össur annual report2009 - Euroland

The Company’s exposures to interest rates on financial assets and financial liabilities are
detailed in the liquidity risk management section of this note.
Contracts with nominal values of USD 140 million and EUR 48.6 million have been made
to swap floating interest rates to fixed with an average weighted interest rate of 5.69%
for periods up to 2012. The fair value of interest rate swaps at the reporting date is determined
by discounting the future cash flows using the curves at reporting date and the
credit risk inherent in the contract, and is disclosed below. The average interest rate is
based on the outstanding balances at the start of the financial period.
Outstanding interest rate swap contracts (cash flow hedge) at 31 December 2009 are
due over the next three years. The contracts´ fair value is negative USD 10.0 million
(2008: negative USD 9.5 million) and principal amount USD 147 million (2008: USD 167
million).
Following the collapse of Kaupthing Bank in October 2008, the treatment of Össur’s
interest rate swap agreements has been subject to uncertainty. In April 2009, Össur formally
declared the agreements void and invalid, based on the counterparty’s inability to
fulfil its obligations according to the agreements. Kaupthing Bank has argued that the
agreements remained in full force. In January 2010, Kaupthing Bank formally declared
that the agreements had been closed as of 30 December 2009 because Össur had denied
to pay outstanding payments and put up collateral. Preliminary settlement discussions
between Össur and Kaupthing Bank are currently ongoing. As a precaution, the agreements
will continue to be accounted for according to International Financial Reporting
Standards in the Company’s Consolidated Financial Statements. At the end of December
their market value amounted to minus USD 10.0 million (2008: 9.5 million). Changes in
market value are realized through equity.
33.6 liquidity risk ManageMent
The Company manages liquidity risk by maintaining adequate reserves, banking facilities
and reserve borrowing facilities, by monitoring forecast and actual cash flows and matching
the maturity profiles of financial assets and liabilities. At period end the Company had
undrawn revolving credit facilities at its disposal amounting to USD 10.8 million (2008:
0.8 million) to further reduce liquidity risk.
The following tables detail the Company´s remaining contractual maturity for its nonderivative
financial liabilities. The tables have been drawn up based on the undiscounted
cash flows of financial liabilities based on the earliest date on which the Company can be
required to pay. The table includes both interest and principal cash flows.
WEIGHTED
AVERAGE LESS
EffECTIVE THAN
INTEREST 1 YEAR 1–5 YEARS 5+ YEARS TOTAL
2009
Borrowings 5.69% 39,994 225,314 0 265,308
Non-interest bearing liabilities – 49,081 0 0 49,081
89,075 225,314 0 314,389
2008
Borrowings 5.95% 97,882 208,769 0 306,651
Non-interest bearing liabilities – 41,159 0 0 41,159
34. operating lease arrangeMents
139,041 208,769 0 347,810
Payments recognised as an expense:
2009 2008
Minimum lease payments 7,807 7,641
Non-cancellable operating lease commitments
31.12.2009 31.12.2008
Not longer than 1 year 8,485 5,964
Longer than 1 year and not longer than 5 years 24,429 16,691
Longer than 5 years 11,217 7,735
All amounts in thousands of USD 93 annual report 09
44,131 30,390
Operating lease payments represent rentals payable by the consolidation for certain
of its office properties and cars. Thirty rental agreements are in place for premises in
Reykjavik, Netherlands, Germany, Canada, Australia, Sweden, United Kingdom, China
and the United States. The leases expire in the periods 2010-2017.
Össur hf. consolidated financial stateMents 2009