Form 6-K
FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16
OF THE SECURITIES EXCHANGE ACT OF 1934
For the month of May 2004
Commission File Number: 1-14836
ALSTOM
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(Translation of registrant's name into English)
25, avenue Kléber, 75116 Paris, France
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(Address of principal executive offices)
Indicate by check mark whether the Registrant files or will file annual reports
under cover of Form 20-F or Form 40-F
Form 20-F X Form 40-F
----- -----
Indicate by check mark if the registrant is submitting the Form 6-K in paper as
permitted by Regulation S-T Rule 101(b)(1):
Yes No X
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Indicate by check mark if the registrant is submitting the Form 6-K in paper as
permitted by Regulation S-T Rule 101(b)(7):
Yes No X
----- -----
Indicate by check mark whether the Registrant, by furnishing the information
contained in this Form, is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934
Yes No X
----- -----
If "Yes" is marked, indicate below the file number assigned to the Registrant in
connection with Rule 12g3-2(b)
This Report on Form 6-K includes materials that make reference and relate in
part to certain proposed issuances of securities by ALSTOM. The securities
mentioned in these materials have not been and will not be registered under the
United States Securities Act of 1933, as amended, and may not be offered or sold
in the United States absent registration or exemption from registration under
the Securities Act.
These materials are not an offer to sell securities or the solicitation of an
offer to buy securities, nor shall there be any offer or sale of securities in
any jurisdiction in which such offer or sale would be unlawful.
ENCLOSURES:
Press release dated May 25, 2004, "ALSTOM Signs Long-Term Service Agreement for
Muara Tawar Power Station in Indonesia"
Press release dated May 26, 2004, "Board Changes at ALSTOM - Proposed
Appointment of Pascal Colombani"
Press release dated May 26, 2004 "Full-Year Results 2003/04 (1st April 2004-31st
March 2004)"
Consolidated Financial Statements for Fiscal Year 2003/2004
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
ALSTOM
Date: May 28, 2004 By: /s/ Philippe Jaffré
-------------------------------
Name: Philippe Jaffré
Title: Chief Financial Officer
25 May 2004
ALSTOM SIGNS LONG-TERM SERVICE AGREEMENT FOR
MUARA TAWAR POWER STATION IN INDONESIA
ALSTOM has signed a long-term service agreement (LTSA) for six years, worth
about 110 million euros, with PT Pembangkitan Jawa Bali (PJB).
The agreement includes the supply of new and reconditioned turbine hot gas path
components for the Muara Tawar power station. The LTSA, which covers major
inspections of the gas turbines also includes the cooperation in outage planning
and technology issues and will help PJB ensure the efficient and economic
operation and maintenance of the existing plant.
The Muara Tawar power station, which is located about 20 km from downtown
Jakarta, consists of one combined cycle KA13E2-3 (block 1) and two further
GT13E2 gas turbines in single cycle operation forming block 2. It has a total
electricity output of 950 MW.
PJB is one of the Electricity Generation Company in Java and Bali, which is the
subsidiary from PT PLN, Indonesian State owned company for Electricity
Generation and Distribution.
Press relations: G. Tourvieille/S. Gagneraud
(Tel. +33 1 47 55 23 15)
internet.press@chq.alstom.com
Investor relations: E. Chatelain
(Tel. +33 1 47 55 25 33)
investor.relations@chq.alstom.com
PRESS INFORMATION
26 May 2004
BOARD CHANGES AT ALSTOM -
PROPOSED APPOINTMENT OF PASCAL COLOMBANI
The Board of ALSTOM has proposed the appointment of Pascal Colombani as a
Director of the Board. A resolution relative to his appointment will be
submitted for shareholders' approval at the Shareholders' Meeting to be held on
second call on 9 July 2004.
Mr. Colombani is currently Associate Director of A.T. Kearney, Paris, the
management consulting firm, and a non-executive director of British Energy. He
is also a member of the French Academy of Technology.
M. Colombani was a member of several Boards of Directors in recent years,
including France Telecom (1998-2000), Electricité de France (2000-2003) and
Areva (2001-2003), where he was Chairman of the Supervisory Board.
He held several management positions at Schlumberger in the USA and France
(1978-1992), in Brussels (1993-1995) and in Japan (1995-1997), before joining
the French Ministry of Research as Director of Technology (1998-1999) and
heading the Atomic Energy Commission of France (2000-2002).
Press relations: S. Gagneraud / G. Tourvieille
(Tél. +33 1 47 55 25 87)
internet.press@chq.alstom.com
Investor relations: E. Chatelain
(Tél. +33 1 47 55 25 33)
Investor.relations@chq.alstom.com
PRESS INFORMATION
COMPREHENSIVE FINANCING PACKAGE
FULL-YEAR RESULTS 2003/04
1ST APRIL 2003 - 31ST MARCH 2004
COMPREHENSIVE FINANCING PACKAGE IN ADVANCED NEGOTIATION
o Equity to be strengthened by between €1.8 - €2.5 bn
> Conversion into equity of €300 m subordinated bonds held by the
French State
> New capital increase of between €1.5 - €2.2 bn
- rights issue of between €1.0 - €1.2 bn
- debt-to-equity swap of between €500 m - €1.2 bn
o Extension of bonding capacity aimed at covering commercial needs for next
2 years
o ALSTOM's current scope of activities confirmed: additional disposals
representing €1.5 bn in sales will not affect remaining activities
o Shareholding structure stabilised: French State to become important
minority shareholder pending the Group's recovery
o Package subject to European Commission approval (formal decision expected
end-June 2004)
FULL-YEAR RESULTS 2003/04
|_| OPERATING MARGIN IN LINE WITH GUIDANCE
o Orders received: €16.5 bn, up 1% from fiscal year 2002/03 on a comparable
basis, with strong rebound in the second half (+34%)
o Sales: €16.7 bn, down 10% from fiscal year 2002/03 on a comparable basis
o Operating margin at 1.8%, hit by exceptional charges
o Implementation of major restructuring and overhead reduction plans
|_| HEAVY NET LOSS DUE TO LOW OPERATING INCOME, HIGH FINANCIAL AND EXCEPTIONAL
RESTRUCTURING EXPENSES, WRITE-DOWN OF DEFERRED TAX ASSETS
o Exceptional restructuring (€655 m) and financial (€460 m) COSTS
o Net loss of €1,836 m
o Nominal value of the share to be reduced from €1.25 to €0.35 subject
to shareholder approval
|_| FREE CASH FLOW IN LINE WITH GUIDANCE; FURTHER DEBT REDUCTION
o Negative free cash flow of €1,007 m, after cash outflow of €766 m for
GT24/GT26
o Economic debt reduced to €3.0 bn at 31 March 2004 from €4.9 bn at
31 March 2003
PRESS INFORMATION
Commenting on the financing package and results, Patrick Kron, ALSTOM's Chairman
& Chief Executive Officer, said:
"We are currently working on a comprehensive financing package, which, subject
to its approval by the European Commission and our shareholders, will give
ALSTOM the visibility and stability needed to progress towards recovery.
We worked hard over the last year to refocus the Group on its core businesses
and to build a base for better profitability, while strengthening our balance
sheet. We made major progress on all these fronts, which are essential for the
success of our recovery plan. We are still facing three difficult issues: debt
and financial expenses are too high; we need access to contract bonding
necessary for our future commercial activity; and we lack stability in our
shareholder base which results in high volatility of the share price.
The financing package is designed to address these three issues.
A COMPREHENSIVE FINANCING PACKAGE
We aim at syndicating through our banks a new bonding facility which should
cover our needs for the next 2 years. We expect our core banks to provide
approximately three-quarters of these needs; discussions on this issue are
on-going. The remainder would be proposed to other financial institutions. The
participating financial institutions would be protected by a guarantee scheme,
including a first loss guarantee through a cash collateral of €700 million
provided by ALSTOM and a second loss guarantee of €1.3 billion provided By the
French State and a group of banks.
We target strengthening our equity by between €1.8 - €2.5 billion by the
conversion of the €300 million 20-year bonds held by the French State and a
capital increase of between €1.5-€2.2 billion which would be submitted to an
Annual General Meeting to be called in July. This would comprise a rights issue
of between €1.0 - €1.2 billion with preferential subscription rights and a
debt-to-equity swap of between €500 million - €1.2 billion, of which €500
million is to be subscribed by the French State and the remainder on an optional
basis by our banks.
The French State would become an important minority shareholder to accompany
ALSTOM's recovery through the conversion of its existing subordinated bonds into
equity, its participation in the rights issue and its intended conversion of
existing loans. It would have Board representation.
The European Commission is expected to render its decision on this package, when
finalised, before the end of June 2004, and its approval is obviously a
condition to implementation. This approval will also be conditional upon certain
commitments we will make including the sale of businesses representing around
10% of the current scope of the Group; these asset sales, however, will not
affect our remaining activities and should not impact our recovery plan.
PRESS INFORMATION
With a defined portfolio, strengthened balance sheet and stable shareholding
structure after the entry of the French State in the Group's capital, this plan
would allow us to concentrate fully on our operational priorities: to sharpen
our commercial focus and to significantly improve operational performance
through more effective project tendering and execution and continued cost
reduction.
FISCAL YEAR 2003/04: UNDERLYING IMPROVEMENT DESPITE UNSATISFACTORY RESULTS
Our results for fiscal year 2003/04 are again unsatisfactory, with a net loss of
€1.8 billion and a negative free cash flow of €1 billion. I believe that the
legitimate disappointment at these results should be mitigated by a review of
the decisive actions taken over this period which will translate into benefits
for the Group:
- after the concerns over the Group's liquidity problems were addressed last
summer, we saw a major rebound in orders taken in the second half of the
year (+34% on a comparable basis), with margins entirely consistent with
the performance targets we have committed to;
- our GT24/GT26 issues are under control and the action plans to deal with
this past problem are proceeding to schedule. The booking last December of
our first GT26 gas turbine order since we identified technical problems
with this technology in 2000 confirms the success of our gas turbine
recovery programme and our return to the large gas turbine market;
- we also made good headway on numerous other aspects of our action plan. All
our restructuring and cost-reduction programmes are now well-advanced. Our
risk management processes are constantly improving to ensure stricter
control of order intake and more effective project execution.
Of course, we must clear some hurdles in the short-term: finalisation of the
financing package; the European Commission's decision on the package, expected
by the end of June; syndication of the bonding lines and the submission of the
capital increase for our shareholders' approval at an Extraordinary and Ordinary
General Shareholders' Meeting scheduled to take place on 9 July; and finally,
implementation of the financing package upon approval.
Following implementation of the financing package, our focus will remain the
achievement of our operational targets for 2005/06: an operating margin of 6%
and positive free cash flow. Together with the new management team, I believe
that this package will provide a sound base from which to move forward and meet
these objectives."
PRESS INFORMATION
COMPREHENSIVE FINANCING PACKAGE
o SECURED BONDING FACILITY TO COVER OUR COMMERCIAL NEEDS FOR THE NEXT 18-24
MONTHS
We intend to launch the syndication of a bonding facility programme which would
include a maximum outstanding amount of €8 billion. This programme would include
the bonds issued under the bonding line of €3.5 billion provided last summer by
a syndicate of banks and counter guaranteed by a French State-guaranteed
financial institution and new bonds to be issued over the coming 2 years. This
programme is revolving: any bond expiring releases capacity to issue new bonds
within the €8 billion limit. The bonds under this programme would benefit from a
€2 billion guarantee package with €700 million collateral provided by ALSTOM,
guarantees given By a French State-guaranteed institution for €1.25 billion and
the remainder by a group comprising our core banks.
We expect these banks to participate in the programme for around 75% of the
Group's forecast bonding needs for the next 2 years; discussions on this issue
are on-going. The remainder would be syndicated to other financial institutions.
o CONVERSION INTO EQUITY OF €300 MILLION SUBORDINATED BONDS BY THE FRENCH STATE
Under the financing package announced in September 2003, the French State
subscribed to €300 million of subordinated bonds reimbursable with shares with a
20-year maturity (TSDDRA). They will be automatically reimbursed with shares
upon approval by the European Commission, giving the French State an equity
participation in ALSTOM of approximately 18.5%.
o NEW CAPITAL INCREASE AND DEBT-TO-EQUITY SWAP TO RAISE BETWEEN €1.5 BILLION
- €2.2 BILLION
We intend to raise between €1.5 - €2.2 billion through a capital increase by way
of a rights issue and a debt-to-equity swap as follows:
CAPITAL INCREASE OF BETWEEN €1- €1.2 BILLION
o A new capital increase of up to €1.2 billion would involve the issue of
shares with preferential subscription rights in countries where it is
practical under applicable local law. The French State has indicated its
readiness to subscribe to this capital increase by exercise of its
preferential subscription rights - after reimbursement with shares of the
TSDDRA - for approximately €185 million. We are in advanced negotiations with
our core banks for the underwriting of €1 billion of the capital increase,
less the French State's part.
CONVERSION INTO EQUITY OF BETWEEN €500 MILLION - €1.2 BILLION OF EXISTING DEBT.
PRESS INFORMATION
o The conversion of up to €500 million of subordinated bonds and loans issued
by the French State ("TSDD", "PSDD"), provided that its equity participation
in ALSTOM does not exceed 31.5%.
o The conversion into equity, to be proposed to our lenders, of an aggregate
maximum amount of existing debt of €700 million.
The maximum amount proposed for conversion by our lenders would be reduced
accordingly should the rights issue exceed €1 billion.
Resolutions regarding the capital increase will be submitted for approval at
ALSTOM's Ordinary and Extraordinary Annual General Meeting to be held on 9 July
2004. The timing, terms and final amount of the capital increase would be
decided by our Board of Directors, and would depend on market conditions and the
willingness of our creditors to convert their debt.
o COMMITMENTS INCLUDING ADDITIONAL ASSET DISPOSALS
To respond to the European Commission's requirements, we have committed not to
make any significant acquisitions in the transport sector within Europe over the
next four years and to dispose of businesses representing approximately €1.5
billion in sales.
Around 50% of this figure covers the following:
o our freight locomotive business in Valencia, Spain;
o our Transport Sector's activities in Australia and New Zealand; and
o our industrial boilers business, which is part of our Power Environment
Sector.
The remaining 50% covers other businesses which have not yet been identified and
which will be disposed of within the next two years.
We have agreed that, as part of our international development in the Hydro
business, we would enter into a 50-50 joint venture in the coming years.
Finally, we intend to implement, within the next four years, industrial
partnerships to ensure our future development; this is supported by both the
French State and the European Commission.
o APPROVAL BY THE EUROPEAN COMMISSION
This package will be subject to European Commission approval. A decision is
expected before the end of June 2004, prior to our Annual General Shareholders'
Meeting.
PRESS INFORMATION
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FULL-YEAR RESULTS 2003/04
SUMMARY OF RESULTS
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TOTAL Year ended March % Var.
ACTUAL FIGURES ---------- March 04/
(IN € MILLION) 2003 | 2004 | March 03
------ | ------ | ---------
Orders received 19,123 | 16,500 | (14%)
Sales 21,351 | 16,688 | (22%)
Operating income (507) | 300 |
Net income (1,432) | (1,836) |
Free Cash Flow (a) (265) | (1,007) |
Economic debt (b) 4,918 | 3,000 |
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--------------------------------------------------------------------------------
TOTAL Year ended March % Var.
COMPARABLE FIGURES (c) ---------- March 04/
(IN € MILLION) 2003 | 2004 | March 03
------ | ------ | ---------
Orders received 16,366 | 16,500 | (1%)
Sales 18,531 | 16,688 | (10%)
--------------------------------------------------------------------------------
(a) We define Free Cash Flow to mean Net cash provided by (used in) operating
activities less Capital expenditures, net of proceeds from disposals of
property, plant and equipment (excluding proceeds from the sale of real estate
as part of our strategic plan) and increase (decrease) in variation in existing
receivables considered as source of funding of our operations. However, this
measure is not a measurement of performance either under French or US GAAP.
(b) We define Economic debt to mean Net debt (or Financial debt net of short
term investments and cash and cash equivalents) plus cash proceeds from sale of
trade receivables ("securitisation of existing receivables"). Economic debt does
not represent our Financial debt as calculated under French GAAP, and should not
be considered as an indicator of our currently outstanding indebtedness because
trade receivables securitised are sold irrevocably and without recourse.
(c) Adjusted for changes in business composition and exchange rates
REBOUND OF ORDERS IN CHALLENGING MARKET CONDITIONS
Despite an unfavourable economic climate, markets remained buoyant in rail
transport and sound in power generation service. The new equipment market in
power, however, remained at historically low levels. New emissions regulations
continue to drive needs for environmental control equipment in Europe and the
US, and there is growing demand for new boiler and hydro equipment in Asia and
Latin America. The cruise-ship market remained weak.
Overall, Group order intake was up 1% on a comparable basis against the prior
year, with a first half down 23% on a comparable basis and the second half
showing a strong rebound in the level of orders received (+34% on a comparable
basis). The margins on these orders are consistent with our performance targets.
Major orders included three GT26 gas turbines in Spain and associated services,
a steam power plant in Saudi Arabia, service contracts in the US and Brazil and
orders for trams and metros across Europe and for high-speed tilting trains in
Italy.
PRESS INFORMATION
Sales decreased by 10% on a comparable basis as a result of the low level of
orders booked last year.
The order backlog amounted to over €25.4 billion at 31 March 2004, representing
approximately 18 months of sales. This year the book to bill ratio stands at 1,
compared to 0.9 last year.
OPERATING INCOME AFFECTED BY LOWER SALES AND NON-RECURRING CHARGES
Operating income was €300 million, or 1.8% of sales, due to a lower sales level
leading to underactivity and exceptional charges on US projects amounting to
€102 million for our Transport Sector and €108 million for our Power Environment
Sector.
Stricter control of terms and conditions and margins in our order intake is
fully in place and processes to monitor the execution of large projects are
rigorously applied.
NET INCOME; REDUCTION OF THE NOMINAL VALUE OF SHARE
Net loss after goodwill amortisation was €1,836 million for fiscal year 2003/04,
as a result of low operating income , high restructuring charges (€655 million
versus €268 million in prior year), high financial expenses (€460 million
compared with €270 million in fiscal year 2002/03) and tax charges of €251
million (compared with tax income of €263 million in the prior year).
As a result of a net loss in our statutory accounts, the reduction of the
nominal value of the share from €1.25 to €0.35 will be proposed to our
shareholders at the next Annual General Meeting.
FREE CASH FLOW: STRONGLY NEGATIVE DUE TO CASH OUTFLOWS ON GT24/GT26
In line with our previous guidance, free cash flow was €(1,007) million,
reflecting scheduled cash outflows of €766 million relating to the GT24/GT26 gas
turbines and higher restructuring and financial expenses. This was partly offset
by the improvement in our working capital following the rebound in orders
received during the second half of the fiscal year and continued efforts to
reduce receivables and inventories.
Excluding cash outflow on the GT24/GT26, free cash flow was positive in the
second half.
ECONOMIC DEBT REDUCED BY APPROXIMATELY €2 BILLION
Economic debt was €3,000 million at the end of March 2004 compared with €4,918
million at the end of March 2003. This primarily reflects the impact of the
capital increase and proceeds from the disposal notably of our Transmission &
PRESS INFORMATION
Distribution activities and Industrial Turbines businesses during the year,
partly offset by the negative free cash flow for the fiscal year.
PRESS INFORMATION
UPDATE ON GT24/GT26 GAS TURBINE ISSUES
The resolution of our GT24/GT26 issues is progressing satisfactorily. Of the 80
machines, 74 are now in operation, one is in commissioning, one is under
construction and one contract for four units which was previously suspended has
now been cancelled.
The machines in service are demonstrating good levels of reliability and have
accumulated around 900,000 operating hours. We have reached settlements on 64
units, with only twelve units subject to commercial dispute. Our previous cases
of customer litigation in court have been settled.
At end-March 2004, we retained €738 million of provisions related to the
GT24/GT26 issues, assuming €234 million of mitigation. At end-March 2003, we
retained €1,655 million, assuming €454 million of mitigation. Both numbers have
thus been reduced significantly.
PRESS INFORMATION
SECTOR REVIEW*
POWER TURBO-SYSTEMS
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POWER TURBO-SYSTEMS Year ended 31 March % Variation
ACTUAL FIGURES ---------- March 04/
(IN € MILLION) 2003 | 2004 | March 03
------- | ------- | ---------
Order backlog 3,445 | 2,940 | (15%)
Orders received 1,821 | 2,463 | 35%
Sales 3,857 | 2,381 | (38%)
Operating income (1,399) | (246) |
Operating margin (36.3%) | (10.3%) |
EBIT (1,527) | (461) |
Capital employed (a) n/a | (1,232) |
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---------------------------------------------------------------------------------
POWER TURBO-SYSTEMS Year ended 31 March % Variation
COMPARABLE FIGURES ---------- March 04/
(IN € MILLION) 2003 | 2004 | March 03
------- | ------- | ---------
Order backlog 3,355 | 2,940 | (12%)
Orders received 1,732 | 2,463 | 42%
Sales 3,659 | 2,381 | (35%)
Operating income (1,275) | (246) |
Operating margin (34.8%) | (10.3%) |
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(a) We define capital employed to mean net fixed assets, plus current assets
(excluding net amount of securitisation of existing receivables), less
provisions for risks and charges and current liabilities. Capital employed does
not represent current assets, as calculated under French GAAP.
Despite difficult conditions linked to the new equipment market downturn,
particularly in the US, orders increased by 42% on a comparable basis, with
recent positive signs of an upturn in Europe, the Middle East and Asian markets.
Sales on a comparable basis declined by 35%, in comparison with the very high
level achieved in the previous year.
The Sector's operating margin remained strongly negative, at (10.3)%, mainly
because our cost structure is not yet in line with our current volume, together
with the impact of cost increases in the execution of certain turnkey contracts.
* only Sectors existing as of 31 March 2004 are discussed here below.
PRESS INFORMATION
POWER ENVIRONMENT
--------------------------------------------------------------------------------
POWER ENVIRONMENT Year ended 31 March % Variation
ACTUAL FIGURES ----------- March 04/
(IN € MILLION) 2003 | 2004 | March 03
------- | ------- | ---------
Order backlog 3,863 | 3,508 | (9%)
Orders received 2,583 | 2,644 | 2%
Sales 3,098 | 2,678 | (14%)
Operating income 224 | (7) |
Operating margin 7.2% | (0.3%) |
EBIT 107 | (180) |
Capital employed n/a | 733 |
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--------------------------------------------------------------------------------
POWER ENVIRONMENT Year ended 31 March % Variation
COMPARABLE FIGURES ----------- March 04/
(IN € MILLION) 2003 | 2004 | March 03
------- | ------- | ---------
Order backlog 3,761 | 3,508 | (7%)
Orders received 2,427 | 2,644 | 9%
Sales 2,860 | 2,678 | (6%)
Operating income 203 | (7) |
Operating margin 7.1% | (0.3%) |
--------------------------------------------------------------------------------
The US market downturn continued to impact Power Environment, though there has
been slight recovery. In Europe, the market remained active in certain areas, in
particular, Germany and Italy. China continued to develop its power generation
capacity at a fast pace, creating numerous opportunities particularly for hydro
equipment and boilers.
Orders increased by 9% on a comparable basis, driven by a strong performance in
the second half across all the Sector's businesses. Sales fell 6% compared with
fiscal year 2002/03 on a comparable basis.
As already disclosed, the Sector's operating margin, at (0.3%), was negatively
impacted by the €108 million charge related to the revised cost to complete
of a utility boiler contract in the US (Seward).
PRESS INFORMATION
POWER SERVICE
--------------------------------------------------------------------------------
POWER SERVICE Year ended 31 March % Variation
ACTUAL FIGURES ---------- March 04/
(IN € MILLION) 2003 | 2004 | March 03
------- | ------- | ---------
Order backlog 2,793 | 3,107 | 11%
Orders received 2,934 | 3,023 | 3%
Sales 2,678 | 2,747 | 3%
Operating income 403 | 417 |
Operating margin 15.0% | 15.2% |
EBIT 304 | 227 |
Capital employed n/a | 1,921 |
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--------------------------------------------------------------------------------
POWER SERVICE Year ended 31 March % Variation
COMPARABLE FIGURES ---------- March 04/
(IN € MILLION) 2003 | 2004 | March 03
------- | ------- | ---------
Order backlog 2,707 | 3,107 | 15%
Orders received 2,760 | 3,023 | 10%
Sales 2,507 | 2,747 | 10%
Operating income 371 | 417 |
Operating margin 14.8% | 15.2% |
--------------------------------------------------------------------------------
The power service market remained sound, despite some price pressure. Growth is
expected due to expansion of the world's base of power generation equipment and
the need to modernise aging equipment, while the trend to outsource service and
maintenance continues. Orders were strong in the US, Spain and Italy, while new
long-term service agreements were signed notably in Asia.
Orders received were 10% higher than in fiscal year 2002/03 on a comparable
basis. Sales increased 10% as compared with the previous fiscal year on a
comparable basis due to stable growth in several European countries, including
the UK, Italy and the Netherlands, and increased volumes in the Asia/Pacific
region.
The Sector's operating margin was 15.2%, broadly stable as compared with the
previous fiscal year (14.8%).
PRESS INFORMATION
TRANSPORT
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TRANSPORT Year ended 31 March % Variation
ACTUAL FIGURES ---------- March 04/
(IN € MILLION) 2003 | 2004 | March 03
------- | ------- | ---------
Order backlog 14,676 | 14,321 | (2%)
Orders received 6,412 | 4,709 | (27%)
Sales 5,072 | 4,862 | (4%)
Operating income (24) | 64 |
Operating margin (0.5%) | 1.3% |
EBIT (113) | (189) |
Capital employed 738 | 360 |
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--------------------------------------------------------------------------------
TRANSPORT Year ended 31 March % Variation
COMPARABLE FIGURES ---------- March 04/
(IN € MILLION) 2003 | 2004 | March 03
------- | ------- | ---------
Order backlog 14,537 | 14,321 | (1%)
Orders received 6,065 | 4,709 | (22%)
Sales 4,903 | 4,862 | (1%)
Operating income (9) | 64 |
Operating margin (0.2%) | 1.3% |
-------------------------------------------------------------------------------
Transport took advantage of a generally active market in Europe and Asia, which
partially offset a downturn in North America. The market for tramways remains
most active, while advanced signaling systems (information solutions) and the
expansion of high-speed rail networks in a number of European countries will
represent significant opportunities for the Sector over the coming period.
Orders decreased by 22% on a comparable basis due to lower order intake in the
US, where there were few major transport projects this year. Order levels,
however, almost doubled in the second half of the fiscal year compared with the
first half. Sales were stable on a comparable basis (-1%) compared with fiscal
year 2002/03.
Transport's operating margin at 1.3% was affected by a €102 million
exceptional charge in relation to its US Transport business.
PRESS INFORMATION
MARINE
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MARINE Year ended 31 March % Variation
ACTUAL FIGURES ---------- March 04/
(IN € MILLION) 2003 | 2004 | March 03
------- | ------- | ---------
Order backlog 1,523 | 817 | (46%)
Orders received 163 | 381 | 134%
Sales 1,568 | 997 | (36%)
Operating income 24 | (19) |
Operating margin 1.5% | (1.9%) |
EBIT 12 | (40) |
Capital employed (343) | (580) |
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--------------------------------------------------------------------------------
MARINE Year ended 31 March % Variation
COMPARABLE FIGURES ---------- March 04/
(IN € MILLION) 2003 | 2004 | March 03
------- | ------- | ---------
Order backlog 1,523 | 817 | (46%)
Orders received 163 | 381 | 134%
Sales 1,568 | 997 | (36%)
Operating income 24 | (19) |
Operating margin 1.5% | (1.9%) |
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The cruise-ship construction market remained weak worldwide, due to a high level
of orders in previous years and uncertainties linked to the international
situation. Orders received were low, at €381 million, while sales amounted to
€997 million. The Sector's operating margin was negative mainly due to
underactivity during the second half of the fiscal year.
PRESS INFORMATION
OUTLOOK
The prompt finalisation and implementation of the financing package are
essential for ALSTOM's future.
ALSTOM's scope is clear, with core activities focused on the power generation
and rail transport markets. We expect overall demand to remain generally low
over the next months in the power new equipment market but are confident that
market fundamentals will lead to an upturn in demand. The transport and power
service markets should remain generally sound. The timing of the expected
recovery in the cruise-ship market remains uncertain.
Fiscal year 2004/05 will be a transitional year. We forecast orders to be above
the level recorded in fiscal year 2003/04 on a comparable basis. On the same
basis, sales are expected to be at around the same level as fiscal year 2003/04.
Operating margin for fiscal year 2004/05 should be between 3.5% and 4% in
comparison with a proforma margin of 2.6% before exceptionals in 2003/04. Free
cash flow, though difficult to predict with accuracy, is forecast at around
(€400) million.
We confirm our previously announced targets for fiscal year 2005/06: operating
margin of 6% and positive free cash flow.
* * *
- ends -
A FULL SET OF ACCOUNTS AND NOTES IS AVAILABLE ON ALSTOM'S WEBSITE
(WWW.ALSTOM.COM).
Press enquiries: S. Gagneraud/G. Tourvieille
(Tel. +33 1 47 55 23 15)
internet.press@chq.alstom.com
Investor relations: E. Châtelain
(Tel. +33 1 47 55 25 33)
INVESTOR.RELATIONS@CHQ.ALSTOM.COM
M:Communications L. Tingström
(Tel. + 44 789 906 6996) tingstrom@mcomgroup.com
This press release does not constitute an offer to sell or the solicitation of
an offer to buy securities, nor shall there be any sale of securities in any
jurisdiction, including the United States, in which such offer, solicitation or
sale would be unlawful prior to registration or qualification under the
securities laws of such jurisdiction. Securities may not be offered or sold in
the United States absent registration or exemption from registration. If any
offering of securities is made, it will only be made pursuant to a prospectus
prepared for such purpose and filed with the appropriate regulatory authorities
or exempt from filing requirements. The prospectus will contain important
PRESS INFORMATION
information regarding the Company, including financial statements and a
description of its business and strategy.
FORWARD-LOOKING STATEMENTS:
This press release contains, and other written or oral reports and
communications of ALSTOM may from time to time contain, forward-looking
statements, within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. Examples of such
forward-looking statements include, but are not limited to (i) projections or
expectations of sales, orders received, income, operating margins, dividends,
provisions, cash flow, debt or other financial items or ratios, (ii) statements
of plans, objectives or goals of ALSTOM or its management, (iii) statements of
future product or economic performance, and (iv) statements of assumptions
underlying such statements. Words such as "believes", "anticipates", "expects",
"intends", "aims", "plans" and "will" and similar expressions are intended to
identify forward looking statements but are not exclusive means of identifying
such statements. By their very nature, forward-looking statements involve risks
and uncertainties that the forecasts, projections and other forward-looking
statements will not be achieved. Such statements are based on management's
current plans and expectations and are subject to a number of important factors
that could cause actual results to differ materially from the plans, objectives
and expectations expressed in such forward-looking statements. These factors
include: (i) the inherent difficulty of forecasting future market conditions,
level of infrastructure spending, GDP growth generally, interest rates and
exchange rates; (ii) the effects of, and changes in, laws, regulations,
governmental policy, taxation or accounting standards or practices; (iii) the
effects of currency exchange rate movements; (iv) the effects of competition in
the product markets and geographic areas in which ALSTOM operates; (iv) the
ability to increase market share, control costs and enhance cash generation
while maintaining high quality products and services; (v) the timely development
of new products and services; (vi) the ability to implement the financing
package and to meet the financial and other covenants contained in ALSTOM's
financing agreements; (vii) difficulties in obtaining bid, performance and other
bonds with customary amounts or terms; (vii) the timing of and ability to meet
the cash generation, cost control, restructuring and other initiatives of the
new action plan, including the ability to dispose of certain real estate and
other assets on favourable terms or in a timely fashion; (viii) the results of
the United States Securities and Exchange Commission's ("SEC") investigation of
matters relating to ALSTOM Transportation Inc., and the impact thereof on ALSTOM
Transportation Inc.'s ability to conduct its business; (ix) the outcome of the
putative class action lawsuits filed against ALSTOM and certain of its current
and former officers; (x) the results of the European Commission's review of the
French State's involvement in ALSTOM's financing package, the sale of our T&D
Sector to Areva and other aspects of ALSTOM's businesses; (xi) whether ALSTOM
finalised and receives shareholder approval of important elements of its new
comprehensive financing package; (xii) the availability of external sources of
financing on commercially reasonable terms; (xiii) the inherent technical
complexity of many of ALSTOM's products and technologies and our ability to
resolve effectively, on time, and at reasonable cost technical problems,
infrastructure constraints or regulatory issues that inevitably arise, including
in particular the problems encountered with the GT24/GT26 gas turbines and the
UK trains; (xiv) risks inherent in large contracts and/or significant fixed
price contracts that comprise a substantial portion of ALSTOM's business; (xv)
the inherent difficulty in estimating future charter or sale prices of any
cruise ship in any appraisal of ALSTOM's exposure in respect of Marine vendor
financing; (xvi) the inherent difficulty in estimating ALSTOM's vendor financing
risks and other credit risks, which may notably be affected by customers'
payment default; (xvii) ALSTOM's ability to invest successfully in, and compete
at the leading edge of, technology developments across all of its sectors;
(xviii) the availability of adequate cash flow from operations or other sources
of liquidity to achieve management's objectives or goals, including our goal of
reducing indebtedness; (xix) whether certain of ALSTOM's markets, particularly
the Power Sectors, recover from their currently depressed state; (xx) the
possible impact on customer confidence of ALSTOM's recent financial
difficulties, and if so its ability to re-establish this confidence; (xxi) the
effects of acquisitions and disposals generally; (xxii) the unusual level of
PRESS INFORMATION
uncertainty at this time regarding the world economy in general; and (xxiii)
ALSTOM's success in adjusting to and managing the foregoing risks.
The foregoing list is not exhaustive; when relying on forward-looking statements
to make decisions with respect to ALSTOM, you should carefully consider the
foregoing factors and other uncertainties and events, as well as other factors
described in other documents ALSTOM files or submits from time to time with the
SEC, including reports submitted on Form 6-K and our Annual Report on Form 20-F
for the fiscal year ended 31 March 2003 which was filed with the SEC on October
16, 2003. Forward-looking statements speak only as of the date on which they are
made, and ALSTOM undertakes no obligation to update or revise any of them,
whether as a result of new information, future events or otherwise.
CONSOLIDATED FINANCIAL STATEMENTS
FISCAL YEAR 2004
ALSTOM
CONSOLIDATED INCOME STATEMENTS
YEAR ENDED 31 MARCH
-------------------------------------------------
NOTE 2002 2003 2004
--------- ---------- ---------
(IN € MILLION)
SALES 23,453 21,351 16,688
OF WHICH PRODUCTS 17,541 16,374 12,786
OF WHICH SERVICES 5,912 4,977 3,902
Cost of sales (19,623) (19,187) (14,304)
OF WHICH PRODUCTS (15,141) (15,504) (11,353)
OF WHICH SERVICES (4,482) (3,683) (2,951)
Selling expenses (1,078) (970) (785)
Research and development expenses (575) (622) (473)
Administrative expenses (1,236) (1,079) (826)
--------- ---------- ---------
OPERATING INCOME (LOSS) 941 (507) 300
Other income (expenses), net (4) (390) (555) (1,111)
Other intangible assets amortisation (8) (64) (67) (60)
--------- ---------- ---------
EARNINGS BEFORE INTEREST AND TAX 487 (1,129) (871)
Financial income (expense), net (5) (294) (270) (460)
--------- ---------- ---------
PRE-TAX INCOME (LOSS) 193 (1,399) (1,331)
Income tax (charge) credit (6) (10) 263 (251)
Share in net income (loss) of equity investments 1 3 -
Dividend on redeemable preference shares of a subsidiary (14) - -
Minority interests (23) (15) 2
Goodwill amortisation (7) (286) (284) (256)
--------- ---------- ---------
(139) (1,432) (1,836)
========= ========== =========
NET INCOME (LOSS)
Earnings per share in Euro
Basic (0.6) (5.4) (4.1)
Diluted (0.6) (5.4) (4.1)
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE
CONSOLIDATED FINANCIAL STATEMENTS.
CONSOLIDATED BALANCE SHEETS
AT 31 MARCH
---------------------------------------
NOTE 2002 2003 2004
------ --------- ---------- ---------
(IN € MILLION)
ASSETS
Goodwill, net (7) 4,612 4,440 3,424
Other intangible assets, net (8) 1,170 1,168 956
Property, plant and equipment, net (9) 2,788 2,331 1,569
Equity method Investments and other investments, net (10) 301 245 160
Other fixed assets, net (11) 1,326 1,294 1,217
--------- ---------- ---------
FIXED ASSETS, NET 10,197 9,478 7,326
DEFERRED TAXES (6) 1,486 1,831 1,561
Inventories and contracts in progress, net (12) 5,593 4,608 2,887
Trade receivables, net (13) 4,730 4,855 3,462
Other accounts receivable, net (15) 3,304 2,265 2,022
--------- ---------- ---------
CURRENT ASSETS 13,627 11,728 8,371
SHORT TERM INVESTMENTS (17) 331 142 39
CASH AND CASH EQUIVALENTS (18) 1,905 1,628 1,427
--------- ---------- ---------
TOTAL ASSETS 27,546 24,807 18,724
========= ========== =========
LIABILITIES
SHAREHOLDERS' EQUITY 1,752 758 29
MINORITY INTERESTS (19) 91 95 68
BONDS REIMBURSABLE WITH SHARES - - 152
REDEEMABLE PREFERENCE SHARES OF A SUBSIDIARY (22) 205 - -
UNDATED SUBORDINATED NOTES (22) 250 - -
PROVISIONS FOR RISKS AND CHARGES (20) 3,849 3,698 3,489
ACCRUED PENSION AND RETIREMENT BENEFITS (21) 994 972 842
FINANCIAL DEBT (22) 6,035 6,331 4,372
DEFERRED TAXES (6) 47 37 30
Customers' deposits and advances (24) 4,221 3,541 2,714
Trade payables 5,564 4,629 3,130
Accrued contract costs and other payables (23) 4,538 4,746 3,898
--------- ---------- ---------
CURRENT LIABILITIES 14,323 12,916 9,742
--------- ---------- ---------
TOTAL LIABILITIES 27,546 24,807 18,724
========= ========== =========
Commitments and contingencies (27&28)
The accompanying Notes are an integral part of these
Consolidated Financial Statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEAR ENDED 31 MARCH
---------------------------------------------
2002 2003 2004
--------- --------- ---------
(IN € MILLION)
NET INCOME (LOSS) (139) (1,432) (1,836)
Minority interests 23 15 (2)
Depreciation and amortisation 792 754 726
Changes in provision for pension and retirement benefits, net (51) 22 85
Net (gain) loss on disposal of fixed assets and investments (198) (19) (175)
Share in net income (loss) of equity investees (net of dividends
received) - (3)
Changes in deferred tax (86) (424) 149
--------- --------- ---------
NET INCOME AFTER ELIMINATION OF NON CASH ITEMS 341 (1,087) (1,053)
Decrease (increase) in inventories and contracts in progress, net 54 415 389
Decrease (increase) in trade and other receivables, net 528 650 770
Increase (decrease) in sale of trade receivables, net 140 (661) (267)
Increase (decrease) in contract related provisions (948) 160 (295)
Increase (decrease) in other provisions 2 (49) 113
Increase (decrease) in restructuring provisions (123) (29) 271
Increase (decrease) in customers' deposits and advances (1,254) (98) (1)
Increase (decrease) in trade and other payables, accrued contract
costs and accrued expenses 681 162 (985 )
CHANGES IN NET WORKING CAPITAL (2) (920) 550 (5)
--------- --------- ---------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (579) (537) (1,058)
Proceeds from disposals of property, plant and equipment 118 252 244
Capital expenditures (550) (410) (254)
Decrease(increase) in other fixed assets (104) (55) 125
Cash expenditures for acquisition of investments, net of net cash
acquired (113) (166) (8)
Cash proceeds from sale of investments, net of net cash sold (4) 772 38 1,454
--------- --------- ---------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 123 (341) 1,561
Capital increase - 622 1,024
Bonds reimbursable with shares not yet converted - - 152
Dividends paid including minorities (136) (1) (3)
--------- --------- ---------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (136) 621 1,173
Net effect of exchange rate (12) (41) (7)
Other changes (3) 16 (464) (14)
--------- --------- ---------
DECREASE (INCREASE) IN NET DEBT (588) (762) 1,655
--------- --------- ---------
NET DEBT AT THE BEGINNING OF THE PERIOD (1) (3,211) (3,799) (4,561)
--------- --------- ---------
NET DEBT AT THE END OF THE PERIOD (1) (3,799) (4,561) (2,906)
========= ========= =========
Cash paid for income taxes 154 70 75
Cash paid for net interest 165 172 251
(1) NET DEBT INCLUDES SHORT-TERM INVESTMENTS, CASH AND CASH EQUIVALENTS NET OF
FINANCIAL DEBT.
(2) SEE NOTE 16.
(3) INCLUDING IN YEAR ENDED 31 MARCH 2003 RECLASSIFICATION OF REDEEMABLE
PREFERENCE SHARES OF A SUBSIDIARY AND UNDATED SUBORDINATED NOTES TOTALLING
€ 455 MILLION AS DISCLOSED IN NOTE 22 (a).
(4) THE NET PROCEEDS OF € 1,454 MILLION ARE MADE OF:
- TOTAL SELLING PRICE OF € 1,977 MILLION INCLUDING A TOTAL AMOUNT OF € 1,927
MILLION FOR T&D SECTOR AND INDUSTRIAL TURBINES BUSINESSES (SEE NOTE 3),
- CONSIDERATION TO BE RECEIVED FOR A TOTAL AMOUNT OF € 263 MILLION OF WHICH
€ 214 MILLION ARE HELD IN ESCROW AT 31 MARCH 2004,
- NET CASH SOLD TO BE REIMBURSED BY THE ACQUIRERS AND SELLING COSTS OF € 260
MILLION.
The accompanying Notes are an integral part of these
Consolidated Financial Statements.
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
NUMBER OF ADDITIONAL CUMULATIVE
in € million, OUTSTANDING PAID-IN RETAINED TRANSLATION SHAREHOLDERS'
except for number of shares SHARES CAPITAL CAPITAL EARNINGS ADJUSTMENT EQUITY
------------- -------- ---------- ---------- ----------- -------------
AT 1 APRIL 2001 215,387,459 1,292 85 774 (61) 2,090
Changes in Cumulative Translation _ _ _ _ (80) (80)
Adjustments
Net income (loss) _ _ _ (139) _ (139)
Dividend paid _ _ _ (119) _ (119)
------------- -------- ---------- ---------- ----------- -------------
AT 31 MARCH 2002 215,387,459 1,292 85 516 (141) 1,752
Capital increase 66,273,064 398 224 - - 622
Changes in Cumulative Translation _ _ _ - (184) (184)
Adjustments
Net income (loss) _ _ _ (1,432) (1,432)
Dividend paid _ _ _ - _ -
------------- -------- ---------- ---------- ----------- -------------
AT 31 MARCH 2003 281,660,523 1,690 309 (916) (325) 758
Capital increase 774,997,049 969 64 - - 1,033
Capital decrease (1,338) (309) 1,647 - -
Changes in Cumulative Translation - - - - 74 74
Adjustments
Net income (loss) - - - (1,836) - (1,836)
Dividend paid - - - - - -
------------- -------- ---------- ---------- ----------- -------------
AT 31 MARCH 2004 1,056,657,572 1,321 64 (1,105) (251) 29
============= ======== ========== ========== =========== =============
In July 2002, an issue of shares was made and 66,273,064 shares having a par
value of € 6 were subscribed. Related costs net of tax of € 15 million were
charged against additional paid-in capital of € 239 million.
The ALSTOM shareholders' equity at 31 March 2003 constituted less than 50% of
its share capital. Therefore, in accordance with article L. 225-248 of the
French Code de commerce, the shareholders were requested, at the General
Shareholders' Meeting held on 2 July 2003, to decide not to liquidate the
company. Further, it was decided at that General Shareholders' Meeting, to
reduce ALSTOM's share capital, due to losses, from € 1,689,963,138 to €
352,075,653. This reduction in the share capital was implemented through the
reduction in the nominal value of ALSTOM ordinary share from € 6 per share to €
1.25 per share.
Subsequently, in November 2003, an issue of shares was made and 239,933,033
shares with a par value of € 1.25 were subscribed.
In December 2003, an issue of bonds reimbursable in shares "OBLIGATIONS
REMBOURSABLES EN ACTIONS" was made and 643,795,472 bonds having a par value of €
1.25 were subscribed. At 31 March 2004, 535,064,016 bonds were converted into
shares on the basis of one share for one bond. Related costs net of tax of € 16
million were charged against additional paid-in capital of € 80 million.
At 31 March 2004, the share capital amounted to € 1,320,821,965 consisting of
1,056,657,572 shares with a nominal value of € 1.25 per share. All shares are
fully paid up.
At the Ordinary General Shareholders' Meeting which is scheduled on first call
on 30 June 2004 and if the quorum requirement is not met on that date will be
held on 9 July 2004, the Board will propose that no dividend be paid.
The accompanying Notes are an integral part of these
Consolidated Financial Statements.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - DESCRIPTION OF BUSINESS AND BASIS OF PREPARATION
(A) DESCRIPTION OF BUSINESS
ALSTOM (the Group) is a provider of energy and transport infrastructure. The
energy market is served through activities in the fields of power generation,
power conversion, and the transport market through rail and marine activities. A
range of components, systems and services is offered by the Group covering
design, manufacture, commissioning, long-term maintenance, system integration,
management of turnkey projects and applications of advanced technologies.
(B) BASIS OF PREPARATION
The consolidated financial statements for the year ended 31 March 2004 have been
prepared on the basis of the accounting policies and methods of computation as
set out in Note 2.
In preparing these consolidated financial statements the Group has taken into
account the matter set out hereafter :
- The Financing Package negotiated in September 2003 resulted in a new set of
financial covenants which are set out in Note 22. As at 31 March 2004, the
Group would have failed to comply with those covenants related to
"consolidated net worth" and "EBITDA". Accordingly, the Group obtained
agreement from its lenders to suspend the covenants it had previously
negotiated until 30 September 2004.
- The Group obtained bonding and guarantee facilities as a result of the
Financing Package agreed in September 2003 of € 3,500 million, of which 65%
was guaranteed by the Republic of France. This facility was sufficient to
meet approximately one year of orders and is now expected to be used during
the summer 2004. The Group has entered into discussions with certain of its
main banks to secure access to contract bonding and guarantee facilities.
- The approval of the European Commission for the Financing Package announced
on 22 September 2003 remains outstanding.
Having considered the matters set out above, the Group has concluded that the
going concern principle is the appropriate basis of preparation for these
consolidated financial statements on the assumption that it will be able to:
- Secure contract bonding and guarantee facilities to meet its normal business
activity (see Note 27 (a)),
- Successfully negotiate new covenants with its lenders (see Note 22 (a) and
29 (e)),
- Obtain all necessary approvals from the European Commission,
- Generate operating income and cash flow sufficient to respect covenants or
waivers being granted, thus ensuring continued availability of debt
financing.
NOTE 2 - SUMMARY OF ACCOUNTING POLICIES
The Consolidated Financial Statements of the Group are prepared in accordance
with Accounting Principles and Règlements 99-02 & 00-06 of the Comité de
Règlementation Comptable (French Consolidation Generally accepted in France
methodology). Benchmark treatments are generally used. Capital lease
arrangements and long term rentals are not capitalised, see Note 27 (b).
(A) CONSOLIDATION METHODS
Investments over which the Group has direct or indirect control of more than 50%
of the outstanding voting shares, or over which it exercises effective control,
are fully consolidated. Control exists where the Group has the power, directly
or indirectly, to govern the financial and operating policies of an enterprise
so as to obtain benefits from its activities.
Joint ventures in companies in which the Group has joint control are
consolidated by the proportionate method with the Group's share of the joint
ventures' results, assets and liabilities recorded in the Consolidated Financial
Statements.
Investments in which the Group has an equity interest of 20% to 50% and over
which the Group exercises significant influence, but not control, are accounted
for under the equity method.
Results of operations of subsidiaries acquired or disposed of during the year
are recognised in the Consolidated Income Statements as from the date of
acquisition or up to the date of disposal, respectively.
Inter company balances and transactions are eliminated on consolidation.
A list of the Group's major consolidated businesses and investees and the
applicable method of consolidation is provided in Note 32.
(B) USE OF ESTIMATES
The preparation of the Consolidated Financial Statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent gains and liabilities at the date of the financial
statements and the reported amounts of the revenues and expenses during the
reporting period. Management reviews estimates on an ongoing basis using
currently available information on a contract by contract basis. Costs to date
are considered, as are estimated costs to complete and estimated future costs of
warranty obligations. Estimates of future cost reflect management's current best
estimate of the probable outflow of financial resources that will be required to
settle contractual obligations. The assumptions to calculate present obligations
take into account current technology as well as the commercial and contractual
positions, assessed on a contract by contract basis.
The introduction of technologically advanced products exposes the Group to risks
of product failure significantly beyond the terms of standard contractual
warranties applying to suppliers of equipment only. Changes in facts and
circumstances may result in actual financial consequences different from the
estimates.
(C) REVENUE AND COST RECOGNITION
Revenue on contracts which are of less than one year duration, substantially the
sale of manufactured products, is recognised upon transfer of title, including
the risks and rewards of ownership, which generally occurs on delivery to the
customer.
Revenue on construction type contracts of more than one year, long term
contracts, is recognised on the percentage of completion method, measured either
by segmented portions of the contract "contract milestones" or costs incurred to
date compared to estimated total costs.
Claims are recognised as revenue when it is probable that the claim will result
in additional revenue and the amount can be reasonably estimated, which
generally occurs upon agreement by the customer.
Government subsidies relating to the Marine sector are added to the related
contract value and are recognised as revenue using the percentage of completion
method.
For long term service contracts, revenues are recognised as delivery occurs or
as services are performed over the term of the contract, using estimated
contract profit margins.
Total estimated costs at completion include direct (such as material and labour)
and indirect contract costs incurred to date as well as estimated similar costs
to complete, including warranty accruals and costs to settle claims or disputes
that are considered probable. Selling and administrative expenses are recorded
as incurred. As a result of contract review, accruals for losses on contracts
and other contract related provisions are recorded as soon as they are probable
in the line item "Cost of sales" in the Consolidated Income Statement.
Adjustments to contract estimates resulting from job conditions and performance,
as well as changes in estimated profitability, are recognised in "Cost of Sales"
as soon as they occur.
Cost of sales is computed on the basis of percentage of completion applied to
total estimated costs. The excess of that amount over the cost of sales reported
in prior periods is the cost of revenues for the period. Contract completion
accruals are recorded for future expenses to be incurred in connection with the
completion of contracts or of identifiable portions of contracts. Warranty
provisions are estimated on the basis of contractual agreement and available
statistical data.
(D) TRANSLATION OF FINANCIAL STATEMENTS DENOMINATED IN FOREIGN CURRENCIES
The functional currency of the Group's foreign subsidiaries is the applicable
local currency. Assets and liabilities of foreign subsidiaries located outside
the Euro zone are translated into euros at the year-end rate of exchange, and
their income statements and cash flow statements are converted at the average
annual rate of exchange. The resulting translation adjustment is included as a
component of shareholders' equity.
(E) FOREIGN CURRENCY TRANSACTION
Foreign currency transactions are translated into local currency at the rate of
exchange applicable to the transaction (market rate or forward hedge rate). At
year-end, foreign currency assets and liabilities to be settled are translated
into local currency at the rate of exchange prevailing at that date or the
forward hedge rate. Resulting exchange rate differences are included in the
Consolidated Income Statement.
(F) FINANCIAL INSTRUMENTS
The Group operates internationally giving rise to exposure to market risks and
changes in interest rates and foreign exchange rates. Financial instruments are
utilised by the Group to reduce those risks. The Group's policy is to hedge
currency exposures by holding or issuing financial instruments.
The Group enters into various interest rate swaps, forward rate agreements
("FRA") and floors to manage its interest rate exposures. Net interest is
accrued as either interest receivable or payable with the offset recorded in
financial interest.
The Group enters into forward foreign exchange contracts to hedge foreign
currency transactions. Realised and unrealised gains and losses on these
instruments are recorded against the related hedged asset or liability.
The Group also uses export insurance contracts to hedge its currency exposure on
certain long-term contracts during the open bid time as well as when the
commercial contract is signed. If the Group is not successful in signing the
contract, the Group incurs no additional liability towards the insurance company
except the prepaid premium. As a consequence, during the open bid period, these
insurance contracts are accounted for as such, the premium being expensed when
incurred. When the contract is signed, the insurance contract is accounted for
as described above for forward foreign exchange contracts.
In addition, the Group may enter into derivatives in order to optimise the use
of some of its existing assets. Such a decision is taken on a case by case basis
and is subject to approval by the management.
(G) GOODWILL
Goodwill represents the excess of the purchase price over the fair value of the
assets and liabilities acquired in a business combination. Initial estimates of
fair values are finalised at the end of the financial year following the year of
acquisition. Thereafter, releases of unrequired provisions for risks and charges
resulting from the purchase price allocation are applied to goodwill. Goodwill
is amortised on the straight-line basis over a period of twenty years in all
sectors due to the long-term nature of the contracts and activities involved.
(H) OTHER INTANGIBLE ASSETS
The Group recognises other intangible assets such as technology, licensing
agreements, installed bases of customers, etc. These acquired intangible assets
are amortised on the straight-line basis over a period of twenty years in all
sectors due to the long-term nature of the contracts and activities involved.
(I) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are recorded at historical cost to the Group.
Depreciation is computed using the straight-line method over the following
estimated useful lives :
ESTIMATED USEFUL LIFE
IN YEARS
----------------------------
Buildings 25
Machinery and equipment 10
Tools, furniture, fixtures and others 3-7
Assets financed through capital lease are not capitalised (see Note 27 (b))
(J) OTHER INVESTMENTS
Other investments are recorded at the lower of historical cost or net realisable
value, assessed on an individual investment basis. The net realisable value is
calculated using the following parameters : equity value, profitability and
expected cash flow from the investment.
(K) OTHER FIXED ASSETS
Other fixed assets are recorded at the lower of historical cost or net
realisable value, assessed on an individual investment basis.
(L) INVENTORIES AND CONTRACTS IN PROGRESS
Raw materials and supplies, work and contracts in progress, and finished
products are stated at the lower of cost, using the weighted average cost
method, or net realisable value. Net realisable value is the estimated selling
price in the ordinary course of business, less the estimated costs of completion
and selling expenses. Inventory cost includes costs of acquiring inventories and
bringing them to their existing location and condition. Finished goods and work
and contract in progress inventory includes an allocation of applicable
manufacturing overheads.
(M) SHORT-TERM INVESTMENTS
Short-term investments include debt and equity securities and deposits with an
initial maturity greater than three months but available for sale. Short-term
investments are recorded at the lower of cost or market value, on a line by line
basis.
(N) CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of cash and highly liquid investments with an
initial maturity of less than three months.
(O) DEFERRED TAXATION
Deferred taxes are calculated for each taxable entity for temporary differences
arising between the tax value and book value of assets and liabilities. Deferred
tax assets and liabilities are recognised where timing differences are expected
to reverse in future years. Deferred tax assets are recorded up to their
expected recoverable amount. Deferred tax amounts are adjusted for changes in
the applicable tax rate upon enactment.
No provision is made for income taxes on accumulated earnings of consolidated
businesses or equity method investees for which no distribution is planned.
(P) CUSTOMER DEPOSITS AND ADVANCES
Customer deposits and advances are shown net, and represent amounts received
from customers in advance of work being undertaken on their behalf. Where
trading has taken place under the long term contract trading rules, but
provisional acceptance of the contract has not taken place, the related customer
advance is shown as a deduction from the related receivables.
If any balance of customer deposits and advances is still outstanding and where
work is undertaken on behalf of customers before sale, the related customer
advance, termed a progress payment is deducted from Inventories and Contracts in
Progress on a contract by contract basis.
(Q) PROVISIONS FOR RISKS AND CHARGES
A provision is recognised when :
- the Group has a present legal or constructive obligation of uncertain timing
or amount as a result of a past event;
- it is probable that an outflow of economic resources will be required to
settle the obligation;
- such outflow can be reliably estimated.
Provisions for warranties are recognised based on contract terms. Warranty
periods may extend up to five years. The provisions are based on historical
warranty data and a weighting of all possible outcomes against their associated
probabilities. Provisions for contract losses are recorded at the point where
the loss is first determined. Provisions are recorded for all penalties and
claims based on management's assessment of the likely outcome.
(R) IMPAIRMENT
At the balance sheet date, whenever events or changes in markets indicate a
potential impairment including goodwill, other intangible assets, property,
plant and equipment and deferred tax assets, a detailed review is carried out
based on projected operating performance. Whenever such review indicates that
there is an impairment, the carrying amount of such assets is reduced to their
estimated recoverable value.
(S) STOCK OPTIONS
Stock options are not recorded by the Group at the date of grant. However, upon
exercise of stock options, the Group records the issuance of the common shares
as an equity transaction based on the amount of cash received from the holders.
(T) RESEARCH AND DEVELOPMENT
Internally generated research and development costs are expensed as incurred.
(U) EMPLOYEE BENEFITS
The estimated cost of providing benefits to employees is accrued during the
years in which the employees render services.
For single employer defined benefit plans, the fair value of plan assets is
assessed annually and actuarial assumptions are used to determine cost and
benefit obligations. Liabilities and prepaid expenses are accrued over the
estimated term of service of employees using actuarial methods. Experience gains
and losses, as well as changes in actuarial assumptions and plan assets and
provisions are amortised over the average future service period of employees.
For defined contribution plans and multi-employer pension plans, expenses are
recorded as incurred.
(V) RESTRUCTURING
Restructuring costs are accrued when management announces the reduction or
closure of facilities, or a program to reduce the workforce and when related
costs are precisely determined. Such costs include employees' severance and
termination benefits, estimated facility closing costs and write-off of assets.
(W) FINANCIAL INCOME (EXPENSE)
Financial income (expense) is principally comprised of interest payable on
borrowings, interest receivable on funds invested, foreign exchange gains and
losses as well as gains and losses on hedging instruments, fees paid for putting
in place guarantees, syndicated loans and other financing facilities,
depreciation of financial assets and investments.
Interest income is recognised in the income statement as it accrues, taking into
account the effective yield on the asset. Dividend income is recognised in the
income statement on the date that the dividend is declared.
All interest and other costs incurred in connection with borrowings are expensed
as incurred as part of net financing costs.
(X) EARNINGS PER SHARE
Basic Earnings per share are computed by dividing the annual net income (loss)
by the weighted average number of outstanding shares during the financial year.
Diluted earnings per share are computed by dividing the annual net income (loss)
by the weighted average number of shares outstanding plus the effect of any
dilutive instruments.
For the diluted earnings per share calculation, Net income (loss) is not
adjusted as the Group is loss making.
(Y) EXCHANGE RATES USED FOR THE TRANSLATION OF MAIN CURRENCIES
2002 2003 2004
-------------------------- -------------------------- --------------------------
€ FOR 1 MONETARY UNIT AVERAGE CLOSING AVERAGE CLOSING AVERAGE CLOSING
------------------------- ---------- ---------- ---------- ---------- ---------- ----------
British pound 1.627372 1.631321 1.549571 1.450116 1.444363 1.501727
Swiss franc 0.670010 0.681663 0.682536 0.677323 0.646074 0.641272
US dollar 1.136956 1.146263 0.997990 0.917852 0.849427 0.818063
Canadian dollar 0.725494 0.718236 0.646284 0.623558 0.628913 0.625821
Australian dollar 0.582556 0.610426 0.563472 0.553220 0.591628 0.622975
NOTE 3 - CHANGES IN CONSOLIDATED COMPANIES
The main changes in the consolidated companies during the year ended 31 March
2004 are as follows:
(1) DISPOSAL OF INDUSTRIAL TURBINES BUSINESSES
In April 2003, the Group signed binding agreements to sell its small gas
turbines business and medium-sized gas turbines and industrial steam turbines
businesses in two transactions.
The first transaction covered the small gas turbines business, and the second
transaction covered medium-sized gas turbines and industrial steam turbines
businesses.
In April 2003, the closing of the sale of the small gas turbines business
occurred. In August 2003 completion of the major part of the disposal of the
medium gas turbines and industrial steam turbines businesses (excluding US
businesses) occurred following approval from both the European Commission and US
merger control authorities.
These businesses have ceased to be consolidated from their respective dates of
disposal.
On 15 April 2004, the disposal of the US businesses was completed with effect
from 1 April 2004 (See Note 31). This business will be de-consolidated from 1
April 2004.
Total selling price is € 970 million of which € 125 million is held in escrow at
31 March 2004.
(2) DISPOSAL OF TRANSMISSION & DISTRIBUTION SECTOR (EXCLUDING THE POWER
CONVERSION BUSINESS)
In early January 2004, the Group disposed of the T&D Sector excluding the Power
Conversion business, which is being retained.
Total selling price is € 957 million (subject to closing price adjustments) of
which € 89 million is held in escrow at 31 March 2004.
As a result, the T&D Sector ceased to be consolidated with effect from 31
December 2003.
Alstom continues to own and therefore to consolidate certain former T&D
businesses insignificant to the Group which are expected to be transferred to
Areva subject to local regulatory approvals.
NOTE 4 - OTHER INCOME (EXPENSE), NET
YEAR ENDED 31 MARCH
-----------------------------------------------------------
2002 2003 2004
--------------- --------------- ---------------
(IN € MILLION)
Net gain on disposal of fixed assets 11 29 13
Net gain (loss) on disposal of investments (1) 107 (35) (24)
Restructuring costs (2) (227) (268) (655)
Employees' profit sharing (5) (18) (16)
Pension costs (3) (139) (214) (263)
Others, net (4) (137) (49) (166)
--------------- --------------- ---------------
OTHER INCOME (EXPENSE), NET (390) (555) (1,111)
=============== =============== ===============
(1) In the year ended 31 March 2002, it reflects :
- the net gains on the disposal of Contracting Sector of € 106 million and
GTRM of € 43 million
- the net loss on disposal of the Waste to Energy business of € (42)
million.
In the year ended 31 March 2003 it mainly reflects the net losses on
disposal of South Africa operations and Alstom Power Insurance Ltd.
In the year ended 31 March 2004 it mainly corresponds to:
- the net loss of € 10 million on the disposal of the Industrial Turbine
businesses (See Note 3). The Group has disposed of its Industrial Turbines
businesses in a two part transaction with effect from, respectively, 30
April 2003 and 31 July 2003. As a result, the consolidation packages
prepared for each unit disposed of for the last month of activity prior to
sale were prepared under the control of the acquirer. The Group made
certain adjustments to the consolidation packages received to ensure
conformity with Group accounting principles and judgements, consistently
applied. These adjustments resulted in no impact on Earnings Before
Interest and Taxation on or Net income, but did result in a
reclassification reducing the gain on disposal included within other
income (expense), net and increasing operating income by € 67 million.
- the net gain of € 4 million on the disposal of T&D sector excluding the
Power Conversion business (See Note 3). Certain restructuring costs in T&D
totaling € 62 million accruals recorded prior to disposal but not
impacting cash and wholly for the benefit of the acquirer are shown as
part of the Net gain (loss) on disposal of investments.
- the net loss of € 10 million on the disposal of the Group's 40%
shareholding in the Chinese entity "FIGLEC" (see Note 10)
- other net losses of € 8 million on various disposal of non significant
consolidated companies
(2) In the year ended 31 March 2004, it corresponds to additional plans accrued
for a net amount of € 628 million relating to downsizing of activities
including closure of plants or activities and reduction in employees in all
sectors except Marine and € 27 million of write-off of assets.
(3) See Note 21 "Retirement, termination and post-retirement benefits".
(4) In the year ended 31 March 2002, in addition to other non operating costs it
mainly includes € 90 million for additional Marine vendor finance
provisioning.
In the year ended 31 March 2003, in addition to other non operating costs it
mainly include € 15 million of costs related to past acquisition and
disposal of activities.
In the year ended 31 March 2004, in addition to other non operating costs it
mainly includes costs related to past acquisitions and disposal of
activities of € 59 million, costs of existing or reorganising activities not
qualifying as restructuring costs of € 34 million, and € 10 million of costs
related to the capital increase.
NOTE 5 - FINANCIAL INCOME (EXPENSE)
YEAR ENDED 31 MARCH
----------------------------------
2002 2003 2004
------ ------ ------
(IN € MILLION)
Net interest income (expense) (163) (182) (247)
Securitisation expenses (87) (82) (24)
Foreign currency gain (loss) (1) (3) 55 (19)
Other financial income (expense) (2) (41) (61) (170)
------ ------ ------
FINANCIAL INCOME (EXPENSE) (294) (270) (460)
====== ====== ======
(1) The foreign currency gain in the year ended 31 March 2003 mainly results
from the unwinding of forward sale contracts of US dollars against euros
following a reassessment of the financing structure in USA.
(2) Other financial income (expenses), net include fees paid on guarantees,
syndicated loans and other financing facilities of € 22 million, € 41
million and € 125 million for the years ended 31 March 2002, 2003 and 2004
respectively.
NOTE 6 - INCOME TAX
(A) ANALYSIS BY NATURE AND GEOGRAPHIC ORIGIN
YEAR ENDED 31 MARCH
------------------------------------------
2002 2003 2004
------ ------ ------
(IN € MILLION)
France (3) (3) (7)
Foreign (94) (150) (95)
------ ------ ------
CURRENT INCOME TAX (97) (153) (102)
France 114 8 14
Foreign (27) 408 (163)
------ ------ ------
DEFERRED INCOME TAX 87 416 (149)
------ ------ ------
INCOME TAX (CHARGE) CREDIT (10) 263 (251)
====== ====== ======
(B) EFFECTIVE INCOME TAX RATE
YEAR ENDED 31 MARCH
---------------------------------------------------------
2002 2003 2004
--------------- ------------- ---------------
(IN € MILLION)
France (128) (218) (796)
Foreign 321 (1,181) (535)
------------- ------------- ---------------
PRE-TAX INCOME (LOSS) 193 (1,399) (1,331)
Statutory income tax rate of the parent company 35.43 % 35.43 % 35.43 %
EXPECTED TAX (CHARGE ) CREDIT (68) 496 472
Impact of :
- difference in rate of taxation 4 (110) 5
- reduced taxation of capital gain (non recognised 39 36 (172)
losses on disposals)
- recognition (non recognition) of deferred tax assets (20) (76) (377)
- net change in estimate of tax liabilities 37 35 (43)
- intangible assets amortisation (23) (22) (21)
- other permanent differences 21 (96) (115)
------------- ------------- ---------------
INCOME TAX ( CHARGE ) CREDIT (10) 263 (251)
------------- ------------- ---------------
EFFECTIVE TAX RATE 5.2 % - -
============= ============= ===============
In the year ended 31 March 2002, the effective tax rate was principally affected
by the reduced tax rate on capital gains.
In the year ended 31 March 2003 the effective tax rate was principally affected
by the non recognition of deferred tax assets and the lower rate of taxation in
Switzerland.
In the year ended 31 March 2004, the effective tax rate is principally affected
by the non recognition of deferred tax assets and the taxation of disposals.
The Group consolidates most of its country operations for tax purposes,
including in France, the United Kingdom, the United States, and Germany. At 31
March 2004 there were tax losses, principally relating to France, Germany,
Italy, Switzerland, United Kingdom and United States, which aggregated € 4,482
million.
Furthermore, the changes in industrial activity and shareholding that the Group
is undergoing may in some jurisdictions cause certain deferred tax assets on
loss carry forward to be examined under anti-abuse legislation relating to
change. The Group is aware of this possibility but does not currently believe
that any material impact on the Consolidated Financial statements would arise.
The tax loss carry forward by maturity is as follows
AT 31 MARCH 2003 AT 31 MARCH 2004
---------------- ----------------
(IN € MILLION)
Expiring within 1 year 221 20
2 years 66 15
3 years 157 75
4 years 507 80
5 years and more 2,873 1,999
Not subject to expiration 1,501 2,293
---------------- ----------------
TOTAL 5,325 4,482
================ ================
On the part of the € 4,482 million that led to recognition of net deferred tax
assets, € 22 million of losses expire within 5 years.
The losses incurred over the last two years have lead to a detailed review by
jurisdiction of deferred tax assets. This review took into account current and
past performance, length of carry back, carry forward and expiry periods,
existing contracts in the order book, budget and three years plan. This review
led to valuation allowance on deferred tax assets of € 730 million at 31 March
2004. Most of the deferred tax assets currently subject to valuation allowance
remain available to be utilised in future.
The deferred tax assets and liabilities are made up as follows :
AT 31 MARCH
-----------------------------------------------------
2002 2003 2004
------------ ------------ ------------
(IN € MILLION)
Accelerated depreciation 54 48 54
Intangible assets 188 245 337
Profit sharing, annual leave and pension accrual not
yet deductible 137 113 89
Provisions and other expenses not currently deductible 629 535 512
Contract provisions taxed in advance 91 110 38
Tax loss carryforwards 1,294 1,755 1,510
Others 21 149 161
------------ ------------ ------------
GROSS DEFERRED TAX ASSETS 2,414 2,955 2,701
------------ ------------ ------------
VALUATION ALLOWANCE (270) (365) (730)
------------ ------------ ------------
NETTING BY TAX GROUPING OR BY LEGAL ENTITY (658) (759) (410)
------------ ------------ ------------
DEFERRED TAX ASSETS 1,486 1,831 1,561
============ ============ ============
Accelerated depreciation for tax purposes (88) (81) (63)
Contract revenues not currently taxable (209) (255) (132)
Losses on intercompany transfers (44) (34) (4)
Deferred income related to leasing transactions (32) (60) (67)
Inventory valuation methods (69) (49) (22)
Pensions and other adjustments not currently taxable (76) (91) (57)
Provisions and other expenses deducted in advance (187) (226) (95)
------------ ------------ ------------
GROSS DEFERRED TAX LIABILITIES (705) (796) (440)
------------ ------------ ------------
NETTING BY TAX GROUPING OR BY LEGAL ENTITY 658 759 410
------------ ------------ ------------
DEFERRED TAX LIABILITIES (47) (37) (30)
============ ============ ============
The Group is satisfied as to the recoverability of the deferred tax assets, net
at 31 March 2004 of € 1,531 million, on the basis of an extrapolation of the
three year business plan, approved by the Board of Directors, which shows a
capacity to generate a sufficient level of taxable profits to recover its net
tax loss carry forward and other net assets generated through timing differences
over a period of four to twelve years, this reflecting the long term nature of
the Group's operations.
NOTE 7 - GOODWILL, NET
TRANSLATION
NET VALUE AT NET VALUE AT ADJUSTMENTS NET VALUE AT
31 MARCH 31 MARCH ACQUISITIONS/ AND OTHER 31 MARCH
2002 (1) 2003 (1) DISPOSALS AMORTISATION CHANGES 2004
------------ ------------ ------------- ------------ ----------- ------------
(IN € MILLION)
Power Environment (a) 790 755 - (45) - 710
Power Turbo Systems (a) 121 115 - (7) (1) 107
Power Service (a) & (2) 2,268 2,166 (47) (128) - 1,991
Transport (b) 449 558 7 (38) 3 530
Marine 2 2 - - - 2
Power Industrial Turbines (a) 345 329 (324) (5) - -
& (2)
Transmission & Distribution (3) 564 515 (394) (26) (95) -
Power conversion (3) - - (1) (7) 87 79
Other (c) 73 - - - 5 5
------------ ------------ ------------- ------------ ----------- ------------
GOODWILL, NET 4,612 4,440 (759) (256) (1) 3,424
============ ============ ============= ============ =========== ============
(1) From 1 April 2003, the former Power Sector was reorganised into three new
sectors, Power Turbo-Systems, Power Service and Power Environment (See Note
26). Consequently, the Goodwill, net allocated to the former Sector is now
presented to reflect the current reporting structure.
(2) In April 2003, the Group announced the completion of the disposal of its
small gas turbine business and on 1 August 2003, the completion of the
disposal of the medium gas turbines and industrial steam turbines business
was announced, both to Siemens. The related Service activities were sold in
the same transactions. The result of these transactions is a decrease of
Goodwill of € 371 million (See Note 3).
(3) In January 2004, the Group announced the completion of the disposal of the
majority of its T&D Sector (excluding Power conversion business). As a
result, Power conversion goodwill, included in T&D Sector in March 2002 and
2003, has been presented in a separate line. Goodwill relating to the T&D
activities not de-consolidated at 31 March 2004 is shown in the line "other"
(See Note 3).
The gross value of goodwill was € 5,452 million, € 5,449 million and € 4,420
million at 31 March 2002, 2003 and 2004 respectively.
(a) Power Turbo Systems, Power Environment and Power Service (ex Power Sector)
The goodwill of Power Turbo Systems, Power Environment and Power Service arose
from the acquisition of ABB ALSTOM Power in a two step process in 1999 and 2000.
The aggregate amount of goodwill recorded in connection with the acquisition of
ALSTOM Power in the June 1999 and May 2000 transactions was € 3,953 million.
(b) Transport
In October 2000, the Group purchased 51% of Fiat Ferroviaria SPA now renamed
ALSTOM Ferroviaria SPA for € 149 million. Goodwill arising on that acquisition
is € 109 million.
In April 2002, a put option requiring the Group to purchase the remaining 49% of
the capital was exercised by Fiat Spa for an amount of € 154 million. The
resulting goodwill increase amounts to € 158 million.
(c) Other
At 31 March 2003, other goodwill, which substantially reflected the acquisition
costs of the Group's international network activity, was re-allocated to the
sectors which the Network serves.
(d) Impairment
The Group requested a third party valuer to provide an independent report as
part of its impairment test, performed annually, on goodwill and other
intangible assets (see Note 8).
The valuation in use was determined primarily by focusing on the discounted cash
flow methodology which captured the potential of the asset base to generate
future profits and cash flow and was based on the following factors :
- The Group's internal three year Business Plan prepared as part of its annual
budget exercise at sector level and reviewed by external experts.
- Extrapolation of the three year Business Plan over 10 years.
- Terminal value at the end of the ten year period representing approximately
45% of total enterprise value.
- The Group's Weighted Average Cost of Capital, post-tax, of 10.5 % to 11.5 %.
The valuation supported the Group's opinion that its goodwill and other
intangible assets were not impaired on a reporting unit basis.
NOTE 8 - OTHER INTANGIBLE ASSETS, NET
TRANSLATION
AT AT ADJUSTMENTS AT
31 MARCH 31 MARCH ACQUISITIONS/ AND OTHER 31 MARCH
2002 2003 AMORTISATION DISPOSALS CHANGES 2004
--------- -------- ------------- --------- ----------- ---------
(IN € MILLION)
Gross value
1,289 1,354 16 (193) (5) 1,172
Amortisation
(119) (186) (60) 30 - (216)
--------- -------- ------------- --------- ----------- ---------
OTHER INTANGIBLE ASSETS, NET
1,170 1,168 (44) (163) (5) 956
========= ======== ============= ========= =========== =========
Other intangible assets mainly result from the allocation of the purchase price
following the acquisition of ABB's 50% shareholding in Power. It includes
technology, an installed base of customers and licensing agreements. Additions
in the year-end 31 March 2003 and 2004 reflect payments under a technology
sharing agreement signed during the year ended 31 March 2002.
The decrease of € 163 million results from the disposal of the small and medium
gas turbine business and the industrial steam turbine business (see Note 3).
NOTE 9 - PROPERTY, PLANT AND EQUIPMENT, NET
AT AT CHANGES IN TRANSLATION AT
31 MARCH 31 MARCH ACQUISITIONS/ SCOPE OF ADJUSTMENTS AND 31 MARCH
2002 2003 DEPRECIATION DISPOSALS CONSOLIDATION OTHER CHANGES 2004
-------- -------- ------------- --------- ------------- --------------- --------
(IN € MILLION)
Land 390 286 28 (122) (37) (3) 152
Buildings 1,661 1,505 43 (209) (251) 25 1,113
Machinery and Equipment 3,516 3,174 123 (296) (759) 78 2,320
Tools, furniture, fixtures and others 1,009 947 76 (89) (201) (175) 558
-------- ------- ------------- --------- ------------- --------------- --------
GROSS VALUE 6,576 5,912 270 (716) (1,248) (75) 4,143
-------- ------- ------------- --------- ------------- --------------- --------
Land (23) (8) (2) 1 1 2 (6)
Buildings (667) (638) (77) 98 150 (24) (491)
Machinery and Equipment (2,541) (2,415) (199) 267 603 27 (1,717)
Tools, furniture, fixtures and others (557) (520) (68) 62 143 23 (360)
-------- ------- ------------- --------- ------------- --------------- --------
ACCUMULATED DEPRECIATION (3,788) (3,581) (346) 428 897 28 (2,574)
-------- ------- ------------- --------- ------------- --------------- --------
Land 367 278 26 (121) (36) (1) 146
Buildings 994 867 (34) (111) (101) 1 622
Machinery and Equipment 975 759 (76) (29) (156) 105 603
Tools, furniture, fixtures and others 452 427 8 (27) (58) (152) 198
-------- ------- ------------- --------- ------------- --------------- --------
NET VALUE 2,788 2,331 (76) (288) (351) (47) 1,569
======== ======= ============= ========= ============= =============== ========
Assets financed through capital leases are not capitalised (see Note 27 (b)).
NOTE 10 - EQUITY METHOD INVESTMENTS AND OTHER INVESTMENTS, NET
Investments in which the Group has direct or indirect control of more than 50%
of the outstanding voting shares or over which it exercises effective control,
are fully consolidated. Only investments in which the Group has an equity
interest of 20% to 50% and over which it exercises significant influence are
accounted for under the equity method.
(A) EQUITY METHOD INVESTMENTS
AT 31 MARCH
----------------------------------- % SHARE IN
2002 2003 2004 INTEREST NET INCOME
------- ------- ------- -------- ----------
(IN € MILLION)
Guangxi Laibin Electric Power Co Ltd "Figlec" 65 59 - - -
Termoeléctrica del Golfo and Termoelectrica
Peñoles 72 87 66 49.5 0
ALSTOM S.A. de C.V., Mexico 10 8 8 49.0 2
Others 15 8 10 (2)
------- ------- ------- ----------
TOTAL 162 162 84 -
======= ======= ======= ==========
During the year ended 31 March 2004, the Group sold to a third party its
shareholding of 40 % of the registered capital of a Chinese entity "Figlec", a
company which operates a thermal Power Plant at Laibin, China.
(B) OTHER INVESTMENTS, NET
AT 31 MARCH
--------------------------------------------------
2002 2003 2004 %
------ ------ ------------------------------ INTEREST
NET NET GROSS PROVISION NET 2004
------ ------ ------- ----------- ------ ---------
(IN € MILLION)
Ballard 40 22 29 (2) 27 2.37 %
A-Train AB & A-Train Invest
AB (1) 11 5 - - - -
La Maquinista Vila Global 28 - - - - -
Birecik Baraj ve Hidroelektrik Santrali Tesis ve Isletme AS 16 20 20 (5) 15 13.60 %
Tramvia Metropolita SA 7 8 8 - 8 25.35 %
Tramvia Metropolita del Besos - 8 8 - 8 25.35 %
Others (2) 37 20 39 (21) 18
------ ------ ------ ---------- ------
TOTAL 139 83 104 (28) 76
====== ====== ====== ========== ======
(1) A-Train AB & A-Train Invest AB were sold in January 2004
(2) No other investments' net value exceeds € 5 million
Information on the main other investments at 31 March 2004 is based on the most
recent financial statements available and is the following:
SHARE IN
NET INCOME NET EQUITY
---------- ----------
(IN € MILLION)
Birecik Baraj ve Hidroelektrik Santrali Tesis ve Isletme AS 119 43
Tramvia Metropolita SA 0 8
Tramvia Metropolita des Besos (Trambesos) 0 8
NOTE 11 - OTHER FIXED ASSETS, NET
AT 31 MARCH
------------------------------
2002 2003 2004
------ ------ ------
(IN € MILLION)
Long term loans, deposits and retentions 778 814 798
Prepaid assets - pensions (see Note 21) 469 397 357
Others 79 83 62
------ ------ ------
OTHER FIXED ASSETS, NET (1) 1,326 1,294 1,217
====== ====== ======
(1) Include loans and cash deposits in respect of Marine vendor financing (See
Note 27 (a)(2)) for total amounts of € 561 million, € 510 million and € 329
million at 31 March 2002, 2003 and 2004, respectively. At 31 March 2004, it
also includes € 125 million held in escrow following the disposal of the
small and medium gas turbine businesses and the industrial steam turbines
business.
NOTE 12 - INVENTORIES AND CONTRACTS IN PROGRESS, NET
AT 31 MARCH
---------------------------------------
2002 2003 2004
--------- -------- --------
(IN € MILLION)
Raw materials and supplies 1,586 1,485 1,094
Work and contracts in progress 6,929 5,198 3,363
Finished products 361 276 63
INVENTORIES, AND CONTRACTS IN PROGRESS, GROSS 8,876 6,959 4,520
--------- -------- --------
Less valuation allowance (323) (301) (241)
--------- -------- --------
INVENTORIES, AND CONTRACTS IN PROGRESS, NET OF VALUATION ALLOWANCES 8,553 6,658 4,279
Less related customers' deposits and advances (2,960) (2,050) (1,392)
--------- -------- --------
INVENTORIES, AND CONTRACTS IN PROGRESS, NET OF VALUATION
ALLOWANCES AND RELATED CUSTOMERS' DEPOSITS AND ADVANCES 5,593 4,608 2,887
========= ======== ========
NOTE 13 - TRADE RECEIVABLES, NET
AT 31 MARCH
---------------------------------------
2002 2003 2004
--------- -------- --------
(IN € MILLION)
Trade receivables on contracts 10,376 10,941 7,499
Other trade receivables 1,469 1,142 692
--------- -------- --------
TRADE RECEIVABLES, GROSS (1) 11,845 12,083 8,191
Less valuation allowance (137) (130) (113)
--------- -------- --------
TRADE RECEIVABLES, NET OF VALUATION ALLOWANCES 11,708 11,953 8,078
Less related customers' deposits and advances (6,978) (7,098) (4,616)
--------- -------- --------
TRADE RECEIVABLES, NET OF VALUATION ALLOWANCES AND RELATED
CUSTOMERS' DEPOSITS AND ADVANCES 4,730 4,855 3,462
========= ======== ========
(1) after sale of trade receivables (see Note 14)
NOTE 14 - SALE OF TRADE RECEIVABLES
The following table shows net proceeds from sale of trade receivables :
AT 31 MARCH
------------------------------
2002 2003 2004
------ ------ ------
(IN € MILLION)
Trade receivables sold 1,388 357 94
Retained interests( Note 15) (352) - -
------ ------ ------
NET CASH PROCEEDS FROM SALE OF TRADE RECEIVABLES 1,036 357 94
====== ====== ======
During the year ended 31 March 2002, the Group sold trade receivables which it
irrevocably and without recourse transferred eligible receivables to third
parties. Under the terms of certain of these agreements, certain receivables are
pledged as credit enhancement. The retained interest in these pledged
receivables remains on the consolidated balance sheet as other receivables. The
Group generally continues to service, administer, and collect the receivables on
behalf of the purchasers.
During the years ended 31 March 2003 and 2004, the Group sold, irrevocably and
without recourse, trade receivables to third parties. The Group generally
continues to service, administer, and collect the receivables on behalf of the
purchasers.
NOTE 15 - OTHER ACCOUNTS RECEIVABLES, NET
AT 31 MARCH
------------------------------
2002 2003 2004
------ ------ ------
(IN € MILLION)
Advances paid to suppliers 1,192 758 528
Amounts due on local part of contracts 241 248 111
Income tax and other government receivables 519 496 450
Prepaid expenses 446 262 200
Retained interests in receivables (Note 14) 352 - -
Others (1) 554 501 733
------ ------ ------
OTHER ACCOUNTS RECEIVABLES, NET 3,304 2,265 2,022
====== ====== ======
(1) the variation between fiscal year 2003 and 2004 is mainly due to the
receivables held at 31 March 2004 following the disposal of the T&D Sector
to Areva.
NOTE 16 - CHANGES IN NET WORKING CAPITAL
AT CHANGES IN AT
31 MARCH TRANSLATION SCOPE AND 31 MARCH
2003 CASH FLOW ADJUSTMENTS OTHERS 2004
-------- --------- ----------- ---------- --------
(IN € MILLION)
Inventories and contract in progress, net 4,608 (389) (99) (1,233) 2,887
Trade and other receivables, net (1) 7,477 (770) (144) (985) 5,578
Sale of trade receivables, net (357) 267 - (4) (94)
Contract related provisions (3,264) 295 103 163 (2,703)
Other provisions (296) (113) - 8 (401)
Restructuring provisions (138) (271) (1) 25 (385)
Customers' deposits and advances (3,541) 1 84 742 (2,714)
Trade and other payables (9,375) 985 174 1,188 (7,028)
-------- --------- ----------- ---------- --------
NET WORKING CAPITAL (4,886) 5 117 (96) (4,860)
======== ========= =========== ========== ========
(1) before impact of net proceeds from sale of trade receivables
NOTE 17 - SHORT-TERM INVESTMENTS
CARRYING VALUE WITHIN 1 YEAR 1 TO 5 YEARS OVER 5 YEARS
-------------- ------------- ------------ ------------
(IN € MILLION)
AT 31 MARCH 2002
Equity securities 31 - - 31
Deposits 121 117 4 -
Bonds and other debt securities 179 18 160 1
-------------- ------------- ------------ ------------
TOTAL 331 135 164 32
============== ============= ============ ============
AT 31 MARCH 2003
Government debt securities 4 1 3 -
Deposits 53 53 - -
Bonds and other debt securities 85 36 43 6
-------------- ------------- ------------ ------------
TOTAL 142 90 46 6
============== ============= ============ ============
AT 31 MARCH 2004
Bonds and other debt securities 39 35 4 -
-------------- ------------- ------------ ------------
TOTAL 39 35 4 -
============== ============= ============ ============
The aggregate fair value is € 333 million, € 143 million and € 39 million at 31
March 2002, 2003 and 2004, respectively.
NOTE 18 - CASH AND CASH EQUIVALENTS
Cash and cash equivalents include cash at banks and cash on hand of € 1,413
million, € 897 million and € 735 million at 31 March 2002, 2003 and 2004
respectively, and highly liquid investments of € 492 million, € 731 million and
€ 692 million at 31 March 2002, 2003 and 2004, respectively.
NOTE 19 - MINORITY INTERESTS
AT 31 MARCH
----------------------------------
2002 2003 2004
------ ------ ------
(IN € MILLION)
BALANCE BEGINNING OF YEAR 102 91 95
Share of net income 23 15 (2)
Translation adjustment (1) (15) (4)
Dividend paid (21) (1) (3)
Change in scope and other changes (12) 5 (18)
------ ------ ------
BALANCE END OF YEAR 91 95 68
====== ====== ======
NOTE 20 - PROVISIONS FOR RISKS AND CHARGES
TRANSLATION
ADJUSTMENTS
AT AT AND AT
31 MARCH 31 MARCH OTHER 31 MARCH
2002 2003 ADDITIONS RELEASES APPLIED CHANGES* 2004
-------- -------- --------- -------- ------- ---------- --------
(IN € MILLION)
Warranties 1,618 815 456 (138) (225) (101) 807
Penalties and claims 774 1,766 175 (109) (631) (123) 1,078
Contract loss accruals 490 412 251 (27) (328) (4) 304
Other risks on contracts 333 271 384 (42) (61) (38) 514
PROVISIONS ON CONTRACTS 3,215 3,264 1,266 (316) (1,245) (266) 2,703
RESTRUCTURING 178 138 645 (17) (357) (24) 385
OTHER PROVISIONS 456 296 203 (47) (43) (8) 401
-------- -------- -------- -------- ------- ---------- --------
TOTAL 3,849 3,698 2,114 (380) (1,645) (298) 3,489
======== ======== ======== ======== ======= ========== ========
*Including € (102) million of translation effects.
PROVISIONS ON CONTRACTS
GT24/GT26 HEAVY DUTY GAS TURBINES
In July 2000, the Group announced that it had experienced significant technical
difficulties in the introduction of the new GT24/GT26 heavy-duty gas turbines
which are at the top end of the extensive range of gas turbines. They are among
the largest individual products the Group sells and are typically sold as part
of a larger power project involving other Power products. The GT24/GT26 turbines
are based upon technology developed by ABB which initiated the development and
marketing of the GT24/GT26 turbines in 1995, and also entered into contracts for
sales of these turbines. These turbines were based on an advanced and novel
design concept. In connection with the start of commercial operation of these
turbines in 1999 and 2000, a number of significant technical problems were
identified affecting all the turbines.
In response, the Group set in motion high-priority initiatives to design and
implement modifications across the fleet. The first step of these initiatives
was to de-rate the units so that they could operate in commercial service with
lower efficiency and output, while the Group developed the technical solutions
to allow full rating operation. The Group also embarked on a comprehensive
programme to discuss and resolve any contractual issues with customers.
Commercial settlements with customers were negotiated to deal with the
consequences of the de-rating. Typically, what was proposed was a Performance
Recovery Period of around 2-3 years, prior to implementing the life-time and
performance upgrades, that the Group calls a "recovery package". This deferred
the timing of the date at which provisional acceptance was achieved and related
contractual remedies, including liquidated damages, apply. During that period,
varying solutions were applied depending on the situation, however in general
the Group replaced short life components at its cost and agreed on contractual
amendments, including revised financial conditions, with each customer.
By March 2003, the commercial situation with respect to the GT24/GT26 gas
turbines became clearer. The Group reached commercial settlements on 61 of the
80 units and of these settlements 24 were unconditional that is to say the
contracts were in the normal warranty period, and there was no obligation to
upgrade or pay further penalties. Under the other settlements, the Group
committed to make additional upgrade improvements, either in respect of
performance or the life of key components and was required to pay liquidated
damages if the modified gas turbines did not meet performance criteria or if the
Group did not respect the agreed time delays for the implementation of the
modifications. As concerns the remaining 19 units for which no settlements had
been reached, 7 were subject to litigation, and negotiations were ongoing or not
yet started for the remainder. The orders in hand included € 558 million, at 31
March 2003, in respect of a GT26 suspended contract for four units on
which the customer had an option for termination. As this contract has now been
terminated, the orders in hand were adjusted accordingly during the year ended
31 March 2004.
Notwithstanding the progress achieved since November 2002, the Group experienced
unexpected set backs and delays in validating and testing several important
components of the recovery package, notably the GT24 compressor upgrade and the
'full lifetime' blades. These delays resulted in being unable to respect the
duration of the recovery periods agreed with some of its customers under
applicable agreements, including under conditional settlement agreements, prior
to the implementation of the recovery package with the expected improvements in
performance, efficiency and life of key components. In the current state of the
energy wholesale markets, customers do not have the incentive to accept these
machines. These delays therefore mean significantly increased exposure as
customers are less inclined to agree to further extensions of the recovery
periods and are invoking penalties and liquidated damages. The Group also
incurred additional costs because it has been forced to shut down the machines
more frequently to replace short life components at its expense. The Group's
previously expected targets were therefore not achievable.
As a consequence, the Group revised its analysis of the residual financial
impact of the GT24/GT26 issue on a contract by contract basis, which it
estimated at € 1,655 million net at 31 March 2003.
As of 31 March 2004, the 73 machines in service had accumulated over 900,000
operating hours at high reliability levels.
The commercial situation with respect to the remaining 76 GT24/GT26 gas turbines
initially sold continues to improve at 31 March 2004: 73 units are in commercial
operation, 2 are in commissioning, 1 is in construction. Under agreements
covering 22 of the units, the Group is committed to or otherwise has the
opportunity to make upgrade improvements within agreed time periods. The other
units which are in commercial operation, are either in normal warranty or have
had those warranty periods expire. All of the cases of client litigation which
affected 7 units as of March 2003 are now resolved via satisfactory commercial
settlements. There are commercial disputes involving contractual arbitration
with respect to two projects for which the customers have accepted the turbines,
but allege that contractual penalties are due in amounts contested by the Group.
At 31 March 2002, € 1,489 million of provisions and accrued contract costs were
retained in respect of these turbines after having recorded € 1,075 million
during the year.
The Group recorded an additional € 1,637 million of provisions and accrued
contract costs related to these turbines in the year ended March 2003, including
€ 83 million recorded in the Customer Service Segment (now Power Service Sector)
in respect of contracts transferred to this Segment as part of the Group's after
market operations and on which it has no uncovered exposure. The Group,
therefore, retained € 1,655 million of provisions and accrued contract costs at
31 March 2003 in respect of these turbines after taking into account mitigation
plans of € 454 million. This provision did not take into account interest to be
paid to customers (cost of carry), the cost of which are recorded when it falls
due.
In the year ended 31 March 2004, provisions and accrued contract costs of € 825
million were utilised and € 738 million were retained at 31 March 2004 in
Provisions for Risks and Charges, after taking into account remaining mitigation
plans of € 234 million and currency movements.
Actual costs incurred may exceed the amounts of provisions retained at 31 March
2004 because of a number of factors, including cost overruns or delays the Group
may incur in the manufacture of modified components, the implementation of
modifications or the delivery of modified turbines and the outcome of claims or
arbitration made by or against the Group.
UK TRAINS
At 31 March 2004, provisions of € 41 million are retained in respect of UK train
equipment supply contracts.
Actual costs incurred may exceed the amounts of provisions and accrued contract
costs retained at 31 March 2004 as, among other items, the outcome of claims
made by or against the Group are at such an early stage that no meaningful
assessment of amounts which may become due to or by the Group is possible. On
one of the UK contracts, the West Coast Main Line, any settlement will require
the approval of the Strategic Rail Authority.
ALSTOM TRANSPORTATION INC.
During the year ended 31 March 2004, the Group identified and recognised
additional costs of € 102 million of which € 44 million in provisions for risks
on contracts following the re-estimation of costs to complete on several
contracts in Alstom Transportation Inc. The additional provisions mainly concern
two North East Corridor (NEC) line contracts together with receivables
write-down and accrued contract costs and other payables.
On these two NEC contracts, new build and maintenance, all parties agreed to
enter a mediation phase starting June 2003. A resolution between the parties has
been achieved in line with amounts previously provided.
RESTRUCTURING EXPENDITURES AND PROVISIONS
During the year ended 31 March 2004, further restructuring plans were adopted
for an amount of € 645 million in all Sectors other than Marine, and also in
Corporate headquarters. At 31 March 2004, provisions of € 385 million were
retained after an expenditure in the period of € 357 million.
During the year ended 31 March 2003, restructuring expenditure amounted to € 297
million. New plans were adopted during the period in Power, Transmission &
Distribution and Transport, for which provisions have been created. At 31 March
2003, restructuring and redundancy provisions mainly relate to Power and
Transmission & Distribution Sectors.
During the year ended 31 March 2002, restructuring expenditure amounted to € 344
million, principally in the Power, Transmission & Distribution and Transport
Sectors. New plans were adopted during the period in Transport for which
provisions have been created during the year. At 31 March 2002, restructuring
and redundancy provisions mainly relate to Power, Transmission and Distribution
and Power Conversion Sectors.
OTHER PROVISIONS
Other provisions include € 144 million at 31 March 2002 and € 140 million at 31
March 2003 and 2004, respectively to cover Marine vendor financing exposure
(Note 27 (a)).
NOTE 21 - RETIREMENT, TERMINATION AND POST-RETIREMENT BENEFITS
The Group provides various types of retirement, termination benefits and post
retirement benefits (including healthcare benefits and medical cost) to its
employees. The type of benefits offered to an individual employee is related to
local legal requirements as well as the historical operating practices of the
specific subsidiaries.
Termination benefits are generally lump sum payments based upon an individual's
years of credited service and annualised salary at retirement or termination of
employment. Pension benefits are generally determined using a formula which uses
the employee's years of credited service and average final earnings. Most
defined-benefit pension liabilities are funded through separate pension funds.
Pension plan assets related to funded plans are invested mainly in equity and
debt securities. Other supplemental defined-benefit pension plans sponsored by
the Group for certain employees are funded from the Group's assets as they
become due.
CHANGE IN BENEFIT OBLIGATION
PENSION BENEFIT OTHER BENEFITS TOTAL
---------------------------- -------------------------- ----------------------------
AT 31 MARCH AT 31 MARCH AT 31 MARCH
---------------------------- -------------------------- ----------------------------
2002 2003 2004 2002 2003 2004 2002 2003 2004
-------- -------- -------- ------ ------ ------ -------- -------- --------
(IN € MILLION)
ACCUMULATED BENEFIT
OBLIGATION AT
END OF YEAR (3,168) (3,137) (3,335) (242) (204) (144) (3,410) (3,341) (3,479)
BENEFIT OBLIGATION AT
BEGINNING OF YEAR (3,865) (3,527) (3,339) (206) (242) (204) (4,071) (3,769) (3,543)
Service cost (99) (107) (86) (3) (2) (1) (102) (109) (87)
Interest cost (205) (196) (184) (16) (15) (11) (221) (211) (195)
Plan participants (19) (20) (26) - - - (19) (20) (26)
contributions
Amendments (16) 1 (2) - - 15 (16) 1 13
Business Combinations / 359 (3) 129 - - - 359 (3) 129
disposals (1)
Curtailment 9 12 6 - - - 9 12 6
Settlements - 91 74 - - - - 91 74
Actuarial (loss) gain 154 (97) (234) (31) (12) 17 123 (109) (217)
Benefits paid 178 149 206 17 17 18 195 166 224
Foreign currency
translation (23) 358 (32) (3) 50 21 (26) 408 (11)
------- ------- ------- ------ ------ ------ -------- -------- --------
BENEFIT OBLIGATION AT
END OF YEAR (3,527) (3,339) (3,488) (242) (204) (145) (3,769) (3,543) (3,633)
======= ======= ======= ====== ====== ====== ======== ======== ========
(1) IN THE YEAR ENDED 31 MARCH 2002, THE BUSINESS COMBINATION RELATES MAINLY TO
THE PURCHASE AND THE INTEGRATION OF RAILCARE LIMITED AND TO THE SALE OF GT
RAILWAYS MAINTENANCE LIMITED AND CONTRACTING SECTOR.
IN THE YEAR ENDED 31 MARCH 2004, THE BUSINESS COMBINATION RELATES MAINLY TO
THE DISPOSAL OF T&D SECTOR (EXCLUDING POWER CONVERSION BUSINESS).
CHANGE IN PLAN ASSETS
PENSION BENEFIT OTHER BENEFITS TOTAL
-------------------------- ------------------------ -------------------------
AT 31 MARCH AT 31 MARCH AT 31 MARCH
-------------------------- ------------------------ -------------------------
2002 2003 2004 2002 2003 2004 2002 2003 2004
------ ------ ------ ------ ------ ------ ------ ------ ------
(IN € MILLION)
FAIR VALUE OF PLAN
ASSETS AT
BEGINNING OF YEAR 3,322 2,712 2,012 - - - 3,322 2,712 2,012
Actual return on plan assets (165) (282) 302 - - - (165) (282) 302
Company contributions 81 73 74 - - - 81 73 74
Plan participant contributions 19 23 26 - - - 19 23 26
Business Combinations/disposals (1) (444) (30) 12 - - - (444) (30) 12
Settlements - (75) (33) - - - - (75) (33)
Benefits paid (122) (95) (159) - - - (122) (95) (159)
Foreign currency translation 21 (314) 29 - - - 21 (314) 29
------ ------ ------ ------ ------ ------ ------ ------ ------
FAIR VALUE OF PLAN ASSETS AT
END OF YEAR 2,712 2,012 2,263 - - - 2,712 2,012 2,263
FUNDED STATUS OF THE PLAN (815) (1,327) (1,225) (242) (204) (145) (1,057) (1,531) (1,370)
Unrecognised actuarial loss (gain) 506 933 904 34 34 14 540 967 918
Unrecognised prior service cost 18 11 8 - (1) (14) 18 10 (6)
Unrecognised transitional obligation (26) (24) (29) - 3 2 (26) (21) (27)
------ ------ ------ ------ ------ ------ ------ ------ ------
(ACCRUED) PREPAID BENEFIT COST (317) (407) (342) (208) (168) (143) (525) (575) (485)
------ ------ ------ ------ ------ ------ ------ ------ ------
OF WHICH:
ACCRUED PENSIONS AND RETIREMENT
BENEFITS (786) (804) (699) (208) (168) (143) (994) (972) (842)
PREPAID ASSETS (NOTE 11) 469 397 357 - - - 469 397 357
(1) IN THE YEAR ENDED 31 MARCH 2002, THE BUSINESS COMBINATION RELATES MAINLY TO
THE PURCHASE AND THE INTEGRATION OF RAILCARE LIMITED AND TO THE SALE OF GT
RAILWAYS MAINTENANCE LIMITED AND CONTRACTING SECTOR.
IN THE YEAR ENDED 31 MARCH 2004, THE BUSINESS COMBINATION RELATES MAINLY TO
THE DISPOSAL OF T&D SECTOR (EXCLUDING POWER CONVERSION BUSINESS).
COMPONENTS OF PLAN ASSETS
AT 31 MARCH
2002 2003 2004
----------------------- ---------------------- -----------------------
(IN € MILLION) % (IN € MILLION) % (IN € MILLION) %
Equities 1,646 60.7 1,156 57.5 1,289 57.0
Bonds 827 30.5 641 31.8 734 32.4
Properties 142 5.2 129 6.4 137 6.0
Others 97 3.6 86 4.3 103 4.6
--------- -------- -------- -------- -------- --------
TOTAL 2,712 100 2,012 100 2,263 100
========= ======== ======== ======== ======== =======-
The actuarial assumptions used vary by business unit and country, based upon
local considerations:
ASSUMPTIONS (WEIGHTED AVERAGE RATES)
PENSION BENEFIT OTHER BENEFITS
----------------------------------- ------------------------------------
YEAR ENDED 31 MARCH YEAR ENDED 31 MARCH
----------------------------------- ------------------------------------
2002 2003 2004 2002 2003 2004
--------- --------- --------- --------- --------- --------
Discount rate 6.14% 5.90% 5.66% 7.25 % 6.75 % 6.3%
Rate of compensation increase 3.31% 3.28% 3.00% N/A N/A N/A
Expected return on plan assets 7.79% 7.57% 8.00% N/A N/A N/A
Regarding the Expected return of plan assets, the same basis has been applied in
all countries where the Group has assets covering its pension liabilities: the
Expected return on plan assets is the weighted average of the returns of bonds,
equities and properties portfolios determined as follows:
- Equity return = risk free rate (government bond yield) + Equity risk premium
(4%)
- Bond return = Discount rate
- Property return = Equity return - 1%
The 4% equity risk premium is considered to be a fair assumption given the
following reasons:
- It reflects the relatively low valuation of stock markets, following 3 years
of stock market declines,
- In addition, risk free rates are low by historical standards due to
disappointing growth and aggressive monetary policies.
The following table shows the amounts of net periodic benefit cost for each of
the three years ended 31 March 2002, 2003 and 2004.
PENSION BENEFIT OTHER BENEFITS
---------------------------- --------------------------
YEAR ENDED 31 MARCH YEAR ENDED 31 MARCH
---------------------------- --------------------------
2002 2003 2004 2002 2003 2004
------ ------ ------ ------ ------ ------
(IN € MILLION)
Service cost 99 107 86 3 2 1
Interest cost 205 196 184 16 15 11
Expected return on plan assets (208) (193) (147) - - -
Amortisation of unrecognised prior service cost (8) 2 1 - - -
Amortisation of actuarial net loss (gain) 11 16 61 - 1 -
Curtailments/Settlements (32) 9 (143) - - -
------ ------ ------ ------ ------ ------
NET PERIODIC BENEFIT COST 67 137 42 19 18 12
====== ====== ====== ====== ====== ======
Curtailments/Settlements effects included in Net
gain on disposal of investments (See Note 4) (1) - - 149 - - -
------ ------ ------ ------ ------ ------
NET PERIODIC BENEFIT COST CLASSIFIED IN PENSIONS
(SEE NOTE 4) 67 137 191 19 18 12
====== ====== ====== ====== ====== ======
(1) Disposal of T&D Sector as well as Small and Medium gas turbines and
Industrial steam turbines businesses.
The Group's health care plans, disclosed in other benefits are generally
contributory with participants' contributions adjusted annually. The healthcare
trend rate is assumed to be 10% in the year ended 31 March 2004 and 7.4%
thereafter.
In addition to the net periodic benefit cost disclosed above, the Group charged
in pensions costs contributions related to schemes mixing defined benefits and
defined contributions for € 32 million together with multi-employer
contributions for € 28 million.
The total of pension and other post retirement benefit costs for each of the
three year ended 31 March 2004 are shown in Note 4 - Other income (expenses),
net.
The total cash spend in the year ended 31 March 2004 was € 199 million.
NOTE 22 - FINANCIAL DEBT
(A) ANALYSIS BY NATURE
AT 31 MARCH
--------------------------------------
2002 2003 2004
-------- -------- --------
(IN € MILLION)
Redeemable preference shares (1) - 205 205
Subordinated notes (2) - 250 250
Bonds (3) 1,200 1,200 650
Syndicated loans (4) 1,550 2,627 1,922
Subordinated long term bond (TSDD) (5) - - 200
Subordinated bonds reimbursable with shares (TSDDRA) (6) - - 300
Bilateral loans 283 358 260
Bank overdraft and other facilities 779 266 274
Commercial paper (7) 455 83 -
Accrued interest 33 50 46
-------- -------- --------
TOTAL 4,300 5,039 4,107
======== ======== ========
Future receivables securitised, net (8) 1,735 1,292 265
-------- -------- --------
FINANCIAL DEBT 6,035 6,331 4,372
======== ======== ========
Long-term portion 3,644 3,647 3,829
Short-term portion 2,391 2,684 543
(1) On 30 March 2001, a wholly owned subsidiary of ALSTOM Holdings issued
perpetual, cumulative, non voting, preference shares for a total amount of €
205 million.
The preference shares were not redeemable, except at the exclusive option of
the issuer, in whole but not in part, on or after the 5th anniversary of the
issue date or at any time in case of certain limited specific pre identified
events. Included in those events, are changes in tax laws and the issuance
of new share capital.
In July 2002 an issue of shares was made triggering the contractual
redemption of the preferred shares at 31 March 2006 at a price equal to par
value together with dividends accrued, but not yet paid.
(2) The Group issued, on September 2000, € 250 million Auction Rate Coupon
Undated Subordinated Notes. In March 2003, the terms of redemption were
amended and the notes are redeemable in September 2006. They retain their
subordinated nature and rank "pari passu" with holders of other subordinated
indebtedness. Interest is payable quarterly, at variable rates based on
EURIBOR.
(3) On July 26, 1999, the Group issued bonds for a principal amount of € 650
million with a 7 year maturity, listed on the Paris and Luxembourg Stock
Exchanges, bearing a 5% coupon and to be redeemed at par on 26 July 2006. On
February 6, 2001, the Group issued bonds for a principal amount of € 550
million with a 3 year maturity, listed on the Luxembourg Stock Exchange,
bearing a 5.625% coupon. These bonds have been redeemed at par on 6 February
2004.
(4) Syndicated loans
Syndicated loans include:
- A 5-year subordinated debt facility signed on 30 September 2003 with a
syndicate of banks and financial institutions for an amount up to € 1,563
million, as part of the new financing package (the "Financing package)
which was announced on 22 September 2003, following an agreement reached
with all interested parties.
This subordinated debt facility is divided between the term loan "Part A"
of € 1,200 million and the revolving credit "Part B" of € 363 million.
The "Part A" has been made available in two advances used to repay the
outstanding balance of the € 1,250 million 2004 Multicurrency Revolving
Credit Agreement, commercial paper (BILLETS DE TRÉ ESORERIE) and the € 550
million bonds in full. The "Part B" is available since 20 January 2004 and
was not drawn at 31 March 2004.
- € 722 MILLION AS PART OF A 2006 MULTICURRENCY REVOLVING CREDIT AGREEMENT.
The subordinated debt facility and the 2006 Multicurrency Revolving Credit
Agreement are subject to new financial covenants amending the ones
applicable at 31 March 2003.
Under this agreement, upon the occurrence and continuation of events that
qualify as events of default (or early repayment events), the lenders may cancel
all commitments and declare all outstanding amounts to be immediately due and
payable.
On the basis of the Consolidated Financial Statements as of 31 March 2004, the
Group would have failed to comply with the financial covenants "Consolidated net
worth" and "EBITDA" described below. In late April 2004, the Group obtained an
agreement from its lenders to suspend these covenants until 30 September 2004
and expects to negotiate new financial covenants before this date.
MINIMUM
MINIMUM CONSOLIDATED NET MAXIMUM TOTAL DEBT MAXIMUM MINIMUM
INTEREST WORTH (EXCLUDING TSDDRA *) NET DEBT EBITDA
COVER (INCLUDING TSDDRA *) LEVERAGE
COVENANTS (a) (b) (c) (d) (e)
-------- ------------------- -------------------- -------- ------------
(IN € MILLION) (IN € MILLION) (IN € MILLION)
March 2004 1,400 4,750 100
June 2004 4,850
September 2004 1,000 4,800 230
December 2004 4,600
March 2005 1.2 1,100 4,450 8.0
June 2005 4,650
September 2005 1.6 850 4,650 7.5
December 2005 4,600
March 2006 2.5 1,150 4,450 4.0
June 2006 4,400
September 2006 2.5 1,150 4,400 3.6
December 2006 4,400
March 2007 2.5 1,150 4,400 3.6
June 2007 4,400
September 2007 2.5 1,150 4,400 3.6
December 2007 4,400
March 2008 2.5 1,150 4,400 3.6
June 2008 4,400
--------------
* TSDDRA, or "titres subordonnés à durée déterminée remboursables en
actions"
(a) Ratio of EBITDA (see (e) below) to consolidated net financial expense
(interest expense plus securitisation expenses less interest income).
(b) Sum of shareholders' equity and minority interests (this covenant will
not apply if and for as long as ALSTOM's long term unsecured,
unsubordinated debt is assigned a credit rating of at least Baa3 by
Moody's or BBB- by Standard & Poor's). For purposes of this financial
covenant, consolidated net worth shall include the TSDDRA.
(c) Sum of the financial debt and the net amount of sale of trade
receivables (this covenant will not apply if and for as long as ALSTOM's
long term unsecured, unsubordinated debt is assigned a credit rating of
at least Baa3 by Moody's or BBB- by Standard & Poor's). For purposes of
this financial covenant, total debt is to be calculated excluding the
TSDDRA.
(d) Ratio of total net debt (total financial debt less short-term
investments and cash and cash equivalents) to EBITDA (see (e) below).
For purposes of this financial covenant, total financial debt is
contractually to be calculated excluding the TSDDRA.
(e) Earnings Before Interest and Tax plus depreciation and amortisation as
set out in Consolidated Statements of Cash Flow less goodwill
amortisation and less capital gain on disposal of investments.
(5) As part of the financing package mentioned above, the Group issued € 200
million of subordinated bonds with a 15-year maturity to the French State
("TSDD" or titres subordonnés à durée déterminée). These subordinated bonds
are carrying an interest rate of EURIBOR plus 5%, of which 1.5% is
capitalised annually and paid upon reimbursement
(6) As part of the financing package mentioned above, the Group issued € 300
million of subordinated bonds with a 20-year maturity to the French State,
which will be automatically reimbursable with shares upon the approval of
the reimbursement with shares by the European Commission ("TSDDRA" or titres
subordonnés à durée déterminée remboursables en actions). These subordinated
bonds are carrying an interest rate of 2% until a decision of the European
Commission is obtained, at which point (if the decision is negative) the
rate will be adjusted to EURIBOR plus 5%, of which 1.5% will be capitalised
annually and paid upon reimbursement. The issue price for each bond will be
1.25, and each will be reimbursable with one share, subject to anti-dilution
adjustments
(7) The total authorised commercial paper program is € 2,500 million,
availability being subject to market conditions. As part of the financing
package, the French State and a consortium of banks have committed to
subscribe, if requested by the Group, an amount of commercial paper of € 420
million until January 2005.
(8) The Group sold, in several transactions, the right to receive payment from
certain customers for future receivables for a net amount of € 1,735
million, € 1,292 million and € 265 million at 31 March 2002, 2003 and 2004,
respectively. The Total amount of € 265 million at 31 March 2004 concerns
Transport Sector.
Total available credit lines at Group level at 31 March 2004 of € 783 million
are constituted of € 420 million of commercial paper and € 363 million of the
tranche B of the Subordinated loans not yet drawned.
(B) ANALYSIS BY MATURITY AND INTEREST RATE
SHORT TERM LONG TERM
---------- ----------------------------------------------------------------------
LESS THAN AFTER 5 AVERAGE
(IN € MILLION) TOTAL 1 YEAR 1-2 YEARS 2-3 YEARS 3-4 YEARS 4-5 YEARS YEARS INTEREST RATE
------- ------- --------- --------- --------- --------- -------- -------------
Redeemable preference shares 205 - 205 - - - - 5,2%
Subordinated notes 250 - - 250 - - - 14,2%
Bonds 650 - - 650 - - - 3,5%
(1)
Syndicated loans 1,922 - - 722 - 1,200 - 5,7%
Subordinated long term bond (TSDD) 200 - - - - 200 7,3%
Subordinated bonds reimbursable - - - - -
with shares (TSDDRA) 300 300 2,0%
Bilateral loans 260 27 33 200 - - 4,3%
Bank overdraft and other facilities 274 232 14 6 3 3 16 3,4%
Commercial Paper - - - - - - - -
Accrued interests 46 46 - -
------- ------- --------- --------- --------- --------- --------
TOTAL 4,107 278 246 1,661 203 1,203 516
======= ======= ========= ========= ========= ========= ========
Future receivables securitised,
net (2) 265 265 - - - - - 5,4%
------- ------- --------- --------- --------- --------- --------
FINANCIAL DEBT 4,372 543 246 1,661 203 1,203 516
======= ======= ========= ========= ========= ========= ========
(1) including the effects of interest rate swaps associated with the underlying
debt (see Note 29 (b)).
(2) the reimbursement of which will come from the direct payment of the customer
to the investor to whom the Group sold the right to receive the payment.
AT 31 MARCH 2004
-----------------------------
AMOUNT
BEFORE AMOUNT AFTER
HEDGING HEDGING(1)
------------ --------------
(IN € MILLION)
Financial debt at fixed rate 1,055 735
Financial debt at floating rate(2) 3,317 3,637
------------ --------------
TOTAL 4,372 4,372
============ ==============
(1) after taking into account € 320 million of interest swaps converting the
financial debt at fixed rates into variable rates (see Note 29 (b))
(2) floating interest rates are based on EURIBOR and LIBOR
(C) ANALYSIS BY CURRENCY
AT 31 MARCH
----------------------------
2002 2003 2004
------ ------ ------
(IN € MILLION)
Euro 5,676 6,205 4,214
US dollar 125 22 112
Swiss franc - - 8
Mexican peso 59 - -
British Pound 24 3 12
Other currencies 151 101 26
------ ------ ------
TOTAL 6,035 6,331 4,372
====== ====== =======
NOTE 23 - ACCRUED CONTRACT COSTS AND OTHER PAYABLES
AT 31 MARCH
----------------------------
2002 2003 2004
------ ------ ------
(IN € MILLION)
Accrued contract cost (contract completion) 2,725 2,822 2,229
Staff and associated costs 910 888 694
Income taxes 158 192 195
Other taxes 239 254 291
Others 506 590 489
------ ------ ------
ACCRUED CONTRACT COSTS AND OTHER PAYABLES 4,538 4,746 3,898
====== ====== ======
NOTE 24 - QUEEN MARY II FINANCING
In the year ended 31 March 2003 the Group's marine subsidiary entered into a
construction finance contract in respect of one ship delivered in December 2003.
Under the terms of this contract finance was made available against commitments
to suppliers and to work in progress. The amounts financed were secured against
the ship involved and the future receivable was collaterised by way of a
guarantee of the prefinancement.
Cash received was firstly been applied against amounts included in trade
receivables then against work in progress and where commitments made did not
become work in progress cash was shown as part of customer deposits and
advances.
At 31 March 2003 cash received on this pre-financing was € 453 million, of which
€ 434 million was applied and the remaining balance of € 19 million included in
customer deposits and advances.
At 31 March 2004, this financing is fully repaid.
NOTE 25 - FINANCING ARRANGEMENTS
(A) SPECIAL PURPOSE LEASING ENTITIES
At 31 March 2004, the Group has interests in eight special purpose leasing
entities relating to seven cruise-ships and sixty locomotives. Because the Group
has no shares in these entities, they are not consolidated. Four special purpose
entities are active at 31 March 2004, the four others being dormant.
During the year ended 31 March 2002 the leasing arrangements of four special
purpose leasing entities owning four cruise-ships were re-organised following
the bankruptcy of Renaissance Cruises which went into Chapter 11 bankruptcy
proceedings in September 2001 and for which the Group had previously built and
delivered eight cruise-ships.
The four cruise-ships owned by four special purpose leasing entities which were
afterwards put into liquidation were subsequently sold to separate subsidiaries
of Cruiseinvest L.L.C, a subsidiary of Cruiseinvest (Jersey) Ltd, an entity in
which the Group has no shares.
Consequently, at 31 March 2003 and 2004, the Group has four ongoing leasing
arrangements, three relating to Marine Sector and one relating to Transport
Sector.
The summarised balance sheets is as follows :
AT 31 MARCH
----------------------------
2002 2003 2004
------ ------ ------
ASSETS (IN € MILLION)
Fixed assets, net 88 85 118
Long-term receivables, net (*) 923 770 677
Advance payments 10 10 10
Other assets 43 41 29
------ ------ ------
TOTAL 1,064 906 834
====== ====== ======
LIABILITIES
Bank borrowings (1) 634 510 602
Alstom borrowings (2) 270 266 115
Customers retentions 160 130 117
------ ------ ------
TOTAL 1,064 906 834
====== ====== ======
(*) Long-term receivables, net are presented net of unearned income that amounts
to € 552 million, € 457 million and € 366 million at 31 March 2002, 2003 and
2004 respectively.
The decrease of total balance sheet in fiscal year 2003 and 2004 is mainly due
to the appreciation of Euro against US dollar during the periods.
(1) Bank borrowings
Marine
Borrowing of one entity totalling € 123 million, € 111 million and € 96 million
at 31 March 2002, 2003 and 2004, respectively is guaranteed by the Group. In the
event of the guarantee of repayment of borrowings being called, the Group's
position is secured on the underlying assets of the entity. The Group's exposure
is disclosed in Note 27 (a) (2) "vendor financing".
Borrowings of the two other entities of € 224 million, € 147 million and € 263
million at 31 March 2002, 2003 and 2004, respectively are not guaranteed by the
Group which consequently has no exposure in respect of these borrowings.
Transport
Borrowings of the entity involving sixty locomotives totalling € 287 million, €
252 million and € 243 million at 31 March 2002, 2003 and 2004, respectively are
guaranteed by a Western European state with no recourse to the members of the
entity in case of default. The Group has no exposure in respect of these
borrowings.
(2) Alstom borrowings
Marine
Two leasing entities are also directly financed by the Group for an amount of €
270 million, € 223 million and € 48 million at 31 March 2002, 2003 and 2004,
respectively, that will increase to a maximum of approximately € 49 million (USD
60 million) in 2005. The decrease is due to the appreciation of Euro against US
dollars during the fiscal year 2003 and 2004 and the repayment of part of the
financing granted for an amount of approximately € 180 million in fiscal year
2004.
In addition, at 31 March 2004, a loan of € 17 million has been granted to the
other leasing entity. This financing is secured by ship mortgages. The Group's
exposure is disclosed in Note 27 (a) (2) "vendor financing".
Transport
The entity involving sixty locomotives is also directly financed by the Group
for an amount of € 43 million and € 50 million at 31 March 2003 and 2004,
respectively, that will increase to a maximum of approximately € 61 million in
2009. This financing is guaranteed by a Western European state. The Group has no
exposure in respect of these borrowings.
As a consequence, at 31 March 2003 and 2004, the Group's vendor financing
exposure in respect of these entities is € 351 million and € 162 million,
respectively (see Note 27 (a) (2) "vendor financing").
The summarised income statement is as follows:
YEAR ENDED 31 MARCH
----------------------------
2002 2003 2004
------ ------ ------
(IN € MILLION)
Lease income 58 63 58
Financial expenses (69) (60) (54)
Other income (expenses) 11 (3) (4)
------ ------ ------
NET INCOME (LOSS) - - -
====== ====== ======
Such arrangements are structured in such a way that cumulative results of each
special purpose leasing entity equal zero at the end of each arrangement,
interest expenses being compensated by leasing revenues. As a consequence,
interim net income (loss) is put to zero by the recording of a corresponding
liability (asset) to reflect the substance of the transactions.
(B) CRUISEINVEST
The ultimate owner of Cruiseinvest (Jersey) Ltd, a company, incorporated on
November 12, 2001, is a Jersey charitable trust. The main assets of this
structure through subsidiaries of Cruiseinvest LLC are six cruise-ships
initially delivered to Renaissance, the ownership of which was reorganised
following the bankruptcy of Renaissance Cruises, including the four cruise-ships
referred to in Note 25(a), and acquired after a sealed bid auction process.
The summarised condensed balance sheets is as follows:
AT 31 MARCH
-------------------------------------------
2002 (*) 2003 (**) 2004 (**)
--------- ---------- ---------
(IN € MILLION)
Cruise ships at cost, net 1,026 907 781
Other assets 26 6 6
--------- ---------- ---------
TOTAL ASSETS 1,052 913 787
========= ========== ========-
Retained earnings (including Cumulative Translation Adjustments) - 7 (67)
Net income (loss) - (85) (63)
--------- ---------- ---------
NET EQUITY - (78) (130)
Bank borrowings (1) & (***) 857 804 718
Alstom limited recourse notes (2) & (***) 195 169 159
Alstom credit lines (3) & (***) - 15 35
Other payables - 3 5
--------- ---------- ---------
TOTAL LIABILITIES 1,052 913 787
========= ========== ========-
(*) Unaudited, based on data provided by Cruiseinvest at 31 December 2001.
(**) Based on financial statement information provided by Cruiseinvest prepared
in accordance with International Financial Reporting Standards.
Cuiseinvest's independent auditors have indicated a likely impairment in
the carrying value of the vessels which the Group has considered in
determining its vendor financing provision (see Note 27 (a) (2) "Vendor
Financing").
(***) Including interests due and accrued.
(1) The Group guaranteed some of the financing arrangements up to US $173
million at 31 March 2002 and 2003 and US $156 million at 31 March 2004 (€
197 million at 31 March 2002 , € 159 million at 31 March 2003 and € 128
million at 31 March 2004) of which US $84 million (€ 96 million at 31 March
2002, € 77 million at 31 March 2003 and € 69 million at 31 March 2004) are
supported by a cash deposit.
(2) The Group purchased US $170 million (€ 195 million at 31 March 2002 , € 156
million at 31 March 2003 and € 139 million at 31 March 2004) of subordinated
limited recourse notes issued by Cruiseinvest (Jersey) Ltd. These
subordinated limited recourse notes are composed of a series of five notes
bearing interest at 6% per annum payable half yearly in arrears, and
maturing in December 2011. The right of the Group as note-holder is limited
to amounts that shall become payable up to the value of the notes. Related
interest due and accrued amounted to € 13 million at 31 March 2003 and € 20
million at 31 March 2004.
(3) The Group provided Cruiseinvest LLC with a € 40 million line of credit, of
which € 15 million and € 16 million was drawn down at 31 March 2003 and
2004, respectively. Additional loans were granted by the Group at 31 March
2004 for an amounts of € 16 million to Cruiseinvest Jersey Ltd subsidiaries.
Related interest due and accrued amounted to € 3 million at 31 March 2004.
The decrease of total balance sheet in fiscal years 2003 and 2004 is mainly due
to the appreciation of Euro against US dollar during the period.
At 31 March 2003, the Group's vendor financing exposure in respect of
Cruiseinvest was € 368 million, corresponding to the limited recourse note
including interest of € 169 million, the total commitment concerning the line of
credit of € 40 million and € 159 million of guarantees given on borrowings (see
Note 27 (a) (2) "Vendor financing").
At 31 March 2004, the Group's vendor financing exposure in respect of
Cruiseinvest is € 323 million, corresponding to the limited recourse note of €
139 million, excluding interest, the total commitment concerning the line of
credit of € 40 million, € 128 million of guarantees given on borrowings and
loans to Cruiseinvest subsidiaries of € 16 million, excluding interest (see Note
27 (a) (2) "Vendor financing").
The summarised income statement of Cruiseinvest is as follows:
YEAR ENDED 31 MARCH
-----------------------
2003 2004
------ ------
(IN € MILLION)
Lease income 5 28
Operating expenses (19) (31)
Depreciation expense (35) (28)
------ ------
OPERATING LOSS (49) (31)
Financial expenses (36) (32)
------ ------
NET INCOME (LOSS) (85) (63)
====== ======
The Article 133 of the Loi de Sécurité Financière suppressed the obligation to
hold shares for consolidation of controlled entities. As a consequence,
remaining entities that the Group will control without owning share will be
consolidated next fiscal year.
NOTE 26 - SECTOR AND GEOGRAPHIC DATA
A) SECTOR DATA
The Group is managed through Sectors of activity and has determined its
reportable segments accordingly.
Starting from 1 April 2003, the Group is organised in seven sectors:
The Former Power sector has been reorganised into three new sectors. Starting
from 1st April 2003, the former Gas Turbine and Steam Power Plant segments have
been merged into Power Turbo-systems, the Boiler & Environment and Hydro segment
have been merged into Power Environment, the Customer Service segment has been
renamed Power Service.
o POWER TURBO-SYSTEMS SECTOR
Power Turbo-Systems provides steam turbines, generators and power plant
engineering and construction and mid-range gas turbines.
o POWER ENVIRONMENT SECTOR
Power Environment focuses on emissions control equipment in the power
generation, petrochemical and industrial markets; demand for upgrades and
modernisation of existing power plants; hydro power plant refurbishment;
small-scale hydro plants; and large-scale irrigation projects.
o POWER SERVICE SECTOR
Power Service promotes the service activities relating to the Power Turbo
Systems Sector and the Power Environment Sector and services to customers in all
geographic markets. The Segment supplies the following products and services:
- portfolio of services from spare parts and field services to full operation
and maintenance packages;
- refurbishment and modernisation of existing plants;
- technical consultancy services;
- tailor-made services and "value packages" (integrated solutions designed to
achieve improved plant availability and reliability; improved plant
efficiency and capacity; lower production costs and enhanced environmental
compatability); and
- new service product development.
o TRANSPORT SECTOR
Transport offers equipment, systems, and customer support for rail
transportation including passenger trains, locomotives, signalling equipment,
rail components and service;
o MARINE SECTOR
Marine designs and manufactures cruise and other speciality ships.
o TRANSMISSION & DISTRIBUTION SECTOR
The Transmission & Distribution Sector offers equipment and customer support for
the transmission and distribution of electrical energy.
In early January 2004, the closing of the sale of the T&D Sector was announced.
T&D Sector ceased to be consolidated with effect from 31 December 2003,
excluding insignificant businesses that are still part of the Group's scope at
31 March 2004.
o POWER CONVERSION
Power Conversion provides solutions for manufacturing processes and supplies
high-performance products including motors, generators, propulsion systems for
Marine and drives for a variety of industrial applications.
The composition of the Sectors may vary slightly from time to time. As part of
any change in the composition of its sectors, Group management may also modify
the manner in which it evaluates and measures profitability. It evaluates
internally their performance on Operating income and Free Cash Flow.
Some units, not material to the sector presentation, have been transferred
between sectors. The revised segment composition has not been reflected on a
retroactive basis as the Group determined it was not practicable to do so.
ORDERS RECEIVED YEAR ENDED 31 MARCH
----------------------------------------------------
2002 2003 2004
------------- --------------- ---------------
(IN € MILLION)
Power Environment n/a 2,583 2,644
Power Turbo Systems n/a 1,821 2,463
Power Service n/a 2,934 3,023
Power Industrial Turbines (1) n/a 1,265 320
8,603 8,450
--------------------------------------- ------------- --------------- ---------------
Total Power 11,033
Transport 6,154 6,412 4,709
Marine 462 163 381
Transmission & Distribution (2) 3,210 3,198 2,231
Power Conversion 667 533 434
Contracting (3) 909 - -
Corporate & others (4) 251 214 295
------------- --------------- ---------------
TOTAL 22,686 19,123 16,500
============= =============== ===============
SALES YEAR ENDED 31 MARCH
----------------------------------------------------
2002 2003 2004
------------- --------------- ---------------
(IN € MILLION)
Power Environment n/a 3,098 2,678
Power Turbo Systems n/a 3,857 2,381
Power Service n/a 2,678 2,747
Power Industrial Turbines (1) n/a 1,268 210
--------------------------------------- ------------- --------------- ---------------
Total Power 12,976 10,901 8,016
4,413 5,072 4,862
Transport
Marine 1,240 1,568 997
Transmission & Distribution (2) 3,164 3,082 2,073
Power Conversion 650 523 499
Contracting (3) 759 - -
Corporate & others (4) 251 205 241
------------- --------------- ---------------
TOTAL 23,453 21,351 16,688
============= =============== ===============
OPERATING INCOME YEAR ENDED 31 MARCH
----------------------------------------------------
2002 2003 2004
------------- --------------- ---------------
(IN € MILLION)
Power Environment n/a 224 (7)
Power Turbo Systems n/a (1,399) (246)
Power Service n/a 403 417
Power Industrial Turbines (1) n/a 82 14
---------------------------------------- ------------- --------------- ---------------
Total Power 572 (690) 178
Transport 101 (24) 64
Marine 47 24 (19)
Transmission & Distribution (2) 203 212 121
Power Conversion 23 15 15
Contracting (3) 30 - -
Corporate & others (4) (35) (44) (59)
------------- --------------- ---------------
TOTAL 941 (507) 300
============= =============== ===============
EBIT YEAR ENDED 31 MARCH
----------------------------------------------------
2002 2003 2004
------------- --------------- ---------------
(IN € MILLION)
Power Environment n/a 107 (180)
Power Turbo Systems n/a (1,527) (461)
Power Service n/a 304 227
Power Industrial Turbines (1) n/a 53 7
--------------------------------------- ------------- --------------- ---------------
Total Power 271 (1,063) (407)
Transport 83 (113) (189)
Marine 32 12 (40)
Transmission & Distribution (2) 140 103 36
Power Conversion (18) (22) (19)
Contracting (3) 28 - -
Corporate & others (4) (49) (46) (252)
------------- --------------- ---------------
TOTAL 487 (1,129) (871)
============= =============== ===============
CAPITAL EMPLOYED (*) YEAR ENDED 31 MARCH
----------------------------------------------------
2002 2003 2004
------------- --------------- ---------------
(IN € MILLION)
Power Environment n/a n/a 733
Power Turbo Systems n/a n/a (1,232)
Power Service n/a n/a 1,921
Power Industrial Turbines (1) n/a n/a -
---------------------------------------- ------------- --------------- ---------------
Total Power 3,012 2,383 1,422
Transport 1,041 738 360
Marine 100 (343) (580)
Transmission & Distribution (2) 1,044 963 -
Power Conversion - - 25
Corporate & others (4) 1,491 1,208 1,333
------------- --------------- ---------------
TOTAL 6,688 4,949 2,560
============= =============== ===============
(*) Capital employed is defined as the closing position of the total of
tangible, intangible and other fixed assets net, current assets (excluding net
amount of securitisation of existing receivables) less current liabilities and
provisions for risks and charges.
(1) Disposed of in a two step process in April 2003 and August 2003.
(2) Disposed of in January 2004.
(3) Disposed of in July 2001.
(4) Corporate & others include all units accounting for Corporate costs, the
International Network and the overseas entities in Australia, New Zealand, South
Africa (before disposal) and India, that are not allocated to Sectors.
B) GEOGRAPHIC DATA
SALES BY COUNTRY OF DESTINATION YEAR ENDED 31 MARCH
------------------------------------------
2002 2003 2004
-------- -------- --------
(IN € MILLION)
Europe 9,313 9,219 8,002
North America 6,255 4,719 3,001
South & Central America 1,439 1,534 857
Asia / Pacific 4,521 3,727 3,401
Middle East / Africa 1,925 2,152 1,427
-------- -------- --------
TOTAL 23,453 21,351 16,688
======== ======== ========
SALES BY COUNTRY OF ORIGIN YEAR ENDED 31 MARCH
------------------------------------------
2002 2003 2004
-------- -------- --------
(IN € MILLION)
Europe 14,755 14,762 12,204
North America 5,623 3,935 2,519
South & Central America 683 601 415
Asia / Pacific (*) 2,050 1,833 1,416
Middle East / Africa (*) 342 220 134
-------- -------- --------
TOTAL 23,453 21,351 16,688
======== ======== ========
(*) India and Pakistan, included in Middle East at 31 March 2002, are included
in Asia / Pacific since April 2002. The figures at 31 March 2002 have been
restated accordingly.
Net sales of € 3,258 million (13.9%), € 3,300 million (15.5%) and € 2,650
million (15.9%) in the years ended 31 March 2002, 2003 and 2004 respectively,
are obtained from a group of state owned companies, independently managed, the
largest of which represented 2.4%, 4.2% and 3.9% in the years ended 31 March
2002, 2003 and 2004 respectively.
No client represented more than 10% of net sales in any of the three years.
NOTE 27 - OFF BALANCE SHEET COMMITMENTS AND OTHER OBLIGATIONS
A) OFF BALANCE SHEET COMMITMENTS
AT 31 MARCH
----------------------------
2002 2003 2004
------ ------ ------
(IN € MILLION)
Guarantees related to contracts (1) 11,451 9,465 8,169
Guarantees related to Vendor financing (2) 932 749 640
Discounted notes receivable 18 11 6
Commitments to purchase fixed assets 8 7 -
Other guarantees 58 94 43
------ ------ ------
TOTAL 12,467 10,326 8,858
====== ====== ======
(1) GUARANTEES RELATED TO CONTRACTS
In accordance with industry practice guarantees of performance under contracts
with customers and under offers on tenders are given.
Such guarantees can, in the normal course, extend from the tender period until
the final acceptance by the customer, and the end of the warranty period and may
include guarantees on project completion, of contract specific defined
performance criteria or plant availability.
The guarantees are provided by banks or surety companies by way of performance
bonds, surety bonds and letters of credit and are normally for defined amounts
and periods.
The Group provides a counter indemnity to the bank or surety company.
The projects for which the guarantees are given are regularly reviewed by
management and when it becomes probable that payments pursuant to performance
guarantees will be required to be made accruals are recorded in the Consolidated
Financial Statement at that time.
Guarantees given by parent or group companies relating to liabilities included
in the consolidated accounts are not included.
In September 2003, the Group entered into a revised financing agreement with its
banks and the French Republic. This agreement included a new bonding facility of
€ 3,500 million, 65% of which was counter guaranteed by the French Republic.
On the basis of current management estimates, this bonding facility is expected
to be fully used during the summer 2004.
The Group is currently negotiating with its main banks for an extension of this
bonding facility in order to be able to provide contract related guarantees to
its customers.
(2) VENDOR FINANCING
The Group has provided financial support, referred to as vendor financing, to
financial institutions and granted financing to certain purchasers of its
cruise-ships for ship-building contracts signed up to fiscal year 1999 and other
equipment. The total "vendor financing" was € 1, 493 million, € 1,259 million
and € 969 million at 31 March 2002,2003 and 2004, respectively.
The table below sets forth the breakdown of the outstanding vendor financing by
Sector at 31 March 2003 and 31 March 2004 :
AT 31 MARCH 2003 AT 31 MARCH 2004
-------------------------------- ---------------------------------
BALANCE
BALANCE OFF BALANCE SHEET OFF BALANCE
SHEET (1) SHEET(2) TOTAL (1) & (3) SHEET (2) TOTAL
--------- ----------- ------- --------- ----------- -------
(IN € MILLION)
MARINE 510 423 933 329 314 643
CRUISEINVEST/ RENAISSANCE 261 107 368 240 83 323
FESTIVAL 26 208 234 41 144 185
OTHERS 223 108 331 48 87 135
TRANSPORT - 317 317 - 321 321
EUROPEAN METRO OPERATOR - 257 257 - 266 266
OTHERS - 60 60 - 55 55
OTHER SECTORS - 9 9 - 5 5
--------- ----------- ------- --------- ----------- -------
TOTAL 510 749 1,259 329 640 969
========= =========== ======= ========= =========== =======
(1) Balance sheets items are included in « other fixed assets» (Note 11)
(2) Off-balance sheet figures correspond to the total guarantees and
commitments, net of related cash deposits, which are shown as balance-sheet
items.
(3) At 31 March 2004, outstanding vendor financing did not include interest due
and accrued (€ 23 million) which is not recorded until it is reasonably
certain to be received.
MARINE
Cruiseinvest / Renaissance
The "vendor financing" granted to Cruiseinvest relating to Renaissance Cruises
amounted to € 432 million, € 368 million and € 323 million at 31 March 2002,
2003 and 2004, respectively. The decrease is mainly due to the appreciation of
Euro against US dollars during the fiscal years 2003 and 2004. See Note 25 (b).
Festival
The Group guarantees the financing of one special leasing entity relating to one
cruise-ship for an amount of € 123 million, € 111 million and € 96 million at 31
March 2002, 2003 and 2004 respectively, and finances the entity for an amount of
€ 17 million at 31 March 2004. See Note 25 (a).
In addition, the Group has guaranteed the financing arrangements of two cruise
ships delivered to Festival for an amount of € 93 million, € 97 million and € 48
million at 31 March 2002, 2003 and 2004 respectively, of which € 26 million and
€ 24 million are supported by a cash deposit at 31 March 2003 and 2004. The
decrease is due to the release by a French state owned company of the counter
guarantee obtained from the Group on delivery of one cruise-ship.
Other
The Group finances two special leasing entities relating to two cruise-ships for
an amount of € 270 million, € 223 million and € 48 million at 31 March 2002,
2003 and 2004 respectively. The maximum amount is of € 286 million, € 240
million and € 49 million at 31 March 2002, 2003 and 2004, respectively. See Note
25 (a).
The Group has guaranteed the financing arrangements of one cruise-ship and two
high speed ferries delivered to three customers for an amount of € 108 million,
€ 91 million and € 86 million at 31 March 2002, 2003 and 2004 respectively. The
decrease is due to the appreciation of Euro against US dollars during the fiscal
year 2003 and 2004
Based on current known facts and circumstances, cash flow forecasts based on the
existing leasing arrangements and on assumptions as to leases renewal and ships
sales for Cruiseinvest and other cruise-ships, the Group considers that the
provision in respect of Marine Vendor financing of € 140 million at 31 March
2004 (€ 140 million at 31 March 2003 and € 144 million at 31 March 2002) remains
adequate to cover the probable risk.
TRANSPORT
Guarantees given as part of vendor financing arrangements in Transport Sector
amount to € 416 million, € 317 million and € 321 million at 31 March 2002, 2003
and 2004, respectively.
Included in this amount are guarantees given as part of a leasing scheme
involving a major European metro operator as described in the section (b) (1) of
this Note. If the metro operator decides in year 2017 not to extend the initial
period the Group has guaranteed to the lessors that the value of the trains and
associated equipment at the option date should not be less than GBP 177 million
(€ 289 million, € 257 million and € 266 million at 31 March 2002, 2003 and 2004,
respectively).
OTHER SECTORS
Other guarantees totalling € 33 million, € 9 million and € 5 million at 31 March
2002, 2003 and 2004 respectively have been given. There has been no default by
any of the concerned entities under the underlying agreements.
B) CAPITAL AND OPERATING LEASE OBLIGATIONS
TOTAL WITHIN 1 YEAR 1 TO 5 YEARS OVER 5 YEARS
------- ------------- ------------ ------------
(IN € MILLION)
Long term rental (1) 667 6 48 613
Capital leases obligation (2) 278 31 93 154
Operating leases (3) 534 90 225 219
------- ------------- ------------ ------------
AT 31 MARCH 2003 1,479 127 366 986
Long term rental (1) 683 11 75 597
Capital leases obligation (2) 237 37 94 106
Operating leases (3) 430 62 181 187
------- ------------- ------------ ------------
AT 31 MARCH 2004 1,350 110 350 890
======= ============= ============ ============
(1) Long term rental
Pursuant to a contract signed in 1995 with a major European metro operator, the
Group has sold 103 trains and associated equipment to two leasing entities.
These entities have entered into an agreement by which the Group leases back the
trains and associated equipment from the lessors for a period of 30 years. The
trains are made available for use by the metro operator for an initial period of
20 years, extendible at the option of the operator for a further ten year
period. The trains are being maintained and serviced by the Group.
These commitments are in respect of the full lease period and are covered by
payments due to the Group from the metro operator.
If this lease was capitalised it would increase long-term assets and long-term
debt by € 757 million, € 667 million and € 683 million at 31 March 2002, 2003
and 2004 respectively.
(2) Capital leases
If capital leases had been capitalised, it would have the following effects on
the consolidated balance sheet :
AT 31 MARCH AT 31 MARCH AT 31 MARCH
2002 2003 2004
----------- ----------- ------------
(IN € MILLION)
Increase of long term assets (property plant and equipment) 112 212 205
Increase of long term financial debt 119 216 200
----------- ----------- ------------
INCREASE (DECREASE) OF SHAREHOLDER'S EQUITY (7) (4) 5
=========== =========== ============
(3) Operating leases
A number of these operating leases have renewal options. Rent expense was € 87
million in the year ended 31 March 2004.
No material commitments are omitted in this note in accordance with current
accounting rules.
NOTE 28 - CONTINGENCIES
- LITIGATION
The Group is engaged in several legal proceedings, mostly contract disputes that
have arisen in the normal course of business. Contract disputes, often involving
claims for contract delays or additional work, are common in the areas in which
the Group operates, particularly for large, long-term projects. In some cases,
the amounts claimed against the Group, sometimes jointly with its consortium
partners, in these proceedings and disputes are significant, ranging in one case
up to approximately € 500 million (USD 611 million), although the Group
estimates its exposure in this case and a number of others to be negligible.
Some proceedings against the Group are without a specified amount. Amounts
retained in respect of litigation, considered as best estimates of probable
liabilities are included in provisions for risks and charges and accrued
contract costs. Actual costs incurred may exceed the amount of provisions for
litigation because of a number of factors including the inherent uncertainties
of the outcome of litigation.
- CLAIM FROM ROYAL CARIBBEAN CRUISES LIMITED ("RCCL")
In August 2003, RCCL and various RCCL group companies filed a lawsuit in
Florida, USA against various Rolls Royce group companies and against various
ALSTOM group companies claiming damages for a global amount of approximately €
245 million (USD 300 million) for alleged misrepresentations in the selling of
pods, and negligence in the design and manufacture of pods. The Group and Rolls
Royce are strongly contesting this claim.
- ASBESTOS
The Group is subject to regulations, including in France, the US and the UK,
regarding the control and removal of asbestos-containing material and
identification of potential exposure of it's employees to asbestos. It has been
the Group's policy for many years to abandon definitively the use of products
containing asbestos by all of it's operating units world-wide and to promote the
application of this principle to all of the Group's suppliers, including in
those countries where the use of asbestos is permitted. In the past, however,
the Group has used and sold some products containing asbestos, particularly in
France in the Group's Marine Sector and to a lesser extent in the Group's other
Sectors.
As of 30 April 2004, in France, the Group is aware of approximately 2,090
asbestos sickness related declarations accepted by the French Social Security
authorities in France concerning the Group's employees, former employees or
third parties, arising out of the Group's activities in France. All of such
cases are treated under the French Social Security system which pays the medical
and other costs of those who are sick and which pays a lump sum indemnity. Out
of these 2,090 declarations, the Group is aware of approximately 207
asbestos-related cases in France from employees or former employees. They have
instituted judicial proceedings against certain of the Group's subsidiaries with
the aim of obtaining a court decision holding these subsidiaries liable for an
inexcusable fault (FAUTE INEXCUSABLE) which would allow them to obtain a
supplementary compensation above the payments made by the French Social Security
funds of related medical costs. All decisions rendered as of today by the Social
Security Affairs Courts in proceedings involving the Group's subsidiaries have
found these subsidiaries liable on the grounds of inexcusable fault. Decisions
of the Courts of Appeal have all confirmed these findings of inexcusable fault.
In March 2004, the French Supreme Court (COUR DE CASSATION) rendered its first
decisions on the appeals lodged by a subsidiary of the Group's Marine Sector.
The French Supreme Court has confirmed the inexcusable fault, but has reversed
the Court of Appeal's decisions which had ordered the Group's subsidiary to pay
damages as the damages are to be directly compensated by the Social Security
funds (CAISSE PRIMAIRE D'ASSURANCE MALADIE). In May 2004, the French Supreme
Court has confirmed the finding of inexcusable fault in six decisions rendered
in relation to cases in the Group's Marine Sector, while confirming that the
damages were to be definitively borne by the Social Security funds . In the
current cases within the Group's Marine Sector, the Social Security authorities
have not in fact attempted to charge the Group subsidiary the financial
consequences of occupational disease, including those arising out of the
inexcusable fault pursuant to article 2 paragraph 2 of the decree of 16 October
1995. In the Group's other Sectors, the Group estimates that most of the Group's
current cases will be governed by the same terms, pursuant to the
above-mentioned decree.
The Group therefore believes that the above-mentioned lawsuits in France will
not have material adverse consequences on the Group financial position. The
compensation for most of the current 207 proceedings has been and is expected to
continue to be borne by the general French Social Security (medical) funds.
Based on applicable legislation and current case law, the Group also believes
that the financial consequences of any subrogatory action of the publicly funded
Indemnification Fund for Asbestos Victims (FIVA), created in 2001, in relation
to proceedings referred to above, will be borne by the general French Social
Security (medical) funds. The Group also believes that those cases where
compensation may not be definitively borne by the general French Social Security
(medical) funds or by the FIVA represent an immaterial exposure for which the
Group has not made any provisions.
In addition to the foregoing, in the United States, as of 15 May 2004, the Group
was subject to approximately 155 asbestos-related personal injury lawsuits which
have their origin solely in the Company's purchase of some of ABB's power
generation business, for which the Group is indemnified by ABB. The Group is
also currently subject to two class action lawsuits in the United States
asserting fraudulent conveyance claims against various ALSTOM and ABB entities
in relation to Combustion Engineering, Inc. ("CE"), for which the Group has
asserted indemnification against ABB. CE is a United States subsidiary of ABB,
and its power activities were part of the power generation business purchased by
the Group from ABB. In January 2003, CE filed a "pre-packaged" plan of
reorganisation in United States bankruptcy court. This plan was confirmed by the
bankruptcy court and the United States federal district court. The plan has been
appealed and has not yet become effective; consummation of the plan is subject
to certain other conditions specified therein. In addition to its protection
under the ABB indemnity, ALSTOM believes that under the terms of the plan it
would be protected against pending and future personal injury asbestos claims,
or fraudulent conveyance claims, arising out of the past operations of CE.
As of 15 May 2004, the Group was subject to approximately 32 other
asbestos-related personal injury lawsuits in the United States involving
approximately 507 claimants that, in whole or in part, assert claims against
ALSTOM which are not related to ALSTOM's purchase of some of ABB's power
generation business or as to which the complaint does not provide details
sufficient to permit the Group to determine whether the ABB indemnity applies.
Most of these lawsuits are in the preliminary stages of the litigation process
and they each involve multiple defendants. The allegations in these lawsuits are
often very general and difficult to evaluate at preliminary stages in the
litigation process. In those cases where ALSTOM's defence has not been assumed
by a third party and meaningful evaluation is practicable, the Group believes
that it has valid defences and, with respect to a number of lawsuits, the Group
is asserting rights to indemnification against a third party.
The Group has not in recent years suffered any adverse judgement, or made any
settlement payment, in respect of any US personal injury asbestos claim. Between
31 October 2002 and 15 May 2004, a total of 171 cases involving approximately
17,724 claimants were voluntarily dismissed by plaintiffs, typically without
prejudice (which is to say the plaintiffs may refile these cases in the future).
For purposes of the foregoing discussion of U.S. asbestos-related cases, the
Group considers a claim to have been dismissed, and to no longer be pending
against it, if the plaintiffs' attorneys have executed a notice or stipulation
of dismissal or non-suit, or other similar document.
The Group is also subject to asbestos-related or other employee personal injury
related claims in other countries, including in the UK. As of 31 March 2004, the
Group is subject to approximately 150 asbestos related claims currently ongoing
in the UK. The Group retains provisions of €3 million in relation to these
claims.
While the outcome of the existing-asbestos-related cases described above is not
predictable, the Group believes that those cases will not have a material
adverse effect on it's financial condition. The Group can give no assurances
that asbestos-related cases against it will not grow in number or that those it
has at present, or may face in the future, may not have a material adverse
impact on it's financial condition.
- PRODUCT LIABILITY
The Group designs, manufactures, and sells several products of large individual
value that are used in major infrastructure projects. In this environment,
product-related defects have the potential to create liabilities that could be
material. If potential product defects become known, a technical assessment
occurs whereby products of the affected type are quantified and studied. If the
results of the study indicate that a product liability exists, provisions are
recorded. The Group believes that it has made adequate provisions to cover
currently known product-related liabilities, and regularly revises its estimates
using currently available information. Neither the Group nor any of its
businesses are aware of product-related liabilities, which would exceed the
amounts already recognised and believes it has provided sufficient amounts to
satisfy its litigation, environmental and product liability obligations to the
extent they can be estimated.
- SEC INVESTIGATION
The SEC is conducting a formal investigation, and the Group has conducted its
own internal review, into certain matters relating to ALSTOM Transportation Inc.
("ATI"), one of the Group's subsidiaries. These actions followed receipt of
anonymous letters alleging accounting improprieties on a railcar contract being
executed at ATI's New York facility. Following receipt of these letters, the
United States Federal Bureau of Investigation (the "FBI") also began an informal
inquiry. The Group has fully cooperated with the SEC and the FBI in this matter
and intends to continue to do so. The Group believes the FBI inquiry is
currently dormant.
- AMF INVESTIGATION
Senior officials of the Group have been interviewed by inspectors of the French
Autorite des Marches Financiers (the "AMF") in connection with the AMF's
investigation regarding public disclosures by the Group and trading of the
Group's shares since 31 December 2001. ALSTOM is cooperating fully with the AMF
in these inquiries.
- UNITED STATES PUTATIVE CLASS ACTION LAWSUITS
ALSTOM, certain of its subsidiary and certain of its current and former officers
and directors, have been named as defendants by shareholders in the United
States in a number of putative shareholder class action lawsuits filed on behalf
of various alleged classes of purchasers of American Depositary Receipts or
other ALSTOM securities between various dates beginning as of 17 November 1998.
These lawsuits which are now consolidated into one proceeding before the Federal
District Court of the Southern District of New York seek to allege violations of
United States federal securities laws, specifically Sections 10(b) and 20(a) of
the Securities Exchange Act of 1934, as amended, and Section 11 of the
Securities Act of 1933, as amended, on the basis of various allegations that
there were untrue statements of materials facts, and/or omissions to state
material facts necessary to make the statements made not misleading, in various
ALSTOM public communications regarding our business, operations and prospects,
causing the putative classes to purchase ALSTOM securities at artificially
inflated prices. The plaintiffs seek, among other things, class action
certification, compensatory damages in an unspecified amount, and an award of
costs and expenses, including counsel fees.
- ENVIRONMENTAL, HEALTH AND SAFETY
The Group is subject to a broad range of environmental laws and regulations in
each of the jurisdictions in which it operates. These laws and regulations
impose increasingly stringent environmental protection standards regarding,
among other things, air emissions, wastewater discharges, the use and handling
of hazardous waste or materials, waste disposal practices and the remediation of
environmental contamination. These standards expose the Group to the risk of
substantial environmental costs and liabilities, including liabilities
associated with divested assets and past activities. In most of the
jurisdictions in which operations take place, industrial activities are subject
to obtaining permits, licenses or/and authorisations, or to prior notification.
Most facilities must comply with these permits, licenses or authorisations and
are subject to regular administrative inspections.
Significant amounts are invested to ensure that activities are conducted in
order to reduce the risks of impacting the environment and capital expenditures
are regularly incurred in connection with environmental compliance requirements.
Although involved in the remediation of contamination of certain properties and
other sites, the Group believes that its facilities are in compliance with its
operating permits and that operations are generally in compliance with
environmental laws and regulations.
The outcome of environmental matters cannot be predicted with certainty and
there can be no assurance that the amounts provided will be adequate. In
addition, future developments, such as changes in law or environmental
conditions, could result in increased environmental costs and liabilities that
could have a material effect on the financial condition or results of
operations. To date, no significant liability has been asserted against us, and
compliance with environmental regulations has not had a material effect on the
results of operations.
- CLAIMS RELATING TO DISPOSALS
From time to time the Group disposes of certain businesses or business segments.
As is usual certain acquirers make claims against the Group as a result of price
adjustment mechanisms generally foreseen in the sale agreements. The Group has
received certain demands from the acquirer following the disposal of the T&D
Sector. Areva informed the Group on 11 May 2004 of an investigation commenced by
the European Commission with respect to alleged anti-competitive arrangements
among suppliers of gas-insulated switch gears, including the T&D Sector sold to
Areva. It is not possible to estimate the amount of any potential liability of
the Group with respect to this investigation, which is at an early stage. The
Group considers that there are no claims or demands outstanding and unprovided
that are capable of estimation and likely to have a material adverse impact on
the consolidated financial statements.
NOTE 29 - MARKET RELATED EXPOSURES
(A) CURRENCY RISK
Due to the international nature of its activities, numerous cash flows of the
Group are denominated in foreign currencies. The Group acquires financial
instruments with off balance sheet risk solely to hedge such exposure on either
anticipated transactions or firm commitments. The only instruments used are
exchange rate guarantees obtained through export insurance companies, forward
exchange contracts and options.
The Group may not, in specific circumstances, and as an exception to the policy
described above, fully hedge certain identified exposures or anticipate the
forthcoming risks on its operating transactions with management approval.
With respect to anticipated transactions:
o During the tender period, depending on the probability of obtaining the
project and market conditions, the Group generally hedges a portion of its
tenders using options or export insurance contracts when possible. The
guarantees granted by these contract become firm if and when the underlying
tender is accepted.
o Once the contract is signed, forward exchange contracts or currency swaps
are used to adjust the hedging position to the actual exposure during the
life of the contract (either as the only hedging instruments or as a
complement to existing export insurance contracts).
(B) INTEREST RATE RISK
The Group does not have a dynamic interest rate risk management policy. However,
it may enter into transactions in order to hedge its interest rate risk on a
case by case basis according to market opportunities, under the supervision of
the Executive Committee.
AT 31 MARCH
2004 ‹ 1 YEAR 1 - 5 YEARS › 5 YEARS
----------- --------- ------------ ----------
(IN € MILLION)
Financial assets at floating rate 1,864 1,636 72 156
Financial assets at fixed rate 371 101 - 270
Financial assets not bearing interests 91 7 34 50
----------- --------- ------------ ----------
FINANCIAL ASSETS 2,326 1,744 106 476
Financial debt at floating rate (3,316) (511) (2,605) (200)
Financial debt at fixed rate (1,056) (32) (708) (316)
----------- --------- ------------ ----------
FINANCIAL DEBT (4,372) (543) (3,313) (516)
Net position at floating rate before hedging (1,452) 1,125 (2,533) (44)
Net position at fixed rate before hedging (685) 69 (708) (46)
----------- --------- ------------ ----------
NET POSITION BEFORE HEDGING (2,137) 1,194 (3,241) (90)
Swap fixed to variable 320 - 320 -
-
Net position at floating rate after hedging (1,772) 1,125 (2,853) (44)
Net position at fixed rate after hedging (365) 69 (388) (46)
----------- --------- ------------ ----------
NET POSITION AFTER HEDGING (2,137) 1,194 (3,241) (90)
The net short term loan position at floating rate after hedging amounts to €
1,125 million. A 100 bps increase in the market rates would have decreased the
net interest expense by € 11 million, representing 4.1% of the net interest
expense for the year ended 31 March 2004.
(C) NOMINAL AND FAIR VALUE OF FINANCIAL INSTRUMENTS OUTSTANDING AT YEAR-END
NOMINAL VALUE OF FINANCIAL INSTRUMENTS
AT 31 MARCH 2004
-----------------------------------------------------------------
REMAINING AVERAGE
TERM FIXED RATE
TOTAL ‹ 1 YEAR 1-5 YEARS › 5 YEARS (*)
-------- -------- --------- --------- -----------
(IN € MILLION)
INTEREST RATE INSTRUMENTS:
Interest rate swaps - receive fixed (1) 374 21 353 - 5.1%
FOREIGN EXCHANGE INSTRUMENTS:
Currency swaps - currencies purchased (2) 2,728 2,705 23 -
Currency swaps - currencies sold (2) 4,708 4,511 197 -
Forward contracts - currencies purchased 922 691 231 -
Forward contracts - currencies sold 2,477 2,028 449 -
Insurance contracts - currencies purchased - - - -
Insurance contracts - currencies sold 161 148 13 -
Currency options - purchased 557 557 - -
Currency options - sold 522 522 - -
(1) At 31 March 2004, the outstanding interest rate swaps mainly relate to € 320
million receiving fixed rates hedging a portion of the € 650 million bond issue.
(2) the currency swaps include four swaps, two swaps -- currency purchased for a
notional amount of € 1,200 million and two swaps -- currency sold for a notional
amount of € 1,200 million , whose final pay-off are also related to Group's
share price. As a whole, these swaps do not create any currency position and
their future potential losses are capped.
AT 31 MARCH 2003
-----------------------------------------------------------------
REMAINING AVERAGE
TERM FIXED RATE
TOTAL ‹ 1 YEAR 1-5 YEARS › 5 YEARS (*)
-------- -------- --------- --------- -----------
(IN € MILLION)
INTEREST RATE INSTRUMENTS:
Interest rate swaps - receive fixed (1) 649 248 401 - 4.4%
FOREIGN EXCHANGE INSTRUMENTS:
Currency swaps - currencies purchased (1) 2,906 1,658 1,249 -
Currency swaps - currencies sold (1) 6,898 4,867 2,031 -
Forward contracts - currencies purchased 798 584 214 -
Forward contracts - currencies sold 2,708 1,646 895 168
Insurance contracts - currencies purchased 96 78 18 -
Insurance contracts - currencies sold - - - -
Currency options - purchased 591 568 23 -
Currency options - sold 564 544 20 -
(*) FLOATING RATES ARE GENERALLY BASED ON EURIBOR/LIBOR.
(1) At 31 March 2003, the main interest rate swaps outstanding are :
- € 353 million receiving fixed rates, € 320 million hedging a portion of the
€ 650 million bond issue and € 33 million hedging a bilateral loan.
- € 33 million receiving fixed rates with an effective starting date at 20
January 2004.
- € 200 million receiving fixed rates to optimise the short term liquidity
management.
(2) the currency swaps include four swaps, two swaps - currency purchased for a
notional amount of € 1,200 million and two swaps - currency sold for a
notional amount of € 1,200 million , whose final pay-off are also related
to Group's share price. As a whole, these swaps do not create any currency
position and their future potential losses are capped.
AT 31 MARCH 2002
-----------------------------------------------------------------
REMAINING AVERAGE
TERM FIXED RATE
TOTAL ‹ 1 YEAR 1-5 YEARS › 5 YEARS (*)
-------- -------- --------- --------- -----------
(IN € MILLION)
INTEREST RATE INSTRUMENTS:
Interest rate swaps - receive fixed 546 30 449 67 5.3%
Cap 2 - - 2
FOREIGN EXCHANGE INSTRUMENTS:
Currency swaps - currencies purchased 1,581 1,550 31 -
Currency swaps - currencies sold 7,143 6,243 898 2
Forward contracts - currencies purchased 971 856 115 -
Forward contracts - currencies sold 5,172 3,443 1,521 208
Insurance contracts - currencies purchased - - - -
Insurance contracts - currencies sold 227 184 43 -
Currency options - purchased 854 854 - -
Currency options - sold 547 547 - -
(*) FLOATING RATES ARE GENERALLY BASED ON EURIBOR/LIBOR.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Publicly traded equity and marketable debt securities are disclosed at market
prices. The fair values of all financial instruments other than specified items
such as lease contracts, controlled businesses and Equity method investees and
other investments and employers' pension and benefit obligations have been
estimated using various valuation techniques, including the present value of
future cash flows. However, methods and assumptions followed to disclose data
presented herein are inherently judgmental and involve various limitations,
including the following:
- Fair values presented do not take into consideration the effects of future
interest rate and currency fluctuations,
- Estimates as at 31 March 2004 are not necessarily indicative of the amounts
that the Group would record upon further disposal/termination of the
financial instrument.
The use of different estimations, methodologies and assumptions may have a
material effect on the estimated fair value amounts. The methodologies used are
as follows:
LONG TERM LOANS, RETENTIONS, DEPOSITS AND OTHER FIXED ASSETS
The fair values of these financial instruments were determined by estimating
future cash flows on an item-by-item basis and discounting these future cash
flows using a risk free rate (Government bond yield).
CASH AND CASH EQUIVALENTS , BANK OVERDRAFTS, SHORT-TERM BORROWINGS,
The carrying amounts reflected in the consolidated balance sheet approximate
fair value due to the short-term nature of the instruments.
LONG-TERM DEBT
The fair value of the long term debt was determined by estimating future cash
flows on an item-by-item basis and discounting these future cash flows using the
market price when it relates to publicly traded instruments.
INTEREST RATE SWAPS, CURRENCY SWAPS, OPTIONS, AND FORWARD EXCHANGE CONTRACTS
The fair value of these instruments is the estimated amount that the Group would
receive or pay to settle the related agreements, valued upon relevant yield
curves and foreign exchange rates as of, 31 March 2002, 2003 and 2004.
The fair value of forward exchange contracts was computed by applying the
difference between the contract rate and the market forward rate at closing date
to the nominal amount.
Export insurance contracts related to tenders are insurance contracts that are
not marked to market. Export insurance contracts that hedge firm commitments are
considered as acting as derivatives and were marked to market for the purpose of
the disclosure.
The fair value of financial instruments outstanding is analysed as follows:
AT 31 MARCH 2002 AT 31 MARCH 2003 AT 31 MARCH 2004
------------------- ------------------- -------------------
CARRYING FAIR CARRYING FAIR CARRYING FAIR
VALUE VALUE VALUE VALUE VALUE VALUE
-------- ------- -------- ------- -------- -------
(IN € MILLION)
BALANCE SHEET
ASSETS
Long term loans, deposits and retentions 778 750 814 701 798 782
Other fixed assets 79 79 83 83 62 62
Short-term investments 331 333 142 143 39 39
Cash & cash equivalents 1,905 1,905 1,628 1,628 1,427 1,427
LIABILITIES
Financial debt 6,035 5,948 6,331 5,909 4,372 4,310
OFF BALANCE SHEET
Interest rate instruments:
Interest rate swaps - receive fixed - 5 - 39 - 18
Foreign exchange instruments
Currency swaps - currencies purchased - 16 - (178) - (127)
Currency swaps - currencies sold - (70) - 257 - 121
Forward contracts - currencies purchased - 38 - (30) - (58)
Forward contracts - currencies sold - (197) - 87 - 94
Insurance contracts - currencies purchased - - - (6) - -
Insurance contracts - currencies sold - 2 - - - (5)
Currency option contracts - purchased - 8 - 37 - 19
Currency option contracts - sold - (13) - (7) - (4)
The increase in fair value of forward contracts and currency swaps (currency
sold) and the decrease in fair value of forward contracts and currency swaps
(currency purchased) during the fiscal years ending 31 March 2003 and 2004 is
mainly due to the appreciation of the Euro against the US Dollar.
(D) CREDIT RISK
The Group hedges up to 90% of the credit risk on certain contracts using export
credit insurance contracts. The Group believes the risk of counterparty failure
to perform as contracted, which could have a significant impact on the Group's
financial statements or results of operations, is limited due to the generally
high credit rating of the counterparties.
(E) LIQUIDITY RISK
The analysis by maturity and interest rate of the Group's debt is set out in
Note 22 (b). Details of short-term liquidity are set out below.
After the implementation of the financing package renegotiated in September
2003, the Group's available liquidity for the coming year is as follows:
AT 31 MARCH
(IN € MILLION ) 2004
-----------
Available credit lines (see Note 22 (a)) (1) 783
Cash equivalents available at parent Company level (2) 532
Cash equivalents and Short Term investments at subsidiary level (2) 934
-----------
AVAILABLE LIQUIDITY 2,249
Financial debt to be reimbursed within one year (see Note 22) (3) (278)
Available credit line to be reimbursed within one year (420)
AVAILABLE LIQUIDITY FOR THE COMING YEAR 1,551
===========
(1) including €420 million of commercial paper available until January 2005.
(2) See Notes 17 & 18
(3) The reimbursement of securitisation of future receivables is excluded as
this occurs only when amounts are received from customers.
The Group's lines of credit as well as certain of its other financing agreements
contain covenants requiring it to maintain compliance with financial covenants
as disclosed in Note 22.
In addition, most of the financing agreement and outstanding debt securities
include cross-default and cross-acceleration provisions pursuant to which a
payment default, an acceleration, or a failure to respect financial covenants or
other undertakings, may result in the acceleration of all or a significant part
of the Group's debt and may consequently prevent it from drawing upon its credit
lines.
On the basis of the Consolidated Financial Statements as of 31 March 2004, the
Group would have failed to comply with the financial covenants "Consolidated net
worth" and "EBITDA" described in Note 22. In late April 2004, the Group obtained
an agreement from its lenders to suspend these covenants until 30 September 2004
and expects to negotiate new financial covenants before this date.
The Group's ability to maintain financing depends on its ability to renegotiate
covenants
NOTE 30 - PAYROLL, STAFF, EMPLOYEE PROFIT SHARING AND STOCK OPTIONS
YEAR ENDED 31 MARCH
---------------------------------------
(IN € MILLION EXCEPT NUMBER OF EMPLOYEES) 2002 2003 2004
-------- -------- --------
Total wages and salaries 4,499 3,919 3,274
Of which executive officers (*) 5 5 5
Social security payments and other benefits 1,236 1,032 866
Employee profit sharing 5 18 16
Staff of consolidated companies at year-end
Managers, Engineers and professionals 38,087 35,983 23,885
Other employee 80,908 73,688 52,926
-------- -------- --------
APPROXIMATE NUMBER OF EMPLOYEES 118,995 109,671 76,811
======== ======== ========
(*) executive officers at closing.
STOCK OPTIONS
Main characteristics of Group's stock options plans are as follows :
PLAN NO. 3 PLAN NO. 5 PLAN NO. 6
------------------ ------------------- -------------------
DATE OF SHAREHOLDERS' MEETING 24 July 2001 24 July 2001 24 July 2001
CREATION DATE 24 July 2001 8 January 2002 7 January 2003
EXERCISE PRICE (1) €33.00 €13.09 €6.00
ADJUSTED EXERCISE PRICE (2) €25.72 €10.21 €4.84
BEGINNING OF EXERCISE PERIOD 24 July 2002 8 January 2003 7 January 2004
EXPIRATION DATE 23 July 2009 7 January 2010 6 January 2011
NUMBER OF BENEFICIARIES 1,703 1,653 5
TOTAL NUMBER OF OPTIONS ORIGINALLY GRANTED 4,200,000 4,200,000 1,220,000
TOTAL NUMBER OF OPTIONS EXERCISED 0 0 0
TOTAL NUMBER OF OPTIONS CANCELLED SINCE THE 731,800 653,600 0
ORIGIN
ADJUSTED NUMBER OF REMAINING OPTIONS AS OF 4,449,662 4,546,578 1,512,397
31 MARCH 2004 (2)
ADJUSTED NUMBER OF SHARES THAT MAY BE 83,399 121,800 1,487,605
SUBSCRIBED BY MEMBERS OF THE EXECUTIVE
COMMITTEE (2)
TERMS AND CONDITIONS OF EXERCISE - 1/3 of options - 1/3 of options - 1/3 of options
exercisable as exercisable as from exercisable as from
from 24 July 2002 8 January 2003 7 January 2004
- 2/3 of options - 2/3 of options - 2/3 of options
exercisable as exercisable as exercisable as
from 24 July 2003 from 8 January from 7 January
- all options 2004 2005
exercisable as - all options - all options
from 24 July 2004. exercisable as exercisable as
from 8 January from 7 January
2005. 2006.
(1)Subscription price corresponding to the average opening price of the shares
during the twenty trading days preceding the day on which the options were
granted by the board (no discount or surcharge) or the nominal value of the
share when the average share price is lower.
(2)Plans n°3, 5 and 6 have been adjusted in compliance with French law as
a result of the completion of the operations which impacted the share capital
in 2002 and 2003.
Plans n(degree)1 previously granted became void in April 2004 as a result of the
non fulfilment of its exercise condition. Therefore, no options have been
exercised under this plan and 2,611,663 options have been cancelled (adjusted
number).
The following is a summary of activity of the plans:
WEIGHTED AVERAGE
EXERCISE
SHARES PRICE PER SHARE
---------------- ----------------
OUTSTANDING AT 1 APRIL 2001 6,086,500 € 29.17
Granted 8,685,000 € 23.37
Exercised - -
Cancelled (540,400) € 19.36
---------------- ----------------
OUTSTANDING AT 31 MARCH 2002 14,231,100 € 25.67
================ ================
OUTSTANDING AT 1 APRIL 2002 14,231,100 € 25.67
Outstanding at 1 April 2002 adjusted 14,726,354 € 24.81
Granted 1,220,000 € 6.00
Exercised - -
Cancelled (4,833,091) € 28.62
---------------- ----------------
OUTSTANDING AT 31 MARCH 2003 11,113,263 € 21.09
================ ================
11,113,263 € 21.09
OUTSTANDING AT 1 APRIL 2003
Outstanding at 1 April 2003 adjusted 13,775,923 € 17.01
Granted - -
Exercised - -
Cancelled (1) (3,267,286) € 20.25
---------------- ----------------
OUTSTANDING AT 31 MARCH 2004 10,508,637 € 16.00
================ ================
(1) including Plan n°1 which became void in April 2004.
NOTE 31 - POST BALANCE SHEET EVENTS
- SUSPENSION OF APPLICATION OF FINANCIAL COVENANTS
The financing package agreed in September 2003 between the Group, its banks and
the French State required the Group to respect certain financial covenants set
out in Note 22.
On the basis of the Consolidated Financial Statements as of 31 March 2004, the
Group would have failed to comply with the financial covenants "Consolidated net
worth" and "EBITDA". In late April 2004, the Group obtained an agreement from
its lenders to suspend these covenants until 30 September 2004 and expects to
negotiate new financial covenants before this date.
- DISPOSAL OF INDUSTRIAL TURBINES BUSINESSES
In April 2004, the disposal of the minor US businesses of Industrial Turbines
was completed. The business will cease to be consolidated from 1 April 2004.
NOTE 32 - MAJOR COMPANIES INCLUDED IN THE SCOPE OF CONSOLIDATION
The major companies are selected according to the following criteria:
- holding companies
- sales above 50 M€
CONSOLIDATION
COMPANIES COUNTRY OWNERSHIP % METHOD
--------- ------- ----------- -------------
ALSTOM............................................. France Parent company
ALSTOM Holdings.................................... France 100.0 Full consolidation
ALSTOM Gmbh (holding).............................. Germany 100.0 Full consolidation
ALSTOM UK Ltd (holding)........................... United Kingdom 100.0 Full consolidation
ALSTOM Inc (holding)............................... United-States 100.0 Full consolidation
ALSTOM NV (holding)................................ Netherlands 100.0 Full consolidation
ALSTOM Mexico SA de CV (holding)................... Mexico 100.0 Full consolidation
ALSTOM Espana IB (holding)......................... Spain 100.0 Full consolidation
ALSTOM (Switzerland) Ltd........................... Switzerland 100.0 Full consolidation
ALSTOM Australia Ltd............................... Australia 100.0 Full consolidation
ALSTOM Belgium SA ................................. Belgium 100.0 Full consolidation
ALSTOM Brasil Ltda................................. Brazil 100.0 Full consolidation
ALSTOM Canada Inc.................................. Canada 100.0 Full consolidation
ALSTOM Controls Ltd................................ United Kingdom 100.0 Full consolidation
Alstom Export Sdn Bhd.............................. Malaysia 100.0 Full consolidation
ALSTOM Ferroviaria Spa............................. Italy 100.0 Full consolidation
ALSTOM K.K......................................... Japan 100.0 Full consolidation
ALSTOM LHB GmbH.................................... Germany 100.0 Full consolidation
ALSTOM Ltd ........................................ United Kingdom 100.0 Full consolidation
ALSTOM Ltd ........................................ India 100.0 Full consolidation
ALSTOM New Zealand Holdings Ltd.................... New Zealand 100.0 Full consolidation
ALSTOM Power s.r.o................................. Czech Republic 100.0 Full consolidation
ALSTOM Power Asia Pacific Sdn Bhd.................. Malaysia 100.0 Full consolidation
ALSTOM Power Austria AG............................ Austria 100.0 Full consolidation
ALSTOM Power Boiler GmbH........................... Germany 100.0 Full consolidation
ALSTOM Power Centrales............................. France 100.0 Full consolidation
ALSTOM Power Conversion GmbH....................... Germany 100.0 Full consolidation
ALSTOM Power Conversion Inc........................ United-States 100.0 Full consolidation
ALSTOM Power Conversion SA France.................. France 100.0 Full consolidation
ALSTOM Power Energy Recovery GmbH.................. Germany 100.0 Full consolidation
ALSTOM Power Generation AG......................... Germany 100.0 Full consolidation
ALSTOM Power Hydraulique........................... France 100.0 Full consolidation
ALSTOM Power Hydro................................. France 100.0 Full consolidation
ALSTOM Power Inc................................... United States 100.0 Full consolidation
ALSTOM Power Italia Spa............................ Italy 100.0 Full consolidation
ALSTOM Power ltd................................... Australia 100.0 Full consolidation
ALSTOM Power Mexico S.A. de C.V.................... Mexico 100.0 Full consolidation
ALSTOM Power Norway AS............................. Norway 100.0 Full consolidation
ALSTOM Power O&M Ltd............................... Switzerland 100.0 Full consolidation
ALSTOM Power SA.................................... Spain 100.0 Full consolidation
ALSTOM Power Service............................... France 100.0 Full consolidation
ALSTOM Power Service Ltd........................... United Arab Emirate 100.0 Full consolidation
ALSTOM Power Service GmbH.......................... Germany 100.0 Full consolidation
ALSTOM Power Sp Zoo................................ Poland 100.0 Full consolidation
ALSTOM Power Sweden AB............................. Sweden 100.0 Full consolidation
ALSTOM Power Turbomachines ........................ France 100.0 Full consolidation
ALSTOM Projects India Ltd.......................... India 68.5 Full consolidation
ALSTOM Schienenfahrzeuge AG........................ Switzerland 100.0 Full consolidation
ALSTOM Signalling Inc.............................. United States 100.0 Full consolidation
ALSTOM T&D Inc..................................... United States 100.0 Full consolidation
ALSTOM Transport SA................................ France 100.0 Full consolidation
ALSTOM Transportation Inc.......................... United States 100.0 Full consolidation
ALSTOM Transporte SA de CV......................... Mexico 100.0 Full consolidation
ALSTOM Transport BV................................ Netherlands 100.0 Full consolidation
ALSTOM Transporte.................................. Spain 100.0 Full consolidation
Chantiers de l'Atlantique.......................... France 100.0 Full consolidation
EUKORAIL Ltd....................................... South Korea 100.0 Full consolidation
West Coast Traincare............................... United Kingdom 76.0 Full consolidation
Companies included in the list of major companies at 31 March 2003 and sold during the year
ALSTOM Energietechnik GmbH......................... Germany
ALSTOM T&D SA...................................... France
ALSTOM T&D SA de CV................................ Mexico
Companies included in the list of major companies at March 2003 for which sales are below €50 million at March 2004.
ALSTOM DDF SA...................................... France
ALSTOM Power UK Ltd................................ United Kingdom
ALSTOM Projects Taiwan Ltd......................... Taiwan
ALSTOM Rail Ltd.................................... United Kingdom
Japan Gas Turbines K.K............................. Japan
Companies included in the list of major companies at Match 2003 and which merged
ALSTOM Power Turbinen GmbH......................... merged into ALSTOM Power Conversion GmbH
A list of all consolidated companies is available upon request at the head office of the Group.