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

8. Inventories

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

Share plans

In 2019, employees were able to purchase a defined number of shares at a discount of 35% (PY: 35%) compared to the market price (“Employee share purchase plan”). 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”). For each of these shares, management participants received 1.5 options (see part 2: “Option plans”). The members of the Board of Directors received a significant part of their compensation for 2018 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 2019 are summarised below:

  End of
blocking
period
Number of
participants
Number
of shares
issued
Issuing
price
CHF
Employee share purchase plan (ESPP) 2021 2,424 18,903 264.40
Management share purchase plan (MSPP) 2022 99 10,278 406.75
Board of Directors compensation 2023 6 3,398 406.75
Total     32,579  

The 32,579 shares required for these plans were taken from the stock of treasury shares.

As at 31 December 2019, the Board of Directors, the Group Executive Board and the employees owned a combined total of 372,600 (PY: 386,381) shares, i.e. 1.0% (PY: 1.0%) of the share capital of Geberit AG under these plans.

Option 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, 1.5 free options are provided for each share purchased through the programme. These options are subject to a vesting period of three years.

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 three years.

The exercise price of the options corresponds to the fair market value of the Geberit shares at the time of granting. The options have a term of nine years (MSPP & MSOP). 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 numbers of options out of the 2019 grant are expected to be allocated with final effect at the end of the vesting period1:

  Vesting period Maturity Number of
participants
Number of
options expected
to be allocated
Exercise
price CHF
Management share purchase plan (MSPP) 2019 - 2022 2028 99 10,278 406.75
Option plan (MSOP) 2019 - 2022 2028 92 114,435 406.75
Total       124,713  

The fair value of the options granted in 2019 as at March 2019 amounted on average to CHF 39.39 (PY: CHF 36.61) for MSPP and CHF 39.39 (PY: CHF 39.29) 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:

  Exercise
price
2
Expected Ø
volatility
Expected Ø
dividend
yield
Contractual
period
Riskfree Ø
interest rate
  CHF % % Years %
Management share purchase plan (MSPP) 406.75 16.51 2.55 9 -0.27
Option plan (MSOP) 406.75 16.51 2.55 9 -0.27


1 The number of options expected to be allocated with final effect at the end of the vesting period depends on target achievement (average ROIC) and has been calculated on the basis of expected target achievement.
2 The exercise price corresponds to the average price of Geberit shares for the period from 5. – 18.3.2019.

The following table summarises all option plans in place as at 31 December 20191:

End of vesting period Maturity Number of
options
outstanding
Ø exercise
price
CHF
Number of
options in
the money
Ø exercise
price
CHF
Vested 2020 - 2026 117,637 311.78 117,637 311.78
2020 2023 - 2027 76,187 398.75 76,187 398.75
2021 2024 - 2028 139,186 416.12 139,186 416.12
2022 2025 - 2028 160,422 412.59 160,422 412.59
2023 2028 34,420 432.20 34,420 432.20
Total   527,852 390.33 527,852 390.33
This table also includes options under participation plans from earlier years that have different terms and vesting conditions.

The following movements took place in 2019 and 20181:

    MSOP     MSPP     Total
2019
    Total
2018
  Number
of
options
Ø
exercise
price
  Number
of
options
Ø
exercise
price
  Number
of
options
Ø
exercise
price
  Number
of
options
Ø
exercise
price
    CHF     CHF     CHF     CHF
Outstanding 1 January 461,881 373.39   46,063 382.21   507,944 374.19   473,375 351.52
Granted options 114,435 406.75   10,278 406.75   124,713 406.75   116,779 432.20
Forfeited options 7,012 534.74   246 416.61   7,258 530.74   25,390 398.31
Expired options 0 0   0 0   0 0   0 0
Exercised options 85,752 324.36   11,795 331.75   97,547 325.25   56,820 293.37
Outstanding 31 December 483,552 389.35   44,300 401.06   527,852 390.33   507,944 374.19
Exercisable at 31 December 99,437 299.76   18,200 377.43   117,637 311.78   143,895 293.39
This table also includes options under participation plans from earlier years that have different terms and vesting conditions.

The 527,852 options outstanding represent 1.4% of the outstanding shares of Geberit AG. In principle, the Group hedges this exposure with treasury shares.

The options outstanding as at 31 December 2019 had an exercise price of between CHF 231.20 and CHF 435.95 and an average remaining contractual life of 6.4 years (PY: 5.5 years).

Costs resulting from share plans amounted to MCHF 2.9 in 2019 (PY: MCHF 3.0); those for option plans totalled MCHF 4.7 (PY: MCHF 3.8).

1 The number of options expected to be allocated with final effect at the end of the vesting period depends on target achievement (average ROIC) and has been calculated on the basis of expected target achievement.

18. Deferred tax assets and liabilities

19. Other non-current liabilities and provisions

20. Contingencies

21. Capital stock and treasury shares

22. Earnings per share

23. Other operating expenses, net

24. Financial result, net

25. Income tax expenses

26. Leases

27. Research and development cost

28. Free Cashflow

29. Segment reporting

30. Related party transactions

31. Foreign exchange rates

32. Subsequent events

33. Group companies as of 31 December 2019

Services

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