APC 2004 Annual Report Download

Download and view the complete annual report

Please find the complete 2004 APC annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 148

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142
  • 143
  • 144
  • 145
  • 146
  • 147
  • 148

Building a New Electric World
2004 Annual Report
Schneider Electric SA

Table of contents

  • Page 1
    Schneider Electric SA 2004 Annual Report Building a New Electric World

  • Page 2

  • Page 3
    ... IFRS accounts 60 61 62 64 65 107 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 15 15 18 19 21 22 24 7 - Auditors' Report...

  • Page 4
    ... The Company has staked out positions in new, less economically sensitive businesses with high growth potential in building automation and security, secured power, energy management, ultra terminal distribution and services. These specialized activities dovetail with our core businesses and open the...

  • Page 5
    ... teams. Supported by our key values and talented people, Schneider Electric will continue to grow to bring even more satisfaction to our shareholders, customers, employees and host communities. That's our ambition, as expressed in new2, our new Company Program for the next four years. Our diversity...

  • Page 6
    ... opened 23 production sites over the last three years, including eight new units in Asia in 2004. Workforce by region Schneider Electric has an active policy of geographic mobility to create a talent pool of multicultural managers. The international mobility rate for executives exceeded 35% at end...

  • Page 7
    ... of operating income. After capital spending and changes in working capital requirement, free cash flow stood at â,¬ 839 million, or 8% of sales. 2002 2003 2004 2002 2003 2004* EPS up 32% Dividend before tax credit up 64% * Proposed dividend to be approved by shareholders at the Annual Meeting on...

  • Page 8
    ...é Européen des Assurances René Barbier de La Serre* Corporate Director Chris Richardson Former Executive Vice-President of Schneider Electric's North American Division James Ross* Corporate Director Piero Sierra* Special Advisor for the administration of Pirelli's international companies Caisse...

  • Page 9
    General Management as of March 2005 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
    ..., leader in ultra terminal distribution in the Asia-Pacific region. In 2004, the Company gained full control of MGE UPS Systems, which ranks first in Europe and third worldwide in uninterruptible power supplies. It also acquired Andover Controls, a US manufacturer of building automation and security...

  • Page 12
    ... countries. The Industry market accounted for 31% of sales in 2004. We offer companies a wide range of products, equipment and services to distribute and manage electricity, control and monitor machines, automate industrial processes, and supervise and manage industrial sites and their consumption...

  • Page 13
    ... market, Schneider Electric offers products, equipment and systems to optimize the generation, transmission, distribution and sale of electricity. We serve power companies, systems integrators, OEMs and panelbuilders with a lineup that integrates new web technologies and high value added products...

  • Page 14
    ... operating costs in service, commercial and industrial buildings. We leverage our systems integrator partners' expertise and the market's broadest open systems technology to offer comprehensive, consistent solutions for control, supervision, monitoring, security, intruder alert and access control...

  • Page 15
    ...the start up of new businesses. And the Globalization & Industry division leverages the Company's global presence to optimize purchasing, supply chain management, production unit specialization and localization, and information systems. The four operating divisions-Europe, North America, AsiaPacific...

  • Page 16
    ...To put its principles into action, the Global Compact focuses on sharing experience during annual meetings, identifying areas for improvement and raising awareness by reminding all of us that its values are universal. Schneider Electric's supplier list includes international companies such as Nippon...

  • Page 17
    ... the bylaws). Schneider Electric's fiscal year runs from January 1 to December 31. The bylaws, minutes of Annual Meetings, Auditors' Reports and other legal documents concerning the Company are available for consultation at the Company's head office (Board of Directors' Secretariat) located at 43/45...

  • Page 18
    ... shares to the Employee Stock Purchase Plan, the May 5, 2000, March 5, 2003 and December 9, 2004 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 Summary of Changes in Capital Number...

  • Page 19
    ... later date. Details of the stock options plans are provided on pages 20 and 21. At the Combined Annual and Extraordinary Shareholders' Meeting of May 6, 2004, the Board of Directors was authorized to grant options to purchase new or existing shares to employees and corporate offices of the Company...

  • Page 20
    ... Consignations Employees Treasury stock Intragroup cross shareholdings Public 4.45% 3.76% 3.20% 88.59% Disclosure thresholds To the best of the Company's knowledge, no shareholders other than Caisse des Dépôts, listed above, hold, either directly or indirectly, more than 5% of Schneider Electric...

  • Page 21
    .... The first, number 23, is designed to reward the 2003 winners of the NEW2004 Trophies. This awards program is part of the NEW2004 company program. The plan has 107 grantees, members of the six winning teams. Each member was granted 1,000 options. 19 General Presentation of Schneider Electric SA

  • Page 22
    ... employees exercising the largest number of options during the year (not including corporate officers) (1) Weighted average price Price (in euros) Expiration date 282,200 56.09 2012 77,000 43.53 (1) - Stock option plan details Plan no. Date of Board Meeting Number of initial grantees Number...

  • Page 23
    ...their options. 5 Stock buybacks The Annual Shareholders' Meeting of May 16, 2003 authorized the Board of Directors to buy back shares on the open market. Pursuant to this authorization, the Company purchased 1,660,253 shares at an average unit price of â,¬ 51.50. The Annual Shareholders' Meeting of...

  • Page 24
    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 25
    .... As part of the Euro Medium Term Notes program initiated on December 20, 2002, Schneider Electric issued â,¬ 750 million worth of 3.875% bonds due October 31, 2008. The bonds are traded on the Luxembourg bond market under ISIN code FR 0010023200. 23 General Presentation of Schneider Electric SA

  • Page 26
    ... documents In addition to the annual report and a summary report, the Company also publishes: The Annual Report and "In Brief". A Shareholders' Letter (three times a year). General, economic and financial information (presentation, press releases). A corporate website (www.schneider-electric...

  • Page 27
    ... he joined Schneider Electric, where he has been in charge of special projects for the Corporate Services department since 2001. Mr. Lachmann owns 10,500 Schneider Electric SA shares. Directors Daniel Bouton* First elected: 1995 Term ends: 2008 54 years old, Chairman and Chief Executive Officer of...

  • Page 28
    ... of services, systems and equipment for building technology, electrical contracting and payphones. Since 1998, Mr. Kissling has been Chairman of Unaxis Corporation, also serving as Chairman and Chief Executive Officer from 1998 to 2002. Mr. Kissling owns 250 Schneider Electric SA shares. Gérard...

  • Page 29
    ... as Chairman of Axa's Management Board and Chairman of its Executive Committee. He was a Director of Schneider Electric SA from 1986 to 2003. Mr. Ross owns 300 Schneider Electric SA shares. Piero Sierra * First elected: 1997 Term ends: 2008 70 years old, Special Advisor for the administration of...

  • Page 30
    ... to acquire or sell assets exceeding â,¬ 100 million as well as all transactions involving a commitment by the Company above this amount. In addition, the Board must carry out an annual review of its membership, organization and operating procedures. Article 2 defines the principles the Board shall...

  • Page 31
    ... four months. The meeting that closed the 2003 accounts also set the dividend to be submitted for shareholder approval at â,¬ 1.1 per share, plus a tax credit of â,¬ 0.55, for a total payment of â,¬ 1.65 per share. The Board reviewed the interim financial statements for the six months ended June...

  • Page 32
    ... the procedures required by law. These include reviewing budgets and business plans, placing on record capital increases and drawing up a report to shareholders on any employee share issues under the Employee Stock Purchase Plan. Directors and corporate officers hold 4.45% of the Company's capital...

  • Page 33
    ...). In connection with its risk review, the Committee examined the Company's environmental policy, the status of operations in France, information systems outsourcing and globalization, and procedures for the integration of newly-acquired businesses. It also analyzed the Company's dividend and share...

  • Page 34
    ... business strategy decided by the Board of Directors of Schneider Electric SA, the Group's parent company, that they comply with the applicable laws and regulations and that they reflect the Group's values and internal standards and rules. Obtain assurance that statutory and management accounting...

  • Page 35
    ... 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 36
    ... or purchased by the Group are tracked by the Industrial Property team within the Finance & Control - Legal Affairs Department. All industrial property information for the main Group subsidiaries is transmitted to this team, which is responsible for managing and protecting these intangible assets...

  • Page 37
    ... 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 38
    ... and policies. Accounts closing process The reporting units produce monthly income statements, which are used to determine the Group's monthly operating income. Effective from 2003, the consolidated financial statements are produced 16 working days after the annual or half-yearly period-end. To meet...

  • Page 39
    ... of each term. Corporate Management Control and Accounting Department standards manual, which includes details of debit/credit pairings in the consolidation system. A Group reporting procedures manual. A manual describing the procedures to be followed to integrate newly-acquired businesses in the...

  • Page 40
    ... of â,¬ 55,400 by 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 his...

  • Page 41
    ... Total % 2003 % Audit - Statutory accounting, certification, review of individual and consolidated financial statements - Related engagements Sub-total Other services - Legal, fiscal and labor issues Total 476 6,476 7% 100% 30 3,392 1% 100% 506 9,868 5% 566 3% 100% 5,816 184 6,000 90% 3% 93...

  • Page 42
    ..., 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 paid...

  • Page 43
    ... for building automation and security and energy management solutions by merging TAC and Andover Controls. Together, these companies represented full-year sales of â,¬ 470 million and 2,700 employees. We also enhanced our presence in the Asia-Pacific region and moved into the number 2 spot worldwide...

  • Page 44
    ... of a core system has taken on a global scope. Capgemini was selected as our partner to build the core system and manage IT systems in Europe. Services: Being part of the solution Schneider Electric is building on support services for its installed base-the largest in the market-and developing...

  • Page 45
    ... of MGE UPS Systems, a world leader in uninterruptible power supplies. The acquisition increased the Group's stake in the company to 84.8%. The Clipsal Ultra Terminal businesses acquired from Gerard Industries in December 2003 and located in Australia, New Zealand, India and South Africa were fully...

  • Page 46
    ... include recently acquired activities (building automation, secured power and sensors and detectors for repetitive machines) that are managed separately from Schneider Electric's core businesses. The year's key acquisitions-MGE UPS Systems, Andover Controls and Kavlico-represented sales of â,¬ 894...

  • Page 47
    ... to reduce the sensitivity of earnings to changes in exchange rates. Hedging programs mainly concern foreign currency receivables, payables and operating cash flows, which are generally hedged by means of forward sales. Depending on market conditions, risks in the main currencies may be hedged based...

  • Page 48
    ... by the Finance & Control - Legal Affairs Department and are reviewed at monthly intervals based on changes in financial market conditions. Claims, litigation and other risks 46 In 2001, Schneider Electric made a public offer to purchase Legrand in exchange for shares as part of a proposed merger...

  • Page 49
    ... Schneider Electric's strategy for managing insurable risks is designed to defend the interests of employees and customers and to protect the environment, the Company's assets and its shareholders' investment. This strategy entails: Identifying and quantifying risk using different reporting systems...

  • Page 50
    ... million worth of Schneider Electric shares. This was partially offset by the issuance of shares to cover the exercise of stock options and the worldwide employee stock purchase plan. Retained earnings rose by â,¬ 299 million, reflecting income for the year of â,¬ 565 million, the dividend paid in...

  • Page 51
    ... increase in other short-term borrowings in non-French subsidiaries. Net cash used by investment in operating assets amounted to â,¬ 284 million versus â,¬ 265 million in 2003. Purchases of intangible assets and of property, plant and equipment declined to 2.7% of sales from 3% the year before...

  • Page 52
    ... 6,813.4 million at the previous year-end. This reflects 2004 income, changes stemming from the cancellation of 7 million shares in an amount of â,¬ 347.1 million, dividends paid, and premiums on shares issued on the exercise of options and as part of the worldwide employee stock purchase plan. 50

  • Page 53
    ... through local programs. In Our Principles of Responsibility, a document of reference for the entire Schneider Electric corporate community, we affirm our commitment to diversity: "All employees are entitled to express their cultural diversity and are managed without discrimination. Team members are...

  • Page 54
    ... Total number of hours worked in ...years 25-34 years 17.2 % 12.9 % 2.7 % > 35 years Category 2003 2004 Breakdown by Operating Division 2003 2004 44 % 43 % 58 % Line employees Non-executive staff and technicians Engineers and managers 54 % Europe North America 22 % 14.5 % 5.5 % 21 % 18 % 7% Asia...

  • Page 55
    ... team members in Australia, India, China and other countries. Number of days of training 2003 18.4 % Schneider Electric uses training to develop skills and nurture employee loyalty. In 2004, the Company welcomed 117 graduates from 50 countries into its Marco Polo international recruitment program...

  • Page 56
    ...at the AFI plant in Grenoble, France. Work accidents: Frequency rate 2003 2004 Line employees 27.56 20.09 Non-executive staff and technicians Engineers and managers 7.33 3.06 8.73 3.42 NEW2004 objective: Conduct professional satisfaction surveys among 100% of employees every two years 99 % 75 % 43...

  • Page 57
    ...have health coverage 97 % 100 % 100 % 100 % ognizing the diversity of disability. Schneider Electric Industries SAS is among the six CAC-40 firms in which disabled employees account for more than 6% of payroll. In May 2004, the Company won an award from France's business leaders' union for its work...

  • Page 58
    ... building automation and security market by acquiring US-based Andover Controls. Following on the 2003 acquisition of TAC, this move has extended our lineup of solutions that allow customers to manage, optimize and reduce energy consumption. Our TAC subsidiary has a performance contract with...

  • Page 59
    ... electrical distribution and low voltage industrial control products. A dedicated program has been developed to promote the necessary measures in design, industrialization, purchasing and production. 67 % 74 % 2002 2003 Dec. 31, 2004 2004 target NEW2004 objective: Ensure that 100% of our new...

  • Page 60
    ...Inverter. The approach used for this range has reduced product volume by 19% and mass by 23%. Schneider Electric also came in second in the "Environmental management for sustainable development" category for its facility in Carros, France, which primarily manufactures automation components. Ratings...

  • Page 61
    ... such as building automation and security, energy management, secured power, services, sensors and other specialized automation devices are allowing us to double our accessible markets from â,¬ 100 billion to â,¬ 200 billion. Geographically, our two top priorities are North America and Asia. We...

  • Page 62
    ... of goodwill (note 3) Group's share of losses of equity investments (note 6) Net income before minority interests Minority interests Net income (attributable to Schneider Electric SA) Earnings per share (in euros) (note 14.6) Diluted earnings per share (in euros) The accompanying notes are...

  • Page 63
    ...-term investments Long-term pension assets Sub-total III - Net cash (used) / provided by financing activities Increase in long-term debt Reduction of long-term debt (Purchase)/sale of Company shares (Decrease)/increase in other borrowings Common stock issued Dividends paid: Schneider Electric SA...

  • Page 64
    ... 11) Deferred taxes (note 12) Cash and cash equivalents (note 13) Total current assets Non-current assets Intangible assets - net (note 4) Goodwill - net (note 3) Property, plant and equipment - net (note 5) Investments Investments accounted for by the equity method (note 6) Investments - net (note...

  • Page 65
    ... 31, 2003 Dec. 31, 2002 Current liabilities Customer prepayments Trade accounts payable Accrued taxes and payroll costs Deferred tax liabillities (note 12) Other payables and accrued liabilities Short-term liabilities Short-term debt (note 17) Total current liabilities Provisions for contingencies...

  • Page 66
    ... 2003 net income At December 31, 2003 Cancellation of shares (3) Worldwide Employee Stock Purchase Plan (3) Exercise of stock options (3) Dividends (including précompte equalization tax) Refund of précompte equalization tax overpaid in previous years Change in treasury stock Translation adjustment...

  • Page 67
    ... subsidiaries are not consolidated. All of the companies included in the scope of consolidation end the fiscal year on December 31. Note 1 - Accounting Principles 1.1 - Basis of presentation The consolidated financial statements of the Group have been prepared in accordance with French GAAP...

  • Page 68
    ...Group's equity in the underlying net assets, the expected future profitability and business prospects of the company and, in the case of listed securities, the market value of the stock. 1.13 - Deferred taxes Deferred taxes, corresponding to temporary differences between the tax basis and reporting...

  • Page 69
    ... levels. Two methods are used to calculate the Group's liability for statutory retirement benefits: Accruals - the accrual is calculated for all eligible employees based on the determination of the present value of the future liability using a rate reviewed each year and based on market conditions...

  • Page 70
    ...of â,¬ 32 million (â,¬ 20 million net of tax), which was charged against retained earnings in the opening balance sheet at January 1, 2004. b) Long-term contracts Income from long-term contracts is recognized using the percentage-of-completion method, based either on the percentage of costs incurred...

  • Page 71
    ...Ltd., was accounted for by the equity method as of January 1, 2004 due to CIH's dominating role in managing the company in its first year. Clipsal's Ultra Terminal subsidiaries, acquired from Gerard Industries in December 2003 and located in Australia, New Zealand, India and South Africa, were fully...

  • Page 72
    ...12,794.8 Dec. 31, 2003 Reported Goodwill - net Property, plant & equipment and intangible assets - net Other non-current assets Current assets Total Assets Shareholders' equity (excluding minority interests) Minority interests Long-term debt Other long-term liabilities Provisions for contingencies...

  • Page 73
    ...20 years Lexel Group companies As part of the process of integrating the Lexel subsidiaries into the Schneider Electric organization, the related goodwill, in a net amount of â,¬ 860.2 million at January 1, 2004, has been allocated among these units, the most significant of which are presented in...

  • Page 74
    ... has been calculated on the basis of the financial statements at that date. All of Clipsal's businesses were covered by an agreement with the Gerard family. Under this agreement: Clipsal's Ultra Terminal business, retained by Schneider Electric, was valued at â,¬ 445 million (enterprise value). This...

  • Page 75
    ... Group, which comprises ten subsidiaries, was consolidated for the first time as of July 1, 2004. The related goodwill has been calculated on the basis of the financial statements at that date. In millions of US dollars Acquisition price Fair value of the assets and liabilities acquired Net assets...

  • Page 76
    ...Other intangible assets 101.2 61.9 71.9 Total December 31, 2002 December 31, 2003 December 31, 2004 Main trademarks recognized during the period: 40.4 615.3 158.7 168.4 159.3 259.9 270.7 846.5 2004 Net MGE UPS Clipsal TAC Digital Electronics Andover Controls Security International Other Total...

  • Page 77
    ...Property, Plant and Equipment 5.1 - Changes in property, plant and equipment Gross value (in millions of euros) Land Buildings Plant and equipment...of euros) 111....9 Land Buildings Plant and equipment (1,681... value (in millions of euros)... (2,644.1) Land Buildings Plant and equipment 783.5 733.5...

  • Page 78
    5.2 - Capital leases Property, plant and equipment include the following assets held under capital leases: (in millions of euros) Dec. 31, 2004 2.7 70.7 39.6 10.6 4.4 (82.6) 45.4 (in millions of euros) Dec. 31, 2003 2.7 56.7 29.2 (61.8) 26.8 Land Buildings Machinery and equipment Other tangible ...

  • Page 79
    Note 6 - Equity Investments Investments accounted for by the equity method are detailed as follows: % interest at December 31 (in millions of euros) Share in net assets at December 31 2004 41.1 16.8 11.5 (4.1) 65.3 2003 10.1 16.9 0.8 35.5 (2.8) 60.5 Share in net income at December 31 2004 (2.8) ...

  • Page 80
    ... of euros) * Dec. 31, 2004 Sales Cost of sales Selling, general and administrative expenses Operating (loss) / income Financial expense, net Exceptional items Income taxes Net loss before minority interests Minority interests Net loss * On the basis of the average exchange rate for the year Dec...

  • Page 81
    ... Mathematical average of share price over last month of the year. (5) Companies with no operations. On November 24, 2004, Schneider Electric paid $ 25 million to acquire Abacus Engineered Systems, a USbased provider of energy efficiency and engineering solutions for buildings with sales of nearly...

  • Page 82
    ...585.4 Vendor loan to buyer of Legrand shares (1) Receivable on divestment of VA Tech Schneider HV GmbH Loan to Clipsal Australia MGE Finances convertible bonds Restricted cash Advances to non-consolidated companies and other long-term loans Other Other investments (2) 167.9 17.5 35.6 19.6 54.7 295...

  • Page 83
    ... returns. Schneider Electric files a consolidated tax return with its French subsidiaries held directly or indirectly through Schneider Electric Industries SAS. 12.1 - Analysis of tax expense for the year (in millions of euros) At Dec. 31, 2004 At Dec. 31, 2003 Current taxes France International...

  • Page 84
    ... Net income of companies accounted for by the equity method Income before tax and amortization of goodwill Statutory tax rate Income tax expense calculated at the statutory rate (35.43%) Reconciliation items: Difference between French and foreign tax rates Adjustment of tax loss carryforwards France...

  • Page 85
    ... in France In 2003, the Group had deferred tax assets of â,¬ 486.3 million corresponding to tax loss carryforwards arising primarily from the loss incurred on the sale of Legrand in 2002. In 2004, the use of tax loss carryforwards and a change in the tax rate used to calculate deferred taxes reduced...

  • Page 86
    ...by the Board of Directors on December 9, 2004 and the share issue carried under the worldwide employee stock purchase plan: Number of shares issued or cancelled Total shares outstanding New capital (in euros) Capital at December 31, 2002 Cancellation of shares Worldwide employee stock purchase plan...

  • Page 87
    ...an employee or corporate officer of the Group. In addition, exercise of half the options is conditional on the achivement of annual objectives based on operating margin. The purpose of the program is to stabilize the market price of the Company's stock, reduce dilution and optimize return on equity...

  • Page 88
    ... year in question. The dilutive impact of stock options is determined by calculating the number of shares that could be purchased on the open market using the funds obtained from the exercise of the options (treasury stock method - see Note 1.22). Determination of the share base used in calculation...

  • Page 89
    ...-ofservice awards mainly concerns French companies in the Group and is generally calculated based on the seniority, grade and end-of-career salary of the employees concerned. For defined benefit plans, the accrued or prepaid periodic pension cost is determined using the projected unit credit method...

  • Page 90
    ... plans 4. Change 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...

  • Page 91
    ... 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 assumptions used...

  • Page 92
    ... coverage provided by insurance. Such warranties may run up to 18 months and are classified as accrued expenses. The Group also recognizes provisions to cover disputes concerning defective products and recalls of clearly identified products. The short-term portion (less than one year) is classified...

  • Page 93
    ...(Note 6.2) Employee profit-sharing Less current portion (1) Long-term debt Short-term debt consists of the following: (in millions of euros) Dec. 31, 2004 28.0 60.4 80.8 11.3 (1) Dec. 31, 2003 93.3 60.2 53.8 37.0 1,008.7 1,253.0 2,688.3 Bank overdrafts Commercial paper Other short-term borrowings...

  • Page 94
    ... in principal amount of â,¬ 457 million, generating net proceeds of â,¬ 345 million. Most of the bonds issued were originally swapped for a fixed rate. (2) Schneider Electric SA issues commercial paper on behalf of the entire Group. Confirmed lines of credit back the commercial paper program. 92

  • Page 95
    ...â,¬ 150 million and concerned mainly MGE UPS for an amount of â,¬ 76.5 million (see Note 3.3). Information technology services In October 2004, the Group signed an agreement with Capgemini to outsource its European IT functions (800 employees) and deploy shared management applications. The agreement...

  • Page 96
    ... ratios. As of December 31, 2004, the Group was in compliance with all of these covenants. Depending on market conditions, risks in the main currencies may be hedged based on recurring forecast flows using contracts that expire in 12 months or less. Certain recently acquired companies use options...

  • Page 97
    ... 31, 2003 Book value 369.6 585.4 3,087.5 45.3 (2,151.0) (113.6) (407.0) (16.7) 1,399.5 Market value 416.9 585.4 3,087.5 45.3 (2,194.0) (113.6) (407.0) (18.8) 1,401.7 Non-consolidated investments Other financial assets Cash and cash equivalents Forward purchases and sales of foreign currencies...

  • Page 98
    ...Dec. 31, 2004 Dec. 31, 2003 Income statement Sales Cost of sales Other operating income and expense Financial income (expense) Exceptional items Balance sheet Loans (1) Trade receivables Other accounts receivable Long-term debt Other accounts payable Off balance sheet commitments Commitments given...

  • Page 99
    ... Net gains (losses) on sales of marketable securities Cost of net debt Dividend income Exchange gains and losses, net Valuation allowances (long and short-term investments) Other Other financial income and expense, net Total Note 24 - Exceptional Items (in millions of euros) Dec. 31, 2004 (88...

  • Page 100
    ... average number of employees Europe North America Asia Pacific Rest of the world 25.2 - Payroll costs (in millions of euros) Dec. 31, 2004 (3,307.6) (72.7) (3,380.3) Dec. 31, 2003 (2,959.4) (38.6) (2,998.0) Payroll costs Profit-sharing and incentive bonuses Total 25.3 - Management compensation...

  • Page 101
    ... 27 - Consolidated Companies The main companies included in the Schneider Group scope of consolidation are listed below. % interest interest Dec. 31 2004 Dec. 31 2003 EUROPE Fully consolidated Andover Controls GmbH Berger Lahr GmbH Berger Lahr Positec GmbH & Co KG Berger Lahr Services GmbH Crouzet...

  • Page 102
    ... Gardy Sarel Appareillage Electrique Scanelec Schneider Automation SA Schneider Electric Industries SAS Schneider Electric SA (parent company) Schneider Electric International Schneider Electric SA Company Schneider Toshiba Inverter Europe SAS Schneider Toshiba Inverter SAS SCI du Pré Blanc Senside...

  • Page 103
    ... Equipements Tableaux Basse Tension - SETBT Transfo Services Usibati SCI Ajax Electrical Ltd Andover Controls Ltd Avenue Solutions Limited Berger Lahr Positec Ltd Capacitors Ltd Crouzet Ltd Grawater Ltd Grawater of Wakefield Ltd JO EL Electric Ltd JO JO (UK) Ltd JO JO Products Ltd Lexel Holdings (UK...

  • Page 104
    ... MGE UPS Systemer AS TAC Control Systems AS Crouzet BV Polam Holding BV Polinsta Holding BV Pro Face HMI (sub-group) Sandas Montage BV Schneider Electric BV Schneider Electric Logistic Centre BV Stago BV Andover Controls Sp Zo.o Elda Eltra S.A. (ex Eltra SA) ELDA Szczecinek SA MGE UPS Systems Polska...

  • Page 105
    ... de CV Square D Company Mexico SA de CV Andover Controls Corp Berger Lahr Motion Technology Inc. Control Solutions Ltd. LLC CSI Acquisition Holding Corp. E-Business @ Schneider Electric Inc. EFI Electronics Inc Hyde Park Electronics LLC Kavlico Corp MGE UPS Systems Inc Num Corporation Palatine Hills...

  • Page 106
    ... 2003 Power Distribution Services Inc. Pro Face America Inc. Quantronix Inc Schneider Automation Inc. Schneider Electric Holdings Inc. Security International Inc. Square D Company Square D Holdings One. Inc. Square D Investment Company Square D Receivables. LLC SNA Holdings Inc. ST Inverter Americas...

  • Page 107
    ... Schneider Electric New Zealand Holdings Ltd (sub-group 1 subsidiary) MGE UPS Philippines Inc. Schneider Electric Philippines Inc Andover Controls Singapore Pty Ltd MGE Asia Pte Ltd MGE Logistics South East Asia pacific Pte Ltd TAC Control Asia Schneider Electric Export Services Schneider Electric...

  • Page 108
    ... 100.00 100.00 100.00 100.00 100.00 Accounted for by the equity method IPower Solutions Pty Ltd Clipsal Asia Holding Schneider Electric Engineering Ltd EFI Asia Pacific PTE Ltd Australia Hong Kong Japan Singapore 50.00 40.00 30.00 40.00 50.00 REST OF THE WORLD Fully consolidated Alight Investments...

  • Page 109
    ... assets Property, plant and equipment Assets held for sale Investments Investments accounted for by the equity method Available for sale financial assets Other financial assets Total investments Deferred taxes Other non current assets Total non-current assets Current assets Inventories and work...

  • Page 110
    ... bonds Long term portion of financial debt Deferred taxes Other long term liabilities Total non-current liabilities Current liabilities Customer prepayments Trade accounts payable Accrued taxes and payroll costs Other payable and accrued liabilities Short-term portion of financial debt Total current...

  • Page 111
    ... assets Property, plant and equipment Assets held for sale Investments Investments accounted for by the equity method Available for sale financial assets Other financial assets Total investments Deferred taxes Other non current assets Total non-current assets Current assets Inventories and work...

  • Page 112
    ... bonds Long term portion of financial debt Deferred taxes Other long term liabilities Total non-current liabilities Current liabilities Customer prepayments Trade accounts payable Accrued taxes and payroll costs Other payable and accrued liabilities Short-term portion of financial debt Total current...

  • Page 113
    ... items Income tax Net income of fully consolidated companies before amortization of goodwill Amortization of goodwill Group's share of income/(loss) of equity investments Net income/(loss) before minority interests Minority interests Net income/(loss) (attributable to Schneider Electric SA) Earnings...

  • Page 114
    ... are calculated by adjusting net income and the number of shares outstanding for the dilutive effect of exercise of outstanding stock options. The dilutive effect of stock options is determined by applying the "treasury stock" method (theoretical number of shares purchased at average market price...

  • Page 115
    ... French GAAP accounts using methods that are similar to those set out in IAS 19 - Employee Benefits. These methods are described in the 2004 Annual Report (note 15 to the consolidated financial statements). In connection with the changeover to IFRS, the Group has performed a comprehensive review of...

  • Page 116
    ... of IAS 16 - Property, Plant And Equipment and IAS 40 - Investment Property has no impact on the Group accounts. Property, plant and equipment consist mainly of manufacturing equipment dedicated to specific product lines and material parts of individual items of equipment are already depreciated...

  • Page 117
    ...with IAS 36 - Impairment Of Assets and the level (Cash Generating Unit) at which the recoverability of goodwill is assessed is also compatible with this standard. The Group's business is highly sensitive to technological advances and property, plant and equipment are already tested for impairment at...

  • Page 118
    ... on the financial statements for the year ended December 31, 2004, prepared in accordance with French generally accepted accounting principles and standards (French GAAP) and audited by us in accordance with professional standards applied in France. Based on our audit, we expressed an unqualified...

  • Page 119
    ... statements, which describes a change in accrual method for volume discounts granted to distributors. Specific procedures We also reviewed the information about the Group given in the report of the Board of Directors in accordance with French generally accepted accounting principles and standards...

  • Page 120
    ... 663,753.1 2,546,445.0 2,029,691.7 150,887.9 4,732,745.2 Property, plant and equipment (note 1b) Land Buildings Other Investments (notes 2 & 3) Shares in subsidiaries and affiliates Other investments Accounts receivable Accounts receivable - trade Other (note 4) 228.1 148,621.8 87,046.3 2,654,393...

  • Page 121
    ...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 1,200,000.0 70,437.0 13.4 2,191.0 936.8 1,295.7 2,168.6 1,277,042.5 1,100.2 2,151,000...

  • Page 122
    2 Statement of Income year ended December 31, 2004 Expenses (â,¬ thousands) 2004 2003 2002 Operating expenses Purchases and external charges Taxes other than on income Payroll costs Depreciation, amortization and provision expense Other operating expenses and joint-venture losses 6,449.2 1,466.6...

  • Page 123
    ...Operating revenues Sales of services and other 1,254.1 1,254.1 Financial income Dividend income Interest income Other 463,278.8 164,001.7 1,553.7 628,834.2 Non-recurring income Net gains on disposals of fixed assets... form an integral part of these financial statements 667,565.5 690,424.5 865,256.2 121 C o ...

  • Page 124
    ...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 December 31, 2004 have been prepared in accordance with French generally accepted...

  • Page 125
    ... table shows the proceeds from sales of investments and the related gains and losses: Net book value of investment Brime Technologies Schneider Electric SA Legrand SA Siap Other (less than â,¬ 100,000) Total 1,087.8 349,122.6 1,297.7 8,057.1 287.0 359,852.2 Sale price Net gain (loss) 1,200.3 349...

  • Page 126
    ... earnings outlook of the issuer. For listed investments, fair value is also based on market price. Unrealized gains on investments are not recognized. Certificates of deposit and mutual funds Schneider Electric SA shares purchased in connection with the 14th, 15th and 16th Stock Option Plans Total...

  • Page 127
    ...cancelled as part of a capital decrease. 646,160 shares issued on exercise of management stock options. 705,847 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 is...

  • Page 128
    ... 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 loans and overdrafts and other debt Accounts payable - trade Accrued taxes and...

  • Page 129
    ... Electric SA is the parent company of the Group and therefore publishes the consolidated financial statements of the Schneider Electric Group. Off-balance sheet instruments The Company does not purchase or sell any off-balance sheet instruments. Hedging transactions are carried out by the manager...

  • Page 130
    ... 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, 2004, on: Our examination of the accompanying financial statements of Schneider Electric SA. The basis of our opinion. The specific procedures...

  • Page 131
    ... 45.0 38.0 40.0 159,208.4 1,798,319.0 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 10,080 1,871,592 Geodis Schneider Electric SA shares (stock option plans no. 14, 15 and 16) Total...

  • Page 132
    ... 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 A. Subsidiaries (at least 50% owned) Schneider Electric Industries SAS 89 boulevard Franklin Roosevelt...

  • Page 133
    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 - - 3,127,867.6 Holding company Holding company 221,796.1 455,105.3 136,896.2 136,896.2 - - 1,692.4 5,016.1 82,607.9 82,607.9...

  • Page 134
    ... Income tax (IFA) Net income excluding précompte Dividends equalization tax and tax credit paid (1) 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...

  • Page 135
    .... We remind you that dividends paid by Schneider Electric SA for the last three years were as follows: Approval of the consolidated financial statements - second resolution We also ask you to approve the consolidated financial statements, as presented, which show net income after amortization of...

  • Page 136
    ... Annual Meeting of May 6, 2004 to buy back its shares by any appropriate method, including through the use of derivatives, in accordance with the provisions of article L.225-209 of the Commercial Code. The shares could be bought back to reduce the issued capital, or in connection with stock option...

  • Page 137
    ... limits set in the above resolutions, in payment for shares in another company tendered in connection with a Public Exchange Offer initiated by Schneider Electric. In accordance with the new measures in the Commercial Code, the shares and share equivalents issued for this purpose may represent, in...

  • Page 138
    ... In 2004, the Board of Directors used this authorization to issue shares equivalent to 0.3% of the issued capital as part of a worldwide employee stock purchase program. This authorization, which was granted for a period of five years, was renewed by shareholders at the Annual Meeting of May 6, 2004...

  • Page 139
    ... was signed between your Company and Spie Batignolles (renamed Amec Spie SA) covering the administrative and legal management of contract disputes that remained at the level of Schneider Electric SA at the time of the merger. In 2004, Schneider Electric paid Amec Spie SA â,¬ 100,000 (excluding VAT...

  • Page 140
    ... as Statutory Auditors of Schneider Electric SA and pursuant to Articles L.225-135, L.225129, L.225-129-2 and L.228-92 of the Commercial Code, we present below our report on the authorizations sought by the Board of Directors for a period of 26 months to increase the Company's capital by issuing, on...

  • Page 141
    ...This report refers to articles in the Commercial Code that reflect changes brought about by Order 2004-604 of June 24, 2004. Paris and Neuilly-sur-Seine, February 17, 2005 Auditors' Report on the Proposal to Grant Existing or New Shares without Consideration to Officers and Employees of the Company...

  • Page 142
    ... and financial statements for the year ended December 31, 2004, as presented by the Board of Directors. The whole dividend suggested is entitled to the 50 % deduction in favor of individuals residing in France provided for in Article 153-8-2 of the Tax Code. Unpaid dividends on shares held in...

  • Page 143
    ... up by capitalizing reserves, earnings, additional paid-in capital or other legally acceptable items in accordance with the bylaws. Tenth resolution (Authorization to trade in the Company's shares maximum acquisition price: â,¬ 90, minimum selling price: â,¬ 50) The General Meeting, acting with the...

  • Page 144
    ...and the Auditors' special report, resolves that the authorization given in the twelfth resolution may be used to issue shares in payment for shares of another company tendered to a public exchange offer governed by article L.225-148 of the Commercial Code. The General Meeting also gives the Board of...

  • Page 145
    ... for extraordinary General Meetings and having heard the report of the Board of Directors and the Auditors' special report, resolves, in accordance with articles L.225-197-1 et seq. of the Commercial Code: To authorize the Board of Directors to grant to officers and employees of the Company, as...

  • Page 146
    ... concerning internal control procedures related to the establishment and processing of accounting and financial information Free translation of the original report in French Year ended December 31, 2004 To the shareholders, In our capacity as Statutory Auditors of Schneider Electric SA (the Company...

  • Page 147

  • Page 148
    ... 41 29 71 00 Internet : www.schneider-electric.com Incorporated in France with issued capital of â,¬ 1,809,553,416 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...