December 31, 2010
Comprehensive income:
Net income
Foreign currency translation loss
Unrealized depreciation on available–for–
sale securities
Total comprehensive income
Common stock issued for cash
Dividends paid on preferred stock
Stock–based compensation
Balance, December 31, 2009
Cumulative effect of adoption of ASC Topic 740
as it relates to uncertain tax provisions
Comprehensive income:
Net income
Foreign currency translation gain
Total comprehensive income
Common stock issued for cash
Stock–based compensation
Balance, January 1, 2009
F-120
$
$
(20,308)
-
(1,036)
(258)
(19,014)
-
42,956
-
(61,970)
Accumulated
Other
Comprehensive
Loss
$
$
(15,400)
-
-
-
(15,400)
-
-
-
(15,400)
Treasury
Stock
4
$ 34,205,091
(1,036)
18,676,201
114,781
(150,000)
233,463
18,677,495
(258)
15,330,646
5,614,493
42,956
5,657,449
26,171
146,889
(1,199,000)
$ 10,699,137
Total
Texas Advanced Optoelectronic Solutions, Inc.
Consolidated Statements of Cash Flows
Years Ended December 31, 2010 and 2009
2010
Operating Activities
Net income
Items not requiring (providing) cash
Depreciation and amortization
Stock–based compensation
Allowance for doubtful accounts
Deferred income taxes
Changes in
Accounts receivable
Inventories
Other current assets
Deposits and other assets
Accounts payable
Accrued liabilities
Income taxes payable
Unrecognized tax benefits
Other long–term liabilities
2009
$ 18,677,495
Net cash provided by operating activities
Investing Activities
Purchase of property and equipment
Purchase of available–for–sale securities
Net cash used in investing activities
Financing Activities
Net payments on line of credit
Proceeds from issuance of common stock
Principal payments on capital lease obligations
Dividends paid on preferred stock
Net cash used in financing activities
Effects of foreign currency exchange rate changes on cash
and cash equivalents
$
1,563,826
233,463
(70,818)
1,367,681
146,889
5,000
(271,641)
(4,272,285)
(8,539,559)
(102,889)
(604,750)
1,693,221
1,857,143
96,623
8,977,000
70,896
(2,659,730)
2,780,430
63,857
(936)
1,611,684
1,074,921
55,000
666
19,579,366
9,788,314
(5,320,484)
(1,997,120)
(630,678)
-
(7,317,604)
(630,678)
(1,000,000)
114,781
(150,000)
(2,458,000)
26,171
(58,164)
-
(1,035,219)
(2,489,993)
(258)
Increase in Cash and Cash Equivalents
Cash and Cash Equivalents, Beginning of Year
5,614,493
42,956
11,226,285
6,710,599
9,560,456
2,849,857
Cash and Cash Equivalents, End of Year
$ 20,786,741
$
9,560,456
Supplemental Cash Flows Information
Interest paid
Income taxes paid
$
$
$
$
179,957
24,790
See Notes to Consolidated Financial Statements
F-121
24,817
383,950
5
Texas Advanced Optoelectronic Solutions, Inc.
Notes to Consolidated Financial Statements
December 31, 2010 and 2009
Note 1: Nature of Operations and Summary of Significant Accounting Policies
Nature of Operations
Texas Advanced Optoelectronic Solutions, Inc. (TAOS) was incorporated under the laws of the state of Nevada
in November 1998. Operating activities began in January 1999 when the Company entered into a license
agreement with Texas Instruments, Incorporated (TI). The Company designs, manufactures and markets analog
and mixed signal optical sensor semiconductors devices, both domestically and internationally.
Principles of Consolidation
The consolidated financial statements include the accounts of TAOS and its wholly owned foreign subsidiaries;
Texas Advanced Optoelectronic Solutions Korea, Ltd., TAOS International, Inc. and TAOS Germany GmbH
and are collectively referred to as “Company”. All significant intercompany accounts and transactions have
been eliminated in consolidation.
Foreign Currency Translation
The local currency of the Company’s foreign operations is considered to be its functional currency. Assets and
liabilities of foreign operations are translated using exchange rates at each balance sheet date. Revenues and
expenses are translated using average rates in effect during the period, with the resulting adjustments included
as a component of stockholders’ equity and are considered to be a component of other comprehensive income.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the
United States of America requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reporting period. Actual results could
differ from those estimates. Significant estimates include the reserve for inventory obsolescence and the
estimate of unrecognized tax benefits.
Cash Equivalents
The Company considers all liquid investments with original maturities of three months or less to be cash
equivalents.
The financial institution holding the Company’s cash accounts in the United States of America is participating
in the FDIC’s Transaction Account Guarantee Program. Under that program, through December 31, 2012, all
noninterest–bearing transaction accounts are fully guaranteed by the FDIC for the entire amount in the account.
At December 31, 2010 and 2009, approximately $14,980,000 and $8,630,000, respectively, was held primarily
in interest–bearing bank accounts in foreign countries. The cash in these foreign bank accounts also serves as
collateral on the line of credit agreement.
F-122
6
Texas Advanced Optoelectronic Solutions, Inc.
Notes to Consolidated Financial Statements
December 31, 2010 and 2009
Securities
Securities not classified as held to maturity or trading, including equity securities with readily determinable fair
values, are classified as “available for sale” and recorded at fair value, with unrealized gains and losses
excluded from earnings and reported in other comprehensive income. Purchase premiums and discounts are
recognized in interest income using the interest method over the terms of the securities. Gains and losses on the
sale of securities are recorded on the trade date and are determined using the specific identification method.
For available–for–sale securities that management has no intent to sell and believes that it is more likely than
not will not be required to sell prior to recovery, only the credit loss component of the impairment is recognized
in earnings, while the noncredit loss is recognized in accumulated other comprehensive income. The credit loss
component recognized in earnings is identified as the amount of principal cash flows not expected to be
received over the remaining term of the security as projected based on cash flow projections.
For equity securities, when the Company has decided to sell an impaired available–for–sale security and the
entity does not expect the fair value of the security to fully recover before the expected time of sale, the security
is deemed other–than–temporarily impaired in the period in which the decision to sell is made. The Company
recognizes an impairment loss when the impairment is deemed other than temporary even if a decision to sell
has not been made.
Accounts Receivable
Accounts receivable represent amounts due from customers which are unsecured and stated at the amount the
Company expects to collect. The Company maintains allowances for doubtful accounts for estimated losses
resulting from the inability of its customers to make required payments. Management considers the following
factors when determining the collectability of specific customer accounts: customer credit–worthiness, past
transaction history with the customer, current economic industry trends and changes in customer payment
terms. If the financial condition of the Company’s customers were to deteriorate, adversely affecting their
ability to make payments, additional allowances would be required. Based on management’s assessment, the
Company provides for estimated uncollectible amounts through a charge to earnings and a credit to a valuation
allowance. Balances that remain outstanding after the Company has used reasonable collection efforts are
written off through a charge to the valuation allowance and a credit to accounts receivable. As of December 31,
2010 and 2009, the Company’s allowance for doubtful accounts totaled $15,000.
Inventories
Inventories are stated at the lower of cost or market, determined using the first–in, first–out method. The
majority of inventory is produced by subcontractor manufacturers. Inventories include raw materials and costs
incurred by the subcontractors. The Company maintains a reserve for obsolete and slow moving inventory, as
appropriate, based on current inventory levels and historical and expected future sales levels.
F-123
7
Texas Advanced Optoelectronic Solutions, Inc.
Notes to Consolidated Financial Statements
December 31, 2010 and 2009
Property and Equipment
Property and equipment are stated at cost, less accumulated depreciation and amortization. Depreciation and
amortization of property and equipment is calculated on a straight–line basis over the estimated useful life of
the assets ranging from 3 to 5 years. Leasehold improvements are amortized using the straight–line basis over
the shorter of the term of the remaining related lease term when the asset is acquired or the respective useful life
of the asset. Expenditures for major renewals and betterments that extend the useful lives of property and
equipment are capitalized. Expenditures for maintenance and repairs are charged to expense as incurred.
Long–lived Asset Impairment
Long–lived assets, including property and equipment, are reviewed for possible impairment whenever events or
circumstances indicate that the carrying amounts may not be recoverable. Recoverability of assets to be held
and used is measured by a comparison of the carrying value of the asset to the undiscounted expected future
cash flows generated by that asset. If the carrying value of that asset exceeds the expected future cash flows, an
impairment exists, which is measured by the amount the carrying value exceeds the estimated fair value of the
asset. There were no indicators of impairment during the years ended December 31, 2010 and 2009.
Product Warranties
The Company provides limited warranties on certain of its products, for periods ranging from 30 days to two
years. The Company records a reserve for estimated future warranty claims based upon historical experience
and management’s estimate of the level of future claims.
A reconciliation of the warranty liability for the years ended December 31, 2010 and 2009 is as follows:
2010
2009
Beginning balance
Changes in liability for product warranties issued
Warranty obligations incurred
$
9,173
597,415
(561,498)
$
23,155
78,216
(92,198)
Ending balance
$
45,090
$
9,173
Income Taxes
The Company accounts for income taxes in accordance with income tax accounting guidance (ASC 740,
Income Taxes). The income tax accounting guidance results in two components of income tax expense: current
and deferred. Current income tax expense reflects taxes to be paid or refunded for the current period by
applying the provisions of the enacted tax law to the taxable income or excess of deductions over revenues. The
Company determines deferred income taxes using the liability (or balance sheet) method. Under this method,
the net deferred tax asset or liability is based on the tax effects of the differences between the book and tax
bases of assets and liabilities, and enacted changes in tax rates and laws are recognized in the period in which
they occur. Deferred income tax expense results from changes in deferred tax assets and liabilities between
periods. Deferred tax assets are reduced by a valuation allowance if, based on the weight of evidence available,
it is more likely than not that some portion or all of a deferred tax asset will not be realized.
F-124
8
Texas Advanced Optoelectronic Solutions, Inc.
Notes to Consolidated Financial Statements
December 31, 2010 and 2009
Uncertain tax positions are recognized if it is more likely than not, based on the technical merits that the tax
position will be realized or sustained upon examination. The term more likely than not means a likelihood of
more than 50 percent; the terms examined and upon examination also include resolution of the related appeals
or litigation processes, if any. A tax position that meets the more likely than not recognition threshold is
initially and subsequently measured as the largest amount of tax benefit that has a greater than 50 percent
likelihood of being realized upon settlement with a taxing authority that has full knowledge of all relevant
information. The determination of whether or not a tax position has met the more likely than not recognition
threshold considers the facts, circumstances and information available at the reporting date and is subject to the
management’s judgment.
TAOS is subject to U.S. Federal and state income taxes. The foreign subsidiaries are subject to income taxes by
their respective taxing authorities in the countries in which they are located.
The Company recognizes interest and penalties on income taxes as a component of income tax expense. With a
few exceptions, the Company is no longer subject to U.S. federal, state and local or non–U.S. income tax
examinations by tax authorities for years before 2004.
Revenue Recognition
Revenue from the sale of the Company’s products is recognized as products are delivered to customers and title
to the product has been transferred to the customers. The Company records revenues net of estimated returns
which historically have not been significant.
Shipping and Handling Costs
Shipping and handling costs incurred for delivery of products to customers are charged to cost of goods sold.
Research and Development
Research and development expense represents all costs related to bringing the product to production status and
product testers to in–service status. The costs related to bringing products to production status include
semiconductor circuit design and layout, wafer masks, packaging design, engineering pilot or prototype lots,
device characterizations and device qualification. The costs related to bringing product testers to in–service
status include hardware and software design, layout, integration, testing and qualification. These product and
tester costs include personnel, pre–production materials and outside services, hardware, software and test
equipment. Research and development costs are expensed as incurred.
Advertising Costs
Advertising costs are expensed as incurred. Advertising expense for the years ended December 31, 2010 and
2009, totaled $152,938 and $82,066, respectively.
F-125
9
Texas Advanced Optoelectronic Solutions, Inc.
Notes to Consolidated Financial Statements
December 31, 2010 and 2009
Treasury Stock
Common stock shares repurchased are recorded at cost. Cost of shares retired or reissued is determined using
the first–in, first–out method.
Stock Option Plan
The Company applies the provisions of FASB ASC 718, Share–Based Payment, which requires the Company
to recognize compensation costs for all share–based payments based on their grant date fair value. Share based
compensation is recognized on a straight–line basis over the requisite service period of the reward, generally
four years.
Comprehensive Income
Comprehensive income consists of net income and other comprehensive income (loss), net of applicable income
taxes. Other comprehensive income includes unrealized appreciation (depreciation) on available–for–sale
securities and foreign currency translation gains and losses.
Transfers Between Fair Value Hierarchy Levels
Transfers in and out of Level 1 (quoted market prices); Level 2 (other significant observable inputs) and Level 3
(significant unobservable inputs) are recognized on the actual transfer date.
Reclassifications
Certain reclassifications have been made to the 2009 financial statements to conform to the 2010 financial
statement presentation. These reclassifications have no effect on net earnings.
Note 2: Securities
The amortized cost and approximate fair values, together with gross unrealized gains and losses, of securities
are as follows:
Gross
Unrealized
Gains
Amortized
Cost
Available–for–sale securities
December 31, 2010:
U.S. Government and federal agencies
Corporate debt obligations
$
Gross
Unrealized
Losses
Fair
Value
1,221,856
775,130
$
219
$
(665)
(456)
$ 1,221,191
774,893
$ 1,996,986
$
219
$
(1,121)
$ 1,996,084
All securities mature within one year from December 31, 2010.
F-126
10
Texas Advanced Optoelectronic Solutions, Inc.
Notes to Consolidated Financial Statements
December 31, 2010 and 2009
Note 3: Inventories
The components of the Company’s inventories at December 31, are as follows:
2010
Manufacturing inventories
Work–in–process at subcontractor facilities
Raw materials
Finished units
$ 10,048,341
451,675
3,487,811
2009
$
13,987,827
(500,000)
Reserve for obsolete and slow moving items
$ 13,487,827
3,051,285
355,895
1,641,088
5,048,268
(100,000)
$
4,948,268
Note 4: Property and Equipment
Property and equipment at December 31, consists of the following:
2010
Equipment and tooling
Computer software
Computer hardware
Leasehold improvements
Furniture and equipment
Construction in progress
2009
$
9,190,839
486,632
203,113
120,651
52,678
20,731
10,074,644
(4,172,626)
$
3,966,670
466,152
126,993
116,974
51,280
26,653
4,754,722
(2,609,362)
$
5,902,018
$
2,145,360
Accumulated depreciation and amortization
Note 5: Line of Credit
During 2006, the Company entered into a loan and security agreement with Silicon Valley Bank (SVB). Under
this agreement, the Company may receive advances, subject to the terms of the agreement, up to the revolving
line of credit maximum of $3,500,000. Under the agreement, SVB may also issue letters of credit on behalf of
the Company up to $250,000. Letters of credit issued reduce the revolving line of credit availability. The
Company may also enter into foreign exchange contracts with SVB whereby the Company commits to purchase
from or sell to the bank a specific amount of foreign currency on a specified date. Such foreign exchange
contracts reduce the revolving line of credit amount available and are also subject to a reserve of 10% of the
face amount of exchange contract. Line of credit amounts are collateralized by the Company’s bank accounts,
accounts receivables, inventories and fixed assets. The interest rate at December 31, 2010, was the greater of
prime plus 1% or 5% (which was 5% at December 31, 2010). The line of credit matured January 29, 2011 and
was renewed on March 23, 2011. See Note 14.
F-127
11
Texas Advanced Optoelectronic Solutions, Inc.
Notes to Consolidated Financial Statements
December 31, 2010 and 2009
At December 31, 2010 and 2009, the balance on the revolving line of credit was $0 and $1,000,000,
respectively.
Note 6: Accrued Liabilities
Accrued liabilities at December 31, consists of the following:
2010
Accrued compensation
Accrued commissions
Accrued property, sales and other taxes
Warranty and returns
Other accrued expenses
2009
$
3,067,893
546,651
295,036
232,756
714,301
$
1,670,380
385,519
301,445
265,765
318,221
$
4,856,637
$
2,941,330
Note 7: Operating Leases
The Company leases office, factory and warehouse space under operating leases expiring at various dates
through December 2016. These leases contain customary clauses and rent escalation provisions. Rental
expense was approximately $340,000 during the years ended December 31, 2010 and 2009, respectively.
Future minimum rental payments under operating leases at December 31, 2010 are as follows:
2011
2012
2013
2014
2015
Later years
F-128
$
299,726
253,519
249,414
249,414
249,414
103,923
$
1,405,410
12
Texas Advanced Optoelectronic Solutions, Inc.
Notes to Consolidated Financial Statements
December 31, 2010 and 2009
Note 8: Income Taxes
The provision for income taxes includes these components as of December 31:
2010
2009
U.S. Federal and state income taxes
Foreign income taxes
Deferred income taxes
$
9,435,415
22,158
(70,818)
$
9,345
10,152
(271,641)
Income tax expense (benefit)
$
9,386,755
$
(252,144)
A reconciliation of income tax expense (benefit) at the statutory rate to the Company’s actual income tax
expense for the years ended December 31, 2010 and 2009 is as follows:
2010
Computed at the statutory rate
Increase (decrease) resulting from
Foreign income taxed at foreign rates
Unrecognized tax expense
Nondeductible expenses
Changes in the deferred tax asset valuation
allowance
Other
$
Actual tax expense (benefit)
$
9,541,845
2009
$
1,823,199
(9,141,254)
8,977,000
18,509
(1,852,605)
23,825
(9,345)
(228,495)
(18,068)
9,386,755
$
(252,144)
The tax effects of temporary differences related to deferred taxes shown on the balance sheets were:
2010
Deferred tax assets
Allowance for doubtful accounts
Deferred compensation
Net operating loss carryforwards
Net property and equipment
Accrued compensated absences
Warranty and return reserves
Accrued sales taxes
Net deferred tax asset
F-129
2009
$
1,700
121,850
2
107,470
11,137
100,300
$
1,700
91,719
111,487
66,735
-
$
342,459
$
271,641
13
Texas Advanced Optoelectronic Solutions, Inc.
Notes to Consolidated Financial Statements
December 31, 2010 and 2009
The deferred tax asset is presented on the balance sheets as follows:
2010
Deferred tax asset–current
Deferred tax asset–long–term
Net deferred tax asset
2009
$
220,607
121,852
$
271,641
$
342,459
$
271,641
The Company adopted the provisions of ASC 740 on January 1, 2009, as it related to uncertain tax provisions.
As a result of the adoption of this new standard and the Company’s evaluation of uncertain tax positions, the
Company recognized a $1,254,000 increase in the liability for unrecognized tax benefits, which was accounted
for as a reduction of $1,199,000 to the January 1, 2009, balance of retained earnings and an increase of $55,000
in interest tax expense during the year ended December 31, 2009. In 2010, the Company recorded an additional
$8,977,000 in uncertain tax liability resulting in a total uncertain tax liability of $10,231,000 at December 31,
2010. The uncertain tax liability pertains to (1) expenses incurred by foreign entities deducted by the U.S.
operating entity that may not be deductible for U.S. income tax purposes (2) foreign income potentially
connected with a trade or business within the United States and (3) related penalties and interest. The ultimate
unrecognized tax benefit could change materially.
During the years ended December 31, 2010 and 2009, the Company recognized approximately $789,000 and
$55,000 in penalties and interest, respectively.
A reconciliation of the beginning and ending amount of unrecognized tax benefit for the year ended December
31, 2010 is as follows:
Balance at January 1
Additions based on tax provision related
to the current year
$
1,254,000
Balance at December 31
$ 10,231,000
8,977,000
Note 9: Stockholders’ Equity
Dividends
Series A and Series B Preferred shares are entitled to receive annual non–cumulative 3% dividends upon
declaration by the Board of Directors. Preferred dividends were declared and paid during the years ended
December 31, 2010 and 2009, totaling $150,000 and $0, respectively
If the Company declares a cash dividend on the common stock, the holders of the Series A or Series B Preferred
will be entitled to receive a cash dividend that is not less than 1.3 times the cash dividend declared on the
common stock.
F-130
14
Texas Advanced Optoelectronic Solutions, Inc.
Notes to Consolidated Financial Statements
December 31, 2010 and 2009
Liquidation Preference
In the event of any liquidation, dissolution, or winding up of the Company, the holders of Series A Preferred
shares shall be entitled to receive $2.00 per outstanding share and share equally in liquidation preference with
the Series B Preferred shareholders prior and in preference to any distribution of any of the assets or funds of
the Company to the holders of the common stock plus any declared but unpaid dividends.
In the event of any liquidation, dissolution, or winding up of the Company, the holders of Series B Preferred
shares shall be entitled to receive $1.60 per outstanding share prior and in preference to any distribution of any
of the assets or funds of the Company to the holders of the common stock plus any declared but unpaid
dividends.
Conversion Rights
Each share of Series A Preferred is convertible at any time, at the option of the holder into 1 share of common
stock at the conversion price of $1.93 per share, adjustable based on common stock issuances for consideration
less than $1.93 per share (as provided for in the preferred stock agreement).
Each share of Series B Preferred is convertible at any time, at the option of the holder into 1 share of common
stock at the conversion price of $1.60 per share, adjustable based on common stock issuances for consideration
less than $1.60 per share (as provided for in the preferred stock agreement).
Voting Rights
The holder of each share of Series A or Series B Preferred has the right to one vote for each share of common
stock into which such share of Series A or Series B Preferred could be converted.
Warrant
In March, 2006, the Company issued a warrant in conjunction with a sale–leaseback transaction with a
financing company. The Company issued the warrant for the purchase price of $100 to purchase 60,000 shares
of Series B Preferred stock at an exercise price of $2.00 per share. The warrant was immediately exercisable
upon issuance. The value of the warrant at the date of issue was determined to be insignificant using the Black–
Scholes model. The warrant does not contain an expiration date.
Note 10: Employee Stock Option Plan
The Texas Advanced Optoelectronic Solutions, Inc. 2000 Equity Incentive Plan (2000 Plan) was approved by
the Board of Directors and Stockholders in November 2000, and provided for incentive stock options,
nonqualified stock options and restricted stock to be awarded to employees, certain directors and consultants of
the Company. The terms of each award and the exercise price are established at each option grant, based on the
fair market value of the Company’s stock on the date of grant as determined by the Board of Directors. Awards
typically have a ten year contractual life.
F-131
15
Texas Advanced Optoelectronic Solutions, Inc.
Notes to Consolidated Financial Statements
December 31, 2010 and 2009
At December 31, 2000, the Company had reserved 2,500,000 shares of common stock par value $0.01 for
issuance of restricted shares and for issuance upon exercise of options granted pursuant to the 2000 Plan.
Effective April 15, 2008, the reserved shares of common stock for issuance under this plan was increased to
3,500,000 shares. The 2000 Plan terminated in November 2010. Effective December 7, 2010, the Company
renewed the Plan and adopted the Texas Advanced Optoelectronic Solutions, Inc. 2010 Equity Incentive Plan
(2010 Plan) with the same effective terms as contained in the 2000 Equity Incentive Plan.
The fair value of each option grant is estimated on the date of grant using the Black–Scholes option valuation
model with the following assumptions used for options granted during 2010 and 2009:
•
•
•
•
•
Average risk free rate of 3.23% in 2010 and 3.33% in 2009 (based on U.S. federal reserve bank 10
year bond rates)
Expected dividend yield of zero for 2010 and 2009
Expected term (in years) of 7 years for 2010 and 2009
Expected volatility of 46% for 2010 and 47% for 2009
Expected forfeiture rate of 15% for 2010 and 2009 (based on historical data of employee exercise
behavior)
The Company elected to use the calculated value method to account for options granted. A nonpublic entity
that is unable to estimate the expected volatility of the price of its underlying share may measure awards based
on a “calculated value,” which substitutes the volatility of an appropriate index for the volatility of the entity’s
own share price. Currently, there is no active market for the Company’s common shares and management has
not been able to identify a similar publicly held entity that can be used as a benchmark. Therefore, as a
substitute for volatility, the Company used the historical volatility of the Dow Jones Small Cap Semiconductor
Companies Index, which management believes is representative of the Company’s size and industry. The
Company has used the historical closing values of that index to estimate volatility.
The estimated weighted average grant date fair value per share of all options granted in 2010 and 2009, using
the Black–Scholes model, is approximately $2.33 and $1.39 per share, respectively. The total intrinsic value of
options exercised during the years ended December 31, 2010 and 2009, was approximately $1,468,000 and
$230,000, respectively. The estimated fair value of options granted during the years ended December 31, 2010
and 2009, is approximately $547,000 and $211,000, respectively, which is being amortized to expense over the
vesting period of the options, generally four years. The Company recognized stock–based compensation
expense of approximately $233,000 and $147,000 for the years ended December 31, 2010 and 2009,
respectively. At December 31, 2010, there was approximately $746,000 of unamortized compensation cost
related to non–vested stock options which will be recognized over a weighted average period of two years.
Cash received from option exercises for the years ended December 31, 2010 and 2009, totaled $114,781 and
$26,171, respectively.
F-132
16
Texas Advanced Optoelectronic Solutions, Inc.
Notes to Consolidated Financial Statements
December 31, 2010 and 2009
A summary of option activity in the Plan as follows:
Weighted–
Average
Exercise
Price
Shares
Outstanding at December 31, 2008
Granted
Exercised
Forfeited or expired
Outstanding at December 31, 2009
Granted
Exercised
Forfeited or expired
1,524,346
$
257,500
(153,344)
(5,625)
1,622,877
235,000
(507,123)
(54,000)
Weighted–
Average
Remaining
Contractual
Term (Years)
0.45
5.45
1.82
0.17
1.63
9.68
-
0.71
5.38
5.28
0.23
0.83
9.52
-
Outstanding at December 31, 2010
1,296,754
$
1.70
6.58
Exercisable at December 31, 2010
831,858
$
0.75
5.35
A summary of option activity of the Company’s non–vested shares as of December 31, 2010, and the changes
during the year then ended is presented below:
Shares
Non–vested, beginning of year
Granted
Vested
Forfeited
Non–vested, end of year
Weighted–
Average
Grant–Date
Fair Value
428,115
235,000
(184,365)
(13,854)
$
1.57
N/A
N/A
N/A
464,896
$
3.26
F-133
17
Texas Advanced Optoelectronic Solutions, Inc.
Notes to Consolidated Financial Statements
December 31, 2010 and 2009
Note 11: Disclosures About Fair Value of Assets and Liabilities
ASC Topic 820, Fair Value Measurements, defines fair value as the price that would be received to sell an asset
or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
Topic 820 also specifies a fair value hierarchy which requires an entity to maximize the use of observable inputs
and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of
inputs that may be used to measure fair value:
Level 1 Quoted prices in active markets for identical assets or liabilities
Level 2 Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities;
quoted prices in markets that are not active; or other inputs that are observable or can be
corroborated by observable market data for substantially the full term of the assets or liabilities
Level 3 Unobservable inputs that are supported by little or no market activity and that are significant to the
fair value of the assets or liabilities
Following is a description of the valuation methodologies and inputs used for assets and liabilities measured at
fair value on a recurring basis and recognized in the accompanying balance sheets, as well as the general
classification of such assets and liabilities pursuant to the valuation hierarchy.
Available–for–Sale Securities
Where quoted market prices are available in an active market, securities are classified within Level 1 of the
valuation hierarchy. Level 1 securities include U.S. government and federal agency issues and corporate debt
obligations. If quoted market prices are not available, then fair values are estimated by using pricing models,
quoted prices of securities with similar characteristics or discounted cash flows. Level 2 securities include
securities with observable inputs other than Level 1. In certain cases where Level 1 or Level 2 inputs are not
available, securities are classified within Level 3 of the hierarchy.
December 31, 2010
Fair Value Measurements Using
Quoted Prices
in Active
Markets for
Identical
Assets
Significant
Other
Observable
Inputs
Significant
Unobservable
Inputs
(Level 1)
(Level 2)
(Level 3)
Fair Value
U.S. Government and federal agencies
Corporate debt obligations
Total
$
1,221,191
774,893
$
1,221,191
774,893
$
$
1,996,084
$
1,996,084
$
F-134
-
$
$
-
18
Texas Advanced Optoelectronic Solutions, Inc.
Notes to Consolidated Financial Statements
December 31, 2010 and 2009
Note 12: Significant Estimates and Concentrations
Accounting principles generally accepted in the United States of America require disclosure of certain
significant estimates and current vulnerabilities due to certain concentrations. Those matters include the
following:
Major Customers
The majority of the Company’s accounts receivable are unsecured. A substantial portion of the receivables are
due from customers located in Taiwan and China. In the event of complete non–performance by customers, the
maximum exposure to the Company is the outstanding accounts receivable balance at the date of non–
performance.
Revenues from customers located outside the U.S. were approximately $78,000,000 and $38,000,000,
respectively, for the years ended December 31, 2010 and 2009.
The Company conducts a large portion of its business through two distributors with revenues totaling
approximately $57,400,000 and $12,600,000 for the years ended December 31, 2010 and 2009, respectively.
These distributors accounted for 79% and 48% of accounts receivable at December 31, 2010 and 2009,
respectively.
Major Suppliers
The Company purchases a substantial portion of its parts from three vendors. These vendors comprised 80%
and 58% of the Company’s accounts payable at December 31, 2010 and 2009, respectively. Management
believes if necessary, there are other vendors that would be able to provide the Company parts within required
specifications.
Net Foreign Assets
The carrying amount of net foreign assets located in the Cayman Island, South Korea and Germany totaled
approximately $41,000,000 and $14,000,000 at December 31, 2010 and 2009, respectively.
Current Economic Conditions
The current protracted economic decline continues to present manufacturers with difficult circumstances and
challenges, which in some cases have resulted in large and unanticipated declines in the fair value of
investments and other assets, declines in the volume of business, constraints on liquidity and difficulty
obtaining financing. The financial statements have been prepared using values and information currently
available to the Company.
Current economic and financial market conditions could adversely affect the Company’s results of operations in
future periods. The current instability in the financial markets may make it difficult for certain of the
Company’s customers to obtain financing, which may significantly impact the volume of future sales which
could have an adverse impact on the Company’s future operating results.
F-135
19
Texas Advanced Optoelectronic Solutions, Inc.
Notes to Consolidated Financial Statements
December 31, 2010 and 2009
In addition, given the volatility of current economic conditions, the values of assets and liabilities recorded in
the financial statements could change rapidly, resulting in material future adjustments in allowances for
accounts receivable and net realizable value of inventory.
Note 13: Related Party Transactions
The Company sells manufactured products to two of its distributors who are controlled by entities who also own
all of the Series A and B Convertible Preferred Stock. Revenues from these two distributors accounted for
approximately $57,400,000 and $12,600,000 for the years ended December 31, 2010 and 2009, respectively.
These two distributors accounted for approximately $7,977,000 and $2,807,000 of accounts receivable at
December 31, 2010 and 2009, respectively.
Note 14: Subsequent Events
Line of Credit
On March 23, 2011, the Company amended and restated the loan and security agreement with SVB which now
matures in June 2013. Effective with this amendment, the interest rate is the greater of 1.25% plus prime or
4.5%. All other major terms of the agreement remain substantially unchanged.
Subsequent events have been evaluated through May 26, 2011, which is the date the financial statements were
available to be issued.
F-136
20