annual report 2004 - Severočeské doly a.s.

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62 —— 63 6. Investments in Associates The following is a list of the principal investments in associates at December 31, 2004 (in CZK million): Entity Place Principal activity Ownership interest Group’s share of incorporation of income PRODECO, a.s. Czech Republic Projections and constructions 50.50% 4 SHD – KOMES, a.s. Czech Republic Purchase and sale of goods 46.33% 3 Výzkumný ústav pro hnědé uhlí a.s.` Czech Republic Research 38.97% 1 ENETECH a.s. Czech Republic Engineering 50.00% — Coal Energy, a.s. Czech Republic Energy trading 20.00% 20 Although the interest in share capital of PRODECO, a.s., is 50.50%, the Company does not exercise control and thus the investment is accounted for using the equity method of consolidation. In 2004 the Company sold the share in Teplárna Ústí nad Labem, a.s. for the price of CZK 194 million. The net book value of sahe sold is in the Consolidated Statement of Income reported in Other financial expenses, net. 7. Accounts Receivable, Net The composition of accounts receivable at December 31, 2004 and 2003 is as follows (in CZK million): 2004 2003 Trade receivables 1,018 1,057 Other receivables 15 36 Less: allowance for doubtful accounts (94) (136) Total 939 957 8. Cash and Cash Equivalents The composition of cash and cash equivalents at December 31, 2004 and 2003 is as follows (in CZK million): 2004 2003 Cash in hand 1 1 Bank accounts 232 257 Total 233 258 9. Accounts Payable The composition of accounts payable at December 31, 2004 and 2003 is as follows (in CZK million): 2004 2003 Trade payables 423 529 Wages, social and health insurance payable 128 119 Other 114 166 Total 665 814 10. Accrued and Other Liabilities The composition of accrued and other liabilities at December 31, 2004 and 2003 is as follows (in CZK million): 2004 2003 Accruals 99 147 Social and donations fund 186 146 Total 285 293 11. Shareholders’ Equity As of December 31, 2004, the share capital of Severočeské doly consisted of 7,516,485 registered shares and 1,483,570 bearer shares with a nominal value of CZK 1,000 each. In 2004 the National Property Fund contributed assets with a total value of CZK 89 million, which resulted in an increase in share capital and non-distributable reserve fund. In 2002 the National Property Fund contributed land with a total value of CZK 2 million, which resulted in an increase in share capital. The increase was registered in 2003. 28
Reserve Fund In accordance with Czech regulations, joint stock companies are required to establish a non-distributable reserve fund for contingencies against possible future losses and other events. Contributions must be a minimum of 20% of after-tax profit in the first year in which profits are made and 5% of profit each year thereafter, until the fund reaches at least 20% of share capital. As of December 31, 2004 and 2003, the balance was CZK 1,537 million and CZK 1,460 million, respectively, and is reflected as a component of retained earnings. Net Profit per Share 2004 2003 Numerator – basic and diluted (CZK millions) Net Profit 179 1,411 Denominator (shares) Basic: Weighted average shares outstanding 9,000,055 8,999,958 Diluted: Adjusted weighted average shares 9,006,898 8,999,958 12. Income Taxes Income Tax Legislation Corporate income tax is calculated in accordance with Czech tax regulations at the rate of 28%. The corporate income tax rate for 2005 and 2006 will be 26% and 24%, respectively. The Czech Republic currently has a number of laws related to various taxes imposed by governmental authorities. Applicable taxes include value-added tax, corporate tax, and payroll (social) taxes, together with others. In addition, laws related to these taxes have not been in force for significant periods, in contrast to more developed market economies. Accordingly, few precedents with regard to issues have been established. Often, differing opinions regarding legal interpretations exist both among and within government ministries and organizations; thus, creating uncertainties and areas of conflict. Tax declarations, together with other legal compliance areas (as examples, customs and currency control matters) are subject to review and investigation by a number of authorities, who are enabled by law to impose extremely severe fines, penalties and interest charges. These facts create tax risks in the Czech Republic substantially more significant than typically found in countries with more developed tax systems. Management believes that it has adequately provided for tax liabilities in the accompanying financial statements; however, the risk remains that those relevant authorities could take differing positions with regard to interpretive issues and the effect could be significant. Income Tax Provision The components of the income tax provisions for the years ended December 31, 2004 and 2003 are as follows (in CZK million): 2004 2003 Current 390 401 Deferred (318) 303 Total 72 704 Reconciliation of expected income tax expense to the actual tax expense is as follows (in CZK million): 2004 2003 Profit before income taxes 251 2,115 Statutory income tax rate 28% 31% ‘Expected’ income tax expense 71 655 Add/(deduct) the effect of: Czech/IFRS accounting differences 31 36 Tax exempt income (24) (32) Investment tax relief (8) (10) Income already taxed (11) (20) Final withholding income tax on security income 3 9 Tax credits (1) (41) Additional tax assessments/(recoveries) (2) (4) Change in tax rates 13 80 Other items, net — 31 Income taxes 72 704 Effective tax rate 28% 33%
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SEVEROČESKÉ DOLY a.s. — annual
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Severočeské doly a.s. is the larg
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RAM The operating part of a heavy t
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CONCERTINA The protective concertin
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Most Important Events of 2004 Janua
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10 —— 11 Interview with the Cha
Page 14 and 15: 12 —— 13 Directors and Officers
Page 16 and 17: 14 —— 15 Jaroslav Volšický (*
Page 18 and 19: 16 —— 17 Executive Management T
Page 20 and 21: 18 —— 19 Company Profile Severo
Page 22 and 23: 20 —— 21 Report of the Board of
Page 24 and 25: 22 —— 23 Sales and Marketing Sa
Page 26 and 27: 24 —— 25 Product structure (%)
Page 28 and 29: 26 —— 27 Developments in coal e
Page 30 and 31: 28 —— 29 Developments in invest
Page 32 and 33: 30 —— 31 How Investments are Fi
Page 34 and 35: 32 —— 33 Employee education str
Page 36 and 37: 34 —— 35 municipalities and oth
Page 38 and 39: 36 —— 37 tion plants based on t
Page 40 and 41: 38 —— 39 on the innovation of t
Page 42 and 43: 40 —— 41 Financial Performance
Page 44 and 45: 42 —— 43 sumption of materials
Page 46 and 47: 44 —— 45 Shares and Shareholder
Page 48 and 49: 46 —— 47 Right to a Dividend 1.
Page 50 and 51: 48 —— 49 Strategy and Outlook f
Page 52 and 53: 50 —— 51 Outlook for 2005 Terri
Page 54 and 55: 52 —— 53 Report of Independent
Page 56 and 57: 54 —— 55 Consolidated Statement
Page 58 and 59: 56 —— 57 Notes to Consolidated
Page 60 and 61: 58 —— 59 Held-to-maturity inves
Page 62 and 63: 60 —— 61 Segments The Group has
Page 66 and 67: 64 —— 65 Deferred Taxes, Net At
Page 68 and 69: 66 —— 67 The effect on retained
Page 70 and 71: 68 —— 69 Cash and In-kind Incom
Page 72 and 73: 70 —— 71 Organizational Chart G
Page 74 and 75: 72 —— 73 Shareholder Financial
Page 76 and 77: 74 —— 75 Persons Responsible fo
Page 78: Consulting and production: © B.I.G
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