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Notes to the consolidated financial statements

01 Nature of COMET's business activities

The COMET Group (“COMET”, the “Group”) is one of the world's leading vendors of x-ray, radio frequency (RF) and ebeam technology. With high-quality components, systems and services, marketed under the “COMET”, “YXLON” and “ebeam” brands, the Group helps its customers optimize the quality, reliability and efficiency of their products and processes. YXLON x-ray systems for non-destructive testing are supplied to end customers in the automotive, aerospace, electronics and energy sectors. Under the COMET brand, the Group builds components and modules such as x-ray sources, vacuum capacitors, RF generators and impedance matching networks, marketed to manufacturers in the automotive, aerospace, semiconductor and solar industries as well as for security applications at airports. Under the ebeam brand, the Group develops and markets compact ebeam sets and whole ebeam systems for the treatment of surfaces in the food and printing industries.

02 Accounting policies

The consolidated financial statements (except with respect to certain financial instruments) have been drawn up under the historical cost convention. The fiscal year-end of the subsidiaries is December 31. Assets and liabilities are recognized if they are likely to result in inflows or outflows, respectively, of future economic benefits and if the associated amounts can be measured reliably. These consolidated financial statements for 2015 have been prepared in compliance with Swiss stock corporation law and International Financial Reporting Standards (IFRS). All IFRS in force at the balance sheet date and all interpretations (IFRIC) of the International Accounting Standards Board (IASB) were applied. COMET did not early-adopt new standards and interpretations except as specifically stated below. The significant accounting policies applied are unchanged from the prior year except as set out below.

02.1 Changes in accounting policies

Revised and new accounting rules

With effect from January 1, 2015, COMET has applied the following new or revised IFRS / IAS for the first time:

  • IAS 19 – Amendments – Employee Contributions
  • Annual Improvements to IFRSs, published December 2013

The first-time application of the above new or amended standards and interpretations had no effect on the balance sheet and income statement in these financial statements.

02.2 New accounting rules becoming effective in subsequent periods

       
Standard Expected impact Effective date Planned adoption by COMET
IAS 1 – Amendments – Disclosure Initiative (1) Jan. 1, 2016 Fiscal year 2016
IAS 16 and IAS 38 – Amendments – Clarification of Acceptable Methods of Depreciation and Amortisation (1) Jan. 1, 2016 Fiscal year 2016
IAS 27 – Amendments – Equity Method in Separate Financial Statements (1) Jan. 1, 2016 Fiscal year 2016
IFRS 10, IFRS 12, and IAS 28 – Amendment – Investment Entities Consolidation Exception (1) Jan. 1, 2016 Fiscal year 2016
IFRS 11 – Amendment – Accounting for Acquisitions of Interests in Joint Operations (1) Jan. 1, 2016 Fiscal year 2016
Annual Improvements published September 2014 (1) Jan. 1, 2016 Fiscal year 2016
IAS 7 – Amendment – Disclosure Initiative (1) Jan. 1, 2017 Fiscal year 2017
IAS 12 – Amendment – Recognition of Deferred Tax Assets for Unrealised Losses (1) Jan. 1, 2017 Fiscal year 2017
IFRS 9 – Financial Instruments (1) Jan. 1, 2018 Fiscal year 2018
IFRS 15 – Revenue from Contracts with Customers (3) Jan. 1, 2018 Fiscal year 2018
IFRS 16 – Leases (2) Jan. 1, 2019 Fiscal year 2019

(1) Expected to have no, or no significant, impact on the consolidated financial statements.

(2) Change in recognition and measurement of leases. The exact impact on the financial statements is still being determined.

(3) The new revenue recognition model under IFRS 15 can lead to shifts in the timing of revenue recognition, particularly in the Systems business. The standard also requires extensive new disclosures. A transition project under which the impact of IFRS 15 on the Group's significant transactions is being studied was launched in 2015. No information on the extent of the restatement can as yet be provided.

Estimates

The consolidated financial statements of COMET Holding AG, Flamatt, Switzerland, contain assumptions and estimates that affect the reported financial position, results of operations and cash flows. These assumptions and estimates were made on the basis of management's best knowledge at the time of preparation of the accounts. Actual results could differ from the values presented. The following estimates have the greatest effects on the consolidated financial statements:

  • Intangible assets (see note 9 and 10): For acquisitions, the fair value of the acquired net assets (including acquired intangible assets) is estimated. Any amount paid in excess of this estimate represents goodwill. Intangible assets with a finite life are written off over the expected period of use; those with an indefinite life (primarily goodwill and rights to trademarks and names) are not amortized but are tested annually for impairment. Especially in the determination of the value in use of goodwill and rights to trademarks and names, differences between assumed and actual outcomes could lead to revaluations. The valuation of goodwill and other intangibles, as well as the estimation of useful life, have an effect on the consolidated financial statements.
  • Provisions (see note 15): Provisions are recognized only if the specific criteria under IFRS for doing so are met. Provisions represent probable obligations arising from a past event and are established only if their amount can be estimated reliably. Provisions are determined by taking into account all information available at the time of preparation of the financial statements. Nevertheless, adjustments to provisions may be required in subsequent periods, with corresponding effects on income.
  • Deferred tax assets (see note 11) are recognized only if it is likely that taxable profits will be earned in the future. Making this determination involves the use of estimates and assumptions, which may later prove incorrect. This can lead to changes with an effect on income.
  • Employee benefit plans (see note 16): The Group operates employee benefit plans for its staff that are classified as defined benefit plans under IFRS. These defined benefit plans are valued annually, which requires the use of various assumptions. Departures of actual developments from the assumptions, particularly with respect to the discount rate for future obligations, may have effects on the valuation of plan assets and thus on the financial position of the Group.

Basis of consolidation

The consolidated financial statements comprise the accounts of COMET Holding AG (based at Herrengasse 10, 3175 Flamatt, Switzerland) and of its subsidiaries. Subsidiaries are those companies controlled directly or indirectly by COMET Holding AG through a majority of votes or by other means. The list of companies consolidated in the Group is presented in the notes to the separate financial statements of COMET Holding AG in note 2, “Investments in subsidiaries”.

At May 1, 2015, COMET acquired sole ownership of PCT Engineered Systems LLC, Davenport, Iowa, USA. The information on this transaction is provided below in note 4, “Acquisition”. The business combination was accounted for by the purchase method. In these consolidated financial statements, the results of PCT Engineered Systems LLC are included for the eight months from May 1 to December 31, 2015.

Method of consolidation

The consolidated financial statements represent the aggregation of the annual accounts of the individual Group companies, which are prepared using uniform accounting principles. Those companies controlled by the COMET Group are fully consolidated. This means that these companies' assets, liabilities, equity, expenses and income are entirely included in the consolidated financial statements. All intragroup balances and transactions, and unrealized gains and losses resulting from intragroup transactions and dividends, are eliminated in full. Interests in companies in which the Group holds between 20% and 50% of the voting power and over which it exerts significant influence, but which it does not control, are classified as investments in associates. These are consolidated by the equity method.

Acquisitions and goodwill

Companies are consolidated from the date on which effective control passes to the Group. Consolidation ends only when effective control ceases. On acquisition, the identifiable assets, liabilities and contingent liabilities are remeasured to fair value and included in the accounts using the purchase method. For acquisitions, intangible assets that arise from a contractual or legal right or are separable from the business entity, and whose fair value can be measured reliably, are reported separately as intangible assets. Goodwill, being the excess of the aggregate consideration transferred over the fair value of the net assets of the acquired subsidiary, is initially measured at cost. If the aggregate consideration transferred is lower than the fair value of the acquired net assets, the difference is recognized as negative goodwill in other operating income at the acquisition date. Goodwill and other intangible assets are allocated on acquisition to those companies expected to benefit from the acquisition or to generate future cash flows as a result of it. When consolidated companies are sold, the difference between their sale price and their net assets, plus accumulated currency translation differences, is recognized as operating income in the consolidated statement of income.

Foreign currency translation

The functional currency of the Group companies is their respective national currency. Transactions in a currency other than the functional currency are translated at the exchange rate prevailing at the transaction date. Financial assets and liabilities are translated at the balance sheet date at the exchange rate as of that date; the resulting currency translation differences are reported in the income statement. The consolidated financial statements are presented in Swiss francs. The financial statements of Group companies are translated at average exchange rates for the year (the “average rate” in the table below) for the income statement and at year-end rates (the “closing rate”) for the balance sheet. The resulting currency translation differences are recognized in other comprehensive income. Currency translation differences from intragroup loans for the long-term financing of Group companies are also recognized in other comprehensive income, to the extent that repayment is neither planned nor is likely to occur in the foreseeable future.

The exchange rates used to translate the most important currencies are listed below:

             
      Closing rate Average rate
             
Foreign currency translation     Dec. 31, 2015 Dec. 31, 2014 2015 2014
USA USD 1 1.001 0.990 0.963 0.915
Europe EUR 1 1.087 1.203 1.068 1.215
China CNY 1 0.154 0.159 0.153 0.149
Japan JPY 100 0.832 0.828 0.796 0.866
Denmark DKK 1 0.146 0.162 0.143 0.163
Republic of Korea KRW 1,000 0.853 0.909 0.851 0.869

Financial assets and liabilities

Financial assets are initially measured at fair value, including transaction costs, except in the case of financial assets categorized as at fair value through profit or loss, for which transaction costs are recorded directly in financing expenses. All purchases and sales of financial assets are recognized at the transaction date.

  • Financial items at fair value through profit or loss: These include all derivatives, trading positions, and certain financial assets and liabilities designated as falling into this category. These assets are recognized at fair value in the balance sheet. Changes in value are reported as financing income or expense in the reporting period in which they occur.
  • Available-for-sale financial assets: These assets are recognized at fair value in the balance sheet. Value changes are recognized in other comprehensive income until the financial instrument is sold or impaired. At that time the cumulative gain or loss recognized in comprehensive income is recorded in the income statement.
  • Loans and receivables as well as held-to-maturity investments: These items are measured at amortized cost using the effective interest method.
  • Other financial liabilities: With the exception of derivatives, financial liabilities are measured at amortized cost.

In the case of derivatives used for cash flow hedges meeting the criteria of IAS 39, the remeasurement to fair value is recognized only in other comprehensive income until the underlying transaction has taken place. Once the transaction occurs, the remeasurement effect is reallocated to the underlying transaction and recognized in profit or loss. Fair values are measured based on quoted market prices and / or, in the case of derivatives, on the basis of market prices determined by banks. In the fiscal year and the prior year, no hedge accounting under IAS 39 was applied to any hedging transactions. Financial assets are recognized as soon as COMET acquires control of them, and derecognized when COMET ceases to have control, i.e., when it has sold the rights or they have lapsed. Financial liabilities are derecognized when the obligation specified in the contract is discharged or is canceled or expires.

Cash and cash equivalents

In addition to cash on hand and balances in checking accounts, cash and cash equivalents can also include fixed-term deposits with original maturities of up to three months.

Trade and other receivables

Trade and other receivables are reported at their face value less any necessary write-downs. Such write-downs are based on uniform rules. On specific doubtful arrears, impairment charges are provided individually.

Inventories

Inventories are recorded at the lower of cost and net realizable value. Net realizable value represents the estimated normal sale price less the costs of completion, marketing, selling and distribution. Raw materials and purchased products are measured using the weighted-average method; internally produced goods are measured at target costs. Proportionate shares of production overheads are included in inventories.

Revenue recognition

Net sales represent the revenue from goods sold and services rendered to third parties, net of discounts and other price reductions. In the case of the sale of goods, revenue is recognized at the time that the risks and rewards of ownership of the products sold are transferred to the customer. Depending on the product and the agreed shipment terms (Incoterms), this occurs at the time of shipment or in some cases only at the time of customer acceptance of the shipment. Revenue is recognized only if an economic benefit is likely to accrue to the Group and the amount of revenue can be reliably measured. Customer contributions to development projects, including revenue from prototypes, are recorded in other operating income. Interest income is recognized on a time-proportion basis by the effective interest method unless the claim to the interest is in doubt. Dividend income is recognized when the right to receive payment is established.

Assets held for sale and associated liabilities

These are assets, and liabilities associated with such assets, that the Group intends to sell. They are individual balance sheet items or groups of such items. Instruments are reclassified to this category only when management has decided to sell them and the sale appears likely to occur within one year. Measurement is at the lower of past carrying amount or fair value less costs to sell. Assets in this category are no longer depreciated. Income and expenses from discontinued operations are shown separately on the face of the income statement, both in the period under review and the comparative period.

Property, plant and equipment

Property, plant and equipment are stated at cost less accumulated depreciation and impairment. Borrowing costs related to qualifying assets form part of the historical cost. Depreciation is provided on a straight-line basis over the estimated useful life of the assets. Land values are not depreciated. Impairment charges are recognized as a separate line item under accumulated depreciation. Maintenance costs are recognized as assets only if the maintenance extends the expected life of the asset, expands production capacity or otherwise increases asset values. The cost of maintenance and repair that does not increase asset values is charged directly to income.

The following estimated useful lives are applied in determining depreciation:

   
Buildings 20 – 40 years
Machinery and other equipment 6 –10 years
Demonstration equipment 6 –10 years
Furniture and leasehold improvements 5 years
Tools 3 – 5 years
Vehicles 5 years
Computer hardware 3 years

Intangible assets

The intangible assets recognized are goodwill, rights to trademarks and names, customer lists, technology, licenses, patents, and software. Intangible assets are recognized at cost and generally amortized on a straight-line basis over their expected useful life. Internally developed operating software for systems is in some cases amortized based on units of production, with the amortization period determined in advance. Goodwill and acquired rights to trademarks and names are not amortized but are tested annually for impairment (see section “Impairment of non-current assets” below). The expense for amortization of intangible assets with finite useful lives is recognized in the income statement under that expense category which corresponds to the function of the intangible asset in the Group.

The following estimated useful lives are applied in determining amortization:

   
Customer lists 10 –15 years
Technology 5 –10 years
Computer software 3 – 5 years

Provisions

Provisions are recognized only where COMET has a present obligation to a third party arising from a past event and the amount of the obligation can be estimated reliably. Possible losses resulting from future events are not recognized. Provisions for potential restructuring costs are recognized if a detailed plan for the restructuring has been formulated, the costs can be determined reliably and an obligation to incur the costs has been established by contract or communication.

Employee benefits

The COMET Group maintains various employee benefit plans that differ according to the local circumstances of the individual Group companies. The benefit plans are financed by contributions to government pension plans, private sector insurance arrangements or separate legal entities in the form of foundations, or by the accumulation of reserves in the balance sheet of the respective Group company. In the case of defined contribution plans or equivalent arrangements, the expenses accrued in the reporting period represent the agreed contributions of the Group company. For defined benefit plans, the service costs are calculated in actuarial valuations by independent experts using the projected unit credit method. The calculations are updated annually. The surplus or deficit recognized in the balance sheet is equal to the present value of the defined benefit obligation as determined by the actuary, less the fair value of plan assets. A resulting net obligation is always recognized as a liability. Any resulting net surplus (an asset) is recognized only to the extent of the potential economic benefit that the Company may realize from this asset in the future, taking into consideration IFRIC 14. The expense charged to income is the actuarially determined service cost plus the net interest cost. Actuarial gains and losses arise from experience adjustments (the differential between previous actuarial assumptions and observed outcomes) and from changes in actuarial assumptions. Actuarial gains and losses are recognized in other comprehensive income.

Share-based payments

COMET pays some of the Board's compensation, and some of the variable compensation of the operational management, in the form of shares of COMET Holding AG. The expense is recognized at the value of the shares earned, measured at the quoted market price (fair value) at the grant date. The amount accrued for those components of compensation which must be equity-settled (i.e., for which there is no option of cash payment) is recognized directly in equity. For components which the beneficiary can choose to receive in equity or in cash, the value of the option which this choice represents is determined and recognized as an increase in equity, while the rest of the obligation is recorded as a liability.

Length-of-service awards

COMET grants length-of-service awards to employees in Switzerland, Germany the USA and China after ten years of service and every five years thereafter, in the form of lump-sum payments that increase in amount with the number of years of service. COMET calculates the resulting obligation using the projected unit credit method. The obligation is recalculated annually and any actuarial gains or losses from the remeasurement are immediately taken to income.

Deferred taxes

Deferred taxes are accounted for by the liability method. Under this approach, the income tax effects of temporary differences between the financial statements and the corresponding tax bases are recorded as non-current liabilities or as other non-current assets. Deferred taxes are calculated at actual or expected local tax rates. Changes in deferred taxes are included in income tax expense in the income statement, except for deferred taxes in respect of items that are recognized outside profit or loss. These are likewise recognized outside profit or loss, according to the underlying accountable event – either in other comprehensive income or directly in equity. Deferred tax liabilities are recognized on all taxable temporary differences except for goodwill. Deferred tax assets are recognized for all deductible temporary differences, the carryforward of unused tax credits and any unused tax losses. Deferred tax assets are recognized to the extent that it is probable that taxable profit will be available against which the deductible temporary differences and the carryforward of unused tax credits and unused tax losses can be utilized, except:

  • When the deferred tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit for the period nor taxable profit or loss.
  • In respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, deferred tax assets are recognized only to the extent that it is probable that the temporary differences will reverse in the foreseeable future.

Dividends

In accordance with Swiss law and the Company's Bylaws, dividends and other distributions to shareholders are recognized as distributions in the fiscal year in which they were approved by the Shareholder Meeting and paid, rather than the fiscal year in which they were accrued.

Leases

Leases of property, plant and equipment that transfer substantially all risks and rewards of ownership to Group companies are classified as finance leases. For assets acquired under finance leases, the lower of the fair value of the asset and the net present value of future non-cancelable lease payments is recognized as a non-current asset. Assets held under finance leases are depreciated over the shorter of their estimated useful life and the term of the lease. Service contracts (particularly outsourcing agreements) involving direct or indirect provisions on the use of specified assets are reviewed at inception as to whether the arrangements contain a lease under IFRS.

Unrealized income from sale-and-leaseback transactions that represent finance leases is deferred and realized over the term of the lease. Payments under operating leases are recorded as operating expenditure and recognized on a straight-line basis in profit or loss over the periods to which they relate.

Impairment of non-current assets

The value of property, plant and equipment and other non-current assets, including intangibles, is reviewed whenever it appears possible, as a result of changed circumstances or events, that the assets' carrying amount represents an overvaluation. If the carrying amount exceeds the amount recoverable through use or sale of the asset, the carrying amount is reduced to this recoverable amount and the difference is recorded as an impairment charge in the income statement. The recoverable amount is the higher of fair value or value in use. Value in use is determined on the basis of discounted expected future cash flows. Any acquired goodwill and any rights to trademarks or names with an indefinite useful life are not amortized but are reviewed annually at the same date for impairment. This impairment test is based on the results for the fiscal year, the rolling multi-quarter forecast and the rolling multi-year plan.

03 Segment reporting

The Group is managed on the basis of the three operating segments described below, which are delineated based on the products and services offered.

  • The X-Ray & ebeam Technologies (XET) segment develops, manufactures and markets metal ceramic x-ray sources and portable x-ray modules for non-destructive testing and security inspection, as well as ebeam sets and complete ebeam systems for the treatment of surfaces in the food and printing industries.
  • The Plasma Control Technologies (PCT) segment develops, manufactures and markets vacuum capacitors, RF generators and RF impedance matching networks for the high-precision control of plasma processes required, for instance, in the production of memory chips, flat screens and solar panels.
  • The X-Ray Systems (IXS) segment develops, manufactures and markets x-ray systems and services for non-destructive testing using x-ray and microfocus technology and computed tomography.

Segment operating income represents all revenues and expenses attributable to a particular segment. The only revenues and expenses not allocated to the segments are the costs and revenues of COMET Holding AG, certain government grants, and net financial items and income taxes. These unallocated expenses and revenues are reported in the “Corporate” column.

The segment assets and liabilities represent all operating items. The following assets and liabilities are not allocated to operating segments: the assets and liabilities of COMET Holding AG, all cash and cash equivalents, all current and long-term debt and all income tax assets and liabilities. These unallocated assets and liabilities are reported in the “Corporate” column.

03.1 Operating segments

             
Fiscal year 2015        
In thousands of CHF X-Ray &  beam Technologies (XET) Plasma Control Technologies (PCT) X-Ray Systems (IXS) Elimination of intersegment sales Corporate Consolidated
Net sales            
External net sales 70,558 111,949 99,814 0 0 282,321
Intersegment sales 11,040 0 1,555 (12,595) 0 0
Total net sales 81,598 111,949 101,369 (12,595) 0 282,321
Earnings            
Segment operating income (1,391) 18,583 10,406 (217) 0 27,381
Unallocated costs 0 0 0 0 (1,893) (1,893)
Operating income (1,391) 18,583 10,406 (217) (1,893) 25,488
Financing expenses           (10,159)
Financing income           6,750
Income before tax           22,079
Income tax           (4,973)
Net income           17,106
             
EBITDA 3,059 21,662 13,106 (217) (1,893) 35,718
EBITDA in % of sales 3.7% 19.3% 12.9%     12.7%
             
Assets and liabilities at Dec. 31, 2015            
Segment assets 67,863 75,523 80,299 0 31,957 255,642
Segment liabilities (25,400) (7,720) (30,654) 0 (29,663) (93,438)
Net assets 42,463 67,803 49,645 0 2,293 162,205
Other segment information            
Capital expenditure 8,879 2,739 2,238 0 0 13,857
Depreciation and amortization 4,450 3,079 2,700 0 0 10,230
Change in provisions (475) 754 (179) 0 0 101
Other non-cash expense / (income) 313 (343) 593 307 1,051 1,921
Number of employees at year end 405 336 355 0 0 1,095
             
Fiscal year 2014        
In thousands of CHF X-Ray &  ebeam Technologies (XET) Plasma Control Technologies (PCT) X-Ray Systems (IXS) Elimination of intersegment sales Corporate Consolidated
Net sales            
External net sales 58,564 105,759 123,572 0 0 287,895
Intersegment sales 15,523 0 1,124 (16,647) 0 0
Total net sales 74,087 105,759 124,696 (16,647) 0 287,895
Earnings            
Segment operating income 3,992 15,010 12,646 (436) 0 31,212
Unallocated costs 0 0 0 0 (1,557) (1,557)
Operating income 3,992 15,010 12,646 (436) (1,557) 29,655
Financing expenses           (4,669)
Financing income           3,782
Income before tax           28,768
Income tax           (2,492)
Net income           26,277
             
EBITDA 7,327 18,316 16,115 (436) (1,557) 39,765
EBITDA in % of sales 9.9% 17.3% 12.9%     13.8%
             
Assets and liabilities at Dec. 31, 2014            
Segment assets 66,632 63,455 90,353 0 25,471 245,911
Segment liabilities (11,989) (15,619) (27,180) 0 (31,354) (86,143)
Net assets 54,643 47,835 63,173 0 (5,883) 159,768
Other segment information            
Capital expenditure 4,950 2,065 5,245 0 0 12,259
Depreciation and amortization 3,335 3,307 3,469 0 0 10,110
Change in provisions 405 726 276 0 (11) 1,395
Other non-cash expense / (income) (272) (590) (20) 436 178 (268)
Number of employees at year end 298 333 355 0 0 986

Reconciliation of aggregate segment assets and liabilities to consolidated results

     
In thousands of CHF 2015 2014
Operating segments' assets 223,685 220,440
Total cash and cash equivalents 24,295 18,559
Derivatives used for foreign exchange hedging 25 13
Tax receivables 0 432
Deferred tax assets 7,633 6,459
COMET Holding AG's receivables from 3rd parties 3 7
Total assets 255,642 245,911
     
Operating segments' liabilities (63,774) (54,788)
Current and non-current debt (22,036) (20,570)
Derivatives used for foreign exchange hedging (320) (633)
Tax payables (2,201) (4,951)
Deferred tax liabilities (4,330) (4,286)
COMET Holding AG's payables to 3rd parties (777) (914)
Total liabilities (93,438) (86,143)

03.2 Geographic information

The COMET Group markets its products and services throughout the world and has its own companies in Switzerland, Germany, Denmark, the USA, China, Japan and South Korea. Net sales are allocated to countries on the basis of customer location.

     
Net sales by region    
In thousands of CHF 2015 2014
Switzerland 3,396 3,015
Germany 27,435 27,830
Rest of Europe 37,883 40,692
Total Europe 68,714 71,537
Total USA 105,316 102,859
China 49,415 57,117
Japan 14,714 17,932
Rest of Asia 30,240 25,997
Total Asia 94,368 101,046
Rest of world 13,923 12,453
Total 282,321 287,895
     
Non-current assets by region    
In thousands of CHF 2015 2014
Switzerland 57,569 52,425
Germany 35,211 39,911
USA 13,568 6,050
Rest of world 2,587 2,741
Total 108,935 101,127

03.3 Sales with key accounts

In the year under review, the Plasma Control Technologies segment recorded sales of CHF 56.9 million with its largest customer, which represented 20.1% of Group sales (prior year: CHF 50.4 million and 17.5%, respectively).

04 Acquisitions

At May 1, 2015, COMET acquired sole ownership of PCT Engineered Systems LLC, Davenport, Iowa, USA. Acting as a system integrator, the company develops, manufactures and markets solutions for the curing and enhancement of plastic films and printing inks using electron beams (ebeam). Through the acquisition, COMET has gained direct access to the ebeam end-user market and expanded its product portfolio. The new subsidiary was assigned to the Group's X-Ray & ebeam Technologies segment.

04.1 Acquired net assets

The assets and liabilities identified at the acquisition date are shown in the following table.

     
In thousands of CHF   Fair value at acquisition date
Cash and cash equivalents   321
Trade accounts receivable   1,503
Other receivables   330
Inventories   9,836
Property, plant and equipment   1,491
Intangible assets   6,929
Total assets   20,410
Liabilities   (9,113)
Accrued expenses   (428)
Provisions   (66)
Total liabilities   (9,607)
Total identified net assets, at fair value   10,802
Total consideration transferred   10,787
Gain on bargain purchase, recognized in income   (15)

The small “bargain purchase” excess of the identified net assets over the consideration transferred results from differential cash flow projections for the acquired business and was recognized in other operating income.

The purchase price allocation – the measurement of the assets and liabilities at the acquisition date – is final and will thus not be further adjusted later.

For tax purposes in the USA the purchase is treated as an asset deal (purchase of assets and liabilities) and therefore no deferred taxes arise at the acquisition date.

The gross amount of the acquired trade receivables was CHF 1,521 thousand and their fair value was CHF 1,503 thousand. All receivables are expected to be recoverable.

04.2 Purchase price

The non-contingent portion of the purchase price was paid in cash and the deferred, contingent consideration is also payable entirely in cash.

   
In thousands of CHF Cash flow from acquisition
Non-contingent consideration 6,798
Contractual repayment of existing financial debt of acquiree 1,962
Fair value of contingent consideration for purchase price allocation 2,028
Total consideration 10,787
Liability for contingent consideration (2,028)
Liability for purchase price holdback (249)
Cash and cash equivalents acquired (321)
Net cash outflow on acquisition 8,190

The contingent consideration is governed by an earn-out agreement under which this further conditional payment is to be made in an amount that depends on the achievement of certain new-order targets during the twelve months following the acquisition. The potential range of this consideration extends from USD 0 to USD 8.0 million. See note 25, “Financial instruments”, for details on the measurement of the contingent consideration.

04.3 Effects on consolidated results

The consolidated income statement for the fiscal year includes the acquired company's results for the period from May 1 to December 31, which were sales of CHF 12.5 million and a net loss of CHF 2.1 million.

04.4 Transaction costs

The transaction costs of CHF 0.6 million incurred were recognized in general and administrative expenses and are included in operating income of the X-Ray & ebeam Technologies segment.

05 Trade and other receivables

     
In thousands of CHF 2015 2014
Trade receivables, gross 41,201 50,803
Provision for doubtful accounts (1,157) (1,377)
Trade receivables, net 40,043 49,426
Refundable sales taxes and value-added taxes 1,716 3,242
Prepayments to suppliers 1,844 2,354
Sundry receivables 880 2,211
Total other receivables 4,440 7,807
Total trade and other receivables 44,483 57,233

COMET provides for doubtful accounts (impaired trade receivables) when there is an indication of payment difficulties on the part of customers.

The provision (the allowance account) for impaired trade receivables showed the following movement:

     
In thousands of CHF 2015 2014
January 1 1,377 892
Used 0 (8)
Added 316 518
Released (464) (73)
Foreign currency translation differences (71) 48
December 31 1,157 1,377

At the balance sheet date, full impairment was recognized and provided on CHF 810 thousand (prior year: CHF 534 thousand) of trade receivables. In all other receivables, there were no amounts past due and no impaired receivables. The Group does not hold security against trade and other receivables.

The aging schedule for past-due trade receivables for which impairment has been partly provided is summarized in the table below (at net amounts).

     
In thousands of CHF 2015 2014
Trade receivables, net 40,043 49,426
Not past due, no impairment provided 30,076 39,095
Total past due with impairment partly provided, net 9,967 10,331
1 – 30 days past due, impairment partly provided, net 5,403 5,778
30 – 60 days past due, impairment partly provided, net 1,698 1,729
Over 60 days past due, impairment partly provided, net 2,866 2,824

06 Other financial assets and liabilities

06.1 Other financial assets

     
In thousands of CHF 2015 2014
Other financial assets at fair value through profit or loss    
Derivatives used for foreign exchange hedging 25 13
Total other financial assets at fair value through profit or loss 25 13
     
Loans and receivables    
Other non-current financial assets 349 379
Total loans and receivables 349 379
     
Total other financial assets 374 392
Total current 25 13
Total non-current 349 379

06.2 Other financial liabilities

     
In thousands of CHF 2015 2014
Other financial liabilities    
Derivatives used for foreign exchange hedging 320 633
Liability for contingent consideration 3,857 0
Total other financial liabilities 4,177 633

06.3 Derivative financial instruments

At the balance sheet date, open positions in forward exchange contracts were as follows:

     
In thousands of CHF 2015 2014
USD forward exchange contracts    
Contract amounts 14,713 13,073
Positive fair values 25 0
Negative fair values 268 631
     
JPY forward exchange contracts    
Contract amounts 1,846 482
Positive fair values 0 13
Negative fair values 52 2

The gains and losses from foreign exchange contracts are recognized as financing income or expense (see note 22). The contract amounts shown represent the notional principal amounts of the forward contracts. Consistent with the nature of the Group's activities, the forward exchange contracts have maturities of less than one year; most are due within six months.

07 Inventories

     
In thousands of CHF 2015 2014
Raw materials and semi-finished products 32,566 34,619
Work in process 16,311 10,244
Finished goods 16,943 11,758
Total inventories 65,820 56,621

The inventory amounts reflect any necessary individual write-downs for items with a market value below manufacturing cost. The expense recognized for inventory write-downs was CHF 2.2 million (prior year: CHF 1.9 million).

08 Property, plant and equipment

         
Fiscal year 2015        
In thousands of CHF Real estate Plant and equipment Other tangible assets Total property, plant and equipment
Cost        
January 1, 2015 51,176 63,984 12,699 127,860
Acquisition of a subsidiary 0 1,229 262 1,491
Additions 2,107 5,392 3,871 11,371
Disposals 0 (1,222) (1,262) (2,484)
Foreign currency translation differences (57) (384) (478) (919)
December 31, 2015 53,226 68,999 15,093 137,318
         
Accumulated depreciation        
January 1, 2015 20,078 45,937 7,186 73,202
Additions 1,681 4,342 1,701 7,724
Disposals 0 (1,078) (501) (1,579)
Foreign currency translation differences (17) (230) (261) (509)
December 31, 2015 21,742 48,971 8,125 78,837
         
Carrying amount        
January 1, 2015 31,098 18,047 5,513 54,658
December 31, 2015 31,485 20,028 6,968 58,481

In the year under review, the disposals of other tangible assets included the reclassification of CHF 826 thousand of internally produced demonstration equipment in the X-Ray Systems segment to inventories, which did not result in an outflow of funds. The carrying amount of leased assets (under finance leases) within property, plant and equipment was CHF 410 thousand. Assets under construction in the amount of CHF 2,648 thousand were included in real estate, CHF 1,687 thousand were included in plant and equipment and CHF 1,584 thousand were included in other tangible assets.

         
Fiscal year 2014        
In thousands of CHF Real estate Plant and equipment Other tangible assets Total property, plant and equipment
Cost        
January 1, 2014 50,624 58,625 14,347 123,595
Additions 564 7,163 1,661 9,388
Disposals 0 (2,420) (3,595) (6,015)
Foreign currency translation differences (11) 616 286 891
December 31, 2014 51,176 63,984 12,699 127,860
         
Accumulated depreciation        
January 1, 2014 18,393 43,549 6,505 68,447
Additions 1,688 3,908 1,753 7,349
Disposals 0 (1,839) (1,193) (3,032)
Foreign currency translation differences (3) 319 121 437
December 31, 2014 20,078 45,937 7,186 73,202
         
Carrying amount        
January 1, 2014 32,231 15,076 7,842 55,148
December 31, 2014 31,098 18,047 5,513 54,658

In the prior year, the disposals of other tangible assets included the reclassification of CHF 2,718 thousand of internally produced demonstration equipment in the X-Ray Systems segment to inventories, which did not result in an outflow of funds. The carrying amount of leased assets (under finance leases) within property, plant and equipment was CHF 574 thousand. Assets under construction in the amount of CHF 541 thousand were included in real estate, CHF 1,502 thousand were included in plant and equipment and CHF 135 thousand were included in other tangible assets.

Assets pledged or assigned as collateral for Group obligations (encumbered assets)

     
In thousands of CHF 2015 2014
Carrying amount of pledged real estate 28,502 30,132
Total principal amount of real estate liens (mortgage notes) 30,000 30,000
Of which held by the Group (6,000) (6,000)
Total deposited as security for Group obligations 24,000 24,000
Mortgage loan amounts drawn 13,500 17,000

09 Intangible assets

             
Fiscal year 2015            
In thousands of CHF Goodwill and trademarks Customer lists Technology Software Other intangible assets Total intangible assets
Cost            
January 1, 2015 29,876 24,896 2,169 13,063 39 70,042
Acquisition of a subsidiary 0 4,183 2,551 15 180 6,929
Additions 0 0 0 2,486 0 2,486
Disposals 0 0 0 (10) 0 (10)
Foreign currency translation differences (2,207) (1,254) (43) (395) 8 (3,891)
December 31, 2015 27,669 27,825 4,676 15,159 227 75,556
             
Accumulated amortization            
January 1, 2015 0 14,691 723 8,133 27 23,573
Additions 0 1,431 367 697 11 2,506
Disposals 0 0 0 (10) 0 (10)
Foreign currency translation differences 0 (859) (59) (47) (2) (967)
December 31, 2015 0 15,264 1,031 8,772 35 25,101
             
Carrying amount            
January 1, 2015 29,876 10,205 1,446 4,931 12 46,469
December 31, 2015 27,669 12,561 3,645 6,387 192 50,454
             
Fiscal year 2014            
In thousands of CHF Goodwill and trademarks Customer lists Technology Software Other intangible assets Total intangible assets
Cost            
January 1, 2014 30,310 24,861 2,210 10,379 39 67,798
Additions 0 0 0 2,871 0 2,871
Disposals 0 0 0 (165) 0 (165)
Foreign currency translation differences (434) 35 (41) (22) (1) (463)
December 31, 2014 29,876 24,896 2,169 13,063 39 70,042
             
Accumulated amortization            
January 1, 2014 0 13,092 516 7,277 23 20,907
Additions 0 1,527 219 1,012 4 2,761
Disposals 0 0 0 (165) 0 (165)
Foreign currency translation differences 0 73 (12) 9 0 70
December 31, 2014 0 14,691 723 8,133 27 23,573
             
Carrying amount            
January 1, 2014 30,310 11,769 1,694 3,102 16 46,892
December 31, 2014 29,876 10,205 1,446 4,931 12 46,469

The categories “goodwill and trademarks”, “customer lists” and “technology” were capitalized in connection with business combinations. The residual useful lives of the customer lists ranged from one to nine years.Under a long-term multi-brand strategy, the well-established YXLON name is used alongside the COMET brand. COMET therefore deems the capitalized YXLON brand to have an indefinite useful life.

In the year under review, in the X-Ray Systems segment, CHF 1,024 thousand of internal development work on the new software platform for the systems was capitalized (prior year: CHF 2,341 thousand).

10 Impairment test of goodwill and intangible assets with indefinite useful lives

The impairment test for goodwill and other intangible assets with indefinite useful lives was performed as at September 30, 2015. For the purpose of the impairment test, the assets to be tested were allocated to and measured as the following two cash generating units at the segment level:

  • X-Ray & ebeam Technologies, for the generator business acquired as part of the acquisition of YXLON.
  • X-Ray Systems, as the relevant cash generating unit for all activities of the acquired YXLON group and for the FeinFocus product group with the exception of the generator business.

The impairment test is based on the value in use method. The recoverable amount was determined from the present value of the future cash flows (DCF valuation). The calculations are based on the Board-approved rolling forecast and on the Board-approved rolling medium-term plan for 2016 to 2020. Using experience-based estimates, the amounts in the forecast and in the medium-term plan are based on growth projections for net sales, operating income and other parameters, taking into consideration the estimated market trends in the various regions. Cash flows beyond the forecast period are extrapolated using an assumed growth rate of 1.5%, which is less than the expected rate of market growth. The assumptions applied in determining value in use correspond to the expected long-term average growth rate of the X-Ray Systems segment's operating business and of the X-Ray & ebeam Technologies segment's generator business. Input variables with a critical impact on the outcome of the impairment test are the assumed rates of sales growth and the projected trend in operating income.

             
  X-Ray Systems CGU X-Ray & ebeam Technologies CGU Total
             
In thousands of CHF 2015 2014 2015 2014 2015 2014
Goodwill 18,621 20,597 6,873 6,873 25,494 27,470
Trademarks (YXLON) 2,175 2,406 0 0 2,175 2,406
Total carrying amount 20,795 23,002 6,873 6,873 27,669 29,876
         
  X-Ray Systems CGU X-Ray & ebeam Technologies CGU
         
  2015 2014 2015 2014
Discount rate (WACC) before tax 12.7% 12.7% 12.1% 12.2%
Growth rate of terminal value 1.5% 1.5% 1.5% 1.5%
Inflation rate 1.0% 1.0% 1.0% 1.0%

Sensitivities to the assumptions applied in the valuation model

The measurement of value in use of the X-Ray Systems CGU is sensitive to the following assumptions in the planning period (2016 to 2020):

  • Growth assumptions: Sales revenue is projected by product group and region. Based on the stable situation of 2015 as the starting point, the average annual rate of sales growth is assumed to be 9% (prior year: 9%).
  • Gross margins: It is expected that with rising sales, gross margins will average approximately 45% in the medium term (prior year: 41%). Target achievement also depends in part on the trend in the purchasing prices of materials.
  • Foreign exchange rates: The movement in exchange rates between the Swiss franc and the euro and US dollar has an effect on company value. The forecasts are based on September 2015 exchange rates.
  • Discount rate (WACC): The capital costs were determined based on borrowing costs (before tax) as well as the long-term risk-free rate, a small-cap premium, and a market risk premium weighted by a COMET-specific beta factor.

COMET believes that, with a realistic change in the material assumptions, the recoverable amount would not fall below the carrying amount.

11 Income tax

11.1 Current and deferred income tax expense

     
In thousands of CHF 2015 2014
Current income tax expense in respect of the current year 5,204 7,181
Current income tax expense in respect of prior years 374 18
Deferred income tax (credit) (605) (4,708)
Total income tax expense 4,973 2,492

11.2 Reconciliation of tax expense

     
In thousands of CHF 2015 2014
Income before tax 22,079 28,768
Expected income tax at base tax rate of 28% (prior year: 28%) 6,182 8,055
Effect of tax rates other than base tax rate 487 162
Effect of tax exemption by canton of Fribourg (541) (211)
Effect of non-tax-deductible expenses 58 112
Effect of change in tax rate on deferred income tax (201) 29
Effect of non-recognition of tax loss carryforwards 71 246
Effect of recognitionzuse of previously unrecognized tax loss carryforwards and of tax credits for R & D (1,845) (6,143)
Effect of income tax from other periods 374 18
Effect of non-refundable withholding tax 345 195
Other effects 43 29
Income tax reported in the income statement 4,973 2,492
Effective income tax rate in % of income before tax 22.5% 8.7%

COMET AG, based in Flamatt, has been granted conditional tax relief by the canton of Fribourg in the form of a reduction in cantonal and municipal taxes for the period from 2013 to 2022. For 2015 the tax reduction amounted to 50% (prior year: 30%). The level of the tax reduction is tied to the Group's maintaining a certain level of activity at the Flamatt location. The tax reduction can be either 0%, 30% or a maximum of 50%, depending on fulfilment of the attached conditions.

11.3 Deferred tax assets and liabilities

Deferred tax assets and liabilities can be analyzed by origin as follows:

         
  2015 2014
In thousands of CHF Assets Liabilities Assets Liabilities
Financial instruments* 711 8 533 89
Inventories 2,741 513 3,341 340
Property, plant and equipment 226 166 197 167
Intangible assets 124 4,570 2 5,525
Employee benefit plan assets 0 144 0 524
Trade and other payables 347 112 33 1
Accrued expenses 1,149 20 791 0
Provisions 760 1 422 2
Employee benefit plan liabilities 8 32 0 44
Other 324 1 119 5
Tax loss carryforwards, incl. tax credits for R & D 2,481 0 3,432 0
Total gross deferred tax of Group companies 8,870 5,567 8,870 6,697
Netting of deferred tax by Group companies (1,237) (1,237) (2,411) (2,411)
Amounts in the consolidated balance sheet 7,633 4,330 6,459 4,286

* Financial instruments were previously included in “Other” (2014 adjusted to new presentation).

The deferred tax assets and liabilities were measured at local tax rates, ranging from 15% to 39%. No deferred tax liabilities were established for temporary differences of CHF 50.4 million (prior year: CHF 47.5 million) in respect of the value of the ownership interests in Group companies. Distributions of retained earnings by subsidiaries are not expected to have an effect on income taxes, except for future distributions from China. There were no tax provisions for non-refundable withholding taxes on future distributions of foreign subsidiaries to COMET Holding AG. Distributions by COMET Holding AG to its shareholders have no effect on the reported or future income taxes.

11.4 Movement in deferred tax assets and liabilities

     
In thousands of CHF 2015 2014
Net asset / (liability) at January 1 2,173 (3,155)
Origination and reversal of temporary differences recognized in the income statement 1,689 1,691
Recognition of deferred tax assets on loss carryforwards 0 3,016
Use of tax loss carryforwards (1,084) 0
Deferred tax credit in the income statement 605 4,708
Origination and reversal of temporary differences recognized in other comprehensive income 251 173
Foreign currency translation differences 275 447
Net asset at December 31 3,303 2,173

11.5 Unrecognized tax assets

Deferred tax assets, including tax loss carryforwards and expected tax credits, are recognized only if it is likely that future taxable profits will be available to which these deferred tax assets can be applied. Temporary differences (between the IFRS financial statements and the corresponding tax base) for which no tax assets were recognized were CHF 0.3 million (prior year: CHF 0.3 million). In addition, there were tax loss carryforwards on which no deferred tax assets were recognized, as presented in the following overview.

         
  2015 2014
In thousands of CHF Loss carryforwards Potential tax asset Loss carryforwards Potential tax asset
Within one year 0 0 0 0
In two to five years 0 0 0 0
In more than five years 2,375 534 4,349 1,000
Total 2,375 534 4,349 1,000

12 Current and long-term debt

12.1 Current debt

     
In thousands of CHF 2015 2014
Bank borrowings with original maturities of less than twelve months 8,119 621
Current obligations under finance leases 168 186
Current portion of long-term debt 3,000 5,750
Total current debt 11,287 6,557

At the end of the fiscal year under review the COMET Group had undrawn credit facilities of CHF 23.1 million (prior year: CHF 33.7 million).

12.2 Long-term debt

The long-term debt consisted of mortgage loans in respect of the company's premises in Flamatt, Switzerland. In the year under review, all interest and principal payments were made as contractually agreed. The financial covenants with banks were adhered to as of December 31, 2015.

     
In thousands of CHF 2015 2014
Repayment due in two to five years 10,795 11,107
Repayment due in more than five years 0 3,000
Subtotal 10,795 14,107
Future amortization of costs (46) (94)
Total long-term debt 10,749 14,013

All long-term debt consisted of fixed-rate loans denominated in CHF with fixed maturities. Loans with original maturities of more than twelve months coming due in the subsequent year were reclassified to current debt.

12.3 Finance lease obligations

Current and long-term debt included finance lease obligations with the following maturity schedule:

     
In thousands of CHF 2015 2014
Due within one year 168 186
Due in two to five years 294 512
Due in more than five years 0 0
Total payment obligations 462 698
Less interest component (46) (94)
Total finance lease obligations 416 603

13 Trade and other payables

     
In thousands of CHF 2015 2014
Trade payables 14,211 17,562
Sundry payables 3,073 3,320
Sales commissions 3,037 3,607
Total financial liabilities 20,321 24,489
Sales tax and value-added tax 927 538
Prepayments by customers 21,154 8,332
Total other payables 22,081 8,870
Total trade and other payables 42,402 33,358

14 Accrued expenses

     
In thousands of CHF 2015 2014
Accrued staff costs 4,896 9,088
Other accrued expenses 5,544 5,208
Total accrued expenses 10,440 14,296

Accrued staff costs consist mainly of the amount accrued for performance-based compensation, and employees' vacation and overtime credits. The item “other accrued expenses” consists largely of deliverables still to be supplied under projects already invoiced and recognized in sales, such as installation and similar non-material elements of orders.

15 Provisions

       
Fiscal year 2015      
In thousands of CHF Warranties Other provisions Total provisions
January 1, 2015 5,855 245 6,100
Acquisition of a subsidiary 66 0 66
Added 1,310 149 1,459
Used (925) (95) (1,020)
Released (288) (49) (337)
Foreign currency translation differences (200) (8) (209)
December 31, 2015 5,817 241 6,058
Of which:      
Current provisions 5,817 176 5,993
Non-current provisions 0 65 65

Provisions are classified as current to the extent that the related cash outflows are expected to occur within one year from the balance sheet date. Conversely, the cash outflows in respect of non-current provisions are expected to occur more than twelve months after the balance sheet date. Where the interest effect is material, the cash outflows are discounted. The provision for warranties covers the risk of expenses that have not occurred to date, but that could potentially occur until the end of the warranty periods. COMET believes that the amount provided is sufficient to cover the expected costs over the warranty periods.

16 Employee benefits

16.1 Defined benefit plans

The COMET Group maintains defined benefit pension plans in Switzerland and Germany. These plans differ according to their particular purpose (retirement, disability, and / or survivor benefits) and are based on the legal requirements in the respective countries.

Switzerland

The defined benefit plans are managed within a multi-employer pension fund. This is a separate legal entity falling under the Swiss Federal Act on Occupational Retirement, Survivors' and Disability Pensions (the BVG). The pension fund is managed by an administration committee, composed of equal numbers of employee and employer representatives, that is required to act in the interests of the plan participants. This committee sets the investment strategy and makes the investment decisions.

The pension fund maintains a main (“base”) plan for employees that provides the legally required benefits, and a supplemental plan that provides benefits in respect of pay components above the statutory range. Both plans are administered by the multi-employer pension fund, which is in the form of a foundation organized by an insurance company. Retirement, disability and survivor benefits are thus insured, but the investment risk is carried by the pension plans.

Plan participants are insured against the financial consequences of old age, disability and death. The benefits are specified in a set of regulations. Minimum levels of benefits are prescribed by law. Contribution levels are set as a percentage of the insured portion of employees' pay. The retirement benefit is calculated as the retirement pension asset existing at the time of retirement, multiplied by the conversion rate specified in the regulations. Plan participants can opt to receive their capital as a lump sum instead of drawing a pension. The retirement benefit from the additional plan is always paid as a lump sum. The amounts of the disability and survivor pensions are defined as a percentage of insured pay.

Germany

In Germany there is a closed plan with pension commitments which no longer has active participants. The obligations in respect of current pension payments and deferred pensions are recognized in the balance sheet. In addition, there is a partial early retirement agreement, which is in its latter, inactive phase. The Group's obligations are for the additional contributions (bonus element of the partial early retirement pay and additional contributions to the government pension plan) and the compensation arrears under the so-called block model: In standard block-model partial retirement, employees work full-time at half pay for the first half (the working phase) of the partial early retirement period, and then do not work at all during the second half (the inactive phase) but still receive half pay to complete the compensation for the service in the earlier, working phase.

         
Principal actuarial assumptions        
  Switzerland Germany
         
  2015 2014 2015 2014
Discount rate at January 1 1.2% 1.8% 2.3% 3.0%
Discount rate at December 31 0.7% 1.2% 2.0% 2.3%
Expected rate of salary increases 1.0% 1.0%
Mortality tables BVG 2010 GT BVG 2010 GT Heubeck 2005 GT Heubeck 2005 GT

Movement in present value of defined benefit obligation, in plan assets and in net carrying amount for defined benefit plans

         
Fiscal year 2015        
In thousands of CHF Present value of defined benefit obligation Fair value of plan assets Effect of asset ceiling under IAS 19.57(b) Net carrying amount recognized in balance sheet
January 1 (49,167) 51,326 0 2,159
Current service cost (2,295) 0 0 (2,295)
Interest (expense) / income (636) 653 0 17
Defined benefit cost recognized in profit or loss (2,931) 653 0 (2,278)
Return on plan assets, excluding interest income 0 1,615 0 1,615
Actuarial loss arising from changes in financial assumptions (2,112) 0 0 (2,112)
Actuarial loss arising from changes in demographic assumptions (716)     (716)
Actuarial loss arising from experience adjustments (612) 0 0 (612)
Defined benefit cost recognized in other comprehensive income (3,440) 1,615 0 (1,825)
Benefits paid-in / deposited (317) 341   24
Employee contributions (1,553) 1,553  
Employer contributions 0 2,124   2,124
Foreign currency translation differences 244 (153)   91
December 31 (57,164) 57,459 0 295
Reported as an asset       997
Reported as a liability       (702)

The average duration of the defined benefit obligation was 13.4 years.

         
Fiscal year 2014        
In thousands of CHF Present value of defined benefit obligation Fair value of plan assets Effect of asset ceiling under IAS 19.57(b) Net carrying amount recognized in balance sheet
January 1 (41,619) 45,251 (781) 2,851
Current service cost (1,818) 0 0 (1,818)
Interest (expense) / income (809) 865 (14) 41
Defined benefit cost recognized in profit or loss (2,627) 865 (14) (1,777)
Return on plan assets, excluding interest income 0 1,893 0 1,893
Actuarial loss arising from changes in financial assumptions (2,163) 0 0 (2,163)
Actuarial gain arising from experience adjustments (1,414) 0 795 (619)
Defined benefit cost recognized in other comprehensive income (3,578) 1,893 795 (889)
Benefits paid-in / deposited 34 (23)   11
Employee contributions (1,424) 1,424  
Employer contributions 0 1,946   1,946
Foreign currency translation differences 48 (31)   17
December 31 (49,167) 51,326 0 2,159
Reported as an asset       3,084
Reported as a liability       (925)
         
Key figures by country        
  Switzerland Germany
         
In thousands of CHF 2015 2014 2015 2014
Present value of defined benefit obligation (55,150) (46,667) (2,014) (2,500)
Fair value of plan assets 56,148 49,751 1,311 1,575
Net carrying amount recognized in balance sheet 997 3,084 (702) (925)
         
Defined benefit (cost) / gain recognized in profit or loss (2,314) (1,869) 36 92
Defined benefit (cost) / gain recognized in other comprehensive income (1,896) (743) 71 (146)

The employer contributions to the plans in Switzerland for fiscal year 2016 are expected to amount to CHF 2,184 thousand.

     
Major categories of plan assets    
In thousands of CHF 2015 2014
Cash and cash equivalents 4,863 6,371
Equity instruments 13,909 13,636
Debt instruments 28,649 22,868
Real estate 8,726 6,877
Total plan assets at fair value (quoted market price) 56,148 49,751
Other assets 1,311 1,575
Total non-quoted market price 1,311 1,575
Total plan assets 57,459 51,326

COMET does not utilize any real estate held by the employee benefit plans.

Sensitivity analysis

The following table presents an analysis of how the reported present value of the defined benefit obligation would change in response to hypothetical changes in the actuarial assumptions.

         
Sensitivity of present value of defined benefit obligation        
  Switzerland Germany
         
In thousands of CHF 2015 2014 2015 2014
Discount rate: 0.25% decrease 57,087 48,154 2,075 2,585
Discount rate: 0.25% increase 53,346 45,269 1,941 2,419
Salaries: 0.25% decrease 54,998 46,458 2,006 2,500
Salaries: 0.25% increase 55,293 46,836 2,006 2,500
Life expectancy: 1-year increase 55,647 47,046 2,088 2,579
Life expectancy: 1-year decrease 54,656 46,287 1,924 2,419

16.2 Defined contribution plans

The contributions paid to defined contribution plans in the fiscal year amounted to CHF 3,875 thousand (prior year: CHF 2,753 thousand).

16.3 Length-of-service awards

COMET grants length-of-service awards to employees in Switzerland, Germany the USA and China after ten years of service and every five years thereafter, in the form of lump-sum payments that increase in amount with the number of years of service. The provision for this item changed as follows in the year under review:

     
In thousands of CHF 2015 2014
Provision at January 1 1,024 856
Current service cost 181 164
Interest cost 15 20
Benefits paid (144) (77)
Actuarial losses 59 66
Foreign currency translation differences (42) (5)
Provision at December 31 1,093 1,024

17 Net sales

Sales revenues from products and services supplied to third parties are stated on a net basis, that is, after deducting price discounts, sales taxes and value-added taxes, credits and refunds. Sales in the year under review did not include any amounts (prior year: none) from current customer projects accounted for using the percentage of completion method.

18 Other operating income

     
In thousands of CHF 2015 2014
Customers' contributions to development projects 3,094 2,704
Government grants 124 337
Revenue from sale of prototypes 2,257 1,587
Miscellaneous income 64 21
Total other operating income 5,539 4,649

19 Staff costs and staff count

19.1 Staff costs

     
In thousands of CHF 2015 2014
Wages and salaries 83,854 83,601
Employee benefits 14,181 12,954
Total staff costs 98,035 96,555

19.2 Staff count

     
  2015 2014
Number of employees (year-end) 1,095 986
Average full-time equivalents during the year 1,014 909

20 Development expenses

Development expenses comprise the costs of new-product development, improvement of existing products, and process engineering. The COMET Group's development activities focus on the fields of vacuum technology, high voltage engineering and material science, and on the core products of x-ray sources and vacuum capacitors. In view of the uncertainty of future economic benefits that may flow from development projects, COMET as a rule does not capitalize development costs but charges them directly to the income statement. In the year under review, in the X-Ray Systems segment, CHF 1,024 thousand of internal development work on the new software platform for the systems was capitalized (prior year: CHF 2,341 thousand). This software development was completed in 2015.

21 Amortization and depreciation

     
In thousands of CHF 2015 2014
Amortization 2,506 2,761
Depreciation 7,724 7,349
Total amortization and depreciation 10,230 10,110

22 Financing income and expenses

     
In thousands of CHF 2015 2014
Interest expense 1,036 1,211
Losses on derivatives used for currency hedging 1,445 1,448
Foreign currency translation losses 7,677 2,009
Total financing expenses 10,159 4,669
     
In thousands of CHF 2015 2014
Interest income 11 21
Gains on derivatives used for currency hedging 459 1,263
Foreign currency translation gains 6,279 2,498
Total financing income 6,750 3,782
     
In thousands of CHF 2015 2014
Net interest expense 1,024 1,190
Net foreign currency translation losses / (gains) 2,384 (303)

Foreign currency translation gains and losses resulted largely from items denominated in US dollars and euros.

23 Earnings per share

Basic earnings per share represents the reporting period's consolidated net income, divided by the average number of shares outstanding.

     
  2015 2014
Weighted average number of shares outstanding 773,078 771,237
Net income in thousands of CHF 17,106 26,277
Net income per share in CHF, diluted and basic 22.13 34.07

There are no outstanding stock options or stock subscription rights that could lead to a dilution of earnings per share.

24 Off-balance sheet transactions

24.1 Contingent liabilities

As a global company, COMET is exposed to numerous legal risks. These can include, especially, risks relating to product liability and patent, tax and competition law. The outcomes of currently pending and future legal proceedings cannot be predicted with certainty. Expenses may therefore be incurred that are not, or not fully, covered by insurance benefits and which may thus have effects on business and on future financial results.

Provisions are established inasmuch as the financial consequences of a past event can be estimated reliably and the estimate can be confirmed by independent expert opinion. Contingent liabilities that are likely to result in an obligation are included in provisions.

In 2006 COMET sold a property in Switzerland that is listed in the register of contaminated sites. Although the experts involved do not believe that the situation will change significantly in the short to medium term, the site must be regularly monitored by means of test drilling. If the ground water testing under this monitoring does not produce new, significantly poorer findings, all monitoring activities will be terminated at the end of 2019. The site would then not require any further monitoring. At present a final assessment cannot yet be made of the matters at issue, and any resulting as yet unprovided additional costs cannot yet be estimated. However, based on the results of the groundwater sampling to date, COMET believes it is currently unlikely that any significant costs will be incurred.

24.2 Other off-balance sheet obligations

In the course of its operating activities, the COMET Group has concluded long-term rental and lease agreements resulting in payment obligations coming due as follows:

     
In thousands of CHF 2015 2014
Due within one year 3,245 3,036
Due within two to five years 4,292 5,546
Due in more than five years 24
Total payment obligations 7,538 8,606

The payment obligations arise from off-balance sheet operating leases for business premises and for road vehicles, office equipment and similar assets. The expense recognized in the fiscal year for operating leases was CHF 3,583 thousand (prior year: CHF 3,559 thousand).

25 Financial instruments

25.1 Classes of financial instruments

           
Fiscal year 2015          
In thousands of CHF Financial assets Financial liabilities  
  Held for trading Loans and receivables Held for trading At amortized cost Fair value
           
Cash and cash equivalents   24,295     *
Trade and other receivables   40,043     *
Derivatives 25       25
Financial assets   349     *
Current debt       11,287 11,336
Trade and other payables       20,321 *
Derivatives     320   320
Liability for contingent consideration     3,857   3,857
Long-term debt (fixed rate)       10,749 11,711
           
Interest income / (expense) 0 11 0 (1,036)  
Gain / (loss) on derivatives 459 0 (1,445) 0  
Change in provisions for doubtful accounts and in losses on trade receivables   148      
Total net gain / (loss) recognized in the income statement 459 159 (1,445) (1,036)  

* The carrying amount approximates fair value.

There were no available-for-sale financial assets or held-to-maturity investments. IFRS require all financial instruments which are held at fair value, and all reported fair values, to be categorized into three classes (or “levels”) according to whether the fair values are based on quoted prices in active markets (Level 1), on models using other observable market data (Level 2), or on models using unobservable inputs (Level 3). The only financial instruments recognized at fair value by COMET were derivatives held for currency hedging and the liability for contingent consideration for the acquisition of PCT Engineered Systems LLC. The measurement of the derivatives falls into Level 2 and the measurement of the liability for contingent consideration represents Level 3 of the fair value measurement hierarchy under IFRS 13.

           
Fiscal year 2014          
In thousands of CHF Financial assets Financial liabilities  
  Held for trading Loans and receivables Held for trading At amortized cost Fair value
           
Cash and cash equivalents   18,559     *
Trade and other receivables   49,426     *
Derivatives 13       13
Financial assets   379     *
Current debt       6,557 6,675
Trade and other payables       24,489 *
Derivatives     633   633
Long-term debt (fixed rate)       14,013 15,408
           
Interest income / (expense) 0 21 0 (1,211)  
Gain / (loss) on derivatives 1,263 0 (1,448) 0  
Change in provisions for doubtful accounts and in losses on trade receivables   (445)      
Total net gain / (loss) recognized in the income statement 1,263 (424) (1,448) (1,211)  

* The carrying amount approximates fair value.

The deferred consideration specified in the purchase agreement for PCT Engineered Systems LLC, Davenport, Iowa, USA is contingent on the achievement of certain threshold values related to new orders booked over a period of twelve months after the acquisition. Depending on the actual new orders booked from May 1, 2015 to April 30, 2016 and the budget margins achieved for them, a further consideration of between USD 0 and USD 8 million will become payable.

The unobservable material inputs used in the valuation were the probability of the expected new orders; the resulting contingent consideration, for which a range of USD 2.0 million to USD 5.0 million was assumed; and the discount rate of 11.3%.

The movement in the liability for contingent consideration was as follows:

   
In thousands of CHF Liability for contingent consideration
Fair value at acquisition date 2,028
Unrealized fair value adjustment July to December 2015 * 1,482
Effect of foreign exchange and unwinding of discount 347
Liability at December 31, 2015 3,857

* Recognized in the XET segment under “general and administrative expenses”.

25.2 Fair values of financial instruments

The only differences between fair values and carrying amounts occurred in fixed-rate long-term debt. Fair values are determined by discounting the future cash flows at the interest rate prevailing at the year-end. The interest rate spreads used are those of the most recently obtained or refinanced loans.

26 Management of financial risks

COMET operates its own subsidiaries in a number of countries and, in addtion, exports products to still other countries. As an international company, the Group is subject to various financial risks which are inseparable from its business activities. COMET seeks to avoid unreasonable financial risks and to mitigate risks through appropriate hedges. The key elements of risk management form an integral part of Group strategy. Clearly defined management information and control systems are used to measure, monitor and control risks. Detailed risk reports are produced on a regular basis.

26.1 Capital management

The primary goal of capital management is to manage equity capital in such a way as to ensure the Group's high creditworthiness and an equity ratio appropriate to the Group's risk profile, thus supporting its business activities. COMET manages the Group's capital structure to meet liquidity requirements and pursue growth and profitability targets, taking into account the economic environment and the financial results achieved and planned. On this basis, the Board of Directors proposes dividend payments or capital repayments to the shareholders or recommends increases in capital stock.

COMET monitors and evaluates its capital structure by reference to net debt and the equity ratio, with the aim of ensuring that the capital structure covers the business risks and assures the Group's lasting financial flexibility.

     
In thousands of CHF 2015 2014
Current debt 11,287 6,557
+ Long-term debt 10,749 14,013
./. Cash and cash equivalents 24,295 18,559
Net debt (2,259) 2,010
     
EBITDA 35,718 39,765
Debt ratio (net debt in relation to EBITDA) (0.1) 0.1
     
Shareholders' equity 162,205 159,768
Equity ratio (equity in % of total assets) 63.4% 65.0%

26.2 Risks in connection with financial instruments

COMET is exposed to many risks associated with financial instruments. These can be divided into market risks, credit risks and liquidity risks.

26.2.1 Market risk

Market risk is the risk of changes in the price of financial assets, in currency exchange rates, interest rates and the price of exchange-traded commodities. As a manufacturer, COMET is inherently exposed to commodity price risks (for example, with respect to inputs such as energy, copper and ceramics), but these are not considered financial risks for the purposes of IFRS 7, as COMET procures commodities only for use in manufacturing, not for trading of commodity contracts. Consequently, these risks are not explicitly determined and are not separately disclosed in the consolidated financial statements.

Exchange rate risk

With its worldwide activities and strong focus on exports, COMET has particularly high exposure to exchange rate risks, as revenues and costs often do not arise in the same currency. The currency risk from operations is reduced by purchasing and selling in local currency where possible, an approach known as natural hedging. In addition, to protect against fluctuation in exchange rates, significant foreign currency orders in the X-Ray Systems segment are hedged by means of forward exchange contracts at the time the order is received. The X-Ray & ebeam Technologies segment and the Plasma Control Technologies segment non-selectively hedge a large portion of the expected cash flows up to a one-year time horizon, using forward exchange contracts to do so. As COMET hedges only cash flows, there are no hedges of net investments in foreign operations. The table below shows the sensitivity of income before tax and of shareholders' equity to a possible movement in those exchange rates that are material for COMET, with all other variables held constant. The most important monetary foreign currency positions in the balance sheets of the Group companies are in euros and US dollars. The percentages of movement in exchange rates are based on an estimated potential range of fluctuation.

       
Fiscal year 2015      
  Increase in exchange rate in % Effect on income before tax in thousands of CHF Effect on equity in thousands of CHF
EUR / CHF + 10 + 2,293 + 5,355
USD / CHF + 10 + 575 + 1,905
       
Fiscal year 2014      
  Increase in exchange rate in % Effect on income before tax in thousands of CHF Effect on equity in thousands of CHF
EUR / CHF + 10 + 3,616 + 3,685
USD / CHF + 10 + 1,342 + 967

A reduction in exchange rates of the same percentage amount produces an opposite effect of equal size. The sensitivity analysis covers only monetary balance sheet items that, relative to the functional currency of the respective Group company, are settled in foreign currencies.

Interest rate risk

COMET's debt financing exposes it to the risk of interest rate fluctuation. As a high proportion of the loans of the COMET Group carry fixed rates of interest, movements in market interest rates have no material short-term effect on the amounts of interest payable and hence on the income statement. All loans are measured at amortized cost; therefore, in the year under review and the prior year, changes in market interest rates did not have a direct effect on the carrying amounts of the loans, nor therefore on income before tax or on equity. The fair values of long-term debt based on the current interest rate situation are presented on an indicative basis in note 25.1.

26.2.2 Credit risk

Credit risk is the risk that a counterparty will not be willing or able to meet its obligations. To mitigate this risk, COMET deals with multiple well-established banks and spreads credit risk as widely as necessary and reasonable.

Banking transactions: The COMET Group spreads its cash holdings among different banks in order to minimize the potential for losses from credit risk. Banking transactions are conducted only with reputable banks of national and international standing. The types of transactions in which subsidiaries are permitted to engage is centrally determined. The following table shows the amounts held at the four most important counterparties at the balance sheet date:

         
    2015   2014
In thousands of CHF Rating * Balance Rating * Balance
Bank A BBB+ 3,062 A 4,122
Bank B BBB- 7,144 A 2,267
Bank C A 3,489 A 5,271
Bank D A- 4,326 A 3,234
Other counterparties   6,273   3,666
Total bank deposits   24,295   18,559

* Long-term credit rating from Standard & Poor's.

Trade receivables: COMET operates worldwide, selling its products in various countries and to a large number of customers. Consequently there are no excessive concentration risks in individual countries or with respect to individual customers. Payment terms vary according to market and customer. The credit limits and payments received are monitored for each customer by the individual Group companies and the resulting information is made available to Group management in the form of monthly special reports. Appropriate allowance for expected risk of default is made through the provision for doubtful accounts. Receivables are written off only when payment is highly unlikely to be forthcoming. Detailed information on the provision for doubtful accounts and its movement in the year can be found in note 5.

The amount of exposure to credit risk equals the carrying amount of the respective financial instruments in the balance sheet.

26.2.3 Liquidity risk

COMET defines liquidity risk as the risk that, at any time, it will not be able to meet its financial obligations fully as they become due. The foremost goal of financial management is the permanent assurance of the Group's solvency in order to prevent such a contingency. To this end, using liquidity planning, COMET always maintains sufficient liquid assets and credit lines to avoid shortages of liquidity. Ensuring solvency also includes active working capital management. The Group's credit quality is safeguarded by monitoring the leverage ratio of net debt to EBITDA. Liquidity planning and liquidity procurement are to a large extent performed centrally for the whole Group. A rolling three-month cash flow forecast is prepared monthly based on a decentralized, bottom-up approach. The long-term financing of subsidiaries is normally arranged through loans of COMET Holding AG. Following is an overview of all contractual payment obligations as at the balance sheet date, on an undiscounted basis:

           
Fiscal year 2015          
In thousands of CHF Carrying amount Payments due by period
    Total In 2016 2017 – 2020 After 2020
           
Current and long-term debt 22,036 22,232 10,527 11,705 0
Trade and other payables 20,321 20,321 20,321 0 0
Liability for contingent consideration 3,857 3,857 3,857 0 0
Derivatives (negative fair values) 320 320 320 0 0
Total 46,533 46,730 35,024 11,705 0
           
Fiscal year 2014          
In thousands of CHF Carrying amount Payments due by period
    Total In 2015 2016 – 2019 After 2019
           
Current and long-term debt 20,570 22,130 6,682 12,346 3,102
Trade and other payables 24,489 24,489 24,489 0 0
Derivatives (negative fair values) 633 633 633 0 0
Total 45,692 47,252 31,804 12,346 3,102

Current and long-term debt represents both the principal amounts of these borrowings and the contractual interest payments.

The key assumptions of the above summary of payment obligations are:

  • For variable-rate debt, the interest rates at the balance sheet date are used
  • All amounts denominated in foreign currencies are translated at the rate prevailing at the balance sheet date
  • The maturity date used is the earliest possible

The contract amounts of open derivative positions are presented in note 6.3.

27 Capital structure and shareholders

Capital stock

The capital stock at January 1, 2015 was CHF 7,720,660, divided into 772,066 registered shares with a par value of CHF 10 per share. During fiscal year 2015 the capital stock was increased by 1,735 shares from the portion of authorized capital designated for equity compensation. Including the increase of 1,735 shares from this portion of authorized capital, COMET Holding AG at December 31, 2015 thus had CHF 7,738,010 of capital stock, divided into 773,801 registered shares with a par value of CHF 10 per share. The capital stock is fully paid in. At its meeting on August 13, 2015 the Board of Directors established that the capital increase from authorized capital for equity compensation was properly performed. The information on COMET Holding AG in the commercial register was updated to reflect the change in capital stock.

         
    2015   2014
  Number of shares Par value in CHF Number of shares Par value in CHF
January 1 772,066 7,720,660 770,088 7,700,880
Increase in capital from the portion of authorized capital designated for equity compensation 1,735 17,350 1,978 19,780
December 31 773,801 7,738,010 772,066 7,720,660

At the balance sheet date, COMET Holding AG held no treasury stock (prior year: none).

Authorized capital for equity compensation

Under section 3a of its Bylaws, a portion of the Company's unissued authorized capital is designated for use only as equity compensation (in German this portion is known as “bedingtes Aktienkapital”). In such an increase, shares are issued to Executive Committee members and / or Board members of COMET Holding AG (i.e., of the COMET Group). With respect to this portion of authorized capital, the other shareholders' pre-emptive rights are excluded. The issuance of stock or stock subscription rights to employees and Board members is based on a compensation plan (in the form of a written regulation) adopted by the Board of Directors. Grants of stock and of subscription rights to employees and Board members may be made at less than the market price.

In April 2015, under profit-sharing compensation for 2014, the Board of Directors of COMET Holding AG and the Executive Committee of the COMET Group were granted a total of 1,651 shares of stock. In addition, the members of the Board of Directors were granted a total of 84 shares in payment of retainers due for the period from January 1, 2015 to the 2015 Annual Shareholder Meeting. As a result of these grants of a total of 1,735 shares during the year under review, the Company's unissued authorized capital for equity compensation showed the following movement:

         
    2015   2014
  Number of shares Par value in CHF Number of shares Par value in CHF
January 1 24,246 242,460 26,224 262,240
Increase in capital in the fiscal year (award to Board of Directors and Executive Committee for retainers due and for prior year's profit-sharing compensation) (1,735) (17,350) (1,978) (19,780)
December 31 22,511 225,110 24,246 242,460

Authorized capital for other capital increases

The Company had no other unissued authorized capital (in German: “genehmigtes Kapital”) at December 31, 2015, i.e., no unissued capital authorized for purposes other than equity compensation.

27.1 Significant shareholders

At December 31, 2015 the Company, according to disclosure notifications, had the following significant shareholders (defined for this purpose as holding voting rights in excess of 3% of the COMET capital stock recorded in the Swiss commercial register of companies):

     
Beneficial owner Direct shareholder Share of voting rights as disclosed by shareholders
Garlito B.V., Amsterdam   5.09%
Artisan Partners Limited Partnership, Milwaukee, USA Eric R. Colson
Charles J. Daley
Gregory K. Ramirez
5.08%
Pictet Asset Management SA (Direction de Fonds) PICTET (CH) SWISS MID SMALL CAP 5.04%
Vanessa Frey Beat Frey Brigitte Frey Alexandra Frey KWE Beteiligungen AG 5.01%
BlackRock Inc. BlackRock Advisors (UK) Limited BlackRock Asset Management Canada Limited BlackRock Asset Management Schweiz AG BlackRock Fund Advisors BlackRock Fund Managers Limited BlackRock Institutional Trust Company, National Association BlackRock International Limited BlackRock Investment Management (UK) Limited BlackRock (Luxembourg) SA 4.98%
Credit Suisse Funds AG   3.21%
BlackRock Asset Management Schweiz AG BlackRock Global Funds - Swiss Small & MidCap Opportunities Fund, Zurich 3.04%

The Company has not been notified of and is not aware of any other shareholders that held more than 3% of its shares. To the best of the Company's knowledge, there were no voting pool agreements.

28 Share-based payments

Main elements of the compensation system

The compensation system of the COMET Group is designed to attract and retain excellent management and specialist staff. COMET seeks to set compensation levels that reflect individual levels of skills and responsibility in the Group and that are competitive with other employers.

For all employees (including the Executive Committee), the compensation system of the COMET Group provides a fixed base salary paid in cash, and a profit-sharing component. Up to one-half of the profit-sharing remuneration of the Executive Committee members is paid in shares of COMET stock, as a long-term element of compensation. The other employees are paid their profit-sharing compensation in cash. The compensation system for the Board of Directors does not have a performance-based element.

The compensation elements in place take into account short-term and long-term aspects of sustainable company performance and development. COMET is confident that its remuneration architecture creates an effective link between compensation and performance that generates lasting value for shareholders.

Compensation of the Board of Directors

To ensure the independence of the Board of Directors in its supervision of the Executive Committee, the Board members receive only a fixed retainer, of which 75% is paid in cash and 25% is disbursed in shares of the Company.

Compensation of the Executive Committee

The compensation of the members of the Executive Committee includes a fixed base salary and a flat expense allowance. In addition to the base salary, the compensation plan provides a performance-related pay component, of which up to one-half must be drawn in stock. No termination benefits are provided.

Calculation of grant price for share awards

The grant price, at which the stock is awarded and transferred to recipients, is the average closing price of the stock (during the period from the stock's first trading day after the date of the annual results press conference, to the stock's last trading day before the Annual Shareholder Meeting) less a discount of 36%. The discount is intended to make up for the deferral of the compensation and for the price risks associated with the holding period. The shares awarded are subject to a holding period of three years from the date of the award, during which they cannot be sold. All other shareholder rights are already effective during the holding period, including rights to dividends and similar distributions and the right to participate in Shareholder Meetings.

Expenses recorded

The expense recognized for share-based payments in the year under review was CHF 480 thousand (prior year: CHF 1,363 thousand). The amount consisted of CHF 67 thousand for shares already awarded to the Board of Directors in 2015 (84 shares at a quoted market price of CHF 806 per share) and CHF 413 thousand for shares earned in 2015 by the Board and Executive Committee that will not be awarded until 2016.

29 Compensation of the Board of Directors and Executive Committee

Transactions with related parties are conducted at arm's length. The compensation paid to the members of the Executive Committee and Board of Directors can be analyzed as follows:

     
In thousands of CHF 2015 2014
Cash compensation, including short-term employee benefits 2,823 2,992
Contributions to post-employment benefit arrangements 339 293
Expense for share-based payments 492 1,318
Total compensation 3,654 4,604

Additional compensation for legal services

In the year under review the law firm Notter, Mégevand & Partner, based in Berne, Fribourg and Geneva, invoiced services in the amount of CHF 30,600 (prior year: CHF 36,500). Hans Leonz Notter is a partner at this firm, whose members provide legal advice and other legal services to the COMET Group.

30 Events after the balance sheet date

There have been no events after the balance sheet date with a material effect on the amounts in the consolidated financial statements.

31 Proposed distribution to shareholders

The Board of Directors will propose at the Annual Shareholder Meeting to pay a distribution of CHF 11.00 per share (prior year: CHF 11.00) to shareholders from distributable paid-in capital. The total amount of the proposed distribution is CHF 8,512 thousand (prior year: CHF 8,493 thousand).

32 Release of the consolidated financial statements for publication

The Board of Directors released these annual financial statements on March 3, 2016 for publication and will present them to shareholders for approval at the Annual Shareholder Meeting on April 21, 2016.