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Building a New Electric World
Annual
Report 2003
Schneider Electric SA

Table of contents

  • Page 1
    Schneider Electric SA Annual Report 2003 Building a New Electric World

  • Page 2

  • Page 3
    ...7. Product distribution and customer base 8. Production 9. Human resources General Presentation of Schneider Electric SA 1. General information 2. Capital 3. Ownership structure 4. Employee profit-sharing and stock purchase plans 5. Stock buybacks 6. Stock market data 7. Investor relations Corporate...

  • Page 4
    Chairman's Message Henri Lachmann Chairman and Chief Executive Officer In 2003, Schneider Electric returned to growth and maintained a high operating margin In 2003, your Company returned to growth and confirmed its ability to achieve strong operating results. After reaching a low in the first ...

  • Page 5
    ... increasingly converging worlds of Electrical Distribution and Automation & Control, Schneider Electric will be able to leverage considerable strengths to pursue profitable, long-term growth. These include our geographic coverage, our high-quality lineup of products and services, our powerful brands...

  • Page 6
    ... business Sales by geographic division Workforce by geographic division (Average full-time and temporary employees) 31 % 69 % 20 % 55 % 25 % 14,609 43,151 16,516 200 3 Electrical distribution Automation & Control Europe North America International 200 3 Europe North America International 200...

  • Page 7
    ....3 % -11 % 2002** Electrical Distribution Automation & Control -5 % 2003 2003 2002** Europe North America International 2003 1999 2000 2001 2002 ** The Company made changes in its management accounting system in 2003. This led to modifications in the measurement of the operating margin by...

  • Page 8
    ... non-executive Director* Chairman and Chief Executive Officer of Société Générale Thierry Breton, 49 Independent non-executive Director* Chairman and Chief Executive Officer of France Telecom Alain Burq, 50 Member of the Supervisory Board of the "Schneider Actionnariat" corporate mutual...

  • Page 9
    General Management as of January 2004 Henri Lachmann Chairman and Chief Executive Officer Jean-Pascal Tricoire Chief Operating Officer Antoine Giscard d'Estaing Executive Vice-President Finance and Control Legal Affairs Eric Pilaud Executive Vice-President Strategic Deployment Jean-François ...

  • Page 10
    8

  • Page 11
    ...-machine interface. In 2003, Schneider Electric acquired TAC, a Swedish manufacturer of building control and automation systems, and Clipsal, leader in ultra terminal distribution in the Asia-Pacific region. At the end of the year, it also signed an agreement to ultimately increase its stake in MGE...

  • Page 12
    ...offering products, equipment and services to control, monitor, protect and supervise machines and installations in industry, infrastructure, and industrial, commercial and residential buildings. Operations are divided into three operating divisions: Europe, North America and International. Schneider...

  • Page 13
    ... products. Develop Transparent Readyâ„¢ products, equipment and services Leveraging innovative products to widen our market share means developing the Transparent Readyâ„¢ concept, which harnesses the power of the Internet for Electrical Distribution and Automation & Control. In the Building market...

  • Page 14
    ... important contracts in keeping with the Company's profitability targets, while ensuring customer satisfaction and product and service safety. Although products for the international â- Traditional services that support our products (warranties, after-sales service, training, on-line assistance...

  • Page 15
    ...as circuit breakers, switches and sockets. Medium voltage: Electrical switchgear and equipment from 1 kV to 52 kV. The products in this category are generally used to transform and manage high voltage electricity from the distribution grid. The medium voltage power is then sent directly to end users...

  • Page 16
    ... opportunities lie in home renovation in Europe and the United States and in large complexes in Eastern Europe, Asia, Latin America and other developing economies. Commercial buildings (notably heating, air conditioning and lighting systems), building control and related services are another growth...

  • Page 17
    ... all of our Electrical Distribution and Automation & Control products, equipment and services for telecommunication, air, rail, road and maritime transportation, water and extracted gas transport, gas and oil transport and processing and water treatment. A number of products, such as surveillance...

  • Page 18
    ... products, equipment, projects and services that our customers need. In addition, each member of our General Management team oversees one or several global accounts as part of SGBD. In most cases, the relationship is formalized in a comprehensive Program Alliance that sets out agreements concerning...

  • Page 19
    ... include increasing the variable portion of compensation, profit-linked incentive schemes, stock options and employee share ownership. Following the third employee stock purchase plan, offered in more than 60 countries in 2003, Schneider Electric employees held 3.62% of the Company's outstanding...

  • Page 20
    18

  • Page 21
    ... options, the conversion of bonds, the issuance of shares to the Employee Stock Purchase Plan, the May 5, 2000 and March 5, 2003 cancellation of shares and the tender in August 2001 of 98.1% of outstanding Legrand shares to the public exchange offer initiated by Schneider Electric SA. Five-Year...

  • Page 22
    ...of the Employee Stock Purchase Plan, within a limit of 5% of the Company's capital stock. At the Combined Annual and Extraordinary Shareholders' Meeting of May 6, 1999, the Board of Directors was authorized to grant options to purchase new or existing shares to employees and corporate offices of the...

  • Page 23
    ... Caisse des Dépôts, listed above, hold, either directly or indirectly, more than 5% of Schneider Electric's capital or voting rights. During the year, Caisse des Dépôts' voting rights rose above and fell below the 5% threshold. Caisse des Dépôts et Consignations Employees 4.34 % 3.62 % 3.83...

  • Page 24
    ... any options during the year. The "Schneider Electric" corporate mutual fund Schneider Electric has long been committed to developing employee stock ownership. Employees who are members of the Employee Stock Purchase Plan have an opportunity to purchase new or existing Schneider Electric SA shares...

  • Page 25
    ...year (not including corporate officers) 445,000 Price (in euros) 45.65 Expiration date 2011 114,860 36.03 (1) - (1) Weighted average price (4,060 under plan 10, 18,300 under plan 11, 82,300 under plan 12, and 10,200 under plan 13). Stock option plan details Plan no. Date of Board Meeting Number...

  • Page 26
    ... cancellations in relation to plans 20 and 21. 5. Stock buybacks The Annual Shareholders' Meeting of May 27, 2002 authorized the Board of Directors to buy back shares on the open market. Pursuant to this authorization, the Company purchased 6,637,487 shares at an average unit price of â,¬ 48.80 in...

  • Page 27
    6. Stock market data The Schneider Electric SA share is listed on the Euronext First Market in Paris, where it is traded in lots of one under ISIN code FR0000121972. It is part of the market's benchmark CAC 40 index of France's largest stocks. 18-Month Trading Data Year Month Trading volume (in ...

  • Page 28
    ...Both are traded on the Euronext Paris and the Luxembourg bond markets under ISIN code FR0000492316. During the year, the Company redeemed part of the issue, in an amount of â,¬ 49 million. As part of the Euro Medium Term Notes program initiated on December 21, 1999, Schneider Electric SA issued two...

  • Page 29
    ... and Lille, France. â- Changes in information documents. At the Annual Meeting, shareholders received a copy of "The Year in Review" and "In Brief", as well as the Annual Report on request. Shareholder documents In addition to the annual report and a summary report, the Company also publishes...

  • Page 30
    28

  • Page 31
    ... been in charge of special projects for the Corporate Services department since 2001. Mr. Burq owns 250 Schneider Electric SA shares. Directors Daniel Bouton* (1) First elected: 1995 Term ends: 2004 53 years old, Chairman and Chief Executive Officer of Société Générale. Other directorships and...

  • Page 32
    ... director. Mr. Friderichs owns 500 Schneider Electric SA shares. James F. Hardymon* First elected: 1998 Term ends: 2004 69 years old, Corporate Director. Other directorships and functions: Director of Air Products & Chemicals Inc., American Standard Inc., Circuit City Stores Inc., and Lexmark...

  • Page 33
    ... Chief Executive Officer of Pirelli SpA from 1991 to 1995. Mr. Sierra owns 500 Schneider Electric SA shares. * Independent Director, as defined in the Bouton report on corporate governance (1) Up for re-election at the May 2004 Annual Shareholders' Meeting 2. Organizational and operating procedures...

  • Page 34
    ...speculative trading involving Schneider Electric SA shares. This includes margin trading, trading in options and warrants and purchasing and re-selling securities in a period of less than four months. To ensure that Board members are fully prepared, the Company sends them the meeting agenda ten days...

  • Page 35
    ... The Board was informed of the compensation policy for the Company's senior executives. It also decided to set up two new option plans (21 and 22) and to issue shares to employees under the 2003 worldwide Employee Stock Purchase Plan. Throughout the year, the Board monitored business performance and...

  • Page 36
    ... at the Annual Meeting and the dividend distribution policy. It was also informed about the measures taken by the Company to transition to International Financial Reporting Standards (IFRS) for the 2004 financial statements. The Committee presented its findings concerning the 2003 financial year to...

  • Page 37
    ... standards and rules. â- â- Obtain assurance that statutory and management accounting data presented to the Board of Directors of Schneider Electric SA and the Executive Committee present fairly the sales, results of operations and financial position of the Group. No system of internal control...

  • Page 38
    ... into account the work performed by the external auditors. In light of Schneider Electric's core businesses, internal audit procedures focus mainly on revenue recognition, cash and asset management processes, wages and benefits, financial reporting, information systems, manufacturing operations...

  • Page 39
    ...based on the projected future earnings of the acquired business and its positioning within the Group. A joint review of the present value of assets is performed at each year-end by the units and the Finance & Control - Legal Affairs Department. If the net book value of goodwill -corresponding to the...

  • Page 40
    ...The Statutory and Management Accounting unit of the Finance & Control - Legal Affairs Department has launched a project to standardize management reporting processes among the various subsidiaries by rolling out an integrated SAP system across the entire Group. Subsidiaries in France, Spain, certain...

  • Page 41
    ... newly-acquired businesses in the Group reporting process. - An intercompany reconciliation procedure manual. - Account closing instructions. It also provides training to all finance staff, including in the form of seminars for new recruits. The reporting units produce monthly income statements...

  • Page 42
    ...2003 of â,¬ 53,700 from Schneider Electric SA. Mr. Lachmann's benefits include a chauffeur-driven Company car. He is also covered by the Company's pension plan for senior executives, under the plan's general terms and conditions. On retiring, he would receive a maximum annual pension equal to 25% of...

  • Page 43
    ... Barbier Frinault et Autres Ernst & Young Amount 2003 2002 2003 % 2002 Audit - Statutory accounting, certification, review of individual and consolidated financial statements - Related engagements Sub-total Other services - Legal, fiscal and labor issues - Information technology - Internal audit...

  • Page 44
    ..., and to retained earnings. - To the payment of a dividend. The Annual Meeting may decide to offer shareholders the opportunity to receive the dividend in cash or in the form of new shares of common stock. Dividends not claimed within five years from the date of payment become time-barred and are...

  • Page 45
    ... thanks to the impact of a policy package designed to provide maximum economic stimulus. Historically low interest rates combined with tax breaks for households promoted consumer spending, car sales, and demand for residential buildings and related equipment. Businesses benefited from an accelerated...

  • Page 46
    ... the building market. TAC recorded sales of around â,¬ 350 million in 2002 and had 2,100 employees. August 2003: Schneider Electric signs an agreement to enhance its presence in ultra terminal distribution in the Asia-Pacific region Schneider Electric and Clipsal Industries (holdings) Limited signed...

  • Page 47
    ... voice-data-image infrastructure market. Leviton is North America's largest manufacturer of electrical and electronic wiring systems. â- 3. Research and development The Company devoted 5.6% of sales to research and development in 2003. In the course of conducting its business, Schneider Electric...

  • Page 48
    ... in market prices of copper, aluminum, silver, nickel and zinc. The purchasing departments of our operating entities report their purchasing forecasts to the Corporate Treasury Center unit twice a year. Purchase commitments are hedged using forward contracts, swaps and, to a lesser extent, options...

  • Page 49
    ... 1993, when SPEP (the Group holding company at the time) launched public offers for its Belgian subsidiaries Cofibel and Cofimines. Certain minority shareholders filed suit. Schneider Electric is paying the legal expenses not covered by insurance of the former executives involved. In connection with...

  • Page 50
    ... casualty/business interruption insurance program has been set up for Schneider Electric and its subsidiaries in all countries except for the United States, Canada and Mexico where a specific program has been established to take account of the specific requirements and characteristics of the North...

  • Page 51
    ..., we promote sophisticated energy management systems, while in developing nations, we offer solutions to ensure that everyone has access to electric power. These policies are part of our strategic vision to bring the best of the New Electric World to everyone, everywhere at any time. France, the US...

  • Page 52
    Business Review This data is then reconciled with information from accounting and purchasing reporting systems to ensure consistency. All of the workforce and environmental data covers the Company as a whole, unless stated otherwise. The NEW2004 indicators are published quarterly. Statistics ...

  • Page 53
    ... employers, including on-site job interviews. Number of days of training 1 8 .4 % 3 6. 8 % France As part of various transformation programs in France, some of them entailing job cuts, Schneider Electric signed a framework agreement concerning a Job and Skills Planning System with employee unions...

  • Page 54
    ..., Nief Plastic Holding, Ruget and Semikron. Pay equity In 2003, 60% of our employees had a variable salary component linked to local and Company-wide profits, regardless of their country of employment. In addition, a worldwide Employee Stock Purchase Plan was offered during the year. The number of...

  • Page 55
    ... the Schneider Electric Youth Opportunities Foundation. In Bulgaria, Brazil, India and Indonesia, for example, we are helping to set up educational and professional training systems with important input from our employees. During the year, 82% of our sites participated in the second Company-wide...

  • Page 56
    ... European Waste from Electrical and Electronic Equipment (WEEE) Directive, which be applicable in 2005, we also offer end-of-life product management for customers in France. These policies have prompted us to integrate environmental protection in our strategic decisions, act transparently with all...

  • Page 57
    ... 250 200 150 100 50 0% 50% 100% Social Dimension Employees Environment Customers & Shareholders Community & Society Suppliers max sector min sector Schneider Electric 0 0% 50% 100% Industry Average on a Global Basis Schneider Electric SA Best Company on a Global Basis within Industry Group...

  • Page 58
    .... To expand our accessible markets, we are focusing on developing in strategically-related activities with high potential. These new growth platforms include building control and automation, secured power, energy management systems and a number of specific segments. Acquisitions since the end of...

  • Page 59
    ...infrastructure and commercial buildings markets. In South America, we saw an increase of 9% despite the difficult economic situation in most countries. As in other developing regions, growth was driven by Automation & Control and medium voltage, reflecting sustained high levels of investment. Sales...

  • Page 60
    ... operations in France, â,¬ 14 million for reorganization of the automation business, â,¬ 40 million to close manufacturing sites in Europe and â,¬ 12 million for restructuring in the US (primarily to close the Monroe and Asheville plants). Net income attributable to Schneider Electric SA Net income...

  • Page 61
    .... Schneider Electric Australia Holding acquired shares in Clipsal Australia for â,¬ 185 million and in the joint venture in Asia for â,¬ 49 million. The Group also assumed â,¬ 259 million in debt and placed â,¬ 32 million in an escrow account to cover an additional payment due in 2007. The increase...

  • Page 62
    ... financing. Schneider Electric bought back Company shares in an amount of â,¬ 112 million and cancelled 12 million shares in March 2003. A total of â,¬ 102 million in common stock was issued on the exercise of stock options and to serve the worldwide employee stock purchase plan. Dividends paid...

  • Page 63
    ...of Schneider Electric SA shares. Income from continuing operations before tax came to â,¬ 3.04 million compared with â,¬ 4.37 million in 2002. Income after tax stood at â,¬ 2.54 million versus â,¬ 3.70 million the year before. Cofimines In 2003, income from continuing operations before tax amounted...

  • Page 64
    ...) of equity investments (note 7) Net income/(loss) before minority interests Minority interests Net income/(loss) (attributable to Schneider Electric SA) Earnings/(loss) per share (in euros) (note 15.6) Diluted earnings/(loss) per share (in euros)) The accompanying notes are an integral part of the...

  • Page 65
    ... to Schneider Electric SA) Minority interests Group share of (income)/loss of companies accounted for by the equity method (net of dividend received) Adjustments to reconcile net income to net cash provided by operating activities: Depreciation of property, plant and equipment (note 6) Amortization...

  • Page 66
    ... and equipment - at cost (note 6) Investments Investments accounted for by the equity method (note 7) Investments at cost (note 8) Other investments (note 8) Total investments Other non-current assets (note 9) Total non-current assets Current assets Inventories and work in process (note 10) Trade...

  • Page 67
    Liabilities and shareholders' equity (in millions of euros, at December 31) 2003 2002 2001 Current liabilities Customer prepayments Trade accounts payable Accrued taxes and payroll costs Deferred tax liabilities (note 13) Other payables and accrued liabilities Short-term debt (note 18) Total ...

  • Page 68
    ... other 2002 net income At December 31, 2002 Exercise of stock options (4) Cancellation of shares (4) Worldwide Employee Stock Purchase Plan (4) Appropriation to legal reserve Dividends (including précompte equalization tax) Increase in treasury stock Translation adjustment (note 15.5) Tax effect on...

  • Page 69
    ... control and automation. The Group also provides services related to these products, such as repair and maintenance, and services related to system reviews. The Group is organized on a geographical basis with three divisions (Europe, North America and International). Note 2 - Accounting Principles...

  • Page 70
    ... methods) or estimated net realizable value. The cost of work-in-process, semi-finished and finished products includes direct materials and labor costs, subcontracting costs and production overhead. Buildings Machinery and equipment Other 20 to 40 years 3 to 10 years 3 to 12 years For operating...

  • Page 71
    ... stock Schneider Electric shares held by the parent company or by companies fully consolidated are either: â- Changes resulting from periodic changes in actuarial assumptions regarding general financial and business conditions (i.e., changes in the discount rate, annual salary increases and return...

  • Page 72
    ... discounts The Group offers rebates, calculated as a percentage of sales, to some of its distributors when the distributor reaches a specified sales and volume objective. Additionally, in limited circumstances, the Group directly negotiates with international customers of distributors to set prices...

  • Page 73
    ...the companies listed in Note 28. The scope of consolidation at December 31, 2003, 2002 and 2001 is summarized as follows: TAC On August 6, 2003, the Group acquired TAC, a major manufacturer of building automation and control equipment. TAC offers a full lineup of controllers, sensors, display units...

  • Page 74
    ... to the new Clipsal Asia Holdings Limited joint venture created at the end of the year (see Note 8.2). The two subsidiaries were consolidated until December 31, 2003. Schneider Shilin (Suzhou) Transformers Company Limited (SSST), a joint venture in China 49%-owned by SEEC (a non-Group unit) and 51...

  • Page 75
    ... units, for a net amount of â,¬ 59.1 million (see note 5). â- â,¬ 10.5 million reduction in Crouzet Group goodwill to take into account the cancellation of a tax reserve booked when the business was acquired and which is no longer required â- The â,¬ 241.1 million negative effect of exchange rate...

  • Page 76
    ...Parent Company Financial Statements Digital Electronics Corporation goodwill Fair value adjustments and the calculation of goodwill were finalized during the year ended December 31, 2003, as follows: TAC goodwill The TAC Group has been consolidated as from September 1, 2003. The Schneider Electric...

  • Page 77
    ... (1) The â,¬ 38.3 million in unrecognized prior service costs related to the Square D pension plans have been reclassified under "Other non-current assets". See Note 9. (2) Including the Digital brand valued at the time of acquisition. (3) Corresponding mainly to a gross amount of â,¬ 76.8 million...

  • Page 78
    Consolidated and Parent Company Financial Statements Note 6. Property, plant and equipment 6.1 - Changes in property, plant and equipment a) Gross value (â,¬ millions) Land 144.9 1.7 (2.3) (11.2) (21.4) 111.7 0.4 (4.5) (7.1) 2.7 103.2 Buildings 844.2 37.9 (18.0) (41.1) 37.6 860.6 28.4 (28.6) (41...

  • Page 79
    6.2 - Capital leases Property, plant and equipment include the following assets held under capital leases: (â,¬ millions) Dec. 31, 2003 2.7 56.7 29.2 (61.8) 26.8 Dec. 31, 2002 2.7 55.8 30.7 (62.3) 26.9 Land Buildings Machinery and equipment Less accumulated depreciation Assets under capital lease...

  • Page 80
    ... as described in Note 2.3. See Note 27. (2) VA Tech Schneider High Voltage GmbH was formed with VA Tech (TD) GmbH & Co KEG to compete in the high voltage equipment business. The summarized balance sheet and statement of income data for MGE Finances SAS and VA Tech Schneider High Voltage GmbH are as...

  • Page 81
    ... Sales Cost of sales Selling, general and administrative expenses Operating income Financial expense, net Amortization of goodwill Exceptional items Income taxes Net loss before minority interests Minority interests Net loss 7.2 - VA Tech Schneider High Voltage GmbH VA Tech Schneider High Voltage...

  • Page 82
    ...Cost Reserves Net I - Listed investments Finaxa Gold Peak Industries Holding Ltd Digital Electronics Corporation Clipsal Industries Holding Ltd. Other listed investments Total listed investments II - Unlisted companies Clipsal Australia Holdings Pty Ltd (3) 100.00 % Clipsal Asia holdings Limited...

  • Page 83
    ... asset value of AUD211.2 million (â,¬ 125.7 million) at December 31, 2003. The company was fully consolidated on January 1, 2004. CIH Ltd. contributed all of its ultra terminal products and systems operations in Asia to the 50-50 Clipsal Asia Holdings Limited joint venture, while Schneider Electric...

  • Page 84
    ... the terms of the agreement, Square D Company is obligated to pay fees, which approximate the purchaser's cost of issuing a comparable amount of commercial paper plus certain administrative costs. Square D Company is contingently liable for the collection of the receivables sold. Management believes...

  • Page 85
    ....7 Note 13. Income Tax Wherever possible, Group entities file consolidated tax returns. Schneider Electric files a consolidated tax return with its French subsidiaries held directly or indirectly through Schneider Electric Industries SAS. 13.1 - Analysis of tax expense for the year (â,¬ millions...

  • Page 86
    ... equity method Income before tax and amortization of goodwill Statutory tax rate Income tax (expense) benefit calculated at the statutory rate Reconciliation items: Difference between French and foreign tax rates Reserve on Legrand investment Adjustment of tax loss carryforwards (note 13.4) France...

  • Page 87
    ...State in 2006. The French Finance Act for 2004 allows tax losses generated in France to be carried forward indefinitely. In light of this change in tax law, in 2003 the Group recognized a deferred tax asset for the total loss on the sale of the Legrand shares. The resulting increase in deferred tax...

  • Page 88
    ... Short-term investments at cost Schneider Electric shares (intended to stabilize the share price) Schneider Electric shares (intended to cover stock option exercises), net Schneider Electric shares, net Money market instruments and short-term deposits Cash Total cash and cash equivalents Short-term...

  • Page 89
    ...- Stock option plans Outstanding options as of December 31, 2003 Plan no. 9 Date of Board Meeting Type de plan Number of options outstanding at Dec. 31, 2002 Options granted to: - Corporate officers - Top ten employee grantees Starting date of exercise period Expiration date Subscription or purchase...

  • Page 90
    ... the market price of the Company's stock, reduce dilution and optimize return on equity. It provides for the purchase of a maximum of 10% of the capital stock for a period of up to eighteen months from May 16, 2003. Under the program, 2,557,142 shares were purchased during the year ended December...

  • Page 91
    Note 16. Provisions for pensions and other post-retirement benefit obligations The Group has set up pension, life insurance, lengthof-service award and other post-retirement benefit plans for its employees. These range from plans providing for the payment of a lump sum based on years of service to ...

  • Page 92
    ... and Parent Company Financial Statements (â,¬ millions) O/w US plans Dec. 31, 2003 O/w US plans Dec. 31, 2002 Dec. 31, 2003 Dec. 31, 2002 2. Components of periodic pension cost Service cost Interest cost (impact of discounting) Expected return on plan assets Amortization of prior service cost...

  • Page 93
    ... in fair value of plan assets Fair value of plan assets at beginning of year Actual return on plan assets Plan participants' contributions Employer contributions Prior service cost Acquisitions - Disposals (*) Benefits paid Translation adjustment Fair value of plan assets at end of year 914.8 170...

  • Page 94
    ...-retirement health care and life insurance benefits mainly concern employees in the United States and Canada. The North American subsidiaries pay certain health care costs and provide life insurance benefits to retired employees who fulfill certain criteria in terms of age and years of service. The...

  • Page 95
    ... by insurance. Such warranties rarely exceed 12 months and are classified as accrued expenses. The Group also recognizes technical risks in connection with product development and manufacturing. In 1996, the Group became aware that an electronic component contained in its Masterpact circuit breakers...

  • Page 96
    ...was reserved for the entire product recall program. At December 31, 2003, a provision of â,¬ 1.3 million remained to cover replacement costs until the end of 2004, when the program will expire. d. Other risks mainly include provisions recorded for potential losses on asset sales, notably in Germany...

  • Page 97
    ... main Group borrowings, excluding overdrafts and short-term bank loans, are as follows: (â,¬ millions) 2003 Interest rate Maturity a) Perpetual bonds Schneider Electric Industries SA (formerly Merlin Gerin) (1) b) Bonds Schneider Electric SA 2004 Schneider Electric SA 2007 Schneider Electric SA...

  • Page 98
    ... to cover this liability (see Note 8.3). 20.4 - Other commitments No provision has been booked in the consolidated balance sheet to cover the commitments of Group companies in France in respect of mutual health insurance plans (MESE) and other employee benefit plans (CAPRA). These commitments are...

  • Page 99
    ... Commodity price risk In its manufacturing operations, the Group uses metals such as copper, silver, aluminum and nickel that are traded on the commodity markets. The risk of fluctuations in the market prices of these metals is hedged using futures, swaps and options. Currency hedges mainly concern...

  • Page 100
    ...of â,¬ 3,087.5 million, including â,¬ 800 million converted into fixed rate by means of swaps. A one point increase or decrease in interest rates would have the effect of increasing or reducing the Group's net financial expense by â,¬ 19 million. 21.7 - Market value of financial instruments (on and...

  • Page 101
    ....2) (25.0) 36.9 (26.1) (38.4) (157.8) Interest income Interest expense Net gains (losses) on sales of marketable securities Cost of net debt Exchange gains and losses, net Valuation allowances (long and short-term investments) Dividend income Other Other financial income and expense, net Total 99

  • Page 102
    ... of site closures and downsizing measures. The Automation & Control business. The costs incurred in 2003 under the ongoing restructuring program amounted to â,¬ 14 million, mainly for the closure of the Argenteuil plant. Note 25. Geographic and Business Segment Information In 2003, a new method of...

  • Page 103
    ... 13,111 Production Administration Total average number of employees Europe North America International 26.2 - Payroll costs (â,¬ millions) 2003 (2,959.4) (38.6) (2,998.0) 2002 (3,090.9) (29.2) (3,120.1) Payroll costs Profit-sharing and incentive bonuses Total 26.3 - Management compensation In...

  • Page 104
    ...Company Financial Statements Note 27. Subsequent events On December 22, 2003, Schneider Electric signed two agreements for the acquisition of additional shares in MGE UPS Systems Group, in two transactions. After obtaining the green light from the anti-trust authorities in the United States, Europe...

  • Page 105
    ... interest Percent interest Dec. 31, 2003 Dec. 31, 2002 Schneider Automation Schneider Electric Industries SAS Schneider Electric SA (parent company) Schneider Electrique Foncière Schneider Toshiba Inverter Europe SAS Schneider Toshiba Inverter SAS SCI du Pré Blanc Simelectro Société Alpine de Pr...

  • Page 106
    ... Limited (United Kingdom) Berger Lahr Positec Ltd (United Kingdom) Capacitors Ltd (United Kingdom) Num UK (United Kingdom) Sarel Ltd (United Kingdom) Schneider Electric (UK) Ltd (United Kingdom) Schneider Electric Ltd (United Kingdom) Westinghouse Systems (United Kingdom) Yorkshire Switchgear Group...

  • Page 107
    ...,00 100,00 100,00 100,00 83,70 100,00 100,00 100,00 100,00 98,27 100,00 100,00 100,00 Accounted for by the equity method Va Tech Schneider High Voltage GmbH (Austria) Môre Electric Group A/S (Norway) 40,00 34,00 40,00 34,00 NORTH AMERICA Fully consolidated Cofimines Overseas Corporation (Canada...

  • Page 108
    ... 100,00 100,00 100,00 100,00 100,00 Accounted for by the equity method Entivity Holdings Inc. (United States) 31,23 31,18 Proportionally consolidated Easy Plug Inc 50,00 50,00 REST OF THE WORLD Fully consolidated Merlin Gerin SA (Pty) Ltd (Conlog business) (South Africa) Schneider Automation Pty...

  • Page 109
    ... Company (Egypt) Schneider Electric Egypt SA (Egypt) Schneider Electric FZE (United Arab Emirates) Schneider Busway Limited (Hong Kong) Schneider Electric Hong Kong Ltd (Hong Kong) Square D Foreign Sales Corporation (Virgin Islands) Schneider Electric India Private Ltd (India) PT Schneider Electric...

  • Page 110
    Consolidated and Parent Company Financial Statements Percent interest Percent interest Dec. 31, 2003 Dec. 31, 2002 Accounted for by the equity method Hoist-Tec (Pty) Ltd (South Africa) IPower Solutions Pty Ltd (Australia) Schneider Electric Engineering Ltd (Japan) EFI Asia Pacific PTE Ltd (JV) (...

  • Page 111
    ... Holding AB (Sweden) Lexel Electric a.s (Czech Republic) Metesan Lexel Elektrik Malzemeleri Sanayi Ve Ticaret AS (Turkey) 100,00 100,00 100,00 100,00 100,00 100,00 100,00 100,00 100,00 merger 100,00 100,00 100,00 100,00 merger merger 100,00 100,00 100,00 100,00 100,00 100,00 100,00 100,00 100,00 100...

  • Page 112
    ... A/B GROUP TAC GmbH Control Systems (Germany) TAC Pacific Pty Ltd (Australia) TAC A/S (Denmark) Control Solutions Ltd, LLC (United States) CSI Acquisition Holding Corp. (United States) TAC Americas Inc. (United States) TAC Com Oy (Finland) TAC Regional Ltd (United Kingdom) TAC UK Ltd (United Kingdom...

  • Page 113
    ... of Schneider Electric SA and its subsidiaries as of December 31, 2003, and of the results of their operations for the year then ended in accordance with French accounting principles and regulations. As explained in note 13 to the consolidated financial statements, deferred tax assets recognized...

  • Page 114
    ...,792.8 6,342,575.4 1,048,066.3 484.9 7,397,027.8 Property, plant and equipment (note 1b) Land Buildings Other Investments (notes 2 et 3) Shares in subsidiaries and affiliates Other investments Accounts receivable Accounts receivable - trade Other (note 4) 2,723.8 162,007.6 90,697.0 65.3 4,880,639...

  • Page 115
    ... 11) Amounts payable to subsidiaries and affiliates Short-term bank loans and overdrafts and other debt (note 11) Accounts payable - trade Accrued taxes and payroll costs (note 12) Other liabilities (note 13) Total III Deferred income Conversion gains 2,151,000.0 95,797.0 13.4 4,372.7 598.5 309.5 61...

  • Page 116
    ... and Parent Company Financial Statements Statement of Income year ended December 31, 2003 Expenses (â,¬ thousands) 2003 2002 2001 Operating expenses Purchases and external charges Taxes other than on income Payroll costs Depreciation, amortization and provision expense Other operating expenses...

  • Page 117
    ... revenues Sales of services and other 4,225.7 4,225.7 Financial income Dividend income Interest income Other 457,689.9 174,763.6 12,530.9 644,984.4 Non-recurring income Net gains on disposals of fixed assets Provision reversals and expense transfers Other 1,524.7 3,547.7 10,135.5 15,207.9 Income tax...

  • Page 118
    ... and Parent Company Financial Statements Notes to the Financial Statements of Schneider Electric SA (All amounts in thousands of euros unless otherwise specified) Note 1: Non-current assets Non-current assets are stated at cost. Accounting principles The financial statements for the year ended...

  • Page 119
    ...The following table shows the proceeds from sales of investments and the related gains and losses: Net book value of investment Telemecanique India Ltd Schneider Electric SA Legrand SA Other (less than â,¬ 100,000) Total 565,679.2 2,268.9 45.0 567,993.1 Sale price Net gain (loss) 15.0 (74,072.9) 19...

  • Page 120
    ... on market price. Unrealized gains on investments are not recognized. Note 6 : Marketable securities Marketable securities include: Certificates of deposit and mutual funds Schneider Electric SA shares purchased in connection with the 14th Stock Option Plan and to stabilize the share price Total...

  • Page 121
    ... as part of a capital decrease. â- 1,958,180 shares issued on exercise of management stock options â- 1,071,085 shares issued as part of the worldwide employee share purchase plan. No other securities have been issued carrying rights to a share in the Company's income. The par value of the shares...

  • Page 122
    ... 58,641.9 Note 11: Other borrowings Other borrowings at December 31, 2003 include commercial paper issued on the market by Schneider Electric SA on behalf of the Group in the amount of â,¬ 60 million (2002: â,¬ 395 million) and accrued interest on bonds of â,¬ 35.8 million Short-term bank loans and...

  • Page 123
    ... to 5 years 5 years Non-current assets Advances to subsidiaries and affiliates Other investments Current assets Accounts receivable - trade Other accounts receivable Marketable securities Prepaid expenses Debt Bonds Other borrowings Amounts payable to subsidiaries and affiliates Short-term bank...

  • Page 124
    ... retired senior executives and managers. The related obligations have been accrued for in the amount of â,¬ 11.0 million. Exchange of Legrand shares As part of its public exchange offer for Legrand SA, Schneider Electric SA made a commitment to exchange shares held upon exercise of options granted...

  • Page 125
    8. Auditors' Report on the Financial Statements Year ended December 31, 2003 To the Shareholders of Schneider Electric SA In accordance with the terms of our appointment at the Annual Shareholders' Meeting, we hereby submit our report for the year ended December 31, 2003, on: â- Our examination of ...

  • Page 126
    ... and Parent Company Financial Statements 9. Subsidiaries and Affiliates (â,¬ thousands) Company Capital Reserves and retained earnings before appropriation of income for the year* % interest I. Subsidiaries and affiliates whose book value exceeds 1% of Schneider Electric SA's capital...

  • Page 127
    Book value of shares Cost Net Loans and advances Guarantees Net sales for the year Income or loss for the year Dividends received 1,531,981.3 1,531,981.3 - - 2,898 164.4 Holding company Holding company 494,603.9 450,968.0 136,877.7 136,877.7 - - 2,539.9 3,674.2 82,601.1 82,601.1...

  • Page 128
    ...854,387.1 B. Investments with a carrying value of less than â,¬ 15,000 C. Investments in real estate companies D. Investments in foreign companies Total Marketable securities 10,722 1,943,846 Geodis Schneider Electric SA shares (stock option plan no. 14 and to stabilize the share price) Total 90,672...

  • Page 129
    ....4 474,732.4 255,026.4 Per Share Data (in euros) Net income before depreciation, amortization and provisions Earnings per share Dividend per share, net of tax credit Employees Average number of employees during the year Total payroll for the year (in thousands of euros) 1.40 1.96 1.34 1.94 2.29...

  • Page 130
    128

  • Page 131
    ...in Annual Meeting Approval of the annual financial statements - first resolution - We ask you to approve the transactions and financial statements for the year, as presented, which show net income of â,¬ 474.7 million. 2000 2001 (3) 2002 We remind you that dividends paid by Schneider Electric SA for...

  • Page 132
    ...Commercial Code. The shares could be bought back to stabilize the Schneider Electric share price, or to be used in connection with stock option plans, or to reduce dilution, or to optimize the management of the Company's shareholders' equity. The shares could also be resold by any appropriate method...

  • Page 133
    ... was authorized to grant options to purchase new or existing shares to the management and key employees of Schneider Electric SA and its subsidiaries and affiliates, as defined in article L.225-180 of the Commercial Code. The total number of options outstanding at any given time would not be...

  • Page 134
    ... stock-for-stock offer for the Company's shares is in progress. In 2003, shareholders refused to renew this authorization because they found it too broad in scope. As a result, the Board of Directors proposes that shareholders authorize the use of authorizations to issue Schneider Electric SA shares...

  • Page 135
    ...and legal management of contract disputes that remained at the level of Schneider Electric SA at the time of the merger. In 2003, Schneider Electric paid Amec Spie SA â,¬ 100,000 (excluding VAT) pursuant to this agreement. We carried out our work in accordance with the professional standards applied...

  • Page 136
    ... of Schneider Electric SA and pursuant to Article L.225-177 of the Commercial Code, as well as to Article 174-19 of the decree of March 23, 1967, we present below our report on the proposal to grant stock options to the management and employees of the Company and related entities within the meaning...

  • Page 137
    ... canceling shares bought back by the issuer, we present below our report on our assessment of the reasons for the proposed capital reduction and the terms and conditions of the operation. We carried out our work in accordance with the professional standards applied in France. Those standards require...

  • Page 138
    ... General Meetings and having heard the Auditors' Special Report on agreements governed by article L.225-38 of the Commercial Code, presented in accordance with article L.225-40 of the Code, notes the information contained in the Auditors' Report. (1) 50% tax credit (2) 25% tax credit (3) Return...

  • Page 139
    ... employee shareholders for a period of four years expiring at the Annual Shareholders' Meeting to be called in 2008 to approve the 2007 accounts. Mr. Burq is a member of the Supervisory Board of the corporate mutual fund invested in Schneider Electric SA shares. The General Meeting, acting...

  • Page 140
    ...of eighteen months from the date of this Meeting. To set the maximum discount at which shares may be offered under the Employee Stock Purchase Plan at 15% of the average of the opening prices quoted for Schneider Electric shares on Euronext Paris over the 20 trading days preceding the date on which...

  • Page 141
    ...to officers and key employees of the Company and its subsidiaries and affiliates, as defined in article L.225-180 of the Commercial Code, on one or several occasions, options to subscribe new Schneider Electric SA shares or to purchase existing Schneider Electric SA shares acquired by the Company in...

  • Page 142
    ... programs, provided that the total number of shares canceled in the 24 months following the date of this Meeting does not exceed 10% of the total number of shares outstanding, and to reduce the Company's capital accordingly. The difference between the purchase price of the shares and their par value...

  • Page 143
    ... in France, we have examined the objectives and general organization of the Company's internal control system and the internal control procedures covering the preparation and processing of accounting and financial information, as described in the Chairman's report. As this is the first year of...

  • Page 144

  • Page 145
    ... 41 29 71 00 Internet : www.schneider-electric.com Incorporated in France with issued capital of â,¬ 1,854,737,360 Registered in Nanterre, RCS 542 048 574 Siret no. 542 048 574 01775 Printed on paper made from 100% recycled fibers, 100% chlorine free. All production waste has been recycled. March...