Consolidated financial statements
53_ Consolidated income statements 54_ Consolidated balance sheets 56_ Consolidated cash flow statements 57_ Statement of changes in consolidated shareholders’ equity 58_ Notes to the consolidated financial statements 85_ Consolidated companies 52
FINANCIAL REPORT
88_ Simplified organizational chart 90_ Statutory Auditors’ report on the consolidated financial statements
Faurecia – Registration document 2006
Consolidated income statements
(in € millions)
Notes
2006
2005
2004
Sales Cost of sales Research and development costs Selling and administrative expenses Operating income before amortization of contractual customer relationships Amortization of contractual customer relationships Operating income after amortization of contractual customer relationships Other operating income and (expense), net Income from loans, cash investments and marketable securities Finance costs Other financial income and expense Income (loss) before tax of fully consolidated companies Corporate income tax Net income (loss) of fully consolidated companies Equity in net income of companies accounted for by the equity method Consolidated net income (loss) Net income (loss) attributable to equity holders of the parent company Net income attributable to minority interests Basic earnings (loss) per share (in €) Diluted earnings (loss) per share (in €)
4 5 5 5
11,648.7 (10,937.3) (285.1) (357.1)
10,978.5 (10,131.3) (259.5) (320.5)
10,719.5 (9,740.5) (264.2) (311.9)
69.2
267.2
402.9 (119.4)
69.2 6 (386.0) 10.9 (97.5) 7 (3.4) (406.8) 8 (35.2) (442.0)
267.2 (315.0) 9.1 (74.6) (12.6) (125.9) (52.8) (178.7)
283.5 (11.8) 8.7 (76.0) (22.6) 181.8 (46.9) 134.9
53
FINANCIAL REPORT
13
4.4 (437.6)
5.9 (172.8)
7.3 142.2
(447.9) 10.3 9 9 (18.72) (18.72)
(182.5) 9.7 (7.64) (7.64)
130.7 11.5 5.48 5.45
Faurecia – Registration document 2006
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated balance sheets
CONSOLIDATED FINANCIAL STATEMENTS
Assets
(in € millions) Notes Dec. 31, 2006 Dec. 31, 2005 Dec. 31, 2004
Goodwill Intangible assets Property, plant and equipment Investments in companies accounted for by the equity method Other equity interests Other non-current financial assets Other non-current assets Deferred tax assets Total non-current assets
10 11 12 13 14 15 16
1,289.3 575.7 1,452.9 40.1 1.3 29.9 9.1 54.8 3,453.1
1,414.5 600.3 1,620.8 34.8 2.3 26.5 7.4 111.6 3,818.2 543.8 1,742.4 239.3 49.3 18.1 2,592.9 623.3
1,546.0 536.6 1,534.4 33.1 1.6 19.8 6.9 147.3 3,825.7 490.7 1,762.5 210.4 69.0 11.6 2,544.2 746.6
54
FINANCIAL REPORT
Inventories, net Trade accounts receivable Other operating receivables Other receivables and prepaid expenses Currency and interest rate derivatives Total current assets Cash and cash equivalents
17 18 19 20 27
581.4 1,759.4 268.0 62.8 28.7 2,700.3
21
586.6
Total assets
6,740.0
7,034.4
7,116.5
Faurecia – Registration document 2006
(in € millions)
Notes
Dec. 31, 2006
Dec. 31, 2005
Dec. 31, 2004
Shareholders’ equity Capital stock Additional paid-in capital Treasury stock Retained earnings Translation adjustment Net income (loss) Total shareholders’ equity Minority interests Total equity Provisions for pensions and other employee benefits Other provisions Long-term debt Other non-current liabilities Deferred tax liabilities Total non-current liabilities Short-term debt Prepayments from customers Trade payables Accrued taxes and payroll costs Other payables Currency and interest rate derivatives Total current liabilities 28 29 27 26 24 25 26 22 23 22 169.8 359.6 (12.5) 917.0 40.4 (447.9) 1,026.4 64.2 1,090.6 193.3 283.7 1,065.6 2.8 16.6 1,562.0 1,234.3 133.5 2,128.9 460.7 118.3 11.7 4,087.4 169.6 723.2 (13.6) 733.2 46.0 (182.5) 1,475.9 64.4 1,540.3 201.1 217.1 599.0 3.2 89.0 1,109.4 1,622.4 84.1 2,088.0 440.8 130.6 18.7 4,384.7 169.5 722.5 (14.1) 625.8 5.6 130.7 1,640.0 60.9 1,700.9 239.9 201.4 521.0 3.6 103.3 1,069.2 1,762.0 67.8 2,008.2 397.8 99.3 11.3 4,346.4
55
FINANCIAL REPORT
Total liabilities and shareholders’ equity
6,740.0
7,034.4
7,116.5
Faurecia – Registration document 2006
CONSOLIDATED FINANCIAL STATEMENTS
Liabilities and shareholders’ equity
Consolidated cash flow statements
(in € millions)
2006
2005
2004
CONSOLIDATED FINANCIAL STATEMENTS
I – Operating activities Consolidated net income (loss) Depreciation and amortization Deferred tax (benefits) charges Increase (decrease) in provisions and other long-term liabilities Equity in net income of companies accounted for by the equity method, net of dividends received Capital (gains) losses on disposals of assets Other Cash flow from operations Change in inventories Change in trade accounts receivable Change in trade payables Change in other operating receivables and payables Change in other receivables and payables (Increase) decrease in working capital requirement
(437.6) 754.9 (12.9) 67.1 (1.6) (20.9) (18.4) 330.6 (31.5) (24.8) 42.0 38.3 40.6 64.6 395.2
(172.8) 682.6 21.2 (15.5) (1.8) (0.3) 7.7 521.1 3.1 63.5 18.7 28.8 29.6 143.7 664.8
142.3 609.9 3.2 (4.8) (1.6) (47.6) (1.3) 700.1 19.3 66.3 130.2 73.7 (69.2) 220.3 920.4
56
FINANCIAL REPORT
Net cash provided by operating activities II – Investing activities Additions to property, plant and equipment Capitalized development costs Acquisitions of investments Proceeds from disposals of property, plant and equipment Proceeds from disposals of financial assets Change in investment-related receivables and payables Other movements Net cash used by investing activities Net cash (used) provided by operating and investing activities (I)+(II) III – Financing activities Issuance of shares by Faurecia and fully-consolidated companies Dividends paid by the parent company Dividends paid to minority interests in consolidated subsidiaries Issuance of debt securities and increase in borrowings Repayments of debt and other financial liabilities Net cash provided (used) by financing activities IV – Other changes in cash and cash equivalents Impact of exchange rate changes on cash and cash equivalents Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year
(302.2) (208.3) (1.6) 52.3 (42.4) (15.6) (517.8) (122.6)
(433.9) (215.8) (9.2) 9.2 37.9 (19.9) (631.7) 33.1
(399.4) (209.0) (29.0) 35.1 90.4 (13.7) (11.7) (537.3) 383.1
1.1 (6.2) 552.0 (452.9) 94.0
1.5 (26.3) (11.6) 316.1 (452.4) (172.7)
1.2 (21.7) (3.5) 370.1 (506.5) (160.4)
(8.0) (36.6) 623.3 586.6
16.3 (123.3) 746.6 623.3
12.7 235.4 511.2 746.6
Faurecia – Registration document 2006
Statement of changes in consolidated shareholders’ equity
(in € millions)
Number of shares (2)
Capital stock
Additional paid-in capital
Treasury stock
Retained earnings
Translation Total adjustment shareholders’ equity
Minority interests
Total equity
Balance as of Jan. 1, 2004 before appropriation Net income for the year Currency translation adjustments Total income and expense recognized directly in equity Issue of share capital (1) 2003 dividend Share-based payments Sales of treasury stock Changes in scope of consolidation Balance as of Dec. 31, 2004 before appropriation
24,206,751
169.4
722.4
(15.1)
645.1 130.6 5.6 130.6 5.6
1,521.8 130.6 5.6 136.2 0.2 (21.7) 1.7 1.8
62.1 11.5 (1.7) 9.8 (3.5)
1,583.9 142.1 3.9 146.0 0.2 (25.2) 1.7 1.8 (7.5)
5,300
0.1
0.1 (21.7) 1.7 0.8
1.0
(7.5)
24,212,051
169.5
722.5
(14.1)
756.5 (182.5)
5.6
1,640.0 (182.5) 40.4 (0.6)
60.9 9.7 5.7
1,700.9 (172.8) 46.1 (0.6)
Net loss for the year Currency translation adjustments Changes in fair value of currency hedging instruments Total income and expense recognized directly in equity Issue of share capital(1) 2004 dividend Share-based payments Sales of treasury stock Changes in scope of consolidation Balance as of Dec. 31, 2005 before appropriation
40.4 (0.6) (183.1) 21,550 0.1 0.7 (26.3) 2.4 1.2 40.4
57
FINANCIAL REPORT
0.5
(142.7) 0.8 (26.3) 2.4 1.7 0.0
15.4 0.7 (11.6)
(1.0)
(127.3) 1.5 (37.9) 2.4 1.7 (1.0)
24,233,601
169.6
723.2
(13.6)
550.7 (447.9)
46.0
1,475.9 (447.9) (5.6) (0.8)
64.4 10.3 (4.3)
1,540.3 (437.6) (9.9) (0.8)
Net loss for the year Currency translation adjustments Changes in fair value of currency hedging instruments Total income and expense recognized directly in equity Issue of share capital(1) 2005 dividend Share-based payments Sales of treasury stock Changes in scope of consolidation Recognition of 2005 losses of the parent company Balance as of Dec. 31, 2006 before appropriation
(1) Shares issued on exercise of stock options.
(5.6) (0.8) (448.7) 25,635 0.2 0.9 2.3 0.3 (5.6)
1.1
(454.3) 1.1 0.0 2.3 1.4 0.0 0.0
6.0 (6.2)
(448.3) 1.1 (6.2) 2.3 1.4 0.0 0.0
(364.5)
364.5
24,259,236
169.8
359.6
(12.5)
469.1
40.4
1,026.4
64.2
1,090.6
(2) Including 302,154 treasury shares as of December 31, 2006, compared with 335,804 as of December 31, 2005 and 380,089 as of December 31, 2004 (see note 22.3). Faurecia – Registration document 2006
CONSOLIDATED FINANCIAL STATEMENTS
Notes to the consolidated financial statements
Faurecia SA and its subsidiaries form one of the world’s leading suppliers of six major vehicle modules: seats, cockpits, doors, acoustics modules, front ends and exhaust systems. The Group has operations in 28 countries, spanning 180 sites. Faurecia’s registered office is located in Nanterre, in the Hauts-de-Seine region in France. The Company is quoted on the Eurolist market of Euronext Paris. The consolidated financial statements were approved by Faurecia’s Board of Directors on February 2, 2007.
NOTE
CONSOLIDATED FINANCIAL STATEMENTS
[1]
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
58
FINANCIAL REPORT
The consolidated financial statements of the Faurecia Group have been prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union, including International Accounting Standards (IASs) and related interpretations issued by the International Financial Reporting Interpretations Committee (IFRIC). The standards used to prepare the 2006 financial statements and comparative data for 2005 and 2004 are those published in the Official Journal of the European Union (OJEU) as of December 31, 2006, and whose application was mandatory at that date. In fiscal 2004 the Group opted for early adoption of the amendment to IAS 39 – Cash Flow hedge accounting of forecast intragroup transactions – issued by the International Accounting Standards Board (IASB) on April 14, 2005, and endorsed by the European Commission as of December 31, 2005. This amendment modifies IAS 39 to permit hedge accounting in consolidated financial statements of the foreign currency risk of certain forecast intragroup transactions. The Group has not opted for early adoption of any other standards published in the OJEU. In accordance with IFRS 1, First-time adoption of International Financial Reporting Standards, Faurecia elected the following exemptions: • translation adjustments arising on consolidation were taken to consolidated retained earnings at January 1, 2004; • unrecognized actuarial gains and losses on employee benefit obligations as of January 1, 2004 were recorded under consolidated retained earnings. The Group also used the possibility offered by IFRS 1 permitting companies to restate business combinations that occurred prior to January 1, 2004. The accounting policies used for the 2006 financial statements are consistent with those applied by the Group for the prior fiscal year. The new standards, interpretations and amendments issued by the IASB whose application was mandatory as of January 1, 2006 have been applied where appropriate. However, as they did not have a material impact on the financial statements comparative prior-year data were not restated. The Group has not elected to apply the option available under IAS 19 permitting actuarial gains and losses on pension benefit obligations to be recorded directly in equity. Consequently, such gains and losses are still recognized according to the corridor method over the expected average remaining working lives of the employees participating in the plans concerned.
1.1 ] CONSOLIDATION PRINCIPLES
Companies which are at least 20%-owned are consolidated when one or more of the following criteria are met: annual sales of over €20 million, total assets of over €20 million, and/or debt of over €5 million. Non-consolidated companies are not material, either individually or in the aggregate. Subsidiaries controlled by the Group are fully consolidated. Control is presumed to exist where the Group holds over 50% of a company’s voting rights, and may also arise as a result of shareholders’ agreements. Companies that are between 20% and 50%-owned are carried at equity when the Group exercises significant influence. The functional currency of foreign subsidiaries is generally their local currency. The assets and liabilities of these companies are translated into euros at the year-end exchange rate and their income statement items are translated at the average exchange rate for the year. The resulting translation adjustments are recorded within equity. Certain companies located outside the euro zone which carry out the majority of their transactions in euros may, however, use euros as their functional currency. For companies located in high-inflation countries, non-monetary assets and liabilities and the corresponding income statement items are translated at historical exchange rates, after restatement for the effects of hyperinflation. Translation gains and losses on other items are recognized in the income statement.
Faurecia – Registration document 2006
1.2 ] GOODWILL
Goodwill represents the difference between the cost of shares in consolidated subsidiaries and the Group’s equity in the fair value of the identifiable underlying net assets at the time of acquisition. In accordance with IFRS 3, goodwill is not amortized but is tested for impairment at least once a year and more often if there is an indication that it may be impaired. For the purpose of impairment testing, goodwill is allocated to cash-generating units (CGUs). A CGU is defined as the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets. The CGU to which goodwill is allocated represents the lowest level within the business segment at which goodwill is monitored for internal management purposes. The Group has identified the following CGUs: • Automotive Seating; • Vehicle Interiors; • Exhaust Systems; • Front End. The carrying amount of these assets is then compared with the higher of their value in use and their market value.
1.3 ] INTANGIBLE ASSETS
CONSOLIDATED FINANCIAL STATEMENTS
Research and development expenditure The Faurecia Group incurs certain development costs in connection with producing and delivering modules for specific customer orders which are either a) not sold to the customer, or b) paid for by the customer on delivery of each part, without the customer guaranteeing full financing of the costs incurred. In accordance with IAS 38, these development costs are recorded as an intangible asset where the Company concerned can demonstrate: • its intention to complete the project as well as the availability of adequate technical, financial and other resources to complete the development; • how the customer contract will generate probable future economic benefits and the Company’s ability to measure these reliably; • its ability to measure reliably the expenditure attributable to the contracts concerned (costs to completion). These capitalized costs are amortized to match the quantities of parts delivered to the customer, over a period not to exceed five years except under exceptional circumstances. Research costs, and development costs that do not meet the above criteria are expensed as incurred. Other intangible assets Other intangible assets include development and purchase costs relating to software used within the Group – which are amortized on a straight-line basis over a period of between one and three years – as well as patents and licenses.
1.4 ] PROPERTY, PLANT, AND EQUIPMENT
59
FINANCIAL REPORT
Property, plant and equipment are stated at acquisition cost or production cost in the case of assets produced by the Group for its own use. Maintenance and repair costs are expensed as incurred, except where they serve to increase productivity or to prolong the useful life of an asset. Borrowing costs are not included in the cost of assets. Property, plant and equipment are depreciated by the straight-line method over their estimated useful lives, as follows: • Buildings 20 to 30 years • Leasehold improvements, fixtures and fittings 10 to 20 years • Machinery, tooling and furniture 3 to 10 years Certain tooling is produced or purchased for the purpose of manufacturing parts or modules for customer orders, which are either a) not sold to the customer, or b) paid for by the customer on delivery of each part, without the customer guaranteeing full financing of the costs incurred. In accordance with IAS 16, this tooling is recognized as property, plant and equipment. It is depreciated to match the quantities of parts delivered to the customer, over a maximum of three years due to the rate at which models are replaced. Investment grants are recorded as a deduction from the assets that they were used to finance. Property, plant and equipment acquired under finance leases which transfer substantially all the risks and rewards of ownership of the asset to the lessee are recorded under assets at their purchase price at the inception of the lease and depreciated as described above. An obligation of the same amount is recorded as a liability.
Faurecia – Registration document 2006
1.5 ] CASH GENERATING UNITS AND IMPAIRMENT TESTS
Impairment tests are carried out where there is an indication that the asset may be impaired. Goodwill is tested for impairment at least once a year. Impairment testing consists of comparing the carrying amount of an asset, or group of assets, with the higher of its market value and value in use. Value in use is defined as the present value of the future cash flows expected to be derived from an asset or group of assets. The assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units, or CGUs). In line with this principle, tests are performed on each group of intangible assets (development costs) and property, plant and equipment attributable to a customer contract to compare their aggregate carrying amount with the present value of the expected economic benefits to be received under the contract, net of the expected expenses.
1.6 ] FINANCIAL ASSETS AND LIABILITIES EXCLUDING DERIVATIVES
CONSOLIDATED FINANCIAL STATEMENTS
Loans and receivables are stated at amortized cost calculated by the effective interest method and are regularly tested for impairment. Marketable securities consist mainly of units in mutual funds. They are stated in the balance sheet at fair value with changes in fair value recorded under “Other financial income and expense”. Cash and cash equivalents correspond to highly liquid investments with maturities of less than three months which are not exposed to significant risks of impairment in value in the event of a rise in interest rates. Financial liabilities include borrowings and other forms of financing. They are measured at amortized cost using the effective interest method. Borrowing costs may be expensed as incurred if the amounts concerned are not material. Financial assets and liabilities are broken down into current and non-current components for maturities of less than and more than one year, respectively, at the balance sheet date.
1.7 ] INVENTORIES AND WORK-IN-PROGRESS
Inventories of raw materials and supplies are stated at cost, determined by the FIFO method (First-In, First-Out). Finished and semifinished products, as well as work-in-progress, are stated at production cost, determined by the FIFO method. Production cost includes the cost of raw materials and supplies as well as direct and indirect production costs, excluding overheads not linked to production and borrowing costs. Work-in-progress includes the costs of internally-manufactured specific tooling or development work which is sold to customers, i.e. where the related risks and rewards are transferred. These costs are recognized in the income statement over the period in which the corresponding sales are made, as each technical stage is validated by the customer. Provisions are booked for inventories for which the probable realizable value is lower than cost.
1.8 ] RECEIVABLES
60
FINANCIAL REPORT
Receivables are recorded at cost. Provisions are booked on a case-by-case basis where there is a risk of non-recovery.
1.9 ] FOREIGN CURRENCY TRANSACTIONS
Transactions in foreign currency are converted at the exchange rate prevailing on the transaction date. Receivables and payables are reconverted at the year-end exchange rate and the resulting gain or loss is recorded in the income statement as part of operating income for trade receivables and payables, and under “Other financial income and expense” for other receivables and payables.
1.10 ] DERIVATIVES
Faurecia uses derivative instruments traded on organized markets or purchased over-the-counter from first-rate counterparties to hedge currency and interest rate risks. They are recorded at fair value in the balance sheet. Currency hedges: The effective portion of changes in the fair value of instruments used to hedge future revenues is recorded in equity and taken to operating income when the hedged revenues are received. Changes in the fair value of instruments used to hedge trade receivables and payables are recorded as operating income or expenses. The portion of the change in fair value of these hedges that is ineffective (time value of the hedges) is recorded under “Other financial income and expense” together with changes in the fair value of instruments used to hedge other receivables and payables.
Faurecia – Registration document 2006
Interest rate hedges: Changes in the fair value of interest rate hedges are recorded directly in “Other financial income and expense” when a hedging relationship cannot be demonstrated under IAS 39, or where the Group has elected not to apply hedge accounting principles.
1.11 ] MINORITY INTERESTS
This item corresponds to minority shareholders’ interests in the net assets of consolidated subsidiaries. In the case of subsidiaries with a negative net worth, minority interests are deducted from consolidated shareholders’ equity except where an agreement has been signed requiring minority shareholders to contribute to financing the Company pro rata to their stake in the capital.
1.12 ] PROVISIONS FOR PENSIONS AND OTHER EMPLOYEE BENEFITS
1.13 ] STOCK OPTION PLANS
Stock options are granted to the management executives of Group companies and their over 50%-owned subsidiaries, allowing them to subscribe to new Faurecia shares or to purchase existing shares. Options granted after November 7, 2002 that had not vested as of January 1, 2005 are measured at fair value as of the grant date using the Black & Scholes option pricing model. The fair value of stock options is recognized in payroll costs on a straight-line basis over the vesting period (the period between the grant date and the vesting date), with a corresponding increase in equity.
1.14 ] RESTRUCTURING AND REORGANIZATION PROVISIONS
A provision for restructuring is booked when Group General Management has decided to rationalize the organization structure and announced the program to the employees concerned or their representatives.
1.15 ] REVENUE RECOGNITION
FINANCIAL REPORT
Sales are recognized when the risks and rewards of the ownership of the modules or parts produced are transferred. This generally corresponds to when the goods are shipped, or – in the case of development contracts or the sale of tooling – when the technical stages are validated by the customer.
1.16 ] OPERATING INCOME
61
Operating income is the Faurecia Group’s principal performance indicator. It corresponds to net income of fully consolidated companies before: • other operating income and expense which includes rationalization and early retirement costs, the impact of exceptional events such as the discontinuation of a business, the closure or sale of an industrial site, disposals of non-operating buildings or shares in subsidiaries, and goodwill impairment losses; • net finance costs; • other financial income and expense, which includes the impact of discounting the pension benefit liability and the return on related external funds, the ineffective portion of gains and losses on interest rate and currency hedges, as well as changes in value of interest rate and currency instruments for which a hedging relationship cannot be demonstrated under IAS 39; • corporate income tax.
1.17 ] CORPORATE INCOME TAX
Deferred taxes are recognized by the liability method for all temporary differences between the carrying amount of assets and liabilities and their tax base. Temporary differences arise mainly from consolidation adjustments to subsidiaries’ accounts and tax loss carryforwards. Deferred tax assets resulting from deductible temporary differences and tax loss carryforwards are not recorded when their recovery is deemed uncertain.
Faurecia – Registration document 2006
CONSOLIDATED FINANCIAL STATEMENTS
The Group’s liability for pensions and other employee benefits is determined on an actuarial basis using the projected unit credit method. The valuation takes into account the probability of employees staying with the Group up to retirement age and expected future salary levels. Benefit obligations are partially funded by contributions to external funds. In cases where the funds are permanently allocated to the benefit plan concerned, their value is deducted from the related liability. Actuarial gains and losses are recognized according to the corridor method over the expected average remaining working lives of the employees participating in the plans. Periodic pension and other employee benefit costs are recognized as operating expenses over the benefit vesting period, except for the interest cost, which is recorded under “Other financial income and expense” in accordance with the alternative method under IAS 19. Changes in the present value of external funds are also recorded under this item.
Where appropriate, an accrual is booked to cover taxes payable on the distribution of retained earnings of subsidiaries and affiliates which are not considered as having been permanently reinvested.
1.18 ] USE OF ESTIMATES
The preparation of financial statements in accordance with IFRS requires the use of estimates and assumptions when measuring certain assets, liabilities, income, expenses and commitments. These estimates and assumptions are primarily used when calculating the impairment of intangible assets, goodwill and deferred tax assets, as well as for measuring pension and other post-employment benefit obligations. They are based on historical experience and other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates and assumptions.
1.19 ] EARNINGS PER SHARE
Basic earnings per share are calculated by dividing net income attributable to equity holders of the parent company by the weighted average number of shares outstanding during the year, excluding treasury stock. Diluted earnings per share are calculated by the treasury stock method. This method consists of multiplying the number of outstanding stock options by the ratio between the average exercise price of outstanding stock options and the average share price for the year.
CONSOLIDATED FINANCIAL STATEMENTS
NOTE
[2]
CHANGES IN SCOPE OF CONSOLIDATION
2.1 ] 2006
In first-half 2006, Faurecia purchased the US assets held by the Copo Ibérica Group which is 50%-owned by Faurecia and accounted for by the equity method. Also during the year, Kwang Jin Faurecia was accounted for by the equity method for the first time. Formed in 2005, this South Korea-based company is 50%-owned by Faurecia.
2.2 ] 2005
62
FINANCIAL REPORT
No significant acquisitions took place during 2005. Faurecia did, however, purchase for €3.5 million the 50% interest held by a third party in Faurecia Riverside LLC, a US-based company. The Group also acquired for €4 million the 49.2% stake it did not already own in the South Korean company Daeki Faurecia Corporation. Also in 2005, Faurecia bought out the minority interests in Faurecia Lecotex, based in the Czech Republic, for €0.5 million. These three transactions generated goodwill in the amount of €6.9 million, of which €6.2 million related to Daeki Faurecia Corporation. The companies concerned were already fully consolidated.
2.3 ] IMPACT ON CONSOLIDATED DATA OF CHANGES IN SCOPE OF CONSOLIDATION
Changes in scope of consolidation did not have a material impact on the Group’s consolidated data.
NOTE
[3]
EVENTS AFTER THE BALANCE SHEET DATE
No significant post-balance sheet events have occurred.
NOTE
[4]
INFORMATION BY BUSINESS SEGMENT AND GEOGRAPHIC AREA
IAS 14 defines a business segment as a distinguishable component of an entity that is engaged in providing an individual product or service or a group of related products or services and that is subject to risks and returns that are different from those of other business segments. Faurecia has distinguished two separate business segments: Interior modules and Other modules, which present different risk profiles. The segments defined reflect Faurecia’s organization and internal reporting structure.
Faurecia – Registration document 2006
4.1 ] KEY FIGURES BY BUSINESS SEGMENT
2006 (in € millions) Interior modules Other modules Holding companies Total
Net sales 8,305.8 Inter-segment eliminations (35.0) Consolidated sales 8,270.8 Operating income (loss) (44.5) Segment income (loss) (433.1) Net financial expense Corporate income tax Equity in net income of companies accounted for by the equity method Net loss Segment assets Property, plant and equipment, net Other Total segment assets Investments in companies accounted for by the equity method Other equity interests Short- and long-term financial assets Tax assets (current and deferred) Total assets Segment liabilities Borrowings Tax liabilities (current and deferred) Shareholders’ equity and minority interests Total liabilities Capital expenditure Depreciation of property, plant and equipment Impairment in value of property, plant and equipment
2005 (in € millions)
3,393.6 (15.7) 3,377.9 113.7 87.9
144.3 (144.3) 0.0 0.0 25.0
11,843.7 (195.0) 11,648.7 69.2 (320.2) (86.6) (35.2) 4.4 (437.6)
6,740.0 2,503.6 767.5 (1.4) 3,269.7 2,314.4 65.3 1,090.6 6,740.0 234.3 (262.9) (80.2)
Interior modules
69.2 (60.7) (3.9)
Other modules
2.7 (2.8)
306.2 (326.4) (84.1)
Total
Holding companies
Net sales 8,310.5 Inter-segment eliminations (33.4) Consolidated sales 8,277.1 Operating income 157.7 Segment income (loss) (171.3) Net financial expense Corporate income tax Equity in net income of companies accounted for by the equity method Net loss Segment assets Property, plant and equipment, net Other Total segment assets Investments in companies accounted for by the equity method Other equity interests Short- and long-term financial assets Tax assets (current and deferred) Total assets Segment liabilities Borrowings Tax liabilities (current and deferred) Shareholders’ equity and minority interests Total liabilities Capital expenditure Depreciation of property, plant and equipment Impairment in value of property, plant and equipment 340.0 (266.2) (52.7) 2,491.1
5.7
(172.8)
1,305.8 3,682.5 4,988.3
306.2 889.3 1,195.5
8.8 19.5 28.3
1,620.8 4,591.3 6,212.1 34.8 2.3 662.4 122.8 7,034.4
627.3
25.3
3,143.7 2,240.1 110.3 1,540.3 7,034.4
93.0 (55.9) (1.3)
7.8 (2.2)
440.8 (324.3) (54.0)
Faurecia – Registration document 2006
FINANCIAL REPORT
2,711.7 (10.3) 2,701.4 109.6 105.2
99.3 (99.3) 0.0
11,121.5 (143.0) 10,978.5 267.3 (60.4) (65.5) (52.8) 5.9
63
CONSOLIDATED FINANCIAL STATEMENTS
1,146.6 3,464.3 4,610.9 40.1
296.3 1,021.5 1,317.8
10.0 23.4 33.4
1,452.9 4,509.2 5,962.1 40.1 1.3 654.3 82.2
2004 (in € millions)
Interior modules
Other modules
Holding companies
Total
Net sales 8,334.6 Inter-segment eliminations (49.0) Consolidated sales 8,285.6 Operating income before amortization of contractual customer relationships 289.7 Operating income after amortization of contractual customer relationships 170.3 Segment income (loss) 97.2 Net financial expense Corporate income tax Equity in net income of companies accounted for by the equity method Net income Segment assets Property, plant and equipment, net Other Total segment assets Investments in companies accounted for by the equity method Other equity interests Short- and long-term financial assets Tax assets (current and deferred) Total assets Segment liabilities Borrowings Tax liabilities (current and deferred) Shareholders’ equity and minority interests Total liabilities Capital expenditure Depreciation of property, plant and equipment Impairment in value of property, plant and equipment 317.7 (261.5) (2.6) 2,393.2
2,450.8 (16.9) 2,433.9 117.9 117.9 158.1
77.9 (77.9) 0.0 (4.7) (4.7) (6.2)
10,863.3 (143.8) 10,719.5 402.9 283.5 249.1 (67.3) (46.9) 7.3 142.2
CONSOLIDATED FINANCIAL STATEMENTS
1,268.4 3,637.2 4,905.6
256.7 842.7 1,099.4
9.4 134.4 143.8
1,534.5 4,614.3 6,148.8 33.1 1.6 770.8 162.2 7,116.5
600.8
(1.1)
2,992.9 2,294.3 128.4 1,700.9 7,116.5
84.2 (52.0) (2.6)
1.8 (2.0)
403.7 (315.5) (5.2)
64
FINANCIAL REPORT
Sales by business segment break down as follows:
(in € millions) 2006 % 2005 % 2004 %
Interior modules – Automotive Seating – Vehicle Interiors
4,812.8 3,458.0 8,270.8
41 30 71
4,794.4 3,482.7 8,277.1
44 32 75
4,784.7 3,500.9 8,285.6
44 33 77
Other modules – Exhaust Systems – Front End
2,659.4 718.5 3,377.9
23 6 29 100
1,961.3 740.1 2,701.4 10,978.5
18 7 25 100
1,714.9 719.0 2,433.9 10,719.5
16 7 23 100
Total
11,648.7
Faurecia – Registration document 2006
4.2 ] KEY FIGURES BY GEOGRAPHIC AREA
Sales are analyzed by the country of sale; the other items are presented by location of the companies concerned.
2006 (in € millions) France Germany Other European countries North America South America Asia Other countries Total
Sales Property, plant and equipment, net Capital expenditure Number of employees as of December 31
2005 (in € millions)
3,066.5 449.6 88 20,276
France
2,977.8 189.6 13.2 9,364
Germany
2,913.2 492.7 113.6 20,593
Other European countries
1,485.9 172.1 61.9 6,867
North America
246.7 71.4 11.2 4,529
South America
634.4 61.9 16.1 2,774
Asia
324.2 15.7 2.2 1,279
Other countries
11,648.7 1,452.9 306.1 65,682
Total
Sales Property, plant and equipment, net Capital expenditure Number of employees as of December 31
2004 (in € million)
3,382.6 508.8 139.2 22,148
France
2,892.0 241.8 68.6 10,050
Germany
2,583.1 521.4 125.9 17,299
Other European countries
1,234.7 185.1 51.2 5,072
North America
221.6 80.3 19.6 3,810
South America
404.2 62.5 31.8 2,067
Asia
260.2 20.9 4.5 1,275
Other countries
10,978.5 1,620.8 440.8 61,721
CONSOLIDATED FINANCIAL STATEMENTS
Total
Sales Property, plant and equipment, net Capital expenditure Number of employees as of December 31
3,610.9 530.2 143.3 24,504
2,715.2 269.5 83.4 10,304
2,769.0 488.7 94.0 17,503
1,028.4 140.5 32.6 5,386
162.9 57.2 25.1 1,770
307.7 29.0 19.3 1,529
125.4 19.3 6.0 1,511
10,719.5 1,534.4 403.7 62,507
NOTE
[5]
OPERATING EXPENSES
5.1 ] ANALYSIS BY FUNCTION
(in € millions) 2006 2005 2004
Cost of sales Research and Development costs Selling and administrative expenses Total
(10,937.3) (285.1) (357.1) (11,579.5)
(10,131.3) (259.5) (320.5) (10,711.3)
(9,740.5) (264.2) (311.9) (10,316.6)
65
FINANCIAL REPORT
5.2 ] ANALYSIS BY NATURE
(in € millions) 2006 2005 2004
Purchases used in production External expenses Payroll costs Taxes other than on income Other income and expense(1) Depreciation, amortization and provisions for impairment in value of non-current asset Charges to and releases of other provisions Total
(1) Including production taken into inventory or capitalized (development and tooling).
(7,808.4) (1,307.5) (2,104.3) (66.3) 242.6 (518.3) (17.3) (11,579.5)
223.1
(7,232.4) (1,236.9) (1,954.6) (60.5) 253.7 (491.4) 10.8 (10,711.3)
256.4
(6,664.5) (1,357.4) (1,944.5) (60.1) 155.8 (480.3) 34.4 (10,316.6)
168.7
5.3 ] PAYROLL COSTS
(in € millions) 2006 2005 2004
Wages and salaries Payroll taxes Total
(1,622.6) (481.7) (2,104.3)
(1,488.4) (466.2) (1,954.6)
(1,496.4) (448.1) (1,944.5)
Faurecia – Registration document 2006
5.4 ] RESEARCH AND DEVELOPMENT COSTS
(in € millions) 2006 2005 2004
Research and Development costs, gross – amounts billed to customers and changes in inventories – capitalized development costs – amortization of capitalized development costs – charges to and releases of provisions for impairment in value of capitalized development costs Net expense
(610.6) 296.3 208.3 (161.5) (17.6) (285.1)
(628.1) 303.9 215.8 (142.6) (8.5) (259.5)
(594.9) 257.1 209.0 (145.6) 10.2 (264.2)
5.5 ] DEPRECIATION, AMORTIZATION AND PROVISIONS FOR IMPAIRMENT IN VALUE OF NON-CURRENT ASSETS
(in € millions) 2006 2005 2004
CONSOLIDATED FINANCIAL STATEMENTS
Amortization of development costs Amortization of other intangible assets Depreciation of specific tooling Depreciation of other items of property, plant and equipment Provisions for impairment in value of capitalized development costs Total
(161.5) (12.8) (13.8) (312.6) (17.6) (518.3)
(142.6) (15.9) (14.6) (309.8) (8.5) (491.4)
(145.6) (11.4) (13.7) (319.8) 10.2 (480.3)
NOTE
[6]
OTHER OPERATING INCOME AND EXPENSE
2006 2005 2004
(in € millions)
66
FINANCIAL REPORT
Releases of (charges to) provisions for contingencies and charges and for impairment in value of non-current assets, net Provisions for impairment in value of goodwill and other non-current assets – Vehicle Interior (1) Other provisions for impairment in value of non-current assets Reorganization expenses(2) Early-retirement costs Gains (losses) on disposals of assets, net Other Total
(0.1) (197.8) (35.7) (168.7) (0.5) 20.9 (4.1) (386.0)
7.8 (180.0) (136.2) (1.4) 0.3 (5.5) (315.0)
(3.2)
(55.5) (3.1) 48.4 1.6 (11.8)
(1) In 2006, these provisions concerned goodwill in the amount of €125.0 million and non-current assets in the amount of €72.8 million, compared with respective amounts of €138.4 million and €41.6 million in 2005. (2) In 2006, this item included €165.5 million worth of restructuring costs, and €3.2 million in provisions for impairment in value of non-current assets (versus respective amounts of €123.8 million and €12.4 million in 2005 and €50.3 million and €5.2 million in 2004).
Restructuring operations Total reorganization expenses came to €168.7 million in 2006 and early retirement costs totaled €0.5 million. These amounts concerned 3,346 employees and break down as follows by country:
In € millions Number of employees
France Germany Spain Other
(91.6) (44.4) (6.2) (27.0) (169.2)
1,607 799 209 731 3,346
Faurecia – Registration document 2006
NOTE
[7]
OTHER FINANCIAL INCOME AND EXPENSE
2006 2005 2004
(in € millions)
Impact of discounting pension benefit obligations Changes in the ineffective portion of gains and losses on currency hedges Changes in fair value of currency hedges on debt Changes in fair value of interest rate instruments Other Total
(9.5) (0.5) 0.1 7.9 (1.4) (3.4)
(10.0) (1.1) (3.9) (0.9) 3.3 (12.6)
(9.7)
(8.3) (4.6) (22.6)
NOTE
[8]
CORPORATE INCOME TAX
Corporate income tax can be analyzed as follows:
(in € millions) 2006 2005 2004
(37.0) (11.1) (48.1)
(27.3) (4.8) (32.1)
(41.9)
(41.9)
Deferred taxes – deferred taxes for the year – impairment of deferred tax assets recognized in prior periods Deferred taxes Total
44.1 (31.2) 12.9 (35.2)
4.3 (25.0) (20.7) (52.8)
(5.0)
(5.0) (46.9)
8.1 ] ANALYSIS OF THE TAX CHARGE The effective corporate income tax charge can be reconciled with the theoretical tax charge as follows:
(in € millions) 2006 2005 2004
Income (loss) before tax of fully consolidated companies Tax at standard French tax rate (34.43% at end-2006, 34.93% at end-2005 and 35.43% at end-2004) Impact of income taxable at a reduced rate in France and Spain Impact on deferred taxes of changes in tax rates Impact of different tax rates applicable to foreign subsidiaries Tax credits Utilization of previously unrecognized tax loss carryforwards Tax loss carryforwards arising during the year for which no deferred tax asset was recognized Impairment of previously recognized tax assets Permanent differences Effective corporate income tax charge
(406.9)
(125.9)
181.7
67
140.1 9.1 1.6 19.1 49.2 8.1 (188.6) (31.2) (42.6) (35.2) 44.0 1.1 (0.5) 11.8 22.3 7.5 (50.4) (25.0) (63.5) (52.8) (64.4) 5.0 (0.9) 14.6 11.8 6.0 (23.7) 4.7 (46.9)
FINANCIAL REPORT
8.2 ] DEFERRED TAXES
(in € millions) Dec. 31, 2006 Dec. 31, 2005 Dec. 31, 2004
Current taxes – Assets – Liabilities
26.0 (47.3) (21.3)
11.2 (21.3) (10.1)
15.0 (25.1) (10.1)
Deferred taxes – Deferred tax assets resulting from tax loss carryforwards – Deferred tax assets resulting from consolidation adjustments – Liabilities
28.9 25.9 (16.6) 38.2
63.2 48.4 (89.0) 22.6
66.8 80.5 (103.3) 44.0
Faurecia – Registration document 2006
CONSOLIDATED FINANCIAL STATEMENTS
Current taxes – corporate income tax currently payable – tax on intercompany dividends, tax reassessments
Changes in deferred taxes recorded in the balance sheets can be analyzed as follows:
(in € millions) 2006 2005
Net as of January 1 – Deferred taxes for the year recorded in the income statement (1) – Deferred taxes recognized directly in equity – Impact of exchange rate changes – Impairment of deferred tax assets recognized in prior periods Net as of December 31
(1) Including subsidies in the form of tax credits.
22.6 44.1 0.0 2.7 (31.2) 38.2
20
44.0 4.3 (0.6) (0.1) (25.0) 22.6
8.3 ] UNRECOGNIZED DEFERRED TAX ASSETS
(in € millions) Dec. 31, 2006 Dec. 31, 2005 Dec. 31, 2004
CONSOLIDATED FINANCIAL STATEMENTS
Y+1 Y+2 Y+3 Y+4 Y + 5 and beyond Available indefinitely Total
13.0 3.0 2.6 3.1 122.4 350.3 494.4
2.3 1.9 2.3 3.1 52.0 239.1 300.7
1.8 1.7 2.9 1.7 20.1 162.8 191.0
NOTE
[9]
EARNINGS (LOSS) PER SHARE
2006 2005 2004
(in € millions)
Number of shares outstanding at the year end(1) Adjustments: – Treasury stock – Impact of share issues weighted based on the period between the date of the share issue and the year-end Basic weighted average number of shares
24,259,236 (302,154) (24,968) 23,932,114 90,358 24,022,472
24,233,601 (335,804) (6,276) 23,891,521 184,537 24,076,058
24,212,051 (380,089) (3,092) 23,828,870 166,729 23,995,599
68
FINANCIAL REPORT
Weighted impact of dilutive instruments (stock options)(2) Weighted average number of shares after dilution
(1) Changes in the number of shares outstanding during 2005 and 2006 can be analyzed as follows: As of December 31, 2004: number of Faurecia shares outstanding • Faurecia stock options exercised in 2005 As of December 31, 2005: number of Faurecia shares outstanding • Faurecia stock options exercised in 2006 As of December 31, 2006: number of Faurecia shares outstanding
24,212,051 21,550 24,233,601 25,635 24,259,236
(2) As of December 31, 2006, a total of 1,265,715 stock subscription options were outstanding and exercisable, compared with 1,176,550 as of December 31, 2005 and 1,011,100 as of December 31, 2004. In the above table, the weighted impact of dilutive instruments was calculated using the treasury stock method. This method consists of multiplying the number of outstanding stock options by the ratio between the average exercise price of outstanding stock options and the average share price for the year, i.e. €49.75 for 2006.
Basic earnings per share Basic earnings per share are calculated by dividing net income by the weighted average number of shares outstanding during the year, excluding treasury stock.
(in € millions) 2006 2005 2004
Basic earnings (loss) per share Diluted earnings (loss) per share
(18.72) (18.72)
(7.64) (7.64)
5.48 5.45
Faurecia – Registration document 2006
NOTE
[10]
GOODWILL
Gross Impairment Net
(in € millions)
Net goodwill as of January 1, 2004 Acquisitions and minority interest buyouts Tax benefits related to unrecognized tax losses of acquired companies Translation adjustment and other movements Net goodwill as of December 31, 2004 Acquisitions and minority interest buyouts Translation adjustment and other movements Impairment of goodwill (Vehicle Interiors) Net goodwill as of December 31, 2005 Translation adjustment and other movements Impairment of goodwill (Vehicle Interiors) Net goodwill as of December 31, 2006
1,530.2 26.8 (1.8) (9.2) 1,546.0 6.8 0.1 1,552.9 (0.2) 1,552.7
0.0
0.0
(138.4) (138.4) (125.0) (263.4)
1,530.2 26.8 (1.8) (9.2) 1,546.0 6.8 0.1 (138.4) 1,414.5 (0.2) (125.0) 1,289.3
Net goodwill breaks down as follows by business:
(in € millions) Dec. 31, 2006 Dec. 31, 2005 Dec. 31, 2004
Automotive Seating Vehicle Interiors Front End Exhaust Systems Total
792.5 239.3 96.1 161.4 1,289.3
792.7 364.3 96.1 161.4 1,414.5
792.0 502.7 96.1 155.2 1,546.0
In accordance with the accounting policy described in note 1.5, the carrying amount of each CGU – representing the lowest aggregation of assets that generate largely independent cash flows within the business segment – including goodwill allocated to that unit, has been compared with its value in use, corresponding to the present value of future cash flows based on the most recent estimates of Group Management for each cash-generating unit concerned. The most recent estimate used was the business plan drawn up for 2007-2010. The calculation was performed by projecting to perpetuity projected cash flows for the last year of the business plan (i.e. 2010), applying a growth rate of 1.5%. This rate, which was the same for 2006 as that for the previous year, was determined based on analysts’ forecast trends for the automotive market. Faurecia called on an independent expert to calculate the weighted average cost of capital used to discount future cash flows. The market parameters used in the expert’s calculation were based on a sample of 12 companies operating in the automotive equipment sector (six in Europe and six in the US). On the basis of these parameters and a market risk premium of 5%, the weighted average cost of capital used to discount future cash flows was set at 7.9%, unchanged since 2004. As of December 31, 2005, the impairment test described above resulted in the recognition of a goodwill impairment loss in the amount of €138.4 million, relating to the Vehicle Interiors business. A further €41.6 million worth of impairment losses were recorded on other assets of this CGU, not including impairment related to restructuring. The total asset impairment figure of €180 million for 2005 was recorded under “Other operating income and expense”. As of December 31, 2006, this same impairment test resulted in the recognition of an additional goodwill impairment loss of €125 million, relating to the Vehicle Interiors business. A further €72.8 million worth of impairment losses were recorded on other non-current assets of this business, not including impairment related to restructuring. The total €197.8 million asset impairment figure for 2006 was recorded under “Other operating income and expense”. The impairment recorded reflects a decline in operating profitability in the Vehicle Interiors business since end-2005, as well as a time lag before effects of the profitability improvement plan begin to feed through, and the impact on forecast sales of a more selective marketing strategy. The table below shows the sensitivity of the test results to changes in the assumptions used to determine the value in use of this CGU.
(in € millions) +1 pt
69
FINANCIAL REPORT
Sensitivity(1) – 1 pt
Rate used to discount future cash flows Growth rate used to project cash flows to perpetuity
(1) Impact on value in use of the impaired group of assets allocated to the Vehicle Interiors business.
(145.5) 165.6
199.8 (120.8)
Faurecia – Registration document 2006
CONSOLIDATED FINANCIAL STATEMENTS
NOTE
[11]
INTANGIBLE ASSETS
Intangible assets can be analyzed as follows:
(in € millions) Development costs Software and other Total
Net as of January 1, 2004 Additions Amortization Provisions Translation adjustment and other movements Net as of December 31, 2004 Additions Amortization Provisions Translation adjustment and other movements Net as of December 31, 2005 Additions Amortization Provisions (1) Translation adjustment and other movements Net as of December 31, 2006
426.6 209.0 (140.0) 4.6 13.8 514.0 215.8 (142.6) (8.5) (5.0) 573.7 208.3 (161.5) (40.5) (26.4) 553.6
139.2 8.8 (125.7) 0.0 0.3 22.6 7.3 (15.9) 0.0 12.6 26.6 5.3 (12.8) 0.0 3.0 22.1
565.8 217.8 (265.7) 4.6 14.1 536.6 223.1 (158.5) (8.5) 7.6 600.3 213.6 (174.3) (40.5) (23.4) 575.7
CONSOLIDATED FINANCIAL STATEMENTS
(1) Including a non-recurring impairment loss of €22.9 million, of which €15.1 million related to Automotive Seating and €7.8 million to Vehicle Interiors.
NOTE
[12]
PROPERTY, PLANT AND EQUIPMENT
2006 2005 2004
(in € millions)
Net at beginning of year Additions (including own work capitalized) Disposals Depreciation and provisions for impairment in value Non-recurring impairment losses(1) Translation adjustment Other movements Net at end of year
(1) Including: Vehicle Interiors Automotive Seating Front End (in € millions) Gross Dec. 31, 2006 Depreciation
1,620.8 306.2 (29.9) (331.0) (84.0) (23.1) (6.1) 1,452.9
1,534.4 440.8 (9.2) (335.3) (41.5) 58.9 (27.3) 1,620.8
1,516.3 403.7 (32.0) (338.9) 8.9 (23.6) 1,534.4
70
FINANCIAL REPORT
(65.0) (15.1) (3.9)
(41.5)
Dec. 31, 2005 Net Gross Net
Dec. 31, 2004 Net
Land Buildings Plant and equipment Specific tooling Other and assets under construction Total Including assets held under finance leases
66.3 840.6 2,699.1 105.9 605.3 4,317.2 93.6
(7.4) (493.3) (1,936.8) (78.1) (348.7) (2,864.3) (51.0)
58.9 347.3 762.3 27.8 256.6 1,452.9 42.6
79.5 820.5 2,683.1 86.2 586.4 4,255.7 104.3
74.9 389.8 851.2 30.4 274.5 1,620.8 52.5
70.5 361.0 818.3 30.2 254.4 1,534.4 53.7
Faurecia – Registration document 2006
NOTE
[13]
INVESTMENTS IN COMPANIES ACCOUNTED FOR BY THE EQUITY METHOD
As of December 31, 2006, this item breaks down as follows:
(in € millions) % interest(1) Group share of equity Dividends received by the Group Group share of sales Group share of total assets
Vanpro Assentos Lda Teknik Malzeme Copo Ibérica SA Componentes de Vehiculos de Galicia SA Faurecia Japon NHK Kyushi Co. Ltd Faurecia Japon NHK Co. Ltd Arsed d.o.o. Kwang Jin Faurecia Co Ltd SAS Group Total
(1) Percent interest held by the Company that owns the shares.
50 50 50 50 50 50 50 50 50 –
2.1 7.2 1.9 3.7 (7.6) 2.0 0.6 0.8 29.4 40.1
(1.0) (1.6) (0.2)
21.4 68.8 20.4 15.1 14.5 41.7 13.4 6.9 1,704.4 1,906.6
5.9 21.9 15.9 12.2 7.8 16.1 5.4 6.0 372.7 463.9
CONSOLIDATED FINANCIAL STATEMENTS
(2.8)
SAS is a joint venture with Siemens-VDO which manufactures full cockpit modules with electronics and circuitry built into the instrument panels. The accounts of the SAS Group used for the preparation of Faurecia’s consolidated financial statements were those for the period ending September 30, 2006.
13.1 ] CHANGE IN INVESTMENTS IN COMPANIES ACCOUNTED FOR BY THE EQUITY METHOD
(in € millions) 2006 2005 2004
Group equity in the underlying net assets at beginning of year Dividends Group equity in net income Changes in scope of consolidation Capital increase Translation adjustment Group equity in the underlying net assets at end of year
34.8 (2.8) 4.4 1.0 1.5 1.2 40.1
33.1 (4.0) 5.9
48.3 (5.7) 7.3 (17.3) 0.5 33.1
(0.2) 34.8
13.2 ] GROUP EQUITY IN THE NET ASSETS OF COMPANIES ACCOUNTED FOR BY THE EQUITY METHOD
(in € millions) Dec. 31, 2006 Dec. 31, 2005 Dec. 31, 2004
71
FINANCIAL REPORT
Non-current assets Current assets Cash and cash equivalents Total assets Shareholders’ equity Borrowings Other non-current liabilities Non-financial current liabilities Total liabilities and shareholders’ equity
42.0 400.6 21.3 463.9 40.5 33.2 14.9 375.3 463.9
34.6 380.0 32.2 446.8 34.8 25.5 48.5 338.0 446.8
38.3 313.8 23.7 375.8 33.1 13.2 58.4 271.1 375.8
NOTE
[14]
OTHER EQUITY INTERESTS
% interest Gross Dec. 31, 2006 Net Dec. 31, 2005 Net Dec. 31, 2004 Net
(in € millions)
SCI Messei Kwang Jin Faurecia Co Ltd (1) Taco-Faurecia Other Total
100 50 50 –
0.4 0.4 1.4 2.2
0.1 0.4 0.8 1.3
0.1 1.0 0.4 0.8 2.3
0.1 0.4 1.1 1.6
(1) A South-Korean company accounted for by the equity method for the first time in 2006
Faurecia – Registration document 2006
NOTE
[15]
OTHER NON-CURRENT FINANCIAL ASSETS
This item includes:
(in € millions) Gross Dec. 31, 2006 Provisions Net Dec. 31, 2005 Net Dec. 31, 2004 Net
Long-term loans Other Total
21.4 13.9 35.3
(3.9) (1.5) (5.4)
17.5 12.4 29.9
20.9 5.6 26.5
16.8 3.0 19.8
NOTE
[16]
OTHER NON-CURRENT ASSETS
This item includes:
(in € millions) Dec. 31, 2006 Dec. 31, 2005 Dec. 31, 2004
CONSOLIDATED FINANCIAL STATEMENTS
Pension plan surpluses Guarantee deposits and other Total
0.1 9.0 9.1
0.1 7.3 7.4
6.9 6.9
NOTE
[17]
INVENTORIES
Dec. 31, 2006 Gross Provisions Net Dec. 31, 2005 Net Dec. 31, 2004 Net
(in € millions)
Raw materials and other supplies Work-in-progress Finished and semi-finished products Total
262.5 247.3 143.5 653.3
(20.8) (35.4) (15.7) (71.9)
241.7 211.9 127.8 581.4
206.4 213.8 123.6 543.8
223.6 159.6 107.5 490.7
Work-in-progress as of December 31, 2006 included €42.1 million in Research and Development costs billable to customers (December 31, 2005: €62.2 million; December 31, 2004: €33.8 million).
72
FINANCIAL REPORT
NOTE
[18]
TRADE ACCOUNTS RECEIVABLE
In 2000, Faurecia and certain of its French subsidiaries entered into a one-year agreement with a Group bank providing for the sale of receivables. Under this agreement, which was renewable through November 2005, the bank’s right of recourse was limited to the amount of the related subordinated deposit. The agreement was renegotiated in 2004 and replaced by a one-year factoring agreement renewable through December 2007, providing for the no-recourse sale of receivables without a security deposit. In order to further diversify its financial resources, in December 2002 Faurecia entered into a second one-year agreement with another Group bank, extending the receivables securitization program to other French and non-French subsidiaries in Europe. The agreement, which is renewable through December 2007, is based on the same subordinated deposit principle. In 2004, a Spanish subsidiary of the Group entered into a factoring agreement with one of its banks, and in 2006 certain of the Group’s French subsidiaries signed additional factoring agreements with their banks. The receivables sold under the initial and renewable factoring programs have been derecognized as follows:
(in € millions) Dec. 31, 2006 Dec. 31, 2005 Dec. 31, 2004
Initial factoring program Renewable factoring program Total
120.0 126.5 246.5
90.5 122.0 212.5
20.8 152.4 173.2
NOTE
[19]
OTHER OPERATING RECEIVABLES
Dec. 31, 2006 Dec. 31, 2005 Dec. 31, 2004
(in € millions)
Prepayments to suppliers Other receivables(1) Total
(1) Including recoverable VAT and other taxes.
61.4 206.6 268.0
195.9
66.3 173.0 239.3
165.5
42.0 168.4 210.4
159.8
Faurecia – Registration document 2006
NOTE
[20]
OTHER RECEIVABLES AND PREPAID EXPENSES
Dec. 31, 2006 Dec. 31, 2005 Dec. 31, 2004
(in € millions)
Current maturities of long-term loans Prepaid expenses Other receivables Total
0.1 18.1 44.6 62.8
0.1 16.3 32.9 49.3
0.0 21.6 47.4 69.0
NOTE
[21]
CASH AND CASH EQUIVALENTS
As of December 31, 2006, cash and cash equivalents included current account balances of €530.1 million (December 31, 2005: €558.8 million; December 31, 2004: €393.0 million) and marketable securities of €56.5 million (December 31, 2005: €64.5 million; December 31, 2004: €353.6 million). The carrying amount of marketable securities is almost identical to market value as they are held on a very short term basis.
CONSOLIDATED FINANCIAL STATEMENTS
NOTE
[22]
SHAREHOLDERS’ EQUITY
22.1 ] CAPITAL STOCK AND ADDITIONAL PAID-IN CAPITAL
As of December 31, 2006, the Company’s capital stock amounted to €169,814,652, divided into 24,259,236 fully paid-up common shares with a par value of €7 each. Shares which have been registered in the name of the same holder for at least two years carry double voting rights.
22.2 ] EMPLOYEE STOCK OPTIONS
Stock subscription options The Company has a policy of issuing stock options to the management of Group companies and their over 50%-owned subsidiaries, allowing them to subscribe for newly-issued Faurecia shares. As of December 31, 2006, a total of 1,265,715 stock subscription options were outstanding. Exercising these options would result in: • capital stock being increased by €8.9 million; • additional paid-in capital being increased by €57.2 million. Details of the stock subscription option plans as of December 31, 2006 are set out in the table below:
Date of Shareholders’ Meeting Date of Board Meeting Exercise price (in €) Number of options granted Of which granted to senior executive management/ Executive Committee members Start of exercise period Expiry date of exercise period Options exercised Options forfeited Number of options outstanding as of Dec. 31, 2006
73
FINANCIAL REPORT
June 18, 1992 May 31, 1994 May 31, 1994 May 3, 1995 May 31, 1994 June 5, 1997 June 5, 1997 June 1, 2001 June 1, 2001 May 14, 2002 May 14, 2002 May 25, 2004 May 23, 2005 Total
April 7, 1994 Oct. 20, 1994 May 3, 1995 Sept. 12, 1996 June 26, 1997 June 26, 1997 Feb. 22, 2002 Nov. 28, 2002 April 14, 2004 April 19, 2005 April 13, 2006
25.06 23.84 26.07 24.39 40.25 42.38 55.00 41.71 58.18 63.7 53.80
115,000 125,000 71,000 125,000 54,000 35,500 351,700 269,500 268,000 275,000 284,000
75,000 30,000 15,000 40,000 15,000 15,000 69,500 101,000 109,000 122,000 140,000
April 8, 1999 Oct. 21, 1999 May 4, 2000 Sept. 13, 2001 June 27, 2002 June 27, 2002 Feb. 23, 2006 Nov. 29, 2006 April 14, 2008 April 18, 2009 April 12, 2010
April 6, 2009 Oct. 19, 2009 May 2, 2010 Sept. 11, 2011 June 25, 2012 June 25, 2007 Feb. 22, 2012 Nov. 27, 2012 April 13, 2014 April 18, 2015 April 12, 2016
73,200 110,000 63,000 81,500 28,500 14,285 5,600 23,000 – – –
– – 1,000 – 1,500 7,000 75,400 88,500 73,000 39,500 23,000
41,800 15,000 7,000 43,500 24,000 14,215 270,700 158,000 195,000 235,500 261,000 1,265,715
Faurecia – Registration document 2006
In accordance with IFRS 2, the four plans issued since November 7, 2002 have been measured at fair value as of the grant date. The measurement was performed using the Black & Scholes option pricing model, based on the following assumptions:
Plan of Nov. 28, 2002 Plan of April 14, 2004 Plan of April 19, 2005 Plan of April 13, 2006
Option exercise price (as of grant date) Share price as of grant date Vesting period Expected share dividend Zero coupon rate Expected share price volatility
€41.71 €41.82 4 years 2% 3.57% 40%
€58.18 €58.45 4 years 2% 3.33% 40%
€63.70 €62.05 4 years 2% 2.93% 40%
€53.80 €53.15 4 years 1,5% 3.50% 30%
Changes in fair value are recorded under payroll costs over the vesting period, with a corresponding adjustment to equity. The related expense in 2006 totaled €2.3 million, compared with €2.4 million in 2005. Stock purchase options Between 1999 and 2001, the Company granted stock options to the management of Group companies and their over 50%-owned subsidiaries, allowing them to purchase existing Faurecia shares. As of December 31, 2006, a total of 293,570 stock purchase options were outstanding. Details of the stock purchase option plans as of December 31, 2006 are set out in the table below:
Date of Shareholders’ Meeting Date of Board Meeting Exercise price (in €) Number of options granted Of which granted to senior executive management/ Executive Committee members Start of exercise period Expiry date of exercise period Options exercised Options forfeited Number of options outstanding as of Dec. 31, 2006
CONSOLIDATED FINANCIAL STATEMENTS
June 1, 1999 June 1, 1999 May 22, 2000
Sept. 6, 1999 Sept. 4, 2000
52.0 40.0 54.5
200,000 254,000 43,500
53,100 54,900 40,000
Sept. 6, 2004 Sept. 4, 2005 April 26, 2005
Sept. 5, 2009 Sept. 3, 2010 April 25, 2011
37,250 96,930 6,500
17,250 41,000 5,000
145,500 116,070 32,000 293,570
May 22, 2000 April 26, 2001 Total
22.3 ] TREASURY STOCK
74
FINANCIAL REPORT
As of December 31, 2006, Faurecia held 302,154 shares in treasury stock, reflecting the following transactions: • 200,000 shares contributed by ECTRA in 1999; • 19,613 shares purchased in 2000 for €0.8 million; • 96,361 shares purchased in 2001 for €4.2 million; • 96,860 shares purchased in 2002 for €3.8 million; • 32,745 shares sold in 2004 for €1 million; • 74,285 shares sold in 2005 for €2.3 million; • 30,000 shares purchased in 2005 for €1.8 million; • 33,650 shares sold in 2006 for €1.3 million. The cost of the shares held in treasury stock as of December 31, 2006 totaled €12.5 million, representing an average cost of €41.31 per share. At the year-end, Faurecia’s share price was €49.08. A 10% fall in the share price would represent a decrease of €4.91 per share, corresponding to a share price of €44.17 – above the average cost per share. These shares are being held for allocation on the exercise of stock options granted to directors and managers of the Group further to decisions of the Board of Directors on September 6, 1999, September 4, 2000 and April 26, 2001. The options outstanding as of December 31, 2006 are exercisable for 293,570 shares (see note 22.2 b)
Faurecia – Registration document 2006
NOTE
[23]
MINORITY INTERESTS
Changes in minority interests were as follows:
(in € millions) 2006 2005 2004
Balance as of January 1 Minority interests in share issues by subsidiaries Other changes in scope of consolidation (1) Minority interests in net income for the year Dividends paid to minority shareholders Translation adjustments Balance as of December 31
(1) Including: 2004: buyout of minority interests in Faurecia Automotive GmbH Other minority interests in companies consolidated in 2004 2005: buyout of minority interests in Daeki, Faurecia Lecotex and Faurecia Riverside
64.4
10.3 (6.2) (4.3) 64.2
60.9 0.7 (1.0) 9.7 (11.6) 5.7 64.4
62.1 (7.8) 11.5 (3.7) (1.2) 60.9
(11.0) 3.2
NOTE
[24]
PROVISIONS FOR PENSIONS AND OTHER EMPLOYEE BENEFITS
24.1 ] PROJECTED BENEFIT OBLIGATION
(in € millions) Dec. 31, 2006 Dec. 31, 2005 Dec. 31, 2004
Projected benefit obligation – Pension benefit obligations – Healthcare costs
291.1 34.9 326.0
328.0 30.4 358.4
305.5 24.2 329.7
Funded status: – Provisions booked in the accounts – External funds (market value) – Plan surpluses(1) – Actuarial gains and losses Total
(1) Plan surpluses are included in “Other non-current assets”.
193.3 97.2 (0.1) 35.6 326.0
201.1 106.5 (0.1) 50.9 358.4
239.9 89.9 0 (0.1) 329.7
75
FINANCIAL REPORT
24.2 ] CHANGE IN THE PROVISION FOR PENSIONS AND EMPLOYEE BENEFITS Movements in the provision in 2004, 2005 and 2006 were as follows:
(in € millions) 2006 2005 2004
Balance at beginning of year Effect of changes in Group structure (provision net of plan surpluses) Allocations for the year Expenses charged to the provision Payments to external funds Other movements Balance at end of year
The overall provision includes: provision for pension benefit obligations provision for healthcare costs
201.1 19.9 (13.7) (11.5) (2.5) 193.3
165.2 28.1 193.3
239.9 (21.3) (14.7) (10.4) 7.6 201.1
170.2 30.8 201.0
242.1 (2.1) 20.5 (9.4) (8.5) (2.6) 239.9
215.3 24.6 239.9
Faurecia – Registration document 2006
CONSOLIDATED FINANCIAL STATEMENTS
24.3 ] PENSION LIABILITY
Description of the plans In addition to the pension benefits provided under local legislation in the various countries where Group companies are located, Group employees are entitled to supplementary pension benefits and retirement bonuses. Assumptions used The Group’s obligations under these plans are determined on an actuarial basis, using the following assumptions: • retirement age – generally between 60 and 65 for employees in France; • staff turnover assumptions, based on the economic conditions specific to each country and/or Group company; • mortality assumptions specific to each country; • estimated future salary levels, based on inflation assumptions and forecasts of individual salary increases for each country; • the expected return on external funds; • discount and inflation rates based on local conditions. The main actuarial assumptions used in the past three years to measure the pension liability are as follows:
CONSOLIDATED FINANCIAL STATEMENTS
(in %)
Euro zone
United Kingdom
United States
Discount rate 2006 2005 2004 Inflation rate 2006 2005 2004 Expected return on external funds 2006 2005 2004
4.50% 4.00% 4.50% 2.00% 2.00% 2.00% 4.00% 4.00% 4.00%
5.50% 5.00% 5.30% 2.80% 2.50% 2.50% 8.00% 8.00% 8.00%
5.75% 5.70% 6.00% – 4.00% 4.00% 8.25% 8.25% 9.00%
Information on external funds External funds are invested as follows: 76
FINANCIAL REPORT
(in %) Equities 2006 Bonds Equities 2005 Bonds Equities 2004 Bonds
France United Kingdom United States
16% 89% 63%
84% 11% 37%
15% 72% 60%
85% 28% 40%
15% 72% 60%
85% 28% 40%
Provision for the pension liability recorded in the balance sheet
(in € millions) France 2006 Outside France Total France 2005 Outside France Total France 2004 Outside France Total
Balance of provision at beginning of year Effect of changes in Group structure (provision net of plan surpluses) Allocations for the year Expenses charged to the provision Payments to external funds Other movements Balance of provision at end of year
90.3
79.9
170.2
134.1
81.1
215.2
132.1 (4.2) 12.3 (3.5) (2.6) 134.1
82.6 2.1 6.5 (3.1) (5.9) (1.0) 81.2
214.7 (2.1) 18.8 (6.6) (8.5) (1.0) 215.3
10.4 (7.7) (6.6) 86.4
5.3 (2.1) (4.9) 0.6 78.8
15.7 (9.8) (11.5) 0.6 165.2
(31.4) (8.2) (4.2) 90.3
7 (2.1) (6.3) 0.2 79.9
(24.4) (10.3) (10.5) 0.2 170.2
Faurecia – Registration document 2006
Changes in the pension liability
(in € millions) France 2006 Outside France Total France 2005 Outside France Total France 2004 Outside France Total
Projected benefit obligation At beginning of year Service cost Interest cost Benefits paid Change in fair value of external funds – amount – as a % of the projected benefit obligation Other movements (including translation adjustment) Curtailment - Settlement Impact of plan closures and amendments At end of year Funded status At beginning of year Expected return on external funds Change in fair value of external funds – amount – as a % of the projected benefit obligation Other movements (including translation adjustment) Employer contributions Benefits paid Curtailment - Settlement Impact of plan closures and amendments At end of year Deferred items At beginning of year New deferred items Amortization of deferred items Other movements (including translation adjustment) Curtailment - Settlement Impact of plan closures and amendments At end of year Balance of provision at end of year
143.0 9.1 6.1 (15.6) (7.5)
185.0 5.5 7.8 (6.0) (7.1)
328.0 14.6 13.9 (21.6) (14.6)
145.9 11.1 6.0 (13.0) 36.3
159.7 4.3 9.2 (2.3) (2.9) 17.0
305.5 15.4 15.2 (15.3) 33.4 0.0 17.0 (8.1) (35.1) 328.0
151.4 10.9 7.4 (8.3) (1.4) (5.5) (8.6)
151.5 4.9 6.9 (5.7) 4.2 (2.1)
302.9 15.8 14.2 (14.0) 2.8 0.0 (7.6) (8.6) 0.0 305.5
CONSOLIDATED FINANCIAL STATEMENTS
(7.6)
(7.5) (14.1)
(7.5) (21.7) 0.0 291.1
(8.1) (35.1) 143.0 185.0
127.5
163.6
145.9
159.7
15.7 0.6 (0.2)
90.8 5.6 1.8 (7.3) 4.9 (3.7) (9.7)
106.5 6.2 1.6 (7.3) 11.5 (11.6) (9.7)
15.9 0.6 (0.2)
74.0 6.3 (9.5) 13.9 6.3 (0.2)
89.9 6.9 (9.7) 0.0 13.9 10.4 (5.0) 0.0
19.3 0.7 (0.8) (1.2) (2.6) 0.5 0.0 15.9
68.4 5.2 (1.0) (1.8) (5.9) 9.2 0.0 74.0
87.6 5.9 (1.8) 0.0 (3.0) (8.5) 9.7 0.0 89.9
6.6 (7.9)
4.2 (4.8)
14.8
82.4
97.2
15.7
90.8
106.5
37.0 (7.3) (2.0) (1.4)
26.3 86.4
2.4 78.8
28.7 165.2
37.0 90.3
14.2 80.0
51.2 170.3
(4.1) 134.1
4.5 81.2
0.4 215.2
Periodic pension cost Periodic pension cost is recognized: - in “Operating income” for the portion relating to service cost and amortization of deferred items; - in “Other financial income and expense” for the portion relating to the expected return on external funds and interest cost. Periodic pension cost can be analyzed as follows:
(in € millions) France 2006 Outside France Total France 2005 Outside France Total France 2004 Outside France Total
Service cost Interest cost Change in top-up scheme Actual return on external funds Curtailment - Settlement Amortization of deferred items Other
Total
(9.1) (6.1) 0.6 6.2 (2.0)
(10.4)
(5.5) (7.8) 5.6 2.7 (0.3) 0.0
(5.3)
(14.6) (13.9) 0.0 6.2 8.9 (2.3) 0.0
(15.7)
(11.1) (6.0) 39.9 0.6 9.0 (1.1)
31.3
(4.3) (9.2) 0.0 6.3 0.3
(6.9)
(15.4) (15.2) 39.9 6.9 9.0 (0.8)
24.4
(7.3) (7.4) 0.7 5.1 (3.4)
(12.3)
(4.9) (6.9) 5.2 0.0
(6.6)
(12.3) (14.2) 0.0 5.9 5.1 (3.4)
(18.9)
Faurecia – Registration document 2006
FINANCIAL REPORT
14.2 (9.1) (0.3) (0.8) (1.6)
51.2 (16.4) (2.3) (0.8) (3.0)
(4.1) 36.5 (1.1) 0.9 4.9
4.4 6.6 0.3 2.9
0.3 43.1 (0.8) 2.9 0.9 4.9
0.0 (0.6) 0.0 (0.1) (3.5) 0.0
0.6 5.2 0.0 (1.3) 0 0.0
0.6 4.6 0.0 (1.4) (3.5) 0.0
77
CONSOLIDATED FINANCIAL STATEMENTS
a) The defined benefit plan provided to certain employee categories in a number of Group companies in France was discontinued in 2005 and a new supplementary pension scheme was set up for all managerial employees in France. This scheme comprises: • a defined contribution plan relating to salary tranches A and B, whose contribution rate varies depending on the employee’s seniority within Faurecia; • a defined benefit plan relating to salary tranche C. The benefits under the previous plan were maintained for managers aged over 53 with at least ten years’ seniority as of December 31, 2005. The above changes in 2005 led to a settlement and/or significant definitive curtailment of future entitlements. In accordance with IAS 19, the related impact – amounting to €39.9 million – was deducted from payroll costs. At the same time, actuarial losses in the amount of €22.8 million were recognized. The net impact on the total liability was therefore a decrease of €17.1 million. b) Under the French Social Security financing act for 2007, as from January 1, 2010 collective agreements may no longer provide the possibility for employers to require an employee to retire before the age of 65 even if the employee is already entitled to a full-rate pension. Employees may still elect for voluntary retirement as from the age of 60 but they will receive a lower statutory retirement bonus which will be subject to tax and social security charges. The act does however provide that between January 1, 2010 and January 1, 2014 employees may retire before the age of 65 if the decision is taken jointly with their employer. In such a case the employee will be entitled to a statutory retirement indemnity which is eligible for tax and social security exemptions. The assumption used to calculate the Group’s pension liability as of December 31, 2006 was based on voluntary retirement from the age of 60 rather than compulsory retirement for employees covered by the collective bargaining agreement applicable in the metallurgical industry. The impact of this change will be a reduction in the projected benefit obligation of €5.3 million, or 7.4%. This amount will be recorded under actuarial gains and losses in 2007 and will have no impact on net income for the year. c) The defined benefit plan that existed within one of the Group’s US subsidiaries has been closed to new participants and the benefits of existing participants have been frozen.
24.4 ] HEALTHCARE COSTS
In addition to pension plans, some Group companies – mainly in the United States – cover the healthcare costs of their employees. The related liability can be analyzed as follows:
(in € millions) Dec. 31, 2006 Dec. 31, 2005 Dec. 31, 2004
Foreign companies Total
28.1 28.1
30.8 30.8
24.6 24.6
Expenses recognized in connection with this liability break down as follows: 78
FINANCIAL REPORT
(in € millions) Dec. 31, 2006 Dec. 31, 2005 Dec. 31, 2004
Service cost Interest cost(1) Amortization of deferred items Total
(1) Interest cost is recorded under “Other financial income and expense”.
(2.3) (1.8) (0.1) (4.2)
(1.3) (1.7) (0.1) (3.1)
(0.1) (1.5) 0.0 (1.6)
The impact of a one percentage point increase in medical cost trend rates would be 10% rises in service cost, financial expenses and the projected benefit obligation. The impact of a one percentage point decrease in medical cost trend rates would be 9% reductions in service cost, financial expenses and the projected benefit obligation.
NOTE
[25]
OTHER PROVISIONS
Dec. 31, 2006 Dec. 31, 2005 Dec. 31, 2004
(in € millions)
Restructuring Early-retirement Employee profit-sharing Long-term contract losses and customer warranties Claims and litigation Long-service awards Other Total
161.6 6.2 1.8 47.5 20.9 21.2 24.5 283.7
89.0 6.4 3.8 46.2 16.9 21.6 33.2 217.1
61.6 9.2 9.7 43.0 16.7 18.7 42.5 201.4
Faurecia – Registration document 2006
Movements in these provisions in 2006 were as follows:
(in € millions) Balance as of Dec. 31, 2005 Allocations Expenses charged to provisions Reversals (1) Effect of changes in Group structure and other movements Balance as of Dec. 31, 2006
Restructuring Early-retirement Employee profit-sharing (2) Long-term contract losses and customer warranties Claims and litigation Long-service awards Other Total
(1) Surplus provisions.
89.0 6.4 3.8 46.1 17.0 21.6 33.2 217.1
164.9 0.8 2.1 22.4 8.7 1.1 7.7 207.7
(87.8) (3.8) (0.5) (18.6) (4.7) (1.5) (14.4) (131.3)
(1.5)
(3.0) 2.8 (3.6) (2.4) (0.1) (0.5) (6.8)
(1.5) (3.0)
161.6 6.2 1.8 47.5 20.9 21.2 24.5 283.7
(2) The provision for employee profit-sharing concerns French companies of the Group.
Claims and litigation In the normal course of business, the Group may be involved in disputes with its customers, suppliers, tax authorities in France or abroad, or other third parties. To the best of the Group’s knowledge, no claims or litigation are in progress or pending that are likely to have a material impact on the Group’s consolidated financial position. Long-service awards The Group calculates its liability for the payment of long-service awards using the same method and assumptions as for its pension liability. A provision has been set aside for long-service awards, as follows:
(in € millions) Dec. 31, 2006 Dec. 31, 2005 Dec. 31, 2004
French companies Foreign companies Total
10.7 10.5 21.2
11.2 10.4 21.6
9.5 9.2 18.7
NOTE
[26]
NET DEBT
79
Dec. 31, 2006 Dec. 31, 2005 Dec. 31, 2004
26.1 ] DETAILED BREAKDOWN
(in € millions)
Perpetual notes (TDI) Bonds Bank borrowings Other borrowings Obligations under finance leases Sub-total – long-term debt Current portion of long-term debt Short-term debt Derivatives (net) Total Cash and cash equivalents Net debt 26.2 ] MATURITIES OF LONG-TERM DEBT
(in € millions) 2008 2009
– 300.0 725.1 9.2 31.3 1,065.6 83.9 1,150.4 (14.8) 2,285.1 (586.6) 1,698.5
– 300.0 251.9 9.5 37.6 599.0 47.9 1,574.5 6.1 2,227.5 (623.3) 1,604.2
5.3 466.8 6.3 42.6 521.0 60.2 1,701.8 6.9 2,289.9 (746.6) 1,543.3
2010
2011
2012 and beyond
Total
Bonds Bank borrowings Other borrowings Obligations under finance leases Total as of December 31, 2006
15.3 0.3 7.6 23.2
703.8 1.6 7.9 713.3
300.0 2.4 4.8 5.7 312.9
1.7 2.0 3.6 7.3
1.9 0.5 6.5 8.9
300.0 725.1 9.2 31.3 1,065.6
Faurecia – Registration document 2006
FINANCIAL REPORT
CONSOLIDATED FINANCIAL STATEMENTS
26.3 ] PERPETUAL NOTES
On October 15, 1991, Faurecia (formerly Bertrand Faure) issued subordinated perpetual notes amounting to FRF900 million (€137.2 million) paying interest at the six-month Pibor plus 1.1% through October 15, 2006 and a symbolic rate of interest thereafter. The notes were repackaged in 1996 and the subordination clause was eliminated. In the pro forma balance sheet as of December 31, 1997, the notes were stated at their estimated discounted present value on that date of €50 million, determined on the basis of the value of future cash flows discounted at a rate of 4.21%, corresponding to the six-month Pibor at the end of 1997 plus a 0.4% margin. As from 1998, the residual value was amortized on the basis of the repayments that would have been due on a fixed-rate loan bearing interest of 4.21% over the period remaining to October 15, 2006.
26.4 ] EUROBOND AND SYNDICATED LINE OF CREDIT
CONSOLIDATED FINANCIAL STATEMENTS
On October 5, 2005, Faurecia issued €300 million worth of bonds redeemable in October 2010. In addition, since November 2004, Faurecia has had access to a medium-term syndicated line of credit of up to €1,600 million which can be drawn down for renewable periods of one, three or six months through November 2009. As of December 31, 2006, the undrawn portion of this credit line amounted to €900 million. The contracts relating to these two forms of borrowings include covenants, certain of which concern financial ratios. As of December 31, 2006, the Group complied with all of these ratios, as shown in the table below:
Type of ratio
Contractual ceiling/floor Ratio
Value as of Dec. 31, 2006 Amount
Adjusted net debt (1) EBITDA(2) EBITDA (2) net interest
3,50 ceiling 4,50 floor
2.97 6.78
1,743.6/587.4 587.4/86.6
(1) Adjusted net debt = consolidated net debt + adjustments for certain commitments given, based on definitions provided in the credit contract (e.g. mortgages or collateralized liabilities). (2) Earnings before interest, tax, depreciation and amortization = operating margin + depreciation, amortization and provisions for impairment in value of property, plant and equipment and intangible assets.
26.5 ] SECURITIZATION AND FACTORING PROGRAMS
Part of Faurecia’s financing requirements is met through receivables securitization and factoring programs (see note 18). As of December 31, 2006, financing under these programs totaled €628.9 million (€749 million as of December 31, 2005). Of this amount €248.9 million came from the sale of receivables with a subordinated deposit and €380 million from factoring programs.
26.5.1 Securitization program
80
FINANCIAL REPORT
(in € millions) Dec. 31, 2006 Dec. 31, 2005 Dec. 31, 2004
Financing Subordinated deposit, deducted from the related liability
248.9 78.6
370.0 85.7
370.0 81.9
26.5.2 Factoring program
Only the receivables sold under the initial and renewable factoring programs have been derecognized.
(in € millions) Dec. 31, 2006 Dec. 31, 2005 Dec. 31, 2004
Initial factoring program Renewable factoring program – Financing – Receivables sold and derecognized 26.6 ] ANALYSIS OF LONG- AND SHORT-TERM DEBT BY INTEREST RATE AND MATURITY
120.0 260.0 126.5
90.5 288.5 122.0
20.8 299.0 152.4
As of December 31, 2006, 86.4% of the Group’s borrowings were at variable rates, taking into account swap transactions. The Group has set up derivatives to hedge the interest rate risk on the interest payable on its borrowings between January 2007 and December 2009 (see note 27.2).
(in € millions) Before swaps After swaps
Variable rate borrowings Fixed rate borrowings Total
1,969.8 315.3 2,285.1
1,973.8 311.3 2,285.1
Faurecia – Registration document 2006
Borrowings (taking into account currency swaps) break down as follows by repayment currency:
(in € millions) Dec. 31, 2006 Dec. 31, 2005 Dec. 31, 2004
Euro US dollar Other currencies Total
1,902.5 184.2 198.4 2,285.1
83.3% 8.1% 8.7% 100%
1,895.7 230.5 101.3 2,227.5
85.1% 10.4% 4.5% 100.0%
2,114.2 138.5 37.2 2,289.9
92.3% 6.0% 1.6% 100.0%
As of December 31, 2006, the weighted average interest rate on outstanding borrowings was 3.85%.
NOTE
[27]
HEDGING OF CURRENCY AND INTEREST RATE RISKS
27.1 ] HEDGING OF CURRENCY RISKS
(in € millions) Currency sold/ currency purchased
USD/ EUR
USD/ CAD
GBP/ EUR
CAD/ EUR
EUR/ JPY
EUR/ CZK
Other/ ZAR
EUR SEK
EUR/ PLN
EUR/ RON
EUR/ SKK
EUR/ TND
Other/ BRL
Other/ MXN
TOTAL
Trade receivables (net of payables) Financial assets (net of liabilities) Net position before hedging Hedging Net balance sheet position after hedging Hedging of future receivables and payables
7.5 0.0 7.5 (2.6) 4.9
6.9 2.5 9.4 (9.1) 0.2
6.9 (3.9) 2.9 0.0 2.9 0.0
GBP
0.2 0.0 0.2 0.0 0.2 0.0
CAD
3.1 0.0 3.1 (3.2) (0.1) (4.0)
JPY
20.8 0.2 20.9 0.0 20.9 0.0
CZK
19.2 1.7 20.9 (15.7) 5.2 (4.5)
ZAR
(1.8) 3.5 1.7 0.0 1.7 0.0
SEK
64.4 (31.0) 33.5 0.0 33.5 (84.0)
PLN
(0.2) 0.6 0.4 (0.3) 0.1 (2.7)
KRW
(3.0) 0.0 (3.0) 0.0 (3.0) 0.0
Total
1.3 (3.3) (2.0) 0.0 (2.0) 0.0
4.5 0.0 4.5 0.0 4.5 0.0
4.9 134.5 (28.3) (58.0) (23.4) 76.6 0.0 (31.0) (23.4) 45.5
(6.5) (27.3)
USD
0.0 (129.0)
48.8
19.6
8.2
28.7
4.4
(6.6)
76.4
(2.0) 337.4
Forward purchase and sale contracts (excluding swaps relating to the refinancing of inter-company loans) and call and put options are as follows:
(in € millions) USD/EUR USD/CAD EUR/ZAR EUR/PLN EUR/JPY EUR/RON TOTAL
Forward sales Forward purchases Call options Put options
0.2
12.1
16.5 (8.3) 12.0 84.0
5.2
3.0
9.0
24.3
2.0
37.0 (8.3) 0 131.3 160.0
Hedging instruments are recorded in the balance sheet at fair value. Calculations of fair value are based on measurements confirmed by banks.
(in € millions) Dec. 31, 2006 Dec. 31, 2005 Dec. 31, 2004
Fair value of currency hedges of operating receivables and payables – Assets – Liabilities Fair value of instruments used to hedge financial assets and liabilities – Assets – Liabilities Total
2.1 – 0.6 – 2.7
5.5 – – (2.3) 3.2
7.2 – 1.5 – 8.7
Faurecia – Registration document 2006
FINANCIAL REPORT
Inter-company loans in foreign currencies swapped for euros 160.0
81
CONSOLIDATED FINANCIAL STATEMENTS
Currency risks relating to the commercial transactions of the Group’s subsidiaries are managed centrally by Faurecia, principally using forward purchase and sale contracts and options, as well as foreign currency financing. Subsidiaries outside the euro zone are granted inter-company loans in their operating currencies. As such loans are refinanced in euros, exchange-rate risk is hedged through swaps.
Changes in fair value break down as follows:
2006 2005
Effective portion of gains and losses on hedges of commercial receivables and payables recorded under operating margin (1) Effective portion of gains and losses on hedges of forecast transactions recorded in equity Ineffective portion of gains and losses on hedges, recorded under other financial income and expense Change in fair value of hedges of financial assets and liabilities
(1.3) (0.8) (0.2) (0.3) (2.6)
(1.9) 0.3 (1.1) (3.9) (6.6)
(1) The impact corresponding to the effective portion of gains and losses on hedges of forecast transactions was recorded in equity as of December 31, 2005, for €4.1 million. This amount was written back to the income statement in 2006.
The impact of cash flow hedges on income and equity was as follows in 2006 and 2005:
(in € millions) 2006 2005
Fair value at beginning of year Effective portion of gains and losses recorded in equity Derecognition on exercise or disposal of instruments
CONSOLIDATED FINANCIAL STATEMENTS
4.1 3.3 (4.1) 3.3 (2.1) (2.1) 3.3
3.8 4.1 (3.8) 4.1 (2.7) – (2.7) 4.1
Fair value at year-end Ineffective portion of hedges recorded in the income statement Amounts taken to the income statement – hedge accounting no longer applied Pre-tax impact Net impact on equity
27.2 ] INTEREST RATE HEDGES
Fixed rate borrowings of €4.0 million due in more than one year have been swapped for variable rate debt with the same maturity. The table below provides a schedule of maturities of financial assets and liabilities, according to the interest repricing date.
(in € millions) Within 1 year Intraday to 1 year Fixed rate Repricing date 1 to 5 years Beyond 5 years Total
82
FINANCIAL REPORT
Borrowings Cash and cash equivalents Net balance sheet position Fixed rate / variable rate swaps Net position after hedging
1,940.5 586.6 1,353.9 4.0 1,357.9
4.0
340.6
0
2,285.1 586.6 1,698.5 0.0
4.0 (4.0) 0.0
340.6
340.6
0
1,698.5
Caps and other options in euros and US dollars have been taken out to hedge interest rate risk on the interest payable on the Group’s borrowings between January 2007 and December 2009. Variable rate / fixed rate swaps in euros and US dollars have also been set up as hedges in relation to interest payable over the same period. In addition, floors have been purchased in order to benefit from any lowering of medium-term interest rates on fixed rate debt.
(in € millions) 2007 2008 2009
Caps and other options Variable rate / fixed rate swaps Floors
2,940 132 639
3,711
1,508 76 75
1,659
795 263 225
1,283
Interest rate hedging instruments are recorded in the balance sheet at fair value. Calculations of fair value are based on measurements confirmed by banks. As of December 31, 2006 the fair value of hedging instruments amounted to €25.9 million. Premiums payable as of December 31, 2006 totaled €11.7 million, and will be paid in instalments between 2007 and 2009. As these hedges are not accounted for in accordance with the hedge accounting principles set out in IAS 39, changes in their fair value are recorded directly in “Other financial income and expense”. In 2006, these changes represented a net gain of €7.9 million.
Faurecia – Registration document 2006
The related instruments are recognized in the balance sheet as follows:
(in € millions) Dec. 31, 2006 Dec. 31, 2005 Dec. 31, 2004
Fair value of interest rate instruments Premiums payable through 2010 Net value
25.9 (11.7) 14.2
12.6 (16.4) (3.8)
2.9 (11.3) (8.4)
NOTE
[28]
ACCRUED TAXES AND PAYROLL COSTS
Dec. 31, 2006 Dec. 31, 2005 Dec. 31, 2004
(in € millions)
Accrued payroll costs Accrued payroll taxes Other Total
183.2 116.0 161.5 460.7
173.3 122.4 145.1 440.8
160.0 115.3 122.5 397.8
NOTE
[29]
OTHER PAYABLES
Dec. 31, 2006 Dec. 31, 2005 Dec. 31, 2004
(in € millions)
Due to suppliers of non-current assets Deferred income Other Total
50.3 11.3 56.7 118.3
90.9 5.7 34.0 130.6
53.9 4.8 40.6 99.3
NOTE
[30]
COMMITMENTS GIVEN AND CONTINGENT LIABILITIES
30.1 ] COMMITMENTS GIVEN
(in € millions) Dec. 31, 2006 Dec. 31, 2005 Dec. 31, 2004
27.9 120.5 246.7
17.0 95.0 6.6 233.1
Total
284.9
Future minimum lease payments under operating leases break down as follows:
(in € millions) Dec. 31, 2006 Dec. 31, 2005 Dec. 31, 2004
Y+1 Y+2 Y+3 Y+4 Y + 5 and beyond
31.1 16.1
24.6 20.6
19.4 15.9
11.5 10.0 12.4
81.1
16.1 12.9 34.3
108.5
12.1 10.4 34.1
91.9
Expiry dates of mortgages and guarantees:
(in € millions) Dec. 31, 2006
– Within 1 year – In 1 to 5 years – Beyond 5 years
13.3 17.5 14.3 45.1
Faurecia – Registration document 2006
FINANCIAL REPORT
Future minimum lease payments under operating leases Debt collateral: – Pledged shares of Group companies – Mortgages Guarantees for the return of prepayments Other debt guarantees Firm orders for property, plant and equipment Other
81.1
108.5
91.9
83
17.2 19.5 22.0 16.1 118.3 0.5 22.6
CONSOLIDATED FINANCIAL STATEMENTS
30.2 ] CONTINGENT LIABILITIES
Individual training entitlement In accordance with the provisions of French Act no. 2004-391 dated May 4, 2004 relating to professional training, employees of the Group’s French companies are entitled to at least twenty hours - training per calendar year, which may be carried forward for up to six years. If all or part of the entitlement is not used within six years, it is capped at 120 hours. In 2006, the average utilization rate of this entitlement was 2%. The number of unused accumulated training hours at the year-end totaled 923,000. No provision was recorded in the financial statements for these individual training entitlements.
NOTE
[31]
RELATED PARTY TRANSACTIONS
31.1 ] TRANSACTIONS WITH PSA PEUGEOT CITROËN
The Faurecia Group is managed independently and transactions with the PSA Peugeot Citroën Group are conducted on arm’s length terms. Related party transactions with the PSA Peugeot Citroën Group were as follows in 2006, 2005 and 2004:
CONSOLIDATED FINANCIAL STATEMENTS
(in € millions) 2006 2005 2004
Sales Purchases of products, services and materials Receivables Payables
2,701.2 31.8 776.1 55.4
2,721.9 32.0 735.7 21.2
2,847.0 24.9 739.5 31.1
31.2 MANAGEMENT COMPENSATION
Total compensation for 2006 awarded to the members of the Board of Directors and the Group Executive Committee amounted to €7,088,269 including directors’ fees of €188,574, compared with the year-earlier figures of €6,951,510 and €192,000, respectively. In addition to this compensation, 140,000 Faurecia stock subscription options were awarded to management during the year, and the amount recognized with respect to share-based payments to management was €980,000.
NOTE
[32]
EMPLOYEES
Dec. 31, 2006 Dec. 31, 2005 Dec. 31, 2004
The number of employees of fully-consolidated companies as of December 31, 2006, 2005 and 2004 was as follows:
84
FINANCIAL REPORT
Europe – France – Germany – Other European countries Sub-total Europe Outside Europe Total
20,276 9,364 20,593 50,233 15,449 65,682
22,148 10,050 17,299 49,497 12,225 61,722
24,504 10,304 17,503 52,311 10,196 62,507
The number of employees by business segment was as follows:
Dec. 31, 2006 Dec. 31, 2005 Dec. 31, 2004
Interior modules Other modules Holding companies Total
54,506 10,657 519 65,682
51,395 10,073 254 61,722
52,606 9,666 235 62,507
NOTE
[33]
INFORMATION ON THE CONSOLIDATING COMPANY
The consolidated accounts of the Group are included in the consolidated financial statements of the PSA Peugeot Citroën Group, 75 avenue de la Grande-Armée, 75116 Paris, France. As of December 31, 2006, Peugeot SA held 71.25% of the capital and 83.75% of the voting rights of Faurecia SA, the parent company of the Faurecia Group.
NOTE
[34]
DIVIDENDS
The Board of Directors proposes that no dividend be paid with respect to the 2006 fiscal year.
Faurecia – Registration document 2006
Consolidated companies as of December 31, 2006
Country
% interest
% control(1)
I – FULLY-CONSOLIDATED COMPANIES Faurecia Financière Faurecia SFEA – Société Foncière pour l’Équipement Automobile Faurecia Investments (merged with Sieloir) Faurecia Automotive Holdings (merged with Faurecia Automotive Intérieur France) Blériot Investissements Faurecia Services Groupe Faurecia Global Purchasing Faurecia Exhaust International Faurecia Werwaltungs GmbH Société Internationale de Participations (SIP) Faurecia Netherlands Holding BV United Parts Exhaust Systems AB Faurecia USA Holdings, Inc AUTOMOTIVE SEATING AND VEHICLE INTERIORS Faurecia Sièges d’Automobile SAS Faurecia Industries EAK Composants pour l’Automobile SAS EAK Composants pour l’Automobile SNC Trecia Siebret Siemar Sienor Sieto Sieval Sotexo Siedoubs Sielest ECSA-Études et Construction de Sièges pour l’Automobile Faurecia Intérieur Industrie SNC Faurecia Automotive Industrie SNC Automotive Sandouville Société Automobile du Cuir de Vesoul Faurecia Autositze GmbH & Co KG Faurecia Deutschland Holding GmbH & Co-KG Faurecia Automotive GmbH Faurecia Innenraum Systeme GmbH Industriepark Sassenburg GmbH Faurecia Industrie NV Faurecia Asientos Para Automóvil Espana SA Asientos de Castilla Leon SA Asientos del Norte SA
(1) Total interest of fully-consolidated companies.
France ” ” ” ” ” ” ” ” Germany Belgium Netherlands Sweden USA
Parent company 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
France ” ” ” ” ” ” ” ” ” ” ” ” ” ” ” ” ” Germany ” ” ” ” Belgium Spain ” ”
100.00 100.00 51.00 51.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
100.00 100.00 51.00 51.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
85
FINANCIAL REPORT
Faurecia – Registration document 2006
CONSOLIDATED FINANCIAL STATEMENTS
Country
% interest
% control(1)
86
FINANCIAL REPORT
Industrias Cousin Frères SL Tecnoconfort Faurecia Automotive España SL Faurecia Interior Systems España SA Faurecia Interior Systems SALC España SL Cartera e inversiones Enrich SA Asientos de Galicia SL Valencia Modulos de Puerta SL Faurecia AST Luxembourg SA Faurecia Automotive Seating BV Faurecia Assentos de Automóvel, Lda Sasal Faurecia Sistemas de Interior de Portugal. Componentes para Automóvel SA (formerly SAI Automotive Portugal) EDA – Estofagem de Assentos Lda Faurecia Automotive Seating UK Ltd Faurecia Midlands Ltd SAI Automotive Telford Ltd SAI Automotive Fradley Ltd SAI Automotive Washington Ltd Faurecia Interior Systems Sweden AB Faurecia Fotele Samochodowe SpZoo Faurecia Walbrzych SpZoo Faurecia Legnica SpZoo (formerly SAI Automotive Polska SpZoo) Faurecia Systemy Kierownicze SpZoo Faurecia Gorzow SpZoo Faurecia Lecotex AS Faurecia Interior Systems Bohemia (formerly SAI Automotive Bohemia Sro) Faurecia Components Písek Sro Faurecia Seating Talmaçiu Sro Faurecia Leather Kosice Sro Faurecia Slovakia Sro Faurecia Interior Systems Bratislava Sro Faurecia Polifleks Otomotiv Sanayi Ve Ticaret Anonim Sirketi Faurecia Interior Systems South Africa (Proprietary) Ltd Société Tunisienne d’Équipements Automobiles Faurecia Automotive Seating Canada Ltd Faurecia Canada Investment Company Faurecia Automotive Seating Inc. Faurecia Interior Systems Inc. Faurecia Automotive do Brasil Ltda Faurecia Duroplast México, SA de CV Servicios Corporativos de Personal Especializado, SA de CV Faurecia Interior Systems México, SA de CV CFXAS (Changchun Faurecia Xuyang Automotive Seating Co. Ltd) Faurecia (Changchun) Automotive Systems Co. Ltd Faurecia-GSK (Wuhan) Automotive Seating Co. Ltd Faurecia (Wuxi) Seating Components Co. Ltd Faurecia (Shanghai) Management Cy, Ltd Faurecia Automotive Seating India Private Ltd Faurecia Japon KK (merged with Faurecia Interior Systems KK)
CONSOLIDATED FINANCIAL STATEMENTS
” ” ” ” ” ” ” ” Luxembourg Netherlands Portugal ” ” ” United Kingdom ” ” ” ” Sweden Poland ” ” ” ” Czech Republic ” ” Romania Slovakia ” ” Turkey South Africa Tunisia Canada ” USA ” Brazil Mexico ” ” China ” ” ” ” India Japan
50.01 50.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 50.00 50.00 100.00 60.00 100.00 51.00 100.00 100.00 100.00 100.00
50.01 50.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 50.00 50.00 100.00 60.00 100.00 51.00 100.00 100.00 100.00 100.00
(1) Total interest of fully-consolidated companies.
Faurecia – Registration document 2006
Country
% interest
% control(1)
EXHAUST SYSTEMS AND FRONT ENDS Faurecia Systèmes d’Échappement Faurecia Bloc Avant Faurecia Cooling System Faurecia Abgastechnik GmbH Faurecia Kunststoffe Automobilsysteme GmbH Leistritz Abgastechnik Stollberg GmbH Faurecia Sistemas de Escape España, SA Faurecia Sistemas de Escape Portugal Lda Faurecia Exhaust Systems AB Faurecia Magyarorszag Kipufogo-Rendszer Kft Faurecia Exhaust Systems Sro Faurecia Automotive Czech Republic Sro Faurecia Exhaust Systems South Africa (Proprietary), Ltd Faurecia Exhaust Systems, Inc. Faurecia Sistemas de Escape Argentina SA Faurecia Sistemas de Escapamento do Brasil Ltda Faurecia Exhaust Mexicana SA de CV Exhaust Services Mexicana SA de CV Faurecia Honghu Exhaust Systems Shanghai Co. Ltd (formerly SHEESC) Faurecia Tongda Exhaust System (Wuhan) Co. Ltd (formerly TEEC) Faurecia Exhaust Systems Changchun Faurecia (Shanghai) Business Consulting Cy FESK (Faurecia Exhaust Systems Korea) Daeki Faurecia Corporation II – COMPANIES ACCOUNTED FOR BY THE EQUITY METHOD AUTOMOTIVE SEATING AND VEHICLE INTERIORS Componentes de Vehiculos de Galicia Copo Ibérica SA Vanpro Assentos Lda ARSED Teknik Malzeme Ticaret Ve Sanayi AS WBF Technologies Bertrand Faure Argentina SA PAB SA Kwang Jin Faurecia Co. Ltd Faurecia NHK Co. Ltd Faurecia NHK Kyushu Ltd EXHAUST SYSTEMS AND FRONT END SAS Group SAS Automotive France Cockpit Automotive Systems Douai SNC SAS Autosystemtechnik Verwaltungs GmbH SAS Autosystemtechnik GmbH & Co. KG SAS Autosystemtechnik SA SAS Autosystemtechnik de Portugal Unipessoal Ltda SAS Autosystemtechnik Sro SAS Automotriz Argentina SA SAS Automotive do Brasil Ltda
(1) Total interest of fully-consolidated companies.
France ” France Germany ” ” Spain Portugal Sweden Hungary Czech Republic ” South Africa USA Argentina Brazil Mexico ” China ” ” ” South Korea South Korea
100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 51.00 50.00 51.00 100.00 100.00 100.00
100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 51.00 50.00 51.00 100.00 100.00 100.00
87
Spain ” Portugal Slovenia Turkey Canada Argentina ” South Korea Japan ” 50.00 50.00 50.00 50.00 50.00 50.00 50.00 50.00 50.00 50.00 50.00 50.00 50.00 50.00 50.00 50.00 50.00 50.00 50.00 50.00 50.00 50.00
FINANCIAL REPORT
France France Germany ” Spain Portugal Czech Republic Argentina Brazil
50.00 50.00 50.00 50.00 50.00 50.00 50.00 50.00 50.00
50.00 50.00 50.00 50.00 50.00 50.00 50.00 50.00 50.00
Faurecia – Registration document 2006
CONSOLIDATED FINANCIAL STATEMENTS
Organizational structure
Simplified organization chart of operating companies as of December 31, 2006 (direct and indirect holdings)
Faurecia
100% 100% 100% 100% 100% 50% 100%
Financière Faurecia
(France)
Faurecia Services Groupe
(France)
Faurecia Industries
(France)
Faurecia Bloc avant
(France)
Faurecia Cooling Systems
(France)
Trecia
(France)
50%
Faurecia Automotive Holdings
(France)
50%
50%
100%
100%
100%
82.55%
Servicios Corporativos de Personal Especializado, SA de CV
(Mexico)
Faurecia Duroplast Mexico, SA de CV
(Mexico)
Faurecia Interior Systems Mexico SA de CV (Mexico)
Faurecia Interior Systems, Inc.
(USA)
Faurecia Automotive Seating, Inc.
(USA)
Faurecia USA Holdings, Inc.
(USA)
17.45%
51%
51%
100%
100%
100%
100%
EAK SAS
(France)
EAK SNC
(France)
Faurecia Exhaust Systems AB
(Sweden)
Faurecia Automotive Seating BV
(Netherlands)
Faurecia Netherlands Holding BV
(Netherlands)
Faurecia Exhaust Systems, Inc.
(USA)
ORGANIZATIONAL STRUCTURE
27.96%
72.04%
Faurecia Autositze GmbH
(Germany)
100%
Faurecia Abgastechnik GmbH
(Germany)
Leistritz Abgastechnik Stollberg GmbH (LAS)
(Germany)
100%
Faurecia Exhaust Systems Changchun Co. Ltd (China)
51%
Faurecia Automotive GmbH
(Germany)
100%
13%
31.2%
Faurecia Investiments
(France)
Faurecia Deutschland Holding GmbH & Co.KG
(Germany)
55.8%
Faurecia Kunststoffe Automobilsysteme GmbH (Germany)
100% 100% 100% 100% 100% 100%
100%
100%
Faurecia Sièges d’Automobile
(France)
ECSA
(France)
Siebret
(France)
Siedoubs
(France)
Sielest
(France)
Siemar
(France)
Sienor
(France)
100%
100%
100%
50.01%
88
FINANCIAL REPORT
Sieto
(France)
Société Automobile du Cuir de Vesoul
(France)
Sotexo
(France)
Industrias Cousin Frères, SL
(Spain)
100%
100%
100%
100%
100%
50%
Faurecia - Assentos de Automóvel Lda
(Portugal)
EDA - Estofagem de Assentos Lda
(Portugal)
SASAL
(Portugal)
Faurecia Sistemas de Escape Portugal Lda (Portugal)
Faurecia Sistemas de Interior de Portugal. Componentes Para Automóvel SA (Portugal)
50%
Vanpro Assentos Lda
(Portugal)
100%
100%
100%
50%
100%
Faurecia Components Pisek Sro
(Czech Republic)
Faurecia Fotele Samochodowe SpZoo
(Poland)
Faurecia Walbrzych SpZoo
(Poland)
ARSED d.o.o.
(Slovenia)
Teknik Malzeme
(Turkey)
BFTC
(Turkey)
100%
100%
50%
50%
50%
50%
Société Tunisienne d’Équipements d’Automobile
(Tunisia)
Faurecia Automotive SeatIng Canada Ltd
(Canada)
WBF Technologies
(Canada)
PAB SA
(Argentina)
Bertrand Faure Argentina SA
(Argentina)
Somil SA
(Uruguay)
100%
100%
100%
60%
51%
50%
50%
Faurecia Automotive Seating UK Ltd
(United Kingdom)
Faurecia Midlands Ltd
(United Kingdom)
Faurecia Japan KK
(Japan)
CFXAS
(China)
Faurecia GSK (Wuhan) Automotive Seating Co. Ltd
(China)
Faurecia NHK Co. Ltd
(FNK) (Japan)
Faurecia NHK Kyushu Co. Ltd
(FNQ) (Japan)
100%
100%
100%
100%
100%
51%
50%
Faurecia Exhaust Systems South Africa
(South Africa)
Faurecia Exhaust Systems Sro
(Czech Republic)
Faurecia Sistemas de Escape Argentina SA
(Argentina)
Faurecia Systèmes d’Échappement
(France)
Exhaust Services Mexicana, SA de CV
(Mexico)
Faurecia Honghu Exhaust Systems Shanghai Co. Ltd
(China)
Faurecia Tongda Exhaust System (Wuhan) Co. Ltd
(China)
100%
100%
50%
Faurecia Automotive Seating India Private Ltd (India)
Faurecia Lecotex a.s.
(Czech Republic)
Tecnoconfort
(Spain)
Faurecia – Registration document 2006
100%
100%
100%
100%
100%
100%
Automotive Sandouville
(France)
Faurecia Automotive Industrie
(France)
Faurecia Global Purchasing
(France)
Faurecia Intérieur Industrie
(France)
SAI Automotive Fradley Ltd
(United Kingdom)
SAI Automotive Washington Ltd
(United Kingdom)
100%
100%
100%
100%
51%
50%
Faurecia Argentina SA
(Argentina)
Faurecia Industrie NV
(Belgium)
Faurecia Interior Systems South Africa (Pty) Ltd
(South Africa)
Faurecia Interior Systems Bohemia Sro
(Czech Republic)
Faurecia AD Plastik Automotive Romania s.r.l.
(Romania)
Taco-Faurecia Design Center Pvt Ltd
(India)
63.88%
10.66%
Faurecia Automotive España, SL
(Spain)
Faurecia Leather Kosice Sro
(Slovakia)
100%
Cartera e Inversiones Enrich SA
(Spain)
Valencia Modulos de Puerta, SL
(Spain)
Faurecia Interior Systems España, SA
(Spain)
Faurecia Automotive do Brasil Ltda
(Brazil)
Faurecia Sistemas de Escapamento do Brasil Ltda (Brazil)
Faurecia Interior Systems SALC Espana, SL (Spain)
50.05%
100%
100%
100%
100%
100%
50%
Faurecia Legnica SpZoo
(Poland)
Faurecia Gorzow SpZoo
(Poland)
Faurecia Automotive Czech Republic Sro
(Czech Republic)
Faurecia Interior Systems Bratislava Sro
(Slovakia)
Faurecia Exhaust Systems Korea
(South Korea)
Kwang Jin Faurecia Co, Ltd
(South Korea)
100%
100%
60%
Faurecia Asientos Para Automovil España, SA (Spain)
Daeki Faurecia Corporation
(South Korea)
49.23% 50.77%
Faurecia Sistemas de Escape España SA
(Spain)
Faurecia (Shanghai) Business Consulting Company Ltd (China)
100%
Faurecia Exhaust Mexicana, SA de CV
(Mexico)
100% 100%
Faurecia Technoplast Automotive
(Russia)
100%
100%
100%
100%
100%
Asientos de Castilla Leon SA
(Spain)
Asientos del Norte SA
(Spain)
Asientos de Galicia SL
(Spain)
Faurecia Seating Talmaçiu Sro
(Romania)
100%
68.75%
50%
Faurecia (Changchun) Automotive Systems Co. Ltd (China)
Faurecia Slovakia Sro
(Slovakia)
31.24%
Copo Ibérica, SA
(Spain)
50%
100%
100%
100%
100%
100%
Componentes de Vehiculos de Galicia SA (Spain)
Faurecia Innenraum Systeme GmbH
(Germany)
Faurecia Interior Systems Sweden AB
(Sweden)
Faurecia AST Luxembourg SA
(Luxembourg)
Faurecia Polifleks Otomotiv Sanayi Ve Ticaret AS (Turkey)
Dempo Otomotiv Sanayi Ve Ticaret AS
(Turkey)
50%
100%
100%
100%
100%
100%
100%
SAS Autosystemtechnik GmbH & Co. KG
(Germany)
SAS Autosystemtechnik Verwaltungs GmbH
(Germany)
SAS Autosystemtechnik SA
(Spain)
SAS Autosystemtechnik de Portugal, Unipessoal Lda (Portugal)
100%
SAS Automotive Belgium NV
(Belgium)
SAS Automotive France
(France)
Cockpit Automotive Systems Douai SNC
(France)
100%
100%
100%
100%
SAS Automotive Ltd
(United Kingdom)
SAS Automotive USA, Inc.
(USA)
SAS Autosystemtechnik Sro
(Czech Republic)
SAS Automotriz Argentina SA
(Argentina)
SAS Automotive do Brasil Ltda
(Brazil)
100%
100%
100%
100%
SAS Automotive RSA (Pty) Ltd
(South Africa)
SAS Automotive Sro
(Slovakia)
SAS Automotive Systems SA de CV
(Mexico)
SAS Automotive Systems & Services SA de CV (Mexico)
Europe Asia South America & Africa North America
Faurecia – Registration document 2006
FINANCIAL REPORT
Faurecia (Wuxi) Seating Components Co. Ltd (China)
Faurecia (Shanghai) Management Co. Ltd
(China)
89
ORGANIZATIONAL STRUCTURE
100%
100%
100%
100%
100%
49.95%
Statutory Auditors’ report on the consolidated financial statements for the year ended December 31, 2006
This is a free translation into English of the Statutory Auditors’ report issued in the French language and is provided solely for the convenience of English speaking readers. The Statutory Auditors’ report includes information specifically required by French law in all audit reports, whether qualified or not. This information is presented below the opinion on the consolidated financial statements and includes an explanatory paragraph discussing the Auditors’ assessments of certain significant accounting and auditing matters. These assessments were considered for the purpose of issuing an audit opinion on the consolidated financial statements taken as a whole and not to provide separate assurance on individual account captions or on information taken outside of the consolidated financial statements. This report should be read in conjunction with, and construed in accordance with, French law and professional auditing standards applicable in France.
To the Shareholders,
CONSOLIDATED FINANCIAL STATEMENTS
In compliance with the assignment entrusted to us by the Annual Shareholders’ Meeting, we have audited the accompanying consolidated financial statements of Faurecia SA and its subsidiaries for the year ended December 31, 2006. These consolidated financial statements have been approved by the Board of Directors. Our role is to express an opinion on these consolidated financial statements based on our audit. I – Opinion on the consolidated financial statements We conducted our audit in accordance with professional standards applicable in France. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the consolidated financial statements give a true and fair view of the assets and liabilities and of the financial position of the Group as at December 31, 2006 and the results of its operations for the year then ended in accordance with IFRS as adopted by the European Union. II – Justification of our assessments In accordance with the requirements of article L. 823-9 of the French Commercial Code (Code de commerce) relating to the justification of our assessments, we bring to your attention the following matters: • The Company performs impairment tests on goodwill at each balance sheet date, and also assesses whether fixed assets show any indication of impairment, based on the methods described in notes 1-2, 1-5 and 10 to the consolidated financial statements. We reviewed the methods applied to carry out these impairment tests, as well as the cash flow projections and assumptions used. We also verified that note 10 discloses appropriate information in this regard. • Note 1-17 to the consolidated financial statements, concerning corporate income taxes, specifies that deferred tax assets are not recognized in the accounts when it is deemed uncertain that they will be recovered in the future. Our work consisted in verifying that this method had been correctly applied and assessing whether the forecast data and assumptions supporting the probability of recovery for these deferred tax assets were reasonable. • As part of our assessment of the accounting rules and principles applied by your Company, we reviewed the criteria used for capitalizing and amortizing development expense and measuring the recoverable amount. We also ensured that note 1-3 discloses appropriate information. These assessments were made in the context of our audit of the consolidated financial statements, taken as a whole, and therefore contributed to the opinion we formed which is expressed in the first part of this report. III – Specific verification In accordance with professional standards applicable in France, we have also verified the information given in the Group’s Management Report. We have no matters to report regarding its fair presentation and consistency with the consolidated financial statements. Neuilly-sur-Seine and Paris-La Défense, February 5, 2007 The Statutory Auditors PricewaterhouseCoopers Audit Guy A. Sitbon Ernst & Young Audit Laurent Miannay
90
FINANCIAL REPORT
Faurecia – Registration document 2006