Table of Contents
Table of Contents
o | REGISTRATION STATEMENT PURSUANT TO SECTION 12(B) OR (G) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
OR | ||
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 | ||
OR | ||
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
OR | ||
o | SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the Transition Period from to |
Title of each class | Name of each exchange on which registered | |
American Depositary Receipts representing Ordinary Shares, nominal value €2 per share | New York Stock Exchange |
3
Table of Contents
4
Table of Contents
• | our ability to develop an integrated strategy for CGG Veritas; | |
• | difficulties and delays in achieving synergies and cost savings; | |
• | our substantial indebtedness; | |
• | changes in international economic and political conditions and, in particular, in oil and gas prices; | |
• | exposure to the credit risk of customers; | |
• | our ability to finance our operations on acceptable terms; | |
• | the timely development and acceptance of our new products and services; | |
• | the complexity of products sold; | |
• | changes in demand for seismic products and services; | |
• | the effects of competition; | |
• | the social, political and economic risks of our global operations; | |
• | the costs and risks associated with pension and post-retirement benefit obligations; | |
• | changes to existing regulations or technical standards; | |
• | existing or future litigation; | |
• | difficulties and costs in protecting intellectual property rights and exposure to infringement claims by others; | |
• | the costs of compliance with environmental, health and safety laws; | |
• | the timing and extent of changes in currency exchange rates and interest rates; | |
• | the accuracy of our assessment of risks related to acquisitions, projects and contracts and whether these risks materialize; | |
• | our ability to integrate successfully the businesses or assets we acquire, including Veritas; | |
• | our ability to monitor existing and targeted partnerships; | |
• | our ability to sell our seismic data library; | |
• | our ability to access the debt and equity markets during the periods covered by the forward-looking statements, which will depend on general market conditions and on our credit ratings for our debt obligations; and | |
• | our success at managing the risks of the foregoing. |
5
6
Table of Contents
• | as of and for each of the three years in the period ended December 31, 2006 in accordance with IFRS; and | |
• | as of and for each of the five years in the period ended December 31, 2006 in accordance with U.S. GAAP. |
7
Table of Contents
At and for the year ended December 31, | ||||||||||||
2006 | 2005 | 2004 | ||||||||||
(in € million except | ||||||||||||
for number of shares and | ||||||||||||
operational data) | ||||||||||||
Amounts in accordance with IFRS: | ||||||||||||
Statement of Operations Data: | ||||||||||||
Operating revenues | 1,329.6 | 869.9 | 687.4 | |||||||||
Other revenues from ordinary activities | 1.8 | 1.9 | 0.4 | |||||||||
Cost of operations | (890.0 | ) | (670.0 | ) | (554.0 | ) | ||||||
Gross profit | 441.4 | 201.8 | 133.8 | |||||||||
Research and development expenses, net | (37.7 | ) | (31.1 | ) | (28.8 | ) | ||||||
Selling, general and administrative expenses | (126.4 | ) | (91.2 | ) | (78.6 | ) | ||||||
Other revenues (expenses) | 11.7 | (4.4 | ) | 19.3 | ||||||||
Operating income | 289.0 | 75.1 | 45.7 | |||||||||
Cost of financial debt, net | (25.4 | ) | (42.3 | ) | (27.8 | ) | ||||||
Variance on derivative on convertible bonds | (23.0 | ) | (11.5 | ) | (23.5 | ) | ||||||
Other financial income (loss) | (8.8 | ) | (14.5 | ) | 0.8 | |||||||
Income taxes | (83.2 | ) | (26.6 | ) | (10.9 | ) | ||||||
Equity in income of affiliates | 10.1 | 13.0 | 10.3 | |||||||||
Net income (loss) | 158.7 | (6.8 | ) | (5.4 | ) | |||||||
Attributable to minority interests | 1.6 | 1.0 | 1.0 | |||||||||
Attributable to shareholders | 157.1 | (7.8 | ) | (6.4 | ) | |||||||
Net income (loss) per share: | ||||||||||||
Basic(1) | 9.04 | (0.64 | ) | (0.55 | ) | |||||||
Diluted(1) | 8.86 | (0.64 | ) | (0.55 | ) | |||||||
Balance sheet: | ||||||||||||
Cash and cash equivalents | 251.8 | 112.4 | 130.6 | |||||||||
Working capital(2) | 210.4 | 154.1 | 116.4 | |||||||||
Property, plant & equipment, net | 455.2 | 480.1 | 204.1 | |||||||||
Multi-client surveys | 71.8 | 93.6 | 124.5 | |||||||||
Total assets | 1,782.1 | 1,565.1 | 971.2 | |||||||||
Gross financial debt(3) | 405.6 | 409.6 | 252.4 | |||||||||
Shareholders’ equity | 877.0 | 698.5 | 393.2 | |||||||||
Other financial historical data and other ratios: | ||||||||||||
EBITDA(4) | 483.0 | 221.4 | 178.2 | |||||||||
Capital expenditures (Property, plant & equipment)(5) | 149.3 | 125.1 | 49.8 | |||||||||
Capital expenditures for multi-client surveys | 61.5 | 32.0 | 51.1 | |||||||||
Net financial debt(6) | 153.8 | 297.2 | 121.8 | |||||||||
Gross financial debt(3)/EBITDA(4) | 0.8x | 1.9x | 1.4x | |||||||||
Net indebtedness(6)/EBITDA(4) | 0.3x | 1.3x | 0.7x | |||||||||
EBITDA(4)/Net financial expenses | 19.0x | 5.2x | 6.4x |
8
Table of Contents
At and for the year ended December 31, | ||||||||||||||||||||
2006 | 2005 | 2004 | 2003 | 2002 | ||||||||||||||||
(in € millions except for number | ||||||||||||||||||||
of shares and operational data) | ||||||||||||||||||||
Amounts in accordance with U.S. GAAP: | ||||||||||||||||||||
Statement of Operations Data: | ||||||||||||||||||||
Operating revenues | 1,348.7 | 860.8 | 709.5 | 645.6 | 719.0 | |||||||||||||||
Operating income | 289.6 | 61.9 | 55.0 | 42.7 | 81.9 | |||||||||||||||
Net income (loss) | 123.9 | 8.3 | (20.2 | ) | 3.1 | 15.1 | ||||||||||||||
Per share amounts: | ||||||||||||||||||||
Basic common stock holder(1) | 7.13 | 0.69 | (1.73 | ) | 0.27 | 1.29 | ||||||||||||||
Diluted common stock holder(7) | 6.99 | 0.67 | (1.73 | ) | 0.26 | 1.29 | ||||||||||||||
Balance sheet: | ||||||||||||||||||||
Total assets | 1,785.7 | 1,573.8 | 975.8 | 924.2 | 1,036.8 | |||||||||||||||
Gross financial debt(3) | 411.1 | 416.7 | 251.7 | 234.0 | 318.3 | |||||||||||||||
Shareholders’ equity | 831.9 | 689.5 | 372.2 | 413.4 | 431.0 | |||||||||||||||
Operational data (end of period): | ||||||||||||||||||||
Land teams in operations | 9 | 11 | 8 | 12 | 14 | |||||||||||||||
Operational Streamers(8) | 56 | 46 | 39 | 42 | 42 | |||||||||||||||
Data processing centers | 29 | 27 | 26 | 26 | 26 |
(1) | Basic (under IFRS and U.S. GAAP) and diluted (under IFRS) per share amounts have been calculated on the basis of 17,371,927 issued and outstanding shares in 2006, 12,095,925 issued and outstanding shares in 2005 and 11,681,406 issued and outstanding shares in 2004. Basic per share amounts under U.S. GAAP have been calculated on the basis of 11,680,718 issued and outstanding shares in 2003 and 2002. |
(2) | Working capital consists of trade accounts and notes receivable, inventories andwork-in-progress, tax assets, other current assets and assets held for sale less trade accounts and notes payable, accrued payroll costs, income tax payable, advance billings to customers, current provisions and other current liabilities. |
(3) | “Gross financial debt” means total financial debt, including current maturities, capital leases, bank overdrafts and accrued interest. |
(4) | EBITDA is defined as operating income (loss) plus depreciation and amortization and plus the accounting expense of stock-options plans and our free shares’ allocation plan. EBITDA is presented as additional information because we understand that it is one measure used by certain investors to determine our operating cash flow and historical ability to meet debt service and capital expenditure requirements. However, other companies may present EBITDA differently than we do. EBITDA is not a measure of financial performance under French GAAP, U.S. GAAP or IFRS and should not be considered as an alternative to cash flow from operating activities or as a measure of liquidity or an alternative to net income as indicators of our operating performance or any other measures of performance derived in accordance with French GAAP, U.S. GAAP or IFRS. EBITDA differs from ORBDA (also referred to in the past as Adjusted EBITDA), which is the measure that CGG has previously included in its periodic reports and public communications. See “Item 5: Operating and Financial Review and Prospects — Liquidity and Capital Resources — EBITDA” for a reconciliation of EBITDA to operating income. |
(5) | “Capital expenditures” is defined as purchases of property, plant and equipment plus equipment acquired under capital lease. |
9
Table of Contents
For the year ended | ||||||||||||
December 31, | ||||||||||||
2006 | 2005 | 2004 | ||||||||||
(in € million) | ||||||||||||
Purchase of Property, Plant and Equipment | 149.2 | 107.7 | 41.1 | |||||||||
Equipment acquired under capital lease | 0.1 | 17.4 | 8.7 | |||||||||
Capital expenditures | 149.3 | 125.1 | 49.8 | |||||||||
(6) | “Net financial debt” means bank overdrafts and financial debt including current portion (including capital lease debt) net of cash and cash equivalents. |
(7) | Diluted per share amounts under U.S. GAAP have been calculated on the basis of 17,731,386 issued and outstanding shares in 2006, 12,357,779 issued and outstanding shares in 2005, 11,681,406 issued and outstanding shares in 2004, 11,760,630 issued and outstanding shares in 2003 and 11,680,718 issued and outstanding shares in 2002. In 2002 and 2004, the effects of stock options were not dilutive (as a result of applying the treasury stock method). |
(8) | Data at December 31, 2006 and at December 31, 2005 include Exploration Resources’ streamers and exclude streamers of vessels in transit or dry-dock. |
Period-End | Average | |||||||||||||||
Rate(1) | Rate(2) | High | Low | |||||||||||||
Recent Monthly Data | ||||||||||||||||
May 2007 (through May 4) | 1.3587 | 1.3588 | 1.3600 | 1.3566 | ||||||||||||
April 2007 | 1.3660 | 1.3513 | 1.3660 | 1.3363 | ||||||||||||
March 2007 | 1.3374 | 1.3246 | 1.3374 | 1.3094 | ||||||||||||
February 2007 | 1.3230 | 1.3080 | 1.3246 | 1.2933 | ||||||||||||
January 2007 | 1.2998 | 1.2993 | 1.3286 | 1.2904 | ||||||||||||
December 2006 | 1.3197 | 1.3205 | 1.3327 | 1.3073 | ||||||||||||
November 2006 | 1.3261 | 1.2888 | 1.3261 | 1.2705 | ||||||||||||
Annual Data (Year Ended December 31,) | ||||||||||||||||
2006 | 1.3197 | 1.2560 | 1.3327 | 1.1860 | ||||||||||||
2005 | 1.1842 | 1.2400 | 1.3476 | 1.1667 | ||||||||||||
2004 | 1.3538 | 1.2478 | 1.3625 | 1.1801 | ||||||||||||
2003 | 1.2597 | 1.1411 | 1.2597 | 1.0361 | ||||||||||||
2002 | 1.0485 | 0.9495 | 1.0485 | 0.8594 |
(1) | The period-end rate is the noon buying rate on the last business day of the applicable period. |
(2) | The average rate for each monthly period was calculated by taking the simple average of the daily noon buying rates, as published by the Federal Reserve Bank of New York. The average rate for each annual period was |
10
Table of Contents
calculated by taking the simple average of the noon buying rates on the last business day of each month during the relevant period. |
• | instability of foreign economies and governments; | |
• | risks of war, terrorism, civil disturbance, seizure, renegotiation or nullification of existing contracts; and | |
• | foreign exchange restrictions, sanctions and other laws and policies affecting taxation, trade and investment. |
11
Table of Contents
• | We may not fully recover the costs of acquiring and processing the data through future sales. The amounts of these data sales are uncertain and depend on a variety of factors, many of which are beyond our control. In addition, the timing of these sales is unpredictable and sales can vary greatly from period to period. Technological or regulatory changes or other developments could also materially adversely affect the value of the data. | |
• | The value of our multi-client data could be significantly adversely affected if any material adverse change occurs in the general prospects for oil and gas exploration, development and production activities in the areas where we acquire multi-client data. | |
• | Any reduction in the market value of such data will require us to write down our recorded value, which could have a significant material adverse effect on our results of operations. |
12
Table of Contents
13
Table of Contents
14
Table of Contents
• | demand for oil, natural gas and natural gas liquids; | |
• | worldwide political, military and economic conditions, including political developments in the Middle East, economic growth levels and the ability of OPEC to set and maintain production levels and prices for oil; | |
• | levels of oil and gas production; | |
• | the price and availability of alternative fuels; | |
• | policies of governments regarding the exploration for and production and development of oil and gas reserves in their territories; and | |
• | global weather conditions. |
15
Table of Contents
• | increase our vulnerability to general adverse economic and industry conditions; | |
• | require us to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness, thereby reducing the availability of our cash flow to fund working capital, capital expenditures and other general corporate purposes; | |
• | limit our flexibility in planning for, or reacting to, changes in our businesses and the industries in which we operate; | |
• | place us at a competitive disadvantage compared to our competitors that have less debt; and |
16
Table of Contents
• | limit, along with the financial and other restrictive covenants of our indebtedness, among other things, our ability to borrow additional funds. |
• | incur or guarantee additional indebtedness or issue preferred shares; | |
• | pay dividends or make other distributions; | |
• | purchase equity interests; | |
• | create or incur certain liens; | |
• | create or incur restrictions on the ability to pay dividends or make other payments to us; | |
• | enter into transactions with affiliates; | |
• | issue or sell capital stock of subsidiaries; | |
• | engage insale-and-leaseback transactions; and | |
• | sell assets or merge or consolidate with another company. |
17
Table of Contents
• | identifying new areas where subsurface conditions are favorable for the accumulation of oil and gas; | |
• | determining the size and structure of previously identified oil and gas fields; and | |
• | optimizing development and production of oil and gas reserves (reservoir management). |
18
Table of Contents
• | the combination of CGG and Veritas took place in a strong business environment, as decreasing reserves of oil and gas companies have been coupled with growing energy consumption sustained by long-term demand, particularly in China and India; | |
• | the combination of CGG and Veritas created a strong, global, pure-play seismic company, offering a broad range of seismic services, and, through Sercel, geophysical equipment to the industry across all markets; | |
• | the combination of CGG and Veritas brought together two companies with strong technological foundations in the geophysical services and equipment market, as both CGG and Veritas have a long tradition of providing seismic services both onshore and offshore; | |
• | the addition of Veritas’ fleet of seven vessels created a combined seismic services business operating the world’s leading seismic fleet of 20 vessels, including 14 high capacity 3D vessels; | |
• | multi-client services benefit from two complementary, recent vintage, well-positioned seismic data libraries; | |
• | CGG’s and Veritas’ respective offerings for land acquisition services represent strong geographical and technological complementarities for high-end positioning and further development of local partnerships; | |
• | the combination of CGG’s and Veritas’ respective positions in data processing and imaging as well as the combination of our skills and reputation of our experts and geoscientists, created the industry reference in this segment, with particular strengths in advanced technologies such as depth imaging, 4D processing and reservoir characterization as well as a close link with clients through dedicated centers; | |
• | with a combined workforce of approximately 7,000 staff operating worldwide, including Sercel, CGGVeritas is, through continued innovation, an industry leader in seismic technology, services and equipment with a broad base of customers, including independent, international and national oil companies. |
19
Table of Contents
• | Economic growth, particularly in more active regions such as Asia (notably China and India), is generating increased energy demand and leading to higher energy prices and increased exploration efforts; | |
• | The need to replace depleting reserves and maximize the recovery of oil in existing reservoirs should encourage capital expenditures by companies engaged in exploration and production, which we expect will benefit the seismic industry; | |
• | The scope of application of geophysical services has considerably increased over the last several years as a result of significant research and development efforts. Geophysical services can now potentially be applied to the entire sequence of exploration, development and production as opposed to exploration only. This is particularly true with technologies such as 4D (time lapse seismic data); and | |
• | Finally, the depth and duration of the contraction in the geophysical sector between 1999 and 2004 may have increased awareness among geophysical service providers of the risks related to market overcapacity. |
20
Table of Contents
• | land and transition zone seismic data acquisition systems and know-how; | |
• | innovative marine or subsea acquisition systems and services; | |
• | seismic data processing and reservoir services; and | |
• | manufacturing of land, marine and subsea data acquisition equipment. |
21
Table of Contents
• | tailoring our data acquisition operations to meet specific client demands; | |
• | expanding regional multi-client and dedicatedon-site processing centers; | |
• | recruiting and training customer-oriented service staff; | |
• | organizing client training seminars focused on our products and services; | |
• | developing easy access to our multi-client data library through the increasing application ofe-business technologies; | |
• | developing corporate contracts with our main clients; and | |
• | gaining access to new data acquisition markets, such as subsea and newly opening territories. |
22
Table of Contents
Year ended December 31, | ||||||||||||||||
2006 | 2005 | |||||||||||||||
(in € million, except percentages) | ||||||||||||||||
Land SBU | 119.1 | 9% | 119.8 | 14% | ||||||||||||
Offshore SBU | 533.2 | 40% | 319.5 | 37% | ||||||||||||
Processing & Reservoir SBU | 139.7 | 11% | 113.0 | 13% | ||||||||||||
Services | 792.1 | 60% | 552.3 | 64% | ||||||||||||
Products | 537.5 | 40% | 317.6 | 36% | ||||||||||||
Total | 1,329.6 | 100% | 869.9 | 100% | ||||||||||||
Year ended July 31, | ||||||||||||||||
2006 | 2005 | |||||||||||||||
(in $ million, except percentages) | ||||||||||||||||
Land | 286.9 | 35% | 195.5 | 31% | ||||||||||||
Offshore | 405.1 | 49% | 331.4 | 52% | ||||||||||||
Processing and Reservoir | 110.6 | 14% | 90.9 | 14% | ||||||||||||
Total Services | 802.6 | 98% | 617.8 | 97% | ||||||||||||
VHR | 19.6 | 2% | 16.2 | 3% | ||||||||||||
Total | 822.2 | 100% | 634.0 | 100% | ||||||||||||
Year ended December 31, | ||||||||||||||||
2006 | 2005 | |||||||||||||||
(in € million, except percentages) | ||||||||||||||||
Americas | 482.5 | 36% | 291.7 | 34% | ||||||||||||
Asia-Pacific/Middle East | 430.0 | 32% | 297.3 | 34% | ||||||||||||
Europe and CIS | 288.4 | 22% | 190.3 | 22% | ||||||||||||
Africa | 128.6 | 10% | 90.6 | 10% | ||||||||||||
Total | 1,329.6 | 100% | 869.9 | 100% | ||||||||||||
23
Table of Contents
Year ended July 31, | ||||||||||||||||
2006 | 2005 | |||||||||||||||
(in $ million, except percentages) | ||||||||||||||||
Americas | 552.4 | 67% | 397.8 | 63% | ||||||||||||
Asia-Pacific/Middle East | 138.2 | 17% | 124.9 | 20% | ||||||||||||
Europe and CIS | 93.6 | 11% | 71.9 | 11% | ||||||||||||
Africa | 38.0 | 5% | 39.4 | 6% | ||||||||||||
Total | 822.2 | 100% | 634.0 | 100% | ||||||||||||
• | the land business line for land and shallow water seismic acquisition and non-exclusive (“multi-client”) library sales; | |
• | the offshore business line for marine seismic acquisition, multi-client library sales and related services; and | |
• | the processing & reservoir business line for seismic data processing, data management and reservoir studies. |
24
Table of Contents
• | the Sercel 408UL and 428XL seismic data recorders; | |
• | Geoland quality control software, which is used to verify that the location of field data points during a survey corresponds to their theoretical position; | |
• | the Sercel VE 432 vibrator electronic control system, used to synchronise and verify the emission of acoustical waves by vibrators; and | |
• | Geocluster software, used foron-site processing and quality control of acquired data. |
25
Table of Contents
• | focus our presence in certain geographic markets, such as Europe, Africa and the Middle East, where we believe we have a competitive advantage and where we will operate through a joint venture organized with our regional partner TAQA; | |
• | continue to promote our expertise in harsh environments, sensitive areas (in terms of environmental or community concerns), shallow water and transition zones, and in management of complex projects where barriers to entry are higher and pricing competition less intense; | |
• | develop partnerships with local seismic acquisition companies to better leverage our technological know-how and to mitigate our risk exposure; and | |
• | Onshore, Veritas’ land library offers additional potential in North America and we also plan to continue investing in non-exclusive land seismic data libraries, especially in the U.S. and in Canada where we have a strong and recent vintage library. |
26
Table of Contents
27
Table of Contents
Year added | Charter | Number of | Vessel length | |||||||||||||||||||||
Vessel name | Year built | to fleet | expires | 2D/3D | streamers | (in meters) | ||||||||||||||||||
CGG Föhn | 1985 | 1985 | 2008 | 3D | 8 | (1) | 84.5 | |||||||||||||||||
CGG Harmattan | 1993 | 1993 | 2008 | 3D | 8 | (1) | 96.5 | |||||||||||||||||
CGG Alizé | 1999 | 1999 | 2007 | 3D | 10 | 100.0 | ||||||||||||||||||
Laurentian | 1983 | 2003 | 2008 | 3D | 6 | 84.4 | ||||||||||||||||||
CGG Amadeus | 1999 | 2001 | N/A | 3D | 8 | 87.0 | ||||||||||||||||||
CGG Symphony | 1999 | 2001 | N/A | 3D | 10 | 120.7 | ||||||||||||||||||
Search(2) | 1982 | 2005 | N/A | 3D | 6 | 98.5 | ||||||||||||||||||
C-Orion(2) | 1979 | 2005 | N/A | 3D | 8 | 81.0 | ||||||||||||||||||
Geo Challenger(2) | 1999 | 2005 | 2010 | 3D | 12 | 96.4 | ||||||||||||||||||
Princess(2) | 1985 | 2005 | N/A | 2D | 1-2 | (3) | 76.2 | |||||||||||||||||
Duke(2) | 1983 | 2005 | N/A | 2D | 1 | 66.7 | ||||||||||||||||||
Venturer(2) | 1986 | 2005 | N/A | 2D | 1-4 | (3) | 89.5 | |||||||||||||||||
Pacific Titan(2) | 1982 | 2005 | 2006 | 2D | 1-4 | (3) | 64.5 |
(1) | In high-resolution mode. |
(2) | Vessel in the Exploration Resources fleet. |
(3) | One streamer if long or multi-streamer mode for shorter streamers. |
28
Table of Contents
Year entered | Charter | |||||||
Vessel | service | Length | expiration | |||||
Pacific Sword | 1999 | 189 feet | October 2009 | |||||
Seisquest | 2001 | 300 feet | May 2007 | |||||
Veritas Viking | 1998 | 305 feet | May 2011 | |||||
Veritas Viking II | 1999 | 305 feet | May 2007 | |||||
Veritas Vantage | 2002 | 305 feet | April 2010 | |||||
Veritas Voyager | 2006 | 220 feet | July 2011 |
29
Table of Contents
30
Table of Contents
31
Table of Contents
• | develop and promote our high technology expertise, regional experience and flexibility with the ultimate goal of providing our clients with solutions that are innovative, adapted and geared towards reservoir solutions; | |
• | consolidate our presence in our markets and further expand our activities through our network of processing centers, the quality of our personnel and our innovative technology. Seismic data is mainly used by oil and gas companies for exploration purposes; and | |
• | progressively extending our core business towards compiling and analyzing seismic data of existing reservoirs. Through high-resolution images and our expertise in 4D seismic and permanent monitoring, we aim to assist hydrocarbon producers in better characterizing and predicting the static properties and dynamic behavior of their reservoirs. |
• | clusters of ultra-light acquisition modules allowing total flexibility of configuration; | |
• | the option of mixing different communication media (cable, radio, micro-wave, laser, fiber-optic) to form a true network allowing the user to define data routing and hence avoid obstacles in the field; and | |
• | an architecture fully supported by a new generation of object-oriented software. |
32
Table of Contents
• | use the continuous and intensive R&D efforts, crossed with dedicated business acquisitions to expand Sercel’s range of products or improve existing technology and strengthen its leading position in the geophysical equipment market; and | |
• | maintain Sercel’s leading position in the seismic data equipment market by capitalizing on growth opportunities resulting from the strength of its current product base, the application of new technologies in all of its products as well as from its diversified geographical presence. |
33
Table of Contents
34
Table of Contents
Jurisdiction of | % of | |||||||
Subsidiary | Organization | Head office | interest | |||||
Sercel S.A. | France | Carquefou, France | 100.0 | |||||
CGG Services SA | France | Massy, France | 100.0 | |||||
CGG Americas, Inc. | United States | Houston, Texas, United States | 100.0 | |||||
CGG Marine Resources Norge A/S | Norway | Hovik, Norway | 100.0 | |||||
Companía Mexicana de Geofisica | Mexico | Mexico City, Mexico | 100.0 | |||||
CGG do Brasil Participaçoes Ltda | Brazil | Rio de Janeiro, Brazil | 100.0 | |||||
Exploration Resources ASA | Norway | Oslo, Norway | 100.0 | |||||
Sercel Inc. | United States | Tulsa, Oklahoma, United States | 100.0 | |||||
CGG Veritas Services Inc. | Delaware | Houston, Texas | 100.0 |
Lease | ||||||||||||
Principal properties of CGG : | Owned/ | expiration | ||||||||||
Location | Type of facilities | Size | Leased | date | ||||||||
Paris, France | Headquarters of the CGG group | 725 m2 | Leased | 2009 | ||||||||
Massy, France | Headquarters of CGG Services | 9,174 m2 | Owned | |||||||||
Massy, France | Data processing centre | 7,371 m2 | Owned | |||||||||
London, England | Data processing centre | 2,320 m2 | Leased | 2011 | ||||||||
Redhill, England | Administrative offices | 2,095 m2 | Leased | 2010 | ||||||||
Houston, Texas, U.S.A | Offices of CGG Americas, Inc. | 6,905 m2 | Leased | 2007 | ||||||||
Houston, Texas, U.S.A | Offices and manufacturing premises of Sercel | 24,154 m2 | Owned | |||||||||
Cairo, Egypt | Data processing center | 2,653 m2 | Leased | 2013 | ||||||||
Kuala Lumpur, Malaysia | Data processing center and administrative offices | 1,152 m2 | Leased | 2008 | ||||||||
Perth, Australia | Data processing center | 429 m2 | Leased | 2008 | ||||||||
Calgary, Canada | Administrative offices and data processing center | 1,764 m2 | Leased | 2013 | ||||||||
Rio de Janeiro, Brazil | Offices of CGG Do Brazil | 326 m2 | Leased | 2010 | ||||||||
Oslo, Norway | Data processing center CGG Norge Offices of CGG | 1,431 m2 | Leased | 2008 | ||||||||
Marine Resources Norge AS | 243 m2 | Leased | 2008 |
35
Table of Contents
Lease | ||||||||||||
Owned/ | expiration | |||||||||||
Location | Type of facilities | Size | Leased | date | ||||||||
Bergen, Norway | Offices of Exploration Resources AS and Multiwave AS | 992 m2 | Leased | 2009 | ||||||||
Mexico City, Mexico | Registered office of CMG | 570 m2 | Leased | 2007 | ||||||||
Caracas, Venezuela | Administrative offices | 315 m2 | Leased | 2007-2008 | ||||||||
Processing activities | 1,394 m2 | Leased | 2007-2008 | |||||||||
Carquefou, France | Sercel factory. Activities include research and | 23,318 m2 | Owned | |||||||||
development relating to, and manufacture of, | ||||||||||||
seismic data recording equipment | ||||||||||||
Saint Gaudens, France | Sercel factory. Activities include research and | 16,000 m2 | Owned | |||||||||
development relating to, and manufacture of, | ||||||||||||
geophysical cables, mechanical equipment and | ||||||||||||
borehole seismic tools | ||||||||||||
Sydney, Australia | Activities include research and development | 669 m2 | Leased | 2007 | ||||||||
relating to, and manufacture and marketing of, marine streamers | ||||||||||||
Xu Shui, China | Activities include research and development | 59,247 m2 | Leased | 2053 | ||||||||
relating to, and manufacture of geophones | ||||||||||||
Calgary, Canada | Manufacture of geophysical cables | 8,357 m2 | Owned | |||||||||
Alfreton, England | Manufacture of geophysical cables | 5,665 m2 | Owned | |||||||||
Singapore | Manufacture of geophysical cables | 5,595 m2 | Owned |
Lease | ||||||||||||
Principal properties of Veritas : | Owned/ | expiration | ||||||||||
Location | Type of facilities | Size | Leased | date | ||||||||
Calgary, Canada | Offices of Veritas Energy Services Partnership | 9,273 m2 | Leased | 2015 | ||||||||
Crawley | Offices of Digital Exploration Limited | 8,082 m2 | Leased | 2013 | ||||||||
Jakarta | Offices of PT Veritas DGC Mega Pratama | 337 m2 | Leased | 2009 | ||||||||
Singapour | Offices of DGC Asia Pacific Ltd. | 4,338 m2 | Leased | 2007 | ||||||||
Kuala Lumpur, Kuching | Offices of DGC (Malaysia) SDN BHD | 1,397 m2 | Leased | 2007-2008 | ||||||||
Perth | Offices of DGC Australia Pty Ltd. | 1,579 m2 | Leased | 2009 | ||||||||
Buenos Aires | Offices of Veritas DGC Land, Inc. | 1,129 m2 | Leased | 2009 | ||||||||
Houston, Texas | Registered office of CGG Veritas Services Inc. | 20,267 m2 | Leased | 2015 |
36
Table of Contents
• | the Land SBU for land and shallow water seismic acquisition activities; | |
• | the Offshore SBU for marine seismic acquisition and multi-client library sales; and | |
• | the Processing & Reservoir SBU for seismic data processing, data management and reservoir studies. |
• | the land business line for land and shallow water seismic acquisition and non-exclusive (“multi-client”) library sales; | |
• | the offshore business line for marine seismic acquisition, multi-client library sales and related services; and | |
• | the processing & reservoir business line for seismic data processing, data management and reservoir studies. |
37
Table of Contents
• | oil and gas companies (including both the major multinational oil companies and the national oil companies) and the large oil and gas consuming nations have perceived a growing and potentially lasting imbalance between reserves and future demand for hydrocarbons. A rapid rise in world consumption requirements, particularly in China and India, resulted in demand for hydrocarbons growing more rapidly than anticipated. At the same time, the excess production capacity of OPEC appeared to have reached historical lows, focusing attention on existing production capacities and available reserves; and | |
• | the recognition of an imbalance between hydrocarbon supply and demand has led the oil and gas industry to significantly increase capital expenditures in exploration and production. The seismic services market generally benefits from this spending since seismic services are an important element in the search for new reserves and extraction of more oil from existing reservoirs. |
38
Table of Contents
• | the technological upgrade of one source vessel, theLaurentian, into a 3D seismic vessel in the second half of 2005; and | |
• | the addition to our existing fleet, through the acquisition of Exploration Resources ASA (“Exploration Resources) on September 1, 2005, of three owned seismic vessels equipped for 2D studies (Princess, Duke andVenturer), one chartered 2D vessel (Pacific Titan), two owned vessels equipped for 3D studies (Search andC-Orion, the latter of which was launched as a 3D vessel with 8 streamers in early 2006), and one chartered cable vessel (Geo Challenger) that was converted to a 3D seismic vessel and started seismic operations as a 3D vessel in mid-May 2006. |
• | PT Alico |
• | CGG Vostok |
• | Exploration Resources |
39
Table of Contents
During 2006 |
• | TAQA |
• | Cybernetix |
• | Vibtech |
During 2007 |
• | Veritas |
• | 33,004,041 of the shares, or 81.7%, elected to receive cash; | |
• | 5,788,701 of the shares, or 14.3%, elected to receive CGG Veritas ADSs; and | |
• | 1,627,741 of the shares, or 4.0%, did not make a valid election. |
40
Table of Contents
41
Table of Contents
• | finance a portion of the cash component of the merger consideration; | |
• | repay certain existing debt of CGG and Veritas; and | |
• | pay the fees and expenses incurred in connection with the foregoing. |
• | finance a portion of the cash component of the merger consideration; | |
• | repay certain existing debt of CGG and Veritas; and | |
• | pay the fees and expenses incurred in connection with the foregoing. |
42
Table of Contents
• | Multi-client surveys |
• | Exclusive surveys |
43
Table of Contents
• | Other geophysical services |
• | Equipment sales |
• | Software and hardware sales |
• | Gulf of Mexico surveys are amortized on the basis of 50% of revenues (66.6% previously and until December 1, 2006). Starting at time of data delivery, a minimum straight-line depreciation scheme is applied on a five-year period (three-year period previously and until December 1, 2006), should total accumulated depreciation from the 50% of revenues (66.6% previously and until December 1, 2006) amortization method be below this minimum level; the impact of change of estimates of the percentage of revenues to be amortized from 66.6% to 50% and of the minimum straight-line depreciation from a three-year period to a five-year period, applied from December 1, 2006 is a lower depreciation of €1.2 million over the year ended at December 31, 2006 and a lower depreciation of €2.7 million over the year ended at December 31, 2007; and | |
• | Rest of the world surveys: same as above except depreciation is 83.3% of revenues and straight-line depreciation is over a five-year period from data delivery. |
44
Table of Contents
• | the project is clearly defined, and costs are separately identified and reliably measured; | |
• | the product or process is technically and commercially feasible; | |
• | we have sufficient resources to complete development; and | |
• | the intangible asset is likely to generate future economic benefits, either because it is useful to us or through an existing market for the intangible asset itself or for its products. |
• | significant underperformance relative to expected operating results based upon historical and/or projected data; | |
• | significant changes in the manner of our use of the acquired assets or the strategy for our overall business; and | |
• | significant negative industry or economic trends. |
45
Table of Contents
Year ended December 31, | ||||||||||||||||
2006 | 2005 | |||||||||||||||
(in € million, | ||||||||||||||||
except percentages) | ||||||||||||||||
Land SBU | 119.1 | 9% | 119.8 | 14% | ||||||||||||
Offshore SBU | 533.2 | 40% | 319.5 | 37% | ||||||||||||
Processing and Reservoir SBU | 139.7 | 11% | 113.0 | 13% | ||||||||||||
Services | 792.1 | 60% | 552.3 | 64% | ||||||||||||
Products | 537.5 | 40% | 317.6 | 36% | ||||||||||||
Total | 1,329.6 | 100% | 869.9 | 100% | ||||||||||||
46
Table of Contents
47
Table of Contents
• | €8.9 million of income related to the application of our hedging policy (a €4.6 million of income in the Services segment and a €4.3 million income in the Products segment); | |
• | a €5.3 million of net gain on the sale of 49% of CGG Ardiseis in the Services segment; and | |
• | a €1.9 million net of depreciation of Veritas share in the asset “Customer relationships” that was recognized in the purchase accounting of Thales Underwater Systems’ seismic equipment activity in 2004, when CGG merged with Veritas on January 12, 2007. |
• | a €2.9 million expense related to the application of our hedging policy (a €0.9 million expense in the Services segment, a €3.6 million expense in the Products segment and a €1.6 million elimination on hedging on intra-group sales of equipment); and | |
• | a €1.0 million net loss on fixed assets sold or written-off. |
• | at December 31, 2005, our U.S.$165 million 71/2% Senior Notes (issued in April 2005), our 7.75% U.S.$85 million convertible bonds due 2012 (partially converted in November 2005, with the remainder |
48
Table of Contents
converted in May 2006) and our U.S.$375 million bridge loan facility put in place at the beginning of September 2005 to acquire Exploration Resources (generating €14.2 million expenses over 2005); and |
• | at December 31, 2006, our U.S.$165 million 71/2% Senior Notes due 2015 issued in April 2005, with a further fungible issuance of U.S.$165 million in principal amount in January 2006, and a credit facility of U.S.$70 million to Exploration Resources. |
49
Table of Contents
Year ended December 31, | ||||||||||||||||
2005 | 2004 | |||||||||||||||
(in € million, | ||||||||||||||||
except percentages) | ||||||||||||||||
Land SBU | 119.8 | 14% | 77.3 | 11% | ||||||||||||
Offshore SBU | 319.5 | 37% | 205.7 | 30% | ||||||||||||
Processing and Reservoir SBU | 113.0 | 13% | 105.0 | 15% | ||||||||||||
Services | 552.3 | 64% | 388.0 | 56% | ||||||||||||
Products | 317.6 | 36% | 299.4 | 44% | ||||||||||||
Total | 869.9 | 100% | 687.4 | 100% | ||||||||||||
50
Table of Contents
• | €2.9 million expense related to the application of our hedging policy (a €0.9 million expense in the Services segment, a €3.6 million expense in the Products segment and a €1.6 million elimination on hedging on intra-group sales of equipment); and | |
• | a €1.0 million net loss on fixed assets sold or written-off. |
• | a €7.9 million gain on the sale of PGS shares (at the corporate level); | |
• | a €1.8 million of insurance proceeds related to the seismic vessel theCGG Mistral (in the Services segment); | |
• | a €2.2 million gain on the sale of a building (in the Services segment); and | |
• | a €4.5 million income related to the application of our hedging policy (in Products segment). |
51
Table of Contents
52
Table of Contents
53
Table of Contents
54
Table of Contents
December 31, | December 31, | December 31, | ||||||||||
2006 | 2005 | 2004 | ||||||||||
(in € million) | ||||||||||||
Bank overdrafts | 6.5 | 9.3 | 2.8 | |||||||||
Current portion of financial debt | 38.1 | 157.9 | 73.1 | |||||||||
Financial debt | 361.0 | 242.4 | 176.5 | |||||||||
Less cash and cash equivalents | (251.8 | ) | (112.4 | ) | (130.6 | ) | ||||||
Net debt | 153.8 | 297.2 | 121.8 | |||||||||
Year ended December 31, | ||||||||||||
2006 | 2005 | 2004 | ||||||||||
(in € million) | ||||||||||||
Operating income | 289.0 | 75.1 | 45.7 | |||||||||
Depreciation and amortization | 106.0 | 76.3 | 65.5 | |||||||||
Depreciation of multi-client surveys | 80.6 | 69.6 | 66.5 | |||||||||
Expenses calculated on stock-option | 7.4 | 0.4 | 0.5 | |||||||||
EBITDA | 483.0 | 221.4 | 178.2 | |||||||||
55
Table of Contents
Payments due by period | ||||||||||||||||||||
Less than | More than | |||||||||||||||||||
1 year | 2-3 years | 4-5 years | 5 years | Total | ||||||||||||||||
(in € million) | ||||||||||||||||||||
Long-term debt | 26.2 | 41.3 | 27.1 | 246.1 | 340.7 | |||||||||||||||
Capital Lease Obligations | 11.7 | 18.1 | 33.8 | — | 63.6 | |||||||||||||||
Operating Leases | 46.3 | 40.6 | 10.5 | 4.2 | 101.6 | |||||||||||||||
Other Long-term Obligations (bond interest) | 18.8 | 37.6 | 37.6 | 65.8 | 159.8 | |||||||||||||||
Total Contractual Obligations | 103.0 | 137.6 | 109.0 | 316.1 | 665.7 | |||||||||||||||
56
Table of Contents
57
Table of Contents
58
Table of Contents
Initially | Term | |||||||||
Name | Position | appointed | expires | |||||||
Robert Brunck(1)(2) | Chairman of the Board and Chief Executive Officer | 1998 | 2008 | |||||||
Olivier Appert(1)(3) | Director | 2003 | 2008 | |||||||
Loren Carroll(4) | Director | 2007 | 2013 | |||||||
Rémi Dorval(3)(4) | Director | 2005 | 2010 | |||||||
Jean Dunand(4) | Director | 1999 | 2007 | |||||||
Yves Lesage(2)(4) | Director | 1988 | 2009 | |||||||
Christian Marbach(1) | Director | 1995 | 2007 | |||||||
Thierry Pilenko(2) | Director | 2007 | 2013 | |||||||
Robert Semmens(1)(3) | Director | 1999 | 2011 | |||||||
Daniel Valot(4) | Director | 2001 | 2012 | |||||||
David Work(3) | Director | 2007 | 2013 | |||||||
Terence Young(2) | Director | 2007 | 2013 |
(1) | Member of Strategic Committee. |
(2) | Member of the Technology Committee. |
(3) | Member of Appointment-Remuneration Committee. |
(4) | Member of Audit Committee. |
59
Table of Contents
60
Table of Contents
Executive | ||||||
Name | Current position | officer since | ||||
Robert Brunck | Chairman and Chief Executive Officer | 1989 | ||||
Thierry Le Roux | President and Chief Operating Officer | 1995 | ||||
Stephane-Paul Frydman | Chief Financial Officer | 2003 | ||||
Gérard Chambovet | Senior Executive Vice President, QHSE, Career Development and Training, Investor Relations, Communication and Audit | 1995 | ||||
Christophe Pettenati-Auzière | President, Geophysical Services | 1997 | ||||
Luc Benoît-Cattin | President Eastern Hemisphere | 2003 | ||||
Timothy Wells | President Western Hemisphere | 2007 | ||||
Pascal Rouiller | Chief Executive Officer, Sercel Group | 1997 |
61
Table of Contents
62
Table of Contents
63
Table of Contents
Amount paid to | ||||
CGG directors | ||||
Name | for 2006 | |||
(in €) | ||||
Robert Brunck(1) | € | 43,277.05 | ||
Olivier Appert | € | 24,765.48 | ||
Rémi Dorval | € | 34,156.76 | ||
Jean Dunand | € | 39,712.32 | ||
Gérard Friès(2) | € | 35,584.74 | ||
Yves Lesage | € | 36,720.87 | ||
John J. MacWilliams(2) | € | 27,892.43 | ||
Christian Marbach | € | 34,730.04 | ||
Robert F. Semmens(3) | € | 66,813.63 | ||
Daniel Valot | € | 21,346.68 |
(1) | Mr. Brunck does not receive any compensation as member of the Supervisory Board of Sercel Holding or as Chairman of the Board of Directors of CGG Americas. |
(2) | Resigned from the Board on January 9, 2007. |
(3) | Includes €51,813.63 paid by CGG to Mr. Semmens as a director and €15,000 paid by Sercel Holding to Mr. Semmens as a member of the Supervisory Board. |
64
Table of Contents
• | the proposed acquisition by Sercel of Cybernetix S.A. and Vibtech; | |
• | the proposed modification of the terms and conditions of the CGG 7.75% subordinated convertible bonds due 2012 before the modification was proposed to bondholders’ and shareholders’ meetings in April and May 2006, respectively; and | |
• | the Board performance evaluation. |
• | Reviewing and discussing with management and our statutory auditors (i) the consistency and appropriateness of the accounting methods we adopt to prepare our corporate and consolidated financial statements; (ii) the consolidation perimeter and requesting, when necessary, all appropriate explanations; (iii) our draft annual, semi-annual and quarterly financial statements together with the notes to them, and especially off-balance sheet arrangements; and (iv) the quality, comprehensiveness, accuracy and veracity of the financial statements; |
• | Receiving reports from our statutory auditors on their review, including any comments and suggestions they may have made in the scope of their audit; and | |
• | Raising any financial or accounting question that the Committee deems important. |
• | Reviewing our annual report onForm 20-F and our“Document de Référence” filed with the French securities market regulator. | |
• | In consultation with our statutory auditors, our internal auditors and management, reviewing the structure of our internal control procedures and the way in which they operate, notably those procedures relating to the preparation and treatment of accounting and financial information used to prepare our financial statements, to assess and manage risks, to comply with the principal regulations applicable to us, and to review the comments and observations made by the statutory auditors on our internal control procedures. | |
• | With respect to internal audit, reviewing and discuss with management particularly: |
• | its organization and operation, | |
• | its activities and the responsibilities proposed in the scope of the internal audit plan approved by the general management and presented to the Audit Committee. |
• | Reviewing and discussing with management and, when appropriate, our statutory auditors the transactions directly or indirectly binding the Group and its executive officers. |
65
Table of Contents
• | With respect to external audit: |
• | Reviewing and discussing with the statutory auditors their annual audit plan, | |
• | Meeting, if necessary, with the statutory auditors outside the presence of management, | |
• | Ensuring the independence of the statutory auditors by managing the procedure for selection of the auditors. The Audit Committee submits its choice to the Board of Directors, which, pursuant to law, must submit the appointment of auditors to a vote at a shareholders’ meeting, | |
• | Discussing the extent and results of the audit work with the statutory auditors and management and reviewing the amount of auditors’ fees regularly with management. The Audit Committee has sole authority to authorize performance of non-audit services by our auditors or members of their network. |
• | Overseeing the anonymous handling of any report concerning a possible internal control problem or any problem of an accounting or financial nature. | |
• | Finally, the management of the company must report to the Audit Committee any suspected fraud of a significant amount so that the committee may proceed with any verification that it deems appropriate. |
66
Table of Contents
• | to propose to the Board of Directors: |
— | the implementation of stock option and performance share plans and employee shareholding plans; | |
— | the remuneration of the executive officers(mandataires sociaux); and | |
— | the appointment of directors, executive officers(mandataires sociaux) or members of Board committees. |
• | to be kept informed of the remuneration of the members of the Executive Committee. |
• | the remuneration of the Chairman and Chief Executive Officer and the Presidents, | |
• | the proposal to be subject to the annual general meeting with respect to stock-options and performance shares and the final allocation of such performance shares and stock-options to employees of the Group, | |
• | the protection letters of the Chairman and Chief Executive Officer and the Presidents, | |
• | the proposal to be made to the extraordinary general meeting for the appointment of the four new directors after completion of the merger with Veritas, | |
• | the reorganization of the Group Management Committee to be effective after completion of the merger with Veritas, and | |
• | the implementation of the evaluation process of the Board of Directors and the Chief Executive Officer. |
• | to assist the Board in reviewing: |
— | the technology offered by competitors and other oil service companies, | |
— | our development strategy in reservoir imaging: seismic and opportunities in other oilfield services and products, | |
— | the main development program in services and products, | |
— | our R&D budgets. |
67
Table of Contents
Options | ||||||||||||||||||||
exercised | Options | |||||||||||||||||||
(ordinary | outstanding | Exercise | ||||||||||||||||||
Options | shares) at | at | price per | |||||||||||||||||
initially | March 31, | March 31, | ordinary | |||||||||||||||||
Date of board of directors’ resolution | granted(1) | 2007 | 2007(2) | share(1) | Expiration date | |||||||||||||||
January 18, 2000(3) | 231,000 | 182,628 | 38,191 | € | 45.83 | January 17, 2008 | ||||||||||||||
March 14, 2001(4) | 256,000 | 127,846 | 133,253 | € | 65.39 | March 13, 2009 | ||||||||||||||
May 15, 2002(5) | 138,100 | 55,657 | 83,072 | € | 39.92 | May 14, 2010 | ||||||||||||||
May 15, 2003(6) | 169,900 | 16,224 | 163,960 | € | 14.53 | May 14, 2011 | ||||||||||||||
May 11, 2006(7) | 202,500 | 0 | 201,800 | € | 131.26 | May 10, 2014 | ||||||||||||||
March 23, 2007(8) | 261,750 | 0 | 261,750 | € | 151.98 | March 22, 2015 | ||||||||||||||
Total | 1,259,250 | 382,355 | 882,026 | |||||||||||||||||
(1) | Pursuant to French law and the terms of the stock option plans, the numbers of options granted and the exercise price were adjusted following our share capital increase in December 2005. |
(2) | The stock option plans provide for the cancellation of the options if the holder is no longer our employee, director or executive officer. |
(3) | Options under the 2000 plan could not be exercised before January 2003. |
68
Table of Contents
(4) | Options under the 2001 plan vest by one-fifth each year from March 2001 and could not be exercised before March 14, 2004. |
(5) | Options under the 2002 plan vest by one-fifth each year from May 2002 and could not be exercised before May 16, 2005. |
(6) | Options under the 2003 plan vest by one-fourth each year from May 2003 and could not be exercised before May 16, 2006. |
(7) | Options under the 2006 plan vest by one-fourth each year from May 2006 and can be exercised at any time. However the resulting shares cannot be sold before May 12, 2010. |
(8) | Options under the 2007 plan vest by one-third each year from March 2007 and can be exercised at any time. However the resulting shares cannot be sold by French tax residents before March 24, 2011. |
March 31, | December 31, | |||||||||||||||||||||||||||||||
2007 | 2006 | 2005 | 2004 | |||||||||||||||||||||||||||||
% of | % of | % of | % of | |||||||||||||||||||||||||||||
% of | voting | % of | voting | % of | voting | % of | voting | |||||||||||||||||||||||||
shares | rights | shares | rights | shares | rights | shares | rights | |||||||||||||||||||||||||
Identity of Person or Group | ||||||||||||||||||||||||||||||||
The Beacon Group | — | — | — | — | — | — | 15.21 | 25.51 | ||||||||||||||||||||||||
EBPF-Financière de l’Echiquier | — | — | — | — | — | — | 4.58 | 3.84 | ||||||||||||||||||||||||
Fidelity International Limited | 3.32 | 3.16 | 10.36 | 9.59 | 10.31 | 9.50 | — | — | ||||||||||||||||||||||||
Morgan Stanley | 2.74 | 2.60 | 5.16 | 4.48 | — | — | — | — | ||||||||||||||||||||||||
Institut Français du Pétrole | 4.99 | 9.49 | 7.73 | 14.32 | 8.21 | 15.13 | 12.01 | 12.94 | ||||||||||||||||||||||||
Public | 88.95 | 84.75 | 76.75 | 71.31 | 81.48 | 75.37 | 68.20 | 57.71 |
69
Table of Contents
70
Table of Contents
Price per Share(1) | ||||||||
High | Low | |||||||
(€) | ||||||||
2007 | ||||||||
March | 159.40 | 138.11 | ||||||
February | 151.00 | 166.45 | ||||||
January | 167.00 | 145.10 | ||||||
2006 | ||||||||
December | 166.40 | 149.40 | ||||||
November | 158.00 | 130.10 | ||||||
October | 138.80 | 113.80 |
(1) | Source: Euronext Paris. |
71
Table of Contents
Price per Share(1) | ||||||||
High | Low | |||||||
(€) | ||||||||
2007 | ||||||||
First Quarter | 138.11 | 167.00 | ||||||
2006 | ||||||||
First Quarter | 121.30 | 75.25 | ||||||
Second Quarter | 164.00 | 108.00 | ||||||
Third Quarter | 140.00 | 112.80 | ||||||
Fourth Quarter | 166.40 | 113.80 | ||||||
2005 | ||||||||
First Quarter | 72.40 | 50.20 | ||||||
Second Quarter | 71.65 | 59.60 | ||||||
Third Quarter | 86.90 | 69.00 | ||||||
Fourth Quarter | 89.00 | 64.78 |
(1) | Source: Euronext Paris. |
Price per Share(1) | ||||||||
High | Low | |||||||
(€) | ||||||||
2006 | 166.40 | 75.25 | ||||||
2005 | 89.00 | 50.20 | ||||||
2004 | 56.50 | 29.70 | ||||||
2003 | 32.30 | 9.11 | ||||||
2002 | 50.05 | 13.35 |
(1) | Source: Euronext Paris. |
High | Low | |||||||
(U.S.$) | ||||||||
2007 | ||||||||
March | 42.38 | 36.96 | ||||||
February | 43.76 | 39.53 | ||||||
January | 44.11 | 34.99 | ||||||
2006 | ||||||||
December | 45.00 | 40.00 | ||||||
November | 40.90 | 33.35 | ||||||
October | 34.92 | 28.80 |
72
Table of Contents
High | Low | |||||||
(U.S.$) | ||||||||
2007 | ||||||||
First Quarter | 44.11 | 34.99 | ||||||
2006 | ||||||||
First Quarter | 29.27 | 18.33 | ||||||
Second Quarter | 40.70 | 27.78 | ||||||
Third Quarter | 35.99 | 28.71 | ||||||
Fourth Quarter | 45.00 | 28.80 | ||||||
2005 | ||||||||
First Quarter | 19.40 | 13.35 | ||||||
Second Quarter | 18.29 | 15.03 | ||||||
Third Quarter | 20.96 | 16.50 | ||||||
Fourth Quarter | 21.14 | 16.57 |
High | Low | |||||||
(U.S.$) | ||||||||
2006 | 45.00 | 18.33 | ||||||
2005 | 21.14 | 13.35 | ||||||
2004 | 14.05 | 7.47 | ||||||
2003 | 7.62 | 2.12 | ||||||
2002 | 9.00 | 2.50 |
73
Table of Contents
• | to develop and operate, in any form and under any conditions whatsoever, any and all businesses relating to the geophysical surveying of soil and subsoil in any and all countries, on behalf of third parties or ourselves; | |
• | to participate directly or indirectly in any business, firm or company whose object would be likely to promote our object; and | |
• | generally, to engage in any commercial, industrial, mining, financial, personal or real property activities relating directly or indirectly to the above objects without limitation or reserve. |
74
Table of Contents
75
Table of Contents
• | by issuing additional shares (either ordinary or preferred shares) or securities giving access, immediately or in the future, to a portion of our share capital; or | |
• | by increasing the nominal value of our existing shares. |
• | for cash; | |
• | for assets contributed in kind; |
76
Table of Contents
• | upon the conversion of preferred shares, debt securities or other debt instruments previously issued; | |
• | upon the conversion of ordinary shares into preferred shares; | |
• | as a result of a merger or a split; | |
• | by the capitalization of reserves, retained earnings or issuance premiums; | |
• | for cash credits payable by the company; or | |
• | for any combination of the preceding items. |
• | by decreasing the nominal value of our outstanding shares; or | |
• | by reducing the number of our outstanding shares. |
77
Table of Contents
• | the election, replacement and removal of directors; | |
• | the appointment of statutory auditors; | |
• | the approval of annual accounts; | |
• | more generally, all decisions which do not require the approval of the extraordinary general meeting of the shareholders; and | |
• | the declaration of dividends or the authorization for dividends to be paid in shares. |
• | changes in ourstatuts (including changing our corporate purposes); | |
• | increasing or reducing our share capital; | |
• | change of nationality of the company, subject to certain conditions as described in article L.225-97 of the French Commercial Code; | |
• | extending or abridging the duration of the company; | |
• | mergers and spin-offs; | |
• | creation of a new class of shares; | |
• | issuance of debt securities; | |
• | authorization of notes or other securities giving access, immediately or in the future, to a portion of our share capital; | |
• | transformation of our company into another legal form; and | |
• | voluntary liquidation of our company before the end of its statutory term. |
78
Table of Contents
• | one or several shareholders holding in the aggregate at least 5% of our share capital; | |
• | any interested parties in cases of emergency; | |
• | the workers’ committee in case of emergency; or | |
• | an association of holders of shares who have held the shares in registered form held for at least two years and holding, in the aggregate, at least 1% of our voting rights. |
• | one or more shareholders holding, in the aggregate, a certain percentage of our share capital (0.5% to 4% determined on the basis of a statutory formula relating to capitalization); or | |
• | a duly authorized association of shareholders who have held their shares in registered form for at least two years and holding, in the aggregate, at least 1% of our voting rights. |
79
Table of Contents
• | his or her spouse; | |
• | another shareholder; | |
• | in the case of a non-French resident person, to the relevant intermediary; | |
• | in the case of a corporation, to a legal representative; | |
• | in the case of an employee, to the representative of the shareholding employees pursuant toarticle L.225-106 of the French Commercial Code. |
• | 20% of the shares entitled to vote (in the case of an ordinary general meeting convened on first call, an extraordinary general meeting convened on second call or an extraordinary general meting convened on first call, if deciding upon any capital increase by capitalization of reserves, retained earnings or share premium); or | |
• | 25% of the shares entitled to vote (in the case of any other extraordinary general meeting convened on first call). |
80
Table of Contents
(1) | to reduce our share capital (albeit not to absorb losses), canceling the shares we purchase, with our shareholders’ approval at an extraordinary general meeting; | |
(2) | to provide shares to our employees under a profit sharing plan or stock option plan; or | |
(3) | in the context of a share repurchase program that allows us to acquire up to 10% of our share capital for a maximum period of 18 months. To acquire shares in the context of a share repurchase program, we must first obtain our shareholders’ approval at an ordinary general meeting and make public a description of such program prior to its launch. |
81
Table of Contents
• | to support liquidity of our shares through a liquidity contract entered into with an investment service provider in compliance with the Code of Practice of theAssociation Française des Entreprises d’Investissement, | |
• | to deliver shares in the scope of securities giving access, immediately or in the future, to shares by redemption, conversion, exchange, presentation of a warrant or by any other means, | |
• | to deliver, immediately or in the future, shares in exchange in the scope of external growth, in accordance with the conditions to be defined by theAutorité des marchés financiers, | |
• | to allocate bonus shares to employees and officers of the company or affiliated companies within the meaning of article L.225-180 of the French Commercial Code, especially in the scope of options to purchase shares of the company, | |
• | cancel the shares through a capital reduction, subject to a decision of, or an authorization, by the extraordinary general meeting. |
— | purchased, in 2006, 880,387 CGG shares at an average weighed price of €128.42; and | |
— | sold, in 2006, 922,887 CGG shares at an average weighed price of €126.91. |
• | each trade must not be made at a price higher than the higher of the price of the last independent trade and the highest current independent bid on Euronext Paris; |
82
Table of Contents
• | if we carry out the purchase of our own shares through derivative financial instruments, the exercise price of those derivative financial instruments must not be above the higher of the last independent trade and the highest current independent bid; and | |
• | the trade must not account for more than 25% of the average daily trading volume on Euronext Paris in the shares during the twenty trading days immediately preceding the trade. |
83
Table of Contents
84
Table of Contents
Single currency term facility agreement dated September 1, 2005 by and among us, certain of our subsidiaries, Credit Suisse First Boston International and BNP Paribas. |
Amendment and restatement accession and novation agreement dated September 30, 2005 relating to US$375,000,000 Single Currency Term Facility Agreement originally dated 1 September 2005 between, among others, us, certain of our subsidiaries acting as original guarantors, Credit Suisse First Boston International and BNP Paribas. |
Underwriting Agreement dated November 15, 2005 by and among us, BNP Paribas, Credit Suisse First Boston (Europe) limited and RBC Capital Markets Corporation. |
Purchase Agreement dated January 27, 2006 by and among us, certain of our subsidiaries acting as original guarantors, Credit Suisse Securities (Europe) Limited and BNP Paribas Securities Corp. |
85
Table of Contents
Registration Rights Agreement dated February 3, 2006 by and among us, certain of our subsidiaries acting as original guarantors, Credit Suisse Securities (Europe) Limited and BNP Paribas Securities Corp. |
Long term facility agreement dated March 29, 2006 by and among Exploration Investment Resources II AS, DnB NOR Bank ASA and certain banks and financial institutions. |
Agreement between the Shareholders of CGG Ardiseis, dated June 23, 2006, between Industrialization & Energy Services Company (TAQA) and us. |
Agreement and Plan of Merger, dated as of September 4, 2006, by and among us, Volnay Acquisition Co. I, Volnay Acquisition Co. II and Veritas DGC Inc.(11) |
U.S.$1.6 billion Single Currency Term Facility Agreement, dated as of November 22, 2006, among us, certain of our subsidiaries acting as guarantors, the lenders party thereto and Credit Suisse International as Agent and Security Agent. |
• | finance a portion of the cash component of the merger consideration; | |
• | repay certain existing debt of CGG and Veritas; and | |
• | pay the fees and expenses incurred in connection with the foregoing. |
U.S.$1.115 billion Credit Agreement dated as of January 12, 2007, among Volnay Acquisition Co. I, us, certain of our subsidiaries acting as guarantors, the lenders party thereto and Credit Suisse as Administrative Agent and Collateral Agent. |
86
Table of Contents
Underwriting Agreement, dated February 2, 2007, among us, certain of our subsidiaries acting as guarantors, Credit Suisse Securities (Europe Limited) and the several underwriters party thereto. |
U.S.$200 million Revolving Credit Agreement, dated as of February 7, 2007, among us, certain of our subsidiaries acting as guarantors, Natixis as Facility Agent, Credit Suisse as Collateral Agent and the lenders party thereto. |
87
Table of Contents
• | an individual who is a citizen or resident of the United States for U.S. federal income tax purposes; | |
• | a corporation, or other entity treated as a corporation, created or organized in or under the laws of the United States or of any State thereof; | |
• | an estate the income of which is subject to United States federal income taxation regardless of its source; or | |
• | a trust if a court within the United States is able to exercise primary supervision over the trust and one or more U.S. persons have the authority to control all substantial decisions of the trust, or the trust has elected to be treated as a domestic trust for U.S. federal income tax purposes. |
• | investors that own (directly or indirectly) 10% or more of our voting stock; | |
• | banks; | |
• | dealers in securities or currencies; | |
• | traders in securities who elect to apply amark-to-market method of accounting; | |
• | financial institutions; | |
• | regulated investment companies; | |
• | real estate investment trusts; | |
• | tax-exempt organizations; | |
• | insurance companies; | |
• | persons holding ADSs as part of a hedging, straddle, conversion or other integrated transaction; | |
• | U.S. Holders who hold ADSs other than as capital assets; | |
• | persons whose functional currency is not the U.S. dollar; | |
• | certain U.S. expatriates; | |
• | individual retirement accounts and other tax-deferred accounts; | |
• | partners in partnerships; |
88
Table of Contents
• | persons subject to the U.S. alternative minimum tax; and | |
• | persons who acquired ADSs pursuant to an employee stock option or otherwise as compensation. |
• | an individual or other non-corporate holder; or | |
• | a corporation that does not own, directly or indirectly, 10% or more of the capital of our company, |
• | is a resident of the United States under the Treaty; | |
• | is entitled to Treaty benefits under the limitation on benefits provisions in Article 30 of the Treaty; and | |
• | complies with the procedural rules to obtain Treaty benefits described below under“Taxation of Dividends — Procedure to Obtain Treaty Benefits”. |
• | complete a certificate (the “Certificate”) as provided under Schedule III to the administrative instruction of 14 February 2005 referenced BOI 4 J-1-05; |
89
Table of Contents
• | have it certified by the U.S. financial institution that is in charge of the administration of the ADSs of that Eligible U.S. Holder; and | |
• | file it with us or the French person in charge of the payment of dividends on our shares underlying the ADSs, such as the French paying agent, in the case of our shares, or with the Depositary in the case of ADSs, |
90
Table of Contents
91
Table of Contents
92
Table of Contents
93
Table of Contents
94
Table of Contents
Fair | ||||||||||||||||||||||||||||||||
Carrying value | 2007 | 2008 | 2009 | 2010 | 2011 | Thereafter | Total | Value | ||||||||||||||||||||||||
(in € million) | ||||||||||||||||||||||||||||||||
Debt | ||||||||||||||||||||||||||||||||
U.S. dollar | 11.4 | 10.0 | 8.5 | 6.1 | 28.8 | 246.1 | 310.9 | 369.2 | ||||||||||||||||||||||||
Average fixed rate | 5.3% | 5.3% | 5.2% | 5.7% | 5.3% | 7.8% | 7.3% | |||||||||||||||||||||||||
U.S. dollar | 21.5 | 19.7 | 18.0 | 16.7 | 7.8 | — | 83.7 | 83.7 | ||||||||||||||||||||||||
Average variable rate | 6.3% | 6.3% | 6.4% | 6.5% | 6.5% | — | 6.4% | |||||||||||||||||||||||||
Euro | 0.1 | 0.0 | — | — | — | — | 0.1 | 0.1 | ||||||||||||||||||||||||
Average fixed rate | 4.9% | 5.0% | — | — | — | — | 4.9% | |||||||||||||||||||||||||
Euro | 1.4 | — | — | — | — | — | 1.4 | 1.4 | ||||||||||||||||||||||||
Average variable rate | 3.2% | — | — | — | — | — | 3.2% | |||||||||||||||||||||||||
Other currencies | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||
Average fixed rate | — | — | — | — | — | — | — | |||||||||||||||||||||||||
Other currencies | 0.1 | 0.1 | — | — | — | — | 0.2 | 0.2 | ||||||||||||||||||||||||
Average variable rate | 6.4% | 6.4% | — | — | — | — | 6.4% | |||||||||||||||||||||||||
Foreign Exchange — Firm commitments | ||||||||||||||||||||||||||||||||
Forward sales (in U.S.$) | 305.9 | 8.1 | ||||||||||||||||||||||||||||||
U.S. dollars average rate/€ | 1.2619 | |||||||||||||||||||||||||||||||
Forward sales (in GBP) | 21.9 | 0.6 | ||||||||||||||||||||||||||||||
GBP average rate/U.S. | $ | 1.8956 |
95
Table of Contents
Item 14: | MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITYHOLDERS AND USE OF PROCEEDS |
96
Table of Contents
97
Table of Contents
Ernst & Young & Autres | Mazars & Guerard | |
/s/ Pascal Macioce | /s/ Philippe Castagnac | |
Pascal Macioce | Philippe Castagnac |
December 31, | ||||||||||||||||
2006 | 2005 | |||||||||||||||
Ernst & Young | Mazars & Guerard | Ernst & Young | Mazars & Guerard | |||||||||||||
(in € thousands) | ||||||||||||||||
Audit Fees(a) | 1,593 | 1,234 | 938 | 670 | ||||||||||||
Audit-Related Fees(b) | 1,288 | 345 | 1,019 | 484 | ||||||||||||
Tax Fees(c) | 142 | — | 280 | 5 | ||||||||||||
All Other Fees(d) | — | — | 10 | — | ||||||||||||
Total | 3,023 | 1,579 | 2,247 | 1,159 | ||||||||||||
(a) | Audit fees are the aggregate fees billed by our independent auditors for the audit of the individual and consolidated annual and semi-annual financial statements and the provision of services that are normally provided by our independent auditors in connection with statutory and regulatory filings or engagements. |
(b) | Audit-related fees are the aggregate fees billed by our independent auditors for services that are reasonably related to the performance of the audit or review of our financial statements and are not reported under “audit fees”. They include consultations relating to accounting principles and internal controls. |
(c) | Tax fees are the aggregate fees billed by our independent auditors for services rendered by our auditors for tax compliance, tax advice, and tax planning. They include assistance when dealing with local authorities, advice regarding tax audit and litigation, expatriate taxation and tax advice relating to mergers and acquisitions. |
(d) | All other fees are the aggregate fees billed by our independent auditors other than the services reported in paragraphs (a) through (c) of this item. They include training services as well as general and specific advice. |
98
Table of Contents
99
Table of Contents
Item 16E: | PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS |
Total number of | Maximum number | |||||||||||||||||||
Shares purchased as | Total number | Average | of shares that may | |||||||||||||||||
part of the | of shares | price paid | yet be purchased | |||||||||||||||||
programs | purchased | per share | Total amount paid | under the program | ||||||||||||||||
(€) | (€) | |||||||||||||||||||
January, 2006(a) | 40,717 | 40,717 | 150.33 | 22 749 398.91 | 1,708,127 | |||||||||||||||
February, 2006(a) | 59,574 | 59,574 | 102.60 | 6,123,989.12 | 1,708,108 | |||||||||||||||
March 2006(a) | 64,455 | 64,455 | 111.19 | 7,236,602.48 | 1,715,472 | |||||||||||||||
April, 2006(b) | 52 145 | 52 145 | 123.10 | 6,607,485.35 | 1,663,392 | |||||||||||||||
May, 2006(b) | 71 769 | 71 769 | 136.08 | 8,519,514.00 | 1,675,964 | |||||||||||||||
June, 2006(b) | 80,449 | 80,449 | 122.13 | 8,762,624.28 | 1,748,464 | |||||||||||||||
July, 2006(b) | 62,485 | 62,485 | 131.60 | 8,297,226.28 | 1,748,482 | |||||||||||||||
August, 2006(b) | 28,201 | 28,201 | 131.21 | 5,799,267.43 | 1,748,516 | |||||||||||||||
September, 2006(b) | 144,913 | 144,913 | 121.02 | 15,610,047.72 | 1,750,566 | |||||||||||||||
October, 2006(b) | 50,440 | 50,440 | 121.49 | 10,080,580.00 | 1,750,661 | |||||||||||||||
November, 2006(b) | 168,385 | 168,385 | 145.23 | 20,624,682.79 | 1,750,543 | |||||||||||||||
December, 2006(b) | 75,854 | 75,854 | 158.60 | 11,709,877.88 | 1,759,713 | |||||||||||||||
TOTAL | 853,991 | 853,991 | 129.55 | 131,121,296.24 |
(a) | Shares purchased as part of the 2006 program approved by the shareholders’ meeting of May 11, 2006 for a period of 18 months, authorizing purchases of shares up to 10% of our common stock at a maximum price of €200 per share; this program replaced the previous program announced on May 12, 2005. |
(b) | Shares purchased as part of the 2005 program approved by the shareholders’ meeting of May 12, 2005 for a period of 18 months, authorizing purchases of shares up to 10% of our common stock at a maximum price of €120 per share; this program replaced the previous program announced on May 13, 2004. |
100
Table of Contents
Page | ||||
F-1 | ||||
Consolidated Financial Statements: | ||||
F-2 | ||||
F-3 | ||||
F-4 | ||||
F-5 | ||||
F-6 |
Page | ||||
Report of Independent Auditors | F-75 | |||
Financial Statements: | ||||
Balance Sheet as at December 31, 2006, 2005 and 2004 | F-76 | |||
Statement of Income for the years ended December 31, 2006, 2005 and 2004 | F-77 | |||
Statement of Cash Flows for the years ended December 31, 2006, 2005 and 2004 | F-78 | |||
Statement of Changes in Partners’ Equity for the years ended December 31, 2006, 2005 and 2004 | F-79 | |||
Notes to the Financial Statements | F-80 |
Exhibit No | Exhibit | |||
1 | .1* | English translation of our Articles of Association(statuts). | ||
2 | .1 | Indenture dated as of April 28, 2005 between us, certain of our subsidiaries acting as guarantors and JP Morgan Chase Manhattan Bank as Trustee, which includes the form of the 71/2% Senior Notes due 2015 as an exhibit thereto (Exhibit 4.1 to the Registrant’s Registration Statement onForm F-4 (SEC FileNo. 333-126556), dated September 21, 2005, as amended, is incorporated herein by reference). | ||
2 | .2 | Supplemental Indenture dated as of January 12, 2007 between us, certain of our subsidiaries acting as guarantors and The Bank of New York Trust Company, as Trustee to add guarantors to the 71/2% Senior Notes due 2015 (Exhibit 4.1 to the Registrant’s Report onForm 6-K, dated February 2, 2007, is incorporated herein by reference) | ||
2 | .3* | Supplemental Indenture dated as of February 9, 2007 between us, certain of our subsidiaries acting as guarantors and The Bank of New York Trust Company, for the issuance of the additional $200 million in aggregate principal amount of the 71/2% Senior Notes due 2015. |
101
Table of Contents
Exhibit No | Exhibit | |||
2 | .4* | Indenture dated as of February 9, 2007 between us, certain of our subsidiaries acting as guarantors and The Bank of New York Trust Company, as Trustee, which includes the form of the 73/4 Senior Notes due 2017 as an exhibit thereto. | ||
4 | .1 | 2000 Stock Option Plan (Exhibit 4.2 to the Registrant’s Annual Report onForm 20-F for the fiscal year ended December 31, 2002, dated May 14, 2003, is incorporated herein by reference). | ||
4 | .2 | 2001 Stock Option Plan (Exhibit 4.21 to the Registrant’s Annual Report onForm 20-F for the fiscal year ended December 31, 2001, dated May 3, 2002, is incorporated herein by reference). | ||
4 | .3 | 2002 Stock Option Plan (Exhibit 4.4 to the Registrant’s Annual Report onForm 20-F for the fiscal year ended December 31, 2002, dated May 14, 2003, is incorporated herein by reference). | ||
4 | .4 | 2003 Stock Option Plan (Exhibit 10.1 to the Registrant’s Report onForm 6-K, dated September 3, 2003, is incorporated herein by reference). | ||
4 | .5* | 2006 Stock Option Plan. | ||
4 | .6* | 2007 Stock Option Plan. | ||
4 | .7* | 2006 Free Share Allocation Plan. | ||
4 | .8* | 2007 Free Share Allocation Plan. | ||
4 | .9 | Lease dated as of April 2, 1991 for our data processing center in London, England (Exhibit 10.6 to the Registrant’s Registration Statement onForm F-1 (SEC FileNo. 333-06800) dated April 16, 1997, as amended, is incorporated herein by reference). | ||
4 | .10 | Leases dated as of November 8, 1991 and December 13, 1996 for our data processing center in Houston, Texas, USA (Exhibit 10.7 to the Registrant’s Registration Statement onForm F-1 (SEC FileNo. 333-06800) dated April 16, 1997, as amended, is incorporated herein by reference). | ||
4 | .11 | Lease dated as of September 1, 1996 for Sercel’s factory in Tulsa, Oklahoma, USA (Exhibit 10.8 to the Registrant’s Registration Statement onForm F-1 (SEC FileNo. 333-06800) dated April 16, 1997, as amended, is incorporated herein by reference). | ||
4 | .12 | Time charter agreement dated as of March 1, 1996 for CGG Föhn, as amended on July 1, 1996 (Exhibit 10.9 to the Registrant’s Registration Statement onForm F-1 (SEC FileNo. 333-06800) dated April 16, 1997, as amended, is incorporated herein by reference). | ||
4 | .13 | Time charter agreement dated as of May 7, 1996 for CGG Harmattan, as amended on July 1, 1996 (Exhibit 10.10 to the Registrant’s Registration Statement onForm F-1 (SEC FileNo. 333-06800) dated April 16, 1997, as amended, is incorporated herein by reference). | ||
4 | .14 | Time charter agreement dated as of December 22, 1997 for CGG Alizé (Exhibit 10.3 to the Registrant’s Registration Statement onForm F-3 (SEC FileNo. 333-11074), dated November 3, 1999, as amended, is incorporated herein by reference). | ||
4 | .15 | Mixed Capital Company Contract dated November 26, 2003 by and among Sercel SA, the Committee of the Hebei JunFeng Prospecting Equipment Company, the Dongfang Geological Prospecting Limited Liability Company, and the Xian General Factory for Oil Prospecting Equipment (Exhibit 10.1 to the Report onForm 6-K, dated May 13, 2004, is incorporated herein by reference). | ||
4 | .16 | Single currency term facility agreement dated September 1, 2005 by and among us, certain of our subsidiaries, Credit Suisse First Boston International and BNP Paribas (Exhibit 4.17 to the Registrant’s Annual Report onForm 20-F for the fiscal year ended December 31, 2005, dated May 9, 2006, is incorporated herein by reference). | ||
4 | .17 | Amendment and restatement accession and novation agreement dated September 30, 2005 related to US$375 million single currency term facility agreement originally dated September 1, 2005 between, among others us, certain of our subsidiaries and Credit Suisse First Boston International and BNP Paribas (Exhibit 4.18 to the Registrant’s Annual Report onForm 20-F for the fiscal year ended December 31, 2005, dated May 9, 2006, is incorporated herein by reference). |
102
Table of Contents
Exhibit No | Exhibit | |||
4 | .18 | Underwriting Agreement dated November 15, 2005 by and among us, BNP Paribas, Credit Suisse First Boston (Europe) limited and RBC Capital Markets Corporation (Exhibit 4.19 to the Registrant’s Annual Report onForm 20-F for the fiscal year ended December 31, 2005, dated May 9, 2006, is incorporated herein by reference). | ||
4 | .19 | Purchase Agreement dated January 27, 2006 by and among us, certain of our subsidiaries acting as original guarantors, Credit Suisse Securities (Europe) Limited and BNP Paribas Securities Corp. (Exhibit 4.20 to the Registrant’s Annual Report onForm 20-F for the fiscal year ended December 31, 2005, dated May 9, 2006, is incorporated herein by reference). | ||
4 | .20 | Registration Rights Agreement dated February 3, 2006 by and among us, certain of our subsidiaries acting as original guarantors, Credit Suisse Securities (Europe) Limited and BNP Paribas Securities Corp. (Exhibit 4.21 to the Registrant’s Annual Report onForm 20-F for the fiscal year ended December 31, 2005, dated May 9, 2006, is incorporated herein by reference). | ||
4 | .21 | U.S.$70 million Term Credit Facility, dated March 29, 2006, by and among Exploration Investment Resources II AS, DnB NOR Bank ASA and certain banks and financial institutions (Exhibit 4.22 to the Registrant’s Annual Report onForm 20-F for the fiscal year ended December 31, 2005, dated May 9, 2006, is incorporated herein by reference). | ||
4 | .22* | Agreement between the Shareholders of CGG Ardiseis, dated June 23, 2006, between Industrialization & Energy Services Company (TAQA) and us (we have requested that the Commission grant confidential treatment for certain portions of this document). | ||
4 | .23 | Agreement and Plan of Merger, dated as of September 4, 2006, by and among us, Volnay Acquisition Co. I, Volnay Acquisition Co. II and Veritas DGC Inc. (Exhibit 2.1 to the Registrant’s Report onForm 6-K, dated September 6, 2006, is incorporated herein by reference). | ||
4 | .24* | Single Currency Term Facility Agreement, dated as of November 22, 2006, among us, certain of our subsidiaries acting as guarantors, the lenders party thereto and Credit Suisse International as Agent and Security Agent. | ||
4 | .25* | Credit Agreement, dated as of January 12, 2007, among Volnay Acquisition Co. I, us, certain of our subsidiaries acting as guarantors, the lenders party thereto and Credit Suisse as Administrative Agent and Collateral Agent. | ||
4 | .26* | Underwriting Agreement, dated February 2, 2007, among us, certain of our subsidiaries acting as guarantors, Credit Suisse Securities (Europe Limited) and the several underwriters party thereto. | ||
4 | .27* | Revolving Credit Agreement, dated as of February 7, 2007, among us, certain of our subsidiaries acting as guarantors, Natixis as Facility Agent, Credit Suisse as Collateral Agent and the lenders party thereto. | ||
4 | .28 | Support Agreement dated August 30, 1996 between Digicon Inc. and Veritas Energy Services Inc. (Exhibit 10.1 of Veritas DGC Inc.’s Current Report onForm 8-K dated August 30, 1996 is incorporated herein by reference). | ||
4 | .57 | Loan Agreement ($45,000,000 U.S. Revolving Loan Facility, $15,000,000 Canadian Revolving Loan Facility, $15,000,000 Singapore Revolving Loan Facility, and $10,000,000 U.K. Revolving Loan Facility) dated as of February 6, 2006, among Veritas DGC Inc., as U.S. Borrower, Veritas Energy Services Inc. and Veritas Energy Services Partnership, as Canadian Borrowers, Veritas Geophysical (Asia Pacific) Pte. Ltd., as Singapore Borrower, Veritas DGC Limited, as U.K. Borrower, Wells Fargo Bank, National Association, as U.S. Agent and Lead Arranger, HSBC Canada, as Canadian Agent, The Hongkong and Shanghai Banking Corporation Limited, Singapore Branch, as Singapore Agent, HSBC Bank plc, as U.K. Agent, and the other lenders now or hereafter parties thereto (Exhibit 10.1 to Veritas DGC Inc.’s Form 8-K dated February 6, 2006 is incorporated herein by reference). | ||
4 | .63 | Employment Agreement between Veritas DGC Inc. and Timothy L. Wells dated December 27, 2006 (Exhibit 10.12 to Veritas DGC Inc.’s Form 8-K dated January 4, 2007 is incorporated herein by reference). | ||
4 | .64 | Draft form of Consulting Agreement entered into by Thierry Pilenko and the Registrant (Exhibit 10.13 to Veritas DGC Inc.’s Form 8-K dated January 4, 2007 is incorporated herein by reference). |
103
Table of Contents
Exhibit No | Exhibit | |||
8 | * | Our Subsidiaries | ||
11 | Code of Ethics(9) | |||
12 | .1* | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes Oxley Act of 2002 | ||
12 | .2* | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes Oxley Act of 2002 | ||
13 | .1* | Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes Oxley Act of 2002 (10 U.S.C. § 1350) | ||
13 | .2* | Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes Oxley Act of 2002 (10 U.S.C. § 1350) |
* | Filed herewith. |
104
Table of Contents
105
Table of Contents
Table of Contents
ERNST & YOUNG & AUTRES | MAZARS & GUERARD | |
ERNST & YOUNG | MAZARS | |
41, rue Ybry | Exaltis – 61, rue Henri Regnault | |
92576 Neuilly-sur-Seine cedex | 92400 Courbevoie |
To the Board of Directors and Shareholders of CGGVeritas.:
ERNST & YOUNG & AUTRES | MAZARS & GUERARD | |
/s/ Pascal MACIOCE | /s/ Philippe CASTAGNAC | |
F-1
Table of Contents
December 31, | ||||||||||||||||
Notes | 2006 | 2005 | 2004 | |||||||||||||
(amounts in million of euros) | ||||||||||||||||
ASSETS | ||||||||||||||||
Cash and cash equivalents | 28 | 251.8 | 112.4 | 130.6 | ||||||||||||
Trade accounts and notes receivable, net | 3 | 301.1 | 297.5 | 196.8 | ||||||||||||
Inventories andwork-in-progress, net | 4 | 188.7 | 139.5 | 86.8 | ||||||||||||
Income tax assets | 18.0 | 10.1 | 4.2 | |||||||||||||
Other current assets, net | 5 | 63.1 | 41.5 | 48.7 | ||||||||||||
Assets held for sale | 9 | 0.4 | 3.5 | |||||||||||||
Total current assets | 823.1 | 604.5 | 467.1 | |||||||||||||
Deferred tax assets | 24 | 43.4 | 31.6 | 31.5 | ||||||||||||
Investments and other financial assets, net | 7 | 19.2 | 15.3 | 12.5 | ||||||||||||
Investments in companies under equity method | 8 | 46.2 | 44.4 | 30.8 | ||||||||||||
Property, plant and equipment, net | 9 | 455.2 | 480.1 | 204.1 | ||||||||||||
Intangible assets, net | 10 | 127.6 | 136.3 | 162.7 | ||||||||||||
Goodwill, net | 11 | 267.4 | 252.9 | 62.5 | ||||||||||||
Total non-current assets | 959.0 | 960.6 | 504.1 | |||||||||||||
TOTAL ASSETS | 1,782.1 | 1,565.1 | 971.2 | |||||||||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||||||||
Bank overdrafts | 13 | 6.5 | 9.3 | 2.8 | ||||||||||||
Current portion of financial debt | 13 | 38.1 | 157.9 | 73.1 | ||||||||||||
Trade accounts and notes payables | 161.2 | 178.5 | 98.3 | |||||||||||||
Accrued payroll costs | 74.4 | 57.8 | 47.6 | |||||||||||||
Income taxes payable | 37.7 | 29.3 | 24.0 | |||||||||||||
Advance billings to customers | 45.9 | 19.5 | 13.2 | |||||||||||||
Provisions — current portion | 16 | 10.4 | 17.7 | 14.2 | ||||||||||||
Other current liabilities | 12 | 31.3 | 35.2 | 22.8 | ||||||||||||
Total current liabilities | 405.5 | 505.2 | 296.0 | |||||||||||||
Deferred tax liabilities | 24 | 66.5 | 56.9 | 26.7 | ||||||||||||
Provisions — non-current portion | 16 | 25.5 | 18.4 | 16.0 | ||||||||||||
Financial debt | 13 | 361.0 | 242.4 | 176.5 | ||||||||||||
Derivative on convertible bonds | 13 | — | 11.3 | 33.9 | ||||||||||||
Other non-current liabilities | 17 | 23.7 | 20.7 | 19.8 | ||||||||||||
Total non-current liabilities | 476.7 | 349.7 | 272.9 | |||||||||||||
Common stock: 34,949,764 shares authorized and 17,597,888 shares with a €2 nominal value issued and outstanding at December 31, 2006; 17,081,680 at December 31, 2005; 11,682,218 at December 31, 2004 | 15 | 35.2 | 34.2 | 23.4 | ||||||||||||
Additional paid-in capital | 394.9 | 372.3 | 173.4 | |||||||||||||
Retained earnings | 320.6 | 291.0 | 214.5 | |||||||||||||
Treasury shares | 3.0 | (1.1 | ) | 1.8 | ||||||||||||
Net income (loss) for the period — Attributable to the Group | 157.1 | (7.8 | ) | (6.4 | ) | |||||||||||
Income and expense recognized directly in equity | 4.8 | (1.4 | ) | 3.7 | ||||||||||||
Cumulative translation adjustment | (38.6 | ) | 11.3 | (17.2 | ) | |||||||||||
Total shareholders’ equity | 877.0 | 698.5 | 393.2 | |||||||||||||
Minority interests | 22.9 | 11.7 | 9.1 | |||||||||||||
Total shareholders’ equity and minority interests | 899.9 | 710.2 | 402.3 | |||||||||||||
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | 1,782.1 | 1,565.1 | 971.2 | |||||||||||||
F-2
Table of Contents
December 31, | ||||||||||||||||
Notes | 2006 | 2005 | 2004 | |||||||||||||
(in million of euros, | ||||||||||||||||
except per share data) | ||||||||||||||||
Operating revenues | 19 | 1329.6 | 869.9 | 687.4 | ||||||||||||
Other income from ordinary activities | 19 | 1.8 | 1.9 | 0.4 | ||||||||||||
Total income from ordinary activities | 1331.4 | 871.8 | 687.8 | |||||||||||||
Cost of operations | (890.0 | ) | (670.0 | ) | (554.0 | ) | ||||||||||
Gross profit | 19 | 441.4 | 201.8 | 133.8 | ||||||||||||
Research and development expenses — net | 20 | (37.7 | ) | (31.1 | ) | (28.8 | ) | |||||||||
Selling, general and administrative expenses | (126.4 | ) | (91.2 | ) | (78.6 | ) | ||||||||||
Other revenues (expenses) — net | 21 | 11.7 | (4.4 | ) | 19.3 | |||||||||||
Operating income | 19 | 289.0 | 75.1 | 45.7 | ||||||||||||
Expenses related to financial debt | (31.8 | ) | (45.8 | ) | (30.0 | ) | ||||||||||
Income provided by cash and cash equivalents | 6.4 | 3.5 | 2.2 | |||||||||||||
Cost of financial debt, net | 22 | (25.4 | ) | (42.3 | ) | (27.8 | ) | |||||||||
Derivative and other expenses on convertible bonds | 23 | (23.0 | ) | (11.5 | ) | (23.5 | ) | |||||||||
Other financial income (loss) | 23 | (8.8 | ) | (14.5 | ) | 0.8 | ||||||||||
Income (loss) of consolidated companies before income taxes | 231.8 | 6.8 | (4.8 | ) | ||||||||||||
Income taxes | 24 | (83.2 | ) | (26.6 | ) | (10.9 | ) | |||||||||
Net income (loss) from consolidated companies | 148.6 | (19.8 | ) | (15.7 | ) | |||||||||||
Equity in income of affiliates | 10.1 | 13.0 | 10.3 | |||||||||||||
Net income (loss) | 158.7 | (6.8 | ) | (5.4 | ) | |||||||||||
Attributable to: | ||||||||||||||||
Shareholders | 157.1 | (7.8 | ) | (6.4 | ) | |||||||||||
Minority interests | 1.6 | 1.0 | 1.0 | |||||||||||||
Weighted average number of shares outstanding | 29 | 17,371,927 | 12,095,925 | 11,681,406 | ||||||||||||
Dilutive potential shares from stock-options(1) | 29 | 309,584 | 270,789 | 108,631 | ||||||||||||
Dilutive potential shares from free share plan | 29 | 49,875 | — | — | ||||||||||||
Dilutive potential shares from convertible bonds(1) | 29 | — | 252,500 | 233,333 | ||||||||||||
Dilutive weighted average number of shares outstanding adjusted when dilutive | 17,731,386 | 12,095,925 | 11,681,406 | |||||||||||||
Net income (loss) per share | ||||||||||||||||
— Basic | 9.04 | (0.64 | ) | (0.55 | ) | |||||||||||
— Diluted(1) | 8.86 | (0.64 | ) | (0.55 | ) |
(1) | Stock-options and convertible bonds have an anti-dilutive effect at December 31, 2005 and at December 31, 2004; as a consequence, potential shares linked to those instruments are not taken into account in the adjusted dilutive weighted average number of shares, nor in the calculation of diluted loss per share. |
F-3
Table of Contents
Year | ||||||||||||||||
Notes | 2006 | 2005 | 2004 | |||||||||||||
OPERATING | ||||||||||||||||
Net income (loss) | 158.7 | (6.8 | ) | (5.4 | ) | |||||||||||
Depreciation and amortization | 106.0 | 76.3 | 65.5 | |||||||||||||
Multi-client surveys amortization | 10 | 80.6 | 69.6 | 66.5 | ||||||||||||
Variance on provisions | 4.6 | 6.7 | (3.5 | ) | ||||||||||||
Cancellation of stock based compensation expenses | 7.4 | 0.4 | 0.5 | |||||||||||||
Cancellation of net gain (loss) on disposal of fixed assets | (5.3 | ) | 1.6 | (11.5 | ) | |||||||||||
Share in profits of affiliates | (10.1 | ) | (13.0 | ) | (10.3 | ) | ||||||||||
Dividends received from affiliates | 4.3 | 4.5 | 4.8 | |||||||||||||
Other non-cash items | 28 | 31.5 | 27.5 | 21.4 | ||||||||||||
Net cash including net cost of financial debt and income tax | 377.7 | 166.8 | 128.0 | |||||||||||||
Less net cost of financial debt | 25.4 | 42.3 | 27.8 | |||||||||||||
Less income tax expense | 83.2 | 26.6 | 10.9 | |||||||||||||
Net cash excluding net cost of financial debt and income tax | 486.3 | 235.7 | 166.7 | |||||||||||||
Income tax paid | 28 | (80.4 | ) | (31.7 | ) | (17.0 | ) | |||||||||
Net cash before changes in working capital | 405.9 | 204.0 | 149.7 | |||||||||||||
— change in trade accounts and notes receivables | (18.8 | ) | (24.3 | ) | (26.8 | ) | ||||||||||
— change in inventories andwork-in-progress | (40.0 | ) | (45.2 | ) | (16.4 | ) | ||||||||||
— change in other current assets | (5.8 | ) | (3.1 | ) | 17.4 | |||||||||||
— change in trade accounts and notes payable | 5.0 | 38.8 | 9.0 | |||||||||||||
— change in other current liabilities | 20.1 | 1.0 | (5.5 | ) | ||||||||||||
Impact of changes in exchange rate on financial items | (19.0 | ) | 11.2 | (0.5 | ) | |||||||||||
Net cash provided by operating activities | 347.4 | 182.4 | 126.9 | |||||||||||||
INVESTING | ||||||||||||||||
Total capital expenditures (including variation of fixed assets suppliers, excluding multi-client surveys) | 9 and 10 | (149.2 | ) | (117.1 | ) | (44.4 | ) | |||||||||
Investments in multi-client surveys | 10 | (61.5 | ) | (32.0 | ) | (51.1 | ) | |||||||||
Proceeds from disposals of tangible & intangible assets | 6.1 | 3.6 | 6.9 | |||||||||||||
Total net proceeds from financial assets | 28 | 16.8 | 0.9 | 17.2 | ||||||||||||
Acquisition of investments, net of cash & cash equivalents acquired | 28 | (48.3 | ) | (265.8 | ) | (27.9 | ) | |||||||||
Variation in loans granted | (0.2 | ) | 0.8 | 0.1 | ||||||||||||
Variation in subsidies for capital expenditures | (0.2 | ) | (1.3 | ) | (0.4 | ) | ||||||||||
Variation in other non-current financial assets | 28 | (6.9 | ) | (0.2 | ) | (1.2 | ) | |||||||||
Net cash from investing activities | (243.4 | ) | (411.1 | ) | (100.8 | ) | ||||||||||
FINANCING | ||||||||||||||||
Repayment of long-term debt | (131.9 | ) | (391.7 | ) | (16.5 | ) | ||||||||||
Total issuance of long-term debt | 208.3 | 461.1 | 73.7 | |||||||||||||
Lease repayments | (19.6 | ) | (13.5 | ) | (11.9 | ) | ||||||||||
Change in short-term loans | (2.4 | ) | (4.1 | ) | (0.6 | ) | ||||||||||
Financial expenses paid | 28 | (23.8 | ) | (62.6 | ) | (29.1 | ) | |||||||||
Net proceeds from capital increase: | ||||||||||||||||
— from shareholders | 12.4 | 207.3 | — | |||||||||||||
— from minority interest of integrated companies | — | — | — | |||||||||||||
Dividends paid and share capital reimbursements: | ||||||||||||||||
— to shareholders | — | — | — | |||||||||||||
— to minority interest of integrated companies | (0.3 | ) | (0.2 | ) | — | |||||||||||
Acquisition/disposal of treasury shares | 4.1 | (2.9 | ) | 2.0 | ||||||||||||
Net cash provided by financing activities | 46.8 | 193.4 | 17.6 | |||||||||||||
Effect of exchange rates on cash | (11.4 | ) | 17.1 | (9.5 | ) | |||||||||||
Net increase (decrease) in cash and cash equivalents | 139.4 | (18.2 | ) | 34.2 | ||||||||||||
Cash and cash equivalents at beginning of year | 28 | 112.4 | 130.6 | 96.4 | ||||||||||||
Cash and cash equivalents at end of period | 28 | 251.8 | 112.4 | 130.6 | ||||||||||||
F-4
Table of Contents
Income and | Total | |||||||||||||||||||||||||||||||||||||||
expense | shareholders’ | |||||||||||||||||||||||||||||||||||||||
Number of | Additional | recognized | Cumulative | Total | equity and | |||||||||||||||||||||||||||||||||||
shares | Share | paid-in | Retained | Treasury | directly in | translation | shareholders’ | Minority | minority | |||||||||||||||||||||||||||||||
issued | capital | capital | earnings | shares | equity | adjustment | equity | interest | interest | |||||||||||||||||||||||||||||||
(amounts in million of euros, except share data) | ||||||||||||||||||||||||||||||||||||||||
Balance at January 1, 2004 | 11,680,718 | 23.4 | 292.7 | 94.7 | (0.8 | ) | 9.2 | — | 419.2 | 8.8 | 428.0 | |||||||||||||||||||||||||||||
Capital increase | 1,500 | — | — | |||||||||||||||||||||||||||||||||||||
Net loss | (6.4 | ) | (6.4 | ) | 1.0 | (5.4 | ) | |||||||||||||||||||||||||||||||||
Cost of share-based payment | 0.5 | 0.5 | 0.5 | |||||||||||||||||||||||||||||||||||||
Operations on treasury shares | 2.6 | 2.6 | 2.6 | |||||||||||||||||||||||||||||||||||||
Financial instruments: change in fair value and transfer to income statement(1) | (1.2 | ) | (1.2 | ) | (1.2 | ) | ||||||||||||||||||||||||||||||||||
Financial assets: variance and transfer to income statement(2) | (4.3 | ) | (4.3 | ) | (4.3 | ) | ||||||||||||||||||||||||||||||||||
Foreign currency translation: change in fair value and transfer to income statement(3) | (17.2 | ) | (17.2 | ) | (0.7 | ) | (17.9 | ) | ||||||||||||||||||||||||||||||||
Income and expense recognized directly in equity(1)+(2)+(3) | (5.5 | ) | (17.2 | ) | (22.7 | ) | (0.7 | ) | (23.4 | ) | ||||||||||||||||||||||||||||||
Others(a) | (119.3 | ) | 119.3 | — | — | |||||||||||||||||||||||||||||||||||
Balance at December 31, 2004 | 11,682,218 | 23.4 | 173.4 | 208.1 | 1.8 | 3.7 | (17.2 | ) | 393.2 | 9.1 | 402.3 | |||||||||||||||||||||||||||||
Capital increase | 4,251,962 | 8.5 | 199.1 | 207.6 | 207.6 | |||||||||||||||||||||||||||||||||||
Conversion of convertible bonds | 1,147,500 | 2.3 | 54.0 | 28.9 | 85.2 | 85.2 | ||||||||||||||||||||||||||||||||||
Net loss | (7.8 | ) | (7.8 | ) | 1.0 | (6.8 | ) | |||||||||||||||||||||||||||||||||
Cost of share-based payment | 0.4 | 0.4 | (0.2 | ) | 0.2 | |||||||||||||||||||||||||||||||||||
Operations on treasury shares | (2.9 | ) | (2.9 | ) | (2.9 | ) | ||||||||||||||||||||||||||||||||||
Financial instruments: change in fair value and transfer to income statement(1) | (5.7 | ) | (5.7 | ) | (5.7 | ) | ||||||||||||||||||||||||||||||||||
Foreign currency translation: change in fair value and transfer to income statement(2) | 28.5 | 28.5 | 1.8 | 30.3 | ||||||||||||||||||||||||||||||||||||
Income and expense recognized directly in equity(1)+(2) | (5.7 | ) | 28.5 | 22.8 | 1.8 | 24.6 | ||||||||||||||||||||||||||||||||||
Others(a) | (54.2 | ) | 53.6 | 0.6 | — | — | ||||||||||||||||||||||||||||||||||
Balance at December 31, 2005 | 17,081,680 | 34.2 | 372.3 | 283.2 | (1.1 | ) | (1.4 | ) | 11.3 | 698.5 | 11.7 | 710.2 | ||||||||||||||||||||||||||||
Capital increase | 241,294 | 0.5 | 11.9 | 12.4 | 12.4 | |||||||||||||||||||||||||||||||||||
Conversion of convertible bonds | 274,914 | 0.5 | 10.7 | 31.0 | 42.2 | 42.2 | ||||||||||||||||||||||||||||||||||
Net income | 157.1 | 157.1 | 1.6 | 158.7 | ||||||||||||||||||||||||||||||||||||
Cost of share-based payment | 7.4 | 7.4 | �� | (0.3 | ) | 7.1 | ||||||||||||||||||||||||||||||||||
Operations on treasury shares | 4.1 | 4.1 | 4.1 | |||||||||||||||||||||||||||||||||||||
Actuarial gains and losses of pension plans(1)(c) | (1.0 | ) | (1.0 | ) | (1.0 | ) | ||||||||||||||||||||||||||||||||||
Financial instruments: change in fair value and transfer to income statement(2)(c) | 6.2 | 6.2 | 6.2 | |||||||||||||||||||||||||||||||||||||
Foreign currency translation: change in fair value and transfer to income statement(3)(c) | (49.9 | ) | (49.9 | ) | (1.6 | ) | (51.5 | ) | ||||||||||||||||||||||||||||||||
Income and expense recognized directly in equity(1)+(2)+(3) | (1.0 | ) | 6.2 | (49.9 | ) | (44.7 | ) | (1.6 | ) | (46.3 | ) | |||||||||||||||||||||||||||||
Changes in consolidation scope | — | 11.5 | 11.5 | |||||||||||||||||||||||||||||||||||||
Balance at December 31, 2006 | 17,597,888 | 35.2 | 394.9 | 477.7 | 3.0 | (b) | 4.8 | (38.6 | ) | 877.0 | 22.9 | 899.9 |
(a) | transfer of additionalpaid-in-capital to retained earnings. |
(b) | at December 31, 2006, CGG did not hold any of its own shares through the liquidity contract. |
(c) | net of deferred tax. |
December 31, | ||||||||||||
2006 | 2005 | 2004 | ||||||||||
(amounts in | ||||||||||||
millions of euros) | ||||||||||||
Net income (loss) | 157.1 | (7.8 | ) | (6.4 | ) | |||||||
— Change in actuarial gains and losses on pension plan | (1.0 | ) | — | — | ||||||||
— Change in fair value ofavailable-for-sale investments | — | — | (4.3 | ) | ||||||||
— Change in fair value of hedging instruments | 6.2 | (5.7 | ) | (1.2 | ) | |||||||
— Change in foreign currency translation adjustment | (49.9 | ) | 28.5 | (17.2 | ) | |||||||
Incomes and expenses recognized directly in equity for the period | 112.4 | 15.0 | (29.1 | ) | ||||||||
F-5
Table of Contents
— | Business combinations (IFRS 3): the Company elected not to restate business combinations previous than January 1, 2004; | |
— | Fair value used as assumed cost (IAS 16): the Company did not elect to assess its property, plant and equipment at fair value. Property, plant and equipment are recognized at amortized historical cost; | |
— | Actuarial gains (losses) on pension plans (IAS 19): the Company elected to recognize actuarial gains (losses) on pension plans previously unrecognized at January 1, 2004, in retained earnings; | |
— | Currency translation adjustments (IAS 21): the Company elected to recognize currency translation adjustments at January 1, 2004 through retained earnings. |
— | Financial instruments: the Company early adopted the standards IAS 32 and IAS 39 from January 1, 2004; | |
— | Actuarial gains (losses) on pension plans (IAS 19): the Company elected to recognize actuarial gains (losses) on pension plans directly in retained earnings. |
F-6
Table of Contents
F-7
Table of Contents
F-8
Table of Contents
F-9
Table of Contents
• | Property, plant and equipment |
— equipments and tools | 3 to 10 years | |
— vehicles | 3 to 5 years | |
— seismic vessels | 30 years | |
— buildings for industrial use | 20 years | |
— buildings for administrative and commercial use | 20 to 40 years |
F-10
Table of Contents
— | Gulf of Mexico surveys are amortized on the basis of 50% of revenues (66.6% previously and until December 1, 2006). Starting at time of data delivery, a minimum straight-line depreciation scheme is applied on a five-year period (three-year period previously and until December 1, 2006), should total accumulated depreciation from the 50% of revenues (66.6% previously and until December 1, 2006) amortization method be below this minimum level; the impact of change of estimates of the percentage of revenues to be amortized from 66.6% to 50% and of the minimum straight-line depreciation from a three-year period to a five-year period, applied from December 1, 2006 is a reduction in depreciation expenses of €1.2 million over the year ended at December 31, 2006 and a lower depreciation of €2.7 million over the year ended at December 31, 2007. | |
— | Rest of the world surveys: same as above except depreciation is 83.3% of revenues and straight-line depreciation is over a five-year period from data delivery. |
F-11
Table of Contents
— | the project is clearly defined, and costs are separately identified and reliably measured, | |
— | the product or process is technically and commercially feasible, | |
— | we have sufficient resources to complete development, and | |
— | the intangible asset is likely to generate future economic benefits, either because it is useful to us or through an existing market for the intangible asset itself or for its products. |
— | significant underperformance relative to expected operating results based upon historical and/or projected data, | |
— | significant changes in the manner of our use of the acquired assets or the strategy for our overall business, and | |
— | significant negative industry or economic trends. |
F-12
Table of Contents
F-13
Table of Contents
— | As at the date of issuance, at the fair value of the consideration received, less issuance fees and/or issuance premium; | |
— | subsequently, at amortized cost, corresponding to the fair value at which financial debt is initially recognized, less repayments of the nominal amount and increased or decreased for the amortization of all differences between this original fair value recognized and the amount at maturity; differences between the initial fair value recognized and the amount at maturity are amortized using the effective interest rate method. |
F-14
Table of Contents
F-15
Table of Contents
F-16
Table of Contents
• | 33,004,041 of the shares, or 81.7%, had elected to receive cash, | |
• | 5,788,701 of the shares, or 14.3%, had elected to receive CGG ADSs; and | |
• | 1,627,741 of the shares, or 4.0%, did not make a valid election. |
(in million of U.S. dollars) | ||||
Total acquisition price | 3,500 | |||
Cash and cash equivalents acquired | 100 | |||
Fair value of intangible assets acquired | 600 | |||
Fair value of tangible assets acquired | 200 | |||
Other assets and liabilities acquired, net | — | |||
Preliminary fair value of acquired net assets | 900 | |||
Preliminary goodwill | 2,600 |
F-17
Table of Contents
(in million of euros) | ||||
Total acquisition of Exploration Resources shares | 294.7 | |||
Acquisition fees | 8.6 | |||
Total acquisition price | 303.3 | |||
Cash and cash equivalents acquired | 37.4 | |||
Fair value of fixed assets acquired | 188.7 | |||
Deferred tax liabilities net assumed | (31.9 | ) | ||
Other assets and liabilities acquired | (70.8 | ) | ||
Definitive fair value of net assets acquired | 123.4 | |||
Definitive goodwill | 179.9 |
F-18
Table of Contents
F-19
Table of Contents
December 31 | ||||||||||||
2006 | 2005 | 2004 | ||||||||||
(in million of euros) | ||||||||||||
Trade accounts and notes receivable gross — current portion | 207.5 | 240.0 | 159.4 | |||||||||
Less: allowance for doubtful accounts | (8.3 | ) | (6.2 | ) | (4.4 | ) | ||||||
Trade accounts and notes receivables net — current portion | 199.2 | 233.8 | 155.0 | |||||||||
Trade accounts and notes receivable gross — long term portion | 4.3 | 12.0 | 13.1 | |||||||||
Less: allowance for doubtful accounts | — | — | — | |||||||||
Trade accounts and notes receivables net — long term portion | 4.3 | 12.0 | 13.1 | |||||||||
Recoverable costs and accrued profit, not billed | 97.6 | 51.7 | 28.7 | |||||||||
Total accounts and notes receivables | 301.1 | 297.5 | 196.8 | |||||||||
December 31, 2006 | December 31, 2005 | December 31, 2004 | ||||||||||||||||||||||||||||||||||
Valuation | Valuation | Valuation | ||||||||||||||||||||||||||||||||||
Cost | Allowance | Net | Cost | Allowance | Net | Cost | Allowance | Net | ||||||||||||||||||||||||||||
(in million of euros) | ||||||||||||||||||||||||||||||||||||
Geophysical services | ||||||||||||||||||||||||||||||||||||
— Consumables and spares parts | 30.3 | (1.1 | ) | 29.2 | 23.1 | (1.1 | ) | 22.0 | 18.6 | (1.0 | ) | 17.6 | ||||||||||||||||||||||||
— Work in progress | 8.0 | — | 8.0 | 7.6 | — | 7.6 | 5.4 | — | 5.4 | |||||||||||||||||||||||||||
Geophysical products | ||||||||||||||||||||||||||||||||||||
— Raw materials and spare parts | 62.6 | (8.0 | ) | 54.6 | 45.4 | (6.9 | ) | 38.5 | 27.4 | (6.1 | ) | 21.3 | ||||||||||||||||||||||||
— Work in progress | 73.8 | (4.3 | ) | 69.5 | 51.0 | (5.7 | ) | 45.3 | 34.9 | (4.6 | ) | 30.3 | ||||||||||||||||||||||||
— Finished goods | 30.3 | (2.9 | ) | 27.4 | 30.1 | (4.0 | ) | 26.1 | 16.0 | (3.8 | ) | 12.2 | ||||||||||||||||||||||||
Inventories and work in progress | 205.0 | (16.3 | ) | 188.7 | 157.2 | (17.7 | ) | 139.5 | 102.3 | (15.5 | ) | 86.8 | ||||||||||||||||||||||||
F-20
Table of Contents
December 31, | December 31, | December 31, | ||||||||||
Variation of the period | 2006 | 2005 | 2004 | |||||||||
(in million of euros) | ||||||||||||
Balance at beginning of period | 139.5 | 86.8 | 62.4 | |||||||||
Variations | 39.3 | 46.6 | 9.5 | |||||||||
Movements in valuation allowance | 0.7 | (1.3 | ) | 6.9 | ||||||||
Change in consolidation scope | 3.1 | 1.1 | 7.5 | |||||||||
Change in exchange rates | (4.6 | ) | 4.3 | (1.5 | ) | |||||||
Others | 10.7 | 2.0 | 2.0 | |||||||||
Balance at end of period | 188.7 | 139.5 | 86.8 | |||||||||
December 31, | ||||||||||||
2006 | 2005 | 2004 | ||||||||||
(in million of euros) | ||||||||||||
Personnel and other tax assets | 15.4 | 16.0 | 5.5 | |||||||||
Fair value of financial instruments (see note 14) | 8.8 | — | 8.9 | |||||||||
Other miscellaneous receivables | 18.1 | 11.6 | 18.9 | |||||||||
Supplier prepayments | 10.6 | 3.7 | 8.2 | |||||||||
Assets of retirement indemnity plans | 0.4 | 1.8 | — | |||||||||
Prepaid expenses(a) | 9.8 | 8.4 | 7.2 | |||||||||
Other current assets | 63.1 | 41.5 | 48.7 | |||||||||
(a) | includes principally prepaid rent, vessel charters. |
F-21
Table of Contents
December 31, 2006 | ||||||||||||||||
Additions/ | ||||||||||||||||
Balance at | Deductions | Balance | ||||||||||||||
beginning | charged in | at end | ||||||||||||||
of year | income | Others(a) | of period | |||||||||||||
(in million of euros) | ||||||||||||||||
Trade accounts and notes receivables | 6.2 | 2.3 | (0.2 | ) | 8.3 | |||||||||||
Inventories andwork-in-progress | 17.7 | (0.7 | ) | (0.7 | ) | 16.3 | ||||||||||
Tax assets | 0.3 | 0.5 | — | 0.8 | ||||||||||||
Other current assets | 1.4 | (0.7 | ) | — | 0.7 | |||||||||||
Loans receivables and other investments | 1.3 | (0.2 | ) | (0.1 | ) | 1.0 | ||||||||||
Total assets valuation allowance | 26.9 | 1.2 | (1.0 | ) | 27.1 | |||||||||||
(a) | includes the effects of exchange rate changes and changes in the scope of consolidation. |
December 31, 2005 | ||||||||||||||||
Additions/ | ||||||||||||||||
Balance at | Deductions | Balance | ||||||||||||||
beginning | charged in | at end | ||||||||||||||
of year | income | Others(a) | of period | |||||||||||||
(in million of euros) | ||||||||||||||||
Trade accounts and notes receivables | 4.4 | 2.3 | (0.5 | ) | 6.2 | |||||||||||
Inventories andwork-in-progress | 15.4 | 1.3 | 1.0 | 17.7 | ||||||||||||
Tax assets | — | — | 0.3 | 0.3 | ||||||||||||
Other current assets | 0.7 | 0.7 | — | 1.4 | ||||||||||||
Loans receivables and other investments | 2.0 | (0.7 | ) | — | 1.3 | |||||||||||
Total assets valuation allowance | 22.5 | 3.6 | 0.8 | 26.9 | ||||||||||||
(a) | includes the effects of exchange rate changes and changes in the scope of consolidation. |
December 31, 2004 | ||||||||||||||||
Additions/ | ||||||||||||||||
Balance at | Deductions | Balance | ||||||||||||||
beginning | charged | at end | ||||||||||||||
of year | in income | Others(a) | of period | |||||||||||||
(in million of euros) | ||||||||||||||||
Trade accounts and notes receivables | 3.9 | (0.1 | ) | 0.6 | 4.4 | |||||||||||
Inventories andwork-in-progress | 22.7 | (6.9 | ) | (0.4 | ) | 15.4 | ||||||||||
Other current assets | 0.6 | 0.1 | — | 0.7 | ||||||||||||
Loans receivables and other investments | 2.0 | 0.2 | (0.2 | ) | 2.0 | |||||||||||
Total assets valuation allowance | 29.2 | (6.7 | ) | (0,0 | ) | 22.5 | ||||||||||
(a) | includes the effects of exchange rate changes and changes in the scope of consolidation. |
F-22
Table of Contents
December 31, | ||||||||||||
2006 | 2005 | 2004 | ||||||||||
(in million of euros) | ||||||||||||
Other financial investments: | ||||||||||||
Non-consolidated investments | 8.9 | 3.7 | 2.8 | |||||||||
Loans and advances(a) | 6.8 | 7.3 | 6.3 | |||||||||
Other | 3.5 | 4.3 | 3.4 | |||||||||
Total | 19.2 | 15.3 | 12.5 | |||||||||
(a) | includes loans and advances to companies accounted for under the equity method at December 31, 2006 for €6.0 million, at December 31, 2005 for €6.6 million, and at December 31, 2004 for €5.8 million. |
December 31, | ||||||||||||
2006 | 2005 | 2004 | ||||||||||
(in million of euros) | ||||||||||||
Cybernetix | 4.1 | — | — | |||||||||
Tronic’s Microsystems SA | 3.9 | 3.5 | 2.6 | |||||||||
Other investments in non-consolidated companies | 0.9 | 0.2 | 0.2 | |||||||||
Total investments in unconsolidated companies | 8.9 | 3.7 | 2.8 | |||||||||
December 31, | ||||||||||||
2006 | 2005 | 2004 | ||||||||||
(in million of euros) | ||||||||||||
Balance at beginning of period | 43.9 | 30.8 | 27.0 | |||||||||
Investments made during the year | 1.0 | — | — | |||||||||
Equity in income | 10.1 | 13.0 | 10.3 | |||||||||
Dividends received during the period, reduction in share capital | (4.3 | ) | (4.5 | ) | (4.8 | ) | ||||||
Changes in exchange rates | (4.5 | ) | 4.6 | (1.7 | ) | |||||||
Balance at end of period | 46.2 | 43.9 | 30.8 | |||||||||
F-23
Table of Contents
December 31, | ||||||||||||
2006 | 2005 | 2004 | ||||||||||
(in million of euros) | ||||||||||||
Argas | 37.5 | 36.5 | 23.7 | |||||||||
Geomar | 5.4 | 5.5 | 5.6 | |||||||||
JV Xian Peic/Sercel Limited | 2.4 | 2.4 | 2.2 | |||||||||
VS Fusion LLC | 0.9 | (0.5 | ) | (0.7 | ) | |||||||
Investments in companies accounting for using the equity method | 46.2 | 43.9 | 30.8 | |||||||||
December 31, | ||||||||||||
2006 | 2005 | 2004 | ||||||||||
(in million of euros) | ||||||||||||
Argas | 33.2 | 32.2 | 19.4 | |||||||||
Geomar | (0.2 | ) | (0.2 | ) | — | |||||||
JV Xian Peic/Sercel Limited | 0.9 | 0.8 | 0.6 | |||||||||
VS Fusion LLC | (0.3 | ) | (0.5 | ) | (0.7 | ) | ||||||
Total | 33.6 | 32.3 | 19.3 | |||||||||
2006 | 2005 | 2004 | ||||||||||
(in million of euros) | ||||||||||||
Current assets | 65.5 | 57.5 | 41.9 | |||||||||
Fixed assets | 21.0 | 33.5 | 23.7 | |||||||||
Current liabilities | 3.7 | 3.5 | 5.7 | |||||||||
Non current liabilities | 4.6 | 8.7 | 2.6 | |||||||||
Gross revenue | 81.1 | 76.3 | 70.0 | |||||||||
Operating profit | 15.5 | 19.6 | 21.6 | |||||||||
Income from continuing operations before extraordinary items and cumulative effect of change in accounting principle | 17.1 | 20.4 | 21.3 | |||||||||
Net income | 17.1 | 20.4 | 21.3 | |||||||||
F-24
Table of Contents
December 31 | ||||||||||||||||||||||||||||
2006 | 2005 | |||||||||||||||||||||||||||
Accumulated | Accumulated | 2004 | ||||||||||||||||||||||||||
Gross | depreciation | Net | Gross | depreciation | Net | Net | ||||||||||||||||||||||
(amounts in million of euros) | ||||||||||||||||||||||||||||
Land | 4.7 | (0.2 | ) | 4.5 | 4.7 | (0.2 | ) | 4.5 | 4.2 | |||||||||||||||||||
Buildings | 62.2 | (31.6 | ) | 30.6 | 60.3 | (29.6 | ) | 30.7 | 27.7 | |||||||||||||||||||
Machinery & equipment | 447.6 | (263.9 | ) | 183.7 | 457.0 | (295.9 | ) | 161.1 | 80.4 | |||||||||||||||||||
Vehicles & vessels | 322.8 | (101.4 | ) | 221.4 | 373.1 | (104.3 | ) | 268.8 | 80.2 | |||||||||||||||||||
Other tangible assets | 36.4 | (26.9 | ) | 9.5 | 35.8 | (25.9 | ) | 9.9 | 9.5 | |||||||||||||||||||
Assets under constructions | 5.5 | — | 5.5 | 5.1 | — | 5.1 | 2.1 | |||||||||||||||||||||
Total Property, plant and equipment | 879.2 | (424.0 | ) | 455.2 | 936.0 | (455.9 | ) | 480.1 | 204.1 | |||||||||||||||||||
December 31 | ||||||||||||||||||||||||||||
2006 | 2005 | |||||||||||||||||||||||||||
Accumulated | Accumulated | 2004 | ||||||||||||||||||||||||||
Gross | depreciation | Net | Gross | depreciation | Net | Net | ||||||||||||||||||||||
(amounts in million of euros) | ||||||||||||||||||||||||||||
Land and buildings under capital leases | — | — | — | 5.9 | (0.2 | ) | 5.7 | 5.8 | ||||||||||||||||||||
Geophysical equipment and vessels under capital leases | 72.6 | (22.1 | ) | 50.5 | 101.7 | (25.5 | ) | 76.2 | 8.6 | |||||||||||||||||||
Other tangible assets under capital leases | 0.5 | (0.5 | ) | — | 0.5 | (0.5 | ) | — | 0.1 | |||||||||||||||||||
Total Property, plant and equipment under capital leases | 73.1 | (22.6 | ) | 50.5 | 108.1 | (26.2 | ) | 81.9 | 14.5 | |||||||||||||||||||
F-25
Table of Contents
December 31, | ||||||||||||
2006 | 2005 | 2004 | ||||||||||
(in million of euros) | ||||||||||||
Balance at beginning of period | 480.1 | 204.1 | 215.8 | |||||||||
Acquisitions | 133.3 | 107.7 | 41.1 | |||||||||
Acquisitions through capital lease | 0.1 | 17.4 | 8.7 | |||||||||
Depreciation | (92.8 | ) | (67.9 | ) | (58.0 | ) | ||||||
Disposals | (3.6 | ) | (6.0 | ) | (1.9 | ) | ||||||
Changes in exchange rates | (41.1 | ) | 35.2 | (8.9 | ) | |||||||
Change in consolidation scope | (6.5 | ) | 195.1 | 8.8 | ||||||||
Reclassification of seismic equipments as “Assets held for sale” | (0.4 | ) | (3.5 | ) | — | |||||||
Other | (13.9 | ) | (2.0 | ) | (1.5 | ) | ||||||
Balance at end of period | 455.2 | 480.1 | 204.1 | |||||||||
F-26
Table of Contents
December 31, 2006 | December 31, 2005 | |||||||
(in million of euros) | (in million of euros) | |||||||
Acquisitions of tangible assets (excluding capital lease) — see above | 133.3 | 107.7 | ||||||
Development costs capitalized — see note 20 | 11.9 | 8.1 | ||||||
Additions in other tangible assets (excluding non-exclusive surveys) — see note 10 | 4.1 | 2.3 | ||||||
Variance of fixed assets suppliers | (0.1 | ) | (1.0 | ) | ||||
Total purchases of tangible and intangible assets according to cash-flow statement | 149.2 | 117.1 | ||||||
Acquisitions through capital lease — see above | 0.1 | 17.4 | ||||||
Increase in multi-client surveys — see note 10 | 61.5 | 32.0 | ||||||
Less variance of fixed assets | 0.1 | 1.0 | ||||||
Capital expenditures according to note 19 | 210.9 | 167.5 | ||||||
December 31 | ||||||||||||||||||||||||||||
2006 | 2005 | |||||||||||||||||||||||||||
Accumulated | Accumulated | 2004 | ||||||||||||||||||||||||||
Gross | depreciation | Net | Gross | depreciation | Net | Net | ||||||||||||||||||||||
(amounts in million of euros) | ||||||||||||||||||||||||||||
Multi-client surveys | 543.3 | (471.5 | ) | 71.8 | 568.4 | (474.8 | ) | 93.6 | 124.5 | |||||||||||||||||||
Development costs capitalized | 40.1 | (8.5 | ) | 31.6 | 29.2 | (3.9 | ) | 25.3 | 18.3 | |||||||||||||||||||
Software | 28.8 | (21.5 | ) | 7.3 | 25.9 | (19.5 | ) | 6.4 | 7.4 | |||||||||||||||||||
Other intangible assets | 30.1 | (13.2 | ) | 16.9 | 19.6 | (8.6 | ) | 11.0 | 12.5 | |||||||||||||||||||
Total intangible assets | 642.3 | (514.7 | ) | 127.6 | 643.1 | (506.8 | ) | 136.3 | 162.7 | |||||||||||||||||||
F-27
Table of Contents
December 31, | ||||||||||||
Variation of the period | 2006 | 2005 | 2004 | |||||||||
(in million of euros) | ||||||||||||
Balance at beginning of period | 136.3 | 162.7 | 159.1 | |||||||||
Increase in multi-client surveys | 61.5 | 32.0 | 51.1 | |||||||||
Development costs capitalized | 11.9 | 8.2 | 4.6 | |||||||||
Others acquisitions | 4.1 | 2.3 | 1.7 | |||||||||
Depreciation on multi-client surveys | (80.6 | ) | (69.6 | ) | (66.5 | ) | ||||||
Other depreciation | (13.2 | ) | (8.4 | ) | (7.8 | ) | ||||||
Disposals | — | — | (0.9 | ) | ||||||||
Changes in exchange rates | (4.0 | ) | 9.0 | (5.1 | ) | |||||||
Change in consolidation scope | 11.4 | — | 26.3 | |||||||||
Other | 0.2 | 0.1 | 0.2 | |||||||||
Balance at end of period | 127.6 | 136.3 | 162.7 | |||||||||
December 31 | ||||||||||||
2006 | 2005 | 2004 | ||||||||||
(amounts in million of euros) | ||||||||||||
Goodwill of consolidated subsidiaries | 267.4 | 252.9 | 62.5 |
December 31, | ||||||||||||
Variation of the period | 2006 | 2005 | 2004 | |||||||||
(in million of euros) | ||||||||||||
Balance at beginning of period | 252.9 | 62.5 | 58.2 | |||||||||
Additions | 35.6 | 177.1 | 7.0 | |||||||||
Adjustments | 2.9 | — | — | |||||||||
Changes in exchange rates | (24.0 | ) | 13.3 | (3.3 | ) | |||||||
Other | — | — | 0.6 | |||||||||
Balance at end of period | 267.4 | 252.9 | 62.5 | |||||||||
F-28
Table of Contents
— | the Products segment level: test of the net book value of the goodwill | |
— | the Offshore SBU: test of the historical multi-client library net book value and of the tangible assets net book value, which results notably from the 2001 Aker purchase accounting, from the assets acquired in 2005 Exploration Resources purchase accounting and of the goodwill, corresponding mainly to the goodwill booked from Exploration Resources purchase accounting in 2005 | |
— | the Processing SBU: test of the goodwill, corresponding mainly to the goodwill booked from Exploration Resources purchase accounting in 2005 | |
— | the Land SBU level: test of the net book value of assets. |
• | forecasted cash-flows estimated in the5-year business plans deemed on the basis of the average medium term exchange rate €1 equals U.S.$1.30; and | |
• | discount ratios corresponding to the respective sector weighted average cost of capital (WACC): |
Excess of the | ||||||||||||||||
expected future | ||||||||||||||||
discounted | Sensitivity to a | Sensitivity to an | ||||||||||||||
cash-flows over | reduction of one | increase of one | ||||||||||||||
the net book | point on the | point on the | ||||||||||||||
Goodwill | value of assets | discount rate | discount rate | |||||||||||||
in million of euros | ||||||||||||||||
Products segments | 86.6 | 1,160.2 | +180.6 | −144.6 | ||||||||||||
Multi-client library | — | 94.2 | +3.7 | −3.5 | ||||||||||||
Offshore SBU | 154.5 | 343.7 | +129.6 | −102.2 | ||||||||||||
Processing SBU | 26.3 | 79.1 | +19.3 | −15.2 | ||||||||||||
Land SBU | — | 34.9 | +11.2 | −9.0 |
F-29
Table of Contents
December 31, | ||||||||||||
2006 | 2005 | 2004 | ||||||||||
(in million of euros) | ||||||||||||
Value added tax and other taxes payable | 15.7 | 12.9 | 7.7 | |||||||||
Deferred income | 7.0 | 10.6 | 3.9 | |||||||||
Fair value of financial instruments (see note 14) | 0.6 | 4.7 | — | |||||||||
Other liabilities | 8.0 | 7.0 | 11.2 | |||||||||
Other current liabilities | 31.3 | 35.2 | 22.8 | |||||||||
December 31 | ||||||||||||||||||||||||||||
2006 | 2005 | |||||||||||||||||||||||||||
Non- | Non- | 2004 | ||||||||||||||||||||||||||
Current | current | Total | Current | current | Total | Total | ||||||||||||||||||||||
(amounts in million of euros) | ||||||||||||||||||||||||||||
Outstanding bonds | — | 245.5 | 245.5 | — | 146.3 | 146.3 | 210.0 | |||||||||||||||||||||
Bank loans | 26.2 | 69.0 | 95.2 | 135.9 | 28.8 | 164.7 | 11.9 | |||||||||||||||||||||
Capital lease obligations | 9.0 | 46.5 | 55.5 | 20.1 | 67.3 | 87.4 | 24.8 | |||||||||||||||||||||
Sub-total | 35.2 | 361.0 | 396.2 | 156.0 | 242.4 | 398.4 | 246.7 | |||||||||||||||||||||
Bank overdrafts | 6.5 | 6.5 | 9.3 | 9.3 | 2.8 | |||||||||||||||||||||||
Accrued interest | 2.9 | 2.9 | 1.9 | 1.9 | 2.9 | |||||||||||||||||||||||
Gross financial debt | 44.6 | 405.6 | 167.2 | 409.6 | 252.4 | |||||||||||||||||||||||
December 31, | ||||||||||||
2006 | 2005 | 2004 | ||||||||||
(in million of euros) | ||||||||||||
Euro | 1.5 | 11.8 | 18.7 | |||||||||
U.S. dollar | 394.6 | 385.6 | 226.0 | |||||||||
Other currencies | 0.1 | 1.0 | 2.0 | |||||||||
Total | 396.2 | 398.4 | 246.7 | |||||||||
F-30
Table of Contents
December 31, | ||||||||||||
2006 | 2005 | 2004 | ||||||||||
(in million of euros) | ||||||||||||
Variable rates (average effective rate December 31, 2006: 6.34%, 2005: 7.60%, 2004: 2.76%) | 85.3 | (1) | 156.6 | 15.4 | ||||||||
Fixed rates (average effective rate December 31, 2006: 7.30%, 2005: 7.06%, 2004: 11.07%) | 310.9 | 241.8 | 231.3 | |||||||||
Total | 396.2 | 398.4 | 246.7 | |||||||||
(1) | of which €62.3 million with maturity of more than one year |
F-31
Table of Contents
F-32
Table of Contents
F-33
Table of Contents
(a) | the ratio of net debt over equity should not exceed 2.50; |
F-34
Table of Contents
(b) | the ratio of net debt over Adjusted EBITDA (ORBDA) should not exceed (i) 2.00 on the12-month periods ending December 31, 2003, June 30, 2004 and December 31, 2004, (ii) 1.75 on the12-month periods ending June 30, 2005, (iii) 2.50 on the12-month period preceding December 31, 2005 and (iv) 2.00 on the following12-month periods; and | |
(c) | the ratio of net debt (in USD at closing rate) over cash-flow from operations on a rolling12-month period calculated at average rate of the period should not exceed (i) 4.00 on the12-month periods ending December 31, 2003 and June 30, 2004, (ii) 3.75 on the12-month periods ending December 31, 2004, (iii) 3.50 on the12-month period ending June 30, 2005, (iv) 3.00 on the following12-month periods. |
F-35
Table of Contents
December 31, | ||||||||||||
2006 | 2005 | 2004 | ||||||||||
Forward sales of U.S. dollars against euros | ||||||||||||
Notional amount (in millions of US$) | 305.9 | 183.6 | 127.0 | |||||||||
—of which forward sales qualifying as cash-flow hedges | 305.9 | 183.6 | 108.4 | |||||||||
—of which forward sales not qualifying as cash-flow hedges | — | — | 18.6 | |||||||||
Weighted average maturity | 94 days | 91 days | 96 days | |||||||||
Weighted average forward U.S.$/Euro exchange rate | 1.2619 | 1.2048 | 1.2453 | |||||||||
Forward sales of U.S. dollars against British pounds | ||||||||||||
Notional amount (in millions of US$) | 21.9 | 6.5 | — | |||||||||
—of which forward sales qualifying as cash-flow hedges | 21.9 | 6.5 | — | |||||||||
—of which forward sales not qualifying as cash-flow hedges | — | — | — | |||||||||
Weighted average maturity | 123 days | 90 days | — | |||||||||
Weighted average forward U.S.$/£ exchange rate | 1.8956 | 1.8871 | — |
December 31, | ||||||||||||
2006 | 2005 | 2004 | ||||||||||
(in million of euros) | ||||||||||||
Carrying value of forward exchange contracts (see notes 5 and 12) | 8.8 | (4.7 | ) | 8.9 | ||||||||
Fair value of forward exchange contracts | 8.8 | (4.7 | ) | 8.9 | ||||||||
Gains recognized in profit and loss (see note 21) | 8.9 | — | 4.5 | |||||||||
Losses recognized in profit and loss (see note 21) | — | (2.9 | ) | — | ||||||||
Gains recognized directly in equity | 8.7 | — | 3.7 | |||||||||
Losses recognized directly in equity | — | (5.6 | ) | — |
F-36
Table of Contents
— | one on a variable rate loan in U.S. dollars to pay the interest at fixed rate of 4.75% and to receive interest at the variable rate of the loan, on the nominal amount of U.S. dollars 12 millions. | |
— | one on a variable rate loan in U.S. dollars to pay the interest at fixed rate of 6.77% and to receive interest at the variable rate of the loan, on the nominal amount of U.S. dollars 63 millions. |
At December 31, | ||||||||||||
2006 | 2005 | 2004 | ||||||||||
(in million of euros) | ||||||||||||
Carrying value of interest rate swaps (see note 12) | (0,6 | ) | — | — | ||||||||
Fair value of interest rate swaps | (0,6 | ) | — | — | ||||||||
Gains recognized in profit and loss | — | — | — | |||||||||
Losses recognized in profit and loss | (0,6 | ) | — | — | ||||||||
Gains recognized directly in equity | — | — | — | |||||||||
Losses recognized directly in equity | — | — | — |
2006 | 2005 | 2004 | ||||||||||||||||||||||
Carrying | Fair | Carrying | Fair | Carrying | Fair | |||||||||||||||||||
Amount | Value | Amount | Value | Amount | Value | |||||||||||||||||||
(in million of euros) | ||||||||||||||||||||||||
Cash and cash equivalents | 251.8 | 251.8 | 112.4 | 112.4 | 130.6 | 130.6 | ||||||||||||||||||
Bank overdraft facilities | 6.5 | 6.5 | 9.3 | 9.3 | 2.8 | 2.8 | ||||||||||||||||||
Bank loans, vendor equipment financing and shareholder loans: | ||||||||||||||||||||||||
Variable rate | 85.3 | 85.3 | 156.6 | 156.6 | 15.4 | 15.4 | ||||||||||||||||||
Fixed rate | 310.9 | 369.2 | 241.8 | 244.0 | 231.7 | 254.8 | ||||||||||||||||||
Forward currency exchange contracts | 8.7 | 8.7 | (4.7 | ) | (4.7 | ) | 8.9 | 8.9 | ||||||||||||||||
Interest rate swaps | (0.6 | ) | — | — | — | — | — |
F-37
Table of Contents
— | 241,294 fully paid shares related to stock options exercised for which the company received net proceeds of €12.4 million; | |
— | 274,914 fully paid ordinary shares issued on the conversion of 2,525 convertibles bonds being the remaining outstanding convertible bonds issued on November 4, 2004 with maturity date 2012 and; |
F-38
Table of Contents
Options | ||||||||||||||||||||
outstanding at | Exercise price | Remaining | ||||||||||||||||||
Date of Board of Directors’ Resolution | Options granted | Dec. 31. 2006 | per share (€) | Expiration date | duration | |||||||||||||||
January 18, 2000 | 231.000 | 39.625 | 45.83 | January 17, 2008 | 12.5 months | |||||||||||||||
March 14, 2001 | 256.000 | 147.297 | 65.39 | March 13, 2009 | 26.5 months | |||||||||||||||
May 15, 2002 | 138.100 | 97.124 | 39.92 | May 14, 2010 | 40.5 months | |||||||||||||||
May 15, 2003 | 169.900 | 164.711 | 14.53 | May 14, 2010 | 52.5 months | |||||||||||||||
May 11, 2006 | 202.500 | 201.950 | 131.26 | May 14, 2014 | 88.5 months | |||||||||||||||
Total | 997.500 | 650.797 | ||||||||||||||||||
2006 | 2005 | 2004 | ||||||||||||||||||||||
Weighted | Weighted | Weighted | ||||||||||||||||||||||
average | average | average | ||||||||||||||||||||||
Number of | exercise | Number of | exercise | Number of | exercise | |||||||||||||||||||
options | price | options | price | options | price | |||||||||||||||||||
(weighted average exercise price in euro) | ||||||||||||||||||||||||
Outstanding-beginning of year | 691.939 | 43.63€ | 809.050 | 48.95€ | 815.673 | 48.86€ | ||||||||||||||||||
Granted | 202.500 | 131.26€ | — | — | — | — | ||||||||||||||||||
Adjustments following the capital increase | — | — | 57.917 | 43.49€ | — | — | ||||||||||||||||||
Exercised | (241.294 | ) | 51.50€ | (152.834 | ) | 53.86€ | (1.500 | ) | 15.82€ | |||||||||||||||
Forfeited | (2.348 | ) | 48.36€ | (22.194 | ) | 55.61€ | (5.123 | ) | 44.39€ | |||||||||||||||
Outstanding-end of year | 650.797 | 67.96€ | 691.939 | 43.63€ | 809.050 | 48.95€ | ||||||||||||||||||
Exercisable-end of year | 379.307 | 42.21€ | 376.631 | 58.89€ | 56.662 | 61.03€ |
— | Period of acquisition of the rights for allocation and realization of the conditions |
F-39
Table of Contents
— | General conditions of allocation |
• | the Group average consolidated net income per share over the year ended December 31, 2006 and 2007. | |
• | the average yearly return before tax on capital employed over the year ended December 31, 2006 and 2007 of either the Group, the Services segment, or the Products segment, according to which segment the beneficiary belongs to. |
— | Holding Period of the allocated shares |
Fair value per | ||||||||||||||||
Options | share at the | |||||||||||||||
granted | Volatility | Risk-free rate | grant date (€) | |||||||||||||
2003 stock options plan | 169.900 | 57% | 3.9% | € | 11.13 | |||||||||||
2006 stock options plan | 202.500 | 35% | 3.8% | € | 74.83 | (a) |
Achievement | Fair value per | |||||||||||||||
Free Shares | Annual | of performance | share at the | |||||||||||||
granted | Turnover | Conditions | grant date (€) | |||||||||||||
2006 free shares allocation plan | 53.200 | 2.5% | 95% | € | 158.2 | (b) |
(a) | the hypothetical exercise date was estimated at May 11, 2012, corresponding to the mid-term between the last acquisition date (May 11, 2010) and the end of the plan (May 11, 2014) |
(b) | corresponds to CGG share price at the date of allocation |
Year | ||||||||||||
2006 | 2005 | 2004 | ||||||||||
(in million of euros) | ||||||||||||
2003 stock options plan(a) | 0.2 | 0.4 | 0.5 | |||||||||
2006 stock options plan(b) | 4.8 | — | — | |||||||||
2006 free shares plan(c) | 2.4 | — | — | |||||||||
Total recognized expense according to IFRS 2 | 7.4 | 0.4 | 0.5 | |||||||||
(a) | of which €0.1 million for the executive managers of the Group in 2006, €0.2 million in 2005 and €0.2 million in 2004 |
F-40
Table of Contents
(b) | of which €3.2 million for the executive managers of the Group in 2006 |
(c) | of which €0.6 million for the executive managers of the Group in 2006 |
Balance at | Balance at | |||||||||||||||||||||||
31 December, | Deductions | Deductions | 31 December, | |||||||||||||||||||||
2005 | Additions | (used) | (non used) | Others(a) | 2006 | |||||||||||||||||||
(in million of euros) | ||||||||||||||||||||||||
Provisions for onerous contracts | 2.2 | 1.9 | (4.6 | ) | — | 0.8 | 4.1 | |||||||||||||||||
Provisions for restructuring costs | 1.4 | 0.7 | (0.1 | ) | — | — | 0.8 | |||||||||||||||||
Provisions for litigations | 0.7 | 0.1 | (3.7 | ) | — | (4.0 | ) | 8.3 | ||||||||||||||||
Others provisions | 6.1 | 2.0 | (5.1 | ) | (0.1 | ) | 4.8 | 4.5 | ||||||||||||||||
Total short-term provisions | 10.4 | 4.7 | (13.5 | ) | (0.1 | ) | 1.6 | 17.7 | ||||||||||||||||
Customers Guarantee provisions | 11.7 | 11.8 | (3.7 | ) | — | (1.4 | ) | 5.0 | ||||||||||||||||
Retirement indemnity provisions | 13.0 | 2.0 | (0.7 | ) | — | — | 11.8 | |||||||||||||||||
Other provisions | 0.8 | — | (0.3 | ) | — | — | 1.1 | |||||||||||||||||
Negative value of investments in companies under the equity method | — | — | — | — | (0.5 | ) | 0.5 | |||||||||||||||||
Total long-term provisions | 25.5 | 13.8 | (4.7 | ) | — | (1.9 | ) | 18.4 | ||||||||||||||||
Total provisions | 35.9 | 18.5 | (18.2 | ) | (0.1 | ) | (0.3 | ) | 36.1 |
(a) | includes the effects of exchange rates changes and acquisitions and divestitures |
• | historical staff turnover and standard mortality schedule; | |
• | age of retirement between 60 and 65 years old in France and 67 years old in Norway; and | |
• | actuarial rate and average rate of increase in future compensation. |
F-41
Table of Contents
December 31, | ||||||||||||
2006 | 2005 | 2004 | ||||||||||
(in million of euros) | ||||||||||||
Projected benefit obligation | 21.0 | 18.2 | 13.2 | |||||||||
Unamortized cost of past services(a) | (3.2 | ) | (3.7 | ) | — | |||||||
Effect of changes in discount rates | — | — | — | |||||||||
Pension obligation | 17.8 | 15.0 | 13.2 | |||||||||
Service cost | 1.4 | 1.6 | 0.6 | |||||||||
Interest expense | 0.9 | 0.7 | 0.5 | |||||||||
Amortization of cost of past services | 0.6 | — | — | |||||||||
Amortization of loss arising from change in discount rate | — | (0.2 | ) | (0.3 | ) | |||||||
Net expense of the year | 2.9 | 2.1 | 0.8 | |||||||||
Benefit payments | (0.5 | ) | (0.4 | ) | (0.2 | ) | ||||||
Actuarial gains and losses directly recognized in equity | 1.1 | — | — | |||||||||
Consolidation scope entries & currency translation | (0.7 | ) | 0.1 | 0.3 | ||||||||
Net changes | 2.8 | 1.8 | 0.9 | |||||||||
Fair value of plan assets | 5.2 | 5.0 | 2.2 | |||||||||
Contributions paid | 0.6 | 2.6 | 0.4 | |||||||||
Expected return on plan assets | 0.2 | 0.2 | 0.1 | |||||||||
Consolidation scope entries & currency translation | (0.6 | ) | — | — | ||||||||
Net changes | 0.2 | 2.8 | 0.5 | |||||||||
Net liability at end of the year | (13.0 | ) | (11.8 | ) | (11.0 | ) | ||||||
Net asset at end of the year | 0.4 | 1.8 | — | |||||||||
Key assumptions used in estimating the Group’s retirement obligations are: | ||||||||||||
Discount rate | 4.50% | 4.25% | 4.00% | |||||||||
Average rate of increase in future compensation | 3.00% | 3.00% | 3.00% | |||||||||
Average expected return on assets | 4.00% | 4.00% | 5.50% |
(a) | corresponds to the supplemental pension and retirement plan for the members of the Group’s Management Committee and members of the management board of Sercel Holding. |
December 31, | ||||||||||||
2006 | 2005 | 2004 | ||||||||||
(in million of euros) | ||||||||||||
Research and development subsidies | 5.5 | 5.5 | 6.8 | |||||||||
Profit sharing scheme | 18.2 | 15.2 | 13.0 | |||||||||
Other non-current liabilities | 23.7 | 20.7 | 19.8 | |||||||||
F-42
Table of Contents
F-43
Table of Contents
Payments due by period | ||||||||||||||||||||
Less than | After | |||||||||||||||||||
1 year | 1-3 years | 4-5 years | 5 years | Total | ||||||||||||||||
(in million of euros) | ||||||||||||||||||||
Long-term debt (Note 13) | 26.2 | 41.3 | 27.1 | 246.1 | 340.7 | |||||||||||||||
Capital Lease Obligations | 11.7 | 18.1 | 33.8 | — | 63.6 | |||||||||||||||
Operating Leases | 46.3 | 40.6 | 10.5 | 4.2 | 101.6 | |||||||||||||||
Other Long-term Obligations (bond interest) | 18.8 | 37.6 | 37.6 | 65.8 | 159.8 | |||||||||||||||
Total Contractual Obligations | 103.0 | 137.6 | 109.0 | 316.1 | 665.7 | |||||||||||||||
Less than | After | |||||||||||||||
1 year | 1-5 years | 5 years | Total | |||||||||||||
(in million of euros) | ||||||||||||||||
Capital Lease Obligations | 11.7 | 51.9 | — | 63.6 | ||||||||||||
Discounting | (2.7 | ) | (5.4 | ) | — | (8.1 | ) | |||||||||
Capital lease debt (see note 13) | 9.0 | 46.5 | — | 55.5 |
December 31, | ||||||||||||
2006 | 2005 | 2004 | ||||||||||
(in million of euros) | ||||||||||||
Guarantees issued in favor of clients(a) | 161.6 | 82.4 | 83.0 | |||||||||
Guarantees issued in favor of banks(a) | 21.8 | 26.3 | 13.7 | |||||||||
Other guarantees(b) | 25.5 | 14.2 | 13.3 | |||||||||
Total | 208.9 | 122.9 | 110.0 | |||||||||
(a) | Guarantees issued in favor of clients relate mainly to guarantees issued by the Company to support bids made at the subsidiaries level. |
(b) | Guarantees issued in favor of banks related mainly to guarantees issued by the Company to support credit facilities made at the subsidiaries level. |
(c) | Other guarantees relate primarily to guarantees issued by the Company on behalf of subsidiaries and affiliated companies in favor of customs or other governmental administrations. |
F-44
Table of Contents
Due date | ||||||||||||||||||||
Less than | After | |||||||||||||||||||
1 year | 2-3 years | 4-5 years | 5 years | Total | ||||||||||||||||
(in million of euros) | ||||||||||||||||||||
Guarantees issued in favor of clients | 151.0 | 4.1 | 6.5 | — | 161.6 | |||||||||||||||
Guarantees issued in favor of banks | 21.8 | — | — | — | 21.8 | |||||||||||||||
Other guarantees | 25.5 | — | — | — | 25.5 | |||||||||||||||
Total | 198.3 | 4.1 | 6.5 | 208.9 | ||||||||||||||||
F-45
Table of Contents
• | Geophysical services, which consist of (i) land seismic acquisition, (ii) marine seismic acquisition, (iii) other geophysical acquisition, including activities not exclusively linked to oilfield services, and (iv) data processing, and data management; | |
• | Geophysical products, which consist of the manufacture and sale of equipment involved in seismic data acquisition, such as recording and transmission equipment and vibrators for use in land seismic acquisition. and software development and sales. |
F-46
Table of Contents
Geophysical | Geophysical | Eliminations and | Consolidated | |||||||||||||
2006 | services | products | Adjustments | Total | ||||||||||||
(in million of euros) | ||||||||||||||||
Revenues from unaffiliated customers | 792.0 | 537.5 | — | 1329.6 | ||||||||||||
Inter-segment revenues | 0.9 | 72.6 | (73.4 | ) | — | |||||||||||
Operating revenues | 792.9 | 610.1 | (73.4 | ) | 1329.6 | |||||||||||
Other income from ordinary activities | 1.8 | — | — | 1.8 | ||||||||||||
Total income from ordinary activities | 794.7 | 610.1 | (73.4 | ) | 1331.4 | |||||||||||
Operating income (loss) | 150.3 | 174.2 | (35.5 | )(a) | 289.0 | |||||||||||
Equity income (loss) of investees | 9.8 | 0.4 | 10.2 | |||||||||||||
Capital expenditures(b) | 200.3 | 29.8 | (19.2 | ) | 210.9 | |||||||||||
Depreciation and amortization(c) | (177.2 | ) | (18.1 | ) | 7.2 | (188.1 | ) | |||||||||
Corporate assets amortization | — | — | — | — | ||||||||||||
Investments in companies under equity method | — | — | — | — | ||||||||||||
Identifiable assets | 1106.2 | 550.0 | (181.0 | ) | 1475.2 | |||||||||||
Unallocated and corporate assets | 306.9 | |||||||||||||||
Total assets | 1782.1 | |||||||||||||||
of which equity method companies | 46.2 | |||||||||||||||
Identifiable liabilities | 508.8 | 243.9 | (118.3 | ) | 634.4 | |||||||||||
Unallocated and corporate liabilities | 247.8 | |||||||||||||||
Total liabilities | 882.2 | |||||||||||||||
(a) | Includes general corporate expenses of €27.4 million for year ended December 31, 2006. |
(b) | Includes (i) investments in multi-client surveys of €61.5 million, (ii) equipment acquired under capital lease of €0.1 million, (iii) capitalized development costs in the Services segment of €8.2 million, and (iv) capitalized development costs in the Products segment of €3.7 million for year ended December 31, 2006. |
(c) | Includes multi-client surveys amortization of €80.6 million for year ended December 31, 2006. |
F-47
Table of Contents
Geophysical | Geophysical | Eliminations and | Consolidated | |||||||||||||
2005 | services | products | Adjustments | Total | ||||||||||||
(in million of euros) | ||||||||||||||||
Revenues from unaffiliated customers | 552.3 | 317.6 | — | 869.9 | ||||||||||||
Inter-segment revenues | 0.6 | 61.2 | (61.8 | ) | — | |||||||||||
Operating revenues | 552.9 | 378.8 | (61.8 | ) | 869.9 | |||||||||||
Other income from ordinary activities | 1.9 | — | — | 1.9 | ||||||||||||
Total income from ordinary activities | 554.8 | 378.8 | (61.8 | ) | 871.8 | |||||||||||
Operating income (loss) | 25.2 | 79.8 | (29.9 | )(a) | 75.1 | |||||||||||
Equity income (loss) of investees | 12.9 | 0.1 | — | 13.0 | ||||||||||||
Capital expenditures(b) | 165.5 | 21.6 | (19.6 | ) | 167.5 | |||||||||||
Depreciation and amortization(c) | 132.9 | 18.2 | (5.2 | ) | 145.9 | |||||||||||
Corporate assets amortization | — | — | — | — | ||||||||||||
Investments in companies under equity method | — | — | — | — | ||||||||||||
Identifiable assets | 1,105.4 | 412.7 | (113.4 | ) | 1,404.7 | |||||||||||
Unallocated and corporate assets | 160.4 | |||||||||||||||
Total assets | 1,565.1 | |||||||||||||||
of which equity method companies | 42.0 | 2.4 | 44.4 | |||||||||||||
Identifiable liabilities | 575.5 | 179.8 | (59.5 | ) | 695.8 | |||||||||||
Unallocated and corporate liabilities | 159.1 | |||||||||||||||
Total liabilities | 854.9 | |||||||||||||||
(a) | Includes general corporate expenses of €15.8 million for year ended December 31, 2005. |
(b) | Includes (i) investments in multi-client surveys of €31.9 million, (ii) equipment acquired under capital lease of €17.4 million, (iii) capitalized development costs in the Services segment of €3.5 million, and (iv) capitalized development costs in the Products segment of €4.6 million for year ended December 31, 2005. |
(c) | Includes multi-client surveys amortization of €69.6 million for year ended December 31, 2005. |
F-48
Table of Contents
Geophysical | Geophysical | Eliminations and | Consolidated | |||||||||||||
2004 | services | products | Adjustments | Total | ||||||||||||
(in million of euros) | ||||||||||||||||
Revenues from unaffiliated customers | 388.0 | 299.4 | — | 687.4 | ||||||||||||
Inter-segment revenues | 1.3 | 14.2 | (15.5 | ) | — | |||||||||||
Operating revenues | 389.3 | 313.6 | (15.5 | ) | 687.4 | |||||||||||
Other income from ordinary activities | 0.4 | — | — | 0.4 | ||||||||||||
Total income from ordinary activities | 389.7 | 313.6 | (15.5 | ) | 687.8 | |||||||||||
Operating income (loss) | (19.8 | ) | 64.5 | 1.0 | (a) | 45.7 | ||||||||||
Equity income (loss) of investees | 10.0 | 0.3 | — | 10.3 | ||||||||||||
Capital expenditures(b) | 94.0 | 14.2 | (0.9 | ) | 107.3 | |||||||||||
Depreciation and amortization(c) | 121.8 | 15.5 | (5.0 | ) | 132.3 | |||||||||||
Corporate assets amortization | — | — | — | — | ||||||||||||
Investments in companies under equity method | — | |||||||||||||||
Identifiable assets | 540.8 | 311.9 | (44.9 | ) | 807.8 | |||||||||||
Unallocated and corporate assets | 163.4 | |||||||||||||||
Total assets | 971.2 | |||||||||||||||
of which equity method companies | 28.6 | 2.2 | 30.8 | |||||||||||||
Identifiable liabilities | 230.7 | 129.6 | (38.4 | ) | 321.9 | |||||||||||
Unallocated and corporate liabilities | 247.0 | |||||||||||||||
Total liabilities | 568.9 | |||||||||||||||
(a) | Includes general corporate expenses of €13.0 million for year ended December 31, 2004. |
(b) | Includes (i) investments in multi-client surveys of €51.1 million, (ii) equipment acquired under capital lease of €8.7 million, (iii) capitalized development costs in the Services segment of €1.9 million, and (iv) capitalized development costs in the Products segment of €2.7 million for year ended December 31, 2004. |
(c) | Includes multi-client surveys amortization of €66.5 million for year ended December 31, 2004. |
2006 | 2005 | 2004 | ||||||||||||||||||||||
(in million of euros) | ||||||||||||||||||||||||
France | 18.8 | 1% | 7.8 | 1% | 14.1 | 2% | ||||||||||||||||||
Rest of Europe | 269.6 | 20% | 182.5 | 21% | 124.1 | 18% | ||||||||||||||||||
Asia-Pacific/Middle East | 430.0 | 32% | 297.3 | 34% | 274.5 | 40% | ||||||||||||||||||
Africa | 128.7 | 10% | 90.6 | 10% | 67.0 | 10% | ||||||||||||||||||
Americas | 482.5 | 37% | 291.7 | 34% | 207.7 | 30% | ||||||||||||||||||
Consolidated total | 1,329.6 | 100% | 869.9 | 100% | 687.4 | 100% | ||||||||||||||||||
F-49
Table of Contents
2006 | 2005 | 2004 | ||||||||||||||||||||||
(in million of euros) | ||||||||||||||||||||||||
France | 359.1 | 27% | 227.4 | 26% | 244.5 | 36% | ||||||||||||||||||
Rest of Europe | 94.0 | 7% | 133.2 | 15% | 64.8 | 9% | ||||||||||||||||||
Asia-Pacific/Middle East | 296.5 | 22% | 185.1 | 21% | 131.7 | 19% | ||||||||||||||||||
Africa | 102.3 | 8% | 50.2 | 6% | 50.7 | 7% | ||||||||||||||||||
Americas | 477.7 | 36% | 274.0 | 32% | 195.7 | 29% | ||||||||||||||||||
Consolidated total | 1,329.6 | 100% | 869.9 | 100% | 687.4 | 100% | ||||||||||||||||||
2006 | 2005 | 2004 | ||||||||||||||||||||||
(in million of euros) | ||||||||||||||||||||||||
Sales of goods | 499.4 | 37% | 296.6 | 34% | 281.3 | 41% | ||||||||||||||||||
Services rendered | 688.2 | 52% | 468.6 | 54% | 339.9 | 49% | ||||||||||||||||||
Royalties (after-sales)(a) | 133.5 | 10% | 97.4 | 11% | 60.9 | 9% | ||||||||||||||||||
Leases | 8.5 | 1% | 7.3 | 1% | 5.3 | 1% | ||||||||||||||||||
Consolidated total | 1,329.6 | 100% | 869.9 | 100% | 687.4 | 100% | ||||||||||||||||||
(a) | corresponds to after-sales on multi-client surveys |
December 31, | ||||||||||||
2006 | 2005 | 2004 | ||||||||||
(in million of euros) | ||||||||||||
Research and development costs — gross, incurred | (51.1 | ) | (43.5 | ) | (35.5 | ) | ||||||
Development costs capitalized | 11.9 | 8.2 | 4.6 | |||||||||
Research and development expensed | (39.2 | ) | (35.3 | ) | (30.9 | ) | ||||||
Government grants recognized in income | 1.5 | 4.2 | 2.1 | |||||||||
Research and development costs — net | (37.7 | ) | (31.1 | ) | (28.8 | ) | ||||||
• | for the geophysical services segment, projects concerning data processing services; and | |
• | for the products segment, projects concerning seismic data recording equipment. |
F-50
Table of Contents
December 31, | ||||||||||||
2006 | 2005 | 2004 | ||||||||||
(in million of euros) | ||||||||||||
Assets depreciation | (1.9 | ) | — | 0.3 | ||||||||
Restructuring costs | (0.1 | ) | (0.2 | ) | (11.0 | ) | ||||||
Variation of reserves for restructuring | (0.5 | ) | 0.1 | 11.1 | ||||||||
Other non-recurring revenues | — | — | 3.5 | |||||||||
Other non-recurring expenses | — | (0.4 | ) | (0.6 | ) | |||||||
Non-recurring revenues (expenses) — net | (2.5 | ) | (0.5 | ) | 3.3 | |||||||
Exchange gains (losses) on hedging contracts | 8.9 | (2.9 | ) | 4.5 | ||||||||
Gains (losses) on sales of assets | 5.3 | (1.0 | ) | 11.5 | ||||||||
Other revenues (expenses) — net | 11.7 | (4.4 | ) | 19.3 | ||||||||
F-51
Table of Contents
December 31, | ||||||||||||
2006 | 2005 | 2004 | ||||||||||
(in million of euros) | ||||||||||||
Current interest expenses related to financial debt | (29.8 | ) | (22.2 | ) | (25.7 | ) | ||||||
Financial cost on early redemption of bonds | — | (9.4 | ) | (4.3 | ) | |||||||
Interest expenses and financial expenses related to the Bridge loan put in place for the acquisition of Exploration Resources | (2.0 | ) | (14.2 | ) | — | |||||||
Income provided by cash and cash equivalents | 6.4 | 3.5 | 2.2 | |||||||||
Cost of financial debt, net | (25.4 | ) | (42.3 | ) | (27.8 | ) | ||||||
F-52
Table of Contents
December 31, | ||||||||||||
2006 | 2005 | 2004 | ||||||||||
(in million of euros) | ||||||||||||
Variance in fair value of conversion option on convertible bonds | (20.7 | ) | (11.5 | ) | (23.5 | ) | ||||||
Premium paid for the early conversion of the convertible bonds | (1.6 | ) | (8.9 | ) | — | |||||||
Write-off of issuance costs on convertible bonds recognized as expense at the time of the early conversion | (0.7 | ) | (3.7 | ) | — | |||||||
Derivative and other expenses on convertible bonds | (23.0 | ) | (24.1 | ) | (23.5 | ) | ||||||
Exchange gains and losses, net | (4.1 | ) | (1.8 | ) | 3.9 | |||||||
Other financial income | 0.6 | 1.6 | 0.5 | |||||||||
Other financial expenses | (5.3 | ) | (1.7 | ) | (3.6 | ) | ||||||
Other financial income (loss) | (8.8 | ) | (1.9 | ) | 0.8 | |||||||
Other financial (loss) including derivative and other expenses on convertible bonds | (31.8 | ) | (26.0 | ) | (22.7 | ) | ||||||
F-53
Table of Contents
December 31, | ||||||||||||
2006 | 2005 | 2004 | ||||||||||
(in million of euros) | ||||||||||||
France | ||||||||||||
• current income taxes before use of carry-forward losses | (31.0 | ) | — | — | ||||||||
• adjustments on income tax recognized in the period for prior periods | — | (0.4 | ) | (0.2 | ) | |||||||
• deferred taxes on reversal of temporary differences | 2.5 | — | — | |||||||||
• deferred taxes arising from previously unrecognized deferred tax on temporary differences | (12.5 | ) | — | — | ||||||||
• deferred taxes arising from previously unrecognized deferred tax income | 28.8 | — | — | |||||||||
Total France | (12.2 | ) | (0.4 | ) | (0.2 | ) | ||||||
Foreign countries | ||||||||||||
• current income taxes(a) | (84.3 | ) | (30.9 | ) | (21.9 | ) | ||||||
• adjustments on income tax recognized in the period for prior periods(b) | (1.0 | ) | — | — | ||||||||
• deferred taxes on reversal of temporary differences | 13.2 | 2.3 | 0.8 | |||||||||
• deferred taxes arising from previously unrecognized tax loss | 1.1 | 2.4 | 10.4 | |||||||||
Total Foreign countries | (71.0 | ) | (26.2 | ) | (10.7 | ) | ||||||
Total income tax expense | (83.2 | ) | (26.6 | ) | (10.9 | ) | ||||||
(a) | includes withholding taxes |
(b) | correspond to the tax audit at CGG Nigeria — see below |
F-54
Table of Contents
2006 | 2005 | |||||||
Net income (loss) attributable to shareholders | 157.1 | (7.8 | ) | |||||
Income tax | (83.2 | ) | (26.6 | ) | ||||
Income before tax | 240.3 | 18.8 | ||||||
Differences on tax basis : | ||||||||
Equity investment companies income | (10.1 | ) | (13.0 | ) | ||||
Theorical tax basis | 230.2 | 5.8 | ||||||
Enacted tax rate in France | 34.43 | % | 34.93 | % | ||||
Theorical tax | (79.3 | ) | (2.0 | ) | ||||
Differences on tax : | ||||||||
Differences in tax rates between France and foreign countries | 3.2 | 1.0 | ||||||
Non-deductible part of dividends | (1.0 | ) | — | |||||
Other permanent differences | (19.5 | ) | — | |||||
Tax on carry-forward losses net of temporary differences on the French tax group not recognized in the income statement at December 31, 2005(a) | 16.3 | (26.1 | ) | |||||
Other unrecognized deferred tax in income statement on previous years(b) | 1.1 | 6.1 | ||||||
Adjustments on the tax expense recognized in the period for the previous years(c) | (1.0 | ) | — | |||||
Income tax and deferred tax on Argas net income (equity method company)(d) | (1.9 | ) | (1.9 | ) | ||||
Foreign deferred tax unrecognized on losses of the period | (3.2 | ) | — | |||||
Deferred tax on currency translation adjustments(e) | 2.2 | (4.6 | ) | |||||
Deferred tax on income subject to Norwegian tonnage tax system | (0.6 | ) | (0.8 | ) | ||||
Others | 0.5 | 1.7 | ||||||
Income tax | (83.2 | ) | (26.6 | ) |
(a) | In 2005, the theorical deferred tax income related to the loss and the reversal of temporary differences of the French tax group, estimated at €26.1 million was not recognized in the income statement. At December 31, 2005 the tax position of the French tax group was a net future tax benefit basis of €47.5 million corresponding, on one hand, to carry-forward losses of €83.9 million and, on the other hand, to temporary differences liabilities of €36.4 million. This net position was not subject to the recognition of deferred tax since tax perspectives were still unlikely for the French tax group. As soon as the tax perspectives of the French tax group lead to the conclusion in 2006 that the carry forward losses would be used, the deferred tax relating to this position were recognized in the income statement. At December 31, 2006, a €16.3 million deferred tax income relating to the tax position of the French tax group was thus recognized. |
(b) | Corresponds in 2005 to €2.4 million on Mexican carry-forward losses and to €3.7 million on Norwegiancarry-forward losses. |
(c) | Corresponds to the tax notification received for CGG Nigeria. |
(d) | CGG, as shareholder of Argas, is directly required to pay income tax for Argas in Saudi Arabia for its share in Argas. |
(e) | Corresponds to the currency translation adjustment related to the translation in functional currency (U.S. dollar) of Norwegian entities’ books in Norwegian krone. |
F-55
Table of Contents
Foreign countries | ||||
(in million of euros) | ||||
2011 and thereafter | 13.3 | |||
Available indefinitely | 55.8 | |||
Total | 69.1 |
December 31, | ||||||||||||
2006 | 2005 | 2004 | ||||||||||
(in million of euros) | ||||||||||||
Deferred tax assets — temporary differences | 33.6 | 17.0 | 23.8 | |||||||||
Deferred tax assets — tax losses carried forward(a) | 9.8 | 14.6 | 7.7 | |||||||||
Total deferred tax assets | 43.4 | 31.6 | 31.5 | |||||||||
Total deferred tax liabilities | (66.5 | ) | (56.9 | ) | (26.7 | ) | ||||||
Total deferred tax net | (23.1 | ) | (25.3 | ) | 4.8 | |||||||
(a) | relating to loss carry forwards in United Kingdom, Norway and France. |
F-56
Table of Contents
December 31, | ||||||||
2006 | 2005 | |||||||
(in million of euros) | ||||||||
Non-deductible provisions (including pensions and profit sharing) | 11.8 | 3.0 | ||||||
Tangible assets | 3.8 | (2.3 | ) | |||||
Effect of currency translation adjustment not recognized in income statement | 2.6 | 0.8 | ||||||
Multi-client surveys | 0.8 | 1.8 | ||||||
Assets reassessed in purchase price allocation of acquisistions | (35.3 | ) | (35.8 | ) | ||||
Development costs capitalized | (8.0 | ) | (0.8 | ) | ||||
Incomes and losses subject to Norwegian tax tonnage system | (6.8 | ) | (6.9 | ) | ||||
Financial instruments | (1.9 | ) | — | |||||
Others | 0.1 | 0.3 | ||||||
Total deferred tax assets net of deferred tax (liabilities) | (32.9 | ) | (39.9 | ) |
F-57
Table of Contents
Year ended December 31, | ||||||||||||
2006 | 2005 | 2004 | ||||||||||
Personnel employed under French contracts performing Geophysical services | 863 | 821 | 797 | |||||||||
Products | 703 | 654 | 622 | |||||||||
Personnel employed under local contracts | 2.934 | 2.477 | 2.250 | |||||||||
Total | 4.500 | 3.952 | 3.669 | |||||||||
Including field staff of: | 739 | 579 | 475 |
Year ended December 31, | ||||||||||||
2006 | 2005 | 2004 | ||||||||||
(in euros) | ||||||||||||
Short-term employee benefit excluding tax on salary(1) | 3,590,163 | 3,026,474 | 2,929,051 | |||||||||
Long-term employee benefit — pension(2) | 16,903 | 26,331 | 19,576 | |||||||||
Long-term employee benefit — supplemental pension(3) | 679,013 | 321,310 | — | |||||||||
Share-based payments(4) | 3,907,966 | 170,676 | 240,724 |
(1) | Includes gross remunerations and attendance fees paid during the year but excludes attendance fees paid to the President of the Board of Directors, respectively €39,216 in 2006, €37,873 in 2005 and €39,886 in 2004. |
(2) | Cost of services rendered and interest cost |
(3) | Cost of services rendered and interest cost and amortization of past service cost on the supplemental pension implemented by the end of 2004. |
(4) | Expense in the income statement related to the stock-options plan. |
F-58
Table of Contents
Year ended December 31, | ||||||||||||
2006 | 2005 | 2004 | ||||||||||
(in million of euros) | ||||||||||||
Financial expenses paid | 23.8 | 62.6 | 29.1 | |||||||||
Income taxes paid | 80.4 | 31.7 | 17.0 |
F-59
Table of Contents
Year ended December 31, | ||||||||||||
2006 | 2005 | 2004 | ||||||||||
(in million of euros) | ||||||||||||
Equipment acquired under capital leases | 0.1 | 17.4 | 8.7 |
Year ended December 31, | ||||||||||||
2006 | 2005 | 2004 | ||||||||||
(in million of euros) | ||||||||||||
Cash | 114.0 | 70.9 | 60.0 | |||||||||
Cash equivalents | 137.8 | 41.5 | 70.6 | |||||||||
Total cash and cash equivalents | 251.8 | 112.4 | 130.6 | |||||||||
F-60
Table of Contents
Year | ||||||||||||
2006 | 2005 | 2004 | ||||||||||
(in million of euros, excepted per share data) | ||||||||||||
Net income (loss) attributable | ||||||||||||
Net income (loss) attributable to shareholders (a) | 157.1 | (7.8 | ) | (6.4 | ) | |||||||
Effect of dilution | ||||||||||||
Ordinary shares outstanding at the beginning of the year (b) | 17,081,680 | 11,682,218 | 11,680,718 | |||||||||
Weighted average number of ordinary shares outstanding during the year (c) | 290,247 | 413,707 | 688 | |||||||||
Weighted average number of ordinary shares outstanding (d) =(b) +(c) | 17,371,927 | 12,095,925 | 11,681,406 | |||||||||
Dilutive potential shares from 1997 stock options | Expired | Expired | (2 | ) | ||||||||
Dilutive potential shares from 2000 stock options | 25,930 | 45,915 | (2 | ) | ||||||||
Dilutive potential shares from 2001 stock options | 71,795 | 23,189 | (2 | ) | ||||||||
Dilutive potential shares from 2002 stock options | 66,793 | 61,052 | 1,761 | |||||||||
Dilutive potential shares from 2003 stock options | 145,606 | 140,633 | 106,870 | |||||||||
Dilutive potential shares from 2006 stock options | (2 | ) | — | — | ||||||||
Total dilutive potential shares from stock options(1) | 309,584 | 270,789 | 108,631 | |||||||||
Total dilutive potential shares from free shares allocation | 49,875 | — | — | |||||||||
Dilutive potential shares from stock convertible bonds(1) | — | 252,500 | 233,333 | |||||||||
Dilutive weighted average number of shares outstanding adjusted when dilutive (e) | 17,731,586 | 12,095,925 | 11,681,406 | |||||||||
Earning per share | ||||||||||||
Basic (a) / (d) | 9.04 | (0.64 | ) | (0.55 | ) | |||||||
Diluted(a) / (e) | 8.86 | (0.64 | )(1) | (0.55 | )(1) |
(1) | Stock-options and convertible bonds have an anti-dilutive effect at December 31, 2005 and at December 31, 2004; as a consequence, potential shares linked to those instruments are not taken into account in the adjusted dilutive weighted average number of shares, nor in the calculation of diluted loss per share. |
(2) | Exercise price of this stock-options was higher than the average run stock exchange of the share. |
• | Veritas merger |
F-61
Table of Contents
• | Financing of Veritas merger |
— | an additional $200 million of its existing dollar-denominated 71/2% Senior Notes due 2015 issued in April 2005 and February 2006. The additional Notes have the same terms and conditions as the existing Notes and were issued under the same indenture and at a price of 100% of their principal amount. | |
— | a new offering of $400 million 73/4% Senior Notes due 2017. The Notes were issued at a price of 100% of their principal amount. |
• | Capital increases linked to the conversion of Veritas convertible bonds |
• | New stock-option plan and free shares allocation plan |
F-62
Table of Contents
— | Shares will be issued from the latest of the two following dates : March 23, 2009 or the date of the General Shareholders’ meeting to approve the financial statements for the year ended December 31, 2008, if the realization of the performance conditions mentioned below has been enacted by the Board of Directors. | |
— | The beneficiaries would be allocated the shares, after the two-year acquisition period had expired, only if each beneficiary still has a valid employment contract with CGG or one of its subsidiaries (except specific conditions) at the date the two-year acquisition period expires and if the conditions of allocation are met. | |
— | The Board of Directors also defined two general performance conditions of the Group based on the Group average consolidated net income per share over the year ended December 31, 2007 and 2008 and the average yearly return before tax on capital employed over the year ended December 31, 2007 and 2008 of either the Group, the Services segment, or the Products segment, according to which segment the beneficiary belongs to. | |
— | Once allocated, the shares may not be sold for a two years conservation period from the date of the actual allocation. |
F-63
Table of Contents
NOTE 31 — | LIST OF PRINCIPAL CONSOLIDATED SUBSIDIARIES AND COMPANIES ACCOUNTED FOR USING THE EQUITY METHOD AS OF DECEMBER 31, 2006 |
% of | ||||||||||
Siren Number(a) | Consolidated companies | Head Office | interest | |||||||
403 256 944 | CGG Services SA (previously CGG Marine SAS) | Massy, France | 100.0 | |||||||
351 834 288 | Geocal SARL | Massy, France | 100.0 | |||||||
966 228 363 | Geoco SAS | Paris, France | 100.0 | |||||||
378 040 497 | Sercel SA | Carquefou, France | 100.0 | |||||||
410 072 110 | CGG Explo SARL | Massy, France | 100.0 | |||||||
866 800 154 | Sercel Holding SA | Carquefou, France | 100.0 | |||||||
CGG Americas. Inc. | Houston, United States | 100.0 | ||||||||
CGG do Brasil Participaçoes Ltda | Rio do Janeiro, Brazil | 100.0 | ||||||||
CGG Canada Services Ltd. | Calgary, Canada | 100.0 | ||||||||
CGG I SA | Geneva, Switzerland | 100.0 | ||||||||
CGG (Nigeria) Ltd. | Lagos, Nigeria | 100.0 | ||||||||
CGG Marine Resources Norge A/S | Hovik, Norway, | 100.0 | ||||||||
CGG Offshore UK Ltd. | United Kingdom | 100.0 | ||||||||
CGG India Private Ltd. | New Delhi, India | 100.0 | ||||||||
CGG Ardiseis | Dubaï, Dubaï | 51,0 | ||||||||
Exploration Resources ASA | Bergen, Norway | 100.0 | ||||||||
Exploration Investment Resources AS | Bergen, Norway | 100.0 | ||||||||
Exploration Investment Resources II AS | Bergen, Norway | 100.0 | ||||||||
Exploration Vessel Resources AS | Bergen, Norway | 100.0 | ||||||||
Exploration Vessel Resources II AS | Bergen, Norway | 100.0 | ||||||||
Multiwave Geophysical Company ASA and its subsidiaries | Bergen, Norway | 100.0 | ||||||||
Companía Mexicana de Geofisica | Mexico City, Mexico, | 100.0 | ||||||||
Companhia de Geologia e Geofisica Portuguesa | Lisbon, Portugal | 100.0 | ||||||||
Exgeo CA | Caracas, Venezuela | 100.0 | ||||||||
Geoexplo | Almaty, Kazakhstan | 100.0 | ||||||||
Geophysics Overseas Corporation Ltd. | Nassau, Bahamas | 100.0 | ||||||||
CGG Australia Services Pty Ltd. | Sydney, Australia | 100.0 | ||||||||
CGG Asia Pacific(b) | Kuala Lumpur, Malaisia | 33.2 | ||||||||
Petroleum Exploration Computer Consultants Ltd. | Forest Row, United Kingdom | 100.0 | ||||||||
CGG Vostok | Moscow, Russia | 100.0 | ||||||||
PT CGG Indonesia | Jakarta, Indonesia | 100.0 | ||||||||
Sercel Australia | Sydney, Australia | 100.0 | ||||||||
Hebei Sercel JunFeng(c) | Hebei, China | 51.0 | ||||||||
Sercel Inc. | Tulsa, United States | 100.0 | ||||||||
Sercel Singapore Pte Ltd. | Singapore, Singapore | 100.0 | ||||||||
Sercel England Ltd. | Somercotes, United Kingdom | 100.0 | ||||||||
Sercel Canada Ltd. | Calgary, Canada | 100.0 | ||||||||
Sercel Vibtech Ltd. | Stirlingshire, Scotland | 100.0 |
(a) | Siren number is an individual identification number for company registration purposes under French law. |
(b) | the consolidation of CGG Asia Pacific, in which CGG owns 33.2% of the ordinary shares and 30% of the total shares is compliant with IAS 27. |
(c) | Sercel JunFeng is fully consolidated since, according to the management agreement, the Group has operating control of the company. |
F-64
Table of Contents
% of | ||||||||||
Siren number(a) | Accounted for using the equity method | Head Office | interest | |||||||
413 926 320 | Geomar SAS | Paris. France | 49.0 | |||||||
Argas Ltd. | Al-Khobar. Saudi Arabia | 49.0 | ||||||||
JV Xian Peic/Sercel Limited | Xian. China | 40.0 | ||||||||
VS Fusion | Houston. United States | 49.0 |
A — | SUMMARY OF DIFFERENCES BETWEEN ACCOUNTING PRINCIPLES FOLLOWED BY THE GROUP AND U.S. GAAP |
F-65
Table of Contents
• | the project is clearly defined, and costs are separately identified and reliably measured, | |
• | the product or process is technically and commercially feasible, | |
• | the Group has sufficient resources to complete development. |
F-66
Table of Contents
• | changes in the cumulative translation adjustment related to consolidated foreign subsidiaries, |
• | changes in the fair value of derivative instruments designed as cash flow hedges meeting the criteria established by SFAS 133; and | |
• | changes in the amount of the additional minimum pension liability due to actuarial losses. |
December 31, | ||||||||||||
2006 | 2005 | 2004 | ||||||||||
(in million of euros) | ||||||||||||
Net income (loss) as reported in Consolidated Statements of operations | 157.1 | (7.8 | ) | (6.4 | ) | |||||||
Deferred tax (FAS 109) | (2.8 | ) | 2.7 | (3.4 | ) | |||||||
Loss on extinguishment of debt (APB 26) | — | (2.8 | ) | 2.8 | ||||||||
Stock options | (0.7 | ) | (1.5 | ) | 0.3 | |||||||
Cancellation of IFRS long-term contracts adjustment | — | (2.4 | ) | 2.4 | ||||||||
Cancellation of IFRS tangible assets adjustment | 2.4 | 0.2 | 0.1 | |||||||||
Cancellation of IFRS currency translation adjustment | — | 3.6 | (4.0 | ) | ||||||||
Cancellation of IFRS capitalization of development costs | (2.4 | ) | (6.1 | ) | (4.2 | ) | ||||||
Available for sale security (FAS 115) | — | — | 1.3 | |||||||||
Derivative instruments (FAS 133) | (29.7 | ) | 22.4 | (9.1 | ) | |||||||
Net income (loss) under U.S. GAAP | 123.9 | 8.3 | (20.2 | ) | ||||||||
(a) | all adjustments disclosed above are net of tax effect if applicable. |
F-67
Table of Contents
December 31, | ||||||||||||
2006 | 2005 | 2004 | ||||||||||
(in million of euros) | ||||||||||||
Shareholders’ equity as reported in the Consolidated Balance Sheets | 877.0 | 698.5 | 393.2 | |||||||||
Goodwill amortization (FAS 142)(b) | 12.0 | 13.4 | 12.6 | |||||||||
Deferred tax (FAS 109)(b) | (11.0 | ) | (8.3 | ) | (9.6 | ) | ||||||
Loss on extinguishment of debt (APB 26) | — | — | 2.8 | |||||||||
Unamortized prior service costs on pension plans (FAS 158) | (2.1 | ) | — | — | ||||||||
Stock options | (3.2 | ) | (2.5 | ) | (0.6 | ) | ||||||
Cancellation of IFRS long-term contracts adjustment | — | — | 2.4 | |||||||||
Cancellation of IFRS tangible assets adjustment | (4.5 | ) | (6.9 | ) | (7.1 | ) | ||||||
Cancellation of IFRS capitalization of development costs | (15.5 | ) | (13.6 | ) | (6.5 | ) | ||||||
Derivative instruments (FAS 133) | (20.8 | ) | 8.9 | (15.0 | ) | |||||||
Shareholders’ equity under U.S. GAAP | 831.9 | 689.5 | 372.2 | |||||||||
(a) | All adjustments disclosed above are net of tax effects, if applicable. |
(b) | This amount is net of currency translation adjustment effect. |
December 31, | ||||||||||||
2006 | 2005 | 2004 | ||||||||||
(in million of euros, except per share data) | ||||||||||||
Operating revenues | 1,348.7 | 860.8 | 709.5 | |||||||||
Cost of operations | (889.7 | ) | (665.4 | ) | (559.5 | ) | ||||||
Gross profit | 459.0 | 195.4 | 150.0 | |||||||||
Research and development expenses — net | (49.6 | ) | (39.3 | ) | (33.5 | ) | ||||||
Selling, general and administrative expenses | (127.1 | ) | (92.7 | ) | (79.7 | ) | ||||||
Other revenues (expenses) — net | 7.3 | (1.5 | ) | 18.2 | ||||||||
Operating income | 289.6 | 61.9 | 55.0 | |||||||||
Cost of financial debt, net | (25.4 | ) | (46.6 | ) | (22.4 | ) | ||||||
Variance on derivative on convertible bonds | (23.0 | ) | (11.5 | ) | (23.5 | ) | ||||||
Other financial income (loss) | (60.6 | ) | 14.7 | (23.6 | ) | |||||||
Equity in income of affiliates | 10.1 | 13.0 | 10.3 | |||||||||
Income (loss) of consolidated companies before income taxes and minority interests | 190.7 | 31.5 | (4.2 | ) | ||||||||
Income taxes | (65.2 | ) | (22.2 | ) | (15.0 | ) | ||||||
Minority interests | (1.6 | ) | (1.0 | ) | (1.0 | ) | ||||||
Net income (loss) | 123.9 | 8.3 | (20.2 | ) | ||||||||
F-68
Table of Contents
December 31, | ||||||||||||
2006 | 2005 | 2004 | ||||||||||
(in million of euros, except per share data) | ||||||||||||
Dilutive weighted average number of shares outstanding | 17,371,927 | 12,095,925 | 11,681,406 | |||||||||
Dilutive potential shares from stock-options(1) | 309,584 | 261,855 | 83,211 | |||||||||
Dilutive potential shares from free shares | 49,875 | — | — | |||||||||
Dilutive potential shares from convertible bonds(2) | — | 252,500 | 233,333 | |||||||||
Adjusted weighted average shares and assumed option exercises when dilutive | 17,731,386 | 12,357,779 | 11,681,406 | |||||||||
Net income (loss) per share | ||||||||||||
Basic for shareholder | 7.13 | 0.69 | (1.73 | ) | ||||||||
Diluted for shareholder | 6.99 | 0.67 | (1.73 | ) |
(1) | anti-dilutive for year ended at December 31, 2004. |
(2) | anti-dilutive for years ended at December 31, 2004 and December 31, 2005. |
December 31, | ||||||||||||
2006 | 2005 | 2004 | ||||||||||
(amounts in million of euros) | ||||||||||||
ASSETS | ||||||||||||
Current assets | 826.0 | 608.5 | 480.2 | |||||||||
Long-term assets | 959.7 | 965.4 | 495.6 | |||||||||
Total Assets | 1,785.7 | 1,573.8 | 975.8 | |||||||||
LIABILITIES | ||||||||||||
Current liabilities | 442.3 | 509.9 | 325.8 | |||||||||
Long term liabilities | 488.6 | 362.7 | 268.6 | |||||||||
Minority interests | 22.9 | 11.7 | 9.1 | |||||||||
Shareholders equity | 831.9 | 689.5 | 372.2 | |||||||||
Total Liabilities | 1,785.7 | 1,573.8 | 975.8 | |||||||||
December 31, | ||||||||||||
2006 | 2005 | 2004 | ||||||||||
(in million of euros) | ||||||||||||
Net income (loss) under US GAAP | 123.9 | 8.3 | (20.2 | ) | ||||||||
Other comprehensive income (loss) | ||||||||||||
Changes in the cumulative translation adjustment | (50.7 | ) | 23.3 | (13.6 | ) | |||||||
— Changes in the fair value ofavailable-for-sale securities | — | — | (7.8 | ) | ||||||||
— Changes in actuarial gains and losses and prior service costs on pension plans | (3.1 | ) | — | — | ||||||||
— Changes in the fair value of derivative instruments | 6.2 | (4.1 | ) | (2.8 | ) | |||||||
Comprehensive income (loss) under U.S. GAAP | 76.3 | 27.5 | (43.1 | ) | ||||||||
(a) | All adjustments disclosed above are net of tax effects, if applicable. |
F-69
Table of Contents
December 31, | ||||||||||||
2006 | 2005 | 2004 | ||||||||||
(in million of euros) | ||||||||||||
— Cumulative Translation adjustment | (92.6 | ) | (41.9 | ) | (65.2 | ) | ||||||
— Actuarial gains and losses and unamortized prior service costs on pension plans | (3.1 | ) | — | — | ||||||||
— Fair value of derivative instruments | 4.8 | (1.4 | ) | 2.7 | ||||||||
Accumulated Other Comprehensive loss under U.S. GAAP | (90.9 | ) | (43.3 | ) | (62.5 | ) | ||||||
(a) | All adjustments disclosed above are net of tax effects, if applicable. |
December 31, 2004 | ||||
(in million of | ||||
euros except for | ||||
income (loss) per | ||||
share information) | ||||
Net loss, as reported | € | (20.2 | ) | |
Add: total stock-based employee compensation expense included in reported net income, net of related tax effect | 0.2 | |||
Deduct: total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects | (3.8 | ) | ||
Pro forma U.S. GAAP net loss | (23.8 | ) | ||
Earnings per share: | ||||
Basic for common stock holder — as reported | (1.73 | ) | ||
Basic for common stock holder — pro forma | (2.03 | ) | ||
Diluted for common stock holder — as reported | (1.73 | ) | ||
Diluted for common stock holder — pro forma | (2.03 | ) |
F-70
Table of Contents
Year ended December 31, 2006 | ||||||||||||||||||||||||
Balance at | Balance at | |||||||||||||||||||||||
beginning of | Deductions | Deductions | end of | |||||||||||||||||||||
year | Additions | (used) | (unused) | Other(a) | year | |||||||||||||||||||
(in million of euros) | ||||||||||||||||||||||||
Termination benefits | 0.6 | 0.5 | — | — | — | 1.1 | ||||||||||||||||||
Other associated costs | 0.2 | 0.2 | (0.1 | ) | — | — | 0.3 | |||||||||||||||||
Total | 0.8 | 0.7 | (0.1 | ) | — | — | 1.4 | |||||||||||||||||
(a) | Includes the effects of exchange rate changes |
Year ended December 31, 2005 | ||||||||||||||||||||||||
Balance at | Balance at | |||||||||||||||||||||||
beginning of | Deductions | Deductions | end of | |||||||||||||||||||||
year | Additions | (used) | (unused) | Other(a) | year | |||||||||||||||||||
(in million of euros) | ||||||||||||||||||||||||
Termination benefits | 0.4 | 0.2 | — | — | — | 0.6 | ||||||||||||||||||
Other associated costs | 0.5 | 0.1 | — | (0.4 | ) | — | 0.2 | |||||||||||||||||
Total | 0.9 | 0.3 | — | (0.4 | ) | — | 0.8 | |||||||||||||||||
(a) | Includes the effects of exchange rate changes |
F-71
Table of Contents
Year ended December 31, 2004 | ||||||||||||||||||||||||
Balance at | Balance at | |||||||||||||||||||||||
beginning of | Deductions | Deductions | end of | |||||||||||||||||||||
year | Additions | (used) | (unused) | Other(a) | year | |||||||||||||||||||
(in million of euros) | ||||||||||||||||||||||||
Termination benefits | 10.8 | — | (10.4 | ) | — | 0.4 | ||||||||||||||||||
Contract termination costs | 0.6 | — | (0.4 | ) | (0.2 | ) | — | 0.0 | ||||||||||||||||
Other associated costs | 0.7 | — | (0.2 | ) | — | — | 0.5 | |||||||||||||||||
Total | 12.1 | — | (11.0 | ) | — | — | 0.9 | |||||||||||||||||
(a) | Includes the effects of exchange rate changes |
Total | Cumulative | |||||||||||
amount | Amount incurred | amount incurred | ||||||||||
expected | as of Dec. 31, 2006 | as of Dec. 31, 2006 | ||||||||||
(in million of euros) | ||||||||||||
Termination benefits | 10.8 | 0.1 | 10.5 | |||||||||
Contract termination costs | 0.4 | — | 0.4 | |||||||||
Other associated costs | 1.6 | — | 1.1 | |||||||||
Total | 12.8 | — | 12.0 | |||||||||
F-72
Table of Contents
Sercel | ||||||||||||||||||||||||
Subsidiary | Consolidating | Subsidiary | ||||||||||||||||||||||
IFRS | CGG | Group | Others | adjustments | Consolidated | Group | ||||||||||||||||||
(in € million) | ||||||||||||||||||||||||
2006 | ||||||||||||||||||||||||
Total assets | 1,033.0 | 626.2 | 1,475.5 | (1,352.6 | ) | 1,782.1 | 237.9 | |||||||||||||||||
Operating revenues | 263.4 | 607.5 | 1,092.0 | (633.3 | ) | 1,329.6 | 341.6 | |||||||||||||||||
Operating income (loss) | (7.7 | ) | 172.3 | 182.3 | (57.9 | ) | 289.0 | 52.6 | ||||||||||||||||
Net income (loss) | 54.3 | 104.1 | 169.6 | (169.3 | ) | 158.7 | 34.8 | |||||||||||||||||
2005 | ||||||||||||||||||||||||
Total assets | 799.8 | 600.3 | 1,082.5 | (917.5 | ) | 1,565.1 | 205.9 | |||||||||||||||||
Operating revenues | 221.3 | 307.5 | 668.9 | (327.8 | ) | 869.9 | 146.5 | |||||||||||||||||
Operating income (loss) | (26.4 | ) | 60.7 | 76.6 | (35.8 | ) | 75.1 | 10.9 | ||||||||||||||||
Net income (loss) | (29.5 | ) | 37.0 | 108.3 | (122.6 | ) | (6.8 | ) | 6.3 | |||||||||||||||
2004 | ||||||||||||||||||||||||
Total assets | 623.6 | 341.7 | 718.3 | (712.4 | ) | 971.2 | 150.8 | |||||||||||||||||
Operating revenues | 190.7 | 227.8 | 589.6 | (320.7 | ) | 687.4 | 104.8 | |||||||||||||||||
Operating income (loss) | (45.2 | ) | 36.2 | 64.5 | (9.8 | ) | 45.7 | 6.8 | ||||||||||||||||
Net income (loss) | (38.2 | ) | 31.7 | 78.7 | (77.6 | ) | (5.4 | ) | 14.2 |
F-73
Table of Contents
F-74
Table of Contents
ARABIAN GEOPHYSICAL & SURVEYING COMPANY LIMITED
F-75
Table of Contents
As At 31 December 2006 | ||||||||||||||||
Note | 2006 | 2005 | 2004 | |||||||||||||
SR | SR | SR | ||||||||||||||
ASSETS EMPLOYED | ||||||||||||||||
PROPERTY AND EQUIPMENT | 3 | 103,593,754 | 148,187,403 | 121,111,759 | ||||||||||||
CURRENT ASSETS | ||||||||||||||||
Inventories | 4 | 10,407,767 | 11,181,732 | 7,961,714 | ||||||||||||
Accounts receivable and prepayments | 5 | 93,527,307 | 127,578,318 | 101,800,723 | ||||||||||||
Bank balances and cash | 222,654,814 | 115,622,483 | 104,151,363 | |||||||||||||
326,589,888 | 254,382,533 | 213,913,800 | ||||||||||||||
CURRENT LIABILITIES | ||||||||||||||||
Accounts payable, accruals and provision | 6 | 22,660,799 | 22,433,138 | 12,078,475 | ||||||||||||
Zakat and income tax | 7 | 3,324,645 | 15,908,684 | 17,166,077 | ||||||||||||
25,985,444 | 38,341,822 | 29,244,552 | ||||||||||||||
NET CURRENT ASSETS | 300,604,444 | 216,040,711 | 184,669,248 | |||||||||||||
404,198,198 | 364,228,114 | 305,781,007 | ||||||||||||||
FUNDS EMPLOYED | ||||||||||||||||
PARTNERS’ EQUITY | ||||||||||||||||
Capital | 8 | 36,000,000 | 36,000,000 | 36,000,000 | ||||||||||||
Statutory reserve | 9 | 18,000,000 | 18,000,000 | 18,000,000 | ||||||||||||
General reserve | 10 | 4,646,910 | 4,646,910 | 4,646,910 | ||||||||||||
Capital reserve | 11 | 14,439,567 | 13,999,304 | 13,392,139 | ||||||||||||
Reserve for employees’ training | 12 | — | 3,000,000 | 3,000,000 | ||||||||||||
Retained earnings | 312,630,040 | 272,939,576 | 217,433,007 | |||||||||||||
385,716,517 | 348,585,790 | 292,472,056 | ||||||||||||||
NON CURRENT LIABILITIES | ||||||||||||||||
Employees’ terminal benefits | 18,481,681 | 15,642,324 | 13,308,951 | |||||||||||||
404,198,198 | 364,228,114 | 305,781,007 | ||||||||||||||
F-76
Table of Contents
Year ended 31 December 2006 | ||||||||||||||||
Note | 2006 | 2005 | 2004 | |||||||||||||
SR | SR | SR | ||||||||||||||
Contracts revenue | 380,539,159 | 359,398,833 | 324,889,670 | |||||||||||||
Operating costs | (301,204,358 | ) | (262,462,397 | ) | (227,316,493 | ) | ||||||||||
GROSS PROFIT | 79,334,801 | 96,936,436 | 97,573,177 | |||||||||||||
General and administration expenses | 13 | (6,738,746 | ) | (5,253,509 | ) | (4,870,222 | ) | |||||||||
INCOME FROM MAIN OPERATIONS | 72,596,055 | 91,682,927 | 92,702,955 | |||||||||||||
Other income | 14 | 7,545,031 | 4,439,959 | 7,778,330 | ||||||||||||
Exchange loss | — | — | (40,740 | ) | ||||||||||||
Financial charges | (10,359 | ) | (9,152 | ) | (1,352,685 | ) | ||||||||||
NET INCOME FOR THE YEAR | 80,130,727 | 96,113,734 | 99,087,860 | |||||||||||||
F-77
Table of Contents
Year ended 31 December 2006 | ||||||||||||
2006 | 2005 | 2004 | ||||||||||
SR | SR | SR | ||||||||||
OPERATING ACTIVITIES | ||||||||||||
Net income for the year | 80,130,727 | 96,113,734 | 99,087,860 | |||||||||
Adjustments for: | ||||||||||||
Transfer to provision for employee’s training | (2,421,570 | ) | — | — | ||||||||
Depreciation | 60,126,209 | 76,023,171 | 62,855,322 | |||||||||
Financial charges | 10,359 | 9,152 | — | |||||||||
Profit on sale of property and equipment | (440,263 | ) | (607,165 | ) | (6,430,842 | ) | ||||||
137,405,462 | 171,538,892 | 155,512,340 | ||||||||||
Changes in operating assets and liabilities: | ||||||||||||
Inventories | 773,965 | (3,220,018 | ) | (3,070,715 | ) | |||||||
Receivables | 34,051,011 | (25,777,595 | ) | (15,846,239 | ) | |||||||
Payables | 12,916,650 | 26,270,446 | 18,880,156 | |||||||||
Cash from operations | 185,147,088 | 168,811,725 | 155,475,542 | |||||||||
Financial charges paid | (10,359 | ) | (9,152 | ) | — | |||||||
Employees’ terminal benefits, net | 2,839,357 | 2,333,373 | 2,521,890 | |||||||||
Zakat and income tax paid | (25,851,458 | ) | (17,173,176 | ) | (12,598,742 | ) | ||||||
Net cash from operating activities | 162,124,628 | 153,962,770 | 145,398,690 | |||||||||
INVESTING ACTIVITIES | ||||||||||||
Purchase of property and equipment | (16,141,756 | ) | (103,265,814 | ) | (10,789,409 | ) | ||||||
Proceeds from sale of property and equipment | 1,049,459 | 774,164 | 7,597,889 | |||||||||
Net cash used in investing activities | (15,092,297 | ) | (102,491,650 | ) | (3,191,520 | ) | ||||||
FINANCING ACTIVITIES | ||||||||||||
Term loans, net | — | — | (65,766,667 | ) | ||||||||
Dividends paid | (40,000,000 | ) | (40,000,000 | ) | (57,380,000 | ) | ||||||
Net cash used in financing activities | (40,000,000 | ) | (40,000,000 | ) | (123,146,667 | ) | ||||||
INCREASE IN BANK BALANCES AND CASH | 107,032,331 | 11,471,120 | 19,060,503 | |||||||||
Bank balances and cash at the beginning of the year | 115,622,483 | 104,151,363 | 85,090,860 | |||||||||
BANK BALANCES AND CASH AT THE END OF THE YEAR | 222,654,814 | 115,622,483 | 104,151,363 | |||||||||
F-78
Table of Contents
Year ended 31 December 2006 | ||||||||||||||||||||||||||||
Reserve for | ||||||||||||||||||||||||||||
Statutory | General | Capital | employees’ | Retained | ||||||||||||||||||||||||
Capital | reserve | reserve | reserve | training | earnings | Total | ||||||||||||||||||||||
SR | SR | SR | SR | SR | SR | SR | ||||||||||||||||||||||
Balance at 31 December 2003 | 36,000,000 | 18,000,000 | 4,646,910 | 6,961,297 | 3,000,000 | 162,775,989 | 231,384,196 | |||||||||||||||||||||
Net income for the year | — | — | — | — | — | 99,087,860 | 99,087,860 | |||||||||||||||||||||
Provision for zakat and income tax (note 7) | — | — | — | — | — | (17,374,428 | ) | (17,374,428 | ) | |||||||||||||||||||
Zakat and income tax reimburseable by the partners | — | — | — | — | — | 17,374,428 | 17,374,428 | |||||||||||||||||||||
Transfer to capital reserve (note 11) | — | — | — | 6,430,842 | — | (6,430,842 | ) | — | ||||||||||||||||||||
Transfer to retained earnings | — | — | — | — | (2,077,836 | ) | 2,077,836 | — | ||||||||||||||||||||
Transfer to reserve for Employees’ training (note 12) | — | — | — | — | 2,077,836 | (2,077,836 | ) | — | ||||||||||||||||||||
Dividends relating to 2003 | — | — | — | — | — | (38,000,000 | ) | (38,000,000 | ) | |||||||||||||||||||
Balance at 31 December 2004 | 36,000,000 | 18,000,000 | 4,646,910 | 13,392,139 | 3,000,000 | 217,433,007 | 292,472,056 | |||||||||||||||||||||
Net income for the year | — | — | — | — | — | 96,113,734 | 96,113,734 | |||||||||||||||||||||
Provision for zakat and income tax (note 7) | — | — | — | — | — | (15,915,783 | ) | (15,915,783 | ) | |||||||||||||||||||
Zakat and income tax reimburseable by the partners | — | — | — | — | — | 15,915,783 | 15,915,783 | |||||||||||||||||||||
Transfer to capital reserve (note 11) | — | — | — | 607,165 | — | (607,165 | ) | — | ||||||||||||||||||||
Transfer to retained earnings | — | — | — | — | (1,730,387 | ) | 1,730,387 | — | ||||||||||||||||||||
Transfer to reserve for Employees’ training (note 12) | — | — | — | — | 1,730,387 | (1,730,387 | ) | — | ||||||||||||||||||||
Dividends relating to 2004 | — | — | — | — | — | (40,000,000 | ) | (40,000,000 | ) | |||||||||||||||||||
Balance at 31 December 2005 | 36,000,000 | 18,000,000 | 4,646,910 | 13,999,304 | 3,000,000 | 272,939,576 | 348,585,790 | |||||||||||||||||||||
Net income for the year | — | — | — | — | — | 80,130,727 | 80,130,727 | |||||||||||||||||||||
Provision for zakat and income tax (note 7) | — | — | — | — | — | (13,267,419 | ) | (13,267,419 | ) | |||||||||||||||||||
Zakat and income tax reimbursable by the partners | — | — | — | — | — | 13,267,419 | 13,267,419 | |||||||||||||||||||||
Transfer to capital reserve (note 11) | — | — | — | 440,263 | — | (440,263 | ) | — | ||||||||||||||||||||
Transfer to provision for employees’ training (note 12) | — | — | — | — | (3,000,000 | ) | — | (3,000,000 | ) | |||||||||||||||||||
Dividends relating to 2005 | — | — | — | — | — | (40,000,000 | ) | (40,000,000 | ) | |||||||||||||||||||
Balance at 31 December 2006 | 36,000,000 | 18,000,000 | 4,646,910 | 14,439,567 | — | 312,630,040 | 385,716,517 | |||||||||||||||||||||
F-79
Table of Contents
1 | ACTIVITIES |
2 | SIGNIFICANT ACCOUNTING POLICIES |
F-80
Table of Contents
3 | PROPERTY AND EQUIPMENT |
Camp and Geophysical equipment | 4 to 5 years | |||
Vehicles | 4 to 5 years | |||
Others | 3 to 5 years |
Camp and | ||||||||||||||||||||||||||||
Freehold | Geophysical | Total | Total | Total | ||||||||||||||||||||||||
land | equipment | Vehicles | Others | 2006 | 2005 | 2004 | ||||||||||||||||||||||
SR | SR | SR | SR | SR | SR | SR | ||||||||||||||||||||||
Cost: | ||||||||||||||||||||||||||||
At the beginning of the year | 10,894,745 | 428,505,997 | 74,936,284 | 4,310,210 | 518,647,236 | 431,322,873 | 457,716,818 | |||||||||||||||||||||
Additions | — | 13,775,577 | 2,334,888 | 31,291 | 16,141,756 | 103,265,814 | 10,789,409 | |||||||||||||||||||||
Disposals | — | (2,039,221 | ) | (1,602,550 | ) | (337,088 | ) | (3,978,859 | ) | (15,941,451 | ) | (37,183,354 | ) | |||||||||||||||
At the end of the year | 10,894,745 | 440,242,353 | 75,668,622 | 4,004,413 | 530,810,133 | 518,647,236 | 431,322,873 | |||||||||||||||||||||
Depreciation: | ||||||||||||||||||||||||||||
At the beginning of the year | — | 313,113,384 | 53,752,658 | 3,593,791 | 370,459,833 | 310,211,114 | 283,372,099 | |||||||||||||||||||||
Charge for the year | — | 53,356,445 | 6,455,786 | 313,978 | 60,126,209 | 76,023,171 | 62,855,322 | |||||||||||||||||||||
Disposals | — | (1,838,205 | ) | (1,194,379 | ) | (337,079 | ) | (3,369,663 | ) | (15,774,452 | ) | (36,016,307 | ) | |||||||||||||||
At the end of the year | — | 364,631,624 | 59,014,065 | 3,570,690 | 427,216,379 | 370,459,833 | 310,211,114 | |||||||||||||||||||||
Net book amounts: | ||||||||||||||||||||||||||||
At 31 December 2006 | 10,894,745 | 75,610,729 | 16,654,557 | 433,723 | 103,593,754 | |||||||||||||||||||||||
At 31 December 2005 | 10,894,745 | 115,392,613 | 21,183,626 | 716,419 | 148,187,403 | |||||||||||||||||||||||
At 31 December 2004 | 1,382,000 | 110,031,600 | 8,797,152 | 901,007 | 121,111,759 | |||||||||||||||||||||||
F-81
Table of Contents
4 | INVENTORIES |
2006 | 2005 | 2004 | ||||||||||
SR | SR | SR | ||||||||||
Equipment spares and others | 9,822,380 | 8,535,353 | 6,697,432 | |||||||||
Goods in transit | 585,387 | 2,646,379 | 1,264,282 | |||||||||
10,407,767 | 11,181,732 | 7,961,714 | ||||||||||
5 | ACCOUNTS RECEIVABLE AND PREPAYMENTS |
2006 | 2005 | 2004 | ||||||||||
SR | SR | SR | ||||||||||
Trade accounts receivable | 37,033,906 | 57,120,568 | 48,034,478 | |||||||||
Retentions receivable | 35,825,270 | 41,892,370 | 35,159,374 | |||||||||
Amounts due from partners (note 15) | 6,340,014 | 14,996,318 | 16,856,091 | |||||||||
Unbilled receivables | — | 7,596,342 | — | |||||||||
Advance to an affiliate (note 15) | 6,087,053 | — | — | |||||||||
Advances to suppliers | 2,988,261 | 1,661,670 | 208,164 | |||||||||
Other receivables | 2,247,103 | 1,843,450 | 307,976 | |||||||||
Prepaid expenses | 3,005,700 | 2,467,600 | 1,234,640 | |||||||||
93,527,307 | 127,578,318 | 101,800,723 | ||||||||||
6 | ACCOUNTS PAYABLE, ACCRUALS AND PROVISION |
2006 | 2005 | 2004 | ||||||||||
SR | SR | SR | ||||||||||
Trade accounts payable | 9,055,245 | 10,943,801 | 6,718,682 | |||||||||
Provision for employee’s training (note 12) | 578,430 | — | — | |||||||||
Amounts due to affiliates (note 15) | 1,781,946 | 1,268,815 | 293,909 | |||||||||
Accrued expenses | 7,952,526 | 8,083,410 | 3,967,197 | |||||||||
Other payables | 3,292,652 | 2,137,112 | 1,098,687 | |||||||||
22,660,799 | 22,433,138 | 12,078,475 | ||||||||||
F-82
Table of Contents
7 | ZAKAT AND INCOME TAX |
2006 | 2005 | 2004 | ||||||||||
SR | SR | SR | ||||||||||
Provision for the year | 3,724,186 | 2,652,142 | 2,271,559 | |||||||||
Prior Years | — | 567 | 207,308 | |||||||||
Charge for the year | 3,724,186 | 2,652,709 | 2,478,867 | |||||||||
2006 | 2005 | 2004 | ||||||||||
SR | SR | SR | ||||||||||
Equity | 155,848,753 | 127,230,749 | 98,625,940 | |||||||||
Opening provisions and other adjustments | 9,507,585 | 8,317,565 | 5,501,401 | |||||||||
Book value of long term assets | (66,052,658 | ) | (98,450,756 | ) | (65,182,687 | ) | ||||||
99,303,680 | 37,097,558 | 38,944,654 | ||||||||||
Zakatable income for the year | 49,663,763 | 68,988,128 | 51,917,716 | |||||||||
Zakat base | 148,967,443 | 106,085,686 | 90,862,370 | |||||||||
2006 | 2005 | 2004 | ||||||||||
SR | SR | SR | ||||||||||
Provision for the year | 9,543,233 | 13,256,542 | 14,894,518 | |||||||||
Prior years | — | 6,532 | 1,043 | |||||||||
Charge for the year | 9,543,233 | 13,263,074 | 14,895,561 | |||||||||
2006 | 2005 | 2004 | ||||||||||
SR | SR | SR | ||||||||||
At the beginning of the year | 15,908,684 | 17,166,077 | 12,390,391 | |||||||||
Provided during the year | 13,267,419 | 15,915,783 | 17,374,428 | |||||||||
Payments during the year | (25,851,458 | ) | (17,173,176 | ) | (12,598,742 | ) | ||||||
At the end of the year | 3,324,645 | 15,908,684 | 17,166,077 | |||||||||
F-83
Table of Contents
8 | CAPITAL |
9 | STATUTORY RESERVE |
10 | GENERAL RESERVE |
11 | CAPITAL RESERVE |
12 | RESERVE FOR EMPLOYEES’ TRAINING |
2006 | 2005 | 2004 | ||||||||||
SR | SR | SR | ||||||||||
At the beginning of the year | 3,000,000 | 3,000,000 | 3,000,000 | |||||||||
Transfer to retained earnings | — | (1,730,387 | ) | (2,077,836 | ) | |||||||
Transfer from retained earnings | — | 1,730,387 | 2,077,836 | |||||||||
Transfer to provision for employee’s training | (3,000,000 | ) | — | — | ||||||||
At the end of the year | — | 3,000,000 | 3,000,000 | |||||||||
F-84
Table of Contents
13 | GENERAL AND ADMINISTRATION EXPENSES |
2006 | 2005 | 2004 | ||||||||||
SR | SR | SR | ||||||||||
Rent | 1,223,829 | 1,082,246 | 1,178,503 | |||||||||
Printing and stationery | 1,051,575 | 1,014,003 | 872,659 | |||||||||
Postage, fax and telephone | 1,650,446 | 570,271 | 587,883 | |||||||||
Other | 2,812,896 | 2,586,989 | 2,231,177 | |||||||||
6,738,746 | 5,253,509 | 4,870,222 | ||||||||||
14 | OTHER INCOME |
2006 | 2005 | 2004 | ||||||||||
SR | SR | SR | ||||||||||
Profit on sale of plant and equipment | 440,263 | 607,165 | 6,430,842 | |||||||||
Income from bank deposits | 7,104,768 | 3,832,794 | 1,347,488 | |||||||||
7,545,031 | 4,439,959 | 7,778,330 | ||||||||||
15 | RELATED PARTY TRANSACTIONS |
16 | CAPITAL COMMITMENTS |
17 | RISK MANAGEMENT |
F-85
Table of Contents
18 | FAIR VALUES OF FINANCIAL INSTRUMENTS |
19 | COMPARATIVE FIGURES |
20 | SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN ACCOUNTING PRINCIPLES FOLLOWED BY THE COMPANY AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES |
2006 | 2005 | 2004 | ||||||||||
SR | SR | SR | ||||||||||
Net income under Saudi accounting standards | 80,130,727 | 96,113,734 | 99,087,860 | |||||||||
US GAAP adjustments: | ||||||||||||
Provision for zakat and income tax (note 7(c)) | (13,267,419 | ) | (15,915,783 | ) | (17,374,428 | ) | ||||||
Net over payment of zakat and income tax (refer below) | 906,988 | 904,631 | — | |||||||||
Deferred tax adjustment for the year | 1,116,425 | 3,787,829 | 43,367 | |||||||||
Net income under US GAAP | 68,886,721 | 84,890,411 | 81,756,799 | |||||||||
Difference in net income between Saudi Standards and US GAAP | 11,244,006 | 11,223,323 | 17,331,061 | |||||||||
Difference in partners’ equity between Saudi Accounting Standards and US GAAP (due to cumulative effect of current and prior years’ adjustments) | 6,151,900 | 13,680,456 | 20,735,296 | |||||||||
F-86
Table of Contents
2006 | 2005 | 2004 | ||||||||||
SR | SR | SR | ||||||||||
Partners’ equity under Saudi accounting standards | 385,716,517 | 348,585,790 | 292,472,056 | |||||||||
Cumulative effect of current and prior year adjustments (note 20(a)) | (6,151,900 | ) | (13,680,456 | ) | (20,735,296 | ) | ||||||
Partners’ equity under US GAAP | 379,564,617 | 334,905,334 | 271,736,760 | |||||||||
F-87