FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: SODEXHO ALLIANCE SA
CENTRAL INDEX KEY: 0001169715
STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MANAGEMENT SERVICES [8741]
IRS NUMBER: 000000000
FISCAL YEAR END: 0831
FILING VALUES:
FORM TYPE: 6-K
SEC ACT: 1934 Act SEC
FILE NUMBER:
FILM NUMBER:
BUSINESS ADDRESS:
STREET 1: 3 AVENUE NEWTON
STREET 2: 78180 MONTIGNY-LE-BRETONNEUX
CITY: FRANCE
STATE:
ZIP: 00000
BUSINESS PHONE: 33130857500
6-K
FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13A-16 OR 15D-16 OF THE
SECURITIES EXCHANGE ACT OF 1934
June 20, 2003
SODEXHO ALLIANCE SA
3, avenue Newton
78180 Montigny-le-Bretonneux
France
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports
under cover 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
If "Yes" is marked, indicate below the file number assigned to the registrant in
connection with Rule 12g3-2(b):
Contents: Consolidated Financial Statements as of and for the year ended
February 28, 2003
EXHIBIT LIST
Exhibit Description
99.1
Consolidated Financial Statements as of and for the year ended February 28, 2003
SIGNATURES
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.
SODEXHO ALLIANCE SA
By: /s/ Sian Herbert-Jones
-------------------------------
Name: Sian Herbert-Jones
Title: Chief Financial Officer
Date: June 20, 2003
Exhibit 99.1
Consolidated Financial Statements as of and for the year ended February 28, 2003
Code EURONEXT: EXHO.PA / Code NYSE: SDX
This document may contain "forward-looking statements" within the meaning of
the United States Private Securities Litigation Reform Act of 1995. These
include, but are not limited to, statements regarding anticipated future
events and financial performance with respect to our operations. Forward-
looking statements can be identified by the fact that they do not relate
strictly to historical or current facts. They often include words like
"believe", "expect", "anticipate", "estimated", "project", "plan", "pro forma"
and "intend" or future or conditional verbs such as "will", "would" or "may".
Factors that could cause actual results to differ materially from expected
results include, but are not limited to, those set forth in our Registration
Statement on Form 20-F, as filed with the Securities and Exchange Commission
(SEC), the competitive environment in which we operate,changes in general
economic conditions and changes in the French, American and/or global financial
and/or capital markets. Forward-looking statements represent management's
views as of the date they are made, and we assume no obligation to update any
forward-looking statements for actual events occurring after that date. You
are cautioned not to place undue reliance on our forward-looking statements.
SODEXHO Group
Consolidated Financial Statements
February 28, 2003
I. Consolidated Income Statement
6 months % revenues Change 6 months Year ended
ended ended August 31,
February 28, February 2002
2003 28, 2002
(in millions of euro)
REVENUES 6,168 100% (6.1%) 6 572 12,612
Other income 21 22 54
Purchases (2,121) (34.4%) (2,437) (4,559)
Employee costs (2,874) (46.6%) (2,990) (5,868)
Other external
charges (779) (12.6%) (733) (1,464)
Taxes, other
than income taxes (36) (0.6%) (38) (74)
Depreciation and
increase in provisions (85) (1.4%) (82) (173)
------ ------ ------ ----- -----
EARNINGS BEFORE
INTEREST, EXCEPTIONAL
ITEMS,INCOME TAXES,
INCOME FROM EQUITY
METHOD INVESTEES,
GOODWILL AMORTIZATION
AND MINORITY INTERESTS
(EBITA) 294 4.8% (6.2%) 314 528
------ ------ ------ ----- -----
Financial expense, net (82) (1.3%) 48.5% (55) (166)
------ ------ ------ ----- -----
INCOME BEFORE
EXCEPTIONAL ITEMS,
INCOME TAXES,INCOME
FROM EQUITY METHOD
INVESTEES, GOODWILL
AMORTIZATION AND
MINORITY INTERESTS 212 3.4% (17.9%) 259 362
Exceptional (expense)
income, net (7) (0.1%) (35.8%) (12) 3
Income taxes (83) (1.4%) (2.9%) (81) (126)
------ ------ ------ ----- -----
NET INCOME BEFORE
INCOME FROM EQUITY
METHOD INVESTEES,
GOODWILL AMORTIZATION
AND MINORITY INTERESTS 122 2.0% (26.9%) 166 259
Net income (loss)
from equity method
investees 2 2 4
Goodwill amortization (32) (0.5%) (33) (67)
------ ------ ------ ---- -----
NET INCOME BEFORE
MINORITY INTERESTS 92 1.5% (32.5%) 135 196
Minority interests 6 0.1% (25.0%) 7 13
------ ----- ------ ---- -----
GROUP NET INCOME 86 1.4% (33.0%) 128 183
====== ===== ====== ==== =====
EARNINGS PER SHARE
(in euro) 0.54 (33.0%) 0.81 1.15
====== ====== ==== =====
DILUTED EARNINGS PER
SHARE (in euro) 0.53 (33.0%) 0.79 1.13
====== ====== ==== =====
II. Consolidated balance sheet
February 28, August 31, February 28,
2003 2002 2002
FIXED AND INTANGIBLE ASSETS, NET
Goodwill 1,505 1,616 1,768
Intangible assets 2,732 2,940 3,174
Property, plant and
equipment 358 371 409
Financial investments 78 67 71
Equity method investees 9 11 7
----- ----- -----
Total fixed and
intangible assets,
net 4,682 5,005 5,429
CURRENT AND OTHER ASSETS
Inventories 178 170 203
Accounts receivable, net 1,603 1,456 1,747
Prepaid expenses, other
receivables and other
assets 612 606 622
Marketable securities 544 553 598
Restricted cash 152 165 147
Cash 593 589 705
------ ------ -----
Total current and
other assets 3,682 3,539 4,022
------ ------ -----
TOTAL ASSETS 8,364 8,544 9,451
====== ====== =====
SHAREHOLDERS'EQUITY AND LIABILITIES
(in millions of euro)
GROUP SHAREHOLDERS'EQUITY
Common stock 636 636 636
Additional paid in
capital 1,191 1,191 1,191
Consolidated reserves 365 571 769
----- ----- -----
Total group
shareholders'equity 2,192 2,398 2,596
MINORITY INTERESTS 68 73 78
PROVISIONS FOR CONTINGENCIES 85 99 76
LIABILITIES
Borrowings 2,616 2,693 2,989
Accounts payable 1,245 1,251 1,419
Vouchers payable 763 732 822
Other liabilities 1,395 1,298 1,471
----- ----- -----
Total liabilities 6,019 5,974 6,701
----- ----- -----
TOTAL SHAREHOLDERS' EQUITY
AND LIABILITIES 8,364 8,544 9,451
===== ===== =====
III Consolidated cash flow statement
6 months ended 6 months ended Year ended
February 28, February 28, August 31,
2003 2002 2002
OPERATING ACTIVITIES
Consolidated net income
before income (loss)
from equity method
investees and minority
interests 90 133 192
Noncash items:
Depreciation and
provisions 96 87 254
Deferred taxes 6 (9) 5
Losses (gains) on disposal
and other, net of tax 15 0 (61)
--- --- ---
Cash provided by
operating activities 207 211 390
--- --- ---
Dividends received from
equity method investees 1 1 1
Change in working
capital from operating
activities (86) 105 228
--- --- ---
Net cash provided by
operating activities 122 317 619
--- --- ---
INVESTING ACTIVITES
Tangible and intangible
fixed assets (121) (129) (297)
Fixed asset disposals 9 16 33
Change in consolidation
scope (4) (81) (48)
Change in working
capital from investing
activities (7) (20) (3)
--- --- ---
Net cash used in
investing activities (123) (214) (315)
--- --- ---
FINANCING ACTIVITIES
Dividends paid to parent
company shareholders (98) (88) (87)
Dividends paid to
minority shareholders of
consolidated companies (6) (9) (15)
Increase in shareholders'
equity 0 59 59
Proceeds from borrowings 130 177 1,120
Repayment of borrowings (90) (90) (1,146)
Change in working capital
from financing activities 89 101 (1)
--- --- -----
Net cash provided by
(used in) financing
activities 25 150 (70)
--- --- -----
INCREASE IN NET CASH, 24 253 234
CASH EQUIVALENTS AND
MARKETABLE SECURITIES
Cash, cash equivalents,
and marketable securities,
as of beginning of period 1,307 1,213 1,213
Add: opening provisions 23 1 1
Cash, cash equivalents,
and marketable securities,
as of end of period 1,289 1,450 1,307
Add: closing provisions 12 1 23
Net effect of exchange
rates on cash 53 16 118
----- ----- -----
INCREASE IN NET CASH,
CASH EQUIVALENTS,
AND MARKETABLE
SECURITIES 24 253 234
===== ===== =====
Notes to the consolidated Financial Statements
I. SIGNIFICANT EVENTS
On September 3, 2002, the Group, through its American subsidiary Sodexho,
Inc., acquired 83.10% of Patriot Medical Technologies Inc, an American
company based in Tennesee, for 3.1 million US dollars (2.8 million euro)
This company, which was created in 1997 and specializes in engineering
services to the medical sector, has annual revenues of approximately 30
million US dollars.
The goodwill resulting from this transaction of 8.4 million euro will be
amortized over 30 years.
This company is fully consolidated in Sodexho Allianc's consolidated
financial statements and contributed an operating loss of 0.4 million euro
for the 6 months ended February 28, 2003.
II. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, VALUATION AND CONSOLIDATION
METHODS, AND PRIOR YEAR COMPARATIVES
The Group financial statements have been prepared in accordance with
accounting principles established by the Comite de la Reglementation
Comptable No 99-02 ("CRC Regulation 99-02") and the Opinion of the Conseil
National de la Comptabilite in relation to Interim Financial Statements in
France.
The interim consolidated financial statements have been prepared in
accordance with the same accounting principles as the year end financial
statements, including the tax calculation, which, given the nature of our
activities, could be calculated with sufficient accuracy.
There have been no changes in accounting methods during the 6 months ended
February 28, 2003.
Amounts in tables are expressed in millions of euros.
1. Revenue recognition
In the Food and Management Services, Remote Sites and River and Harbor
Cruise activities, revenue is recognized in the period in which
services are provided pursuant to the terms of the contractual
relationships with clients. Revenues for the service voucher segment
include commissions received from customers, commissions received from
affiliates, and investment income realized on the nominal value of the
vouchers during the period from their issuance through redemption.
2. Employee costs
- Retirement benefits
The Group's benefit obligations relating to defined benefit pension
and retirement indemnity plans are recorded in the balance sheet. For
funded plans to which the subsidiary makes a contribution, the amount
of the contribution is recorded as the annual expense of the plan.
- Stock options Sodexho Alliance has acquired treasury shares (which
are recorded in deposits and marketable securities) in connection with
its stock option plans. A liability is recorded if at the closing
date of the period, the market price of the shares acquired is
superior to the exercise price of the options awarded (and
potentially exercisable). If the number of treasury shares acquired
is less than the number of "in the money" options awarded, a liability
is recorded for the difference between the market price at February 28
and the exercise price, multiplied by the number of remaining shares to
be acquired for the applicable tranche of stock options.
3. Earnings per share
Earnings per share and diluted earnings per share are calculated using
methods recommended by Advice No. 27 of the Ordre des Experts Comptables.
Earnings per share is calculated by dividing group net income by the
average number of shares outstanding during the year. In the calculation
of diluted earnings per share, the denominator is increased by the number
of potential shares outstanding, and the numerator is increased by the
net-of-tax interest income (calculated at the Taux Moyen Mensuel du
Marche Monetaire Euro, a French reference rate) on the proceeds which
would have resulted from the issuance of these shares. The potential
shares included in diluted earnings per share relate to stock options
awarded but not yet exercised and warrants outstanding from the 1996 bond
issuance exercisable until June 2004.
4. Foreign currency transactions and translation
For subsidiaries located in countries with stable currencies, assets and
liabilities are translated using the end of period exchange rate. Income
statement and cash flow statement line items are translated using the
average exchange rate for the 6 month period, calculated using monthly
averages. The monthly average exchange rates are calculated as the
average of the end of month rate and the rate for the prior month.
Exchange rates used are obtained from the Bourse de Paris and
other international financial markets. The difference between the
translation of the income statement at average and period end rates,
as well as the difference between the opening balance sheet accounts as
translated at beginning and end of period rates is recorded in
shareholders' equity. Foreign exchange gains and losses resulting from
intragroup transactions in foreign currencies during the year are
recorded in the income statement.
The financial statements of the following subsidiaries reflect currency
devaluations as required by local regulations:
- Sodexho Chile (sub-consolidation)
- Sodexho Pass Chile - Sodexho de Colombia
- Promocupon (Mexico) - Sodexho Servicios Operativos (Mexico)
- Sodexho Maintenimientos y servicios (Mexico)
- Sodexho Toplu Yemek (Turkey)
- Luncheon Tickets (Argentina)
- Siges Chile - BAS (Chile)
- Sodexho Peru
- Prestaciones Mexicanas SA de CV
- Sodexho Servicios de Personal (Mexico)
- Sodexho Restoran Servisleri (Turkey)
- Sodexho Argentina
The inclusion of monetary corrections imposed by local regulators on
these subsidiaries in the consolidated financial statements had no impact
on the income statement. Foreign currency translation differences for
these subsidiaries are recorded in the currency translation adjustment
account in shareholders' equity in the same manner as for the
subsidiaries in countries with stable currencies.
For subsidiaries located in highly inflationary countries (Brazil,
Colombia, Mexico and Venezuela), differences between net income
translated at average and period-end rates are included in net financial
expense. Translation differences on monetary assets and liabilities
denominated in foreign currencies are recorded in the income statement.
Translation differences related to a monetary component of a net
investment in a company within a consolidated foreign subsidiary are
recorded in consolidated shareholders' equity until the sale or
liquidation of the net investment.
5. Business combinations
The assets and liabilities of acquired companies have been recorded at
their respective fair values effective September 1, 2000. Due to the
insignificant impact, the accounting for acquisitions made prior to
September 1, 2000 has not been restated.
5.1 Intangible assets
The initial inclusion of the companies SODEXHO, INC., WOOD DINING
SERVICES, SOGERES, SODEXHO SERVICES GROUP LTD, SODEXHO SCANDINAVIAN
HOLDING AB, and UNIVERSAL SERVICES in the consolidation scope at their
fair value led us to record intangible assets which represent the
value attributed to the significant market shares held by these six
companies in their principal geographic markets (the United States,
France, the United Kingdom and Ireland, Netherlands, Australia and
Sweden).
Market share is principally determined based on an average of
multiples of revenues and EBITA achieved by the acquired companies in
the applicable countries and is reviewed annually for diminution in
value. If there is a significant diminution in the market share value
for more than two consecutive years, as recomputed based on actual
results of the applicable subsidiary as compared to the original
calculation, it is written down. Market shares are not amortized in
the consolidated financial statements, and no deferred taxes are
recorded on market shares.
As of February 28, 2003, market share pertaining to our subsidiary
SODEXHO AUSTRALIA had been provisioned by 1.2 million euro. Additional
information pertaining to market share is provided in note IV 5.
5.2 Goodwill
Goodwill represents the excess of acquisition cost over the identified
assets and liabilities assumed, as of the initial inclusion of an
acquired company in the consolidation scope. Due to the long-term
nature of the Group's business, goodwill is generally amortized over
thirty years (on a pro rata basis in the year of acquisition).
The value of goodwill is analyzed each period end with respect to the
net assets and projections of the subsidiary. During the 6 months
ended February 28, 2003, an exceptional charge of 1 million euro
relating to the non-amortized balance of goodwill of our subsidiary
Armement Le Buisson, was recorded following the sale of its holdings
in the Societe d'Exploitation des Croisieres Nantaises (SECN).
Additional information pertaining to goodwill balances is provided in
note IV 4.
5.3 Property, plant and equipment
Leased assets are recorded on the balance sheet as capital leases in
instances where a Group company is deemed to bear substantially all of
the risks and rewards of the leased asset. A corresponding obligation
is recorded as a liability, and the related rental expense is
allocated between depreciation and interest expense in the income
statement.
Depreciation of property, plant and equipment is calculated on a
straight-line basis over the estimated useful lives of the respective
assets giving consideration to the local economic conditions and
climate. The following useful lives are generally used by Group
companies:
- Software 25%
- Enterprise resource planning (ERP) systems 20%
- Buildings 3.33% - 5%
- Facilities and fixtures 10%
- Plant and machinery 10% - 50%
- Vehicles 25%
- Office and computer equipment 20% - 25%
- Other fixed assets 10%
Organization costs are amortized over a maximum duration of five
years.
6. Deferred income taxes
Deferred income taxes are recorded on temporary differences between
the tax basis of assets and liabilities and their carrying values for
financial reporting purposes and on consolidation adjustments.
As the pattern of temporary difference reversals is not fixed,
deferred taxes recorded on the balance sheet have not been present
valued. In addition, deferred tax assets pertaining to net operating
loss carry-forwards are only recorded in cases where recovery is
deemed probable.
A reconciliation of income taxes computed at SODEXHO ALLIANCE'S
statutory rate to the actual income tax provision is provided in note
IV 3.
7. Vouchers payable
Vouchers payable represents the face value of vouchers in circulation
or presented to SODEXHO by the customer but not yet reimbursed to the
affiliate.
8. Financial instruments
Group policy is to finance acquisitions through borrowings in the
acquired company's currency generally at fixed rates of interest. In
most cases where variable rate debt has been negotiated, the variable
rate interest is swapped into fixed rates through the use of
cross-currency or interest-rate swap agreements. Similarly, in most
cases where acquisition financing has been negotiated in a currency
other than that of the acquired company, a cross-currency or currency
swap agreement is negotiated.
All such agreements are designated as hedges at contract inception. As
a policy, the Group does not engage in speculative transactions. For
swaps negotiated on inter-company debt, the difference between the
amount of the debt at the originally negotiated rates and at the
swapped rates is recorded as debt. For other swap agreements, the
related loans and borrowings are recorded at the swapped interest rate
and currency.
The fair values of financial instruments are presented in note IV 20.
9. Deferred financing charges
Deferred financing costs incurred in connection with bond issuances
are amortized over the maturity of the related debt.
III. ANALYSIS OF OPERATING ACTIVITIES AND GEOGRAPHIC INFORMATION
6 months ended Change 6 months ended
February 28, February 28,
2003 2002
(in millions of Euro)
REVENUES
o By Operating Activity:
Food and Management Services
North America 2,950 (9.0%) 3,241
United Kingdom and Ireland 756 (12.2%) 862
Continental Europe 1,799 4.8% 1,716
Rest of the World 234 (6.6%) 281
Remote Sites 270 (10.5%) 301
Service Vouchers and Cards 127 (8.0%) 138
River and Harbor Cruises 32 (1.7%) 33
----- ------ -----
TOTAL 6,168 (6.1%) 6,572
===== ===== =====
o by Geographic Region:
North America 3,047 (9.2%) 3,355
United Kingdom and Ireland 810 (10.8%) 909
France 877 3.5% 847
Rest of Europe 1,029 6.0% 970
Rest of the World 405 (17.6%) 491
----- ------ -----
TOTAL 6,168 (6.1%) 6,572
===== ===== =====
Net Fixed Assets
By Operating Activity :
Food and Management Services
North America 2,768 (17.4%) 3,353
United Kingdom and Ireland 876 (11.5%) 990
Continental Europe 688 (0.9%) 694
Rest of the World 54 (26.2%) 72
Remote Sites 90 (13.8%) 105
Service Vouchers and Cards 123 (16.2%) 147
River and Harbor Cruises 26 (6.8%) 28
Holding Companies 57 42.9% 40
----- ----- -----
TOTAL 4,682 (13.8%) 5,429
===== ===== =====
By Geographic Region:
North America 2,849 (17.4%) 3,450
United Kingdom and Ireland 883 (11.4%) 996
France 376 0.3% 375
Rest of Europe 412 2.2% 403
Rest of the World 162 (20.1%) 205
----- ------ -----
TOTAL 4,682 (13.8%) 5,429
===== ===== =====
EBITA (before corporate expenses):
By Operating Activity:
Food and Management Services
North America 172 (10.1%) 191
United Kingdom and Ireland 5 (72.6%) 19
Continental Europe 90 22.8% 73
Rest of the World 1 - (1)
Remote Sites 10 (26.2%) 14
Service Vouchers and Cards 42 (6.0)% 44
River and Harbor Cruises (5) - (8)
Holding Companies (21) 11.3% (18)
--- ----- ---
TOTAL 294 (6.2%) 314
=== ==== ===
IV ANALYSIS OF THE INCOME STATEMENT, BALANCE SHEET AND STATEMENT OF CASH FLOWS
Note 1) - Financial Expense, Net
6 months 6 months
ended ended
February 28, February 28,
2003 2002
Interest income 13 14
Net variation in financial provisions (1) (3)
Net exchange gains (7) 19
Interest expense (87) (85)
---- ----
(82) (55)
==== ====
The decrease in the financial result arises from 26 million euro of
exchange losses: 12 million euro in exchange gains had been recorded
in 2001/2002 by our subsidiary Luncheon Ticket on deposits in strong
currencies before the devaluation of the Argentinian peso.
The increase in the dollar against the euro also enabled us to realize
5 million in exchange gains on cash held in dollars by the holding
company during the first 6 months of fiscal 2001/2002; the balance of
this cash in dollars realized an exchange loss of 2 million euro
during the first six months of fiscal 2002/2003.
In the first half of 2002/2003, our subsidiary Sodexho Holdings Ltd
recorded an exchange loss of 5 million euro arising from Euro/Sterling
differences on part of its borrowings.
Interest expense primarily included 22 million euro of interest
expense on the debt arranged in April 2001 at our subsidiary, Sodexho,
Inc., and interest of 45 million euro on the 1996, 1999 and 2002 bond
issuances.
Note 2) - Exceptional Items
The net exceptional loss of 7 million euro is explained principally by
a provision recorded on Sodexho Alliance shares held in connection
with the exercise of certain employee stock options. To the extent
that these treasury shares were related to options whose exercise
price was higher than the fair value of the shares for February 2003
of 22.82 euro per share, the Group recorded a provision and
corresponding charge for the difference from their cost.
Note 3) - Income Tax Provision
Following is a reconciliation of income taxes computed at Sodexho
Alliance's statutory rate to the actual income tax provision for the
year ended February 28, 2003
Income before exceptional items, income taxes,
income from equity investees and goodwill
amortization 212
Exceptional items (7)
----
Income before taxes 205
Sodexho Alliance tax rate 35.43%
Theoretical tax provision (73)
Effect of differing jurisdictional tax
rates (4)
Permanent differences (2)
Other tax (4)
Net operating loss carryforwards
utilized in the current year but generated in
prior years and not previously recognized 4
Current year non-recognition of net
operating loss carryforwards (3)
----
Actual tax provision (82)
Withholding tax (1)
----
Total income tax (83)
====
Note 4) - Goodwill
Principal goodwill amounts were as follows :
Additions Disposal
during during
August the the Translation February
31, 2002 year year adjustment 28, 2003
Sodexho, Inc.
(including Wood
Dining Services) gross 1,039.8 8.8 (68.9) 979.7
amortization (61.2) (17.0) 3.5 (74.7)
Sodexho Services
Group gross 272.1 (19.2) 252.9
amortization (68.8) (4.5) 5.2 (68.1)
Sodexho Pass do
Brazil gross 63.4 1.3 (3.6) 61.1
amortization (9.7) (1.0) 0.3 (10.4)
Sodexho
Management
Services gross 56.0 (4.0) 52.0
amortization (9.0) (0.9) 0.7 (9.2)
Sogeres gross 56.0 56.0
amortization (2.1) (0.9) (3.0)
Sodexho
Scandinavian
Holding AB gross 53.7 0.5 54.2
amortization (9.0) (0.9) (9.9)
Sodexho Espana gross 28.5 28.5
amortization (7.4) (0.5) (7.9)
Sodexho Belgique gross 22.9 22.9
amortization (8.0) (0.4) (8.4)
Tillery Valley
Foods gross 22.7 (1.6) 21.1
amortization (4.5) (0.4) 0.4 (4.5)
Luncheon Tickets gross 22.5 22.5
amortization (3.0) (0.4) (3.4)
Sodexho Italie gross 17.9 17.9
amortization (2.4) (0.3) (2.7)
Universal
Services gross 17.2 17.2
amortization (1.6) (0.3) (1.9)
Other goodwill
(less than 15
million euro) gross 172.4 1.8 2.7 (4.7) 166.8
amortization (42.7) (4.1) (2.7) 0.6 (43.5)
------ ----- ---- ---- -----
Total goodwill gross 1,845.1 12.4 2.7 (102.0) 1,752.8
amortization (229.4) (31.6) (2.7) 10.7 (247.6)
------ ----- ---- ---- -------
Net 1,615.7 (19.2) 0 (91.3) 1,505.2
======= ===== ====== ===== =======
Note 5) - Intangible Assets
Addi- Dispo- Changes
August tions sals in Trans-
31, 2002 during during consoli- lation February
the the dation adjust- 28, 2003
year year scope ments
Market Shares:
North America
(FMS) 1,851.0 (162.9) 1,688.1
North America (RS) 44.4 (3.9) 40.5
United Kingdom and
Ireland 589.3 (42.2) 547.1
Netherlands 86.1 86.1
Sweden 77.9 0.2 78.1
Australia 10.2 10.2
France 137.0 137.0
------- ----- ----- ----- ------- -------
Total Cost 2,795.9 0.0 0.0 0.0 (208.8) 2,587.1
Diminutions in value (1.2) (1.2)
------- ----- ----- ----- ------- -------
Net book
value 2,794.7 0.0 0.0 0.0 (208.8) 2,585.9
Other Intangible Assets:
Cost 190.6 24.3 3.6 (0.3) (12.6) 198.4
Accumulated
amortization and
diminutions in
value (45.2) (9.6) (0.3) 2.4 (52.1)
------ ---- ---- ---- ---- -----
Net book 145.4 14.7 3.3 (0.3) (10.2) 146.3
value
TOTAL:
Cost 2,986.5 24.3 3.6 (0.3) (221.4) 2,785.5
Accumulated
amortization and
diminutions in value (46.4) (9.6) (0.3) 2.4 (53.3)
------- ----- ----- ----- ------ -------
Net book 2,940.1 14.7 3.3 (0.3) (219.0) 2,732.2
value
======= ===== ===== ===== ====== =======
FMS : Food and Management Services
RS : Remote Sites
Note 6) - Property, Plant and Equipment
Changes Trans-
Additions Disposals in consoli- lation
August during during dation adjust- February
31, 2002 the year the year scope ments 28, 2003
TOTAL
Cost 924.2 66.3 30.1 0.5 (53.3) 907.6
Diminutions in
value (553.6) (56.3) (25.9) 0.3 33.8 (549.9)
------ ----- ---- ---- ------ ------
Net book
value 370.6 10 4.2 0.8 (19.5) 357.7
===== ===== ==== ==== ====== ======
- Capital Leases
Assets recorded under capital lease arrangements totaled 121 million
euro gross, 81 million euro accumulated, and 40 million euro net as of
February 28, 2003 (44 million euro net as of August 31, 2002).
Increase
(decrease) Changes Trans-
during in conso- lation
August the lidation adjust- February
31, 2002 year scope ments 28, 2003
Investment securities
Cost 19.5 0.3 13.4 (0.5) 32.7
Diminutions in value (8.6) 0.0 0.0 0.1 (8.5)
----- ---- ---- ---- -----
Net book value 10.9 0.3 13.4 (0.4) 24.2
Other investments
Cost 23.3 (0.5) 0.0 (0.2) 22.6
Diminutions in value (0.8) (0.5) 0.0 0.0 (1.3)
---- ---- ---- ---- -----
Net book value 22.5 (1.0) 0.0 (0.2) 21.3
Receivables from investees
Cost 14.2 0.0 0.0 (0.6) 13.6
Diminutions in value 0.0 0.0 0.0 0.0 0.0
---- ---- ---- ---- -----
Net book value 14.2 0.0 0.0 (0.6) 13.6
Cost 7.5 (1.4) 0.0 (0.1) 6.0
Diminutions in value (0.1) 0.0 0.0 0.0 (0.1)
---- ---- ---- ---- ----
Net book value 7.4 (1.4) 0.0 (0.1) 5.9
Cost 12.9 (0.2) (0.2) 0.2 12.7
Diminutions in value 0.0 0.0 0.0 0.0 0.0
---- ---- ---- ---- ----
Net book value 12.9 (0.2) (0.2) 0.2 12.7
Total financial investments
Cost 77.4 (1.8) 13.2 (1.2) 87.6
Diminutions in value (9.5) (0.5) 0.0 0.1 (9.9)
---- ---- ---- ---- ----
Net book value 67.9 (2.3) 13.2 (1.1) 77.7
==== ==== ==== ==== ====
(*) These items are included in working capital in the cash flow statement.
- Significant investment securities
Significant investment securities include a 13 million euro investment in 100%
of PAKZON BV, a company deconsolidated in the first half of 2002-2003 and
which is being liquidated; a 3 million euro investment in 15.8% of STADIUM
AUSTRALIA MANAGEMENT; a 3 million euro investment in 9.3% of SODEX JAPAN
COMPANY LTD and a 1 million euro investment in 10.7% of SOCIETE PRIVEE DE
GESTION.
Note 8) - Investments in Equity Investees
Gross Current Changes Gross
balance, year net in consoli- Translation balance,
August income dation adjustments February
31, 2002 (loss) scope and other 28, 2003
Equity method
investees 10.9 1.5 (1.0) (2.6) 8.8
Note 9) - Inventories and work in progress
Inventories principally comprise food and other consumable items with
a high turnover rate and are valued on a first in first out basis.
Note 10) - Prepaid Expenses, Other Receivables and Other Assets
Gross Diminutions Gross Diminutions
value, in value, value, in value,
February February August 31, August 31,
28, 2003 28, 2003 2002 2002
Advances 8 10
Other operating
receivables 256 (1) 238 (2)
Investment
receivables 2 1
Financing
receivables 1 1
---- --- ---- ----
Total other receivables 267 (1) 250 (2)
Prepaid expenses 68 64
Deferred financing
charges 25 29
Other deferred
charges (*) 158 155
Net deferred tax
asset 95 110
---- --- ---- ----
Total 613 (1) 608 (2)
==== === ==== ====
(*) This item is classified as fixed assets in the cash flow statement.
Note 11) - Accounts and Other Receivables
Due Net
Gross Diminution Net book Due from Due book
values, in value, value, within one to after value
February February February one year five five August
28, 2003 28, 2003 28, 2003 years years 31,2002
Accounts
receivable 1,661 58 1,603 1,587 16 0 1,456
Other
receivables 267 1 266 197 69 0 248
Prepayments 68 0 68 62 6 0 64
The allowance for doubtful accounts represents 3.5% of accounts
receivable as of February 28, 2003.
Concentration of credit risk within accounts receivable is limited
because of the large customer base. The Group generally does not
require collateral or specific guarantees.
Note 12) - Deferred Charges
Net
Net book book
value, Due Due from value,
February within one to Due after August
28, 2003 one year five years five years 31, 2002
Deferred
financing costs 25 6 17 2 29
Deferred charges 158 42 78 38 155
Deferred financing costs are amortized over the maturity period of the
related debt.
As of February 28, 2003, deferred charges mainly include 119 million
euro of investments in client facilities in the United States, which are
amortized over the life of the related contract, and bid costs on long-term
contracts, which are amortized over the shorter of the life of the related
contract and ten years.
Note 13) - Deferred taxes
February 28, August 31,
2003 2002
Deferred tax assets 95 110
Deferred tax liabilities (16) (18)
--- ---
Net deferred tax assets 79 92
=== ===
As of February 28, 2003, deferred tax assets which were not recorded
because their realization was not considered probable totaled 25
million euro.
Breakdown of deferred taxes
Deductible temporary differences
- Staff cost provisions 84
- Other temporary differences (24)
Net operating loss carryforwards 19
-----
TOTAL 79
=====
Note 14) - Deposits and marketable securities
Deposits and marketable securities include 2,566,529 shares in Sodexho
Alliance purchased for a total amount of 98 million euro. These shares
are to be used to fulfill our obligation with respect to Sodexho, Inc.
employees, who held Sodexho Marriott Services, Inc. stock options
which were transformed into equivalent options to purchase Sodexho
Alliance shares in connection with our acquisition of the remaining
53% of Sodexho Marriott Services, Inc. As a result of the decline in
value of Sodexho Alliance shares as of February 28, 2003, the shares
(only 1,325,126 shares are exercisable) potentially in excess of those
needed to fund these obligations were provisioned by 9 million euro in
order to reflect their market value as of February 28, 2003.
Deposits and marketable securities represent short-term cash
investments and are stated at the lower of cost or net realizable
value.
The fair values of deposits and marketable securities are shown in
note IV.20.
Note 15) - Restricted cash
Restricted cash consists of funds set aside in order to comply with
regulations governing the issuance of restaurant vouchers in France
(139 million euro) and as a guarantee for certain commitments entered
into by Mexican affiliates (13 million euro).
Note 16) - Shareholders' Equity
Changes in shareholders' equity are as follows (in millions of euro):
Foreign
Shares Additional Retained currency Treasury Group Share-
outstan- Common paid-in earn- transla- shares net holders'
ding stock capital ings tion income equity
Share
holders'
equity,
August
31,
2001 157,559,654 630 1,141 441 86 (31) 138 2,405
Share
capital 1,461,762 6 50 56
Dividend
payments by
the holding
company (net
of dividends
on treasury
shares) 51 (138) (87)
Net income for
the period 183 183
Foreign
currency
translation
adjustment 3 (162) (159)
------------ ------ ------ ---- ----- ----- ---- ------
Share 159,021,416 636 1,191 495 (76) (31) 183 2,398
holder'
equity,
August
31, 2002
Share 149 0
capital
increase
Dividend
payments by
the holding
company (net 86 (183) (97)
of dividends
on treasury
shares)
Net income for 86 86
the period
Foreign
currency
translation
adjustment (195) (195)
---------- ------ ------ ---- ----- ----- ---- ------
Share-
holders'
equity,
February
28,
2003 159,021,565 636 1,191 581 (271) (31) 86 2,192
=========== ====== ====== ==== ===== ===== ==== ======
Indirectly Held Treasury shares:
As of February 28, 2003, SOFINSOD had a 5.57% indirect interest in
SODEXHO ALLIANCE S.A. through its 14.4% interest in the capital of
BELLON SA, which in turn holds 38.69% of SODEXHO ALLIANCE S.A.
As of February 28, 2003, SOFINSOD and ETINBIS together had a 1.59%
indirect interest in SODEXHO ALLIANCE S.A., through their respective
56.88% and 43.11% interests in LA SOCIETE FINANCIERE DE LA PORTE
VERTE, which in turn owns 4.10% of BELLON S.A., which in turn holds
38.69% of SODEXHO ALLIANCE S.A.
Note 17)- Minority Interests
Changes in minority interests are as follows:
February 28, August 31,
2003 2002
Minority interests, beginning of year 73 131
Share capital increase 0 0
Dividends paid (6) (15)
Net income for the period 6 13
Change in consolidation scope (3) (54)
Currency translation and other (2) (2)
---- ----
Minority interests, end of year 68 73
==== ====
Note 18)- Provisions for Contingencies and Losses
Provisions for contingencies and losses include the following
amounts:
Release Transla- Change
without tion in
August correspond- differences consoli- February
31, ing and other dation 28,
2002 Increase Release charge and other scope 2003
Sodexho, Inc.
transaction-
related
liabilities 5 (1) 4
Payroll and
other taxes 39 6 (1) (4) (3) 37
Contract
termination
costs 22 (5) (5) 12
Client and
supplier
litigation 5 1 (1) 5
Employee
litigation 18 1 (2) 16
Large repairs 6 (1) 6
Other 4 1 5
---- ---- ---- ---- ---- ---- ----
99 8 (9) (4) (10) 1 85
==== ==== ==== ==== ==== ==== ====
The following table summarizes the net impact of the charges and
releases of provisions for contingencies and losses on the fiscal 2003
income statement:
Charge Release
Operating 7 (6)
Financial 0 0
Exceptional 1 (7)
-- --
8 (13)
== ==
Note 19) - Borrowings and Financial Debt
Future payments on borrowings and other debt balances as of February
28, 2003 were due as follows:
More February August 31,
Less One to than 28, 2002
than five five 2003
one year years years
Bonds
Euro 81 305 1,300 1,686 1,642
---- ---- ----- ----- -----
81 305 1,300 1,686 1,642
Bank borrowings
US dollars (1) 153 858 1 1,012 1,175
Euro (1) (100) (420) 59 (461) (501)
Pounds Sterling (1) 80 88 0 168 224
Other currencies 27 17 0 44 41
---- ---- ---- ---- ----
160 543 60 763 939
Capital Lease Obligation
US dollars 3 7 0 10 12
Euro 13 18 2 33 36
Other currencies 0 4 0 4 4
---- ---- ---- ---- ----
16 29 2 47 52
Other borrowings
Euro 2 1 1 4 5
---- ---- ---- ---- ----
2 1 1 4 5
Bank overdraft balances
Euro 37 37 18
Pounds Sterling 77 77 31
Other currencies 2 2 6
---- ---- ----- ----- -----
116 0 0 116 55
---- ---- ----- ----- -----
Total 375 878 1,363 2,616 2,693
==== ==== ===== ===== =====
(1) Includes the effect of swaps
Note 19a) - Bond Issues
August 31, Translation February
2002 Increase Repayments Differences 28, 2003
1996 bond issue - FRF
2,000,000,000
Principal 305 305
Accrued interest 4 9 13
----- ---- ---- ---- ----
Total 309 9 0 318
Number of
securities 400,000 400,000
1999 bond issue - EUR
300,000,000
Principal 300 300
Accrued interest 7 6 13
----- ---- ---- ---- ----
Total 307 6 0 313
Number of
securities 300,000 300,000
2002 bond issue - EUR
1,000,000,000
Principal 1,000 1,000
Accrued interest 26 29 55
----- ---- ---- ---- -----
Total 1,026 29 0 0 1,055
----- ---- ---- ---- -----
Total 1,642 44 0 0 1,686
===== ==== ==== ==== =====
EUR 305 bond issue
On May 22, 1996, SODEXHO ALLIANCE issued 400,000 bonds with a nominal
value of FRF 5,000 each (EUR 762.25) representing a total of FRF
2 billion (305 million euro). The bonds are redeemable at par on
June 7, 2004 and bear interest at 6 percent per annum, which is
payable on June 7 annually. Each bond carried a warrant, entitling
the bearer to purchase one SODEXHO ALLIANCE share prior to
June 7, 2004 for FRF 2,700, with a current exercise price of 24.71
euro per share. There were 374,773 warrants and 400,000 bonds
outstanding as of February 28, 2003.
EUR 300 million bond issue
On March 16, 1999, SODEXHO ALLIANCE issued 300,000 bonds of 1,000 euro
each for total proceeds of 300 million euro. The bonds will be fully
redeemable at par on March 16, 2009. The bonds carry interest at 4.625
percent per annum, which is payable on March 16 annually. There were
300,000 bonds outstanding at February 28, 2003.
EUR 1 billion bond issue On March 25, 2002
SODEXHO issued bonds totaling 1 billion euro, maturing on March 25,
2009, and carrying interest of 5.875% payable on March 25 annually.
Note 19b) - Other Borrowings
At February 28, 2003, portions of thee three tranches of the credit
facility negotiated with a syndicate of banks in April 2001 and
guaranteed by SODEXHO ALLIANCE have been reimbursed as follows:
- Tranche A totaling 1,932 million euro, of which 875 million euro was
outstanding as of August 31, 2001, has been fully reimbursed;
- USD 172 million of Tranche B, issue total of USD 930 million, has
quarterly repayments over five years. Pursuant to the swap agreement
described in note 20 below the U.S. dollar variable LIBOR-based rate
has been swapped for a fixed rate;
- Tranche C totaling USD 150 million (available for short-term
financing, working capital needs and for letters of credit and
reimbursable in full in 2006), was not utilized as of February 28,
2003.
Covenants
The Group's debt is subject to covenants with customary terms. These
covenants pertain to our financing arrangements, which in certain
cases, could limit our ability to develop our business. These
agreements limit the following: our ability to sell assets; the
possibility for our subsidiaries to borrow or give guarantees; our
ability to seek certain types of financing arrangements; the ratio of
net debt to our EBITA plus depreciation and provisions; and the ratio
of financial result to EBITA.
Interest rates
In accordance with Group policy, the majority of variable rate
borrowings are swapped to fixed interest rates. If borrowings are
arranged other than in local currency, a currency swap agreement is
negotiated.
As of February 28, 2003, 92% of borrowings were at fixed rates
(including those swapped) and the average interest rate for fiscal
2003 was 5.60%.
Note 20) - Financial Instruments
The table below shows the impact of the financial intruments on the
borowings and financial debt as detailed in Note 19.
Equivalent
in millions of euro Borrowings Borrowings Borrowings Other
Note in EUR in USD in GBP currencies TOTAL
a) Cross currency
swaps
- UK borrowings 1)
Due to the bank
114.5 M GBP*
1.461561 167 167
Due from the bank
157.6 M EUR (158) (158)
- Sxo do Brazil
borrowings
Due to the bank
1.7M USD*0.927472 2 2
Due from the bank
1.7M EUR (2) (2)
- Sodexho
Scandinavia 2)
Due to the bank
175M SEK*0.10934 19 19
Due from the bank
19.5M eur (20) (20)
- Sodexho Inc.
Borrowings 3)
Due to the bank
309.5 M USD*
0.927472 287 287
Due from the bank
348.8 M EUR (349) (349)
b) Debt subject to
swap agreements 68 703 771
c) Debt not subject to
swap agreements 20 1 25 46
---- ----- --- --- ----
Total borrowings (461) 1,012 168 44 763
==== ===== === === ====
a) Cross Currency Swaps:
1) In order to match the cash flows on debt repayments with the
currency of our U.K. subsidiary (the 1995 acquisition of Gardner Merchant
1995 was made in GBP), the Group negotiated the following swap
transactions:
- in fiscal 1996, an amortizing cross currency swap with a maturity
date of August 29, 2003 (8.3% against 5.25% in pounds sterling against
euro) on an intercompany loan of 305 million euro; and
- in October 1999, a cross currency swap (capped LIBOR in pounds
sterling against 5.25% in pounds sterling against euro) on an
intercompany loan of 93 million euro. The total of the two swaps as of
February 28, 2003 amounted to 158 million euro.The increase in the
value of the sterling against the euro increased borrowings as
converted to euro by 9.7 million euro related to these instruments as
of February 28, 2003.
2) In June 1999, a cross currency swap was negotiated on a loan of
50.1 million euro (19.5 million euro as of February 28, 2003) to
Sodexho Scandinavian Holding AB (4.15% against a variable interest
rate in Swedish Crowns). This swap terminates in August 2005.
3) In March 2002, a cross currency swap was negotiated on a loan of
309 million euro to SODEXHO, Inc. repayable over 5 years (6.325%
against 6.5775% in euro against U.S. dollars). As of February 28, 2003
the swaps amounted to 349 million euro, and the decrease in the dollar
against the euro led to a decrease in the debt as converted to euro of
62 million euro.
b) Debt subject to swap agreements
- Several interest rate swaps (1.8% to 5.9% against US dollar LIBOR) with
the following maturities were negotiated in order to convert variable
rate interest to fixed on USD 758 million (703 million euro)drawn on Tranche
B of the credit facility described above. Following are the maturities of
the underlying notional amounts.
Fiscal year 6 months 2003-2004 2004-2005
ended August
31, 2003
Notional amounts (in
millions of USD) 110 278 370
Notional amounts (in
millions of euro) 102 258 343
In October 1999, the Group negotiated an interest rate swap maturing in 2004 on
a notional amount of 68 million euro which converted fixed rate debt at 5.2% to
EURIBOR.
Fair Values of Financial Instruments Following are the fair values of
the Grou's financial instruments as of February 28, 2003:
Net book
ASSETS value Fair value Difference
Investment securities 24 24 0
Receivables from investees 14 14 0
Loans receivable 6 6 0
Other long-term securities 21 21 0
Deposits and other 13 13 0
---- ---- ----
Total Financial Investments 78 78 0
Equity method investees 9 9 0
Cash 4 4 0
Term deposits 87 87 0
Debt Securities 125 125 0
Listed Securities 0 0 0
Mutual funds SICAV 230 230 0
Mutual funds other 8 8 0
SODEXHO ALLIANCE shares 90 59 (*) (31)
---- ---- ---
Total marketable securities
and other 544 513 (31)
Restricted cash 152 152 0
----- ----- ----
Total 783 752 (31)
===== ===== ====
LIABILITIES
2002 1 billion euro bond issuance 1,055 1,127 72
1999 300 million euro bond issuance 313 315 2
1996 305 million euro (FRF 2,000
million) bond issuance 318 324 6
----- ----- ---
Total bonds 1,686 1,766 80
SODEXHO, INC.borrowings 709 721 12
Swap on intercompany loan with SODEXHO
SERVICES GROUP LTD (6) (5) 1
Swap on intercompany loan with SODEXHO
HOLDINGS LTD 15 17 2
Swap on intercompany loan with SODEXHO
INC (62) (64) (2)
Other 107 107 0
----- ----- ---
Total 763 776 13
Bank overdrafts 116 116 0
Other debt 51 51 0
----- ----- ---
Total bank debt 2,616 2,709 93
Other non-operating borrowings:
Debt on acquisition of 53% of SODEXHO
INC 36 5 (*) (31)
------- ------ ----
Total 2,652 2,714 62
======= ====== ====
(*) part of the acquisition debt for the remaining SODEXHO MARRIOTT
SERVICES, Inc. shares acquired in June 2001 was payable in the
equivalent of SODEXHO ALLIANCE shares; the debt has been revalued
using the price paid by SODEXHO to purchase its own shares on the open
market.
The market value of SODEXHO ALLIANCE shares and the debt as of
February 28, 2003 is below the 31 million euro book value.
Note 21) - Other liabilities
February 28, 2003 August 31, 2002
Advances from clients and
deposits received 165 130
Taxes and social charges payable 962 985
Other operating liabilities 68 81
Other non-operating liabilities 160 55
Deferred revenue 24 29
Deferred tax liabilities 16 18
------ ------
Total 1,395 1,298
====== ======
Note 22) - Statement of Cash Flows - Additional Information
The table below only details the changes in balance sheet elements which
have an impact on the cash flow statement. It does not take into account
exchange differences, changes in consolidation scope or other changes which do
not have an impact on the cash flow statement.
Note 22a) - Changes in Working Capital
Total
Assets Liabilities Change
Inventories 19
Accounts receivable, net of allowance for
doubtful accounts 217
Other operating receivables 33
Prepaid expenses 7
Accounts payable 118
Vouchers payable 26
Taxes and social charges payable 21
Other operating payables 31
Deferred revenues (6)
---- ---- ----
Change in working capital from
operating activities 276 190 (86)
Investment related receivables 1
Investment related payables (6)
---- ---- ----
Change in working capital from
investment activities 1 (6) (7)
Financing related receivables 7
Financing related payables 96
---- ---- ----
Change in working capital from
financing activities 7 96 89
Note 22b) - Acquisitions and Disposals of Tangible and Intangible Assets
and Subsidiaries
Acquisitions Disposals Net
Tangible and intangible assets (*) (120.5) 7.4 (113.1)
Variation in financial investments 0 1.4 1.4
------ ---- ------
Total acquistions and disposals of
tangible and intangible assets (120.5) 8.8 (111.7)
Acquisitions and disposals of
subsidiaries (7.5) 1.6 (5.9)
Less: tax on gains from disposal (0.3) (0.3)
Less: cash in acquired and disposed of
companies 2.6 (0.4) 2.2
Total change in consolidation scope (4.9) 0.9 (4.0)
------ ---- -----
(125.4) 9.7 (115.7)
====== ==== ======
(*) including deferred charges classified as fixed assets
Note 23) - Commitments
Financial guarantees to third parties 38
Performance bonds on operating leases 88
Client performance bonds 23
Other commitments 3
----
Total 152
====
Note 23a) Minority shares of Patriot Medical Technologies, Inc.
Commitment made The Group has entered into a put agreement with the
minority shareholders of Patriot Medical Technologies, Inc.
("Patriot"), to acquire the remaining shares outstanding during the
period from March 3, 2003 to March 3, 2004 for a total of USD 234,000
(0.2 million euro). As of April 29, 2003, a portion of the put option
had already been exercised, in the amount of USD 100,000 (0.1 million
euro).
Commitment received
The minority shareholders of Patriot, have entered into a call
agreement with the Group, which allows the Group, during the period
from September 3, 2003 and September 3, 2005, to acquire the remaining
outstanding shares of Patriot, if any, for the greater of USD 2
million and five times Patriot's EBITDA, less 1) the value of the put
option already exercised as of the date of acquisition of the
remaining shares, and 2) the service cost, as defined in the contract,
of the related debt from the date of acquisition through the date of
exercise of the call option.
Note 23b) Commitments for stock options
The Group has the following stock option commitments:
- 2,625,047 shares with an average exercise price of USD 26.25, to
certain employees of Sodexho, Inc., in connection with the Grou's
acquisition of 53% of Sodexho Marriott Services, Inc., in June 2001.
- 5,086,220 shares granted by Sodexho Alliance to certain of its
employees in connection with various stock option plans and with an
average exercise price of 33.56 euro.
Note 24) - Litigation
McReynolds vs. Sodexho Marriott Services, Inc.
On March 8, 2001, ten current and former employees of Marriott
Management Services, Inc., which later became Sodexho Marriott
Services, Inc. and is now Sodexho, Inc., filed a lawsuit alleging that
they and other African-American salaried employees were discriminated
against on the basis of their race. The plaintiffs' complaint alleges
unspecified damages on behalf of a class of over 2,600 current and
former employees of Sodexho, Inc., relating to the period commencing
March 27, 1998, as well as reimbursement of plaintiffs' costs and
attorneys' fees. Sodexho has denied the plaintiffs' allegations and is
vigorously defending the lawsuit. On June 25, 2002, the district court
certified the case as a class action for purposes of determining
liability. Sodexho, Inc. has appealed this decision. The appeal was
denied on February 23, 2003. The parties to this litigation have
commenced discovery. In fiscal 2002, a provision of 10 million dollars
was recorded for defense costs anticipated in connection with this
lawsuit. A resolution of plaintiffs' claims in their favor could have
a material effect on our net income.
To our knowledge at this time, no other exceptional events or legal
proceedings are pending or considered probable of occuring or having
occured, which would have a material impact on the financial position,
the activities, the net worth or the net income of Sodexho Alliance or
of the Group.
V. Consolidation scope
The activities of the SODEXHO GROUP are carried out autonomously in
different subsidiaries in each country where the Group has a presence. Under
the control of the Executive Committee, each subsidiary has an independent
organizational structure with its own Board, operating, human resources and
financial and administrative management.
Companies managed by SODEXHO have been fully consolidated. Companies over
which SODEXHO is able to exercise significant influence have been accounted
for by the equity method.
All fully consolidated companies that do not have an August 31 year-end are
consolidated on the basis of financial statements prepared as at August 31
and for the twelve months then ended (fiscal year-end of SODEXHO ALLIANCE).
A number of companies having minimal impact on the true and fair view of
Group's consolidated financial statements have been excluded from
consolidation, notably those having revenues of less than 2 million euro, net
income or loss less than 0.1 million euro and total assets of less than 2
million euro.
The only companies which had a significant impact on consolidation during the
first half of 2002-2003 were:
- the purchase of the Patriot Medical Technologies Inc. (in which Group holds
83.10% of the shares); and,
- the sale, during September 2002, of SRN and SECN (River and Harbor
Cruises in Nantes, France).
VI MANAGEMENT REVIEW
VI.1 Financial Performance for the first half 2002-2003
Results (in EUR millions)
Six months Six months % change Currency % change
ended ended February excl. effect
February 28, 2003 currency
28, 2002 effect
Revenues 6,572 6,168 +3% -9% -6%
EBITA 314 294 +5% -11% -6%
Group net income 128 86 -17% -16% -33%
Excluding the currency effect:
- Consolidated revenues totaled EUR 6.2 billion, with organic growth of 3%.
- EBITA amounted to EUR 294 million, a 5% increase over the prior comparable
period.
- EBITA margin stood at 4.8%, essentially from a significant improvement in
operating results in Continental Europe.
- Net financial expense increased by EUR 27 million, mainly due to foreign
exchange gains realized in the first-half of 2001-2002, when cash held by the
Service Vouchers and Cards business in Latin America was transferred into hard
currencies
- The effective tax rate increased from 33% to 41%, as first-half 2001-2002
results included certain exceptional items which where not subject to
income tax.
- Group net income after goodwill amortization amounted to EUR 86 million, a
17% decrease.
The euro's sharp appreciation against other currencies, notably the US
dollar, led to a negative translation effect in the consolidated accounts which
reduced reported revenues by 9%, EBITA by 11%, and Group net income by 16%.
However, unlike exporting companies, our subsidiaries' revenues and operating
expenses are denominated in the same currency. Consequently, currency
fluctuations do not create operating risks for Sodexho.
VI.2 Sodexho in North America
Currently, 49% of Sodexho's revenues are generated in North America,
where organic growth in revenues amounted to 3% in the first-half of 2002-2003.
Since October 1, 2002, Sodexho Inc. has provided food services on 55 US Marine
Corps sites in the United States. We have established a strong relationship of
mutual respect and true partnership with the US Marine Corps, and they have
recently assured us that they are satisfied with our performance and have no
basis to cancel our contract.
With operations in all 50 states, Sodexho Inc. is solidly anchored in the
United States, where it employs more than 110,000 Americans. Sodexho is
proud to be a leader in the world's largest market, notably in the two
client segments with the greatest growth potential: education and healthcare.
VI.3 New Contracts
Food and Management Services
Business and Industry:
Hewlett Packard - United States, 200 sites - 90,000 people - food services
Rich Products - United States, New York - 35,000 people - multi-services
HJ Heinz - United Kingdom, Wigan - 2,000 people - multi-services
JP Morgan - United Kingdom, (2 sites), London - 2,216 people - multi-services
Alcatel - France, Velizy-Villacoublay - 1,700 people - food services
TotalFinaElf - France, La Mede - 200 people - multi-services
Nuon - Netherlands (16 sites) - 7,000 people - food services
Dutch Congress Center - Netherlands, The Hague - 2,000 people - food services
IBM - Italy, Milan/Rome - 3,000 people - food services
Johnson Controls - Sweden, Goteborg - 900 people - food services
Grupo Santander - Spain, Madrid - 11,000 people - multi-services
Sony Corporation - Brazil, Sao Paulo - 565 people - food services
Almacenes Exito - Colombia, Bogota - multi-services
Nestle - Peru, Lima - 200 people - multi-services
Banco Santander - Chile (115 sites), Santiago - multi-services
Borders Group - Australia (3 sites) Knox, Brisbane and Carlton - multi-services
Healthcare:
Ben Taub General Hospital - United States, Texas - 879 beds - food services
Fairview Health Services - United States, Minneapolis - 2,613 beds - food
services
Medical Center Of Louisiana - United States, Louisiana - 680 beds - food
services
Fundacion - Socio Sanitaria de Barcelona - Spain - 9 sites - multi-services
Centre Hospitalier Prive de L'Ouest Parisien - France - 470 beds - food services
Wesley Garden Aged Care Facilities - 6 sites - Australia, Sydney - 700 beds
- multi-services
Education:
Penn Harris Madison School Corp - United States, Indiana - 10,000 children
- multi-services
College Mount St. Vincent - United States, New York - 1,600 students - food
services
Concordia University - United States, Oregon - 1,100 students - food services
Hayward School District - United States, California - 25,000 students - food
services
Clamart Municipal Schools - France, Clamart - 1,620 children - food services
Remote Sites
BP - (4 sites) United States and United Kingdom - 880 people - multi-services
Service Vouchers and Cards
Qualix SA Servicios Ambientais - Brazil - 8,000 beneficiaries - multi-services
Pepsi - Hungary - 1,000 beneficiaries - multi-services
VI.4 Fiscal 2002-2003 Outlook
As Pierre Bellon said during the Annual Meeting of Sodexho Alliance
shareholders last February, "the economic environment will not improve
in 2003, which makes our clients hesitant about investing and hiring."
We have therefore set the following intermediary objectives for fiscal
2002-2003:
- Organic growth in revenues of 4% or less, greater than the 1.9% in
organic growth achieved in fiscal 2001-2002.
- EBITA margin of 4.7%, as compared to 4.2% in fiscal 2001-2002.
- Group net income of EUR 210 million, at constant exchange rates and
excluding exceptional items.
In his remarks at the Annual Meeting, Pierre Bellon indicated that
this would be difficult. We are continuing to use our best efforts to
meet this net income objective, but according to our estimates, we are
currently closer to a figure of EUR 200 million at constant exchange
rates and excluding exceptional items.
At current exchange rates, the negative currency effect for fiscal
2002-2003 will be approximately EUR 20 million.
We are confident in the future of our Group, which enjoys enormous
growth potential both in Food and Management Services and in Service
Vouchers and Cards. We also benefit from many advantages over our
global competitors.
- Our values: service spirit, team spirit, the spirit of progress and
conviviality.
- Our mission: improving the quality of daily life, which gives
meaning to everything our employees do.
- A global network and operations in 74 countries.
- Low capital-intensive businesses that generate cash flow.
- An excellent business model where cash flow finances organic growth,
reimburses borrowings and pays dividends.
VII Statutory FINANCIAL STATEMENTS of Sodexho Alliance FOR SIX MONTHS ENDED
February 28, 2003
Income statement key figures for the Holding Company for the first half of
2002-2003
6 months ended 6 months ended
February 28, 2003 February 28, 2002
Revenue 47 40
EBIT 31 75
Net income 34 80
VIII ACCOUNTANT'REPORT ON THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
AND THE HALF-YEARLY REPORT FOR THE SIX MONTHS ENDED FEBRUARY 28.2003
To the shareholders
SODEXHO ALLIANCE
3, avenue Newton
78180 Montigny-le-Bretonneux
In our capacity as independent accountants and as required by section
232(7) of the Commercial Code,
- we have performed a limited review of the accompanying interim
consolidated financial statements, presented in euro, for the period from
September 1, 2002 to February 28, 2003;
- we have also reviewed the information provided in the interim report.
These interim consolidated financial statements are the responsibility of the
Board of Directors. Our responsibility, based on our limited review, is to
report our conclusions concerning these statements.
We conducted our limited review in accordance with the generally accepted
standards in France. Those standards require that we perform limited procedures
to obtain reasonable assurance, that the interim consolidated financial
statements do not contain any material errors. A limited review of interim
financial information consists principally of applying analytical procedures
and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards in France.
Based on our limited review, we are not aware of any material modifications
that should be made to the interim consolidated financial statements, that
were prepared in accordance with French accounting principles and regulations,
in order to present a true and fair view of the consolidated results of
operations for the six months ended February 28, 2003 and the consolidated
financial position and assets of the company and its consolidated
subsidiaries at that date.
We have also reviewed the information provided in the interim report, which
accompanies the interim consolidated financial statements, that were the
subject of our limited review, in accordance with the generally accepted
standards in France. We have no comments as to its fair presentation and its
conformity with the interim consolidated financial statements.
Paris. Paris La Defense, May 13, 2003
The Statutory Auditors
PricewaterhouseCoopers Audit KPMG Audit
Departement de KPMG SA
Gerard Dantheny Patrick Hubert Petit
About Sodexho Alliance
Founded in Marseille in 1966 by Chairman and Chief Executive Officer Pierre
Bellon, Sodexho Alliance is the world's leading provider of food and
management services. With more than 315,000 employees on 24,700 sites in
74 countries, Sodexho Alliance reported consolidated sales of 12.6 billion
euros for the fiscal year that ended on August 31, 2002. The Sodexho
Alliance share has been listed since 1983 on the Euronext Paris Bourse, where
its market value totals 3.2 billion euros. The Sodexho Alliance share has been
listed since April 3, 2002, on the New York Stock Exchange.
Press Relations : Jerome Chambin
Telephone: + 33 (1) 30 85 74 18 - Fax: + 33 (1) 30 85 52 32
E-mail: Jerome.Chambin@sodexhoalliance.com
Investors Relations : Jean-Jacques Vironda
Telephone: + 33 (1) 30 85 29 39 - Fax: +33 (1) 30 85 50 05
E-mail: Jean-Jacques.VIRONDA@sodexhoalliance.com