Notes to the Consolidated Financial Statements
1. Basic information and principles of the report
2. Changes in Group structure
3. Summary of significant accounting policies
4. Risk assessment and management
5. Management of capital
6. Trade accounts receivable
7. Other current assets and current financial assets
9. Property, plant and equipment
10. Other non-current assets and non-current financial assets
11. Goodwill and intangible assets
12. Short-term debt
13. Other current liabilities and provisions
14. Long-term debt
15. Financial instruments
16. Retirement benefit plans
17. Participation plans
In 2016, employees were able to purchase a defined number of shares at a discount of 35% (PY: 45%) compared to the market price (“Employee share purchase plan 2016”). Geberit management was entitled to draw the previous year’s variable remuneration partly or entirely in shares valued at market price (“Management share purchase plan 2016”). For each of these shares, management participants received one option (see part 2: “Option plans”). As part of the “Directors programme 2016”, members of the Board of Directors received their compensation for 2015 in shares of Geberit AG (measured at current market value). All share plans are subject to blocking periods valid beyond the period of employment.
The share plans introduced in 2016 are summarised below:
|Employee share purchase plan 2016 (ESPP)||2018||2,234||18,661||235.14|
|Management share purchase plan 2016 (MSPP)||2019||91||8,600||361.75|
|Directors programme 2016 (DSPP)||2020||6||3,616||361.75|
The 30,877 shares required for these plans were taken from the stock of treasury shares.
As of December 31, 2016, the Board of Directors, the Group Executive Board and the employees owned a combined total of 353,688 (PY: 357,850) shares, i.e. 1.0% (PY: 0.9%) of the share capital of Geberit AG under these plans.
The management has the opportunity to invest part or all of their variable remuneration in shares of Geberit AG through the management share purchase plan (MSPP). They may define a fixed number of shares to purchase, or a certain amount or a percentage of their variable remuneration to be invested in shares. In order to encourage management to participate in the programme, a free option is provided for each share purchased through the programme. These options are subject to a vesting period of four years: a quarter of the options can be exercised one year after the grant, a further quarter two years after the grant, a further quarter three years after the grant, and the remaining quarter four years after the grant.
In connection with an additional option plan (MSOP), the members of the Group Executive Board and managing directors are entitled to additional options. The options are subject to a vesting period of five years: a third of the options can be exercised three years after the grant, a further third four years after the grant and a further third five years after the grant.
The exercise price of the options corresponds to the fair market value of the Geberit shares at the time of grant. The options have a term of seven years (MSPP) resp. ten years (MSOP) after which they expire. They can be exercised between the vesting date and the maturity date. The vesting of share options is subject to the achievement of a performance criterion - the average Return on Invested Capital (ROIC) - over the respective vesting period.
The following is a summary of the options allocated to the management in 2016:
|End of vesting period||Maturity||Number of participants||Number of options allocated||Exercise price CHF|
|Management share purchase plan 2016 (MSPP)||2017 - 2020||2023||91||8,600||361.75|
|Option plan 2016 (MSOP)||2019 - 2021||2026||88||122,619||361.75|
The fair value of the options granted in 2016 amounted on average to CHF 26.81 (PY: 34.06) for MSPP and CHF 31.42 (PY: 34.06 resp. 33.48 for the members of the Group Executive Board) for MSOP at the respective granting date. The fair value was determined using the binomial model for “American Style Call Options”.
The calculation model was based on the following parameters:
|Expected Ø volatility||Expected Ø dividend yield||Contractual period||Riskfree Ø interest rate|
|Management share purchase plan 2016 (MSPP)||361.75||17.06||2.33||7||-0.61|
|Option plan 2016 (MSOP)||361.75||17.43||2.33||10||-0.42|
|1 The exercise price corresponds to the average price of Geberit shares for the period from 8. – 21.3.2016.|
The following table summarises all option plans in place as of December 31, 2016:
|End of vesting period||Maturity||Number of options outstanding||Ø exercise
|Vested||2017 - 2022||86,867||260.16||86,867||260.16|
|2017||2020 - 2023||94,138||292.12||94,138||292.12|
|2018||2021 - 2023||70,845||311.26||70,845||311.26|
|2019||2022 - 2026||67,393||357.15||67,393||357.15|
|2020||2023 - 2026||42,811||361.75||42,811||361.75|
The following movements took place in 2016 and 2015:
|MSOP||MSPP||Total 2016||Total 2015|
|Number of options||Ø exercise price||Number of options||Ø exercise price||Number of options||Ø exercise price||Number of options||Ø exercise price|
|Outstanding January 1||312,211||278.09||34,873||287.80||347,084||279.07||302,914||247.98|
|Outstanding December 31||364,838||314.35||37,877||309.68||402,715||313.91||347,084||279.07|
|Exercisable at December 31||75,933||259.10||10,934||267.56||86,867||260.16||49,223||232.22|
The 402,715 options outstanding represent 1.1% of the outstanding shares of Geberit AG. In principle, the Group hedges this exposure with treasury shares. The options outstanding at December 31, 2016 had an exercise price of between CHF 192.85 and CHF 361.75 and an average remaining contractual life of 5.8 years. Cost resulting from participation plans amounted to MCHF 2.6 in 2016 (PY: MCHF 3.0); those for option plans totalled MCHF 2.9 (PY: MCHF 3.0).