Annual Financial Statements for the Operating Period 2011 HELLENIC SEAWAYS Maritime S.A. Annual Financial Statements for the operating period 2011 (01.01.2011 - 31.12.2011) On a consolidated and corporate basis According to the International Financial Reporting Standards (IFRS)
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Annual Financial Statements for the Operating Period 2011
HELLENIC SEAWAYS
Maritime S.A.
Annual Financial Statements for the operating period 2011 (01.01.2011 - 31.12.2011)
On a consolidated and corporate basis
According to the International Financial Reporting Standards (IFRS)
Annual Financial Statements for the Operating Period 2011
I
Table of contents Page
Audit Report of the Independent Chartered Auditor-Accountant.......................................................1
Annual Financial Statements in accordance with the International Financial Reporting Standards (IFRS) for fiscal year 2011 ......................................................................................................................3
Annual Financial Statements for the Operating Period 2011
II
21. Cost of sales....................................................................................................................................30
22. Other operating income .................................................................................................................30
Annual Financial Statements for the Operating Period 2011
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Audit Report of the Independent Chartered Auditor-A ccountant
To the Shareholders of maritime company "HELLENIC SEAWAYS".
Report on the Corporate and Consolidated Financial Statements
We audited the attached corporate and consolidated statements of the Maritime Company "HELLENIC SEAWAYS", which consist by the corporate and consolidated statement of financial position as of December 31st, 2011, the corporate and consolidated statements on total income, equity changes and cash flows for the operating period that ended on the same date, as well as the summary of significant accounting principles and methods and other explanatory information. Management's Responsibility for the Consolidated an d Corporate Financial Statements The management is responsible for the establishment and fair presentation of the corporate and consolidated financial statements, in accordance with the International Financial Reporting Standards, as these are adopted by the European Union, while it is also responsible for the internal safety mechanism, defined by the management as necessary in order to ensure the establishment of financial statements that are free from any material inaccuracies, attributed either to fraud or error. Auditor's Responsibility Our responsibility is to express an opinion on these consolidated and corporate financial statements based on our audit. We conducted our audit in accordance with International Auditing Standards. These standards require compliance on our part with a code of conduct, as well as to design and perform our audit with the scope of obtaining reasonable assurance about whether the corporate and consolidated financial statements are free from material misstatements. The audit involves the performance of procedures in order to acquire auditing evidence about the amounts and notifications contained in the corporate and consolidated financial statements. The procedures selected depend on the auditor's judgment, and include an assessment of risks of material misstatement of the corporate and consolidated financial statements, attributed either to fraud or error. During conduction of such risk assessments, the auditor shall examine the internal safety mechanisms related to the establishment and fair presentation of the corporate and consolidated financial statements of the company, in order to design auditing procedures that are adequate for the circumstances, without however with the intention to express an opinion on the effectiveness of the said internal safety mechanisms of the company. The audit also includes the evaluation of the adequacy of the accounting principles and methods used and the rationality of the accounting assessments made by management, as well as the evaluation of the overall presentation of the corporate and consolidated financial statements. We believe that the audit evidence obtained suffice and are appropriate for the documentation of our auditing opinion.
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Basis for an opinion under reservation Our audit revealed that the consolidated financial statements of the company include, through the global consolidation method, amounts that refer to 7 subsidiaries of the group, one of which is in liquidation and 3 are idle. These 7 subsidiaries are not audited by a chartered auditor accountant. These amounts, on the basis of their financial statements, represent 6.58% of the consolidated assets and 2.62% of the consolidated turnover. Opinion under reservation In our opinion, apart from the eventual consequences of the issue referenced in paragraph "Basis for an opinion under reservation" the corporate and consolidated financial statements attached present fairly, on all material aspects, the financial position of the Anonymous Shipping Company "HELLENIC SEAWAYS" and its subsidiaries as of December 31, 2011 and their financial performances and cash flows for the operating period that ended on the said date, in accordance with the International Financial Reporting Standards, as adopted by the European Union. Point of emphasis We draw your attention to the fact that the tax obligations of the Parent Company and its Subsidiaries for the years that ended on 31.12.2007 up to 31.12.2011 have not been audited by the tax authorities and thus have not been finalized for the relevant operating periods. The Group has not proceeded to an estimate of additional taxes and surcharges, which may be allocated upon a future tax audit, and has not formed a relevant provision for this amount. Thus, we have not acquired reasonable assurance as to the required forecast. In our opinion there is no reservation in relation to this matter. Report on Other Legal and Regulatory Affairs We verified the agreement and correspondence of the content of the Management Report of the Board of Directors with the corporate and consolidated financial statements attached, in the framework of the provisions of articles 43, 108 and 37 of C.L. 2190/1920
Athens, 08.06.2012 The Chartered Auditor Accountant
KONSTANTINOS A. ARAMPATZIS Reg. No. Chartered Auditors-Accountants Association 34351
Associated Chartered Accountants a.e.o.e. member of Crowe Horwath International
Annual Financial Statements for the Operating Period 2011
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Annual Financial Statements in accordance with the International Financial Reporting Standards (IFRS) for fiscal year 2011
It is certified that the attached Financial Statements are those approved by the Board of Directors of the company "HELLENIC SEAWAYS" at the assembly dated June 7, 2012. Ioannis I. Vardinogiannis President of the Board of Directors of HELLENIC SEAWAYS S.A.
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Notes to the annual financial statements for the ye ar 2011 (01/01/2011 - 31/12/2011)
1. General information about the Company and the Gr oup Parent company HELLENIC SEAWAYS SA (from now on the "Company" or "Parent") is an anonymous shipping company with the distinctive name HELLENIC SEAWAYS, which in its international trade is titled HELLENIC SEAWAYS MARITIME SA. The Company's previous name was HELLAS FLYING DOLPHINS MARITIME SA and the name prior to the above was MINOAN FLYING DOLPHINS MARITIME SA, The company evolved from the name change, the change of scope and the change of object of activity of the Company SERRES GREEK MARITIME ENTERPRISES SA (Government Gazette No. 1118/26.2.1999 SAs and LTDs circular). Company's headquarters are located in the municipality of Piraeus (6 Astiggos Street Karaiskaki Square, PO 185 31). The share capital of the Company is divided into 77,615,000 registered shares of nominal value € 2,50 each, which are currently held by more than 2,200 natural and legal persons.
Group HELLENIC SEAWAYS MARITIME S.A. (from now on the "Group"), in addition to the Parent company, includes the following subsidiaries, which are fully controlled (100% participation rate) by the Parent company:
Trade name Parent Participation Percentage Headquarters
Hellenic Seaways Cargo N.E. 100% Greece
Hellenic Seaways Management S.A. 100% Liberia
Trailer Shipping Company Ltd * 100% Cyprus
Easy Cruise Ltd 100% Liberia
Helcat Lines S.A. 100% Marshall Islands
Alpha Ferries Ltd** 100% Liberia
Betta Ferries Ltd** 100% Liberia
Vertino Shipping Company Limited ** 100% Cyprus
* Companies in liquidation ** Idle companies. The Group operates in the passenger shipping industry, providing marine transport to passengers and goods in Greece and abroad. The Parent Company HELLENIC SEAWAYS MARITIME SA operates mainly in the Greek maritime transport exploiting its own passenger - ferries under Greek flag, while subsidiary HELLENIC SEAWAYS CARGO MC operates in the exploitation of privately owned cargo -ferriers of Ro - Ro type under Greek flag on the Greece - Italy line. Foreign company TRAILER SHIPPING COMPANY LTD was established for the operation of ships under foreign flag and after the sale of these vessels it is currently in process of liquidation. Foreign company HELLENIC SEAWAYS MANAGEMENT SA established in Greece according to L. 89/1967 deals with the management of the Group’s ships performing trips abroad. Company EasyCruise Ltd was acquired on July 13, 2009. Company Helcat Lines
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SA was established on August 17, 2009. Companies Alpha Ferries Ltd and Betta Ferries Ltd were established on June 10, 2010. The financial results of the above subsidiaries are included in the consolidated financial statements of the Company using the full consolidation method. The number of employees on December 31, 2011 amounted to 436 people for the Company (of which 313 were employed as crew on ships) and 520 in the Group (Group's vessels crews 377 people).
2. Basis of preparation of the financial statements
2.1 General context The annual corporate and consolidated financial statements dated December 31, 2011 (from now on the "Financial Statements") were prepared in accordance with the International Accounting Standards/International Financial Reporting Standards (from now on IAS/IFRS) as issued by the International Accounting Standards Committee (from now on IASC) and their Interpretation Committee, and adopted by the European Union. The financial statements were prepared in accordance with the principle of going concern and the historical cost principle, as modified by the revaluation of certain assets and liabilities at fair value. It is also noted that the Group has applied IFRS 1 "First time implementation of IFRS" in preparing its financial statements for the year 2007, which were the first prepared according to IFRS, with the transition date for the purpose of IFRS 1 being January 1, 2005.
2.2 New accounting standards, amendments to standar ds and interpretations
2.2.1 Standards and Interpretations that are mandat ory for year 2011
New standards and interpretations
The International Accounting Standards Committee (IASC) and the Interpretations Committee have issued a series of new IFRSs and interpretations that are mandatory for accounting periods beginning on January 1, 2011 or later. The most important new standards and interpretations are set out below: Amendment to IAS 24 - Related Party Notifications Effective for annual periods beginning on or after January 1, 2011. This review refers to the assessment required in order to determine whether the state and companies that are known to be controlled by the state can be considered as a single customer. For this determination, the company should consider the extent to which there is economic interaction between these companies. This amendment is not expected to affect the financial statements of the Group. Amendment to IAS 32 - Classification of share right s issuances Effective for annual periods beginning on or after Monday, February 01, 2010. The amendment refers to the issuance of options rights against a specified amount of foreign currency, which rights were treated by the existing model as derivatives. On the basis of this amendment, in case such rights are issued proportionally to the shareholders of a company, such shareholders holding company participation titles of the same class, and for a specific amount in foreign currency, then, they must be classified as net position elements, regardless of the currency defined for exercising the related right. This amendment is not expected to affect the financial statements of the Group.
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IFRIC 19 - Settlement of liabilities on net positio n Effective for annual periods beginning on or after Thursday, July 01, 2010. This interpretation clarifies the accounting treatment followed in cases of renegotiation of the terms of a commitment between the company and a creditor, where the creditor accepts the company's shares or other net position elements of the company for the partial or total settlement of the liability. This interpretation clarifies the fact that these net position elements are the price we paid for under IAS 39, para. 41 and therefore the financial liability is removed and the net position elements issued are treated as the price payable for the elimination of the financial liability. This interpretation does not apply to the Group. Amendment to IFRIC 14 - Cases of advances when mand atory minimum contributions apply Effective for annual periods beginning on or after January 1, 2011. The purpose of this amendment is to allow companies to recognize certain voluntary prepayments for minimum funding liabilities as assets. This interpretation does not apply to the Group. Moreover, the following standards and interpretations are mandatory for periods beginning on or after January 1, 2012 and the Group shall consider the potential impact of their adoption on its financial statements: Amendment to IAS 12 - Income taxes - Deferred tax Effective for annual periods beginning on or after Sunday, January 01, 2012. The International Accounting Standards Committee issued an amendment to IAS 12 with regard to the method for the calculation of deferred tax on one hand in the cases when the method as per which the company shall retrieve the value of an asset is not clear, and on the other when the asset value retrieval method affects the determination of the taxation basis and tax coefficient. The revised text of IAS 12 specifies that in case that an asset is classified in category "Investments to property" and is valued at fair value, or is classified under "Privately used fixed assets" and is valued with the readjustment method, it can be reasonably assumed that its accounting value shall be retrieved by means of sale and thus for the calculation of deferred tax there must be usage of the respective tax coefficient and the corresponding taxation basis. However, and specifically for the cases of investment to property, the revised standard specifies that the above fair assumption does not apply in case the asset can be amortized and is subject to a business model as per which the company's objective is to materially consume all financial benefits emanating from it and not to retrieve its value through sale. Amendment to IFRS 7 - Notifications - transfers of financial assets Effective for annual periods beginning on or after Monday, July 01, 2013. The amendments will allow users of financial statements to better understand the transfers made between groups of financial assets and the potential impact of any risks that may remain in the financial entity to which assets are transferred. On the basis of the amendment, additional notifications are required if a disproportionate amount of transfer transactions occur at the end of a reporting period. IFRS 9 - Financial means Effective for annual periods beginning on or after Thursday, January 01, 2015. The IASC plans to completely replace IAS 39 "Financial means recognition and valuation" at the end of 2010, which will apply for annual financial periods beginning
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on January 1, 2013. IFRS 9 is the first stage of the overall replacement plan under IAS 39. The basic steps are as follows: 1st stage: Recognition and valuation 2nd stage: Depreciation methodology 3rd stage: Hedging In addition, another scheme deals with matters relating to the suspension of recognition. IFRS 9 aims to reduce complexity in accounting for financial means , providing fewer categories of financial assets. In the new standard, the entity classifies its financial assets at amortized cost or at fair value on the basis of the following: a) the company's business model for managing financial assets, and b) the characteristics of compatible cash flows of financial assets (if it has chosen to designate a financial asset at fair value through profit and loss). The existence of only two categories (amortized cost and fair value) means that only one depreciation model is required in the context of the new standard, thus reducing complexity. Amendment to IAS 1 - Presentation of Financial Stat ements Effective for annual periods beginning on or after Sunday, January 01, 2012. This amendment requires entities to separate the data presented in other comprehensive income into two groups based on whether they are likely to be transferred to operating results or not. IFRS 13 - Measurement of fair value Effective for annual periods beginning on or after Tuesday, January 01, 2013. The standard provides new guidance on measuring fair value and required notifications. The requirements of the standard does not expand the use of fair values but provide clarification on their application, if their use is binding based on other models. IFRS 13 describes the methods of measurement of fair value acceptable and applicable as of the date of implementation of the standard and on. Moreover, the notification have been extended to cover all assets and liabilities measured at fair value, not just the financial ones. IFRS 10 - Consolidated Financial Statements Effective for annual periods beginning on or after Tuesday, January 01, 2013. This standard replaces IAS 27 "Consolidated and Separate Financial Statements" and SIC 12 "Consolidation - Special Purpose Entities." The new standard changes the definition of control, which is the determining factor in whether an entity should be included in the consolidated financial statements of the parent. The standard provides additional guidance to support the determination of control, where it is difficult to estimate. Furthermore, the Group must materialize a series of notifications regarding the companies consolidated as subsidiaries, as well as non-consolidated companies with which shareholder relationship exists. The standard is expected to lead to changes in the structures of conventional groups and the effects can sometimes be significant. IFRS 11 - Joint Activities Effective for annual periods beginning on or after Tuesday, January 01, 2013. The new standard replaces IAS 31 "Interests in Joint Ventures." Under the new principles such agreements are treated more according to the rights and obligations emanating from such an agreement, rather than on the basis of the legal form related to them. The new standard removes the proportionate consolidation for joint ventures
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and abolishes the terminology of IAS 31 for "jointly controlled operations" or "jointly controlled assets". Most joint ventures will involve "jointl activities". IFRS 12 - Notification of participation in other en tities Effective for annual periods beginning on or after Tuesday, January 01, 2013. The standard combines the notification requirements of subsidiaries, joint ventures, associates and non-consolidated entities, as part of a comprehensive notifications standard. It also provides more transparency and will help investors to assess the extent to which the reporting entity has been involved in creating special structures and risks to which it is exposed. Amendment to IAS 27 - Separate financial statements Effective for annual periods beginning on or after Tuesday, January 01, 2013. This standard refers to the consequential changes resulting from the publication of the new IFRS 10. IAS 27 will now treat only separate financial statements, the requirements for which remain essentially unchanged. Amendment to IAS 28 - Investments in associates and joint ventures Effective for annual periods beginning on or after Tuesday, January 01, 2013. The purpose of this revised standard is to identify the accounting principles to be applied due to changes resulting from the publication of IFRS 11. The revised standard continues to define the accounting monitoring mechanisms for the net position method. Amendment to IAS 32 and IFRS 7 - Offsetting financi al assets and liabilities Applicable for the accounting periods beginning on or after January 1, 2014 (IAS 32) and on or after January 1, 2013 (IFRS 7). The amendments to IAS 32 and IFRS 7 relate to offsetting financial assets and liabilities. The amendment to IAS 32 consists of adding instructions on when it is allowed to perform offsetting, while the amendment to IFRS 7 relates to the addition of notifications with regard to this matter. Amendment to IAS 19 - Employee Benefits Effective for annual periods beginning on or after Tuesday, January 01, 2013. Standard amendment eliminates the option regarding the recognition of gains and losses using the «corridor» method. Also, changes arising from revaluation of assets and liabilities arising from defined benefit plans will be presented in the statement of other comprehensive income. There shall also be provision of additional notifications for determined benefits plans, with regard to the features of the determined benefits plans and the risks to which operators are exposed through their participation in such plans. Amendment to IFRS 1 - First time adoption of IFRS, Abolishment of the recognition of financial assets and liabilities ces sation. Applies to annual periods beginning on or after July 1, 2011. The amendment eliminates the use of a fixed transition date (January 1, 2004) and replaces it with the actual date of transition to IFRS. At the same time, it eliminates the requirements for the recognition of transactions performed before the defined transition date. IFRS 1 - First-time (amendment) - Hyper-inflationar y economies. Applies to annual accounting periods beginning on or after July 1, 2011.
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The amendment provides guidance for the reactivation of IFRS after a year hiatus, attributed to the fact that the operational currency of the Entity was the currency of a hyper-inflationary economy. Previous application of the standard is allowed. IFRS 7 - Financial means: Notifications (amendment) - Enhanced requirements for derecognition notifications Applies to annual accounting periods beginning on or after July 1, 2011. This amendment requires additional notifications on financial assets transferred but not de-recognized in order to enable the users of financial statements to understand the relationship with these assets that are not de-recognized, including the related liabilities. Additionally, the amendment requires notifications about the continued involvement in de-recognized assets so that users can estimate the nature of ongoing involvement of the company in de-recognized assets and the risk associated with it. IFRIC 20 - Exposure expenses during the production phase of a mine Applies to annual accounting periods beginning on or after July 1, 2013. This interpretation applies only to exposure expenditure materialized during the process of surface extraction, during the production phase of the mine. The expenses incurred in exposure activities are considered to create two potential benefits a) production of inventories during the current year or/and b) improved access to ore mined in the future (asset by the exposure activity). In case that the costs can not be specifically allocated between stocks produced during the period and the asset arising from the exposure activity, interpretation 20 requires the company to use a basis of allocation based on a measurement unit relevant to the production . Earlier application is permitted. The European Union has not yet adopted this interpretation.
3. Basic Accounting Policies The accounting policies adopted in preparing the financial statements for the year 2011, have been applied consistently and in preparing the financial statements of the previous year 2010 and are as follows:
3.1 Use of Management estimates and judgments
The preparation of financial statements in accordance with IFRS., requires from the Management to proceed to valuation judgments and estimates that affect the assets and liabilities, the amounts of revenues and expenses and the notification of eventual assets and liabilities. These valuation judgments and estimates are based on the most complete information availed by the Management on the Group and the markets in which it operates, as well as its experience in relation to similar transactions or events and they are considered reasonable under the circumstances. Subsequent possible changes to existing conditions are taken into account for the revision, if necessary, of these judgments and estimates. Actual results may differ from these estimates. Critical accounting estimates for the assets of the Company and the Group are those of the useful life and residual value of ships, as they affect significantly the financial statements (see Accounting Policy 3.5). Also, the recoverability of receivables, the assessment of certain balances as doubtful, the formation of projections on the recovery of claims or other contingent liabilities require judgments and estimates that are also important, since they can significantly affect the financial statements.
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3.2 Basis of Consolidation
3.2.1 Subsidiaries The consolidated financial statements of the Company include the financial statements of the Parent and all subsidiaries. These are controlled, directly or indirectly, by the Parent, through the ownership of the majority of their shares (see Note 1) and of the control of their boards. Subsidiaries are fully consolidated as per the total consolidation method, from the date that control on them is acquired and cease to be consolidated when such control ceases. Where necessary, accounting policies of subsidiaries have been changed to be consistent with those adopted by the Parent. In the separate financial statements of the Parent, the subsidiaries are valued at acquisition less any depreciation losses. H Company reviews on a periodic basis (every date of the financial statements), whether there are reasons to depreciate to acquisition costs of subsidiaries.
3.2.2 Inter-company transactions The intercompany (between group companies) transactions, intercompany balances and unrealized gains from intercompany assets transactions are eliminated during preparation of the consolidated financial statements. Unrealised losses are also eliminated unless the transaction provides evidence of depreciation of the asset transferred.
3.3 Conversion of assets to foreign currency The items included in the financial statements are measured at the currency of the primary economic environment in which the Company operates (operational currency), which is Euro. Transactions in foreign currencies are translated into Euro using the exchange rates in effect at the date of such transactions. At the date of the financial statements, monetary assets and liabilities denominated in other currencies are valued at the exchange rates applicable on that date. The gains and losses from foreign exchange differences that arise, are recognized in financial income or expense in profit or loss depending on their nature (debit or credit exchange differences, respectively).
3.4 Intangible assets Intangible assets include: (a) the user licenses of software programs and (b) the cost of patenting the brand of the company. The software licenses and brand are valued at cost, less accumulated depreciation. Depreciation is calculated on a straight line throughout useful life, which is set at three (3) years for software and ten (10) years for the brand.
3.5 Tangible fixed assets Tangible fixed assets are valued in the financial statements at their acquisition cost, plus construction period interest, less accumulated depreciation and any value depreciations and increased with later additions - improvements. The acquisition values of fixed assets on January 1, 2005 (date of transition to IFRS) were identified as follows:
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a) Floating means (vessels) were valued at the deemed cost, according to the provisions of IFRS 1. Deemed cost is the fair value on transition date, which was determined by an independent appraiser and
b) Other tangible assets were valued at their historical acquisition costs. Depreciation of fixed assets is carried out using the straight line method and is charged to the operating period results statement, throughout the estimated useful lives of fixed assets. The Company's management has made estimates of the useful life and residual value of fixed assets, which are as follows: a) Estimated useful life
Category of assets Years Conventional ships (passenger - ro) 35 Fast ships of catamaran type (passenger or passenger - ro) 25 Hydrofoil vessels - hydrofoils (passenger) 35 Ro / Ro type of ships (cargo- ro) 35 Buildings on third party property 9 Machinery
b) Residual value Appointed only for ships at 20% of the acquisition cost. These estimates are reviewed periodically and are adjusted if necessary, but are not expected to differentiate in the next twelve (12) months. Upon sale of a tangible fixed asset, the difference between the selling price and the unamortized value thereof, after deducting any sale expenses is registered in the period results, in the period when the sale takes place, as a gain or loss on the sale of assets.
3.6 Impairment of non current assets The carrying amounts of non-current assets (tangible and intangible assets) are reviewed for impairment whenever events or changes in circumstances indicate that the carrying value (unamortized cost) may not be recoverable. The impairment loss is recognized to the amount per which the carrying amount of the asset exceeds its recoverable value and are recognized in the income statement. The recoverable amount is determined as the higher of net selling value and use value. The net sale amount is the amount that can be received from the sale of an asset in the context of a transaction in which parties are fully aware and proceed willingly, following deduction of any additional direct costs related to asset disposition, while the use value is the net current value of estimated cash flows anticipated from the continuous use of an asset and the income expected from its disposal at the end of its estimated useful life.
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3.7 Inventories Inventories include goods and fuels - oils on board. The acquisition cost includes all costs incurred in order to bring inventories to their present location and condition. At the balance sheet date, inventories are valued at the lower price, between cost and net realizable value. The net realizable value of fuels and lubricants on board ships is their replacement cost.
3.8 Financial Instruments A financial instrument is any contract that creates a financial asset to one entity and a financial liability to another. The Company and the Group avali only non derivative financial instruments which are claims from customers and other claims, assets for sale, cash at hand and equivalents (financial assets data), as well as loan obligations and obligations to suppliers and othe rliabilities (financial liablities data). Non-derivative financial instruments are initially recognized in the financial statements at fair value (which coincides with the transaction costs), adjusted by the direct transaction costs, when the Company and the Group are parties to a transaction of such instruments. A financial asset is de-recognised in the financial statements when the contractual rights of the Company and the Group on the cash flows of that asset expire or when the item is transferred to a third party, without retaining the control or all material benefits or risks associated with it. Purchases and sales of financial assets held during the normal course of activity of the Group companies are registered in the financial statements at the date of the transaction, ie on the date they are committed to buy or sell the asset. A financial liability is de-recognised in the financial statements when the contractual obligations of the Company and the Group arising from it, expire or are canceled.
3.8.1 Receivables from customers / other requiremen ts Receivables from customers and other receivables are measured at the value initially recognized (nominal value which coincides with the fair value), reduced by any provision for non-receivable balances. For this purpose, at each balance sheet date all defaulted or doubtful receivables are assessed in order to determine the necessity of provision for doubtful debts. Any balance definitively characterized as non-receivable is deleted followed by a corresponding decrease in the provision for doubtful debts.
3.8.2 Financial assets available for sale Financial assets available for sale are measured at fair value, which is the stock price at the balance sheet date. The related gains or losses are recognized at fair value reserve in equity until disposed or until determination of a permanent impairment of their value, case upon which the cumulative gain or loss previously recognized in equity is transferred to the income statement.
3.8.3 Cash and cash equivalents Cash and cash equivalents include cash on hand, demand deposits and short term bank deposits up to three months from the balance sheet date.
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Loan liabilities include bank and bond loans. All loans are initially recognized at cost being the fair value of the consideration received, net of the cost for entering the bank loan agreement or the cost of issuance of the bond loan. After initial recognition, loans are valued at unamortized cost using the effective interest method.
3.8.5 Liabilities to suppliers and other liabilitie s Suppliers' and other liabilities include trade and other payables. These are recognized at their nominal amounts considered to be the same as the fair value, unless the effect of time value of money is important.
3.9 Provisions for employee benefits
Liabilities for employee compensation (except the crews of ships) upon retirement, are calculated to the current value of future benefits considered as accrued at the end of the year, based on the recognition of workers' right to benefits during the expected working life. The above obligations are calculated annually based on financial and actuarial assumptions made by an independent assessor and are determined using the actuarial method of valuation of the estimated liability units (projected unit credit method). The related provisions are included in the other expenses of the administrative operation costs and consist of the current value of the benefits rendered accrued during the period, interest on benefits obligations, eventual prior service (experience) costs, and the actuarial profit or loss acknowledged in the operating period. Un-recognised actuarial gains or losses, in case they exceed, during the period, 10% of the estimated benefits provision, are recognized equally in the average remaining period of employment for active employees and are included in the net cost of the retirement year. Regarding the crews of ships, based on existing legislation, these do not accrue remuneration rights due to resignation, redundancy or retirement, and therefore the financial statements do not include such a provision.
3.10 Other provisions / Contingent liabilities and contingent assets Provisions are made when the Company and the Group present current legal or deduced liabilities as a result of past events, their realization is possible through an outflow of resources and the estimate of the related liability amounts can be performed reliably. Provisions are reviewed at each balance sheet date and are adjusted to reflect the current value of the expenditure expected to be required to settle the obligation. Contingent liabilities are not recognized in the financial statements but are notified unless the probability of outflow of resources for the settlement is small. Contingent assets are not recognized in financial statements but they are notified when an inflow of economic benefits is probable.
3.11 Income tax (current and deferred) Under current tax law on vessels (Article 2 L.27/1975), the owners of ships under Greek flag are exempt from income tax on profits from the operation of ships. By the same law, ships are only subject to excise duty, based on the total gross capacity. This tax is considered income tax. Profits from non-shipping activities are taxed under the general provisions on income tax, where under the current provisions rules the tax rate is 20% for the year 2011. The costs for the current income tax, therefore, refers to the current tax on ships under Law 27/1975 and income tax for non-shipping activities.
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The Group and the Company do not form provisions for additional taxes and penalties for fiscal years not yet audited and recognize as income tax expense any tax audit differences at the time of completion of such audit. Deferred income tax is the tax to be paid or recovered in the future for revenues or costs incurred during a year, but are considered taxable income or deductible expenses of future periods. Due to this special tax regime for the domestic Group companies, deferred taxes are not recognized for the Company and the Group.
3.12 Operating leases Leases where the lessor transfers the right to use an asset for an agreed period of time, without however assigning the property risks and benefits are classified as operating leases. Payments made by the lessee under operating leases are recognized as an expense in the income statement over the lease term. The Parent Company and the Group act as lessees under operating leases.
3.13 Revenue Recognition Revenue comprises the value of services and value of sales of goods, net of Value Added Tax, third party deductions, discounts and rebates. The recognition of revenue is performed as follows: Revenue from fares: The services provided refer mainly to passengers and goods sea transport and revenues are the relevant fares from tickets or ship chartering. Revenue from tickets is recognized at the time of travel for which the ticket is issued, while revenue from chartering ships are recognized based on the accrual accounting principle. Revenues from services related to services to be provided in a later year, are recognized in a liability account (deferred income) and are transferred to the revenue of the period in which services are provided. Revenue from sales on board: The proceeds from the sale of goods on board are identified by the delivery of goods, while revenue from services on board ships (under contract with third parties who have been granted the use of catering and stores on the ships) are recognized based on the accrued income principle of accounting in the context of the relevant contracts. Credit interest income (Financial income): Interest income is recognized on a time basis using the effective interest rate basis. Income from dividends of shares available for sale (Financial income): The income from share dividends is recognized in the income statement at the date of allocation approval.
3.14 Expenses Recognition Repairs and maintenance expenses (cost of sales):
Annual Financial Statements for the Operating Period 2011
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Operating costs are recognized in the income statement in accrued basis. Based on this principle, the cost of repairs, maintenance and periodic inspections of ships engines are recognized as follows: a) The costs of repairs and maintenance carried out at the annual immobility of ships are recognized in the period in which they operate, after the end of their immobility, allocated to the periods (quarter, semester, nine months) of the relevant year, according to the realized cruising miles in relation to the budgeted miles. b) The cost of periodic inspections of ships engines made at regular intervals (three to six years depending on the specifications of the manufacturers in combination with the hours of operation) are recognized in the respective years based on actual hours of operation every year. Debit interest expenses (Financial expenses): Interest expense is recognized on a time basis using the effective interest rate basis and includes interest on short and long term loans. Debit interest expenses, when loans are directly related to the acquisition or construction of fixed assets and up to the completion of the construction of such fixed asset, are recognized in the acquisition costs of such fixed asset.
Annual Financial Statements for the Operating Period 2011
20
4. Intangible and tangible fixed assets
The analysis and transactions of intangible and tangible fixed assets for the Group and Company for the years 2010 - 2011 is as follows:INTANGIBLE AND TANGIBLE FIXED ASSETS
Group Vessels MachineryPassenger & other
vehicles
Furniture & other
equipmentIntangible assets Total
Acquisition value 01.01.10 432.750 69 29 4.280 2.301 439.429
Period additions 36.852 0 0 303 49 37.204
Period reductions (33.094) 0 0 (51) (50) (33.195)
Acquisition value 31.12.10 436.508 69 29 4.532 2.300 443.438
Period additions 58 6 64
Period reductions (12.300) (129) (20) (12.449)
Period depreciation (3.000) (3.000)
Acquisition value 31.12.11 421.208 69 29 4.461 2.286 428.053
Unamortized value 31.12.10 337.654 1 0 614 66 338.335
Unamortized value 31.12.10 312.364 0 0 483 21 312.868
HELLENIC SEAWAYS S.A. Amounts expressed in thousands Euros unless otherwise
stated
Annual Financial Statements for the Operating Period 2011
21
Reductions in 2011 concerning the acquisition value and depreciations relate to the sales vessels "HighSpeed", "Flying Dolphin II", "Flying Dolphin IV", "Flying Dolphin XV" and "Flying Dolphin XXI" which were completed within the operating period ending as above. The total price of these sales amounted to € 4.263 thousand While the result of sales amounted cumulatively to a loss of € 4.154 thousand and is included in "Results from investment activities". The Group proceeds to the valuation of the ships on the balance sheet date. To determine the current values of the ships, there is consideration of the assessments performed by independent experts firms. On the basis of the relevant valuations on 31/12/2011, the current asset values of the Group amounted to a total of € 348.708 thousand, while the book value before impairment amounted to € 335.310 thousand. In application of the provisions of IAS 36, there was application of € 3.000 thousand depreciation on certain ships whose net book value at the end of year 2011, was less than their current value. The amount of impairment was entered in the investment activities results of the total revenues statement for the operating period 1/1-31/12/2011. On certain Company ships there has been registration of naval mortgages, amounting to € 275.472 thousand, to ensure long-term debt obligations of the Company amounting on 31/12/2011 to € 154.945 thousand
5. Investments in subsidiaries
The Parent's interest in subsidiaries and the respective participation rates are referenced in Note 1. The subsidiary participation values included in the Company's financial statements are as follows:
31.12.11 31.12.10
Hellenic Seaways Cargo N.E. 15.500 17.500
Hellenic Seaways Management S.A. 0 0
Trailer Shipping Company Ltd 0 0
Easy Cruise Ltd 10.698 12.198
Helcat Lines S.A. 5.745 5.745
Alpha Ferries Ltd 0 0
Betta Ferries Ltd 0 0
Vertino Shipping Company Limited 0
Total 31.943 35.443
Investment in subsidiaries
Company
During operating period 2011 there was no change in the participation rates of the Company in subsidiaries. The value of participation in subsidiaries in the financial statements of the Parent company on 31/12/2011 amounts to € 31.943 thousand euros, reduced per € 3.500 thousand compared to 31.12.2010, due to the depreciation of the value of subsidiaries "Hellenic Seaways Cargo MC " (€ 2,000 thousand) and "EasyCruise Ltd." (€ 1.500 thousand). The Company's management believes that the depreciated value of these subsidiaries represent the fair value on 31/12/2011. The impairment loss is included in the results from investing activities.
HELLENIC SEAWAYS S.A. Amounts expressed in thousands Euros unless otherwise
stated
Annual Financial Statements for the Operating Period 2011
22
6. Other non-current assets
Other non-current assets of the Group and the Company relate to rent guarantees, PPC, PPA, etc.
31.12.11 31.12.10 31.12.11 31.12.10
Other non current assets 151 165 148 162
Total 151 165 148 162
Group Company
7. Inventories The inventories of both the Group and Parent refer mainly to fuel and lubricants. The analysis of the stock of the Company and the Group is as follows:
31.12.11 31.12.10 31.12.11 31.12.10
Merchandise 222 59 217 55
Fuel and lubricants 2.787 1.845 1.692 1.158
Total 3.009 1.904 1.910 1.213
STOCKS
Group Company
The Group and company inventories are not subject to liens and there was no cases of value depreciation.
8. Receivables from customers Receivables from customers for both the Group and the Parent refer to commercial shipping receivables from collaborating agencies, travel agencies and transport companies, ticket issuing and waybills. The above receivables of the Group and Company analyze as follows:
HELLENIC SEAWAYS S.A. Amounts expressed in thousands Euros unless otherwise
stated
Annual Financial Statements for the Operating Period 2011
23
31.12.11 31.12.10 31.12.11 31.12.10
Customer balances 28.669 33.175 21.514 27.081
Cheques receivable 2.618 7.383 1.973 6.393
Minus: Doubtful claims
provisions (9.159) (9.044) (5.955) (6.468)
Total 22.128 31.514 17.532 27.006
CUSTOMER RECEIVABLES
Group Company
The fair values of the above receivables are identified with their respective book values. Similarly, the maximum exposure to credit risk without taking into account the guarantees received, does not differ from the carrying value of receivables. The formation of a provision for the depreciation of bad debts from customers receivables for the Group and Company during the years 2010 - 2011 is as follows:
Group Company
Balance 01.01.10 6.813 5.901
Provisions for the period 2.231 567
Provisions reversal due to collection of
doubtful claims 0 0
Balance 31.12.10 9.044 6.468
Provisions for the period 763 135
Provisions reversal due to collection of
doubtful claims (200) (200)
Provisions reversal due to settlement(448) (448)
Balance 31.12.11 9.159 5.955 The provision formed is deemed sufficient to cover potential non-recovery of claims. In order to secure claims from customers the following securities were received: The Group The Company 31.12.11 31.12.10 31.12.11 31.12.10 Letters of guarantee 2,668 3,187 2,273 2,792 Guaranteed cheques 12,028 12,354 9,118 9,309 Total 14,696 15,541 11,391 12,101
9. Other receivables and other current assets
HELLENIC SEAWAYS S.A. Amounts expressed in thousands Euros unless otherwise
stated
Annual Financial Statements for the Operating Period 2011
24
Other receivables and other current assets of the Group and Company for the years 2010 - 2011, analyze as follows:
The deferred costs fund for the period 31.12.2011 of the Group consists of: i) Repairs and maintenance costs amounting to € 543 thousand ii) vessel premiums amounting to € 987 thousand iii) overheads amounting to € 44 thousand to be charged to the period 2012 . All these claims are short-term maturities and fair values coincide with the corresponding book values. Similarly, the maximum exposure to credit risk of the other claims does not differ from the carrying amounts of those claims. The formation of depreciation provisions for doubtful receivables related to the other claims of the Group and Company during the years 2010 - 2011 is as follows:
Group Company
Balance 01.01.10 7.692 7.692
Provisions for the period 0 0
Provisions reversal 0 0
Balance 31.12.10 7.692 7.692
Provisions for the period 0 0
Provisions reversal 0 0
Balance 31.12.11 7.692 7.692 The provision formed is deemed sufficient to cover potential non-recovery of the specific claims.
10. Financial assets available for sale
HELLENIC SEAWAYS S.A. Amounts expressed in thousands Euros unless otherwise
stated
Annual Financial Statements for the Operating Period 2011
25
On 31.12.2011 there were no financial assets available for sale. The Company held 11,000 shares of the company "Maritime Company of Lesvos SA", whose value was null.
11. Cash and cash equivalents The analysis of cash and cash equivalents of the Group and Company for the years 2010 - 2011 is as follows:
31.12.11 31.12.10 31.12.11 31.12.10
Cash at hand 21 14 18 13
Bank deposits 2.017 2.544 1.878 2.099
Total 2.038 2.558 1.896 2.112
Cash and cash equivalents
Group Company
12. Share capital and premium The share capital of the Parent amounted to € 194.038 thousand, divided into 77,615,000 common registered shares of nominal value € 2,50 each. All shares of Parent company provide equal rights in receiving dividends and each share represents one vote at the general assembly of the shareholders of the Parent. The premium was formed during the increases of the share capital of the Parent, with shares issuance value greater than the nominal one. After capitalization of the premium difference, which occurred prior to 2005, this account amounted to EUR € 9.376 thousand
13. Other reserves The other reserves for the Group and the Company for the years 2010 - 2011, analyze as follows:
31.12.11 31.12.10 31.12.11 31.12.10
Regular reserve 2.700 2.700 2.700 2.700
Reserves at fair value (13) (13) (13) (13)
Total 2.687 2.687 2.687 2.687
Other reserves
Group Company
Regular reserve : Refers to the mandatory pre-distribution deduction of 5% per year from the net profits of the Parent company, as provided for by C.L. 2190/1920, until the amount reaches one third of the share capital. Reserves at fair value: It involves loss of the trading portfolio valuation of the shares of "NEL SA", held by the Company on 31/12/2011, which is deducted from the remaining reserves.
14. Results carried forward
HELLENIC SEAWAYS S.A. Amounts expressed in thousands Euros unless otherwise
stated
Annual Financial Statements for the Operating Period 2011
26
The retained earnings of the Group and Company for the years 2010 - 2011 are as follows:
31.12.11 31.12.10 31.12.11 31.12.10
Previous operating periods result
balance (3.172) (29.066) 6.304 24.806
Operating period profit / (loss) balance
carried forward (29.523) 25.894 (21.818) (18.501)
Total (32.695) (3.172) (15.514) 6.305
Results carried forward
Group Company
Retained earnings of the company include an amount of € 2.513 thousand, arising from the revaluation of a ship owned by the Group, which shall be retained in the said account, as long as the ship belongs to the Group.
15. Long-term loan liabilities The long-term debenture loans of the Group and Company for the years 2010 - 2011 are as follows:
31.12.11 31.12.10 31.12.11 31.12.10
Bond loans 134.835 135.809 134.835 135.809
Minus: Short term part of bond loans(23.085) (22.257) (23.085) (22.257)
Total 111.750 113.551 111.750 113.551
Group Company
During period 2007 the Company issued two bonds used for financing its investment program and to refinance its oldest bank loans. The first loan (whose bondholders are represented by the National Bank of Greece) amounted to € 154.000 thousand while the second loan (whose bondholders are represented by the AEGEAN BALTIC BANK SA) amounted to € 23.284 thousand Both have a ten-year, and are subject to floating interest rate (Euribor), plus a margin. On 1/11/2010 there was issuance of a bond loan with PROTON BANK amounting to € 10.000 thousand for a term of three years. The evolution of payment of the above long-term capital loan obligations is as follows:
Group Company
Payments within the next year 23.085 23.085
Payments between 2 and 5 years 66.079 66.079
Payments over 5 years 45.671 45.671
HELLENIC SEAWAYS S.A. Amounts expressed in thousands Euros unless otherwise
stated
Annual Financial Statements for the Operating Period 2011
27
The management of the parent company after negotiations with banks ETE (in the capacity of bondholders representative), Aegean Baltic Bank and PROTON BANK transferred its maturities for the years 2010 and 2011 in subsequent years. In order to secure the above loans, there has been registration of naval mortgages on certain ships of the Company amounting to € 272.472 thousand
16. Provisions for employee benefits and other prov isions The transactions of the liability for employee compensation, due to retirement is as follows:
31.12.11 31.12.10 31.12.11 31.12.10
Balances at the beginning of the
period1.178 1.117 1.097 1.049
Additional provisions for the period 168 61 152 48
Balances at the end of the period 1.346 1.178 1.249 1.097
Provisions for employee benefits
Group Company
Provisions recognized during the operating period are included in other expenses of operating expenses and distribution expenses. The above accumulated provision refers to the Group employees, with the exception of vessel crews, for which current legislation states that they do not accumulate remuneration rights in case of removal due to redundancy or retirement. These obligations of the Group and the Company (see Note 3.9) were determined based on an actuarial valuation by independent actuaries. The principal actuarial assumptions of this study are as follows: Discount rate : 4.4% on 31.12.2010 Mean annual inflation : 2 % Average annual payroll increase : 4 % Expected average of remaining Labor life on 31.12.2010 : 15.42 years The Management of the Company and the Group believes that this provision for sea-laborers requirements suffices to cover the amounts of any charges that are expected to occur (see Note 32.1 (g)). Other provisions for the Group and the Company amounting to € 140 thousand refer to projections for sea-laborers claims. For the closing year there was formation of projections amounting to € 60 thousand , Included in the payroll and other crew expenses account of the Cost of sales (see Note 21) and in the Provisions for doubtful claims depreciation account of Other operating expenses (see note25).
17. Suppliers and other liabilities Suppliers and other liabilities of the Group and Company for the years 2010 - 2011 are as follows:
HELLENIC SEAWAYS S.A. Amounts expressed in thousands Euros unless otherwise
stated
Annual Financial Statements for the Operating Period 2011
28
31.12.11 31.12.10 31.12.11 31.12.10
Suppliers balances 20.144 27.365 15.135 22.002
Cheques payable 2.975 8.696 2.873 7.363
Customer down payments 544 2.883 494 2.870
Tax-duties liabilities 2.474 3.092 2.143 2.778
Liabilities to social security funds 1.851 1.761 1.715 1.680
Dividends payable 640 697 640 697
Various creditors 5.014 3.684 4.274 3.259
Liabilities to related companies 0 0 526 1.769
Total 33.642 48.179 27.799 42.417
Suppliers and other liabilities
Group Company
The fair values of the above liabilities are identified with their respective book values. The obligations to suppliers, are on average repayable within two months as of the balance sheet date.
18. Short-term liabilities to banks
Short-term bank liabilities (including the short term portion of long term loans) for the Group and Company and for the years 2010 to 2011, analyze as follows:
31.12.11 31.12.10 31.12.11 31.12.10
Short term part of bond loans 23.085 22.257 23.085 22.257
Short term bank liabilities 20.110 18.544 20.110 18.544
Total 43.195 40.801 43.195 40.801
Short term bank liabilities
Group Company
Short-term bank financing was received and used as working capital.
19. Accrued expenses and deferred income The accrued expenses and deferred income of the Group and Company for the years 2010 - 2011 are as follows:
HELLENIC SEAWAYS S.A. Amounts expressed in thousands Euros unless otherwise
stated
Annual Financial Statements for the Operating Period 2011
29
31.12.11 31.12.10 31.12.11 31.12.10
Next periods income 524 437 524 437
Accrued operating period
expenses4.690 967 4.552 516
Total 5.214 1.405 5.076 953
Accrued expenses and income of next periods
Group Company
20. Turnover (sales) The turnover of the Group and Company for the years 2010 - 2011 is analyzed as follows:
01.01.11
31.12.11
01.01.10
31.12.10
01.01.11
31.12.11
01.01.10
31.12.10
Income from fares 142.641 144.821 127.400 126.467
Income from sales on board 1.031 6.249 1.018 6.231
Other income 646 2.324 628 2.139
Total 144.318 153.394 129.046 134.837
Turnover (sales)
Group Company
HELLENIC SEAWAYS S.A. Amounts expressed in thousands Euros unless otherwise
stated
Annual Financial Statements for the Operating Period 2011
30
21. Cost of sales The cost of sales for the Group and Company for the years 2010 - 2011 is analyzed as follows:
01.01.11
31.12.11
01.01.10
31.12.10
01.01.11
31.12.11
01.01.10
31.12.10
Payroll and other crew expenses 33.217 37.442 30.222 35.644
Fuel and lubricants 59.501 57.889 48.353 47.031
Repairs, naintenance, spare parts and
technicians payroll 10.781 17.931 9.442 15.298
Port expenses 4.040 4.186 2.408 2.714
Premiums 4.425 4.227 3.528 3.622
Overheads 8.993 9.641 6.292 7.263
Amortizations 17.870 17.833 13.960 12.476
Total 138.828 149.149 114.206 124.048
Cost of sales
Group Company
22. Other operating income The other operating income for the Group and Company for the years 2010 - 2011 analyze as follows:
01.01.11
31.12.11
01.01.10
31.12.10
01.01.11
31.12.11
01.01.10
31.12.10
Commission from third party rights on fares357 465 357 348
Subsidies and financing income 393 8 393 8
Other income 2.390 1.640 1.634 713
Total 3.140 2.113 2.384 1.068
Other income
Group Company
HELLENIC SEAWAYS S.A. Amounts expressed in thousands Euros unless otherwise
stated
Annual Financial Statements for the Operating Period 2011
31
23. Administrative expenses The administrative expenses of the Group and Company for the years 2010 - 2011 analyze as follows:
01.01.11
31.12.11
01.01.10
31.12.10
01.01.11
31.12.11
01.01.10
31.12.10
Payroll and other personnel expenses 5.758 6.020 5.255 5.038
Fees and third party expenses 1.528 1.463 1.292 1.214
Other expenses 1.441 1.515 1.381 1.434
Amortizations 91 98 91 82
Total 8.818 9.095 8.019 7.768
Administrative expenses
Group Company
24. Distribution Costs The distribution costs for the Group and Company for the years 2010 - 2011 analyze as follows:
01.01.11
31.12.11
01.01.10
31.12.10
01.01.11
31.12.11
01.01.10
31.12.10
Payroll and other personnel expenses 2.233 2.591 1.820 1.981
Third party fees and expenses 89 130 53 130
Sales commissions 7.629 8.080 7.104 7.560
Sales advertizing and promotion expenses358 1.393 358 1.305
Other expenses 337 392 253 346
Provisions for the reduction of doubtful
claims from customers 250 866 46 14
Amortizations 52 133 35 116
Total 10.948 13.586 9.669 11.452
Group Company
HELLENIC SEAWAYS S.A. Amounts expressed in thousands Euros unless otherwise
stated
Annual Financial Statements for the Operating Period 2011
32
25. Other operating expenses The other operating expenses for the Group and Company for the years 2010 - 2011 analyze as follows:
01.01.11
31.12.11
01.01.10
31.12.10
01.01.11
31.12.11
01.01.10
31.12.10
Provisions for the depreciation of doubtful claims 517 1.324 139 567
Crew back payment provisions 504 0 487 0
Other expenses 200 1.611 128 289
Total 1.221 2.936 754 856
26. Financial income The financial income of the Group and Company for the years 2010 - 2011 analyze as follows:
01.01.11
31.12.11
01.01.10
31.12.10
01.01.11
31.12.11
01.01.10
31.12.10
Credit interest 130 94 130 92
Credit exchange rate differences 142 308 93 197
Total 272 402 223 289
Group Company
27. Financial expenses The financial expenses of the Group and Company for the years 2010 - 2011 analyze as follows:
01.01.11
31.12.11
01.01.10
31.12.010
01.01.11
31.12.11
01.01.10
31.12.10
Debit interest 9.566 3.856 9.566 3.842
Other financial expenses 425 380 353 359
Debit exchange rate differences 147 380 113 222
Total 10.138 4.616 10.032 4.423
Group Company
Other financial expenses include bank commissions and costs for the issuance of letters of guarantee and the clearance of sales through credit cards as well as loan expenses related
HELLENIC SEAWAYS S.A. Amounts expressed in thousands Euros unless otherwise
stated
Annual Financial Statements for the Operating Period 2011
33
primarily to the annual depreciation of loan issuance expenses (or bond loans issuance expenses) calculated using the standard amortization method, during the loan terms.
28. Results from investing activities
The results from investing activities of the Group and Company for the years 2010 - 2011 analyze as follows:
Results from investing activities
The Group The Company
01.01.11 01.01.10 01.01.11 01.01.10
31.12.11 31.12.10 31.12.11 31.12.10 Profit / (loss) from the sale of assets (4,159) (4,042) (4,159) (4,616) Vessels depreciation losses (3,000) 0 (3,000) 0 Participations depreciation losses 0 0 (3,500) 0
(7,159) (4,042) (10,659) (4,616) During the operating period, vessels Highspeed 1 and Flying Dolphins III, IV, XV, XXI were sold resulting in a cumulative loss of € 4.154 thousand which is included in the profits / losses from the sale of assets. Furthermore, based on assessment of the management, the examination of vessels value depreciation and investments to subsidiaries of the Parent company, revealed the need to proceed to a depreciation amounting to € 3 million and € 3,5 million respectively.
29. Income Taxes The Parent and its subsidiaries are not subject to income tax on profits arising from the operation of their vessels, but are subject to tax under the gross tonnage of ships according to L.27/1975 and income tax for non- shipping activities (see Note 3.11). The income tax shown in the income statements of the Group and the Company for the years 2010 and 2011 is analyzed as follows:
All Group companies have been audited by tax authorities up to and including year 2006. The tax audit differences that emerged, were recognized in year 2007.
HELLENIC SEAWAYS S.A. Amounts expressed in thousands Euros unless otherwise
stated
Annual Financial Statements for the Operating Period 2011
34
30. Results per share after taxation The results per share after taxation are calculated by dividing after application of taxation of the results attributable to shareholders of the parent by the weighted number of shares outstanding during the operating period. For the years 2010 - 2011, these analyze as follows:
01.01.11
31.12.11
01.01.10
31.12.10
01.01.11
31.12.11
01.01.10
31.12.10
Profit / (loss) after taxation attributable to Parent
shareholders (29.523) (29.065) (21.818) (18.501)
Weighted number of shares (pcs.) 77.615.000 77.615.000 77.615.000 77.615.000
Basic profit / (loss) per share, after taxation, in € (0,3804) (0,3745) (0,2811) (0,2384)
Group Company
31. Dividends According to the legislation on societes anonymes (Codified Law 2190/1920), the companies are required to distribute each year a first dividend, which corresponds to a minimum of 35% of profits after taxation and following deduction of the statutory reserve. The Regular General Assembly dated May 8, 2011 decided not to distribute dividends for the year 2010. For the fiscal year 2011 due to the negative results of the Company there is no dividend distribution.
32. Contingent liabilities and contingent assets
32.1 Contingent liabilities There are no pending litigation, or arbitration or other obligations against the Company and the Group which could have significant impact on their economic situation, with the exception of those mentioned below: (a) 3 pending law suits by companies owned by Mr Agapitos relating to a security given for the price of the share of the Company, issued to the benefit of the persons registered in the share capital increase, during transfer of his ships to the Company in December 1999, these were rejected at first degree. The Company has been vindicated in similar cases by virtue of Supreme Court decisions. (b) Company Rabbit Company S.A. (beneficiary Kon. Agapitos) has brought an action against the Company for a claim amounting to € 5,9 million from alleged non-delivery of shares to that company during the share capital increase performed in 1999. The action was dismissed at first degree and the other party brought an appeal against the rejecting decision, the hearing has been adjourned. (c) Company European Maritime Agencies Ltd (ETA) has filed three lawsuits against the Company for claims amounting to a total of € 4,6 million with regard to the alleged ownership of the seats reservation program (MINOWIDE) used by the Company during years 2000 to 2001. A counter action of the Company against ETA for the same matter is also pending. The Company has not formed a relevant provision, as it estimates to be vindicated in the courts.
HELLENIC SEAWAYS S.A. Amounts expressed in thousands Euros unless otherwise
stated
Annual Financial Statements for the Operating Period 2011
35
(d) The Maritime employment agency (GENE) has imposed to the Company fines amounting to a total of € 1,56 million with regard to the non-manning of vessels during winter season of years 1999-2000. The Company has appealed against all of these decisions. Such an imposition of fine amounting to € 0.28 million has been definitively canceled and there is a pending appeal of NAT before the State Council (SC), eight (8) other fines amounting to a total of € 0.82 millions were canceled by SC decisions, while before the same court there are still pending five (5) similar cases of fines imposition amounting to a total of € 0.70 millions. Part of this amount, amounting to € 0.25 million has been revoked at an earlier stage by decisions of GENE itself. The Company estimates that it will be vindicated by the SC for the above cases and shall be reimbursement with the amount of € 0,46 million already paid for them (the amounts paid are included in the said total amount of fines). (e) Through decision No. 210/111/2002 of the Competition Commission there was imposition of a fine against the Company amounting to € 1,8 million with regard to the non-disclosure and realization of business concentration in the coastal shipping industry in 1999. The Company appealed against that decision to the Admin. Court of Appeal, which reduced the fine to € 0.9 million, amount which the Company paid (plus interest € 0.15 million). Against this decision, there has been filing of opposing appeals before the SC by the Company and the Greek government, which are pending. The Company has not formed a relevant provision, as it estimates that there will be no further burden by the decision of the State Council. (f) The Port Fund Authority of Corinth has confirmed alleged debts against Group companies amounting to a total of € 0.79 million for vehicles passage fees related to the port of Corinth. Against such confirmations the group has appealed to the Admin. Court of First Instance of Corinth, the hearing of these cases has not yet been determined. The Company has not formed a relevant provision, as it estimates to be vindicated by the courts. (g) There are pending actions against Group companies for sea-laborer claims amounting to a total of € 1.3 million. As a standard practice, the Group forms a provision on the basis of the estimates of the Legal Consultants handling these cases with regard to the amount of the final charges per case, considering that numerous court decisions issued in the past for similar cases adjudicate amounts significantly lower than those requested. For this reason, the Group has formed a provision in its balance sheet for an amount of € 0.14 million for the above claims and estimates that this amount suffices to cover the cost that may result from these actions. Moreover, on 31.12.2011 there are also in force Bank letters of credit for the assurance of Company liabilities arising from ordinary activities (issued to Port Funds, Piraeus Port Authority, Navy Retirement Fund, etc. ), which amount to 1782 thousand.
32.2 Contingent assets The Company has filed an action against the Greek government for the return of outstanding amount of € 6.6 million arising from discounts applied to the transportation of certain passenger categories, imposed by Ministerial decision for the year 2003. The same ministerial decision provisioned the compensation of the Company. The hearing of this action has not been scheduled yet.
HELLENIC SEAWAYS S.A. Amounts expressed in thousands Euros unless otherwise
stated
Annual Financial Statements for the Operating Period 2011
36
33. Transactions with related parties
33.1 Receivables - Payables to related parties The balances (assets / liabilities) with related parties as defined by IAS 24, during the balance sheet dates are as follows:
31.12.11 31.12.10 31.12.11 31.12.10
Receivables
Receivables from subsidiaries 0 0 10.604 2.976
Receivables from other affiliated parties 13.199 16.120 13.199 16.120
Total 13.199 16.120 23.803 19.096
Liabilities
Liabilities to subsidiaries 0 0 526 1.769
Liabilities to other affiliated parties 332 57 332 57
Liabilities to BoD members and Managerial Staff 41 0 59 0
Total 373 57 917 1826
Group Company
33.2 Purchases - sales to related parties Purchases and sales to related parties as defined by IAS 24, for the years 2010 -2011 are as follows:
01.01.11
31.12.11
01.01.10
31.12.10
01.01.11
31.12.11
01.01.10
31.12.10
Purchases
Purchase of goods and services from other affiliated
parties 726 394 726 1.235
Sales
Sales of goods and services to subsidiaries 0 0 4.799 4.815
Sales of goods and services to other affiliated parties10.840 7.544 10.840 7.544
Total 10.840 7.544 15.639 12.359
Group Company
The transactions between group companies were invoiced as per standard market terms.
HELLENIC SEAWAYS S.A. Amounts expressed in thousands Euros unless otherwise
stated
Annual Financial Statements for the Operating Period 2011
37
33.3 Remuneration of Board of Directors and key man agement personnel The gross fees and allowances of Board members and key executives of the Group and Company for the years 2010 - 2011 are as follows:
01.01.11
31.12.11
01.01.10
31.12.10
01.01.11
31.12.11
01.01.10
31.12.10
Fees and remunerations to members of the Board of
Directors 505 507 505 507
Fees to key executive personnel 532 792 415 675
Total 1.037 1.299 920 1.182
Group Company
34. Financial Risk Management The Company and the Group is exposed to financial risks, including credit risk, liquidity risk and market risk (interest rate fluctuations, exchange rates and fuel prices). For this reason, the Management of the Company and the Group seeks to mitigate these risks through a risk management program. Furthermore, the Management implements policies of capital risk management in order to ensure the smooth operation of the Company and the Group in the future and ensure a satisfactory dividend yield for the shareholders. This note presents information on the report of the Company and the Group for each one of the above risks as well as the objectives, policies and procedures implemented by the management to measure and manage them.
34.1 Credit risk The Company and the Group believe that credit risk is low because, with regard to maritime, there is adequate dispersion of receivables from customers. Additionally, the Management apply strict credit control procedures, which include determination of a particular credit limit and payment terms per customer, while there have been also received letters of bank guarantees, as collateral for major claims. With regard to ship chartering, claims present increased concentration, however, credit risk is low as the greatest claim (60% of Group Customer claims), relates to the affiliated companies ΑΝΕΚ and AIGAION PELAGOS, with which the Company, following negotiations entered an agreement for the settlement of the debt, including interest charges.
34.2 Liquidity Risk The liquidity risk, due to the decline in finances and the severe cuts in bank lending possibilities, have increased significantly compared to previous years. To avoid the case of lack of sufficient liquidity, the Management ensures sufficient bank credit availability in order to provide for emergencies at times of low liquidity. In all cases, however, it cannot be excluded the possibility of violation of certain term or terms of the loan contracts of the Group, a fact which could result in substantially negative impact on business, the operating results, cash flows and financial position of the Group. In this context, in 2011 it was agreed with the creditor banks to rearrange the repayment terms for loans, transferring the payable amortizations to a later time.
HELLENIC SEAWAYS S.A. Amounts expressed in thousands Euros unless otherwise
stated
Annual Financial Statements for the Operating Period 2011
38
To strengthen the capital of the Group, there are examined various measures such as selling assets, the reduction of operating costs and the divestiture of unprofitable lines.
34.3 Risk of market conditions The long and short term loans of the Group are in Euros at Euribor floating rate plus margin. Accordingly, the Group is exposed to interest rate fluctuation risk, because in case of interest rate increase, the Group shall incur higher interest charges. Indicatively, an interest rate change of 1% on an annual basis would affect the results and equity of the Group per € 1.5 million The Company and the Group are exposed to the fuel prices increase risk, given the significant contribution of fuel costs in operating costs. An increase or decrease of 1% on the price of fuel annually would influence the results and equity of the Group per € 0.6 million. Consequently, any increase in fuel prices is expected to bring substantially adverse effects on financial results, cash flows and financial position of the Group.
34.4 Capital management The target of the Company and the Group concerning capital management is to safeguard the going concer so as to ensure adequate returns for shareholders and benefits to other parties, relating to their activities. In order to maintain or adjust their capital structure, the Company and the Group may adjust the amount of dividends payable, return capital to shareholders, issue new shares, or sell assets. The Group's management controls and monitors its capital adequacy with a gearing ratio, calculated by dividing the total foreign capital (Total liabilities) to total capital employed (Total Equity and Liabilities). Management's goal is to keep, on the long run, this ratio below 60% (0.6) for the Group, a level that is very satisfactory for a group of capital-intensity. This index is formulated as follows for the Company and the Group as of the dates of the balance sheet:
01.01.11
31.12.11
01.01.10
31.12.10
01.01.11
31.12.11
01.01.10
31.12.10
Total liabilities 195.287 205.218 189.211 198.923
Total equity and liabilities 368.692 408.146 379.797 411.328
Capital leverage index 0,53 0,50 0,50 0,48
Group Company
35. Events after the balance sheet date
In early 2012, the Company proceeded to the conclusion of a bond loan which strengthened its liquidity, and also it converted a short-term loan to a long term one. Also, the Company proceeded with the sale of cargo ship «Hellenic Sailor». From the sales proceeds there was settlement of part of the liabilities to banks.
HELLENIC SEAWAYS S.A. Amounts expressed in thousands Euros unless otherwise
stated
Annual Financial Statements for the Operating Period 2011
39
There are no other events, following December 31, 2011, which would materially affect the financial position and results of the Group and the Company or that should be mentioned in the notes to the financial statements.
Piraeus, June 7, 2012
The President of the Board of Directors The Second Vice President of the Board of Directors
Ioannis I. Vardinogiannis Konstantinos E. Klironomo s ID P966572 ID K980430
Chief Financial Officer Accountings Manager
Nikolaos D. Artemis Androulla N. Portidou ID AK004796 ID S112527