RAPALA VMC CORPORATION STOCK EXCHANGE RELEASE February 6, 2007 1(15)
ANNUAL ACCOUNTS 2006 - STRONG GROWTH CONTINUED
. Net sales for the full year increased 16% to 226.6 MEUR (I-IV/05: 196.1 MEUR).
Fourth quarter net sales were up 10% from last year and amounted to 49.2 MEUR
(IV/05: 44.8 MEUR).
. Operating profit for year 2006 improved slightly from 2005 and totaled 21.7
MEUR (21.5 MEUR). Increased costs for labor and raw materials especially in
China and the weakening of US dollar during 2006 slowed down the increase of
operating profit. Operating profit for October-December was 0.7 MEUR (2.7
MEUR).
. Net profit for the full year amounted to 11.0 MEUR (14.0 MEUR) and 0.5 MEUR
(0.8 MEUR) for the fourth quarter. Earnings per share were 0.28 EUR (0.37 EUR)
for the full financial year 2006 and 0.01 EUR (0.02 EUR) for the quarter.
. Cash flow from operating activities was 10.0 MEUR (12.1 MEUR) for the full
year. Working capital decreased 0.2 MEUR from September. Net interest-bearing
debt increased to 99.3 MEUR (Dec 2005: 95.9 MEUR). Equity-to-asset ratio
increased to 33.4% (Dec 2005: 33.1%) and gearing decreased to 122.2% (Dec 2005:
127.1%).
. The Group continued to implement its strategy for profitable growth. The
purchase of French fishing line supplier Tortue was completed in January and
the purchase of South-African fishing tackle distributor Tatlow & Pledger in
February. In January 2007, the Group completed the acquisition of Terminator
lure business in the USA. Also organic growth continued. The Group opened a
distribution company in South Korea and is commencing a lure assembly factory
in Russia in next 2-3 weeks. Integration of previously acquired businesses
progressed on plan.
. The outlook for 2007 is positive. Including the Terminator acquisition in early
2007, it is expected that the Group's net sales for the financial year 2007
will increase 5-10% assuming 2006 average exchange rates. Possible additional
acquisitions during 2007 would further increase the sales. Assuming 2006
average exchange rates, operating profit margin is expected to improve from
2006.
. Board proposes to the Annual General Meeting that a dividend of EUR 0.12 per
share be paid.
The attachment presents the summary of annual review by the Board of Directors
and extracts from the IFRS financial statements.
A conference call concerning the fourth quarter interim report will be arranged
today at 2 pm Finnish time (1 pm CET). To participate, please dial 5 minutes
before the beginning of the event +358 2069 9121 and request to be connected to
the Rapala teleconference. Rapala's financial information is also available on
the internet at www.rapala.com.
For further information, please contact:
Jorma Kasslin, President and Chief Executive Officer, +358 9 7562 540
Jouni Grönroos, Chief Financial Officer, +358 9 7562 540
Olli Aho, Investor Relations, +358 9 7562 540
Distribution: Helsinki Stock Exchange and Main Media
RAPALA VMC CORPORATION STOCK EXCHANGE RELEASE February 6, 2007 2(15)
Markets and Sales
The general market conditions were quite good and stable during 2006. After the
good first quarter, the US market temporarily slowed down due to certain working
capital initiatives of some large customers. Second quarter also suffered from
the cool spring in many countries. During the third quarter, US market recovered
from the dip and showed growth again. Several markets benefited also from the
summer lasting longer than normally. In West Europe, the trading conditions
continued to be stable while the new markets like East Europe, South-Africa and
Asia continued to grow faster than the other markets.
Year 2006 was characterized by strong sales growth and expansion of operations as
a result of acquired businesses and newly established distribution companies in
the end of 2005 and early 2006. The seasonality of the fishing tackle business
was mitigated by expanding the Group's sales operations in southern hemisphere
and closer to equator, including the acquisitions of Australian Freetime in 2005
and South African Tatlow & Pledger in 2006. Also new start-up operations in
Malaysia, Thailand, China and South Korea balance the seasonality. This
development has increased the sales of fishing tackle products in the seasonally
slow third quarter. Accordingly, the sales and profitability differences between
the quarters are decreasing.
Net sales were up 16% from last year and amounted to 226.6 MEUR (2005: 196.1
MEUR). This increase came from all geographical segments. Relatively, the sales
growth was strongest in new markets. All product lines increased their sales:
lures sales were up 15%, fishing hooks 3%, accessories 24%, third party fishing
products 23% and other products 5%. The businesses acquired during 2006 increased
sales by 9.1 MEUR. For more detailed segment information see the attached
accounts.
Financial Results
Key figures
EUR million IV/2006 IV/2005 2006 2005
Net sales 49.2 44.8 226.6 196.1
EBITDA 2.4 3.3* 28.0 26.3*
Operating profit (EBIT) 0.7 2.7* 21.7 21.5*
Profit before taxes -0.3 0.5* 14.6 18.6*
Net profit for the period 0.5 0.8* 11.0 14.0*
* Note: 2005 and Q4 comparables changed due to IFRS improvements during 2006
audit.
Operating profit increased slightly from previous year and totaled 21.7 MEUR
(21.5 MEUR). Increased costs for labor and raw materials especially in China and
the weakening of US dollar during 2006 slowed down the increase of operating
profit. Operating margin was 9.6% (11.0%) and return on capital employed 12.3%
(13.8%). The profitability was affected by the start-up costs in newly
established operations and strong investment in business development. In 2006,
these costs were some 3.0 MEUR higher than in 2005. Operating profit includes a
negative foreign exchange effect of 2.3 MEUR. Big part of this exposure was
hedged in the second half of the year but the hedging result (+0.3 MEUR) is
booked in financial items in accordance with IFRS. On the other hand, operating
profit in 2005 included 0.6 MEUR more IFRS based option expenses than in 2006.
All geographical segments generated a positive operating profit for 2006 and the
biggest improvement came from North America. Nordic was down from last year due
to foreign exchange movements. For more detailed geographical segment information
see the attached accounts.
RAPALA VMC CORPORATION STOCK EXCHANGE RELEASE February 6, 2007 3(15)
Financial expenses were above previous year level as a result of increased
interest rates and foreign exchange losses compared to major foreign exchange
gains in 2005.
Net profit for 2006 amounted to 11.0 MEUR (14.0 MEUR) and earning per share was
0.28 EUR (0.37 EUR).
Cash Flow and Financial Position
Cash flow from operating activities decreased from 2005 and amounted to 10.0 MEUR
(12.1 MEUR).
The project to reduce working capital continued during the year. Part of the
business units met their targets while more work is still needed in few units. As
a result of organic growth and acquired operations, the working capital
increased. During 2006, the working capital increased 8.1 MEUR excluding
acquisitions. Excluding the effect of newly acquired or established businesses,
inventories increased 3% from 2005, which is clearly less than the sales growth
in comparable operations, which was almost 11%.
Net cash used in investing activities amounted to 14.7 MEUR (16.2 MEUR). This
includes the final payment of Luhr Jensen acquisition closed in 2005 (2.9 MEUR).
The total purchase price for all acquisitions closed in 2006 is 5.5 MEUR of which
3.9 MEUR is allocated to working capital, 1.7 MEUR to fixed assets, 0.2 MEUR to
other assets and 0.3 MEUR to liabilities.
Net interest-bearing debt increased to 99.3 MEUR (Dec 2005: 95.9 MEUR) as a
result of acquisitions done in 2006. Thanks to good profitability, equity-to-
asset ratio increased to 33.4% (Dec 2005: 33.1%) and gearing decreased to 122.2%
(Dec 2005: 127.1%).
In October, the Group signed the agreements for refinancing its bank debt. The
new 7-year multicurrency loan facility with Nordea Bank and OKO Bank totals 130
MEUR. These two banks currently hold more than 90% of the Group's bank debt. The
new loan facility strengthens the Group's capabilities to finance its strategy
for profitable growth and reduces financing costs.
Also Rapala's first ever commercial paper program of 25 MEUR was signed in
October. It will be used to finance working capital and other short term
financing needs.
Strategy Implementation
Strong investment in business development to implement the Group's strategy for
profitable growth continued in 2006 while increasing emphasis was put on
integration of the acquired businesses. Both the market coverage and the product
portfolio were expanded and the Group's position in current markets and product
categories was strengthened.
Management continued discussions and negotiations regarding acquisitions and
business combinations to further implement Group's strategy. French fishing line
supplier Tortue was acquired in January and the South-African distributor Tatlow
& Pledger in February 2006. In January 2007, Terminator branded spinner bait and
lure business was acquired in the USA.
Also organic growth continued strong. The Group established a lure assembling
factory in Russia and it will commence operations during February 2007. The start-
up process of the new sales companies in Asia continued well and the ramp-up of
the
RAPALA VMC CORPORATION STOCK EXCHANGE RELEASE February 6, 2007 4(15)
production at the Chinese new knife factory was completed. The sales growth in
Eastern Europe continued strong through Group's own distribution network. In
January 2007, a wholly owned distribution company was established in South Korea.
Work on integration of previously acquired businesses continued on plan. The
manufacturing of Luhr Jensen products ended in the USA in June and the first
products from the Group's Chinese factory were delivered in September. The
integration of sales companies acquired in 2005 and early 2006, as well as
Marttiini and Peltonen manufacturing operations, is now completed.
During 2006 the Group also finalized the development of new products for 2007
season and introduced them to distribution channels. The deliveries of these new
products started in the last quarter of 2006 and they have reached or are about
to reach the retail stores by now.
Performance Improvement Initiatives
In addition to the working capital project and renegotiation of bank debt,
several cost cutting and sales improvement initiatives were started during 2006
in business units with unsatisfactory profitability. A clear improvement was seen
in most of these units. This initiative will continue in 2007. Also a global
tender process was arranged for several insurances and new Global insurance
policies with lower premiums signed in December.
Shareholder Agreement and Management Ownership
In June 2006, Utavia S.à.r.l (Utavia) purchased 1 610 000 shares of Rapala from
De Pruines Industries (DPI). Simultaneously, Viellard Migeon & Cie (VM&C) and
Utavia entered into a shareholders' agreement with respect to their shares in
Rapala. DPI is a subsidiary of VM&C. The main shareholder of Utavia is CEO Jorma
Kasslin with some 43% shareholding. The other shareholders are Board members or
managers of the Group. After the deal, VM&C owns directly or through its
subsidiaries some 27% and Utavia some 4% of the issued share capital and voting
rights of Rapala. For more details, see notes.
Personnel
The number of personnel decreased slightly during the year and was 3 921 (3 986)
at year end.
RAPALA VMC CORPORATION STOCK EXCHANGE RELEASE February 6, 2007 5(15)
Outlook for 2007
The outlook for 2007 is positive and no major changes are expected in the
markets. Including the Terminator acquisition, it is expected that the Group's
net sales for the financial year 2007 will increase 5-10% assuming 2006 average
exchange rates. Possible additional acquisitions during 2007 would further
increase the sales.
The profitability of the Group's ongoing operations continues to be good. Special
initiatives have been started to further improve the profitability. In addition,
prices have been increased to compensate for recent cost increases. Business
development and integration expenses and start-up costs will continue still in
2007 while new initiatives are planned and implemented but these costs are not
expected to exceed the comparable costs in 2006. Assuming 2006 average exchange
rates, operating profit margin is expected to improve compared to 2006 while the
investments and development initiatives made in 2005 and 2006 will start to bear
fruit in 2007.
Negotiations and discussions for new acquisitions and business combinations
continue while new products and applications are being planned and developed. New
products for 2008 season have just been finalized and they will be introduced to
the distributors within the next few months.
The project to reduce working capital and to improve cash flow will continue in
2007. The target is to see an improvement on ongoing operations while new
acquisitions, start-ups and strongly growing units will tie additional working
capital.
In 2007, the Group will publish interim reports as follows: first quarter on
April 26, second quarter on July 26 and third quarter on October 25, 2007. The
annual report for 2006 will be published on the week starting on March 19, 2007.
Proposal for Profit Distribution
The Board of Directors proposes to the Annual General Meeting that a dividend of
EUR 0.12 for 2006 (EUR 0.11 for 2005) per share be paid from the Group's
distributable funds and that any remaining distributable funds be allocated to
retained earnings. At December 31, 2006, the parent company's distributable funds
totaled 52.3 MEUR.
Helsinki, February 6, 2007
Board of Directors of Rapala VMC Corporation
RAPALA VMC CORPORATION STOCK EXCHANGE RELEASE February 6, 2007 6(15)
CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
INCOME STATEMENT Oct-Dec Oct-Dec* Jan-Dec Jan-Dec*
EUR million 2006 2005 2006 2005
Net sales 49.2 44.8 226.6 196.1
Other operating income 1.0 -0.2 1.5 0.8
Cost of sales 29.6 25.3 128.3 108.5
Other costs and expenses 18.3 16.0 71.9 62.0
EBITDA 2.4 3.3 28.0 26.3
Depreciation 1.6 0.5 6.3 4.8
Operating profit (EBIT) 0.7 2.7 21.7 21.5
Financial income and expenses 1.0 2.2 7.1 2.9
Profit before taxes -0.3 0.5 14.6 18.6
Income taxes -0.8 -0.3 3.6 4.6
Net profit for the period 0.5 0.8 11.0 14.0
Attributable to:
Equity holders of the Company 0.4 0.8 10.8 14.0
Minority interest 0.1 0.1 0.2 0.0
Earnings per share for profit
attributable
to the equity holders of the Company:
Earnings per share, EUR (diluted = 0.01 0.02 0.28 0.37
non-diluted)
RAPALA VMC CORPORATION STOCK EXCHANGE RELEASE February 6, 2007 7(15)
STATEMENT OF CASH FLOWS Oct-Dec Oct-Dec Jan-Dec Jan-Dec
EUR million 2006 2005 2006 2005
Net profit for the period 0.5 0.8 11.0 14.0
Adjustments -0.8 -2.8 7.1 1.9
Change in working capital 0.2 2.0 -8.1 -3.8
Net cash generated from operating -0.1 0.0 10.0 12.1
activities
Investments -2.6 -2.0 -7.2 -6.2
Proceeds from sales of assets 0.1 0.1 0.6 0.4
Change in loans receivable 0.2 0.0 0.2 0.0
Acquisition of subsidiaries, net of -2.1 -6.5 -8.3 -10.4
cash
Net cash used in investing activities -4.4 -8.5 -14.7 -16.2
Dividends paid 0.0 0.0 -4.2 -3.4
Net funding 6.6 -0.7 14.7 8.8
Proceeds from share subscriptions 0.0 2.0 0.4 2.0
Net cash generated from financing 6.6 1.3 10.9 7.4
activities
Change in cash and cash equivalents 2.2 -7.2 6.2 3.2
Cash & cash equivalents at the 22.7 26.7 19.2 14.8
beginning of the period
Foreign exchange rate effect -0.4 -0.2 -1.0 1.2
Cash and cash equivalents at the end of 24.4 19.2 24.4 19.2
the period
RAPALA VMC CORPORATION STOCK EXCHANGE RELEASE February 6, 2007 8(15)
BALANCE SHEET Dec 31 Dec 31*
EUR million 2006 2005
ASSETS
Non-current assets
Intangible assets 53.3 55.1
Property, plant and equipment 29.4 29.8
Non-current financial assets
Interest-bearing 0.6 0.9
Non interest-bearing 6.3 5.6
89.6 91.4
Current assets
Inventories 73.0 71.7
Current financial assets
Interest-bearing 0.2 0.0
Non interest-bearing 56.5 45.5
Cash and cash equivalents 24.4 19.2
154.0 136.4
Total assets 243.6 227.8
EQUITY AND LIABILITIES
Equity
Equity attributable to the equity holders 80.7 75.3
of the Company
Minority interest 0.6 0.2
81.3 75.4
Non-current liabilities
Interest-bearing 64.6 60.4
Non interest-bearing 6.6 3.6
71.1 64.0
Current liabilities
Interest-bearing 59.9 55.6
Non interest-bearing 31.3 32.8
91.2 88.4
Total equity and liabilities 243.6 227.8
Rounding of figures
All figures in these accounts have been rounded. Consequently the sum of
individual figures can deviate from the presented sum figure. Key figures have
been calculated using exact figures.
RAPALA VMC CORPORATION STOCK EXCHANGE RELEASE February 6, 2007 9(15)
CONSOLIDATED STATEMENT OF CHANGES IN
EQUITY
Attributable to equity holders
Share Share Fair Cumulative Retained Minority Total
capital premium value translation equity
reserve earnings interest
fund differences
EUR million
Equity on January 1, 3.4 11.2 - -5.1 49.8 0.6 59.8
2005
Adjustments according to - - - - -1.0 - -1.0
IAS 8
Restated equity on 3.4 11.2 - -5.1 48.7 0.6 58.8
January 1, 2005
Change in translation - - - 0.6 - - 0.6
differences
Net profit for the - - - - 14.7 0.0 14.7
period
Total recognized income - - - 0.6 14.7 0.0 15.3
and expenses
Private offering - 3.2 - - - - 3.2
Dividends paid - - - - -3.4 - -3.4
Shares subscribed with 0.1 1.9 - - - - 2.0
options
Stock option program - - - - 1.4 - 1.4
Other changes - - - 0.0 -0.6 -0.5 -1.0
Equity on December 31, 3.5 16.3 - -4.5 60.8 0.2 76.3
2005
Adjustments according to - - - - -0.8 - -0.8
IAS 8
Restated equity on 3.5 16.3 - -4.5 60.0 0.2 75.4
January 1, 2005
Change in translation - - - -2.6 - - -2.6
differences
Net profit for the - - - - 10.8 0.2 11.0
period
Total recognized income - - - -2.6 10.8 0.2 8.4
and expenses
Dividends paid - - - - -4.2 - -4.2
Shares subscribed with 0.0 0.4 - - - - 0.4
options
Stock option program - - - - 0.8 - 0.8
Net investment in a - - - 0.0 - - 0.0
foreign operation
Fair value gains on - - 0.1 - - - 0.1
available-for-sale
investments, net of tax
Other changes - - - - 0.2 0.2 0.4
Equity on December 31, 3.5 16.7 0.1 -7.1 67.6 0.6 81.3
2006
RAPALA VMC CORPORATION STOCK EXCHANGE RELEASE February 6, 2007 10(15)
KEY FIGURES IV/2006 IV/2005* 2006 2005*
EBITDA margin, % 4.8% 7.3% 12.4% 13.4%
Operating margin, % 1.5% 6.1% 9.6% 11.0%
Return on capital employed, % 1.7% 7.0% 12.3% 13.8%
Capital employed at end of period, MEUR 180.6 171.3 180.6 171.3
Net interest-bearing debt at end of period, MEUR 99.3 95.9 99.3 95.9
Equity-to-assets ratio at end of period, % 33.4% 33.1% 33.4% 33.1%
Debt-to-equity ratio at end of period, % 122.2% 127.1% 122.2% 127.1%
Earnings per share, EUR 0.01 0.02 0.28 0.37
Average number of shares outstanding (1000) 38 576 37 871 38 565 37 871
Fully diluted earnings per share, EUR 0.01 0.02 0.28 0.37
Fully diluted average number of shares (1000) 38 620 37 889 38 609 37 889
Equity per share at end of period, EUR 2.09 1.96 2.09 1.96
Number of shares outstanding at end of period 38 576 38 498 38 576 38 498
(1000)
Average personnel for the period 3 964 3 780 3 987 3 780
RAPALA VMC CORPORATION STOCK EXCHANGE RELEASE February 6, 2007 11(15)
KEY FIGURES BY QUARTERS
EUR million I/05 II/05 III/05 IV/05* 2005* I/06 II/06 III/06 IV/06 2006
Net sales 51.6 60.6 39.0 44.8 196.1 63.4 64.2 49.8 49.2 226.6
EBITDA 8.7 13.1 1.3 3.3 26.3 11.6 9.7 4.4 2.4 28.0
Operating profit
(EBIT) 7.3 11.7 -0.2 2.7 21.5 10.0 8.1 2.8 0.7 21.7
Profit before
taxes 6.9 11.7 -0.5 0.5 18.6 7.8 6.1 1.0 -0.3 14.6
Net profit for
the period 5.1 8.7 -0.6 0.8 14.0 5.7 4.5 0.4 0.5 11.0
SEGMENT INFORMATION**
EUR million IV/2006 IV/2005* 2006 2005*
Net Sales by Area**
North America 14.3 13.5 69.7 66.4
Nordic 22.1 22.2 94.2 84.0
Rest of Europe 18.0 15.6 83.0 69.9
Rest of the world 11.7 8.8 43.7 27.8
Intra Group -16.9 -15.4 -64.0 -52.1
Total 49.2 44.8 226.6 196.1
Operating Profit by Area**
North America 1.2 0.7 6.4 3.9
Nordic 0.5 2.6 6.9 10.2
Rest of Europe 0.8 0.5 7.0 5.7
Rest of the world -1.0 -0.2 2.8 2.0
Intra Group -0.9 -0.9 -1.4 -0.4
Total 0.7 2.7 21.7 21.5
Net Sales by Product line***
Lures 16.2 11.8 73.0 63.4
Fishing Hooks 3.4 4.0 14.8 14.3
Fishing Accessories 13.9 11.9 45.8 37.0
Third Party Fishing Products 3.9 4.4 53.5 43.4
Other Products 12.7 13.0 42.4 40.3
Intra Group -0.7 -0.3 -2.9 -2.4
Total 49.2 44.8 226.6 196.1
** Note: This primary segment information is by geographical areas and it has
been prepared on source basis i.e. based on the location of the business unit.
Each area shows the sales/profit generated in that area excluding intra-group
transaction within that area, which have been eliminated. Intra Group line
includes the eliminations of intra-group transactions between geographical areas.
*** Note: This secondary segment information is by product lines. Lures, Fishing
Hooks and Fishing Accessories include Group branded fishing tackle products.
Third Party Fishing Products include non-Group branded fishing products, mostly
rods and reels. Other Products include non-Group branded (third party) products
for hunting, outdoor and winter sports and Group branded products for winter
sports and some other businesses.
RAPALA VMC CORPORATION STOCK EXCHANGE RELEASE February 6, 2007 12(15)
NOTES TO THE INCOME STATEMENT AND BALANCE SHEET
This interim report has been prepared in accordance with recognition and
valuation principles of International Financial Reporting Standards (IFRS) and in
accordance with IAS 34 (Interim Financial Reporting). The Group adopted in 2006
the following new and amended standards and interpretations: IAS 19 (amendment)
Employee benefits, IAS 21 (amendment) The Effects of Changes in Foreign Exchange
Rates, IAS 39 (amendment) Financial Instruments: Recognition and Measurement,
IFRS 6 Exploration for and Evaluation of Mineral Resources, IFRIC 4 Determining
whether an Arrangement Contains a Lease, IFRIC 5 Rights to Interest arising from
Decommissioning, Restoration, and Environmental Rehabilitation Funds, and IFRIC 6
Liabilities arising from Participating in a Specific Market - Waste Electrical
and Electronic equipment. Adoption of these standards and interpretations did
not result in any changes in the accounting principles that would have affected
the information presented in this report.
Inventories
In 2006 the book value of inventories differed from its net realizable value by
EUR 1.0 million. In 2005, the book value of inventories did not differ
significantly from its net realizable value.
Open currency derivatives
EUR million Dec 31, Dec 31,
2006 2005
Net fair values 0.0 0.0
Contract amount 0.4 0.6
Commitments
EUR million Dec 31, Dec 31,
2006 2005
Mortgages and pledges
To secure borrowings of Group companies 17.6 41.8
Guarantees
To secure borrowings of Group companies 1.1 0.5
On behalf of other parties 0.6 0.1
Minimum future lease payments on operating leases 12.6 5.6
Related party transactions
EUR million 2006 2005
Purchases from associated company Lanimo Oü 0.1 0.0
Trade payables to associated company Lanimo Oü 0.1 0.0
Impact of acquisitions on the consolidated financial statements
In January 2006, Rapala acquired the French fishing line supplier Tortue. In
February 2006, Rapala VMC South-Africa Distributors Pty Ltd ("Rapala South-
Africa")
RAPALA VMC CORPORATION STOCK EXCHANGE RELEASE February 6, 2007 13(15)
acquired 100% of the shares of Tatlow and Pledger Pty Ltd ("T&P"). Rapala's
ownership of Rapala South-Africa is now 70% while the former managers of T&P,
Grant and Mark Pledger, together own 30%. These acquisitions contributed EUR 9.1
million to the 2006 net sales and EUR 1.0 million to the net profit of the Group.
These figures would have been the same even if the acquisitions would have taken
place in the beginning of the year.
In January 2007, Rapala acquired the fishing tackle business of Outdoor
Innovations LLC and Horizon Lures LP ("Terminator"), USA based manufacturers and
distributors of Terminator branded spinner baits and other fishing lures. The
deal includes patents for the use of nickel titanium wire in fishing lures, trade
marks, customer lists, inventories, and some other assets. The total
consideration was 2.4 MEUR including 0.1 MEUR of transaction costs. The book
value of acquired assets where: working capital 2.6 MEUR, intangible assets 0.1
MEUR and tangible assets 0.1 MEUR. The fair value adjustment is 0.5 MEUR to
intangible assets. Excess of Group's interest in the net fair value of acquired
net assets over cost is 0.9 MEUR. These figures are preliminary.
Dec 31, 2006 Fair Seller's
EUR million value carrying
amount
Cash and cash equivalents and interest-bearing assets 1.1 1.1
Working capital 3.9 3.9
Intangible assets 1.2 0.0
Tangible assets 0.1 0.1
Deferred tax asset 0.0 0.0
Interest-bearing liabilities 0.0 0.0
Deferred tax liability -0.3 0.0
Fair value of acquired net assets 5.9 5.0
EUR million 2006
Cash paid 6.3
Cash to be paid later 0.2
Cost associated with the acquisitions 0.1
Total purchase consideration 6.6
Goodwill 0.7
Cash paid for 2006 acquisitions 6.4
Final payment of the Luhr Jensen acquisition closed in 2005 2.9
Cash and cash equivalents acquired -0.9
Net cash flow 8.3
Non-recurring income and expenses in operating profit
EUR million 2006 2005
Losses on disposals of intangible and tangible assets -0.1 0.0
Excess of Group's interest in the net fair value of 0.0 0.8
acquired net assets over cost
Restructuring costs -0.2 0.0
Start-up costs -0.1 -0.1
Total -0.4 0.7
RAPALA VMC CORPORATION STOCK EXCHANGE RELEASE February 6, 2007 14(15)
Share-based payments
The Group has three separate share-based payment programs: two stock option
programs and one synthetic option program settled in cash. Terms and conditions
of the option program are described in detail in the Annual Report 2006. The
options are valued at fair value on the grant date by using the Black-Scholes-
Merton option-pricing model. The total estimated value of the program is EUR 5.5
million. Share-based payments programs are valued at fair value on the grant date
and recognized as an expense in the income statement during the vesting period
with a corresponding adjustment to the equity or liability.
Grant date is the date at which the entity and another party agree to a share-
based payment arrangement, being when the entity and the counter party have a
shared understanding of the terms and conditions of the arrangement. 1 909 500
share option where granted on June 8, 2004, 92 500 share options on February 14,
2006 and 995 500 synthetic options on December 14, 2006. Vesting period is the
period during which all the specified vesting conditions of a share-based payment
arrangement are to be satisfied. The vesting periods of the option program are:
for 2003A March 31, 2005 to March 31, 2007, for 2003B March 31, 2006 to March 31,
2008, for 2004A March 31, 2007 to March 31, 2009, for 2004B from March 31, 2008
to March 31, 2010, for 2006A from March 31, 2009 to March 31, 2011 and 2006B from
March 31, 2010 to March 31, 2012. Applying of IFRS 2 reduced operating profit
with 1.5 MEUR in 2005 and 0.9 in 2006.
Shares and share capital
Based on this authorization given by the Annual General Meeting (AGM) in April
2006, the Board can decide on an increase of the share capital by a maximum of
675 000 euros in one or more issues of new shares within one year from the AGM. A
maximum of 7 500 000 new shares each with a counter book value of 0.09 euro may
be offered for subscription. 77 966 new Rapala shares where subscribed with 2003A
option rights in February 2006. The share capital increased with 7 016.94 EUR and
the subscriptions were registered in the Trade Register on March 3, 2006 and
listed on the main list of the Helsinki Stock Exchange on March 6, 2006. As a
result of the share capital increase the company's share capital is 3 471 864.21
EUR and the number of shares 38 576 269 on December 31, 2006. A further 2 500
shares may still be subscribed with the 2003A option rights by 31 March 2007 at
the latest.
As a result of the share subscriptions with the 2003 and 2004 stock option
programs, and if all stock options are fully exercised, the Group's share capital
may still be increased by a maximum of 122 730 EUR and the number of shares by a
maximum of 1 363 668 shares. The shares that can be subscribed with these stock
options correspond to 3.5% of the Company's shares and voting rights.
In 2006, 12 468 161 shares (23 027 428 shares) were traded. The shares traded at
a high of 6.75 EUR and a low of 5.60 EUR during the period. The closing share
price at the end of the period was 6.19 EUR.
RAPALA VMC CORPORATION STOCK EXCHANGE RELEASE February 6, 2007 15(15)
Shareholder Agreement
Viellard Migeon & Cie (VM&C) and Utavia S.à.r.l (Utavia) entered into a
shareholders' agreement on June 29, 2006 with respect to their shares in Rapala,
and the shareholders of Utavia have agreed to be bound by the said shareholders'
agreement. The main shareholder of Utavia is the CEO of Rapala, Jorma Kasslin,
with ca. 43% shareholding. The other shareholders are Board members or managers
of the Group. In total, Utavia has some 40 shareholders. On June 29, 2006 Utavia
purchased from De Pruines Industries 1 610 000 shares representing ca. 4.17% of
the issued share capital and voting rights in Rapala. De Pruines Industries is a
subsidiary of VM&C.
In the shareholders' agreement Utavia has undertaken to vote in Rapala's general
meetings of shareholders in favor of the resolutions approved and/or submitted by
VM&C and authorized VM&C to exercise the voting rights attached to the Rapala
shares held by it. Utavia has undertaken not to sell more than 50% of the shares
it owns in Rapala during the period of first two years after the execution of the
shareholders' agreement. VM&C has a right of first refusal to any shares sold by
Utavia. The parties to the shareholders' agreement undertake to use and exercise
the votes that they control at the general meetings of shareholders of Rapala so
that two persons designated by VM&C and one person designated by Utavia (the
first person to be appointed being Jorma Kasslin in this respect) are appointed
as members of the Board. The parties to the shareholders' agreement have agreed
to support Jorma Kasslin as the CEO of Rapala for a period of three years from
the execution of the shareholders' agreement and election of Emmanuel Viellard as
the chairman of the Board during the same period.
Events after the balance sheet date
The Group has no knowledge of any significant events after the balance sheet date
that would have a material impact on the financial statements for 2006. Material
events after the balance sheet date have been discussed in the Review of the
Board.