INTERIM FINANCIAL S TAT E M E N T S H1 2015 FOR THE FIRST HALF YEAR FROM JANUARY 1 TO JUNE 30, 2015 O F K T M A G, M AT T I G H O F E N 1
KTM OVERVIEW in million EUR EARNINGS RATIOS 1. HY 2015 1. HY 2014 Revenue 515.1 410.3 EBITDA 70.2 52.4 EBIT 50.3 33.6 EBT 44.3 30.1 Net result after tax 33.3 26.2 EBITDA margin 13.6% 12.8% EBIT margin 9.8% 8.2% BALANCE SHEET RATIOS 06/30/15 12/31/14 31.03.2015 31.12.2014 Balance sheet total 793.7 694.8 Working capital 1) 146.1 106.8 Equity 346.3 327.6 Equity in % of total assets 43.6% 47.1% Net financial debt 2) 135.7 87.5 Gearing 3) 39.2% 26.7% CASH FLOW 1. HY 2015 1. HY 2014 Q1 2015 Q1 2014 Cash flow from operating activities 21.3 5.0 Free cash flow -22.9-25.3 EMPLOYEES 06/30/15 12/31/14 31.03.2015 31.12.2014 Employees 4) 2,380 2,143 1) Working Capital = Trade receivables + inventories - trade payables 2) Net financial debt = Financial liabilities (current, non-current) - cash and cash equivalents - financing receivables 3) Gearing = Net financial debt / equity including non-controlling interests 4) Employees including temporary staff and external employees 2
TABLE OF CONTENTS Interim consolidated management report 4 Economic Environment 4 Business development and Highlights 4 Market development 4 Development of sales 4 Development of revenue 5 KTM Share 5 Annual General Meeting of the shareholders 5 Risk report 6 Related party disclosures 6 Significant events after the balance sheet date 6 Outlook 6 Interim consolidated financial statements 7 Consolidated statement of profit or loss 7 Consolidated statement of comprehensive income 7 Consolidated statement of financial position 8 Consolidated statement of cash flows 9 Consolidated statement of changes in equity 10 Notes to the interim consolidated financial statements 11 Statement of all legal representatives 18 3
INTERIM CONSOLIDATED MANAGEMENT REPORT FOR THE 1. HALF YEAR 2015 (CONDENSED) (1) Economic Environment According to the International Monetary Fund (IMF) as of July 2015 the global economic growth will grow further in 2015 by 3.3 %, whereas the prognosis as of April 2015 showed a growth of 3.5%. For advanced economies, a growth of 2.1 % is projected for the current year and 2.4% for the next year. For the Euro area, a development of 1.5 % is projected for 2015. For the year 2016, the IMF anticipates a global economic growth of 3.8 % and for the Euro area a growth of 1.7 %. For emerging markets and developing economies, a growth in economic output of 4.2 % is projected for the year 2015 and a growth of 4.7 % for the year 2016. For China, a growth rate of 6.8 % for the year 2015 and 6.3 % for the year 2016 is projected, as the prognosis in April already stated. The highest growth rate is expected for China, with 7.5 % for the current and for the next year. At the beginning of April, Red Bull KTM factory driver Ryan Dungey won the first 450 Supercross world championship title for the Red Bull KTM factory team in the 14th round of the Monster Energy Supercross world championship in Houston. In May KTM presented the models of the new motocross generation 2016, developed with a lot of experience, work, information, tests, and research and development. In the first half year of 2015 KTM started to build a new motorsports building in Munderfing with planned investments of EUR 13.2 million. The construction of a new logistics center in Munderfing, with investments amounting to approximately EUR 30 million, will be completed soon. (3) Market development (2) Business development and highlights In the first half year of 2015 KTM reported consolidated revenues amounting to EUR 515.1 million. Therefore, an increase of 25.5 % compared to same period in prior year could be achieved. Taking into account the 200 Duke, 390 Duke, RC 200 and RC 390 sold by our partner Bajaj in India 88,531 KTM motorcycles were sold worldwide in the first half year of 2015 (+25.6 % compared to prior year). In the first six months of 2015 KTM showed an EBITDA of EUR 70.2 million (+34.0 % compared to prior year) and an EBIT of EUR 50.3 million (+49.7 % compared to prior year). Net result could be increased from EUR 26.2 million in prior year to EUR 33.3 million in the first half year of 2015. The implementation of the global product strategy as well as the expansion into further Asian and South American markets has been consistently pursued in the first quarter of 2015. In March 2015, the prolongation of the contracts of the Executive Board until February 29, 2020 has been decided. Since the integration of the brand Husqvarna, KTM AG follows a two brand strategy for KTM and Husqvarna. Therefore, the sales organization has been realigned. As the final step of this reorganization, the Supervisory Board concluded in the meeting in March 2015 to merge KTM Motorrad AG into the listed KTM AG. In the racing division, KTM factory rider Marc Coma celebrated his fifth title in the Dakar championship. This is the 14th consecutive title for KTM in the world s toughest rally. Compared to prior year, the overall European market 1 increased by 9.6 % to approximately 304,000 vehicles registered in the first half year of 2015. This increase is primarily due to the upward trend in the largest European markets such as Germany (+8 %), the United Kingdom (+22 %) and Spain (+20 %). Registrations of KTM motorcycles in the overall European market could be increased to 8.1 % (+5 % compared to prior year). In the overall US market 2 registrations increased, compared to prior year by 5.7 % to approximately 236,000 vehicles registered in the first half year of 2015. KTM succeeded in increasing its share in the overall US market by 5.7 % to 4.6 %. (4) Development of sales In the first half year of 2015 KTM sold 70,491 Fullsize 3 motorcycles (+10,896 motorcycles compared to prior year) out of which 24,336 motorcycles (+2,993 motorcycles compared to prior year) were sold in the offroad division and 46,155 motorcycles (+7,903 motorcycles compared to prior year) in the street division. Sales units of Sportminicycles decreased to 3,139 motorcycles (-1,361 motorcycles compared to prior year). In the first six months of 2015 KTM sold 18 X-Bows (-15 X-Bows compared to prior year). By region, sales in North America (USA and Canada), our largest single market, increased to 12,740 vehicles (+3,847 vehicles compared to prior year). 1) Motorcycles >120 ccm, excluding Motocross, Scooters and ATVs 2) Motorcycles >120 ccm, including Motocross, excluding Scooters and ATVs 3) Motorcycles >120 ccm 4
(5) Development of revenue In the offroad division, revenue rose to EUR 143.1 million (+26.1 % compared to prior year). Revenue of Sportminicycles decreased to EUR 9.9 million compared to prior year (-23.7 % compared to prior year). In the street division, revenue increased to EUR 278.5 million (+34.1 % compared to prior year). (6) KTM Share The KTM share showed a downward trend in the first half year of 2015 closing at EUR 107.95 on the last trading day (June 30, 2015). Compared to prior year balance sheet date the share price rose from EUR 135 by 20.0 %. The highest closing price in a period of six months was EUR 138.40 and the lowest closing price was EUR 104.50. As of June 30, 2015 the market capitalization for 10,845,000 shares admitted for trading amounted to EUR 1,170.7 million. In the related products division, revenue could be increased by 9.7 %, to EUR 83.6 million. By region, sales in Europe increased to EUR 285.4 million (+16.3 % compared to prior year). In North America revenue increased to EUR 134.5 million (+75.8 % compared to prior year). Revenue in other countries decreased slightly by 7.7 % to EUR 95.2 million. SHARE FIGURES 1. HY 2015 Number of shares outstanding (ultimo 06/30/2015) 10,845,000 Lowest price (in EUR) 99.69 Highest price (in EUR) 140.00 Closing price (in EUR) as of June 30 th, 2015 107.95 Market capitalization as of June 30 th, 2015 (in million EUR) 1,170.7 TICKER SYMBOLS KTM Reuters Bloomberg ISIN KTMP:VI KTM AV AT0000645403 Contact: Viktor Sigl / Tel.: +43 7742 6000 144 / E-mail: ir@ktm.com (7) Annual General Meeting of the shareholders The 27 th Annual General Meeting of the shareholders of KTM AG took place on April 23, 2015 in Mattighofen. For the business year 2014, the Annual General Meeting decided to distribute a dividend amounting to 1.50 EUR (prior year: 1.00 EUR) per share. The members of the Supervisory Board and the Executive Board were discharged. No changes were made to the composition of the Executive Board and the Supervisory Board. REVENUE BY PRODUCTS REVENUE BY REGION 16.2% PG&A 0.2% X-Bow 1.9% Sportminicycles 27.8% Offroad 18.5% Rest of the world 55.4% Europe 53.9% Street 26.1% North America 5
(8) Risk report The risk report is provided in the consolidated financial statements as of December 31, 2014. Since then, there have been no material changes in the evaluation of risks. (9) Related party disclosures All products and services rendered and received from related companies and individuals as stated in the consolidated financial statements as of December 31, 2014 are carried out at arm s lengths. In the first half year of 2015 there have been no material changes regarding transaction partner, volume and nature of the business realtionship. (10) Significant events after the balance sheet date There have been no reportable events after June 30, 2015. (11) Outlook The global product strategy continues to be implemented as a result of planned expansions and is leading to strong rates of revenue and sales growth for the business year. The investment volume planned for 2015 continues on a high level. Investments will continue to focus in particular on new series development projects along with infrastructure and development investments in motorsport and logistics. The completion of the construction of the logistics center in Munderfing will be completed in the third quarter. Production capacities at the main plant in Mattighofen will also continue to be expanded. The KTM Group s liquidity and financing situation is marked by long-term loans and a varied portfolio of different financing instruments with various counterparties. Sufficient liquidity reserves for the planned growth are thus available. The Executive Board of KTM AG July 2015: Chairman of the Executive Board: DI Stefan Pierer e.h. Members of the Executive Board: DI Harald Plöckinger e.h., Mag. Friedrich Roithner e.h., Mag. Viktor Sigl, MBA e.h., Mag. Ing. Hubert Trunkenpolz e.h., DEVELOPEMENT OF THE KTM SHARES IN THE FIRST HY OF 2015 SHAREHOLDER STRUCTURE BY SHAREHOLDER RIGHTS (BY SHARE CAPITAL) <1,0% Freefloat and others 130% 100 120% 110% 100% 51,2% CROSS Industries AG 76 90% 80% 70% 48,0% Bajaj Auto International Holdings B.V. Jän Feb März Apr Mai Juni KTM AG ATX Prime 6
INTERIM CONSOLIDATED FINANCIAL STATEMENTS FOR THE 1. HALF YEAR 2015 (CONDENSED) CONSOLIDATED STATEMENT OF PROFIT OR LOSS in million EUR Note 1. HY 2015 1. HY 2014 Revenue (6) 515.1 410.3 Cost of sales -363.4-293.9 Gross profit (6) 151.7 116.4 Selling and racing expenses (6) -67.3-55.5 Research and development expenses -6.6-4.4 Infrastructure and administration expenses -17.9-14.9 Other operating expenses -9.7-8.2 Other operating income 0.1 0.1 Result from operating activities (6) 50.3 33.6 Interest income 0.5 0.3 Interest expenses -4.3-4.0 Other financial result -2.1 0.1 Profit before tax 44.3 30.1 Tax expense -11.0-3.9 Profit for the reporting period (6) 33.3 26.2 of which attributable to the owners of the parent company 33.2 26.1 of which attributable to non-controlling interests 0.1 0.1 Earnings per share (in EUR) basic = diluted 3.07 2.41 Consolidated statement of comprehensive income in million EUR Note 1. HY 2015 1. HY 2014 Profit for the reporting period 33.3 26.2 Currency translation 1.2-0.1 Valuation of cash flow hedges 0.6 0.9 Deferred taxes on valuation of cash flow hedges -0.1-0.2 Other comprehensive income - Possible reclassification into the income statement 1.7 0.6 Total comprehensive income (7) 35.0 26.8 of which attributable to the owners of the parent company 34.9 26.7 of which attributable to non-controlling interests 0.1 0.1 7
CONSOLIDATED STATEMENT OF FINANCIAL POSITION in million EUR Note 06/30/2015 12/31/2014 ASSETS NON-CURRENT ASSETS Property, plant and equipment (8) 142.5 124.1 Goodwill 78.6 78.7 Intangible assets (9) 189.7 174.0 Investments accounted for using the equity method 2.9 2.9 Deferred tax assets 3.1 2.5 Other non-current assets (10) 2.0 1.8 418.8 384.1 CURRENT ASSETS Cash and cash equivalents (11) 76.5 68.8 Trade receivables (12) 106.7 70.3 Inventories (13) 156.0 141.6 Prepayments 3.3 2.9 Other current assets 32.4 27.0 374.9 310.7 Total 793.7 694.8 in million EUR Note 06/30/2015 12/31/2014 EQUITY AND LIABILITIES CONSOLIDATED EQUITY Share capital 10.8 10.8 Reserves including retained earnings 334.8 316.2 Equity of the owners of the parent company 345.7 327.1 Non-controlling interests 0.6 0.5 346.3 327.6 NON-CURRENT LIABILITES Bonds 84.8 84.7 Financial liabilities (14) 113.6 64.0 Employee benefits 13.9 13.5 Deferred tax liabilities 29.2 20.5 Other non-current liabilities (15) 6.8 6.5 248.3 189.2 CURRENT LIABILITIES Financial liabilities (14) 14.7 8.6 Trade payables 116.7 105.1 Provisions 7.6 6.8 Tax liabilities 6.1 5.9 Prepayments 1.5 1.6 Other current liabilities (16) 52.6 50.2 199.1 178.0 Total 793.7 694.8 8
CONSOLIDATED STATEMENT OF CASH FLOWS in million EUR 1. HY 2015 1. HY 2014 CONSOLIDATED CASH FLOW FROM OPERATING ACTIVITIES + (-) Profit (loss) for the reporting period 33.2 26.1 + (-) Profit (loss) allocated to non-controlling interests 0.1 0.1 + (-) Interest expenses/ Interest income 3.8 3.7 - Interest paid -3.6-3.3 + Interest received 0.5 0.3 + (-) Current income tax 3.0 2.1 - Income taxes paid -1.3-0.8 + (-) Deferred taxes 8.0 1.8 + (-) Write-downs (additions) of fixed assets 20.0 18.7 + (-) Other non cash-effective income and expense 1.6 0.7 Gross cash flow 65.2 49.4 - (+) Increase (decrease) in inventories -11.1-12.4 - (+) + (-) + (-) Increase (decrease) in trade receivables, prepayments, other current and non-current assets Increase (decrease) in trade payables, prepayments and other current and non-current liabilities Increase (decrease) in tax liabilities, deferred taxes and other provisions -36.7-33.8 4.4 0.5-0.5 1.4-43.9-44.4 Consolidated cash flow from operating activities 21.3 5.0 CONSOLIDATED CASH FLOW FROM INVESTING ACTIVITIES - Investments in fixed assets -44.1-30.9 - Investments in financial assets -0.1 0.0 + Disposals of fixed assets 0.1 0.6 Consolidated cash flow from investing activities -44.2-30.3 CONSOLIDATED CASH FLOW FROM FINANCING ACTIVITIES - Dividend -16.3-5.6 + (-) Increase (decrease) in current and non-current financial liabilities 3.2 11.0 + Taking out research loan 45.0 0.0 - (+) Other financing activities 0.1 0.3 Consolidated cash flow from financing activities 32.0 5.6 CONSOLIDATED CASH FLOW + (-) Consolidated cash flow from operating activities 21.3 5.0 + (-) Consolidated cash flow from investing activities -44.2-30.3 + (-) Consolidated cash flow from financing activities 32.0 5.6 Change in cash and cash equivalents 9.1-19.6 + (-) Effect of exchange rate fluctuations on cash held -1.4 0.1 + Cash and cash equivalents at the beginning of the reporting period 68.8 31.6 Cash and cash equivalents at the end of the reporting period 76.5 12.1 comprising: cash on hand, checks, cash in banks and time deposits 9
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY in million EUR Attributable to the owners of the parent company Noncontrolling Share Total capital interests Reserves including retained earnings Cash flow hedge reserve Foreign currency translation reserve Total consolidated equity Balance as of January 1, 2015 10.8 319.4-3.6 0.4 327.1 0.5 327.6 Currency translation 0.0 0.0 0.0 1.2 1.2 0.0 1.2 Financial instruments 0.0 0.0 0.5 0.0 0.5 0.0 0.5 Other comprehensive income 0.0 0.0 0.5 1.2 1.7 0.0 1.7 Profit of the reporting period 0.0 33.2 0.0 0.0 33.2 0.1 33.3 Total comprehensive income 0.0 33.2 0.5 1.2 34.9 0.1 35.0 Dividend 0.0-16.3 0.0 0.0-16.3 0.0-16.3 Balance as of June 30, 2015 10.8 336.4-3.1 1.6 345.7 0.6 346.3 in million EUR Attributable to the owners of the parent company Noncontrolling Share Total capital interests Reserves including retained earnings Cash flow hedge reserve Foreign currency translation reserve Total consolidated equity Balance as of January 1, 2014 10.8 275.0-2.5-0.9 282.5 0.4 282.8 Currency translation 0.0 0.0 0.0 0.1 0.1 0.0 0.1 Financial instruments 0.0 0.0 0.6 0.0 0.6 0.0 0.6 Other comprehensive income 0.0 0.0 0.6 0.1 0.7 0.0 0.7 Profit of the reporting period 0.0 26.1 0.0 0.0 26.1 0.1 26.3 Total comprehensive income 0.0 26.1 0.6 0.1 26.8 0.1 26.9 Dividend 0.0-10.8 0.0 0.0-10.8 0.0-10.8 Balance as of June 30, 2014 10.8 290.3-1.9-0.8 298.4 0.5 298.9 10
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS FOR THE 1. HALF YEAR 2015 (CONDENSED) (1) The Company KTM AG has its registered office in Stallhofnerstrasse 3, 5230 Mattighofen, Austria, and has been recorded in the commercial register at the Provincial Court as Commercial Court of Ried im Innkreis under file number FN 107673 v. KTM AG engages in the development, production and distribution of motorized vehicles for recreational purposes (power sports), in particular under the KTM and Husqvarna brands, and in the acquisition and holding of stakes in entities engaging in the development, production and distribution of such equipment. As of June 30, 2015, the KTM Group comprised 39 subsidiaries, located in Austria, Switzerland, the U.S., Japan, South Africa, Mexico and India as well as in various other European countries, which are included within the consolidated financial statements. Furthermore, the KTM Group has equity holdings in general importers that are based in important distribution markets (New Zealand and Dubai) as well as in various flagship stores in Austria and Germany. Significant sales markets include the U.S., Germany, Australia, France, Malaysia, Italy, the United Kingdom, Austria, Spain, and Canada as well as other European countries. (2) Principles of financial reporting The interim financial statements of KTM AG as of June 30, 2015 were prepared in accordance with the International Financial Reporting Standards (IFRS) as adopted by the EU considering IAS 34 Interim Financial Reporting. The interim consolidated financial statements were neither audited nor reviewed by a certified public accountant. The condensed interim consolidated financial statements do not include all the information and disclosures required in the annual financial statements, and should be read in conjunction with the consolidated financial statements as of December 31, 2014. The accounting and valuation methods used for the consolidated financial statements as of December 31, 2014 were applied unchanged, in principle, except the change in presentation as described below. Further information regarding the accounting and valuation methods are explained in the notes to the consolidated financial statements for the financial year 2014. The accounting and valuation methods applied therein constitute the basis for the present interim consolidated financial statements for the first half year of 2015. In the consolidated statement of profit or loss of 2015, the depreciation of the capitalized development costs is shown under cost of sales instead of research and development expenses, as they were shown so far. The prior year figures are adopted accordingly und therefore cost of sales increased whereas research and development expenses decreased by EUR 10.3 million. Otherwise, there were no changes in accounting and valuation methods. The accounting principles of the companies included in the condensed interim consolidated financial statements are based on standardized accounting principles. These principles were fully applied by all consolidated companies. All further new or amended standards and interpretations that are effective in the European Union from January 1, 2015 have no significant impact on the consolidated interim financial statements of KTM AG.» IAS 19 Employee Contributions: Clarification of the allocation of employee contributions or contributions from third parties that are linked to the period of service, as well as the creation of a facilitation, if the amount of the contributions is depending on the years of service.» Annual Improvements 2010-2012: Changes and clarifications of several IFRS.» Annual Improvements 2011-2013: Changes and clarifications of several IFRS. The figures in the interim consolidated financial statements are reported in the functional currency of the parent, the Euro. Unless deviations are indicated specifically, all amounts are rounded to 1,000,000 euros (EUR million), which may give rise to rounding differences. Slight differences in totals from adding up rounded amounts and percentages cannot be excluded due to automated calculation tools. 11
(3) Scope of consolidation All material subsidiaries under the legal or factual control of KTM AG have been included in the interim consolidated financial statements of KTM AG for the first half year of 2015. Apart from the parent, 39 entities (of which 33 are foreign entities and six are domestic entities) are therefore included by full consolidation in the KTM Group. The following table shows the scope of consolidation as of June 30, 2015: Full consolidation At-equity consolidation As of January 1, 2015 39 3 Additions 2 0 Disposals 2 0 As of June 30, 2015 39 3 Husqvarna Motorsports, Inc., Murrieta, US, and Husqvarna Motorcycles SA Pty Ltd, Northriding, South Africa, have been founded in the first half year of 2015 and are therefore included in the consolidation scope for the first time. (6) Notes to the consolidated statement of profit or loss Revenue increased, compared to prior year, by EUR 104.8 million to EUR 515.1 million (+ 25.5 %). In the first half year of 2015 gross profit rose by 30.3 % to EUR 151.7 million compared to prior year due to an increased business volume resulting in a gross margin ratio of 29.5 %. Selling and racing expenses increased by EUR 11.8 million to EUR 67.3 million (+ 21.3%) compared to prior year. Overhead expenses increased in total from EUR 82.8 million in the prior year to EUR 101.4 million (+22.5 %). The result from operating activities increased to EUR 50.3 million (+ EUR 16.7 million compared to prior year) due to a positive development of sales and revenue in the first half year of 2015. An EBIT margin of 9.8% (8.2% in prior year) could be recorded. In the first half year 2015, KTM Events & Travel GmbH, in liquidation, was deconsolidated and is therefore no longer included in the consolidation scope. The financial result increased by EUR -2.3 million to EUR -5.9 million compared to prior year (EUR -3.6 million) due to curreny valution effects. Furthermore, the number of companies that are included by full consolidation decreased by one due to the merger of KTM Motorrad AG into KTM AG. The effective tax rate as of June 30, 2015, increased compared to the same period in prior year from 13.0% to 24.8% due to the use of capitalised loss carryforwards. (4) Estimates The profit for the financial year increased from EUR 26.2 million in prior year to EUR 33.3 million. In the consolidated financial statements, certain estimates and assumptions have to be made that affect the recognized assets and liabilities, the disclosure of contingent liabilities as of the balance sheet date and the presentation of income and expenses for the financial year. Estimates and assumptions are based on empirical values the Executive Board deems appropriate. The amounts actually arising may differ from the estimates if assumed parameters develop contrary to expectations. If new conditions become known, they are duly taken into account and previous assumptions are revised accordingly. Estimates and uncertainties in judgements and assumptions are explained in the consolidated financial statements of KTM AG as of December 31, 2014 under note (4) accounting policies. (7) Notes to the consolidated statement of comprehensive income The cash flow hedge reserve increased equity by EUR 0.5 million net in the reporting period. Total comprehensive income increased the group s equity in the reporting period by EUR 35.0 million. Notes to the consolidated statement of financial position (5) Seasonality Seasonality effects occur due to a different seasonality of offroad- and street motorcycles. In the street segment, there are higher sales in the first half of the year, whereas in the offroad division, the main focus is on the second half of the year. Due to the increasing importance of the street segment to total revenue, seasonal effects are straightened over the year to a great extent. Therefore, management is not expecting a high dependency on seasons. (8) Property, plant and equipment Property, plant and equipment increase by EUR 18.4 million to EUR 142.5 million due to investments in the logistics center under construction and investments in tools. 12
(9) Intangible assets Intangible assets include, in substance, capitalized development costs as well as license rights to brands and licenses. In the first six months of 2015, intangible assets rose by EUR 15.7 million to EUR 189.7 million due to the net capitalization of development costs and also due to IT investments. (15) Other non-current liabilities Other non-current liabilities increased by EUR 0.3 million to EUR 6.8 million compared to December 31, 2014 and include, in substance, deposits received. (16) Other current liabilities (10) Other non-current assets Other non-current financial assets include, as reported in the consolidated financial statement as of December 31, 2014, equity instruments, that are not quoted in an active market and whose fair value cannot be reliably measured. These are accounted for at cost less impairment Other current liabilities rose by EUR 2.4 million to EUR 52.6 million. Other current liabilities include, in substance, employee benefits, tax liabilities, liabilities from derivative financial instruments and liabilities due to sales bonuses and price discounts. (11) Cash and cash equivalents In the first half year 2015, cash and cash equivalents increase by EUR 7.7 million to EUR 76.5 million. (17) Notes to the consolidated statement of cash flows Compared to prior year the free cash flow changed slightly from EUR -25.3 million to EUR -22.9 million, and is therefore negative due to seasonality. Whereas cash flow from operating activities rose due to an increase in net profit (+ EUR 16.3 million), cash flow from investing activities increased due to high investment measures (+ EUR 13.9 million). 12) Trade receivables Trade receivables including receivables due from affiliated and associated companies increased by EUR 36.4 million to EUR 106.7 million due to seasonal influences. Taking into account the receivables sold in the first six months of 2015 in the framework of the ABS transaction, this increase amounts to EUR 45.0 million. (18) Notes to the consolidated statement of changes in equity Total equity rose from EUR 327.6 million as of December 31, 2014 to EUR 346.3 million. (13) Inventories Inventories rose by EUR 14.4 million to EUR 156.0 million compared to prior year due to an increase in finished goods and merchandise (+ EUR 13.8 million compared to December 31, 2014). In the first half year 2015, allowances amounting to EUR 27.8 million (EUR 20.4 million in prior year) have been recognized. (14) Financial liabilities In the first half year 2015, non-current financial liabilities decreased by EUR 49.6 million to EUR 113.6 million due to repayments as scheduled. Current financial liabilities increased by EUR 6.1 million to EUR 14.7 million due to seasonal influences. Net Financial Debt increased in the first half year of 2015, compared to December 31, 2014, by EUR 48.2 million to EUR 135.7 million due to seasonality. The gearing ratio amounts to 39.3% (December 31, 2014: 26.7 %), due to seasonality. (19) Notes to financial instruments The fair value of a financial instrument is determined by means of quoted market prices for an identical instrument in active markets (Level 1). If no quoted market prices in active markets are available for the instrument, the fair value is determined by means of valuation techniques for which the material parameters are based only on observable market data (Level 2). In all other cases, the fair value is determined on the basis of valuation techniques for which at least one material parameter is not based on observable market data (Level 3). Reclassifications from one level to another are taken into account at the end of the reporting period. There were no transfers between levels in the financial year. The following table shows the carrying amounts and fair values of the financial assets (financial instruments shown on the assets side), broken down by class or measurement category according to IAS 39. But it does not provide information on financial instruments not measured at fair value where the carrying amount is a reasonable approximation of fair value. 13
million EUR Carrying amount Fair value Fair value Level 1 Level 2 Level 3 Total 06/30/2015 Loans and receivables Cash and cash equivalents 76.5 - - - - - Trade receivables 106.7 - - - - - Other financial assets 22.4 - - - - - Sum 205.6 Available for sale Other non-current financial assets 1.9 - - - - - Sum 1.9 Held for trading Other current financial assets - securities 1.5 1.5 1.5 - - 1.5 Sum 1.5 Fair value - Hedging instruments Other current assets - Derivatives with positive market value (cash flow hedge) 0.8 0.8-0.8-0.8 Sum 0.8 Total 209.8 million EUR Carrying amount Fair value Fair value Level 1 Level 2 Level 3 Total 12/31/2014 Loans and receivables Cash and cash equivalents 68.8 - - - - - Trade receivables 70.3 - - - - - Other financial assets 22.2 - - - - - Sum 161.3 Available for sale Other non-current financial assets 1.8 - - - - - Sum 1.8 Fair value - Hedging instruments Other current assets - Derivatives with positive market value (cash flow hedge) 0.5 0.5-0.5-0.5 Sum 0.5 Total 163.6 The following table shows the carrying amounts and fair values of the financial liabilities (financial instruments shown on the liabilities side), broken down by class or measurement category according to IAS 39. But it does not provide information on financial liabilities not measured at fair value where the carrying amount is a reasonable approximation of fair value. 14
million EUR Carrying amount Fair value Fair value Level 1 Level 2 Level 3 Total 06/30/2015 At amortized cost Financial liabilities 128.3 130.2 - - 130.2 130.2 Trade payables 116.7 - - - - - Bonds 84.8 89.5 89.5 - - 89.5 Other current and non-current financial liabilities 27.3 - - - - - Sum 357.1 Held for trading Other financial liabilities - Derivatives with negative market value 0.2 0.2-0.2-0.2 Sum 0.2 Fair value - Hedging instruments Other financial liabilities - Derivatives with negative market value (cash flow hedge) 7.6 7.6-7.6-7.6 Sum 7.6 Totoal 364.9 million EUR Carrying amount Fair value Fair value Level 1 Level 2 Level 3 Total 12/31/2014 At amortized cost Financial liabilities 72.6 73.1 - - 73.1 73.1 Trade payables 105.1 - - - - - Bonds 84.7 89.3 89.3 - - 89.3 Other current and non-current financial liabilities 30.0 - - - - - Sum 292.4 Held for trading Other financial liabilities - Derivatives with negative market value 0.3 0.3-0.3-0.3 Sum 0.3 Fair value - Hedging instruments Other financial liabilities - Derivatives with negative market value (cash flow hedge) 7.6 7.6-7.6-7.6 Sum 7.6 Totoal 300.3 15
Fair value determination The following table shows the valuation technique used to determine the fair value as well as the significant unobservable inputs used. Financial instruments measured at fair value Type Valuation technique Significant, unobservable inputs Connection between significant unobservable inputs and fair value measurement Foreign currency forwards and interest rate swaps Market comparison method: The fair values are based on the market values determined using accepted methodologies of financial mathematics; they are regularly checked for plausibility Not applicable Not applicable Securities held short term For the valuation of securities held short term, the current market price at the balance sheet date is used. Not applicable Not applicable Financial instruments not measured at fair value Type Valuation technique Significant, unobservable inputs Bonds The exchange listed bond is measured using the price quoted on the balance sheet date Not applicable Loans Discounted cash flows Risk premium for own credit risk (20) Segment reporting Given the previous structuring and internal reporting, the KTM Group did not until 2013 consist of one single business segment. The functional areas of R&D, Production, Purchasing, and Marketing and the administrative group functions are focused on a legal company at the single global production location in Austria. Likewise, the product range and pricing for global sales connected with the bundling of opportunities and risk from selling motorcycles were established on the basis of a legal company at the central location. Segment reporting for a single reporting segment was therefore restricted to cross-segment information as per IFRS 8.31ff. In 2014 the business volume of the Husqvarna brand measured in terms of consolidated group sales increased sharply after operating activities began in October 2013. Furthermore, in 2014 the organization was restructured to implement the two-brand strategy. In 2014, therefore, internal reporting to the chief operating decision-maker underwent a separation into the KTM and Husqvarna business segments. Thus, at December 31, 2014, the requirements of IFRS 8.5 are for the first time implemented for a second business segment. The marketing activities of both brands now take place via two different marketing entities that are separated in both corporate and staffing terms. The outsourced processes such as R&D activities, production and purchasing, and the administrative group functions continue to provide services for both brands and therefore also continue to be centered in corporate terms in one company that are to be allocated to the KTM business segment. A division of property, plant, and equipment between the two brands is not possible because of the single production location and almost identical production processes and is not therefore reported internally to the chief operating decision-maker. 16
The table below shows segment information for the first half year 2015 and 2014: in million EUR KTM Husqvarna Konsolidierung Konzern 06/30/2015 External revenue 460.6 54.5 0.0 515.1 Revenue between the segments 38.6 0.3-38.9 0.0 Revenue total 499.2 54.8-38.9 515.1 EBIT 47.5 2.7 0.1 50.3 Depreciation 19.6 0.4 0.0 20.0 in TEUR KTM Husqvarna Konsolidierung Konzern 06/30/2014 External revenue 372.7 37.6 0.0 410.3 Revenue between the segments 21.0 2.6-23.6 0.0 Revenue total 393.7 40.2-23.6 410.3 EBIT 31.7 1.8 0.1 33.6 Depreciation 18.5 0.2 0.0 18.7 The result in the balance column corresponds to the result in the statement of profit or loss. The reconciliation from the result before tax is shown in the statement of profit or loss. The following tables show the cross-segment information or the first half year 2014 and the first half year 2015. Revenue by region HY 2015 in % HY 2014 in % Europe 285.4 55.4 % 245.4 59.8 % North America 134.5 26.1 % 76.5 18.7 % Other regions 95.2 18.5 % 88.4 21.5 % Total 515.1 100.0 % 410.3 100.0 % Revenue by product group HY 2015 in % HY 2014 in % Offroad-Sportmotorcycles 143.2 27.8 % 113.5 27.7 % Street-Sportmotorcycles 277.5 53.9 % 205.8 50.1 % Sportminicycles 9.8 1.9 % 12.9 3.1 % X-Bows 1.0 0.2 % 1.9 0.5 % PG&A 83.6 16.2 % 76.3 18.6 % Total 515.1 100.0 % 410.3 100.0 % In the first half year 2015 non-current assets of EUR 398.6 million (December 31, 2014: EUR 365.7 million) were allocated to the company s country of origin and EUR 12.3 million (December 31, 2014: EUR 11.2 million) concern third countries. (22) Significant events after the balance sheet date There have been no reportable events after June 30, 2015. Neither the KTM segment nor Husqvarna report reliance on external customers within the meaning of IFRS 8.34. (21) Related Party disclosures All products and services rendered and received from related companies and individuals as stated in the consolidated financial statements as of December 31, 2014 are carried out at arm s lengths. In the first half year of 2015 there have been no material changes regarding transaction partner, volume and nature of the business realtionship. 17
STATEMENT OF ALL LEGAL REPRESENTATIVES We, the executive board of KTM AG, confirm to the best of our knowledge that the condensed interim consolidated financial statements for the first six months of 2015 give a true and fair view of the assets, liabilities, financial position and profit or loss of the group as required by the applicable accounting standards and that the condensed consolidated management report gives a true and fair view of important events that have occurred during the first six months of the financial year and their impact on the condensed interim consolidated financial statements, of the principal risks and uncertainties for the remaining six months of the financial year and of significant related party transactions to be disclosed. The Executive Board of KTM AG July 2015 DI Stefan Pierer e.h., Chairman of the Executive Board Members of the Executive Board: DI Harald Plöckinger e.h., Mag. Friedrich Roithner e.h., Mag. Viktor Sigl, MBA e.h., Mag. Ing. Hubert Trunkenpolz e.h., 18
INTERIM FINANCIAL STATEMENTS H1 2015 Editorial deadline: July 24th, 2015 While every care was taken in compiling this report and checking that the data it contains is correct, slight differences in totals from adding up rounded amounts and percentages, typographical errors and misprints cannot be excluded. This report and the forward-looking statements it contains were prepared on the basis of all data and information available at the time of going to press. We wish to point out, however, that various factors may cause the actual results to deviate from the forward-looking statements given in the report. 19
KTM AG 5230 Mattighofen, Austria www.ktm.com 20