2017 CONSOLIDATED FINANCIAL STATEMENTS - Valeo ?· 2017 consolidated financial statements 2017 consolidated…

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<ul><li><p>1. Consolidated statement of income 22. Consolidated statement of comprehensive </p><p>income 33. Consolidated statement of financial position 44. Consolidated statement of cash flows 55. Consolidated statement of changes </p><p>in stockholders equity 66. Notes to the consolidated financial statements 77. Statutory auditors report on the </p><p>consolidated financial statements 93</p><p>5 2017 CONSOLIDATED FINANCIAL STATEMENTS</p><p>1Valeo 2017 consolidated financial statements</p></li><li><p>2017 consolidated financial statements </p><p>2017 consolidated financial statements AFR</p><p>1. Consolidated statement of income</p><p>(in millions of euros) Notes 2017 2016</p><p>SALES 4.1 18,550 16,519</p><p>Cost of sales 4.3 (15,076) (13,499)</p><p>GRoss maRGin 4.3 3,474 3,020</p><p>as a % of sales 18.7% 18.3%</p><p>Research and Development expenditure, net 4.5.1 (1,130) (956)</p><p>Selling expenses (302) (258)</p><p>Administrative expenses (587) (533)</p><p>OPERATING MARGIN 1,455 1,273</p><p>as a % of sales 7.8% 7.7%</p><p>Share in net earnings of equity-accounted companies 4.5.3.1 22 61</p><p>OPERATING MARGIN INCLUDING SHARE IN NET EARNINGS OF EQUITY-ACCOUNTED COMPANIES 4.5 1,477 1,334</p><p>as a % of sales 8.0% 8.1%</p><p>Other income and expenses 4.6.2 (67) (33)</p><p>oPeRatinG income inclUdinG sHaRe in net eaRninGs of eQUitY-accoUnted comPanies 4.6.1 1,410 1,301</p><p>Interest expense 8.2.1 (88) (90)</p><p>Interest income 8.2.1 15 7</p><p>Other financial income and expenses 8.2.2 (47) (46)</p><p>income BefoRe income taXes 1,290 1,172</p><p>Income taxes 9.1 (325) (189)</p><p>NET INCOME FOR THE YEAR 965 983</p><p>attributable to:</p><p> Owners of the Company 886 925</p><p> Non-controlling interests 10.1.4 79 58</p><p>earnings per share:</p><p> Basic earnings per share (in euros) 10.2 3.72 3.91</p><p> Diluted earnings per share (in euros) 10.2 3.68 3.86</p><p>The Notes are an integral part of the consolidated financial statements.</p><p>Valeo 2017 consolidated financial statements2 </p></li><li><p>2017 consolidated financial statements </p><p>2. Consolidated statement of comprehensive income</p><p>(in millions of euros) 2017 2016</p><p>NET INCOME FOR THE YEAR 965 983</p><p>Share of changes in comprehensive income from equity-accounted companies that may subsequently be recycled to income (7) (8)</p><p>o/w income taxes - -</p><p>Translation adjustment (331) 45</p><p>Cash flow hedges:</p><p> Gains (losses) taken to equity 44 (14)</p><p> (Gains) losses transferred to income for the year (26) 4</p><p>o/w income taxes (1) 3</p><p>Remeasurement of available-for-sale financial assets 4 -</p><p>o/w income taxes (1) -</p><p>otHeR comPReHensiVe income (loss) tHat maY sUBseQUentlY Be RecYcled to income (316) 27</p><p>Share of changes in comprehensive income from equity-accounted companies that may not subsequently be recycled to income - (1)</p><p>o/w income taxes - -</p><p>Actuarial gains (losses) on defined benefit plans 51 (90)</p><p>o/w income taxes (18) 2</p><p>otHeR comPReHensiVe income (loss) tHat maY not sUBseQUentlY Be RecYcled to income 51 (91)</p><p>otHeR comPReHensiVe income (loss) foR tHe YeaR, net of taX (265) (64)</p><p>TOTAL COMPREHENSIVE INCOME FOR THE YEAR 700 919</p><p>attributable to:</p><p> Owners of the Company 642 860</p><p> Non-controlling interests 58 59</p><p>The Notes are an integral part of the consolidated financial statements.</p><p>Valeo 2017 consolidated financial statements 3</p></li><li><p>2017 consolidated financial statements </p><p>3. Consolidated statement of financial position</p><p>(in millions of euros) Notes December31, 2017december31, 2016 </p><p>restated(1)</p><p>ASSETSGoodwill 6.1 2,615 1,944Other intangible assets 6.2 1,830 1,372Property, plant and equipment 6.3 4,055 3,063Investments in equity-accounted companies 4.5.3.2 357 473Other non-current financial assets 8.1.1 420 211Assets relating to pensions and other employee benefits 5.3 5 -Deferred tax assets 9.2 456 625non-cURRent assets 9,738 7,688Inventories, net 4.4 1,720 1,393Accounts and notes receivable, net 4.2 2,919 2,462Other current assets 4.5.2 483 427Taxes receivable 42 38Other current financial assets 8.1.1 40 20Cash and cash equivalents 8.1.3.2 2,436 2,359Assets held for sale 2.2.2.1 41 -cURRent assets 7,681 6,699TOTAL ASSETS 17,419 14,387EQUITY AND LIABILITIESShare capital 10.1.1 240 239Additional paid-in capital 10.1.1 1,487 1,462Translation adjustment 10.1.3 (36) 282Retained earnings 2,723 2,134stocKHoldeRs eQUitY 4,414 4,117Non-controlling interests 10.1.4 649 236stocKHoldeRs eQUitY inclUdinG non-contRollinG inteRests 5,063 4,353Provisions for pensions and other employee benefits long-term portion 5.3 1,018 983Other provisions long-term portion 7.1 388 358Long-term portion of long-term debt 8.1.2.1 3,237 2,069Other financial liabilities long-term portion 8.1.1 162 116Liabilities associated with put options granted to holders ofnon-controlling interests long-term portion 8.1.2.2 17 23Subsidies and grants long-term portion 43 41Deferred tax liabilities 9.2 73 66non-cURRent liaBilities 4,938 3,656Accounts and notes payable 4,394 3,885Provisions for pensions and other employee benefits current portion 5.3 117 89Other provisions current portion 7.1 207 302Subsidies and grants current portion 19 18Taxes payable 116 107Other current liabilities 1,401 1,128Current portion of long-term debt 8.1.2.1 383 225Other financial liabilities current portion 8.1.1 15 26Liabilities associated with put options granted to holders ofnon-controlling interests current portion 8.1.2.2 65 56Short-term debt 8.1.2.3 664 542Liabilities held for sale 2.2.2.1 37 -cURRent liaBilities 7,418 6,378TOTAL EQUITY AND LIABILITIES 17,419 14,387(1) The consolidated statement of financial position for December 31, 2016 differs from that presented in the 2016 consolidated financial statements published in February 2017 </p><p>since it has been adjusted to reflect the impacts of finalizing the allocation of goodwill to peiker and Spheros (see Notes2.2.1.10 and 2.2.1.9).</p><p>The Notes are an integral part of the consolidated financial statements.</p><p>Valeo 2017 consolidated financial statements4 </p></li><li><p>2017 consolidated financial statements </p><p>4. Consolidated statement of cash flows</p><p>(in millions of euros) Notes 2017 2016</p><p>CASH FLOWS FROM OPERATING ACTIVITIESNet income for the year 965 983Share in net earnings of equity-accounted companies (22) (61)Net dividends received from equity-accounted companies 46 43Expenses (income) with no cash effect 11.1 882 854Cost of net debt 73 83Income taxes (current and deferred) 325 189GRoss oPeRatinG casH floWs 2,269 2,091Income taxes paid (265) (257)Changes in working capital 11.2 35 56net casH floWs fRom (Used in) oPeRatinG actiVities 2,039 1,890CASH FLOWS FROM INVESTING ACTIVITIESAcquisitions of intangible assets (627) (483)Acquisitions of property, plant and equipment(1) (1,158) (844)Investment subsidies and grants received(1) 9 27Disposals of property, plant and equipment and intangible assets 31 51Net change in non-current financial assets (91) (38)Acquisitions of investments with gain of control, net of cash acquired 11.3 (537) (630)Acquisitions of investments in associates and/or joint ventures 11.4 (7) (17)Disposals of investments with loss of control, net of cash transferred 11.5 (1) 22net casH floWs fRom (Used in) inVestinG actiVities (2,381) (1,912)CASH FLOWS FROM FINANCING ACTIVITIESDividends paid to owners of the Company (297) (236)Dividends paid to non-controlling interests in consolidated subsidiaries (20) (27)Capital increase 26 29Sale (purchase) of treasury stock 11.6 (73) 13Issuance of long-term debt 11.7 1,486 1,112Loan issue costs and premiums 11.7 (7) (64)Interest paid (72) (63)Interest received 9 5Repayments of long-term debt 11.7 (630) (469)Acquisitions of investments without gain of control 11.8 (16) (24)net casH floWs fRom (Used in) financinG actiVities 406 276casH and casH eQUiValents RelatinG to assets Held foR sale (6) -effect of eXcHanGe Rate cHanGes on casH and casH eQUiValents (103) (34)NET CHANGE IN CASH AND CASH EQUIVALENTS (45) 220net casH and casH eQUiValents at BeGinninG of YeaR 1,817 1,597net casH and casH eQUiValents at end of YeaR 1,772 1,817Of which:</p><p> Cash and cash equivalents 2,436 2,359</p><p> Short-term debt (664) (542)(1) The consolidated statement of cash flows shown for 2016 differs from that presented in the 2016 consolidated financial statements published in February 2017 since it has </p><p>been adjusted to present the impacts of subsidies and grants on non-current assets on a separate line within cash flows from investing activities.</p><p>The Notes are an integral part of the consolidated financial statements.</p><p>Valeo 2017 consolidated financial statements 5</p></li><li><p>2017 consolidated financial statements </p><p>5. Consolidated statement of changes in stockholders equity</p><p>Total stockholders' equity including non-controlling interests</p><p>number of shares outstanding (in millions of euros)</p><p>share capital</p><p>additional paid-in capital</p><p>cumulative translation adjustment</p><p>Retained earnings</p><p>Stockholders' equity</p><p>Non-controlling interests Total</p><p>235,362,555STOCKHOLDERS' EQUITY ATJANUARY1,2016 238 1,434 245 1,556 3,473 219 3,692</p><p>Dividends paid - - - (236) (236) (27) (263)</p><p>1,784,200 Treasury stock - - - 13 13 - 13</p><p>755,511 Capital increase 1 28 - - 29 - 29</p><p>Share-based payment - - - 21 21 - 21</p><p>Put options granted(2) - - - (18) (18) (3) (21)</p><p>Other movements - - - (25) (25) (12) (37)</p><p>tRansactions WitH oWneRs 1 28 - (245) (216) (42) (258)</p><p>Net income for the year - - - 925 925 58 983</p><p>Other comprehensive income (loss), net of tax - - 37 (102) (65) 1 (64)</p><p>total comPReHensiVe income - - 37 823 860 59 919</p><p>237,902,266STOCKHOLDERS EQUITY AT DECEMBER31,2016 239 1,462 282 2,134 4,117 236 4,353</p><p>Dividends paid - - - (297) (297) (20) (317)</p><p>(488,256) Treasury stock(1) - - - (73) (73) - (73)</p><p>509,990 Capital increase(4) 1 25 - - 26 - 26</p><p>Share-based payment - - - 27 27 - 27</p><p>Put options granted(2) - - - 1 1 (4) (3)</p><p>Other movements(3) - - - (29) (29) 379 350</p><p>tRansactions WitH oWneRs 1 25 - (371) (345) 355 10</p><p>Net income for the year - - - 886 886 79 965</p><p>Other comprehensive income (loss), net of tax - - (318) 74 (244) (21) (265)</p><p>total comPReHensiVe income - - (318) 960 642 58 700</p><p>237,924,000STOCKHOLDERS EQUITY AT DECEMBER31,2017 240 1,487 (36) 2,723 4,414 649 5,063</p><p>(1) Changes in stockholders equity attributable to treasury stock for 2017 include the impact of the share buyback program entered into with an investment services provider on March6, 2017 in an amount of 75millioneuros (see Note 10.1.1.3).</p><p>(2) This item includes changes in the fair value of liabilities relating to put options granted to holders of non-controlling interests (see Note8.2.2.2).(3) Other movements in non-controlling interests mainly include the impacts of the creation of Valeo-Kapec with Pyeong Hwa (see Note2.2.1.1) and, to a lesser extent, the </p><p>takeover of Ichikoh on January20, 2017 (see Note2.2.1.5).(4) The terms and conditions of the July 27, 2017 capital increase reserved for employees are detailed in Note 10.1.1.1.</p><p>The Notes are an integral part of the consolidated financial statements.</p><p>Valeo 2017 consolidated financial statements6 </p></li><li><p>2017 consolidated financial statements </p><p>6. Notes to the consolidated financial statements</p><p>note1 accoUntinG Policies 81.1 Accounting standards applied 81.2 Basis of preparation 11</p><p>note2 scoPe of consolidation 122.1 Accounting policies relating </p><p>to the scope of consolidation 122.2 Changes in the scope of consolidation 142.3 Off-balance sheet commitments </p><p>relating to the scope of consolidation 21</p><p>note 3 seGment RePoRtinG 223.1 Key segment performance indicators 223.2 Reconciliation with Group data 243.3 Reporting by geographic area 243.4 Breakdown of sales by major customer 25</p><p>note 4 oPeRatinG data 254.1 Sales 254.2 Accounts and notes receivable 264.3 Gross margin and cost of sales 274.4 Inventories 274.5 Operating margin including share </p><p>innet earnings of equity-accounted companies 28</p><p>4.6 Operating income and other income and expenses 34</p><p>note 5 PeRsonnel eXPenses and emPloYee Benefits 365.1 Headcount 365.2 Employee benefits 365.3 Provisions for pensions and other </p><p>employee benefits 375.4 Share-based payment 445.5 Executive compensation </p><p>(Related party transactions) 46</p><p>note 6 intanGiBle assets and PRoPeRtY, Plant and eQUiPment 476.1 Goodwill 476.2 Other intangible assets 486.3 Property, plant and equipment 506.4 Impairment losses on non-current assets 526.5 Off-balance sheet commitments </p><p>relating to operating activities 55</p><p>note 7 otHeR PRoVisions and continGent liaBilities 567.1 Other provisions 567.2 Antitrust investigations 577.3 Contingent liabilities 58</p><p>note8 financinG and financial instRUments 588.1 Financial assets and liabilities 588.2 Financial income and expenses 75</p><p>note 9 income taXes 769.1 Income taxes 769.2 Deferred taxes 78</p><p>note10 stocKHoldeRs eQUitY and eaRninGs PeR sHaRe 7910.1 Stockholders equity 7910.2 Earnings per share 81</p><p>note11 BReaKdoWn of casH floWs 8111.1 Expenses (income) with no cash effect 8111.2 Changes in working capital 8211.3 Acquisitions of investments withgain </p><p>of control, net of cash acquired 8211.4 Acquisitions of investments </p><p>inassociates and/or joint ventures 8211.5 Disposals of investments </p><p>with loss of control, net of cash transferred 82</p><p>11.6 Sale (purchase) of treasury stock 8211.7 Issuance and repayment </p><p>of long-term debt 8211.8 Acquisitions of investments </p><p>withoutgain of control 8311.9 Free cash flow and net cash flow 83</p><p>note12 fees Paid to tHe statUtoRY aUditoRs 84</p><p>note13 list of consolidated comPanies 85</p><p>Valeo 2017 consolidated financial statements 7</p></li><li><p>2017 consolidated financial statements </p><p>Note1 ACCOUNTING POLICIES</p><p>The consolidated financial statements of the Valeo Group for the year ended December31, 2017 include: the accounts of Valeo; the accounts of its subsidiaries; Valeos share in the net assets and earnings of equity-accounted companies ( joint ventures and associates).</p><p>Valeo is an independent group fully focused on the design, production and sale of components, integrated systems, modules and services for the automotive sector. As a technology company, Valeo proposes innovative products and systems that contribute to the reduction of CO2 emissions and to the development of intuitive driving. Valeo is one of the worlds leading automotive suppliers and is a partner to all automakers across the globe.</p><p>Valeo is a French legal entity listed on the Paris Stock Exchange. Its head office is at 43 rue Bayen, 75017 Paris, France.</p><p>Valeos consolidated financial statements for the year ended December 31, 2017 were authorized for issue by the Board of Directors on February22,2018.</p><p>They will be submitted for approval to the next Annual Shareholders Meeting.</p><p>1.1 Accounting standards appliedThe financial statements are prepared in accordance with International Financial Reporting Standards (IFRS) published by the International Accounting Standards Board (IASB) and endorsed by the European Union. The IFRS as adopted by the European Union can be consulted on the European Commissions website(1).The financial statements include the information deemed material as required by the ANC in Standardno. 2016-09.</p><p>1.1.1 standards, amendments and interpretations adopted by the european Union and effective forreporting periods beginning on or after January1,2017</p><p>The following standards, amendments and interpretations have been published by the IASB and a...</p></li></ul>