Consolidated Financial Statements

Transcription

1 Össur hf. Consolidated Financial Statements December Össur hf. Grjóthálsi Reykjavík Id-no

2 Össur hf. Consolidated Financial Statements December Table of Contents Financial Ratios 1 Statement by the Board of Directors and President and CEO 2 Independent Auditor s Report 3 Consolidated Income Statement 4 Consolidated Statement of Comprehensive Income 5 Consolidated Balance Sheet 6 Consolidated Statements of Cash Flow 8 Consolidated Statement of Changes in Equity 9 Notes to the Consolidated Financial Statement 10

3 Financial Highlights and Key Ratios Unaudited USD m Q Q Income Statement Net sales Gross profit Operating expenses (excl. other income) EBIT Net profit EBITDA EBITDA adjusted Sales growth Sales growth USD % (4) 1 (5) Growth breakdown: Organic growth in LCY % Currency effect % (9) (5) (10) (1) 1 (3) 3 Acquired/divested business % Balance Sheet Total assets Equity Net interest-bearing debt (NIBD) Cash Flow Cash generated by operations Free cash flow Key ratios Gross profit margin % EBIT margin % EBITDA margin % EBITDA adjusted margin % Equity ratio % Net debt to EBITDA * Effective tax rate % Return on equity * % CAPEX / Net sales % Full time employees on average 2,556 2,224 2,420 2,214 1,765 1,860 1,864 Market Market value of equity 1,546 1,311 1,546 1, Number of shares Millions Price/earnings ratio, (P/E) * Diluted EPS US cent Diluted cash EPS US cent * Financial ratios for Q and Q are based on operations for the preceding 12 months. Össur Financial Statements

4 Statement by the Board of Directors and President and CEO It is the opinion of the Board of Directors and the President and CEO of Össur hf. (the Company), that these Consolidated Financial Statements present the necessary information to evaluate the financial position of the Company at year end, the operating results for the year and financial developments during the year Össur Consolidated Financial Statements are prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union and additional Danish disclosure requirements for listed companies. Össur hf. designs, manufactures and sells orthopaedic products specializing in prosthetics and bracing and supports solutions. The Company is headquartered in Iceland and the Company owns and operates subsidiaries in the United States, Canada, Mexico, France, the Netherlands, Germany, United Kingdom, Sweden, Iceland, Spain, S-Africa, China, Hong Kong and Australia. The Company sells its products world wide, but the principal market areas are North America and Europe. The total sales of the Össur Consolidation amounted to USD million, compared to USD million in the preceding year. This represents a decrease in sales of 5%. In local currency, sales growth was 5%. Net profit amounted to USD 51.2 million compared to USD 59.5 million in Diluted Earnings per Share amounted to US cents 11.5 compared to US cents 13.1 in Earnings before interest, taxes, depreciation and amortization (EBITDA) amounted to USD 97.5 million compared to USD million in the preceding year. The total assets of the Össur Consolidation amounted to USD million at year end, liabilities were USD million and equity was USD million. The equity ratio at year end was 71%, compared to 65% the preceding year. In the course of the year the Company employed on average 2,420 employees and 2,525 at year end. The Board of Directors and President and CEO of Össur hf. hereby confirm the Consolidated Financial Statements of Össur for the year 2015 with their signatures. Össur is listed on the NASDAQ Copenhagen. The market value of the Company at year end was USD 1,546 million. During the year the share price in DKK increased by 34%. At year end, shareholders in Össur hf. numbered 4,033 compared to 3,272 at the beginning of the year. The ten largest shareholders and their ownership percentage are: William Demant Invest A/S %, Lífeyrissjóður Verslunarmanna (Pension Fund)- 8.1%, Gildi lífeyrissjóður (Pension Fund) - 5.9%, Lífeyrissjóður starfsmanna ríkisins (Pension Fund) - 5.1%, Arbejdsmarkedets Tillægspension (Pension Fund) - 5.1%, JP Morgan Chase Bank - 4.4%, SEB Stockholm (Customer account) - 1.8%, Stefnir IS-15 (Equity Fund) - 1.6%, Sameinaði lífeyrissjóðurinn (Pension Fund) - 1.4%, Stafir lífeyrissjóður (Pension Fund) - 1.3%. In its procedures, the Board of Directors complies with the Articles of Association of the Company, the Board of Directors' Rules of Procedure and follows the Danish Recommendations for Corporate Governance issued by the Danish Committee on Corporate Governance. The Rules of Procedure address issues such as allocation of responsibilities and power of decision within the Board, independency issues, confidentiality etc. An Audit Committee is present within the Board. The Board of Directors is composed of five members elected at each Annual General Meeting for a term of one year. The Board of Directors consists of two women and three men and therefore complies with Icelandic law on gender ratio which entered into effect on the 1st of September No Össur employee sits on the Board of Directors. The Board of Directors recommends payment of dividends to shareholders in 2016 amounting to DKK 0.12 per share, this approximates USD 8 million and 16% of 2015 net profit. As regards to changes in the equity of the Company, the Board refers to the Notes attached to the Consolidated Financial Statements. The Board of Directors proposes to reduce the share capital by ISK 1,892,688 by way of canceling 1,892,688 of the Company s own shares of ISK 1 nominal value each. The Board of Directors and President and CEO of Össur hf. hereby confirm the Consolidated Financial Statements of Össur for the year 2015 with their signatures. Reykjavík, 2 February 2016 Board of Directors Niels Jacobsen Chairman of the Board Arne Boye Nielsen Kristján T. Ragnarsson Guðbjörg Edda Eggertsdóttir Svafa Grönfeldt President and CEO Jón Sigurðsson Össur Financial Statements

5 Independent Auditor s Report To the Board of Directors and Shareholders of Össur hf. We have audited the accompanying financial statements of Össur hf, which comprise the statement of Board of Directors and the CEO, balance sheet as of 31 December, 2015, the income statement, statement of comprehensive income, statement of cash flow and statement of changes in equity, for the year then ended, and a summary of significant accounting policies and other explanatory information. Management s and the Board of Directors Responsibility for the Financial Statements Management and the board of directors are responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards as adopted by the European Union and additional Danish disclosure requirements for listed companies and for such internal control as management and the board of directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor s Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the Consolidated Financial Statements gives a true and fair view, of the financial position of Össur hf. as of 31 December 2015, and its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by the European Union and additional Danish disclosure requirements for listed companies. Kópavogur, 2 February 2016 Deloitte ehf. Þorsteinn Pétur Guðjónsson State Authorized Public Accountant Signý Magnúsdóttir State Authorized Public Accountant Össur Financial Statements

6 Consolidated Income Statement 2015 and 2014 Unaudited All amounts in USD '000 Notes Q Q Net sales Cost of goods sold 2 483, , , ,300 (179,925) (186,231) (46,683) (47,823) Gross profit 303, ,126 77,845 81,477 Other income Sales and marketing expenses Research and development expenses General and administrative expenses (13) 68 (157,761) (168,296) (40,857) (43,248) (18,361) (19,428) (4,574) (4,583) (49,746) (49,651) (13,279) (12,600) Earnings before interest and tax (EBIT) 77,342 85,939 19,122 21,114 Financial income Financial expenses Net exchange rate difference Net financial income / (expenses) (3,332) (3,968) (817) (1,021) (4,882) (4,351) (1,122) (1,965) 6 (7,870) (8,112) (1,857) (2,962) Share in net profit / (loss) of associated companies (949) 0 (127) (5) Earnings before tax (EBT) 68,523 77,827 17,138 18,147 Income tax 7 (17,360) (18,369) (4,553) (3,248) Net profit 51,163 59,458 12,585 14,899 Attributable to: Owners of the Company Non-controlling interests 51,243 59,447 12,648 14,998 (80) 11 (63) (99) 51,163 59,458 12,585 14,899 Earnings per share 8 Basic earnings per share (US cent) Diluted earnings per share (US cent) Össur Financial Statements

7 Consolidated Statement of Comprehensive Income 2015 and 2014 Unaudited All amounts in USD '000 Notes Q Q Net profit 51,163 59,458 12,585 14,899 Items that will not be reclassified subsequently to profit or loss: Defined benefit plan actuarial gains/losses (41) (862) (41) (862) Income tax relating to components of other comprehensive income (60) 254 (60) 254 (101) (608) (101) (608) Items that may be reclassified subsequently to profit or loss: Change in cash flow hedges Translation difference of shares in foreign operations Income tax relating to components of other comprehensive income (19,913) (24,498) (3,027) (8,767) (853) (1,270) (317) (50) (20,467) (25,754) (3,366) (9,290) Total comprehensive income 30,696 33,704 9,218 5,608 Attributable to: Owners of the Company Non-controlling interests 30,776 33,693 9,281 5,707 (80) 11 (63) (99) 30,696 33,704 9,218 5,608 Össur Financial Statements

8 Consolidated Balance Sheet 31 December 2015 and 31 December 2014 Assets All amounts in USD '000 Notes Property, plant and equipment Goodwill Other intangible assets Other financial assets Deferred tax assets 9 44,536 39, , , ,119 41, ,779 10, ,326 21,038 Non-current assets 475, ,079 Inventories Accounts receivables Other assets Bank balances and cash 14 64,882 64, ,269 69, ,563 15, ,707 28,484 Current assets 177, ,704 Total assets 653, ,783 Össur Financial Statements

9 Consolidated Balance Sheet 31 December 2015 and 31 December 2014 Equity and liabilities All amounts in USD '000 Notes Issued capital Reserves Retained earnings , ,198 (42,187) (21,421) 329, ,055 Equity attributable to owners of the Company 461, ,832 Non-controlling interest in equity 1,085 1,292 Total equity 463, ,124 Borrowings Defined employee benefits Deferred tax liabilities Provisions Other financial liabilities 20 83, , ,952 21, ,018 6, Non-current liabilities 110, ,436 Borrowings Accounts payable Taxes payable Provisions Accrued salaries and related expenses Other liabilities ,067 17,504 11,095 12, ,939 3,770 27,910 28, ,309 23,096 Current liabilities 80,378 85,223 Total equity and liabilities 653, ,783 Össur Financial Statements

10 Consolidated Statement of Cash Flow 2015 and 2014 Unaudited All amounts in USD '000 Notes Q Q Profit from operations Depreciation and amortization (Gain) / loss on disposal of assets Change in provisions Change in inventories Change in receivables Change in payables 77,342 85,939 19,122 21,114 9, 11 20,153 18,398 5,616 4, (2,120) (150) (2,339) (7) (4,948) (1,108) 802 (2,855) (3,814) (5,163) 4,407 1,045 (3,342) (119) 3,029 5,042 Cash generated by operations 83,519 97,866 30,714 29,263 Interest received Interest paid Income tax paid (3,499) (3,089) (1,408) (554) (14,895) (9,953) (5,271) (3,478) Net cash provided by operating activities 65,500 85,133 24,194 25,417 Purchase of fixed and intangible assets Proceeds from sale of fixed assets Acquisition of subsidiaries Changes in financial assets 9, 11 (23,841) (16,770) (6,664) (5,740) (18,767) 0 (1,864) (1,101) (5,333) (32) (358) Cash flows from investing activities (24,627) (40,822) (6,546) (7,927) Proceeds from long-term borrowings Repayments of long-term borrowings Changes in revolving credit facility Payment of dividends 3,419 51, ,670 (710) (69,483) 235 (553) (34,350) (939) (5,515) 12,935 (7,536) (8,401) 0 0 Increase in interest that does not affect control (448) Dividends from subsidiaries paid to non-controlling interests (127) 0 (127) 0 Change in treasury shares (2,664) (29,167) (7,793) (29,167) Cash flows from financing activities (42,416) (56,120) (13,039) (14,115) Net change in cash (1,543) (11,809) 4,609 3,375 Effects of exchange rate changes on: Balance of cash held in foreign currencies Other items held in foreign currencies Cash at beginning of period (2,461) (3,880) (321) (6,374) 1,227 2, ,238 28,484 41,769 21,224 26,245 Cash at end of period 25,707 28,484 25,707 28,484 Össur Financial Statements

11 Consolidated Statement of Changes in Equity 2015 and 2014 Attributable to Non- Share Share Statutory Share option Fair value Translation Accumulated owners of controlling Total All amounts in USD '000 capital premium reserve reserve reserve reserve profits the parent interests equity Balance at 1 January , ,317 1,267 1,321 (735) 2, , ,650 1, ,037 Net profit 59,447 59, ,458 Change in cash flow hedges net of tax Translation difference of shares in foreign operations (25,632) (25,632) (25,632) Defined benefit plan actuarial gains/losses (608) (608) (608) Total comprehensive income for the period (122) (25,632) 59,447 33, ,704 Payment of dividends (8,401) (8,401) (8,401) Share option charge for the period Share option vested during the period (473) (473) (473) Acquisition of Non-controlling interests (2,193) (2,193) (106) (2,299) Movement of treasury shares (80) (29,087) (29,167) (29,167) Balance at 31 December , ,230 1,267 1,571 (857) (23,402) 293, ,832 1, ,124 Net profit 51,243 51,243 (80) 51,163 Change in cash flow hedges net of tax Translation difference of shares in foreign operations (20,666) (20,666) (20,666) Defined benefit plan actuarial gains/losses (101) (101) (101) Total comprehensive income for the period (20,666) 51,243 30,776 (80) 30,696 Change in benefit plans 709 (709) 0 0 Payment of dividends (7,536) (7,536) (127) (7,663) Share option charge for the period Share option vested during the period 39 13,733 (1,542) (6,510) 5,720 5,720 Acquisition of Non-controlling interests (231) (231) (231) Purchase of treasury shares (21) (8,425) (8,446) (8,446) Balance at 31 December , ,538 1, (44,068) 329, ,942 1, ,027 Össur Financial Statements

12 1. Quarterly statements Unaudited Full year Q4 Q3 Q2 Q Net sales 483, , , , ,785 Cost of goods sold (179,925) (46,683) (43,733) (47,078) (42,431) Gross profit 303,109 77,845 73,578 80,332 71,354 Gross profit margin 63% 63% 63% 63% 63% Other income 101 (13) Sales and marketing expenses (157,761) (40,857) (37,055) (41,178) (38,671) Research and development expenses (18,361) (4,574) (4,826) (4,627) (4,334) General and administrative expenses (49,746) (13,279) (11,253) (13,030) (12,184) EBIT 77,342 19,122 20,494 21,532 16,194 Net financial income / (expenses) (2,988) (735) (663) (802) (788) Net exchange rate difference (4,882) (1,122) (975) 223 (3,008) Share in profit of associated companies (949) (127) (470) (126) (226) EBT 68,523 17,138 18,386 20,827 12,172 Income tax (17,360) (4,553) (4,281) (5,306) (3,220) Net profit 51,163 12,585 14,105 15,521 8,952 EBITDA 97,495 24,738 25,442 26,510 20,805 EBITDA margin 20% 20% 22% 21% 18% EBITDA adjusted 98,962 24,738 25,442 27,977 20,805 EBITDA adjusted margin 20% 20% 22% 22% 18% 2. Net sales Unaudited Q Q Specified according to geographical segments: EMEA 237, ,098 62,751 67,178 Americas 210, ,195 53,085 52,856 APAC 34,800 33,064 8,692 9, , , , ,300 Specified according to product lines: Bracing and Supports 277, ,585 71,900 75,408 Prosthetics 203, ,388 52,279 53,471 Other products 1,551 1, , , , ,300 Össur Financial Statements

13 3. Segment information Information reported to the President and CEO for the purposes of resource allocation and assessment of segment performance focuses on geographical markets from the location of customers. The geographical segments are EMEA (Europe Middle-East and Africa), Americas and APAC (Asia-Pacific) Americas EMEA APAC Eliminations Consolidated Sales External sales 210, ,312 34, ,034 Inter-segment sales 56, ,796 1,127 (304,181) 0 Total sales 267, ,108 35,927 (304,181) 483,034 Results Segment results Net financial income / (expenses) Share in net profit of associated companies EBT Income tax Net profit 27,959 42,002 7, ,342 (7,870) (949) 68,523 (17,360) 51,163 Balance sheet Assets Segment assets Liabilities Segment liabilities Other information 2015 Capital additions Depreciation and amortization 499, ,327 37,655 (360,429) 653, , ,128 23,425 (412,050) 190,392 10,672 12, ,841 7,343 12, ,153 Sales of approximately USD 24 million (2014: USD 23 million) arose from sales to the Company's largest customer Americas EMEA APAC Eliminations Consolidated Sales External sales 209, ,098 33, ,357 Inter-segment sales 48, ,579 1,555 (224,886) 0 Total sales 257, ,677 34,619 (224,886) 509,357 Results Segment results Net financial income/(expenses) Share in net profit of associated companies EBT Income tax Net profit 27,535 50,865 7, ,939 (8,112) 0 77,827 (18,369) 59,458 Balance sheet Assets Segment assets Liabilities Segment liabilities Other information 2014 Capital additions Depreciation and amortization 523, ,435 40,910 (396,740) 677, , ,218 25,403 (446,855) 235,659 6,161 10, ,770 6,227 11, ,398 Össur Financial Statements

14 4. Sales and expenses split by main currencies Unaudited 2015 Q LCY USD % LCY USD % Sales USD 207, ,054 43% 48,035 48,035 39% EUR 115, ,999 26% 31,198 34,155 27% ISK 251,753 1,909 0% 124, % Nordic curr. (SEK, NOK, DKK) 75,562 16% 22,982 18% Other (GBP, AUD, CAD & Other) 70,509 15% 18,389 15% 483, % 124, % COGS and OPEX USD 178, ,001 44% 44,324 44,323 42% EUR 72,568 80,543 20% 19,946 21,837 21% ISK 5,825,259 44,183 11% 1,612,358 12,480 12% Nordic curr. (SEK, NOK, DKK) 71,346 18% 18,701 18% Other (GBP, MXN, CAD & Other) 31,619 8% 8,065 8% 405, % 105, % Unaudited 2014 Q LCY USD % LCY USD % Sales USD 206, ,763 41% 54,307 54,307 42% EUR 105, ,414 28% 32,653 40,793 32% ISK 351,007 3,012 1% 43, % Nordic curr. (SEK, NOK, DKK) 90,118 17% 17,996 14% Other (GBP, AUD, CAD & Other) 69,049 13% 15,851 12% 509, % 129, % COGS and OPEX USD 178, ,860 42% 47,006 47,006 44% EUR 65,703 87,328 21% 18,695 23,356 21% ISK 5,078,378 43,574 10% 1,458,990 11,847 11% Nordic curr. (SEK, NOK, DKK) 82,568 20% 21,128 20% Other (GBP, MXN, CAD & Other) 31,088 7% 4,849 4% 423, % 108, % LCY amounts are translated at average exchange rates for relevant periods. Össur Financial Statements

15 5. Salaries Salaries 143, ,297 Salary-related expenses 28,364 30, , ,521 Included in salary-related expense are pension related expenses amounting to USD 7.1 million (2014: USD 7.2 million). Full time employees (FTE) on average 2,420 2,214 Full time employees at period end 2,525 2,233 Salaries and salary-related expenses, classified by operational category: Cost of goods sold 44,125 43,059 Sales and marketing 89,834 94,812 Research and development 10,489 11,171 General and administrative 27,446 31, , ,521 Management salaries and benefits Salaries Stock Shares Board of Directors: and related exp. options owned Niels Jacobsen - Chairman of the Board (i) ,960,514 Kristján Tómas Ragnarsson - Vice Chairman ,539 Arne Boye Nielsen Guðbjörg Edda Eggertsdóttir ,318 Svafa Grönfeldt (i) Shares owned by William Demant Invest A/S which Niels Jacobsen represents on the Board. Niels and financially related parties own personally 193,405 shares Fixed base Cash based Other Share based Total salary incentive Pension benefits incentive remuneration Executive Management: Jón Sigurðsson President and CEO (i) ,768 Executive management (6 people) (ii) 1, ,660 2, , Fixed base Cash based Other Share based Total salary incentive Pension benefits incentive remuneration Executive Management: Jón Sigurðsson President and CEO (i) ,739 Executive management (9 people) (ii) 1, ,784 2,720 1, ,523 (i) Shares owned by Jón Sigurðsson 539,806 (2014: 458,834) (ii) Shares owned by members of executive management 838,119 (2014: 836,849) Össur Financial Statements

16 6. Financial income / (expenses) Unaudited Q Q Interests on bank deposits Other financial income (49) 17 Financial income Interests on loans (2,586) (3,393) (605) (704) Other financial expenses (746) (575) (212) (317) Financial expenses (3,332) (3,968) (817) (1,021) Net exchange rate differences (4,882) (4,351) (1,122) (1,965) Net financial income / (expenses) (7,870) (8,112) (1,857) (2,962) 7. Income tax Unaudited Q Q Current tax expenses (13,727) (16,365) (1,656) (3,911) Deferred tax expenses (3,633) (2,004) (2,897) 663 (17,360) (18,369) (4,553) (3,248) Amount % Amount % Profit before taxes 68,523 77,827 Income tax calculated at 20% (13,705) 20% (15,565) 20% Effect of different tax rates of other jurisdictions (2,844) 4% (3,617) 5% Effect of non-deductible expenses / nontaxable income (333) 0% (186) 0% Effect of change in tax rate 0 0% 1,393 (2%) Other effects (478) 1% (394) 1% (17,360) 25% (18,369) 24% Deferred tax: Origination and reversal of temporary differences (3,634) (3,373) Write-downs (reversals of previous write-downs) of deferred tax assets 0 (24) Losses (recognized) and utilized 1 0 Effect of changes in tax rate 0 1,393 (3,633) (2,004) Deferred tax balances: Recognized in Income statement Recognized directly in equity Acquisitions / disposals Exc. rate difference Goodwill 2,818 (4,299) 38 (1,443) Intangible assets (5,767) (4,495) Operating fixed assets (3,003) (352) 22 (3,333) Tax loss carry forward 4,475 (2,671) (15) 1,789 Inventories 1, (14) 2,034 Provisions (12) 880 Current liabilities (538) 1, Receivables (668) 585 (3) (86) Other 501 (152) (160) (61) 128 Total (297) (3,633) (160) 464 (3,626) Össur Financial Statements

17 Recognized in Income statement Recognized directly in equity Acquisitions / disposals Exc. rate difference Goodwill 5,438 (2,714) 94 2,818 Intangible assets (5,952) (65) (505) 755 (5,767) Operating fixed assets (2,421) (610) 28 (3,003) Tax loss carry forward 2,789 1,697 (11) 4,475 Inventories 1, (12) (22) 1,754 Provisions 204 (134) 73 (12) 131 Current liabilities 253 (997) (538) Receivables (728) 61 (1) (668) Other (313) (46) 501 Total 1,042 (2,004) 118 (416) 963 (297) 8. Earnings per share Unaudited Q Q Net profit 51,163 59,458 12,585 14,899 Total weighted average number of ordinary shares (in thousands) 443, , , ,789 Total weighted average number of shares including potential shares (in thousands) 445, , , ,735 Basic earnings per share (US cent) Diluted earnings per share (US cent) Cash earnings per share Diluted cash earnings per share Property, plant and equipment 2015 Buildings & sites Machinery & equipment Fixtures & office equip. Computer equipments Total Cost At 1 January 13,145 57,847 24,853 9, ,431 Additions 7 12,812 4,254 1,641 18,714 Exchange rate differences (1,356) (2,417) (1,831) (220) (5,824) Eliminated on disposal (12) (1,615) (7) (43) (1,677) Fully depreciated assets 0 (1,361) (655) (715) (2,731) At 31 December ,784 65,266 26,614 10, ,913 Depreciation At 1 January 8,409 36,552 13,476 7,099 65,536 Charge for the period 349 6,411 2,934 1,836 11,530 Exchange rate differences (845) (1,707) (1,055) (238) (3,845) Eliminated on disposal 0 (1,147) 55 (21) (1,113) Fully depreciated assets 0 (1,361) (655) (715) (2,731) At 31 December ,913 38,748 14,755 7,961 69,377 At 31 December ,871 26,518 11,859 2,288 44,536 Unaudited Depreciation classified by operational category: Q Q Cost of goods sold 6,925 5,897 1,844 1,676 Sales and marketing expenses 1,566 1, Research and development expenses General and administrative expenses 2,589 2, ,530 10,696 3,054 2,763 Össur Financial Statements

18 2014 Cost Buildings & sites Machinery & equipment Fixtures & office equip. Computer equipments At 1 January 15,184 54,558 27,354 9, ,507 Additions 151 8,496 1,975 1,385 12,007 Acquired on acquisition of subsidiary Exchange rate differences (2,122) (1,181) (1,407) (693) (5,403) Eliminated on disposal (68) (442) (66) (46) (622) Fully depreciated assets 0 (4,051) (3,244) (587) (7,882) At 31 December ,145 57,847 24,853 9, ,431 Depreciation At 1 January 9,452 37,012 14,494 5,189 66,147 Charge for the period 423 5,581 2,866 1,826 10,696 Acquired on acquisition of subsidiary Exchange rate differences (1,398) (1,911) (669) 633 (3,345) Eliminated on disposal (68) (349) (61) (34) (512) Fully depreciated assets 0 (4,051) (3,244) (587) (7,882) At 31 December ,409 36,552 13,476 7,099 65,536 Total At 31 December ,736 21,295 11,377 2,487 39, Goodwill At 1 January 388, ,601 Arising on acquisition of subsidiaries 0 15,941 Exchange rate differences (18,862) (24,442) 369, ,100 During the year, the Company assessed the recoverable amount of goodwill and determined that none of the Company s cash-generating units have suffered an impairment loss Allocation of goodwill to cash-generating units The carrying amount of goodwill was allocated to the following cash-generating units: WACC % Americas 7.4 / , ,790 EMEA 6.9 / , ,857 APAC 7.7 / ,770 17, , ,100 The recoverable amount of the cash-generating units is determined based on a value in use calculation which uses cash flow projections based on the financial forecast for 2016 approved by management and the Board of Directors. The discount rate of % (2014: %) per annum was used. Cash flow projections in the forecast are based on the same expected gross margins and raw materials prices throughout the period. Cash flows beyond 2020 have been extrapolated using a steady 3% per annum growth rate for all segments. This growth rate does not exceed the long-term average growth rate for the market in each market area. Management believes that any reasonably further change in the key assumptions on which recoverable amount is based would not cause the carrying amount to exceed its recoverable amount. At balance sheet date an intangible asset with indefinite useful life is allocated to the EMEA cash-generating unit amounting (2014: USD 14.0 million). to USD 12.2 million Össur Financial Statements

19 11. Other intangible assets 2015 Cost Cust./distrib relationships Patents Trademarks Software and other At 1 January 32,913 3,742 14,638 27,490 78,783 Additions ,213 2,724 Additions - internally generated ,403 2,403 Fully depreciated assets (765) (765) Exchange rate differences (2,490) (126) (1,547) (271) (4,434) At 31 December ,423 4,127 13,091 31,070 78,711 Amortization At 1 January 20,842 1, ,663 37,744 Charge for the period 3, ,781 8,623 Fully depreciated assets (765) (765) Exchange rate differences (1,550) (93) (139) (228) (2,010) At 31 December ,981 1, ,451 43,592 Total At 31 December ,442 2,434 12,624 12,619 35,119 Unaudited Amortization classified by operational category: Q Q Cost of goods sold 1, Sales and marketing expenses 5,497 5,080 1,532 1,279 Research and development expenses General and administrative expenses 1,995 1, ,623 7,702 2,562 2,144 Cust./distrib Patents Trademarks Software and Total 2014 relationships other Cost At 1 January 36,408 4,287 16,640 24,315 81,650 Additions ,295 2,467 Additions - internally generated ,296 2,296 Acquired on acquisition of subsidiary Fully depreciated assets 0 (538) 0 (1,016) (1,554) Exchange rate differences (3,886) (179) (2,002) (400) (6,467) At 31 December ,913 3,742 14,638 27,490 78,783 Amortization At 1 January 18,481 2, ,341 33,779 Charge for the period 4, ,307 7,702 Fully depreciated assets 0 (538) 0 (1,016) (1,554) Exchange rate differences (1,904) (139) (171) 31 (2,183) At 31 December ,842 1, ,663 37,744 At 31 December ,071 2,099 14,042 12,827 41,039 The Gibaud trademarks amounting to USD 12.2 million (2014: USD 14.0 million) are estimated to have infinitive life. The trademark has been well established within the French market since the foundation of the company in Össur Financial Statements

20 12. The Consolidation The main operation is carried out in the following companies: Name of company Place of registration and operation Ownership % Principal activity Össur Iceland ehf Iceland 100% Manufacturer and sales Össur Americas, Inc. USA 100% Sales, R&D, distribution and services Össur Canada, Inc. Canada 100% Sales, distribution and services Össur Mexico S. de R.L. de C.V. Mexico 100% Manufacturer Össur Europe BV Netherlands 100% Sales, distribution and services Gibaud SAS France 100% Manufacturer, sales, R&D, distribution and services Össur Nordic AB Sweden 100% Sales, distribution and services Össur UK Ltd UK 100% Sales, distribution and services Össur Deutschland GmbH Germany 100% Sales, distribution and services Össur Iberia SA Spain 100% Sales, distribution and services Össur South Africa (Pty) Ltd South Africa 100% Sales, distribution and services TeamOlmed AB Sweden 100% Sales, distribution and services Össur Australia PTY, Ltd. Australia 100% Sales, distribution and services Össur Prosth. & Rehabilit. Co, Ltd. China 100% Sales, distribution and services Össur Hong Kong, Ltd Hong Kong 100% Sales, distribution and services The Consolidation is financed through two companies, Össur Americas LP and Össur Finance AG. 13. Other financial assets Investment in associates Restricted cash Loans and receivables 8,355 7, , ,259 9,779 10,007 Investments in associates At 1 January Additions Share in net profit / (loss) Sold associates Exchange rate differences At end of period 7,485 2,493 1,932 5,000 (951) 0 (98) 0 (13) (8) 8,355 7,485 The Company has guaranteed a credit line up to USD 2.9 million for one of it s associates. 14. Inventories Raw material 14,705 14,808 Work in progress 5,486 6,302 Finished goods 44,691 43,114 64,882 64,224 Inventories of USD 4.7 million (2014: USD 3.5 million) are expected to be sold or used in production after more than twelve months. In the preparation of the Consolidated Financial Statements, accumulated gains in inventories from intercompany transactions amounting to USD 12.8 million (2014: USD 11.3 million) were eliminated. This has an effect on the income tax expense of the consolidated companies, and an adjustment of USD 3.8 million (2014: USD 3.2 million) is made in the Consolidated Financial Statements to reduce income tax expense to account for this. The cost of inventories recognized as an expense includes USD 3.1 million (2014: USD 2.2 million) in respect of write-downs of inventory to net realizable value. Reserve for obsolete inventories at year end is USD 3.9 million compared to USD 5.2 million in Össur Financial Statements

21 15. Accounts receivables Nominal value 76,395 72,093 Allowances for doubtful accounts (2,183) (1,665) Allowances for sales return (943) (954) 73,269 69,474 The average credit period on sales of goods is 47 days (2014: 42 days). Allowance has been made for doubtful accounts and sales returns, this allowance has been determined by management in reference to past default experience. Management considers that the carrying amount of receivables approximates their fair value. Aging of accounts receivables Less than three months Three to six months Six to nine months Older than nine months ,983 61,535 5,659 6, ,887 2,844 2,254 76,395 72,093 Movement in the allowance for doubtful accounts At 1 January (1,665) (1,934) Impairment (losses)/gains recognized on receivables (819) (94) Amounts written off as uncollectible Exchange rate difference At 31 December (2,183) (1,665) In determining the recoverability of accounts receivable, the Company considers any change in the credit quality of the accounts receivable from the date credit was initially granted up to the reporting date. The concentration of credit risk is limited due to the customer base being large and unrelated. Accordingly, management believe that there is no further credit provision required in excess of the allowance for doubtful debts. Within accounts receivables are USD 8.3 million (2014: USD 7.2 million) with more than 30 days past due of which USD 6.1 million (2014: USD 5.6 million) is considered recoverable. 16. Other assets VAT refundable 2,612 3,607 Prepaid expenses 6,533 8,533 Taxes receivable 1, Other 2,682 3,337 13,563 15, Bank balances and cash Bank accounts 22,183 24,897 Bankers draft received 3,420 3,516 Cash and other cash equivalents ,707 28,484 Össur Financial Statements

22 18. Issued capital Common stock is as follows in thousands of shares: Issued shares Treasury shares Balance at 1 January ,750 (2,243) 451,507 Purchased treasury shares (9,864) (9,864) Balance at 31 December 2014 Cancellation of own shares Purchased treasury shares Sold treasury shares At 31 December 2015 Total 453,750 (12,107) 441,643 (7,457) 7,457 0 (2,593) (2,593) 4,650 4, ,293 (2,592) 443,701 In accordance with resolutions from the Annual General Meeting on 12 March 2015, the share capital was decreased in April by ISK 7,456,755 by cancelling the Company's own shares of ISK 1 nominal value each. The Company currently holds 2,592,688 own shares. The Company has initiated a "Safe Harbor" share buyback program where it may purchase up to 5,000,000 shares, corresponding to 1.1% of the current share capital. Movement in issued capital is as follows in USD thousands: Share Share capital premium Total Balance at 1 January , , ,365 Purchased treasury shares (80) (29,087) (29,167) Balance at 31 December , , ,198 Purchased treasury shares (21) (8,425) (8,446) Sold treasury shares 39 13,733 13,772 Balance at 31 December , , , Share option contracts The Company has in place a share option plan, approved at the Company's Annual General Meetings, under which managers may be granted options to purchase ordinary shares at an exercise price. The exercise price of each share option is determined by the average closing price on shares traded in the OMX Copenhagen stock exchange over the 20 trading days prior to the issue date. The employee must remain continuously employed with the Company until expiring date, either as an employee or in any other way, deemed satisfactory by the Company. Each employee share option converts into one ordinary share on exercise. No amounts are paid or payable by the recipient on receipt of the option. The options carry neither rights to dividends nor voting rights and are valued using the Black-Scholes pricing model. The expected volatility assumptions used to value the options range from 28.8% to 31.7% and the annual discount rate range from -0.6% to 0.6%. The options expire one year after the exercise date. If a share option vests during a closed period for insider trading the vesting period is automatically extended until the next open window for insider trading. The following share-based payment arrangements were in existence at balance sheet date: Number of shares Grant/Issue year Exercise year Exercise price (in DKK) Fair value at grant date (in DKK) Issued to executive management: Jón Sigurðsson President and CEO 625, Members of executive management (2 persons) 700, / / 7.9 Members of executive management (4 persons) 925, / / ,250,000 Issued to management team: Six managers 600, Twenty managers 1,200, / / ,800,000 Total issued option contracts 4,050,000 Össur Financial Statements

23 Movements in share options during the period Number of shares Weighted average contract rate Number of (in DKK) shares Weighted average contract rate (in DKK) Outstanding at beginning of period Granted during period Exercised during period Outstanding at end of period 5,950, ,350, ,750, (4,650,000) 8.6 (400,000) 6.2 4,050, ,950, Share options exercised during the period Share price at Number exercised Exercise date exercise date (in DKK) Issued to Executive Management 450,000 5/5/ Issued to Management team 1,750,000 5/5/ Issued to Executive Management 150,000 5/29/ Issued to Executive Management 1,250,000 8/4/ Issued to Executive Management 350,000 8/12/ Issued to Executive Management 150,000 8/13/ Issued to Management team 50,000 8/14/ Issued to Executive Management 500,000 10/27/ Total exercised during the year 4,650,000 Estimated remaining cost due to the share option contracts is USD 1.6 million. in the Income Statement for the period. An expense of USD 0.8 million (2014: USD 0.7 million) is recognized 20. Borrowings Current Non-current Current Non-current Loans in USD 57 24, ,810 Loans in EUR 0 24, ,036 Revolver in USD 0 19, ,450 Revolver in EUR 0 15, ,719 Other borrowings , ,718 The maturity of the revolving credit facility is Q The Company has classified the revolving credit facility as non-current liability as the intention is to use it to finance further growth of the Company. Aggregated maturities of borrowings are as follows: In 2016 / In 2017 / , In 2018 / ,936 23,877 In 2019 / ,055 23,877 In 2020 / ,170 84, ,819 Össur s banking partners are ING, Nordea and SEB. The total facility is USD 195m and is secured with shares in Össur's larger subsidiaries. The facility contains covenants that place various financial and operational restrictions on the company. The covenants are in line with market standard for investment grade rated companies. Current average interest terms are 98 bps + LIBOR/EURIBOR, changing in line with financial leverage. 21. Defined employee benefits At end of 2015, employee contracts containing defined benefits were changed to defined contribution plan. No assets or liabilities relating to defined employee benefit plans are in place at year end. An expense of USD 0.1 million (2014: USD 0.2 million) related to defined employee plans is recognized in the Income Statement for the period. An amount of USD 0.1 million was recognized in actuary gains and losses in equity in relation to defined plans during the year (2014: USD 0.6 million). Össur Financial Statements

24 22. Other financial liabilities At balance sheet date, two interest rate swap agreements are effective, with a negative value close to zero and an end date on March 2016 (2014: negative USD 0.5 million). 23. Deferred tax asset / (liability) At beginning of period (297) 1,042 Income tax payable for the period 13,727 16,365 Calculated tax for the period (17,360) (18,369) Arising on acquisition of a subsidiary 0 (416) Recognized directly through equity (160) 118 Exchange rate differences At end of period (3,626) (297) Deferred tax in the balance sheet: Deferred tax asset 17,326 21,038 Deferred tax liabilities (20,952) (21,335) (3,626) (297) The following are the major deferred tax liabilities and assets recognized: Assets Liabilities Net Goodwill 14,451 (15,894) (1,443) Intangible assets 0 (4,495) (4,495) Operating fixed assets 19 (3,352) (3,333) Tax loss carry forward 1, ,789 Inventories 2, ,034 Provisions 1,380 (500) 880 Current liabilities 5,491 (4,590) 901 Receivables 0 (86) (86) Other 843 (715) 128 Total tax assets / (liabilities) 26,007 (29,633) (3,626) Tax asset and liabilities offsetting (8,681) 8, ,326 (20,952) (3,626) Assets Liabilities Net Goodwill 17,869 (15,051) 2,818 Intangible assets 1,018 (6,785) (5,767) Operating fixed assets 0 (3,003) (3,003) Tax loss carry forward 4, ,475 Inventories 1,780 (26) 1,754 Provisions 531 (400) 131 Current liabilities 3,865 (4,403) (538) Receivables 0 (668) (668) Other 1,000 (499) 501 Total tax assets / (liabilities) 30,538 (30,835) (297) Tax asset and liabilities offsetting (9,500) 9, ,038 (21,335) (297) Össur Financial Statements

25 24. Provisions Warranty Other 2015 provisions provisions Total At 1 January 7,095 3,304 10,399 Additional provision recognized 2,731 1,183 3,914 Utilization of provision (4,794) (1,240) (6,034) Exchange rate differences (3) (319) (322) At 31 December ,029 2,928 7,957 Non-current Current At 31 December ,681 2,337 5,018 2, ,939 5,029 2,928 7,957 Warranty Other 2014 provisions provisions Total At 1 January 7,014 2,228 9,242 Additional provision recognized 2,414 1,966 4,380 Utilization of provision (2,333) (693) (3,026) Exchange rate differences 0 (197) (197) At 31 December ,095 3,304 10,399 Non-current Current At 31 December ,056 1,573 6,629 2,039 1,731 3,770 7,095 3,304 10,399 (i) The warranty provision represents management's best estimate of the Company's liability under warranties granted on prosthetic products, based on past experience. 25. Related party transactions Balances and transactions between the Company and its subsidiaries, which are related parties of the Company, have been eliminated on consolidation and are not disclosed in this note. The Company had no material transactions with related parties during the period. 26. Other liabilities Accrued expenses Accrued royalties Sales tax and VAT Payable due to previous acquisition Other ,905 10, ,929 3,479 2,324 2,324 3,262 5,883 22,309 23, Financial instruments 27.1 Capital risk management The Company manages capital to ensure that affiliates within the consolidation will be able to continue as a going concern while maximizing the return to stakeholders through the optimization of the debt and equity balance. The Company's overall strategy remains unchanged from The capital structure of the Company consists of debt, which includes the borrowings disclosed in note 20, cash and cash equivalents and equity attributable to equity holders of the parent, comprising issued capital, reserves and retained earnings as disclosed in the equity overview. Net debt to EBITDA ratio The Company's management continuously reviews the capital structure. As a part of this review, the management considers, amongst other, the cost of capital and net debt to EBITDA. The net debt to EBITDA at period end was as follows: Net debt 58,350 93,335 EBITDA 97, ,337 Net debt/ebitda Össur Financial Statements

26 27.2 Significant accounting policies Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement and the basis on which income and expenses are recognized, in respect of each class of financial asset, financial liability and equity instrument are disclosed in note 31 to the Consolidated Financial Statements Financial risk management objectives The Company's Corporate Finance function provides services to the business, co-ordinates access to domestic and international financial markets, monitors and manages the financial risks relating to the operations of the Company through internal risk reports which analyze exposures by degree and magnitude of risks. These risks include liquidity risk, interest rate risk, foreign exchange risk and counterparty credit risk. The general policy is to apply natural hedging to the extent possible and prohibit any speculative trading of financial instruments. The use of financial derivatives is governed by the Company's policies approved by the Board of Directors, which provide written principles on foreign exchange risk, interest rate risk, credit risk, the use of financial derivatives and non-derivative financial instruments and the investment of excess liquidity. The Company does not enter into or trade financial instruments, including derivative financial instruments, for speculative purposes Foreign currency risk management The Company operates on a global market, hence exposure to exchange rate fluctuations arises. Exchange rate exposures are managed within approved policy parameters. The general policy is to apply natural exchange rate hedging to the extent possible. The carrying amounts of the Company's foreign currency denominated monetary assets and monetary liabilities at the reporting date are as follows: Liabilities Assets EUR 61,655 86,338 35,148 37,508 USD 65,611 81,239 47,184 45,178 SEK 11,008 12,797 14,014 14,223 GBP 1,677 1,760 4,741 4,412 Other 21,531 21,791 21,231 22, , , , ,487 Foreign currency sensitivity analysis The Company is mainly exposed to the fluctuation of the Iceland (ISK) and the Eurozone (EUR) currency. The following table details the Company's sensitivity to a 10% decrease in USD against the relevant foreign currencies with all other variables fixed. The sensitivity analysis includes all foreign currency denominated items and adjusts their translation at the period end for a 10% change in foreign currency rates. The table below indicates the effect on profit or loss and other equity where USD weakens 10% against the relevant currency. For a 10% strengthening of USD against the relevant currency, there would be an equal and opposite impact on the profit or loss and other equity. EUR (i) ISK (ii) Profit or loss 3,377 3,748 (3,108) (2,981) Other equity 9,825 8,839 (1,068) (975) (i) 20% (2014: 21%) of the Company's COGS and OPEX is in EUR against 26% (2014: 28%) of its sales causing an increase in profit if the USD decreases against the EUR. (ii) 11% (2014: 10%) of the Company's COGS and OPEX is in ISK against 0.4% (2014: 0.6%) of its sales causing a decrease in profits if the USD decreases against the ISK Interest rate risk management The Company is exposed to interest rate risks as funds are borrowed at floating interest rates. Interest rate risk is managed by the Corporate Finance function by maintaining an appropriate mix between fixed and floating rate borrowings, by the use of interest rate swap contracts. Hedging activities are evaluated regularly to align with interest rate views and defined risk appetite; ensuring optimal hedging strategies are applied. The Company's exposures to interest rates on financial assets and financial liabilities are detailed in the liquidity risk management section of this note. Contracts made to swap floating interest rates to fixed with an average weighted interest rate of 2.4% for periods up to March 2016 are outstanding at year end with nominal values of USD 14 million (2014: USD 26 million). At year end the fair value of the swaps were close to zero (2014: negative USD 0.5 million). The fair value of the interest rate swaps at the reporting date is determined by the present value of the expected future cash flows. Changes in fair value are realized through equity. The interest swaps are the Company's sole derivative financial liability valued at fair value and belong to level 2 in the fair value hierarchy in accordance to IFRS's 7.27A. Össur Financial Statements