ANNUAL ACCOUNTS 2009: MAJOR CASH FLOW IMPROVEMENT
(Thomson Reuters ONE) - Rapala VMC CorporationStock Exchange ReleaseFebruary 4, 2010 at 9.30 a.m.- Net sales for the fourth quarter increased to 51.4 MEUR (IV/08: 50.9 MEUR).Net sales for the full year decreased to 234.6 MEUR (I-IV/08: 243.0 MEUR). Withcomparable exchange rates, last quarter net sales increased 4% and full year netsales decreased 1%.- Operating profit for the fourth quarter benefitted from a small capital gainbut was strongly affected by negative currency movements and stock salesrelated to the major working capital project and amounted to 0.7 MEUR (3.2MEUR). Comparable operating profit for the full year was 23.5 MEUR (30.5 MEUR)and comparable operating margin 10.0% (12.6%). Reported operating profit was22.1 MEUR (31.3 MEUR) for the full year.- Net profit for the fourth quarter was -0.8 MEUR (1.0 MEUR) and 14.3 MEUR (19.2MEUR) for the full year. Earnings per share were -0.02 EUR (0.05 EUR) for thequarter and 0.31 EUR (0.45 EUR) for the full year.- The major working capital initiative started in late 2008 progressed during2009 and the results started to capitalize. Accordingly, the cash flow fromoperating activities for the fourth quarter increased in multiples to 6.0 MEUR(1.6 MEUR) and to 24.6 MEUR (5.4 MEUR) for the full year. This project continuesand further results are expected in 2010.- Implementation of the Group's strategy continued in the fourth quarter withwork to establish new distribution companies in Romania, Belarus, Iceland andChina as well as to finalize the performance improvement initiative in Hungary.The set-up of the new operating model in China and the integration of Sufixfishing line business were also completed. In December, the fish pheromone brandUltrabite was acquired.- Orders for Group branded lures and winter sports equipment have recently beenon a record level. Accordingly, the Group lure manufacturing facilities and thePeltonen ski factory are currently running at full capacity.- It is expected that both the net sales and the operating margin excludingnon-recurring items will increase from 2009.- Board proposes to the Annual General Meeting that a dividend of EUR 0.19 pershare to be paid. This represents 61% of earnings per share.The attachment presents the summary of the annual review by the Board ofDirectors and extracts from the financial statements for 2009.A conference call on the 2009 result will be arranged today at 3 p.m. Finnishtime (1 p.m. CET). Please dial +44 (0)20 3147 4971 or +1 347 366 9564 or +358(0)9 2310 1667 (pin code: 667611#.) five minutes before the beginning of theevent and request to be connected to Rapala teleconference. A replay facilitywill be available for 14 days following the teleconference. The number to dialis +44 (0)20 7111 1244 (pin code: 667611#). Financial information andteleconference replay facility are available at www.rapala.com.For further information, please contact:Jorma Kasslin, President and Chief Executive Officer, +358 9 7562 540Jouni Gr?os, Chief Financial Officer, +358 9 7562 540Olli Aho, Investor Relations, +358 9 7562 540Distribution: NASDAQ OMX Helsinki and Main MediaMarket Situation and SalesYear 2009 started quite well although the general downturn in the world economystarted to influence also fishing tackle market in the end of 2008. The strongweakening of many currencies increased the pressure on consumer confidence inEast Europe and started quickly to reduce the purchase power in the region. Atthe same time, market situation especially in West Europe and Nordic countriescontinued quite weak but confidence in Asia and Australia continued to pick-up.During the third quarter, both European and North American markets started togradually strengthen. In North America, orders especially for lures increasedduring the second half of the year. In the fourth quarter, sales of products forwinter sports increased as a result of good snow situation in Europe. Theimproved sales performance in the latter part of the year was though diluted bythe weak currencies in many European countries.Net sales for 2009 decreased 3% to 234.6 MEUR (243.0 MEUR). US dollar (USD)strengthened 5% from previous year but many currencies especially in East Europeand Scandinavia weakened strongly. The net effect of the currency movementsdecreased the 2009 net sales by 5.0 MEUR. With comparable exchange rates, netsales decreased 1%.Net sales of Group Fishing Products, boosted by the new sales of Sufix fishinglines, were up 6% in 2009. Net sales of Other Group Products decreased 27% as aresult of reduced sales of gift products and subcontracting services while salesof Peltonen cross-country skis increased markedly. Net sales of Third PartyProducts decreased 9% mainly due to the weakening of many East European andScandinavian currencies and reduced sales of higher price category products likefishing electronics and expensive reels and hunting equipments.Supported by the strengthening of USD, the net sales in North America increased6%. In the Nordic Countries, the net sales decreased 4% as a result of reduceddistribution volumes of especially hunting products and weakening of Swedish andNorwegian crowns. Net sales in Rest of Europe were down by 11% due to difficultmarket situation and weakened currencies in East Europe. Net sales in Rest ofthe World increased 2% as a result of the new sales of Sufix products andstrengthening of USD while the sales of gift products fell strongly.Financial Results and ProfitabilityOperating profit for 2009, excluding non-recurring items, amounted to 23.5 MEUR(30.5 MEUR). It was strongly affected by reduction of sales and negativecurrency movements in Scandinavia and East Europe. Profitability was alsoaffected by liquidation campaigns arranged in several countries to reduceinventories as part of the ongoing working capital project. On the other hand,fixed costs were down 3% as a result of several performance improvementinitiatives carried out during the last two years. Comparable operating marginfor the year was 10.0% (12.6%).Reported operating profit for 2009 was 22.1 MEUR (31.3 MEUR) includingnon-recurring costs and impairment losses of 1.9 MEUR and a non-recurring gainof 0.5 MEUR from the sale of office premises in Hong Kong (net gain of 0.8 MEURin 2008). Most of these non-recurring costs and impairment losses relate to therestructure of the operating model in the Group's Chinese manufacturingoperations and Hungarian distribution unit. Reported operating margin was 9.4%(12.9%) and return on capital employed 11.5% (16.9%). Key figures IV IV I-IV I-IV MEUR 2009 2008 2009 2008------------------------------------------------------- Net sales 51.4 50.9 234.6 243.0 EBITDA as reported 2.5 4.8 28.9 37.5 EBITDA excl. one-off items 2.5 4.8 29.2 36.7 Operating profit as reported 0.7 3.2 22.1 31.3 Operating profit excl. one-offs 1.1 3.2 23.5 30.5-------------------------------------------------------Operating profit of Group Fishing Products decreased to 15.7 MEUR (19.5 MEUR) asa result of currency movements and stock-clearance sales. Operating profit ofOther Group Products fell to 0.5 MEUR (1.6 MEUR) due to the strong fall insales. Operating profit of Third Party Products decreased to 5.8 MEUR (10.3MEUR) due to negative currency movements and reduced sales.Financial (net) expenses were 2.1 MEUR (4.8 MEUR) including net interestexpenses of 3.5 MEUR (5.1 MEUR) and (net) currency exchange gains of 1.5 MEUR(0.4 MEUR).Net profit for the year decreased to 14.3 MEUR (19.2 MEUR) and earnings pershare to 0.31 EUR (0.45 EUR).Cash Flow and Financial PositionAs a result of the strong execution of working capital management, inventoriesdecreased 5.6 MEUR and non-interest bearing assets, mainly trade receivables,decreased 6.6 MEUR. Accordingly, the cash flow from operating activities morethan fourfolded to 24.6 MEUR (5.4 MEUR).Net cash used in investing activities amounted to 6.3 MEUR (6.8 MEUR). Inaddition to the normal capital expenditure of 6.7 MEUR (7.1 MEUR) and 2.1 MEUR(2.0 MEUR) of acquisitions, it included a 0.1 MEUR (0.0) change ininterest-bearing receivables and 2.6 MEUR (2.2 MEUR) proceeds from sales ofassets.Net interest-bearing debt decreased to 79.4 MEUR (Dec 2008: 89.5 MEUR) as cashwas released from working capital. The liquidity of the Group remained goodthrough the year. Equity-to-assets ratio improved and reached 42.8% (Dec2008: 38.0%). Also gearing improved and decreased to 71.1% (Dec 2008: 86.4%).Strategy ImplementationImplementation of the Group's strategy for profitable growth continued in 2009with high emphasis on making a positive turnaround in cash flow and finalizingthe new operating model in the Chinese manufacturing operations.The results of the major working capital initiative kicked off in late 2008 toreduce Group inventories and improve cash flow started to capitalize during thesecond quarter with further progress during the second half of the year. Tosupport this development, a major supply chain and logistics initiative toshorten the lead-times, lower the inventories and further improve the servicelevels to customers, was started in 2009 including an implementation of a commonlogistics software covering the Group's manufacturing and distribution unitsglobally. This project continues and further results are expected in 2010. Thereduction of inventories started quicker in Group products and therefore, thefurther decrease of inventories in 2010 is expected especially in third partyproducts for which the purchasing volumes were adjusted accordingly alreadyduring 2009.The performance improvement initiatives started in 2008 at the Group'smanufacturing facilities in China were finalized in 2009. With the new set-upof four Group-owned factories and a network of dozens of outsourcing partners,Rapala can adjust capacity quicker and more accurately to meet the marketrequirements. The benefits will also include shorter lead-times and improvedservice levels. As a result of the new operating model, the Group has reducedits headcount in China considerably. Accordingly, the headquarters of Chinesemanufacturing operations in Hong Kong moved into smaller leased premises in theend of the year and the old office was sold. This resulted in a 0.5 MEURnon-recurring gain.The integration of Sufix fishing line business acquired in 2008 was completed in2009. Rapala intends to increase its worldwide fishing line sales to some 20MEUR in the next few years. The long-term strategic target for Rapala is toincrease its annual fishing line sales to 30-50 MEUR.Discussions and negotiations regarding acquisitions and business combinationscontinued in 2009. In December, Rapala acquired the fish pheromone brandUltrabite and signed an exclusive agreement to commercialize this patentedpheromone technology to the sport fishing market worldwide. Rapala's sales ofproducts including pheromones were less than 2 MEUR in 2009 but it is expectedthat the sales will grow substantially in the future as the newly developedproducts will be sold through the Group's worldwide distribution network withfurther new products being developed and introduced.To further expand and strengthen its distribution network, Rapala established anew distribution company in Romania in 2009. The Group also started the processto establish new distribution companies in Iceland and Belarus as well as aspecialized distribution company for gift products in China. These units havestarted or will start their operations in the first quarter of 2010.In addition, the Group introduced and implemented several other performanceimprovement initiatives like further development of lure manufacturing processesand restructuring of Hungarian distribution operations. Also development oforganic growth in terms of extensions of current product categories as well asspecial marketing, sales and brand initiatives continued.Personnel and R&DNumber of personnel decreased 29% during the year and was 2 271 (3 197) at theyear-end.This change resulted mainly from the new operating model in the manufacturingoperations in China. At the same time, the Group has further strengthened itsorganizations in the fastest growing markets. The average number of personneldecreased 45% to 2 259 (4 143).Research and development expenses increased 11% to 2.0 MEUR (1.8 MEUR) in 2009.Risk Management, Internal Controls and Corporate ResponsibilityIn 2009, increased attention was paid to risk management, internal controls andcorporate responsibility. Both internal controls and risk management weredeveloped and reviewed through several projects and actions during the year. Inaddition, the Board redefined and approved its updated Corporate GovernanceStatement, which will be included in the Annual Report for 2009.The work to further develop actions and reporting within corporateresponsibility progressed. In addition to the implementation and development ofenvironmental measurements, actions were taken to widen the reporting ofcorporate responsibility to economic and social responsibility. The progressmade in these areas is described in more detail in the Annual Report for 2009.Short-term OutlookWhile the general market situation did not change a lot during 2009, positivesigns were witnessed in several countries during the second half of the year. Inaddition, good winter weather conditions have recently boosted the sales ofwinter sports equipment in the Nordic countries. The general uncertainty in theworld economy may continue in 2010 through increased unemployment in manycountries, which will most likely continue to affect the ordering behavior ofmany customers and maintain the need for quick deliveries and short lead-times.In general though, the short-term outlook is cautiously optimistic.In this economic and market situation, it is expected that both the net salesand the operating margin excluding non-recurring items will increase from 2009even if the Group continues to reduce its inventories.While the Group continues to implement its strategy for profitable growth,reducing working capital and increasing cash flow continue to be the toppriority for 2010 together with strong emphasis on innovation and development ofnew products.At the end of 2009, the Group's order backlog was up 13% at 43.8 MEUR (38.6MEUR). Orders for Group branded lures and winter sports equipment have recentlybeen on a record level. Accordingly, the Group lure manufacturing facilities andthe Peltonen cross country ski factory are currently running at full capacity.Proposal for profit distributionThe Board of Directors proposes to the Annual General Meeting that a dividend ofEUR 0.19 for 2009 (2008: EUR 0.19) per share be paid from the Group'sdistributable equity and that any remaining distributable funds be allocated toretained earnings. At December 31, 2009, the parent company's distributableequity totaled 42.6 MEUR.No material changes have taken place in the Group's financial position after theend of the financial year 2009. Group's liquidity is good and the view of theBoard of Directors is that the distribution of the proposed dividend will notundermine this liquidity.Helsinki, February 4, 2010Board of Directors of Rapala VMC CorporationINTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) INCOME STATEMENT IV IV I-IV I-IV MEUR 2009 2008 2009 2008--------------------------------------------------------------------------- Net sales 51.4 50.9 234.6 243.0 Other operating income 0.6 0.8 1.2 3.1 Cost of sales 32.8 29.7 135.8 135.3 Other costs and expenses 16.7 17.2 71.1 73.2 ------------------------ EBITDA 2.5 4.8 28.9 37.5 Depreciation and amortization 1.8 1.6 6.9 6.2 ------------------------ Operating profit 0.7 3.2 22.1 31.3 Finance income and expenses 1.1 1.4 2.1 4.8 Share of results in associates 0.0 0.0 0.0 0.0 ------------------------ Profit before taxes -0.4 1.9 19.9 26.5 Income taxes 0.4 0.9 5.7 7.3 ------------------------ Net profit for the period -0.8 1.0 14.3 19.2 Attributable to: Equity holders of the Company -0.9 1.9 12.1 17.7 Minority interest 0.1 -0.9 2.2 1.6 Earnings per share for profit attributable to the equity holders of the Company: Earnings per share, EUR (diluted = non-diluted) -0.02 0.05 0.31 0.45 STATEMENT OF COMPREHENSIVE INCOME IV IV I-IV I-IV MEUR 2009 2008 2009 2008--------------------------------------------------------------------------- Net profit for the period -0.8 1.0 14.3 19.2 ------------------------ Other comprehensive income, net of tax: Change in translation differences 1.5 -1.5 1.5 -1.2 Gains and losses on cash flow hedges 0.1 -0.2 -0.1 -0.2 Gains and losses on hedges of net investments 0.1 -1.4 0.2 -2.8 Fair value gains on available-for-sale investments - -0.1 - -0.1 ------------------------ Total other comprehensive income, net of tax 1.7 -3.1 1.6 -4.3 ------------------------ Total comprehensive income for the period 1.0 -2.1 15.9 14.9 Total comprehensive income attributable to: Equity holders of the Company 0.8 -1.2 13.6 13.4 Minority interest 0.1 -0.9 2.3 1.6 STATEMENT OF FINANCIAL POSITION Dec 31 Dec 31 MEUR 2009 2008------------------------------------------------------------------------ ASSETS Non-current assets Intangible assets 58.3 57.6 Property, plant and equipment 27.5 28.7 Non-current financial assets Interest-bearing 0.5 0.5 Non-interest-bearing 8.0 7.7 --------------- 94.2 94.6 Current assets Inventories 94.4 98.4 Current financial assets Interest-bearing 0.2 0.4 Non-interest-bearing 43.5 49.5 Cash and cash equivalents 29.0 30.6 --------------- 167.0 178.9 Total assets 261.2 273.4 EQUITY AND LIABILITIES Equity Equity attributable to the equity holders of the Company 107.4 101.7 Minority interest 4.2 1.9 --------------- 111.7 103.7 Non-current liabilities Interest-bearing 36.0 42.8 Non-interest-bearing 10.1 10.5 --------------- 46.0 53.3 Current liabilities Interest-bearing 73.1 78.1 Non-interest-bearing 30.5 38.3 --------------- 103.5 116.4 Total equity and liabilities 261.2 273.4 KEY FIGURES IV IV I-IV I-IV 2009 2008 2009 2008-------------------------------------------------------------------------- EBITDA margin, % 4.8% 9.5% 12.3% 15.5% Operating profit margin, % 1.3% 6.4% 9.4% 12.9% Return on capital employed, % 1.4% 7.0% 11.5% 16.9% Capital employed at end of period, MEUR 191.1 193.2 191.1 193.2 Net interest-bearing debt at end of period, MEUR 79.4 89.5 79.4 89.5 Equity-to-assets ratio at end of period, % 42.8% 38.0% 42.8% 38.0% Debt-to-equity ratio at end of period, % 71.1% 86.4% 71.1% 86.4% Earnings per share, EUR -0.02 0.05 0.31 0.45 Fully diluted earnings per share, EUR -0.02 0.05 0.31 0.45 Equity per share at end of period, EUR 2.75 2.59 2.75 2.59 Average personnel for the period 2 261 4 259 2 259 4 143--------------------------------------------------------------------------Definitions of key figures in the interim report are consistent with those inthe Annual Report 2008. STATEMENT OF CASH FLOWS IV IV I-IV I-IV MEUR 2009 2008 2009 2008------------------------------------------------------------------------------- Net profit for the period -0.8 1.0 14.3 19.2 Adjustments to net profit for the period * 2.9 2.8 14.7 13.0 Financial items and taxes paid and received -1.6 -4.7 -7.4 -14.0 Change in working capital 5.6 2.5 3.0 -12.7------------------------------------------------------------------------------- Net cash generated from operating activities 6.0 1.6 24.6 5.4 Investments -2.4 -2.3 -6.7 -7.1 Proceeds from sales of assets 0.9 0.6 2.6 2.2 Sufix brand acquisition - -0.1 -1.1 -1.5 Ultrabite brand acquisition -0.9 - -0.9 - Acquisition of subsidiaries, net of cash - -0.1 -0.1 -0.5 Change in interest-bearing receivables -0.1 0.1 -0.1 0.0------------------------------------------------------------------------------- Net cash used in investing activities -2.6 -1.9 -6.3 -6.8 Dividends paid - - -7.5 -6.9 Net funding -12.1 4.1 -12.8 11.9 Purchase of own shares -0.1 -0.3 -0.6 -0.9------------------------------------------------------------------------------- Net cash generated from financing activities -12.1 3.7 -20.8 4.1 Adjustments 1.3 0.6 0.8 0.9 Change in cash and cash equivalents -7.3 4.1 -1.7 3.6 Cash & cash equivalents at the beginning of the period 36.3 27.0 30.6 27.3 Foreign exchange rate effect 0.0 -0.5 0.1 -0.4------------------------------------------------------------------------------- Cash and cash equivalents at the end of the period 29.0 30.6 29.0 30.6* Includes reversal of non-cash items, income taxes and financial income andexpenses. STATEMENT OF CHANGES IN EQUITY Attributable to equity holders of the Company -------------------------------------------------------------- Cumul. Fund for Share Fair trans- invested Re- Mino- pre- value lation non-rest- Own tained rity Share mium re- diffe- ricted sha- earn- inte- Total MEUR capital fund serve rences equity res ings rest equity-------------------------------------------------------------------------------- Equity on Jan 1, 2008 3.6 16.7 0.0 -9.8 4.9 - 80.6 0.9 96.9-------------------------------------------------------------------------------- Comprehensive income* - - -0.3 -4.0 - - 17.7 1.6 14.9 Purchase of own shares - - - - - -0.9 - - -0.9 Dividends paid - - - - - - -6.9 - -6.9 Share based payment - - - - - - 0.1 - 0.1 Other changes - - - - - - 0.0 -0.5 -0.5-------------------------------------------------------------------------------- Equity on Dec 31, 2008 3.6 16.7 -0.3 -13.8 4.9 -0.9 91.5 1.9 103.7---------------------------------------------------------------------------------------------------------------------------------------------------------------- Equity on Jan 1, 2009 3.6 16.7 -0.3 -13.8 4.9 -0.9 91.5 1.9 103.7-------------------------------------------------------------------------------- Comprehensive Income* - - -0.1 1.5 - - 12.1 2.3 15.9 Purchase of own shares - - - - - -0.6 - - -0.6 Dividends paid - - - - - - -7.5 - -7.5 Share based payment - - - - - - 0.1 - 0.1 Other changes - - - - - - 0.0 0.0 0.0-------------------------------------------------------------------------------- Equity on Dec 31, 2009 3.6 16.7 -0.3 -12.3 4.9 -1.4 96.3 4.2 111.7--------------------------------------------------------------------------------* For the period (net of tax) SEGMENT INFORMATION* MEUR IV IV I-IV I-IV Net Sales by Operating Segment 2009 2008 2009 2008------------------------------------------------------------- Group Fishing Products 26.7 26.4 126.8 119.6 Other Group Products 6.3 7.0 17.8 24.5 Third Party Products 18.7 17.7 90.6 99.7 Intra-Group -0.2 -0.2 -0.6 -0.9------------------------------------------------------------- Total 51.4 50.9 234.6 243.0 Operating Profit by Operating Segment Group Fishing Products 1.5 3.9 15.7 19.5 Other Group Products 0.3 0.1 0.5 1.6 Third Party Products -1.2 -0.8 5.8 10.3------------------------------------------------------------- Total 0.7 3.2 22.1 31.3 Dec. 31 Dec. 31 Assets by Operating Segment 2009 2008---------------------------------------------------------- Group Fishing Products 159.6 167.5 Other Group Products 10.2 10.2 Third Party Products 61.9 64.3 Intra-Group -0.0 -0.1---------------------------------------------------------- Non-interest bearing assets total 231.6 242.0 Unallocated interest-bearing assets 29.6 31.4---------------------------------------------------------- Total assets 261.2 273.4 Liabilities by Operating Segment Group Fishing Products 30.8 30.1 Other Group Products 2.5 2.7 Third Party Products 7.2 16.0 Intra-Group -0.0 -0.1---------------------------------------------------------- Non-interest bearing liabilities total 40.5 48.8 Unallocated interest-bearing liabilities 109.1 121.0---------------------------------------------------------- Total liabilities 149.6 169.7 Net Sales by Area** IV IV I-IV I-IV MEUR 2009 2008 2009 2008--------------------------------------------- North America 13.1 14.8 61.1 57.5 Nordic 23.2 18.5 102.0 105.9 Rest of Europe 17.4 18.0 89.7 101.3 Rest of the world 13.7 14.6 55.3 54.3 Intra-Group -15.9 -15.1 -73.5 -76.0--------------------------------------------- Total 51.4 50.9 234.6 243.0* The new operating segments (IFRS 8) include the following product lines: GroupFishing Products include Group Lures, Fishing Hooks, Fishing Lines and FishingAccessories, Other Group Products include Group manufactured and/or brandedproducts for winter sports and some other businesses and Third Party Productsinclude non-Group branded fishing products and third party products for hunting,outdoor and winter sports.**Geographical sales information has been prepared on source basis i.e. based onthe location of the business unit. Each area shows the sales generated in thatarea excluding intra-Group transaction within that area, which have beeneliminated. Intra-Group line includes the eliminations of intra-Grouptransactions between geographical areas. KEY FIGURES BY QUARTERS I II III IV I-IV I II III IV I-IV MEUR 2008 2008 2008 2008 2008 2009 2009 2009 2009 2009------------------------------------------------------------------------------- Net sales 65.1 74.2 52.7 50.9 243.0 65.2 67.7 50.2 51.4 234.6 EBITDA 12.2 15.4 5.2 4.8 37.5 11.6 11.5 3.3 2.5 28.9 Operating profit 10.6 13.8 3.6 3.2 31.3 10.0 9.4 1.9 0.7 22.1 Profit before taxes 9.3 12.8 2.6 1.9 26.5 8.5 9.8 2.1 -0.4 19.9 Net profit for the period 6.8 9.4 2.0 1.0 19.2 6.2 7.4 1.5 -0.8 14.3-------------------------------------------------------------------------------NOTES TO THE INCOME STATEMENT AND FINANCIAL POSITIONThe financial statement figures included in this release are unaudited.This report has been prepared in accordance with IAS 34. Accounting principlesadopted in the preparation of this report are consistent with those used in thepreparation of the Annual Report 2008, except for the adoption of the new oramended standards and interpretations. Adoption of the amended standard IAS 1affected the presentation of Group's consolidated financial statements,especially the consolidated income statement and the statement of changes inequity. Adoption of IFRS 8 changed the presentation of segment information.Adoption of IAS 23, IAS 32, IFRS 2 and IAS 39/IFRS 7 as well as the newinterpretations, IFRIC 13, IFRIC 15 and IFRIC 16 did not result in any changesin the accounting principles that would have affected the information presentedin this interim report.Use of estimates and rounding of figuresComplying with IFRS in preparing financial statements requires the management tomake estimates and assumptions. Such estimates affect the reported amounts ofassets and liabilities, the disclosure of contingent assets and liabilities, andthe amounts of revenues and expenses. Although these estimates are based on themanagement's best knowledge of current events and actions, actual results maydiffer from these estimates.All figures in these accounts have been rounded. Consequently the sum ofindividual figures can deviate from the presented sum figure. Key figures havebeen calculated using exact figures.Events after the end of the interim periodThe Group has no knowledge of any significant events after the end of theinterim period that would have a material impact on the financial statements forJanuary-December 2009. Material events after the end of the interim period, ifany, have been discussed in the interim review by the Board of Directors.InventoriesOn December 31, 2009, the book value of inventories included a provision for netrealizable value of 3.0 MEUR (2.4 MEUR). Non-recurring income and expenses included in operating profit IV IV I-IV I-IV MEUR 2009 2008 2009 2008-------------------------------------------------------------------------------- Sale of Hong Kong office premises 0.5 - 0.5 - Restructuring of Chinese manufacturing operations * -0.3 - -0.4 - Consolidation of French operations - 0.1 0.0 -0.1 Closure of Irish lure factory - - -0.1 0.0 Sale of French warehouse and office building - - - 1.4 Other restructuring costs -0.2 -0.1 -0.4 -0.3 Other non-recurring items -0.1 - -0.1 -0.2-------------------------------------------------------------------------------- Total included in EBITDA 0.0 0.0 -0.3 0.8-------------------------------------------------------------------------------- Non-recurring impairment of non-current assets in China 0.0 - -0.7 - Non-recurring impairment of non-current assets in Hungary -0.3 - -0.3 --------------------------------------------------------------------------------- Total included in operating profit -0.4 0.0 -1.4 0.8*) Includes redundancy and other costs as well as gains and losses from the saleof fixed assets. Commitments Dec 31 Dec 31 MEUR 2009 2008----------------------------------------------------------------- On own behalf Business mortgage 16.1 16.1 Guarantees 0.2 0.3 Minimum future lease payments on operating leases 10.3 11.3----------------------------------------------------------------- Related party transactions Rents Other MEUR Purchases paid expenses Receivables Payables-------------------------------------------------------------------------------- I-IV 2009 Associated company Lanimo O? 0.1 - - 0.0 - Entity with significant influence over the Group* - 0.2 0.1 0.0 - Management - 0.3 0.0 0.0 0.0 I-IV 2008 Associated company Lanimo O? 0.1 - - 0.0 - Entity with significant influence over the Group* - 0.2 0.1 0.0 0.0 Management - 0.2 0.0 0.0 0.0--------------------------------------------------------------------------------* Lease agreement for the real estate for the consolidated operations in Franceand a service fee. Open derivatives Positive fair Negative fair Net fair MEUR Nominal amount values values values-------------------------------------------------------------------------------- Dec 31, 2009 Foreign currency forwards 7.1 0.1 - 0.1 Interest rate swaps 98.0 0.0 0.5 -0.5 Total 105.0 0.2 0.5 -0.3 Dec 31, 2008 Foreign currency forwards 7.2 0.3 - 0.3 Interest rate swaps 14.1 0.0 0.4 -0.4 Total 21.3 0.3 0.4 -0.1--------------------------------------------------------------------------------Group's financial risks and hedging principles are described in detail in theAnnual Report 2008.Share-based paymentsThe Group had three separate share-based payment programs in place on December31, 2009: one share option program, one synthetic option program settled in cashand one share reward program settled in shares.Share-based payment programs are valued at fair value on the grant date andrecognized as an expense in the income statement during the vesting period witha corresponding adjustment to the equity or liability. Grant date is the date atwhich the entity and another party agree to a share-based payment arrangement,being when the entity and the counterparty have a shared understanding of theterms and conditions of the arrangement.Options are valued at fair value on the grant date by using the Black-Scholesoption-pricing model. Regarding the option programs in place, 454 750 shareoptions (2004B) were granted on June 8, 2004, 46 250 share options (2004B) onFebruary 14, 2006 and 978 500 synthetic options (2006A and 2006B) on December14, 2006. On March 31, 2009, the exercise period for the 2004A stock optionprogram expired. The 2004B stock option program is exercisable between March31, 2008 and March 31, 2010 at an exercise price of 6.09 EUR, the 2006Asynthetic option program is exercisable between March 31, 2009 and March31, 2011 at an exercise price of 6.14 EUR and the 2006B synthetic option programis exercisable between March 31, 2010 and March 31, 2012 at an exercise price of5.95 EUR. The exercise prices have been reduced by the amount of dividendsdistributed after the subscription period for option rights has ended and beforethe commencement of the subscription period.In March 2009, the Board approved a new share-based incentive plan (Plan) forthe Group's key personnel. The aim of the Plan is to combine the objectives ofthe shareholders and the key personnel in order to increase the value of theCompany, to commit the key personnel to the Company, and to offer them acompetitive reward plan based on holding the Company shares. The Plan includesone earning period, which commenced on January 1, 2009 and will end on December31, 2010. The potential reward from the Plan will be based on the Rapala'searnings per share (EPS) in 2010. The potential reward from the Plan will bepaid as the Company's shares in 2011. The target group of the Plan consists of50 key employees. The gross rewards to be paid on the basis of the Plan willcorrespond to the value of a maximum total of 200 000 Rapala shares.The IFRS accounting effect on operating profit was -0.1 MEUR (0.0 MEUR) for thefourth quarter and -0.3 MEUR (+0.3 MEUR) for the financial year. Terms andconditions of the share-based payment programs are described in detail in theAnnual Report 2008 and the descriptions will be updated in the Annual Report2009.Shares and share capitalBased on authorization given by the Annual General Meeting in April 2007, theBoard can decide to issue shares through issuance of shares, options or specialrights entitling to shares in one or more issues. The number of new shares to beissued including the shares to be obtained under options or special rights shallbe no more than 10 000 000 shares. This authorization includes the right for theBoard to resolve on all terms and conditions of the issuance of new shares,options and special rights entitling to shares, including issuance in deviationfrom the shareholders' preemptive rights. This authorization is in force for aperiod of 5 years from the resolution by the Annual General Meeting. The Boardis also authorized to resolve to repurchase a maximum of 2 000 000 shares byusing funds in the unrestricted equity. This amount of shares corresponds toless than 10% of all shares of the company. The shares will be repurchasedthrough public trading arranged by NASDAQ OMX Helsinki at the market price ofthe acquisition date. The shares will be acquired and paid in pursuance of therules of NASDAQ OMX Helsinki and applicable rules regarding the payment periodand other terms of the payment. This authorization is effective until the end ofthe next Annual General Meeting.On December 31, 2009, the share capital fully paid and reported in the TradeRegister was 3.6 MEUR and the total number of shares was 39 468 449. The averagenumber of shares in 2009 was 39 468 449. On February 6, 2009 the Board decidedto continue buying back own shares in accordance with the authorization grantedby the Annual General Meeting on April 3, 2008. The repurchasing of shares endedon March 30, 2009 when Rapala held 221 936 own shares. Based on the Board'sdecision on July 24, 2009 the repurchasing of own shares continued untilSeptember 18, 2009 and on September 30, 2009 Rapala held 321 867 own shares.Based on the Board's decision on October 23, 2009, the repurchasing of ownshares continued until December 30, 2009. At the end of December 2009, Rapalaheld 340 344 own shares, representing 0.9% of the total number and the totalvoting rights of Rapala shares. The average price for the repurchased own sharesin 2009 was EUR 4.31.As a result of the share subscriptions with the 2004B stock option program, andif all stock options are fully exercised, the Group's share capital may still beincreased by a maximum of 38 970 EUR and the number of shares by a maximum of433 000 shares. The shares that can be subscribed with these share optionscorrespond to 1.1% of the Company's shares and voting rights.During the year 2009, 3 138 597 shares (4 144 626) were traded. The sharestraded at a high of 5.16 EUR and a low of 3.50 EUR during the period. Theclosing share price at the end of the period was 4.97 EUR.Short term risks and uncertaintiesThe objective of Rapala's risk management is to support the implementation ofthe Group's strategy and execution of business targets. The importance of riskmanagement has increased when Rapala has continued to expand its operationsfast. Accordingly, Group management also continued to develop risk managementpractices and internal controls during 2009. Detailed description of Group'sstrategic, operative and financial risks and risk management principles areincluded in the Annual Report 2008 and will be updated in the Annual Report2009.Due to the nature of the fishing tackle business and the geographical scope ofGroup's operations, Group's deliveries and sales as well as operating profithave traditionally been seasonally stronger in the first half of the financialyear compared to the second half. In 2009, although more than 40 % of the netsales were generated during the second half of the year, almost 90 % of theoperating profit was still generated in the first six months. In 2009,deliveries to customers realized mostly according to plan. A major supply chainand logistics initiative was started in the second quarter of 2009 to shortenthe lead-times and further improve the service levels to customers.Group's sales are also to some extent affected by the weather. Weather hassupported the sales of winter sports equipment especially in the Nordiccountries during the on-going winter season but may simultaneously delay thebeginning of the coming summer fishing season. Last year such delay partly ledto higher than anticipated inventory levels, which subsequently started todecrease mostly as a result of the major ongoing working capital initiative.Further reduction of inventory levels, even at the risk of losing some profitmargin, and improvement of cash flow remains a top priority in the Group also in2010.The Group renegotiated its bank covenants during the second quarter of 2009 andas one of the results has now more flexibility to the most critical cash flowcovenant also for 2010.Even if the fishing tackle business has traditionally not been stronglyinfluenced by the increased uncertainties and downturns in the general economicclimate, this may influence, at least for a short while, the sales of fishingtackle when retailers reduce their inventory levels and face financialchallenges. Also quick and strong increases in living expenses and uncertaintiesconcerning employment may temporarily affect consumer spending also in fishingtackle, even though historically the underlying consumer demand has proven to befairly solid.The truly global nature of Group's sales and operations is spreading the marketrisks caused by the current uncertainties in the global economy. Despite somepositive signals received during the second half of 2009, the Group is stillcautiously monitoring the development in the various markets in order to avoidhasty conclusions. Especially, the importance of cash collection and credit riskmanagement increased during 2009 and this may affect sales to some customers.The good sales for winter sports supports financially many retailers especiallyin the Nordic countries and reduces the risks related to cash collection andorders for summer fishing.Group's sales and profitability are impacted by the changes in foreign exchangerates, especially US dollar and other currencies connected to it. Group isactively monitoring the currency position and risks and using e.g. foreigncurrency nominated loans to manage the natural hedging. In order to fix theexchange rate of some of the future USD-nominated purchases, the Group hasentered into currency hedging agreements. As the Group is not applying hedgeaccounting in accordance with IAS 39, also the change in fair value of theseunrealized currency hedging agreements have an impact on the Group's operatingprofit. As the Group has material amount of Chinese renminbi nominated expenses,the Group is closely monitoring the on-going discussions on the potential futureappreciation of the renminbi and considering feasibility of hedgingpossibilities.Especially in East Europe, local currencies weakened dramatically during thesecond half of 2008 and have not significantly appreciated since. This weakeningwas taken into account in price setting, which has together with the generaleconomic downturn somewhat negatively impacted the number of units sold in thesecountries. The market price of some commodity raw materials have started toincrease again and this may put pressure on pricing of some products in thefuture.The integration of the new Sufix-fishing line business to the Group'sdistribution network was completed in 2009.No significant changes are identified in the Group's strategic risks or businessenvironment.[HUG#1380445] StockExchangeRelease_Annual_Accounts2009: http://hugin.info/120091/R/1380445/339971.pdf
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Datum: 04.02.2010 - 02:31 Uhr
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