Selected notes to the condensed consolidated statement of financial position

Goodwill and other intangible assets

Goodwill amounted to €3,453.5 million as at September 30, 2020 (December 31, 2019: €3,475.8 million). Based on the provisional purchase price allocation, the acquisition of software company DAI resulted in a €71.8 million increase in goodwill. Exchange-rate effects, conversely, caused a €94.1 million decrease in goodwill in the reporting period. In qualitative and quantitative analyses, the estimates and assumptions adjusted as a result of the coronavirus pandemic did not give rise to sufficient indications as at the reporting date that goodwill or brand names might have become impaired during the reporting period.

As at September 30, 2020, the value of the brand names stood at €939.2 million and the total carrying amount for technology and development assets at €678.7 million (December 31, 2019: €939.8 million and €697.9 million respectively).

At €584.0 million, sundry intangible assets were €34.9 million below their carrying amount as at December 31, 2019 of €619.0 million and were primarily in connection with customer relationships.

Other property, plant and equipment

Other property, plant and equipment totaled €1,290.8 million (December 31, 2019: €1,236.3 million) and included a figure of €492.7 million for right-of-use assets related to procurement leases (December 31, 2019: €452.7 million). Of this figure, €376.2 million was attributable to land and buildings (December 31, 2019: €325.9 million) and €116.5 million to plant & machinery and office furniture & equipment (December 31, 2019: €126.8 million).

Inventories

Inventories increased by €106.4 million to €1,191.7 million as at September 30, 2020 (December 31, 2019: €1,085.3 million). Work in progress was up by €48.4 million to €191.7 million (December 31, 2019: €143.3 million), while finished goods rose by €34.5 million to €673.0 million (December 31, 2019: €638.5 million). Write-downs of €5.6 million were recognized on inventories in the third quarter of 2020 (Q3 2019: €5.2 million) and of €22.9 million in the first nine months of 2020 (Q1–Q3 2019: €21.4 million). Reversals of write-downs had to be recognized in the amount of €1.7 million in the third quarter of 2020 (Q3 2019: €1.4 million) and in the amount of €6.2 million in the first three quarters of 2020 (Q1–Q3 2019: €6.2 million) because the reasons for the write-downs no longer applied.

Trade receivables

The €18.8 million rise in trade receivables to €1,093.0 million as at September 30, 2020 (December 31, 2019: €1,074.2 million) predominantly consisted of an increase of €15.7 million in receivables from factoring transactions to €20.5 million (December 31, 2019: €4.8 million) and an increase of €12.4 million in receivables due from third parties to €1,083.2 million (December 31, 2019: €1,070.8 million). Receivables due from non-consolidated subsidiaries, equity-accounted investments, and other equity investments rose by €1.5 million to €42.3 million (December 31, 2019: €40.8 million). Valuation allowances for trade receivables stood at €53.0 million (December 31, 2019: €42.2 million).

Equity

As at September 30, 2020, the Company’s share capital amounted to €118.1 million, which was unchanged on December 31, 2019 and was fully paid up. It was divided into 118,090,000 no-par-value shares.

The total number of shares outstanding was 117,966,694 no-par-value shares as at September 30, 2020 (December 31, 2019: 117,959,356 no-par-value shares). At the reporting date, KION GROUP AG held 123,306 treasury shares (December 31, 2019: 130,644). In February 2020, a further 7,338 no-par-value shares were issued for employees’ own investments under KEEP 2019.

The distribution of a dividend of €0.04 per share (2019: €1.20 per share) to the shareholders of KION GROUP AG resulted in an outflow of funds of €4.7 million in July 2020 (2019: €141.5 million).

Retirement benefit obligation and similar obligations

For the purposes of the interim report, a qualified estimate of the defined benefit obligation was made on the basis of the change in actuarial parameters in the period under review.

The retirement benefit obligation and similar obligations were higher than they had been at the end of 2019 owing to actuarial losses that resulted from lower discount rates in all three currency areas. The present value of the defined benefit obligation was calculated on the basis of the discount rates shown in the following table.

The change in estimates relating to defined benefit pension entitlements resulted in an €81.2 million decrease in equity as at September 30, 2020 (after deferred taxes). Overall, the net obligation under defined benefit pension plans rose to €1,359.2 million (December 31, 2019: €1,211.7 million). This consisted of €1,408.7 million recognized under the retirement benefit obligation and similar obligations (December 31, 2019: €1,263.4 million) less an amount of €49.5 million (December 31, 2019: €51.7 million) recognized under other non-current assets.

Financial liabilities

The non-current and current financial liabilities totaling €2,296.6 million (December 31, 2019: €1,820.5 million) included promissory notes amounting to €1,320.3 million as at September 30, 2020 (December 31, 2019: €1,317.3 million). The corporate bond of €494.2 million (December 31, 2019: €0.0 million), liabilities to banks of €261.6 million (December 31, 2019: €498.3 million), and liabilities arising from the issuance of commercial paper amounting to €185.0 million (December 31, 2019: €0.0 million) were also included under financial liabilities.

In January 2020, ahead of schedule, KION GROUP AG repaid all of the remaining liability of €200.0 million that was outstanding as at December 31, 2019 under the acquisition facilities agreement (AFA).

The KION GROUP AG applied for an additional liquidity line of up to €1.0 billion from Kreditanstalt für Wiederaufbau (KfW). The liquidity line was approved on May 22, 2020. Of the total amount, €800.0 million has been put up by KfW and €200.0 million by the KION Group’s core banks. The transaction costs of €4.5 million attributable to the new liquidity line will be recognized over the term of the liquidity line. So far, no drawdowns have been made from the new syndicated liquidity line. The KION GROUP AG also agreed with the banks providing its funding that the covenants in respect of the current credit facility and the additional liquidity line can be temporarily suspended.

On September 24, 2020, KION GROUP AG placed a corporate bond on the Luxembourg Stock Exchange with a total volume of €500.0 million, a coupon of 1.625 percent, and a term ending in 2025. The unsecured corporate bond was issued at a price of 99.407 percent. The transaction costs of €2.8 million attributable to the corporate bond will be recognized over the term of the corporate bond.

Furthermore, the variable-rate tranches of the promissory note that matures in May 2022 with a total nominal value of €653.5 million will be repaid ahead of schedule on October 30, 2020. They were recognized as current liabilities as at September 30, 2020. The nominal value and the maturity of the fixed-rate tranche of the promissory note that matures in May 2022 and of the other promissory notes were unchanged compared with December 31, 2019.

Liabilities from financial services

Non-current and current liabilities from financial services, which totaled €2,772.3 million (December 31, 2019: €2,500.2 million), comprised a sum of €2,360.1 million related to the financing of long-term leasing business and to residual value obligations arising from the indirect leasing business (December 31, 2019: €2,062.9 million) and a sum of €412.3 million related to the financing of industrial trucks for the short-term rental fleet (December 31, 2019: €437.2 million).

Liabilities from financial services arising from the long-term leasing business encompass liabilities from financing by means of sale and leaseback sub-lease transactions entered into with leasing companies since January 1, 2018 in an amount of €843.2 million (December 31, 2019: €729.6 million). They also include residual value obligations of €265.6 million (December 31, 2019: €297.2 million) resulting from the indirect leasing business.

Furthermore, liabilities from financial services include liabilities from lease facilities in an amount of €207.9 million (December 31, 2019: €392.9 million), liabilities from the issuance of notes (securitizations) in an amount of €883.5 million (December 31, 2019: €530.2 million) – of which €489.8 million resulted from the issuance through K-Lift S.A., Luxembourg (December 31, 2019: €285.9 million) – and other liabilities from financial services in an amount of €159.8 million (December 31, 2019: €113.0 million).

Lease liabilities

Non-current and current lease liabilities amounting to €284.1 million (December 31, 2019: €432.1 million) related solely to finance lease obligations arising from sale and leaseback sub-lease transactions entered into up to December 31, 2017 for the financing of long-term leases with end customers. On the opposite side of the statement of financial position, there were lease receivables worth €230.2 million (December 31, 2019: €316.0 million) and leased assets under sale and leaseback sub-lease transactions of €110.8 million (December 31, 2019: €166.1 million).

Contract balances

Contract assets increased by €56.2 million to €206.5 million as at September 30, 2020 (December 31, 2019: €150.2 million). They mainly related to work under project business contracts that has not yet been invoiced.

Of the contract liabilities, €347.8 million was attributable to project business contracts with a net debit balance due to customers as at the reporting date (December 31, 2019: €416.8 million) and €100.7 million to prepayments received from customers (December 31, 2019: €88.1 million). The contract liabilities related to services that are still to be provided but for which prepayments from customers have been received or are due.

Other financial liabilities

Other non-current and current financial liabilities, which totaled €754.6 million (December 31, 2019: €784.9 million), included liabilities of €527.6 million from procurement leases (December 31, 2019: €486.1 million). Liabilities of €111.7 million from sale and leaseback transactions used to finance the short-term rental fleet were also included in other financial liabilities (December 31, 2019: €178.6 million).