FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Report of Foreign Private Issuer Pursuant to Rule 13a-16 or 15d-16 of the
Securities Exchange Act of 1934
For the month of September 2002
GEMPLUS INTERNATIONAL S.A.
(Exact name of registrant as specified in its charter)
Gemplus International S.A.
(Translation of registrant's name in English)
Aerogolf Center
1 Hohenhof
L-2633 Senningerberg
Grand Duchy of Luxembourg
(Address of Principal Executive Offices)
(Indicate by check mark whether the registrant files or will file
annual reports under cover of Form 20-F or Form 40-F.)
Form 20-F X Form 40-F
--- ---
(Indicate by check mark whether the registrant by
furnishing the information contained in this form
is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the
Securities Exchange Act of 1934.)
Yes No X
--- ---
INDEX Page No
-------
Part I - Financial Information
Item 1. Financial Statements.............................................................................2
Condensed Consolidated Statements of Income
Three and Six Months Ended June 30, 2002 and 2001 (Unaudited).............................2
Condensed Consolidated Balance Sheets
June 30, 2002 (Unaudited) and December 31, 2001...........................................3
Condensed Consolidated Statements of Cash Flows
Six Months Ended June 30, 2002 and 2001 (Unaudited).......................................4
Consolidated Statement of Changes in Shareholders' Equity
Six Months Ended June 30, 2002 (Unaudited)................................................5
Notes to the Condensed Consolidated Financial Statements (Unaudited)......................6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations............18
Item 3. Qualitative Disclosures About Market Risk........................................................29
Part II - Other Information
Item 1. Legal proceedings................................................................................30
Item 2. Changes in securities............................................................................30
Item 3. Default upon senior securities...................................................................30
Item 4. Submission of Matters to a Vote of Security Holders..............................................30
Item 5. Other Information................................................................................32
Item 6. Exhibits and other Reports on Form 6-K...........................................................32
Signature...................................................................................................33
GEMPLUS INTERNATIONAL S.A.
Quarterly Report on Form 6-K
For the period ended June 30, 2002
Item 1. Financial Statements
Condensed Consolidated Statements of Income
(in thousands of euros, except share and per share data)
------------------------------------------------------------
Three months ended Six months ended
June 2002 June 2001 June 2002 June 2001
(unaudited) (unaudited)
------------------------------------------------------------
Net sales 209,798 252,252 386,330 545,883
Cost of sales (161,430) (159,567) (301,786) (353,295)
Gross Profit 48,368 92,685 84,544 192,588
Research and development expenses (23,126) (32,645) (50,502) (62,309)
Selling and marketing expenses (28,491) (46,913) (60,588) (92,603)
General and administrative expenses (20,978) (25,492) (45,032) (52,562)
Goodwill amortization (7,242) (6,711) (13,378) (14,436)
Operating loss before restructuring (31,469) (19,076) (84,956) (29,322)
Restructuring expenses (43,129) (28,466) (62,453) (28,466)
Operating loss (74,598) (47,542) (147,409) (57,788)
Interest income and (expense), net (62,253) 1,652 (57,490) 10,074
Other income (expense), net (4,345) (9,480) (9,544) (14,636)
Loss before taxes (141,196) (55,370) (214,443) (62,350)
Income taxes benefit 18,129 15,579 28,913 15,400
-----------------------------------------------------------------------------------------------
Net loss (123,067) (39,791) (185,530) (46,950)
-----------------------------------------------------------------------------------------------
Net loss per share
Basic (0.20) (0.06) (0.31) (0.07)
Diluted (0.20) (0.06) (0.31) (0.07)
Shares used in net loss per share
calculation
Basic 606,619,119 641,804,505 606,204,557 640,258,293
Diluted 606,619,119 641,804,505 606,204,557 640,258,293
In filings with the Commission des Operations de Bourse and its annual report to
shareholders, the Company has included goodwill amortization below operating
income (loss). See Note 10.
The accompanying notes are an integral part of these condensed financial
statements
GEMPLUS INTERNATIONAL S.A.
Quarterly Report on Form 6-K
For the period ended June 30, 2002
Condensed Consolidated Balance Sheets
(in thousand of euros)
--------------------------------------
June 30, 2002 December 31, 2001
--------------------------------------
Assets (unaudited)
Current assets:
Cash and cash equivalents 411,752 490,652
Trade accounts receivable, net 145,468 188,635
Inventory, net 106,865 139,794
Other current assets 112,661 103,733
Total current assets 776,746 922,814
Non-current assets:
Property, plant and equipment, net 246,516 268,784
Goodwill, net 101,464 116,580
Other non-current assets 206,576 222,514
Total non-current assets 554,556 607,878
---------------------------------------------------------------------------------------------------
Total assets 1,331,302 1,530,692
---------------------------------------------------------------------------------------------------
Liabilities
Current liabilities:
Accounts payable 106,518 109,661
Accrued liabilities and other 146,337 168,905
Current obligations under capital leases 3,676 3,734
Total current liabilities 256,531 282,300
Non-current liabilities:
Long-term obligations under capital leases 42,656 32,581
Long-term debt, less current portion - 14
Other non-current liabilities 24,484 30,859
Total non-current liabilities 67,140 63,454
Minority interest 13,222 17,176
Shareholders' equity
Ordinary shares no legal par value, 2,000,000,000
shares authorized, 637,756,588 and 641,396,497 shares
issued and outstanding at June 30, 2002 and
December 31, 2001, respectively 127,268 127,056
Additional paid-in capital 1,029,153 1,027,850
Retained earnings (74,997) 125,016
Other comprehensive income 6,694 (3,968)
Less, cost of treasury shares (93,709) (108,192)
Total shareholders' equity 994,409 1,167,762
-------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity 1,331,302 1,530,692
-------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these condensed financial
statements
GEMPLUS INTERNATIONAL S.A.
Quarterly Report on Form 6-K
For the period ended June 30, 2002
Condensed Consolidated Statements of Cash Flows
(in thousands of euros)
------------------------------
Six months ended June 30,
2002 2001
------------------------------
Cash flows from operating activities: (unaudited)
Net loss (185,530) (46,950)
Adjustments to reconcile net loss to net cash from
operating activities:
Depreciation and amortization 52,418 59,536
Change in other non-current liabilities (819) (9,599)
Gain on assets sold 2,466 208
Provision for income taxes (28,913) (15,400)
Other, net (331) 1,253
Changes in operating assets and liabilities:
Trade accounts receivable and related current liabilities 31,147 69,815
Trade accounts payable and related current assets (6,124) (72,437)
Inventories 26,484 (49,359)
Value-added and income taxes (14,130) (14,327)
Other, net (27,502) 2,106
Restructuring reserve 41,799 25,994
Litigation expenses (18,120) -
Management severance expenses (10,629) -
Provision for a loan to the former Chairman of the Board 66,938 -
------------------------------------------------------------------------------------------
Net cash used in operating activities (70,846) (49,160)
Cash flows from investing activities:
Sale / (Purchase) of activities net of cash
disposed / (acquired) - (122)
Other investments (12,220) (35,785)
Purchase of property, plant and equipment (22,258) (71,535)
Purchase of other assets (1,725) (10,814)
Change in non-trade accounts payable and other
current assets 3,106 (4,532)
------------------------------------------------------------------------------------------
Net cash used in investing activities (33,097) (122,788)
Cash flows from financing activities:
Proceeds from exercise of share options 1,514 6,967
Purchase of Gemplus S.A. shares - (6,982)
Proceeds from minority contribution 367 -
Payments on long-term borrowings (58) (1,732)
Proceeds from sale-leaseback operations 11,762 -
Principal payments on obligations under capital leases (1,745) (1,598)
Increase (decrease) in bank overdrafts (2,589) 11,078
Dividends paid by subsidiaries to minority shareholders (5,002) (4,256)
Change in treasury shares - (581)
Interest receivable on loans to senior management (1,706) (1,796)
Change in non-trade accounts payable on financing
activities - (8,044)
------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities 2,543 (6,944)
Effect of exchange rate changes on cash 22,500 (27,460)
Net increase (decrease) in cash and cash equivalents (101,400) (178,892)
Cash and cash equivalents, beginning of period 490,652 636,284
------------------------------------------------------------------------------------------
Cash and cash equivalents, end of period 411,752 429,932
------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these condensed financial
statements
Consolidated Statement of Changes in Shareholders' Equity
Number of Share Additional Retained Net loss Other Treasury Total
shares value paid-in earnings compre- shares
capital hensive
income
---------------------------------------------------------------------------------------------------------------------------------
Balance at December
31, 2001 641,396,497 127,056 1,027,850 225,236 (100,220) (3,968) (108,192) 1,167,762
---------------------------------------------------------------------------------------------------------------------------------
Allocation of prior year
earnings - - - (100,220) 100,220 - - -
Net loss - - - - (185,530) - - (185,530)
Shares issued by
Gemplus S.A. pursuant
to share options
exercised to be
contributed 596,600 - 849 - - - - 849
Contribution of Gemplus
S.A. shares to Gemplus
International S.A. - 132 (132) - - - - -
Shares issued by
Gemplus International S.A.
pursuant to share
options exercised 398,350 80 586 - - - - 666
Cancellation of treasury
shares (4,634,859) - - (14,483) - - 14,483 -
Change in other
comprehensive income - - - - - 10,662 - 10,662
---------------------------------------------------------------------------------------------------------------------------------
Balance at June 30,
2002 (unaudited) 637,756,588 127,268 1,029,153 110,533 (185,530) 6,694 (93,709) 994,409
---------------------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these condensed financial
statements
GEMPLUS INTERNATIONAL S.A.
Quarterly Report on Form 6-K
For the period ended June 30, 2002
Notes to the Condensed Consolidated Financial Statements
1/ Basis of presentation and accounting policies
These unaudited interim financial statements prepared in accordance with
International Accounting Standards (IAS), reflect all normal recurring
adjustments which are, in the opinion of management, necessary to present
fairly, in all material respects, the financial position of Gemplus
International S.A. (the "Company") and its subsidiaries as of June 30, 2002, and
the results of operations for the three-month periods ended June 30, 2002 and
2001. All material intercompany balances have been eliminated. Because all of
the disclosures required by IAS are not included, these interim statements
should be read in conjunction with the audited financial statements and
accompanying notes in the Company's annual report for the year ended December
31, 2001. The year-end condensed balance sheet data was derived from the audited
financial statements and does not include all of the disclosures required by
generally accepted accounting principles. The statements of operations for the
periods presented are not necessarily indicative of results to be expected for
any future period, nor for the entire year.
The annual consolidated financial statements of the Company are prepared in
accordance with IAS. As of January 1, 2001, the Company has adopted the new
standard applicable for the first time to financial statements of periods
beginning after January 1, 2001, relating to Financial Instruments (IAS 39).
2/ Inventories
Inventories are stated at the lower of cost or market (with cost being
determined principally on the weighted average cost basis).
Inventory consists of the following:
(in thousands of euros)
-------------------------------------------------------------------
June 30, 2002 December 31,
(unaudited) 2001
-------------------------------------------------------------------
Raw materials and supplies 43,521 63,621
Work-in-process 64,293 79,394
Finished goods 14,340 14,738
-------------------------------------------------------------------
Inventory, gross 122,154 157,753
-------------------------------------------------------------------
Less, inventory allowance (15,289) (17,959)
-------------------------------------------------------------------
Inventory, net 106,865 139,794
-------------------------------------------------------------------
3/ Common control transactions
As at June 30, 2002, certain shares of Gemplus S.A. held mainly by employees
have not yet been contributed to Gemplus International S.A. for administrative
and legal reasons. The total amount of shares to be issued by Gemplus
International S.A. upon the contribution of Gemplus S.A. shares amounted to
6,049,500 shares, representing 0.95% of the shareholdings of Gemplus
International S.A., which in total was represented by 637,756,588 shares
outstanding as at June 30, 2002.
4/ Net loss per share
A reconciliation of the numerator and denominator of basic and diluted net
income per share is provided in the following table:
(in thousands of euros, except shares and per share data)
----------------------------------------------------------------------------------------------------------------
Three months ended Six months ended
June 30, June 30,
2002 2001 2002 2001
(unaudited) (unaudited)
----------------------------------------------------------------------------------------------------------------
Basic and diluted net loss (numerator) (123,067) (39,791) (185,530) (46,950)
----------------------------------------------------------------------------------------------------------------
Shares used in basic net loss per share calculation
(denominator):
----------------------------------------------------------------------------------------------------------------
Weighted average number of common shares
outstanding 638,462,673 641,804,505 639,979,302 640,258,293
Weighted average number of treasury shares (31,843,554) - (33,774,745) -
----------------------------------------------------------------------------------------------------------------
Weighted average number of common shares
outstanding (basic) 606,619,119 641,804,505 606,204,557 640,258,293
----------------------------------------------------------------------------------------------------------------
Dilutive effect of stock options 934,557 11,153,592 2,514,663 32,652,553
Dilutive effect of warrants - 1,158,301 56,147 1,469,431
Dilutive effect of shares to be issued following
acquisitions of Celocom Ltd and Slp InfoWare SA - - - 378,074
----------------------------------------------------------------------------------------------------------------
Weighted average diluted number of shares
outstanding 607,553,676 654,116,398 608,775,367 674,758,351
----------------------------------------------------------------------------------------------------------------
Shares used in diluted net loss per share
(denominator) 606,619,119 641,804,505 606,204,557 640,258,293
----------------------------------------------------------------------------------------------------------------
Basic net income (loss) per share (0.20) (0.06) (0.31) (0.07)
Diluted net income (loss) per share (0.20) (0.06) (0.31) (0.07)
5/ Segment reporting
As of January 1, 2002, the Company elected to change the reporting of its
business segments, and restated its prior periods' presentation to conform to
this revised segment reporting.
All the activities formerly reported as part of the Network Systems segment and
the Other operating segment have been transferred to the Financial Services and
Security segment, except the access control systems activities of the Company's
former subsidiary Skidata and the electronic smart labels solutions activities
of the Company's former Tag subsidiary, which have been reported separately
under "Disposed Operations", as they were sold during the third quarter of 2001.
Consequently, the Financial Services and Security segment includes systems and
services based on chip card technology in areas such as financial services,
identification, health care, corporate security, loyalty programs,
transportation access, pay-television applications, e-business security
activities as well as magnetic stripe plastic cards for banking applications.
The Company's activities in this segment also include the sales of smart card
readers to customers as well as smart card interfacing technologies to device
manufacturers. There is no change with respect to the Telecommunications
segment, which includes the Company's wireless solutions, as well as prepaid
telephone cards and other products.
This change in business segment reporting is consistent with the changes in the
Company's financial reporting structure incorporated in its management
reporting. The Company`s two operating segments, the Telecommunications segment
and the Financial Services and Security segment, have a different customer base,
and each of them has separate financial information available. These segments
are evaluated regularly by the management in deciding how to allocate resources
and in assessing performance. The Company's management makes decisions about
resources to be allocated to the segments and assesses their performance using
revenues and gross margins. The Company does not identify or allocate assets to
the operating or geographic segments nor does management evaluate the segments
on this criterion on a regular basis.
The following tables present selected data for the three-month and six-month
periods ended June 30, 2002 and 2001:
(in thousands of euros)
-------------------------------------------------------------------------------------
Three months ended Six months ended
June 30, June 30,
2002 2001 2002 2001
(unaudited) (unaudited)
-------------------------------------------------------------------------------------
Net sales
Telecommunications 141,752 166,728 263,163 380,043
Financial Services and Security 68,046 69,147 123,167 131,594
Disposed Operations - 16,377 - 34,246
-------------------------------------------------------------------------------------
Net sales 209,798 252,252 386,330 545,883
-------------------------------------------------------------------------------------
Gross profit
Telecommunications 34,573 66,670 66,463 151,067
Financial Services and Security 13,795 18,555 18,081 28,352
Disposed Operations - 7,460 - 13,169
-------------------------------------------------------------------------------------
Gross profit 48,368 92,685 84,544 192,588
-------------------------------------------------------------------------------------
Research and development expenses (23,126) (32,645) (50,502) (62,309)
Selling and marketing expenses (28,491) (46,913) (60,588) (92,603)
General and administrative expenses (20,978) (25,492) (45,032) (52,562)
Goodwill amortization (7,242) (6,711) (13,378) (14,436)
-------------------------------------------------------------------------------------
Operating loss before restructuring (31,469) (19,076) (84,956) (29,322)
-------------------------------------------------------------------------------------
Restructuring expenses (43,129) (28,466) (62,453) (28,466)
-------------------------------------------------------------------------------------
Operating loss (74,598) (47,542) (147,409) (57,788)
-------------------------------------------------------------------------------------
Note:
Disposed operations include Skidata and Tag activities, which were sold during
the third quarter of 2001.
In filings with the Commission des Operations de Bourse and its annual report to
shareholders, the Company has included goodwill amortization below operating
income (loss). See Note 10.
The following is a summary of sales by geographic area for the three-month and
six-month periods ended June 30, 2002 and 2001:
(in thousands of euros)
--------------------------------------------------------------------------------
Three months ended Six months ended
June 30, June 30,
2002 2001 2002 2001
(unaudited) (unaudited)
--------------------------------------------------------------------------------
Europe, Middle East, Africa 104,245 106,577 195,888 245,235
Asia 63,208 74,621 107,466 171,952
Americas 42,345 54,677 82,976 94,450
Disposed operations - 16,377 - 34,246
--------------------------------------------------------------------------------
Net sales 209,798 252,252 386,330 545,883
--------------------------------------------------------------------------------
Note: Disposed operations include Skidata and Tag activities, which were sold
during the third quarter of 2001, and were reported primarily in the Europe,
Middle East and Africa region during the first quarter of 2001.
6/ Ordinary shares
In March 2002, the Company issued 596,600 shares following the exercise of
Gemplus SA stock options held by employees.
In April 2002, the Company issued 661,300 shares following the contribution of
13,226 shares of Gemplus S.A. held mainly by employees. For accounting purposes,
these shares were already assumed to be a component of shareholder's equity.
In April 2002, the Company issued 398,350 shares following the exercise of
Gemplus International S.A. stock options held by employees.
As at December 31, 2001, the Company held directly 4,780,907 shares of its
outstanding common stock and an indirect subsidiary held 30,925,029 shares of
its outstanding common stock. At the extraordinary general meeting of
shareholders held on April 17, 2002, shareholders approved the cancellation of
4,634,859 shares held directly pursuant to the Company's stock repurchase
program, as well as the cancellation of the 30,743,679 shares held by its
indirect subsidiary at the time as such shares may be transferred to the
Company. The 4,634,859 shares were cancelled without reduction of the issued
share capital of the Company but with a consequential increase of the accounting
par of the shares in issue. As at June 30, 2002, the Company held 31,077,077
shares of its outstanding common stock.
As mentioned in Note 3, as at June 30, 2002, the total amount of shares to be
issued by Gemplus International S.A. upon the contribution of Gemplus S.A.
shares amounted to 6,049,500 shares, representing 0.95% of the shareholdings of
Gemplus International S.A., which in total was represented by 637,756,588 shares
outstanding as at June 30, 2002.
7/ Restructuring
In addition to the restructuring program that was put into place in the second
quarter of 2001, the Company announced on February 6, 2002 a further
restructuring and rationalization program. The Company began to implement the
program and recorded a pre-tax restructuring charge of (euro) 19,324 thousand in
the Consolidated Statement of Income for the first quarter of 2002 (Phase 1) and
an additional (euro) 43,129 thousand in the Consolidated Statement of Income for
the second quarter of 2002 (Phase 2), resulting in a total restructuring expense
of (euro) 62,453 thousand during the six-month period ended June 30, 2002.
Phase 1 and Phase 2 of the 2002 restructuring program relate to the termination
of 767 employees. The Company expects that additional initiatives (non-renewal
of temporary employment contracts and reduction of subcontractors) combined with
natural attrition will bring the overall reduction in employees to approximately
1,140 in 2002, representing 16% of the Company's global workforce as at December
31, 2001.
The 2002 restructuring program (Phase 1 as well as Phase 2) affects all areas
within the Company (Manufacturing, Selling, Marketing, Research and Development
and General and Administrative functions). The overall reduction of the
workforce is broken down as follows:
o Manufacturing organization: 550 employees,
o General and administrative functions: 245 employees,
o Selling and marketing organization: 215 employees, and
o Research and development organization: 130 employees.
Phase 1 of the 2002 restructuring program involved the termination of 236
employees, mainly in North and South America, the United Kingdom, Northern
Europe and Asia. The restructuring charge also included costs related to the
rationalization of office facilities in North America, the United Kingdom and
Northern Europe, as well as asset write-offs related to the rationalization of
these facilities.
Phase 2 of the 2002 restructuring charge related to the termination of an
additional 531 employees with a majority of reductions relating to the social
plans in France (385 employees) and Germany (69 employees). It also included
further reductions made in the United Kingdom, Southern Europe, North America
and Asia.
In France and Germany, the Company was required to carry out consultations with
employee representatives before implementing workforce reductions. This
consultation process was completed during the second quarter of 2002 and the
content of the plan was finalized and communicated to the employees. In France,
the social plan is based on voluntary leave with a total target of 385
departures. The Company had previously announced a reduction of 416 employees;
however, there were 31 departures prior to the finalization of the procedure.
In addition to the charge associated with the termination of employees, the
restructuring charge recorded during the second quarter of 2002 also included
costs related to the shutdown of a personalization center in the Paris, France,
area, the reduction of office space in the South of France, the reduction of
production floor space in one of the German factories, and the close of office
facilities in North America and Spain. The restructuring charge recorded during
the second quarter of 2002 also included asset write-offs related to the
rationalization of these facilities, as well as charges for the write-off of
certain generic reader inventories.
In total, the restructuring charge estimated for 2002 is expected to be
approximately (euro) 65-68 million, of which:
Phase 1 - (euro) 19.3 million charge consisting of (euro) 8.8 million
for headcount reductions, (euro) 6.5 million
for consolidation of facilities, (euro) 2.2 for other exit
costs and (euro) 1.8 million related to fixed asset write-offs.
Phase 2 - (euro) 43.1 million charge consisting of (euro) 34.9
million for headcount reductions, (euro) 3.1 million for
consolidation of facilities, (euro) 0.7 for other exit
costs, (euro) 3.3 million related to fixed asset
write-offs, and (euro) 1.1 million related to inventory
write-offs.
In a third phase (Phase 3), the Company expects to record an additional (euro)
3-6 million restructuring charge related to additional employee terminations,
certain adjustments to the restructuring charge to be recorded in France when
the total number of employees departing voluntarily is known, and other costs.
These costs will be recorded during the second half of 2002.
In 2002, total cash outlays for the restructuring programs are expected to
amount to approximately (euro) 54-57 million, of which:
- (euro) 6.0 million for the restructuring program implemented in 2001,
- (euro) 45.0 million for Phase 1 and Phase 2 of the 2002 restructuring
program,
- (euro) 3-6 million for Phase 3 of the 2002 restructuring program.
Restructuring activity at the end of June 2002 was as follows:
- Concerning the 2001 restructuring program:
(in thousands of euros)
-----------------------------------------------------------------------------------------
Reduction of
workforce and
other cash Non-cash write-
2001 restructuring program outflows offs of assets Total
-----------------------------------------------------------------------------------------
2001 restructuring charge 22,022 6,444 28,466
-----------------------------------------------------------------------------------------
Amounts utilized in 2001 (15,466)
Exchange rate differences (379)
Restructuring reserve as at
December 31, 2001 6,177
-----------------------------------------------------------------------------------------
Amounts utilized in Q1- 2002 (3,902)
Exchange rate differences 30
Restructuring reserve as at March
31, 2002 2,305
-----------------------------------------------------------------------------------------
Amounts utilized in Q2- 2002 (706)
Exchange rate differences (140)
Restructuring reserve as at
June 30, 2002 1,459
-----------------------------------------------------------------------------------------
- Concerning the 2002 restructuring program:
(in thousands of euros)
-----------------------------------------------------------------------------------------
Reduction of
workforce and
other cash Non-cash write-
2002 restructuring program outflows offs of assets Total
-----------------------------------------------------------------------------------------
First quarter 2002 restructuring charge 18,065 1,259 19,324
Amounts utilized in first quarter 2002 (4,568)
Exchange rate differences (75)
-----------------------------------------------------------------------------------------
Restructuring reserve as at March 31, 2002 13,422
-----------------------------------------------------------------------------------------
Second quarter 2002 restructuring charge 39,059 4,070 43,129
Amounts utilized in second quarter 2002 (6,339)
Exchange rate differences (865)
-----------------------------------------------------------------------------------------
Restructuring reserve as at June 30, 2002 45,277
-----------------------------------------------------------------------------------------
8/ Comprehensive income
Certain items defined as other comprehensive income, such as foreign currency
translation adjustments, are reported separately from retained earnings and
additional paid-in-capital in the shareholders' equity section of the balance
sheets.
The components of cumulative other comprehensive income in the shareholders'
equity section of the balance sheets as at June 30, 2002 and December 31, 2001,
respectively, were as follows:
(in thousands of euros)
----------------------------------------------------------------------------------------
June 30, 2002 December 31, 2001
(unaudited)
----------------------------------------------------------------------------------------
Cumulative translation adjustment (1,878) (3,567)
Net unrealized gain (loss) on hedging instruments
qualifying as effective 8,572 (401)
----------------------------------------------------------------------------------------
Cumulative other comprehensive income 6,694 (3,968)
----------------------------------------------------------------------------------------
The components of comprehensive income for the three-month and six-month periods
ended June 30, 2002 and 2001, respectively, were as follows:
(in thousands of euros)
--------------------------------------------------------------------------------------------------------
Three months ended Six months ended
June 30, June 30,
2002 2001 2002 2001
(unaudited) (unaudited)
--------------------------------------------------------------------------------------------------------
Net loss (123,067) (39,791) (185,530) (46,950)
--------------------------------------------------------------------------------------------------------
Change in cumulative translation adjustment 1,681 1,534 1,688 136
Effect of adopting IAS 39 as at January 1, 2001 - - - 9,093
Change in fair value of available-for-sale financial
assets - (61) - (286)
Change in fair value of derivatives qualifying as
effective hedging instruments 7,921 1,240 8,973 (6,916)
--------------------------------------------------------------------------------------------------------
Change in cumulative other comprehensive income 9,602 2,713 10,661 2,027
--------------------------------------------------------------------------------------------------------
Comprehensive net loss (113,465) (37,078) (174,869) (44,923)
--------------------------------------------------------------------------------------------------------
9/ Differences between International Accounting Standards and U.S.
Generally Accepted Accounting Principles
The Company's consolidated financial statements are prepared in accordance with
IAS, which differ in certain respects from generally accepted accounting
principles in the United States (U.S. GAAP).
The principal differences between IAS and U.S. GAAP are presented below:
(in thousands of euros, except for net income per share)
-------------------------------------------------------------------------------------------------------------------------------
For the three months ended For the six months ended
June 30, June 30,
2002 2001 2002 2001
-------------------------------------------------------------------------------------------------------------------------------
Net loss in accordance with IAS (123,067) (39,791) (185,530) (46,950)
-------------------------------------------------------------------------------------------------------------------------------
Capitalized development costs (627) (914) (1,377) (678)
Share options accounting 7,021 35,901 7,267 75,221
Purchase consideration (419) - (839) -
Goodwill amortization 7,242 - 13,378 -
Other differences 134 23 301 90
Deferred tax effect of U.S. GAAP adjustments 125 214 (666) 204
-------------------------------------------------------------------------------------------------------------------------------
Total differences between U.S. GAAP and IAS 13,476 35,224 18,064 74,837
-------------------------------------------------------------------------------------------------------------------------------
Net income (loss) per U.S. GAAP before change in
accounting principle (109,591) (4,567) (167,466) 27,887
-------------------------------------------------------------------------------------------------------------------------------
Change in accounting principles - Hedge accounting - - - (8,807)
-------------------------------------------------------------------------------------------------------------------------------
Net income (loss) per U.S. GAAP (109,591) (4,567) (167,466) 19,080
-------------------------------------------------------------------------------------------------------------------------------
Change in cumulative other comprehensive income in
accordance with IAS 9,602 2,713 10,661 2,027
Change in effect of IAS/US GAAP adjustments on other
comprehensive income (1,059) (43) (979) (383)
-------------------------------------------------------------------------------------------------------------------------------
Other comprehensive income (loss), net of taxes 8,543 2,670 9,682 1,644
-------------------------------------------------------------------------------------------------------------------------------
Comprehensive income (loss) per U.S. GAAP (101,048) (1,897) (157,784) 20,724
-------------------------------------------------------------------------------------------------------------------------------
Net income per share
Basic (0.18) (0.01) (0.28) 0.03
Diluted (0.18) (0.01) (0.28) 0.03
Number of shares
Basic 606,619,119 641,804,505 606,204,557 640,258,293
Diluted 606,619,119 641,804,505 606,204,557 674,758,351
(in thousands of euros)
-------------------------------------------------------------------------------
June 30, December 31,
2002 2001
(unaudited)
-------------------------------------------------------------------------------
Shareholders' equity in accordance with IAS 994,409 1,167,762
-------------------------------------------------------------------------------
Capitalized development costs (6,895) (5,518)
Loans related to share options (71,856) (71,856)
Purchase consideration (8,943) (8,104)
Goodwill amortization 13,378 -
Effect of IAS / U.S. GAAP adjustments on other
comprehensive income (5,890) (4,911)
Other differences (9) (310)
Deferred tax effect of U.S. GAAP adjustments 567 1,224
-------------------------------------------------------------------------------
Total difference between U.S. GAAP and IAS (79,648) (89,475)
-------------------------------------------------------------------------------
Shareholders' equity in accordance with US GAAP 914,761 1,078,287
-------------------------------------------------------------------------------
10/ Presentation of the consolidated statement of income
For years ended prior to or on December 31, 2001 and for purposes of filing the
Company's Annual Report on form 20-F with the U.S. Securities and Exchange
Commission, the consolidated statements of income prepared in accordance with
IAS include goodwill amortization above operating income (loss).
As a result of the adoption of SFAS 142 as of January 1, 2002, the Company no
longer amortizes goodwill under US GAAP (see Note 11). Consequently, goodwill
amortization no longer represents a presentation difference between operating
income (loss) under IAS and operating income (loss) under US GAAP.
The operating income (loss) would have been as follows under US GAAP:
(in thousands of euros)
-----------------------------------------------------------------------------------------------
Three months ended June 30, Six months ended June 30,
2002 2001 2002 2001
(unaudited) (unaudited)
-----------------------------------------------------------------------------------------------
Operating loss per IAS (67,356) (40,831) (134,031) (43,352)
Goodwill amortization (7,242) (6,711) (13,378) (14,436)
-----------------------------------------------------------------------------------------------
Operating loss - US presentation (74,598) (47,542) (147,409) (57,788)
-----------------------------------------------------------------------------------------------
Goodwill amortization 7,242 - 13,378 -
Purchase consideration (419) - (839) -
Capitalized development costs (627) (914) (1,377) (678)
Share options accounting 7,021 35,901 7,267 75,221
Interest accrued on loans
related to share options 863 (519) 1,706 1,796
Other differences 134 23 301 90
-----------------------------------------------------------------------------------------------
Operating income (loss) per US GAAP (60,384) (13,051) (126,973) 18,641
-----------------------------------------------------------------------------------------------
11/ New accounting pronouncements under US GAAP
For the presentation of its consolidated net income and total shareholders'
equity under US GAAP, the Company adopted the following new standards:
SFAS 142:
On January 1, 2002 the Company adopted the provisions of the Statement of
Financial Accounting Standard SFAS N(degree)142, "Goodwill and other intangible
assets", issued by the Financial Accounting Standards Board ("FASB") in July
2001. SFAS 142 requires that goodwill and intangible assets with indefinite
lives no longer be amortized but be tested for impairment at least annually in
accordance with the provisions of SFAS 142. Statement 142 also requires that
intangible assets with definite useful lives be amortized over their respective
estimated useful lives to their estimated residual values and be reviewed for
impairment in accordance with SFAS N(degree)144, "Accounting for the impairment
of long-lived assets to be disposed of", which was also adopted on January 1,
2002. For the period ended June 30, 2002, as a result of its adoption, the
Company did not recognize amortization expense under US GAAP. The Company has
reassessed the useful lives of its intangible assets and has not made any
adjustment. The Company did not reclassify any indefinite-life intangible assets
from goodwill, nor did the Company reclassify any intangible assets as goodwill.
In accordance with SFAS 142, the Company has six months from the date of
adoption to complete its initial impairment testing. In the event an impairment
loss is determined in the initial phase, the Company has until December 31, 2002
to finalize the calculation or effectively until June 30, 2003, the date on
which the Company's Form 20-F is due (six months after year-end). As at June 30,
2002, the Company completed its impairment testing, resulting in no material
change to the carrying value of goodwill as a result of the adoption of SFAS
142.
SFAS 144
As mentioned above, the Company adopted SFAS N(degree)144, "Accounting for the
impairment or disposal of long-lived assets", which was issued by the FASB on
October 3, 2001. SFAS 144 supersedes SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed of".
However, it retains many of the fundamental provisions of that Statement. SFAS
144 also amends the accounting and reporting provisions of APB 30, "Reporting
the Results of Operations-Discontinued Events and Extraordinary, Unusual and
Infrequently Occurring Events and Transactions", to broaden the definition of
what constitutes a discontinued operation, amends the accounting and
presentation for discontinued operations, and amends ARB 51, "Consolidated
Financial Statements to eliminate the exception to consolidation for a
temporarily controlled subsidiary". SFAS 144 is effective for fiscal years
beginning after December 31, 2001. The adoption of this standard does not have a
material impact on the Company's consolidated net income and total shareholders'
equity under US GAAP.
SFAS 141
In July 2001, the FASB issued Statement No 141, "Business Combinations". The
provisions of this Statement were required to be adopted immediately. Statement
141 requires that the purchase method of accounting be used for all business
combinations initiated after June 30, 2001 as well as all purchase method
business combinations completed after June 30, 2001. Statement 141 also
specifies criteria that must be met in order for intangible assets acquired in a
purchase method business combination to be recognized and reported apart from
goodwill. During the six-month period ended June 30, 2002, the Company has not
entered into any business combination transactions.
12/ Related party transactions
During the first half of 2002, the Company paid amounts totaling (euro) 10,629
thousand in connection with the resignation and cessation, respectively, of its
former Chief Executive Officer, Mr. Perez, on December 19, 2001 and its former
Chairman of the Board of Directors, Dr. Lassus, on January 10, 2002. The payment
to Dr. Lassus also included an amount in relation to costs for pledging the
shares of the Company held by Dr. Lassus (the shares ultimately were not
pledged, as discussed further below).
During 2001, the Company entered into an agreement with a service company whose
Chief Executive Officer, Mr. Ronald Mackintosh, also served on our Board of
Directors. Mr. Mackintosh served as our interim Chief Executive Officer from
December 19, 2001 to August 15, 2002 and has resigned as Chief Executive Officer
of the service company effective on December 19, 2001. He remains a member of
its board of directors. This service company was appointed to provide an
independent review of the Company's management, information, organization and
business systems as well as identification and recommendation of remedial
action. In 2002, the Company continued to use the services of this company and
the total cost recorded in its consolidated statement of income in the first
half of 2002 for this arrangement amounted to (euro)831,000.
During the first half of 2002, upon the advice of its external auditors, the
Company recorded an interest expense of (euro) 67 million following the
write-down of a loan granted to its former Chairman of the Board of Directors,
Dr. Lassus. This loan was granted to Dr. Lassus by one of the Company's indirect
subsidiaries in 2000 to permit him to exercise stock options, pursuant to his
then-current terms of employment. The write-down was recorded to cover the risk
of possible non-reimbursement, as the Company has not yet received the
guarantees of reimbursement (including a pledge of his option shares) that Dr.
Lassus was required to provide, inter alia and as confirmed in the letter
agreement signed with him on December 19, 2001. The Company however has not
forgiven the loan and still expects to be fully reimbursed by Dr. Lassus. The
Company's Board of Directors has established a special committee which
recommended that it was appropriate for the Company's indirect subsidiary to
take action to seek security for the loan and its repayment. The Company's Board
of Directors agreed on the special committee's recommendations based on the
opinion of special independent legal counsel.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
This report contains forward-looking statements reflecting management's
current expectations regarding our future financial performance. Such
expectations are based on certain assumptions and involve risks and
uncertainties. These uncertainties include, but are not limited to:
o trends in the wireless communication and financial services markets,
o trends in the growth of mobile commerce, mobile banking and internet
business,
o the effect of the adoption of competing technologies in our target markets,
o the profitability of our market expansion strategy,
o our ability to develop and take advantage of new software and services,
o our ability to develop and market new chip card technologies to meet market
demands,
o our ability to attract and maintain qualified executives and personnel,
o our ability to manage our inventories of microprocessor chips,
o challenges to or loss of our intellectual property rights regarding our
chip card technology,
o expected intense competition in our main markets,
o our ability to implement our restructuring plans effectively, and
o trade risks, legal risks, and social and economic risks, and other risks
that are described in our filings with the U.S. Securities and Exchange
Commission.
You are cautioned not to place undue reliance on the forward-looking
statements, which speak only as of the date hereof. We are not under any
obligation, and we expressly disclaim any obligation, to update or alter any
forward-looking statements, whether as a result of new information, future
events or otherwise, except to the extent that as a result of fulfilling our
disclosure obligations under the U.S. securities laws and regulations, we
determine that such an update is necessary.
Results of Operations
Second quarter 2002 compared with second quarter 2001
Net Sales
Net sales for the second quarter ended June 30, 2002 amounted to (euro)
209.8 million, a 17% decrease compared with net sales of (euro) 252.3 million
for the same period in 2001. Excluding our disposed operations, i.e. the SkiData
and Tag activities sold during the third quarter of 2001, net sales recorded in
the second quarter of 2001 amounted to (euro) 235.9 million, resulting in an
adjusted 11% decrease of net sales in the second quarter of 2002 as compared to
the same period in 2001. Approximately 3% of this decrease in net sales was due
to the impact of currency exchange rate movements, as the dollar was at its peak
against the Euro in June 2001 but has declined in the second quarter of 2002.
The second quarter of 2001 was the first quarter in which revenues were impacted
by the slowdown in wireless telecom sales.
The decrease in net sales was mainly concentrated in our
telecommunications segment, which consists of wireless products, prepaid phone
cards and other products. Sales in our telecommunications segment decreased 15%
in the second quarter of 2002 as compared to the same period in 2001. This
decrease was primarily attributable to pressure from a competitive market
resulting in lower prices, primarily in Asia and Europe during the second
quarter of 2002. Net sales also decreased due to a decline in prepaid phone
cards, which was mainly driven by lower demand in the Americas and Asia.
Net sales in the financial services and security segment, which
consists of products and services based on chip card technology in areas such as
financial services, identification, health care, corporate security, loyalty
programs, transportation access, pay-television applications, as well as
magnetic stripe plastic cards for banking applications and smart card readers
and interfacing technologies, were essentially flat, decreasing by 2% in the
second quarter of 2002 as compared to the same period in 2001.
The following table shows the breakdown of our net sales in the
three-month periods ended June 30, 2002 and 2001 by market segment.
Three months ended
June 30,
------------------------- ----------
2002 2001 % change
---------- ---------- ----------
(millions of euros)
Telecommunications....................... 141.8 166.7 (15%)
Financial services and security ......... 68.0 69.2 (2%)
Disposed operations(*) .................. - 16.4 (100%)
----- ---- ------
Total.................................... 209.8 252.3 (17%)
===== ===== =====
(*) includes SkiData and Tag activities, which we sold during the third quarter
of 2001.
Wireless products accounted for half of the decrease in net sales in
the telecommunications segment. We recorded net sales of wireless products and
services of (euro) 103.5 million in the second quarter of 2002, representing a
decrease of 9% as compared to (euro) 113.4 million recorded in the second
quarter of 2001. During the second quarter of 2002, the decrease resulted
primarily from price pressure experienced in the wireless market in all regions,
the effect of which was only partially offset by higher volume, as we sold
approximately 38% more units in the second quarter of 2002 compared with the
same period a year ago.
The rest of the decrease in net sales in the telecommunications segment
was attributable to phone card sales, resulting from lower demand in all
regions, with a significant slowdown in the Americas and Asia, and price
pressure in the phone card market.
As a result of decreased revenues, the telecommunications segment
represented 68% of our revenues in the second quarter of 2002, as compared to
71% of our revenues in the second quarter of 2001 (excluding disposed
operations).
The slight decrease in the financial services and security segment
sales resulted primarily from lower demand for non-strategic business products,
such as plastic and magnetic stripe cards, as well as Other Equipment
Manufacturers products ("OEM" products) and contactless cards for transport
activity, which was only partly offset by strong growth in chip card sales in
the second quarter of 2002 as compared to the same period in 2001.
The proportion of the financial services and security segment in our
total revenues increased in connection with the decline in sales in the
telecommunications segment. As a result, the financial services and security
segment represented 32% of our revenues in the second quarter of 2002, as
compared to 29% of our revenues in the second quarter of 2001 (excluding
disposed operations).
During the second quarter of 2002, our net sales decreased in the
Americas and in Asia, and remained stable in the Europe, Middle East and Africa
region, as compared to the same period in 2001.
The following table breaks down our net sales among our three regions:
Three months ended
June 30,
--------------------------
2002 2001 % change
------- ---------- ----------
(millions of euros)
Europe, Middle East and Africa......... 104.3 106.6 (2%)
Asia................................... 63.2 74.6 (15%)
Americas............................... 42.3 54.7 (23%)
Disposed operations.................... - 16.4 (100%)
----- ---- ------
Total.................................. 209.8 252.3 (17%)
===== ===== =====
The Europe, Middle East and Africa region, which represented 50% of the
second quarter net sales in 2002, experienced a slight decrease of 2% as
compared to the same period in 2001, excluding our disposed operations. This
resulted from a decrease of net sales in our telecommunication segment due to
pressure on SIM card prices despite stronger demand for wireless products and
from lower demand in non-strategic businesses such as plastic and contactless
card products within our financial and security services segment. The decrease
was partly offset by stronger demand in the banking segment, primarily in
Germany and in France.
The Asia region, which represented 30% of the second quarter net sales
in 2002, decreased 15% from the same period in 2001. This primarily reflected
the significant pressure on wireless sales prices despite higher shipments of
wireless products in Asia and was combined with a decrease in the financial
services and security segment net sales due to lower demand for contactless
products in Pacific Asia.
The revenue in the Americas, which represented 20% of the second
quarter net sales in 2002, decreased 23% from the same period in 2001, resulting
primarily from lower demand for phone cards in Latin America and lower demand
for financial services products.
Gross profit
Gross profit decreased 48% from (euro) 92.7 million in the second
quarter of 2001 to (euro) 48.4 million in the second quarter of 2002. Our gross
margin decreased from 36.7% in the second quarter of 2001 to 23.1% in the second
quarter of 2002. Excluding disposed operations, gross profit decreased 43% from
(euro) 85.2 million in the second quarter of 2001 to (euro) 48.4 million in the
same period in 2002 and our gross margin decreased from 36.1% in the second
quarter of 2001 to 23.1% in the second quarter of 2002.
Three unfavorable factors contributed to the decline in our gross
profit in the second quarter of 2002. First, the wireless industry faced
stronger price pressure on SIM cards compared to the second quarter of the prior
year. Second, the business mix between the telecommunications and the financial
services and security segments was unfavorable with a higher proportion of sales
in our financial services and security segment where we generate lower margins.
Financial services and security gross profit remained below that of
telecommunications, and both decreased in the second quarter of 2002. Third, the
second quarter of 2001 included a one-time favorable (euro) 10 million royalty
expense adjustment resulting from the partial reversal of a provision for a
patent claim that was settled as of June 30, 2001.
The following table breaks down our gross profit and gross margin by
segment.
Three months ended June 30,
---------------------------
2002 2001
---- ----
(millions of (millions of % change in
euros) (% of sales) euros) (% of sales) gross profit
------ ------------ ------ ------------ ------------
Telecommunications .................. 34.6 24.4% 66.7 40.0% (48%)
Financial services and security...... 13.8 20.3% 18.5 26.7% (26%)
Disposed operations ................. - - 7.5 45.7% (100%)
----------------------------------------------------------------------------
Total................................ 48.4 23.1% 92.7 36.7% (48%)
==== ====
The telecommunications segment gross margin decreased from 40.0% in the
second quarter of 2001 to 24.4% in the second quarter of 2002. This decrease was
mainly attributable to price pressure on wireless SIM card products and
unfavorable regional mix. In addition, gross profit recorded in the second
quarter of 2001 was favorably impacted by a one-time royalty expense adjustment
resulting from the partial reversal of a provision for a patent claim.
The financial services and security segment gross margin decreased from
26.7% in the second quarter of 2001 to 20.3% in the second quarter of 2002. The
segment gross margin suffered from an unfavorable product mix and from the
underabsorption of certain manufacturing fixed costs. In addition, gross profit
recorded in the second quarter of 2001 had been favorably impacted by the
one-time royalty expense adjustment.
Operating loss
We recorded an operating loss before restructuring expenses of (euro)
31.5 million in the second quarter of 2002, compared to an operating loss of
(euro) 19.1 million in the second quarter of 2001 or (euro) 16.1 million in the
second quarter of 2001 excluding our disposed operations, SkiData and Tag
activities. Operating expenses before restructuring expenses and goodwill
amortization decreased by 31% from (euro) 105.1 million in the second quarter of
2001 to (euro) 72.6 million in the second quarter of 2002, as a result of the
disposal of our Skidata and Tag businesses, the continued implementation of our
restructuring programs and the sustained tight cost controls and improved
business processes. Excluding disposed operations, operating expenses before
restructuring expenses and goodwill amortization were (euro) 94.6 million in the
second quarter of 2001, as compared to (euro) 72.6 million in the second quarter
of 2002.
Research and development expenses decreased 29%, from (euro) 32.6
million in the second quarter of 2001 to (euro) 23.1 million in the second
quarter of 2002. Excluding disposed operations, research and development
expenses decreased 21%, from (euro) 29.3 million in the second quarter of 2001
to (euro) 23.1 million in the second quarter of 2002. The effects of the
implementation of our restructuring plans and tight cost controls brought
additional savings compared to the same period in 2001.
Selling and marketing expenses decreased 39%, from (euro) 46.9 million
in the second quarter of 2001 to (euro) 28.5 million in the first quarter of
2002. Excluding disposed operations, selling and marketing expenses decreased by
31% and amounted to (euro) 41.3 million in the second quarter of 2001 compared
to (euro) 28.5 million in the second quarter of 2002. The decrease was due to
the implementation of our restructuring plans within our business units and the
implementation of cost reduction actions on marketing events and related
activities.
General and administrative expenses decreased 18% from (euro) 25.5
million in the second quarter of 2001 to (euro) 21.0 million in the second
quarter of 2002. Excluding disposed operations, general and administrative
expenses decreased by 13% from (euro) 24.0 million in the second quarter of 2001
to (euro) 21.0 million in the second quarter of 2002, due primarily to a
rightsizing of management information system activities and sustained tight cost
controls in the second quarter of 2002.
Goodwill amortization amounted to (euro) 7.2 million in the second
quarter of 2002, compared to (euro) 6.7 million in the first quarter of 2001.
Restructuring expenses
We recorded a restructuring charge of (euro) 43.1 million in the second
quarter of 2002 pursuant to the restructuring and rationalization program
announced on February 6, 2002, as compared to a restructuring charge of (euro)
28.5 million incurred in the second quarter of 2001. The restructuring charge
recorded in the second quarter of 2002 was attributable to the second phase of
the 2002 restructuring program, including the reduction of the workforce
primarily in France and Germany and the rationalization of office facilities on
a worldwide basis (see Note 7 to our financial statements included in Item 1 of
this Form 6-K). The restructuring charge recorded in the second quarter of 2001
was related to the restructuring program announced on May 2, 2001 and was
primarily attributable to the closure of a manufacturing facility in Germany, a
reduction of the workforce following the combination of our financial services
and internet business security activities, and the rationalization of office
facilities on a worldwide basis.
Net interest income and expense
We recorded net interest expense of (euro) 62.3 million in the second
quarter of 2002, compared to net interest income of (euro) 1.7 million in the
second quarter of 2001. Net interest expense incurred in the second quarter of
2002 included a (euro) 67 million non-cash interest expense following the
provision recorded to cover the risk of possible non-reimbursement of a loan
granted by one of our indirect subsidiaries in 2000 to Dr. Marc Lassus, our
former Chairman of the Board and a current Director. We have not forgiven the
loan and expect to be fully reimbursed by Dr. Lassus. Excluding this one-time
item, net interest income recorded in the second quarter of 2002 amounted to
(euro) 4.7 million. Interest income primarily reflects interest earned on the
substantial equity investments by Texas Pacific Group in February and May 2000,
the proceeds of the initial public offering of our ordinary shares in December
2000 and other capital injections from the exercise of warrants and stock
options by our shareholders and employees. The difference between the 2001 and
2002 figures primarily resulted from a (euro) 2.9 million interest expense
incurred in the second quarter of 2001 following the measurement at amortized
cost of an advance made to a trade supplier and from the decrease of interest
income following the decrease in our cash balances and the decrease in the
market interest rates.
Other income and expense, net
We recorded net other expense of (euro) 4.3 million in the second
quarter of 2002, compared to net other expense of (euro) 9.5 million in the
second quarter of 2001. Net other expense in the second quarter of 2002 was
primarily attributable to losses on investments and minority interests. Net
other expense in the second quarter of 2001 consisted primarily of foreign
exchange losses and minority interests.
Income tax
We recorded an income tax credit of (euro) 18.1 million in the second
quarter of 2002, representing an effective tax rate of 13.5%, as compared to an
income tax credit of (euro) 15.6 million in the second quarter of 2001,
representing an effective tax rate of 32%. In the second quarter of 2002, our
effective tax rate declined due to the (euro) 67 million non-cash write-down of
a loan granted to a director.
Net loss
We recorded a net loss of (euro) 123.1 million in the second quarter of
2002, or (euro) 0.20 per share, as compared to a net loss of (euro) 39.8 million
in the second quarter of 2001, or (euro) 0.06 per share. The net loss primarily
reflected the decline in our operating income, the (euro) 67 million non-cash
write-down of a loan granted in 2000 to one of our directors and the (euro) 43.1
million restructuring charge recorded during the second quarter of 2002, as
compared to the (euro) 28.5 million restructuring charge recorded during the
same period in 2001.
Six months 2002 compared with six months 2001
Net Sales
Net sales for the six-month period ended June 30, 2002 amounted to
(euro) 386.3 million, a 29% decrease compared with net sales of (euro) 545.9
million for the same period in 2001. Excluding our disposed operations, i.e. the
SkiData and Tag activities sold during the third quarter of 2001, net sales
recorded in the six-month period ended June 30, 2001 amounted to (euro) 511.6
million, resulting in an adjusted 25% decrease of net sales in the six-month
period ended June 30, 2002 as compared to the same period in 2001. Approximately
1% of this decrease in net sales was due to the impact of currency exchange rate
movements.
The decrease in net sales was mainly concentrated in our
telecommunications segment, in which sales decreased 31% in the six-month period
ended June 30, 2002 as compared to the same period in 2001. This decrease was
primarily attributable to price pressure resulting in lower prices, primarily in
Asia and Europe during the six-month period ended June 30, 2002. Net sales also
decreased due to a decline in prepaid phone cards, which was mainly driven by
lower demand in the Americas and Asia.
Net sales in the financial services and security segment decreased 6%
in the six-month period ended June 30, 2002 as compared to the same period in
2001. The decrease in our financial services and security segment was mainly due
to the slowdown of non-strategic business such as plastic and OEM products and
contactless cards for transport activity.
The following table shows the breakdown of our net sales in the
six-month periods ended June 30, 2002 and 2001 by market segment.
Six months ended
June 30,
------------------------- ----------
2002 2001 % change
---------- ---------- ----------
(millions of euros)
Telecommunications.................... 263.2 380.0 (31%)
Financial services and security ...... 123.1 131.6 (6%)
Disposed operations(*) ............... - 34.3 (100%)
----- ---- ------
Total................................. 386.3 545.9 (29%)
===== ===== =====
(*) includes SkiData and Tag activities, which we sold during the third quarter
of 2001.
In our telecommunications segment, a 32% decrease in net sales of
wireless products accounted for most of the decrease in net sales. We recorded
net sales of wireless products and services of (euro) 189.4 million in the first
half of 2002 as compared to (euro) 278.4 million recorded in the same period in
2001. During the first half of 2002, the decrease reflected primarily price
pressure in the wireless market in all regions and lower volume, as we sold
approximately 6% fewer units in the six-month period ended June 30, 2002
compared with the same period in 2001.
Phone card sales decreased 28% in the first half of 2002 compared to
the first half of 2001, resulting from lower demand in all regions, with a
significant slowdown in the Americas and Asia and price pressure in the phone
card market.
Due to lower revenues, the telecommunications segment represented 68%
of our revenues in the first half of 2002, as compared to 74% of our revenues in
the first half of 2001 (excluding disposed operations).
The proportion of the financial services and security segment in our
total revenues increased due to the decline in sales in the telecommunications
segment. As a result, the financial services and security segment represented
32% of our revenues in the first half of 2002, as compared to 26% of our
revenues in the same period in 2001 (excluding disposed operations).
During the six-month period ended June 30, 2002, our net sales
decreased in all regions, as compared to the same period in 2001.
The following table breaks down our net sales among our three regions:
Six months ended
June 30,
------------------------- ----------
2002 2001 % change
---------- ---------- ----------
(millions of euros)
Europe, Middle East and Africa....... 195.8 245.2 (20%)
Asia................................. 107.5 171.9 (38%)
Americas............................. 83.0 94.5 (12%)
Disposed operations.................. - 34.3 (100%)
----- ---- ------
Total................................ 386.3 545.9 (29%)
===== ===== =====
The Europe, Middle East and Africa region, which represented 51% of the
net sales of the first half of 2002, decreased 20% from the same period in 2001
excluding our disposed operations. This resulted from the pressure on SIM card
prices and lower demand for wireless products and non-strategic businesses such
as plastic and contactless products within our financial and security services
segment. This was partly offset by favorable sales growth in the financial
services sales segment primarily in Germany and France.
The Asia region, which represented 28% of net sales in the first half
of 2002, decreased 38% from the same period in 2001. This primarily reflected
the significant pressure on wireless sales prices and was combined with a
decrease in the financial services and security segment net sales due to lower
demand for contactless products in Pacific Asia.
Revenues in the Americas, which represented 21% of net sales in the
first half of 2002, decreased 12% from the same period in 2001, resulting
primarily from lower demand for phone cards in Latin America.
Gross profit
Gross profit decreased 56% from (euro) 192.6 million in the first half
of 2001, to (euro) 84.5 million in the first half of 2002. Our gross margin
decreased from 35.3% in the first half of 2001 to 21.9% in the first half of
2002. Excluding disposed operations, gross profit decreased 53% from (euro)
179.4 million in the first half of 2001, to (euro) 84.5 million in the same
period in 2002 and our gross margin decreased from 35.1% in the first half of
2001 to 21.9% in the first half of 2002.
Three unfavorable factors contributed to the decline in our gross
profit in the six-month period ended June 30, 2002. First, the wireless industry
faced greater price pressure on SIM cards compared to the first half of the
prior year. Second, the business mix between the telecommunications and the
financial services and security segments was unfavorable with a higher
proportion of sales in our financial services and security segment where we
generate lower margins. Financial services and security gross profit remained
below that of telecommunications, and both decreased in the six-month period
ended June 30, 2002. Third, the first half of 2001 included a one-time favorable
(euro) 10 million royalty expense adjustment resulting from the partial reversal
of a provision for a patent claim that was settled as of June 30, 2001.
The following table breaks down our gross profit and gross margin by
segment.
Six months ended June 30,
-------------------------
2002 2001
---- ----
(millions of (millions of % change in
euros) (% of sales) euros) (% of sales) gross profit
------ ------------ ------ ------------ ------------
Telecommunications ........................ 66.5 25.3% 151.1 39.8% (56%)
Financial services and security............ 18.1 14.7% 28.3 21.5% (36%)
Disposed operations ....................... - - 13.2 38.5% (100%)
------------------------------------------------------------------------
Total...................................... 84.6 21.9% 192.6 35.3% (56%)
==== =====
The telecommunications segment gross margin decreased from 39.8% in the
six-month period ended June 30, 2001, to 25.3% during the same period in 2002.
This decrease was mainly attributable to price pressure on wireless SIM cards.
In addition, gross profit recorded in the six-month period ended June 30, 2001
had been favorably impacted by a one-time royalty expense adjustment resulting
from the partial reversal of a provision for a patent claim.
The financial services and security segment gross margin decreased from
21.5% in the six-month period ended June 30, 2001 to 14.7% during the same
period in 2002. The financial services and security segment gross margin
suffered from an unfavorable product mix and from the underabsorption of certain
manufacturing fixed costs. In addition, gross profit recorded in the six-month
period ended June 30, 2001 had been favorably impacted by the one-time royalty
expense adjustment.
Operating loss
We recorded an operating loss before restructuring expenses of (euro)
85.0 million in the first half of 2002, compared to an operating loss of (euro)
29.3 million in the first half of 2001. The operating loss before restructuring
expenses amounted to (euro) 71.6 million in the first half of 2002, compared to
an operating loss of (euro) 7.9 million in the first half of 2001, excluding
goodwill amortization and our disposed operations, SkiData and Tag activities.
Operating expenses before restructuring expenses and goodwill amortization
decreased by 25% from (euro) 207.5 million in the first half of 2001 to (euro)
156.1 million in the first half of 2002, as a result of the disposal of our
Skidata and Tag businesses, the continued implementation of our restructuring
programs and the sustained tight cost controls and improved business processes.
Excluding disposed operations, operating expenses before restructuring expenses
and goodwill amortization were (euro) 187.3 million in the six-month period
ended June 30, 2001, as compared to (euro) 156.1 million in the same period in
2002.
Research and development expenses decreased 19%, from (euro) 62.3
million in the first half of 2001 to (euro) 50.5 million in the first half of
2002. Excluding disposed operations, research and development expenses decreased
9%, from (euro) 55.6 million in the six-month period ended June 30, 2001 to
(euro) 50.5 million in the same period in 2002. The effects of the
implementation of our restructuring plans and tight cost controls brought
additional savings compared to the prior period.
Selling and marketing expenses decreased 35%, from (euro) 92.6 million
in the first half of 2001 to (euro) 60.6 million in the first half of 2002.
Excluding disposed operations, selling and marketing expenses decreased by 26%
and amounted to (euro) 81.8 million in the first half of 2001 compared to (euro)
60.6 million in the first half of 2002. The decrease was due to the
implementation of our restructuring plans within our business units and the
implementation of cost reduction measures on marketing events and related
activities.
General and administrative expenses decreased 14% from (euro) 52.6
million in the first half of 2001 to (euro) 45.0 million in the first half of
2002. Excluding disposed operations, general and administrative expenses
decreased by 10% from (euro) 49.9 million in the first half of 2001 to (euro)
45.0 million in the first half of 2002, due primarily to a rightsizing of
management information system activities and sustained tight cost controls in
the six-month period ended June 30, 2002.
Goodwill amortization amounted to (euro) 13.4 million in the first half
of 2002, compared to (euro) 14.4 million in the first half of 2001. Goodwill
amortization recorded in the first half of 2001 included a one-time (euro) 1.1
million charge resulting from a write-off of goodwill previously recorded from
the acquisition of a 21% equity interest in Softcard due to Softcard's decision
to cease its operations. The rest of the decrease in goodwill amortization was
related to the disposal of our Skidata and Tag businesses.
Restructuring expenses
We recorded a restructuring charge of (euro) 62.5 million in the first
half of 2002, as compared to a restructuring charge of (euro) 28.5 million in
the first half of 2001. The restructuring charge recorded in the first half of
2002 was related to the restructuring and rationalization program announced on
February 6, 2002, and included the reduction of the workforce and the
rationalization of office facilities on a worldwide basis, pursuant to phase 1
and phase 2 of the 2002 restructuring program. The restructuring charge recorded
in the first half of 2001 was related to the restructuring program announced on
May 2, 2001 and was primarily attributable to the closure of a manufacturing
facility in Germany, a reduction of the workforce following the combination of
the our financial services and internet business security activities, and the
rationalization of office facilities on a worldwide basis (see Note 7 to our
financial statements included in Item 1 of this Form 6-K).
Net interest income and expense
We recorded net interest expense of (euro) 57.5 million in the first
half of 2002, compared to net interest income of (euro) 10.1 million in the
first half of 2001. Net interest expense incurred in the first half of 2002
included a (euro) 67 million non-cash interest expense following the provision
recorded to cover the risk of possible non-reimbursement of a loan granted by
one of our indirect subsidiaries in 2000 to Dr. Marc Lassus, our former Chairman
of the Board and a current Director. We have not forgiven the loan and expect to
be fully reimbursed by Dr. Lassus. Net interest income incurred in the first
half of 2001 included a (euro) 2.9 million interest expense following the
measurement at amortized cost of an advance made to a trade supplier. Excluding
these one-time items, net interest income reported in the first half of 2002
amounted to (euro) 9.5 million, as compared to net interest income of (euro) 13
million in the first half of 2001, reflecting primarily the decrease in our cash
balances and the decrease in the market interest rate. Interest income primarily
reflects the substantial equity investments by Texas Pacific Group in February
and May 2000, the proceeds of the initial public offering of our ordinary shares
in December 2000 and other capital injections from the exercise of warrants and
stock options by our shareholders and employees.
Other income and expense, net
We recorded net other expense of (euro) 9.5 million in the first half
of 2002, compared to net other expense of (euro) 14.6 million in the first half
of 2001. Net other expense in the first half of 2002 was primarily attributable
to losses on investments, as well as foreign exchange losses and minority
interests. Net other expense in the first quarter of 2001 consisted primarily of
foreign exchange losses and minority interests.
Income tax
We recorded an income tax credit of (euro) 28.9 million in the first
half of 2002, representing an effective tax rate of 14.4%, as compared to an
income tax credit of (euro) 15.4 million in the first half of 2001, representing
an effective tax rate of 32%. In the first half of 2002, our effective tax rate
declined due to the (euro) 67 million non-cash write-down of a loan granted to a
director.
Net loss
We recorded a net loss of (euro) 185.5 million in the first half of
2002, or (euro) 0.31 per share, as compared to a net loss of (euro) 46.9 million
in the first half of 2001, or (euro) 0.07 per share. The net loss primarily
reflected the decline in our operating income, the (euro) 67 million non-cash
write-down of a loan granted in 2000 to one of our directors, and the (euro)
62.5 million restructuring charge recorded in the first half of 2002, as
compared to the (euro) 28.5 million restructuring charge recorded in the same
period in 2001.
Liquidity and Capital Resources
Our financial position remained strong in the first half of 2002. Cash
and cash equivalents were (euro) 411.8 million at June 30, 2002 as compared to
(euro) 490.7 million at December 31, 2001. Excluding non-recurring items,
primarily restructuring charges, one-time royalty prepayment, amounts paid in
connection with a litigation expense and management severance costs accrued in
2001, cash outflows during the first half of 2002 were relatively limited. We
also used limited amounts of cash to fund our purchases of property, plant and
equipment and investments.
Operating activities used (euro) 70.9 million of cash during the first
half of 2002, compared to (euro) 49.2 million of cash used during the first half
of 2001. Net cash used in operating activities in the first half of 2002 was
impacted by four non-recurring items: (i) (euro) 15.5 million paid in connection
with our restructuring program, (ii) (euro) 11.2 million of a one-time royalty
prepayment for the period through 2004, (iii) (euro) 18.1 million paid with
respect to the exceptional costs relating to the Humetrix litigation and (iv)
(euro) 10.6 million paid in management severance costs accrued in 2001.
Excluding these exceptional items, net cash used in operating activities in the
first half of 2002 was limited to (euro) 15.6 million, as a result of
significant improvements produced by working capital management. Inventory
levels declined (euro) 33 million in the first half of 2002 as compared to
December 31, 2001, representing 71 days supply compared to 94 days at the end of
the first quarter of 2002 and 135 days at the end of June last year. Accounts
receivable declined (euro) 43 million as compared to December 31, 2001,
reflecting the lower revenue levels. We reported a record performance with
respect to the days of sales outstanding, at 53 days, compared to 63 days at the
end of the first quarter of 2002 and 75 days at the end of June last year.
Net cash used in investing activities in the first half of 2002 was
(euro) 33.1 million, compared to (euro) 122.8 million in the first half of 2001.
The decrease in cash used in investing activities was primarily due to the
decrease of capital expenditures. Capital expenditures were (euro) 22.3 million
in the first half of 2002 as compared to (euro) 71.5 million in the first half
of 2001. In the first half of 2002, capital expenditures were made primarily in
Europe, and included principally (euro) 11.8 million related to a research and
development and office building located in La Ciotat, France, which was under
construction as at June 30, 2002 and financed through a sale-leaseback
transaction. Cash used in investing activities in the first half of 2002 also
included (euro) 12.2 million in connection with investments in start-up
technology companies. Cash used in investing activities in the first half of
2001 included a (euro) 13 million cash disbursement for the purchase of 20% of
Skidata's issued share capital in anticipation of the sale of this subsidiary
which was completed during the third quarter of 2001, as well as investments
made primarily in two technology companies in the wireless communications
market. Cash used in investing activities in the first half of 2001 also
included a (euro) 14 million loan to Mr. Perez, our former Chief Executive
Officer, to fund tax liabilities relating to his receipt of a grant of free
shares in 2000.
Financing activities generated (euro) 2.5 million of cash during the
first half of 2002, compared to (euro) 6.9 million used by our financing
activities during the first half of 2001. The 2002 figure was primarily the
result of the (euro) 11.8 million proceeds generated by a sale-leaseback
transaction entered into to finance land and a research and development and
office building located in La Ciotat, France. Cash generated by financing
activities in the first half of 2002 was also impacted by the payment of
dividends to minority shareholders of one of our Asian subsidiaries in the
amount of (euro) 5.0 million. Negative cash flow from financing activities
during the first half of 2001 was principally attributable to the payment of
(euro) 8.0 million concerning expenses incurred in 2000 in connection with sales
of equity securities to Texas Pacific Group and with respect to our initial
public offering, the purchase of shares of Gemplus S.A. at fair market value for
(euro) 7.0 million and the payment of dividends to minority shareholders of one
of our Asian subsidiaries of (euro) 4.3 million.
We entered into a (euro) 150 million revolving credit facility in 1999
with a syndicate of international banking institutions that bears interest at a
floating rate. In July 2000, (euro) 52.5 million of loan commitments under the
revolving credit facility expired without being used. Out of the remaining
(euro) 97.5 million, (euro) 24.4 million expired in July 2002, (euro) 24.4
million will expire in July 2003 and (euro) 48.7 million in July 2004. As of
June 30, 2002, we had not drawn any amounts under the revolving credit facility.
We believe that our existing cash resources, our anticipated cash flow
from operations and amounts available for drawdowns under our working capital
facility are sufficient to provide for our foreseeable near term and medium term
liquidity needs. At June 30, 2002, cash and cash equivalents amounted to (euro)
411.8 million.
Item 3. Qualitative Disclosures About Market Risk
We develop products in our worldwide manufacturing centers and sell
these products and provide related services around the world. Generally, our
sales are made in the local currency of the place of delivery or where the
service is rendered, and part of our manufacturing costs are incurred in the
local currency of the place of each of our manufacturing sites. As a result, our
results of operations are affected by factors such as changes in foreign
currency exchange rates or weak economic conditions in foreign markets. To
minimize the impact of these factors on the profitability of our business and
our overall financial performance, we seek to provide cost efficient funding to
our business and our subsidiaries and to identify, evaluate and hedge financial
risks in cooperation with our subsidiaries around the world.
Our policy is to hedge against adverse changes in foreign currency
rates. The management of our hedging activity is carried out centrally by our
corporate treasury in accordance with the objectives and procedures established
by management and approved by our Audit Committee. Our operating policies cover
specific areas such as foreign exchange risk (including the use of derivative
financial instruments), interest rate risk and credit risk. Affiliated companies
are not permitted to enter into derivative contracts other than with our
corporate treasury. Derivative instruments are used for hedging purposes only.
Foreign exchange risk
We measure our foreign exchange exposure based on anticipated and
identified transactions, both on purchases and sales. Each of our subsidiaries
regularly measures its exposure and reports it to our corporate treasury. Our
corporate treasury department seeks to hedge our foreign currency exposure on
most of our firm and anticipated purchases and sales commitments denominated in
currencies other than its subsidiaries' functional currencies for periods
commensurate with its known or forecasted transactions. Our foreign currency
hedging contracts generally mature within twelve months. Our corporate treasury
uses currency derivative instruments such as foreign exchange forward contracts
and foreign exchange option contracts. These derivative instruments are
generally traded over-the-counter with major financial institutions. From its
trade date, each hedging operation is allocated to an underlying exposure.
The financing of most of our subsidiaries is managed by our corporate
treasury through inter-company current accounts, using foreign exchange spot and
forward transactions to convert our cash denominated in euros into the
subsidiary's functional currency. We place any excess liquidity in money market
investments with not more than three-month maturity dates. Our money market
investments are placed with major financial institutions in order to reduce our
credit risk exposure.
In addition, because we have subsidiaries located outside the euro-zone
whose functional currencies are different than the euro, the euro-denominated
value of our consolidated equity is exposed to fluctuations in exchange rates.
Equity changes caused by movements in foreign exchange rates are shown as a
translation difference in our consolidation.
Interest rate risk
We are not materially exposed to interest rates fluctuations. Our
indebtedness was significantly reduced during 2000 with the proceeds of our
capital increases and we have few fixed rate borrowings. Cash and cash
equivalents are invested in money market accounts that pay interest at a
floating rate. Debts and cash are mostly denominated in euros. As of June 30,
2002, we had not entered into any interest rate risk hedging transactions.
Equity risk in minority investments
We have several minority equity investments in publicly traded
companies. The book value of our minority equity investments in publicly traded
companies was totally provided for as of June 30, 2002. Because these
investments are relatively small, we currently do not have any outstanding
derivative financial instruments to hedge fluctuations in these marketable
equity investments.
Part II -Other Information
Item 1. Legal proceedings
We are subject to legal proceedings, claims, and litigation arising in the
ordinary course of business. Our management does not expect that the ultimate
costs to resolve these matters will have a material adverse effect on our
consolidated financial position, results of operations, or cash flows.
Item 2. Changes in securities
Not applicable
Item 3. Default upon senior securities
Not applicable
Item 4. Submission of Matters to a Vote of Security Holders
At the Annual General Meeting of shareholders held on April 17, 2002 in
Luxembourg, our shareholders adopted the following resolutions:
(a) approval of the financial statements of the Company for the year
ended December 31, 2001 in their consolidated and unconsolidated form.
(b) allocation of the results of the Company for the year ended December 31,
2001 by allocation of the annual losses to the carry forward account.
(c) grant of discharge to all directors of the Company who have been in office
during the year ended December 31, 2001 in respect of the proper performance of
their duties for the year ended December 31, 2001.
(d) authorization to the Company, or any wholly-owned subsidiary, to purchase,
acquire or receive shares in the Company, from time to time over the stock
exchange or in privately negotiated transactions, and in the case of acquisition
for value, at a price being no less than (euro) 1 and no more than (euro) 20 and
on such other terms as shall be determined by the Board of Directors of the
Company, provided such purchase is in conformity with Article 49-2 of the
Luxembourg Company Law and with applicable laws and regulations, such
authorization being granted for purchases completed on or before October 17,
2003.
(e) appointment of the following eight individuals as directors for a two-year
period to end at the annual general meeting deciding on the 2003 accounts (so
that the board of directors be composed of thirteen members).
The following individuals were elected to the board of directors: Dr.-Ing. Hasso
Freiherr von Falkenhausen, Mr. David Bonderman, Mr. Peter Kraljic, Mr. Daniel Le
Gal, Mr. Ronald W. Mackintosh, Mr. Ziad Takieddine, Mr. Gilles Lisimaque and Mr.
Thierry Dassault.
The annual meeting resolved to increase the size of the board of directors from
12 to 13 members and to propose Mr. Bonderman as a candidate for election. The
extraordinary general meeting of shareholders held on May 15, 2002 ratified the
increase of the board size from 12 to 13 members and the election of Mr.
Bonderman.
(f) authorization to the board of directors to delegate day to day management to
Mr. Ronald W. Mackintosh and to confirm his appointment as interim chief
executive officer (administrateur delegue) of the Company and to approve a total
remuneration package for the interim chief executive officer.
(g) authorization to the board of directors to appoint a new chief executive
officer (administrateur delegue) in replacement of the interim chief executive
officer and to delegate day to day management to the new permanent chief
executive officer as well as to approve the principles of the total remuneration
package for the new permanent chief executive officer in replacement of the
interim chief executive officer.
(h) the approval of the principles of the compensation of board members.
(i) reappointment of the independent auditors of the Company,
PriceWaterhouseCoopers, for a one-year period to end at the next annual general
meeting deciding on the 2002 accounts.
At the Extraordinary Meeting of shareholders held on April 17, 2002 in
Luxembourg, our shareholders adopted the following resolutions:
(a) change of the date of the annual general meeting to take place on the last
Tuesday of the month of April in each year and thus to amend accordingly the
Company's articles of incorporation.
(b) extension of the duration of the authorization to grant stock options within
the existing authorized share capital to the beneficiaries of the Gemplus stock
option plans until May 31, 2003.
(c) amendment of the number of shares in issue in the Company by the
cancellation of the 4,634,859 shares held by the Company pursuant to its share
repurchase program without reduction of the issued share capital of the Company
but with a consequential increase of the accounting par of the shares in issue
in the Company.
(d) reception of further own shares currently held by an indirect subsidiary of
the Company up to a total amount of 30,743,679 additional shares without
consideration and to cancel the 30,743,679 shares as and when received, without
reduction of the issued share capital of the Company.
(e) in view of the above resolution, authorization to any board member or the
General Counsel, or the Company Secretary, each acting alone and with full power
of substitution, to appear in front of a notary to record the receipt and
cancellation of such shares without reduction of the issued share capital and as
a consequence thereof to record an amendment of the articles of incorporation of
the Company.
At the Extraordinary General Meeting of shareholders held on May 15, 2002 in
Luxembourg, our shareholders adopted the following resolutions:
(a) ratification of the decision of the annual general meeting held on April 17,
2002 to increase the number of board members by adding a thirteenth board
member.
(b) ratification of the appointment of David Bonderman, a founding partner of
Texas Pacific Group, as a board member for a two-year period to end at the
annual general meeting deciding on the 2003 accounts.
Item 5. Other Information
Further information can be found on the Company in the Annual Report on Form
20-F filed with the Securities and Exchange Commission on July 1, 2002, as
amended on July 24, 2002.
Item 6. Exhibits and other reports on Form 6-K
(a) Exhibits:
Not applicable
(b) Other reports on Form 6-K:
A report on Form 6-K was filed in August 2002 reporting our press release and
analysts' presentation dated July 31, 2002, on our results of operations for the
second quarter of 2002.
A report on Form 6-K was filed in August 2002 containing our press release of
August 15, 2002 indicating that we would make a statement on the appointment of
our Chief Executive Officer at the end of August.
A report on Form 6-K was filed in August 2002 containing our press release of
August 30, 2002 reporting the appointment of our new Chief Executive Officer,
Mr. Mandl.
A report on Form 6-K was filed in September 2002 containing our press release of
September 24, 2002 reporting on board changes and a shareholder meeting.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
GEMPLUS INTERNATIONAL S.A.
Date: September 27, 2002
By: /s/ Yves Guillaumot
---------------------------
Name: Yves Guillaumot
Title: Chief Financial Officer
-----------------------------------