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 Bacou-Dalloz Reference document 2004 3 1 4 Reference document 2004 Bacou-Dalloz Financial Report 1 Page Page 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 6 Reference document 2004 Bacou-Dalloz Financial Report 1 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.