REPORT ON OPERATIONS CONSOLIDATED FINANCIAL STATEMENTS STATUTORY FINANCIAL STATEMENTS OF SORIN SPA AT DECEMBER 31, 2012

Transcription

1 REPORT ON OPERATIONS CONSOLIDATED FINANCIAL STATEMENTS STATUTORY FINANCIAL STATEMENTS OF SORIN SPA AT DECEMBER 31, 2012 SORIN S.p.A. Registered and Administrative Offices: Tel.: Share Capital: 478,738,144 euros Milano Tax I.D. No Via Benigno Crespi, 17 VAT No Milan Company Register, REA No

2 Disclaimer This document contains forward-looking statements, particularly in the section entitled Business Outlook. By their very nature, forward-looking statements entail a certain degree of risk and uncertainty because they are predicated on the occurrence of future events and developments. Actual results could differ, even to a significant extent, from those projected, due to a number of factors, such as general macroeconomic conditions, changes in economic and regulatory framework in many of the countries where Sorin Group operates, success in developing and implementing new technologies and other changes in business conditions, including activities by the competition. 2 Sorin Group 2012 Annual Report

3 CONTENTS CORPORATE GOVERNANCE BODIES AND COMMITTEES... 4 SORIN GROUP... 6 SUSTAINABILITY INVESTOR RELATIONS CONSOLIDATED FINANCIAL HIGHLIGHT Foreword REPORT ON OPERATIONS AT DECEMBER 31, at a Glance A Letter to Shareholders Alternative Performance Indicators Operating Performance Operating Performance of the Main Group Companies Sorin Group s Operating and Financial Results Operating and Financial Results of Sorin S.p.A Research and Development Human Resources and Industrial Relations Intra-Group Transactions and Transactions with Related Parties Main Risks and Uncertainties to Which Sorin S.p.A. and the Group Are Exposed Report on Corporate Governance and the Company s Ownership Structure Compensation Report Significant Events Occurring After December 31, Business Outlook Motion to Approve the Financial Statements and Appropriate the 2012 Net Profit SORIN GROUP CONSOLIDATED FINANCIAL STATEMENTS AT DECEMBER 31, ANNEX (Pursuant Article 149-duodecies of the Consob s Issuer s Regulations) ATTESTATION OF THE CONSOLIDATED FINANCIAL STATEMENTS AT DECEMBER 31, 2012 PURSUANT TO ARTICLE 154 BIS OF LEGISLATIVE DECREE N. 58/ SORIN SPA STATUTORY FINANCIAL STATEMENTS AT DECEMBER 31, ANNEX (Pursuant Article 149-duodecies of the Consob s Issuer s Regulations) ATTESTATION OF THE STATUTORY FINANCIAL STATEMENTS AT DECEMBER 31, 2012 PURSUANT TO ARTICLE 154 BIS OF LEGISLATIVE DECREE N. 58/ REPORT OF THE BOARD OF STATUTORY AUDITORS REPORT OF THE INDEPENDENT AUDITORS Sorin Group 2012 Annual Report

4 CORPORATE GOVERNANCE BODIES AND COMMITTEES Board of Directors Chairman Deputy Chairman Chief Executive Officer Directors Rosario Bifulco Giovanni Pavese André-Michel Ballester Andrea Bovone Giuseppe Carteni (1) (3) Luciano Cattani (1) (3) Sergio Gianfranco Luigi Maria Dompé (1) (5) Roberto Ferri (1) (3) Laura Iris Ferro (1) (3) Roberto Giay (3) Ugo Ortelli (1) (3) Gino Santini (1) (3) Ugo Smiraglia (3) Maurizia Squinzi (3) Massimo Tononi Claudio Albertini (2) Giuliano Asperti (1) (2) Paolo Baessato (1) (2) Giorgio Fossa (1) (2) Pietro Guindani (1) (2) Ettore Morezzi (1) (2) Enzo Nicoli (2) Luigi Ragno (1) (4) Francesco Silva (2) Claudio Agostino Zulli (2) Board of Statutory Auditors Chairman Statutory Auditors Cesare Piovene Porto Godi Paolo Gualtieri Andrea Zaglio Independent Auditors Reconta Ernst & Young S.p.A. (1) Independent Director (2) Up to April 30, 2012 (3) Since April 30, 2012 (4) Up to July 4, 2012 (5) Since July 10, Sorin Group 2012 Annual Report

5 Executive Committee Provides support to the Chairman and the Board of Directors in connection with major decisions involving the Group. Its members are: Rosario Bifulco André-Michel Ballester Andrea Bovone Maurizia Squinzi (2) Massimo Tononi (1) Chairman Control and Risk Committee Provides consulting support and makes recommendations regarding internal control. Its members are: Giuseppe Carteni (2) Chairman Laura Iris Ferro (5) Maurizia Squinzi (2) Luigi Ragno (2) (4) Giuliano Asperti (1) Paolo Baessato (1) Claudio Agostino Zulli (1) Compensation Committee Provides consulting support with regard to the fees received by Directors, the compensation of top management and the Company s overall compensation policies. Its members are: Giovanni Pavese Giuseppe Carteni (2) Luciano Cattani (2) Paolo Baessato (1) Pietro Guindani (1) Chairman Related-party Transaction Committee Renders an opinion on the Company's procedure prior to its approval and reasoned opinions on individual related-party transactions. Its members are: Sergio Gianfranco Luigi Maria Dompé Giuseppe Carteni (2) Gino Santini (2) Luigi Ragno (3) (4) Giuliano Asperti (1) Paolo Baessato (1) Chairman (1) Up to April 30, 2012 (2) Since May 4, 2012 (3) Already a member of the Related-party Transaction Committee, w as appointed Committee Chairman on May 4, (4) Up to July 4, 2012 (5) Since July 10, Sorin Group 2012 Annual Report

6 SORIN GROUP Sorin Group is a multinational corporation, world leader in the field of medical devices to treat cardiovascular diseases. The Group develops, produces and distributes medical devices for cardiac surgery and the treatment of cardiac rhythm dysfunctions With about 3,700 employees worldwide, the Group is focused on three main therapeutic areas: Systems and disposable biomedical devices for extracorporeal circulation during heart surgery; Implantable prostheses to replace or repair native heart valves; Implantable devices, monitoring systems and accessories to treat cardiac rhythm dysfunctions. Each year, over one million patients in over 80 countries are treated with Sorin Group devices. Our lifesaving products are used in over 5,000 hospitals worldwide. Through steady growth and expansion, Sorin Group emerged as a market leader in medical technologies for cardiovascular diseases. The Group is the world leader in cardiopulmonary bypass, has a strong market position in the in the hearth valve segment and is a rapidly growing operator in the segment of devices to manage cardiac rhythm. Despite challenging market conditions, Sorin Group retained its global leadership position, particularly in the cardiovascular area. Driven by a commitment to improve patient care, Sorin Group is focused on supporting its longterm growth strategy through new investments in technology and geographic expansion projects. Sorin Group s products are lifesaving products; consequently, the Group is focused on meeting the strictest performance and quality standards and complying with the highest ethical standards. In 2012, Sorin Group s organization was based on three Business Units (Cardiopulmonary, Heart Valves and Cardiac Rhythm Management), corresponding to the three main therapeutic areas. Under a reorganization launched in the fourth quarter, the Cardiopulmonary and Heart Valves Business Units are being merged into a single Business Unit called Cardiac Surgery. Following this combination, starting in the first quarter of 2013, Sorin Group will publish results for the new Cardiac Surgery Business Unit on an aggregate basis. CARDIOPULMONARY (CP) Heart-lung machines Oxygenators Autotransfusion systems Other products Systems and disposable biomedical devices for extracorporeal circulation during heart surgery - Heart-lung machines - Cardiopulmonary systems (oxygenators, custom packs) - Autotransfusion systems and disposables - Perfusion tubing systems (PTS) - Cannulae - Endoscopic vessel harvesting systems in coronary surgery System for extracorporeal circulation include oxygenators, heart-lung machines, perfusion tubing systems, cannulae and accessories, and systems for autotransfusion and autologous blood washing. These systems are used to keep patients alive during open heart surgery by temporarily taking over cardiopulmonary functions. The Cardiopulmonary Business Unit offers a complete range of products for patients of every size: neonatal, pediatric and adult. 6 Sorin Group 2012 Annual Report

7 HEART VALVES (HV) Mechanical valves Tissue valves Self-anchoring tissue valve Annuloplasty rings Implantable prostheses to replace or repair native heart valves - Mechanical heart valves - Tissue heart valves - Self-anchoring tissue heart valves - Annuloplasty rings Sorin Group products include tissue and mechanical heart valves, as well annuloplasty rings to replace or repair dysfunctional heart valve or treat congenital diseases. CARDIAC RHYTHM MANAGEMENT (CRM) Bradyarrhythmia Tachyarrhythmia management systems management systems Heart-failure management systems Other products Implantable devices, monitoring systems and accessories to treat cardiac rhythm dysfunctions - Pacemakers - Implantable defibrillators - Systems to treat heart failure (CRT-D) - Programmers - Electrodes - Electrophysiology leads - Holter monitors Therapeutic devices in this area include: pacemakers to reestablish normal cardiac rhythm, implantable cardiac defibrillators, cardiac resynchronization therapy (CRT) systems to treat heart failure and monitor the risk of arrhythmia. Sorin Group has a global presence and its expertise, developed in over a decade of activity, is recognized throughout the global medical community. Listed on the Milan Stock Exchange since January 2004, Sorin Group is the result of the integration of successful brands, such as Sorin Biomedica, Dideco, Stöckert, Cobe Cardiovascular, Ela Medical and Carbomedics. 7 Sorin Group 2012 Annual Report

8 Sorin Group has a unique wealth of innovative technologies: SMARTVIEW TM monitoring system for patients wearing cardiac rhythm management devices Inspire family of new adult oxygenators for an optimized approach to perfusion FIRST CRT device with automated weekly optimization: SonR FIRST sutureless self-anchoring aortic valve: PERCEVAL TM S New XTRA autotransfusion system World s FIRST CRT-D with hemodynamic sensors: PARADYM FIRST semi rigid ring with unique 3D motion (Memo 3D ) FIRST oxygenator with integrated arterial filter SORIN* Synthesis World s FIRST sensor to optimize patient hemodynamics FIRST dual chamber adult oxygenator DIDECO* Avant World s FIRST dual-chamber ICD implant : ELA Medical* DEFENDER World s FIRST implant of a bi-ventricular pacing system (ELA Medical) FIRST neonatal oxygenator DIDECO Lilliput FIRST implant of a stented tissue heart valve (MITROFLOW* ) World s FIRST microcomputer within an ELA Medical s pacemaker FIRST modular heart-lung machine by STÖCKERT Sorin Group has a global presence, with activities in all regions of the world. Sales by Geography Manufacturing and R&D Locations 10% Rest of the world 10% Japan Europe 52% 731 million 28% North America CARDIOPULMONARY HEART VALVES CARDIAC RHYTHM MANAGEMENT Mirandola (Italy) Munich (Germany) Denver (United States) Vancouver (Canada) Saluggia (Italy) Clamart (France) 8 Sorin Group 2012 Annual Report

9 Sorin Group is driven by an unwavering commitment to health. 75 million euros devoted to R&D equal to more than 10% of sales revenues 15% of employees work in R&D in North America, France, Italy and Germany Ongoing collaborative relationships with specialists in cardiology, heart surgery and electrophysiology,as well as renowned universities and top research centers worldwide Relying on engineer-physician intelligence networks to develop innovative therapeutic solutions A portfolio of more than 2,000 patents Sorin Group s Vision Sorin Group wants to be recognized by the medical community, patients, shareholders, the financial community, the biomedical industry, government agencies and its employees not only as a top player in the heart valve and cardiopulmonary fields, but also as a world leader in the overall cardiovascular market and as a true innovator in the area of cardiac rhythm management. Sorin Group s organizational structure is based on three Business Units Cardiopulmonary, Cardiac Rhythm Management and Heart Valves supported by corporate functions and led by a management team with international experience in the medical industry. Following the reorganization launched at the end of 2012, the Cardiopulmonary and Heart Valve Business Units were merged into a single Business Unit called Cardiac Surgery. The Group s executive leadership team is presented below: Rosario BIFULCO Chairman André-Michel BALLESTER Chief Executive Officer Michel DARNAUD President, Cardiac Surgery & Intercontinental Stefano DI LULLO President, Cardiac Rhythm Management Edward ANDRLE Vice President Strategy & Business Development Stéphane BESSETTE Vice President Human Resources & Communication Demetrio MAURO Chief Financial Officer Brian SHERIDAN General Counsel Kieran TUITE Vice President Corporate Operations Jacques GUTEDEL Vice President Intercontinental 9 Sorin Group 2012 Annual Report

10 SUSTAINABILITY Because Sorin Group operates in the global biomedical industry, it is keenly aware of the responsibility that a company in its position must assume vis-à-vis all of its stakeholders. The highly innovative medical devices that Sorin Group produces are used every day by the medical profession to save human lives. The Group s mission is thus to develop, produce and distribute high quality cardiovascular medical devices, complying with the most stringent ethical standard and rules of conduct in its industry. This philosophy is also reflected in the Group s daily operating activities and in the relationships it entertains with customers, employees, shareholders, health care operators, partners, suppliers and professional associations within a commercial, health care, financial and/or regulatory framework. This section of the Report provides a brief overview of the Group s commitment to responsible management practices, not only economically, but also in social, environmental and governance terms. Ethical Responsibility and Governance Sorin Group operates in a particularly complex and strict compliance environment that reflects the specific regulatory framework of its industry globally and particularly in the United States. In this country, the Chief Compliance Officer (who reports directly to the Chief Executive Officer) is responsible, together with the Compliance Committee, for developing, promoting and maintaining all of the procedures needed to operate in the regulated U.S. med-tech market in accordance with the Corporate Integrity Agreement it signed in 2010 with the Office of Inspector General of the Department of Health and Human Services of the United States government. This agreement sets forth a compliance plan that defines all issues concerning training and interaction with health care operators. In the rest of the world, compliance activities are managed and coordinated by the Group s Legal and Internal Auditing functions. In Italy, the Group adopted in 2004 an Organization and Management Model in accordance with the requirements of Legislative Decree No. 231 of June 8, 2001, which introduced into the Italian legal system the principle of corporate administrative liability for certain types of crimes committed by Directors, executives or employees in the interest or for the benefit of a company. Consistent with this approach, Sorin Group adopted a Code of Conduct that sets forth the principles and guiding values that must be followed by anyone acting on the Company s behalf (members of governance bodies, managers, employees and associates) and by parties who engage in commercial and/or financial transactions with Sorin. In addition to reflecting specific governance and regulatory elements that are valid at the national level, the Code of Conduct constitutes a fundamental component of the Group s system of internal control that must be complied with and adopted at all Group locations worldwide. Special attention is devoted to transactions with suppliers. As a rule, all Group procurement transactions include a clause requiring compliance with Sorin s Code of Conduct. The processes applied to qualify and monitor suppliers are extremely detailed and the procedure used to verify supplier requirements includes controls concerning their ethical and social commitment. The Code of Conduct is available in the Corporate Governance section, Investor Relations page, of the corporate website: In addition, Sorin established toll-free telephone lines and a protected address devoted to ethical conduct that can be accessed to ask questions or raise issues. Sorin Group s Code of Conduct was updated in 2012 and the revised version was published in English, Italian, German and French. In 2013, it will be translated into Spanish, Japanese and, for the first time, into Arabic and Chinese. The new Code of Conduct has a completely redesigned layout and differs from the previous version in that it is clearer and more intuitive and contains a pamphlet for health care providers. The presentation of the new Code to the Chief Executive Officer in June 2012 was followed by training sessions provided to employees by the Corporate Counsel department both online and in the Group s main geographic regions. The rules of operation of Sorin s management and oversight bodies are defined in the Corporate Governance Model, which complies with the recommendations of Corporate Governance Code for Listed Companies promoted by Borsa Italiana S.p.A. and, more in general, is consistent with best international practices. Additional information about the Corporate Governance Model is available in the Report on Corporate Governance and the Company s Ownership Structure, which is available on Sorin Group s website, at the following address: 10 Sorin Group 2012 Annual Report

11 Lastly, consistent with sound corporate governance and the protection of stakeholders, a company is required to adopt an adequate risk management system. This area is under the jurisdiction of the Corporate Internal Auditing function, which performs each year a risk assessment (mapping of processes and activities; identification of financial and other risks with gap analysis; identification of existing measures; definition of an Audit Plan). The results of these activities and the Audit Plan are submitted for approval to the Internal Control and Risk Committee and the Board of Statutory Auditors. Environmental Responsibility The environmental impact is different in each of the three areas of activity in which the Group operates. However, in general terms, it is fair to say that, compared with other industries, the production of medical devices is an activity with a low environmental impact. Insofar as safety and the environment are concerned, the Group complies with the regulations in effect in the countries where it operates; in Italy, for example, the relevant statutes include Uniform Code No. 81/2008 (Uniform Safety Code) and Legislative Decree No. 152/2006 (environment). The Group s facility in Clamart (France), which produces devices distributed by the CRM Business Unit, received the ISO environmental certificate and the HQE (Haute qualité environnementale) certificate. While the other Group sites did not receive specific environmental certifications, it is important to keep in mind that all facilities are inspected and certified on a regular basis by such biomedical institutions as the FDA (Food and Drug Administration), G-MED (Groupement pour l'évaluation des dispositifs médicaux) and TUV (an independent certification entity). The Group adopted at its production facilities internal procedures to preserve the environment through a rational use of resources and energy sources, help protecting the ecosystem and, in general, continuously improve the Group s efficiency in the areas of health, safety and the environment. With regard to the environment, the Group adopted specific procedures concerning soil and water treatment, waste disposal and emissions into the atmosphere. The following project completed in 2012 or planned for 2013 in the environmental area are provided by way of example: Activities to bring Italian sites in compliance with SISTRI Regulations (the new control system for waste traceability). Design of a new sterilizing facility (100% insourced) with reduced emissions and consumption levels (ethylene oxide into the atmosphere, CO 2 almost eliminated (reduction of 100 tons), lower use of natural gas), resulting in less pollution (Mirandola site, Cardiopulmonary). This project, initially planned for 2012, was postponed to 2013, due to the earthquake (Mirandola site, Cardiopulmonary). Activities to recycle process-waste plastics for shipment to companies specialized in recycling it; a significant increase is expected for 2013 (10-15%) thanks to the promotion of differentiated waste collection at production facilities (Mirandola site, Cardiopulmonary). Launch of the JOIN SORIN S GREEN LEAF PROGRAM to make plant personnel more aware of the importance of differentiated waste collection inside cafeterias and a responsible use of electric power in offices and company facilities (Mirandola site, Cardiopulmonary). Activities for the distillation of significant process chemicals, such as Isopropyl alcohol and bromochloromethane by means of distillation systems to recover these substances from process waste. This system makes it possible to reuse 50% of these chemicals (Mirandola site, Cardiopulmonary). Upgrade of the active carbon emission reduction system installed at the solvent exhausts used in clean rooms, which further reduced the levels of volatile organic substances released from these facilities, bringing them well below the emissions limit allowed pursuant to law (Mirandola site, Cardiopulmonary). For 2013, as part of the renovation of the Central Office Building, plans to install automatic shutdown and zone segmentation equipment for the use of electric power and heating systems, which are expected to yield considerable savings of electric power (Mirandola site, Cardiopulmonary). Direct purchases of molded and pre-formed pump head components for heart-lung machines, instead of machining and milling solid bars, with a resulting reduction of about 30% in raw materials used (Munich site, Cardiopulmonary). Redesign of the waste collection and disposal service to increase the percentage of reusable materials (Munich site, Cardiopulmonary). 11 Sorin Group 2012 Annual Report

12 Installation of a steel central cooling system resulting in a 30% reduction in the use of cooling fluid (Munich site, Cardiopulmonary). Optimization of the plant s compressed air system with installation of automatic control. Expected energy savings of 20% (Munich site, Cardiopulmonary). Utilization of a new Streamline Recycle Compactor to recycle cardboard, paper, plastics, glass, metal, etc. (all recyclable materials) at a single compactor, which reduced by 50% the volume of waste sent to landfills (Arvada site, Cardiopulmonary). Optimization of the lighting system, with resulting energy savings, by switching from fluorescent to the more energy efficient T8 lighting system (Arvada site, Cardiopulmonary). Significant reduction of non-conformity issues regarding practices for the handling and storage of chemicals (Clamart site, Cardiac Rhythm Management). Training of 20% of the sales force to make them more responsive to the need for a reduction of driving risks and a more environmentally responsible style of driving. Reduction of 10% in consumption of water and electric power (Clamart site, Cardiac Rhythm Management). Removal of asbestos cement roofing still present at Company owned buildings and mapping of all pipes of heating and cooling systems to check for the presence of asbestos (Saluggia site, Heart Valves). Differentiated waste collection (paper, plastic, glass) at all Group locations. Human Resources With about 3,700 employees worldwide, Sorin is constantly mindful of the needs of its human resources. The Group is committed to providing a healthy, safe and discrimination free work environment. Occupational safety prevention and protection is handled at the level of the individual Group companies, in accordance with the regulations in effect locally and with the aim of preventing accidents and protecting the physical integrity of employees. At all of it main production facilities, the Group established Safety Committees responsible for continuously monitoring and improving the work environment. In 2012, as was the case in previous years, there were no fatal or very serious accidents and the rate of lost workdays due to accidents continued to follow a downward trend. Special attention is paid to defining effective systems to develop relevant professional competencies and training investments are being made to foster the growth both of the Company and its employees. Sorin Group established a Sorin University, with international training courses available in various languages. A total of 15 training modules have been implemented thus far. Training programs launched in 2012 included the following: Talent management projects for the Research and Development function concerning Time to Market and New Product Launches. Training courses to help the sales force develop medical-scientific competencies. Short-term training paths for executives and middle managers. Another important development of 2012 was Sorin Group s decisions to open ACCESS Advanced Center for Continuous Education on Scientific Solutions, its own training center located near Paris. This innovative training center makes it possible to provide quality training with classroom lessons, meetings of professionals and carefully targeted workshops. ACCESS offers a complete series of training modules designed for electrophysiologists, cardiologists and other health-care professionals. In the area of internal communications, the following initiatives were carried out to make Group employees aware of the objectives achieved and share future short and long-term strategic objectives: Quarterly CEO conference calls with key Group managers; All-employee meetings held at least three times a year at the Group s main production facilities, open to all employees with a top-down, interactive approach based on specific Q&A sessions. Department Team meetings, held monthly with the aim of obtaining feedback from the team to establish bottom-up communications as a means of assessing the progress made on specific projects. New hires 90 breakfast sessions (each quarter or twice a year, depending on the number of new hires), during which Business Unit and department managers meet new hires. Intranet, a system to share information (procedures, policies, models, announcements). 12 Sorin Group 2012 Annual Report

13 In the areas of industrial relations and the involvement of labor unions, the Group signed collective bargaining agreements in accordance with local laws. Lastly, Sorin adopts employee development, compensation and incentivization systems that acknowledge and reward merit and performance. The compensation and incentivization policy includes the following: Collective profit sharing bonuses tied to productivity and profitability at all of the Group s main production sites. Incentive systems for the sales force and office staff, based on individual performance and the financial performance of their respective areas or Business Units. Variable annual compensation systems for middle and top management, tied to the achievement of personal and Group business targets. Long-term incentive plan (LTI) through the award of stock grants to top management and to manager with key roles within the Group, tied to business performance targets. Additional information about this three-year rolling program is provided in Note 30 to the Consolidated Financial Statements and in the Report on Corporate Governance and the Company s Ownership Structure, which is available on Sorin Group s website, at the following address: All Sorin employees are required to comply with and adopt the Group s Code of Conduct; compliance with this requirement is a primary objective in the assessment of personal performance. Personnel policies are defined by the Human Resource function of the Group s Parent Company and are implemented by the Human Resource managers of the individual Business Units and the main geographic regions. Social Responsibility Consistent with its activity as a manufacturer of medical devices for cardiovascular diseases, Sorin Group carried out a series of activities related to its core business, such as development of clinical trials and attendance at medicalscientific congresses and conventions, which, for the most part, are aimed at improving quality of life for patients suffering from cardiovascular diseases and promote their wellbeing. Among the social initiatives carried out by Sorin Group, one particularly worthy of mention is the partnership established with the nonprofit association Bambini Cardiopatici nel Mondo to support the association s humanitarian missions in the developing countries for children suffering from congenital cardiac diseases. Up to this point, the association performed over 2,100 life-saving cardiac surgery procedures during more than 300 surgical missions in 20 countries worldwide. The association, in addition to helping and treating directly children suffering from heart diseases, is involved in establishing the conditions for a sustainable development of health care in the countries where it operates: it builds health care facilities, donates technical and surgical equipment and field trains local physicians directly. In 2012, Sorin Group donated to the association 250,000 euros, with another 5,000 euros contributed by Group employees. In addition, Sorin Group donated life-saving devices and incentivized the involvement of its employees as volunteers in activities promoted by the association. Another noteworthy social initiative was the establishment of the Earthquake Relief Fund to benefit Sorin employees affected by the earthquakes of May 20 and 29, 2012 in the Emilia-Romagna region and Mirandola specifically. Subsequent to these dramatic events, the Company launched a fund raising drive in which all Sorin employees could donate a portion of their salary to benefit the victims of the earthquake, with the Company agreeing to match the amount raised by employees. The amount raised totaled 240,000 euros, which was used to help 60 employees severely affected by the earthquake. 13 Sorin Group 2012 Annual Report

14 INVESTOR RELATIONS Sorin maintains an ongoing dialog with the financial community with the objective of delivering a steady flow of information to its shareholders, institutional investors, financial analysts and the financial markets in general, while complying fully with the principles of transparency and equal treatment for everyone. Sorin uses all of the usual financial communication tools and dialogs with financial operators by means of one-on-one meetings and Group presentations, roadshows, meetings with financial analysts, company visits by institutional investors and analysts, conference calls, attendance at industry conference and press releases, and through a constantly updated Investor Relations page of the corporate website and economic-financial publications. The main events providing interaction with the financial community held in 2012 are reviewed below: On September 24, 20012, the Investor and Analyst Day presentation to the financial community at Palazzo Mezzanotte, in Milan, accessible also in videoconferencing mode, during which the Group s top management team reviewed the guidelines of the strategic plan and provided a detailed update of the Group s business. This event was attended by the following guests: Angelo Auricchio (Director Clinical Electrophysiology Program, Division of Cardiology, Fondazione Cardiocentro Ticino, Lugano, and Professor of Cardiology, Magdeburg University, Germany) and Mattia Glauber (Director of the Thoracic Cardiac Surgery Unit, Fondazione Toscana G. Monasterio, Ospedale Del Cuore G. Pasquinucci, Massa, Italy). Attendance at numerous international biomedical or health care sector conferences organized by major international financial institutions (including Citi, Piper Jaffray, Goldman Sachs, Jefferies and Berenberg Bank, mostly in New York and London). Attendance at conference for Italian listed companies, namely the Italian Investment Conference, organized by Unicredit in collaboration with Kepler Capital Markets and the Small & Mid Cap Event organized by Equita, both held in Milan. Participation in the Italian Equity Roadshow organized by Borsa Italiana and Banca IMI for the New York financial market. Conference calls held to announce annual and interim data. As for the coverage by financial analysts, four new firms began to cover the Sorin stock in 2012: Kepler, a major European broker, in February; Berenberg Bank, a top German financial institution, in May; Fidentiis, a Spanish independent research firm and broker, in September; and Bryan Garnier, a major French broker, also in September. The 10 securities dealers who currently follow the stock published several reports about the Group, all providing a generally positive recommendation. Lastly, in order to ensure that the expectations of the financial markets match as closely as possible its actual results, the Company continued to provide guidance about its projected operating and financial results, both on an annual and quarterly basis. Contact information for the Investor Relations Department, which is the entity responsible for financial communications is provided below: Investor Relations Tel.: Fax: investor.relations@sorin.com Sorin s stock price, which was euros at December 30, 2011, improved to euros at December 28, 2012, for an average price for the year of 1.55 euros. The stock price increased by about 42% in 2012, while the Italian market as a whole (FTSE MIB Index) appreciated by 8%. In 2012, the stock s average daily trading volume was generally over 1 million shares with a Free Float Velocity, computed as the ratio of the annual trading volume to the share float, of 93%. 14 Sorin Group 2012 Annual Report

15 The chart below tracks the performance of the Sorin stock (SRN) compared with the FTSE All Shares Italia index for the 12 months ended December 28, SRN FTSE At December 31, 2012, the Company s share capital was comprised of 478,738,144 shares, par value 1 euro each. The Shareholders Meeting or April 30, 2012 and, subsequently, the Board of Directors, at a meeting held on May 4, 2012, launched a new share buyback program. The purpose of this program is to buy, in one or more installments, up to 10 million common shares, in order to acquire treasury shares earmarked to implement existing and future stock incentive plans reserved for Directors and/or employees and/or associates of the Company and its subsidiaries and, consequently, exclusively to implement the new Long-term Incentive Stock Plan and for the deferment and conversion into shares of the 2012 Short-term Incentive. The share buyback authorization is valid for 18 months counting from the date of the resolution of the Shareholders Meeting, i.e., until October 31, On June 1, 2012, 1,281,787 treasury shares were used for grants awarded under the Long-term Incentive Stock Plan. A total of 975,000 azioni treasury shares were acquired in At December 31, 2012, Sorin S.p.A. held 2,626,813 treasury shares, equal to % of its share capital. 15 Sorin Group 2012 Annual Report

16 Major shareholders (with equity stakes equal to more than 2% of the share capital) at December 31, 2012, determined based on the information received by the Company, are listed below: Name of filer Name Direct shareholder % interest in voting capital BIOS S.p.A BIOS S.p.A EQUINOX TWO S.c.a. TOWER 6 BIS S.a.r.l GENERAL ELECTRIC COMPANY GE CAPITAL EQUITY HOLDINGS BANCA MONTE DEI PASCHI DI SIENA S.p.A. BANCA MONTE DEI PASCHI DI SIENA S.p.A FINSOE S.p.A. UNIPOL ASSICURAZIONI S.p.A ZADIG GESTION (LUXEMBOURG) S.A. ZADIG GESTION (LUXEMBOURG) S.A A Shareholders Agreement signed by Mittel S.p.A., Equinox Two S.c.A., Banca Monte dei Paschi di Siena S.p.A. and Unipol Gruppo Finanziario S.p.A., each for the respective equity stake held directly or indirectly in Sorin S.p.A., as amended, has been in effect since November 18, On August 3, 2012, the parties entered into an agreement extending to November 18, 2013 the duration of the Shareholders Agreement, which would have expired on November 18, By the agreement executed on August 3, 2012, the abovementioned parties mutually expressly waived the cancellation right provided under the old agreement (exercisable until August 18, 2012) and changed the duration of the agreement, stipulating that it would be in effect until November 18, 2013, with exclusion of the automatic renewal clause after the abovementioned expiration date. 16 Sorin Group 2012 Annual Report

17 CONSOLIDATED FINANCIAL HIGHLIGHT 12/31/12 12/31/11 Income Statement Data Net revenues (1) 731,1 743,4 EBITDA before special items 101,8 128,3 EBIT 36,9 87,2 EBIT before special items 58,0 87,4 Profit (Loss) before taxes 22,6 79,6 Net profit 23,0 57,8 Adjusted net profit 41,9 58,0 Statement of Financial Position Data Net invested capital 647,6 628,1 Net indebtedness (2) (87,8) (105,9) Shareholders equity 559,8 522,2 Other Data Number of employees at end of the year Average number of employees for the year Data per Share (in euros) Profit (loss) per share: - basic and diluted, based on the net profit (loss) for the year 0,048 0,122 - basic and diluted, based on the net profit (loss) from continuing operations 0,048 0,122 Dividend per share Shareholders equity per share 1,169 1,101 Stock market price (average for the period) 1,557 1,749 Key Indicators EBITDA before special items/net revenues (% ) 13,9 17,3 EBIT/Net revenues (% ) 5,0 11,7 EBIT before special items/net revenues (% ) 7,9 11,8 EBIT/Average net invested capital (% ) 5,8 14,4 Net profit/net revenues (% ) 3,1 7,8 Adjusted net profit/net revenues (% ) 5,7 7,8 Net profit (loss)/average shareholders equity (% ) 4,2 11,8 Net indebtedness/shareholder s equity 0,16 0,20 (IN MILLIONS OF EUROS) (1) Includes sales and serv ice rev enues and cost recov eries. (2) A breakdow n of net indebtedness is prov ided after the consolidated statement of financial position. 17 Sorin Group 2012 Annual Report

18 Foreword The financial statements at December 31, 2012 were prepared in accordance with the international financial reporting standards (IFRS) published by the International Accounting Standards Board (IASB) and approved by the European Union and comply with the provisions enacted to implement Article 9 of Legislative Decree No. 38/2005. The abbreviation IFRS also stands for the International Accounting Standards (IAS) currently still in effect and all of the interpretations issued by the International Financial Reporting Interpretations Committee (IFRIC), including earlier interpretations issued by the Standing Interpretations Committee (SIC). The international accounting principles adopted are the same as those applied to prepare the consolidated financial statements at December 31, 2011, except as noted in Note 1 to the Consolidated Financial Statements. In May 2012, a powerful earthquake struck the area around Mirandola (MO) where one of the Group s production facilities is located. No Group employees were physically injured by the earthquake, but the Mirandola plant was damaged and production activities were temporarily interrupted. The Mirandola plant is one of the seven production facilities operated by the Group. Production of oxygenators and autotransfusion kits, which are part of the Cardiopulmonary Business Unit, is concentrated at this plant. Other activities related to the oxygenator and autotransfusion product lines and the entire heart-lung machine segment are carried out at plants located in Denver (Colorado, United States) and Munich (Germany). As a result, these products did not suffer any negative repercussions, and the same was true for all of the devices included in the product lines of the Cardiac Rhythm Management Business Unit and the Heart Valves Business Units, which were not affected in any way by seismic events. Thanks to the extraordinary commitment of the staff at the Mirandola site, despite the extensive damage caused by the earthquake, production resumed earlier than the date originally anticipated and communicated to the market, reaching levels higher than those reported before the earthquake. The financial statements at December 31, 2012 were prepared on a going concern basis. Specifically, the Group concluded that, even though the economic and financial environment remains challenging and despite the abovementioned seismic event, there were no material uncertainties (as defined in Paragraph 25 of IAS 1) as to the Company's ability to continue as a going concern, owing in part to the actions already taken to address perceived risks and adapt the Group s operating and financial structure to the new economic environment. California Medical Laboratories Inc. ( CalMed ), a U.S. company that produces high quality cardiovascular cannulae, was acquired in July CalMed develops, produces and distributes a complete portfolio of cannulae, catheters and accessories for heart surgery. Also in July the Group acquired in the United States a minority interest in Cardiosolutions Inc., a startup company involved in the development of an innovative percutaneous technology for patients suffering from mild and acute mitral valve regurgitation. Under the terms of the agreement, Sorin has an option to acquire the company s entire share capital in the future. Another acquisition, completed in the United States in September, involved a minority interest, with an option to buy the entire share capital, in Caisson Interventional LLC, a company engaged in the development of innovative percutaneous anchoring technologies for valve prostheses. In November, the Group acquired in Belgium the entire share capital of Neurotech SA, a company that develops neurostimulation devices. In the same month, a minority interest, with an option to buy the entire share capital, was acquired in HighLife SAS, a French company engaged in the development of an innovative technology for transcatheter mitral valve replacement for patients suffering from regurgitation. In the fourth quarter of 2012, the Group launched a reorganization that involves merging the Cardiopulmonary and Heart Valves Business Units into a single Business Unit called Cardiac Surgery. Following this combination, starting in the first quarter of 2013, Sorin Group will publish the data of the new Cardiac Surgery Business Unit on an aggregate basis. 18 Sorin Group 2012 Annual Report

19 Starting with the 2012 financial statements, the Group opted for early adoption of the amendments to IAS 19 Employee Benefits, recognizing the net revaluation of liabilities (assets) for defined benefits in other components of comprehensive income and no longer in profit or loss. As required by IAS 18, this change was applied retroactively and, consequently, the following adjustments were made to the 2011 financial statements: - Increase of 477,000 euros in Personnel expense; - Decrease of 284,000 euros in Income taxes; - Decrease of 193,000 euros in Result for the year. In this document, amounts are in millions of euros, with one decimal, in the Report on Operations, and in thousands of euros in the consolidated financial statements and the separate financial statements of Sorin S.p.A. As a result, some rounding of figures difference may occur in some schedules. Sorin S.p.A. further announces that, pursuant to Article 70, Section 8, and Article 71, Section 1-bis, of Consob Regulation No /99, as amended by Resolution No of January 20, 2012, it is availing itself of the option of non-complying with the obligation to publish the information memoranda required in connection with material transactions involving mergers, demergers, capital increases through conveyances of assets in kind, acquisitions and divestments. 19 Sorin Group 2012 Annual Report

20 REPORT ON OPERATIONS AT DECEMBER 31, Sorin S.p.A Consolidated Financial Statements Report on Operations at December 31, 2012