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OPERATING
REVENUES
TANDBERG develops and sells
products within the communications
area Videoconferencing. The
group’s business activities
are so closely related that
no separate business segments
could be identified according
to the accounting definitions
of segments. All our sales
derive from the same product
group or services related
to this product group, and
there is a high degree of
similarity of growth opportunities,
risk and earnings potential
for the various products within
our portfolio. The geographical
areas we operate in also have
a high degree of similarity
when it comes to potential
for future development and
levels of risk. The largest
geographical areas, Americas
and Europe, amount to 90%
of total sales, and they both
have a similar profile in
terms of earnings potential,
growth and risk.
TANDBERG’s business
activities are managed on
a globally integrated basis
as our customers tend to be
global in nature. Lack of
disciplined implementation
of terms and conditions globally
would cause a continuing deteriorating
profitability and lack of
perceived professionalism.
As we do want to provide
as much relevant qualitative
and quantitative information
as possible for analytical
purposes, we will present
a geographic breakdown of
the group’s operating
revenues in the largest areas
and operating revenues per
product category:
Group management and the
Board of Directors receive
on a regular basis Group financial
statements with revenues per
geographic area. Information
about geographic profit centres
are not presented on a regular
basis internally. However,
additional operational and
market related data are provided
on a regular basis to management
to support their assessment
of business performance and
growth opportunities.
FINANCIAL
MARKET RISK
TANDBERG is exposed to changes
in exchange rates since a
large part of its revenues
are in USD and GBP. A large
part of the cost of goods
and operating costs are also
in USD, and the foreign exchange
fluctuations impact on the
operating results is therefore
reduced. A change in the NOK/USD
rate of +/– 1.00, impact
the operating revenue with
about +/– NOK 158 million
and the operating profit with
about +/– NOK 56 million.
The company has no interest-bearing
debt. Liquid funds are invested
at floating interest rates
with banks, with an average
interest rate of 4.1% in 2003.
FOREIGN
EXCHANGE
The company does not take
positions in financial instruments
with a view to hedging future
cash flows or cash holdings.
The group’s net foreign
exchange losses were NOK 16.4
million in 2003, against NOK
47.6 million in foreign exchange
losses in 2002, and NOK 5.5
million in foreign exchange
gains in 2001.
PENSION
SCHEMES
TANDBERG has a service pension
plan for employees in the
Norwegian companies through
an insurance company. In valuing
pension funds and measuring
accrued liabilities, estimated
values are used. In calculating
future pensions the following
assumptions have been used
at 1.1 and 31.12.2003:
We have made two changes
in the assumptions since last
year-end. The discount rate
is reduced by 1% to reflect
the interest rate reduction
on long term risk free (government)
bonds. Annual increase in
salary is up by 0.5%.
The calculations assume
a rate of staff turnover falling
from 8% for the age group
20 to 24 years down to 0%
for employees over 51. On
average this gives a turnover
ratio of 2-3% for the entire
workforce.
Those active in the pension
plan have an average age of
32.6 years and a remaining
service period in the plan
of 23 years. As at 01.01.03
the plan covered 180 employees.
Total Benefit Obligation
(TBO) for Norwegian companies
is estimated to NOK 85.6 million.
Estimated pension funds in
the balance sheet are considerably
lower than estimated TBO.
Therefore, we find it likely
that we can use the over-financing
in the future and take it
into the balance sheet.
TANDBERG Inc. has a 401-K
contributions plan for the
employees. Employees are eligible
upon reaching the age of 21
and after 3 months employment.
Employees can defer up to
15% of their pre-tax salary
up to a maximum of USD 13,000
per year. The employer must
correspondingly pay 35% of
the first 8% paid in by the
employees.
Pension payments from TANDBERG
Inc. are released to the employees
at 20% a year over a 5-year
period.If an employee leaves
the company before the end
of the 5-year period, the
retained amount will belong
to TANDBERG Inc. As at 31.12.03,
172 employees participated
in this pension plan.The pension
costs for TANDBERG Inc. in
2003 were NOK 1,999,208. TANDBERG
Inc. had a liability of NOK
190,748 as at 31.12.03.
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