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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
    ... 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 Governance 1. Board of...

  • Page 4
    ... 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 quarter, sales gradually turned...

  • Page 5
    ... 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, the flexibility of our flat corporate structure, our...

  • Page 6
    ... the most profitable companies in its industry, Schneider Electric maintained a high operating margin in 2003 despite declining sales. The margin was lifted by a noticeable improvement in North America driven by our cost-cutting plans. It was negatively affected, however, in International markets by...

  • 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
    ... 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 fund Michel François...

  • Page 9
    ... Globalization & Industry Alain Marbach Executive Vice-President Products & Technology Julio Rodriguez Executive Vice-President International & Iberian Operating Division Dave Petratis Executive Vice-President North American Operating Division Russel Stocker Executive Vice-President Asia...

  • Page 10
    8

  • Page 11
    ... 2002, Schneider Electric acquired Japan's Digital Electronics Corporation, the world leader in human-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...

  • Page 12
    ...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 Electric primarily operates under the Merlin Gerin, Square D and Telemecanique brand...

  • Page 13
    ... dedicated Schneider Global Business Development (SGBD) unit, we supply our main international customers with technological, logistic and contracting solutions that can be deployed around the world. SGBD's mission is to help make us the benchmark for Electrical Distribution and Automation & Control...

  • Page 14
    ... and implementing an electrical distribution network for a commercial or industrial building. Projects require the deployment of a comprehensive, customized set of products, systems and/or equipment. We also offer and develop three types of services: â- â- Combine a global vision and local...

  • Page 15
    ... to VA Tech Schneider High Voltage GmbH, a joint venture in which we hold a 40% interest. 3 - Domae electric products for homes in international markets and the Eloge range for the residential market in France. Eloge includes easy-to-connect modular switchgear, enclosures and phase/neutral systems...

  • Page 16
    ... products and systems. The Clipsal brand is internationally recognized in the residential market. The Industry market, accounted for around 32% of sales in 2003. We offer companies in a large number of sectors a wide range of products, equipment and services to distribute and manage electricity...

  • Page 17
    ... by stepped-up privatization of public infrastructure and the increasing use of new information and communication technologies, which open up new markets such as systems operation and maintenance, metering and remote payment. 7. Product distribution and customer base Distributors Electrical...

  • Page 18
    ... that help inspire our future product development. Global Strategic Accounts While distributors are critical to our business, we also sell directly to a wide range of end users and international OEMs. Our dedicated Schneider Global Business Development (SGBD) unit was created to serve these...

  • Page 19
    ... than 60 countries in 2003, Schneider Electric employees held 3.62% of the Company's outstanding shares through mutual funds. For Schneider Electric, pension and healthcare guarantees are an important part of human resources policy. For this reason, we encourage our units around the world to set up...

  • Page 20
    18

  • Page 21
    ...) in 1995, and then to Schneider Electric SA in May 1999. Its term is up to July 1, 2031, and its summarized corporate purpose is to operate, directly or indirectly, in France and abroad, any and all businesses related to electricity, industrial control and general contracting, as well as to carry...

  • 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
    ... Public France Public (International) â- â- As of December 31, 2003, Schneider Electric had approximately 205,500 shareholders (TPI estimate). A total of 30,325,855 shares benefited from double voting rights. Pledges on Schneider Electric shares To the best of the Company‚s knowledge, shares...

  • Page 24
    ...,425 Schneider Electric SA shares through the corporate mutual funds, representing 3.62% of the capital and 6% of the voting rights, taking into account double voting rights. Stock option plans Grant policy Stock option plans are approved by the Board of Directors following a review of the plans by...

  • Page 25
    ...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 Number of...

  • Page 26
    ... any 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...

  • Page 27
    ... 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 thousands of shares) 18...

  • Page 28
    ...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 tranches...

  • Page 29
    ... the Legrand divestment. The Committee's participation in the Q&A session with the Chairman at the Annual Shareholders' Meeting. In this capacity, Committee members relay certain questions phoned in to the toll-free number. â- â- Contacts Institutional investors, financial analysts and private...

  • Page 30
    28

  • Page 31
    ...he joined Schneider Electric, where he has 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 Soci...

  • Page 32
    ... 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 International Inc.; Member...

  • 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
    ... the acquisition of TAC and Clipsal and the increase in Schneider Electric's stake in MGE UPS Systems to 100%. Board members were also informed of the divisions' growth plans. Following the Audit Committee's report, the Board closed the accounts for 2002 and reviewed the 2003 interim financial...

  • Page 35
    ... that audit-related engagements by Schneider Electric SA's Statutory Auditors or units belonging to their networks would require prior authorization from the Audit Committee Chairman or the Executive VicePresident, Finance. Acting on the Remunerations and Appointments Committee's report, the Board...

  • Page 36
    ... meetings to the Directors. Responsibilities The Committee is regularly informed of the Group's compensation policies, especially executive compensation. It reviews stock option plans and employee stock purchase plans decided by the Board. It also makes recommendations to the Board concerning the...

  • Page 37
    ... plans. The Committee also reports to the Board about senior management compensation policies applied within the Group. b) General Management In 2003, the Executive Committee comprised Henri Lachmann, Chairman and Chief Executive Officer, the Executive Vice-Presidents of the North American, European...

  • Page 38
    .... Copies of the report are given to the head of the audited entity, General Management and the Audit Committee. The Group has established a system of commitment limits within each unit. Under this system, contracts for the purchase or sale of products or services that exceed a certain...

  • Page 39
    ... systems have been developed to guarantee the completeness of transaction data recorded in the accounts. â- Purchases Schneider Electric has established rules governing metal and other purchases, which represent in total 40% of consolidated sales. These rules mainly concern purchasing department...

  • Page 40
    ... 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 other European...

  • Page 41
    ... of changes in Group structure and the tax charge. â- Role of the Statutory and Management Accounting unit The majority of subsidiaries are consolidated at Group level; however, the Lexel, Square D, Crouzet Automatismes and TAC subgroups submit consolidated reporting packages. The list of entities...

  • Page 42
    ... 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 his...

  • Page 43
    ... or by the Executive Vice-President, Finance. Annual Shareholders' Meetings (article 18 of the bylaws) All shareholders are entitled to attend Annual Meetings, regardless of the number of shares held. The notice of meeting is sent directly by the Company to holders of registered shares. Holders of...

  • Page 44
    ... until the date of the Meeting, which may be held at the Company's head office or at any other location indicated in the notice of meeting. legal entities, acquires or increases its stake to at least two-thirds of the Company's capital through a public tender offer for all the Company's shares. In...

  • Page 45
    ... for computers, software and other new technology components. This increased productivity but not manufacturing employment. Investment in capacity extension, machines and non-residential buildings rose very slightly in the second half, but the general full-year trend was negative. Asia was again the...

  • Page 46
    ... high value-added Clipsal brand covers traditional ultra terminal products, such as switches, sockets and miniature circuit breakers; home automation solutions such as lighting scenarios, audio and video and safety systems; and voicedata-image transmission systems. December 2003: Schneider Electric...

  • Page 47
    ... in the US industry market. Hyde Park Electronics' sensors will be marketed under the Telemecanique brand name. â- Leviton Manufacturing Technological partnership for multimedia network infrastructure in homes Schneider Electric (Square D) and Leviton Manufacturing Company signed a technological...

  • Page 48
    ...in the manufacture of our products. We are therefore exposed to commodity risk arising from changes 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...

  • Page 49
    ... filed suit. Schneider Electric is paying the legal expenses not covered by insurance of the former executives involved. In connection with the divestment of Spie Batignolles, Schneider Electric SA booked contingency reserves to cover the risks associated with certain major contracts and projects...

  • Page 50
    ... global transport 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 American market...

  • Page 51
    ... 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, Spain, South Korea, Greece, Japan, Germany...

  • Page 52
    ... by Operating Division 20 % 22 % Category 58 % 27 % 44 % G North Americ a G E u rope G Intern a tion a l 29 % (200 3 d a t a a t 2002 s cope of con s olid a tion: 25.7 % - 2 8 . 3% - 46 % ) G Engineer s a nd m a n a ger s G Non-exec u tive s t a ff a nd technici a n s G Line employee s 2003...

  • Page 53
    ... also provided support. Plant management supplied detailed information on the pension system and organized numerous contacts with local 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...

  • Page 54
    ... 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 participating employees and countries was higher than...

  • Page 55
    ... plants in India and production units in Brazil, China, the US, France and the Czech Republic. Several Country Organizations, including Spain and the US, initiated programs to reduce energy consumption. In France, we deployed remote monitoring and audit procedures at 20 manufacturing sites to cut...

  • Page 56
    ... consumption related to manufacturing as well as to administrative and logistical operations. Our deep-rooted quality policy, which calls for reducing non-quality costs by 50%, also contributes to this objective by cutting down on transfers, waste, packaging, etc. Products Schneider Electric's eco...

  • Page 57
    ... 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 CoreRatings www.coreratings.com In 2003, Schneider Electric was rated by CoreRatings, a European...

  • Page 58
    ...-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 2002 (Digital Electronics, TAC, Clipsal and MGE UPS Systems) will add sales...

  • Page 59
    ... national utility EDF, which impacted mediumvoltage projects. â- In Italy, the UK and Germany, sales fell between 1% and 6%. Electrical Distribution business in Germany was depressed by the steady decline in the building market, whereas automation sales rose slightly, lifted by our action plans and...

  • Page 60
    ... for 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...

  • Page 61
    ...the Clipsal acquisition. 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...

  • Page 62
    ... divestment of Legrand shares provided â,¬ 3,224 million in 2002. The main investments during the year included TAC (â,¬ 385 million) and Clipsal (â,¬ 185 million), along with an increase in Schneider Electric's interest in MGE UPS Systems (â,¬ 15 million). Other long-term investments correspond to...

  • Page 63
    ... â,¬ 235.7 million and represented 2.8% of sales. Net income came to â,¬ 494.6 million compared with â,¬ 398.9 million the year before. Cofibel Cofibel's portfolio consists entirely of Schneider Electric SA shares. Income from continuing operations before tax came to â,¬ 3.04 million compared with...

  • Page 64
    ... of goodwill Amortization of goodwill (note 4) Group's share of income/(loss) 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...

  • Page 65
    ... long-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 Sale/(purchase) of Company shares Increase/(decrease) in other borrowings Common stock issued Dividends paid: Schneider Electric SA...

  • Page 66
    ...and Parent Company Financial Statements 3. Consolidated Balance Sheet Assets (in millions of euros, at December 31) 2003 2002 2001 Non-current assets Goodwill, net (note 4) Other intangible assets (note 5) Property, plant and equipment - at cost (note 6) Investments Investments accounted for by...

  • Page 67
    ... 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 current liabilities Provisions for contingencies and charges Provisions for pensions (note 16) Provisions...

  • Page 68
    ... 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 cancellation of treasury...

  • Page 69
    ... industrial 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...

  • Page 70
    ...recorded. 2.7 - Intangible assets Costs incurred by the Group in developing computer software for internal use are generally expensed when incurred. However for external and internal costs related to implementing enterprise resource planning (ERP) applications, such costs are deferred and amortized...

  • Page 71
    ... of the projected benefit obligations or market-related value of plan assets. The Group also provides supplemental retirement benefits to a limited number of active and retired senior executives. These defined benefit obligations are accrued for based on the contractual terms of the agreements...

  • Page 72
    ... the necessary conditions for obtaining compensation. The North American subsidiaries also offer cash discounts to distributors. These discounts are deducted from sales. Total sales are presented net of these discounts and rebates. b) Long-term contracts Income from long-term contracts is recognized...

  • Page 73
    ... Group acquired TAC, a major manufacturer of building automation and control equipment. TAC offers a full lineup of controllers, sensors, display units and actuators combined with highperformance supervision and design software. Headquartered in Malmö, Sweden, TAC has 2,100 employees and operations...

  • Page 74
    ...) Transformers Company Limited (SSST), a joint venture in China 49%-owned by SEEC (a non-Group unit) and 51% by Schneider Electric. â- Schneider Electric Devices (Dong Guan) Company Limited (SEDD), a wholly-owned subsidiary in China. Schneider Electric Australia Holding Pty Limited, a wholly...

  • Page 75
    ... 73.5 43.4 10.5 62.7 4.9 6.7 9.5 7.0 28.3 12.9 224.0 1,479.3 Square D Company Groupe Lexel Telemecanique Federal Pioneer Ldt Merlin Gerin Crouzet Automatismes Mita Holding Ldt Positec PDL TAC Digital Electronics Infra + Schneider Automation JV VAS (1) Other (2) Total 40 years 40 years 40 years 40...

  • Page 76
    ... 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 Group...

  • Page 77
    ....5 513.2 (3.5) 43.9 (2) 40.4 Software Brands Other intangible assets (54.3) (17.8) ...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...

  • Page 78
    ...) Land 113.6 94.6 87.5 Buildings 448.4 441.7 426.9 Plant and equipment 836.0 783.5 733.5 Other 353.0 253.6 191.3 Total 1,751.0 1,573.3 1,439.1 December 31, 2001 December 31, 2002 76 December 31, 2003 (1) SAP project costs were reclassified under intangible assets (software) in an amount of...

  • Page 79
    ...(62.3) 26.9 Land Buildings Machinery and equipment Less accumulated depreciation Assets under capital lease - net Future minimum lease payments related to capital leases as of...rental payments required under operating leases that have initial or remaining non-cancelable (â,¬ millions) lease terms in...

  • Page 80
    ... 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 follows: 7.1 - MGE...

  • Page 81
    ...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 GmbH was...

  • Page 82
    ... 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 Comipar SIAP...

  • Page 83
    ..., Clipsal Asia Holdings Limited, manufactures and markets ultra terminal electrical distribution products. In a separate transaction, the Group signed an agreement with CIH Ltd. and the Gerard family to acquire Gerard Industry Pty Ltd.'s ultra terminal business in Australia, New Zealand, India and...

  • Page 84
    ... to suppliers Accounts receivable, at cost Reserves Accounts receivable, net Sold receivables (1) 82 (1) The Group's main North American subsidiary, Square D Company, has a sale of receivables agreement under which it sells fractional interests in a pool of eligible short-term trade receivables...

  • Page 85
    ... subsidiaries held directly or indirectly through Schneider Electric Industries SAS. 13.1 - Analysis of tax expense for the year (â,¬ millions) 2003 2002 Current taxes France International Total Deferred taxes France International Total Total tax (expense) benefit 96.2 47.9 144.1 (127.3) 444...

  • Page 86
    ... 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 International Unrecognized tax losses arising in current year...

  • Page 87
    ...the 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...

  • Page 88
    ... in Schneider Electric SA's capital stock and additional paid-in capital since December 31, 2002, through the exercise of stock options, the cancellation of shares decided by the Board of Directors on March 5, 2003 and the share issue carried under the worldwide employee stock purchase plan: Number...

  • 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
    ...Schneider Electric shares held A share buyback program was authorized by shareholders at the Annual Meeting on May 6, 1999, and renewed at the Annual Meetings held on May 5, 2000, June 11, 2001, May 27, 2002 and May 16, 2003. The purpose of the program is to stabilize the market price of the Company...

  • Page 91
    ... 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 supplementary pension plans and other multi-employer plans. Payments made...

  • Page 92
    ...2002 3. Change in projected benefit obligation Projected benefit obligation at beginning of year Service cost Interest cost Actuarial losses (gains) Plan participants' contributions Prior service cost Acquisitions - Disposals* Benefits paid Translation adjustment Projected benefit obligation at end...

  • Page 93
    ..., 2002 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...

  • Page 94
    ... balance sheet in respect of post-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...

  • 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
    ... pushbutton installed on a wide range of machines, failed to function in certain circumstances. The Group initiated a comprehensive product recall program. As of December 31, 2003, approximately 16% of the 2.2 million installed pushbuttons had been located and repaired. A total of â,¬ 18.3 million...

  • Page 97
    ... Schneider Electric SA 2004 Schneider Electric SA 2007 Schneider Electric SA 2008 Total c) Other bank borrowings (all currencies) Bank loan (Schneider UK) Syndicated loan (Lexel) Industrial Revenue Bonds (Square D Company) Other loans (less than â,¬ 20 million per loan) Total d) Commercial paper...

  • Page 98
    ... 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 currently being assessed. 96

  • Page 99
    ... conditions, the Group hedges its interest rate risk using swaps, caps and floors and other financial instruments. Interest rate swaps and other financial instruments are also used to hedge interest rate risks on investments. 21.3 - Commodity price risk In its manufacturing operations, the Group...

  • Page 100
    ....5 million at December 31, 2003). b) SE (UK) Ltd: swaps on lines of credit (two swaps, both on a notional amount of â,¬ 58.9 million). c) Boissière Finance: In 2003, interest rate swaps were set up as a protection against a possible cut in interest rates. The Group is the fixed rate lender and the...

  • Page 101
    ... Transactions with related parties (mainly equity affiliates) primarily affect the following accounts: (â,¬ millions) Dec. 31, 2003 Dec. 31, 2002 Income statement Sales Cost of sales Other operating income and expense Financial income (expense) Exceptional items Balance sheet Loans (1) Trade...

  • Page 102
    ... targeted by the programs were as follows: â- Site closure costs concerned the Celbridge plant in Ireland and the Marienhiede plant in Germany. Downsizing measures were implemented mainly at Lexel, which has been integrated into the Schneider organization, leading to the merger of sales forces and...

  • 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
    ... around half of the shares held by management and employees, representing in total 48.7% of MGE UPS Systems' capital. Following this transaction, Schneider Electric's interest now stands at 84.9%. The remaining 15.1% will be acquired in 2006 at a price based on 2005 operating income. The transaction...

  • 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
    ... Group Ltd (United Kingdom) Schneider Electric AE (Greece) Merlin Gerin Zala Villamossagi Keszûlekgyar KFT (Hungary) Prodax (Hungary) Schneider Electric Hungeria Villamossagi RT (Hungary) Schneider Electric Ireland Ltd (Ireland) Schneider Electric Manufacturing Celbridge (Ireland) Square D Company...

  • Page 107
    ... 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) Inde Electronics Inc. (Canada) Schneider Canada Inc. (Canada) Industricas Electronias Pacifico SA de CV (Mexico) Schneider...

  • Page 108
    ...Holding Pty (Australia) Schneider Electric Australia Pty Ltd (Australia) (sub-group) Palatine Ridge Insurance Company Ltd (Bermuda) SHL (Bermuda) CDI Power (Brazil) Primelectrica (Brazil) Schneider Electric Brasil LTDA (Brazil) Schneider Electric Chile SA (Chile) Schneider Beijing Low Voltage (China...

  • Page 109
    ...-group) Schneider Electric Peru SA (Peru) Schneider Electric Philippines Inc (Philippines) PDL Electric (S) Pte Ltd (Singapore) (sub-group) Schneider Electric Export Services (Singapore) Schneider Electric Industrial Development Singapore Pte Ltd (Singapore) Schneider Electric Logistic Asia Pte Ltd...

  • Page 110
    ... Finland AB (Finland) Alombard Finance SA (France) Alombard SA (France) Scanelec SA (France) Grawater Ltd (United Kingdom) Grawater of Wakefield Ltd (United Kingdom) JO EL Electric Limited (United Kingdom) JO JO (UK) Ltd (United Kingdom) JO JO Products Ltd (United Kingdom) Lexel Holdings Ltd (United...

  • Page 111
    ... Stiger A/S (Norway) Polam Holding BV (Netherlands) Polinsta Holding B.V. (Netherlands) Sandas Montage BV (Netherlands) Stago BV (Netherlands) Stago Production BV (Netherlands) Stago BV (formerly Stago Thorsman BV) (Netherlands) ELDA Szczecinek Elektrotechnika SA (Poland) Elda-Eltra Elektrotechnika...

  • Page 112
    ...2002 TAC 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...

  • Page 113
    ...Report on the Consolidated Financial Statements Year ended December 31, 2003 To the Shareholders of Schneider Electric S.A. In accordance with the terms of our appointment at the Annual Shareholders' Meeting, we have audited the accompanying consolidated financial statements of Schneider Electric SA...

  • Page 114
    Consolidated and Parent Company Financial Statements 7. Financial statements of Schneider Electric SA Balance Sheet at December 31, 2003 Assets (â,¬ thousands, at December 31) Depreciation, amortization and Cost provisions 2003 Net 2002 Net 2001 Net Non-current assets Intangible assets (note ...

  • Page 115
    ... 2001 Shareholders' equity Capital stock (note 8) Additional paid...pensions Total II Liabilities Bonds (note 10) Other borrowings (note 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...

  • Page 116
    ...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 and joint-venture losses 11,011.0 2,937.9 2,628.6 1,450...

  • Page 117
    ... 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 benefit...

  • Page 118
    ...,000. Property, plant and equipment are depreciated by the straight-line method over their estimated useful lives, ranging from 3 to 10 years. 2. Bond issue On October 31, 2003, Schneider Electric SA issued â,¬ 750 million worth of bonds. Part of the proceeds will be used to finance the redemption...

  • 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
    ... historical cost of the Merlin Gerin and Telemecanique shares in the accounts of Schneider Electric SA and the book value of the two companies' net assets, was primarily attributable to an interest in Schneider Electric Industries SAS. The 1997 merger difference has been added to the historical cost...

  • Page 121
    ... is limited to the net loss. 77,594.2 (394,200.0) (192,650.3) (95,120.5) 4,290,833.0 Additional paid-in capital at December 31, 2003 breaks down as follows: Premiums on shares issued in connection with stock-for-stock offers Premiums on shares issued for cash Merger premiums (Schneider SA/ Spie...

  • Page 122
    ...écompte equalization tax Current account advances and other Total 1,155.5 23,105.8 12,628.5 61,928.0 2002 54,152.5 3,519.7 969.7 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...

  • Page 123
    ... 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 payroll...

  • Page 124
    ... to paying supplementary pension benefits to certain active and 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...

  • Page 125
    ... 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 the accompanying...

  • Page 126
    ... 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 A. Subsidiaries (at least 50% owned) Schneider Electric Industries SAS 89 boulevard...

  • 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
    ... 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 90,672.5 90,697.0 24.5 14.5 8,055...

  • Page 129
    ...468.9 3 3,822.5 3 2,213.1 Total employee benefits paid over the year (payroll taxes, other benefits) (in thousands of euros) 1,736.8 901.7 914.1 668.3 415.5 (1) Dividends paid to shares held in treasury on the dividend payment date and the associated précompte tax are credited to retained...

  • Page 130
    128

  • Page 131
    ... paid on each of the shares carrying rights to the 2003 dividend will amount to â,¬ 1.10, representing a total revenue per share of â,¬ 1.65 including the â,¬ 0.55 avoir fiscal tax credit for individual investors and companies at the head of a tax group. The dividend will be paid on May 10, 2004...

  • Page 132
    ... in the US Air Force from 1964 to 1968 and joined Square D in 1971. Mr. Richardson spent his entire career with the company, which was acquired by Schneider Electric in 1991. He served as Executive Vice-President of Schneider Electric's North American Division from 1998 to January 2004. Based on the...

  • Page 133
    ... the current issued capital. The shares would be offered at a maximum discount of 15%. Stock options - nineteenth resolution - In May 1999, the Board of Directors was authorized to grant options to purchase new or existing shares to the management and key employees of Schneider Electric SA and its...

  • Page 134
    ... shareholders authorize the use of authorizations to issue Schneider Electric SA shares and share equivalents granted at the Extraordinary Shareholders' Meeting of May 16, 2003 while a takeover bid is in progress only to carry out acquisition projects presented before the bid was initiated. Under no...

  • Page 135
    ...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 in France...

  • Page 136
    ... Auditors 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...

  • Page 137
    ... Schneider Electric SA and as required by Article L.225-209, paragraph 4, of the Commercial Code in the case of a capital reduction carried out by 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...

  • Page 138
    ... total revenue will include a â,¬ 0.55 tax credit for individual shareholders and companies at the head of a tax group and a tax credit equal to 10% of the dividend paid for other shareholders. Unpaid dividends on shares held in treasury as of the ex-dividend date and the corresponding amount of pr...

  • Page 139
    ... representing 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...

  • Page 140
    ... 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 the decision is made to launch the employee share issue. The Board of Directors is specifically...

  • Page 141
    ... the options and the exercise dates or periods. - Determine the conditions governing any adjustment of the exercise price or the number of shares to be subscribed or purchased, to take account of any dilutive financial operations carried out by Schneider Electric SA. - carry out, directly or through...

  • Page 142
    ...issue shares while a cash-for-stock or a stock-for-stock offer for the Company's shares is in progress for the sole purpose of increasing the capital by any method authorized under the applicable legislation, to finance acquisition projects presented to the Board of Directors before the takeover bid...

  • Page 143
    ... report concerning the internal control procedures related to the preparation and processing of accounting and financial information. In accordance with the professional guidelines applicable in France, we have examined the objectives and general organization of the Company's internal control system...

  • Page 144

  • Page 145
    Schneider Electric SA Headquarters 43-45, boulevard Franklin-Roosevelt F-92500 Rueil-Malmaison (France) Tel. : +33 (0) 1 41 29 70 00 Fax : +33 (0) 1 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...