Form 6-K EXFO INC. For: Apr 26

April 26, 2018 1:59 PM EDT

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.   20549


FORM 6-K


Report of Foreign Private Issuer Pursuant to Rule 13a-16 or 15d-16
Under the Securities Exchange Act of 1934

For the month of April 2018

EXFO Inc.

400 Godin Avenue, Quebec, Quebec, Canada   G1M 2K2
(Address of principal executive offices)


Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.


Form 20-F
Form 40-F

Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

Yes
No


If "Yes" is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82-______.
 
 

 



 
 
TABLE OF CONTENTS
 
 
Signature
Business Acquisition Report
Unaudited Pro Forma Consolidated Statement of Earnings of EXFO Inc. for the Year Ended August 31, 2017
Unaudited Pro Forma Consolidated Statement of Earnings of EXFO Inc. for the Six Months Ended February 28, 2018
Notes to Unaudited Pro Forma Consolidated Statements of Earnings of EXFO Inc.
Auditor's Report
Consolidated Balance Sheet of Astellia SA for the Year Ended December 31, 2017
Consolidated Statement of Income of Astellia SA for the Year Ended December 31, 2017
Consolidated Statement of Cash Flows of Astellia SA for the Year Ended December 31, 2017
Consolidated Statement of Changes in Equity of Astellia SA for the Year Ended December 31, 2017
Notes to Consolidated Financial Statements of Astellia SA for the Year Ended December 31, 2017
 
 


 
 
On April 26, 2018, EXFO Inc., a Canadian corporation, filed a Business Acquisition Report following the acquisition of Astellia SA pursuant to Canadian legislation. This report on Form 6-K sets forth the Business Acquisition Report Form relating to EXFO's filing of its Business Acquisition Report in Canada.

The Business Acquisition Report Form contains material information relating to EXFO and are hereby incorporated as documents by reference to Form F-3 (Registration Statement under the Securities Act of 1933) declared effective as of July 30, 2001 and to Form F‑3 (Registration Statement under the Securities Act of 1933) declared effective as of March 11, 2002 and to amend certain material information as set forth in these two Form F-3 documents.

 


 
 
SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



 
EXFO INC.
 
 
 
By:       /s/ Philippe Morin
Name:  Philippe Morin
Title:    Chief Executive Officer
   


Date: April 26, 2018


 


 
 
FORM 51-102F4

BUSINESS ACQUISITION REPORT
 

Item 1
Identity of Company
 
1.1
Name and Address of Company
 
EXFO Inc. ("EXFO" or the "company")
400 Godin Avenue
Québec City, Quebec
G1M 2K2

1.2
Executive Officer

The following executive officer of EXFO is knowledgeable about the significant acquisition and this business acquisition report:

Pierre Plamondon, CPA, CA
Chief Financial Officer and Vice-President, Finances
(418) 683-0211


Item 2
Details of Acquisition

2.1
Nature of Business Acquired
 
In this business acquisition report, all dollar amounts are expressed in US dollars, except as otherwise noted.

On January 26, 2018, the company acquired, by way of a public tender offer, 1,245,209 shares of Astellia S.A. ("Astellia"), at a purchase price of €10 per share for a total cash consideration of €12,452,090 ($15,476,900), which brought the company's investment in Astellia to 88.4%. Prior to this acquisition, the company held 40.3% of Astellia's shares.

Astellia is a publicly traded company on the NYSE Euronext Paris stock exchange. Astellia is a provider of network and subscriber intelligence enabling mobile operators to drive service quality, maximize operational efficiency, reduce churn and increase revenue. Its vendor-independent, real-time monitoring and troubleshooting solution is used to optimize networks end-to-end from radio to core.

2.2
Date of Acquisition
 
January 26, 2018

2.3
Consideration
 
The details of the acquisition of Astellia and the consideration paid are disclosed in note 3 to the company's unaudited condensed interim consolidated financial statements for the three months and six months ended February 28, 2018 filed with the Canadian securities commissions on April 11, 2018.

The company financed the cash consideration of this acquisition from existing cash and existing revolving credit facilities of CA$70,000,000 (approximately $54,300,000), which were concluded on December 21, 2017.
 
 


 

2.4
Effect on Financial Position
 
The acquisition of Astellia was accounted for by applying the acquisition method as required by IFRS 3, "Business Combinations", and the requirements of IFRS 10, "Consolidated Financial Statements". The purchase price was allocated to the net assets acquired based on management's preliminary estimate of their fair value as of the date of acquisition. Other than the resulting impact of the acquisition on the company's consolidated balance sheet and statement of earnings, the company does not foresee, as a result of this acquisition, any material changes in its business affairs or the affairs of the acquired business which may have a significant effect on the results of operations and financial position of the company.

2.5
Prior Valuations
 
On September 11, 2017, pursuant to article 261-1 1 of the Règlement général de l'AMF, the Board of Directors of Astellia appointed an independent valuation expert, Associés en Finance, to determine the fairness of the public tender offer made by EXFO to acquire Astellia's share at a price of €10 per share.

On November 27, 2017, Associés en Finance, determined that the public tender offer made by EXFO at €10 per share was fair. Associés en Finance used a market approach that relied on valuation multiples and recent transactions for comparable assets or businesses, within the same industry, as well as discounted cash flows to support its assessment.

2.6
Parties to Transaction
 
The acquisition of Astellia was not a transaction with an informed person, associate or affiliate of the company.

2.7
Date of Report
 
April 26, 2018


Item 3
Financial Statements
 
The following financial statements required by Part 8 of National Instrument 51-102, "Continuous Disclosure Obligations", are included in this report:

a)
Audited consolidated financial statements of Astellia as at December 31, 2017 and 2016 and for the years ended December 31, 2017 and 2016, and an audited supplementary note, which include a reconciliation of the consolidated balance sheets and statements of earnings as at and for the years ended December 31, 2016 and 2017 prepared in accordance with French accounting rules and principles to International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB).

b)
Unaudited pro forma consolidated statement of earnings of EXFO for the year ended August 31, 2017, to give effect to the acquisition of Astellia as if it had occurred at the beginning of that fiscal year.

c)
Unaudited pro forma consolidated statement of earnings of EXFO for the six-month period ended February 28, 2018, to give effect to the acquisition of Astellia as if it had occurred at the beginning of that period.
 
 


 
 
EXFO Inc.
Unaudited Pro Forma Consolidated Statement of Earnings
for the Year Ended August 31, 2017

(in thousands of US dollars, except share and per share data)
 
 
 
   
EXFO Inc.
Year ended
August 31,
2017
   
Astellia
Twelve months
ended June 30,
2017
   
Pro forma
adjustments
 
Note 3
 
Pro forma
Year ended
August 31,
2017
 
         
(notes 2 and
3(i))
     
3(i)
         
                             
Sales
 
$
243,301
   
$
47,961
   
$
     
$
291,262
 
                                   
Cost of sales
   
94,329
     
21,981
     
       
116,310
 
Selling and administrative
   
86,256
     
16,263
     
       
102,519
 
Net research and development
   
47,168
     
11,522
     
       
58,690
 
Depreciation of property, plant and equipment
   
3,902
     
914
     
       
4,816
 
Amortization of intangible assets
   
3,289
     
735
     
11,061
   (iii)    
15,085
 
Change in fair value of cash contingent consideration
   
(383
)
   
     
       
(383
)
Interest expense
   
303
     
498
     
       
801
 
Foreign exchange loss
   
978
     
     
       
978
 
                                   
Earnings (loss) before income taxes
   
7,459
     
(3,952
)
   
(11,061
)
     
(7,554
)
                                   
Income taxes
   
6,608
     
418
     
       
7,026
 
                                   
Net earnings (loss) for the period
 
$
851
   
$
(4,370
)
 
$
(11,061
)
   
$
(14,580
)
                                   
Basic and diluted net earnings (loss) per share
 
$
0.02
                               
$
(0.27
)
                                   
Basic weighted average number of shares outstanding (000's)
   
54,423
                       
54,423
 
                                   
Diluted weighted average number of shares outstanding (000's)
   
55,555
                       
54,423
 
 
 


 
 
EXFO Inc.
Unaudited Pro Forma Consolidated Statement of Earnings
for the Six Months Ended February 28, 2018

(in thousands of US dollars, except share and per share data)
 
 
 
   
EXFO Inc.
Six months
ended
February 28,
2018
   
Astellia
   
Pro forma
adjustments
 
Note 3
 
Pro forma
Six months
ended
February 28,
2018
 
         
(notes 2 and 3(i))
     
3(i)
         
                             
Sales
 
$
128,113
   
$
24,350
   
$
     
$
152,463
 
                                   
Cost of sales
   
48,615
     
10,950
     
       
59,565
 
Selling and administrative
   
48,109
     
7,096
     
       
55,205
 
Net research and development
   
24,339
     
4,290
     
       
28,629
 
Depreciation of property, plant and equipment
   
2,417
     
408
     
       
2,825
 
Amortization of intangible assets
   
4,175
     
65
     
268
 
(iii)
   
4,508
 
Change in fair value of cash contingent consideration
   
(716
)
   
     
       
(716
)
Interest expense
   
672
     
182
     
       
854
 
Foreign exchange (gain) loss
   
(1,226
)
   
110
               
(1,116
)
Share in net loss of an associate
   
2,080
     
     
(2,080
)
(iv)
   
 
Gain on the deemed disposal of the investment in an associate
   
(2,080
)
   
     
2,080
 
(iv)
   
 
                                   
Earnings (loss) before income taxes
   
1,728
     
1,249
     
(268
)
     
2,709
 
                                   
Income taxes
   
4,061
     
218
     
       
4,279
 
                                   
Net earnings (loss) for the period
   
(2,333
)
   
1,031
     
(268
)
     
(1,570
)
Net earnings (loss) for the period attributable to non-controlling interest
   
(352
)
   
     
352
 
(v)
   
 
Net earnings (loss) for the period attributable to parent interest
 
$
(1,981
)
 
$
1,031
   
$
(620
)
   
$
(1,570
)
                                   
Basic and diluted net loss attributable to parent interest per share
 
$
(0.04
)
                     
$
(0.03
)
                                   
                                   
Basic weighted average number of shares outstanding (000's)
   
54,890
                       
54,890
 
                                   
Diluted weighted average number of shares outstanding (000's)
   
54,890
                       
54,890
 
 

 


 
 
EXFO Inc.
Notes to Unaudited Pro Forma Consolidated Statements of Earnings

(in US dollars, except as otherwise noted)
 
 
1
Acquisition of Astellia

On January 26, 2018, the company acquired, by way of a public tender offer, 1,245,209 shares of Astellia S.A. ("Astellia"), at a purchase price of €10 per share for a total cash consideration of €12,452,090 (US$15,476,900), which brought the company's total investment in Astellia to 88.4% and provided the company with control over Astellia. Prior to this acquisition, the company held 40.3% of Astellia's shares. Over the month of February 2018, the company gained control over the remaining shares of Astellia

2
Basis of Presentation

The unaudited pro forma consolidated statements of earnings of EXFO Inc. ("the company" or "EXFO") have been prepared to give effect to the acquisition of Astellia. In the opinion of management, the unaudited pro forma consolidated statements of earnings for the year ended August 31, 2017 and for the six months ended February 28, 2018, include all significant adjustments necessary for the presentation of the acquisition on a basis consistent with the company's accounting policies applied in its audited consolidated financial statements for the year ended August 31, 2017 and for the unaudited condensed interim consolidated financial statements for the six months ended February 28, 2018.

The pro forma adjustments are based on available information, estimates and certain assumptions that the company believes are reasonable and are described in the accompanying notes to the unaudited pro forma consolidated statements of earnings.

The unaudited pro forma consolidated statement of earnings for the year ended August 31, 2017 has been prepared by the management of EXFO as if the acquisition had occurred on September 1, 2016. Due to the different fiscal-year periods, the unaudited pro forma consolidated statement of earnings for the year ended August 31, 2017 combines the audited consolidated statement of earnings of EXFO for the year ended August 31, 2017 and the constructed unaudited consolidated statement of earnings of Astellia for the twelve months ended June 30, 2017.

The unaudited pro forma consolidated statement of earnings for the six months ended February 28, 2018 has been prepared by the management of EXFO as if the acquisition had occurred on September 1, 2016. Due to the different fiscal-year periods, the unaudited pro forma consolidated statement of earnings for the six months ended February 28, 2018 combines the unaudited condensed interim consolidated statement of earnings of EXFO for the six months ended February 28, 2018, and a constructed unaudited consolidated statement of earnings of Astellia, that includes the unaudited consolidated statement of earnings of Astellia for the six months ended December 31, 2017 and that eliminates Astellia's results for the one-month contribution (February 2018), already included in EXFO's unaudited condensed interim consolidated statement of earnings for the six months ended February 28, 2018.

Astellia's consolidated financial statements used in the preparation of the unaudited pro forma consolidated statements of earnings for the year ended August 31, 2017 and for the six months ended February 28, 2018, have been prepared in accordance with accounting rules and principles used in France (regulation 99-02 issued by the Comité de Réglementation Comptable / French Accounting Regulations Committee, referred to herein as "French GAAP").  Accordingly, management has also considered adjustments to conform with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standard Board.  The adjustments made mainly related to differences in revenue recognition of multiple-deliverable sales arrangements and in the accounting for development expenses. The nature of these adjustments is further described in a supplemental audited note to the audited consolidated financial statements of Astellia for the year ended December 31, 2017, which is included in this Business Acquisition Report.  No additional adjustments were made to comply with the company's accounting policies.
 
 


 
 
The unaudited pro forma statements of earnings are provided for illustrative purposes only and do not purport to represent what the combined company's actual performance would have been had the transaction occurred on the dates indicated and do not purport to indicate results of operations as of any future period.


3 Significant Assumptions and Adjustments

(i)
The unaudited consolidated statement of earnings of Astellia for the twelve months ended June 30, 2017 has been translated into US dollars at an average rate of €1.00 = US$1.0851 for that period; the unaudited consolidated statement of earnings of Astellia for the six months ended December 31, 2017 has been translated into US dollars at an average rate of €1.00 = US$1.1749 for that period.

(ii)
The acquisition of Astellia was accounted for by applying the acquisition method as required by IFRS 3, "Business Combinations", and the requirements of IFRS 10, "Consolidated Financial Statements". In the preparation of these unaudited pro forma consolidated statements of earnings, the purchase price has been allocated on a preliminary basis to the fair value of the net assets acquired, based on management best estimates and considering all relevant information available at the time these statements were prepared. Upon the completion of the purchase price allocation, actual amounts for the fair values of the net assets acquired could differ materially from those reflected in the unaudited pro forma consolidated financial statements. Assets and liabilities susceptible to change upon the finalization of the purchase price allocation mainly consist of accounts receivable, intangible assets, goodwill, deferred revenue and deferred income taxes.

(iii)
The fair value of acquired intangible assets is estimated to be $15,000,000 based on management's preliminary estimate of fair value. Acquired intangible assets are amortized on a straight-line basis over their estimated useful lives of one to five years.

(iv)
Prior to the acquisition of Astellia on January 26, 2018, the company's investment in Astellia was accounted for under the equity method as required by IAS 28, "Investments in Associates and Joint Ventures". Therefore, the company's unaudited condensed interim consolidated statement of earnings for the six months ended February 28, 2018 included the company's share of Astellia's net results prior to the acquisition in the amount of $2,079,800. In addition, at the acquisition date, the carrying value of the interest in Astellia held prior to the business combination was re-measured at fair value, that is, €10 per share, and was deemed to have been disposed of on that date. This acquisition-date re-measurement and deemed disposal resulted in a gain of $2,079,800 that was accounted for in the unaudited condensed interim consolidated statement of earnings for the six months ended February 28, 2018. These amounts were eliminated for the purposes of the unaudited pro forma consolidated statement of earnings for the six months ended February 28, 2018.

(v)
On January 26, 2018, the company's total interest in Astellia amounted to 88.4% and the non-controlling interest amounted to 11.6% of Astellia's share capital. However, over the month of February 2018, the company gained control over the remaining shares of Astellia. The company's unaudited pro forma consolidated statements of earnings for the year ended August 31, 2017 and the six months ended February 28, 2018 have been prepared assuming the company had full control over the shares of Astellia. Consequently, an adjustment was included in the preparation of the unaudited pro forma consolidated statement of earnings for the six months ended February 28, 2018 to eliminate the non-controlling interest in Astellia's net results for that period.





 
 
 
MGA AUDIT
 
ERNST & YOUNG et Autres














 
 
This is a translation into English of the statutory auditors' report on the consolidated financial statements of the Company issued in French and it is provided solely for the convenience of English·speaking users.
This statutory auditors' report includes information required by French law, such as information about the appointment of the statutory auditors or verification of the information concerning the Group presented in the management report. This report should be read in conjunction with, and construed in accordance with French law and professional auditing standards applicable in France.
 
 

















Astellia
Year ended December 31, 2017






Statutory auditors' report on the consolidated financial statements
 



MGA AUDIT
8, quai de Tréguier
29600 Morlaix
S.A.R.L. au capital de € 50.000
450 541 974 R.C.S. Morlaix
 
ERNST & YOUNG et Autres
Immeuble Eolios
3, rue Louis Braille
CS 10847
34208 Rennes Cedex 2
S.A.S. à capital variable
438 476 913 R.C.S. Nanterre
 
Commissaire aux Comptes
Membre de la compagnie
régionale de Rennes
 
Commissaire aux Comptes
Membre de la compagnie
régionale de Versailles




Astellia
Year ended December 31, 2017


Statutory auditors' report on the consolidated financial statements


To the Annual General Meeting of Astellia,


Opinion

In compliance with the engagement entrusted to us by your Annual General Meetings, we have audited the accompanying consolidated financial statements of Astellia for the year ended December 31, 2017.

In our opinion, the consolidated financial statements give a true and fair view of the assets and liabilities and of the financial position of the Group as at December 31, 2017 and of the results of its operations for the year ended in accordance with International Financial Reporting Standards as adopted by the European Union.


Basis for Opinion
 
§
Audit Framework
 
We conducted our audit in accordance with professional standards applicable in France. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Our responsibilities under those standards are further described in the Statutory Auditors' Responsibilities for the Audit of the Consolidated Financial Statements section of our report.
 
§
Independence
 
We conducted our audit engagement in compliance with independence rules applicable to us, for the period from January 1, 2017 to the date of our report and specifically we did not provide any prohibited non-audit services referred to in the French Code of Ethics (Code de déontologie) for statutory auditors.

 



 
Justification of Assessments

In accordance with the requirements of Articles L.823-9 and R.823-7 of the French Commercial Code (Code de commerce) relating to the justification of our assessments, we inform you of the assessments that, in our professional judgment, were of most significance in our audit of the financial statements of the current period.

These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on specific items of the financial statements.

Paragraph 4 to the consolidated financial statements presents the accounting policies related to the elements as follows:
 
§
research and development costs (4.2.1);

§
Business amortization (4.2.3);

§
Evaluation of provisions for risks and charges (4.11) including provisions for retirement bonuses (4.11.2).
 
Our work consisted in analyzing the data used, to assess the hypothesis adopted, to review the calculations performed and to assess that Paragraph 4 to the consolidated financial statements has provided the required information. As part or our work, we made sure that this evaluation was correct.


Verification of the Information Pertaining to the Group Presented in the Management Report

As required by law, we have also verified in accordance with professional standards applicable in France the information pertaining to the Group presented in the Board of Directors' management report.

We have no matters to report as to its fair presentation and its consistency with the consolidated financial statements.


Responsibilities of Management and Those Charged with Governance for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with International Financial Reporting Standards as adopted by the European Union and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the consolidated financial statements, management is responsible for assessing the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless it is expected to liquidate the Company or to cease operations.

The consolidated financial statements were approved by the Board of Directors.

 
 
 
Astellia
Year ended December 31, 2017
 
 



 
Statutory Auditors' Responsibilities for the Audit of the Consolidated Financial Statements

Our role is to issue a report on the consolidated financial statements. Our objective is to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with professional standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.

As specified in Article L.823-10-1 of the French Commercial Code (Code de commerce), our statutory audit does not include assurance on the viability of the Company or the quality of management of the affairs of the Company.

As part of an audit conducted in accordance with professional standards applicable in France, the statutory auditor exercises professional judgment throughout the audit and furthermore:
 
§
Identifies and assesses the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, designs and performs audit procedures responsive to those risks, and obtains audit evidence considered to be sufficient and appropriate to provide a basis for his opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

§
Obtains an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose or expressing an opinion on the effectiveness of the internal control.

§
Evaluates the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management in the consolidated financial statements.

§
Assesses the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company's ability to continue as a going concern. This assessment is based on the audit evidence obtained up to the date of his audit report. However, future events or conditions may cause the Company to cease to continue as a going concern. If the statutory auditor concludes that a material uncertainty exists, there is a requirement to draw attention in the audit report to the related disclosures in the consolidated financial statements or, if such disclosures are not provided or inadequate, to modify the opinion expressed therein.

§
Evaluates the overall presentation of the consolidated financial statements and assesses whether these statements represent the underlying transactions and events in a manner that achieves fair presentation.

 
 
 
Astellia
Year ended December 31, 2017
 
 
 


 
 

 
§
Obtains sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. The statutory auditor is responsible for the direction, supervision and performance of the audit of the consolidated financial statements and for the opinion expressed on these consolidated financial statements.
 
 
 


Morlaix and Rennes, April 18, 2018

The Statutory Auditors
French original signed by
 
 
 
MGA AUDIT
 
ERNST & YOUNG et Autres
 
 
 
 
/s/ Michel Gouriten
 
 
 
 
/s/ Guillaume Ronco
  Michel Gouriten
 
Guillaume Ronco

 
 
 
Astellia
Year ended December 31, 2017
 

Consolidated Financial Statements – Year ended 31/12/2017
 

 
S.A. Astellia
 
Consolidated Financial Statements
Year ended
31/12/2017
 
This document has 41 pages
 

Consolidated Financial Statements – Year ended 31/12/2017
 

 
General summary
 
Consolidated Balance Sheet
3
   
Consolidated Statement of Income
4
   
Statement of Cash Flows
5
   
Consolidated Statement of Changes in Equity
6
   
Notes to the Consolidated Financial Statements
7
   

All amounts are in thousands of euros
 
2

Consolidated Financial Statements – Year ended 31/12/2017
 

 
Consolidated Balance Sheet
 
In thousands of euros
       
Assets
 
Note
   
31/12/2017
   
31/12/2016
 
Goodwill
   
4.1
     
0
     
0
 
Intangible assets
   
4.2
     
7,689
     
7,617
 
Property, plant and equipment
   
4.3
     
1,639
     
1,600
 
Long-term investments
   
4.4
     
367
     
447
 
Equity-accounted securities
           
0
     
0
 
Total non-current assets
           
9,695
     
9,664
 
Inventories and work in progress
   
4.5
     
916
     
1 942
 
Trade receivables and related accounts
   
4.6
     
21,512
     
40,723
 
Other receivables and accruals
   
4.7
     
11,472
     
11,884
 
Liquidities and marketable securities
   
4.8
     
4,485
     
6,757
 
Total current assets
           
38,384
     
61,306
 
Total assets
          48,080      
70,970
 
           
Liabilities
 
Note
   
31/12/2017
   
31/12/2016
 
Share capital
   
4.9
     
1,295
     
1,295
 
Premiums
           
11,229
     
11,229
 
Consolidated reserves
           
11,552
     
12,189
 
Consolidated net income (loss)
           
-6,393
     
-638
 
Other (foreign currency translation reserve)
           
-536
     
-402
 
Equity (group’s share)
           
17,147
     
23,674
 
Non-controlling interests
           
18
     
2
 
Total equity
           
17,164
     
23,676
 
Other equity
                       
Provisions for risks and expenses
   
4.11
     
1,671
     
1,957
 
Loans and financial debts
   
4.12
     
11,592
     
11,228
 
Trade payables and related accounts
   
4.13
     
4,404
     
4,875
 
Other accounts payables
   
4.13
     
12,021
     
26,746
 
Other payables and accruals
   
4.13
     
1,228
     
2,489
 
Total debt
           
29,245
     
45,337
 
Total liabilities
         
48,080
     
70,970
 
 
3

Consolidated Financial Statements – Year ended 31/12/2017
 


Consolidated Statement of Income
 
In thousands of euros
       
Statement of Income
 
Note
   
31/12/2017
   
31/12/2016
 
Sales
   
5.1
     
38,574
     
48,879
 
Other revenues
   
5.2
     
13,071
     
10,791
 
Total revenues
           
51,645
     
59,670
 
Purchases consumed, raw materials and goods
           
-5,239
     
-5,890
 
Other purchases and external expenses
           
-15,520
     
-15,793
 
Salaries and benefits
   
5.3
     
-24,629
     
-26,348
 
Taxes
           
-1,334
     
-2,255
 
Depreciation and charges to provisions
   
5.4
     
-10,084
     
-9,421
 
Other operating expenses
           
-227
     
-255
 
Total operating expenses
           
-57,032
     
-59,963
 
Operating income (loss)
   
5.5
     
-5,387
     
-293
 
Financial expenses
           
-1,354
     
-1,142
 
Financial income
           
343
     
1,248
 
Net financial income (expenses)
   
5.6
     
-1,011
     
106
 
Current income (loss) of consolidated companies
           
-6,399
     
-187
 
Unusual expenses and income
   
5.7
     
175
     
-254
 
Income taxes
   
6.5
     
-153
     
-279
 
Net income (loss) of consolidated companies
   
5.8
     
-6,376
     
-720
 
Share of income from equity-accounted investees
           
0
     
0
 
Amortization of goodwill
   
4.1
     
0
     
69
 
Consolidated net income (loss)
   
4.10
     
-6,376
     
-651
 
Non-controlling interests
           
17
     
-13
 
Net income (loss) (group’s share)
           
-6,393
     
-638
 
 
4

Consolidated Financial Statements – Year ended 31/12/2017
 

Statement of Cash Flows
 
 
 
 
           
 
STATEMENT OF CASH FLOWS
Notes
 
31/12/2017
   
31/12/2016
 
 
OPERATING ACTIVITIES
 
           
 
CONSOLIDATED NET INCOME (LOSS)
     
-6,376
     
-651
 
Dividends from equity-accounted investees
 
               
Other non-cash adjustments
 
               
Net income discrepancy + Dilution gains (losses)
 
               
Depreciation and charges to provisions
 
    8,265       8,102  
Reversal of depreciation and provisions
 
    -388       -148  
Gains and losses on disposals
 
    -4       114  
Deferred income taxes
 
   
0
         
Grants transferred to the Statement of Income
 
               
CASH FLOWS FROM OPERATIONS
 
   
1,497
     
7,417
 
Change in accrued interest
 
   
24
     
-0
 
Change in inventories
     
1,026
     
959
 
Change in accounts receivable
     
19,155
     
1,741
 
Change in other receivables
     
487
     
-761
 
Change in accounts payable
     
-15,037
     
291
 
Change in other payables
     
-515
     
29
 
Transfers of prepaid expenses
 
               
Reciprocal accounts
 
         
-15
 
Deferred expenses and revenues
     
-888
     
-325
 
Foreign exchange gains and losses
 
               
CHANGE IN WORKING CAPITAL REQUIREMENTS
     
4228
     
1,918
 
 
Net cash flows from operating activities
 
   
5,749
     
9,335
 
INVESTING ACTIVITIES
 
               
Outflows/acquisition of intangible assets (1)
     
-7,464
     
-7,212
 
Outflows/acquisition of property, plant and equipment (1)
     
-824
     
-904
 
Inflows/disposal of intangible assets and property, plant and equipment
     
12
     
8
 
Investment grants received
 
           
-99
 
Outflows/acquisition of long-term investments
     
-5
     
150
 
Inflows/disposal of long-term investments
     
79
     
-193
 
Net cash used in/received from the acquisition/disposal of subsidiaries
 
               
Net cash flows used in investing activities
     
-8,202
     
-8,250
 
FINANCING ACTIVITIES
 
               
Capital increases or contributions
 
               
Dividends paid to the parent company shareholders
 
               
Dividends paid to non-controlling shareholders
 
               
Change in other equity
 
               
Proceeds from loans (1)
     
1,400
     
1,921
 
Repayment of loans
     
-1,966
     
-1,560
 
Net cash flows from (used in) financing activities
     
-566
     
362
 
CHANGE IN CASH for the year
 
   
-3,019
     
1,446
 
                 
Impact of changes in exchange rates
   
-160
     
80
 
CASH AT BEGINNING (*)
   
3,675
     
2,066
 
CASH AT END (*)
   
497
     
3,675
 
(1) Excluding acquisition/finance lease transactions
               
(*) Cash reported here reflects its restrictive definition:
               
   
31/12/2017
 
31/12/2016
 
+ Liquidities
   
4,485
     
6,757
 
- Short-term bank facilities
   
-3,988
     
-3,082
 
Net cash
   
497
     
3,675
 
 
5

Consolidated Financial Statements – Year ended 31/12/2017
 

 
Consolidated Statement of Changes in Equity
In thousands of euros

Ending balance
 
Share
capital
   
Premiums
   
Consoli-
dated
reserves
   
Net income
(loss) for
the year
   
Total equity –
group’s share
   
Non-controlling
interests
 
Balance as at 31/12/2015
   
1,295
     
11,229
     
16,764
     
(5,096
)
   
24,192
     
15
 
Net income (loss) appropriation
                   
(5,096
)
   
5,096
                 
Net income (loss) for the year
                           
(638
)
   
(638
)
   
(13
)
Change in foreign currency translation reserve
                   
120
             
120
         
Other
                                           
(1
)
Balance as at 31/12/2016
   
1,295
     
11,229
     
11,788
     
(638
)
   
23,674
     
2
 
Net income (loss) appropriation
                   
(638
)
   
638
                 
Net income (loss) for the year
                           
(6,393
)
   
(6,393
)
   
17
 
Distributed dividends
                                               
Change in foreign currency translation reserve
                   
(134
)
           
(134
)
   
(1
)
Balance as at 31/12/2017
   
1,295
     
11,229
     
11,015
     
(6,393
)
   
17,147
     
17
 
 
6

Consolidated Financial Statements – Year ended 31/12/2017
 

 
Notes to the Consolidated Financial Statements
All amounts are in thousands of euros
 
7

Consolidated Financial Statements – Year ended 31/12/2017
 

Summary of the Notes to the Consolidated Financial Statements
 
     
1.
Major events
   10
1.1.
Main events during the period
10
1.1.1.
Changes in share ownership structure
10
1.1.2.
New loans
10
1.1.3.
Spanish subsidiary
10
1.1.4.
Indian subsidiary
11
     
2.
Group’s scope of consolidation
12
2.1.
Organization chart as at 31/12/2017
12
2.2.
Consolidated entities
12
2.3.
Year-end dates for consolidated entities
13
2.4.
Entities excluded from the scope of consolidation
13
     
3.
Basis of accounting, principles of consolidation, measurement policies and rules
14
3.1.
Basis of accounting
14
3.2.
Principles of consolidation
14
3.2.1.
Consolidation methods
14
3.2.2.
Elimination of intercompany transactions
15
3.2.3.
Translation of foreign companies financial statements
15
3.3.
Measurement policies and rules
16
3.3.1.
Application of preferential accounting policies
16
3.3.2.
Translation of foreign currency transactions
16
3.3.3.
Measurement of assets and liabilities
16
3.3.4.
Distinction between unusual income (loss) and current income (loss)
16
3.3.5.
Earnings per share
16
3.3.14
Tax credits
17
3.3.14.1
Research tax credit
17
3.3.14.2
Competitiveness and employment tax credit
17
     
4.
Notes on balance sheet items
18
4.1.
Goodwill
18
4.2.
Intangible assets (excluding goodwill)
19
4.2.1.
Research and development expenses
20
4.2.2.
Establishment costs
20
4.2.3.
Business assets
20
4.3.
Property, plant and equipment
21
4.4.
Long-term investments
22
4.5.
Inventories and work in progress
23
4.6.
Trade receivables and related accounts
24
 
8

Consolidated Financial Statements – Year ended 31/12/2017


4.7.
Other receivables and accruals
25
4.8.
Cash assets
25
4.9.
Equity
26
4.9.1.
Composition of share capital
26
4.9.2.
Shareholders’ voting rights
26
4.9.3.
Share value as at December 31, 2017
26
4.9.4.
Analysis of consolidated equity
27
4.10.
Analysis of consolidated net income (loss)
28
4.11.
Provisions for risks and expenses
29
4.11.1.
Summary
29
4.11.2.
Retirement and similar benefits
29
4.12.
Loans and financial debts
30
4.12.1.
Nature and maturities of loans and financial debts
30
4.12.2.
Change in loans and financial debts
30
4.13.
Trade and other payables
31
     
5.
Statement of income items
32
5.1.
Sales by company
32
5.2.
Other revenues
32
5.3.
Salaries and benefits
33
5.4.
Depreciation and charges to provisions
33
5.5.
Operating income (loss) by company
34
5.6.
Net financial income (expenses)
34
5.7.
Unusual income (loss)
35
5.8.
Net income (loss) of consolidated companies by company
36
     
6.
Corporate income taxes
37
6.1.
Balance sheet presentation
37
6.2.
Deferred taxes by nature
37
6.3.
Tax losses for which no deferred tax assets are recognized
37
6.4.
Other unrecognized tax credits
38
6.5.
Corporate income tax expense
39
6.6.
Income tax proof
39
     
7.
Other information
40
7.1.
Off-balance sheet commitments
40
7.1.1.
Commitments given
40
7.1.2.
Commitments received
40
7.2.
Segmented reporting
41
7.3.
Related entities
41
7.4.
Management personnel
41
7.4.1.
Compensation awarded to members of administrative and management bodies
41
7.4.2.
Auditors’ fees
41
 
9

Consolidated Financial Statements – Year ended 31/12/2017
 

 

1.
Major events

1.1.
Main events of the period
 
The significant events that occurred during the period are as follows:
 
1.1.1.
Changes in share ownership structure
 
On August 31, 2017, EXFO, a Canadian company, announced through a press release that it entered into an agreement with the founders and Isatis capital to acquire 33.1% of the shares of Astellia SA at €10 per share. In this same press release, they announced that they intended to file a voluntary public tender offer at the same price of €10 for all the remaining shares.
 
This public tender offer was launched on December 15, 2017. On January 26, 2018, the AMF issued the results of this public tender offer. As of that date, EXFO held 88.39% of the shares of Astellia SA.
 
1.1.2.
New loans
 
Astellia SA took out two new loans totalling €1,400,000 to finance its invesments and its innovation.
 
1.1.3.
Spanish subsidiary
 
·
Change in corporate name
 
The corporate name of the company was changed to “Astellia Telecom Spain”.
 
·
Increase in capital and reduction of losses
 
Astellia Telecom Spain increased its capital by €1,500,000 by incorporating the cash advances from its parent company, Astellia SA.
 
Previous losses were eliminated through a reduction of capital. As a result, the company’s capital was €975,000 as at December 31, 2017.
 
·
Write-down of the amount receivable
 
In view of the recapitalization of the Ingénia subsidiary, Astellia SA had written down its amount receivable by €2,150,000 as at December 31, 2016.
 
As at December 31, 2017, Astellia SA has written off its amount receivable (amount of €3,000,000).
 
·
Write-off of shares
 
As at December 31, 2017, the shares of Astellia Telecom Spain were written off, for an amount of €5,750,628.
 
·
Implementation of a cost-plus contract
 
10

Consolidated Financial Statements – Year ended 31/12/2017
 

 
Since January 1, 2017, the relationships between Astellia Telecom Spain and its parent company have been governed by 3 new contracts:

-
A “Distribution and sales services agreement”, which governs the business activities between the two companies.

-
A “Framework services agreement”, which covers the R&D activities and services to customers.

-
A “Management services agreement”, which provides for the billing of management fees to this subsidiary.
 
·
Transfer of ownership
 
As at December 31, 2016, Astellia Telecom Spain had capitalized development expenses related to the Nova Ran 4.0 project. This asset was sold to Astellia SA for €882,900.
 
1.1.4.
Indian subsidiary
 
During 2016, the Company decided to close its Indian subsidiary. As at December 31, 2017, as the net position of Astellia Telecom Pvt was greater than the value of the shares held, these shares were not written down.
 
As at December 31, 2017, the administrative closure was not yet completed, and the last transactions were recorded in the financial statements of Astellia SA.
 
11

Consolidated Financial Statements – Year ended 31/12/2017
 

 

2.
Group’s scope of consolidation


2.1.
Organization chart as at 31/12/2017
 
 
 
2.2.
Consolidated entities
 
The following table presents the entities included in the scope of consolidation.

Company
 
Siren #
 
Head Office
Consolidation
method
2017
 
Consolidation
method
2016
 
%
control
2017
   
%
control
2016
   
%
ownership
2017
   
%
ownership
2016
 
S.A. Astellia
 
428,780,241
 
2 rue Jacqueline Auriol Saint Jacques de la Lande
Parent
 
Parent
   
100
%
   
100
%
   
100
%
   
100
%
Astellia Inc.
 
United States
 
2711 Centerville Road, Suite 400 Wilmington New Castle, Delaware 19808
Full
 
Full
   
100
%
   
100
%
   
100
%
   
100
%
Astellia South Africa (PTY) LTD
 
South Africa
 
Executive City Corner Cross Street and Charmaine Avenue President Ridge Ranburg
Full
 
Full
   
100
%
   
100
%
   
100
%
   
100
%
Astellia Telecom (PYT) LTD
 
India
 
C66 Okhla Phase 1, New Delhi 110020
Full
 
Full
   
95
%
   
95
%
   
95
%
   
95
%
Astellia Md East S.A.L.
 
Lebanon
 
Centre Starco Beyrouth – Lebanon
Full
 
Full
   
100
%
   
100
%
   
100
%
   
100
%
Astellia Telecom Spain
 
Spain
 
C/Ronda Narciso Monturiol, 6. Oficina 113 – B. 46 980 Paterna (Valencia) Spain
Full
 
Full
   
100
%
   
100
%
   
100
%
   
100
%
Astellia Canada Inc.
 
Canada
 
2135 Sherbrooke Street E Montreal (Quebec) H2K 1C2
Full
 
Full
   
100
%
   
100
%
   
100
%
   
100
%
Astellia Afrique AU
 
Morocco
 
Casablanca
Full
 
Full
   
100
%
   
100
%
   
100
%
   
100
%
 
12

Consolidated Financial Statements – Year ended 31/12/2017
 


2.3.
Year-end dates for consolidated companies
 
Companies are consolidated based on their balance sheet as at December 31, 2017, for a period of 12 months, except for Astellia Telecom, whose year end is March 31. Interim statements as at December 31 have been prepared for consolidation purposes.
 
2.4.
Entities excluded from the scope of consolidation
 
No companies have been excluded from the scope of consolidation.
 
13

Consolidated Financial Statements – Year ended 31/12/2017
 

 

3.
Basis of accounting, principles of consolidation, policies and measurement rules

 
3.1.
Basis of accounting
 
The financial statements of Astellia Group have been prepared in accordance with French accounting rules and principles. The provisions of Regulation No. 99.02 of the “Comité de Réglementation Comptable”, approved on June 22, 1999, have been applied since January 1, 2000, as well as those of Regulation CRC 2005-10, dated 26/12/2005, which updated those provisions.
 
The principles and policies applied by Astellia Group are described in sections 3.2 and following.
 
3.2.
Principles of consolidation
 
3.2.1.
Consolidation methods
 
Consolidation is based on the financial statements as at 31/12/2017. All material interests in entities over which the Astellia Group companies exercise, directly or indirectly, exclusive control are consolidated using the full consolidation method.
 
Companies over which joint control is exercised are consolidated using the proportionate consolidation method.
 
Companies over which Astellia Group exercises a significant influence and holds, directly or indirectly, an ownership interest of more than 20% are accounted for under the equity method.
 
All significant transactions between consolidated companies are eliminated.
 
The full consolidation method involves:
 
including in the financial statements of the consolidating entity the financial statement items of the consolidated entities, after any restatements;
allocating equity and net income between the interests of the consolidating entity and the interests of other shareholders or partners, called “non-controlling interests”;
eliminating the transactions and accounts between the fully consolidated entity and the other consolidated entities.
 
The proportionate consolidation method involves:
 
including in the financial statements of the consolidating entity the proportionate share representing its interests in the financial statements of the consolidated entity, after any restatements; no non-controlling interests are therefore recognized;
eliminating the transactions and accounts between the proportionately consolidated entity and the other consolidated entities to the extent of the percentage used to include the proportionately consolidated entity.
 
14

Consolidated Financial Statements – Year ended 31/12/2017
 

 
The equity method involves:
 
replacing the carrying amount of the securities held with the proportionate share of equity, including net income for the year determined using the consolidation rules;
eliminating the integrated internal profits between the equity-accounted entity and the other consolidated entities to the extent of the ownership percentage in the equity-accounted entity.
 
3.2.2.
Elimination of intercompany transactions
 
In accordance with regulations, transactions between consolidated companies and internal income (loss) between these companies were eliminated in the consolidated financial statements.
 
3.2.3.
Translation of foreign companies financial statements
 
As the subsidiaries of SA Astellia are self-sustaining foreign operations, their financial statements have been translated using the current rate method:
 
Balance sheet items are translated into euros using the closing rate;
 
Statement of income items are translated using the average rate for the year;
 
The translation difference obtained is included in consolidated equity, under “Foreign currency translation reserve”. The following table presents a breakdown of that account.
 
Foreign currency translation
reserve
 
Company
Currency
 
Foreign currency
translation reserve
related to equity,
opening balance
   
Change in foreign
currency translation
reserve related to
equity
   
 
Foreign
currency
translation
reserve related
to equity,
ending balance
   
   
Translation
difference
related to net
income (loss)
   
Total foreign
currency
translation
reserve
 
Astellia Inc
USD
   
(459,880
)
   
(43,989
)
   
(503,869
)
   
(18,635
)
   
(522,504
)
Astellia South Africa
ZAR
   
(14,578
)
   
(991
)
   
(15,569
)
   
327
     
(15,242
)
Astellia Telecom
INR
   
3,925
     
(2,100
)
   
,825
     
(13,024
)
   
(11,199
)
Astellia Middle East
USD
   
62,698
     
(34,548
)
   
28,150
     
(67
)
   
28,083
 
Astellia Canada Inc
CAD
   
,144
     
(12,447
)
   
(8,303
)
   
(1,737
)
   
(10,040
)
Astellia Afrique
MAD
   
1,790
     
(6,376
)
   
(4 ,586
)
   
(899
)
   
(5,485
)
Total
     
(401,901
)
   
(100,451
)
   
(502,352
)
   
(34,035
)
   
(536,387
)
 
15

Consolidated Financial Statements – Year ended 31/12/2017
 

 
3.3.
Measurement policies and rules
 
3.3.1.
Application of preferential accounting policies
 
The preferential accounting policies stated in Regulation CRC 99-02 have been applied as follows:
 
Application of preferential accounting policies
YES
NO-N/A
Note
Recognition of finance leases
N/A
N/A
Provisioning of pension and similar benefits
YES
4.12.2
Deferral of issuance costs and repayment premiums for bonds and recognition over the life of the bonds
N/A
N/A
Recognition in net income of translation gains and losses
YES
N/A
Use of the percentage of completion method to recognize partially completed transactions at the reporting date
N/A
N/A
Capitalization of development expenses
YES
4.2.1

3.3.2.
Translation of foreign currency transactions
 
Any transactions denominated in foreign currencies are translated at the exchange rate in effect at the transaction date.
 
At the reporting date, monetary balances denominated in foreign currencies are translated at the closing rate. Exchange differences resulting from such translation and exchange differences resulting from foreign currency transactions, if any, are recognized in net financial income (loss).
 
3.3.3.
Measurement of assets and liabilities
 
Assets and liabilities are measured and recognized at historical cost.
 
A write-down or impairment loss is recognized when fair value is lower than the net carrying amount of non-current assets.
 
3.3.4.
Distinction between unusual income (loss) and current income (loss)
 
Current income (loss) results from the activities in which the Company engages in the normal course of its business and any related activities that it carries out on an ancillary basis or as an extension of its ordinary activities.
 
Unusual income (loss) results from events or transactions that are unusual and distinct from the ordinary activities and are not expected to recur frequently and regularly.
 
3.3.5.
Earnings per share
 
Earnings per share represents consolidated net income (group’s share) divided by the weighted average number of shares of the parent company outstanding during the year (excluding treasury shares deducted from equity).
 
16

Consolidated Financial Statements – Year ended 31/12/2017
 

 
3.3.14
Tax credits
 
3.3.14.1
 Research tax credit
 
The research tax credit (“RTC”) is classified as operating grant in the statement of income.
 
3.3.14.2
 Competitiveness and employment tax credit
 
The 2012 Amending Finance Law No. 2012-1510, dated 29/12/2012, introduced a competitiveness and employment tax credit (“CETC”) effective 01/01/2013. This tax credit represents 6% for compensation paid on or after 2014 that does not exceed 2.5 times the guaranteed minimum wage (“SMIC”).
 
As at December 31, 2017, the CETC recognized in the financial statements of our group amounted to €311,934.
 
In the statement of income, our group elected to recognize the CETC as a reduction of salaries and benefits.
 
The CETC was used to partially finance investments.
 
17

Consolidated Financial Statements – Year ended 31/12/2017
 

 

4.
Notes on balance sheet items

 
4.1.
Goodwill
 
Goodwill relates to the following entity:
 
Company
 
31/12/2016
  Increases   Decreases  
31/12/2017
 
Gross amount (in K€)
                     
Astellia Telecom Spain
   
1,464
             
1,464
 
Total
   
1,464
               
1,464
 
Accumulated amortization
                         
Astellia Telecom Spain
   
1,464
               
1,464
 
Total
   
1,464
               
1,464
 
Net amount
                         
Astellia Telecom Spain
   
0
               
0
 
Total
   
0
               
0
 
 
According to regulations, goodwill represents the difference between:
 
the acquisition cost of equity securities;
 
the proportionate share of the acquiring company in the total value of identified assets and liabilities at acquisition date.
 
Positive goodwill is recognized in non-current assets and amortized over a period that reflects, as reasonably as possible, the assumptions used and the objectives set for the acquisitions. This maximum period is estimated at 20 years.
 
The goodwill related to Astellia Telecom Spain is fully amortized.
 
18

Consolidated Financial Statements – Year ended 31/12/2017
 

 
4.2.
Intangible assets (excluding goodwill)
 
Amounts in K€
 
31/12/2016
   
Increases
   
Decreases
   
Translation
differences
   
Other
changes
   
31/12/2017
 
Gross amounts
                                   
Research and development expenses
   
59,727
     
7,437
     
0
                     
67,164
 
Establishement costs
   
28
                     
(3
)
           
25
 
Concessions, patents, brands
   
2,864
     
27
     
5
                     
2,886
 
Business assets
   
15
                                     
15
 
Other intangible assets
   
4,160
                                     
4,160
 
Advances and deposits paid
                                               
Total
   
66,794
     
7,464
     
5
     
(3
)
           
74,250
 
Accumulated amortization
                                               
Research and development expenses
   
53,000
     
6,759
                     
144
     
59,902
 
Establishement costs
   
28
                     
(3
)
           
25
 
Concessions, patents, brands
   
2,009
     
613
     
5
             
(144
)
   
2,473
 
Business assets
   
15
                                     
15
 
Other intangible assets
   
4,125
     
20
                             
4,145
 
Advances and deposits paid
                                               
Total
   
59,177
     
7,392
     
5
     
(3
)
           
66,561
 
Net amounts
                                               
Research and development expenses
   
6,728
     
678
     
0
             
(144
)
   
7,261
 
Establishement costs
                                               
Concessions, patents, brands
   
854
     
(586
)
   
0
             
144
     
413
 
Business assets
                                               
Other intangible assets
   
35
     
(20
)
                           
15
 
Advances and deposits paid
                                               
     
7,617
     
72
     
0
                     
7,689
 
 
Intangible assets are measured at acquisition value or production value.
 
The amortization methods and periods used are as follows:
 
Intangible assets
Method
Period
Software
Straight line
1 to 3 years
Technical software module
Straigh line
3 to 10 years
 
19

Consolidated Financial Statements – Year ended 31/12/2017
 

 
4.2.1.
Research and development expenses
 
Projects with high probability of technical feasibility and commercial success are capitalized and amortized over 3 years.
 
Projects without such characteristics are expensed.
 
Astellia SA
 
The “Astellia Solution” is a comprehensive development project: development of algorithms for monitoring and analyzing the quality of mobile (software) and physical (hardware) networks.
 
Base year RTC
 
Amount
   
2014
   
2015
   
2016
   
2017
   
To be amortized
 
2012
   
6,441,613
     
2,147,204
                         
2013
   
6,798,037
     
2,266,012
     
2,266,012
                   
2014
   
4,584,692
     
1,528,231
     
1,528,231
     
1,528,231
             
2015
   
5,370,206
             
1,790,069
     
1,790,069
     
1,790,069
       
2016
   
6,062,413
                     
2,020,804
     
2,020,804
     
2,020,804
 
2017
   
7,436,638
                             
2,478,879
     
4,957,759
 
Total    
63,369,859
     
5,941,447
     
5,584,312
     
5,339,104
     
6,289,752
     
6,978,563
 
 
Astellia Telecom Spain
 
Astellia Telecom Spain capitalizes development expenses in its separate financial statements. In consolidation, these capitalized expenses are restated to reflect the application of the group amortization method over a 3-year period.
 
Base year RTC
 
Amount
   
2014
   
2015
   
2016
   
Previous conso.
amortization conso
   
2017
   
To be amortized
 
2012
   
463278
     
154,426
     
77,213
     
0
     
463,278
     
0
     
0
 
2013
   
727459
     
242,486
     
242,486
     
121,243
     
727,459
     
0
     
0
 
2014
   
764439
     
254,813
     
254,813
     
254,813
     
764,439
     
0
     
0
 
2015
   
990191
             
330,064
     
330,064
     
660,127
     
330,064
     
0
 
2016
   
848694
                     
282,898
     
282,898
     
282,898
     
282,898
 
2017
   
0
                             
0
     
0
     
0
 
Total
   
3,794,061
     
651,725
     
904,576
     
989,018
     
2,898,201
     
612,962
     
282,898
 
 
For the first two years, an average date was used for the moment when the product was put into service, which resulted in development expenses being amortized for half of the year of capitalization.
 
4.2.2.
Establishment costs
 
Establishment costs are essentially comprised of costs related to capital increases and expenses incurred for the acquisition of new subsidiaries.
 
4.2.3.
Business assets
 
Business assets recognized in separate financial statements have been amortized in the consolidated financial statements over a period of three years.
 
20

Consolidated Financial Statements – Year ended 31/12/2017
 

 
4.3.
Property, plant and equipment
 
Amounts in K€
 
31/12/2016
   
Increases
    Decreases    
Translation
differences
   
31/12/2017
 
Gross amounts
                             
Land
                             
Leased land
                             
Buildings
   
3
           
3
             
Leased buildings
                                 
Technical facilities, mach. & equip.
   
2,948
     
666
     
348
     
(2
)
   
3,263
 
Leased facilities, mach. & equip.
                                       
Other property, plant and equipment
   
2,807
     
132
     
222
     
(23
)
   
2,694
 
Other leased PP&E
                                       
PP&E in progress
           
26
                     
26
 
Advances and deposits
                                       
Total
   
5,758
     
824
     
573
     
(25
)
   
5,983
 
Accumulated depreciation
                                       
Land
                                       
Leased land
                                       
Buildings
   
3
     
0
     
3
                 
Leased buildings
                                       
Technical facilities, mach. & equip.
   
2,270
     
491
     
348
             
2,413
 
Leased facilities, mach. & equip.
                                       
Other property, plant and equipment
   
1,884
     
281
     
214
     
(20
)
   
1,931
 
Other leased PP&E
                                       
PP&E in progress
                                       
Advances and deposits
                                       
Total
   
4,157
     
772
     
565
     
(20
)
   
4,344
 
Net amounts
                                       
Land
                                       
Leased land
                                       
Buildings
   
0
     
(0
)
   
0
             
(0
)
Leased buildings
                                       
Technical facilities, mach. & equip.
   
678
     
175
             
(2
)
   
850
 
Leased facilities, mach. & equip.
                                       
Other property, plant and equipment
   
923
     
(149
)
   
8
     
(3
)
   
763
 
Other leased PP&E
                                       
PP&E in progress
           
26
                     
26
 
Advances and deposits
                                       
Total
   
1,600
     
52
     
8
     
(5
)
   
1,639
 
 
Property, plant and equipment are measured at acquisition cost, net of rebates, discounts and cash discounts, or at production cost.
 
21

Consolidated Financial Statements – Year ended 31/12/2017
 

 
An impairment loss is recognized when the present value of an asset is lower that its net carrying amount.
 
The depreciation pattern for each item of property, plant and equipment depends on its own use and the economic benefits it provides.
 
The main depreciation methods and periods used are as follows:
 
Property, plant and equipment
Method
Period
Computer hardware
Straight line
3 years
General facilities
Straight line
5 to 10 years
Office and computer equipment
Straight line
3 to 10 years
Internal computer network
Straight line
3 to 5 years
Furniture
Straight line
8 to 10 years

4.4.
Long-term investments
 
Amounts in K€
 
31/12/2016
   
Increases
   
Decreases
   
Translation
differences
   
31/12/2017
 
Gross amounts
                             
Equity securities
   
(0
)
                     
(0
)
Receivables related to equity interests
                                 
Loans
                                 
Other long-term investments
   
447
     
5
     
79
     
(6
)
   
367
 
Equity-accounted securities