ANNUAL REPORT 2007
ANNUAL REPORT 2007
BRINGING PEOPLE TOGETHER
BRINGING PEOPLE TOGETHER
People who kiss enjoy a better quality of life. When lips touch, hormones ‘buzz’: adrenalin is released and the brain secretes oxytocin, a hormone associated with social bonding and the formation of trust. People with bad or missing teeth are much less likely to kiss or to be kissed than those with healthy, attractive dentition. Large clinical trials conducted by McGill University in Canada and supported by Straumann show that the medical status and quality of life of people who wear dentures improve significantly if their dentures are held in place with implants. The research also shows that unease during kissing and intimacy significantly decreases when dentures are anchored by implants (Heydecke G et al. J Dent 2005; 33:649).
As this report shows, Straumann products restore teeth, natural attractiveness and self-confidence, bringing people together and enhancing the quality of life in a variety of ways.
Straumann Holding AG Peter Merian-Weg 12 4002 Basel Switzerland www.straumann.com
ANNUAL REPORT 2007
ANNUAL REPORT 2007
BRINGING PEOPLE TOGETHER
BRINGING PEOPLE TOGETHER
People who kiss enjoy a better quality of life. When lips touch, hormones ‘buzz’: adrenalin is released and the brain secretes oxytocin, a hormone associated with social bonding and the formation of trust. People with bad or missing teeth are much less likely to kiss or to be kissed than those with healthy, attractive dentition. Large clinical trials conducted by McGill University in Canada and supported by Straumann show that the medical status and quality of life of people who wear dentures improve significantly if their dentures are held in place with implants. The research also shows that unease during kissing and intimacy significantly decreases when dentures are anchored by implants (Heydecke G et al. J Dent 2005; 33:649).
As this report shows, Straumann products restore teeth, natural attractiveness and self-confidence, bringing people together and enhancing the quality of life in a variety of ways.
Straumann Holding AG Peter Merian-Weg 12 4002 Basel Switzerland www.straumann.com
KEY FACTS & FIGURES NET REVENUE
PROFITABILITY
• NET PROFIT RISES 25%; MARGIN EXPANDS TO 24.8%
(in CHF million)
(in %)
• MARKET POSITION MAINTAINED
900
Return on assets (ROA) Return on equity (ROE) Return on capital employed (ROCE)
• NET REVENUE CLIMBS 19% TO CHF 714 MILLION
800
• PORTFOLIO SIGNIFICANTLY ENHANCED
700
• DIRECT DISTRIBUTION AND REACH EXPANDED
CAG
600
R 20
%
• NEW GENERATION PRODUCTS AND SERVICES TO DRIVE FUTURE GROWTH
2006*
2007
22 32 33
(in CHF million)
24 32 49
240 220 200
* CHF The presentation of 2006 figures has been adapted to the 2007 format.
500
• LEADERSHIP TEAM COMPLETE, COMPETENCIES ENHANCED, 241 JOBS CREATED
CASH FLOW AND INVESTMENTS
140
300
120 80
50 2003
2007
2006
Change (in %)
Net revenue Operating profit (EBIT) Net profit Cash generated from operating activities Capital expenditure Free cash flow* Value added (economic profit) Earnings per share (in CHF)
714 202 177
599 175 142
19 15 25
227 43 186 129 11.29
176 42 134 98 9.09
29 (3) 39 32 24
* See footnote on p. 97.
2006
Change (in %)
3.00 * 2.50 312.25 295.00
20 6
(in CHF)
0
(in CHF million)
%
100 SHARE INFORMATION
100
KEY FIGURES
R 18
160
400 200
CAG
180
2004
2005
2006
2007
2007
Ordinary dividend paid per share Share price at year-end
60 40 20 0 2003
2004
* CHF 3.75 proposed for 2007, payable in 2008 subject to shareholder approval.
■ Operating cash flow
OPERATING AND NET PROFIT
SHARE PRICE DEVELOPMENT
EMPLOYEES
(in CHF million)
(in %)
225
40
200 22%
2
3
4
5
6
7 8
9
10 11
2007
2006
2007
■ Investments
1800
20
1600
150
10
1400
125
0
1200
100
-10
75
2007
50
■ STMN
R CAG
2006
2000 1
30
175
2005
CAG
R 21
%
1000 J
F
M
A
M
J
J
A
S
O
N
D
800 600
■ SPI
25
400
0 2003
■ Operating profit
2004
2005
2006
2007
■ Net profit
1 2 3 4 5
US import detention 2006 results Acquisition of etkon Ex dividend date Q1 results
6 7 8 9 10 11
Japanese distributor acquired Korean distributor acquired H1 results IR Day Bone Level Implant launched Q3/9M results
200 2003
2004
2005
For 5-year share price development see p. 185.
HEADCOUNT
REVENUES BY REGION
Rest of World 3%
.
Employees at 31 December
Asia/Pacific 11%
STRAUMANN
Straumann is a global leader in implant and restorative dentistry and oral tissue regeneration. For a brief overview of our company, our vision, mission, and core beliefs, please see pp. 9-13.
North America 22%
Europe 64%
IMPRESSUM 2007
2006
Change (in %)
1 955
1 534
27
Published by: Institut Straumann AG, Basel Layout concept and realization: Eclat AG, Erlenbach/Zurich Consultant on sustainability chapter: sustainserv, Zurich and Boston Photography: Tobias Dürring, Derek Li Wan Po, Howard Brundrett Independent expert interviews: Abbott Chrisman Print: Neidhart + Schön AG, Zurich Basel, 1 February 2008
KEY FACTS & FIGURES NET REVENUE
PROFITABILITY
• NET PROFIT RISES 25%; MARGIN EXPANDS TO 24.8%
(in CHF million)
(in %)
• MARKET POSITION MAINTAINED
900
Return on assets (ROA) Return on equity (ROE) Return on capital employed (ROCE)
• NET REVENUE CLIMBS 19% TO CHF 714 MILLION
800
• PORTFOLIO SIGNIFICANTLY ENHANCED
700
• DIRECT DISTRIBUTION AND REACH EXPANDED
CAG
600
R 20
%
• NEW GENERATION PRODUCTS AND SERVICES TO DRIVE FUTURE GROWTH
2006*
2007
22 32 33
(in CHF million)
24 32 49
240 220 200
* CHF The presentation of 2006 figures has been adapted to the 2007 format.
500
• LEADERSHIP TEAM COMPLETE, COMPETENCIES ENHANCED, 241 JOBS CREATED
CASH FLOW AND INVESTMENTS
140
300
120 80
50 2003
2007
2006
Change (in %)
Net revenue Operating profit (EBIT) Net profit Cash generated from operating activities Capital expenditure Free cash flow* Value added (economic profit) Earnings per share (in CHF)
714 202 177
599 175 142
19 15 25
227 43 186 129 11.29
176 42 134 98 9.09
29 (3) 39 32 24
* See footnote on p. 97.
2006
Change (in %)
3.00 * 2.50 312.25 295.00
20 6
(in CHF)
0
(in CHF million)
%
100 SHARE INFORMATION
100
KEY FIGURES
R 18
160
400 200
CAG
180
2004
2005
2006
2007
2007
Ordinary dividend paid per share Share price at year-end
60 40 20 0 2003
2004
* CHF 3.75 proposed for 2007, payable in 2008 subject to shareholder approval.
■ Operating cash flow
OPERATING AND NET PROFIT
SHARE PRICE DEVELOPMENT
EMPLOYEES
(in CHF million)
(in %)
225
40
200 22%
2
3
4
5
6
7 8
9
10 11
2007
2006
2007
■ Investments
1800
20
1600
150
10
1400
125
0
1200
100
-10
75
2007
50
■ STMN
R CAG
2006
2000 1
30
175
2005
CAG
R 21
%
1000 J
F
M
A
M
J
J
A
S
O
N
D
800 600
■ SPI
25
400
0 2003
■ Operating profit
2004
2005
2006
2007
■ Net profit
1 2 3 4 5
US import detention 2006 results Acquisition of etkon Ex dividend date Q1 results
6 7 8 9 10 11
Japanese distributor acquired Korean distributor acquired H1 results IR Day Bone Level Implant launched Q3/9M results
200 2003
2004
2005
For 5-year share price development see p. 185.
HEADCOUNT
REVENUES BY REGION
Rest of World 3%
.
Employees at 31 December
Asia/Pacific 11%
STRAUMANN
Straumann is a global leader in implant and restorative dentistry and oral tissue regeneration. For a brief overview of our company, our vision, mission, and core beliefs, please see pp. 9-13.
North America 22%
Europe 64%
IMPRESSUM 2007
2006
Change (in %)
1 955
1 534
27
Published by: Institut Straumann AG, Basel Layout concept and realization: Eclat AG, Erlenbach/Zurich Consultant on sustainability chapter: sustainserv, Zurich and Boston Photography: Tobias Dürring, Derek Li Wan Po, Howard Brundrett Independent expert interviews: Abbott Chrisman Print: Neidhart + Schön AG, Zurich Basel, 1 February 2008
CONTENTS ANNUAL REPORT 2007
OPERATIONAL REVIEW
Letter to shareholders Straumann in brief Markets and regions Products and services Production and logistics Innovation and partnership Research and development Partnership Sustainability Our responsibility Employees Customers Communities Environmental protection
4 9 16 26 38 42 42 46 50 50 54 56 58 60
INDEPENDENT EXPERT OPINIONS
Implants today and tomorrow Trends in periodontology High standards in clinical publishing Changes in the dental sector Advocating for innovation
67 68 69 70 71
CORPORATE GOVERNANCE
Principles Group structure Shareholders Capital structure Board of Directors Executive Management Board Compensation, participations and loans Shareholders’ meeting and rights of participation Changes in control and defense measures Auditors Information policy
75 75 78 79 82 86 89 90 90 90 91
FINANCIAL REPORT 2007
95
APPENDIX
181
4
Straumann Annual Report 2007
Operational Review
LETTER TO SHAREHOLDERS
LETTER TO SHAREHOLDERS
Dr h.c. Rudolf Maag, Chairman; Gilbert Achermann, President and CEO
DEAR SHAREHOLDER,
‘Bringing people together’ sums up many of Straumann’s achievements in 2007: through acquisitions we have brought companies together; the growth of our organization has brought new talented people into our team; we have done more than ever before to get closer to our customers; our research programs have connected hundreds of clinicians; our education and network-building initiatives have linked dentists, labs and surgeons; and our sales professionals have contacted thousands of prospective new customers around the globe in addition to serving our existing clients. Most importantly our dental solutions have restored the smile, laughter, appearance and self-confidence of countless people stigmatized by bad or missing teeth. This has enabled them to interact freely and confidently with other people. 2007 has been a landmark year for Straumann. In addition to generating continued double-digit growth from our
ongoing business, we successfully completed a number of important acquisitions and other initiatives to expand our business portfolio and extend our market reach. This and the continued strengthening of our team and capabilities have put us in a strong position to sustain future growth and maintain a leadership position in the highly attractive, under-penetrated global market for implant, restorative and regenerative dentistry. DIRECT ACCESS TO CUSTOMERS
We have been resolute in pursuing our strategy to gain direct access to customers in key markets. To this end, we acquired our distributors in Japan and Korea and took over distribution in New Zealand. More recently, we opened offices in China and Hungary and we acquired our distributor in the Czech Republic and Slovakia. These additions bring the overall number of our sales subsidiaries to 21, which now collectively generate approximately 95% of the Group’s net revenues, with the remainder coming from third-party distributors.
Straumann Annual Report 2007
Operational Review
LETTER TO SHAREHOLDERS
ENTRY INTO ATTRACTIVE MARKET SEGMENTS
PROGRESS MADE WITH REGENERATIVES
2007 saw a significant strategic broadening of our business portfolio. For the past decade and a half, Straumann has concentrated almost exclusively on the dental implant market, where we now compete from a position of strength as the global number-two player. The interplay between medical devices and biologics prompted us to expand into the oral tissue regeneration segment four years ago. In 2007, we entered the highly attractive market for CAD/CAM dental prosthetics (crown and bridge) through the friendly acquisition of etkon AG.
Regeneratives continue to be an important element of our overall business strategy, which is why we have made every effort to resolve the issues that led to the import detention on our Biora products in the US. The detention was in place throughout 2007 and we are hopeful that the required reinspection of the Biora facility by the FDA will take place in the early part of 2008. Although this matter is limited to Biora products in the US, we have conducted thorough audits of other sites to prevent a similar situation arising elsewhere. SOLID REVENUE GROWTH IN 2007
THE NEW GENERATION BONE LEVEL IMPLANT
Our full-year net revenue climbed 19% in Swiss francs or 17% in local currencies (l.c.) to CHF 714 million, driven mainly by the organic growth of our implant business and lifted by acquisitions. Operating profit rose 15% to CHF 202 million, while net profit increased 25% to CHF 177 million. Our operating profit margin (28.2%) was constrained by integration and amortization costs from acquisitions and by the increased portion of sales generated by lower margin products. This was partially offset by efficiency gains at our production sites and tax improvements, resulting in a net profit margin of 25%.
Another significant expansion of our portfolio was achieved in our implant business, which hitherto has focussed exclusively on tissue level implants. At the end of October, we stepped into the bone level segment with the new generation Straumann Bone Level Implant. This was a major undertaking that involved launching the new implant and a comprehensive range of prosthetics simultaneously. We succeeded in accelerating the development time considerably without cutting corners. The new implant was subject to extensive scientific testing and review prior to launch, true to our guiding principle of 'simply doing more'. Importantly, it opens the door to 50–70% of the overall implant market, which we were previously unable to address. This launch and the aforementioned acquisitions were the main highlights of the year and, while they have required considerable resources and effort, they have not detracted from our ongoing implant and regenerative businesses.
Geographically, Europe continued to be our main source of revenue followed by North America and Asia/Pacific. Europe generated good growth of 16% (l.c.) contributing 64% to overall net revenue. Going forward, we will intensify our activities in Eastern Europe where we now have direct distribution in three markets. North America contributed 22% to global net revenue and grew (excluding the Biora import detention effect) by 16%. While this is encouraging, we shall have to sustain our recent good progress going forward to outperform the market. The addition of etkon and our Bone Level Implant will be particularly valuable in this respect. Revenue growth in Asia/Pacific was enhanced by the acquisitions in Japan and Korea, although the performance in these countries had been declining in the run-up to the transition. We have already addressed a number of the issues, but it will take some time to achieve the efficiency and effectiveness
ETKON – CAD/CAM BY STRAUMANN
This is Straumann’s largest strategic transaction to date and it opens up a very substantial new market opportunity in one of the most dynamically growing fields of modern dentistry. etkon’s leading CAD/CAM technology and ceramics provide Straumann with two further competitive substitution technologies, while Straumann offers etkon an entry into implant-based prosthetics as well as critical mass, brand power and global reach.
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Straumann Annual Report 2007
Operational Review
LETTER TO SHAREHOLDERS
needed to reach Straumann benchmarks. To support our ambitions in Asia, we are already preparing to establish a regional hub in the first half of 2008. A GROWING TEAM OF TALENTED PROFESSIONALS WITH COMPLEMENTARY SKILLSETS
To absorb and drive growth, we enlarged our worldwide team by 421 to 1955, which means that our staff has doubled over the past three and a half years.
QUALITY EDUCATION–FUNDAMENTAL TO TREATMENT QUALITY
While innovation and thorough clinical testing can help to mitigate treatment risk, they will never be able to compensate for inadequate training or experience. In 2007, we further strengthened our efforts in education, working together with our academic partner the International Team for Implantology (ITI) and its worldwide network of experts to educate dental professionals through structured programs, mentoring, consensus papers and treatment guides (see p. 46).
In July, we were joined by a new Global 'BRINGING PEOPLE TOGETHER' ALL CUSTOMER SEGMENTS ADDRESSED SUMS UP MANY OF OUR The demand side of the dental industry Head of Sales, completing the Executive ACHIEVEMENTS IN 2007. comprises three principal customer segManagement Board, which now has an ments: specialists, restorative dentists excellent balance of skills. In 2007, we (generalists) and technicians. To serve all three optimally systematically assessed our global management, which we developed a new sales-force blueprint, which our counis made up of more than 60 high-caliber individuals. The try organizations began implementing in the second half increasing complexities of our organization and the growof the year. We believe that this and direct access to each ing competitive pressure have prompted us to recruit exsegment will increase our ‘share of wallet’ and protect our perienced professionals from larger organizations in more customer franchises from competitors (see pp. 56-57). mature industries. At the same time we have begun work on a comprehensive talent development program with the GLOBAL MARKET LARGER THAN PREVIOUSLY ESTIMATED mid-term goal of filling at least 50% of vacant managerial At Straumann’s first Investor Day, in Andover in Septempositions internally in the future (see p. 54). ber, we presented an update on the dental implant industry INNOVATION: A KEY TO SUCCESS (see pp. 16-18). Based on our own data and the latest indeInnovation continues to be a key success factor in our induspendent market research, we believe that the global market try. SLActive, our third-generation implant surface technolfor implant dentistry is considerably larger than originally ogy, is an excellent example of this. Its unique properties thought. This, together with the continuing low penetration significantly reduce healing time and the risk of implant and demographic trends, emphasizes the tremendous opporfailure in the first weeks after placement. Data published tunities open to Straumann. 1 in 2007 further substantiate this, as does the continued in1 Oates TW et al. Enhanced implant stability with a chemically modified crease in the proportion of our implants sold with SLActive. Clinical studies presented during the year also endorse the innovative benefits of our fully synthetic BoneCeramic2 and our hydrogel-based membrane,3 which is in the registration phase of development. A further example is our Bone Level Implant,which combines innovative features with clinically proven concepts.4 In each case, our goal has been to increase treatment predictability through ease of use and reliability.
2
3
4
SLA surface: a randomized pilot study. Int J Oral Maxillofac Implants 2007; 22: 755-760. / Bornstein MM et al. Bone apposition around two different types of SLA titanium implant surfaces. EAO 16th Annual Scientific Meeting, 25-27 Oct 2007, Barcelona, Spain, Abs # 030. Van Assche N et al. BoneCeramic as alternative for BioOss in the treatment of bony dehiscence along implants. EAO 16th Annual Scientific Meeting, 25-27 Oct 2007, Barcelona, Spain, Abs # 053. Thoma DS et al. Prevention of gingival invagination by a new biodegradable hydrogel membrane. EAO 16th Annual Scientific Meeting, 25-27 Oct, Barcelona, Spain, Abs # 025. Belser U, Blanco J, Hämmerle CH. Data presented at the EAO 16th Annual Scientific Meeting, 25-27 Oct 2007, Barcelona, Spain.
Straumann Annual Report 2007
REIMBURSEMENT AND THE ECONOMY
With very few exceptions, the fields of dentistry in which we operate continue to be non-reimbursed, which means that dental implants, prosthetics, and regenerative products are financed with the patient’s ‘disposable’ income. It has therefore been postulated that economic downturns – such as the one experienced in the US in 2007 – have a negative impact on our industry, but there is no evidence yet to support this in Straumann’s case. However, we do believe that as penetration levels increase among the middle to lower income population, cyclicality may affect our businesses in the continuing absence of reimbursement. BRINGING TREATMENT TO THE UNDERPRIVILEGED
Many patients throughout the world suffer severely from the loss of dental function and, because of financial hardship, are unable to afford dental implant treatment. As a leader in our industry and as a responsible corporate citizen, we believe that our company has a duty to help in a practical and meaningful way. In 2007, we established a new global initiative called Straumann AID (Access to Implant Dentistry), the goal of which is to make implant treatment available to underprivileged patients free of charge. This complements our continuing commitment to support those who have malformed or missing teeth as a result of ectodermal dysplasia (see pp. 58-59). In addition to these charitable activities, we continued to sponsor a number of relief initiatives to provide basic dental treatment and oral hygiene in regions where access to treatment is limited. All of these initiatives are examples of Straumann’s guiding principle of ‘simply doing more’ and each of them has been influential in bringing people together.
Operational Review
LETTER TO SHAREHOLDERS
thus brought us one step closer to our vision of becoming the partner of choice in implant, restorative and regenerative dentistry. Our core belief ‘achieving more is our future’ means that we have no intention to rest on our laurels. Looking ahead we want to become a true solution provider and to differentiate the Straumann brand further through meaningful innovation and superior services. We want to add value in each customer segment for specialists, generalists and technicians. In 2008 and beyond, our goal is to maintain our leadership in the tissue level implant segment, capture a substantial share of the bone level segment, drive our CAD/CAM franchise internationally and develop our regenerative portfolio. Geographically, we aim to maintain our lead in Europe, accelerate growth in North America, integrate and invigorate our Asian and Eastern European distribution and explore opportunities in the so-called BRIC5 countries. We believe that our main market, dental implants, is capable of growing in the mid teens over the next three years. We also believe that our expanded access to customers, our superior technological platform, our power to innovate, and the quality of our people give us one of the best positions for outpacing each of the markets in which we compete. Our goal is to achieve this and to increase our underlying profitability in a sustainable manner. GROWTH OUTLOOK FOR 2008 (BARRING UNFORESEEN CIRCUMSTANCES)
The strength of our underlying business and the growing contributions from new products, technologies and subsidiaries are expected to drive our full-year revenue growth in 2008 to the mid-twenties range in local currencies.
STRATEGIC OUTLOOK
Thanks to our achievements in 2007, Straumann has become a unique dental partner offering a very broad range of implants with ultimate simplicity in addition to stateof-the-art prosthetics and regenerative products. 2007 has
As efficiency improvements are expected to exceed the higher levels of amortization related to acquisitions, we foresee 5
Brazil, Russia, India, China
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Straumann Annual Report 2007
Operational Review
LETTER TO SHAREHOLDERS
an improvement of around 50 basis points in full-year operating margin. With the tax rate returning to normal, the net profit margin is expected to be around 23% (see p. 99). PROPOSED DIVIDEND INCREASE OF 25%
Based on the solid performance in 2007, the Board of Directors proposes a dividend increase of 25% to CHF 3.75 per share. This is the tenth consecutive double-digit rise in the 10 years since Straumann became a public traded company. Once again we would like to thank you, our shareholders, for your confidence in our company, especially those of you who have held Straumann shares since our initial public offering. Each Straumann share that you purchased then for CHF 360 rose to a value of more than CHF 6245 at the end of 2007, based on the share price at year-end and accounting for the share split in 2001. Including dividends, your average total shareholder return over the same period has amounted to 33% per annum. We would like you to join us in thanking each of our employees whose commitment and hard work over the years have driven this success story.
Basel, 1 February 2008
Dr h.c. Rudolf Maag Chairman of the Board of Directors
Gilbert Achermann President and Chief Executive Officer
Straumann Annual Report 2007
Operational Review
STRAUMANN IN BRIEF
STRAUMANN IN BRIEF WHO WE ARE, WHAT WE STAND FOR, WHERE WE ARE HEADED, AND WHAT MAKES US SPECIAL.
OUR COMPANY
OUR GUIDING PRINCIPLE
Headquartered in Basel, Switzerland, the Straumann Group is a global leader in implant and restorative dentistry and oral tissue regeneration. In collaboration with leading clinics, research institutes and universities, the Group researches and develops implants, instruments, CAD/CAM prosthetics and tissue regeneration products for use in tooth replacement and restoration solutions or to prevent tooth loss.
‘Committed to simply doing more for dental professionals’ is the guiding principle we use to position our products and services and to highlight our day-to-day operations in the interest of the dental community and patients.
The Group manufactures implant system components and instruments in Switzerland and the US. Its CAD/CAM prosthetics and scanning technology are mainly produced in Germany, while oral tissue regeneration products are manufactured in Sweden. Straumann also offers comprehensive services to the dental profession worldwide, including training and education, which are provided in collaboration with the International Team for Implantology (ITI). Altogether, Straumann employs 1955 people worldwide, and its products and services are available in more than 60 countries through the Group’s 21 distribution subsidiaries and broad network of distribution partners. More about the company structure, organization and management can be found in the Corporate Governance chapter (pp. 75-76).
For more than half a century we have concentrated our scientific expertise and our passion for excellence on researching and delivering superior solutions.
OUR CORE BELIEFS SPECIALIZATION IS OUR SOUL
SIMPLICITY IS OUR STRENGTH
We translate complex technologies and procedures into user-friendly solutions to improve the standard of patient care. For us, simplicity also means being straightforward in all our relationships to build trust and respect. CUSTOMERS ARE OUR INSPIRATION
We are dedicated to the success of every customer and the well-being of every patient. That is why we always seek to understand the customer’s perspective and deliver more than implants.
OUR VISION RELIABILITY IS OUR TRADEMARK
To be the partner of choice in implant and restorative dentistry and oral tissue regeneration.
We deliver peace of mind. Our customers and patients rely on us for thoroughly researched, predictable solutions. We never compromise on quality.
OUR MISSION ACHIEVING MORE IS OUR FUTURE
We are committed to creating success for customers in implant and restorative dentistry and oral tissue regeneration. By 'simply doing more', we deliver superior solutions that enable dental professionals to provide the best possible care to patients.
We strive relentlessly to provide better solutions and to create higher value for our stakeholders and employees. We must always believe in our ability to achieve more.
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Straumann Annual Report 2007
OUR STRATEGY BUSINESS FOCUS
Operational Review
STRAUMANN IN BRIEF
In Asia/Pacific, we will further invest in our new subsidiaries in addition to establishing a regional hub that will bring us closer to customers. We will also continue to evaluate opportunities in emerging markets.
Our strategy is to focus on implant, restorative and regenerative dentistry and related fields, where we want to be INNOVATION FOCUS the partner of choice. These three fields are inter-related beStraumann will continue to defend its premium position cause all implant patients require some form of prosthetic through innovative, differentiated products, education and restoration and many of them also require bone or tissue marketing. We believe that continued product and service regeneration procedures. While market dynamics and our innovation, tailored to the different cusown range of products and services proOUR SUCCESS IS BUILT tomer segments and skill levels, is a key vide potential for continued attractive organic growth, we constantly moni- ON INNOVATION LEADERSHIP to future success. We will therefore conAND SERVICE EXCELLENCE. tinue to invest considerable resources in tor trends and evaluate opportunities the development of innovative products in implant and restorative dentistry, and solutions, delivering benefits to patients and customers. tissue regeneration and closely related fields. Our aim is to become a true solution provider in each of our CUSTOMER AND SEGMENT FOCUS fields. Although recent additions have significantly compleStraumann has a substantial presence in all current major mented our portfolio, we also work in and explore partnermarkets either through our own subsidiaries or through disships to bring further meaningful innovations and solutions tribution partners. We continue to believe that in order to to our customers and their patients. serve our customers best, we need to have direct access to them. Our strategy has therefore been to gain greater control Implant dentistry, CAD/CAM prosthetics and oral tissue over distribution channels. The successful execution of this regeneration are driven by the substitution of convenstrategy, particularly in 2007, means that approximately tional treatments, production methods and materials. New 95% of our sales are now direct. We shall continue to explore treatments and technologies rely on education. We are further opportunities in this respect wherever appropriate committed to the training and education of dental proand value enhancing. fessionals at all levels, not only to grow our business in a sustainable manner but also to improve the standard of We are determined to be a leading player in all our current patient care. market segments and we will carefully evaluate the viabiliLONG-TERM SHAREHOLDER VALUE FOCUS ty and benefits of entering new segments as we have, for exStraumann has a solid financial base and strategic financial ample, done with our new generation Bone Level Implant. flexibility. We are committed to return excess liquidity to REGIONAL FOCUS our shareholders in the absence of major strategic underWe are committed to maintaining and solidifying our leadtakings, such as operational expansion or acquisitions. ing position in Europe through continued investments in sales, marketing and education. In addition, we will continue Our considerable acquisitions and strategic investments in developing selected Eastern European markets in the comnew product introductions in 2007 have reduced our excess ing years. In North America, we are continuing our efforts to liquidity and created an additional basis for future sharestrengthen our current presence. holder value creation.
Straumann Annual Report 2007
OUR HISTORY
The history of the Straumann Group has three distinct eras and spans more than half a century. It began in the Swiss village of Waldenburg in 1954 with the foundation of a research institute bearing the name of its founder, Dr. Ing. Reinhard Straumann. Between 1954 and 1970, the company specialized in alloys used in timing instruments and in materials testing. Among Straumann’s renowned inventions in this period were special alloys that are still used in watch springs today. A breakthrough in the use of non-corroding alloys for treating bone fractures prompted Dr Fritz Straumann, the founder’s son, to enter the fields of orthopedics and dental implantology, which began the second phase of the company’s history.
Forschungsinstitut Dr. Ing. Reinhard Straumann 1954
Technology licensed out
Operational Review
STRAUMANN IN BRIEF
Between 1970 and 1990, Straumann became a leading manufacturer of osteosynthesis implants. A management buy-out of the osteosynthesis division in 1990 led to the creation of Stratec (subsequently Synthes) as a separate company. Thus, 1990 marked the beginning of the Straumann Group as it is known today. Thomas Straumann, grandson of the founder, headed the remaining part of the firm, which employed just 25 people and focused exclusively on dental implants. In 1998, Straumann Holding AG became a publicly traded company on the SWX Swiss Exchange. Another major milestone in the company’s history was in 1980 when Straumann established a partnership with the International Team for Implantology, forming a symbiosis of research expertise and industrial know-how.
Kuros 2002
Biora 2003
etkon 2007
Tooth restoration Oral tissue regeneration
Alloys, instruments, material testing Orthopedics/implants
Synthes 1990
IMPLANT DENTISTRY
IPO 1998
Distributors: 2005: Italy, Australia 2006: Denmark, Mexico 2007: Japan, Korea
Schematic illustration of the most significant strategic acquisitions and divestments that have shaped Straumann into a global leader in implant, restorative and regenerative dentistry.
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Straumann Annual Report 2007
Operational Review
STRAUMANN IN BRIEF
Through the acquisition of Kuros Therapeutics (2002) and Biora (2003), Straumann entered the promising field of oral tissue regeneration. This, together with the acquisition in 2007 of etkon, an emerging leader in CAD/CAM tooth restoration, positions Straumann as a unique partner in the dental sector offering surgical, restorative and regenerative solutions from bone augmentation through implants to individualized crowns and bridges. OUR BRAND
In the past two years, the number of companies exhibiting at the world’s biggest dental meeting, the International Dental Show (IDS) in Cologne, Germany, has increased by more than 40%.6 With several hundred implant manufacturers competing for the trust of customers in an increasingly crowded global market place, branding is becoming an important tool for companies to differentiate themselves. Straumann is positioned as a leading, global, premium brand in implant dentistry and tissue regeneration, with a strong reputation for scientific backing, clinical excellence and customer service. We invested considerably in a number of significant corporate branding initiatives in 2005 and 2006. These included customer surveys and the development of a stronger corporate visual identity built on established elements combined with new features that further distinguish the company. These, together with the appropriate guidelines to ensure correct and consistent usage, were rolled out internally and to key suppliers. At the same time, we worked on refining our vision, mission and guiding principle, as well as defining five core beliefs, which we believe will shape the behavior, culture and future success of our employees and company. Having conducted training sessions with all our employees worldwide, all that was necessary in 2007 was to make several refinements, to ensure consistency and to put all newcomers through the same corporate alignment program. 6
Merrill Lynch Medical Technology Industry Overview, March 2007.
The friendly acquisition of etkon in 2007 underlined the value and power of the Straumann brand. etkon has taken us into the dynamic emerging field of CAD/CAM prosthetics, and, being a young company that has only just begun to expand internationally, etkon has little recognition outside its home market, Germany. Straumann’s global brand and reputation for clinical excellence in dentistry provide the door opener to many customers. The timing of the acquisition coincided almost exactly with the IDS in March 2007, enabling us to use the event to promote both brands. With etkon now integrated into Straumann, our goal is to use the power of our parent brand to drive global expansion and to capitalize on etkon’s inherent brand value appropriately. With this in mind, our tooth restoration products are currently tagged with a combined label: ‘etkon – CAD/CAM by Straumann’. In contrast, a different acquisition in 2007 revealed a brand weakness. In July, we acquired the exclusive distributor of our products in Japan. Despite the fact that our Dental Implant System ranks among the leaders there, our company name and brand are poorly recognized among key Japanese audiences in comparison to the former distributor’s name. The situation is similar in Korea. These deficiencies are being addressed.
Branding visuals for the SLActive implant surface (left) and the new Straumann Bone Level Implant (right).
Straumann Annual Report 2007
On a product level we continued to exploit the value of both our corporate and existing product brands. For instance, in 2007, strong visual elements used for SLActive were adapted to the new corporate identity and integrated into the visual element developed for our new generation Bone Level Implant, as illustrated opposite. PROTECTING OUR BRAND
It is a priority for the company not only to enhance but also to protect the value of our corporate and product brands. For this reason, we have further increased our trademark protection activities and have built up a broad and strong trademark portfolio. In 2007, we issued several warnings to infringing parties. One legal action was pursued by Straumann against a major competitor for trademark infringement and was settled in Straumann’s favor early in 2008. The Group regularly scrutinizes competitor products, materials and activities, and will continue to defend its trademark position vigorously wherever appropriate.
Operational Review
STRAUMANN IN BRIEF
13
THE FIRST KISS The very first kiss is usually the most nerve-racking because of the unexpected hormone cascade it unleashes. In Europe, 88% of girls experience their first kiss between the ages of 11 and 13. In contrast, 84% of boys have to wait a year longer, until they are 12 to 14. Almost all teenagers have ‘braved’ their first kiss before their 16th birthday.
Dental implants are rarely used in young patients because their jaw-bones are not fully developed. However, youngsters do benefit from Straumann in other ways: through our sponsorship programs to provide dental care and hygiene, we help to give children around the world a smile for years to come.
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Straumann Annual Report 2007
Operational Review
MARKETS AND REGIONS
MARKETS AND REGIONS GEOGRAPHY DOES NOT LIMIT OUR COMMITMENT TO SIMPLY DOING MORE FOR DENTAL PROFESSIONALS.
STRAUMANN DENTAL IMPLANTS: THE NEXT BEST THING
AN ATTRACTIVE MARKET IN THE MEDICAL DEVICE SECTOR
TO NATURAL TEETH
Dental implants are classed broadly as medical devices Straumann tooth restorations closely mirror natural teeth alongside a variety of other products such as orthopedic and offer distinct advantages over conventional treatments. devices, hearing aids, insulin pumps, stents, etc. With its conOne of the major benefits of dental implants is that they act sistent record of double-digit sales and volume growth, the like natural tooth roots and provide a stable foundation dental implant market is one of the most attractive within for replacement teeth (see illustration below). They also the medical device sector. Market leaders in this sector, help preserve bone structure and neighboring teeth, which like Straumann are also able to reach attractive operating would otherwise have to be ground margins. Firstly because manufacturers THE DENTAL IMPLANT MARKET down to carry a conventional bridge. typically distribute directly to customIS FORECAST TO GROW ABOVE The survival rates of implants are very ers, and secondly, because innovative high and well documented.7 In addition, 15% ANNUALLY OVER THE NEXT solutions drive value growth – not just THREE YEARS. long-term overall costs are lower than in terms of benefits for the patient but 8 with conventional treatment. Implants have been shown to also because they help dentists and dental laboratories to improve the quality of life and well-being of patients,9 and increase efficiency. These factors, together with low implant can be used to replace individual teeth (by securing a crown penetration levels, an ageing population in the biggest marto a single implant) or multiple teeth (bridges or dentures kets and increasing awareness, indicate the future potential secured to multiple implants). Despite their proven advanfor continued market growth. tages over conventional treatment, implant-based restoraMARKET SIZE AND STRUCTURE tions are generally not reimbursed by insurance schemes. Independent research10 published in 2007 compounded with our own analysis suggest that the dental implant market A MODERN TOOTH REPLACEMENT SOLUTION is currently worth CHF 3.3 billion in terms of annual sales. This is considerably higher than corresponding estimates in 2006, which valued the market at almost CHF 1 billion less. Bone The difference is due mainly to the inclusion of newly availGum able market data for selected countries as well as the strong overall market growth of 16–18%. Implant Geographically, Europe remains the largest region and, together with North America, accounts for approximately Abutment three quarters of the global market. Crown 7
Dental implants replace natural tooth roots and provide a stable foundation for replacement teeth. This sectional illustration shows a Straumann tissue level implant with a ceramic CAD/CAM abutment and crown, offering a highly esthetic, reliable, long-lasting replacement.
8 9
Schwartz-Arad D, Herzberg R, Levin L. Evaluation of long-term implant success. J Periodontol 2005; 76: 1623–1628. Bragger U, Krenander P, Lang NP. Economic aspects of single-tooth replacement. Clin Oral Implants Res 2005; 16: 335–341. Heydecke G, Thomason J, Lund J, Feine J. The impact of conventional and implant-supported prostheses on social and sexual activities in edentulous adults: Results from a randomized trial 2 months after treatment. J Dent Res 2005; 33: 649–657.
Straumann Annual Report 2007
IMPLANT DENTISTRY MARKET BY REGION
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The market for implant dentistry in major global regions and countries was estimated to be worth CHF 3.3 billion in 2007. Source: see chart below.
THE DENTAL IMPLANT MARKET BY MARKET SHARE
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Source: Millennium Research Group and Straumann. Countries included: Australia, Brazil, Canada, China, France, Germany, India, Italy, Japan, Korea, Russia, Spain, Sweden, Switzerland, UK and US. Straumann sales in other countries are not included.
Operational Review
MARKETS AND REGIONS
The leading five dental implant manufacturers control about two-thirds of the market (see lower chart, left), with Straumann holding a share of almost one-fifth and ranking as the firm number-two player. A large number of small manufacturers account for about a third of the market. Most of them are only active in their national markets and compete mainly on price, with limited investments in R&D, training, education, marketing and sales. In countries like Brazil, Russia and India these companies hold over 50% of the market. TWO IMPLANT DESIGNS/CONCEPTS DOMINATE
Dental implants fall into two broad categories depending on the depth at which they are placed. Bone level implants are placed almost completely into the jaw-bone, while tissue level designs are placed typically with their heads just below the gums, i.e. well above the jaw-bone. Many dental surgeons use both types depending on the clinical situation. According to independent research and our own analyses, bone level and tissue level implants account for 60% and 40% of the market, respectively. Straumann pioneered and is the market leader in tissue level implants. In October 2007, the company took a significant strategic stride into the bone level segment with the launch of the Bone Level Implant. MARKET GROWTH AND TRENDS
Over the past five years the global dental implant market has grown at a relatively stable rate in the mid to high teens. This trend continued in 2007, with growth thought to be approximately 17%. Independent forecasts suggest that growth will continue in excess of 15% annually over the next three years10 (see chart on next page), driven by: substitution of conventional treatments, increasing awareness, education, and demographic trends.
10 Millennium Research Group, 2007
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Straumann Annual Report 2007
Operational Review
MARKETS AND REGIONS
GROWTH FORECAST FOR THE DENTAL IMPLANT MARKET
Implant dentistry is predominantly a substitution market which, despite the strong growth over the past years, exhibits remarkably low penetration rates. It is estimated that at least 600 million people in the developed world are affected by tooth loss, but fewer than 60 million seek treatment per year. Of these, roughly half are eligible for implant treatment based on their medical and ďŹ nancial status but only approximately one in 10 of them actually is treated with implants (In Europe the treatment rate is slightly higher, by contrast with North America and the rest of the developed world, where the comparative rates are below 10%).
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SUBSTITUTION OF CONVENTIONAL TREATMENTS
Source: Millennium Research Group and Straumann.
ANNUAL IMPLANT TREATMENT RATES IN DEVELOPED COUNTRIES
The substitution of conventional treatment options (e.g. traditional crowns and bridges) is the main driver for growth in the dental implant market, and manufacturers seek to unlock potential by raising the awareness about the advantages and clinical beneďŹ ts of implant solutions among patients and dentists.
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INCREASING AWARENESS AND EDUCATION
Public interest in healthcare treatment options has increased, thanks partly to the access to information offered through the internet. Leading manufacturers offer patient information online as well as through dentists and other channels. For instance, in 2007 several professional organizations, manufacturers and universities established the Implantat Stiftung Schweiz (Swiss Implant Foundation) with the clear objective of informing the public about the possibilities of implant treatment.
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In addition to offering the best standard of care to patients, implant dentistry is economically attractive for dental professionals. These factors drive the increasing demand for training and education in implant dentistry, which is provided either at universities or through courses offered by dental associations, training institutes, and manufacturers. In addition, leading manufacturers support universities and professional associations to ensure skilled and well-trained future dentists.
Straumann Annual Report 2007
DEMOGRAPHIC TRENDS
Age and tooth loss are closely related and, despite improved oral hygiene, it is likely that prevalence of tooth loss will increase as the population ages in developed countries. For example, current statistics show that one person in four over the age of 60 in the US has no natural teeth.11 In 2007, life expectancy at birth in the US reached a new record high of 77.9 years.12 Statistics also show that 14% of the US population is aged 60 or older 13 and this is expected to rise to 22% by 2020.14 There is also evidence of a continual improvement in the financial status of the senior population in developed countries.15 Indeed, people in general are increasingly willing to invest in treatments that not only restore function, but which are also highly esthetic – hence the growing popularity of modern dental crown materials like zirconia, which look natural and are fracture-resistant.
Operational Review
MARKETS AND REGIONS
STRAUMANN’S MARKET PRESENCE
DENTAL IMPLANT MARKET
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MORE THAN IMPLANTS
While implant dentistry is clearly Straumann’s major focus, the Group is also active in oral tissue regeneration and – through the acquisition of etkon in 2007 – in the CAD/CAM tooth restoration market. The combined value of the global markets in which Straumann is present exceeded CHF 4.5 billion in 2007.
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4USBVNBOOmT TIBSF 11 Centers for Disease Control and Prevention, USA 2007 12 Centers for Disease Control and Prevention/National Center for
Health Statistics, 2007 13 US Census Bureau, International Data Base, 2008 14 US Census Bureau, Population Division, Interim State Population
Projections, 2005 15 US Census Bureau, Income, Poverty and Health Insurance Coverage
in the United States, 2006
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Source: Millennium Research Group and Straumann estimates.
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Straumann Annual Report 2007
Operational Review
MARKETS AND REGIONS
are also used in combination with dental implants, making The most common cause of tooth loss is periodontal disease, these two businesses highly complementary. CAD/CAM is a which affects the majority of adults. In fact, 5–20% of any fast growing technology, which is very profitable for dental population suffer from severe forms of the disease.16 Periolaboratories and offers high precision ceramic solutions that dontal tissue regeneration products, such as Straumann Emwere not possible on inferior machines. The manufacturing dogain, are used in the preservation of natural teeth by helpof CAD/CAM prosthetics either takes place directly in the lab ing to restore supporting tissues that have been damaged as or in a centralized milling center on high precision industrial a result of periodontal disease. The other main use of regenmachines, in which case the dental lab invests only in the erative products is to build up sufficient bone to carry an imscanner system. Around 40% of CAD/CAM prosthetics are plant either with grafts of the patient’s produced by dental laboratories with PERIODONTAL DISEASE AND own bone or substitutes from alternatheir own machines. Approximately TOOTH LOSS REMAIN CRITICALLY tive sources, such as products derived 60% are made centrally by CAD/CAM IMPORTANT, ESPECIALLY IN from cattle or human cadavers, or fully manufacturers. This proportion is growAGEING SOCIETIES. synthetic materials. More than 50% of ing. In 2007, total sales in the global patients undergoing implant treatment in the US require a CAD/CAM prosthetic market amounted to CHF 1.1 billion.18 17 bone grafting procedure due to insufficient bone. A third OUTLOOK category of oral tissue regeneration products is formed by Although oral health is improving on a global scale, perimembranes, which act as a protective barrier for surgical odontal disease, and tooth loss remain critically important sites. Because of the high prevalence of periodontal disissues, especially in ageing societies. The dental implant ease, the dental bone augmentation market enjoys similar market, the oral tissue regeneration market and the CAD/ growth rates to those of the dental implant market. ComCAM prosthetics market belong to the fastest growing segmon factors such as the ageing population and the prevaments in the dental and medical device industry and doulence of periodontal disease are strong indicators that this ble-digit growth is expected in the future. segment will become increasingly important in the future. In 2007, total sales in the global oral tissue regeneration STRAUMANN’S MARKET PERFORMANCE market were estimated to be in excess of CHF 300 million. ORAL TISSUE REGENERATION
CAD/CAM PROSTHETICS
EUROPE
Modern dental prosthetic inlays, crowns, and bridges are designed by computer (CAD) and then milled on computerized machines (CAM) from metals or ceramics. This procedure is considerably more efficient and replaces traditional labor-intensive processes such as casting, layering and firing performed by dental technicians. CAD/CAM prosthetics
In Europe, where Straumann is the market leader and generates the majority of its revenues, the overall dental implant market is estimated to have grown in the low teens in 2007. During the same period, Straumann’s European revenue grew 16% in local currencies (21% in Swiss francs) to CHF 459 million.
16 Burt B. Research, Science and Therapy Committee of the American
Academy of Periodontology. Position paper: epidemiology of periodontal diseases. J Periodontal 2005; 76: 1406–1419. 17 Millennium Research Group: US Market for Dental Biomaterials 2007. 18 Source: Millennium Research Group and Straumann estimates; based on major markets.
Our most important market, Germany, reported a solid performance throughout 2007. Germany also played an important role in the development of the Straumann Bone Level Implant in the course of the year with a significant number of implants documented and tested by German dental pro-
Straumann Annual Report 2007
Operational Review
MARKETS AND REGIONS
EXECUTIVE INTERVIEW FOCUS: NORTH AMERICA Franz Maier Head of Sales
fessionals prior to the European launches at the EAO and DGI/ÖGI/SGI19 meetings in Barcelona and Vienna respectively. Italy, our second largest European subsidiary grew in line with the overall market. This was a solid performance in view of the fact that half of the Italian market is dominated by ‘copy-cat’ systems. In March, Straumann Italy moved to a representative new headquarters in Milan to accommodate its increasing staff and expanding product distribution center.
ARE YOU SATISFIED WITH STRAUMANN‘S US PERFORMANCE?
It was a very challenging year: we had to complete initiatives started in 2006 and make a number of additional changes. We picked up from a slow start and posted full-year mid-teen underlying growth. So yes, we can be satisfied, especially because 2007 proved that we have the spirit and determination to come through stormy weather on course. HAVE CUSTOMER AND STAFF LOYALTY BEEN A PROBLEM IN THE US?
Among our larger subsidiaries, the two leading performers in Europe were Iberia and the UK, which both expanded and delivered dynamic sales growth throughout the year. Another main contributor to European revenue, France, was restructured and is now in a good position to recapture strong growth in 2008 and beyond.
We have succeeded in retaining and attracting talented staff and managers and have brought our sales team fluctuation down to a low level. Importantly, we have stayed consistent and transparent both with our customer loyalty program and our performance requirements. HAS THE ECONOMIC SITUATION AFFECTED YOUR US SALES?
The majority of our other European subsidiaries posted solid double-digit growth. However, one important market was affected by pending changes in the local reimbursement system. In Sweden, the market decelerated considerably and even contracted as patients postpone treatment in anticipation of an improvement in reimbursement, which is expected in mid 2008. A turn-around in the Swedish market is not foreseen until then. Growth in general was spurred by the continuing success of our third-generation implant surface SLActive with an additional contribution from Straumann BoneCeramic. In addition to the solid underlying growth, our European performance was lifted by the friendly acquisition of etkon in March. Germany, etkon’s home market, benefited not just from the acquisition but also from additional promotion of etkon through the Straumann sales force. The integration of etkon and its roll-out to new markets such as Austria, Sweden, Switzerland, and the UK absorbed significant resources and have established a basis for achieving etkon’s full potential going forward. 19 The Annual Meeting of the DGI/ÖGI/SGI is the major scientific event
in implant dentistry in the German language speaking countries.
Data show that the US economy was moving towards recession in the second half of 2007, but our second-half sales were not negatively affected. Still, it is hard to say how much better they might have been in a more favorable economic environment. WHY IS THE BONE LEVEL SEGMENT SO MUCH BIGGER IN NORTH AMERICA?
Educational background is one reason. Another is the fact that esthetics is an important driver of implant choice. The number of American dentists placing implants in the esthetic zone has increased and research shows that they feel more confident placing bone rather than tissue level implants in the anterior region. WHAT ARE THE GREATEST CHALLENGES STRAUMANN FACES IN NORTH AMERICA IN 2008?
At the product level, we are looking forward to getting back into the regenerative business, establishing etkon and penetrating the bone level segment. We need to maintain and extend our new level of operational excellence. We will also have to be flexible in adapting to a changing market and factors that are beyond our control. The most difficult race is always the one ahead!
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Our Eastern European business developed positively as we continued to make good progress in emerging markets. As the year drew to a close we established a local office in Budapest with a dedicated Hungarian sales team. We also signed a contract to take over distribution in the Czech Republic through the acquisition of our local distributor, which was accomplished in January 2008.
weaknesses and optimize a series of processes. Our education activities were upgraded and the number of course participants rose from the previous year’s level by more than a third. We sharpened our focus on customer service levels and maintained our transparent customer loyalty program. We made strategic investments in sales training and leveraged our robust performance and development programs. These initiatives, together with the continuing success of SLActive, OUTLOOK (EUROPE) consistent pricing discipline and the successful launch of The very positive initial reception to our our new Bone Level Implant in October, DISTINCT MARKET SEGMENTS new generation Bone Level Implant, the fuelled a progressive improvement in ARE EMERGING dynamic development of etkon and the our business performance. Thus, excludAROUND THE GLOBE. introduction of other innovative proding the impact of the import detention ucts and services put Straumann in a on Biora products in the US, our undergood position to maintain its leading position in the Eurolying North American business achieved full-year revenue pean market, which, despite its increasing maturity, is estigrowth of 16% in local currencies. mated to continue to grow in the low teens. In 2008, the sucOUTLOOK (NORTH AMERICA) cessful roll-out of the Bone Level Implant and etkon across In North America, the penetration of implant treatments is all European markets will be a priority, and we will continue still comparatively low, despite the advanced standard of to explore opportunities for increasing our presence in atdentistry and the comparative wealth of consumers, partractive Eastern European markets. ticularly among the senior population. Although concerns were expressed about the US economy and the housing Several markets saw the continued emergence of corpomarket in particular, Straumann’s progress in 2007 was not rate customers in 2007. These range from simple purchase affected by this. We therefore believe that the North Ameriorganizations to franchise chains of fully integrated clinics. can market can continue to grow in the mid teens in 2008. Straumann is monitoring this and other developments and To equal this, Straumann will concentrate on continuing its will continue to defend its premium position through innocurrent progress and on securing FDA clearance to import vative, differentiated products, marketing and education. Biora products into the US again. The roll-out of our new NORTH AMERICA Bone Level Implant and of etkon throughout the region will Our North American region made good progress in 2007 be important contributors to future grown. and finished the year strongly. Whilst Canada continued to ASIA/PACIFIC AND REST OF THE WORLD perform well throughout, the US experienced a challenging The largest and most dynamic markets for dental implants first half as it sought to pull away from the sluggish perin Asia are Japan and South Korea, which are also the fourth formance of the previous year. The FDA’s import detention and fifth largest markets in the world. Straumann has been on our Biora products from the outset of the year, our abwell represented in both for many years through distribusence from the bone level implant segment, together with tion partners. In the second half of 2007, we succeeded in staff changes and sales execution issues, exacerbated the gaining direct access to customers through the acquisition situation. Nevertheless, with a number of key leadership of both distributors. We established local subsidiaries and appointments in place, we were able to address a number of
Straumann Annual Report 2007
management teams in Osaka and Seoul almost simultaneously and were able to take over the majority of our former distributors’ employees, making the transition virtually seamless from the customer’s perspective. These acquisitions clearly enhanced regional full-year growth, but the performance in both countries had been declining in the run-up to the transition. While a number of the issues have already been addressed, it will take some time to achieve the efficiency and effectiveness needed to reach internal Group benchmarks. Overall, Straumann revenues in the Asia/Pacific region rose 42% in Swiss francs to CHF 81 million. In the rest of the world, we operate through distributors with the exception of Mexico and Brazil. Full-year revenues in the rest of the world rose 61% in Swiss francs to CHF 20 million. OUTLOOK (ASIA/PACIFIC)
In 2008, Straumann will establish a hub in the APAC region, which will place regional management in the same time zone and bring us closer to our businesses and customers. We will also invest in Japan and South Korea to integrate our subsidiaries and align them with Straumann benchmarks. Pending regulatory clearances, we expect to launch several innovative products in Asia including SLActive in 2009 and our Bone Level Implant. The timing of the latter depends largely on the capacity of production to meet demand in key markets where the new generation implant is already available. Finally, we plan to introduce etkon CAD/CAM prosthetics in selected markets and will evaluate the potential for regional production. These initiatives and the devotion of our new and existing teams will help us accelerate our underlying growth.
Operational Review
MARKETS AND REGIONS
23
THE TEENAGE KISS A kiss is a cultural exchange of bacteria. Up to a billion microorganisms can be detected in just one milliliter of saliva because the mouth is an ideal habitat for them. In a balanced environment, microorganisms strengthen our immune system, enhance wound healing and even reduce pain.
A kiss is unwelcome if it comes with mouth odor – a common symptom of tooth decay. In addition to replacing and restoring teeth, Straumann products help rescue teeth that are damaged by periodontal decay.
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Straumann Annual Report 2007
Operational Review
PRODUCTS AND SERVICES
PRODUCTS AND SERVICES OUR PRODUCTS ARE INSPIRED BY CUSTOMERS, DESIGNED BY SPECIALISTS AND THOROUGHLY TESTED BY SCIENTISTS AND CLINICIANS FOR RELIABILITY AND LASTING PERFORMANCE.
PRODUCTS A UNIQUE PARTNER OFFERING REGENERATIVE, RESTORATIVE AND REPLACEMENT DENTAL SOLUTIONS
At the heart of Straumann’s success is a dental implant system that has been perfected over the years to give predictable long-lasting esthetic results. It comprises surgical implants and prosthetic components (abutments) that connect the implant with the crown of the replacement tooth (see figure below and on p. 16). These are complemented by a range of matching precision instruments and handling components. Every item is designed for easy handling and is crafted to the highest quality standards, ensuring long-term safety and reliability. In 2007, we added CAD/CAM prosthetics to our range of products and services, including single-tooth inlays and crowns right up to 16-unit full-arch bridges. These are all made using the most advanced computer and machining technology in state-of-the-art ceramics or metals.
To complement our dental implant system and prosthetic solutions, we manufacture products that are used to regenerate oral tissue, either to support implant procedures or to help preserve teeth after treatment for periodontal disease. Because simplicity is our strength, we constantly endeavor to achieve maximum flexibility and predictability from a minimum number of components and procedures. Our new Bone Level Implant line extension is a perfect example of this because it was designed to use exactly the same instrument kit as all our other implants and prosthetics, thereby saving the clinician time and money. It also uses the same treatment protocols reducing the need for additional training. Wherever possible we seek to improve handling and convenience, shorten treatment times and enhance the standard of patient care. In each case, our aim is to achieve optimum treatment outcomes, complete patient satisfaction, and peace of mind for the dental professional. In essence, reliability is our hallmark, which can and does mean that we stop development projects if they do not meet the
Crowns and bridges (etkon) Membrane*
Abutments (e.g. synOcta, screwretained abutment)
Emdogain Emdogain PLUS
Implants (e.g. Standard Plus, Straumann Bone Level Implant)
Straumann BoneCeramic Implant-based tooth replacement
Conventional replacement on natural tooth
In 2007, Straumann added crown and bridge prosthetics to its product range, which is summarized in this illustration. * In regulatory phase. The availability and indications of the products illustrated and mentioned in this report may vary according to country.
Straumann Annual Report 2007
benchmarks we have set for improved reliable performance. It goes without saying that our products and services are designed to add considerable value for both our customers and patients. ORGANIZED TO SERVE EACH CUSTOMER
Our Products Division is organized into four business units (BUs): Surgical, Prosthetics, Regenerative and the recently incorporated etkon – each serving the key customer segments of the market (see chart on p. 57). The following section highlights some of the main achievements of each BU in 2007. SURGICAL A COMPREHENSIVE IMPLANT RANGE THAT EXCELS IN SIMPLICITY
Designed for maximum flexibility with a minimum number of components, the Straumann Dental Implant System covers the complete range of indications and practically every preference in implant dentistry. New
Operational Review
PRODUCTS AND SERVICES
The new implant complements and extends our existing range of highly successful tissue level implants. It comes in three diameters and four lengths and is suitable for all dental implant indications. There is a full matching prosthetic portfolio comprising over a hundred components including a CAD/CAM custom abutment service in titanium and ceramic. In true Straumann tradition, these underwent extensive testing prior to market introduction. IMPRESSIVE SCIENTIFIC BACKING ENDORSED BY EXPERTS
Straumann made use of the EAO and AAP meetings to present data from the extensive research program supporting the new implant line. No fewer than 11 internationally renowned clinicians and researchers presented the latest findings from preclinical and multicenter clinical studies (see pp. 43, 45). The complete set of available data was reviewed by a panel of experts that included the principal investigators, who are all independent eminent clinicians. Their positive opinion provided the external confirmation for Straumann to proceed with the introduction of the product. A NEW GENERATION OF IMPLANT WITH SCIENTIFIC PEDIGREE
Standard
Standard Plus
Tapered Effect
Bone Level
Straumann‘s implant system comprises four implant types, each finished with either the SLA or SLActive surface, which offer the option of immediate loading/function.20
While the bone level concept is not new, the Straumann Bone Level Implant introduces a number of innovative features, which – together with its well-thought-out portfolio of surgical and prosthetic components – position it as the new generation bone level implant. It was developed using a scientific concept called Bone Control Design to preserve bone and provide the foundation for long-term esthetic success. This concept, which was also applied to our tissue level implants, respects several fundamental biological and biomechanical principles for bone maintenance and is supported by long-term clinical experience in millions of patients.
A NEW GENERATION OF BONE LEVEL IMPLANT
The undoubted highlight of 2007 for our Surgical BU was the development and introduction of our new Bone Level Implant, which was launched simultaneously in Europe, North America and Australia at the end of October.
20 With good primary stability and appropriate occlusal loading.
In fully edentulous cases, four or more implants must be rigidly splinted together.
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PRODUCTS AND SERVICES
SLActive surface •Fast healing •Higher security
Consistent Emergence Profiles • Matching geometries •Soft-tissue management
Bone Control Design •Bone preservation •Tissue stability
CrossFit Connection • Precise tight fit • Easy handling
Illustration showing Straumann‘s new generation Bone Level Implant with a fully ceramic customized abutment by etkon.
SIMPLIFIED HANDLING WITH THE CROSSFIT CONNECTION
SLACTIVE: THE GOLD STANDARD FOR ALL INDICATIONS
Implant dentistry involves using tiny, high-precision components in limited, poorly visible spaces. Straumann’s new CrossFit Connection inside the implant is an ingenious solution to this problem because it guides the abutment precisely into the correct position and enables the user literally to ‘feel the fit’. The exceptional precision of the connection safeguards against loosening and bacterial contamination.
One of the unique attributes of the Straumann Bone Level Implant is the remarkable SLActive surface, which has been shown to cut healing time by half,21 in addition to providing higher security and more bone. 22, 23, 24 SLActive is also associated with a significant reduction in the risk of implant loss.25 Backed by a wealth of clinical and preclinical studies and publications together with a large ongoing clinical program, SLActive is one of the best investigated implant surfaces on the market. Indeed, based on feedback from independent research teams around the world, we believe that SLActive is the new gold standard for all implant indications. Its continued success throughout 2007 indicates that the implant community shares this view.
ULTIMATE SIMPLICITY AND A NEW LEVEL OF CONFIDENCE
These features, together with the impressive body of scientific and clinical data, provide dental professionals with a completely new level of confidence at bone level. Furthermore, we have carefully integrated the new implant into our existing system to use the same instruments and procedures. In addition to convenience, this approach offers ultimate flexibility because the dental surgeon can choose right up to the final stage of preparation whether a Straumann bone or tissue level implant is preferable. Clinicians taking part in trials have praised this advantage in addition to providing highly positive feedback on the implant itself.
21 Oates TW et al. Enhanced implant stabilities with a chemically
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Further information on the Straumann Bone Level Implant is provided on pp. 17, 38–39 and 43–45.
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modified SLA surface: a randomized pilot study. Int J Oral Maxillofac Implants 2007; 22: 755–760. Buser D et al. Enhanced bone apposition to a chemically modified SLA titanium surface. J Dent Res 2004; 83: 529–533. Zöllner A. First clinical results from the SLActive multicenter study. EAO 14th Annual Scientific Meeting, 22–24 Sep 2005, Munich, Germany. Becker J, Schwarz F. Does faster osseointegration have relevance today? EAO 15th Annual Scientific Meeting, 5–7 Oct 2006, Zurich, Switzerland. Internal data on first 90 000 SLActive implants sold show loss rate of 0.6% vs. SLA benchmark of 1.3%.
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EXECUTIVE INTERVIEW INNOVATING SOLUTIONS Dr Sandro Matter Head of Products
In 2007, SLActive again exceeded our expectations in North America, while penetration in Europe also accelerated. At year-end more than 20% of all Straumann implants sold were SLActive. VALUABLE PROVEN BENEFITS MORE THAN JUSTIFY THE PREMIUM
It is clear that customers and patients are prepared to pay a premium for the valuable benefits SLActive offers in terms of faster osseointegration, higher security and lower failure risk. The average premium of 30% above the SLA surface enables us to recoup the substantial R&D investment and to cover the higher manufacturing costs. It also contributes to current and future research. SLActive may also bring hope to patients who, because of other predispositions, have a significantly higher risk of implant failure. For example, SLActive may be beneficial in patients with osteoporosis, diabetes or other conditions associated with poor implant outcomes.26 To investigate this, new studies are in preparation/progress in postmenopausal women with osteoporosis and in edentulous patients with diabetes. A further trial will evaluate the influence of implant design and surface on affinity for bone formation and stability. The full potential of SLActive has yet to be explored and we will continue to broaden the clinical fact base in 2008 and beyond.
DOES STRAUMANN’S PORTFOLIO COVER EVERYTHING?
We don’t have veneers or porcelains but we do have all the essentials to cover all the key customer segments. We have the most flexible implant system, the fastest implant surface, and the latest materials, and we are the only company to offer these in combination with CAD/CAM prosthetics and regeneratives. So, we have all the components in terms of products; we just have to put them together with the right services and support. WHICH OF YOUR PIPELINE PROJECTS ARE THE MOST EXCITING?
We are still completing the bone level portfolio. Then, we have our new high strength smaller implants with uncompromised reliability and tissue integration. Our current range is already stronger than thicker competitor implants, so this raises the bar again. etkon ceramic prosthethics for Straumann implants and our membrane are further examples. WILL THE BONE LEVEL IMPLANT CANNIBALIZE TISSUE LEVEL SALES?
In some instances. The new implant has advantages in anterior and submerged indications and in narrow spaces. Our tissue level implant is unbeatable in posterior indications and for straightforward single-tooth replacement. So, I don’t see any shift there. IS ATTENTION MOVING FROM IMPLANTS TO PROSTHETICS?
UNCEASING FLOW OF SCIENTIFIC RESULTS
In 2007, 12-month clinical data became available in an ongoing multicenter study with 380 implants. These further confirm that excellent results can be achieved with SLActive even when the implant is fitted with a crown and loaded immediately after placement. Furthermore, a survival rate of 100% was observed in class IV bone (28 patients) and bone gain was reported in approximately 16% of cases.27
26 Hwang D, Wang HL. Medical contraindications to implant therapy:
Part II: Relative contraindications. Implant Dent 2007; 16: 13–23. 27 Norkin FJ. Predictable treatment success of SLActive implants in a
multi-center RCT in aggressive protocols. AO 22nd Annual Meeting, 8–10 March 2007, San Antonio, TX, USA.
Regeneratives enable us to put implants where we want, not just where there is bone. So, the restoring dentist now advises the surgeon which implant type and placement will facilitate an esthetic restoration. With esthetics driving the process, having a superior prosthetics portfolio is a must. WITH IMPLANT SUCCESS RATES OF 98%, DO WE NEED MORE INNOVATION?
These rates are linked to optimum conditions. To achieve them in everyday practice with lower levels of experience and imperfect treatment planning, we need products, systems, and treatments with greater risk tolerance. To reduce treatment times and sessions, we need higher performance products, enhanced protocols and innovative solutions.
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This phenomenon, which is specific to SLActive, has been also observed in other preclinical and clinical trials with the Soft Tissue and Bone Level Implant lines.28, 29 SLActive has a competitive advantage in all indications, particularly in the growing field of stability-critical treatment protocols and whenever esthetics plays a role. PIONEERING LINE EXTENSIONS
Despite recent launches, our pipeline is still stocked with exciting innovations (see. p. 44) including two new materials. Besides excellent bone formation (osseoconductivity) characteristics, one of the materials has exceptional strength, which will enable us to produce even smaller, thinner implants without the risk of fracture. The new material has proved very promising in preclinical tests and clinical trials have commenced. Another innovative material is a toothcolored implant material, intended for high-end esthetic applications. This too has been through preclinical testing and clinical trials are in preparation.
PROSTHETICS A SIMPLE, COMPREHENSIVE, BALANCED PORTFOLIO FOR EVERY INDICATION
While much attention is devoted to implant design and handling, it is increasingly clear that the choice of implant and type of placement are being driven more and more by prosthetic planning. Straumann therefore supplies a broad range of versatile prosthetic components (abutments and copings), which are machined to the highest precision to fit on our implants with absolute accuracy. There are two fixture types, which allow the crown either to be screw-retained or cemented permanently (see illustration below). Dentures can be clipped on and off the implant with various attachments, e.g. the LOCATOR.30 Our prosthetic range includes standard abutments with various corrective angles and individualized CAD/CAM abutments in ceramic or titanium.
AWARD WINNING INNOVATION TO SUPPORT TREATMENT
Apart from these major development undertakings we continued to invest in the continuous refinement and improvement of the Straumann Implant System in general. An excellent example of this is the innovative Straumann Thermoplastic Drill Template, which provides a quick, simple and precise solution for ensuring optimum implant placement. This won the prestigious, international 2007 Medical Design Excellence Award, presented in New York in June, in recognition of its design and features that provide enhanced benefits for patients.
synOcta
Solid abutment CAD/CAM ceramic LOCATOR
Illustrations from Straumann’s comprehensive prosthetics range. From left to right: the synOcta abutment for screw-retained crowns, a solid abutment for cemented crowns, a custom ceramic abutment extending right to the bone, and a LOCATOR for removable dentures.
28 Chen S. Innovation without compromising safety. EAO 16th Annual
Scientific Meeting, 25–27 Oct 2007, Barcelona, Spain. 29 Hämmerle CHF. Expand your treatment options based on new clinical
Straumann‘s award winning Thermoplastic Drill Template.
evidence. EAO 16th Annual Scientific Meeting, 25–27 Oct 2007, Barcelona, Spain. 30 Trademark of Zest Anchors Inc., CA, USA.
Straumann Annual Report 2007
THE CHALLENGES OF A NEW IMPLANT AND A NEW COMPANY
The main challenges that faced our Prosthetics BU in 2007 were: to develop a flexible and comprehensive prosthetic portfolio for the new Bone Level Implant, to integrate etkon’s prosthetic range into Straumann’s portfolio, and to develop a customized abutment service using etkon’s technology. PROSTHETICS FOR A NEW GENERATION IMPLANT
One of the most remarkable attributes of the Straumann Bone Level Implant is the versatility and breadth of its prosthetic portfolio, which aims to offer exactly the right components for whatever type of prosthesis the clinician chooses. The range comprises more than a hundred items, each carefully designed for optimum simplicity, reliability and esthetics. CAD/CAM ceramic custom abutments are also available.
Healing abutment
Temporary restoration
Final restoration
Emergence profiles of soft tissue management components are designed to have consistently matching geometries.
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ETKON CAD/CAM BY STRAUMANN
Computer aided design and manufacturing (CAD/CAM) have revolutionized conventional tooth restoration, offering fast, cost-efficient, reliable, and esthetic solutions. The acquisition of etkon makes Straumann a unique dental partner offering the latest generation implant and prosthetic technology combined with regenerative solutions. A USER-FRIENDLY, COST-EFFECTIVE SOLUTION FOR LABS AND DENTISTS
etkon’s success is derived from its powerful scanning technology, its user-friendly software and its manufacturing expertise using state-of-the-art materials and high-precision machinery. It assembles compact laser scanners, which are sold or leased in combination with proprietary modeling software to dental laboratories. Cost-efficient and extremely easy to use, the package enables the dental technician to model prosthetic crowns and bridges via computer. The data are then sent to one of etkon’s high-speed milling centers, which produces the desired prosthetic component within three working days and sends it to the lab for coloring and finishing. The prosthetic solutions offered range from single-tooth inlays up to 16-unit full-arch restorations for either conventional or implant-borne restorations. A range of biocompatible, durable and esthetic materials is available, including high-performance ceramics such as Zerion, a highly pure zirconium oxide with perfect surface quality.
ESTHETICS THROUGH CONSISTENT EMERGENCE PROFILES
UNINTERRUPTED INNOVATION
One special differentiating feature of the system is the fact that the healing, temporary and final abutments have been designed with matching base shapes, or ‘consistent emergence profiles’ (see illustration above). This facilitates the entire process of soft-tissue management and optimizes the esthetic result, in addition to improving comfort for the patient.
At the International Dental Show in Cologne, etkon presented its new 5D high-speed production machine and ‘visual 4’ software. This fast and easy-to-use combination offers unlimited design possibilities, making it possible to model the undercut of the prosthetic. The 5D high-speed mills so precisely that the machined prosthetics have a polished appearance.
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@ Technician scans impression model
Technician designs prosthetic by computer
Data transfer
Prosthetic is produced at etkon center
Prosthetic is delivered to lab
Schematic illustration of the etkon CAD/CAM prosthetic production process. RAPID EXPANSION
Prior to the acquisition, etkon had focused on CAD/CAM tooth-borne restorations. Its acquisition by a leader in implant dentistry has provided the resources, technology and expertise to expand into implant CAD/CAM prosthetic solutions. In the space of a few months, we succeeded in incorporating the etkon scanner system into our custom abutment service for Straumann implants. Straumann’s resources, network and global brand provide an excellent platform to drive etkon’s international expansion. At the beginning of 2007, etkon’s business was predominantly in Germany, with a foot-hold in France, Italy, Spain, the Benelux countries, and the US. In the course of the year dedicated sales and support teams were established in a number of countries. REGENERATIVE PERIODONTAL DISEASE AND REGENERATION
Periodontal disease is a major cause of tooth loss because it destroys the tissues that anchor the tooth root. Mild to moderate periodontitis affects most adults at some time, while 5–20% of any population suffer from severe forms of the disease. Demographic developments indicate that periodontal disease will continue to be a major issue.31 Therapy involves controlling the causative bacteria and inflammation and then restoring the lost tissue structures in order to regain tooth attachment.
The decision to rescue or replace a compromised tooth requires careful consideration by the treating clinician (cf. expert opinion on p. 68). The Straumann Regenerative System offers treatment options to support both tooth preservation and tooth replacement. Straumann Emdogain is a unique, easy-to-use therapy that helps to rescue teeth and improve the outcome of periodontal surgery by regenerating the tissue structures that anchor the tooth. Since its introduction in 1996, Emdogain has been used in more than a million patients and continues to be the leading product for periodontal regeneration. The wealth of evidence for its effectiveness continues to grow. In 2007 alone, more than 30 new scientific articles were published in peer reviewed journals, including a systematic review of 18 studies on the treatment of gum recessions.32 It showed that Emdogain increases the predictability of surgery by achieving significantly better root coverage and attachment. Further studies published in 2007 show that Emdogain significantly enhances treatment effectiveness, patient comfort33 and quality of life in the immediate post-operative period.34 An evaluation of lasting effectiveness over a period of nine years impressively showed that none of the treated teeth were lost and the clinical improvements measured at one year were maintained eight years later.35 Emdogain PLUS combines the regenerative capabilities of Emdogain with the mechanical stability of Straumann
Straumann Annual Report 2007
BoneCeramic and is used for filling wide defects resulting from severe periodontal disease. In 2007, Emdogain PLUS contributed more than 10% of Emdogain revenues outside North America – after just a year on the market. Marketing authorization in Canada was received in the fourth quarter of 2007, and we are working towards regulatory clearance in the US later in 2008. The clinical evaluation of this combined treatment was successfully completed in 2007 with the 12-month follow-up including more than 70 patients with advanced periodontal defects. In 2007, we introduced an improved version of our root conditioning agent Straumann PrefGel, which has been well received by clinicians. STRAUMANN BONECERAMIC
One of every five dental implants needs bone augmentation either prior to or concurrent with implant placement. The patient’s own (autologous) bone, from the jaw or elsewhere is the preferred material for this procedure. However, limited quantities are available and the procedure can result
31 Petersen P, Ogawa H. Strengthening the Prevention of Periodontal
Disease: The WHO Approach. J Periodontol, 2005; 76: 2187–2193. 32 Cheng S et al. Is coronally positioned flap procedure adjunct with
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enamel matrix derivative or root conditioning a relevant predictor or achieving root coverage? A systemic review. J Periodontal Res. 2007; 42: 474–85. Cortellini P, Tonetti MS: A minimally invasive surgical technique with an enamel matrix derivative in the regenerative treatment of intra-bony defects: a novel approach to limit morbidity. J Clin Periodontol. 2007; 34: 87–93. Ozcelik O et al. Immediate post-operative effects of different periodontal treatment modalities on oral health-related quality of life: a randomized clinical trial. J Clin Periodontol. 2007; 34: 788–96. Sculean A et al. Nine-year results following treatment of intrabony perio-dontal defects with an enamel matrix derivative: report of 26 cases. Int J Periodontics Restorative Dent. 2007; 27: 221–9. Cordaro L. Histological results of a sinus augmentation using Straumann BoneCeramic; Presented at the ITI World Symposium, New York, April 2007. Zafiropoulos GG et al. Treatment of intrabony defects using guided tissue regeneration and autogenous spongiosa alone or combined with hydroxyapatite/beta-tricalcium phosphate bone substitute or bovine-derived xenograft. J Periodontol 2007; 78: 2216–2225.
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in pain and complications at the donor site. Furthermore, autologous bone is readily resorbed and may not provide the required bone volume in the long term. The leading commercially available bone augmentation material is sourced from bovine bone, while another commonly used material is sourced from human cadavers. Being fully synthetic, Straumann BoneCeramic is a very attractive, high-performance alternative. In 2007, important clinical results were presented at the ITI World Symposium, the EAO and other major international congresses. In a prospective, multicenter, randomized, controlled clinical trial (RCT) Straumann BoneCeramic was compared headto-head with the market leader. Histological examination revealed that Straumann BoneCeramic achieved the same amount of new bone but with less residual graft material. The result was more vital tissue that was highly similar to the native bone.36 Other studies have confirmed this. In one study published in 2007, Straumann BoneCeramic combined with autologous bone proved superior to autologous bone alone.37 With our extensive clinical program continuing, we expect long-term follow-up data in 2008 on implant success in bone augmentation situations. Initial results are very positive. In 2007, we continued the roll-out of the product and received regulatory clearance in South Korea, one of the most important Asian markets for bone substitutes. Excluding the US, where the FDA import detention affected sales, Straumann BoneCeramic grew significantly ahead of the worldwide market. STRAUMANN MEMBRANE
The concept of guided bone regeneration involves the use of a barrier membrane to help stabilize the graft and prevent unwanted soft-tissue infiltration. Various membranes are commercially available, usually as prefabricated sheets that require cutting to fit the defect.
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Based on hydrogel technology, Straumann’s innovative insitu-forming membrane is easy to apply and moulds to fit the defect exactly. Within seconds of application the liquid components form a gel, which acts as an effective barrier to cells for several months, enabling bone formation and supporting graft stability. The membrane is resorbed over time.
Straumann’s innovative resorbable hydrogel membrane comes in a dual chamber syringe for convenient application.
First results from a prospective RCT were presented at the ITI World Symposium in April38 and showed that, while the hydrogel membrane was equivalent to the leading conventional membrane with regard to bone gain, it cut application time by half. The clinical program for this exciting product will be further extended with a larger multicenter trial planned for 2008. The membrane is an important and valuable complement to Straumann’s regenerative portfolio, however the launch activities have been postponed until the Biora site in Sweden has passed reinspection by the FDA (see pp. 39, 51). We do however expect to obtain regulatory clearances in Europe and the USA in 2008.
The proven benefits of the SLActive surface are a major contribution to increasing the standard of patient care and we shall continue to focus on making it available worldwide in addition to educating the medical community about its unique benefits. We will also pursue the global roll-out of our new Bone Level Implant and will complement it with additional components. Further data will be presented at major congresses endorsing the outstanding clinical results achieved with this product line. The need for new materials and procedures that save time, add convenience and increase clinical success will continue to drive our innovation in 2008. To address the fast growing need for tooth and implantborne restorations, we will continue to invest in innovative technology and new materials to further improve esthetics and functionality. In regeneratives, our expanded research team in Basel will continue to explore novel approaches to oral tissue regeneration, including new synthetic materials and bioactive molecules for the inclusion in novel systems. SERVICES LIFE-TIME SOLUTIONS
As the long-term satisfaction and well-being of our customers and patients are paramount, we are committed to supplying prosthetic parts and instruments for every implant system that we have ever produced. Patients with Straumann implants can therefore have complete peace of mind that high quality ‘Straumann-original’ replacement components are available to fit implants that have been in place for up to 30 years. Our long-term clinical data give us the confidence to provide a unique 10-year guarantee against implant loss. These commitments form the building blocks for a life-long partnership with our customers.
OUTLOOK (PRODUCTS)
We will continue the global roll-out of recently launched products and technologies, and will further our efforts to develop and introduce meaningful innovations and improvements.
38 Jung R. Development of new Solutions in Bone Regeneration.
Presented at the ITI World Symposium, New York, April 2007.
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SUPPORT
OUTLOOK (SERVICES)
Each Straumann subsidiary operates a hotline for customers needing assistance. We quickly link callers to a trained specialist to help with difficulties. All our sales representatives are trained in implant procedures and usually assist with initial cases. Customers can and do make use of an assistance service we offer, whereby a trained representative is in attendance during the procedure. Also, experienced mentors can be arranged if practitioners require. Straumann sales representatives and specialists provide special training for new products.
Additional education courses will also be offered throughout the coming year in new regions to meet the growing requirements of the dental community.
EDUCATION
With regard to proper use and handling of our products, which are important aspects for safety and optimal treatment outcome, Straumann offers a very broad education program in implantology and oral tissue regeneration. The courses are designed for various customer groups (e.g. surgeons, prosthodontists, general practitioners, nurses, technicians) and for all levels of competence. The curriculum is built on the ITI consensus guidelines, which themselves are based on clinical science, with the goal of teaching the skills needed to provide the best possible treatment for each situation. The syllabus of continuing education helps to ensure the safety of patients and the success of customers. We endeavor to arrange courses and training opportunities as close to the customer as possible. In 2007, this resulted in a significant increase in the number of courses and training opportunities around the world, particularly in the US, Asian and Eastern European markets. Our Education and Training team grew correspondingly. The teaching at most of our courses is provided by ITI specialists and internationally renowned speakers and is conducted in collaboration with well-known universities. Straumann also provides an extensive training program for its own employees in order to maintain and increase their standard of knowledge for the benefit of our customers.
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THE GREETING KISS The greeting kiss is the most culturally diverse. While a single kiss is customary in northern countries, the Swiss kiss cheeks three times and the Poles up to ďŹ ve times. In some cultures greeting kisses between people of the same sex are customary, whereas in others a kiss is common between women, but unthinkable between men.
Straumann products transcend barriers of culture, gender and age, and are available in more than 60 countries around the world.
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Operational Review
PRODUCTION AND LOGISTICS
PRODUCTION AND LOGISTICS OUR CUSTOMERS RELY ON US FOR DESIGN EXCELLENCE, UNCOMPROMISED QUALITY AND TIMELY DELIVERY.
Throughout 2007, we considerably strengthened our production and supply capabilities to meet the growing demand for our products. At the same time, we established, validated and started production of an entire range of new items. While we intensified our efforts to improve procedures and processes in order to further increase efficiency, we also continued to invest in personnel, machinery and processing capacity. IMPLANT PRODUCTION MASTERS NEW CHALLENGES SWITZERLAND
In Villeret, our main center of excellence for implant production, one of our major undertakings in 2007 was to establish production capability for the new implant line extension. This called for exceptional technical and logistic effort, not just because the Straumann Bone Level Implant has a new design and is complex to machine, but also because it is accompanied by an extensive range of abutments and other components. Exceptional teamwork between Development, Logistics and Production ensured that everything was delivered on time for the launch.
NORTH AMERICA
Throughout 2007, we continued the build-up of our Andover production site, adding further CNC machines and processing equipment. Just two and a half years after becoming operational, Andover now manufactures a substantial proportion of all Straumann abutments, which it supplies as finished packaged products to our central global warehouse. With the continued transfer of know-how, Andover started producing implant blanks in 2007, which are surface-treated and finished in Switzerland. This has enabled Villeret to concentrate further on the manufacture of new products and technologies. At year-end the US production team employed a staff of 90, more than 20 of whom were recruited in 2007. A NEW PRECISION BENCHMARK IN CAD/CAM PROSTHETICS
Our main production center for CAD/CAM-based dental prosthetics for Europe and the rest of the world is in Leipzig, Germany. A second facility, located in Arlington near Dallas, USA, ensures that North American customers are served quickly and cost-effectively. Thanks to the high degree of automation, our global CAD/CAM production team is relatively small and comprises approximately 30 people. The milling centers receive design data direct from the cusTo help meet increasing volume requirements and space tomer, and convert them into commands for special industrial constraints, we have piloted an advanced automation techmachines (see illustration and descripnology in Villeret. The new fully-autoWE ESTABLISHED, tion on p. 32). Ultra high-speed milling mated twin machine cell that was VALIDATED AND STARTED cutters and very sturdy construction installed in the latter part of 2006 was PRODUCTION OF AN ENTIRE make the machines extremely accurate. validated and went into full operation RANGE OF NEW ITEMS. In 2007, etkon launched its new 5D highin mid 2007. At the same time, we also speed production machine, which sets new standards in expanded our implant surface production capabilities conspeed, precision and undercutting. siderably, introducing production flow processes and multishift operation. Our high performance laser scanners, which are essential to the CAD/CAM process, are assembled in Gräfelfing near The general step-up in production meant that we continued Munich, Germany. As the global roll-out of the etkon busito recruit additional skilled personnel, creating some 30 ness is a priority for Straumann, we took a number of initianew jobs in Villeret, where at year-end we employed around tives in 2007 to ensure future capacity and infrastructure 365 people. requirements.
Straumann Annual Report 2007
Operational Review
PRODUCTION AND LOGISTICS
QUALITY SYSTEMS COME THROUGH STRINGENT TESTS
The Malmö facility successfully passed an audit by its notified body, the Nordic Institute of Dental Materials, at the beginning of 2007. Later in the year, Villeret and Andover successfully completed ISO 13485 audits by TÜV and the British Standards Institute respectively. In spite of the successful outcome of these audits, the Biora issue prompted Straumann to commission independent expert assessments of each site to ensure that any potential deficiencies in our quality systems are addressed. Launched at the IDS in 2007, the new etkon 5D high-speed machine weighs 7.8 tonnes and can produce individualized ceramic inlays, crowns or bridges with ultimate precision and a perfect surface finish.
REGENERATIVE PRODUCTION COVERS GROWING GLOBAL DEMAND
Straumann’s Biora unit in Malmö unit is devoted to the specialized production of oral tissue regeneration products, which are manufactured under clean-room conditions and involve protein extraction and purification processes. The production team in Malmö currently comprises about 30 people. In 2007, we invested considerably to strengthen our quality system and procedures in Malmö in response to the FDA Warning Letter received at the outset of the year. After considerable remedial action and a comprehensive review of Biora’s quality management system by outside experts, the company met with the FDA in the third quarter to signal our readiness for a re-inspection, which is necessary before the prevailing import detention on Biora products in the US can be lifted. As this situation is specific to the US only, full-scale production of our regenerative products continued in order to meet growing demand elsewhere.
LOGISTICS AND SUPPLY CHAIN MANAGEMENT
The successful launch of our Bone Level Implant and prosthetics portfolio placed huge demands on logistics in Villeret, at our central warehouse in Basel and throughout the supply chain. Mastering these challenges was facilitated by a significant optimization in the supply chain planning process, thanks to the implementation of an SAP-based reporting system covering every step through production, warehousing and distribution. OUTLOOK
The significant investments in people, processes, capacity and organizational structure have equipped our Villeret facility to meet our requirements for the 2–3 years. To cater for future production, we have begun evaluating possibilities to expand the facility further. In 2008, we shall continue the build-up in Andover and will evaluate the transfer of technology to produce the SLActive implant surface. We will also invest further in our milling centers in Leipzig and Arlington to satisfy the increasing demand for crowns and bridges. Rising demand for SLActive and the new Bone Level Implant range will also be challenging for logistics. To address this we will continue to optimize supply chain management and logistics, with particular emphasis on planning accuracy and stocking to ensure optimum inventory levels and 100% deliverability.
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THE FAREWELL KISS It may seem unbelievable but, on average, people kiss between ďŹ fty and a hundred thousand times in their lifetime. Of these, the farewell kiss is one of the longest, most intense and most melancholic. In the 1970s, the average parting kiss lasted ďŹ ve and a half seconds, whereas today it lasts twelve.
Almost every adult has to say good-bye to at least one tooth at sometime in life. At Straumann, we simply do more to ensure that nobody will have to say good-bye to one of our implants.
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INNOVATION AND PARTNERSHIP
INNOVATION AND PARTNERSHIP RESEARCH AND DEVELOPMENT – WE BELIEVE IN THE THOROUGH TESTING OF ALL NEW PRODUCTS BEFORE THEY ARE INTRODUCED TO THE MARKET AND IN OBSERVING THEIR PERFORMANCE OVER THE LONG TERM.
OUR PASSION FOR PURPOSEFUL INNOVATION
Of the many players competing in our field, Straumann has arguably the longest tradition in innovation coupled with scientific research and development. We believe that manufacturers have a responsibility to do more than the minimum statutory requirements, which is why we evaluate our products extensively prior to putting them through a controlled launch in order to validate their clinical benefits fully. Because of this and our passion for purposeful innovation, we have one of the largest financial commitments to R&D in our sector. In 2007, we channeled more than CHF 31 million into R&D, with the goal of enhancing the standard of patient care and giving peace of mind to our customers. At peak in 2007, we had no fewer than 50 ongoing preclinical and clinical studies. A POWERFUL NETWORK BRINGING WORLD-RENOWNED EXPERTS TOGETHER
To keep R&D focused, flexible, productive and cost-efficient, we have a dedicated internal team of specialists who collaborate with an extensive global network of external partners at leading universities, institutes and clinics. In 2007, this network was extended to China and Australia and now spans 18 countries. Our in-house expertise covers the full range of relevant scientific disciplines – from preclinical research, such as material science, cell biology, protein and molecular biology through to clinical research and evaluation. The recent acquisition of etkon has added R&D capabilities in new fields such as in scanning technology and software design. INNOVATION PROCESS OPTIMIZED
At the outset of 2007, we implemented a program to optimize processes and structures in innovation, research and development. This had several consequences: firstly we strengthened our licensing capabilities to evaluate and capture promising innovative ideas and technologies. Secondly, to increase critical mass, speed and efficiency, we transferred
Straumann‘s research center of excellence in Basel.
our biological research activities from Malmö to Basel, where our Regenerative BU and global R&D teams are located. Thirdly we succeeded in shortening time to market significantly without reducing the depth and quality of research. This is exemplified by our bone level portfolio, which took just two and a half years to develop, despite the program being one of the most extensive ever conducted prior to launch. PRECLINICAL RESEARCH ACTIVITIES
In 2007, our preclinical research activities focused on new materials and technologies, implant designs, surfaces and tissue regeneration. We continued to upgrade our research tools and cell-culture-based technologies in cooperation with partners from academia. Our platform now enables us to tackle scientific and medical questions that range from mechanical stability and strength to the behavior of bone and soft-tissue cells. More than 25 preclinical studies were in progress at yearend. The preclinical data on our new implant line extension were presented at three major international congresses and at many national events. In addition, results of preclinical studies on SLActive, Straumann BoneCeramic, Emdogain, Membrane and new materials were presented at major international scientific meetings.
Straumann Annual Report 2007
CLINICAL TRIALS
We believe that clinical research is crucial to product development and that today’s benchmark is to perform randomized controlled clinical trials (RCTs) before introducing a new product to the market. Eight of the 10 clinical studies we completed in 2007 were multicenter RCTs with observation times of up to five years, yielding the highest level of clinical evidence. Of the other two, one was a single center RCT. At year-end, we had 20 clinical studies in progress of which 10 were RCTs.
Operational Review
INNOVATION AND PARTNERSHIP
In the tissue regeneration field, we continued to study our fully synthetic bone augmentation material, Straumann BoneCeramic, and its combination in Straumann Emdogain PLUS. To date, nine RCTs have been successfully conducted with these products, of which three were completed in 2007. The results are expected to appear in peer-reviewed journals in the near future. We also successfully completed the first clinical study with the Straumann Membrane. A large multicenter study and a non-interventional study will start in 2008. The Straumann Membrane is one of a number of exciting projects in our current pipeline, which are outlined in the table next page.
A CLEAR PICTURE OF ‘REAL LIFE’ PERFORMANCE
While RCTs demonstrate that a new product works well, TESTING THE NEW GENERATION BONE LEVEL IMPLANT they are usually conducted by specialists in a carefully Our priority in 2007 was collecting data on the new Bone selected and strictly controlled population. Our commitLevel Implant, which were presented by 11 leading clinicians ment to simply doing more has led us beyond this to invesat the EAO meeting in Barcelona and at the AAP meeting in tigate how the product will perform in the hands of less Washington DC. The mechanical stabilspecialized practitioners in routine clinWE SHORTENED TIME TO ity data were excellent. Strength and ical practice and in a wide range of MARKET SIGNIFICANTLY WITHfatigue resistance proved to be compapatients. In addition, we want to know OUT REDUCING THE DEPTH rable to those of larger diameter implants how the outcome will look after 5, 10 and AND QUALITY OF RESEARCH. from leading competitors. Preclinical 20 years. investigations showed excellent osseointegration with minimal bone loss (0–0.5 mm) and even bone gain in cases To do this we began a large ‘non-interventional’ study (NIS) in where the implant was placed 1 mm above the level of the 2007 with more than 800 patients in over 130 clinical centers bone crest. Inter-implant bone levels were also maintained in Europe and North America. ‘Non-interventional’ means between adjacent implants, even when placed only 3 mm that the participating clinicians are free to include all indiapart. cations and apply their preferred treatment approach with minimal intervention by the study organizer. The results The clinical program currently includes three studies. The will give us a clear picture of product performance in ‘realfirst, a pilot trial in 20 patients, has confirmed predictlife’ situations. able osseointegration and crestal bone preservation with excellent esthetics. The second, the aforementioned nonAmong our other implant research activities, two studies were published in 2007 substantiating the long-term success of our dental implant system. One of them, which tracked 39 Blanes RJ, Bernard JP, Blanes ZM, Belser UC. A 10-year prospective 198 implants, achieved a 10-year cumulative survival rate of study of ITI dental implants placed in the posterior region. I: Clinical and radiographic results. Clin Oral Implants Res 2007; 18: 699–706. 97.9%.39 The other, an observational field trial, documented 40 Cochran D, Oates T, Morton D, Jones A, Buser D, Peters F. Clinical 990 SLA implants over a period of five years and reported an field trial examining an implant with a sand-blasted, acid-etched surface. J Periodontol 2007; 78: 974–982. overall success rate of 97.4%.40
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Operational Review
INNOVATION AND PARTNERSHIP
CONTINUING LEADERSHIP IN EVIDENCE-BASED INNOVATION
Project
Key benefit
Preclinical
Clinical
Introduction/roll-out
SLActive
Increased security, cuts healing time to 3–4 weeks
6 studies completed, 8 studies ongoing
3 large studies ongoing, 1 completed
Launched in Europe (2005), N. America and initial APAC markets (2007). Japan expected 2009.
>30% of implant unit sales by end 2008
Bone Level Implant
Expanded options for treatment approaches
2 studies ongoing, 2 studies completed
3 studies (1 pilot, Launched in initial European, 1 multicenter RCT, N. American and APAC markets 1 NIS) ongoing, 2007. Roll-out Asia and RoW 2009. 3 RCTs in preparation
Addressable segment: ~50% of implant market
New implant material (1)
Smaller size, same strength and osseoconductivity
1 study completed, 1 study ongoing
2 studies ongoing
Initial launches planned 2008–09.
Addressable segment: ~10–20% of future market
New implant material (2)
Tooth-colored implant for high-end esthetics
2 studies ongoing, 1 study completed
1 multicenter study starting 2008
Initial launches planned 2009–10.
Addressable segment: ~10–20% of future market
Straumann customized abutments
Reliable, customized high-end esthetics
Extensive durability testing
2 studies ongoing in >60 patients
etkon scanned custom abutments, launched in Europe 2007. N. America planned 2008.
Up to 10% of prosthetics volume
Straumann BoneCeramic
Fully-synthetic, optimal handling, morphology and resorption
Several studies 5 RCTs completed ongoing, 1 completed
Launched in N. America 2005, Europe 2006 and initial APAC 2007. Japan expected 2009.
Addressable market: up to 25% of all implant procedures
Straumann Emdogain PLUS
Convenient combination for wide periodontal defects
Components extensively documented
2 studies completed, 1 study ongoing
Launched in European and initial APAC markets (2006). N. America 2008, Asia planned 2009.
Addressable market: up to 10% of periodontal surgical treatments
Membrane
Resorbable, easy to use
4 studies completed, 2 studies ongoing
1 study completed, 1 multicenter RCT starting 2008
Initial launches planned 2009.
Addressable market: >50% of guided bone regeneration procedures
Highlights from Straumann‘s pipeline. Introductions/roll-outs are subject to positive clinical results and regulatory clearances, and barring unforeseen circumstances.
Potential
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Operational Review
INNOVATION AND PARTNERSHIP
ANDRÉ SCHROEDER RESEARCH PRIZE
interventional study, had documented more than 1500 implants by year-end in more than 800 patients. Approximately a third had been observed for more than six months and the success rate was higher than 99%. Results from the third study, an RCT in 134 patients in 12 centers and seven countries, are not yet available, although – as in the other studies – no serious events or major complications have been reported. Overall, the data show that clinicians perceive the new implant as an excellent solution for a wide range of indications. SCIENCE ENDORSED AT THE HIGHEST LEVEL
As in 2006, more than 80 scientific and clinical papers on Straumann products were published in peer-reviewed journals in 2007, adding to the body of evidence supporting our products. Our own researchers were instrumental in producing several significant publications: in total, 23 preclinical papers on 15 studies were published by or submitted to peer-reviewed journals. OUTLOOK
We will continue our commitment to R&D and expect to maintain our overall level of funding at 4–5% of sales. The results of several important investigations are expected in 2008, including further clinical data on SLActive, Straumann BoneCeramic, Emdogain PLUS, our Membrane and Bone Level Implant. These will be presented at major congresses. In addition, seven new studies, including multicenter trials, are planned to start in 2008. These will look at the Bone Level Implant, new implant materials, prosthetics, and regenerative products. In addition, a number of investigator-initiated clinical studies are also due to commence.
The André Schroeder Research Prize is an annual award presented by Straumann to promote new scientific findings in oral implantology and related fields. First presented in 1992 in honor of the late Professor Schroeder, a pioneer in dental implantology, the prize is one of the most prestigious in the field. The 2007 cash prize of CHF 20 000 and gold medal were awarded by the independent jury to Dr Frank Schwarz of the Department of Oral Surgery, Westdeutsche Kieferklinik, at the University of Düsseldorf in Germany for his scientific investigation of the effects of implant surface hydrophilicity and microtopography on soft- and hard-tissue integration. The winning research investigated early tissue reactions to a new chemically active hydrophilic implant surface technology, in comparison with conventional roughened and machined surface implants.41 It concluded that both soft- and hard-tissue integration were mainly influenced by surface hydrophilicity, rather than by microtopography. The research demonstrated that the attachment of soft gum tissue as well as bone attachment were enhanced by the new hydrophilic surface. One important implication of these findings is that the improved tissue attachment around the implant forms a natural barrier to oral bacteria and thus may prevent infection. These and other observations are being investigated further in a clinical setting and could translate into enhanced implant treatment outcomes and a higher standard of patient care.
41 Schwarz F, Ferrari D, Herten M, Mihatovic I, Wieland M, Sager M,
Becker J. Effects of surface hydrophilicity and microtopography on early stages of soft-and hard-tissue integration at non-submerged titanium implants: an immunohistochemical study in dogs. J Periodontol 2007; 78: 2171–2184.
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Operational Review
INNOVATION AND PARTNERSHIP
PARTNERSHIP – WHILE INNOVATIVE PRODUCT DESIGN AND THOROUGH TESTING ARE ESSENTIAL, TREATMENT OUTCOME RELIES ON PROVEN METHODOLOGY, QUALITY EDUCATION, AND EXPERIENCE. ALL OF THESE ASPECTS ARE COVERED THROUGH STRAUMANN’S PARTNERSHIP WITH THE ITI.
UNIQUE IN ITS FIELD
ITI WORLD SYMPOSIUM
The ITI is an independent academic organization with a misOne of ITI’s major events in 2007 was its World Symposium sion to ‘promote and disseminate knowledge on all aspects in New York. Renowned as one of the most prestigious nonof implant dentistry and related tissue regeneration through commercial scientific events in implant and regenerative research, development and education, to dentistry, the World Symposium brought the benefit of the patient’. Driven by this 90 eminent speakers together and THE ITI'S MEMBERSHIP mission since 1980, the ITI today is an inattracted more than 3000 participants INCREASED BY 50% IN 2007. terdisciplinary group spread around the from 69 countries. Its theme ‘Reality and world. In 2007, membership increased by Myth in Clinical Implant Dentistry’ stimmore than 50%, and the ITI now comprises more than 5000 ulated lively debate on procedures and techniques offered Fellows and Members, including many leading academics. today. Given the profession’s growing concern about strong This provides Straumann unique access to and collaboration promotion and marketing from certain areas of industry, the with a network of experts from universities, dental schools symposium theme was timely and appropriate. and other academic institutions. CONSENSUS GUIDELINES
The increasing popularity of dental implants presents the significant challenge of ensuring the highest possible standard of treatment. The focus of the ITI has therefore shifted over the years, away from the implant itself and towards optimizing treatment methods, documenting long-term results, and promoting and supporting education in implant dentistry. RESEARCH FUNDING
One aspect that has not changed is the importance the ITI places on scientific research in implant dentistry and tissue regeneration. Over the past two decades, the ITI has committed close to CHF 27 million to research and is the largest non-governmental research sponsor worldwide for implant dentistry, tissue regeneration and related fields. EDUCATIONAL ACTIVITIES
As the field of implant dentistry continues to expand rapidly, broad access to reliable continuing medical education is becoming even more important. The ITI holds conferences and congresses on a national and international basis, the programs of which reflect the latest discussions in the field.
As part of its ongoing program, the ITI holds regular Consensus Conferences during which indications and treatment approaches are discussed in depth to arrive at guidelines for the profession. The ITI has been working on a classification of treatment procedures according to their complexity – Straightforward (S), Advanced (A) or Complex (C) – to help clinicians evaluate the degree of difficulty and risk of esthetic, restorative and surgical complications in individual cases. An SAC Consensus Conference was held in March 2007 at which 28 Fellows discussed and defined the level of difficulty of various clinical indications. The proceedings will be published in 2008. ITI TREATMENT GUIDE SERIES
The Consensus Conferences are summarized and published as scholarly guidelines. However, the need for a user-friendly manual for individual clinical situations led the ITI to launch a publication series entitled the ITI Treatment Guide. Volume 142 appeared in October 2006 and became a bestseller in 2007. The sequel volume entitled: Loading Protocols in Implant Dentistry – Partially Dentate Patients43 was completed and published in 2007. With its detailed step-by-step
Straumann Annual Report 2007
instructions, this volume offers clinicians concrete support and a reliable reference tool for daily practice. Another work published in 2007 with the support and involvement of the ITI was a Glossary of Oral and Maxillofacial Implants (GOMI).44 Launched at the ITI World Symposium, this reference book defines more than 2000 terms used in implant dentistry. A publication with the potential to become a benchmark in the field, the GOMI is also endorsed by the Academy of Osseointegration, the European Academy of Osseointegration, the American Academy of Periodontology and the American College of Prosthodontists.
Operational Review
INNOVATION AND PARTNERSHIP
SCHOLARSHIP GRANTS
The ITI continued to support education through international scholarships for young clinicians. In 2007, it funded 21 scholarships in 17 scholarship centers around the world with a total of approximately CHF 1 million. The number of centers also continues to grow, with the addition of the University of Toronto, Canada, in 2007. ITI SECTIONS WORLDWIDE
The expansion of the ITI’s global reach is best exemplified by the increase in number of national sections. In 2007, sections were established in Belgium, South Africa, and Taiwan, bringing the overall total to 22. Each section promotes the ITI philosophy and principles within the profession through national congresses, section meetings, study clubs and speaker training activities. The ITI communicates with its membership through various channels including its magazine Forum Implantologicum. This provides a platform for the broad exchange and active discussion of knowledge and opinions. OUTLOOK
The Glossary of Oral and Maxillofacial Implants and the second volume of the ITI Treatment Guide were both published in 2007. Volume 1, published in 2006, became a best-seller in 2007.
42 Buser D, Belser UC, Wismeijer D, editors. ITI Treatment Guide,
Vol. 1: Implant therapy in the esthetic zone – single-tooth replacements. Berlin: Quintessenz; 2006. 43 Wismeijer D, Buser D, Belser UC, editors. ITI Treatment Guide, Vol. 2: Loading protocols in implant dentistry – partially dentate patients. Berlin: Quintessenz; 2007. 44 Laney WR, editor. Glossary of Oral and Maxillofacial Implants. Berlin: Quintessenz; 2007.
The ITI has informed Straumann that a large number of national congresses are scheduled for 2008, with a continuing emphasis on education. In August 2008, the ITI will hold its fourth Consensus Conference in Stuttgart, Germany, where the latest topics in implant dentistry will be debated. The results will be published in a peer-reviewed periodical to serve as an international guideline and reference to recommended practice for clinicians worldwide. In order to strengthen communication with key audiences, particularly universities and educational institutions as well as the national sections, the ITI is currently adapting its organizational structure. A proposal for the amended structure will be put forward at the August 2008 Annual General Meeting.
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THE GOOD-NIGHT KISS The good-night kiss is one of the few kisses that accompany us throughout our lives. It is the kiss of caring and affection – a symbol of thanks for the day gone by and a sign of confidence that a new day will dawn.
Because reliability is our hallmark at Straumann, we claim that our products are designed and tested to give our customers ‘peace of mind’ and a ‘good night’s sleep’.
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Operational Review
SUSTAINABILITY
SUSTAINABILITY OUR RESPONSIBILITY – IS TO CREATE VALUE FOR OUR SHAREHOLDERS, CUSTOMERS, PATIENTS, STAFF AND COMMUNITIES IN A SUSTAINABLE MANNER WITH DUE RESPECT FOR THE ENVIRONMENT.
Our vision, mission and core beliefs articulate the priority we place on the professional success of our customers and the quality of care provided to patients. They highlight our commitment to ‘simply doing more’, which applies to all our external interactions and internal processes. As partnership and trust are essential for long-term business success, we continued throughout 2007 to engage in open dialogue with stakeholders who determine our performance and upon whom we have a major impact.
We also engaged with several other non-profit groups to focus our charitable activities on dental treatment for people who otherwise would not have access to it (see pp. 58-59). A further opportunity for direct contact with stakeholders are company visits. Our Swiss sites alone received 116 groups comprising more than 1700 visitors in 2007. These included customers, educators, scientists, investors, analysts, members of the general public, and business/cultural delegations from abroad.
LEARNING FROM DIALOGUE WITH CUSTOMERS, STAFF, AND OTHER STAKEHOLDERS
CODE OF CONDUCT – A CORNERSTONE FOR RESPONSIBILITY
A customer survey in the US and selected European markets The Straumann Code of Conduct, a key element in our focus complemented our online feedback channel, which keep us on responsible business behavior, was integrated into all our in touch with our customers and their needs. Further examemployment contracts in 2007. It refers to national and local ples of this include: regular management field trips to all rerules, including those of the FASMED (Federation of Swiss gions, participation at key trade and scientific congresses, as Medical Devices’ Trade and Industry Association). Rather well as clinical programs, including our non-interventional than formal subscriptions to other external economic, envitrial (see p. 43). The ITI also provides us ronmental, or social charters or associaWE SEE QUALITY AS with a broad platform for dialogue with tion memberships, the Code is the basis AN ESSENTIAL ELEMENT the dental profession. of Straumann’s identification with, and IN CONDUCTING management of, sustainability issues BUSINESS RESPONSIBLY. With regard to our employees, we have and goals. It formalizes the commitment extended our performance appraisal mechanism to encourof our company and employees to respect human rights, to age robust dialogue, while introducing a standardized comabstain from discrimination, to be truthful and honest in petency model and appraisal process. Positive and negative marketing, and never to be party to anti-competitive befeedback will also be the focus of our global staff survey in havior or corruption. We also commit to high standards in early 2008, which will support our continuous efforts and patient and employee health and safety and to minimizing initiatives to engage our staff as co-entrepreneurs. our impact on the environment. Throughout 2007, we also engaged with investors and representatives of the financial community (see p. 91), and we collaborated with a number of non-profit groups who advise shareholders and stakeholders on sustainability and environmental excellence. These contacts have helped us to refine our environmental reporting and prompted our participation in the Carbon Disclosure Project, which was facilitated by the efforts we had already undertaken to assess our carbon footprint systematically (see pp. 62, 63).
Employees are obliged to report any violation or suspected violation of the Code of Conduct or any other suspected misconduct. In 2007, there were no reports of alleged violation or suspected misconduct. All our business units are analyzed by our legal department for risks of corruption. No incidents involving corruption were reported in 2007. Furthermore, we have not been incriminated in any legal actions for anti-competitive behavior. To our knowledge, we have not received any public censures
Straumann Annual Report 2007
Operational Review
SUSTAINABILITY
CEO STATEMENT
Gilbert Achermann President and CEO
for non-compliance of marketing communications with regulations or voluntary codes. In early 2007, we created an Internal Audit function, which is not confined to financial audits, but also monitors compliance with external and internal policies and guidelines. A WIDE-SWEEPING INITIATIVE TO SECURE QUALITY
The health and safety of patients is the overriding priority at Straumann. The safety and effectiveness of our products are scrutinized throughout product conceptualization research, development and manufacturing, where it is ensured that production routinely follows the specifications laid out in the product development, storage and distribution processes. These processes are described in detail in our quality system, which is audited externally for compliance with the regulations of European authorities, the US Food and Drug Administration (FDA), and other regulatory bodies. At the beginning of 2007, our facility in Malmö received a warning letter from the FDA concerning observations made during a routine inspection in October 2006. The observations predominantly concerned quality system documentation and procedures. The import of Biora products into the US was stopped and we informed customers and stakeholders. Apart from this, we are not aware of any incidents of non-compliance with regulations and voluntary codes concerning health and safety of products in the whole Straumann Group during the year under review. We see quality as an essential element in conducting business responsibly. In 2007, our quality team, supported by external specialists, devoted itself to addressing the issues raised by the FDA. Although the pressing need was to establish an effective, compliant, and sustainable quality system at Biora, we engaged leading experts to help us ensure that all our sites exceed the required standards. We considerably strengthened our Quality Management function, adding leadership, resources, procedures, and experience at all levels.
In the spirit of 'bringing people together', dialogue and cooperation are cornerstones of our continued efforts to conduct our business in a responsible, sustainable manner. Our scientifically proven products contribute to the success of our customers and improve the quality of life of their patients by restoring dental function and esthetics. Innovation and development at Straumann, such as the introduction of our Bone Level Implant in 2007, are achieved in close collaboration with our customers, who support controlled market releases with their knowledge and participation. The quality of our people is the basis of our successes both in innovation and in providing service excellence to our customers. We place great value on staff training and have prepared a strategic initiative to redesign our training and learning programs in 2008. The Straumann Code of Conduct, integrated into all our employment contracts in 2007, supports our staff in consistently behaving in an ethical, responsible manner toward their colleagues and all external partners, and with respect to environmental protection. Regarding the environment, we have further refined our reporting processes, including the assessment of our carbon footprint, and have started collaborating with the non-profit ‘Carbon Disclosure Project’, which strives to bring environmentally conscious investors and companies together. While the ageing global population will increase demand for dental treatment and enable long-term growth potential for Straumann, such treatment is often unaffordable for the under-privileged. We collaborate with charitable organizations to support patients in need, a commitment that includes our new Straumann AID program, which operates in close collaboration with our customers. In the spirit of our core belief that ‘achieving more is our future’, we want to deepen our initiatives to ensure that we run our business in a responsible, sustainable manner. I want to thank our staff, customers, and other partners for their invaluable contributions in this respect throughout 2007.
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SUSTAINABILITY
CLEAR MANAGEMENT RESPONSIBILITIES SUPPORT OUR PRECAUTIONARY APPROACH
Clear responsibilities ensure that issues relating to sustainability are managed at top executive level. Product responsibility issues are monitored by our Product Safety Officer, who reports to the CFO, who is also responsible for Operations. Compliance with our Code of Conduct – including human rights – is managed by our General Counsel. Environmental management is carried out by local environmental officers at our research and production sites, ensuring closeness to operations, and is overseen by the Head of Operations. Labor issues fall within the responsibilities of the Head of Corporate Human Resources, and dialogues with external stakeholders are the responsibility of the Head of Corporate Communications, who both report to the CEO. At the governance level, strategic aspects of sustainability management are ultimately the joint responsibility of all members of the Board of Directors, which has delegated operational aspects related to sustainability to Management. The Board reviews sustainability performance data annually. While there are no formal procedures for determining qualifications of Members of the Board, for example on environmental and social issues, or for assessing the Board’s performance on them, the tradition of success at Straumann is based on its Board of Directors’ taking a long-term view of business performance. This includes protecting the reputation Straumann has gained as a responsible business partner and employer with a good environmental record. To protect our partners and our reputation, Straumann generally applies the precautionary principle to risk management. For example, our products are designed and produced with stringent requirements concerning safety and effectiveness. In the rare case of a complaint indicating potentially serious product safety issues, our Product Safety Officer can call an incident meeting at extremely short notice and can initiate immediate response up to and including a recall and corrective/preventive action. In addition to this,
our production processes are optimized on environmental protection wherever possible, without compromising on quality or health and safety. We continuously strive towards environmental excellence, extending and refining our environmental monitoring and reporting to adapt it to the needs of our dynamic growth. SUSTAINABLE DEVELOPMENT AND STRAUMANN
Most of the UN Millennium Development Goals addressing sustainability are related to poverty, hunger, basic education, and life-threatening illness, and are not impacted directly by Straumann as a provider of dental-implant, oral tissue-regeneration, and CAD/CAM-prosthetic products that improve quality of life but are not life-saving. However, the two UN Millennium Development Goals that have direct application in our internal operations are: the promotion of gender equality – where we have a clear policy of equal opportunity – and the promotion of environmental sustainability. As a manufacturer of high-value but small and light devices produced in well-contained modern facilities, we have moderate environmental impacts, but nonetheless monitor and minimize them carefully. Straumann’s main sustainability impacts, and the implications of sustainable development for Straumann, are related to the ageing of populations around the globe and the related increase in demand for preserving/restoring dental function and esthetics. According to the World Health Organization, ‘Global population ageing is expected to continue in the 21st century, and maintaining maximum individual and population health throughout the life-span is thus a significant challenge. Oral health is an essential element of general health and quality of life through an individual’s life-course – yet one that is often neglected in integrated approaches for the promotion of general health’. 45 The loss of teeth is
45 Oral health in ageing societies: Integration of oral health and general
health: report of a meeting at the WHO Center for Health Development in Kobe, Japan, 1 June 2005, World Health Organization 2006.
Straumann Annual Report 2007
widespread and implant treatment is ultimately the best solution in many cases. For a number of years, Straumann has supported research at McGill University in Montreal, Canada, that documented health and quality of life improvements achieved by implant treatment, particularly for edentulous patients. Thus, among the responsibilities to our stakeholders, providing our customers with proven and reliable products that allow the highest quality of care for their patients is central. The scientific basis of our products, and the high quality of service provided by our competent and motivated employees, allow us to excel in our industry and to achieve high treatment success rates and lasting customer satisfaction. Our goal is to maintain these levels of proven excellence during our foreseen growth over the coming years. While ageing populations and the related increasing demand for our products provides opportunities for Straumann, in the absence of reimbursement, general economic development determines the ability of patients to afford treatment. This means that we have to focus our business activities on markets with a certain degree of consumer affluence – e.g. Europe, North America, and parts of Asia. Notwithstanding, we believe that part of our responsibility as a good corporate citizen is to help other patients with particular needs. For example, we support access to dental implant treatment for needy patients in collaboration with our ITI partners, and for sufferers from ectodermal dysplasia, whose quality of life can benefit particularly from implant solutions. We also support access to basic dental treatment for underprivileged patients in projects around the globe (see pp. 58–59). The importance that Straumann attaches to sustainability is underlined by the fact that sustainability reporting guidelines of the Global Reporting Initiative (GRI) were followed in preparing the present Annual Report.
Operational Review
SUSTAINABILITY
FTSE Group confirms that Straumann Holding AG has been independently assessed according to the FTSE4Good criteria, and has satisfied the requirements to become a constituent of the FTSE4Good Index Series. Created by the global index company FTSE Group, FTSE4Good is an equity index series that is designed to facilitate investment in companies that meet globally recognized corporate responsibility standards. Companies in the FTSE4Good Index Series have met stringent social, ethical and environmental criteria, and are positioned to capitalize on the benefits of responsible business practice.
For the second year running, we have based our sustainability reporting on the guidelines disseminated by Global Reporting Initiative (GRI), a non-profit, multi-stakeholder organization that strives to provide companies with systematic basis for disclosure regarding sustainability performance. This 2007 Annual Report was successfully possed an ‘Application level Check’ by GRI.
For the third consecutive year, Straumann was commended in the Europe’s 500 listing, published by BusinessWeek, for our outstanding growth performance and contribution to employment creation.
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SUSTAINABILITY
EMPLOYEES – OUR SUCCESS DEPENDS ON THE PEOPLE WE ENGAGE AND OUR ABILITY TO SET, SHARE AND ACHIEVE THE RIGHT OBJECTIVES TOGETHER.
EMPLOYEES (WORLDWIDE)
2003 2004 2005 2006 2007
HIRING, DEVELOPMENT, AND TRAINING GEARED TO GROWTH
903 1104 1342 1534 1955
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Straumann’s workforce has more than doubled in the past three and a half years and continues to expand rapidly. In 2007, we created 241 new jobs and added 180 through acquisitions. Managing this growth and developing people to sustain our business in the years to come is a challenging objective and a key to success. In addition to our primary three-step approach to Human Resources (HR) – Search and Select, Develop and Coach, Reward and Retain – we have a new Strategic Management Development (SMD) process to leverage the capability of our organization proactively to meet the needs of our business strategy as it unfolds.
The SMD process, which was implemented in 2007, assesses, develops and deploys key people in senior management to ensure succession planning, the integration of new talent, and career development. At year-end, the SMD pool included more than 60 positions, a quarter of which were filled by new hires in 2007. Our goal is to fill the majority of new Strategic Management placements internally, and potential candidates are coached for inclusion in SMD. We expanded our recruiting criteria in 2007 to draw talent from more mature, consumer industries that have similar business models to our own. Selected recruitment from other sectors broadens our thinking and vision. Our investment in staff learning exceeded CHF 4 million in 2007, demonstrating our belief that training employees is integral to securing their highest competence. The average time devoted to training and learning in 2007 was approximately five days per employee, with the emphasis on sales and products. Personal development and improvement is discussed with each employee in our annual performance appraisal, which is now based on a new competency model that is closely tied to Straumann’s core beliefs. CONSTANT DIALOGUE SUPPORTS ENGAGEMENT
Constant dialogue throughout the company brings out the best in our people. To foster and promote this, our Executive Management Board (EMB) – comprising the CEO, CFO, and the Heads of Sales and Products – held two of its regular meetings in Europe, one in North America and one in the Asia/Pacific region. These meetings were combined with EMB ‘field trips’ with Straumann sales representatives as well as ‘town hall meetings’ with local staff to seek direct dialogue with them and their management. In addition, the Executive Management continued its tradition of regular breakfast meetings with randomly chosen employees to encourage informal dialogue.
Straumann Annual Report 2007
Operational Review
SUSTAINABILITY
As a broad and structured approach to collecting feedback The proportion of women in the global workforce in 2007 from our entire organization, we planned our first full-scale was approximately 45%; it was 26% in managerial positions employee survey with a team of external specialists. Mulgroup-wide, and 6% in our SMD pool. tiple acquisitions prompted us to postpone the survey until March 2008 in order to include our new businesses. The We are committed to fair and equal treatment of all our emsurvey has been designed to focus on engagement and to ployees. Our Code of Conduct strongly prohibits discriminaassure full confidentiality. Our redesigned annual Perfortion, defined in internal regulations as discrimination based mance Appraisal broadened the channel for direct employee on gender, race, background, religion, and sexual orientafeedback in 2007. It includes an extended section on ‘robust tion. We offer equal employment chances to disabled perdialogue’, actively encouraging both sons. Our codes and regulations proOUR STAFF HAS DOUBLED IN negative and positive feedback as well hibit sexual harassment and mobbing, THREE AND A HALF YEARS AND as open discussion. and require respect for human rights. CONTINUES TO EXPAND RAPIDLY. In 2007, this code was integrated into All of Straumann’s units allow freedom all our employment contracts. of association in compliance with relevant laws and regulations. There is, however, a general preference for informal Staff fluctuation rose slightly to 15%, which is not remarkemployee dialogue rather than union representation. Our able, given our dynamic business environment. There were labor contracts are therefore individually negotiated rather virtually no absences related to workplace accidents in 2007, than through collective bargaining. There are no formal which speaks for the quality of our processes and health & minimal notice periods, as Straumann informs its staff as safety training. At less than 3%, the absence rate due to sickearly as possible about relevant operational changes. ness was very low. SHARING SUCCESS FAIRLY
As we place high demands on our people, we also offer corresponding rewards. We seek to base our average compensation on the median of local market salaries in general and above the median for high performers. Benchmarking is performed annually. Our bonus plans are in line with local practices. In Switzerland, for instance, the bonus is directly tied to the company’s economic profit, in addition to individual goals. Employees can also participate in a share purchase program (see p. 79). Overall, we spent CHF 229 million on salaries and benefits worldwide in 2007. As we clearly surpass all local regulations for minimum wages, these have no real impact on our compensation policy. At Straumann, compensation is not influenced by gender or by non-performance-related criteria other than specific professional experience. We continue to monitor staff diversity.
As a further measure to protect our employees and the company, pension liabilities are planned with great care. In 2007, we conducted a systematic survey of our pension plans in 18 countries. Most of these are run as defined contribution plans. For the few pension plans that have defined benefit elements, all risks are covered by full funding or reinsurance of potential liabilities. OUTLOOK
In 2008, particular emphasis will be placed on implementing a comprehensive ‘Training and Learning’ program, on refining our Performance Management Process to introduce more individualized targets for employees, and on conducting our global employee survey. These actions will support the continued growth of our highly competent and engaged staff, securing the highest quality of products and services for our customers.
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CUSTOMERS – THE ADDITION OF CAD/CAM CROWN AND BRIDGE SOLUTIONS MAKE US A PARTNER OF CHOICE FOR ALL CUSTOMER SEGMENTS IN THE DENTAL NETWORK.
A UNIQUE PARTNER FOR ALL DENTAL PROFESSIONALS
Straumann’s customer base comprises oral and maxillofacial surgeons, prosthodontists, periodontists, general practitioners (GPs), dental technicians, and other members of the dental profession around the world. With the exception of distributor markets, we sell our products and services directly to our customers. We also work closely with them to secure the best outcome for patients, emphasizing the importance of teamwork between the general dentist, the implant specialist and the dental technician for achieving optimum lasting results and patient satisfaction. STRAUMANN’S CUSTOMER BASE BY SEGMENT
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The provision of dental care relies on an important interplay between three principal groups of dental professionals: GPs, specialists and technicians. Most patients initially seek treatment from a GP, who performs restorative procedures (fillings, crowns, bridges etc), extractions, hygiene and maintenance. If surgery is required (e.g. periodontal treatment, implant placement, jaw reconstruction), the patient is usually
referred to a specialist. Depending on training and experience, some GPs place implants and perform periodontal treatments in straightforward situations, referring complex cases to specialists. In most cases, general and restorative dentists rely on dental laboratories to make and supply the prosthetics. Apart from prosthodontists, specialists normally have limited interaction with labs (see illustration opposite). The acquisition of etkon has established Straumann in CAD/ CAM crown and bridge prosthetics, expanding our scope and ability to cover the key GP and dental laboratory segments comprehensively. etkon also provides us with additional customer insights, innovation capabilities, and brand leverage. By building stable client relationships with all participants of the dental community and bringing them together in our network, we are able to raise the barrier of entry to newcomer competitors with less comprehensive ranges. BRINGING CUSTOMERS TOGETHER
Our customer relationships are built and maintained through three main ‘touch points’: Education, Sales and dedicated Customer Marketing. In 2007, we combined these functions with our Global Sales Division to ensure that we leverage each touch point optimally. Furthermore, to understand and address the various needs of each customer group, we reorganized our sales force in 2007 to include specialist teams for specific segments. In addition, we extensively expanded our e-commerce and web-based facilities to complement our customer service options. PROVIDING PEACE OF MIND TO CUSTOMERS
Straumann’s products secure very high success rates for our customers. Based on all complaints reported to us worldwide in 2007, the probability of success of a Straumann implant that has integrated with the bone and has been correctly fitted with a Straumann prosthetic in a healthy patient is greater than 99.9%. Despite the increasing number of patients, this high rate has been maintained for the past four years.
Straumann Annual Report 2007
Surgical
Specialists*
Regeneratives
Prosthetics
GPs and others**
etkon
Dental labs
PATIENT
Schematic illustration of the relationships between customer groups and Straumann. * Surgically active dental professionals irrespective of specialty. ** Restoratively/prosthetically active dental professionals irrespective of specialty.
ADAPTING AND OPTIMIZING OUR SALES TEAM
In 2007, we commissioned an independent market research survey in the US and selected European markets, which polled more than 1400 dental professionals. Results showed that Straumann was perceived to be superior to its competitors with regard to key product attributes that most influenced the selection of dental implants, including “overall superior clinical results”. While this is gratifying, the survey also revealed that target customers were less aware of the superior esthetic options that Straumann provides. Educating the market more thoroughly on these qualities is an important goal going forward. The information yielded by the survey is also being used to further optimize our sales approach. CUSTOMER EDUCATION AS A KEY STRENGTH
Straumann offers numerous in-depth educational courses to the dental community covering all aspects of implant
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dentistry – from treatment planning, surgery, and prosthetics to post-procedural maintenance and care. These address all our customer groups. Education is provided in conjunction with a worldwide network of specialists and our academic partner, the ITI, and is based on the ITI’s consensus guidelines. The new additions to our portfolio in 2007 made it necessary to adapt our educational activities. We introduced bone level implant surgery and prosthetics and we launched the CAD/CAM Academy, which qualifies dental technicians as specialists in CAD/CAM applications. Apart from the above, courses in practice management are offered, helping practitioners develop their business successfully. PRODUCT ROLL-OUT IN COLLABORATION WITH CUSTOMERS
Our core belief that customers are our inspiration has been a key element in the development of our Bone Level Implant. This included large scale pre-launch testing (see p. 43) involving extensive collaboration with our customers. During the launch itself, scientific presentations by 11 renowned experts from around the world were delivered at the EAO and AAP meetings. These complemented extensive printed and audiovisual material targeted at dental professionals around the globe – just part of our continuous activities to provide information for dental professionals. OUTLOOK
Excellence in customer relationship management – through sales, education and marketing – will continue to be a key to Straumann’s success. The positive experience gained from involving customers in the development of our Bone Level Implant will be further used to enable and refine future innovation. We will remain consistent in our commitment to fair and truthful marketing practices, never compromising on the safety and quality of our products, upon which our own success and the success of our customers ultimately rest.
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COMMUNITIES – GOOD CORPORATE CITIZENSHIP INCLUDES BEING A RESPONSIBLE EMPLOYER IN THE COMMUNITY AND MAKING A MEANINGFUL CONTRIBUTION TOWARDS HELPING THOSE WHOSE FINANCIAL OR GEOGRAPHIC STATUS DENY THEM ACCESS TO TREATMENT.
The loss of teeth affects people both physically and psychologically and has a remarkable social impact on patients and their families.46 Restoring teeth with implant solutions restores human respect, not to mention the improvement in physiological well-being due to regained chewing function. Developing and producing safe and effective dental treatments that restore lasting dental function and esthetics is therefore our most important contribution to society in general. At the same time, we are aware that millions of people around the world are unable to benefit from tooth replacement and restoration because of geographic and economic factors. As a leader in our industry and as a responsible corporate citizen, we believe we have a duty to help in a practical, meaningful way and that our contribution adds value for the recipients and, indirectly, for other stakeholders. BRINGING NEEDY PATIENTS TOGETHER WITH DENTAL CARE PROVIDERS
In 2007, we continued to focus our charitable sponsoring on fields related to dentistry, where, thanks to our own competencies and the collaboration of our partners, we can make the greatest impact. In particular, we sought to help needy people who cannot afford implant dentistry and people who do not have access to dental care. Our contributions included the following:
• For the third year running we supported a project of the American Academy of Prosthodontics, which provides treatment to people in remote areas in Alaska. Our support of these and similar charitable projects in 2007 totalled approximately CHF 50 000. Thanks to the assistance of our partners in dentistry, these projects have been an extremely efficient use of funding and have made a real difference to hundreds of people. CONTINUING COMMITMENT TO FAMILIES AND PATIENTS AFFECTED BY ECTODERMAL DYSPLASIA
Ectodermal Dysplasia (ED) refers to a group of genetic disorders characterized by abnormal development of the skin and associated structures. Patients typically have few teeth and the teeth they do develop are usually severely misformed (see picture opposite). On average, each ED patient in the US faces dental charges of USD 28 000. This is a considerable burden because more than 50% of patients are not covered by insurance.47 The National Foundation for Ectodermal Dysplasia (NFED), based in Mascoutah, Illinois, is committed to providing help and hope to families around the globe who are affected by this condition. Today, several thousand individuals af-
THE LOSS OF TEETH HAS A fected by ED in more than 65 countries REMARKABLE SOCIAL IMPACT ON receive services from the foundation, • For the fourth consecutive year we PATIENTS AND THEIR FAMILIES. which has provided financial assistance supported projects to provide dental treatment and preventative care to indigenous patients in Cambodia. The patients treated included approximately 500 children. • Through the University of Geneva, we supported an oral health program that provides oral care in a hospital in Mfou, Cameroun, and preventative care for young students in 15 area schools. • In Nicaragua and Guatemala, we continued to support the provision of dental treatment and prevention in children’s homes. These two projects collectively benefited 500 children and 50 of their carers.
and information, in addition to connecting affected families with each other and with practitioners. Once patients reach adulthood, they can be treated with dental implants, which make a significant difference. Straumann provides free implants to ED patients but these represent a small portion of the overall treatment costs. We therefore 46 Brånemark P-I. Access to treatment. Straumann Annual Report 2006; 63. 47 Murdock S, Lee JY, Guckes A, Wright JT. A cost analysis of dental
treatment for ectodermal dysplasia. J Amer Dent Ass 2005;136: 1273–1276.
Straumann Annual Report 2007
worked with the NFED in 2007 to expand its network of dental professionals who provide free services to ED patients. We also supported the foundation with financial aid for the third year running. Our sponsorship for ED in 2007 amounted to approximately CHF 30 000.
Ectodermal dysplasia patients are typically stigmatized by severely misformed or missing teeth (left) in addition to other debilitating symptoms. These pictures before and after treatment demonstrate the tremendous difference that treatment can make. THE STRAUMANN AID PROGRAM
In 2007, we began work on establishing a structured global program to assist patients who suffer severely from the loss of dental function and need implant treatment but are unable to afford it. The program, called Straumann AID (Access to Implant Dentistry), relies on the assistance of dental professionals in the ITI network, who provide treatment to ‘hardship cases’ free of charge. For our part, we donate the Straumann products needed for the treatment. A RESPONSIBLE AND ETHICAL LOCAL EMPLOYER
We believe that the most important contribution we can make to our local communities is the creation of new jobs and the preservation of existing ones. We hire people regardless of their origin and without discriminating in favor of or against members of the local community. In 2007, we created 241 new jobs Group-wide in addition to offering continued employment to 180 people in companies we acquired. This meant that redundancies due to acquisitions were virtually zero. For the third consecutive year, Straumann was commended in the Europe’s 500 listing, published by
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BusinessWeek, for our outstanding growth performance and contribution to employment creation. Straumann applies high standards of ethical behavior in its employee relations, as well as in all other aspects of the business. Our Code of Conduct requires the company and our employees to uphold human rights at all times. Although child labor and forced labor are not significant risks in any of the locations where we operate, we have strict internal regulations prohibiting both throughout our organization. It is important for Straumann to work with suppliers who also respect human rights. For this reason we have obtained written confirmation from all our titanium suppliers that they do not use child labor. The Straumann Code of Conduct furthermore strictly prohibits all forms of corruption. In our sponsorship activities, we maintain political neutrality and do not provide financial support or contributions in kind to politicians or political parties. Furthermore, we do not make statements on public policy positions, or participate in political lobbying. OUTLOOK
We will maintain the focus of our sponsoring activities on areas that are closely related to dentistry and in which Straumann can make a meaningful difference. In addition to rolling out the Straumann AID program, we intend to continue our charitable support for ED patients and for dental care and relief projects in underprivileged regions. In this respect, we recently provided funds to train two dental students and to purchase a dental chair in Cambodia. We expect to continue to create new jobs and opportunities around the world based on the continued growth in demand for our products.
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ENVIRONMENTAL PROTECTION – WE CONTINUE TO REFINE AND BROADEN OUR ENVIRONMENTAL REPORTING, AND STRIVE TO KEEP RESOURCE USE AND EMISSIONS IN LINE WITH OR BELOW GROWTH IN PRODUCTION AND STAFF
AN INTEGRAL PART OF RESPONSIBLE MANAGEMENT
Straumann views environmental protection as an integral part of responsible business practice. We are committed to continuously refining products and processes, conserving resources, recycling, and periodically defining and monitoring environmental goals. Our Code of Conduct obligates every employee to comply with all laws and internal regulations regarding environmental concerns, and requires managers to encourage employees to approach environmental protection as part of their daily responsibility. Furthermore, all applicable laws and regulations relating to environmental protection, health and safety in the workplace are an integral part of our management system, and our company is regularly assessed to ensure compliance. ENVIRONMENTAL REPORTING REFINED
Straumann’s dynamic growth and changing organization bring new challenges to our environmental management and reporting. Our production sites in Villeret and Malmö are ISO 14001 certified. Our Andover site completed most of the preparatory work for this certification in 2007 and expects to obtain it in 2008. Although the Group’s headquarters in Basel now houses our global research center of excellence as well as administration, it is no longer classified as a production facility and has thus been excluded from our ISO 14001 scope. Nevertheless, we continue to monitor and disclose resource use and emissions in Basel. Our 2006 report included environmental data from our US and Swedish production sites for the first time. In this year’s report, which consolidates data from Basel, Villeret, Andover, and Malmö, we have further refined this information with the consequence that certain values have been restated in the table on p. 63. For instance, we now use annual headcount averages rather than year-end numbers, as well as a refined methodology for reporting carbon emissions (see p. 62 for details). A revision was also necessary in our titanium consumption measurements.
It has not been possible to include the recently acquired etkon business in this environmental report, although etkon also views environmental protection as an integral business goal. For example, at its new production center in Leipzig, a geothermal system is being installed that will cover 80% of the site’s heating requirements, ensuring that CO2 emissions and heating costs are both kept low. MONITORING ENVIRONMENTAL ASPECTS OF OUR CORE PROCESSES
Our environmental monitoring and reporting focus on the main physical processes carried out by the company because this is where our efforts to improve and sustain environmental performance are most meaningful. In terms of physical weight, our main product group is dental implants made from titanium. As an example of our manufacturing processes, implant component production starts with extensive material testing of the titanium rods we purchase. Implants and abutments are machined from the rods on computerized CNC lathes or from pre-cut titanium blanks in our new high-speed cell, which – thanks to a turn-table feature – can machine multiple implants simultaneously, significantly increasing efficiency and saving space. Titanium scrap from cutting and processing is recycled for non-medical applications. Traceability through each production step, right back to the original titanium rod, is achieved by the laser inscription of a serial number on every implant. During processing, the implants are pre-cleaned and a defined part of the surface is sand blasted and etched with acid. To preserve surface activity, part of the production of our SLActive implants is carried out in a nitrogen atmosphere, and the implants are stored in isotonic saline solution produced with purified water. Straumann Dental Implant System components are mainly produced in Villeret, although an increasing proportion is made in Andover. With global research and development now consolidated in Basel, our Malmö unit, which is by far our smallest manufacturing site, produces oral tissue
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regeneration products and thus has an environmental footprint that is typical for biopharmaceutical facilities. Beyond production and research, the physical activities of Straumann include those typical for any organization of our size, such as heating and other energy use, ordinary water consumption, and solid waste production.
ducting in-house cutting oil filtration regularly. While overall consumption of cleaning solvents increased owing to increased production, an improvement in the recycling rate was achieved through our staff’s efforts to minimize solvent evaporation. The amount of recycled acid increased in connection with the increase in SLActive production.
As far as data availability allows, we publish the environmental performance related to the aforementioned processes for all four sites. With the exception of etkon, which we plan to include in future environmental reports, our activities elsewhere are in much smaller facilities focused on sales and distribution. They are not included in this report, due to their minor impact and a lack of meaningful data.
WATER AND WASTE
Expanding SLActive volumes also contributed to an increase in ordinary and purified water consumption, together with a corresponding rise in hydroxide sludge, a by-product of water purification. We use water as carefully as possible. For example in our Andover and Swiss facilities, rest-rooms, showers, and kitchens are equipped with low-flow devices to reduce water consumption.
DETAILED MONITORING AND REPORTING OF ENVIRONMENTAL PERFORMANCE
Given our dynamic growth, our main goal is to keep the use of resources and emissions in line with, or lower than the increases in production and staff. We achieved this in many cases, and even reached absolute reductions in others. Wherever the increases were higher than sales or headcount, we have monitored developments to address any environmentally relevant inefficiencies they might indicate. TITANIUM AND CUTTING OIL
A slight reduction in the consumption of titanium, our primary raw material, was achieved in proportion to revenue growth, mainly due to the increase in the share of revenues generated by SLActive. In contrast, titanium scrap increased considerably, mainly due to the development of our new Bone Level Implant and the installation of new machines. We are currently conducting a project to optimize the diameters and dimensions of the raw materials used for all our titanium products in order to reduce machining and scrap. We succeeded in reducing cutting oil consumption, by analyzing the oil’s characteristics and replacing it only when necessary, rather than at scheduled intervals, and by con-
Our untreated waste water contains comparatively low concentrations of cleaning detergents, solvents, acid, and oil. It is disposed of separately by external authorized specialist contractors, and mainly arises when maintenance work has to be carried out on our waste-water treatment station in Villeret. Maintenance led to a large amount of untreated waste water in 2006, while in 2007 the corresponding amount was much lower. While contaminated materials increased only slightly, there was a marked increase in solvent waste. This was mainly cleaning solvent in Andover, which is incinerated as fuel in a district heating facility. The other cause of increased solvent disposal was in Malmö in connection with the transfer of research activities to Basel. Refuse per capita went down in Villeret, while Basel and Andover achieved both per capita and absolute reductions, thanks to continuous process improvements in Basel and a comprehensive recycling program in Andover. The latter was one of our environmental focus issues in 2007 and has brought refuse per capita down to the level of our other sites. In Malmö, refuse disposal is handled collectively for the entire site by the owner, and data are not available.
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A small increase was recorded in overall paper consumption per capita. An initiative to replace printed with electronic filing, together with the strong trend towards electronic correspondence have contributed to keeping paper consumption in check.
change. Its goal is to facilitate a dialogue, supported by quality information. In this context, and as part of our efforts to further improve our environmental reporting, we assessed our carbon footprint comprehensively at all four sites based on a robust methodology,48 reporting tons of CO2 equivalent that result from our electricity consumption and heating.
ENERGY USE AND CARBON DISCLOSURE
Electricity consumption decreased per capita and increased only slightly overall. The nature of our production is energyintensive, but this is partly offset by energy optimization at our Basel facility, where we do not operate an air-conditioning system, and electricity-saving systems in Andover, which include room occupancy sensors to control lighting. With regard to heating energy, our consumption per capita decreased slightly in Andover, while in Villeret, Basel, and Malmö reductions both in per capita and absolute consumption were achieved, reflecting the care our facility management places on resource efficiency.
Business activities with minimal impact or for which meaningful data are not available, such as vehicle emissions from transport of our products (which are small and light), sales representative travel, or employee commuting, are not included. The results show that our global warming potential values decreased from 2006 to 2007, both per capita and in absolute terms. The main contributors were reduced emissions from electricity use in Andover, and from heating at other sites. OUTLOOK
In 2008, we plan to apply for ISO 14001 certification in Andover. We will also explore possibilities for further reducing our CO2 emissions, for example by increasing the proportion of electricity purchased from low emission sources. We also plan further refinements in our environmental reporting system and will work towards including etkon’s main sites in our reporting.
Deep below Straumann’s global headquarters in Basel large pipes connect the company to an 'environmentally-friendly' district heating network.
In 2007, Straumann started to participate in the Carbon Disclosure Project, an independent not-profit organization that aims to create a lasting relationship between shareholders and corporations regarding the implications for shareholder value and commercial operations presented by climate
48 We base the measurement of our global warming potential on
the 'primary energy' use caused by the final energy we consume. This accounts for the energy required globally to produce, transform, refine, transport, and distribute the energy we use. These primary energy figures are multiplied by coefficients expressing greenhouse gas emissions related to each type of energy source used. The result is a global warming potential expressed in tons of CO2 equivalents. The calculation was based on the European leading ecobalance database 'ecoinvent' (preliminary version 2.0).
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SUMMARY OF ENVIRONMENTAL PERFORMANCE FIGURES
Performance indicator
Unit
Consumption Recycled (consumption minus product) Consumption/net revenue Consumption Recycled Recycled/net revenue Consumption Recycled Recycled Recycled/net revenue
kg kg kg/CHF million kg kg kg/CHF million kg kg kg kg/CHF million
Hydroxide sludge Contaminated materials Solvents Villeret Per capita, Villeret Basel Per capita, Basel Andover Per capita, Andover Consumption Consumption per capita
2007
2006
9 983 7 762 14 47 862 37 746 67 43 481 30 934 35 352 61
9 893 5 294 17 56 562 39 499 66 40 491 27 781 31 813 48
kg kg kg kg kg/employee kg kg/employee kg kg/employee sheet sheet/employee
9 436 12 733 800 43 432 124 55 980 157 28 600 159 5 551 350 5 989
5 192 12 027 574 41 762 134 65 940 191 39 094 301 4 852 250 5 896
Consumption Consumption per capita Natural gas, Villeret Per capita, Villeret District heat, Basel Per capita, Basel Natural gas, Andover Per capita, Andover District heat, Malmรถ Per capita, Malmรถ
kWh kWh/employee kWh kWh/employee kWh kWh/employee kWh kWh/employee kWh kWh/employee
11 930 116 12 870 1 545 291 4 403 529 554 1 488 1 553 620 8 631 278 000 6 950
11 445 073 13 907 1 696 654 5 438 621 272 1 796 1 182 164 9 094 289 000 8 257
Consumption Consumption per capita Consumption Disposal
m3 m3/employee m3 kg
23 961 26 8 092 5 900
18 390 22 4 747 32 579
CO2 equivalents CO2 equivalents per capita
kg kg/employee
7 939 425 8 565
7 983 310 9 700
Raw materials & supplies
Titanium
Various oils
Cleaning solvents Acid Miscellaneous
Diverse waste
Refuse
Paper Energy
Electricity Heating
Water
Water Pure water Untreated waste water Emissions
Global warming potential
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THE JUBILANT KISS Jubilant kisses express the release of inner tension and nervous strain. To the observer, kissing a face drenched in sweat hardly appeals, but perspiration and kisses have similar compositions: 98–99% water and electrolytes.
Teeth often get damaged in sporting accidents. When they are, Straumann has solutions to restore the winning smile.
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INDEPENDENT EXPERT OPINIONS*
IMPLANTS TODAY AND TOMORROW
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(Richard Lazzara) TRENDS IN PERIODONTOLOGY
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(Stuart Froum) HIGH STANDARDS IN CLINICAL PUBLISHING
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(Horst-Wolfgang Haase) CHANGES IN THE DENTAL SECTOR
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(Robert Ganley) ADVOCATING FOR INNOVATION
71
(Stephen Ubl)
* In each case, the personal opinions expressed are those of the interviewee and may not reямВect the views of Straumann.
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IMPLANTS TODAY AND TOMORROW: RICHARD LAZZARA ‘WE ARE PUTTING SOMETHING INTO THE PATIENT’S JAW-BONE THAT BECOMES PART OF THEIR BODY FOR THE REST OF THEIR LIFE.’
Richard Lazzara, DMD, MScD, practises periodontics and implant dentistry in West Palm Beach, FL. He is a Clinical Assistant Professor at USC School of Dentistry and an Associate Clinical Professor at the Universities of Maryland and Miami. He co-founded the implant company 3i.
MORE GP’S ARE OFFERING IMPLANTS. IS THIS GOOD?
It’s great that more practitioners accept implant dentistry as part of normal treatment planning. It can be profitable for the dentist and is certainly better for the patient than grinding down teeth to carry crowns and bridges. Every generalist should be involved in restoring implants. For surgery, they need adequate training, not just a weekend course.
WHAT ELSE NEEDS TO BE INNOVATED?
For implants, we need a better sealing mechanism to keep bacteria from entering the underlying bone where the metal of the implant leaves the bone and meets the soft tissue of the oral cavity. In regeneration, we are OK. We have all kinds of ways to rebuild lost tissue. Is it perfect? No. But I’m not sure that we are going to have some magic dust to put on and clone new teeth! DOES INDUSTRY REALLY LISTEN TO CUSTOMERS ABOUT NEW PRODUCTS?
Some do, some don’t. It seems to depend on whether the company is interested in doing research and modifications or whether they are worried about their stock price and need to bring a product out right away.
SHOULD INDUSTRY AND ACADEMIA COOPERATE IN TRAINING?
IS THE MUSHROOMING NUMBER OF IMPLANT
In implants, as in other medical technologies, the companies do the technical training on how to use the components, while the schools teach the surgical skills. Both sides need to understand that they can’t be independent.
MANUFACTURERS GOOD?
No, because not all those companies stay in business, and then the patient might not be able to get parts that fit if something breaks five or 10 years down the road. An implant lasts a lifetime. It must be precise and available for as long as possible.
WHAT ARE THE MAIN TRENDS IN DENTISTRY TODAY?
Dentistry is being driven by esthetics, and modified by technology. We will be able to create restorations faster and cheaper with less manpower, maybe even in the office with a computer and a milling machine.
HOW IMPORTANT IS THE 'ONE-STOP SHOP’CONCEPT?
It’s absolutely critical that the implant and the prosthetic part match mechanically. I think maintaining that within one company is important. Biologics are a nice convenience factor but they don’t have to interrelate in the same way.
IS THE FUTURE OF DENTISTRY DIGITAL?
You are not going to be able to plug a patient in and everything gets done. There are surgical and diagnostic skills you cannot turn over to a computer. But the hard-component processes can be computerized to a large degree. ARE EVEN SHORTER TREATMENTS FEASIBLE?
Restorations will take less time to build, and surface topography on the implant can improve integration quality and speed, but we can push biology only to a point. We shouldn’t sacrifice quality for speed.
ARE IMPLANTS TOO EXPENSIVE?
Compared with alternative techniques, an implant is not much different in cost, and biologically much better. Implant companies have to make a profit to stay in business and to support research, training and development. People need to be adequately compensated for skills and liability. It shouldn’t be the responsibility of the dentists or suppliers to make it cheaper. Insurance companies and politicians need to understand that implant dentistry saves money in the long run, and they need to find a way to reimburse.
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TRENDS IN PERIODONTOLOGY: STUART FROUM ‘A TOOTH THAT CAN BE A FUNCTIONING ESTHETIC MEMBER OF THE ORAL CAVITY SHOULD BE PRESERVED.’
Stuart Froum, DDS, PC, is a private practitioner in New York City and Clinical Professor and Director of Clinical Research, Dept. of Periodontology and Implant Dentistry, New York University College of Dentistry.
of the initial, non-surgical therapy, so when patients come to the periodontist they have more severe bone loss than previously seen, requiring regenerative procedures. Also, periodontists are still the specialists who are best trained to determine whether to save or extract a tooth in the context of the overall prosthetic treatment plan. If a tooth has to be saved, it is the periodontist who will save it.
WHAT ARE THE MAIN TRENDS IN PERIODONTOLOGY TODAY?
There is increasing attention on periodontal disease as a risk factor for systemic diseases like diabetes, cardiovascular, and Alzheimer’s disease. We have, for example, seen that periodontal treatment can improve diabetes. Procedures to enhance periodontal esthetics are becoming more common and periodontists are doing more extractions because they can immediately operate to preserve bone. They are also doing more procedures to prepare implant sites, and they are placing more implants. WHERE DO YOU SEE THE BIGGEST NEED FOR INNOVATION?
We need better diagnostic and prognostic procedures and better methods for removing biofilm and calculus – maybe smaller, more effective instruments. We also need methods for soft tissue grafting that are less invasive, better materials for regenerating bone and soft-tissue, and finally better means of assessing results. SOME DENTAL PROFESSIONALS PUT THE CASE FOR EARLY EXTRACTION AND IMPLANT PLACEMENT. WHAT IS IN THE PATIENT’S BEST INTEREST?
A tooth that can be a useful member of the oral cavity should be preserved, particularly if it is in a strategic position for esthetics, function or maintenance of the dentition. Extraction often causes bone loss, putting other teeth at risk. For example, preserving a cuspid may avoid losing the maxillary anterior teeth. So I will do what I can to save the tooth, surgeries, pain, and cost for the patient. IS PERIODONTOLOGY AS A SPECIALTY INCREASING OR DECREASING?
I see it increasing and changing. Fewer full-mouth perio cases are being seen by periodontists. GPs are doing more
WILL PERI-IMPLANTITIS BECOME A MAIN RISK FACTOR FOR IMPLANT LOSS?
It’s going to become more of a problem. The early smoothsurface implants were fairly resistant to peri-implantitis. Now almost every company makes rough-surface implants and many are textured all the way to the top. The micro-texturing is designed to hold soft or hard tissue, but if it fails, the roughened surface is exposed and cleaning becomes a major problem. We need more studies on factors responsible for peri-implantitis, and on detoxifying implants. We need techniques to re-attach bone and soft tissue to an implant that’s been exposed to the oral cavity. HOW IMPORTANT IS IT TO HAVE AN INDUSTRY PARTNER THAT SUPPLIES EVERYTHING FROM BIOLOGICS TO IMPLANTS AND PROSTHETICS?
It’s more convenient for ordering and inventory control. There’s more response from the reps and it’s easier to follow the products. From a philosophical point of view, I like a company that produces biologics as well as implants and prosthetics because it is not going to focus on extracting teeth and placing implants. A company that offers a variety of products is concerned with repairing teeth as well as replacing them.
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HIGH STANDARDS IN CLINICAL PUBLISHING: HORST-WOLFGANG HAASE ‘THE VALUE OF RESEARCH IS CLOSELY CONNECTED WITH ITS ABILITY TO BE USED AND CITED BY OTHER RESEARCHERS.’
Dr h. c. Horst-Wolfgang Haase took over the Quintessence Publishing Group (Berlin) in 1969 and led it to become one of the world‘s leading publishing houses specialized in dental medicine.
ners. The ITI Foundation offers concrete concepts for quality assurance in therapy for the practitioner with its Treatment Guides. HOW IMPORTANT ARE PEER-REVIEWED PUBLICATIONS?
HOW CAN DENTISTS AND PATIENTS KEEP UP TO DATE WITH NEW DEVELOPMENTS IN DENTISTRY?
Dentists get scientific information from journals and product information from companies. Continuing education programs are also an important source. Patients get information from dentists, advertising, friends and the Internet.
I consider it extremely important that a journal, even if it is published for generalists, adheres to a rigorous peer-review process. This is a stamp of specific quality assurance, which in my opinion is related to quality assurance in diagnostics and therapy. THE DELAY BETWEEN COMPLETING RESEARCH AND PEER-REVIEWED PUBLICATION CAN BE SO LONG THAT THE FINDINGS ARE OUT OF DATE WHEN THEY ARE PUBLISHED. WHAT CAN BE DONE TO IMPROVE THIS?
ARE PATIENTS ADEQUATELY INFORMED ABOUT IMPLANT DENTISTRY?
I think they are informed about the possibilities, but not always correctly. While most dentists know about implants, many are not prepared to treat patients themselves and may therefore be a poor source of information. The best information will come from a dentist trained in implantology. WILL NEW MEDIA IMPROVE PATIENT INFORMATION?
CD-ROMs, DVDs, videos on demand, and Internet-TV are all available. Electronic media are important, but the information itself must be didactically well-prepared and suitable for integration into chair-side communication.
We generally publish articles no later than half a year after submission, unless there are significant queries or post-editing requirements. The process can be accelerated for online journals in the future, increasing topicality further. IS THERE ANY VALUE IN SCIENTIFIC WORK THAT IS NOT PUBLISHED?
The value of research is closely connected to its ability to be used and cited by other researchers. If it is not published in a well-read journal, it will lose both its meaning and its place in the international arena of ideas. WITH THE FLOOD OF LITERATURE AIMED AT DENTAL PROFESSIONALS, HOW CAN COMPANIES BEST REACH KEY CUSTOMER GROUPS?
IS DIRECT-TO-CONSUMER ADVERTISING A USEFUL OPTION FOR COMPANIES?
I consider it dangerous if companies excite consumer interest in treatment methods and products that dentists may not be able to deliver. Company image campaigns and product-specific advertising should be done very carefully. The whole area of homecare products, such as oral hygiene articles, is less sensitive. IS THERE A TRULY AUTHORITATIVE VOICE THAT ESTABLISHES TREATMENT AND PRACTICE STANDARDS IN IMPLANT DENTISTRY?
Large national and international scientific societies are very active, for example with their guidelines for practitio-
The dental industry would be well advised to advertise in journals that have high reader loyalty and are well-established in expert groups. Circulation volume is less important than recognition as a reliable source of information.
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INDEPENDENT EXPERT OPINIONS
CHANGES IN THE DENTAL SECTOR: ROBERT GANLEY ‘OUR APPROACH IS ALWAYS TO LOOK AT THE OPPORTUNITY AND HOW WE NEED TO RESTRUCTURE OURSELVES TO MEET THE NEEDS OF THE CHANGING CUSTOMER.’
Robert Ganley, MBA, BSc, is Chief Executive Officer of Ivoclar Vivadent AG, the international supplier of comprehensive systems for dental practices and laboratories.
HOW HAVE CUSTOMERS IN DENTISTRY CHANGED IN RECENT YEARS?
First, more patients want esthetic improvement as well as dental health maintenance. Second, while the traditional personal relationship between patient and dentist still exists, some patients are willing to go to different places and dentists for specific services or for price reasons. Third, both groups are armed with much more knowledge. The patient is turning into a consumer with needs and not just pain. We believe that the difference between a patient asking about a particular product or treatment and not asking is due to one thing: knowledge.
competition in low-cost regions is a natural process. Markets are efficient and such imbalances create a new balance. WILL SMALL DENTAL LABS AND INDIVIDUAL DENTISTS SURVIVE?
The formula of single dentist practices and small, local dental laboratories has worked for a long time. Economic evolution will force some consolidation, and competition will accelerate the trend, but it will be a generational change. WHAT IS THE IMPACT OF THE CONSOLIDATION OF DENTAL PRACTICES AND LABORATORIES?
For patients, I believe that the quality of care is comparable. For dentists and dental laboratories it is a good way to deal with the escalating costs of high-tech equipment. For manufacturers, the larger corporate practices present challenges and opportunities. CONSIDERABLE CONSOLIDATION WAS FORECAST IN THE DENTAL INDUSTRY BUT THERE ARE MORE COMPANIES THAN EVER. WHAT’S
DENTISTS ARE KNOWN FOR THEIR CONSERVATISM. DO THEY KEEP UP
NEXT?
WITH CHANGE?
The industry will continue to consolidate but at a slower rate. Larger companies will make acquisitions to expand their portfolios and benefit from the rewards of scale. Other companies will expand by acquiring technology and by internal growth. Both are viable strategies. Our customers are not demanding ‘larger’, they just want ‘better’.
Dentists have always changed when there is a good reason to do so. Market changes and improvements in dental materials and technologies provide opportunities for both business expansion and clinical improvement, which validate change. Furthermore, the expansion of the patient’s knowledge of the benefits available from new dental technologies is a catalyst for change. IS THERE STILL ROOM FOR SIGNIFICANT INNOVATION?
Market needs and financial reward attract innovation. Esthetics is driving development of materials for replacing missing teeth and restoring partially damaged teeth. Dentists and patients continue to demand more natural-looking materials that bring biological benefits but also restore or even improve a person‘s self-esteem. Innovation will continue and will accelerate. WILL TRAVELLING TO SAVE ON DENTAL TREATMENT INCREASE?
The imbalance in pricing caused by the emergence of
IS THE DENTAL SECTOR SUSCEPTIBLE TO ECONOMIC DOWNTURNS?
In my experience it is not severely affected. Historically, the dental industry has grown in the 5–7% range with few highs and fewer lows. It offers limited risk and predictable rewards. This performance is attracting increased investment. DO YOU SEE OPPORTUNITIES IN MARKETS LIKE CHINA AND INDIA?
They will become important production sites if reliability, quality, responsiveness and consistency can be achieved. Moreover, the growth of dental demand in these markets exceeds the local capacity to meet it. Companies are already investing in sales, marketing and distribution infrastructure, and in education facilities and personnel.
Straumann Annual Report 2007
Operational Review
INDEPENDENT EXPERT OPINIONS
ADVOCATING FOR INNOVATION: STEPHEN UBL ‘THE REGULATORY AND REIMBURSEMENT PROCESSES ARE BECOMING MUCH MORE COMPLEX, AS ARE THE LEGAL AND ETHICAL ISSUES AROUND SALES AND MARKETING PRACTICES.’
Stephen Ubl is President and CEO of AdvaMed, Washington D.C., the world‘ s largest medical technology association.
interaction and cooperation is vital for continued innovation and ultimately good for patients. IS THAT PRINCIPALLY IN THE US?
Yes. However, we interact with the European trade associations and we are planning a global conference this spring to encourage convergence around the AdvaMed code. WHAT IS THE ROLE OF ADVAMED IN THE MEDICAL DEVICE UNIVERSE?
AdvaMed is the largest trade association representing medical technology companies. Our members produce nearly 90% of the medical devices, diagnostic products and health information systems purchased in the US and more than 50% worldwide. We advocate for a legal and regulatory environment that facilitates innovation in medical technology.
IS IMPLANT DENTISTRY OF INTEREST TO ADVAMED?
Absolutely. Dental implant manufacturers now face many of the same issues as our broader membership, and they can certainly benefit from our expertise and effectiveness. The door is open. WOULD DENTAL COMPANIES COME IN UNDER THE SAME UMBRELLA?
The regulatory and reimbursement processes are becoming much more complex, as are the legal and ethical issues around sales and marketing practices.
It’s a combination. We already have working groups that the dental implant sector could join. If critical mass could be achieved we would form a sector organization bringing CEOs and senior managers together to work on dental issues.
DOES STRINGENT REGULATION IMPROVE TREATMENT QUALITY?
DON’T YOU NEED EVERY COMPANY TO JOIN BEFORE YOU CAN BE
Not necessarily. Overly stringent regulation can slow the pace of innovation and unnecessarily delay the patient’s access to better treatments.
EFFECTIVE?
IS THE POLICY ENVIRONMENT FOR MEDICAL COMPANIES CHANGING?
IS THE MEDICAL DEVICE SECTOR SIMILAR TO PHARMACEUTICALS REGARDING LEGAL COMPLIANCE AND RELATIONSHIPS BETWEEN
We are already viewed by policy makers as representing the industry as a whole. The real question is whether a company can afford not to have a seat at the table. Those that are present will be heard and will help create the future. Those that aren’t, won’t.
DOCTORS AND COMPANIES?
Scrutiny is increasing in both. Media accounts suggest that any relationship a company has with a physician is somehow improper. Actually there is a big difference. In pharma, laboratory research doesn’t require much interaction with the average physician. On the device side, interaction is the lifeblood of innovation as physicians and companies work together to improve technologies. WHAT HAS ADVAMED DONE ABOUT THESE COMPLIANCE ISSUES?
We developed a voluntary code of ethical conduct that is becoming the standard for industry practice. Also, we are educating the government and the public that this type of
SHOULD THIRD PARTIES BE INTERESTED IN WHO FOLLOWS THE CODE?
The voluntary acceptance of an industry code of ethics is an important indicator of a company’s commitment to high business standards. If I were a clinician or a patient or an investor I would be keenly interested in whether a company was subscribing to the AdvaMed code.
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INDEPENDENT EXPERT OPINIONS
THE AFFECTIONATE KISS Embrace or shrivel! An intense kiss exercises up to 38 facial muscles, which smoothens away existing wrinkles and prevents others from forming. Muscular activity in energetic kissing burns as many calories per minute as cleaning your teeth or walking to the beautician. Attractive teeth increase ‘kissability’ and might even reduce anti-ageing cream bills!
After wrinkles, one of the most common causes of facial changes in older people is bone resorption, which is a result of tooth loss. Straumann dental implants stimulate the jaw-bone and prevent it shrinking away, preserving natural facial contours.
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XXXXXXXXXXXXXXX
CORPORATE GOVERNANCE
Principles Group structure Shareholders Capital structure Board of Directors Executive Management Board Compensation* of, participations by, and loans to Directors and Executives Shareholders’ general meeting and rights of participation Changes in control and defense measures Auditors Information policy
75 75 78 79 82 86 89 90 90 90 91
* In accordance with accounting standards, the compensation paid/awarded to Directors and Executives is now presented in our audited Financial Report on p. 177. The components are explained on p. 89.
Straumann Annual Report 2007
Operational Review
CORPORATE GOVERNANCE
WE ARE COMMITTED TO A POLICY OF OPEN, TRANSPARENT AND CONTINUOUS INFORMATION. OUR COMMITMENT TO RESPONSIBLE CORPORATE GOVERNANCE MEANS LEADERSHIP BALANCED BY CONTROL, SAFEGUARDING THE INTERESTS OF OUR SHAREHOLDERS.
PRINCIPLES
Straumann’s principles of, and rules on, corporate governance are laid down in the Articles of Association, the Rules for Organization and Operation, the Code of Conduct, and the Charters of the Board Committees. These principles and rules are the basis of corporate governance disclosures, which are in compliance with the Directive on Information relating to Corporate Governance published by the SWX Swiss Exchange, where Straumann’s shares are traded.
in North America, also holds the US Distribution company Straumann USA, LLC. Straumann Holding AG directly or indirectly holds 100% of the capital and voting rights in all Group companies except one of which it held 95.4% at year-end. As laid down in the Rules of Organization and Operation, the CEO or the respective Regional Head, the CFO and the General Counsel are generally Members of the Board of Directors in all Straumann companies and represent the parent company as the shareholder.
GROUP STRUCTURE CHANGES AND DEVELOPMENTS IN 2007
Straumann Holding AG is a listed stock corporation incorporated and domiciled in Switzerland. Registered in Basel, Straumann Holding AG is the parent company of the Straumann Group, and has been listed at the SWX Swiss Exchange since 1998. Information about its shares, which are traded on the main segment of the SWX Swiss Exchange under the symbol STMN, is provided on the inside cover and p. 185. Headquartered in Basel, Switzerland, the Straumann Group includes a total of 21 fully owned distribution companies around the world (see chart on p. 189). The Group sells products and services through 14 distribution companies in Europe, including its headquarters in Switzerland, and through its CAD/CAM unit in Germany. There are two sales companies in North America, three in the Asia/Pacific region and two in Latin America. Two companies – one in Switzerland, the other in North America – manufacture dental implants and related products, one company in Europe produces oral tissue regeneration products. The Group also operates three production sites for CAD/CAM products and equipment for use in tooth restoration. Two of these are in Germany, the other is in the US. Apart from this, Straumann Holding AG holds 100% of the shares in one subholding company in Germany and one subholding company in Japan. In addition, Straumann Manufacturing, Inc., the company responsible for production
STRAUMANN VILLERET
In February 2007, Straumann’s production site in Villeret in the Swiss Canton of Bern became a separate legal entity from Institut Straumann AG. This was effected by transferring the corporate seat of Institut Straumann AG from Basel to Villeret and renaming it Straumann Villeret SA. All nonproduction assets were transferred to Straumann Services AG, which was founded in December 2006 and subsequently renamed into the current Institut Straumann AG in February 2007, with its corporate seat in Basel. ACQUISITION OF ETKON GROUP
In March 2007, Straumann acquired 77.7% of the shareholdings of the German company etkon Centrum für dentale CAD/CAM-Technologie AG and its subsidiaries (referred to subsequently and throughout this report as ‘etkon AG’ or simply ‘etkon’). For the purpose of this acquisition Straumann Holding Deutschland GmbH was established in February 2007 (see p. 132 for details). Subsequently, 17.7% were acquired, bringing total ownership at the end of 2007 to 95.4%. UPSTREAM MERGERS RELATED TO BIORA
At the beginning of 2007, Straumann merged Biora BioEx AB, a company of the former Biora Group, with Biora AB. Straumann Holding Sweden AB was then merged into
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CORPORATE GOVERNANCE
Straumann AB. These two mergers were officially executed in August 2007.
Marketing and Marketing Support, which was transferred from the Products Division in the third quarter of 2007.
ACQUISITIONS OF DISTRIBUTORS
CEO
In July 2007, Straumann Holding Japan K.K., which was formed in May 2007, acquired 100% of the interest in Daishin Implant System, Co. Ltd in Osaka, Japan, the former distribution company of Straumann in Japan. In August 2007, Daishin Implant System, Co. Ltd. was renamed Straumann Japan K.K. (see pp. 133–134 for details). At the beginning of August 2007, Straumann acquired 100% of the interest in B.I. Trading, its former distributor in the Republic of Korea. B.I. Trading was renamed Straumann Dental Korea Inc. at the end of August 2007 (see pp. 134–135 for details). In January 2008, Straumann acquired 100% of the interest in Ormedent spol. s r.o., the exclusive distributor of Straumann products and services in the Czech Republic and Slovakia (see p. 167 for details).
Corporate Services
Finance & Operations
Products
Sales
The CEO, the Head of Finance & Operations (the CFO), the Head of Products and the Head of Sales comprise the Executive Management Board of the Straumann Group. Further information on the Group’s Management is provided on pp. 86–89. LEGAL GROUP STRUCTURE LISTED COMPANIES
OTHER
In January 2008, Straumann opened a local branch office in Budapest taking over the distribution of Straumann products from its former distributor Valid Dental-Medical. OPERATIONAL GROUP STRUCTURE
Operationally, the Group comprised three divisions as of the beginning of 2007: • Finance & Operations, which incorporates all finance-related functions, Operations (Purchasing, Corporate Quality Management & Assurance, Production, and Logistics), Group Audit, Investor Relations and Information Technology. • Products, which is structured into distinct business units responsible for product innovation and life-cycle management. • Sales, which comprises the various country organizations grouped into multiple regional responsibilities as well as
Straumann Holding AG is the sole listed company of the Straumann Group. Name
Straumann Holding AG
Domicile
Basel, Switzerland
Share capital
CHF 1 563 067*
Registered shares
15 630 671*
Nominal value
CHF 0.10
Percentage of treasury shares
0.35%
Market capitalization
CHF 4 881 million*
Listed at
SWX Swiss Exchange
Security ID
0 01228 007
ISIN
CH 0012 280 076
Bloomberg
STMN SW
Reuters
STMN.S
Telekurs (Investdata)
STMN
* At 31 December 2007.
Straumann Annual Report 2007
Operational Review
CORPORATE GOVERNANCE
PRINCIPAL GROUP COMPANIES
Straumann holds 100% of the shareholdings in all Group companies except in etkon AG, of which it held 95.4% on 31 December 2007.
Straumann Holding AG Basel, Switzerland CHF 1 563 067
Institut Straumann AG Basel, Switzerland CHF 100 000 Straumann Italia srl Milan, Italy EUR 270 000 Straumann Villeret SA Villeret, Switzerland CHF 9 000 000 Straumann GmbH Vienna, Austria EUR 40 000 Straumann GmbH Freiburg, Germany EUR 170 000
Straumann Holding Deutschland GmbH Freiburg, Germany EUR 25 000 etkon Centrum für dentale CAD/CAMTechnologie AG Gräfelfing, Germany EUR 326 000 Straumann SARL Marne-la-Vallée, France EUR 192 000 Straumann SA Madrid, Spain EUR 60 101 Straumann Ltd Crawley, Great Britain GBP 100 000 Straumann BV Ijsselstein, Netherlands EUR 18 151 Straumann SA/NV Zaventem, Belgium EUR 1 450 000
Straumann AB Gothenburg, Sweden SEK 100 000 Straumann AS Oslo, Norway NOK 1 000 000 Straumann Danmark ApS Greve, Denmark DKK 125 000 Straumann OY Helsinki, Finland EUR 32 000 Biora AB Malmö, Sweden SEK 950 152 Bioventures BV Amsterdam, Netherlands EUR 18 151
Straumann Manufacturing, Inc Andover, USA USD 1
Straumann Pty Ltd Victoria, Australia AUD 100
Straumann USA, LLC Andover, USA USD 1 Straumann Canada Ltd Burlington, Canada CAD 1 500 000 Straumann Mexico SA de CV Mexico DF, Mexico MXN 19 407 000
Straumann Holding Japan KK Tokyo, Japan JPY 1 000 000 000 Straumann Japan KK Osaka, Japan JPY 10 000 000 Straumann Dental Korea Inc Seoul, South Korea KRW 200 000 000
Straumann Brasil Ltda São Paulo, Brazil BRL 465 999
■ Holding and subholding ■ Sales and distribution ■ Manufacturing ■ Manufacturing and subholding ■ Headquarters,
At 31 December 2007
sales and distribution and subholding
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CORPORATE GOVERNANCE
MAJOR SHAREHOLDERS
SHAREHOLDERS REGISTERED SHAREHOLDERS
On 31 December 2007, 11 098 shareholders were registered as holding 85.3% of the total shares. Share ownership is as follows:
The following major shareholders, as deďŹ ned by Art. 663c of the Swiss Code of Obligations, were registered as holding more than 3% of the share capital on 31 December 2007. (Prior to 1 December 2007, major shareholders were deďŹ ned as holding more than 5%.)
Registered shareholders 31 Dec 2007
Registered shareholders 31 Dec 2006
1–100
7 354
8 433
Dr h.c. Thomas Straumann
101–1000
3 394
4 109
(Member of the Board)
287
311
54
40
7
7
Simone Maag de Moura Cunha
2
2
Total
11 098
12 902
Shares held
1001–10 000 10 001–100 000 100 001–1 000 000 1 000 001 and more Total
SHAREHOLDINGS ON 31 DECEMBER 2007
/PO SFHJTUFSFE .BKPS TIBSFIPMEFST
3FTU PG 8PSME 64" 3FTU PG &VSPQF (SFBU #SJUBJO
1SJWBUF JOEJWJEVBMT *OTUJUVUJPOBM TIBSFIPMEFST
/PO SFHJTUFSFE
4XJU[FSMBOE
(in %)
31 Dec 2007
31 Dec 2006
32.4
32.4
12.3
12.3
6.0
6.0
50.7
50.7
Dr h.c. Rudolf Maag (Chairman of the Board)
Baillie Gifford, an independent investment managment ďŹ rm based in Edinburgh, Scotland, reported that it held approximately 6.8% of the share capital of Straumann Holding AG at the end of December 2007. The stake is divided among Baillie Gifford and Co., Baillie Gifford Life Ltd and Baillie Gifford Overseas Ltd, all of Calton Square, Greenside Row, Edinburgh, UK. No other shareholder reported a holding of more than 3% of the share capital. To the Company’s knowledge, no shareholders’ agreements or other agreements between the shareholders exist. CROSS -SHAREHOLDINGS
Straumann does not have, and has not entered into, any cross shareholdings with other companies relating to equity or voting rights.
Straumann Annual Report 2007
Equity Share capital Reserves Retained earnings
31 Dec 2007
31 Dec 2006
31 Dec 2005
623 495
503 574
419 989
1 563
1 562
1 558
51 564
32 057
46 601
566 552
469 955
370 319
37
38
42
0
0
0
Conditional share capital Authorized share capital
CORPORATE GOVERNANCE
CONDITIONAL SHARE CAPITAL
CAPITAL STRUCTURE
(in CHF 1 000)
Operational Review
A conditional share capital of CHF 300 000 was resolved at the extraordinary General Meeting on 6 May 1998. Following the share split of 1:20 in 2001 and the reductions in nominal value in 2001 and 2002, the conditional share capital at the end of 2007 amounted to CHF 36 932 and the number of conditional shares at the end of 2007 to 369 329. The conditional share capital is for the use in equity participation plans for employees and management (see following sections for details). EMPLOYEE SHARES
Number of registered shares 15 630 671
15 615 978 15 576 761
Nominal value per share (in CHF)
0.10
0.10
0.10
Registration restrictions
none
none
none
Voting restrictions
none
none
none
Opting-out, opting-up
none
none
none
Employees in Switzerland are able to purchase Straumann shares for 75% of the average share price over a period of seven trading days beginning on the ‘ex-dividend’ day, with shareholders’ preemptive rights being excluded. The employees are entitled to buy between 10 and 100 shares per calendar year. The shares are subject to a 2-year lock-up period starting on the 21st trading day after the ex-dividend day. STOCK OPTION PLAN
SHARE CAPITAL
On 1 January 2008, the share capital was composed of 15 630 671 registered shares, each with a nominal value of CHF 0.10. The share capital is fully paid up. All shares have the same entitlements to a dividend. Each share duly entered in Straumann’s register of shares as being held in the shareholder’s own name and on the shareholder’s own account entitles the shareholder to one vote. On 31 December 2007, Straumann Holding AG did not have any authorized share capital and had not issued any participation certificates or profit participation certificates. The conditional share capital amounted to CHF 36 932.
At Straumann, options with a lock-up period are used as a compensation instrument with the intention of fostering and rewarding longer-term business decision making. Part of the compensation paid to the Board of Directors, Executives and other members of senior management takes the form of stock options. The options have a term of up to six years and a vesting period of on to three years. The exercise price is equal to the share price on 31 December / 1 January. The value of the options is determined at grant date and expensed as personnel expense from the service commencement to the end of the vesting period. In order to facilitate valuation and transferability of options granted under this plan, the options are structured as ‘Private Placement’. Since 2000, a Swiss bank has functioned as ‘market maker’ for the quoted and private placement warrants. One option is equal to 50 warrants. The warrants issued are shown in the following table.
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CORPORATE GOVERNANCE
SUMMARY OF ALL VALID WARRANTS ISSUED IN THE STRAUMANN STOCK OPTION PLAN
Year
Security ID number
Market maker
Type/ratio
Number
Strike price
Expiry
STMN/UBSW Wt 12.08 (STMN08)
2003
1792394
UBS Derivatives
American 50:1
2 529 550
187.90
12.2008
STMN/UBSW Wt 12.09 (STMN09)
2004
2038075
UBS Derivatives
American 50:1
2 334 700
236.00
12.2009
STMN/UBSW Wt 12.10 (STMN10)
2005
2409263
UBS Derivatives
American 50:1
2 574 000
304.50
12.2010
STMCR* Wt 12.12 (STMN12)
2006
2882303
Credit Suisse Derivatives
American 50:1
2 184 250
295.00
12.2012
STMLG* Wt 12.13 (STMN13)
2007
3669084
Credit Suisse Derivatives
American 50:1
2 631 250
312.25
12.2013
Name/Symbol
Total valid warrants issued
12 253 750
*Traded on the SWX Swiss Exchange.
Apart from the above, 5330 non-tradable options were granted for the ďŹ scal year 2007 for management compensation schemes in certain countries. Including the above, the number of options (1 option = 50 warrants) outstanding under the stock option plan developed as follows:
The options outstanding are available as follows:
In year
Options available for exercise
2007
102 471
0
2008
133 126
50 524
Options expiring at year-end
2009
142 644
45 878
2007
2006
2010
150 641
46 086
As of 1 January
206 231
202 675
2011
104 555
0
Granted options
57 955
48 000
2012
104 555
50 680
Exercised options
(14 693)
(39 217)
2013
53 875
Forfeited options
(2 450)
(5 227)
Total
As of 31 December
247 043
206 231
Options available for exercise
102 471
86 505
(See p. 177 for options granted to the Board of Directors and the Executive Management Board.)
53 875 247 043
In 2007, 14 693 options were exercised and exchanged for the corresponding number of shares.
Straumann Annual Report 2007
RESTRICTIONS ON THE TRANSFERABILITY OF SHARES AND NOMINEE REGISTRATIONS
• There are no restrictions on the transferability of Straumann Holding’s shares. • A register of shares and their owners is maintained. The Company must be informed of mutations. • The person recorded in the register of shares is considered to be a shareholder in relation to the Company. • Proof of acquisition of title in the shares is a prerequisite for entry in the register of shares. • On request, purchasers of shares will be entered in the register of shares as shareholders with voting rights if they expressly declare that they have acquired the registered shares in their own name and for their own account. If a purchaser is not willing to make such a declaration, he/she will be registered as a shareholder without voting rights. Currently 17% of the entries in the register of shares are registered without voting rights. • After hearing the affected parties, the Company may delete entries in the register of shares if these are based on false statements made by the purchaser. • The Board of Directors decides whether nominee entries shall have voting rights.
Operational Review
CORPORATE GOVERNANCE
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CORPORATE GOVERNANCE
DR H.C. RUDOLF MAAG
DOMINIK ELLENRIEDER
DR H.C. THOMAS STRAUMANN
OSKAR RONNER
DR SEBASTIAN BURCKHARDT
JÜRG MORANT
Straumann Annual Report 2007
BOARD OF DIRECTORS
In 2007, the Board of Directors of Straumann Holding AG consisted of six non-executive members. All members are individually elected by the General Meeting for a three-year period of office. Re-election is permitted and not limited. On 30 March 2007, Dominik Ellenrieder and Dr h.c. Thomas Straumann were reelected for a further 3-year term by the General Meeting. The Board reappointed Rudolf Maag as its Chairman and Oskar Ronner as Vice Chairman. The average age of the members of the Board of Directors is 55. DR H.C. RUDOLF MAAG
Swiss (born 1946), Chairman of the Board, Chairman of the Finance and Audit Committee
Rudolf Maag has a long, distinguished career in finance and business administration. It began in 1968, when he joined the Basel-based UTC trading company. In 1973 – the year in which he obtained his MBA with distinction at INSEAD – he moved to the Agro Division of the Swiss multinational Sandoz AG. There, he held a series of senior management positions: Head of Planning and Financial Control, Director of Marketing USA, Head of the Brazilian Division, and Head of Business Development and Acquisitions. In 1986, he was appointed Commercial Director of Institut Straumann AG. In 1990, following a management buy-out, he created Stratec Medical, of which he was Vice Chairman and CEO. In 1999, following the merger with Synthes USA, he became Vice Chairman and CEO of Synthes-Stratec and held both positions until 2000, when he left the company. He has since assumed various Board of Directors mandates and is involved in private equity financed start-ups and spin-offs. In 2006, he was awarded an honorary doctorate by the University of Basel, Switzerland. Rudolf Maag has been a member and Chairman of the Board of Directors of Straumann since 2002, and is elected until 2008.
Operational Review
CORPORATE GOVERNANCE
OSKAR RONNER
Swiss (born 1945), Vice Chairman of the Board, Chairman of the Human Resources Committee
Oskar Ronner graduated with an MBA from Harvard Business School in 1978 and with a MSc in mechanical and industrial engineering from the Swiss Federal Institute of Technology (ETH), Zurich, in 1970. After General Management and CEO positions in the aircraft industry, he joined Gebr. Sulzer AG, Winterthur, in 1988 as President of the Sulzer Medica Division. At the same time he held the post of CEO of Intermedics Inc, Angleton (Texas, USA). From 1990 to 1994, he was a member of the Executive Board and Executive Vice President in charge of the Industry Division of Elektrowatt AG, Zurich, and was subsequently the company’s President and CEO until 1998. Between 1994 and 1996, he was also Executive Vice President at Credit Suisse Holding, the major shareholder of Elektrowatt AG. When Elektrowatt Building Technologies was bought by Siemens in 1998, he was appointed President and CEO of what is now Siemens Building Technologies AG, a post he held until 2003. Oskar Ronner has been a member of the Board of Directors of Straumann since 2000, and is elected until 2009. DR SEBASTIAN BURCKHARDT
Swiss (born 1954), Member of the Finance and Audit Committee
Sebastian Burckhardt began his studies in the fields of economics and law and obtained his doctorate law degree at the University of Basel. He is a qualified lawyer and public notary in Switzerland, and was admitted to the New York bar following studies at New York University Law School. He is a partner at VISCHER, Attorneys-at-law, in Basel. In 2007 the law firm VISCHER received fees amounting to CHF 178 435 (CHF 302 046 in 2006) for legal and tax consultancy services. All transactions with VISCHER are based on standard commercial contracts concluded at arm’s length. Sebastian Burckhardt has been a member of the Board of Directors of Straumann since 2002 and is elected until 2008.
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Other key directorships include: Dolder AG, Petroferm Inc, Cell Int. AG, and the School for Healing of the Deaf and Persons with Speech Impediments (Riehen, Switzerland).
Jürg Morant has been a member of the Board of Directors of Straumann since 2002 and is elected until 2008. Other key directorships include Hotel ‘Les Trois Rois’ and Grand Hotel Bellevue.
DOMINIK ELLENRIEDER
Swiss (born 1958), Chairman of the Technical Committee, Member of the Human Resources Committee
A graduate of the University of Basel, where he obtained a degree in economics, Dominik Ellenrieder was Head of International Sales at Protek AG (later Sulzer Medica). In 1990, he joined Stratec Medical, where he held a series of managerial positions with increasing responsibility (development, product management, operations of affiliated companies). In 2000, he founded Kuros Therapeutics AG, where he was Chairman of the Board until 2002. Dominik Ellenrieder has been a member of the Board of Directors of Straumann since 2001 and is elected until 2010. Other key directorships include Medartis AG, Kuros Biosurgery AG, and Sentec AG. JÜRG MORANT
Swiss (born 1944), Member of the Finance and Audit Committee, Member of the Technical Committee
Jürg Morant’s academic background includes medical studies at the University of Bern and business management at the University of St. Gallen, reinforced by INSEAD’s Senior Executive Program. His business experience started with the Pharma Division of Ciba-Geigy, where he rose to be Group Head, Pharma Marketing Services. In 1982, he was appointed CEO of Documed AG, which he took over in 1986. He then led the company, renamed MediMedia, through a phase of international expansion and consolidation which culminated in its sale to Havas (part of Vivendi Universal) in 1999. He was appointed CEO Europe and member of the Executive Committee of Vivendi Universal Health, where he was also member of the Audit Committee. From 2004 to 2005, he was a member of the Executive Management of the Galenica Group.
DR H.C. THOMAS STRAUMANN
Swiss (born 1963), Member of the Human Resources Committee, Member of the Technical Committee
Thomas Straumann’s skills in precision engineering were complemented by his studies at the Basel Management School, from which he graduated in 1988. In 1990, he was responsible for restructuring Institut Straumann AG and was CEO and Chairman of the Board of Directors until 1994. He was Chairman of the Board of Straumann Holding AG until 2002. In 2004, he was awarded an honorary doctorate by the University of Basel, Switzerland. Thomas Straumann has been a member of the Board of Directors of Straumann since 1990 and is elected until 2010. Other key directorships include Hotel ‘Les Trois Rois’ (Chairman), Centervision AG (Chairman), Medartis AG (Chairman), Grand Hotel Bellevue (Chairman), Tschudin+Heid AG (Deputy Chairman), Moser Group Schaffhausen Ltd (Member of the Board), Member of the Board of Directors and Board of Trustees of ITI and IBRA. OPERATING PRINCIPLES OF THE BOARD OF DIRECTORS
The Board of Directors meets at least four times a year and as often as business requires. In 2007, the Board of Directors held seven meetings. The members of the Executive Management Board participate in Board meetings in an advisory capacity. Dr Andreas Meier (General Counsel) acts as Secretary to the Board of Directors (non-member). The Board of Directors consults external experts where necessary when discussing specific topics. The Board of Directors is responsible for the strategic management of the Company, the supervision of the Executive Management Board and financial control. The Board of Directors reviews the Company’s objectives and identifies opportunities and risks. In addition, it decides on the appointment and/or dismissal of the members
Straumann Annual Report 2007
Name
Operational Review
CORPORATE GOVERNANCE
Age*
Nationality
Member since
Elected in
Elected until
Dr h.c. Rudolf Maag (Chairman)
61
Swiss
2002
2005
2008
Oskar Ronner (Vice Chairman)
62
Swiss
2000
2006
2009
Dr Sebastian Burckhardt
53
Swiss
2002
2005
2008
Dominik Ellenrieder
49
Swiss
2001
2007
2010
Jürg Morant
63
Swiss
2002
2005
2008
Dr h.c. Thomas Straumann
44
Swiss
1990
2007
2010
* At 31 December 2007.
of the Executive Management Board. The Board of Directors is a quorum if a majority of its members is present. Valid resolutions require a majority of the votes cast. In the event of a draw, the Chairman of the Board holds the casting vote. COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has the following three permanent committees: the Finance and Audit Committee, the Human Resources Committee and the Technical Committee. The Board relies on the recommendations of these Committees to facilitate the efficient and effective organization of its work. Each Committee comprises three non-executive Board Members. In 2007, the Finance and Audit Committee met five times, the Human Resources Committee twice and the Technical Committee twice. FINANCE AND AUDIT COMMITTEE
Members: Dr h.c. Rudolf Maag (Chair), Dr Sebastian Burckhardt, Jürg Morant.
This Committee’s main tasks include: • Examination of the effectiveness of the external auditors and the internal controls • Review of the instructions for management in terms of financial risks and compliance therewith • Discussion of the financial statements with the CFO and the Head of the external auditors • Review of the services provided by the auditors, their remuneration, and their independence • Review of the risk management procedures.
HUMAN RESOURCES COMMITTEE
Members: Oskar Ronner (Chair), Dominik Ellenrieder, Dr h.c. Thomas Straumann.
This Committee’s main tasks include: • Recommendation of the compensation to be paid to members of the Board and Executive Management Board • Development of the principles for the market and performance driven compensation of all employees • Proposal to the Board regarding the stock option plans and the principles governing grants made under them • Drawing up of the employment contracts for the members of the Executive Management Board • Decision on the recruitment of EMB members. TECHNICAL COMMITTEE
Members: Dominik Ellenrieder (Chair), Dr h.c. Thomas Straumann, Jürg Morant.
The main tasks of this Committee include: • Observation and evaluation of the market situation • Review of Straumann’s product range and the positions of the Group’s most important competitors • Evaluation of Straumann’s future position (three to five years’ time) • Identifying key projects and assessing their planning and implementation.
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Operational Review
CORPORATE GOVERNANCE
ASSIGNMENT OF RESPONSIBILITIES
EXECUTIVE MANAGEMENT BOARD
TO THE EXECUTIVE MANAGEMENT BOARD
The Board of Directors has delegated responsibility for the management of the Company to the CEO, Gilbert Achermann, and the Executive Management Board (EMB). The CEO is responsible for the overall management of the Straumann Group. The CFO is responsible for Finance and Operations, including the IT department and worldwide production. The Head of Products is responsible for the performance of the four Business Units (Surgical, Prosthetics, Regenerative and etkon), as well as for Research & Development. The Head of Sales is responsible for global sales and marketing. The Board of Directors has not delegated any management tasks to companies outside of the Company. INFORMATION AND CONTROL MECHANISMS FOR THE BOARD OF DIRECTORS AND THE EXECUTIVE MANAGEMENT BOARD
The Straumann Group’s Management Information System (MIS) covers the areas of management reporting, business and financial reporting. The information is provided to the Board of Directors on a quarterly basis and to the Executive Management Board on a monthly basis. At the beginning of 2007, Straumann created a new Internal Audit position as an independent and objective assurance and consulting body, which reports directly to the CFO and to the Finance and Audit Committee. Internal Audit does not confine itself to financial audits, but also monitors compliance with external and internal policies and guidelines. One of its main tasks is to focus on assessing internal processes and controls and improving them as necessary, with the objective of safeguarding the Group’s material and immaterial assets and to evaluate the effectiveness of the Group’s risk management and governance processes. Additional Group Management tools include strategic planning and its breakdown into business and operational planning. Risk management and monitoring procedures are evaluated at regular intervals by the Finance and Audit Committee.
The Group’s Executive Management Board (EMB) includes four members (three members up to July 2007). Under the leadership of CEO Gilbert Achermann, the Executive Management Board includes: CFO Marco Gadola, who heads Finance and Operations, Dr Sandro Matter, who heads Products, and Franz Maier, who joined Straumann on 1 July 2007 as Head of Sales. The EMB is responsible for the operational management of the Straumann Group, in-line with the instructions issued by the Board of Directors. Its tasks are laid down in the Organizational and Business Regulations. It is also respon-sible for the global strategy and stakeholder management. The EMB is supported by an Executive Management Group (EMG), which is responsible for driving regional and business strategy implementation and includes the regional sales heads, the Heads of the Business Units, the Head of Production and the Head of Human Resources. With effect of 1 January 2008 the EMG also included the General Counsel, the Head of Group Controlling and the Head of Business Development and comprised 12 members on 1 January 2008.
Straumann Annual Report 2007
GILBERT ACHERMANN
Operational Review
CORPORATE GOVERNANCE
MARCO GADOLA
FRANZ MAIER
DR SANDRO MATTER
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Operational Review
CORPORATE GOVERNANCE
GILBERT ACHERMANN
FRANZ MAIER
Swiss (born 1964), President and CEO
German (born 1965), Executive Vice President Sales
Gilbert Achermann holds a degree from the HWV business school in St. Gallen and an Executive MBA from IMD in Lausanne. His extensive experience in the field of corporate finance and investment banking, in particular capital restructuring, was gained over a 13-year period at UBS, where he worked in Brokerage, Sales & Trading and Corporate Finance. He held a series of senior positions at UBS in Switzerland, the US, and Germany.
Franz Maier holds a degree in Business Administration from Passau University in Germany. He joined Straumann in June 2007 from Procter & Gamble (P&G), where he was responsible for Global Export Operations Professional Care at the company’s international headquarters in Geneva.
Mr Achermann joined Straumann in 1998 as Chief Financial Officer and was appointed Chief Executive Officer & President in 2002. He is a member of the Board of Directors and Board of Trustees of the independent academic network International Team for Implantology (ITI).
Previously, Mr Maier worked for the Wella Group for 14 years, which was acquired by P&G in 2003. He held managerial positions of increasing responsibility in Product Management, Strategic Management and Sales. He spent two years as Marketing Director of Wella France and was Managing Director of P&G Professional Care in Italy for three years prior to his promotion to Corporate Senior Vice President and Regional Manager of Professional Care, South and West Europe.
MARCO GADOLA
DR SANDRO MATTER
Swiss (born 1963), CFO, Executive Vice President Finance & Operations
Swiss (born 1964), Executive Vice President Products
Marco Gadola graduated from Basel University in business administration and economics and completed an accelerated management development program at the London School of Economics. He joined Straumann in June 2006 from Hero, the Swiss-based international food group. He was appointed CFO at Hero in 2001 and was in charge of finance, information technology and supply chain. He also had full financial and commercial responsibility for several Hero group companies. Previously, Mr Gadola spent nine years at the international construction tool manufacturer Hilti, where he held a number of senior commercial and finance-related positions in various countries. Before joining Hilti, he worked for Sandoz International Ltd. as an Audit Manager and for Swiss Bank Corporation, Basel, in Corporate Finance.
Sandro Matter completed a professional apprenticeship at Ciba-Geigy, followed by the Swiss Federal Matura. After earning a Master’s degree in organic chemistry from the Swiss Federal Institute of Technology in Zurich, he achieved a PhD in materials sciences at the same institution. His business career began at Synthes-Stratec, where he was responsible for biomaterials product management and development from 1997 to 2002. He was also a co-founder of Kuros Therapeutics. Dr Matter joined Straumann in 2002 as Head of the Biologics and Research Division and became Head of the Products Division in 2005. He was appointed to his current position at the end of 2006. SUPERVISORY/CONSULTING/POLITICAL FUNCTIONS
Other than Gilbert Achermann’s membership in the Board of Directors and Board of Trustees of the ITI, none of the members of the Executive Management Board:
Straumann Annual Report 2007
• performs any activities in governing or supervisory bodies of significant foreign or domestic organizations, institutions or foundations under private or public law, • holds any permanent management or consultancy function for significant domestic or foreign interest groups, • holds any official function or political post.
Operational Review
CORPORATE GOVERNANCE
improvement per fiscal year. The multiplier for 2007 was 3. The available bonus is credited to a bonus bank and only paid out in part, with the balance being carried forward to the next year. This allows the Company to take both positive and negative fluctuations in its business development into account, to retain top talent and to take a long-term approach to variable compensation. In addition to the variable compensation, a fi xed number of options, determined on an individual basis, are also granted. The options are issued as warrants (1 option = 50 warrants). Options issued prior to 2007 had a term of 5 years and a vesting period of one to three years. The exercise price of the options was the share price on 31 December. The value of the options is determined in line with the Black Scholes method at grant date and amortized as personnel expense over the vesting period (see p. 150). As of 2007, the following changes apply to the terms and conditions of the existing stock option program. The option term has been extended from five to six years with a cliff vesting period of two years. The exercise price equals the grant date price (1 January).
MANAGEMENT CONTRACTS
The Board of Directors and the Executive Management Board run the business directly. They have not delegated any managerial powers to persons or companies outside Straumann. COMPENSATION OF (SEE ALSO P. 177), PARTICIPATIONS BY, AND LOANS TO DIRECTORS AND EXECUTIVES COMPONENTS OF THE COMPENSATION PACKAGE
A value-based compensation program was introduced for the Board of Directors, the Executive Management Board and Senior Management in 2003. The aim of the program is to link the variable compensation paid to participants in the plan to the long-term added value generated by the Straumann Group. The concept builds on the principle of ‘Economic Profit’ (EP) and is based on a multi-year plan that complies with shareholders’ expectations. In addition to measuring sales growth and profitability increases, the main advantage of the EP concept is that funds used to achieve these increases can be assessed, and the resulting additional costs of capital can be taken into account. In addition to the individual fi xed salaries, the variable compensation component takes the form of an individual cash remuneration (cash bonus). The multiplier for calculating the available bonus is derived from the economic profit
The compensation of the Board of Directors and the Executive Management Board is reported on p. 177 in the audited Financial Report in accordance with IAS 24 and the Swiss code of Obligations. MANAGEMENT TRANSACTIONS
Management transactions include transactions by the Members of the Board of Directors and the Executive Management Board. For 2007, Straumann reported the following management transactions:
Number of persons
Number of transactions
Value of purchasing transactions (in CHF 1 000)
Management transactions in shares
6
12
15 267
0
Management transactions in options
4
5
0
1 471
10
17
15 267
1 471
Total
Value of selling transactions (in CHF 1 000)
89
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Straumann Annual Report 2007
Operational Review
CORPORATE GOVERNANCE
SHAREHOLDERS’ GENERAL MEETING AND SHAREHOLDERS’ RIGHTS OF PARTICIPATION
The shareholders’ general meeting is held in Basel at or towards the end of March. Invitations to the general meeting are issued in writing at least 20 days before the meeting and are published once in the company‘s journals of record, the Schweizerisches Handelsamtsblatt (SHAB – Swiss Official Gazette of Commerce), the Neue Zürcher Zeitung and on the company’s website, www.straumann.com. The 2007 meeting took place on 30 March and was attended by 770 shareholders representing 61% of the company’s shares. A summary of the meeting is published on the company’s website, www.straumann.com.
the Board of Directors in writing, stating the agenda items and motions. Shareholders have the right to receive dividends and hold other such rights as defined in the Swiss Code of Obligations. CHANGES IN CONTROL AND DEFENSE MEASURES
The statutes of Straumann Holding AG do not contain provisions for opting out or opting up. There are no provisions for changes in control regarding Members of the Board of Directors, the Executive Management Board, or other Management staff. AUDITORS
All shareholders who are entered in the share register as having voting rights are entitled to attend the General Meeting and have the right to vote. Each registered share entitles the holder to one vote. There are no voting restrictions. All shareholders may be represented at the General Meeting by written proxy. There are no statutory quorums.
The General Meeting elects the auditors on an annual basis. In March 2007, PricewaterhouseCoopers AG (PwC), Basel, was re-elected for a third consecutive year as the auditor and Group auditor of Straumann Holding AG. The auditor in charge was Thomas Brüderlin, Swiss Certified Public Accountant, who took over the mandate in 2005.
For organizational reasons, new entries cannot be made in the share register 20 or fewer days prior to the General Meeting. Shareholders who sell their shares prior to the General Meeting are no longer entitled to vote.
The worldwide fees paid to the auditors PwC are as follows:
(in CHF 1 000)
2007
2006
1 028
714
consultancy services
2 522
991
Total
3 550
1 705
Audit
The invitation to submit proposals for agenda items is announced by publication once in the aforementioned publications and on the company’s website.
Tax consultancy and other
Shareholders individually or jointly representing 400 000 shares may request items to be included in the agenda not later than the date published on the invitation to submit proposals.
The increase in fees paid is to be seen in the context of the acquisitions and subsequent changes in Group structures in 2007.
Shareholders individually or jointly representing at least 10% of the share capital may request the holding of anextraordinary General Meeting. The request must be made to
The Board of Directors supervises the external auditors through the Finance and Audit Committee, which met five times in 2007. The external auditor participated in one of these five meetings.
Straumann Annual Report 2007
INFORMATION POLICY
Straumann is committed to a policy of open, transparent and continuous information. In accordance with the rules of the Swiss Exchange (SWX), Straumann publishes detailed sales figures on a quarterly basis as well as annual and half-yearly reports. Detailed information is provided at the Shareholder’s Annual General Meeting. A summary of the meeting and the minutes are published on the company’s website. Where necessary or appropriate, the company also publishes additional information on significant events. The CEO, CFO, Head of Investor Relations and Head of Corporate Communication are responsible for communication with investors. In addition to personal contacts, discussions, and presentations in Europe and North America, Straumann held two financial results conferences for the media and analysts in 2007, each attended by around 50 participants. Both of these conferences were transmitted live on the Internet. In addition, Straumann held three teleconferences for the media and analysts as well as an ‘Investor Day’ event attended by 80 participants. The presentation slides used for these events are published on the company’s website. Several non-financial media events, including two media conferences/web briefings were held. Apart from this, the company frequently publishes media releases and briefing documents, which are archived and available from the company’s website: www.straumann.com. Straumann’s calendar of reporting dates and investor relations events planned for 2008 is printed on pp. 186–187 and is also published and updated on the investor pages of the company’s website. Research analysts from 18 banks/financial institutions cover developments at the Straumann Group and are listed on p. 186 of this report as well as on the Straumann website.
Operational Review
CORPORATE GOVERNANCE
Straumann Holding AG’s journal of record is the Swiss Official Gazette of Commerce (SHAB). The statutes of Straumann Holding AG and an excerpt from the commercial register can be downloaded as a PDF file from the company information section of Straumann’s website. This, and more information on the company, is available via the Internet at www.straumann.com.
91
THE BLOWN KISS The blown kiss is often aimed at a crowd and sometimes reciprocates admiration. It is the most relaxed kiss because the pulse and body temperature remain constant. The blown kiss is not intended to arouse and it does not stimulate the immune system because bacterial transfer is minimal.
Straumann’s SLActive implant surface signiďŹ cantly reduces healing times, which is one reason why our implants are chosen for treating celebreties and other people who are constantly in the public eye.
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Straumann Financial Report 2006
Straumann-Group
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FINANCIAL REPORT 2007
Management summary Risk assessment Selected financial information
96 100 102
STRAUMANN GROUP
Consolidated balance sheet Consolidated income statement Consolidated cash flow statement Consolidated statement of changes in equity Notes to the consolidated financial statements Report of the Group auditors
108 109 110 111 112 168
STRAUMANN HOLDING AG
Balance sheet Income statement Notes to the financial statements Proposal of the Board of Directors for the appropriation of the available earnings Report of the statutory auditors
172 173 174 178 179
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Financial Report
MANAGEMENT SUMMARY
EXECUTIVE INTERVIEW: TAKING CHANGE IN OUR STRIDE Marco Gadola CFO, Executive Vice President Finance & Operations
WERE THERE ANY ACCOUNTING CHANGES IN 2007?
Hardly a year passes without some change in accounting standards. In 2007, we adopted several changes, the biggest of which increases the level of transparency of the company’s financial instrument and risk management. WHAT WERE THE MAIN FINANCIAL CHALLENGES?
We completed three substantial acquisitions, which consumed considerable resources. As a result, we had to integrate several entities with very different IT platforms and accounting systems. Although this had to be done simultaneously in companies on opposite sides of the world, we were able to take it in our stride, which speaks for the high level of professionalism in our finance team. DO ALL THE ACQUISITIONS LEAVE YOU WITH ANY FINANCIAL FLEXIBILITY?
Yes. In a fast changing growth industry like ours, winning companies have to maintain flexibility to capture attractive opportunities. Financing the etkon deal through a short-term euro loan maintains our flexibility and reduces our currency exposure. Apart from our net cash position, we have no longterm financial debt. Our standing in the capital markets is excellent and we generate substantial free cash flow year on year, as evidenced by the 26% free cash flow margin in 2007. SO, CAN WE EXPECT A SHARE BUYBACK?
We intend to return excess liquidity to shareholders in the absence of major strategic undertakings. Following our recent acquisitions, expansion and launch activities, which are important contributors to maximizing shareholder value, a share buyback is not on the agenda at present. WHAT EFFECT WILL ETKON HAVE ON YOUR PROFITABILITY GOING FORWARD?
As etkon’s products are lower margin than implants it will be dilutive. We also have to amortize intangibles for some time to come, and we want to invest in rolling out etkon globally. These are one side of the coin. The huge growth potential that etkon offers is the other. SO CAN WE EXPECT ANY MARGIN IMPROVEMENTS?
We expect an improvement in the margin of our underlying business, which will be partially offset by the dilutive effect of etkon which we expect to grow overproportionally. HOW DO YOU EXPECT CURRENCY TRENDS TO AFFECT YOU IN 2008?
I cannot speculate on exchange rates. With almost two-thirds of our sales in euros, we benefited from the rising strength of the euro against the Swiss franc in 2007. In contrast, the weaker dollar did not help us, although our overall dollar exposure is smaller due to the manufacturing costs of our Andover facility. Obviously, we will continue to reduce our currency exposure through appropriate hedging.
Straumann Annual Report 2007
Financial Report
MANAGEMENT SUMMARY
MANAGEMENT SUMMARY
STRAUMANN LIFTS NET PROFIT BY 25%
In 2007, Group net revenue climbed 19% in Swiss francs driven by strong customer demand for existing, newly launched and recently acquired products. With net revenue reaching CHF 714 million, growth was lifted by a 6%-point contribution from acquisitions and a positive exchange rate effect. Excluding the effect of the US import detention imposed on Biora products by the Food and Drug Administration (FDA) throughout 2007, the organic growth was 13%. Operating profit (EBIT) rose 15% to CHF 202 million, corresponding to an EBIT margin of 28.2%. Excluding the effects of acquisitions and the import detention the underlying49 EBIT margin increased to 32.3%. Profitability gains and tax improvements pushed net profit up 25% to CHF 177 million, yielding a net profit margin of 24.8%. With cash from operating activities climbing 29% to CHF 227 million, free cash flow50 rose 39% to CHF 186 million. ROBUST UNDERLYING BUSINESS EXPANSION
The solid underlying growth throughout 2007 was driven by our core implant business, supported by the progressive conversion to SLActive, our innovative third-generation implant surface that significantly reduces healing times and increases security. More than 20% of our implants now have this gold-standard surface and we have maintained its price premium of approximately 30% above the standard SLA. This means that SLActive is accretive to operating profit margin, despite being more complex and expensive to manufacture. With the support of additional clinical data, our global regenerative business continued to develop solidly, except in the US, where the Biora products were subject to an FDA import detention throughout the year. We estimate that these products would otherwise have generated US sales of about CHF 10 million in 2007. We believe that we will be able to supply them to US customers and their patients in the second quarter of 2008 pending successful reinspection of Biora by the FDA. NEW GENERATION BONE LEVEL IMPLANT DOUBLES ADDRESSABLE MARKET
One of our biggest undertakings in 2007 was the clinical development and launch of our new generation Bone Level Implant line extension, which doubles our addressable implant market (see chart on p. 19). The new implant and a comprehensive matching prosthetic portfolio were launched in initial European markets, North America, Australia and New Zealand in the fourth quarter and will be rolled out globally in 2008 and beyond. ENTRY INTO PROMISING CAD/CAM DENTAL PROSTHETIC MARKET
The main strategic highlight in 2007 was Straumann’s friendly acquisition of etkon AG at the beginning of March, which establishes us in the highly attractive fast-growing CAD/CAM prosthetics market. The combination positions Straumann as a differentiated partner providing solutions to rescue, restore or replace teeth. At year-end, Straumann owned 95.4% of all etkon shares and expects the remainder to be tendered in the course of 2008, bringing the total purchase consideration to EUR 100 million (acquisition details on pp. 132-133). The cost implications of etkon include the amortization of acquired intangible assets and certain integration and restructuring costs. etkon contributed CHF 27 million to Straumann’s 2007 net revenues. DISTRIBUTION CHANNELS TAKEN OVER IN ASIA AND EASTERN EUROPE
In July and August, we acquired our Japanese and Korean distributors, gaining direct access to customers in the world’s fourth and fifth largest markets for dental implants (acquisition details on pp. 133-134). 49 In this report the 'underlying' business excludes the effects of businesses acquired in 2007 and the impact
of the import detention on Biora products in the US. 50 Free cash flow is defined as net cash from operating activities less capital expenditures plus net proceeds
from property, plant and equipment, and financial assets.
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Financial Report
MANAGEMENT SUMMARY
These companies have expanded our top-line growth but also add to our selling and administrative costs. Subsidiaries and leadership were put in place rapidly, and most of the key management and staff were retained, making the transitions seamless from the customer’s perspective. Considerable investments will be made to bring the two businesses in line with Straumann’s benchmarks. Shortly after year-end, we took over distribution in Hungary and acquired our distributor in the Czech Republic and Slovakia (acquisition details on p. 167). These initiatives considerably enhance our presence in attractive emerging markets in Eastern Europe and mean that the portion of our revenues generated through third-party distributors is only about 5%. NEW TALENT STRENGTHENS TEAM
We continued to invest in recruiting and training new talent with particular emphasis on strengthening our leadership team with high-caliber managers from mature consumer industries. Our global workforce increased by 421 to 1955 at year-end, of which 241 were newly created jobs. SOLID EUROPEAN PERFORMANCE
64% of Group revenues were generated in Europe, which posted a 16% rise in local currencies (21% in CHF) to CHF 459 million. Most countries reported good performances with double-digit underlying revenue growth. The UK and Spain in particular enjoyed dynamic growth. etkon contributed to the regional expansion, mainly in its home market Germany, which bolstered its position as our largest European subsidiary. See regional details on pp. 20–22. SUBSTANTIAL PICK-UP IN NORTH AMERICA
Revenue in North America, which accounts for 22% of Group, reached CHF 154 million, representing an increase of 7% in local currencies (3% in CHF). Excluding the effect of the import detention, net revenue grew 16% in local currencies over the full year and 18% in the fourth quarter, reflecting an encouraging pick-up in US implant sales and the contribution of the Bone Level Implant launch in October. See p. 22 for regional details. ASIA/PACIFIC BOOSTED BY NEW SUBSIDIARIES; ROW CONTINUES DYNAMIC DEVELOPMENT
In the Asia/Pacific region, net revenue rose 42% to CHF 81 million (11% of Group), boosted by the acquired distribution business and underpinned by consistent strong growth in Australia. Meanwhile, in the rest of the world revenues climbed 61% to CHF 20 million, on top of the particularly strong growth rates in the previous year. See pp. 22–23 for regional details. OPERATING PROFIT RISES 15%
The cost of goods sold increased slower than net revenue thanks to process improvements and a decrease in start-up costs in Andover. This offset the higher costs of the complex production of SLActive and the Bone Level Implant, as well as the dilutive effect of the restorative business. As a result, gross profit rose 21% to CHF 582 million and the gross margin expanded 1.5 percentage points to 81.6%. Sales and administrative expenses increased to CHF 356 million or 49.9% of sales, while research and development costs increased slightly to CHF 31.2 million or 4% of sales. In spite of the integration and start-up costs related to the aforementioned acquired businesses, operating profit before depreciation and amortization (EBITDA) rose 12%, with the EBITDA margin exceeding 34%. Operating profit rose 15% to CHF 202 million while the EBIT margin was squeezed by just over one percentage point to 28.2%. The underlying EBIT margin would have expanded 3% points to 32.3%.
Straumann Annual Report 2007
Financial Report
MANAGEMENT SUMMARY
NET PROFIT MARGIN EXPANDS TO 24.8%
For currency hedging considerations, the etkon deal was financed with cash and a short-term euro loan, which will be repaid using earnings generated in euros. Interest expense on the loan together with other financial expenses amounted to CHF 6.6 million. This was mostly offset by interest of CHF 4.1 million. Currency exchange rates were mainly responsible for the negative net financial result of CHF 7.0 million. A one-time revaluation of deferred tax liabilities and a further improved tax structure resulted in an exceptional full-year tax rate of 8.9%. Going forward, we expect our underlying tax rate to be in the region of 17%. Profitability gains combined with tax structure improvements led to a 25% rise in net profit to CHF 177 million. The net profit margin increased 1.1 percentage points to 24.8% and diluted earnings per share consequently rose 24% to CHF 11.26. STRONG IMPROVEMENTS IN CASH FLOW
Net cash from operating activities rose 29% to CHF 227 million. Net cash used in investing activities amounted to CHF 250 million, of which CHF 162 million were due to the etkon acquisition. Net cash from financing activities was a positive CHF 58 million reflecting the aforementioned euro loan. Free cash flow strongly increased to CHF 186 million, lifting the free cash flow margin to 26%. The combination of all these activities together with the 2006 dividend payment of CHF 47 million meant that overall cash and cash equivalents on 31 December 2007 amounted to CHF 190 million. PROPOSED DIVIDEND INCREASE OF 25% CHF 3.75 PER SHARE
On the basis of the 2007 performance, the Board of Directors proposes a 25% increase in the ordinary dividend to CHF 3.75 per share, subject to the shareholders’ approval at their annual general meeting on 28 March 2008. This corresponds to a pay-out ratio of 33%. OUTLOOK (BARRING UNFORESEEN CIRCUMSTANCES)
The strength of our underlying business and the growing contributions from new products, technologies and subsidiaries are expected to drive our full-year revenue growth in 2008 to the mid-twenties range in local currencies. As efficiency improvements are expected to exceed the higher levels of amortization related to acquisitions, we foresee an improvement of around 50 basis points in full-year operating margin. With the tax rate returning to normal, the net profit margin is expected to be around 23%. 2008 NET REVENUE GUIDANCE
+ mid
twenti
2008 OPERATING PROFIT MARGIN GUIDANCE
es (%)
. approx oints sis p +50 ba
Amortization of acquired intangibles
Underlying business etkon roll-out
Build-up of etkon structure
Bone Level Implant
Restructuring costs acquired businesses
Acquired distribution channels
Dilutive effect of Bone Level franchise
Biora relaunch in US*
Reported FY 2007
Efficiency gains on underlying business
Expected FY 2008
Reported FY 2007
Expected FY 2008
*Pending lift of import detention
Illustration of expected net revenue and EBIT margin growth in 2008, barring unforeseen circumstances (not to scale).
99
100
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Financial Report
RISK ASSESSMENT
RISK ASSESSMENT
MARKET ENVIRONMENT
Straumann is active in specialty segments of the dental industry, the estimated overall value exceeds CHF 4.5 billion. Based on the low level of penetration, the ageing population, and increasing awareness, the chances are good that these markets will continue to offer attractive prospects for future growth. The number of competitors on the market has increased in recent years – as illustrated by the number of implant companies exhibiting at the International Dental Show, which almost doubled from 70 in 2003 to 135 in 2007.51 One challenge facing Straumann is the need to expand its market reach and grow its organization in order to capture the significant market potential. Straumann’s future revenues also depend on its ability to defend and increase its business with existing customers, to enlarge its customer base, to develop innovative products and services that meet customers’ needs and to bring them to market in a timely manner. PRODUCT RISK AND TREATMENT OUTCOME
The increase in suppliers and choice complicates the purchasing decisions. Price, clinical documentation, customer service, ease of use are all additional factors. Very few products on the market today are supported by substantial clinical data, making it difficult to predict whether treatment success and survival rates will drop. This uncertainty is accentuated by the increase in the number of less experienced treatment providers. Straumann can be affected by such risks as well, but seeks to minimize the product risks by going well beyond the minimum statutory requirements and conducting thorough large scale trials, followed by controlled selective introductions. COMPLIANCE, REGULATORY AND REIMBURSEMENT
The dental medical device industry is expected to come under increasing regulatory scrutiny on all continents. Recent changes in European legislation affecting medical devices as well the Japanese Pharmaceutical Affairs Law are two examples. Non-compliance with regulatory requirements can lead to sales stops. Actions taken by the US FDA with respect to the Biora products prompted Straumann to engage external specialist consultants to conduct extensive audits at multiple sites and to address any potential weaknesses. In addition, Straumann has strengthened its Quality Management team. HEALTH SYSTEM CHANGES
Reimbursement in our markets is rare, and although implant materials make up only about a fifth to a sixth of the overall treatment costs, implant manufacturers can be affected by changes in healthcare regulations that affect the overall cost to the patient. DISRUPTIVE TECHNOLOGIES
While innovation will continue, the Group does not believe that disruptive technologies represent a fundamental risk to its businesses, mainly because it drives substitution technologies itself. Basic research into novel tooth replacement technologies such as growth factors or stem cells will continue to evolve. These might improve product performance and ultimately lead to combination devices – as in other medtech areas. Straumann’s expertise in oral tissue regeneration puts it in an excellent position to exploit potential synergies in this field. FINANCIAL RISK MANAGEMENT (SEE PP. 130–131, 161–164)
87% of Group sales is generated in currencies other than the Swiss franc and Straumann is therefore exposed to translation risk. Major foreign currencies are the euro, the US dollar, the British pound and the Japanese yen. Straumann invoices its subsidiaries in local currencies. Straumann also has interest bearing liabilities in currencies other than Swiss francs. International exchange rate fluctuations impact the company’s assets and earnings, which are reported in Swiss francs. Transaction risk arises when 51 Merrill Lynch Medical Technology Industry Overview, March 2007.
Straumann Annual Report 2007
Financial Report
RISK ASSESSMENT
the currency structure of Straumann’s costs and liabilities deviates to some extent from the currency structure of the sales proceeds and assets as well as from imbalances in the payment streams between the various currencies. Straumann hedges these risks on a selective basis by means of options, spot transactions, or forward transactions. The Group’s transaction exposure to continental European currencies is approximately 53%; to the US, Canadian and Australian dollars, and the British pound it is collectively above 20%. Our exposure to Asian currencies including the yen is less than 10% (see pp. 130, 131, 162, 163). Straumann has no considerable concentration of commercial credit risk, as no individual customer accounts for a substantial share of Group sales (see p. 163). To reduce investment risk on cash and cash-like positions, Straumann manages the liquid funds centrally. Liquidity risk is minimized by ensuring that sufficient cash and cash equivalents are maintained to cover operational needs (see p. 164). For strategic acquisitions, Straumann may consider entering into additional loan agreements, with the goal of repaying loans with operating cash flow within a reasonable time frame. Straumann aims to maintain an equity ratio of at least 50%. Further information on financial risk can be found in note 30 and in the section ‘Derivative Financial Instruments and Hedging’ on pp. 130–131. LEGAL AND INTELLECTUAL PROPERTY RISKS
Straumann operates in a competitive market in which various legal risks exist, such as issues relating to unfair competition law and the enforcement of non-compete obligations. In addition, intellectual property rights are of significant importance. The Group therefore actively pursues a strategy of protecting its rights and intellectual properties, especially its know-how, patents and trademarks. The Group may, therefore, be engaged in litigations related to such legal issues as well as intellectual property rights, either as a claimant or a defendant. The Group is currently not involved in any material litigation. INTERNAL AUDIT
In 2007, Straumann created an Internal Audit function (see p. 86) with the objective of safeguarding the Group’s material and immaterial assets and to evaluate the effectiveness of the Group’s risk management and governance processes. INSURANCE POLICIES
Straumann covers its inherent key business risks in the same way that it covers product or employer liability risks, i.e. through corresponding insurance policies held with reputed insurance companies. PENSION LIABILITY RISKS
The Group offers its staff competitive pensions. The pension funds are managed locally and invested by independent financial institutions. The investment strategy is determined by the Pension Fund Board and executed by the financial institution. Neither Straumann nor the trustees are allowed to influence the specific investment decision. The pension funds publish regular reports for all members. The Swiss pension fund represents the largest pension plan of the Group.
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SELECTED FINANCIAL INFORMATION
SELECTED FINANCIAL INFORMATION
OPERATING PERFORMANCE (in CHF million)
Net revenue Growth in %
Gross profit Margin in %
Operating result before depreciation and amortization (EBITDA)
2007
2006
713.7
599.2
19.1
17.6
582.3
479.7
81.6
80.1
244.1
217.8
Margin in %
34.2
36.4
Growth in %
12.0
20.3
Operating result before amortization (EBITA)
218.5
185.2
Margin in %
30.6
30.9
Growth in %
18.0
14.2
Operating profit (EBIT)
201.5
175.3
Margin in %
28.2
29.3
Growth in %
14.9
12.4
Net profit
177.3
141.9
Margin in %
24.8
23.7
Growth in %
24.9
10.7
Basic earnings per share (in CHF)
11.29
9.09
Value added (economic profit)
129.4
98.4
Increase in value added
31.0
5.2
Increase in value added in %
31.5
5.5
In % of net revenue
18.1
16.4
Number of employees (year-end)
1 955
1 534
Number of employees (average)
1 736
1 483
411
404
Sales per employee (average) in CHF 1 000
Straumann Annual Report 2007
Financial Report
SELECTED FINANCIAL INFORMATION
FINANCIAL PERFORMANCE (in CHF million)
Cash and cash equivalents Net working capital (net of cash) In % of net revenue
Inventories
2007
20061
190.2
171.8
40.8
38.0
5.7
6.3
79.6
59.0
Days of supplies
208
161
Trade receivables
94.6
85.3
44
47
946.5
646.9
22.2
21.0
Days of sales outstanding
Balance sheet total Return on assets in % (ROA)
Equity
623.5
503.6
Equity ratio in %
65.9
77.8
Return on equity in % (ROE)
31.5
31.5
Capital employed
560.7
326.1
Return on capital employed in % (ROCE)
35.9
53.8
Cash generated from operating activities
227.2
176.2
31.8
29.4
287.0
49.8
In % of net revenue
Investments In % of net revenue
40.2
8.3
Capital expenditures
42.5
42.1
Acquisitions
244.5
7.8
Free cash flow
186.3
134.2
26.1
22.4
58.4
46.7
33.0
32.9
In % of net revenue
Dividend Pay-out ratio in % 1 The presentation of 2006 figures has been adapted to the 2007 format throughout this report.
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SELECTED FINANCIAL INFORMATION
SALES BY REGION (in CHF million)
H1
H2
Total 2007
Total 2006
233.1
225.8
458.9
380.5
Growth in %
19.8
21.5
20.6
20.4
Growth in local currencies in %
15.2
17.1
16.1
18.6
In % of net revenue
66.3
62.4
64.3
63.5
North America
76.8
77.3
154.1
149.3
Growth in %
3.4
2.9
3.2
13.7
Growth in local currencies in %
7.2
7.1
7.1
12.2
21.8
21.4
21.6
24.9
Europe
In % of net revenue
Asia / PaciďŹ c
31.6
49.1
80.7
57.0
Growth in %
5.2
82.5
41.7
11.5
In % of net revenue
9.0
13.6
11.3
9.5
Rest of the World
10.2
9.8
20.0
12.4
Growth in %
55.8
66.1
61.1
11.9
2.9
2.6
2.8
2.1
351.7
362.0
713.7
599.2
In % of net revenue
Total Growth in %
15.2
23.2
19.1
17.6
Growth in local currencies in %
13.1
21.3
17.1
16.1
In % of full-year sales
49.3
50.7
100.0
100.0
Straumann Annual Report 2007
Financial Report
SELECTED FINANCIAL INFORMATION
QUARTERLY SALES BY REGION (in CHF million)
Q1
Q2
Q3
Q4
Total 2007
113.2
119.9
100.6
125.2
458.9
13.3
26.6
25.0
18.6
20.6
9.7
20.9
20.3
14.5
16.1
63.4
69.3
60.2
64.2
64.3
North America
37.9
38.9
37.1
40.2
154.1
Growth in %
2.6
4.3
0.9
5.0
3.2
Growth in local currencies in %
8.8
5.8
3.5
10.5
7.1
21.2
22.5
22.2
20.6
21.6
Europe Growth in % Growth in local currencies in % In % of net revenue
In % of net revenue
Asia / PaciďŹ c
22.4
9.2
24.2
24.9
80.7
Growth in %
17.3
(15.8)
95.5
71.4
41.7
In % of net revenue
12.5
5.3
14.5
12.8
11.3
Rest of the World
5.2
5.0
5.1
4.7
20.0
Growth in %
75.0
39.6
115.9
33.8
61.1
2.9
2.9
3.1
2.4
2.8
178.7
173.0
167.0
195.0
713.7
In % of net revenue
Total Growth in %
12.5
18.1
26.6
20.4
19.1
Growth in local currencies in %
11.6
14.8
24.2
18.9
17.1
In % of full-year sales
25.0
24.2
23.4
27.4
100.0
105
106
STRAUMANN GROUP
Consolidated balance sheet Consolidated income statement Consolidated cash ow statement Consolidated statement of changes in equity Notes to the consolidated ďŹ nancial statements Report of the Group auditors
108 109 110 111 112 168
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Straumann Annual Report 2007
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STRAUMANN GROUP
CONSOLIDATED BALANCE SHEET
ASSETS
Notes
31 Dec 2007
31 Dec 20061
Property, plant and equipment
5
139 772
129 468
Investment properties
6
8 700
9 000
Intangible assets
7
379 054
152 854
Other financial assets
8
562
400
(in CHF 1 000)
Deferred income tax assets
18
Total non-current assets
30 099
24 821
558 187
316 543
9
79 565
58 974
10
115 011
98 471
3 533
1 152
11
190 185
171 807
Total current assets
388 294
330 404
Total assets
946 481
646 947
Inventories Trade and other receivables Income tax receivables Cash and cash equivalents
EQUITY AND LIABILITIES (in CHF 1 000)
Notes
31 Dec 2007
31 Dec 20061
Share capital
12
1 563
1 562
Retained earnings and reserves
618 116
502 012
Total equity attributable to the shareholders of the parent company
619 679
503 574
Non-controlling interests Total equity
3 816
0
623 495
503 574
Financial liabilities measured at amortized costs
14
4 438
0
Provisions
16
3 171
1 925
Retirement benefit obligations
20
4 522
4 514
Deferred income tax liabilities
18
20 590
16 368
32 721
22 807
Total non-current liabilities
Trade and other payables
17
95 469
75 947
Interest-bearing loans and borrowings
13
123 973
0
Financial liabilities measured at amortized costs
14
9 006
0
Other financial liabilities
15
0
15 000
52 380
29 580
Income tax payable
9 437
39
Total current liabilities
290 265
120 566
Total liabilities
322 986
143 373
Total equity and liabilities
946 481
646 947
Provisions
16
1 Prior year’s presentation has been adapted to the 2007 format.
The notes on pages 112 to 167 are an integral part of these consolidated financial statements.
Straumann Annual Report 2007
Financial Report
STRAUMANN GROUP
CONSOLIDATED INCOME STATEMENT
(in CHF 1 000)
Net revenue
Notes
2007
20061
4
713 654
599 204
(131 383)
(119 455)
582 271
479 749
6 531
8 257
Cost of goods sold Gross profit
Other income
21
(356 062)
(282 209)
Research and development costs
(31 230)
(30 476)
Operating profit
201 510
175 321
Selling and administrative costs
Finance income
24
18 572
5 767
Finance costs
24
(25 596)
(7 121)
194 486
173 967
Profit before income tax
Income tax expense
18
Net profit
(17 223)
(32 039)
177 263
141 928
175 866
141 725
Attributable to: Shareholders of the parent company Non-controlling interests
1 397
203
Basic earnings per share (in CHF)
25
11.29
9.09
Diluted earnings per share (in CHF)
25
11.26
9.07
1 Operating foreign exchange results are recognized from 2007 onwards as ‘finance income/costs’. For 2007, the net operating foreign exchange gain was CHF 1.7 million (2006: CHF 1.3 million).
The notes on pages 112 to 167 are an integral part of these consolidated financial statements.
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STRAUMANN GROUP
CONSOLIDATED CASH FLOW STATEMENT
(in CHF 1 000)
Notes
Operating profit
2007
20061
201 510
175 321
Depreciation of property, plant and equipment
5;22
25 258
29 449
Depreciation and impairment of investment properties
6;22
300
3 200
Amortization of intangible assets
7;22
17 011
9 870
7 503
(354)
63
905
4 675
3 039
456
415
Change in provisions Change in retirement benefit obligation Share-based payment expense
19
Losses on disposals of property, plant and equipment Working capital adjustments:
(11 091)
(9 849)
Decrease/Increase in trade and other receivables
2 406
(17 092)
Increase in trade and other payables
2 164
10 220
Increase in inventories
Foreign exchange result on intra-group payments Foreign exchange result
(924)
778
(2 129)
(2 288)
Interest paid
24
(6 574)
(716)
Interest received
24
4 077
1 649
Income tax paid
(17 475)
(28 317)
Net cash from operating activities
227 230
176 230
Purchase of property, plant and equipment
5
(32 957)
(28 461)
Purchase of intangible assets
7
(9 567)
(13 631)
Acquisition of subsidiaries, net of cash acquired
3
(208 606)
(2 924)
Net proceeds from sale of financial assets and property, 1 575
38
(249 555)
(44 978)
26
(46 729)
(39 040)
3
(35 936)
(4 837)
1 983
5 512
120 650
0
(2 877)
(18 005)
plant and equipment Net cash used in investing activities
Dividends paid Purchase of shares of non-controlling interests Proceeds from exercise of options Proceeds from loans and borrowings Purchase of treasury shares Sale of treasury shares Net cash used in financing activities
Effect of exchange rate differences on cash held Net increase in cash and cash equivalents
3 022
2 345
40 113
(54 025)
590
385
18 378
77 612
Cash and cash equivalents at 1 January
11
171 807
94 195
Cash and cash equivalents at period end
11
190 185
171 807
1 Prior year’s presentation has been adapted to the 2007 format.
The notes on pages 112 to 167 are an integral part of these consolidated financial statements.
Straumann Annual Report 2007
Financial Report
STRAUMANN GROUP
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Attributable to the shareholders of the parent company
Notes
(in CHF 1 000)
Balance at 1 January 2006
Share capital
Share premium
Treasury shares
1 558
47 403
0
Cash flow hedge Translation reserve reserves
0
Currency translation adjustments
NonRetained controlling earnings interests
(802) 370 319
Total equity
1 511 419 989
7 870
12
7 882
(301)
Effect of cash flow hedges, net of tax
(301) 129
First-time recognition defined benefit plans
129
Total gains and losses recognized directly in equity
0
0
0
(301)
7 870
141 725
203 141 928
0
0
0
(301)
7 870 141 854
215 149 638
(39 040)
(39 040)
Net profit Total recognized income and expense
Dividends paid
26
Exercise of options
12
Share based payments
19
Issuer’s own equity instruments
15
4
129
12
7 710
5 508 2 355
Purchase of treasury shares Sale of treasury shares
5 512 684
3 039
(15 000)
(15 000)
(18 005)
(18 005)
2 345
2 345
Goodwill on transactions with holders (3 178)
of non-controlling interests
(1 726)
(4 904)
Balance at 31 December 2006
1 562
55 266 (29 976)
(301)
7 068 469 955
0 503 574
Balance at 1 January 2007
1 562
55 266 (29 976)
(301)
7 068 469 955
0 503 574
Currency translation adjustments
1 914
1 914
301
Effect of cash flow hedges, net of tax
301
Total gains and losses recognized directly in equity
0
0
0
301
1 914
175 866
1 397 177 263
0
0
0
301
1 914 175 866
1 397 179 478
(46 729)
(46 729)
1
1 982
Net profit Total recognized income and expense
Dividends paid
26
Exercise of options
12
Share based payments
19
0
0
2 215
1 983 4 675
4 675
Acquisition of subsidiaries with non-controlling interest Issuer’s own equity instruments
8 816
3 15
Purchase of treasury shares
15 000
15 000
(2 877)
(2 877)
3 187
Sale of treasury shares
8 16
(165)
3 022
(7 353)
(7 353)
(29 697)
(6 397) (36 094)
8 982 566 552
3 816 623 495
Put options granted to holders of non-controlling interests
3
Goodwill on transactions with holders of non-controlling interests Balance at 31 December 2007
3
1 563
57 248 (14 666)
0
The share capital is represented by 15 630 671 issued shares (2006: 15 615 978) of CHF 0.10 par value, fully paid in. The number of treasury shares amounted to 54 071 (2006: 54 500). The notes on pages 112 to 167 are an integral part of these consolidated financial statements.
111
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STRAUMANN GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1 CORPORATE INFORMATION
The consolidated financial statements of the Straumann Group for the year ended 31 December 2007 were authorized for issue in accordance with a resolution of the Board of Directors on 1 February 2008. Straumann Holding AG is a public company whose shares are traded on the Swiss Exchange (SWX). Headquartered in Basel, Switzerland, the Straumann Group is a global leader in implant and restorative dentistry and oral tissue regeneration. In 2007, Straumann entered the fast-growing field of restorative dentistry through the acquisition of etkon, an emerging force in CAD/CAM based tooth replacement. This makes Straumann the only company in the dental sector that offers surgical, restorative and regenerative solutions – from bone augmentation and tissue regeneration, through implants and prosthetics, to individualized crowns and bridges. In collaboration with leading clinics, research institutes and universities, Straumann researches and develops implants, instruments and tissue regeneration products for use in tooth replacement solutions or to prevent tooth loss. The Group manufactures implant system components and instruments in Switzerland and the US, and dental tissue regeneration products in Sweden. Straumann’s restorative products are manufactured in Germany and the US. Straumann also offers comprehensive training and services to the dental profession worldwide, including training and education, which is provided in collaboration with the International Team for Implantology (ITI). Altogether, Straumann employs approximately 2000 people worldwide, and the Group’s products and services are available in more than 60 countries through its own distribution subsidiaries and a broad network of distribution partners.
2.1 BASIS OF PREPARATION
The consolidated financial statements have been prepared on a historical cost basis, except financial assets and financial liabilities (including derivative financial instruments) that have been measured at fair value. The carrying values of recognized assets and liabilities that are hedged items in fair value hedges, and are otherwise carried at cost, are adjusted to record changes in the fair values attributable to the risks that are being hedged. The consolidated financial statements are presented in Swiss francs (CHF) and all values are rounded to the nearest thousand except where otherwise indicated. STATEMENT OF COMPLIANCE
The consolidated financial statements of the Straumann Group and all its subsidiaries have been prepared in accordance with International Financial Reporting Standards (IFRS). BASIS OF CONSOLIDATION
The consolidated financial statements comprise the financial statements of Straumann Holding AG and its subsidiaries as at 31 December each year.
Straumann Annual Report 2007
Financial Report
STRAUMANN GROUP
Subsidiaries are fully consolidated from the date of acquisition, being the date which the Group obtains control, and continue to be consolidated until the date that such control ceases. The financial statements of the subsidiaries are prepared for the same reporting period as the parent company, using consistent accounting policies. All intra-group balances, income and expenses and unrealized gains and losses resulting from intragroup transactions are eliminated in full. Unrealized losses are also eliminated but considered an impairment indicator of the asset transferred. Non-controlling interests represent the portion of profit or loss and net assets not held by the shareholders of the parent company and are presented separately in the income statement and within equity in the consolidated balance sheet, as non-controlling interests. Acquisitions of non-controlling interests are accounted for using the ‘economic entity method’, whereby the difference between the consideration paid and the book value of the share of the net assets is recorded in equity and attributed to the owners of the parent. Further details are provided in Note 2.2.
2.2 CHANGES IN ACCOUNTING POLICIES
The accounting policies adopted are consistent with those of the previous financial year except as follows: The Group adopted the following new and amended IFRS and IFRIC interpretations in 2007. Adoption of these revised standards and interpretations did not have any material effect on the financial performance or position of the Group. They did, however, give rise to additional disclosures, including in some cases, revisions to accounting policies: (A) STANDARDS, AMENDMENTS AND INTERPRETATIONS EFFECTIVE IN 2007
• IFRS 7 – Financial Instruments: Disclosure This standard requires disclosures that enable users of the financial statements to evaluate the significance of the Group’s financial instruments as well as the nature and the extent of risks arising from those instruments. The new disclosures are included throughout the financial statements. While there has been no effect on the financial positions or results, comparative information has been provided where needed. • IAS 1 – Presentation of Financial Statements: This amendment requires the Group to make new disclosures to enable users of the financial statements to evaluate the Group’s objectives, policies and processes for managing capital. These new disclosures are shown in Note 29. • IFRIC 8 – Scope of IFRS 2: This interpretation requires IFRS 2 to be applied to any arrangements in which the entity cannot identify specifically some or all of the goods received, in particular where equity instruments are issued for consideration which appears to be less than fair value. As equity instruments are only issued to employees in accordance with the employee share scheme, the interpretation had no impact on the financial position or performance of the Group. • IFRIC 9 – Reassessment of Embedded Derivatives: IFRIC 9 states that the date to assess the existence of an embedded derivative is the date that an entity first becomes a party to the contract, with reassessment only if there is a change to the contract that significantly modifies the cash flows. As the Group has no embedded derivative requiring separation from the host contract, the interpretation had no impact on the financial position or performance of the Group.
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STRAUMANN GROUP
• IFRIC 10 – Interim Financial Reporting and Impairment: The Group adopted IFRIC Interpretation 10 as of 1 January 2007, which requires that an entity must not reverse an impairment loss recognized in a previous interim period in respect of goodwill or an investment in either an equity instrument or a financial asset carried at cost. As the Group had no impairment losses previously reversed, the interpretation had no impact on the financial position or performance of the Group. (B) STANDARDS, AMENDMENTS AND INTERPRETATIONS EFFECTIVE IN 2007, BUT NOT RELEVANT
The following standards, amendments and interpretations to published standards are mandatory for accounting periods beginning on or after 1 January 2007 but they are not relevant to the Group’s operations: • IFRIC 7 – Applying the restatement approach under IAS 29, Financial Reporting in hyper-inflationary economies (C) STANDARDS, AMENDMENTS AND INTERPRETATIONS TO EXISTING STANDARDS THAT ARE NOT YET EFFECTIVE AND HAVE NOT BEEN ADOPTED EARLY BY THE GROUP
The following standards, amendments and interpretations to existing standards have been published and are mandatory for the Group’s accounting periods beginning on or after 1 March 2007 or later periods, but the Group has not adopted them early: • IAS 23 (amended) – Borrowing costs (effective from 1 January 2009): IAS 23 requires an entity to capitalize borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset (one that takes a substantial period of time to get ready for use or sale) as part of the cost of that asset. The option of immediately expensing those borrowing costs will be removed. The Group will apply IAS 23 (amended) from 1 January 2009. No effect is expected as the Group does not hold qualifying assets. • IAS 27 (revised) – Consolidated and separate financial statements (effective from 1 July 2009): IAS 27 (revised) requires the effects of all transactions with non-controlling (minority) interests to be recorded in equity if there is no change in control. The standard also specifies the accounting when control is lost. Any remaining interest in the entity is remeasured to fair value and a gain or loss is recognized in profit or loss. • IFRS 3 (revised) (effective from 1 July 2009): The standard continues to apply the acquisition method to business combinations, with some significant changes. For example, all payments to purchase a business are to be recorded at fair value at the acquisition date, wih some contingent payments subsequently remeasured at fair value through income. Goodwill may be calculated based on the parent’s share of net assets or it may include goodwill related to the non-controlling interest. All transaction costs will be expensed. • IFRS 8 – Operating segments (effective from 1 January 2009): IFRS 8 replaces IAS 14 and aligns segment reporting with the requirements of the US standard SFAS 131, ‘Disclosures about segments of an enterprise and related information’. The new standard requires a ‘Management approach’, under which, segment information is presented on the same basis as that used for internal reporting purposes. The Group will apply IFRS 8 from 1 January 2009. The expected impact is still being assessed in detail by Management, but it appears likely that the number of reportable segments, as well as the manner in which the segments are reported, will change in a manner that is consistent with the internal reporting provided to the chief operating decision-maker. As goodwill is allocated to groups of cash-generating units based on segment level, the change will also require Management to reallocate goodwill to the newly identified operating segments. Management does not anticipate that this will result in any material impairment to the goodwill balance.
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• IFRIC 11 – Group and treasury share transactions (effective from 1 March 2007): IFRIC 11 provides guidance on whether share-based transactions involving treasury shares or involving Group entities (for example, options over a parent’s shares) should be accounted for as equity-settled or cash-settled share-based payment transaction in the stand-alone accounts of the parent and Group companies. Straumann will apply IFRIC 11 from financial year 2008, but it is not expected to have any significant impact on the Group’s accounts. • IFRIC 13 – Customer loyalty programs (effective from 1 July 2008): IFRIC 13 clarifies that where goods or services are sold together with a customer loyalty incentive (for example, loyalty points or free products), the arrangement is a multiple-element arrangement and the consideration receivable from the customer is allocated between the components of the arrangement using fair values. IFRIC 13 is not expected to have any material impact on the Group’s accounts as the Group does not operate any financially significant customer loyalty programs. • IFRIC 14 IAS 19 – The limit on a defined benefit asset, minimum funding requirements and their interaction’ (effective from 1 January 2008): IFRIC 14 provides guidance on assessing the limit in IAS 19 on the amount of the surplus that can be recognized as an asset. It also explains how the pension asset or liability may be affected by a statutory or contractual minimum funding requirement. The Group will apply IFRIC 14 from 1 January 2008, but it is not expected to have any material impact on the Group’s accounts. (D) INTERPRETATIONS TO EXISTING STANDARDS THAT ARE NOT YET EFFECTIVE AND NOT RELEVANT FOR THE GROUP’S OPERATIONS
The following interpretations to existing standards have been published and are mandatory for the Group’s accounting periods beginning on or after 1 January 2008 or later periods but are not relevant for the Group’s operations: • IFRIC 12 – Service concession arrangements (effective from 1 January 2008): IFRIC 12 applies to contractual arrangements whereby a private sector operator participates in the development, financing, operation and maintenance of infrastructure for public sector services. IFRIC 12 is not relevant to the Group’s operations because none of its supply to public sector services. (E) CHANGE IN ACCOUNTING POLICY FOR NON-CONTROLLING INTERESTS
In cases where Straumann Holding AG directly or indirectly holds a majority of voting rights or otherwise exercises another form of direct or indirect control, the assets and liabilities, expenses and income of the companies concerned are included in full in the consolidated financial statements. Non-controlling interests in the profit and equity of subsidiaries are disclosed separately. In prior years, Straumann applied a policy of treating transactions with non-controlling interests as transactions with parties external to the Group. Purchases from non-controlling interests resulted in goodwill, being the difference between any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary. In reviewing the accounting policies, Management noted that non-controlling interests are treated as part of the Group’s equity and net profit. Management therefore decided that transactions with other holders of the Group’s equity instruments should be treated as equity transactions to better reflect the economic substance in line with the ‘economic entity model’. In 2007, the Group therefore changed from the ‘parent company method’ to the ‘economic entity model’. Straumann now applies a policy of treating transactions with non-controlling interests as transactions with equity owners of the Group. When purchasing of non-controlling interests, the difference between any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is recorded in equity and attributed to the owners of the parent. This change in accounting policy has been applied retrospectively, which resulted in a reclass of CHF 3.2 million from goodwill to shareholders’ equity in 2006. This change was reflected throughout the financial report.
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2.3 CRITICAL ACCOUNTING ESTIMATES, ASSUMPTIONS AND JUDGMENTS
The preparation of Straumann’s financial statements requires Management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities, at the reporting date. However, uncertainty about these assumptions and estimates could result in outcomes that may require a material adjustment to the carrying amount of the asset or liability affected in the future. The key assumptions concerning the future and other key sources of estimation uncertainty at the balance sheet date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.
CRITICAL ACCOUNTING ESTIMATES AND ASSUMPTIONS IMPAIRMENT OF NON-FINANCIAL ASSETS
The Group assesses whether there are any indicators of impairment for all non-financial assets at each reporting date. Non-financial assets with indefinite life and assets not yet in use are tested for impairment annually and at other times when such indicators exist. Other non-financial assets are tested for impairment when there are indicators that the carrying amounts may not be recoverable. When value-in-use calculations are undertaken, Management must estimate the expected future cash flows from the asset or cash-generating unit and choose a suitable discount rate in order to calculate the present value of those cash flows. Further details are given in Notes 5, 6 and 7. SHARE-BASED PAYMENTS
The Group measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the date on which they are granted. Estimating fair value requires determining the most appropriate valuation model for a grant of equity instruments, which is dependent on the terms and conditions of the grant. This also requires determining the most appropriate inputs to the valuation model including the expected life of the option, volatility and dividend yield, and making assumptions about them. The assumptions and models used are disclosed in Note 19. DEFERRED INCOME TAX ASSETS
Deferred tax assets are recognized for all unused tax losses to the extent that it is probable that taxable profit will be available against which the losses can be utilized. Significant Management judgment is required to determine the amount of deferred tax assets that can be recognized, based upon the likely timing and level of future taxable profits together with future tax planning strategies. The carrying value of recognized tax losses at 31 December 2007 was CHF 40.4 million (2006: CHF 39.4 million) and the unrecognized tax losses at 31 December 2007 was CHF 7.1 million (2006: CHF 5.9 million). Further details are provided in Note 18. INCOME TAXES
Straumann is subject to income taxes in numerous jurisdictions. Significant judgment is required in determining the worldwide provision for income taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. The Group recognizes liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where the final tax outcome differs from the amounts that were initially recorded, the difference impacts the income tax and deferred tax provisions in the period in which the estimate was made and recognized.
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PENSION AND OTHER POST-EMPLOYMENT BENEFITS
The cost of defined benefit pension plans and other post-employment medical benefits is determined using actuarial valuations which involve making assumptions about discount rates, expected rates of return on assets, future salary increases, mortality rates and future pension increases. Due to the longterm nature of these plans, such estimates are subject to significant uncertainty. The net employee at 31 December 2007 was CHF 4.5 million (2006: CHF 4.5 million). Further details are given in Note 20. DEVELOPMENT COSTS
Development costs are capitalized in accordance with the accounting policy in Note 2.4. Initial capitalization of costs is based on Management’s judgment that technological and economic feasibility is confirmed – usually when a development project has reached a defined milestone according to an established project management model. In determining the amounts to be capitalized, Management makes assumptions regarding the expected future cash generation of the assets, discount rates to be applied and the expected period of benefits. At 31 December 2007, the best estimate of the carrying amount of capitalized development costs was CHF 17.7 million (2006: CHF 15.8 million). CRITICAL JUDGMENTS IN APPLYING THE ENTITY’S ACCOUNTING POLICIES
The Group has recognized CHF 95.5 million of goodwill in conjunction with the acquisition of etkon AG. The value-in-use calculation for the cash-generating unit depends on the successful geographical roll-out of the etkon business model to markets outside Germany. In order to substantiate the value-in-use calculation of the cash-generating unit, the average revenue growth rate over the next five years must exceed the growth rate of the dental industry.
2.4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES FOREIGN CURRENCY TRANSLATION
The consolidated financial statements are presented in Swiss francs (CHF), which is Straumann Holding AG’s functional and presentation currency. Each entity in the Group determines its own functional currency, and items included in the financial statements of each entity are measured using this functional currency. Transactions in foreign currencies are initially recorded at the functional currency rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the functional currency rate of exchange ruling at the balance sheet date. All differences are taken to profit or loss with the exception of differences arising on monetary items that in substance form part of an entity’s net investment in a foreign operation. These are taken directly to equity until the disposal of the net investment, at which time they are recognized in profit or loss. Tax charges and credits attributable to exchange differences on those borrowings are also recognized within equity. Non-monetary items that are measured in terms of historical costs in a foreign currency are translated using the exchange rates on the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value is determined. Any goodwill arising from the acquisition of a foreign operation and any fair value adjustments to the carrying amounts of assets and liabilities arising from the acquisition are treated as assets and liabilities of the foreign operation and translated at the closing rate. The assets and liabilities of foreign operations are translated into Swiss francs at the rate of exchange ruling at the balance sheet date and their income statements are translated at the weighted average exchange rates for the year. The exchange differences arising from the translation are taken directly to a separate component of equity. On disposal of a foreign entity, the deferred cumulative amount recognized in equity relating to that particular foreign operation is recognized in profit or loss.
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PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is stated at cost less accumulated depreciation and accumulated impairment losses. Such costs include the cost of replacing part of the plant and equipment when that cost is incurred, if the recognition criteria are met. Likewise, when a major inspection is performed, its cost is recognized in the carrying amount of the plant and equipment as a replacement if the recognition criteria are satisfied. All other repair and maintenance costs are recognized in profit or loss as incurred. A straight-line method of depreciation is applied through the estimated useful life. Estimated useful lives of major classes of depreciable assets are: • Buildings: 20–30 years • Plant, machinery and other equipment: 3–10 years Land is not depreciated as it is deemed to have an indefinite life. Leasehold improvements are depreciated over the lease term including optional extension of the lease period. An item of property, plant and equipment is derecognized when it is abandoned, removed or classified as ‘held for sale’. Prior to classification as ‘held for sale’, any excess of the net carrying value of the asset over the fair value less costs to sell are charged to profit or loss in the year the asset is reclassified. For assets that are abandoned or removed, any remaining net carrying value is charged to profit or loss. The asset’s residual values, useful lives and methods of depreciation are reviewed, and adjusted if appropriate, at the end of each financial year. NON-CURRENT ASSETS HELD FOR SALE
When an asset or disposal Group’s carrying value will be recovered principally through a sale transaction rather than through continuing use, it is classified as held for sale and stated at the lower of carrying value and fair value less costs to sell. No depreciation is charged in respect to non-current assets classified as held for sale. Any remaining difference between the fair value of the consideration received and the net carrying value at the time of disposal is charged to profit or loss in the year the asset is finally disposed. BORROWING COSTS
Borrowing costs are capitalized as incurred on qualifying assets. INVESTMENT PROPERTIES
Investment properties are held for long-term rental yields and are not occupied by the Group. Investment properties are stated at cost less accumulated depreciation and accumulated impairment losses. Depreciation is computed on a straight-line basis over the estimated useful life of the investment properties. The useful lives applied for such properties are 20–30 years. Land is not depreciated as it is deemed to have an indefinite life. The carrying value of investment properties is reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. If this occurs, the market value is determined by external appraisers. If the market value is less than the carrying amount of the asset, an impairment loss is recognized in the amount by which the asset’s book value exceeds its fair value. Transfers are made to or from investment properties only when there is a change in use. For a transfer from investment properties to owner-occupied properties, the deemed cost for subsequent accounting is the carrying amount at the date of change in use. If owner-occupied properties become investment properties, the Group accounts for such properties in accordance with the policy stated under property, plant and equipment up to the date of change in use. No assets held under operating lease have been classified as investment properties.
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BUSINESS COMBINATIONS AND GOODWILL
Business combinations are accounted for using the purchase method. Goodwill is initially measured at cost being the excess of the costs of the business combination above the Group’s share in the net fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values on the acquisition date, irrespective of any non-controlling interests. The excess of the costs of the acquisition above the fair value of the Group’s share of the identifiable net assets acquired is recorded as goodwill. If the costs of the acquisition are less than the fair value of the net assets of the subsidiary acquired, the difference is recognized directly in the income statement. After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of impairment testing, goodwill acquired in a business combination is allocated from the acquisition date to each of the Group’s cash generating units that are expected to benefit from the synergies of the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units. Where goodwill forms part of a cash-generating unit and part of the operation within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in this circumstance is measured based on the relative values of the operation disposed of and the portion of the cash-generating unit retained. Goodwill arising from the purchase of non-controlling interests is taken to equity under the ‘economic entity model’ (Note 2.1). INTANGIBLE ASSETS
Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a business combination is the fair value on the date of acquisition. Following initial recognition, intangible assets are carried at cost, less any accumulated amortization and any accumulated impairment losses. Internally generated intangible assets, excluding capitalized development costs, are not capitalized and expenditure is reflected in profit or loss in the year in which the expenditure is incurred. The useful lives of intangible assets are assessed to be either finite or indefinite. Intangible assets with finite lives are amortized over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortization period and the amortization method for an intangible asset with a finite useful life is reviewed at least at each financial year end. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are accounted for by changing the amortization period or method, as appropriate, and are treated as changes in accounting estimates. The amortization expense on intangible assets with finite lives is recognized in profit or loss in the expense category consistent with the function of the intangible asset. Intangible assets with indefinite useful lives are tested for impairment annually either individually or at the cash generating unit level. Such intangibles are not amortized. The useful life of an intangible asset with an indefinite life is reviewed annually to determine whether indefinite life assessment continues to be supportable. If not, the change in the useful life assessment from indefinite to finite is made on a prospective basis. Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in profit or loss when the asset is derecognized.
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Research and development costs Research and development costs are expensed as incurred. Development expenditure on an individual project is recognized as an intangible asset if Straumann can demonstrate the technical feasibility of completing the intangible asset so that it will be available for use or sale, its intention to complete and its ability to use or sell the asset, how the asset will generate future economic profit, the availability of resources to complete the asset and the ability to measure reliably the expenditure during development. Following initial recognition of the development expenditure as an asset, the cost model is applied requiring the asset to be carried at cost less any accumulated amortization and accumulated impairment losses. The asset is amortized on a straight-line basis over the period of its expected benefit, starting from the date of full commercial use of the product. During the period of development, the asset is tested for impairment annually.
Customer relationships, technology and trademarks Intangible assets acquired in a business combination are identified separately and recognized at fair value at the date of acquisition. Customer relationships, technology and trademarks have finite useful lives and are amortized using the straight-line method over their useful lives, usually over a period of 10–20 years. Computer software Acquired computer software licenses are capitalized on the basis of the costs incurred to acquire and bring the specific software to use. These costs are amortized over their estimated useful lives, usually two to three years. A summary of the amortization methods applied to the Group’s intangible assets is as follows: Customer relationships
Technology
Trademarks
Development costs
Computer software
Finite Amortization over estimated useful life but not exceeding 3 years
Useful life
Finite
Finite
Finite
Finite
Amortization method used
Amortization on a straight-line basis over a period of usually 10 years
Amortization on a straight-line basis over a period of usually 10 years
Amortization on a straight-line basis over a period of usually 20 years
Amortization over the period of expected sales from the related project on a straight line basis but not exceeding 3 years
Internally generated or acquired
Acquired
Acquired
Acquired
Internally generated or acquired
Internally generated or acquired
INVESTMENTS IN ASSOCIATES
The Group’s investment in its associate is accounted for using the equity method of accounting. An associate is an entity in which the Group has significant influence, but no control. Under the equity method, the investment in the associate is carried in the balance sheet at cost plus post-acquisition changes in the Group’s share of net assets of the associate. Goodwill relating to the associate is included in the carrying amount of the investment and is not amortized. The income statement reflects the share of the results of operations of the associate. Where a change has been recognized directly in the equity of the associate, the Group recognizes its share of any changes and discloses this, when applicable, in the statement of changes in equity. Profits and losses resulting from transactions between the Group and the associate are eliminated to the extent of the interest in the associate. The financial statements of the associate are prepared for the same reporting period as the parent company. Where necessary, adjustments are made to bring the accounting policies in line with those of the Group.
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SEGMENT REPORTING
A business segment is a group of assets and operations engaged in providing products and services that are subject to risks and returns which are different from those of other business segments. Straumann presents segment information by geographical segments. A geographical segment is engaged in providing products or services that are subject to risks and returns which differ from those in other geographical segments. As Straumann is organized into one business segment only, no secondary information is reported by business segments. IMPAIRMENT OF NON-FINANCIAL ASSETS
The Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists, or when annual impairment testing for an asset is required, the Group estimates the asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs to sell, an appropriate valuation model is used. These calculations are corroborated by valuation multiples, quoted share prices for publicly traded subsidiaries or other available fair value indicators. Impairment losses of operations are recognized in profit or loss in the expense categories consistent with the function of the impaired asset. For assets excluding goodwill, an assessment is made at each reporting date as to whether there is any indication that previously recognized impairment losses may no longer exist or may have decreased. If there is such an indication, the Group makes an estimate of the recoverable amount. A previously recognized impairment loss is reversed only if there has been a change in the estimate used to determine the asset’s recoverable amount since the last impairment loss was recognized. If that is the case the carrying amount of the asset is increased to its recoverable amount. The increased amount cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognized for the asset in prior years. The following criteria are also applied in assessing impairment of specific assets:
Goodwill The Group assesses whether there are any indicators that goodwill is impaired at each reporting date. Goodwill is tested for impairment annually and when circumstances indicate that the carrying value may be impaired. Impairment is determined for goodwill by assessing the recoverable amount of the cash-generating units, to which the goodwill relates. Where the recoverable amount of the cash-generating units is less than their carrying amount an impairment loss is recognized. Impairment losses relating to goodwill cannot be reversed in future periods. The Group performs its annual impairment test of goodwill on 30 November.
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OTHER FINANCIAL ASSETS
Financial assets within the scope of IAS 39 are classified as fi nancial assets at fair value through profit or loss, loans and receivables, held-to-maturity investments, or available-for-sale financial assets, as appropriate. When fi nancial assets are recognized initially, they are measured at fair value, plus, in the case of investments not at fair value through profit or loss, directly attributable transaction costs. The Group determines the classification of its fi nancial assets on initial recognition and, where allowed and appropriate, re-evaluates this designation at the end of each fi nancial year. All ‘regular way’ purchases and sales of fi nancial assets are recognized on the trade date, which is the date that the Group commits to purchase the asset. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the period generally established by regulation or convention in the marketplace.
Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss include fi nancial assets held for trading and fi nancial assets designated upon initial recognition as at fair value through profit or loss. Financial assets are classified as held for trading if they are acquired for the purpose of selling in the near term. Derivatives, including separated embedded derivatives, are also classified as held for trading unless they are designated as effective hedging instruments or as a fi nancial guarantee contract. Gains or losses on investments held for trading are recognized in profit or loss. The Group assesses whether embedded derivatives are required to be separated from host contracts when the Group fi rst becomes party to the contract. Reassessment only occurs if there is a change in the terms of the contract that significantly modifies the cash flows that would otherwise be required. Held-to-maturity investments Non-derivative financial assets with fi xed or determinable payments and fi xed maturities are classified as held-to-maturity when the Group has the positive intention and ability to hold to maturity. After initial measurement, held-to-maturity investments are measured at amortized cost using the effective interest method. Gains and losses are recognized in profit or loss when the investments are derecognized or impaired, as well as through the amortization process. Loans and receivables Loans and receivables are non-derivative financial assets with fi xed or determinable payments that are not quoted in an active market. After initial measurement, loans and receivables are carried at amortized cost using the effective interest method less any allowance for impairment. Gains and losses are recognized in profit or loss when the loans and receivables are derecognized or impaired, as well as through the amortization process. Available-for-sale financial assets Available-for-sale fi nancial assets are those non-derivative fi nancial assets that are designated as available-for-sale or are not classified in any of the three preceding categories. After initial measurement, available-for-sale fi nancial assets are measured at fair value with unrealized gains or losses recognized directly in equity until the investment is derecognized or determined to be impaired, at which time the cumulative gain or loss previously recorded in equity is recognized in profit or loss. Fair value The fair value of investments that are actively traded in organized fi nancial markets is determined by reference to quoted market bid prices at the close of business on the balance sheet date. In the case of investments, for which there is no active market, fair value is determined using valuation techniques. Such techniques include using recent arm’s-length market transactions; reference to the current market value of another instrument that is substantially the same; discounted cash flow analysis or other valuation models.
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Amortized cost Held-to-maturity investments, loans and receivables are measured at amortized cost. This is computed using the effective interest method less any allowance for impairment. The calculation takes into account any premium or discount on acquisition and includes transaction costs and fees that are an integral part of the effective interest rate. IMPAIRMENT OF FINANCIAL ASSETS
The Group assesses at each balance sheet date whether a financial asset or group of fi nancial assets is impaired.
Assets carried at amortized cost If there is objective evidence that an impairment loss on assets carried at amortized cost has been incurred, the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (taking the future expected credit losses into consideration) discounted at the fi nancial asset’s original effective interest rate (e. g. the effective interest rate computed at initial recognition). The carrying amount of the asset is reduced through the use of an allowance account. The loss is recognized in profit or loss. If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized, the previously recognized impairment loss is reversed, to the extent that the carrying value of the asset does not exceed its amortized cost at the reversal date. Any subsequent reversal of an impairment loss is recognized in profit or loss. In relation to trade receivables, a provision for impairment is made when there is objective evidence (such as the probability of insolvency or significant fi nancial difficulties of the debtor) that the Group will not be able to collect all of the amounts due under the original terms of the invoice. The carrying amount of the receivable is reduced through use of an allowance account. Impaired receivables are derecognized when they are assessed as uncollectible.
Available-for-sale financial investments If an available-for-sale asset is impaired, an amount comprising the difference between its cost (net of any principal payment and amortization) and its current fair value, less any impairment loss previously recognized in profit or loss, is transferred from equity to profit or loss. Reversals in respect to equity instruments classified as available-for-sale are not recognized in profit or loss. Reversals of impairment losses on debt instruments are reversed through profit or loss, if the increase in fair value of the instrument can be objectively related to an event occurring after the impairment loss was recognized in profit or loss. INVENTORIES
Inventories are valued at the lower of cost or net realizable value. Costs incurred in bringing each product to its present location and condition are accounted as follows: Raw materials • Purchase cost on a weighted average basis. Finished goods and work in progress • Cost of direct materials and labor and a proportion of manufacturing overhead based on normal operating capacity but excluding borrowing costs.
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Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale. Work-in-progress and finished goods are valued at manufacturing costs, including the cost of materials, labor and production overheads. Provisions for impairments are set up in the case of slow-moving and obsolete stock. TREASURY SHARES
Own equity instruments which are re-acquired (treasury shares) are deducted from equity. No gain or loss is recognized in profit or loss on the purchase, sale, issue or cancellation of the Group’s own equity instruments. CASH AND CASH EQUIVALENTS
Cash and cash equivalents in the balance sheet comprise cash at banks and on hand and short-term deposits with an original maturity of three months or less. For the purpose of the consolidated cash flow statement, cash and cash equivalents consist of cash and cash equivalents as defined above, net of short-term bank overdrafts. TRADE PAYABLES
Trade payables are recognized initially at fair value and subsequently measured at amortized cost using the effective interest method. FINANCIAL LIABILITIES
Interest bearing loans and borrowings All loans and borrowings are initially recognized at fair value less directly attributable transaction costs, and have not been designated as ‘at fair value through profit or loss’. After initial recognition, interest bearing loans and borrowings are subsequently measured at amortized cost using the effective interest method. Gains and losses are recognized in profit or loss when the liabilities are derecognized as well as through the amortization process. Financial liabilities at fair value through profit or loss Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities designated upon initial recognition as at fair value through profit or loss. Financial liabilities are classified as held for trading if they are acquired for the purpose of selling in the near term. Derivatives, including separated embedded derivatives are also classified as held for trading unless they are designated as effective hedging instruments. Gains or losses on liabilities held for trading are recognized in profit or loss. DERECOGNITION OF FINANCIAL ASSETS AND LIABILITIES
Financial assets A financial asset (or, where applicable, part of a financial asset or part of a group of similar financial assets) is derecognized when: • the rights to receive cash flows from the asset has expired, or • the Group retains the right to receive cash flows from the asset, but has assumed an obligation to pay them in full without material delay to a third party under a ‘pass through’ arrangement, or • the Group has transferred its rights to receive cash flows from the asset and either (a) has transferred substantially all the risks and rewards of the asset, or (b) has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.
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STRAUMANN GROUP
When the Group has transferred its rights to receive cash flows from an asset and has neither transferred nor retained substantially all the risks and rewards of the asset nor transferred control of the asset, the asset is recognized to the extent of the Group’s continuing involvement in the asset. Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Group could be required to repay. When continuing involvement takes the form of a written and/or purchased option (including a cash settled option or similar provision) on the transferred asset, the extent of the Group’s continuing involvement is the amount of the transferred asset that the Group may repurchase, unless in the case of a written put option (including a cash settled option or similar provision) on an asset measured at fair value – the extent of the Group’s continuing involvement is limited to the lower of the fair value of the transferred asset and the option exercise price.
Financial liabilities A financial liability is derecognized when the obligation under the liability is discharged, cancelled or expired. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognized in profit or loss. PROVISIONS
Provisions are recognized when the Group has a present obligation (legal or constructive) resulting from a past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. Where the Group expects some or all of a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognized as a separate asset but only when the reimbursement is virtually certain. The expense relating to any provision is presented in profit or loss, net of any reimbursement. If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognized as a finance cost. EMPLOYEE BENEFITS
Pension obligations The employees of all Straumann companies are eligible for retirement benefits under defined benefit and defined contribution plans provided through separate funds, insurance plans, or unfunded arrangements. The pension plans are generally funded through regular contributions made by the employer and the employee and through the income generated by their capital investments, taking the recommendations of independent actuaries into account. Where, due to local conditions, a plan is not funded, a liability is recognized in the financial statements. In the case of defined contribution plans, the net periodic pension cost to be recognized in the income statement equals the contributions made by the employer. The liabilities of the Group arising from defined benefit obligations and the related current service costs are determined on an actuarial basis using the projected unit credit method. Actuarial gains and losses are recognized in the income statement over the remaining working lives of the employees to the extent that their cumulative amount exceeds 10% of the greater of the present value of the obligation and of the fair value of plan assets. For defined benefit plans, the actuarial costs charged to the income statement consist of current service cost, interest cost, expected return on plan assets and past service cost as well as actuarial gains or losses to the extent they are recognized. The past service cost for the enhancement of pension benefits is accounted for over the period that such benefits vest.
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Some benefits are also provided by defined contribution plans; contributions to such plans are charged to the income statement as incurred.
Termination benefits Termination benefits are payable when employment is terminated by the Group before the normal retirement date, or whenever an employee accepts voluntary redundancy in exchange for these benefits. The Group recognizes termination benefits when it is demonstrably committed to either: terminating the employment of current employees according to a detailed formal plan without possibility of withdrawal; or providing termination benefits as a result of an offer made to encourage voluntary redundancy. Benefits due more than 12 months after the balance sheet date are discounted to their present value. Other post-employment benefits Certain subsidiaries provide healthcare and insurance benefits for a portion of their retired employees and their eligible dependents. The costs of these benefits are actuarially determined and included in the related function expenses over the employees’ working lives. The related liability is also included in the position ‘employee benefits.’ Cash remuneration As part of the annual compensation, individual cash remuneration (cash bonus) is defined for each employee as well as for the Board of Directors. The multiplier for calculating the declared bonus is derived from the economic profit improvement per fiscal year. For the Strategic Management, the available bonus is credited to a bonus bank and only paid out in part, with the balance being carried forward to the next year. The Group recognizes a liability and an expense for these cash remunerations, based on a formula that takes into consideration the economic profit improvement.
Share-based compensation The Management of Straumann receives remuneration in the form of share-based payment transactions, whereby Management members render services as consideration for equity instruments (‘equity-settled transactions’). In situations where equity instruments are issued and some or all goods or services received by the entity as consideration cannot be specifically identified, they are measured as the difference between the fair value of the share-based payment and the fair value of any identifiable goods or services received at grant date. The cost of equity-settled transactions with employees is measured with reference to the fair value at the date on which they are granted. The fair value is determined by an external valuer using an appropriate pricing model, further details of which are given in Note 19. The cost of equity-settled transactions is recognized, together with a corresponding increase in equity, over the period in which the performance and/or service conditions are fulfilled, ending on the date on which the relevant employees become fully entitled to the award (‘the vesting date’). The cumulative expense recognized for equity-settled transactions at each reporting date until the vesting date reflects the extent to which the vesting period has expired and the Group’s best estimate of the number of equity instruments that will ultimately vest. The profit or loss charge or credit for a period represents the movement in cumulative expense recognized as at the beginning and end of that period. No expense is recognized for awards that do not ultimately vest.
Straumann Annual Report 2007
Financial Report
STRAUMANN GROUP
Where the terms of an equity-settled award are modified, the minimum expense recognized is the expense as if the terms had not been modified. An additional expense is recognised for any modification, which increases the total fair value of the share-based payment arrangement, or is otherwise beneficial to the employee as measured at the date of modification. Where an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any expense not yet recognized for the award is recognized immediately. However, if a new award is substituted for the cancelled award, and designated as a replacement award on the date that it is granted, the cancelled and new awards are treated as if they were a modification of the original award, as described in the previous paragraph. The dilutive effect of outstanding options is reflected as additional share dilution in the computation of earnings per share (Note 25).
Employee shares Employees have the right to buy between 10 and 100 shares as part of the employee equity compensation program. The employee is offered a discount of 25% based on the average share price over the seven trading days period following the ex-dividend day. The difference between the fair value at grant and the cash consideration paid by the employee is immediately recognized as personnel expenses. The shares are subject to a 2-year lock-up period. The shareholders’ General Meeting of the parent company has created conditional share capital for the share-based compensation as well as for the employee shares. Non-employee shareholders are excluded from subscribing for these shares. REVENUE RECOGNITION
Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. Revenue is measured at the fair value of the remuneration received, excluding discounts, rebates, and other sales taxes or duty. The following specific recognition criteria must also be met before revenue is recognized:
Sale of goods Revenue from the sale of goods is recognized when the significant risks and rewards of ownership of the goods have passed to the buyer, usually on delivery of the goods. Revenue from customer training and education Revenue from customer training and education is recognized once the related services are performed. Interest income Revenue is recognized as interest accrued (using the effective interest rate, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial instrument to the net carrying amount of the financial asset). Royalty income Royalty income is recognized on an accrual basis in accordance with the substance of the relevant agreements. Dividends Revenue is recognized when the Group’s right to receive the payment is established.
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Rental income Rental income arising from operating leases on investment properties is accounted for on a straight-line basis over the lease terms. LEASES
The determination of whether an arrangement is, or contains, a lease is based on the substance of the arrangement at inception date of whether the fulfillment of the arrangement is dependent on the use of a specific asset or assets or the arrangement conveys a right to use the asset.
Group as a lessee Finance leases, which transfer to the Group substantially all the risks and benefits incidental to ownership of the leased item, are capitalized at the inception of the lease at the fair value of the leased property or, if lower, at the present value of the minimum lease payments. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are reflected in profit or loss within the financial result. Capitalized leased assets are depreciated over the shorter of the estimated useful life of the asset and the lease term, if there is no reasonable certainty that the Group will obtain ownership by the end of the lease term. Operating lease payments are recognized as an expense in profit or loss on a straight-line basis over the lease term.
Group as a lessor Leases where the Group does not transfer substantially all the risks and benefits of ownership of the asset are classified as operating leases. Initial direct costs incurred in negotiating an operating lease are added to the carrying amount of the leased asset and recognized over the lease term on the same bases as rental income. RELATED PARTIES
A party is related to an entity if the party directly or indirectly controls, is controlled by, or is under common control with the entity, has an interest in the entity that gives it signficant influence over the entity, has joint control over the entity or is an associate or a joint venture of the entity. In addition, members of the Key Management Personnel of the entity (Board of Directors and Executive Management Board) and close members of which the family are also considered related parties, as well as post-employment benefit plans for the benefit of employees of the entity and the International Team for Implantology (ITI). Transactions with related parties are conducted at arm’s length. GOVERNMENT GRANTS
Government grants are recognized where there is a reasonable assurance that the grant will be received and all attaching conditions will be complied with. When the grant relates to an expense item, it is recognized as income over the period necessary to match the grant on a systematic basis to the costs that it is intended to compensate. Where the grant relates to an asset, it is recognized as deferred income and released to income in equal annual amounts over the expected useful life of the related asset. Where the Group receives non-monetary grants, the assets and the grants are recorded at nominal amounts and released to profit or loss over the expected useful life of the relevant assets by equal annual instalments.
Straumann Annual Report 2007
Financial Report
STRAUMANN GROUP
TAXES
Current income tax Current income tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the balance sheet date. Current income tax relating to items recognized directly in equity is recognized in equity and not in profit or loss.
Deferred income tax Deferred income tax is provided using the liability method on temporary differences at the balance sheet date between the tax base of assets and liabilities and their carrying amounts for fi nancial reporting purposes. Deferred income tax liabilities are recognized for all taxable temporary differences, except: • where the deferred income tax liability arises from the initial recognition of goodwill or of an asset • or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and • in respect of taxable temporary differences associated with investments in subsidiaries and associates, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not be reversed in the foreseeable future. Deferred income tax assets are recognized for all deductible temporary differences, carry forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilized except: • where the deferred income tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and • in respect of deductible temporary differences associated with investments in subsidiaries and associates, deferred income tax assets are recognized only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilized. The carrying amount of deferred income tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilized. Unrecognized deferred income tax assets are reassessed at each balance sheet date and are recognized to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered. Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance sheet date. Deferred income tax relating to items recognized directly in equity is recognized in equity and not in profit or loss. Deferred income tax assets and deferred income tax liabilities are offset, if a legally enforceable right exists to set off current tax assets against current income tax liabilities and the deferred income taxes relate to the same taxable entity and the same taxation authority.
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Sales taxes Revenues, expenses and assets are recognized net of the amount of sales tax except: • where the sales tax incurred on a purchase of assets or services is not recoverable from the taxation authority, in which case the sales tax is recognized as part of the cost of acquisition of the asset or as part of the expense item as applicable, and • receivables and payables that are stated with the amount of sales tax included. The net amount of sales tax recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the balance sheet. DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING
The Group uses derivative financial instruments such as forward currency contracts and interest rate swaps to hedge its risks associated with interest rate and foreign currency fluctuations. Such derivative financial instruments are initially recognized at fair value on the date on which a derivative contract is entered into and are subsequently remeasured at fair value. Derivatives are carried as assets when the fair value is positive and as liabilities when the fair value is negative. Any gains or losses arising from changes in fair value on derivatives during the year that do not qualify for hedge accounting are taken directly into profit or loss. The fair value of forward currency contracts is calculated by reference to current forward exchange rates for contracts with similar maturity profiles. The fair value of interest rate swap contracts is determined by reference to market values for similar instruments. For the purpose of hedge accounting, hedges are classified as: • fair value hedges when hedging the exposure to changes in the fair value of a recognised asset or liability or an unrecognized firm commitment (except for foreign currency risk); or • cash flow hedges when hedging exposure to variability in cash flows that is either attributable to a particular risk associated with a recognized asset or liability or a highly probable forecast transaction or the foreign currency risk in an unrecognized firm commitment; or • hedges of a net investment in a foreign operation. At the inception of a hedge relationship, the Group formally designates and documents the hedge relationship to which the Group wishes to apply hedge accounting and the risk management objective and strategy for undertaking the hedge. The documentation includes identification of the hedging instrument, the hedged item or transaction, the nature of the risk being hedged and how the entity will assess the hedging instruments’ effectiveness in offsetting the exposure to changes in the hedged item’s fair value or cash flows attributable to the hedged risk. Such hedges are expected to be highly effective in achieving offsetting changes in fair value or cash flows and are assessed on an ongoing basis to determine that they actually have been highly effective throughout the financial reporting periods for which they were designated. Hedges which meet the strict criteria for hedge accounting are accounted for as follows:
Fair value hedges The change in the fair value of a hedging derivative is recognized in profit or loss. The change in the fair value of the hedged item attributable to the risk hedged is recorded as a part of the carrying value of the hedged item and is also recognized in profit or loss.
Straumann Annual Report 2007
Financial Report
STRAUMANN GROUP
For fair value hedges relating to items carried at amortized cost, the adjustment to the carrying value is amortized through the profit or loss over the remaining term to maturity. Any adjustment to the carrying amount of a hedged fi nancial instrument for which the effective interest rate method is used, is amortized through profit or loss. Amortization may begin as soon as an adjustment exists and shall begin no later than when the hedged item ceases to be adjusted for changes in its fair value attributable to the risk being hedged. If the hedged item is derecognized, the unamortized fair value is recognized immediately in profit or loss. When an unrecognized fi rm commitment is designated as a hedged item, the subsequent cumulative change in the fair value of the fi rm commitment attributable to the hedged risk is recognized as an asset or liability with a corresponding gain or loss recognized in profit or loss. The changes in the fair value of the hedging instrument are also recognized in profit or loss.
Cash flow hedges The effective portion of the gain or loss on the hedging instrument is recognized directly in equity, while any ineffective portion is recognized immediately in profit or loss. Amounts taken to equity are transferred to profit or loss when the hedged transaction affects profit or loss, such as when the hedged financial income or financial expense is recognized or when a forecast sale occurs. Where the hedged item is the cost of a non-financial asset or non-financial liability, the amounts taken to equity are transferred to the initial carrying amount of the non-financial asset or liability. If the forecast transaction or firm commitment is no longer expected to occur, amounts previously recognized in equity are transferred to profit or loss. If the hedging instrument expires or is sold, terminated or exercised without replacement or rollover, or if its designation as a hedge is revoked, amounts previously recognized in equity remain in equity until the forecast transaction or fi rm commitment occurs.
Hedges of a net investment Hedges of a net investment in a foreign operation, including a hedge of a monetary item that is accounted for as part of the net investment, are accounted for in a way similar to cash flow hedges. Gains or losses on the hedging instrument relating to the effective portion of the hedge are recognized directly in equity while any gains or losses relating to the ineffective portion are recognized in profit and loss. On disposal of the foreign operation, the cumulative value of any such gains or losses recognized directly in equity is transferred to profit or loss. Derivatives that do not qualify for hedge accounting Certain derivative instruments do not qualify for hedge accounting. Changes in the fair value of any derivative instruments that do not qualify for hedge accounting are recognized immediately in the profit or loss. DIVIDEND DISTRIBUTION
Dividend distribution to the company’s shareholders is recognized as a liability in the Group’s financial statements in the period in which the dividends are approved by the Company’s shareholders. SHAREHOLDERS’ EQUITY
The equity of Straumann Holding AG consists of one class of registered shares with a par value of CHF 0.10 per share.
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3 BUSINESS COMBINATIONS ETKON AG, GERMANY
On 1 March 2007, the Group acquired 77.71% of the voting shares of etkon AG (‘etkon’), an unlisted company based in Germany, specializing in CAD/CAM tooth restoration. The fair value of the identifiable assets and liabilities of etkon as preliminary determined at the date of acquisition and the corresponding carrying amounts immediately before the acquisition were:
(in CHF 1 000)
Property, plant and equipment (Note 5)
Fair value recognized on acquisition
Previous carrying value
4 448
3 188
Customer relationships (Note 7)
31 222
0
Technology (Note 7)
11 486
0
Trademarks (Note 7)
9 221
0
877
2 415
Other intangible assets (Note 7) Other financial assets
628
628
Inventories
4 330
3 777
Trade and other receivables
4 181
4 181
Cash and cash equivalents
6
6
Total assets
66 399
14 195
Interest-bearing loans and borrowings
(3 191)
(1 970)
Long-term provisions (Note 16)
(1 037)
(1 037)
Deferred income tax liabilities
(19 743)
0
(2 877)
(2 877)
(26 848)
(5 884)
Net assets
39 551
8 311
Non-controlling interests (22.29%)
(8 816)
Trade and other payables Total liabilities
Net assets attributable to the Group
30 735
Goodwill arising from acquisition (Note 7)
95 494
Consideration, satisfied in cash
126 229
Cash flow on acquisition:
Net cash acquired with the subsidiary
6
Cash paid
(126 229)
Net cash outflow
(126 223)
From the date of acquisition, etkon has contributed CHF -3.5 million from operating activities to the net profit of the Group. Due to a transfer of non-current assets within the Group the legal entity etkon AG has recognized a book gain on a stand-alone basis which is partially allocated to the non-controlling interest based on their respective shareholdings in etkon AG at the time of transfer. If the combination had taken place at the beginning of year, the revenue for the Group would have been CHF 5.4 million higher at CHF 719.1 million and the net profit of the combined entity would not have been materially different from the consolidated net profit of Straumann as of 31 December 2007.
Straumann Annual Report 2007
Financial Report
STRAUMANN GROUP
These amounts have been calculated using Straumann’s accounting policies and by adjusting the results of the subsidiary to reflect the additional depreciation and amortization that would have been charged assuming that the fair value adjustments to tangible and intangible assets had applied from 1 January 2007, together with the consequential tax effects. The goodwill recognized above is attributed to the expected synergies and other benefits from combining the assets and activities as well as from the roll-out of etkon’s existing business model – previously limited to its home market – to other markets in which the Group is already present. As part of the sale and purchase agreement the Group has entered into an agreement with the remaining shareholders of etkon AG giving them the unconditional right to sell, and giving the Group the obligation to purchase the outstanding shares of etkon AG at a fi xed price during a defi ned period (‘the put options’). The put options can be exercised between August 2007 and October 2008. The exercise price per share of the put options is equal to the fair value of the price per share the Group has paid for the acquisition of the controlling interest. The present value of the total potential consideration to be paid to the non-controlling interests was recorded as a financial liability at the date of acquisition. The Group does not have a call option on the remaining shares of etkon AG.
Non-controlling interests in etkon On 19 July 2007 and 31 July 2007 respectively, Straumann acquired the remaining shares of etkon BeNeLux & France N.V. and etkon USA, Inc., two companies in which etkon AG previously held a controlling stake. The purchase price for the shares held by non-controlling interests for etkon BeNeLux & France N.V. included a cash consideration of CHF 3.5 million, plus an earn-out component of up to a maximum of CHF 1.3 million payable in July 2008, conditional upon a set of performance criteria regarding the acquired business. The cash consideration for etkon USA amounted to CHF 4.7 million of which CHF 1.2 million were payable in January 2008. Applying the ‘economic entity model’ and based on a preliminary purchase price allocation, Straumann recorded goodwill in the amount of CHF 7.2 million directly in equity. On 15 August 2007, holders of the non-controlling interests in etkon AG exercised a portion of their put options. Consequently the Group acquired an additional 17.69% of the voting shares of etkon AG, taking its ownership to 95.40%. The cash consideration paid amounted to CHF 28.9 million. The book value of the net assets of etkon AG at this date was CHF 38.4 million, and the book value of the additional interest acquired was CHF 6.4 million. The difference of CHF 22.5 million between the consideration and the book value of the interest acquired was recorded in equity. STRAUMANN JAPAN K.K., JAPAN
On 2 July 2007, the Group gained control of its Japanese business by acquiring 100% of the interest in its Japanese distributor Daishin Implant System, Co. Ltd (‘Daishin’), based in Osaka, Japan. The company was subsequently renamed Straumann Japan K.K. The fair value of the identifiable assets and liabilities of Daishin as preliminarily determined at the date of acquisition and the corresponding carrying amounts immediately before the acquisition were:
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(in CHF 1 000)
Property, plant and equipment Customer relationships (Note 7)
Fair value recognized on acquisition
Previous carrying value
0
101
63 441
66 596
Deferred tax assets
1 582
0
Inventories
3 233
3 002
Trade and other receivables
7 111
7 111
Cash and cash equivalents
2 973
2 973
78 340
79 783
Total assets
Retirement benefit obligations (Note 20)
(55)
(55)
Trade and other payables
(1 472)
(1 343)
Total liabilities
(1 527)
(1 398)
Net assets
76 813
78 385
Goodwill arising from acquisition Consideration, satisfied in cash
0 76 813
Cash flow on acquisition:
Net cash acquired with the subsidiary
2 973
Cash paid
(76 813)
Net cash outflow
(73 840)
In addition to the cash settlement of CHF 73.8 million the purchase consideration includes an earn-out component of up to a maximum of CHF 10.0 million payable in 2014, which is conditional upon a set of performance criteria regarding the acquired business. The Group is currently in negotiations with the seller regarding a claim for an upward purchase price adjustment of CHF 5.0 million. The Group has not recognized this amount as part of the purchase price consideration. From the date of acquisition, Daishin has contributed CHF 0.4 million to the net profit of the Group. If the combination had taken place at the beginning of year, the revenue for the Group would have been CHF 12.7 million higher at CHF 726.4 million and the net profit of the combined entity would not have been materially different from the consolidated net profit of Straumann as of 31 December 2007 as the additional net profit of the Daishin business would have been largely offset by the additional amortization of the separately identifiable intangible assets recognized during the purchase price allocation. These amounts have been calculated using Straumann’s accounting policies and by adjusting the results of the subsidiary to reflect the additional amortization that would have been charged assuming the fair value adjustments to intangible assets had applied from 1 January 2007, together with the consequential tax effects. STRAUMANN DENTAL KOREA INC., REPUBLIC OF KOREA
On 7 August 2007, the Group acquired 100% of the interest in its Korean distributor B.I. Trading in Seoul, Republic of Korea, subsequently renamed Straumann Dental Korea Inc. The fair value of the identifiable assets and liabilities of B.I. Trading as preliminarily determined on the date of acquisition and the corresponding carrying amounts immediately before the acquisition were:
Straumann Annual Report 2007
(in CHF 1 000)
Property, plant and equipment (Note 5)
Financial Report
STRAUMANN GROUP
Fair value recognized on acquisition
Previous carrying value
293
293
Customer relationships (Note 7)
6 650
0
Other intangible assets (Note 7)
187
187
Inventories
1 664
1 420
Trade and other receivables
6 387
6 387
Cash and cash equivalents
1 194
1 194
16 375
9 481
Total assets
Long-term provisions (Note 16)
(2 158)
0
Deferred income tax liabilities
(1 829)
0
Retirement benefit obligations (Note 20)
(496)
(496)
Trade and other payables
(2 651)
(3 308)
Total liabilities
(7 134)
(3 804)
9 241
5 677
Net assets
Goodwill arising from acquisition (Note 7) Consideration, total
4 496 13 737
– Satisfied in cash
9 737
– Unpaid purchase price consideration (Note 17)
4 000
Cash flow on acquisition:
Net cash acquired with the subsidiary
1 194
Cash paid
(9 737)
Net cash outflow
(8 543)
From the date of acquisition to year end, B.I. Trading contributed CHF 0 (zero) to the net profit of the Group. If the combination had taken place at the beginning of year, the revenue for the Group would have been CHF 3.6 million higher at CHF 717.3 million and the net profit of the combined entity would not have been materially different from the consolidated net profit of Straumann as of 31 December 2007 as the additional net profit of the B.I. Trading business would have been largely offset by the additional amortization of the separately identifiable intangible assets recognized during the purchase price allocation. These amounts have been calculated using Straumann’s accounting policies and by adjusting the results of the subsidiary to reflect the additional amortization that would have been charged assuming the fair value adjustments to intangible assets had applied from 1 January 2007, together with the consequential tax effects.
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4 SEGMENT INFORMATION
The primary segment reporting format is determined to be geographical segments as Straumann’s risk and rates of return are affected predominately by differences in the geographical areas. As Straumann is organized into one business segment only, no secondary information is reported by business segments.
2007
(in CHF 1 000)
Segment assets Corporate / unallocated assets
Europe
North America
Asia / Pacific
Rest of World
Corporate/ unallocated
Eliminations
Group
811 248
54 728
93 802
7 284
0
0
0
0
618 214
(638 795)
(20 581)
967 062
Consolidated total assets
811 248
54 728
93 802
7 284
618 214
(638 795)
946 481
Segment liabilities
148 831
19 503
10 193
3 563
0
0
182 090
Corporate / unallocated liabilities
0
0
0
0
779 531
(638 635)
140 896
148 831
19 503
10 193
3 563
779 531
(638 635)
322 986
37 825
4 037
340
322
0
0
42 524
Net revenue with external customers
507 801
151 176
45 900
8 777
0
0
713 654
Net revenue with other segments
108 437
13 804
0
0
0
(122 241)
0
616 238
164 980
45 900
8 777
0
(122 241)
713 654
5 704
75
654
98
0
0
6 531
188 292
10 233
5 204
(263)
40 613
0
244 079
30 657
4 556
3 711
276
3 369
0
42 569
157 635
5 677
1 493
(539)
37 244
0
201 510
Consolidated total liabilities
Capital expenditures
Total net revenue based on location of assets Other income
Segment result before depreciation and amortization Depreciation / amortization Operating profit
Financial result
(7 024)
Income tax expenses
(17 223)
Net profit
177 263
Net revenue based on geographical location of customers
458 867
154 073
80 732
19 982
0
0
713 654
Straumann Annual Report 2007
Financial Report
STRAUMANN GROUP
2006
(in CHF 1 000)
Segment assets Corporate / unallocated assets Consolidated total assets
Segment liabilities Corporate / unallocated liabilities Consolidated total liabilities
Capital expenditures Net revenue with external customers Net revenue with other segments
Europe
North America
Asia / Pacific
Rest of World
Corporate/ unallocated
Eliminations
582 391
61 042
3 817
5 352
0
0
0
0
361 673
(367 328)
582 391
61 042
(5 655)
3 817
5 352
361 673
(367 328)
646 947
99 813
26 897
681
2 806
0
130 197
Group
652 602
0
0
0
0
380 640
(367 464)
13 176
99 813
26 897
681
2 806
380 640
(367 464)
143 373
36 456
5 227
76
333
0
0
42 092
437 093
148 354
8 175
5 582
0
0
599 204
83 067
9 975
0
0
0
(93 042)
0
520 160
158 329
8 175
5 582
0
(93 042)
599 204
4 343
0
0
233
3 681
0
8 257
181 433
8 549
1 245
(837)
27 450
0
217 840
31 136
5 072
118
196
3 047
0
39 569
2 950
0
0
0
0
0
2 950
147 347
3 477
1 127
(1 033)
24 403
0
175 321
Total net revenue based on location of assets Other income
Segment result before depreciation and amortization Depreciation / amortization Impairment Operating profit
Financial result
(1 354)
Income tax expenses
(32 039)
Net profit
141 928
Net revenue based on geographical location of customers
380 551
149 273
56 979
12 401
0
0
599 204
137
138
Straumann Annual Report 2007
Financial Report
STRAUMANN GROUP
5 PROPERTY, PLANT AND EQUIPMENT
2007
(in CHF 1 000)
Land
Buildings
Plant and machinery
Other equipment
Property, plant and equipment 2007
255 054
Cost At 1 January
799
87 258
92 037
74 960
Changes in scope of consolidation (Note 3)
0
62
3 461
1 218
4 741
Additions
0
4 865
18 912
9 180
32 957
Disposals
0
(2 846)
(1 936)
(5 178)
(9 960)
ReclassiďŹ cations
0
(1 220)
1 983
(763)
0
Currency translation adjustments
0
(521)
(518)
689
(350)
799
87 598
113 939
80 106
282 442
At 1 January
0
37 155
45 740
42 691
125 586
Depreciation charge (Note 22)
0
4 773
9 061
11 424
25 258
Disposals
0
(1 271)
(1 645)
(5 119)
(8 035)
At 31 December
Accumulated depreciation
ReclassiďŹ cations
0
50
0
(50)
0
Currency translation adjustments
0
(33)
(160)
54
(139)
At 31 December
0
40 674
52 996
49 000
142 670
Net book value
799
46 924
60 943
31 106
139 772
Land
Buildings
Plant and machinery
Other equipment
Property, plant and equipment 2006
238 570
2006
(in CHF 1 000)
Cost At 1 January
799
87 266
84 271
66 234
Changes in scope of consolidation
0
0
350
0
350
Additions
0
4 636
11 155
12 670
28 461
Disposals
0
(3 755)
(3 279)
(3 744)
(10 778)
Currency translation adjustments
0
(889)
(460)
(200)
(1 549)
799
87 258
92 037
74 960
255 054
At 1 January
0
31 682
39 361
35 294
106 337
Depreciation charge (Note 22)
0
9 236
9 516
10 697
29 449
Disposals
0
(3 755)
(3 194)
(3 209)
(10 158)
Currency translation adjustments
0
(8)
57
(91)
(42)
At 31 December
0
37 155
45 740
42 691
125 586
Net book value
799
50 103
46 297
32 269
129 468
At 31 December
Accumulated depreciation
Repair and maintenance expenses for property, plant and equipment for the business year 2007 amounted to CHF 3.7 million (2006: CHF 4.2 million).
Straumann Annual Report 2007
Financial Report
STRAUMANN GROUP
6 INVESTMENT PROPERTIES
(in CHF 1 000)
2007
2006
Cost At 1 January
13 931
13 931
At 31 December
13 931
13 931
4 931
1 731
Accumulated depreciation and impairment At 1 January Depreciation charge (Note 22)
300
250
0
2 950
At 31 December
5 231
4 931
Net book value
8 700
9 000
Fair value
9 000
9 000
Impairment (Note 22)
Investment properties are treated as non-current investments and are carried at cost, less accumulated depreciation and any impairment in value. Straumann’s investment properties refer to the former headquarters in Waldenburg comprising two buildings. The fair value is based on an independent valuation which was obtained in August 2006.
(in CHF 1 000)
2007
2006
725
473
that generate rental income
(51)
(67)
Direct operating expenses that did not generate rental income
(29)
(95)
Amounts recognized in proďŹ t or loss from investment properties Rental income Direct operating expenses arising from investment properties
139
140
Straumann Annual Report 2007
Financial Report
STRAUMANN GROUP
7 INTANGIBLE ASSETS
2007 Goodwill
Development costs
123 643
24 449
33 649
181 741
99 990
0
123 084
223 074
Additions
0
4 451
5 116
9 567
Disposals
0
0
(3 852)
(3 852)
(in CHF 1 000)
Other intangibles
Total 2007
Cost At 1 January Changes in scope of consolidation (Note 3)
Currency translation adjustments At 31 December
9 071
(39)
1 739
10 771
232 704
28 861
159 736
421 301
Accumulated amortization and impairment At 1 January
0
8 623
20 264
28 887
Amortization charge (Note 22)
0
2 595
14 416
17 011
Disposals
0
0
(3 746)
(3 746)
Currency translation adjustments
0
(38)
133
95
At 31 December
0
11 180
31 067
42 247
Net book value
232 704
17 681
128 669
379 054
Goodwill
Development costs
Other intangibles
Total 2006
116 864
17 731
28 802
163 397
2 067
0
0
2 067
Additions
0
6 698
6 933
13 631
Disposals
0
(183)
(2 360)
(2 543)
2006 (in CHF 1 000)
Cost At 1 January Changes in scope of consolidation
Currency translation adjustments At 31 December
4 712
203
274
5 189
123 643
24 449
33 649
181 741
Accumulated amortization and impairment At 1 January
0
5 471
15 697
21 168
Amortization charge (Note 22)
0
3 133
6 737
9 870
Disposals
0
(183)
(2 338)
(2 521)
Currency translation adjustments
0
202
168
370
At 31 December
0
8 623
20 264
28 887
Net book value
123 643
15 826
13 385
152 854
Straumann Annual Report 2007
Financial Report
STRAUMANN GROUP
DEVELOPMENT COSTS
(in CHF 1 000)
2007
2006
Breakdown of development costs at 31 December Development projects
13 775
9 323
3 906
6 503
At cost
12 570
12 570
Accumulated amortization
(8 664)
(6 067)
17 681
15 826
Projects in commercial use
Net book value development costs
Additions to development costs amounting to CHF 4.5 million (2006: CHF 6.7 million) include costs relating to the design and testing of new product lines. Other intangibles include customer relationships, brands, trademarks and proprietary technology recognized during a business combination, as well as patents, software and capitalized IT-related costs. IMPAIRMENT TEST FOR GOODWILL
Goodwill is allocated to cash-generating units (CGU) for the purpose of impairment testing. The goodwill has been tested for impairment. The recoverable amount of a CGU is determined based on value-in-use calculations. These calculations use cash flow projections based on financial budgets approved by Management covering a 5-year period. Cash flows beyond the 5-year period are extrapolated using the estimated growth rates stated below. The growth rate does not exceed the long-term average growth rate for the dental implant, restoration and tissue regeneration sector. Based on the impairment tests conducted none of the listed goodwill positions were impaired. A summary of the goodwill allocation per cash-generating unit is presented below:
(in CHF 1 000)
etkon AG, Gräfelfing, Germany
2007 1
2006
100 718
0
Straumann Italia srl, Milan, Italy
70 922
68 206
Biora AB, Malmö, Sweden1
48 255
47 447
Straumann SA, Madrid, Spain
5 335
5 131
Straumann Dental Korea, Republic of Korea
4 496
0
Straumann Danmark ApS, Greve, Denmark
2 355
2 265
Straumann Pty Ltd, Victoria, Australia Total goodwill
623
594
232 704
123 643
1 Cash flows and assets used for the purpose of impairment testing are those originally acquired with the CGU regardless of their subsequent transfer within the Group.
ETKON
Goodwill as well as customer relationships, technology and brands (all with finite lives) acquired during the business combination have been allocated to one cash-generating unit (CGU). The CGU comprises the business with (etkon) scanners, conventional CAD/CAM manufactured crowns and bridges (i.e. ‘elements’) as well as implant-borne elements.
141
142
Straumann Annual Report 2007
Financial Report
STRAUMANN GROUP
The customer relationships recognized represent the value in use of the installed customer base using etkon scanners and generating element revenues. The customer base valued is mainly located in Germany. The technology recognized comprises mainly the proprietary technology of scanning and element milling embedded in the software and milling architecture of the etkon business model. The trademarks recognized comprise the name ‘etkon’ and minor other trade names owned and used by the etkon business. IMPAIRMENT TEST
The calculation of value in use for the cash-generating unit is most sensitive to the growth assumptions made for the period of the rollout of the etkon business model to markets outside of etkon’s home market.
(in %)
Gross profit margin of the CGU1 Terminal growth rate
2
Weighted average cost of capital (WACC)3
Biora AB
Straumann Italia srl
etkon AG
44.0
39.4
58.0
1.5
2.5
2.5
11.9
15.0
12.1
1 Budgeted gross profit margin. 2 Used for calculating the terminal value. 3 Pre-tax discount rate applied to the cash-flow projections.
Management determined budgeted gross margin based on past performance and its expectations for market development. The growth rates used are consistent with the forecasts included in industry reports. The WACCs used are pre-tax and reflect specific risks relating to the relevant cash generating units.
8 OTHER FINANCIAL ASSETS (in CHF 1 000)
2007
2006
Long-term loans
146
0
Long-term rent deposits
366
354
46
43
Liability insurance Other Total other financial assets
4
3
562
400
9 INVENTORIES (in CHF 1 000)
Raw materials (at cost)
2007
2006
16 305
10 915
Work in progress (at cost)
23 238
21 626
Finished goods (at the lower of cost and net realizable value)
40 022
26 433
Total inventories at the lower of cost and net realizable value
79 565
58 974
The amount of write-down of inventories recognized as an expense is CHF 2.5 million (2006: CHF 3.0 million) which is recognized in cost of goods sold.
Straumann Annual Report 2007
Financial Report
STRAUMANN GROUP
10 TRADE AND OTHER RECEIVABLES (in CHF 1 000)
Trade receivables, net
2007
20061
94 581
85 348
Value added tax
8 876
5 170
Withholding tax
2 387
1 252
Prepayments
5 506
4 823
Rent deposits
613
647
Vendors with debit balances
268
46
Accrued income
220
218
Others Total trade and other receivables
2 560
967
115 011
98 471
1 Prior year’s presentation has been adapted to the 2007 format.
Trade receivables are non-interest bearing and are generally on 30–90 days’ term. There is no concentration of credit risk with respect to trade receivables, as Straumann has a large number of customers who are dispersed internationally. Moreover, as the Group usually has less than 1% on bad debt, the quality of the debtors is considered to be good. Movements in the provision for impairment of receivables were as follows:
(in CHF 1 000)
2007
2006
At 1 January
(2 492)
(1 915)
Charge for the year
(1 401)
(807)
Impairment receivables
Utilized
624
122
Unused amounts reversed
566
108
(2 703)
(2 492)
At 31 December
The changes of provisions for impaired trade receivables are booked against net revenue in the income statement.
143
144
Straumann Annual Report 2007
Financial Report
STRAUMANN GROUP
The overdue analysis of the trade receivables is as follows:
(in CHF 1 000)
2007
2006
Neither past due nor impaired
58 207
60 259
Past due but not impaired, thereof:
36 374
25 089
21 723
13 911
30 – 60 days
7 304
4 617
60 – 90 days
2 878
2 337
90 – 120 days
1 728
2 314
> 120 days
2 741
1 910
94 581
85 348
< 30 days
Total
11 CASH AND CASH EQUIVALENTS (in CHF 1 000)
2007
2006
110 185
121 773
in EUR
43 082
10 009
in CHF
29 883
79 500
in SEK
19 872
27 796
in USD
6 126
1 361
11 222
3 107
Cash at banks and on hand
other currencies
Short-term bank deposits Total cash and cash equivalents
80 000
50 034
190 185
171 807
Cash at banks earns interest at floating rates based on daily bank deposit rates in the respective currency. Short-term bank deposits are made in Swiss francs for varying periods of between one and three months, depending on the immediate cash requirements of the Group, and earn interest at the respective short-term bank deposit rates. The effective interest rates on short-term bank deposits obtained during 2007 vary between 1.74% and 2.62% (2006: 1.5% to 1.8%). The fair value of cash and short-term deposits is CHF 190.2 million (2006: CHF 171.8 million).
12 SHARE CAPITAL (in CHF 1 000)
At 1 January
2007
2006
1 562
1 558
Issuance of new shares Compensation plan – options
At 31 December
1
4
1 563
1 562
The share capital is presented by 15 630 671 issued shares (2006: 15 615 978) of CHF 0.10 par value, fully paid in. In 2007, the share capital increased by CHF 1 469 (2006: CHF 3 922). In the course of 2007, 14 693 (2006: 39 217) options were exercised at an average strike price of CHF 135.00 (2006: 140.55). No shares were issued for the employee share plan during the periods under review, as they were granted from treasury shares.
Straumann Annual Report 2007
Financial Report
STRAUMANN GROUP
Treasury shares are valued at weighted average cost and have been deducted from equity. The fair value of the treasury shares as of 31 December 2007 amounted to CHF 16.9 million (2006: CHF 16.1 million). As of 31 December 2007, the number of outstanding shares amounted to 15 576 600 (2006: 15 561 478) and the number of treasury shares to 54 071 (2006: 54 500). During 2007, 10 965 treasury shares were sold and 10 536 purchased. The number of shares outstanding developed as follows:
2007
2006
15 561 478
15 576 761
14 693
39 217
Number of shares At 1 January Issuance of new shares Compensation plan – options (Note 19)
Treasury shares Sold Purchased
At 31 December
10 965
10 334
(10 536)
(64 834)
15 576 600
15 561 478
The additional share capital was created from conditional share capital that can be used for the employee share plan and the option plan for management. Non-employee shareholders are excluded from subscribing for these shares. The effective amount of registered conditional share capital at year-end was CHF 36 933 equivalent to 369 329 shares with a par value of CHF 0.10 each at year-end (2006: CHF 38 402 equivalent to 384 022 shares with a par value of CHF 0.10 each at year-end).
(in CHF)
2007
2006
38 402
42 324
Conditional share capital At 1 January Issuance of new shares Compensation plan – options
At 31 December
(1 469)
(3 922)
36 933
38 402
2007
2006
384 022
423 239
Conditional shares (number) At 1 January Issuance of new shares Compensation plan – options (Note 19)
At 31 December
(14 693)
(39 217)
369 329
384 022
145
146
Straumann Annual Report 2007
Financial Report
STRAUMANN GROUP
13 INTEREST-BEARING LOANS AND BORROWINGS (in CHF 1 000)
2007
2006
Bank borrowings (Note 29; 30)
123 973
0
Total current interest bearing loans and borrowings
123 973
0
Bank borrowings consist of short-term overdrafts of a maximum three months denominated in Euros, which are unsecured and belong to uncommitted credit lines. The effective interest rate during the period was between 4.09% and 4.89%.
14 FINANCIAL LIABILITIES MEASURED AT AMORTIZED COSTS (in CHF 1 000)
2007
2006
Put options held by the non-controlling interest of etkon AG (Note 3)
7 539
0
Finance leases
1 467
0
Total current financial liabilities measured at amortized costs
9 006
0
2007
2006
(in CHF 1 000)
Finance leases
4 438
0
Total non-current financial liabilities measured at amortized costs
4 438
0
Finance leases mainly consist of financial lease contracts acquired through the acquisition of etkon AG.
15 OTHER FINANCIAL LIABILITIES
On 4 December 2006, the Group entered into a Discounted Share Purchase Program (DSPP) for treasury shares with a financial institution for the amount of CHF 15 million which allowed the Group to purchase a maximum of 54 924 Straumann Holding AG shares at a fixed price of CHF 273.10 between 4 December 2006 and 5 June 2007. On 5 June 2007, the Group purchased 10 536 shares for a total consideration of CHF 2.9 million. At inception of the DSPP, the Group had recognized a financial liability of CHF 15 million against shareholders’ equity. At expiration of the agreement the financial liability was derecognized and reversed against shareholders’ equity.
Straumann Annual Report 2007
Financial Report
STRAUMANN GROUP
16 PROVISIONS Warranties
Other
Total 2007
Total 2006
144
1 820
1 964
2 527
0
3 195
3 195
0
(45)
(1 520)
(1 565)
(116)
Reversal
0
(300)
(300)
(641)
Additions
53
9 395
9 448
160
0
(134)
(134)
34
152
12 456
12 608
1 964
9 437
(in CHF 1 000)
At 1 January Change in consolidation scope (Note 3) Utilization
Currency translation adjustment At 31 December Current 2007
86
9 351
Non-current 2007
66
3 105
3 171
152
12 456
12 608
Total provisions 2007 Current 2006
39
0
39
Non-current 2006
105
1 820
1 925
Total provisions 2006
144
1 820
1 964
‘Other’ contain mainly other non-income tax provisions of CHF 7.7 million and other long-term employee benefits of CHF 1.3 million as well as CHF 1.4 million of indemnities based on the requirements by law in Italy for external sales agents.
17 TRADE AND OTHER PAYABLES 2007
20061
Trade payables
25 112
25 001
Accrued wages and social security
34 423
25 217
6 100
3 966
Customer bonuses / sales commissions
5 867
5 446
Value added tax
4 486
3 331
Unpaid purchase price consideration Straumann Dental Korea (Note 3)
4 000
0
ITI Foundation (Note 28)
2 375
1 588
(in CHF 1 000)
Marketing / freight / shipping
Accrued legal and rent expenses
2 356
2 179
Other non-income tax liabilities
2 205
2 228
Customers with credit balances
704
1 657
0
868
Hedged firm commitments (Note 29; 30) Other Total trade and other payables 1 Prior year’s presentation has been adapted to the 2007 format.
7 841
4 466
95 469
75 947
147
148
Straumann Annual Report 2007
Financial Report
STRAUMANN GROUP
18 INCOME TAX (in CHF 1 000)
2007
2006
Current
38 006
30 516
Deferred
(20 783)
1 523
17 223
32 039
8.9
18.4
Income tax expense
Total income tax expense Effective income tax rate (in %)
RECONCILIATION FROM INCOME TAX EXPENSE AT THE APPLICABLE TAX RATE TO EFFECTIVE INCOME TAX EXPENSE
The applicable Group tax rate of 21.7 % (2006: 27.4 %) is a weighted tax rate, calculated from the income tax expense based on the results before taxes of each Group company, adjusted by extraordinary non-recurring items, multiplied by the individual applicable tax rate. The following elements explain the difference between the income tax expense at the applicable Group tax rate and the effective income tax expense.
(in CHF 1 000)
2007
2006
Tax reconciliation Income tax expense at the applicable Group tax rate
42 237
47 659
Taxes on non-tax-deductible items
1 156
(712)
Changes in recognition of tax assets from losses or tax credits (and their expiry)
(510)
4
(46)
(633)
Utilization of previously unrecognized tax losses or tax credits used to offset current taxes Tax losses or tax credits from current year that are not recognized Effect of changes in tax rates or imposition of new taxes Current taxes from previous year Tax impact on items not taxable or taxed at a reduced rate Other Effective income tax expense
0
1
(5 795)
(1 339)
1 642
(585)
(21 291)
(12 378)
(170)
22
17 223
32 039
2007
2006
39 398
68 996
(20)
0
TAX LOSS CARRY-FORWARDS
(in CHF 1 000)
Tax loss carry-forwards Available tax loss carry-forwards at 1 January Exchange differences to beginning balance Change in scope of consolidation Tax loss carry-forwards adjustments to beginning balance Tax losses and credits arising from current year
2 986 2 211
(5 711)
(4 826)
846
Tax losses and credits expired (not used) during current year
130
0
Tax losses and credits utilized against current year profits
499
(24 733)
Available tax loss carry-forwards at 31 December
40 378
39 398
Deferred tax assets of CHF 11.2 million (2006: CHF 10.2 million) were recorded in respect of available tax loss carry-forwards and tax credits of CHF 33.3 million (2006: CHF 33.5 million). Deferred tax assets for unused tax losses are recognized to the extent that it is probable that future taxable profits will be available, against which the unused tax losses can be utilized in the respective countries, or to the extent that the individual enterprises have sufficient taxable temporary differences.
Straumann Annual Report 2007
Financial Report
STRAUMANN GROUP
Previous years’ utilization of tax loss carry-forwards are mainly related to taxable financial restructuring gains. 75.5 % (2006: 92.8 %) of tax loss carry forwards are within Europe. Unused tax loss carry-forwards for which no deferred tax has been recognized will expire as follows:
(in CHF 1 000)
2007
2006
Unused tax loss carry-forwards for which no deferred tax has been recognized will expire as follows Expiry in next business year (current year +1)
55
0
Expiry current year +2
0
0
Expiry current year +3
0
0
Expiry current year +4
284
0
Expiry current year +5 and later
6 730
5 864
Unused tax loss carry-forwards at 31 December
7 069
5 864
DEFERRED INCOME TAXES
Deferred income tax assets and liabilities by type of balance sheet item:
(in CHF 1 000)
2007 Assets
2006
Liabilities
Net
Assets
Liabilities
(2 040)
Net
Deferred income tax assets and liabilities relate to the following Property, plant and equipment
509
(2 364)
505
Intangible assets
5 743
(11 620)
4 383
(3 927)
Inventories
6 465
(3 625)
6 142
(3 749)
434
(733)
419
(1 363) (4 117)
Trade and other receivables Provisions (non-current) Retirement benefit obligations Trade payables Other payables Subtotal by balance sheet item
757
(2 412)
2 200
1 339
(23)
99
0
0
(34)
2
0
3 679
221
18 926
(20 590)
(1 664)
831
(1 172)
14 581
(16 368)
(1 787)
(16 368)
8 453
Deferred income tax assets on tax loss carry-forwards
11 173
10 240
Total deferred income tax assets and liabilities
30 099
(20 590)
9 509
24 821
149
150
Straumann Annual Report 2007
Financial Report
STRAUMANN GROUP
19 SHARE-BASED PAYMENTS
Part of the compensation paid to the Board of Directors, Executive Management and other members of Senior Management takes the form of stock options. The options have a term of up to six years and a vesting period of 1–3 years. The options, which are issued in the form of warrants (one option = 50 warrants), can be exercised 1:1 into shares. The fair value of the options granted is determined using the Black-Scholes valuation model. The calculation of the option value was performed by independent specialists, applying the following significant inputs into the model: 2007
2006
Black-Scholes based model parameters Dividend yield (in %) Expected volatility (in %)
1.07
1.10
26.00
22.00
Risk-free interest rate (in %)
3.24
2.80
Expected life of options (years)
6.00
6.00
312.25
295.00
Strike price as per 31 December (in CHF)
The options granted are recognized as personnel expense from service commencement to the end of the vesting period. In 2007, 57 955 (2006: 48 000) options were granted. 14 693 (2006: 39 217) options were exercised during 2007 and a corresponding number of shares issued. The weighted average share price at the date of exercise was CHF 344.50 (2006: CHF 304.50). The option program developed as follows: 2007
2006
206 231
202 675
Equity compensation plan – outstanding options At 1 January Granted options
57 955
48 000
(14 693)
(39 217)
(2 450)
(5 227)
At 31 December
247 043
206 231
Options available for exercise at period-end
102 471
86 505
Exercised options (Note 12) Forfeited options
Unvested options are forfeited when an employee leaves the Company.
Straumann Annual Report 2007
Financial Report
STRAUMANN GROUP
The options are structured as private placement. Since 2000, a Swiss bank has functioned as market maker for the quoted and private placement warrants. The range of exercise prices of the options outstanding at period-end is between CHF 187.90 and CHF 312.25. The exercise period and the expiry date of the outstanding options are as follows:
Options available for exercise
Options expiring at year-end
2007
102 471
2008
133 126
50 524
2009
142 644
45 878
2010
150 641
46 086
2011
104 555
2012
104 555
2013
53 875
Total
50 680 53 875 247 043
Employees have the right to buy between 10 and 100 shares as part of the employee equity compensation program. The employee is offered a discount of 25% based on the average share price over the 7 trading days period following the ex-dividend day. The difference between the fair value at grant and the cash consideration paid by the employee is immediately recognized as personnel expenses. The shares are subject to a 2-year lock-up period. During the reporting period, employees subscribed to 10 535 (2006: 10 202) of those shares. Share-based payments for option and employee share plans are shown under personnel expense. The cost of share-based payment is as follows: (in CHF 1 000)
Employee share plan
2007
2006
511
684
Option plan
4 164
2 355
Total share based payments
4 675
3 039
20 RETIREMENT BENEFIT OBLIGATIONS
Apart from the legally required social security schemes, the Group has several independent pension plans, principally in Switzerland, the USA and Italy. The assets are principally held externally. For certain Group companies, however, no independent assets exist for the pension plan and other long-term employee beneďŹ t obligations. In these cases, the related liability is included in the balance sheet.
151
152
Straumann Annual Report 2007
Financial Report
STRAUMANN GROUP
The amounts recognized in the balance sheet are as follows:
(in CHF 1 000)
2007
2006
4 514
3 487
551
777
Movements in net liabilities recognized in balance sheet At 1 January Change in consolidation scope (Note 3) Currency loss
(285)
127
Expense recognized in income statement (Note 23)
5 759
5 328
(6 017)
(5 205)
4 522
4 514
2007
2006
Employer’s contributions At 31 December
(in CHF 1 000)
Balance sheet Fair value of plan assets
73 445
64 619
(81 777)
(76 071)
Funded status
(8 332)
(11 452)
Present value of unfunded benefit obligation
(3 902)
(4 103)
Present value of benefit obligation
Unrecognized actuarial losses
7 712
11 041
(4 522)
(4 514)
2007
2006
Service cost
(7 762)
(7 670)
Interest cost
(2 498)
(2 101)
Expected return on plan assets
2 589
2 086
Actuarial losses outside corridor recognized in year
(331)
(173)
Total retirement benefit obligations
The amounts recognized in the income statement are as follows:
(in CHF 1 000)
Net pension costs for defined benefit plans
Past service cost recognized in year
0
(6)
Actuarial losses recognized due to asset ceiling
0
(945)
Curtailment Other pension cost Periodic pension cost
Employee contributions Expense recognized in the income statement
(1 186)
0
0
31
(9 188)
(8 778)
3 429
3 450
(5 759)
(5 328)
Straumann Annual Report 2007
Financial Report
STRAUMANN GROUP
The movement in the defined benefit obligation over the year is as follows:
(in CHF 1 000)
2007
2006
(80 174)
(67 635)
(551)
(334)
(7 762)
(7 669)
Development of defined benefit obligation Present value of benefit obligation Change in consolidation scope (Note 3) Service cost Past service cost
0
(6)
Interest cost
(2 498)
(2 101)
Curtailments
(1 186)
0
Benefits paid
2 128
(1 331)
Actuarial gains and losses
4 089
(969)
Foreign currency exchange losses Present value of benefit obligation
275
(129)
(85 679)
(80 174)
2007
2006
64 619
56 002
The movement in the fair value of plan assets of the year is as follows:
(in CHF 1 000)
Development of plan assets Fair value of plan assets Change in consolidation scope
0
(443)
Expected return on plan assets
2 589
2 086
Employer contributions
6 017
5 205
Employee contributions
3 429
3 450
Benefits paid
(2 127)
1 331
Actuarial losses
(1 085)
(3 012)
Foreign currency exchange gains Fair value of plan assets
3
0
73 445
64 619
The actual return on plan assets in 2007 was CHF 1.5 million (2006: -0.9 million). Plan assets are comprised as follows:
(in CHF 1 000)
2007
2006
Asset allocation Cash
1 836
2.5%
10 533
16.3%
Bonds
28 276
38.5%
24 038
37.2%
Equity
23 649
32.2%
17 059
26.4%
5 876
8.0%
3 813
5.9%
Other
13 808
18.8%
9 176
14.2%
Total plan assets
73 445
100.0%
64 619
100.0%
Properties
153
154
Straumann Annual Report 2007
Financial Report
STRAUMANN GROUP
The expected return on plan assets was determined by considering the expected returns available on the assets underlying the current investment policy. Expected yields on fixed interest investments are based on gross redemption yields as at the balance sheet date. Expected return on equity and property investments reflect long-term real rates of return experienced in the respective markets.
Expected contributions to post-employment benefit plans for the year ending 31 December 2007 were CHF 6.0 million.
(in CHF 1 000)
2007
2006
(81 777)
(76 071)
Defined benefit pension plans Present value of defined benefit obligation Fair value of plan assets
73 445
64 619
Deficit
(8 332)
(11 452)
(1)
(4 436)
(1 085)
(3 013)
Experience adjustments On plan liabilities On plan assets
The principal actuarial assumptions for the plans in Switzerland and Italy, which are determined with respect to local conditions, were as follows:
Switzerland
Discount rate
2007
2006
3.50%
3.00%
Expected return on plan assets
4.25%
4.00%
Average future salary increase
2.25%
2.00%
Expected future pension increase
0.25%
0.25%
62
62
1.00%
1.00%
Average retirement age (in years) Inflation rate
Italy
Discount rate
2007
2006
5.35%
4.40%
Expected return on plan assets
n/a
n/a
Average future salary increase
2.00%
3.00%
Expected future pension increase
0.00%
0.00%
Average retirement age (in years) Inflation rate
65
65
2.00%
2.00%
Straumann Annual Report 2007
Financial Report
STRAUMANN GROUP
21 OTHER INCOME (in CHF 1 000)
2007
2006
Royalty income
450
2 529
Rental income
918
673
Gain on disposal of property, plant and equipment
968
106
Other income
Other
4 195
4 949
Total other income
6 531
8 257
The position ‘Other’ contains an amount of CHF 1.5 million from non-income tax refund.
22 DEPRECIATION AND AMORTIZATION
Notes
2007
2006
Depreciation of property, plant and equipment
5
25 258
29 449
Depreciation and impairment of investment properties
6
300
3 200
Amortization of intangible assets
7
17 011
9 870
42 569
42 519
2007
2006
179 466
135 068
(in CHF 1 000)
Depreciation and amortization
Total depreciation and amortization
23 EMPLOYEE BENEFITS EXPENSE (in CHF 1 000)
Employee benefits expense Wages and salaries Share-based payments (Note 19)
4 675
3 039
23 976
19 555
Pension costs – defined benefit plan (Note 20)
5 759
5 328
Pension costs – defined contribution plan
3 011
2 481
Social security cost
Other personnel expense Total employee benefits expense
11 714
9 741
228 601
175 212
155
156
Straumann Annual Report 2007
Financial Report
STRAUMANN GROUP
24 FINANCE INCOME AND COSTS (in CHF 1 000)
2007
2006
18 572
5 767
Interest income
4 077
1 649
Exchange gains
14 495
4 118
(25 596)
(7 121)
Finance income
Finance costs Interest expense
(6 574)
(716)
Exchange losses
(19 022)
(6 405)
(7 024)
(1 354)
Total finance costs
25 EARNINGS PER SHARE BASIC EARNINGS PER SHARE
Basic earnings per share are calculated by dividing the net profit for the year attributable to ordinary shareholders of Straumann Holding AG by the weighted average number of ordinary shares outstanding during the year, excluding ordinary shares purchased by the Group and held as treasury shares (see Note 12).
Net profit attributable to shareholders (in CHF 1 000) Weighted average number of ordinary shares Basic earnings per share (in CHF)
2007
2006
175 866
141 725
15 573 099
15 588 406
11.29
9.09
DILUTED EARNINGS PER SHARE
Diluted earnings per share are calculated by dividing the net profit for the year attributable to ordinary shareholders of Straumann Holding AG by the weighted average number of ordinary shares outstanding during the year plus the weighted average number of ordinary shares that would be issued on the conversion of all the dilutive potential of outstanding options into ordinary shares. The number of shares calculated as above is compared with the number of shares that would have been issued assuming the exercise of the share options.
Net profit used to determine diluted earnings per share (in CHF 1 000) Weighted average number of ordinary shares outstanding
2007
2006
175 866
141 725
15 573 099
15 588 406
Adjustments for: – Share option program Weighted average number of ordinary shares for diluted earnings per share Diluted earnings per share (in CHF)
44 608
33 511
15 617 707
15 621 917
11.26
9.07
There have been no other transactions involving ordinary shares or potential ordinary shares between the reporting date and the date of completion of these financial statements.
Straumann Annual Report 2007
Financial Report
STRAUMANN GROUP
26 DIVIDENDS PER SHARE
The dividends paid in 2007 and 2006 were CHF 46.7 million (CHF 3.00 per share) and CHF 39.0 million (CHF 2.50 per share) respectively. A dividend in respect for the year ended 31 December 2007 of CHF 3.75 per share, amounting to a total dividend of CHF 58.4 million, is to be proposed at the annual shareholder’s meeting on 28 March 2008. These financial statements do not reflect this dividend payable.
27 CONTINGENCIES AND COMMITMENTS (in CHF 1 000)
2007
2006
Operating lease commitments The maturity schedule is as follows: Within 1 year
14 834
14 257
After 1 year but not more than 5 years
62 349
54 469
More than 5 years
Total operating lease commitments Total rental and operating lease expenses
(in CHF 1 000)
25 961
35 362
103 144
104 088
18 689
16 023
2007
2006
0
0
Finance lease commitments
Buildings Machinery and fixtures Furniture, equipment and cars Total carrying amount of finance lease commitments
5 758
0
147
0
5 905
0
Finance lease commitments mainly consist of financial lease contracts acquired through the acquisition of etkon AG.
Minimum lease payments
Present value of minimum lease payments
Within 1 year
2 168
1 853
After 1 year but not more than 5 years
3 999
4 052
0
0
6 167
5 905
(in CHF 1 000)
Reconciliation between total amount of minimum lease payments and their present value The maturity schedule is as follows:
More than 5 years
Reconciliation between total amount of minimum lease payments and their present value
The majority of the operating lease commitments are in connection with non-cancellable operating lease agreements for the global headquarters and the US headquarters. The non-cancellable leases have remaining terms of between five and 15 years. In addition, the Group entered into various cancellable operating lease agreements. The leases have varying terms, escalation clauses and renewal rights.
157
158
Straumann Annual Report 2007
Financial Report
STRAUMANN GROUP
(in CHF 1 000)
2007
2006
3 079
3 640
Contingent liabilities Securities
CONTINGENT ASSETS AND LIABILITIES
In the US, the Company has entered into USD 2.7 million (2006: USD 3.0 million) letter-of-credit facilities as a deposit for future lease payments. Some Group companies are involved in litigation arising from the normal course of their business and might be liable to pay compensation. The costs relating to these lawsuits may not be partially or fully covered by insurance. However, it is the view of the Group’s management that the outcome of such litigation will not significantly affect the Group’s financial position. Straumann is subject to taxes in numerous jurisdictions and is hence subject to regular tax audits. The tax liability assessed by the authorities may ultimately differ from the expenses recognized in profit and loss for the respective periods. In this case additional expenses would have to be recognized in profit and loss.
28 RELATED-PARTY DISCLOSURE
The International Team for Implantology (ITI) Foundation, the Pension Fund, VISCHER Attorneys-at-law, the Board of Directors and the Executive Management were all identified as related parties. In the period under review, the following related-party transactions were made:
(in CHF 1 000)
2007
2006
Transactions – purchase of services International Team for Implantology Foundation
8 928
8 260
Pension Fund
5 207
4 902
VISCHER, Attorneys-at-law Total related-party transactions
178
302
14 313
13 464
2 375
1 588
0
26
2 375
1 614
Open balances at period-end International Team for Implantology Foundation (Note 17) VISCHER, Attorneys-at-law Total open balances due to related parties, included in trade and other payables
The payments to the ITI Foundation are based on a collaboration agreement between Straumann and the ITI. The payments to VISCHER Attorneys-at-law were made for tax and legal consulting and are priced at arm’s length.
Straumann Annual Report 2007
Financial Report
STRAUMANN GROUP
KEY MANAGEMENT PERSONNEL COMPENSATION
Key Management Personnel consists of the Board of Directors and the Executive Management Board. Compensation of the Board of Directors depends on the course of business. The Board of Directors receives a cash bonus and a fixed number of options, which are issued in the form of warrants (one option = 50 warrants). The options have a term of up to six years and are subject to a vesting period of 1–3 years. The price of the options is based on the share price at the end of December. The fair value of the options granted is determined using the Black-Scholes valuation model. The compensation of the Executive Management Board consists of a fixed portion and a variable portion, which depends on the course of business. Besides a fixed salary, Management receives an individual performance-based bonus and a fixed number of options. The options have a term of up to six years and are subject to a vesting period of one to three years. The price of the options is based on the share price at the end of December. The fair value of the options granted is determined using the Black-Scholes valuation model. COMPENSATION
The following table shows the compensation of Key Management Personnel recognized in profit or loss in line with the Group’s accounting policies.
(in CHF 1 000)
Salaries and other short-term employee benefits Post-employment benefits
2007
2006
4 227
4 110
486
230
Share-based payments
1 540
2 333
Total Key Management Personnel compensation recognized in profit or loss
6 253
6 673
The following table shows the compensation of Key Management Personnel in line with §663bbis and §663c of the Swiss Code of Obligations. The variable compensation in the form of options comprises the amount of options granted for the respective fiscal year valued at the fair value consistent with the Group’s policies regarding share based payments. For the purpose of expense recognition in the financial statements (table above), this amount is amortized over the service period in line with the Group’s policy for share-based payments.
159
160
Straumann Annual Report 2007
Financial Report
(in CHF 1 000)
STRAUMANN GROUP
Salaries
Cash bonus
Other Options compensations
Total compensations 2007
Board of Directors
Dr h.c. Rudolf Maag (Chairman of the Board)
240
178
22
Oskar Ronner (Vice Chairman of the Board)
180
134
17
440 331
Dr Sebastian Burckhardt (Board member)
120
89
12
221
Dominik Ellenrieder (Board member)
120
89
12
221
Jürg Morant (Board member)
120
89
12
221
Dr h.c. Thomas Straumann (Board member)
120
89
12
221
Total
900
668
87
1 655
Executive Management Board
Gilbert Achermann (President and CEO)
523
600
534
151
1 808
Other members
1 011
1 163
823
278
3 275
Total
1 534
1 763
1 357
429
5 083
Total
1 534
2 663
2 025
516
6 738
Reconciliation1
(485)
Total Key Management Personnel compensation recognized in profit or loss
1 Timing difference between the fair value of options granted for the fiscal year (under Swiss Code of Obligations) and the expense for share-based payments recognized in profit and loss of the financial statements. In the financial statements, expenses recognized for every given accounting period relate to multiple grants due to the overlapping service periods.
(485) 6 253
Straumann Annual Report 2007
Financial Report
STRAUMANN GROUP
EQUITY HOLDINGS OF KEY MANAGEMENT PERSONNEL
The following table shows the equity holdings in Straumann Holding AG of Key Management Personnel and their related parties in line with §663bbis and §663c of the Swiss Code of Obligations:
Shares
Options (End of vesting periods) 2008
2009
2010
Board of Directors
Dr h.c. Rudolf Maag (Chairman of the Board) Oskar Ronner (Vice Chairman of the Board) Dr Sebastian Burckhardt (Board member) Dominik Ellenrieder (Board member) Jürg Morant (Board member)
1 928 558
5 332
2 668
2 000
69 500
3 500
2 000
1 500
2 750
2 666
1 333
1 000
0
1 667
1 333
1 000
820
1 333
1 333
1 000
Dr h.c. Thomas Straumann (Board member)
5 065 084
3 167
1 333
1 000
Total
7 066 712
17 665
10 000
7 500
4 800
4 667
7 167
6 000
Executive Management Board
Gilbert Achermann (President and CEO) Marco Gadola (CFO, EVP Finance and Operations)
100
1 698
3 293
3 500
Dr Sandro Matter (EVP Products)
200
4 067
3 500
2 500
Franz Maier (EVP Sales)
1 000
0
1 500
1 750
Total
6 100
10 432
15 460
13 750
7 072 812
28 097
25 460
21 250
Total
29 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
The Group’s principal financial liabilities, other than derivatives, comprise bank loans, short-term overdrafts, finance leases, trade payables and hire purchase contracts. The main purpose of these financial liabilities is to raise financing for the Group’s operations. The Group has various financial assets such as trade receivables which arise directly from its operations and cash, cash equivalents and short-term deposits, which form part of the liquidity management managed by Group Treasury. The Group also enters into derivative transactions, primarily into forward currency contracts. The purpose of these contracts is to manage the currency risks arising from the Group’s operations conducted in foreign currency. It is, and has been throughout 2007 and 2006, the Group’s policy not to use derivatives without an underlying operational transaction or for trading (i.e. speculative) purposes. The main risks arising from the Group’s financial instruments are interest rate risk, foreign currency risk, credit risk and liquidity risk. The Financial and Audit Committee agrees and reviews policies for managing each of these risks which are summarized below.
161
162
Straumann Annual Report 2007
Financial Report
STRAUMANN GROUP
INTEREST RATE RISK
The Group’s exposure to the risk of changes in market interest rates relates primarily to the Group’s short-term interest bearing assets and short-term debt obligations with floating interest rates. No material hedging activities (such as interest rate swaps) were used during the period under review. The Group is not exposed to cash flow interest risk by non-current borrowings. The Group’s policy is to manage its interest cost using variable rate. INTEREST RATE RISK TABLE
The following table demonstrates the sensitivity to a reasonably possible change in interest rates, with all other variables held constant, of the Group’s profit before tax (through the impact on floating rate on interest bearing assets and borrowings).
(in CHF 1 000)
2007
2006
Increase / decrease
Effect on profit
Increase / decrease
Effect on profit
(in base points)
before tax
(in base points)
before tax
CHF
30
330
30
389
EUR
50
(404)
50
50
USD
50
31
50
7
SEK
40
79
40
111
CHF
(30)
(330)
(30)
(389)
EUR
(50)
404
(50)
(50)
USD
(50)
(31)
(50)
(7)
SEK
(40)
(79)
(40)
(111)
Currency
FOREIGN CURRENCY RISK
Straumann operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the euro, the US dollar and the yen. Foreign exchange risk arises from future commercial transactions, recognized assets and liabilities and net investments in foreign operations. Foreign exchange risk arises when future commercial transactions or recognized assets or liabilities are denominated in a currency that is not the entity’s functional currency. To manage their foreign exchange risk arising from future commercial transactions and recognized assets and liabilities, entities of the Straumann Group use forward currency contracts, transacted with Corporate Treasury. Corporate Treasury is responsible for managing the net positioning each foreign currency by using external forward currency contracts. Each subsidiary designates contracts with Corporate Treasury as fair value hedges or cash flow hedges, as appropriate. External foreign exchange contracts are designated at Group level as hedges of foreign exchange risk on specific assets, liabilities or future transactions on a gross basis. Straumann’s risk management policy is to hedge anticipated transactions (mainly export sales) in each major currency for a maximum of 12 months based on budget assumptions and currency expectations. The forward currency contracts must be in the same currency as the hedged item. It is the Group’s policy to negotiate the terms of the hedge derivatives to match the terms of the hedged item to maximize hedge effectiveness. At 31 December 2007, the Group had not hedged its foreign currency sales for which firm commitments existed at the balance sheet date since its external financing in foreign currency currently acts as a natural hedge.
Straumann Annual Report 2007
Financial Report
STRAUMANN GROUP
Straumann has certain investments in foreign operations, whose net assets are exposed to foreign currency translation risk. Currency exposure arising from the net assets of Straumann’s foreign operations is not hedged. The following table demonstrates the sensitivity to a reasonably possible change in the euro, US dollar, SEK and Japanese yen exchange rate, with all other variables held constant, of the Group’s profit before tax (due to changes in the fair value of monetary assets and liabilities) and the Group’s equity (due to changes in the fair value of forward exchange contracts).
(in CHF 1 000)
Currency
2007
Increase / decrease
Effect on profit
2006
Effect on Increase / decrease
Effect on profit
Effect on equity
(in percentage)
before tax
equity
(in percentage)
before tax
USD / CHF
5
308
0
5
543
0
EUR / CHF
3
(2 714)
0
3
607
(1 500)
JPY / CHF
2
19
0
2
0
0
SEK / CHF
3
(424)
0
3
(34)
0
USD / CHF
(5)
(308)
0
(5)
(543)
0
EUR / CHF
(3)
2 714
0
(3)
(607)
1 500
JPY / CHF
(2)
(19)
0
(2)
0
0
SEK / CHF
(3)
424
0
(3)
34
0
CREDIT RISK
The Group trades only with recognized, creditworthy third parties. It is the Group’s policy that all customers who wish to trade on credit terms are subject to credit verification procedures. In addition, receivable balances are monitored on an ongoing basis with the result that the Group’s exposure to bad debts is not significant. The maximum exposure is the carrying amount as disclosed in Note 10. More than 95% of the transactions occur in the country of the relevant operating unit. There are no significant concentrations of credit risk within the Group. With respect to credit risk arising from the other financial assets of the Group, which comprise cash and cash equivalents, money market deposits and certain derivative instruments, the Group’s exposure to credit risk arises from default of the counterparty, with a maximum exposure equal to the carrying amount of these instruments. The table below shows the balance of the three major counterparties at the balance sheet date.
(in CHF 1 000)
Bank
2007
Rating
Balance
2006
Rating
Balance
Bank A
AA
74 355
AA+
91 468
Bank B
AA–
35 292
AA–
123
Bank C
A+
24 397
A
Total
134 044
0 91 591
163
164
Straumann Annual Report 2007
Financial Report
STRAUMANN GROUP
LIQUIDITY RISK
The Group monitors its liquidity risk to a shortage of funds through prudent liquidity management using a recurring liquidity planning tool. This tool considers the maturity of its financial investments, financial assets (e.g. accounts receivables and other financial assets) as well as projected cash flows from operations. The Group’s objective is to maintain a balance between continuity of funding and flexibility through the use of bank overdrafts, bank loans and finance leases. Group treasury maintains flexibility in funding by maintaining availability under uncommitted credit lines. Management monitors rolling forecasts of the group’s liquidity reserve (comprises undrawn borrowing facility and cash and cash equivalents on the basis of expected cash flow). The Group’s policy follows the principle of maintaining liquidity reserves higher than the daily and monthly demand of operating cash and the target of maintaining a minimum cash on hand of CHF 60.0 million and available liquidity including credit lines of more than CHF 100.0 million. The table below summarizes the maturity profile of the Group’s financial liabilities at 31 December 2007 and 31 December 2006 respectively, based on contractual undiscounted payments.
(in CHF 1 000)
2007
<1 year Borrowings (Note 13)
1–5 years
2006
>5 years
<1 year
1–5 years
>5 years
123 973
0
0
0
0
0
Trade and other payables (Note 17)
95 469
0
0
75 947
0
0
Income tax payable
0
52 380
0
0
29 580
0
Discounted Share Purchase Program
0
0
0
15 000
0
0
Derivative financial instruments (Note 17)
0
0
0
868
0
0
Financial liabilities measured at amortized costs Total
9 006
4 438
0
0
0
0
280 828
4 438
0
121 395
0
0
CAPITAL MANAGEMENT
The primary objective of the Group’s capital management is to ensure that it maintains a strong credit rating and healthy capital ratios in order to support its business and to secure shareholder investments. The Group manages its capital structure and makes adjustments if required. To maintain or adjust the capital structure, the Group may adjust the dividend payment to shareholders, return capital to shareholders by the means of share buy-backs or issue new shares. No changes were made in the objectives, policies or processes during 2007 and 2006. As the Group operates in a high growth, fast moving industry, it is the Group’s policy to maintain a high degree of flexibility in its capital structure by maintaining a high availability of liquid funds. The Group monitors its capital base using the equity ratio, which is equity including non-controlling interest divided by total assets. The Group’s current policy is to maintain an equity ratio of 50% or higher.
(in CHF 1 000)
2007
2006
Equity ratio Total assets
946 481
646 947
Equity incl. non-controlling interests
623 495
503 574
65.9%
77.8%
Equity ratio
Straumann Annual Report 2007
Financial Report
STRAUMANN GROUP
30 FINANCIAL INSTRUMENTS FAIR VALUES
The following table presents a comparison by category of carrying amounts and fair values of all of the Group’s financial instruments that are carried in the financial statements.
(in CHF 1 000)
Carrying amount
Fair value
2007
2006
2007
2006
121 773
Financial assets Cash at banks and on hand
110 185
121 773
110 185
Short-term bank deposits
80 000
50 034
80 000
50 034
Total financial assets
190 185
171 807
190 185
171 807
Financial liabilities Bank overdraft Bank borrowings (Note 13)
0
0
0
0
123 973
0
123 973
0
Derivative financial instruments (Note 17)
0
868
0
868
Discounted Share Purchase Program (DSPP)
0
15 000
0
15 000
Put option granted to holders of non-controlling interests
7 539
0
7 539
0
Finance leases (Note 14; 27)
5 905
0
5 905
0
137 417
15 868
137 417
15 868
Total financial liabilities
The fair value of derivatives and borrowings has been calculated by discounting the expected future cash flows at prevailing interest rates. The fair value of loan notes and other financial assets have been calculated using market interest rates. HEDGING ACTIVITIES
(in CHF 1 000)
2007
2006
Assets
Liabilities
Assets
Forward foreign exchange contracts cash flow hedges
0
0
0
Liabilities
401
Forward foreign exchange contracts fair value hedges
0
0
0
467
Total hedging activities
0
0
0
868
CASH FLOW HEDGES
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges are recognized in equity. The gain or loss relating to the ineffective portion is recognized immediately in the income statement. Amounts recognized in equity are transferred to the income statement in the periods when the hedged item will affect profit or loss. However, when the forecast transaction that is hedged results in the recognition of a non-financial asset or a liability, the gains and losses previously recognized in equity are transferred from equity and are included in the initial measurement of the cost of the asset or liability. When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss recognized in equity is transferred to the income statement. When a forecast transaction is no longer expected to occur, the cumulative gain or loss previously recognized in equity is immediately transferred to the income statement.
165
166
Straumann Annual Report 2007
Financial Report
STRAUMANN GROUP
At 31 December 2007, the Group had no forward exchange contracts designated as hedges of expected future sales to customers for which the Group has firm commitments (2006: CHF 80.1 million). However, forward exchange contracts were used during 2007 and 2006 to hedge the Group’s foreign currency risk of the firm commitments. The cash flow hedges of the expected future sales during 2007 and 2006 were assessed to be highly effective. At 31 December 2006, the Group held six forward exchange contracts which were designated as hedges of expected future sales to subsidiaries in the Euro zone. The cash flow hedges of the expected future sales of 2007 were assessed to be highly effective and a loss of EUR 2.7 million was included in equity in respect of these contracts. FAIR VALUE HEDGES
Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded in the income statement, together with any changes in the fair value of the hedged asset or liability that are attributable to the hedged risk. At 31 December 2007, the Group had no forward exchange contracts designated as fair value hedges (2006: CHF 32.1 million). HEDGES OF NET INVESTMENTS IN FOREIGN OPERATIONS
The Group does not use any derivative financial instruments to hedge net investments in foreign operations. It is the Group’s policy to use natural hedges and foreign currency financing to hedge net investments in foreign operations as much as possible. Monetary items that form part of net investment in foreign operations are accounted for similarly to cash flow hedges. Any foreign currency gain or loss on the monetary instrument is recognized in equity. Gains and losses accumulated in equity are included in the income statement when the foreign operation is disposed of. At 31 December 2007, the Group had CHF 4.0 million of foreign currency gains recognized in equity (2006: CHF 6.7 million).
31 PRINCIPAL CURRENCY TRANSLATION RATES
Currency
Unit
31 Dec 2007
Average 2007
31 Dec 2006
Average 2006
1.57
EUR
1
1.67
1.64
1.60
GBP
1
2.28
2.40
2.38
2.31
SEK
100
17.61
17.78
17.88
17.00
NOK
100
20.88
20.52
19.66
19.55
1
1.14
1.20
1.21
1.26
USD CAD
1
1.17
1.12
1.05
1.11
100
64.66
61.68
56.19
57.58
AUD
1
1.00
1.01
0.95
0.94
MXN
1
0.11
0.11
0.11
0.12
DKK
1
0.22
0.22
0.21
0.21
NZD
1
0.88
0.88
JPY
100
1.00
1.02
KRW
100
0.12
0.13
BRL
Straumann Annual Report 2007
Financial Report
STRAUMANN GROUP
32 EVENTS AFTER THE BALANCE SHEET DATE
On 16 January 2008 Straumann acquired Ormedent spol. s r.o. in Prague, Czech Republic. The purchase consideration was CHF 1.6 million plus the fair value of the net assets acquired. The agreement includes an earn-out with a maximum of CHF 1.6 million payable in 2010 conditional upon a set of performance criteria regarding the acquired business.
33 GROUP SUBSIDIARIES
The consolidated financial statements of Straumann include the financial statements of Straumann Holding AG and the principal subsidiaries listed in the following table:
Purpose Currency
Institut Straumann AG, Basel, Switzerland Straumann Villeret SA, Villeret, Switzerland
Share capital
Interest and voting rights 2007 (in %)
Interest and voting rights 2006 (in %)
Sales
CHF
100 000
100
100
Production
CHF
9 000 000
100
100 100
Straumann GmbH, Freiburg, Germany
Sales
EUR
170 000
100
Straumann USA LLC, Andover, USA
Sales
USD
1
100
100
Straumann Ltd, Crawley, UK
Sales
GBP
100 000
100
100
Straumann BV, Ijsselstein, Netherlands
Sales
EUR
18 151
100
100
Straumann SARL, Marne-la-Vallée, France
Sales
EUR
192 000
100
100
Straumann AB, Gothenburg, Sweden
Sales
SEK
100 000
100
100
Straumann AS, Oslo, Norway
Sales
NOK
1 000 000
100
100
Straumann Oy, Helsinki, Finland
Sales
EUR
32 000
100
100
Straumann SA, Madrid, Spain
Sales
EUR
60 101
100
100
Straumann Canada Ltd, Burlington, Canada
Sales
CAD
1 500 000
100
100
Straumann GmbH, Vienna, Austria
Sales
EUR
40 000
100
100
Straumann Brasil Ltda, São Paulo, Brazil
Sales
BRL
465 999
100
100
Straumann SA/NV, Zaventem, Belgium
Sales
EUR
1 450 000
100
100
Straumann Italia srl, Milan, Italy
Sales
EUR
270 000
100
100
Production / Holding
USD
1
100
100
Straumann Pty Ltd, Victoria, Australia
Sales
AUD
100
100
100
Straumann Mexico SA de CV, Mexico DF, Mexico
Sales
MXN
19 407 008
100
100
Straumann Danmark ApS, Greve, Denmark
Sales
DKK
125 000
100
100
Holding
SEK
100 000
–
100 100
Straumann Manufacturing Inc, Andover, USA
Straumann Holding Sweden AB, Malmö, Sweden (merged in 2007) Biora AB, Malmö, Sweden
Production
SEK
950 152
100
Bioventures BV, Amsterdam, Netherlands
Patents
EUR
18 151
100
100
Biora BioEx AB, Malmö, Sweden (liquidated in 2007)
Patents
SEK
100 000
–
100
Holding
EUR
25 000
100
–
Production / Sales
EUR
Straumann Holding Deutschland GmbH, Freiburg, Germany etkon Centrum für dentale CAD/CAM-Technologie AG, Gräfelfing, Germany Straumann Holding Japan KK, Tokyo, Japan
Holding
Straumann Japan KK, Osaka, Japan
Sales
Straumann Dental Korea Inc, Seoul, Republic of Korea
Sales
326 000
95.4
–
JPY1 000 000 000
100
–
JPY
10 000 000
100
–
KRW 200 000 000
100
–
167
168
Straumann Annual Report 2007
Auditors‘ Report
STRAUMANN GROUP
REPORT OF THE GROUP AUDITORS
REPORT OF THE GROUP AUDITORS TO THE GENERAL MEETING OF STRAUMANN HOLDING AG, BASEL
As auditors of the Group, we have audited the consolidated financial statements (balance sheet, income statement, cash flow statement, statement of changes in equity and notes – pp. 108–167) of Straumann Holding AG for the year ended 31 December 2007. These consolidated financial statements are the responsibility of the Board of Directors. Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We confirm that we meet the legal requirements concerning professional qualification and independence. Our audit was conducted in accordance with Swiss Auditing Standards and with the International Standards on Auditing, which require that an audit be planned and performed to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. We have examined on a test basis evidence supporting the amounts and disclosures in the consolidated financial statements. We have also assessed the accounting principles used, significant estimates made and the overall consolidated financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the consolidated financial statements give a true and fair view of the financial position, the results of operations and the cash flows in accordance with the International Financial Reporting Standards (IFRS) and comply with Swiss law. We recommend that the consolidated financial statements submitted to you be approved. PricewaterhouseCoopers AG
Thomas Brüderlin Auditor in charge
Basel, 5 February 2008
Gerhard Siegrist
Straumann Financial Report 2007
Straumann-Group
STRAUMANN GROUP
169
170
Straumann Financial Report 2007
Straumann Group
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
STRAUMANN HOLDING
Balance sheet Income statement Notes to the ďŹ nancial statements Proposal of the Board of Directors for the appropriation of the available earnings Report of the statutory auditors
172 173 174 178 179
172
Straumann Annual Report 2007
Financial Report
STRAUMANN HOLDING
BALANCE SHEET
ASSETS (in CHF 1 000)
Notes
Intangible assets
31 Dec 2007
31 Dec 2006
1 994
2 926
209 826
80 846
Intercompany loans
421 933
276 105
Total non-current assets
633 753
359 877
11 668
11 668
2 083
37 440
Investments
2
Treasury shares Intercompany receivables Other receivables
377
167
Cash and cash equivalents
366
15 070
14 494
64 345
648 247
424 222
Total current assets
Total assets
EQUITY AND LIABILITIES (in CHF 1 000)
Notes
31 Dec 2007
31 Dec 2006
Share capital
3
1 563
1 562
General reserve Additional paid-in capital
1 540
1 540
47 383
45 035
2 000
2 000
14 831
14 976
Available earnings
429 863
335 028
Total equity
497 180
400 141
Other provisions
19 329
17 783
Total non-current liabilities
19 329
17 783
Special reserve Reserve for treasury shares
Interest-bearing loans and borrowings Income tax liabilities
4
123 973
0
6 737
4 315
Accrued expenses
538
356
Other liabilities
490
1 627
Total current liabilities
131 738
6 298
Total liabilities
151 067
24 081
Total equity and liabilities
648 247
424 222
Straumann Annual Report 2007
Financial Report
STRAUMANN HOLDING
INCOME STATEMENT
2007
2006
Income from investments
96 699
97 077
Financial income
28 964
12 019
License income
47 650
28 576
(in CHF 1 000)
Other income
0
3 681
Total income
173 313
141 353
Administration expense
(7 039)
(4 761)
Depreciation and amortization
(3 384)
(3 063)
Financial expense
(17 384)
(497)
Total expenses
(27 807)
(8 321)
Profit before taxes
145 506
133 032
(4 087)
(2 667)
141 419
130 365
Income and capital tax expense Net profit
173
174
Straumann Annual Report 2007
Financial Report
STRAUMANN HOLDING
NOTES TO THE FINANCIAL STATEMENTS
GENERAL
Straumann Holding AG is a public company whose shares are traded on the Swiss Exchange (SWX). As the parent company of the Straumann Group, the purpose of Straumann Holding AG is to acquire, dispose and manage investments in the field of dental and medical technology. These financial statements were drawn up in accordance with the regulations of the Swiss Code of Obligations. 1 GUARANTEES
The Company has given a guarantee for interest-bearing loans of CHF 30.0 million (2006: CHF 0). Additionally, the Company has issued ‘letters of subordination’ in a total amount of CHF 0.1 million (2006: 3.5 million) in favor of its subsidiaries. Straumann Holding AG, together with its subsidiaries Institut Straumann AG and Straumann Villeret SA are treated as VAT Group by the Swiss Federal Tax Administration. Owing to this Group taxation, Straumann Holding AG is liable to the Swiss Federal Tax Administration jointly and severally with all Group members for any VAT. 2 INVESTMENTS
Straumann Holding AG holds directly the following investments:
(in CHF 1 000)
Interest and voting rights (in %) 2007
Investment value 2007
Interest and voting rights (in %) 2006
Investment value 2006
Institut Straumann AG1, Basel, Switzerland
100
2 100
100
100
Straumann Villeret SA2, Villeret, Switzerland
100
7 000
100
9 000
Straumann GmbH, Freiburg, Germany
100
31 980
100
31 980
Straumann Ltd, Crawley, UK
100
4 415
100
4 415
Straumann BV, IJsselstein, Netherlands
100
58
100
58
Straumann SARL, Marne-la-Vallée, France
100
301
100
301
Straumann AB, Gothenburg, Sweden
100
26
100
26
Straumann AS, Oslo, Norway
100
4 183
100
4 183
Straumann Oy, Helsinki, Finland
100
633
100
633
Straumann SA, Madrid, Spain
100
6 726
100
6 726
Straumann Canada Ltd, Burlington, Canada
100
1 415
100
1 415
Straumann GmbH, Vienna, Austria
100
730
100
730
Straumann Brasil Ltda, São Paulo, Brazil
100
2 564
100
2 564
Straumann SA/NV, Zaventem, Belgium
100
2 373
100
148
Straumann Manufacturing Inc, Andover, USA
100
10 419
100
10 419
Straumann Pty Ltd, Victoria, Australia
100
1
100
1
Straumann Mexico SA de CV, Mexico DF, Mexico
100
2 142
100
2 142
Straumann Danmark ApS, Greve, Denmark
100
3 535
100
3 535
100
2 470
Straumann Holding Sweden AB3, Malmö, Sweden Biora AB, Malmö, Sweden
100
48 750
Straumann Holding Deutschland GmbH, Freiburg, Germany
100
50 189
Straumann Holding Japan KK, Tokyo, Japan
100
20 254
Straumann Dental Korea Inc, Seoul, Republic of Korea
100
10 032
Total investments
209 826
1 Formerly Straumann Services AG, Basel, renamed during the course of 2007. 2 Formerly Institut Straumann AG, Basel, renamed during the course of 2007. 3 Straumann Holding Sweden AB was merged into Straumann AB, Gothenburg, Sweden, during the course of 2007.
Investments are stated at cost less any impairment.
100
80 846
Straumann Annual Report 2007
(in 1 000)
Financial Report
STRAUMANN HOLDING
Purpose
Currency
Share capital
Sales
CHF
100
Details of the investments Institut Straumann AG, Basel, Switzerland This company holds: – Straumann Italia srl, Milan, Italy
Sales
EUR
270
Production
CHF
9 000
Straumann GmbH, Freiburg, Germany
Sales
EUR
170
Straumann Ltd, Crawley, UK
Sales
GBP
100
Straumann BV, IJsselstein, Netherlands
Sales
EUR
18
Straumann SARL, Marne-la-Vallée, France
Sales
EUR
192
Straumann Villeret SA, Villeret, Switzerland
Straumann AB, Gothenburg, Sweden
Sales
SEK
100
Straumann AS, Oslo, Norway
Sales
NOK
1 000
Straumann Oy, Helsinki, Finland
Sales
EUR
32
Straumann SA, Madrid, Spain
Sales
EUR
60
Straumann Canada Ltd, Burlington, Canada
Sales
CAD
1 500
Straumann GmbH, Vienna, Austria
Sales
EUR
40
Straumann Ltda, São Paulo, Brazil
Sales
BRL
466
Sales
EUR
1 450
Production / Sales
SEK
950
Patents
EUR
18
Production / Participation
USD
1 1
Straumann SA/NV, Zaventem, Belgium Biora AB, Malmö, Sweden This company holds: – Bioventures BV, Amsterdam, Netherlands Straumann Manufacturing Inc, Andover, USA This company holds:
Sales
USD
Straumann Pty Ltd, Victoria, Australia
– Straumann USA LLC, Andover, USA
Sales
AUD
1
Straumann Mexico SA de CV, Mexico DF, Mexico
Sales
MXN
19 407
Straumann Danmark ApS, Greve, Denmark Straumann Holding Deutschland GmbH, Freiburg, Germany
Sales
DKK
125
Holding
EUR
25
Production / Sales
EUR
326
Holding
JPY
1 000 000
This company holds: – etkon Centrum für dentale CAD / CAM-Technologie AG, Gräfelfing, Germany Straumann Holding Japan KK, Tokyo, Japan This company holds: – Straumann Japan KK, Osaka, Japan Straumann Dental Korea Inc, Seoul, Republic of Korea
Sales
JPY
10 000
Sales
KRW
200 000
175
176
Straumann Annual Report 2007
Financial Report
STRAUMANN HOLDING
3 EQUITY
The share capital of CHF 1.563 million (2006: CHF 1.562 million) consists of 15 630 671 (2006: 15 615 978) registered shares with a par value of CHF 0.10 each.
(in %)
31 Dec 2007
31 Dec 2006
Dr h.c. Thomas Straumann (Member of the Board)
32.4
32.4
Dr h.c. Rudolf Maag (Chairman of the Board)
12.3
12.3
Major shareholders
Simone Maag de Moura Cunha Total major shareholders
6.0
6.0
50.7
50.7
There are no shareholder commitment contracts or other material agreements between shareholders. CONDITIONAL SHARE CAPITAL
In 2007, share capital increased by CHF 1469 (2006: CHF 3922). The additional share capital was created from conditional share capital that can be used for the employee share plan and the option plan for management. Non-employee shareholders are excluded from subscribing for these shares. 14 693 options (2006: 39 217) were exercised in the option plan for management during 2007 and a corresponding number of shares issued. The effective amount of registered conditional share capital on 31 December 2007 was CHF 36 933 (369 329 shares with a par value of CHF 0.10 each) at year-end. 4 TREASURY SHARES
The reserve for treasury shares was valued using the weighted average purchase price method. On the balance sheet of Straumann Holding AG, it amounted to CHF 14.831 million on 31 December 2007 (2006: CHF 14.976 million), and thereby covers the treasury shares recognized as assets on the balance sheets of Straumann Holding AG and Institut Straumann AG at year-end. The number of treasury shares held directly or indirectly by Straumann Holding AG changed in 2007 as shown in the table below:
Shares held by: Straumann Holding AG At 1 January 2007 Acquisitions in 2007 Disposals in 2007 At 31 December 2007
42 500 0 0 42 500
Institut Straumann AG At 1 January 2007 Acquisitions in 2007 Disposals in 2007 At 31 December 2007
12 000 10 536 (10 965) 11 571
Straumann Annual Report 2007
Financial Report
STRAUMANN HOLDING
5 COMPENSATION
The following table shows the compensation of Key Management Personnel in line with §663bbis and §663c of the Swiss Code of Obligations. The variable compensation in the form of options comprises the amount of options granted for the respective fiscal year valued at the fair value consistent with the Group’s policies regarding share based payments. For the purpose of expense recognition this amount is amortized over the service period in line with the Group’s policy for share based payments.
(in CHF 1 000)
Salaries
Cash bonus
Other Total compensaOptions compensations tions 2007
Board of Directors
Dr h.c. Rudolf Maag (Chairman of the Board)
240
178
22
Oskar Ronner (Vice Chairman of the Board)
180
134
17
440 331
Dr Sebastian Burckhardt (Board member)
120
89
12
221
Dominik Ellenrieder (Board member)
120
89
12
221
Jürg Morant (Board member)
120
89
12
221
Dr h.c. Thomas Straumann (Board member)
120
89
12
221
Total
900
668
87
1 655
Executive Management Board
Gilbert Achermann (President and CEO)
523
600
534
151
1 808
Other members
1 011
1 163
823
278
3 275
Total
1 534
1 763
1 357
429
5 083
Total
1 534
2 663
2 025
516
6 738
The following table shows the equity holdings in Straumann Holding AG of Key Management Personnel and their related parties in line with §663bbis and §663c of the Swiss Code of Obligations.
Shares
Options (End of vesting periods) 2008
2009
2010
Board of Directors
Dr h.c. Rudolf Maag (Chairman of the Board) Oskar Ronner (Vice Chairman of the Board) Dr Sebastian Burckhardt (Board member) Dominik Ellenrieder (Board member) Jürg Morant (Board member)
1 928 558
5 332
2 668
2 000
69 500
3 500
2 000
1 500
2 750
2 666
1 333
1 000
0
1 667
1 333
1 000
820
1 333
1 333
1 000
Dr h.c. Thomas Straumann (Board member)
5 065 084
3 167
1 333
1 000
Total
7 066 712
17 665
10 000
7 500
Executive Management Board
Gilbert Achermann (President and CEO) Marco Gadola (CFO, EVP Finance and Operations) Dr Sandro Matter (EVP Products)
4 800
4 667
7 167
6 000
100
1 698
3 293
3 500
200
4 067
3 500
2 500
Franz Maier (EVP Sales)
1 000
0
1 500
1 750
Total
6 100
10 432
15 460
13 750
7 072 812
28 097
25 460
21 250
Total
177
178
Straumann Annual Report 2007
Financial Report
STRAUMANN HOLDING
PROPOSAL OF THE BOARD OF DIRECTORS FOR THE APPROPRIATION OF THE AVAILABLE EARNINGS (in CHF 1 000)
2007
2006
Net profit for the year
141 419
130 365
Carried forward from previous year
288 301
219 641
145
(14 976)
429 865
335 030
Change in reserve of treasury shares Profit available to the Annual General Meeting Number of shares:
Dividend according to Annual General Meeting (CHF 3.00 per share) of 30 March 2007 No dividend paid on treasury shares Dividend paid
15 630 671
(46 892)
(54 500)
163
15 576 171
(46 729)
Balance carried forward
288 3 1
The Board of Directors proposes to the Annual General Meeting a dividend of CHF 3.75 gross per share be distributed, payable as of 1 April 2008. Calculated on the total number of outstanding shares of 15 576 000, this corresponds to a total amount of CHF 58.410 million. In deciding on the appropriation of dividends, the Annual General Meeting shall take into account that the Company will not pay on treasury shares held by the Company. Until the time of the shareholders’ General Meeting, 133 126 free options could be exercised and converted into shares. The maximum dividends related to such options if exercised would be CHF 0.499 million. The remaining amount of the available earnings is to be carried forward.
Straumann Annual Report 2007
Auditors’ Report
STRAUMANN HOLDING
REPORT OF THE STATUTORY AUDITORS
REPORT OF THE STATUTORY AUDITORS TO THE GENERAL MEETING OF STRAUMANN HOLDING AG, BASEL
As statutory auditors, we have audited the accounting records and the financial statements (balance sheet, income statement and notes – pp. 172–178) of Straumann Holding AG for the year ended 31 December 2007. These financial statements are the responsibility of the Board of Directors. Our responsibility is to express an opinion on these financial statements based on our audit. We confirm that we meet the legal requirements concerning professional qualification and independence. Our audit was conducted in accordance with Swiss Auditing Standards, which require that an audit be planned and performed to obtain reasonable assurance about whether the financial statements are free from material misstatement. We have examined on a test basis evidence supporting the amounts and disclosures in the financial statements. We have also assessed the accounting principles used, significant estimates made and the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the accounting records and financial statements and the proposed appropriation of available earnings comply with Swiss law and the Company’s articles of incorporation. We recommend that the financial statements submitted to you be approved. PricewaterhouseCoopers AG
Thomas Brüderlin Auditor in charge
Basel, 5 February 2008
Gerhard Siegrist
179
180
Straumann Financial Report 2007
Straumann-Group
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
APPENDIX
Five-year overview Information for investors Calendar Contacts and addresses Country organizations (addresses) Global Reporting Initiative (GRI) Glossary Index Points to note
182 184 186 187 188 190 192 195 198
182
Straumann Annual Report 2007
Appendix
FIVE-YEAR OVERVIEW
FIVE-YEAR OVERVIEW
OPERATING PERFORMANCE (in CHF million)
Net revenue Growth in %
Gross profit Margin in %
2003
2004
2005
20061
2007
343.9
420.3
509.6
599.2
713.7
25.1
22.2
21.2
17.6
19.1
274.9
342.4
416.6
479.7
582.3
80.0
81.5
81.8
80.1
81.6
Operating result before depreciation and amortization (EBITDA)
120.0
156.0
181.1
217.8
244.1
Margin in %
34.9
37.1
35.5
36.4
34.2
Growth in %
28.4
30.0
16.1
20.3
12.1
Operating result before amortization 102.3
136.8
162.2
185.2
218.5
Margin in %
(EBITA)
29.7
32.6
31.8
30.9
30.6
Growth in %
27.0
33.8
18.5
14.2
18.0
Operating profit (EBIT)
97.5
127.0
155.9
175.3
201.5
Margin in %
28.4
30.2
30.6
29.3
28.2
Growth in %
30.2
30.2
22.2
12.4
14.9
Net profit
80.9
100.5
128.2
141.9
177.3
Margin in %
23.5
23.9
25.2
23.7
24.8
Growth in %
43.3
24.2
27.5
10.7
24.9
Basic earnings per share (in CHF)
5.22
6.44
8.22
9.09
11.29
Value added (economic profit)
59.2
80.1
93.2
98.4
129.4
Increase in value added
20.5
20.9
13.1
5.2
31.0
Increase in value added in %
52.9
35.4
16.4
5.5
31.5
In % of Group revenue
17.2
19.1
18.3
16.4
18.1
Number of employees (year-end)
903
1 104
1 342
1 534
1 955
Number of employees (average)
845
1 006
1 236
1 483
1 736
407
418
412
404
411
Sales per employee (average) in CHF 1 000
1 The presentation of 2006 figures has been adapted to the 2007 format throughout this report.
Straumann Annual Report 2007
Appendix
FIVE-YEAR OVERVIEW
FINANCIAL PERFORMANCE (in CHF million)
2003
2004
2005
20061
2007
Cash and cash equivalents
88.4
107.1
94.2
171.8
190.2
Net working capital (net of cash)
31.6
17.0
35.5
38.0
40.8
10.6
5.8
5.2
6.3
5.7
In % of net revenue
Inventories
34.7
35.5
48.1
59.0
79.6
Days of supplies
190
162
152
161
208
Trade receivables
42.4
48.8
69.6
85.3
94.6
40
39
42
47
44
351.8
404.5
536.3
646.9
946.5
26.8
26.6
27.3
21.0
22.2
623.5
Days of sales outstanding
Balance sheet total Return on assets in % (ROA)
Equity
256.7
311.6
420.0
503.6
Equity ratio in %
73.0
77.0
78.8
77.8
65.9
Return on equity in % (ROE)
36.2
35.4
35.0
31.5
31.5
14.2
0.0
0.0
0.0
0.0
Long-term financial debt Capital employed
270.9
311.6
420.0
326.1
560.7
Return on capital employed in % (ROCE)
41.1
43.6
42.6
53.8
35.9
Cash generated from operating activities
118.0
145.5
145.4
176.2
227.2
34.3
34.6
28.5
29.4
31.8
In % of net revenue
Investments
84.8
66.1
122.0
49.8
287.0
In % of net revenue
24.7
15.7
23.9
8.3
40.2
Capital expenditures
26.9
65.5
59.4
42.1
42.5
Acquisitions
57.9
0.6
61.7
7.8
244.5
Free cash flow
33.1
79.4
23.4
134.2
186.3
9.6
18.9
4.6
22.4
26.1
48.1
31.1
39.0
46.7
58.4
59.4
31.0
30.5
32.9
33.0
In % of net revenue
Dividend Pay-out ratio in %
1 The presentation of 2006 figures has been adapted to the 2007 format throughout this report.
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INFORMATION FOR INVESTORS
INFORMATION FOR INVESTORS
CAPITAL STRUCTURE (in CHF 1 000)
Equity Share capital Reserves
31 Dec 2007
31 Dec 2006
623 495
503 574
1 563
1 562
55 380
32 057
566 522
469 955
Conditional share capital
37
38
Authorized share capital
0
0
15 630 671
15 615 978
Retained earnings
Number of registered shares Nominal value per share (in CHF)
0.10
0.10
Registration restrictions
none
none
Voting restrictions
none
none
Opting-out, opting-up
none
none
31 Dec 2007
31 Dec 2006
NUMBER OF SHAREHOLDERS Shares
31 Dec 2007
31 Dec 2006
1 – 100
7 354
8 433
101 – 1 000
3 394
4 109
287
311
54
40
1 001 – 10 000 10 001 – 100 000 100 001 – 1 000 000
7
7
1 000 001 and more
2
2
11 098
12 902
Total
SHAREHOLDERS BY CATEGORY (in %)
Major shareholders
50.6
50.7
Institutional shareholders
23.3
20.2
Private individuals
11.4
13.2
Non-registered shareholders
14.7
15.9
MAJOR SHAREHOLDERS (in %)
31 Dec 2007
31 Dec 2006
Dr h.c. Thomas Straumann (Member of the Board)
32.4
32.4
Dr h.c. Rudolf Maag (Chairman of the Board)
12.3
12.3
Simone Maag de Moura Cunha Total
6.0
6.0
50.7
50.7
Straumann Annual Report 2007
Appendix
INFORMATION FOR INVESTORS
SHARE PRICE DATA (in CHF)
2007
2006
Price
Date
Price
Date
295.00
3.01.
308.00
3.01.
Lowest*
291.00
8.01.
249.50
25.08.
Highest*
372.75
2.05.
329.00
11.05.
Last trading day
312.25
28.12.
295.00
29.12.
Average
333.25
295.25
Tax value
312.25
295.00
6.90
(2.30)
4 863
4 598
First trading day
Total shareholder return, gross of tax (in %) Market capitalization 31 Dec (in CHF million) * Value reflects closing price.
SHARE PRICE (in %)
250 200 150 100 50 0 –50 2003
2004
■ Straumann
■ SPI
2005
2006
2007
SHARE EARNINGS AND DIVIDEND (in CHF)
2007
Basic earnings
11.29 3.75 *
Ordinary dividend
2006
9.09 3.00
*To be proposed to the shareholders’ Annual General Meeting on 28 March 2008.
STOCK EXCHANGE INFORMATION
Listing
SWX Swiss Exchange (STMN)
Bloomberg
STMN SW
Reuters
STMN.S
Investdata
STMN
Expected ex date
2 April 2008
Security ID
001 228 007
ISIN
CH 0012 280 076
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INFORMATION FOR INVESTORS/CALENDAR
RESEARCH COVERAGE
Bank am Bellevue: Karin Bendler-Müller, Tel. +41 44 267 67 67 Bank Sal. Oppenheim: Stephan Vollert, Tel. +41 44 214 22 85 Bank Vontobel: Christoph Gubler, Tel. +41 58 283 63 43 Cheuvreux: Thomas Bernhardsgrütter, Tel. +41 44 218 17 03 Citigroup: Cora Scowcroft, Tel. +44 20 7986 4047 Credit Suisse: Christoph Gretler, Tel. +41 44 333 79 44 Deutsche Bank: Yi-Dan Wang, Tel. +44 20 7545 9999 Exane BNP Paribas: Julien Dormois, Tel. +33 1 44 95 69 49 Goldman Sachs International: Hans Boström, Tel. +44 20 7552 5991 Helvea: Daniel Jelovcan, Tel. +41 43 388 92 63 JP Morgan: Tom Jones, Tel. +44 20 7742 6657 Kepler Equities: Florian Gaiser, Tel. +41 43 333 66 06 Lehman Brothers: Ed Ridley-Day, Tel. +44 20 7102 1366 MainFirst Bank: Liz Mitchell, Tel. +44 20 7647 8023 Merrill Lynch: Michael Jüngling, Tel. +1 212 449 8536 Neue Zürcher Bank: Zubin Dastoor, Tel. +41 44 288 82 45 UBS: Maja Pataki, Tel. +41 44 239 13 65 Valartis Bank: Markus Good, Tel. +41 43 336 83 21 Zürcher Kantonalbank: Sibylle Bischofberger Frick, Tel. +41 44 292 37 34 INFORMATION POLICY (SEE P. 91 ALSO)
The Straumann Annual Report is published in February and presented at the analysts and press conference. It is also available online at: www.straumann.com/annualreport. The half-year interim report is published in the form of a media release in August. Other media releases include the quarterly sales reports published in April for the first quarter and in October for the third quarter. Where necessary or appropriate, Straumann also publishes additional information on key significant events. Press releases and presentations can be downloaded from the Straumann homepage at www.straumann.com.
CALENDAR KEY REPORTING DATES IN 2008
7 February: 28 March: 28 April: 7 August: 30 October:
2007 full-year results Annual General Meeting Q1 sales Q2 sales and H1 results Q3 and 9M sales
PLANNED INVESTOR RELATIONS EVENTS AND CONFERENCES IN 2008
Members of Straumann’s Executive Management and/or Investor Relations team plan to take part in the following events, subject to availability. CONFERENCES
29 April: 13 May:
UBS Investors Club, Zurich Merrill Lynch Conference, London
Straumann Annual Report 2007
21 August: 2 September: 3 – 4 September: 18 November:
Appendix
CALENDAR/CONTACTS AND ADDRESSES
UBS Conference, Glattbrugg (CH) Sal. Oppenheim Conference, Frankfurt Goldman Sachs Health Care Conference, London Credit Suisse Health Care Conference, Zurich
ROADSHOWS/INFORMATION MEETINGS
18 February: 19 February: 20 February: 28 February: 29 February: 2 April: 5 May: 11 August: 12 August: 13 August: 14 August: 15 August: 18 August: 19 August: 6 November: 17 November:
Edinburgh, Paris London, Frankfurt London, Zurich Boston New York Basel, Reverse Roadshow Morgan Stanley Dubai Zurich Frankfurt New York, Paris Boston, Benelux Toronto, London Denver San Francisco Edinburgh Tokyo
SELECTED DENTAL MEETINGS IN 2008
28 February –1 March: 23rd Annual meeting of the Academy of Osseointegration (AO), Boston, USA 4 – 6 March: UAE International Dental Conference & Arab Dental Exhibition, Dubai, UAE 4 – 6 April: International Dental Exhibition and Meeting (IDEM), Singapore 6 – 10 May : 30th Asia Pacific Dental Congress, Bangkok, Thailand 8 – 10 May : Toronto Osseointegration Conference, Toronto, Canada 6 – 7 June: World Aesthetic Congress, London, UK 2 – 5 July: 86th Meeting of the International Association for Dental Research (IADR), Toronto, Canada 6 – 9 September: American Academy of Periodontology Annual Meeting (AAP), Seattle WA, USA 9 – 13 September: European Association for Cranio-Maxillo-Facial Surgery (EACMFS), Bologna, Italy 18 – 20 September: 17th Annual European Association for Osseointegration (EAO) Congress, Warsaw, Poland 24 – 27 September: FDI World Dental Federation, Stockholm, Sweden
CONTACTS AND ADDRESSES GROUP HEADQUARTERS STRAUMANN HOLDING AG
Peter Merian-Weg 12, 4002 Basel, Tel. +41 61 965 11 11, Fax +41 61 965 11 01
General enquiries: Corporate Communication, Tel. +41 61 965 11 11, Fax +41 61 965 11 03 Investor relations: Fabian Hildbrand, Tel. +41 61 965 13 27, Fax +41 61 965 11 23 Media relations: Mark Hill, Tel. +41 61 965 13 21, Fax +41 61 965 11 03 Publications and further information: corporate.communication@straumann.com or investor.relations@straumann.com
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COUNTRY ORGANIZATIONS AUSTRALIA
Straumann Australia P/L 7 Gateway Crt Port Melbourne, Victoria Tel. +61 3 9646 7060 Fax +61 3 9646 7232 AUSTRIA
Straumann GmbH Austria Floridsdorfer Hauptstrasse 1 Florido Tower 1210 Vienna Tel. +43 1 29 40 660 Fax +43 1 29 40 666 BELGIUM
Straumann SA/NV Belgicastraat 3, box 3 1930 Zaventem Tel. +32 2 790 10 00 Fax +32 2 790 10 20 BRAZIL
Straumann Brasil Ltda Rua Funchal 263 04551-060 São Paulo Tel. +55 11 30 89 66 83 Fax +55 11 30 89 66 84 CANADA
Straumann Canada Ltd 4145 North Service Road Suite 303 Burlington, Ontario - L7L 6A3 Tel. +1 905 319 29 00 Fax +1 905 319 29 11 CHINA
Straumann Beijing Representative Office Rm 1534, 15th Floor, NCI Tower 12A Jianguomenwai Ave Chaoyang District Beijing 100022 P.R. China Tel. +86 10 8523 3101 Fax +86 10 8523 3001
COUNTRY ORGANIZATIONS
CZECH REPUBLIC
ITALY
ORMEDENT spol. s r.o. Na zˇertvách 2196 180 00 Prague 8 Tel. +42 0284094650 Fax +42 0284094659
Straumann Italia srl Viale Bodio 37a 20158 Milan Tel. +39 02 3932 831 Fax +39 02 3932 8365
DENMARK
JAPAN
Straumann Danmark ApS Hundige Strandvej 178 2670 Greve Tel. +45 46 16 06 66 Fax +45 43 61 25 81
Straumann Japan K.K. 3-231-3, Hamadera Koen-cho Nishi-ku, Sakai-shi Osaka 592-8346 Tel. +81 72 265 8777 Fax +81 72 265 8797
FINLAND
Straumann OY Fredrikinkatu 48 A 7 krs. 00100 Helsinki Tel. +35 89 694 28 77 Fax +35 89 694 06 95 FRANCE
Straumann France 3, rue de la Galmy-Chessy 77701 Marne-la-Vallée Cedex 4 Tel. +33 1 64 17 30 00 Fax +33 1 64 17 30 10 GERMANY
Straumann GmbH Jechtinger Strasse 9 79111 Freiburg Tel. +49 761 450 10 Fax +49 761 450 11 49 etkon AG Lochhamer Schlag 6 82166 Gräfelfing Tel. +49 89 30 90 75 0 Fax + 49 89 30 90 75 599 HUNGARY
Straumann GmbH Magyarországi Fióktelepe Bank Center, Szabadság tér 7 1054 Budapest Tel. +36 1 474 8316 Fax +36 1 474 8181
MEXICO
Straumann México SA de CV Rubén Darío # 281 int. 1702 Piso 17 Col. Bosque de Chapultepec 11580 México DF Tel. +52 55 5282 6262 Fax +52 55 5282 6289 NETHERLANDS
Straumann BV Einsteinweg 15 3404 LE Ijsselstein Tel. +31 30 604 66 11 Fax +31 30 604 67 28 NORWAY
Straumann AS Nedre Vollgate 3 P.O. Box 1751 Vika 0122 Oslo Tel. +47 23 35 44 88 Fax +47 23 35 44 80 PORTUGAL
Straumann S.A. Rue do Amial, 283 2° Esq. 4200-060 Porto Tel. +351 22 834 77 20 Fax +351 22 834 77 29
Straumann Annual Report 2007
SOUTH KOREA
SWITZERLAND
Straumann Dental Korea Inc. 1467-75, Seocho 3-Dong Seocho-Gu Seoul Tel. +82 2 3472 3761 3 Fax +82 2 3472 37 60
Institut Straumann AG Peter Merian-Weg 12 4002 Basel Tel. +41 61 965 11 11 Fax +41 61 965 11 01
Appendix
UNITED KINGDOM
Straumann SA Edificio Arroyo - A Avda. de Bruselas, 38 Planta 1 y 2 28108 Alcobendas - Madrid Tel. +34 902400 979 Fax +34 913 449 517
Straumann Ltd Pegasus 3 Pegasus Place Gatwick Road Crawley West Sussex, RH10 9AY Tel. +44 1293 651230 Fax +44 1293 651239
SWEDEN
USA
Straumann AB Fabriksgatan 13 41250 Gothenburg Tel. +46 31 708 75 00 Fax +46 31 708 75 29
Straumann USA, LLC 60 Minuteman Road Andover, MA 01810 Tel. +1 978 747 2500 Fax +1 978 747 2490
SPAIN
Straumann locations Distributors etkon main facilities
Straumann’s products and services are available in more than 60 countries through our subsidiaries and broad network of distributors.
COUNTRY ORGANIZATIONS
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GLOBAL REPORTING INITIATIVE
GLOBAL REPORTING INITIATIVE (GRI)
SCOPE OF SUSTAINABILITY REPORTING WITH REGARD TO GRI
We believe that sustainability is an integral part of business success, and that it is important to integrate sustainability topics in our annual reporting because they provide the context to what we have or have not been able to achieve. This practice increases transparency for our shareholders and other stakeholders including customers, employees, and members of the communities in which we operate. For the second year running, we have based our sustainability reporting on the guidelines disseminated by GRI, a non-profit, multi-stakeholder organization that strives to provide companies with a systematic basis for disclosure regarding sustainability performance. The aim is to give stakeholders a framework that facilitates comparison and understanding of disclosed information. It has not been possible to incorporate every GRI performance indicator into the format of this annual report; full coverage would require a comprehensive dedicated sustainability report. GRI CONTENT INDEX
To help readers locate specific GRI-related information, the following table provides an overview of the main GRI elements discussed in this report, including: Economic (EC), Environmental (EN), Human Rights (HR), Labor (LA), Society (SO), and Product Responsibility (PR) performance indicators, as well as Disclosures on Management Approach (DMA) to these topics. The GRI indicators referenced have been covered to the extent that data were available and as far as the format of Straumann’s Annual Report allows. While a number of GRI points are discussed in more than one place, the table indicates those places in which the main information on each indicator is to be found. In cases where substantial information is presented in more than one place, multiple references are given.
Report part
Key facts & figures Letter to shareholders Straumann in brief Markets and regions Products and services Production and logistics Innovation and partnership Research and development Partnership Sustainability Our responsibility
Pages
GRI content elements
Inside front cover 4–8 9–13 16–23 26–35 38–39
2.8 DMA-EC 2.5, DMA-EC 2.7, DMA-EC 2.2, DMA-PR, PR5
42–45 46–47 50–53
Employees
54–55
Customers Communities
56–57 58–59
Environmental protection Independent expert opinions Corporate governance Financial report 2007 Appendix
60–63 66–71 74–91 95–179 182–198
1.1, 1.2, 2.10, 4.7- 4.17, DMA-EC, DMA-EN, DMA-LA, DMA-HR, DMA-SO, SO2 – SO4, SO7, DMA-PR, PR1, PR2, PR7 2.10, 4.8, EC3, EC5, DMA-LA, LA1, LA2, LA4, LA5, LA7, LA10, LA12 - LA14, DMA-HR, HR5, SO3 2.7, 4.17, PR5 4.8, DMA-EC, EC1, EC7, DMA-HR, HR2, LA6, LA7, DMA-SO, SO5, SO6 3.10, DMA-EN, EN1, EN3-EN5, EN8, EN16, EN22 2.1, 2.3, 2.4, 2.6, 2.9, 4.1 - 4.6 EC1, EC3, EC4 2.8, 3.1 – 3.13
Straumann Annual Report 2007
Appendix
GLOBAL REPORTING INITIATIVE
NOTES ON PARAMETERS OF THIS REPORT
This Annual Report reviews the business year 2007 and draws certain comparisons with previous years. It aims to provide sufficient detail to give shareholders a clear overview of developments in 2007, as well as to address main points of concern to other stakeholder groups, including customers, employees, and members of the community. The information given pertains to the whole Straumann Group unless stated otherwise. There were no major changes in subsidiaries, leased facilities or outsourced operations in the year under review that significantly affect comparability with the previous Annual Report unless stated. No reporting changes were made that have significant relevance to GRI topics. The data measurements for reported GRI indicators follow GRI guidelines as far as data availability has allowed. We have not sought external assurance of the GRI information given, but have used the standards for our internal auditing wherever practical. SUCCESSFUL GRI APPLICATION LEVEL CHECK
The present report, together with the ‘Appendum GRI-Sustainability Reporting’ published on the Internet, fulfil the requirements of the latest GRI-G3 reporting guidelines at Application Level B. This was checked and confirmed by GRI on 6 February 2008.
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GLOSSARY
GLOSSARY OF SELECTED TERMS AND ABBREVIATIONS USED IN THIS REPORT DENTAL/MEDICAL TERMS
prosthetics according to the dentist’s specifications
ABUTMENT
EDENTULOUS
A component that connects the implant with the prosthesis and protrudes into the oral cavity (see illustrations on pp. 16, 26, 31)
Having no teeth
BONECERAMIC
Straumann’s fully synthetic bone substitute for bone augmentation procedures
EMDOGAIN PLUS
A treatment for wide periodontal defects that combines Straumann Emdogain with Straumann BoneCeramic ENAMEL MATRIX DERIVATE (EMDOGAIN)
BONE LEVEL IMPLANT
Implant where the connection between the implant and the abutment is placed at the level of the bone crest
Having an extract of enamel matrix proteins, which are involved in the development of cementum, periodontal ligament and bone GBR
BRIDGE
An appliance used literally to bridge the gap left by missing teeth by using one or more false teeth fixed to crowns anchored to tooth stumps or implants CAD/CAM
Computer Aided Design/Computer Aided Manufacturing; computer system is used both for designing a product and for controlling manufacturing processes
Guided Bone Regeneration HYDROGEL
A colloid suspension in which the microscopic particles (between 1 nm and 1 μm) are in the external (dispersion) phase and water is in the internal (dispersed) phase HYDROPHILIC
Readily absorbing or attracting water, or having chemical groups that interact with water
CARES
Straumann’s Computer Aided Restoration Service
INLAY
CNC LATHE
A pre-made individualized filling cemented into a tooth. Inlays can also be used to carry bridges (see illustration on p. 32)
Computerized Numerically Controlled lathe used to machine implants and other components
ITI COPING
International Team for Implantology (see p. 46)
A covering or cap that fits on an abutment and usually made of metal, ceramic or plastic
LOADING
CROSSFIT
Subjecting an implant to biting pressure by fitting a temporary/permanent crown
Straumann’s self-guiding internal implant-abutment connection, featuring: four internal grooves that prevent rotation and ensure precise fit; and a chronical interface for lasting mechanical stability.
MEMBRANE
CROWN
A barrier used e.g. in GBR to prevent rapidly growing soft tissue occupying space into which new bone should form, and to stabilize bone augmentation materials
A tooth-shaped cap attached to a tooth stump or implant prosthesis
ONE-STAGE PROCEDURE
DENTAL TECHNICIAN
Dental professional who manufactures patientspecific crowns, bridges, dentures and other dental
Surgical procedure whereby the implant is placed but not covered by the gum tissue during healing, so no second surgical procedure is necessary to uncover the implant
Straumann Annual Report 2007
Appendix
GLOSSARY
OSSEOINTEGRATION
'SUBSTANTIAL EQUIVALENCY'
The integration of an implant with the surrounding bone
Medical devices, including dental implants, can be cleared for sale in a fast-track process if they are recognized by regulatory authorities as substantially equivalent to existing products that already have marketing clearance
OSTEOINDUCTIVE
A substance with the ability to induce bone growth
SYNOCTA PERI-IMPLANTITIS
Inflammation of the tissues around an implant that can lead to disintegration of bone and implant loss PERIODONTIST
Dental professional specialized in the periodontal tissue and bone surrounding the teeth and in treating diseases that affect them
Prosthetic system combining Morse taper and octagonal connections TISSUE LEVEL IMPLANT
Implant where the connection between the implant and the abutment is placed at the level of the soft tissue, so that the soft tissue surrounds the polished collar of the implant TITANIUM
PERIODONTITIS
Progressive disease of the periodontal tissues, resulting in the gradual loss of the tooth and supporting structures
Metallic substance isolated from minerals as an iron-gray powder; available in many forms and used in many dental and orthopedic applications TWO-STAGE PROCEDURE
PROSTHODONTIST
Surgical procedure whereby the implant is inserted and a healing cap placed, which is covered by the gum tissue during healing; a second surgical procedure is performed later, where the healing cap is removed and an abutment and provisional prosthesis placed
A dental professional who carries out the prosthetic restoration on natural teeth and implants
VENEER
RCT
A thin layer of tooth-colored material that covers an impaired tooth
POLYETHYLENE GLYCOL (PEG)
A hydrophilic polymer (macromolecule of repeating units) that interacts with cell membranes and promotes fusion of cells
Randomized controlled (clinical) trial ZERION SLA
Sand blasted with Large grit and Acid etched. SLA refers to Straumann’s second-generation implant surface technology introduced in 1998, which – with the exception of SLActive – is the gold-standard in terms of osseointegration time SLActive Straumann’s third-generation implant surface technology, which – by virtue of its hydrophilic properties – cuts healing times by half (see p. 28)
etkon’s 100% metal-free, biocompatible, full-ceramic zirconium oxide for customized reconstructions ZIRCONIA
ZrO2 – the white oxide of zirconium used on account of its infusibility and luminosity in dental prosthetics, enamels and glazes ZIRCONIUM
A grayish-white, strong, ductile metallic element obtained from zircon and used in ceramic and refractory compounds as an alloying agent
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GLOSSARY
FINANCIAL TERMS AMORTIZATION
GOODWILL
Systematic allocation of the depreciable amount of an intangible asset or goodwill over its useful life
Future economic benefits arising from assets that are not capable of being individually identified and separately recognized
CAGR
Compound Annual Growth Rate, annualized growth rate over a multiple-year periode
IFRS
DEPRECIATION
NET PROFIT MARGIN
Systematic allocation of the depreciable amount of a tangible asset
Net profit divided by group sales in %
International Financial Reporting Standards
PAY-OUT RATIO
Net profit divided by the number of shares
Dividend paid divided by net profit over the same period in %
EBIT
REVENUES
Earnings before interest and taxes; also referred to here as operating profit
Sales, see pp. 127-128
EARNINGS PER SHARE (EPS)
ROA EBITDA
Earnings before interest, taxes, depreciation and amortization
Return on assets; net profit divided by average assets in % ROCE
EBIT MARGIN
Operating profit (EBIT) divided by group sales in %
Return on capital employed; earnings before interest and taxes divided by average capital employed in %
ECONOMIC PROFIT (EP)
Operating profit minus taxes and minus cost of capital
ROE
Return on equity; net profit divided by average equity in %
EQUITY RATIO
Shareholder equity divided by total assets in %
SALES
See ‘sales of goods’ on p. 127 ERP
Enterprise Resource Planning
UNDERLYING (BUSINESS/EBIT)
FREE CASH FLOW
(Business/EBIT) excluding the effect of business acquired in 2007 and the impact of the import detention on Biora products in the US
Net cash from operating activities less capital expenditures plus net proceeds from property, plant and equipment, and financial assets
WACC
Weighted average cost of capital FREE CASH FLOW MARGIN
Free cash flow divided by group sales in %
Straumann Annual Report 2007
Appendix
INDEX
INDEX
A
C
Absence (due to accidents/ sickness) 55 Abutments 16, 26-28, 30, 31, 38, 44, 60 Accidents, workplace 55 Accounting policies and principles 96, 113-131, 134, 135, 159, 168, 179 Acquisitions 4, 5 ,7 , 10-12, 19, 21-23, 31, 41, 54-56, 59, 75, 76, 81, 96-99, 108, 111-114, 117, 119, 120, 132-135 Administration costs 98, 109, 173 Annual General Meeting 91, 99, 157, 178, 185, 186 Amortization 5, 89, 96-99, 102, 110, 119, 120, 122-124, 131, 132, 134137, 140, 141, 146, 155, 159, 164, 173, 177, 182 Andover 6, 38, 39, 60-63, 77, 96, 98, 167, 174, 175, 189 Asia/Pacific 5, 10, 17, 22, 23, 34, 35, 44, 53, 54, 56, 75, 97, 98, 104, 105, 136, 137 Auditors 85,90, 168, 179
Calendar of events 186, 187 Capital structure 79, 164, 184 Cash and short-term deposits 96, 99, 101, 103, 108, 110, 124, 125, 130, 132, 134, 135, 144, 161, 163, 164, 165, 172, 183 Cash equivalents 99, 101, 103, 108, 110, 124, 132, 134, 135, 144, 161, 163, 164, 172, 183 Cash flow 99, 110, 131, 164, 165 CEO, Straumann 4, 51, 52, 54, 75, 76, 86, 88, 91, 160, 161, 177 Ceramic 5, 16, 20, 26-32, 39 Child labor 59 Clinical trials and development 6, 27-30, 33, 34, 42-45, 97 Code of Conduct 50-52, 55, 59, 60, 75 Compensation 55, 79, 80, 85, 89, 126, 127, 144, 145, 150, 151, 158-160, 177 Competition and competitors 6, 13, 29, 30, 43, 50, 57, 70, 85, 100 Conditional shares 79, 127, 145, 176, 184 Contact addresses 187-189 Contingencies 157 Core beliefs 7, 9, 12, 50, 51, 54, 57 Corporate Governance 75-91 Cost of goods 98, 109, 142 Costs, treatment 16, 58, 67, 68 Costs, financial 5, 29, 89, 96-98, 101, 108, 109, 112, 114, 116-126, 128, 130, 131, 138-142, 145, 146, 151-153, 155, 156, 158, 164 Credit risk 101, 143, 161, 163 Customers 4, 6, 7, 9, 10, 12, 16, 2123, 27, 28, 35, 42, 50, 53, 56-57, 67, 100, 101, 120, 136-137, 163 Customized abutments 16, 27, 28, 30, 31, 44 Czech Republik 4, 22, 76, 98, 167, 188
B
Balance sheet 103, 108, 111, 113, 116, 117, 120, 122-124, 126, 129, 130, 149, 151, 152, 154, 162, 163, 168, 172, 173, 176, 179, 183 Biora 5, 11, 12, 22, 34, 39, 51, 75, 77, 97, 100, 141, 142, 174, 175 Board of Directors 8, 52, 75, 7986, 89-90, 99, 112, 126, 128, 150, 158-161, 168, 177-179 Bone Level Implant 5-7, 10, 12, 13, 17, 19-23, 26-31, 34, 38, 39, 42-45, 51, 57, 61, 97, 98 BoneCeramic 6, 21, 26, 33, 34, 43-45 Bonus 55, 89, 126, 159, 160, 177 Borrowings 108, 110, 114, 117, 118, 123, 124, 132, 146, 162, 164, 165, 172 Brand(s), branding 5, 7, 12, 13, 32, 141 Business focus 10 Business units 27, 30, 42, 76, 86
Depreciation 110, 118, 121, 128, 132, 136-139, 155, 173, 182 Derivative(s) 101, 112, 113, 122, 124, 130, 131, 160-166 Diversity (women, gender) 55 Dividend(s) 8, 79, 90, 99, 103, 110, 111, 127, 131, 150, 157, 164, 178, 183, 185 E
Earnings per share 99, 102, 109, 127, 156, 182 EBIT 97, 99, 102, 182 EBITDA 98, 102, 182 Ectodermal dysplasia 7, 53, 58, 59 Education 4, 6, 9, 10, 17, 18, 22, 35, 46, 47, 52, 56, 57, 112, 127 Emdogain 20, 26, 32, 33, 43 Emdogain PLUS 26, 33, 43-45 Emerging markets 10, 22, 98 Emissions 60-63 Employee benefits 117, 125, 126, 155 Energy consumption 61-63 Environmental protection and monitoring 50-52, 60-63, 190 Equal opportunity 52, 55 Equity 78, 79, 101, 103, 108, 111, 113-117, 119, 120, 122-124, 126, 127, 129, 131, 133, 145, 146, 150, 151, 153, 154, 161, 163-166, 168, 172, 176, 177, 183, 184 etkon 5, 11, 12, 19, 21-23, 26-29, 31, 32, 38, 39, 42, 56, 57, 60-62, 75, 77, 86, 96-99, 112, 132, 133, 141, 142, 146, 157, 167, 175, 188 Europe 5, 7, 10, 16-18, 20-22, 27, 28, 34, 35, 38, 43, 44, 50, 53, 54, 56, 57, 59, 75, 78, 97, 98, 104, 105, 136, 137, 149 Events after balance sheet 167 Executive Management Board 6, 54, 76, 80, 84, 90, 128, 150, 158161, 177, 186
D
F
Denmark/Danish distributor 11, 77, 141, 167, 174, 175, 188 Dentures and overdentures 16, 30, 31
FDA 5, 22, 34, 39, 51, 97, 100 Financial assets 122-124, 142, 165 Fluctuation, staff 6, 21, 55 Forced labor 59
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Free cash flow 96, 97, 99, 103, 183 FTSE4Good 53 G
General dentists 6, 16, 18, 29, 31, 56, 67, 69, 70 Germany 9, 12, 17, 20, 21, 32, 38, 75, 77, 98, 112, 117, 132, 141, 142, 167, 174, 175, 188 Glossary 192-194 Goodwill 111, 114, 115, 119-121, 132135, 140, 141 Government grants 128 GRI 53, 190, 191 H
Headquarters (Basel) 9, 34, 39, 42, 60-63, 75-77, 112, 157, 167, 174, 175, 187 Healthcare regulation 100 Hedging (hedge) 96, 99, 101, 111, 112, 122, 124, 130, 131, 147, 162, 163, 165, 166 History 11 Human rights 50, 52, 55, 59, 190 Hungary 4, 98, 188 I
IFRIC 113-115 IFRS 112-114, 168 Impairment 110, 113, 114, 116, 118124, 137, 139-144, 155, 174 Implant system 9, 12, 26, 27, 29, 30, 35, 43, 60, 112 Income statement 109, 113, 117, 119, 120, 125, 126, 143, 152, 165, 168, 173, 179 Independent experts 67-71 Information policy (inform) 75, 91, 186 Innovation 6, 7, 10, 16, 22, 23, 27, 29, 30, 32, 34, 42, 44, 46, 51, 56, 57, 68, 70, 71, 76, 100, 190 Insurance 16, 58, 67, 101, 125, 126, 142, 158 Intangible assets 96, 97, 108, 110, 119, 120, 132, 134, 135, 140, 149, 155, 172 Intellectual property 101 Internal audit 51, 86, 101, 191
INDEX
Interviews Froum, Stuart 68 Gadola, Marco 96 Ganley, Robert 70 Haase, Horst-Wolfgang 69 Lazzara, Richard 67 Maier, Franz 21 Matter, Sandro 29 Ubl, Stephen 71 Inventories 39, 103, 108, 110, 123, 132, 134, 135, 142, 149, 183 Investment property 108, 110, 118, 128, 139, 155 Investments 10, 17, 22, 39, 96, 98, 103, 114, 120, 122, 123, 125, 129, 139, 154, 162-164, 166, 172-175, 183 Investments in subsidiaries 39, 98, 117, 129-131, 162, 166, 174, 175 Investor relations 76, 91, 186, 187 Investor relations calendar 91, 186 ISO certification 39, 60, 62 ITI 6, 9, 33-35, 46, 47, 50, 53, 57, 59, 84, 88, 112, 128, 147, 158 J
Japan 4, 5, 11, 12, 17, 22, 23, 44, 75, 76, 77, 97, 133, 167, 174, 175, 188 Job creation 38, 54, 59, 98 K
Key figures inside front cover Korea 4, 5, 11, 12, 17, 22, 23, 34, 76, 77, 97, 134, 141, 147, 167, 174, 175, 189 Kuros 11, 12, 84, 88 L
Launches see ‘Product launches’ Lease(s) 118, 128, 146, 157, 158, 161, 164, 165 Legal structure 50, 75, 101 Liabilities 55, 99-101, 108, 115-117, 119, 124-126, 128-137, 142, 146, 147, 149, 151, 152, 154, 158, 161-166, 172 Liquidity risk 101, 161, 164 Litigation 101, 158 Loans 89, 96, 99, 101, 108, 110, 122-124, 132, 142, 146, 161, 164, 165, 172, 174 Logistics 38, 39, 76, 190
M
Malmö 39, 42, 50, 60-63, 77, 141, 167, 174, 175 Management 6, 9, 23, 52, 54, 76, 79, 80, 83-86, 88-90, 97, 98, 100, 114-117, 126, 128, 141, 142, 145, 150, 158-161, 164, 176, 177, 186 Management transactions 89 Margin(s) 5, 8, 96-99, 102, 142, 182 Market penetration 4, 6, 16, 18, 22, 28, 100 Market share 16, 17, 19, 44, 97 Market(s) 4-7, 10, 12, 16-23, 27, 34, 35, 42, 44, 53, 57, 76, 85, 97, 98, 100, 117, 133, 142, 154, 190 Meetings and congresses 186, 187 Membrane 6, 19, 26, 29, 34, 43-45 Minority interests 114 Mission 9, 12, 50 N
Non-derivatives 122 North America 5, 7, 10, 16-18, 21, 22, 27, 28, 33, 38, 43, 53, 54, 56, 75, 91, 97, 98, 104, 105, 136, 137 O
Operating expense 128, 139, 182 Operating profit 5, 97-99, 102, 109, 110, 136, 137, 182 Options, stock 79, 80, 89, 110, 127, 133, 144-146, 150, 151, 156, 159161, 176-178 Other income 109, 136, 137, 155, 173 Outlook 7, 20, 22, 23, 34, 35, 39, 45, 47, 55, 57, 59, 62, 99 P
Patents 101, 141, 167, 175 Payables 108, 110, 124, 130, 132, 134, 135, 147, 149, 158, 161, 164 Pensions 55, 101, 115, 117, 125, 151, 152, 154, 155, 158 Periodontal disease 20, 26, 32, 33, 68 Personnel expense 79, 89, 127, 150, 151, 155
Straumann Annual Report 2007
Pipeline 29, 30, 43 Post-employment benefits 117, 126, 128, 154, 159 Process improvement 38, 42, 60, 61, 98 Product launches 5, 17, 21-23, 27, 29, 30, 34, 38, 39, 42, 44, 57, 96-98 Production 5, 10, 23, 28, 32, 38, 39, 51, 52, 60-62, 75, 76, 86, 98, 124, 175, 190 Products 5, 7, 9, 10, 12, 20, 22, 23, 26-35, 38, 42, 43, 45, 51-57, 59-62, 75, 76, 112, 121, 189, 190 Profit 97-99, 122, 124 Property 108, 110, 118, 128, 132, 134, 135, 138, 149, 153-155 Prosthetics 5, 7, 9, 10, 19, 20, 23, 26, 27, 29-32, 35, 38, 39, 44, 45, 52, 56, 57, 67, 68, 97, 112 Provisions 108, 110, 116, 125, 132, 135, 143, 147, 149, 172 Q
Quality of life 16, 33, 51-53 R
Raw materials 61, 63, 123, 142 Receivables 103, 108, 110, 122, 123, 130, 132, 134, 135, 143, 144, 149, 161, 163, 164, 172, 183 Reclassification 115, 118, 138 Regenerative system/products 5, 7, 12, 20, 26, 29, 31-34, 39, 45, 97, 112 Regions 16, 17, 20, 22, 23, 35, 54, 56, 75, 98, 104, 105, 190 Related-party transactions 128, 158, 161, 177 Revenue recognition 127 Risk, financial 85, 100, 101, 124, 125, 127, 128, 130, 142, 161-164 Risk assessment 100, 101 Risk factors 68 Risk management 86 ROA 103, 183 ROCE 103, 183 ROE 103, 183 RoW 44, 98 Rounding 112
Appendix
INDEX
S
T
Safety 26, 35, 50-52, 55, 57, 60 Salaries/wages 55, 89, 147, 154, 155, 159, 160, 177 Sales force 6, 21, 56 Sales/revenue 4, 5, 7, 20-23, 33, 34, 45, 91, 96-105, 109, 116, 117, 130, 136, 175, 182, 183, 186 Scholarships 47 Segment information 4-7, 10, 17, 20-22, 27, 29, 44, 56, 114, 121, 136, 137 Selling costs 98, 109 Services 7, 9, 10, 22, 26-29, 35, 55, 56, 75, 76, 100, 112, 121, 158, 189, 190 Share capital 76, 78, 79, 90, 108, 111, 127, 144, 145, 175, 176, 184 Share price 8, 79, 89, 127, 150, 151, 159, 185 Share purchase program 55, 146, 164, 165 Share-based payments 110, 111, 114, 126, 127, 150, 151, 155, 159 Shareholder’s equity 108, 111, 115, 131, 146, 176 Shareholders 4, 8, 10, 50, 75, 78, 79, 81, 89-91, 96, 99, 108, 109, 115, 127, 131, 133, 145, 146, 156, 157, 164, 176, 178, 184, 185, 190 Shares 8, 75, 76, 78-81, 89, 90, 110-112, 114, 115, 127, 129, 132, 133, 144-146, 150, 151, 156, 161, 164, 172, 174, 176-178, 184 SLA 27, 43, 97 SLActive 6, 12, 13, 21-23, 27-30, 34, 39, 43-45, 60, 61, 97, 98 Sponsoring 46, 58, 59 Staff training and learning 54 Statutes 90, 91 Strategy 4, 5, 10, 54, 86, 101 Subsidiaries 4, 7, 9, 21-23, 35, 75, 98-100, 110-113, 115, 119, 121, 126, 129, 132, 134, 135, 162, 174, 189 Surgical 12, 20, 26, 27, 44, 57, 86, 112 Surveys 12, 50, 55, 57 Sustainability 50-63, 190 synOcta 26, 31
Tangible assets 132 Taxes 116, 127, 129, 130, 148, 149, 158, 173 TE (tapered effect) implant 27 Titanium 30, 59-61, 63 Tissue level implant 5, 7, 16, 17, 19, 27-29 Tooth replacement 9, 16, 26, 29, 32, 112 Total shareholder return 8, 185 Treasury shares 76, 110, 111, 114, 124, 144-146, 156, 172, 176, 178 U
UK 17, 21, 78, 98, 174, 175 Unions 55 USA 34, 38, 75, 77, 78, 98, 133, 151, 167, 174, 175 V
Villeret 38, 39, 60-63, 75, 77, 167, 174, 175 Vision 7, 9, 12, 50 W
Waldenburg 11, 139 Warning letter 39, 51 Waste 61, 63 Water consumption 61, 63 Working capital 103, 110, 183
197
198
Straumann Annual Report 2007
Appendix
POINTS TO NOTE
POINTS TO NOTE
CONCERNING FORWARD-LOOKING STATEMENTS
This report contains certain ‘forward-looking statements’, which can be identified by the use of terminology such as ‘could’, ‘propose’, ‘addressable’, ‘outlook’, ‘attractive’ or similar wording. Such forwardlooking statements reflect the current views of Management and are subject to known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements of the Straumann Group (‘Group’) to differ materially from those expressed or implied. These include risks related to the success of and demand for the Group’s products, the potential for the Group’s products to become obsolete, the Group’s ability to defend its intellectual property, the Group’s ability to develop and commercialize new products in a timely manner, the dynamic and competitive environment in which the Group operates, the regulatory environment, changes in currency exchange rates, the Group’s ability to generate revenues and profitability, the Group’s ability to realize expansion projects or projects to establish subsidiaries in a timely manner, and the Group’s ability to recruit and retain key employees. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described in this report. Straumann is providing the information in this report as of this date and does not undertake any obligation to update any forward-looking statements contained in it as a result of new information, future events or otherwise. TRADEMARKS
The following and other trademarks have either been registered or applied for by Straumann Holding AG and/or its affiliated companies: Straumann® Bone Level Implant, Straumann® Emdogain, Straumann® Emdogain PLUS, Straumann® BoneCeramic, Straumann® CARES, SLA®, SLActive®, Straumann® Dental Implant System, Straumann® TempImplant, synOcta®, Straumann® Thermoplastic Drill Template, Straumann® Membrane, CrossFit, etkon® and Zerion®. PRODUCT AVAILABILITY
The availability and indications of the products mentioned and/or illustrated in this report may vary according to country.
KEY FACTS & FIGURES NET REVENUE
PROFITABILITY
• NET PROFIT RISES 25%; MARGIN EXPANDS TO 24.8%
(in CHF million)
(in %)
• MARKET POSITION MAINTAINED
900
Return on assets (ROA) Return on equity (ROE) Return on capital employed (ROCE)
• NET REVENUE CLIMBS 19% TO CHF 714 MILLION
800
• PORTFOLIO SIGNIFICANTLY ENHANCED
700
• DIRECT DISTRIBUTION AND REACH EXPANDED
CAG
600
R 20
%
• NEW GENERATION PRODUCTS AND SERVICES TO DRIVE FUTURE GROWTH
2006*
2007
22 32 33
(in CHF million)
24 32 49
240 220 200
* CHF The presentation of 2006 figures has been adapted to the 2007 format.
500
• LEADERSHIP TEAM COMPLETE, COMPETENCIES ENHANCED, 241 JOBS CREATED
CASH FLOW AND INVESTMENTS
140
300
120 80
50 2003
2007
2006
Change (in %)
Net revenue Operating profit (EBIT) Net profit Cash generated from operating activities Capital expenditure Free cash flow* Value added (economic profit) Earnings per share (in CHF)
714 202 177
599 175 142
19 15 25
227 43 186 129 11.29
176 42 134 98 9.09
29 (3) 39 32 24
* See footnote on p. 97.
2006
Change (in %)
3.00 * 2.50 312.25 295.00
20 6
(in CHF)
0
(in CHF million)
%
100 SHARE INFORMATION
100
KEY FIGURES
R 18
160
400 200
CAG
180
2004
2005
2006
2007
2007
Ordinary dividend paid per share Share price at year-end
60 40 20 0 2003
2004
* CHF 3.75 proposed for 2007, payable in 2008 subject to shareholder approval.
■ Operating cash flow
OPERATING AND NET PROFIT
SHARE PRICE DEVELOPMENT
EMPLOYEES
(in CHF million)
(in %)
225
40
200 22%
2
3
4
5
6
7 8
9
10 11
2007
2006
2007
■ Investments
1800
20
1600
150
10
1400
125
0
1200
100
-10
75
2007
50
■ STMN
R CAG
2006
2000 1
30
175
2005
CAG
R 21
%
1000 J
F
M
A
M
J
J
A
S
O
N
D
800 600
■ SPI
25
400
0 2003
■ Operating profit
2004
2005
2006
2007
■ Net profit
1 2 3 4 5
US import detention 2006 results Acquisition of etkon Ex dividend date Q1 results
6 7 8 9 10 11
Japanese distributor acquired Korean distributor acquired H1 results IR Day Bone Level Implant launched Q3/9M results
200 2003
2004
2005
For 5-year share price development see p. 185.
HEADCOUNT
REVENUES BY REGION
Rest of World 3%
.
Employees at 31 December
Asia/Pacific 11%
STRAUMANN
Straumann is a global leader in implant and restorative dentistry and oral tissue regeneration. For a brief overview of our company, our vision, mission, and core beliefs, please see pp. 9-13.
North America 22%
Europe 64%
IMPRESSUM 2007
2006
Change (in %)
1 955
1 534
27
Published by: Institut Straumann AG, Basel Layout concept and realization: Eclat AG, Erlenbach/Zurich Consultant on sustainability chapter: sustainserv, Zurich and Boston Photography: Tobias Dürring, Derek Li Wan Po, Howard Brundrett Independent expert interviews: Abbott Chrisman Print: Neidhart + Schön AG, Zurich Basel, 1 February 2008
ANNUAL REPORT 2007
ANNUAL REPORT 2007
BRINGING PEOPLE TOGETHER
BRINGING PEOPLE TOGETHER
People who kiss enjoy a better quality of life. When lips touch, hormones ‘buzz’: adrenalin is released and the brain secretes oxytocin, a hormone associated with social bonding and the formation of trust. People with bad or missing teeth are much less likely to kiss or to be kissed than those with healthy, attractive dentition. Large clinical trials conducted by McGill University in Canada and supported by Straumann show that the medical status and quality of life of people who wear dentures improve significantly if their dentures are held in place with implants. The research also shows that unease during kissing and intimacy significantly decreases when dentures are anchored by implants (Heydecke G et al. J Dent 2005; 33:649).
As this report shows, Straumann products restore teeth, natural attractiveness and self-confidence, bringing people together and enhancing the quality of life in a variety of ways.
Straumann Holding AG Peter Merian-Weg 12 4002 Basel Switzerland www.straumann.com