2000 Financial statements - Nestlé

1 2000 Financial statementsConsolidated accounts of the nestl GroupAnnual report of nestl Consolidated income statement for the year ended 31st December 20006 Consolidated balance sheet as at 31st December 20008 Consolidated cash flow statement for the year ended 31st December 200010 Consolidated statement of changes in equity11 Annex11 Accounting policies13 Valuation methods and definitions16 Changes in accounting policies and modification of the scope of consolidation17 Notes44 Principal exchange rates45 Report of the Group auditors46 Financial information ten year review48 Companies of the nestl GroupConsolidated accounts of the nestl Group54 Income statement for the year 200055 Balance sheet at 31st December 200056 Annex to the annual accounts of nestl Accounting policies59 Notes to the annual accounts67 Proposed appropriation of profit68 Report of the statutory auditors69 Agenda for the 134th Ordinary General Meeting of nestl Important dates71 Shareholder information134th Annual report of nestl millions of CHFN otes20001999 Sales to customers18142274660 Cost of goods sold(38121)(35912)Distribution expenses(5884)(5268)Marketing and administration expenses(26467)(23887)Research and development costs(1038)(893)Restructuring costs(312)(402)Amortisation of goodwill(414)(384)Trading profit191867914 Net financing cost2(746)(998)Net non-trading items3(99)(57)

2 Profit before taxes483416859 Taxes5(2761)(2314)Net profit of consolidated companies55804545 Share of profit attributable to minority interests(212)(160)Share of results of associated companies6395339 Net profit for the year57634724As percentages of salesTrading profit for the per share(in CHF)Basic earnings per diluted earnings per income statementfor the year ended 31st December 20005 Consolidated accounts of the nestl GroupIn millions of CHFN otes20001999 AssetsCurrent assetsLiquid assets8 Cash and cash equivalents54513 322 Other liquid assets46803 34810131 6 670 Trade and other receivables91268512 443 Inventories1071687 383 Prepayments and accrued income763673 Total current assets3074727 169 Fixed assetsTangible fixed assets11 Gross value4351944 014 Accumulated depreciation(24894)(24 796)

3 1862519 218 Financial assetsInvestments in associated companies1221731 828 Deferred tax assets2125692 293 Other Financial assets1326922 4317434 6552 Goodwill1479025 258 Intangible assets15816742 Total fixed assets3477731 770 Total assets6552458 939 Consolidated balance sheet as at 31st December 2000before appropriations6 Consolidated accounts of the nestl GroupIn millions of CHFN otes20001999 Liabilities and equityCurrent liabilitiesTrade and other payables1610 0019 635 Financial liabilities178 3767 967 Tax payable1 035985 Accruals and deferred income3 7623 595 Total current liabilities23 17422 182 Medium and long term liabilitiesFinancial liabilities184 7684905 Employee benefit liabilities192 8602822 Deferred tax liabilities211 5501 327 Tax payable5372 Other payables402264 Provisions222 2042289 Total medium and long term liabilities11 83711 679 Total liabilities35 01133 861 Minority interests609625 EquityShare capital23404404 Share premium and reservesShare premium59265 926 Reserve for treasury shares2 2322873 Translation reserve571839 Retained earnings23 38817 43932 11727 07732 52127 481 Less:Treasury shares24(2 617)(3 028)Total equity before appropriations2 9 90424 453 Total liabilities and equity65 5245 89397 Consolidated accounts of the nestl Groupa) Taxes paid amount to CHF 2714 million(1999: CHF 2304 mil-lion).

4 Interest received/paiddoes not differ materi-ally from interestshown under note 2 Net financing cost .In millions of CHFN otes20001999 Operating activitiesNet profit of consolidated companies55804 545 Depreciation of tangible fixed assets1127372 597 Impairment of tangible fixed assets11223373 Amortisation of goodwill14414384 Depreciation of intangible assets1517992 Impairment of goodwill14230212 Increase/(decrease) in provisions and deferred taxes(4)101 Decrease/(increase) in working capital25(368)235 Other movements(140)(352)Operating cash flow (a)88518 187 Investing activitiesExpenditure on tangible fixed assets11(3305)(2 806)Expenditure on intangible assets15(188)(139)Sale of tangible fixed assets355363 Acquisitions26(2846)(440)Disposals277802 53 Income from associated companies10786 Other movements39(76)

5 Cash flow from investing activities(5058)(2 759)Consolidated cash flow statementfor the year ended 31st December 20008 Consolidated accounts of the nestl Group9 Consolidated accounts of the nestl GroupIn millions of CHFN otes20001999 Financing activitiesDividend for the previous year(1 657)(1 469)Purchase of treasury shares (net)1 072(2 311)Premium on warrants issued81 Movements with minority interests(221)(190)Bonds issued1 016328 Bonds repaid(1 143)(400)Increase/(decrease) in other medium/long term Financial liabilities(155)500 Increase/(decrease) in short term Financial liabilities921(3 488)Decrease/(increase) in marketable securities andother liquid assets(2 788)(355)Decrease/(increase) in short term investments1 45212 Cash flow from financing activities(1 422)(7 373)Translation differences on flows(175)49 Increase/(decrease) in cash and cash equivalents2 196(1 896)Cash and cash equivalents at beginning of year3 3224 984 Effects of exchange rate changes on opening balance(67)234 Cash and cash equivalents retranslated at beginning of year3 2555 218 Cash and cash equivalents at end of year85 4513 32210 Consolidated accounts of the nestl GroupReserve forLess.

6 Share treasury Translation RetainedTotalShare TreasuryTotalIn millions of CHFpremiumsharesreserve earningsreservescapital sharesequityEquity as at31st December 19985926562226 1628522 999404 (588)22 815 Currency retranslation613613613 Net profit47244 7244 724 Movement of treasury shares (net)2311(2311) (2311)(2 311)Result on options and treasuryshares held for trading purposes139139(129)10 Dividend for the previous year(1469)(1 469)(1 469)Recovery of goodwill ondisposals charged to equityprior to 1st January 1995717171 Equity as at31st December 199959262873839 1743927 077404 (3028)24 453 Adjustment for the introductionof IAS 37 Provisions132132132 Related deferred taxes(21)(21)(21)Equity restated as at31st December 199959262873839 1755027 188404 (3028)24 564 Currency retranslation(268)(268)(268)Net profit57635 7635 763 Movement of treasury shares (net)(641)641 641641 Result on options and treasuryshares held for trading purposes959959(230)729 Premium on warrants issued818181 Dividend for the previous year(1657)(1 657)(1 657)Recovery of goodwill ondisposals charged to equityprior to 1st January 1995515151 Equity as at31st December 200059262232571 2338832 117404 (2617)29 904 Consolidated statement of changes in equityAccounting policiesAccounting convention and accounting standardsThe Consolidated accounts comply with InternationalAccounting Standards (IAS)

7 Issued by the InternationalAccounting Standards Committee (IASC) and with theStanding Interpretations issued by the Standing Interpre-tation Committee of the IASC (SIC).The accounts have been prepared under the historicalcost convention and on an accrual basis. All significantconsolidated companies have a 31st December account-ing year end. All disclosures required by the 4th and 7thEuropean Union company law directives are of consolidationThe Consolidated accounts comprise those of nestl and of its affiliated companies, including joint ven-tures, and associated companies (the Group). The list ofthe principal companies is given in section Companiesof the nestl Group .Consolidated companiesCompanies in which the Group has a participation, usu-ally a majority, and where it is responsible for the man-agement, are fully consolidated.

8 This applies irrespectiveof the percentage of the participation in the sharecapital. Minority interests in equity, as well as in the netresults, are shown separately in the consolidation is applied for companiesowned, controlled and managed jointly with individual assets, liabilities, income and expenditureare consolidated in proportion to the nestl participationin the equity (usually 50%).Newly acquired companies are consolidated from theeffective date of acquisition, using the purchase companiesCompanies where the Group has a participation of 20%or more and a significant influence but does not exercisemanagement control are accounted for by the equitymethod. The net assets and results are recognised on thebasis of the associates own accounting policies, whichmay differ from those of the currenciesIn individual companies, transactions in foreign curren-cies are recorded at the rate of exchange at the date ofthe transaction or, if hedged forward, at the rate of ex-change under the related hedge instrument.

9 Assets andliabilities in foreign currencies are translated at year endrates. Any resulting exchange differences are taken tothe income consolidation, assets and liabilities of Group com-panies denominated in foreign currencies are translatedinto Swiss francs at year end rates. Income and expenseitems are translated into Swiss francs at the annual aver-age rates of exchange or, where known or determinable,at the rate on the date of the transaction for arising from the retranslation of openingnet assets of Group companies, together with differ-ences arising from the restatement of the net results forthe year of Group companies from average or actualrates to year end rates, are taken to balance sheet and net results of Group com-panies operating in hyperinflationary economies arerestated for the changes in the general purchasingpower of the local currency, using official indices at thebalance sheet date.

10 Before translation into Swiss francsat year end Financial instruments are used to manageoperational exposures to foreign exchange, interest rateand commodity price risks. They are entered into withhigh credit quality Financial institutions, consistent withspecific approval, limit and monitoring procedures. Theinstruments used to hedge foreign currency flows andpositions mainly include forward foreign exchange con-tracts, options and currency swaps. Foreign exchangegains and losses on hedging instruments are matchedwith foreign exchange gains and losses on the underlyingasset or liability. When an anticipated future transactionhas been hedged and the underlying position has notbeen recognised in the Financial statements any changein the fair value of the hedging instrument is not recog-nised in the income statement for the accounts of the nestl GroupWhere derivatives are held for the long term and areused to manage interest rate risks, they are accountedfor on the cost basis (where the underlying asset or lia-bility is accounted for on the cost basis) and paymentsand receipts relating to the instruments are recognisedunder net financing cost as they accrue.