MELEXIS N.V. www.melexis.com
TABLE OF CONTENTS1. Letter to the shareholders 4
2. Key figures 6
3. Corporate responsibility 8
3.1 At Melexis, we engineer the sustainable future, helping cars go green 8
3.2 At Melexis, we engineer the sustainable future, helping our planet
remain green 8
3.3 'The Melexis Way' 11
4. Reflection on our strategy 12
4.1 Simply the Best Innovation Made Safe at Launch 12
4.2 A world of growth opportunities 12
4.3 Spotlight on ASSPs and ASICs 13
4.4 Partners of choice 13
4.5 Leadership in semiconductor and sensor solutions 13
4.6 At the front of the pack regarding quality and environmental awareness 13
5. Product portfolio 14
5.1 | Introduction | 14 |
5.2 | Sensing | 15 |
5.3 | Communication | 19 |
5.4 | Driving | 20 |
5.5 | Conclusion | 21 |
6. International locations 22
7. Annual report - financial report 24
7.1 Consolidated statement of financial position 34
7.2 Consolidated income statement 26
7.3 Consolidated statement of comprehensive income 27
7.4 Consolidated statement of changes in equity 28
7.5 Consolidated statement of cash flows 31
7.6 Result of operations 33
7.7 Liquidity, working capital and capital resources 33
7,8 Statement of the Board of Directors 34
7.9 Notes to the consolidated financial statements 34
7.9.1 General 34
7.9.2 Statement of compliance 34
7.9.3 Summary of significant accounting policies 34
7.9.4 Overview of Group structure 42
2 MELEXIS ANNUAL REPORT 2014
7.9.5 Notes 43
A. | Cash and cash equivalents | 44 | U. General and administrative expenses | 55 |
B. | Current investments | 44 | V. Selling expenses | 55 |
C. | Derivatives | 44 | W. Personnel expenses and average number | |
D. | Trade receivables | 46 | of employees | 55 |
E. | Assets held for sale | 47 | X. Depreciation and amortization expenses | 56 |
F. | Inventories | 47 | Y. Other operating expenses (net) | 56 |
G. | Other Current Assets | 47 | Z. Net Financial Result | 57 |
H. | Intangible Assets | 48 | AA. Income taxes | 58 |
I. | Property, plant and equipment | 49 | AB. Operating segments | 60 |
J. | Non Current Financial Assets | 49 | AC. Related parties | 63 |
K. | Accrued expenses, accrued charges, payroll and | AD. Remuneration of Board of Directors | 66 | |
related taxes | 50 | AE. Earnings per share | 66 | |
L. | Deferred Income | 50 | AF. Commitments & estimated liabilities | 66 |
M. | Other current liabilities | 50 | AG. Operating lease arrangements | 66 |
N. | Long and short term debts | 51 | AH. Business Combinations | 66 |
O. | Other non current liabilities | 52 | AI. Litigation | 66 |
P. | Shareholders' equity and rights attached | AJ. Auditor's Services | 67 | |
to the shares | 52 | AK. Reserves Post-retirement Benefits | 67 | |
Q. | Product sales and research and development | AL. Subsequent events | 67 | |
revenues | 53 | AM. List of subsidiaries consolidated | 67 | |
R. | Government grants | 53 | AN. Risk factors | 67 |
S. | Cost of sales | 54 | AO. Sensitivity analysis on financial risk | 72 |
T. | Research and development expenses | 54 | AP. Financial instruments | 73 |
8. Corporate governance statement 74
8.1 Management structure 74
8.2 Board of Directors 75
8.3 Committees 77
8.4 Executive Management 78
8.5 Remuneration report 78
8.6 Policy on certain transactions 80
8.7 Internal control and risk assessment procedures in relation to financial
reporting 81
8.8 Elements pertinent to a take-over bid 82
8.9 Auditor 83
8.10 Compliance with the 2009 Belgian Code on Corporate Governance 83
9. Shareholder information 86
9.1 Shareholder structure 86
9.2 Share information 86
9.3 Shareholder contact info 87
9.4 Financial calendar 2015 87
9.5 Dividend policy 87
10. Excerpt from the Melexis nv statutory 88
11. Glossary 94
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LETTER TO THE SHAREHOLDERSThe mission at Melexis is to provide innovative micro-electronics for our customers' challenges with a passion for achieving mutual success.
Dear Melexis Shareholder,
2014 was a dazzling year for Melexis. It is the first time since 2000 that Melexis experienced a sales growth of over 20%, except for 2010 which was by all means very exceptional immediately following the crisis years. According to Strategy Analytics, the world automotive semiconductor demand grew by 7,7% in 2014, where- as Melexis automotive sales outperformed with 23% growth. This clearly demonstrates that Melexis is gaining market share and that we are moving in the right markets and applications.
Françoise Chombar
As in previous years, growth was mainly driven by Position sensors and Sensor Interface ASICs, mainly for under the hood applications. In addition, the sensor product lines FIR (Far Infrared) and TPMS (Tire Pressure Monitoring System) showed an above average growth. In the driving product lines we can highlight the mi- cro-actuators. These are used to actuate small motors in applications such as airco flaps and grille shutters. A growth driver in the area of communicating is the Keyless Entry & Go product line. Geographically speaking, Asia and in particular China contributed most.
2014 saw the launch of more products than ever before. We launched 17 products across our spectrum of technologies: magnetic, pressure, image and temperature sensors, motor controllers and pre-drivers, LIN transceivers and wireless products, such as a combo of an NFC for wireless power charging. With more than
2/3rds of launches contributing to the green economy and more than half of them that can be considered world premieres, we live up to our vision of being an innovator engineering the sustainable future.
Financials
Melexis financial performance in 2014 was extremely strong: sales growth of 21% was translated in a gross margin growth of 26% thanks to a favorable product mix, improved capacity utilization and better yield levels. Stronger than anticipated growth throughout the whole year triggered multiple top line guidance increases and as a result, lower operating costs versus sales. The operating result increased from 23 to 27% of sales, or an increase of 40% versus 2013.
In 2014, Melexis increased its (interim-)dividend from 0.70 to 1.00 EUR per share, an increase of 43% in line with net profit growth.
The Melexis share ended 2014 at 37.50 EUR or a performance of 62% for the year, excluding dividend.
4 MELEXIS ANNUAL REPORT 2014
Long Term Trends
The long term drivers for growth, being safer and greener cars remain strongly present. According Strategy Analytics, global light vehicle production is expected in the next 3 years to grow at an average rate of 4 to 5% and semiconductor content per car around 2%, resulting in total growth of the automotive semi market of 6 to 8%. Automotive sales currently accounts for a record 88% of total Melexis sales.
Melexis outside automotive sales growth was 6% in 2014. We intend to further leverage our automotive technology expertise into other markets, particularly white goods. In 2014 we were for instance successful in HVAC (Heating Ventilation and Air Conditioning) applications in China with several new customers currently being lined up.
Outlook 2015
Assuming a stable EUR/USD exchange rate versus 2014, Melexis expects sales growth in 2015 to be between
8% and 14%, a gross profit margin above 47% and an operating margin above 25%. Taking into account a EUR/USD exchange rate of 1.15, the sales growth is expected to be between 18% and 24% with an operating margin above 26%.
In order to support long term growth, we intend to invest around 40 million EUR in 2015, of which 10 million in infrastructure. Furthermore, we want to increase R&D spending to our mid-term target of 14-15% in order to further strengthen our portfolio of current product lines.
Vision
We pride ourselves of caring for both our results and our people. Our company culture and the values it un- derwrites are the cornerstone of everything we do every day. True innovation lives in an environment where listening to stakeholders, conscious product marketing and delivering on promises is coupled with an open mind and respect for both the disciplined and the maverick. 2014 has taught us again more about what to do better and how to improve further. Our people deserve the recognition for the results we present to you today. Thanks to their dedication and engagement, we are convinced we can continue to be leaders in our field to the benefit of all our stakeholders.
This is what we do:
This is what we are proud of: This is who we are:
We Engineer the Sustainable Future.
Sincerely,
Françoise Chombar
In name and on behalf of the whole Melexis Crew around the globe
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KEY FIGURESIn 1,000 Euro
Operating results | 2010 | 2011 | 2012 | 2013 | 2014 |
Revenue | 219,427 | 230,661 | 247,041 | 275,352 | 332,408 |
Gross profit | 102,251 | 108,210 | 115,476 | 127,529 | 161,306 |
EBITDA | 67,813 | 66,394 | 71,066 | 79,222 | 108,951 |
EBIT | 56,290 | 54,446 | 55,856 | 63,713 | 89,175 |
Net income | 48,612 | 45,894 | 51,529 | 55,214 | 84,994 |
Balance structure | 2010 | 2011 | 2012 | 2013 | 2014 |
Shareholders' equity | 95,455 | 107,121 | 129,277 | 157,639 | 204,936 |
Net indebtedness | 29,852 | 19,212 | 11,732 | (9,225) | (41,446) |
Working capital | 59,914 | 57,077 | 61,023 | 64,630 | 71,985 |
Cash flow and capital expenditure | 2010 | 2011 | 2012 | 2013 | 2014 |
Net cash from operating activities | 45,047 | 58,212 | 55,456 | 70,825 | 94,994 |
Depreciation + amortization | 11,523 | 11,948 | 15,210 | 15,509 | 19,775 |
Capital expenditure | 15,377 | 14,613 | 20,749 | 22,532 | 23,694 |
Ratios | 2010 | 2011 | 2012 | 2013 | 2014 |
ROE | 51% | 43% | 40% | 35% | 41% |
Liquidity | 2.5 | 3.4 | 1.8 | 3.4 | 4.2 |
Solvency | 53% | 60% | 66% | 73% | 80% |
6 MELEXIS ANNUAL REPORT 2014
350,000
325,000
300,000
275,000
250,000
225,000
200,000
175,000
150,000
125,000
100,000
75,000
50,000
25,000
0
2010
2011
2012
2013
2014180,000
160,000
140,000
120,000
100,000
80,000
60,000
40,000
20,000
0
2010
2011
2012
2013
2014120,000
100,000
80,000
60,000
40,000
20,000
0
EBITDA Evolution
95,000
90,000
85,000
80,000
75,000
70,000
65,000
60,000
55,000
50,000
45,000
40,000
30,000
25,000
20,000
15,000
10,000
5,000
0
2010
2011
2012
2013
20142010
2011
2012
2013
201490,000
Net Income Evolution
1.20
Dividend Evolution
80,000
70,000
1.00
1.00
60,000
50,000
40,000
0.80
0.60
0.60
0.65
0.70
30,000
0.40
20,000
10,000
0.20
0.30
0
2010
2011
2012
2013
20140
2010
2011
2012
2013
20147
CORPORATE RESPONSIBILITY3.1 At Melexis, we engineer the sustainable future, helping cars go green
Melexis designs, develops, tests and markets ad- vanced integrated semiconductor devices. Our core expe- rience is derived from over twenty years supplying ICs to the automotive electronics market. Melexis is and has been an engineering innovator with strong historical contributions toward more energy efficient, safer and more reliable cars, trucks and off-road equipment. Our engineering of greener, more environmental friendly automotive systems generates dozens of new, smart ICs and sensor components every year with a positive impact on fuel economy, carbon emissions and life safety systems on car brands throughout the globe.
Reduced fuel consumption and lower emissions result direct- ly from improvements in IC and IC sensor technologies cre- ated by Melexis. Advanced IC Sensors improve fuel injection systems to lower fuel consumption. Sensor Interface ICs are key to pressure sensors to allow better emissions controls. Bus networking ICs mean weight reduction in wire harnesses and advanced microcontroller products such as the Sensor- less BLDC motor drivers are critical in HEV (Hybrid and elec- tric vehicles) and Stop/Start Systems.
The engineers behind these innovations are committed to helping our customers achieve success which is, more than ever, accomplished by targeting designs toward a more sus- tainable future.
8 MELEXIS ANNUAL REPORT 2014
3.2 At Melexis, we engineer the sustainable future, helping our planet remain green
Pure Pragmatism. No Nonsense. At Melexis we embrace lean manufacturing and management techniques which emphasize our attention on waste and inefficiency. The Environmental Policy of Melexis acts as the red line throughout the organization. It expresses what we stand for as a company and highlights those areas where we want to contribute to our customer's successes and to a sustain- able environment. It provides a framework for our everyday operation, influences every decision, guides every action and is the basis of the Quality Strategy represented by the following Quality Mission statement:
'Drive smart solutions
to enable Melexis innovative products and to encourage customer confidence'
Proactively taking ownership of improvement opportunities and timely implementation of smart solutions is the Melexis Quality Way.
Continuously monitoring and enhancing product quali- ty throughout the product life cycle and supply chain and steering creativity into concrete actions enable Melexis inno- vative products.
Effectively listening and timely response to customers and systemic improvements of systems, methods, tools and skills encourage customer confidence.
Through a lean and global organization we strive to pro- vide credibility and technical competence to our internal and external customers.
The Environmental Policy of Melexis aims to interact with the environment and society with the utmost respect and care, demonstrating our responsibility for people and planet. It is based on four environmental principles:
Sustainable development - development of products and processes that have a minimum effect on the environment today and in the future
Preventing is better than curing - our goal is to make our products 'safe at launch on time' achieving 'first time right' designs, maximizing the value of all effort and materials.
The total effect on the environmentcounts - embodied in the development of products whose production (including energy use), operation and disposal at end-of-life have min- imum adverse effects on the environment
Open contact with stakeholders
By every measure, Melexis strives to be a responsible cor- porate citizen and our team members take an active role in these commitments. The same positive attitudes are in- strumental to our continued financial and technical success. We take pride in our daily efforts to reduce waste, improve efficiencies and contribute to engineering the sustainable future.
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A GREENER BENCHMARK FOR FUTURE GENERATIONS
Pursuing the future in transportation electronics, collabora- tively working on state of the art concepts and technolo- gies, knowing the value created from cleaner driving cars, more fuel efficient trucks and buses. Our teams and partners thinking together to create the integrated circuits and sensor components responsible for bringing new possibilities to this century's rapidly changing automobile landscape. Whether combustion, hybrid or electric it is manifest that all improve to their most efficient form. Melexis is proud to be immersed in this effort. Rooted deeply in the knowledge that only the best ICs and sensor components can make the dream a rea- lity. That is the benchmark for our future. A greener future for our world.
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3.3 'The Melexis Way'
At Melexis our values are key to our successful corporate culture. With each day our people reinforce the success of our company culture by embracing the following 5 principles that guide our business approach internally and externally.
Customer Orientation
We engineer the sustainable future for our customers. Our challenge is finding innovative ways to excel in the quality of our products and services, our relationships and our results. In doing so, we enable our customers to be successful with their respective customers.
Enjoyment
We are committed to make working at Melexis enjoyable. Passion is part of our mission. Our goals are very ambitious and challenging for all of us. Both the private sphere and our work environment are essential parts of who we are. We therefore support our people in establishing a sustainable balance in their life.
Leadership
We are leaders in our markets, through providing state-of-the-art and innovative products and technologies to our customers. We show leadership through team work and responsibility. Combined individual success creates team success. We will recognize the individual results as well as the team effort. To get there, we will ensure that our people are provided with opportunities to be heard and with the skills, information and empowerment to make a difference. One goal, one team, one voice.
Profitability
This is the clearest and most tangible way to gauge our true effectiveness at delivering products and services that fulfill our customers' expectations. Superior products and services are bound to generate superior profits. Superior profits will attract superior investors and shareholders thereby sustaining the investment cycles necessary to a financially healthy organization. Profitability is food for the future.
Respect
We value diversity and strive for business sustainability. We build a work environment of mutual trust and respect, founded on honesty, openness and fairness where each has equality of opportunity regardless of gender, race, ethnic background or experience.
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