Annual Report 2016
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V. INCOME STATEMENT DISCLOSURES

11
Sales revenue
(€ thousands) 2016 2015
Revenue from the sale of goods and goods purchased and held for resale 1,915,739 2,086,660
Services sales revenue 249,913 248,171
2,165,652 2,334,831

The impact of the percentage of completion method pursuant to IAS 11 and the breakdown of sales revenue by segment (Pumps, Valves and Service) is presented in the segment reporting.

12
Other income
(€ thousands) 2016 2015
Income from disposal of assets 1,478 2,769
Reversal of impairment losses on receivables 9,277 10,032
Currency translation gains 3,629 2,450
Income from the reversal of provisions 8,400 14,222
Miscellaneous other income 24,443 20,479
47,227 49,952

Miscellaneous other income relates primarily to commission income, rental and lease income, insurance compensation, grants and subsidies. Income from government grants for individual projects (for example, for research activities) amounted to € 2,564 thousand (previous year: € 2,846 thousand).

13
Cost of materials
(€ thousands) 2016 2015
Cost of raw materials and production supplies consumed and of goods purchased and held for resale 789,298 888,152
Cost of purchased services 84,858 91,379
874,156 979,531
14
Staff costs
(€ thousands) 2016 2015
Wages and salaries 641,451 661,374
Social security contributions and employee assistance costs 129,574 126,876
Pension costs 27,725 31,000
798,750 819,250

Pension costs are reduced by the interest component of provisions for pensions and similar obligations, which is reported as an interest cost in financial income / expense.

EMPLOYEES
Average for the year At reporting date
2016 2015 31 Dec. 2016 31 Dec. 2015
Wage earners 7,311 7,512 7,091 7,351
Salaried employees 8,125 8,364 8,015 8,415
15,436 15,876 15,106 15,766
Apprentices 477 438 466 430
15,913 16,314 15,572 16,196

The first-time inclusion of fully consolidated companies in Slovenia and Finland led to an increase of 21 in the average number of employees over the year and in the total number at the reporting date.

15
Other expenses
(€ thousands) 2016 2015
Losses from asset disposals 1,270 3,258
Losses from current assets (primarily impairment losses on receivables) 12,744 12,798
Currency translation losses 2,222 2,778
Other staff costs 31,157 28,253
Repairs, maintenance, third-party services 85,816 95,546
Selling expenses 73,835 90,658
Administrative expenses 83,657 94,038
Rents and leases 26,898 28,923
Miscellaneous other expenses 54,842 55,215
372,441 411,467

Miscellaneous other expenses relate primarily to warranties, contractual penalties and additions to provisions.

16
Financial income / expense
(€ thousands) 2016 2015
Financial income 6,612 7,682
Income from equity investments 147
thereof from other investments (147) (–)
Interest and similar income 6,357 7,635
thereof from other investments (37) (76)
thereof from investments accounted for using the equity method (20) (12)
Other financial income 108 47
Financial expense – 20,672 – 22,360
Interest and similar expenses – 19,885 – 19,414
thereof to other investments (1) (–)
Write-downs on other investments – 2
Write-downs on investments accounted for using the equity method – 2,700
Expenses from the remeasurement of financial instruments – 62 – 178
Other financial expense – 725 – 66
Income / expense from / to investments accounted for using the equity method – 1,342 4,373
Financial income / expense – 15,402 – 10,305

Interest and similar expenses include the interest cost on pension provisions amounting to € 11,940 thousand (previous year: € 11,577 thousand). The change in the financial income / expense is mainly due to the negative result from investments accounted for using the equity method. Write-downs on investments accounted for using the equity method in the previous year were attributable to a German joint venture that faced ongoing economic difficulties.

17
Taxes on income

All income-related taxes of the consolidated companies and deferred taxes are reported in this item. Other taxes are reported in the income statement after other expenses.

(€ thousands) 2016 2015
Effective taxes 41,160 43,538
Deferred taxes – 14,296 – 2,316
26,864 41,222

€ 875 thousand (previous year: € 85 thousand) of the effective taxes in the year under review related to prior-period tax refunds and € 2,923 thousand (previous year: € 2,912 thousand) to tax arrears.

RECONCILIATION OF DEFERRED TAXES
(€ thousands) 2016 2015
Change in deferred tax assets – 27,806 2,493
Change in deferred tax liabilities – 664 1,015
Change in deferred taxes recognised in balance sheet – 28,470 3,508
     
Change in deferred taxes taken directly to equity 13,999 – 5,983
Changes in consolidated Group / CTA* / Other 175 159
Deferred taxes recognised in income statement – 14,296 – 2,316
* CTA = Currency translation adjustments
ALLOCATION OF DEFERRED TAXES
Deferred tax assets Deferred tax liabilities
(€ thousands) 2016 2015 2016 2015
Non-current assets 1,828 1,619 31,309 33,543
Intangible assets 1,152 1,019 279 484
Property, plant and equipment 612 479 30,964 32,932
Non-current financial assets 64 121 66 127
Current assets 57,152 59,132 45,621 54,236
Inventories 48,516 52,413 1,924 94
Receivables and other current assets 7,096 6,719 43,554 54,142
Assets held for sale 1,540 143
Non-current liabilities 96,462 82,244 25 222
Provisions 96,305 82,055 183
Other liabilities 157 189 25 39
Current liabilities 20,949 17,789 8,573 8,765
Provisions 11,248 7,929 1,201 719
Other liabilities 9,701 9,860 7,372 8,046
Tax loss carryforwards 8,928 7,303
Gross deferred taxes – before offsetting 185,319 168,087 85,528 96,766
Offset under IAS 12.74 – 73,153 – 83,727 – 73,153 – 83,727
Net deferred taxes – after offsetting 112,166 84,360 12,375 13,039

As at the reporting date, deferred tax assets of € 97,825 thousand (previous year: € 66,867 thousand) were recognised, arising from companies posting a loss in the financial year or previous year, whose realisation exclusively depends on the creation of future profit. Based on the planning figures available, we expect realisation to take place.

The taxes included under equity can be broken down as follows:

INCOME TAXES INCLUDED UNDER EQUITY
(€ thousands) 2016 2015
Remeasurement of defined benefit plans – 47,278 18,087
Taxes on income 13,546 – 5,454
Currency translation differences 20,223 1,158
Taxes on income
Changes in the fair value of financial instruments – 1,622 3,077
Taxes on income 453 – 529
Other comprehensive income – 14,678 16,339

As in the previous year, the introduction of new local taxes had no effects in the year under review. Changes in foreign tax rates led to a reduction in the total tax expense of € 664 thousand (previous year: reduction of € 591 thousand).

As far as net income from affiliates and other equity investments is concerned, withholding taxes incurred in connection with distributions and German taxes incurred are recognised as deferred taxes if these gains are expected to be subject to corresponding taxation, or there is no intention of reinvesting them in the long term. No deferred tax liabilities were recognised for temporary differences of € 6,529 thousand (previous year: € 7,205 thousand) in relation to affiliates and associates as it is unlikely that these temporary differences will be reversed in the foreseeable future.

We did not recognise deferred tax assets from loss carryforwards amounting to € 41,720 thousand (previous year: € 49,641 thousand) because it is unlikely that there will be sufficient taxable profit available in the near future against which these deferred tax assets can be utilised. They are largely available for an indefinite period.

Deductible temporary differences for which no deferred tax assets had to be set up amounted to € 9,145 thousand (previous year: € 9,736 thousand).

RECONCILIATION OF INCOME TAXES
(€ thousands) 2016 2015
Earnings before income taxes (EBT) 74,641 93,392
Calculated income taxes on the basis of the applicable tax rate (30 % as in the previous year) 22,392 28,018
Differences in tax rates – 793 – 331
Change in write-downs on deferred taxes on loss carryforwards and unused tax loss carryforwards – 108 2,357
Tax-exempt income – 1,184 – 4,071
Non-deductible expenses 1,231 2,211
Impairment loss on goodwill 1,542 3,535
Prior-period taxes 2,048 2,827
Non-deductible foreign income tax 3,396 2,851
Investments accounted for using the equity method 662 – 306
Deferred taxes not recognised – 273 2,181
Other – 2,049 1,950
Current taxes on income 26,864 41,222
Current tax rate 36 % 44 %

The unchanged applicable tax rate of 30 % is a composite rate resulting from the current German corporation tax, solidarity surcharge and trade tax rates.

18
Earnings after income taxes – Non-controlling interests

The net profit attributable to non-controlling interests amounts to € 15,190 thousand (previous year: € 13,259 thousand) and the net loss attributable to non-controlling interests amounts to € 356 thousand (previous year: € 374 thousand). They relate primarily to PAB GmbH, Frankenthal, Germany, and the interests it holds, as well as to our companies in India.

19
Earnings per share
2016 2015
Earnings after income taxes attributable to KSB AG shareholders € thousands 32,943 39,285
Additional dividend attributable to preference shareholders (€ 0.26 per preference share) € thousands – 225 – 225
€ thousands 32,718 39,060
Number of ordinary shares 886,615 886,615
Number of preference shares 864,712 864,712
Total number of shares 1,751,327 1,751,327
       
Diluted and basic earnings per ordinary share 18.68 22.30
Diluted and basic earnings per preference share 18.94 22.56
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