Table of Contents
(Mark One) | ||
o | REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
þ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the fiscal year ended December 31, 2006 | ||
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the transition period from to | ||
o | SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
Date of event requiring this shell company report |
Title of each class | Name of each exchange on which registered | |
American Depositary Shares, each representing one Ordinary Share, without nominal value | New York Stock Exchange | |
Ordinary Shares, without nominal value | New York Stock Exchange* |
Ordinary Shares, without nominal value (as of December 31, 2006)** | 1,267,537,248 |
Yes þ | No o |
Yes o | No þ |
Yes þ | No o |
Item 17 o | Item 18 þ |
�� | ||
Yes o | No þ |
** | Including 49,250,676 treasury shares. |
Table of Contents
Table of Contents
Page | ||||||
1 | ||||||
2 | ||||||
3 | ||||||
7 | ||||||
7 | ||||||
7 | ||||||
7 | ||||||
7 | ||||||
8 | ||||||
9 | ||||||
10 | ||||||
23 | ||||||
24 | ||||||
29 | ||||||
32 | ||||||
32 | ||||||
33 | ||||||
34 | ||||||
34 | ||||||
36 | ||||||
36 | ||||||
37 | ||||||
39 | ||||||
39 | ||||||
39 | ||||||
40 | ||||||
42 | ||||||
53 | ||||||
57 | ||||||
59 | ||||||
59 | ||||||
65 | ||||||
65 | ||||||
67 | ||||||
69 | ||||||
71 | ||||||
71 | ||||||
72 | ||||||
74 | ||||||
85 | ||||||
86 | ||||||
87 |
i
Table of Contents
Page | ||||||||
90 | ||||||||
90 | ||||||||
92 | ||||||||
92 | ||||||||
92 | ||||||||
92 | ||||||||
92 | ||||||||
96 | ||||||||
96 | ||||||||
96 | ||||||||
100 | ||||||||
101 | ||||||||
101 | ||||||||
103 | ||||||||
109 | ||||||||
110 | ||||||||
110 | ||||||||
112 | ||||||||
112 | ||||||||
113 | ||||||||
114 | ||||||||
114 | ||||||||
114 | ||||||||
114 | ||||||||
114 | ||||||||
114 | ||||||||
115 | ||||||||
115 | ||||||||
116 | ||||||||
116 | ||||||||
116 | ||||||||
117 | ||||||||
117 | ||||||||
117 | ||||||||
118 | ||||||||
118 | ||||||||
120 | ||||||||
120 | ||||||||
120 | ||||||||
120 | ||||||||
Exhibit 8 | ||||||||
Exhibit 12.1 | ||||||||
Exhibit 12.2 | ||||||||
Exhibit 13 | ||||||||
Exhibit 15 |
ii
Table of Contents
1
Table of Contents
• | general economic and business conditions; | |
• | attracting and retaining personnel; | |
• | competition in the software industry; | |
• | implementing our business strategy; | |
• | developing and introducing new services and products; | |
• | freedom to use intellectual property; | |
• | regulatory and political conditions; | |
• | adapting to technological developments; | |
• | obtaining and expanding market acceptance of our services and products; | |
• | terrorist attacks or other acts of violence or war; | |
• | integrating newly acquired businesses; | |
• | meeting our customers’ requirements; and | |
• | other risks and uncertainties, some of which we describe under “Item 3. Key Information — Risk Factors.” |
2
Table of Contents
• | Stock-based compensation, including expenses for stock-based compensation as defined under U.S. GAAP as well as expenses related to the settlement of stock-based compensation plans in the context of mergers and acquisitions. | |
• | Acquisition-related charges, including amortization of identifiable intangible assets acquired in acquisitions of businesses or intellectual property. | |
• | Impairment-related charges, including other-than-temporary impairment charges on minority equity investments. |
3
Table of Contents
Reconciliation | ||||||||||||||||
Stock-based | ||||||||||||||||
U.S. GAAP | compensation | Acquisition-related | Adjusted | |||||||||||||
Measure | expenses | charges | Measure | |||||||||||||
€ millions | ||||||||||||||||
2006 | ||||||||||||||||
Total operating expenses | 6,837 | 99 | 43 | 6,695 | ||||||||||||
Operating income | 2,565 | 99 | 43 | 2,707 | ||||||||||||
2005 | ||||||||||||||||
Total operating expenses | 6,182 | 45 | 34 | 6,103 | ||||||||||||
Operating income | 2,331 | 45 | 34 | 2,410 | ||||||||||||
2004 | ||||||||||||||||
Total operating expenses | 5,496 | 38 | 30 | 5,428 | ||||||||||||
Operating income | 2,018 | 38 | 30 | 2,086 |
Reconciliation | ||||||||||||||||||||
(net after tax) | ||||||||||||||||||||
Stock-based | ||||||||||||||||||||
U.S. GAAP | compensation | Acquisition-related | Impairment-related | Adjusted | ||||||||||||||||
Measure | expenses | charges | charges | Measure | ||||||||||||||||
2006 | ||||||||||||||||||||
Net income in€ millions | 1,871 | 71 | 27 | 1 | 1,970 | |||||||||||||||
Earnings per share in€ | 1.53 | 0.06 | 0.02 | 0.00 | 1.61 | |||||||||||||||
2005 | ||||||||||||||||||||
Net income in€ millions | 1,496 | 31 | 21 | 4 | 1,552 | |||||||||||||||
Earnings per share in€ | 1.21 | 0.02 | 0.02 | 0.00 | 1.25 | |||||||||||||||
2004 | ||||||||||||||||||||
Net income in€ millions | 1,311 | 24 | 18 | 5 | 1,358 | |||||||||||||||
Earnings per share in€ | 1.05 | 0.02 | 0.02 | 0.00 | 1.09 |
4
Table of Contents
5
Table of Contents
Percentage change | Constant currency | |||||||||||||
from 2005 to 2006 | percentage change | Currency | ||||||||||||
as reported | from 2005 to 2006 | effect | ||||||||||||
% | % | % | ||||||||||||
Software revenue | 10 | 12 | (2 | ) | ||||||||||
Maintenance revenue | 11 | 12 | (1 | ) | ||||||||||
Software and maintenance revenue | 11 | 12 | (1 | ) | ||||||||||
Consulting revenue | 9 | 10 | (1 | ) | ||||||||||
Training revenue | 12 | 12 | 0 | |||||||||||
Service revenue | 10 | 10 | 0 | |||||||||||
Total revenue by Region(1): | ||||||||||||||
EMEA region | 9 | 9 | 0 | |||||||||||
United States | 12 | 14 | (2 | ) | ||||||||||
Rest of Americas region | 18 | 16 | 2 | |||||||||||
Americas region | 13 | 14 | (1 | ) | ||||||||||
Japan | 6 | 14 | (8 | ) | ||||||||||
Rest of Asia Pacific Japan region | 14 | 16 | (2 | ) | ||||||||||
Asia Pacific Japan region | 11 | 15 | (4 | ) | ||||||||||
Total revenue | 10 | 11 | (1 | ) |
(1) | Based on customer location |
6
Table of Contents
Year Ended December 31, | |||||||||||||||||||||||||
2006 | 2006 | 2005 | 2004 | 2003 | 2002 | ||||||||||||||||||||
US$(1) | € | € | € | € | € | ||||||||||||||||||||
(In thousands, except share data) | |||||||||||||||||||||||||
Income Statement Data: | |||||||||||||||||||||||||
Total revenue | 12,407,982 | 9,402,123 | 8,512,429 | 7,514,493 | 7,024,606 | 7,412,838 | |||||||||||||||||||
Operating income | 3,385,550 | 2,565,394 | 2,330,732 | 2,018,381 | 1,724,019 | 1,625,678 | |||||||||||||||||||
Income before income taxes and minority interest | 3,529,932 | 2,674,799 | 2,316,356 | 2,072,642 | 1,776,615 | 1,107,698 | |||||||||||||||||||
Net income | 2,469,656 | 1,871,377 | 1,496,407 | 1,310,521 | 1,077,063 | 508,614 | |||||||||||||||||||
Earnings per share(2) | |||||||||||||||||||||||||
Basic | 2.02 | 1.53 | 1.21 | 1.05 | 0.87 | 0.41 | |||||||||||||||||||
Diluted | 2.01 | 1.52 | 1.20 | 1.05 | 0.87 | 0.41 | |||||||||||||||||||
Other Data: | |||||||||||||||||||||||||
Weighted average number of shares outstanding(2) | |||||||||||||||||||||||||
Basic | 1,226,263 | 1,226,263 | 1,239,264 | 1,243,209 | 1,243,124 | 1,252,064 | |||||||||||||||||||
Diluted | 1,231,650 | 1,231,650 | 1,243,342 | 1,248,623 | 1,245,636 | 1,255,920 |
7
Table of Contents
Year Ended December 31, | ||||||||||||||||||||||||
2006 | 2006 | 2005 | 2004 | 2003 | 2002 | |||||||||||||||||||
US$(1) | € | € | € | € | € | |||||||||||||||||||
(In thousands, except share data) | ||||||||||||||||||||||||
Balance Sheet Data: | ||||||||||||||||||||||||
Cash and cash equivalents | 3,165,605 | 2,398,731 | 2,064,074 | 1,505,793 | 838,737 | 897,285 | ||||||||||||||||||
Total assets | 12,540,763 | 9,502,738 | 9,039,904 | 7,585,472 | 6,325,865 | 5,608,463 | ||||||||||||||||||
Shareholders’ equity | 8,097,488 | 6,135,855 | 5,782,238 | 4,594,253 | 3,709,445 | 2,872,091 | ||||||||||||||||||
Subscribed capital | 1,672,769 | 1,267,537 | 316,458 | 316,004 | 315,414 | 314,963 | ||||||||||||||||||
Short-term financial debt(3) | 40,870 | 30,969 | 22,308 | 25,851 | 19,043 | 22,657 | ||||||||||||||||||
Long-term financial debt(3) | 3,719 | 2,818 | 10,622 | 11,116 | 12,933 | 11,462 |
(1) | Amounts presented in US$ have been translated for the convenience of the reader at€1.00 to US$1.3197, the Noon Buying Rate for converting€1.00 into dollars on December 29, 2006. See “— Exchange Rates” for recent exchange rates between the euro and the dollar. |
(2) | Amounts are retrospectively adjusted for all periods presented for the effect of the December 15, 2006 fourfold increase in the number of shares under a capital increase pursuant to German law. See “Item 9. The Offer and Listing — General” for more detail of the share increase. |
(3) | Financial debt represents bank loans, overdrafts and capital lease obligations. Short-term means a remaining life of one year or shorter; long-term, beyond one year. The balances include convertible bonds issued pursuant to stock-based compensation plans. See “Item 6. Directors, Senior Management and Employees — Stock-Based Compensation Plans.” |
Year | Average(1) | High | Low | |||||||||
2002 | 0.9495 | 1.0485 | 0.8594 | |||||||||
2003 | 1.1411 | 1.2597 | 1.0361 | |||||||||
2004 | 1.2478 | 1.3625 | 1.1801 | |||||||||
2005 | 1.2400 | 1.3476 | 1.1667 | |||||||||
2006 | 1.2661 | 1.3327 | 1.1860 |
8
Table of Contents
Month | High | Low | |||||||
2006 | |||||||||
July | 1.2822 | 1.2500 | |||||||
August | 1.2914 | 1.2735 | |||||||
September | 1.2833 | 1.2648 | |||||||
October | 1.2773 | 1.2502 | |||||||
November | 1.3261 | 1.2705 | |||||||
December | 1.3327 | 1.3073 | |||||||
2007 | |||||||||
January | 1.3286 | 1.2904 | |||||||
February | 1.3246 | 1.2933 | |||||||
March (through March 14, 2007) | 1.3227 | 1.3094 |
(1) | The average of the applicable Noon Buying Rates on the last day of each month during the relevant period. |
Dividend Paid | ||||||||
per Ordinary | ||||||||
Share | ||||||||
Year Ended December 31, | € | US$ | ||||||
2002 | 0.15 | 0.17 | (1)(4) | |||||
2003 | 0.20 | 0.24 | (1)(4) | |||||
2004 | 0.28 | 0.35 | (1)(4) | |||||
2005 | 0.36 | 0.43 | (1)(4) | |||||
2006 (proposed) | 0.46 | (2) | 0.61 | (2)(3)(4) |
(1) | Translated for the convenience of the reader from euro into dollars at the Noon Buying Rate for converting euro into dollars on the dividend payment date. The depositary is required to convert any dividend payments received from SAP as promptly as practicable upon receipt. |
(2) | Subject to approval of the Annual General Meeting of Shareholders of SAP AG to be held on May 10, 2007. |
(3) | Translated for the convenience of the reader from euro into dollars at the Noon Buying Rate for converting euro into dollars on March 14, 2007 of US$1.3227 per€1.00. The depositary is required to convert any dividend payments received from SAP as promptly as practicable upon receipt. The dividend paid may differ due to changes in the exchange rate. |
9
Table of Contents
(4) | One SAP ADS currently represents one SAP AG ordinary share. Accordingly, the final dividend per ADS is equal to the dividend for one SAP AG ordinary share and is dependent on the euro/dollar exchange rate. |
10
Table of Contents
• | general economic or political conditions in each country or region; | |
• | the overlap of differing tax structures; | |
• | the management of an organization spread over various jurisdictions; | |
• | exchange rate fluctuations; and | |
• | regulatory constraints such as export restrictions, regulation of the Internet, and additional requirements for the design and for the distribution of software and services. |
11
Table of Contents
12
Table of Contents
13
Table of Contents
14
Table of Contents
15
Table of Contents
• | the relatively long sales cycles for our products; | |
• | the size and timing of individual license transactions; | |
• | the timing of the introduction of new products or product enhancements by us or our competitors; | |
• | changes in customer budgets; | |
• | seasonality of a customer’s technology purchases; and | |
• | other general economic and market conditions. |
• | expansion of our operations; | |
• | research and development directed towards new products and product enhancements; and | |
• | development of new distribution and resale channels, particularly for small and midsize enterprises. |
16
Table of Contents
17
Table of Contents
• | the announcement of new products or product enhancements by us or our competitors; | |
• | technological innovation by us or our competitors; | |
• | quarterly variations in our results of operations; | |
• | changes in revenue and revenue growth rates on a consolidated basis or for specific geographic areas, business units, products or product categories; | |
• | speculation in the press or financial community; | |
• | general market conditions specific to particular industries; | |
• | general and country specific economic or political conditions (particularly wars, terrorist attacks, etc.); and | |
• | proposed and completed acquisitions or other significant transactions by us or our competitors. |
18
Table of Contents
19
Table of Contents
• | continue to enhance and expand our existing products and services; | |
• | provide best-in-class business solutions and services; and | |
• | develop and introduce new products and provide new services that satisfy increasingly sophisticated customer requirements, that keep pace with technological developments and that are accepted in the market. |
20
Table of Contents
21
Table of Contents
• | inability to successfully integrate the acquired business, including integrating different business and licensing models; | |
• | inability to integrate the acquired technologies or products with our current products and technologies; | |
• | potential disruption of our ongoing business; | |
• | inability to retain key technical and managerial personnel of the acquired business; | |
• | dilution of existing equity holders caused by capital stock issuances to the stockholders of acquired companies or capital stock issuances to retain employees of the acquired companies; | |
• | assumption of unknown material liabilities of acquired companies; | |
• | incurrence of debt or significant cash expenditure; | |
• | difficulty in implementing or maintaining controls, procedures and policies; | |
• | potential adverse impact on our relationships with partner companies or third-party providers of technology or products; | |
• | impairment of relationships with employees and customers; | |
• | regulatory constraints; and | |
• | problems with product quality, product architecture, legal contingencies, product development issues or other significant risks that may not be detected through the due diligence process. |
22
Table of Contents
23
Table of Contents
24
Table of Contents
25
Table of Contents
26
Table of Contents
• | To be innovative | |
• | To succeed with their business strategy | |
• | To lift the productivity of their employees | |
• | To comply with laws and regulations that apply to their efforts |
27
Table of Contents
• | Organic growth: By supporting our growth strategy principally through organic development of our product portfolio. | |
• | Co-innovation: By expanding our partner ecosystem to accelerate innovation by supporting the development of solutions and enterprise services built on the SAP NetWeaver platform and to leverage sales forces to address the various market and customer segments. | |
• | Smart acquisitions: By targeting strategic “fill-in” acquisitions to add to our broad solution offering within industries or across industries by gaining specific technologies and capabilities that meet the needs of our customers. |
28
Table of Contents
• | For large enterprises, we offer more than 25 tailored solution portfolios for industries. Solution portfolios for industries are created by SAP through the assembly of general-purpose applications, industry-specific applications, service-enabled composite applications, and, potentially, partner products. These portfolios support industry-specific business processes using software that is tailored to various roles in a business. |
29
Table of Contents
Process Industries • Chemicals • Mill Products • Oil & Gas • Mining Discrete Industries • Aerospace & Defense • Automotive • Engineering, Construction & Operations • High Tech • Industrial Machinery & Components Consumer Industries • Consumer Products • Retail • Wholesale Distribution • Life Sciences | Services Industries • Media • Logistics Service Providers • Postal Services • Railways • Telecommunications • Utilities • Professional Services Financial Services • Banking • Insurance Public Services • Healthcare • Higher Education & Research • Public Sector • Defense & Security |
• | For small and midsize enterprises, we offer the SAP Business One application and SAP All-in-One solutions. SAP Business One targets small businesses with fewer than one hundred employees and offers capabilities for various work involved in managing a small business such as bookkeeping, reporting, sales and marketing, purchasing, and warehousing and inventory. It is developed by SAP and delivered by SAP channel partners who provide local services and support. SAP All-in-One solutions are designed to meet the requirements of midsize companies of up to 2,500 employees, and offer preconfigured industry-specific solutions for rapid deployment. SAP All-in-One solutions are developed and sold by SAP, and deployed and supported by either SAP or an experienced partner. |
• | General-purpose applications.These include the SAP Business Suite family of business applications which consists of SAP ERP (which further consists of SAP ERP Human Capital Management (SAP ERP HCM), SAP ERP Financials, SAP ERP Operations, and SAP ERP Corporate Services), SAP Customer Relationship Management (SAP CRM), SAP Product Lifecycle Management (SAP PLM), SAP Supply Chain Management (SAP SCM), and SAP Supplier Relationship Management (SAP SRM). These applications can be licensed individually or together as a suite, and in some cases, such as with customer relationship management and supplier relationship management, customers can choose to license the software as a service with SAP on-demand solutions. In addition, we offer various cross-industry optional applications such as SAP Global Trade Management, Environment, Health & Safety, Duet, and SAP solutions for radio frequency identification (RFID). | |
• | Industry-specific applications.These perform defined business functions in particular industries. These applications often are delivered as add-ons to general-purpose applications, particularly to the SAP ERP application. Some industry-specific applications may run stand-alone, and others require SAP ERP or other SAP Business Suite applications. Examples of industry-specific applications include the SAP Apparel and Footwear application for the consumer products industry and the SAP Reinsurance Management application for the insurance industry. |
30
Table of Contents
• | SAP xApps composite applications. These perform functions spanning multiple applications, departments, and organizations. These applications are designed to reuse, integrate, and orchestrate enterprise services that are provided by SAP NetWeaver. They can be general-purpose or industry-specific, and can be categorized into the following families: SAP xApps composite applications for analytics; SAP xApps composite applications for governance, risk, and compliance; SAP xApps composite applications for mobile business; and SAP xApps composition applications for personal productivity. Our software and consulting partners can also develop and offer “SAP xApps Certified” composite applications. |
• | SAP Custom Development.The SAP Custom Development organization develops custom solutions that address customers’ unique business requirements on the SAP NetWeaver platform. The service portfolio includes development services that help customers to extend and enhance existing SAP solutions or build new and innovative business solutions, and maintenance services to protect their custom solutions and SAP investment as their business evolves over time. | |
• | SAP Active Global Support.The SAP Active Global Support organization offers a broad range of services to support customers before, during and after implementation of our software solutions, providing around-the-clock technical support for high-priority messages to resolve issues as well as proactive, preventative services to mitigate potential problems before they get out of hand. Key offerings of SAP Active Global Support include the SAP Standard Support option which provides the knowledge, tools, and functions to keep customers’ SAP environment up-to-date and running efficiently, and the SAP Premium Support option through which SAP’s experts take a more active role in establishing support operations. As part of the SAP Standard Support, customers are entitled to unspecified upgrades and enhancements to the software products they licensed. |
31
Table of Contents
• | SAP Consulting.The SAP Consulting organization offers consulting, implementation, and optimization services that aim at delivering business value in all phases of the solution life-cycle, from the planning phase through building and running the solutions. SAP Consulting advises and supports customers on designing business processes and IT infrastructure, helps customers with project management, solution implementation and integration, and helps with solution and IT landscape optimization to adapt to changing business needs of customers. | |
• | SAP Education.The SAP Education organization provides the training and tools required to assist SAP customers and partners in maximizing the benefits attained from SAP solutions. SAP Education services include education needs analysis, education delivery via classroom or e-learning, assessment certification and continuous improvement. | |
• | SAP Managed Services.The SAP Managed Services organization provides a comprehensive portfolio of services, which include application management services and hosting services, running and managing SAP solutions on behalf of customers. |
2006 | 2005 | 2004 | ||||||||||
(In€ millions) | ||||||||||||
Germany | 1,907.4 | 1,810.4 | 1,780.1 | |||||||||
Rest of EMEA | 2,994.3 | 2,702.4 | 2,443.4 | |||||||||
Total EMEA | 4,901.7 | 4,512.8 | 4,223.5 | |||||||||
United States | 2,617.0 | 2,342.8 | 1,893.7 | |||||||||
Rest of Americas | 776.3 | 656.8 | 530.1 | |||||||||
Total Americas | 3,393.3 | 2,999.6 | 2,423.8 | |||||||||
Japan | 431.3 | 406.2 | 387.4 | |||||||||
Rest of Asia Pacific Japan | 675.8 | 593.8 | 479.8 | |||||||||
Total Asia Pacific Japan | 1,107.1 | 1,000.0 | 867.2 | |||||||||
Total revenue | 9,402.1 | 8,512.4 | 7,514.5 | |||||||||
32
Table of Contents
2006 | 2005 | 2004 | ||||||||||
(In€ millions) | ||||||||||||
Process Industries | 1,996.4 | 1,765.9 | 1,469.1 | |||||||||
Discrete Industries | 2,180.9 | 1,986.1 | 1,807.9 | |||||||||
Consumer Industries | 1,666.7 | 1,457.0 | 1,349.8 | |||||||||
Service Industries | 2,134.5 | 1,946.0 | 1,673.9 | |||||||||
Financial Services | 590.8 | 543.4 | 519.1 | |||||||||
Public Services | 832.8 | 814.0 | 694.7 | |||||||||
Total revenue | 9,402.1 | 8,512.4 | 7,514.5 | |||||||||
33
Table of Contents
34
Table of Contents
35
Table of Contents
36
Table of Contents
Ownership | Country of | |||||||
Name of Subsidiary | % | Incorporation | Function | |||||
Germany | ||||||||
SAP Deutschland AG & Co. KG, Walldorf | 100 | Germany | Sales, consulting and training | |||||
Rest of Europe/ Middle East/ Africa | ||||||||
SAP (UK) Limited, Feltham | 100 | Great Britain | Sales, consulting and training | |||||
SAP (Schweiz) AG, Biel | 100 | Switzerland | Sales, consulting and training | |||||
SAP France S.A., Paris | 100 | France | Sales, consulting and training | |||||
SAP ITALIA SISTEMI, APPLICAZIONI, PRODOTTI IN DATA PROCESSING S.P.A., Milan | 100 | Italy | Sales, consulting and training | |||||
SAP Nederland B.V.,’s-Hertogenbosch | 100 | The Netherlands | Sales, consulting and training | |||||
Americas | ||||||||
SAP America, Inc., Newtown Square | 100 | USA | Sales, consulting and training | |||||
SAP Canada Inc., Toronto | 100 | Canada | Sales, consulting, training, and research and development | |||||
Asia/ Pacific | ||||||||
SAP JAPAN Co., Ltd., Tokyo | 100 | Japan | Sales, consulting training, and research and development |
37
Table of Contents
38
Table of Contents
• | To provide additional transparency, for the first time we provided an outlook for software and maintenance revenue (previously referred to as product revenue). We expected full-year 2006 software and maintenance revenue to increase in the range of 13% to 15% compared to 2005. This growth rate was based on our expectation for full-year 2006 software revenue growth in the range of 15% to 17% compared to 2005. As in 2005, the growth was expected to be driven by the Americas and Asia Pacific Japan. Low single-digit revenue growth in Germany was likely, while high single-digit growth was expected for the rest of the EMEA region. Consulting and training revenues were expected to grow more slowly than software and maintenance revenue. | |
• | We expected the full-year 2006 Adjusted operating margin, which excludes stock-based compensation and acquisition-related charges, to increase in the range of 0.5 to 1.0 percentage points compared to 2005. | |
• | We expected full-year 2006 Adjusted earnings per share, which exclude stock-based compensation, acquisition-related charges and impairment-related charges, to be in the range of€1.45 to€1.50 per share. |
• | We increased our expected full-year 2006 guidance for Adjusted earnings per share, which excluded stock based compensation, acquisition-related charges and impairment-related charges. We then expected Adjusted earnings per share to be slightly above the previously communicated range of€1.45 to€1.50 per share. | |
• | We reaffirmed that we expected full-year 2006 software and maintenance revenue to increase in a range of 13% to 15% compared to 2005. This growth rate was based on our expectation for full-year |
39
Table of Contents
2006 software revenue growth in a range of 15% to 17% compared to 2005. We announced that it appeared less likely that software and maintenance revenue growth as well as software revenue growth would reach the upper end of the aforementioned ranges. | ||
• | We reaffirmed that we expected the full-year 2006 Adjusted operating margin, which excludes stock-based compensation and acquisition-related charges, to increase in a range of 0.5 to 1.0 percentage points compared to 2005. We announced it appeared less likely that the Adjusted operating margin increase would be at the upper end of the aforementioned range. | |
• | The outlook continued to be based on an U.S. dollar to euro exchange rate of $1.23 per€1.00. |
• | key factors that impacted our performance; | |
• | discussion of our operating results for 2006 compared to 2005 and for 2005 compared to 2004; and | |
• | our outlook for 2007. |
40
Table of Contents
41
Table of Contents
Change | Change | |||||||||||||||||||
2006 | 2005 | 2004 | 2006 vs. 2005 | 2005 vs. 2004 | ||||||||||||||||
(In€000s) | ||||||||||||||||||||
Total revenue | 9,402,123 | 8,512,429 | 7,514,493 | 10.5% | 13.3% |
42
Table of Contents
Date | Period-End | |||
December 2005 | 1.1842 | |||
March 2006 | 1.2139 | |||
June 2006 | 1.2779 | |||
September 2006 | 1.2687 | |||
December 2006 | 1.3197 |
Date | Period-End | |||
December 2004 | 1.3538 | |||
March 2005 | 1.2969 | |||
June 2005 | 1.2098 | |||
September 2005 | 1.2058 | |||
December 2005 | 1.1842 |
Change | Change | ||||||||||||||||||||
2006 | 2005 | 2004 | 2006 vs. 2005 | 2005 vs. 2004 | |||||||||||||||||
(In€000s) | |||||||||||||||||||||
Software revenue | 3,071,291 | 2,782,751 | 2,361,012 | 10.4% | 17.9% | ||||||||||||||||
Maintenance revenue | 3,533,282 | 3,175,642 | 2,823,189 | 11.3% | 12.5% | ||||||||||||||||
Software and maintenance revenue | 6,604,573 | 5,958,393 | 5,184,201 | 10.8% | 14.9% |
43
Table of Contents
44
Table of Contents
Change | Change | ||||||||||||||||||||
2006 | 2005 | 2004 | 2006 vs. 2005 | 2005 vs. 2004 | |||||||||||||||||
(In€000s) | |||||||||||||||||||||
Consulting revenue | 2,340,268 | 2,138,941 | 1,970,606 | 9.4 | % | 8.5 | % | ||||||||||||||
Training revenue | 382,830 | 342,466 | 302,443 | 11.8 | % | 13.2 | % | ||||||||||||||
Service revenue | 2,723,098 | 2,481,407 | 2,273,049 | 9.7 | % | 9.2 | % |
45
Table of Contents
Change | Change | |||||||||||||||||||
2006 | 2005 | 2004 | 2006 vs. 2005 | 2005 vs. 2004 | ||||||||||||||||
(In€000s) | ||||||||||||||||||||
Total operating expenses | 6,836,729 | 6,181,697 | 5,496,112 | 10.6% | 12.5% | |||||||||||||||
Operating income | 2,565,394 | 2,330,732 | 2,018,381 | 10.1% | 15.5% | |||||||||||||||
Operating margin (Operating income as a percentage of total revenue) | 27.3% | 27.4% | 26.9% |
• | We increased our research and development expenses in 2006 by€246.2 million, or 22.6%, compared to 2005. | |
• | Our growing workforce resulted in an increase in personnel expenses, which went up from€3,371.5 million in 2005 to€3,833.1 million in 2006, or 13.7%. This increase in personnel expenses is the result of the overall headcount increase from 35,873 full-time equivalents as of December 31, 2005, to 39,355 full-time equivalents as of December 31, 2006, an increase of 9.7%. The biggest |
46
Table of Contents
increase in headcount was in research and development, in which the worldwide full-time equivalent count rose 15.5% to 11,801. The increase is consistent with our organic growth strategy and commitment to meet product release schedules. We continued to keep a tight control on personnel expenses due to minimal fixed salary increases as well as by adding additional headcount primarily in the major emerging markets with modest salary levels such as China and India. The share of resources in low-cost locations (Bulgaria, China, and India) increased from 10.9% in 2005 to 13.8% in 2006. | ||
• | Cost of purchased licenses increased due to the strong growth in software and maintenance revenue. | |
• | We had higher travel expenses due to increased business activity. |
• | We increased our sales and marketing expenses in 2005 by€222.6 million, or 14.6% compared to 2004, reflecting additional investment in aligning our operations to volume business and in our sales organization. | |
• | Our growing workforce resulted in an increase in personnel expenses, which went up from€2,968.0 million in 2004 to€3,371.5 million in 2005, or 13.6%. This increase in personnel expenses is the result of the overall headcount increased from 32,205 full-time equivalents as of December 31, 2004, to 35,873 full-time equivalents as of December 31, 2005, an increase of 11.4%. The biggest increase in headcount was in research and development, in which the worldwide full-time equivalent count rose 18% to 11,629. The increase is consistent with our organic growth strategy and commitment to meet product release schedules. We continued to keep a tight control on personnel expenses due to minimal fixed salary increases as well as by adding additional headcount primarily in the major emerging markets with modest salary levels such as China and India. The share of resources in low-cost locations (Bulgaria, China, and India) increased from 8.2% in 2004 to 10.9% in 2005. | |
• | The rise in the headcount and overall increase in business activity during 2005 resulted in higher travel expenses compared to 2004 (an increase of€55.8 million or 17.5%). | |
• | As a result of the strong software and maintenance revenue growth, cost of purchased licenses increased by 19.5%. |
47
Table of Contents
Change | Change | |||||||||||||||||||
2006 | 2005 | 2004 | 2006 vs. 2005 | �� | 2005 vs. 2004 | |||||||||||||||
(In€000s) | ||||||||||||||||||||
Adjusted operating income | 2,707,924 | 2,409,339 | 2,086,125 | 12.4% | 15.5% | |||||||||||||||
Adjusted operating margin | 28.8% | 28.3% | 27.8% |
Change | Change | |||||||||||||||||||
2006 | 2005 | 2004 | 2006 vs. 2005 | 2005 vs. 2004 | ||||||||||||||||
(In €000s) | ||||||||||||||||||||
Cost of software and maintenance | 1,099,966 | 993,227 | 916,278 | 10.7% | 8.4% | |||||||||||||||
As a percentage of software and maintenance revenue | 16.7% | 16.7% | 17.7% |
• | Customer support costs which include 24x7 message handling, services for upgrades, SAP EarlyWatch services, SAP GoingLive services and premium maintenance services (SAP Safeguarding services, SAP Empowering services and SAP MaxAttention support option) — delivered by the SAP Active Global Support organization. | |
• | Costs of developing custom solutions that address customers’ unique business requirements. | |
• | License fees and commissions paid to third parties for databases and the other complementary third-party products sublicensed by us to customers. |
48
Table of Contents
Change | Change | |||||||||||||||||||
2006 | 2005 | 2004 | 2006 vs. 2005 | 2005 vs. 2004 | ||||||||||||||||
(In€000s) | ||||||||||||||||||||
Cost of services | 2,078,011 | 1,924,614 | 1,783,453 | 8.0% | 7.9% | |||||||||||||||
As a percentage of service revenue | 76.3% | 77.6% | 78.5% |
49
Table of Contents
Change | Change | |||||||||||||||||||
2006 | 2005 | 2004 | 2006 vs. 2005 | 2005 vs. 2004 | ||||||||||||||||
(In€000s) | ||||||||||||||||||||
Research and development | 1,334,815 | 1,088,632 | 908,056 | 22.6% | 19.9% | |||||||||||||||
As a percentage of total revenue | 14.2% | 12.8% | 12.1% |
• | Personnel expenses related to our research and development employees; | |
• | Amortization of computer hardware used in our research and development activities; and | |
• | Costs incurred for independent contractors retained by us to assist in our research and development activities. |
Change | Change | |||||||||||||||||||
2006 | 2005 | 2004 | 2006 vs. 2005 | 2005 vs. 2004 | ||||||||||||||||
(In€000s) | ||||||||||||||||||||
Sales and marketing | 1,915,441 | 1,746,221 | 1,523,662 | 9.7% | 14.6% | |||||||||||||||
As a percentage of total revenue | 20.4% | 20.5% | 20.3% |
50
Table of Contents
Change | Change | |||||||||||||||||||
2006 | 2005 | 2004 | 2006 vs. 2005 | 2005 vs. 2004 | ||||||||||||||||
(In €000s) | ||||||||||||||||||||
General and administration | 464,966 | 435,185 | 366,425 | 6.8% | 18.8% | |||||||||||||||
As a percentage of total revenue | 4.9% | 5.1% | 4.9% |
Change | Change | |||||||||||||||||||
2006 | 2005 | 2004 | 2006 vs. 2005 | 2005 vs. 2004 | ||||||||||||||||
(In €000s) | ||||||||||||||||||||
Other operating income/expense, net | 56,470 | 6,182 | 1,762 | 813.5% | 250.9% | |||||||||||||||
As a percentage of total revenue | 0.6% | 0.1% | 0.0% |
51
Table of Contents
Change | Change | |||||||||||||||||||
2006 | 2005 | 2004 | 2006 vs. 2005 | 2005 vs. 2004 | ||||||||||||||||
(In €000s) | ||||||||||||||||||||
Financial income/expense, net | 121,708 | 10,785 | 40,987 | 1,028.5% | (73.7 | )% | ||||||||||||||
As a percentage of total revenue | 1.3% | 0.1% | 0.5% |
Change | Change | |||||||||||||||||||
2006 | 2005 | 2004 | 2006 vs. 2005 | 2005 vs. 2004 | ||||||||||||||||
(In€000s) | ||||||||||||||||||||
Income taxes | 801,612 | 817,053 | 757,269 | (1.9 | )% | 7.9% | ||||||||||||||
As a percentage of Income before income taxes and minority interest | 30.0% | 35.3% | 36.5% |
52
Table of Contents
Change | Change | |||||||||||||||||||
Product Segment | 2006 | 2005 | 2004 | 2006 vs. 2005 | 2005 vs. 2004 | |||||||||||||||
External revenue | 6,652 | 6,044 | 5,293 | 10.1% | 14.2% | |||||||||||||||
Segment expenses | (2,628 | ) | (2,452 | ) | (2,058 | ) | 7.2% | 19.2% | ||||||||||||
Segment contribution | 4,024 | 3,592 | 3,235 | 12.0% | 11.0% | |||||||||||||||
Segment profitability | 60.5% | 59.4% | 61.1% | 1.1 percentage points | (1.7) percentage points |
Change | Change | |||||||||||||||||||
Consulting Segment | 2006 | 2005 | 2004 | 2006 vs. 2005 | 2005 vs. 2004 | |||||||||||||||
External revenue | 2,300 | 2,078 | 1,910 | 10.7% | 8.8% | |||||||||||||||
Segment expenses | (1,703 | ) | (1,619 | ) | (1,484 | ) | 5.2% | 9.1% | ||||||||||||
Segment contribution | 597 | 459 | 426 | 30.2% | 7.7% | |||||||||||||||
Segment profitability | 26.0% | 22.1% | 22.3% | 3.9 percentage points | (0.2) percentage points |
53
Table of Contents
Change | Change | |||||||||||||||||||
Training Segment | 2006 | 2005 | 2004 | 2006 vs. 2005 | 2005 vs. 2004 | |||||||||||||||
External revenue | 440 | 380 | 307 | 15.8% | 24.0% | |||||||||||||||
Segment expenses | (273 | ) | (248 | ) | (209 | ) | 10.0% | 18.6% | ||||||||||||
Segment contribution | 167 | 132 | 98 | 26.7% | 35.5% | |||||||||||||||
Segment profitability | 38.1% | 34.8% | 31.8% | 3.3 percentage points | 3.0 percentage points |
54
Table of Contents
55
Table of Contents
56
Table of Contents
57
Table of Contents
• | We expect year-over-year software and software-related service revenue growth in the range of 12% to 14% on a constant currency basis. The corresponding rate of growth in 2006 on a constant currency basis was 12%. We expect subscription and other software-related services to account for approximately 2% to 4% of total software and software-related services revenue. | |
• | To tap new business in the lower midmarket in the coming years, over a period of eight quarters we intend to invest about€300 million to€400 million in sales channels, process, infrastructure, and human resources, all oriented toward new customer relationships and a big, diversified partner ecosystem. We plan to fund these capital expenditures by using our operating cash flow. Depending on when we actually make these investments, in 2007 we expect to reinvest the equivalent of about one to two operating margin percentage points in preparing for additional future growth opportunities. Therefore, we assume our 2007 operating margin will be in the range 26.0% to 27.0%. Our 2006 operating margin was 27.3%. | |
• | We plan to increase our headcount by 3,500 full-time equivalents in 2007. | |
• | We plan to continue to buy back shares in the open market. If the Annual General Meeting of Shareholders in May 2007 so resolves, we expect to pay a dividend that provides a payout ratio of about 30%. |
58
Table of Contents
59
Table of Contents
• | Revenue recognition | |
• | Valuation of accounts receivable | |
• | Accounting for stock-based compensation | |
• | Accounting for income taxes and other income tax related judgments | |
• | Impairment assessments | |
• | Legal contingencies |
60
Table of Contents
1. | Persuasive evidence of an arrangement exists | |
2. | Delivery has occurred | |
3. | The fee is fixed or determinable, and | |
4. | Collectibility is probable. |
61
Table of Contents
2006 | 2005 | 2004 | ||||||||||
(In€ millions) | ||||||||||||
Specific customer credit loss risks | 2.6 | 9.0 | 0.0 | |||||||||
Customer credit loss risks based on aging of the receivables | (43.0 | ) | 3.4 | 1.7 | ||||||||
Total amounts charged to expense/(income) for allowances for doubtful accounts | (40.4 | ) | 12.4 | 1.7 | ||||||||
62
Table of Contents
63
Table of Contents
64
Table of Contents
2006 | 2005 | % change | ||||||||||
(In€ millions) | ||||||||||||
Cash and cash equivalents | 2,399 | 2,064 | 16.2% | |||||||||
Short-term investments | 931 | 1,782 | (47.8 | )% | ||||||||
Total | 3,330 | 3,846 | (13.4 | )% |
65
Table of Contents
Years ended December 31, | ||||||||||||||||||||
Change | Change | |||||||||||||||||||
2006 | 2005 | 2004 | 2006 vs. 2005 | 2005 vs. 2004 | ||||||||||||||||
(In€ millions) | ||||||||||||||||||||
Net cash provided by operating activities | 1,847 | 1,608 | 1,845 | 15% | (13 | )% | ||||||||||||||
Net cash used in investing activities | (134 | ) | (583 | ) | (748 | ) | (77 | )% | (22 | )% | ||||||||||
Net cash used in financing activities | (1,375 | ) | (555 | ) | (388 | ) | 148% | 43% |
66
Table of Contents
67
Table of Contents
Payments due by period | ||||||||||||||||||||
Contractual obligations | Total | Less than 1 year | 1-3 years | 3-5 years | More than 5 years | |||||||||||||||
(In€ millions) | ||||||||||||||||||||
Long-term debt obligations(1) | 2 | 1 | 1 | — | — | |||||||||||||||
Capital (finance) lease obligations(2) | 1 | 1 | — | — | — | |||||||||||||||
Operating lease obligations(3) | 657 | 149 | 205 | 134 | 169 | |||||||||||||||
Purchase obligations(4) | 197 | 142 | 46 | 9 | — | |||||||||||||||
Other long-term liabilities reflected on the balance sheet(5) | 78 | — | 72 | 4 | 2 | |||||||||||||||
Total | 935 | 293 | 324 | 147 | 171 |
(1) | This represents a bank loan. |
(2) | This mainly represents capital leases of computer equipment and cars. |
(3) | We have operating leases for office facilities for most of our subsidiaries, cars, computer hardware and certain other equipment. Rental expense for operating leases in 2006 was€182 million (2005:€165 million; 2004:€153 million). |
(4) | Purchase obligations represent agreements to purchase goods or services that are enforceable and legally binding on us that specify all significant terms, including: fixed or minimum quantities to be purchased, fixed; minimum or variable price provisions; and the approximate timing of the transaction. |
The outstanding obligations include the construction of facilities, office equipment and car purchase commitments, food and security services and other facility commitments. | |
Our expected contributions to our pension and other postemployment benefit plans are not included in the table above. We expect to contribute in 2007 statutory minimum and discretionary amounts of€1.8 million to our German defined benefit plans and€45.6 million to our foreign defined benefit plans, all of which are expected to be paid as cash contributions. Our contributions to our German and foreign defined contribution plans have ranged from€76 million to€92 million in 2004 through 2006; we expect similar contributions to be made in 2007. See Note 21(a) to our consolidated financial statements in “Item 18. Financial Statements” for additional information. |
(5) | Amounts mainly consist of income tax payable (€67 million), restructuring and other accruals (€10 million) and trade accounts payable (€0.4 million). Other noncurrent liabilities on the balance sheet such as pension and other postemployment benefit liabilities, deferred compensation, deferred income, deferred tax liabilities, and deferred rent are not included in this table. Please see Notes 20 and 21 to our consolidated financial statements in “Item 18. Financial Statements.” |
68
Table of Contents
69
Table of Contents
70
Table of Contents
Year | Year | |||||||||||||
First | Term | |||||||||||||
Name | Age | Principal Occupation | Elected | Expires | ||||||||||
Prof. Dr. h.c. mult. Hasso Plattner, Chairperson(2) (3)(5)(7)(8) | 63 | Chairperson of the Supervisory Board | 2003 | 2007 | ||||||||||
Pekka Ala-Pietilä(1)(8) | 50 | Executive Advisor to the CEO of Nokia Corporation (until January 31, 2006) Co-founder and CEO Blyk Ltd. (from April 12, 2006) | 2002 | 2007 | ||||||||||
Prof. Dr. Wilhelm Haarmann(1) (3)(5)(9) | 56 | Attorney at Law, Certified Public Auditor and Certified Tax Advisor; HAARMANN Partnerschaftsgesellschaft, Rechtsanwälte, Steuerberater, Wirtschaftsprüfer | 1988 | 2007 | ||||||||||
Dr. h.c. Hartmut Mehdorn(1) (7) | 64 | Chairperson of Executive Board, Deutsche Bahn AG | 1998 | 2007 | ||||||||||
Prof. Dr. Dr. h.c. mult. August-Wilhelm Scheer(1) (6)(8) | 65 | Professor at Saarland University | 2002 | 2007 | ||||||||||
Dr. Erhard Schipporeit(11) | 58 | Former member of the Executive Board, EON AG, Management consultant | 2005 | 2007 | ||||||||||
Dr. Dieter Spöri(1)(5) | 63 | Head of Corporate Representation Federal Affairs, DaimlerChrysler AG | 1998 | 2007 | ||||||||||
Dr. h.c. Klaus Tschira(1) (4) | 66 | Managing Director, Klaus Tschira Stiftung gGmbH | 1998 | 2007 | ||||||||||
Helga Classen, Vice Chairperson(5)(7)(10) | 56 | Employee, Chairperson of the Works Council of SAP AG and SAP Hosting AG & Co. KG | 1993 | 2007 | ||||||||||
Willi Burbach(7)(8)(10) | 44 | Employee, Developer | 1993 | 2007 | ||||||||||
Bernhard Koller(4)(10) | 57 | Employee, Manager of Idea Management | 1989 | 2007 | ||||||||||
Christiane Kuntz-Mayr(5) (8)(10) | 44 | Employee, Development Architect | 2002 | 2007 | ||||||||||
Lars Lamadé(6)(10) | 35 | Employee, Project Manager Service & Support | 2002 | 2007 | ||||||||||
Dr. Gerhard Maier(3) (6)(10) | 53 | Employee, Development Project Manager | 1989 | 2007 | ||||||||||
Dr. Barbara Schennerlein(5)(10) | 50 | Employee, Principal Consultant | 1998 | 2007 | ||||||||||
Stefan Schulz(4)(8)(10) | 37 | Employee, Development Project Manager | 2002 | 2007 |
(1) | Elected by SAP AG’s shareholders on May 3, 2002. |
(2) | Elected by SAP AG’s shareholders on May 9, 2003. |
71
Table of Contents
(3) | Member of the Compensation Committee. |
(4) | Member of the Audit Committee. |
(5) | Member of the General Committee. |
(6) | Member of the Finance and Investment Committee. |
(7) | Member of the Mediation Committee. |
(8) | Member of the Technology Committee. |
(9) | Until January 1, 2006, Wilhelm Haarmann practiced as a partner of Haarmann Hemmelrath which served as special German tax counsel to SAP AG and counseled SAP with regard to other legal matters. On January 1, 2006, he founded HAARMANN Partnerschaftsgesellschaft in Frankfurt. Wilhelm Haarmann was determined to be the Audit Committee’s financial expert until July 2005. |
(10) | Elected by SAP AG’s employees on April 9, 2002. |
(11) | Elected by SAP AG’s shareholders on May 12, 2005, replacing Dietmar Hopp who resigned from the Supervisory Board on the same day. Member of the Audit Committee, and determined to be the Audit Committee financial expert, replacing Wilhelm Haarmann. |
Year First | Year Current | |||||||
Name | Appointed | Term Expires | ||||||
Prof. Dr. Henning Kagermann, CEO | 1991 | 2009 | ||||||
Dr. Peter Zencke | 1993 | 2008 | ||||||
Prof. Dr. Claus Heinrich | 1996 | 2010 | ||||||
Gerhard Oswald | 1996 | 2010 | ||||||
Dr. Werner Brandt | 2001 | 2009 | ||||||
Shai Agassi | 2002 | 2007 | (1) | |||||
Léo Apotheker | 2002 | 2010 |
(1) | Resigned effective April 1, 2007. Additional information located below. |
72
Table of Contents
73
Table of Contents
74
Table of Contents
• | The fixed element is paid as a monthly salary. | |
• | The amount of performance-related compensation to be paid out in respect of 2006 depends on the Group’s achievement of its targets for Adjusted operating income that is, before stock-based compensation expenses and acquisition-related charges and on software revenue growth. On February 14, 2007 the Supervisory Board’s compensation committee assessed SAP’s performance against the agreed targets and determined how much performance-related compensation was payable. The payment will be made after the Annual General Meeting of Shareholders in May 2007. | |
• | The regular form of stock-based compensation is the issue of stock options under the terms of SAP SOP 2002 that the Annual General Meeting of Shareholders approved on May 3, 2002. The terms and detail of SAP SOP 2002 are reported in Note 29 to our consolidated financial statements in “Item 18. Financial Statements.” For options granted to members of the Executive Board in and from February 2004, the SAP SOP 2002 plan terms provide that the Supervisory Board can cap subscription rights if it believes that an option holder would make a windfall profit by exercising them. If the total profit from the exercise at all times of rights under options issued to that holder at the same time exceeds two times the product of (i) the number of subscription rights received by that option holder; and (ii) the exercise price, that total profit is a windfall profit. It is determined by reference to the total of the differences, calculated individually for each exercised subscription right, between the closing price of the share on the exercise day and the exercise price. SAP bears any expenses incurred by the option holder through fees, taxes, or deductions related to the cap. The Supervisory Board can only cap subscription rights if it decides the windfall profits are due to not inconsequential, extraordinary, unforeseen appreciation for which the Executive Board is not responsible. | |
• | The additional nonrecurring stock-based compensation awarded in 2006 is comprised of STARs for the Incentive Plan 2010 stock-based compensation plan. This plan is a nonrecurring incentive with a term of up to five years, intended to give more encouragement than hitherto for originality and to ensure the Executive Board actions remain focused on a long-term goal. Incentive Plan 2010 is a stock-based compensation plan intended to reward a substantial increase in our market capitalization. The Executive Board will qualify for payout under the plan only if, not later than the end of 2010, SAP’s average market capitalization during the last six months of a year is not less than 50% greater than its average value between July 1 and July 31, 2005 and SAP stock outperforms the GSTI Software Index over the same period. Payouts are scaled as follows: |
• | If market capitalization does not increase by 50% or more, the Executive Board will receive no payout. | |
• | If market capitalization increases by more than 50% but less than 100%, target achievement will be measured progressively. | |
• | If SAP’s market capitalization increases not less than twofold during the said period, the Executive Board will receive a payout of€100 million. |
75
Table of Contents
2006 | 2005 | |||||||||||||||||||||||||||||||
Regular | Nonrecurring | |||||||||||||||||||||||||||||||
Performance- | Long-Term | Long-Term | ||||||||||||||||||||||||||||||
Related | Incentive | Incentive | ||||||||||||||||||||||||||||||
Fixed Elements | Compensation | Elements | Element | |||||||||||||||||||||||||||||
Total Before | ||||||||||||||||||||||||||||||||
Stock-Based | Nonrecurring | Stock-Based | ||||||||||||||||||||||||||||||
Directors’ | Compensation | Long-Term | Compensation | |||||||||||||||||||||||||||||
Profit | (SAP SOP | Incentive | (Incentive | |||||||||||||||||||||||||||||
Salary | Other* | Sharing | 2002)** | Element | Plan 2010)** | Total | Total | |||||||||||||||||||||||||
€(000) | ||||||||||||||||||||||||||||||||
Prof. Dr. Henning Kagermann (CEO) | 710.7 | 17.0 | 2,673.7 | 949.0 | 4,350.4 | 4,680.1 | 9,030.5 | 6,084.8 | ||||||||||||||||||||||||
Shai Agassi | 474.4 | 59.5 | 1,782.5 | 632.7 | 2,949.1 | 3,120.1 | 6,069.2 | 4,001.1 | ||||||||||||||||||||||||
Léo Apotheker | 473.8 | 0.3 | 1,782.5 | 632.7 | 2,889.3 | 3,120.1 | 6,009.4 | 3,901.1 | ||||||||||||||||||||||||
Dr. Werner Brandt | 432.6 | 41.3 | 1,627.5 | 577.7 | 2,679.1 | 1,560.0 | 4,239.1 | 3,942.2 | ||||||||||||||||||||||||
Prof. Dr. Claus E. Heinrich | 432.6 | 20.0 | 1,627.5 | 577.7 | 2,657.8 | 1,560.0 | 4,217.8 | 3,920.9 | ||||||||||||||||||||||||
Gerhard Oswald | 432.6 | 14.8 | 1,627.5 | 577.7 | 2,652.6 | 1,560.0 | 4,212.6 | 3,915.1 | ||||||||||||||||||||||||
Dr. Peter Zencke | 432.6 | 27.7 | 1,627.5 | 577.7 | 2,665.5 | 1,560.0 | 4,225.5 | 3,922.8 | ||||||||||||||||||||||||
Total | 20,843.8 | 38,004.1 | 29,688.0 | |||||||||||||||||||||||||||||
* | Insurance contributions, benefits in kind, compensation from seats on other governing bodies in the SAP Group |
** | Fair value at the time of allocation |
2006 | ||||||||||||||||||||
Regular Stock-Based | Nonrecurring Stock- | |||||||||||||||||||
Compensation | Based Compensation | |||||||||||||||||||
Total Fair | ||||||||||||||||||||
Value Of | ||||||||||||||||||||
SAP SOP 2002 | Incentive Plan 2010 | Long-Term | ||||||||||||||||||
Incentive | ||||||||||||||||||||
Fair Value | Fair Value | Elements | ||||||||||||||||||
At Time | At Time | At Time | ||||||||||||||||||
Quantity | Of Grant | Quantity | Of Grant | Of Grant | ||||||||||||||||
€ | € | |||||||||||||||||||
€(000) | ||||||||||||||||||||
Prof. Dr. Henning Kagermann (CEO) | 35,851 | 26.47 | 188,182 | 24.87 | 5,629.1 | |||||||||||||||
Shai Agassi | 23,901 | 26.47 | 125,455 | 24.87 | 3,752.7 | |||||||||||||||
Léo Apotheker | 23,901 | 26.47 | 125,455 | 24.87 | 3,752.7 | |||||||||||||||
Dr. Werner Brandt | 21,823 | 26.47 | 62,727 | 24.87 | 2,137.7 | |||||||||||||||
Prof. Dr. Claus E. Heinrich | 21,823 | 26.47 | 62,727 | 24.87 | 2,137.7 | |||||||||||||||
Gerhard Oswald | 21,823 | 26.47 | 62,727 | 24.87 | 2,137.7 | |||||||||||||||
Dr. Peter Zencke | 21,823 | 26.47 | 62,727 | 24.87 | 2,137.7 | |||||||||||||||
Total | 170,945 | 690,000 | 21,685.3 | |||||||||||||||||
76
Table of Contents
2005 | ||||||||||||||||||||
Regular Stock-Based | Nonrecurring Stock- | |||||||||||||||||||
Compensation | Based Compensation | |||||||||||||||||||
Total Fair | ||||||||||||||||||||
Value Of | ||||||||||||||||||||
SAP SOP 2002 | Incentive Plan 2010 | Long-Term | ||||||||||||||||||
Incentive | ||||||||||||||||||||
Fair Value | Fair Value | Elements | ||||||||||||||||||
At Time | At Time | At Time | ||||||||||||||||||
Quantity | Of Grant | Quantity | Of Grant | Of Grant | ||||||||||||||||
€ | € | €(000) | ||||||||||||||||||
Prof. Dr. Henning Kagermann (CEO) | 66,955 | 20.08 | — | — | 1,344.5 | |||||||||||||||
Shai Agassi | 37,495 | 20.08 | — | — | 752.9 | |||||||||||||||
Léo Apotheker | 37,495 | 20.08 | — | — | 752.9 | |||||||||||||||
Dr. Werner Brandt | 37,495 | 20.08 | — | — | 752.9 | |||||||||||||||
Prof. Dr. Claus E. Heinrich | 37,495 | 20.08 | — | — | 752.9 | |||||||||||||||
Gerhard Oswald | 37,495 | 20.08 | — | — | 752.9 | |||||||||||||||
Dr. Peter Zencke | 37,495 | 20.08 | — | — | 752.9 | |||||||||||||||
Total | 291.925 | 5,861.9 | ||||||||||||||||||
Fair Value At | Fair Value On | |||||||
Time Of Grant | December 31, 2006 | |||||||
SAP SOP 2002 Stock Options (February 6, 2006 grant) | €26.47 | €18.23 | ||||||
Incentive Plan 2010 STARs (March 6, 2006 grant) | €24.87 | €14.02 |
77
Table of Contents
Prof. Dr. | ||||||||||||||||||||||||||||
Henning | Prof. Dr. | |||||||||||||||||||||||||||
Kagermann | Léo | Dr. Werner | Claus E. | Gerhard | Dr. Peter | |||||||||||||||||||||||
(CEO) | Apotheker | Brandt | Heinrich | Oswald | Zencke | Total | ||||||||||||||||||||||
€ | € | € | € | € | € | € | ||||||||||||||||||||||
PBO January 1, 2006 | 5,592,058 | 462,069 | 529,437 | 3,252,434 | 3,525,780 | 4,127,569 | 17,489,347 | |||||||||||||||||||||
less Plan assets market value January 1, 2006 | 3,952,372 | 579,113 | 313,834 | 1,512,327 | 1,732,440 | 2,559,739 | 10,649,825 | |||||||||||||||||||||
Accrued January 1, 2006 | 1,639,686 | (117,044 | ) | 215,603 | 1,740,107 | 1,793,340 | 1,567,830 | 6,839,522 | ||||||||||||||||||||
PBO change in 2006 | (257,394 | ) | (16,752 | ) | 63,897 | (237,154 | ) | (241,536 | ) | (251,614 | ) | (940,553 | ) | |||||||||||||||
Plan assets change in 2006 | 630,102 | 24,274 | 94,352 | 251,077 | 282,635 | 387,276 | 1,669,716 | |||||||||||||||||||||
PBO December 31, 2006 | 5,334,664 | 445,317 | 593,334 | 3,015,280 | 3,284,244 | 3,875,955 | 16,548,794 | |||||||||||||||||||||
less Plan assets market value December 31, 2006 | 4,582,474 | 603,387 | 408,186 | 1,763,404 | 2,015,075 | 2,947,015 | 12,319,541 | |||||||||||||||||||||
Accrued December 31, 2006 | 752,190 | (158,070 | ) | 185,148 | 1,251,876 | 1,269,169 | 928,940 | 4,229,253 |
Prof. Dr. | ||||||||||||||||||||||||
Henning | Prof. | |||||||||||||||||||||||
Kagermann | Léo | Dr. Werner | Dr. Claus E. | Gerhard | Dr. Peter | |||||||||||||||||||
(CEO) | Apotheker | Brandt | Heinrich | Oswald | Zencke | |||||||||||||||||||
Annual pension entitlement at age 60 vested on December 31, 2006 | €289,827 | €45,487 | €34,364 | €165,487 | €184,553 | €207,188 |
78
Table of Contents
79
Table of Contents
SAP SOP 2002 Stock Options | ||||||||||||||||||||||||||||
Vested On | Not Vested On | |||||||||||||||||||||||||||
December 31, 2006 | December 31, 2006 | Total | ||||||||||||||||||||||||||
Exercise | ||||||||||||||||||||||||||||
Price | Remaining | Remaining | Remaining | |||||||||||||||||||||||||
per | Quantity | Term In | Quantity | Term In | Quantity | Term In | ||||||||||||||||||||||
Share (€) | of Shares | Years | of Shares | Years | of Shares | Years | ||||||||||||||||||||||
Prof. Dr. Henning Kagermann (CEO) | 22.59 | 320,000 | 1.16 | — | — | 320,000 | 1.16 | |||||||||||||||||||||
37.50 | 200,000 | 2.13 | — | — | 200,000 | 2.13 | ||||||||||||||||||||||
33.55 | — | — | 267,820 | 3.11 | 267,820 | 3.11 | ||||||||||||||||||||||
46.48 | — | — | 143,404 | 4.10 | 143,404 | 4.10 | ||||||||||||||||||||||
Shai Agassi | 22.59 | 120,000 | 1.16 | — | — | 120,000 | 1.16 | |||||||||||||||||||||
24.78 | 120,000 | 1.33 | — | — | 120,000 | 1.33 | ||||||||||||||||||||||
37.50 | 112,000 | 2.13 | — | — | 112,000 | 2.13 | ||||||||||||||||||||||
33.55 | — | — | 149,980 | 3.11 | 149,980 | 3.11 | ||||||||||||||||||||||
46.48 | — | — | 95,604 | 4.10 | 95,604 | 4.10 | ||||||||||||||||||||||
Léo Apotheker | 37.50 | 112,000 | 2.13 | — | — | 112,000 | 2.13 | |||||||||||||||||||||
33.55 | — | — | 149,980 | 3.11 | 149,980 | 3.11 | ||||||||||||||||||||||
46.48 | — | — | 95,604 | 4.10 | 95,604 | 4.10 | ||||||||||||||||||||||
Dr. Werner Brandt | 37.50 | 112,000 | 2.13 | — | — | 112,000 | 2.13 | |||||||||||||||||||||
33.55 | — | — | 149,980 | 3.11 | 149,980 | 3.11 | ||||||||||||||||||||||
46.48 | — | — | 87,292 | 4.10 | 87,292 | 4.10 | ||||||||||||||||||||||
Prof. Dr. Claus E. Heinrich | 22.59 | 180,000 | 1.16 | — | — | 180,000 | 1.16 | |||||||||||||||||||||
37.50 | 112,000 | 2.13 | — | — | 112,000 | 2.13 | ||||||||||||||||||||||
33.55 | — | — | 149,980 | 3.11 | 149,980 | 3.11 | ||||||||||||||||||||||
46.48 | — | — | 87,292 | 4.10 | 87,292 | 4.10 | ||||||||||||||||||||||
Gerhard Oswald | 33.55 | — | — | 149,980 | 3.11 | 149,980 | 3.11 | |||||||||||||||||||||
46.48 | — | — | 87,292 | 4.10 | 87,292 | 4.10 | ||||||||||||||||||||||
Dr. Peter Zencke | 22.59 | 180,000 | 1.16 | — | — | 180,000 | 1.16 | |||||||||||||||||||||
37.50 | 112,000 | 2.13 | — | — | 112,000 | 2.13 | ||||||||||||||||||||||
33.55 | — | — | 149,980 | 3.11 | 149,980 | 3.11 | ||||||||||||||||||||||
46.48 | — | — | 87,292 | 4.10 | 87,292 | 4.10 | ||||||||||||||||||||||
Total | 1,680,000 | 1,851,480 | 3,531,480 | |||||||||||||||||||||||||
SAP SOP 2002 Stock Options Exercised | ||||||||||||||||
Stock Options — 2006 | Stock Options — 2005 | |||||||||||||||
Average Exercise | Average Exercise | |||||||||||||||
Quantity | Price (€) | Quantity | Price (€) | |||||||||||||
Léo Apotheker | 30,000 | 90.37 | — | — | ||||||||||||
Dr. Werner Brandt | — | — | 30,000 | 90.37 | ||||||||||||
Gerhard Oswald | 28,000 | 149.99 | 45,000 | 90.37 | ||||||||||||
Total | 58,000 | 75,000 | ||||||||||||||
80
Table of Contents
LTI Plan 2000 Stock Options | ||||||||||||||||||||||||||||
Vested On | Not Vested On | |||||||||||||||||||||||||||
December 31, 2006 | December 31, 2006 | Total | ||||||||||||||||||||||||||
Exercise | ||||||||||||||||||||||||||||
Price | Remaining | Remaining | Remaining | |||||||||||||||||||||||||
per | Quantity | Term In | Quantity | Term In | Quantity | Term In | ||||||||||||||||||||||
Share (€) | of Shares | Years | of Shares | Years | of Shares | Years | ||||||||||||||||||||||
Prof. Dr. Henning Kagermann (CEO) | 19.35 | 112,128 | 3.14 | — | — | 112,128 | 3.14 | |||||||||||||||||||||
23.51 | 157,500 | 4.14 | — | — | 157,500 | 4.14 | ||||||||||||||||||||||
Léo Apotheker | 29.05 | 87,500 | 5.14 | — | — | 87,500 | 5.14 | |||||||||||||||||||||
Dr. Peter Zencke | 19.35 | 27,924 | 3.14 | — | — | 27,924 | 3.14 | |||||||||||||||||||||
23.51 | 73,700 | 4.14 | — | — | 73,700 | 4.14 | ||||||||||||||||||||||
Total | 458,752 | 458,752 | ||||||||||||||||||||||||||
81
Table of Contents
LTI Plan 2000 Convertible Bonds | ||||||||||||||||||||||||||||
Vested On | Not Vested On | |||||||||||||||||||||||||||
December 31, 2006 | December 31, 2006 | Total | ||||||||||||||||||||||||||
Exercise | Remaining | Remaining | Remaining | |||||||||||||||||||||||||
Price per | Quantity | Term In | Quantity | Term In | Quantity | Term In | ||||||||||||||||||||||
Share (€) | of Shares | Years | of Shares | Years | of Shares | Years | ||||||||||||||||||||||
Prof. Dr. Henning Kagermann (CEO) | 72.58 | 89,700 | 3.14 | — | — | 89,700 | 3.14 | |||||||||||||||||||||
47.81 | 126,000 | 4.14 | — | — | 126,000 | 4.14 | ||||||||||||||||||||||
37.88 | 360,000 | 5.14 | — | — | 360,000 | 5.14 | ||||||||||||||||||||||
Léo Apotheker | 83.67 | 95,400 | 3.19 | — | — | 95,400 | 3.19 | |||||||||||||||||||||
47.81 | 120,000 | 4.14 | — | — | 120,000 | 4.14 | ||||||||||||||||||||||
37.88 | 70,000 | 5.14 | — | — | 70,000 | 5.14 | ||||||||||||||||||||||
Dr. Werner Brandt | 47.81 | 20,000 | 4.14 | — | — | 20,000 | 4.14 | |||||||||||||||||||||
37.88 | 120,000 | 5.14 | — | — | 120,000 | 5.14 | ||||||||||||||||||||||
Prof. Dr. Claus E. Heinrich | 72.58 | 65,700 | 3.14 | — | — | 65,700 | 3.14 | |||||||||||||||||||||
47.81 | 88,000 | 4.14 | — | — | 88,000 | 4.14 | ||||||||||||||||||||||
37.88 | 200,000 | 5.14 | — | — | 200,000 | 5.14 | ||||||||||||||||||||||
Gerhard Oswald | 72.58 | 65,700 | 3.14 | — | — | 65,700 | 3.14 | |||||||||||||||||||||
47.81 | 88,000 | 4.14 | — | — | 88,000 | 4.14 | ||||||||||||||||||||||
Dr. Peter Zencke | 72.58 | 65,700 | 3.14 | — | — | 65,700 | 3.14 | |||||||||||||||||||||
47.81 | 88,000 | 4.14 | — | — | 88,000 | 4.14 | ||||||||||||||||||||||
37.88 | 200,000 | 5.14 | — | — | 200,000 | 5.14 | ||||||||||||||||||||||
1,862,200 | 1,862,200 | |||||||||||||||||||||||||||
LTI Plan 2000 Stock Options Exercised | ||||||||||||||||
Stock Options — 2006 | Stock Options — 2005 | |||||||||||||||
Average Exercise | Average Exercise | |||||||||||||||
Quantity | Price (€) | Quantity | Price (€) | |||||||||||||
Dr. Werner Brandt | — | — | 2,125 | 88.12 | ||||||||||||
Prof. Dr. Claus E. Heinrich | 48,032 | 74.07 | — | — | ||||||||||||
Gerhard Oswald | 10,625 | 116.04 | 19,663 | 99.00 | ||||||||||||
58,657 | 21,788 | |||||||||||||||
LTI Plan 2000 Convertible Bonds Exercised | ||||||||||||||||
Convertible Bonds — 2006 | Convertible Bonds — 2005 | |||||||||||||||
Average Exercise | Average Exercise | |||||||||||||||
Quantity | Price (€) | Quantity | Price (€) | |||||||||||||
Gerhard Oswald | 25,000 | 151.50 | — | — | ||||||||||||
25,000 | — | — | ||||||||||||||
82
Table of Contents
Transactions in SAP Shares and ADRs | ||||||||||||
Notifying Party | Transaction Date | Transaction | Quantity | Unit Price (€) | ||||||||
Léo Apotheker | November 15, 2006 | Exercise of Subscription Rights | 30,000 | 90.37 | ||||||||
Dr. Werner Brandt | July 17, 2006 | Stock purchase | 500 | 147.48 | ||||||||
Prof. Dr. Claus E. Heinrich | June 12, 2006 | Exercise of subscription rights | 20,532 | 65.9461 | ||||||||
June 12, 2006 | Exercise of subscription rights | 27,500 | 80.1342 | |||||||||
June 12, 2006 | Stock sale | 48,032 | 157.1696 | |||||||||
Gerhard Oswald | March 10, 2006 | Exercise of subscription rights | 25,000 | 151.50 | ||||||||
March 10, 2006 | Exercise of subscription rights | 28,000 | 149.99 | |||||||||
March 10, 2006 | Exercise of subscription rights | 10,625 | 116.0380 | |||||||||
March 10, 2006 | Stock sale | 63,625 | 172.54184 |
83
Table of Contents
2006 | 2005 | |||||||||||||||||||||||||||
Compensation | ||||||||||||||||||||||||||||
Fixed | Variable | For Committee | Fixed | Variable | ||||||||||||||||||||||||
Compensation | Compensation | Work | Total | Compensation | Compensation | Total | ||||||||||||||||||||||
€(000) | €(000) | €(000) | €(000) | €(000) | €(000) | €(000) | ||||||||||||||||||||||
Prof. Dr. h.c. mult. Hasso Plattner (chairperson) | 75.0 | 125.0 | 15.0 | 215.0 | 50.0 | 50.0 | 100.0 | |||||||||||||||||||||
Helga Classen (deputy chairperson) | 50.0 | 100.0 | 2.5 | 152.5 | 37.5 | 37.5 | 75.0 | |||||||||||||||||||||
Willi Burbach | 37.5 | 62.5 | 2.5 | 102.5 | 25.0 | 25.0 | 50.0 | |||||||||||||||||||||
Prof. Dr. Wilhelm Haarmann | 37.5 | 62.5 | 7.5 | 107.5 | 25.0 | 25.0 | 50.0 | |||||||||||||||||||||
Dietmar Hopp (until May 12, 2005) | 0.0 | 0.0 | 0.0 | 0.0 | 10.4 | 10.4 | 20.8 | |||||||||||||||||||||
Bernhard Koller | 37.5 | 62.5 | 2.5 | 102.5 | 25.0 | 25.0 | 50.0 | |||||||||||||||||||||
Christiane Kuntz-Mayr | 37.5 | 62.5 | 5.0 | 105.0 | 25.0 | 25.0 | 50.0 | |||||||||||||||||||||
Lars Lamadé | 37.5 | 62.5 | 2.5 | 102.5 | 25.0 | 25.0 | 50.0 | |||||||||||||||||||||
Dr. Gerhard Maier | 37.5 | 62.5 | 5.0 | 105.0 | 25.0 | 25.0 | 50.0 | |||||||||||||||||||||
Dr. h.c. Hartmut Mehdorn | 37.5 | 62.5 | 0.0 | 100.0 | 25.0 | 25.0 | 50.0 | |||||||||||||||||||||
Pekka Ala-Pietilä | 37.5 | 62.5 | 2.5 | 102.5 | 25.0 | 25.0 | 50.0 | |||||||||||||||||||||
Prof. Dr. Dr. h.c. August-Wilhelm Scheer | 37.5 | 62.5 | 7.5 | 107.5 | 25.0 | 25.0 | 50.0 | |||||||||||||||||||||
Dr. Barbara Schennerlein | 37.5 | 62.5 | 2.5 | 102.5 | 25.0 | 25.0 | 50.0 | |||||||||||||||||||||
Dr. Erhard Schipporeit (from May 12, 2005) | 37.5 | 62.5 | 5.0 | 105.0 | 16.7 | 16.7 | 33.3 | |||||||||||||||||||||
Stefan Schulz | 37.5 | 62.5 | 5.0 | 105.0 | 25.0 | 25.0 | 50.0 | |||||||||||||||||||||
Dr. Dieter Spöri | 37.5 | 62.5 | 2.5 | 102.5 | 25.0 | 25.0 | 50.0 | |||||||||||||||||||||
Dr. h.c. Klaus Tschira | 37.5 | 62.5 | 2.5 | 102.5 | 25.0 | 25.0 | 50.0 | |||||||||||||||||||||
Total | 650.0 | 1,100.0 | 70.0 | 1,820.0 | 439.6 | 439.6 | 879.2 | |||||||||||||||||||||
84
Table of Contents
Transactions in SAP Shares and ADRs | ||||||||||||
Notifying Party | Transaction Date | Transaction | Quantity | Unit Price | ||||||||
Klaus Tschira | December 14, 2006 | Assignment of a reassignment right relating to a securities loan | 1,500,000 | Not disclosed | ||||||||
December 14, 2006 | Premature cancellation of a derivative(1) | 1,125,000 | €127.65 | |||||||||
Hasso Plattner GmbH & Co. Beteiligungs-KG | November 28, 2006 | Stock sale | 1,350,000 | €155.95 | ||||||||
March 2, 2006 | Stock sale | 1,460,000 | €172.82 | |||||||||
March 2, 2006 | Repayment of security loan | 500,000 | Not disclosed | |||||||||
February 10, 2006 | Stock acquisition by way of a security loan | 90,000 | Variable(2 | ) |
(1) | Derivative hedging a reassignment right relating to securities loan |
(2) | Original price of 0.35% of€167.00 per annum and additionally the payment of a sum of 140% of any cash disbursements received on the share loan with an original value of€52,605.00 |
85
Table of Contents
Employees as of December 31, | ||||||||||||||||||||||||||||||||||||||||||||||||
2006 | 2005 | 2004 | ||||||||||||||||||||||||||||||||||||||||||||||
FTEs | EMEA | Americas | APJ(*) | Total | EMEA | Americas | APJ(*) | Total | EMEA | Americas | APJ(*) | Total | ||||||||||||||||||||||||||||||||||||
Product | 2,854 | 900 | 1,613 | 5,368 | 2,508 | 684 | 1,267 | 4,460 | 2,231 | 450 | 966 | 3,647 | ||||||||||||||||||||||||||||||||||||
Service | 6,336 | 3,364 | 1,818 | 11,518 | 6,636 | 3,204 | 1,590 | 11,430 | 6,759 | 2,876 | 1,480 | 11,114 | ||||||||||||||||||||||||||||||||||||
Development | 7,508 | 1,530 | 2,764 | 11,801 | 7,063 | 1,151 | 2,001 | 10,215 | 6,523 | 974 | 1,246 | 8,744 | ||||||||||||||||||||||||||||||||||||
Sales & Marketing | 3,336 | 2,628 | 1,118 | 7,082 | 3,302 | 2,189 | 936 | 6,426 | 3,149 | 1,750 | 822 | 5,721 | ||||||||||||||||||||||||||||||||||||
General & Administration | 1,613 | 523 | 337 | 2,472 | 1,504 | 470 | 287 | 2,261 | 1,308 | 379 | 250 | 1,937 | ||||||||||||||||||||||||||||||||||||
Infrastructure | 713 | 281 | 120 | 1,114 | 715 | 256 | 110 | 1,081 | 688 | 255 | 99 | 1,042 | ||||||||||||||||||||||||||||||||||||
SAP Group | 22,360 | 9,225 | 7,770 | 39,355 | 21,729 | 7,953 | 6,191 | 35,873 | 20,658 | 6,684 | 4,863 | 32,205 | ||||||||||||||||||||||||||||||||||||
(*) | Asia Pacific Japan |
86
Table of Contents
87
Table of Contents
88
Table of Contents
89
Table of Contents
90
Table of Contents
Ordinary Shares | ||||||||
Beneficially Owned | ||||||||
% of | ||||||||
Principal Shareholders | Number | Outstanding | ||||||
Dietmar Hopp Stiftung GmbH | 109,869,200 | 8.668% | ||||||
DH Besitzgesellschaft mbH & Co. KG | 8,404,000 | 0.663% | ||||||
Dietmar Hopp, collectively(1) | 118,273,200 | 9.331% | ||||||
Hasso Plattner GmbH & Co. Beteiligungs-KG(2) | 113,718,960 | 8.972% | ||||||
Hasso Plattner Förderstiftung GmbH | 15,244,922 | 1.203% | ||||||
Hasso Plattner (24,100 ADRs) | 24,100 | 0.002% | ||||||
Hasso Plattner, Chairperson Supervisory Board, collectively(3) | 128,987,982 | 10.176% | ||||||
Dr. h.c. Klaus Tschira Beteiligungs GmbH & Co. KG | 63,330,640 | 4.996% | ||||||
Klaus Tschira Stiftung gGmbH | 64,144,048 | 5.060% | ||||||
Gerda Tschira | 440,000 | 0.035% | ||||||
Klaus Tschira | 1,560,000 | 0.123% | ||||||
Klaus Tschira, Member Supervisory Board, collectively(4) | 129,474,688 | 10.215% | ||||||
Executive Board Members as a group (7 persons) | 289,384 | 0.023% | ||||||
Supervisory Board Members as a group (16 persons) | 258,479,378 | 20.392% | ||||||
Executive Board Members and Supervisory Board Members as a group (23 persons) | 258,768,762 | 20.415% | ||||||
Options and convertible bonds that are vested and exercisable within 60 days of March 14, 2007, held by Executive Board Members and Supervisory Board Members, collectively(5) | 1,325,638 | N/A |
(1) | Dietmar Hopp exercises sole voting and dispositive power in Dietmar Hopp Stiftung GmbH and DH Besitzgesellschaft mbH & Co. KG. |
(2) | Hasso Plattner exercises sole voting and dispositive power in Hasso Plattner GmbH & Co. Beteiligungs-KG. |
(3) | Hasso Plattner exercises sole voting and dispositive power in Hasso Plattner GmbH & Co. Beteiligungs-KG and in Hasso Plattner Förderstiftung gGmbH. |
(4) | Klaus Tschira exercises shared voting and dispositive power in Klaus Tschira Stiftung gGmbH and Dr. h.c. Tschira Beteiligungs GmbH & Co. KG. |
(5) | Includes 845,963 stock options and 479,675 convertible bonds. Each of these stock options and convertible bonds entitles the holder, if exercised or converted, to four SAP AG ordinary shares. |
91
Table of Contents
92
Table of Contents
93
Table of Contents
Price per | |||||||||||||||||
Ordinary Share(1) | DAX(2) | ||||||||||||||||
High | Low | High | Low | ||||||||||||||
(In€) | |||||||||||||||||
Annual Highs and Lows | |||||||||||||||||
2002 | 44.08 | 10.41 | 5,462.55 | 2,597.88 | |||||||||||||
2003 | 33.50 | 16.91 | 3,965.16 | 2,202.96 | |||||||||||||
2004 | 35.68 | 29.03 | 4,261.79 | 3,646.99 | |||||||||||||
2005 | 38.95 | 28.63 | 5,458.58 | 4,178.10 | |||||||||||||
2006 | 46.86 | 34.56 | 6,611.81 | 5,292.14 | |||||||||||||
Quarterly Highs and Lows | |||||||||||||||||
2005 | |||||||||||||||||
First Quarter | 33.34 | 29.50 | 4,428.09 | 4,201.81 | |||||||||||||
Second Quarter | 36.00 | 28.63 | 4,627.48 | 4,178.10 | |||||||||||||
Third Quarter | 36.95 | 33.98 | 5,048.74 | 4,530.18 | |||||||||||||
Fourth Quarter | 38.95 | 35.01 | 5,458.58 | 4,806.05 | |||||||||||||
2006 | |||||||||||||||||
First Quarter | 44.75 | 36.50 | 5,984.19 | 5,334.30 | |||||||||||||
Second Quarter | 46.86 | 38.49 | 6,140.72 | 5,292.14 | |||||||||||||
Third Quarter | 41.85 | 34.56 | 6,004.33 | 5,396.85 | |||||||||||||
Fourth Quarter | 41.40 | 38.38 | 6,611.81 | 5,992.22 | |||||||||||||
Monthly Highs and Lows | |||||||||||||||||
2006 | |||||||||||||||||
July | 41.85 | 34.56 | 5,729.01 | 5,396.85 | |||||||||||||
August | 37.58 | 34.58 | 5,867.53 | 5,596.74 | |||||||||||||
September | 39.50 | 36.20 | 6,004.33 | 5,773.72 | |||||||||||||
October | 41.40 | 38.65 | 6,284.19 | 5,992.22 | |||||||||||||
November | 40.73 | 38.38 | 6,476.13 | 6,223.33 | |||||||||||||
December | 40.26 | 38.46 | 6,611.81 | 6,241.13 | |||||||||||||
2007 | |||||||||||||||||
January | 42.27 | 35.41 | 6,789.11 | 6,566.56 | |||||||||||||
February | 36.33 | 34.81 | 7,027.59 | 6,715.44 | |||||||||||||
March (through March 14, 2007) | 36.13 | 33.77 | 6,716.52 | 6,447.70 |
(1) | Share prices for December 2006 and prior are retrospectively adjusted for the effect of the December 15, 2006 fourfold increase in the number of shares resulting from the capital increase which became effective December 15, 2006 (see a section above with the heading “GENERAL” for more detail of the share increase). |
(2) | The DAX is a continuously updated, capital-weighted performance index of 30 German blue chip companies. In principle, the shares included in the DAX are selected on the basis of their stock exchange turnover and the issuer’s market capitalization. Adjustments to the DAX are made for capital changes, subscription rights and dividends. Subsequent to June 18, 1999, the highs and lows of the DAX are disclosed on Xetra. |
94
Table of Contents
Price per ADS | |||||||||
High | Low | ||||||||
(In US$) | |||||||||
Annual Highs and Lows | |||||||||
2002 | 38.84 | 10.05 | |||||||
2003 | 41.80 | 18.46 | |||||||
2004 | 45.45 | 35.50 | |||||||
2005 | 46.43 | 36.96 | |||||||
2006 | 57.00 | 43.57 | |||||||
Quarterly Highs and Lows | |||||||||
2005 | |||||||||
First Quarter | 44.04 | 38.52 | |||||||
Second Quarter | 43.42 | 36.96 | |||||||
Third Quarter | 44.92 | 41.82 | |||||||
Fourth Quarter | 46.43 | 42.08 | |||||||
2006 | |||||||||
First Quarter | 54.32 | 44.00 | |||||||
Second Quarter | 57.00 | 48.58 | |||||||
Third Quarter | 53.42 | 43.57 | |||||||
Fourth Quarter | 53.12 | 49.04 | |||||||
Monthly Highs and Lows | |||||||||
2006 | |||||||||
July | 53.42 | 43.57 | |||||||
August | 48.26 | 43.92 | |||||||
September | 50.08 | 46.26 | |||||||
October | 52.07 | 49.11 | |||||||
November | 52.75 | 49.04 | |||||||
December | 53.12 | 51.38 | |||||||
2007 | |||||||||
January | 55.71 | 46.20 | |||||||
February | 47.63 | 45.16 | |||||||
March (through March 14, 2007) | 47.52 | 45.00 |
95
Table of Contents
• | developing and marketing integrated product and service solutions for e-commerce; | |
• | developing software for information technology and the licensing of its use to others; | |
• | organization and deployment consulting, as well as user training, for e-commerce and other software solutions; | |
• | selling, leasing, renting and arranging the procurement and provision of all other forms of use of information technology systems and related equipment; and | |
• | making capital investments in enterprises active in the field of information technology to promote the opening and advancement of international markets in the field of information technology. |
96
Table of Contents
97
Table of Contents
98
Table of Contents
99
Table of Contents
100
Table of Contents
101
Table of Contents
• | changing the objectives provision in the articles of incorporation; | |
• | capital increases and capital decreases; | |
• | excluding preemptive rights of shareholders to subscribe for new shares; | |
• | dissolution; | |
• | a merger into, or a consolidation with, another company; | |
• | a transfer of all or virtually all of the assets; and | |
• | a change of corporate form. |
102
Table of Contents
103
Table of Contents
104
Table of Contents
105
Table of Contents
106
Table of Contents
107
Table of Contents
108
Table of Contents
109
Table of Contents
110
Table of Contents
Contract Notional | ||||||||||||
Amounts Expected | Fair Value | Weighted Average | ||||||||||
Maturity Date | December 31, | Contractual | ||||||||||
Foreign Currency Risk | 2007 | 2006(1) | Exchange Rate | |||||||||
€(000) | €(000) | |||||||||||
Derivatives used to manage firm commitments | ||||||||||||
Foreign Currency Forward Contracts | ||||||||||||
(Receive Local Currency, Sell euro) | ||||||||||||
Japanese Yen | 188,872 | (8,094 | ) | 148.2487 | ||||||||
British Pounds | 87,091 | 265 | 0.6775 | |||||||||
U.S. dollars | 58,626 | (17 | ) | 1.3185 | ||||||||
Australian dollars | 52,151 | 1,234 | 1.7257 | |||||||||
Czech Korunas | 28,059 | 521 | 27.8699 | |||||||||
Mexican Pesos | 24,335 | (432 | ) | 14.0950 | ||||||||
Danish krone | 11,398 | (5 | ) | 7.4573 | ||||||||
New Zealand dollars | 10,164 | 350 | 1.9677 | |||||||||
Singapore dollars | 7,809 | (22 | ) | 2.0105 | ||||||||
Hong Kong dollars | 7,616 | (98 | ) | 10.1109 | ||||||||
South African Rand | 3,572 | 7 | 9.7011 | |||||||||
Swedish krona | 2,511 | 37 | 9.1600 | |||||||||
Swiss Francs | 2,314 | (8 | ) | 1.5993 | ||||||||
Foreign Currency Forward Contracts | ||||||||||||
(Receive euro, Sell Local Currency) | ||||||||||||
U.S. dollars | 884,618 | 11,473 | 1.3097 | |||||||||
British Pounds | 34,177 | 14 | 0.6730 | |||||||||
Japanese Yen | 30,254 | 318 | 154.8555 | |||||||||
Canadian dollars | 20,340 | 60 | 1.5241 | |||||||||
Swiss Francs | 10,569 | 37 | 1.5990 | |||||||||
Australian dollars | 9,489 | (53 | ) | 1.6861 | ||||||||
Singapore dollars | 9,166 | (53 | ) | 2.0260 | ||||||||
Czech Korunas | 820 | (2 | ) | 27.4300 | ||||||||
South African Rand | 472 | (17 | ) | 10.0333 | ||||||||
Derivatives used to manage anticipated Cash Flows | ||||||||||||
Foreign Currency Forward Contracts | ||||||||||||
(Receive euro, Sell Local Currency) | ||||||||||||
U.S. dollars | 239,971 | 6,211 | 1.2939 | |||||||||
British Pounds | 124,385 | (2,124 | ) | 0.6890 | ||||||||
Japanese Yen | 68,820 | 4,744 | 143.1262 | |||||||||
Swiss Francs | 67,290 | 1,641 | 1.5530 | |||||||||
Canadian dollars | 59,415 | 3,757 | 1.4323 | |||||||||
Australian dollars | 40,620 | (450 | ) | 1.7134 |
(1) | Amounts included on SAP’s consolidated balance sheet. |
111
Table of Contents
Expected Maturity Date | ||||||||||||||||||||||||||||||||
€(000), unless otherwise indicated | Fair Value | |||||||||||||||||||||||||||||||
December 31, | ||||||||||||||||||||||||||||||||
Marketable debt securities | 2007 | 2008 | 2009 | 2010 | 2011 | Thereafter | Total | 2006 | ||||||||||||||||||||||||
Fixed rate | 341,374 | 433,648 | — | — | — | — | 775,022 | 699,412 | ||||||||||||||||||||||||
Average interest rate | 4.16% | 4.58% | — | — | — | — | ||||||||||||||||||||||||||
Variable rate | 303 | 15,913 | — | 54 | — | 158 | 16,428 | 16,511 | ||||||||||||||||||||||||
Total investments | 341,677 | 449,561 | — | 54 | — | 158 | 791,450 | 715,923 | ||||||||||||||||||||||||
Bank loans and overdrafts | 2006 | |||
Fixed rate bank loans (€000) | 17,966 | |||
Average interest rate of fixed rate bank loans | 8.08% | |||
Overdrafts (€000) | 8,204 | |||
Total bank loans and overdrafts (€000) | 26,170 | |||
112
Table of Contents
113
Table of Contents
114
Table of Contents
115
Table of Contents
116
Table of Contents
1. | “Prohibited services:” This category includes services that our independent auditors must not be engaged to perform. These are services that are not permitted by applicable law or that would be inconsistent with maintaining the auditors’ independence. | |
2. | “Services requiring universal approval:” Services of this category may be provided by our independent auditors up to a certain aggregate amount in fees per year that is determined annually by the Audit Committee. | |
3. | “Services requiring individual approval:” Services of this category may only be provided by our independent auditors if they have been individually (specifically) pre-approved by the Audit Committee or an Audit Committee member who is authorized by the Audit Committee to make such approvals. |
117
Table of Contents
(b) | (c) | (d) | ||||||||||||||
(a) | Average Price | Total Number of Shares | Maximum Number of | |||||||||||||
Total Number | Paid per | Purchased as Part of | Shares that May Yet | |||||||||||||
of Shares | Share | Publicly Announced | Be Purchased Under | |||||||||||||
Period | Purchased | (in€) | Plans or Programs | the Plans or Programs | ||||||||||||
January 1/1/06 — 1/31/06 | 2,399,340 | 39.34 | 2,399,340 | 97,551,141 | ||||||||||||
February 2/1/06 — 2/28/06 | 5,757,308 | 42.34 | 5,757,308 | 92,961,307 | ||||||||||||
March 3/1/06 — 3/31/06 | 2,065,500 | 43.26 | 2,065,500 | 93,331,722 | ||||||||||||
April 4/1/06 — 4/30/06 | 911,396 | 44.12 | 911,396 | 92,451,722 | ||||||||||||
May 5/1/06 — 5/31/06 | 7,066,180 | 41.52 | 7,066,180 | 85,568,330 | ||||||||||||
June 6/1/06 — 6/30/06 | 4,627,416 | 39.95 | 4,627,416 | 81,495,246 | ||||||||||||
July 7/1/06 — 7/31/06 | 600,000 | 36.80 | 600,000 | 80,948,454 | ||||||||||||
August 8/1/06 — 8/31/06 | 40 | 36.84 | 40 | 81,142,054 | ||||||||||||
September 9/1/06 — 9/30/06 | 0 | — | 0 | 81,352,915 | ||||||||||||
October 10/1/06 — 10/31/06 | 3,175,200 | 39.39 | 3,175,200 | 78,363,460 | ||||||||||||
November 11/1/06 — 11/30/06 | 1,216,800 | 38.83 | 1,216,800 | 77,360,297 | ||||||||||||
December 12/1/06 — 12/31/06 | 229,624 | 39.01 | 229,624 | 77,503,049 | ||||||||||||
Total | 28,048,804 | 40.97 | 28,048,804 | |||||||||||||
118
Table of Contents
119
Table of Contents
• | Report of Independent Registered Public Accounting Firm. | |
• | Consolidated Statements of Income for the years ended 2006, 2005 and 2004. | |
• | Consolidated Balance Sheets as of December 31, 2006 and 2005. | |
• | Consolidated Statements of Shareholders’ Equity and Comprehensive Income for the years ended December 31, 2006, 2005 and 2004. | |
• | Consolidated Statements of Cash Flows for the years ended December 31, 2006, 2005 and 2004. | |
• | Notes to Consolidated Financial Statements. |
• | Schedule II — Valuation and Qualifying Accounts and Reserves. |
1 | Articles of Incorporation (Satzung) of SAP AG, as amended to date (English translation).(1) | |||
2 | .1 | Form of global share certificate for ordinary shares (English translation).(1) | ||
2 | .2 | Form of American Depositary Receipt.(2) | ||
4 | .1 | Form of Amended and Restated Deposit Agreement among SAP AG, Deutsche Bank Trust Company Americas, as Depositary, and all owners and holders from time to time of American Depositary Receipts issued thereunder, including the form of American Depositary Receipts, dated as of December 3, 2004.(3) | ||
4 | .2 | Amendment No. 1 dated as of December 20, 2006 to Amended and Restated Deposit Agreement among SAP AG, Deutsche Bank Trust Company Americas, as Depository, and all owners and holders from time to time of American Depositary Receipts issued thereunder, including the form of American Depositary Receipts.(2) | ||
8 | Subsidiaries, Equity Method Investments, and Other Investments of SAP AG. | |||
12 | .1 | Certification of Chief Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a). | ||
12 | .2 | Certification of Chief Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a). | ||
13 | Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |||
15 | Consent of Independent Registered Public Accounting Firm. |
(1) | Incorporated by reference to the Annual Report on Form 20-F of SAP AG filed on March 22, 2006. |
(2) | Incorporated by reference to Post Effective Amendment No 1 to Form F-6 filed on December 20, 2006. |
(3) | Incorporated by reference to the Current Report on Form 6-K of SAP AG, filed on December 13, 2004. |
120
Table of Contents
SAP AG | |
(Registrant) | |
By: /s/ HENNING KAGERMANN | |
Name: Prof. Dr. Henning Kagermann | |
Title: Chief Executive Officer |
By: /s/ WERNER BRANDT | |
Name: Dr. Werner Brandt | |
Title: Chief Financial Officer |
121
Table of Contents
Page | |||||
Report of Independent Registered Public Accounting Firm | F-1 | ||||
Consolidated Financial Statements: | |||||
Consolidated Statements of Income for the years ended December 31, 2006, 2005 and 2004 | F-2 | ||||
Consolidated Balance Sheets as of December 31, 2006 and 2005 | F-3 | ||||
Consolidated Statements of Shareholders’ Equity and Comprehensive Income for the years ended December 31, 2006, 2005 and 2004 | F-4 | ||||
Consolidated Statements of Cash Flows for the years ended December 31, 2006, 2005 and 2004 | F-6 | ||||
Notes to Consolidated Financial Statements | F-7 | ||||
Schedule for the years ended December 31, 2006, 2005 and 2004: | |||||
Schedule II — Valuation and Qualifying Accounts and Reserves | S-1 |
Table of Contents
F-1
Table of Contents
Note | 2006(1) | 2006 | 2005 | 2004 | ||||||||||||||||||
US$(000) | €(000) | €(000) | €(000) | |||||||||||||||||||
Software revenue | 4,053,183 | 3,071,291 | 2,782,751 | 2,361,012 | ||||||||||||||||||
Maintenance revenue | 4,662,872 | 3,533,282 | 3,175,642 | 2,823,189 | ||||||||||||||||||
Software and maintenance revenue | 8,716,055 | 6,604,573 | 5,958,393 | 5,184,201 | ||||||||||||||||||
Consulting revenue | 3,088,452 | 2,340,268 | 2,138,941 | 1,970,606 | ||||||||||||||||||
Training revenue | 505,221 | 382,830 | 342,466 | 302,443 | ||||||||||||||||||
Service revenue | 3,593,673 | 2,723,098 | 2,481,407 | 2,273,049 | ||||||||||||||||||
Other revenue | 98,254 | 74,452 | 72,629 | 57,243 | ||||||||||||||||||
Total revenue | (5 | ) | 12,407,982 | 9,402,123 | 8,512,429 | 7,514,493 | ||||||||||||||||
Cost of software and maintenance | (1,451,625 | ) | (1,099,966 | ) | (993,227 | ) | (916,278 | ) | ||||||||||||||
Cost of service | (2,742,351 | ) | (2,078,011 | ) | (1,924,614 | ) | (1,783,453 | ) | ||||||||||||||
Research and development | (1,761,555 | ) | (1,334,815 | ) | (1,088,632 | ) | (908,056 | ) | ||||||||||||||
Sales and marketing | (6 | ) | (2,527,807 | ) | (1,915,441 | ) | (1,746,221 | ) | (1,523,662 | ) | ||||||||||||
General and administration | (613,616 | ) | (464,966 | ) | (435,185 | ) | (366,425 | ) | ||||||||||||||
Other operating income, net | (7 | ) | 74,523 | 56,470 | 6,182 | 1,762 | ||||||||||||||||
Total operating expenses | (9,022,431 | ) | (6,836,729 | ) | (6,181,697 | ) | (5,496,112 | ) | ||||||||||||||
Operating income | 3,385,551 | 2,565,394 | 2,330,732 | 2,018,381 | ||||||||||||||||||
Other non-operating income/expense, net | (9 | ) | (16,236 | ) | (12,303 | ) | (25,161 | ) | 13,274 | |||||||||||||
Financial income, net | (10 | ) | 160,618 | 121,708 | 10,785 | 40,987 | ||||||||||||||||
Income before income taxes and minority interest | 3,529,933 | 2,674,799 | 2,316,356 | 2,072,642 | ||||||||||||||||||
Income taxes | (11 | ) | (1,057,887 | ) | (801,612 | ) | (817,053 | ) | (757,269 | ) | ||||||||||||
Minority interest | (2,389 | ) | (1,810 | ) | (2,896 | ) | (4,852 | ) | ||||||||||||||
Net income | 2,469,657 | 1,871,377 | 1,496,407 | 1,310,521 | ||||||||||||||||||
Earnings per share — basic | (12 | ) | US$ | 2.02 | €1.53 | €1.21 | €1.05 | |||||||||||||||
Earnings per share — diluted | (12 | ) | US$ | 2.01 | €1.52 | €1.20 | €1.05 |
(1) | The 2006 figures have been translated solely for the convenience of the reader at an exchange rate of US$1.3197 to€1.00, the Noon Buying Rate certified by the Federal Reserve Bank of New York on December 29, 2006. |
F-2
Table of Contents
Note | 2006(1) | 2006 | 2005 | ||||||||||||||
US$(000) | €(000) | €(000) | |||||||||||||||
Assets | |||||||||||||||||
Cash and cash equivalents | (13 | ) | 3,165,605 | 2,398,731 | 2,064,074 | ||||||||||||
Short-term investments | (13 | ) | 1,228,575 | 930,950 | 1,782,318 | ||||||||||||
Accounts receivables, net | (14 | ) | 3,220,316 | 2,440,188 | 2,249,482 | ||||||||||||
Inventories | (15 | ) | 5,248 | 3,977 | 19,377 | ||||||||||||
Other assets | (16 | ) | 484,768 | 367,332 | 211,565 | ||||||||||||
Deferred income taxes | (11 | ) | 141,888 | 107,515 | 129,336 | ||||||||||||
Prepaid expenses/deferred charges | (17 | ) | 99,487 | 75,386 | 63,708 | ||||||||||||
Current assets | 8,345,887 | 6,324,079 | 6,519,860 | ||||||||||||||
Goodwill | (18 | ) | 1,303,317 | 987,586 | 626,546 | ||||||||||||
Intangible assets, net | (18 | ) | 346,529 | 262,582 | 139,697 | ||||||||||||
Property, plant, and equipment, net | (19 | ) | 1,591,816 | 1,206,195 | 1,094,965 | ||||||||||||
Investments | (13 | ) | 125,346 | 94,981 | 62,614 | ||||||||||||
Accounts receivable, net | (14 | ) | 3,530 | 2,675 | 1,545 | ||||||||||||
Other assets | (16 | ) | 703,781 | 533,289 | 472,562 | ||||||||||||
Deferred income taxes | (11 | ) | 90,385 | 68,489 | 98,238 | ||||||||||||
Prepaid expenses/deferred charges | (17 | ) | 30,171 | 22,862 | 23,877 | ||||||||||||
Noncurrent assets | 4,194,875 | 3,178,659 | 2,520,044 | ||||||||||||||
Total assets | 12,540,762 | 9,502,738 | 9,039,904 | ||||||||||||||
Note | 2006(1) | 2006 | 2005 | |||||||||||||||
US$(000) | €(000) | €(000) | ||||||||||||||||
Liabilities, Minority interests and Shareholders’ equity | ||||||||||||||||||
Accounts payable | (20 | ) | 805,061 | 610,033 | 546,447 | |||||||||||||
Income taxes payable | 343,949 | 260,627 | 365,319 | |||||||||||||||
Other liabilities | (20 | ) | 1,713,323 | 1,298,267 | 1,280,271 | |||||||||||||
Provisions current | (21 | ) | 215,429 | 163,241 | 159,642 | |||||||||||||
Deferred income taxes | (11 | ) | 47,430 | 35,940 | 44,326 | |||||||||||||
Deferred income | (22 | ) | 534,680 | 405,153 | 346,966 | |||||||||||||
Current liabilities | 3,659,872 | 2,773,261 | 2,742,971 | |||||||||||||||
Accounts payable | (20 | ) | 45,326 | 34,346 | 40,359 | |||||||||||||
Accrued income taxes | 88,487 | 67,051 | 41,320 | |||||||||||||||
Other liabilities | (20 | ) | 96,149 | 72,857 | 56,310 | |||||||||||||
Provisions noncurrent | (21 | ) | 446,664 | 338,459 | 284,611 | |||||||||||||
Deferred income taxes | (11 | ) | 21,672 | 16,422 | 27,020 | |||||||||||||
Deferred income | (22 | ) | 72,626 | 55,032 | 57,460 | |||||||||||||
Total liabilities | 4,430,796 | 3,357,428 | 3,250,051 | |||||||||||||||
Minority interests | 12,478 | 9,455 | 7,615 | |||||||||||||||
Common stock, no par value | 1,672,769 | 1,267,537 | 316,458 | |||||||||||||||
Authorized — Not issued or outstanding: 495 million shares at December 31, 2006 and 135 million shares at December 31, 2005 Authorized — Issued and outstanding: 1,268 million shares at December 31, 2006 and 316 million shares at December 31, 2005 | ||||||||||||||||||
Treasury stock | (2,298,667 | ) | (1,741,810 | ) | (775,318 | ) | ||||||||||||
Additional paid-in capital | 465,382 | 352,642 | 372,767 | |||||||||||||||
Retained earnings | 8,703,169 | 6,594,809 | 5,986,186 | |||||||||||||||
Accumulated other comprehensive loss | (445,165 | ) | (337,323 | ) | (117,855 | ) | ||||||||||||
Shareholders’ equity | (23 | ) | 8,097,488 | 6,135,855 | 5,782,238 | |||||||||||||
Total liabilities, Minority interests and Shareholders’ equity | 12,540,762 | 9,502,738 | 9,039,904 | |||||||||||||||
(1) | The 2006 figures have been translated solely for the convenience of the reader at an exchange rate of US$1.3197 to€1.00, the Noon Buying Rate certified by the Federal Reserve Bank of New York on December 29, 2006. |
F-3
Table of Contents
Number of | Additional | ||||||||||||||||
shares issued | Common | paid-in | Retained | ||||||||||||||
and outstanding | stock | capital | earnings | ||||||||||||||
(000) | €(000) | €(000) | €(000) | ||||||||||||||
December 31, 2003 | 315,414 | 315,414 | 296,555 | 3,761,086 | |||||||||||||
Net income | 1,310,521 | ||||||||||||||||
Other comprehensive income/loss, net of tax | |||||||||||||||||
Total comprehensive income/loss | |||||||||||||||||
Stock-based compensation | 186 | ||||||||||||||||
Dividends | (248,716 | ) | |||||||||||||||
Treasury stock transactions | 8,881 | ||||||||||||||||
Convertible bonds and stock options exercised | 590 | 590 | 21,389 | ||||||||||||||
Other | (4,351 | ) | 7,265 | ||||||||||||||
December 31, 2004 | 316,004 | 316,004 | 322,660 | 4,830,156 | |||||||||||||
Net income | 1,496,407 | ||||||||||||||||
Other comprehensive income/loss, net of tax | |||||||||||||||||
Total comprehensive income/loss | |||||||||||||||||
Stock-based compensation | (36,356 | ) | |||||||||||||||
Dividends | (340,425 | ) | |||||||||||||||
Treasury stock transactions | 48,136 | ||||||||||||||||
Convertible bonds and stock options exercised | 454 | 454 | 42,294 | ||||||||||||||
Other | (3,967 | ) | 48 | ||||||||||||||
December 31, 2005 | 316,458 | 316,458 | 372,767 | 5,986,186 | |||||||||||||
Net income | 1,871,377 | ||||||||||||||||
Other comprehensive income/loss, net of tax | |||||||||||||||||
Total comprehensive income/loss | |||||||||||||||||
Stock-based compensation | 17,611 | ||||||||||||||||
Dividends | (447,219 | ) | |||||||||||||||
Treasury stock transactions | 44,434 | ||||||||||||||||
Convertible bonds and stock options exercised | 426 | 426 | 48,940 | ||||||||||||||
Issuance of common stock | 950,653 | 950,653 | (134,768 | ) | (815,885 | ) | |||||||||||
Other | 3,658 | 350 | |||||||||||||||
Impact of first-time adoption of SFAS 158 | |||||||||||||||||
December 31, 2006 | 1,267,537 | 1,267,537 | 352,642 | 6,594,809 | |||||||||||||
F-4
Table of Contents
Accumulated other comprehensive income/loss | ||||||||||||||||||||||||||||||||
Unrealized | Currency effects | |||||||||||||||||||||||||||||||
Foreign | Unrealized | gains/losses | from intercompany | |||||||||||||||||||||||||||||
currency | gains/losses | on cash | Unrealized | long-term | ||||||||||||||||||||||||||||
translation | on marketable | Unrecognized | flow | gains/losses on | investment | Treasury | ||||||||||||||||||||||||||
adjustment | securities | pension cost | hedges | STAR hedges | transactions | stock | Total | |||||||||||||||||||||||||
€(000) | €(000) | €(000) | €(000) | €(000) | €(000) | €(000) | €(000) | |||||||||||||||||||||||||
(251,673 | ) | 15,979 | (3,722 | ) | 13,441 | 23,996 | 0 | (461,631 | ) | 3,709,445 | ||||||||||||||||||||||
1,310,521 | ||||||||||||||||||||||||||||||||
(70,723 | ) | (7,678 | ) | (7,019 | ) | (131 | ) | (15,398 | ) | (2,473 | ) | (103,422 | ) | |||||||||||||||||||
1,207,099 | ||||||||||||||||||||||||||||||||
186 | ||||||||||||||||||||||||||||||||
(248,716 | ) | |||||||||||||||||||||||||||||||
(107,535 | ) | (98,654 | ) | |||||||||||||||||||||||||||||
21,979 | ||||||||||||||||||||||||||||||||
2,914 | ||||||||||||||||||||||||||||||||
(322,396 | ) | 8,301 | (10,741 | ) | 13,310 | 8,598 | (2,473 | ) | (569,166 | ) | 4,594,253 | |||||||||||||||||||||
1,496,407 | ||||||||||||||||||||||||||||||||
120,136 | 2,867 | 766 | (22,273 | ) | 42,814 | 43,236 | 187,546 | |||||||||||||||||||||||||
�� | 1,683,953 | |||||||||||||||||||||||||||||||
(36,356 | ) | |||||||||||||||||||||||||||||||
(340,425 | ) | |||||||||||||||||||||||||||||||
(206,152 | ) | (158,016 | ) | |||||||||||||||||||||||||||||
42,748 | ||||||||||||||||||||||||||||||||
(3,919 | ) | |||||||||||||||||||||||||||||||
(202,260 | ) | 11,168 | (9,975 | ) | (8,963 | ) | 51,412 | 40,763 | (775,318 | ) | 5,782,238 | |||||||||||||||||||||
1,871,377 | ||||||||||||||||||||||||||||||||
(148,568 | ) | (6,692 | ) | 19,546 | (47,966 | ) | (26,022 | ) | (209,702 | ) | ||||||||||||||||||||||
1,661,675 | ||||||||||||||||||||||||||||||||
17,611 | ||||||||||||||||||||||||||||||||
(447,219 | ) | |||||||||||||||||||||||||||||||
(966,492 | ) | (922,058 | ) | |||||||||||||||||||||||||||||
49,366 | ||||||||||||||||||||||||||||||||
0 | ||||||||||||||||||||||||||||||||
4,008 | ||||||||||||||||||||||||||||||||
(9,766 | ) | (9,766 | ) | |||||||||||||||||||||||||||||
(350,828 | ) | 4,476 | (19,741 | ) | 10,583 | 3,446 | 14,741 | (1,741,810 | ) | 6,135,855 | ||||||||||||||||||||||
F-5
Table of Contents
Note | 2006(1) | 2006 | 2005 | 2004 | |||||||||||||||||
US$(000) | €(000) | €(000) | €(000) | ||||||||||||||||||
Net income | 2,469,656 | 1,871,377 | 1,496,407 | 1,310,521 | |||||||||||||||||
Minority interests | 2,389 | 1,810 | 2,896 | 4,852 | |||||||||||||||||
Income before minority interests | 2,472,045 | 1,873,187 | 1,499,303 | 1,315,373 | |||||||||||||||||
Adjustments to reconcile income before minority interests to net cash provided by operating activities: | |||||||||||||||||||||
Depreciation and amortization | 282,736 | 214,243 | 203,545 | 209,669 | |||||||||||||||||
Loss (income) from equity investees | (10 | ) | 887 | 672 | (610 | ) | 342 | ||||||||||||||
Gains/losses on disposal of property, plant, and equipment | (2,790 | ) | (2,114 | ) | (4,726 | ) | 549 | ||||||||||||||
Gains on disposal of investments | (393 | ) | (298 | ) | (1,075 | ) | (14,034 | ) | |||||||||||||
Writeups/downs of financial assets | 505 | 383 | 13,519 | 17,800 | |||||||||||||||||
Impacts of STAR hedging | (104,892 | ) | (79,482 | ) | 7,399 | (7,428 | ) | ||||||||||||||
Stock-based compensation including income tax benefits | 107,957 | 81,804 | 50,096 | 18,828 | |||||||||||||||||
Excess tax benefit from stock-based compensation | (3,786 | ) | (2,869 | ) | 0 | 0 | |||||||||||||||
Change in accounts receivables | (356,620 | ) | (270,228 | ) | (321,926 | ) | (158,385 | ) | |||||||||||||
Change in accrued and other liabilities | 175,065 | 132,655 | 165,474 | 433,545 | |||||||||||||||||
Deferred income taxes | (2,803 | ) | (2,124 | ) | (16,064 | ) | 19,205 | ||||||||||||||
Change in other assets | (288,876 | ) | (218,895 | ) | (63,869 | ) | (9,958 | ) | |||||||||||||
Change in deferred income | 158,207 | 119,881 | 76,834 | 19,821 | |||||||||||||||||
Net cash provided by operating activities | (24 | ) | 2,437,242 | 1,846,815 | 1,607,900 | 1,845,327 | |||||||||||||||
Acquisition of minority interests in subsidiaries | 0 | 0 | (59,964 | ) | (168,103 | ) | |||||||||||||||
Business combinations, net of cash and cash equivalents acquired | (665,508 | ) | (504,287 | ) | (176,849 | ) | (19,181 | ) | |||||||||||||
Purchase of intangible assets and property, plant, and equipment | (483,980 | ) | (366,735 | ) | (261,762 | ) | (192,682 | ) | |||||||||||||
Proceeds from disposal of intangible assets and property, plant, and equipment | 38,277 | 29,004 | 17,243 | 21,381 | |||||||||||||||||
Purchase of investments | (2,712,399 | ) | (2,055,315 | ) | (4,484,582 | ) | (3,540,598 | ) | |||||||||||||
Sales of investments | 3,649,398 | 2,765,324 | 4,386,854 | 3,155,661 | |||||||||||||||||
Purchase of other financial assets | (22,391 | ) | (16,967 | ) | (17,104 | ) | (30,759 | ) | |||||||||||||
Sales of other financial assets | 19,999 | 15,154 | 12,709 | 25,959 | |||||||||||||||||
Net cash used in investing activities | (176,604 | ) | (133,822 | ) | (583,455 | ) | (748,322 | ) | |||||||||||||
Dividends paid | (590,195 | ) | (447,219 | ) | (340,425 | ) | (248,716 | ) | |||||||||||||
Purchase of treasury stock | (1,516,579 | ) | (1,149,185 | ) | (454,357 | ) | (175,018 | ) | |||||||||||||
Proceeds from reissuance of treasury stock | 217,889 | 165,105 | 205,695 | 55,856 | |||||||||||||||||
Proceeds from issuance of common stock (stock-based compensation) | 65,148 | 49,366 | 42,748 | 15,395 | |||||||||||||||||
Excess tax benefit from stock-based compensation | 3,786 | 2,869 | 0 | 0 | |||||||||||||||||
Repayment of bonds | (678 | ) | (514 | ) | (350 | ) | (2,806 | ) | |||||||||||||
Proceeds from convertible bonds | 0 | 0 | 0 | 6,754 | |||||||||||||||||
Proceeds from short-term and long-term debt | 57,751 | 43,761 | 338,558 | 107,807 | |||||||||||||||||
Repayments of short-term and long-term debt | (57,019 | ) | (43,206 | ) | (339,171 | ) | (104,389 | ) | |||||||||||||
Proceeds from the exercise of equity-based derivative instruments (STAR hedge) | 75,719 | 57,376 | 39,278 | 0 | |||||||||||||||||
Purchase of equity-based derivative instruments (STAR hedge) | (70,282 | ) | (53,256 | ) | (46,864 | ) | (43,041 | ) | |||||||||||||
Net cash used in financing activities | (1,814,460 | ) | (1,374,903 | ) | (554,888 | ) | (388,158 | ) | |||||||||||||
Effect of foreign exchange rates on cash and cash equivalents | (4,531 | ) | (3,433 | ) | 88,724 | (41,791 | ) | ||||||||||||||
Net increase in cash and cash equivalents | 441,647 | 334,657 | 558,281 | 667,056 | |||||||||||||||||
Cash and cash equivalents at the beginning of the period | 2,723,958 | 2,064,074 | 1,505,793 | 838,737 | |||||||||||||||||
Cash and cash equivalents at the end of the period | (13 | ) | 3,165,605 | 2,398,731 | 2,064,074 | 1,505,793 | |||||||||||||||
(1) | The 2006 figures have been translated solely for the convenience of the reader at an exchange rate of US$1.3197 to€1.00, the Noon Buying Rate certified by the Federal Reserve Bank of New York on December 29, 2006. |
F-6
Table of Contents
F-7
Table of Contents
German | Foreign | Total | ||||||||||
December 31, 2005 | 17 | 86 | 103 | |||||||||
Additions | 5 | 14 | 19 | |||||||||
Disposals | (1 | ) | (6 | ) | (7 | ) | ||||||
December 31, 2006 | 21 | 94 | 115 | |||||||||
F-8
Table of Contents
Closing rate at | ||||||||||||||||||||||
December 31 | Annual average exchange rate | |||||||||||||||||||||
2006 | 2005 | 2006 | 2005 | 2004 | ||||||||||||||||||
to€1 | to€1 | to€1 | to€1 | to€1 | ||||||||||||||||||
U.S. dollar | USD | 1.3170 | 1.1797 | 1.2611 | 1.2360 | 1.2490 | ||||||||||||||||
Pound sterling | GBP | 0.6715 | 0.6853 | 0.6800 | 0.6827 | 0.6795 | ||||||||||||||||
Japanese yen | JPY | 156.93 | 138.90 | 147.02 | 137.08 | 134.73 | ||||||||||||||||
Swiss franc | CHF | 1.6069 | 1.5551 | 1.5757 | 1.5478 | 1.5421 | ||||||||||||||||
Canadian dollar | CAD | 1.5281 | 1.3725 | 1.4296 | 1.4908 | 1.6163 | ||||||||||||||||
Brazilian real | BRL | 2.8202 | 2.7691 | 2.7313 | 2.9240 | 3.6361 |
F-9
Table of Contents
F-10
Table of Contents
F-11
Table of Contents
Useful lives of property, | ||||
plant, and equipment | ||||
Buildings | 25 to 50 years | |||
Leasehold improvements | Based upon the lease contract | |||
Information technology equipment | 3 to 5 years | |||
Office furniture | 4 to 20 years | |||
Automobiles | 5 years |
F-12
Table of Contents
F-13
Table of Contents
F-14
Table of Contents
F-15
Table of Contents
2005 | 2004 | |||||||
€(000) | €(000) | |||||||
As reported | 1,496,407 | 1,310,521 | ||||||
Add: Expense for stock-based compensation, net of tax according to APB 25 | 31,130 | 23,445 | ||||||
Deduct: Expense for stock-based compensation, net of tax according to SFAS 123 | 138,468 | 181,323 | ||||||
Adjusted | 1,389,069 | 1,152,643 | ||||||
2005 | 2004 | |||||||
€ | € | |||||||
Basic — as reported | 1.21 | 1.05 | ||||||
Diluted — as reported | 1.20 | 1.05 | ||||||
Basic — adjusted | 1.12 | 0.93 | ||||||
Diluted — adjusted | 1.12 | 0.92 |
F-16
Table of Contents
F-17
Table of Contents
• | Recognized financial assets and financial liabilities unless a special exception applies | |
• | Firm commitments that would otherwise not be recognized at inception and that involve only financial instruments | |
• | Non-financial insurance contracts | |
• | Host financial instruments resulting from separation of an embedded non-financial derivative instrument from a non-financial hybrid instrument |
F-18
Table of Contents
Estimated useful | ||||||||
€ million | lives (years) | |||||||
Customer contracts | 17.1 | 2 - 11 | ||||||
Intellectual property | 118.3 | 5 - 10 | ||||||
In-process research and development | 1.5 | expensed at the acquisition date | ||||||
Identifiable intangible assets acquired | 136.9 | |||||||
F-19
Table of Contents
2006 | 2005 | 2004 | ||||||||||
€(000) | €(000) | €(000) | ||||||||||
Bad debt expense | 0 | (3,409 | ) | (1,791 | ) | |||||||
Restructuring costs — severance obligations | (302 | ) | (899 | ) | (5,796 | ) | ||||||
Restructuring costs — unused lease space | (274 | ) | (832 | ) | (1,210 | ) | ||||||
Expenses to obtain rental income | 0 | 0 | (1,517 | ) | ||||||||
Miscellaneous other operating expenses | (38 | ) | (2,783 | ) | (2,834 | ) | ||||||
Other operating expense | (614 | ) | (7,923 | ) | (13,148 | ) | ||||||
Bad debt income | 43,004 | 0 | 0 | |||||||||
Rental income | 5,222 | 6,811 | 7,135 | |||||||||
Receipt of insurance proceeds | 1,751 | 1,618 | 4,318 | |||||||||
Miscellaneous other operating income | 7,107 | 5,676 | 3,457 | |||||||||
Other operating income | 57,084 | 14,105 | 14,910 | |||||||||
56,470 | 6,182 | 1,762 | ||||||||||
F-20
Table of Contents
2006 | 2005 | 2004 | ||||||||||
€(000) | €(000) | €(000) | ||||||||||
Raw materials and supplies, purchased goods | 31,599 | 30,030 | 27,124 | |||||||||
Purchased services | 879,064 | 827,831 | 722,727 | |||||||||
910,663 | 857,861 | 749,851 | ||||||||||
2006 | 2005 | 2004 | ||||||||||
€(000) | €(000) | €(000) | ||||||||||
Salaries | 3,290,044 | 2,882,828 | 2,513,791 | |||||||||
Social security costs | 417,001 | 379,240 | 350,052 | |||||||||
Pension expense | 126,037 | 109,479 | 104,175 | |||||||||
3,833,082 | 3,371,547 | 2,968,018 | ||||||||||
2006 | 2005 | 2004 | ||||||||||
Employees in full-time equivalents | 38,053 | 34,550 | 31,224 |
F-21
Table of Contents
2006 | 2005 | 2004 | ||||||||||
€(000) | €(000) | €(000) | ||||||||||
Foreign currency losses | (254,971 | ) | (116,628 | ) | (140,881 | ) | ||||||
Losses on disposal of fixed assets | (5,139 | ) | (2,915 | ) | (6,696 | ) | ||||||
Other | (14,715 | ) | (16,406 | ) | (8,830 | ) | ||||||
Other non-operating expenses | (274,825 | ) | (135,949 | ) | (156,407 | ) | ||||||
Foreign currency gains | 250,668 | 77,987 | 152,831 | |||||||||
Gains on disposal of fixed assets | 7,253 | 7,641 | 6,147 | |||||||||
Other | 4,601 | 25,160 | 10,703 | |||||||||
Other non-operating income | 262,522 | 110,788 | 169,681 | |||||||||
(12,303 | ) | (25,161 | ) | 13,274 | ||||||||
2006 | 2005 | 2004 | ||||||||||
€(000) | €(000) | €(000) | ||||||||||
Interest and similar income | 124,026 | 93,778 | 63,880 | |||||||||
Interest and similar expenses | (4,218 | ) | (3,859 | ) | (8,122 | ) | ||||||
Interest income, net | 119,808 | 89,919 | 55,758 | |||||||||
Gain/loss from investments, net | (578 | ) | 855 | 1,842 | ||||||||
— thereof from equity method investments | (672 | ) | 610 | (342 | ) | |||||||
Income from marketable securities and loans of financial assets | 157,303 | 64,791 | 2,865 | |||||||||
Impairment on minority equity investments | (1,186 | ) | (4,026 | ) | (5,074 | ) | ||||||
Other write-downs of financial assets | (3,391 | ) | (12,559 | ) | (15,329 | ) | ||||||
Gains on sales of equity securities | 298 | 1,075 | 14,034 | |||||||||
Unrealized gains/losses on STAR hedge | 7,330 | (66,166 | ) | (14,558 | ) | |||||||
Other financial income/expense | (157,876 | ) | (63,104 | ) | 1,449 | |||||||
Other financial loss from investments, net | 2,478 | (79,989 | ) | (16,613 | ) | |||||||
121,708 | 10,785 | 40,987 | ||||||||||
F-22
Table of Contents
2006 | 2005 | 2004 | ||||||||||
€(000) | €(000) | €(000) | ||||||||||
Current taxes — Germany | 426,328 | 514,836 | 470,473 | |||||||||
Current taxes — Foreign | 377,408 | 318,281 | 267,591 | |||||||||
803,736 | 833,117 | 738,064 | ||||||||||
Deferred taxes — Germany | (357 | ) | 15,317 | 22,120 | ||||||||
Deferred taxes — Foreign | (1,767 | ) | (31,381 | ) | (2,915 | ) | ||||||
(2,124 | ) | (16,064 | ) | 19,205 | ||||||||
Income tax expense | 801,612 | 817,053 | 757,269 | |||||||||
2006 | 2005 | 2004 | ||||||||||
€(000) | €(000) | €(000) | ||||||||||
Germany | 1,519,182 | 1,454,675 | 1,352,200 | |||||||||
Foreign | 1,155,617 | 861,681 | 720,442 | |||||||||
2,674,799 | 2,316,356 | 2,072,642 | ||||||||||
2006 | 2005 | 2004 | ||||||||||
€(000) | €(000) | €(000) | ||||||||||
Income before income taxes | 2,674,799 | 2,316,356 | 2,072,642 | |||||||||
Expected income taxes 35.66% in 2006 (36.32% in 2005, 36.20% in 2004) | 953,833 | 841,300 | 750,296 | |||||||||
Foreign tax rate differential | (25,708 | ) | (5,717 | ) | (7,800 | ) | ||||||
Tax effect on non-deductible expenses | 17,644 | 12,776 | 12,631 | |||||||||
Prior year taxes | (80,069 | ) | (5,787 | ) | 11,422 | |||||||
Tax effect on equity investments and securities | (71,540 | ) | (34,626 | ) | (7,795 | ) | ||||||
Other | 7,452 | 9,107 | (1,485 | ) | ||||||||
Actual income tax expense | 801,612 | 817,053 | 757,269 | |||||||||
F-23
Table of Contents
2006 | 2005 | |||||||
€(000) | €(000) | |||||||
Deferred tax assets | ||||||||
Intangibles | 15,216 | 12,276 | ||||||
Property, plant, and equipment | 8,027 | 7,785 | ||||||
Financial assets | 23,762 | 30,131 | ||||||
Accounts receivable | 11,614 | 27,982 | ||||||
Net operating loss carryforwards | 8,574 | 9,427 | ||||||
Pension provisions | 45,121 | 39,739 | ||||||
Stock-based compensation | 34,004 | 27,858 | ||||||
Other provisions | 121,697 | 135,145 | ||||||
Deferred income | 33,246 | 38,789 | ||||||
Other | 4,021 | 4,015 | ||||||
305,282 | 333,147 | |||||||
Less: Valuation allowance | (9,502 | ) | (6,927 | ) | ||||
Deferred tax assets | 295,780 | 326,220 | ||||||
Deferred tax liabilities | ||||||||
Intangibles | 37,578 | 22,164 | ||||||
Property, plant, and equipment | 23,720 | 13,600 | ||||||
Financial assets | 22,579 | 34,620 | ||||||
Accounts receivable | 34,529 | 36,411 | ||||||
Pension provisions | 17,411 | 13,034 | ||||||
Stock-based compensation | 7,384 | 198 | ||||||
Other provisions | 5,115 | 8,626 | ||||||
Deferred income | 4,844 | 7,415 | ||||||
Other | 18,978 | 33,924 | ||||||
Deferred tax liabilities | 172,138 | 169,992 | ||||||
Net deferred tax assets | 123,642 | 156,228 | ||||||
F-24
Table of Contents
2006 | 2005 | 2004 | ||||||||||
€(000) | €(000) | €(000) | ||||||||||
Income tax from continuing operations | 801,612 | 817,053 | 757,269 | |||||||||
Stockholders’ equity for items in additional paid in capital related to stock-based compensation | (10,822 | ) | (23,035 | ) | (15,752 | ) | ||||||
Stockholders’ equity for items in Other comprehensive income/loss | (16,522 | ) | 7,792 | (11,262 | ) | |||||||
774,268 | 801,810 | 730,255 | ||||||||||
2006 | 2005 | 2004 | ||||||||||
(in thousands, except per share data) | ||||||||||||
Net income | €1,871,377 | €1,496,407 | €1,310,521 | |||||||||
Weighted average shares — basic | 1,226,263 | 1,239,264 | 1,243,209 | |||||||||
Stock options/ Convertible bonds | 5,387 | 4,078 | 5,414 | |||||||||
Weighted average shares — diluted | 1,231,650 | 1,243,342 | 1,248,623 | |||||||||
Earnings per share — basic | €1.53 | €1.21 | €1.05 | |||||||||
Earnings per share — diluted | €1.52 | €1.20 | €1.05 | |||||||||
F-25
Table of Contents
Equity and other | ||||||||||||||||||||||||
Cash and cash equivalents | Short-term investments | investments | ||||||||||||||||||||||
2006 | 2005 | 2006 | 2005 | 2006 | 2005 | |||||||||||||||||||
€(000) | €(000) | €(000) | €(000) | €(000) | €(000) | |||||||||||||||||||
Cash | 477,820 | 455,523 | ||||||||||||||||||||||
Money market funds/ Fund securities | 203,788 | 381,909 | 335 | 11,898 | 11,914 | |||||||||||||||||||
Time deposits | 1,598,522 | 1,226,642 | 19,028 | 910,851 | ||||||||||||||||||||
Commercial paper | 118,601 | |||||||||||||||||||||||
Auction rate securities | 154,822 | |||||||||||||||||||||||
Variable rate demand notes | 33,721 | 238,648 | ||||||||||||||||||||||
Other debt securities available-for-sale | 715,677 | 625,162 | 246 | 5,275 | ||||||||||||||||||||
Marketable equity securities available-for-sale | 4,537 | 6,594 | 9,901 | 16,486 | ||||||||||||||||||||
Equity securities at cost | 3,165 | 728 | 54,579 | 27,532 | ||||||||||||||||||||
Equity method securities | 18,357 | 1,407 | ||||||||||||||||||||||
2,398,731 | 2,064,074 | 930,950 | 1,782,318 | 94,981 | 62,614 | |||||||||||||||||||
2006 | 2005 | |||||||
€(000) | €(000) | |||||||
Due within 1 year | 456,304 | 204,041 | ||||||
Due 1 year through 2 years | 447,916 | 421,121 | ||||||
Due after 2 years | 246 | 243,923 | ||||||
Total of auction rate securities, variable rate demand notes and debt securities | 904,466 | 869,085 | ||||||
F-26
Table of Contents
Marketable securities in loss position | ||||||||||||||||||||||||||||||||
Marketable securities | for less than | for more than | ||||||||||||||||||||||||||||||
not in loss position | 12 months | 12 months | Total | |||||||||||||||||||||||||||||
Fair | Unrealized | Fair | Unrealized | Fair | Unrealized | Fair | Unrealized | |||||||||||||||||||||||||
value | gains | value | losses | value | losses | value | losses | |||||||||||||||||||||||||
€(000) | €(000) | €(000) | €(000) | €(000) | €(000) | €(000) | €(000) | |||||||||||||||||||||||||
2006 | ||||||||||||||||||||||||||||||||
Marketable equity securities (available-for-sale) | 11,440 | 5,939 | 2,998 | 391 | 2,998 | 391 | ||||||||||||||||||||||||||
Marketable debt securities (available-for-sale) | 226,415 | 720 | 451,819 | 1,145 | 226,232 | 1,084 | 678,051 | 2,229 | ||||||||||||||||||||||||
Investment fund securities | 11,898 | 78 | 11,898 | 78 | ||||||||||||||||||||||||||||
2005 | ||||||||||||||||||||||||||||||||
Marketable equity securities (available-for-sale) | 23,080 | 13,787 | ||||||||||||||||||||||||||||||
Marketable debt securities (available-for-sale) | 412,959 | 2 | 456,126 | 3,643 | 456,126 | 3,643 | ||||||||||||||||||||||||||
Investment fund securities | 2,329 | 19 | 9,920 | 79 | 9,920 | 79 |
F-27
Table of Contents
2006 | 2005 | |||||||
€(000) | €(000) | |||||||
Current | 2,440,188 | 2,249,482 | ||||||
Noncurrent | 2,675 | 1,545 | ||||||
2,442,863 | 2,251,027 | |||||||
�� | ||||||||||||||||||||||||
2006 | 2005 | |||||||||||||||||||||||
Current | Noncurrent | Total | Current | Noncurrent | Total | |||||||||||||||||||
€(000) | €(000) | €(000) | €(000) | €(000) | €(000) | |||||||||||||||||||
Investments in insurance policies held for employee-financed pension plans, and semiretirement | 0 | 278,061 | 278,061 | 0 | 210,966 | 210,966 | ||||||||||||||||||
Income tax receivables | 160,543 | 12,268 | 172,811 | 72,025 | 4,430 | 76,455 | ||||||||||||||||||
Fair value of STAR hedge and other derivatives | 117,102 | 87,332 | 204,434 | 57,490 | 117,766 | 175,256 | ||||||||||||||||||
Other receivables | 41,319 | 40,724 | 82,043 | 35,227 | 30,437 | 65,664 | ||||||||||||||||||
Loans to employees | 8,337 | 42,169 | 50,506 | 5,773 | 42,215 | 47,988 | ||||||||||||||||||
Prepaid pensions | 0 | 45,663 | 45,663 | 0 | 38,595 | 38,595 | ||||||||||||||||||
Rent deposits | 0 | 26,388 | 26,388 | 0 | 27,364 | 27,364 | ||||||||||||||||||
Loans to third parties | 538 | 341 | 879 | 488 | 438 | 926 | ||||||||||||||||||
Miscellaneous other assets | 39,493 | 343 | 39,836 | 40,562 | 351 | 40,913 | ||||||||||||||||||
Total other financial assets and other assets | 367,332 | 533,289 | 900,621 | 211,565 | 472,562 | 684,127 | ||||||||||||||||||
F-28
Table of Contents
Licenses, trademarks, | ||||||||||||
similar rights, and | ||||||||||||
other intangibles | Goodwill | Total | ||||||||||
€(000) | €(000) | €(000) | ||||||||||
Purchase cost | ||||||||||||
1/1/2006 | 379,745 | 726,640 | 1,106,385 | |||||||||
Exchange rate differences | (17,037 | ) | (49,872 | ) | (66,909 | ) | ||||||
Change in the scope of consolidation | 908 | 0 | 908 | |||||||||
Additions | 189,088 | 407,407 | 596,495 | |||||||||
Retirements/disposals | (99,333 | ) | 0 | (99,333 | ) | |||||||
Reclassifications | 911 | 0 | 911 | |||||||||
12/31/2006 | 454,282 | 1,084,175 | 1,538,457 | |||||||||
Accumulated amortization | ||||||||||||
1/1/2006 | 240,048 | 100,094 | 340,142 | |||||||||
Exchange rate differences | (8,894 | ) | (3,505 | ) | (12,399 | ) | ||||||
Change in the scope of consolidation | 0 | 0 | 0 | |||||||||
Additions | 58,708 | 0 | 58,708 | |||||||||
Retirements/disposals | (98,167 | ) | 0 | (98,167 | ) | |||||||
Reclassifications | 5 | 0 | 5 | |||||||||
12/31/2006 | 191,700 | 96,589 | 288,289 | |||||||||
Carrying value 12/31/2006 | 262,582 | 987,586 | 1,250,168 | |||||||||
Carrying value 12/31/2005 | 139,697 | 626,546 | 766,243 | |||||||||
F-29
Table of Contents
Software and | Licenses, trademarks, | |||||||||||||||
database | Acquired | similar rights, and | ||||||||||||||
licenses | technology | Other | other intangibles | |||||||||||||
€(000) | €(000) | €(000) | €(000) | |||||||||||||
12/31/2006 | ||||||||||||||||
Purchase cost | 200,603 | 214,076 | 39,603 | 454,282 | ||||||||||||
— thereof additions in 2006 | 52,148 | 118,347 | 18,593 | 189,088 | ||||||||||||
Accumulated amortization | 127,468 | 50,465 | 13,767 | 191,700 | ||||||||||||
— thereof amortization in 2006 | 15,627 | 34,860 | 8,221 | 58,708 | ||||||||||||
Carrying value | 73,135 | 163,611 | 25,836 | 262,582 | ||||||||||||
Weighted average amortization period in years | 3.0 | 9.0 | 7.5 | |||||||||||||
12/31/2005 | ||||||||||||||||
Purchase cost | 160,425 | 194,217 | 25,103 | 379,745 | ||||||||||||
Accumulated amortization | 124,432 | 108,738 | 6,878 | 240,048 | ||||||||||||
Carrying value | 35,993 | 85,479 | 18,225 | 139,697 | ||||||||||||
€(000) | ||||
2007 | 58,400 | |||
2008 | 50,952 | |||
2009 | 45,006 | |||
2010 | 34,961 | |||
2011 | 21,955 | |||
thereafter | 51,308 |
Thereof | Thereof | |||||||||||||||
additions | additions | |||||||||||||||
Segment | 12/31/2006 | in 2006 | 12/31/2005 | in 2005 | ||||||||||||
€(000) | €(000) | €(000) | €(000) | |||||||||||||
Product | 618,397 | 350,444 | 308,647 | 84,185 | ||||||||||||
Consulting | 340,338 | 39,725 | 304,934 | 56,995 | ||||||||||||
Training | 28,851 | 17,238 | 12,965 | 2,066 | ||||||||||||
987,586 | 407,407 | 626,546 | 143,246 | |||||||||||||
F-30
Table of Contents
Land, leasehold | ||||||||||||||||
improvements, and | ||||||||||||||||
buildings, including | Other property, | Payments and | ||||||||||||||
buildings on | plant, and | construction | ||||||||||||||
third-party land | equipment | in progress | Total | |||||||||||||
€(000) | €(000) | €(000) | €(000) | |||||||||||||
Purchase cost | ||||||||||||||||
1/1/2006 | 954,983 | 1,046,357 | 43,470 | 2,044,810 | ||||||||||||
Exchange rate differences | (23,617 | ) | (18,879 | ) | (628 | ) | (43,124 | ) | ||||||||
Change in the scope of consolidation | 389 | 4,207 | 0 | 4,596 | ||||||||||||
Additions | 33,178 | 186,792 | 91,835 | 311,805 | ||||||||||||
Retirements/disposals | (11,987 | ) | (121,586 | ) | 0 | (133,573 | ) | |||||||||
Reclassifications | 22,606 | 1,910 | (25,427 | ) | (911 | ) | ||||||||||
12/31/2006 | 975,552 | 1,098,801 | 109,250 | 2,183,603 | ||||||||||||
Accumulated depreciation | ||||||||||||||||
1/1/2006 | 287,336 | 662,509 | 0 | 949,845 | ||||||||||||
Exchange rate differences | (7,877 | ) | (12,241 | ) | 0 | (20,118 | ) | |||||||||
Change in the scope of consolidation | 0 | 0 | 0 | 0 | ||||||||||||
Additions | 27,774 | 127,761 | 0 | 155,535 | ||||||||||||
Retirements/disposals | (10,956 | ) | (96,893 | ) | 0 | (107,849 | ) | |||||||||
Reclassifications | 0 | (5 | ) | 0 | (5 | ) | ||||||||||
12/31/2006 | 296,277 | 681,131 | 0 | 977,408 | ||||||||||||
Carrying value 12/31/2006 | 679,275 | 417,670 | 109,250 | 1,206,195 | ||||||||||||
Carrying value 12/31/2005 | 667,647 | 383,848 | 43,470 | 1,094,965 | ||||||||||||
F-31
Table of Contents
Term | ||||||||||||||||||||
Term less | between | Term more than | Balance on | Balance on | ||||||||||||||||
than 1 year | 1 and 5 years | 5 years | 12/31/2006 | 12/31/2005 | ||||||||||||||||
€(000) | €(000) | €(000) | €(000) | €(000) | ||||||||||||||||
Other employee-related liabilities | 948,628 | 0 | 50,513 | 999,141 | 926,546 | |||||||||||||||
Payables to suppliers | 580,966 | 403 | 0 | 581,369 | 516,881 | |||||||||||||||
Other taxes | 220,236 | 0 | 0 | 220,236 | 232,700 | |||||||||||||||
Advanced payments received | 29,067 | 33,943 | 0 | 63,010 | 69,925 | |||||||||||||||
Bank loans and overdraft | 24,556 | 0 | 1,614 | 26,170 | 24,300 | |||||||||||||||
Other financial liabilities | 18,128 | 1,204 | 0 | 19,332 | 52,548 | |||||||||||||||
Other liabilities | 86,719 | 12,301 | 7,225 | 106,245 | 100,487 | |||||||||||||||
1,908,300 | 47,851 | 59,352 | 2,015,503 | 1,923,387 | ||||||||||||||||
2006 | 2005 | |||||||||||||||||||||||
Current | Noncurrent | Total | Current | Noncurrent | Total | |||||||||||||||||||
€(000) | €(000) | €(000) | €(000) | €(000) | €(000) | |||||||||||||||||||
Pension plans and similar obligations (see Note 21a) | 991 | 230,648 | 231,639 | 0 | 183,619 | 183,619 | ||||||||||||||||||
Other obligations (see Note 21b) | 162,250 | 107,811 | 270,061 | 159,642 | 100,992 | 260,634 | ||||||||||||||||||
163,241 | 338,459 | 501,700 | 159,642 | 284,611 | 444,253 | |||||||||||||||||||
F-32
Table of Contents
2006 | 2005 | |||||||
€(000) | €(000) | |||||||
Domestic benefit plans | 8,174 | 13,410 | ||||||
Foreign benefit plans | 32,630 | 19,280 | ||||||
Other defined benefit plans not included in footnote | 285 | 4,806 | ||||||
Total defined benefit plans | 41,089 | 37,496 | ||||||
Employee financed plans | 190,550 | 146,123 | ||||||
Total pension plans | 231,639 | 183,619 | ||||||
Before | After | |||||||||||
application of | application of | |||||||||||
SFAS 158 | Adjustments | SFAS 158 | ||||||||||
€(000) | €(000) | €(000) | ||||||||||
Intangible assets | 262,155 | 427 | 262,582 | |||||||||
Deferred tax assets (noncurrent) | 66,164 | 2,325 | 68,489 | |||||||||
Pension liabilities and other obligations | (28,621 | ) | (12,468 | ) | (41,089 | ) | ||||||
Deferred tax liability (noncurrent) | (16,372 | ) | (50 | ) | (16,422 | ) | ||||||
Accumulated other comprehensive income | 327,557 | 9,766 | 337,323 |
F-33
Table of Contents
2006 | 2005 | |||||||
€(000) | €(000) | |||||||
Pension assets | 45,663 | 38,595 | ||||||
— thereof principal pension benefit plans | 45,221 | 37,594 | ||||||
— thereof insignificant pension benefit plans not included in notes | 442 | 1,001 | ||||||
Accumulated other comprehensive income | 27,701 | 15,660 | ||||||
— thereof principal pension benefit plans | 28,214 | 15,517 | ||||||
— thereof insignificant pension benefit plans not included in notes | (513 | ) | 143 | |||||
Less income tax effect (deferred income tax assets net of deferred tax liabilities) | 7,960 | 5,685 | ||||||
— thereof principal pension benefit plans | 7,994 | 5,633 | ||||||
— thereof insignificant pension benefit plans not included in notes | (34 | ) | 52 | |||||
Accumulated other comprehensive income net of income taxes | 19,741 | 9,975 | ||||||
— thereof principal pension benefit plans | 20,220 | 9,884 | ||||||
— thereof insignificant pension benefit plans not included in notes | (479 | ) | 91 | |||||
Accrued pension benefit liability | (41,089 | ) | (33,876 | ) | ||||
— thereof principal pension benefit plans | (40,804 | ) | (32,690 | ) | ||||
— thereof insignificant pension benefit plans not included in notes | (285 | ) | (1,186 | ) |
F-34
Table of Contents
2006 | 2005 | |||||||
€(000) | €(000) | |||||||
Change in benefit obligation | ||||||||
Benefit obligation at beginning of year | 42,745 | 33,236 | ||||||
Additional plans included in pension disclosure | 715 | 0 | ||||||
Service cost | 394 | 300 | ||||||
Interest cost | 1,719 | 1,640 | ||||||
Actuarial gain/loss | (3,695 | ) | 8,361 | |||||
Benefits paid | (999 | ) | (792 | ) | ||||
Benefit obligation at year end | 40,879 | 42,745 | ||||||
Change in plan assets | ||||||||
Fair value of plan assets at beginning of year | 28,722 | 27,536 | ||||||
Additional plans included in pension disclosure | 163 | 0 | ||||||
Actual return on plan assets | 1,597 | 295 | ||||||
Employer contributions | 3,222 | 1,683 | ||||||
Benefits paid | (999 | ) | (740 | ) | ||||
Assets transferred to defined contribution plan | 0 | (52 | ) | |||||
Fair value of plan assets at year end | 32,705 | 28,722 | ||||||
Funded status at year end | (8,174 | ) | (14,023 | ) | ||||
Amounts recognized in the consolidated balance sheets: | ||||||||
Noncurrent pension assets | 0 | 6 | ||||||
Accrued benefit liability (current) | 0 | 0 | ||||||
Accrued benefit liability (noncurrent) | (8,174 | ) | (13,410 | ) | ||||
Net amount recognized | (8,174 | ) | (13,404 | ) | ||||
2006 | 2005 | 2004 | ||||||||||
% | % | % | ||||||||||
Discount rate | 4.5 | 4.0 | 5.0 | |||||||||
Compensation increase | 2-5 | 2-7 | 2-7 |
F-35
Table of Contents
2006 | 2005 | 2004 | ||||||||||
€(000) | €(000) | €(000) | ||||||||||
Service cost | 394 | 300 | 301 | |||||||||
Interest cost | 1,719 | 1,640 | 1,587 | |||||||||
Expected return on plan assets | (1,274 | ) | (1,572 | ) | (1,638 | ) | ||||||
Amortization of initial net obligation | 42 | 42 | 42 | |||||||||
Amortization of prior service cost | 0 | 762 | 503 | |||||||||
Amortization of net loss | 2,306 | 0 | 0 | |||||||||
Net periodic benefit cost | 3,187 | 1,172 | 795 | |||||||||
2006 | ||||
€(000) | ||||
Initial net transition obligation | 406 | |||
Net loss | 10,131 | |||
Total unrecognized pension cost | 10,537 | |||
2006 | 2005 | 2004 | ||||||||||
% | % | % | ||||||||||
Discount rate | 4.0 | 5.0 | 5.3 | |||||||||
Expected return on plan assets | 4.25 | 5.5 | 6.0 | |||||||||
Rate of compensation increase | 2-5 | 2-7 | 2-7 |
F-36
Table of Contents
2006 | 2005 | |||||||
€(000) | €(000) | |||||||
Change in benefit obligation | ||||||||
Benefit obligation at beginning of year | 256,658 | 189,838 | ||||||
Additional plans included in pension disclosure | 5,061 | 0 | ||||||
Service cost | 35,911 | 29,872 | ||||||
Interest cost | 10,358 | 9,021 | ||||||
Employee contributions | 3,271 | 2,965 | ||||||
Actuarial loss/gain | (4,925 | ) | 15,064 | |||||
Benefits paid | (7,338 | ) | (7,853 | ) | ||||
Foreign currency exchange rate changes | (24,687 | ) | 17,751 | |||||
Other changes | 740 | 0 | ||||||
Benefit obligation at year end | 275,049 | 256,658 | ||||||
Change in plan assets | ||||||||
Fair value of plan assets at beginning of year | 241,642 | 185,628 | ||||||
Additional plans included in pension disclosure | 4,700 | 0 | ||||||
Actual return on plan assets | 26,702 | 18,087 | ||||||
Employer contributions | 41,874 | 20,385 | ||||||
Employee contributions | 3,271 | 2,965 | ||||||
Benefits paid | (7,158 | ) | (6,554 | ) | ||||
Foreign currency exchange rate changes | (23,391 | ) | 21,131 | |||||
Other changes | 0 | 0 | ||||||
Fair value of plan assets at year end | 287,640 | 241,642 | ||||||
Funded status at year end | 12,591 | (15,016 | ) | |||||
Amounts recognized in the consolidated balance sheets: | ||||||||
Prepaid benefit cost | 45,221 | 37,588 | ||||||
Accrued benefit liability (current) | (991 | ) | 0 | |||||
Accrued benefit liability (noncurrent) | (31,639 | ) | (19,280 | ) | ||||
Net amount recognized | 12,591 | 18,308 | ||||||
2006 | 2005 | 2004 | ||||||||||
% | % | % | ||||||||||
Discount rate | 4.4 | 4.2 | 4.5 | |||||||||
Rate of compensation increase | 4.6 | 4.9 | 4.9 |
F-37
Table of Contents
2006 | 2005 | 2004 | ||||||||||
€(000) | €(000) | €(000) | ||||||||||
Service cost | 35,911 | 29,872 | 30,220 | |||||||||
Interest cost | 10,358 | 9,021 | 7,817 | |||||||||
Expected return on plan assets | (17,000 | ) | (14,270 | ) | (11,959 | ) | ||||||
Amortization of initial net obligation | 189 | 175 | 176 | |||||||||
Amortization of prior service cost | (139 | ) | (141 | ) | (139 | ) | ||||||
Amortization of net loss | 808 | 150 | 812 | |||||||||
Other | 253 | 0 | 0 | |||||||||
Net periodic benefit cost | 30,380 | 24,807 | 26,927 | |||||||||
2006 | ||||
€(000) | ||||
Initial net transition obligation | 1,690 | |||
Prior service credit | (356 | ) | ||
Net loss | 16,343 | |||
Total unrecognized pension cost | 17,677 | |||
2006 | 2005 | 2004 | ||||||||||
% | % | % | ||||||||||
Discount rate | 4.1 | 4.5 | 4.7 | |||||||||
Expected return on plan assets | 6.9 | 6.9 | 6.9 | |||||||||
Rate of compensation increase | 4.5 | 5.0 | 4.7 |
F-38
Table of Contents
Target | Target | |||||||||||||||
asset | Actual % | asset | Actual % | |||||||||||||
allocation | of 2006 | allocation | of 2005 | |||||||||||||
Asset category | 2007 | plan assets | 2006 | plan assets | ||||||||||||
% | % | % | % | |||||||||||||
Equity | 54.7 | 57.4 | 53.8 | 57.2 | ||||||||||||
Fixed income | 41.0 | 40.8 | 37.2 | 31.8 | ||||||||||||
Real estate | 3.2 | 1.4 | 2.9 | 0.4 | ||||||||||||
Insurance policies | 0.0 | 0.0 | 5.5 | 3.7 | ||||||||||||
Other | 1.1 | 0.4 | 0.6 | 6.9 | ||||||||||||
100.0 | 100.0 | 100.0 | 100.0 | |||||||||||||
Under- | ||||||||||||||||
funding of | ||||||||||||||||
Projected | Accumulated | Fair | accumulated | |||||||||||||
benefit | benefit | value of | benefit | |||||||||||||
obligation | obligation | plan assets | obligation | |||||||||||||
€(000) | €(000) | €(000) | €(000) | |||||||||||||
12/31/2006 | ||||||||||||||||
Domestic plans | 40,879 | 40,394 | 32,705 | 7,689 | ||||||||||||
Foreign plans | 109,196 | 101,270 | 77,768 | 23,502 | ||||||||||||
Total | 150,075 | 141,664 | 110,473 | 31,191 | ||||||||||||
12/31/2005 | ||||||||||||||||
Domestic plans | 42,745 | 42,147 | 28,722 | 13,425 | ||||||||||||
Foreign plans | 21,578 | 16,686 | 0 | 16,686 | ||||||||||||
Total | 64,323 | 58,833 | 28,722 | 30,111 | ||||||||||||
F-39
Table of Contents
2007 | ||||
€(000) | ||||
Estimated amounts expected to be recognized from OCI over the next fiscal year | ||||
Initial net obligation | 106 | |||
Prior service credit | (58 | ) | ||
Net loss | 1,619 | |||
1,667 | ||||
Domestic | Foreign | |||||||||||
plans | plans | Total | ||||||||||
€(000) | €(000) | €(000) | ||||||||||
2007 | 1,184 | 9,313 | 10,497 | |||||||||
2008 | 1,392 | 11,121 | 12,513 | |||||||||
2009 | 1,419 | 12,676 | 14,095 | |||||||||
2010 | 1,610 | 14,115 | 15,725 | |||||||||
2011 | 1,691 | 16,147 | 17,838 | |||||||||
2012-2016 | 10,540 | 112,413 | 122,953 |
F-40
Table of Contents
2006 | 2005 | |||||||||||||||||||||||
Current | Noncurrent | Total | Current | Noncurrent | Total | |||||||||||||||||||
€(000) | €(000) | €(000) | €(000) | €(000) | €(000) | |||||||||||||||||||
STAR obligations | 82,534 | 50,792 | 133,326 | 73,966 | 48,274 | 122,240 | ||||||||||||||||||
Employee-related obligations | 46,553 | 46,726 | 93,279 | 33,869 | 41,636 | 75,505 | ||||||||||||||||||
Customer-related obligations | 26,141 | 0 | 26,141 | 43,404 | 0 | 43,404 | ||||||||||||||||||
Restructuring obligations | 1,951 | 3,527 | 5,478 | 3,997 | 5,528 | 9,525 | ||||||||||||||||||
Warranty obligations | 2,700 | 0 | 2,700 | 2,900 | 0 | 2,900 | ||||||||||||||||||
Other obligations | 2,371 | 6,766 | 9,137 | 1,506 | 5,554 | 7,060 | ||||||||||||||||||
162,250 | 107,811 | 270,061 | 159,642 | 100,992 | 260,634 | |||||||||||||||||||
2006 | 2005 | 2004 | ||||||||||
€(000) | €(000) | €(000) | ||||||||||
Balance as of 1/1 | 2,900 | 3,852 | 7,600 | |||||||||
Additions | 2,700 | 2,849 | 3,852 | |||||||||
Utilization | 2,900 | 2,737 | 4,366 | |||||||||
Release | 0 | 1,064 | 3,234 | |||||||||
Balance as of 31/12 | 2,700 | 2,900 | 3,852 | |||||||||
F-41
Table of Contents
Severance | ||||||||||||
Unused | payments for | |||||||||||
lease space | restructuring | Total | ||||||||||
€(000) | €(000) | €(000) | ||||||||||
Balance as of 1/1/2004 | 17,691 | 3,529 | 21,220 | |||||||||
Additions | 2,625 | 6,972 | 9,597 | |||||||||
Utilization | (7,557 | ) | (3,668 | ) | (11,225 | ) | ||||||
Release | (1,415 | ) | (1,176 | ) | (2,591 | ) | ||||||
Currency | (779 | ) | 13 | (766 | ) | |||||||
Balance as of 12/31/2004 | 10,565 | 5,670 | 16,235 | |||||||||
— thereof current | 4,404 | 4,846 | 9,250 | |||||||||
— thereof noncurrent | 6,161 | 824 | 6,985 | |||||||||
Balance as of 1/1/2005 | 10,565 | 5,670 | 16,235 | |||||||||
Additions | 2,379 | 4,203 | 6,582 | |||||||||
Utilization | (4,404 | ) | (4,846 | ) | (9,250 | ) | ||||||
Release | (1,547 | ) | (3,304 | ) | (4,851 | ) | ||||||
Currency | 833 | (24 | ) | 809 | ||||||||
Balance as of 12/31/2005 | 7,826 | 1,699 | 9,525 | |||||||||
— thereof current | 2,418 | 1,579 | 3,997 | |||||||||
— thereof noncurrent | 5,408 | 120 | 5,528 | |||||||||
Balance as of 1/1/2006 | 7,826 | 1,699 | 9,525 | |||||||||
Additions | 2,589 | 2,161 | 4,750 | |||||||||
Utilization | (2,770 | ) | (1,492 | ) | (4,262 | ) | ||||||
Release | (2,315 | ) | (1,859 | ) | (4,174 | ) | ||||||
Currency | (341 | ) | (20 | ) | (361 | ) | ||||||
Balance as of 12/31/2006 | 4,989 | 489 | 5,478 | |||||||||
— thereof current | 1,919 | 32 | 1,951 | |||||||||
— thereof noncurrent | 3,070 | 457 | 3,527 | |||||||||
F-42
Table of Contents
2006 | 2005 | |||||||||||||||
Number of | Subscribed | Number of | Subscribed | |||||||||||||
shares | capital | shares | capital | |||||||||||||
(000) | % | (000) | % | |||||||||||||
Hasso Plattner GmbH & Co. Beteiligungs-KG | 113,719 | 9.0 | 31,650 | 10.0 | ||||||||||||
Dietmar Hopp Stiftung GmbH | 109,869 | 8.7 | 27,467 | 8.7 | ||||||||||||
Klaus Tschira Stiftung gGmbH | 67,472 | 5.3 | 17,641 | 5.6 | ||||||||||||
Dr. h.c. Tschira Beteiligungs GmbH & Co. KG | 63,331 | 5.0 | 15,833 | 5.0 | ||||||||||||
Hasso Plattner Förderstiftung gGmbH | 16,062 | 1.2 | 4,763 | 1.5 | ||||||||||||
DH-Besitzgesellschaft mbH & Co. KG(1) | 10,200 | 0.8 | 4,061 | 1.3 | ||||||||||||
Dr. h.c. Tschira and wife | 2,000 | 0.2 | 500 | 0.2 | ||||||||||||
Treasury stock | 49,251 | 3.9 | 6,679 | 2.1 | ||||||||||||
Free float | 835,633 | 65.9 | 207,864 | 65.6 | ||||||||||||
1,267,537 | 100.0 | 316,458 | 100.0 | |||||||||||||
(1) | DH-Besitzgesellschaft mbH & Co. KG is wholly owned by Dietmar Hopp. |
• | up to a total amount of€60 million through the issuance of new common shares in return for contributions in cash until May 11, 2010 (“Authorized Capital I”). The issuance is subject to the statutory subscription rights of existing shareholders | |
• | up to a total amount of€180 million through the issuance of new common shares in return for contributions in cash until May 8, 2011 (“Authorized Capital Ia”). The issuance is subject to the statutory subscription rights of existing shareholders | |
• | up to a total amount of€60 million through the issuance of new common shares in return for contributions in cash or in kind until May 11, 2010 (“Authorized Capital II”). Subject to certain preconditions and the consent of the Supervisory Board, the Executive Board is authorized to exclude the shareholders’ statutory subscription rights |
F-43
Table of Contents
• | up to a total amount of€180 million through the issuance of new common shares in return for contributions in cash or in kind until May 8, 2011 (“Authorized Capital IIa”). Subject to certain preconditions and the consent of the Supervisory Board, the Executive Board is authorized to exclude the shareholders’ statutory subscription rights | |
• | up to an aggregate amount of€15 million against contribution in cash by issuing new common shares until May 1, 2007 (“Authorized Capital III”). The new shares may be subscribed to by a credit institution only, and only to the extent that such credit institution, releasing SAP from its corresponding obligation, satisfies the conversion and subscription rights granted under the SAP AG 2000 Long Term Incentive Plan (“LTI 2000 Plan”) or SAP Stock Option Plan 2002 (“SAP SOP 2002”), respectively. The shareholders’ statutory subscription rights are excluded from this capital increase. The Executive Board may exercise this authorization only to the extent that the capital stock attributable to the new shares issued from this Authorized Capital III, together with new shares from contingent capital and treasury shares issued or transferred for the purposes of satisfying subscription rights, does not amount to more than 10% of the capital stock at the time of adoption of the authorization |
Contingent | ||||
capital | ||||
€(000) | ||||
12/31/2004 | 55,247 | |||
Exercise | (454 | ) | ||
New authorized | 0 | |||
Reduction/cancellation | (1,863 | ) | ||
12/31/2005 | 52,930 | |||
Exercise | (426 | ) | ||
New authorized | 100,000 | |||
Increase in consequence of capital increase | 82,575 | |||
Reduction/cancellation | (25,000 | ) | ||
12/31/2006 | 210,079 | |||
F-44
Table of Contents
2006 | 2005 | 2004 | |||||||||||||||||||||||||||||||||||
Tax | Tax | Tax | |||||||||||||||||||||||||||||||||||
Pre-tax | (expense) | Net | Pre-tax | (expense) | Net | Pre-tax | (expense) | Net | |||||||||||||||||||||||||||||
amount | or benefit | amount | amount | or benefit | amount | amount | or benefit | amount | |||||||||||||||||||||||||||||
€(000) | €(000) | €(000) | €(000) | €(000) | €(000) | €(000) | €(000) | €(000) | |||||||||||||||||||||||||||||
Accumulated unrealized gains/losses on marketable securities as of January 1 | 11,168 | 8,301 | 15,979 | ||||||||||||||||||||||||||||||||||
Unrealized gains/losses on marketable securities | |||||||||||||||||||||||||||||||||||||
Unrealized holding gains/losses | (7,637 | ) | (137 | ) | (7,774 | ) | 1,571 | 1,153 | 2,724 | (699 | ) | 774 | 75 | ||||||||||||||||||||||||
Reclassification adjustments for gains/losses included in net income | 1,587 | (505 | ) | 1,082 | 220 | (77 | ) | 143 | (8,020 | ) | 267 | (7,753 | ) | ||||||||||||||||||||||||
Net unrealized gains/losses on marketable securities | (6,050 | ) | (642 | ) | (6,692 | ) | 1,791 | 1,076 | 2,867 | (8,719 | ) | 1,041 | (7,678 | ) | |||||||||||||||||||||||
Accumulated unrealized gains/losses on marketable securities as of December 31 | 4,476 | 11,168 | 8,301 |
F-45
Table of Contents
2006 | 2005 | 2004 | |||||||||||||||||||||||||||||||||||
Tax | Tax | Tax | |||||||||||||||||||||||||||||||||||
Pre-tax | (expense) | Net | Pre-tax | (expense) | Net | Pre-tax | (expense) | Net | |||||||||||||||||||||||||||||
amount | or benefit | amount | amount | or benefit | amount | amount | or benefit | amount | |||||||||||||||||||||||||||||
€(000) | €(000) | €(000) | €(000) | €(000) | €(000) | €(000) | €(000) | €(000) | |||||||||||||||||||||||||||||
Accumulated currency translation adjustments as of January 1 | (202,260 | ) | (322,396 | ) | (251,673 | ) | |||||||||||||||||||||||||||||||
Currency translation adjustments | (148,568 | ) | 0 | (148,568 | ) | 120,136 | 0 | 120,136 | (70,723 | ) | 0 | (70,723 | ) | ||||||||||||||||||||||||
Accumulated currency translation adjustments as of December 31 | (350,828 | ) | (202,260 | ) | (322,396 | ) | |||||||||||||||||||||||||||||||
Accumulated additional minimum pension liability as of January 1 | (9,975 | ) | (10,741 | ) | (3,722 | ) | |||||||||||||||||||||||||||||||
Additional minimum pension liability adjustments | (737 | ) | 1,503 | 766 | (9,089 | ) | 2,070 | (7,019 | ) | ||||||||||||||||||||||||||||
Accumulated additional minimum pension liability as of December 31 | (9,975 | )* | (9,975 | ) | (10,741 | ) | |||||||||||||||||||||||||||||||
Accumulated unrealized gains/losses on cash flow hedges as of January 1 | (8,963 | ) | 13,310 | 13,441 | |||||||||||||||||||||||||||||||||
Unrealized gains/losses on cash flow hedges | |||||||||||||||||||||||||||||||||||||
Unrealized cash flow hedge gains/losses | 40,543 | (14,567 | ) | 25,976 | (30,323 | ) | 10,992 | (19,331 | ) | 11,691 | (1,681 | ) | 10,010 | ||||||||||||||||||||||||
Reclassification adjustments for gains/losses included in net income | (10,035 | ) | 3,605 | (6,430 | ) | (4,614 | ) | 1,672 | (2,942 | ) | (11,844 | ) | 1,703 | (10,141 | ) | ||||||||||||||||||||||
Net unrealized cash flow hedge gains/losses | 30,508 | (10,962 | ) | 19,546 | (34,937 | ) | 12,664 | (22,273 | ) | (153 | ) | 22 | (131 | ) | |||||||||||||||||||||||
Accumulated unrealized gains/losses on cash flow hedges as of December 31 | 10,583 | (8,963 | ) | 13,310 | |||||||||||||||||||||||||||||||||
Accumulated unrealized gains/losses on STAR hedge as of January 1 | 51,412 | 8,598 | 23,996 | ||||||||||||||||||||||||||||||||||
Unrealized gains/losses on STAR hedge | |||||||||||||||||||||||||||||||||||||
Unrealized gains/losses on STAR hedge | 48,139 | (16,754 | ) | 31,385 | 78,376 | (27,417 | ) | 50,959 | (1,094 | ) | 378 | (716 | ) | ||||||||||||||||||||||||
Reclassification adjustments for gains/losses included in net income | (121,711 | ) | 42,360 | (79,351 | ) | (12,527 | ) | 4,382 | (8,145 | ) | (22,433 | ) | 7,751 | (14,682 | ) | ||||||||||||||||||||||
Net unrealized gains/losses on STAR hedge | (73,572 | ) | 25,606 | (47,966 | ) | 65,849 | (23,035 | ) | 42,814 | (23,527 | ) | 8,129 | (15,398 | ) | |||||||||||||||||||||||
Accumulated unrealized gains/losses on STAR hedge as of December 31 | 3,446 | 51,412 | 8,598 | ||||||||||||||||||||||||||||||||||
Accumulated currency effects from intercompany long-term investments as of January 1 | 40,763 | (2,473 | ) | 0 | |||||||||||||||||||||||||||||||||
Currency effects from intercompany long-term investment transactions | (26,022 | ) | 0 | (26,022 | ) | 43,236 | 0 | 43,236 | (2,473 | ) | 0 | (2,473 | ) | ||||||||||||||||||||||||
Accumulated currency effects from intercompany long-term investments as of December 31 | 14,741 | 40,763 | (2,473 | ) | |||||||||||||||||||||||||||||||||
F-46
Table of Contents
2006 | 2005 | 2004 | |||||||||||||||||||||||||||||||||||
Tax | Tax | Tax | |||||||||||||||||||||||||||||||||||
Pre-tax | (expense) | Net | Pre-tax | (expense) | Net | Pre-tax | (expense) | Net | |||||||||||||||||||||||||||||
amount | or benefit | amount | amount | or benefit | amount | amount | or benefit | amount | |||||||||||||||||||||||||||||
€(000) | €(000) | €(000) | €(000) | €(000) | €(000) | €(000) | €(000) | €(000) | |||||||||||||||||||||||||||||
Total other comprehensive income/loss | (223,704 | ) | 14,002 | (209,702 | ) | 195,338 | (7,792 | ) | 187,546 | (114,684 | ) | 11,262 | (103,422 | ) | |||||||||||||||||||||||
Total accumulated other comprehensive income/loss as of January 1 | (117,855 | ) | (305,401 | ) | (201,979 | ) | |||||||||||||||||||||||||||||||
Impact due to first-time adoption SFAS 158 | |||||||||||||||||||||||||||||||||||||
Additional minimum pension liability effect | 15,660 | (5,685 | ) | 9,975* | |||||||||||||||||||||||||||||||||
— Unrealized transition obligation | (1,698 | ) | |||||||||||||||||||||||||||||||||||
— Unrealized prior service cost | 346 | ||||||||||||||||||||||||||||||||||||
— Unrealized actuarial gains/losses | (26,349 | ) | |||||||||||||||||||||||||||||||||||
Net unrealized pension cost | (27,701 | ) | 7,960 | (19,741 | ) | ||||||||||||||||||||||||||||||||
Total accumulated other comprehensive income/loss as of December 31 | (337,323 | ) | (117,855 | ) | (305,401 | ) |
2005 | 2004 | |||||||
€ | € | |||||||
Dividend per common share | 0.36 | 0.28 |
F-47
Table of Contents
€(000) | ||||
Due 2007 | 148,958 | |||
Due 2008 | 114,127 | |||
Due 2009 | 90,763 | |||
Due 2010 | 72,375 | |||
Due 2011 | 61,935 | |||
Due thereafter | 168,657 |
F-48
Table of Contents
F-49
Table of Contents
2006 | 2005 | |||||||||||||||
Carrying | Fair | Carrying | Fair | |||||||||||||
value | value | value | value | |||||||||||||
€(000) | €(000) | €(000) | €(000) | |||||||||||||
Assets | ||||||||||||||||
Financial assets and securities | 1,006,903 | 1,006,903 | 934,081 | 934,081 | ||||||||||||
Other loans | 51,385 | 51,385 | 48,915 | 48,915 | ||||||||||||
Forward exchange contracts | 33,549 | 33,549 | 6,143 | 6,143 | ||||||||||||
Call options (STAR hedge) | 170,885 | 170,885 | 169,113 | 169,113 | ||||||||||||
Liabilities | ||||||||||||||||
Bank loans and overdrafts | (26,170 | ) | (26,170 | ) | (24,300 | ) | (24,300 | ) | ||||||||
Forward exchange contracts | (11,708 | ) | (11,708 | ) | (43,919 | ) | (43,919 | ) |
• | Financial assets and securities: The fair values of Marketable debt, fund and equity securities are based upon available quoted market prices. | |
• | Other loans, bank loans and overdrafts: The fair values of Other loans, bank loans and overdrafts approximate their carrying values. The interest-free, below-market-rate employee loans included in other loans are discounted based on prevailing market rates. | |
• | Derivative financial instruments: The fair value of derivatives reflects the estimated amounts we would pay or receive to terminate the contracts on the reporting date. |
F-50
Table of Contents
F-51
Table of Contents
2006 | ||||||||||
Hedge of 12.0 million 2006 STARs | ||||||||||
Buy/sell | Options | Strike price | ||||||||
Buy | 12,000,000 | 42.12 | ||||||||
Sell | 6,000,000 | 54.62 | ||||||||
Sell | 3,000,000 | 67.12 |
2006 | ||||||||||
Hedge of 15.2 million 2005 STARs | ||||||||||
Buy/sell | Options | Strike price | ||||||||
Buy | 15,200,000 | 30.47 | ||||||||
Sell | 7,600,000 | 42.97 | ||||||||
Sell | 3,800,000 | 55.47 |
2006 | ||||||||||
Hedge of 12.0 million 2004 STARs | ||||||||||
Buy/sell | Options | Strike price | ||||||||
Buy | 12,000,000 | 33.59 | ||||||||
Sell | 6,000,000 | 46.09 | ||||||||
Sell | 3,000,000 | 58.59 |
2005 | ||||||||||
Hedge of 15.2 million 2005 STARs | ||||||||||
Buy/sell | Options | Strike price | ||||||||
Buy | 15,200,000 | 30.47 | ||||||||
Sell | 7,600,000 | 42.97 | ||||||||
Sell | 3,800,000 | 55.47 |
2005 | ||||||||||
Hedge of 12.0 million 2004 STARs | ||||||||||
Buy/sell | Options | Strike price | ||||||||
Buy | 12,000,000 | 33.59 | ||||||||
Sell | 6,000,000 | 46.09 | ||||||||
Sell | 3,000,000 | 58.59 |
2005 | ||||||||||
Hedge of 8.0 million 2003 STARs | ||||||||||
Buy/sell | Options | Strike price | ||||||||
Buy | 8,000,000 | 21.23 | ||||||||
Sell | 4,000,000 | 33.73 | ||||||||
Sell | 2,000,000 | 46.23 |
F-52
Table of Contents
Weighting factor, quarter ended | ||||||||||||||||||||||||||||
March 31 | June 30 | Sep. 30 | Dec. 31 | March 31 | June 30 | Sep. 30 | Dec. 31 | |||||||||||||||||||||
5% | 5% | 10% | 20% | 10% | 10% | 10% | 30% |
F-53
Table of Contents
F-54
Table of Contents
Calculation of | Maximum | |||||||||||
payout per % | payout as % of | Maximum | ||||||||||
Increase in market capitalization | point increase | grant value | payout per right | |||||||||
€ | ||||||||||||
% | % | |||||||||||
0 to 50 | 0.00 | 0 | 0.00 | |||||||||
>50 to 80 | 0.67 | 20 | 28.92 | |||||||||
>80 to 90 | 3.00 | 30 | 43.38 | |||||||||
>90 to 99.99 | 5.00 | 50 | 72.30 | |||||||||
Total | 100 | 144.60 | ||||||||||
% | ||
Risk-free interest rate 3.85 to 3.91 (depending on maturity) | ||
Expected volatility | 23.4 | |
Expected dividend ratio | 1.15 |
F-55
Table of Contents
2006 | 2005 | 2004 | ||||||||||
Expected life | 3.5 years | 3.5 years | 2.5 years | |||||||||
Risk-free interest rate | 3.10% | 2.82% | 2.65% | |||||||||
Expected volatility | 24% | 24% | 57% | |||||||||
Expected dividend ratio | 0.87% | 0.65% | 0.45% |
Weighted | ||||||||||||||||
Number | Weighted average | average | ||||||||||||||
of options | exercise price | remaining | Aggregate | |||||||||||||
outstanding | per option | contractual term | intrinsic value | |||||||||||||
€ | ||||||||||||||||
(000) | years | €(000) | ||||||||||||||
12/31/2005 | 6,669 | 127.02 | ||||||||||||||
Granted | 1,841 | 185.93 | — | — | ||||||||||||
Exercised | (900 | ) | 114.23 | — | — | |||||||||||
Forfeited or expired | (164 | ) | 152.77 | — | — | |||||||||||
12/31/2006 | 7,446 | 142.57 | 2.8 | 181,846 | ||||||||||||
Fully vested options as of December 31, 2006 | 2,905 | 123.95 | 1.7 | 107,763 |
F-56
Table of Contents
Weighted average | ||||||||
Number of | grant-date | |||||||
options | fair value | |||||||
€ | ||||||||
€(000) | ||||||||
Nonvested at January 1, 2006 | 4,846 | 29.81 | ||||||
Granted | 1,842 | 26.47 | ||||||
Vested | (2,000 | ) | 43.61 | |||||
Forfeited | (147 | ) | 23.21 | |||||
Nonvested at December 31, 2006 | 4,541 | 22.59 | ||||||
F-57
Table of Contents
Weighted | ||||||||||||||||
Number | Weighted average | average | ||||||||||||||
of options | exercise price | remaining | Aggregate | |||||||||||||
outstanding | per option | contractual term | intrinsic value | |||||||||||||
€ | ||||||||||||||||
(000) | years | €(000) | ||||||||||||||
Stock options | ||||||||||||||||
12/31/2005 | 1,467 | 107.44 | ||||||||||||||
Granted | — | — | ||||||||||||||
Exercised | (435 | ) | 108.00 | |||||||||||||
Forfeited | (22 | ) | 105.04 | |||||||||||||
12/31/2006 | 1,010 | 106.15 | 4.7 | 55,465.24 | ||||||||||||
Convertible bonds | ||||||||||||||||
12/31/2005 | 6,925 | 200.31 | ||||||||||||||
Granted | — | — | ||||||||||||||
Exercised | (334 | ) | 151.54 | |||||||||||||
Forfeited | (180 | ) | 149.93 | |||||||||||||
12/31/2006 | 6,411 | 202.20 | 4.2 | 21,569.64 | ||||||||||||
F-58
Table of Contents
2006 | ||||||||||||||||
Product | Consulting | Training | Total | |||||||||||||
€(000) | €(000) | €(000) | €(000) | |||||||||||||
External revenue | 6,652,370 | 2,300,056 | 440,257 | 9,392,683 | ||||||||||||
Depreciation and amortization | (83,542 | ) | (23,078 | ) | (6,558 | ) | (113,178 | ) | ||||||||
Other segment expenses | (2,544,717 | ) | (1,679,488 | ) | (266,164 | ) | (4,490,369 | ) | ||||||||
Segment contribution | 4,024,111 | 597,490 | 167,535 | 4,789,136 | ||||||||||||
Segment profitability | 60.5% | 26.0% | 38.1% |
2005 | ||||||||||||||||
Product | Consulting | Training | Total | |||||||||||||
€(000) | €(000) | €(000) | €(000) | |||||||||||||
External revenue | 6,044,338 | 2,078,091 | 380,209 | 8,502,638 | ||||||||||||
Depreciation and amortization | (81,723 | ) | (24,055 | ) | (7,054 | ) | (112,832 | ) | ||||||||
Other segment expenses | (2,370,747 | ) | (1,594,979 | ) | (240,914 | ) | (4,206,640 | ) | ||||||||
Segment contribution | 3,591,868 | 459,057 | 132,241 | 4,183,166 | ||||||||||||
Segment profitability | 59.4% | 22.1% | 34.8% |
2004 | ||||||||||||||||
Product | Consulting | Training | Total | |||||||||||||
€(000) | €(000) | €(000) | €(000) | |||||||||||||
External revenue | 5,292,941 | 1,910,292 | 306,591 | 7,509,824 | ||||||||||||
Depreciation and amortization | (84,166 | ) | (24,885 | ) | (8,047 | ) | (117,098 | ) | ||||||||
Other segment expenses | (1,973,933 | ) | (1,459,108 | ) | (200,954 | ) | (3,633,995 | ) | ||||||||
Segment contribution | 3,234,842 | 426,299 | 97,590 | 3,758,731 | ||||||||||||
Segment profitability | 61.1% | 22.3% | 31.8% |
F-59
Table of Contents
2006 | 2005 | 2004 | ||||||||||
€(000) | €(000) | €(000) | ||||||||||
Total revenue for reportable segments | 9,392,683 | 8,502,638 | 7,509,824 | |||||||||
Other external revenues | 9,033 | 10,349 | 4,474 | |||||||||
Other differences | 407 | (558 | ) | 195 | ||||||||
Total consolidated revenue | 9,402,123 | 8,512,429 | 7,514,493 | |||||||||
2006 | 2005 | 2004 | ||||||||||
€(000) | €(000) | €(000) | ||||||||||
Total contribution for reportable segments | 4,789,136 | 4,183,166 | 3,758,731 | |||||||||
Contribution from activities outside the reportable segments | (2,082,073 | ) | (1,773,325 | ) | (1,672,252 | ) | ||||||
Acquisition-related charges | (43,090 | ) | (33,664 | ) | (30,221 | ) | ||||||
Stock-based compensation expenses | (99,449 | ) | (45,042 | ) | (38,126 | ) | ||||||
Other differences | 870 | (403 | ) | 249 | ||||||||
Operating income | 2,565,394 | 2,330,732 | 2,018,381 | |||||||||
Other non-operating income/expenses, net | (12,303 | ) | (25,161 | ) | 13,274 | |||||||
Finance income/expense, net | 121,708 | 10,785 | 40,987 | |||||||||
Income before income taxes and minority interest | 2,674,799 | 2,316,356 | 2,072,642 | |||||||||
F-60
Table of Contents
Revenue by sales destination | Revenue by operations | |||||||||||||||||||||||
2006 | 2005 | 2004 | 2006 | 2005 | 2004 | |||||||||||||||||||
€(000) | €(000) | €(000) | €(000) | €(000) | €(000) | |||||||||||||||||||
Germany | 1,907,428 | 1,810,342 | 1,780,128 | 2,030,432 | 1,906,018 | 1,875,081 | ||||||||||||||||||
Rest of EMEA(1) | 2,994,281 | 2,702,429 | 2,443,383 | 2,959,511 | 2,670,304 | 2,411,294 | ||||||||||||||||||
Total EMEA | 4,901,709 | 4,512,771 | 4,223,511 | 4,989,943 | 4,576,322 | 4,286,375 | ||||||||||||||||||
United States | 2,616,923 | 2,342,808 | 1,893,746 | 2,596,586 | 2,343,466 | 1,880,247 | ||||||||||||||||||
Rest of Americas | 776,336 | 656,789 | 530,043 | 753,108 | 653,938 | 513,586 | ||||||||||||||||||
Total Americas | 3,393,259 | 2,999,597 | 2,423,789 | 3,349,694 | 2,997,404 | 2,393,833 | ||||||||||||||||||
Japan | 431,253 | 406,173 | 387,443 | 429,118 | 402,226 | 385,013 | ||||||||||||||||||
Rest of Asia Pacific Japan | 675,902 | 593,888 | 479,750 | 633,368 | 536,477 | 449,272 | ||||||||||||||||||
Total Asia Pacific Japan | 1,107,155 | 1,000,061 | 867,193 | 1,062,486 | 938,703 | 834,285 | ||||||||||||||||||
9,402,123 | 8,512,429 | 7,514,493 | 9,402,123 | 8,512,429 | 7,514,493 | |||||||||||||||||||
F-61
Table of Contents
Income before income tax(2) | Total assets | |||||||||||||||||||||||
2006 | 2005 | 2004 | 2006 | 2005 | 2004 | |||||||||||||||||||
€(000) | €(000) | €(000) | €(000) | €(000) | €(000) | |||||||||||||||||||
Germany | 2,041,868 | 2,001,816 | 1,528,052 | 3,866,193 | 4,202,554 | 3,567,090 | ||||||||||||||||||
Rest of EMEA(1) | 505,915 | 345,573 | 335,768 | 1,556,075 | 1,368,949 | 1,376,879 | ||||||||||||||||||
Total EMEA | 2,547,783 | 2,347,389 | 1,863,820 | 5,422,268 | 5,571,503 | 4,943,969 | ||||||||||||||||||
United States | 470,261 | 417,124 | 265,344 | 2,919,074 | 2,361,033 | 1,866,987 | ||||||||||||||||||
Rest of Americas | 80,808 | 68,821 | 21,593 | 517,900 | 528,741 | 288,370 | ||||||||||||||||||
Total Americas | 551,069 | 485,945 | 286,937 | 3,436,974 | 2,889,774 | 2,155,357 | ||||||||||||||||||
Japan | 56,364 | 39,176 | 38,752 | 147,735 | 153,137 | 151,712 | ||||||||||||||||||
Rest of Asia Pacific Japan | 140,664 | 93,717 | 62,027 | 497,867 | 448,328 | 334,434 | ||||||||||||||||||
Total Asia Pacific Japan | 197,028 | 132,893 | 100,779 | 645,602 | 601,465 | 486,146 | ||||||||||||||||||
3,295,880 | 2,966,227 | 2,251,536 | 9,504,844 | 9,062,742 | 7,585,472 | |||||||||||||||||||
Property, plant, and equipment | Capital expenditures | |||||||||||||||||||||||
2006 | 2005 | 2004 | 2006 | 2005 | 2004 | |||||||||||||||||||
€(000) | €(000) | €(000) | €(000) | €(000) | €(000) | |||||||||||||||||||
Germany | 858,354 | 764,175 | 702,500 | 205,657 | 170,358 | 117,187 | ||||||||||||||||||
Rest of EMEA(1) | 132,804 | 129,427 | 128,347 | 34,248 | 27,586 | 27,003 | ||||||||||||||||||
Total EMEA | 991,158 | 893,602 | 830,847 | 239,905 | 197,944 | 144,190 | ||||||||||||||||||
United States | 152,356 | 154,650 | 132,590 | 33,653 | 22,030 | 11,689 | ||||||||||||||||||
Rest of Americas | 9,640 | 8,531 | 5,371 | 6,741 | 4,568 | 3,226 | ||||||||||||||||||
Total Americas | 161,996 | 163,181 | 137,961 | 40,394 | 26,598 | 14,915 | ||||||||||||||||||
Japan | 4,147 | 4,383 | 5,377 | 2,240 | 1,981 | 1,959 | ||||||||||||||||||
Rest of Asia Pacific Japan | 48,894 | 33,799 | 24,898 | 29,266 | 14,157 | 10,924 | ||||||||||||||||||
Total Asia Pacific Japan | 53,041 | 38,182 | 30,275 | 31,506 | 16,138 | 12,883 | ||||||||||||||||||
1,206,195 | 1,094,965 | 999,083 | 311,805 | 240,680 | 171,988 | |||||||||||||||||||
(1) | Europe/ Middle East/ Africa. |
(2) | Figures of the unconsolidated Stand-alone Financial Statements. |
Employees as of December 31, | ||||||||||||||||||||||||
Depreciation | in full-time equivalents | |||||||||||||||||||||||
2006 | 2005 | 2004 | 2006 | 2005 | 2004 | |||||||||||||||||||
€(000) | €(000) | €(000) | €(000) | €(000) | €(000) | |||||||||||||||||||
Germany | 93,866 | 101,097 | 109,714 | 14,214 | 13,916 | 13,525 | ||||||||||||||||||
Rest of EMEA(1) | 24,790 | 24,916 | 24,862 | 8,146 | 7,813 | 7,133 | ||||||||||||||||||
Total EMEA | 118,656 | 126,013 | 134,576 | 22,360 | 21,729 | 20,658 | ||||||||||||||||||
United States | 20,457 | 18,001 | 18,211 | 6,958 | 6,019 | 5,143 | ||||||||||||||||||
Rest of Americas | 3,785 | 2,798 | 1,985 | 2,267 | 1,934 | 1,541 | ||||||||||||||||||
Total Americas | 24,242 | 20,799 | 20,196 | 9,225 | 7,953 | 6,684 | ||||||||||||||||||
Japan | 1,925 | 2,958 | 3,778 | 1,236 | 1,264 | 1,340 | ||||||||||||||||||
Rest of Asia Pacific Japan | 10,712 | 7,936 | 5,916 | 6,534 | 4,927 | 3,523 | ||||||||||||||||||
Total Asia Pacific Japan | 12,637 | 10,894 | 9,694 | 7,770 | 6,191 | 4,863 | ||||||||||||||||||
155,535 | 157,706 | 164,466 | 39,355 | 35,873 | 32,205 | |||||||||||||||||||
(1) | Europe/ Middle East/ Africa. |
F-62
Table of Contents
Total revenue by industry sectors | Software revenues by industry sectors(1) | |||||||||||||||||||||||
2006 | 2005 | 2004 | 2006 | 2005 | 2004 | |||||||||||||||||||
€(000) | €(000) | €(000) | €(000) | €(000) | €(000) | |||||||||||||||||||
Process industries | 1,996,408 | 1,765,909 | 1,469,136 | 731,300 | 659,346 | 489,024 | ||||||||||||||||||
Discrete industries | 2,180,924 | 1,986,113 | 1,807,871 | 718,171 | 638,441 | 550,444 | ||||||||||||||||||
Consumer industries | 1,666,666 | 1,457,006 | 1,349,825 | 538,949 | 463,504 | 426,547 | ||||||||||||||||||
Service industries | 2,134,471 | 1,946,026 | 1,673,901 | 628,289 | 552,120 | 455,054 | ||||||||||||||||||
Financial services | 590,861 | 543,360 | 519,115 | 183,516 | 179,046 | 197,511 | ||||||||||||||||||
Public services | 832,793 | 814,015 | 694,645 | 271,066 | 290,294 | 242,432 | ||||||||||||||||||
9,402,123 | 8,512,429 | 7,514,493 | 3,071,291 | 2,782,751 | 2,361,012 | |||||||||||||||||||
(1) | Based on actual customer assignment. |
F-63
Table of Contents
Membership on other supervisory boards and comparable governing | ||
bodies of enterprises, other than subsidiaries of the Company, in | ||
Germany and other countries, on | ||
December 31, 2006(1) | ||
Prof. Dr. Henning Kagermann | ||
Chief Executive Officer Overall responsibility for SAP’s strategy and business development, Global Communications, Global Intellectual Property, Internal Audit, Top Talent Management | Supervisory Board, Deutsche Bank AG, Frankfurt am Main, Germany Supervisory Board, Münchener Rückversicherungs- Gesellschaft AG, Munich, Germany Supervisory Board, DaimlerChrysler Financial Services AG, Berlin, Germany (until July 31, 2006) | |
Shai Agassi Product development and technology, Industry solutions, Product and industry marketing | ||
Léo Apotheker | ||
Sales, Consulting, Education, Marketing | Supervisory Board, AXA, Paris, France Supervisory Board, Ginger Group, Paris, France (until January 12, 2007) | |
Dr. Werner Brandt | ||
Chief Financial Officer Finance and Administration, Shared Services, SAP Ventures | Supervisory Board, LSG Lufthansa Service Holding AG, Neu-Isenburg, Germany | |
Prof. Dr. Claus E. Heinrich Labor Relations Director Global Human Resources, Quality Management, Internal IT, SAP Labs | ||
Gerhard Oswald Global Service and Support, Custom Development, new dedicated midmarket solution | ||
Dr. Peter Zencke Research, Application Platform, new dedicated midmarket solution | Supervisory Board, SupplyOn AG, Hallbergmoos, Germany |
(1) | Memberships on supervisory boards and comparable governing bodies of subsidiaries can be obtained from the Company upon request. |
F-64
Table of Contents
Membership on other supervisory boards and comparable | ||
governing bodies of enterprises other than the Company, in | ||
Germany and other countries on December 31, 2006 | ||
Prof. Dr. h.c. mult. Hasso Plattner(2), (4), (5), (7) Chairman of the Supervisory Board | ||
Helga Classen(1), (4), (7) Deputy Chairperson Chairperson of the Works Council of SAP AG and SAP Hosting AG & Co. KG | ||
Pekka Ala-Pietilä(5) Executive Advisor to the CEO of Nokia Corporation, Espoo, Finland (until January 31, 2006) Co-founder and CEO Blyk Ltd., London, Great Britain (from April 12, 2006) | Board of Directors, Pöyry Plc, Vantaa, Finland (from March 7, 2006) Board of Directors, CVON Group Limited (UK), London, Great Britain (from March 28, 2006) Board of Directors, CVON Group (UK), London, Great Britain (from March 28, 2006) Board of Directors, CVON Innovations Limited (UK), London, Great Britain (from July 10, 2006) Board of Directors, Blyk Services Oy (Finland), Helsinki, Finland (from May 12, 2006) | |
Willi Burbach(1), (4), (5) Developer | ||
Prof. Dr. Wilhelm Haarmann(2), (6), (7) Attorney-at-law, certified public auditor, certified tax advisor HAARMANN Partnerschaftsgesellschaft, Rechtsanwälte, Steuerberater, Wirtschaftsprüfer, Frankfurt am Main, Germany | Supervisory Board, Aareon AG (formerly Depfa IT Services), Mainz, Germany Supervisory Board, Vodafone Deutschland GmbH, Düsseldorf, Germany | |
Bernhard Koller(1), (3) Manager of idea management | ||
Christiane Kuntz-Mayr(1), (5), (7) Development architect | ||
Lars Lamadé(1), (6) Project Manager Service & Support | ||
Dr. Gerhard Maier(1), (2), (6) Development project manager |
F-65
Table of Contents
Membership on other supervisory boards and comparable | ||
governing bodies of enterprises other than the Company, in | ||
Germany and other countries on December 31, 2006 | ||
Dr. h.c. Hartmut Mehdorn(4) Chairman of the Executive Board, Deutsche Bahn AG, Berlin, Germany | Supervisory Board, DB Netz AG, Frankfurt am Main, Germany Supervisory Board, DEVK Deutsche Eisenbahn Versicherung Lebensversicherungsverein a.G., Cologne, Germany Supervisory Board, DEVK Deutsche Eisenbahn Versicherung Sach- und HUK-Versicherungsverein a.G., Cologne, Germany Supervisory Board, Dresdner Bank AG, Frankfurt am Main, Germany Supervisory Board, DB Magnetbahn GmbH, Munich, Germany (from March 27, 2006) | |
Prof. Dr. Dr. h.c. mult. August-Wilhelm Scheer(5), (6) Professor at Saarland University, Saarbrücken, Germany | Supervisory Board, IDS Scheer AG, Saarbrücken, Germany Supervisory Board, imc information multimedia communication AG, Saarbrücken, Germany Board of Trustees, Hasso-Plattner-Stiftung für Software-systemtechnik, Potsdam, Germany Supervisory Board, Saarbrücker Zeitung Verlag und Druckerei GmbH, Saarbrücken, Germany Member of the Senate, Fraunhofer-Gesellschaft zur För-derung der angewandten Forschung e.V., Munich, Germany | |
Dr. Barbara Schennerlein(1), (7) Principal consultant |
F-66
Table of Contents
Membership on other supervisory boards and comparable | ||
governing bodies of enterprises other than the Company, in | ||
Germany and other countries on December 31, 2006 | ||
Dr. Erhard Schipporeit(3) Former member of the Executive Board, E.ON AG, Düsseldorf, Germany Management Consultant | Supervisory Board, Commerzbank AG, Frankfurt am Main, Germany Supervisory Board, Talanx AG, Hanover, Germany Supervisory Board, Deutsche Börse AG, Frankfurt am Main, Germany Supervisory Board, HDI V.a.G., Hanover, Germany Supervisory Board, Degussa AG, Düsseldorf, Germany (until December 31, 2006) Supervisory Board, E.ON Ruhrgas AG, Essen, Germany (until December 31, 2006) Supervisory Board, E.ON IS GmbH, Hanover, Germany (until December 31, 2006) Supervisory Board, E.ON Risk Consulting GmbH, Düsseldorf, Germany (until December 31, 2006) Supervisory Board, E.ON Audit Services, Düsseldorf, Germany (until December 31, 2006) Supervisory Board, E.ON UK plc, Coventry, UK (until December 31, 2006) Supervisory Board, E.ON US Investment Corp., Delaware, USA (until December 31, 2006) | |
Stefan Schulz(1), (3), (5) Development Project Manager | ||
Dr. Dieter Spöri(7) Head of Corporate Representation Federal Affairs, DaimlerChrysler AG, Berlin, Germany | Advisory Council, Contraf Nicotex Tobacco GmbH, Heilbronn, Germany | |
Dr. h.c. Klaus Tschira(3) Managing Director, Klaus Tschira Foundation gGmbH, Heidelberg, Germany | Supervisory Board, SRH Learnlife AG, Heidelberg, Germany Member of the Senate, Max-Planck-Gesellschaft zur Förderung der Wissenschaften e.V., Munich, Germany |
(1) | Elected by the employees. |
(2) | Member of the Company’s Compensation Committee. |
(3) | Member of the Company’s Audit Committee. |
(4) | Member of the Company’s Mediation Committee. |
(5) | Member of the Company’s Technology Committee. |
(6) | Member of the Company’s Finance and Investment Committee. |
(7) | Member of the Company’s General Committee. |
F-67
Table of Contents
F-68
Table of Contents
2006 | 2005 | 2004 | ||||||||||
€(000) | €(000) | €(000) | ||||||||||
Audit fees | 7,435 | 5,234 | 4,328 | |||||||||
Audit-related fees | 641 | 1,090 | 888 | |||||||||
Tax fees | 57 | 154 | 1,198 | |||||||||
All other fees | 375 | 196 | 38 | |||||||||
8,508 | 6,674 | 6,452 | ||||||||||
F-69
Table of Contents
F-70
Table of Contents
Year ended December 31, | ||||||||||||
2006 | 2005 | 2004 | ||||||||||
€(000) | €(000) | €(000) | ||||||||||
Balance at beginning of year | 72,889 | 63,362 | 71,011 | |||||||||
Charged (credited) to costs and expenses(*) | (40,453 | ) | 12,383 | 1,742 | ||||||||
Amounts written off | (5,399 | ) | (8,053 | ) | (7,700 | ) | ||||||
Currency translation and other changes | (2,140 | ) | 5,197 | (1,691 | ) | |||||||
Balance at end of year | 24,897 | 72,889 | 63,362 | |||||||||
S-1