Thielert: New date for Publication of Annual Results 2006
Hamburg (euro adhoc) -
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companies/Annual Report
Thielert AG is rescheduling the publication of the audited annual results 2006 from March 28, 2007 to April 13, 2007. This decision was necessary, because the company will now book development services in accordance with IAS 11.23, whereas until now these contracts have been booked in accordance with IAS 18.13 (multi-component contracts). The auditors are in full agreement with this change, which represents a more conservative accounting treatment. As a result, more time is needed to carry out the necessary restatements.
Part of the revenues from development services, which were recorded in the income statement in 2006 within the framework of combined development and production supply contracts according to IAS 18.13, will now, following this decision, be recorded once full production runs begin. As a consequence, there will be a postponement of revenues and earnings from 2006 to 2007 and subsequent years. The company expects that this change in accounting will result in postponed revenues of approximately 12 million Euros from 2006 to 2007 and beyond. There will be a similar postponement of about 5 million Euros in pretax income. There will be no impact on operating cash flow.
Even taking this postponement into account, an increase in revenues of approximately 60 percent was achieved in 2006. The company sees no change in the operating success of its products and expects further growth of at least 50 per cent in sales and earnings.
Background
Generally speaking, there exist two different contract types with our key customers:
1. Development contracts with clear development objectives and with an independent contract for the supply of full production runs. This type of contract is used particularly in the case of defense engineering customers and customer-specific development work. Such development services are renumerated separately and independently from any supply for production runs.
2. Combined development and production run supply contracts in which the primary focus is on the supply of the production runs. In this case, development services are renumerated through payments for production run supplies.
During the years up to and including 2005 no development revenues were booked under contract type 2. In the years 2001 to 2005 development revenues were capitalized, in accordance with IAS 38, but only once the developed products were ready for launch and applications for certifications were submitted to the authorities and once the market potential could be precisely estimated. Research services and general development services were not capitalized at any time.
In 2006 two new engines, the Centurion 2.0 and the Centurion 4.0, were developed ready for launching and were certified. The normal production run was started and some engines were even shipped to OEM customers. In addition, significant sums were invested in upgrading and expanding production capacity to satisfy strong demand.
Ahead of the start of full production runs, the company had decided to book the considerable customer-specific development services as multi-component business according to IAS 18.13 in order to record earnings during the same period as the services rendered as much as possible. Such a procedure is also used by other engine manufacturers and is thus standard practise in the industry.
However, during the audit of the annual accounts the company and its auditors concluded that these combined development and supply-contracts should be recognized as a single contract and the development revenues should be accounted for according to the "cost-to-cost" method. Most development services are therefore recorded as revenue and income only once production runs have begun.
As a result of accounting according to IAS 11.23, revenues of 12 million Euros will be postponed from 2006 to 2007 and subsequent years. This is a more conservative accounting treatment that will also be used in the future. There will be no negative effect on income over the coming years, since development of only one new engine is planned for the next five years. 2006 was therefore an exceptional year in this respect since two engine types were launched at the same time.
Following the FAA certification of the Centurion 2.0 on 12th March 2007 for the installation in all important Cessna 172 models in the US, a fleet of 40,000 airplanes can be retrofitted now. This results in an annual retrofit potential of approx. 4,000 units. The Centurion 2.0 has also been certified for the Piper PA28 at the 23rd March 2007 by EASA. A validation in the USA is expected soon, because the Centurion 1.7 and its installation in the PA28 are already certified.
The Centurion 4.0 was certified by the EASA for the installation in the Cirrus SR 22 on 12th February 2007 already. The certification of the 4.0 for the Cessna 206 is expected in the next days. These two certifications will open the market for deliveries of the 4.0 engine.
This change in our accounting practises will not have a lasting impact on profitability; it results in the postponement of revenues and income as well as in a one time effect in 2006. The sales volume, revenue and profit forecasts of the company remain unchanged.
There will be a positive impact on working capital as a result of this change in accounting practise. There is no impact on operating cash flow. The company remains in full compliance with all governance ratios with its banks.
The company is confident that it will be able to publish the annual accounts with an unqualified opinion from its auditors on 13th April 2007.
end of announcement euro adhoc 26.03.2007 07:32:09
Further inquiry note:
Sebastian Wentzler
Head of Corporate Communication
Telefon: +49(0)40/696950-35
E-Mail: press@thielert.com
Branche: Machine Manufacturing
ISIN: DE0006052079
WKN: 605207
Index: SDAX, CDAX, Prime All Share, Classic All Share
Börsen: Frankfurter Wertpapierbörse / official dealing/prime standard
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