KCI KONECRANES GROUP'S ADOPTION OF IFRS STANDARDS
KCI KONECRANES PLC STOCK EXCHANGE RELEASE 19 April, 2005 11.00 a.m. 1(10)
KCI KONECRANES GROUP'S ADOPTION OF IFRS STANDARDS
KCI Konecranes Group applies IFRS standards (International Financial Reporting
Standards) as of 1 January 2005. The first interim report 2005 in accordance with
IFRS will be published on 3 May 2005.
The Group has prepared the IFRS opening balance sheet for 1 January 2004 and
comparative information for 2004 in compliance with each IFRS standards effective
at reporting date.
The tables in this release present the reconciliation of net income and
shareholders' equity between FAS (Finnish Accounting Standards) and IFRS as of
the transition date 1 January 2004 and of all quarters of the financial year
2004. Comparative IFRS statements of income, balance sheet and segment reporting
are also presented. The "Notes"- column in the tables below refers to the
numbered items at the end of this release, which includes additional information
of major changes in accounting principals and effects of transition to IFRS.
The main impacts of IFRS transition for the Group's future results and balance
sheets are:
Business combinations, IFRS 3 and Impairment of Assets, IAS 36
In IFRS goodwill is no longer amortized but it is instead tested for impairment
annually. The discontinuation of goodwill amortization will increase the Group's
EBIT whereas potential impairments will reduce EBIT.
Employee benefits, IAS 19
Valuation and periodizing of defined benefit pension plans of the Group may cause
gains or losses in the result of coming years depending on economic fluctuation
and return on plan assets. Finnish pensions under the Employees´ Pensions Act
(TEL) are classified as defined contribution plans.
Financial instruments, IAS 32 and IAS 39
All derivatives will be measured at fair value and recorded through profit and
loss. The Group does not apply hedge accounting and the derivatives hedging the
off-balance sheet items will cause short-term fluctuation to the Group's result
through exchange rate differences. In the course of time (6-12 months) the
cumulative effect of this fluctuation will be close to zero.
Own shares, IAS 32
Investments in own shares may not be recorded as assets or within equity. The
Board of Directors of KCI Konecranes Plc has the authorisation to repurchase or
to dispose of the Company's own shares.
Stock Options, IFRS 2
The fair value of the Group's 2003 option program is estimated and expensed in
personnel expenses and credited to shareholders' equity. Potential future share-
based programs may increase personnel expenses and reduce Business Area level
EBIT.
Income taxes, IAS 12
Deferred taxes will be recognised of all taxable IFRS-adjustments.
2 (10)
KCI Konecranes, headquartered in Hyvinkää, Finland is a world leading Engineering
Group specialising in advanced overhead lifting solutions and maintenance
services. In 2004, Group sales totalled EUR 728 million. The Group has 4850
employees in 35 countries.
KCI KONECRANES PLC
Franciska Janzon
IR Manager
FURTHER INFORMATION
KCI Konecranes Plc
Teuvo Rintamäki, Chief Financial Officer
Tel. +358 20 427 2040
DISTRIBUTION
Helsinki Exchanges
Media
RECONCILIATION OF NET
INCOME
(EUR million) Notes 1-3/2004 1-6/2004 1-9/2004 1-12/2004
Net income according to
FAS 1.3 4.6 10.2 23.0
Reversal of amortization
of goodwill 1 0.6 1.2 1.9 2.6
Impairment 1 0.0 0.0 0.0 - 1.2
Employee benefits 2 - 0.2 - 0.5 - 0.8 - 1.1
Stock options 5 - 0.2 - 0.4 - 0.6 - 0.8
Income taxes 6 0.7 0.7 0.9 1.5
Provisions 7 - 2.0 - 2.0 - 2.4 - 5.4
Other IFRS adjustments 10 0.0 0.1 0.0 - 0.2
Total IFRS adjustments - 1.1 - 0.9 - 1.0 - 4.6
Net income according to
IFRS 0.2 3.7 9.2 18.4
3 (10)
RECONCILIATION OF
SHAREHOLDERS' EQUITY
(EUR million) Notes 12/2003 3/2004 6/2004 9/2004 12/2004
Equity according to FAS 163.4 151.6 154.4 159.7 157.9
IFRS adjustments:
Reversal of
amortization of 1 0.0 0.6 1.2 1.9 2.6
goodwill
Impairment 1 - 0.1 - 0.1 - 0.1 - 0.1 - 1.3
Employee benefits 2 - 15.0 - 15.2 - 15.5 - 15.8 - 16.1
Reserve for own shares 4 - 5.5 - 5.5 - 5.5 - 5.5 - 4.4
Income taxes 6 3.8 4.5 4.5 4.7 5.3
Provisions 7 5.4 3.4 3.4 3.0 0.0
Minority interest 8 0.1 0.1 0.1 0.1 0.1
Changes in accounting
policy 9 0.0 0.0 0.0 0.0 - 4.9
Other IFRS adjustments 10 - 1.8 - 2.2 - 2.0 - 1.7 - 1.5
Total IFRS adjustments - 13.1 - 14.4 - 13.9 - 13.4 - 20.2
Equity according to 150.3 137.2 140.5 146.3 137.7
IFRS
EFFECTS OF IFRS STANDARDS ON
BALANCE SHEET at 1.12004 and
31.12.2004
(EUR million) FAS IFRS IFRS FAS IFRS IFRS
12/2003 Effect 1/2004 12/2004 Effect 12/2004
Fixed Assets 98.0 - 7.4 90.6 116.9 - 4.8 112.1
Inventories 72.4 0.0 72.4 108.8 5.3 114.1
Receivables and
other current assets 218.6 4.9 223.5 247.3 19.7 267.0
Cash in hand and at
banks 13.2 0.0 13.2 20.4 0.3 20.7
Total Assets 402.2 - 2.5 399.7 493.4 20.5 513.9
Equity 163.4 - 13.1 150.3 157.9 - 20.2 137.7
Minority interest 0.1 - 0.1 0.0 0.1 - 0.1 0.0
Provisions 20.3 - 5.3 15.0 15.4 2.1 17.5
Long-term debt 32.5 16.2 48.7 7.4 17.4 24.8
Current liabilities 185.9 - 0.2 185.7 312.7 21.4 334.1
Total shareholders'
equity and
liabilities 402.2 -2.5 399.7 493.4 20.5 513.9
4 (10)
CONSOLIDATED STATEMENT OF
INCOME, IFRS
(EUR million) Notes IFRS IFRS IFRS IFRS
1-3/2004 1-6/2004 1-9/2004 1-12/2004
Sales 3 152.2 317.5 487.6 728.0
Share of result of
participating interest
undertakings 1 0.0 0.0 0.0 0.0
Depreciation 1 - 3.1 - 6.2 - 9.3 - 12.4
Impairment losses 1 0.0 0.0 0.0 - 1.2
Other operating 2,5,7 - 148.4 - 305.1 - 463.4 - 683.1
expenses
Operating income (EBIT) 0.7 6.2 14.9 31.3
Financial income and
expenses 3 - 0.6 - 1.0 - 1.5 - 3.6
Profit before taxes 0.1 5.2 13.4 27.7
Taxes 6 0.1 - 1.5 - 4.1 - 9.2
Net income 0.2 3.7 9.2 18.4
KEY FIGURES
Earnings per share,
basic (EUR) 0.01 0.26 0.66 1.31
Earnings per share,
diluted (EUR) 0.01 0.26 0.65 1.29
Return on equity % 2.7 % 5.5 % 8.3 % 12.5 %
Return on capital
employed% 5.0 % 7.9 % 10.7 % 13.7 %
CONSOLIDATED STATEMENT
OF INCOME, FAS
(EUR million) Notes FAS FAS FAS FAS
1-3/2004 1-6/2004 1-9/2004 1-12/2004
Sales 3 152.2 317.5 487.6 728.0
Share of result of
participating interest
undertakings 1 - 0.1 - 0.3 - 0.4 - 0.5
Depreciation 1 - 3.7 - 7.2 - 10.8 - 14.6
Impairment losses 1 0.0 0.0 0.0 0.0
Other operating 2,5,7 - 145.9 - 302.2 - 459.6 - 675.5
expenses
Operating income (EBIT) 2.5 7.8 16.8 37.4
Financial income and
expenses 3 - 0.6 - 1.0 - 1.5 - 3.6
Profit before taxes 1.9 6.8 15.3 33.8
Taxes 6 - 0.6 - 2.2 - 5.0 - 10.7
Net income 1.3 4.6 10.2 23.0
KEY FIGURES
Earnings per share,
basic (EUR) 0.09 0.32 0.73 1.64
Earnings per share,
diluted (EUR) 0.09 0.32 0.72 1.62
Return on equity % 3.4 % 5.9 % 8.7 % 14.8 %
Return on capital
employed% 5.7 % 8.5 % 11.3 % 15.9 %
5 (10)
CONSOLIDATED BALANCE SHEET, IFRS
(EUR million) IFRS IFRS IFRS IFRS
3/2004 6/2004 9/2004 12/2004
Fixed Assets 89.4 88.9 86.4 112.1
Inventories 83.2 89.6 101.6 114.1
Receivables and other
current assets 202.3 202.6 217.2 267.0
Cash in hand and at banks 18.2 21.8 21.3 20.7
Total Assets 393.1 402.9 426.5 513.9
Equity 137.2 140.5 146.3 137.7
Minority interest 0.0 0.0 0.0 0.0
Provisions 16.5 16.0 15.6 17.5
Long-term debt 49.3 49.7 49.2 24.8
Current liabilities 190.2 196.7 215.5 334.1
Total shareholders'
equity and liabilities 393.1 402.9 426.5 513.9
KEY FIGURES
Equity/Share (EUR) 9.77 10.00 10.42 9.76
Solidity % 38.1 % 38.1 % 38.0 % 29.1 %
Gearing % 30.6 % 30.4 % 34.6 % 80.2 %
CONSOLIDATED BALANCE SHEET, FAS
(EUR million) FAS FAS FAS FAS
3/2004 6/2004 9/2004 12/2004
Fixed Assets 96.0 94.8 91.7 116.9
Inventories 83.2 89.6 101.6 108.8
Receivables and other
current assets 196.4 196.6 211.2 247.3
Cash in hand and at banks 18.2 21.8 21.3 20.4
Total Assets 393.8 402.8 425.8 493.4
Equity 151.6 154.4 159.7 157.9
Minority interest 0.1 0.1 0.1 0.1
Provisions 19.9 19.4 18.6 15.4
Long-term debt 32.0 32.2 31.9 7.4
Current liabilities 190.3 196.8 215.6 312.7
Total shareholders'
equity and liabilities 393.8 402.8 425.8 493.4
KEY FIGURES
Equity/Share (EUR) 10.40 10.60 10.98 10.89
Solidity % 41.1 % 41.0 % 40.7 % 34.3 %
Gearing % 28.7 % 28.6 % 32.8 % 67.2 %
6 (10)
SEGMENT REPORTING
1. BUSINESS SEGMENTS
Sales by Business Area,
IFRS Notes IFRS IFRS IFRS IFRS
(EUR million) 11 1-3/2004 1-6/2004 1-9/2004 1-12/2004
Maintenance Services 74.5 157.8 239.5 344.6
Standard Lifting
Equipment 47.0 99.2 157.8 231.2
Special Cranes 43.2 88.3 132.4 214.1
./. Internal - 12.4 - 27.8 - 42.1 - 62.0
Total 152.2 317.5 487.6 728.0
Sales by Business Area,
FAS Notes FAS FAS FAS FAS
(EUR million) 11 1-3/2004 1-6/2004 1-9/2004 1-12/2004
Maintenance Services 74.5 157.8 239.5 344.6
Standard Lifting
Equipment 47.0 99.2 157.8 231.2
Special Cranes 43.2 88.3 132.4 214.1
./. Internal - 12.4 - 27.8 - 42.1 - 62.0
Total 152.2 317.5 487.6 728.0
Operating Income by
Business Area, IFRS Notes IFRS IFRS IFRS IFRS
(EUR million) 11 1-3/2004 1-6/2004 1-9/2004 1-12/2004
Maintenance Services 2.6 6.5 11.6 22.1
Standard Lifting
Equipment 3.2 7.7 13.3 20.7
Special Cranes 2.4 4.7 7.6 15.9
Group Costs - 7.4 - 12.5 - 17.3 - 27.3
Consolidation items 0.0 - 0.2 - 0.3 - 0.1
Total 0.7 6.2 14.9 31.3
Operating Income by
Business Area, FAS Notes FAS FAS FAS FAS
(EUR million) 11 1-3/2004 1-6/2004 1-9/2004 1-12/2004
Maintenance Services 2.9 7.1 12.5 23.3
Standard Lifting
Equipment 3.2 7.7 13.4 21.0
Special Cranes 2.4 4.8 7.7 16.0
Group Costs - 5.3 - 10.3 - 14.7 - 20.5
Consolidation items - 0.6 - 1.5 - 2.1 - 2.4
Total 2.5 7.8 16.8 37.4
7 (10)
KCI Konecranes Group's transition to International Financial Reporting Standards
(IFRS)
KCI Konecranes Group has applied IFRS as of 1 January 2005 and prepared the
opening IFRS balance sheet at the date of transition, which was 1 January 2004.
The Group will publish the interim report for Q1 2005 on 3 May in accordance with
IFRS.
This presentation outlines the effects of the transition to IFRS standards on the
opening IFRS balance sheet and on comparative figures 2004. KCI Konecranes
Group's financial statements for 2004 have previously been published in
accordance with Finnish Accounting Standards (FAS). KCI Konecranes Group's
accounting principles under FAS are described in the Group's Annual Report for
2004.
The Group started its implementation process to fully comply with IFRS already in
2002. Implementation started with those accounting principles that already
according to FAS were allowed; IAS 11 (Construction Contracts): Long term crane
and modernisation projects revenue was recognised according to the percentage of
completion (POC)- method and IAS 17 ( Leases); The Group accounted for finance
lease contracts as if the assets had been acquired.
In the transition to IFRS, KCI Konecranes Group has applied some optional
exceptions allowed by the First-time adoption standard (IFRS 1).
Major changes in accounting principles and effects of transition to IFRS:
1. Business combinations, IFRS 3 and Impairment of Assets, IAS 36
KCI Konecranes Group has applied the exemption given to a first-time adopter in
IFRS 1 from IFRS 3 (Business combination). In accordance with this the business
combinations before the date of transition to IFRS are reported as they were
recognized under FAS.
As required by IFRS 1 the first-time adopter shall, regardless of whether there
is any indication for impairment, apply IAS 36 (Impairment of Assets) in testing
the goodwill for impairment at the date of transition to IFRS. According to IAS
36 a company is required to assess at each balance sheet date whether there is
any indication for impairment. If such an indication exists, a company should
then estimate the recoverable amount of the assets. An impairment loss is
recognised when the recoverable amount of an asset is less than its carrying
amount.
Goodwill, as well as partly intangible and tangible assets were tested for
possible impairments at the date of transition of 1 January 2004.
As a result of impairment tests minor impairment losses were recognized (EUR 0.1
million) in tangible and intangible assets at the date of transition. At the
balance sheet date 31 December 2004 there were EUR 1.0 million impairment losses
due to impairment of tangible assets in USA and EUR 0.2 million due to impairment
of goodwill.
In accordance with IFRS goodwill is no longer amortized but is instead tested for
impairment annually. Accordingly, goodwill amortization of EUR 2.6 million has
been reversed for the 2004 comparative figures.
The Group made two important business acquisitions during the fourth quarter of
2004. The acquisition of SMV Lifttrucks AB, Sweden was closed on 29 October 2004
and the acquisition of Morris Material Handling Ltd and its affiliated
8 (10)
companies on 31 December 2004. The cost of these acquisitions has provisionally
been allocated to the assets and liabilities of the acquired entities on the
basis of their fair values. The excess of the allocated cost of the net fair
value of the identifiable assets, liabilities and contingent liabilities
amounting to EUR 21.6 million has been recorded as goodwill. Morris Material
Handling Ltd and its affiliate companies were not consolidated to the Group´s
financial statements for 2004, which were published in accordance with FAS. The
acquisition costs of Morris Material Handling Ltd and its affiliated companies
were included in other shares and similar rights of ownership.
2. Employee benefits (pensions), IAS 19
The KCI Konecranes Group companies have various pension plans in accordance with
local conditions and practices. In IAS 19 the pension plans are classified as
either defined contribution plans or defined benefit plans.
Under defined contribution plans, expenses are recognised in the period
contribution is payable.
Under defined benefit plans, a liability is recognised in the balance sheet equal
to the net of the present value of the defined benefit obligation; the fair value
of the plan assets at the balance sheet date and deferred actuarial gains and
losses and unrecognised pension service costs.
At the transition balance sheet of 1 January 2004, the Group pension obligations
have increased by EUR 15.0 million. The major part of this amount arises from one
defined benefit plan in the Group's subsidiary in the United Kingdom.
KCI Konecranes Group accounts for the Finnish system under the Employees'
Pensions Act (TEL) as a defined contribution plan. The expected cost of the
disability benefit is recognised when an event causing the disability occurs.
3. Financial instruments, IAS 32 and IAS 39
In accordance with the exemption allowed for first-time adopters of IFRS, the
IFRS opening balance and comparative figures 2004 need not comply with IAS 32
(Financial Instruments: Disclosure and Presentation) and IAS 39 (Financial
Instruments: Recognition and Measurement). Accordingly KCI Konecranes Group
presents the values of financial instruments in comparative figures 2004
according to FAS. Standards 32 and 39 are applied from 1 January 2005, and the
effect of the chance in accounting policy has been recorded directly in
shareholders' equity. See also Note 9. Changes in Accounting Policies, IAS 8.
KCI Konecranes Group does not apply hedge accounting to derivatives hedging
forecasted cash flows or balance sheet items in other currencies than euros,
although currency derivative contracts have been acquired for hedging purposes in
accordance with the Group's hedging policy.
All derivatives are measured at fair value and recorded through profit and loss
to adjust sales and purchases and financial items, if they relate to balance
sheet items. If they relate to off- balance sheet items, they are recorded under
financial items.
The derivatives hedging the off-balance sheet items will cause short-term
fluctuation to the Group's result through exchange rate differences. In the
course of time (6 - 12 months) the cumulative effect of this fluctuation will be
close to zero.
9 (10)
4. Own shares, IAS 32
According to IFRS, investments in own shares are not allowed to be presented as
assets or within equity. This decreases the assets and equity values by EUR 5.5
million in the balance sheet as at 1 January 2004. The corresponding figure in
the balance sheet as at 31 December 2004 is EUR 4.4 million.
5.Stock Options, IFRS 2
IFRS 2 (Share-based Payment) requires that all equity-settled share-based
payments granted after 7 November 2002, that are not yet vested before 1 January
2005, must be recognised through profit and loss.
KCI Konecranes Group uses equity instruments only in share options that are
granted to key personnel. The Group has several employee share option programs,
but the 2003 option program is the only program, which will have an effect on the
Group's income. According to the standard the fair value of these share options
shall be estimated by applying an option-pricing model and the resulting value is
to be expensed during the vesting period.
The total cost of the option programs for the financial year 2004 was EUR 0.8
million. Option program costs are included in personnel expenses and credited to
shareholders' equity.
6. Income Taxes, IAS 12
Deferred taxes have been recognized of all taxable IFRS-adjustments in accordance
with IAS 12 (Income Taxes). The total deferred tax asset effect in the balance
sheet as at 1 January 2004 was EUR 3.8 million and EUR 5.3 million in the balance
sheet as at 31 December 2004.
7. Provisions, IAS 37
At the date of transition as of 1 January 2004 some provisions in the Group did
not meet the recognition criteria of restructuring provisions prescribed in IAS
37. Based on this these provisions of EUR 5.4 million were reversed in the
opening IFRS balance sheet and correspondingly recorded on comparative figures
2004.
8. Minority interest, IAS 1
In accordance with IAS 1 (Presentation of Financial Statements) minority interest
(EUR 0.1 million) is presented in equity in the IFRS balance sheet.
9. Changes in Accounting Policies, IAS 8
According to IAS 8 changes in Accounting Policies shall be applied
retrospectively. When it is impracticable to determine the period-specific
effects of changing an accounting policy on comparative information the
corresponding adjustment should be reported as an adjustment to equity.
In KCI Konecranes Group IAS 32 and 39 standards will be applied during 2005. In
the Balance sheet as at 1 January 2005 an amount in total of EUR -4.9 million as
a result of applying IAS 39 was entered directly to shareholders' equity.
10 (10)
10. Other IFRS adjustments
The other IFRS adjustments relate mainly to the reversal of goodwill allocation
which was recorded according to FAS, but is not in accordance with IFRS, in total
EUR -1.8 million.
In addition to changes described in items 1-9 above, there were minor IFRS
adjustments or reclassifications to the Group's statement of income and balance
sheet.
11. Segment reporting, IAS 14
The Group's reporting segments will not change under IFRS. KCI Konecranes Group's
primary segment is the business segment. It is based on the Group's managerial
reporting and organizational structure. The business segments are: Maintenance
Services, Standard Lifting Equipment and Special Cranes.
As its secondary segments KCI Konecranes Group reports four geographical areas,
which were also published under FAS reporting: Nordic and Eastern Europe, EU
(excl. Nordic), Americas and Asia Pacific.
