Reference document 2004 Reference document 2004
This is a free translation of the Reference document (Document de référence) that was filed with the French Market Authority (Autorité des Marchés Financiers) on April 19, 2005, in accordance with Articles 211 to 211-42 of the AMF’s general regulations.
Copies of this reference document are available on request, at no charge, from the Investor Relations department of Bacou-Dalloz at the following address: Paris Nord II, Immeuble Edison, 33 rue des Vanesses, BP 55288 Villepinte, 95958 Roissy CDG Cedex, France; and by telephone at +33 (0)1.49.90.79.74; by fax at +33 (0)1.49.90.79.78; or by email at [email protected]; or on the website of the Autorité des Marchés Financiers (www.amf-france.org).
Bacou-Dalloz Reference document 2004 1 2 Reference document 2004 Bacou-Dalloz Contents
Chapter Page Chapter Page
1 Financial Report 5 4 Corporate Governance 77 1.1. Management report on the financial year 7 4.1. Board of Directors 79 1.2. Risk management report 11 4.2. Shareholdings by senior executives 84 1.3. Recent developments and future perspectives 15 4.3. Organization of Bacou-Dalloz 88 1.4. Summary financial information 16 4.4. Chairman’s report 91 1.5. Consolidated financial statements 19 4.5. Auditors and audits 99 1.6. Summary of Company financial statements 40 1.7. Liquidity & capital resources 43
5 Shareholder Information 101 5.1. General information about the Company 103 2 Business Overview 45 5.2. Information concerning capital issued 108 2.1. History 47 5.3. Unissued authorized capital 110 2.2. The personal protective equipment 5.4. Distribution of capital and voting rights 112 (PPE) market 48 5.5. Market for the Company’s shares 117 2.3. Bacou-Dalloz business sectors 52 5.6. Dividends and distribution policy 118 2.4. Strategy 57 5.7. Information policy 119 2.5. Research and development 60
6 Other Information 121 Social and Environmental Report 63 3 6.1. Person responsible for the reference document 123 3.1. Human resources policy 65 6.2. Declaration of the person responsible 3.2. Breakdown and trends in the workforce 66 for the reference document 123 3.3. Labor agreements concerning 6.3. Persons responsible for auditing the French companies of the Bacou-Dalloz group 68 the financial statements 124 3.4. Employee incentive schemes 69 6.4. Statutory auditors’ report 125 3.5. Manufacturing 73 3.6. Environmental policy 74 Cross reference table 127
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1.1. Management report 1.5. Consolidated financial statements 19 on the financial year 7 1.5.1. Balance Sheet 19 1.1.1. Business trend in 2004 7 1.5.2. Consolidated income statement 20 1.1.2. Operating income 8 1.5.3. Consolidated statement of cash flows 21 1.1.3. Net income 9 1.5.4. Changes in shareholders’ equity of 1.1.4. Summarized cash flow statement the Bacou-Dalloz group 22 & balance sheet 10 1.5.5. Notes to the consolidated financial statements 22 1.5.6. Statutory auditors’ report on the consolidated 1.2. Risk management report 11 financial statements 39 1.2.1. Financial and market risks 11 1.2.2. Legal risks 12 1.6. Summary of Company 1.2.3. Insurance 13 financial statements 40 1.6.1. Statutory auditors’ report on the annual 1.3. Recent developments financial statements 40 and future perspectives 15 1.6.2. Extracts of the financial statements 41 1.3.1. Henri-Dominique Petit appointed 1.6.3. Parent company results 42 Chairman of the Board of Directors 15 1.6.4. Dividend proposal 42 1.3.2. Bacou-Dalloz strengthens its position in China 15 1.3.3. Sales in the 1st quarter of 2005 15 1.7. Liquidity & capital resources 43 1.3.4. Future outlook 15 1.7.1. Syndicated financing 43 1.7.2. Bilateral financing 43
1.4. Summary financial information 16 1.4.1. Sales breakdown 16 1.4.2. 2004 quarterly sales 17 1.4.3. Consolidated income statement 17 1.4.4. Seasonality 18 1.4.5. Inflationary effects 18
Bacou-Dalloz Reference document 2004 5 1 Financial Report
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1.1 Management report on the financial year
The year 2004 represented an important step for Bacou-Dalloz. improved operating margin at 12.3% of sales. Finally, the arrival The completion of the divestiture of the Abrium distribution of Henri-Dominique Petit as the CEO of Bacou-Dalloz in June 2004 business permitted the Group to focus on its core activity, created the conditions for new dynamism within the Group. the design, manufacturing and sales of personal protective All these parameters, along with the work accomplished in terms equipment. That transaction, combined with strong growth of operating and functional methods, have placed the Group from the high value-added product lines and the benefits of the on the path to profitable growth. synergy plans, permitted the Group to realize a significantly
1.1.1. Business trend in 2004
2004 2003 Total Organic In millions of Euros change change
Bacou-Dalloz 706 796 -11.3% Abrium sales(1) 40 101 Inter Company Sales to Abrium(1) (13) (37) Bacou-Dalloz sales excluding distribution business 678 732 -7.3% -3.1% Head protection 369 403 -8.4% -2.0% Body protection 309 329 -6.1% -4.3% Americas 345 381 -9.4% -1.9% EMEA(2) 298 319 -6.6% -6.1% Asia Pacific 36 33 9.1% 12.9%
(1) For a 6 month period in 2004 versus 12 months in 2003. (2) EMEA: Europe, Middle East and Africa.
Group sales amounted to 706 million Euros as compared to hand, the respiratory protection business showed a decrease consolidated sales of 796 million Euros in 2003, or a decrease of in sales, suffering particularly from the non-renewal in 2004 of 11.3%. The decrease was partially the result of changes in the Group one time sales in 2003 of escape hood respirators to the homeland consolidation perimeter. In fact, Abrium, the previously owned security sector. distribution subsidiary, has been consolidated in the Bacou-Dalloz financial statements based on 6 months activity in 2004 versus The body protection business recorded an organic decrease of 4.3% 12 months in 2003. 2004 sales were also negatively impacted by over the year: only the fall protection segment reported positive changes in exchange rates, the US dollar as compared to the Euro organic growth. The other businesses reported decreases of more decreased at an average annual rate of 9% over the 2004 period or less significance: the clothing business continued its downward which resulted in a 4.4% or 35 million Euros decrease in sales. trend mainly because of the non-renewal of large orders recorded The decrease in organic sales was limited to 3.1%. in 2003; the steady performance in sales of gloves in Europe did not offset significant decreases in the US following operational difficulties The organic change in sales of the head protection business for which have since been resolved; finally, sales within the footwear the year (-2%) reflected mixed tendencies. On one hand, the steady segment increased gradually since the beginning of the year due performance of the hearing and eye and face protection businesses to the successful launch of new product ranges, but remain, generated positive organic growth over the year and, on the other however, below 2003 levels over the full year period.
Bacou-Dalloz Reference document 2004 7 1 Financial Report
Group sales by region excluding Abrium were mainly split between in the consolidation perimeter, sales in the Asia Pacific region the North American continent (51%) and the EMEA region (44%). increased almost 12.9%. In Europe, the 6.1% decrease in sales Sales in the rest of the world represented 5% and were mainly reflected declining sales of body protection equipment. in China and Australia. Excluding changes in exchange rates and
1.1.2. Operating income
Operating income before the amortization of intangible assets Operating losses related to Abrium and included in the Group‘s revalued amounted to 87.2 million Euros, a slight decrease of operating income amounted to 4.7 million Euros in 2004 which 2.4 million Euros or 2.8% versus 2003. At comparable exchange correspond to Abrium losses in the first half of 2004 as compared rates, income increased by over 4% to 93.2 million Euros. to Abrium losses of 8.5 million Euros in 2003.
2004 2004 at 2003 2003 Total In millions of Euros exchange rates change
Sales 706.1 741.1 795.7 -11.3% Gross margin 266.0 280.5 284.3 -6.4% as a % of Sales 37.7% 37.9% 35.7% Sales & Marketing expenses (89.1) (93.5) (99.0) -10.0% General & Administrative expenses (77.2) (80.6) (83.5) -7.6% Research & Development expenses (12.6) (13.2) (12.2) +3.3% Operating income(1) 87.2 93.2 89.6 -2.7% as a % of Sales 12.3% 12.6% 11.3% Amortization of revalued intangible assets (1.8) (2.0) (2.0) -8.9% Operating income 85.4 91.2 87.6 -2.6%
Operating income at comparable exchange rates and based on the comparable consolidation perimeter are as follows:
2004 2004 at 2003 2003 Total In millions of Euros exchange rates change
Sales 678.3 713.3 731.4 -7.3% Gross margin 262.8 277.3 272.1 -3.4% as a % of Sales 38.7% 38.9% 37.2% Sales & Marketing expenses (83.8) (88.2) (85.1) -1.6% General & Administrative expenses (74.2) (77.6) (76.6) -3.1% Research & Development expenses (12.6) (13.2) (12.2) +3.3% Operating income excl. distribution business (1) 92.3 98.3 98.2 -6.1% as a % of Sales 13.6% 13.8% 13.4% Amortization of revalued intangible assets (1.8) (2.0) (2.0) -8.9% Operating profits 90.5 96.3 96.3 -6.0%
(1) Before amortization of revalued intangible assets.
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The various items of the Profit & Loss Statement items can be • The increase in General & Administrative expenses was limited analyzed as follows: to 1 million Euros and was related to inflation and increases in provisions related to health risks in the US. • Gross margin increased by 5.2 million Euros as compared to 2003 from 37.2% to 38.9% of sales on a comparable • Research & Development expenses as a percentage of sales consolidation perimeter and exchange rate basis as a result of increased from 1.7% (excluding Abrium) to 1.8% of sales in 2004. the benefits of manufacturing restructuring initiatives and This increase resulted from investment efforts aimed at the strong growth of high value-added product lines which offset accelerating innovation. decreases in volumes. • The amortization of revalued intangible assets amounted to • Sales & Marketing expenses increased by 3 million Euros of 1.8 million Euros in 2004 versus 2.0 million Euros in 2003 which nearly 2 million Euros were related to increases (exchange rate impact only). in marketing expenses required for the launch of new products.
1.1.3. Net income
Net income after minority interests decreased from 15.1 million excluding exceptional items amounted to 26.3 million Euros Euros in 2003 to a loss of 27.7 million Euros in 2004. Net income in 2004 or 3.7% of sales.
In millions of Euros 2004 2003 Change
Operating income 85.4 87.6 -2.2 Net financial income (loss) (20.1) (19.8) -0.3 Income taxes (17.9) (25.7) +7.8 Goodwill amortization (20.8) (18.3) -2.5 Other minority interests (0.3) (0.1) -0.3 Net income before exceptional items 26.3 23.7 +2.6 As a % of Sales 3.7% 3.0% Exceptional items (16.8) (8.7) -8.2 Write-off related to the divestiture of Abrium (37.1) -37.1 Net Income (27.7) 15.1 -42.7
The Income Statement items can be analyzed as follows: the impact of exceptional expenses related to the divestiture of Abrium. The high tax rate in 2003 was related to the high level of • Financial expenses for the year amounted to 18.5 million Euros, restructuring in France and losses generated by the Abrium a decrease from amounts recorded in 2003, despite increases business; in interest rates in the United States, however, due to decreases in average debt over the year (339 million Euros in 2004 versus • The amortization of goodwill in 2004 included the impairment 363 million Euros in 2003 at comparable exchange rates, i.e. related to the Moptics subsidiary (3.4 million Euros); 1.3621 US $ per 1 Euro. Net financial income / (Loss) also included exchange rate losses of 1.5 million Euros related to hedging • Exceptional items in 2004 consist of expenses of 16.8 million operations; Euros which include costs of 11.5 million Euros related to restructuring and the closing of various manufacturing sites • Tax expenses decreased by 7.8 million Euros from 25.7 million in Europe and the United States. In addition, the decision Euros in 2003 to 17.9 million Euros in 2004. The effective tax rate to rationalize the corporate organization resulted in additional decreased from 43.5% in 2003 to 36.9% in 2004 excluding restructuring expense of 1.9 million Euros. On top of those
Bacou-Dalloz Reference document 2004 9 1 Financial Report
amounts were costs associated with the departure of the Chief • The write-off related to the Abrium divestiture resulted in net Executive Officer (2.6 million Euros) as well as a net loss of accounting losses of 37.1 million Euros. They consisted of all 0.8 million Euros related to the disposal of assets; related income, expenses and provisions for the divestiture. In addition to the write-off of the current assets outstanding as of the selling date and a cash contribution of 1.6 million Euros, the provisions include the conservative revaluation of Abrium specific inventory included in the Bacou-Dalloz financial statements.
1.1.4. Summarized cash flow statement & balance sheet
Summarized cash flow statement Summarized balance sheet In millions of Euros Dec. 2004 Dec. 2003 In millions of Euros Dec. 2004 Dec. 2003
Attributable net income (27.7) 15.1 Goodwill 250 286 Minority interests 0.3 0.1 Net intangible assets 300 320 Depreciation 40.8 42.2 Tangible assets 78 88 Changes in provisions (6.9) (0.7) Investments 2 2 Gains on disposals 3.6 (0.4) Current assets 299 335 Losses on divestitures (Abrium) 37.1 Cash and cash equivalents 17 57 Cash flow from sales of products and services 47.2 56.3 Total Assets 946 1,088 Work in process (9.1) 11.0 Shareholders’ equity 438 495 Trade receivable 3.9 22.5 Minority interests 1 1 Trade payable (0.5) (9.2) Provisions 70 80 Other current operating assets/(liabilities) 5.6 (6.0) Loans and borrowings 338 404 Trade payable 44 60 Changes in working capital (0.1) 18.3 Other operating liabilities 55 48 Cash flow from operations 47.1 74.5 Total Liabilities 946 1,088 Capital expenditure (20.0) (25.0) Abrium divestiture (10.7) Other acquisitions / divestitures 1.4 (15.4) Over the course of the year 2004, Bacou-Dalloz reduced its net debt Financing (58.0) (14.9) by 26 million Euro at year-end. It amounted to 321 million Euros Dividends paid (4.0) (8.0) at December 31, 2004 versus 347 million Euros at December 31, 2003. Exchange rate impact (4.1) (13.2) Of the decrease, nine million was the result of the exchange rate impact on US dollar denominated debt and the favorable impact Changes in cash and cash equivalent (48.3) (1.9) of the positive operating cash flow.
The cash flow from operations for 2004 amounted to 47.1 million Operating working capital requirements (ie. WCR excluding differed Euros versus 74.5 million Euros in 2003. taxes) improved slightly as compared with the year 2003 and amounted to 91 days sales versus 93 days in 2003. Capital expenditures reached 20 million Euros and mainly concerned “Project One”, the creation of a logistics center in The Group maintained a balanced financial structure with a debt the United States, and the launch of new products. Other to EBITDA ratio (leverage) amounting to 3.0x at year-end 2004 investments were related to information systems and versus 3.1x at year-end 2003 and the debt to equity ratio (gearing) improvements in productivity and quality. of 73% versus 70% at year-end 2003. Over the course of the year, the Group renegotiated the ratio threshold (debt / EBITDA) in order to take the volatility of the US dollar into account. It is now 3.5x whereas the gearing ratio (Debt / Equity) remains at 100%.
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1.2 Risk management report
1.2.1. Financial and market risks
Market risks represent the risk of unfavorable changes in the value & Risks associated with exchange rates of financial instruments resulting from exchange rate variances, changes in interest rates or fluctuations in share prices. The Group realizes a major part of its sales in foreign currencies, The Company is only subject to market risks associated with most notably in US dollars. Group consolidated financial statements exchange rate variances or changes in interest rates. are reported only in Euros. In order to do that, all financial items denominated in a currency other than the Euro must be converted & Risks associated with changes in interest rates to Euros at the exchange rates effective at any point in time. As a consequence, fluctuations in exchange rates may have an impact Company debt has been mainly contracted at variable interest on the relevant financial items within the Group’s consolidated rates and denominated in Euros and US dollars. The Bacou-Dalloz financial statements even in the case where amounts may not have group policy aims to reduce the exposure to changes in interest changed in the original currency. Thus, increases in the value of rates. The management of those risks is monitored centrally the Euro versus other currencies may create a decrease in Group at the Group level which permits the definition of an overall policy revenues or asset values in the financial statements of subsidiaries with respect to hedging. Hedging contracts are negotiated on whose financial statements are denominated in a foreign currency. the market on a back to back basis with first class banks as The following table illustrates the proportion of balance sheet items counterparts. Profits or losses on hedging contracts are recorded denominated in US dollars, Euros or other currencies with the against the commensurate profits or losses realized on items Bacou-Dalloz Group in 2004: covered. • US Dollars 55% Although the Company strategy is to maintain coverage against • Euros 38% rate increases on a minimum of 50% of borrowed amounts • Other 7% with respect to financial contracts, it cannot guarantee that a change • Total 100% in exchange rates will not have a negative effect on the growth in profitability. Net sales for the Group in 2004 split by geographic zone were as follows: Until now, the Company has used derivatives such as caps, floors, collars and swaps. At December 2004, 99 million Euros of debt was • North America 51% covered and presented a negative market value of 200,000 Euros. • Europe 44% Dollar denominated debt of 100 millions dollars was covered • Other 5% and presented a positive market value of 400,000 US dollars. • Total 100%
The Bacou-Dalloz group companies are also exposed to risks The amounts of positions covered at December 31, 2004 were as associated with fluctuations in exchange rates every time follows: a transaction takes place in a foreign currency. In order to minimize exchange rate risks arising from Bacou-Dalloz group intercompany • Euro Collars: 44 million Euros trading, whenever possible, the operating Companies invoice • Euro Caps: 45 million Euros or are invoiced in their functional currency. When that is not • Euro Swaps: 10 million Euros the case, the hedging of potential exchange rate risks is decided • Dollar Caps: 90 million US dollars on a case by case basis. The management of transaction exchange • Dollar Swaps: 10 million US dollars rate risks is centralized at the Group level. All exchange rate risks are at least 50% covered over a 12 month rolling period.
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Because of the volatility of exchange rates, Bacou-Dalloz in not Exchange rate Movements Impact Impact in a position to efficiently manage the risks associated with $ / Euro in the Euro on sales on fluctuations in exchange rates. Although the Bacou-Dalloz operating rate versus operating the dollar income companies dispose of exchange rate hedging tools on a case by case basis, the Company cannot guarantee that exchange rate 1.05 $ per 1 -15% +9% +13% fluctuations will not have a negative impact on its sales and 1.12 $ per 1 -10% +6% +8% its profits. 1.18 $ per 1 -5% +3% 4% 1.24 $ per 1 * 0% 0% 0% As an example, the following table illustrates the estimated impact 1.30 $ per 1 +5% -2% -4% of exchange rates on sales and profits based upon various exchange 1.36 $ per 1 +10% -5% -7% rates: 1.43 $ per 1 +15% -7% -10%
* Average rate in 2004.
1.2.2. Legal risks
The Company exercises the manufacturing and/or distribution of & Protection of Bacou-Dalloz personal protective equipment throughout the world either through Intellectual Property rights its subsidiaries or through contractual relationships with third parties. In that respect, it is subject to a complex regulatory Bacou-Dalloz policy is to protect its property rights through environment associated with the types of businesses and / or the filing of patents, trademarks and through confidentiality the business location (see chapter 2 of this document). The risks agreements. Nonetheless, there can be no assurance that to which it is exposed are the typical risks for identical companies this policy will be adequate for the protection of its technology or given the domain covered: defective products, product sales the prevention of fraudulent copies or imitations. In addition, methods, sub-contractor relationships, suppliers and / or distribution although the Company believes that its products do not infringe networks and intellectual property. upon the proprietary rights of third parties, there can be no assurance that infringement or invalidity claims will not be asserted & Litigation against it in the future. The costs of defending such claims or the costs and interest associated with an unfavorable judgment In the course of normal business, the Company can find itself resulting from such litigation could have a material negative impact confronted with litigation. With the exception of the applicable upon the Company’s financial position and business. insurance loss exemptions, the Bacou-Dalloz group believes that it has subscribed to an appropriate level of liability insurance which & Liability for defective products provides coverage against any material financial loss which could result should its legal responsibility be put in question. In general, given the nature of the business, the Group can be confronted with product liability claims if the use of its products With the exception of the actions described in the paragraph result in, or such products fail to protect from, personal injury. on responsibilities related to defective products, to the knowledge As far as PPE products are concerned, legal actions related of the Company, at this day, no litigation or arbitration exists which to defective products are generally claims based upon negligence, could have a significant impact on the business, financial structure, product design defects or safety requirements, sometimes without the Company value or those of its subsidiaries either in the past the possibility of establishing a link between the damages and the or within the foreseeable future. cause of the source event. Similarly, in the event that any of its products prove to be defective, Bacou-Dalloz may be required to recall or redesign them. The company maintains insurance against product liability claims however there can be no assurance that such coverage will be adequate to cover liabilities which the Company may incur or that such insurance will continue to be available on reasonable terms.
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Certain of the Company’s American subsidiaries are currently The Group has taken the necessary measures to reduce the risks the subject of class action suits for product liability in the states of related to this litigation, and most notably has created adequate Mississippi and Texas. The plaintiffs, who claim to have contracted provisions based upon actuarial estimates (see note 5.8 of respiratory illnesses (silicosis and / or illnesses related to asbestos) the consolidated financial statements). The Group does not expect at their workplace, have challenged the quality of the masks used these legal proceedings to have a significant impact upon its financial and the lack of warning labels on the masks and, consequently statements. the shared liability of the manufacturers. In 2003, the number of legal actions increased significantly as a result of changes There are no other litigation or arbitration outstanding which may in Mississippi and Texas law, which led plaintiffs’ attorneys to file have, or may have had, in the recent past, a significant impact proceedings before the end of those changes. On the other hand, on the Company’s financial statement, its business or its profitability at the end of 2003 and in 2004, the number of suits declined and as a consequence, on the Group. significantly. Although the risk by case is relatively small, the legal expense for the American subsidiaries concerned is significant due to the large number of cases in process.
1.2.3. Insurance
As of December 31, 2004, Bacou-Dalloz has merged its insurance This global program provides a level of coverage deemed to be policies into a single global program which provides diverse suitable by the Company. Globalization of the company's insurance categories of insurance coverage for subsidiaries worldwide on program provides for consistency of coverage across all operating either a primary or DIC (Difference In Conditions) basis. Additionally, companies, efficiencies of administration and premium savings various local policies are still in place in those countries where due to the economies of scale associated with a worldwide program. mandated by local laws. & Europe & Rest of World Civil (general) liability policies are in place to cover all entities for exposures stemming from the daily operations of its manufacturing All of the Bacou-Dalloz companies each benefit from, at a minimum, facilities. Additionally, product liability coverage is in force a liability insurance policy as well as a “property damage” policy. to provide protection for the Company for potential claims emanating from the use of Bacou-Dalloz products. Claims related Liability coverage is provided within the framework of a European to exposure to asbestos and silica are excluded from coverage. program, with local policies to face the legal specificities resulting from local legal environments, and supplemented by additional A global property policy is in place for all entities worldwide either insurance coverage provided within the framework of the Group on a primary or DIC (Difference In Conditions) basis. policy subscribed to by the mother company.
This policy provides coverage for property damage resulting from The insurance coverage includes “Operating”, “Product” and the perils of fire, explosion, lighting, windstorm, vandalism, “Accidental pollution” risks for the sites not subject to operating riot or civil commotion. Coverage for business interruption losses approval. is provided for all entities in the United States and for numerous Bacou-Dalloz companies outside the U.S. as well. Limited coverage The amount of the coverage is limited to 3 million Euros per claim for earthquakes and floods is provided up to certain limits dependant and per year. The Group is studying, with respect to the risks, upon location. Pollution coverage is provided only to the extent the possibilities and the potential interest in increasing those that the pollution at issue is the result of one of the perils covered amounts. by the policy and as listed above.
Workers' compensation coverage is provided for all Bacou-Dalloz companies in the United States as required by applicable law. Employer's liability coverage is provided on a worldwide basis.
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Those subsidiaries which are not included in the above mentioned • Property Damage and Losses related to Business Interruption, program benefit from coverage which has been judged by the combined amount of insurer coverage per incident being the Group to be satisfactory with respect to the risks to which they limited to 115 million US dollars and, within that amount, a limit may be exposed. of 50 million US dollars for damages and losses related to business interruption resulting from certain events such as floods. Limited With respect to “Property Damage”, an insurance program has coverage of 10 million US dollars is provided for damages resulting been implemented which provides coverage in line with the capacity from earthquakes; of the insurance market and for coverage amounts which are sufficient given the property values which are regularly • Employer liabilities as well as coverage for employees according reassessed. to the local laws and regulations or local common practice for amounts required by those jurisdictions; The retention level remains relatively low and has not been questioned by the insurers because of the fact that incidents remain • Transportation, fraud, embezzlement and automotive according low in frequency as well as in total amount. In the current state, to the standards in force. no insurance has been taken against losses related to business interruption (with the exception of the comment in the following The total cost of the premiums amounted to 3.8 million US dollars paragraph) however this item is currently being reevaluated taking in 2004 and is the subject of regular analysis and control. into account the new Group organization and the study and implementation of procedures which would permit a confrontation All insurance companies with which Bacou-Dalloz has subscribed with a major event. its policies are rated A or A+ by A.M. Best.
The maximum coverage amount per incident is fixed at 19.2 million In addition, the Company holds a worldwide insurance policy for Euros. Management Liability for a cumulative amount of 25 million dollars.
For companies which benefit from additional coverage outside In 2003, the Company formed a captive insurance company based of the program, the amount of their coverage corresponds in Vermont, USA. Bacou-Dalloz transferred its self insured portion to reported values existing and, should insurance related to losses of its product liability related to Respiratory Protection Products as a result of business interruption have been subscribed, to that captive and, as a result, transferred all of the related damages. that coverage amount is based upon the gross margin amounts The captive insurer will cover the company for all of the indemnities as recorded in accounting records. due with respect to claims covered by this program including rights, expenses and other related costs. The total amount of the premium in 2004 amounted to 1.2 million Euros, an amount which is subject to controlled changes with In addition to this self insurance, insurance coverage has been put respect to the generally observed price demands of insurers. in place with other insurers for the same Respiratory product group and the same product liability risks. & The United States and the Pacific
The American companies benefit from their own insurance programs which are subscribed to locally (with extensions in certain cases to subsidiaries in Australia, New Zealand or Mexico).
These programs cover risks such as:
• Liability, most notably product liability with significant coverage provided through the use of several “lines” of which the cumulative amount is fixed for the financial year at 52 million Euros;
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1.3 Recent developments and future perspectives
1.3.1. Henri-Dominique Petit appointed Chairman of the Board of Directors
On January 12, 2005, the Bacou-Dalloz Board of Directors appointed On the same occasion, Mr. Alfroid was appointed President of Henri-Dominique Petit to the position of Chairman of the Board the Nominations and Remuneration Committee. of Directors as a replacement to Philippe Alfroid.
1.3.2. Bacou-Dalloz strengthens its position in China
On February 2, 2005, the Group announced the creation of a new manufacturing center and logistics platform in Songjiang, China, near Shanghai for an investment of approximately 2 million Euros.
1.3.3. Sales in the 1st quarter of 2005
On April 12, 2005, the Bacou-Dalloz group reported its estimated Excluding changes in exchange rates and consolidation perimeter, consolidated sales according to IFRS for the first quarter of 2005 the organic change in sales continued to improve gradually which amounted to 164.9 million Euros compared to consolidated as compared to the prior quarter and remains stable (– 0.4%). sales on a comparable basis of 169.7 million Euros for the same The 4.8% devaluation of the dollar versus the Euro over the period period in 2004 (184.0 million Euros with Abrium sales included, impacted sales by – 2.1%. the business divested in July of 2004).
1.3.4. Future outlook
The momentum initiated in 2004 will be sustained in 2005, margin above the levels reached in 2004 and to reduce its net debt when our action plans will take full effect, and should permit with the objective of resuming its strategy of external growth. the Group to renew organic growth, to generate an operating
Bacou-Dalloz Reference document 2004 15 1 Financial Report
1.4 Summary financial information
The paragraphs below should be read jointly with the financial chapter 1 as well as all information contained in this Reference statements of the Company and the items presented in this document.
1.4.1. Sales breakdown
The distribution of sales by product category and by geographic zone in 2004, 2003 and 2002 are as follows:
2004 2003 2002
Sales by product category Eye & Face protection 22% 21% 23% Respiratory protection 18% 19% 16% Hearing protection 12% 11% 11% Head protection 52% 51% 50% Fall protection 15% 13% 14% Protective gloves 11.5% 12% 12% Protective clothing 10.5% 10% 9% Safety footwear 6% 6% 6% Body protection 43% 41% 41% Distribution 6% 13% 14% Intra-Group sales (1)% (5)% (5)%
100% 100% 100% Sales by geographic zone Americas 49% 48% 49% France 24% 29% 30% EMEA* (outside France) 22% 19% 17% Asia Pacific 5% 4% 4% 100% 100% 100%
* Europe, Middle East, Africa.
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1.4.2. 2004 quarterly sales
Q1 Q2 Q3 Q4 2004 In millions of Euros
Sales 184 187 166 169 706 Of which Abrium 22 19 41 Of which Intra-Group sales to Abrium* (7) (6) (13) Sales excluding distribution business 169 174 166 169 678 Split by product: Head protection 92 96 94 88 370 Body protection 77 78 72 81 308 169 174 166 169 678 Geographic split: Americas 86 90 87 81 344 EMEA 76 75 69 78 298 Asia-Pacific region 7 9 10 10 36 169 174 166 169 678
* Bacou-Dalloz sales to Abrium amounted to approximately 4 million Euros in the third and fourth quarters of 2004 (external sales).
1.4.3. Consolidated income statement
The following table provides the various income statement items expressed as a percentage of sales:
2004 2003 2002
Cost of goods sold 62.3% 64.3% 62.7% Sales & Marketing expenses 12.6% 12.4% 11.3% General & Administrative expenses 12.7% 12.0% 11.1% Operating income before the amortization of revalued intangible assets 12.3% 11.3% 14.9% Amortization of revalued intangible assets 0.3% 0.2% 0.3% Operating income 12.1% 11.0% 14.6% Financial expenses 2.8% 2.5% 3.2% Amortization of R & D rights acquired – – 0.3% Exceptional items (7.6)% (1.1)% (0.1)% Income before taxes 1.6% 7.4% 11.0% Taxes 2.5% 3.2% 3.5% Share of income (loss) in equity method companies 0.0% 0.0% 0.0% Amortization of goodwill 2.9% 2.3% 2.4% Net income of minority interests (3.9)% 1.9% 5.1% Minority interests and other 0.05% 0.03% 0.1% Net income (3.9)% 1.9% 5.0%
Bacou-Dalloz Reference document 2004 17 1 Financial Report
1.4.4. Seasonality
The Group’s business is subject to slight seasonal variances which distributors. Sales are also weaker during the summer vacation can be attributed to manufacturing activities and changes in periods in Europe during the month of August. Outside of the weather throughout the year. Historically, sales are slightly this seasonal character, the Group’s business also evolves over time weaker from November through February due to the expected due to diverse factors, of which, sales promotions destined decrease in demand during the winter months, traditionally less to respond to competitive pressures, manufacturing capacity pleasant, and planned reductions in inventories by the main and inventory levels.
1.4.5. Inflationary effects
Inflation has been modest over the course of recent years and has not had a significant impact upon the Company’s profitability.
18 Reference document 2004 Bacou-Dalloz Financial Report 1
1.5 Consolidated financial statements
1.5.1. Balance sheet
2004 2003 2002 In thousands of Euros ASSETS Intangible assets Goodwill on acquisition (Note 5.1) 250,295 285,706 324,644 Net intangible assets (Note 5.2) 299,689 319,913 361,213
Tangible assets (Note 5.3) Land 4,008 4,851 5,434 Buildings 26,955 33,233 38,433 Other net tangible assets 46,982 50,186 59,219
Other long-term assets (Note 5.4) Investments in affiliates accounted for under the equity method 688 743 1,575 Other investments 1,318 1,656 6,264 TOTAL FIXED ASSETS 629,935 696,288 796,782 Inventories and work in process (Note 5.5) 115,757 125,370 142,502 Trade receivables (Note 5.6) 130,016 156,028 172,644 Other receivables and accruals (Note 5.6) 21,373 28,201 37,799 Deferred taxes (Note 5.15) 31,366 25,324 46,365 Marketable securities (Note 5.7) 0 166 166 Cash & cash equivalents 17,313 57,068 71,006
TOTAL CURRENT ASSETS 315,825 392,157 470,482
TOTAL ASSETS 945,760 1,088,445 1,267,264
LIABILITIES Paid-in capital 15,238 15,238 15,228 Additional paid-in capital 436,038 436,038 435,797 Reserves & Retained earnings 147,946 136,696 100,166 Currency translation differences (133,420) (107,740) (42,342) Period net income (27,685) 15,059 44,144 TOTAL SHAREHOLDERS’ EQUITY 438 117 495 291 552 993 Minority interests 996 925 1,811 Retirement benefits & Pension obligations (Note 5.9) 7,412 8,012 9,757 Other provisions (Notes 5.8 and 5.10) 47,165 62,396 80,344 Deferred taxes (Note 5.15) 15,281 9,880 15,326 TOTAL PROVISIONS 69,858 80,288 105,427 Loans and borrowings (Note 5.11) 337,883 404,341 480,792 Trade payables 43,796 59,681 75,017 Other operating liabilities and accruals 55,110 47,919 51,224
TOTAL LIABILITIES 436,789 511,941 607,033
TOTAL LIABILITIES & SHAREHOLDERS’ EQUITY 945,760 1,088,445 1,267,264
Bacou-Dalloz Reference document 2004 19 1 Financial Report
1.5.2. Consolidated income statement
2004 2003 2002 In thousands of Euros
Sales 706,076 795,691 877,985 Cost of goods sold (440,031) (511,355) (550,424)
GROSS MARGIN 266,045 284,336 327,561 Sales & Marketing expenses (89,120) (99,008) (99,129) Administrative & Research expenses (89,763) (95,768) (97,818)
OPERATING INCOME BEFORE AMORTIZATION OF REVALUED INTANGIBLE ASSETS 87,162 89,560 130,614 Amortization of revalued intangible assets (1,804) (1,976) (2,327) OPERATING INCOME 85,358 87,584 128,287 Financial income / (expense) (Note 5.13) (20,073) (19,813) (28,474) NET INCOME FROM OPERATIONS 65,285 67,771 99,813 Amortization of intangible R&D rights acquired (2,233) Exceptional items (Note 5.14) (53,941) (8,654) (1,279) NET INCOME BEFORE TAXES 11,344 59,117 96,301 Income taxes (Note 5.15) (17,885) (25,702) (30,524) NET INCOME BEFORE GOODWILL AMORTIZATION (6,541) 33,415 65,777 Share of income (loss) in companies consolidated using the equity method 0 142 66 Goodwill amortization (20,815) (18,279) (20,906) TOTAL CONSOLIDATED INCOME / (LOSS) (27,356) 15,278 44,937 Minority interests (329) (219) (793) ATTRIBUTABLE NET INCOME / (LOSS) (27,685) 15,059 44,144 Net income (in Euros): - per share on shares issued (3.63) 1.98 6.22 - per share - diluted (3.63) 1.98 6.10 Income excluding exceptional items (in euros) - per share on shares issued 3.10 3.09 6.56 - per share - diluted 3.10 3.09 6.43 Weighted average number of shares outstanding 7,618,807 7,616,640 7,096,275 Weighted average number of shares after dilution 7,629,243 7,624,358 7,237,081
The number of shares representing paid-in capital was increased by 1,407,811 shares following the increase in capital carried out in 2002 (documentation approved by the Commission des opérations de bourse under N° 02-555 dated May 14, 2002). Assuming that this capital increase occurred on January 1, 2002, net earnings per share outstanding and earnings per share excluding extraordinary items are 5.80 and 6.12 Euros respectively in 2002.
20 Reference document 2004 Bacou-Dalloz Financial Report 1
1.5.3. Consolidated statement of cash flows
2004 2003 2002 In thousands of Euros
Cash flow generated by operating activities Net attributable income (27,685) 15,059 44,144 Abrium divestiture 37,091 Minority interests 329 219 793 Share of income (loss) in companies consolidated using the equity method 0 (142) (66) Depreciation & Amortization 40,809 42,238 48,026 Step-up in inventory value Changes in provision (4,732) (12,264) (21,483) Gains / Losses on disposals of fixed assets 3,594 (394) 243 Deferred taxes (2,212) 11,562 9,425
CASH GENERATED FROM SALES OF PRODUCTS & SERVICES 47,194 56,278 81,082 (Increases) decreases in work in process (9,081) 10,962 (8,368) (Increases) decreases in trade receivable 3,910 22,549 (12,054) Increases (decreases) in trade payable (541) (9,208) 2,496 Changes in other operating assets / liabilities 5,656 (6,031) (13,225)
NET CASH FLOW FROM OPERATIONS 47,138 74,540 49,931
Cash flow from investment activities Purchases of tangible and intangible assets (19,981) (25,025) (17,881) Share purchases of consolidated companies (640) (22,113) (1,823) Investments in other financial assets (375) Cash and cash equivalents of acquired companies 1,600 Abrium divestiture (10,731) Sales of tangible and intangible assets 2,006 5,469 423
CASH FLOW FROM INVESTMENT ACTIVITIES (29,346) (40,444) (19,281)
Cash flow from financing activities (Decreases) / Increases in financial debt (58,018) (15,141) (189,435) Increases in capital 249 145,978 Dividends paid to Company shareholders (3,809) (7,614) Dividends paid to minority shareholders (185) (380) (306)
NET CHANGES IN CASH & CASH EQUIVALENTS FROM FINANCING ACTIVITIES (62,012) (22,886) (43,763) Impact of exchange rate variances (4,083) (13,159) (9,496)
CHANGES IN CASH & CASH EQUIVALENTS (48,303) (1,949) (22,609) Cash & Cash equivalents at beginning of year 43,385 45,334 67,943 Cash & Cash equivalents at end of year (4,918) 43,385 45,334
Bacou-Dalloz Reference document 2004 21 1 Financial Report
1.5.4. Changes in shareholders’ equity of the Bacou-Dalloz group
Paid-in Additional Consolidated Currency Income Total capital paid-in reserves translation (loss) for In thousands of Euros capital differences the year
Balance at December 31, 2004 15,238 436,038 147,946 (133,420) (27,685) 438,117 Increases in number of shares outstanding: Stock options Allocation of net income 2003 11,250 (11,250) 0 Dividends paid (3,809) (3,809) Net income 2004 (27,685) (27,685) Currency translation differences (25,680) (25,680) Balance at December 31, 2003 15,238 436,038 136,696 (107,740) 15,059 495,291 Increases in number of shares outstanding: Stock options 10 241 251 Allocation of net income 2002 36,530 (36,530) 0 Dividends paid (7,614) (7,614) Net income 2003 15,059 15,059 Currency translation differences (65,398) (65,398) Balance at December 31, 2002 15,228 435,797 100,166 (42,342) 44,144 552,993
The currency translation differences are mainly the result of changes in the exchange rate for the US dollar (reduction in 2004 and 2003).
Options for the purchase of shares (see chapter 3).
1.5.5. Notes to the consolidated financial statements
& Note 1: Key events & Note 2: Accounting principles
The first half of 2004 was marked by the announcement on 2.1 - GENERALITIES May 11, 2004 of the beginning of exclusive negotiations between The financial statements of the Bacou-Dalloz group companies Bacou-Dalloz and Butler Capital Partners for the divestiture of were prepared according to the generally accepted accounting Abrium which was completed on July 13, 2004. In addition, standards applicable in their respective countries and were Henri-Dominique Petit was appointed as Chief Executive Officer of the subject of adjustments in order to bring them into compliance the Group following the departure of Claude Balleyguier. with the Bacou-Dalloz accounting principles.
The 2004 financial year for Bacou-Dalloz was also marked by The consolidated financial statements for the Bacou-Dalloz group the strong depreciation of the dollar versus the Euro. are prepared in accordance with French legal and regulatory requirements and, in particular, in compliance to regulation n° 99-02 of the CRC of July 31, 1999.
In closing this year’s consolidated financial statements, Bacou-Dalloz applied the same accounting methods as those used for the 2003 closing.
22 Reference document 2004 Bacou-Dalloz Financial Report 1
2.2 - CONSOLIDATION PRINCIPLES Elimination of intra-group transactions: Transactions between consolidated companies and any intra-group Consolidation scope and methods: profits are eliminated. The financial statements of directly or indirectly owned subsidiaries of the Bacou-Dalloz group are fully consolidated. Year-end closing: All companies are consolidated based on financial statements Companies in which the Group exercises significant influence over as of December 31, 2004. the financial and operational policies, but which it does not control, are consolidated using the equity method. Significant influence Translation of financial statements denominated in foreign is generally presumed to exist if the Bacou-Dalloz group holds currencies: at least 20% of the voting rights in the company. Balance sheet items are translated into Euros based on exchange rates outstanding as of December 31, 2004 and income statement Earnings of companies acquired or divested during the year are items are translated using the average annual exchange rates consolidated in the income statement for the period following for the year. The resulting translation differences are recorded the acquisition or preceding the divestiture. under reserves with respect to the portion attributable to the Group and under minority interests with respect to third parties. Consolidated subsidiaries of the Group are listed in note 6.4. The note 6.5. lists companies which are not consolidated due to The exchange rates of the main currencies used for the consolidation the fact that their size makes them immaterial to the Group financial are as follows: statements.
Year-end rates Average rates Per Euro 2004 2003 2002 2004 2003 2002 United States USD 1.3621 1.2630 1.0487 1.2433 1.1309 0.9449 Australia AUD 1.7459 1.6802 1.8556 1.6893 1.7384 1.7366 Canada CAD 1.6416 1.6234 1.6550 1.6170 1.5820 1.4828 China CNY 11.2734 10.4537 8.6798 10.2928 9.3624 7.8192 Hong Kong HKD 10.5881 9.8049 8.1780 9.6836 8.8059 7.3697 Morocco MAD 11.2075 11.0546 10.6406 11.0199 10.8143 10.3907 New Zealand NZD 1.8871 1.9244 1.9975 1.8729 1.9437 2.0357 Poland PLN 4.0845 4.7019 4.0211 4.5322 4.3983 3.8536 United Kingdom GBP 0.7051 0.7048 0.6505 0.6786 0.6919 0.6288 Slovakia SKK 38.7447 41.1692 41.5110 40.0336 41.4938 42.6803 Sweden SEK 9.0206 9.0802 9.1525 9.1250 9.1241 9.1592 Switzerland CHF 1.5429 1.5579 1.4524 1.5441 1.5207 1.4672
2.3 - ACCOUNTING PRINCIPLES AND METHODS APPLIED TO VARIOUS BALANCE SHEET AND INCOME STATEMENT ITEMS
Intangible assets for liabilities and charges. Differences between purchase price Goodwill on acquisition and the value of assets thus purchased are recorded as “Goodwill”. For each acquisition, the Group identifies and values all asset and liability amounts at their fair value, among which are purchased The difference is amortized over a fixed period based upon the intangible assets, R & D in process, intellectual property rights, economic prospects of the acquired company and for a period patents, trademarks and market share, inventories and all provisions which cannot exceed 20 years.
Bacou-Dalloz Reference document 2004 23 1 Financial Report
When significant changes in the structure of the acquired business The expenses are recorded in the current period with the exception occur, of such a nature as to bring into question amounts previously of financial expenses incurred during the construction period which recorded as goodwill, an exceptional write-off of goodwill are capitalized to the cost of the fixed assets. is recorded against income. Inventories and work in process: Research and Development expenses Inventories include raw materials, semi-finished and finished Expenditures related to research and development are recorded products and resale goods. They are valued at the lower of as expenses when incurred. production cost or market value.
Other intangible assets Provisions are recorded in order to take into account the risk of The other intangible assets purchased by the Bacou-Dalloz group obsolescence and are calculated based on analysis performed are recorded at purchase cost or their fair market value in the most notably on inventory turnover in the prior year and sales case they are valued following the acquisition of the consolidated prospects. company shares. The valuations at fair market value are performed by independent evaluators. Receivables Receivables are valued at their face value. Trademarks and market shares are not amortized. The amortization period of other intangible items are determined by the estimated The method retained for the construction of allowances on accounts useful life of those assets: receivable is based upon an analysis of late payments which are provided for as a function of the probability of collecting those Estimated useful lives are as follows: receivables.
• Patents and patent rights 15 years Income tax and provisions for deferred taxes: • Software 3 to 10 years Deferred taxes reflect timing differences between the time that expenses or credits are recorded in the accounting records The accounting value of these assets is reviewed at each closing and when they are recognized for tax purposes, as well as in order to identify eventual decrease in value. In the case of unrealized tax expenses or credits related to revaluations made a decrease in value, an exceptional write-off is recorded. during an acquisition.
Tangible assets: They also reflect temporary differences resulting from consolidation Tangible assets are valued at their purchase price or fair market entries made in order to harmonize accounting valuation methods value in the case that they are valued following the acquisition of used by various subsidiaries. the consolidated company shares, and depreciated on a straight line basis according to the following periods: Deferred tax assets on tax loss carry forwards are recognized to the extent that it is probable that the Group will have the future Period: taxable income against which unused tax credits may be offset. • Buildings 20 to 40 years • Improvements and fittings 10 years The calculation applies the liability method which requires • Manufacturing equipment and materials 5 to 10 years that deferred tax be based on the most recent known or anticipated • Tooling 3 to 5 years tax rates as of the balance sheet date. • Transportation equipment 3 to 5 years • Office furniture and equipment 5 to 10 years In the absence of a reliable forecast schedule, deferred tax assets and liabilities are not discounted to present value.
Leased assets Assets subject to a financing lease or a sales rental contract which have the effect of transferring all the risks and advantages of ownership are capitalized as an asset at their rental or leasing cost and depreciated according to the methods described above. The corresponding debt is recorded as a liability as if they were purchased on loans.
24 Reference document 2004 Bacou-Dalloz Financial Report 1
Marketable securities: all clearly specified in terms of purpose and the events that had Investment securities are subject to write-downs as necessary. occurred or that were in process which made them likely. Each line of securities of the same nature is valued at the average As a result, in 2002 the Bacou-Dalloz group did not see a significant price over the most recent month past or at its probable realizable impact upon its financial statements due to the application of value for unlisted securities. these rules.
Foreign currency translation: Retirement benefit obligations: Unhedged receivables and payables are converted into Euros The Bacou-Dalloz group records its retirement benefits and similar at the exchange rates outstanding as of the closing date and obligations according to methods consistent with French accounting exchange differences are recorded against income. principles and accounting standard IAS 19. The costs of lump-sum retirement payments and similar commitments (medical expenses Financial instruments: for retired employees, other medical/accident insurance) The Group’s policy is to reduce its exposure to interest and exchange are accounted for as employees accrue rights. Entitlements rate fluctuations and not to take speculative positions. are valued at the close of the financial year taking into account the length of service of the staff and the probability of their These risks are monitored at the Group level which makes it possible employment with the company at retirement and in accordance to define the broad policy with respect to hedging. with the applicable legislation in the countries where Bacou-Dalloz is present. The calculation is based on an actuarial model including Coverage contracts are negotiated on the market with counterpart assumptions for mortality, staff turnover, salary increases, yield banks of the highest quality. on long term investments and economic conditions in each country. With respect to the lump-sum retirement payments, the calculation Gains or losses from these instruments are accounted for is made by projecting the expense over the total duration of symmetrically against the gains or losses realized on the items the employee’s active time spent with the Bacou-Dalloz group. covered. Provisions are stated net of any payments made to external fund management institutions in respect of these commitments. Exchange risks In order to minimize exchange risks arising from Group trading Commitments of US subsidiaries: activities, subsidiaries invoice or are invoiced in their functional Defined contribution plans currency as much as possible. When such is not the case, Defined contribution plans consist of schemes to compensate the exchange risk is hedged on a case by case basis. employees after retirement for which the Group’s North American
Interest rate risk subsidiaries pay defined contributions to a distinct entity (an external The Bacou-Dalloz group manages interest rate risk centrally based fund). These contributions are recorded when an employee upon a general policy approved by Group management and which has rendered service in exchange for these contributions. excludes speculative positions. Coverage contracts are negotiated The contributions are recorded as an expense when incurred. on the market with counterpart banks of the highest quality. Defined benefit plans
Accounting The net liability of companies within the Bacou-Dalloz group under Bacou-Dalloz uses derivatives only for the purpose of hedging. defined benefit and health care plans is calculated separately The profits and losses associated with such contracts are recognized for each plan. It is calculated by estimating the amount of in a symmetrical manner to the hedged items. post-employment benefits employees will have accumulated in exchange for services rendered during the current and past Cash and cash equivalents: years. The benefits are discounted in order to determine the present Cash and cash equivalents are defined as the total of the balance value of the defined benefit commitments net of the fair value of sheet items “Cash” and “Marketable securities” net of bank the plan’s assets. The discount rate used corresponds to the yield overdrafts. on risk free bonds for which the maturity is approximately the same as those for the Group. The calculation is performed by Provisions for liabilities and charges: an independent qualified actuary. Since January 1, 2002 the Group has applied CRC Regulation N° 2000-06 for liabilities. The liabilities and charges as of December 31, 2001 in the consolidated balance sheet were
Bacou-Dalloz Reference document 2004 25 1 Financial Report
Provisions for litigation: 2.4 - TRANSITION TO NEW INTERNATIONAL ACCOUNTING These provisions are calculated every year-end based on STANDARDS the probability of known liabilities and charges as of the date when the financial statements are prepared. Pursuant to European Regulation N° 1606/2002 and in compliance to IFRS 1 “First-time adoption of IFRS”, the consolidated financial They are determined on the basis of best knowledge of the risks statements of the Bacou-Dalloz group for the financial year ending incurred, and their likelihood, and are assigned to specific risks. December 31, 2005 will be prepared using the international financial They are designed specifically to cover risks not covered reporting standards (IFRS) in effect as of December 31, 2005 by insurance. with comparative financial statements for the financial period 2004 established according to the same standards. In order to publish This item mainly consists of a valuation of litigation for which this comparative information, the Group must prepare an opening the Group companies could be obliged to pay and which are not balance sheet as of January 1, 2004, the starting point for applying fully covered by insurance. The amount of the provision is estimated the IFRS rules. The first financial statements produced using IFRS based upon known litigation at closing dates and potential litigation will be based on the period ending June 30, 2005. They will include calculated on an actuarial basis. The provision is in compliance comparable figures for the period ending June 30, 2004 also according with regulations R 00-06 of the CRC with respect to liabilities. to IFRS.
Earnings per share: A work group has already been established and is composed of ten Consolidated earnings per share are calculated based upon people who have performed a complete analysis which has permitted a weighted average number of shares outstanding during the year. the identification of:
Consolidated diluted net income per share is calculated based • the main differences between the principles currently being applied upon the weighted average number of shares outstanding during by the Group and the IFRS principles with respect to accounting the year plus the number of shares that would be issued after treatment, valuation and financial statement presentation; exercising all outstanding stock options. • the additional accounting information for which disclosure is required; Earnings excluding non-operating items represent consolidated net income excluding non-operating charges net of taxes, • the necessary changes of systems and information flows; amortization of R&D rights acquired and amortization associated with the value of inventory acquired in the context of the merger • the historical data to compile and analyze in order to construct with the Bacou group. an opening balance sheet according to IFRS at January 1, 2004.
Non-operating income / (expense): The status of this work has been presented on several occasions Non-operating income / (expense) represents operations which to the Group’s Audit Committee. are not considered part of the Company’s normal business activities such as certain restructurings or the divestiture of assets. The main differences identified which will have an impact upon equity as of January 1, 2004 and / or future profitability are the following:
• Goodwill will no longer be amortized. It will be reviewed for impairment once a year;
• Deferred taxes on intangible assets will be reported;
26 Reference document 2004 Bacou-Dalloz Financial Report 1
• The value of stock options as of their issuance date will be accounted for as a personnel expense.
Nonetheless, in order to best comply with the AMF recommendation of January 2005, the Group does not disclose quantitative information related to the impact of these changes with the annual results for 2004 as the data have not been completed, and, as a result, have not been yet audited.
& Note 3: Changes in consolidation perimeter and comparative figures
3.1 - CHANGES IN CONSOLIDATION PERIMETER: 3.2 - INFORMATION RELATED TO ABRIUM : The main change in consolidation perimeter concerns the divestiture of Abrium which became effective as of July 13, 2004 Abrium, the divestiture of which became effective on July 13, 2004, (see note 3.2). is no longer included in the consolidation perimeter at December 31, 2004. The profit and loss statement has been consolidated up to July Other changes in the year concerned the purchase of minority 13, 2004. The following are key figures summarizing the contribution interests which were immaterial. In April 2003, Bacou-Dalloz of this subsidiary to the Group consolidated financial statements acquired Securitex, the number three producer of fire protection as of June 30, 2004: garments in North America. The company has been consolidated for a nine month period and contributed 14 millions Euros to sales Balance Sheet in 2003. In 2002, the company realized 18 million US dollars June 2004 in sales. In thousands of Euros
In addition, in 2003, Bacou-Dalloz created a captive insurance Fixed assets 1,942 company in the United States called Bacou-Dalloz Assurance Co., Ltd. Current assets 47,588 The company has been fully consolidated at December 31, 2004. Net equity (24,020) Provisions for risks and charges 4,607 Bacou-Dalloz current account 50,764 Current liabilities 18,115
Income statement
June 2004 2003 2002 In thousands of Euros
Sales outside of Group 40,387 100,679 116,794 Operating profits (4,699) (8,294) (5,132) Net income (5,365) (11,082) (6,578)
Abrium purchases from Bacou-Dalloz group companies represented 13.0 million Euros as of June 30, 2004.
Bacou-Dalloz Reference document 2004 27 1 Financial Report
& Note 4: Segment information
2004 2003 Body Head Distribution Corporate Total Body Head Distribution Corporate Total Protection Protection Protection Protection In thousands of Euros
Net external sales 299,454 366,235 40,387 706,076 303,740 391,272 100,679 795,691 Operating income 18,090 71,812 (4,544) 85,358 24,545 71,333 (8,294) 87,584 Net fixed assets 77,338 262,656 37,640 377,634 84,361 285,993 1,195 36,634 408,183
Expenses for the administrative headquarters are distributed on a prorata basis based on external net sales.
2004 2003
Americas Europe / Total Americas Europe / Total Rest of Rest of world world In thousands of Euros
Net external sales 345,206 360,870 706,076 381,027 414,664 795,691 Net fixed assets 269,993 107,641 377,634 293,798 114,385 408,183
& Note 5: Additional balance sheet and income statement information
5.1 - GOODWILL ON ACQUISITIONS:
2004 2003 2002 Additions correspond to the buybacks from minority shareholders In thousands of Euros and equity interests.
Gross value on January 1 359,362 389,917 413,018 Other changes for the 2004 financial year are related to provisions Currency translation differences (16,501) (45,248) (50,578) for risks and restructuring recorded in the framework of the final Additions 571 17,777 1,652 valuation of the Bacou-Dalloz group’s assets and liabilities, at their Other changes (3,319) (3,084) 25,825 fair value, performed during the allocation period, which exceeded Gross value on December 31 340,114 359,362 389,917 costs incurred. Other changes for the 2002 financial year were Accumulated amortization (89,819) (73,656) (65,273) related to the final valuation of Bacou-Dalloz assets and liabilities, Net book value at December 31 250,295 285,706 324,644 at their fair value, performed during the allocation period.
28 Reference document 2004 Bacou-Dalloz Financial Report 1
The breakdown of goodwill as of December 31, 2004 is as follows:
Acquisition Amortization Gross Accumulated Net book year period value amortization value In thousands of Euros
WGM 1988 20 years 46,155 (25,206) 20,949 Pulsafe 1996 20 years20,100 (8,169) 11,931 Söll 2000 20 years27,700 (7,043) 20,657 Fendall 2000 20 years11,222 (2,478) 8,745 Groupe Bacou – USA 2001 20 years 131,525 (21,830) 109,696 Groupe Bacou – Europe & Rest of world 2001 20 years 65,367 (10,849) 54,518 Sécuritex 2003 20 years8,731 (764) 7,967 SGP 2003 20 years1,218 (61) 1,157 Other* 20 years28,096 (13,419) 14,675 Total 340,114 (89,819) 250,295
* Goodwill on acquisitions prior to 2002 and for which all items are below 10 million Euros.
The Group has proceeded with a review of the book value of 5.2 - NET VALUE OF OTHER INTANGIBLE ASSETS: goodwill and other intangible assets as of December 31, 2004. 2004 2003 2002 This review was performed by net asset group within the same In thousands of Euros business and / or geographic area on the basis of the expected Gross value as of January 1 338,924 377,045 428,008 cash flow of those assets in the framework of strategic reviews Changes in consolidation perimeter (317) 216 performed during the budgeting process. Future cash flow growth Acquisitions 2,608 13,164 1,316 in the first years is based on budget assumptions which take into Other changes 2,364 account the specificities of each business. Beyond that period, Reclassifications 1,205 (34) 1,390 future cash flows are projected based upon a normalized growth Divestitures (109) (342) rate below the inflation rate and with a final cash flow amount Currency translation differences (18,611) (51,125) (56,033) representing the residual value which is divided by the discount Gross value as of December 31 323,700 338,924 377,045 rate. The discount rate used is the weighted average cost of Accumulated amortization (24,011) (19,011) (15,832) Bacou-Dalloz capital plus a risk premium. Net Value as of December 31 299,689 319,913 361,213
The amounts reported within intangible assets as goodwill in the Patents, trade marks and market shares 282,352 300,242 349,202 balance sheet of December 31, 2004, grouped with other assets Other 17,337 19,671 12,011 by activity and / or geographic regions, were compared to Net value as of December 31 299,689 319,913 361,213 their calculated value using the method described above. Patents, trade marks and market shares were primarily the result Sensitivity analyses on the realization of budget assumptions, of the valuation of the Bacou group’s intangible assets acquired on growth rates to infinity or the weighted average cost of capital, in 2001 at their fair market value. The variances reported are mainly permitted the conclusion that, with the exception of Moptics, the result of exchange rate differences and the amortization of there was no loss of value to report on December 31, 2004. patents.
Impairment related to the Moptics subsidiary (sun lenses business) The “Other variances” reported for the year 2002 were related amounts to 3.4 million Euros in 2004. to the final valuation of the Bacou Group’s assets and liabilities at their fair market value performed during the allocation period.
Bacou-Dalloz Reference document 2004 29 1 Financial Report
5.3 - TANGIBLE ASSETS:
Value at Changes in Additions Removals Adjustments Currency Depreciation Value at beginning consolidation or sales differences translation end of year perimeter and of year write-offs In thousands of Euros
Land 4,851 (232) (401) (210) 4,008 Buildings 54,478 (443) 1,576 (7,309) 2,692 (1,548) (1,459) 47,987 Equipment, tooling and other assets 116,374 (1,387) 15,813 (7,490) (4,043) (4,647) (21) 114,599 Gross value 175,703 (1,830) 17,389 (15,031) (1,752) (6,405) (1,480) 166,594 Buildings (21,245) 210 4,557 (1,788) 554 (3,320) (21,032) Equipment, tooling and other assets (66,188) 665 6,408 1,905 2,345 (12,752) (67,617) Net value 88,270 (955) 17,389 (4,066) (1,635) (3,506) (17,552) 77,945
5.4 - LONG TERM FINANCIAL ASSETS: 5.5 - INVENTORIES & WORK IN PROCESS:
2004 2003 2002 2004 2003 2002 In thousands of Euros In thousands of Euros Raw materials and supplies 55,415 54,911 59,728 Investments in affiliates accounted for under the equity method 688 743 1,575 Resale products, finished goods and work-in-process 86,998 101,877 113,177 Other financial assets 1,318 1,656 6,264 Gross value at December 31 142,413 156,788 172,905 Net value 2,006 2,399 7,839 Provisions (26,656) (31,418) (30,403) Net value at December 31 115,757 125,370 142,502 At December 31, 2004, only the company McKowan was consolidated using the equity method. The Group has considerable influence over this company considering 5.6 - OPERATING RECEIVABLES: its percentage share. Nonetheless, there is no specific agreement with the majority shareholders that would justify another 2004 2003 2002 In thousands of Euros consolidation method. Redi, which was consolidated using the equity method until December 23, 2002, has since that date Gross value 135,134 164,278 182,371 been fully consolidated. Provisions (5,118) (8,250) (9,727) Net value of trade receivables 130,016 156,028 172,644 Gross value 21,545 28,298 37,892 Other financial assets at December 31, 2002 mainly included Provisions (172) (97) (93) shares in the companies Uvex Australia and Uvex UK of which Net value of other operating 30% was held and which were divested to Uvex Arbeitschutz receivables 21,373 28,201 37,799 GmbH on January 31, 2003. At December 31, 2004, other operating receivables consisted mainly Other financial assets at December 31, 2003 included non- of tax refunds receivable (7.8 million Euros) and accruals for unpaid consolidated controlling interest shares amounting to 445 million expenses incurred (8.0 millions Euros). Euros and various deposits made and guarantees provided for the amount of 873 million Euros. All trade and other receivables fall due in less than one year.
The non-consolidated controlling interest shares are described in detail in paragraph 6.5 of this document.
30 Reference document 2004 Bacou-Dalloz Financial Report 1
5.7 - MARKETABLE SECURITIES:
2004 2003 2002 In thousands of Euros Gross book value 0 166 166 Net book value 0 166 166 Mutual funds on hand 0 166 166 Net book value 0 166 166 Market value 0 166 166
5.8 - PROVISIONS FOR LIABILITIES AND CHARGES:
Value at Changes in Increases Provisions Provisions Currency Value at beginning consolidation applied reversed changes year-end of year perimeter In thousands of Euros
Provisions 2004 Litigation 33,922 (532) 3,979 (4,916) (514) (2,147) 29,792 Warranties 1,212 170 (21) (53) (80) 1,228 Restructuring expenses 19,336 (3,017) 7,070 (12,515) (25) (460) 10,389 Other provisions for risks 7,925 (3,549) 2,873 (768) (540) (186) 5,755 Total 62,396 (7,098) 14,092 (18,220) (1,132) (2,873) 47,165
Provisions for litigation include, in particular, the valuation of litigation 5.9 - RETIREMENT BENEFIT OBLIGATIONS: related to defective product liabilities for which the Bacou-Dalloz group companies could be found at fault and for which settlement Value at Changes Currency Value at amounts could be larger than insurance coverage subscribed. beginning during changes year-end of year the year The amount of this provision is based on known litigation at In thousands of Euros the closing date of the financial statements and potential litigation calculated on an actuarial base. Other provisions for litigation Provisions include no provision which, taken separately, would be significant for retirement 8,012 (527) (73) 7,412 and require detailed information, especially in paragraph 1.2, benefit obligations Legal Risks, of the reference document.
Restructuring expenses include provisions aimed at covering restructuring initiatives already committed to during the 2004 financial year however not yet completed at year-end.
Other provisions for liabilities correspond to various identified risks for which the individual amounts are insignificant.
Bacou-Dalloz Reference document 2004 31 1 Financial Report
The rates used to calculate the retirement benefit obligations of The following table illustrates the ratios: French companies are 4.50% for the gross inflation adjusted discount rate, 1.5% for the average increase in management Reached Contractual limits salaries and 1% for the average increase in non-management employee salaries. Retirement age is 62 years for management Net debt over shareholders’ equity 73% 100% employees born before December 31, 1949, 64 years for Net debt over EBITDA 3.04 3.50 management employees born after January 1, 1950, 60 years EBITDA over financial expenses 5.25 5.00 for non-management employees born before December 31, 1949 and 62 years for non-management employees born after January 1, 1950. The average turnover rate used for all Group employees 2004 2003 2002 In thousands of Euros is between 4% and 4.5%. Maturity of less than one year 79,157 111,954 59,525
For the North American subsidiaries, the discount rate used From one to two years 64,219 45,786 81,152 is on average 6% and the yield on funds invested is 8.32%. From two to three years 47,623 59,501 93,205 From three to four years 123,897 38,385 137,863 For the German subsidiaries, the assumptions retained for the More than four years 756 134,866 83,209 valuation of benefits are identical to those applied for French Medium and Long-term loans and borrowings subsidiaries, with the exception of the social security rate which from financial institutions 315,652 390,492 454,954 is 25% for Germany. The discount rate applied was 4.75%. Short term financing 22,231 13,849 25,838 Total loans and borrowings 337,883 404,341 480,792 5.10 - PROVISIONS FOR LITIGATION AND RESTRUCTURING: To the Company’s knowledge, there is no unprovisioned litigation Breakdown by currency or arbitration in the foreseeable future or in the recent past which could have a material impact on the Company’s business, financial 2004 2003 2002 In thousands of Euros position, earnings or assets and liabilities. Euro EUR 147,806 151,127 157,050 US Dollar USD 185,078 251,198 321,326 5.11 - LOANS AND BORROWINGS: Other currencies 4,999 2,016 2,416 Refinancing of the Group will partially result from the loan syndicate Total loans and borrowings 337,883 404,341 480,792 which was put in place on July 31, 2003. However, the Group will continue to pursue its policy of diversifying its financing sources with the implementation of a certain number of bilateral credits 5.12 - FINANCIAL INSTRUMENTS: lines. At December 31, 2004, these totaled 103 million Euros of which 52 million Euros have not been utilized. Interest rate hedging operations
Euros American Other Total The syndicated loan covenants specify certain financial ratios. dollars currencies Those ratios are: net-debt over shareholders’ equity, net debt over In thousands of Euros gross operating earnings (consolidated EBITDA) and the coverage Debt 147,806 185,078 4,999 337,883 of net financial expenses by gross operating earnings (EBITDA). Portion of debt hedged Failure to adhere to these ratios can lead to the right of the financial at December 31, 2004 67% 40% 0% 51% institutions to demand repayment. (rate instruments)
The debt in Euros is essentially hedged using option based solutions however also by fixed interest swaps which together amount to a level below 3.25%.
In the same manner, dollar denominated debt is hedged exclusively by options at levels below 3.50%.
32 Reference document 2004 Bacou-Dalloz Financial Report 1
At December 31, 2004, 99 million Euros of denominated debt was 5.14 - NON-OPERATING INCOME / (EXPENSE): hedged with a negative market value of 0.2 million Euros. 100 million of US dollar denominated debt was hedged with a positive 2004 2003 2002 market value of 0.4 million US dollars. In thousands of Euros Exceptional expenses related to To date, the Group has primarily used derivatives such as caps, the Abrium divestiture of July 12, 2004 (37,090) floors, collars or swaps. Charges and reversals of provisions for restructuring expenses (12,615) (10,254) (1,036) The amounts of hedged positions as of December 31, 2004 were Severance package of Chief Executive Officer (2,600) as follows: Gains / (Losses) on assets disposals (842) 508 (243) • Euro Collars: 44 million Euros Miscellaneous (794) 1,092 • Euro Caps: 45 million Euros Total (53,941) (8,654) (1,279) • Euro Swaps: 10 million Euros The charges and reversals of provisions for restructuring expense are • Dollar Caps: 90 million US dollars related to reorganizations and the closure of various manufacturing • Dollar Swaps: 10 million US dollars and distribution sites in Europe and the United States. Some of the restructuring announced in 2004 will become effective during 5.13 - FINANCIAL INCOME / (EXPENSE): 2005.
2004 2003 2002 The tax credit related to non-operating expenses amounted In thousands of Euros to 3.5 million Euros in 2004 versus 0.2 million in 2003. Interest on bank borrowings (16,551) (17,617) (27,906) Investment income 694 903 1,565 5.15 - INCOME TAX AND DEFERRED TAX PROVISION: Income on equity investments 80 50 78 Exchange gains 1,457 3,520 325 Split by category: Exchange losses (2,883) (2,614) (5) Miscellaneous (2,870) (4,065) (2,531) In thousands of Euros 2004 2003 2002 Total (20,073) (19,813) (28,474) Current tax (18,616) (41,144) (21,945) Deffered tax 731 15,442 (8,579) Total (17,885) (25,702) (30,524)
Effective tax rate The effective tax rate on earnings went from 43.48% in 2003 to 158% in 2004 and 36.94% excluding the effect of the Abrium divestiture for which no tax savings were reported at 12/31/04.
In the current year, the reconciliation, excluding the impact of Abrium, with the legal tax rate in France can be analyzed as follows:
2004 French statutory rate 34.33% Effect of various rates in site location countries 3.20% Effect of tax free income from fiscal incentives (6.72)% Tax loss carried forward (1.89)% Deferred taxes for the year not recorded 8.56% Other (0.54)% Effective tax rate 36.94%
Bacou-Dalloz Reference document 2004 33 1 Financial Report
Deferred tax analysis The deferred tax balance can be broken down as follows:
2004 2003 In thousands of Euros Assets Liabilities Assets Liabilities Differences between fiscal and consolidation valuations of fixed assets 12,702 11,593 10,904 8,373 Retirement provisions 1,792 2,042 Other provisions 4,648 1,238 3,014 932 Temporary tax differences 8,062 981 5,297 569 Profits on inventory elimination entries 389 818 Tax losses recognized (of which France: 3 000) 3,732 3,000 Other deferred tax differences 41 1,469 249 6 Total 31,366 15,281 25,324 9,880
The deferred tax assets not included in the balance sheet amounted to 42 million Euros versus 21 million Euros in 2003 and were related to companies consolidated for tax purposes in France for the amount of 40 million Euros.
& Note 6: Other information
6.1 - OFF-BALANCE SHEET LIABILITIES 6.2 - AVERAGE HEADCOUNT OF FULLY CONSOLIDATED The establishment of a syndicated financing contract with a pool COMPANIES: of banks on July 31, 2003 required that the borrowing companies of the Bacou-Dalloz group provide a reciprocal and joint guarantee 2004 2003 2002 By country in favor of the syndicated banking pool set up for this purpose. France 1,377 1,750 1,828 At the time of the Abrium divestiture agreement, the parties signed Western Europe excluding France 359 403 228 a specific partnership contract for an 18 month period aimed Other Europe 752 717 958 at accompanying the removal of Abrium from the Bacou-Dalloz USA & Canada 1,901 1,959 2,771 consolidation perimeter. Mexico 1,016 786 687 Rest of world 645 639 121 The presentation of these commitments does not omit the existence Total 6,050 6,254 6,593 of a significant liability according to the accounting standards in effect. Other off-balance sheet liabilities provided by companies in the Bacou-Dalloz group include, in particular, the operating lease Personnel expenses amounted to 187.6 million Euros in 2004 versus agreements which can be broken down as follows: 206.1 million Euros in 2003.
Payments due by period
Less than 1 to 3 4 to 5 More than Total one year years years 5 years In thousands of Euros Operating leases 6,514 10,328 8,767 6,507 32,116
34 Reference document 2004 Bacou-Dalloz Financial Report 1
6.3 - COMPENSATION OF MEMBERS OF THE BOARD OF DIRECTORS
Over the course of 2004, the total amount of direct and indirect The following amounts of remuneration and benefits were received remuneration and benefits received by the members of by the individual members of the Board of Directors: the Company’s Board of Directors amounted to 2,690,954 Euros of which 194,678 Euros were received in the form of Directors’ fees.
In Euros Financial year 2004 Financial year 2003 Director Fixed Variable Directors’ Benefits Fixed Variable Directors’Benefits remuneration(1) remuneration(2) fees in kind remuneration(1) remuneration fees in kind
Philippe Alfroid 57,355 11,608 65,514 11,154 Philippe Bacou 88,971 11,608 122,890 10,084 Claude Balleyguier(3) 1,983,238 67,901 7,918 515,010 155,113 11,154 8,654 Gérard Cottet 28,062 28,678 Ginette Dalloz 18,293 10,084 18,293 9,630 Patrice Hoppenot 25,014 22,874 Idia Participations (Via its permanent representative) 10,084 11,154 Norbert Majerholc 25,014 25,014 Gunther Mauerhofer 24,398 25,468 Walter Stepan(3) 17,534 36,438 André Talmon 26,538 26,084 Henri-Dominique Petit(3) 234,610 57,250 4,734 2,709
(1) Some remuneration amounts are denominated in US dollars for which the exchange rate used is the average exchange rate of the French Central Bank for 2004, or, 1.2433 EURO per US dollar. (2) Variable remuneration paid in 2004 is related to profits achieved in the 2003 financial period. (3) Claude Balleyguier was dismissed on April 2, 2004. Mr. Balleyguier’s fixed remuneration includes his severance package. The mandates of Claude Balleyguier and Walter Stepan were not renewed at the Shareholders’ Meeting of May 18, 2004. Henri-Dominique Petit was appointed as Director by said meeting and appointed as Chief Executive Officer at the Board Meeting which followed the Shareholders’ Meeting on May 18, 2004.
Bacou-Dalloz Reference document 2004 35 1 Financial Report
6.4 - LIST OF FULLY CONSOLIDATED COMPANIES:
Name Address Country Ownership SIREN code in % (French companies)
Annic SAS La Mayounelle, 82250 Laguépie France 99.9% 778 115 436 Bacou Dalloz Vierzon SAS 35-37 rue de la Bidauderie, BP 427, 18104 Vierzon France 100.0% 338 833 577 Bacou Dalloz Europe SAS Paris Nord II, 33 rue des Vanesses, 93420 Villepinte France 100.0% 432 718 229 Bacou Dalloz Plaintel SAS ZI de la gare, 22940 Plaintel France 100.0% 497 180 695 Bacou Dalloz Logistique Systems SNC 25 porte d’Autun, 71400 St Forgeot France 99.0% 431 434 208 Bacou Dalloz France SAS Paris Nord II, 33 rue des Vanesses, 93420 Villepinte France 100.0% 348 982 307 Bacou Développement 1 SARL Paris Nord II, 33 rue des Vanesses, 93420 Villepinte France 100.0% 440 331 247 Bacou Développement 2 SARL Paris Nord II, 33 rue des Vanesses, 93420 Villepinte France 100.0% 440 337 814 Beal SAS ZI du Gier, 69700 Givors France 100.0% 351 044 607 Bacou Dalloz Béziers SAS Zone Industrielle, 8 rue André Blondel, 34500 Beziers France 100.0% 572 921 062 Christian Dalloz Sunoptics SAS Route de Genève, BP 155, 39 206 Saint Claude France 100.0% 403 063 050 Comoditex SAS 47, rue Henri Dunant, 02100 Saint Quentin France 100.0% 585 580 301 Delta Protection SAS ZA du Berret, 30 200 Bagnols sur Ceze France 100.0% 309 047 454 Engineering Henri Bacou SAS 168, Avenue des Auréats, 26000 Valence France 100.0% 306 331 182 Établissements Foin SAS Paris Nord II, 33 rue des Vanesses, 93420 Villepinte France 100.0% 542 091 699 FENZY SAS Paris Nord II, 33 rue des Vanesses, 93420 Villepinte France 100.0% 552 057 440 IPSA SAS 168, Avenue des Auréats, 26000 Valence France 100.0% 417 781 013 JL Immobilier Sarl Rue des Condamines, 01100 Oyonnax France 100.0% 398 195 982 Mavetra SARL 192, Rue Etienne Poulet, 69400 Villefranche sur Saône France 100.0% 429 028 749 Mercadier SAS La Mayounelle, 82250 Laguépie France 100.0% 379 207 624 Oxbridge SAS 15 Rue Béranger, 75003 Paris France 100.0% 632 025 649 PASA SAS ZI du Marenton, 25 Chemin de Porte-Broc, BP 102, 07102 Annonay France 100.0% 330 305 830 Riby SAS 57, Fg des Vosges, 68100 Thann France 99.8% 389 168 782 SCI Bacou 168, Avenue des Auréats, 26000 Valence France 100.0% 407 572 726 SCI Bacou Valence 168, Avenue desFrance Auréats, 26000 Valence France 100.0% 342 282 936 SIC SAS Zone InFranceelle, 07270 Lamastre France 100.0% 321 190 167 Saint Germain Plastiques SAS L’Arbresle, 69210 St Germain sur l’Arbresle France 100.0% 322 828 609 Bacou Dalloz Autun SAS 25 porte d’Autun, 71400 St Forgeot France 100.0% 439 886 730 SP Défense SAS Paris Nord II, 33 rue des Vanesses, 93420 Villepinte France 100.0% 379 999 477 Usine Splindler SAS Le Mont, Plancher Bas, 70290 Champagney France 100.0% 675 450 167 Bacou Deutschland Verwaltung GmbH Waldstrass 23 C1/C2, 63128 Dietzenbach Germany 100.0% Bacou Dalloz Deutschland GmbH & Co KG Kronsforder Allee 16, 23560 Lübeck 3, 91448 Emskirchen Germany 100.0% OPMA Arbeitsshutz GmbH Postfach 80, Fabrikweg Germany 100.0% Christian Dalloz Holding Deutschland GmbH & Co KG Seligen 10, D-95028 Hof Germany 100.0% Bacou Dalloz Australia Pty. Ltd 19 Topko Road, Terrey Hills NSW 2084 Australia 100.0% Auralgard Pty. Ltd 19 Topko Road, Terrey Hills NSW 2084 Australia 100.0% Dalloz Holding Pty Ltd 4 Park Drive, Dandenong South, Victoria 3175 Australia 100.0% Dalloz Safety Pty Ltd 4 Park Drive, Dandenong South, Victoria 3175 Australia 100.0% Moxham Ind. Pty Ltd 4 Park Drive, Dandenong South, Victoria 3175 Australia 100.0% Celis Europ Proctection Holding 33 rue de Seraing, 4020 Liege Belgium 100.0% Celis Europ Proctection 33 rue de Seraing, 4020 Liege Belgium 100.0% Dalloz Safety NV/SA Kluwaartslaan 3, Box 5, B1853 Strombeek Bever Belgium 100.0% Bacou-Dalloz Produtos de Seguranca Ltda. Av. Brigadiro Faria Lima, 2.1601 5e andar-1451-935 Sao Paulo Brasilia 100.0%
36 Reference document 2004 Bacou-Dalloz Financial Report 1
Name Address Country Ownership SIREN code in % (French companies)
Bacou-Dalloz Fall Protection Ltd P.O. 1200 Trenton, Ontario K8V 6B4 Canada 100.0% Bacou-Dalloz Protective Apparel Ltd 4200 St-Laurent Blvd, 6th Floor, Montreal, Quebec H2W 2R2 Canada 100.0% Bacou Industrial & Trading 389, Gang Ao & 2005 Yang Gao Bei Road, Giao free trade zone, Shanghai China 100.0% Bacou-Dalloz Hong Kong Ltd Unit 4, 10 Floor, Entrepot Center, 117 How Ming St., Kwun Tong, Kowloon Hong Kong 100.0% Bacou Dalloz Iberica Calle Torrejon 7, 28850 Torrejon de Ardoz, Madrid Spain 100.0% Fagunit SL Gabiria 80, E-20305 Irun Spain 100.0% Bacou-Dalloz USA, Inc 910 Douglas Pike, Smithfield, RI 02917 United States 100.0% Bacou-Dalloz Americas, Inc 910 Douglas Pike, Smithfield, RI 02917 United States 100.0% Bacou-Dalloz Assurance Co, Ltd 100 Bank Street, Suite 610 Burlington, VT 05402-0530 United States 100.0% Survivair Respirators, Inc 3001 S. Susan Street Santa Ana, CA 92704 United States 100.0% Bacou-Dalloz Safety, Inc 910 Douglas Pike, Smithfield, RI 02917 United States 100.0% Bacou-Dalloz Fall Protection, Inc 1345 15th Street, Extension, Franklin, PA 16323-0371 United States 100.0% Bacou-Dalloz Investment, Inc 910 Douglas Pike, 3rd floor Smithfield, RI 02917, United States 100.0% Bacou-Dalloz Protective Apparel, LLC 715 4th Ave., Grand Junction, Colorado 81501 United States 100.0% Bacou-Dalloz USA Finance, Inc Multifoods Tower, 33 South Sixth Street, Minneapolis, MN55402 United States 100.0% Biosystems, LLC 651 So. Main St. Middletown, CT 06457 United States 100.0% BMP I, Inc 910 Douglas Pike, Smithfield, RI 02917 United States 100.0% Fall Arrest Systems Inc 1345 15th Street, Franklin, PA 16323 United States 100.0% Fendall Inc 825 E Highway 151 Platteville, WI 53818 United States 100.0% GPT Glendale Inc 10 Thurber Blvd., Smithfield, RI 02917 United States 100.0% Howard Leight Industries,LLC 7828 Waterville Road San Diego, CA 92154 United States 100.0% Perfect Fit Glove Co, LLC 85 Innsbruck Drive, Buffalo, NY 14227 United States 100.0% PPE Holdings, Inc 910 Douglas Pike, Smithfield, RI 02917 United States 100.0% Titmus Optical, Inc 3811 Corporate Drive, Petersburg, VA 23805 United States 100.0% Bacou-Dalloz Eye and Face Protection, Inc 10 Thurber Blvd. Smithfield, RI 02917 United States 100.0% Whiting & Davis, Inc 200 John Dietsch Blvd., Attleboro Falls, MA 02763 United States 100.0% Bacou Hungary Forgach U 9B H 1139 Budapest Hungary 60.0% Bacou-Dalloz Italia Srl Piazza IV Novembre, 4, 20124, Milano, Italia Italy 100.0% Intratex Via Reycend 51, 10148 Torino Italy 100.0% El Beyda Route Côtière 111, Km 11.5, Bernoussi Casablanca Morocco 64.9% Sofracuir Rue El Hawza Oukacha, Casablanca Morocco 54.5% Animac Route 110, KM 12, No 9, Sidi Bernoussi, Ain Sebna, Casablanca Morocco 69.9% Fagunit Morocco Lot 1+2, Tanger Zone Franche, Boukhalef, Tanger Morocco 90.0% Howard Leight de Mexico, SA de CV Av. Ferrocarril y Km 14.5, Centro Industrial Limon Los Pinos, Tijuana BC Mexico 100.0% Survivair, S de RL de CV Av. Ferrocarril y Km 14.5, Centro Industrial Limon Los Pinos, Tijuana BC Mexico 100.0% Dalloz Safety New Zealand Ltd PO Box 13-487, Auckland 6, New Zealand New Zealand 100.0% Bacou International BV Zoutverkopersstraat 8, 3334 KJ Zwijndrecht Netherlands 100.0% Pulsafe Europe Holding BV Parnassustoren, Locatellikade 1, 1076 AZ Amsterdam Netherlands 100.0% Bacou Intersafe Eastern Europe BV Zoutverkopersstraat 8, 3334 KJ Zwijndrecht Netherlands 100.0% Bacou Export Zoutverkopersstraat 8, 3334 KJ Zwijndrecht Netherlands 100.0% Loti BV H/O Eurepi, Laan Copes Van Cattenbuch 52, 2585 GB Den Haag Netherlands 99.8% Vinylon Hanzeweg 16, Postbus 39, 7240 AA Lochem Netherlands 100.0% Annic International BV Laan Copes van Cattenburch 52, 2585 GB, Den Haag Netherlands 100.0% Fenzy Polska UL Gornizca 18/36, 91765 Lodz Poland 96.0% Christian Dalloz UK Ltd Osborn Way, Hook, Hampshire RG27 9HX UK 100.0%
Bacou-Dalloz Reference document 2004 37 1 Financial Report
Name Address Country Ownership SIREN code in % (French companies)
Bacou Dalloz Ltd Osborn Way, Hook, Hampshire RG27 9HX UK 100.0% Troll Safety Equipment Ltd Spring Mill, Spring, St., Uppermill, Nr, Oldham 013 6AA UK 100.0% ITK Safety Ltd Spring Mill, Spring, St., Uppermill, Nr, Oldham 013 6AA UK 100.0% Dalloz Fall Protection Ltd Spring Mill, Spring, St., Uppermill, Nr, Oldham 013 6AA UK 100.0% Logandene Ltd 3 Holmethorpe Avenue, Redhill, Surrey RH1 2PA UK 100.0% Pulsafe Safety Product Ltd 3 Holmethorpe Avenue, Redhill, Surrey RH1 2PA UK 100.0% Safety Eyewear Ltd 3 Holmethorpe Avenue, Redhill, Surrey RH1 2PA UK 100.0% Bacou-Dalloz Safety Office 813, Stroenie 1, Pereulok Krasina 16, 123995 Moscow, D-56, GSP-5 Russia 99.8% Bacou Produkt SRO Nitrianska Cesta 503/60, 95801 Partizanske Slovakia 100.0% Bacou Dalloz Safety SRO Nitrianska Cesta 503/60, 95801 Partizanske Slovakia 100.0% Bacou Dalloz SRO Nitrianska Cesta 503/60, 95801 Partizanske Slovakia 100.0% Bacou Dalloz A.B Box 550, Fibergatan 3, Billesholm S-26050 Sweden 100.0% Milab International A.B Box 550, Fibergatan 3, Billesholm S-26050 Sweden 100.0% Optrel Industriestrasse2, Postfach, CH 9630 Wattwil Switzerland 99.9% Société Tunisienne de Lunetterie 8011, ZI Dar Chaabane, El Fehri, Nabeul Tunisia 100.0%
6.5 - NON-CONSOLIDATED SUBSIDIARIES 6.6 - POST CLOSING EVENTS: The companies Bak Mouldings (UK, 25% owned by Bacou-Dalloz No events have occurred subsequent to the financial year closing Ltd), Bacou UK (UK, 100% owned by Bacou-Dalloz SA) and EPIC which had or might have a material financial impact upon (France, 50% owned by Bacou-Dalloz France SA) have no activity the Bacou-Dalloz group. and are therefore not consolidated. 6.7 - RELATED COMPANIES: Glovita (Hungary, 25% owned by Riby), of which Bacou-Dalloz None. owns more than 20% of the capital is not consolidated due too its insignificance.
38 Reference document 2004 Bacou-Dalloz Financial Report 1
1.5.6. Statutory auditors’ report on the consolidated financial statements - Year ended December 31, 2004
(Free translation of a French language original)
To the shareholders, • As indicated in Note 5.8 to the consolidated financial statements, at each financial close, the management of the Group assesses In compliance with the assignment entrusted to us by your annual the risks supported by the Group and the need for provisions general meeting, we have audited the accompanying consolidated to be recorded. The Group uses as often as possible, counselors', financial statements of Bacou-Dalloz for the year ended December lawyers' and actuaries' advice in order to assess those provisions. 31, 2004. Pursuant to the professional standard governing accounting estimates, our procedures consisted in reviewing the actuarial These consolidated financial statements have been approved by studies and legal letters prepared by those independent experts, the Board of Directors. Our role is to express an opinion on these in particular those related to the risk assessment of product financial statements based on our audit. liabilities.
I. OPINION ON THE FINANCIAL STATEMENTS The assessments were thus made in the context of the performance We conducted our audit in accordance with the professional of our audit of the consolidated financial statements taken as a standards applicable in France; those standards require that we whole and therefore contributed to the formation of our unqualified plan and perform the audit to obtain reasonable assurance about audit opinion expressed in the first part of this report. whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting III. SPECIFIC VERIFICATION the amounts and disclosures in the financial statements. An audit In accordance with professional standards applicable in France, also includes assessing the accounting principles used and we have also verified the information given in the Board of Directors' significant estimates made by the management, as well as Report. evaluating the overall financial statements presentation. We believe that our audit provides a reasonable basis for our opinion. We have no matters to report regarding its fair presentation and conformity with the consolidated financial statements. In our opinion, the financial statements give a true and fair view of the assets, liabilities, financial position and results of the Dijon and Paris-La Défense, April 18, 2005 consolidated group of companies in accordance with the accounting rules and principles applicable in France. The Statutory Auditors II. JUSTIFICATION OF ASSESSMENTS In accordance with the requirements of article L. 225-235 of the Expertise Comptable et Audit Ernst & Young Audit French Company Law (Code de commerce) relating to the justification of our assessments, we bring to your attention the following matters:
• As indicated in Note 5.1 to the consolidated financial statements, the Group regularly reviews its major assets in order to identify Patrick Collomb François Carrega any long lasting impairment. As part of our assessment, we ensured ourselves that the Group properly identified these impairments, recorded in the corresponding write-downs and assessed the reasonableness of these estimates. In particular, we have reviewed the data and assumptions on which were based the cash flows estimated by the management of the Group and reviewed the calculations prepared by the Group.
Bacou-Dalloz Reference document 2004 39 1 Financial Report
1.6 Summary of Company financial statements
The individual financial statements related to the financial the registered offices of the Company. They have been certified year ended December 31, 2004 are available upon request at by the statutory auditors without reserves or comments.
1.6.1. Statutory auditors’ report on the annual financial statements - Year ended December 31, 2004
This is a free translation into English of the statutory auditors’ report issued and disclosures in the financial statements. An audit also includes in the French language and is provided solely for the convenience of English assessing the accounting principles used and significant estimates speaking readers. This report includes information specifically required by made by the management, as well as evaluating the overall financial French law in all audit reports, whether qualified or not, and this is presented below the opinion on the financial statements. This information includes statements presentation. We believe that our audit provides (an) explanatory paragraph(s) discussing the auditors’ assessment(s)(1) of a reasonable basis for our opinion. certain significant accounting matters. These assessments were made for the purpose of issuing an opinion on the financial statements taken as In our opinion, the financial statements present fairly, in all material a whole and not to provide separate assurance on individual account captions respects, the financial position of the Company at December 31, 2004 or on information taken outside of the annual financial statements. and the results of its operations for the year then ended, in accordance The report also includes information relating to the specific verification(2) of information in the group management report. with the accounting rules and principles applicable in France.
This report, [together with the statutory auditors’ report addressing financial Without qualifying our opinion, we draw your attention to and accounting information in the Chairman’s report an internal control], should be read in conjunction with, and is construed in accordance the matter discussed in Notes 2.2.3 and 3.12 to the financial with French law and professional auditing standards applicable in France. statements relating to the investments of the Company:
• An internal capital gain due to the transfer of DSI shares to To the shareholders, Bacou USA, was booked in 2004 for 115,2 millions of euros In compliance with the assignment entrusted to us by your annual as described in paragraphs 2.2.3 and 3.12 of the notes of general meeting, we hereby report to you, for the year ended the financial statements. December 31, 2004, on: II. JUSTIFICATION OF ASSESSMENTS • the audit of the accompanying financial statements of In accordance with the requirements of article L. 225-235 of Bacou-Dalloz; the French Company Law (Code de commerce) relating to the justification of our assessments, we bring to your attention • the justification of our assessments; the following matters:
• the specific verifications and information required by law. • As indicated in Note 2.2.3 to the financial statements on accounting
These financial statements have been approved by the Board of principles and methods, the valuation of investments in Directors. Our role is to express an opinion on these financial subsidiaries is performed taking into consideration not only statements based on our audit. the share of shareholders’ equity that such investments represent, but also future profitability prospects. As part of our assessment I. OPINION ON THE FINANCIAL STATEMENTS of the material estimates used to prepare the financial statements, We conducted our audit in accordance with the professional we have revised the assumptions used to make projections with standards applicable in France; those standards require that we plan respect to the future results of these subsidiaries on which and perform the audit to obtain reasonable assurance about whether this estimate was based as well as the resulting figures. Within the financial statements are free of material misstatement. An audit the framework of the justification of our assessments, we ensured includes examining, on a test basis, evidence supporting the amounts of the reasonableness of these estimates.
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The assessments were thus made in the context of the performance In accordance with French law, we have ensured that the required of our audit of the financial statements taken as a whole and information concerning the purchase of investments and controlling therefore contributed to the formation of our unqualified audit interests and the names of the principal shareholders (and holders opinion expressed in the first part of this report. of the voting rights) has been properly disclosed in the Board of Directors’ report. III. SPECIFIC VERIFICATIONS AND INFORMATION We have also performed the specific verifications required by Dijon and Paris-La Défense, April 18, 2005 law in accordance with professional standards applicable in France. We have no matters to report regarding the fair presentation and The Statutory Auditors the conformity with the financial statements of the information Expertise Comptable et Audit Ernst & Young Audit given in the Board of Directors’ Report and in the documents addressed to the shareholders with respect to the financial position and the financial statements.
Patrick Collomb François Carrega
1.6.2. Extracts of the financial statements
The financial statements of Bacou-Dalloz SA are those which will is better reflected by the consolidated financial statements. be submitted to shareholders for approval at the Annual Other accounting details not included in this document do not Shareholders’ Meeting. However, they provide a very incomplete provide any information which would be of use to investors. view of the financial position of the Bacou-Dalloz group which
Balance sheet as of December 31
2004 2003 2002 2004 2003 2002 In thousands of Euros In thousands of Euros ASSETS LIABILITIES AND Intangible assets 34 34 4 SHAREHOLDERS’ EQUITY Amortization (18) (10) (1) Paid-in capital 15,238 15,238 15,228 Tangible assets 73 73 73 Issue, merger and contribution premiums 436,038 436,038 435,797 Depreciation (58) (43) (28) Goodwill reserves 18,100 17,097 17,097 Long term financial assets Retained earnings 7,449 15,449 (11,108) Shareholdings accounted for under the equity method 647,763 527,491 528,403 Period earnings 126,822 (3,187) 34,170 Provisions (2,450) SHAREHOLDERS’ EQUITY 603,647 480,635 491,185 Receivables associated Provisions for liabilities and charges 675 1,276 with participating policy(1) 76,248 88,164 66,147 Financial liabilities(2) 127,072 145,690 111,297 Other long term financial assets(1) 3 Other liabilities(2) 19,748 25,649 20,922 FIXED ASSETS 721,595 615,709 594,598 LIABILITIES 146,820 171,340 132,219 Other Receivables(1) 26,696 33,037 24,987 Accruals(2) 67 275 0 Marketable securities Cash and cash equivalents 46 144 271 TOTAL LIABILITIES AND SHAREHOLDERS EQUITY 751,209 653,525 623,404 CURRENT ASSETS 26,742 33,181 25,258 (2) of which greater than one year 78,667 114,667 81,285 Accounts receivable(1) 2,872 4,635 3,548 TOTAL ASSETS 751,209 653,525 623,404 (1) of which greater than one year 2,496 3,775 2,961
Bacou-Dalloz Reference document 2004 41 1 Financial Report
Income statement
2004 2003 2002 In thousands of Euros OPERATING INCOME 28,403 23,417 15,954 Services 28,403 21,796 15,954 Write-backs of provisions & expense transfers 1,621 OPERATING EXPENSES (31,714) (27,851) (20,146) Purchases and services purchased (24,682) (24,024) (17,613) Taxes, fees and related (110) (57) (7) Personnel expenses (5,410) (2,329) (1,444) Amortization and provisions (1,317) (1,223) (938) Other expenses (195) (218) (144) NET OPERATING INCOME (3,311) (4,434) (4,192) Shared operations Financial income 8,244 (2,950) 36,107 Income from continued operations 4,933 (7,384) 31,915 Exceptional items 118,422 518 (64) Income tax 3,467 3,679 2,319 NET INCOME 126,822 (3,187) 34,170
1.6.3. Parent company results
Bacou-Dalloz SA, the parent company, performs purely a holding of 6.9 million Euros related to the portion of Group debt carried function. Sales revenues amounted to 28.4 million Euros and by Bacou-Dalloz SA. Net income amounted to 126.8 million Euros included management fees reinvoiced to the Group’s companies. and includes exceptional income of 115.2 million Euros related to Financial income (8.2 million Euros) includes dividends received gains recorded in the context of a legal restructuring within from subsidiaries of 15.6 million Euros as well as financial expenses the Group in the United States.
1.6.4. Dividend proposal
The Board of Directors will propose the payment of a dividend of Shareholders’ Meeting which, in principle will take place on 0.60 Euro per share to shareholders attending the Annual May 11, 2005. The dividend payment will be made on July 7, 2005.
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1.7 Liquidity & capital resources
The capital requirements of the Bacou-Dalloz group are driven by That financing was supplemented by an increase in capital of the expenditures related to manufacturing activities as well as our 145 million Euros in May 2002. strategic acquisition policy. In order to obtain more flexibility and to provide itself with Financing has been assured by a syndicated credit for a total amount the means to continue its growth, in 2003 the Group began a policy of 411 million Euros and 291 million US dollars which accompanied of renegotiation and diversification of the debt which is now the finalization of the merger of the Bacou and Christian Dalloz structured as follows. groups on September 6, 2001.
1.7.1. Syndicated financing
As a replacement to the financing contract implemented in 2001, an additional year, from which the banks cannot withdraw). At the on July 31, 2003 the Company negotiated new financing in terms end of the first year, the Company has decided to exercise of a credit agreement for 450 million Euros which was concluded the first option and dispose of this facility for each of the three with a pool of French and foreign financial institutions which included following years. ABN Amro N.V., CDC Ixis, Calyon, HSBC CCF and Natexis Banques The syndicated credit includes certain loan covenants in the form Populaires, HSBC CCF acting as the agent. of financial ratios. These financial ratios are: net debt over gross The purpose of the credit agreement, on one hand, is to refinance operating income (consolidated EBITDA), and net interest expenses the credit contracted on September 6, 2001 at the time of the merger coverage by the gross operating income (consolidated EBITDA). between Bacou and Dalloz which had become restrictive with respect Non-compliance to these covenants could result in the loans being to the development and growth strategies, and, on the other hand, called by the banking institutions. During the last financial year, to provide for other general financing needs of the Group. the Company renegotiated the threshold of the net debt over EBITDA The syndicated loan is on behalf of two borrowers: Bacou-Dalloz ratio (leverage ratio) from 3.25 to 3.50, in order to mitigate SA and Bacou-Dalloz USA Inc, and is split in 2 tranches: the volatility of the American dollar.
• Facility A: a medium term amortising loan of 300 million Euros, The financial ratios at December 31, 2004 were as follows: with a 5-year maturity, available for drawdowns in multiple Reached Contractual currencies, and whose purpose is to finance general corporate thresholds purposes and refinance the existing syndicated facility. Net debt to equity 73% 100% • Facility B: a revolving multi-currency loan of 150 million Euros Net debt to EBITDA 3.04 3.50 for 364 days for refinancing general business needs and working EBITDA to interest expense 5.25 5.00 capital requirements. At December 31, 2004, 240 million Euros of facility A was This Facility B is matched by i) an extension option that is renewable outstanding and payable. The facility B revolving credit was reduced four times, in which individual banks may choose to not renew by 50 million Euros during the course of the financial year and was their portion, ii) a “term-out” option (renewal of Facility B for in no cases taken.
1.7.2. Bilateral financing
The Company is pursuing its policy of diversifying its financing (93 million for thee years and 10 million for one year), of which sources by putting bilateral loans in place. At December 31, 52 million were available for drawdowns at December 31, 2004. these loans amounted to a total amount of 103 million Euros
Bacou-Dalloz Reference document 2004 43 2 Business Overview
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Page Page
2.1. History 47 2.4. Strategy 57 2.4.1. Returning to organic growth 57 2.4.2. Improving operational efficiencies 58 2.2. The personal protective equipment (PPE) market 48 2.4.3. Strengthening the Group’s position of worldwide leader 59 2.2.1. Market segments 48 2.2.2. A fragmented market with growth potential 49 2.5. Research and development 60 2.2.3. PPE market regulations 49 2.5.1. Innovation at the heart of 2.2.4. Competition 50 the Group’s development 60 2.2.5. Main customers and suppliers 51 2.5.2. Intellectual property 60 2.5.3. Investments 61
2.3. Bacou-Dalloz business sectors 52 2.3.1. Head protection 52 2.3.2. Body protection 54
Bacou-Dalloz Reference document 2004 45 2 Business Overview
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2.1 History
The Bacou-Dalloz group was created following the merger between the Bacou and Christian Dalloz groups that took place on September 6, 2001. This merger gave birth to the world leader in Personal Protective Equipment (PPE) designed to protect individuals against all types of hazards in the workplace.
Since the merger, the Group has acquired the company Securitex, the third largest manufacturer of protective garments for first responders in North America, thus reinforcing its offering on the homeland security market in this region. In July 2004, Bacou-Dalloz divested its French distribution subsidiary, Abrium. This divestiture was an important strategic step for the Group, enabling it to refocus on the design and manufacture of personal protective equipment. Bacou-Dalloz has thus clarified its position in relation to its distributor-partners both in France and worldwide.
& Christian Dalloz & Bacou
The Christian Dalloz group was founded by Christian Dalloz The Bacou Group was founded by Henri Bacou in 1974, initially in France in 1957 to manufacture industrial components produced as a manufacturer of safety footwear in France. In the years following using injection-molded plastics. By 1980, the Group had become its creation, the Group made a succession of acquisitions in France: a leader among producers of polycarbonate injection-molded Fernez (respiratory) in 1997, Comoditex and Commeinhes-Remco eyewear. (clothing) in 1980, Sofraf (gloves) in 1984, Delta Protection and Mutexil (clothing) in 1986, Antec (fall protection) in 1989, The company Christian Dalloz S.A. was introduced on the stock Ox’bridge (clothing) in 1993, Fenzy (respiratory) in 1997 and Optrel market in 1986. The same year, it entered the North American (welding) in 1998. Over the same period, the Group gradually market and, in 1989, acquired the WGM Safety Corp., a manufacturer acquired distributors which were consolidated in 1999 under of fall protection and head protection equipment which also the name Bacou Développement. distributed eye protection equipment in the United States. After the death of its founder in 1991, the Group pursued In March 1993, the Group created the subsidiary Bacou USA its worldwide growth in the head protection industry through and, in 1994, Bacou USA acquired Uvex Safety Inc. (eye and face). the acquisition of several companies: the Swedish company Bilsom In 1996, Bacou USA was listed on the New York Stock Exchange (hearing) in 1994, the British companies Pulsafe (eye and face) where it remained listed until the merger with Christian Dalloz and Troll (fall protection) in 1996, the French company Komet in September 2001. After the death of its founder in 1996, (fall protection) in 1997, the Australian company Moxham (fall the company continued its external growth strategy in the USA protection) in 1998, the US company Fendall (eye and face) as well with the acquisitions of Survivair (respiratory) and Biosystems as the German company Söll (fall protection) in the year 2000. (gas detection equipment) in 1997, Howard Leight (hearing) in 1998, Perfect Fit (gloves) in 1999 and Whiting & Davis and Platinum (gloves) in the year 2000.
Bacou-Dalloz Reference document 2004 47 2 Business Overview
2.2 The personal protective equipment (PPE) market
The term PPE applies to any device or product worn, carried or held by an individual with the intent of providing protection against a range of hazards capable of endangering his health or safety.
The PPE industry provides personal protective equipment and services designed to protect its users from the risk of illness or injury in the workplace or in a hazardous environment.
2.2.1. Market segments
The PPE market can be characterized by two main market segments: The following pie chart provides an estimate of the relative size of each of the sectors present in the PPE market: • Body protection, which represents approximately two thirds of the market and includes fall protection, protective gloves, protective clothing and safety footwear; Business sectors regrouping • Head protection, which represents one third of the market PPE end-user companies and includes eye and face protection, hearing protection and respiratory protection. 11% Homeland security The equipment is mainly used in the following business sectors: 9% 6% Energy, telecommunications • Industry: chemical, oil, oil services, food, pharmaceutical, Retail consumers and public services and others automotive, aerospace, naval shipyards and metallurgy; 15% Construction • Construction; 59% Industry • Homeland security: fire fighting, municipalities, armed forces, security forces and law enforcement;
Source: Bacou-Dalloz estimates • The energy sector, telecommunications and public services;
• Retail consumers.
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2.2.2. A fragmented market with growth potential
The worldwide market for PPE is estimated by Bacou-Dalloz to be Market growth should therefore continue thanks mainly to approximately 11 billion Euros. The total market has been stable the following factors: in the last two years however market tendencies have varied widely depending on the region and the market segment: the North • In Eastern Europe, the entry of ex-“East block” countries into American and European markets have shown small variances the European community; whereas the Asia-Pacific zone has shown strong growth. The respiratory protection and fall protection segments have • In the Middle East, Asia and Latin America, the coming into effect demonstrated the strongest growth whereas the protective glove of more stringent regulations for the emerging markets and segment has been the least favorable. the export to these countries of western business practices related to health and safety; The market is driven by the following main factors: • In Western Europe and the United States, the constant changes • Regulations in force and changes to these regulations; in regulations, the imposition of major work safety requirements and the demands of insurance companies; but also the growth • The need for replacement equipment due to wear and tear in certain domestic markets which cannot be internationally or obsolescence; relocated such as homeland security, construction and public services. • Increases in the PPE end-user workforce;
• Changes in mentality and the increased interest in health and safety issues;
• The recognition by PPE manufacturers of the need for comfort, ergonomics and esthetics;
• Innovations offered by the manufacturers of PPE.
2.2.3. PPE market regulations
The PPE market is subject to numerous regulations that vary according to the geographic region.
& North America
US regulations require the use of personal protective equipment The PPE must also be in compliance with non-governmental when exercising certain professions in certain workplaces. standards such as the American National Standards Institute (ANSI) The Occupational Safety and Health Administration (OSHA) and the Canadian Standards Association (CSA). is the primary regulatory authority in the United States responsible for defining the minimum workplace health and safety requirements In order to meet the requirements of each of the American standards for workers using PPE as well as the standards to which the PPE that apply to its products, the Group performs all of the tests required must comply. in its certified laboratories.
Bacou-Dalloz Reference document 2004 49 2 Business Overview
& Europe
The minimum heath and safety requirements for PPE products In compliance with the applicable regulations, the Group assures used by workers in performing their jobs and the conditions under that new PPE products developed adhere to the relevant which the PPE products may be traded, are defined by two European requirements necessary for regulatory approval prior to their directives. The directives also provide the framework for the free introduction to the market. trade of PPE products within the European Community and the basic safety requirements that these products must fulfill. These requirements govern the design and manufacture of PPE equipment & Other jurisdictions within which the Group’s and are intended to protect the health and safety of PPE users. products are manufactured and/or sold
These directives were introduced in France with the law N° 91-1414 PPE products manufactured by the Group are subject to various dated December 31, 1991 which defines the principles of prevention. regulations in each country in which they are sold. Each of The decree N° 93-41 dated January 11, 1993 specifies the minimum the Bacou-Dalloz divisions is responsible for implementing regulatory requirements related to the use of PPE, especially in appropriate means to ensure compliance with regulations terms of training and inspection. applicable to its products.
The essential safety requirements to which the PPE must comply are derived from the standardized norms to which all of the economic actors have contributed within the framework of the standardization organisms. Within the European Union, the primary authority is the European Committee for Standardization.
2.2.4. Competition
Historically, this industry consisted of small regional manufacturers • The take-over by Aearo of VH Industries (a US manufacturer of fall which specialized in specific products or market segments. Due to protection equipment) in 2003; the gradual standardization of worldwide norms, a certain number of mergers and take-overs have occurred, in particular: • The acquisition by 3M of Hornell International (a Swedish company specializing in protective equipment for welders) in 2004. • The merger of the Bacou Group with Christian Dalloz in 2001 and the acquisition by Bacou-Dalloz of Securitex in 2003; The industry consolidation has permitted the creation of larger players capable of offering a broader range of products to several market • The take-over by MSA of Gallet (a French company specialized segments or geographic zones and generating sales above in firefighter helmets) in 2002 and of Sordin AB (a Swedish the 100 million Euros level. The following table lists the main manufacturer of hearing protection equipment for the logging Bacou-Dalloz competitors and their primary business sectors: industry) in 2004;
• The take-over by Norcross of KCL (a German company specializing in protective gloves) in 2003;
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Country of origin Head protection Body protection Non-PPE activities Bacou-Dalloz France 3M USA MSA (Mine Safety Appliance) USA Dräger Safety Germany Norcross Safety Products USA Ansell Australia Aearo USA Tyco USA
Bacou-Dalloz estimates of competitors’ primary business sectors
Nonetheless, the largest portion of the market (approximately two- 15 million Euros and are approximately 500 in number in the thirds) continues to consist of relatively small specialized players. United States, Latin America, Europe and Asia. In general, these smaller competitors realize sales of less than
2.2.5. Main customers and suppliers
& Purchasing & Customers
The annual amount of direct purchases made by the Bacou-Dalloz Bacou-Dalloz realizes approximately 90% of its sales with industrial group is approximately 300 million Euros. These purchases distributors which buy products for resale to PPE end-user are mainly of raw materials (approximately 30%), finished goods companies. There are several types of distributors: or semi-finished goods (50%). • Specialized PPE distributors such as Abrium in France and Arco Bacou-Dalloz has a wide range of products and produces a large in the United Kingdom, etc.; number of different types of personal protective equipment. The Group purchases a wide variety of raw materials such as: • Distributors specialized in vertical markets such as Autodistribution plastics (polyamide, polycarbonate, etc.) for eye protection, hearing (France) for the automotive industry and Ecotel Chomette Favor protection and respiratory protection; steel for fall protection; (France) for the food industry, etc.; latex for protective gloves; leather and rubber for safety footwear and protective gloves, and; cotton for protective clothing and • Distributors which are generalists such as Grainger in the respiratory protection. In general, Bacou-Dalloz uses a limited United States and Descours et Cabaud in France, etc. number of suppliers for each raw material necessary for the production of its products, but the Group does not consider Direct sales to end-user customers mainly concern the image wear itself dependant on any one supplier due to the fact that all of clothing business, certain sales of fall protection equipment used its raw materials can be easily procured from third party suppliers. in public services and in the telecommunications industry, and specific markets serving firefighters. The Group also purchases finished products which enable it to broaden its product range to include lower priced products. In 2004, Bacou-Dalloz realized 15% of its sales (excluding These purchases are mainly made from Asian suppliers. The Group distribution) with its top five customers and 20% with the top ten. has put a local structure into place in order to ensure the control Based on this breakdown, the Group does not consider this element and monitoring of these suppliers. to be a major risk factor.
Bacou-Dalloz Reference document 2004 51 2 Business Overview
2.3 Bacou-Dalloz business sectors
Group activity in 2004 can be broken down by sector and geographic region as per the following charts (excluding Abrium distribution activity).
2004 sales by business sector (excluding Abrium) 2004 sales by geographic region (excluding Abrium)
19% 51% Respiratory protection 23% Americas 11% Eye and face protection Protective clothing 5% 6.5% Rest of world Safety footwear 12.5% 12% Hearing protection 44% Protective gloves Europe 16% Fall protection
Source: Bacou Dalloz – 2004 Sales excluding Abrium Source: Bacou Dalloz – 2004 Sales excluding Abrium
2.3.1. Head protection
& Eye and face protection Bacou-Dalloz manufactures prescription safety glasses under the Titmus brand name, which dominates the American market for Eye and face protection equipment protects the eyes, eyesight this type of product, and solar protection eyewear in polycarbonate and face against impact, splashes, specks, projectiles and ultraviolet for manufacturers of sunglasses and high range sporting eyewear. and infrared radiation. Bacou-Dalloz is number one on The Group is also present on the market for laser protection eyewear the worldwide market with approximately 22% of the market share under the Glendale brand name. This type of eyewear is used within (Group estimates) and offers a comprehensive range of products the defense, aerospace, scientific research and education sectors. from protective eyewear, goggles and face shields to prescription safety glasses, emergency eye-wash stations and laser protection Bacou-Dalloz is one of the most innovative companies when eyewear. it comes to top of the range welding helmets, especially with respect to the self-darkening filter welding helmets. This technology permits Bacou-Dalloz markets its protective eyewear and face shields under users to prepare components for welding while wearing the helmet, the Uvex and Willson brand names in the Americas and under thanks to a shade cartridge which is composed of photosensitive the Pulsafe brand name in Europe. These products are fibers and which does not darken until the welding process begins. in competition with Aearo and Crews on the American market and This reduces the risk of facial injuries caused by welding sparks with Uvex products in Europe. The Group also markets a line of and increases workplace safety. These welding helmets protective eyewear in the United States bearing the Harley-Davidson are marketed under the Optrel and Beauverger brand names label, a legendary brand name for which Bacou-Dalloz holds and compete on a worldwide basis with helmets sold by Hornel a license for the sale of work safety products. In addition, (3M Group).
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Over the course of recent years, Bacou-Dalloz has developed of compressed breathing air, and air line respirators, consisting numerous technological innovations within the eyewear segment of a face-piece and a fixed air supply hose which connects to in order to respond to the demand for products which are more an existing compressed breathing air supply. They are mainly comfortable, more efficient, lighter and with a more modern design. used by firefighters and within the petrochemical industry. These developments rely, amongst others, upon the “double The Group disposes of accredited training centers on both sides injection” technology (also called Multi-Material) which combines of the Atlantic in order to maintain this type of device. In 2004, comfort and resistance, and upon the use of new materials such more than 600 firefighters were trained in France and in the as silicone, used, for example, in the manufacture of the Group’s United States. latest goggle, the Flex Seal, launched in 2004. This material has revolutionary qualities enabling a perfect fit to almost any face The Group’s products are sold under the brand names Willson and unmatched comfort when used over long periods of time. (reusable and disposable respirators), Survivair (SCBA, filters and The eyewear product range was also enlarged in 2004 to include cartridges), Biosystems (gas detection equipment), Fenzy (SCBA) a new generation face shield, the Bionic, destined for high risk and SP Défense (nuclear, biological and chemical contamination environments and offering increased protection and comfort thanks protection systems). These brands compete with brands sold by to its highly adjustable headgear, and the Pivot safety eyewear 3M, MSA, Scott Technologies (Tyco) and Draeger. with a contemporary design and choice of fashion mirror lenses. Optrel also pursued its dynamic development with several product The year 2004 was highlighted by significant sales of SCBA, launches in 2004, including the Orion OSE. This liquid-crystal helmet in particular with the finalization of large orders in China for use incorporates sensorial analysis technology previously unheard of by firefighters and for employees within both the public and private in the world of welding. Optrel has also launched a new petrochemical industry. Harley-Davidson helmet which will compliment the range of eyewear already marketed by Bacou-Dalloz under this well known brand name in the United States. & Hearing protection
An estimated 275 million workers throughout the world are exposed & Respiratory protection to hazardous noise conditions on a day-to-day basis which present a risk to their health. Hearing protection products protect users Respiratory protection products permit workers to breathe while from hearing loss related to exposure to loud noise: these include performing their jobs in contaminated environments, either by earplugs (disposable and reusable), banded earplugs and earmuffs filtering air or by providing a separate air supply. Bacou-Dalloz (passive and communication enabled): markets a comprehensive range of respiratory protection products from disposable respirators to supplied air respirators. The Group • Earplugs are small devices that fit into the outer ear canal also manufactures gas detection and monitoring systems. and reduce ambient noise. Approximately two thirds of the plugs sold throughout the world are disposable and one third • Air purifying respirators are composed of sophisticated filters are reusable. The reusable plugs are generally more costly and through which contaminated air is purified before being inhaled. are considered less comfortable. The Group offers a range of products that includes disposable respirators, filtering devices (full masks or half masks), • Earmuffs are most often used when the wearer is required and electrical devices which draw air mechanically through a to communicate with ease (airports, shooting ranges, etc.), filter. These devices are used to filter or absorb particles or toxic facilitated by the possibility of incorporating a radio or telephone. gases present in the ambient air and are very commonly used They can also be used with earplugs in cases where there is in manufacturing, construction and the pharmaceutical industry. exposure to extreme noise levels.
• Supplied air respirators are used when the ambient air cannot be • Banded earplugs offer an alternative to earplugs and earmuffs. purified. They are also used when the work environment presents The banded earplug is a head band with foam which does not a very high level of contamination or lack of oxygen and requires penetrate into the ear canal. This product is generally worn by an independent source of clean air. Supplied air respirators include individuals that are inconvenienced by earplugs. Banded earplugs a self-contained breathing apparatus (SCBA) which consists of are especially appropriate for low or medium noise level work a face-piece attached to an oxygen source, generally a cylinder environments.
Bacou-Dalloz Reference document 2004 53 2 Business Overview
Bacou-Dalloz is number two worldwide (Group estimates) in the & Other head protection market for earplugs with two well-known brands: Howard Leight (hard hats and eyewash stations) (earplugs) and Bilsom (earmuffs). Its main competitor in this segment is Aearo. These products, primarily hard hats, are intended to protect users from shocks, blows or falling objects. The Group’s products are sold The 24 new hearing protection products launched in 2003 drove growth in 2004. In 2005, the product range will be boosted under the Willson brand name. by another 20 new products including 11 earmuffs. Notable improvements have been made using the Group’s new patented Emergency eyewash stations allow a person who has been exposed technology “Air Flow Control” which significantly improves low to toxic liquids or gas to clean his eyes. These products distribute frequency attenuation – a typical shortcoming with traditional saline solutions either in refillable bottles or throw-away cartridges. earmuffs. The Group is the worldwide leader in this specialized market.
2.3.2. Body protection
& Fall protection The main competitor in this market is Capital Safety, a company which includes the brand names Protecta (in the USA) and Sala Falls represent the second largest cause of serious or fatal accidents (in Europe). in the workplace, just after vehicle-related accidents. Personal fall arrest systems are intended to increase the safety of working Following its success in the United States, in 2004, a new line of at height and to protect users from falls. This is especially the case value products was launched in Europe under the Titan by Miller within the construction industry, public services (such as electrical brand name. This product line responds to the specific demands line installation and telecommunications) and in the logging industry. of professionals who desire moderately priced fall protection Personal fall arrest systems include: solutions which respect industry norms.
• harnesses which hold a worker in case of a fall; Among the other new products presented in 2004 in the United States, Miller unveiled a system which reduces the risk of orthostatic • anchoring systems which provide a reliable attachment point; intolerance or suspension trauma in the case of a prolonged suspension following a fall (Relief Step). Other new Miller products • connecting devices which provide the critical link that joins that included the Butterfly II and Dragonfly belts for tree surgeons, harness to the anchoring point in order to limit the free fall zone. and the Falcon cable retractable lifelines and fall limiters.
Bacou-Dalloz is the worldwide leader in fall protection with The Group continues its efforts to sensitize workers as to the risks approximately 22% of the market share (Group estimates). of working at heights and offers a wide range of training modules The Group offers a comprehensive range of personal fall protection adapted to a wide variety of professionals. solutions under the Miller brand name, and permanently installed height access systems under the Söll brand name. Personal fall protection solutions mainly concern three sectors: the construction and manufacturing industries (Miller); telecommunications, public services and tree pruning (Miller-Komet); rope access and rescue (Miller-Troll). Söll fall arrest systems are built around ladders, cables and rails that provide secured access when working at height, as well as horizontal lifelines that can be easily installed in any environment and adapted to all types of working configuration.
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& Protective gloves In addition, the European licensing agreement signed with The Timberland Company will further strengthen the Bacou-Dalloz Hand protection is one of the top requirements of users confronted product range with 9 new glove models. with a variety of risks which are based upon the tasks they perform. Protective gloves can be disposable or reusable and are used to protect against extreme temperatures, chemical and biological & Safety footwear risks, cuts and abrasions, risks associated with difficult weather conditions and risks associated with specific industries. Safety footwear protects users against shocks and the risks of slipping, skidding and falling by means of protective soles specifically designed Bacou-Dalloz is present on the market for reusable gloves that to provide stability, absorb shocks and ensure a good grip. Comfort are mainly destined for highly technical use: and style are important factors which influence the user’s choice of a product. The main markets for safety footwear are the manufacturing, • insulated gloves which protect against the exposure to high metal, chemical, automotive, construction, transportation and voltage electricity exposure; institutional catering service industries as well the armed forces.
• cut and abrasion prevention gloves which protect against Bacou-Dalloz manufactures safety shoes and boots using both highly penetration by sharp objects and/or surface abrasion due to automated manufacturing processes (injected or vulcanized soles) friction. These gloves are composed of a double layer of fibers as well as manual assembly methods (sewn soles and ankle shank dipped or coated in a protective material. Advanced synthetic production). The Group markets its safety footwear under the Bacou fibers such as Kevlar have been used alone or in combination and MTS brand names primarily in Europe where it is considered with other fibers to improve the durability and performance of to be one of the market leaders. The main competitors in Europe these gloves. Metal mesh gloves are another type of cut prevention are Jalatte-Almar and Cofra. gloves, often used in the food processing industry; The year 2004 was highlighted by the major renewal of the product • chemical gloves which are impermeable and protect the hands range. In April, the Group launched the Bac’run line: these shoes from risks associated with exposure to chemical products. reconcile comfort, esthetics and optimal protection due to the new These gloves can be backed (made with a knit liner dipped into soles which contain thermoplastic polyurethane inserts, a profiled protective material) or non-backed (made entirely of protective ultra light toecap and breathable leather. In addition, a new line material). Materials such as natural rubber, PVC, nitrile or even designed especially for women, Temptation, was presented at neoprene are used to make the glove impermeable to chemical the Expoprotection trade show. Lastly, the Timberland PRO® line, products. a result of the exclusive partnership signed at the beginning of 2004 between The Timberland Company and Bacou-Dalloz, has also The main Bacou-Dalloz products within this segment are sold under enriched the footwear product range with products targeted towards the Perfect Fit brand name (knit gloves, cut and sewn gloves), outdoor professionals (public works, construction, logging, etc.). Whiting & Davis and Chainex (metal mesh gloves) and Electrosoft (insulated coated gloves for the electricity industry). Bacou-Dalloz is the world leader in metal mesh gloves and insulated coated gloves (Group estimates). All of these brands compete with Ansell which is the worldwide leader in the sector, as well as with Mapa and Marigold in Europe and Memphis and Wells Lamont in the United Sates.
The year 2004 saw the European launch of a new generation of high performance knit gloves (Dynaglass) which provide outstanding resistance against cuts and abrasion. In the United Sates, two new lines were launched, PowerCoat, designed for protection against chemical and corrosive products, and the Carbtex range, which provides resistance to extremely high temperatures.
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& Protective clothing Image wear clothing is marketed under the Ox’bridge and Comoditex brand names: this includes uniforms or outfits which Combining high-tech content and esthetic design, the Bacou-Dalloz serve an integral role in the promotion of the client-company’s clothing division offers equipment suitable for hazardous work visual identity (airlines, railroads, hotel groups and service chains environments, as well as practical and elegant clothing etc.). In addition, the Group launched the “City” line under the WW that contribute to the client-companies’ brand images. brand name, destined to protect against intemperate weather. The line combines esthetics with comfort and safety and includes The choice of protective clothing which meets industry norms parkas, windbreakers, rain jackets and sweatshirts. is made after an analysis of risks to which workers are exposed and takes into account the type of workplace in question. Comfort The Group’s disposable and reusable clothing is marketed only and ergonomics are also important criteria. Bacou-Dalloz offers in Europe whereas the bullet resistant vests and uniforms are sold clothing which has been designed to resist against a larger number only in France. The main competitors in this segment are Kansas of risks, in particular: (uniforms and outdoor clothing) and Dupont (disposable clothing). Fire protective garments are sold only in North America • Mutexil disposable suits for professionals in which hygiene and compete with products sold by the American company, is a priority: pharmaceutical industries, chemicals, food, etc.; Lion Apparel.
• anti-contamination suits for the nuclear and pharmaceutical In 2004, Delta Protection launched the first anti-contamination industries, under the Delta Protection brand, European leader autonomous breathing protective suit. Destined for the in this field; pharmaceutical and nuclear industries, it is the result of 5 years of research and development. • bullet resistant vests;
• protective garments for first responders, mainly used by municipal, industrial and military firefighters and ambulance technicians.
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2.4 Strategy
The Bacou-Dalloz strategy consists of pursuing its development in order to strengthen its position as the leader in the PPE market. In the short term, the Group is focusing on returning to profitable growth and on repositioning itself towards more dynamic growth. In the medium term, the Group will continue to participate in the industry consolidation with the objective of strengthening its position.
2.4.1. Returning to organic growth
During 2004, Bacou-Dalloz implemented a number of actions plans • The North-American distribution center, based in Ohio, occupies which are currently mobilizing all Bacou-Dalloz associates a surface of 32,000 square meters and has progressively been worldwide around the Group’s priorities for growth: integrating, since mid-2004, all of the product lines sold in North America. A central call center and a centralized invoicing system have also been developed which, for the first time in the USA, & Developing an optimal level of provide distributors the possibility of obtaining their global PPE customer service order in one go;
Capturing new market share and winning customer loyalty require • Announced at the beginning of 2005, the Group is creating a new a sales organization which is close to its customers, strengthened logistics and production center in Songjiang near Shanghai. by specialized sales staff who have a perfect knowledge of both This new logistics platform will double the Group’s inventory their products and their markets. These experts work hand-in-hand capacity in China and enable a reinforced quality control of with our customers to help them correctly define their needs. outsourced products. The site will provide Bacou-Dalloz the capability of providing optimized services and represents Providing optimal service also requires developing customer a key link in the satisfaction of our customers throughout China, awareness about the visible and latent risks associated with their the Asian region, as well as other parts of the world. environment. For this reason, providing training to our distributor- partners, the ambassadors for our products to end-users, is a key priority. This training, provided via modules either directly at Bacou- & Strengthening innovation Dalloz sites or at our customers’ sites, provides them with practical in all business sectors knowledge on the use of our products and their applications.
Bacou-Dalloz’s capacity to innovate is the differentiating factor Finally, optimal service requires top-performing and responsive that gives the Group a competitive advantage over its competitors. supply chain management. The development of the “One Stop The Group must offer its customers PPE solutions that respond Shopping” strategy involving a global purchase order, a single perfectly to their entire head-to-toe protection requirements delivery and a single invoice, both within Europe and the United and that continually offer more added value in terms of safety, States, highlights this demand and is behind the creation of new centralized logistics platforms to service specific regions: ergonomics and design. To do that, the Group has implemented a specific process which combines hands-on experience, working • In Europe, a centralized distribution center, situated in Chalon-sur- closely with customers in their various environments, and Saône in the center of France, was inaugurated in June 2004 the technological expertise of its R&D teams. This approach to serve the entire EMEA (Europe, Middle East, Africa) region. is supported by the company’s product specialists who master The platform, with a surface of 22,000 square meters, contains the particularities and the risks of each end-user group. In 2004, approximately 8,000 articles and enables the delivery of all products the Group’s capacity to innovate enabled it to launch new products proposed to our European distributors in less than five days; across all its business sectors.
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& Improving our brand recognition Strengthening the recognition and image of the Group’s brands is based on a long term communication policy vis-à-vis PPE brand names are appreciated by users in the sense that the distributors and the end-users: promotional campaigns, they symbolize the efforts taken by manufacturers with respect advertising, catalogs, specialty press releases, significant presence to safety, comfort and quality, factors which favor users’ respect at professional trade shows, internet sites and all other types of of safety measures. The Group believes that its brands benefit from promotional communications. Bacou-Dalloz is the common name the loyalty and trust of users because they enjoy an excellent associated with all product communications. It provides reputation in terms of security, style, comfort and dependability. the guaranty of a PPE world leader and strengthens the cohesive force of a global product offering. Bacou-Dalloz has undertaken a program of rationalizing its portfolio of brands in order to propose leading brands which are recognized internationally. As an example, in 2003, the Group reconsidered the presentation and the organization of its hearing protection lines with a realignment of the know-how of each brand. On one side, earplugs for the Howard Leight brand and, on the other side, earmuffs for the Bilsom brand. In the same manner, the Group has recently consolidated the fall protection brands dedicated to specific markets under the umbrella brand Miller.
2.4.2. Improving operational efficiencies
& The pursuit of our profitability • The improvement of our global sourcing procedures improvement plan Bacou-Dalloz is constantly searching for opportunities to optimize
Bacou-Dalloz has continued the implementation of its profitability its purchasing policy by exploiting synergies provided by improvement plan around 3 major axes: the Group’s size. A thorough analysis of purchasing methods performed in 2004 permitted the redefinition of a purchasing policy • The consolidation and rationalization of our manufacturing sites for all purchase categories as well as the definition of common methods. This audit will provoke the implementation of a new Following the rationalization of manufacturing for the head purchasing organization in 2005 based upon poles of competence protection business in 2002 and 2003, the Group implemented per material type and per service. The pooling of our requirements the rationalization of manufacturing within the body protection and the identification of the most competitive suppliers worldwide business with the closure of 5 sites in 2004. Production at some are part of the Group’s profitability improvement levers. of these sites has been regrouped in other Group manufacturing sites that operate with the same technical know-how, but which • The development of our manufacturing outsourcing expertise had, until now, specialized in a single product line. Thus, the Franklin site in the United States, which until 2004 had specialized in fall In 2004, Bacou-Dalloz strengthened its purchasing team in China: protection equipment, will gradually become a site dedicated the team has been assigned the task of identifying new finished to stitched products and as such will produce protective gear goods suppliers for the entire Group. It also has additional resources for firefighters. The French site in Plaintel, which specialized to ensure the optimal quality control of current outsourced in disposable respiratory masks, now also produces disposable manufacturing. protective suits, thereby creating a competence center for non-woven products. In addition, the Group has continued to transfer its activities to multi-product competency sites, in particular those in Tijuana, Mexico and in Partizanske, Slovakia.
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& A transversal organization and the supply chain teams ensure that the right products to drive performance are available at the right time. This coordination of the different departments maximizes customer service levels and significantly A coordinated and transversal approach towards our operating improves the Group’s results. processes contributes to efficiency gains. To achieve this objective, Bacou-Dalloz has rallied personnel worldwide around a common • The worldwide coordination of the commercialization of products operating vision. In 2004, two key processes among several others With a significant number of new products to be launched, resource were developed: coordination and planning are critical to ensuring the optimization • The optimization of Sales & Operations Planning (“S&OP”) of the potential profits. The product commercialization process, created in 2004, will progressively be implemented in 2005 Progressively implemented in 2004 in Europe and the USA, S&OP and will guarantee proper coordination at every stage, from R&D is a planning tool based on forecasted customer demand. to the product launch. Similarly, a global marketing approach must All departments are stakeholders in this process: the sales and be capable of assuring the smooth launch of new products at customer service teams produce local forecasts which are then the Group level. In this way the Group properly manages the risks of consolidated and validated at the regional level. Production teams both inventory shortages and overburdened sales resources, organize manufacturing schedules based on the sales forecasts, maximizing each product launch.
2.4.3. Strengthening the Group’s position of worldwide leader
& Pursue a policy of strategic acquisitions & Penetrate new market segments
In the medium term, the Group envisages continuing to make The Group is attentive to all development opportunities in related strategic acquisitions within the PPE sector and to continue markets. As an example, at the beginning of 2004, a sales team its participation in the consolidation of the industry. The Group was created in the United States to develop sales within retail will mainly seek well-managed companies which benefit from markets through retailers and hardware distributors, and another well-known brand names and with internationally high potential team was set up specializing in sales to the US federal government. products that are of interest to the distributors currently serving the Group. In the long term, the Group envisages exploiting its position as the main reference in the PPE market as leverage for the penetration into new markets for which the products are also among those proposed by industrial distributors.
& Develop its geographic expansion
The Group is already present in Poland, the Czech Republic, Slovakia and Hungary and, in 2004, opened a new subsidiary in Russia equipped with its own logistics platform with the purpose of developing a more aggressive strategy in that region. In addition, Bacou-Dalloz strengthened its manufacturing and logistic capacities in China in 2005: this will permit the Group to participate in the growth of the PPE market throughout Asia.
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2.5 Research and development
2.5.1. Innovation at the heart of the Group’s development
The careful monitoring of end-user requirements, our in-depth In 2004, all of our business sectors benefited from the launch of knowledge of the diverse business sectors and our command of new products. The NSC trade show which takes place every year cutting edge technologies are the foundations of our research in the United States and the Expoprotection trade show in France and development approach. This approach plays a vital role were two opportunities to present the major innovations of in building customer loyalty. R&D activities are driven by each the year. Positive feedback from end users as well as distributors product division which assures the monitoring of technologies that discovered our new products confirmed the importance of necessary with respect to new materials, new product innovation in our markets. Several products previewed developments, product improvements and the development of are especially awaited in 2005 in the fields of eye and face protection, new manufacturing methods, in particular in the field of production fall protection and body protection. automation. The sharing of knowledge between all divisions permits all product ranges to benefit from the leading technologies Group research and development expenses amounted to exploited by Bacou-Dalloz, for example, the multi-material 12.6 million Euros or 1.8% of sales as compared to 12.2 million molding originally used in eye and face protection and now used Euros or 1.5% of sales in 2003. As innovation is at the heart of in hearing protection. the Group’s growth dynamics, Bacou-Dalloz plans on maintaining research and development expenses at this level.
2.5.2. Intellectual property
Bacou-Dalloz owns patents related to certain PPE production The Group also maintains the secrecy of production processes processes. The Group believes that it is not dependant on third which are not protected by intellectual property rights. party patents for the manufacture of its products. In addition, Bacou-Dalloz protects the secrecy of its production processes it believes that it will not incur significant damages following through the use of confidentiality agreements by requiring certain the legal expiration of any of its patents. employees, consultants, suppliers, customers, agents and advisors to commit to maintaining the confidentiality of such information. Bacou-Dalloz believes that its brands and patents make up In general, confidentiality agreements used by the company provide an important component of its marketing strategy. Consequently, that all confidential information developed by or communicated it practices a policy of protecting its intellectual property rights and to the source must remain confidential and cannot, with attempts, in general, to file its brand names and patents in France, the exclusion of certain exceptions, be communicated to third Europe, the United States and other countries (such as China), parties. as well as within the framework of international and European treaties in force. In addition, Bacou-Dalloz believes that obtaining licenses of well-known names is a complementary aspect of its marketing strategy and, as a consequence, it promotes any steps towards obtaining licenses which are certain to provide added value to the manufacturing and distribution of its products.
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2.5.3. Investments
Capital expenditure amounted to 20 million Euros in 2004 These investments were mainly made in North America (56%) and were mainly related to the creation of a logistics center in where the weight of the logistics center is significant (40% of the United States (“Project One”) and to the launch of new products. the total investments for this region). The other investments Other non-financial investments include funding for productivity are divided between Western Europe (38% of total) and the rest of and quality improvement initiatives. the world (6%), primarily in Slovakia and Mexico.
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Page Page
3.1. Human resources policy 65 3.5. Manufacturing 73 3.5.1. Manufacturing sites 73 3.5.2. Use of subcontractors 73 3.2. Breakdown and trends in the workforce 66 3.2.1. Diversity and equality in the workplace 67 3.6. Environmental policy 74 3.2.2. Organization of the work week 67 3.6.1. Compliance to legislation 74 3.2.3. Remuneration 67 3.6.2. Consumption 74 3.2.4. Career development 67 3.6.3. Waste 75 3.2.5. Health and safety conditions 67 3.6.4. Noise and odor 75 3.6.5. Expenses incurred 75 3.3. Labor agreements concerning 3.6.6. Industrial and environmental risks 75 the French companies of the Bacou-Dalloz group 68
3.4. Employee incentive schemes 69 3.4.1. Profit sharing agreements 69 3.4.2. Incentive agreements 69 3.4.3. Employee stock ownership 69 3.4.4. Stock option plans 70 3.4.5. Allotment of free shares 72
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3.1 Human resources policy
Bacou-Dalloz believes that the motivation and quality of its - Bacou-Dalloz promotes employee development and seeks employees are essential to the Group’s growth, and has to improve skills through specialized training programs designed consequently established a human resources policy appropriate to improve customer service, project management and to its structure and its needs. communications skills;
In 2004, at the initiative of the new Chief Executive Officer and the - Bacou-Dalloz continues to use various internal communications new Senior Vice President of Human Resources, a collective in- media to enrich employee dialogue and to disseminate house project was undertaken to identify the company’s key values, information regarding the Group. In 2004, the global employee an important part of our effort to federate the Group, subsequent directory was improved, and is now available to all employees, to the merger in 2001. These values comprise the basic principles thereby facilitating exchanges of information. that underlie our individual and collective objectives, including namely teamwork, and a team effort to drive performance; fostering • Optimizing performance management: a spirit of mutual respect, thus promoting the sharing of information and experience; stimulating creativity, ongoing improvements and - the “People Performance First” program, part of the risk taking; and focusing our efforts on satisfying our customers. comprehensive performance measurement program, matches These values are a vital component of the Group’s performance individual career goals with Group priorities, provides for management system and contribute to building a common the evaluation of individual performances, and ensures that corporate culture shared by all Group employees throughout the career development plans are developed for each employee. world. Under the program, Group employees benefit from an annual review of their individual results, work methods, and respect The principal challenges of the human resources policy are: of Group values;
• Accelerating collective and individual development: - at the same time, Bacou-Dalloz has also established a variable compensation policy based on both individual and collective - the Group appreciates the value of its “human capital,” performances, with measurement criteria adapted specifically and consequently employs a dynamic policy intended to retain to each position and to each country. and attract some of the most talented people in the industry;
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3.2 Breakdown and trends in the workforce
Bacou-Dalloz is an international group, with 6,050 employees Employees by function at December 31, 2004 in more than 20 countries at December 31, 2004. The following table shows the trend in employee headcount over the last three years: Direct manufacturing 3,475 Sales and marketing 1,093 By country 2004 2003 2002 Manufacturing/supervisors 851 France 1,377 1,750 1,828 General and administrative 376 Western Europe excl. France 359 403 228 Rest of Europe 752 717 958 Research and development 123 USA and Canada 1,901 1,959 2,771 Information technology 88 Rest of world 1,661 1,425 808 Human resources 44
Total 6,050 6,254 6,593 Total 6,050
Employee profile at December 31, 2004
France Western Europe Rest of USA and Canada Rest of Total Excl.France Europe world
Total workforce 1,377 359 752 1,901 1,661 6,050
Of which women 715 135 435 942 860 3,087 As a % of total workforce 51.9% 37.6% 57.8% 49.6% 51.8% 51.0% Of which managers 267 91 13 372 32 775 As a % of total workforce 19.4% 25.3% 1.7% 19.6% 1.9% 12.8% Of which women managers 73 11 3 90 9 186 As a % of total managers 27.3% 12.1% 23.1% 24.2% 28.1% 24.0% Average age 40.4 41.0 32.3 43.4 27.8 36.9 Average length of service (in years) 12.2 7.8 2.5 8.0 2.7 6.8
In France, the Group employs 21 persons qualified as disabled and makes financial contributions to various organizations according to terms set down by law.
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3.2.1. Diversity and equality in the workplace
Bacou-Dalloz is an equal opportunity employee and strives to avoid Bacou-Dalloz makes every effort to respect each of the communities any discrimination based notably on race, religion, national origin, in which its manufacturing facilities are located. In fact, the Group ancestry, gender, age or health status. endeavors to reinvest wealth into the local economy, both directly through the jobs created, and indirectly, through its conduct as The Group aims to be a responsible “citizen” in all the countries a corporate citizen and through the benefits it offers in terms of in which it is present. In addition to respecting the environment, training and equal opportunity.
3.2.2. Organization of the work week
In France, work hours have been reduced and redistributed within In the rest of the world, work schedules are set and overtime Group companies in accordance with the laws and various collective is managed in compliance with the laws of each country concerned agreements. Overtime is managed in compliance with all legal and with European Union laws in Europe. provisions and collective agreements.
3.2.3. Remuneration
Total 2004 payroll was 187 million Euros. individually and based on individual employee performances. A general increase is negotiated for workers and employees, Managers’ salaries are determined on the principle that after three according to individual country salary surveys. years’ seniority, base salaries should be situated around the median reported in salary surveys in each country; increases are determined
3.2.4. Career development
To enable each employee to play an active role in the management • at the manufacturing facility level, to develop professional skills of his own career, the Group has established measures available and local expertise. to all employees. Training programs are developed and monitored at three levels: Approximately two-thirds of all employees received training in 2004. Total training amounted to more than 54,000 hours over • at the Group level, to strengthen team cohesion and adherence the course of the year, equivalent to some 13 hours per person to the Group’s values and strategy; trained.
• at the business level, to meet their specific challenges;
3.2.5. Health and safety conditions
Because of the very nature of the business and the products Health and safety conditions are in compliance with all employment manufactured, personnel safety is the Group’s primary concern. safety rules in all the countries in which the Company is present.
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3.3 Labor agreements concerning the French companies of the Bacou-Dalloz group
& Collective bargaining agreements & Labor representatives and work hours
The Bacou-Dalloz group’s French companies are subject to various Most of the Company’s French subsidiaries have works councils. collective bargaining agreements, dependent upon the business they engage in: Agreements relating to work hour reductions have been implemented in all concerned companies. They cover virtually (i) The French comprehensive national collective bargaining every employee of the French companies of the Bacou-Dalloz group agreement was extended by an order dated June 15, 1972 and and qualify for so-called Aubry 2 Grants. updated on September 27, 1984, and extended by an order dated February 4, 1985; (ii) The French national collective bargaining & Information relating to plans to reduce agreement covering shoes and other articles of footwear was personnel and save jobs, outplacement efforts, revised and recodified by an agreement protocol dated March 7, new hiring and monitoring measures 1990 and extended by an order dated June 9, 1988; (iii) The French national collective bargaining agreement for the textile industry Bacou-Dalloz takes systematic measures when sites are closed was extended by an order dated December 17, 1951 and updated or staffing is reduced. One important measure is the implementation on May 29, 1979, and extended by an order dated October 23, 1979; of an outplacement unit, responsible for assisting each employee, (iv) The French national collective bargaining agreement for for seeking employment solutions outside the Group and for the apparel industry was extended by an order dated July 23, 1959; assisting outgoing employees in obtaining any available resources (v) The French national collective bargaining agreement of March they may qualify for, such as subsidies provided by the French 6, 1953 for rubber was extended by an order dated May 29, 1969; government for hiring, training and new business creation, etc. (vi) The French national collective bargaining agreement covering
engineers, professional and management employees working Three French production sites were closed in 2004. The closing of in metallurgy was extended by an order dated April 27, 1971; the Pasa site, in Annonay, resulted in the layoff of 59 employees (viii) The French regional collective bargaining agreement for with long-term employment contracts (CDI); that of the Mutexil the metallurgical, mechanical and related industries in the Paris site, in Troyes, resulted in 22 employees (CDI) being laid off; region was extended by an order dated August 11, 1965, the updated and 20 employees (CDI) were laid off due to the closing of version of which, dated July 13, 1973, was extended by an order the Mavetra site, in Villefrance sur Saône. Staffing was reduced at dated December 10, 1979; (ix) The French regional collective two French sites, resulting in the departure or layoffs (for CDIs) of bargaining agreement for the Aisne metallurgical industry; 6 employees at Beal, in Givors, and 9 employees at SIC, in Lamastre. (xi) The French regional collective bargaining agreement for the metallurgical industry in Aude and the Eastern Pyrenees; (xii) The French regional collective bargaining agreement for the metallurgical industry of the Haute- Saône; (xiii) The French national collective bargaining agreement for the chemical industries signed on December 30, 1952 and extended by an order dated November 13, 1956; and (xiv) The French national collective bargaining agreement for plastics processes extended by an order dated May 14, 1962.
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3.4 Employee incentive schemes
3.4.1. Profit sharing agreements
Pursuant to current legislation, French companies of the 1970), Fenzy (September 14, 2001), Foin/Spindler (March 21, 2001), Bacou-Dalloz group employing more than 50 employees pay profit- Pasa (November 12, 1992), SAF/SIC (September 30, 1998), sharing to their employees, which is calculated according to Bacou-Dalloz Autun (March 25, 1982), Bacou-Dalloz Plaintel the statutory formula. (March 16, 1995) and Christian Dalloz Sunoptics (July 7, 1988).
Profit-sharing agreements have been signed at the following All these agreements provide for an amount to be set aside to companies: Annic (March 15, 1989), Bacou-Dalloz Vierzon the special profit-sharing reserve that is calculated in compliance (November 22, 2000), Beal (March 22, 2000), Comoditex (April 14, with Article L. 442-2 of the Labor Code.
3.4.2. Incentive agreements
Several incentive agreements have been signed within different The total annual amounts allocated under profit-sharing and subsidiaries of the Company: incentive agreements over the last five years were as follows:
• Bacou-Dalloz France S.A., agreement dated June 14, 2001 2004 2003 2002 2001 2000 providing for the distribution of 4% of the operating income of Euros Euros Euros French French Bacou-Dalloz France S.A.; francs francs Profit-sharing • Bacou-Dalloz Autun, agreement dated May 17, 2004 providing agreements 902,551 803,440 784,785 1,129,013 858,841 for a distribution of a variable percentage of its operating income, Incentive depending on the amount of its operating income. agreements 55,358 89,775 42,935 216,700 126,451
3.4.3. Employee stock ownership
The Group is currently developing a long-term employee incentive plan. At present, no employee stock ownership programs exist other than the stock option plan and the proposal for the allotment of free shares under the conditions described elsewhere in this section.
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3.4.4. Stock option plans
The Company has implemented 19 stock option plans since The authorization, which was granted for a term of thirty-eight December 14, 1992. months from the date of the aforementioned Ordinary and Extraordinary Shareholders’ Meeting and expired on November & Stock option plans established in 2004 6, 2004, included the following conditions: – Plans 18 and 19 • Shareholders expressly waived their preemptive subscription rights to the shares to be issued as the options are exercised, The current stock option plan results from the authorization granted in favor of the beneficiaries of the options; by the Ordinary and Extraordinary Shareholders’ Meeting of September 6, 2001, which authorized the Board of Directors, • Total number of options granted under this authorization could pursuant to Articles L. 225-177 to L. 225-185 of the French not give the right to subscribe to a number of shares greater Commercial Code, to grant, on one or more occasions, than 11% of the capital stock; to the staff members or senior managers of the Company and of • The options were to expire six years after the allocation date; affiliated companies as defined by Article L. 225-180 of the Commercial Code whom it designates, options to subscribe to new • The subscription price of the shares was set by the Board of shares in the Company to be issued as part of a capital increase Directors according to the methods and limits authorized by for the Company. the regulations in effect on the date the options were allotted.
Stock options granted in 2004 by the Board of Directors under the current authorization
Options granted to the top ten option-receiving employees, other Number of options Weighted Plan no. than Company directors, and options exercised by these employees allotted/shares subscribed average price or purchased per share
Options granted during the financial year, by the Company and by any company in the option-allotment group, to the ten employees, of the Company and of any company within said scope, thus receiving the greatest number of options 51,000 €52.25 18/19
Options, on the shares of the Company and the companies cited above, held and exercised during the financial year by the ten employees of the Company and of those companies thus purchasing or subscribing the greatest number of options 0 0 0
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Stock options granted
Plan no. 8 9 10 11 12 13 14 15 16 17 18 19
Date of Shareholders’ Meeting 5/15/98 5/15/98 5/15/98 5/15/98 5/15/98 5/15/98 9/6/01 9/6/01 9/6/01 9/6/01 9/6/01 9/6/01 Date of Board meeting 1/8/99 3/4/99 11/10/99 3/9/00 6/8/00 3/12/01 10/4/01 9/3/02 11/14/02 10/31/03 9/7/04 11/5/04 Number of options originally allotted 5,000 3,000 5,000 14,041 6,500 21,200 553,800 192,954 73,227 38,000 46,500 4,500
Total number of shares that may be purchased or subscribed by: Company directors 5,000 0 5,000 0 4,968 0 92,784 22,022 0 0 40,000 Top ten employee beneficiaries 0 3,000 0 9,417 1,513 12,606 250,728 74,283 73,227 15,000 6,500 4,500
Start date for exercise 2/8/00 4/4/00 12/10/00 4/9/01 7/8/01 4/12/02 10/4/05 9/3/06 11/14/06 10/31/07 9/7/08 11/5/08 of options Expiration date 1/8/05 3/4/05 11/10/05 3/9/06 6/8/06 3/12/07 10/4/07 9/3/08 11/14/08 10/31/09 9/7/10 9/7/10 Adjusted subscription price 62.22 62.22 42.19 51.56 63.46 77.80 76.35 92 92 66.6 51.59 59.08 Exercise conditions (1) (1) (1) (1) (1) (1) (2) (2) (2) (3) (3) (3)
Number of shares subscribed - in 2004 0 0 0 0 0 0 0 0 0 0 0 0 Stock options cancelled during the exercise 0 0 0 1,685 0 3,992 155,934 47,767 16,292 7,600 0 0 Stock options still to be exercised 5,043(4) 0 5,043(4) 3,532(4) 6,481(4) 12,453(4) 239,682(4) 97,708 56,985 29,400 46,500 4,500 - of which Company directors 5,043(4) 0 0 40 000 As a percentage of diluted capital(5) 0.06 0.06 0.04 0.08 0.16 3.03 1.22 0.74 0.36 0.57 0.05
(1) For plans governed by the Shareholders’ Meeting of May 15, 1998, residents and non-residents may exercise one-third of their options any time between the thirteenth month and the fourth year following the date the options were allotted. After four years, they may exercise any or all of the options. (2) For options granted by the Board meetings of October 4, 2001, September 3, 2002 and November 14, 2002, for which the plans are governed by the Shareholders’ Meeting of September 6, 2001, residents and non-residents may exercise any or all of the common options four years after they are allotted. These options were divided into two categories: the first allotment consisted for 30% of ordinary options and for 70% of performance shares; a second allotment consisted solely of performance shares. (3) For the options granted by the Board meetings of October 31, 2003, September 7, 2003 and November 5, 2003, for which the plans are governed by the Shareholders’ Meeting of September 6, 2001, non-residents may exercise one-third of their options any time between the thirteenth month and the third year following the date the options were allotted. After three years, they may exercise any or all of the options. Residents may exercise any or all of the options four years after they are allotted. (4) After adjustment following the capital increase on May 21, 2002. (5) The diluted capital (shares) corresponds to the capital stock of Bacou-Dalloz as of January 1, 2005 (7,618,807 shares) plus the new shares that would be created if all the options in all of the stock option plans cited above were to be exercised.
& Potential capital
As of January 1, 2005, if all stock options yet to be exercised were exercised, 507,327 new shares would be created, representing a potential dilution of 6.7%.
Bacou-Dalloz Reference document 2004 71 3 Social and Environmental Report
& Renewal of the authorization including the new shares that would be created by the exercise of the options and excluding any stock options previously granted At the Ordinary and Extraordinary Shareholders’ Meeting to be that have not been cancelled and have not yet been exercised; held May 11, 2005, shareholders of the Company will be requested shareholders will also be requested to rule that the options may to authorize the Board of Directors, for a term of thirty-eight (38) be exercised only after four years from the date they are allotted months from the date of the aforementioned Ordinary by the Board of Directors. and Extraordinary Shareholders’ Meeting, pursuant to Article L.225-177 of the Commercial Code, to grant, on one or more Shareholders will be requested to delegate to the Board of Directors occasions, to employees or senior managers of the Company all powers, without this list being restrictive, regarding decisions holding less than 10% of the capital of the Company, options to grant options on one or more occasions and at times that granting holders the right to subscribe to shares issued by it judges opportune, to set the exercise price of stock options the Company or to purchase shares of the Company that had been granted, as provided for under the procedures approved by acquired under the conditions provided for by law. the shareholders.
Shareholders will be requested to rule that the total number of Pursuant to Article L.225-184 of the Code of Commerce, a special options to be created cannot grant the right to subscribe to or report will be provided each year to the Shareholders’ Meeting of to purchase a number of shares greater than 3% of the capital stock, the transactions carried out in compliance with the provisions of such amount to be calculated on the day the options are granted, Articles L.225-177 to L.225-186 of said Code.
3.4.5. Allotment of free shares
At the Ordinary and Extraordinary Shareholders’ Meeting to be Shareholders will be also be requested to delegate to the Board held May 11, 2005, shareholders of the Company will be requested of Directors all powers, without this list being restrictive, concerning to authorize the Board of Directors to allot free shares of the the determination of the beneficiaries, or the categories of Company, that exist or to be issued, in an amount not to exceed beneficiaries, to whom shares are allotted; to grant free shares 3% of the capital stock, in compliance with the provisions of Articles on one or more occasions and at any time it feels opportune; L.225-197-1 to L.225-197-5 of the Code of Commerce, on one to establish the conditions and criteria for the allotment of shares; or more occasions, to employees of the Company or to certain to establish the definitive terms of the vesting and holding periods categories of employees, and/or to senior managers as defined by for the rights and the shares within the limits set out above by Article L.225-197-1 II of the Code of Commerce, as well as employees the Shareholders’ Meeting; and to inscribe the free shares and senior managers of companies or economic interest groupings in an account registered in the name of their beneficiary. (GIE) related to the Company as provided for by Article L.225- 197-2 of the Code of Commerce. Pursuant to Articles L.225-197-4 and L.225-197-5 of the Code of Commerce, a special report will be provided each year to Shareholders will be requested to rule that these rights will become the Shareholders’ Meeting of the transactions carried out by virtue fully vested only two years after the date they are granted by of the present authorization. the Board of Directors, and that fully-vested beneficiaries will be required to hold any shares so acquired for a period of at least two years.
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3.5 Manufacturing
3.5.1. Manufacturing sites
The Group’s manufacturing processes vary widely between product After scaling back the productive capacity of our head protection segments and individual products in the same segment. business subsequent to the merger, in 2004 the Group rationalized Manufacturing processes for Bacou-Dalloz include injection molding, the manufacturing capacity of its body protection business by closing metal cutting and stamping, textile cutting, sewing and knitting, 5 facilities, including 4 in Europe and 1 in the United States. coating and thermoforming. Products are assembled manually, or production is automated when volumes permit. Bacou-Dalloz Moreover, in addition to manufacturing facilities specializing in manufacturing sites are located throughout the world. Its products a category of product, Bacou-Dalloz is developing new “skills centers” are manufactured under strict quality control rules in ISO-certified focusing on specific areas of expertise. Starting in 2005, the Franklin production facilities. site in the United States, which had specialized in fall protection until 2004, will specialize in woven products and manufacture clothing As of December 31, 2004, the Company operated 38 facilities around for firefighters. At the same time, the Plaintel site in France, the world, including 18 in Western Europe, 11 in North America which specializes in disposable respirator masks, will now be (United States and Canada), 5 in Africa, and 1 in each of the following responsible for disposable protective suits, thus creating a skills regions: Eastern Europe, Central America, Asia and Australia. center for “non-woven” products.
Number of sites by region at December 31, 2004:
Head Body Multi- Total protection protection product
North America 65 11 Western Europe 611118 Rest of world 549 12 21 5 38
3.5.2. Use of subcontractors
Bacou-Dalloz manufactures most of the products sold under In 2003, the Bacou-Dalloz group formed a China-based outsourcing its brand names itself, but the Group also buys merchandise from team to study opportunities to increase its activities over the next subcontractors, especially in Eastern Europe and Southeast Asia. few years with a certain number of subcontractors, particularly in Southeast Asia, for the manufacture of labor-intensive products. This team is also responsible for quality control for these products. The team pays particular attention to ethical standards when selecting subcontractors.
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3.6 Environmental policy
Bacou-Dalloz has made a commitment to act as a responsible The Group’s manufacturing processes, by their nature, have very corporate citizen in all dealings with its financial and commercial little impact on the surrounding ecosystems. However, as a partners, its employees or its immediate environment. In 2003, corporate citizen, Bacou-Dalloz ensures that it plans and rationalizes the Group established an internal structure designed to centralize the use of all resources required for its production - water, energy all environmental information regarding its European and American and raw materials - before they are transformed into finished facilities. This structure strives to improve the data collection products. process and the accuracy of the information submitted by all the sites in the different countries, all of which are subject to different The data provided in this section applies to the Western European, environmental standards and are expressed in different units of North American and Mexican manufacturing facilities. measure. This benchmark geographic zone includes 30 of the Group’s 38 manufacturing sites worldwide.
3.6.1. Compliance to legislation
The policy to identify, monitor, measure, audit and reduce risks No accident concerning air, water or soil pollution or contamination on each of the Group sites is based on the best practices of was reported in 2004. The Group has not set aside any provisions internationally recognized standards. Bacou-Dalloz facilities for environmental risk. are in compliance with national and local regulation.
3.6.2. Consumption
Bacou-Dalloz continuously strives to reduce its consumption of In 2004, consumption amounted to: non-renewable resources (especially water and energy) during production processes, thus proving it’s ‘‘ecological’’ responsibility • Water (general services and manufacturing): 355,357 m3. as a good corporate citizen. Bacou-Dalloz analyzes the use of various components throughout the life cycle of its products, for all • Energy: 221,404 MWh, including 80% natural gas and its product lines, in order to determine how it can continue to reduce 20% electricity. consumption. A significant proportion of activity at Bacou-Dalloz manufacturing facilities consists of manual assembly, which The main raw materials used in manufacturing processes are plastic consumes few natural resources. (polycarbonate and polyamide, etc.), cotton, leather, steel, rubber and latex.
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3.6.3. Waste
The Group’s industrial waste, both hazardous and non-hazardous, In 2004, the 5,046 tons of waste included: is assigned to duly accredited recycling specialists that provide storage and suitable treatment. • 399 tons of hazardous waste, of which 48% was incinerated, 44% was recycled and 8% disposed of in a restricted landfill.
• 4,647 tons of non-hazardous waste, of which 71% was placed in landfills, 28% was recycled and 1% was incinerated.
3.6.4. Noise and odor
The Bacou-Dalloz group’s activities generated no noise or odor complaints in 2004.
3.6.5. Expenses incurred
In 2004, the Group committed itself to expenditures of 71 thousand was mainly due to the impact of investments in 2003 related to Euros on measures intended to limit the environmental impact of the new Tijuana site in Mexico and to Partizanske in Slovakia, its activities. The decline in expenditures between 2003 and 2004 and documentation costs for the Sofraf facility in France.
3.6.6. Industrial and environmental risks
Manufacturing industries, including the PPE industry, are subject In addition, courts or regulatory authorities may require the Group to stringent environmental laws and regulations. In particular, to undertake investigatory or remedial measures, which may go production of certain Bacou-Dalloz products involves a number of so far as to include shutting down facilities, in connection with chemical processes and materials that may have an impact on applicable environmental laws and regulations. Bacou-Dalloz the environment. Although the quantity of polluting products used could also become subject to third-party liability claims by the Group is limited and it believes that it complies with under environmental protection regulations. Furthermore, the applicable environmental standards, Bacou-Dalloz may be as environmental laws and regulations become increasingly required to pay fines, damages and interest and clean-up costs stringent, the Group could be required to incur significant capital related to non-compliance to these environmental standards. expenditures to enhance its air, water and ground pollution controls.
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Page Page
4.1. Board of Directors 79 4.3. Organization of Bacou-Dalloz 88 4.1.1. The Directors 79 4.3.1. A matrix organization 88 4.1.2. Board management structure 83 4.3.2. Senior management 88 4.1.3. Conditions for the preparation 4.3.3. Services rendered by Bacou-Dalloz SA and organization of the Board’s work 83 to its subsidiaries 89 4.1.4. Procedure to prevent insider trading 83 4.3.4. Simplified Group organizational chart as of December 31, 2004 90
4.2. Shareholdings by senior executives 84 4.4. Chairman’s report 91 4.2.1. Shareholdings of senior executives 4.4.1. Preparation and organization of the Board of in the capital stock of the Company Directors’ work 91 and its subsidiaries 84 4.4.2. Report on the Board of Directors’ activity 4.2.2. Compensation of members of in the previous financial year 92 the Board of Directors 84 4.4.3. Limitations on the authority of 4.2.3. Number of options held by members of the Chief Executive Officer 94 the Board of Directors 86 4.4.4. Internal control procedures 95 4.2.4. Loans and guaranties granted 4.4.5. Auditors’ report 98 or outstanding in favor of members of the Board of Directors 86 4.2.5. Information on transactions entered into 4.5. Auditors and audits 99 with members of the Board of Directors 86 4.5.1. Auditors 99 4.2.6. Auditors’ special report on certain 4.5.2. Auditors’ fees 99 related party transactions 87
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4.1 Board of Directors
4.1.1. The Directors
As of March 8, 2005, the Company’s Board of Directors was composed of the following persons:
Name, Age Date of Expiration of Principle Principle Other positions and appointments Number of or First Appointment current position positions in any Company shares Company Name appointment within outside held in the the Company the Company Company
Philippe Alfroid, Director: Shareholders’ Director Deputy Chief In France Director of: 7,056 59 years old April 8, 1991 Meeting called Executive - Faiveley SA, to approve Officer of - Faiveley Transport. the financial Essilor statements International Outside France, Director of: for financial - Bacou-Dalloz, Usa, Inc, year 2005 - Essilor Of America Inc (USA), - Gentex Optics Inc (USA), - Visionweb Inc (USA), - EOA Holding Co Inc. (USA), - EOA Investment Inc. (USA), - Omega Optical Holding, Inc (USA), - Essilor Canada LTEE/LTD (Canada), - Pro-Optic Canada Inc. (Canada), - Shanghai Essilor Optical Company Ltd (China).
Philippe Bacou, Director: Shareholders’ Director, In France, Director of: 596 47 years old September 6, 2001 Meeting called Co-Executive - Trophy SA. to approve Officer Co-Executive the financial Officer: statements September 3, 2003, for financial for the duration of year 2006 the appointment of the Chief Executive Officer
Gérard Cottet, Director: Shareholders’ Director In France, Director of: 206 73 years old July 8, 1992 Meeting called - ASNAV (France-association), to approve - SILMO (France-association). the financial Outside France, Director of: statements - Essilor of America (USA). for financial year 2005 Chairman of: - Essilor (Switzerland) SA.
Ginette Dalloz, Director: Shareholders’ Director, 487,224 70 years old April 13, 1983 Meeting called Co-Executive directly to approve Officer and 524,144 Co-Executive the financial through Officer: statements S.C.F.D September 3, 2002 for financial for the duration of year 2006 the appointment of the Chief Executive Officer
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Name, Age Date of Expiration of Principle Principle Other positions and appointments Number of or First Appointment current position positions in any Company shares Company Name appointment within outside held in the the Company the Company Company
Patrice Director: Shareholders’ Director President of Director of: 200 Hoppenot, May 21, 2003 Meeting called Investisseur - Rolot Lemasson. 59 years old to approve & Partenaire the financial Member of the Supervisory Board of: statements - Elior de KOS (holding of Benedicta). for financial year 2005
Norbert Director: Shareholders’ Director Attorney 5 Majerholc, May 21, 2003 Meeting called -at-law, 44 years old to approve partner the financial in the firm statements White for financial & Case year 2006
Gunther Director: Shareholders’ Director Outside France, Vice Chairman of 601 Mauerhofer, May 21, 2003 Meeting called the Supervisory Board of: 65 years old to approve - Backoma SA (Poland). the financial statements Member of the Supervisory Board of: for financial - Danone GmbH (Germany), year 2005 - Danone Holding AG.
Henri- Director: Shareholders’ Chairman and Outside France, in Bacou-Dalloz group 201 Dominique Petit, May 18, 2004 Meeting called Chief Executive companies: 56 years old to approve Officer - Survivair Respirators, Inc, the financial - Bacou-Dalloz, USA, Inc, statements - Bacou-Dalloz Safety, Inc, for financial - Bacou-Dalloz Eye&Face Protection, year 2006 - Fendall, Inc, - GPT Glendale, Inc, - Bacou-Dalloz Investment, Inc, - Bacou-Dalloz USA Finance, Inc, - Bacou-Dalloz Protection, Inc, - BMP I, Inc, - Fall Arrest Systems, Inc, - Perfect Fit Gloves Co., LLC, - Whiting + Davis, Inc, - PPE Holdings, Inc - Bacou-Dalloz Americas, Inc, - Howard Leight Industries, LLC.
Outside the Group – Director of: - Chesapeake Corporation (USA).
André Talmon, Director: Shareholders’ Director President of In France, Director of: 201 65 years old May 16, 2002 Meeting called Sa Carrieres - ARD (France). to approve Degan and of the financial Degan Outside France, President of: statements Marketing - L’Association IMA (Belgium). for financial SAS year 2006
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Name, Age Date of Expiration of Principle Principle Other positions and appointments Number of or First Appointment current position positions in any Company shares Company Name appointment within outside held in the the Company the Company Company
François Permanent Permanent Manager of In France, permanent representative of NA de Lisle, representative of representative of Investments, CAPE Holding or Idia Participations in: 58 years old the company Idia CAPE Holding - Dufour Yatchts, Idia Participations Participations (ex UEI) - Groupe Gascogne, appointed - Kappa 26, March 18, 2003 - Rep Holding.
Outside France, permanent representative of UE I for: - International Sailing Boats Spa, - Financière Tractel, - Immobilière Dumoulin.
Idia Director : Shareholders’ Director In France, Director of: 59,395 Participations September 6, 2001 Meeting called - Adelior, to approve - Alven Capital the financial - Ceveco Cie Europ de vente statements par correspondance, for the financial - Compagnie des Vins de Bordeaux year 2006 et de Gironde, - Controlab Développement S.A, - Financière LGR II, - Financière LGR, - Fromagerie Guilloteau, - Groupe Quartier Français, - Groupe Bartin, - Groupe Novasep, - IB group, - Jean Niel, - Laboratoire Goemar, - Modus Vin, - Nickel, - Norac, - Pan Medica, - Panil, - Suren SA, - Trialis. Member of the Supervisory Board of: - Berkem S.A., - Châteaudun Développement 1, - Châteaudun Développement 2, - Compagnie Française du Cristal Daum, - Creagro, - Etablissements Jacquot et Cie, - Financière Daum, - Financière G.N., - REP Holding, - Société des Opérations Funéraires, - Laboratoires Thea. Outside France, Director of: - Reitzel (Switzerland).
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& Information on Directors(1) Norbert Majerholc is an attorney at law and a member of the Paris bar. After beginning his career in 1984 as a tax consultant with Philippe Alfroid is Chief Operating Officer of Essilor International, Peat Marwick International (KPMG since 1988), he joined White & which he joined in 1972. He has been a Director of the Company Case LLP (an international firm based in the United States) in 1997, since 1991 and assumed the chairmanship of the Company, as an associate specializing in tax law, corporate law and international law. in alternance with Philippe Bacou, as of the time of the merger of the Bacou and Christian Dalloz Groups in September 1991, Gunther Mauerhofer began his career at Kimberly-Clark in 1963. until January 11, 2005. Since January 11, 2005, he has been In 1984, he joined the Danone group as Director of Development President of the Nominations and Remunerations Committee. for all divisions and, subsequently, as Director of International Operations for the biscuit division. He ended his professional career Philippe Bacou joined the Bacou Group in 1985, after a career in February 2002 as Vice President of the dairy products division as a certified public accountant, and assumed its chairmanship for Central and Eastern Europe. Gunter Mauerhofer holds degrees until the merger with the Christian Dalloz group. After assuming from the University of Vienna, the SAIS (School of Advanced the chairmanship of the Bacou-Dalloz group between 2001 International Studies) at John Hopkins, and the University of and 2003, he now exercises the function of Co-Executive Officer Bologna in Italy and holds an MBA from INSEAD. and is President of the Company’s Strategy Committee.
Henri-Dominique Petit is an engineer from the Ecole Supérieure Gérard Cottet spent most of his career at Essilor International de Physique et Chimie de Paris and holds a masters degree where he was Chairman of the Board from 1991 to 1996. Gérard in nuclear physics, a Ph.D. in corpuscular electronics, as well as Cottet is a graduate of the Ecole des Hautes Etudes Commerciales. a degree from INSEAD’s Advanced Management Program. He joined Kodak in 1975 where he held several operating and Ginette Dalloz began her career at the Rhone-Poulenc group before management positions within France, the United States creating the Christian Dalloz group with her husband and assuming and England before being appointed Chairman and President of the Group’s management until 1991. Ginette Dalloz is a graduate the greater Asia region in February 2001, a position based of l'Ecole des Hautes Etudes Commerciales Jeunes Filles. in Shanghai. He was appointed Chief Executive Officer of She exercises the function Co-Executive Officer within the Company. the Bacou-Dalloz group in May 2004 and has been Chairman of the Board of Directors since January 11, 2005. Patrice Hoppenot worked mainly in financial functions within the agricultural and pharmaceutical industries between 1971 and 1985, André Talmon joined the Company in January 2002. Mr. Talmon and, in 1985, assumed the chairmanship of Géladour, a distributor began his career at Exxon Chemicals and held an executive role of frozen foods. In 1988, he and three other founders created BC within the Rio Tinto group until 2001. Mr. Talmon graduated from Partners, an independent European financial investor, specialized the Ecole Polytechnique Fédérale in Zurich and holds an MBA from in LMBO’s. After leaving the company in 2001, he founded INSEAD. Investisseur & Partenaire pour le Developpement of which he is the Chairman. This company is a Mauritian registered financial The Shareholder’s Meeting of May 18, 2004 renewed the company that provides financing to entrepreneurs for useful appointments of Ginette Dalloz and of Philippe Bacou, Norbert investments in developing countries. Patrice Hoppenot is a graduate Majerholc and André Talmon as well as Idia Participations for of the Ecole Nationales des Mines in Paris and holds an MBA from a period of three years, or, until the Shareholders’ Meeting for the the University of Chicago. approval of the 2006 financial statements. It was decided that the mandates of Claude Balleyguier and Walter Stepan would François de Lisle has been the permanent representative of Idia not be renewed. The Shareholders’ Meeting also named Participations on the Bacou-Dalloz board since March 18, 2003. Henri-Dominique Petit as Director for a period of three years, or, He has a degree from l'Ecole des Hautes Etudes Commerciales until the Shareholders’ Meeting for the approval of the 2006 financial and has spent his entire career within the Crédit Agricole group statements. which he joined in 1973. In 1988, he joined the CAPE Holding Group (previously called Union d’Etudes et d’Investissement) of which
Idia Participations is a component, as Manager of Investments. (1) Independent Directors are listed in paragraph 4.4.1.
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4.1.2. Board management structure
In its meeting of April 2, 2004, the Board of Directors announced In the meeting of January 11, 2005, in compliance with legal the dismissal of Claude Balleyguier as Chief Executive Officer and provisions and with Article 17 of the statutes, the Board decided appointed Philippe Alfroid to replace him as Chairman and Chief to accumulate the functions of Chairman of the Board and of Chief Executive Officer of the Company. At the same session, Executive Officer. As a result, Henri-Dominique Petit was appointed the mandates of Ginette Dalloz and Philippe Bacou as Co- Executive Chairman of the Board of Directors replacing Philippe Alfroid. Officers were confirmed. Henri-Dominique Petit has thus taken the title of Chairman and Chief Executive Officer. During the same session, the mandates of In its meeting of May 18, 2004, the Board appointed Ginette Dalloz and Philippe Bacou were confirmed as Co-Executive Henri-Dominique Petit as Chief Executive Officer of the Company. Officers. Philippe Alfroid maintained his position as Chairman of the Board of Directors of the Company.
4.1.3. Conditions for the preparation and organization of the Board’s work
Pursuant to the provisions of Article L225-37 of the French on the powers of the Chief Executive Officer. Information Commercial Code, the Chairman will report to shareholders at the concerning the conditions of the preparation and organization next Shareholders’ Meeting, which will be held in principle of the Board’s work are described in full in paragraph 4.4.1. of on May 11, 2005, concerning the preparation and organization of this document. The limitations on the Chief Executive Officer the Board and the internal control procedures set up by are described in paragraph 4.4.3. the Company, along with any limits that the Board has placed
4.1.4. Procedure to prevent insider trading
During 2002, the members of the Board of Directors established in the financial department. Designated Persons are prohibited an internal procedure applicable to both directors and employees. from conducting transactions during the two weeks before The principle is the following: to limit the risk of insider trading, the Group announces its earnings (annual and half-year) and Designated Persons (as defined below) and /or employees of the its quarterly revenues. The financial department regularly publishes Company are not entitled to buy or sell Company shares during the start and end dates of these periods to notify the Designated certain periods proceeding public disclosure of significant Persons. information or events. For Designated Persons and all employees of the Company, Designated Persons are the following: the Company’s Chairman as soon as any person is aware of Privileged Information, he is and Board members, members of the Executive Committee, certain prohibited from conducting any transaction prior to the first market managers, senior managers or their equivalent in affiliates of day following the publication of a press release announcing the Company and certain Company employees working primarily Privileged Information.
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4.2 Shareholdings by senior executives
4.2.1. Shareholdings of senior executives in the capital stock of the Company and its subsidiaries
Shareholdings in the capital of the Company by Board members and senior management as of March 8, 2005 are as follows:
Board Members Number of Percentage of Percentage of shares capital voting rights
Philippe Alfroid 7,056 0.09 0.07 Philippe Bacou 596 Gérard Cottet 206 Ginette Dalloz* 487,224 6.4 10.4 Idia Participations 59,395 0.77 0.63 Patrice Hoppenot 200 Nobert Majerholc 5 Gunther Mauerhofer 601 Henri-Dominique Petit 201 André Talmon 201
* Shares held directly by Ginette Dalloz. See chapter 5 for shares held indirectly.
As of December 31, 2004, no other Board member had any significant holding in any of the Bacou-Dalloz subsidiaries.
4.2.2. Compensation of members of the Board of Directors
During the financial year 2004, the total amount of direct and indirect payable for each year shall be paid in a single lump sum during gross remuneration of any kind received by the members of the first quarter of the following year. In the event that targets are the Company’s Board of Directors was 2,712,923 Euros of which met, it will amount to 300,000 Euros gross. It may be increased 194,678 Euros in directors’ fees. to as much as 600,000 Euros gross in the event that targets are exceeded. The practical terms of this variable remuneration The following Company directors received a salary in 2004: (particularly the targets to be met) shall be determined annually the Chairman, the Chief Executive Officer and the two Co-Executive by the Nominations and Remuneration Committee; Officers (see table that follows).
• a daily foreign travel bonus shall be paid, the maximum total At the Shareholders’ Meeting of May 18, 2004, the remuneration of amount of which shall not exceed the sum of 100,000 Euros gross, the Chief Executive Officer was established in the following manner: regardless of the total number of days spent and worked abroad; • gross annual remuneration of 400,000 Euros (including 5 weeks of paid leave per year), payable in 12 monthly installments; • the Company shall arrange and shall pay the cost of special redundancy insurance for Company officers for the benefit of • variable remuneration in the context of the policy defined by the Chief Executive Officer (Senior Executives Welfare Insurance, the Company for its senior executives. The variable remuneration basic cover for 24 months).
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In the event that the Company terminates the appointment of At the same session on January 11, 2005, the Board of Directors Mr. Petit as Chief Executive Officer by any means and for any reason ended the remuneration of Philippe Alfroid related to his mandate (save in the event of gross negligence or misconduct or compulsory as Chairman of the Board of Directors and set the gross or voluntary retirement) and particularly by his dismissal, remuneration of Ginette Dalloz at 20,004 Euros for the year 2005 non-renewal of his term of office for any reason or the abolition instead of 18,293 Euros for the previous period. The compensation of his office as a result of a reorganization or merger, he shall be of Philippe Bacou was modified at the Board Meeting of paid severance pay equivalent to 1.5 times the total remuneration May 8, 2005 after which it is 30,000 Euros instead of 70,000 Euros that he was paid in respect of the twelve months preceding previously. the termination. The methods of allocating directors’ fees that were adopted by Upon the appointment of Henri-Dominique Petit as Chairman the directors for 2004 are described in chapter 4.4.1. on January 11, 2005, the above remuneration terms were renewed, and no additional remuneration was awarded to him by reason The following table presents the remuneration and benefits received of his appointment as Chairman. by individual members of the Board of Directors:
Financial year 2004 Financial year 2003 Directors Fixed(1) Variable(2) Directors Benefits Fixed(1) Variable(2) Directors Benefits Remuneration Remuneration Fees In Kind Remuneration Remuneration Fees In Kind
Philippe Alfroid 57,355 11,608 65,514 11,154 Philippe Bacou 88,971 11,608 122,890 10,084 Claude Balleyguier(3) 1,983,238 67,901 7,918 515,010 155,113 11,154 8,654 Gérard Cottet 28,062 28,678 Ginette Dalloz 18,293 10,084 18,293 9,630 Patrice Hoppenot 25,014 22,874 Idia Participations (via its Permanent 10,084 11,154 representative) Norbert Majerholc 25,014 25,014 Gunther Mauerhofer 24,398 25,468 Walter Stepan(3) 17,534 36,438 André Talmon 26,538 26,084 Henri-Dominique Petit(3) 234,610 57,250 4,734 2,709
(1) Some remuneration amounts are denominated in US dollars for which the exchange rate used is the average exchange rate of the French Central Bank for 2004, or, 1.2433 EURO per US dollar. (2) Variable remuneration paid in 2004 is related to the 2003 period. (3) By way of reminder, during 2004: Claude Balleyguier was dismissed on April 2, 2004. The fixed remuneration of Claude Balleyguier includes his severance pay. The mandates of Claude Balleyguier and Walter Stepan were not renewed by the Shareholders’ Meeting of May 18, 2004. Henri-Dominique Petit was appointed Director by said meeting and appointed as Chief Executive Officer at the Board Meeting which followed the Shareholders’ Meeting on May 18, 2004.
There are no complementary retirement benefits for Company directors.
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4.2.3. Number of options held by members of the Board of Directors
With the exception of Philippe Alfroid and of Henri-Dominique With the exception of Henri-Dominique Petit, no Company stock Petit, no director holds any Company stock options as of options were awarded to Company directors during 2004: December 31, 2004.
Options for new or existing shares granted Number of options Maturity to each officer and options exercised by them allocated/shares Price Dates Plan* subscribed or bought
Options granted during the financial year to Henri-Dominique Petit 40,000 51.59 € 09/07/2010 18 by the Company and by any company of the Group Options exercised by Company directors during the 2004 financial period 0 0 0 0
* For the history of allotments, see chapter 3 paragraph 3.4.3
The members of the Board of Directors held 45,043 options as of December 31, 2004:
Directors Number of Subscription Relevant plans Maturity Dates options Price
Philippe Alfroid 5,043 62.22 € January 8, 1999 January 8, 2005
Henri-Dominique Petit 40,000 51.59 € September 7, 2004 September 7, 2010
Total 45,043
Claude-Henri Balleyguier, the previous Chief Executive Officer No company in the Bacou-Dalloz group granted options for new dismissed on April 2, 2004, held 124,817 Company stock options. and/or outstanding shares to members of the Company Board of As of December 31, 2004, 90,375 Company stock options had been Directors. cancelled.
4.2.4. Loans and guaranties granted or outstanding in favor of members of the Board of Directors
No loans were granted or guarantees provided by the Company to Directors.
4.2.5. Information on transactions entered into with members of the Board of Directors
On September 7, 2004, the Board of Directors authorized de Lunetterie owned by the Société Civile Familiale Dalloz at the Company (directly or through the intermediary of one of the price of 60,000 Euros. its subsidiaries) to purchase the portion of the company Tunisienne
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On September 7, 2004, the Company Board of Directors authorized of 489,069 Euros related to the audit and divestiture of Abrium which the Company to enter into legal assistance agreements with White began in 2003 and was completed 2004. & Case (directly or through the intermediary of one of its subsidiaries) concerning contractual matters in Hong Kong upon which fees of With the exclusion of these agreements, there have been no 8,893 Euros were invoiced in 2004 and fiscal matters in France upon transactions with directors which are not of an ordinary nature. which fees of 143,152 Euros were invoiced in 2004 as well as fees
4.2.6. Auditors’ special report on certain related party transactions - Year ended December 31, 2004
To the shareholders, WITH WHITE & CASE
In our capacity as statutory auditors of your Company, we are On September 7, 2004, the Board of Directors of Bacou-Dalloz required to report on certain contractual agreements with certain authorized your Company (directly or indirectly by the mean of related parties. subsidiaries) to carry on contracting with the firm White & Case the following legal services: assistance on contractual issues In accordance with Article L.225-40 of French Company Law (Code in Hong-Kong, with related fees amounting to EUR 8.893 in 2004, de commerce), we have been advised of certain contractual assistance on fiscal issues in France, with related legal fees agreements which were authorized by your Board of Directors. amounting to EUR 143.152, and assistance for the disposal of the French distribution subsidiary Abrium, with related fees amounting We are not required to ascertain whether any other contractual to EUR 489.069. agreements exist but to inform you, on the basis of the information provided to us, of the terms and conditions of agreements indicated WITH MR. WALTER STEPAN to us. It is not our role to comment as to whether they are beneficial or appropriate. It is your responsibility, under the terms of On March 18, 2003, the Board of Directors of Bacou-Dalloz Article 92 of the March 23, 1967 Decree, to evaluate the benefits authorized Bacou-Dalloz USA Inc. A subsidiary of your Company resulting from these agreements prior to their approval. to sign a contract with Smithfield Office Center LLC., a company in which M. Walter Stepan has direct interest, related to the lease We conducted our works in accordance with French professional of offices in Smithfield (United-Sates, Rhode Island) with an annual standards. These standards require that we perform the necessary rent amounting to 539,965 US$. procedures to verify that the information provided to us is consistent with the documentation from which it has been extracted. Dijon and Paris-La Défense, April 18, 2005
WITH MRS. GINETTE DALLOZ The Statutory Auditors
On September 7, 2004, the Board of Directors of Bacou-Dalloz Expertise Comptable et Audit Ernst & Young Audit authorized Bacou-Dalloz (directly or indirectly by the mean of subsidiaries) to purchase the share hold by "Société Civile Familiale Dalloz" in "Société Tunisienne de Lunetterie" for an amount of EUR 60.000. This purchase was achieved in 2004.
Moreover, under the term of the March 23, 1967 Decree, we have Patrick Collomb François Carrega been informed that the execution of the following related party transactions continued in 2004.
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4.3 Organization of Bacou-Dalloz
4.3.1. A matrix organization
The Group has adopted a matrix organization which includes, and footwear). Their missions include strategic marketing, product on one side, Strategic Business Units (SBU) which are based upon management, research and development as well as manufacturing. product lines and respond directly to the requirements of globalization and, on the other side, Market Business Units (MBU), The MBU correspond to the main locations in which Bacou-Dalloz organized geographically and which respond locally to best meet operates. They cover three regions: America (North and South), specific customer needs. EMEA (Europe, Middle East and Africa) and Asia Pacific. Their missions include operational marketing, sales, logistics, and The SBU cover Head Protection (eye and face, respiratory and distribution. As such, these entities record the major portion of hearing), Fall Protection and Body Protection (gloves, clothing sales for the various product lines.
4.3.2. Senior management
As of the date of this document, besides the Chief Executive Officer, Henri-Dominique Petit, appointed on June 7, 2004, the senior managers of Bacou-Dalloz are the following:
most notably, he exercised the function of President of Nike Team Nom Fonction Sports, Inc. In November 2004, he took responsibility for all of Janet Dekker Senior Vice-President, Human Resources the divisions within the Head Protection business. Mark Hampton Senior Vice-President, Head Protection Brice de La Morandière Chief Financial Officer Brice de La Morandière, a French national, joined the Christian Jerry McGurkin Senior Vice-President, Dalloz group in 1997 as Chief Financial Officer, following Respiratory Protection an international career as Financial Director at CarnaudMetalbox Mike Moorefield Senior Vice-President, Americas in the Specialty Containers business. He holds a law degree as well Joe Reimer Senior Vice-President, Fall Protection as an advanced degree in Strategic Management and is a graduate Philippe Suhas Senior Vice-President, of the Institut d'Études Politiques in Paris. Since January 2005, Europe, Middle East & Africa he has also taken responsibility for the IT function. Christian Voegeli Senior Vice-President, Body Protection Jerry McGurkin, an American national, joined the Christian Dalloz group in 1995. Since then, he has mainly worked in the Respiratory Janet Dekker, a Dutch national, joined Bacou-Dalloz in May 2004 Protection division of the Group were he currently holds the position as Senior Vice-President, Human Resources. She previously of Senior Vice-President. Prior to entering the Group, he held occupied a number of human resource functions within the positions of President of Neotronics, a manufacturer of gas the Honeywell and Sodexho Alliance groups, both in Europe and detection instruments in the United States, and Chief Executive in the United States. She holds a degree in psychology from Officer of the Industrial Products Division at Allied Signal. the University of Amsterdam. Mike Moorefield, an American national, joined Bacou-Dalloz Mark Hampton, an American national, joined Bacou-Dalloz in July in June 2002 as Senior Vice-President in charge of the American 2002 as Senior Vice-President of the Hearing Protection division markets, logistics and marketing. Mike Moorefield was previously following an international career within the Nike group where, with Rubbermaid where, following a career in sales, he held
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the position of President of the Commercial Products Division. Philippe Suhas was previously Chief Executive of Valeo Distribution He has a degree from the University of Virginia and an MBA from France where he occupied various positions, over a ten year period, Nova-Southeastern University in Florida in the United States. within the marketing and sales function. He holds a degree from the Institut National Polytechnique in Grenoble and from Joe Reimer, an American national, joined the Christian Dalloz group the Ecole des Hautes Etudes Commerciales. in January 1981. During the course of these past twenty years, Joe Reimer has most notably been in charge of head protection Christian Voegeli, a French national, joined Bacou-Dalloz in June sales on the American market. Joe Reimer is currently Senior 2002 as Senior Vice-President of the Body Protection division. Vice-President of the Bacou-Dalloz Fall Protection division, a position Christian Voegeli was previously Chief Executive Officer of Thermic he previously held for five years within the Christian Dalloz group. Engine European division of Valeo, after having previously held several positions within Valeo. He holds a degree from the University Philippe Suhas, a French national, joined Bacou-Dalloz in March of Grenoble in Electronics and Automation. 2002 as Senior Vice-President for the European, Middle East and African Markets, the logistics organization in Europe and marketing.
4.3.3. Services rendered by Bacou-Dalloz SA to its subsidiaries
Bacou-Dalloz SA provides certain services to the companies of • Legal Services; the Bacou-Dalloz group. These services are invoiced to the companies of the Group on the basis of actual costs plus • Development Services: studies and execution of investments 6% based on the “arms length price” principle. The total amount in new countries or expansion in existing countries, negotiations of these intra-group invoices was 28.4 million Euros in 2004. and closings on acquisitions and partnership agreements, and the technical, commercial and financial studies prior to those These services essentially fall into the following categories: acquisitions;
• General Management Services: general strategy in terms of • Information technology services: data center costs and general products, activities and geographic expansion; information services, costs related to the implementation of SAP.
• Administrative and Financial Services: Financial and Treasury services, shared service centers;
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4.3.4. Simplified Group organizational chart as of December 31, 2004
Bacou-Dalloz Dalloz Safety Bacou-Dalloz Bacou-Dalloz Bacou-Dalloz Christian SRO Ltd HK Ltd Australia Pty Ltd Dalloz Bacou-Dalloz Bacou-Dalloz Bacou-Dalloz, (Slovakia) (N-Zealand) (Hong Kong) (Australia) (UK) Sunoptics Europe SAS Plaintel SAS AB (Sweden) SAS
Société Christian Dalloz Christian Bacou-Dalloz Tunisienne Holding Dalloz Ltd Deutschland Vierzon SAS de Lunetterie (UK) GmbH & Co kg (Tunisia) (Germany) Mercadier SAS Bacou Bacou-Dalloz Saint Germain Produkt SRO Safety LLCo Plastiques (Slovakia) (Russia) SAS
Bacou-Dalloz Delta Annic Logistique Optrel AG Oxbridge Loti BV IPSA SAS Protection International Annic SAS Systems, (Switzerland) SAS (NL) SAS BV (NL) Engineering SNC Henri Bacou 99 % 99 % SAS
Bacou-Dalloz BacouDev1, Comoditex Bacou-Dalloz Bacou-Dalloz Fenzy SAS GmbH & Co kg SIC SAS SARL SAS Italia (Italy) Béziers SAS (Germany)
Bacou-Dalloz Bacou-Dalloz SA France SAS
Bacou-Dalloz Bacou Bacou-Dalloz BITCO SP Défense Etablissement Iberica International PASA SAS BEAL SAS Autun SAS (China) SAS Foin SAS (Spain) BV (NL)
Survivair Bacou-Dalloz Respirators, USA, Inc. Inc. Howard Howard Uvex Safety Bacou-Dalloz Survivair S. Leight de Biosystems Leight Manu- Eye and Face de RL de CV Mexico LLC Industries facturing, Protection, (Mexico) (Mexico) LLC Inc. Inc.
Bacou-Dalloz Bacou-Dalloz Perfect Fit Titmus Whiting Bacou-Dalloz Bacou-Dalloz PPE Holdings, Assurance Americas, Inc. Glove Co., LLC Optical, Inc. & Davis, Inc. USA Finance Safety, Inc. Inc. Co, Ltd
Bacou-Dalloz Produtos de Bacou-Dalloz Bacou-Dalloz Segurancia, GPT Glendale, Fall Fendall, Inc. BMPI, Inc. Investment, Ltd (Brazil) Inc. Protection, French subsidiaries Inc. Inc. US subsidiaries
Subsidiaries outside France/US Bacou-Dalloz Bacou-Dalloz Fall Fall Arrest Protective Directly or indirectly held 100% by the Group Protection, Ltd Systems Inc. Apparel, LLC unless otherwise mentioned (Canada)
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4.4 Chairman’s report
4.4.1. Preparation and organization of the Board of Directors’ work
As of the submission date of this reference document, the Board & Internal rules and Director’s Charter consists of ten Board members. In the Board meeting of March 8, 2005, the Board noted the end of the agreements concluded in the Pursuant to the Financial Security Act of August 1, 2003, the Board context of the merger of the Bacou and Christian Dalloz groups of Directors is formalizing the internal procedures for the Board of (described in chapter 5) and the Board reviewed the application of Directors and each Committee. The internal procedures of the Audit the rules defining the independent Board members as they relate Committee have already been approved on March 11, 2004. to the current members. The Board thus qualified six directors, Internal procedures for the Board of Directors which were approved Gérard Cottet, Patrice Hoppenot, Norbert Majerholc, Gunther on June 25, 2002, as well as the Director’s Charter approved at Mauerhofer, André Talmon and the company Idia Participations, the Board meeting of March 23, 2004 have been reviewed and as independent Board members. completed by the Governance Committee held on March 8, 2005 with the objective of taking recent developments on the topic of & Definition of independent director Corporate Governance into account. A final version of the two documents are in the process of being drawn up and will be The Board of Directors, at its meeting held on January 23, 2003, proposed for approval at a next Board meeting. Most notably, adopted the definition recommended by the Bouton report. the following principles will be recommended to the Board for Accordingly, independent directors shall be considered to be approval: directors who are not: • directors shall represent the interest of all shareholders. • employees of the Group and who have not been employees of All directors agree to respect the rights and obligations defined the Group for the last five full financial years ended; in the Director’s Charter and the internal procedures of the Board of Directors and to act under all circumstances in the Company’s • Company directors or legal representatives of any affiliated interest; company and who have not held these positions for the last five full financial years ended; • directors must hold 200 shares;
• legal representatives of a company of which the Group, or a legal • the function of the Board shall be to review, direct and oversee representative or employee of the Group, is a Company director, the management of the Company assured by the Chief Executive and who have not held such a position for the last five full financial Officer and his team; years ended;
• the Board shall meet regularly, at least four times per year; • beneficiaries of a significant economic relationship with the company (suppliers, customers) or bankers for the Company; • four Committees - Strategy, Audit, Nominations and • close family members of a Company director; Remuneration, and Governance - have been created to prepare the topics under their authority for approval by the complete • former auditors or partners or employees of a firm that was Board. Other ad hoc committees may be formed, as needed; an auditor of the company doing business with the Group within the last five full financial years ended; • the Chief Executive Officer shall report on his management of the Company to the Board; • Company directors of the company since more than twelve years;
• the Chief Executive Officer shall be a Company director. He shall • board members holding above 10% of the capital. The Board of be a member of the Board of Directors. Directors shall declare whether the existence of that interest causes the director to forfeit his or her status as an independent director.
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& Responsibilities of the Board: the Group and the Charter of Ethical Conduct and Sustainable Development of the Company. • the Board shall define the medium and long-term strategy of the Company based on the recommendations of the Chief & Director remuneration Executive Officer. To do so, it may use all available means inside or outside the Company, through the Strategy Committee; The methods for allocating Director’s fees adopted by the directors for 2004 were identical to those used in 2003. The Ordinary and • the Board shall approve the short term and medium term Extraordinary Shareholders’ Meeting of May 18, 2004 voted a total quantitative and qualitative targets presented by the Chief amount of 225,000 Euros for the year 2004. An amount equal to Executive Officer, and shall see to it that they are consistent 194,678 Euros was distributed. with the Group’s strategy as previously approved by the Board; The allocation rules were as follows: • the Board shall approve the annual budget which results from those targets; • 1,070 Euros was attributed to directors residing in Europe
• the Board shall approve all decisions to acquire or divest and 3,050 Euros for directors residing in the United States in order companies, businesses, a part of, or parts of businesses; to take their travel time into account. Over the course of 2004, no board meeting took place outside of France. Board members • the Board shall approve all investments that exceed an amount defined who participate by video conference or tele-conference are by the limitations of the authority of the Chief Executive Officer; attributed 1,070 Euros;
• the Board shall evaluate the performance of the Chief Executive • independent directors and directors without a significant Officer and his direct team. Through the Nominations and shareholding are attributed additional fees. At December 31, 2004, Remuneration Committee, which is an integral part of the Board, it the following Directors received additional fees: Gérard Cottet, shall define the remuneration of the senior managers (Chief Executive Officer, Chief Financial Officer, operational directors, etc.); Patrice Hoppenot, Nobert Majerholc, Gunter Mauerhofer, André Talmon. The additional remuneration for the year • the Chief Executive Officer and his team shall provide the amounted to 16,000 Euros; day-to-day management of the Group, in accordance with the Group’s strategy as approved by the Board of Directors, • all members of a Committee which meets at least once per year in compliance with the internal management procedures of are attributed a token worth 1,524 Euros per year.
4.4.2. Report on the Board of Directors’ activity in the previous financial year
& Number of meetings and rate of attendance • business review (past and outlook); • review and approval of recommendations made by the The Board met nine times over the course of 2004. All directors were Committees which were held between two Board Meetings. present at three meetings, 9 out of 10 directors were present at three In addition, at some Board Meetings, the following topics were other meetings, 7 out of 10 directors were present at two meetings addressed: and 6 directors were present at the July meeting. • management changes within the Company with the dismissal of & Decisions of and information for the Board of Claude Balleyguier as Chief Executive Officer on April 2, 2004 and Directors the appointment of Henri-Dominique Petit to this function on May 18, 2004;
During the last financial year, the Board of Directors was informed, • membership and operations of the Board of Directors: renewal reviewed or adopted the following points: of directorships, director remuneration;
• review and approval of the minutes of previous Board Meetings; • corporate governance;
• financial review (budget and earnings); • granting of guarantees and surety bonds;
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• approval of annual financial statements; In consideration of the Company’s management changes which took place in May 2004, the Committee judged it useful to defer • group refinancing; the second Committee meeting, which was initially planned • litigation; for the second half of 2004, to January 2005.
• acquisitions or sales of assets; • Audit Committee • commercial agreements of significance to the Company; The Audit Committee is composed of François de Lisle (Committee • general organization of the Group; President), Patrice Hoppenot and Gunther Mauerhofer. • granting of stock options, and; The Audit Committee’s mission is to issue an opinion on • significant capital expenditures. the accounting methods used to prepare the financial statements and on the organization of the internal audit function within & Work in preparation of Board Meetings the Company. In addition, it is responsible for the review of risks and off-balance sheet commitments, as well as the external audit In the days preceding the Board Meeting, each director is sent fees. It also has the mission of choosing and reviewing the methods the notice, the agenda, the main documents necessary for the employed for the renewal of independent auditor appointments. analysis of the issues under consideration and the minutes of The Committee also consults the CFO and the managers of internal the previous Board Meeting. Additional documents presented audit, management control and the treasury function as well as at the Board Meetings are distributed to them during the meeting. the Company’s independent auditors.
In addition, a compilation of press articles and financial analysts’ The Committee also receives the independent auditors’ conclusions reports are either made available to them during the Board Meeting on the financial statements. It has assured itself that the means or sent afterwards. put in place by the Company permit them to fulfill their missions.
Since the departure of Walter Stepan, an American director, in May The Committee met four times in 2004 in order to review the 2004, the documents and the debates are presented in French. financial statements for the 2003 financial year (both estimated and final), the half year financial statements for 2004 and the No specific external training was proposed for directors (or taken estimated statements for 2004. During the meeting of March 11, by them) on the methods of performing their duties, on the specific 2004, it approved the final version of the internal procedures of characteristics of the Company or its business or the industry. the Committee. The attendance rate was 100%. However, certain directors have benefited from internal training related to the Group’s activities during site visits and at trade shows Besides the review of financial statements, the main subjects or with Company management other than Company directors. addressed concerned: the audit program and internal control, the preparation of the transition to IFRS, the financial policy of & the Group and, in particular, the debt structure and the fiscal analysis, Organization and Operation of Committees intercompany pricing policy, the policy vis-à-vis the independent auditors, and, the impact of larger projects on the financial • Strategy Committee statements, most notably, the Abrium divestiture.
This Committee is composed of Philippe Bacou (Committee • The Nominations and Remuneration Committee President), Philippe Alfroid, Gérard Cottet, André Talmon, Gunther Mauerhofer and Henri-Dominique Petit. Membership in the Nominations and Remuneration Committee The Committee’s mission is to evaluate and provide its opinion was partially renewed at the beginning of this year with the arrival to the Board of Directors on strategic orientations proposed by of Philippe Alfroid as a replacement to Walter Stepan. The the Company. Committee now includes Philippe Alfroid (Committee President), Norbert Majerholc and Gérard Cottet. During the 2004 financial year, the Committee met in July. All members of the Committee were present. On that occasion, certain Most notably, this Committee’s mission is to pre-select independent directors who are not members of the Committee participated in directors, to review and provide an opinion on the remuneration the debates. proposals for senior managers of the Company, the variable remuneration policies of the other employees, the terms of stock
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option plans, the long term incentives plans for employees and, two times in 2004 during the second half. The attendance rate in general, to provide an opinion on significant organizational was 100%. changes within the Group. During these meetings, members reviewed the Board operations This Committee met three times in 2004. The attendance rate based on a questionnaire which was sent to directors. was 100%. More specifically, its work addressed the remuneration The questionnaire is related to the achievement of targets, the of directors and of the members of the Executive Committee, relevance of the Director’s Charter, the frequency of the meetings, the variable remuneration policy of the Company and, most notably, the quality of the information distributed, the composition and the definition of targets and the performance criteria retained, efficiency of the Board and the amount of time devoted to debate. the employment contracts of the senior managers, the Human Based on this review, the Committee has launched the redesign Resources procedures of the Company, the limitations of of the internal rules of the Board and of the Director’s Charter which Chief Executive authority and the granting of stock options will continue during 2005. in 2004. & • The Governance Committee Evaluation of the activity of the Board of Directors The members of the Governance Committee are André Talmon, who is the Committee President, Ginette Dalloz, Philippe Bacou, Each Committee systematically provides a report at the Board Philippe Alfroid and Gérard Cottet. Henri-Dominique Petit has also Meeting which reviews the progress of its mission and the resulting been a member since his appointment as Chairman of the Board proposals. of Directors of the Company. In addition, as indicated above, under the supervision of the This Committee oversees Company operations in accordance Governance Committee and based upon a questionnaire sent by with the Governance Charter in total transparency and with the said committee, the Board of Directors has launched an evaluation cooperation of the Company’s senior management. For that reason, of its performance. This work will be continued over 2005 and its mission is to evaluate the Board and Committees and to propose will be extended to include the work done by the Committees. amendments or changes to existing rules. The Committee met
4.4.3. Limitations on the authority of the Chief Executive Officer
At the Board of Directors meeting of January 11, 2005, the limitations • closing or cancellation of consulting contracts within the context of authority adopted by the Board on January 23, 2003, and of normal operating activities resulting in an annual commitment amended by the Board on May 22, 2003, were modified. of over 500,000 Euros; These provisions defined the limitations on the authority of the Chief Executive Officer with respect to acquisitions, divestitures, • closing or cancellation of any contractual agreement within the borrowings, loans, guarantees, unusual spending commitments context of normal operating activities of over 5,000,000 Euros and the recruitment of executive personnel. per agreement;
In particular, the Chief Executive Officer must obtain prior approval • launch of any legal procedure which commits the Company for of the Board for the: an amount above 1,000,000 Euros.
• commitment of the Company for any transaction of a strategic In the hypothetical case where an urgent situation might require nature (merger, acquisition, or divestiture) above the amount of an immediate decision, the Chief Executive Officer is not restricted one million Euros and for any investment above the amount of by the limitations described above and is authorized to act 500,000 Euros; in the best interest of Bacou-Dalloz with respect to the use of his powers. He shall inform the President of the Advising Committee • request for any borrowings of an amount above 5,000,000 Euros; concerned in writing immediately of decisions by him thus taken.
• granting of any guarantee for an amount above 4,000,000 Euros;
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4.4.4. Internal control procedures
The elements which make up this report are regularly presented The missions of the internal audit function are the following: to the Group’s Audit committee. They have been judged to be • ensure the efficiency of the organization relative to the targets in line with current practices. established by the Group;
& Company targets with respect to • analyze procedures and define action plans for improvements; internal control • in general, evaluate risks inherent to the business and remediate such risks. Internal control is an integral component of the Bacou-Dalloz group governance strategy. & Documentation upon which internal controls
The internal control procedures assist the Executive Committee are structured in the identification and management of risks. The purpose of The Bacou-Dalloz accounting rules are included in the Financial the procedures is: Accounting Policies (or FAP) which describe the rules which apply to each accounting item within the Income Statement and Balance • firstly, to assure that management processes and actions as well Sheet, in particular: fixed assets, inventories, receivables, trade as the behavior of employees are in compliance with payables, treasury, taxes, provisions, shareholders’ equity, the laws and regulations applicable to the Company and respect dividends, sales, cost of goods sold, R&D costs, marketing expenses, the internal rules, standards and values of the Company; general & administrative expenses and human resources.
• secondly, to assure the protection of the Group’s net worth and The Group also has a reporting system, Arcplan, and a statutory the protection of its assets; consolidation system, L-Form; the systems are supported by documentation which describe all input information which must • lastly, to guarantee the reliability of accounting, financial and be input in compliance with Group procedures. management information which serves the Company’s management, controlling authorities, shareholders and the public. The internal audit manual, which was completed during 2004, was presented to the independent auditors and the Audit Committee. Nonetheless, as with any system of control, there can be no absolute It defines all common principles which respect the internal control guarantee that the risk of errors or fraud are totally controlled procedures. It includes the Group Ethics Code, which defines the or eliminated. Group’s rules of correct behavior both internally and externally, and all of the internal procedures related to internal controls which, & General internal control organization on one hand, assure the optimal efficiency of the Company’s processes and, on the other, the reliability of accounting and financial information: The Group is progressively implementing the specific organization and information systems which will permit it to assure significant • business development cycle and purchasing procedures; control at all levels of decision making. Support functions (internal • inventory management; audit, management control, consolidation, treasury and legal) have the necessary means to control all Group operations. • investments; • salaries and the reimbursement of expenses; In 2003, the Audit Committee approved the appointment of • travel expenses policy; an internal audit manager. In 2004, the team was strengthened with the arrival of a person dedicated to the audit of the US • treasury; subsidiaries. An audit plan which provides for interim period audits • accounting organization; was approved by senior management and the Audit Committee. The divisions concerned by these audits receive the audit reports • information systems; and are responsible for the implementation of action plans. • off-balance sheet liabilities;
• accounting and fiscal audits.
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The manual has been distributed to all Group entities. It identifies • Procedures related to the consolidation of financial statements the main risks encountered by Group processes and provides the appropriate internal control solutions to address those risks The manager responsible for the consolidation of financial as well as the process to follow in order to control them. statements reports to the Group Financial Controller.
The consolidation of the financial statements is performed & Control procedures implemented two times per year, for the half year and annual financial statements. The financial information for consolidation is input by The Group is managed by product family (SBU: eye and face, the accountants at every legal entity on the basis of instructions respiratory, hearing, fall, clothing, footwear and gloves) and issued by the consolidation department. The input forms are by geographic region (MBU: EMEA, Americas and Asia Pacific) transmitted to the consolidation manager who validates the data within a matrix organization. The SBU are responsible for product for coherency, analyses differences and compares the information manufacturing and, in that respect, plant managers are under with information reported within the management reporting system. their management. The marketing and sales functions are assumed by the MBU. The consolidation procedures implemented have the objective of assuring:
The identification of the main risks within the Group (market risks, • the compliance of data with the relevant accounting principles manufacturing risks, environmental risks) is the responsibility of (French accounting principles, the Group chart of accounts, COB the SBU managers (product family) and MBU managers and AMF directives); (geographic zones). This is carried out during the regular business reviews. Any change or incident which may have a significant • the reliability of the financial information; impact on the achievement of targets is communicated to • the integrity of the data. the various senior managers, who are equally members of the Executive Committee. The latter analyzes the information and SBU and MBU management as well as their respective management defines corrective actions and/or a change in strategy. controllers validate the financial input data of their entities and sign a letter of affirmation to confirm that they are in compliance MBU and SBU managers receive a self-assessment questionnaire with Group’s accounting procedures. annually which assures that all internal control processes have been implemented and that these are suitable within the context In addition, the independent auditors inform themselves of the of each business activity. In addition, the results of the questionnaire accounting systems and the internal controls in order to develop are analyzed by the internal audit department who thereby decide their audit programs and plan their audits. They perform their audit on its priorities for the following year. The first self-assessment work at the entities and then at the Group level. An audit report questionnaires were established for the year 2004. is generated with a summary of the main accounting issues arising from the audit and the related closing exercise, which is discussed & Control of financial information with the Committee. Finally, the independent auditors are responsible for certifying • Budget process procedures that the financial statements are a fair and reasonable representation with respect to the accounting principles applied and provide The budget process begins in September with the establishment an honest presentation of the Company, of its balance sheet of budget targets by senior management and the definition of structure, and of the profitability of the Bacou-Dalloz group. the sales budgets for the Group. In November, sessions are organized for the presentation of budgets by product family (SBU) and • Reporting procedures by geographic zone (MBU) as well as the budgets for central functions. The consolidation of budget information is completed Group reporting procedures were gradually implemented as of in mid-December and adjustments are made throughout the year. year-end 2001 at the time of the merger. They are based on For the 2005 budget, the first presentation to the Board was made the monthly review of sales, the balance sheet and the income in mid-November and the final version was presented in January. statement as compared with the budget. The financial reports Actual financial information is followed and analyzed monthly are generated by the management controllers of each legal entity through the reporting system. who present their analysis to each operating manager. Any significant variance versus budget is analyzed by the Group controller function and reported to the Executive Committee.
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Monthly reporting is performed using the same accounting financial statements for the 2004 period using the same standards. principles as the half year and annual financial statements. In order to publish this comparable information, the Group will need to restate the opening balance sheet as of January 1, 2004, • Description of the accounting system the starting point as of which the IFRS are applied. The first financial statements generated using IFRS will be for the period ending June Because of its international presence, the Bacou-Dalloz group’s 30, 2005. They will include a comparison with the financial accounting function is organized “regionally”: a shared service statements as of June 30, 2004 which will also be restated according center is based in Roissy (France) whose mission is to progressively to IFRS. assume the accounting function for the Group’s French entities. Over 2005, the European entities will also be gradually integrated. In this context, the Group set up a work group of ten people which In the United States, the implementation of an equivalent center carried out a complete analysis, enabling the identification of: is taking place gradually and will also be operational during the course of 2005. • the main differences between the principles currently being applied by the Group and IFRS practices with respect to accounting & Internal audit work in 2004 treatment, valuation and presentation; • additional reporting requirements; This work, which includes reoccurring audits and specific audits, was presented to the Audit Committee in December 2004. • the necessary modifications of information systems and circuits; Reccurring audits were essentially related to the follow-up on internal audits previously performed. Specific work in 2004 • historical data to compile and analyze in order to construct concerned: an opening balance sheet as of January 1, 2004.
• the creation and introduction of an internal control manual The progress of this work was presented to the Group’s Audit for the Group (distribution and training of financial controllers Committee on several occasions. and senior managers at the plants); The main differences identified which impact consolidated • the creation and introduction of an initial list of critical control shareholders’ equity at January 1, 2004 and/or future results issues and a letter of representation. are the following:
No major anomaly was reported. Nonetheless, these audits • goodwill is no longer amortized. It is subject to an impairment permitted the identification of weaknesses and the launch of test at least once a year; corrective action plans. • deferred taxes on intangible assets must be accounted for;
& Progress on the transition to IFRS • the value of stock options attributed to employees is reported as a personnel expense as of their issuance date. In application of European regulation n°1606/2002 and in compliance with IFRS 1, “First-Time adoption of international However, in order to best comply with the recommendations of reporting standards (IFRS)”, the consolidated financial statements the AMF of January 2005, the Group has not disclosed, in relation of the Bacou-Dalloz group for the period ending December 31, 2005 to its 2004 annual results, quantified information on the impact of will be generated according to the international financial reporting this accounting treatment, due to the fact that the data is not standards (IFRS) effective at December 31, 2005 with comparable complete and, as a result, remains unaudited.
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4.4.5. Auditor’s report - Year ended December 31, 2004
Auditors’ report, prepared in accordance with article L. 225-235 • obtaining an understanding of the objectives and general of the French Company Law (Code de commerce), on the report organization of internal control, as well as the internal control prepared by the President of Bacou-Dalloz S.A., on the internal procedures relating to the preparation and processing of financial control procedures relating to the preparation and processing of and accounting information, as set out in the President’s report; financial and accounting information • obtaining an understanding of the work performed to support This is a free translation into English of a report issued in the French the information given in the report. language and is provided solely for the convenience of English speaking readers. This report should be read in conjunction with, On the basis of these procedures, we have no matters to report and construed in accordance with, French law and professional in connection with the information and the assertions on the internal auditing standards applicable in France control procedures relating to the preparation and processing of financial and accounting information, contained in the President of the Board of Directors' report, prepared in accordance with article L. 225-37 of the French Company Law (Code de commerce). To the shareholders, Dijon and Paris-La Défense, April 18, 2005 In our capacity as statutory auditors of Bacou-Dalloz S.A., and in accordance with article L.225-235 of the of the French Company The Statutory Auditors Law (Code de commerce), we report to you on the report prepared by the President of your company in accordance with article L. 225-37 Expertise Comptable et Audit Ernst & Young Audit of the Commercial code for the year ended December 31, 2004.
It is for the President to give an account, in his report, of the conditions in which the tasks of board of directors are prepared and organized and the internal control procedures in place within the company. Patrick Collomb François Carrega
It is our responsibility to report to you our observations on the information and assertions set out in the President’s report on the internal control procedures relating to the preparation and processing of financial and accounting information.
We performed our procedures in accordance with professional guidelines applicable in France. These require us to perform procedures to assess the fairness of the information and assertions set out in the President’s report on the internal control procedures relating to the preparation and processing of financial and accounting information. These procedures notably consisted of:
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4.5 Auditors and audits
4.5.1. Auditors
The firm Expertise Comptable et Audit and Jérôme Burrier were • the term of office of Jérome Burrier as alternate joint auditor. respectively appointed as the statutory and alternate auditors by shareholders who met at the Ordinary and Extraordinary The firm Ernst & Young Audit and François Sorel have been Shareholders’ Meeting on June 4, 1999, for a period of six financial respectively appointed as the statutory and alternate auditors years or until the certification of the financial statements for by shareholders who met at the Ordinary and Extraordinary the 2004 financial year. Shareholders’ Meeting on September 6, 2001, for a six year period or until the certification of the financial statements for the 2006 In accordance with Law no. 2003-706 of August 1, 2003, the Board financial year. of Directors will propose to the next Annual Shareholders’ Meeting to be held on May 11, 2005, the renewal of:
• the term of office of the firm Expertise Comptable et Audit as statutory joint auditor. The partner who will sign the reports will be Claude Cornuot in place of Patrick Colomb;
4.5.2. Auditors’ fees
Fees paid to auditors and to members of their network within in the context of the year-end closing at December 31, 2004 the framework of missions performed in 2003, 2004 or 2005 and December 31, 2003 are as follows:
Ernst & Young ECA Amount % Amount % In thousands of Euros 2004 2003 2004 2003 2004 2003 2004 2003
Audit Statutory audits, certification, audits of 1,001 1,236 85% 69% 200 209 100% 95% individual and consolidated financial statements Accessory missions 62 59 6% 3%
Sub-total Audit fees 1,063 1,295 91% 73% 200 209 100% 95%
Other services Legal, fiscal, statutory 110 485 9% 27% Other 12 5%
Total other services 110 485 9% 27% 0 12 0% 5%
TOTAL 1,173 1,780 100% 100% 200 221 100% 100%
In 2003 and 2004, other services were principally of a fiscal nature in the United States. These services were approved by the Group’s Audit Committee.
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Page Page
5.1. General information about 5.4. Distribution of capital the Company 103 and voting rights 112 5.1.1. Name and registered office 103 5.4.1. Current distribution of capital 5.1.2. Legal form and applicable law 103 and voting rights 112 5.1.3 Date of formation and expiration date 103 5.4.2. Changes in capital ownership structure over the past three year period 113 5.1.4. Business purpose (Article 3 of Bylaws) 103 5.4.3. Shareholders’ Agreements 115 5.1.5. Register of commerce 104 5.4.4. Persons holding control of the Company 116 5.1.6. Locations where legal documents pertaining to the Company may be inspected 104 5.1.7. Financial year 104 5.5. Market for the Company’s shares 117 5.1.8. Statutory distribution of earnings 104 5.5.1. Listing markets 117 5.1.9. Dividend payments 105 5.5.2. Price Trend 117 5.1.10. Management of the Company 105 5.1.11. Shareholders’ Meetings 105 5.6. Dividends and distribution policy 118 5.2. Information concerning capital issued 108 5.7. Information policy 119 5.2.1. Modification of the capital and the rights 5.7.1. Person responsible for the information 119 attached to shares 108 5.7.2. Financial communication calendar 119 5.2.2. Form and registration of shares 108 5.2.3. Service for the Company’s securities 108 5.2.4. Transfer of shares 108 5.2.5. Declaration of statutory thresholds (Article 6 of the Bylaws) 109
5.3. Unissued authorized capital 110 5.3.1. Capital increase authorizations 110 5.3.2. Share buyback program 111
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5.1 General information about the Company
5.1.1. Name and registered office
Company name: Bacou-Dalloz Registered office: Paris Nord II, 33, rue des Vanesses, 93420 Villepinte.
5.1.2. Legal form and applicable law
The Company is a French société anonyme with a Board of the French Commercial Code, as well as by market regulations Directors governed by French laws regarding commercial in effect, particularly those which relate to public information companies and, more specifically, by the second Book of requirements.
5.1.3. Date of formation and expiration date
The Company was created on June 8, 1983 for a period of 99 years beforehand or extended by resolution of an Extraordinary from the date of its registration in the register of commerce. Shareholders’ Meeting. The Company will expire on June 24, 2082 unless it is dissolved
5.1.4. Business purpose (Article 3 of Bylaws)
The purpose of the Company in France and in all countries is to: The Company may act directly or indirectly, on its own behalf or on the behalf of third parties, either alone or in a partnership, • In any way, acquire any interests and holdings in all companies, group or company, with any other company, or individuals or legal groups, or enterprises that are engaged in the manufacturing, entities in any legal form whatsoever, specifically by means of purchasing, selling and marketing of all that that has to do the creation of companies, subscription, partnership, merger with eyewear, sunglasses and personal protection in general. or consolidation, advances, purchases, or sale of shares and corporate rights, or the transfer or lease of all or part of its assets • In general, to perform all commercial, financial, personal property and personal or property rights, or by other means. or real estate transactions that may be directly or indirectly related to or useful for the corporate purpose or which might facilitate the corporate purpose.
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5.1.5. Register of commerce
The Company is entered in the Bobigny Register of Commerce under N° 327 359 345 (APE code – 741 J).
5.1.6. Locations where legal documents pertaining to the Company may be inspected
The legal documents pertaining to the Company, that must be regulations, may be inspected at the registered office at Paris Nord II, made available to the shareholders in compliance with applicable 33, rue des Vanesses, 93420 Villepinte – France.
5.1.7. Financial year
The Company’s financial year begins on January 1 and ends on December 31 of every year.
5.1.8. Statutory distribution of earnings
The income statement that lists the income and expenses for Moreover, the Shareholders’ Meeting may resolve to distribute the financial year shows the net income for the financial year after amounts deducted from the reserves at its disposal; in this case, deduction of depreciation, amortization and provisions. the resolution shall indicate expressly from which reserve items the withdrawals are made. In any case, dividends shall be taken The net income for the financial year, less any losses carried forward first from the net income available for distribution for the financial from prior years, is subject to a deduction of at least 5% in order year. to establish the legal reserve fund. This deduction ceases to be required once the reserve fund reaches an amount equivalent to Except in the case of a capital decrease, no distribution may be one tenth of the capital. It shall resume if, for any reason whatsoever, made to the shareholders if equity is, or would become as a result the reserve falls below this one-tenth. of such distribution, less than the capital plus reserves that may not be distributed as required by law. The balance, less any amounts to be contributed to reserves as required by law, plus any retained earnings, constitutes A revaluation discrepancy may not be distributed. It may be fully the net earnings that may be distributed. or partially capitalized.
A primary dividend of 5% of the paid-up and non-amortized All of the foregoing is valid subject to the creation of non-voting Company shares owned is deducted from earnings to distribute preferred shares. to shareholders. This dividend is not cumulative from one financial year to the next.
The Shareholders’ Meeting has the right to deduct from the balance remaining any amounts that it deems appropriate to establish any optional, ordinary or extraordinary reserve funds or to retain, all of which in the proportions that it shall determine. The balance, if any exists, is distributed among the shareholders as a superdividend.
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5.1.9. Dividend payments
The Shareholders’ Meeting has the right to grant each shareholder, Payment of a dividend for shares for which the Company requested for all or a portion of the dividend to be distributed or for interim identification under the terms of Articles L. 228-2 to L. 228-3-1 of dividends, an option between the payment of dividends in cash the Commercial Code, and for which the requested information or in shares. has not been provided within the period set by law or was incomplete or inaccurate, shall be deferred until the identification Dividends paid in cash may be paid by check, bank transfer has been provided. or postal transfer, sent to the shareholder at the address shown in the Company’s records.
5.1.10. Management of the Company
After having separated the functions of the Chairman of the Board of and those of the Chief Executive Officer, be cumulative and Directors from those of the Chief Executive Officer in September has named Henri-Dominique Petit as Chairman in addition to 2002, the Board of Directors at the meeting dated January 11, 2005, his mandate as Chief Executive Officer. has decided that the functions of Chairman of the Board of Directors,
5.1.11. Shareholders’ Meetings
The collective decisions of the Company’s shareholders are made Conditions of attendance at Shareholders’ Meetings, which may be designated as ordinary, All shareholders may participate in Shareholders’ Meetings, extraordinary or special, depending on the nature of the decisions either in person or by proxy, whatever the number of shares owned, they are called to make. with proof of identity and ownership of the shares in the form of:
Special Shareholders’ Meetings bring together the shareholders • a registration in the shareholder’s name; or, of a particular share class to make decisions on any changes in the rights of that class of shares. Special Shareholders’ Meetings • a certificate from the authorized intermediary as stipulated are convened and conduct their deliberations under the same by decree n° 83-359 of May 2, 1983 verifying that the shares conditions as those required for Extraordinary Shareholders’ registered in the account may not be transferred until the date Meetings. of the meeting.
Duly convened and constituted Shareholders’ Meetings represent These formalities must be completed at least five days before all shareholders. Their decisions are binding on all shareholders, the meeting. However, the Board of Directors may reduce even those who are absent, dissident or incapacitated. or eliminate this period, provided that it benefits all shareholders.
Notice of meetings A shareholder may be represented only by his or her spouse Shareholders’ Meetings are called and conduct their deliberations or by another shareholder. under the terms and conditions set by law. Functioning of the meeting The meetings are held on the day and at the time and place indicated Shareholders’ Meetings are chaired by the Chairman of the Board in the notice of the meeting. They are held either at the registered of Directors or, in his absence, by the eldest Vice-Chairman of offices or at another location specified in the notice of meeting. the Board, if the Board has appointed a Vice-Chairman, or by the director delegated to replace the Chairman. Otherwise, the Shareholders’ Meeting shall elect its own chair.
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The duties of tellers are performed by two members of Shareholders’ Meeting may be postponed to a date no later than the Shareholders’ Meeting, who are present and agree, and who two months from the date on which it had been called. hold the largest number of shares both in their own right and as proxies. The officers shall appoint a secretary, who does not The meeting shall make decisions by a two-thirds majority of have to be a shareholder. the votes held by the shareholders present or represented.
An attendance sheet is kept at every Shareholders’ Meeting Subject to legislative and regulatory requirements, the Extraordinary containing the information required by law. Shareholders’ Meeting may eliminate double voting rights after ratification by the Special Shareholders’ Meeting of shareholders Minutes are prepared and the copies are certified and delivered benefiting from such rights. as required by law and regulations. Double voting rights Quorum - Voting (Article 25 of the bylaws pursuant to a decision adopted by In Ordinary and Extraordinary Shareholders’ Meetings, the quorum the Extraordinary Shareholders’ Meeting of December 13, 1985) is calculated on the basis of all shares composing the capital stock and, in Special Shareholders’ Meetings, on all shares deprived of The voting right of each member of the Shareholders’ Meeting voting rights under the provisions of the law. is proportional to the nominal value of the shares that he or she owns and represents without restriction. For the purpose of calculating the quorum and majority, shareholders who participate in the Shareholders’ Meeting However, a voting right double to the right granted to other by video conference or by telecommunication methods that allow shares, with respect to the percentage capital they represent, them to be identified, shall be deemed present. is granted to:
Shareholders may vote by mail subject to the conditions and terms • all fully paid-up shares that have been registered in the same established by legislative and regulatory provisions. name in a registered account for at least two years;
Ordinary Shareholders’ Meeting • registered shares allotted as bonus shares in the event of a capital The shareholders meet every year in an Ordinary Shareholders’ increase by capitalization of reserves, profits, or share premiums Meeting in the form and within the time periods defined for existing shares which also benefit from this right. by legislative and regulatory provisions. The double voting right shall automatically cease for any share In addition to this Annual Shareholders’ Meeting, the Board of converted to a bearer share or transferred to a different owner. Directors may also call an Ordinary Shareholders' Meeting However, the period specified above and the right acquired in exceptional cases when it deems useful. shall not be interrupted because of transfer due to inheritance, dissolution of community property between spouses, or gifts inter The Ordinary Shareholders’ Meeting shall consist of all shareholders vivos in favor of a spouse or relative. with voting rights, even those who hold only one share. An intermediary that has fulfilled the obligations provided in lines Extraordinary Shareholders’ Meeting 7 and 8 of Article L. 228-1 of the French Commercial Code, provided The Extraordinary Shareholders’ Meeting may make any that it meets the request of the Company or its agent to provide, modifications whatsoever to the bylaws that are authorized under the conditions set by law, the list of non-resident owners of by current legislation. shares holding these voting rights, may send to a Shareholders’ Meeting the vote or proxy of a shareholder who is not domiciled The Extraordinary Shareholders’ Meeting shall consist of in French territory as this is defined in Article 102 of the Civil Code. all shareholders who are entitled to at least one vote. A vote or proxy issued by an intermediary that either has not The Extraordinary Shareholders Meeting may conduct valid declared its status as an intermediary pursuant to the eighth deliberations only if the shareholders present or represented hold paragraph of Article L. 228-3-2 of the Commercial Code or that at least one third of the voting shares on the first notice of meeting, has not revealed the identity of the owners of the shares under or at least one fourth of the voting shares on the second notice of Articles L. 228-2 or L. 228-3 of the Commercial Code may not be the meeting. If the second quorum is not met, then the second taken into account.
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As of March 8, 2005, the total number of votes was 9,359,815 of The nature of these documents and the conditions for mailing them which 1,739,323 were double votes. or making them available are defined by the legislative and regulatory provisions in force. Shareholders’ right to obtain information Every shareholder is entitled to obtain the documents necessary to make a decision and to make an informed judgment about the management and control of the Company.
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5.2 Information concerning capital issued
As of the date this reference document was filed with the French resulted in the release of 1,685 stock options between January 1, Market Authority (AMF), April 19, 2005, the Company’s capital stock 2005 and March 7, 2005. The capital stock is divided into 7,620,492 is established as 15,240,984 Euros, following the increase in capital shares with a nominal value of 2 Euros per share which have been recorded at the Board of Directors Meeting of March 8, 2005, which paid-in and belong to the same category.
5.2.1. Modification of the capital and the rights attached to shares
Any modification of the capital or the rights attached to the as the bylaws do not contain any specific provisions in this regard. shares of capital stock shall be subject to the provisions of the law,
5.2.2. Form and registration of shares
Shares are either registered or in bearer form, at the discretion of the Company are also registered or “ identifiable bearer” shares. the shareholder. Each of these categories is governed by the respective “Bearer” shares are thus “identifiable bearer” shares. legal provisions applicable. All transferable securities issued by
5.2.3. Service for the Company’s securities
The Company has delegated securities service to Crédit Agricole Investors Service Corporate Trust: 14, rue Rouget de Lisle, 92862 Issy-les-Moulineaux – cedex 9.
5.2.4. Transfer of shares
The Company’s shares may be transferred freely inter vivos or Company shares that are not paid up may not be transferred. by inheritance. The Company’s shares may be transferred to third parties or to the Company by means of a transfer order from account to account.
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5.2.5. Declaration of statutory thresholds (Article 6 of the Bylaws)
In addition to the legal requirements applicable to the declaration If they have not been duly declared under the conditions cited of thresholds, any individual or legal entity that holds, or comes above, shares exceeding the fraction that should have been declared to hold, a fraction of the Company’s capital equal to 2.5% of shall be deprived of voting rights at any Shareholders’ Meetings the capital, shall be required to inform the Company of the number that may be held prior to the expiration of a three-month period of shares said person owns directly or indirectly within 15 days following the date on which the declaration was regularized. from the date this threshold is crossed. This declaration must be made under the conditions stipulated above, every time a new threshold of 2.5% is crossed.
Changes in the Company’s capital over the last five years
Cumulative Successive Capital Increases number of amounts of Company nominal Date Operations Nominal Prime Shares capital (in Euros)
2000 Exercise of subscription options 50,662 1,181,215.86 2,885,748 5,771,496
2001 Contributions and merger operations 3,302,411 246,343,189.00 6,188,159 12,376,318 Exercise of subscription options 10,918 337,390.00 6,193,618 12,387,236
2002 Exercise of subscription options 9,328 358,696.72 6,198,282 12,396,564 Capital increases through market transactions 2,815,622 152,184,369.10(1) 7,606,093 15,212,186 Exercise of subscription options 15,916 558,156.90 7,614,051 15,228,102 Exercise of subscription options 492 18,646.80 7,614,297 15,228,594
2003 Exercise of subscription options 9,020 240,848.76 7,618,807 15,237,614
2005(2) Exercise of subscription options 3,370 83,508.60 7,620,492 15,240,984
(1) Share premium before charging of costs (2) After the exercise of stock options between January 1 and March 7, 2005
No changes occurred during 2004.
No shares of the Company have been pledged.
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5.3 Unissued authorized capital
5.3.1. Capital increase authorizations
An Ordinary and Extraordinary Shareholders’ Meeting held on May 18, 2004 assigned the Board of Directors the authority necessary to proceed with the following operations:
Maximum nominal Maximum nominal Date of Expiration Date Authorizations amount authorized amount authorized authorization utilized over for capital increase for the issuance of by the Annual the 2004 period or increases investment Shareholders' providing access securities Meeting to shares of capital (in Euros) Nature of authorizations (in Euros)
Authorization to issue shares and investment securities providing access to capital while 15,000,000 250,000,000 May 18, 2004 July 18, 2006 none maintaining preferential subscription rights of shareholders
Authorization to issue shares and investment securities providing access to capital without 15,000,000 250,000,000 May 18, 2004 July 18, 2006 none maintaining preferential subscription rights of shareholders
Authorization to increase capital by incorporating retained earnings, May 18, 2004 July 18, 2006 none earnings and premiums
These delegations replace and cancel delegations assigned by The cancellation of these delegations and their replacement by the Annual Shareholders’ Meeting of May 21, 2003. new equivalent delegations, described in the document Texte des Résolutions which can be consulted jointly with this reference document, will be proposed at the Ordinary and Extraordinary Shareholders’ Meeting which is scheduled to take place on May 11, 2005.
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5.3.2. Share buyback program
The implementation of a share buyback program governed by March 8, 2005: 762,049 shares, for a theoretical maximum amount Articles L. 225-209 and ff. of the Commercial Code was the subject of 76,204,920 Euros. The maximum purchase price would be of an offering circular approved by the French Market Authority 100 Euros per share. This purchase program, which would last for (AMF) under N° 04-318 dated April 26, 2004 in accordance 18 months, would be used for a number of purposes: the allocation with Articles 241-1 to 241-7 of the French Market Authority (AMF) of shares to employees, the implementation of stock option plans, general regulations. The program was authorized by the Ordinary the stimulation of the market using investment service providers and Extraordinary Shareholders’ Meeting held on May 18, 2004 acting entirely independently within the framework of liquidity and permits the Company to trade shares, within the limits contracts, the transfer of shares in the context of external growth established by the program for a maximum period of eighteen transactions, the transfer of shares upon the exercise of rights months as of the said Shareholders’ Meeting date within a range attached to negotiable securities, and the cancellation of securities of between 50 and 100 Euros. in order to increase the profitability of shareholders’ equity and profits per share. No repurchase of shares has been carried out by the Board of Directors following the authorization accorded to it by shareholders In addition, the Ordinary and Extraordinary Shareholders’ Meeting at the Annual Shareholders’ Meeting of May 18, 2004. held on May 18, 2004 authorized the Board of Directors to reduce The cancellation of these delegations and their replacement by the capital by canceling shares acquired by the Company under new equivalent delegations, described in the document the authority granted to it by shareholders. This authority has not Texte des Résolutions which can be consulted jointly with been exercised. The cancellation of these delegations and their this reference document, will be proposed at the Ordinary and replacement by new equivalent delegations, described in Extraordinary Shareholders’ Meeting which is scheduled to take the document Texte des Résolutions which can be consulted jointly place on May 11, 2005. with this reference document, will be proposed at the Ordinary and Extraordinary Shareholders’ Meeting which is scheduled Pursuant to this authorisation, the Company could purchase to take place on May 11, 2005. a number of shares not exceeding 10% of the authorised share capital of the company; thus, based on the share capital as at
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5.4 Distribution of capital and voting rights
5.4.1. Current distribution of capital and voting rights
The survey conducted by Euroclear, dated December 31, 2004, of 5% financial intermediaries holding a minimum of 8,000 Bacou-Dalloz Individual shareholders (approximately 7000) shares permitted the identification of approximately 7,400 bearer shareholders representing 98.3% of bearer shares. 29% Foreign institutional 35% Based on the information obtained from the survey and the register shareholders “Historical”* of nominatively held shares, the capital is currently divided Bacou-Dalloz shareholders as follows: 31% French institutional shareholders
* Essilor, Dalloz family and Bacou family
To the Company’s knowledge, the division of the Company’s capital and voting rights is established as follows:
Number of Number of Total Percentage Main shareholders Number of Percent single double number of of shares ownership voting rignts voting rignts voting rignts voting rignts
Essilor International 1,151,800 15.11 0 1,151,800 2,303,600 24.61 Ginette Dalloz(1) 1,011,368 13.27 434,000 577,368 1,588,736 16.97 Philippe Bacou 596 0.01 596 0 596 0.01 Christophe Bacou 376,577 4.94 376,577 0 376,577 4.02 Véronique Mirabel 126,060 1.65 126,060 0 126,060 1.35 CAPE Holding(2) 435,569 5.72 435,569 0 435,569 4.65 Caisse des Dépôts et Consignations 192,363 2.52 192,363 0 192,363 2.06 Public 4,326,159 56.77 4,316,004 10,155 4,336,314 46.33 Total 7,620,492 100.00 5,881,169 1,739,323 9,359,815 100.00
(1) Shares held directly (487,224 shares) and through the Société Civile Familiale Dalloz (524,144 shares). (2) CAPE Holding was previously named Union d’Etudes et d’Investissements. Shares held by CAPE Holding (356,375 shares), Idia Participations (59,395 shares), FCPR Montparnasse Investissements 2 (19,799 shares).
Over the course of 2004, the Company was informed that • On January 29, 2004, Philippe Bacou informed the Company the following thresholds have been crossed: that he had fallen below the 5% threshold of Company voting rights following the sale of shares. • On January 12, 2004, Fidelity Investments informed the Company that it had crossed the 5% threshold of capital following • On February 12, 2004, Christophe Bacou informed the Company the purchase of shares on the market. that he had fallen below the 5% threshold of Company voting rights following the sale of shares.
112 Reference document 2004 Bacou-Dalloz Shareholder Information 5
• On June 1, 2004, Philippe Bacou informed the Company that In 2005: he had fallen below the 5% threshold of Company capital following • On January 24, 2005, Philippe Bacou informed the Company that the sale of shares. over the course of the second half in 2004, he had sold 380,000 shares.
• On June 7, 2004, Ginette Dalloz informed the company that, • On February 14, 2005, Christophe Bacou informed the Company following the restructuring of the family estate, the Société Civile that he had fallen below the 5% threshold of capital following Familiale Dalloz had crossed the threshold of 5% of voting rights. the sale of shares.
• On December 17, 2004, Fidelity Investments informed the company To the knowledge of the Company, there are no other shareholders that it had fallen below the threshold of 5% of capital following who hold directly, indirectly or together, 2.5% or more of the capital the sale of shares. or voting rights.
Information concerning Management and Board of Director ownership in Company capital as of March 8, 2005 is presented in chapter 4.
5.4.2. Changes in capital ownership structure over the past three year period
Change in capital ownership structure over the past three years
As of March 1, 2002 As of September 3, 2002 As of March 18, 2003 As of September 5, 2003 Number of % % voting Number of % % voting Number of % % voting Number of % % voting shares capital rights shares capital rights shares capital rights shares capital rights
Essilor International 1,151,800 18.61% 25.50% 1,151,800 15.13% 21.68% 1,151,800 15.13% 21.68% 1,151,800 15.13% 22.47% Ginette Dalloz(1) 921,224 14.89% 22.95% 921,224 12.10% 19.52% 921,224 12.10% 19.53% 587,224 7.71% 12.91% Société Familiale Dalloz(1) 90,144 1.46% 1.12% 90,144 1.18% 0.95% 90,144 1.18% 0.95% 424,144 5.57% 4.66% Philippe Bacou(2) 759,892 12.28% 9.46% 556,217 7.31% 5.89% 556,217 7.30% 5.89% 553,372 7.27% 6.08% Christophe Bacou(3) 759,892 12.28% 9.46% 547,245 7.19% 5.80% 547,245 7.19% 5.80% 547,142 7.19% 6.01% Véronique Mirabel(4) 506,594 8.19% 6.31% 364,828 4.79% 3.87% 364,828 4.79% 3.87% 364,759 4.79% 4.01% Jacqueline Bacou 95,500 1.54% 1.19% MSHL LLC(5) 22,336 0.36% 0.28% 16,136 0.21% 0.17% 16,136 0.21% 0.17% 16,136 0.21% 0.18% BRMM LLC(5) 41,880 0.68% 0.52% 30,263 0.40% 0.32% 30,263 0.40% 0.32% 30,263 0.40% 0.33% TKRM LLC(5) 69,800 1.13% 0.87% 50,418 0.66% 0.53% 50,418 0.66% 0.53% 50,418 0.66% 0.55% Adrien W. Herbert(5) 4,018 0.05% 0.04% 4,018 0.05% 0.04% 4,018 0.05% 0.04% Alan Bennett(5) 1,457 0.02% 0.02% 1,457 0.02% 0.02% Financial Investors(6) 595,724 9.63% 7.42% 595,724 7.82% 6.32% 160,155 2.10% 1.70% 160,155 2.10% 1.76% Executive Officers(7) 54,649 0.88% 0.68% 54,649 0.72% 0.66% UEI(8) 435,569 5.72% 4.61% 435,569 5.72% 4.78% CDC(9) 192,363 2.53% 2.04% 192,363 2.53% 2.11% Public 1,118,599 18.08% 14.24% 3,229,928 42.42% 34.24% 3,092,460 40.61% 32.85% 3,096,934 40.67% 34.11%
6,188,034 100.00% 100.00% 7,614,051 100.00% 100.00% 7,614,297 100.00% 100.00% 7,614,297 100.00% 100.00%
Bacou-Dalloz Reference document 2004 113 5 Shareholder Information
As of March 5, 2004 As of December 31, 2004 As of March 8, 2005 Number of % % voting Number of % % voting Number of % % voting shares capital rights shares capital rights shares capital rights
Essilor International 1,151,800 15.12% 24.58% 1,151,800 15.12% 24.62% 1,151,800 15.11% 24.61% Ginette Dalloz(1) 587,224 7.71% 12.53% 487,224 6.40% 10.41% 487,224 6.39% 10.41% Société Familiale Dalloz(1) 424,144 5.57% 4.53% 524,144 6.88% 6.56% 524,144 6.88% 6.56% Philippe Bacou(2) 437,261 5.74% 4.67% 596 0.01% 0.01% 596 0.01% 0.01% Christophe Bacou(3) 417,142 5.48% 4.45% 413,142 5.42% 4.41% 376,577 4.94% 4.02% Véronique Mirabel(4) 193,333 2.54% 2.06% 126,060 1.65% 1.35% 126,060 1.65% 1.35% CAPE Holding(8) 435,569 5.72% 4.65% 435,569 5.72% 4.65% 435,569 5.72% 4.65% CDC(9) 192,363 2.52% 2.05% 192,363 2.52% 2.06% 192,363 2.52% 2.06% Fidelity(10) 381,369 5.01% 4.07% 350,053 4.59% 3.74% Public 3,398,602 44.61% 36.42% 3,937,856 51.69% 42.19% 4,326,159 56.77% 46.33%
7,618,807 100.00% 100.00% 7,618,807 100.00% 100.00% 7,620,492 100.00% 100.00%
1. On June 7, 2004, Ginette Dalloz informed the Company that, included in the “Public” line. To the knowledge of the Company, following the restructuring of the family estate during which no shareholder in this category holds more than 2.5% of capital she had transferred 100,000 of her own shares to the Société (statutory threshold). Civile Familiale Dalloz, of which she holds 99.98% of the capital, the said company had crossed the threshold of 5% of voting 6. Parantech Expansion, Francarep, Sergest and Guarida. rights. In September 2003, the commitments subscribed by financial investors other than those of Bacou-Dalloz Crédit Agricole 2. On January 29, 2004, Philippe Bacou informed the Company (see paragraph 5.4.3. below) having ended, shareholders that, following the sale of shares in the Company, he had fallen referenced in the line “Other financial investors” are included below the 5% threshold of Company voting rights and, on June 1, as of this date in the line “Public”. To the knowledge of 2004 that he had fallen below the 5% threshold of capital. Finally, the Company, no shareholder in this category holds more than on January 24, 2005, Philippe Bacou informed the Company 2.5% of capital (statutory threshold). that he had sold 380,000 shares over the course of the second half of 2004. 7. In November 2002, as the commitments made by Executive Officers had ended, the shareholders referenced in the line 3. Christophe Bacou informed the Company on February 12, 2004, “Executive Officers” are included as of this date in the “Public” that, following the sale of shares in the Company, he had fallen line. To the knowledge of the Company, no shareholder in this below the 5% threshold of Company voting rights and, category holds more than 2.5% (statutory threshold). on February 14, 2005, informed the Company that he had fallen below the 5% threshold of capital. As of this date, Mr. Christophe 8. Including the following companies: UEI (holder of 356,375 shares) Dalloz holds 376,577 shares. renamed as of the publication date of this reference document
4. Ms. Mirabel informed the Company on March 5, 2004, that CAPE Holding, Idia participations (holder of 59,395 shares), FCPR she held 193,333 shares. At the Ordinary Shareholders’ Meeting Montparnasse Investissements 2 (holder of 19,799 shares). of 2004, 126,060 shares were locked up. 9. Includes Etablissements Public/CDC Ixis/CDC Ixis Capital 5. Following the expiration of the Shareholders’ Agreement (see Market. On March 31, 2003, the Caisse Des Dépôts et paragraph 5.4.3 below), the American companies BRMM LLC, Consignations informed the Company that on March 18, 2003, TKRM LLC and MSHL LLC and MM. Adrien W. Hebert and it had indirectly crossed the statutory threshold of 2.5% of Alan Bennett are no longer individually identified and are capital and 2.04% of voting rights issued.
114 Reference document 2004 Bacou-Dalloz Shareholder Information 5
10. On January 12, 2004, Fidelity Investments, a non-resident Fidelty Investments reduced its investment below 2.5% of shareholder, informed the Company that it had exceeded capital and thus, as of March 8, 2005, its ownership portion the threshold of 5% of capital following the purchase of shares is included in the line “Public”. on the market. The shares held or classified as held by the shareholder are FMR Corp: 367,332 or 4.82%, FIL: 14,037 The Shareholders’ Agreement expired on September 5, 2003 under or 0.18%, the total of which represents 5.01%. In addition, the conditions described in paragraph 5.4.3. on December 17, 2004, Fidelity Investments acting on behalf of mutual funds managed by their subsidiaries, declared to Information concerning employee shareholders is detailed the Company to have fallen below the 5% threshold following in chapter 3. the sale of shares. FMR Corp declared at that time to hold 350,053 shares for the account of its funds, or 4.59% of capital. In addition, the Company holds no treasury shares or controlled Following that, to the knowledge of the Company, shares.
5.4.3. Shareholders’ Agreements
The various agreements and commitments between certain - with respect to the procedure guaranteeing the ordered nature shareholders of the Company that took effect on September 6, 2001 of the sales of Company shares on the market during a period of at the time of the merger of the Bacou and Christian Dalloz groups one year starting on September 6, 2003, without the participation that are described in Document E registered by the Commission of former members of the agreement, in order to avoid unfavorable des opérations de bourse on July 30, 2001 under N° E. 01-1001, effects on market prices at the end of the agreement and expired on September 5, 2003 with the exception of certain the commitments not to transfer. commitments described below. The agreements were as follows: • The shareholder agreement (the “Pacte Investisseurs Financiers”) • The shareholder agreement (the “Pacte de Concert”) between between Essilor International, Ms. Ginette Dalloz, the Bacou family, Essilor International, Ms. Ginette Dalloz, members of the Bacou Sauvegarde LLC and “the Investors of the Bacou Dalloz Crédit family and the former shareholders of Sauvegarde LLC. Agricole Group”. The Financial Investors agreement was entered The agreement was concluded on May 29, 2001 between Essilor into on May 29, 2001 by the shareholders bound by the Pacte International, Ms. Ginette Dalloz, Mr. Philippe Bacou, de Concert and a group of financial investors of the Crédit Agricole Mr. Christophe Bacou, Ms. Véronique Mirabel, Ms. Jacqueline group (the “Investisseurs du groupe Bacou-Dalloz Crédit Bacou and Sauvegarde LLC (divided in January 2002 among Agricole”), comprised of the companies Union d'Etudes et the 4 former shareholders of the Sauvegarde company), with d'Investissements, Idia Participations and FCPR Montparnasse the stipulation that Mr. Philippe Bacou, Mr. Christophe Bacou and Investissements 2. The commitment which existed until Ms. Véronique Mirabel acted in their own behalf and in their September 6, 2004 concerned the process guaranteeing capacity as members of the Bacou family joint ownership the orderered sale of Company shares on the market for a period of (this joint ownership was split in February 2002). The commitments one year as of the end of the agreement not to transfer shares of which continued to exist until September 6, 2004 were the Investisseurs du groupe Bacou-Dalloz Crédit Agricole, the following: with the objective of preventing unfavorable consequences on the market price at the end of the agreement. - commitments not to transfer signed by Essilor and Ms. Ginette Dalloz up to the date on which the Bacou family, the MSHL LLC, BRMM LLC, • Commitments made by financial investors other than the TKRMM LLC companies and Adrien W. Herbert reached an amount “Investisseurs du groupe Bacou-Dalloz Crédit Agricole”. of transfers corresponding to the « investment objective » or The companies Sergest, Franarep, Parantech Expansion SAS an equivalent equal to no more than 93 million Euros, although this and Guarida, financial investors who acquired shares period could not exceed three years from the date the September 6, in the company in the context of the merger of the Bacou 2001 agreement took place; and Christian Dalloz groups, entered into an agreement with
Bacou-Dalloz Reference document 2004 115 5 Shareholder Information
the parties to the Pacte de Concert, under the terms of which The principal stipulations of this agreement are as follows: they made commitments not to transfer and for the ordered sales identical to those for the former members of the Pacte de Concert - termination, as of the effective date of this agreement, of the and the Investisseurs du groupe Bacou-Dalloz Crédit Agricole. memorandum of understanding establishing the reciprocal These commitments expired under the same conditions as preferential right; the commitments entered into with the Investisseurs du groupe Bacou-Dalloz Crédit Agricole. - establishment of a reciprocal preferential right at the time of any sale of securities performed by one of the parties to The only outstanding agreement at the date of this reference the agreement, except excluding transfers made by Essilor document is the preferential agreement “Pacte de Préférence” International to a controlled company as this term is defined between Essilor International and Ms. Ginette Dalloz: in Article L. 233-3 of the Commercial Code, or a donation by Ginette this agreement was entered into by Essilor International and Dalloz of a portion of her securities to a recognized foundation Ms. Ginette Dalloz on May 29, 2001 and ended the existing serving the public interest; preferential agreement between the same parties as of its effective date on September 6, 2001. Essentially, this agreement renews, - stipulations of special conditions for the exercise of the preferential for the securities of the Company, the reciprocal preferential right in the event of a public offer for the shares of the Company; right previously existing between Essilor International and and commitment by Ginette Dalloz, on her own behalf and Ginette Dalloz for the securities of Financière Christian Dalloz. on behalf of her heirs, to sell all shares that she may own in the Company to Essilor International, or to any other person substitued therefore, in the event of her death during the term of the agreement, at the discretion of Essilor International.
5.4.4. Persons holding control of the Company
As of the submission date of this reference document, or April 19, 2005, there is no longer any shareholders’ agreement (Pacte de concert).
116 Reference document 2004 Bacou-Dalloz Shareholder Information 5
5.5 Market for the Company’s shares
5.5.1. Listing markets
The shares of the Company have been admitted for trading on Since March 7, 2003, Bacou-Dalloz has been included in the SBF the Eurolist Euronext market (compartment B) since February 21, 120 and in the Deferred Settlement Service by the Conseil 2005 for Euroclear France operations. Scientifique des Indices de la Bourse de Paris.
Name: Bacou-Dalloz Within the framework of the creation of a single regulated market, FTSE classification : 341 as of January 3, 2005 Euronext has put a new range of indices AFC code : 6089 in place. Since that date, Bacou-Dalloz also appears in the following ISIN code : FR0000060899 indices: CAD Mid 100 and CAC Mid & Small 190. Symbol: DAL.FP
5.5.2. Price Trend
The graph below shows the prices and volumes of Bacou-Dalloz shares traded over the last 18 months:
Daily Average Minimum Maximum Average average of Lowest Highest price at daily daily daily capital share price (€) share price (€) close (€) volume volume volume traded (M€) 2003 September 62.10 80.70 70.95 3,110 140,127 22,988 1,640.31 October 63.30 70.00 66.48 2,068 41,163 10,515 698.22 November 66.50 75.85 71.35 4,182 51,024 16,184 1,159.56 December 57.10 69.90 63.25 1,981 38,311 12,871 807.69
2004 January 62.20 73.00 67.74 4,014 155,514 30,357 2,075.44 February 72.00 76.90 74.25 2,556 57,709 20,158 1,503.50 March 58.80 76.45 67.59 3,185 93,044 16,504 1,096.67 April 61.20 66.60 63.88 6,704 122,483 34,916 2,227.08 May 57.55 65.25 62.27 635 112,157 20,648 1,286.19 June 59.50 64.50 61.09 2,367 93,716 10,826 670.14 July 48.11 62.65 54.00 1,885 98,476 21,634 1,179.15 August 46.30 54.00 50.99 1,693 25,781 8,099 408.68 September 48.65 58.00 55.09 1,612 79,636 17,056 918.97 October 56.00 60.95 58.71 849 80,623 12,181 707.01 November 56.50 62.50 60.65 894 81,492 12,879 779.63 December 55.50 59.80 57,68 2,034 110,971 18,253 1,048.73
2005 January 58.00 69.50 65.07 2,784 130,715 24,126 1,564.05 February 66.25 72.50 70.31 3,610 125,410 23,616 1,668.05
Over the course of 2004, the trading price of Bacou-Dalloz At December 31, 2004, the market capitalization of the Company shares declined by 4.8%. The highest trading price was reached on was 449,509,613 Euros. At December 31, 2003, it was 472,366,034 February 26, 2004 at 76.9 Euros and the lowest on August 2 at Euros. 46.30 Euros. As a comparison, the SBF 120 appreciated by 8.2% over the course of the same year.
Bacou-Dalloz Reference document 2004 117 5 Shareholder Information
5.6 Dividends and distribution policy
The dividends per share paid out by the company in the last 5 years The Company’s Board of Directors Meeting of March 8, 2005, having and the total dividend per share (dividend plus tax credit) are as approved the financial statements for the period ended December follows: 31, 2004, decided to recommend to Company shareholders at the Ordinary and Extraordinary Shareholders’ Meeting which, in principle, takes place on May 11, 2005, to allocate the profit for Total dividend the 2004 period i.e. 126,821,701 Euros increased by prior period In Euros Dividend per share retained earnings of 7,449,794 Euros, i.e. the amount of 134,271,495 1999 0.76 1.14 Euros as follows: 2000 0.90 1.35 • the amount of 4,572,295 Euros to be distributed as dividends; 2001 0.00 0.00 2002 1.00 1.50 • the remaining balance of 129,699,200 Euros to retained earnings. 2003 0.50 0.75
The Board of Directors has decided to recommend to Company shareholders that they provide full powers to proceed with It should be noted that, in compliance with the requirements of the payment on July 7, 2005 of a dividend of 0.60 Euro for each of Article 93 of the Loi de finances dated December 31, 2003, the shares that make up the Company’s capital stock. the dividend as declared no longer includes the tax credit. The dividends paid to individual shareholders (as opposed to legal Dividends that have not been claimed within five years from entities), provide the right to claim a reduction of 50% on amounts the date of declaration are closed by statue and shall be paid to received. the Caisse des Dépôts et Consignations.
118 Reference document 2004 Bacou-Dalloz Shareholder Information 5
5.7 Information policy
Information available to shareholders is available upon presentations prepared for earnings announcements, press releases simple request or on the Group’s web site (Investors section). and disclosures to the AMF. It mainly consists of Annual Reports and Reference Documents,
5.7.1. Person responsible for the information
Brice de La Morandière Group CFO
Immeuble Edison, Paris Nord II, 33, rue des Vanesses, BP 55288 Villepinte 95958 Roissy CDG Cedex Telephone: 01 49 90 79 74 Fax: 01 49 90 79 78 E-mail: [email protected] www.bacou-dalloz.com
5.7.2. Financial communications calendar
The provisional calendar for the 2005 period is as follows:
1st half sales July 12, 2005 1st half results September 7, 2005 3rd quarter sales October 13, 2005
Bacou-Dalloz Reference document 2004 119 16 Other Information
120 Reference document 2004 Bacou-Dalloz Other Information 6
Page Page
6.1. Person responsible 6.3. Persons responsible for auditing for the reference document 123 the financial statements 124
6.2. Declaration of 6.4. Statutory auditors’ report 125 the person responsible for the reference document 123
Bacou-Dalloz Reference document 2004 121 6 Other Information
122 Reference document 2004 Bacou-Dalloz Other Information 6
6.1 Person responsible for the reference document
Mr. Henri-Dominique Petit, Chairman and Chief Executive Officer(1) of the company Bacou-Dalloz (also referred to as the “Company” or “Bacou-Dalloz” in this document).
6.2 Declaration of the person responsible for the reference document
“To my knowledge, the information in this reference document fairly presents the reality. It includes all the information necessary for investors to form a judgment of the assets, business activity, financial position, net income, and future prospects of the Company. It does not contain any omissions that might alter the import.”
Roissy, April 19, 2005
Chairman and Chief Executive Officer
Monsieur Henri-Dominique Petit
(1) Henri-Dominique Petit was appointed Chairman of the Board of Directors of Bacou-Dalloz on January 12, 2005, replacing Philippe Alfroid.
Bacou-Dalloz Reference document 2004 123 6 Other Information
6.3 Persons responsible for auditing the financial statements
& Statutory joint auditors: & Alternate joint auditors:
Expertise Comptable et Audit Alternate to Expertise Comptable et Audit: Represented by: Patrick Collomb Monsieur Jérôme Burrier 37 C, cours du Parc 37 C, cours du Parc 21000 Dijon 21000 Dijon
Date of initial appointment: June 4, 1999 at the Shareholders’ Date of initial appointment: June 28, 1993 at the Shareholders’ Meeting of the same date. Meeting of the same date.
Term of current appointment: Six years (as of June 4, 1999). Term of current appointment: Six years (as of June 4, 1999).
Expiration date of current appointment: At the conclusion of Expiration date of current appointment: At the conclusion of the Shareholders’ Meeting the Shareholders’ Meeting approving the financial statements approving the financial statements for the financial year ended for the financial year ended December 31, 2004. December 31, 2004.
Belonging to group: No Belonging to group: Expertise Comptable et Audit.
Ernst & Young Audit Represented by: François Carrega Alternate to Ernst & Young Audit: Faubourg de l’Arche Monsieur François Sorel 11, allée de l’Arche 9, rue de l’Hermitage 92037 Paris – La Défense Cedex 95160 Montmorency
Date of initial appointment: September 6, 2001 at the Ordinary Date of initial appointment: September 6, 2001 at the Ordinary and Extraordinary Shareholders’ and Extraordinary Shareholders’ Meeting of the same date. Meeting of the same date.
Term of current appointment: Six years Date of initial appointment: Six years (as of September 6, 2001). (as of September 6, 2001).
Expiration date of current appointment: At the conclusion of Expiration date of current appointment: At the conclusion of the Shareholders’ Meeting the Shareholders’ Meeting approving the financial statements approving the financial statements for the financial year ended for the financial year ended December 31, 2006. December 31, 2006.
Belonging to group: Ernst & Young. Belonging to group: Ernst & Young.
124 Reference document 2004 Bacou-Dalloz Other Information 6
6.4 Statutory auditors’ report
Free translation of a French language original for convenience purposes in France. An unqualified opinion was expressed on such financial only. Accounting principles and auditing standards and their application statements and the auditors' report did not include any emphasis in practice vary among nations. The accompanying financial statements of matter paragraph. are not intended to present the financial position, results of operations and cash flows in accordance with accounting principles and practices generally accepted in countries other than France. In addition, the procedures The individual financial statements and the consolidated financial and practices utilized by the statutory auditors in France with respect to such statements for the year ended December 31, 2003, prepared financial statements included in a "document de référence" may differ from in accordance with accounting standards generally accepted those generally accepted and applied by auditors in other countries. Accordingly, the French financial statements and the auditors' report of in France and approved by the Board of Directors, were audited which a translation for convenience purposes only is presented in this by us, in accordance with professional standards applicable document are for use by those knowledgeable about French accounting in France. An unqualified opinion was expressed on such financial procedures, auditing standards and their application in practice. statements. The emphasis of matter paragraph referred to the In our capacity as the statutory auditors of Bacou-Dalloz and as disposal of the Group distribution subsidiary Abrium. required by Article 211-5-2 of the General Rules of the “Autorité des Marchés Financiers”, we have performed procedures on The individual financial statements and the consolidated financial the information contained in the “document de référence” relating statements for the year ended December 31, 2004, prepared to the historical financial statements of the company, in accordance in accordance with accounting standards generally accepted in with the professional standards applicable in France. France and approved by the Board of Directors, were audited by us in accordance with professional standards applicable in France. The Chairman of the company’s Board of Directors is responsible An unqualified opinion was expressed on such financial statements. for the preparation of the “document de référence”. The emphasis of matter paragraph in our report on individual Our responsibility is to report on the fairness of the information financial statements refers to the internal capital gain realized on presented in the “document de référence” with respect to the transfer of DSI shares to Bacou USA, booked in 2004 for the financial statements. EUR 115.2 million, as described in paragraph 2.2.3 and 3.12 of the notes of the financial statements. Our work has been performed in accordance with professional standards applicable in France. Those standards require that Based on the procedures performed, we have no matters to report we assess the fairness of the information presented relating to regarding the fairness of the information relating to the financial the financial statements and its consistency with the financial statements presented in the “document de référence”. statements on which we have issued a report. Our work also includes reading the other information contained in the “document Paris-La-Défense and Dijon, April 18, 2005 de référence”, in order to identify material inconsistencies with the information presented with respect to the financial statements The Statutory Auditors and to report any apparent misstatement of facts that we may have uncovered in reading the other information based on our general Expertise Comptable et Audit Ernst & Young Audit knowledge of the company obtained during the course of our engagement, given that this “document de référence” does not include any selected prospective data resulting from an organized process.
The individual financial statements and the consolidated financial Patrick Collomb François Carrega statements for the year ended December 31, 2002, prepared in accordance with accounting standards generally accepted in France and approved by the Board of Directors, were audited by us, in accordance with professional standards applicable
Bacou-Dalloz Reference document 2004 125 6 Other Information
The "document de référence" also includes:
- The Statutory Auditor's report on individual and consolidated - The Statutory Auditors’ report (paragraph 4.4.5 of the "document financial statements as of December 31, 2004 (respectively, de référence") prepared in accordance with article L. 225-235 of in paragraph 1.6.1 and paragraph 1.5.6 of the "document de the French Commercial Code, on the report prepared by référence", including explanations on the assessments made the Chairman of the Bacou-Dalloz Board of Directors on the internal in the course of their audit in order to form their opinion on control procedures relating to the preparation and processing of the financial statements in accordance with Article L. 225-235 of financial and accounting information. the French Commercial Code
126 Reference document 2004 Bacou-Dalloz Cross reference table
Cross reference table
Page Page
DECLARATIONS OF PERSONS RESPONSIBLE GROUP RISK ANALYSIS • Declaration of person responsible • Risk factors for the reference document 123 - Market risks (liquidity, rates, exchange, • Declaration of the statutory auditors 125 equity investments) 11-12 • Information policy 119 - Specific risks related to the business (of which dependence upon suppliers, customers, sub-contractors, GENERAL INFORMATION contracts or manufacturing processes…) 51 Issuer - Legal risks (specific regulations, franchises, patents, • Applicable regulations (foreign companies) 103 significant litigation, extraordinary events…) 12-13 - Manufacturing risks and risks related Capital to the environment 75 • Specificities (Limitations on voting rights etc.) 106 • Insurance and risk coverage 13-14 • Non-issued authorized capital 110-111 • Potential capital 71 ASSETS, FINANCIAL POSITION AND RESULTS • Table of changes in capital over 5 years 109 • Consolidated financial statements and notes 19-38 • Off-balance sheet liabilities 34 Stock market • Fees paid to auditors and to members of their networks 99 • Table of share price and volume trends over 18 months 117 • Financial ratio regulations (banks, insurers, brokers) 43 • Dividends 118 • Statutory financial statements and notes 40-42
SHARE CAPITAL OWNERSHIP AND VOTING RIGHTS CORPORATE GOVERNANCE • Current distribution of capital and voting rights 112 • Composition and operation of • Changes in shareholder structure 113-115 head management bodies 79-87/91-97 • Shareholder agreements 115-116 • Composition and operation of Committees 92-94 • Company directors (remuneration and incentives, GROUP ACTIVITY options granted and exercised (BSA and BSPCE) 84-86 • Group organization (parent and subsidiary • Top ten non-executive salaried employees company relations) 89-90 (options granted and exercised) 70-71 • Group key figures 16-17 • Regulatory agreements 86-87 • Sector information (by business, region and/or country) 52 • Issuer’s markets and competitive position 48-51 RECENT DEVELOPMENTS AND OUTLOOK • Investment policy 61 • Recent developments 15 • Outlook 15
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