FORM 6-K
 

Gemplus International SA
 
 
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 January 2006
GEMPLUS INTERNATIONAL S.A.
(Exact name of registrant as specified in its charter)
GEMPLUS INTERNATIONAL S.A.
(Translation of registrant’s name in English)
46A, Avenue J.F. Kennedy
L-1855 Luxembourg
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     
 
 

 

 

This Report on Form 6-K is hereby incorporated by reference into Gemplus International S.A.’s Solicitation/Recommendation Statement on Schedule 14D-9C filed on February 9, 2006 and shall be a part of that Statement from the date on which this Report is submitted, to the extent not superseded by documents or reports subsequently filed or furnished.

Gemplus reports strong improvement in results for fiscal year 2005
Full year 2005 highlights:
  •   Revenue increased by 8.5% to 939 million euros: growth sustained in all core businesses.
 
  •   Operating income at 67 million euros: a 2.5 fold increase, driven by good overall Company performance.
 
  •   Very strong net income1, at 90 million euros.
 
  •   Robust free cash flow, at 85 million euros, excluding non-recurring items.
Fourth quarter 2005 highlights:
  •   Operating margin at 6.0%, despite impact related to a quality issue with a specific chip.
  •   Strong net income1, at 40 million euros, boosted by recognition of deferred tax assets of 25.6 million euros.
Luxembourg, February 9, 2006 — Gemplus International S.A. (Euronext: LU0121706294 — GEM and NASDAQ: GEMP), the world’s leading provider of smart card solutions, today reported results for the fourth quarter and full year ended December 31, 2005.
                                                 
In millions of euros   Q42005     Q42004     Year-on-     FY 2005     FY 2004     Year-on-  
                    year                     year  
                    change                     change  
Net sales
     261.7       242.5       +7.9 %     938.9       865.0       +8.5 %
Adjusted for currency fluctuations, discontinued operations and acquisitions     -1.5 %                     +3.6 %
Gross profit
     85.2       77.3       +10.3 %     309.9       270.5       +14.6 %
Gross margin as a % of sales
     32.6 %     31.9 %   +0.7 ppt     33.0 %     31.3 %   +1.7 ppt
Operating income
     15.6       16.1       -3.0 %     66.8       26.3       +153.7 %
Operating margin
     6.0 %     6.6 %   -0.6 ppt     7.1 %     3.0 %   +4.1 ppts
Net income1
     40.0       11.8       +239 %     89.9       4.7     NM
Free cash flow excluding non recurring items
     21.5       11.3       +90 %     85.3       58.8       +45 %
Free cash flow2
     19.6       1.7     NM     95.7       5.5     NM
Cash and cash equivalents
     418.4       388.4       +7.7 %     418.4       388.4       +7.7 %
Per share data (in euros)
Earnings per share (fully diluted)
     0.06       0.02       +224 %     0.14       0.01     NM
 
1   Net Income attributable to Equity Holders
 
2   Free cash flow is defined as net cash flow from operating activities less the purchase of property, plant and equipment and other investments related to the operating cycle (excluding acquisitions and financial investments).

 

 

Commenting on the performance for the fiscal year 2005, Alex Mandl, President and Chief Executive Officer, said: “2005 was another year of substantial achievements for Gemplus: we reinforced the Group’s leadership, notably in high-end wireless and financial services, and strongly improved our financial performance, especially in terms of margin and cash flow. At the same time, we undertook two very important strategic moves: the Setec acquisition, which strengthens our position in the Government ID space, and the proposed Gemalto merger which will create a world-class leader in digital security. We feel very excited about this project which will take the Company to new horizons.”
Full Year 2005 financial review
•   Highlights:
  •   Revenue up 8.5%: growth sustained in all core businesses.
  •   Operating income at 67 million euros: a 2.5 fold increase, driven by good overall Company performance:
  •   Gross margin up 1.7 percentage points.
 
  •   Operating expenses flat.
  •   Very strong net income1, at 90 million euros.
 
  •   Robust free cash flow, at 85 million euros, excluding non-recurring items.
                                 
                    Year-on-year     Adjusted  
In millions of euros   FY 2005     FY 2004     change     change3  
Group revenue
     938.9       865.0       +8.5 %     +3.6 %
Telecom
     654.5       641.8       +2.0 %     +0.5 %
   of which Wireless products & services
     600.4       558.5       +7.5 %   NA
   of which Prepaid phone cards & scratchcards
     54.1       83.3       -35.1 %   NA
Financial Services
     202.9       182.2       +11.3 %     +4.9 %
ID and Security
     81.5       41.0       +98.7 %     +46.6 %
On a segment and geographical basis for the full year:
  •   Telecom revenue was driven by Wireless. Wireless revenue was up 7.5% (up 7.2% currency adjusted), to 600.4 million euros, confirming the Group’s leading position in this sub-segment. Wireless card shipments rose 34% to 342 million units, due to strong growth in EMEA4 and the Americas. The Group’s focus on value creation drove a substantial shift toward high-end cards, now considered only 3G and above, with their share increasing from 6.0% in 2004 of total shipments to 10% in 2005. The share of 64Kb, 128Kb, 3G cards and above rose from 34% in 2004 to 47% in 2005. The average selling price declined 20%, currency adjusted.
 
  •   Financial Services revenue was driven by the EMV migration, with substantial rollouts in many European countries and ramp-up in Latin America and Japan. Gemplus shipped 70 million payment microprocessor cards (up 36%), with revenue up 25%.
 
3   Adjusted for currency fluctuations, discontinued operations & acquisitions.
 
4   Europe, Middle East and Africa

 

 

  •   ID and Security revenue was driven by the Setec acquisition, Government ID projects, particularly, in the Middle East, and Corporate Security projects, notably in the Americas.
 
  •   On a geographical basis, revenue from the Americas was up 21.0%, currency and acquisition adjusted, driven by Wireless. The EMEA4 region was up 1.8%, led by Financial Services. Asia was down 12.5% reflecting Wireless price pressure.
                                 
            As a % of             As a % of  
In millions of euros   FY 2005     revenue     FY 2004     revenue  
Group gross profit
     309.9       33.0 %     270.5       31.3 %
Telecom
     241.5       36.9 %     220.8       34.4 %
of which Wireless products & services
     236.6       39.4 %     215.6       38.6 %
of which Prepaid phone cards & scratchcards
     4.9       9.1 %     5.2       6.2 %
Financial Services
     41.9       20.6 %     37.7       20.7 %
ID and Security
     26.5       32.5 %     12.0       29.4 %
Gross margin increased by 1.7 percentage points, mainly driven by a favourable business mix as well as improvement in Telecom and ID & Security.
                                 
            As a % of             As a % of  
In millions of euros   FY 2005     revenue     FY 2004     revenue  
Operating expenses
     243.2       25.9 %     244.2       28.2 %
Operating income
     66.8       7.1 %     26.3       3.0 %
Financial income & expenses
     7.7               5.7          
Share of profit (loss) of associates
     -0.5               -6.0          
Other non operating income (expenses), net
     -2.3               -6.8          
Income tax
     19.8               -13.0          
Minority interests
     -1.5               -1.6          
Net income1
     89.9               4.7          
Operating expenses were stable, despite the overall growth in the business and the Setec acquisition. Operating expenses represented 25.9% of sales, compared to 28.2% the previous year, reflecting good cost control and a reduction in restructuring expenses.
Consequently, operating income rose substantially, to 66.8 million euros, taking the operating margin to 7.1%.
Income tax reflects the recognition of deferred tax assets of 26.9 million euros. This contributed to the Company reporting net income1 of 89.9 million euros, an increase of 85.2 million euros over last year, mainly due to improved operating income.
The Company generated free cash flow of 85.3 million euros, up 45% compared with last year, excluding non-recurring items. Net cash flow was 30 million euros, which included the cash outlay of 63 million euros related to the Setec acquisition.

 

 

Fourth quarter 2005 financial review
•   Income statement
Fourth quarter 2005 highlights:
  •   Revenue up 7.9% year-on-year (down 1.5% adjusted3).
 
  •   Operating margin at 6.0%, despite impact related to a quality issue with a specific chip.
 
  •   Strong net income1, at 40.0 million euros, boosted by recognition of deferred tax assets of 25.6 million euros.
                                 
                            Adjusted3  
In millions of euros   Q4 2005     Q4 2004     % change     change (%)  
Net sales
     261.7       242.5       +7.9 %     -1.5 %
Gross profit
     85.2       77.3       +10.3 %        
Gross margin as a % of sales
     32.6 %     31.9 %   +0.7 ppt        
Operating income
     15.6       16.1       -3.0 %        
Net income1
     40.0       11.8       +239 %        
Revenue was up 7.9%, driven by the Setec acquisition. Price pressure in Wireless, combined with some softness in this sub-segment and the quality issue in Telecom, translated into a 1.5% decline in revenue, after restating for acquisitions and currency fluctuations. On a geographical basis, adjusted3 revenue was up 0.8% in the Americas and down 0.9% in EMEA4. In both regions, strong growth in ID & Security and Financial Services was offset by a decline in Telecom revenue. In Asia, revenue was down 6.6%.
Gross profit was up 10.3%, despite the Telecom quality issue. Gross margin was up 0.7 percentage point year-on-year, due to improved business mix and manufacturing efficiency in Telecom.
Operating expenses increased 13.8% year-on-year, to 69.6 million euros, mainly due to the Setec acquisition and severance packages.
Consequently, operating income for the fourth quarter was down 3%, at 15.6 million euros.
Net income1 rose to 40.0 million euros, including the recognition of deferred tax assets of 25.6 million euros.
•   Balance sheet and cash flow statement
Fourth quarter 2005 highlights:
  •   Robust free cash flow of 21.5 million euros, excluding non-recurring items.
 
  •   Strong cash position, at 418.4 million euros.
The Group’s cash position is up 17.6 million euros compared to September 30, 2005.

 

 

Segment Analysis
•   Telecom
Fourth quarter 2005 highlights.
  •   Record wireless shipments, at 101 million units, mainly driven by emerging countries.
 
  •   Wireless ASP down 28.4% year-on-year, currency adjusted, reflecting an unfavorable regional mix and price pressure.
                                 
                            Adjusted  
                            change3  
In millions of euros   Q4 2005     Q4 2004     % change     (%)  
Wireless products & services net sales
     163.6       165.3       -1.0 %        
Wireless gross profit
     62.6       62.4       +0.3 %        
Wireless gross margin
     38.2 %     37.7 %   +0.5 ppt        
Prepaid phone cards & scratchcards net sales
     15.9       22.6       -29.6 %        
Prepaid phone cards & scratchcards gross profit
     2.0       1.9       +5.0 %        
Prepaid phone cards & scratchcards gross margin
     12.8 %     8.6 %   +4.2 ppts        
                 
Telecom net sales
     179.5       187.9       -4.5 %     -7.9 %
Telecom gross profit
     64.6       64.3       +0.3 %        
Telecom gross margin
     36.0 %     34.2 %   +1.8 ppt        
                     
Telecom operating expenses
     44.5       39.1       +14.0 %        
As a % of sales
     24.8 %     20.8 %   +4.0 ppts        
                     
Telecom operating income
     20.1       25.2       -20.4 %        
Operating margin
     11.2 %     13.4 %   -2.2 ppts        
Wireless revenue:
  •   Wireless products & services revenue5 was down 1.0% year-on-year (down 4.6%, currency adjusted), to 163.6 million euros.
 
  •   Fourth quarter Wireless shipments grew 35% year-on-year, to 101 million units, mostly driven by emerging countries in all regions: Latin America, Eastern Europe, China, South-East Asia, Middle East and Africa.
 
  •   The Wireless mix notably improved in EMEA4 and North America, driven by momentum in 3G cards. High-end card shipments (3G and above) accounted for 15% of the fourth quarter total, compared to 8% a year ago.
 
  •   Wireless average selling price (ASP) was down 7.7% quarter-on-quarter and 28.4% year-on-year, both currency adjusted, reflecting ongoing price pressure and a substantial unfavorable change in the regional mix.
Wireless gross margin rose 0.5 percentage point, despite a quality issue with a specific chip. This issue should have minimal impact on financial statements of fiscal year 2006.
 
5   Wireless products & services revenue comprises wireless microprocessor cards and related applications (embedded software and Over The Air platforms) and services (system integration and operated services).

 

 

•   Financial Services
Fourth quarter 2005 highlights:
  •   Very strong growth in payment microprocessor cards: shipments up 70%, to 18.1 million units.
 
  •   EMV6 roll-out gained further momentum in Eastern Europe and Latin America.
                                 
                            Adjusted3  
In millions of euros   Q4 2005     Q4 2004     % change     change (%)  
Net sales
     55.8       44.2       +26.3 %     +10.8 %
Gross profit
     12.2       9.7       +26.0 %        
Gross margin as a % of sales
     21.8 %     21.9 %   -0.1 ppt        
Operating expenses
     12.5       13.7       -9.0 %        
As a % of sales
     22.3 %     31.0 %   -8.7 ppts        
Operating income
     -0.3       -4.0     NM        
Operating margin as a % of sales
     -0.5 %     -9.1 %   NM        
Revenue reflects very strong growth in payment microprocessor cards as well as the Setec acquisition.
Payment microprocessor card revenue rose 45% year-on-year. Shipments of payment microprocessor cards grew 70% to 18.1 million units. ASP decline reflects a greater share of modules in the sales mix.
The strong performance in payment cards was mainly driven by the EMV roll-out, which gained momentum in Eastern Europe and Latin America, and sales growth in the United Kingdom and Continental Europe. In addition, this quarter saw the first shipments of EMV cards to China.
•   Identity and Security
Fourth quarter 2005 highlights:
  •   Very strong growth, driven by Government ID and Corporate Security projects.
 
  •   On-going roll-out of e-passports in Singapore, Sweden and Norway.
 
6   EMV is a jointly defined set of specifications adopted by Europay, MasterCard and Visa for the migration of bank cards to smart card technology.

 

 

                                 
                            Adjusted3  
In millions of euros   Q4 2005     Q4 2004     % change     change (%)  
Net sales
     26.4       10.4       +152.5 %     +61.3 %
Gross profit
     8.4       3.3       +157.1 %        
Gross margin as a % of sales
     32.0 %     31.5 %   +0.5 ppt        
Operating expenses
     12.6       8.4       +50.3 %        
As a % of sales
     47.9 %     80.5 %   -32.6 ppts        
Operating income
     -4.2       -5.1     NM        
Operating margin as a % of sales
     -15.9 %     -49.0 %   +33.1 ppts        
Strong growth was driven by a substantial increase in Government ID projects, notably in the Middle East, and Corporate Security projects, particularly in the United States, in addition to those from Setec.
Outlook
The Group continues to see strong momentum in its core segments and will maintain its focus on cost efficiency.
Gemplus confirms that it is firmly on track to realize its mid-term objective to achieve a 10% operating margin in 2007.
The Group remains confident in its ability to further strongly improve its operating income in 2006 taking into account the usual seasonality effect of stronger organic growth in the second half than in the first half.
Gemplus also continues to expect the Financial Services and ID & Security segments to turn profitable in 2006.
Fourth Quarter 2005 Business Highlights
•   Telecom
During the fourth quarter 2005, Orange included in its Orange Intense campaign a bundle of multimedia services for the youth segment with SIM+. This was the first commercial launch of Gemplus’s multimedia SIMs and endorsed its strategy to bring SIM cards into the multimedia era.
Within a record time of nine months, Gemplus went from proof of concept to commercial deployment for a range of SIMs, with one of the most advanced mobile operators.
Gemplus was also selected by Optimus Portugal for its device management solution, GemConnect Device Manager, to improve customer care and boost data traffic.
•   Financial Services
In China, Gemplus was the first smart card manufacturer to deliver chip banking cards for ICBC’s EMV migration. The cards were produced locally by Gemplus’s joint venture with Goldpac and complied with MasterCard specifications, MCHIP/4.0.

 

 

Gemplus also announced the launch of a new range of products designed to help card issuers differentiate their service offerings and attract new clients. The Caisse d’Epargne was one of the first banks to deploy this marketing strategy in France, with the roll-out of mandarin-tinted transparent cards targeted at young customers.
Within the contactless segment, Gemplus moved forward with the delivery in the USA of GemInstant cards for MasterCard® PayPass™ contactless payment to one of the top ten leading banks in North America.
Gemplus was also the first smart card manufacturer to achieve the certification for the MasterCard OneSMART™ Chip Authentication Program for its GemAuthenticate™ server, which enables financial institutions to secure customer access to online banking services and online purchases using two-factor authentication.
•   Identity and Security
For the enterprise security sector, Gemplus was selected by Pfizer to deploy Gemplus’s SafesITe solution for network access and digital signature. Gemplus has shipped over 100,000 cards to Pfizer as part of its Global Identity Services program.
Lastly, in a recent report by Frost & Sullivan, Gemplus came out top in the smart card readers and chipsets segment, with a 34.8% share in 2004, up from 20.8% in 2003 (Source Frost & Sullivan, January 2006).
•   Research and Development
Gemplus R&D teams were rewarded for their innovation with the win of the Sesames 2005 award for Best Software at the Cartes 2005 Conference and Exhibition. Gemplus innovated with the most compact implementation of the .NET platform for networked secure devices, such as USB dongles, secure MMC and smart cards.
Financial calendar
The ordinary shareholders meeting relating to the proposed Gemalto merger is scheduled to take place on February 28, 2006.
First quarter 2006 results are scheduled to be reported on April 24, 2006, before the opening of Euronext Paris.
Conference Call:
The Company has scheduled a conference call for Thursday, February 9, 2006 at 2:30 pm CET (1:30 pm London time and 8:30 am New York time). Callers may participate in the live conference call by dialing:
+44 (0) 207 784 1018 or +1 718 354 1171, access code 5438605.
The slide show will be available on the web site at 12:30 p.m. CET (11:30 a.m. London time). The webcast will also be available on the IR section of www.gemplus.com.
Replays of the conference call will be available approximately 5 hours after the conclusion of the conference call until February 24, 2006 midnight by dialing:
+44 (0) 207 784 1024 or +1 718 354 11 12, access Code: 5438605#.

 

 

About Gemplus
Gemplus International S.A. (Euronext: LU0121706294 — GEM and NASDAQ: GEMP) is the world’s leading player in the smart card industry in both revenue and total shipments (source: Gartner-Dataquest 2005, Frost & Sullivan, Datamonitor.). It has sold over 5.5 billion smart cards.
Gemplus delivers a wide range of portable, personalized solutions in areas including Identity, Mobile Telecommunications, Public Telephony, Banking, Retail, Transport, Healthcare, WLAN, Pay-TV, e-government, and access control.
Gemplus’ revenue in 2005 was 939 million euros.
www.gemplus.com
For more information:
     
Press
  Investor Relations
Gemplus
  Gemplus
Jane Strachey
  Celine Berthier
Tel: +33 (0) 4 42 36 46 61
  Tel: +41 (0) 22 544 5054
Mob: +33 (0) 6 79 46 35 93
   
Email: jane.strachey@gemplus.com
  Email: celine.berthier@gemplus.com
 
    
Edelman
  Fineo
Frédéric Boullard
   
Tel: +33 (0) 1 56 69 73 95
  Tel: +33 (0) 1 56 33 32 31
Email: frederic.boullard@edelman.com
  Email: investors@gemplus.com
©2004 Gemplus. All rights reserved. Gemplus, the Gemplus logo, are trademarks and service marks of Gemplus S.A. and are registered in certain countries. All other trademarks and service marks, whether registered or not in specific countries, are the property of their respective owners.
Some of the statements contained in this release constitute forward-looking statements. These statements relate to future events or our future financial performance and involve known and unknown risks, uncertainties, and other factors that may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activities, performance, or achievements expressed or implied by such forward-looking statements. Actual events or results may differ materially. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Factors that could cause actual results to differ materially from those estimated by the forward-looking statements contained in this release include, but are not limited to: trends in wireless communication and mobile commerce sectors; our ability to develop new technology, and the effects of competing technologies developed and expected intense competition generally in our main segments; profitability of our expansion strategy; challenges to or loss of our intellectual property rights; our ability to establish and maintain strategic relationships in our major businesses; our ability to develop and take advantage of new software and services; and the effect of future acquisitions and investments on our share price. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of such forward-looking statements. The forward-looking statements contained in this release speak only as of this release. We are under no duty to update any of the forward-looking statements after this date to conform such statements to actual results or to reflect the occurrence of anticipated results.

 

 

Gemplus International SA

 
 
 
Gemplus International SA
Press Release — Financial statements
For the quarterly period ended December 31, 2005

 

 

Gemplus International SA

 
Consolidated Statements of Income
                                 
    ( (in thousands of euros, except shares and per share amounts)  
    Twelve months ended     Three months ended  
    December 31,     December 31,  
    2005     2004     2005     2004  
    (unaudited)                  
     
Net sales
     261,703       242,542       938,875       865,034  
Cost of sales
     (176,475 )     (165,278 )     (628,967 )     (594,533 )
 
                        
Gross Profit
     85,228       77,264       309,908       270,501  
 
                        
Research and development expenses
     (17,882 )     (14,893 )     (62,269 )     (62,592 )
Selling and marketing expenses
     (31,851 )     (27,129 )     (116,088 )     (101,493 )
General and administrative expenses
     (21,982 )     (17,298 )     (67,983 )     (63,895 )
Restructuring expenses
     1,713       227       3,235       (8,384 )
Other operating income (expense), net
     391       (101 )     (48 )     (101 )
Goodwill amortization and impairment
     —       (1,970 )     —       (7,718 )
 
                        
Operating income
     15,617       16,100       66,755       26,318  
 
                        
Financial income (expense), net
     2,289       1,364       7,659       5,653  
Share of profit (loss) of associates
     662       (947 )     (531 )     (5,970 )
Other non-operating income (expense), net
     (2,373 )     (2,158 )     (2,301 )     (6,757 )
 
                        
Income before taxes
     16,195       14,359       71,582       19,244  
 
                        
Income tax expense
     24,219       (2,676 )     19,816       (12,953 )
 
                        
NET INCOME
     40,414       11,683       91,398       6,291  
 
                        
Attributable to:
                                
Equity holders of the Company
     40,013       11,806       89,890       4,674  
Minority interest
     401       (123 )     1508       1,617  
 
                        
Net income per share attributable to equity holders of the Company (in euros)
                                
Basic
     0.06       0.02       0.15       0.01  
Diluted
     0.06       0.02       0.14       0.01  
 
                        
Shares used in net income per share calculation:
                                
Basic
     628,003,671       606,933,869       618,285,864       606,672,060  
Diluted
     647,413,175       618,170,575       634,742,894       619,022,472  
 
                        
Due to the adoption of IAS 1 (revised 2003) Presentation of Financial Statements, the Company has modified its Consolidated Balance Sheet and its Consolidated Statement of Income. Please refer to Note 2.23 “Comparatives” of our 2004 Annual Report for further details.

 

 

Gemplus International SA

 
Consolidated Balance Sheets
                 
    (in thousands of euros)  
    December 31,     December 31,  
    2005     2004  
ASSETS
                
Current assets:
                
Cash and cash equivalents
     418,365       388,430  
Trade accounts receivable, net
     183,022       148,512  
Inventory, net
     107,673       115,610  
Derivative financial instruments
     4,187       33,387  
Other current receivables
     82,128       66,160  
 
            
Total current assets
     795,375       752,099  
 
            
Non-current assets:
                
Property, plant and equipment, net
     158,284       148,916  
Goodwill, net
     90,826       28,197  
Deferred development costs, net
     21,227       19,222  
Other intangible assets, net
     23,600       8,965  
Deferred income tax assets
     32,788       6,264  
Investments in associates
     16,309       12,864  
Available-for-sale financial assets, net
     2,469       4,752  
Other non-current receivables, net
     40,846       43,900  
 
            
Total non-current assets
     386,349       273,080  
 
            
TOTAL ASSETS
     1,181,724       1,025,179  
 
            
 
                
LIABILITIES
                
Current liabilities:
                
Accounts payable
     106,085       94,025  
Derivative financial instruments
     2,592       —  
Salaries, wages and related items
     62,641       55,199  
Current portion of provisions and other liabilities
     73,434       50,217  
Current income tax liabilities
     5,228       6,581  
Other current tax liabilities
     20,821       19,127  
Current obligations under finance leases
     5,539       6,005  
 
            
Total current liabilities
     276,340       231,154  
 
            
Non-current liabilities:
                
Non-current obligations under finance leases
     26,425       33,663  
Non-current portion of provisions
     23,482       25,696  
Other non-current liabilities
     13,417       13,353  
Deferred income tax liabilities
     4,354       —  
 
            
Total non-current liabilities
     67,678       72,712  
 
            
Shareholders’ equity:
                
Ordinary shares
     133,466       128,643  
Additional paid-in capital
     1,071,388       1,031,558  
Retained earnings
     (374,183 )     (459,560 )
Other comprehensive income
     (4,407 )     11,956  
Less, cost of treasury shares
     (1,395 )     (1,985 )
 
            
Equity attributable to equity holders of the Company
     824,869       710,612  
 
            
Minority interest
     12,837       10,701  
 
            
Total shareholders’ equity
     837,706       721,313  
 
            
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
     1,181,724       1,025,179  
 
            
Due to the adoption of IAS 1 (revised 2003) Presentation of Financial Statements, the Company has modified its Consolidated Balance Sheet and its Consolidated Statement of Income. Please refer to Note 2.23 “Comparatives” of our 2004 Annual Report for further details.

 

 

Gemplus International SA

 
Consolidated Statements of Cash Flows
                 
    (in thousands of euros)  
    Twelve months ended  
    December 31,  
    2005     2004  
Cash flow from operating activities:
                
Net income (loss)
     91,398       6,291  
Adjustments to reconcile net income (loss) to net cash from operating activities:
                
Depreciation, amortization and impairment
     41,369       56,691  
Changes in non-current portion of provisions and other liabilities, excluding restructuring
     (3,367 )     (32,930 )
Deferred income taxes
     (28,372 )     3,661  
(Gain) / loss on sale and disposal of assets
     (4,612 )     2,582  
Share of (profit) loss of associates
     571       5,970  
Share-based compensation
     4,320       —  
Other, net
     (2,130 )     (2,700 )
Changes in operating assets and liabilities:
                
Trade accounts receivable and related current liabilities
     (12,133 )     (2,962 )
Trade accounts payable and related current assets
     822       20,774  
Inventories
     22,661       (19,466 )
Value-added and income taxes
     (1,021 )     21,288  
Salaries, wages and other
     4,429       14,161  
Restricted cash
     23,277       (28,018 )
Restructuring reserve payable
     (15,847 )     (18,307 )
 
                
 
            
Net cash from operating activities
     121,365       27,035  
 
                
Cash flows from investing activities:
                
Sale / (purchase) of activities net of cash (disposed) / acquired
     (63,457 )     (2,898 )
Other investments
     (1,674 )     (2,982 )
Purchase of property, plant and equipment
     (25,078 )     (22,888 )
Purchase of other assets
     (2,693 )     (1,725 )
Proceeds from sale of non-current assets
     7,025       1,300  
Change in non-trade accounts payable and other
     2,074       3,064  
 
                
 
            
Net cash used for investing activities
     (83,803 )     (26,129 )
 
                
Cash flows from financing activities:
                
Proceeds from exercise of share options
     2,790       1,479  
Payments on long-term borrowings
     (1,231 )     —  
Proceeds from sales-leaseback operations
     —       956  
Principal payments on obligations under finance leases
     (5,938 )     (5,827 )
Increase (decrease) in bank overdrafts
     (2,657 )     1,660  
Dividends paid by subsidiaries to minority shareholders
     (1,307 )     (1,724 )
Change in treasury shares
     —       90  
Changes in non-trade accounts payables on financing activities
     19       —  
 
                
 
            
Net cash used for financing activities
     (8,324 )     (3,366 )
 
                
Effect of exchange rate changes on cash
     697       207  
Net increase (decrease) in cash and cash equivalents
     29,238       (2,461 )
Cash and cash equivalents, beginning of the period
     388,430       390,684  
 
                
 
            
Cash and cash equivalents, end of the period
     418,365       388,430  
 
            

 

 

Gemplus International SA

 
1) Accounting principles:
The consolidated financial statements of the Company have been prepared in accordance with International Financial Reporting Standards (IFRS).
2) Segment information
2.1) Fourth Quarter 2005 compared with Fourth Quarter 2004
2.1.1) Operating Segments
                                 
Three months ended                   (in millions of euros)  
    December 31,     December 31,     %     Adjusted  
Net sales   2005     2004     change     change (%) (*)  
Telecommunications
     179.5       187.9       -4 %     -8 %
Financial Services
     55.8       44.2       26 %     11 %
Identity and Security
     26.4       10.4       153 %     61 %
 
                        
Total
     261.7       242.5       8 %     -2 %
 
                        
                                         
  (in millions of euros)  
    December 31,     (% of net     December 31,     (% of net     %  
Gross profit   2005     sales)     2004     sales)     change  
Telecommunications
     64.6       36 %     64.3       34 %     0 %
Financial Services
     12.2       22 %     9.7       22 %     26 %
Identity and Security
     8.4       32 %     3.3       31 %     157 %
 
                              
Total
     85.2       33 %     77.3       32 %     10 %
 
                              
                                         
(in millions of euros)  
    December 31,     (% of net     December 31,     (% of net     %  
Operating expenses   2005     sales)     2004     sales)     change  
Telecommunications
     (44.5 )     25 %     (39.1 )     21 %     14 %
Financial Services
     (12.5 )     22 %     (13.7 )     31 %     -9 %
Identity and Security
     (12.6 )     48 %     (8.4 )     81 %     50 %
 
                              
Total
     (69.6 )     27 %     (61.2 )     25 %     14 %
 
                              
                         
(in millions of euros)  
                    Change in  
    December 31,     December 31,     Operating  
Operating income (loss)   2005     2004     income (loss)  
Telecommunications
     20.1       25.2       -5.1  
Financial Services
     (0.3 )     (4.0 )     3.7  
Identity and Security
     (4.2 )     (5.1 )     0.9  
 
                  
Total
     15.6       16.1       -0.5  
 
                  
 
(*)   Adjusted for currency fluctuations, disposals & acquisitions
2.1.2) Geographical Segments
                                 
Three months ended (in millions of euros)  
    December 31,     December 31,     %     Adjusted  
Net sales   2005     2004     change     change (%) (*)  
Europe, Middle East and Africa
     137.4       122.2       12 %     -1 %
Asia
     45.5       46.5       -2 %     -7 %
Americas
     78.8       73.8       7 %     1 %
 
                        
Total
     261.7       242.5       8 %     -2 %
 
                        
 
(*)   Adjusted for currency fluctuations, disposals & acquisitions

 

 

Gemplus International SA

 
2.2) Twelve months 2005 compared with Twelve months 2004
2.2.1) Operating Segments
                                 
Twelve months ended (in millions of euros)  
    December 31,     December 31,     %     Adjusted  
Net sales   2005     2004     change     change (%) (*)  
Telecommunications
     654.5       641.8       2 %     1 %
Financial Services
     202.9       182.2       11 %     5 %
Identity and Security
     81.5       41.0       99 %     47 %
 
                        
Total
     938.9       865.0       9 %     4 %
 
                        
                                         
(in millions of euros)
    December 31,     (% of net     December 31,     (% of net     %  
Gross profit   2005     sales)     2004     sales)     change  
Telecommunications
     241.5       37 %     220.8       34 %     9 %
Financial Services
     41.9       21 %     37.7       21 %     11 %
Identity and Security
     26.5       33 %     12.0       29 %     120 %
 
                              
Total
     309.9       33 %     270.5       31 %     15 %
 
                              
                                         
(in millions of euros)
    December 31,     (% of net     December 31,     (% of net     %  
Operating expenses   2005     sales)     2004     sales)     change  
Telecommunications
     (158.7 )     24 %     (149.0 )     23 %     6 %
Financial Services
     (43.2 )     21 %     (63.9 )     35 %     -32 %
Identity and Security
     (41.3 )     51 %     (31.3 )     76 %     32 %
 
                              
Total
     (243.2 )     26 %     (244.2 )     28 %     0 %
 
                              
                         
(in millions of euros)  
                    Change in  
    December 31,     December 31,     Operating  
Operating income (loss)   2005     2004     income (loss)  
Telecommunications
     82.9       71.8       11.1  
Financial Services
     (1.3 )     (26.3 )     25.0  
Identity and Security
     (14.8 )     (19.2 )     4.4  
 
                  
Total
     66.8       26.3       40.4  
 
                  
 
(*)   Adjusted for currency fluctuations, disposals & acquisitions
2.2.2) Geographical Segments
                                 
Twelve months ended (in millions of euros)  
    December 31,     December 31,     %     Adjusted  
Net sales   2005     2004     change     change (%) (*)  
Europe, Middle East and Africa
     491.0       443.1       11 %     2 %
Asia
     172.7       194.3       -11 %     -13 %
Americas
     275.2       227.6       21 %     21 %
 
                        
Total
     938.9       865.0       9 %     4 %
 
                        
 
(*)   Adjusted for currency fluctuations, disposals & acquisitions

 

 


Gemplus International SA
 
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: 9 February, 2006   By:   /s/ Frans SPAARGAREN    
    Name:   Frans SPAARGAREN   
    Title:   Chief Financial Officer