Notes

1. GENERAL PRINCIPLES

AIXTRON SE is incorporated as a European Company (Societas Europaea) under the laws of the Federal Republic of Germany. The Company is domiciled at Dornkaulstraße 2, 52134 Herzogenrath, Germany. AIXTRON SE is registered in the commercial register of the District Court (“Amtsgericht”) of Aachen under HRB 16590.

The consolidated financial statements of AIXTRON SE and its subsidiaries (“AIXTRON“ or “Company“) have been prepared in accordance with, and fully comply with

  • International Financial Reporting Standards (IFRS), and the interpretations as published by the International Accounting Standards Board (IASB); and also
  • International Financial Reporting Standards (IFRS) as adopted for use in the European Union; and also
  • the requirements of Section 315a of HGB (German Commercial Law).

AIXTRON is a leading provider of deposition equipment to the Semiconductor industry. The Company's technology solutions are used by a diverse range of customers worldwide to build advanced components for electronic and opto-electronic applications based on compound, silicon, or organic semiconductor materials. Such components are used in fiber optic communication systems, wireless and mobile telephony applications, optical and electronic storage devices, computing, signaling and lighting, displays, as well as a range of other leading-edge technologies.

These consolidated financial statements have been prepared by the Executive Board and have been submitted to the Supervisory Board at its meeting held on February 22, 2016 for approval and publication.

2. SIGNIFICANT ACCOUNTING POLICIES

  1. A COMPANIES INCLUDED IN CONSOLIDATION

    Companies included in consolidation are the parent company, AIXTRON SE, and 8 companies, in which AIXTRON SE has a 100% direct shareholding or control. The balance sheet date of all consolidated companies is December 31. A list of all consolidated companies is shown in note 31.

  2. B BASIS OF ACCOUNTING

    The consolidated financial statements are presented in Euro (EUR). The amounts are rounded to the nearest thousand Euro (kEUR). Some items in the consolidated statement of financial position and consolidated income statement have been combined under one heading to improve the clarity of presentation. Such items are disclosed and commented on individually in the notes.

    The financial statements have been prepared on the historical cost basis, except for the revaluation of certain financial instruments.

    The preparation of financial statements in conformity with IFRS requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the balance sheet date and the reported amounts of income and expenses during the reported period. Actual results may differ from these estimates.

    The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if this revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods. Judgments which have a significant effect on the Company’s financial statements are described in Note 37.

    The accounting policies set out below have been applied consistently to all periods presented in these consolidated financial statements.

    The accounting policies have been applied consistently by each consolidated company.

  3. C BASES OF CONSOLIDATION
    1. ( I )SUBSIDIARIES

      Entities over which AIXTRON SE has control are treated as subsidiaries (see note 31). Control exists when the Company is exposed, or has the rights to, variable returns from its involvement with the subsidiary and has the ability to affect those returns through its power over the subsidiary. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases.

    2. ( II ) TRANSACTIONS ELIMINATED ON CONSOLIDATION

      All intercompany income and expenses, transactions and balances have been eliminated in the consolidation.

  4. D FOREIGN CURRENCY

    The consolidated financial statements have been prepared in Euro (EUR). In the translation of financial statements of subsidiaries outside the Euro-Zone the local currencies are also the functional currencies of those companies. Assets and liabilities of those companies are translated to EUR at the exchange rate as of the balance sheet date. Revenues and expenses are translated to EUR at average exchange rates for the year or at average exchange rates for the period between their inclusion in the consolidated financial statements and the balance sheet date. Net equity is translated at historical rates. The differences arising on translation are disclosed in the Consolidated Statement of Changes in Equity.

    Exchange gains and losses resulting from fluctuations in exchange rates in the case of foreign currency transactions are recognized in the income statement in “Other operating income“ or “Other operating expenses“.

  5. E PROPERTY, PLANT AND EQUIPMENT
    1. ( I ) ACQUISITION OR MANUFACTURING COST

      Items of property, plant and equipment are stated at cost, plus ancillary charges such as installation and delivery costs, less accumulated depreciation (see below) and impairment losses (see accounting policy J).

      Costs of internally generated assets include not only costs of material and personnel, but also a share of directly attributable overhead costs, such as employee benefits, delivery costs, installation, and professional fees.

      Where parts of an item of property, plant and equipment have different useful lives, they are depreciated as separate items of property, plant and equipment.

    2. ( II ) SUBSEQUENT COSTS

      The Company recognizes in the carrying amount of an item of property, plant and equipment the cost of replacing components or enhancement of such an item when that cost is incurred if it is probable that the future economic benefits embodied in the item will flow to the Company and the cost of the item can be measured reliably. All other costs such as repairs and maintenance are expensed as incurred.

    3. ( III ) GOVERNMENT GRANTS

      Government grants related to the acquisition or manufacture of owned assets are deducted from original cost at the date of capitalization.

    4. ( IV ) DEPRECIATION

      Depreciation is charged on a straight-line basis over the estimated useful lives of each part of an item of property, plant and equipment. Useful lives, depreciation method and residual values of property, plant and equipment are reviewed at the year-end date or more frequently if circumstances arise which are indicative of a change. The estimated useful lives are as follows:

    5. Buildings 25 - 33 years
      Machinery and equipment 3 - 14 years
      Other plant, factory and office equipment 2 - 14 years

      The useful lives of leased assets do not exceed the expected lease periods.

  6. F INTANGIBLE ASSETS
    1. ( I ) GOODWILL

      Business combinations are accounted for by applying the purchase method. In respect of business combinations that have occurred since January 1, 2004, goodwill represents the difference between the fair value of the consideration for the business combination and the fair value of the net identifiable assets acquired.

      Goodwill is stated at cost less any accumulated impairment loss. Goodwill is allocated to cash-generating units and is tested annually for impairment (see accounting policy (j)).

    2. ( II ) RESEARCH AND DEVELOPMENT

      Expenditure on research activities, undertaken with the prospect of gaining new technical knowledge and understanding using scientific methods, is recognized as an expense as incurred.

      Expenditure on development comprises costs incurred with the purpose of using scientific knowledge technically and commercially. As not all criteria of IAS 38 are met AIXTRON did not capitalize such costs.

    3. ( III ) OTHER INTANGIBLE ASSETS

      Other intangible assets that are acquired by the Company are stated at cost less accumulated amortization (see below) and impairment losses (see accounting policy (j)).

      Intangible assets acquired through business combinations are stated at their fair value at the date of purchase.

      Expenditure on internally generated goodwill, trademarks and patents is expensed as incurred.

    4. ( IV ) SUBSEQUENT EXPENDITURE

      Subsequent expenditure on capitalized intangible assets is capitalized only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure is expensed as incurred.

    5. ( V ) AMORTIZATION

      Amortization is charged on a straight-line basis over the estimated useful lives of intangible assets, except for goodwill. Goodwill has a useful life which is indefinite and is tested annually in respect of its recoverable amount. Other intangible assets are amortized from the date they are available for use. Useful lives and residual values of intangible assets are reviewed at the year-end date or more frequently if circumstances arise which are indicative of a change. The estimated useful lives are as follows:

      Software 2 - 5 years
      Patents and similar rights 5 - 18 years
      Customer base and product and technology know how 6 - 10 years
  7. G FINANCIAL INSTRUMENTS
    1. ( I )FINANCIAL ASSETS

      Financial assets are classified into the following specific categories: financial assets ‘at fair value through profit or loss’ (FVTPL), ‘held to maturity investments’, and ‘loans and receivables’. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition.

      Investments are recognized at the contract date, and are initially measured at fair value, plus transaction costs, except for those financial assets classified as at fair value through profit or loss, which are initially measured at fair value.

    2. ( II ) FINANCIAL ASSETS AT FVTPL

      Financial assets are classified as at FVTPL where the asset is either

      • held for trading or
      • it is designated as at FVTPL.

      Financial assets at FVTPL are stated at fair value, with any resultant gain or loss recognized in profit or loss. The fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

    3. ( III ) HELD TO MATURITY INVESTMENTS

      Investments with fixed or determinable payments and fixed maturity dates that the Company intends to and has the ability to hold to maturity are classified as held to maturity investments. Held to maturity investments are recorded at amortized cost using the effective interest rate method less any impairment, with revenue recognized on an effective yield basis.

    4. ( IV )TRADE RECEIVABLES

      Trade receivables and other receivables that have fixed or determinable payments that are not quoted on an active market are classified as loans and receivables. Loans and receivables are measured at amortized cost using the effective interest rate method, less any impairment.

    5. ( V ) IMPAIRMENT OF FINANCIAL ASSETS

      Financial assets are assessed for indicators of impairment at each balance sheet date. Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been impacted.

      The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables, where the carrying amount is reduced through the use of an allowance account. When a trade receivable is considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognized in profit or loss.

      If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized, the previously recognized impairment loss is reversed through profit or loss to the extent that the carrying amount of the investment at the date the impairment is reversed does not exceed what the amortized cost would have been had the impairment not been recognized.

    6. ( VI )CASH AND CASH EQUIVALENTS

      Cash and cash equivalents comprise cash on hand and deposits with banks with a maturity of less than three months at inception.

    7. ( VII ) EQUITY INSTRUMENTS

      Equity instruments, including share capital, issued by the company are recorded at the proceeds received, net of direct issue costs.

    8. ( VIII )FINANCIAL LIABILITIES

      Financial liabilities are classified as either financial liabilities “at FVTPL” or “other financial liabilities”.

    9. ( IX ) FINANCIAL LIABILITIES AT FVTPL

      Financial liabilities are classified as at FVTPL where the liability is either

      • held for trading or
      • it is designated as at FVTPL.

      Financial liabilities at FVTPL are stated at fair value, with any resultant gain or loss recognized in profit or loss. The fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

    10. ( X )OTHER FINANCIAL LIABILITIES

      Other financial liabilities, including borrowings, are initially measured at fair value, net of transaction costs. Other financial liabilities are subsequently measured at amortized cost using the effective interest rate method, with interest expense recognized on an effective yield basis.

    11. ( XI ) DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGE ACCOUNTING

      The Company’s activities expose it to the financial risks of changes in foreign exchange currency rates (see note 26). The Company uses foreign exchange forward contracts to hedge these exposures. The Company does not use derivative financial instruments for speculative purposes. The use of financial derivatives is governed by policies approved by the Executive Board, which provide written principles on the use of financial derivatives.

      Changes in the fair value of derivative financial instruments that are designated as effective hedges of future cash flows are recognized directly in equity and the ineffective portion is recognized immediately in the income statement.

      Changes in fair value of derivative financial instruments that do not qualify for hedge accounting are recognized in the income statement as they arise.

      Hedge accounting is discontinued when the derivative financial instrument expires or is sold, terminated, or exercised, or no longer qualifies for hedge accounting. At that time, any cumulative gain or loss on the derivative financial instrument recognized in equity is retained in equity until the forecasted transaction occurs. If a hedged transaction is no longer expected to occur, the net cumulative gain or loss recognized in equity is transferred to net profit or loss for the period.

  8. H INVENTORIES

    Inventories are stated at the lower of cost and net realizable value. Net realizable value is the estimated selling price in the ordinary course of business, less the estimated cost of completion and selling expenses. Cost is determined using weighted average cost.

    The cost includes expenditures incurred in acquiring the inventories and bringing them to their existing location and condition. In the case of work in progress and finished goods, cost includes direct material and production cost, as well as an appropriate share of overheads based on normal operating capacity. Scrap and other wasted costs are expensed on a periodic basis either as Cost of Sales or, in the case of Beta tools as Research and Development expense.

    Allowance for slow moving, excess and obsolete, and otherwise unsaleable inventory is recorded based primarily on either the Company’s estimated forecast of product demand and production requirement or historical usage. When the estimated future demand is less than the inventory, the Company writes down such inventories.

  9. I OPERATING RESULT

    Operating result is stated before finance income, finance expense and tax.

  10. J IMPAIRMENT OF PROPERTY, PLANT AND EQUIPMENT AND INTANGIBLE ASSETS

    Goodwill purchased as part of a business acquisition is tested annually for impairment, irrespective of whether there is any indication of impairment. For impairment test purposes, the goodwill is allocated to cash-generating units. Impairment losses are recognized to the extent that the carrying amount exceeds the higher of fair value less cost to sell or value in use of the cash-generating unit.

    Property, plant and equipment as well as other intangible assets are tested for impairment, where there is any indication that the asset may be impaired. The company assesses at the end of each period whether there is an indication that an asset may be impaired. Impairment losses on such assets are recognized, to the extent that the carrying amount exceeds either the fair value that would be obtainable from a sale in an arm’s length transaction, or the value in use.

    In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments and the risks associated with the asset.

    Impairment losses are reversed if there has been a change in the estimates used to determine the recoverable amount. Reversals are made only to the extent that the carrying amount of the asset does not exceed the carrying amount that would have been determined if no impairment loss had been recognized.

    An impairment loss in respect of goodwill is not reversed.

  11. K EARNINGS PER SHARE

    Basic earnings per share are computed by dividing net income (loss) by the weighted average number of issued common shares (see note 21) for the year. Diluted earnings per share reflect the potential dilution that could occur if options issued under the Company’s stock option plans were exercised and convertible bonds were converted, unless such conversion had an anti-dilutive effect.

  12. L EMPLOYEE BENEFITS
    1. ( I ) DEFINED CONTRIBUTION PLANS

      Obligations for contributions to defined contribution pension plans are recognized as an expense in the income statement as incurred.

    2. ( II ) SHARE-BASED PAYMENT TRANSACTIONS

      The stock option programs allows members of the Executive Board, management and employees of the Company to acquire shares/ADS (see note 23) of the Company. These stock option programs are accounted for by AIXTRON according to IFRS 2. The fair value of options granted after November 7, 2002 is recognized as personnel expense with a corresponding increase in additional paid-in capital. The fair value is calculated at grant date and spread over the period during which the employees become unconditionally entitled to the options. The fair value of the options granted is measured using a mathematical model, taking into account the terms and conditions upon which the options were granted. In the calculation of the personnel expense options forfeited are taken into account.

  13. M PROVISIONS

    A provision is recognized when the Company has a present legal or constructive obligation as a result of a past event, and it is probable that an outflow of economic benefits will be required to settle this obligation. If the effect is material, provisions are determined by discounting the expected future cash flows at a pre-tax interest rate that reflects current market assessments of the time value of money and, where appropriate, the risks associated with the liability.

    1. ( I ) WARRANTIES

      The Company normally offers one, occasionally two, year warranties on all of its products. Warranty expenses generally include cost of labor, material and related overhead necessary to repair a product free of charge during the warranty period. The specific terms and conditions of those warranties may vary depending on the equipment sold, the terms of the contract and the locations from which they are sold. The Company establishes the costs that may be incurred under its warranty obligations and records a liability in the amount of such costs at the time revenue is recognized. Factors that affect the Company’s warranty liability include the historical and anticipated rates of warranty claims and cost per claim.

      The Company accrues material and labor cost for systems shipped based upon historical experience. The Company periodically assesses the adequacy of its recorded warranty provisions and adjusts the amounts as necessary.

      The Company has reclassified warranty expenses from Selling Expenses to Cost of Sales. This classification is the usual practice in the semiconductor equipment industry. Selling expenses have been reduced by kEUR 1,836 in 2014 (2013 kEUR 14,457) and Cost of Sales increased by the same amounts.

    2. ( II ) ONEROUS CONTRACTS

      A provision for onerous contracts is recognized when the expected economic benefits to be derived by the Company from a contract are lower than the unavoidable cost of meeting its obligations under the contract. The amount recognized as a provision is determined as the excess of the unavoidable costs of meeting the obligations under the contract over the economic benefits expected to be received. Before making that provision any impairment loss that has occurred on assets dedicated to that contract are recognized. The provision is discounted to present value if the adjustment is material.

  14. N REVENUE

    Revenue is generated from the sale and installation of equipment, spare parts and maintenance services and is recognized when the Company satisfies a performance obligation by transferring goods or services to the customer and it is probable that the ecomonic benefits associated with the transaction will flow to the entity.

    The sale of equipment involves a customer acceptance test at AIXTRON´s production facility. After successful completion of this test, the equipment is dismantled and packaged for shipment. Upon arrival at the customer site the equipment is reassembled and installed, which is a service generally performed by AIXTRON engineers. AIXTRON gives no general rights of return, discounts, credits or other sales incentives within its terms of sale. However, occasionally some customers of AIXTRON have specifically negotiated terms and conditions of business.

    Revenues from the sale of products that have been demonstrated to meet product specification requirements are recognized upon shipment to the customer, if a full customer acceptance test has been successfully completed at the AIXTRON production facility and the significant risks and rewards of ownership has passed to the customer.

    Revenue relating to the installation of the equipment at the customer’s site is recognized when the installation is completed and the final customer acceptance has been confirmed.

    The portion of the contract revenue related to equipment deferred until completion of the installation services is determined based on either the fair value of the installation services or, if the company determines that there may be a risk that the economic benefits of installation services may not flow to the Company, the portion of the contract amount that is due and payable upon completion of the installation.

    Fair value of the installation services is determined based on the price that would be received in an orderly transaction in the principal market for such equipment at the measurement date under current market conditions.

    Revenue related to products where meeting the product specification requirements has not yet been demonstrated, or where specific rights of return have been negotiated, is recognized only upon final customer acceptance.

    Revenue on the sale of spare parts is recognized when title and risk passes to the customer, generally upon shipment. Revenue from maintenance services is recognized as the services are provided.

    The consideration from contracts which include combinations of different performance obligations such as equipment, spares and services is allocated to each performance obligation in an amount that depicts the amount of consideration to which the company expects to be entitled in exchange for transferring the goods or services to the customer. The company uses a combination of methods such as an estimated cost plus margin approach, and allocating discounts proportionately to each performance obligation when determining the consideration for each performance obligation.

  15. O EXPENSES
    1. ( I )COST OF SALES

      Cost of sales includes such direct costs as materials, labor and related production overheads.

    2. ( II ) RESEARCH AND DEVELOPMENT

      Research and development costs are expensed as incurred. Costs of beta tools which do not qualify to be recognized as an asset are expensed as research and development costs.

      Project funding received from governments (e.g. state funding) and the European Union is recorded in other operating income, if the research and development costs are incurred and provided that the conditions for the funding have been met.

    3. ( III ) OPERATING LEASE PAYMENTS

      Payments made under operating leases are recognized as expense on a straight-line basis over the term of the lease.

  16. P OTHER OPERATING INCOME
    1. Government grants

      Government grants awarded for project funding are recorded in “Other operating income” if the research and development costs are incurred and provided that the conditions for the funding have been met.

  17. Q TAX

    The tax expense represents the sum of the current and deferred tax.

    Deferred tax assets and liabilities are recorded for all temporary differences between tax and commercial balance sheets and for losses brought forward for tax purposes as well as for tax credits of the companies included in consolidation. The deferred taxes are calculated, based on tax rates applicable at the balance sheet date or known to be applicable in the future. Effects of changes in tax rates on the deferred tax assets and liabilities are recognized upon substantively enacted amendments to the law.

    A deferred tax asset is recognized only to the extent that it is probable that future taxable profits can be set off against tax credits and tax losses carried forward. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit can be realized. The recoverability of deferred tax assets is reviewed at least annually.

  18. R SEGMENT REPORTING

    An operating segment is a component of the Company that is engaged in business activities and whose operating results are reviewed regularly by the Chief Operating Decision Maker, which the Company considers to be its Executive Board, to make decisions about resources to be allocated to the segment and assess its performance and for which discrete financial information is available. AIXTRON has only one reportable segment.

    Accounting standards applied in segment reporting are in accordance with the general accounting policies as explained in this section.

  19. S CASH FLOW STATEMENT

    The cash flow statement is prepared in accordance with IAS 7. Cash flows from operating activities are prepared using the indirect method. Cash inflows and cash outflows from taxes and interest are included in cash flows from operating activities.

  20. T RECENTLY ISSUED ACCOUNTING STANDARDS

    In the current year, the following new and revised standards have been adopted. Their adoption has not had any significant impact on the amounts reported in these financial statements.

    Amendments to IAS 19 Defined Benefit Plans: Employee Contributions The Group has no defined benefit plans.
    Annual Improvements to IFRSs 2010 -2012 Cycle and 2011 – 2013 Cycle The majority of the amendments are clarifications rather than substantive changes to existing requirements. The amendments to IFRS 8 Operating Segments – Aggregation of operating segments and IAS 24 Related Party Disclosures – Key management personnel represent changes to existing requirements. Neither of these changes has had an effect on the reported results because the company does not aggregate operating segments and does not use management entities to provide key management services.

    At the date of authorization of these financial statements, the following Standards and Interpretations which have not been applied in these financial statements were in issue but not yet effective

    IFRS 9 Financial Instruments
    IFRS 15 Revenue from Contracts with Customers
    IFRS 11 (amendments) Accounting for Interests in Joint Operations
    IAS 16 and IAS 41 (amendments) Agriculture: Bearer Plants
    IAS 1 (amendments) Disclosure initiative
    IAS 16 and IAS 38 (amendments) Clarification of Acceptable Methods of Depreciation and Amortization
    IAS 27 (amendments) Equity method in Separate Financial Statements
    IFRS 10 and IAS 28 (amendments) Sale or Contribution of Assets between an Investor and its Associate or Joint Venture
    IFRS 10, IFRS 12 and IAS 28 (amendments) Investment entities: Applying the Consolidation Exemption.
    Annual Improvement to IFRSs: 2012 - 2014 Amendments to various IFRSs Cycle

    The company does not expect that the adoption of these standards will have a material impact on the financial statements of the Group in future periods.

3. SEGMENT REPORTING AND REVENUES

IFRS 8 requires operating segments to be identified on the basis of internal reports about components of the Group that are regularly reviewed by the Executive Board, as chief operating decision maker, in order to allocate resources to the segments and to assess their performance.

The Executive Board regularly reviews financial information to allocate resources and assess performance only on a consolidated group basis since the various activities of the group are largely integrated from an operational perspective. In accordance with IFRS, AIXTRON has only one reportable segment.

The company’s reportable segment is based around the category of goods and services provided to the semiconductor industry.

Revenues are recognized as disclosed in Note 2 (n).

The company values the revenue deferred for installation services, using a market based approach, based on observed transactions for all such contracts involving two elements where revenue has been recognized during the financial year. This is level 2 within the fair value hierarchy described in IFRS 13. The fair value of the installation services is taken as the most frequently observed (modal value) percentage of the contract price payable upon completion of the installation service.

For contracts where revenue is recognized in two elements, the same method is also used to determine the fair value of products delivered, which is taken to be the most frequently observed (modal value) percentage of the contract value payable upon delivery of the equipment to the customer. This is also level 2 in the fair value hierarchy.

Segment revenues and results        
in EUR thousands Note 2015 2014 2013
Equipment revenues   150,971 148,543 138.044
Spares and service
revenue
  46,785 45,254 44.819
Revenue from external customers   197,756 193,797 182.863
Inventories recognized as an expense 16 95,143 134,940 117.900
Reversals of inventory provisions 16 -10,372 -32,018 0
Obsolescence and valuation allowance expense for inventories 16 4,141 3,016 17.885
Personnel expense 7 63,029 66,409 67.548
Depreciation 11 9,146 15,591 16.314
Impairment 6 / 11 0 0 9.888
Amortization 12 1,430 1,409 1.609
Other expenses   71,521 65,384 74.864
Foreign exchange losses 5 -704 1,276 206
Other operating income 5 -8,852 -3,901 -27.610
Segment loss   -26,726 -58,309 -95.741
Finance income 8 788 1,168 839
Finance expense 8 -22 0 -313
Loss before tax   -25,960 -57,141 -95.215

The accounting policies of the reportable segment are identical to the Group’s accounting policies as described in note 2. Segment profit represents the profit earned by the segment without the allocation of investment revenue, finance costs and income tax expense. This is the measure reported to the Executive Board for the purpose of resource allocation and assessment of performance.

Segment assets and liabilities

in EUR thousands 12/31/2015 12/31/2014
Semi-conductor equipment segment assets
266,720 260,693
Unallocated assets 215,233 272,854
Total Group assets 481,953 533,547
in EUR thousands 12/31/2015 12/31/2014
Semi-conductor equipment segment liabilities
82,574 115,842
Unallocated liabilities 2,874 2,003
Total Group liabilities 85,448 117,845

For the purpose of monitoring segment performance and allocating resources all assets other than tax assets, cash and other financial assets are treated as allocated to the reportable segment. All liabilities are allocated to the reportable segment apart from tax liabilities and post-employment benefit liabilities.

Additions to Property, Plant and Equipment, to Goodwill and to Intangible assets, and the depreciation and amortization expenses are given in notes 11 and 12. Other non-current assets increased by kEUR 248 during 2015 (decreased by kEUR 525 in 2014).

Information concerning other material items of income and expense for personnel expenses and R&D expenses can be found in notes 7 and 4.

GEOGRAPHICAL INFORMATION

The Group’s revenue from continuing operations from external customers and information about its non-current assets by geographical location are detailed below. Revenues from external customers are attributed to individual countries based on the country in which it is expected that the products will be used.

in EUR thousands 2015 2014 2013
Asia 118,376 160,240 141,785
Europe 35,772 25,189 24,213
Americas 43,608 8,368 16,865
Total 197,756 193,797 182,863

Sales from external customers attributed to Germany, AIXTRON’s country of domicile, and to other countries which are of material significance are as follows:

in EUR thousands 2015 2014 2013
Germany 6,705 6,621 7,210
USA 41,937 8,162 14,805
Korea 26,507 18,641 30,578
China 52,571 106,568 56,788
Taiwan 27,375 20,580 43,177

Revenues from all foreign countries outside of Germany were kEUR 191,051, kEUR 187,176 and kEUR 175,653 for the years ended December 31, 2015, 2014 and 2013 respectively.

In 2015 sales to one customer were 18.1% of Group revenue, with no other customer exceeding 10%. Sales to four customers in 2014 exceeded 10% of Group revenue, representing 12.2%, 10.9%, 10.4% and 10.1% respectively. In 2013 sales to one customer amounted to 14.4% of Group revenues.

in EUR thousands 12/31/2015 12/31/2014
Asia 3,837 2,591
Europe excluding Germany 13,093 12,619
Germany 124,954 127,536
USA 22,372 2,205
Total Group non current assets 164,256 144,951

Non-current assets exclude deferred tax assets, financial instruments, post-employment benefit assets and rights arising under insurance contracts.

4. RESEARCH AND DEVELOPMENT

Research and development costs, before deducting project funding received, were kEUR 55,415, kEUR 66,739 and kEUR 57,153 for the years ended December 31, 2015, 2014 and 2013 respectively.

After deducting project funding received and not repayable, net expenses for research and development were kEUR 52,409, kEUR 64,944 and kEUR 54,627 for the years ended December 31, 2015, 2014 and 2013 respectively.

5. OTHER OPERATING INCOME

in EUR thousands 2015 2014 2013
Research and development funding 3,006 1,795 2,526
Income from resolved contract obligations 1,904 0 225
Income from the reversal of provisions and
the write-off of debts
0 4 33
Reversal of impairment of building 225 0 0
Gain from the disposal of fixed assets 3 0 43
Insurance recoveries 0 52 22,638
Foreign exchange gains 3,389 979 746
Other 325 1,071 1,399
  8,852 3,901 27,610

In June 2013 inventory belonging to AIXTRON with an original cost of kEUR 22,284 was destroyed by a fire in a third party warehouse in the United Kingdom. The inventory valuation had been written down by a provision of kEUR 17,127 to a net amount of kEUR 5,157. Insurance proceeds related to the incident amounting to kEUR 22,479 are included within Insurance recoveries in Other operating income. The destroyed inventory, net of the provision, is expensed in cost of sales.

The total amount of exchange gains and losses (see also note 6) recognized in profit or loss was a gain of kEUR 2,685, (2014 loss kEUR 297; 2013 gain kEUR 540).

in EUR thousands 2015 2014 2013
Foreign exchange gains 3,389 979 746
Foreign exchange losses (see note 6) -704 -1,276 -206
Net foreign exchange gains (losses) 2,685 -297 540
Other foreign exchange gains (losses) 2,685 -297 540
Net foreign exchange gains (losses) 2,685 -297 540

6. OTHER OPERATING EXPENSES

in EUR thousands 2015 2014 2013
Foreign exchange losses 704 1,276 206
Impairment of building 0 0 9,888
Losses from the disposal of fixed assets 8 29 54
Additions to allowances for receivables or
write-off of receivables
1,439 327 142
Other 8 42 1,341
  2,159 1,674 11,631

7. PERSONNEL EXPENSE

in EUR thousands 2015 2014 2013
Payroll 54,033 57,403 58,783
Social insurance contributions 6,731 6,560 6,444
Expense for defined contribution plans 1,274 1,667 1,340
Share based payments 991 779 981
  63,029 66,409 67,548

Personnel expenses include restructuring costs related to reductions in personnel in a number of the Group’s activities. Costs are included in expenses as set out in the table below.

in EUR thousands 2015 2014 2013
Cost of sales 0 729 2,096
Selling expenses 0 424 525
General administration expenses 0 577 1,680
Research and development costs 0 4,086 930
0 5,816 5,231

8. NET FINANCE INCOME

in EUR thousands 2015 2014 2013
Interest income from financial assets
On financial assets measured at amortised cost 788 1,168 839
Interest expense from financial liabilities
On financial liabilities not at fair value through profit or loss -22 0 -313
Net finance income 766 1,168 526

Interest income relates to interest on cash and cash equivalents and held to maturity investments.

9. INCOME TAX EXPENSE/BENEFIT

The following table shows income tax expenses and income recognized in the consolidated income statement:

in EUR thousands 2015 2014 2013
Current tax expense (+)/current tax income (-)
for current year 2,164 4,093 5,697
for prior years -175 719 -539
Total current tax expense/income 1,989 4,812 5,158
 
Deferred tax expense (+)/deferred tax income (-)
from temporary differences 1,157 989 55
Income/expense from changes in local tax rate 54 0 4
from reversals and write-downs 0 -431 584
Total deferred tax expense 1,211 558 643
Taxes on income/loss 3,200 5,370 5,801

Income/loss before income taxes and income tax expense relate to the following regions:

in EUR thousands 2015 2014 2013
Income/loss before income taxes
Germany -30,479 -61,568 -104,284
Outside Germany 4,519 4,427 9,069
Total -25,960 -57,141 -95,215
 
Income tax expense
Germany 2,192 1,249 353
Outside Germany 1,008 4,121 5,448
Total 3,200 5,370 5,801

The Company’s effective tax rate is different from the German statutory tax rate of 32.80% (2014: 30.55%; 2013: 30.54%) which is based on the German corporate income tax rate, including solidarity surcharge, and trade tax.

The following table shows the reconciliation from the expected to the reported tax expense:

in EUR thousands 2015 2014 2013
Net result before taxes -25,960 -57,141 -95,215
Income tax expense/benefit (German tax rate) -7,928 -17,451 -29,079
Effect from differences to foreign tax rates -833 -2,291 -1,768
Non-deductible expenses 765 1,848 338
Tax losses not recgonized as assets 13,798 27,277 36,089
Recognition/derecognition of deferred tax assets 348 -431 662
Effect from changes in local tax rate 54 0 4
Effect of the use of loss carryforwards -4,113 -1,390 -1,752
Effect of permanent differences -63 -24 -25
Other 1,172 -2,168 1,332
Taxes on income/loss 3,200 5,370 5,801
Effective tax rate -12.3% -9.4% -6.1%

10. CURRENT TAX RECEIVABLE AND PAYABLE

As of December 31, 2015 the current tax receivable and payable, arising because the amount of tax paid in the current or in prior periods was either too high or too low, are kEUR 2,538 (2014: kEUR 543) and kEUR 2,874 (2014: kEUR 1,969) respectively.

11. PROPERTY, PLANT AND EQUIPMENT

in EUR thousands Land and
buildings
Technical equipment and machinery Other plant,
factory and
office
equipment
Assets
under
construction
Total
Cost          
Balance at January 1, 2014 63,539 78,715 19,755 4,291 166,300
Additions 428 2,894 644 8,681 12,647
Disposals 29 504 2,172 47 2,752
Transfers 119 3,200 130 -3,474 -25
Effect of movements in exchange rates 311 2,452 271 153 3,187
Balance at December 31, 2014 64,368 86,757 18,628 9,604 179,357
 
Balance at January 1, 2015 64,368 86,757 18,628 9,604 179,357
Additions 344 10,935 416 829 12,524
Additions from business combinations 0 52 0 0 52
Disposals 76 8,572 2,918 0 11,566
Transfers 17 4,355 139 -4,521 -10
Effect of movements in exchange rates 304 2,346 297 293 3,240
Balance at December 31, 2015 64,957 95,873 16,562 6,205 183,597
 
Depreciation and impairment losses
Balance at January 1, 2014 20,903 51,647 13,884 0 86,434
Depreciation charge for the year 1,940 11,762 1,889 0 15,591
Disposals 16 400 2,146 0 2,562
Effect of movements in exchange rates 204 2,151 240 0 2,595
Balance at December 31, 2014 23,031 65,160 13,867 0 102,058
 
Balance at January 1, 2015 23,031 65,160 13,867 0 102,058
Depreciation charge for the year 1,847 5,391 1,566 342 9,146
Reversal of impairment 225 0 0 0 225
Disposals 76 8,434 2,896 0 11,406
Effect of movements in exchange rates 208 2,250 244 -10 2,692
Balance at December 31, 2015 24,785 64,367 12,781 332 102,265
 
Carrying amounts
At January 1, 2014 42,636 27,068 5,871 4,291 79,866
At December 31, 2014 41,337 21,597 4,761 9,604 77,299
 
At January 1, 2015 41,337 21,597 4,761 9,604 77,299
At December 31, 2015 40,172 31,506 3,781 5,873 81,332

DEPRECIATION

Depreciation expense amounted to kEUR 9,146 for 2015 and was kEUR 15,591 and kEUR 16,314 for 2014 and 2013 respectively.

During each financial year, asset useful lives are reviewed in accordance with IAS 16. The effect of the changes in assets useful lives has been to increase the depreciation expense in 2015 by kEUR nil (2014 kEUR 561, 2013 kEUR 2,160) compared with the depreciation which would have occurred had the asset useful lives remained unchanged. The changes relate to test equipment which is no longer used.

IMPAIRMENTS

In 2015 and 2014 there were no impairments of Fixed Assets.

In 2013 impairment charges of kEUR 9,888 were made in respect of a building and specific equipment contained in that building in Herzogenrath, Germany. The impairment losses are recorded in Other operating expenses in the Income Statement, within AIXTRON’s one operating segment, and are also shown in the table above.
The company decided to relocate its main activities from its Kaiserstrasse facility in Herzogenrath to a purpose built building nearby. Consequently, the recoverable amount of the Kaiserstrasse facility was re-assessed as its fair value less costs of disposal, which was kEUR 5,500.
The valuation was carried out by a professionally qualified valuer (CIS Immobiliengutachter HypZert fuer finanzwirtschaftliche Zwecke) and is level 2 in the hierarchy of valuations in IFRS 13. The valuation was based on observable inputs from comparable property transactions. The valuation given of the building in 2013 was kEUR 5,670 and an allowance for the costs of disposal of kEUR 170 has been made against this.
The valuation was updated on the same basis as at the end of 2015. The building is now valued at kEUR 5,070 less costs of disposal of kEUR 152. Other operating income includes a reversal of impairment of kEUR 225 resulting from this updated valuation.
The building is expected to be put on the market for sale in the near future.

ASSETS UNDER CONSTRUCTION

Assets under construction relates mainly to self-built systems for development laboratories in 2015 and 2014.

12. INTANGIBLE ASSETS

in EUR thousands Goodwill Other
intangible
assets
Total
Cost      
Balance at January 1, 2014 81,504 36,833 118,337
Acquisitions 0 759 759
Disposals 0 1,990 1,990
Transfers 0 25 25
Effect of movements in exchange rates 982 2,620 3,602
Balance at December 31, 2014 82,486 38,247 120,733
 
Balance at January 1, 2015 82,486 38,247 120,733
Acquisitions 0 696 696
Additions from business combinations 10,515 4,655 15,170
Transfers 0 10 10
Effect of movements in exchange rates 867 2,604 3,471
Balance at December 31, 2015 93,868 46,212 140,080
 
Amortisation and impairment losses
Balance at January 1, 2014 17,389 33,775 51,164
Amortisation charge for the year 0 1,409 1,409
Disposals 0 1,990 1,990
Effect of movements in exchange rates 284 2,595 2,879
Balance at December 31, 2014 17,673 35,789 53,462
 
Balance at January 1, 2015 17,673 35,789 53,462
Amortisation charge for the year 0 1,430 1,430
Effect of movements in exchange rates 293 2,601 2,894
Balance at December 31, 2015 17,966 39,820 57,786
 
Carrying amounts
At January 1, 2014 64,115 3,058 67,173
At December 31, 2014 64,813 2,458 67,271
 
At January 1, 2015 64,813 2,458 67,271
At December 31, 2015 75,902 6,392 82,294

AMORTIZATION AND IMPAIRMENT EXPENSES FOR OTHER INTANGIBLE ASSETS

Amortization and impairment expenses for other intangible assets are recognized in the income statement as follows:

in EUR thousands 2015 2014 2013
  Amortization Amortization Amortization
Cost of sales 2 0 0
Selling expenses 0 1 1
General administration expenses 861 1,261 1,461
Research and
development costs
570 147 147
  1,433 1,409 1,609

In 2015, 2014 and 2013, no impairment losses were incurred and no reversals of impairment losses were made.

The amortization expected to be charged on other intangible assets in the future years is as follows:

in EUR thousands  
2016 1,274
2017 975
2018 815
2019 718
2020 580
After 2020 2,030

The actual amortization can differ from the expected amortization.

IMPAIRMENT OF GOODWILL

At the end of 2015 the Group assessed the recoverable amount of goodwill and determined that no impairment loss had to be recognized (2014: kEUR 0; 2013 kEUR 0).

The carrying value of goodwill was kEUR 75,902 (2014 kEUR 64,813; 2013 kEUR 64,115).

As at the end of 2015 the cash generating unit, to which the goodwill has been allocated, is the AIXTRON Group Semiconductor Equipment segment.

The recoverable amount of the cash-generating unit is determined through a fair value less cost to sell calculation. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. As AIXTRON has only one cash generating unit (CGU), market capitalization of AIXTRON, adjusted for a control premium, has been used to determine the fair value less cost to sell of the cash generating unit. This is level 2 in the hierarchy of fair value measures set out in IFRS 13.

As at December 31, 2015 the market capitalization of AIXTRON was Euro 460.6 million, based on a share price of Euro 4.128 and issued shares (excluding Treasury Shares) of 111,581,783. In an orderly selling process costs are incurred. AIXTRON has used 1.5% to account for the costs to sell.
A control premium typically in the range 20%-40% is incurred in the acquisition of a company.

A 20% premium has been applied in this test to adjust the market capitalization to the fair value. Market capitalization was also adjusted for net debt and tax assets prior to comparing it to the carrying amount of the CGU. The analysis shows that the fair value less costs to sell of the CGU AIXTRON exceeds its carrying amount and that Goodwill is not impaired.

Euro millions Impairment
Test
Impairment
Test
Sensitivity
Analysis
Sensitivity
Analysis
  2015 2014 20152015
      No control
premium
20% Control
premium
Market capitalisation as of December 31 460.6 1,045.6 402.5335.5
Costs to sell in percentage 1.50% 1.50% 1.50%1.50%
Costs to sell -6.9 -15.7 -6.0-5.0
Market capitalisation less cost to sell 453.7 1,029.9 396.5330.4
Control premium in percentage 20.00% 20.00% 0.00%20.00%
Control premium 90.7 206.0 0.066.1
Market capitalisation and control premium less cost to sell 544.4 1,235.9 396.5396.5
Net debt -209.4 -268.1 -209.4-209.4
Tax assets -3.0 -2.8 -3.0-3.0
Fair value less costs to sell of CGU 332.0 965.0 184.1184.1
 
Carrying amount of the CGU 184.1 144.8 184.1184.1
 
Surplus of fair value less cost to sell over carrying amount 147.9 820.2 0.00.0
 
Surplus of fair value less cost to sell over carrying amount as a percentage 80% 566% 0%0%

The fair value less costs to sell, which is the recoverable amount, exceeds the carrying amount of the CGU by 80% (2014 566%).

A sensitivity analysis of the impairment test, in which the control premium is reduced to zero, shows that the carrying amount of the CGU would equal the revoverable amount should the market capitalization of AIXTRON fall by 13% (2014: 60%) to EUR 402.5 million; EUR 3.61 per share (2014: EUR 422.0 million EUR 3.78 per share).

A sensitivity analysis of the impairment test in which a control premium of 20% or 40% was used would show that the carrying amount of the CGU would equate with the recoverable amount should the share price be EUR 3.01 or EUR 2.58 respectively (2014: 20%, EUR 3.15; 40%, EUR 2.70).

13. OTHER NON-CURRENT ASSETS

Other non-current assets totaling kEUR 630 (2014: kEUR 382) include mainly rent deposits for buildings.

14. DEFERRED TAX ASSETS AND LIABILITIES

RECOGNIZED DEFERRED TAX ASSETS AND LIABILITIES

Deferred tax assets are recognized at the level of individual consolidated companies in which a loss was realized in the current or preceding financial year, only to the extent that realization in future periods is probable. The nature of the evidence used in assessing the probability of realization includes forecasts, budgets and the recent profitability of the relevant entity. The carrying amount of deferred tax assets for entities which have made a loss in either the current or preceding year was kEUR 1,542 (2014: kEUR 2,281).

Deferred taxes for tax losses in the amount of kEUR 161,068 (2014: kEUR 129,544) and on deductible temporary differences in the amount of kEUR 19,555 (2014: kEUR 12,164) were not recognized. Tax losses in the amount of kEUR 139,853 can be used indefinitely (2014: kEUR 110,550), kEUR nil expire by 2020 (2014: kEUR nil, by 2019) and kEUR 21,215 expire after 2020 (2014: kEUR 18,994 after 2019).

The following table shows the development of temporary differences during the financial year:

in EUR thousands Assets Liabilities Net
  2015 2014 2015 2014 2015 2014
Property, plant and equipment 185 624 0 0 185 624
Trade receivables 1 -29 0 0 1 -29
Inventories 473 939 0 0 473 939
Employee benefits 257 318 0 0 257 318
Currency translation 9 -37 0 0 9 -37
Provisions and other liabilities 74 80 0 0 74 80
Other -35 -56 0 -34 -35 -90
Tax losses 2,278 2,281 0 0 2,278 2,281
Deferred tax assets (+) liabilities (-) 3,242 4,120 0 -34 3,242 4,086
in EUR thousands Balance at January 1, 2015 Recognized in income statement Directly recognized in Other Comprehensive Income Balance at December 31, 2015
Property, plant and equipment 624 -439 0 185
Trade receivables -29 30 0 1
Inventories 939 -466 0 473
Employee benefits 318 -61 0 257
Currency translation -37 -320 366 9
Provisions and other liabilities 80 -6 0 74
Other -90 55 0 -35
Tax losses 2,281 -3 0 2,278
4,086 -1,210 366 3,242
in EUR thousands Balance at
January
1, 2014
Recognized in income statement Directly recognized in Other Comprehensive Income Balance at
December 31, 2014
Property, plant and equipment 124 500 0 624
Trade receivables 693 -722 0 -29
Inventories 959 -20 0 939
Employee benefits 209 109 0 318
Currency translation 29 -397 331 -37
Provisions and other liabilities 53 27 0 80
Intangible assets -711 711 0 0
Other -371 281 0 -90
Tax losses 3,328 -1,047 0 2.281
  4,313 -558 331 4.086

15. LONG TERM RECEIVABLE FROM CURRENT TAX

Long term receivables from current tax consist of a receivable from corporate tax which will be refunded over a period of up to five years. The amount included in long term receivables is for the amount receivable after more than one year from the balance sheet date.

16. INVENTORIES

in EUR thousands 2015 2014
Raw materials and supplies   37,259 32,019
Work in process   20,615 42,269
Inventories at customers' locations   12,943 7,406
    70,817 81,694
in EUR thousands Note 2015 2014
Inventories recognised as an expense during the period 3 95,143 134,940
Reversals of write-downs recognised during the year 3 -10,372 -32,018
    84,771 102,922
Write-down of inventories during the year 3 4,141 3,016
Inventories measured at net realisable value   10,312 5,665
Carrying amount of inventories pledged as security for liabilities   0 0

The reversal of write-downs recognized during the year in both 2014 and 2015 mainly relates to inventories which had been written down to their net realizable value and has subsequently been sold.

17. TRADE RECEIVABLES AND OTHER CURRENT ASSETS

Current Assets

in EUR thousands 2015 2014
Trade receivables 28,366 27,269
Allowances for doubtful accounts -2,410 -945
Trade receivables - net 25,956 26,324
Prepaid expenses 1,551 1,152
Reimbursement of research and development costs 1,310 1,485
Advance payments to suppliers 919 2,010
VAT recoverable 1,046 1,865
Other assets 865 1,211
Total other current assets 5,691 7,723
  31,647 34,047

Additions to allowances against trade receivables are included in other operating expenses, releases of allowances are included in other operating income. Allowances against receivables developed as follows:

in EUR thousands 2015 2014
Allowance at January 1 945 1,821
Translation adjustments 16 21
Impairment losses recognised 1,509 2
Used 0 -866
Impairment losses reversed -60 -33
Allowance at December 31 2,410 945

Ageing of past due but not impaired receivables

in EUR thousands 2015 2014
1-90 days past due 2,534 1,891
More than 90 days past due 3,200 2,084

Due to the worldwide spread of risks, there is a diversification of the credit risk for trade receivables. Generally, the Company demands no securities for financial assets. In accordance with usual business practice for capital equipment however, the Company mitigates its exposure to credit risk by requiring payment by irrevocable letters of credit and substantial payments in advance from most customers as conditions of contracts for sale of major items of equipment.

At the balance sheet date one customer accounted for 22% of the company’s net trade receivables, no other single customer accounted for more than 10% of trade receivables. In 2014 four customers each accounted for more than 10% of the company’s net trade receivables, representing respectively 30.4%, 16.2%,11.5% and 10.5% of trade receivables. In determining concentrations of credit risk the company defines counterparties as having similar characteristics if they are connected entities.

Included in the Company’s trade receivable balance are debtors with a carrying amount of kEUR 5,734 (2014: kEUR 3,975) which are past due at the reporting date for which the Company has not provided. As there has not been a significant change in credit quality, and although the company has no collateral, the amounts are still considered recoverable.

In determining the financial assets which may be individually impaired the Company has taken into account the likelihood of recoverability based on the past due nature of certain receivables, and our assessment of the ability of all counter-parties to perform their obligations.

18. OTHER FINANCIAL ASSETS

Other financial assets of kEUR 93,089 (2014: kEUR 151,494) are fixed deposits with banks with a maturity of more than three months at inception of the contracts.

An analysis of the maturities at December 31, 2015 and 2014 is as follows:

In EUR thousands 2015 2014
Maturity up to 180 days 93,089 111,494
Maturity 181 days to 365 days 0 40,000
  93,089 151,494

19. CASH AND CASH EQUIVALENTS

in EUR thousands 2015 2014
Cash-in-hand 5 3
Bank balances 116,300 116,577
Cash and Cash equivalents 116,305 116,580

Cash and cash equivalents comprise short-term bank deposits with an original maturity of 3 months or less. The carrying amount and fair value are the same.

Bank balances included kEUR 0 given as security (2014: kEUR 0) at December 31, 2015.

20. SHAREHOLDERS’EQUITY

FULLY PAID CAPITAL

  2015 2014
January 1 112,694,555 112,613,445
Shares issued during the year 25,800 81,110
Issued and fully paid capital at December 31, including Treasury Shares 112,720,355 112,694,555
Treasury shares -1,138,572 -1,103,519
Issued and fully paid share capital at December 31 under IFRS 111,581,783 111,591,036

The share capital of the company consists of no-par value shares and was fully paid-up during 2015 and 2014. Each share represents a portion of the share capital in the amount of EUR 1.00.

AUTHORIZED SHARE CAPITAL

Authorized share capital, including issued capital, amounted to EUR 219,214,144 (2014: 219,214,144).

ADDITIONAL PAID-IN CAPITAL

Additional paid-in capital mainly includes the premium on increases of subscribed capital as well as cumulative expense for share-based payments.

In 2015 and 2014 all shares issued were the results of stock options being exercised.

The Company regards its shareholders’ equity as capital for the purpose of managing capital. Changes in Shareholders’ equity are shown in the Consolidated Statement of Changes in Equity. The Company considers its capital resources to be adequate.

INCOME AND EXPENSES RECOGNIZED IN OTHER COMPREHENSIVE INCOME

in EUR thousands Currency translation Total
Balance at December 31, 2012 -2,553 -2,553
Change in currency translation -6,130 -6,130
Balance at December 31, 2013 -8,683 -8,683
Change in currency translation 11,815 11,815
Balance at December 31, 2014 3,132 3,132
Change in currency translation 9,117 9,117
Balance at December 31, 2015 12,249 12,249

The foreign currency translation adjustment comprises all foreign exchange differences arising from the translation of the financial statements of foreign subsidiaries whose functional currency is not the Euro.

21. LOSS PER SHARE

BASIC LOSS PER SHARE

The calculation of the basic loss per share is based on the weighted-average number of common shares outstanding during the reporting period.

DILUTED LOSS PER SHARE

The calculation of the diluted loss per share is based on the weighted-average number of outstanding common shares and of common shares with a possible dilutive effect resulting from share options being exercised under the share option plan.

  2015 2014 2013
Loss per share      
Net loss attributable to the shareholders of
AIXTRON SE in kEUR
-29,160 -62,511 -101,016
Weighted average number of common shares and
ADS for the purpose of Earnings/Loss Per Share
111,583,480 112,107,905 103,016,618
Basic loss per share (EUR) -0.26 -0.56 -0.98
Loss per share (diluted)
Net profit/loss attributable to the shareholders of
AIXTRON SE in kEUR
-29,160 -62,511 -101,016
Weighted average number of common shares and
ADS for the purpose of Earnings/Loss Per Share
111,583,480 112,107,905 103,016,618
Dulutive effects of share options 0 0 0
Weighted average number of common shares and
ADS for the purpose of Earnings/Loss Per Share (diluted)
111,583,480 112,107,905 103,016,618
Diluted loss per share (EUR) -0.26 -0.56 -0.98

The following securities issued were not included in the computation of the diluted earnings per share, as their effect would be anti-dilutive:

Number of shares 2015 2014 2013
Share options 2,891,815 3,521,639 3,289,025

22. EMPLOYEE BENEFITS

DEFINED CONTRIBUTION PLAN

The Company grants retirement benefits to qualified employees through various defined contribution pension plans. The expenses incurred for defined contribution plans mainly arise from two pension plans in subsidiaries. The contributions made by the company do not exceed 10% of qualified employees’ base salaries. In 2015 the expense recognized for defined contribution plans amounted to kEUR 1,274 (2014: kEUR 1,667, 2013: kEUR 1,340).

In addition to the Company’s retirement benefit plans, the company is required to make contributions to state retirement benefit schemes in most of the countries in which it operates. The company is required to contribute a specified percentage of payroll costs to the retirement schemes in order to fund the benefits. The only obligation of the group is to make the required contributions.

23. SHARE-BASED PAYMENT

The Company has different fixed option plans which reserve shares of common stock and AIXTRON American Depository Shares (ADS) for issuance to members of the Executive Board, management and employees of the Company. Each AIXTRON ADS represents the beneficial ownership in one AIXTRON common share. The following is a description of these plans:

AIXTRON stock option plan 1999

In May 1999, options were authorized to purchase 3,000,000 shares of common stock (after giving effect to capital increases, stock splits, and the EURO conversion). The stock options can be exercised when 15 years have elapsed since their issue. Under the terms of the 1999 plan, options were granted at prices equal to the average closing price over the last 20 trading days on the Frankfurt Stock Exchange before the grant date. Under this plan options for the purchase of 644,000 common shares were outstanding as of December 31, 2015.

AIXTRON STOCK OPTION PLAN 2002

In May 2002, options were authorized to purchase 3,511,495 shares of common stock. The options are exercisable in equal instalments of 25% per year after the second anniversary of the date of grant, subject to certain conditions. Options expire ten years from date of grant. Under the terms of the 2002 plan, options are granted at prices equal to the average closing price over the last 20 trading days on the Frankfurt Stock Exchange before the grant date, plus 20%. No grants were issued with a strike price less than fair market value. Options to purchase 108,750 common shares were outstanding under this plan as of December 31, 2015.

AIXTRON STOCK OPTION PLAN 2007

In May 2007, options were authorized to purchase 3,919,374 shares of common stock. 50% of the granted options may be executed after a waiting period of not less than two years, further 25% after three years and the remaining 25% after at least four years. The options expire 10 years after they have been granted. Under the terms of the 2007 plan, options were granted at prices equal to the average closing price over the last 20 trading days on the Frankfurt Stock Exchange before the grant date, plus 20%. Options to purchase 1,113,665 common shares were outstanding under this plan as of December 31, 2015.

AIXTRON STOCK OPTION PLAN 2012

In May 2012, options were authorized to purchase shares of common stock. The granted options may be exercised after a waiting period of not less than four years. The options expire 10 years after they have been granted. Under the terms of the 2012 plan, options are granted at prices equal to the average closing price over the last 20 trading days on the Frankfurt Stock Exchange before the grant date, plus 30%. Options to purchase 1,025,400 were outstanding under this plan as of December 31, 2015.

GENUS STOCK OPTION PLAN 2000

With the acquisition of Genus, Inc. the company adopted the Genus Incentive Stock Option Plan 2000. Under this plan at the date of acquisition options were authorized to purchase the equivalent of 2,013,487 AIXTRON ADS. Options granted before October 3, 2003 vest over a three-year-period and expire five years from the date of grant. Options granted after October 3, 2003 vest over a four-year-period and expire ten years from the date of grant.
No options to purchase AIXTRON ADS remain outstanding under this plan as of December 31, 2015.

SUMMARY OF STOCK OPTION TRANSACTIONS

AIXTRON share options Number of shares Average exercise price (EUR) Number of shares Average exercise price (EUR)
  2015 2014
Balance at January 1 3,521,639 21.02 3,283,435 23.47
Granted during the year 0 0 1,150,400 13.19
Exercised during the year 25,800 4.08 81,110 5.53
Forfeited during the year 604,024 42.61 831,086 21.35
Outstanding at December 31 2,891,815 16.67 3,521,639 21.02
Exercisable at December 31 1,214,165 20.46 1,564,214 28.91

GENUS SHARE OPTIONS

Genus share options Number of shares Average exercise price (USD) Number of shares Average exercise price (USD)
  2015 2014
Balance at January 1 0 5,590 6.55
Expired during the year 0 5,590 6.55
Outstanding at December 31 0 0 0.00
Exercisable at December 31 0 0 0.00

AIXTRON STOCK OPTIONS AS OF DECEMBER 31, 2015

Exercise price per share (EUR) Underlying shares represented by outstanding options Shares represented by exercisable options Average option life (in years)
26.93 252,000 0 0.5
7.48 392,000 0 1.5
3.83 108,750 108,750 0.5
10.09 119,125 119,125 2.0
4.17 83,415 83,415 3.0
24.60 425,825 425,825 4.0
26.60 452,300 452,300 5.0
12.55 8,000 6,000 6.0
15.75 25,000 18,750 7.0
14.01 41,000 0 9.0
13.14 984,400 0 9.0
2,891,815 1,214,165

ASSUMPTIONS USED TO CALCULATE FAIR VALUES AND SHARE-BASED PAYMENT EXPENSES

The fair value of services received in return for stock options granted is measured by reference to the fair value of the stock options granted. The fair value of the stock options is determined on the basis of a mathematical model. In accordance with IFRS 2 the measurement includes only options which were granted after November 7, 2002.

In 2015, the personnel expenses from share-based payments, all of which were equity settled share based payments, were kEUR 991 (2014: kEUR 779; 2013: kEUR 981).

As of December 31, 2015 an amount of kEUR 2,649 relating to stock options granted prior to that date had not yet been recognized as a personnel expense. This amount will be charged over the periods to 2018. The expected allocation of the expense is as follows: 2016: kEUR 980, 2017: kEUR 975 and 2018: kEUR 694

AIXTRON SHARE OPTIONS GRANTED

  in 2014
(October)
in 2014
(June)
Fair value on grant date 3.79 € 4.26 €
Price per share 10.11 € 10.77 €
Exercise price 13.14 € 14.01 €
Expected volatility 50.53% 50.92%
Option life 10.0 years 10.0 years
Expected dividend payments 0.13 € 0.13 €
Risk-free interest rate 1.03% 1.46%

The expected volatility is based on historical volatility.

24. PROVISIONS

Development and breakdown of provisions

in EUR thousands 01.01.2015 Exchange rate differences Usage Reversal Addition 31.12.2015 Current Non-current
Personnel
expenses
9,666 244 4,830 2,273 2,817 5,624 5,624 0
Warranties 7,683 51 6,807 0 5,539 6,466 5,381 1,085
Onerous contracts 3,352 70 3,352 5 2,571 2,636 2,636 0
Commissions 682 7 508 174 418 425 425 0
Other 7,880 163 6,134 1,228 5,655 6,336 6,116 220
Total 29,263 535 21,631 3,680 17,00 21,487 20,182 1,305

PERSONNEL EXPENSES

These include mainly provisions for holiday pay, payroll and severance costs, which are financial liabilities.

PROVISIONS FOR ONEROUS CONTRACTS

These include provisions associated with contracts where the unavoidable costs of meeting the contract obligations exceed the economic benefits expected to be received. These mainly relate to supply contracts for materials which are excess to the forecast future requirements.

COMMISSIONS

Commissions are payable to sales agents and are recorded as financial liabilities.

WARRANTIES

Warranty provisions are the estimated unavoidable costs of providing parts and service to customers during the normal warranty periods.

OTHER PROVISIONS

Other provisions consist mainly of the estimated cost of services received.

For provisions existing at both December 31, 2015 and December 31, 2014, the economic outflows resulting from the obligations that are provided for are expected to be settled within one year of the respective balance sheet date for current provisions and within two years of the respective balance sheet date, but more than one year, for non-current provisions.

25. TRADE PAYABLES AND OTHER CURRENT LIABILITIES

The liabilities consist of the following:

in EUR thousands 2015 2014
Trade payables 9,814 16,397
Liabilities from grants 2,665 2,015
Payroll taxes and social security contributions 655 769
VAT and similar taxes 644 52
Other liabilities 21,004 356
Other current liabilities 24,968 3,192
Trade payables and other current liabilities 34,782 19,589

The carrying amount of trade payables and other current liabilities approximates their fair value. Trade payables, grant liabilities, taxes and other liabilities fall due for payment within 90 days of receipt of the relevant goods or services.

Other liabilities includes kEUR 17,187 (2014 kEUR nil) previously recorded as an advance payment from a customer in China and which is repayable following the reduction in order volume.

26. FINANCIAL INSTRUMENTS

Details of the significant accounting policies and methods, the basis of measurement that are used in preparing the financial statements and the other accounting policies that are relevant to an understanding of the financial statement are disclosed in note 2 to the financial statements.

FINANCIAL RISK MANAGEMENT OBJECTIVES

The group seeks to minimize the effects of any risk that may occur from any financial transaction. Key aspects are the exposures to liquidity risk, credit risk, interest rate risk and currency risk arising in the normal course of the Company’s business.

The AIXTRON Group’s central management coordinates access to domestic and international financial institutions and monitors and manages the financial risks relating to the operations of the Group through internal risk reports which analyze exposure to risk by likelihood and magnitude. These risks cover all aspects of the business, including financial risks; and the risk management system is in accordance with the corporate governance recommendations specified in the German Corporate Governance Code.

Liquidity risks

Liquidity risk is the risk that the Group is unable to meet its existing or future obligations due to insufficient availability of cash or cash equivalents. Managing liquidity risk is one of the central tasks of AIXTRON SE. In order to be able to ensure the Group’s solvency and flexibility at all times cash and cash equivalents are projected on the basis of regular financial and liquidity planning.

As at December 31, 2015 the group had no borrowings (2014 nil). Financial liabilities, all due within one year, of kEUR 34,782 (2014 kEUR 19,589) consisting of trade payables and other liabilities and are shown in Note 25, together with an analysis of their maturity.

As at December 31, 2015 the group had kEUR 116,305 cash and cash equivalents (2014 kEUR 116,580) and a further kEUR 93,089 of fixed deposits with banks (2014 kEUR 151,494).

CREDIT RISKS

Financial assets generally exposed to a credit risk are trade receivables (see note 17) and cash and cash equivalents.

The Group’s cash and cash equivalents are kept with banks that have a good credit standing. Central management of the Group assesses the counter-party risk of each financial institution dealt with and sets limits to the Group’s exposure to those institutions. These credit limits are reviewed from time to time so as to minimize the default risk as far as possible and to ensure that concentrations of risk are managed.

The maximum exposure of the Group to credit risk is the total amount of receivables, financial assets and cash balances as described in notes 17, 18 and 19.

For receivables measured at fair value, the maximum amount of the exposure to credit risk is the amount of receivables measured at fair value as disclosed in note 26. There are no credit derivatives or similar instruments which mitigate the maximum exposure to credit risk and there has been no change during the period or cumulatively in the fair value of such receivables that is attributable to changes in the credit risk.

MARKET RISKS

The Company’s activities expose it to the financial risks of changes in foreign currency exchange rates and interest rate risks. Interest rate risks are not material as the company only receives a minor amount of interest income. The Company does not use derivative financial instruments to manage its exposure to interest rate risk. Cash deposits are made with the company’s bankers at the market rates prevailing at inception of the deposit for the period and currency concerned. There has been no change to the Company’s exposure to market risk or the manner in which it manages and measures the risk.

FOREIGN CURRENCY RISK

The Company may enter into a variety of derivative financial instruments to manage its exposure to foreign currency risk, including forward exchange contracts to hedge the exchange rate risk arising on the export of equipment, the Company did not use derivative financial instruments during either 2015 or 2014. The main exchange rates giving rise to the risk are those between the US Dollar, Pound Sterling and Euro.

The carrying amounts of the Group’s foreign currency denominated monetary assets and monetary liabilities at the reporting date are as follows:

in EUR thousands Liabilities  Assets 
  2015 2014  2015 2014
US Dollars -24,416 -62,064 112,313 123,852
GB Pounds -1,903 -3,158 10,489 13,218

Exposures are reviewed on a regular basis and are managed by the Company through sensitivity analysis.

FOREIGN CURRENCY SENSITIVITY ANALYSIS

The Company is mainly exposed to US Dollar exchange rate risks through its worldwide activities.

The following table details the company’s sensitivity to a 10% change in the value of the Euro against the Dollar. A positive number indicates an increase in profit and other equity, a negative number indicates a reduction in profit and other equity.

Increase in value of Euro by 10% USD Currency Effect 
In EUR thousands 2015 2014
Profit or loss -6,482 -3,529
Other comprehensive income -1,404 -2,429
Decrease in value of Euro by 10%
In EUR thousands 2015 2014
Profit or loss 6,482 3,529
Other comprehensive income 1,404 2,429

The sensitivity analysis represents the foreign exchange risk at the year-end date only. It is calculated by revaluing the Group's financial assets and liabilities, existing at 31 December, denominated in US-Dollars by 10%. It does not represent the effect of a 10% change in exchange rates sustained over the whole of the financial year, only the effect of a different rate occurring on the last day of the year.

FAIR VALUES

Cash and cash equivalents, Loans and receivables and Held to maturity investments are stated at amortized cost. At FVTPL are classed as at fair value through profit or loss and are designated as such upon initial recognition. At FVTPL includes accrued receivables arising as the difference between the fair value of revenue (note 3) and the invoiced amounts. The fair value is level 2 in the fair value hierarchy.

The fair values and the carrying amounts of the financial instruments shown in the balance sheet are shown in the following table. Financial assets are classified into categories.

FINANCIAL ASSETS 2015

in EUR thousands Cash and cash equivalents Loans and receivables Held to-maturity investments At FVTPL Total Carrying amount and fair value
  at amortised cost at amortised cost at amortised cost at fair value  
Cash and cash equivalents 116,305 0 0 0 116,305
Other financial assets 0 0 93,089 0 93,089
Other non-current assets 0 630 0 0 630
Trade receivables 0 25,542 0 414 25,956
Total 116,305 26,172 93,089 414 235,980
At amortized cost 116,305 26,172 93,089 0 235,566
At fair value 0 0 0 414 414

FINANCIAL LIABILITIES 2015

in EUR thousands Cash and cash equivalents Loans and receivables Other payables At FVTPL Total Carrying amount and fair value
  at amortised cost at amortised cost at amortised cost at fair value  
Trade payables 0 0 9,814 0 9,814
Advance payments from customers (not in scope of IFRS 7) 0 0 24,011 0 24,011
Total 0 0 33,825 0 33,825
At amortized cost 0 0 33,825 0 33,825
At fair value  0  0 0 0 0

FINANCIAL ASSETS 2014

in EUR thousands Cash and cash equivalents Loans and receivables Held to-maturity investments At FVTPL Total Carrying amount and fair value
  at amortised cost at amortised cost at amortised cost at fair value  
Cash and cash equivalents 116,580 0 0 0 116,580
Other financial assets 0 0 151,494 0 151,494
Other non-current assets 0 382 0 0 382
Trade receivables 0 23,374 0 2,950 26,324
Total 116,580 23,756 151,494 2,950 294,780
At amortized cost 116,580 23,756 151,494 0 291,830
At fair value 0 0 0 2,950 2,950

FINANCIAL LIABILITIES 2014

in EUR thousands Cash and cash equivalents Loans and receivables Other payables At FVTPL Total Carrying amount and fair value
  at amortised cost at amortised cost at amortised cost at fair value  
Trade payables 0 0 16,397 0 16,397
Advance payments from customers (not in scope of IFRS 7) 0 0 66,928 0 66,928
Total 0 0 83,325 0 83,325
At amortized cost 0 0 83,325   83,325
At fair value 0 0 0 0 0

TRADE RECEIVABLES/PAYABLES

For trade receivables/payables due within less than one year, measured at amortized cost, the fair value is taken to be the carrying amount.

27. OPERATING LEASES

LEASES AS LESSEE

Non-cancellable operating lease rentals are payable as follows:

in EUR thousands  
2016 3,919
2017 1,916
2018 487
2019 375
2020 100
after 2020 41
  6,838

The Company leases certain office and plant facilities, office furniture and motor vehicles under various operating leases. Under most of the lease commitments for office and plant facilities the Company has options to renew the leasing contracts. The leases typically run for a period between one and fifteen years. None of the leases include contingent rentals.

The expenses for leasing contracts were kEUR 4,520, kEUR 4,150 and kEUR 3,957 for 2015, 2014 and 2013 respectively.

28. CAPITAL COMMITMENTS

As of December 31, 2015, the Company had entered into purchase commitments with suppliers in the amount of kEUR 19,104 (2014: kEUR 38,998) for purchases within the next 12 months. Commitments for capital expenditures for fixed assets are kEUR 1,059 (2014: kEUR 1,977) as of December 31, 2015.

29. CONTINGENCIES

The Company is involved in various legal proceedings or can be exposed to a threat of legal proceedings in the normal course of business. The Executive Board regularly analyses these matters, considering any possibilities of avoiding legal proceedings or of covering potential damages under insurance contracts and has recognized, where required, appropriate provisions. It is not expected that such matters will have a material effect on the Company’s net assets, results of operations and financial position.

30. IDENTITY OF RELATED PARTIES

Related parties of the Company are members of the Executive Board and members of the Supervisory Board.

EXECUTIVE BOARD AND SUPERVISORY BOARD REMUNERATION

The disclosures for key management personnel compensation required according to IAS 24 contain the remuneration of the Executive Board and the Supervisory Board.

Remuneration of the members of the Executive Board:

in EUR thousands201520142013
 
Short-term employee benefits1,0411,3871,555
Termination benefits00780
Share based payments0628250
1,0412,0152,585

Share based payments refer to the fair value of share options at grant date and also includes that portion of bonus agreements which is settled in shares.

Remuneration of the members of the Supervisory Board:

in EUR thousands201520142013
 
Fixed remuneration (incl. attendance fee)303293290
303293290

Individual amounts and further details regarding the remuneration of the members of the Executive Board and Supervisory Board are disclosed in the Remuneration Report which is an integral part of the Group Management Report.

31. CONSOLIDATED ENTITIES

AIXTRON S.E. controls the following subsidiaries:

  Country Share of capital in %
    2015   2014
AIXTRON Inc USA 100   100
AIXTRON Ltd. England & Wales 100   100
AIXTRON Korea Co. Ltd. South Korea 100   100
AIXTRON Taiwan Co. Ltd. Taiwan 100   100
AIXTRON AB Sweden 100   100
AIXTRON KK Japan 100   100
AIXTRON China Ltd P. R. China 100   100
Genus trust * USA n.a.   n.a.

All companies in the Group are engaged in the supply of equipment to the semiconductor industry. Design and manufacture of equipment takes place at the entities in Germany, UK and USA. Service and distribution takes place at all locations.

32. EVENTS AFTER THE REPORTING PERIOD

There are no events which have occurred after the balance sheet date, of which the directors have knowledge, which would result in a different assessment of the Company’s net assets, results of operation and financial position.

33. AUDITORS’FEES

Fees expensed in the income statement for the services of the group auditor Deloitte & Touche are as follows:

in EUR thousands 2015 2014
for audit 731 699
for other confirmation services 33 34
for tax advisory services 124 173
for other services 18 53
906 959

Included in the total amount of fees are fees for the group auditor Deloitte & Touche GmbH, Wirtschaftsprüfungsgesellschaft, Duesseldorf, in the amount of kEUR 583 for audit (2014: kEUR 416), kEUR 33 for other confirmation services (2014: kEUR 34), kEUR 41 for tax services (2014: kEUR 76) and kEUR 18 for other services (2014: kEUR 53).

34. EMPLOYEES

Compared to last year, the average number of employees during the current year was as follows:

EMPLOYEES BY FUNCTIONS

  2015 2014
Sales 61 65
Research and Development 265 285
Manufacturing and Service 326 331
Administration 88 86
Employees (§ 314 HGB) 740 767
Executive board members 2 2
742 769
Apprentices 15 16
757 785

35. STATEMENT OF COMPLIANCE WITH THE GERMAN CORPORATE GOVERNANCE CODE

In 2015, Executive and Supervisory Boards have made the declaration of compliance in accordance with Section 161 of AktG and this is permanently available on the Company’s web site at http://www.aixtron.com/en/investors/corporate-governance/principles.

36. SUPERVISORY BOARD AND EXECUTIVE BOARD

Composition of the Supervisory Board as of December 31, 2015

  • Dipl.-Kfm. Kim Schindelhauer
    • Aachen / businessman /Chairman of the Supervisory Board since 2002
  • Prof. Dr. Wolfgang Blättchen
    • Leonberg / Managing Director of Blättchen Advisory GmbH / member of the Supervisory Board since 1998 / Deputy Chairman of the Supervisory Board since February 27, 2013

      Membership of Supervisory Boards and controlling bodies:

      • Pfisterer Holding AG, Winterbach - Chairman of the Supervisory Board
      • H. STOLL AG & Co. KG, Reutlingen – member of the Supervisory Board (June 2015 until January 2016)
      • FAS AG, Stuttgart - member of the Supervisory Board
  • Prof. Dr. Rüdiger von Rosen
    • Frankfurt/Main / businessman / member of the Supervisory Board since 2002

      Membership of Supervisory Boards and controlling bodies:

      • ICF Bank AG, Frankfurt/Main – Deputy Chairman of the Supervisory Board
      • Paladin Asset Management Investment AG, Hannover – Chairman of the Supervisory Board
      • AKO Capital AG, Thalwil/Switzerland – member of the Board
  • Prof. Dr. Petra Denk
    • Unterschleißheim / Professor of Energy Economics / member of the Supervisory Board since 2011
    • Membership of Supervisory Boards and controlling bodies:
      • Pfisterer Holding AG, Winterbach - member of the Supervisory Board(since September 22, 2015)
  • Dr. Andreas Biagosch
    • Munich / Managing Partner Impacting I GmbH & Co KG / member of the Supervisory Board since May 2013

      Membership of Supervisory Boards and controlling bodies

      • Lürssen Maritime Beteiligungen, Bremen, member of the Advisory Board
      • Ashok Leyland Limited, Chennai/Indien - non-executive director
      • Wacker Chemie AG, Munich – member of the Supervisory Board (since February 4, 2015)
  • Dr. Ing. Martin Komischke
    • Morgarten/Switzerland / Group Chief Executive Officer, Hoerbiger Holding AG, Zug/Switzerland / member of the Supervisory Board since May 2013

      Membership of Supervisory Boards and controlling bodies

      • ADCURAM Group AG, Munich - member of the Supervisory Board (since July 2014)

The composition of the Company’s Executive Board is:

  • Martin Goetzeler, Aachen, businessman, Chairman, President and Chief Executive Officer since March 1, 2013
  • Dr. Bernd Schulte, Aachen, physicist, Executive Vice President and Chief Operating Officer since 2002

37. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION AND UNCERTAINTY

The preparation of AIXTRON’s Consolidated Financial Statements requires the Company to make certain estimates, judgments and assumptions that the Company believes are reasonable based upon the information available. These estimates and assumptions affect the reported amounts and related disclosures and are made in order to fairly present the Company’s financial position and results of operations. The following accounting policies are significantly impacted by these estimates and judgments that AIXTRON believes are the most critical to aid in fully understanding and evaluating its reported financial results:

REVENUE RECOGNITION

Revenue is generally recognized in two stages for the supply of equipment to customers, partly on delivery and partly on final installation and acceptance (see note 2 (n)). The Company believes, based on past experience, that this method of recognizing revenue fairly states the revenues of the Company. The judgements made by management include an assessment of the point at which substantially all of the risks and rewards of ownership have passed to the customer.

VALUATION OF INVENTORIES

Inventories are stated at the lower of cost and net realizable value. This requires the Company to make judgments concerning obsolescence of materials. This evaluation requires estimates, including both forecasted product demand and pricing environment, both of which may be susceptible to significant change. The carrying amount of inventories is disclosed in note 16.

As disclosed in notes 3 and 16, during the years 2015, 2014 and 2013 the Company incurred expenses of kEUR 4,141, kEUR 3,016 and kEUR 17,885 respectively arising mainly from changes to past assumptions concerning net realizable value of inventories and excess and obsolete inventories. In future periods, write-downs of inventory may be necessary due to (1) reduced demand in the markets in which the Company operates, (2) technological obsolescence due to rapid developments of new products and technological improvements, or (3) changes in economic or other events and conditions that impact the market price for the Company’s products. These factors could result in adjustment to the valuation of inventory in future periods, and significantly impact the Company’s future operating results.

Commitments for the manufacture of 25 AIX R6 systems existed as of December 31, 2015. The carrying value of inventories and outstanding supplier commitments totals kEUR 20,608. The expected realizable value of these systems has been based on past experience and estimates supplied by regional and head office sales management. A further 3 systems were in the process of customer qualification as of December 31, 2015

INCOME TAXES

At each balance sheet date, the Company assesses whether the realization of future tax benefits is sufficiently probable to recognize deferred tax assets. This assessment requires the exercise of judgement on the part of management with respect to future taxable income. The recorded amount of total deferred tax assets could be reduced if estimates of projected future taxable income are lowered, or if changes in current tax regulations are enacted that impose restrictions on the timing or extent of the Company’s ability to utilize future tax benefits. The carrying amount of deferred tax assets is disclosed in note 14.

PROVISIONS

Provisions are liabilities of uncertain timing or amount. At each balance sheet date, the Company assesses the valuation of the liabilities which have been recorded as provisions and adjusts them if necessary. Because of the uncertain nature of the timing or amounts of provisions, judgement has to be exercised by the Company with respect to their valuation. Actual liabilities may differ from the estimated amounts. Details of provisions are shown in Note 24.

LEGAL PROCEEDINGS

In the normal course of business, the Company is subject to various legal proceedings and claims. On January 4, 2016, the Company was named as a defendant in a putative class action commenced in the United States District Court for the Southern District of New York brought on behalf of a putative class of purchasers of the Company’s securities between September 25, 2014 and December 9, 2015. The complaint claims in part that the Company made false and/or misleading statements, as well as failed to disclose material adverse facts about the Company’s business, operations and prospects. AIXTRON disputes the allegations and intends to contest the allegations vigorously.

The Company, based upon advice from legal counsel, believes that the matters the Company is aware of are not likely to have a material adverse effect on its financial condition or results of operations. The Company is not aware of any unasserted claims that may have a material adverse effect on its financial condition or results of operation.

38. Acquisition of PlasmaSi Inc

On April 1st, 2015 the group acquired 100% of the voting equity interests of PlasmaSi Inc.(USA), obtaining control of the company. PlasmaSi enables the encapsulation of organic thin-films by depositing ultra-thin, light weight and flexible barrier films through its proprietary technology which is particularly well suited to OLED displays. In combining AIXTRON’s OVPD technology with PlasmaSi’s innovative approach the Company expects to be able to add significant value in the production of flexible OLED applications.

The amounts recognized in respect of the identifiable assets acquired and liabilities assumed are as set out in the table below.

in EUR thousands
Cash & cash equivalents1,471
Property, plant & equipment52
Other current assets24
Identifiable intangible assets4,655
Other current liabilities-2,541
Other non-current liabilities-2,256
Contingent consideration-4,236
Total identifiable liabilities-2,831
Goodwill10,515
Net assets acquired & consideration7,684
Satisfied by :
Cash paid7,684
Cash consideration7,684
Less: cash acquired-1,471
Net cash outflow on acquisition6,213

In March 2015, AIXTRON made a short term loan to PlasmaSi Inc. of USD 1.65 million which is included in the other current liabilities assumed. The cash acquired of kEUR 1,471 is effectively the cash needed to repay this loan to AIXTRON.

The goodwill arising on the acquisition of kEUR10,515 is underpinned by a number of elements which individually cannot be quantified. The most significant of these is the competitive advantage gained from AIXTRON’s complimentary products. None of the goodwill is expected to be deductible for tax purposes. Individually identifiable and quantifiable intangible assets amount to kEUR 4,655 and represent the fair value of the developed technology acquired.

Contingent consideration of kEUR4,236 is payable if specified sales milestones are met. The contingent consideration has been valued at its gross contractual amount because the milestones were met during the final quarter of 2015 and payment is expected to be made within one year of the acquisition date The contingent consideration outstanding as at December 31, 2015 was kEUR 4,177, the difference arising from exchange rate movements.

During 2015 the business of PlasmaSi was absorbed within other AIXTRON companies and PlasmaSi Inc. was dissolved.

The acquired business did not record revenue in 2015. A loss of kEUR 2,719 in respect of the business is included in the Group Income Statement.

Had the acquisition taken place on January 1, 2015, the combined Group revenue would have been EUR 197.8 million and the loss for the year would have been EUR 30.0 million.

Herzogenrath, February 22, 2016

AIXTRON SE

Executive Board

 
     
Martin Goetzeler
Chief Executive Officer
  Dr. Bernd Schulte
Chief Operating Officer