Financial statements Georg Fischer Ltd

Notes to the financial statements

1 Principles

Notes to the financial statements

1 Principles

1.1 General

These annual financial statements were prepared in accordance with the provisions of the Swiss accounting law (Title 32 of the Swiss Code of Obligations). The main valuation principles applied that are not prescribed by law are described below.

Georg Fischer Ltd, Schaffhausen (Switzerland), reports its consolidated financial statements based on a recognized standard (Swiss GAAP FER) and, in accordance with the legal provisions, the company has decided not to provide notes on the audit fees, a cash flow statement or a report on the business situation.

1.2 Securities with market price

Securities held for the short term are valued at the market price on the balance sheet date. No equalization reserve has been created.

1.3 Loans to Corporate Companies and other financial assets

Loans granted to Corporate Companies and other financial investments in foreign currencies are valued at the market rate on the actual closing date. Unrealized currency losses are booked, while unrealized gains are deferred (imparity principle). The valuation is at nominal values, taking into consideration any value adjustments required.

1.4 Investments

Investments are valued in line with the principle of individual valuation. In addition, further flat-rate value adjustments can be applied.

1.5 Dividend income

Dividend income is booked when paid out.

1.6 Share-based compensation

More information about share-based compensation is available in the Compensation Report as well as in note 6.

1.7 Long-term interest-bearing liabilities

Interest-bearing liabilities are recognized at nominal value.

1.8 Treasury shares

Treasury shares are recognized at cost and deducted from shareholderʼs equity. The gain or loss from the sale of treasury shares is recognized in shareholderʼs equity as increase or reduction of retained earnings.

2 Information on the income statement 

2 Information on the income statement 

2.1 Dividend income

The dividend income for the year under review was CHF 127 million (previous year: CHF 139 million).

2.2 Income from services provided to Corporate Companies

The income from Corporate Companies consisted primarily of licensing income for the use of the corporate brand +GF+ as well as income for services provided.

2.3 Financial income

The financial income comes from interest income on the loans granted to Corporate Companies and currency gains.

2.4 Commission income from Corporate Companies

This position contains commission income from Corporate Companies for issued guarantees.

2.5 Value adjustment on investments

Some investments of Georg Fischer Ltd had to be value adjusted due to the application of the principle of individual evaluation. The principles for the valuation of investments are found in note 1.4.

2.6 Financial expenses

In the previous year, this position included interest expense for a debenture loan which was repaid in 2016 as well as currency losses.

2.7 Other operating expenses

The main expense items related to external consulting services, marketing expenses, fees for the Board of Directors, and IT costs.

2.8 Direct taxes

Income taxes in the period under review concerned not only the income taxes of Georg Fischer Ltd, but also the corporation taxes of Georg Fischer BV & Co KG, Singen (Germany), acting as the German fiscal unity parent of GF. Georg Fischer Ltd, as the associate of Georg Fischer BV & Co KG, is liable for German corporation taxes.

3 Information on balance sheet positions 

3 Information on balance sheet positions 

3.1 Cash and cash equivalents and short-term investments with a quoted market price

This balance sheet position contains securities in the amount of CHF 3.6 million (previous year: CHF 3.3 million).

3.2 Other current receivables due from Corporate Companies

The balance sheet position includes short-term receivables and loans to Corporate Companies and positions from cash pooling with Corporate Companies. These are reported as a gross amount under “Other current receivables due from Corporate Companies” and “Short-term interest-bearing liabilities due to Corporate Companies”.

3.3 Loans to Corporate Companies

The activities of Corporate Companies are, whenever possible and suitable, financed by loans from the Corporation instead of credit facilities from local banks.

3.4 Investments

Direct and indirect investments in Corporate Companies of Georg Fischer Ltd include the companies listed in note 4.2 (4.2.1 Affiliated companies) in the consolidated financial statements.

3.5 Short-term interest-bearing liabilities due to Corporate Companies

This balance sheet item includes short-term liabilities and loans from Corporate Companies and items from cash pooling with Corporate Companies. These are reported as a gross amount under “Other current receivables due from Corporate Companies” and “Short-term interest-bearing liabilities due to Corporate Companies”.

3.6 Accrued expenses and deferred income

Accrued expenses and deferred income largely comprises variable compensation for employees and fees for the Board of Directors.

3.7 Long-term provisions

This provision mainly concerns currency risks.

3.8 Share capital

As of 31 December 2017, the share capital amounted to 4ʼ100ʼ898 registered shares at a par value of CHF 1.

Conditional capital: As of 31 December 2017, the conditional capital amounted to CHF 0.6 million and can be created by exercising conversion or option rights granted in connection with debenture loans or similar bonds of Georg Fischer Ltd or its Corporate Companies that were issued on the capital markets.

Authorized capital: In accordance with the resolution of the Annual General Meeting of 23 March 2016, the Board of Directors is authorized to increase the share capital, until no later than 22 March 2018, by a maximum amount of CHF 0.6 million, by issuing a maximum of 600ʼ000 fully paid-in registered shares with a nominal value of CHF 1 each. The increase may be made in partial amounts.

The maximum amount of the authorized or conditional capital is reduced by the amount that authorized or conditional capital is created through the issue of bonds or similar debt instruments or new shares.

3.9 Treasury shares

As of 31 December 2017, treasury shares were directly held by Georg Fischer Ltd. The principles for the valuation of treasury shares are found in note 1.8.

In the previous year, treasury shares were held by a fully consolidated subsidiary of Georg Fischer Ltd and accordingly, a reserve for treasury shares was set up at Georg Fischer Ltd. As of 31 December 2017, this reserve was reversed to retained earnings.

4 Additional information

4 Additional information

4.1 Full-time equivalents

As of 31 December 2017, Georg Fischer Ltd employed 65 people including trainees.

4.2 Contingent liabilities

CHF 1'000

 

2017

 

2016

 

 

 

 

 

Guarantees and pledges in favor of third parties:

 

 

 

 

Guaranteed maximum amount

 

1'831'005

 

1'787'263

Thereof utilized

 

961'328

 

940'168

Georg Fischer Ltd bears joint liability with regard to the Swiss Federal Tax Administration for the amounts due of value-added tax of all the Swiss Corporate Companies.

4.3 Pension fund obligations

At year-end 2017, pension fund obligations amounted to CHF 2.2 million (previous year: CHF 4 million).

4.4 Significant shareholders

An overview can be found in the chapter Share price (Investor information).

4.5 Shareholdings of members of the Board of Directors, Executive Committee, or persons related to them

Information on the shareholdings of members of the Board of Directors, Executive Committee, or persons related to them is provided in note 4.2 (4.2.2 Related parties) in the consolidated financial statements.

5 Events after the balance sheet date

5 Events after the balance sheet date

On 31 January 2018, GF announced the acquisition of 100% of Precicast Industrial Holding SA, the Swiss-based precision casting specialist. In order to better reflect its portfolio evolution, the division GF Automotive will, upon closing expected for the first quarter of 2018, be renamed GF Casting Solutions. Precicast generated in 2017 sales of approximately CHF 120 million with a workforce of 730 employees in Switzerland and Romania. Closing is subject to the approval of the relevant authorities.

There were no other events between 31 December 2017 and 22 February 2018 that would require an adjustment to the carrying amounts of assets and liabilities and equity or would need to be disclosed under this heading.

6 Compensation and shareholdings

6 Compensation and shareholdings

Board of Directors

The members of the Board of Directors received cash compensation of CHF 1.159 million in the year under review. In addition, a total of 1ʼ390 GF registered shares with a total market value of CHF 1.79 million were allocated as share-related compensation. In the previous year, the allocation had been 1ʼ501 GF registered shares, equivalent to a total market value of CHF 1.251million. Together with other benefits, the total compensation paid to the Board of Directors in the year under review amounted to CHF 3.085 million (previous year: CHF 2.523 million).

According to the compensation model for the Board of Directors, the Board of Directors would have been entitled to 1ʼ500 GF registered shares with a total market value of CHF 1.932 million leading to a total compensation of the Board of Directors amounting to CHF 3.23 million. This total compensation would have been above the maximum sum of CHF 3.093 million approved by the Annual Shareholdersʼ Meeting of 19 April 2017 for remuneration of the members of the Board; according to the Articles of Association Art. 22.2b, the number of registered shares to be allocated have been reduced proportionally.

The detailed disclosure of compensation to the Board of Directors is as follows:

Compensation of the members of the Board of Directors 2017

 

 

Compensation

 

Social insurance funds3

 

Total compen- sation 20174

 

Total compen- sation 20164

 

 

Cash compensation1

 

Number of shares

 

Share-based compensation2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Andreas Koopmann

 

270

 

278

 

358

 

27

 

655

 

543

Chairman Board of Directors

 

 

 

 

 

 

 

 

 

 

 

 

Chairman Nomination Committee

 

 

 

 

 

 

 

 

 

 

 

 

Hubert Achermann

 

150

 

139

 

179

 

14

 

343

 

287

Chairman Audit Committee

 

 

 

 

 

 

 

 

 

 

 

 

Gerold Bührer

 

123

 

139

 

179

 

12

 

314

 

258

Vice Chairman Board of Directors

 

 

 

 

 

 

 

 

 

 

 

 

Member Audit Committee

 

 

 

 

 

 

 

 

 

 

 

 

Roman Boutellier5

 

96

 

139

 

179

 

11

 

286

 

239

Member Nomination Committee

 

 

 

 

 

 

 

 

 

 

 

 

Member Compensation Committee

 

 

 

 

 

 

 

 

 

 

 

 

Riet Cadonau6

 

84

 

139

 

179

 

13

 

276

 

159

Member Compensation Committee

 

 

 

 

 

 

 

 

 

 

 

 

Roger Michaelis

 

123

 

139

 

179

 

15

 

317

 

261

Member Audit Committee

 

 

 

 

 

 

 

 

 

 

 

 

Eveline Saupper

 

110

 

139

 

179

 

15

 

304

 

243

Chairwoman Compensation Committee

 

 

 

 

 

 

 

 

 

 

 

 

Jasmin Staiblin

 

90

 

139

 

179

 

14

 

283

 

226

Member Compensation Committee

 

 

 

 

 

 

 

 

 

 

 

 

Zhiqiang Zhang

 

113

 

139

 

179

 

15

 

307

 

251

Member Nomination Committee

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

1'159

 

1'390

 

1'790

 

136

 

3'085

 

2'467*

(all in CHF 1'000, except column "Number of shares")

*The total compensation in 2016 amounted to CHF 2.523 million, including a compensation for Ulrich Graf (Chairman Compensation Committee until 23 March 2016) of CHF 56'000.

1The cash compensation includes reimbursements for international travel amounting to CHF 45'000.

2The share-based compensation consists in the allocation of a fixed number of shares. The amount of the share-related compensation is calculated on the basis of the full value of the shares at the year-end price of CHF 1'288 on 29 December 2017.

3Social insurance funds represent employer contributions to social insurance funds.

4The total compensation encompasses the cash compensation, the share-based compensation, and the contribution to social insurance funds.

5Member of the Compensation Committee until 19 April 2017.

6Member of the Compensation Committee since 19 April 2017.

The compensation paid to the Board of Directors for the year 2017 was above that of the previous year. The increase is explained solely by the increased value of the shares from CHF 834 in 2016 to CHF 1ʼ288 in 2017. The compensation system for the Board of Directors remained unchanged.

In the year under review, both, Mr. Roger Michaelis and Mr. Zhiqiang Zhang, received each CHF 22ʼ500 for international travel time spent; these reimbursements are included in the cash compensation. No further compensation was paid to members of the Board of Directors. No compensation was paid to parties closely related to members of the Board of Directors.

Executive Committee

The members of the Executive Committee received cash, share-related compensation, social security and pension contributions amounting to CHF 9.123 million for the year under review (previous year: CHF 8.320 million). Under the new long-term incentive plan, 1ʼ750 performance shares with a total value at grant of CHF 2.254 million, based on a share price of CHF 1ʼ288 at year-end 2017, were granted to members of the Executive Committee for the year under review (previous year: 1ʼ063 restricted shares and 1ʼ063 performance shares with a total value of CHF 1.773 million).

At the Annual Shareholdersʼ Meeting of 19 April 2017, a maximum sum of CHF 10.177 million for remuneration of the members of the Executive Committee for the business year 2017 was approved.

The detailed disclosure of compensation to the Executive Committee in accordance with the Ordinance against excessive pay in stock exchange listed companies is as follows:

Compensation of the members of the Executive Committee 2017

 

 

Fixed salary in cash

 

Short-term incentive in cash1

 

EPS dependent performance shares PS(EPS)

 

rTSR dependent performance shares PS(rTSR)

 

Share-based remune- ration2

 

Social insu- rance funds3

 

Pension funds4

 

Total com- pen- sation 20175

 

Total compen- sation 2016

Executive Committee

 

2'978

 

2'675

 

875

 

875

 

2'254

 

359

 

857

 

9'123

 

8'320

Of whom Yves Serra, CEO (highest individual compensation)

 

942

 

1'163

 

375

 

375

 

966

 

127

 

273

 

3'471

 

2'976

(all in CHF 1'000, except rows "EPS dependent performance shares" and "rTSR dependent performance shares")

1The short-term incentive is based on the short-term incentive plan. The amount is determined by the fulfillment of personal performance objectives and by the financial results of the divisions and the Corporation. The short-term incentive for the 2017 financial year was approved by the Board of Directors on 22 February 2018. Payment will be made in March 2018.

2The share-based remuneration is based on the long-term incentive plan: Each year, fixed numbers of performance shares (PS) are allocated. The amount of the PS-based compensation is calculated on the basis of the grant value of the PS at the year-end price of CHF 1'288 on 29 December 2017. The number of PS vesting after the vesting period of three years depends on meeting the respective performance criteria.

3The social insurance funds expenses represent employer contributions to social security.

4The pension funds expenses represent employer contributions to pension funds.

5The total compensation is comprised of the fixed salary, the short-term incentive, the share-based remuneration, and the social and pension contributions.

Total compensation for the Chief Executive Officer and the other members of the Executive Committee in 2017 was higher than in 2016. The increase is explained by the following factors:

  • The value of the shares increased from CHF 834 in 2016 to CHF 1ʼ288 in 2017.
  • The short-term incentive related to the financial results of the Corporation and the divisions and to the individual performance was higher than in 2016, based on the excellent results achieved. Consequently, the overall short-term incentive percentage ranges from 62% to 80.7% of the base salary for the Executive Committee members and amounts to 123.5% of the base salary for the Chief Executive Officer.
  • The fixed salaries were adjusted, due to the reduction of number of shares granted compared to the long-term incentive plan 2016. For the CEO the number of shares granted has been reduced from 850 to 750, for the Executive Committee members from 300 to 250; the value of the reduced shares has been calculated with a share value of CHF 810 and has been embedded within the other elements of compensation (fixed salary in cash and short-term incentive).
  • The employerʼs contributions to social security and to company retirement plans have increased following the adjustments of fixed salary. Please note that a significant portion of the social security payments of the employer to the Swiss social security system represents a solidarity payment as the individuals will not get any return or benefit due to these payments.

Achievement of the corporate business objectives

The achievement of the corporate business objectives for the year 2017 is as follows:

Business objectives

 

Hurdle1

 

Strategy targets 2016–2020

 

Result 2017

Organic sales growth (at constant currencies)

 

1%

 

3–5%

 

9.8%

EBIT margin

 

6%

 

8–9%

 

8.5%

ROIC

 

14%

 

18–22%

 

20.3%

1Achievements below the hurdle result in zero payout for the respective business objective; for the objectives EBIT margin and ROIC, hurdle achievements result in 50% payout for the respective target

Starting 1 January 2017 until the end of October 2017, Pietro Lori continued his employment with GF as non-Executive Committee member and the compensation package for this period amounted to CHF 101ʼ684. Roland Abt continued his employment with GF as non-Executive Committee member from 1 January 2017 until the end of August 2017; his compensation package for the year 2017 amounted to CHF 342ʼ899.

In the year under review, no further compensation was paid to former members of the Executive Committee. No compensation was paid to parties closely related to members of the Executive Committee.

Shareholdings of members of the Board of Directors, Executive Committee, or persons related to them

Related persons and companies are defined as family members and persons or companies over which a significant influence can be exercised. Transactions with related persons and companies must be settled on prevailing market terms.

Apart from the compensation paid to the Board of Directors and the Executive Committee and the regular contributions to the various pension fund institutions, no transactions with related persons or companies took place.

Shareholdings Board of Directors

 

 

 

 

 

Number of Georg Fischer registered shares as of 31 Dec. 2017

 

Number of Georg Fischer registered shares as of 31 Dec. 2016

 

 

 

 

 

 

 

 

Andreas Koopmann

 

Chairman Board of Directors Chairman Nomination Committee

 

 

2'459

 

2'181

Hubert Achermann

 

Chairman Audit Committee

 

 

556

 

417

Gerold Bührer

 

Vice Chairman Board of Directors Member Audit Committee

 

 

3'011

 

2'872

Roman Boutellier

 

Member Nomination Committee

 

 

3'088

 

2'949

Riet Cadonau1

 

Member Compensation Committee

 

 

255

 

116

Roger Michaelis

 

Member Audit Committee

 

 

856

 

717

Eveline Saupper

 

Chairwoman Compensation Committee

 

 

917

 

778

Jasmin Staiblin

 

Member Compensation Committee

 

 

1'034

 

895

Zhiqiang Zhang

 

Member Nomination Committee

 

 

2'076

 

1'937

Total Directors

 

 

14'252

 

12'862

1Member of the Compensation Committee since the Annual Shareholders' Meeting 2017 (19 April 2017).

Shareholdings Executive Committee

 

 

 

 

 

Number of Georg Fischer registered shares as of 31 Dec. 2017

 

Number of Georg Fischer registered shares as of 31 Dec. 2016*

 

 

 

 

 

 

 

 

Yves Serra

 

President and CEO

 

 

5'003

 

5'478

Andreas Müller1

 

CFO, Head of Corporate Finance & Controlling

 

 

410

 

 

Joost Geginat

 

Head of GF Piping Systems

 

 

100

 

Josef Edbauer

 

Head of GF Automotive

 

 

2'182

 

2'032

Pascal Boillat

 

Head of GF Machining Solutions

 

 

1'070

 

1'005

Total Executive Committee

 

 

 

 

8'765

 

8'515

*The number of Georg Fischer registered shares amounted to 10'879 in 2016 and included the number of registered shares of Roland Abt (Member Excutive Committee until 31 December 2016) of 2'364.

1Member Excutive Committee since 1 January 2017.

The registered shares transferred as part of share-based compensation to the Executive Committee are blocked for at least five years.

As of 31 December 2017, members of the Senior Management registered a total of 18ʼ700 shares of Georg Fischer Ltd. A total of 41ʼ717 Georg Fischer shares were held by the Board of Directors, the Executive Committee, and the Senior Management as of 31 December 2017, corresponding to 1.02% of issued shares.

Neither Georg Fischer Ltd nor its Corporate Companies granted any guarantees, loans, advances, or credit facilities to members of the Executive Committee or the Board of Directors or related parties.

Compensation has not involved the allocation of options to current or past members of the Executive Committee or Board of Directors. Neither they nor any related persons possess option rights allocated by GF. As of 31 December 2017, the members of the Executive Committee held no option rights for Georg Fischer registered shares.

In 2017, GF did not make any severance payments to members of the Board of Directors or Executive Committee who left the company in the period under review or earlier.