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ArcamAnnual Report 2014

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A R C A M A N N U A L R E P O R T 2014 1

Contents


Strong position in AM production using metal

Arcam has a lot to offer when it comes to AM

EBM® system (Arcam AB, Sweden)Machinery for AM production using proprietary and patented EBM® technology, as well as servicing, training and supplies.

Metal powder (AP&C, Montreal, Canada)Metal powder for both EBM and laser-based equipment, as well as for other powder metallurgy applications.

Contract manufacturing (DiSanto, Shelton CT, USA)Contract manufacturing of orthopaedic implants using both EBM® technology and CNC machinery.

Growing market

The Arcam Group operates in the growing AM market. Arcam’s market is global with customers mainly in the orthopaedic implant and aerospace industries.

The company is developing rapidly, with an increasing turnover, healthy profits, stable gross margins and a strong financial position. The business is propelled by a growing acceptance of the application of the EBM®technology in production.

Arcam develops and manufactures products for Additive Manufacturing (AM), which is essentially industrial 3D printing using metal. Arcam’s technology, Electron Beam Melting (EBM®), facilitates the cost-effective manufacture of products with an advanced design and function.

HQ Production Sales and service Agents and distributors


At the core of Arcam’s business and what it offers is the proprietary EBM® technology, which enables the cost- effective manufacture of complex products with advanced functionality. Arcam’s position within EBM® technology is protected by patents as well as close co-operation with our customers, which creates high barriers to entry.

Industrial player in a global market

Arcam is an industrial player that sells its products and services globally to well-defined customer segments with high demands. A growing share of the installed EBM® systems are used for industrial production, a trend that clearly shows the growing insight into the technique’s potential. Customer relationships are close and long-standing and are deepened by Arcam’s presence in all segments of the market – systems, service, metal powder and contract manufacturing. To be closer to the customers, Arcam has established its own sales and service offices in China, Italy, the US and in the UK.

Well-defined markets with clear driving forces

EBM® technology creates new production opportunities

The market for advanced orthopaedic implants is growing steadily. The interest in AM-produced implants is primarily being driven by higher demand for advanced surfaces and structures of the implants, but also by the orthopaedic market’s general growth, driven by demography and greater prosperity.

The aerospace industry market is driven by the demand for lighter and thus more fuel-efficient aircraft, as well as by the need for more cost-effective production. This in turn drives demand for new materials and new production methods. The potential in the aerospace industry is considered to be significant in both the short and long terms.


Full year 2014

MSEK 20

Operating profit

42

New orders for EBM® systems

35

EBM® systems delivered

MSEK 339

Net sales

Full year 2014

• Net sales increased by 70 percent to MSEK 339.0 (199.4)

• Operating profit increased to MSEK 19.6 (14.5) Operating profit includes costs affecting comparability of approximately MSEK 9.3 (5.0)

• Net profit for the year increased to MSEK 57.1 (15.4) Profits include, in addition to the above costs affecting comparability, capitalised loss carry-forwards of MSEK 15.8

• Earnings per share amounted to SEK 3.10 (0.96)

Significant events

• Acquisition of the metal powder manufacturer AP&C Advanced Powders and Coatings Inc. in Canada

• Acquisition of contract manufacturer DiSanto Technology Inc. in the US


Multi-year trendInstalled base, accumulated Sales and profit

MSEK 2010 2011 2012 2013 2014

Net sales 90.5 107.7 139.1 199.4 339.0

Increase in sales, % 21 19 29 43 70

Operating profit 1.7 4.6 14.5 14.5 19.6

Equity ratio, % 68.1 65.0 60.2 87.2 68.7

R&D180

160

140

120

100

80

60

40

20

02010 2011 2012 2013 2014

Production

Number

2010 2011 2012 2013 2014

350

300

250

200

150

100

50

0

MSEK

Net sales

Pretax pro�t


“Arcam is an awesome companyJohan Backlund is an engineer and doctor of engineering in physics and is responsible for developing the electron gun.

I was hired by Arcam in 2013 but had already been working for

the company as a consultant since 2008. It was an easy choice

to make when I was offered the position. Arcam is an awe-

some company that is dynamic and has high aspira-

tions when it comes to its development. We have

everything in one place – development, produc-

tion, service, etc. This helps me to see the results

of my work and to constantly develop further.

Aside from my responsibility for and focus on part

of the EBM® system, we have an interdisciplinary

approach to maintaining the entire chain as a well-

oiled machine for industrial use. The innovative climate here

also benefits from not having to fear failure and being rewarded

for ideas that become reality.

My job gives me a lot of positive energy, but the job isn’t

everything of course; my family and children mean a lot to me.

To have just as much fun outside of work, I like to go fly fishing.


Arcam’s EBM® technology and DiSanto’s all-in-one service and expertise for the contract manufacturing of orthopaedic implants. DiSanto has a broad range with a fully equipped and certified production plant and over 100 employees. The combination of Arcam’s EBM® technology and DiSanto’s knowledge accelerates the market’s conversion to products manufactured using AM.

During the year we signed a large number of new customers to DiSanto and also expanded its operations with newly built premises for EBM-based manufacturing. The new facility has been built to allow for future growth. We currently manufacture implants using four EBM® systems.

Operations at DiSanto also increase our presence in North America and in November we hosted a well-regarded capital market day when some 50 investors had the opportunity to see our new facility.

With the acquisition of AP&C and DiSanto, we are broadening what we offer to include EBM® systems through Arcam AB in Mölndal, metal powder through AP&C in Canada and the production of advanced orthopaedic implants through DiSanto in the US. These acquisitions are thus in line with our growth strategy and complement our product and technology portfolio.

We now have a business in which Arcam’s EBM® system forms the hub and metal powder sales and implant manufac-turing are key supplementary products that broaden our market offering and also provide important regular income. These strategic transactions are important for our operation-al development, boosting our business volumes among existing customers and reaching new ones.

Acquisitions that broaden what we offer

The acquisition of metal powder manufacturer AP&C from Raymor Industries in Canada took place at the start of the year and has broadened our business considera-bly. AP&C is a leading producer of high-quality metal powders and has been a supplier of titanium powder to Arcam since 2006. Titanium powder is an important element of what we offer and thanks to the acquisition of AP&C, access to the best technology for the manufacture of top-quality metal powders has been secured for our customers. AP&C is a supplier not only to our EBM customers but also to other AM market players and for other advanced applications.

In September, we acquired DiSanto, with which we have had a strategic partnership since February 2013. Thanks to this acquisition we can combine

Strong growth and strategic transactions2014 was another eventful year for Arcam. During the year the company changed and developed considerably. While sales of our EBM® systems continue to grow, we have expanded our operations with metal powder manufacturer AP&C in Canada and contract manufacturer DiSanto in the US.


We have already come a long way in establishing a new industry and we have a long, exciting and challenging journey ahead of us.

“Message from the CEO, cont.

Increased demand

We received orders for 42 new systems during the year, which is an increase of more than 50 percent on the previous year. Both the implant and aerospace industries are growing and these areas currently account for roughly equal shares of our sales. We are continuing to see considerable demand from the aerospace industry in particular and sales of our new large system, Arcam Q20, continue to be especially healthy.

The Asian market is continuing to grow and over a third of orders received during the year came from Asia.

Efforts to industrialise our technology among major players in the aerospace and implant industries are continuing and we predict good business opportunities in the future.

Growth – organic and through acquisitions

In addition to the acquisitions of AP&C and DiSanto, we are experiencing organic growth in our core business area, EBM® systems. This was further bolstered at the end of the year by the recruitment of a Chief Operating Officer (COO) based in Mölndal. The new COO has overall management responsibility for product development, production and customer service. Together with the heads of the Group’s subsidiaries, the COO is included in a newly formed Group management team. The changes free up management resources for important sales work and for the equally important work on the refinement of our new acquisitions.

A sharp increase in the number of installations puts increased demands on the support department, which has been enhanced both in Sweden and at our subsidiaries in China and the UK.

During the year we began to expand our facilities in Mölndal, enabling us to double our production area for EBM® systems.

This strong growth, expansion into new markets and the exchange of our acquisitions will require further enhance-ments of the organisation in both its core activities and

subsidiaries. In order to continue to develop our technology and take advantage of the business situation, we have developed a very ambitious future recruitment plan.

Research and development

In 2014, development costs amounted to almost 15 percent of sales and related primarily to EBM® systems. We will continue to add significant resources to develop and refine the EBM® technology, both internally and in collaboration with research institutions and customers. EBM for the metal Inconel was launched during the year – a result of the research partnership with Oak Ridge in the US.

Market development and our image

We are convinced that our market will continue to grow rapidly, with particularly bright prospects in orthopaedics and the aerospace industry. We are just at the beginning of a long and exciting development of the market and the company. At the same time, we are humble in our under-standing that industry’s adaptation to broad mass production using Additive Manufacturing will take time and, consequently, it is difficult to foresee exactly how growth will shape up

in the near future. For the time being, we will not release detailed forecasts or financial goals but instead we will regularly communicate significant events. We feel this makes it easy for investors and other stakeholders to assess our current status and our future prospects.

Great future opportunities

We have already come a long way in establishing a new industry and we have a long, exciting and challenging journey ahead of us. Our EBM® systems are currently used by some of the world’s largest companies in advanced manufacturing and we see considerable opportunities in the markets we currently serve. At the same time we are growing our powder business and are seeing huge potential within contract manufacturing. A strong financial position gives us good future stability and room for manoeuvre. And perhaps most importantly, we have a team of dedicated, skilled and creative employees upon whom our success depends.

Overall, we are well positioned for continued strong growth.

Mölndal, March 2015Magnus René, President & CEO


Business concept, targets and visionArcam’s business concept

Arcam develops and manufactures products and services for AM using metal. Marketing is focused on the implant and aerospace industries.

Arcam’s vision

Arcam’s products will become a natural element of the machinery in every manufacturing industry company.

Operational targets

Arcam’s long-term objective is to be the leading supplier of products and services for AM using metal for the implant and aerospace industries.

In the long term, Arcam has the ambition of:

Strengthening its market position within AM by utilising the Group’s broad market offering. Long-term sustainable growth is ensured by a continued broadening of the customer base and offering, as well as repeat sales of products and services to existing customers.

The long-term aim is also to identify new customer segments where the broad technical potential of both EBM® technology and the Group as a whole can be utilised. Examples include applications in the space industry, offshore, in parts of the automotive industry and in other advanced manufacturing.

SHORT-TERM TARGETS INCLUDE: TARGET ATTAINMENT IN 2014

• Constant improvement of the EBM® technology’s productivity to achieve additional applications in prioritised markets

Arcam Q20 was launched with deliveries beginning in the autumn

• Broaden the user base with new customers The acquisitions of AP&C and DiSanto give a broader offering and thus a larger customer base

• Increasing sales while maintaining stable profitability Sales MSEK 339.0 (199.4)Operating profit MSEK 19.6 (14.5)

• Close co-operation with customers through a strong Key Account organisation

Organisation has been strengthened during the year and Key Account work now takes place at the Group level

The aerospace industry is believed to have

considerable long-term potential.

A R C A M A N N U A L R E P O R T 2014 1 0

StrategiesA complete offering

Arcam manufactures products for AM production using metal. At the heart of Arcam’s offering is the EBM® system, which facilitates the cost-effective manufacture of products with an advanced design and function.

Arcam also offers metal powder through its subsidiary AP&C in Canada and advanced orthopaedic implants through its subsidiary DiSanto in the US.

EBM® systems for volume production

Arcam believes that the market for direct manufacturing of metal parts using Additive Manufacturing has considerable potential (more information on the market is available on page 14). Consequently, Arcam is focusing on the develop-ment and sale of systems that are suitable for volume manufacturing. Arcam will continue to allocate considerable resources to development in order to increase the systems’ speed, precision and building volume.

Advanced materials

Arcam expects the market for production using AM to be geared towards applications based on advanced materials such as titanium alloys, inconel and cobalt chrome. These alloys, which are the main materials for Arcam’s target groups, are suitable for manufacture using EBM® technology and are also difficult to machine and expensive to manufac-ture using conventional methods. Arcam is therefore focussing its development efforts on this type of material. In the long term, customers’ needs to manufacture parts efficiently from a wide range of materials will be met.

Metal powder

The availability of high-quality metal powders in production volumes is crucial to being able to break into production applications. Consequently, extensive expertise in metal powder technology is a key aspect of what Arcam can offer. Access to well-developed technology and production capacity for high-quality metal powder is ensured through the subsidiary AP&C.

Contract manufacturing

Arcam’s strategy is to rapidly make EBM® technology available to a wider audience within the orthopaedic industry and thus accelerate the market development of EBM-made implants. Through its subsidiary DiSanto in the US, Arcam offers the production of finished implants based on EBM® technology.

Arcam’s technology is developed in-house.

Patent strategy

Arcam protects its technology from copying and infringement through strong patent protection for both process expertise and key components, hardware as well as software. Around 150 patents belonging to 47 different registered patent families are either pending or approved in 11 key countries. Patent work was strengthened in 2014 by the filing of 10 new patent applications and the approval of one new patent family.

Local customer support

Arcam’s EBM® systems are sold and used worldwide. To support its customers locally with service, spare parts and consumables, Arcam has established its own sales and service offices in China, Italy, the US and in the UK.


45

40

35

30

25

20

15

10

5

0

No. of EBM systems

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Order Delivery Sales

350

300

250

200

150

100

50

0

Arcam group total net sales, MSEK

The Arcam Group offers industrial 3D printers through Arcam AB in Mölndal, metal powder through its subsidiary AP&C in Canada and the production of advanced orthopaedic implants through DiSanto in the US.

Two distinct target groups

Arcam manages the implant and aerospace industry target groups through its own sales organisations in the US, the UK and the Nordic region, as well as through agents in Asia and the rest of Europe. For these target groups, Arcam offers:

EBM® systemsMachinery for AM production using proprietary and patented EBM® technology (Electron Beam Melting), as well as servicing, training and supplies.

Metal powder Metal powder for both EBM and laser-based equipment, as well as for other powder metallurgy applications. Contract manufacturing Contract manufacturing of orthopaedic implants using both EBM® technology and CNC machinery.

The sales process – EBM® systems

Every initial sale of a system is unique since the customer has special requirements and wishes.

The customer makes a thorough evaluation of the technology. This may either be through Arcam receiving an assignment to produce a specific part for further evaluation or, for a longer project period, the active participation of the customer in the use of an EBM® system. The sales process from first contact to order normally takes 6–12 months. A customer relationship is usually initiated with the sale of a single system for further evaluation and application adaptation.

Business modelKAM organisation – focus on customers that can change Arcam

Arcam has a KAM organisation (Key Account Management) with the purpose of creating trusting co-operative relation-ships with the company’s strategically important customers. The KAM organisation works with customers who are important to the whole Group, with a focus on both applica-tion development and certification processes to shorten the time to industrial production.

When income occurs

Revenue recognition takes place according to the same principles in the Arcam Group as a whole – a signed order is converted into income when the product or service is delivered. Only then is it recorded in the income statement.

Total Group sales and orders and deliveries of EBM® systems


End users Universities/institutions

Implantatindustri

Lima, Italien

Nakashima Medical, Japan

FlygindustriPratt & Whitney, USA

GKN Aerospace, Storbritannien

Avio, Italien

North Carolina State University, USA

Tohoku University, Japan

Sheffield University, Storbritannien

Oak Ridge National Lab, USA

Examples of Arcam’s EBM customers

Currency exposure

EBM® systemsSystem sales are invoiced in EUR except in the US, where invoicing is in USD. At the same time, the majority of the costs are in SEK. Arcam continuously hedges net currency flows through forward contracts.

AP&C and DiSantoAP&C’s and DiSanto’s activities are primarily in USD and not currency hedged. The companies’ income statements are translated at the average exchange rate and their balance sheets at the closing rate.

System orders in 2014 by geography

Europe, 50%

Asia, 36%

USA, 14%

System orders in 2014 by application area

Implants, 45%

Other, 29% Aerospace, 26%

Lima in Italy has the most EBM® systems in the world.


Continous develop-ment is stimulatingHafet Sinoune is an engineer in chemistry and works as a production manager at AP&C in Canada.

I was hired by AP&C in 2003 where I initially

started as a laboratory technician. I now am the

Production Manager for the atomization process and

as part of my duties, I train new employees that will

operate the atomization reactors where we transform

metal wire into fine spherical powder. A stimulating and

challenging aspect of my work is the constant develop-

ment of our production process. With my team of

operators we constantly refine and improve productiv-

ity while maintaining the quality of our products and the

stability of our process. The results of our work is very satisfying

since we managed over the years to multiply our productivity by

several folds. Being now part of the Arcam group is also very

positive as we can now benefit from their complementary expertise

in AM.

It is not just my job that brings me happiness but also and naturally

my family. My three children keep me busy and I try to relax and

exercise by playing soccer.

“


Additive Manufacturing – technology that is increasingly in demand

Industrial application dominant in AM production

Additive Manufacturing (AM) is also popularly known as 3D printing. The term “free-form production” is used in Swedish to illustrate the geometric freedom in the construction of an object. The term “AM” is used mainly in industrial contexts, from prototyping to industrial production. According to the Wohlers Report, industrial application comprises a clear majority – 90 percent – of the total AM market. The remaining 10 percent relates to the consumer market, primarily in plastics.

AM production for the metal market is divided into the systems themselves, their servicing, the supply of metal and contract manufacturing (see the ‘Distribution of revenues’ diagram). Arcam operates within all of these sub-segments.

Market data currently available is based on figures for 2012, when the market for AM production using metal amounted to MEUR 161 and accounted for roughly 10 percent of the total AM market, which was dominated by AM systems for the industrial production of plastics (source: Codex Partners 2014). In 2012, the industries in which Arcam’s EBM® systems were sold – orthopaedic implants, the aerospace industry, contract manufacturing and

Additive manufacturing is becoming increasingly recognised and established. President Obama’s speech in 2013 that the technology “has the potential to revolutionise the way we produce almost everything” has been significant to this increased awareness.

institutional development – accounted for 65 percent of the total market for AM systems using metal.

The latest available market data evidences strong growth from 2009 to 2013. Growth continues to be high, primarily thanks to technological development and acceptance making it possible to use the technology within more application areas. The market’s long-term potential size is difficult to estimate, however. Considering the underlying driving forces, the potential is assessed to be very great in current segments and areas of application over the next few years.

According to the Wohlers Report 2014, by 2021 revenues within AM-related industry (for metals and plastics), the production of AM equipment and the production of parts by contract manufacturers using AM equipment will increase from just over USD 3 billion to approximately USD 11 billion, with average annual growth of 17 percent (the figures exclude all production of industries which own their AM systems, which is a significantly higher figure). The report predicts even faster growth for AM systems designed for metal components where there is expected to be exceptionally strong demand.

Sales in the industry for AM systems in 2012,

MEUR

AM systems for metal production installed in 2012,

by market segment

Contract manufacturing , 31

Service, 27

Metal powder, 19

Systems, 85

Aerospace, 20%

Implantat, 14%

Implants, 13%

Academic Institutions, 13%

Service center, 18%

Automotive, 6%

Other, 16%

Source: Codex Partners Source: Codex Partners


Based on the metal segment’s 10 percent share of the total AM market, conservative estimates suggest that the market will achieve annual growth of 18 percent in 2021, equivalent to USD 1.1 billion (just over SEK 8 billion). Using the same basis, SEB predicts annual growth of 30 percent for the AM metal segment, which indicates a market value of approxi-mately USD 2.3 billion by 2021 (SEK 16.6 billion).

Arcam’s focus is on markets with significant potential

Great potential in orthopaedics...Arcam believes that there is considerable potential for its EBM® systems within orthopaedic implants. So far, Arcam has delivered 65 systems for implant production, with future potential estimated to be several thousand installed systems.

...and even greater potential in the aerospace industryArcam believes that the aerospace industry has an even greater potential market, with the potential for tens of thousands of installed systems compared with the 60 systems delivered up until the end of 2014.

Tim Caffrey, who worked on the market analysis of AM for the Wohlers Report, notes that “The industry is experiencing an unparalleled change not seen for 20 years (since the AM industry began). What’s most interesting is that we’ve barely scratched the surface of what’s possible.”

Potential in other segments

Arcam intends to gradually identify new market segments where the possibilities provided by EBM® technology can be utilised. Examples of segments of interest may be the offshore industry, the nuclear power industry and other advanced short-series production.

Competing production methods

Arcam’s biggest challenge in launching its EBM® technology has been and perhaps still is, to compete on price and quality with traditional and well-established production methods such as precision casting and finishing by cutting with the use of increasingly sophisticated CNC equipment.

According to Codex Partners, an independent market analyst, as the productivity and reliability of EBM® systems increase, so too do Arcam’s competitiveness and market potential (see illustration).

Clear benefits of EBM®

For the time being, Arcam is the only company using electron beam technology within the AM segment. The technology is well suited for the production of titanium alloys and other materials that are difficult to machine and expensive to manufacture using traditional methods. The company understands that there is currently no other supplier that can offer AM systems that offer the same combination of productivity, good material properties and precision in the manufacture of titanium and other precious metals (see pages 22 to 27 for information about EBM®).

Market growth 2013–2021 in USD billion for the market for AM

in metal, with 18 and 30 percent annual growth

2.5

2

1.5

1

0.5

02013 2014 2015 2016 2017 2018 2019 2020 2021

18% 30%

ADDITIVE MANUFACTURING

Low1

1M

Geometric Part Complexity

Pro

duct

ion

Qua

ntity

High

PowderTechniques

Die Casting MIM

High-speed Cutting

InvestmentCasting

Laser-based systems are the primary competing technology within AM

Arcam faces a number of competitors within AM whose technology is based on lasers instead of electron beams as the energy source. Laser technology delivers high overall precision and the systems thus produce highly detailed components. The laser beam not only has a lower power output, but it also moves mechanically, which means that it is significantly slower than the electron beam. Overall, laser technology provides much lower productivity. An additional consequence of this limited power is inferior material properties, including stress, which requires post-processing and thus prolongs production time even further. The high levels of precision and detail mean that the technology is well suited for prototyping and very small applications such as dental crowns (false teeth), where productivity is not crucial. The larger the part and the greater the volume, the more important the speed of construction becomes, which is where Arcam offers advantages when it comes to series production.

Most advantageous production method, volume

and geometric complexity

Source: Codex Partners


Concept Laser, founded in 2000, has around 150 employees in Germany (within AM) and is part of the Hofmann Group. It has annual sales of approximately MEUR 30. The company focuses on direct production of tooling, inserts for tools, dental implants, prototypes and components. The systems are designed for the manufacture of metal parts. One of the models has been specially developed to build very small parts such as dental implants and also jewellery. Another is designed for larger components for the aerospace industry. There are estimated to be approximately 200 installed systems. In the customer segments on which Arcam focuses (aerospace and orthopaedics), Arcam estimates that around 40 machines have been sold by Concept Laser.

SLM Solutions was previously a part of MTT Technologies Group, but has been an independent company since 2010. The company was listed in Germany in 2014 and has around 100 employees. Sales of MEUR 21.6 in 2013. SLM Solutions offers systems for the production of short series focused on the automotive, education, consumer electronics, aerospace and medicine segments. The technology used by SLM Solutions in its systems is known as selective laser melting (SLM) and the company currently has four different systems in its product portfolio. Like other laser technologies, the advantage of SLM technology is the ability to build small parts with high resolution.

Arcam’s key competitors

Competing players that offer laser-based systems for Additive Manufacturing are located in Germany, France and in the UK. The firms EOS, Concept Laser and SLM Solutions are considered to be those closest to Arcam in terms of perfor-mance. ReaLizer and Renishaw are examples of other suppliers with similar laser technology, but of somewhat less significance in terms of competition.

Founded in 1989, EOS GmbH (Electro Optical Systems) of Germany sells AM systems for plastics and metal and is a market leader in metal in terms of the number of installed systems. The company has around 540 employees with revenues of around USD 221 million in 2013/14. Machinery for the production of plastic parts accounted for a large share of sales.

The number of installed systems amounts to around 1,500, of which roughly 450 are systems for metal. EOS’s systems make parts with superior surfaces and high precision. However, productivity is low and it is difficult to build large parts without excessively large residual tensions in the material, thus resulting in the process being best suited to small parts. The process is adapted to multiple alloys of which the most important are various grades of steel, cobalt chrome and aluminium alloys. The principal applications to date have been prototypes, tooling (inserts for tools), orthopaedic instruments and dental implants. In the customer segments on which Arcam focuses (aerospace and orthopaedics), the company estimates that around 50 machines have been sold.

Arcam’s business differs in certain key points from other listed companies in AM

Arcam’s business differs in many respects from the two major companies in the field listed in the US, 3D Systems and Stratasys, which have so far focused on systems for manufacturing using plastics. It should be noted that in 2013, 3D Systems acquired the French company Phoenix and so is establishing itself in the metal segment as well. Both 3D Systems and Stratasys have devoted considerable resources to establishing a consumer market for 3D printing.


Orthopaedic implants – a market in growth

Metal alloys such as titanium and cobalt chrome are estab - lished as materials for implants. These metals are also well suited to manufacturing in Arcam’s system since they are expensive and difficult to process compared with other methods.

The area comprises suppliers of orthopaedic implants and their sub-suppliers, as well as universities and research institutes with a focus on implants and biomaterials.

Greater prosperity a strong driving force

The US accounted for 59 percent of the total orthopaedic implant market in 2013. However, growth is strongest in emerging markets, with the greatest potential in China and India.

The implant market is driven by a number of factors, such as population growth, an ageing population, osteoporosis, more active lifestyles, younger patients, obesity and medical progress with more treatment possibilities, new products and better techniques.

Five leaders

Arcam’s main segment – reconstruction – is dominated by the US companies Zimmer, DePuy Synthes, Stryker, Biomet and Smith & Nephew. Together they account for 85 percent of this market segment.

The orthopaedic implant industry can be divided into three segments: reconstruction, trauma and spinal surgery. Arcam mainly works in the reconstruction market, primarily knee and hip joint implants. Market observer Orthoworld estimates annual market growth of 3 percent between 2014 and 2018.

The five leaders currently use proprietary technologies for the manufacture of advanced implants. Besides the leaders, the market continues to be fragmented with a large number of small and midsize companies. Arcam’s largest customer, Lima, is in this group.

Arcam’s technology well suited to new applications

Arcam’s technology is mainly used for the production of orthopaedic implants in new areas of application where the implant makers are prepared to use new technology. One example is the unique porous surface structure that facilitates ingrowth into surrounding bone tissue, what is known as a trabecular structure.

12,000

10,000

8,000

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2,000

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A consolidated and fragmented market with many small participants Lima is Arcam’s biggest customer in the implant industry.


Implants currently mass produced using Arcam’s systems include hip, knee and shoulder joints, as well as spinal implants. Arcam’s technology is also suited to the production of prototypes and of individually adapted implants, where production using conventional technology would be unrea-sonably expensive and time consuming.

In terms of volume, the manufacture of acetabular cups for hip joints is a component that has made a major break-through and around 2 percent of all acetabular cups world-wide are currently produced using EBM® technology.

Authority approval a prerequisite

The systems that manufacture implant products do not require authority approval. The implant products themselves,

however, do require approval. CE marking applies in Europe and the Food and Drug Administration (FDA) issues approval in the US. Approved implant products manufactured using Arcam’s systems can today be found in Europe, Japan, Australia, Korea, China and in the US.

Arcam’s customers in the implant industry

Lima of Italy currently has the most EBM® systems in the world for volume production and placed an order for a further five systems at the end of 2014. Lima is continuing to invest in its proprietary trabecular surface using titanium. The Walter Reed Army Medical Center military hospital in Washington, D.C. in the US uses one system to make advanced, custom- made implants for patients. Medical Modeling in the

US has four systems and Nakashima Medical in Japan has two. Beijing AKEC in China has three systems and is about to begin volume production. In total, just over 60 EBM® systems are used for implant production.

DiSanto accelerates the introduction of EBM®

The activities of subsidiary DiSanto not only involve business opportunities through its role as a contract manufacturer for orthopaedic implant companies, but also create oppor-tunities to accelerate EBM® technology for additional prospective clients.

Hip implants Knee implantsSpine implants


Aerospace industry in development and growth

More fuel-efficient planes driving technological development

The basic concept in aircraft design is changing. After having used aluminium to build commercial aircraft for more than 50 years, new design solutions and materials are now being applied that make the aircraft lighter and consequently more fuel efficient. The fuselage and the wings are increasingly being made of composites instead of aluminium, while titanium is also much more widely used. The Airbus A350X-WB and Boeing 787 are the first aircraft of this generation. These aircraft boast estimated fuel savings of 20 percent compared with earlier designs.

Aerospace industry in strong growth

Global economic growth is resulting in increased travel and, in particular, air travel. Boeing’s market analysis in 2014 estimates the total civil aviation fleet will double by 2033, with almost 37,000 newly manufactured aircraft (an increase of 1,800 aircraft compared to the 2013 forecast).

The vast majority of these are expected to be twin-engined aircraft. This means the production of a total of almost 75,000 aircraft engines over the next 20 years – nearly 4,000 engines per year.

Huge application potential

Reduction in weightComposites and aluminium are difficult to combine as aluminium corrodes easily when it comes into contact with other materials. However, titanium alloys have no negative properties when combined with composites and are there fore well suited to future designs. This means that the demand for design components made of titanium is growing in pace with the growing use of composites.

Titanium accounts for between 15 and 18 percent of next generation aircraft – the Boeing 787 and Airbus A350 – as a percentage of weight, which is a significant increase compared to previous generation aircraft, where the proportion was between 2 and 10 percent.

Within the aircraft engine industry, demand is driven by the development of entirely new materials that reduce weight and retain advanced characteristics. One example of such a material is the titanium aluminide alloy, which is lighter and stronger than conventional alloys.

Cost reductionIn addition to its pursuit of lightweight components, the aerospace industry is characterised by intense pressure on costs. This is clearly because the industry often has to work with expensive materials where small cost improvements can generate significant savings. Cost savings are often the only answer for existing products, as a redesign would involve expensive recertification.

Volume depending on application

The aerospace industry demands technically highly ad-vanced parts that are made in relatively short series. The material requirements are rigorous and the aerospace industry is consequently an important partner for the development of applications based on new materials. Today, the industry uses Arcam’s technology mainly for prototype production, but also for initial series production. The material requirements are an opportunity, but at the same time constitute a high entry threshold. The aerospace industry is traditionally conservative in the selection of new production methods and new materials.

Once a component has been approved for inclusion in a design, its lifecycle is long as aircraft models are usually built in long series over a long period of time, often for decades.

Few major players and many suppliers

Arcam has active customer contacts with most aerospace industry participants. Subsequently, the company has a good knowledge of the aerospace market.

The aerospace industry applies the automotive industry’s production principles, where multiple sub-suppliers supply finished components and parts that undergo final assembly by a few major players.

Two major manufacturers dominate aircraft production – Airbus and Boeing. Other players include Brazilian Embraer and Canadian Bombardier and new players such as Japanese Mitsubishi and the Chinese ACAC/COMAC consortium.

The aircraft engine industry consists of a few players – Rolls Royce, GE, Pratt & Whitney, Honeywell, the CFM consortium (GE and French Snecma) and Mitsubishi.

Arcam’s customers

Of a total of 42 orders in 2014, 12 (10) came from the aero -space industry. The largest customer to date is the Italian GE-owned sub-supplier for aircraft engine components Avio, which has ordered a total of 10 systems. Avio recognises the business opportunities offered by Arcam’s technology and has created the eManufacturing business area to highlight this.


Universities and research institutes

Material and production methodology is a large and broad area of research. Relatively speaking, Arcam’s technology is a new method of production, which is creating a lot of interest at institutions around the world. The research findings generated are important for both Arcam and potential customers as the technology is verified and the application areas are developed. Sales of systems to these customers usually take place as single units.

The academic world is global

Arcam has sold some 40 systems to universities and institutes since 2002. Among the customers are North Carolina State University in Raleigh, N.C. and Oak Ridge National Laboratory in Tennessee, both in the US and Sheffield University in the UK, Erlangen University in Germany and Tohoku University in Japan.

Arcam and Oak Ridge National Laboratory (ORNL) in Tennessee have a co-operation agreement where the parties work together to adapt and demonstrate Arcam’s EBM® technology to American industry in a demonstration facility. ORNL is a national research center under the supervision of the US Department of Energy. The research areas include energy-efficient materials, implants and application development for the aerospace industry.


This is what I want to doMladen Mitrovic, high school engineer in mechatronics and KY-trained fitter and function tester.

“I’ve been an employee of Arcam since 2011. There were seven

of us in production when I started and now there are 20. Before

I applied for the job, I took a look at what Arcam was doing and

immediately thought ‘This is what I want to do’. It’s still just as

exciting and I learn something new every day. My colleagues are

happy to share their knowledge, which creates a good atmosphere

of co-operation. In production, we’re also involved in product

development and see things that can be improved so as to make

the service technician’s job easier. The fact that all of us in produc-

tion can be involved in the recruitment of new colleagues also

contributes to good cohesion. I also see potential for the develop-

ment of my professional role, which is another advantage of

working for a growing company.

The downside of having such a fun job is that I’m willing to take it

home with me, as I’m always thinking about how something can be

done better. But I make sure I relax completely by going away one

weekend a month to get some distance.”

“


EBM® – unique production methods

The patented EBM® technology is based on Arcam’s expertise in electron beam melting technology and metallurgy. The component to be manufactured is created in a three- dimensional digital CAD design, which is transferred to the machine’s control computer. The work chamber is loaded with metal powder and a vacuum is established. The system’s computer-controlled electron beam melts the metal powder with very high energy and the part is gradually constructed according to the design by a thin layer of powder being added to the part and melted. The process is repeated layer by layer until the entire part has been built. This process is called Additive Manufacturing. The entire process takes place in a vacuum, which provides a very pure smelt and the finished object benefits from optimal material properties.

Unique electron beam

The electron beam is generated with a filament and con-trolled using proprietary software. The EBM® MultibeamTM technology makes it possible to direct the beam in multiple directions simultaneously, providing greater productivity and precision.

At the core of Arcam’s business and what it offers is the proprietary EBM® tech-nology, which enables the cost-effective manufacture of complex products with advanced functionality. Electron beam technology is used as an energy source in Arcam’s systems in order to melt the metal powder, while Arcam’s competitors within AM use laser technology.

Benefits of EBM® technology

Arcam’s systems have distinct advantages:• New design opportunities – EBM® technology makes

it possible to create completely new designs of complex components that were not possible to produce in the past.

• Shorter lead time from design to production and market-ing (time to market) as no special tools are required.

• Lower cost – efficient material utilisation makes EBM® technology cost-effective.

High-quality metals – suitable building material

In principle, Arcam’s systems are technically suitable to all kinds of metal alloys, but are commercially most suitable for alloys with high raw material prices, such as titanium and other advanced alloys. These include titanium, titanium aluminide, cobalt chrome and inconel.

To ensure building quality and the availability of metal powder, Arcam develops and manufactures proprietary metal powder in-house through its subsidiary AP&C in Montreal, Canada.


Arcam LayerQamTM provides traceability

The company’s systems Arcam Q10 and Arcam Q20 use Arcam LayerQamTM, a function which enables production verification through photography and image processing. This function records any deviations in each individual layer. With Arcam LayerQam, it is possible to monitor the building process and verify the quality of the product.

CE-marked according to the Machinery Directive

Arcam’s systems are CE-marked in accordance with the Machinery Directive and do not require any additional authority approval for implants or aerospace component manufacturing. However, the parts that customers manufacture using the systems must in most cases undergo certification.

Software

The proprietary software is included as an integrated element of all systems. The software is continuously developed to increase the systems’ reliability, user-friendliness and productivity. Besides process control, there is also software for customer monitoring, which enables remote web-based production monitoring and quality assurance.

Development

Bigger customers and greater volumes – new challengesCustomer requirements are growing in line with the integra-tion of Arcam’s EBM® systems into more complex production systems in industrial applications. These requirements relate to operational safety, efficiency and traceability in production.

Long-term product development – within EBM® technology Arcam’s EBM® technology is a production method for which the fundamental research and development work has been completed. However, Arcam’s continued future growth is highly dependent on the continued development and broadening of the current range of products and services. Product development occurs mainly in-house but also in close collaboration with customers and in externally financed projects.

Continuous research and development is being conduct-ed in electron beam technology and metallurgy, as well as application development that can be rapidly commercialised into new products and services. The development work is also dedicated to further increasing capacity, beam power, productivity and precision in the systems. The user interface also continues to be developed to improve user friendliness.

Development in close collaboration with customersArcam’s development work is an ongoing process, largely in close collaboration with customers in the implant and aerospace industries, to not only enhance system productivity and reliability but also to adapt the technology to new applications.

Quality assurance

The company’s operations in Mölndal have been certified in accordance with ISO 9001 since 2013.

Patents – a natural feature of the product development process

The patenting of Arcam’s technology is an integral part of development efforts. To minimise the risk of imitation and to maintain its market-leading position, Arcam applies for patents for both process expertise and key components in the systems developed by the company. Arcam continuously monitors new patent applications from around ten potential competitors. Patents are initially filed internationally through the PCT (Patent Cooperation Treaty) and then in Europe through the EPO (European Patent Organisation), after which the application is filed in ten strategically selected countries, providing broad global patent protection.

Production and installation

The assembly of EBM® systems takes place in-house. Some components that are crucial to the system’s perfor-mance and function, including the electromagnetic lens system, are manufactured by Arcam. Otherwise, sub sys -tems are finished by subcontractors as far as possible, thus reducing the need for in-house manufacturing capacity. Most of Arcam’s subcontractors are Swedish. After final assembly, Arcam conducts quality assurance tests of the system. The systems are delivered as complete free-standing units and the installation work at the customer takes approximately two weeks.

User-friendly software for control is essential.

Picture taken by LayerQam of a layer of metal added to hip joint cups.


Arcam´s EBM®systems

Arcam A2X is primarily intended for the manufacture of high-temperature materials such as titanium aluminide and inconel for the aerospace industry.

Arcam Q10 is primarily intended for the manufacture of orthopaedic implants. The system features Arcam LayerQamTM, a function for product traceability.

Arcam Q20 is based on the same new technology as Arcam Q10, but features a larger building chamber that is primarily intended for the aerospace industry.

At the core of Arcam’s business and what it offers is the proprietary EBM® technology, which enables the cost-effective manufacture of complex products with advanced functionality. Arcam currently manufactures three different EBM® systems.


I have a passion for orthopedicsBrian McLaughlin is a Biomedical Engineer and runs the Additive Manufacturing Unit at DiSanto Technology Inc. in Shelton, CT, USA.

I joined DiSanto in June 2014 to help realize contract manufacturing services

using Arcam technology. I work in concert with clients to help them realize

their innovative orthopedic designs using cutting edge software solutions and

building their solutions using the Arcam EBM® technology platform. I have a

passion for orthopedics that has driven my professional development over the

past 7 years, from helping orthopedic companies design and develop their

products, to being an orthopedic clinical sales resentative supporting surgeons

and cases in the OR, to now manufacturing designs that can only be made

using Additive Manufacturing. Throughout my whole career I have utilized

3D printing leveraging multiple platforms and materials, and look forward

to helping the industry stay on the cutting edge.

Although passionate about the work I do, my family is everything

to me and a driving force in my life. I enjoy just about

everything outdoors from skiing and soccer,

to cycling and golf.

“



Contract manufacturing of orthopaedic implants through the subsidiary DiSanto

Through its wholly owned subsidiary DiSanto in the US, Arcam offers contract manufacturing of orthopaedic implants. DiSanto has a broad offering covering the production of complete implant systems with components made of titanium, cobalt chrome and medical grade plastics. DiSanto uses both EBM® technology and conventional manufacturing equipment.

DiSanto currently has four Arcam Q10 systems in newly built premises. In addition to EBM® the company already has a bank of CNC machines (around 55) and finishing equipment.

DiSanto is a contract manufacturer of implants in a variety of both metals and plastics for a broad customer base. These customers are based primarily in the US.

Clear benefits of EBM®

DiSanto is noticing considerable interest in EBM® from its customers. Since the company started offering EBM®-made implants, the number of customers has increased significantly. The company is seeing a trend in which complex designs and parts with porous surfaces are increasingly being manufac-tured using EBM®.

Better surfacesEBM® is primarily used for the manufacture of implants with surfaces for bone tissue ingrowth in that EBM® offers better conditions during production as the process eliminates the need for plasma spraying and moulding. At the same time, EBM® offers better design possibilities.

Higher productivityEBM® involves a change in production methods as some external suppliers are replaced. The company’s CNC processing will also change. Some parts will be produced using EBM®. These parts will require limited post-processing using CNC, resulting in shorter production cycles and more efficient use of machinery.

Structured quality work

DiSanto is approved by the FDA as a contract manufacturer of implants certified in accordance with ISO 13485–2003 (quality management systems for the design and manufac-ture of medical devices) and ISO 9001–2008.

Established:1967, acquired by Arcam in 2014.

CEO:Ronald Dunn

Facility: 55 CNC machines and four Arcam Q10s

Employees: 94


Metal powders through subsidiary AP&C

Around 40% of the powder produced and supplied by AP&C is sold to EBM customers and roughly the same amount is sold to customers using laser-based systems. The remaining 20 percent is sold to customers in other powder metallurgy industries.

The majority of the powder is titanium or titanium alloy, although AP&C also supplies other types of metals and alloys such as niobium and inconel.

A high-quality independent supplier

AP&C, which is AS 9100 certified, is positioned as a quality producer of spherical metal powders of reactive metals for the specific requirements of AM producers. AP&C pulverises a number of high value metal alloys such as titanium and nickel alloys, as well as niobium, molybdenum, zirconium and tantalum. The majority of the company’s production involves titanium alloys.

Specific selling points include: high purity, truly spherical powders that provide superior fluidity, low oxygen content and consistency between production cycles. The properties of the metal powder are certified internally and by a third- party laboratory.

The company’s metal powders are also suitable for MIM (metal injection moulding), HIP and CIP (hot and cold isostatic pressing) and surface coatings.

Worldwide sales

AP&C sells its powder in the US, Europe and Asia through the company’s retailers and a network of agents and distributors.

The metal powders are primarily used for the production of orthopaedic implants and production for the aerospace industry. Titanium powder accounts for 90 percent of the company’s production and 80 percent is attributable to AM production.

In addition to ensuring supply capacity for Arcam’s customers, AP&C also supplies other AM manufacturers, including laser/sintering companies or their customers.

R&D focuses on production and efficiency

R&D is primarily directed at improving productivity and efficiency and achieving the highest possible level of quality. The development of additional metal alloy powders is also underway. Part of the research is being conducted in co- operation with one of Canada’s largest technical institutes for the development of new materials.

Limited competition

The titanium powder market is a rapidly growing niche market with a limited number of manufacturers globally. AP&C differentiates itself by being the only company to use the pulverisation technique of gas plasma burners to produce spherical powder with low oxygen levels that is specially adapted to AM technology.

Established: 2004, acquired by Arcam in 2014.

CEO: Jacques Mallette

Employees: 34

Current production capacity: 150 tonnes

Through its wholly owned subsidiary AP&C, Arcam supplies metal powder for both EBM and laser-based equipment, as well as for other powder metallurgy applications.


Arcam’s contribution to a more sustainable worldSustainability work is an integral part of Arcam’s business. The objective is to ensure greater integrity with the best possible results – financially, socially and environmentally.

EnvironmentDistinct environmental gains with EBM®

The EBM® system’s environmental gains occur during its entire life cycle. This occurs primarily through maximum utilisation of the material to generate minimum material loss compared with traditional methods such as casting and cutting.

In terms of the work environment, the EBM® system has no negative impact thanks to very low noise levels and emission-free process, because the build process occurs in a vacuum.

EBM®-manufactured components

The EBM® system contributes to a more sustainable world through not only its functionality but also the opportunities provided in the production of new components. In the aerospace industry, this involves finding ways to produce lighter and thus more fuel-efficient aircraft. Here several possibilities have been identified thanks to EBM® technology. For example, engine components made of titanium alloys can replace components made of heavier metals.

Distinct improvements for individuals

EBM® is also used in the production of orthopaedic implants with unique properties and/or shapes adapted to the individual. From a social perspective, people are given a better quality of life with increased mobility and a more active life.

Internal environmental work

None of Arcam’s activities requires permits or registration under the Swedish Environmental Code. Arcam’s own environmental impact derives primarily from energy usage and the indirect consumption of raw materials through the processed components purchased from subcontractors.

Stakeholders

Arcam has a multifaceted network of stakeholders. These comprise customers, the customers’ customers, suppliers, universities and research institutions, co-operation partners, employees and shareholders, as well as the financial market. In addition to these groups there are those who use products manufactured using EBM® technology, primarily the large number of people with implants.

Product liability Work to develop Arcam’s EBM® system into efficient production resources is a prerequisite for the company’s continued success. Arcam’s system is CE-marked (Conform-ité Européenne – complying with the EC directive) in accord-ance with the directives for low voltage, machinery and EMC (electromagnetic compatibility). The systems do not require any additional authority approval for the production of implants or aerospace components. However, the parts that the customers manufacture in the systems must most often undergo certification, depending on the purpose.

For implants, CE-marking applies in Europe, the FDA in the US and the corresponding authority approval in Asia. The aerospace industry also has extensive requirements for the approval of components.

Arcam’s, AP&C’s and DiSanto’s facilities are ISO 9001 certified.

DiSanto is also approved by the FDA as a contract manufac-turer of implants and is certified in accordance with ISO 13485-2003 (quality management systems for the design and manufacture of medical devices). AP&C is certified in accordance with AS9100.


Employees – a prerequisite for success

The properties and quality of the company’s products are highly significant, but it is Arcam’s employees, their expertise, values, attitudes and behaviour that are the primary genera-tors of success.

Clear corporate culture

Arcam’s corporate culture and spirit are key success factors. By utilising and strengthening the knowledge and culture that Arcam has fostered over the years, the organisation can both be successful and fulfil its vision.

Arcam’s success and operations are based on four values:

• Customer orientation

• Drive

• Innovation

• Quality

The company’s recruitment consultant describes Arcam as an innovative company where work is carried out in an atmosphere of acceptance and an informal environment. The organisation is solution-oriented, where employees work hard and are dedicated.

Arcam’s organisation is highly specialised. The Group has expertise in metallurgy, mechanical engineering, electronics, programming, production technology and marketing. The educational level is high, with a number of graduate engineers, including some 15 holding PhDs within the Group.

The Arcam Group has a total of 228 employees: 100 at Arcam, 34 at AP&C and 94 at DiSanto.

Skills development vital

Arcam is a distinct knowledge-based company. Through Arcam’s many years of research and development work, the company and its employees have acquired specialist know-how within the company’s core areas – metallurgy and electron beam technology. Arcam will continue to prioritise skills development, including through participation in international research and development projects. Arcam is able to continuously benefit from new research findings in its operating area thanks to close co-operation with several international research institutions and technical universities.

Work environment and health

The health risks at Arcam are deemed minor and are rimarily related to production. Through preventive measures, the company strives to ensure a healthy work environment at the workplaces. In 2014, no environment-related incidents were reported (2).

Arcam also invests in healthcare, offering regular health check-ups to its employees. During 2014, sickness absence remained very low.


Engaging technologyCaisa Wessberg, electrotechnology engineer and customer project manager.

“I started at Arcam as a service engineer in 2007 – a fun job

involving a lot of travelling to our customers around the world.

I’ve been working as a customer project manager for a year now.

I’m the link between the customer and Arcam from the time the

order is signed until the system is installed and tested on site.

The job is based on communication, both internal and external.

Arcam’s technology is an important reason why I’m still at the

company – I’m proud to say I work here. The rapid level of expan-

sion is another thing that makes my job fun as I’m constantly

developing, thanks largely to being given and being expected

to take responsibility.

Outside of work, I’ve just started a gymnastics association for

children and young people back home in Sätila. We give the

kids the joy of movement and I also nurture my own interest in

gymnastics as a coach, which helps both to create distance

from and empower my work.”

“


HistoryArcam’s history begins as a research project in the mid-1990s based on the first patent that was granted in 1993. The Arcam AB company was founded in 1997.

Following seven years of intense development work, including five years within Arcam, the first production version of the company’s machine, the EBM® S12, was launched in 2002 for manufacturing using steel. At the end of 2003, manufacturing using titanium began followed by the launch of manufacturing using cobalt chrome in 2005. Since the introduction, more than 150 systems have been sold to customers in Europe, the US and Asia.

Below is a description of the company’s development from 2000 until the end of 2014.

2000 Additive manufacturing technology developed. There were co-operation projects with companies including Caran Models & Prototypes, Volvo Car Corporation and Ericsson. Five prototype systems were developed. Net sales MSEK 1.4. Operating loss MSEK -10.2. In July, Arcam was floated on the NGM (Nordic Growth Market).

2001 Development of the electron beam’s precision and the accuracy of the manufactured components continued. Arcam received two orders for prototype systems which were delivered in 2002. Collaborative projects with Ericsson and Volvo concluded. Net sales TSEK 0. Operating loss MSEK -27.6.

2002 Two prototype systems were delivered. The EBM® S12, the first commercial version of Arcam’s electron beam machine, was launched. Marketing activities gradually increased. Net sales MSEK 1.0. Operating costs (excluding depreciation/amortisation) amounted to MSEK 22.7, of which development expenditure was approximately MSEK 9. Operating loss MSEK -28.5.

2003 Marketing preparation was intensified and four EBM® systems were sold, one to North Carolina State University in the US, one to Tecnomach in Italy, one to the Warwick Manufacturing Group in the UK and one to a car manufacturer. EBM® S12T for AM using titanium was launched. Net sales MSEK 8.9. Operating loss MSEK -20.0.

2004 Arcam received reference orders in the key aerospace and implant industry segments. Four EBM® systems were sold, one to Boeing in the US, one to an implant manufacturer and to two contract manufacturers in the US and Germany. Net sales MSEK 16.7. This increase was due to the higher price of the systems sold. Operating loss MSEK -12.7.

2005 Arcam strengthened its position in the US market and established a service company. Four EBM® systems were sold, one to the University of Erlangen in Germany, one to a US processing industry and to two contract manufacturers in the US. Cobalt chrome for AM was launched. Net sales MSEK 22.3. Operating loss MSEK -12.2.

2006 12 systems were sold to ten new customers, primarily in the implant and aerospace industries. Customers included NASA, Airbus, the Royal College of Art in London and a Japanese supplier of medical implants. Net sales MSEK 47.3. Operating loss MSEK -8.2.

2007 13 systems were delivered to ten new customers, including the implant company DePuy in the US and Sheffield University. The second generation of Arcam’s A2 electron beam system was launched and featured a greater construction volume and faster construction speed with better measurement accuracy and surface finish. Net sales MSEK 76.0 (+61%). Operating profit MSEK 1.8.

2008 Six systems were delivered to new and existing customers. EBM® Multibeam was launched, featuring greater precision and build speed. Net sales MSEK 58.3. Operating loss MSEK -20.4.

2009 Nine systems were delivered to existing customers. A major order was signed by the Italian company Avio, which ordered four systems for industrial production with a view to ordering additional systems. EBM® S12 was superseded by the new A1 system, suited for industrial production in the implant industry. Net sales MSEK 74.5. Operating loss MSEK -6.5.

2010 13 systems were delivered, of which seven were to existing customers and six to new customers. The majority of these were to Asia. Two new service offices opened, one in Beijing and one in Milan. A Key Account Management (KAM) organisation was introduced for Arcam’s strategically important customers. Net sales MSEK 90.5. Operating profit MSEK 1.8.

2011 14 systems were delivered, of which three were to existing customers. The aerospace industry became more signifi-cant. Orders received amounted to 12 systems. Net sales MSEK 107.7. Operating profit MSEK 5.5.

2012 15 systems were delivered, of which eight were to existing customers. The aerospace industry continued to grow in importance. Orders received amounted to 24 systems. The organisation continued to grow, adding five new members of staff to make a total of 50 employees. Net sales MSEK 139.1. Operating loss MSEK 15.0.

2013 25 systems were delivered. Orders received amounted to 27 systems. A strategic co-operation agreement to boost the wareness and acceptance of AM was concluded with DiSanto. Arcam secured its supply capacity of titanium powder by acquiring the Canadian metal powder manufacturer AP&C. A new system platform, Arcam Q10 and Q20, was introduced. Net sales MSEK 199.4. Operating profit MSEK 14.5.

2014 35 systems were delivered. Orders received amounted to 42 systems. The Group developed and grew sharply. Contract manufacturer DiSanto in the US was acquired. Net sales MSEK 339.0. Operating loss MSEK 19.6.


At 31 December 2014, Arcam’s share capital amounted to SEK 18,665,241.50, represented by 18,665,240 shares each with a quotient value of SEK 1.00. All shares carry one vote and equal entitlement to a share in the company’s assets and profits. Arcam has been listed on Nasdaq QMX since 2012 under the designation ARCM. Prior to that, the company had been listed on NGM Equity since 2000. A share split was implemented with effect from 21 January 2014, whereby one old share was split into four new shares.

Historical performance

During 2014, the price of Arcam’s stock fell by 37 percent to SEK 145. The OMX Industrial Goods & Services index rose 11 percent (4) during the same period. During the year, Arcam’s stock cost a maximum of SEK 304 (282) per share and a minimum of SEK 132 (34) per share. At the end of 2014, Arcam’s market capitalisation amounted to approximately MSEK 2,427 (4,010).

Trade volume

During the year, 40.9 million (40.6) of Arcam’s shares were traded, corresponding to an annual turnover rate of 222 percent.

Shareholders

The number of shareholders at 31 December 2014 totalled 5,602 (3,261).

The share350

300

250

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50

02010 2011 2012 2013 2014

2,450,000

2,100,000

1,750,000

1,400,000

1,050,000

700,000

350,000

0

SEK

Turnover Arcam OMX STO Industrial Goods & Services PI

Turnover

Share development 2010–2014

350

300

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150

100

50

0

2014

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02

2014

-02-

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0220

14-0

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2,450,000

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SEK Turnover

Turnover Arcam OMX STO Industrial Goods & Services PII

Share development 2014

Shareholding by area

Rest of Europe, 29%

Rest of the world, 3%

Sweden, 37%

Denmark, Finland and Norway, 1%

USA, 30%


Warrants

At the end of the year, Arcam had three incentive programs under which warrants were issued to employees and strategic cooperation partners. The subscription period for warrants issued under the programs will run until June 2015, June 2016 and June 2017. The conditions for the company’s warrants program are listed below. In 2014, 1,923,000 shares were added in three new issues.

Warrant programme GrossOf which assigned

Subscription price

Programme 12–15 105,000 62,000 17.90

Programme 13–16 160,000 93.19

Programme 14–17 200,000 311.48

Total 465,000 62,000

Dividend policy

The Board’s intention is that the dividend should reflect Arcam’s long-term earnings trend and capital requirements. In future years, it has been deemed that any surplus funds will be reinvested in the business to finance the company’s continued growth.

DividendFor the 2014 financial year, the Board proposes to the Annual General Meeting that no dividend be paid (SEK 0 for 2013).

Arcam’s information policy

Arcam’s ambition is to communicate information internally and externally so that information about the company and its operations, as well as confidence in the company, is maintained. The information must be correct, relevant and well-formulated as well as adapted to the target groups, including shareholders, the capital market, media, employees, suppliers, customers, authorities and the public.

The Arcam Group is growing and although the sale of EBM® systems is important for the Group, individual orders for EBM® systems are no longer crucial. The Board therefore considers that individual transactions do not affect the perception of the company. As of 6 February 2015, the company is changing its information policy so that each EBM transaction will no longer be published. The company will continue, of course, to publish business events that the company considers significant.

Annual Report available on Arcam’s websiteArcam has chosen to not print and distribute the Annual Report to the shareholders for environmental and cost reasons. The annual report, as well as quarterly reports and press releases, is available on the company’s website for investors at www.arcamgroup.com. The report can also be ordered from the company.

Arcam AB’s largest shareholder at 31 December 2014

Owner SharesHolding and

votes, %

1 Stiftelsen Industrifonden 1,948,808 10.44

2 Oppenheimer Glob Opportunity Fund 1,200,000 6.43

3 State Street Bank & Trust com., Boston 1,004,388 5.38

4 Citibank Na New York 709,414 3.80

5 Six Sis Ag, W8imy 606,251 3.25

6 Clearstream Banking S.A., w8imy 520,549 2.79

7 Cbldn-Ubs Financial Services Inc 497,309 2.66

8 Euroclear Bank S.A/N.V, W8-Imy 412,065 2.21

9 CBNY-Charles Schwab Fbo Customer 407,087 2.18

10 NTC Various Fiduciary Capacit 347,427 1.86

11 Goldman Sachs & Co, W9 336,080 1.80

12 SSB Client Omnibus Ac Om07 (15 Pct) 334,812 1.79

13 Canadian Treaty Clients Account 297,604 1.59

14 Ml, Pierce, Fenner & Smith Inc 290,611 1.56

15 Polar Capital Technology Trust Plc 284,536 1.52

16 Prodatec aktiebolag 280,000 1.50

17 State Street Bank and Trust Omnibus 275,133 1.47

18 Hedlund, Henrik 262,157 1.40

19 Jpm Chase na 228,067 1.22

20 Försäkringsaktiebolaget, Avanza pension 221,636 1.19

Total 20 largest shareholders 10,463,934 56.1%

Other shareholders 8,201,306 43.9%

Total in the company 18,665,240 100.00%


Trend in share capital 2006–2014

Year TransactionChange in

number of sharesTotal

number of sharesChange in

share capital, SEKTotal

share capital, SEK Quotient value

2006 New issue 1 1,834,664 47,448,128 183,466.00 4,744,813.00 0.10

2006 New issue 2 10,000,000 57,448,128 1,000,000.00 5,744,813.00 0.10

2006 New issue 3 250,000 57,698,128 25,000.00 5,769,813.00 0.10

2006 New issue 4 2,416,000 60,114,128 241,600.00 6,011,413.00 0.10

2007 New issue 5 3,250,000 63,364,128 325,000.00 6,336,413.00 0.10

2009 New issue 6 84,064,687 147,428,815 8,406,468.50 14,742,881.50 0.10

2012 Reverse split7 -143,743,095 3,685,720 0.00 14,742,881.50 4.00

2012 New issue 8 49,375 3,735,095 197,500.00 14,940,381.50 4.00

2013 New issue 9 21,500 3,756,595 86,000.00 15,026,381.50 4.00

2013 New issue 10 200,000 3,956,595 800,000.00 15,826,381.50 4.00

2013 New issue 11 175,000 4,131,595 700,000.00 16,526,381.50 4.00

2013 New issue 12 27,625 4,159,220 110,500.00 16,636,881.50 4.00

2013 New issue 13 26,188 4,185,408 104,752.00 16,741,633.50 4.00

2014 New issue 14 400,000 4,585,408 1,600,000.00 18,341,633.50 4.00

2014 Split 15 13,756,224 18,341,632 0.00 18,341,633.50 1.00

2014 New share issue 16 55,000 18,396,632 55,000.00 18,396,633.50 1.00

2014 New share issue 17 95,000 18,491,632 95,000.00 18,491,633.50 1.00

2014 New share issue 18 173,608 18,665,240 173,608.00 18,665,241.50 1.00

1) New share issue due to exercise of warrants. The exercise price was SEK 1.37 and the total amount issued was MSEK 2.5.2) New share deviating from the preferential rights of shareholders. The exercise price was SEK 3.17 and the total amount issued was MSEK 31.7.3) New share issue due to exercise of warrants. The exercise price was SEK 1.21 and the total amount issued was MSEK 0.3.4) New share issue due to exercise of warrants. The exercise price was SEK 2.48 and the total amount issued was MSEK 6.0.5) New share issue due to exercise of warrants. The exercise price was SEK 1.21 and the total amount issued was MSEK 3.9.6) New share issue due to subscription rights. The shareholders received four (4) subscription rights for each share held. The exercise price was SEK 0.35 and the total amount issued was SEK 29.422.640.45.7) 1:40 reverse split was resolved at the Annual General Meeting of March 29 and the first date of trading was May 7, 2012.8) New share issue due to exercise of warrants. The subscription price was SEK 44.40 (after the reverse split) and the total issue amount was MSEK 2,192.9) New share issue due to exercise of warrants. The subscription price was SEK 78 (after the reverse split) and the total issue amount was MSEK 1,677.10) Directed new issue through Carnegie. The exercise price was SEK 300 and the total amount issued was MSEK 60.0. 11) Directed new issue through Carnegie. The exercise price was SEK 325 and the total amount issued was MSEK 56.875.12) New share issue due to exercise of warrants. The subscription price was SEK 78 (after the reverse split) and the total issue amount was MSEK 2,155.13) New share issue due to exercise of warrants. The subscription price was SEK 70.4 (after the reverse split) and the total issue amount was MSEK 1,844.14) Directed new issue through Carnegie. The exercise price was SEK 870 and the total amount issued was MSEK 348.0. (Issue expenses amounted to SEK 10,511,000)15) A 4:1 split was resolved at the Extraordinary General Meeting on 6 December and the first day of trading was 21 January 2014. 16) New share issue due to exercise of warrants. The subscription price was SEK 17.6 (after the reverse split) and the total issue amount was MSEK 0.968.17) New share issue due to exercise of warrants. The subscription price was SEK 17.9 (after the reverse split) and the total issue amount was MSEK 1,701.18) New share issue (offset issue) due to exercise of warrants (DTI). The subscription price was SEK 55.8 (after the reverse split) and the total issue amount was MSEK 9,687.

} (Issue expenses amounted to SEK 3,651,872)


Analysts following Arcam

Mikael Laséen, Carnegie Investment BankNils Sjögren, RemiumBobby Burleson, Canaccord GenuityTroy Jensen, Piper JaffrayJason North, Jefferies LLCAnanda Baruah, Brean Capital

Share data

2010 2011 2012 2013 2014

Number of shares at end of period 147,428,815 147,428,815 3,735,095 4,185,408 18,665,240

Number of shares after dilution 151,428,815 153,412,132 3,735,095 4,254,772 18,721,486

Average number of shares 147,428,815 147,428,815 3,710,408 15,983,476 18,412,004

Equity per share, SEK 0.41 0.45 22.39 132.10 34.36

Shareholders’ equity per share after dilution, SEK 0.00 0.43 22.39 129.95 34.26

Earnings per share, SEK 0.01 0.04 4.04 0.96 3.10

Earnings per share after dilution, SEK 0.01 0.04 4.04 0.96 3.09

Operating cash flow per share, SEK 0 0.16 -1.29 7.10 1.45

Dividend per share, SEK 0 0 0 0 0

Share price at year-end, SEK 1.22 1.04 169.50 958.00 145.00

Number of shares traded 20,574,969 15,802,606 1,423,360 10,163,262 40,921,884

Annual turnover rate, % 14.0 10.7 38.4 254.3 222.3

P/E multiple 78 27 42 249 47


Risk

Operating risks

Market acceptanceArcam is a system manufacturer that is introducing a new technology. If it takes longer than expected for the market to accept the new technology and/or Arcam as a supplier, this could have a negative impact on Arcam’s development.

The company has expanded the value chain vertically to include the supply of metal powder and contract manufacturing.

Technical development and competitionArcam’s technology competes with several traditional and established manufacturing methods and with alternative free-form methods. Competitive methods are developed continuously and it is not impossible that such a development could have a negative impact on Arcam’s competitive situation.

The company is continuously developing the technology, largely in close collaboration with customers.

Sales and marketingThere is considerable interest in Arcam’s technology. However, there is also considerable caution from customers when investing in new technology and introducing an article in the market takes a long time. Building up a market organisation has associated costs. Arcam’s strategy is to cooperate with local agents and distributors.An order that is brought forward or delayed could have an impact on the company’s annual sales and earnings.

Arcam’s strategy is to work both with direct sales to end customers as well as with indirect sales by co-operating with local agents and distributors. Sensitivity decreases as the number of customers and system orders increases.

The company’s productsArcam has developed a commercially viable product system. To fully utilise its potential requires continuous development of both applications and the introduction of new materials, for instance. Although product development is estimated to generate added competitive advantages for Arcam, it cannot be ruled out that development will be delayed, either due to insufficient resources or due to unforeseen technical problems.

The company is continuously developing the technologies, often in close collaboration with customers.

The company’s servicesArcam offers contract manufacturing through its subsidiary DiSanto. The company offers manufacturing using several technologies, but it cannot be ruled out that new technolo-gies will be added.

The company maintains continuous contact with customers and the industry, while products manufactured using new technologies require authority approval, which enables DiSanto to plan in advance with regard to additional equip-ment and skills.

EmployeesArcam has a number of key employees with a high level of expertise and established customer relationships. Both development and customer efforts take place in teams, thus limiting the financial effect of the possible loss of a single key employee.

Arcam offers stimulating work assignments and market-based salaries. Employees have signed employment contracts with Arcam, including confidentiality clauses and restrictions on competition during the term of employment. As the organisa-tion and the number of employees grow, so the risk decreases.

SuppliersSome of the components that are included in the EBM® system are purchased from individual or a limited number of suppliers. It may be difficult to source these products from alternative suppliers. Should one of the company’s existing suppliers terminate an agreement, offer inferior terms and conditions, or be unable to supply the components required by the company, this could have a negative impact on Arcam’s competitiveness.

Arcam is systematically expanding the number of suppliers in order to secure future supplies.

Product liabilityArcam offers guarantees for its products. Claims may pertain, for example, to quality defects in the company’s products, or material and personal damage caused by the company’s products.

To manage the product liability risk, Arcam has taken out liability insurance.


AcquisitionsIn 2014, Arcam completed two major acquisitions involving AP&C and DiSanto. While these two businesses are expect-ed to contribute to Arcam’s development, it cannot be ruled out that challenges related to the takeovers or delays in the exchange of the Group’s business will have a negative impact on Arcam’s earnings.

Before the acquisitions, Arcam carried out thorough due diligence of the acquisition objects and a detailed market assessment.

Technology, products and patentsArcam is a world leader and is setting new standards for the freeform production of advanced components in solid metal. Accordingly, it is also natural that the technology may be copied.

Arcam protects its innovations both through patent applica-tions in applicable markets, as well as by monitoring patent applications from competitors.

Financial risks

FinancingArcam’s future earnings potential is highly dependent on the future trend of the market. According to the company’s assessment, the existing cash flow and working capital are sufficient for 12 months. With respect to possible acquisitions or future investments, it cannot be ruled out that an injection of capital may be required. This could result in the need to inject shareholder equity for Arcam to develop optimally.

Currency risksThe majority of Arcam’s revenues and expenses are denomi-nated in EUR and USD, while the reporting currency is SEK. Arcam operates on an international level and is exposed to currency risks from various currency exposures, primarily in respect of EUR and USD. In 2014, approximately 65 percent of sales were in EUR and about 35 percent in USD.

Arcam continuously hedges the net currency flows through forward contracts.

Credit riskArcam has no significant concentration of credit risks. Sales of products and services are made to customers with an appropriate credit record.

Arcam has adopted a formal credit policy and credit-hedges its accounts receivable.

Liquidity riskLiquidity risks are managed with caution, which means that cash and cash equivalents are deposited in the bank.

The company’s objective is to maintain a strong cash balance.

Sensitivity analysis 1)

Factor Change

Effect on operating profit/loss,

KSEK

Net sales +/-5% volume 8,000

Sale price:

EBM® systems +/-5% 10,000

Metal powder +/-5% 5,000

Contract manufacturing +/-5% 5,000

Costs:

Personnel expenses +/-5%1) 2,000

Production costs +/-5% 3,000

Currency sensitiv-ity: 2)

EUR exchange rate +/-5% 5,000

USD rate +/-5% 2,000

1) Based on sales of MSEK 400.2) Currency exposure is approximately 65 percent EUR and 35 percent

USD. For a more detailed description of the risks and uncertainties, refer to the Directors’ report, as well as Note 3 of the Annual Report.


Multi-year overviewMSEK 2007 2008 2009 2010 2011 2012 2013 2014

Income statement

Net sales 76.0 58.3 74.5 90.5 107.7 139.1 199.4 339.0

Operating profit 1.8 -20.5 -6.5 1.7 4.6 14.5 14.5 19.6

Depreciation/amortisation -7.7 -8.7 -7.7 -7.2 -6.9 -6.1 -6.4 -18.6

Profit from financial items 0.4 0.0 0.0 0.1 1.0 0.1 0.9 20.2

Net profit for the year 2.3 -20.4 -6.5 1.8 5.5 15.0 15.4 57.1

Balance sheet

Fixed assets 18.7 15.5 14.4 12.9 14.2 17.5 19.4 354.6

Current assets 47.8 44.0 48.9 52.5 56.4 94.4 111.2 257.9

Cash and cash equivalents 17.8 0.1 16.1 23.2 38.3 26.9 503.3 321.1

Total assets 84.2 59.5 79.4 88.6 109.0 138.8 633.9 933.7

Shareholders’ equity 57.3 36.1 57.8 60.3 65.7 83.6 552.9 641.4

Long-term liabilities – – – – – – – 64.8

Current liabilities 26.9 23.4 21.6 28.3 43.2 55.2 81.0 227.5

Total shareholders’ equity and liabilities 84.2 59.5 79.4 88.6 109.0 138.8 633.9 933.7

Key figures

Number of employees, average 34 36 36 39 43 48 57 213

Sales per employee, KSEK 2,234 1,619 2,258 2,321 2,504 2,898 3,498 1,591

Sales increase, % 61 -23 28 21 19 29 43 70

Operating margin, % 2.3 neg neg 1.9 4.3 10.3 7.3 5.8

Net margin, % 3.0 neg neg 2.0 5.1 10.8 7.7 16.8

Equity/assets ratio, % 68.0 60.6 72.8 68.1 65.0 60.2 87.2 68.7

Debt/equity ratio, % – 5 – – – – – –

Return on shareholders’ equity, % 4.3 neg neg 3.0 8.7 20.1 10.7 9.6

Return on capital employed, % 4.3 neg neg 3.0 8.7 20.1 10.7 6.7

Share of risk-bearing capital 68 61 73 68 60 60 87 69

Interest coverage ratio, multiple 50 neg neg 84 25 174 168 268


Board of Directors’ Report 2014

The Board of Directors and the Chief Executive Officer of Arcam AB (publ.) (Arcam), Corp. ID No. 556539-5356, hereby present their Annual Report for 2014. It is proposed that the Annual Report be adopted by the Annual General Meeting of the company on 23 March 2015.

SharesThe number of shares in Arcam AB was 18,665,240 as of 31 December 2014.

All shares carry equal voting rights. Stiftelsen Industrifon-den, a Swedish foundation, owns at least one tenth (currently 10.4 percent) of the shares in the company.

OperationsArcam AB was established in 1997 to develop and commer-cialise technology for metal-based free-form manufacturing.

Arcam develops and manufactures products for industrial 3D printing using metal. Arcam’s technology, Electron Beam Melting (EBM®), facilitates the cost-effective manufacture of products with an advanced design and function. The Arcam Group produces industrial 3D printers through Arcam AB in Mölndal, metal powder through its subsidiary AP&C in Canada and advanced orthopaedic implants through its subsidiary DiSanto Technology Inc. in the US. Arcam’s customers are active in manufacturing, specifically in the implant and aerospace industries.

The company is listed on the Nasdaq Mid Cap in Stockholm and its headquarter is in Mölndal.

EnvironmentThe company does not pursue operations that are subject to official notification obligations or mandatory authorisation under the Swedish Environmental Code.

GroupThe subsidiary Arcam Forskning och Utveckling AB (corp. ID. no. 556605-8052) is a dormant company that does not conduct any operations.

The subsidiary Arcam Cad to Metal Inc. was registered during 2005 in Illinois, US and has five employees. The company sells spare parts, consumables and servicing to Arcam’s customers in the US.

The Group’s operations in China are conducted through the operating company Arcam (Beijing) Industrial Equipment Limited. The company provides servicing to Arcam’s customers in China and elsewhere in Asia. Arcam employs four engineers in China. Arcam Beijing is owned by a holding company in Hong Kong, Arcam China Limited.

The subsidiary AP&C was established in Quebec, Canada in 2013. The company was set up for the purpose of acquiring the AP&C metal powder-production division of Raymor Industries in Canada. The transaction was finalised in February 2014. AP&C has 34 employees and manufactures metal powder.

The subsidiary Arcam Cad to Metal Ltd. sells spare parts, consumables and servicing to Arcam’s customers in the UK. In July 2014, Arcam’s agent in the UK, Additive Manufacturing Solutions UK Ltd., was acquired and so Arcam itself is now assuming responsibility for sales in this market. Arcam Cad to Metal Ltd. has two employees.

The subsidiary DiSanto Technology Inc. in Shelton, CT, USA was acquired in September 2014. DiSanto had been a strategic partner of the company since February 2013. DiSanto has 94 employees working in the contract manu-facturing of orthopaedic implants.

Significant events in 2014During the year, orders were signed for 42 EBM® systems (27), with a total of 35 EBM® systems (25) shipped to customers. The order book at year-end was 19 systems (12). Sales for the year therefore amounted to MSEK 339.0 (199.4).

The acquisition of metal powder manufacturer AP&C from Raymor Industries in Canada took place in February 2014. AP&C is a leading producer of high-quality metal powders and has been a supplier of titanium powder to Arcam since 2006. Titanium powder is an important element in what the company offers and thanks to the acquisition of AP&C,

access to the best technology for the manufacture of top- quality metal powders has been secured for the compa-ny’s customers.

DiSanto Technology, a strategic partner since February 2013, was acquired in September 2014. The acquisition combines Arcam’s EBM® technology and DiSanto’s all-in-one service for the contract manufacturing of orthopaedic implants. Through DiSanto, the company can offer both new and existing customers the production of advanced EBM- based implants.

The combination of Arcam’s EBM® technology and DiSanto’s knowledge of the manufacture of orthopaedic implants accelerates the market’s conversion to products manufactured using Additive Manufacturing.

Efforts to industrialise the company’s technology among major players in the aerospace and implant industries are continuing. Of the 35 systems delivered during the year, the majority were destined for customers in the orthopaedic implant or aerospace industry.

Warrant programmeIn line with the Board’s proposal, the AGM resolved to launch a warrant programme targeted at senior executives and strategic partners. The programme involves the issuing of 200,000 stock options leading to a dilution effect of about 1.08 percent when fully exercised. The programme has not yet been allocated.

New share issuesThe AGM approved the Board’s proposal to authorise the Board to, on one or more occasions, decide on new share issues and the issue of convertible bonds or warrants, until the next AGM. The issue shall take place with or without deviation from the shareholders’ preferential rights and with or without provisions regarding issues in kind, offset issues, or other conditions. The total increase in share capital pursuant to this authorisation shall not exceed SEK 1,800,000. The shares will be issued at the current market price.


StockThe number of shares amounted to 18,665,240 as of 31 December 2014. At year-end, the listed share price was SEK 145.

Financial resultsNet sales in 2014 amounted to MSEK 339.0 (199.4). Sales of EBM® systems and services accounted for MSEK 237 of total sales, with the corresponding figures for the sale of metal powder and contract manufacturing being MSEK 79 and MSEK 23 respectively.

Operating profit amounted to MSEK 19.6 (14.5). During the year, the company absorbed one-off costs totalling MSEK 9.3 (5.0) in connection with the strategic acquisition of DiSanto and AP&C.

Net profit for the period amounted to MSEK 57.1 (15.4). Net profit for the year includes, in addition to the above costs affecting comparability, capitalised loss carry-forwards of MSEK 15.8.

Financial positionConsolidated cash and cash equivalents as at 31 December 2014 amounted to MSEK 321.1 (503.3).

Cash includes MSEK 6.3 (4.8) which the company is allocating for the FP7 programme run by the company. The Group has no bank financing.

InvestmentsInvestments in fixed assets amounted to MSEK 11.2 (2.7), of which intangible fixed assets account for MSEK 2.2 (1.3) and tangible fixed assets for MSEK 9.0 (1.4).

Parent CompanyNet sales in 2014 amounted to MSEK 277.8 (198.2). Opera-ting profit amounted to MSEK 36.4 (17.1). Investments pertaining to tangible fixed assets in the Parent Company amounted to MSEK 2.5 (1.9) and investments in intangible fixed assets amounted to MSEK 8.4 (11.2).

Organisation and personnelThe number of employees in the Group at the end of the period was 228 (73).

Currency exposureExchange rate risks in business transactions are consistently currency hedged (refer also to Note 3).

The work of the Board of DirectorsThe AGM was held on 27 March 2014 and the following resolutions were passed:

The AGM re-elected Board members Jan-Olof Brüer, Lars Bergström, Henrik Hedlund, Anna Hultin Stigenberg, and Thomas Carlström. Göran Malm was appointed as the new Chairman of the Board.

Over the course of the year, the Board held nine meetings that dealt with such issues as strategic direction and acquisitions, technological development, patents, sales and finances. The Board is responsible for the company’s organisation and administration and continuously assesses the company’s financial situation. The Board has adopted a written formal work plan, which, for instance, regulates the number of Board meetings, issues to be submitted for Board consideration, financial reports and instructions for the Chief Executive Officer.

Salaries and other remunerationThe Board complies with the established guidelines for the determination of salaries and other remuneration of the Chief Executive Officer and other members of the company’s mana-gement. Remuneration takes the form of a fixed salary and a bonus programme that is set each year on the basis of targets for the Group (see also Note 32).

OutlookAhead of 2015, the company expects machine sales to surpass the 2014 level and that the market for metal powder and contract manufacturing will continue to show positive development. The company also expects improved sales and operating profit for 2015 as a whole.

Significant risks and uncertainty factorsThe company sells a limited number of complex EBM® systems. The sales process is protracted, requiring six to twelve months to complete a transaction. Thus, shifts

in business conditions or deliveries can have a substantial impact on earnings for various quarters. Moreover, in current conditions, the long-term progress of the company depends on movements in industrial trends. Although Arcam’s primary markets are less cyclical than in other economic sectors, the long-term development of the company is affected by developments in the industrial economic cycle at large and so it cannot be precluded that these may, from time to time, have an adverse impact on machinery investments even in Arcam’s key market segments.

Arcam has developed a commercially viable product. Continuous development of applications and the introduction of new materials are needed to fully utilise the product’s potential. Although product development is expected to generate added competitive advantages for Arcam, it cannot be ruled out that development will be delayed, either due to insufficient resources or due to unforeseen technical problems.

In 2014, Arcam completed two major acquisitions involving AP&C and DiSanto. While these two businesses are expected to contribute to Arcam’s development, it cannot be ruled out that challenges related to the takeovers or delays in the exchange of the Group’s business will have a negative impact on Arcam’s earnings.

Proposed disposition of profits 2014The following funds are at the disposal of the Annual General Meeting:

Share premium reserve SEK 527,438,549

Accumulated loss SEK -38,967,043

Net profit for the year SEK 63,314,404

Total SEK 551,785,910

The Board of Directors propose that the Parent Company’s profit be disposed of as follows:

To be carried forward to a new account SEK 551,785,910


Statement of comprehensive incomeGroup Parent Company

TSEK Note 2014 2013 2014 2013

Net sales 4,5,32 338,987 199,367 277,766 198,202

Cost of goods sold -221,068 -115,650 -164,679 -116,717

Gross profit 117,919 83,717 113,087 81,485

Selling expenses -19,045 -11,961 -15,389 -10,971

Administrative expenses -37,392 -20,897 -18,583 -17,941

Research and development expenses -48,127 -36,324 -47,130 -35,509

Other operating income 7 6,282 – 4,398 –

Other operating costs 7 – – – –

Total operating expenses8,9,10, 16,27 -98,282 -69,182 -76,704 -64,421

Operating profit 19,637 14,535 36,383 17,064

Financial income 20,306 1,028 23,669 2,061

Financial expenses -149 -93 -12,544 -2,607

Net financial items 11 20,157 935 11,125 -546

Profit after financial items 39,794 15,470 47,508 16,518

Tax on net profit for the year 12 17,323 -72 15,806 –

Net profit for the year 57,117 15,398 63,314 16,518

– of which, attributable to Parent Company shareholders 57,117 15,398 63,314 16,518

Group Parent Company

TSEK Note 2014 2013 2014 2013

Other comprehensive income

Items that can later be reversed in the income statement:

Translation differences 16,510 24 – –

Cash-flow hedges 2,546 -2,546 – –

Income tax, other comprehensive income – – – –

Other comprehensive income, net after tax 19,056 -2,522 – –

Comprehensive income 76,173 12,876 63,314 16,518

– of which, attributable to Parent Company shareholders 76,173 12,876 63,314 16,518

Earnings per share before dilution, SEK 22 3.10 0.96 3.44 1.03

Earnings per share after dilution, SEK 22 3.09 0.96 3.43 1.03


Statement of financial positionGroup Parent Company

TSEK Note 2014 2013 2014 2013

ASSETS 3,6,26

Fixed assets

Intangible fixed assets

Goodwill 13 204,317 – – –

Capitalized expenditure for research and development 13 8 365 11,202 8,365 11,202

Other intangible fixed assets 13 62 942 – – –

Tangible fixed assets

Machinery 14 51,652 375 275 375

Equipment, tools and fixtures 15 9,147 1,497 2,266 1,493

Financial fixed assets

Deferred tax assets 12 18,192 667 15,806 –

Participations in Group companies 29 – – 148,588 178

Receivables from Group companies 32 86,552 –

Other long-term receivables – 5,714 – 5,714

Total fixed assets 354,615 19,456 261,852 18,962

Current assets

Inventories 17 115,369 46,738 67,675 41,269

Accounts receivable 18 117,648 57,192 89,399 54,427

Accounts receivable, Group companies 32 23,146 5,026

Current tax assets 12 594 633 594 633

Receivables from Group companies 32 16,797 9,564

Other receivables 11 795 1,300 9,442 2,466

Prepaid expenses and accrued income 19 12,581 5,299 8,327 5,181

Blocked funds 20 31,500 – 31,500 –

Cash and cash equivalents 20 289,640 503,321 274,785 500,502

Total current assets 579,127 614,483 521,665 619,068

Total assets 933,742 633,939 783,517 638,030


TSEK Note 2014 2013 2014 2013

EQUITY AND LIABILITIES

Shareholders’ equity, Group

Share capital 21 18,665 16,742

Other capital contributions 679,820 669,388

Reserves 17,301 -1,755

Retained earnings including net profit for the year -74,365 -131,483

Total shareholders’ equity, Group 641,422 552,892

Shareholders’ equity, Parent Company

Restricted shareholders’ equity

Share capital 21 18,665 16,742

Statutory reserve 62,337 62,337

Unrestricted shareholders’ equity

Share premium reserve 527,439 517,006

Accumulated loss -38,967 -55,485

Net profit for the year 63,314 16,518

Total shareholders’ equity, Parent Company 632,788 557,118

Long-term liabilities, interest-free

Provisions 23 42,925 – – –

Deferred tax liabilities 12 13,406 – – –

Other long-term liabilities 23 8,460 – – –

Total long-term liabilities 64,791 – – –

Current liabilities, interest-free

Advances from customers 32,007 20,089 32,007 20,089

Accounts payable 31 51,645 17,852 43,406 17,606

Liabilities to Group companies 32 8,143 806

Other liabilities 24 84,712 4,386 8,571 4,292

Accrued expenses and deferred income 25 59,165 38,720 58,602 38,119

Total current liabilities, interest-free 227,529 81,047 150,729 80,912

Total shareholders’ equity and liabilities 933,742 633,939 783,517 638,030

Assets pledged 28 1,602 25,000 1,602 25,000

Contingent liabilities 28 – – 128,848 –


Statement of changes in equity – GroupEquity attributable to Parent Company shareholders

GroupTSEK

Share capital

Other capital

contribu-tions Reserves

Earnings broughtforward Total

Shareholders’ equity 01/01/2013 14,940 214,802 767 -146,881 83,629

Comprehensive income

Net profit for the year – – – 15,398 15,398


Translation differences – – 24 – 24

Cash-flow hedges – – -2,546 – -2,546

Income tax, other comprehensive income – – – – –

Total other comprehensive income – – -2,522 – -2,522

Total comprehensive income – – -2,522 15,398 12,876

Transactions with shareholders

New subscription through warrants 301 5,374 – – 5,675

New issue in progress – 348,000 – – 348,000

New issue 1,500 115,375 – – 116,875

Costs for new share issue – -14,163 – – -14,163

Total transactions with shareholders 1,801 454,586 – – 456,388

Shareholders’ equity, 31/12/2013 16,742 669,388 -1,755 -131,483 552,892

Equity attributable to Parent Company shareholders

GroupTSEK

Share capital

Other capital

contribu-tions Reserves

Earnings broughtforward Total

Shareholders’ equity 01/01/2014 16,742 669,388 -1,755 -131,483 552,892


Net profit for the year 57,117 57,117


Translation differences – – 16,510 – 16,510

Cash-flow hedges – – 2,546 – 2,546

Income tax, other comprehensive income – – – – –

Total other comprehensive income – – 19,056 – 19,056

Total comprehensive income – – 19,056 57,117 76,173


New subscription through warrants 150 2,519 – – 2,669

New issue in progress – -348,000 – – -348,000

New issue 1,600 346,400 – – 348,000

Offset issue 174 9,514 – – 9,687

Total transactions with shareholders 1,924 10,432 – – 12,356

Shareholders’ equity, 31/12/2014 18,665 679,820 17,301 -74 365 641,422


Statement of changes in equity – Parent Company

TSEKShare

capitalStatutory

reserve

Share premium

reserveAccumulat-

ed lossNet profit

for the year Total

Shareholders’ equity 01/01/2013 14,940 62,337 62,420 -65,997 10,512 84,211


Appropriation of profits – – – 10,512 -10,512 –

Net profit for the year – – – – 16,518 16,518

Total – – – 10,512 6,006 16,518


New subscription through warrants 301 – 5,374 – – 5,675

New issue in progress – – 348,000 – – 348,000

New issue 1,500 – 115,375 – – 116,875

Costs for new share issue – – -14,163 – – -14,163

Total transactions with shareholders 1,801 – 454,586 – – 456,388

Shareholders’ equity, 31/12/2013 16,742 62,337 517,006 -55,485 16,518 557,118


Appropriation of profits – – – 16,518 -16,518 –

Net profit for the year – – – – 63,314 63,314

Total – – – 16,518 46,796 63,314


New subscription through warrants 150 – 2,519 – – 2,668

New issue in progress – – -348,000 – – -348,000

New issue 1,600 – 346,400 – – 348,000

Offset issue 174 – 9,514 – – 9,687

Total transactions with shareholders 1,924 – 10,432 – – 12,355

Shareholders’ equity, 31/12/2014 18,665 62,337 527,439 -38,967 63,314 632,788


Cash flow statementGroup Parent Company

TSEK Note 2014 2013 2014 2013

Cash flow from operating activities

Profit after financial items 39,794 15,470 47,508 16,518

Adjustments for items not included in cash flow 30 -2,641 7,200 - 2 460 9 689

Cash flow from operating activities before changes in working capital 37,153 22,670 45,048 26,208

Change in inventory -26,245 -20,264 -26,406 -20,260

Change in current receivables -50,976 933 -70,408 -2,599

Change in current liabilities 66,720 25,149 69,819 22,394

Cash flow from operating activities 26,652 28,488 18,053 25,742

Cash flow from investing activities

Investments in intangible fixed assets -2,210 -1,284 -2,210 -1,284

Investments in tangible fixed assets -9,007 -1,500 -1,268 -1,500

Investment in financial fixed assets – -5,714 – -5,714

Acquisitions -200,284 – -148,409 –

Change of loans Group – – -63,051 –

Cash flow from investing activities -211,501 -8,498 -214,938 -8,498

Cash flow from financing activities

New issue 2,668 118,899 2,668 118,899

New issue in progress – 337,489 – 337,489

Cash flow from financing activities 2,668 456,388 2,668 456,388

Decrease/increase in cash and cash equivalents -182,181 476,377 -194,217 473,632

Cash and cash equivalents at the beginning of the year 503,321 26,944 500,502 26,870

Cash and cash equivalents at year-end 321,140 503,321 306,285 500,502


NotesAccounting and valuation policies

Note 1 General informationArcam AB (publ.) corporate identity number 556539-5356, develops and manufactures machinery for the free form fabrication of complex metal components. The Parent Company is a limited company with its registered office in Mölndal, Sweden. The Parent Company’s address is Krokslätts Fabriker 27 A, SE-431 37 Mölndal, Sweden. The Parent Company is listed on NASDAQ OMX Mid Cap. These consolidated financial statements were approved by the Board of Directors for publication on 2 March 2015. The Annual Report will be submitted to the Annual General Meeting for adoption on 23 March 2015.

Note 2 Summary of important accounting policies

Basis for the preparation of the reportsThe consolidated financial statements for Arcam AB have been pre pared in accordance with the Swedish Annual Accounts Act, RFR 1 Supplementary Accounting Rules for Groups and International Financial Reporting Standards (IFRS), as adopted by the EU. The Annual Report has been prepared according to the cost method except for certain financial instruments that are recognised at fair value.

The preparation of financial statements in conformity with IFRS requires the use of some key accounting estimates. It also requires management to make certain assessments in the application of the company’s accounting policies. Areas that include a high degree of assessment, are complex, or are such areas where assumptions and estimates are of substantial significance to the consolidated financial statements are stated in Note 4. The same accounting policies have been applied as in the preceding year’s Annual Report. Income Statement is as of January 1, 2014 by function of expense.

The most important accounting principles applied in the preparation of the consolidated financial statements are indicated below. These policies have been applied consistently for all years presented, unless otherwise stated.

Standards, amendments and interpretations that came into effect in 2014, but have not given rise to any effects

• IFRS 10 Consolidated Financial Statements • IFRS 11 Joint Arrangements • IFRS 12 Disclosure of Interests in Other Entities

No new standards that came into effect in 2014 have had an impact on the financial statements.

New standards, interpretations and amendments announced but not in effectA number of new standards and interpretations enter into effect for financial years beginning after 1 January 2015, which have not been applied in the preparation of this financial report. None of these is expected to have any material impact on the consolidated financial statements with the exception of the following:• IFRS 9 Financial Instruments (replacement of IAS 39) introduces

three accounting models for financial assets that have the form of debt instruments. The Group intends to apply IFRS 9 for the financial year beginning 1 January 2018 and has not yet evaluated the full impact on the financial statements.

• IFRS 15 Revenue from Contracts with Customers contains a comprehensive model for revenue recognition with regard to customer contracts. The Group intends to apply IFRS 15 for the financial year beginning 1 January 2017 and has not yet evaluated the full impact on the financial statements

Going concern assumptionThe financial statements have been prepared in accordance with the going concern assumption.

Consolidated financial statementsThe consolidated financial statements include subsidiaries where the Parent Company directly or indirectly holds more than 50 percent of the votes, or otherwise has a controlling influence.

The Group’s financial statements are prepared according to the cost method, which means that the subsidiaries’ equity at the acquisition date, established as the difference between the fair value of the assets and liabilities, is eliminated in its entirety. Consolidated equity thus only includes the part of the subsidiaries’ equity that has arisen after the acquisition. Intra-Group profit is eliminated in its entirety. Intra-Group transactions and balance items and unrealised profit and loss on transactions between Group companies are eliminated.

Operating segment reportingOperating segments are recognised in a manner that matches the internal reporting submitted to the Group’s highest executive decision-maker. The highest executive decision-maker is the function responsible for the allocation of resources and assessment of operating segment results. The Group’s highest executive decision-maker is the Group’s President and CEO. The regular internal reporting of results to the CEO and which meets the criteria

for constituting a segment takes place for the Group as a whole. Otherwise, sales of an individual product are monitored at a product group level. None of these follow-up levels meets the criteria for an operating segment. The total Group is therefore reported as the company’s only segment.

Foreign currenciesFunctional currency and reporting currency:A functional currency is the currency that is used in the economic environment in which each Group company is primarily active. For all companies in the Group, the functional currency is the currency in the country in which the company is active. In the consolidated financial statements, the Swedish kronor is used, which is the Parent Company’s functional and reporting currency.

Transactions and balance sheet items:Foreign currency transactions are translated to the reporting currency at the exchange rates applicable on the transaction date. Exchange gains and losses arising upon payment of such transac-tions and in the translation of monetary assets and liabilities in foreign currencies at the exchange rate prevailing on the reporting date are recognised in the income statement. Exceptions are when the transactions constitute hedges that meet the criteria for hedge accounting of cash flows or of net investments, in which case gains/losses are recognised in equity via other comprehensive income. There is currently no hedge accounting in the Group.

Group companiesThe performance and financial position of Group companies are translated to the Group’s reporting currency by assets and liabilities being translated at the closing rate and income and expenses being translated to the average exchange rate. In consolidation, any exchange rate differences that have arisen in equity are carried in the item translation reserves via other comprehensive income.

IncomeSales are recognised on delivery of the products to the customer, in accordance with the terms of sale. Income attributable to service agreements is recognised as it is accrued. Sales are recognised net of VAT and discounts. Intra-Group sales are eliminated in the consolidated financial statements. The company normally has security in the asset according to sales agreements until final payment is made by the customer.


Income taxRecognised income taxes comprise taxes that are to be paid or received for the current year, adjustments to current tax pertaining to previous years and changes in deferred tax. All tax liabilities/receivables are measured at nominal amounts and in accordance with the tax regulations and tax rates that are established or have been announced and will, with great probability, be established.

Deferred tax is recognised in accordance with the balance sheet method on all temporary differences that arise between the tax values of assets and liabilities and their recognised amounts in the consolidated financial statements. Deferred income tax is calculated by applying the tax rates (and laws) that have been enacted or announced at the balance-sheet date and are expected to apply when the deferred tax asset concerned is realised or the deferred tax liability is settled.

Deferred tax assets pertaining to loss carry-forwards or other future tax deductions are recognised to the extent that it is probable that the deduction can be made against a surplus in future taxation.

Intangible assetsResearch and development:Expenses for research are expensed immediately and consist exclusively of direct costs. Expenses regarding development projects (attributable to construction and testing of new or improved products) are capitalised as intangible assets insofar as these expenses are expected to generate future financial benefits. Since the basic technical development is complete, the company assesses that future development expenses will primarily be expensed and thereby only a small part will be capitalised.

The following amortisation periods are applied: Development 5 years. Software 3–5 years.

Tangible fixed assetsAll tangible assets are recognised at cost less depreciation. Expenses for repair and maintenance are recognised as costs. Additional expenses, i.e. an increase in the future economic benefits associated with the asset, are capitalised as assets at the same time that any remaining undepreciated residual value of replaced equipment is expensed.

Property, plant and equipment are systematically depreciated over the assets’ estimated useful life. When the assets’ depreciable amount is established, their residual value is taken into account where appropriate. Component depreciation is applied in cases of essential components identified.

The straight-line depreciation method is applied for all types of tangible assets.

The following depreciation periods are applied:Machinery 5 years.Equipment, tools and fixtures 3 – 5 years.

In cases where the carrying amount of an asset exceeds its estimated recoverable amount, the asset is impaired immediately to its recoverable amount.

Impairment lossesAssets that have an indefinite useful life are not depreciated but are impairment-tested annually. Assets that are impaired are impairment- tested whenever events or changes in conditions indicate that the carrying amount may not be recoverable. An impairment loss is recognised in the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less selling expenses and value in use. In assessing impairment requirements, assets are grouped at the lowest levels where there are separate identifiable cash flows (cash-generating units).

LeasesIn the consolidated financial statements, a lease is classified either as a financial or an operating lease. A financial lease exists when the financial risks and benefits associated with ownership are essentially transferred to the lessee; if this is not the case, it is an operating lease.

Signed leases regarding leased machinery and equipment are operating leases.

Costs pertaining to operating leases are recognised in the income statement using the straight-line method over the period of the lease. Benefits acquired in connection with the signing of an agreement are recognised in the income statement as a reduction of the leasing fees using the straight-line method over the term of the lease. Variable fees are expensed in the periods in which they arise.

Financial instrumentsThe Group classifies its financial instruments in the following categories: loan receivables and accounts receivable and financial assets measured at fair value via the income statement, which solely comprise financial derivatives with positive values. Arcam currently does not apply hedge accounting. Loans and accounts receivable are initially recognised at fair value and then continuously at accrued cost in accordance with the effective interest method.

Value fluctuations on derivative instruments during the period are recognised in the income statement. Arcam also holds financial liabilities measured at fair value in the income statement in the form of financial derivatives with negative values and other liabilities. They are later recognised initially at fair value and then continuously at accrued cost in accordance with the effective interest method. Other liabilities comprise loans, accounts payable and other current liabilities.

Purchases and sales of financial instruments are recognised on the transaction date – the date the Group commits to buy or sell the asset. Financial instruments are initially measured at fair value plus transaction costs, which applies to all financial assets except those measured at fair value through the income statement. Financial instruments are derecognised from the balance sheet when the right to receive cash flows from the instrument expires or is transferred and the Group has largely transferred all risks and benefits associated with the right of ownership.

Loan receivables and accounts receivable are non-derivative financial assets with determined or determinable payments that are not listed on an active market. A distinguishing factor is that they arise when the Group provides money, goods, or services directly to a customer without the intention of trading with the accruing receivable. They are included in current assets, except for items that mature more than 12 months after the balance-sheet date, which are classified as fixed assets.


Receivables are carried at the amount expected to be paid after individual assessment. Accounts receivable are carried at the amount expected to be paid after individual assessment. When the due dates of accounts receivable extend beyond one year in the future, they are classified as long-term. A provision for depreciation of accounts receivable is made when there is objective evidence that the Group will not be able to obtain all amounts due under the receivables’ original terms. The size of the provision comprises the difference between the asset’s carrying amount and the present value of assessed future cash flows, discounted by the effective interest rate. The allocated amount is recognised in the income statement.

Derivatives The Group’s derivative instruments have been acquired to hedge the currency risks to which the Group is exposed. Derivatives are initially recognised at fair value, meaning that transaction costs are charged to profit or loss for the year. After initial recognition, derivative instruments are measured at their fair values and value fluctuations are recognised as described below. They are recognised as current receivables or liabilities in the balance sheet.

To meet hedge accounting requirements in accordance with IAS 39, there must be a documented connection to the hedged item. In addition, the hedging must effectively protect the hedged item, hedge documentation must have been prepared and the effective-ness must be measurable.

Derivatives are used for hedging future cash flows. Foreign exchange contracts that are used to hedge cash flows are recog-nized in the balance sheet at fair value. Revaluation is recognised in the income statement.

Accounts payableAccounts payable are initially recognised at fair value and then at accrued cost using the effective interest method.

Calculation of fair valueThe carrying amount after any impairment losses, for accounts receivable, accounts payable and other liabilities, are presumed to correspond to their fair value since these items are current by nature.

Loan receivables and accounts receivable, financial liabilities valued at accrued cost, financial assets measured at fair value via the income statement.

InventoriesInventories are recognised at the lower of cost and net selling price. The cost is determined by using the first-in, first-out method (FIFO).

The cost of finished goods and work in progress consists of raw materials, delivery costs and direct wages. Loan expenses are not included. The net selling price is the estimated selling price in the operating activities less applicable variable selling expenses.

Cash and cash equivalentsIncluded in cash and cash equivalents are cash and bank balances.

EquityOrdinary shares are classified as equity. Transaction costs that can be directly attributed to the issue of new shares or options are recognised, net of tax, in equity as a deduction from the issue proceeds.

Employee remunerationSalaries, social security contributions, bonuses and other current remuneration to employees are recognised when the employee has performed the service. The Group only has defined-contribution pension plans. For these, the Group pays fees to privately adminis-tered pension insurance plans on a compulsory, contractual, or voluntary basis. The Group has no further payment obligations once the fees are paid. The fees are recognised as personnel expenses when they fall due for payment.

At Arcam’s Annual General Meeting on 27 March 2014, it was resolved to issue warrants to Arcam Forskning och Utveckling AB, a wholly owned subsidiary of Arcam and to then offer employees the opportunity to acquire these warrants. The warrants programme comprises 200,000 warrants, which have not yet been allotted to employees. The exercise price for the warrants is SEK 311.48 for every new share and the subscription period is 1 July 2016 to 30 June 2017, inclusive.

Arcam’s warrants programme does not come under the regulations of IFRS 2 Share-based Payment, as employees have been invited to acquire the warrants at market price.

ProvisionsProvisions for warranty are made for every machine sold and are reported as current liabilities. The Guarantee is intended to cover the costs that could arise within one year of the machine being delivered.

Related party transactionsTransactions with related parties are specified in Note 32.

Statement of cash flowsThe statement of cash flows is prepared in accordance with the indirect method. The recognised cash flow solely comprises transactions that result in receipts or disbursements.

In addition to cash and bank balances, classification as cash and cash equivalents includes current financial investments that are exposed to only an insignificant risk of value fluctuations and:

– are traded on an open market at known amounts or– have a remaining maturity of less than three months from the

time of acquisition.Estimates and assumptions about the useful life of intangible and

tangible fixed assets could pose a risk of adjustments to the carrying amounts of assets and liabilities during future financial years.

The Parent Company’s accounting policiesThe Annual Report for the Parent Company has been prepared in accordance with the Swedish Annual Accounts Act and RFR 2 Accounting for legal entities. RFR 2 states that the Parent Company in its Annual Report shall apply International Financial Reporting Standards (IFRS) as adopted by the EU to the greatest extent possible within the scope of the Swedish Annual Accounts Act and the Safeguarding of Pension Commitments Act and in consideration of the connection between reporting and taxation. The recommen-dation indicates which additions and exceptions must be made with regard to IFRS.

The Parent Company consequently applies the policies presented in Note 2 of the consolidated financial statements, subject to the exceptions stated below. These policies have been applied consistently for all years presented, unless otherwise stated. The same accounting policies as in previous years have been applied.

The preparation of financial statements in conformity with applicable regulations requires the use of certain key accounting estimates. It also requires management to make certain assess-ments in the application of the company’s accounting policies.


Areas that include a high degree of assessment, are complex, or are areas where assumptions and estimates are of material significance to the company’s Annual Report are stated in Note 4.

Shares and participations in subsidiaries are recognised at cost less any impairment losses. Dividends received are recognised as income.

When there is an indication that shares and participations in subsidiaries have decreased in value, a calculation is made of the recoverable amount. If this is lower than the carrying amount, an impairment loss is recognised. Impairment losses are recognised in the item “Profit/loss from participations in Group companies”.

Estimates and assessments are evaluated continuously and are based on historic experience and other factors, including expecta-tions of future events considered to be reasonable under prevailing circumstances. The description found in Note 4 to the consolidated financial statements is also applicable to the Parent Company.

Since the Group applies a common risk management approach to all units, the description found in Note 3 to the consolidated financial statements is essentially also applicable to the Parent Company.

Note 3 Financial risk managementThrough its business, the Group is exposed to a number of financial risks: market risk (including currency risk, interest rate risk and price risk), credit risk, liquidity risk and cash flow risk. The Group’s overall risk management policy focuses on the unpredictability of the financial markets and strives to minimise potentially unfavourable effects on the Group’s financial performance. Risk management is taken care of by the President in accordance with policies established by the Board of Directors.

Currency riskThe Group operates internationally and is exposed to currency risks from various currency exposures, primarily with regard to USD and EUR. Currency risk arises through future business transactions, carried assets and liabilities and net investments in foreign operations. To manage the currency risk that arises from future business transactions and carried assets and liabilities, Group companies use forward contracts. Since Arcam’s expenses are primarily in SEK and Arcam sells its products in foreign currencies, mainly USD and EUR, there is a risk of lower income in the event of a considerable change in exchange rates. Arcam secures its machine sales through forward foreign exchange contracts and the effect is recognised directly in profit or loss for the year.

At the balance-sheet date, there were forward contracts amounting to KEUR 5,738 and KUSD 2,200. The negative fair value of these contracts is estimated at KSEK -2,361 and is recognised among current liabilities.

Credit riskThe risk that the Group’s customers fail to fulfil their commitments, i.e. that Arcam does not receive payment for its accounts receivable, constitutes a credit risk. The Group has formulated a written credit policy where the aim is to create uniform and clear management of credit issues. The objective is to minimise risk exposure, reduce capital tied up in accounts receivable and prevent credit losses through effective and rational credit monitoring of new and existing customers. Sales of products and services are made to customers with suitable credit backgrounds.

Liquidity riskPrudence in the management of liquidity risk entails holding adequate cash and cash equivalents and saleable securities, adequate financing through sufficient agreed credit opportunities and the possibility of closing market positions. The Group deposits its cash and cash equivalents in banks. The company conducts continuous discussions with banks regarding credit.

Interest rate risk regarding cash flows and fair valuesDue to the scope of interest-bearing assets in the Group, income and cash flow from operating activities are affected to some extent by changes in market rates.

Management of capital risksThe Group’s objective regarding the capital structure is to secure the Group’s ability to continue its business, to capitalise on business opportunities and to generate returns for the shareholders and value for other stakeholders. To effectively secure this ability, in the foreseeable future the Group will strive to remain free of debt and retain an adequate cash balance. The Board of Directors carefully monitors financial development in the company to be able to strengthen the company’s liquidity when necessary. In Arcam’s opinion, it cannot be ruled out that additional capital contributions may be necessary.

Note 4 Judgments and estimatesPreparing the financial statements in accordance with IFRS requires executive management to make assessments and estimates as well as assumptions that affect the application of the accounting policies and the recognised amounts of assets, liabilities, revenues and expenses. The actual outcome can deviate from these estimates and assessments.

Estimates and assumptions are continually evaluated and are based on historical experience and other factors, including expecta-tions of future events that are believed to be reasonable under the circumstances. The estimates and assumptions are regularly reviewed and revised as necessary. Changes of estimates are recognised in the period the change is made if the change affects only this period, or in the period the change is made and in future periods if the change affects both the period in question and future periods.

In preparing the consolidated financial statements, the Board and the Chief Executive Officer, in addition to estimates, made a number of critical accounting issues that are important for the amounts reported. This applies to the following areas:

Valuation of GoodwilThe carrying value of goodwill is tested when the indication is present at least once a year. In assessing whether there is any indication of impairment of the carrying values of goodwill assumptions about future expected earnings and cash flow are made and determination of a discount rate to the lowest possible cash-generating unit. Note 13 contains an account of the significant assumptions made in testing for impairment of goodwill and a description of the effect of possible changes in the assumptions underlying the calculations.

Credit risk in trade receivablesIn valuating the credit risk in trade receivables individual assessments are made based on historical ability to pay and on information in general.


Note 5 Distribution of income


2014 2013 2014 2013

Sale of goods 336,181 197,539 275,628 196,376

Freight income 2,806 1,828 2 138 1 826

Total 338,987 199,367 277,766 198,202

Arcam’s largest customer in 2014 accounted for approximately 4% of consolidated sales. In 2014, sales from this customer amounted to SEK 14,000 thousands, of which SEK 4,300 thousands was in aftermarket sales.

Note 6 AcquisitionsAP&COn 11 February, Arcam acquired the powder division AP&C from Raymor Industries Inc., Canada through a newly established subsidiary in Canada. The total purchase price amounted to MCAD 35 divided into an initial cash payment of MCAD 20 at takeover and a supplementary purchase price totalling a maximum of MCAD 15 to be paid during 2015 and 2016, on condition that certain targets are achieved. At the balance sheet date, the additional purchase price for AP&C is considered to amount to MCAD 15. The transaction is being financed with Arcam’s existing funds.

The business has contributed net sales of MSEK 39.9 and profits of MSEK 5.2 after charges of MSEK 4.5 relating to amortisation of the surplus value attributable to the acquisition of assets and liabilities. It is considered impracticable to present its contribution in respect of net sales and profits as if the business (assets and liabilities) had been included in the Group for the entire year. This is because the assets and liabilities does not constitute a separate unit of the seller.

Additive Manufacturing Solutions UK LtdOn 1 July, Arcam AB acquired the UK agent Additive Manufacturing Solutions UK Ltd through subsidiary Arcam CAD to Metal Ltd and is now taking over responsibility for sales in this market. The total purchase price is estimated to amount to MGBP 1.0, divided into an initial cash payment of MGBP 0.3 at takeover and an additional purchase price at the balance sheet date estimated to amount to MGBP 0.7. The additional purchase price – payable in 2015 and 2016 provided that certain targets are met – may reach a maximum of MGBP 3. The transaction is being financed with Arcam’s existing funds.

The initial cash payment is equivalent to net worth. The business consists of an agent right with no employees and so has not contributed any sales or profits following the acquisition. It is considered impracticable to present its contribution in respect of net sales and profits as if the business had been included in the Group for the entire year.

DiSanto Technology Inc.On 2 September, Arcam AB acquired strategic partner DiSanto Technology Inc. in the US. The acquisition combines Arcam’s EBM® technology and DiSanto’s all-in-one service for the contract manufacturing of orthopaedic implants. The total purchase price preliminarily amounts to MUSD 12.5, divided into a cash payment of MUSD 10.2, an offset issue of MUSD 1.4 (relating to the subscription settlement upon the sellers’ exercise of warrants in Arcam AB) and the conversion of a convertible loan to DiSanto of MUSD 0.9. The transaction is being financed with Arcam’s existing funds.

The business has contributed net sales of MSEK 23.2 and losses of MSEK -8.9 after charges of MSEK 2.5 relating to amortisation of the surplus value attributable to the acquisition. Had the business been included in the Group for the entire year, it would have contributed net sales of MSEK 88.8 and losses of MSEK -8.2 after charges of MSEK 7.5 relating to amortisation of the surplus value attributable to the acquisition.

Fair value in the Group: AP&C AMS DiSanto*

Intangible fixed assets 188.8 8.4 50.5

Tangible fixed assets 13.9 – 37.0

Deferred tax – – -12.9

Current assets 26.5 7.1 36.6

Long-term liabilities -5.5 – -8.5

Current liabilities -6.6 -3.8 -15.3

Net assets/purchase price 217.1 11.8 87.5

Unsettled purchase price -91.7 -8.2 –

Convertible/Offset issue – – -16.2

The impact of the acquisition on the Group’s cash flow 125.4 3.6 71.3

*Preliminary allocation due to non investigated tax options.

Not 7 Other operating income/expenses


Income 2014 2013 2014 2013

Exchange rate differences 5,176 – 4,223 –

Other income 1,106 – 175 –

Total 6,282 – 4,398 –


Expenses 2014 2013 2014 2013

Other expenses – – – –

Total – – – –


Note 8 Salaries and other remuneration, as well as social security contributions


Average no. of employees 2014 2013 2014 2013

Women 45 10 12 9

Men 168 47 57 38

Total 213 57 69 47

The Group employs 24 (-) women and 79 (4) men in the US, 8 (-) women and 26 (-) men in Canada, 2 (2) men in Italy, 2 (2) men in the UK and 1 (1) woman and 3 (1) men in China.

2014 2013

Gender distribution in the Group and the Parent Company among Board members and other senior executives Number

Of whom men Number

Of whom men

Board members 6 5 7 6

CEO and other senior executives 5 4 5 4

Group, total 11 9 12 10

Salaries and other remuneration 2014 2013 2014 2013

President and CEO 2,527 2,272 2,527 2,272

Board of Directors 900 675 900 675

Senior executives* 4,493 3,553 3,030 3,553

Other employees 62,254 28,926 37,764 24,940

Total 70,174 35,426 44,221 31,440

*Senior executives refers to members of the Group’s management team, excluding the CEOThe Management group has been changed after the acquisitions of AP&C and DiSanto.

Pension costs 2014 2013 2014 2013

President and CEO 498 442 498 442

Board of Directors – – – –

Other employees 4,196 2,994 4,075 2,735

Total 4,694 3,436 4,573 3,177


Social security contributions 2014 2013 2014 2013

President and CEO 915 821 915 821

Board of Directors 191 212 191 212

Other employees 14,065 8,948 11,540 8,529

Total 15,170 9,981 12,645 9,562

Note 9 Fees and remuneration to auditors


2014 2013 2014 2013

Ernst & Young AB

Auditing assignments 515 242 311 242

Other audit assignments 275 149 275 149

Tax advisory services 50 11 12 11

Other assignments 481 283 12 283

Other

Auditing assignments 9 – – –

Other audit assignments – – – –

Tax advisory services 33 – – –

Other assignments – – 11 –

Total 1,363 685 621 685

Auditing assignments pertain to examination of the Annual Report and financial statements, as well as the administration of the Board and the CEO, other tasks incumbent upon the company’s auditors and advisory services or other assistance resulting from observations made during such audits or the implementation of other such tasks. All other work is defined as other audit assignments.


Note 10 Expenses by nature


2014 2013 2014 2013

Cost of direct materials -133,932 -87,133 -125,849 -85,391

Personnel expenses -96,849 -47,774 -64,790 -46,819

Depreciation/amortisation -18,633 -6,437 -5,642 -6,434

Other operating costs -76 218 -43,403 -49,501 -42,409

Total -325,632 -184,747 -245,781 -181,053

Note 11 Net financial items


Income 2014 2013 2014 2013

Interest, external 3,174 1,028 6,633 2,061

Other financial income 17,132 – 17,036 –

Total 20,306 1,028 23,669 2,061

Expenses 2014 2013 2014 2013

Interest, external -117 -93 -56 -93

Impairment of receivables from subsidiaries – – -8,284 –

Other financial expenses -32 – - 4 204 -2,514

Total -149 -93 -12 544 -2,607

Note 12 Tax GroupThe accumulated tax deficit amounted to MSEK 84.8 (139.4), of which MSEK 11.8 (9.0) is attributable to the subsidiary Arcam Cad to Metal Inc.

The capitalisation of tax loss carry-forwards in the Parent Company of MSEK 15.8 (-) is in accordance with IAS 12 and is based on the positive profit trend in recent years. No deferred tax assets have been recognised in the subsidiaries since it is difficult to assess when they will be utilised and in view of the company’s reported losses historically. As a result, the income tax recognised in the income statement deviates from the amount which, based on the current tax rate, should have been recognised based on profits before tax. There are temporal limitations to the utilisation of the loss carry-forwards related to the subsidiary Arcam Cad to Metal Inc, which begin to expire after 20 years (2026).

The effective rate of income tax is -44% (0). Deferred tax assets of SEK 18.2 million (0.7) refers to temporary differences and deferred tax asset. Deferred tax liability of 13.4 million relates to temporary differences related to the identifiable assets acquired.

Parent CompanyCurrent tax assets pertain to preliminary payments of corporate tax for the year. The accumulated tax deficit amounted to MSEK 71.8 (130.4). The capitalisation of tax loss carry-forwards in the Parent Company of MSEK 15.8 (-) is in accordance with IAS 12 and is based on the positive profit trend in recent years.

The current rate for income tax in the Parent Company is 22.0% (22.0). Deferred tax assets of SEK 15.8 million (-) relate to capitalised loss carry-forwards.


Difference between recognised tax expense and tax expense based on the current tax rate 2014 2013 2014 2013

Recognised profit before tax 39,794 15,470 47,508 16,518

Tax according to current tax rate (22%) -8 755 -3,403 -10,452 -3,634

Tax effect of deductible expenses recognised directly in equity

Costs for new share issue – 3,116 – 3,116

Tax effect of non-deductible expenses

Impairment of receivables from group companies – – -1,823 –

Effect related to different tax rates of subsidiaries -1,194 – – –

Other non-deductible expenses -1,408 -786 -599 -786

Utilisation of loss carry-forwards not previously recognised 12,874 1,001 12,874 1,304

Capitalisation of loss carry-forwards 15,806 – 15,806 –

Tax on net profit for the year, according to the income statement 17,323 -72 15,806 0



Other intangible fixed asstes* 2014 2013 2014 2013

Opening cost 131 131 131 131

Business combinations 69,912 – – –

Internally developed assets – – – –

Closing accumulated costs 70,043 131 131 131

Opening depreciation -131 -131 -131 -131

Business combinations – – – –

Translation difference -297 – – –

Depreciation for the year -6,673 – – –

Closing accumulated depreciation -7,101 -131 -131 -131

Closing impairment losses – – – –

Closing carrying amount 62,942 – – –

*Refers mainly to production technology, customer relations and quality systems.

Note 13 Intangible fixed assets


Goodwill 2014 2013 2014 2013

Opening cost – – – –


Closing accumulated costs 204,317 – – –

Closing book value 204,317 – – –

Goodwill is mainly attributable to synergism, future sales growth and the knowledge among existing personnel.

Goodwill is impairment tested annually and when there are indications of an impairment requirement.A test of the goodwill value relating to AP&C has been carried out in connection with the annual

accounts at the end of December 2014. The recoverable amount of the cash-generating unit is deter-mined based on a calculation of the useful value. These calculations are based on estimated future cash flows after tax.

The company’s budget and prepared forecasts were used in the calculation of future cash flows. The time period for forecasting future cash flows is five years, after which a growth rate of 2% per year has been adopted. The discount rate used was 13.4% before tax.

To support the impairment test of goodwill, a comprehensive analysis of the sensitivity of the variables used in the model has been carried out. A deterioration of each of the main assumptions included in the business plan, a worsening of annual growth in sales, or an increase in the discount rate, each of which is possible, demonstrates that there is a good margin between the recoverable amount and the carrying amount. The consequence of the calculation is that there is no need for impairment of goodwill as at the end of 2014.

A test of the goodwill value relating to DTI has not been carried out in connection with the annual accounts at the end of December 2014. This is because the acquisition was made late in 2014 and the purchase price has not been finally allocated. In the assessment of other intangible assets, the manage-ment had no indications of impairment requirements within the Group.


Capitalized expenditure for research and development 2014 2013 2014 2013

Opening cost 94,893 93,609 94,893 93,609

Business combinations – – – –

Internally developed assets 2,210 1,284 2,210 1,284

Closing accumulated costs 97,103 94,893 97,103 94,893

Opening depreciation -83,691 -77,885 -83,691 -77,885

Depreciation for the year -5,047 -5,806 -5,047 -5,806

Closing accumulated depreciation -88,738 -83,691 -88,738 -83,691


Closing carrying amount 8,365 11,202 8,365 11,202


Note 16 Depreciation/amortisation by asset class and function


Depreciation/amortisation 2014 2013 2014 2013

Capitalized development costs (Note 13) -5,047 -5,806 -5,047 -5,806

Other (Note 13) -6,673 – – –

Machinery (Note 14) -4,220 -359 -100 -359

Equipment, tools, fixtures and fittings (Note 15) -2,693 -272 -495 -269

Total -18,633 -6,437 -5,642 -6,434

Total depreciation/amortisation by function 2014 2013 2014 2013

Cost of goods sold -13,026 -361 -395 -361

Selling expenses -55 -28 -24 -28

Administrative expenses -354 -28 -24 -28

Research and development expenses -5,198 -6,020 -5,198 -6,017

Total -18,633 -6,437 -5,642 -6,434

Note 17 Inventories


2014 2013 2014 2013

Raw materials 64,222 34,535 48,799 29,066

Work in progress 11,651 979 2,379 979

Stocks of finished goods 39,496 11,224 16,497 11,224

Total 115,369 46,738 67,675 41,269

Note 18 Accounts receivable


2014 2013 2014 2013

Accounts receivable 118,092 57,440 89,647 54,675

Less provision for doubtful accounts -443 -248 -248 -248

Total 117,648 57,192 89,399 54,427

Note 14 Machinery


2014 2013 2014 2013

Opening cost 2,999 2,999 2,999 2,999

Acquisitions 6,052 – – –


Translation difference 2,307 – – –

Sale/disposal -390 – – –



Business combinations -45,816 – – –

Depreciation for the year -4,220 -359 -100 -359




Closing carrying amount 51,652 375 275 375

Note 15 Equipment, tools, fixtures and fittings


2014 2013 2014 2013

Opening cost 5,252 3,752 5,101 3,601

Acquisitions 2 955 1,500 1,267 1,500


Translation difference 345 – – –

Disposal -422 – – –



Disposal 422 – – –

Business combinations -2,414 – – –


Depreciation for the year -2,693 -272 -495 -269



Closing carrying amount 9,147 1,497 2,266 1 493



2014 2013 2014 2013

Not due 93,141 24,449 84,496 23,427

< 60 days 11,530 12,243 2,468 11,455

61–120 days 12,977 20,500 2,435 19,427

> 121 days – – – 118

Total 117,648 57,192 89,399 54,427

An impairment requirement of TSEK 443 (248) is considered to exist for accounts receivable for the 2014 fiscal year. The remaining overdue accounts receivable pertain to a number of independent customers, who are not considered to have payment difficulties and from whom the remaining receivables are expected to be received. Other categories within accounts receivable and other receivables do not include any assets for which impairment requirements exist. Other non-current receivables fall due within five years from the balance-sheet date.

Note 19 Prepaid expenses and accrued income


2014 2013 2014 2013

Deferred rent 1,103 905 1,094 905

Other prepaid expenses 11,478 4,394 7,233 4,276

Total 12,581 5,299 8,327 5,181

Note 20 Cash and cash equivalents


2014 2013 2014 2013

Cash and bank balances 289,640 503,321 274,785 500,502

Blocked funds 31,500 – 31,500 –

Total 321,140 503,321 306,285 500,502

The total includes funding of MSEK 6.3 (4.8) from the EU, which was received by the company for two research projects. The limit on the overdraft facility is MSEK 0 (25).

Note 21 Shareholders’ equityA specification of the changes in shareholder’s equity can be found in the Statement of Changes in Shareholder’s Equity, which directly follows the balance sheets. The total amount is attributable to the Parent Company’s shareholders.

SharesNumber of

shares

Quantity, 01/01/2014 16,741,632

New subscription through new share issues 1,600,000

New subscription through warrants 323,608

Quantity, 31/12/2014 18,665,240

The quotient value of the shares is SEK 1. All shares carry equal voting rights.

Outstanding warrants

Warrant programmeNumber of

new shares

Subscrip-tion price,

SEK Subscription period

TO 2012/2015 105,000 17.90 2014-07-01 - 2015-06-30

TO 2013/2016 160,000 93.19 2015-07-01 - 2016-06-30

TO 2014/2017 200,000 311.48 2016-07-01 - 2017-06-30

Total 465,000

The TO 2014/2017 warrants program was issued in 2014. No allotment had occurred on the balance- sheet date.

The TO 2013/2016 warrants program was issued in 2013. No allotment had occurred on the balance-sheet date.

The TO 2012/2015 warrants program, issued in 2012, was offered to existing personnel. A total of 157,000 warrants had been transferred on the balance-sheet date, of which 62,000 were outstanding. The weighted average fair value of the warrants allotted in 2012 determined using the Black-Scholes Model was SEK 1.30 per option. Key input data in the model were the weighted average share price of SEK 11.90 on the allotment date, the subscription price of SEK 17.90, volatility of 45%, expected return of 0%, expected three-year duration for the warrants and an annual risk-free interest rate of 0.87%.

On every occasion when new warrants are exercised, a market valuation of the warrants is performed using the Black-Scholes Model. Volatility is measured as the standard deviation of the expected return on the share price, based on a statistical analysis of daily share prices over the past three years. Payment for the warrants is based on this valuation, which means that no costs will be incurred by the company in relation to these warrant contracts.

(As of 7 May 2012, the share is traded after the merger (reverse split), whereby 40 old shares were merged into one new share. The number of warrants and the exercise price in the TO 2012/2015 warrants program have been adjusted due to this merger. As of 21 January 2014, the share is traded after the split, whereby one old share was divided into four new shares. The number of warrants and the exercise price in the TO 2012/2015 warrants program have been adjusted due to this share split).

Note 18, cont.


Change pertaining to outstanding share options

Antal o ptioner

At 1 January 2014 628,856

Exercised / Matured -268,856

Exercised in ongoing programs -95,000

Allotted 200,000

At 31 December 2014 465,000

Note 22 Earnings per share


Before dilution 2014 2013 2014 2013

Net profit for the year, TSEK. 57 117 15,398 63,314 16,518

Weighted average number of shares 18,412,004 15,983,476 18,412,004 15,983,476

Earnings per share, SEK 3.10 0.96 3.44 1.03

Earnings per share before dilution are calculated by dividing the earnings attributable to the Parent Company’s shareholders by a weighted average number of common shares outstanding during the period.

After dilution 2014 2013 2014 2013

Net profit for the year, TSEK. 57,117 15,398 63,314 16,518

Weighted average number of shares 18,412,004 15,983,476 18,412,004 15,983,476

Additional shares upon conversion of convertible promissory notes 56,246 69,364 56,246 69,364

Additional shares upon exercise of warrants, dilution 18,468,250 16,052,840 18,468,250 16,052,840

Total 3.09 0.96 3.43 1.03

Earnings per share, SEK

To calculate earnings per share after dilution, the weighted average number of common shares outstand-ing is adjusted for the dilution effect of all potential common shares. The Parent Company has a category of potential common shares that could have a dilutive effect: stock options. For stock options, the number of shares that could have been acquired at fair value is calculated (based on the average market price for the Parent Company’s shares during the period), for an amount equivalent to the monetary value of the subscription rights attached to outstanding stock options. The number of shares calculated according to the above are compared with the number of shares that would have been allotted assuming the stock options had been exercised.All key figures per share have been recalculated to reflect the split and have been adjusted by a factor of four.

Note 23 Long-term liabilities


Long-term liabilities 2014 2013 2014 2013

Other long-term liabilities 8,460 – – –

Total 8,460 – – –

Maturity

1–2 years 2,420 – – –

2–5 years 6,008 – – –

> 5 years 32 – – –

Total 8,460 – – –


Provisions 2014 2013 2014 2013

Additional consideration 42,925 – – –

Total 42,925 – – –

Note 24 Other liabilities


2014 2013 2014 2013

Social security contributions, withholding tax 2,202 1,502 2,200 1,502

Tax liabilities 1,590 – – –

Valuation of forward contracts 2,361 – 2,361 –

Supplementary purchase price 66,905 – – –

Warranty reserve 4,010 2,790 4,010 2,790

Other liabilities 7,644 94 – –

Total 84,712 4,386 8,571 4,292

Note 21, cont.


Note 25 Accrued expenses and deferred income


2014 2013 2014 2013

Vacation accrual 5,352 3,936 5,195 3,936

Special payroll tax on pension costs 1,109 771 1,109 771

Social security contributions 1,719 1,232 1,617 1,232

Other accrued costs and deferred income 32,692 21,361 32,387 20,760

Service agreements 18,293 11,420 18,293 11,420

Total 59,165 38,720 58,602 38,119

The total includes funding of MSEK 6.3 (4.8) from the EU, which was received by the company for two research projects.

Note 26 Financial instrumentsFinancial instruments by categoryThe accounting policies for financial instruments have been applied for the following items:

The assets (excluding intangible and tangible fixed assets, deferred tax assets and tax receivables) recognised in the balance sheets for the Group and the Parent Company consist exclusively of loans and accounts receivable.

The liabilities (excluding warranty provisions and current tax liabilities) recognised in the balance sheets for the Group and the Parent Company consist exclusively of accounts payable and other liabilities.

Credit quality of the financial assetsCustomer credit risk is managed by the Group’s credit policy, procedures and controls. Individual credit limits are identified and an assessment is made. Outstanding accounts receivable are regularly monitored and parts of outstanding accounts receivable are covered by credit insurance. Investment of surplus funds takes place only with approved counterparties. There are no material differences between the credit quality of the assets of the Group and the Parent Company.

Derivative instrumentsAll of the Group’s derivative instruments are in the Parent Company and are recognised as current assets/liabilities and these belong to Level 2 of the fair value hierarchy.

Note 27 Lease payments relating to operating leasesGroup Parent Company

2014 2013 2014 2013

Leases (operational)

Leasing fees 939 439 282 439

Property leases 6,343 3,680 4,027 3,549

Total 7,283 4,119 4,309 3,988

Future leasing costs for non cancable leases

Within a year 11,084 4,159 6,014 4,159

Later than one year but within five years 31,490 12,804 12,077 12,804

Later than five years 13,484 – – –

Total 56,057 16,963 18,091 16,963

The leases consist primarily of property leases, cars and IT systems. No contingent lease payments occur.

Note 28 Assets pledged and contingent liabilitiesGroup Parent Company

14-12-31 13-12-31 14-12-31 13-12-31

Assets pledged

Bank guarantees (Swedish Customs) 175 – 175 –

Bank guarantees (Customers) 1,427 – 1,427 –

Overdrafts – 25,000 – 25,000

Total 1,602 25,000 1,602 25,000

Contingent liabilities

Warranty to OD Reality (relates to DiSanto's rents) – – 28,826 –

Warranty to Raymor Industries Inc. (relates to additional provision AP&C) – – 100,022 –

Total – – 128,848 –


Note 30 Adjustments for items not included in cash flowGroup Parent Company

2014 2013 2014 2013

Depreciation/amortisation 18,633 6,437 5,642 6,434

Currency translation for intragroup loan -15,643 – -15,643 –

Internal balance DiSanto -10,436 – – –

Impairment of receivables from subsidiaries – – 8,285 –

Miscellaneous 4,806 763 -744 3,255

Total -2,641 7,200 -2,460 9,689

Company Corp. ID no. Registered office Number of shares Share of votes Share of equityBokfört värde

i moderbolaget

Arcam Forskning och Utveckling AB 556605-8052 Mölndal 1,000 100% 100% 100

Arcam CAD to Metal Inc. 20-2776950 Illinois, USA 100 100% 100% 78

AP&C Advanced Powders and Coatings Inc. 9293-0734 Québec, Canada 10,000,100 100% 100% 58,232

Arcam CAD to Metal Limited 836883 Rugby, UK 100 100% 100% 1

Additive Manufacturing Solutions UK 8335508 Rugby, UK 100% 100%

Arcam China Limited 58972693-000-09-12-4 Hong Kong, China 10,000 100% 100%

Arcam (Beijing) Industrial Equipment Limited 11000050233423 Beijing, China 100% 100%

DiSanto Technology Inc. 13-3102364 Shelton, USA 126 100% 100% 90,177

Since the Group’s operation in Italy is conducted as a branch, the operation’s accounting records are included in the Parent Company.

Note 29 Participations in Group companiesParent Company

2014 2013

Opening cost 178 178

Acquisition during the year 148,409 –

Closing accumulated cost 148,588 178

Note 31 Liquidity analysis, accounts payable and other liabilities and derivatives

The Group’s and the Parent Company’s accounts payable and other liabilities and derivatives fall due for payment within one year.


Note 32 Related-party transactions

Arcam AB owns 100% of the shares in all subsidiaries (see Note 29).The following transactions took place with related parties:

Intra-Group transactions 2014 2013

Sale of goods to Arcam Cad to Metal Inc. 13,832 9,853

Sale of goods to Arcam Cad to Metal Limited 419 392

Interest charged on loans to Arcam Cad to Metal Inc. 763 1,065

Interest charged on loans to Advanced Powders and Coatings Inc. 2,633 –

Interest charged on loans to DiSanto Technology Inc. 62 –

Remuneration of senior executives in the Group and the Parent Company.

Sales are made on terms equivalent to those that apply to Arcam’s other distributors.

Cont. Intra-Group transactions 2014 2013

Sale of goods from Arcam Cad to Metal Inc. 2,323 5,072

Sale of services from Arcam Cad to Metal Inc. 4,230 2,174

Sale of services from Arcam Cad to Metal Limited 2,124 686

Sale of goods from Advanced Powders and Coatings Inc. 18,306 –

Sale of goods from DiSanto Technology Inc. 99 –

Sale of services from Arcam (Beijing) Industrial Equipment Limited 1,788 –

2014

Remuneration and other benefits

Salary/Fees

Company car benefit

Pension expenses

Share- based

remuner-ation

Other remu-

neration Total

Göran Malm, Chairman of the Board of Directors 325 – – – – 325

Anna Hultin Stigenberg, Board member 110 – – – – 110

Lars Bergström, Board member 135 – – – – 135

Thomas Carlström, Board member 110 – – – – 110

Jan Olof Bruer, Board member 110 – – – – 110

Henrik Hedlund, Board member 110 – – – – 110

Chief Executive Officer 2,446 81 498 – – 3,025

Other senior executives 4,433 60 489 – – 4,982

Total 7,779 141 987 0 0 8,907

The Chief Executive Officer’s salary includes a bonus of KSEK 634 for 2014. Göran Malm and Lars Bergström have received TSEK 25 each for work in the remuneration comittee.

2013

Remuneration and other benefits

Salary/Fees

Company car benefit

Pension expenses

Share- based remu-

neration

Other remuner-

ation Total

Tommy Klein, Chairman of the Board 135 – – – – 135

Anna Hultin Stigenberg, Board member 90 – – – – 90

Jan Barchan, Board member 90 – – – – 90

Lars Bergström, Board member 90 – – – – 90

Thomas Carlström, Board member 90 – – – – 90

Jan Olof Bruer, Board member 90 – – – – 90

Henrik Hedlund, Board member 90 – – – – 90

Chief Executive Officer 2,200 72 442 – – 2,714

Other senior executives 3,538 15 609 – – 4,162

Total 6,413 87 1,051 0 0 7,551

The Chief Executive Officer’s salary includes a bonus of KSEK 494 for 2013.


The Group only has defined-contribution pension plans. Pension contributions pertain to the expense recognized in profit or loss for the year. The Chairman and members of the Board are remunerated in accordance with AGM resolutions. In 2014, Board fees amounted to KSEK 900, of which KSEK 325 was paid to the Chairman. Remuneration of the Chief Executive Officer and other senior executives comprises salary, benefits and pension. In 2014, Group management comprised mainly of five individuals. These received total remuneration of KSEK 8,907, of which the CEO’s salary, pension and benefits accounted for KSEK 3,025. Salary, pension and benefits for executives who are employees of the parent company amounted to KSEK 3,515. Benefits refers to a company car. The retirement age for the Chief Executive Officer as well as other senior executives is 65 years. Employees in the company are covered by a retirement plan similar to the ITP meaning pension fees up to 5 % of the salary within 7.5 of the IBB (the Swedish Basic amount) and 31 % of the salary exceeding 7.5 IBB. Otherwise, there are no special retirement pledges. In 2014, costs for the CEO’s pension insurance in SEB Trygg Liv amounted to KSEK 498. If employment is terminated by the company, the CEO is entitled to a notice period of 18 months. The CEO may unilaterally convert the notice period into severance pay. If employment is terminated by the CEO, a notice period of 6 months applies. Salary will be paid during the notice period. Other senior executives are, in some cases, in a termination by the company entitled a notice period of 12 months. The notice period may be converted to severance pay when terminated unilaterally by the executive.

The stock options that certain individuals were able to buy have been sold at fair value and no costs have been incurred by the company in relation to these options.

*For information about the number of shares held by the CEO and senior executives, see page 67.

Closing balances at year-end 2014 2013

Long-term receivables

Advanced Powders and Coatings Inc. 80,011

Arcam CAD to Metal Inc. 6,541

Current receivables


Arcam CAD to Metal Inc. 11,584 12,590

DiSanto Technology Inc. 19,438

Arcam CAD to Metal Limited 5,608 1,442

Arcam China Limited 669 558

Current liabilities

Arcam Forskning och Utveckling AB 135 135


DiSanto Technology Inc. 49

Arcam CAD to Metal Limited 4,982 671

An impairment loss of MSEK 8.3 (-) on the receivable from Arcam Cad to Metal Inc. was recognised in 2014

due to the negative equity in Arcam Inc

Note 32, cont.

Note 33 Events after the balance-sheet date

The Board of Directors proposes that no dividend be paid.

On 11 February 2014, Arcam acquired the powder division, AP&C, from Raymor Industries Inc., Canada. In connection with the acquisition, an additional purchase price payable in 2015 and 2016, provided that certain targets are met, was agreed. After the balance-sheet date, an additional purchase price of approximately MSEK 68 was paid in relation to the acquisition of AP&C.

Mölndal March 2, 2015

Jan Olof BrüerMember of the Board

Göran MalmChairman of the Board

Thomas CarlströmMember of the Board

Anna Hultin StigenbergMember of the Board

Lars BergströmMember of the Board

Henrik HedlundMember of the Board

Magnus RenéPresident and CEO

Our audit report was submittedon March 2, 2015Ernst & Young AB

Stefan KylebäckAuthorized Public Accountant


Auditor’s report

To the annual general meeting of Arcam AB (publ), corp. reg. no. 556539-5356

Report on the annual accounts and consolidated accountsWe have audited the annual accounts and the consolidated accounts of Arcam AB (publ) for the 2014 financial year. The annual accounts and consolidated accounts of the company are included in the printed version of this document on pages 39–60.

Responsibilities of the Board of Directors and the CEO for the annual accounts and consolidated accountsThe Board of Directors and the CEO are responsible for the preparation and fair presentation of these annual accounts and consolidated accounts in accordance with International Financial Reporting Standards, as adopted by the EU and the Swedish Annual Accounts Act and for such internal control as the Board of Directors and the CEO determine is necessary to enable the preparation of annual accounts and consolidated accounts that are free from material misstatement, whether due to fraud or error.

Auditor’s responsibilityOur responsibility is to express an opinion on these annual accounts and consolidated accounts based on our audit. We conducted our audit in accordance with International Standards on Auditing and generally accepted auditing standards in Sweden. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the annual accounts and consolidated accounts are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the annual accounts and consolidated accounts. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the annual accounts and consolidated accounts, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the company’s prepara-tion and fair presentation of the annual accounts and consolidated accounts in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control.

An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Board of Directors and CEO, as well as evaluating the overall presentation of the annual accounts and consolidated accounts.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

OpinionsIn our opinion, the annual accounts have been prepared in accordan-ce with the Swedish Annual Accounts Act and present fairly, in all material respects, the financial position of the Parent Company as of 31 December 2014 and of its financial performance and its cash flows for the year in accordance with the Swedish Annual Accounts Act. The consolidated accounts have been prepared in accordance with the Swedish Annual Accounts Act and present fairly, in all material respects, the financial position of the Group as of 31 December 2014 and of its financial performance and cash flows in accordance with International Financial Reporting Standards, as adopted by the EU and the Swedish Annual Accounts Act. The statutory administration report is consistent with the other parts of the annual accounts and consolidated accounts.

We therefore recommend that the annual meeting of shareholders adopt the income statement and balance sheet for the Parent Company and the Group. Report on other legal and regulatory requirementsIn addition to our audit of the annual accounts and consolidated accounts, we have examined the proposed appropriations of the company’s profit or loss and the administration of the Board of Directors and CEO of Arcam AB (publ) for the 2014 financial year.

Responsibilities of the Board of Directors and CEOThe Board of Directors is responsible for the proposal for appropria-tions of the company’s profit or loss and the Board of Directors and the CEO are responsible for administration under the Companies Act.

Auditor’s responsibilityOur responsibility is to express an opinion with reasonable assurance on the proposed appropriations of the company’s profit or loss and on the administration based on our audit. We conducted the audit in accordance with generally accepted auditing standards in Sweden.

As a basis for our opinion on the Board of Directors’ proposed appropriations of the company’s profit or loss, we examined whether the proposal complies with the Companies Act. As a basis for our opinion concerning discharge from liability, in addition to our audit of the annual accounts and consolidated accounts, we examined the significant decisions, actions taken and circumstances of the company in order to determine whether any member of the Board of Directors or the CEO is liable to the company. We also examined whether any member of the Board of Directors or the CEO has, in any other way, acted in contravention of the Companies Act, the Annual Accounts Act or the Articles of Association.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

OpinionsWe recommend to the annual meeting of shareholders that the profit be appropriated in accordance with the proposal in the statutory administration report and that the members of the Board of Directors and the CEO be discharged from liability for the fiscal year.

Gothenburg, 2 March 2015Ernst & Young AB

Stefan KylebäckAuthorised Public Accountant


Corporate Governance Report 2014

Corporate governance at Arcam AB (publ) proceeds on the basis of the Swedish Companies Act, the stock exchange listing agree-ment, the Swedish Corporate Governance Code and other relevant regulations, as well as recommendations for stock market companies. Arcam’s Board and executive management exercise proactive governance and one of the major shareholders is represented on the Board.

Annual General Meeting 2014Arcam AB (publ) held its Annual General Meeting (AGM) on 27 March 2014:

The AGM re-elected Board members Jan-Olof Brüer, Lars Berg-ström, Henrik Hedlund, Anna Hultin Stigenberg and Thomas Carlström. Göran Malm was appointed as the new Chairman of the Board.

The AGM decided that the remuneration to the Board shall total SEK 850,000 in 2014. Of this, SEK 300,000 is for the Chairman of the Board and SEK 110,000 for each Board member. An additional SEK 25,000 is paid for committee work. Remuneration can be paid as employment income or against an invoice. Where employer social security contributions are not paid by Arcam, the corresponding amount shall be paid to the member so that the payment options are cost neutral.

In line with the Board’s proposal, the AGM resolved to launch a warrant programme targeted at senior executives and strategic partners. The programme involves the issuing of 200,000 stock options leading to a dilution effect of about 1.08 percent when fully exercised.

The AGM approved the Board’s proposal to authorise the Board to, on one or more occasions, decide on new share issues and the issue of convertible bonds or warrants, until the next AGM. The issue shall take place with or without deviation from the shareholders’ preferential rights and with or without provisions regarding issues in kind, offset issues, or other conditions. The total increase in share capital pursuant to this authorisation shall not exceed SEK 1,800,000. The shares will be issued at the current market price. The purpose of this authorisation is to give the Board flexibility in its work to finance and facilitate the accelerated expansion and develop-ment of the company, its market and products.

The AGM resolved that the nomination committee for future nominations shall consist of Anna Bernsten, Gunnar Ek, Rolf Ekedahl and Åsa Knutsson. Åsa Knutsson, who represents the largest shareholder in the company, was appointed as the convener. Other members of the nomination committee are independent of the company and major shareholders

The Board of DirectorsComposition of the Board of DirectorsAccording to Arcam’s Articles of Association, the Board consists of at least three and at most seven members. At the 2014 AGM, six members were proposed for re-election: Lars Bergström, Henrik Hedlund, Thomas Carlström, Anna Hultin Stigenberg and Jan Olof Brüer, as well as the newly elected Göran Malm.

The CEO is not a member of the Board, but normally attends Board meetings. The company’s CFO acts as the secretary to the Board of Directors.

Independence of Board membersOn the basis of the definition of “independent member” by both the Stockholm Stock Exchange and the Swedish Corporate Governance Code, Thomas Carlström is deemed independent in relation to the company’s major shareholders. Other AGM-elected Board members are independent in relation both to Arcam and to Arcam’s major shareholders.

The work of the Board of DirectorsThe Board of Directors bears ultimate responsibility for governing the company’s operations between AGMs. The Board makes decisions on issues affecting the company’s strategic direction, financing, major investments, acquisitions, divestments, organisation, incentive principles and major policies. The Board’s responsibilities are regulated by, for example, the Swedish Companies Acts, the Articles of Association and the work procedures that the Board of Directors has set for its work, as well as the Board’s instructions for the CEO.

The Board of Directors’ work arrangement highlights the responsibility of individual members – especially that of the Chairman – and the division of work between Board of Directors and CEO, as well as the latter’s authority. These have been further clarified in the CEO’s instructions. On an overall level, the work arrangement also states the issues that the Board are normally to address during a working year and the time-wise division of work.

Board of Directors’ work in 2014During the 2014 financial year, nine minuted Board meetings were held, which dealt with the budget/business plan and current projects. During 2014, the Board of Directors tested work proce-dures, instructions for the Chief Executive Officer and reporting instructions and also assessed the work of the Chief Executive Officer.

CommitteesRemuneration committeeArcam’s remuneration committee works on the formulation of principles wage setting and other employment terms for Arcam’s CEO and senior executives. The remuneration committee attempts to provide the optimal conditions to ensure that benefit-related matters receive comprehensive and well-conceived treatment. From 1 January to 27 March 2014, the remuneration committee consisted of Tommy Klein and Lars Bergström, followed by Göran Malm and Lars Bergström. It met five times in 2014. The remuneration committee minutes its meetings and informs other Board members.

Audit committeeThe Board of Directors has not appointed a special audit committee. Instead these matters are handled by the Board as a whole. This is done in connection with financial reporting at each regular Board meeting. Such a procedure has been assessed as being the most efficient and direct in exercising internal control in the company in view of the size of the company, for example.


Board and committee

Name Board Committee Remuneration Shares* Board Committee Remuneration Shares*

Tommy Klein, former Chairman 3/9 2/5 – –

Jan Barchan, former Board member 3/9 – –

Göran Malm, Chairman 6/9 3/5 325,000 –

Lars Bergström, Board member 9/9 5/5 135,000 12,332

Thomas Carlström, Board member 9/9 110,000 –

Jan-Olof Brüer, Board member 9/9 110,000 –

Henrik Hedlund, Board member 9/9 110,000 262,157

Anna Hultin Stigenberg, Board member 8/9 110,000 9,500

*Shareholdings as of Dec 31 2014

THE SHAREHOLDERS CONSTITUTE THE ANNUAL GENERAL MEETING

NOMINATION COMMITTEE ANNUAL GENERAL MEETING

AUDITORS

External control instrumentsThe Swedish Companies Act, other applicable laws and regulations, NASDAQ OMX’s regulatory framework for issuers and the Swedish Code of Corporate Governance.

Internal control instrumentsArticles of Association, Rules of Procedure for the Board, instruction for the Chief Executive Officer, communication policy and finance policy. Policy documents and manuals containing rules and recommendations, principles and guidance concerning the company’s operations and its employees.

BOARD OF DIRECTORS

VD OCH BOLAGSLEDNING

Responsible for controlling the entire operation. Report to the Board of Directors and the shareholders.

Election Election Information

Information

Information

Goals and strategies Reports and controls

proposal


Nomination committeeThe nomination committee for the 2014 AGM consisted of: Åsa Knutsson/Industrifonden, Anna Bernsten, Gunnar Ek and Rolf Ekedahl. Åsa Knutsson represents the largest shareholder in the company.

Other members of the nomination committee are independent of the company and major shareholders. None of the members in the nomination committee are part of Arcam’s Board.

The nomination committee had four minuted meetings during the year.

In connection with the Nomination Committee’s work and to enhance its own improvement efforts, the Board conducts annual self-assessment of its work and efficiency. The outcome is reported to the Nomination Committee.

Executive Management 2014The CEO leads operations in line with the CEO’s instructions as established by the Board of Directors. The CEO normally attends Board meetings and provides the requisite information and the underlying decision-making documentation ahead of Board meetings. The CEO also submits monthly reports to the Board concerning ongoing operations.

Arcam has a corporate structure based on a single business area. President and CEO Magnus René leads the company’s operations together with Johan Brandt, CFO, Lars Jonsson, COO Arcam System, Jacques Mallette, CEO of AP&C, Ronald Dunn, CEO of DiSanto and Nigel Bunt, Chief Business Officer.

Principles for the remuneration of the executive managementRemuneration of the CEO and other senior executives consists of salary, benefits and pension. Other benefits take the form of a company car in the case of three of the senior executives.

AuditorsAuditors are appointed by the AGM every fourth year, which occurred most recently in 2011, when the auditing agency Ernst & Young, represented by auditor Stefan Kylebäck, was elected as the auditing agency until the 2015 AGM.

Over the course of the year, the Board of Directors received presentations by the company’s auditors, who examined whether the company’s internal controls and external accounting complied with the requirements imposed on a listed company.

Deviations from the CodeArcam notes the following deviations from the stipulations of the Swedish Code of Corporate Governance:

7.3 Audit committee: Arcam did not have an audit committee in 2014. The Board of Directors was of the opinion that there was no need for such a function.

10.6 Special auditing function: Arcam did not have a separate unit/function for internal auditing in 2014. The Board of Directors was of the opinion that there was no need for such a function in operations.

Board of Directors’ report on governance and internal controlGovernance and internal control comply with the Group’s shared goals and reporting structure, financial policy and other policies adopted by the Parent Company’s Board of Directors. The auditors audit the internal reporting routines each year in connection with the annual audit. The auditors’ audit of internal control and risk is presented in a report that is submitted to the Board of Directors.

Each year, the Board also tests the work procedures and instructions for the Chief Executive Officer, including a reporting instruction. On a continuous basis and scheduled once a year, the CEO’s and executive management’s performance and work are evaluated.

Mölndal, 2 March 2015Board of Directors of Arcam

Auditor’s statement on the corporate governance reportTo the Annual General Meeting of Arcam AB (publ.), org.nr 556539-5356

The Board of Directors is responsible for the corporate governance report for 2014 on pages 62-64 and for its preparation in compliance with the Swedish Annual Accounts Act. We have read the corporate governance report and, based on this reading and our knowledge of the company and the Group, we believe we have sufficient basis for our statement. This entails that our statutory review of the corporate governance report has a different orientation and substantially less scope compared with the orientation and scope that an audit pursuant to International Standards on Auditing and generally accepted auditing standards in Sweden have.

We believe that the manner in which the corporate governance report was prepared and its statutory information are in compliance with the annual accounts and consolidated financial statements.

Gothenburg, 2 March 2015Ernst & Young AB

Stefan KylebäckAuthorised Public Accountant


Focus on sustainable growth

At my side I have a balanced Board that boasts unique experiences, skills and networks.

The vision stands

The Board shares the vision that “Arcam’s systems will become a natural element of the machinery in every manufacturing industry company” and has the objective of helping Arcam to become a major global player in Additive Manufacturing. This is taking place in an increasing-ly competitive market, but also a market that offers huge potential. It is important, therefore, to secure the company’s talent and ability to make decisions, as well as to implement strategies.

A year of strong growth

2014 was a year of strong growth. Arcam’s organic growth in the number of systems delivered was 35 percent. Sales rose from MSEK 199 to MSEK 339 – an increase of 70 percent – while operating profit increased considerably. Arcam’s organisation grew from 60 to 240 employees during the year.

The company’s development, service and support departments went to great lengths to satisfy our customers’ needs in conjunction with the rollout of our new Arcam Q20 system.

The acquisitions of AP&C in Canada and DiSanto in the US are in line with Arcam’s strategy of having a broader value chain and more extensive skills within AM. The company is safeguarding the supply of metal powder and is accelerating the introduction of AM for the orthopaedic implant industry.

The work of the Board of Directors

The work of the Board of Directors focuses on securing sustainable growth within Arcam. Several areas are addressed – the development of the management structure, how organic growth can be strengthened with additional acquisitions, the assessment of continued

financing, the continued expansion of the company’s market presence, strategies which create focus and the follow-up of objectives.

Furthermore, it is important for the Board to have an understand-ing of how Arcam will meet its customers’ requirements and expectations. Every year, the Board makes a study visit to one of the company’s key customers.

Reinvestment a prerequisite for growth

The Board believes that the company’s profits should be reinvested in the business for its continued growth. It is our belief that this also benefits shareholders.

Thank you

Finally, the Board would like to thank the CEO and executive management and all the employees who have together contributed to Arcam’s achievements, but also the company’s main share-holder for its patience and financial support.

Göran Malm

Chairman of the Board of Directors

I took office as Chairman of Arcam in March 2014 and since then I have fully familiarised myself with Arcam’s business and its markets so as to assist Arcam in my work on the Board of Directors in the best way I can. I’m also making use of my experiences from my earlier operational roles in SKF, General Electric and Dell and from my work on the Board of Directors at Samsung Electronics.



Board of Directors

Shareholdings as of Dec 31 2014

Göran Malm Thomas Carlström Jan Olof Brüer Henrik Hedlund Anna Hultin Stigenberg Lars Bergström

Education and positions

Born 1947. Chairman of the Board since 2014. Independent of major shareholders and company management. Master in Business Administration, University of Gothenburg.

Born 1951. Board member since 2004. Dependent of major shareholder, Industrifonden. Mining engineer Investment manager at Industrifonden since 1997.

Born 1951. Board member since 2013. PhD in Information Theory and a BSc in marketing and organi-zation theory, all from Linköping University.

Born 1947. Board member since 1997. Independent of major share-holders and company manage-ment. Medical doctor.

Board member since 2010. Independent of major shareholders and company management. MSc in Material Science and technology doctor in materials science, from the Royal Institute of Technology. External Research Coordinator at Sandvik R&D at Sandvik’s Machin-ing Solutions.

Born 1958. Board member since 2006. Independent of major shareholders and company management. Master of Science in engineering, MBA. CEO of SECO Tools AB since 2011.

Former positions In charge of SKF operations in Asia/pasific 1986-1987, SKF Global Service Organisation 1987–1991, Deputy CEO 1991–1992, GE 1992–2000, President & CEO GE Medical Systems Asia, Senior Vice President GE and President GE Asia Pacific, Dell Computer 2000, Senior Vice President and in charge of operations in Asia. Has been Member of the Board at Samsung Electronics and Swedish Micronic Laser System AB.

President and CEO Sectra AB. Since 1986, held senior positions at Sandvik, including as head of research and development, as well as businessdevelopment new products.

President and CEO KMT 2002–2008, President and CEO BE 2009–2010.

Other assignments As from 2001 investor in Asia combined with Board assign-ments.

Board member of Ceba AB,Poseidon Diving Group AB.Previously Plant Manager atAkzo Nobel, President of AlbyKemi (Stora) and President ofAKV-Ortic AB.

Board Member Sectra AB. Board member of RISE Research Institutes of Sweden Holding AB. Chairman of the Program Committee for material research at the Swedish Foundation for Strategic Research (SSF). Chairman of the Board of Vinnova Excellence Center Hero-M.

Shareholdings 0 shares 0 shares 0 shares 262,157 shares 9,500 shares 12,332 shares


Management

Shareholdings as of Dec 31 2014

Magnus René Johan Brandt Lars Jonsson Jacques Mallette Ronald Dunn Nigel Bunt

Education and positions

Born 1962. President and CEO. Employed since August 2001. MSc Electrical Engineering, Chalmers University of Technology.

Born 1974. CFO since Septem-ber 2012. Graduate in business administration from the Gothen-burg School of Economics,majoring in accounting and financing.

Born 1967. COO Arcam AB since January 2015. MSc and PhD semiconductor physics, Uppsala University.

Born in 1957. President & CEO, AP&C since 2011. Bachelors of Commerce ( HEC Montreal) and Certified Public Accountant.

Born in 1971. President of DiSanto Technology Inc. Associates Degree/Business and Computer Science.

Born in 1954. HNC exams. Managing Director Arcam Cad to Metal Ltd, the Arcam UK subsidiary. Also Director of global key accounts.

Other assignments During 1990–1999, Magnus Renéworked at Micronic Laser Systems as the Area Sales Manager for Asia, as well as VP Customer Service. From 1999–2000,he worked at Hogia Teknik as President and Business Area Manager.

CFO of Nimbus Group, Authorized Public Accountant at Ernst & Young.

Has 2006-2014 held different leading positions at Munters AB. 1999–2006 at M2 Engineering.

2009–2011: Consultant 2005–2009: CFO then CEO of Quebecor World Inc. 2003–2005: CFO of Quebecor Inc. and of Quebecor Media Inc. 1994–2002: CFO then CEO of Cascades Paperboard International Inc.

Vice President of Operations at DiSanto Technology Inc.

Previously owner and Sales Director of HK Holdings, HK Technologies, HK Laser Services and HK 3D Printing.

Shareholdings 158,712 shares, warrantsproviding entitlement tosubscription of 40,000shares

2 000 shares 0 shares 0 shares 60 096 shares 0 shares


Definitions

Share of risk-bearing capital

Sum total of shareholders’ equity and deferred tax liabilities divided by total assets.

Return on equity

Profit after financial items plus interest expenses divided by average shareholders’ equity.

Return on capital employed

Profit after financial items divided by average capital employed.

Equity per share

Equity divided by number of shares outstanding at end of period.

Shareholders’ equity per share after dilution

Shareholders’ equity divided by number of shares after dilution.

Added value per employee

Personnel costs + operating profit + depreciation/amortiza-tion divided by number of employees.

Profit margin

Profit after financial items divided by revenues.

Operating cash flow per share

Cash flow for the period divided by average number of shares during the period.

P/E multiple

Share price divided by earnings per share.

Earnings per share after dilution

Profit for the year divided by number of shares after dilution.

Interest-coverage ratio

Profit after financial items plus financial expenses divided by financial expenses.

Operating margin

Operating profit divided by revenues.

Debt/equity ratio

Interest-bearing liabilities divided by shareholders’ equity.

Equity/assets ratio

Shareholders’ equity divided by total assets.

Capital employed

Total assets less interest-free liabilities and tax.


Shareholder information

Arcam’s Investor Relations website

Current company information, reports and a press release archive are available at www.arcamgroup.com, where it is also possible to subscribe to reports and press releases.

Financial calendarAnnual General Meeting March 23, 2015Interim report – first quarter April 21, 2015Interim report – second quarter July 21, 2015Interim report – third quarter October 21, 2015

Annual General Meeting

The Annual General Meeting for the 2014 financial year will be held on Monday, March 23, 2015 at 17:00 at Arcam head office, Krokslätts Fabriker 27A, Mölndal, Sweden.

Right to participateShareholders who wish to participate in the Annual General Meeting must be entered in the shareholders’ register kept by Euroclear Sweden AB/VPC AB no later than March 17, 2015 and registration for the Annual General Meeting no later than March 19, 2015 at 12:00. Proxies and representatives of legal entities must submit authorization documents before the meeting (signed and dated authorizations and/or a current registration certificate). A Power of Attorney form can be found on our website www.arcamgroup.com.

Shareholders whose shares are registered in the name of a nominee must temporarily re-register their shares in their own names in order to be entitled to participate in the meeting. Such a re-registration must be completed no later than March 17, 2015 and the nominee should accordingly be notified thereof well in advance of this date.

RegistrationRegistration for the Annual General Meeting can be made:– by phone: +46-31-710 32 00, fax +46-31-710 32 01– by e-mail: [email protected]– by letter: Arcam AB, Krokslätts Fabriker 27A, SE-431 37 Mölndal, Sweden

The registration should include:– name– personal or corporate identity number– address and phone number

Arcam’s information policy

Arcam’s ambition is to communicate information internally and externally so that information about the company and its operations, as well as confidence in the company, is maintained. The information must be accurate, relevant and well-formulated and adapted to its target group, i.e. shareholders, the capital market, the media, employees, suppliers, customers, authorities and the general public.

The Arcam Group is growing and although sales of the EBM® systems are important for the Group, each individual EBM order is now not critical. The Board considers that each individual EBM order thus does not affect the valuation of the company.

Hence, from February 6th 2015 Arcam is changing its information policy, which means that each EBM® system order will not be published. The Company will continue, of course, to publish business events that the company considers crucial and thus affect the valuation.

Annual Report available on Arcam’s website

Arcam has chosen to not print and distribute its Annual Report to shareholders for environmen-tal and cost reasons. The annual report, as well as quarterly reports and press releases, are available on the company’s website for investors at www.arcamgroup.com. The report can also be ordered from the company.

Arcam AB Krokslätts Fabriker 27A 431 37 Mölndal Phone +46 31-710 32 00 Fax + 46 31-710 32 01 www.arcam.com

Produced by Stakeholder communication and Carlund & Co.

Photo: Ulf Ackelid, Anna Hult, Johan Wingborg samt bilder från Shutterstock och Airbus.

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