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 recognized, whereas 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 recognized 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 shareholder’s equity. The gain or loss from the sale of treasury shares is recognized in shareholder’s equity as an increase or reduction in 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 156 million (previous year: CHF 127 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.

2.4 Commission income from Corporate Companies

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

2.5 Value adjustment on investments

This position includes value adjustments of investments held by Georg Fischer Ltd. The principles for the valuation of investments are found in note 1.4.

2.6 Financial expenses

This position includes interest expense for a bond of CHF 200 million issued in the year under review as well as losses on foreign currencies. More information on the bond issue can be found in note 3.7.

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 items 

3 Information on balance sheet items 

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

This balance sheet item contains securities in the amount of CHF 3.1 million (previous year: CHF 3.6 million).

3.2 Other current receivables due from Corporate Companies

The balance sheet item includes short-term receivables and loans to 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”.

3.3 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 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 comprises variable compensation for employees and fees for the Board of Directors as well as other deferred items.

3.7 Long-term interest-bearing liabilities

On 20 April 2018, Georg Fischer Ltd issued a bond of CHF 200 million on the Swiss capital market. The bond has a duration of 10 years and carries a coupon of 1.05%.

3.8 Long-term provisions

This provision mainly concerns currency risks.

3.9 Share capital

As of 31 December 2018, the share capital amounted to 4’100’898 registered shares at a par value of CHF 1.

Conditional capital: As of 31 December 2018, 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 18 April 2018, the Board of Directors is authorized to increase the share capital, until no later than 17 April 2020, by a maximum amount of CHF 0.6 million, by issuing a maximum of 600’000 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.

3.10 Treasury shares

Georg Fischer Ltd held 7’586 own shares on the balance sheet date. The principles for the valuation of treasury shares are found in note 1.8.

Before 2017, 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 2018, Georg Fischer Ltd employed 76 people including trainees.

4.2 Contingent liabilities

CHF 1'000

 

2018

 

2017

 

 

 

 

 

Guarantees and pledges to Corporate Companies in favor of third parties

 

1'490'080

 

1'831'005

Guarantees to related parties in favor of third parties

 

125'251

 

 

Guaranteed maximum amount

 

1'615'331

 

1'831'005

Thereof utilized

 

811'479

 

961'328

In addition, 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 2018, pension fund obligations amounted to CHF 4.2 million (previous year: CHF 2.2 million).

4.4 Significant shareholders

An overview can be found in the chapter Corporate Governance (GF share and GF shareholders).

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 in the consolidated financial statements.

5 Events after the balance sheet date

5 Events after the balance sheet date

There were no events between 31 December 2018 and 21 February 2019 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 1’500 GF registered shares with a total market value of CHF 1.18 million were allocated as share-related compensation. In the previous year, and due to the cap of the total remuneration of the Board of Directors approved by the shareholders in 2016 for 2017, the allocation had been 1’390 GF registered shares only, equivalent to a total market value of CHF 1.79 million. Together with other benefits, the total compensation paid to the Board of Directors in 2018 amounted to CHF 2.449 million (previous year: CHF 3.085 million) compared to a total amount approved by the shareholders of CHF 3.750 million.

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

Compensation of the members of the Board of Directors 2018

 

 

Compensation

 

Social insurance funds3

 

Total compen- sation 20184

 

Total compen- sation 20174

 

 

Cash compensation1

 

Number of shares

 

Share-based compensation2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Andreas Koopmann

 

270

 

300

 

236

 

22

 

528

 

655

Chairman Board of Directors

 

 

 

 

 

 

 

 

 

 

 

 

Chairman Nomination Committee

 

 

 

 

 

 

 

 

 

 

 

 

Hubert Achermann

 

150

 

150

 

118

 

11

 

279

 

343

Chairman Audit Committee

 

 

 

 

 

 

 

 

 

 

 

 

Gerold Bührer

 

123

 

150

 

118

 

10

 

251

 

314

Vice Chairman Board of Directors

 

 

 

 

 

 

 

 

 

 

 

 

Member Audit Committee

 

 

 

 

 

 

 

 

 

 

 

 

Roman Boutellier

 

90

 

150

 

118

 

8

 

216

 

286

Member Nomination Committee

 

 

 

 

 

 

 

 

 

 

 

 

Riet Cadonau

 

90

 

150

 

118

 

11

 

219

 

276

Member Compensation Committee

 

 

 

 

 

 

 

 

 

 

 

 

Roger Michaelis

 

123

 

150

 

118

 

13

 

254

 

317

Member Audit Committee

 

 

 

 

 

 

 

 

 

 

 

 

Eveline Saupper

 

110

 

150

 

118

 

12

 

240

 

304

Chairwoman Compensation Committee

 

 

 

 

 

 

 

 

 

 

 

 

Jasmin Staiblin

 

90

 

150

 

118

 

11

 

219

 

283

Member Compensation Committee

 

 

 

 

 

 

 

 

 

 

 

 

Zhiqiang Zhang

 

113

 

150

 

118

 

12

 

243

 

307

Member Nomination Committee

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

1'159

 

1'500

 

1'180

 

110

 

2'449

 

3'085

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

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 based on the full value of the shares at the year-end price of CHF 786.50 on 31 December 2018.

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.

The compensation paid to the Board of Directors for the year 2018 was below that of the previous year. The decrease is explained solely by the decreased value of the shares from CHF 1’288 in 2017 to CHF 786.50 in 2018. 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 22’500 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 8.417 million for the year under review (previous year: CHF 9.123 million) compared to a total amount of CHF 10.298 million approved by the shareholders at the Annual Shareholders’ Meeting of 19 April 2017.

Under the long-term incentive plan, 1’752 performance shares with a total value at grant of CHF 1.378 million, based on a share price of CHF 786.50 at year-end 2018, were granted to members of the Executive Committee for the year under review (previous year: 1’750 performance shares with a total value of CHF 2.254 million).

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

Compensation of the members of the Executive Committee 2018

 

 

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 20185

 

Total compen- sation 2017

Executive Committee*

 

3'003

 

2'797

 

876

 

876

 

1'378

 

375

 

864

 

8'417

 

9'123

Of whom Yves Serra, CEO (highest individual compensation)

 

950

 

1'247

 

375

 

375

 

590

 

132

 

278

 

3'197

 

3'471

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

*The Executive Compensation includes the compensation for Josef Edbauer (Executive Committee member until 31 August 2018) and includes the compensation for Carlos Vasto (Executive Committee member since 1 September 2018).

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 2018 financial year was approved by the Board of Directors on 21 February 2019. Payment will be made in March 2019.

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 based on the grant value of the PS at the year-end price of CHF 786.50 on 31 December 2018. 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 2018 was lower than in 2017, mainly due to the lower share price. The change in compensation is explained by the following factors:

  • The Executive Committee compensation includes the compensation for Josef Edbauer (Executive Committee member until 31 August 2018) and includes the compensation for Carlos Vasto (Executive Committee member since 1 September 2018).
  • The share price decreased from CHF 1’288 in 2017 to CHF 786.50 in 2018.
  • The short-term incentive related to the financial results of the Corporation and the divisions and to the individual performance was higher than in 2017, based on the results achieved. Consequently, the overall short-term incentive percentage ranges from 56.3% to 83.1% of the base salary for the Executive Committee members and amounts to 131.3% of the base salary for the Chief Executive Officer.
  • The fixed salaries were slightly adjusted in order to keep competitive levels in line with the market practice of GF’s industrial sector.
  • The employer’s contributions to social security have increased due to the slightly increased fixed salaries and the higher short-term incentive payout. 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 never 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 2018 is as follows:

Business objectives

 

Hurdle1

 

Strategy targets 2016–2020

 

Result 2018

Organic sales growth (at constant currencies)

 

1%

 

3–5%

 

6.5%

EBIT margin

 

6%

 

8–9%

 

8.4%

ROIC

 

 14%

 

18–22%

 

22.4%

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

For a former Executive Committee member who continued his employment as non-Executive Committee member, a compensation amounting to CHF 471’655 was paid for the year 2018.

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. 2018

 

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

 

 

 

 

 

 

 

 

Andreas Koopmann

 

Chairman Board of Directors Chairman Nomination Committee

 

 

2'759

 

2'459

Hubert Achermann

 

Chairman Audit Committee

 

 

706

 

556

Gerold Bührer

 

Vice Chairman Board of Directors Member Audit Committee

 

 

3'161

 

3'011

Roman Boutellier

 

Member Nomination Committee

 

 

3'238

 

3'088

Riet Cadonau1

 

Member Compensation Committee

 

 

405

 

255

Roger Michaelis

 

Member Audit Committee

 

 

1'006

 

856

Eveline Saupper

 

Chairwoman Compensation Committee

 

 

1'067

 

917

Jasmin Staiblin

 

Member Compensation Committee

 

 

1'184

 

1'034

Zhiqiang Zhang

 

Member Nomination Committee

 

 

2'226

 

2'076

Total Directors

 

 

15'752

 

14'252

Shareholdings Executive Committee

 

 

 

 

 

Number of Georg Fischer registered shares as of 31 Dec. 2018

 

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

 

 

 

 

 

 

 

 

Yves Serra

 

President and CEO

 

 

5'003

 

5'003

Andreas Müller

 

CFO, Head of Corporate Finance & Controlling

 

 

410

 

410

Joost Geginat

 

Head of GF Piping Systems

 

 

100

 

100

Josef Edbauer

 

Head of GF Casting Solutions

 

 

2'182

 

2'182

Vasto Carlos

 

Head of GF Casting Solutions

 

 

63

 

Pascal Boillat

 

Head of GF Machining Solutions

 

 

1'000

 

1'070

Total Executive Committee

 

 

 

 

8'758

 

8'765

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 2018, members of the Senior Management registered a total of 18’994 shares of Georg Fischer Ltd. A total of 43’504 Georg Fischer shares were held by the Board of Directors, the Executive Committee, and the Senior Management as of 31 December 2018, corresponding to 1.06% 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 2018, the members of the Executive Committee held no option rights for Georg Fischer registered shares.

In 2018, 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.