8/12/2019 Panorama 2006 http://slidepdf.com/reader/full/panorama-2006 1/66 T H O M S O N P A N O R A M A 2 0 0 6 PANORAMA 2006 Headquarters 46, quai Alphonse Le Gallo 92648 Boulogne-Billancourt Cedex – France Email:[email protected]Tel.: +33 (0)1 41 86 50 00 – Fax: +33 (0)1 41 86 58 59 USA 2255, North Ontario Street, Suite 350 Burbank, CA 91504 – United States Tel.: 1 (818) 260-3721 – Fax: 1 (818) 260-3807 101 West 103rd Street Indianapolis, IN 46290-1102 – United States Tel.: 1 (317) 587-3000 – Fax: 1 (317) 587-6763 www.thomson.net Thomson – SA with a capital of 1,027,017,360 – 333 773 174 R.C.S. Nanterre p. 02 -Message from the Chairman & p. 06 -Executive Committeep. 08 -Board of Directors p. 10 -Strategy & Market Perspective p. 16 - Technology p. 24 -Systemsp. 32 -Servicesp. 42 -Human Resourcesp. 46 -Corporate Social Responsibliity p. 53 -Financial Information
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Transcript
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T H O M S O N P A N O R A M A 2 0 0 6 PANORAMA 2006
Burbank CA 91504 ndash United StatesTel 1 (818) 260-3721 ndash Fax 1 (818) 260-3807
101 West 103rd Street
Indianapolis IN 46290-1102 ndash United StatesTel 1 (317) 587-3000 ndash Fax 1 (317) 587-6763
wwwthomsonnet
Thomson ndash SA with a capital of 9914041027017360 ndash 333 773 174 RCS Nanterre
p 02 - Message from the Chairman amp
p 06 - Executive Committee
p 08 - Board of Directors
p 10 - Strategy amp Market Perspective
p 16 - Technology
p 24 - Systems
p 32 - Services
p 42 - Human Resources
p 46 - Corporate Social Responsibliity
p 53 - Financial Information
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homson in 2006
Burbank Indianapolis Princeton Rennes Paris London Beijing
Our customers
- Users of Thomson technologies IT electronicstelecoms industries
- Content distributors broadcast cable satellitetelecom internet
- Content creators film studios broadcastersgame developers advertisers corporates
2006 full year core business revenues by division
Systems991404270 bn
Services991404250 bn
Technology991404055 bn
2006 CORE BUSINESS REVENUES
d575 bnEMPLOYEES IN 2006
24000
Our commercial brands
- Systems and Technology - Services
Main sites
- ServicesOur Services division manages video networks on behalf
of its customers and is a world leader in physical and
electronic media services The divisionrsquos offering spans
all types of video network services management
post-production services including visual effects
out-of-home advertising services and film and DVD services
- SystemsOur Systems division provides and integrates
video-focused systems and solutions playing a strategic
role at both ends of network distribution on the one hand
helping broadcasters and network operators distribute
content and on the other providing operators with
the devices that media consumers need to access and
enjoy content wherever and whenever they want
- Technology Our Technology division develops and monetizes
core video technologies through the licensing of patents
IC designs and software while anticipating future standards
in an industry in constant evolution With seven research
laboratories worldwide and more than 55000 patents
its activities cover video and audio compression
content security solutions video distribution over Internet
Protocol and mobile networks image processing
optical and professional storage content production and
management systems and more
Princeton
Indianapolis
Burbank
Beijing
RennesParis
London
8122019 Panorama 2006
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IMAGES amp BEYOND
A world leader in digital video technologies Thomsondelivers high-quality technologies systems and services tothe Media Entertainment amp Communications industriesmdash
or any organization using the moving image to communicate
We have deep and long-standing video expertise and essentialproprietary technology Serving the worldrsquos content creators anddistributorsmdashfrom movie studios broadcasters and networkoperators to advertisers and emerging prosumer and consumermarketsmdashwe constantly innovate to develop video technologies thatmeet evolving needs These range from advanced video compression
to audiovisual content protection
Our services and solutions cover the entire video value chain fromimage capture production and post-production services to physicalor electronic distribution to advanced access devices which enableend-customers to enjoy content wherever and whenever they want
01 Thomson Panorama 2006
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ldquoAt the heart of digital videordquo
The strategic plan for the period 2004-
2006 launched following my appointment
as Chairman amp CEO of Thomson at the endof 2004 has been successfully completed
and has rapidly secured our future as an
innovative technology systems and services
business serving the Media Entertainment
amp Communications industries worldwide
Strategic objectives achieved
We set a clear and unambiguous strategic
direction in 2004 to position Thomson for
the digital video and new media markets
of tomorrow
During the last two years we made rapidprogress to exit the heavily loss-making
consumer electronics businesses a neces-
sity if Thomson was to succeed The dis-
posal process began with the sale of the
TV business in 2004 and 2005 the tubes
business in 2005 and of the accessories
business at the end of 2006 It will come to
an end in 2007 with the divestment of the
remainder of our AudioVideo businesses
In parallel we invested to establish prom-
ising businesses which are now boosting
and will continue to boost revenue growth
Content Services Network Services Broad-cast amp Networks and Access Products
We also set out in 2004 to broaden our
customer base geographically and by
type to increase our focus on RampD and
to strengthen our position in electronic
content and in advanced Internet Protocoldevices and solutions
We have been successful in achieving
those strategic and operational objec-
tives we more than doubled the number
of customers with whom we generate over
99140420 million in revenues and diversified our
activities geographically and along the
entire video value chain We increased very
significantly our RampD spend and launched
several cooperative programs which maxi-
mise our RampD investment and intellectual
property portfolio
We have also built a unique position in
electronic content distributionmdashour Net-
work Services businesses combined with
new activities in Content Services such as
visual effects and other related businesses
in Systems now generate substantial rev-
enues In IP devices and solutions today
we occupy the world-leading position in
the provision of Internet-based access
products to telecom operators
In 2006 we grew faster than our markets
and gained market share across most of
our businesses There will be challengesahead as the world of digital video contin-
MESSAGE FROM
THE CHAIRMAN amp CEO This year saw the successful completion of Thomsonrsquos transformation into aGroup focused on digital video technology signaling the start of a new phase in itsdevelopment
02 Thomson Panorama 2006
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ues to evolve rapidly with further concen-
tration and diversification of both customers
and competitors and the continued impact
of broadband and video technologies on
our markets In that environment our mainfocus will be to work to optimize our port-
folio of activities for higher growth I have
no doubt that the opportunities which lie
ahead for Thomson will be immense
Return to profit in 2006
We saw a strong end to the fiscal year
With full year revenues at euro5854 million
giving core business revenues up 83
at constant currency and core business
EBIT of euro504 millions resulting in a core
EBIT margin of 88 we largely achieved
our financial targets The Systems divisiongrew revenues strongly while Services
showed a stable performance overall and
Technology recorded solid revenue growth
and good profitability
For the first time in many years Thomson
also registered a full year net profit (euro55 mil-
lion) Free cash flow generation was up
15 on last year toeuro483 million for the full
year 2006 In parallel our net financial lia-
bilities were reduced by euro460 million over
the year Over two thirds of our revenue in
2006 was digitalelectronic based and less
than a third was from physical media
Most importantly this transformation leaves
Thomson well-positioned at the heart of
convergence and digital video with sharply
reduced financial exposure to our legacy
consumer electronics businesses
Evolving skills base
Aside from the strategic operat ional or
financial targets we set ourselves and
achieved over the 2004-2006 period we
also made progress in improving opera-
tional management customer cover-
age and our reactivity to rapidly evolving
Media Entertainment amp Communications
markets
That has impl ied a rapid and dramatic
evolution of the Grouprsquos human resources
and skills base Together with a first-class
offering of technologies systems and ser-
vices our RampD software and design skills
are key Also critical is our capacity to win
new business by integrating our broad
offering to our customers
ldquoTogether with a first-class offering of technologies systems and servicesour RampD software and design skillsare keyrdquo
03 Thomson Panorama 2006
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Our current employeesrsquo skill-sets reflect
these business priorities many of whom
are highly-qualified engineers as do
Thomsonrsquos close ties to a number of pres-
tigious institutions of higher education and
universities across the world As testament
to our changed employee profile and the
Grouprsquos transformation almost 80 of our
top management team has been renewedover the last two years drawn equally from
internal promotions acquisitions and
external recruitment
Outlook for 2007-2009
Our strategy for the 2007-2009 period will
see Thomson continue to expand its lead-
ership positions in digital video technolo-
gies services and systems The assump-
tions about the strategic medium-term
evolution of our markets we detailed in
2004 have proven valid and will inform our
decisions as we seek to build and grow
our business
Investments will continue therefore in
our key growth businesses the electronic
media activities within Content Services
and Network Services part of our Services
division and the Broadcast amp Networks
and Access Products businesses part of
our Systems division We intend to manage
our more mature activitiesmdashFilm amp DVD
Servicesmdashfor their cash and continue tore-invest in developing businesses New
media businesses for content makers or
content distributors will add to growth
RampD investment will continue to be strong
and we intend to maintain our intellectual
property leadership This should enable us
to take advantage of the main growth driv-
ers of the digital video industriesmdashaccel-
erating adoption of high-definition mobile
content on-demand content consumer-
generated content fixed-mobile conver-
gence triple-play devices connected
home networking and internet-based and
advertising content delivery
ldquoOur performance in 2006 has shown thatstrategically and operationally we can react effectively to
changes and opportunities in our marketsrdquo
04 Thomson Panorama 2006
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The six key programs we need to imple-
ment are now in place to ensure Thom-
son maintains best-in-class operational
efficiency These focus on key clients
software new product introductions
operational improvement transformation
programs ranging from supply chain man-
agement to IT and the management of our
talent base
Our financial focus over the next three
years will be on optimizing and manag-
ing our portfolio of activities for higher
growth and net income we expect rev-
enue growth to gather pace in 2008-2009
and our objective is to register compound
growth over the 2007-2009 period in line
with or greater than the overall market
In 2007 Thomson will continue actions
already underway to improve operating
profitability across the divisions comple-
menting the achievements of 2006 Weexpect a strong year of revenue growth in
our digital and electronic businesses par-
tially diluted by our physical media busi-
ness (film DVD) and target strong growth
in our net income
As a sign of confidence in Thomsonrsquos
2007-2009 business plans and projec-
tions the Board proposed an increase of
10 in the dividend this year bringing it
to euro033
I wish to thank all our employees and in
particular the senior management team
now in placemdashthe top 100 executives plus
Thomsonrsquos Executive Committeemdashfor the
key role they have played in our progress
and successes
Our performance in 2006 has shown that
strategically and operationally we can reacteffectively to changes and opportunities in
our markets We now plan to build on this
result and look forward to the 2007-2009
period with confidence in our ability to cre-
ate value for our shareholders partners
customers and employees
Frank E DANGEARD
Chairman amp Chief Executive Officer
05 Thomson Panorama 2006
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Under the leadership of Frank E Dange-
ard the Executive Committee currently
comprises 11 membersmdasheight of whom
are French two American and one Brit-
ish These executive managers respon-
sible for the operating divisions as well as
managers in charge of key functions meet
three times a month to review the financial
performance of the divisions in relation tothe budget and strategic developments
Once a month time is also set aside to
review the Grouprsquos key programs clients
software product introduction operations
transformation and talent management
The work of the Executive Committee is
carried out through three operating com-
mittees which contribute to an efficient
decision-making process
bull The Investment Committee chaired by
Senior Executive Vice President and Chief
Financial Officer Julian Waldron is respon-sible for studying and approving invest-
ments and financial commitments by the
different divisions It meets on an ad hoc
basis several times a month
bull The Risk Committee chaired by Senior
Executive Vice President and Chief Operat-
ing Officer Didier Trutt generally meets every
six weeks to assist the Executive Commit-
tee in identifying anticipating preventingand mitigating financial operational and
strategic risk to the business It also serves
as the forum through which the results and
findings of the internal audit team are com-
municated to senior management
bull The Corporate Social Responsibility
(CSR) Committee to be set up in 2007
Chaired by Marie-Ange Debon Execu-
tive Vice President General Secretary
Legal Real Estate amp External Com-
munications the CSR Committee will
oversee all matters related to corpo-
rate social responsibility complianceand ethics
Weekly meetings of Thomsonrsquos
Executive Committee
ensure an efficient
global decision-making process
EXECUTIVE COMMITTEE
06 Thomson Panorama 2006
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1 Frank E DANGEARDChairman amp Chief Executive Officer (Paris New YorkPrinceton andLos Angeles)
2 Jacques DUNOGUEacuteSenior Executive Vice PresidentSystems(Paris and New YorkPrinceton)
of the Grouprsquos divisions and profit centersIn the context of the budgetary procedure
performance measurement indicators are
calculated by the divisions analyzed and
reviewed monthly to serve as a reference
for the Grouprsquos monthly reporting
Management reporting and
closing period work
Th om so n uses a co mmon char t of
accounts which is regularly updated The
principal accounting and financial figures
of the operational and functional depart-
ments consolidated at Group level are
analyzed by the Grouprsquos management
control team and reviewed by the Grouprsquos
Executive Committee
The closing process for the half-year and
annual consolidated financial statementsoccurs in two steps The first step con-
sists of a ldquohard closerdquo completed in May
and September leading to a first review by
the statutory auditors The second step
occurs in July and in JanuaryFebruary and
involves the finalization of half-year and
annual consolidated financial statements
under IFRS The Group then proceeds
once a year with a reconciliation of these
results in accordance with US GAAP
Preparation of financial statements
The financial statements are prepared jointly by the finance department and the
General Secretary They are based on
information reported through the annual
reporting and accounting consolidation
processes and on operational and mar-
ket information which is specifically cen-
tralized for the preparation of Thomsonrsquos
Document de Reacutefeacuterence in France and
the submission of Form 20-F in the United
States Half-year and annual financial infor-
mation is reviewed by the Grouprsquos Audit
Committee
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58 Thomson Panorama 2006
(1) Source PriceWaterhouseCoopers ndash
ldquoGlobal Entertainment and Media Outlook 2006-10rdquo
Revenue growth
Thomson achieved consolidated 2006
net revenues of 9914045854 million up from
9914045591 million in 2005 Revenues for
the Core Business reached 9914045747 mil-
lion (9914045776 million at constant currency)
representing 83 growth over 2005 at
constant currency
Overall the Grouprsquos key growth busi-
nessesmdashContent Services Network
Services Access Products for telecom
operators and our Broadcast amp Networks
businesses (Grass Valley and Network
Software)mdashincreased strongly year-on-
year and accounted for over a third of
Group revenues against less than a quar-
ter in 2005
Thomsonrsquos Core Business EBIT for 2006
was euro504 million representing a Core
Business EBIT margin of 88 Thisreflected growth in some key businesses
and cost actions across the Group off-
setting a significant investment in research
and development and some increase in
restructuring expenses
Increased spend on RampD
Research and development expenditure
charged in the Core Business (net of
external funding) rose from 991404221 million in
2005 to 991404279 million in 2006 an increase
of 26 principally in the Systems divi-
sion The Group expanded the number ofproducts and services in the development
phase across its businesses
Return to profit
Losses in Non-Core Continuing and Dis-
continued operations were substantially
lower year-on-year reflecting principally
the exit from heavily loss-making Displays
activities in 2005 and intensified cost-sav-
ing programs in 2006 A major revision
and harmonization of the Grouprsquos North
American healthcare obligations gave rise
to substantial one-time gains and Thom-
son also initiated significant restructuring
of its French Non-Core operations
The good performance of the Core Busi-
ness lower Non-Core and Discontinued
losses and a low reported tax chargeenabled the Group to return a net profit of
99140455 million in 2006 compared to a loss of
991404573 million in the previous year
Good cash flow
strengthened balance sheet
Thomson generated good free cash flow
and strengthened its balance sheet in
2006 Total net financial liabilities on the
balance sheet fell by 991404460 million reflect-
ing a 99140493 million fall in financial and acqui-
sition-related debts and a 991404367 million
reduction in retirement benefit obligations(including healthcare)
Increase in Net Dividend
The Board of Directors proposed a dis-
tribution to shareholders of 991404033 per
share (2005 dividend 991404030) reflecting
confidence in the prospects of the Group
going forward
Outlook 2007-2009
growth in revenues and net income
With the Grouprsquos transformation complete Thomsonrsquos financial focus over the 2007-
2009 period will be to grow revenues and
net income
Thomson serves growing Media Enter-
tainment amp Communications marketsmdashfor
which external estimates(1) indicate com-
pound growth of around 6 over the last
FINANCIAL AND
OPERATIONAL PERFORMANCE
Full year 2006 results
saw a return to profitability
and leave Thomson
well positioned at
the heart of convergence
and digital video
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59 Thomson Panorama 2006
five years Our digital and electronic busi-
nesses now represent two-thirds of rev-
enues and we believe they are growing
faster than the overall market offsetting
the maturing physical media businesses
Given this profile the Group expects its
revenue growth to be more modest in
2007 but to gather pace over the period
and our overall objective is to show com-pound growth over 2007-2009 in line with
or faster than the overall market
The 2007-2009 period is also expected
to see a sharply reduced impact from
residual Non-Core activities with an end
to losses from the Discontinued Activities
perimeter after 2007 Accordingly Thom-
sonrsquos ambition is to turn its Core Business
growth and profitability and lower impact
from Non-Core into strong growth in net
income over the period 2007-2009
Business operations
Continuous performance improvement is
fundamental to Thomsonrsquos commitment to
create sustainable business models and
long-term value for all stakeholders The
ambitious Group-wide programs launched
in 2004 to improve productivity and
enhance overall performance producedsubstantial results in 2006 and led to new
and strong initiatives for long-term growth
As of the second half of 2006 six ldquoKey
Programsrdquo are monitored at Group level
Clients Software Product Introduction
Operations Transformation and Talent
Management
KEY PROGRAMS IN PLACE
Program Focus
Clients Thomsonrsquos clientregional diversification and
growth of the existing business
through improved Sales amp Marketing
Software Development of integrated software platforms
in all markets (post-production distribution
delivery) and for all types of customer
(professional prosumerhellip)
Product Introduction Ensuring new product roadmaps are in line
with strategy and resource needs have been
identifiedOperations Improving the Grouprsquos cost base cash
generation and working capital
Transformation Multiple programs including initiatives to
improving customer relationship management
worldwide supply chain management
IT transformation as well as Thomsonrsquos RampD
footprint
Talent Management Leveraging human assets with a focus on
talent retention and acquisition
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60 Thomson Panorama 2006
SUMMARY RESULTS FULL YEAR 2006
In 991404 millions unless otherwise stated 2006(1) 2005(1)
Net revenues 5854 5591(1)
Core Business net revenues 5747 5335
Services 2489 2487
Systems 2684 2262
Technology 547 546
Corporate 27 40
Non-Core continuing operations net revenues 107 256
Core Business EBIT(2) 504 512
Services 160 205
Systems 132 109
Technology 289 277Corporate (77) (79)
EBIT from Non-Core continuing operations (25) (122)
(1) Restated with 2006 discontinued activities according to IFRS 5
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61 Thomson Panorama 2006
Year ended December 31in 991404 except number of shares 2006 2005 2004
Year ended December 31in 991404 millions 2006 2005(1) 2004(1)
CONSOLIDATED STATEMENTS OF OPERATIONS
(1) Restated with 2006 discontinued activities according to IFRS 5
(2) After deduction of the interests net of tax paid on the subordinated perpetual notes during the period
Continuing operations
Revenues 5854 5591 5980
Cost of sales (4474) (4240) (4594)
Gross margin 1380 1351 1386
Selling marketing general and administrative expenses (674) (638) (653)
Other income (expense) 52 (96) (69)
Research and development expenses (279) (227) (201)
Profit from continuing operations before tax and net finance costs 479 390 463
Interest income 19 30 52
Interest expense (108) (108) (54)
Other financial income (expense) (111) 36 (26)
Finance costs ndash net (200) (42) (28)
Share of profit (loss) from associates (86) (82) (20)
Income tax ndash (68) (93)
Profit from continuing operations 193 198 322
Discontinued operations
Profit (loss) from discontinued operations (138) (771) (883)
Net income (loss) 55 (573) (561)
Attributable to
Equity Holders 55 (574) (559)
Minority interests ndash 1 (2)
Weighted average number of shares
outstandingmdashbasic net of treasury stock 261188858 266539917 273646869
Earnings per share from continuing operations
Basic(2) 067 074 118
Diluted 063 042 111
Earnings per share from discontinued operations
Basic (053) (289) (323)
Diluted (048) (262) (296)Total earnings per share
Basic(2) 014 (215) (205)
Diluted 015 (220) (185)
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62 Thomson Panorama 2006
CONSOLIDATED BALANCE SHEETS
In 991404 millions December 31 December 31 January 1 December 31 2006 2005 2005(1) 2004
ASSETS
Non-current assets
Property plant and equipment 813 886 1051 1051
Goodwill 1714 1756 1186 1178
Other intangible assets 1071 1150 924 924
Investments in associates 12 204 260 260
Investments and financial assets available-for-sale 266 341 139 113
Derivative financial instruments 7 1 11 ndash
Contract advances 129 173 179 179
Deferred tax assets 397 379 307 301
Other non-current assets 110 182 133 136
Total non-current assets 4519 5072 4190 4142
Current assets
Inventories 366 333 503 568
Trade accounts and notes receivable 1018 1315 1232 1180
Current accounts with associates and joint ventures 97 115 143 143
Derivative financial instruments 8 9 115 ndash
Other current assets 535 644 483 616
Marketable securities ndash 7 58 58
Cash and cash equivalents 1311 996 1845 1848
Assets classified as held for sale 264 369 80 ndash
Total current assets 3599 3788 4459 4413
Total assets 8118 8860 8649 8555
(1) Including the impacts of the first-time application related to IAS 32 and 39 on financial instruments and IFRS 5 on non-current assets held for sale and
discontinued operations
8122019 Panorama 2006
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63 Thomson Panorama 2006
In 991404 millions December 31 December 31 January 1 December 31 2006 2005 2005(1) 2004
SHAREHOLDERSrsquo EQUITY AND LIABILITIES
Shareholdersrsquo equity
Common stock (273871296 shares at
December 31 2006
with nominal value of euro 375 per share) 1027 1025 1025 1025
Trade accounts and notes payable 1032 1164 1199 1226
Accrued employee expenses 165 166 158 163
Income tax payable 57 47 60 60
Other current liabilities 671 750 746 800
Payables on acquisition of companies 13 138 84 84
Liabilities directly associated with
assets classified as held for sale 232 470 88 ndash
Total current liabilities 3681 4393 3602 3459
Total liabilities 5999 6644 6251 6062
Total shareholderrsquos equity and liabilities 8118 8860 8649 8555
(1) Including the impacts of the first-time application related to IAS 32 and 39 on financial instruments and IFRS 5 on non-current assets held for sale and
discontinued operations
8122019 Panorama 2006
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Creation and lay-out
Photo credits Nathalie BerhingGAMMA ndash Steacutephane de Bourgies ndash Jean-Franccedilois DeroubaixGAMMA ndash Christine Donnier- ValentinGAMMA ndash Cars copy 2006 Disney Enterprises IncPixar All Rights Reserved ndash Dreamgirls copy 2006 DREAMWORKS
LLC and PARAMOUNT PICTURES All Rights Reserved ndash Poseidon copy 2006 Warner Bros Pictures ndash Sony Bravia Paint
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 266
homson in 2006
Burbank Indianapolis Princeton Rennes Paris London Beijing
Our customers
- Users of Thomson technologies IT electronicstelecoms industries
- Content distributors broadcast cable satellitetelecom internet
- Content creators film studios broadcastersgame developers advertisers corporates
2006 full year core business revenues by division
Systems991404270 bn
Services991404250 bn
Technology991404055 bn
2006 CORE BUSINESS REVENUES
d575 bnEMPLOYEES IN 2006
24000
Our commercial brands
- Systems and Technology - Services
Main sites
- ServicesOur Services division manages video networks on behalf
of its customers and is a world leader in physical and
electronic media services The divisionrsquos offering spans
all types of video network services management
post-production services including visual effects
out-of-home advertising services and film and DVD services
- SystemsOur Systems division provides and integrates
video-focused systems and solutions playing a strategic
role at both ends of network distribution on the one hand
helping broadcasters and network operators distribute
content and on the other providing operators with
the devices that media consumers need to access and
enjoy content wherever and whenever they want
- Technology Our Technology division develops and monetizes
core video technologies through the licensing of patents
IC designs and software while anticipating future standards
in an industry in constant evolution With seven research
laboratories worldwide and more than 55000 patents
its activities cover video and audio compression
content security solutions video distribution over Internet
Protocol and mobile networks image processing
optical and professional storage content production and
management systems and more
Princeton
Indianapolis
Burbank
Beijing
RennesParis
London
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 366
IMAGES amp BEYOND
A world leader in digital video technologies Thomsondelivers high-quality technologies systems and services tothe Media Entertainment amp Communications industriesmdash
or any organization using the moving image to communicate
We have deep and long-standing video expertise and essentialproprietary technology Serving the worldrsquos content creators anddistributorsmdashfrom movie studios broadcasters and networkoperators to advertisers and emerging prosumer and consumermarketsmdashwe constantly innovate to develop video technologies thatmeet evolving needs These range from advanced video compression
to audiovisual content protection
Our services and solutions cover the entire video value chain fromimage capture production and post-production services to physicalor electronic distribution to advanced access devices which enableend-customers to enjoy content wherever and whenever they want
01 Thomson Panorama 2006
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 466
ldquoAt the heart of digital videordquo
The strategic plan for the period 2004-
2006 launched following my appointment
as Chairman amp CEO of Thomson at the endof 2004 has been successfully completed
and has rapidly secured our future as an
innovative technology systems and services
business serving the Media Entertainment
amp Communications industries worldwide
Strategic objectives achieved
We set a clear and unambiguous strategic
direction in 2004 to position Thomson for
the digital video and new media markets
of tomorrow
During the last two years we made rapidprogress to exit the heavily loss-making
consumer electronics businesses a neces-
sity if Thomson was to succeed The dis-
posal process began with the sale of the
TV business in 2004 and 2005 the tubes
business in 2005 and of the accessories
business at the end of 2006 It will come to
an end in 2007 with the divestment of the
remainder of our AudioVideo businesses
In parallel we invested to establish prom-
ising businesses which are now boosting
and will continue to boost revenue growth
Content Services Network Services Broad-cast amp Networks and Access Products
We also set out in 2004 to broaden our
customer base geographically and by
type to increase our focus on RampD and
to strengthen our position in electronic
content and in advanced Internet Protocoldevices and solutions
We have been successful in achieving
those strategic and operational objec-
tives we more than doubled the number
of customers with whom we generate over
99140420 million in revenues and diversified our
activities geographically and along the
entire video value chain We increased very
significantly our RampD spend and launched
several cooperative programs which maxi-
mise our RampD investment and intellectual
property portfolio
We have also built a unique position in
electronic content distributionmdashour Net-
work Services businesses combined with
new activities in Content Services such as
visual effects and other related businesses
in Systems now generate substantial rev-
enues In IP devices and solutions today
we occupy the world-leading position in
the provision of Internet-based access
products to telecom operators
In 2006 we grew faster than our markets
and gained market share across most of
our businesses There will be challengesahead as the world of digital video contin-
MESSAGE FROM
THE CHAIRMAN amp CEO This year saw the successful completion of Thomsonrsquos transformation into aGroup focused on digital video technology signaling the start of a new phase in itsdevelopment
02 Thomson Panorama 2006
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 566
ues to evolve rapidly with further concen-
tration and diversification of both customers
and competitors and the continued impact
of broadband and video technologies on
our markets In that environment our mainfocus will be to work to optimize our port-
folio of activities for higher growth I have
no doubt that the opportunities which lie
ahead for Thomson will be immense
Return to profit in 2006
We saw a strong end to the fiscal year
With full year revenues at euro5854 million
giving core business revenues up 83
at constant currency and core business
EBIT of euro504 millions resulting in a core
EBIT margin of 88 we largely achieved
our financial targets The Systems divisiongrew revenues strongly while Services
showed a stable performance overall and
Technology recorded solid revenue growth
and good profitability
For the first time in many years Thomson
also registered a full year net profit (euro55 mil-
lion) Free cash flow generation was up
15 on last year toeuro483 million for the full
year 2006 In parallel our net financial lia-
bilities were reduced by euro460 million over
the year Over two thirds of our revenue in
2006 was digitalelectronic based and less
than a third was from physical media
Most importantly this transformation leaves
Thomson well-positioned at the heart of
convergence and digital video with sharply
reduced financial exposure to our legacy
consumer electronics businesses
Evolving skills base
Aside from the strategic operat ional or
financial targets we set ourselves and
achieved over the 2004-2006 period we
also made progress in improving opera-
tional management customer cover-
age and our reactivity to rapidly evolving
Media Entertainment amp Communications
markets
That has impl ied a rapid and dramatic
evolution of the Grouprsquos human resources
and skills base Together with a first-class
offering of technologies systems and ser-
vices our RampD software and design skills
are key Also critical is our capacity to win
new business by integrating our broad
offering to our customers
ldquoTogether with a first-class offering of technologies systems and servicesour RampD software and design skillsare keyrdquo
03 Thomson Panorama 2006
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 666
Our current employeesrsquo skill-sets reflect
these business priorities many of whom
are highly-qualified engineers as do
Thomsonrsquos close ties to a number of pres-
tigious institutions of higher education and
universities across the world As testament
to our changed employee profile and the
Grouprsquos transformation almost 80 of our
top management team has been renewedover the last two years drawn equally from
internal promotions acquisitions and
external recruitment
Outlook for 2007-2009
Our strategy for the 2007-2009 period will
see Thomson continue to expand its lead-
ership positions in digital video technolo-
gies services and systems The assump-
tions about the strategic medium-term
evolution of our markets we detailed in
2004 have proven valid and will inform our
decisions as we seek to build and grow
our business
Investments will continue therefore in
our key growth businesses the electronic
media activities within Content Services
and Network Services part of our Services
division and the Broadcast amp Networks
and Access Products businesses part of
our Systems division We intend to manage
our more mature activitiesmdashFilm amp DVD
Servicesmdashfor their cash and continue tore-invest in developing businesses New
media businesses for content makers or
content distributors will add to growth
RampD investment will continue to be strong
and we intend to maintain our intellectual
property leadership This should enable us
to take advantage of the main growth driv-
ers of the digital video industriesmdashaccel-
erating adoption of high-definition mobile
content on-demand content consumer-
generated content fixed-mobile conver-
gence triple-play devices connected
home networking and internet-based and
advertising content delivery
ldquoOur performance in 2006 has shown thatstrategically and operationally we can react effectively to
changes and opportunities in our marketsrdquo
04 Thomson Panorama 2006
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 766
The six key programs we need to imple-
ment are now in place to ensure Thom-
son maintains best-in-class operational
efficiency These focus on key clients
software new product introductions
operational improvement transformation
programs ranging from supply chain man-
agement to IT and the management of our
talent base
Our financial focus over the next three
years will be on optimizing and manag-
ing our portfolio of activities for higher
growth and net income we expect rev-
enue growth to gather pace in 2008-2009
and our objective is to register compound
growth over the 2007-2009 period in line
with or greater than the overall market
In 2007 Thomson will continue actions
already underway to improve operating
profitability across the divisions comple-
menting the achievements of 2006 Weexpect a strong year of revenue growth in
our digital and electronic businesses par-
tially diluted by our physical media busi-
ness (film DVD) and target strong growth
in our net income
As a sign of confidence in Thomsonrsquos
2007-2009 business plans and projec-
tions the Board proposed an increase of
10 in the dividend this year bringing it
to euro033
I wish to thank all our employees and in
particular the senior management team
now in placemdashthe top 100 executives plus
Thomsonrsquos Executive Committeemdashfor the
key role they have played in our progress
and successes
Our performance in 2006 has shown that
strategically and operationally we can reacteffectively to changes and opportunities in
our markets We now plan to build on this
result and look forward to the 2007-2009
period with confidence in our ability to cre-
ate value for our shareholders partners
customers and employees
Frank E DANGEARD
Chairman amp Chief Executive Officer
05 Thomson Panorama 2006
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 866
Under the leadership of Frank E Dange-
ard the Executive Committee currently
comprises 11 membersmdasheight of whom
are French two American and one Brit-
ish These executive managers respon-
sible for the operating divisions as well as
managers in charge of key functions meet
three times a month to review the financial
performance of the divisions in relation tothe budget and strategic developments
Once a month time is also set aside to
review the Grouprsquos key programs clients
software product introduction operations
transformation and talent management
The work of the Executive Committee is
carried out through three operating com-
mittees which contribute to an efficient
decision-making process
bull The Investment Committee chaired by
Senior Executive Vice President and Chief
Financial Officer Julian Waldron is respon-sible for studying and approving invest-
ments and financial commitments by the
different divisions It meets on an ad hoc
basis several times a month
bull The Risk Committee chaired by Senior
Executive Vice President and Chief Operat-
ing Officer Didier Trutt generally meets every
six weeks to assist the Executive Commit-
tee in identifying anticipating preventingand mitigating financial operational and
strategic risk to the business It also serves
as the forum through which the results and
findings of the internal audit team are com-
municated to senior management
bull The Corporate Social Responsibility
(CSR) Committee to be set up in 2007
Chaired by Marie-Ange Debon Execu-
tive Vice President General Secretary
Legal Real Estate amp External Com-
munications the CSR Committee will
oversee all matters related to corpo-
rate social responsibility complianceand ethics
Weekly meetings of Thomsonrsquos
Executive Committee
ensure an efficient
global decision-making process
EXECUTIVE COMMITTEE
06 Thomson Panorama 2006
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 966
1 Frank E DANGEARDChairman amp Chief Executive Officer (Paris New YorkPrinceton andLos Angeles)
2 Jacques DUNOGUEacuteSenior Executive Vice PresidentSystems(Paris and New YorkPrinceton)
of the Grouprsquos divisions and profit centersIn the context of the budgetary procedure
performance measurement indicators are
calculated by the divisions analyzed and
reviewed monthly to serve as a reference
for the Grouprsquos monthly reporting
Management reporting and
closing period work
Th om so n uses a co mmon char t of
accounts which is regularly updated The
principal accounting and financial figures
of the operational and functional depart-
ments consolidated at Group level are
analyzed by the Grouprsquos management
control team and reviewed by the Grouprsquos
Executive Committee
The closing process for the half-year and
annual consolidated financial statementsoccurs in two steps The first step con-
sists of a ldquohard closerdquo completed in May
and September leading to a first review by
the statutory auditors The second step
occurs in July and in JanuaryFebruary and
involves the finalization of half-year and
annual consolidated financial statements
under IFRS The Group then proceeds
once a year with a reconciliation of these
results in accordance with US GAAP
Preparation of financial statements
The financial statements are prepared jointly by the finance department and the
General Secretary They are based on
information reported through the annual
reporting and accounting consolidation
processes and on operational and mar-
ket information which is specifically cen-
tralized for the preparation of Thomsonrsquos
Document de Reacutefeacuterence in France and
the submission of Form 20-F in the United
States Half-year and annual financial infor-
mation is reviewed by the Grouprsquos Audit
Committee
8122019 Panorama 2006
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58 Thomson Panorama 2006
(1) Source PriceWaterhouseCoopers ndash
ldquoGlobal Entertainment and Media Outlook 2006-10rdquo
Revenue growth
Thomson achieved consolidated 2006
net revenues of 9914045854 million up from
9914045591 million in 2005 Revenues for
the Core Business reached 9914045747 mil-
lion (9914045776 million at constant currency)
representing 83 growth over 2005 at
constant currency
Overall the Grouprsquos key growth busi-
nessesmdashContent Services Network
Services Access Products for telecom
operators and our Broadcast amp Networks
businesses (Grass Valley and Network
Software)mdashincreased strongly year-on-
year and accounted for over a third of
Group revenues against less than a quar-
ter in 2005
Thomsonrsquos Core Business EBIT for 2006
was euro504 million representing a Core
Business EBIT margin of 88 Thisreflected growth in some key businesses
and cost actions across the Group off-
setting a significant investment in research
and development and some increase in
restructuring expenses
Increased spend on RampD
Research and development expenditure
charged in the Core Business (net of
external funding) rose from 991404221 million in
2005 to 991404279 million in 2006 an increase
of 26 principally in the Systems divi-
sion The Group expanded the number ofproducts and services in the development
phase across its businesses
Return to profit
Losses in Non-Core Continuing and Dis-
continued operations were substantially
lower year-on-year reflecting principally
the exit from heavily loss-making Displays
activities in 2005 and intensified cost-sav-
ing programs in 2006 A major revision
and harmonization of the Grouprsquos North
American healthcare obligations gave rise
to substantial one-time gains and Thom-
son also initiated significant restructuring
of its French Non-Core operations
The good performance of the Core Busi-
ness lower Non-Core and Discontinued
losses and a low reported tax chargeenabled the Group to return a net profit of
99140455 million in 2006 compared to a loss of
991404573 million in the previous year
Good cash flow
strengthened balance sheet
Thomson generated good free cash flow
and strengthened its balance sheet in
2006 Total net financial liabilities on the
balance sheet fell by 991404460 million reflect-
ing a 99140493 million fall in financial and acqui-
sition-related debts and a 991404367 million
reduction in retirement benefit obligations(including healthcare)
Increase in Net Dividend
The Board of Directors proposed a dis-
tribution to shareholders of 991404033 per
share (2005 dividend 991404030) reflecting
confidence in the prospects of the Group
going forward
Outlook 2007-2009
growth in revenues and net income
With the Grouprsquos transformation complete Thomsonrsquos financial focus over the 2007-
2009 period will be to grow revenues and
net income
Thomson serves growing Media Enter-
tainment amp Communications marketsmdashfor
which external estimates(1) indicate com-
pound growth of around 6 over the last
FINANCIAL AND
OPERATIONAL PERFORMANCE
Full year 2006 results
saw a return to profitability
and leave Thomson
well positioned at
the heart of convergence
and digital video
8122019 Panorama 2006
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59 Thomson Panorama 2006
five years Our digital and electronic busi-
nesses now represent two-thirds of rev-
enues and we believe they are growing
faster than the overall market offsetting
the maturing physical media businesses
Given this profile the Group expects its
revenue growth to be more modest in
2007 but to gather pace over the period
and our overall objective is to show com-pound growth over 2007-2009 in line with
or faster than the overall market
The 2007-2009 period is also expected
to see a sharply reduced impact from
residual Non-Core activities with an end
to losses from the Discontinued Activities
perimeter after 2007 Accordingly Thom-
sonrsquos ambition is to turn its Core Business
growth and profitability and lower impact
from Non-Core into strong growth in net
income over the period 2007-2009
Business operations
Continuous performance improvement is
fundamental to Thomsonrsquos commitment to
create sustainable business models and
long-term value for all stakeholders The
ambitious Group-wide programs launched
in 2004 to improve productivity and
enhance overall performance producedsubstantial results in 2006 and led to new
and strong initiatives for long-term growth
As of the second half of 2006 six ldquoKey
Programsrdquo are monitored at Group level
Clients Software Product Introduction
Operations Transformation and Talent
Management
KEY PROGRAMS IN PLACE
Program Focus
Clients Thomsonrsquos clientregional diversification and
growth of the existing business
through improved Sales amp Marketing
Software Development of integrated software platforms
in all markets (post-production distribution
delivery) and for all types of customer
(professional prosumerhellip)
Product Introduction Ensuring new product roadmaps are in line
with strategy and resource needs have been
identifiedOperations Improving the Grouprsquos cost base cash
generation and working capital
Transformation Multiple programs including initiatives to
improving customer relationship management
worldwide supply chain management
IT transformation as well as Thomsonrsquos RampD
footprint
Talent Management Leveraging human assets with a focus on
talent retention and acquisition
8122019 Panorama 2006
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60 Thomson Panorama 2006
SUMMARY RESULTS FULL YEAR 2006
In 991404 millions unless otherwise stated 2006(1) 2005(1)
Net revenues 5854 5591(1)
Core Business net revenues 5747 5335
Services 2489 2487
Systems 2684 2262
Technology 547 546
Corporate 27 40
Non-Core continuing operations net revenues 107 256
Core Business EBIT(2) 504 512
Services 160 205
Systems 132 109
Technology 289 277Corporate (77) (79)
EBIT from Non-Core continuing operations (25) (122)
(1) Restated with 2006 discontinued activities according to IFRS 5
8122019 Panorama 2006
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61 Thomson Panorama 2006
Year ended December 31in 991404 except number of shares 2006 2005 2004
Year ended December 31in 991404 millions 2006 2005(1) 2004(1)
CONSOLIDATED STATEMENTS OF OPERATIONS
(1) Restated with 2006 discontinued activities according to IFRS 5
(2) After deduction of the interests net of tax paid on the subordinated perpetual notes during the period
Continuing operations
Revenues 5854 5591 5980
Cost of sales (4474) (4240) (4594)
Gross margin 1380 1351 1386
Selling marketing general and administrative expenses (674) (638) (653)
Other income (expense) 52 (96) (69)
Research and development expenses (279) (227) (201)
Profit from continuing operations before tax and net finance costs 479 390 463
Interest income 19 30 52
Interest expense (108) (108) (54)
Other financial income (expense) (111) 36 (26)
Finance costs ndash net (200) (42) (28)
Share of profit (loss) from associates (86) (82) (20)
Income tax ndash (68) (93)
Profit from continuing operations 193 198 322
Discontinued operations
Profit (loss) from discontinued operations (138) (771) (883)
Net income (loss) 55 (573) (561)
Attributable to
Equity Holders 55 (574) (559)
Minority interests ndash 1 (2)
Weighted average number of shares
outstandingmdashbasic net of treasury stock 261188858 266539917 273646869
Earnings per share from continuing operations
Basic(2) 067 074 118
Diluted 063 042 111
Earnings per share from discontinued operations
Basic (053) (289) (323)
Diluted (048) (262) (296)Total earnings per share
Basic(2) 014 (215) (205)
Diluted 015 (220) (185)
8122019 Panorama 2006
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62 Thomson Panorama 2006
CONSOLIDATED BALANCE SHEETS
In 991404 millions December 31 December 31 January 1 December 31 2006 2005 2005(1) 2004
ASSETS
Non-current assets
Property plant and equipment 813 886 1051 1051
Goodwill 1714 1756 1186 1178
Other intangible assets 1071 1150 924 924
Investments in associates 12 204 260 260
Investments and financial assets available-for-sale 266 341 139 113
Derivative financial instruments 7 1 11 ndash
Contract advances 129 173 179 179
Deferred tax assets 397 379 307 301
Other non-current assets 110 182 133 136
Total non-current assets 4519 5072 4190 4142
Current assets
Inventories 366 333 503 568
Trade accounts and notes receivable 1018 1315 1232 1180
Current accounts with associates and joint ventures 97 115 143 143
Derivative financial instruments 8 9 115 ndash
Other current assets 535 644 483 616
Marketable securities ndash 7 58 58
Cash and cash equivalents 1311 996 1845 1848
Assets classified as held for sale 264 369 80 ndash
Total current assets 3599 3788 4459 4413
Total assets 8118 8860 8649 8555
(1) Including the impacts of the first-time application related to IAS 32 and 39 on financial instruments and IFRS 5 on non-current assets held for sale and
discontinued operations
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 6566
63 Thomson Panorama 2006
In 991404 millions December 31 December 31 January 1 December 31 2006 2005 2005(1) 2004
SHAREHOLDERSrsquo EQUITY AND LIABILITIES
Shareholdersrsquo equity
Common stock (273871296 shares at
December 31 2006
with nominal value of euro 375 per share) 1027 1025 1025 1025
Trade accounts and notes payable 1032 1164 1199 1226
Accrued employee expenses 165 166 158 163
Income tax payable 57 47 60 60
Other current liabilities 671 750 746 800
Payables on acquisition of companies 13 138 84 84
Liabilities directly associated with
assets classified as held for sale 232 470 88 ndash
Total current liabilities 3681 4393 3602 3459
Total liabilities 5999 6644 6251 6062
Total shareholderrsquos equity and liabilities 8118 8860 8649 8555
(1) Including the impacts of the first-time application related to IAS 32 and 39 on financial instruments and IFRS 5 on non-current assets held for sale and
discontinued operations
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 6666
Creation and lay-out
Photo credits Nathalie BerhingGAMMA ndash Steacutephane de Bourgies ndash Jean-Franccedilois DeroubaixGAMMA ndash Christine Donnier- ValentinGAMMA ndash Cars copy 2006 Disney Enterprises IncPixar All Rights Reserved ndash Dreamgirls copy 2006 DREAMWORKS
LLC and PARAMOUNT PICTURES All Rights Reserved ndash Poseidon copy 2006 Warner Bros Pictures ndash Sony Bravia Paint
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 366
IMAGES amp BEYOND
A world leader in digital video technologies Thomsondelivers high-quality technologies systems and services tothe Media Entertainment amp Communications industriesmdash
or any organization using the moving image to communicate
We have deep and long-standing video expertise and essentialproprietary technology Serving the worldrsquos content creators anddistributorsmdashfrom movie studios broadcasters and networkoperators to advertisers and emerging prosumer and consumermarketsmdashwe constantly innovate to develop video technologies thatmeet evolving needs These range from advanced video compression
to audiovisual content protection
Our services and solutions cover the entire video value chain fromimage capture production and post-production services to physicalor electronic distribution to advanced access devices which enableend-customers to enjoy content wherever and whenever they want
01 Thomson Panorama 2006
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 466
ldquoAt the heart of digital videordquo
The strategic plan for the period 2004-
2006 launched following my appointment
as Chairman amp CEO of Thomson at the endof 2004 has been successfully completed
and has rapidly secured our future as an
innovative technology systems and services
business serving the Media Entertainment
amp Communications industries worldwide
Strategic objectives achieved
We set a clear and unambiguous strategic
direction in 2004 to position Thomson for
the digital video and new media markets
of tomorrow
During the last two years we made rapidprogress to exit the heavily loss-making
consumer electronics businesses a neces-
sity if Thomson was to succeed The dis-
posal process began with the sale of the
TV business in 2004 and 2005 the tubes
business in 2005 and of the accessories
business at the end of 2006 It will come to
an end in 2007 with the divestment of the
remainder of our AudioVideo businesses
In parallel we invested to establish prom-
ising businesses which are now boosting
and will continue to boost revenue growth
Content Services Network Services Broad-cast amp Networks and Access Products
We also set out in 2004 to broaden our
customer base geographically and by
type to increase our focus on RampD and
to strengthen our position in electronic
content and in advanced Internet Protocoldevices and solutions
We have been successful in achieving
those strategic and operational objec-
tives we more than doubled the number
of customers with whom we generate over
99140420 million in revenues and diversified our
activities geographically and along the
entire video value chain We increased very
significantly our RampD spend and launched
several cooperative programs which maxi-
mise our RampD investment and intellectual
property portfolio
We have also built a unique position in
electronic content distributionmdashour Net-
work Services businesses combined with
new activities in Content Services such as
visual effects and other related businesses
in Systems now generate substantial rev-
enues In IP devices and solutions today
we occupy the world-leading position in
the provision of Internet-based access
products to telecom operators
In 2006 we grew faster than our markets
and gained market share across most of
our businesses There will be challengesahead as the world of digital video contin-
MESSAGE FROM
THE CHAIRMAN amp CEO This year saw the successful completion of Thomsonrsquos transformation into aGroup focused on digital video technology signaling the start of a new phase in itsdevelopment
02 Thomson Panorama 2006
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 566
ues to evolve rapidly with further concen-
tration and diversification of both customers
and competitors and the continued impact
of broadband and video technologies on
our markets In that environment our mainfocus will be to work to optimize our port-
folio of activities for higher growth I have
no doubt that the opportunities which lie
ahead for Thomson will be immense
Return to profit in 2006
We saw a strong end to the fiscal year
With full year revenues at euro5854 million
giving core business revenues up 83
at constant currency and core business
EBIT of euro504 millions resulting in a core
EBIT margin of 88 we largely achieved
our financial targets The Systems divisiongrew revenues strongly while Services
showed a stable performance overall and
Technology recorded solid revenue growth
and good profitability
For the first time in many years Thomson
also registered a full year net profit (euro55 mil-
lion) Free cash flow generation was up
15 on last year toeuro483 million for the full
year 2006 In parallel our net financial lia-
bilities were reduced by euro460 million over
the year Over two thirds of our revenue in
2006 was digitalelectronic based and less
than a third was from physical media
Most importantly this transformation leaves
Thomson well-positioned at the heart of
convergence and digital video with sharply
reduced financial exposure to our legacy
consumer electronics businesses
Evolving skills base
Aside from the strategic operat ional or
financial targets we set ourselves and
achieved over the 2004-2006 period we
also made progress in improving opera-
tional management customer cover-
age and our reactivity to rapidly evolving
Media Entertainment amp Communications
markets
That has impl ied a rapid and dramatic
evolution of the Grouprsquos human resources
and skills base Together with a first-class
offering of technologies systems and ser-
vices our RampD software and design skills
are key Also critical is our capacity to win
new business by integrating our broad
offering to our customers
ldquoTogether with a first-class offering of technologies systems and servicesour RampD software and design skillsare keyrdquo
03 Thomson Panorama 2006
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 666
Our current employeesrsquo skill-sets reflect
these business priorities many of whom
are highly-qualified engineers as do
Thomsonrsquos close ties to a number of pres-
tigious institutions of higher education and
universities across the world As testament
to our changed employee profile and the
Grouprsquos transformation almost 80 of our
top management team has been renewedover the last two years drawn equally from
internal promotions acquisitions and
external recruitment
Outlook for 2007-2009
Our strategy for the 2007-2009 period will
see Thomson continue to expand its lead-
ership positions in digital video technolo-
gies services and systems The assump-
tions about the strategic medium-term
evolution of our markets we detailed in
2004 have proven valid and will inform our
decisions as we seek to build and grow
our business
Investments will continue therefore in
our key growth businesses the electronic
media activities within Content Services
and Network Services part of our Services
division and the Broadcast amp Networks
and Access Products businesses part of
our Systems division We intend to manage
our more mature activitiesmdashFilm amp DVD
Servicesmdashfor their cash and continue tore-invest in developing businesses New
media businesses for content makers or
content distributors will add to growth
RampD investment will continue to be strong
and we intend to maintain our intellectual
property leadership This should enable us
to take advantage of the main growth driv-
ers of the digital video industriesmdashaccel-
erating adoption of high-definition mobile
content on-demand content consumer-
generated content fixed-mobile conver-
gence triple-play devices connected
home networking and internet-based and
advertising content delivery
ldquoOur performance in 2006 has shown thatstrategically and operationally we can react effectively to
changes and opportunities in our marketsrdquo
04 Thomson Panorama 2006
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 766
The six key programs we need to imple-
ment are now in place to ensure Thom-
son maintains best-in-class operational
efficiency These focus on key clients
software new product introductions
operational improvement transformation
programs ranging from supply chain man-
agement to IT and the management of our
talent base
Our financial focus over the next three
years will be on optimizing and manag-
ing our portfolio of activities for higher
growth and net income we expect rev-
enue growth to gather pace in 2008-2009
and our objective is to register compound
growth over the 2007-2009 period in line
with or greater than the overall market
In 2007 Thomson will continue actions
already underway to improve operating
profitability across the divisions comple-
menting the achievements of 2006 Weexpect a strong year of revenue growth in
our digital and electronic businesses par-
tially diluted by our physical media busi-
ness (film DVD) and target strong growth
in our net income
As a sign of confidence in Thomsonrsquos
2007-2009 business plans and projec-
tions the Board proposed an increase of
10 in the dividend this year bringing it
to euro033
I wish to thank all our employees and in
particular the senior management team
now in placemdashthe top 100 executives plus
Thomsonrsquos Executive Committeemdashfor the
key role they have played in our progress
and successes
Our performance in 2006 has shown that
strategically and operationally we can reacteffectively to changes and opportunities in
our markets We now plan to build on this
result and look forward to the 2007-2009
period with confidence in our ability to cre-
ate value for our shareholders partners
customers and employees
Frank E DANGEARD
Chairman amp Chief Executive Officer
05 Thomson Panorama 2006
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 866
Under the leadership of Frank E Dange-
ard the Executive Committee currently
comprises 11 membersmdasheight of whom
are French two American and one Brit-
ish These executive managers respon-
sible for the operating divisions as well as
managers in charge of key functions meet
three times a month to review the financial
performance of the divisions in relation tothe budget and strategic developments
Once a month time is also set aside to
review the Grouprsquos key programs clients
software product introduction operations
transformation and talent management
The work of the Executive Committee is
carried out through three operating com-
mittees which contribute to an efficient
decision-making process
bull The Investment Committee chaired by
Senior Executive Vice President and Chief
Financial Officer Julian Waldron is respon-sible for studying and approving invest-
ments and financial commitments by the
different divisions It meets on an ad hoc
basis several times a month
bull The Risk Committee chaired by Senior
Executive Vice President and Chief Operat-
ing Officer Didier Trutt generally meets every
six weeks to assist the Executive Commit-
tee in identifying anticipating preventingand mitigating financial operational and
strategic risk to the business It also serves
as the forum through which the results and
findings of the internal audit team are com-
municated to senior management
bull The Corporate Social Responsibility
(CSR) Committee to be set up in 2007
Chaired by Marie-Ange Debon Execu-
tive Vice President General Secretary
Legal Real Estate amp External Com-
munications the CSR Committee will
oversee all matters related to corpo-
rate social responsibility complianceand ethics
Weekly meetings of Thomsonrsquos
Executive Committee
ensure an efficient
global decision-making process
EXECUTIVE COMMITTEE
06 Thomson Panorama 2006
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 966
1 Frank E DANGEARDChairman amp Chief Executive Officer (Paris New YorkPrinceton andLos Angeles)
2 Jacques DUNOGUEacuteSenior Executive Vice PresidentSystems(Paris and New YorkPrinceton)
of the Grouprsquos divisions and profit centersIn the context of the budgetary procedure
performance measurement indicators are
calculated by the divisions analyzed and
reviewed monthly to serve as a reference
for the Grouprsquos monthly reporting
Management reporting and
closing period work
Th om so n uses a co mmon char t of
accounts which is regularly updated The
principal accounting and financial figures
of the operational and functional depart-
ments consolidated at Group level are
analyzed by the Grouprsquos management
control team and reviewed by the Grouprsquos
Executive Committee
The closing process for the half-year and
annual consolidated financial statementsoccurs in two steps The first step con-
sists of a ldquohard closerdquo completed in May
and September leading to a first review by
the statutory auditors The second step
occurs in July and in JanuaryFebruary and
involves the finalization of half-year and
annual consolidated financial statements
under IFRS The Group then proceeds
once a year with a reconciliation of these
results in accordance with US GAAP
Preparation of financial statements
The financial statements are prepared jointly by the finance department and the
General Secretary They are based on
information reported through the annual
reporting and accounting consolidation
processes and on operational and mar-
ket information which is specifically cen-
tralized for the preparation of Thomsonrsquos
Document de Reacutefeacuterence in France and
the submission of Form 20-F in the United
States Half-year and annual financial infor-
mation is reviewed by the Grouprsquos Audit
Committee
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 6066
58 Thomson Panorama 2006
(1) Source PriceWaterhouseCoopers ndash
ldquoGlobal Entertainment and Media Outlook 2006-10rdquo
Revenue growth
Thomson achieved consolidated 2006
net revenues of 9914045854 million up from
9914045591 million in 2005 Revenues for
the Core Business reached 9914045747 mil-
lion (9914045776 million at constant currency)
representing 83 growth over 2005 at
constant currency
Overall the Grouprsquos key growth busi-
nessesmdashContent Services Network
Services Access Products for telecom
operators and our Broadcast amp Networks
businesses (Grass Valley and Network
Software)mdashincreased strongly year-on-
year and accounted for over a third of
Group revenues against less than a quar-
ter in 2005
Thomsonrsquos Core Business EBIT for 2006
was euro504 million representing a Core
Business EBIT margin of 88 Thisreflected growth in some key businesses
and cost actions across the Group off-
setting a significant investment in research
and development and some increase in
restructuring expenses
Increased spend on RampD
Research and development expenditure
charged in the Core Business (net of
external funding) rose from 991404221 million in
2005 to 991404279 million in 2006 an increase
of 26 principally in the Systems divi-
sion The Group expanded the number ofproducts and services in the development
phase across its businesses
Return to profit
Losses in Non-Core Continuing and Dis-
continued operations were substantially
lower year-on-year reflecting principally
the exit from heavily loss-making Displays
activities in 2005 and intensified cost-sav-
ing programs in 2006 A major revision
and harmonization of the Grouprsquos North
American healthcare obligations gave rise
to substantial one-time gains and Thom-
son also initiated significant restructuring
of its French Non-Core operations
The good performance of the Core Busi-
ness lower Non-Core and Discontinued
losses and a low reported tax chargeenabled the Group to return a net profit of
99140455 million in 2006 compared to a loss of
991404573 million in the previous year
Good cash flow
strengthened balance sheet
Thomson generated good free cash flow
and strengthened its balance sheet in
2006 Total net financial liabilities on the
balance sheet fell by 991404460 million reflect-
ing a 99140493 million fall in financial and acqui-
sition-related debts and a 991404367 million
reduction in retirement benefit obligations(including healthcare)
Increase in Net Dividend
The Board of Directors proposed a dis-
tribution to shareholders of 991404033 per
share (2005 dividend 991404030) reflecting
confidence in the prospects of the Group
going forward
Outlook 2007-2009
growth in revenues and net income
With the Grouprsquos transformation complete Thomsonrsquos financial focus over the 2007-
2009 period will be to grow revenues and
net income
Thomson serves growing Media Enter-
tainment amp Communications marketsmdashfor
which external estimates(1) indicate com-
pound growth of around 6 over the last
FINANCIAL AND
OPERATIONAL PERFORMANCE
Full year 2006 results
saw a return to profitability
and leave Thomson
well positioned at
the heart of convergence
and digital video
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 6166
59 Thomson Panorama 2006
five years Our digital and electronic busi-
nesses now represent two-thirds of rev-
enues and we believe they are growing
faster than the overall market offsetting
the maturing physical media businesses
Given this profile the Group expects its
revenue growth to be more modest in
2007 but to gather pace over the period
and our overall objective is to show com-pound growth over 2007-2009 in line with
or faster than the overall market
The 2007-2009 period is also expected
to see a sharply reduced impact from
residual Non-Core activities with an end
to losses from the Discontinued Activities
perimeter after 2007 Accordingly Thom-
sonrsquos ambition is to turn its Core Business
growth and profitability and lower impact
from Non-Core into strong growth in net
income over the period 2007-2009
Business operations
Continuous performance improvement is
fundamental to Thomsonrsquos commitment to
create sustainable business models and
long-term value for all stakeholders The
ambitious Group-wide programs launched
in 2004 to improve productivity and
enhance overall performance producedsubstantial results in 2006 and led to new
and strong initiatives for long-term growth
As of the second half of 2006 six ldquoKey
Programsrdquo are monitored at Group level
Clients Software Product Introduction
Operations Transformation and Talent
Management
KEY PROGRAMS IN PLACE
Program Focus
Clients Thomsonrsquos clientregional diversification and
growth of the existing business
through improved Sales amp Marketing
Software Development of integrated software platforms
in all markets (post-production distribution
delivery) and for all types of customer
(professional prosumerhellip)
Product Introduction Ensuring new product roadmaps are in line
with strategy and resource needs have been
identifiedOperations Improving the Grouprsquos cost base cash
generation and working capital
Transformation Multiple programs including initiatives to
improving customer relationship management
worldwide supply chain management
IT transformation as well as Thomsonrsquos RampD
footprint
Talent Management Leveraging human assets with a focus on
talent retention and acquisition
8122019 Panorama 2006
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60 Thomson Panorama 2006
SUMMARY RESULTS FULL YEAR 2006
In 991404 millions unless otherwise stated 2006(1) 2005(1)
Net revenues 5854 5591(1)
Core Business net revenues 5747 5335
Services 2489 2487
Systems 2684 2262
Technology 547 546
Corporate 27 40
Non-Core continuing operations net revenues 107 256
Core Business EBIT(2) 504 512
Services 160 205
Systems 132 109
Technology 289 277Corporate (77) (79)
EBIT from Non-Core continuing operations (25) (122)
(1) Restated with 2006 discontinued activities according to IFRS 5
8122019 Panorama 2006
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61 Thomson Panorama 2006
Year ended December 31in 991404 except number of shares 2006 2005 2004
Year ended December 31in 991404 millions 2006 2005(1) 2004(1)
CONSOLIDATED STATEMENTS OF OPERATIONS
(1) Restated with 2006 discontinued activities according to IFRS 5
(2) After deduction of the interests net of tax paid on the subordinated perpetual notes during the period
Continuing operations
Revenues 5854 5591 5980
Cost of sales (4474) (4240) (4594)
Gross margin 1380 1351 1386
Selling marketing general and administrative expenses (674) (638) (653)
Other income (expense) 52 (96) (69)
Research and development expenses (279) (227) (201)
Profit from continuing operations before tax and net finance costs 479 390 463
Interest income 19 30 52
Interest expense (108) (108) (54)
Other financial income (expense) (111) 36 (26)
Finance costs ndash net (200) (42) (28)
Share of profit (loss) from associates (86) (82) (20)
Income tax ndash (68) (93)
Profit from continuing operations 193 198 322
Discontinued operations
Profit (loss) from discontinued operations (138) (771) (883)
Net income (loss) 55 (573) (561)
Attributable to
Equity Holders 55 (574) (559)
Minority interests ndash 1 (2)
Weighted average number of shares
outstandingmdashbasic net of treasury stock 261188858 266539917 273646869
Earnings per share from continuing operations
Basic(2) 067 074 118
Diluted 063 042 111
Earnings per share from discontinued operations
Basic (053) (289) (323)
Diluted (048) (262) (296)Total earnings per share
Basic(2) 014 (215) (205)
Diluted 015 (220) (185)
8122019 Panorama 2006
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62 Thomson Panorama 2006
CONSOLIDATED BALANCE SHEETS
In 991404 millions December 31 December 31 January 1 December 31 2006 2005 2005(1) 2004
ASSETS
Non-current assets
Property plant and equipment 813 886 1051 1051
Goodwill 1714 1756 1186 1178
Other intangible assets 1071 1150 924 924
Investments in associates 12 204 260 260
Investments and financial assets available-for-sale 266 341 139 113
Derivative financial instruments 7 1 11 ndash
Contract advances 129 173 179 179
Deferred tax assets 397 379 307 301
Other non-current assets 110 182 133 136
Total non-current assets 4519 5072 4190 4142
Current assets
Inventories 366 333 503 568
Trade accounts and notes receivable 1018 1315 1232 1180
Current accounts with associates and joint ventures 97 115 143 143
Derivative financial instruments 8 9 115 ndash
Other current assets 535 644 483 616
Marketable securities ndash 7 58 58
Cash and cash equivalents 1311 996 1845 1848
Assets classified as held for sale 264 369 80 ndash
Total current assets 3599 3788 4459 4413
Total assets 8118 8860 8649 8555
(1) Including the impacts of the first-time application related to IAS 32 and 39 on financial instruments and IFRS 5 on non-current assets held for sale and
discontinued operations
8122019 Panorama 2006
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63 Thomson Panorama 2006
In 991404 millions December 31 December 31 January 1 December 31 2006 2005 2005(1) 2004
SHAREHOLDERSrsquo EQUITY AND LIABILITIES
Shareholdersrsquo equity
Common stock (273871296 shares at
December 31 2006
with nominal value of euro 375 per share) 1027 1025 1025 1025
Trade accounts and notes payable 1032 1164 1199 1226
Accrued employee expenses 165 166 158 163
Income tax payable 57 47 60 60
Other current liabilities 671 750 746 800
Payables on acquisition of companies 13 138 84 84
Liabilities directly associated with
assets classified as held for sale 232 470 88 ndash
Total current liabilities 3681 4393 3602 3459
Total liabilities 5999 6644 6251 6062
Total shareholderrsquos equity and liabilities 8118 8860 8649 8555
(1) Including the impacts of the first-time application related to IAS 32 and 39 on financial instruments and IFRS 5 on non-current assets held for sale and
discontinued operations
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 6666
Creation and lay-out
Photo credits Nathalie BerhingGAMMA ndash Steacutephane de Bourgies ndash Jean-Franccedilois DeroubaixGAMMA ndash Christine Donnier- ValentinGAMMA ndash Cars copy 2006 Disney Enterprises IncPixar All Rights Reserved ndash Dreamgirls copy 2006 DREAMWORKS
LLC and PARAMOUNT PICTURES All Rights Reserved ndash Poseidon copy 2006 Warner Bros Pictures ndash Sony Bravia Paint
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 466
ldquoAt the heart of digital videordquo
The strategic plan for the period 2004-
2006 launched following my appointment
as Chairman amp CEO of Thomson at the endof 2004 has been successfully completed
and has rapidly secured our future as an
innovative technology systems and services
business serving the Media Entertainment
amp Communications industries worldwide
Strategic objectives achieved
We set a clear and unambiguous strategic
direction in 2004 to position Thomson for
the digital video and new media markets
of tomorrow
During the last two years we made rapidprogress to exit the heavily loss-making
consumer electronics businesses a neces-
sity if Thomson was to succeed The dis-
posal process began with the sale of the
TV business in 2004 and 2005 the tubes
business in 2005 and of the accessories
business at the end of 2006 It will come to
an end in 2007 with the divestment of the
remainder of our AudioVideo businesses
In parallel we invested to establish prom-
ising businesses which are now boosting
and will continue to boost revenue growth
Content Services Network Services Broad-cast amp Networks and Access Products
We also set out in 2004 to broaden our
customer base geographically and by
type to increase our focus on RampD and
to strengthen our position in electronic
content and in advanced Internet Protocoldevices and solutions
We have been successful in achieving
those strategic and operational objec-
tives we more than doubled the number
of customers with whom we generate over
99140420 million in revenues and diversified our
activities geographically and along the
entire video value chain We increased very
significantly our RampD spend and launched
several cooperative programs which maxi-
mise our RampD investment and intellectual
property portfolio
We have also built a unique position in
electronic content distributionmdashour Net-
work Services businesses combined with
new activities in Content Services such as
visual effects and other related businesses
in Systems now generate substantial rev-
enues In IP devices and solutions today
we occupy the world-leading position in
the provision of Internet-based access
products to telecom operators
In 2006 we grew faster than our markets
and gained market share across most of
our businesses There will be challengesahead as the world of digital video contin-
MESSAGE FROM
THE CHAIRMAN amp CEO This year saw the successful completion of Thomsonrsquos transformation into aGroup focused on digital video technology signaling the start of a new phase in itsdevelopment
02 Thomson Panorama 2006
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 566
ues to evolve rapidly with further concen-
tration and diversification of both customers
and competitors and the continued impact
of broadband and video technologies on
our markets In that environment our mainfocus will be to work to optimize our port-
folio of activities for higher growth I have
no doubt that the opportunities which lie
ahead for Thomson will be immense
Return to profit in 2006
We saw a strong end to the fiscal year
With full year revenues at euro5854 million
giving core business revenues up 83
at constant currency and core business
EBIT of euro504 millions resulting in a core
EBIT margin of 88 we largely achieved
our financial targets The Systems divisiongrew revenues strongly while Services
showed a stable performance overall and
Technology recorded solid revenue growth
and good profitability
For the first time in many years Thomson
also registered a full year net profit (euro55 mil-
lion) Free cash flow generation was up
15 on last year toeuro483 million for the full
year 2006 In parallel our net financial lia-
bilities were reduced by euro460 million over
the year Over two thirds of our revenue in
2006 was digitalelectronic based and less
than a third was from physical media
Most importantly this transformation leaves
Thomson well-positioned at the heart of
convergence and digital video with sharply
reduced financial exposure to our legacy
consumer electronics businesses
Evolving skills base
Aside from the strategic operat ional or
financial targets we set ourselves and
achieved over the 2004-2006 period we
also made progress in improving opera-
tional management customer cover-
age and our reactivity to rapidly evolving
Media Entertainment amp Communications
markets
That has impl ied a rapid and dramatic
evolution of the Grouprsquos human resources
and skills base Together with a first-class
offering of technologies systems and ser-
vices our RampD software and design skills
are key Also critical is our capacity to win
new business by integrating our broad
offering to our customers
ldquoTogether with a first-class offering of technologies systems and servicesour RampD software and design skillsare keyrdquo
03 Thomson Panorama 2006
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 666
Our current employeesrsquo skill-sets reflect
these business priorities many of whom
are highly-qualified engineers as do
Thomsonrsquos close ties to a number of pres-
tigious institutions of higher education and
universities across the world As testament
to our changed employee profile and the
Grouprsquos transformation almost 80 of our
top management team has been renewedover the last two years drawn equally from
internal promotions acquisitions and
external recruitment
Outlook for 2007-2009
Our strategy for the 2007-2009 period will
see Thomson continue to expand its lead-
ership positions in digital video technolo-
gies services and systems The assump-
tions about the strategic medium-term
evolution of our markets we detailed in
2004 have proven valid and will inform our
decisions as we seek to build and grow
our business
Investments will continue therefore in
our key growth businesses the electronic
media activities within Content Services
and Network Services part of our Services
division and the Broadcast amp Networks
and Access Products businesses part of
our Systems division We intend to manage
our more mature activitiesmdashFilm amp DVD
Servicesmdashfor their cash and continue tore-invest in developing businesses New
media businesses for content makers or
content distributors will add to growth
RampD investment will continue to be strong
and we intend to maintain our intellectual
property leadership This should enable us
to take advantage of the main growth driv-
ers of the digital video industriesmdashaccel-
erating adoption of high-definition mobile
content on-demand content consumer-
generated content fixed-mobile conver-
gence triple-play devices connected
home networking and internet-based and
advertising content delivery
ldquoOur performance in 2006 has shown thatstrategically and operationally we can react effectively to
changes and opportunities in our marketsrdquo
04 Thomson Panorama 2006
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 766
The six key programs we need to imple-
ment are now in place to ensure Thom-
son maintains best-in-class operational
efficiency These focus on key clients
software new product introductions
operational improvement transformation
programs ranging from supply chain man-
agement to IT and the management of our
talent base
Our financial focus over the next three
years will be on optimizing and manag-
ing our portfolio of activities for higher
growth and net income we expect rev-
enue growth to gather pace in 2008-2009
and our objective is to register compound
growth over the 2007-2009 period in line
with or greater than the overall market
In 2007 Thomson will continue actions
already underway to improve operating
profitability across the divisions comple-
menting the achievements of 2006 Weexpect a strong year of revenue growth in
our digital and electronic businesses par-
tially diluted by our physical media busi-
ness (film DVD) and target strong growth
in our net income
As a sign of confidence in Thomsonrsquos
2007-2009 business plans and projec-
tions the Board proposed an increase of
10 in the dividend this year bringing it
to euro033
I wish to thank all our employees and in
particular the senior management team
now in placemdashthe top 100 executives plus
Thomsonrsquos Executive Committeemdashfor the
key role they have played in our progress
and successes
Our performance in 2006 has shown that
strategically and operationally we can reacteffectively to changes and opportunities in
our markets We now plan to build on this
result and look forward to the 2007-2009
period with confidence in our ability to cre-
ate value for our shareholders partners
customers and employees
Frank E DANGEARD
Chairman amp Chief Executive Officer
05 Thomson Panorama 2006
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 866
Under the leadership of Frank E Dange-
ard the Executive Committee currently
comprises 11 membersmdasheight of whom
are French two American and one Brit-
ish These executive managers respon-
sible for the operating divisions as well as
managers in charge of key functions meet
three times a month to review the financial
performance of the divisions in relation tothe budget and strategic developments
Once a month time is also set aside to
review the Grouprsquos key programs clients
software product introduction operations
transformation and talent management
The work of the Executive Committee is
carried out through three operating com-
mittees which contribute to an efficient
decision-making process
bull The Investment Committee chaired by
Senior Executive Vice President and Chief
Financial Officer Julian Waldron is respon-sible for studying and approving invest-
ments and financial commitments by the
different divisions It meets on an ad hoc
basis several times a month
bull The Risk Committee chaired by Senior
Executive Vice President and Chief Operat-
ing Officer Didier Trutt generally meets every
six weeks to assist the Executive Commit-
tee in identifying anticipating preventingand mitigating financial operational and
strategic risk to the business It also serves
as the forum through which the results and
findings of the internal audit team are com-
municated to senior management
bull The Corporate Social Responsibility
(CSR) Committee to be set up in 2007
Chaired by Marie-Ange Debon Execu-
tive Vice President General Secretary
Legal Real Estate amp External Com-
munications the CSR Committee will
oversee all matters related to corpo-
rate social responsibility complianceand ethics
Weekly meetings of Thomsonrsquos
Executive Committee
ensure an efficient
global decision-making process
EXECUTIVE COMMITTEE
06 Thomson Panorama 2006
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 966
1 Frank E DANGEARDChairman amp Chief Executive Officer (Paris New YorkPrinceton andLos Angeles)
2 Jacques DUNOGUEacuteSenior Executive Vice PresidentSystems(Paris and New YorkPrinceton)
of the Grouprsquos divisions and profit centersIn the context of the budgetary procedure
performance measurement indicators are
calculated by the divisions analyzed and
reviewed monthly to serve as a reference
for the Grouprsquos monthly reporting
Management reporting and
closing period work
Th om so n uses a co mmon char t of
accounts which is regularly updated The
principal accounting and financial figures
of the operational and functional depart-
ments consolidated at Group level are
analyzed by the Grouprsquos management
control team and reviewed by the Grouprsquos
Executive Committee
The closing process for the half-year and
annual consolidated financial statementsoccurs in two steps The first step con-
sists of a ldquohard closerdquo completed in May
and September leading to a first review by
the statutory auditors The second step
occurs in July and in JanuaryFebruary and
involves the finalization of half-year and
annual consolidated financial statements
under IFRS The Group then proceeds
once a year with a reconciliation of these
results in accordance with US GAAP
Preparation of financial statements
The financial statements are prepared jointly by the finance department and the
General Secretary They are based on
information reported through the annual
reporting and accounting consolidation
processes and on operational and mar-
ket information which is specifically cen-
tralized for the preparation of Thomsonrsquos
Document de Reacutefeacuterence in France and
the submission of Form 20-F in the United
States Half-year and annual financial infor-
mation is reviewed by the Grouprsquos Audit
Committee
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 6066
58 Thomson Panorama 2006
(1) Source PriceWaterhouseCoopers ndash
ldquoGlobal Entertainment and Media Outlook 2006-10rdquo
Revenue growth
Thomson achieved consolidated 2006
net revenues of 9914045854 million up from
9914045591 million in 2005 Revenues for
the Core Business reached 9914045747 mil-
lion (9914045776 million at constant currency)
representing 83 growth over 2005 at
constant currency
Overall the Grouprsquos key growth busi-
nessesmdashContent Services Network
Services Access Products for telecom
operators and our Broadcast amp Networks
businesses (Grass Valley and Network
Software)mdashincreased strongly year-on-
year and accounted for over a third of
Group revenues against less than a quar-
ter in 2005
Thomsonrsquos Core Business EBIT for 2006
was euro504 million representing a Core
Business EBIT margin of 88 Thisreflected growth in some key businesses
and cost actions across the Group off-
setting a significant investment in research
and development and some increase in
restructuring expenses
Increased spend on RampD
Research and development expenditure
charged in the Core Business (net of
external funding) rose from 991404221 million in
2005 to 991404279 million in 2006 an increase
of 26 principally in the Systems divi-
sion The Group expanded the number ofproducts and services in the development
phase across its businesses
Return to profit
Losses in Non-Core Continuing and Dis-
continued operations were substantially
lower year-on-year reflecting principally
the exit from heavily loss-making Displays
activities in 2005 and intensified cost-sav-
ing programs in 2006 A major revision
and harmonization of the Grouprsquos North
American healthcare obligations gave rise
to substantial one-time gains and Thom-
son also initiated significant restructuring
of its French Non-Core operations
The good performance of the Core Busi-
ness lower Non-Core and Discontinued
losses and a low reported tax chargeenabled the Group to return a net profit of
99140455 million in 2006 compared to a loss of
991404573 million in the previous year
Good cash flow
strengthened balance sheet
Thomson generated good free cash flow
and strengthened its balance sheet in
2006 Total net financial liabilities on the
balance sheet fell by 991404460 million reflect-
ing a 99140493 million fall in financial and acqui-
sition-related debts and a 991404367 million
reduction in retirement benefit obligations(including healthcare)
Increase in Net Dividend
The Board of Directors proposed a dis-
tribution to shareholders of 991404033 per
share (2005 dividend 991404030) reflecting
confidence in the prospects of the Group
going forward
Outlook 2007-2009
growth in revenues and net income
With the Grouprsquos transformation complete Thomsonrsquos financial focus over the 2007-
2009 period will be to grow revenues and
net income
Thomson serves growing Media Enter-
tainment amp Communications marketsmdashfor
which external estimates(1) indicate com-
pound growth of around 6 over the last
FINANCIAL AND
OPERATIONAL PERFORMANCE
Full year 2006 results
saw a return to profitability
and leave Thomson
well positioned at
the heart of convergence
and digital video
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 6166
59 Thomson Panorama 2006
five years Our digital and electronic busi-
nesses now represent two-thirds of rev-
enues and we believe they are growing
faster than the overall market offsetting
the maturing physical media businesses
Given this profile the Group expects its
revenue growth to be more modest in
2007 but to gather pace over the period
and our overall objective is to show com-pound growth over 2007-2009 in line with
or faster than the overall market
The 2007-2009 period is also expected
to see a sharply reduced impact from
residual Non-Core activities with an end
to losses from the Discontinued Activities
perimeter after 2007 Accordingly Thom-
sonrsquos ambition is to turn its Core Business
growth and profitability and lower impact
from Non-Core into strong growth in net
income over the period 2007-2009
Business operations
Continuous performance improvement is
fundamental to Thomsonrsquos commitment to
create sustainable business models and
long-term value for all stakeholders The
ambitious Group-wide programs launched
in 2004 to improve productivity and
enhance overall performance producedsubstantial results in 2006 and led to new
and strong initiatives for long-term growth
As of the second half of 2006 six ldquoKey
Programsrdquo are monitored at Group level
Clients Software Product Introduction
Operations Transformation and Talent
Management
KEY PROGRAMS IN PLACE
Program Focus
Clients Thomsonrsquos clientregional diversification and
growth of the existing business
through improved Sales amp Marketing
Software Development of integrated software platforms
in all markets (post-production distribution
delivery) and for all types of customer
(professional prosumerhellip)
Product Introduction Ensuring new product roadmaps are in line
with strategy and resource needs have been
identifiedOperations Improving the Grouprsquos cost base cash
generation and working capital
Transformation Multiple programs including initiatives to
improving customer relationship management
worldwide supply chain management
IT transformation as well as Thomsonrsquos RampD
footprint
Talent Management Leveraging human assets with a focus on
talent retention and acquisition
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 6266
60 Thomson Panorama 2006
SUMMARY RESULTS FULL YEAR 2006
In 991404 millions unless otherwise stated 2006(1) 2005(1)
Net revenues 5854 5591(1)
Core Business net revenues 5747 5335
Services 2489 2487
Systems 2684 2262
Technology 547 546
Corporate 27 40
Non-Core continuing operations net revenues 107 256
Core Business EBIT(2) 504 512
Services 160 205
Systems 132 109
Technology 289 277Corporate (77) (79)
EBIT from Non-Core continuing operations (25) (122)
(1) Restated with 2006 discontinued activities according to IFRS 5
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 6366
61 Thomson Panorama 2006
Year ended December 31in 991404 except number of shares 2006 2005 2004
Year ended December 31in 991404 millions 2006 2005(1) 2004(1)
CONSOLIDATED STATEMENTS OF OPERATIONS
(1) Restated with 2006 discontinued activities according to IFRS 5
(2) After deduction of the interests net of tax paid on the subordinated perpetual notes during the period
Continuing operations
Revenues 5854 5591 5980
Cost of sales (4474) (4240) (4594)
Gross margin 1380 1351 1386
Selling marketing general and administrative expenses (674) (638) (653)
Other income (expense) 52 (96) (69)
Research and development expenses (279) (227) (201)
Profit from continuing operations before tax and net finance costs 479 390 463
Interest income 19 30 52
Interest expense (108) (108) (54)
Other financial income (expense) (111) 36 (26)
Finance costs ndash net (200) (42) (28)
Share of profit (loss) from associates (86) (82) (20)
Income tax ndash (68) (93)
Profit from continuing operations 193 198 322
Discontinued operations
Profit (loss) from discontinued operations (138) (771) (883)
Net income (loss) 55 (573) (561)
Attributable to
Equity Holders 55 (574) (559)
Minority interests ndash 1 (2)
Weighted average number of shares
outstandingmdashbasic net of treasury stock 261188858 266539917 273646869
Earnings per share from continuing operations
Basic(2) 067 074 118
Diluted 063 042 111
Earnings per share from discontinued operations
Basic (053) (289) (323)
Diluted (048) (262) (296)Total earnings per share
Basic(2) 014 (215) (205)
Diluted 015 (220) (185)
8122019 Panorama 2006
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62 Thomson Panorama 2006
CONSOLIDATED BALANCE SHEETS
In 991404 millions December 31 December 31 January 1 December 31 2006 2005 2005(1) 2004
ASSETS
Non-current assets
Property plant and equipment 813 886 1051 1051
Goodwill 1714 1756 1186 1178
Other intangible assets 1071 1150 924 924
Investments in associates 12 204 260 260
Investments and financial assets available-for-sale 266 341 139 113
Derivative financial instruments 7 1 11 ndash
Contract advances 129 173 179 179
Deferred tax assets 397 379 307 301
Other non-current assets 110 182 133 136
Total non-current assets 4519 5072 4190 4142
Current assets
Inventories 366 333 503 568
Trade accounts and notes receivable 1018 1315 1232 1180
Current accounts with associates and joint ventures 97 115 143 143
Derivative financial instruments 8 9 115 ndash
Other current assets 535 644 483 616
Marketable securities ndash 7 58 58
Cash and cash equivalents 1311 996 1845 1848
Assets classified as held for sale 264 369 80 ndash
Total current assets 3599 3788 4459 4413
Total assets 8118 8860 8649 8555
(1) Including the impacts of the first-time application related to IAS 32 and 39 on financial instruments and IFRS 5 on non-current assets held for sale and
discontinued operations
8122019 Panorama 2006
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63 Thomson Panorama 2006
In 991404 millions December 31 December 31 January 1 December 31 2006 2005 2005(1) 2004
SHAREHOLDERSrsquo EQUITY AND LIABILITIES
Shareholdersrsquo equity
Common stock (273871296 shares at
December 31 2006
with nominal value of euro 375 per share) 1027 1025 1025 1025
Trade accounts and notes payable 1032 1164 1199 1226
Accrued employee expenses 165 166 158 163
Income tax payable 57 47 60 60
Other current liabilities 671 750 746 800
Payables on acquisition of companies 13 138 84 84
Liabilities directly associated with
assets classified as held for sale 232 470 88 ndash
Total current liabilities 3681 4393 3602 3459
Total liabilities 5999 6644 6251 6062
Total shareholderrsquos equity and liabilities 8118 8860 8649 8555
(1) Including the impacts of the first-time application related to IAS 32 and 39 on financial instruments and IFRS 5 on non-current assets held for sale and
discontinued operations
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 6666
Creation and lay-out
Photo credits Nathalie BerhingGAMMA ndash Steacutephane de Bourgies ndash Jean-Franccedilois DeroubaixGAMMA ndash Christine Donnier- ValentinGAMMA ndash Cars copy 2006 Disney Enterprises IncPixar All Rights Reserved ndash Dreamgirls copy 2006 DREAMWORKS
LLC and PARAMOUNT PICTURES All Rights Reserved ndash Poseidon copy 2006 Warner Bros Pictures ndash Sony Bravia Paint
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 566
ues to evolve rapidly with further concen-
tration and diversification of both customers
and competitors and the continued impact
of broadband and video technologies on
our markets In that environment our mainfocus will be to work to optimize our port-
folio of activities for higher growth I have
no doubt that the opportunities which lie
ahead for Thomson will be immense
Return to profit in 2006
We saw a strong end to the fiscal year
With full year revenues at euro5854 million
giving core business revenues up 83
at constant currency and core business
EBIT of euro504 millions resulting in a core
EBIT margin of 88 we largely achieved
our financial targets The Systems divisiongrew revenues strongly while Services
showed a stable performance overall and
Technology recorded solid revenue growth
and good profitability
For the first time in many years Thomson
also registered a full year net profit (euro55 mil-
lion) Free cash flow generation was up
15 on last year toeuro483 million for the full
year 2006 In parallel our net financial lia-
bilities were reduced by euro460 million over
the year Over two thirds of our revenue in
2006 was digitalelectronic based and less
than a third was from physical media
Most importantly this transformation leaves
Thomson well-positioned at the heart of
convergence and digital video with sharply
reduced financial exposure to our legacy
consumer electronics businesses
Evolving skills base
Aside from the strategic operat ional or
financial targets we set ourselves and
achieved over the 2004-2006 period we
also made progress in improving opera-
tional management customer cover-
age and our reactivity to rapidly evolving
Media Entertainment amp Communications
markets
That has impl ied a rapid and dramatic
evolution of the Grouprsquos human resources
and skills base Together with a first-class
offering of technologies systems and ser-
vices our RampD software and design skills
are key Also critical is our capacity to win
new business by integrating our broad
offering to our customers
ldquoTogether with a first-class offering of technologies systems and servicesour RampD software and design skillsare keyrdquo
03 Thomson Panorama 2006
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 666
Our current employeesrsquo skill-sets reflect
these business priorities many of whom
are highly-qualified engineers as do
Thomsonrsquos close ties to a number of pres-
tigious institutions of higher education and
universities across the world As testament
to our changed employee profile and the
Grouprsquos transformation almost 80 of our
top management team has been renewedover the last two years drawn equally from
internal promotions acquisitions and
external recruitment
Outlook for 2007-2009
Our strategy for the 2007-2009 period will
see Thomson continue to expand its lead-
ership positions in digital video technolo-
gies services and systems The assump-
tions about the strategic medium-term
evolution of our markets we detailed in
2004 have proven valid and will inform our
decisions as we seek to build and grow
our business
Investments will continue therefore in
our key growth businesses the electronic
media activities within Content Services
and Network Services part of our Services
division and the Broadcast amp Networks
and Access Products businesses part of
our Systems division We intend to manage
our more mature activitiesmdashFilm amp DVD
Servicesmdashfor their cash and continue tore-invest in developing businesses New
media businesses for content makers or
content distributors will add to growth
RampD investment will continue to be strong
and we intend to maintain our intellectual
property leadership This should enable us
to take advantage of the main growth driv-
ers of the digital video industriesmdashaccel-
erating adoption of high-definition mobile
content on-demand content consumer-
generated content fixed-mobile conver-
gence triple-play devices connected
home networking and internet-based and
advertising content delivery
ldquoOur performance in 2006 has shown thatstrategically and operationally we can react effectively to
changes and opportunities in our marketsrdquo
04 Thomson Panorama 2006
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 766
The six key programs we need to imple-
ment are now in place to ensure Thom-
son maintains best-in-class operational
efficiency These focus on key clients
software new product introductions
operational improvement transformation
programs ranging from supply chain man-
agement to IT and the management of our
talent base
Our financial focus over the next three
years will be on optimizing and manag-
ing our portfolio of activities for higher
growth and net income we expect rev-
enue growth to gather pace in 2008-2009
and our objective is to register compound
growth over the 2007-2009 period in line
with or greater than the overall market
In 2007 Thomson will continue actions
already underway to improve operating
profitability across the divisions comple-
menting the achievements of 2006 Weexpect a strong year of revenue growth in
our digital and electronic businesses par-
tially diluted by our physical media busi-
ness (film DVD) and target strong growth
in our net income
As a sign of confidence in Thomsonrsquos
2007-2009 business plans and projec-
tions the Board proposed an increase of
10 in the dividend this year bringing it
to euro033
I wish to thank all our employees and in
particular the senior management team
now in placemdashthe top 100 executives plus
Thomsonrsquos Executive Committeemdashfor the
key role they have played in our progress
and successes
Our performance in 2006 has shown that
strategically and operationally we can reacteffectively to changes and opportunities in
our markets We now plan to build on this
result and look forward to the 2007-2009
period with confidence in our ability to cre-
ate value for our shareholders partners
customers and employees
Frank E DANGEARD
Chairman amp Chief Executive Officer
05 Thomson Panorama 2006
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 866
Under the leadership of Frank E Dange-
ard the Executive Committee currently
comprises 11 membersmdasheight of whom
are French two American and one Brit-
ish These executive managers respon-
sible for the operating divisions as well as
managers in charge of key functions meet
three times a month to review the financial
performance of the divisions in relation tothe budget and strategic developments
Once a month time is also set aside to
review the Grouprsquos key programs clients
software product introduction operations
transformation and talent management
The work of the Executive Committee is
carried out through three operating com-
mittees which contribute to an efficient
decision-making process
bull The Investment Committee chaired by
Senior Executive Vice President and Chief
Financial Officer Julian Waldron is respon-sible for studying and approving invest-
ments and financial commitments by the
different divisions It meets on an ad hoc
basis several times a month
bull The Risk Committee chaired by Senior
Executive Vice President and Chief Operat-
ing Officer Didier Trutt generally meets every
six weeks to assist the Executive Commit-
tee in identifying anticipating preventingand mitigating financial operational and
strategic risk to the business It also serves
as the forum through which the results and
findings of the internal audit team are com-
municated to senior management
bull The Corporate Social Responsibility
(CSR) Committee to be set up in 2007
Chaired by Marie-Ange Debon Execu-
tive Vice President General Secretary
Legal Real Estate amp External Com-
munications the CSR Committee will
oversee all matters related to corpo-
rate social responsibility complianceand ethics
Weekly meetings of Thomsonrsquos
Executive Committee
ensure an efficient
global decision-making process
EXECUTIVE COMMITTEE
06 Thomson Panorama 2006
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 966
1 Frank E DANGEARDChairman amp Chief Executive Officer (Paris New YorkPrinceton andLos Angeles)
2 Jacques DUNOGUEacuteSenior Executive Vice PresidentSystems(Paris and New YorkPrinceton)
of the Grouprsquos divisions and profit centersIn the context of the budgetary procedure
performance measurement indicators are
calculated by the divisions analyzed and
reviewed monthly to serve as a reference
for the Grouprsquos monthly reporting
Management reporting and
closing period work
Th om so n uses a co mmon char t of
accounts which is regularly updated The
principal accounting and financial figures
of the operational and functional depart-
ments consolidated at Group level are
analyzed by the Grouprsquos management
control team and reviewed by the Grouprsquos
Executive Committee
The closing process for the half-year and
annual consolidated financial statementsoccurs in two steps The first step con-
sists of a ldquohard closerdquo completed in May
and September leading to a first review by
the statutory auditors The second step
occurs in July and in JanuaryFebruary and
involves the finalization of half-year and
annual consolidated financial statements
under IFRS The Group then proceeds
once a year with a reconciliation of these
results in accordance with US GAAP
Preparation of financial statements
The financial statements are prepared jointly by the finance department and the
General Secretary They are based on
information reported through the annual
reporting and accounting consolidation
processes and on operational and mar-
ket information which is specifically cen-
tralized for the preparation of Thomsonrsquos
Document de Reacutefeacuterence in France and
the submission of Form 20-F in the United
States Half-year and annual financial infor-
mation is reviewed by the Grouprsquos Audit
Committee
8122019 Panorama 2006
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58 Thomson Panorama 2006
(1) Source PriceWaterhouseCoopers ndash
ldquoGlobal Entertainment and Media Outlook 2006-10rdquo
Revenue growth
Thomson achieved consolidated 2006
net revenues of 9914045854 million up from
9914045591 million in 2005 Revenues for
the Core Business reached 9914045747 mil-
lion (9914045776 million at constant currency)
representing 83 growth over 2005 at
constant currency
Overall the Grouprsquos key growth busi-
nessesmdashContent Services Network
Services Access Products for telecom
operators and our Broadcast amp Networks
businesses (Grass Valley and Network
Software)mdashincreased strongly year-on-
year and accounted for over a third of
Group revenues against less than a quar-
ter in 2005
Thomsonrsquos Core Business EBIT for 2006
was euro504 million representing a Core
Business EBIT margin of 88 Thisreflected growth in some key businesses
and cost actions across the Group off-
setting a significant investment in research
and development and some increase in
restructuring expenses
Increased spend on RampD
Research and development expenditure
charged in the Core Business (net of
external funding) rose from 991404221 million in
2005 to 991404279 million in 2006 an increase
of 26 principally in the Systems divi-
sion The Group expanded the number ofproducts and services in the development
phase across its businesses
Return to profit
Losses in Non-Core Continuing and Dis-
continued operations were substantially
lower year-on-year reflecting principally
the exit from heavily loss-making Displays
activities in 2005 and intensified cost-sav-
ing programs in 2006 A major revision
and harmonization of the Grouprsquos North
American healthcare obligations gave rise
to substantial one-time gains and Thom-
son also initiated significant restructuring
of its French Non-Core operations
The good performance of the Core Busi-
ness lower Non-Core and Discontinued
losses and a low reported tax chargeenabled the Group to return a net profit of
99140455 million in 2006 compared to a loss of
991404573 million in the previous year
Good cash flow
strengthened balance sheet
Thomson generated good free cash flow
and strengthened its balance sheet in
2006 Total net financial liabilities on the
balance sheet fell by 991404460 million reflect-
ing a 99140493 million fall in financial and acqui-
sition-related debts and a 991404367 million
reduction in retirement benefit obligations(including healthcare)
Increase in Net Dividend
The Board of Directors proposed a dis-
tribution to shareholders of 991404033 per
share (2005 dividend 991404030) reflecting
confidence in the prospects of the Group
going forward
Outlook 2007-2009
growth in revenues and net income
With the Grouprsquos transformation complete Thomsonrsquos financial focus over the 2007-
2009 period will be to grow revenues and
net income
Thomson serves growing Media Enter-
tainment amp Communications marketsmdashfor
which external estimates(1) indicate com-
pound growth of around 6 over the last
FINANCIAL AND
OPERATIONAL PERFORMANCE
Full year 2006 results
saw a return to profitability
and leave Thomson
well positioned at
the heart of convergence
and digital video
8122019 Panorama 2006
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59 Thomson Panorama 2006
five years Our digital and electronic busi-
nesses now represent two-thirds of rev-
enues and we believe they are growing
faster than the overall market offsetting
the maturing physical media businesses
Given this profile the Group expects its
revenue growth to be more modest in
2007 but to gather pace over the period
and our overall objective is to show com-pound growth over 2007-2009 in line with
or faster than the overall market
The 2007-2009 period is also expected
to see a sharply reduced impact from
residual Non-Core activities with an end
to losses from the Discontinued Activities
perimeter after 2007 Accordingly Thom-
sonrsquos ambition is to turn its Core Business
growth and profitability and lower impact
from Non-Core into strong growth in net
income over the period 2007-2009
Business operations
Continuous performance improvement is
fundamental to Thomsonrsquos commitment to
create sustainable business models and
long-term value for all stakeholders The
ambitious Group-wide programs launched
in 2004 to improve productivity and
enhance overall performance producedsubstantial results in 2006 and led to new
and strong initiatives for long-term growth
As of the second half of 2006 six ldquoKey
Programsrdquo are monitored at Group level
Clients Software Product Introduction
Operations Transformation and Talent
Management
KEY PROGRAMS IN PLACE
Program Focus
Clients Thomsonrsquos clientregional diversification and
growth of the existing business
through improved Sales amp Marketing
Software Development of integrated software platforms
in all markets (post-production distribution
delivery) and for all types of customer
(professional prosumerhellip)
Product Introduction Ensuring new product roadmaps are in line
with strategy and resource needs have been
identifiedOperations Improving the Grouprsquos cost base cash
generation and working capital
Transformation Multiple programs including initiatives to
improving customer relationship management
worldwide supply chain management
IT transformation as well as Thomsonrsquos RampD
footprint
Talent Management Leveraging human assets with a focus on
talent retention and acquisition
8122019 Panorama 2006
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60 Thomson Panorama 2006
SUMMARY RESULTS FULL YEAR 2006
In 991404 millions unless otherwise stated 2006(1) 2005(1)
Net revenues 5854 5591(1)
Core Business net revenues 5747 5335
Services 2489 2487
Systems 2684 2262
Technology 547 546
Corporate 27 40
Non-Core continuing operations net revenues 107 256
Core Business EBIT(2) 504 512
Services 160 205
Systems 132 109
Technology 289 277Corporate (77) (79)
EBIT from Non-Core continuing operations (25) (122)
(1) Restated with 2006 discontinued activities according to IFRS 5
8122019 Panorama 2006
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61 Thomson Panorama 2006
Year ended December 31in 991404 except number of shares 2006 2005 2004
Year ended December 31in 991404 millions 2006 2005(1) 2004(1)
CONSOLIDATED STATEMENTS OF OPERATIONS
(1) Restated with 2006 discontinued activities according to IFRS 5
(2) After deduction of the interests net of tax paid on the subordinated perpetual notes during the period
Continuing operations
Revenues 5854 5591 5980
Cost of sales (4474) (4240) (4594)
Gross margin 1380 1351 1386
Selling marketing general and administrative expenses (674) (638) (653)
Other income (expense) 52 (96) (69)
Research and development expenses (279) (227) (201)
Profit from continuing operations before tax and net finance costs 479 390 463
Interest income 19 30 52
Interest expense (108) (108) (54)
Other financial income (expense) (111) 36 (26)
Finance costs ndash net (200) (42) (28)
Share of profit (loss) from associates (86) (82) (20)
Income tax ndash (68) (93)
Profit from continuing operations 193 198 322
Discontinued operations
Profit (loss) from discontinued operations (138) (771) (883)
Net income (loss) 55 (573) (561)
Attributable to
Equity Holders 55 (574) (559)
Minority interests ndash 1 (2)
Weighted average number of shares
outstandingmdashbasic net of treasury stock 261188858 266539917 273646869
Earnings per share from continuing operations
Basic(2) 067 074 118
Diluted 063 042 111
Earnings per share from discontinued operations
Basic (053) (289) (323)
Diluted (048) (262) (296)Total earnings per share
Basic(2) 014 (215) (205)
Diluted 015 (220) (185)
8122019 Panorama 2006
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62 Thomson Panorama 2006
CONSOLIDATED BALANCE SHEETS
In 991404 millions December 31 December 31 January 1 December 31 2006 2005 2005(1) 2004
ASSETS
Non-current assets
Property plant and equipment 813 886 1051 1051
Goodwill 1714 1756 1186 1178
Other intangible assets 1071 1150 924 924
Investments in associates 12 204 260 260
Investments and financial assets available-for-sale 266 341 139 113
Derivative financial instruments 7 1 11 ndash
Contract advances 129 173 179 179
Deferred tax assets 397 379 307 301
Other non-current assets 110 182 133 136
Total non-current assets 4519 5072 4190 4142
Current assets
Inventories 366 333 503 568
Trade accounts and notes receivable 1018 1315 1232 1180
Current accounts with associates and joint ventures 97 115 143 143
Derivative financial instruments 8 9 115 ndash
Other current assets 535 644 483 616
Marketable securities ndash 7 58 58
Cash and cash equivalents 1311 996 1845 1848
Assets classified as held for sale 264 369 80 ndash
Total current assets 3599 3788 4459 4413
Total assets 8118 8860 8649 8555
(1) Including the impacts of the first-time application related to IAS 32 and 39 on financial instruments and IFRS 5 on non-current assets held for sale and
discontinued operations
8122019 Panorama 2006
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63 Thomson Panorama 2006
In 991404 millions December 31 December 31 January 1 December 31 2006 2005 2005(1) 2004
SHAREHOLDERSrsquo EQUITY AND LIABILITIES
Shareholdersrsquo equity
Common stock (273871296 shares at
December 31 2006
with nominal value of euro 375 per share) 1027 1025 1025 1025
Trade accounts and notes payable 1032 1164 1199 1226
Accrued employee expenses 165 166 158 163
Income tax payable 57 47 60 60
Other current liabilities 671 750 746 800
Payables on acquisition of companies 13 138 84 84
Liabilities directly associated with
assets classified as held for sale 232 470 88 ndash
Total current liabilities 3681 4393 3602 3459
Total liabilities 5999 6644 6251 6062
Total shareholderrsquos equity and liabilities 8118 8860 8649 8555
(1) Including the impacts of the first-time application related to IAS 32 and 39 on financial instruments and IFRS 5 on non-current assets held for sale and
discontinued operations
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 6666
Creation and lay-out
Photo credits Nathalie BerhingGAMMA ndash Steacutephane de Bourgies ndash Jean-Franccedilois DeroubaixGAMMA ndash Christine Donnier- ValentinGAMMA ndash Cars copy 2006 Disney Enterprises IncPixar All Rights Reserved ndash Dreamgirls copy 2006 DREAMWORKS
LLC and PARAMOUNT PICTURES All Rights Reserved ndash Poseidon copy 2006 Warner Bros Pictures ndash Sony Bravia Paint
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 666
Our current employeesrsquo skill-sets reflect
these business priorities many of whom
are highly-qualified engineers as do
Thomsonrsquos close ties to a number of pres-
tigious institutions of higher education and
universities across the world As testament
to our changed employee profile and the
Grouprsquos transformation almost 80 of our
top management team has been renewedover the last two years drawn equally from
internal promotions acquisitions and
external recruitment
Outlook for 2007-2009
Our strategy for the 2007-2009 period will
see Thomson continue to expand its lead-
ership positions in digital video technolo-
gies services and systems The assump-
tions about the strategic medium-term
evolution of our markets we detailed in
2004 have proven valid and will inform our
decisions as we seek to build and grow
our business
Investments will continue therefore in
our key growth businesses the electronic
media activities within Content Services
and Network Services part of our Services
division and the Broadcast amp Networks
and Access Products businesses part of
our Systems division We intend to manage
our more mature activitiesmdashFilm amp DVD
Servicesmdashfor their cash and continue tore-invest in developing businesses New
media businesses for content makers or
content distributors will add to growth
RampD investment will continue to be strong
and we intend to maintain our intellectual
property leadership This should enable us
to take advantage of the main growth driv-
ers of the digital video industriesmdashaccel-
erating adoption of high-definition mobile
content on-demand content consumer-
generated content fixed-mobile conver-
gence triple-play devices connected
home networking and internet-based and
advertising content delivery
ldquoOur performance in 2006 has shown thatstrategically and operationally we can react effectively to
changes and opportunities in our marketsrdquo
04 Thomson Panorama 2006
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 766
The six key programs we need to imple-
ment are now in place to ensure Thom-
son maintains best-in-class operational
efficiency These focus on key clients
software new product introductions
operational improvement transformation
programs ranging from supply chain man-
agement to IT and the management of our
talent base
Our financial focus over the next three
years will be on optimizing and manag-
ing our portfolio of activities for higher
growth and net income we expect rev-
enue growth to gather pace in 2008-2009
and our objective is to register compound
growth over the 2007-2009 period in line
with or greater than the overall market
In 2007 Thomson will continue actions
already underway to improve operating
profitability across the divisions comple-
menting the achievements of 2006 Weexpect a strong year of revenue growth in
our digital and electronic businesses par-
tially diluted by our physical media busi-
ness (film DVD) and target strong growth
in our net income
As a sign of confidence in Thomsonrsquos
2007-2009 business plans and projec-
tions the Board proposed an increase of
10 in the dividend this year bringing it
to euro033
I wish to thank all our employees and in
particular the senior management team
now in placemdashthe top 100 executives plus
Thomsonrsquos Executive Committeemdashfor the
key role they have played in our progress
and successes
Our performance in 2006 has shown that
strategically and operationally we can reacteffectively to changes and opportunities in
our markets We now plan to build on this
result and look forward to the 2007-2009
period with confidence in our ability to cre-
ate value for our shareholders partners
customers and employees
Frank E DANGEARD
Chairman amp Chief Executive Officer
05 Thomson Panorama 2006
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 866
Under the leadership of Frank E Dange-
ard the Executive Committee currently
comprises 11 membersmdasheight of whom
are French two American and one Brit-
ish These executive managers respon-
sible for the operating divisions as well as
managers in charge of key functions meet
three times a month to review the financial
performance of the divisions in relation tothe budget and strategic developments
Once a month time is also set aside to
review the Grouprsquos key programs clients
software product introduction operations
transformation and talent management
The work of the Executive Committee is
carried out through three operating com-
mittees which contribute to an efficient
decision-making process
bull The Investment Committee chaired by
Senior Executive Vice President and Chief
Financial Officer Julian Waldron is respon-sible for studying and approving invest-
ments and financial commitments by the
different divisions It meets on an ad hoc
basis several times a month
bull The Risk Committee chaired by Senior
Executive Vice President and Chief Operat-
ing Officer Didier Trutt generally meets every
six weeks to assist the Executive Commit-
tee in identifying anticipating preventingand mitigating financial operational and
strategic risk to the business It also serves
as the forum through which the results and
findings of the internal audit team are com-
municated to senior management
bull The Corporate Social Responsibility
(CSR) Committee to be set up in 2007
Chaired by Marie-Ange Debon Execu-
tive Vice President General Secretary
Legal Real Estate amp External Com-
munications the CSR Committee will
oversee all matters related to corpo-
rate social responsibility complianceand ethics
Weekly meetings of Thomsonrsquos
Executive Committee
ensure an efficient
global decision-making process
EXECUTIVE COMMITTEE
06 Thomson Panorama 2006
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 966
1 Frank E DANGEARDChairman amp Chief Executive Officer (Paris New YorkPrinceton andLos Angeles)
2 Jacques DUNOGUEacuteSenior Executive Vice PresidentSystems(Paris and New YorkPrinceton)
of the Grouprsquos divisions and profit centersIn the context of the budgetary procedure
performance measurement indicators are
calculated by the divisions analyzed and
reviewed monthly to serve as a reference
for the Grouprsquos monthly reporting
Management reporting and
closing period work
Th om so n uses a co mmon char t of
accounts which is regularly updated The
principal accounting and financial figures
of the operational and functional depart-
ments consolidated at Group level are
analyzed by the Grouprsquos management
control team and reviewed by the Grouprsquos
Executive Committee
The closing process for the half-year and
annual consolidated financial statementsoccurs in two steps The first step con-
sists of a ldquohard closerdquo completed in May
and September leading to a first review by
the statutory auditors The second step
occurs in July and in JanuaryFebruary and
involves the finalization of half-year and
annual consolidated financial statements
under IFRS The Group then proceeds
once a year with a reconciliation of these
results in accordance with US GAAP
Preparation of financial statements
The financial statements are prepared jointly by the finance department and the
General Secretary They are based on
information reported through the annual
reporting and accounting consolidation
processes and on operational and mar-
ket information which is specifically cen-
tralized for the preparation of Thomsonrsquos
Document de Reacutefeacuterence in France and
the submission of Form 20-F in the United
States Half-year and annual financial infor-
mation is reviewed by the Grouprsquos Audit
Committee
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 6066
58 Thomson Panorama 2006
(1) Source PriceWaterhouseCoopers ndash
ldquoGlobal Entertainment and Media Outlook 2006-10rdquo
Revenue growth
Thomson achieved consolidated 2006
net revenues of 9914045854 million up from
9914045591 million in 2005 Revenues for
the Core Business reached 9914045747 mil-
lion (9914045776 million at constant currency)
representing 83 growth over 2005 at
constant currency
Overall the Grouprsquos key growth busi-
nessesmdashContent Services Network
Services Access Products for telecom
operators and our Broadcast amp Networks
businesses (Grass Valley and Network
Software)mdashincreased strongly year-on-
year and accounted for over a third of
Group revenues against less than a quar-
ter in 2005
Thomsonrsquos Core Business EBIT for 2006
was euro504 million representing a Core
Business EBIT margin of 88 Thisreflected growth in some key businesses
and cost actions across the Group off-
setting a significant investment in research
and development and some increase in
restructuring expenses
Increased spend on RampD
Research and development expenditure
charged in the Core Business (net of
external funding) rose from 991404221 million in
2005 to 991404279 million in 2006 an increase
of 26 principally in the Systems divi-
sion The Group expanded the number ofproducts and services in the development
phase across its businesses
Return to profit
Losses in Non-Core Continuing and Dis-
continued operations were substantially
lower year-on-year reflecting principally
the exit from heavily loss-making Displays
activities in 2005 and intensified cost-sav-
ing programs in 2006 A major revision
and harmonization of the Grouprsquos North
American healthcare obligations gave rise
to substantial one-time gains and Thom-
son also initiated significant restructuring
of its French Non-Core operations
The good performance of the Core Busi-
ness lower Non-Core and Discontinued
losses and a low reported tax chargeenabled the Group to return a net profit of
99140455 million in 2006 compared to a loss of
991404573 million in the previous year
Good cash flow
strengthened balance sheet
Thomson generated good free cash flow
and strengthened its balance sheet in
2006 Total net financial liabilities on the
balance sheet fell by 991404460 million reflect-
ing a 99140493 million fall in financial and acqui-
sition-related debts and a 991404367 million
reduction in retirement benefit obligations(including healthcare)
Increase in Net Dividend
The Board of Directors proposed a dis-
tribution to shareholders of 991404033 per
share (2005 dividend 991404030) reflecting
confidence in the prospects of the Group
going forward
Outlook 2007-2009
growth in revenues and net income
With the Grouprsquos transformation complete Thomsonrsquos financial focus over the 2007-
2009 period will be to grow revenues and
net income
Thomson serves growing Media Enter-
tainment amp Communications marketsmdashfor
which external estimates(1) indicate com-
pound growth of around 6 over the last
FINANCIAL AND
OPERATIONAL PERFORMANCE
Full year 2006 results
saw a return to profitability
and leave Thomson
well positioned at
the heart of convergence
and digital video
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 6166
59 Thomson Panorama 2006
five years Our digital and electronic busi-
nesses now represent two-thirds of rev-
enues and we believe they are growing
faster than the overall market offsetting
the maturing physical media businesses
Given this profile the Group expects its
revenue growth to be more modest in
2007 but to gather pace over the period
and our overall objective is to show com-pound growth over 2007-2009 in line with
or faster than the overall market
The 2007-2009 period is also expected
to see a sharply reduced impact from
residual Non-Core activities with an end
to losses from the Discontinued Activities
perimeter after 2007 Accordingly Thom-
sonrsquos ambition is to turn its Core Business
growth and profitability and lower impact
from Non-Core into strong growth in net
income over the period 2007-2009
Business operations
Continuous performance improvement is
fundamental to Thomsonrsquos commitment to
create sustainable business models and
long-term value for all stakeholders The
ambitious Group-wide programs launched
in 2004 to improve productivity and
enhance overall performance producedsubstantial results in 2006 and led to new
and strong initiatives for long-term growth
As of the second half of 2006 six ldquoKey
Programsrdquo are monitored at Group level
Clients Software Product Introduction
Operations Transformation and Talent
Management
KEY PROGRAMS IN PLACE
Program Focus
Clients Thomsonrsquos clientregional diversification and
growth of the existing business
through improved Sales amp Marketing
Software Development of integrated software platforms
in all markets (post-production distribution
delivery) and for all types of customer
(professional prosumerhellip)
Product Introduction Ensuring new product roadmaps are in line
with strategy and resource needs have been
identifiedOperations Improving the Grouprsquos cost base cash
generation and working capital
Transformation Multiple programs including initiatives to
improving customer relationship management
worldwide supply chain management
IT transformation as well as Thomsonrsquos RampD
footprint
Talent Management Leveraging human assets with a focus on
talent retention and acquisition
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 6266
60 Thomson Panorama 2006
SUMMARY RESULTS FULL YEAR 2006
In 991404 millions unless otherwise stated 2006(1) 2005(1)
Net revenues 5854 5591(1)
Core Business net revenues 5747 5335
Services 2489 2487
Systems 2684 2262
Technology 547 546
Corporate 27 40
Non-Core continuing operations net revenues 107 256
Core Business EBIT(2) 504 512
Services 160 205
Systems 132 109
Technology 289 277Corporate (77) (79)
EBIT from Non-Core continuing operations (25) (122)
(1) Restated with 2006 discontinued activities according to IFRS 5
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 6366
61 Thomson Panorama 2006
Year ended December 31in 991404 except number of shares 2006 2005 2004
Year ended December 31in 991404 millions 2006 2005(1) 2004(1)
CONSOLIDATED STATEMENTS OF OPERATIONS
(1) Restated with 2006 discontinued activities according to IFRS 5
(2) After deduction of the interests net of tax paid on the subordinated perpetual notes during the period
Continuing operations
Revenues 5854 5591 5980
Cost of sales (4474) (4240) (4594)
Gross margin 1380 1351 1386
Selling marketing general and administrative expenses (674) (638) (653)
Other income (expense) 52 (96) (69)
Research and development expenses (279) (227) (201)
Profit from continuing operations before tax and net finance costs 479 390 463
Interest income 19 30 52
Interest expense (108) (108) (54)
Other financial income (expense) (111) 36 (26)
Finance costs ndash net (200) (42) (28)
Share of profit (loss) from associates (86) (82) (20)
Income tax ndash (68) (93)
Profit from continuing operations 193 198 322
Discontinued operations
Profit (loss) from discontinued operations (138) (771) (883)
Net income (loss) 55 (573) (561)
Attributable to
Equity Holders 55 (574) (559)
Minority interests ndash 1 (2)
Weighted average number of shares
outstandingmdashbasic net of treasury stock 261188858 266539917 273646869
Earnings per share from continuing operations
Basic(2) 067 074 118
Diluted 063 042 111
Earnings per share from discontinued operations
Basic (053) (289) (323)
Diluted (048) (262) (296)Total earnings per share
Basic(2) 014 (215) (205)
Diluted 015 (220) (185)
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 6466
62 Thomson Panorama 2006
CONSOLIDATED BALANCE SHEETS
In 991404 millions December 31 December 31 January 1 December 31 2006 2005 2005(1) 2004
ASSETS
Non-current assets
Property plant and equipment 813 886 1051 1051
Goodwill 1714 1756 1186 1178
Other intangible assets 1071 1150 924 924
Investments in associates 12 204 260 260
Investments and financial assets available-for-sale 266 341 139 113
Derivative financial instruments 7 1 11 ndash
Contract advances 129 173 179 179
Deferred tax assets 397 379 307 301
Other non-current assets 110 182 133 136
Total non-current assets 4519 5072 4190 4142
Current assets
Inventories 366 333 503 568
Trade accounts and notes receivable 1018 1315 1232 1180
Current accounts with associates and joint ventures 97 115 143 143
Derivative financial instruments 8 9 115 ndash
Other current assets 535 644 483 616
Marketable securities ndash 7 58 58
Cash and cash equivalents 1311 996 1845 1848
Assets classified as held for sale 264 369 80 ndash
Total current assets 3599 3788 4459 4413
Total assets 8118 8860 8649 8555
(1) Including the impacts of the first-time application related to IAS 32 and 39 on financial instruments and IFRS 5 on non-current assets held for sale and
discontinued operations
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 6566
63 Thomson Panorama 2006
In 991404 millions December 31 December 31 January 1 December 31 2006 2005 2005(1) 2004
SHAREHOLDERSrsquo EQUITY AND LIABILITIES
Shareholdersrsquo equity
Common stock (273871296 shares at
December 31 2006
with nominal value of euro 375 per share) 1027 1025 1025 1025
Trade accounts and notes payable 1032 1164 1199 1226
Accrued employee expenses 165 166 158 163
Income tax payable 57 47 60 60
Other current liabilities 671 750 746 800
Payables on acquisition of companies 13 138 84 84
Liabilities directly associated with
assets classified as held for sale 232 470 88 ndash
Total current liabilities 3681 4393 3602 3459
Total liabilities 5999 6644 6251 6062
Total shareholderrsquos equity and liabilities 8118 8860 8649 8555
(1) Including the impacts of the first-time application related to IAS 32 and 39 on financial instruments and IFRS 5 on non-current assets held for sale and
discontinued operations
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 6666
Creation and lay-out
Photo credits Nathalie BerhingGAMMA ndash Steacutephane de Bourgies ndash Jean-Franccedilois DeroubaixGAMMA ndash Christine Donnier- ValentinGAMMA ndash Cars copy 2006 Disney Enterprises IncPixar All Rights Reserved ndash Dreamgirls copy 2006 DREAMWORKS
LLC and PARAMOUNT PICTURES All Rights Reserved ndash Poseidon copy 2006 Warner Bros Pictures ndash Sony Bravia Paint
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 766
The six key programs we need to imple-
ment are now in place to ensure Thom-
son maintains best-in-class operational
efficiency These focus on key clients
software new product introductions
operational improvement transformation
programs ranging from supply chain man-
agement to IT and the management of our
talent base
Our financial focus over the next three
years will be on optimizing and manag-
ing our portfolio of activities for higher
growth and net income we expect rev-
enue growth to gather pace in 2008-2009
and our objective is to register compound
growth over the 2007-2009 period in line
with or greater than the overall market
In 2007 Thomson will continue actions
already underway to improve operating
profitability across the divisions comple-
menting the achievements of 2006 Weexpect a strong year of revenue growth in
our digital and electronic businesses par-
tially diluted by our physical media busi-
ness (film DVD) and target strong growth
in our net income
As a sign of confidence in Thomsonrsquos
2007-2009 business plans and projec-
tions the Board proposed an increase of
10 in the dividend this year bringing it
to euro033
I wish to thank all our employees and in
particular the senior management team
now in placemdashthe top 100 executives plus
Thomsonrsquos Executive Committeemdashfor the
key role they have played in our progress
and successes
Our performance in 2006 has shown that
strategically and operationally we can reacteffectively to changes and opportunities in
our markets We now plan to build on this
result and look forward to the 2007-2009
period with confidence in our ability to cre-
ate value for our shareholders partners
customers and employees
Frank E DANGEARD
Chairman amp Chief Executive Officer
05 Thomson Panorama 2006
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 866
Under the leadership of Frank E Dange-
ard the Executive Committee currently
comprises 11 membersmdasheight of whom
are French two American and one Brit-
ish These executive managers respon-
sible for the operating divisions as well as
managers in charge of key functions meet
three times a month to review the financial
performance of the divisions in relation tothe budget and strategic developments
Once a month time is also set aside to
review the Grouprsquos key programs clients
software product introduction operations
transformation and talent management
The work of the Executive Committee is
carried out through three operating com-
mittees which contribute to an efficient
decision-making process
bull The Investment Committee chaired by
Senior Executive Vice President and Chief
Financial Officer Julian Waldron is respon-sible for studying and approving invest-
ments and financial commitments by the
different divisions It meets on an ad hoc
basis several times a month
bull The Risk Committee chaired by Senior
Executive Vice President and Chief Operat-
ing Officer Didier Trutt generally meets every
six weeks to assist the Executive Commit-
tee in identifying anticipating preventingand mitigating financial operational and
strategic risk to the business It also serves
as the forum through which the results and
findings of the internal audit team are com-
municated to senior management
bull The Corporate Social Responsibility
(CSR) Committee to be set up in 2007
Chaired by Marie-Ange Debon Execu-
tive Vice President General Secretary
Legal Real Estate amp External Com-
munications the CSR Committee will
oversee all matters related to corpo-
rate social responsibility complianceand ethics
Weekly meetings of Thomsonrsquos
Executive Committee
ensure an efficient
global decision-making process
EXECUTIVE COMMITTEE
06 Thomson Panorama 2006
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 966
1 Frank E DANGEARDChairman amp Chief Executive Officer (Paris New YorkPrinceton andLos Angeles)
2 Jacques DUNOGUEacuteSenior Executive Vice PresidentSystems(Paris and New YorkPrinceton)
of the Grouprsquos divisions and profit centersIn the context of the budgetary procedure
performance measurement indicators are
calculated by the divisions analyzed and
reviewed monthly to serve as a reference
for the Grouprsquos monthly reporting
Management reporting and
closing period work
Th om so n uses a co mmon char t of
accounts which is regularly updated The
principal accounting and financial figures
of the operational and functional depart-
ments consolidated at Group level are
analyzed by the Grouprsquos management
control team and reviewed by the Grouprsquos
Executive Committee
The closing process for the half-year and
annual consolidated financial statementsoccurs in two steps The first step con-
sists of a ldquohard closerdquo completed in May
and September leading to a first review by
the statutory auditors The second step
occurs in July and in JanuaryFebruary and
involves the finalization of half-year and
annual consolidated financial statements
under IFRS The Group then proceeds
once a year with a reconciliation of these
results in accordance with US GAAP
Preparation of financial statements
The financial statements are prepared jointly by the finance department and the
General Secretary They are based on
information reported through the annual
reporting and accounting consolidation
processes and on operational and mar-
ket information which is specifically cen-
tralized for the preparation of Thomsonrsquos
Document de Reacutefeacuterence in France and
the submission of Form 20-F in the United
States Half-year and annual financial infor-
mation is reviewed by the Grouprsquos Audit
Committee
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 6066
58 Thomson Panorama 2006
(1) Source PriceWaterhouseCoopers ndash
ldquoGlobal Entertainment and Media Outlook 2006-10rdquo
Revenue growth
Thomson achieved consolidated 2006
net revenues of 9914045854 million up from
9914045591 million in 2005 Revenues for
the Core Business reached 9914045747 mil-
lion (9914045776 million at constant currency)
representing 83 growth over 2005 at
constant currency
Overall the Grouprsquos key growth busi-
nessesmdashContent Services Network
Services Access Products for telecom
operators and our Broadcast amp Networks
businesses (Grass Valley and Network
Software)mdashincreased strongly year-on-
year and accounted for over a third of
Group revenues against less than a quar-
ter in 2005
Thomsonrsquos Core Business EBIT for 2006
was euro504 million representing a Core
Business EBIT margin of 88 Thisreflected growth in some key businesses
and cost actions across the Group off-
setting a significant investment in research
and development and some increase in
restructuring expenses
Increased spend on RampD
Research and development expenditure
charged in the Core Business (net of
external funding) rose from 991404221 million in
2005 to 991404279 million in 2006 an increase
of 26 principally in the Systems divi-
sion The Group expanded the number ofproducts and services in the development
phase across its businesses
Return to profit
Losses in Non-Core Continuing and Dis-
continued operations were substantially
lower year-on-year reflecting principally
the exit from heavily loss-making Displays
activities in 2005 and intensified cost-sav-
ing programs in 2006 A major revision
and harmonization of the Grouprsquos North
American healthcare obligations gave rise
to substantial one-time gains and Thom-
son also initiated significant restructuring
of its French Non-Core operations
The good performance of the Core Busi-
ness lower Non-Core and Discontinued
losses and a low reported tax chargeenabled the Group to return a net profit of
99140455 million in 2006 compared to a loss of
991404573 million in the previous year
Good cash flow
strengthened balance sheet
Thomson generated good free cash flow
and strengthened its balance sheet in
2006 Total net financial liabilities on the
balance sheet fell by 991404460 million reflect-
ing a 99140493 million fall in financial and acqui-
sition-related debts and a 991404367 million
reduction in retirement benefit obligations(including healthcare)
Increase in Net Dividend
The Board of Directors proposed a dis-
tribution to shareholders of 991404033 per
share (2005 dividend 991404030) reflecting
confidence in the prospects of the Group
going forward
Outlook 2007-2009
growth in revenues and net income
With the Grouprsquos transformation complete Thomsonrsquos financial focus over the 2007-
2009 period will be to grow revenues and
net income
Thomson serves growing Media Enter-
tainment amp Communications marketsmdashfor
which external estimates(1) indicate com-
pound growth of around 6 over the last
FINANCIAL AND
OPERATIONAL PERFORMANCE
Full year 2006 results
saw a return to profitability
and leave Thomson
well positioned at
the heart of convergence
and digital video
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 6166
59 Thomson Panorama 2006
five years Our digital and electronic busi-
nesses now represent two-thirds of rev-
enues and we believe they are growing
faster than the overall market offsetting
the maturing physical media businesses
Given this profile the Group expects its
revenue growth to be more modest in
2007 but to gather pace over the period
and our overall objective is to show com-pound growth over 2007-2009 in line with
or faster than the overall market
The 2007-2009 period is also expected
to see a sharply reduced impact from
residual Non-Core activities with an end
to losses from the Discontinued Activities
perimeter after 2007 Accordingly Thom-
sonrsquos ambition is to turn its Core Business
growth and profitability and lower impact
from Non-Core into strong growth in net
income over the period 2007-2009
Business operations
Continuous performance improvement is
fundamental to Thomsonrsquos commitment to
create sustainable business models and
long-term value for all stakeholders The
ambitious Group-wide programs launched
in 2004 to improve productivity and
enhance overall performance producedsubstantial results in 2006 and led to new
and strong initiatives for long-term growth
As of the second half of 2006 six ldquoKey
Programsrdquo are monitored at Group level
Clients Software Product Introduction
Operations Transformation and Talent
Management
KEY PROGRAMS IN PLACE
Program Focus
Clients Thomsonrsquos clientregional diversification and
growth of the existing business
through improved Sales amp Marketing
Software Development of integrated software platforms
in all markets (post-production distribution
delivery) and for all types of customer
(professional prosumerhellip)
Product Introduction Ensuring new product roadmaps are in line
with strategy and resource needs have been
identifiedOperations Improving the Grouprsquos cost base cash
generation and working capital
Transformation Multiple programs including initiatives to
improving customer relationship management
worldwide supply chain management
IT transformation as well as Thomsonrsquos RampD
footprint
Talent Management Leveraging human assets with a focus on
talent retention and acquisition
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 6266
60 Thomson Panorama 2006
SUMMARY RESULTS FULL YEAR 2006
In 991404 millions unless otherwise stated 2006(1) 2005(1)
Net revenues 5854 5591(1)
Core Business net revenues 5747 5335
Services 2489 2487
Systems 2684 2262
Technology 547 546
Corporate 27 40
Non-Core continuing operations net revenues 107 256
Core Business EBIT(2) 504 512
Services 160 205
Systems 132 109
Technology 289 277Corporate (77) (79)
EBIT from Non-Core continuing operations (25) (122)
(1) Restated with 2006 discontinued activities according to IFRS 5
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 6366
61 Thomson Panorama 2006
Year ended December 31in 991404 except number of shares 2006 2005 2004
Year ended December 31in 991404 millions 2006 2005(1) 2004(1)
CONSOLIDATED STATEMENTS OF OPERATIONS
(1) Restated with 2006 discontinued activities according to IFRS 5
(2) After deduction of the interests net of tax paid on the subordinated perpetual notes during the period
Continuing operations
Revenues 5854 5591 5980
Cost of sales (4474) (4240) (4594)
Gross margin 1380 1351 1386
Selling marketing general and administrative expenses (674) (638) (653)
Other income (expense) 52 (96) (69)
Research and development expenses (279) (227) (201)
Profit from continuing operations before tax and net finance costs 479 390 463
Interest income 19 30 52
Interest expense (108) (108) (54)
Other financial income (expense) (111) 36 (26)
Finance costs ndash net (200) (42) (28)
Share of profit (loss) from associates (86) (82) (20)
Income tax ndash (68) (93)
Profit from continuing operations 193 198 322
Discontinued operations
Profit (loss) from discontinued operations (138) (771) (883)
Net income (loss) 55 (573) (561)
Attributable to
Equity Holders 55 (574) (559)
Minority interests ndash 1 (2)
Weighted average number of shares
outstandingmdashbasic net of treasury stock 261188858 266539917 273646869
Earnings per share from continuing operations
Basic(2) 067 074 118
Diluted 063 042 111
Earnings per share from discontinued operations
Basic (053) (289) (323)
Diluted (048) (262) (296)Total earnings per share
Basic(2) 014 (215) (205)
Diluted 015 (220) (185)
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 6466
62 Thomson Panorama 2006
CONSOLIDATED BALANCE SHEETS
In 991404 millions December 31 December 31 January 1 December 31 2006 2005 2005(1) 2004
ASSETS
Non-current assets
Property plant and equipment 813 886 1051 1051
Goodwill 1714 1756 1186 1178
Other intangible assets 1071 1150 924 924
Investments in associates 12 204 260 260
Investments and financial assets available-for-sale 266 341 139 113
Derivative financial instruments 7 1 11 ndash
Contract advances 129 173 179 179
Deferred tax assets 397 379 307 301
Other non-current assets 110 182 133 136
Total non-current assets 4519 5072 4190 4142
Current assets
Inventories 366 333 503 568
Trade accounts and notes receivable 1018 1315 1232 1180
Current accounts with associates and joint ventures 97 115 143 143
Derivative financial instruments 8 9 115 ndash
Other current assets 535 644 483 616
Marketable securities ndash 7 58 58
Cash and cash equivalents 1311 996 1845 1848
Assets classified as held for sale 264 369 80 ndash
Total current assets 3599 3788 4459 4413
Total assets 8118 8860 8649 8555
(1) Including the impacts of the first-time application related to IAS 32 and 39 on financial instruments and IFRS 5 on non-current assets held for sale and
discontinued operations
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 6566
63 Thomson Panorama 2006
In 991404 millions December 31 December 31 January 1 December 31 2006 2005 2005(1) 2004
SHAREHOLDERSrsquo EQUITY AND LIABILITIES
Shareholdersrsquo equity
Common stock (273871296 shares at
December 31 2006
with nominal value of euro 375 per share) 1027 1025 1025 1025
Trade accounts and notes payable 1032 1164 1199 1226
Accrued employee expenses 165 166 158 163
Income tax payable 57 47 60 60
Other current liabilities 671 750 746 800
Payables on acquisition of companies 13 138 84 84
Liabilities directly associated with
assets classified as held for sale 232 470 88 ndash
Total current liabilities 3681 4393 3602 3459
Total liabilities 5999 6644 6251 6062
Total shareholderrsquos equity and liabilities 8118 8860 8649 8555
(1) Including the impacts of the first-time application related to IAS 32 and 39 on financial instruments and IFRS 5 on non-current assets held for sale and
discontinued operations
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 6666
Creation and lay-out
Photo credits Nathalie BerhingGAMMA ndash Steacutephane de Bourgies ndash Jean-Franccedilois DeroubaixGAMMA ndash Christine Donnier- ValentinGAMMA ndash Cars copy 2006 Disney Enterprises IncPixar All Rights Reserved ndash Dreamgirls copy 2006 DREAMWORKS
LLC and PARAMOUNT PICTURES All Rights Reserved ndash Poseidon copy 2006 Warner Bros Pictures ndash Sony Bravia Paint
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 866
Under the leadership of Frank E Dange-
ard the Executive Committee currently
comprises 11 membersmdasheight of whom
are French two American and one Brit-
ish These executive managers respon-
sible for the operating divisions as well as
managers in charge of key functions meet
three times a month to review the financial
performance of the divisions in relation tothe budget and strategic developments
Once a month time is also set aside to
review the Grouprsquos key programs clients
software product introduction operations
transformation and talent management
The work of the Executive Committee is
carried out through three operating com-
mittees which contribute to an efficient
decision-making process
bull The Investment Committee chaired by
Senior Executive Vice President and Chief
Financial Officer Julian Waldron is respon-sible for studying and approving invest-
ments and financial commitments by the
different divisions It meets on an ad hoc
basis several times a month
bull The Risk Committee chaired by Senior
Executive Vice President and Chief Operat-
ing Officer Didier Trutt generally meets every
six weeks to assist the Executive Commit-
tee in identifying anticipating preventingand mitigating financial operational and
strategic risk to the business It also serves
as the forum through which the results and
findings of the internal audit team are com-
municated to senior management
bull The Corporate Social Responsibility
(CSR) Committee to be set up in 2007
Chaired by Marie-Ange Debon Execu-
tive Vice President General Secretary
Legal Real Estate amp External Com-
munications the CSR Committee will
oversee all matters related to corpo-
rate social responsibility complianceand ethics
Weekly meetings of Thomsonrsquos
Executive Committee
ensure an efficient
global decision-making process
EXECUTIVE COMMITTEE
06 Thomson Panorama 2006
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 966
1 Frank E DANGEARDChairman amp Chief Executive Officer (Paris New YorkPrinceton andLos Angeles)
2 Jacques DUNOGUEacuteSenior Executive Vice PresidentSystems(Paris and New YorkPrinceton)
of the Grouprsquos divisions and profit centersIn the context of the budgetary procedure
performance measurement indicators are
calculated by the divisions analyzed and
reviewed monthly to serve as a reference
for the Grouprsquos monthly reporting
Management reporting and
closing period work
Th om so n uses a co mmon char t of
accounts which is regularly updated The
principal accounting and financial figures
of the operational and functional depart-
ments consolidated at Group level are
analyzed by the Grouprsquos management
control team and reviewed by the Grouprsquos
Executive Committee
The closing process for the half-year and
annual consolidated financial statementsoccurs in two steps The first step con-
sists of a ldquohard closerdquo completed in May
and September leading to a first review by
the statutory auditors The second step
occurs in July and in JanuaryFebruary and
involves the finalization of half-year and
annual consolidated financial statements
under IFRS The Group then proceeds
once a year with a reconciliation of these
results in accordance with US GAAP
Preparation of financial statements
The financial statements are prepared jointly by the finance department and the
General Secretary They are based on
information reported through the annual
reporting and accounting consolidation
processes and on operational and mar-
ket information which is specifically cen-
tralized for the preparation of Thomsonrsquos
Document de Reacutefeacuterence in France and
the submission of Form 20-F in the United
States Half-year and annual financial infor-
mation is reviewed by the Grouprsquos Audit
Committee
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 6066
58 Thomson Panorama 2006
(1) Source PriceWaterhouseCoopers ndash
ldquoGlobal Entertainment and Media Outlook 2006-10rdquo
Revenue growth
Thomson achieved consolidated 2006
net revenues of 9914045854 million up from
9914045591 million in 2005 Revenues for
the Core Business reached 9914045747 mil-
lion (9914045776 million at constant currency)
representing 83 growth over 2005 at
constant currency
Overall the Grouprsquos key growth busi-
nessesmdashContent Services Network
Services Access Products for telecom
operators and our Broadcast amp Networks
businesses (Grass Valley and Network
Software)mdashincreased strongly year-on-
year and accounted for over a third of
Group revenues against less than a quar-
ter in 2005
Thomsonrsquos Core Business EBIT for 2006
was euro504 million representing a Core
Business EBIT margin of 88 Thisreflected growth in some key businesses
and cost actions across the Group off-
setting a significant investment in research
and development and some increase in
restructuring expenses
Increased spend on RampD
Research and development expenditure
charged in the Core Business (net of
external funding) rose from 991404221 million in
2005 to 991404279 million in 2006 an increase
of 26 principally in the Systems divi-
sion The Group expanded the number ofproducts and services in the development
phase across its businesses
Return to profit
Losses in Non-Core Continuing and Dis-
continued operations were substantially
lower year-on-year reflecting principally
the exit from heavily loss-making Displays
activities in 2005 and intensified cost-sav-
ing programs in 2006 A major revision
and harmonization of the Grouprsquos North
American healthcare obligations gave rise
to substantial one-time gains and Thom-
son also initiated significant restructuring
of its French Non-Core operations
The good performance of the Core Busi-
ness lower Non-Core and Discontinued
losses and a low reported tax chargeenabled the Group to return a net profit of
99140455 million in 2006 compared to a loss of
991404573 million in the previous year
Good cash flow
strengthened balance sheet
Thomson generated good free cash flow
and strengthened its balance sheet in
2006 Total net financial liabilities on the
balance sheet fell by 991404460 million reflect-
ing a 99140493 million fall in financial and acqui-
sition-related debts and a 991404367 million
reduction in retirement benefit obligations(including healthcare)
Increase in Net Dividend
The Board of Directors proposed a dis-
tribution to shareholders of 991404033 per
share (2005 dividend 991404030) reflecting
confidence in the prospects of the Group
going forward
Outlook 2007-2009
growth in revenues and net income
With the Grouprsquos transformation complete Thomsonrsquos financial focus over the 2007-
2009 period will be to grow revenues and
net income
Thomson serves growing Media Enter-
tainment amp Communications marketsmdashfor
which external estimates(1) indicate com-
pound growth of around 6 over the last
FINANCIAL AND
OPERATIONAL PERFORMANCE
Full year 2006 results
saw a return to profitability
and leave Thomson
well positioned at
the heart of convergence
and digital video
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 6166
59 Thomson Panorama 2006
five years Our digital and electronic busi-
nesses now represent two-thirds of rev-
enues and we believe they are growing
faster than the overall market offsetting
the maturing physical media businesses
Given this profile the Group expects its
revenue growth to be more modest in
2007 but to gather pace over the period
and our overall objective is to show com-pound growth over 2007-2009 in line with
or faster than the overall market
The 2007-2009 period is also expected
to see a sharply reduced impact from
residual Non-Core activities with an end
to losses from the Discontinued Activities
perimeter after 2007 Accordingly Thom-
sonrsquos ambition is to turn its Core Business
growth and profitability and lower impact
from Non-Core into strong growth in net
income over the period 2007-2009
Business operations
Continuous performance improvement is
fundamental to Thomsonrsquos commitment to
create sustainable business models and
long-term value for all stakeholders The
ambitious Group-wide programs launched
in 2004 to improve productivity and
enhance overall performance producedsubstantial results in 2006 and led to new
and strong initiatives for long-term growth
As of the second half of 2006 six ldquoKey
Programsrdquo are monitored at Group level
Clients Software Product Introduction
Operations Transformation and Talent
Management
KEY PROGRAMS IN PLACE
Program Focus
Clients Thomsonrsquos clientregional diversification and
growth of the existing business
through improved Sales amp Marketing
Software Development of integrated software platforms
in all markets (post-production distribution
delivery) and for all types of customer
(professional prosumerhellip)
Product Introduction Ensuring new product roadmaps are in line
with strategy and resource needs have been
identifiedOperations Improving the Grouprsquos cost base cash
generation and working capital
Transformation Multiple programs including initiatives to
improving customer relationship management
worldwide supply chain management
IT transformation as well as Thomsonrsquos RampD
footprint
Talent Management Leveraging human assets with a focus on
talent retention and acquisition
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 6266
60 Thomson Panorama 2006
SUMMARY RESULTS FULL YEAR 2006
In 991404 millions unless otherwise stated 2006(1) 2005(1)
Net revenues 5854 5591(1)
Core Business net revenues 5747 5335
Services 2489 2487
Systems 2684 2262
Technology 547 546
Corporate 27 40
Non-Core continuing operations net revenues 107 256
Core Business EBIT(2) 504 512
Services 160 205
Systems 132 109
Technology 289 277Corporate (77) (79)
EBIT from Non-Core continuing operations (25) (122)
(1) Restated with 2006 discontinued activities according to IFRS 5
8122019 Panorama 2006
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61 Thomson Panorama 2006
Year ended December 31in 991404 except number of shares 2006 2005 2004
Year ended December 31in 991404 millions 2006 2005(1) 2004(1)
CONSOLIDATED STATEMENTS OF OPERATIONS
(1) Restated with 2006 discontinued activities according to IFRS 5
(2) After deduction of the interests net of tax paid on the subordinated perpetual notes during the period
Continuing operations
Revenues 5854 5591 5980
Cost of sales (4474) (4240) (4594)
Gross margin 1380 1351 1386
Selling marketing general and administrative expenses (674) (638) (653)
Other income (expense) 52 (96) (69)
Research and development expenses (279) (227) (201)
Profit from continuing operations before tax and net finance costs 479 390 463
Interest income 19 30 52
Interest expense (108) (108) (54)
Other financial income (expense) (111) 36 (26)
Finance costs ndash net (200) (42) (28)
Share of profit (loss) from associates (86) (82) (20)
Income tax ndash (68) (93)
Profit from continuing operations 193 198 322
Discontinued operations
Profit (loss) from discontinued operations (138) (771) (883)
Net income (loss) 55 (573) (561)
Attributable to
Equity Holders 55 (574) (559)
Minority interests ndash 1 (2)
Weighted average number of shares
outstandingmdashbasic net of treasury stock 261188858 266539917 273646869
Earnings per share from continuing operations
Basic(2) 067 074 118
Diluted 063 042 111
Earnings per share from discontinued operations
Basic (053) (289) (323)
Diluted (048) (262) (296)Total earnings per share
Basic(2) 014 (215) (205)
Diluted 015 (220) (185)
8122019 Panorama 2006
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62 Thomson Panorama 2006
CONSOLIDATED BALANCE SHEETS
In 991404 millions December 31 December 31 January 1 December 31 2006 2005 2005(1) 2004
ASSETS
Non-current assets
Property plant and equipment 813 886 1051 1051
Goodwill 1714 1756 1186 1178
Other intangible assets 1071 1150 924 924
Investments in associates 12 204 260 260
Investments and financial assets available-for-sale 266 341 139 113
Derivative financial instruments 7 1 11 ndash
Contract advances 129 173 179 179
Deferred tax assets 397 379 307 301
Other non-current assets 110 182 133 136
Total non-current assets 4519 5072 4190 4142
Current assets
Inventories 366 333 503 568
Trade accounts and notes receivable 1018 1315 1232 1180
Current accounts with associates and joint ventures 97 115 143 143
Derivative financial instruments 8 9 115 ndash
Other current assets 535 644 483 616
Marketable securities ndash 7 58 58
Cash and cash equivalents 1311 996 1845 1848
Assets classified as held for sale 264 369 80 ndash
Total current assets 3599 3788 4459 4413
Total assets 8118 8860 8649 8555
(1) Including the impacts of the first-time application related to IAS 32 and 39 on financial instruments and IFRS 5 on non-current assets held for sale and
discontinued operations
8122019 Panorama 2006
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63 Thomson Panorama 2006
In 991404 millions December 31 December 31 January 1 December 31 2006 2005 2005(1) 2004
SHAREHOLDERSrsquo EQUITY AND LIABILITIES
Shareholdersrsquo equity
Common stock (273871296 shares at
December 31 2006
with nominal value of euro 375 per share) 1027 1025 1025 1025
Trade accounts and notes payable 1032 1164 1199 1226
Accrued employee expenses 165 166 158 163
Income tax payable 57 47 60 60
Other current liabilities 671 750 746 800
Payables on acquisition of companies 13 138 84 84
Liabilities directly associated with
assets classified as held for sale 232 470 88 ndash
Total current liabilities 3681 4393 3602 3459
Total liabilities 5999 6644 6251 6062
Total shareholderrsquos equity and liabilities 8118 8860 8649 8555
(1) Including the impacts of the first-time application related to IAS 32 and 39 on financial instruments and IFRS 5 on non-current assets held for sale and
discontinued operations
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 6666
Creation and lay-out
Photo credits Nathalie BerhingGAMMA ndash Steacutephane de Bourgies ndash Jean-Franccedilois DeroubaixGAMMA ndash Christine Donnier- ValentinGAMMA ndash Cars copy 2006 Disney Enterprises IncPixar All Rights Reserved ndash Dreamgirls copy 2006 DREAMWORKS
LLC and PARAMOUNT PICTURES All Rights Reserved ndash Poseidon copy 2006 Warner Bros Pictures ndash Sony Bravia Paint
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 966
1 Frank E DANGEARDChairman amp Chief Executive Officer (Paris New YorkPrinceton andLos Angeles)
2 Jacques DUNOGUEacuteSenior Executive Vice PresidentSystems(Paris and New YorkPrinceton)
of the Grouprsquos divisions and profit centersIn the context of the budgetary procedure
performance measurement indicators are
calculated by the divisions analyzed and
reviewed monthly to serve as a reference
for the Grouprsquos monthly reporting
Management reporting and
closing period work
Th om so n uses a co mmon char t of
accounts which is regularly updated The
principal accounting and financial figures
of the operational and functional depart-
ments consolidated at Group level are
analyzed by the Grouprsquos management
control team and reviewed by the Grouprsquos
Executive Committee
The closing process for the half-year and
annual consolidated financial statementsoccurs in two steps The first step con-
sists of a ldquohard closerdquo completed in May
and September leading to a first review by
the statutory auditors The second step
occurs in July and in JanuaryFebruary and
involves the finalization of half-year and
annual consolidated financial statements
under IFRS The Group then proceeds
once a year with a reconciliation of these
results in accordance with US GAAP
Preparation of financial statements
The financial statements are prepared jointly by the finance department and the
General Secretary They are based on
information reported through the annual
reporting and accounting consolidation
processes and on operational and mar-
ket information which is specifically cen-
tralized for the preparation of Thomsonrsquos
Document de Reacutefeacuterence in France and
the submission of Form 20-F in the United
States Half-year and annual financial infor-
mation is reviewed by the Grouprsquos Audit
Committee
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 6066
58 Thomson Panorama 2006
(1) Source PriceWaterhouseCoopers ndash
ldquoGlobal Entertainment and Media Outlook 2006-10rdquo
Revenue growth
Thomson achieved consolidated 2006
net revenues of 9914045854 million up from
9914045591 million in 2005 Revenues for
the Core Business reached 9914045747 mil-
lion (9914045776 million at constant currency)
representing 83 growth over 2005 at
constant currency
Overall the Grouprsquos key growth busi-
nessesmdashContent Services Network
Services Access Products for telecom
operators and our Broadcast amp Networks
businesses (Grass Valley and Network
Software)mdashincreased strongly year-on-
year and accounted for over a third of
Group revenues against less than a quar-
ter in 2005
Thomsonrsquos Core Business EBIT for 2006
was euro504 million representing a Core
Business EBIT margin of 88 Thisreflected growth in some key businesses
and cost actions across the Group off-
setting a significant investment in research
and development and some increase in
restructuring expenses
Increased spend on RampD
Research and development expenditure
charged in the Core Business (net of
external funding) rose from 991404221 million in
2005 to 991404279 million in 2006 an increase
of 26 principally in the Systems divi-
sion The Group expanded the number ofproducts and services in the development
phase across its businesses
Return to profit
Losses in Non-Core Continuing and Dis-
continued operations were substantially
lower year-on-year reflecting principally
the exit from heavily loss-making Displays
activities in 2005 and intensified cost-sav-
ing programs in 2006 A major revision
and harmonization of the Grouprsquos North
American healthcare obligations gave rise
to substantial one-time gains and Thom-
son also initiated significant restructuring
of its French Non-Core operations
The good performance of the Core Busi-
ness lower Non-Core and Discontinued
losses and a low reported tax chargeenabled the Group to return a net profit of
99140455 million in 2006 compared to a loss of
991404573 million in the previous year
Good cash flow
strengthened balance sheet
Thomson generated good free cash flow
and strengthened its balance sheet in
2006 Total net financial liabilities on the
balance sheet fell by 991404460 million reflect-
ing a 99140493 million fall in financial and acqui-
sition-related debts and a 991404367 million
reduction in retirement benefit obligations(including healthcare)
Increase in Net Dividend
The Board of Directors proposed a dis-
tribution to shareholders of 991404033 per
share (2005 dividend 991404030) reflecting
confidence in the prospects of the Group
going forward
Outlook 2007-2009
growth in revenues and net income
With the Grouprsquos transformation complete Thomsonrsquos financial focus over the 2007-
2009 period will be to grow revenues and
net income
Thomson serves growing Media Enter-
tainment amp Communications marketsmdashfor
which external estimates(1) indicate com-
pound growth of around 6 over the last
FINANCIAL AND
OPERATIONAL PERFORMANCE
Full year 2006 results
saw a return to profitability
and leave Thomson
well positioned at
the heart of convergence
and digital video
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 6166
59 Thomson Panorama 2006
five years Our digital and electronic busi-
nesses now represent two-thirds of rev-
enues and we believe they are growing
faster than the overall market offsetting
the maturing physical media businesses
Given this profile the Group expects its
revenue growth to be more modest in
2007 but to gather pace over the period
and our overall objective is to show com-pound growth over 2007-2009 in line with
or faster than the overall market
The 2007-2009 period is also expected
to see a sharply reduced impact from
residual Non-Core activities with an end
to losses from the Discontinued Activities
perimeter after 2007 Accordingly Thom-
sonrsquos ambition is to turn its Core Business
growth and profitability and lower impact
from Non-Core into strong growth in net
income over the period 2007-2009
Business operations
Continuous performance improvement is
fundamental to Thomsonrsquos commitment to
create sustainable business models and
long-term value for all stakeholders The
ambitious Group-wide programs launched
in 2004 to improve productivity and
enhance overall performance producedsubstantial results in 2006 and led to new
and strong initiatives for long-term growth
As of the second half of 2006 six ldquoKey
Programsrdquo are monitored at Group level
Clients Software Product Introduction
Operations Transformation and Talent
Management
KEY PROGRAMS IN PLACE
Program Focus
Clients Thomsonrsquos clientregional diversification and
growth of the existing business
through improved Sales amp Marketing
Software Development of integrated software platforms
in all markets (post-production distribution
delivery) and for all types of customer
(professional prosumerhellip)
Product Introduction Ensuring new product roadmaps are in line
with strategy and resource needs have been
identifiedOperations Improving the Grouprsquos cost base cash
generation and working capital
Transformation Multiple programs including initiatives to
improving customer relationship management
worldwide supply chain management
IT transformation as well as Thomsonrsquos RampD
footprint
Talent Management Leveraging human assets with a focus on
talent retention and acquisition
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 6266
60 Thomson Panorama 2006
SUMMARY RESULTS FULL YEAR 2006
In 991404 millions unless otherwise stated 2006(1) 2005(1)
Net revenues 5854 5591(1)
Core Business net revenues 5747 5335
Services 2489 2487
Systems 2684 2262
Technology 547 546
Corporate 27 40
Non-Core continuing operations net revenues 107 256
Core Business EBIT(2) 504 512
Services 160 205
Systems 132 109
Technology 289 277Corporate (77) (79)
EBIT from Non-Core continuing operations (25) (122)
(1) Restated with 2006 discontinued activities according to IFRS 5
8122019 Panorama 2006
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61 Thomson Panorama 2006
Year ended December 31in 991404 except number of shares 2006 2005 2004
Year ended December 31in 991404 millions 2006 2005(1) 2004(1)
CONSOLIDATED STATEMENTS OF OPERATIONS
(1) Restated with 2006 discontinued activities according to IFRS 5
(2) After deduction of the interests net of tax paid on the subordinated perpetual notes during the period
Continuing operations
Revenues 5854 5591 5980
Cost of sales (4474) (4240) (4594)
Gross margin 1380 1351 1386
Selling marketing general and administrative expenses (674) (638) (653)
Other income (expense) 52 (96) (69)
Research and development expenses (279) (227) (201)
Profit from continuing operations before tax and net finance costs 479 390 463
Interest income 19 30 52
Interest expense (108) (108) (54)
Other financial income (expense) (111) 36 (26)
Finance costs ndash net (200) (42) (28)
Share of profit (loss) from associates (86) (82) (20)
Income tax ndash (68) (93)
Profit from continuing operations 193 198 322
Discontinued operations
Profit (loss) from discontinued operations (138) (771) (883)
Net income (loss) 55 (573) (561)
Attributable to
Equity Holders 55 (574) (559)
Minority interests ndash 1 (2)
Weighted average number of shares
outstandingmdashbasic net of treasury stock 261188858 266539917 273646869
Earnings per share from continuing operations
Basic(2) 067 074 118
Diluted 063 042 111
Earnings per share from discontinued operations
Basic (053) (289) (323)
Diluted (048) (262) (296)Total earnings per share
Basic(2) 014 (215) (205)
Diluted 015 (220) (185)
8122019 Panorama 2006
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62 Thomson Panorama 2006
CONSOLIDATED BALANCE SHEETS
In 991404 millions December 31 December 31 January 1 December 31 2006 2005 2005(1) 2004
ASSETS
Non-current assets
Property plant and equipment 813 886 1051 1051
Goodwill 1714 1756 1186 1178
Other intangible assets 1071 1150 924 924
Investments in associates 12 204 260 260
Investments and financial assets available-for-sale 266 341 139 113
Derivative financial instruments 7 1 11 ndash
Contract advances 129 173 179 179
Deferred tax assets 397 379 307 301
Other non-current assets 110 182 133 136
Total non-current assets 4519 5072 4190 4142
Current assets
Inventories 366 333 503 568
Trade accounts and notes receivable 1018 1315 1232 1180
Current accounts with associates and joint ventures 97 115 143 143
Derivative financial instruments 8 9 115 ndash
Other current assets 535 644 483 616
Marketable securities ndash 7 58 58
Cash and cash equivalents 1311 996 1845 1848
Assets classified as held for sale 264 369 80 ndash
Total current assets 3599 3788 4459 4413
Total assets 8118 8860 8649 8555
(1) Including the impacts of the first-time application related to IAS 32 and 39 on financial instruments and IFRS 5 on non-current assets held for sale and
discontinued operations
8122019 Panorama 2006
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63 Thomson Panorama 2006
In 991404 millions December 31 December 31 January 1 December 31 2006 2005 2005(1) 2004
SHAREHOLDERSrsquo EQUITY AND LIABILITIES
Shareholdersrsquo equity
Common stock (273871296 shares at
December 31 2006
with nominal value of euro 375 per share) 1027 1025 1025 1025
Trade accounts and notes payable 1032 1164 1199 1226
Accrued employee expenses 165 166 158 163
Income tax payable 57 47 60 60
Other current liabilities 671 750 746 800
Payables on acquisition of companies 13 138 84 84
Liabilities directly associated with
assets classified as held for sale 232 470 88 ndash
Total current liabilities 3681 4393 3602 3459
Total liabilities 5999 6644 6251 6062
Total shareholderrsquos equity and liabilities 8118 8860 8649 8555
(1) Including the impacts of the first-time application related to IAS 32 and 39 on financial instruments and IFRS 5 on non-current assets held for sale and
discontinued operations
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 6666
Creation and lay-out
Photo credits Nathalie BerhingGAMMA ndash Steacutephane de Bourgies ndash Jean-Franccedilois DeroubaixGAMMA ndash Christine Donnier- ValentinGAMMA ndash Cars copy 2006 Disney Enterprises IncPixar All Rights Reserved ndash Dreamgirls copy 2006 DREAMWORKS
LLC and PARAMOUNT PICTURES All Rights Reserved ndash Poseidon copy 2006 Warner Bros Pictures ndash Sony Bravia Paint
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 1066
10
3
13
11
12
14
9
1
The Board of Directors(1) comprises nine
independent directors and five non-inde-
pendent directors(2) including the Chair-
man amp CEO all of whom have consider-
able knowledge of Thomsonrsquos businesses
and markets Four directors are Thomson
employees two were elected to repre-
sent employees and two to represent
employee shareholders
Internal Board regulations detail the organi-
zation of the Board of Directorsrsquo work and
were updated in 2005 and 2007 to take
into account legislative changes These
describe in particular the conditions by
which the Board defines the Grouprsquos stra-
tegic objectives and its powers of over-
sight and verification
During 2006 the Board met thirteen times
to review financial and strategic issues
The Board is regular ly updated on the
general status of Thomsonrsquos business and
shareholding structure
BOARD OF DIRECTORS
The Board of Directors
which defines Thomsonrsquos
strategic objectives and
reviews the execution of
the strategy is composed
of individuals with
extensive knowledge of
the Grouprsquos markets
(1) More detailed information is available on the Board of
Directors in the relevant section of Thomsonrsquos 20-F
(2) The Board of Directors will comprise 3 non-indepen-
dent directors as of June 2007 when the mandate
of employee representatives expires
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 1166
7
5
6
2
8
4
Three Board Committees
The Board of Directors is supported by
three committees the Audit Committee
the Strategy Committee and the Nomi-
nation Remuneration and Governance
Committee
The Audit Committee assists the Boardof Directors in fulfilling its oversight respon-
sibilities with regards to the financial report-
ing process the internal control and audit
processes and monitors compliance with
laws and regulations The Committee is
chaired by Eric Bourdais de Charbonniegravere
and its other members are Paul Murray
and Marcel Roulet
The Strategy Committee reviews projects
such as major investments competitive
moves and strategic alliances or acquisi-
tions and also assesses progress in meet-
ing Thomsonrsquos strategic objectives Frank
E Dangeard chairs the Committee which
also comprises Eddy Hartenstein Pierre
Lescure Didier Lombard David Roux
Reacutemy Sautter and Henry P Vigil
The Nomination Remuneration and Gov-
ernance Committee reviews the function-ing of the Board of Directors corporate
governance and remuneration of senior
management including the Chairman amp
CEO as well as employee profit-sharing
The Committee is chaired by Marcel Roulet
and its other member is Eddy Hartenstein
All the members of the Board Commit-
tees are independent directors except for
Chairman amp CEO Frank E Dangeard who
chairs the Strategy Committee
1 Frank E DANGEARDChairman amp CEO of Thomson
2 Eric BOURDAIS
DE CHARBONNIEgraveREChairman of the Supervisory Boardof Michelin
3 Catherine CAVALLARIControlling Technology OperationsRepresentative of Thomson employees
4 Loiumlc DESMOUCEAUX Vice President Market Business IntelligenceRepresentative of Thomsonemployee shareholders
5 Eddy W HARTENSTEINChairman amp CEOHD Partners Acquisition Corporation
6 Pierre LESCUREProducer former Chairman amp CEO of Canal Plus
7 Didier LOMBARDChairman amp CEO of France Telecom
8 Geacuterard MEYMARIAN Vice PresidentBusiness OperationsPTI Sales Process
Asia - Strategic ProjectsRepresentative of Thomsonemployee shareholders
9 Paul MURRAY Director of Tangent Communications plc
10 Jean de ROTALIERHead of Connectique EuropeRepresentative of Thomson employees
11 Marcel ROULETFormer Chairman amp CEO TSAFrance Telecom and Thales
12 David ROUX Managing DirectorSilver Lake Partners
13 Reacutemy SAUTTERChairman of the Supervisory Board
EdiradioRTL
14 Henry P VIGILSenior Vice PresidentStrategy amp PartnershipsMicrosoft Corporation
Independent directors
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 1266
STRATEGY amp
MARKET PERSPECTIVES
Recent market developments
validate Thomsonrsquos
strategic focus on
digital video and open up
large opportunities
2004-2006 Plan
implemented with success
The strategic direction taken in 2004 to
accelerate Thomsonrsquos transformation into
a Group focused entirely on serving the
Media Entertainment amp Communications
industries was based on expectations
of how its core markets would evolvethrough to 2010 and beyond Thomsonrsquos
key assumption is that there will be signifi-
cant growth opportunities as content digi-
tization the trend towards high-definition
and next generation networks continue to
impact the video industry
Market developments of the last two years
validate the direction taken by the Group
particularly the decision to exit legacy
consumer electronics activities The 2004-
2006 Plan leaves Thomson well positioned
at the heart of convergence now emerg-
ing around digital video The Plan soughtto broaden Thomsonrsquos offering to Media
Entertainment amp Communications custom-
ers to strengthen its focus on media tech-
nologies by re-aligning Research amp Devel-
opment (RampD) with long-term strategy to
seize growth opportunities in electronic
content and to consolidate the Grouprsquos
position as a world leader in IP devices
and solutions for video content
The decision to focus on four key growth
businessesmdashContent Services Network
Services Broadcast amp Networks and
Access Productsmdashhas been vindicated
by market developments Strong positions
in each of these areas were built quickly
in part through acquisition and have pro-
vided Thomson with robust growth drivers
during the Plan period Over the last twoyears Thomson grew and diversified its
customer base more than doubling the
number of customers with whom it gen-
erates over 99140420 million in revenues for
example The Grouprsquos offering of technolo-
gies systems and services also expanded
substantially notably in growing digital
video and new media markets
Looking ahead 2007-2009
Over the next three years Thomson aims
to expand further its leadership positions
in digital video technologies systems andservices with an emphasis on integrated
offerings and software to its Media Enter-
tainment amp Communications customers
Investments will continue in the key growth
businesses electronic media activities
within Content Services and Network
Services Broadcast amp Networks and
IP-based Access Products New media
2004-2006 Plan objectives achieved
bull Enlarged client offering and successful implementation of new growing activities
bull Significant increase in RampD spend
bull Digital media related revenues representing 23 of core revenues
bull Leadership position in IP devices with enlarged telecom client base
bull Exit from Displays TV and other non-core businesses
10 Thomson Panorama 2006
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 1366
businesses for content makers or content
distributors should also open up opportu-
nities for additional growth
Investment in RampD will continue to be strong
as technologymdashfrom media asset manage-
ment to content securitymdashbecomes increas-
ingly business-critical in the digital environ-
ment This should enable Thomson to takeadvantage of the main growth drivers of the
digital video industriesmdashthe accelerating
adoption of high-definition mobile content
on-demand content consumer-generated
content fixed-mobile convergence triple-
play devices connected home networking
and internet-based and advertising-based
content delivery
Dynamic markets
open up large opportunities
Until recently creation and distribution of
content were largely conceived as linearprocesses starting with image capture
and continuing through delivery of con-
tent to some kind of consumer screen or
device Today many of these processes
happen simultaneously The one-way flow
of contentmdashfrom creator to distributor to
consumermdashis being replaced by a multi-
directional model in which almost anyone
can create process and distribute media
Right Thomson broadcast management
center London To focus on their core
business broadcasters are increasingly
turning to outside experts such as Thomson
for video network management services
THOMSONrsquoS VISION OF ITS
BUSINESS ENVIRONMENT IN 2010
Market consolidation and rise of Asia
bull Consolidation of Media Entertainment amp
Communications in Europe emergence of media
groups and markets in Asia
bull China and India will have become mainstream markets
bull Customers will have outsourced many of their activities
High-definition mobility security
bull The transition to high-definition will be complete
bull Mobile video will be pervasive
bull Intellectual property will remain a key differentiator and
significant source of revenues
bull Security technologies and services to combat piracy
will have been implemented
bull China and India will have become technology
standards-setters
Digital distribution at home in theater
bull Electronic delivery of content into the home will have
emerged Consumers will continue to buy physical
media (eg DVDs) at retail stores but will also be
purchasingrenting electronic content directly from home
bull Digital delivery of movies to cinema theaters will have
developed in addition to film print
Networks
bull Network operators will have largely switched to
IP technologies
bull All networks will have triple-play offerings
bull ldquoConnected productsrdquo will be ubiquitous inside and
outside the home
bull Home networking will be a reality
11 Thomson Panorama 2006
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 1466
While digitization makes this transformation
possible it is the application of internet tech-
nologies that sets the contours of change
Today internet access is part of basic infra-structure like roads or electricity
Video has become so pervasive that the
era of a data-centric Internet seems to
belong to the past The notion that hun-
dreds of millions of individual users could
be creating and sharing video online
through interactive community websites
was unthinkable only a few years ago
Rather than supplant traditional services
the youth-driven explosion of internet
video has contributed to a multiplica-
tion of the ways video content is viewedand delivered Today consumers want to
select from numerous audio and video
access possibilitiesmdashfrom TV and com-
puter screens to cell phones mp3 players
and game consoles
Numerous new business models are being
conceived and tested as the Media Enter-
tainment amp Communications industries
adapt to this shifting environment
bull High-definition becoming mainstream
Already widely adopted for sports TV
movies and news programming high-definition (HD) broadcasting is expected to
become virtually universal in the US within
the next 2-3 years HD programming has
also begun to emerge in Canada France
the UK and elsewhere in Europe with
MPEG-4 advanced compression techno-
logy as a key enabler for roll-out
There are broad consequences of the
move to high-definition for the entire con-
tent creation and distribution ldquochainrdquo for
example all of the equipment involvedfrom cameras which capture images to
the edge-of-network devices which deliver
them needs the processing and storage
capacity required for high-definition video
The entire broadcast chain will benefit from
this positive momentum Overall the global
broadcast media technology industry is
expected to register compound annual
growth of 12 till 2010 (Source Screen
Digest for the International Association of
Broadcasting Manufacturers)
bull Mobile TV ramps up
As they develop new formats and plat-forms for their offerings broadcasters are
building partnerships with mobile phone
operators delivering TV and video-on-
demand programming to cell phones and
other handheld devices Numerous com-
mercial trials and initial commercial services
were launched in 2006 mainly in Europe
and Asia with large-scale deployments
planned for 2007 and 2008 Market ana-
lysts project more than 100 million mobile
TV subscribers worldwide by 2010
bull Ubiquitous IP amp ldquomultiple playrdquo
In order to differentiate their offeringsnetwork operators are offering a con-
stantly expanding range of innovative
value-added telephone video and inter-
net services (ldquotriple-playrdquo) Driven mainly
by cable operators in North America and
telecom operators in Europe these ser-
vices increasingly include mobile and wire-
Video has become pervasive
and the ways content is viewed and
delivered are multiplying
12 Thomson Panorama 2006
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 1566
less options (ldquoquadruple-playrdquo) enabling
subscribers to benefit from integrated
fixed line and cellular phone services and
household-wide wireless connectivity Advanced access products in subscrib-
of the Grouprsquos divisions and profit centersIn the context of the budgetary procedure
performance measurement indicators are
calculated by the divisions analyzed and
reviewed monthly to serve as a reference
for the Grouprsquos monthly reporting
Management reporting and
closing period work
Th om so n uses a co mmon char t of
accounts which is regularly updated The
principal accounting and financial figures
of the operational and functional depart-
ments consolidated at Group level are
analyzed by the Grouprsquos management
control team and reviewed by the Grouprsquos
Executive Committee
The closing process for the half-year and
annual consolidated financial statementsoccurs in two steps The first step con-
sists of a ldquohard closerdquo completed in May
and September leading to a first review by
the statutory auditors The second step
occurs in July and in JanuaryFebruary and
involves the finalization of half-year and
annual consolidated financial statements
under IFRS The Group then proceeds
once a year with a reconciliation of these
results in accordance with US GAAP
Preparation of financial statements
The financial statements are prepared jointly by the finance department and the
General Secretary They are based on
information reported through the annual
reporting and accounting consolidation
processes and on operational and mar-
ket information which is specifically cen-
tralized for the preparation of Thomsonrsquos
Document de Reacutefeacuterence in France and
the submission of Form 20-F in the United
States Half-year and annual financial infor-
mation is reviewed by the Grouprsquos Audit
Committee
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 6066
58 Thomson Panorama 2006
(1) Source PriceWaterhouseCoopers ndash
ldquoGlobal Entertainment and Media Outlook 2006-10rdquo
Revenue growth
Thomson achieved consolidated 2006
net revenues of 9914045854 million up from
9914045591 million in 2005 Revenues for
the Core Business reached 9914045747 mil-
lion (9914045776 million at constant currency)
representing 83 growth over 2005 at
constant currency
Overall the Grouprsquos key growth busi-
nessesmdashContent Services Network
Services Access Products for telecom
operators and our Broadcast amp Networks
businesses (Grass Valley and Network
Software)mdashincreased strongly year-on-
year and accounted for over a third of
Group revenues against less than a quar-
ter in 2005
Thomsonrsquos Core Business EBIT for 2006
was euro504 million representing a Core
Business EBIT margin of 88 Thisreflected growth in some key businesses
and cost actions across the Group off-
setting a significant investment in research
and development and some increase in
restructuring expenses
Increased spend on RampD
Research and development expenditure
charged in the Core Business (net of
external funding) rose from 991404221 million in
2005 to 991404279 million in 2006 an increase
of 26 principally in the Systems divi-
sion The Group expanded the number ofproducts and services in the development
phase across its businesses
Return to profit
Losses in Non-Core Continuing and Dis-
continued operations were substantially
lower year-on-year reflecting principally
the exit from heavily loss-making Displays
activities in 2005 and intensified cost-sav-
ing programs in 2006 A major revision
and harmonization of the Grouprsquos North
American healthcare obligations gave rise
to substantial one-time gains and Thom-
son also initiated significant restructuring
of its French Non-Core operations
The good performance of the Core Busi-
ness lower Non-Core and Discontinued
losses and a low reported tax chargeenabled the Group to return a net profit of
99140455 million in 2006 compared to a loss of
991404573 million in the previous year
Good cash flow
strengthened balance sheet
Thomson generated good free cash flow
and strengthened its balance sheet in
2006 Total net financial liabilities on the
balance sheet fell by 991404460 million reflect-
ing a 99140493 million fall in financial and acqui-
sition-related debts and a 991404367 million
reduction in retirement benefit obligations(including healthcare)
Increase in Net Dividend
The Board of Directors proposed a dis-
tribution to shareholders of 991404033 per
share (2005 dividend 991404030) reflecting
confidence in the prospects of the Group
going forward
Outlook 2007-2009
growth in revenues and net income
With the Grouprsquos transformation complete Thomsonrsquos financial focus over the 2007-
2009 period will be to grow revenues and
net income
Thomson serves growing Media Enter-
tainment amp Communications marketsmdashfor
which external estimates(1) indicate com-
pound growth of around 6 over the last
FINANCIAL AND
OPERATIONAL PERFORMANCE
Full year 2006 results
saw a return to profitability
and leave Thomson
well positioned at
the heart of convergence
and digital video
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 6166
59 Thomson Panorama 2006
five years Our digital and electronic busi-
nesses now represent two-thirds of rev-
enues and we believe they are growing
faster than the overall market offsetting
the maturing physical media businesses
Given this profile the Group expects its
revenue growth to be more modest in
2007 but to gather pace over the period
and our overall objective is to show com-pound growth over 2007-2009 in line with
or faster than the overall market
The 2007-2009 period is also expected
to see a sharply reduced impact from
residual Non-Core activities with an end
to losses from the Discontinued Activities
perimeter after 2007 Accordingly Thom-
sonrsquos ambition is to turn its Core Business
growth and profitability and lower impact
from Non-Core into strong growth in net
income over the period 2007-2009
Business operations
Continuous performance improvement is
fundamental to Thomsonrsquos commitment to
create sustainable business models and
long-term value for all stakeholders The
ambitious Group-wide programs launched
in 2004 to improve productivity and
enhance overall performance producedsubstantial results in 2006 and led to new
and strong initiatives for long-term growth
As of the second half of 2006 six ldquoKey
Programsrdquo are monitored at Group level
Clients Software Product Introduction
Operations Transformation and Talent
Management
KEY PROGRAMS IN PLACE
Program Focus
Clients Thomsonrsquos clientregional diversification and
growth of the existing business
through improved Sales amp Marketing
Software Development of integrated software platforms
in all markets (post-production distribution
delivery) and for all types of customer
(professional prosumerhellip)
Product Introduction Ensuring new product roadmaps are in line
with strategy and resource needs have been
identifiedOperations Improving the Grouprsquos cost base cash
generation and working capital
Transformation Multiple programs including initiatives to
improving customer relationship management
worldwide supply chain management
IT transformation as well as Thomsonrsquos RampD
footprint
Talent Management Leveraging human assets with a focus on
talent retention and acquisition
8122019 Panorama 2006
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60 Thomson Panorama 2006
SUMMARY RESULTS FULL YEAR 2006
In 991404 millions unless otherwise stated 2006(1) 2005(1)
Net revenues 5854 5591(1)
Core Business net revenues 5747 5335
Services 2489 2487
Systems 2684 2262
Technology 547 546
Corporate 27 40
Non-Core continuing operations net revenues 107 256
Core Business EBIT(2) 504 512
Services 160 205
Systems 132 109
Technology 289 277Corporate (77) (79)
EBIT from Non-Core continuing operations (25) (122)
(1) Restated with 2006 discontinued activities according to IFRS 5
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 6366
61 Thomson Panorama 2006
Year ended December 31in 991404 except number of shares 2006 2005 2004
Year ended December 31in 991404 millions 2006 2005(1) 2004(1)
CONSOLIDATED STATEMENTS OF OPERATIONS
(1) Restated with 2006 discontinued activities according to IFRS 5
(2) After deduction of the interests net of tax paid on the subordinated perpetual notes during the period
Continuing operations
Revenues 5854 5591 5980
Cost of sales (4474) (4240) (4594)
Gross margin 1380 1351 1386
Selling marketing general and administrative expenses (674) (638) (653)
Other income (expense) 52 (96) (69)
Research and development expenses (279) (227) (201)
Profit from continuing operations before tax and net finance costs 479 390 463
Interest income 19 30 52
Interest expense (108) (108) (54)
Other financial income (expense) (111) 36 (26)
Finance costs ndash net (200) (42) (28)
Share of profit (loss) from associates (86) (82) (20)
Income tax ndash (68) (93)
Profit from continuing operations 193 198 322
Discontinued operations
Profit (loss) from discontinued operations (138) (771) (883)
Net income (loss) 55 (573) (561)
Attributable to
Equity Holders 55 (574) (559)
Minority interests ndash 1 (2)
Weighted average number of shares
outstandingmdashbasic net of treasury stock 261188858 266539917 273646869
Earnings per share from continuing operations
Basic(2) 067 074 118
Diluted 063 042 111
Earnings per share from discontinued operations
Basic (053) (289) (323)
Diluted (048) (262) (296)Total earnings per share
Basic(2) 014 (215) (205)
Diluted 015 (220) (185)
8122019 Panorama 2006
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62 Thomson Panorama 2006
CONSOLIDATED BALANCE SHEETS
In 991404 millions December 31 December 31 January 1 December 31 2006 2005 2005(1) 2004
ASSETS
Non-current assets
Property plant and equipment 813 886 1051 1051
Goodwill 1714 1756 1186 1178
Other intangible assets 1071 1150 924 924
Investments in associates 12 204 260 260
Investments and financial assets available-for-sale 266 341 139 113
Derivative financial instruments 7 1 11 ndash
Contract advances 129 173 179 179
Deferred tax assets 397 379 307 301
Other non-current assets 110 182 133 136
Total non-current assets 4519 5072 4190 4142
Current assets
Inventories 366 333 503 568
Trade accounts and notes receivable 1018 1315 1232 1180
Current accounts with associates and joint ventures 97 115 143 143
Derivative financial instruments 8 9 115 ndash
Other current assets 535 644 483 616
Marketable securities ndash 7 58 58
Cash and cash equivalents 1311 996 1845 1848
Assets classified as held for sale 264 369 80 ndash
Total current assets 3599 3788 4459 4413
Total assets 8118 8860 8649 8555
(1) Including the impacts of the first-time application related to IAS 32 and 39 on financial instruments and IFRS 5 on non-current assets held for sale and
discontinued operations
8122019 Panorama 2006
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63 Thomson Panorama 2006
In 991404 millions December 31 December 31 January 1 December 31 2006 2005 2005(1) 2004
SHAREHOLDERSrsquo EQUITY AND LIABILITIES
Shareholdersrsquo equity
Common stock (273871296 shares at
December 31 2006
with nominal value of euro 375 per share) 1027 1025 1025 1025
Trade accounts and notes payable 1032 1164 1199 1226
Accrued employee expenses 165 166 158 163
Income tax payable 57 47 60 60
Other current liabilities 671 750 746 800
Payables on acquisition of companies 13 138 84 84
Liabilities directly associated with
assets classified as held for sale 232 470 88 ndash
Total current liabilities 3681 4393 3602 3459
Total liabilities 5999 6644 6251 6062
Total shareholderrsquos equity and liabilities 8118 8860 8649 8555
(1) Including the impacts of the first-time application related to IAS 32 and 39 on financial instruments and IFRS 5 on non-current assets held for sale and
discontinued operations
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 6666
Creation and lay-out
Photo credits Nathalie BerhingGAMMA ndash Steacutephane de Bourgies ndash Jean-Franccedilois DeroubaixGAMMA ndash Christine Donnier- ValentinGAMMA ndash Cars copy 2006 Disney Enterprises IncPixar All Rights Reserved ndash Dreamgirls copy 2006 DREAMWORKS
LLC and PARAMOUNT PICTURES All Rights Reserved ndash Poseidon copy 2006 Warner Bros Pictures ndash Sony Bravia Paint
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 1166
7
5
6
2
8
4
Three Board Committees
The Board of Directors is supported by
three committees the Audit Committee
the Strategy Committee and the Nomi-
nation Remuneration and Governance
Committee
The Audit Committee assists the Boardof Directors in fulfilling its oversight respon-
sibilities with regards to the financial report-
ing process the internal control and audit
processes and monitors compliance with
laws and regulations The Committee is
chaired by Eric Bourdais de Charbonniegravere
and its other members are Paul Murray
and Marcel Roulet
The Strategy Committee reviews projects
such as major investments competitive
moves and strategic alliances or acquisi-
tions and also assesses progress in meet-
ing Thomsonrsquos strategic objectives Frank
E Dangeard chairs the Committee which
also comprises Eddy Hartenstein Pierre
Lescure Didier Lombard David Roux
Reacutemy Sautter and Henry P Vigil
The Nomination Remuneration and Gov-
ernance Committee reviews the function-ing of the Board of Directors corporate
governance and remuneration of senior
management including the Chairman amp
CEO as well as employee profit-sharing
The Committee is chaired by Marcel Roulet
and its other member is Eddy Hartenstein
All the members of the Board Commit-
tees are independent directors except for
Chairman amp CEO Frank E Dangeard who
chairs the Strategy Committee
1 Frank E DANGEARDChairman amp CEO of Thomson
2 Eric BOURDAIS
DE CHARBONNIEgraveREChairman of the Supervisory Boardof Michelin
3 Catherine CAVALLARIControlling Technology OperationsRepresentative of Thomson employees
4 Loiumlc DESMOUCEAUX Vice President Market Business IntelligenceRepresentative of Thomsonemployee shareholders
5 Eddy W HARTENSTEINChairman amp CEOHD Partners Acquisition Corporation
6 Pierre LESCUREProducer former Chairman amp CEO of Canal Plus
7 Didier LOMBARDChairman amp CEO of France Telecom
8 Geacuterard MEYMARIAN Vice PresidentBusiness OperationsPTI Sales Process
Asia - Strategic ProjectsRepresentative of Thomsonemployee shareholders
9 Paul MURRAY Director of Tangent Communications plc
10 Jean de ROTALIERHead of Connectique EuropeRepresentative of Thomson employees
11 Marcel ROULETFormer Chairman amp CEO TSAFrance Telecom and Thales
12 David ROUX Managing DirectorSilver Lake Partners
13 Reacutemy SAUTTERChairman of the Supervisory Board
EdiradioRTL
14 Henry P VIGILSenior Vice PresidentStrategy amp PartnershipsMicrosoft Corporation
Independent directors
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 1266
STRATEGY amp
MARKET PERSPECTIVES
Recent market developments
validate Thomsonrsquos
strategic focus on
digital video and open up
large opportunities
2004-2006 Plan
implemented with success
The strategic direction taken in 2004 to
accelerate Thomsonrsquos transformation into
a Group focused entirely on serving the
Media Entertainment amp Communications
industries was based on expectations
of how its core markets would evolvethrough to 2010 and beyond Thomsonrsquos
key assumption is that there will be signifi-
cant growth opportunities as content digi-
tization the trend towards high-definition
and next generation networks continue to
impact the video industry
Market developments of the last two years
validate the direction taken by the Group
particularly the decision to exit legacy
consumer electronics activities The 2004-
2006 Plan leaves Thomson well positioned
at the heart of convergence now emerg-
ing around digital video The Plan soughtto broaden Thomsonrsquos offering to Media
Entertainment amp Communications custom-
ers to strengthen its focus on media tech-
nologies by re-aligning Research amp Devel-
opment (RampD) with long-term strategy to
seize growth opportunities in electronic
content and to consolidate the Grouprsquos
position as a world leader in IP devices
and solutions for video content
The decision to focus on four key growth
businessesmdashContent Services Network
Services Broadcast amp Networks and
Access Productsmdashhas been vindicated
by market developments Strong positions
in each of these areas were built quickly
in part through acquisition and have pro-
vided Thomson with robust growth drivers
during the Plan period Over the last twoyears Thomson grew and diversified its
customer base more than doubling the
number of customers with whom it gen-
erates over 99140420 million in revenues for
example The Grouprsquos offering of technolo-
gies systems and services also expanded
substantially notably in growing digital
video and new media markets
Looking ahead 2007-2009
Over the next three years Thomson aims
to expand further its leadership positions
in digital video technologies systems andservices with an emphasis on integrated
offerings and software to its Media Enter-
tainment amp Communications customers
Investments will continue in the key growth
businesses electronic media activities
within Content Services and Network
Services Broadcast amp Networks and
IP-based Access Products New media
2004-2006 Plan objectives achieved
bull Enlarged client offering and successful implementation of new growing activities
bull Significant increase in RampD spend
bull Digital media related revenues representing 23 of core revenues
bull Leadership position in IP devices with enlarged telecom client base
bull Exit from Displays TV and other non-core businesses
10 Thomson Panorama 2006
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 1366
businesses for content makers or content
distributors should also open up opportu-
nities for additional growth
Investment in RampD will continue to be strong
as technologymdashfrom media asset manage-
ment to content securitymdashbecomes increas-
ingly business-critical in the digital environ-
ment This should enable Thomson to takeadvantage of the main growth drivers of the
digital video industriesmdashthe accelerating
adoption of high-definition mobile content
on-demand content consumer-generated
content fixed-mobile convergence triple-
play devices connected home networking
and internet-based and advertising-based
content delivery
Dynamic markets
open up large opportunities
Until recently creation and distribution of
content were largely conceived as linearprocesses starting with image capture
and continuing through delivery of con-
tent to some kind of consumer screen or
device Today many of these processes
happen simultaneously The one-way flow
of contentmdashfrom creator to distributor to
consumermdashis being replaced by a multi-
directional model in which almost anyone
can create process and distribute media
Right Thomson broadcast management
center London To focus on their core
business broadcasters are increasingly
turning to outside experts such as Thomson
for video network management services
THOMSONrsquoS VISION OF ITS
BUSINESS ENVIRONMENT IN 2010
Market consolidation and rise of Asia
bull Consolidation of Media Entertainment amp
Communications in Europe emergence of media
groups and markets in Asia
bull China and India will have become mainstream markets
bull Customers will have outsourced many of their activities
High-definition mobility security
bull The transition to high-definition will be complete
bull Mobile video will be pervasive
bull Intellectual property will remain a key differentiator and
significant source of revenues
bull Security technologies and services to combat piracy
will have been implemented
bull China and India will have become technology
standards-setters
Digital distribution at home in theater
bull Electronic delivery of content into the home will have
emerged Consumers will continue to buy physical
media (eg DVDs) at retail stores but will also be
purchasingrenting electronic content directly from home
bull Digital delivery of movies to cinema theaters will have
developed in addition to film print
Networks
bull Network operators will have largely switched to
IP technologies
bull All networks will have triple-play offerings
bull ldquoConnected productsrdquo will be ubiquitous inside and
outside the home
bull Home networking will be a reality
11 Thomson Panorama 2006
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 1466
While digitization makes this transformation
possible it is the application of internet tech-
nologies that sets the contours of change
Today internet access is part of basic infra-structure like roads or electricity
Video has become so pervasive that the
era of a data-centric Internet seems to
belong to the past The notion that hun-
dreds of millions of individual users could
be creating and sharing video online
through interactive community websites
was unthinkable only a few years ago
Rather than supplant traditional services
the youth-driven explosion of internet
video has contributed to a multiplica-
tion of the ways video content is viewedand delivered Today consumers want to
select from numerous audio and video
access possibilitiesmdashfrom TV and com-
puter screens to cell phones mp3 players
and game consoles
Numerous new business models are being
conceived and tested as the Media Enter-
tainment amp Communications industries
adapt to this shifting environment
bull High-definition becoming mainstream
Already widely adopted for sports TV
movies and news programming high-definition (HD) broadcasting is expected to
become virtually universal in the US within
the next 2-3 years HD programming has
also begun to emerge in Canada France
the UK and elsewhere in Europe with
MPEG-4 advanced compression techno-
logy as a key enabler for roll-out
There are broad consequences of the
move to high-definition for the entire con-
tent creation and distribution ldquochainrdquo for
example all of the equipment involvedfrom cameras which capture images to
the edge-of-network devices which deliver
them needs the processing and storage
capacity required for high-definition video
The entire broadcast chain will benefit from
this positive momentum Overall the global
broadcast media technology industry is
expected to register compound annual
growth of 12 till 2010 (Source Screen
Digest for the International Association of
Broadcasting Manufacturers)
bull Mobile TV ramps up
As they develop new formats and plat-forms for their offerings broadcasters are
building partnerships with mobile phone
operators delivering TV and video-on-
demand programming to cell phones and
other handheld devices Numerous com-
mercial trials and initial commercial services
were launched in 2006 mainly in Europe
and Asia with large-scale deployments
planned for 2007 and 2008 Market ana-
lysts project more than 100 million mobile
TV subscribers worldwide by 2010
bull Ubiquitous IP amp ldquomultiple playrdquo
In order to differentiate their offeringsnetwork operators are offering a con-
stantly expanding range of innovative
value-added telephone video and inter-
net services (ldquotriple-playrdquo) Driven mainly
by cable operators in North America and
telecom operators in Europe these ser-
vices increasingly include mobile and wire-
Video has become pervasive
and the ways content is viewed and
delivered are multiplying
12 Thomson Panorama 2006
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 1566
less options (ldquoquadruple-playrdquo) enabling
subscribers to benefit from integrated
fixed line and cellular phone services and
household-wide wireless connectivity Advanced access products in subscrib-
of the Grouprsquos divisions and profit centersIn the context of the budgetary procedure
performance measurement indicators are
calculated by the divisions analyzed and
reviewed monthly to serve as a reference
for the Grouprsquos monthly reporting
Management reporting and
closing period work
Th om so n uses a co mmon char t of
accounts which is regularly updated The
principal accounting and financial figures
of the operational and functional depart-
ments consolidated at Group level are
analyzed by the Grouprsquos management
control team and reviewed by the Grouprsquos
Executive Committee
The closing process for the half-year and
annual consolidated financial statementsoccurs in two steps The first step con-
sists of a ldquohard closerdquo completed in May
and September leading to a first review by
the statutory auditors The second step
occurs in July and in JanuaryFebruary and
involves the finalization of half-year and
annual consolidated financial statements
under IFRS The Group then proceeds
once a year with a reconciliation of these
results in accordance with US GAAP
Preparation of financial statements
The financial statements are prepared jointly by the finance department and the
General Secretary They are based on
information reported through the annual
reporting and accounting consolidation
processes and on operational and mar-
ket information which is specifically cen-
tralized for the preparation of Thomsonrsquos
Document de Reacutefeacuterence in France and
the submission of Form 20-F in the United
States Half-year and annual financial infor-
mation is reviewed by the Grouprsquos Audit
Committee
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 6066
58 Thomson Panorama 2006
(1) Source PriceWaterhouseCoopers ndash
ldquoGlobal Entertainment and Media Outlook 2006-10rdquo
Revenue growth
Thomson achieved consolidated 2006
net revenues of 9914045854 million up from
9914045591 million in 2005 Revenues for
the Core Business reached 9914045747 mil-
lion (9914045776 million at constant currency)
representing 83 growth over 2005 at
constant currency
Overall the Grouprsquos key growth busi-
nessesmdashContent Services Network
Services Access Products for telecom
operators and our Broadcast amp Networks
businesses (Grass Valley and Network
Software)mdashincreased strongly year-on-
year and accounted for over a third of
Group revenues against less than a quar-
ter in 2005
Thomsonrsquos Core Business EBIT for 2006
was euro504 million representing a Core
Business EBIT margin of 88 Thisreflected growth in some key businesses
and cost actions across the Group off-
setting a significant investment in research
and development and some increase in
restructuring expenses
Increased spend on RampD
Research and development expenditure
charged in the Core Business (net of
external funding) rose from 991404221 million in
2005 to 991404279 million in 2006 an increase
of 26 principally in the Systems divi-
sion The Group expanded the number ofproducts and services in the development
phase across its businesses
Return to profit
Losses in Non-Core Continuing and Dis-
continued operations were substantially
lower year-on-year reflecting principally
the exit from heavily loss-making Displays
activities in 2005 and intensified cost-sav-
ing programs in 2006 A major revision
and harmonization of the Grouprsquos North
American healthcare obligations gave rise
to substantial one-time gains and Thom-
son also initiated significant restructuring
of its French Non-Core operations
The good performance of the Core Busi-
ness lower Non-Core and Discontinued
losses and a low reported tax chargeenabled the Group to return a net profit of
99140455 million in 2006 compared to a loss of
991404573 million in the previous year
Good cash flow
strengthened balance sheet
Thomson generated good free cash flow
and strengthened its balance sheet in
2006 Total net financial liabilities on the
balance sheet fell by 991404460 million reflect-
ing a 99140493 million fall in financial and acqui-
sition-related debts and a 991404367 million
reduction in retirement benefit obligations(including healthcare)
Increase in Net Dividend
The Board of Directors proposed a dis-
tribution to shareholders of 991404033 per
share (2005 dividend 991404030) reflecting
confidence in the prospects of the Group
going forward
Outlook 2007-2009
growth in revenues and net income
With the Grouprsquos transformation complete Thomsonrsquos financial focus over the 2007-
2009 period will be to grow revenues and
net income
Thomson serves growing Media Enter-
tainment amp Communications marketsmdashfor
which external estimates(1) indicate com-
pound growth of around 6 over the last
FINANCIAL AND
OPERATIONAL PERFORMANCE
Full year 2006 results
saw a return to profitability
and leave Thomson
well positioned at
the heart of convergence
and digital video
8122019 Panorama 2006
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59 Thomson Panorama 2006
five years Our digital and electronic busi-
nesses now represent two-thirds of rev-
enues and we believe they are growing
faster than the overall market offsetting
the maturing physical media businesses
Given this profile the Group expects its
revenue growth to be more modest in
2007 but to gather pace over the period
and our overall objective is to show com-pound growth over 2007-2009 in line with
or faster than the overall market
The 2007-2009 period is also expected
to see a sharply reduced impact from
residual Non-Core activities with an end
to losses from the Discontinued Activities
perimeter after 2007 Accordingly Thom-
sonrsquos ambition is to turn its Core Business
growth and profitability and lower impact
from Non-Core into strong growth in net
income over the period 2007-2009
Business operations
Continuous performance improvement is
fundamental to Thomsonrsquos commitment to
create sustainable business models and
long-term value for all stakeholders The
ambitious Group-wide programs launched
in 2004 to improve productivity and
enhance overall performance producedsubstantial results in 2006 and led to new
and strong initiatives for long-term growth
As of the second half of 2006 six ldquoKey
Programsrdquo are monitored at Group level
Clients Software Product Introduction
Operations Transformation and Talent
Management
KEY PROGRAMS IN PLACE
Program Focus
Clients Thomsonrsquos clientregional diversification and
growth of the existing business
through improved Sales amp Marketing
Software Development of integrated software platforms
in all markets (post-production distribution
delivery) and for all types of customer
(professional prosumerhellip)
Product Introduction Ensuring new product roadmaps are in line
with strategy and resource needs have been
identifiedOperations Improving the Grouprsquos cost base cash
generation and working capital
Transformation Multiple programs including initiatives to
improving customer relationship management
worldwide supply chain management
IT transformation as well as Thomsonrsquos RampD
footprint
Talent Management Leveraging human assets with a focus on
talent retention and acquisition
8122019 Panorama 2006
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60 Thomson Panorama 2006
SUMMARY RESULTS FULL YEAR 2006
In 991404 millions unless otherwise stated 2006(1) 2005(1)
Net revenues 5854 5591(1)
Core Business net revenues 5747 5335
Services 2489 2487
Systems 2684 2262
Technology 547 546
Corporate 27 40
Non-Core continuing operations net revenues 107 256
Core Business EBIT(2) 504 512
Services 160 205
Systems 132 109
Technology 289 277Corporate (77) (79)
EBIT from Non-Core continuing operations (25) (122)
(1) Restated with 2006 discontinued activities according to IFRS 5
8122019 Panorama 2006
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61 Thomson Panorama 2006
Year ended December 31in 991404 except number of shares 2006 2005 2004
Year ended December 31in 991404 millions 2006 2005(1) 2004(1)
CONSOLIDATED STATEMENTS OF OPERATIONS
(1) Restated with 2006 discontinued activities according to IFRS 5
(2) After deduction of the interests net of tax paid on the subordinated perpetual notes during the period
Continuing operations
Revenues 5854 5591 5980
Cost of sales (4474) (4240) (4594)
Gross margin 1380 1351 1386
Selling marketing general and administrative expenses (674) (638) (653)
Other income (expense) 52 (96) (69)
Research and development expenses (279) (227) (201)
Profit from continuing operations before tax and net finance costs 479 390 463
Interest income 19 30 52
Interest expense (108) (108) (54)
Other financial income (expense) (111) 36 (26)
Finance costs ndash net (200) (42) (28)
Share of profit (loss) from associates (86) (82) (20)
Income tax ndash (68) (93)
Profit from continuing operations 193 198 322
Discontinued operations
Profit (loss) from discontinued operations (138) (771) (883)
Net income (loss) 55 (573) (561)
Attributable to
Equity Holders 55 (574) (559)
Minority interests ndash 1 (2)
Weighted average number of shares
outstandingmdashbasic net of treasury stock 261188858 266539917 273646869
Earnings per share from continuing operations
Basic(2) 067 074 118
Diluted 063 042 111
Earnings per share from discontinued operations
Basic (053) (289) (323)
Diluted (048) (262) (296)Total earnings per share
Basic(2) 014 (215) (205)
Diluted 015 (220) (185)
8122019 Panorama 2006
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62 Thomson Panorama 2006
CONSOLIDATED BALANCE SHEETS
In 991404 millions December 31 December 31 January 1 December 31 2006 2005 2005(1) 2004
ASSETS
Non-current assets
Property plant and equipment 813 886 1051 1051
Goodwill 1714 1756 1186 1178
Other intangible assets 1071 1150 924 924
Investments in associates 12 204 260 260
Investments and financial assets available-for-sale 266 341 139 113
Derivative financial instruments 7 1 11 ndash
Contract advances 129 173 179 179
Deferred tax assets 397 379 307 301
Other non-current assets 110 182 133 136
Total non-current assets 4519 5072 4190 4142
Current assets
Inventories 366 333 503 568
Trade accounts and notes receivable 1018 1315 1232 1180
Current accounts with associates and joint ventures 97 115 143 143
Derivative financial instruments 8 9 115 ndash
Other current assets 535 644 483 616
Marketable securities ndash 7 58 58
Cash and cash equivalents 1311 996 1845 1848
Assets classified as held for sale 264 369 80 ndash
Total current assets 3599 3788 4459 4413
Total assets 8118 8860 8649 8555
(1) Including the impacts of the first-time application related to IAS 32 and 39 on financial instruments and IFRS 5 on non-current assets held for sale and
discontinued operations
8122019 Panorama 2006
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63 Thomson Panorama 2006
In 991404 millions December 31 December 31 January 1 December 31 2006 2005 2005(1) 2004
SHAREHOLDERSrsquo EQUITY AND LIABILITIES
Shareholdersrsquo equity
Common stock (273871296 shares at
December 31 2006
with nominal value of euro 375 per share) 1027 1025 1025 1025
Trade accounts and notes payable 1032 1164 1199 1226
Accrued employee expenses 165 166 158 163
Income tax payable 57 47 60 60
Other current liabilities 671 750 746 800
Payables on acquisition of companies 13 138 84 84
Liabilities directly associated with
assets classified as held for sale 232 470 88 ndash
Total current liabilities 3681 4393 3602 3459
Total liabilities 5999 6644 6251 6062
Total shareholderrsquos equity and liabilities 8118 8860 8649 8555
(1) Including the impacts of the first-time application related to IAS 32 and 39 on financial instruments and IFRS 5 on non-current assets held for sale and
discontinued operations
8122019 Panorama 2006
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Creation and lay-out
Photo credits Nathalie BerhingGAMMA ndash Steacutephane de Bourgies ndash Jean-Franccedilois DeroubaixGAMMA ndash Christine Donnier- ValentinGAMMA ndash Cars copy 2006 Disney Enterprises IncPixar All Rights Reserved ndash Dreamgirls copy 2006 DREAMWORKS
LLC and PARAMOUNT PICTURES All Rights Reserved ndash Poseidon copy 2006 Warner Bros Pictures ndash Sony Bravia Paint
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 1266
STRATEGY amp
MARKET PERSPECTIVES
Recent market developments
validate Thomsonrsquos
strategic focus on
digital video and open up
large opportunities
2004-2006 Plan
implemented with success
The strategic direction taken in 2004 to
accelerate Thomsonrsquos transformation into
a Group focused entirely on serving the
Media Entertainment amp Communications
industries was based on expectations
of how its core markets would evolvethrough to 2010 and beyond Thomsonrsquos
key assumption is that there will be signifi-
cant growth opportunities as content digi-
tization the trend towards high-definition
and next generation networks continue to
impact the video industry
Market developments of the last two years
validate the direction taken by the Group
particularly the decision to exit legacy
consumer electronics activities The 2004-
2006 Plan leaves Thomson well positioned
at the heart of convergence now emerg-
ing around digital video The Plan soughtto broaden Thomsonrsquos offering to Media
Entertainment amp Communications custom-
ers to strengthen its focus on media tech-
nologies by re-aligning Research amp Devel-
opment (RampD) with long-term strategy to
seize growth opportunities in electronic
content and to consolidate the Grouprsquos
position as a world leader in IP devices
and solutions for video content
The decision to focus on four key growth
businessesmdashContent Services Network
Services Broadcast amp Networks and
Access Productsmdashhas been vindicated
by market developments Strong positions
in each of these areas were built quickly
in part through acquisition and have pro-
vided Thomson with robust growth drivers
during the Plan period Over the last twoyears Thomson grew and diversified its
customer base more than doubling the
number of customers with whom it gen-
erates over 99140420 million in revenues for
example The Grouprsquos offering of technolo-
gies systems and services also expanded
substantially notably in growing digital
video and new media markets
Looking ahead 2007-2009
Over the next three years Thomson aims
to expand further its leadership positions
in digital video technologies systems andservices with an emphasis on integrated
offerings and software to its Media Enter-
tainment amp Communications customers
Investments will continue in the key growth
businesses electronic media activities
within Content Services and Network
Services Broadcast amp Networks and
IP-based Access Products New media
2004-2006 Plan objectives achieved
bull Enlarged client offering and successful implementation of new growing activities
bull Significant increase in RampD spend
bull Digital media related revenues representing 23 of core revenues
bull Leadership position in IP devices with enlarged telecom client base
bull Exit from Displays TV and other non-core businesses
10 Thomson Panorama 2006
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businesses for content makers or content
distributors should also open up opportu-
nities for additional growth
Investment in RampD will continue to be strong
as technologymdashfrom media asset manage-
ment to content securitymdashbecomes increas-
ingly business-critical in the digital environ-
ment This should enable Thomson to takeadvantage of the main growth drivers of the
digital video industriesmdashthe accelerating
adoption of high-definition mobile content
on-demand content consumer-generated
content fixed-mobile convergence triple-
play devices connected home networking
and internet-based and advertising-based
content delivery
Dynamic markets
open up large opportunities
Until recently creation and distribution of
content were largely conceived as linearprocesses starting with image capture
and continuing through delivery of con-
tent to some kind of consumer screen or
device Today many of these processes
happen simultaneously The one-way flow
of contentmdashfrom creator to distributor to
consumermdashis being replaced by a multi-
directional model in which almost anyone
can create process and distribute media
Right Thomson broadcast management
center London To focus on their core
business broadcasters are increasingly
turning to outside experts such as Thomson
for video network management services
THOMSONrsquoS VISION OF ITS
BUSINESS ENVIRONMENT IN 2010
Market consolidation and rise of Asia
bull Consolidation of Media Entertainment amp
Communications in Europe emergence of media
groups and markets in Asia
bull China and India will have become mainstream markets
bull Customers will have outsourced many of their activities
High-definition mobility security
bull The transition to high-definition will be complete
bull Mobile video will be pervasive
bull Intellectual property will remain a key differentiator and
significant source of revenues
bull Security technologies and services to combat piracy
will have been implemented
bull China and India will have become technology
standards-setters
Digital distribution at home in theater
bull Electronic delivery of content into the home will have
emerged Consumers will continue to buy physical
media (eg DVDs) at retail stores but will also be
purchasingrenting electronic content directly from home
bull Digital delivery of movies to cinema theaters will have
developed in addition to film print
Networks
bull Network operators will have largely switched to
IP technologies
bull All networks will have triple-play offerings
bull ldquoConnected productsrdquo will be ubiquitous inside and
outside the home
bull Home networking will be a reality
11 Thomson Panorama 2006
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While digitization makes this transformation
possible it is the application of internet tech-
nologies that sets the contours of change
Today internet access is part of basic infra-structure like roads or electricity
Video has become so pervasive that the
era of a data-centric Internet seems to
belong to the past The notion that hun-
dreds of millions of individual users could
be creating and sharing video online
through interactive community websites
was unthinkable only a few years ago
Rather than supplant traditional services
the youth-driven explosion of internet
video has contributed to a multiplica-
tion of the ways video content is viewedand delivered Today consumers want to
select from numerous audio and video
access possibilitiesmdashfrom TV and com-
puter screens to cell phones mp3 players
and game consoles
Numerous new business models are being
conceived and tested as the Media Enter-
tainment amp Communications industries
adapt to this shifting environment
bull High-definition becoming mainstream
Already widely adopted for sports TV
movies and news programming high-definition (HD) broadcasting is expected to
become virtually universal in the US within
the next 2-3 years HD programming has
also begun to emerge in Canada France
the UK and elsewhere in Europe with
MPEG-4 advanced compression techno-
logy as a key enabler for roll-out
There are broad consequences of the
move to high-definition for the entire con-
tent creation and distribution ldquochainrdquo for
example all of the equipment involvedfrom cameras which capture images to
the edge-of-network devices which deliver
them needs the processing and storage
capacity required for high-definition video
The entire broadcast chain will benefit from
this positive momentum Overall the global
broadcast media technology industry is
expected to register compound annual
growth of 12 till 2010 (Source Screen
Digest for the International Association of
Broadcasting Manufacturers)
bull Mobile TV ramps up
As they develop new formats and plat-forms for their offerings broadcasters are
building partnerships with mobile phone
operators delivering TV and video-on-
demand programming to cell phones and
other handheld devices Numerous com-
mercial trials and initial commercial services
were launched in 2006 mainly in Europe
and Asia with large-scale deployments
planned for 2007 and 2008 Market ana-
lysts project more than 100 million mobile
TV subscribers worldwide by 2010
bull Ubiquitous IP amp ldquomultiple playrdquo
In order to differentiate their offeringsnetwork operators are offering a con-
stantly expanding range of innovative
value-added telephone video and inter-
net services (ldquotriple-playrdquo) Driven mainly
by cable operators in North America and
telecom operators in Europe these ser-
vices increasingly include mobile and wire-
Video has become pervasive
and the ways content is viewed and
delivered are multiplying
12 Thomson Panorama 2006
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less options (ldquoquadruple-playrdquo) enabling
subscribers to benefit from integrated
fixed line and cellular phone services and
household-wide wireless connectivity Advanced access products in subscrib-
of the Grouprsquos divisions and profit centersIn the context of the budgetary procedure
performance measurement indicators are
calculated by the divisions analyzed and
reviewed monthly to serve as a reference
for the Grouprsquos monthly reporting
Management reporting and
closing period work
Th om so n uses a co mmon char t of
accounts which is regularly updated The
principal accounting and financial figures
of the operational and functional depart-
ments consolidated at Group level are
analyzed by the Grouprsquos management
control team and reviewed by the Grouprsquos
Executive Committee
The closing process for the half-year and
annual consolidated financial statementsoccurs in two steps The first step con-
sists of a ldquohard closerdquo completed in May
and September leading to a first review by
the statutory auditors The second step
occurs in July and in JanuaryFebruary and
involves the finalization of half-year and
annual consolidated financial statements
under IFRS The Group then proceeds
once a year with a reconciliation of these
results in accordance with US GAAP
Preparation of financial statements
The financial statements are prepared jointly by the finance department and the
General Secretary They are based on
information reported through the annual
reporting and accounting consolidation
processes and on operational and mar-
ket information which is specifically cen-
tralized for the preparation of Thomsonrsquos
Document de Reacutefeacuterence in France and
the submission of Form 20-F in the United
States Half-year and annual financial infor-
mation is reviewed by the Grouprsquos Audit
Committee
8122019 Panorama 2006
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58 Thomson Panorama 2006
(1) Source PriceWaterhouseCoopers ndash
ldquoGlobal Entertainment and Media Outlook 2006-10rdquo
Revenue growth
Thomson achieved consolidated 2006
net revenues of 9914045854 million up from
9914045591 million in 2005 Revenues for
the Core Business reached 9914045747 mil-
lion (9914045776 million at constant currency)
representing 83 growth over 2005 at
constant currency
Overall the Grouprsquos key growth busi-
nessesmdashContent Services Network
Services Access Products for telecom
operators and our Broadcast amp Networks
businesses (Grass Valley and Network
Software)mdashincreased strongly year-on-
year and accounted for over a third of
Group revenues against less than a quar-
ter in 2005
Thomsonrsquos Core Business EBIT for 2006
was euro504 million representing a Core
Business EBIT margin of 88 Thisreflected growth in some key businesses
and cost actions across the Group off-
setting a significant investment in research
and development and some increase in
restructuring expenses
Increased spend on RampD
Research and development expenditure
charged in the Core Business (net of
external funding) rose from 991404221 million in
2005 to 991404279 million in 2006 an increase
of 26 principally in the Systems divi-
sion The Group expanded the number ofproducts and services in the development
phase across its businesses
Return to profit
Losses in Non-Core Continuing and Dis-
continued operations were substantially
lower year-on-year reflecting principally
the exit from heavily loss-making Displays
activities in 2005 and intensified cost-sav-
ing programs in 2006 A major revision
and harmonization of the Grouprsquos North
American healthcare obligations gave rise
to substantial one-time gains and Thom-
son also initiated significant restructuring
of its French Non-Core operations
The good performance of the Core Busi-
ness lower Non-Core and Discontinued
losses and a low reported tax chargeenabled the Group to return a net profit of
99140455 million in 2006 compared to a loss of
991404573 million in the previous year
Good cash flow
strengthened balance sheet
Thomson generated good free cash flow
and strengthened its balance sheet in
2006 Total net financial liabilities on the
balance sheet fell by 991404460 million reflect-
ing a 99140493 million fall in financial and acqui-
sition-related debts and a 991404367 million
reduction in retirement benefit obligations(including healthcare)
Increase in Net Dividend
The Board of Directors proposed a dis-
tribution to shareholders of 991404033 per
share (2005 dividend 991404030) reflecting
confidence in the prospects of the Group
going forward
Outlook 2007-2009
growth in revenues and net income
With the Grouprsquos transformation complete Thomsonrsquos financial focus over the 2007-
2009 period will be to grow revenues and
net income
Thomson serves growing Media Enter-
tainment amp Communications marketsmdashfor
which external estimates(1) indicate com-
pound growth of around 6 over the last
FINANCIAL AND
OPERATIONAL PERFORMANCE
Full year 2006 results
saw a return to profitability
and leave Thomson
well positioned at
the heart of convergence
and digital video
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 6166
59 Thomson Panorama 2006
five years Our digital and electronic busi-
nesses now represent two-thirds of rev-
enues and we believe they are growing
faster than the overall market offsetting
the maturing physical media businesses
Given this profile the Group expects its
revenue growth to be more modest in
2007 but to gather pace over the period
and our overall objective is to show com-pound growth over 2007-2009 in line with
or faster than the overall market
The 2007-2009 period is also expected
to see a sharply reduced impact from
residual Non-Core activities with an end
to losses from the Discontinued Activities
perimeter after 2007 Accordingly Thom-
sonrsquos ambition is to turn its Core Business
growth and profitability and lower impact
from Non-Core into strong growth in net
income over the period 2007-2009
Business operations
Continuous performance improvement is
fundamental to Thomsonrsquos commitment to
create sustainable business models and
long-term value for all stakeholders The
ambitious Group-wide programs launched
in 2004 to improve productivity and
enhance overall performance producedsubstantial results in 2006 and led to new
and strong initiatives for long-term growth
As of the second half of 2006 six ldquoKey
Programsrdquo are monitored at Group level
Clients Software Product Introduction
Operations Transformation and Talent
Management
KEY PROGRAMS IN PLACE
Program Focus
Clients Thomsonrsquos clientregional diversification and
growth of the existing business
through improved Sales amp Marketing
Software Development of integrated software platforms
in all markets (post-production distribution
delivery) and for all types of customer
(professional prosumerhellip)
Product Introduction Ensuring new product roadmaps are in line
with strategy and resource needs have been
identifiedOperations Improving the Grouprsquos cost base cash
generation and working capital
Transformation Multiple programs including initiatives to
improving customer relationship management
worldwide supply chain management
IT transformation as well as Thomsonrsquos RampD
footprint
Talent Management Leveraging human assets with a focus on
talent retention and acquisition
8122019 Panorama 2006
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60 Thomson Panorama 2006
SUMMARY RESULTS FULL YEAR 2006
In 991404 millions unless otherwise stated 2006(1) 2005(1)
Net revenues 5854 5591(1)
Core Business net revenues 5747 5335
Services 2489 2487
Systems 2684 2262
Technology 547 546
Corporate 27 40
Non-Core continuing operations net revenues 107 256
Core Business EBIT(2) 504 512
Services 160 205
Systems 132 109
Technology 289 277Corporate (77) (79)
EBIT from Non-Core continuing operations (25) (122)
(1) Restated with 2006 discontinued activities according to IFRS 5
8122019 Panorama 2006
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61 Thomson Panorama 2006
Year ended December 31in 991404 except number of shares 2006 2005 2004
Year ended December 31in 991404 millions 2006 2005(1) 2004(1)
CONSOLIDATED STATEMENTS OF OPERATIONS
(1) Restated with 2006 discontinued activities according to IFRS 5
(2) After deduction of the interests net of tax paid on the subordinated perpetual notes during the period
Continuing operations
Revenues 5854 5591 5980
Cost of sales (4474) (4240) (4594)
Gross margin 1380 1351 1386
Selling marketing general and administrative expenses (674) (638) (653)
Other income (expense) 52 (96) (69)
Research and development expenses (279) (227) (201)
Profit from continuing operations before tax and net finance costs 479 390 463
Interest income 19 30 52
Interest expense (108) (108) (54)
Other financial income (expense) (111) 36 (26)
Finance costs ndash net (200) (42) (28)
Share of profit (loss) from associates (86) (82) (20)
Income tax ndash (68) (93)
Profit from continuing operations 193 198 322
Discontinued operations
Profit (loss) from discontinued operations (138) (771) (883)
Net income (loss) 55 (573) (561)
Attributable to
Equity Holders 55 (574) (559)
Minority interests ndash 1 (2)
Weighted average number of shares
outstandingmdashbasic net of treasury stock 261188858 266539917 273646869
Earnings per share from continuing operations
Basic(2) 067 074 118
Diluted 063 042 111
Earnings per share from discontinued operations
Basic (053) (289) (323)
Diluted (048) (262) (296)Total earnings per share
Basic(2) 014 (215) (205)
Diluted 015 (220) (185)
8122019 Panorama 2006
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62 Thomson Panorama 2006
CONSOLIDATED BALANCE SHEETS
In 991404 millions December 31 December 31 January 1 December 31 2006 2005 2005(1) 2004
ASSETS
Non-current assets
Property plant and equipment 813 886 1051 1051
Goodwill 1714 1756 1186 1178
Other intangible assets 1071 1150 924 924
Investments in associates 12 204 260 260
Investments and financial assets available-for-sale 266 341 139 113
Derivative financial instruments 7 1 11 ndash
Contract advances 129 173 179 179
Deferred tax assets 397 379 307 301
Other non-current assets 110 182 133 136
Total non-current assets 4519 5072 4190 4142
Current assets
Inventories 366 333 503 568
Trade accounts and notes receivable 1018 1315 1232 1180
Current accounts with associates and joint ventures 97 115 143 143
Derivative financial instruments 8 9 115 ndash
Other current assets 535 644 483 616
Marketable securities ndash 7 58 58
Cash and cash equivalents 1311 996 1845 1848
Assets classified as held for sale 264 369 80 ndash
Total current assets 3599 3788 4459 4413
Total assets 8118 8860 8649 8555
(1) Including the impacts of the first-time application related to IAS 32 and 39 on financial instruments and IFRS 5 on non-current assets held for sale and
discontinued operations
8122019 Panorama 2006
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63 Thomson Panorama 2006
In 991404 millions December 31 December 31 January 1 December 31 2006 2005 2005(1) 2004
SHAREHOLDERSrsquo EQUITY AND LIABILITIES
Shareholdersrsquo equity
Common stock (273871296 shares at
December 31 2006
with nominal value of euro 375 per share) 1027 1025 1025 1025
Trade accounts and notes payable 1032 1164 1199 1226
Accrued employee expenses 165 166 158 163
Income tax payable 57 47 60 60
Other current liabilities 671 750 746 800
Payables on acquisition of companies 13 138 84 84
Liabilities directly associated with
assets classified as held for sale 232 470 88 ndash
Total current liabilities 3681 4393 3602 3459
Total liabilities 5999 6644 6251 6062
Total shareholderrsquos equity and liabilities 8118 8860 8649 8555
(1) Including the impacts of the first-time application related to IAS 32 and 39 on financial instruments and IFRS 5 on non-current assets held for sale and
discontinued operations
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 6666
Creation and lay-out
Photo credits Nathalie BerhingGAMMA ndash Steacutephane de Bourgies ndash Jean-Franccedilois DeroubaixGAMMA ndash Christine Donnier- ValentinGAMMA ndash Cars copy 2006 Disney Enterprises IncPixar All Rights Reserved ndash Dreamgirls copy 2006 DREAMWORKS
LLC and PARAMOUNT PICTURES All Rights Reserved ndash Poseidon copy 2006 Warner Bros Pictures ndash Sony Bravia Paint
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 1366
businesses for content makers or content
distributors should also open up opportu-
nities for additional growth
Investment in RampD will continue to be strong
as technologymdashfrom media asset manage-
ment to content securitymdashbecomes increas-
ingly business-critical in the digital environ-
ment This should enable Thomson to takeadvantage of the main growth drivers of the
digital video industriesmdashthe accelerating
adoption of high-definition mobile content
on-demand content consumer-generated
content fixed-mobile convergence triple-
play devices connected home networking
and internet-based and advertising-based
content delivery
Dynamic markets
open up large opportunities
Until recently creation and distribution of
content were largely conceived as linearprocesses starting with image capture
and continuing through delivery of con-
tent to some kind of consumer screen or
device Today many of these processes
happen simultaneously The one-way flow
of contentmdashfrom creator to distributor to
consumermdashis being replaced by a multi-
directional model in which almost anyone
can create process and distribute media
Right Thomson broadcast management
center London To focus on their core
business broadcasters are increasingly
turning to outside experts such as Thomson
for video network management services
THOMSONrsquoS VISION OF ITS
BUSINESS ENVIRONMENT IN 2010
Market consolidation and rise of Asia
bull Consolidation of Media Entertainment amp
Communications in Europe emergence of media
groups and markets in Asia
bull China and India will have become mainstream markets
bull Customers will have outsourced many of their activities
High-definition mobility security
bull The transition to high-definition will be complete
bull Mobile video will be pervasive
bull Intellectual property will remain a key differentiator and
significant source of revenues
bull Security technologies and services to combat piracy
will have been implemented
bull China and India will have become technology
standards-setters
Digital distribution at home in theater
bull Electronic delivery of content into the home will have
emerged Consumers will continue to buy physical
media (eg DVDs) at retail stores but will also be
purchasingrenting electronic content directly from home
bull Digital delivery of movies to cinema theaters will have
developed in addition to film print
Networks
bull Network operators will have largely switched to
IP technologies
bull All networks will have triple-play offerings
bull ldquoConnected productsrdquo will be ubiquitous inside and
outside the home
bull Home networking will be a reality
11 Thomson Panorama 2006
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 1466
While digitization makes this transformation
possible it is the application of internet tech-
nologies that sets the contours of change
Today internet access is part of basic infra-structure like roads or electricity
Video has become so pervasive that the
era of a data-centric Internet seems to
belong to the past The notion that hun-
dreds of millions of individual users could
be creating and sharing video online
through interactive community websites
was unthinkable only a few years ago
Rather than supplant traditional services
the youth-driven explosion of internet
video has contributed to a multiplica-
tion of the ways video content is viewedand delivered Today consumers want to
select from numerous audio and video
access possibilitiesmdashfrom TV and com-
puter screens to cell phones mp3 players
and game consoles
Numerous new business models are being
conceived and tested as the Media Enter-
tainment amp Communications industries
adapt to this shifting environment
bull High-definition becoming mainstream
Already widely adopted for sports TV
movies and news programming high-definition (HD) broadcasting is expected to
become virtually universal in the US within
the next 2-3 years HD programming has
also begun to emerge in Canada France
the UK and elsewhere in Europe with
MPEG-4 advanced compression techno-
logy as a key enabler for roll-out
There are broad consequences of the
move to high-definition for the entire con-
tent creation and distribution ldquochainrdquo for
example all of the equipment involvedfrom cameras which capture images to
the edge-of-network devices which deliver
them needs the processing and storage
capacity required for high-definition video
The entire broadcast chain will benefit from
this positive momentum Overall the global
broadcast media technology industry is
expected to register compound annual
growth of 12 till 2010 (Source Screen
Digest for the International Association of
Broadcasting Manufacturers)
bull Mobile TV ramps up
As they develop new formats and plat-forms for their offerings broadcasters are
building partnerships with mobile phone
operators delivering TV and video-on-
demand programming to cell phones and
other handheld devices Numerous com-
mercial trials and initial commercial services
were launched in 2006 mainly in Europe
and Asia with large-scale deployments
planned for 2007 and 2008 Market ana-
lysts project more than 100 million mobile
TV subscribers worldwide by 2010
bull Ubiquitous IP amp ldquomultiple playrdquo
In order to differentiate their offeringsnetwork operators are offering a con-
stantly expanding range of innovative
value-added telephone video and inter-
net services (ldquotriple-playrdquo) Driven mainly
by cable operators in North America and
telecom operators in Europe these ser-
vices increasingly include mobile and wire-
Video has become pervasive
and the ways content is viewed and
delivered are multiplying
12 Thomson Panorama 2006
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 1566
less options (ldquoquadruple-playrdquo) enabling
subscribers to benefit from integrated
fixed line and cellular phone services and
household-wide wireless connectivity Advanced access products in subscrib-
of the Grouprsquos divisions and profit centersIn the context of the budgetary procedure
performance measurement indicators are
calculated by the divisions analyzed and
reviewed monthly to serve as a reference
for the Grouprsquos monthly reporting
Management reporting and
closing period work
Th om so n uses a co mmon char t of
accounts which is regularly updated The
principal accounting and financial figures
of the operational and functional depart-
ments consolidated at Group level are
analyzed by the Grouprsquos management
control team and reviewed by the Grouprsquos
Executive Committee
The closing process for the half-year and
annual consolidated financial statementsoccurs in two steps The first step con-
sists of a ldquohard closerdquo completed in May
and September leading to a first review by
the statutory auditors The second step
occurs in July and in JanuaryFebruary and
involves the finalization of half-year and
annual consolidated financial statements
under IFRS The Group then proceeds
once a year with a reconciliation of these
results in accordance with US GAAP
Preparation of financial statements
The financial statements are prepared jointly by the finance department and the
General Secretary They are based on
information reported through the annual
reporting and accounting consolidation
processes and on operational and mar-
ket information which is specifically cen-
tralized for the preparation of Thomsonrsquos
Document de Reacutefeacuterence in France and
the submission of Form 20-F in the United
States Half-year and annual financial infor-
mation is reviewed by the Grouprsquos Audit
Committee
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 6066
58 Thomson Panorama 2006
(1) Source PriceWaterhouseCoopers ndash
ldquoGlobal Entertainment and Media Outlook 2006-10rdquo
Revenue growth
Thomson achieved consolidated 2006
net revenues of 9914045854 million up from
9914045591 million in 2005 Revenues for
the Core Business reached 9914045747 mil-
lion (9914045776 million at constant currency)
representing 83 growth over 2005 at
constant currency
Overall the Grouprsquos key growth busi-
nessesmdashContent Services Network
Services Access Products for telecom
operators and our Broadcast amp Networks
businesses (Grass Valley and Network
Software)mdashincreased strongly year-on-
year and accounted for over a third of
Group revenues against less than a quar-
ter in 2005
Thomsonrsquos Core Business EBIT for 2006
was euro504 million representing a Core
Business EBIT margin of 88 Thisreflected growth in some key businesses
and cost actions across the Group off-
setting a significant investment in research
and development and some increase in
restructuring expenses
Increased spend on RampD
Research and development expenditure
charged in the Core Business (net of
external funding) rose from 991404221 million in
2005 to 991404279 million in 2006 an increase
of 26 principally in the Systems divi-
sion The Group expanded the number ofproducts and services in the development
phase across its businesses
Return to profit
Losses in Non-Core Continuing and Dis-
continued operations were substantially
lower year-on-year reflecting principally
the exit from heavily loss-making Displays
activities in 2005 and intensified cost-sav-
ing programs in 2006 A major revision
and harmonization of the Grouprsquos North
American healthcare obligations gave rise
to substantial one-time gains and Thom-
son also initiated significant restructuring
of its French Non-Core operations
The good performance of the Core Busi-
ness lower Non-Core and Discontinued
losses and a low reported tax chargeenabled the Group to return a net profit of
99140455 million in 2006 compared to a loss of
991404573 million in the previous year
Good cash flow
strengthened balance sheet
Thomson generated good free cash flow
and strengthened its balance sheet in
2006 Total net financial liabilities on the
balance sheet fell by 991404460 million reflect-
ing a 99140493 million fall in financial and acqui-
sition-related debts and a 991404367 million
reduction in retirement benefit obligations(including healthcare)
Increase in Net Dividend
The Board of Directors proposed a dis-
tribution to shareholders of 991404033 per
share (2005 dividend 991404030) reflecting
confidence in the prospects of the Group
going forward
Outlook 2007-2009
growth in revenues and net income
With the Grouprsquos transformation complete Thomsonrsquos financial focus over the 2007-
2009 period will be to grow revenues and
net income
Thomson serves growing Media Enter-
tainment amp Communications marketsmdashfor
which external estimates(1) indicate com-
pound growth of around 6 over the last
FINANCIAL AND
OPERATIONAL PERFORMANCE
Full year 2006 results
saw a return to profitability
and leave Thomson
well positioned at
the heart of convergence
and digital video
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 6166
59 Thomson Panorama 2006
five years Our digital and electronic busi-
nesses now represent two-thirds of rev-
enues and we believe they are growing
faster than the overall market offsetting
the maturing physical media businesses
Given this profile the Group expects its
revenue growth to be more modest in
2007 but to gather pace over the period
and our overall objective is to show com-pound growth over 2007-2009 in line with
or faster than the overall market
The 2007-2009 period is also expected
to see a sharply reduced impact from
residual Non-Core activities with an end
to losses from the Discontinued Activities
perimeter after 2007 Accordingly Thom-
sonrsquos ambition is to turn its Core Business
growth and profitability and lower impact
from Non-Core into strong growth in net
income over the period 2007-2009
Business operations
Continuous performance improvement is
fundamental to Thomsonrsquos commitment to
create sustainable business models and
long-term value for all stakeholders The
ambitious Group-wide programs launched
in 2004 to improve productivity and
enhance overall performance producedsubstantial results in 2006 and led to new
and strong initiatives for long-term growth
As of the second half of 2006 six ldquoKey
Programsrdquo are monitored at Group level
Clients Software Product Introduction
Operations Transformation and Talent
Management
KEY PROGRAMS IN PLACE
Program Focus
Clients Thomsonrsquos clientregional diversification and
growth of the existing business
through improved Sales amp Marketing
Software Development of integrated software platforms
in all markets (post-production distribution
delivery) and for all types of customer
(professional prosumerhellip)
Product Introduction Ensuring new product roadmaps are in line
with strategy and resource needs have been
identifiedOperations Improving the Grouprsquos cost base cash
generation and working capital
Transformation Multiple programs including initiatives to
improving customer relationship management
worldwide supply chain management
IT transformation as well as Thomsonrsquos RampD
footprint
Talent Management Leveraging human assets with a focus on
talent retention and acquisition
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 6266
60 Thomson Panorama 2006
SUMMARY RESULTS FULL YEAR 2006
In 991404 millions unless otherwise stated 2006(1) 2005(1)
Net revenues 5854 5591(1)
Core Business net revenues 5747 5335
Services 2489 2487
Systems 2684 2262
Technology 547 546
Corporate 27 40
Non-Core continuing operations net revenues 107 256
Core Business EBIT(2) 504 512
Services 160 205
Systems 132 109
Technology 289 277Corporate (77) (79)
EBIT from Non-Core continuing operations (25) (122)
(1) Restated with 2006 discontinued activities according to IFRS 5
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 6366
61 Thomson Panorama 2006
Year ended December 31in 991404 except number of shares 2006 2005 2004
Year ended December 31in 991404 millions 2006 2005(1) 2004(1)
CONSOLIDATED STATEMENTS OF OPERATIONS
(1) Restated with 2006 discontinued activities according to IFRS 5
(2) After deduction of the interests net of tax paid on the subordinated perpetual notes during the period
Continuing operations
Revenues 5854 5591 5980
Cost of sales (4474) (4240) (4594)
Gross margin 1380 1351 1386
Selling marketing general and administrative expenses (674) (638) (653)
Other income (expense) 52 (96) (69)
Research and development expenses (279) (227) (201)
Profit from continuing operations before tax and net finance costs 479 390 463
Interest income 19 30 52
Interest expense (108) (108) (54)
Other financial income (expense) (111) 36 (26)
Finance costs ndash net (200) (42) (28)
Share of profit (loss) from associates (86) (82) (20)
Income tax ndash (68) (93)
Profit from continuing operations 193 198 322
Discontinued operations
Profit (loss) from discontinued operations (138) (771) (883)
Net income (loss) 55 (573) (561)
Attributable to
Equity Holders 55 (574) (559)
Minority interests ndash 1 (2)
Weighted average number of shares
outstandingmdashbasic net of treasury stock 261188858 266539917 273646869
Earnings per share from continuing operations
Basic(2) 067 074 118
Diluted 063 042 111
Earnings per share from discontinued operations
Basic (053) (289) (323)
Diluted (048) (262) (296)Total earnings per share
Basic(2) 014 (215) (205)
Diluted 015 (220) (185)
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 6466
62 Thomson Panorama 2006
CONSOLIDATED BALANCE SHEETS
In 991404 millions December 31 December 31 January 1 December 31 2006 2005 2005(1) 2004
ASSETS
Non-current assets
Property plant and equipment 813 886 1051 1051
Goodwill 1714 1756 1186 1178
Other intangible assets 1071 1150 924 924
Investments in associates 12 204 260 260
Investments and financial assets available-for-sale 266 341 139 113
Derivative financial instruments 7 1 11 ndash
Contract advances 129 173 179 179
Deferred tax assets 397 379 307 301
Other non-current assets 110 182 133 136
Total non-current assets 4519 5072 4190 4142
Current assets
Inventories 366 333 503 568
Trade accounts and notes receivable 1018 1315 1232 1180
Current accounts with associates and joint ventures 97 115 143 143
Derivative financial instruments 8 9 115 ndash
Other current assets 535 644 483 616
Marketable securities ndash 7 58 58
Cash and cash equivalents 1311 996 1845 1848
Assets classified as held for sale 264 369 80 ndash
Total current assets 3599 3788 4459 4413
Total assets 8118 8860 8649 8555
(1) Including the impacts of the first-time application related to IAS 32 and 39 on financial instruments and IFRS 5 on non-current assets held for sale and
discontinued operations
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 6566
63 Thomson Panorama 2006
In 991404 millions December 31 December 31 January 1 December 31 2006 2005 2005(1) 2004
SHAREHOLDERSrsquo EQUITY AND LIABILITIES
Shareholdersrsquo equity
Common stock (273871296 shares at
December 31 2006
with nominal value of euro 375 per share) 1027 1025 1025 1025
Trade accounts and notes payable 1032 1164 1199 1226
Accrued employee expenses 165 166 158 163
Income tax payable 57 47 60 60
Other current liabilities 671 750 746 800
Payables on acquisition of companies 13 138 84 84
Liabilities directly associated with
assets classified as held for sale 232 470 88 ndash
Total current liabilities 3681 4393 3602 3459
Total liabilities 5999 6644 6251 6062
Total shareholderrsquos equity and liabilities 8118 8860 8649 8555
(1) Including the impacts of the first-time application related to IAS 32 and 39 on financial instruments and IFRS 5 on non-current assets held for sale and
discontinued operations
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 6666
Creation and lay-out
Photo credits Nathalie BerhingGAMMA ndash Steacutephane de Bourgies ndash Jean-Franccedilois DeroubaixGAMMA ndash Christine Donnier- ValentinGAMMA ndash Cars copy 2006 Disney Enterprises IncPixar All Rights Reserved ndash Dreamgirls copy 2006 DREAMWORKS
LLC and PARAMOUNT PICTURES All Rights Reserved ndash Poseidon copy 2006 Warner Bros Pictures ndash Sony Bravia Paint
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 1466
While digitization makes this transformation
possible it is the application of internet tech-
nologies that sets the contours of change
Today internet access is part of basic infra-structure like roads or electricity
Video has become so pervasive that the
era of a data-centric Internet seems to
belong to the past The notion that hun-
dreds of millions of individual users could
be creating and sharing video online
through interactive community websites
was unthinkable only a few years ago
Rather than supplant traditional services
the youth-driven explosion of internet
video has contributed to a multiplica-
tion of the ways video content is viewedand delivered Today consumers want to
select from numerous audio and video
access possibilitiesmdashfrom TV and com-
puter screens to cell phones mp3 players
and game consoles
Numerous new business models are being
conceived and tested as the Media Enter-
tainment amp Communications industries
adapt to this shifting environment
bull High-definition becoming mainstream
Already widely adopted for sports TV
movies and news programming high-definition (HD) broadcasting is expected to
become virtually universal in the US within
the next 2-3 years HD programming has
also begun to emerge in Canada France
the UK and elsewhere in Europe with
MPEG-4 advanced compression techno-
logy as a key enabler for roll-out
There are broad consequences of the
move to high-definition for the entire con-
tent creation and distribution ldquochainrdquo for
example all of the equipment involvedfrom cameras which capture images to
the edge-of-network devices which deliver
them needs the processing and storage
capacity required for high-definition video
The entire broadcast chain will benefit from
this positive momentum Overall the global
broadcast media technology industry is
expected to register compound annual
growth of 12 till 2010 (Source Screen
Digest for the International Association of
Broadcasting Manufacturers)
bull Mobile TV ramps up
As they develop new formats and plat-forms for their offerings broadcasters are
building partnerships with mobile phone
operators delivering TV and video-on-
demand programming to cell phones and
other handheld devices Numerous com-
mercial trials and initial commercial services
were launched in 2006 mainly in Europe
and Asia with large-scale deployments
planned for 2007 and 2008 Market ana-
lysts project more than 100 million mobile
TV subscribers worldwide by 2010
bull Ubiquitous IP amp ldquomultiple playrdquo
In order to differentiate their offeringsnetwork operators are offering a con-
stantly expanding range of innovative
value-added telephone video and inter-
net services (ldquotriple-playrdquo) Driven mainly
by cable operators in North America and
telecom operators in Europe these ser-
vices increasingly include mobile and wire-
Video has become pervasive
and the ways content is viewed and
delivered are multiplying
12 Thomson Panorama 2006
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 1566
less options (ldquoquadruple-playrdquo) enabling
subscribers to benefit from integrated
fixed line and cellular phone services and
household-wide wireless connectivity Advanced access products in subscrib-
of the Grouprsquos divisions and profit centersIn the context of the budgetary procedure
performance measurement indicators are
calculated by the divisions analyzed and
reviewed monthly to serve as a reference
for the Grouprsquos monthly reporting
Management reporting and
closing period work
Th om so n uses a co mmon char t of
accounts which is regularly updated The
principal accounting and financial figures
of the operational and functional depart-
ments consolidated at Group level are
analyzed by the Grouprsquos management
control team and reviewed by the Grouprsquos
Executive Committee
The closing process for the half-year and
annual consolidated financial statementsoccurs in two steps The first step con-
sists of a ldquohard closerdquo completed in May
and September leading to a first review by
the statutory auditors The second step
occurs in July and in JanuaryFebruary and
involves the finalization of half-year and
annual consolidated financial statements
under IFRS The Group then proceeds
once a year with a reconciliation of these
results in accordance with US GAAP
Preparation of financial statements
The financial statements are prepared jointly by the finance department and the
General Secretary They are based on
information reported through the annual
reporting and accounting consolidation
processes and on operational and mar-
ket information which is specifically cen-
tralized for the preparation of Thomsonrsquos
Document de Reacutefeacuterence in France and
the submission of Form 20-F in the United
States Half-year and annual financial infor-
mation is reviewed by the Grouprsquos Audit
Committee
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 6066
58 Thomson Panorama 2006
(1) Source PriceWaterhouseCoopers ndash
ldquoGlobal Entertainment and Media Outlook 2006-10rdquo
Revenue growth
Thomson achieved consolidated 2006
net revenues of 9914045854 million up from
9914045591 million in 2005 Revenues for
the Core Business reached 9914045747 mil-
lion (9914045776 million at constant currency)
representing 83 growth over 2005 at
constant currency
Overall the Grouprsquos key growth busi-
nessesmdashContent Services Network
Services Access Products for telecom
operators and our Broadcast amp Networks
businesses (Grass Valley and Network
Software)mdashincreased strongly year-on-
year and accounted for over a third of
Group revenues against less than a quar-
ter in 2005
Thomsonrsquos Core Business EBIT for 2006
was euro504 million representing a Core
Business EBIT margin of 88 Thisreflected growth in some key businesses
and cost actions across the Group off-
setting a significant investment in research
and development and some increase in
restructuring expenses
Increased spend on RampD
Research and development expenditure
charged in the Core Business (net of
external funding) rose from 991404221 million in
2005 to 991404279 million in 2006 an increase
of 26 principally in the Systems divi-
sion The Group expanded the number ofproducts and services in the development
phase across its businesses
Return to profit
Losses in Non-Core Continuing and Dis-
continued operations were substantially
lower year-on-year reflecting principally
the exit from heavily loss-making Displays
activities in 2005 and intensified cost-sav-
ing programs in 2006 A major revision
and harmonization of the Grouprsquos North
American healthcare obligations gave rise
to substantial one-time gains and Thom-
son also initiated significant restructuring
of its French Non-Core operations
The good performance of the Core Busi-
ness lower Non-Core and Discontinued
losses and a low reported tax chargeenabled the Group to return a net profit of
99140455 million in 2006 compared to a loss of
991404573 million in the previous year
Good cash flow
strengthened balance sheet
Thomson generated good free cash flow
and strengthened its balance sheet in
2006 Total net financial liabilities on the
balance sheet fell by 991404460 million reflect-
ing a 99140493 million fall in financial and acqui-
sition-related debts and a 991404367 million
reduction in retirement benefit obligations(including healthcare)
Increase in Net Dividend
The Board of Directors proposed a dis-
tribution to shareholders of 991404033 per
share (2005 dividend 991404030) reflecting
confidence in the prospects of the Group
going forward
Outlook 2007-2009
growth in revenues and net income
With the Grouprsquos transformation complete Thomsonrsquos financial focus over the 2007-
2009 period will be to grow revenues and
net income
Thomson serves growing Media Enter-
tainment amp Communications marketsmdashfor
which external estimates(1) indicate com-
pound growth of around 6 over the last
FINANCIAL AND
OPERATIONAL PERFORMANCE
Full year 2006 results
saw a return to profitability
and leave Thomson
well positioned at
the heart of convergence
and digital video
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 6166
59 Thomson Panorama 2006
five years Our digital and electronic busi-
nesses now represent two-thirds of rev-
enues and we believe they are growing
faster than the overall market offsetting
the maturing physical media businesses
Given this profile the Group expects its
revenue growth to be more modest in
2007 but to gather pace over the period
and our overall objective is to show com-pound growth over 2007-2009 in line with
or faster than the overall market
The 2007-2009 period is also expected
to see a sharply reduced impact from
residual Non-Core activities with an end
to losses from the Discontinued Activities
perimeter after 2007 Accordingly Thom-
sonrsquos ambition is to turn its Core Business
growth and profitability and lower impact
from Non-Core into strong growth in net
income over the period 2007-2009
Business operations
Continuous performance improvement is
fundamental to Thomsonrsquos commitment to
create sustainable business models and
long-term value for all stakeholders The
ambitious Group-wide programs launched
in 2004 to improve productivity and
enhance overall performance producedsubstantial results in 2006 and led to new
and strong initiatives for long-term growth
As of the second half of 2006 six ldquoKey
Programsrdquo are monitored at Group level
Clients Software Product Introduction
Operations Transformation and Talent
Management
KEY PROGRAMS IN PLACE
Program Focus
Clients Thomsonrsquos clientregional diversification and
growth of the existing business
through improved Sales amp Marketing
Software Development of integrated software platforms
in all markets (post-production distribution
delivery) and for all types of customer
(professional prosumerhellip)
Product Introduction Ensuring new product roadmaps are in line
with strategy and resource needs have been
identifiedOperations Improving the Grouprsquos cost base cash
generation and working capital
Transformation Multiple programs including initiatives to
improving customer relationship management
worldwide supply chain management
IT transformation as well as Thomsonrsquos RampD
footprint
Talent Management Leveraging human assets with a focus on
talent retention and acquisition
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 6266
60 Thomson Panorama 2006
SUMMARY RESULTS FULL YEAR 2006
In 991404 millions unless otherwise stated 2006(1) 2005(1)
Net revenues 5854 5591(1)
Core Business net revenues 5747 5335
Services 2489 2487
Systems 2684 2262
Technology 547 546
Corporate 27 40
Non-Core continuing operations net revenues 107 256
Core Business EBIT(2) 504 512
Services 160 205
Systems 132 109
Technology 289 277Corporate (77) (79)
EBIT from Non-Core continuing operations (25) (122)
(1) Restated with 2006 discontinued activities according to IFRS 5
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 6366
61 Thomson Panorama 2006
Year ended December 31in 991404 except number of shares 2006 2005 2004
Year ended December 31in 991404 millions 2006 2005(1) 2004(1)
CONSOLIDATED STATEMENTS OF OPERATIONS
(1) Restated with 2006 discontinued activities according to IFRS 5
(2) After deduction of the interests net of tax paid on the subordinated perpetual notes during the period
Continuing operations
Revenues 5854 5591 5980
Cost of sales (4474) (4240) (4594)
Gross margin 1380 1351 1386
Selling marketing general and administrative expenses (674) (638) (653)
Other income (expense) 52 (96) (69)
Research and development expenses (279) (227) (201)
Profit from continuing operations before tax and net finance costs 479 390 463
Interest income 19 30 52
Interest expense (108) (108) (54)
Other financial income (expense) (111) 36 (26)
Finance costs ndash net (200) (42) (28)
Share of profit (loss) from associates (86) (82) (20)
Income tax ndash (68) (93)
Profit from continuing operations 193 198 322
Discontinued operations
Profit (loss) from discontinued operations (138) (771) (883)
Net income (loss) 55 (573) (561)
Attributable to
Equity Holders 55 (574) (559)
Minority interests ndash 1 (2)
Weighted average number of shares
outstandingmdashbasic net of treasury stock 261188858 266539917 273646869
Earnings per share from continuing operations
Basic(2) 067 074 118
Diluted 063 042 111
Earnings per share from discontinued operations
Basic (053) (289) (323)
Diluted (048) (262) (296)Total earnings per share
Basic(2) 014 (215) (205)
Diluted 015 (220) (185)
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 6466
62 Thomson Panorama 2006
CONSOLIDATED BALANCE SHEETS
In 991404 millions December 31 December 31 January 1 December 31 2006 2005 2005(1) 2004
ASSETS
Non-current assets
Property plant and equipment 813 886 1051 1051
Goodwill 1714 1756 1186 1178
Other intangible assets 1071 1150 924 924
Investments in associates 12 204 260 260
Investments and financial assets available-for-sale 266 341 139 113
Derivative financial instruments 7 1 11 ndash
Contract advances 129 173 179 179
Deferred tax assets 397 379 307 301
Other non-current assets 110 182 133 136
Total non-current assets 4519 5072 4190 4142
Current assets
Inventories 366 333 503 568
Trade accounts and notes receivable 1018 1315 1232 1180
Current accounts with associates and joint ventures 97 115 143 143
Derivative financial instruments 8 9 115 ndash
Other current assets 535 644 483 616
Marketable securities ndash 7 58 58
Cash and cash equivalents 1311 996 1845 1848
Assets classified as held for sale 264 369 80 ndash
Total current assets 3599 3788 4459 4413
Total assets 8118 8860 8649 8555
(1) Including the impacts of the first-time application related to IAS 32 and 39 on financial instruments and IFRS 5 on non-current assets held for sale and
discontinued operations
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 6566
63 Thomson Panorama 2006
In 991404 millions December 31 December 31 January 1 December 31 2006 2005 2005(1) 2004
SHAREHOLDERSrsquo EQUITY AND LIABILITIES
Shareholdersrsquo equity
Common stock (273871296 shares at
December 31 2006
with nominal value of euro 375 per share) 1027 1025 1025 1025
Trade accounts and notes payable 1032 1164 1199 1226
Accrued employee expenses 165 166 158 163
Income tax payable 57 47 60 60
Other current liabilities 671 750 746 800
Payables on acquisition of companies 13 138 84 84
Liabilities directly associated with
assets classified as held for sale 232 470 88 ndash
Total current liabilities 3681 4393 3602 3459
Total liabilities 5999 6644 6251 6062
Total shareholderrsquos equity and liabilities 8118 8860 8649 8555
(1) Including the impacts of the first-time application related to IAS 32 and 39 on financial instruments and IFRS 5 on non-current assets held for sale and
discontinued operations
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 6666
Creation and lay-out
Photo credits Nathalie BerhingGAMMA ndash Steacutephane de Bourgies ndash Jean-Franccedilois DeroubaixGAMMA ndash Christine Donnier- ValentinGAMMA ndash Cars copy 2006 Disney Enterprises IncPixar All Rights Reserved ndash Dreamgirls copy 2006 DREAMWORKS
LLC and PARAMOUNT PICTURES All Rights Reserved ndash Poseidon copy 2006 Warner Bros Pictures ndash Sony Bravia Paint
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less options (ldquoquadruple-playrdquo) enabling
subscribers to benefit from integrated
fixed line and cellular phone services and
household-wide wireless connectivity Advanced access products in subscrib-
of the Grouprsquos divisions and profit centersIn the context of the budgetary procedure
performance measurement indicators are
calculated by the divisions analyzed and
reviewed monthly to serve as a reference
for the Grouprsquos monthly reporting
Management reporting and
closing period work
Th om so n uses a co mmon char t of
accounts which is regularly updated The
principal accounting and financial figures
of the operational and functional depart-
ments consolidated at Group level are
analyzed by the Grouprsquos management
control team and reviewed by the Grouprsquos
Executive Committee
The closing process for the half-year and
annual consolidated financial statementsoccurs in two steps The first step con-
sists of a ldquohard closerdquo completed in May
and September leading to a first review by
the statutory auditors The second step
occurs in July and in JanuaryFebruary and
involves the finalization of half-year and
annual consolidated financial statements
under IFRS The Group then proceeds
once a year with a reconciliation of these
results in accordance with US GAAP
Preparation of financial statements
The financial statements are prepared jointly by the finance department and the
General Secretary They are based on
information reported through the annual
reporting and accounting consolidation
processes and on operational and mar-
ket information which is specifically cen-
tralized for the preparation of Thomsonrsquos
Document de Reacutefeacuterence in France and
the submission of Form 20-F in the United
States Half-year and annual financial infor-
mation is reviewed by the Grouprsquos Audit
Committee
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58 Thomson Panorama 2006
(1) Source PriceWaterhouseCoopers ndash
ldquoGlobal Entertainment and Media Outlook 2006-10rdquo
Revenue growth
Thomson achieved consolidated 2006
net revenues of 9914045854 million up from
9914045591 million in 2005 Revenues for
the Core Business reached 9914045747 mil-
lion (9914045776 million at constant currency)
representing 83 growth over 2005 at
constant currency
Overall the Grouprsquos key growth busi-
nessesmdashContent Services Network
Services Access Products for telecom
operators and our Broadcast amp Networks
businesses (Grass Valley and Network
Software)mdashincreased strongly year-on-
year and accounted for over a third of
Group revenues against less than a quar-
ter in 2005
Thomsonrsquos Core Business EBIT for 2006
was euro504 million representing a Core
Business EBIT margin of 88 Thisreflected growth in some key businesses
and cost actions across the Group off-
setting a significant investment in research
and development and some increase in
restructuring expenses
Increased spend on RampD
Research and development expenditure
charged in the Core Business (net of
external funding) rose from 991404221 million in
2005 to 991404279 million in 2006 an increase
of 26 principally in the Systems divi-
sion The Group expanded the number ofproducts and services in the development
phase across its businesses
Return to profit
Losses in Non-Core Continuing and Dis-
continued operations were substantially
lower year-on-year reflecting principally
the exit from heavily loss-making Displays
activities in 2005 and intensified cost-sav-
ing programs in 2006 A major revision
and harmonization of the Grouprsquos North
American healthcare obligations gave rise
to substantial one-time gains and Thom-
son also initiated significant restructuring
of its French Non-Core operations
The good performance of the Core Busi-
ness lower Non-Core and Discontinued
losses and a low reported tax chargeenabled the Group to return a net profit of
99140455 million in 2006 compared to a loss of
991404573 million in the previous year
Good cash flow
strengthened balance sheet
Thomson generated good free cash flow
and strengthened its balance sheet in
2006 Total net financial liabilities on the
balance sheet fell by 991404460 million reflect-
ing a 99140493 million fall in financial and acqui-
sition-related debts and a 991404367 million
reduction in retirement benefit obligations(including healthcare)
Increase in Net Dividend
The Board of Directors proposed a dis-
tribution to shareholders of 991404033 per
share (2005 dividend 991404030) reflecting
confidence in the prospects of the Group
going forward
Outlook 2007-2009
growth in revenues and net income
With the Grouprsquos transformation complete Thomsonrsquos financial focus over the 2007-
2009 period will be to grow revenues and
net income
Thomson serves growing Media Enter-
tainment amp Communications marketsmdashfor
which external estimates(1) indicate com-
pound growth of around 6 over the last
FINANCIAL AND
OPERATIONAL PERFORMANCE
Full year 2006 results
saw a return to profitability
and leave Thomson
well positioned at
the heart of convergence
and digital video
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59 Thomson Panorama 2006
five years Our digital and electronic busi-
nesses now represent two-thirds of rev-
enues and we believe they are growing
faster than the overall market offsetting
the maturing physical media businesses
Given this profile the Group expects its
revenue growth to be more modest in
2007 but to gather pace over the period
and our overall objective is to show com-pound growth over 2007-2009 in line with
or faster than the overall market
The 2007-2009 period is also expected
to see a sharply reduced impact from
residual Non-Core activities with an end
to losses from the Discontinued Activities
perimeter after 2007 Accordingly Thom-
sonrsquos ambition is to turn its Core Business
growth and profitability and lower impact
from Non-Core into strong growth in net
income over the period 2007-2009
Business operations
Continuous performance improvement is
fundamental to Thomsonrsquos commitment to
create sustainable business models and
long-term value for all stakeholders The
ambitious Group-wide programs launched
in 2004 to improve productivity and
enhance overall performance producedsubstantial results in 2006 and led to new
and strong initiatives for long-term growth
As of the second half of 2006 six ldquoKey
Programsrdquo are monitored at Group level
Clients Software Product Introduction
Operations Transformation and Talent
Management
KEY PROGRAMS IN PLACE
Program Focus
Clients Thomsonrsquos clientregional diversification and
growth of the existing business
through improved Sales amp Marketing
Software Development of integrated software platforms
in all markets (post-production distribution
delivery) and for all types of customer
(professional prosumerhellip)
Product Introduction Ensuring new product roadmaps are in line
with strategy and resource needs have been
identifiedOperations Improving the Grouprsquos cost base cash
generation and working capital
Transformation Multiple programs including initiatives to
improving customer relationship management
worldwide supply chain management
IT transformation as well as Thomsonrsquos RampD
footprint
Talent Management Leveraging human assets with a focus on
talent retention and acquisition
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60 Thomson Panorama 2006
SUMMARY RESULTS FULL YEAR 2006
In 991404 millions unless otherwise stated 2006(1) 2005(1)
Net revenues 5854 5591(1)
Core Business net revenues 5747 5335
Services 2489 2487
Systems 2684 2262
Technology 547 546
Corporate 27 40
Non-Core continuing operations net revenues 107 256
Core Business EBIT(2) 504 512
Services 160 205
Systems 132 109
Technology 289 277Corporate (77) (79)
EBIT from Non-Core continuing operations (25) (122)
(1) Restated with 2006 discontinued activities according to IFRS 5
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61 Thomson Panorama 2006
Year ended December 31in 991404 except number of shares 2006 2005 2004
Year ended December 31in 991404 millions 2006 2005(1) 2004(1)
CONSOLIDATED STATEMENTS OF OPERATIONS
(1) Restated with 2006 discontinued activities according to IFRS 5
(2) After deduction of the interests net of tax paid on the subordinated perpetual notes during the period
Continuing operations
Revenues 5854 5591 5980
Cost of sales (4474) (4240) (4594)
Gross margin 1380 1351 1386
Selling marketing general and administrative expenses (674) (638) (653)
Other income (expense) 52 (96) (69)
Research and development expenses (279) (227) (201)
Profit from continuing operations before tax and net finance costs 479 390 463
Interest income 19 30 52
Interest expense (108) (108) (54)
Other financial income (expense) (111) 36 (26)
Finance costs ndash net (200) (42) (28)
Share of profit (loss) from associates (86) (82) (20)
Income tax ndash (68) (93)
Profit from continuing operations 193 198 322
Discontinued operations
Profit (loss) from discontinued operations (138) (771) (883)
Net income (loss) 55 (573) (561)
Attributable to
Equity Holders 55 (574) (559)
Minority interests ndash 1 (2)
Weighted average number of shares
outstandingmdashbasic net of treasury stock 261188858 266539917 273646869
Earnings per share from continuing operations
Basic(2) 067 074 118
Diluted 063 042 111
Earnings per share from discontinued operations
Basic (053) (289) (323)
Diluted (048) (262) (296)Total earnings per share
Basic(2) 014 (215) (205)
Diluted 015 (220) (185)
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62 Thomson Panorama 2006
CONSOLIDATED BALANCE SHEETS
In 991404 millions December 31 December 31 January 1 December 31 2006 2005 2005(1) 2004
ASSETS
Non-current assets
Property plant and equipment 813 886 1051 1051
Goodwill 1714 1756 1186 1178
Other intangible assets 1071 1150 924 924
Investments in associates 12 204 260 260
Investments and financial assets available-for-sale 266 341 139 113
Derivative financial instruments 7 1 11 ndash
Contract advances 129 173 179 179
Deferred tax assets 397 379 307 301
Other non-current assets 110 182 133 136
Total non-current assets 4519 5072 4190 4142
Current assets
Inventories 366 333 503 568
Trade accounts and notes receivable 1018 1315 1232 1180
Current accounts with associates and joint ventures 97 115 143 143
Derivative financial instruments 8 9 115 ndash
Other current assets 535 644 483 616
Marketable securities ndash 7 58 58
Cash and cash equivalents 1311 996 1845 1848
Assets classified as held for sale 264 369 80 ndash
Total current assets 3599 3788 4459 4413
Total assets 8118 8860 8649 8555
(1) Including the impacts of the first-time application related to IAS 32 and 39 on financial instruments and IFRS 5 on non-current assets held for sale and
discontinued operations
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63 Thomson Panorama 2006
In 991404 millions December 31 December 31 January 1 December 31 2006 2005 2005(1) 2004
SHAREHOLDERSrsquo EQUITY AND LIABILITIES
Shareholdersrsquo equity
Common stock (273871296 shares at
December 31 2006
with nominal value of euro 375 per share) 1027 1025 1025 1025
Trade accounts and notes payable 1032 1164 1199 1226
Accrued employee expenses 165 166 158 163
Income tax payable 57 47 60 60
Other current liabilities 671 750 746 800
Payables on acquisition of companies 13 138 84 84
Liabilities directly associated with
assets classified as held for sale 232 470 88 ndash
Total current liabilities 3681 4393 3602 3459
Total liabilities 5999 6644 6251 6062
Total shareholderrsquos equity and liabilities 8118 8860 8649 8555
(1) Including the impacts of the first-time application related to IAS 32 and 39 on financial instruments and IFRS 5 on non-current assets held for sale and
discontinued operations
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Creation and lay-out
Photo credits Nathalie BerhingGAMMA ndash Steacutephane de Bourgies ndash Jean-Franccedilois DeroubaixGAMMA ndash Christine Donnier- ValentinGAMMA ndash Cars copy 2006 Disney Enterprises IncPixar All Rights Reserved ndash Dreamgirls copy 2006 DREAMWORKS
LLC and PARAMOUNT PICTURES All Rights Reserved ndash Poseidon copy 2006 Warner Bros Pictures ndash Sony Bravia Paint
8122019 Panorama 2006
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Right Thomsonrsquos security solutions
will be key in protecting content from piracy
as the trend to digitization continues
bull Broadcast and network systems
The rapid spread of high-def inition (HD)
programming helped fuel strong growth in
the Grouprsquos broadcast markets in 2006In a global broadcast market estimated
at just under 9914048 billion Thomson ranks
No2 worldwide with approximately 10
market share in 2006 In addition Thom-
son gained or maintained the Ndeg1 position
worldwide in several strategic and fast-
growing industry segments such as high
power TV and radio transmitters video
servers production and routing switchers
HD broadcast cameras and non-linear HD
news editing software all of which dem-
onstrated double-digit growth in 2006
Overall the business is positioned for
further expansion in the extended broad-cast amp professional audio-video (Pro-AV)
market In 2006 Thomsonrsquos product and
service offering also benefited from healthy
demand from telecom and cable opera-
tors seeking to complete their offering in
Video on Demand and mobile TV Finally
softswitch and telecom network software
sales continued to register strong growth
during the year well above the carrier
grade voice-over-IP market According
to a report from the Multimedia Research
Group (IPTV Market Leaders Report
March 2007) Thomson ranks No1 world-
wide by number of IPTV subscribers usingthe Grouprsquos middleware
bull Broadband access products
The market for devices required for access
to broadband networks which Thomson
serves (satellite cable and IP set-top
boxes cable and DSL modems routers
residential phones and advanced gate-
ways) reached almost 99140412 billion in 2006
increasing 5 over 2005 Thomson is the
No1 player worldwide in this market withan estimated 17 market share
In 2006 Thomson shipped 111 million
satellite set-top boxes 2 million cable
set-top boxes and 10 million access
products for telecoms operatorsmdasha total
of 231 million access products in the year
Advanced gateways continued to be the
principal driver of growth in telecoms for
example with the roll-out of the France
Telecom Liveboxtrade and the ramp up of the
BT Hub quadruple-play enabled gateway
in the UK
Cable and telecommunications markets
were particularly buoyant registering dou-
ble digit rates of growth both in volume and
value Though markets for satellite set-top
boxes were less dynamic leading satellite
network operators have announced ambi-
tious expansion programs to enable them
to better compete in the coming years
bull Packaged media (DVD)
Thomson replicated 144 bill ion DVDs in
2006 an increase of 75 on 2005 driven
by a particularly strong fourth quarter and
significant growth in Europe while North Americarsquos growth was more modest In
this mature market Thomson produced
200 million more DVD units in 2006 than
its direct competitor widening its lead as
the No1 worldwide DVD replicator by
volume Thomson had an estimated 30
market share of the 5 billion disc replica-
14 Thomson Panorama 2006
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tion market in 2006 in North America
Europe and Australia
bull Film and digital cinemaIn 2006 Film Services volumes dropped
by 6 compared with 2005 with approxi-
mately 5 billion feet of film processed The
decline was due mainly to a weaker film
slate in the second half of the year
With a leadership position in the film print-
ing business and around 45 market
share in 2006 Thomson is well positioned
to drive the transition from film to digital
cinema that will fuel future growth in the
long term In particular the construction of
digital cinema installations is expected to
drive an increase in related digital cinemaservices such as content mastering and
distribution
bull Content services
Overall the content services market is
estimated at over 9914044 billion in 2006 post-
production accounting for the largest slice
at 99140414 billion Thomson holds the No2
worldwide position with around 7 mar-
ket share In 2006 net revenues from the
Content Services business grew modestly
reflecting organic growth in higher-end
services such as digital intermediates (DI)
and visual effects (VFX) offset by pricingpressure in more commoditized services
The fastest growing segments are in out-
sourcing design visuals for feature films
TV commercial advert ising and video
games including visual effects animation
and other computer-generated services
Thomson is ideally positioned to benefit
from these outsourcing trends including
in emerging markets such as India
bull Network ServicesOver the past two years Thomson has
built upon its broad understanding of
video systems and networks to establish
a leading position in the market for video
network management services broadcast
management services cinema advertising
and retail media networks
During 2006 Thomson entered into major
contracts to manage playout for channels
such as TV5 Monde France 24 NOB in
the Netherlands and ITV plc in the UK By
the end of 2006 Thomson was providing
managed services to close to 200 TV chan-nels in Europe North America and Asia
In 2006 out-of-home video confirmed
its status as one of the fastest growing
Network Services marketsmdashmanaging
video networks in retail stores or anywhere
outside the home environment Thomson
ranks No1 in the worldrsquos largest out-of-
home video market the US with an esti-
mated market share close to 30 and
made headway in expanding into new
geographies during the year A coopera-
tion agreement was signed with CGEN
for example to develop an out-of-homeadvertising network throughout the Big
Cafeacute internet cafeacute chain in China
15 Thomson Panorama 2006
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TECHNOLOGY Thomsonrsquos Technology division develops and monetizes audio and video technologies Acting as an innovation
hub in a range of areasmdashfrom next generation compression and content protection technologies to electronic
content distribution over mobile and broadband networksmdashthe division is focused on the Media Entertainment
amp Communications industriesrsquo short- and long-term technology needs
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From digital cinematography and tape-
less post-production workflows to con-
tent distribution and access systems
the fruits of Thomsonrsquos research enable
customers to take early advantage of the
realm of possibilities opened up by digital
technologies
Strategy
Thomson is techno logy-focused and
continues to invest in RampD in order to
maintain its intellectual property leader-
ship and to take advantage of the main
growth drivers of the digital video indus-
tries These include the accelerating
adoption of high definition mobile con-
tent on-demand content consumer-
generated content fixed-mobile conver-
gence triple-play devices connected
home networking and internet-based
and advertising-based content delivery
A particular focus will be on developmentof integrated software solutions over the
period 2007-2009
In addition to extensive technology trans-
fer activities in support of the Systems
and Services divisions the Technology
division monetizes technology in three
ways through licensing of patents and
trademarks integrated circuit design and
software development
Achievements
Resources dedicated to Group-wide
research and development increased in
2006 in line with Thomsonrsquos strategic
focus on RampD The Technology division
also advanced innovations in its five key
technology domains video and audio
compression networking and communi-cations security storage and recording
and signal acquisition and processing
Thomsonrsquos commitment to open standards
continued in 2006 and is testament to the
Grouprsquos dedication to advancing tech-
nology solutions throughout the Media
Entertainment amp Communications indus-
tries To ensure that industry partners and
customers benefit from standardized solu-
tions many Thomson research initiatives
are carried out in cooperation with other
industry leaders For example Thomson
is leading the European Networked andElectronic Media (NEM) platform designed
to accelerate the pace of innovation and
the convergence between the audiovisual
content and telecom sectors The Group
is also the leader of Quaero the European
cooperative program aimed at developing
technologies and applications to enable
audio and video content to be searched
In 2006 Quaero obtained the backing of
the Agency for Industrial Innovation (AII)
TECHNOLOGY
DEVELOPING VIDEO TECHNOLOGIES
In an environment
undergoing rapid
and fundamental
technological change
a rich technology
legacy and focused
Research amp Development
(RampD) programs enable
Thomson to stay on
the cutting edge of
innovation
Left Researcher in Thomsonrsquos
research center Beijing
Research is focused on
increasing the output and
quality of long-term research
while expanding Thomsonrsquos
intellectual property portfolio
Right Thomsonrsquos NexGuardtrade
content security solution
TECHNOLOGY SYSTEMS SERVICES
18 Thomson Panorama 2006
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Thomson is currently involved in a variety
of standards bodies and with key research
and development partners including INRIA
(Institut national de recherche en infor-
matique et automatique ) in France HHI
(Heinrich Hertz Institute ) in Germany and
universities in Europe and the US
A division driving RampD
The Technology division which comprises
four business unitsmdashResearch Software
amp Technology Solutions Silicon Solutions
and Intellectual Property amp Licensingmdashpro-
vides both the foundation for RampD pro-
grams carried out throughout the Group
and the main impetus for its technological
evolutions
The divisionrsquos strength is to allow the fruits
of fundamental research to be shared
and developed inside the Group so that
business units can better address theircustomersrsquo needs while these same and
other technologies may also be licensed
to outside parties thus monetizing the
Grouprsquos innovation efforts
Thomson breakthroughs are often shared
to provide customers with broad-based
compatibility and long-term availability
Thomsonrsquos innovative NexGuardtrade water-
marking solution for example has been
INTRODUCING THE AGNOSTIC TIGER
The co-existence of two rival formats for high-definition (HD) DVDs presents
a special challenge for those who compress and author video content
Thomson Research engineers have responded with the development of
Tiger an advanced DVD authoring system Tiger combines
an advanced video coding system with an innovative user interface
enabling customers to make their workflows more efficient and streamlined
while providing the highest quality images in both HD formats
Top security for content
Protecting digital content is a major concern for those whose business involves creating
processing or distributing digital audio and video Thomsonrsquos advanced content security solution
NexGuardtrade offers comprehensive protection against piracy or unauthorized usage
Whatever the application or mediummdashfrom duplication to secure professional workflows to
online content deliverymdashNexGuardtrade streamlines the secure storage transfer or viewing of
digital content using encryption forensic watermarking security tokens and other
advanced software techniques
adopted by numerous Media amp Entertain-
ment industry players from post-pro-
duction houses to digital cinema server
vendors Likewise the HD DVD Forum
an industry-standardization group has
adopted Thomsonrsquos Film Grain Technol-
ogytrade specification a revolutionary method
for ensuring compressed video retains the
classic granular visual quality of film thatis still preferred by many in the creative
community
TECHNOLOGY SYSTEMS SERVICES
19 Thomson Panorama 2006
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Technology to serve the Media Entertainment amp Communications industries
Thomsonrsquos five key technology domains
bull Video and audio compression
bull Networking and communications
bull Security
bull Storage and recording
bull Signal acquisition and processing
Thomsonrsquos four system programs
bull Content production and management for cinema
bull Content production and management for broadcast
bull Electronic content distribution on broadband networks
bull Electronic content distribution on mobile networks
20 Thomson Panorama 2006
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Left Silicon microchip As system value and
intelligence is increasingly embedded in chips
Thomson is placing increasing emphasis on
in-house silicon design and development efforts
Research
Thomson has successfully intensi fied
research efforts over the last two years
in order to serve the short and long-term
needs of the Media Entertainment amp
Communications industries leveraging
both close relationships with customers
and deep knowledge of video
New ways to acquire process compress
store and distribute digital content today
provide a central focus for the ongoing
programs at Thomsonrsquos seven research
centers located in Rennes and Paris in
France Hanover and Villingen in Germany
Burbank and Princeton in the US and Bei-
jing in China These range from innovative
coding schemes to advanced methods
for processing audio and video signals
The networking component is especially
important as Thomson engineers work
on solutions to enable operators of fixedand mobile telecom cable and satellite
networks to distribute content more eco-
nomically and flexibly and to introduce
new services
Software amp Technology Solutions
The development of content security solu-
tions counts among the critical initiatives
within the Software amp Technology Solutions
business unit Thomson experts are working
on new ways to help Media Entertainment
amp Communications customers protect their
digital rights They develop and distribute
innovative solutions in the fields of forensic
marking content protection secure con-
tent distribution and anti-counterfeiting
HIGH DEFINITION AT A GALLOP
As high-definition video sweeps the video and TV world video compression
is one of the greatest challenges facing the Media Entertainment amp
Communications industries and companies who need to process and
distribute HD images Thomson is helping meet this challenge through
the Mustang HD video processing engine an advanced chip set that helps
make HD images more compact Using the talents of Thomsonrsquos
Technology and Systems divisions the patented Mustang technology
designed for a wide variety of broadcast equipment has been integrated
into an innovative Grass Valley branded HD video coding device Packing
HD images so compactly greatly reduces costs for broadcasters making it
more commercially attractive for them to adopt advanced MPEG-4 HD
TECHNOLOGY SYSTEMS SERVICES
21 Thomson Panorama 2006
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ldquoIrsquove always worked in video compression RampD for a number of hi-tech companies
but Thomson is different itrsquos truly video-centric Everyonemdashnot just the compression
research engineersmdashunderstands the importance of video technology to the core business
Irsquom in charge of our compression research activities worldwide a key technology
thatrsquos essential for distributing video over networks or storing video on physical media
But what I most enjoy is drawing on my experience in patents to mentor researchers on
preparing patent disclosures for new inventions Preparing patent disclosures is a pretty
unique skill and one thatrsquos key in strengthening the Grouprsquos intellectual property portfoliordquo
Jill Boyce Compression Domain Director Corporate Research
ADDING A NEW DIMENSION TO MUSIC
Movie-goers and people with home cinema installations are accustomed to
the three-dimensional sound that enables them to hear each instrument
voice or sound effect in a different place The concept is known as ldquoSurround
Soundrdquo and it now exists in mp3 format
Developed in cooperation with Germanyrsquos Fraunhofer Institute for Integrated
Circuits mp3 Surround takes the mp3 digital coding system one step furtherwithout making mp3 files larger The new technology is also backwards
compatible so that music with mp3 Surround sounds great with existing players
The technology can be applied in a broad spectrum of applications
including web-based music distribution broadcasting systems PC-related
audiovisual and gaming applications
This yearrsquos achievements covered multiple
domains of technology The businessrsquo
leading watermarking technology embedsinvisible indestructible and fully traceable
pieces of information into content so that
the owner origin or recipient can be identi-
fied The technology was launched for digi-
tal cinema applications and successfully
licensed to most server manufacturers
Thomson technologies also enabled for
example the development of an advanced
TV audience measurement system and a
solution allowing authentification of VIP
accreditation badges during Soccer World
Cup in Germany in 2006 The businessrsquo
consulting activity also implemented an
enterprise-wide security solution for a majorinternational broadcaster during the year
The Software amp Technology Solutions busi-
ness is now expanding from watermarking
into other promising technological areas
such as digital rights management (DRM)
to manage conditional access to content
in the context of professional workflows
content filtering to monitorfilter distribution
of copyrighted content or new protocols
to optimize and secure content distribution
platforms
TECHNOLOGY SYSTEMS SERVICES
22 Thomson Panorama 2006
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Silicon Solutions
As more and more system value and intel-
ligence is embedded onto silicon micro-
chips Thomson has placed increased
emphasis on in-house silicon design and
development efforts These range from
integrated circuits for communications and
set-top boxes to chips designed specifi-cally for broadcasting and mobile devices
The growing sophis tication of home
network access devices helps explain
why more than 200 Thomson engineers
are continuing to develop innovative
integrated circuits As with all Thomson
technology innovations our silicon invest-
ment is focused equally on increasing our
leadership in set-top boxes as much as
on providing integrated circuit solutions
to industry leaders
Intellectual Property amp Licensing
Thomsonrsquos extraordinarily rich intellectual
property assets include over 55000 pat-
ents derived from more than 7000 inven-
tions with some 600 new invention patent
applications filed in 2006
Thomsonrsquos patent portfolio remains a key
pillar for both the Technology division and
the Group as a whole with patented tech-
nologies including digital decoders high-
definition TV optical module patents for
Thomsonrsquos rich intellectual property
assets include over 55000 patents
CD and DVD players MPEG video com-
pression mp3 audio compression format
interactive TV and storage technologies
Having successfully migrated the propor-
tion of income derived from digital rather
than analogue technologies digital tech-
nology-based programs now account for
over 80 of the Grouprsquos large licensingrevenue stream with over 950 licensing
contracts in place worldwide at year-end
2006
TECHNOLOGY SYSTEMS SERVICES
23 Thomson Panorama 2006
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Thomsonrsquos Systems division provides video solutions and integrates video network systems for its customers in
the broadcast cable satellite terrestrial and telecoms markets The divisionrsquos offering spans image capture to
network distribution to the provision of access products enabling operators to enrich their service offerings to
subscribers
SYSTEMS
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Today people benefit from virtually instan-
taneous access to an increasingly custom-
ized range of content available through
a growing set of access possibilities As
internet and digital technologies con-
tinue to infuse the Media Entertainment
amp Communications industries Thomson
is focusing on opportunities arising from
this new paradigm alongside its traditionalcore markets These range from traditional
broadcast equipment to the growing mar-
ket for professional audio-video systems
mobile and IP (Internet Protocol) TV to
booming demand for residential broad-
band services
Strategy
Thomsonrsquos Systems division comprises
three activities Access Products and the
Broadcast amp Networks businesses The
Access Products business aims to deliver
key set-top box platforms for satellite andcable customers and gateway products
for telecom operators The Broadcast
amp Networks businesses are focused on
video network integration bringing to
market advanced products and solutions
to enable network operators broadcast-
ers and film-makers to benefit from the
latest technologies in image acquisition
compression switching and storage The
Network Software business aims to enable
the introduction of new multiple-play ser-
vices based on fixed-mobile convergence
IPTV and broadband telephony
Achievements
Overall the Systems division improved
diversified its customer base in 2006 In
Access Products Thomson consolidated
its leadership of worldwide markets forset-top boxes gateways and modems for
telecom satellite and cable network oper-
ators and service providers while achiev-
ing good growth in higher-end products
in the second half of the year In Grass
Valley demand for high-defin ition (HD)
acquisition production and distribution
systems combined with growing demand
for IT- and IP-based broadcast solutions to
drive growth while in Network Software
Thomsonrsquos SmartVis ion IPTV system
gained good ground with more than 30
IPTV and mobile TV deployments to date
and the worldrsquos largest installed base
Access Products
The Access Products business was driven
in 2006 by the ongoing rapid expansion of
triple (video voice and data) and quadru-
ple play services (also fixed-mobile con-
vergence) offered by cable and telecom
network operators and by the increasing
spread of high definition (HD) broadcasts
among satellite network operators
SYSTEMS
PROVIDING VIDEO SOLUTIONS
From image capture to
distribution via
all types of network
Thomson is reaping the benefits of
growing market demand for
video network integration
TECHNOLOGY SYSTEMS SERVICES
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Thomson further consolidated its market
leading position for dual and triple-play
gateways to telecom operators and inter-
net service providers The established mar-
ket leader for DSL modems and routers
since 1999 Thomson extended its lead
over the competition in 2006 shipping
more than 42 million DSL modems and
gateways during the first half of the yearand 10 million units overall in 2006
Growing market demand for sophisticated
home networking eco-systems able to
accommodate new services over time was
underlined by the success of Thomsonrsquos
Livebox gateway for France Telecom
Early in 2007 Thomson supported large-
scale deployment of the Livebox which
provides access to high-speed wireless
Internet Voice-over-IP IPTV network
gaming fixed-mobile convergence (unik)
and other services
An advanced Thomson gateway also
enabled the UKrsquos leading operator to
launch its innovative Total Broadband ser-
vice in June 2006 Bri tish Telecomrsquos BT
Home Hubtrade is a quadruple-play gateway
designed to support BTrsquos full range of ser-
vices including both BT Total Broadband
and BT Broadband Talk in addition to
providing wired and wireless broadband
connectivity for fixed and mobile phones
PCs and other networked devices It also
Mobile video in Italy
Thomsonrsquos product and service offering benefited in 2006 from increased interest from cable and
telecom operators to complete their offering for Video-on-Demand and mobile TV The Olympic Winter Games
notably provided a showcase for Thomsonrsquos capability to deliver video programming to cell phones and
other mobile devices In the wake of the successful Olympic trial Telecom Italia turned to Thomson
for the systems and technology that enabled it to commercially launch a mobile offering including TV and
sports programming in June 2006
incorporates the latest wideband audio
codec providing near CD-quality sound
for voice and video calls
As broadband services become more and
more of a mass-market service providers
must ensure that their services are both
differentiating and easy to consume This
trend calls for the emergence of simpleyet very technologically-advanced and
software-laden devices Such devices
connect to the home-networking gateway
and make it natural to consume a broad-
band-delivered service One example
is the Music Box first made available to
subscribers of AOLrsquos broadband service
in France which streams Internet-based
radio stations or locally stored music files
to a homersquos legacy Hi-Fi audio system
Strong growth in the cable network sys-
tems market which is projected to expand
another 20 in 2007 helped drive Thom-son toward two major sales milestones
in 2006 two million cable set-top boxes
and ten million cable modems Driven by
operatorsrsquo needs to provide more and
more sophisticated services Thomson
has extended its product range since
2005 to include interactive double- and
triple-play set-top boxes as well as HD
set-top boxes with advanced functions
such as personal video recorders (PVR)
Among the cable operators to have
TECHNOLOGY SYSTEMS SERVICES
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Total Broadband for BT
An advanced Thomson gateway enabled the UKrsquos leading telecommunications operator British Telecom
to launch its innovative Total Broadband service in June 2006 This quadruple-play gateway
known as the BT Home Hubtrade features video voice data and wireless capabilities
It is supporting BTrsquos full range of services including wired and wireless broadband connectivity
for fixed and mobile phones PCs and other networked devices
28 Thomson Panorama 2006
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Left Thomson Grass Valley branded
outside broadcast van under construction
Right Camera operator Kim Marks (left)
a camera first assistant Chris Blauvelt (center)
and a camera second assistant
Jason McCormick (right) line up a scene
with the Grass Valley Viper FilmStreamtrade
camera for the David Fincher feature Zodiac
Photo courtesy Paramount Pictures
selected Thomson in 2006 were Portu-
galrsquos leading Pay-TV Operator TV Cabo
UPC E-Vision Kabel Deutschland and
Premiegravere in Europe Net Serviccedilos in Latin America and StarHub and Dalian Cable
TV in Asia
Thomson expanded its footprint in satel-
lite in Europe notably in the UK and in
Asia where product deliveries began for
Tata Sky the Indian satellite broadcaster
In the UK Thomson delivered the Sky
HD box an MPEG-4 set-top box with
Personal Video Recorder which enabled
the successful launch of the countryrsquos first
high-definition TV service in May 2006
The largest satel li te television service
provider in the US DIRECTV also chose Thomson to expand its HD programming
offering with the delivery of the H20 satel-
lite receiver
Leveraging expertise in free-to-air digi-
tal terrestrial receivers and capabilities in
high-definition Thomson also delivered
the first MPEG-4 HDTV receivers for digital
terrestrial TV to French operators Canal +
and TPS during the year
In telephony Thomson remains a lead-
ing supplier of corded and cordless tele-
phones which are sold at retail outletsunder the RCA GE and Alcatel brands as
well as under third-party brands for opera-
tor sales In 2006 Thomson capitalized
on its leadership position in DECT (Digital
Enhanced Cordless Telecommunications)
in Europe by expanding into the American
retail market
Broadcast amp Networks
The Broadcast amp Networks businesses
gained market share in 2006 particularlyin networks and systems integration and
expanded in the promising Pro-AV (profes-
sional audio-video) market
Continuing trends in this market are high-
definition (HD) broadcasting the merging
of IT and broadcast technology the move
to a tape-less file-based approach to video
storage and management and power-
ful MPEG-4 HD compression technology
which allows content to be delivered to mul-
tiple audiences over multiple platforms
One highly visible application of ThomsonrsquosGrass Valley brand of HD image acquisi-
tion and production systems was the 2006
FIFA World Cup in Germany seen by a
billion viewers around the world Broad-
casters covering the event relied on more
than 182 Grass Valley brand cameras
10 Grass Valley video switching systems
12 large scale Grass Valley video routing
systems and hundreds of other devices to
provide faultless HD images
Leveraging its market leading position
Thomson est imates tha t Grass Valley
HD cameras now account for 50 of theglobal market Most major outside broad-
cast production companies in the world
use Grass Valley branded HD camera sys-
tems with more than 1500 in use
High-definition television is also about
news Based on internal Thomson esti-
mates Grass Valley solutions accounted
for nearly 80 of HD news installations
worldwide in 2006 including CBS Net-
work-owned amp operated stations in the
TECHNOLOGY SYSTEMS SERVICES
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IGNITE HD
TV news operations can work more quickly and efficiently by using information
technology The industryrsquos first and most complete link between the control room
and the newsroom HD Ignite enables a single technician to handle all
news production requirements During its initial months on the market in the US
HD Ignite was selected by such early adaptors as ABC Stations Group
customers in San Francisco and Chicago and Cox Broadcasting customers in
Atlanta San Francisco Charlotte North Carolina and Dayton Ohio
Telecom service providers are working to
provide more content and value-added
services over their broadband lines
Thomsonrsquos SmartVision and
Cirpack software solutions facilitate
their strategies for rapid deployment of
IPTV and triple-play services
US Al Jazeera Englishmdasha global channelbased in the Middle Eastmdashand Belgiumrsquos
VTM (Vlaamse Televisie Maatschappij )
Thomson is the only supplier to provide
an automated production system (Ignite
HD) a full suite of non-linear editing sys-
tems and a news playout systemmdashall of
which enable broadcasters to move to HD
affordably and to speed up and automate
their workflows
MPEG-4 is one of the enabling technolo-
gies which allows operators of telecom-
munications networks to bring TV to
their subscribers in addition to voice andinternet access This is one element in a
complete Thomson systems offering For
example Spanish operator Telefoacutenica
selected Thomson for a range of equip-
ment and systems to upgrade and expand
its rapidly growing ldquoImageniordquo service In
the US Falcon Communications a lead-
ing systems integrator offers a turnkey
IPTV solution featuring encoding content
delivery service management and access
products from Thomson
bull Professional Audio-Video
Thomson serves the rapidly growing mar-ket for professional audiovisual (ProAV)
solutions for corporate institutional wor-
ship and governmental media centers and
networks Thomsonrsquos expansion in ProAV
has been achieved through organic prod-
uct development as well as the integra-
tion of Pro-AV products from Canopus
the Japanese company acquired in early
2006
EDIUS desktop video
editing software part of
Thomsonrsquos growing rangeof professional
audiovisual and
broadcast solutions
TECHNOLOGY SYSTEMS SERVICES
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ldquoHaving started out in research today Irsquom responsible for our modemsrsquo roadmap
and strategy Our customersmdashthe telecoms operatorsmdashhave seen their business
transformed by technology like high-speed broadband And I find it fascinating
how these technologies have penetrated our daily lives the way we live and how
we communicate have changed dramatically over the last ten years
Even faster broadband (VDSL) fiber optics wireless technologies fixed-mobile
convergencehellip mean the pace of change is set to accelerate therersquos no doubt
wersquore living in exciting timesrdquo
Stan Claes Product Manager for IP-based Access Products
A key product introduction in 2006 was
the Grass Valley Indigo AV Presenta-
tion Switcher which combines features
normally found in separate devices in aunified powerful control interface simple
enough to be used by a single operator
Digital signage is also providing new mar-
ket opportunities combining the latest in
display delivery and storage technologies
Thomsonrsquos integrated digital media man-
agement solution Media Edge solves the
complex control distribution and archive
demands of customers Media Edge can
stream high-quality SD and HD content
over an IP network for example to the retail
store environment without the need to re-
invest in infrastructure
Broadcast amp Networksmdash
Network Software
2006 saw telecom service providers con-
tinue to build strategies to provide more
content and value-added services over
their broadband lines Thomsonrsquos Smart-
Vision TV service platforms and Cirpack
telephony switches are at the heart of sev-
eral of the worldrsquos largest IPTV and VoIP
services
In 2006 the launch of a pre-integrated mul-tiple play solution for telecom service provid-
ers illustrated Thomsonrsquos ability to leverage
skills across multiple business units The
solutions which enable telecom providers
to bring a myriad of services to broadband
subscribers are built around Thomsonrsquos
SmartVision and Cirpack software solu-
tions integrated with Thomsonrsquos Grass
Valley branded video head-end equipment
and Thomson home gateways and set-top
boxes This represents the first pre-inte-
grated solution on the market for rapid easy
deployment of triple play services including
voice video and internet access
More than 30 IPTV and mobile TV service
platforms have been deployed around the
world with SmartVision well-positioned
for convergent operators since it allows
video distribution over fixed and mobile
networks
Thomsonrsquos Cirpack softswitches which
help provide the core for the new inte-
grated platforms occupied the top mar-
ket position worldwide for residential
broadband telephony (VoIP) platforms in
2006 Over the course of 2006 Europersquoslargest primary line VoIP operator Freefr
upgraded its Cirpack switches to bring a
new seamless fixedmobile service to its
two million customers placing Thomson
at the forefront of new fixed-mobile con-
vergence solutions Signaling the rapid
expansion of sales outside traditional
Western European markets Thomsonrsquos
Cirpack switches were selected by many
telecom operators in Northern Africa Cen-
tral and Eastern Europe as well as Central
America to build or upgrade legacy voice
networks and deliver advanced telephone
services using IP technologies
TECHNOLOGY SYSTEMS SERVICES
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Thomsonrsquos Services division provides end-to-end management of business-critical services on behalf of Media
Entertainment amp Communications customers These include management of broadcast and network operations
centers on an outsourced basis and the provision of an array of content services to the creative community from
post-production to visual effects
SERVICES
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Thomsonrsquos Services division provides end-
to-end management of business-critical
services spanning physical media con-
tent services electronic content distribu-
tion and network services The division
is the worldrsquos leading provider of state-
of-the-art film-making post-production
visual effects and broadcast center man-
agement services
Strategy
The Services division continues to focus
on managing v ideo networks and
op er at io na l centers on behalf of its
customers who are able to concentrate
on their core business of content The
emphasis on high-growth opportunities
in newer market sectors such as retail
and corporate networks and gaming
has been sharpened
Achievements
New customers in fast-growing market
segments responded well to a range of
high value-added services from the Ser-
vices division in 2006 Network Services
showed particularly strong growth as net-
work operators in Europe Asia and North
America selected Technicolor-branded
management services The addition of
such leading customers as ITV in the
UK and France 24 and TV5 in France
substantially expanded Thomsonrsquos fast-
growing Network Services business
Noteworthy successes were also achieved
in Theatrical Services due in part to the
continued development of Thomsonrsquos digi-
tal cinema activity The Content Services
business continued to expand its post-
production services business by opening
a digital intermediate facility on the SonyPictures Entertainment studio lot In 2006
a new Home Entertainment Services unit
was created combining Thomsonrsquos DVD
business with electronic distribution to
develop new services to support emerging
lsquoon demand contentrsquo business models
Network Services
With a comprehensive portfolio of services
for broadcasters network and internet TV
operators movie theatres retailers and
corporations Network Services continued
to expand briskly in 2006 Broadcastersincreasingly selected Thomson as their
long-term network services partner By
year-end Network Services was providing
managed services under the Technicolor
brand to close to 200 channels from
17 facilities in France the Netherlands
Japan North America and the UK
Late in the year Thomson signed a long-
term agreement with ITV for network
transmission operations services for its six
From managing video
networks on an outsourced
basis to a broad range of
offerings in content services
Thomson is bringing its video
expertise to new markets
and geographies
Left Network Services for broadcasters
cable TV operators movie theaters
retailers and corporations is one of Servicesrsquo
fastest-growing business segments
Right Thomson provided film sound
DVD and digital cinema services for Cars
the DisneyPixar hitCars copy 2006 Disney Enterprises IncPixar All R ights Reserved
SERVICES
MANAGING VIDEO NETWORKS
TECHNOLOGY SYSTEMS SERVICES
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existing UK channels including the coun-
tryrsquos leading commercial channel In addi-
tion an agreement signed with NOB Cross
Media Facilities (NOB CMF) a subsidiary
of Nederlands Omroepproduktie Bedrijf
(NOB) likewise established Thomson as
a major supplier of network management
services in the Netherlands
In France Network Services added new
clients France 24 and TV5 which covers
203 countries and territories to move into
the market-leading position managing
more than 60 channels and 1500 hours
of programming daily The France 24 part-
nership also involves equipping their new
global TV news operation
Thomson drove expansion and innovation
in its retail media services over the course
of the year One of the most notable achie-
vements involves an ambitious in-store
network upgrade program piloted in2006 by Wal-Mart in the USA with Premier
Retail Networks (PRN) a subsidiary within
Thomsonrsquos Network Services operat ion
The in-store network platform was based
on Thomson IPTV technologies adapted
for the retail environment The system
the first pilot of IPTV in the retail environ-
ment delivered real impact on product
sales and improved customer satisfaction
in Wal-Mart stores PRN also expanded
capabilities into China early in 2007 with
Content Services revving up
Thomson provided a wide range of services for a number of major international film releases in 2006
such as Cars one of the three nominees for Best Animated Film at the Oscars Thomson Technicolor provided
film services sound services DVD compression and authoring replication and distribution
as well as digital cinema mastering and distribution for the DisneyPixar hit The Grouprsquos Content Services offering
has expanded in recent years to include the high-growth video-gaming advertising and broadcast markets
the signing of a joint venture with CGEN a
technology company leading the Chinese
in-store digital signage media industry
The two companies are currently collabo-
rating on the roll-out of an in-store media
network to 750 internet cafeacutes part of the
leading Chinese chain Big Cafeacute
Theatrical Services
Thomson signed Europersquos first large-scale
digital cinema rollout agreement in 2006
with the Kinepolis Group one of the conti-
nentrsquos most innovative theater circuits and
the leading exhibition chain in Belgium
The agreement to instal l and operate
digital cinema systems in 130 Kinepolis-
owned and operated screens passed a
first milestone in March 2007 with Thom-
sonrsquos first international distribution by sat-
ellite of an encrypted digital version of the
film Dreamgirls from the US to a Kinepolis
theater in Brussels Belgium
A series of new contracts were awarded
in the US For example in the fall of 2006
Technicolor Digital Cinema began installing
digital projection systems at 120 National
Amusements Inc screens in Boston Los
Angeles New York and elsewhere as part
of a strategic agreement National Amuse-
ments operates more than 1500 screens
in the US UK Latin America and Russia
Digital projection systems were also
TECHNOLOGY SYSTEMS SERVICES
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The growing market for Network Services
The decision by the UKrsquos leading commercial broadcaster to entrust its network services to
Thomsonrsquos Network Services operations illustrates a growing global trend as broadcasters focus increasingly on
programming and meeting customer needs they turn to highly-skilled specialists to handle technology
The long-term agreement with ITV means that the broadcaster will benefit from enhanced service and new technology
as well as more flexibility in launching new services
36 Thomson Panorama 2006
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Left Thomsonrsquos Technicolor
Interactive Services provided in-game
cinematics and voice recording for
Microsoft Game Studiosrsquo Gears of War
Right Thomsonrsquos London-based MPC
subsidiary carried out post-production
work including computer graphics
on Sony Braviarsquos award-wirring colorful
Paint commercial
installed at several landmark theatres in
Los Angeles in 2006 including Mann The-
atresrsquo Graumanrsquos Chinese and the Village
in Westwood
Thomson maintained a leading position in
film processing and printing in 2006 in a
market where volumes were stable Tech-
nicolor handled worldwide release printingfor two of the five 2007 Oscar nominees
for Best PicturemdashMartin Scorcesersquos The
Departed and Clint Eastwoodrsquos Letters
from Iwo Jimamdashas well as release print-
ing for two of the three Best Animated Film
nominees Cars and Happy Feet
As part of its ongoing commitment to meet
customer needs worldwide a state-of-the-
art film and post-production facility was inau-
gurated at Ciudad de la Imagen in Madrid in
2006 It is already becoming known as the
countryrsquos most comprehensive postproduc-
tion facility with advanced film processingand digital intermediate capabilities
Content Services
Thomson continued to leverage its long-
standing strength in post-production
skills and services through expansion into
emerging and high-growth market seg-
ments such as content services for the
video-gaming advertising and broadcast
markets
In order to better serve the growing mar-
ket for entertainment content for mobile
devices Thomson unveiled new mobile
content preparation and distribution capa-
bilities in the US and the UK in 2006 Facili-
ties equipped with state-of-the-art produc-
tion and post-production technologies will
handle the preparation and optimization
of a wide range of digital entertainmentcontentmdashincluding movies TV episodes
and music videosmdashfor distribution to
mobile devices The dedicated services
complement the Grouprsquos extensive global
electronic distribution infrastructure which
enables Thomson to deliver mobile con-
tent to online delivery services as well as
to network operators for final transmission
to mobile customers
Thomson also made progress in the
development of an integrated digital asset
management solution in 2006 known as
MIDAS (Media Ingest Distribution andStorage) MIDAS is a software and hard-
ware platform for digital content prepara-
tion storage security and distribution
From the first day of production planning
through every stage of post-production
and content distribution MIDAS creates
a digital workflow that allows customers
to manage projects remotely and provides
for rapid and seamless global file delivery
streaming and collaboration
TECHNOLOGY SYSTEMS SERVICES
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While expanding into newer markets
growing demand for post-production ser-
vices and visual effects continued to fuel
Thomsonrsquos ongoing content services activ-
ities Among the yearrsquos most noteworthy
achievements were portfolios of services
for such feature films as The Departed
Letters from Iwo Jima and Pirates of the
Caribbean Dead Manrsquos Chest ThomsonrsquosMoving Picture Company (MPC) also pro-
vided high-end visual effects for the three
films nominated for Achievement in Visual
Effects Pirates of the Caribbean Posei-
don and Superman Returns
Confirming the Grouprsquos solid growth in
content services for the video game indus-
try Thomson unveiled a new dedicated
Interactive Services facility in Burbank
California in 2006 Sierra Entertainment
a division of Vivendi Games selected
Thomson to prov ide cinemat ic anima-
tion voice casting and recording sound
design and mixing services for The Leg-
end of Spyrotrade A New Beginning Like-
wise Thomson provided a wide range of
services to support Konamirsquos The SilentHill Experience released simultaneously
with the motion picture
The strategic investment in one of Indiarsquos
leading animation and gaming cinemat-
ics firms announced in February 2007
strengthened Thomsonrsquos position in Asia
for a variety of content services Located in
Bangalore India Paprikaas provides cre-
ldquoIn 1998 I joined Thomson as a Plant Manager within Home Entertainment Services
and was eventually made responsible for the expansion and management of our
Guadalajara DVD operations In summary Irsquove had great opportunities to gain experience
in international operations strategic planning and operational excellence I recently
joined Content Services where Irsquoll be leading the start-up and integration of new activities
in Beijing Bangalore and other emerging markets Content Services is dynamic and
growing and Irsquom looking forward to expanding the business in Asia while improving
our operational performance in North America and Europerdquo
Mike Hayden Vice President Operations amp Strategic Projects Content Services
of the Grouprsquos divisions and profit centersIn the context of the budgetary procedure
performance measurement indicators are
calculated by the divisions analyzed and
reviewed monthly to serve as a reference
for the Grouprsquos monthly reporting
Management reporting and
closing period work
Th om so n uses a co mmon char t of
accounts which is regularly updated The
principal accounting and financial figures
of the operational and functional depart-
ments consolidated at Group level are
analyzed by the Grouprsquos management
control team and reviewed by the Grouprsquos
Executive Committee
The closing process for the half-year and
annual consolidated financial statementsoccurs in two steps The first step con-
sists of a ldquohard closerdquo completed in May
and September leading to a first review by
the statutory auditors The second step
occurs in July and in JanuaryFebruary and
involves the finalization of half-year and
annual consolidated financial statements
under IFRS The Group then proceeds
once a year with a reconciliation of these
results in accordance with US GAAP
Preparation of financial statements
The financial statements are prepared jointly by the finance department and the
General Secretary They are based on
information reported through the annual
reporting and accounting consolidation
processes and on operational and mar-
ket information which is specifically cen-
tralized for the preparation of Thomsonrsquos
Document de Reacutefeacuterence in France and
the submission of Form 20-F in the United
States Half-year and annual financial infor-
mation is reviewed by the Grouprsquos Audit
Committee
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58 Thomson Panorama 2006
(1) Source PriceWaterhouseCoopers ndash
ldquoGlobal Entertainment and Media Outlook 2006-10rdquo
Revenue growth
Thomson achieved consolidated 2006
net revenues of 9914045854 million up from
9914045591 million in 2005 Revenues for
the Core Business reached 9914045747 mil-
lion (9914045776 million at constant currency)
representing 83 growth over 2005 at
constant currency
Overall the Grouprsquos key growth busi-
nessesmdashContent Services Network
Services Access Products for telecom
operators and our Broadcast amp Networks
businesses (Grass Valley and Network
Software)mdashincreased strongly year-on-
year and accounted for over a third of
Group revenues against less than a quar-
ter in 2005
Thomsonrsquos Core Business EBIT for 2006
was euro504 million representing a Core
Business EBIT margin of 88 Thisreflected growth in some key businesses
and cost actions across the Group off-
setting a significant investment in research
and development and some increase in
restructuring expenses
Increased spend on RampD
Research and development expenditure
charged in the Core Business (net of
external funding) rose from 991404221 million in
2005 to 991404279 million in 2006 an increase
of 26 principally in the Systems divi-
sion The Group expanded the number ofproducts and services in the development
phase across its businesses
Return to profit
Losses in Non-Core Continuing and Dis-
continued operations were substantially
lower year-on-year reflecting principally
the exit from heavily loss-making Displays
activities in 2005 and intensified cost-sav-
ing programs in 2006 A major revision
and harmonization of the Grouprsquos North
American healthcare obligations gave rise
to substantial one-time gains and Thom-
son also initiated significant restructuring
of its French Non-Core operations
The good performance of the Core Busi-
ness lower Non-Core and Discontinued
losses and a low reported tax chargeenabled the Group to return a net profit of
99140455 million in 2006 compared to a loss of
991404573 million in the previous year
Good cash flow
strengthened balance sheet
Thomson generated good free cash flow
and strengthened its balance sheet in
2006 Total net financial liabilities on the
balance sheet fell by 991404460 million reflect-
ing a 99140493 million fall in financial and acqui-
sition-related debts and a 991404367 million
reduction in retirement benefit obligations(including healthcare)
Increase in Net Dividend
The Board of Directors proposed a dis-
tribution to shareholders of 991404033 per
share (2005 dividend 991404030) reflecting
confidence in the prospects of the Group
going forward
Outlook 2007-2009
growth in revenues and net income
With the Grouprsquos transformation complete Thomsonrsquos financial focus over the 2007-
2009 period will be to grow revenues and
net income
Thomson serves growing Media Enter-
tainment amp Communications marketsmdashfor
which external estimates(1) indicate com-
pound growth of around 6 over the last
FINANCIAL AND
OPERATIONAL PERFORMANCE
Full year 2006 results
saw a return to profitability
and leave Thomson
well positioned at
the heart of convergence
and digital video
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59 Thomson Panorama 2006
five years Our digital and electronic busi-
nesses now represent two-thirds of rev-
enues and we believe they are growing
faster than the overall market offsetting
the maturing physical media businesses
Given this profile the Group expects its
revenue growth to be more modest in
2007 but to gather pace over the period
and our overall objective is to show com-pound growth over 2007-2009 in line with
or faster than the overall market
The 2007-2009 period is also expected
to see a sharply reduced impact from
residual Non-Core activities with an end
to losses from the Discontinued Activities
perimeter after 2007 Accordingly Thom-
sonrsquos ambition is to turn its Core Business
growth and profitability and lower impact
from Non-Core into strong growth in net
income over the period 2007-2009
Business operations
Continuous performance improvement is
fundamental to Thomsonrsquos commitment to
create sustainable business models and
long-term value for all stakeholders The
ambitious Group-wide programs launched
in 2004 to improve productivity and
enhance overall performance producedsubstantial results in 2006 and led to new
and strong initiatives for long-term growth
As of the second half of 2006 six ldquoKey
Programsrdquo are monitored at Group level
Clients Software Product Introduction
Operations Transformation and Talent
Management
KEY PROGRAMS IN PLACE
Program Focus
Clients Thomsonrsquos clientregional diversification and
growth of the existing business
through improved Sales amp Marketing
Software Development of integrated software platforms
in all markets (post-production distribution
delivery) and for all types of customer
(professional prosumerhellip)
Product Introduction Ensuring new product roadmaps are in line
with strategy and resource needs have been
identifiedOperations Improving the Grouprsquos cost base cash
generation and working capital
Transformation Multiple programs including initiatives to
improving customer relationship management
worldwide supply chain management
IT transformation as well as Thomsonrsquos RampD
footprint
Talent Management Leveraging human assets with a focus on
talent retention and acquisition
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60 Thomson Panorama 2006
SUMMARY RESULTS FULL YEAR 2006
In 991404 millions unless otherwise stated 2006(1) 2005(1)
Net revenues 5854 5591(1)
Core Business net revenues 5747 5335
Services 2489 2487
Systems 2684 2262
Technology 547 546
Corporate 27 40
Non-Core continuing operations net revenues 107 256
Core Business EBIT(2) 504 512
Services 160 205
Systems 132 109
Technology 289 277Corporate (77) (79)
EBIT from Non-Core continuing operations (25) (122)
(1) Restated with 2006 discontinued activities according to IFRS 5
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61 Thomson Panorama 2006
Year ended December 31in 991404 except number of shares 2006 2005 2004
Year ended December 31in 991404 millions 2006 2005(1) 2004(1)
CONSOLIDATED STATEMENTS OF OPERATIONS
(1) Restated with 2006 discontinued activities according to IFRS 5
(2) After deduction of the interests net of tax paid on the subordinated perpetual notes during the period
Continuing operations
Revenues 5854 5591 5980
Cost of sales (4474) (4240) (4594)
Gross margin 1380 1351 1386
Selling marketing general and administrative expenses (674) (638) (653)
Other income (expense) 52 (96) (69)
Research and development expenses (279) (227) (201)
Profit from continuing operations before tax and net finance costs 479 390 463
Interest income 19 30 52
Interest expense (108) (108) (54)
Other financial income (expense) (111) 36 (26)
Finance costs ndash net (200) (42) (28)
Share of profit (loss) from associates (86) (82) (20)
Income tax ndash (68) (93)
Profit from continuing operations 193 198 322
Discontinued operations
Profit (loss) from discontinued operations (138) (771) (883)
Net income (loss) 55 (573) (561)
Attributable to
Equity Holders 55 (574) (559)
Minority interests ndash 1 (2)
Weighted average number of shares
outstandingmdashbasic net of treasury stock 261188858 266539917 273646869
Earnings per share from continuing operations
Basic(2) 067 074 118
Diluted 063 042 111
Earnings per share from discontinued operations
Basic (053) (289) (323)
Diluted (048) (262) (296)Total earnings per share
Basic(2) 014 (215) (205)
Diluted 015 (220) (185)
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62 Thomson Panorama 2006
CONSOLIDATED BALANCE SHEETS
In 991404 millions December 31 December 31 January 1 December 31 2006 2005 2005(1) 2004
ASSETS
Non-current assets
Property plant and equipment 813 886 1051 1051
Goodwill 1714 1756 1186 1178
Other intangible assets 1071 1150 924 924
Investments in associates 12 204 260 260
Investments and financial assets available-for-sale 266 341 139 113
Derivative financial instruments 7 1 11 ndash
Contract advances 129 173 179 179
Deferred tax assets 397 379 307 301
Other non-current assets 110 182 133 136
Total non-current assets 4519 5072 4190 4142
Current assets
Inventories 366 333 503 568
Trade accounts and notes receivable 1018 1315 1232 1180
Current accounts with associates and joint ventures 97 115 143 143
Derivative financial instruments 8 9 115 ndash
Other current assets 535 644 483 616
Marketable securities ndash 7 58 58
Cash and cash equivalents 1311 996 1845 1848
Assets classified as held for sale 264 369 80 ndash
Total current assets 3599 3788 4459 4413
Total assets 8118 8860 8649 8555
(1) Including the impacts of the first-time application related to IAS 32 and 39 on financial instruments and IFRS 5 on non-current assets held for sale and
discontinued operations
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63 Thomson Panorama 2006
In 991404 millions December 31 December 31 January 1 December 31 2006 2005 2005(1) 2004
SHAREHOLDERSrsquo EQUITY AND LIABILITIES
Shareholdersrsquo equity
Common stock (273871296 shares at
December 31 2006
with nominal value of euro 375 per share) 1027 1025 1025 1025
Trade accounts and notes payable 1032 1164 1199 1226
Accrued employee expenses 165 166 158 163
Income tax payable 57 47 60 60
Other current liabilities 671 750 746 800
Payables on acquisition of companies 13 138 84 84
Liabilities directly associated with
assets classified as held for sale 232 470 88 ndash
Total current liabilities 3681 4393 3602 3459
Total liabilities 5999 6644 6251 6062
Total shareholderrsquos equity and liabilities 8118 8860 8649 8555
(1) Including the impacts of the first-time application related to IAS 32 and 39 on financial instruments and IFRS 5 on non-current assets held for sale and
discontinued operations
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Creation and lay-out
Photo credits Nathalie BerhingGAMMA ndash Steacutephane de Bourgies ndash Jean-Franccedilois DeroubaixGAMMA ndash Christine Donnier- ValentinGAMMA ndash Cars copy 2006 Disney Enterprises IncPixar All Rights Reserved ndash Dreamgirls copy 2006 DREAMWORKS
LLC and PARAMOUNT PICTURES All Rights Reserved ndash Poseidon copy 2006 Warner Bros Pictures ndash Sony Bravia Paint
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tion market in 2006 in North America
Europe and Australia
bull Film and digital cinemaIn 2006 Film Services volumes dropped
by 6 compared with 2005 with approxi-
mately 5 billion feet of film processed The
decline was due mainly to a weaker film
slate in the second half of the year
With a leadership position in the film print-
ing business and around 45 market
share in 2006 Thomson is well positioned
to drive the transition from film to digital
cinema that will fuel future growth in the
long term In particular the construction of
digital cinema installations is expected to
drive an increase in related digital cinemaservices such as content mastering and
distribution
bull Content services
Overall the content services market is
estimated at over 9914044 billion in 2006 post-
production accounting for the largest slice
at 99140414 billion Thomson holds the No2
worldwide position with around 7 mar-
ket share In 2006 net revenues from the
Content Services business grew modestly
reflecting organic growth in higher-end
services such as digital intermediates (DI)
and visual effects (VFX) offset by pricingpressure in more commoditized services
The fastest growing segments are in out-
sourcing design visuals for feature films
TV commercial advert ising and video
games including visual effects animation
and other computer-generated services
Thomson is ideally positioned to benefit
from these outsourcing trends including
in emerging markets such as India
bull Network ServicesOver the past two years Thomson has
built upon its broad understanding of
video systems and networks to establish
a leading position in the market for video
network management services broadcast
management services cinema advertising
and retail media networks
During 2006 Thomson entered into major
contracts to manage playout for channels
such as TV5 Monde France 24 NOB in
the Netherlands and ITV plc in the UK By
the end of 2006 Thomson was providing
managed services to close to 200 TV chan-nels in Europe North America and Asia
In 2006 out-of-home video confirmed
its status as one of the fastest growing
Network Services marketsmdashmanaging
video networks in retail stores or anywhere
outside the home environment Thomson
ranks No1 in the worldrsquos largest out-of-
home video market the US with an esti-
mated market share close to 30 and
made headway in expanding into new
geographies during the year A coopera-
tion agreement was signed with CGEN
for example to develop an out-of-homeadvertising network throughout the Big
Cafeacute internet cafeacute chain in China
15 Thomson Panorama 2006
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TECHNOLOGY Thomsonrsquos Technology division develops and monetizes audio and video technologies Acting as an innovation
hub in a range of areasmdashfrom next generation compression and content protection technologies to electronic
content distribution over mobile and broadband networksmdashthe division is focused on the Media Entertainment
amp Communications industriesrsquo short- and long-term technology needs
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From digital cinematography and tape-
less post-production workflows to con-
tent distribution and access systems
the fruits of Thomsonrsquos research enable
customers to take early advantage of the
realm of possibilities opened up by digital
technologies
Strategy
Thomson is techno logy-focused and
continues to invest in RampD in order to
maintain its intellectual property leader-
ship and to take advantage of the main
growth drivers of the digital video indus-
tries These include the accelerating
adoption of high definition mobile con-
tent on-demand content consumer-
generated content fixed-mobile conver-
gence triple-play devices connected
home networking and internet-based
and advertising-based content delivery
A particular focus will be on developmentof integrated software solutions over the
period 2007-2009
In addition to extensive technology trans-
fer activities in support of the Systems
and Services divisions the Technology
division monetizes technology in three
ways through licensing of patents and
trademarks integrated circuit design and
software development
Achievements
Resources dedicated to Group-wide
research and development increased in
2006 in line with Thomsonrsquos strategic
focus on RampD The Technology division
also advanced innovations in its five key
technology domains video and audio
compression networking and communi-cations security storage and recording
and signal acquisition and processing
Thomsonrsquos commitment to open standards
continued in 2006 and is testament to the
Grouprsquos dedication to advancing tech-
nology solutions throughout the Media
Entertainment amp Communications indus-
tries To ensure that industry partners and
customers benefit from standardized solu-
tions many Thomson research initiatives
are carried out in cooperation with other
industry leaders For example Thomson
is leading the European Networked andElectronic Media (NEM) platform designed
to accelerate the pace of innovation and
the convergence between the audiovisual
content and telecom sectors The Group
is also the leader of Quaero the European
cooperative program aimed at developing
technologies and applications to enable
audio and video content to be searched
In 2006 Quaero obtained the backing of
the Agency for Industrial Innovation (AII)
TECHNOLOGY
DEVELOPING VIDEO TECHNOLOGIES
In an environment
undergoing rapid
and fundamental
technological change
a rich technology
legacy and focused
Research amp Development
(RampD) programs enable
Thomson to stay on
the cutting edge of
innovation
Left Researcher in Thomsonrsquos
research center Beijing
Research is focused on
increasing the output and
quality of long-term research
while expanding Thomsonrsquos
intellectual property portfolio
Right Thomsonrsquos NexGuardtrade
content security solution
TECHNOLOGY SYSTEMS SERVICES
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Thomson is currently involved in a variety
of standards bodies and with key research
and development partners including INRIA
(Institut national de recherche en infor-
matique et automatique ) in France HHI
(Heinrich Hertz Institute ) in Germany and
universities in Europe and the US
A division driving RampD
The Technology division which comprises
four business unitsmdashResearch Software
amp Technology Solutions Silicon Solutions
and Intellectual Property amp Licensingmdashpro-
vides both the foundation for RampD pro-
grams carried out throughout the Group
and the main impetus for its technological
evolutions
The divisionrsquos strength is to allow the fruits
of fundamental research to be shared
and developed inside the Group so that
business units can better address theircustomersrsquo needs while these same and
other technologies may also be licensed
to outside parties thus monetizing the
Grouprsquos innovation efforts
Thomson breakthroughs are often shared
to provide customers with broad-based
compatibility and long-term availability
Thomsonrsquos innovative NexGuardtrade water-
marking solution for example has been
INTRODUCING THE AGNOSTIC TIGER
The co-existence of two rival formats for high-definition (HD) DVDs presents
a special challenge for those who compress and author video content
Thomson Research engineers have responded with the development of
Tiger an advanced DVD authoring system Tiger combines
an advanced video coding system with an innovative user interface
enabling customers to make their workflows more efficient and streamlined
while providing the highest quality images in both HD formats
Top security for content
Protecting digital content is a major concern for those whose business involves creating
processing or distributing digital audio and video Thomsonrsquos advanced content security solution
NexGuardtrade offers comprehensive protection against piracy or unauthorized usage
Whatever the application or mediummdashfrom duplication to secure professional workflows to
online content deliverymdashNexGuardtrade streamlines the secure storage transfer or viewing of
digital content using encryption forensic watermarking security tokens and other
advanced software techniques
adopted by numerous Media amp Entertain-
ment industry players from post-pro-
duction houses to digital cinema server
vendors Likewise the HD DVD Forum
an industry-standardization group has
adopted Thomsonrsquos Film Grain Technol-
ogytrade specification a revolutionary method
for ensuring compressed video retains the
classic granular visual quality of film thatis still preferred by many in the creative
community
TECHNOLOGY SYSTEMS SERVICES
19 Thomson Panorama 2006
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Technology to serve the Media Entertainment amp Communications industries
Thomsonrsquos five key technology domains
bull Video and audio compression
bull Networking and communications
bull Security
bull Storage and recording
bull Signal acquisition and processing
Thomsonrsquos four system programs
bull Content production and management for cinema
bull Content production and management for broadcast
bull Electronic content distribution on broadband networks
bull Electronic content distribution on mobile networks
20 Thomson Panorama 2006
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Left Silicon microchip As system value and
intelligence is increasingly embedded in chips
Thomson is placing increasing emphasis on
in-house silicon design and development efforts
Research
Thomson has successfully intensi fied
research efforts over the last two years
in order to serve the short and long-term
needs of the Media Entertainment amp
Communications industries leveraging
both close relationships with customers
and deep knowledge of video
New ways to acquire process compress
store and distribute digital content today
provide a central focus for the ongoing
programs at Thomsonrsquos seven research
centers located in Rennes and Paris in
France Hanover and Villingen in Germany
Burbank and Princeton in the US and Bei-
jing in China These range from innovative
coding schemes to advanced methods
for processing audio and video signals
The networking component is especially
important as Thomson engineers work
on solutions to enable operators of fixedand mobile telecom cable and satellite
networks to distribute content more eco-
nomically and flexibly and to introduce
new services
Software amp Technology Solutions
The development of content security solu-
tions counts among the critical initiatives
within the Software amp Technology Solutions
business unit Thomson experts are working
on new ways to help Media Entertainment
amp Communications customers protect their
digital rights They develop and distribute
innovative solutions in the fields of forensic
marking content protection secure con-
tent distribution and anti-counterfeiting
HIGH DEFINITION AT A GALLOP
As high-definition video sweeps the video and TV world video compression
is one of the greatest challenges facing the Media Entertainment amp
Communications industries and companies who need to process and
distribute HD images Thomson is helping meet this challenge through
the Mustang HD video processing engine an advanced chip set that helps
make HD images more compact Using the talents of Thomsonrsquos
Technology and Systems divisions the patented Mustang technology
designed for a wide variety of broadcast equipment has been integrated
into an innovative Grass Valley branded HD video coding device Packing
HD images so compactly greatly reduces costs for broadcasters making it
more commercially attractive for them to adopt advanced MPEG-4 HD
TECHNOLOGY SYSTEMS SERVICES
21 Thomson Panorama 2006
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ldquoIrsquove always worked in video compression RampD for a number of hi-tech companies
but Thomson is different itrsquos truly video-centric Everyonemdashnot just the compression
research engineersmdashunderstands the importance of video technology to the core business
Irsquom in charge of our compression research activities worldwide a key technology
thatrsquos essential for distributing video over networks or storing video on physical media
But what I most enjoy is drawing on my experience in patents to mentor researchers on
preparing patent disclosures for new inventions Preparing patent disclosures is a pretty
unique skill and one thatrsquos key in strengthening the Grouprsquos intellectual property portfoliordquo
Jill Boyce Compression Domain Director Corporate Research
ADDING A NEW DIMENSION TO MUSIC
Movie-goers and people with home cinema installations are accustomed to
the three-dimensional sound that enables them to hear each instrument
voice or sound effect in a different place The concept is known as ldquoSurround
Soundrdquo and it now exists in mp3 format
Developed in cooperation with Germanyrsquos Fraunhofer Institute for Integrated
Circuits mp3 Surround takes the mp3 digital coding system one step furtherwithout making mp3 files larger The new technology is also backwards
compatible so that music with mp3 Surround sounds great with existing players
The technology can be applied in a broad spectrum of applications
including web-based music distribution broadcasting systems PC-related
audiovisual and gaming applications
This yearrsquos achievements covered multiple
domains of technology The businessrsquo
leading watermarking technology embedsinvisible indestructible and fully traceable
pieces of information into content so that
the owner origin or recipient can be identi-
fied The technology was launched for digi-
tal cinema applications and successfully
licensed to most server manufacturers
Thomson technologies also enabled for
example the development of an advanced
TV audience measurement system and a
solution allowing authentification of VIP
accreditation badges during Soccer World
Cup in Germany in 2006 The businessrsquo
consulting activity also implemented an
enterprise-wide security solution for a majorinternational broadcaster during the year
The Software amp Technology Solutions busi-
ness is now expanding from watermarking
into other promising technological areas
such as digital rights management (DRM)
to manage conditional access to content
in the context of professional workflows
content filtering to monitorfilter distribution
of copyrighted content or new protocols
to optimize and secure content distribution
platforms
TECHNOLOGY SYSTEMS SERVICES
22 Thomson Panorama 2006
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Silicon Solutions
As more and more system value and intel-
ligence is embedded onto silicon micro-
chips Thomson has placed increased
emphasis on in-house silicon design and
development efforts These range from
integrated circuits for communications and
set-top boxes to chips designed specifi-cally for broadcasting and mobile devices
The growing sophis tication of home
network access devices helps explain
why more than 200 Thomson engineers
are continuing to develop innovative
integrated circuits As with all Thomson
technology innovations our silicon invest-
ment is focused equally on increasing our
leadership in set-top boxes as much as
on providing integrated circuit solutions
to industry leaders
Intellectual Property amp Licensing
Thomsonrsquos extraordinarily rich intellectual
property assets include over 55000 pat-
ents derived from more than 7000 inven-
tions with some 600 new invention patent
applications filed in 2006
Thomsonrsquos patent portfolio remains a key
pillar for both the Technology division and
the Group as a whole with patented tech-
nologies including digital decoders high-
definition TV optical module patents for
Thomsonrsquos rich intellectual property
assets include over 55000 patents
CD and DVD players MPEG video com-
pression mp3 audio compression format
interactive TV and storage technologies
Having successfully migrated the propor-
tion of income derived from digital rather
than analogue technologies digital tech-
nology-based programs now account for
over 80 of the Grouprsquos large licensingrevenue stream with over 950 licensing
contracts in place worldwide at year-end
2006
TECHNOLOGY SYSTEMS SERVICES
23 Thomson Panorama 2006
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Thomsonrsquos Systems division provides video solutions and integrates video network systems for its customers in
the broadcast cable satellite terrestrial and telecoms markets The divisionrsquos offering spans image capture to
network distribution to the provision of access products enabling operators to enrich their service offerings to
subscribers
SYSTEMS
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Today people benefit from virtually instan-
taneous access to an increasingly custom-
ized range of content available through
a growing set of access possibilities As
internet and digital technologies con-
tinue to infuse the Media Entertainment
amp Communications industries Thomson
is focusing on opportunities arising from
this new paradigm alongside its traditionalcore markets These range from traditional
broadcast equipment to the growing mar-
ket for professional audio-video systems
mobile and IP (Internet Protocol) TV to
booming demand for residential broad-
band services
Strategy
Thomsonrsquos Systems division comprises
three activities Access Products and the
Broadcast amp Networks businesses The
Access Products business aims to deliver
key set-top box platforms for satellite andcable customers and gateway products
for telecom operators The Broadcast
amp Networks businesses are focused on
video network integration bringing to
market advanced products and solutions
to enable network operators broadcast-
ers and film-makers to benefit from the
latest technologies in image acquisition
compression switching and storage The
Network Software business aims to enable
the introduction of new multiple-play ser-
vices based on fixed-mobile convergence
IPTV and broadband telephony
Achievements
Overall the Systems division improved
diversified its customer base in 2006 In
Access Products Thomson consolidated
its leadership of worldwide markets forset-top boxes gateways and modems for
telecom satellite and cable network oper-
ators and service providers while achiev-
ing good growth in higher-end products
in the second half of the year In Grass
Valley demand for high-defin ition (HD)
acquisition production and distribution
systems combined with growing demand
for IT- and IP-based broadcast solutions to
drive growth while in Network Software
Thomsonrsquos SmartVis ion IPTV system
gained good ground with more than 30
IPTV and mobile TV deployments to date
and the worldrsquos largest installed base
Access Products
The Access Products business was driven
in 2006 by the ongoing rapid expansion of
triple (video voice and data) and quadru-
ple play services (also fixed-mobile con-
vergence) offered by cable and telecom
network operators and by the increasing
spread of high definition (HD) broadcasts
among satellite network operators
SYSTEMS
PROVIDING VIDEO SOLUTIONS
From image capture to
distribution via
all types of network
Thomson is reaping the benefits of
growing market demand for
video network integration
TECHNOLOGY SYSTEMS SERVICES
26 Thomson Panorama 2006
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Thomson further consolidated its market
leading position for dual and triple-play
gateways to telecom operators and inter-
net service providers The established mar-
ket leader for DSL modems and routers
since 1999 Thomson extended its lead
over the competition in 2006 shipping
more than 42 million DSL modems and
gateways during the first half of the yearand 10 million units overall in 2006
Growing market demand for sophisticated
home networking eco-systems able to
accommodate new services over time was
underlined by the success of Thomsonrsquos
Livebox gateway for France Telecom
Early in 2007 Thomson supported large-
scale deployment of the Livebox which
provides access to high-speed wireless
Internet Voice-over-IP IPTV network
gaming fixed-mobile convergence (unik)
and other services
An advanced Thomson gateway also
enabled the UKrsquos leading operator to
launch its innovative Total Broadband ser-
vice in June 2006 Bri tish Telecomrsquos BT
Home Hubtrade is a quadruple-play gateway
designed to support BTrsquos full range of ser-
vices including both BT Total Broadband
and BT Broadband Talk in addition to
providing wired and wireless broadband
connectivity for fixed and mobile phones
PCs and other networked devices It also
Mobile video in Italy
Thomsonrsquos product and service offering benefited in 2006 from increased interest from cable and
telecom operators to complete their offering for Video-on-Demand and mobile TV The Olympic Winter Games
notably provided a showcase for Thomsonrsquos capability to deliver video programming to cell phones and
other mobile devices In the wake of the successful Olympic trial Telecom Italia turned to Thomson
for the systems and technology that enabled it to commercially launch a mobile offering including TV and
sports programming in June 2006
incorporates the latest wideband audio
codec providing near CD-quality sound
for voice and video calls
As broadband services become more and
more of a mass-market service providers
must ensure that their services are both
differentiating and easy to consume This
trend calls for the emergence of simpleyet very technologically-advanced and
software-laden devices Such devices
connect to the home-networking gateway
and make it natural to consume a broad-
band-delivered service One example
is the Music Box first made available to
subscribers of AOLrsquos broadband service
in France which streams Internet-based
radio stations or locally stored music files
to a homersquos legacy Hi-Fi audio system
Strong growth in the cable network sys-
tems market which is projected to expand
another 20 in 2007 helped drive Thom-son toward two major sales milestones
in 2006 two million cable set-top boxes
and ten million cable modems Driven by
operatorsrsquo needs to provide more and
more sophisticated services Thomson
has extended its product range since
2005 to include interactive double- and
triple-play set-top boxes as well as HD
set-top boxes with advanced functions
such as personal video recorders (PVR)
Among the cable operators to have
TECHNOLOGY SYSTEMS SERVICES
27 Thomson Panorama 2006
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Total Broadband for BT
An advanced Thomson gateway enabled the UKrsquos leading telecommunications operator British Telecom
to launch its innovative Total Broadband service in June 2006 This quadruple-play gateway
known as the BT Home Hubtrade features video voice data and wireless capabilities
It is supporting BTrsquos full range of services including wired and wireless broadband connectivity
for fixed and mobile phones PCs and other networked devices
28 Thomson Panorama 2006
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Left Thomson Grass Valley branded
outside broadcast van under construction
Right Camera operator Kim Marks (left)
a camera first assistant Chris Blauvelt (center)
and a camera second assistant
Jason McCormick (right) line up a scene
with the Grass Valley Viper FilmStreamtrade
camera for the David Fincher feature Zodiac
Photo courtesy Paramount Pictures
selected Thomson in 2006 were Portu-
galrsquos leading Pay-TV Operator TV Cabo
UPC E-Vision Kabel Deutschland and
Premiegravere in Europe Net Serviccedilos in Latin America and StarHub and Dalian Cable
TV in Asia
Thomson expanded its footprint in satel-
lite in Europe notably in the UK and in
Asia where product deliveries began for
Tata Sky the Indian satellite broadcaster
In the UK Thomson delivered the Sky
HD box an MPEG-4 set-top box with
Personal Video Recorder which enabled
the successful launch of the countryrsquos first
high-definition TV service in May 2006
The largest satel li te television service
provider in the US DIRECTV also chose Thomson to expand its HD programming
offering with the delivery of the H20 satel-
lite receiver
Leveraging expertise in free-to-air digi-
tal terrestrial receivers and capabilities in
high-definition Thomson also delivered
the first MPEG-4 HDTV receivers for digital
terrestrial TV to French operators Canal +
and TPS during the year
In telephony Thomson remains a lead-
ing supplier of corded and cordless tele-
phones which are sold at retail outletsunder the RCA GE and Alcatel brands as
well as under third-party brands for opera-
tor sales In 2006 Thomson capitalized
on its leadership position in DECT (Digital
Enhanced Cordless Telecommunications)
in Europe by expanding into the American
retail market
Broadcast amp Networks
The Broadcast amp Networks businesses
gained market share in 2006 particularlyin networks and systems integration and
expanded in the promising Pro-AV (profes-
sional audio-video) market
Continuing trends in this market are high-
definition (HD) broadcasting the merging
of IT and broadcast technology the move
to a tape-less file-based approach to video
storage and management and power-
ful MPEG-4 HD compression technology
which allows content to be delivered to mul-
tiple audiences over multiple platforms
One highly visible application of ThomsonrsquosGrass Valley brand of HD image acquisi-
tion and production systems was the 2006
FIFA World Cup in Germany seen by a
billion viewers around the world Broad-
casters covering the event relied on more
than 182 Grass Valley brand cameras
10 Grass Valley video switching systems
12 large scale Grass Valley video routing
systems and hundreds of other devices to
provide faultless HD images
Leveraging its market leading position
Thomson est imates tha t Grass Valley
HD cameras now account for 50 of theglobal market Most major outside broad-
cast production companies in the world
use Grass Valley branded HD camera sys-
tems with more than 1500 in use
High-definition television is also about
news Based on internal Thomson esti-
mates Grass Valley solutions accounted
for nearly 80 of HD news installations
worldwide in 2006 including CBS Net-
work-owned amp operated stations in the
TECHNOLOGY SYSTEMS SERVICES
29 Thomson Panorama 2006
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IGNITE HD
TV news operations can work more quickly and efficiently by using information
technology The industryrsquos first and most complete link between the control room
and the newsroom HD Ignite enables a single technician to handle all
news production requirements During its initial months on the market in the US
HD Ignite was selected by such early adaptors as ABC Stations Group
customers in San Francisco and Chicago and Cox Broadcasting customers in
Atlanta San Francisco Charlotte North Carolina and Dayton Ohio
Telecom service providers are working to
provide more content and value-added
services over their broadband lines
Thomsonrsquos SmartVision and
Cirpack software solutions facilitate
their strategies for rapid deployment of
IPTV and triple-play services
US Al Jazeera Englishmdasha global channelbased in the Middle Eastmdashand Belgiumrsquos
VTM (Vlaamse Televisie Maatschappij )
Thomson is the only supplier to provide
an automated production system (Ignite
HD) a full suite of non-linear editing sys-
tems and a news playout systemmdashall of
which enable broadcasters to move to HD
affordably and to speed up and automate
their workflows
MPEG-4 is one of the enabling technolo-
gies which allows operators of telecom-
munications networks to bring TV to
their subscribers in addition to voice andinternet access This is one element in a
complete Thomson systems offering For
example Spanish operator Telefoacutenica
selected Thomson for a range of equip-
ment and systems to upgrade and expand
its rapidly growing ldquoImageniordquo service In
the US Falcon Communications a lead-
ing systems integrator offers a turnkey
IPTV solution featuring encoding content
delivery service management and access
products from Thomson
bull Professional Audio-Video
Thomson serves the rapidly growing mar-ket for professional audiovisual (ProAV)
solutions for corporate institutional wor-
ship and governmental media centers and
networks Thomsonrsquos expansion in ProAV
has been achieved through organic prod-
uct development as well as the integra-
tion of Pro-AV products from Canopus
the Japanese company acquired in early
2006
EDIUS desktop video
editing software part of
Thomsonrsquos growing rangeof professional
audiovisual and
broadcast solutions
TECHNOLOGY SYSTEMS SERVICES
30 Thomson Panorama 2006
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ldquoHaving started out in research today Irsquom responsible for our modemsrsquo roadmap
and strategy Our customersmdashthe telecoms operatorsmdashhave seen their business
transformed by technology like high-speed broadband And I find it fascinating
how these technologies have penetrated our daily lives the way we live and how
we communicate have changed dramatically over the last ten years
Even faster broadband (VDSL) fiber optics wireless technologies fixed-mobile
convergencehellip mean the pace of change is set to accelerate therersquos no doubt
wersquore living in exciting timesrdquo
Stan Claes Product Manager for IP-based Access Products
A key product introduction in 2006 was
the Grass Valley Indigo AV Presenta-
tion Switcher which combines features
normally found in separate devices in aunified powerful control interface simple
enough to be used by a single operator
Digital signage is also providing new mar-
ket opportunities combining the latest in
display delivery and storage technologies
Thomsonrsquos integrated digital media man-
agement solution Media Edge solves the
complex control distribution and archive
demands of customers Media Edge can
stream high-quality SD and HD content
over an IP network for example to the retail
store environment without the need to re-
invest in infrastructure
Broadcast amp Networksmdash
Network Software
2006 saw telecom service providers con-
tinue to build strategies to provide more
content and value-added services over
their broadband lines Thomsonrsquos Smart-
Vision TV service platforms and Cirpack
telephony switches are at the heart of sev-
eral of the worldrsquos largest IPTV and VoIP
services
In 2006 the launch of a pre-integrated mul-tiple play solution for telecom service provid-
ers illustrated Thomsonrsquos ability to leverage
skills across multiple business units The
solutions which enable telecom providers
to bring a myriad of services to broadband
subscribers are built around Thomsonrsquos
SmartVision and Cirpack software solu-
tions integrated with Thomsonrsquos Grass
Valley branded video head-end equipment
and Thomson home gateways and set-top
boxes This represents the first pre-inte-
grated solution on the market for rapid easy
deployment of triple play services including
voice video and internet access
More than 30 IPTV and mobile TV service
platforms have been deployed around the
world with SmartVision well-positioned
for convergent operators since it allows
video distribution over fixed and mobile
networks
Thomsonrsquos Cirpack softswitches which
help provide the core for the new inte-
grated platforms occupied the top mar-
ket position worldwide for residential
broadband telephony (VoIP) platforms in
2006 Over the course of 2006 Europersquoslargest primary line VoIP operator Freefr
upgraded its Cirpack switches to bring a
new seamless fixedmobile service to its
two million customers placing Thomson
at the forefront of new fixed-mobile con-
vergence solutions Signaling the rapid
expansion of sales outside traditional
Western European markets Thomsonrsquos
Cirpack switches were selected by many
telecom operators in Northern Africa Cen-
tral and Eastern Europe as well as Central
America to build or upgrade legacy voice
networks and deliver advanced telephone
services using IP technologies
TECHNOLOGY SYSTEMS SERVICES
31 Thomson Panorama 2006
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Thomsonrsquos Services division provides end-to-end management of business-critical services on behalf of Media
Entertainment amp Communications customers These include management of broadcast and network operations
centers on an outsourced basis and the provision of an array of content services to the creative community from
post-production to visual effects
SERVICES
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Thomsonrsquos Services division provides end-
to-end management of business-critical
services spanning physical media con-
tent services electronic content distribu-
tion and network services The division
is the worldrsquos leading provider of state-
of-the-art film-making post-production
visual effects and broadcast center man-
agement services
Strategy
The Services division continues to focus
on managing v ideo networks and
op er at io na l centers on behalf of its
customers who are able to concentrate
on their core business of content The
emphasis on high-growth opportunities
in newer market sectors such as retail
and corporate networks and gaming
has been sharpened
Achievements
New customers in fast-growing market
segments responded well to a range of
high value-added services from the Ser-
vices division in 2006 Network Services
showed particularly strong growth as net-
work operators in Europe Asia and North
America selected Technicolor-branded
management services The addition of
such leading customers as ITV in the
UK and France 24 and TV5 in France
substantially expanded Thomsonrsquos fast-
growing Network Services business
Noteworthy successes were also achieved
in Theatrical Services due in part to the
continued development of Thomsonrsquos digi-
tal cinema activity The Content Services
business continued to expand its post-
production services business by opening
a digital intermediate facility on the SonyPictures Entertainment studio lot In 2006
a new Home Entertainment Services unit
was created combining Thomsonrsquos DVD
business with electronic distribution to
develop new services to support emerging
lsquoon demand contentrsquo business models
Network Services
With a comprehensive portfolio of services
for broadcasters network and internet TV
operators movie theatres retailers and
corporations Network Services continued
to expand briskly in 2006 Broadcastersincreasingly selected Thomson as their
long-term network services partner By
year-end Network Services was providing
managed services under the Technicolor
brand to close to 200 channels from
17 facilities in France the Netherlands
Japan North America and the UK
Late in the year Thomson signed a long-
term agreement with ITV for network
transmission operations services for its six
From managing video
networks on an outsourced
basis to a broad range of
offerings in content services
Thomson is bringing its video
expertise to new markets
and geographies
Left Network Services for broadcasters
cable TV operators movie theaters
retailers and corporations is one of Servicesrsquo
fastest-growing business segments
Right Thomson provided film sound
DVD and digital cinema services for Cars
the DisneyPixar hitCars copy 2006 Disney Enterprises IncPixar All R ights Reserved
SERVICES
MANAGING VIDEO NETWORKS
TECHNOLOGY SYSTEMS SERVICES
34 Thomson Panorama 2006
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existing UK channels including the coun-
tryrsquos leading commercial channel In addi-
tion an agreement signed with NOB Cross
Media Facilities (NOB CMF) a subsidiary
of Nederlands Omroepproduktie Bedrijf
(NOB) likewise established Thomson as
a major supplier of network management
services in the Netherlands
In France Network Services added new
clients France 24 and TV5 which covers
203 countries and territories to move into
the market-leading position managing
more than 60 channels and 1500 hours
of programming daily The France 24 part-
nership also involves equipping their new
global TV news operation
Thomson drove expansion and innovation
in its retail media services over the course
of the year One of the most notable achie-
vements involves an ambitious in-store
network upgrade program piloted in2006 by Wal-Mart in the USA with Premier
Retail Networks (PRN) a subsidiary within
Thomsonrsquos Network Services operat ion
The in-store network platform was based
on Thomson IPTV technologies adapted
for the retail environment The system
the first pilot of IPTV in the retail environ-
ment delivered real impact on product
sales and improved customer satisfaction
in Wal-Mart stores PRN also expanded
capabilities into China early in 2007 with
Content Services revving up
Thomson provided a wide range of services for a number of major international film releases in 2006
such as Cars one of the three nominees for Best Animated Film at the Oscars Thomson Technicolor provided
film services sound services DVD compression and authoring replication and distribution
as well as digital cinema mastering and distribution for the DisneyPixar hit The Grouprsquos Content Services offering
has expanded in recent years to include the high-growth video-gaming advertising and broadcast markets
the signing of a joint venture with CGEN a
technology company leading the Chinese
in-store digital signage media industry
The two companies are currently collabo-
rating on the roll-out of an in-store media
network to 750 internet cafeacutes part of the
leading Chinese chain Big Cafeacute
Theatrical Services
Thomson signed Europersquos first large-scale
digital cinema rollout agreement in 2006
with the Kinepolis Group one of the conti-
nentrsquos most innovative theater circuits and
the leading exhibition chain in Belgium
The agreement to instal l and operate
digital cinema systems in 130 Kinepolis-
owned and operated screens passed a
first milestone in March 2007 with Thom-
sonrsquos first international distribution by sat-
ellite of an encrypted digital version of the
film Dreamgirls from the US to a Kinepolis
theater in Brussels Belgium
A series of new contracts were awarded
in the US For example in the fall of 2006
Technicolor Digital Cinema began installing
digital projection systems at 120 National
Amusements Inc screens in Boston Los
Angeles New York and elsewhere as part
of a strategic agreement National Amuse-
ments operates more than 1500 screens
in the US UK Latin America and Russia
Digital projection systems were also
TECHNOLOGY SYSTEMS SERVICES
35 Thomson Panorama 2006
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The growing market for Network Services
The decision by the UKrsquos leading commercial broadcaster to entrust its network services to
Thomsonrsquos Network Services operations illustrates a growing global trend as broadcasters focus increasingly on
programming and meeting customer needs they turn to highly-skilled specialists to handle technology
The long-term agreement with ITV means that the broadcaster will benefit from enhanced service and new technology
as well as more flexibility in launching new services
36 Thomson Panorama 2006
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Left Thomsonrsquos Technicolor
Interactive Services provided in-game
cinematics and voice recording for
Microsoft Game Studiosrsquo Gears of War
Right Thomsonrsquos London-based MPC
subsidiary carried out post-production
work including computer graphics
on Sony Braviarsquos award-wirring colorful
Paint commercial
installed at several landmark theatres in
Los Angeles in 2006 including Mann The-
atresrsquo Graumanrsquos Chinese and the Village
in Westwood
Thomson maintained a leading position in
film processing and printing in 2006 in a
market where volumes were stable Tech-
nicolor handled worldwide release printingfor two of the five 2007 Oscar nominees
for Best PicturemdashMartin Scorcesersquos The
Departed and Clint Eastwoodrsquos Letters
from Iwo Jimamdashas well as release print-
ing for two of the three Best Animated Film
nominees Cars and Happy Feet
As part of its ongoing commitment to meet
customer needs worldwide a state-of-the-
art film and post-production facility was inau-
gurated at Ciudad de la Imagen in Madrid in
2006 It is already becoming known as the
countryrsquos most comprehensive postproduc-
tion facility with advanced film processingand digital intermediate capabilities
Content Services
Thomson continued to leverage its long-
standing strength in post-production
skills and services through expansion into
emerging and high-growth market seg-
ments such as content services for the
video-gaming advertising and broadcast
markets
In order to better serve the growing mar-
ket for entertainment content for mobile
devices Thomson unveiled new mobile
content preparation and distribution capa-
bilities in the US and the UK in 2006 Facili-
ties equipped with state-of-the-art produc-
tion and post-production technologies will
handle the preparation and optimization
of a wide range of digital entertainmentcontentmdashincluding movies TV episodes
and music videosmdashfor distribution to
mobile devices The dedicated services
complement the Grouprsquos extensive global
electronic distribution infrastructure which
enables Thomson to deliver mobile con-
tent to online delivery services as well as
to network operators for final transmission
to mobile customers
Thomson also made progress in the
development of an integrated digital asset
management solution in 2006 known as
MIDAS (Media Ingest Distribution andStorage) MIDAS is a software and hard-
ware platform for digital content prepara-
tion storage security and distribution
From the first day of production planning
through every stage of post-production
and content distribution MIDAS creates
a digital workflow that allows customers
to manage projects remotely and provides
for rapid and seamless global file delivery
streaming and collaboration
TECHNOLOGY SYSTEMS SERVICES
37 Thomson Panorama 2006
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While expanding into newer markets
growing demand for post-production ser-
vices and visual effects continued to fuel
Thomsonrsquos ongoing content services activ-
ities Among the yearrsquos most noteworthy
achievements were portfolios of services
for such feature films as The Departed
Letters from Iwo Jima and Pirates of the
Caribbean Dead Manrsquos Chest ThomsonrsquosMoving Picture Company (MPC) also pro-
vided high-end visual effects for the three
films nominated for Achievement in Visual
Effects Pirates of the Caribbean Posei-
don and Superman Returns
Confirming the Grouprsquos solid growth in
content services for the video game indus-
try Thomson unveiled a new dedicated
Interactive Services facility in Burbank
California in 2006 Sierra Entertainment
a division of Vivendi Games selected
Thomson to prov ide cinemat ic anima-
tion voice casting and recording sound
design and mixing services for The Leg-
end of Spyrotrade A New Beginning Like-
wise Thomson provided a wide range of
services to support Konamirsquos The SilentHill Experience released simultaneously
with the motion picture
The strategic investment in one of Indiarsquos
leading animation and gaming cinemat-
ics firms announced in February 2007
strengthened Thomsonrsquos position in Asia
for a variety of content services Located in
Bangalore India Paprikaas provides cre-
ldquoIn 1998 I joined Thomson as a Plant Manager within Home Entertainment Services
and was eventually made responsible for the expansion and management of our
Guadalajara DVD operations In summary Irsquove had great opportunities to gain experience
in international operations strategic planning and operational excellence I recently
joined Content Services where Irsquoll be leading the start-up and integration of new activities
in Beijing Bangalore and other emerging markets Content Services is dynamic and
growing and Irsquom looking forward to expanding the business in Asia while improving
our operational performance in North America and Europerdquo
Mike Hayden Vice President Operations amp Strategic Projects Content Services
of the Grouprsquos divisions and profit centersIn the context of the budgetary procedure
performance measurement indicators are
calculated by the divisions analyzed and
reviewed monthly to serve as a reference
for the Grouprsquos monthly reporting
Management reporting and
closing period work
Th om so n uses a co mmon char t of
accounts which is regularly updated The
principal accounting and financial figures
of the operational and functional depart-
ments consolidated at Group level are
analyzed by the Grouprsquos management
control team and reviewed by the Grouprsquos
Executive Committee
The closing process for the half-year and
annual consolidated financial statementsoccurs in two steps The first step con-
sists of a ldquohard closerdquo completed in May
and September leading to a first review by
the statutory auditors The second step
occurs in July and in JanuaryFebruary and
involves the finalization of half-year and
annual consolidated financial statements
under IFRS The Group then proceeds
once a year with a reconciliation of these
results in accordance with US GAAP
Preparation of financial statements
The financial statements are prepared jointly by the finance department and the
General Secretary They are based on
information reported through the annual
reporting and accounting consolidation
processes and on operational and mar-
ket information which is specifically cen-
tralized for the preparation of Thomsonrsquos
Document de Reacutefeacuterence in France and
the submission of Form 20-F in the United
States Half-year and annual financial infor-
mation is reviewed by the Grouprsquos Audit
Committee
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58 Thomson Panorama 2006
(1) Source PriceWaterhouseCoopers ndash
ldquoGlobal Entertainment and Media Outlook 2006-10rdquo
Revenue growth
Thomson achieved consolidated 2006
net revenues of 9914045854 million up from
9914045591 million in 2005 Revenues for
the Core Business reached 9914045747 mil-
lion (9914045776 million at constant currency)
representing 83 growth over 2005 at
constant currency
Overall the Grouprsquos key growth busi-
nessesmdashContent Services Network
Services Access Products for telecom
operators and our Broadcast amp Networks
businesses (Grass Valley and Network
Software)mdashincreased strongly year-on-
year and accounted for over a third of
Group revenues against less than a quar-
ter in 2005
Thomsonrsquos Core Business EBIT for 2006
was euro504 million representing a Core
Business EBIT margin of 88 Thisreflected growth in some key businesses
and cost actions across the Group off-
setting a significant investment in research
and development and some increase in
restructuring expenses
Increased spend on RampD
Research and development expenditure
charged in the Core Business (net of
external funding) rose from 991404221 million in
2005 to 991404279 million in 2006 an increase
of 26 principally in the Systems divi-
sion The Group expanded the number ofproducts and services in the development
phase across its businesses
Return to profit
Losses in Non-Core Continuing and Dis-
continued operations were substantially
lower year-on-year reflecting principally
the exit from heavily loss-making Displays
activities in 2005 and intensified cost-sav-
ing programs in 2006 A major revision
and harmonization of the Grouprsquos North
American healthcare obligations gave rise
to substantial one-time gains and Thom-
son also initiated significant restructuring
of its French Non-Core operations
The good performance of the Core Busi-
ness lower Non-Core and Discontinued
losses and a low reported tax chargeenabled the Group to return a net profit of
99140455 million in 2006 compared to a loss of
991404573 million in the previous year
Good cash flow
strengthened balance sheet
Thomson generated good free cash flow
and strengthened its balance sheet in
2006 Total net financial liabilities on the
balance sheet fell by 991404460 million reflect-
ing a 99140493 million fall in financial and acqui-
sition-related debts and a 991404367 million
reduction in retirement benefit obligations(including healthcare)
Increase in Net Dividend
The Board of Directors proposed a dis-
tribution to shareholders of 991404033 per
share (2005 dividend 991404030) reflecting
confidence in the prospects of the Group
going forward
Outlook 2007-2009
growth in revenues and net income
With the Grouprsquos transformation complete Thomsonrsquos financial focus over the 2007-
2009 period will be to grow revenues and
net income
Thomson serves growing Media Enter-
tainment amp Communications marketsmdashfor
which external estimates(1) indicate com-
pound growth of around 6 over the last
FINANCIAL AND
OPERATIONAL PERFORMANCE
Full year 2006 results
saw a return to profitability
and leave Thomson
well positioned at
the heart of convergence
and digital video
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59 Thomson Panorama 2006
five years Our digital and electronic busi-
nesses now represent two-thirds of rev-
enues and we believe they are growing
faster than the overall market offsetting
the maturing physical media businesses
Given this profile the Group expects its
revenue growth to be more modest in
2007 but to gather pace over the period
and our overall objective is to show com-pound growth over 2007-2009 in line with
or faster than the overall market
The 2007-2009 period is also expected
to see a sharply reduced impact from
residual Non-Core activities with an end
to losses from the Discontinued Activities
perimeter after 2007 Accordingly Thom-
sonrsquos ambition is to turn its Core Business
growth and profitability and lower impact
from Non-Core into strong growth in net
income over the period 2007-2009
Business operations
Continuous performance improvement is
fundamental to Thomsonrsquos commitment to
create sustainable business models and
long-term value for all stakeholders The
ambitious Group-wide programs launched
in 2004 to improve productivity and
enhance overall performance producedsubstantial results in 2006 and led to new
and strong initiatives for long-term growth
As of the second half of 2006 six ldquoKey
Programsrdquo are monitored at Group level
Clients Software Product Introduction
Operations Transformation and Talent
Management
KEY PROGRAMS IN PLACE
Program Focus
Clients Thomsonrsquos clientregional diversification and
growth of the existing business
through improved Sales amp Marketing
Software Development of integrated software platforms
in all markets (post-production distribution
delivery) and for all types of customer
(professional prosumerhellip)
Product Introduction Ensuring new product roadmaps are in line
with strategy and resource needs have been
identifiedOperations Improving the Grouprsquos cost base cash
generation and working capital
Transformation Multiple programs including initiatives to
improving customer relationship management
worldwide supply chain management
IT transformation as well as Thomsonrsquos RampD
footprint
Talent Management Leveraging human assets with a focus on
talent retention and acquisition
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60 Thomson Panorama 2006
SUMMARY RESULTS FULL YEAR 2006
In 991404 millions unless otherwise stated 2006(1) 2005(1)
Net revenues 5854 5591(1)
Core Business net revenues 5747 5335
Services 2489 2487
Systems 2684 2262
Technology 547 546
Corporate 27 40
Non-Core continuing operations net revenues 107 256
Core Business EBIT(2) 504 512
Services 160 205
Systems 132 109
Technology 289 277Corporate (77) (79)
EBIT from Non-Core continuing operations (25) (122)
(1) Restated with 2006 discontinued activities according to IFRS 5
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61 Thomson Panorama 2006
Year ended December 31in 991404 except number of shares 2006 2005 2004
Year ended December 31in 991404 millions 2006 2005(1) 2004(1)
CONSOLIDATED STATEMENTS OF OPERATIONS
(1) Restated with 2006 discontinued activities according to IFRS 5
(2) After deduction of the interests net of tax paid on the subordinated perpetual notes during the period
Continuing operations
Revenues 5854 5591 5980
Cost of sales (4474) (4240) (4594)
Gross margin 1380 1351 1386
Selling marketing general and administrative expenses (674) (638) (653)
Other income (expense) 52 (96) (69)
Research and development expenses (279) (227) (201)
Profit from continuing operations before tax and net finance costs 479 390 463
Interest income 19 30 52
Interest expense (108) (108) (54)
Other financial income (expense) (111) 36 (26)
Finance costs ndash net (200) (42) (28)
Share of profit (loss) from associates (86) (82) (20)
Income tax ndash (68) (93)
Profit from continuing operations 193 198 322
Discontinued operations
Profit (loss) from discontinued operations (138) (771) (883)
Net income (loss) 55 (573) (561)
Attributable to
Equity Holders 55 (574) (559)
Minority interests ndash 1 (2)
Weighted average number of shares
outstandingmdashbasic net of treasury stock 261188858 266539917 273646869
Earnings per share from continuing operations
Basic(2) 067 074 118
Diluted 063 042 111
Earnings per share from discontinued operations
Basic (053) (289) (323)
Diluted (048) (262) (296)Total earnings per share
Basic(2) 014 (215) (205)
Diluted 015 (220) (185)
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62 Thomson Panorama 2006
CONSOLIDATED BALANCE SHEETS
In 991404 millions December 31 December 31 January 1 December 31 2006 2005 2005(1) 2004
ASSETS
Non-current assets
Property plant and equipment 813 886 1051 1051
Goodwill 1714 1756 1186 1178
Other intangible assets 1071 1150 924 924
Investments in associates 12 204 260 260
Investments and financial assets available-for-sale 266 341 139 113
Derivative financial instruments 7 1 11 ndash
Contract advances 129 173 179 179
Deferred tax assets 397 379 307 301
Other non-current assets 110 182 133 136
Total non-current assets 4519 5072 4190 4142
Current assets
Inventories 366 333 503 568
Trade accounts and notes receivable 1018 1315 1232 1180
Current accounts with associates and joint ventures 97 115 143 143
Derivative financial instruments 8 9 115 ndash
Other current assets 535 644 483 616
Marketable securities ndash 7 58 58
Cash and cash equivalents 1311 996 1845 1848
Assets classified as held for sale 264 369 80 ndash
Total current assets 3599 3788 4459 4413
Total assets 8118 8860 8649 8555
(1) Including the impacts of the first-time application related to IAS 32 and 39 on financial instruments and IFRS 5 on non-current assets held for sale and
discontinued operations
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63 Thomson Panorama 2006
In 991404 millions December 31 December 31 January 1 December 31 2006 2005 2005(1) 2004
SHAREHOLDERSrsquo EQUITY AND LIABILITIES
Shareholdersrsquo equity
Common stock (273871296 shares at
December 31 2006
with nominal value of euro 375 per share) 1027 1025 1025 1025
Trade accounts and notes payable 1032 1164 1199 1226
Accrued employee expenses 165 166 158 163
Income tax payable 57 47 60 60
Other current liabilities 671 750 746 800
Payables on acquisition of companies 13 138 84 84
Liabilities directly associated with
assets classified as held for sale 232 470 88 ndash
Total current liabilities 3681 4393 3602 3459
Total liabilities 5999 6644 6251 6062
Total shareholderrsquos equity and liabilities 8118 8860 8649 8555
(1) Including the impacts of the first-time application related to IAS 32 and 39 on financial instruments and IFRS 5 on non-current assets held for sale and
discontinued operations
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Creation and lay-out
Photo credits Nathalie BerhingGAMMA ndash Steacutephane de Bourgies ndash Jean-Franccedilois DeroubaixGAMMA ndash Christine Donnier- ValentinGAMMA ndash Cars copy 2006 Disney Enterprises IncPixar All Rights Reserved ndash Dreamgirls copy 2006 DREAMWORKS
LLC and PARAMOUNT PICTURES All Rights Reserved ndash Poseidon copy 2006 Warner Bros Pictures ndash Sony Bravia Paint
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TECHNOLOGY Thomsonrsquos Technology division develops and monetizes audio and video technologies Acting as an innovation
hub in a range of areasmdashfrom next generation compression and content protection technologies to electronic
content distribution over mobile and broadband networksmdashthe division is focused on the Media Entertainment
amp Communications industriesrsquo short- and long-term technology needs
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From digital cinematography and tape-
less post-production workflows to con-
tent distribution and access systems
the fruits of Thomsonrsquos research enable
customers to take early advantage of the
realm of possibilities opened up by digital
technologies
Strategy
Thomson is techno logy-focused and
continues to invest in RampD in order to
maintain its intellectual property leader-
ship and to take advantage of the main
growth drivers of the digital video indus-
tries These include the accelerating
adoption of high definition mobile con-
tent on-demand content consumer-
generated content fixed-mobile conver-
gence triple-play devices connected
home networking and internet-based
and advertising-based content delivery
A particular focus will be on developmentof integrated software solutions over the
period 2007-2009
In addition to extensive technology trans-
fer activities in support of the Systems
and Services divisions the Technology
division monetizes technology in three
ways through licensing of patents and
trademarks integrated circuit design and
software development
Achievements
Resources dedicated to Group-wide
research and development increased in
2006 in line with Thomsonrsquos strategic
focus on RampD The Technology division
also advanced innovations in its five key
technology domains video and audio
compression networking and communi-cations security storage and recording
and signal acquisition and processing
Thomsonrsquos commitment to open standards
continued in 2006 and is testament to the
Grouprsquos dedication to advancing tech-
nology solutions throughout the Media
Entertainment amp Communications indus-
tries To ensure that industry partners and
customers benefit from standardized solu-
tions many Thomson research initiatives
are carried out in cooperation with other
industry leaders For example Thomson
is leading the European Networked andElectronic Media (NEM) platform designed
to accelerate the pace of innovation and
the convergence between the audiovisual
content and telecom sectors The Group
is also the leader of Quaero the European
cooperative program aimed at developing
technologies and applications to enable
audio and video content to be searched
In 2006 Quaero obtained the backing of
the Agency for Industrial Innovation (AII)
TECHNOLOGY
DEVELOPING VIDEO TECHNOLOGIES
In an environment
undergoing rapid
and fundamental
technological change
a rich technology
legacy and focused
Research amp Development
(RampD) programs enable
Thomson to stay on
the cutting edge of
innovation
Left Researcher in Thomsonrsquos
research center Beijing
Research is focused on
increasing the output and
quality of long-term research
while expanding Thomsonrsquos
intellectual property portfolio
Right Thomsonrsquos NexGuardtrade
content security solution
TECHNOLOGY SYSTEMS SERVICES
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Thomson is currently involved in a variety
of standards bodies and with key research
and development partners including INRIA
(Institut national de recherche en infor-
matique et automatique ) in France HHI
(Heinrich Hertz Institute ) in Germany and
universities in Europe and the US
A division driving RampD
The Technology division which comprises
four business unitsmdashResearch Software
amp Technology Solutions Silicon Solutions
and Intellectual Property amp Licensingmdashpro-
vides both the foundation for RampD pro-
grams carried out throughout the Group
and the main impetus for its technological
evolutions
The divisionrsquos strength is to allow the fruits
of fundamental research to be shared
and developed inside the Group so that
business units can better address theircustomersrsquo needs while these same and
other technologies may also be licensed
to outside parties thus monetizing the
Grouprsquos innovation efforts
Thomson breakthroughs are often shared
to provide customers with broad-based
compatibility and long-term availability
Thomsonrsquos innovative NexGuardtrade water-
marking solution for example has been
INTRODUCING THE AGNOSTIC TIGER
The co-existence of two rival formats for high-definition (HD) DVDs presents
a special challenge for those who compress and author video content
Thomson Research engineers have responded with the development of
Tiger an advanced DVD authoring system Tiger combines
an advanced video coding system with an innovative user interface
enabling customers to make their workflows more efficient and streamlined
while providing the highest quality images in both HD formats
Top security for content
Protecting digital content is a major concern for those whose business involves creating
processing or distributing digital audio and video Thomsonrsquos advanced content security solution
NexGuardtrade offers comprehensive protection against piracy or unauthorized usage
Whatever the application or mediummdashfrom duplication to secure professional workflows to
online content deliverymdashNexGuardtrade streamlines the secure storage transfer or viewing of
digital content using encryption forensic watermarking security tokens and other
advanced software techniques
adopted by numerous Media amp Entertain-
ment industry players from post-pro-
duction houses to digital cinema server
vendors Likewise the HD DVD Forum
an industry-standardization group has
adopted Thomsonrsquos Film Grain Technol-
ogytrade specification a revolutionary method
for ensuring compressed video retains the
classic granular visual quality of film thatis still preferred by many in the creative
community
TECHNOLOGY SYSTEMS SERVICES
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Technology to serve the Media Entertainment amp Communications industries
Thomsonrsquos five key technology domains
bull Video and audio compression
bull Networking and communications
bull Security
bull Storage and recording
bull Signal acquisition and processing
Thomsonrsquos four system programs
bull Content production and management for cinema
bull Content production and management for broadcast
bull Electronic content distribution on broadband networks
bull Electronic content distribution on mobile networks
20 Thomson Panorama 2006
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Left Silicon microchip As system value and
intelligence is increasingly embedded in chips
Thomson is placing increasing emphasis on
in-house silicon design and development efforts
Research
Thomson has successfully intensi fied
research efforts over the last two years
in order to serve the short and long-term
needs of the Media Entertainment amp
Communications industries leveraging
both close relationships with customers
and deep knowledge of video
New ways to acquire process compress
store and distribute digital content today
provide a central focus for the ongoing
programs at Thomsonrsquos seven research
centers located in Rennes and Paris in
France Hanover and Villingen in Germany
Burbank and Princeton in the US and Bei-
jing in China These range from innovative
coding schemes to advanced methods
for processing audio and video signals
The networking component is especially
important as Thomson engineers work
on solutions to enable operators of fixedand mobile telecom cable and satellite
networks to distribute content more eco-
nomically and flexibly and to introduce
new services
Software amp Technology Solutions
The development of content security solu-
tions counts among the critical initiatives
within the Software amp Technology Solutions
business unit Thomson experts are working
on new ways to help Media Entertainment
amp Communications customers protect their
digital rights They develop and distribute
innovative solutions in the fields of forensic
marking content protection secure con-
tent distribution and anti-counterfeiting
HIGH DEFINITION AT A GALLOP
As high-definition video sweeps the video and TV world video compression
is one of the greatest challenges facing the Media Entertainment amp
Communications industries and companies who need to process and
distribute HD images Thomson is helping meet this challenge through
the Mustang HD video processing engine an advanced chip set that helps
make HD images more compact Using the talents of Thomsonrsquos
Technology and Systems divisions the patented Mustang technology
designed for a wide variety of broadcast equipment has been integrated
into an innovative Grass Valley branded HD video coding device Packing
HD images so compactly greatly reduces costs for broadcasters making it
more commercially attractive for them to adopt advanced MPEG-4 HD
TECHNOLOGY SYSTEMS SERVICES
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ldquoIrsquove always worked in video compression RampD for a number of hi-tech companies
but Thomson is different itrsquos truly video-centric Everyonemdashnot just the compression
research engineersmdashunderstands the importance of video technology to the core business
Irsquom in charge of our compression research activities worldwide a key technology
thatrsquos essential for distributing video over networks or storing video on physical media
But what I most enjoy is drawing on my experience in patents to mentor researchers on
preparing patent disclosures for new inventions Preparing patent disclosures is a pretty
unique skill and one thatrsquos key in strengthening the Grouprsquos intellectual property portfoliordquo
Jill Boyce Compression Domain Director Corporate Research
ADDING A NEW DIMENSION TO MUSIC
Movie-goers and people with home cinema installations are accustomed to
the three-dimensional sound that enables them to hear each instrument
voice or sound effect in a different place The concept is known as ldquoSurround
Soundrdquo and it now exists in mp3 format
Developed in cooperation with Germanyrsquos Fraunhofer Institute for Integrated
Circuits mp3 Surround takes the mp3 digital coding system one step furtherwithout making mp3 files larger The new technology is also backwards
compatible so that music with mp3 Surround sounds great with existing players
The technology can be applied in a broad spectrum of applications
including web-based music distribution broadcasting systems PC-related
audiovisual and gaming applications
This yearrsquos achievements covered multiple
domains of technology The businessrsquo
leading watermarking technology embedsinvisible indestructible and fully traceable
pieces of information into content so that
the owner origin or recipient can be identi-
fied The technology was launched for digi-
tal cinema applications and successfully
licensed to most server manufacturers
Thomson technologies also enabled for
example the development of an advanced
TV audience measurement system and a
solution allowing authentification of VIP
accreditation badges during Soccer World
Cup in Germany in 2006 The businessrsquo
consulting activity also implemented an
enterprise-wide security solution for a majorinternational broadcaster during the year
The Software amp Technology Solutions busi-
ness is now expanding from watermarking
into other promising technological areas
such as digital rights management (DRM)
to manage conditional access to content
in the context of professional workflows
content filtering to monitorfilter distribution
of copyrighted content or new protocols
to optimize and secure content distribution
platforms
TECHNOLOGY SYSTEMS SERVICES
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Silicon Solutions
As more and more system value and intel-
ligence is embedded onto silicon micro-
chips Thomson has placed increased
emphasis on in-house silicon design and
development efforts These range from
integrated circuits for communications and
set-top boxes to chips designed specifi-cally for broadcasting and mobile devices
The growing sophis tication of home
network access devices helps explain
why more than 200 Thomson engineers
are continuing to develop innovative
integrated circuits As with all Thomson
technology innovations our silicon invest-
ment is focused equally on increasing our
leadership in set-top boxes as much as
on providing integrated circuit solutions
to industry leaders
Intellectual Property amp Licensing
Thomsonrsquos extraordinarily rich intellectual
property assets include over 55000 pat-
ents derived from more than 7000 inven-
tions with some 600 new invention patent
applications filed in 2006
Thomsonrsquos patent portfolio remains a key
pillar for both the Technology division and
the Group as a whole with patented tech-
nologies including digital decoders high-
definition TV optical module patents for
Thomsonrsquos rich intellectual property
assets include over 55000 patents
CD and DVD players MPEG video com-
pression mp3 audio compression format
interactive TV and storage technologies
Having successfully migrated the propor-
tion of income derived from digital rather
than analogue technologies digital tech-
nology-based programs now account for
over 80 of the Grouprsquos large licensingrevenue stream with over 950 licensing
contracts in place worldwide at year-end
2006
TECHNOLOGY SYSTEMS SERVICES
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Thomsonrsquos Systems division provides video solutions and integrates video network systems for its customers in
the broadcast cable satellite terrestrial and telecoms markets The divisionrsquos offering spans image capture to
network distribution to the provision of access products enabling operators to enrich their service offerings to
subscribers
SYSTEMS
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Today people benefit from virtually instan-
taneous access to an increasingly custom-
ized range of content available through
a growing set of access possibilities As
internet and digital technologies con-
tinue to infuse the Media Entertainment
amp Communications industries Thomson
is focusing on opportunities arising from
this new paradigm alongside its traditionalcore markets These range from traditional
broadcast equipment to the growing mar-
ket for professional audio-video systems
mobile and IP (Internet Protocol) TV to
booming demand for residential broad-
band services
Strategy
Thomsonrsquos Systems division comprises
three activities Access Products and the
Broadcast amp Networks businesses The
Access Products business aims to deliver
key set-top box platforms for satellite andcable customers and gateway products
for telecom operators The Broadcast
amp Networks businesses are focused on
video network integration bringing to
market advanced products and solutions
to enable network operators broadcast-
ers and film-makers to benefit from the
latest technologies in image acquisition
compression switching and storage The
Network Software business aims to enable
the introduction of new multiple-play ser-
vices based on fixed-mobile convergence
IPTV and broadband telephony
Achievements
Overall the Systems division improved
diversified its customer base in 2006 In
Access Products Thomson consolidated
its leadership of worldwide markets forset-top boxes gateways and modems for
telecom satellite and cable network oper-
ators and service providers while achiev-
ing good growth in higher-end products
in the second half of the year In Grass
Valley demand for high-defin ition (HD)
acquisition production and distribution
systems combined with growing demand
for IT- and IP-based broadcast solutions to
drive growth while in Network Software
Thomsonrsquos SmartVis ion IPTV system
gained good ground with more than 30
IPTV and mobile TV deployments to date
and the worldrsquos largest installed base
Access Products
The Access Products business was driven
in 2006 by the ongoing rapid expansion of
triple (video voice and data) and quadru-
ple play services (also fixed-mobile con-
vergence) offered by cable and telecom
network operators and by the increasing
spread of high definition (HD) broadcasts
among satellite network operators
SYSTEMS
PROVIDING VIDEO SOLUTIONS
From image capture to
distribution via
all types of network
Thomson is reaping the benefits of
growing market demand for
video network integration
TECHNOLOGY SYSTEMS SERVICES
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Thomson further consolidated its market
leading position for dual and triple-play
gateways to telecom operators and inter-
net service providers The established mar-
ket leader for DSL modems and routers
since 1999 Thomson extended its lead
over the competition in 2006 shipping
more than 42 million DSL modems and
gateways during the first half of the yearand 10 million units overall in 2006
Growing market demand for sophisticated
home networking eco-systems able to
accommodate new services over time was
underlined by the success of Thomsonrsquos
Livebox gateway for France Telecom
Early in 2007 Thomson supported large-
scale deployment of the Livebox which
provides access to high-speed wireless
Internet Voice-over-IP IPTV network
gaming fixed-mobile convergence (unik)
and other services
An advanced Thomson gateway also
enabled the UKrsquos leading operator to
launch its innovative Total Broadband ser-
vice in June 2006 Bri tish Telecomrsquos BT
Home Hubtrade is a quadruple-play gateway
designed to support BTrsquos full range of ser-
vices including both BT Total Broadband
and BT Broadband Talk in addition to
providing wired and wireless broadband
connectivity for fixed and mobile phones
PCs and other networked devices It also
Mobile video in Italy
Thomsonrsquos product and service offering benefited in 2006 from increased interest from cable and
telecom operators to complete their offering for Video-on-Demand and mobile TV The Olympic Winter Games
notably provided a showcase for Thomsonrsquos capability to deliver video programming to cell phones and
other mobile devices In the wake of the successful Olympic trial Telecom Italia turned to Thomson
for the systems and technology that enabled it to commercially launch a mobile offering including TV and
sports programming in June 2006
incorporates the latest wideband audio
codec providing near CD-quality sound
for voice and video calls
As broadband services become more and
more of a mass-market service providers
must ensure that their services are both
differentiating and easy to consume This
trend calls for the emergence of simpleyet very technologically-advanced and
software-laden devices Such devices
connect to the home-networking gateway
and make it natural to consume a broad-
band-delivered service One example
is the Music Box first made available to
subscribers of AOLrsquos broadband service
in France which streams Internet-based
radio stations or locally stored music files
to a homersquos legacy Hi-Fi audio system
Strong growth in the cable network sys-
tems market which is projected to expand
another 20 in 2007 helped drive Thom-son toward two major sales milestones
in 2006 two million cable set-top boxes
and ten million cable modems Driven by
operatorsrsquo needs to provide more and
more sophisticated services Thomson
has extended its product range since
2005 to include interactive double- and
triple-play set-top boxes as well as HD
set-top boxes with advanced functions
such as personal video recorders (PVR)
Among the cable operators to have
TECHNOLOGY SYSTEMS SERVICES
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Total Broadband for BT
An advanced Thomson gateway enabled the UKrsquos leading telecommunications operator British Telecom
to launch its innovative Total Broadband service in June 2006 This quadruple-play gateway
known as the BT Home Hubtrade features video voice data and wireless capabilities
It is supporting BTrsquos full range of services including wired and wireless broadband connectivity
for fixed and mobile phones PCs and other networked devices
28 Thomson Panorama 2006
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Left Thomson Grass Valley branded
outside broadcast van under construction
Right Camera operator Kim Marks (left)
a camera first assistant Chris Blauvelt (center)
and a camera second assistant
Jason McCormick (right) line up a scene
with the Grass Valley Viper FilmStreamtrade
camera for the David Fincher feature Zodiac
Photo courtesy Paramount Pictures
selected Thomson in 2006 were Portu-
galrsquos leading Pay-TV Operator TV Cabo
UPC E-Vision Kabel Deutschland and
Premiegravere in Europe Net Serviccedilos in Latin America and StarHub and Dalian Cable
TV in Asia
Thomson expanded its footprint in satel-
lite in Europe notably in the UK and in
Asia where product deliveries began for
Tata Sky the Indian satellite broadcaster
In the UK Thomson delivered the Sky
HD box an MPEG-4 set-top box with
Personal Video Recorder which enabled
the successful launch of the countryrsquos first
high-definition TV service in May 2006
The largest satel li te television service
provider in the US DIRECTV also chose Thomson to expand its HD programming
offering with the delivery of the H20 satel-
lite receiver
Leveraging expertise in free-to-air digi-
tal terrestrial receivers and capabilities in
high-definition Thomson also delivered
the first MPEG-4 HDTV receivers for digital
terrestrial TV to French operators Canal +
and TPS during the year
In telephony Thomson remains a lead-
ing supplier of corded and cordless tele-
phones which are sold at retail outletsunder the RCA GE and Alcatel brands as
well as under third-party brands for opera-
tor sales In 2006 Thomson capitalized
on its leadership position in DECT (Digital
Enhanced Cordless Telecommunications)
in Europe by expanding into the American
retail market
Broadcast amp Networks
The Broadcast amp Networks businesses
gained market share in 2006 particularlyin networks and systems integration and
expanded in the promising Pro-AV (profes-
sional audio-video) market
Continuing trends in this market are high-
definition (HD) broadcasting the merging
of IT and broadcast technology the move
to a tape-less file-based approach to video
storage and management and power-
ful MPEG-4 HD compression technology
which allows content to be delivered to mul-
tiple audiences over multiple platforms
One highly visible application of ThomsonrsquosGrass Valley brand of HD image acquisi-
tion and production systems was the 2006
FIFA World Cup in Germany seen by a
billion viewers around the world Broad-
casters covering the event relied on more
than 182 Grass Valley brand cameras
10 Grass Valley video switching systems
12 large scale Grass Valley video routing
systems and hundreds of other devices to
provide faultless HD images
Leveraging its market leading position
Thomson est imates tha t Grass Valley
HD cameras now account for 50 of theglobal market Most major outside broad-
cast production companies in the world
use Grass Valley branded HD camera sys-
tems with more than 1500 in use
High-definition television is also about
news Based on internal Thomson esti-
mates Grass Valley solutions accounted
for nearly 80 of HD news installations
worldwide in 2006 including CBS Net-
work-owned amp operated stations in the
TECHNOLOGY SYSTEMS SERVICES
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IGNITE HD
TV news operations can work more quickly and efficiently by using information
technology The industryrsquos first and most complete link between the control room
and the newsroom HD Ignite enables a single technician to handle all
news production requirements During its initial months on the market in the US
HD Ignite was selected by such early adaptors as ABC Stations Group
customers in San Francisco and Chicago and Cox Broadcasting customers in
Atlanta San Francisco Charlotte North Carolina and Dayton Ohio
Telecom service providers are working to
provide more content and value-added
services over their broadband lines
Thomsonrsquos SmartVision and
Cirpack software solutions facilitate
their strategies for rapid deployment of
IPTV and triple-play services
US Al Jazeera Englishmdasha global channelbased in the Middle Eastmdashand Belgiumrsquos
VTM (Vlaamse Televisie Maatschappij )
Thomson is the only supplier to provide
an automated production system (Ignite
HD) a full suite of non-linear editing sys-
tems and a news playout systemmdashall of
which enable broadcasters to move to HD
affordably and to speed up and automate
their workflows
MPEG-4 is one of the enabling technolo-
gies which allows operators of telecom-
munications networks to bring TV to
their subscribers in addition to voice andinternet access This is one element in a
complete Thomson systems offering For
example Spanish operator Telefoacutenica
selected Thomson for a range of equip-
ment and systems to upgrade and expand
its rapidly growing ldquoImageniordquo service In
the US Falcon Communications a lead-
ing systems integrator offers a turnkey
IPTV solution featuring encoding content
delivery service management and access
products from Thomson
bull Professional Audio-Video
Thomson serves the rapidly growing mar-ket for professional audiovisual (ProAV)
solutions for corporate institutional wor-
ship and governmental media centers and
networks Thomsonrsquos expansion in ProAV
has been achieved through organic prod-
uct development as well as the integra-
tion of Pro-AV products from Canopus
the Japanese company acquired in early
2006
EDIUS desktop video
editing software part of
Thomsonrsquos growing rangeof professional
audiovisual and
broadcast solutions
TECHNOLOGY SYSTEMS SERVICES
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ldquoHaving started out in research today Irsquom responsible for our modemsrsquo roadmap
and strategy Our customersmdashthe telecoms operatorsmdashhave seen their business
transformed by technology like high-speed broadband And I find it fascinating
how these technologies have penetrated our daily lives the way we live and how
we communicate have changed dramatically over the last ten years
Even faster broadband (VDSL) fiber optics wireless technologies fixed-mobile
convergencehellip mean the pace of change is set to accelerate therersquos no doubt
wersquore living in exciting timesrdquo
Stan Claes Product Manager for IP-based Access Products
A key product introduction in 2006 was
the Grass Valley Indigo AV Presenta-
tion Switcher which combines features
normally found in separate devices in aunified powerful control interface simple
enough to be used by a single operator
Digital signage is also providing new mar-
ket opportunities combining the latest in
display delivery and storage technologies
Thomsonrsquos integrated digital media man-
agement solution Media Edge solves the
complex control distribution and archive
demands of customers Media Edge can
stream high-quality SD and HD content
over an IP network for example to the retail
store environment without the need to re-
invest in infrastructure
Broadcast amp Networksmdash
Network Software
2006 saw telecom service providers con-
tinue to build strategies to provide more
content and value-added services over
their broadband lines Thomsonrsquos Smart-
Vision TV service platforms and Cirpack
telephony switches are at the heart of sev-
eral of the worldrsquos largest IPTV and VoIP
services
In 2006 the launch of a pre-integrated mul-tiple play solution for telecom service provid-
ers illustrated Thomsonrsquos ability to leverage
skills across multiple business units The
solutions which enable telecom providers
to bring a myriad of services to broadband
subscribers are built around Thomsonrsquos
SmartVision and Cirpack software solu-
tions integrated with Thomsonrsquos Grass
Valley branded video head-end equipment
and Thomson home gateways and set-top
boxes This represents the first pre-inte-
grated solution on the market for rapid easy
deployment of triple play services including
voice video and internet access
More than 30 IPTV and mobile TV service
platforms have been deployed around the
world with SmartVision well-positioned
for convergent operators since it allows
video distribution over fixed and mobile
networks
Thomsonrsquos Cirpack softswitches which
help provide the core for the new inte-
grated platforms occupied the top mar-
ket position worldwide for residential
broadband telephony (VoIP) platforms in
2006 Over the course of 2006 Europersquoslargest primary line VoIP operator Freefr
upgraded its Cirpack switches to bring a
new seamless fixedmobile service to its
two million customers placing Thomson
at the forefront of new fixed-mobile con-
vergence solutions Signaling the rapid
expansion of sales outside traditional
Western European markets Thomsonrsquos
Cirpack switches were selected by many
telecom operators in Northern Africa Cen-
tral and Eastern Europe as well as Central
America to build or upgrade legacy voice
networks and deliver advanced telephone
services using IP technologies
TECHNOLOGY SYSTEMS SERVICES
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Thomsonrsquos Services division provides end-to-end management of business-critical services on behalf of Media
Entertainment amp Communications customers These include management of broadcast and network operations
centers on an outsourced basis and the provision of an array of content services to the creative community from
post-production to visual effects
SERVICES
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Thomsonrsquos Services division provides end-
to-end management of business-critical
services spanning physical media con-
tent services electronic content distribu-
tion and network services The division
is the worldrsquos leading provider of state-
of-the-art film-making post-production
visual effects and broadcast center man-
agement services
Strategy
The Services division continues to focus
on managing v ideo networks and
op er at io na l centers on behalf of its
customers who are able to concentrate
on their core business of content The
emphasis on high-growth opportunities
in newer market sectors such as retail
and corporate networks and gaming
has been sharpened
Achievements
New customers in fast-growing market
segments responded well to a range of
high value-added services from the Ser-
vices division in 2006 Network Services
showed particularly strong growth as net-
work operators in Europe Asia and North
America selected Technicolor-branded
management services The addition of
such leading customers as ITV in the
UK and France 24 and TV5 in France
substantially expanded Thomsonrsquos fast-
growing Network Services business
Noteworthy successes were also achieved
in Theatrical Services due in part to the
continued development of Thomsonrsquos digi-
tal cinema activity The Content Services
business continued to expand its post-
production services business by opening
a digital intermediate facility on the SonyPictures Entertainment studio lot In 2006
a new Home Entertainment Services unit
was created combining Thomsonrsquos DVD
business with electronic distribution to
develop new services to support emerging
lsquoon demand contentrsquo business models
Network Services
With a comprehensive portfolio of services
for broadcasters network and internet TV
operators movie theatres retailers and
corporations Network Services continued
to expand briskly in 2006 Broadcastersincreasingly selected Thomson as their
long-term network services partner By
year-end Network Services was providing
managed services under the Technicolor
brand to close to 200 channels from
17 facilities in France the Netherlands
Japan North America and the UK
Late in the year Thomson signed a long-
term agreement with ITV for network
transmission operations services for its six
From managing video
networks on an outsourced
basis to a broad range of
offerings in content services
Thomson is bringing its video
expertise to new markets
and geographies
Left Network Services for broadcasters
cable TV operators movie theaters
retailers and corporations is one of Servicesrsquo
fastest-growing business segments
Right Thomson provided film sound
DVD and digital cinema services for Cars
the DisneyPixar hitCars copy 2006 Disney Enterprises IncPixar All R ights Reserved
SERVICES
MANAGING VIDEO NETWORKS
TECHNOLOGY SYSTEMS SERVICES
34 Thomson Panorama 2006
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existing UK channels including the coun-
tryrsquos leading commercial channel In addi-
tion an agreement signed with NOB Cross
Media Facilities (NOB CMF) a subsidiary
of Nederlands Omroepproduktie Bedrijf
(NOB) likewise established Thomson as
a major supplier of network management
services in the Netherlands
In France Network Services added new
clients France 24 and TV5 which covers
203 countries and territories to move into
the market-leading position managing
more than 60 channels and 1500 hours
of programming daily The France 24 part-
nership also involves equipping their new
global TV news operation
Thomson drove expansion and innovation
in its retail media services over the course
of the year One of the most notable achie-
vements involves an ambitious in-store
network upgrade program piloted in2006 by Wal-Mart in the USA with Premier
Retail Networks (PRN) a subsidiary within
Thomsonrsquos Network Services operat ion
The in-store network platform was based
on Thomson IPTV technologies adapted
for the retail environment The system
the first pilot of IPTV in the retail environ-
ment delivered real impact on product
sales and improved customer satisfaction
in Wal-Mart stores PRN also expanded
capabilities into China early in 2007 with
Content Services revving up
Thomson provided a wide range of services for a number of major international film releases in 2006
such as Cars one of the three nominees for Best Animated Film at the Oscars Thomson Technicolor provided
film services sound services DVD compression and authoring replication and distribution
as well as digital cinema mastering and distribution for the DisneyPixar hit The Grouprsquos Content Services offering
has expanded in recent years to include the high-growth video-gaming advertising and broadcast markets
the signing of a joint venture with CGEN a
technology company leading the Chinese
in-store digital signage media industry
The two companies are currently collabo-
rating on the roll-out of an in-store media
network to 750 internet cafeacutes part of the
leading Chinese chain Big Cafeacute
Theatrical Services
Thomson signed Europersquos first large-scale
digital cinema rollout agreement in 2006
with the Kinepolis Group one of the conti-
nentrsquos most innovative theater circuits and
the leading exhibition chain in Belgium
The agreement to instal l and operate
digital cinema systems in 130 Kinepolis-
owned and operated screens passed a
first milestone in March 2007 with Thom-
sonrsquos first international distribution by sat-
ellite of an encrypted digital version of the
film Dreamgirls from the US to a Kinepolis
theater in Brussels Belgium
A series of new contracts were awarded
in the US For example in the fall of 2006
Technicolor Digital Cinema began installing
digital projection systems at 120 National
Amusements Inc screens in Boston Los
Angeles New York and elsewhere as part
of a strategic agreement National Amuse-
ments operates more than 1500 screens
in the US UK Latin America and Russia
Digital projection systems were also
TECHNOLOGY SYSTEMS SERVICES
35 Thomson Panorama 2006
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The growing market for Network Services
The decision by the UKrsquos leading commercial broadcaster to entrust its network services to
Thomsonrsquos Network Services operations illustrates a growing global trend as broadcasters focus increasingly on
programming and meeting customer needs they turn to highly-skilled specialists to handle technology
The long-term agreement with ITV means that the broadcaster will benefit from enhanced service and new technology
as well as more flexibility in launching new services
36 Thomson Panorama 2006
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Left Thomsonrsquos Technicolor
Interactive Services provided in-game
cinematics and voice recording for
Microsoft Game Studiosrsquo Gears of War
Right Thomsonrsquos London-based MPC
subsidiary carried out post-production
work including computer graphics
on Sony Braviarsquos award-wirring colorful
Paint commercial
installed at several landmark theatres in
Los Angeles in 2006 including Mann The-
atresrsquo Graumanrsquos Chinese and the Village
in Westwood
Thomson maintained a leading position in
film processing and printing in 2006 in a
market where volumes were stable Tech-
nicolor handled worldwide release printingfor two of the five 2007 Oscar nominees
for Best PicturemdashMartin Scorcesersquos The
Departed and Clint Eastwoodrsquos Letters
from Iwo Jimamdashas well as release print-
ing for two of the three Best Animated Film
nominees Cars and Happy Feet
As part of its ongoing commitment to meet
customer needs worldwide a state-of-the-
art film and post-production facility was inau-
gurated at Ciudad de la Imagen in Madrid in
2006 It is already becoming known as the
countryrsquos most comprehensive postproduc-
tion facility with advanced film processingand digital intermediate capabilities
Content Services
Thomson continued to leverage its long-
standing strength in post-production
skills and services through expansion into
emerging and high-growth market seg-
ments such as content services for the
video-gaming advertising and broadcast
markets
In order to better serve the growing mar-
ket for entertainment content for mobile
devices Thomson unveiled new mobile
content preparation and distribution capa-
bilities in the US and the UK in 2006 Facili-
ties equipped with state-of-the-art produc-
tion and post-production technologies will
handle the preparation and optimization
of a wide range of digital entertainmentcontentmdashincluding movies TV episodes
and music videosmdashfor distribution to
mobile devices The dedicated services
complement the Grouprsquos extensive global
electronic distribution infrastructure which
enables Thomson to deliver mobile con-
tent to online delivery services as well as
to network operators for final transmission
to mobile customers
Thomson also made progress in the
development of an integrated digital asset
management solution in 2006 known as
MIDAS (Media Ingest Distribution andStorage) MIDAS is a software and hard-
ware platform for digital content prepara-
tion storage security and distribution
From the first day of production planning
through every stage of post-production
and content distribution MIDAS creates
a digital workflow that allows customers
to manage projects remotely and provides
for rapid and seamless global file delivery
streaming and collaboration
TECHNOLOGY SYSTEMS SERVICES
37 Thomson Panorama 2006
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While expanding into newer markets
growing demand for post-production ser-
vices and visual effects continued to fuel
Thomsonrsquos ongoing content services activ-
ities Among the yearrsquos most noteworthy
achievements were portfolios of services
for such feature films as The Departed
Letters from Iwo Jima and Pirates of the
Caribbean Dead Manrsquos Chest ThomsonrsquosMoving Picture Company (MPC) also pro-
vided high-end visual effects for the three
films nominated for Achievement in Visual
Effects Pirates of the Caribbean Posei-
don and Superman Returns
Confirming the Grouprsquos solid growth in
content services for the video game indus-
try Thomson unveiled a new dedicated
Interactive Services facility in Burbank
California in 2006 Sierra Entertainment
a division of Vivendi Games selected
Thomson to prov ide cinemat ic anima-
tion voice casting and recording sound
design and mixing services for The Leg-
end of Spyrotrade A New Beginning Like-
wise Thomson provided a wide range of
services to support Konamirsquos The SilentHill Experience released simultaneously
with the motion picture
The strategic investment in one of Indiarsquos
leading animation and gaming cinemat-
ics firms announced in February 2007
strengthened Thomsonrsquos position in Asia
for a variety of content services Located in
Bangalore India Paprikaas provides cre-
ldquoIn 1998 I joined Thomson as a Plant Manager within Home Entertainment Services
and was eventually made responsible for the expansion and management of our
Guadalajara DVD operations In summary Irsquove had great opportunities to gain experience
in international operations strategic planning and operational excellence I recently
joined Content Services where Irsquoll be leading the start-up and integration of new activities
in Beijing Bangalore and other emerging markets Content Services is dynamic and
growing and Irsquom looking forward to expanding the business in Asia while improving
our operational performance in North America and Europerdquo
Mike Hayden Vice President Operations amp Strategic Projects Content Services
of the Grouprsquos divisions and profit centersIn the context of the budgetary procedure
performance measurement indicators are
calculated by the divisions analyzed and
reviewed monthly to serve as a reference
for the Grouprsquos monthly reporting
Management reporting and
closing period work
Th om so n uses a co mmon char t of
accounts which is regularly updated The
principal accounting and financial figures
of the operational and functional depart-
ments consolidated at Group level are
analyzed by the Grouprsquos management
control team and reviewed by the Grouprsquos
Executive Committee
The closing process for the half-year and
annual consolidated financial statementsoccurs in two steps The first step con-
sists of a ldquohard closerdquo completed in May
and September leading to a first review by
the statutory auditors The second step
occurs in July and in JanuaryFebruary and
involves the finalization of half-year and
annual consolidated financial statements
under IFRS The Group then proceeds
once a year with a reconciliation of these
results in accordance with US GAAP
Preparation of financial statements
The financial statements are prepared jointly by the finance department and the
General Secretary They are based on
information reported through the annual
reporting and accounting consolidation
processes and on operational and mar-
ket information which is specifically cen-
tralized for the preparation of Thomsonrsquos
Document de Reacutefeacuterence in France and
the submission of Form 20-F in the United
States Half-year and annual financial infor-
mation is reviewed by the Grouprsquos Audit
Committee
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58 Thomson Panorama 2006
(1) Source PriceWaterhouseCoopers ndash
ldquoGlobal Entertainment and Media Outlook 2006-10rdquo
Revenue growth
Thomson achieved consolidated 2006
net revenues of 9914045854 million up from
9914045591 million in 2005 Revenues for
the Core Business reached 9914045747 mil-
lion (9914045776 million at constant currency)
representing 83 growth over 2005 at
constant currency
Overall the Grouprsquos key growth busi-
nessesmdashContent Services Network
Services Access Products for telecom
operators and our Broadcast amp Networks
businesses (Grass Valley and Network
Software)mdashincreased strongly year-on-
year and accounted for over a third of
Group revenues against less than a quar-
ter in 2005
Thomsonrsquos Core Business EBIT for 2006
was euro504 million representing a Core
Business EBIT margin of 88 Thisreflected growth in some key businesses
and cost actions across the Group off-
setting a significant investment in research
and development and some increase in
restructuring expenses
Increased spend on RampD
Research and development expenditure
charged in the Core Business (net of
external funding) rose from 991404221 million in
2005 to 991404279 million in 2006 an increase
of 26 principally in the Systems divi-
sion The Group expanded the number ofproducts and services in the development
phase across its businesses
Return to profit
Losses in Non-Core Continuing and Dis-
continued operations were substantially
lower year-on-year reflecting principally
the exit from heavily loss-making Displays
activities in 2005 and intensified cost-sav-
ing programs in 2006 A major revision
and harmonization of the Grouprsquos North
American healthcare obligations gave rise
to substantial one-time gains and Thom-
son also initiated significant restructuring
of its French Non-Core operations
The good performance of the Core Busi-
ness lower Non-Core and Discontinued
losses and a low reported tax chargeenabled the Group to return a net profit of
99140455 million in 2006 compared to a loss of
991404573 million in the previous year
Good cash flow
strengthened balance sheet
Thomson generated good free cash flow
and strengthened its balance sheet in
2006 Total net financial liabilities on the
balance sheet fell by 991404460 million reflect-
ing a 99140493 million fall in financial and acqui-
sition-related debts and a 991404367 million
reduction in retirement benefit obligations(including healthcare)
Increase in Net Dividend
The Board of Directors proposed a dis-
tribution to shareholders of 991404033 per
share (2005 dividend 991404030) reflecting
confidence in the prospects of the Group
going forward
Outlook 2007-2009
growth in revenues and net income
With the Grouprsquos transformation complete Thomsonrsquos financial focus over the 2007-
2009 period will be to grow revenues and
net income
Thomson serves growing Media Enter-
tainment amp Communications marketsmdashfor
which external estimates(1) indicate com-
pound growth of around 6 over the last
FINANCIAL AND
OPERATIONAL PERFORMANCE
Full year 2006 results
saw a return to profitability
and leave Thomson
well positioned at
the heart of convergence
and digital video
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59 Thomson Panorama 2006
five years Our digital and electronic busi-
nesses now represent two-thirds of rev-
enues and we believe they are growing
faster than the overall market offsetting
the maturing physical media businesses
Given this profile the Group expects its
revenue growth to be more modest in
2007 but to gather pace over the period
and our overall objective is to show com-pound growth over 2007-2009 in line with
or faster than the overall market
The 2007-2009 period is also expected
to see a sharply reduced impact from
residual Non-Core activities with an end
to losses from the Discontinued Activities
perimeter after 2007 Accordingly Thom-
sonrsquos ambition is to turn its Core Business
growth and profitability and lower impact
from Non-Core into strong growth in net
income over the period 2007-2009
Business operations
Continuous performance improvement is
fundamental to Thomsonrsquos commitment to
create sustainable business models and
long-term value for all stakeholders The
ambitious Group-wide programs launched
in 2004 to improve productivity and
enhance overall performance producedsubstantial results in 2006 and led to new
and strong initiatives for long-term growth
As of the second half of 2006 six ldquoKey
Programsrdquo are monitored at Group level
Clients Software Product Introduction
Operations Transformation and Talent
Management
KEY PROGRAMS IN PLACE
Program Focus
Clients Thomsonrsquos clientregional diversification and
growth of the existing business
through improved Sales amp Marketing
Software Development of integrated software platforms
in all markets (post-production distribution
delivery) and for all types of customer
(professional prosumerhellip)
Product Introduction Ensuring new product roadmaps are in line
with strategy and resource needs have been
identifiedOperations Improving the Grouprsquos cost base cash
generation and working capital
Transformation Multiple programs including initiatives to
improving customer relationship management
worldwide supply chain management
IT transformation as well as Thomsonrsquos RampD
footprint
Talent Management Leveraging human assets with a focus on
talent retention and acquisition
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60 Thomson Panorama 2006
SUMMARY RESULTS FULL YEAR 2006
In 991404 millions unless otherwise stated 2006(1) 2005(1)
Net revenues 5854 5591(1)
Core Business net revenues 5747 5335
Services 2489 2487
Systems 2684 2262
Technology 547 546
Corporate 27 40
Non-Core continuing operations net revenues 107 256
Core Business EBIT(2) 504 512
Services 160 205
Systems 132 109
Technology 289 277Corporate (77) (79)
EBIT from Non-Core continuing operations (25) (122)
(1) Restated with 2006 discontinued activities according to IFRS 5
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61 Thomson Panorama 2006
Year ended December 31in 991404 except number of shares 2006 2005 2004
Year ended December 31in 991404 millions 2006 2005(1) 2004(1)
CONSOLIDATED STATEMENTS OF OPERATIONS
(1) Restated with 2006 discontinued activities according to IFRS 5
(2) After deduction of the interests net of tax paid on the subordinated perpetual notes during the period
Continuing operations
Revenues 5854 5591 5980
Cost of sales (4474) (4240) (4594)
Gross margin 1380 1351 1386
Selling marketing general and administrative expenses (674) (638) (653)
Other income (expense) 52 (96) (69)
Research and development expenses (279) (227) (201)
Profit from continuing operations before tax and net finance costs 479 390 463
Interest income 19 30 52
Interest expense (108) (108) (54)
Other financial income (expense) (111) 36 (26)
Finance costs ndash net (200) (42) (28)
Share of profit (loss) from associates (86) (82) (20)
Income tax ndash (68) (93)
Profit from continuing operations 193 198 322
Discontinued operations
Profit (loss) from discontinued operations (138) (771) (883)
Net income (loss) 55 (573) (561)
Attributable to
Equity Holders 55 (574) (559)
Minority interests ndash 1 (2)
Weighted average number of shares
outstandingmdashbasic net of treasury stock 261188858 266539917 273646869
Earnings per share from continuing operations
Basic(2) 067 074 118
Diluted 063 042 111
Earnings per share from discontinued operations
Basic (053) (289) (323)
Diluted (048) (262) (296)Total earnings per share
Basic(2) 014 (215) (205)
Diluted 015 (220) (185)
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62 Thomson Panorama 2006
CONSOLIDATED BALANCE SHEETS
In 991404 millions December 31 December 31 January 1 December 31 2006 2005 2005(1) 2004
ASSETS
Non-current assets
Property plant and equipment 813 886 1051 1051
Goodwill 1714 1756 1186 1178
Other intangible assets 1071 1150 924 924
Investments in associates 12 204 260 260
Investments and financial assets available-for-sale 266 341 139 113
Derivative financial instruments 7 1 11 ndash
Contract advances 129 173 179 179
Deferred tax assets 397 379 307 301
Other non-current assets 110 182 133 136
Total non-current assets 4519 5072 4190 4142
Current assets
Inventories 366 333 503 568
Trade accounts and notes receivable 1018 1315 1232 1180
Current accounts with associates and joint ventures 97 115 143 143
Derivative financial instruments 8 9 115 ndash
Other current assets 535 644 483 616
Marketable securities ndash 7 58 58
Cash and cash equivalents 1311 996 1845 1848
Assets classified as held for sale 264 369 80 ndash
Total current assets 3599 3788 4459 4413
Total assets 8118 8860 8649 8555
(1) Including the impacts of the first-time application related to IAS 32 and 39 on financial instruments and IFRS 5 on non-current assets held for sale and
discontinued operations
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63 Thomson Panorama 2006
In 991404 millions December 31 December 31 January 1 December 31 2006 2005 2005(1) 2004
SHAREHOLDERSrsquo EQUITY AND LIABILITIES
Shareholdersrsquo equity
Common stock (273871296 shares at
December 31 2006
with nominal value of euro 375 per share) 1027 1025 1025 1025
Trade accounts and notes payable 1032 1164 1199 1226
Accrued employee expenses 165 166 158 163
Income tax payable 57 47 60 60
Other current liabilities 671 750 746 800
Payables on acquisition of companies 13 138 84 84
Liabilities directly associated with
assets classified as held for sale 232 470 88 ndash
Total current liabilities 3681 4393 3602 3459
Total liabilities 5999 6644 6251 6062
Total shareholderrsquos equity and liabilities 8118 8860 8649 8555
(1) Including the impacts of the first-time application related to IAS 32 and 39 on financial instruments and IFRS 5 on non-current assets held for sale and
discontinued operations
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Creation and lay-out
Photo credits Nathalie BerhingGAMMA ndash Steacutephane de Bourgies ndash Jean-Franccedilois DeroubaixGAMMA ndash Christine Donnier- ValentinGAMMA ndash Cars copy 2006 Disney Enterprises IncPixar All Rights Reserved ndash Dreamgirls copy 2006 DREAMWORKS
LLC and PARAMOUNT PICTURES All Rights Reserved ndash Poseidon copy 2006 Warner Bros Pictures ndash Sony Bravia Paint
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From digital cinematography and tape-
less post-production workflows to con-
tent distribution and access systems
the fruits of Thomsonrsquos research enable
customers to take early advantage of the
realm of possibilities opened up by digital
technologies
Strategy
Thomson is techno logy-focused and
continues to invest in RampD in order to
maintain its intellectual property leader-
ship and to take advantage of the main
growth drivers of the digital video indus-
tries These include the accelerating
adoption of high definition mobile con-
tent on-demand content consumer-
generated content fixed-mobile conver-
gence triple-play devices connected
home networking and internet-based
and advertising-based content delivery
A particular focus will be on developmentof integrated software solutions over the
period 2007-2009
In addition to extensive technology trans-
fer activities in support of the Systems
and Services divisions the Technology
division monetizes technology in three
ways through licensing of patents and
trademarks integrated circuit design and
software development
Achievements
Resources dedicated to Group-wide
research and development increased in
2006 in line with Thomsonrsquos strategic
focus on RampD The Technology division
also advanced innovations in its five key
technology domains video and audio
compression networking and communi-cations security storage and recording
and signal acquisition and processing
Thomsonrsquos commitment to open standards
continued in 2006 and is testament to the
Grouprsquos dedication to advancing tech-
nology solutions throughout the Media
Entertainment amp Communications indus-
tries To ensure that industry partners and
customers benefit from standardized solu-
tions many Thomson research initiatives
are carried out in cooperation with other
industry leaders For example Thomson
is leading the European Networked andElectronic Media (NEM) platform designed
to accelerate the pace of innovation and
the convergence between the audiovisual
content and telecom sectors The Group
is also the leader of Quaero the European
cooperative program aimed at developing
technologies and applications to enable
audio and video content to be searched
In 2006 Quaero obtained the backing of
the Agency for Industrial Innovation (AII)
TECHNOLOGY
DEVELOPING VIDEO TECHNOLOGIES
In an environment
undergoing rapid
and fundamental
technological change
a rich technology
legacy and focused
Research amp Development
(RampD) programs enable
Thomson to stay on
the cutting edge of
innovation
Left Researcher in Thomsonrsquos
research center Beijing
Research is focused on
increasing the output and
quality of long-term research
while expanding Thomsonrsquos
intellectual property portfolio
Right Thomsonrsquos NexGuardtrade
content security solution
TECHNOLOGY SYSTEMS SERVICES
18 Thomson Panorama 2006
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Thomson is currently involved in a variety
of standards bodies and with key research
and development partners including INRIA
(Institut national de recherche en infor-
matique et automatique ) in France HHI
(Heinrich Hertz Institute ) in Germany and
universities in Europe and the US
A division driving RampD
The Technology division which comprises
four business unitsmdashResearch Software
amp Technology Solutions Silicon Solutions
and Intellectual Property amp Licensingmdashpro-
vides both the foundation for RampD pro-
grams carried out throughout the Group
and the main impetus for its technological
evolutions
The divisionrsquos strength is to allow the fruits
of fundamental research to be shared
and developed inside the Group so that
business units can better address theircustomersrsquo needs while these same and
other technologies may also be licensed
to outside parties thus monetizing the
Grouprsquos innovation efforts
Thomson breakthroughs are often shared
to provide customers with broad-based
compatibility and long-term availability
Thomsonrsquos innovative NexGuardtrade water-
marking solution for example has been
INTRODUCING THE AGNOSTIC TIGER
The co-existence of two rival formats for high-definition (HD) DVDs presents
a special challenge for those who compress and author video content
Thomson Research engineers have responded with the development of
Tiger an advanced DVD authoring system Tiger combines
an advanced video coding system with an innovative user interface
enabling customers to make their workflows more efficient and streamlined
while providing the highest quality images in both HD formats
Top security for content
Protecting digital content is a major concern for those whose business involves creating
processing or distributing digital audio and video Thomsonrsquos advanced content security solution
NexGuardtrade offers comprehensive protection against piracy or unauthorized usage
Whatever the application or mediummdashfrom duplication to secure professional workflows to
online content deliverymdashNexGuardtrade streamlines the secure storage transfer or viewing of
digital content using encryption forensic watermarking security tokens and other
advanced software techniques
adopted by numerous Media amp Entertain-
ment industry players from post-pro-
duction houses to digital cinema server
vendors Likewise the HD DVD Forum
an industry-standardization group has
adopted Thomsonrsquos Film Grain Technol-
ogytrade specification a revolutionary method
for ensuring compressed video retains the
classic granular visual quality of film thatis still preferred by many in the creative
community
TECHNOLOGY SYSTEMS SERVICES
19 Thomson Panorama 2006
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Technology to serve the Media Entertainment amp Communications industries
Thomsonrsquos five key technology domains
bull Video and audio compression
bull Networking and communications
bull Security
bull Storage and recording
bull Signal acquisition and processing
Thomsonrsquos four system programs
bull Content production and management for cinema
bull Content production and management for broadcast
bull Electronic content distribution on broadband networks
bull Electronic content distribution on mobile networks
20 Thomson Panorama 2006
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Left Silicon microchip As system value and
intelligence is increasingly embedded in chips
Thomson is placing increasing emphasis on
in-house silicon design and development efforts
Research
Thomson has successfully intensi fied
research efforts over the last two years
in order to serve the short and long-term
needs of the Media Entertainment amp
Communications industries leveraging
both close relationships with customers
and deep knowledge of video
New ways to acquire process compress
store and distribute digital content today
provide a central focus for the ongoing
programs at Thomsonrsquos seven research
centers located in Rennes and Paris in
France Hanover and Villingen in Germany
Burbank and Princeton in the US and Bei-
jing in China These range from innovative
coding schemes to advanced methods
for processing audio and video signals
The networking component is especially
important as Thomson engineers work
on solutions to enable operators of fixedand mobile telecom cable and satellite
networks to distribute content more eco-
nomically and flexibly and to introduce
new services
Software amp Technology Solutions
The development of content security solu-
tions counts among the critical initiatives
within the Software amp Technology Solutions
business unit Thomson experts are working
on new ways to help Media Entertainment
amp Communications customers protect their
digital rights They develop and distribute
innovative solutions in the fields of forensic
marking content protection secure con-
tent distribution and anti-counterfeiting
HIGH DEFINITION AT A GALLOP
As high-definition video sweeps the video and TV world video compression
is one of the greatest challenges facing the Media Entertainment amp
Communications industries and companies who need to process and
distribute HD images Thomson is helping meet this challenge through
the Mustang HD video processing engine an advanced chip set that helps
make HD images more compact Using the talents of Thomsonrsquos
Technology and Systems divisions the patented Mustang technology
designed for a wide variety of broadcast equipment has been integrated
into an innovative Grass Valley branded HD video coding device Packing
HD images so compactly greatly reduces costs for broadcasters making it
more commercially attractive for them to adopt advanced MPEG-4 HD
TECHNOLOGY SYSTEMS SERVICES
21 Thomson Panorama 2006
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ldquoIrsquove always worked in video compression RampD for a number of hi-tech companies
but Thomson is different itrsquos truly video-centric Everyonemdashnot just the compression
research engineersmdashunderstands the importance of video technology to the core business
Irsquom in charge of our compression research activities worldwide a key technology
thatrsquos essential for distributing video over networks or storing video on physical media
But what I most enjoy is drawing on my experience in patents to mentor researchers on
preparing patent disclosures for new inventions Preparing patent disclosures is a pretty
unique skill and one thatrsquos key in strengthening the Grouprsquos intellectual property portfoliordquo
Jill Boyce Compression Domain Director Corporate Research
ADDING A NEW DIMENSION TO MUSIC
Movie-goers and people with home cinema installations are accustomed to
the three-dimensional sound that enables them to hear each instrument
voice or sound effect in a different place The concept is known as ldquoSurround
Soundrdquo and it now exists in mp3 format
Developed in cooperation with Germanyrsquos Fraunhofer Institute for Integrated
Circuits mp3 Surround takes the mp3 digital coding system one step furtherwithout making mp3 files larger The new technology is also backwards
compatible so that music with mp3 Surround sounds great with existing players
The technology can be applied in a broad spectrum of applications
including web-based music distribution broadcasting systems PC-related
audiovisual and gaming applications
This yearrsquos achievements covered multiple
domains of technology The businessrsquo
leading watermarking technology embedsinvisible indestructible and fully traceable
pieces of information into content so that
the owner origin or recipient can be identi-
fied The technology was launched for digi-
tal cinema applications and successfully
licensed to most server manufacturers
Thomson technologies also enabled for
example the development of an advanced
TV audience measurement system and a
solution allowing authentification of VIP
accreditation badges during Soccer World
Cup in Germany in 2006 The businessrsquo
consulting activity also implemented an
enterprise-wide security solution for a majorinternational broadcaster during the year
The Software amp Technology Solutions busi-
ness is now expanding from watermarking
into other promising technological areas
such as digital rights management (DRM)
to manage conditional access to content
in the context of professional workflows
content filtering to monitorfilter distribution
of copyrighted content or new protocols
to optimize and secure content distribution
platforms
TECHNOLOGY SYSTEMS SERVICES
22 Thomson Panorama 2006
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Silicon Solutions
As more and more system value and intel-
ligence is embedded onto silicon micro-
chips Thomson has placed increased
emphasis on in-house silicon design and
development efforts These range from
integrated circuits for communications and
set-top boxes to chips designed specifi-cally for broadcasting and mobile devices
The growing sophis tication of home
network access devices helps explain
why more than 200 Thomson engineers
are continuing to develop innovative
integrated circuits As with all Thomson
technology innovations our silicon invest-
ment is focused equally on increasing our
leadership in set-top boxes as much as
on providing integrated circuit solutions
to industry leaders
Intellectual Property amp Licensing
Thomsonrsquos extraordinarily rich intellectual
property assets include over 55000 pat-
ents derived from more than 7000 inven-
tions with some 600 new invention patent
applications filed in 2006
Thomsonrsquos patent portfolio remains a key
pillar for both the Technology division and
the Group as a whole with patented tech-
nologies including digital decoders high-
definition TV optical module patents for
Thomsonrsquos rich intellectual property
assets include over 55000 patents
CD and DVD players MPEG video com-
pression mp3 audio compression format
interactive TV and storage technologies
Having successfully migrated the propor-
tion of income derived from digital rather
than analogue technologies digital tech-
nology-based programs now account for
over 80 of the Grouprsquos large licensingrevenue stream with over 950 licensing
contracts in place worldwide at year-end
2006
TECHNOLOGY SYSTEMS SERVICES
23 Thomson Panorama 2006
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Thomsonrsquos Systems division provides video solutions and integrates video network systems for its customers in
the broadcast cable satellite terrestrial and telecoms markets The divisionrsquos offering spans image capture to
network distribution to the provision of access products enabling operators to enrich their service offerings to
subscribers
SYSTEMS
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Today people benefit from virtually instan-
taneous access to an increasingly custom-
ized range of content available through
a growing set of access possibilities As
internet and digital technologies con-
tinue to infuse the Media Entertainment
amp Communications industries Thomson
is focusing on opportunities arising from
this new paradigm alongside its traditionalcore markets These range from traditional
broadcast equipment to the growing mar-
ket for professional audio-video systems
mobile and IP (Internet Protocol) TV to
booming demand for residential broad-
band services
Strategy
Thomsonrsquos Systems division comprises
three activities Access Products and the
Broadcast amp Networks businesses The
Access Products business aims to deliver
key set-top box platforms for satellite andcable customers and gateway products
for telecom operators The Broadcast
amp Networks businesses are focused on
video network integration bringing to
market advanced products and solutions
to enable network operators broadcast-
ers and film-makers to benefit from the
latest technologies in image acquisition
compression switching and storage The
Network Software business aims to enable
the introduction of new multiple-play ser-
vices based on fixed-mobile convergence
IPTV and broadband telephony
Achievements
Overall the Systems division improved
diversified its customer base in 2006 In
Access Products Thomson consolidated
its leadership of worldwide markets forset-top boxes gateways and modems for
telecom satellite and cable network oper-
ators and service providers while achiev-
ing good growth in higher-end products
in the second half of the year In Grass
Valley demand for high-defin ition (HD)
acquisition production and distribution
systems combined with growing demand
for IT- and IP-based broadcast solutions to
drive growth while in Network Software
Thomsonrsquos SmartVis ion IPTV system
gained good ground with more than 30
IPTV and mobile TV deployments to date
and the worldrsquos largest installed base
Access Products
The Access Products business was driven
in 2006 by the ongoing rapid expansion of
triple (video voice and data) and quadru-
ple play services (also fixed-mobile con-
vergence) offered by cable and telecom
network operators and by the increasing
spread of high definition (HD) broadcasts
among satellite network operators
SYSTEMS
PROVIDING VIDEO SOLUTIONS
From image capture to
distribution via
all types of network
Thomson is reaping the benefits of
growing market demand for
video network integration
TECHNOLOGY SYSTEMS SERVICES
26 Thomson Panorama 2006
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Thomson further consolidated its market
leading position for dual and triple-play
gateways to telecom operators and inter-
net service providers The established mar-
ket leader for DSL modems and routers
since 1999 Thomson extended its lead
over the competition in 2006 shipping
more than 42 million DSL modems and
gateways during the first half of the yearand 10 million units overall in 2006
Growing market demand for sophisticated
home networking eco-systems able to
accommodate new services over time was
underlined by the success of Thomsonrsquos
Livebox gateway for France Telecom
Early in 2007 Thomson supported large-
scale deployment of the Livebox which
provides access to high-speed wireless
Internet Voice-over-IP IPTV network
gaming fixed-mobile convergence (unik)
and other services
An advanced Thomson gateway also
enabled the UKrsquos leading operator to
launch its innovative Total Broadband ser-
vice in June 2006 Bri tish Telecomrsquos BT
Home Hubtrade is a quadruple-play gateway
designed to support BTrsquos full range of ser-
vices including both BT Total Broadband
and BT Broadband Talk in addition to
providing wired and wireless broadband
connectivity for fixed and mobile phones
PCs and other networked devices It also
Mobile video in Italy
Thomsonrsquos product and service offering benefited in 2006 from increased interest from cable and
telecom operators to complete their offering for Video-on-Demand and mobile TV The Olympic Winter Games
notably provided a showcase for Thomsonrsquos capability to deliver video programming to cell phones and
other mobile devices In the wake of the successful Olympic trial Telecom Italia turned to Thomson
for the systems and technology that enabled it to commercially launch a mobile offering including TV and
sports programming in June 2006
incorporates the latest wideband audio
codec providing near CD-quality sound
for voice and video calls
As broadband services become more and
more of a mass-market service providers
must ensure that their services are both
differentiating and easy to consume This
trend calls for the emergence of simpleyet very technologically-advanced and
software-laden devices Such devices
connect to the home-networking gateway
and make it natural to consume a broad-
band-delivered service One example
is the Music Box first made available to
subscribers of AOLrsquos broadband service
in France which streams Internet-based
radio stations or locally stored music files
to a homersquos legacy Hi-Fi audio system
Strong growth in the cable network sys-
tems market which is projected to expand
another 20 in 2007 helped drive Thom-son toward two major sales milestones
in 2006 two million cable set-top boxes
and ten million cable modems Driven by
operatorsrsquo needs to provide more and
more sophisticated services Thomson
has extended its product range since
2005 to include interactive double- and
triple-play set-top boxes as well as HD
set-top boxes with advanced functions
such as personal video recorders (PVR)
Among the cable operators to have
TECHNOLOGY SYSTEMS SERVICES
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Total Broadband for BT
An advanced Thomson gateway enabled the UKrsquos leading telecommunications operator British Telecom
to launch its innovative Total Broadband service in June 2006 This quadruple-play gateway
known as the BT Home Hubtrade features video voice data and wireless capabilities
It is supporting BTrsquos full range of services including wired and wireless broadband connectivity
for fixed and mobile phones PCs and other networked devices
28 Thomson Panorama 2006
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Left Thomson Grass Valley branded
outside broadcast van under construction
Right Camera operator Kim Marks (left)
a camera first assistant Chris Blauvelt (center)
and a camera second assistant
Jason McCormick (right) line up a scene
with the Grass Valley Viper FilmStreamtrade
camera for the David Fincher feature Zodiac
Photo courtesy Paramount Pictures
selected Thomson in 2006 were Portu-
galrsquos leading Pay-TV Operator TV Cabo
UPC E-Vision Kabel Deutschland and
Premiegravere in Europe Net Serviccedilos in Latin America and StarHub and Dalian Cable
TV in Asia
Thomson expanded its footprint in satel-
lite in Europe notably in the UK and in
Asia where product deliveries began for
Tata Sky the Indian satellite broadcaster
In the UK Thomson delivered the Sky
HD box an MPEG-4 set-top box with
Personal Video Recorder which enabled
the successful launch of the countryrsquos first
high-definition TV service in May 2006
The largest satel li te television service
provider in the US DIRECTV also chose Thomson to expand its HD programming
offering with the delivery of the H20 satel-
lite receiver
Leveraging expertise in free-to-air digi-
tal terrestrial receivers and capabilities in
high-definition Thomson also delivered
the first MPEG-4 HDTV receivers for digital
terrestrial TV to French operators Canal +
and TPS during the year
In telephony Thomson remains a lead-
ing supplier of corded and cordless tele-
phones which are sold at retail outletsunder the RCA GE and Alcatel brands as
well as under third-party brands for opera-
tor sales In 2006 Thomson capitalized
on its leadership position in DECT (Digital
Enhanced Cordless Telecommunications)
in Europe by expanding into the American
retail market
Broadcast amp Networks
The Broadcast amp Networks businesses
gained market share in 2006 particularlyin networks and systems integration and
expanded in the promising Pro-AV (profes-
sional audio-video) market
Continuing trends in this market are high-
definition (HD) broadcasting the merging
of IT and broadcast technology the move
to a tape-less file-based approach to video
storage and management and power-
ful MPEG-4 HD compression technology
which allows content to be delivered to mul-
tiple audiences over multiple platforms
One highly visible application of ThomsonrsquosGrass Valley brand of HD image acquisi-
tion and production systems was the 2006
FIFA World Cup in Germany seen by a
billion viewers around the world Broad-
casters covering the event relied on more
than 182 Grass Valley brand cameras
10 Grass Valley video switching systems
12 large scale Grass Valley video routing
systems and hundreds of other devices to
provide faultless HD images
Leveraging its market leading position
Thomson est imates tha t Grass Valley
HD cameras now account for 50 of theglobal market Most major outside broad-
cast production companies in the world
use Grass Valley branded HD camera sys-
tems with more than 1500 in use
High-definition television is also about
news Based on internal Thomson esti-
mates Grass Valley solutions accounted
for nearly 80 of HD news installations
worldwide in 2006 including CBS Net-
work-owned amp operated stations in the
TECHNOLOGY SYSTEMS SERVICES
29 Thomson Panorama 2006
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IGNITE HD
TV news operations can work more quickly and efficiently by using information
technology The industryrsquos first and most complete link between the control room
and the newsroom HD Ignite enables a single technician to handle all
news production requirements During its initial months on the market in the US
HD Ignite was selected by such early adaptors as ABC Stations Group
customers in San Francisco and Chicago and Cox Broadcasting customers in
Atlanta San Francisco Charlotte North Carolina and Dayton Ohio
Telecom service providers are working to
provide more content and value-added
services over their broadband lines
Thomsonrsquos SmartVision and
Cirpack software solutions facilitate
their strategies for rapid deployment of
IPTV and triple-play services
US Al Jazeera Englishmdasha global channelbased in the Middle Eastmdashand Belgiumrsquos
VTM (Vlaamse Televisie Maatschappij )
Thomson is the only supplier to provide
an automated production system (Ignite
HD) a full suite of non-linear editing sys-
tems and a news playout systemmdashall of
which enable broadcasters to move to HD
affordably and to speed up and automate
their workflows
MPEG-4 is one of the enabling technolo-
gies which allows operators of telecom-
munications networks to bring TV to
their subscribers in addition to voice andinternet access This is one element in a
complete Thomson systems offering For
example Spanish operator Telefoacutenica
selected Thomson for a range of equip-
ment and systems to upgrade and expand
its rapidly growing ldquoImageniordquo service In
the US Falcon Communications a lead-
ing systems integrator offers a turnkey
IPTV solution featuring encoding content
delivery service management and access
products from Thomson
bull Professional Audio-Video
Thomson serves the rapidly growing mar-ket for professional audiovisual (ProAV)
solutions for corporate institutional wor-
ship and governmental media centers and
networks Thomsonrsquos expansion in ProAV
has been achieved through organic prod-
uct development as well as the integra-
tion of Pro-AV products from Canopus
the Japanese company acquired in early
2006
EDIUS desktop video
editing software part of
Thomsonrsquos growing rangeof professional
audiovisual and
broadcast solutions
TECHNOLOGY SYSTEMS SERVICES
30 Thomson Panorama 2006
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ldquoHaving started out in research today Irsquom responsible for our modemsrsquo roadmap
and strategy Our customersmdashthe telecoms operatorsmdashhave seen their business
transformed by technology like high-speed broadband And I find it fascinating
how these technologies have penetrated our daily lives the way we live and how
we communicate have changed dramatically over the last ten years
Even faster broadband (VDSL) fiber optics wireless technologies fixed-mobile
convergencehellip mean the pace of change is set to accelerate therersquos no doubt
wersquore living in exciting timesrdquo
Stan Claes Product Manager for IP-based Access Products
A key product introduction in 2006 was
the Grass Valley Indigo AV Presenta-
tion Switcher which combines features
normally found in separate devices in aunified powerful control interface simple
enough to be used by a single operator
Digital signage is also providing new mar-
ket opportunities combining the latest in
display delivery and storage technologies
Thomsonrsquos integrated digital media man-
agement solution Media Edge solves the
complex control distribution and archive
demands of customers Media Edge can
stream high-quality SD and HD content
over an IP network for example to the retail
store environment without the need to re-
invest in infrastructure
Broadcast amp Networksmdash
Network Software
2006 saw telecom service providers con-
tinue to build strategies to provide more
content and value-added services over
their broadband lines Thomsonrsquos Smart-
Vision TV service platforms and Cirpack
telephony switches are at the heart of sev-
eral of the worldrsquos largest IPTV and VoIP
services
In 2006 the launch of a pre-integrated mul-tiple play solution for telecom service provid-
ers illustrated Thomsonrsquos ability to leverage
skills across multiple business units The
solutions which enable telecom providers
to bring a myriad of services to broadband
subscribers are built around Thomsonrsquos
SmartVision and Cirpack software solu-
tions integrated with Thomsonrsquos Grass
Valley branded video head-end equipment
and Thomson home gateways and set-top
boxes This represents the first pre-inte-
grated solution on the market for rapid easy
deployment of triple play services including
voice video and internet access
More than 30 IPTV and mobile TV service
platforms have been deployed around the
world with SmartVision well-positioned
for convergent operators since it allows
video distribution over fixed and mobile
networks
Thomsonrsquos Cirpack softswitches which
help provide the core for the new inte-
grated platforms occupied the top mar-
ket position worldwide for residential
broadband telephony (VoIP) platforms in
2006 Over the course of 2006 Europersquoslargest primary line VoIP operator Freefr
upgraded its Cirpack switches to bring a
new seamless fixedmobile service to its
two million customers placing Thomson
at the forefront of new fixed-mobile con-
vergence solutions Signaling the rapid
expansion of sales outside traditional
Western European markets Thomsonrsquos
Cirpack switches were selected by many
telecom operators in Northern Africa Cen-
tral and Eastern Europe as well as Central
America to build or upgrade legacy voice
networks and deliver advanced telephone
services using IP technologies
TECHNOLOGY SYSTEMS SERVICES
31 Thomson Panorama 2006
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Thomsonrsquos Services division provides end-to-end management of business-critical services on behalf of Media
Entertainment amp Communications customers These include management of broadcast and network operations
centers on an outsourced basis and the provision of an array of content services to the creative community from
post-production to visual effects
SERVICES
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Thomsonrsquos Services division provides end-
to-end management of business-critical
services spanning physical media con-
tent services electronic content distribu-
tion and network services The division
is the worldrsquos leading provider of state-
of-the-art film-making post-production
visual effects and broadcast center man-
agement services
Strategy
The Services division continues to focus
on managing v ideo networks and
op er at io na l centers on behalf of its
customers who are able to concentrate
on their core business of content The
emphasis on high-growth opportunities
in newer market sectors such as retail
and corporate networks and gaming
has been sharpened
Achievements
New customers in fast-growing market
segments responded well to a range of
high value-added services from the Ser-
vices division in 2006 Network Services
showed particularly strong growth as net-
work operators in Europe Asia and North
America selected Technicolor-branded
management services The addition of
such leading customers as ITV in the
UK and France 24 and TV5 in France
substantially expanded Thomsonrsquos fast-
growing Network Services business
Noteworthy successes were also achieved
in Theatrical Services due in part to the
continued development of Thomsonrsquos digi-
tal cinema activity The Content Services
business continued to expand its post-
production services business by opening
a digital intermediate facility on the SonyPictures Entertainment studio lot In 2006
a new Home Entertainment Services unit
was created combining Thomsonrsquos DVD
business with electronic distribution to
develop new services to support emerging
lsquoon demand contentrsquo business models
Network Services
With a comprehensive portfolio of services
for broadcasters network and internet TV
operators movie theatres retailers and
corporations Network Services continued
to expand briskly in 2006 Broadcastersincreasingly selected Thomson as their
long-term network services partner By
year-end Network Services was providing
managed services under the Technicolor
brand to close to 200 channels from
17 facilities in France the Netherlands
Japan North America and the UK
Late in the year Thomson signed a long-
term agreement with ITV for network
transmission operations services for its six
From managing video
networks on an outsourced
basis to a broad range of
offerings in content services
Thomson is bringing its video
expertise to new markets
and geographies
Left Network Services for broadcasters
cable TV operators movie theaters
retailers and corporations is one of Servicesrsquo
fastest-growing business segments
Right Thomson provided film sound
DVD and digital cinema services for Cars
the DisneyPixar hitCars copy 2006 Disney Enterprises IncPixar All R ights Reserved
SERVICES
MANAGING VIDEO NETWORKS
TECHNOLOGY SYSTEMS SERVICES
34 Thomson Panorama 2006
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existing UK channels including the coun-
tryrsquos leading commercial channel In addi-
tion an agreement signed with NOB Cross
Media Facilities (NOB CMF) a subsidiary
of Nederlands Omroepproduktie Bedrijf
(NOB) likewise established Thomson as
a major supplier of network management
services in the Netherlands
In France Network Services added new
clients France 24 and TV5 which covers
203 countries and territories to move into
the market-leading position managing
more than 60 channels and 1500 hours
of programming daily The France 24 part-
nership also involves equipping their new
global TV news operation
Thomson drove expansion and innovation
in its retail media services over the course
of the year One of the most notable achie-
vements involves an ambitious in-store
network upgrade program piloted in2006 by Wal-Mart in the USA with Premier
Retail Networks (PRN) a subsidiary within
Thomsonrsquos Network Services operat ion
The in-store network platform was based
on Thomson IPTV technologies adapted
for the retail environment The system
the first pilot of IPTV in the retail environ-
ment delivered real impact on product
sales and improved customer satisfaction
in Wal-Mart stores PRN also expanded
capabilities into China early in 2007 with
Content Services revving up
Thomson provided a wide range of services for a number of major international film releases in 2006
such as Cars one of the three nominees for Best Animated Film at the Oscars Thomson Technicolor provided
film services sound services DVD compression and authoring replication and distribution
as well as digital cinema mastering and distribution for the DisneyPixar hit The Grouprsquos Content Services offering
has expanded in recent years to include the high-growth video-gaming advertising and broadcast markets
the signing of a joint venture with CGEN a
technology company leading the Chinese
in-store digital signage media industry
The two companies are currently collabo-
rating on the roll-out of an in-store media
network to 750 internet cafeacutes part of the
leading Chinese chain Big Cafeacute
Theatrical Services
Thomson signed Europersquos first large-scale
digital cinema rollout agreement in 2006
with the Kinepolis Group one of the conti-
nentrsquos most innovative theater circuits and
the leading exhibition chain in Belgium
The agreement to instal l and operate
digital cinema systems in 130 Kinepolis-
owned and operated screens passed a
first milestone in March 2007 with Thom-
sonrsquos first international distribution by sat-
ellite of an encrypted digital version of the
film Dreamgirls from the US to a Kinepolis
theater in Brussels Belgium
A series of new contracts were awarded
in the US For example in the fall of 2006
Technicolor Digital Cinema began installing
digital projection systems at 120 National
Amusements Inc screens in Boston Los
Angeles New York and elsewhere as part
of a strategic agreement National Amuse-
ments operates more than 1500 screens
in the US UK Latin America and Russia
Digital projection systems were also
TECHNOLOGY SYSTEMS SERVICES
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The growing market for Network Services
The decision by the UKrsquos leading commercial broadcaster to entrust its network services to
Thomsonrsquos Network Services operations illustrates a growing global trend as broadcasters focus increasingly on
programming and meeting customer needs they turn to highly-skilled specialists to handle technology
The long-term agreement with ITV means that the broadcaster will benefit from enhanced service and new technology
as well as more flexibility in launching new services
36 Thomson Panorama 2006
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Left Thomsonrsquos Technicolor
Interactive Services provided in-game
cinematics and voice recording for
Microsoft Game Studiosrsquo Gears of War
Right Thomsonrsquos London-based MPC
subsidiary carried out post-production
work including computer graphics
on Sony Braviarsquos award-wirring colorful
Paint commercial
installed at several landmark theatres in
Los Angeles in 2006 including Mann The-
atresrsquo Graumanrsquos Chinese and the Village
in Westwood
Thomson maintained a leading position in
film processing and printing in 2006 in a
market where volumes were stable Tech-
nicolor handled worldwide release printingfor two of the five 2007 Oscar nominees
for Best PicturemdashMartin Scorcesersquos The
Departed and Clint Eastwoodrsquos Letters
from Iwo Jimamdashas well as release print-
ing for two of the three Best Animated Film
nominees Cars and Happy Feet
As part of its ongoing commitment to meet
customer needs worldwide a state-of-the-
art film and post-production facility was inau-
gurated at Ciudad de la Imagen in Madrid in
2006 It is already becoming known as the
countryrsquos most comprehensive postproduc-
tion facility with advanced film processingand digital intermediate capabilities
Content Services
Thomson continued to leverage its long-
standing strength in post-production
skills and services through expansion into
emerging and high-growth market seg-
ments such as content services for the
video-gaming advertising and broadcast
markets
In order to better serve the growing mar-
ket for entertainment content for mobile
devices Thomson unveiled new mobile
content preparation and distribution capa-
bilities in the US and the UK in 2006 Facili-
ties equipped with state-of-the-art produc-
tion and post-production technologies will
handle the preparation and optimization
of a wide range of digital entertainmentcontentmdashincluding movies TV episodes
and music videosmdashfor distribution to
mobile devices The dedicated services
complement the Grouprsquos extensive global
electronic distribution infrastructure which
enables Thomson to deliver mobile con-
tent to online delivery services as well as
to network operators for final transmission
to mobile customers
Thomson also made progress in the
development of an integrated digital asset
management solution in 2006 known as
MIDAS (Media Ingest Distribution andStorage) MIDAS is a software and hard-
ware platform for digital content prepara-
tion storage security and distribution
From the first day of production planning
through every stage of post-production
and content distribution MIDAS creates
a digital workflow that allows customers
to manage projects remotely and provides
for rapid and seamless global file delivery
streaming and collaboration
TECHNOLOGY SYSTEMS SERVICES
37 Thomson Panorama 2006
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While expanding into newer markets
growing demand for post-production ser-
vices and visual effects continued to fuel
Thomsonrsquos ongoing content services activ-
ities Among the yearrsquos most noteworthy
achievements were portfolios of services
for such feature films as The Departed
Letters from Iwo Jima and Pirates of the
Caribbean Dead Manrsquos Chest ThomsonrsquosMoving Picture Company (MPC) also pro-
vided high-end visual effects for the three
films nominated for Achievement in Visual
Effects Pirates of the Caribbean Posei-
don and Superman Returns
Confirming the Grouprsquos solid growth in
content services for the video game indus-
try Thomson unveiled a new dedicated
Interactive Services facility in Burbank
California in 2006 Sierra Entertainment
a division of Vivendi Games selected
Thomson to prov ide cinemat ic anima-
tion voice casting and recording sound
design and mixing services for The Leg-
end of Spyrotrade A New Beginning Like-
wise Thomson provided a wide range of
services to support Konamirsquos The SilentHill Experience released simultaneously
with the motion picture
The strategic investment in one of Indiarsquos
leading animation and gaming cinemat-
ics firms announced in February 2007
strengthened Thomsonrsquos position in Asia
for a variety of content services Located in
Bangalore India Paprikaas provides cre-
ldquoIn 1998 I joined Thomson as a Plant Manager within Home Entertainment Services
and was eventually made responsible for the expansion and management of our
Guadalajara DVD operations In summary Irsquove had great opportunities to gain experience
in international operations strategic planning and operational excellence I recently
joined Content Services where Irsquoll be leading the start-up and integration of new activities
in Beijing Bangalore and other emerging markets Content Services is dynamic and
growing and Irsquom looking forward to expanding the business in Asia while improving
our operational performance in North America and Europerdquo
Mike Hayden Vice President Operations amp Strategic Projects Content Services
of the Grouprsquos divisions and profit centersIn the context of the budgetary procedure
performance measurement indicators are
calculated by the divisions analyzed and
reviewed monthly to serve as a reference
for the Grouprsquos monthly reporting
Management reporting and
closing period work
Th om so n uses a co mmon char t of
accounts which is regularly updated The
principal accounting and financial figures
of the operational and functional depart-
ments consolidated at Group level are
analyzed by the Grouprsquos management
control team and reviewed by the Grouprsquos
Executive Committee
The closing process for the half-year and
annual consolidated financial statementsoccurs in two steps The first step con-
sists of a ldquohard closerdquo completed in May
and September leading to a first review by
the statutory auditors The second step
occurs in July and in JanuaryFebruary and
involves the finalization of half-year and
annual consolidated financial statements
under IFRS The Group then proceeds
once a year with a reconciliation of these
results in accordance with US GAAP
Preparation of financial statements
The financial statements are prepared jointly by the finance department and the
General Secretary They are based on
information reported through the annual
reporting and accounting consolidation
processes and on operational and mar-
ket information which is specifically cen-
tralized for the preparation of Thomsonrsquos
Document de Reacutefeacuterence in France and
the submission of Form 20-F in the United
States Half-year and annual financial infor-
mation is reviewed by the Grouprsquos Audit
Committee
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58 Thomson Panorama 2006
(1) Source PriceWaterhouseCoopers ndash
ldquoGlobal Entertainment and Media Outlook 2006-10rdquo
Revenue growth
Thomson achieved consolidated 2006
net revenues of 9914045854 million up from
9914045591 million in 2005 Revenues for
the Core Business reached 9914045747 mil-
lion (9914045776 million at constant currency)
representing 83 growth over 2005 at
constant currency
Overall the Grouprsquos key growth busi-
nessesmdashContent Services Network
Services Access Products for telecom
operators and our Broadcast amp Networks
businesses (Grass Valley and Network
Software)mdashincreased strongly year-on-
year and accounted for over a third of
Group revenues against less than a quar-
ter in 2005
Thomsonrsquos Core Business EBIT for 2006
was euro504 million representing a Core
Business EBIT margin of 88 Thisreflected growth in some key businesses
and cost actions across the Group off-
setting a significant investment in research
and development and some increase in
restructuring expenses
Increased spend on RampD
Research and development expenditure
charged in the Core Business (net of
external funding) rose from 991404221 million in
2005 to 991404279 million in 2006 an increase
of 26 principally in the Systems divi-
sion The Group expanded the number ofproducts and services in the development
phase across its businesses
Return to profit
Losses in Non-Core Continuing and Dis-
continued operations were substantially
lower year-on-year reflecting principally
the exit from heavily loss-making Displays
activities in 2005 and intensified cost-sav-
ing programs in 2006 A major revision
and harmonization of the Grouprsquos North
American healthcare obligations gave rise
to substantial one-time gains and Thom-
son also initiated significant restructuring
of its French Non-Core operations
The good performance of the Core Busi-
ness lower Non-Core and Discontinued
losses and a low reported tax chargeenabled the Group to return a net profit of
99140455 million in 2006 compared to a loss of
991404573 million in the previous year
Good cash flow
strengthened balance sheet
Thomson generated good free cash flow
and strengthened its balance sheet in
2006 Total net financial liabilities on the
balance sheet fell by 991404460 million reflect-
ing a 99140493 million fall in financial and acqui-
sition-related debts and a 991404367 million
reduction in retirement benefit obligations(including healthcare)
Increase in Net Dividend
The Board of Directors proposed a dis-
tribution to shareholders of 991404033 per
share (2005 dividend 991404030) reflecting
confidence in the prospects of the Group
going forward
Outlook 2007-2009
growth in revenues and net income
With the Grouprsquos transformation complete Thomsonrsquos financial focus over the 2007-
2009 period will be to grow revenues and
net income
Thomson serves growing Media Enter-
tainment amp Communications marketsmdashfor
which external estimates(1) indicate com-
pound growth of around 6 over the last
FINANCIAL AND
OPERATIONAL PERFORMANCE
Full year 2006 results
saw a return to profitability
and leave Thomson
well positioned at
the heart of convergence
and digital video
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59 Thomson Panorama 2006
five years Our digital and electronic busi-
nesses now represent two-thirds of rev-
enues and we believe they are growing
faster than the overall market offsetting
the maturing physical media businesses
Given this profile the Group expects its
revenue growth to be more modest in
2007 but to gather pace over the period
and our overall objective is to show com-pound growth over 2007-2009 in line with
or faster than the overall market
The 2007-2009 period is also expected
to see a sharply reduced impact from
residual Non-Core activities with an end
to losses from the Discontinued Activities
perimeter after 2007 Accordingly Thom-
sonrsquos ambition is to turn its Core Business
growth and profitability and lower impact
from Non-Core into strong growth in net
income over the period 2007-2009
Business operations
Continuous performance improvement is
fundamental to Thomsonrsquos commitment to
create sustainable business models and
long-term value for all stakeholders The
ambitious Group-wide programs launched
in 2004 to improve productivity and
enhance overall performance producedsubstantial results in 2006 and led to new
and strong initiatives for long-term growth
As of the second half of 2006 six ldquoKey
Programsrdquo are monitored at Group level
Clients Software Product Introduction
Operations Transformation and Talent
Management
KEY PROGRAMS IN PLACE
Program Focus
Clients Thomsonrsquos clientregional diversification and
growth of the existing business
through improved Sales amp Marketing
Software Development of integrated software platforms
in all markets (post-production distribution
delivery) and for all types of customer
(professional prosumerhellip)
Product Introduction Ensuring new product roadmaps are in line
with strategy and resource needs have been
identifiedOperations Improving the Grouprsquos cost base cash
generation and working capital
Transformation Multiple programs including initiatives to
improving customer relationship management
worldwide supply chain management
IT transformation as well as Thomsonrsquos RampD
footprint
Talent Management Leveraging human assets with a focus on
talent retention and acquisition
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60 Thomson Panorama 2006
SUMMARY RESULTS FULL YEAR 2006
In 991404 millions unless otherwise stated 2006(1) 2005(1)
Net revenues 5854 5591(1)
Core Business net revenues 5747 5335
Services 2489 2487
Systems 2684 2262
Technology 547 546
Corporate 27 40
Non-Core continuing operations net revenues 107 256
Core Business EBIT(2) 504 512
Services 160 205
Systems 132 109
Technology 289 277Corporate (77) (79)
EBIT from Non-Core continuing operations (25) (122)
(1) Restated with 2006 discontinued activities according to IFRS 5
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61 Thomson Panorama 2006
Year ended December 31in 991404 except number of shares 2006 2005 2004
Year ended December 31in 991404 millions 2006 2005(1) 2004(1)
CONSOLIDATED STATEMENTS OF OPERATIONS
(1) Restated with 2006 discontinued activities according to IFRS 5
(2) After deduction of the interests net of tax paid on the subordinated perpetual notes during the period
Continuing operations
Revenues 5854 5591 5980
Cost of sales (4474) (4240) (4594)
Gross margin 1380 1351 1386
Selling marketing general and administrative expenses (674) (638) (653)
Other income (expense) 52 (96) (69)
Research and development expenses (279) (227) (201)
Profit from continuing operations before tax and net finance costs 479 390 463
Interest income 19 30 52
Interest expense (108) (108) (54)
Other financial income (expense) (111) 36 (26)
Finance costs ndash net (200) (42) (28)
Share of profit (loss) from associates (86) (82) (20)
Income tax ndash (68) (93)
Profit from continuing operations 193 198 322
Discontinued operations
Profit (loss) from discontinued operations (138) (771) (883)
Net income (loss) 55 (573) (561)
Attributable to
Equity Holders 55 (574) (559)
Minority interests ndash 1 (2)
Weighted average number of shares
outstandingmdashbasic net of treasury stock 261188858 266539917 273646869
Earnings per share from continuing operations
Basic(2) 067 074 118
Diluted 063 042 111
Earnings per share from discontinued operations
Basic (053) (289) (323)
Diluted (048) (262) (296)Total earnings per share
Basic(2) 014 (215) (205)
Diluted 015 (220) (185)
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62 Thomson Panorama 2006
CONSOLIDATED BALANCE SHEETS
In 991404 millions December 31 December 31 January 1 December 31 2006 2005 2005(1) 2004
ASSETS
Non-current assets
Property plant and equipment 813 886 1051 1051
Goodwill 1714 1756 1186 1178
Other intangible assets 1071 1150 924 924
Investments in associates 12 204 260 260
Investments and financial assets available-for-sale 266 341 139 113
Derivative financial instruments 7 1 11 ndash
Contract advances 129 173 179 179
Deferred tax assets 397 379 307 301
Other non-current assets 110 182 133 136
Total non-current assets 4519 5072 4190 4142
Current assets
Inventories 366 333 503 568
Trade accounts and notes receivable 1018 1315 1232 1180
Current accounts with associates and joint ventures 97 115 143 143
Derivative financial instruments 8 9 115 ndash
Other current assets 535 644 483 616
Marketable securities ndash 7 58 58
Cash and cash equivalents 1311 996 1845 1848
Assets classified as held for sale 264 369 80 ndash
Total current assets 3599 3788 4459 4413
Total assets 8118 8860 8649 8555
(1) Including the impacts of the first-time application related to IAS 32 and 39 on financial instruments and IFRS 5 on non-current assets held for sale and
discontinued operations
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63 Thomson Panorama 2006
In 991404 millions December 31 December 31 January 1 December 31 2006 2005 2005(1) 2004
SHAREHOLDERSrsquo EQUITY AND LIABILITIES
Shareholdersrsquo equity
Common stock (273871296 shares at
December 31 2006
with nominal value of euro 375 per share) 1027 1025 1025 1025
Trade accounts and notes payable 1032 1164 1199 1226
Accrued employee expenses 165 166 158 163
Income tax payable 57 47 60 60
Other current liabilities 671 750 746 800
Payables on acquisition of companies 13 138 84 84
Liabilities directly associated with
assets classified as held for sale 232 470 88 ndash
Total current liabilities 3681 4393 3602 3459
Total liabilities 5999 6644 6251 6062
Total shareholderrsquos equity and liabilities 8118 8860 8649 8555
(1) Including the impacts of the first-time application related to IAS 32 and 39 on financial instruments and IFRS 5 on non-current assets held for sale and
discontinued operations
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Creation and lay-out
Photo credits Nathalie BerhingGAMMA ndash Steacutephane de Bourgies ndash Jean-Franccedilois DeroubaixGAMMA ndash Christine Donnier- ValentinGAMMA ndash Cars copy 2006 Disney Enterprises IncPixar All Rights Reserved ndash Dreamgirls copy 2006 DREAMWORKS
LLC and PARAMOUNT PICTURES All Rights Reserved ndash Poseidon copy 2006 Warner Bros Pictures ndash Sony Bravia Paint
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From digital cinematography and tape-
less post-production workflows to con-
tent distribution and access systems
the fruits of Thomsonrsquos research enable
customers to take early advantage of the
realm of possibilities opened up by digital
technologies
Strategy
Thomson is techno logy-focused and
continues to invest in RampD in order to
maintain its intellectual property leader-
ship and to take advantage of the main
growth drivers of the digital video indus-
tries These include the accelerating
adoption of high definition mobile con-
tent on-demand content consumer-
generated content fixed-mobile conver-
gence triple-play devices connected
home networking and internet-based
and advertising-based content delivery
A particular focus will be on developmentof integrated software solutions over the
period 2007-2009
In addition to extensive technology trans-
fer activities in support of the Systems
and Services divisions the Technology
division monetizes technology in three
ways through licensing of patents and
trademarks integrated circuit design and
software development
Achievements
Resources dedicated to Group-wide
research and development increased in
2006 in line with Thomsonrsquos strategic
focus on RampD The Technology division
also advanced innovations in its five key
technology domains video and audio
compression networking and communi-cations security storage and recording
and signal acquisition and processing
Thomsonrsquos commitment to open standards
continued in 2006 and is testament to the
Grouprsquos dedication to advancing tech-
nology solutions throughout the Media
Entertainment amp Communications indus-
tries To ensure that industry partners and
customers benefit from standardized solu-
tions many Thomson research initiatives
are carried out in cooperation with other
industry leaders For example Thomson
is leading the European Networked andElectronic Media (NEM) platform designed
to accelerate the pace of innovation and
the convergence between the audiovisual
content and telecom sectors The Group
is also the leader of Quaero the European
cooperative program aimed at developing
technologies and applications to enable
audio and video content to be searched
In 2006 Quaero obtained the backing of
the Agency for Industrial Innovation (AII)
TECHNOLOGY
DEVELOPING VIDEO TECHNOLOGIES
In an environment
undergoing rapid
and fundamental
technological change
a rich technology
legacy and focused
Research amp Development
(RampD) programs enable
Thomson to stay on
the cutting edge of
innovation
Left Researcher in Thomsonrsquos
research center Beijing
Research is focused on
increasing the output and
quality of long-term research
while expanding Thomsonrsquos
intellectual property portfolio
Right Thomsonrsquos NexGuardtrade
content security solution
TECHNOLOGY SYSTEMS SERVICES
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Thomson is currently involved in a variety
of standards bodies and with key research
and development partners including INRIA
(Institut national de recherche en infor-
matique et automatique ) in France HHI
(Heinrich Hertz Institute ) in Germany and
universities in Europe and the US
A division driving RampD
The Technology division which comprises
four business unitsmdashResearch Software
amp Technology Solutions Silicon Solutions
and Intellectual Property amp Licensingmdashpro-
vides both the foundation for RampD pro-
grams carried out throughout the Group
and the main impetus for its technological
evolutions
The divisionrsquos strength is to allow the fruits
of fundamental research to be shared
and developed inside the Group so that
business units can better address theircustomersrsquo needs while these same and
other technologies may also be licensed
to outside parties thus monetizing the
Grouprsquos innovation efforts
Thomson breakthroughs are often shared
to provide customers with broad-based
compatibility and long-term availability
Thomsonrsquos innovative NexGuardtrade water-
marking solution for example has been
INTRODUCING THE AGNOSTIC TIGER
The co-existence of two rival formats for high-definition (HD) DVDs presents
a special challenge for those who compress and author video content
Thomson Research engineers have responded with the development of
Tiger an advanced DVD authoring system Tiger combines
an advanced video coding system with an innovative user interface
enabling customers to make their workflows more efficient and streamlined
while providing the highest quality images in both HD formats
Top security for content
Protecting digital content is a major concern for those whose business involves creating
processing or distributing digital audio and video Thomsonrsquos advanced content security solution
NexGuardtrade offers comprehensive protection against piracy or unauthorized usage
Whatever the application or mediummdashfrom duplication to secure professional workflows to
online content deliverymdashNexGuardtrade streamlines the secure storage transfer or viewing of
digital content using encryption forensic watermarking security tokens and other
advanced software techniques
adopted by numerous Media amp Entertain-
ment industry players from post-pro-
duction houses to digital cinema server
vendors Likewise the HD DVD Forum
an industry-standardization group has
adopted Thomsonrsquos Film Grain Technol-
ogytrade specification a revolutionary method
for ensuring compressed video retains the
classic granular visual quality of film thatis still preferred by many in the creative
community
TECHNOLOGY SYSTEMS SERVICES
19 Thomson Panorama 2006
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Technology to serve the Media Entertainment amp Communications industries
Thomsonrsquos five key technology domains
bull Video and audio compression
bull Networking and communications
bull Security
bull Storage and recording
bull Signal acquisition and processing
Thomsonrsquos four system programs
bull Content production and management for cinema
bull Content production and management for broadcast
bull Electronic content distribution on broadband networks
bull Electronic content distribution on mobile networks
20 Thomson Panorama 2006
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Left Silicon microchip As system value and
intelligence is increasingly embedded in chips
Thomson is placing increasing emphasis on
in-house silicon design and development efforts
Research
Thomson has successfully intensi fied
research efforts over the last two years
in order to serve the short and long-term
needs of the Media Entertainment amp
Communications industries leveraging
both close relationships with customers
and deep knowledge of video
New ways to acquire process compress
store and distribute digital content today
provide a central focus for the ongoing
programs at Thomsonrsquos seven research
centers located in Rennes and Paris in
France Hanover and Villingen in Germany
Burbank and Princeton in the US and Bei-
jing in China These range from innovative
coding schemes to advanced methods
for processing audio and video signals
The networking component is especially
important as Thomson engineers work
on solutions to enable operators of fixedand mobile telecom cable and satellite
networks to distribute content more eco-
nomically and flexibly and to introduce
new services
Software amp Technology Solutions
The development of content security solu-
tions counts among the critical initiatives
within the Software amp Technology Solutions
business unit Thomson experts are working
on new ways to help Media Entertainment
amp Communications customers protect their
digital rights They develop and distribute
innovative solutions in the fields of forensic
marking content protection secure con-
tent distribution and anti-counterfeiting
HIGH DEFINITION AT A GALLOP
As high-definition video sweeps the video and TV world video compression
is one of the greatest challenges facing the Media Entertainment amp
Communications industries and companies who need to process and
distribute HD images Thomson is helping meet this challenge through
the Mustang HD video processing engine an advanced chip set that helps
make HD images more compact Using the talents of Thomsonrsquos
Technology and Systems divisions the patented Mustang technology
designed for a wide variety of broadcast equipment has been integrated
into an innovative Grass Valley branded HD video coding device Packing
HD images so compactly greatly reduces costs for broadcasters making it
more commercially attractive for them to adopt advanced MPEG-4 HD
TECHNOLOGY SYSTEMS SERVICES
21 Thomson Panorama 2006
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ldquoIrsquove always worked in video compression RampD for a number of hi-tech companies
but Thomson is different itrsquos truly video-centric Everyonemdashnot just the compression
research engineersmdashunderstands the importance of video technology to the core business
Irsquom in charge of our compression research activities worldwide a key technology
thatrsquos essential for distributing video over networks or storing video on physical media
But what I most enjoy is drawing on my experience in patents to mentor researchers on
preparing patent disclosures for new inventions Preparing patent disclosures is a pretty
unique skill and one thatrsquos key in strengthening the Grouprsquos intellectual property portfoliordquo
Jill Boyce Compression Domain Director Corporate Research
ADDING A NEW DIMENSION TO MUSIC
Movie-goers and people with home cinema installations are accustomed to
the three-dimensional sound that enables them to hear each instrument
voice or sound effect in a different place The concept is known as ldquoSurround
Soundrdquo and it now exists in mp3 format
Developed in cooperation with Germanyrsquos Fraunhofer Institute for Integrated
Circuits mp3 Surround takes the mp3 digital coding system one step furtherwithout making mp3 files larger The new technology is also backwards
compatible so that music with mp3 Surround sounds great with existing players
The technology can be applied in a broad spectrum of applications
including web-based music distribution broadcasting systems PC-related
audiovisual and gaming applications
This yearrsquos achievements covered multiple
domains of technology The businessrsquo
leading watermarking technology embedsinvisible indestructible and fully traceable
pieces of information into content so that
the owner origin or recipient can be identi-
fied The technology was launched for digi-
tal cinema applications and successfully
licensed to most server manufacturers
Thomson technologies also enabled for
example the development of an advanced
TV audience measurement system and a
solution allowing authentification of VIP
accreditation badges during Soccer World
Cup in Germany in 2006 The businessrsquo
consulting activity also implemented an
enterprise-wide security solution for a majorinternational broadcaster during the year
The Software amp Technology Solutions busi-
ness is now expanding from watermarking
into other promising technological areas
such as digital rights management (DRM)
to manage conditional access to content
in the context of professional workflows
content filtering to monitorfilter distribution
of copyrighted content or new protocols
to optimize and secure content distribution
platforms
TECHNOLOGY SYSTEMS SERVICES
22 Thomson Panorama 2006
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Silicon Solutions
As more and more system value and intel-
ligence is embedded onto silicon micro-
chips Thomson has placed increased
emphasis on in-house silicon design and
development efforts These range from
integrated circuits for communications and
set-top boxes to chips designed specifi-cally for broadcasting and mobile devices
The growing sophis tication of home
network access devices helps explain
why more than 200 Thomson engineers
are continuing to develop innovative
integrated circuits As with all Thomson
technology innovations our silicon invest-
ment is focused equally on increasing our
leadership in set-top boxes as much as
on providing integrated circuit solutions
to industry leaders
Intellectual Property amp Licensing
Thomsonrsquos extraordinarily rich intellectual
property assets include over 55000 pat-
ents derived from more than 7000 inven-
tions with some 600 new invention patent
applications filed in 2006
Thomsonrsquos patent portfolio remains a key
pillar for both the Technology division and
the Group as a whole with patented tech-
nologies including digital decoders high-
definition TV optical module patents for
Thomsonrsquos rich intellectual property
assets include over 55000 patents
CD and DVD players MPEG video com-
pression mp3 audio compression format
interactive TV and storage technologies
Having successfully migrated the propor-
tion of income derived from digital rather
than analogue technologies digital tech-
nology-based programs now account for
over 80 of the Grouprsquos large licensingrevenue stream with over 950 licensing
contracts in place worldwide at year-end
2006
TECHNOLOGY SYSTEMS SERVICES
23 Thomson Panorama 2006
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Thomsonrsquos Systems division provides video solutions and integrates video network systems for its customers in
the broadcast cable satellite terrestrial and telecoms markets The divisionrsquos offering spans image capture to
network distribution to the provision of access products enabling operators to enrich their service offerings to
subscribers
SYSTEMS
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Today people benefit from virtually instan-
taneous access to an increasingly custom-
ized range of content available through
a growing set of access possibilities As
internet and digital technologies con-
tinue to infuse the Media Entertainment
amp Communications industries Thomson
is focusing on opportunities arising from
this new paradigm alongside its traditionalcore markets These range from traditional
broadcast equipment to the growing mar-
ket for professional audio-video systems
mobile and IP (Internet Protocol) TV to
booming demand for residential broad-
band services
Strategy
Thomsonrsquos Systems division comprises
three activities Access Products and the
Broadcast amp Networks businesses The
Access Products business aims to deliver
key set-top box platforms for satellite andcable customers and gateway products
for telecom operators The Broadcast
amp Networks businesses are focused on
video network integration bringing to
market advanced products and solutions
to enable network operators broadcast-
ers and film-makers to benefit from the
latest technologies in image acquisition
compression switching and storage The
Network Software business aims to enable
the introduction of new multiple-play ser-
vices based on fixed-mobile convergence
IPTV and broadband telephony
Achievements
Overall the Systems division improved
diversified its customer base in 2006 In
Access Products Thomson consolidated
its leadership of worldwide markets forset-top boxes gateways and modems for
telecom satellite and cable network oper-
ators and service providers while achiev-
ing good growth in higher-end products
in the second half of the year In Grass
Valley demand for high-defin ition (HD)
acquisition production and distribution
systems combined with growing demand
for IT- and IP-based broadcast solutions to
drive growth while in Network Software
Thomsonrsquos SmartVis ion IPTV system
gained good ground with more than 30
IPTV and mobile TV deployments to date
and the worldrsquos largest installed base
Access Products
The Access Products business was driven
in 2006 by the ongoing rapid expansion of
triple (video voice and data) and quadru-
ple play services (also fixed-mobile con-
vergence) offered by cable and telecom
network operators and by the increasing
spread of high definition (HD) broadcasts
among satellite network operators
SYSTEMS
PROVIDING VIDEO SOLUTIONS
From image capture to
distribution via
all types of network
Thomson is reaping the benefits of
growing market demand for
video network integration
TECHNOLOGY SYSTEMS SERVICES
26 Thomson Panorama 2006
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Thomson further consolidated its market
leading position for dual and triple-play
gateways to telecom operators and inter-
net service providers The established mar-
ket leader for DSL modems and routers
since 1999 Thomson extended its lead
over the competition in 2006 shipping
more than 42 million DSL modems and
gateways during the first half of the yearand 10 million units overall in 2006
Growing market demand for sophisticated
home networking eco-systems able to
accommodate new services over time was
underlined by the success of Thomsonrsquos
Livebox gateway for France Telecom
Early in 2007 Thomson supported large-
scale deployment of the Livebox which
provides access to high-speed wireless
Internet Voice-over-IP IPTV network
gaming fixed-mobile convergence (unik)
and other services
An advanced Thomson gateway also
enabled the UKrsquos leading operator to
launch its innovative Total Broadband ser-
vice in June 2006 Bri tish Telecomrsquos BT
Home Hubtrade is a quadruple-play gateway
designed to support BTrsquos full range of ser-
vices including both BT Total Broadband
and BT Broadband Talk in addition to
providing wired and wireless broadband
connectivity for fixed and mobile phones
PCs and other networked devices It also
Mobile video in Italy
Thomsonrsquos product and service offering benefited in 2006 from increased interest from cable and
telecom operators to complete their offering for Video-on-Demand and mobile TV The Olympic Winter Games
notably provided a showcase for Thomsonrsquos capability to deliver video programming to cell phones and
other mobile devices In the wake of the successful Olympic trial Telecom Italia turned to Thomson
for the systems and technology that enabled it to commercially launch a mobile offering including TV and
sports programming in June 2006
incorporates the latest wideband audio
codec providing near CD-quality sound
for voice and video calls
As broadband services become more and
more of a mass-market service providers
must ensure that their services are both
differentiating and easy to consume This
trend calls for the emergence of simpleyet very technologically-advanced and
software-laden devices Such devices
connect to the home-networking gateway
and make it natural to consume a broad-
band-delivered service One example
is the Music Box first made available to
subscribers of AOLrsquos broadband service
in France which streams Internet-based
radio stations or locally stored music files
to a homersquos legacy Hi-Fi audio system
Strong growth in the cable network sys-
tems market which is projected to expand
another 20 in 2007 helped drive Thom-son toward two major sales milestones
in 2006 two million cable set-top boxes
and ten million cable modems Driven by
operatorsrsquo needs to provide more and
more sophisticated services Thomson
has extended its product range since
2005 to include interactive double- and
triple-play set-top boxes as well as HD
set-top boxes with advanced functions
such as personal video recorders (PVR)
Among the cable operators to have
TECHNOLOGY SYSTEMS SERVICES
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Total Broadband for BT
An advanced Thomson gateway enabled the UKrsquos leading telecommunications operator British Telecom
to launch its innovative Total Broadband service in June 2006 This quadruple-play gateway
known as the BT Home Hubtrade features video voice data and wireless capabilities
It is supporting BTrsquos full range of services including wired and wireless broadband connectivity
for fixed and mobile phones PCs and other networked devices
28 Thomson Panorama 2006
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Left Thomson Grass Valley branded
outside broadcast van under construction
Right Camera operator Kim Marks (left)
a camera first assistant Chris Blauvelt (center)
and a camera second assistant
Jason McCormick (right) line up a scene
with the Grass Valley Viper FilmStreamtrade
camera for the David Fincher feature Zodiac
Photo courtesy Paramount Pictures
selected Thomson in 2006 were Portu-
galrsquos leading Pay-TV Operator TV Cabo
UPC E-Vision Kabel Deutschland and
Premiegravere in Europe Net Serviccedilos in Latin America and StarHub and Dalian Cable
TV in Asia
Thomson expanded its footprint in satel-
lite in Europe notably in the UK and in
Asia where product deliveries began for
Tata Sky the Indian satellite broadcaster
In the UK Thomson delivered the Sky
HD box an MPEG-4 set-top box with
Personal Video Recorder which enabled
the successful launch of the countryrsquos first
high-definition TV service in May 2006
The largest satel li te television service
provider in the US DIRECTV also chose Thomson to expand its HD programming
offering with the delivery of the H20 satel-
lite receiver
Leveraging expertise in free-to-air digi-
tal terrestrial receivers and capabilities in
high-definition Thomson also delivered
the first MPEG-4 HDTV receivers for digital
terrestrial TV to French operators Canal +
and TPS during the year
In telephony Thomson remains a lead-
ing supplier of corded and cordless tele-
phones which are sold at retail outletsunder the RCA GE and Alcatel brands as
well as under third-party brands for opera-
tor sales In 2006 Thomson capitalized
on its leadership position in DECT (Digital
Enhanced Cordless Telecommunications)
in Europe by expanding into the American
retail market
Broadcast amp Networks
The Broadcast amp Networks businesses
gained market share in 2006 particularlyin networks and systems integration and
expanded in the promising Pro-AV (profes-
sional audio-video) market
Continuing trends in this market are high-
definition (HD) broadcasting the merging
of IT and broadcast technology the move
to a tape-less file-based approach to video
storage and management and power-
ful MPEG-4 HD compression technology
which allows content to be delivered to mul-
tiple audiences over multiple platforms
One highly visible application of ThomsonrsquosGrass Valley brand of HD image acquisi-
tion and production systems was the 2006
FIFA World Cup in Germany seen by a
billion viewers around the world Broad-
casters covering the event relied on more
than 182 Grass Valley brand cameras
10 Grass Valley video switching systems
12 large scale Grass Valley video routing
systems and hundreds of other devices to
provide faultless HD images
Leveraging its market leading position
Thomson est imates tha t Grass Valley
HD cameras now account for 50 of theglobal market Most major outside broad-
cast production companies in the world
use Grass Valley branded HD camera sys-
tems with more than 1500 in use
High-definition television is also about
news Based on internal Thomson esti-
mates Grass Valley solutions accounted
for nearly 80 of HD news installations
worldwide in 2006 including CBS Net-
work-owned amp operated stations in the
TECHNOLOGY SYSTEMS SERVICES
29 Thomson Panorama 2006
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IGNITE HD
TV news operations can work more quickly and efficiently by using information
technology The industryrsquos first and most complete link between the control room
and the newsroom HD Ignite enables a single technician to handle all
news production requirements During its initial months on the market in the US
HD Ignite was selected by such early adaptors as ABC Stations Group
customers in San Francisco and Chicago and Cox Broadcasting customers in
Atlanta San Francisco Charlotte North Carolina and Dayton Ohio
Telecom service providers are working to
provide more content and value-added
services over their broadband lines
Thomsonrsquos SmartVision and
Cirpack software solutions facilitate
their strategies for rapid deployment of
IPTV and triple-play services
US Al Jazeera Englishmdasha global channelbased in the Middle Eastmdashand Belgiumrsquos
VTM (Vlaamse Televisie Maatschappij )
Thomson is the only supplier to provide
an automated production system (Ignite
HD) a full suite of non-linear editing sys-
tems and a news playout systemmdashall of
which enable broadcasters to move to HD
affordably and to speed up and automate
their workflows
MPEG-4 is one of the enabling technolo-
gies which allows operators of telecom-
munications networks to bring TV to
their subscribers in addition to voice andinternet access This is one element in a
complete Thomson systems offering For
example Spanish operator Telefoacutenica
selected Thomson for a range of equip-
ment and systems to upgrade and expand
its rapidly growing ldquoImageniordquo service In
the US Falcon Communications a lead-
ing systems integrator offers a turnkey
IPTV solution featuring encoding content
delivery service management and access
products from Thomson
bull Professional Audio-Video
Thomson serves the rapidly growing mar-ket for professional audiovisual (ProAV)
solutions for corporate institutional wor-
ship and governmental media centers and
networks Thomsonrsquos expansion in ProAV
has been achieved through organic prod-
uct development as well as the integra-
tion of Pro-AV products from Canopus
the Japanese company acquired in early
2006
EDIUS desktop video
editing software part of
Thomsonrsquos growing rangeof professional
audiovisual and
broadcast solutions
TECHNOLOGY SYSTEMS SERVICES
30 Thomson Panorama 2006
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ldquoHaving started out in research today Irsquom responsible for our modemsrsquo roadmap
and strategy Our customersmdashthe telecoms operatorsmdashhave seen their business
transformed by technology like high-speed broadband And I find it fascinating
how these technologies have penetrated our daily lives the way we live and how
we communicate have changed dramatically over the last ten years
Even faster broadband (VDSL) fiber optics wireless technologies fixed-mobile
convergencehellip mean the pace of change is set to accelerate therersquos no doubt
wersquore living in exciting timesrdquo
Stan Claes Product Manager for IP-based Access Products
A key product introduction in 2006 was
the Grass Valley Indigo AV Presenta-
tion Switcher which combines features
normally found in separate devices in aunified powerful control interface simple
enough to be used by a single operator
Digital signage is also providing new mar-
ket opportunities combining the latest in
display delivery and storage technologies
Thomsonrsquos integrated digital media man-
agement solution Media Edge solves the
complex control distribution and archive
demands of customers Media Edge can
stream high-quality SD and HD content
over an IP network for example to the retail
store environment without the need to re-
invest in infrastructure
Broadcast amp Networksmdash
Network Software
2006 saw telecom service providers con-
tinue to build strategies to provide more
content and value-added services over
their broadband lines Thomsonrsquos Smart-
Vision TV service platforms and Cirpack
telephony switches are at the heart of sev-
eral of the worldrsquos largest IPTV and VoIP
services
In 2006 the launch of a pre-integrated mul-tiple play solution for telecom service provid-
ers illustrated Thomsonrsquos ability to leverage
skills across multiple business units The
solutions which enable telecom providers
to bring a myriad of services to broadband
subscribers are built around Thomsonrsquos
SmartVision and Cirpack software solu-
tions integrated with Thomsonrsquos Grass
Valley branded video head-end equipment
and Thomson home gateways and set-top
boxes This represents the first pre-inte-
grated solution on the market for rapid easy
deployment of triple play services including
voice video and internet access
More than 30 IPTV and mobile TV service
platforms have been deployed around the
world with SmartVision well-positioned
for convergent operators since it allows
video distribution over fixed and mobile
networks
Thomsonrsquos Cirpack softswitches which
help provide the core for the new inte-
grated platforms occupied the top mar-
ket position worldwide for residential
broadband telephony (VoIP) platforms in
2006 Over the course of 2006 Europersquoslargest primary line VoIP operator Freefr
upgraded its Cirpack switches to bring a
new seamless fixedmobile service to its
two million customers placing Thomson
at the forefront of new fixed-mobile con-
vergence solutions Signaling the rapid
expansion of sales outside traditional
Western European markets Thomsonrsquos
Cirpack switches were selected by many
telecom operators in Northern Africa Cen-
tral and Eastern Europe as well as Central
America to build or upgrade legacy voice
networks and deliver advanced telephone
services using IP technologies
TECHNOLOGY SYSTEMS SERVICES
31 Thomson Panorama 2006
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Thomsonrsquos Services division provides end-to-end management of business-critical services on behalf of Media
Entertainment amp Communications customers These include management of broadcast and network operations
centers on an outsourced basis and the provision of an array of content services to the creative community from
post-production to visual effects
SERVICES
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Thomsonrsquos Services division provides end-
to-end management of business-critical
services spanning physical media con-
tent services electronic content distribu-
tion and network services The division
is the worldrsquos leading provider of state-
of-the-art film-making post-production
visual effects and broadcast center man-
agement services
Strategy
The Services division continues to focus
on managing v ideo networks and
op er at io na l centers on behalf of its
customers who are able to concentrate
on their core business of content The
emphasis on high-growth opportunities
in newer market sectors such as retail
and corporate networks and gaming
has been sharpened
Achievements
New customers in fast-growing market
segments responded well to a range of
high value-added services from the Ser-
vices division in 2006 Network Services
showed particularly strong growth as net-
work operators in Europe Asia and North
America selected Technicolor-branded
management services The addition of
such leading customers as ITV in the
UK and France 24 and TV5 in France
substantially expanded Thomsonrsquos fast-
growing Network Services business
Noteworthy successes were also achieved
in Theatrical Services due in part to the
continued development of Thomsonrsquos digi-
tal cinema activity The Content Services
business continued to expand its post-
production services business by opening
a digital intermediate facility on the SonyPictures Entertainment studio lot In 2006
a new Home Entertainment Services unit
was created combining Thomsonrsquos DVD
business with electronic distribution to
develop new services to support emerging
lsquoon demand contentrsquo business models
Network Services
With a comprehensive portfolio of services
for broadcasters network and internet TV
operators movie theatres retailers and
corporations Network Services continued
to expand briskly in 2006 Broadcastersincreasingly selected Thomson as their
long-term network services partner By
year-end Network Services was providing
managed services under the Technicolor
brand to close to 200 channels from
17 facilities in France the Netherlands
Japan North America and the UK
Late in the year Thomson signed a long-
term agreement with ITV for network
transmission operations services for its six
From managing video
networks on an outsourced
basis to a broad range of
offerings in content services
Thomson is bringing its video
expertise to new markets
and geographies
Left Network Services for broadcasters
cable TV operators movie theaters
retailers and corporations is one of Servicesrsquo
fastest-growing business segments
Right Thomson provided film sound
DVD and digital cinema services for Cars
the DisneyPixar hitCars copy 2006 Disney Enterprises IncPixar All R ights Reserved
SERVICES
MANAGING VIDEO NETWORKS
TECHNOLOGY SYSTEMS SERVICES
34 Thomson Panorama 2006
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existing UK channels including the coun-
tryrsquos leading commercial channel In addi-
tion an agreement signed with NOB Cross
Media Facilities (NOB CMF) a subsidiary
of Nederlands Omroepproduktie Bedrijf
(NOB) likewise established Thomson as
a major supplier of network management
services in the Netherlands
In France Network Services added new
clients France 24 and TV5 which covers
203 countries and territories to move into
the market-leading position managing
more than 60 channels and 1500 hours
of programming daily The France 24 part-
nership also involves equipping their new
global TV news operation
Thomson drove expansion and innovation
in its retail media services over the course
of the year One of the most notable achie-
vements involves an ambitious in-store
network upgrade program piloted in2006 by Wal-Mart in the USA with Premier
Retail Networks (PRN) a subsidiary within
Thomsonrsquos Network Services operat ion
The in-store network platform was based
on Thomson IPTV technologies adapted
for the retail environment The system
the first pilot of IPTV in the retail environ-
ment delivered real impact on product
sales and improved customer satisfaction
in Wal-Mart stores PRN also expanded
capabilities into China early in 2007 with
Content Services revving up
Thomson provided a wide range of services for a number of major international film releases in 2006
such as Cars one of the three nominees for Best Animated Film at the Oscars Thomson Technicolor provided
film services sound services DVD compression and authoring replication and distribution
as well as digital cinema mastering and distribution for the DisneyPixar hit The Grouprsquos Content Services offering
has expanded in recent years to include the high-growth video-gaming advertising and broadcast markets
the signing of a joint venture with CGEN a
technology company leading the Chinese
in-store digital signage media industry
The two companies are currently collabo-
rating on the roll-out of an in-store media
network to 750 internet cafeacutes part of the
leading Chinese chain Big Cafeacute
Theatrical Services
Thomson signed Europersquos first large-scale
digital cinema rollout agreement in 2006
with the Kinepolis Group one of the conti-
nentrsquos most innovative theater circuits and
the leading exhibition chain in Belgium
The agreement to instal l and operate
digital cinema systems in 130 Kinepolis-
owned and operated screens passed a
first milestone in March 2007 with Thom-
sonrsquos first international distribution by sat-
ellite of an encrypted digital version of the
film Dreamgirls from the US to a Kinepolis
theater in Brussels Belgium
A series of new contracts were awarded
in the US For example in the fall of 2006
Technicolor Digital Cinema began installing
digital projection systems at 120 National
Amusements Inc screens in Boston Los
Angeles New York and elsewhere as part
of a strategic agreement National Amuse-
ments operates more than 1500 screens
in the US UK Latin America and Russia
Digital projection systems were also
TECHNOLOGY SYSTEMS SERVICES
35 Thomson Panorama 2006
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The growing market for Network Services
The decision by the UKrsquos leading commercial broadcaster to entrust its network services to
Thomsonrsquos Network Services operations illustrates a growing global trend as broadcasters focus increasingly on
programming and meeting customer needs they turn to highly-skilled specialists to handle technology
The long-term agreement with ITV means that the broadcaster will benefit from enhanced service and new technology
as well as more flexibility in launching new services
36 Thomson Panorama 2006
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Left Thomsonrsquos Technicolor
Interactive Services provided in-game
cinematics and voice recording for
Microsoft Game Studiosrsquo Gears of War
Right Thomsonrsquos London-based MPC
subsidiary carried out post-production
work including computer graphics
on Sony Braviarsquos award-wirring colorful
Paint commercial
installed at several landmark theatres in
Los Angeles in 2006 including Mann The-
atresrsquo Graumanrsquos Chinese and the Village
in Westwood
Thomson maintained a leading position in
film processing and printing in 2006 in a
market where volumes were stable Tech-
nicolor handled worldwide release printingfor two of the five 2007 Oscar nominees
for Best PicturemdashMartin Scorcesersquos The
Departed and Clint Eastwoodrsquos Letters
from Iwo Jimamdashas well as release print-
ing for two of the three Best Animated Film
nominees Cars and Happy Feet
As part of its ongoing commitment to meet
customer needs worldwide a state-of-the-
art film and post-production facility was inau-
gurated at Ciudad de la Imagen in Madrid in
2006 It is already becoming known as the
countryrsquos most comprehensive postproduc-
tion facility with advanced film processingand digital intermediate capabilities
Content Services
Thomson continued to leverage its long-
standing strength in post-production
skills and services through expansion into
emerging and high-growth market seg-
ments such as content services for the
video-gaming advertising and broadcast
markets
In order to better serve the growing mar-
ket for entertainment content for mobile
devices Thomson unveiled new mobile
content preparation and distribution capa-
bilities in the US and the UK in 2006 Facili-
ties equipped with state-of-the-art produc-
tion and post-production technologies will
handle the preparation and optimization
of a wide range of digital entertainmentcontentmdashincluding movies TV episodes
and music videosmdashfor distribution to
mobile devices The dedicated services
complement the Grouprsquos extensive global
electronic distribution infrastructure which
enables Thomson to deliver mobile con-
tent to online delivery services as well as
to network operators for final transmission
to mobile customers
Thomson also made progress in the
development of an integrated digital asset
management solution in 2006 known as
MIDAS (Media Ingest Distribution andStorage) MIDAS is a software and hard-
ware platform for digital content prepara-
tion storage security and distribution
From the first day of production planning
through every stage of post-production
and content distribution MIDAS creates
a digital workflow that allows customers
to manage projects remotely and provides
for rapid and seamless global file delivery
streaming and collaboration
TECHNOLOGY SYSTEMS SERVICES
37 Thomson Panorama 2006
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While expanding into newer markets
growing demand for post-production ser-
vices and visual effects continued to fuel
Thomsonrsquos ongoing content services activ-
ities Among the yearrsquos most noteworthy
achievements were portfolios of services
for such feature films as The Departed
Letters from Iwo Jima and Pirates of the
Caribbean Dead Manrsquos Chest ThomsonrsquosMoving Picture Company (MPC) also pro-
vided high-end visual effects for the three
films nominated for Achievement in Visual
Effects Pirates of the Caribbean Posei-
don and Superman Returns
Confirming the Grouprsquos solid growth in
content services for the video game indus-
try Thomson unveiled a new dedicated
Interactive Services facility in Burbank
California in 2006 Sierra Entertainment
a division of Vivendi Games selected
Thomson to prov ide cinemat ic anima-
tion voice casting and recording sound
design and mixing services for The Leg-
end of Spyrotrade A New Beginning Like-
wise Thomson provided a wide range of
services to support Konamirsquos The SilentHill Experience released simultaneously
with the motion picture
The strategic investment in one of Indiarsquos
leading animation and gaming cinemat-
ics firms announced in February 2007
strengthened Thomsonrsquos position in Asia
for a variety of content services Located in
Bangalore India Paprikaas provides cre-
ldquoIn 1998 I joined Thomson as a Plant Manager within Home Entertainment Services
and was eventually made responsible for the expansion and management of our
Guadalajara DVD operations In summary Irsquove had great opportunities to gain experience
in international operations strategic planning and operational excellence I recently
joined Content Services where Irsquoll be leading the start-up and integration of new activities
in Beijing Bangalore and other emerging markets Content Services is dynamic and
growing and Irsquom looking forward to expanding the business in Asia while improving
our operational performance in North America and Europerdquo
Mike Hayden Vice President Operations amp Strategic Projects Content Services
of the Grouprsquos divisions and profit centersIn the context of the budgetary procedure
performance measurement indicators are
calculated by the divisions analyzed and
reviewed monthly to serve as a reference
for the Grouprsquos monthly reporting
Management reporting and
closing period work
Th om so n uses a co mmon char t of
accounts which is regularly updated The
principal accounting and financial figures
of the operational and functional depart-
ments consolidated at Group level are
analyzed by the Grouprsquos management
control team and reviewed by the Grouprsquos
Executive Committee
The closing process for the half-year and
annual consolidated financial statementsoccurs in two steps The first step con-
sists of a ldquohard closerdquo completed in May
and September leading to a first review by
the statutory auditors The second step
occurs in July and in JanuaryFebruary and
involves the finalization of half-year and
annual consolidated financial statements
under IFRS The Group then proceeds
once a year with a reconciliation of these
results in accordance with US GAAP
Preparation of financial statements
The financial statements are prepared jointly by the finance department and the
General Secretary They are based on
information reported through the annual
reporting and accounting consolidation
processes and on operational and mar-
ket information which is specifically cen-
tralized for the preparation of Thomsonrsquos
Document de Reacutefeacuterence in France and
the submission of Form 20-F in the United
States Half-year and annual financial infor-
mation is reviewed by the Grouprsquos Audit
Committee
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58 Thomson Panorama 2006
(1) Source PriceWaterhouseCoopers ndash
ldquoGlobal Entertainment and Media Outlook 2006-10rdquo
Revenue growth
Thomson achieved consolidated 2006
net revenues of 9914045854 million up from
9914045591 million in 2005 Revenues for
the Core Business reached 9914045747 mil-
lion (9914045776 million at constant currency)
representing 83 growth over 2005 at
constant currency
Overall the Grouprsquos key growth busi-
nessesmdashContent Services Network
Services Access Products for telecom
operators and our Broadcast amp Networks
businesses (Grass Valley and Network
Software)mdashincreased strongly year-on-
year and accounted for over a third of
Group revenues against less than a quar-
ter in 2005
Thomsonrsquos Core Business EBIT for 2006
was euro504 million representing a Core
Business EBIT margin of 88 Thisreflected growth in some key businesses
and cost actions across the Group off-
setting a significant investment in research
and development and some increase in
restructuring expenses
Increased spend on RampD
Research and development expenditure
charged in the Core Business (net of
external funding) rose from 991404221 million in
2005 to 991404279 million in 2006 an increase
of 26 principally in the Systems divi-
sion The Group expanded the number ofproducts and services in the development
phase across its businesses
Return to profit
Losses in Non-Core Continuing and Dis-
continued operations were substantially
lower year-on-year reflecting principally
the exit from heavily loss-making Displays
activities in 2005 and intensified cost-sav-
ing programs in 2006 A major revision
and harmonization of the Grouprsquos North
American healthcare obligations gave rise
to substantial one-time gains and Thom-
son also initiated significant restructuring
of its French Non-Core operations
The good performance of the Core Busi-
ness lower Non-Core and Discontinued
losses and a low reported tax chargeenabled the Group to return a net profit of
99140455 million in 2006 compared to a loss of
991404573 million in the previous year
Good cash flow
strengthened balance sheet
Thomson generated good free cash flow
and strengthened its balance sheet in
2006 Total net financial liabilities on the
balance sheet fell by 991404460 million reflect-
ing a 99140493 million fall in financial and acqui-
sition-related debts and a 991404367 million
reduction in retirement benefit obligations(including healthcare)
Increase in Net Dividend
The Board of Directors proposed a dis-
tribution to shareholders of 991404033 per
share (2005 dividend 991404030) reflecting
confidence in the prospects of the Group
going forward
Outlook 2007-2009
growth in revenues and net income
With the Grouprsquos transformation complete Thomsonrsquos financial focus over the 2007-
2009 period will be to grow revenues and
net income
Thomson serves growing Media Enter-
tainment amp Communications marketsmdashfor
which external estimates(1) indicate com-
pound growth of around 6 over the last
FINANCIAL AND
OPERATIONAL PERFORMANCE
Full year 2006 results
saw a return to profitability
and leave Thomson
well positioned at
the heart of convergence
and digital video
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59 Thomson Panorama 2006
five years Our digital and electronic busi-
nesses now represent two-thirds of rev-
enues and we believe they are growing
faster than the overall market offsetting
the maturing physical media businesses
Given this profile the Group expects its
revenue growth to be more modest in
2007 but to gather pace over the period
and our overall objective is to show com-pound growth over 2007-2009 in line with
or faster than the overall market
The 2007-2009 period is also expected
to see a sharply reduced impact from
residual Non-Core activities with an end
to losses from the Discontinued Activities
perimeter after 2007 Accordingly Thom-
sonrsquos ambition is to turn its Core Business
growth and profitability and lower impact
from Non-Core into strong growth in net
income over the period 2007-2009
Business operations
Continuous performance improvement is
fundamental to Thomsonrsquos commitment to
create sustainable business models and
long-term value for all stakeholders The
ambitious Group-wide programs launched
in 2004 to improve productivity and
enhance overall performance producedsubstantial results in 2006 and led to new
and strong initiatives for long-term growth
As of the second half of 2006 six ldquoKey
Programsrdquo are monitored at Group level
Clients Software Product Introduction
Operations Transformation and Talent
Management
KEY PROGRAMS IN PLACE
Program Focus
Clients Thomsonrsquos clientregional diversification and
growth of the existing business
through improved Sales amp Marketing
Software Development of integrated software platforms
in all markets (post-production distribution
delivery) and for all types of customer
(professional prosumerhellip)
Product Introduction Ensuring new product roadmaps are in line
with strategy and resource needs have been
identifiedOperations Improving the Grouprsquos cost base cash
generation and working capital
Transformation Multiple programs including initiatives to
improving customer relationship management
worldwide supply chain management
IT transformation as well as Thomsonrsquos RampD
footprint
Talent Management Leveraging human assets with a focus on
talent retention and acquisition
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60 Thomson Panorama 2006
SUMMARY RESULTS FULL YEAR 2006
In 991404 millions unless otherwise stated 2006(1) 2005(1)
Net revenues 5854 5591(1)
Core Business net revenues 5747 5335
Services 2489 2487
Systems 2684 2262
Technology 547 546
Corporate 27 40
Non-Core continuing operations net revenues 107 256
Core Business EBIT(2) 504 512
Services 160 205
Systems 132 109
Technology 289 277Corporate (77) (79)
EBIT from Non-Core continuing operations (25) (122)
(1) Restated with 2006 discontinued activities according to IFRS 5
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61 Thomson Panorama 2006
Year ended December 31in 991404 except number of shares 2006 2005 2004
Year ended December 31in 991404 millions 2006 2005(1) 2004(1)
CONSOLIDATED STATEMENTS OF OPERATIONS
(1) Restated with 2006 discontinued activities according to IFRS 5
(2) After deduction of the interests net of tax paid on the subordinated perpetual notes during the period
Continuing operations
Revenues 5854 5591 5980
Cost of sales (4474) (4240) (4594)
Gross margin 1380 1351 1386
Selling marketing general and administrative expenses (674) (638) (653)
Other income (expense) 52 (96) (69)
Research and development expenses (279) (227) (201)
Profit from continuing operations before tax and net finance costs 479 390 463
Interest income 19 30 52
Interest expense (108) (108) (54)
Other financial income (expense) (111) 36 (26)
Finance costs ndash net (200) (42) (28)
Share of profit (loss) from associates (86) (82) (20)
Income tax ndash (68) (93)
Profit from continuing operations 193 198 322
Discontinued operations
Profit (loss) from discontinued operations (138) (771) (883)
Net income (loss) 55 (573) (561)
Attributable to
Equity Holders 55 (574) (559)
Minority interests ndash 1 (2)
Weighted average number of shares
outstandingmdashbasic net of treasury stock 261188858 266539917 273646869
Earnings per share from continuing operations
Basic(2) 067 074 118
Diluted 063 042 111
Earnings per share from discontinued operations
Basic (053) (289) (323)
Diluted (048) (262) (296)Total earnings per share
Basic(2) 014 (215) (205)
Diluted 015 (220) (185)
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62 Thomson Panorama 2006
CONSOLIDATED BALANCE SHEETS
In 991404 millions December 31 December 31 January 1 December 31 2006 2005 2005(1) 2004
ASSETS
Non-current assets
Property plant and equipment 813 886 1051 1051
Goodwill 1714 1756 1186 1178
Other intangible assets 1071 1150 924 924
Investments in associates 12 204 260 260
Investments and financial assets available-for-sale 266 341 139 113
Derivative financial instruments 7 1 11 ndash
Contract advances 129 173 179 179
Deferred tax assets 397 379 307 301
Other non-current assets 110 182 133 136
Total non-current assets 4519 5072 4190 4142
Current assets
Inventories 366 333 503 568
Trade accounts and notes receivable 1018 1315 1232 1180
Current accounts with associates and joint ventures 97 115 143 143
Derivative financial instruments 8 9 115 ndash
Other current assets 535 644 483 616
Marketable securities ndash 7 58 58
Cash and cash equivalents 1311 996 1845 1848
Assets classified as held for sale 264 369 80 ndash
Total current assets 3599 3788 4459 4413
Total assets 8118 8860 8649 8555
(1) Including the impacts of the first-time application related to IAS 32 and 39 on financial instruments and IFRS 5 on non-current assets held for sale and
discontinued operations
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63 Thomson Panorama 2006
In 991404 millions December 31 December 31 January 1 December 31 2006 2005 2005(1) 2004
SHAREHOLDERSrsquo EQUITY AND LIABILITIES
Shareholdersrsquo equity
Common stock (273871296 shares at
December 31 2006
with nominal value of euro 375 per share) 1027 1025 1025 1025
Trade accounts and notes payable 1032 1164 1199 1226
Accrued employee expenses 165 166 158 163
Income tax payable 57 47 60 60
Other current liabilities 671 750 746 800
Payables on acquisition of companies 13 138 84 84
Liabilities directly associated with
assets classified as held for sale 232 470 88 ndash
Total current liabilities 3681 4393 3602 3459
Total liabilities 5999 6644 6251 6062
Total shareholderrsquos equity and liabilities 8118 8860 8649 8555
(1) Including the impacts of the first-time application related to IAS 32 and 39 on financial instruments and IFRS 5 on non-current assets held for sale and
discontinued operations
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Creation and lay-out
Photo credits Nathalie BerhingGAMMA ndash Steacutephane de Bourgies ndash Jean-Franccedilois DeroubaixGAMMA ndash Christine Donnier- ValentinGAMMA ndash Cars copy 2006 Disney Enterprises IncPixar All Rights Reserved ndash Dreamgirls copy 2006 DREAMWORKS
LLC and PARAMOUNT PICTURES All Rights Reserved ndash Poseidon copy 2006 Warner Bros Pictures ndash Sony Bravia Paint
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Thomson is currently involved in a variety
of standards bodies and with key research
and development partners including INRIA
(Institut national de recherche en infor-
matique et automatique ) in France HHI
(Heinrich Hertz Institute ) in Germany and
universities in Europe and the US
A division driving RampD
The Technology division which comprises
four business unitsmdashResearch Software
amp Technology Solutions Silicon Solutions
and Intellectual Property amp Licensingmdashpro-
vides both the foundation for RampD pro-
grams carried out throughout the Group
and the main impetus for its technological
evolutions
The divisionrsquos strength is to allow the fruits
of fundamental research to be shared
and developed inside the Group so that
business units can better address theircustomersrsquo needs while these same and
other technologies may also be licensed
to outside parties thus monetizing the
Grouprsquos innovation efforts
Thomson breakthroughs are often shared
to provide customers with broad-based
compatibility and long-term availability
Thomsonrsquos innovative NexGuardtrade water-
marking solution for example has been
INTRODUCING THE AGNOSTIC TIGER
The co-existence of two rival formats for high-definition (HD) DVDs presents
a special challenge for those who compress and author video content
Thomson Research engineers have responded with the development of
Tiger an advanced DVD authoring system Tiger combines
an advanced video coding system with an innovative user interface
enabling customers to make their workflows more efficient and streamlined
while providing the highest quality images in both HD formats
Top security for content
Protecting digital content is a major concern for those whose business involves creating
processing or distributing digital audio and video Thomsonrsquos advanced content security solution
NexGuardtrade offers comprehensive protection against piracy or unauthorized usage
Whatever the application or mediummdashfrom duplication to secure professional workflows to
online content deliverymdashNexGuardtrade streamlines the secure storage transfer or viewing of
digital content using encryption forensic watermarking security tokens and other
advanced software techniques
adopted by numerous Media amp Entertain-
ment industry players from post-pro-
duction houses to digital cinema server
vendors Likewise the HD DVD Forum
an industry-standardization group has
adopted Thomsonrsquos Film Grain Technol-
ogytrade specification a revolutionary method
for ensuring compressed video retains the
classic granular visual quality of film thatis still preferred by many in the creative
community
TECHNOLOGY SYSTEMS SERVICES
19 Thomson Panorama 2006
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Technology to serve the Media Entertainment amp Communications industries
Thomsonrsquos five key technology domains
bull Video and audio compression
bull Networking and communications
bull Security
bull Storage and recording
bull Signal acquisition and processing
Thomsonrsquos four system programs
bull Content production and management for cinema
bull Content production and management for broadcast
bull Electronic content distribution on broadband networks
bull Electronic content distribution on mobile networks
20 Thomson Panorama 2006
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Left Silicon microchip As system value and
intelligence is increasingly embedded in chips
Thomson is placing increasing emphasis on
in-house silicon design and development efforts
Research
Thomson has successfully intensi fied
research efforts over the last two years
in order to serve the short and long-term
needs of the Media Entertainment amp
Communications industries leveraging
both close relationships with customers
and deep knowledge of video
New ways to acquire process compress
store and distribute digital content today
provide a central focus for the ongoing
programs at Thomsonrsquos seven research
centers located in Rennes and Paris in
France Hanover and Villingen in Germany
Burbank and Princeton in the US and Bei-
jing in China These range from innovative
coding schemes to advanced methods
for processing audio and video signals
The networking component is especially
important as Thomson engineers work
on solutions to enable operators of fixedand mobile telecom cable and satellite
networks to distribute content more eco-
nomically and flexibly and to introduce
new services
Software amp Technology Solutions
The development of content security solu-
tions counts among the critical initiatives
within the Software amp Technology Solutions
business unit Thomson experts are working
on new ways to help Media Entertainment
amp Communications customers protect their
digital rights They develop and distribute
innovative solutions in the fields of forensic
marking content protection secure con-
tent distribution and anti-counterfeiting
HIGH DEFINITION AT A GALLOP
As high-definition video sweeps the video and TV world video compression
is one of the greatest challenges facing the Media Entertainment amp
Communications industries and companies who need to process and
distribute HD images Thomson is helping meet this challenge through
the Mustang HD video processing engine an advanced chip set that helps
make HD images more compact Using the talents of Thomsonrsquos
Technology and Systems divisions the patented Mustang technology
designed for a wide variety of broadcast equipment has been integrated
into an innovative Grass Valley branded HD video coding device Packing
HD images so compactly greatly reduces costs for broadcasters making it
more commercially attractive for them to adopt advanced MPEG-4 HD
TECHNOLOGY SYSTEMS SERVICES
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ldquoIrsquove always worked in video compression RampD for a number of hi-tech companies
but Thomson is different itrsquos truly video-centric Everyonemdashnot just the compression
research engineersmdashunderstands the importance of video technology to the core business
Irsquom in charge of our compression research activities worldwide a key technology
thatrsquos essential for distributing video over networks or storing video on physical media
But what I most enjoy is drawing on my experience in patents to mentor researchers on
preparing patent disclosures for new inventions Preparing patent disclosures is a pretty
unique skill and one thatrsquos key in strengthening the Grouprsquos intellectual property portfoliordquo
Jill Boyce Compression Domain Director Corporate Research
ADDING A NEW DIMENSION TO MUSIC
Movie-goers and people with home cinema installations are accustomed to
the three-dimensional sound that enables them to hear each instrument
voice or sound effect in a different place The concept is known as ldquoSurround
Soundrdquo and it now exists in mp3 format
Developed in cooperation with Germanyrsquos Fraunhofer Institute for Integrated
Circuits mp3 Surround takes the mp3 digital coding system one step furtherwithout making mp3 files larger The new technology is also backwards
compatible so that music with mp3 Surround sounds great with existing players
The technology can be applied in a broad spectrum of applications
including web-based music distribution broadcasting systems PC-related
audiovisual and gaming applications
This yearrsquos achievements covered multiple
domains of technology The businessrsquo
leading watermarking technology embedsinvisible indestructible and fully traceable
pieces of information into content so that
the owner origin or recipient can be identi-
fied The technology was launched for digi-
tal cinema applications and successfully
licensed to most server manufacturers
Thomson technologies also enabled for
example the development of an advanced
TV audience measurement system and a
solution allowing authentification of VIP
accreditation badges during Soccer World
Cup in Germany in 2006 The businessrsquo
consulting activity also implemented an
enterprise-wide security solution for a majorinternational broadcaster during the year
The Software amp Technology Solutions busi-
ness is now expanding from watermarking
into other promising technological areas
such as digital rights management (DRM)
to manage conditional access to content
in the context of professional workflows
content filtering to monitorfilter distribution
of copyrighted content or new protocols
to optimize and secure content distribution
platforms
TECHNOLOGY SYSTEMS SERVICES
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Silicon Solutions
As more and more system value and intel-
ligence is embedded onto silicon micro-
chips Thomson has placed increased
emphasis on in-house silicon design and
development efforts These range from
integrated circuits for communications and
set-top boxes to chips designed specifi-cally for broadcasting and mobile devices
The growing sophis tication of home
network access devices helps explain
why more than 200 Thomson engineers
are continuing to develop innovative
integrated circuits As with all Thomson
technology innovations our silicon invest-
ment is focused equally on increasing our
leadership in set-top boxes as much as
on providing integrated circuit solutions
to industry leaders
Intellectual Property amp Licensing
Thomsonrsquos extraordinarily rich intellectual
property assets include over 55000 pat-
ents derived from more than 7000 inven-
tions with some 600 new invention patent
applications filed in 2006
Thomsonrsquos patent portfolio remains a key
pillar for both the Technology division and
the Group as a whole with patented tech-
nologies including digital decoders high-
definition TV optical module patents for
Thomsonrsquos rich intellectual property
assets include over 55000 patents
CD and DVD players MPEG video com-
pression mp3 audio compression format
interactive TV and storage technologies
Having successfully migrated the propor-
tion of income derived from digital rather
than analogue technologies digital tech-
nology-based programs now account for
over 80 of the Grouprsquos large licensingrevenue stream with over 950 licensing
contracts in place worldwide at year-end
2006
TECHNOLOGY SYSTEMS SERVICES
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Thomsonrsquos Systems division provides video solutions and integrates video network systems for its customers in
the broadcast cable satellite terrestrial and telecoms markets The divisionrsquos offering spans image capture to
network distribution to the provision of access products enabling operators to enrich their service offerings to
subscribers
SYSTEMS
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Today people benefit from virtually instan-
taneous access to an increasingly custom-
ized range of content available through
a growing set of access possibilities As
internet and digital technologies con-
tinue to infuse the Media Entertainment
amp Communications industries Thomson
is focusing on opportunities arising from
this new paradigm alongside its traditionalcore markets These range from traditional
broadcast equipment to the growing mar-
ket for professional audio-video systems
mobile and IP (Internet Protocol) TV to
booming demand for residential broad-
band services
Strategy
Thomsonrsquos Systems division comprises
three activities Access Products and the
Broadcast amp Networks businesses The
Access Products business aims to deliver
key set-top box platforms for satellite andcable customers and gateway products
for telecom operators The Broadcast
amp Networks businesses are focused on
video network integration bringing to
market advanced products and solutions
to enable network operators broadcast-
ers and film-makers to benefit from the
latest technologies in image acquisition
compression switching and storage The
Network Software business aims to enable
the introduction of new multiple-play ser-
vices based on fixed-mobile convergence
IPTV and broadband telephony
Achievements
Overall the Systems division improved
diversified its customer base in 2006 In
Access Products Thomson consolidated
its leadership of worldwide markets forset-top boxes gateways and modems for
telecom satellite and cable network oper-
ators and service providers while achiev-
ing good growth in higher-end products
in the second half of the year In Grass
Valley demand for high-defin ition (HD)
acquisition production and distribution
systems combined with growing demand
for IT- and IP-based broadcast solutions to
drive growth while in Network Software
Thomsonrsquos SmartVis ion IPTV system
gained good ground with more than 30
IPTV and mobile TV deployments to date
and the worldrsquos largest installed base
Access Products
The Access Products business was driven
in 2006 by the ongoing rapid expansion of
triple (video voice and data) and quadru-
ple play services (also fixed-mobile con-
vergence) offered by cable and telecom
network operators and by the increasing
spread of high definition (HD) broadcasts
among satellite network operators
SYSTEMS
PROVIDING VIDEO SOLUTIONS
From image capture to
distribution via
all types of network
Thomson is reaping the benefits of
growing market demand for
video network integration
TECHNOLOGY SYSTEMS SERVICES
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Thomson further consolidated its market
leading position for dual and triple-play
gateways to telecom operators and inter-
net service providers The established mar-
ket leader for DSL modems and routers
since 1999 Thomson extended its lead
over the competition in 2006 shipping
more than 42 million DSL modems and
gateways during the first half of the yearand 10 million units overall in 2006
Growing market demand for sophisticated
home networking eco-systems able to
accommodate new services over time was
underlined by the success of Thomsonrsquos
Livebox gateway for France Telecom
Early in 2007 Thomson supported large-
scale deployment of the Livebox which
provides access to high-speed wireless
Internet Voice-over-IP IPTV network
gaming fixed-mobile convergence (unik)
and other services
An advanced Thomson gateway also
enabled the UKrsquos leading operator to
launch its innovative Total Broadband ser-
vice in June 2006 Bri tish Telecomrsquos BT
Home Hubtrade is a quadruple-play gateway
designed to support BTrsquos full range of ser-
vices including both BT Total Broadband
and BT Broadband Talk in addition to
providing wired and wireless broadband
connectivity for fixed and mobile phones
PCs and other networked devices It also
Mobile video in Italy
Thomsonrsquos product and service offering benefited in 2006 from increased interest from cable and
telecom operators to complete their offering for Video-on-Demand and mobile TV The Olympic Winter Games
notably provided a showcase for Thomsonrsquos capability to deliver video programming to cell phones and
other mobile devices In the wake of the successful Olympic trial Telecom Italia turned to Thomson
for the systems and technology that enabled it to commercially launch a mobile offering including TV and
sports programming in June 2006
incorporates the latest wideband audio
codec providing near CD-quality sound
for voice and video calls
As broadband services become more and
more of a mass-market service providers
must ensure that their services are both
differentiating and easy to consume This
trend calls for the emergence of simpleyet very technologically-advanced and
software-laden devices Such devices
connect to the home-networking gateway
and make it natural to consume a broad-
band-delivered service One example
is the Music Box first made available to
subscribers of AOLrsquos broadband service
in France which streams Internet-based
radio stations or locally stored music files
to a homersquos legacy Hi-Fi audio system
Strong growth in the cable network sys-
tems market which is projected to expand
another 20 in 2007 helped drive Thom-son toward two major sales milestones
in 2006 two million cable set-top boxes
and ten million cable modems Driven by
operatorsrsquo needs to provide more and
more sophisticated services Thomson
has extended its product range since
2005 to include interactive double- and
triple-play set-top boxes as well as HD
set-top boxes with advanced functions
such as personal video recorders (PVR)
Among the cable operators to have
TECHNOLOGY SYSTEMS SERVICES
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Total Broadband for BT
An advanced Thomson gateway enabled the UKrsquos leading telecommunications operator British Telecom
to launch its innovative Total Broadband service in June 2006 This quadruple-play gateway
known as the BT Home Hubtrade features video voice data and wireless capabilities
It is supporting BTrsquos full range of services including wired and wireless broadband connectivity
for fixed and mobile phones PCs and other networked devices
28 Thomson Panorama 2006
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Left Thomson Grass Valley branded
outside broadcast van under construction
Right Camera operator Kim Marks (left)
a camera first assistant Chris Blauvelt (center)
and a camera second assistant
Jason McCormick (right) line up a scene
with the Grass Valley Viper FilmStreamtrade
camera for the David Fincher feature Zodiac
Photo courtesy Paramount Pictures
selected Thomson in 2006 were Portu-
galrsquos leading Pay-TV Operator TV Cabo
UPC E-Vision Kabel Deutschland and
Premiegravere in Europe Net Serviccedilos in Latin America and StarHub and Dalian Cable
TV in Asia
Thomson expanded its footprint in satel-
lite in Europe notably in the UK and in
Asia where product deliveries began for
Tata Sky the Indian satellite broadcaster
In the UK Thomson delivered the Sky
HD box an MPEG-4 set-top box with
Personal Video Recorder which enabled
the successful launch of the countryrsquos first
high-definition TV service in May 2006
The largest satel li te television service
provider in the US DIRECTV also chose Thomson to expand its HD programming
offering with the delivery of the H20 satel-
lite receiver
Leveraging expertise in free-to-air digi-
tal terrestrial receivers and capabilities in
high-definition Thomson also delivered
the first MPEG-4 HDTV receivers for digital
terrestrial TV to French operators Canal +
and TPS during the year
In telephony Thomson remains a lead-
ing supplier of corded and cordless tele-
phones which are sold at retail outletsunder the RCA GE and Alcatel brands as
well as under third-party brands for opera-
tor sales In 2006 Thomson capitalized
on its leadership position in DECT (Digital
Enhanced Cordless Telecommunications)
in Europe by expanding into the American
retail market
Broadcast amp Networks
The Broadcast amp Networks businesses
gained market share in 2006 particularlyin networks and systems integration and
expanded in the promising Pro-AV (profes-
sional audio-video) market
Continuing trends in this market are high-
definition (HD) broadcasting the merging
of IT and broadcast technology the move
to a tape-less file-based approach to video
storage and management and power-
ful MPEG-4 HD compression technology
which allows content to be delivered to mul-
tiple audiences over multiple platforms
One highly visible application of ThomsonrsquosGrass Valley brand of HD image acquisi-
tion and production systems was the 2006
FIFA World Cup in Germany seen by a
billion viewers around the world Broad-
casters covering the event relied on more
than 182 Grass Valley brand cameras
10 Grass Valley video switching systems
12 large scale Grass Valley video routing
systems and hundreds of other devices to
provide faultless HD images
Leveraging its market leading position
Thomson est imates tha t Grass Valley
HD cameras now account for 50 of theglobal market Most major outside broad-
cast production companies in the world
use Grass Valley branded HD camera sys-
tems with more than 1500 in use
High-definition television is also about
news Based on internal Thomson esti-
mates Grass Valley solutions accounted
for nearly 80 of HD news installations
worldwide in 2006 including CBS Net-
work-owned amp operated stations in the
TECHNOLOGY SYSTEMS SERVICES
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IGNITE HD
TV news operations can work more quickly and efficiently by using information
technology The industryrsquos first and most complete link between the control room
and the newsroom HD Ignite enables a single technician to handle all
news production requirements During its initial months on the market in the US
HD Ignite was selected by such early adaptors as ABC Stations Group
customers in San Francisco and Chicago and Cox Broadcasting customers in
Atlanta San Francisco Charlotte North Carolina and Dayton Ohio
Telecom service providers are working to
provide more content and value-added
services over their broadband lines
Thomsonrsquos SmartVision and
Cirpack software solutions facilitate
their strategies for rapid deployment of
IPTV and triple-play services
US Al Jazeera Englishmdasha global channelbased in the Middle Eastmdashand Belgiumrsquos
VTM (Vlaamse Televisie Maatschappij )
Thomson is the only supplier to provide
an automated production system (Ignite
HD) a full suite of non-linear editing sys-
tems and a news playout systemmdashall of
which enable broadcasters to move to HD
affordably and to speed up and automate
their workflows
MPEG-4 is one of the enabling technolo-
gies which allows operators of telecom-
munications networks to bring TV to
their subscribers in addition to voice andinternet access This is one element in a
complete Thomson systems offering For
example Spanish operator Telefoacutenica
selected Thomson for a range of equip-
ment and systems to upgrade and expand
its rapidly growing ldquoImageniordquo service In
the US Falcon Communications a lead-
ing systems integrator offers a turnkey
IPTV solution featuring encoding content
delivery service management and access
products from Thomson
bull Professional Audio-Video
Thomson serves the rapidly growing mar-ket for professional audiovisual (ProAV)
solutions for corporate institutional wor-
ship and governmental media centers and
networks Thomsonrsquos expansion in ProAV
has been achieved through organic prod-
uct development as well as the integra-
tion of Pro-AV products from Canopus
the Japanese company acquired in early
2006
EDIUS desktop video
editing software part of
Thomsonrsquos growing rangeof professional
audiovisual and
broadcast solutions
TECHNOLOGY SYSTEMS SERVICES
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ldquoHaving started out in research today Irsquom responsible for our modemsrsquo roadmap
and strategy Our customersmdashthe telecoms operatorsmdashhave seen their business
transformed by technology like high-speed broadband And I find it fascinating
how these technologies have penetrated our daily lives the way we live and how
we communicate have changed dramatically over the last ten years
Even faster broadband (VDSL) fiber optics wireless technologies fixed-mobile
convergencehellip mean the pace of change is set to accelerate therersquos no doubt
wersquore living in exciting timesrdquo
Stan Claes Product Manager for IP-based Access Products
A key product introduction in 2006 was
the Grass Valley Indigo AV Presenta-
tion Switcher which combines features
normally found in separate devices in aunified powerful control interface simple
enough to be used by a single operator
Digital signage is also providing new mar-
ket opportunities combining the latest in
display delivery and storage technologies
Thomsonrsquos integrated digital media man-
agement solution Media Edge solves the
complex control distribution and archive
demands of customers Media Edge can
stream high-quality SD and HD content
over an IP network for example to the retail
store environment without the need to re-
invest in infrastructure
Broadcast amp Networksmdash
Network Software
2006 saw telecom service providers con-
tinue to build strategies to provide more
content and value-added services over
their broadband lines Thomsonrsquos Smart-
Vision TV service platforms and Cirpack
telephony switches are at the heart of sev-
eral of the worldrsquos largest IPTV and VoIP
services
In 2006 the launch of a pre-integrated mul-tiple play solution for telecom service provid-
ers illustrated Thomsonrsquos ability to leverage
skills across multiple business units The
solutions which enable telecom providers
to bring a myriad of services to broadband
subscribers are built around Thomsonrsquos
SmartVision and Cirpack software solu-
tions integrated with Thomsonrsquos Grass
Valley branded video head-end equipment
and Thomson home gateways and set-top
boxes This represents the first pre-inte-
grated solution on the market for rapid easy
deployment of triple play services including
voice video and internet access
More than 30 IPTV and mobile TV service
platforms have been deployed around the
world with SmartVision well-positioned
for convergent operators since it allows
video distribution over fixed and mobile
networks
Thomsonrsquos Cirpack softswitches which
help provide the core for the new inte-
grated platforms occupied the top mar-
ket position worldwide for residential
broadband telephony (VoIP) platforms in
2006 Over the course of 2006 Europersquoslargest primary line VoIP operator Freefr
upgraded its Cirpack switches to bring a
new seamless fixedmobile service to its
two million customers placing Thomson
at the forefront of new fixed-mobile con-
vergence solutions Signaling the rapid
expansion of sales outside traditional
Western European markets Thomsonrsquos
Cirpack switches were selected by many
telecom operators in Northern Africa Cen-
tral and Eastern Europe as well as Central
America to build or upgrade legacy voice
networks and deliver advanced telephone
services using IP technologies
TECHNOLOGY SYSTEMS SERVICES
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Thomsonrsquos Services division provides end-to-end management of business-critical services on behalf of Media
Entertainment amp Communications customers These include management of broadcast and network operations
centers on an outsourced basis and the provision of an array of content services to the creative community from
post-production to visual effects
SERVICES
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Thomsonrsquos Services division provides end-
to-end management of business-critical
services spanning physical media con-
tent services electronic content distribu-
tion and network services The division
is the worldrsquos leading provider of state-
of-the-art film-making post-production
visual effects and broadcast center man-
agement services
Strategy
The Services division continues to focus
on managing v ideo networks and
op er at io na l centers on behalf of its
customers who are able to concentrate
on their core business of content The
emphasis on high-growth opportunities
in newer market sectors such as retail
and corporate networks and gaming
has been sharpened
Achievements
New customers in fast-growing market
segments responded well to a range of
high value-added services from the Ser-
vices division in 2006 Network Services
showed particularly strong growth as net-
work operators in Europe Asia and North
America selected Technicolor-branded
management services The addition of
such leading customers as ITV in the
UK and France 24 and TV5 in France
substantially expanded Thomsonrsquos fast-
growing Network Services business
Noteworthy successes were also achieved
in Theatrical Services due in part to the
continued development of Thomsonrsquos digi-
tal cinema activity The Content Services
business continued to expand its post-
production services business by opening
a digital intermediate facility on the SonyPictures Entertainment studio lot In 2006
a new Home Entertainment Services unit
was created combining Thomsonrsquos DVD
business with electronic distribution to
develop new services to support emerging
lsquoon demand contentrsquo business models
Network Services
With a comprehensive portfolio of services
for broadcasters network and internet TV
operators movie theatres retailers and
corporations Network Services continued
to expand briskly in 2006 Broadcastersincreasingly selected Thomson as their
long-term network services partner By
year-end Network Services was providing
managed services under the Technicolor
brand to close to 200 channels from
17 facilities in France the Netherlands
Japan North America and the UK
Late in the year Thomson signed a long-
term agreement with ITV for network
transmission operations services for its six
From managing video
networks on an outsourced
basis to a broad range of
offerings in content services
Thomson is bringing its video
expertise to new markets
and geographies
Left Network Services for broadcasters
cable TV operators movie theaters
retailers and corporations is one of Servicesrsquo
fastest-growing business segments
Right Thomson provided film sound
DVD and digital cinema services for Cars
the DisneyPixar hitCars copy 2006 Disney Enterprises IncPixar All R ights Reserved
SERVICES
MANAGING VIDEO NETWORKS
TECHNOLOGY SYSTEMS SERVICES
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existing UK channels including the coun-
tryrsquos leading commercial channel In addi-
tion an agreement signed with NOB Cross
Media Facilities (NOB CMF) a subsidiary
of Nederlands Omroepproduktie Bedrijf
(NOB) likewise established Thomson as
a major supplier of network management
services in the Netherlands
In France Network Services added new
clients France 24 and TV5 which covers
203 countries and territories to move into
the market-leading position managing
more than 60 channels and 1500 hours
of programming daily The France 24 part-
nership also involves equipping their new
global TV news operation
Thomson drove expansion and innovation
in its retail media services over the course
of the year One of the most notable achie-
vements involves an ambitious in-store
network upgrade program piloted in2006 by Wal-Mart in the USA with Premier
Retail Networks (PRN) a subsidiary within
Thomsonrsquos Network Services operat ion
The in-store network platform was based
on Thomson IPTV technologies adapted
for the retail environment The system
the first pilot of IPTV in the retail environ-
ment delivered real impact on product
sales and improved customer satisfaction
in Wal-Mart stores PRN also expanded
capabilities into China early in 2007 with
Content Services revving up
Thomson provided a wide range of services for a number of major international film releases in 2006
such as Cars one of the three nominees for Best Animated Film at the Oscars Thomson Technicolor provided
film services sound services DVD compression and authoring replication and distribution
as well as digital cinema mastering and distribution for the DisneyPixar hit The Grouprsquos Content Services offering
has expanded in recent years to include the high-growth video-gaming advertising and broadcast markets
the signing of a joint venture with CGEN a
technology company leading the Chinese
in-store digital signage media industry
The two companies are currently collabo-
rating on the roll-out of an in-store media
network to 750 internet cafeacutes part of the
leading Chinese chain Big Cafeacute
Theatrical Services
Thomson signed Europersquos first large-scale
digital cinema rollout agreement in 2006
with the Kinepolis Group one of the conti-
nentrsquos most innovative theater circuits and
the leading exhibition chain in Belgium
The agreement to instal l and operate
digital cinema systems in 130 Kinepolis-
owned and operated screens passed a
first milestone in March 2007 with Thom-
sonrsquos first international distribution by sat-
ellite of an encrypted digital version of the
film Dreamgirls from the US to a Kinepolis
theater in Brussels Belgium
A series of new contracts were awarded
in the US For example in the fall of 2006
Technicolor Digital Cinema began installing
digital projection systems at 120 National
Amusements Inc screens in Boston Los
Angeles New York and elsewhere as part
of a strategic agreement National Amuse-
ments operates more than 1500 screens
in the US UK Latin America and Russia
Digital projection systems were also
TECHNOLOGY SYSTEMS SERVICES
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The growing market for Network Services
The decision by the UKrsquos leading commercial broadcaster to entrust its network services to
Thomsonrsquos Network Services operations illustrates a growing global trend as broadcasters focus increasingly on
programming and meeting customer needs they turn to highly-skilled specialists to handle technology
The long-term agreement with ITV means that the broadcaster will benefit from enhanced service and new technology
as well as more flexibility in launching new services
36 Thomson Panorama 2006
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Left Thomsonrsquos Technicolor
Interactive Services provided in-game
cinematics and voice recording for
Microsoft Game Studiosrsquo Gears of War
Right Thomsonrsquos London-based MPC
subsidiary carried out post-production
work including computer graphics
on Sony Braviarsquos award-wirring colorful
Paint commercial
installed at several landmark theatres in
Los Angeles in 2006 including Mann The-
atresrsquo Graumanrsquos Chinese and the Village
in Westwood
Thomson maintained a leading position in
film processing and printing in 2006 in a
market where volumes were stable Tech-
nicolor handled worldwide release printingfor two of the five 2007 Oscar nominees
for Best PicturemdashMartin Scorcesersquos The
Departed and Clint Eastwoodrsquos Letters
from Iwo Jimamdashas well as release print-
ing for two of the three Best Animated Film
nominees Cars and Happy Feet
As part of its ongoing commitment to meet
customer needs worldwide a state-of-the-
art film and post-production facility was inau-
gurated at Ciudad de la Imagen in Madrid in
2006 It is already becoming known as the
countryrsquos most comprehensive postproduc-
tion facility with advanced film processingand digital intermediate capabilities
Content Services
Thomson continued to leverage its long-
standing strength in post-production
skills and services through expansion into
emerging and high-growth market seg-
ments such as content services for the
video-gaming advertising and broadcast
markets
In order to better serve the growing mar-
ket for entertainment content for mobile
devices Thomson unveiled new mobile
content preparation and distribution capa-
bilities in the US and the UK in 2006 Facili-
ties equipped with state-of-the-art produc-
tion and post-production technologies will
handle the preparation and optimization
of a wide range of digital entertainmentcontentmdashincluding movies TV episodes
and music videosmdashfor distribution to
mobile devices The dedicated services
complement the Grouprsquos extensive global
electronic distribution infrastructure which
enables Thomson to deliver mobile con-
tent to online delivery services as well as
to network operators for final transmission
to mobile customers
Thomson also made progress in the
development of an integrated digital asset
management solution in 2006 known as
MIDAS (Media Ingest Distribution andStorage) MIDAS is a software and hard-
ware platform for digital content prepara-
tion storage security and distribution
From the first day of production planning
through every stage of post-production
and content distribution MIDAS creates
a digital workflow that allows customers
to manage projects remotely and provides
for rapid and seamless global file delivery
streaming and collaboration
TECHNOLOGY SYSTEMS SERVICES
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While expanding into newer markets
growing demand for post-production ser-
vices and visual effects continued to fuel
Thomsonrsquos ongoing content services activ-
ities Among the yearrsquos most noteworthy
achievements were portfolios of services
for such feature films as The Departed
Letters from Iwo Jima and Pirates of the
Caribbean Dead Manrsquos Chest ThomsonrsquosMoving Picture Company (MPC) also pro-
vided high-end visual effects for the three
films nominated for Achievement in Visual
Effects Pirates of the Caribbean Posei-
don and Superman Returns
Confirming the Grouprsquos solid growth in
content services for the video game indus-
try Thomson unveiled a new dedicated
Interactive Services facility in Burbank
California in 2006 Sierra Entertainment
a division of Vivendi Games selected
Thomson to prov ide cinemat ic anima-
tion voice casting and recording sound
design and mixing services for The Leg-
end of Spyrotrade A New Beginning Like-
wise Thomson provided a wide range of
services to support Konamirsquos The SilentHill Experience released simultaneously
with the motion picture
The strategic investment in one of Indiarsquos
leading animation and gaming cinemat-
ics firms announced in February 2007
strengthened Thomsonrsquos position in Asia
for a variety of content services Located in
Bangalore India Paprikaas provides cre-
ldquoIn 1998 I joined Thomson as a Plant Manager within Home Entertainment Services
and was eventually made responsible for the expansion and management of our
Guadalajara DVD operations In summary Irsquove had great opportunities to gain experience
in international operations strategic planning and operational excellence I recently
joined Content Services where Irsquoll be leading the start-up and integration of new activities
in Beijing Bangalore and other emerging markets Content Services is dynamic and
growing and Irsquom looking forward to expanding the business in Asia while improving
our operational performance in North America and Europerdquo
Mike Hayden Vice President Operations amp Strategic Projects Content Services
of the Grouprsquos divisions and profit centersIn the context of the budgetary procedure
performance measurement indicators are
calculated by the divisions analyzed and
reviewed monthly to serve as a reference
for the Grouprsquos monthly reporting
Management reporting and
closing period work
Th om so n uses a co mmon char t of
accounts which is regularly updated The
principal accounting and financial figures
of the operational and functional depart-
ments consolidated at Group level are
analyzed by the Grouprsquos management
control team and reviewed by the Grouprsquos
Executive Committee
The closing process for the half-year and
annual consolidated financial statementsoccurs in two steps The first step con-
sists of a ldquohard closerdquo completed in May
and September leading to a first review by
the statutory auditors The second step
occurs in July and in JanuaryFebruary and
involves the finalization of half-year and
annual consolidated financial statements
under IFRS The Group then proceeds
once a year with a reconciliation of these
results in accordance with US GAAP
Preparation of financial statements
The financial statements are prepared jointly by the finance department and the
General Secretary They are based on
information reported through the annual
reporting and accounting consolidation
processes and on operational and mar-
ket information which is specifically cen-
tralized for the preparation of Thomsonrsquos
Document de Reacutefeacuterence in France and
the submission of Form 20-F in the United
States Half-year and annual financial infor-
mation is reviewed by the Grouprsquos Audit
Committee
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58 Thomson Panorama 2006
(1) Source PriceWaterhouseCoopers ndash
ldquoGlobal Entertainment and Media Outlook 2006-10rdquo
Revenue growth
Thomson achieved consolidated 2006
net revenues of 9914045854 million up from
9914045591 million in 2005 Revenues for
the Core Business reached 9914045747 mil-
lion (9914045776 million at constant currency)
representing 83 growth over 2005 at
constant currency
Overall the Grouprsquos key growth busi-
nessesmdashContent Services Network
Services Access Products for telecom
operators and our Broadcast amp Networks
businesses (Grass Valley and Network
Software)mdashincreased strongly year-on-
year and accounted for over a third of
Group revenues against less than a quar-
ter in 2005
Thomsonrsquos Core Business EBIT for 2006
was euro504 million representing a Core
Business EBIT margin of 88 Thisreflected growth in some key businesses
and cost actions across the Group off-
setting a significant investment in research
and development and some increase in
restructuring expenses
Increased spend on RampD
Research and development expenditure
charged in the Core Business (net of
external funding) rose from 991404221 million in
2005 to 991404279 million in 2006 an increase
of 26 principally in the Systems divi-
sion The Group expanded the number ofproducts and services in the development
phase across its businesses
Return to profit
Losses in Non-Core Continuing and Dis-
continued operations were substantially
lower year-on-year reflecting principally
the exit from heavily loss-making Displays
activities in 2005 and intensified cost-sav-
ing programs in 2006 A major revision
and harmonization of the Grouprsquos North
American healthcare obligations gave rise
to substantial one-time gains and Thom-
son also initiated significant restructuring
of its French Non-Core operations
The good performance of the Core Busi-
ness lower Non-Core and Discontinued
losses and a low reported tax chargeenabled the Group to return a net profit of
99140455 million in 2006 compared to a loss of
991404573 million in the previous year
Good cash flow
strengthened balance sheet
Thomson generated good free cash flow
and strengthened its balance sheet in
2006 Total net financial liabilities on the
balance sheet fell by 991404460 million reflect-
ing a 99140493 million fall in financial and acqui-
sition-related debts and a 991404367 million
reduction in retirement benefit obligations(including healthcare)
Increase in Net Dividend
The Board of Directors proposed a dis-
tribution to shareholders of 991404033 per
share (2005 dividend 991404030) reflecting
confidence in the prospects of the Group
going forward
Outlook 2007-2009
growth in revenues and net income
With the Grouprsquos transformation complete Thomsonrsquos financial focus over the 2007-
2009 period will be to grow revenues and
net income
Thomson serves growing Media Enter-
tainment amp Communications marketsmdashfor
which external estimates(1) indicate com-
pound growth of around 6 over the last
FINANCIAL AND
OPERATIONAL PERFORMANCE
Full year 2006 results
saw a return to profitability
and leave Thomson
well positioned at
the heart of convergence
and digital video
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59 Thomson Panorama 2006
five years Our digital and electronic busi-
nesses now represent two-thirds of rev-
enues and we believe they are growing
faster than the overall market offsetting
the maturing physical media businesses
Given this profile the Group expects its
revenue growth to be more modest in
2007 but to gather pace over the period
and our overall objective is to show com-pound growth over 2007-2009 in line with
or faster than the overall market
The 2007-2009 period is also expected
to see a sharply reduced impact from
residual Non-Core activities with an end
to losses from the Discontinued Activities
perimeter after 2007 Accordingly Thom-
sonrsquos ambition is to turn its Core Business
growth and profitability and lower impact
from Non-Core into strong growth in net
income over the period 2007-2009
Business operations
Continuous performance improvement is
fundamental to Thomsonrsquos commitment to
create sustainable business models and
long-term value for all stakeholders The
ambitious Group-wide programs launched
in 2004 to improve productivity and
enhance overall performance producedsubstantial results in 2006 and led to new
and strong initiatives for long-term growth
As of the second half of 2006 six ldquoKey
Programsrdquo are monitored at Group level
Clients Software Product Introduction
Operations Transformation and Talent
Management
KEY PROGRAMS IN PLACE
Program Focus
Clients Thomsonrsquos clientregional diversification and
growth of the existing business
through improved Sales amp Marketing
Software Development of integrated software platforms
in all markets (post-production distribution
delivery) and for all types of customer
(professional prosumerhellip)
Product Introduction Ensuring new product roadmaps are in line
with strategy and resource needs have been
identifiedOperations Improving the Grouprsquos cost base cash
generation and working capital
Transformation Multiple programs including initiatives to
improving customer relationship management
worldwide supply chain management
IT transformation as well as Thomsonrsquos RampD
footprint
Talent Management Leveraging human assets with a focus on
talent retention and acquisition
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60 Thomson Panorama 2006
SUMMARY RESULTS FULL YEAR 2006
In 991404 millions unless otherwise stated 2006(1) 2005(1)
Net revenues 5854 5591(1)
Core Business net revenues 5747 5335
Services 2489 2487
Systems 2684 2262
Technology 547 546
Corporate 27 40
Non-Core continuing operations net revenues 107 256
Core Business EBIT(2) 504 512
Services 160 205
Systems 132 109
Technology 289 277Corporate (77) (79)
EBIT from Non-Core continuing operations (25) (122)
(1) Restated with 2006 discontinued activities according to IFRS 5
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61 Thomson Panorama 2006
Year ended December 31in 991404 except number of shares 2006 2005 2004
Year ended December 31in 991404 millions 2006 2005(1) 2004(1)
CONSOLIDATED STATEMENTS OF OPERATIONS
(1) Restated with 2006 discontinued activities according to IFRS 5
(2) After deduction of the interests net of tax paid on the subordinated perpetual notes during the period
Continuing operations
Revenues 5854 5591 5980
Cost of sales (4474) (4240) (4594)
Gross margin 1380 1351 1386
Selling marketing general and administrative expenses (674) (638) (653)
Other income (expense) 52 (96) (69)
Research and development expenses (279) (227) (201)
Profit from continuing operations before tax and net finance costs 479 390 463
Interest income 19 30 52
Interest expense (108) (108) (54)
Other financial income (expense) (111) 36 (26)
Finance costs ndash net (200) (42) (28)
Share of profit (loss) from associates (86) (82) (20)
Income tax ndash (68) (93)
Profit from continuing operations 193 198 322
Discontinued operations
Profit (loss) from discontinued operations (138) (771) (883)
Net income (loss) 55 (573) (561)
Attributable to
Equity Holders 55 (574) (559)
Minority interests ndash 1 (2)
Weighted average number of shares
outstandingmdashbasic net of treasury stock 261188858 266539917 273646869
Earnings per share from continuing operations
Basic(2) 067 074 118
Diluted 063 042 111
Earnings per share from discontinued operations
Basic (053) (289) (323)
Diluted (048) (262) (296)Total earnings per share
Basic(2) 014 (215) (205)
Diluted 015 (220) (185)
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62 Thomson Panorama 2006
CONSOLIDATED BALANCE SHEETS
In 991404 millions December 31 December 31 January 1 December 31 2006 2005 2005(1) 2004
ASSETS
Non-current assets
Property plant and equipment 813 886 1051 1051
Goodwill 1714 1756 1186 1178
Other intangible assets 1071 1150 924 924
Investments in associates 12 204 260 260
Investments and financial assets available-for-sale 266 341 139 113
Derivative financial instruments 7 1 11 ndash
Contract advances 129 173 179 179
Deferred tax assets 397 379 307 301
Other non-current assets 110 182 133 136
Total non-current assets 4519 5072 4190 4142
Current assets
Inventories 366 333 503 568
Trade accounts and notes receivable 1018 1315 1232 1180
Current accounts with associates and joint ventures 97 115 143 143
Derivative financial instruments 8 9 115 ndash
Other current assets 535 644 483 616
Marketable securities ndash 7 58 58
Cash and cash equivalents 1311 996 1845 1848
Assets classified as held for sale 264 369 80 ndash
Total current assets 3599 3788 4459 4413
Total assets 8118 8860 8649 8555
(1) Including the impacts of the first-time application related to IAS 32 and 39 on financial instruments and IFRS 5 on non-current assets held for sale and
discontinued operations
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63 Thomson Panorama 2006
In 991404 millions December 31 December 31 January 1 December 31 2006 2005 2005(1) 2004
SHAREHOLDERSrsquo EQUITY AND LIABILITIES
Shareholdersrsquo equity
Common stock (273871296 shares at
December 31 2006
with nominal value of euro 375 per share) 1027 1025 1025 1025
Trade accounts and notes payable 1032 1164 1199 1226
Accrued employee expenses 165 166 158 163
Income tax payable 57 47 60 60
Other current liabilities 671 750 746 800
Payables on acquisition of companies 13 138 84 84
Liabilities directly associated with
assets classified as held for sale 232 470 88 ndash
Total current liabilities 3681 4393 3602 3459
Total liabilities 5999 6644 6251 6062
Total shareholderrsquos equity and liabilities 8118 8860 8649 8555
(1) Including the impacts of the first-time application related to IAS 32 and 39 on financial instruments and IFRS 5 on non-current assets held for sale and
discontinued operations
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Creation and lay-out
Photo credits Nathalie BerhingGAMMA ndash Steacutephane de Bourgies ndash Jean-Franccedilois DeroubaixGAMMA ndash Christine Donnier- ValentinGAMMA ndash Cars copy 2006 Disney Enterprises IncPixar All Rights Reserved ndash Dreamgirls copy 2006 DREAMWORKS
LLC and PARAMOUNT PICTURES All Rights Reserved ndash Poseidon copy 2006 Warner Bros Pictures ndash Sony Bravia Paint
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Technology to serve the Media Entertainment amp Communications industries
Thomsonrsquos five key technology domains
bull Video and audio compression
bull Networking and communications
bull Security
bull Storage and recording
bull Signal acquisition and processing
Thomsonrsquos four system programs
bull Content production and management for cinema
bull Content production and management for broadcast
bull Electronic content distribution on broadband networks
bull Electronic content distribution on mobile networks
20 Thomson Panorama 2006
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Left Silicon microchip As system value and
intelligence is increasingly embedded in chips
Thomson is placing increasing emphasis on
in-house silicon design and development efforts
Research
Thomson has successfully intensi fied
research efforts over the last two years
in order to serve the short and long-term
needs of the Media Entertainment amp
Communications industries leveraging
both close relationships with customers
and deep knowledge of video
New ways to acquire process compress
store and distribute digital content today
provide a central focus for the ongoing
programs at Thomsonrsquos seven research
centers located in Rennes and Paris in
France Hanover and Villingen in Germany
Burbank and Princeton in the US and Bei-
jing in China These range from innovative
coding schemes to advanced methods
for processing audio and video signals
The networking component is especially
important as Thomson engineers work
on solutions to enable operators of fixedand mobile telecom cable and satellite
networks to distribute content more eco-
nomically and flexibly and to introduce
new services
Software amp Technology Solutions
The development of content security solu-
tions counts among the critical initiatives
within the Software amp Technology Solutions
business unit Thomson experts are working
on new ways to help Media Entertainment
amp Communications customers protect their
digital rights They develop and distribute
innovative solutions in the fields of forensic
marking content protection secure con-
tent distribution and anti-counterfeiting
HIGH DEFINITION AT A GALLOP
As high-definition video sweeps the video and TV world video compression
is one of the greatest challenges facing the Media Entertainment amp
Communications industries and companies who need to process and
distribute HD images Thomson is helping meet this challenge through
the Mustang HD video processing engine an advanced chip set that helps
make HD images more compact Using the talents of Thomsonrsquos
Technology and Systems divisions the patented Mustang technology
designed for a wide variety of broadcast equipment has been integrated
into an innovative Grass Valley branded HD video coding device Packing
HD images so compactly greatly reduces costs for broadcasters making it
more commercially attractive for them to adopt advanced MPEG-4 HD
TECHNOLOGY SYSTEMS SERVICES
21 Thomson Panorama 2006
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ldquoIrsquove always worked in video compression RampD for a number of hi-tech companies
but Thomson is different itrsquos truly video-centric Everyonemdashnot just the compression
research engineersmdashunderstands the importance of video technology to the core business
Irsquom in charge of our compression research activities worldwide a key technology
thatrsquos essential for distributing video over networks or storing video on physical media
But what I most enjoy is drawing on my experience in patents to mentor researchers on
preparing patent disclosures for new inventions Preparing patent disclosures is a pretty
unique skill and one thatrsquos key in strengthening the Grouprsquos intellectual property portfoliordquo
Jill Boyce Compression Domain Director Corporate Research
ADDING A NEW DIMENSION TO MUSIC
Movie-goers and people with home cinema installations are accustomed to
the three-dimensional sound that enables them to hear each instrument
voice or sound effect in a different place The concept is known as ldquoSurround
Soundrdquo and it now exists in mp3 format
Developed in cooperation with Germanyrsquos Fraunhofer Institute for Integrated
Circuits mp3 Surround takes the mp3 digital coding system one step furtherwithout making mp3 files larger The new technology is also backwards
compatible so that music with mp3 Surround sounds great with existing players
The technology can be applied in a broad spectrum of applications
including web-based music distribution broadcasting systems PC-related
audiovisual and gaming applications
This yearrsquos achievements covered multiple
domains of technology The businessrsquo
leading watermarking technology embedsinvisible indestructible and fully traceable
pieces of information into content so that
the owner origin or recipient can be identi-
fied The technology was launched for digi-
tal cinema applications and successfully
licensed to most server manufacturers
Thomson technologies also enabled for
example the development of an advanced
TV audience measurement system and a
solution allowing authentification of VIP
accreditation badges during Soccer World
Cup in Germany in 2006 The businessrsquo
consulting activity also implemented an
enterprise-wide security solution for a majorinternational broadcaster during the year
The Software amp Technology Solutions busi-
ness is now expanding from watermarking
into other promising technological areas
such as digital rights management (DRM)
to manage conditional access to content
in the context of professional workflows
content filtering to monitorfilter distribution
of copyrighted content or new protocols
to optimize and secure content distribution
platforms
TECHNOLOGY SYSTEMS SERVICES
22 Thomson Panorama 2006
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Silicon Solutions
As more and more system value and intel-
ligence is embedded onto silicon micro-
chips Thomson has placed increased
emphasis on in-house silicon design and
development efforts These range from
integrated circuits for communications and
set-top boxes to chips designed specifi-cally for broadcasting and mobile devices
The growing sophis tication of home
network access devices helps explain
why more than 200 Thomson engineers
are continuing to develop innovative
integrated circuits As with all Thomson
technology innovations our silicon invest-
ment is focused equally on increasing our
leadership in set-top boxes as much as
on providing integrated circuit solutions
to industry leaders
Intellectual Property amp Licensing
Thomsonrsquos extraordinarily rich intellectual
property assets include over 55000 pat-
ents derived from more than 7000 inven-
tions with some 600 new invention patent
applications filed in 2006
Thomsonrsquos patent portfolio remains a key
pillar for both the Technology division and
the Group as a whole with patented tech-
nologies including digital decoders high-
definition TV optical module patents for
Thomsonrsquos rich intellectual property
assets include over 55000 patents
CD and DVD players MPEG video com-
pression mp3 audio compression format
interactive TV and storage technologies
Having successfully migrated the propor-
tion of income derived from digital rather
than analogue technologies digital tech-
nology-based programs now account for
over 80 of the Grouprsquos large licensingrevenue stream with over 950 licensing
contracts in place worldwide at year-end
2006
TECHNOLOGY SYSTEMS SERVICES
23 Thomson Panorama 2006
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Thomsonrsquos Systems division provides video solutions and integrates video network systems for its customers in
the broadcast cable satellite terrestrial and telecoms markets The divisionrsquos offering spans image capture to
network distribution to the provision of access products enabling operators to enrich their service offerings to
subscribers
SYSTEMS
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Today people benefit from virtually instan-
taneous access to an increasingly custom-
ized range of content available through
a growing set of access possibilities As
internet and digital technologies con-
tinue to infuse the Media Entertainment
amp Communications industries Thomson
is focusing on opportunities arising from
this new paradigm alongside its traditionalcore markets These range from traditional
broadcast equipment to the growing mar-
ket for professional audio-video systems
mobile and IP (Internet Protocol) TV to
booming demand for residential broad-
band services
Strategy
Thomsonrsquos Systems division comprises
three activities Access Products and the
Broadcast amp Networks businesses The
Access Products business aims to deliver
key set-top box platforms for satellite andcable customers and gateway products
for telecom operators The Broadcast
amp Networks businesses are focused on
video network integration bringing to
market advanced products and solutions
to enable network operators broadcast-
ers and film-makers to benefit from the
latest technologies in image acquisition
compression switching and storage The
Network Software business aims to enable
the introduction of new multiple-play ser-
vices based on fixed-mobile convergence
IPTV and broadband telephony
Achievements
Overall the Systems division improved
diversified its customer base in 2006 In
Access Products Thomson consolidated
its leadership of worldwide markets forset-top boxes gateways and modems for
telecom satellite and cable network oper-
ators and service providers while achiev-
ing good growth in higher-end products
in the second half of the year In Grass
Valley demand for high-defin ition (HD)
acquisition production and distribution
systems combined with growing demand
for IT- and IP-based broadcast solutions to
drive growth while in Network Software
Thomsonrsquos SmartVis ion IPTV system
gained good ground with more than 30
IPTV and mobile TV deployments to date
and the worldrsquos largest installed base
Access Products
The Access Products business was driven
in 2006 by the ongoing rapid expansion of
triple (video voice and data) and quadru-
ple play services (also fixed-mobile con-
vergence) offered by cable and telecom
network operators and by the increasing
spread of high definition (HD) broadcasts
among satellite network operators
SYSTEMS
PROVIDING VIDEO SOLUTIONS
From image capture to
distribution via
all types of network
Thomson is reaping the benefits of
growing market demand for
video network integration
TECHNOLOGY SYSTEMS SERVICES
26 Thomson Panorama 2006
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Thomson further consolidated its market
leading position for dual and triple-play
gateways to telecom operators and inter-
net service providers The established mar-
ket leader for DSL modems and routers
since 1999 Thomson extended its lead
over the competition in 2006 shipping
more than 42 million DSL modems and
gateways during the first half of the yearand 10 million units overall in 2006
Growing market demand for sophisticated
home networking eco-systems able to
accommodate new services over time was
underlined by the success of Thomsonrsquos
Livebox gateway for France Telecom
Early in 2007 Thomson supported large-
scale deployment of the Livebox which
provides access to high-speed wireless
Internet Voice-over-IP IPTV network
gaming fixed-mobile convergence (unik)
and other services
An advanced Thomson gateway also
enabled the UKrsquos leading operator to
launch its innovative Total Broadband ser-
vice in June 2006 Bri tish Telecomrsquos BT
Home Hubtrade is a quadruple-play gateway
designed to support BTrsquos full range of ser-
vices including both BT Total Broadband
and BT Broadband Talk in addition to
providing wired and wireless broadband
connectivity for fixed and mobile phones
PCs and other networked devices It also
Mobile video in Italy
Thomsonrsquos product and service offering benefited in 2006 from increased interest from cable and
telecom operators to complete their offering for Video-on-Demand and mobile TV The Olympic Winter Games
notably provided a showcase for Thomsonrsquos capability to deliver video programming to cell phones and
other mobile devices In the wake of the successful Olympic trial Telecom Italia turned to Thomson
for the systems and technology that enabled it to commercially launch a mobile offering including TV and
sports programming in June 2006
incorporates the latest wideband audio
codec providing near CD-quality sound
for voice and video calls
As broadband services become more and
more of a mass-market service providers
must ensure that their services are both
differentiating and easy to consume This
trend calls for the emergence of simpleyet very technologically-advanced and
software-laden devices Such devices
connect to the home-networking gateway
and make it natural to consume a broad-
band-delivered service One example
is the Music Box first made available to
subscribers of AOLrsquos broadband service
in France which streams Internet-based
radio stations or locally stored music files
to a homersquos legacy Hi-Fi audio system
Strong growth in the cable network sys-
tems market which is projected to expand
another 20 in 2007 helped drive Thom-son toward two major sales milestones
in 2006 two million cable set-top boxes
and ten million cable modems Driven by
operatorsrsquo needs to provide more and
more sophisticated services Thomson
has extended its product range since
2005 to include interactive double- and
triple-play set-top boxes as well as HD
set-top boxes with advanced functions
such as personal video recorders (PVR)
Among the cable operators to have
TECHNOLOGY SYSTEMS SERVICES
27 Thomson Panorama 2006
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Total Broadband for BT
An advanced Thomson gateway enabled the UKrsquos leading telecommunications operator British Telecom
to launch its innovative Total Broadband service in June 2006 This quadruple-play gateway
known as the BT Home Hubtrade features video voice data and wireless capabilities
It is supporting BTrsquos full range of services including wired and wireless broadband connectivity
for fixed and mobile phones PCs and other networked devices
28 Thomson Panorama 2006
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Left Thomson Grass Valley branded
outside broadcast van under construction
Right Camera operator Kim Marks (left)
a camera first assistant Chris Blauvelt (center)
and a camera second assistant
Jason McCormick (right) line up a scene
with the Grass Valley Viper FilmStreamtrade
camera for the David Fincher feature Zodiac
Photo courtesy Paramount Pictures
selected Thomson in 2006 were Portu-
galrsquos leading Pay-TV Operator TV Cabo
UPC E-Vision Kabel Deutschland and
Premiegravere in Europe Net Serviccedilos in Latin America and StarHub and Dalian Cable
TV in Asia
Thomson expanded its footprint in satel-
lite in Europe notably in the UK and in
Asia where product deliveries began for
Tata Sky the Indian satellite broadcaster
In the UK Thomson delivered the Sky
HD box an MPEG-4 set-top box with
Personal Video Recorder which enabled
the successful launch of the countryrsquos first
high-definition TV service in May 2006
The largest satel li te television service
provider in the US DIRECTV also chose Thomson to expand its HD programming
offering with the delivery of the H20 satel-
lite receiver
Leveraging expertise in free-to-air digi-
tal terrestrial receivers and capabilities in
high-definition Thomson also delivered
the first MPEG-4 HDTV receivers for digital
terrestrial TV to French operators Canal +
and TPS during the year
In telephony Thomson remains a lead-
ing supplier of corded and cordless tele-
phones which are sold at retail outletsunder the RCA GE and Alcatel brands as
well as under third-party brands for opera-
tor sales In 2006 Thomson capitalized
on its leadership position in DECT (Digital
Enhanced Cordless Telecommunications)
in Europe by expanding into the American
retail market
Broadcast amp Networks
The Broadcast amp Networks businesses
gained market share in 2006 particularlyin networks and systems integration and
expanded in the promising Pro-AV (profes-
sional audio-video) market
Continuing trends in this market are high-
definition (HD) broadcasting the merging
of IT and broadcast technology the move
to a tape-less file-based approach to video
storage and management and power-
ful MPEG-4 HD compression technology
which allows content to be delivered to mul-
tiple audiences over multiple platforms
One highly visible application of ThomsonrsquosGrass Valley brand of HD image acquisi-
tion and production systems was the 2006
FIFA World Cup in Germany seen by a
billion viewers around the world Broad-
casters covering the event relied on more
than 182 Grass Valley brand cameras
10 Grass Valley video switching systems
12 large scale Grass Valley video routing
systems and hundreds of other devices to
provide faultless HD images
Leveraging its market leading position
Thomson est imates tha t Grass Valley
HD cameras now account for 50 of theglobal market Most major outside broad-
cast production companies in the world
use Grass Valley branded HD camera sys-
tems with more than 1500 in use
High-definition television is also about
news Based on internal Thomson esti-
mates Grass Valley solutions accounted
for nearly 80 of HD news installations
worldwide in 2006 including CBS Net-
work-owned amp operated stations in the
TECHNOLOGY SYSTEMS SERVICES
29 Thomson Panorama 2006
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IGNITE HD
TV news operations can work more quickly and efficiently by using information
technology The industryrsquos first and most complete link between the control room
and the newsroom HD Ignite enables a single technician to handle all
news production requirements During its initial months on the market in the US
HD Ignite was selected by such early adaptors as ABC Stations Group
customers in San Francisco and Chicago and Cox Broadcasting customers in
Atlanta San Francisco Charlotte North Carolina and Dayton Ohio
Telecom service providers are working to
provide more content and value-added
services over their broadband lines
Thomsonrsquos SmartVision and
Cirpack software solutions facilitate
their strategies for rapid deployment of
IPTV and triple-play services
US Al Jazeera Englishmdasha global channelbased in the Middle Eastmdashand Belgiumrsquos
VTM (Vlaamse Televisie Maatschappij )
Thomson is the only supplier to provide
an automated production system (Ignite
HD) a full suite of non-linear editing sys-
tems and a news playout systemmdashall of
which enable broadcasters to move to HD
affordably and to speed up and automate
their workflows
MPEG-4 is one of the enabling technolo-
gies which allows operators of telecom-
munications networks to bring TV to
their subscribers in addition to voice andinternet access This is one element in a
complete Thomson systems offering For
example Spanish operator Telefoacutenica
selected Thomson for a range of equip-
ment and systems to upgrade and expand
its rapidly growing ldquoImageniordquo service In
the US Falcon Communications a lead-
ing systems integrator offers a turnkey
IPTV solution featuring encoding content
delivery service management and access
products from Thomson
bull Professional Audio-Video
Thomson serves the rapidly growing mar-ket for professional audiovisual (ProAV)
solutions for corporate institutional wor-
ship and governmental media centers and
networks Thomsonrsquos expansion in ProAV
has been achieved through organic prod-
uct development as well as the integra-
tion of Pro-AV products from Canopus
the Japanese company acquired in early
2006
EDIUS desktop video
editing software part of
Thomsonrsquos growing rangeof professional
audiovisual and
broadcast solutions
TECHNOLOGY SYSTEMS SERVICES
30 Thomson Panorama 2006
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ldquoHaving started out in research today Irsquom responsible for our modemsrsquo roadmap
and strategy Our customersmdashthe telecoms operatorsmdashhave seen their business
transformed by technology like high-speed broadband And I find it fascinating
how these technologies have penetrated our daily lives the way we live and how
we communicate have changed dramatically over the last ten years
Even faster broadband (VDSL) fiber optics wireless technologies fixed-mobile
convergencehellip mean the pace of change is set to accelerate therersquos no doubt
wersquore living in exciting timesrdquo
Stan Claes Product Manager for IP-based Access Products
A key product introduction in 2006 was
the Grass Valley Indigo AV Presenta-
tion Switcher which combines features
normally found in separate devices in aunified powerful control interface simple
enough to be used by a single operator
Digital signage is also providing new mar-
ket opportunities combining the latest in
display delivery and storage technologies
Thomsonrsquos integrated digital media man-
agement solution Media Edge solves the
complex control distribution and archive
demands of customers Media Edge can
stream high-quality SD and HD content
over an IP network for example to the retail
store environment without the need to re-
invest in infrastructure
Broadcast amp Networksmdash
Network Software
2006 saw telecom service providers con-
tinue to build strategies to provide more
content and value-added services over
their broadband lines Thomsonrsquos Smart-
Vision TV service platforms and Cirpack
telephony switches are at the heart of sev-
eral of the worldrsquos largest IPTV and VoIP
services
In 2006 the launch of a pre-integrated mul-tiple play solution for telecom service provid-
ers illustrated Thomsonrsquos ability to leverage
skills across multiple business units The
solutions which enable telecom providers
to bring a myriad of services to broadband
subscribers are built around Thomsonrsquos
SmartVision and Cirpack software solu-
tions integrated with Thomsonrsquos Grass
Valley branded video head-end equipment
and Thomson home gateways and set-top
boxes This represents the first pre-inte-
grated solution on the market for rapid easy
deployment of triple play services including
voice video and internet access
More than 30 IPTV and mobile TV service
platforms have been deployed around the
world with SmartVision well-positioned
for convergent operators since it allows
video distribution over fixed and mobile
networks
Thomsonrsquos Cirpack softswitches which
help provide the core for the new inte-
grated platforms occupied the top mar-
ket position worldwide for residential
broadband telephony (VoIP) platforms in
2006 Over the course of 2006 Europersquoslargest primary line VoIP operator Freefr
upgraded its Cirpack switches to bring a
new seamless fixedmobile service to its
two million customers placing Thomson
at the forefront of new fixed-mobile con-
vergence solutions Signaling the rapid
expansion of sales outside traditional
Western European markets Thomsonrsquos
Cirpack switches were selected by many
telecom operators in Northern Africa Cen-
tral and Eastern Europe as well as Central
America to build or upgrade legacy voice
networks and deliver advanced telephone
services using IP technologies
TECHNOLOGY SYSTEMS SERVICES
31 Thomson Panorama 2006
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Thomsonrsquos Services division provides end-to-end management of business-critical services on behalf of Media
Entertainment amp Communications customers These include management of broadcast and network operations
centers on an outsourced basis and the provision of an array of content services to the creative community from
post-production to visual effects
SERVICES
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Thomsonrsquos Services division provides end-
to-end management of business-critical
services spanning physical media con-
tent services electronic content distribu-
tion and network services The division
is the worldrsquos leading provider of state-
of-the-art film-making post-production
visual effects and broadcast center man-
agement services
Strategy
The Services division continues to focus
on managing v ideo networks and
op er at io na l centers on behalf of its
customers who are able to concentrate
on their core business of content The
emphasis on high-growth opportunities
in newer market sectors such as retail
and corporate networks and gaming
has been sharpened
Achievements
New customers in fast-growing market
segments responded well to a range of
high value-added services from the Ser-
vices division in 2006 Network Services
showed particularly strong growth as net-
work operators in Europe Asia and North
America selected Technicolor-branded
management services The addition of
such leading customers as ITV in the
UK and France 24 and TV5 in France
substantially expanded Thomsonrsquos fast-
growing Network Services business
Noteworthy successes were also achieved
in Theatrical Services due in part to the
continued development of Thomsonrsquos digi-
tal cinema activity The Content Services
business continued to expand its post-
production services business by opening
a digital intermediate facility on the SonyPictures Entertainment studio lot In 2006
a new Home Entertainment Services unit
was created combining Thomsonrsquos DVD
business with electronic distribution to
develop new services to support emerging
lsquoon demand contentrsquo business models
Network Services
With a comprehensive portfolio of services
for broadcasters network and internet TV
operators movie theatres retailers and
corporations Network Services continued
to expand briskly in 2006 Broadcastersincreasingly selected Thomson as their
long-term network services partner By
year-end Network Services was providing
managed services under the Technicolor
brand to close to 200 channels from
17 facilities in France the Netherlands
Japan North America and the UK
Late in the year Thomson signed a long-
term agreement with ITV for network
transmission operations services for its six
From managing video
networks on an outsourced
basis to a broad range of
offerings in content services
Thomson is bringing its video
expertise to new markets
and geographies
Left Network Services for broadcasters
cable TV operators movie theaters
retailers and corporations is one of Servicesrsquo
fastest-growing business segments
Right Thomson provided film sound
DVD and digital cinema services for Cars
the DisneyPixar hitCars copy 2006 Disney Enterprises IncPixar All R ights Reserved
SERVICES
MANAGING VIDEO NETWORKS
TECHNOLOGY SYSTEMS SERVICES
34 Thomson Panorama 2006
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existing UK channels including the coun-
tryrsquos leading commercial channel In addi-
tion an agreement signed with NOB Cross
Media Facilities (NOB CMF) a subsidiary
of Nederlands Omroepproduktie Bedrijf
(NOB) likewise established Thomson as
a major supplier of network management
services in the Netherlands
In France Network Services added new
clients France 24 and TV5 which covers
203 countries and territories to move into
the market-leading position managing
more than 60 channels and 1500 hours
of programming daily The France 24 part-
nership also involves equipping their new
global TV news operation
Thomson drove expansion and innovation
in its retail media services over the course
of the year One of the most notable achie-
vements involves an ambitious in-store
network upgrade program piloted in2006 by Wal-Mart in the USA with Premier
Retail Networks (PRN) a subsidiary within
Thomsonrsquos Network Services operat ion
The in-store network platform was based
on Thomson IPTV technologies adapted
for the retail environment The system
the first pilot of IPTV in the retail environ-
ment delivered real impact on product
sales and improved customer satisfaction
in Wal-Mart stores PRN also expanded
capabilities into China early in 2007 with
Content Services revving up
Thomson provided a wide range of services for a number of major international film releases in 2006
such as Cars one of the three nominees for Best Animated Film at the Oscars Thomson Technicolor provided
film services sound services DVD compression and authoring replication and distribution
as well as digital cinema mastering and distribution for the DisneyPixar hit The Grouprsquos Content Services offering
has expanded in recent years to include the high-growth video-gaming advertising and broadcast markets
the signing of a joint venture with CGEN a
technology company leading the Chinese
in-store digital signage media industry
The two companies are currently collabo-
rating on the roll-out of an in-store media
network to 750 internet cafeacutes part of the
leading Chinese chain Big Cafeacute
Theatrical Services
Thomson signed Europersquos first large-scale
digital cinema rollout agreement in 2006
with the Kinepolis Group one of the conti-
nentrsquos most innovative theater circuits and
the leading exhibition chain in Belgium
The agreement to instal l and operate
digital cinema systems in 130 Kinepolis-
owned and operated screens passed a
first milestone in March 2007 with Thom-
sonrsquos first international distribution by sat-
ellite of an encrypted digital version of the
film Dreamgirls from the US to a Kinepolis
theater in Brussels Belgium
A series of new contracts were awarded
in the US For example in the fall of 2006
Technicolor Digital Cinema began installing
digital projection systems at 120 National
Amusements Inc screens in Boston Los
Angeles New York and elsewhere as part
of a strategic agreement National Amuse-
ments operates more than 1500 screens
in the US UK Latin America and Russia
Digital projection systems were also
TECHNOLOGY SYSTEMS SERVICES
35 Thomson Panorama 2006
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The growing market for Network Services
The decision by the UKrsquos leading commercial broadcaster to entrust its network services to
Thomsonrsquos Network Services operations illustrates a growing global trend as broadcasters focus increasingly on
programming and meeting customer needs they turn to highly-skilled specialists to handle technology
The long-term agreement with ITV means that the broadcaster will benefit from enhanced service and new technology
as well as more flexibility in launching new services
36 Thomson Panorama 2006
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Left Thomsonrsquos Technicolor
Interactive Services provided in-game
cinematics and voice recording for
Microsoft Game Studiosrsquo Gears of War
Right Thomsonrsquos London-based MPC
subsidiary carried out post-production
work including computer graphics
on Sony Braviarsquos award-wirring colorful
Paint commercial
installed at several landmark theatres in
Los Angeles in 2006 including Mann The-
atresrsquo Graumanrsquos Chinese and the Village
in Westwood
Thomson maintained a leading position in
film processing and printing in 2006 in a
market where volumes were stable Tech-
nicolor handled worldwide release printingfor two of the five 2007 Oscar nominees
for Best PicturemdashMartin Scorcesersquos The
Departed and Clint Eastwoodrsquos Letters
from Iwo Jimamdashas well as release print-
ing for two of the three Best Animated Film
nominees Cars and Happy Feet
As part of its ongoing commitment to meet
customer needs worldwide a state-of-the-
art film and post-production facility was inau-
gurated at Ciudad de la Imagen in Madrid in
2006 It is already becoming known as the
countryrsquos most comprehensive postproduc-
tion facility with advanced film processingand digital intermediate capabilities
Content Services
Thomson continued to leverage its long-
standing strength in post-production
skills and services through expansion into
emerging and high-growth market seg-
ments such as content services for the
video-gaming advertising and broadcast
markets
In order to better serve the growing mar-
ket for entertainment content for mobile
devices Thomson unveiled new mobile
content preparation and distribution capa-
bilities in the US and the UK in 2006 Facili-
ties equipped with state-of-the-art produc-
tion and post-production technologies will
handle the preparation and optimization
of a wide range of digital entertainmentcontentmdashincluding movies TV episodes
and music videosmdashfor distribution to
mobile devices The dedicated services
complement the Grouprsquos extensive global
electronic distribution infrastructure which
enables Thomson to deliver mobile con-
tent to online delivery services as well as
to network operators for final transmission
to mobile customers
Thomson also made progress in the
development of an integrated digital asset
management solution in 2006 known as
MIDAS (Media Ingest Distribution andStorage) MIDAS is a software and hard-
ware platform for digital content prepara-
tion storage security and distribution
From the first day of production planning
through every stage of post-production
and content distribution MIDAS creates
a digital workflow that allows customers
to manage projects remotely and provides
for rapid and seamless global file delivery
streaming and collaboration
TECHNOLOGY SYSTEMS SERVICES
37 Thomson Panorama 2006
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While expanding into newer markets
growing demand for post-production ser-
vices and visual effects continued to fuel
Thomsonrsquos ongoing content services activ-
ities Among the yearrsquos most noteworthy
achievements were portfolios of services
for such feature films as The Departed
Letters from Iwo Jima and Pirates of the
Caribbean Dead Manrsquos Chest ThomsonrsquosMoving Picture Company (MPC) also pro-
vided high-end visual effects for the three
films nominated for Achievement in Visual
Effects Pirates of the Caribbean Posei-
don and Superman Returns
Confirming the Grouprsquos solid growth in
content services for the video game indus-
try Thomson unveiled a new dedicated
Interactive Services facility in Burbank
California in 2006 Sierra Entertainment
a division of Vivendi Games selected
Thomson to prov ide cinemat ic anima-
tion voice casting and recording sound
design and mixing services for The Leg-
end of Spyrotrade A New Beginning Like-
wise Thomson provided a wide range of
services to support Konamirsquos The SilentHill Experience released simultaneously
with the motion picture
The strategic investment in one of Indiarsquos
leading animation and gaming cinemat-
ics firms announced in February 2007
strengthened Thomsonrsquos position in Asia
for a variety of content services Located in
Bangalore India Paprikaas provides cre-
ldquoIn 1998 I joined Thomson as a Plant Manager within Home Entertainment Services
and was eventually made responsible for the expansion and management of our
Guadalajara DVD operations In summary Irsquove had great opportunities to gain experience
in international operations strategic planning and operational excellence I recently
joined Content Services where Irsquoll be leading the start-up and integration of new activities
in Beijing Bangalore and other emerging markets Content Services is dynamic and
growing and Irsquom looking forward to expanding the business in Asia while improving
our operational performance in North America and Europerdquo
Mike Hayden Vice President Operations amp Strategic Projects Content Services
of the Grouprsquos divisions and profit centersIn the context of the budgetary procedure
performance measurement indicators are
calculated by the divisions analyzed and
reviewed monthly to serve as a reference
for the Grouprsquos monthly reporting
Management reporting and
closing period work
Th om so n uses a co mmon char t of
accounts which is regularly updated The
principal accounting and financial figures
of the operational and functional depart-
ments consolidated at Group level are
analyzed by the Grouprsquos management
control team and reviewed by the Grouprsquos
Executive Committee
The closing process for the half-year and
annual consolidated financial statementsoccurs in two steps The first step con-
sists of a ldquohard closerdquo completed in May
and September leading to a first review by
the statutory auditors The second step
occurs in July and in JanuaryFebruary and
involves the finalization of half-year and
annual consolidated financial statements
under IFRS The Group then proceeds
once a year with a reconciliation of these
results in accordance with US GAAP
Preparation of financial statements
The financial statements are prepared jointly by the finance department and the
General Secretary They are based on
information reported through the annual
reporting and accounting consolidation
processes and on operational and mar-
ket information which is specifically cen-
tralized for the preparation of Thomsonrsquos
Document de Reacutefeacuterence in France and
the submission of Form 20-F in the United
States Half-year and annual financial infor-
mation is reviewed by the Grouprsquos Audit
Committee
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58 Thomson Panorama 2006
(1) Source PriceWaterhouseCoopers ndash
ldquoGlobal Entertainment and Media Outlook 2006-10rdquo
Revenue growth
Thomson achieved consolidated 2006
net revenues of 9914045854 million up from
9914045591 million in 2005 Revenues for
the Core Business reached 9914045747 mil-
lion (9914045776 million at constant currency)
representing 83 growth over 2005 at
constant currency
Overall the Grouprsquos key growth busi-
nessesmdashContent Services Network
Services Access Products for telecom
operators and our Broadcast amp Networks
businesses (Grass Valley and Network
Software)mdashincreased strongly year-on-
year and accounted for over a third of
Group revenues against less than a quar-
ter in 2005
Thomsonrsquos Core Business EBIT for 2006
was euro504 million representing a Core
Business EBIT margin of 88 Thisreflected growth in some key businesses
and cost actions across the Group off-
setting a significant investment in research
and development and some increase in
restructuring expenses
Increased spend on RampD
Research and development expenditure
charged in the Core Business (net of
external funding) rose from 991404221 million in
2005 to 991404279 million in 2006 an increase
of 26 principally in the Systems divi-
sion The Group expanded the number ofproducts and services in the development
phase across its businesses
Return to profit
Losses in Non-Core Continuing and Dis-
continued operations were substantially
lower year-on-year reflecting principally
the exit from heavily loss-making Displays
activities in 2005 and intensified cost-sav-
ing programs in 2006 A major revision
and harmonization of the Grouprsquos North
American healthcare obligations gave rise
to substantial one-time gains and Thom-
son also initiated significant restructuring
of its French Non-Core operations
The good performance of the Core Busi-
ness lower Non-Core and Discontinued
losses and a low reported tax chargeenabled the Group to return a net profit of
99140455 million in 2006 compared to a loss of
991404573 million in the previous year
Good cash flow
strengthened balance sheet
Thomson generated good free cash flow
and strengthened its balance sheet in
2006 Total net financial liabilities on the
balance sheet fell by 991404460 million reflect-
ing a 99140493 million fall in financial and acqui-
sition-related debts and a 991404367 million
reduction in retirement benefit obligations(including healthcare)
Increase in Net Dividend
The Board of Directors proposed a dis-
tribution to shareholders of 991404033 per
share (2005 dividend 991404030) reflecting
confidence in the prospects of the Group
going forward
Outlook 2007-2009
growth in revenues and net income
With the Grouprsquos transformation complete Thomsonrsquos financial focus over the 2007-
2009 period will be to grow revenues and
net income
Thomson serves growing Media Enter-
tainment amp Communications marketsmdashfor
which external estimates(1) indicate com-
pound growth of around 6 over the last
FINANCIAL AND
OPERATIONAL PERFORMANCE
Full year 2006 results
saw a return to profitability
and leave Thomson
well positioned at
the heart of convergence
and digital video
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59 Thomson Panorama 2006
five years Our digital and electronic busi-
nesses now represent two-thirds of rev-
enues and we believe they are growing
faster than the overall market offsetting
the maturing physical media businesses
Given this profile the Group expects its
revenue growth to be more modest in
2007 but to gather pace over the period
and our overall objective is to show com-pound growth over 2007-2009 in line with
or faster than the overall market
The 2007-2009 period is also expected
to see a sharply reduced impact from
residual Non-Core activities with an end
to losses from the Discontinued Activities
perimeter after 2007 Accordingly Thom-
sonrsquos ambition is to turn its Core Business
growth and profitability and lower impact
from Non-Core into strong growth in net
income over the period 2007-2009
Business operations
Continuous performance improvement is
fundamental to Thomsonrsquos commitment to
create sustainable business models and
long-term value for all stakeholders The
ambitious Group-wide programs launched
in 2004 to improve productivity and
enhance overall performance producedsubstantial results in 2006 and led to new
and strong initiatives for long-term growth
As of the second half of 2006 six ldquoKey
Programsrdquo are monitored at Group level
Clients Software Product Introduction
Operations Transformation and Talent
Management
KEY PROGRAMS IN PLACE
Program Focus
Clients Thomsonrsquos clientregional diversification and
growth of the existing business
through improved Sales amp Marketing
Software Development of integrated software platforms
in all markets (post-production distribution
delivery) and for all types of customer
(professional prosumerhellip)
Product Introduction Ensuring new product roadmaps are in line
with strategy and resource needs have been
identifiedOperations Improving the Grouprsquos cost base cash
generation and working capital
Transformation Multiple programs including initiatives to
improving customer relationship management
worldwide supply chain management
IT transformation as well as Thomsonrsquos RampD
footprint
Talent Management Leveraging human assets with a focus on
talent retention and acquisition
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60 Thomson Panorama 2006
SUMMARY RESULTS FULL YEAR 2006
In 991404 millions unless otherwise stated 2006(1) 2005(1)
Net revenues 5854 5591(1)
Core Business net revenues 5747 5335
Services 2489 2487
Systems 2684 2262
Technology 547 546
Corporate 27 40
Non-Core continuing operations net revenues 107 256
Core Business EBIT(2) 504 512
Services 160 205
Systems 132 109
Technology 289 277Corporate (77) (79)
EBIT from Non-Core continuing operations (25) (122)
(1) Restated with 2006 discontinued activities according to IFRS 5
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61 Thomson Panorama 2006
Year ended December 31in 991404 except number of shares 2006 2005 2004
Year ended December 31in 991404 millions 2006 2005(1) 2004(1)
CONSOLIDATED STATEMENTS OF OPERATIONS
(1) Restated with 2006 discontinued activities according to IFRS 5
(2) After deduction of the interests net of tax paid on the subordinated perpetual notes during the period
Continuing operations
Revenues 5854 5591 5980
Cost of sales (4474) (4240) (4594)
Gross margin 1380 1351 1386
Selling marketing general and administrative expenses (674) (638) (653)
Other income (expense) 52 (96) (69)
Research and development expenses (279) (227) (201)
Profit from continuing operations before tax and net finance costs 479 390 463
Interest income 19 30 52
Interest expense (108) (108) (54)
Other financial income (expense) (111) 36 (26)
Finance costs ndash net (200) (42) (28)
Share of profit (loss) from associates (86) (82) (20)
Income tax ndash (68) (93)
Profit from continuing operations 193 198 322
Discontinued operations
Profit (loss) from discontinued operations (138) (771) (883)
Net income (loss) 55 (573) (561)
Attributable to
Equity Holders 55 (574) (559)
Minority interests ndash 1 (2)
Weighted average number of shares
outstandingmdashbasic net of treasury stock 261188858 266539917 273646869
Earnings per share from continuing operations
Basic(2) 067 074 118
Diluted 063 042 111
Earnings per share from discontinued operations
Basic (053) (289) (323)
Diluted (048) (262) (296)Total earnings per share
Basic(2) 014 (215) (205)
Diluted 015 (220) (185)
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62 Thomson Panorama 2006
CONSOLIDATED BALANCE SHEETS
In 991404 millions December 31 December 31 January 1 December 31 2006 2005 2005(1) 2004
ASSETS
Non-current assets
Property plant and equipment 813 886 1051 1051
Goodwill 1714 1756 1186 1178
Other intangible assets 1071 1150 924 924
Investments in associates 12 204 260 260
Investments and financial assets available-for-sale 266 341 139 113
Derivative financial instruments 7 1 11 ndash
Contract advances 129 173 179 179
Deferred tax assets 397 379 307 301
Other non-current assets 110 182 133 136
Total non-current assets 4519 5072 4190 4142
Current assets
Inventories 366 333 503 568
Trade accounts and notes receivable 1018 1315 1232 1180
Current accounts with associates and joint ventures 97 115 143 143
Derivative financial instruments 8 9 115 ndash
Other current assets 535 644 483 616
Marketable securities ndash 7 58 58
Cash and cash equivalents 1311 996 1845 1848
Assets classified as held for sale 264 369 80 ndash
Total current assets 3599 3788 4459 4413
Total assets 8118 8860 8649 8555
(1) Including the impacts of the first-time application related to IAS 32 and 39 on financial instruments and IFRS 5 on non-current assets held for sale and
discontinued operations
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63 Thomson Panorama 2006
In 991404 millions December 31 December 31 January 1 December 31 2006 2005 2005(1) 2004
SHAREHOLDERSrsquo EQUITY AND LIABILITIES
Shareholdersrsquo equity
Common stock (273871296 shares at
December 31 2006
with nominal value of euro 375 per share) 1027 1025 1025 1025
Trade accounts and notes payable 1032 1164 1199 1226
Accrued employee expenses 165 166 158 163
Income tax payable 57 47 60 60
Other current liabilities 671 750 746 800
Payables on acquisition of companies 13 138 84 84
Liabilities directly associated with
assets classified as held for sale 232 470 88 ndash
Total current liabilities 3681 4393 3602 3459
Total liabilities 5999 6644 6251 6062
Total shareholderrsquos equity and liabilities 8118 8860 8649 8555
(1) Including the impacts of the first-time application related to IAS 32 and 39 on financial instruments and IFRS 5 on non-current assets held for sale and
discontinued operations
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Creation and lay-out
Photo credits Nathalie BerhingGAMMA ndash Steacutephane de Bourgies ndash Jean-Franccedilois DeroubaixGAMMA ndash Christine Donnier- ValentinGAMMA ndash Cars copy 2006 Disney Enterprises IncPixar All Rights Reserved ndash Dreamgirls copy 2006 DREAMWORKS
LLC and PARAMOUNT PICTURES All Rights Reserved ndash Poseidon copy 2006 Warner Bros Pictures ndash Sony Bravia Paint
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Left Silicon microchip As system value and
intelligence is increasingly embedded in chips
Thomson is placing increasing emphasis on
in-house silicon design and development efforts
Research
Thomson has successfully intensi fied
research efforts over the last two years
in order to serve the short and long-term
needs of the Media Entertainment amp
Communications industries leveraging
both close relationships with customers
and deep knowledge of video
New ways to acquire process compress
store and distribute digital content today
provide a central focus for the ongoing
programs at Thomsonrsquos seven research
centers located in Rennes and Paris in
France Hanover and Villingen in Germany
Burbank and Princeton in the US and Bei-
jing in China These range from innovative
coding schemes to advanced methods
for processing audio and video signals
The networking component is especially
important as Thomson engineers work
on solutions to enable operators of fixedand mobile telecom cable and satellite
networks to distribute content more eco-
nomically and flexibly and to introduce
new services
Software amp Technology Solutions
The development of content security solu-
tions counts among the critical initiatives
within the Software amp Technology Solutions
business unit Thomson experts are working
on new ways to help Media Entertainment
amp Communications customers protect their
digital rights They develop and distribute
innovative solutions in the fields of forensic
marking content protection secure con-
tent distribution and anti-counterfeiting
HIGH DEFINITION AT A GALLOP
As high-definition video sweeps the video and TV world video compression
is one of the greatest challenges facing the Media Entertainment amp
Communications industries and companies who need to process and
distribute HD images Thomson is helping meet this challenge through
the Mustang HD video processing engine an advanced chip set that helps
make HD images more compact Using the talents of Thomsonrsquos
Technology and Systems divisions the patented Mustang technology
designed for a wide variety of broadcast equipment has been integrated
into an innovative Grass Valley branded HD video coding device Packing
HD images so compactly greatly reduces costs for broadcasters making it
more commercially attractive for them to adopt advanced MPEG-4 HD
TECHNOLOGY SYSTEMS SERVICES
21 Thomson Panorama 2006
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ldquoIrsquove always worked in video compression RampD for a number of hi-tech companies
but Thomson is different itrsquos truly video-centric Everyonemdashnot just the compression
research engineersmdashunderstands the importance of video technology to the core business
Irsquom in charge of our compression research activities worldwide a key technology
thatrsquos essential for distributing video over networks or storing video on physical media
But what I most enjoy is drawing on my experience in patents to mentor researchers on
preparing patent disclosures for new inventions Preparing patent disclosures is a pretty
unique skill and one thatrsquos key in strengthening the Grouprsquos intellectual property portfoliordquo
Jill Boyce Compression Domain Director Corporate Research
ADDING A NEW DIMENSION TO MUSIC
Movie-goers and people with home cinema installations are accustomed to
the three-dimensional sound that enables them to hear each instrument
voice or sound effect in a different place The concept is known as ldquoSurround
Soundrdquo and it now exists in mp3 format
Developed in cooperation with Germanyrsquos Fraunhofer Institute for Integrated
Circuits mp3 Surround takes the mp3 digital coding system one step furtherwithout making mp3 files larger The new technology is also backwards
compatible so that music with mp3 Surround sounds great with existing players
The technology can be applied in a broad spectrum of applications
including web-based music distribution broadcasting systems PC-related
audiovisual and gaming applications
This yearrsquos achievements covered multiple
domains of technology The businessrsquo
leading watermarking technology embedsinvisible indestructible and fully traceable
pieces of information into content so that
the owner origin or recipient can be identi-
fied The technology was launched for digi-
tal cinema applications and successfully
licensed to most server manufacturers
Thomson technologies also enabled for
example the development of an advanced
TV audience measurement system and a
solution allowing authentification of VIP
accreditation badges during Soccer World
Cup in Germany in 2006 The businessrsquo
consulting activity also implemented an
enterprise-wide security solution for a majorinternational broadcaster during the year
The Software amp Technology Solutions busi-
ness is now expanding from watermarking
into other promising technological areas
such as digital rights management (DRM)
to manage conditional access to content
in the context of professional workflows
content filtering to monitorfilter distribution
of copyrighted content or new protocols
to optimize and secure content distribution
platforms
TECHNOLOGY SYSTEMS SERVICES
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Silicon Solutions
As more and more system value and intel-
ligence is embedded onto silicon micro-
chips Thomson has placed increased
emphasis on in-house silicon design and
development efforts These range from
integrated circuits for communications and
set-top boxes to chips designed specifi-cally for broadcasting and mobile devices
The growing sophis tication of home
network access devices helps explain
why more than 200 Thomson engineers
are continuing to develop innovative
integrated circuits As with all Thomson
technology innovations our silicon invest-
ment is focused equally on increasing our
leadership in set-top boxes as much as
on providing integrated circuit solutions
to industry leaders
Intellectual Property amp Licensing
Thomsonrsquos extraordinarily rich intellectual
property assets include over 55000 pat-
ents derived from more than 7000 inven-
tions with some 600 new invention patent
applications filed in 2006
Thomsonrsquos patent portfolio remains a key
pillar for both the Technology division and
the Group as a whole with patented tech-
nologies including digital decoders high-
definition TV optical module patents for
Thomsonrsquos rich intellectual property
assets include over 55000 patents
CD and DVD players MPEG video com-
pression mp3 audio compression format
interactive TV and storage technologies
Having successfully migrated the propor-
tion of income derived from digital rather
than analogue technologies digital tech-
nology-based programs now account for
over 80 of the Grouprsquos large licensingrevenue stream with over 950 licensing
contracts in place worldwide at year-end
2006
TECHNOLOGY SYSTEMS SERVICES
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Thomsonrsquos Systems division provides video solutions and integrates video network systems for its customers in
the broadcast cable satellite terrestrial and telecoms markets The divisionrsquos offering spans image capture to
network distribution to the provision of access products enabling operators to enrich their service offerings to
subscribers
SYSTEMS
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Today people benefit from virtually instan-
taneous access to an increasingly custom-
ized range of content available through
a growing set of access possibilities As
internet and digital technologies con-
tinue to infuse the Media Entertainment
amp Communications industries Thomson
is focusing on opportunities arising from
this new paradigm alongside its traditionalcore markets These range from traditional
broadcast equipment to the growing mar-
ket for professional audio-video systems
mobile and IP (Internet Protocol) TV to
booming demand for residential broad-
band services
Strategy
Thomsonrsquos Systems division comprises
three activities Access Products and the
Broadcast amp Networks businesses The
Access Products business aims to deliver
key set-top box platforms for satellite andcable customers and gateway products
for telecom operators The Broadcast
amp Networks businesses are focused on
video network integration bringing to
market advanced products and solutions
to enable network operators broadcast-
ers and film-makers to benefit from the
latest technologies in image acquisition
compression switching and storage The
Network Software business aims to enable
the introduction of new multiple-play ser-
vices based on fixed-mobile convergence
IPTV and broadband telephony
Achievements
Overall the Systems division improved
diversified its customer base in 2006 In
Access Products Thomson consolidated
its leadership of worldwide markets forset-top boxes gateways and modems for
telecom satellite and cable network oper-
ators and service providers while achiev-
ing good growth in higher-end products
in the second half of the year In Grass
Valley demand for high-defin ition (HD)
acquisition production and distribution
systems combined with growing demand
for IT- and IP-based broadcast solutions to
drive growth while in Network Software
Thomsonrsquos SmartVis ion IPTV system
gained good ground with more than 30
IPTV and mobile TV deployments to date
and the worldrsquos largest installed base
Access Products
The Access Products business was driven
in 2006 by the ongoing rapid expansion of
triple (video voice and data) and quadru-
ple play services (also fixed-mobile con-
vergence) offered by cable and telecom
network operators and by the increasing
spread of high definition (HD) broadcasts
among satellite network operators
SYSTEMS
PROVIDING VIDEO SOLUTIONS
From image capture to
distribution via
all types of network
Thomson is reaping the benefits of
growing market demand for
video network integration
TECHNOLOGY SYSTEMS SERVICES
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Thomson further consolidated its market
leading position for dual and triple-play
gateways to telecom operators and inter-
net service providers The established mar-
ket leader for DSL modems and routers
since 1999 Thomson extended its lead
over the competition in 2006 shipping
more than 42 million DSL modems and
gateways during the first half of the yearand 10 million units overall in 2006
Growing market demand for sophisticated
home networking eco-systems able to
accommodate new services over time was
underlined by the success of Thomsonrsquos
Livebox gateway for France Telecom
Early in 2007 Thomson supported large-
scale deployment of the Livebox which
provides access to high-speed wireless
Internet Voice-over-IP IPTV network
gaming fixed-mobile convergence (unik)
and other services
An advanced Thomson gateway also
enabled the UKrsquos leading operator to
launch its innovative Total Broadband ser-
vice in June 2006 Bri tish Telecomrsquos BT
Home Hubtrade is a quadruple-play gateway
designed to support BTrsquos full range of ser-
vices including both BT Total Broadband
and BT Broadband Talk in addition to
providing wired and wireless broadband
connectivity for fixed and mobile phones
PCs and other networked devices It also
Mobile video in Italy
Thomsonrsquos product and service offering benefited in 2006 from increased interest from cable and
telecom operators to complete their offering for Video-on-Demand and mobile TV The Olympic Winter Games
notably provided a showcase for Thomsonrsquos capability to deliver video programming to cell phones and
other mobile devices In the wake of the successful Olympic trial Telecom Italia turned to Thomson
for the systems and technology that enabled it to commercially launch a mobile offering including TV and
sports programming in June 2006
incorporates the latest wideband audio
codec providing near CD-quality sound
for voice and video calls
As broadband services become more and
more of a mass-market service providers
must ensure that their services are both
differentiating and easy to consume This
trend calls for the emergence of simpleyet very technologically-advanced and
software-laden devices Such devices
connect to the home-networking gateway
and make it natural to consume a broad-
band-delivered service One example
is the Music Box first made available to
subscribers of AOLrsquos broadband service
in France which streams Internet-based
radio stations or locally stored music files
to a homersquos legacy Hi-Fi audio system
Strong growth in the cable network sys-
tems market which is projected to expand
another 20 in 2007 helped drive Thom-son toward two major sales milestones
in 2006 two million cable set-top boxes
and ten million cable modems Driven by
operatorsrsquo needs to provide more and
more sophisticated services Thomson
has extended its product range since
2005 to include interactive double- and
triple-play set-top boxes as well as HD
set-top boxes with advanced functions
such as personal video recorders (PVR)
Among the cable operators to have
TECHNOLOGY SYSTEMS SERVICES
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Total Broadband for BT
An advanced Thomson gateway enabled the UKrsquos leading telecommunications operator British Telecom
to launch its innovative Total Broadband service in June 2006 This quadruple-play gateway
known as the BT Home Hubtrade features video voice data and wireless capabilities
It is supporting BTrsquos full range of services including wired and wireless broadband connectivity
for fixed and mobile phones PCs and other networked devices
28 Thomson Panorama 2006
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Left Thomson Grass Valley branded
outside broadcast van under construction
Right Camera operator Kim Marks (left)
a camera first assistant Chris Blauvelt (center)
and a camera second assistant
Jason McCormick (right) line up a scene
with the Grass Valley Viper FilmStreamtrade
camera for the David Fincher feature Zodiac
Photo courtesy Paramount Pictures
selected Thomson in 2006 were Portu-
galrsquos leading Pay-TV Operator TV Cabo
UPC E-Vision Kabel Deutschland and
Premiegravere in Europe Net Serviccedilos in Latin America and StarHub and Dalian Cable
TV in Asia
Thomson expanded its footprint in satel-
lite in Europe notably in the UK and in
Asia where product deliveries began for
Tata Sky the Indian satellite broadcaster
In the UK Thomson delivered the Sky
HD box an MPEG-4 set-top box with
Personal Video Recorder which enabled
the successful launch of the countryrsquos first
high-definition TV service in May 2006
The largest satel li te television service
provider in the US DIRECTV also chose Thomson to expand its HD programming
offering with the delivery of the H20 satel-
lite receiver
Leveraging expertise in free-to-air digi-
tal terrestrial receivers and capabilities in
high-definition Thomson also delivered
the first MPEG-4 HDTV receivers for digital
terrestrial TV to French operators Canal +
and TPS during the year
In telephony Thomson remains a lead-
ing supplier of corded and cordless tele-
phones which are sold at retail outletsunder the RCA GE and Alcatel brands as
well as under third-party brands for opera-
tor sales In 2006 Thomson capitalized
on its leadership position in DECT (Digital
Enhanced Cordless Telecommunications)
in Europe by expanding into the American
retail market
Broadcast amp Networks
The Broadcast amp Networks businesses
gained market share in 2006 particularlyin networks and systems integration and
expanded in the promising Pro-AV (profes-
sional audio-video) market
Continuing trends in this market are high-
definition (HD) broadcasting the merging
of IT and broadcast technology the move
to a tape-less file-based approach to video
storage and management and power-
ful MPEG-4 HD compression technology
which allows content to be delivered to mul-
tiple audiences over multiple platforms
One highly visible application of ThomsonrsquosGrass Valley brand of HD image acquisi-
tion and production systems was the 2006
FIFA World Cup in Germany seen by a
billion viewers around the world Broad-
casters covering the event relied on more
than 182 Grass Valley brand cameras
10 Grass Valley video switching systems
12 large scale Grass Valley video routing
systems and hundreds of other devices to
provide faultless HD images
Leveraging its market leading position
Thomson est imates tha t Grass Valley
HD cameras now account for 50 of theglobal market Most major outside broad-
cast production companies in the world
use Grass Valley branded HD camera sys-
tems with more than 1500 in use
High-definition television is also about
news Based on internal Thomson esti-
mates Grass Valley solutions accounted
for nearly 80 of HD news installations
worldwide in 2006 including CBS Net-
work-owned amp operated stations in the
TECHNOLOGY SYSTEMS SERVICES
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IGNITE HD
TV news operations can work more quickly and efficiently by using information
technology The industryrsquos first and most complete link between the control room
and the newsroom HD Ignite enables a single technician to handle all
news production requirements During its initial months on the market in the US
HD Ignite was selected by such early adaptors as ABC Stations Group
customers in San Francisco and Chicago and Cox Broadcasting customers in
Atlanta San Francisco Charlotte North Carolina and Dayton Ohio
Telecom service providers are working to
provide more content and value-added
services over their broadband lines
Thomsonrsquos SmartVision and
Cirpack software solutions facilitate
their strategies for rapid deployment of
IPTV and triple-play services
US Al Jazeera Englishmdasha global channelbased in the Middle Eastmdashand Belgiumrsquos
VTM (Vlaamse Televisie Maatschappij )
Thomson is the only supplier to provide
an automated production system (Ignite
HD) a full suite of non-linear editing sys-
tems and a news playout systemmdashall of
which enable broadcasters to move to HD
affordably and to speed up and automate
their workflows
MPEG-4 is one of the enabling technolo-
gies which allows operators of telecom-
munications networks to bring TV to
their subscribers in addition to voice andinternet access This is one element in a
complete Thomson systems offering For
example Spanish operator Telefoacutenica
selected Thomson for a range of equip-
ment and systems to upgrade and expand
its rapidly growing ldquoImageniordquo service In
the US Falcon Communications a lead-
ing systems integrator offers a turnkey
IPTV solution featuring encoding content
delivery service management and access
products from Thomson
bull Professional Audio-Video
Thomson serves the rapidly growing mar-ket for professional audiovisual (ProAV)
solutions for corporate institutional wor-
ship and governmental media centers and
networks Thomsonrsquos expansion in ProAV
has been achieved through organic prod-
uct development as well as the integra-
tion of Pro-AV products from Canopus
the Japanese company acquired in early
2006
EDIUS desktop video
editing software part of
Thomsonrsquos growing rangeof professional
audiovisual and
broadcast solutions
TECHNOLOGY SYSTEMS SERVICES
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ldquoHaving started out in research today Irsquom responsible for our modemsrsquo roadmap
and strategy Our customersmdashthe telecoms operatorsmdashhave seen their business
transformed by technology like high-speed broadband And I find it fascinating
how these technologies have penetrated our daily lives the way we live and how
we communicate have changed dramatically over the last ten years
Even faster broadband (VDSL) fiber optics wireless technologies fixed-mobile
convergencehellip mean the pace of change is set to accelerate therersquos no doubt
wersquore living in exciting timesrdquo
Stan Claes Product Manager for IP-based Access Products
A key product introduction in 2006 was
the Grass Valley Indigo AV Presenta-
tion Switcher which combines features
normally found in separate devices in aunified powerful control interface simple
enough to be used by a single operator
Digital signage is also providing new mar-
ket opportunities combining the latest in
display delivery and storage technologies
Thomsonrsquos integrated digital media man-
agement solution Media Edge solves the
complex control distribution and archive
demands of customers Media Edge can
stream high-quality SD and HD content
over an IP network for example to the retail
store environment without the need to re-
invest in infrastructure
Broadcast amp Networksmdash
Network Software
2006 saw telecom service providers con-
tinue to build strategies to provide more
content and value-added services over
their broadband lines Thomsonrsquos Smart-
Vision TV service platforms and Cirpack
telephony switches are at the heart of sev-
eral of the worldrsquos largest IPTV and VoIP
services
In 2006 the launch of a pre-integrated mul-tiple play solution for telecom service provid-
ers illustrated Thomsonrsquos ability to leverage
skills across multiple business units The
solutions which enable telecom providers
to bring a myriad of services to broadband
subscribers are built around Thomsonrsquos
SmartVision and Cirpack software solu-
tions integrated with Thomsonrsquos Grass
Valley branded video head-end equipment
and Thomson home gateways and set-top
boxes This represents the first pre-inte-
grated solution on the market for rapid easy
deployment of triple play services including
voice video and internet access
More than 30 IPTV and mobile TV service
platforms have been deployed around the
world with SmartVision well-positioned
for convergent operators since it allows
video distribution over fixed and mobile
networks
Thomsonrsquos Cirpack softswitches which
help provide the core for the new inte-
grated platforms occupied the top mar-
ket position worldwide for residential
broadband telephony (VoIP) platforms in
2006 Over the course of 2006 Europersquoslargest primary line VoIP operator Freefr
upgraded its Cirpack switches to bring a
new seamless fixedmobile service to its
two million customers placing Thomson
at the forefront of new fixed-mobile con-
vergence solutions Signaling the rapid
expansion of sales outside traditional
Western European markets Thomsonrsquos
Cirpack switches were selected by many
telecom operators in Northern Africa Cen-
tral and Eastern Europe as well as Central
America to build or upgrade legacy voice
networks and deliver advanced telephone
services using IP technologies
TECHNOLOGY SYSTEMS SERVICES
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Thomsonrsquos Services division provides end-to-end management of business-critical services on behalf of Media
Entertainment amp Communications customers These include management of broadcast and network operations
centers on an outsourced basis and the provision of an array of content services to the creative community from
post-production to visual effects
SERVICES
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Thomsonrsquos Services division provides end-
to-end management of business-critical
services spanning physical media con-
tent services electronic content distribu-
tion and network services The division
is the worldrsquos leading provider of state-
of-the-art film-making post-production
visual effects and broadcast center man-
agement services
Strategy
The Services division continues to focus
on managing v ideo networks and
op er at io na l centers on behalf of its
customers who are able to concentrate
on their core business of content The
emphasis on high-growth opportunities
in newer market sectors such as retail
and corporate networks and gaming
has been sharpened
Achievements
New customers in fast-growing market
segments responded well to a range of
high value-added services from the Ser-
vices division in 2006 Network Services
showed particularly strong growth as net-
work operators in Europe Asia and North
America selected Technicolor-branded
management services The addition of
such leading customers as ITV in the
UK and France 24 and TV5 in France
substantially expanded Thomsonrsquos fast-
growing Network Services business
Noteworthy successes were also achieved
in Theatrical Services due in part to the
continued development of Thomsonrsquos digi-
tal cinema activity The Content Services
business continued to expand its post-
production services business by opening
a digital intermediate facility on the SonyPictures Entertainment studio lot In 2006
a new Home Entertainment Services unit
was created combining Thomsonrsquos DVD
business with electronic distribution to
develop new services to support emerging
lsquoon demand contentrsquo business models
Network Services
With a comprehensive portfolio of services
for broadcasters network and internet TV
operators movie theatres retailers and
corporations Network Services continued
to expand briskly in 2006 Broadcastersincreasingly selected Thomson as their
long-term network services partner By
year-end Network Services was providing
managed services under the Technicolor
brand to close to 200 channels from
17 facilities in France the Netherlands
Japan North America and the UK
Late in the year Thomson signed a long-
term agreement with ITV for network
transmission operations services for its six
From managing video
networks on an outsourced
basis to a broad range of
offerings in content services
Thomson is bringing its video
expertise to new markets
and geographies
Left Network Services for broadcasters
cable TV operators movie theaters
retailers and corporations is one of Servicesrsquo
fastest-growing business segments
Right Thomson provided film sound
DVD and digital cinema services for Cars
the DisneyPixar hitCars copy 2006 Disney Enterprises IncPixar All R ights Reserved
SERVICES
MANAGING VIDEO NETWORKS
TECHNOLOGY SYSTEMS SERVICES
34 Thomson Panorama 2006
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existing UK channels including the coun-
tryrsquos leading commercial channel In addi-
tion an agreement signed with NOB Cross
Media Facilities (NOB CMF) a subsidiary
of Nederlands Omroepproduktie Bedrijf
(NOB) likewise established Thomson as
a major supplier of network management
services in the Netherlands
In France Network Services added new
clients France 24 and TV5 which covers
203 countries and territories to move into
the market-leading position managing
more than 60 channels and 1500 hours
of programming daily The France 24 part-
nership also involves equipping their new
global TV news operation
Thomson drove expansion and innovation
in its retail media services over the course
of the year One of the most notable achie-
vements involves an ambitious in-store
network upgrade program piloted in2006 by Wal-Mart in the USA with Premier
Retail Networks (PRN) a subsidiary within
Thomsonrsquos Network Services operat ion
The in-store network platform was based
on Thomson IPTV technologies adapted
for the retail environment The system
the first pilot of IPTV in the retail environ-
ment delivered real impact on product
sales and improved customer satisfaction
in Wal-Mart stores PRN also expanded
capabilities into China early in 2007 with
Content Services revving up
Thomson provided a wide range of services for a number of major international film releases in 2006
such as Cars one of the three nominees for Best Animated Film at the Oscars Thomson Technicolor provided
film services sound services DVD compression and authoring replication and distribution
as well as digital cinema mastering and distribution for the DisneyPixar hit The Grouprsquos Content Services offering
has expanded in recent years to include the high-growth video-gaming advertising and broadcast markets
the signing of a joint venture with CGEN a
technology company leading the Chinese
in-store digital signage media industry
The two companies are currently collabo-
rating on the roll-out of an in-store media
network to 750 internet cafeacutes part of the
leading Chinese chain Big Cafeacute
Theatrical Services
Thomson signed Europersquos first large-scale
digital cinema rollout agreement in 2006
with the Kinepolis Group one of the conti-
nentrsquos most innovative theater circuits and
the leading exhibition chain in Belgium
The agreement to instal l and operate
digital cinema systems in 130 Kinepolis-
owned and operated screens passed a
first milestone in March 2007 with Thom-
sonrsquos first international distribution by sat-
ellite of an encrypted digital version of the
film Dreamgirls from the US to a Kinepolis
theater in Brussels Belgium
A series of new contracts were awarded
in the US For example in the fall of 2006
Technicolor Digital Cinema began installing
digital projection systems at 120 National
Amusements Inc screens in Boston Los
Angeles New York and elsewhere as part
of a strategic agreement National Amuse-
ments operates more than 1500 screens
in the US UK Latin America and Russia
Digital projection systems were also
TECHNOLOGY SYSTEMS SERVICES
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The growing market for Network Services
The decision by the UKrsquos leading commercial broadcaster to entrust its network services to
Thomsonrsquos Network Services operations illustrates a growing global trend as broadcasters focus increasingly on
programming and meeting customer needs they turn to highly-skilled specialists to handle technology
The long-term agreement with ITV means that the broadcaster will benefit from enhanced service and new technology
as well as more flexibility in launching new services
36 Thomson Panorama 2006
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Left Thomsonrsquos Technicolor
Interactive Services provided in-game
cinematics and voice recording for
Microsoft Game Studiosrsquo Gears of War
Right Thomsonrsquos London-based MPC
subsidiary carried out post-production
work including computer graphics
on Sony Braviarsquos award-wirring colorful
Paint commercial
installed at several landmark theatres in
Los Angeles in 2006 including Mann The-
atresrsquo Graumanrsquos Chinese and the Village
in Westwood
Thomson maintained a leading position in
film processing and printing in 2006 in a
market where volumes were stable Tech-
nicolor handled worldwide release printingfor two of the five 2007 Oscar nominees
for Best PicturemdashMartin Scorcesersquos The
Departed and Clint Eastwoodrsquos Letters
from Iwo Jimamdashas well as release print-
ing for two of the three Best Animated Film
nominees Cars and Happy Feet
As part of its ongoing commitment to meet
customer needs worldwide a state-of-the-
art film and post-production facility was inau-
gurated at Ciudad de la Imagen in Madrid in
2006 It is already becoming known as the
countryrsquos most comprehensive postproduc-
tion facility with advanced film processingand digital intermediate capabilities
Content Services
Thomson continued to leverage its long-
standing strength in post-production
skills and services through expansion into
emerging and high-growth market seg-
ments such as content services for the
video-gaming advertising and broadcast
markets
In order to better serve the growing mar-
ket for entertainment content for mobile
devices Thomson unveiled new mobile
content preparation and distribution capa-
bilities in the US and the UK in 2006 Facili-
ties equipped with state-of-the-art produc-
tion and post-production technologies will
handle the preparation and optimization
of a wide range of digital entertainmentcontentmdashincluding movies TV episodes
and music videosmdashfor distribution to
mobile devices The dedicated services
complement the Grouprsquos extensive global
electronic distribution infrastructure which
enables Thomson to deliver mobile con-
tent to online delivery services as well as
to network operators for final transmission
to mobile customers
Thomson also made progress in the
development of an integrated digital asset
management solution in 2006 known as
MIDAS (Media Ingest Distribution andStorage) MIDAS is a software and hard-
ware platform for digital content prepara-
tion storage security and distribution
From the first day of production planning
through every stage of post-production
and content distribution MIDAS creates
a digital workflow that allows customers
to manage projects remotely and provides
for rapid and seamless global file delivery
streaming and collaboration
TECHNOLOGY SYSTEMS SERVICES
37 Thomson Panorama 2006
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While expanding into newer markets
growing demand for post-production ser-
vices and visual effects continued to fuel
Thomsonrsquos ongoing content services activ-
ities Among the yearrsquos most noteworthy
achievements were portfolios of services
for such feature films as The Departed
Letters from Iwo Jima and Pirates of the
Caribbean Dead Manrsquos Chest ThomsonrsquosMoving Picture Company (MPC) also pro-
vided high-end visual effects for the three
films nominated for Achievement in Visual
Effects Pirates of the Caribbean Posei-
don and Superman Returns
Confirming the Grouprsquos solid growth in
content services for the video game indus-
try Thomson unveiled a new dedicated
Interactive Services facility in Burbank
California in 2006 Sierra Entertainment
a division of Vivendi Games selected
Thomson to prov ide cinemat ic anima-
tion voice casting and recording sound
design and mixing services for The Leg-
end of Spyrotrade A New Beginning Like-
wise Thomson provided a wide range of
services to support Konamirsquos The SilentHill Experience released simultaneously
with the motion picture
The strategic investment in one of Indiarsquos
leading animation and gaming cinemat-
ics firms announced in February 2007
strengthened Thomsonrsquos position in Asia
for a variety of content services Located in
Bangalore India Paprikaas provides cre-
ldquoIn 1998 I joined Thomson as a Plant Manager within Home Entertainment Services
and was eventually made responsible for the expansion and management of our
Guadalajara DVD operations In summary Irsquove had great opportunities to gain experience
in international operations strategic planning and operational excellence I recently
joined Content Services where Irsquoll be leading the start-up and integration of new activities
in Beijing Bangalore and other emerging markets Content Services is dynamic and
growing and Irsquom looking forward to expanding the business in Asia while improving
our operational performance in North America and Europerdquo
Mike Hayden Vice President Operations amp Strategic Projects Content Services
of the Grouprsquos divisions and profit centersIn the context of the budgetary procedure
performance measurement indicators are
calculated by the divisions analyzed and
reviewed monthly to serve as a reference
for the Grouprsquos monthly reporting
Management reporting and
closing period work
Th om so n uses a co mmon char t of
accounts which is regularly updated The
principal accounting and financial figures
of the operational and functional depart-
ments consolidated at Group level are
analyzed by the Grouprsquos management
control team and reviewed by the Grouprsquos
Executive Committee
The closing process for the half-year and
annual consolidated financial statementsoccurs in two steps The first step con-
sists of a ldquohard closerdquo completed in May
and September leading to a first review by
the statutory auditors The second step
occurs in July and in JanuaryFebruary and
involves the finalization of half-year and
annual consolidated financial statements
under IFRS The Group then proceeds
once a year with a reconciliation of these
results in accordance with US GAAP
Preparation of financial statements
The financial statements are prepared jointly by the finance department and the
General Secretary They are based on
information reported through the annual
reporting and accounting consolidation
processes and on operational and mar-
ket information which is specifically cen-
tralized for the preparation of Thomsonrsquos
Document de Reacutefeacuterence in France and
the submission of Form 20-F in the United
States Half-year and annual financial infor-
mation is reviewed by the Grouprsquos Audit
Committee
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58 Thomson Panorama 2006
(1) Source PriceWaterhouseCoopers ndash
ldquoGlobal Entertainment and Media Outlook 2006-10rdquo
Revenue growth
Thomson achieved consolidated 2006
net revenues of 9914045854 million up from
9914045591 million in 2005 Revenues for
the Core Business reached 9914045747 mil-
lion (9914045776 million at constant currency)
representing 83 growth over 2005 at
constant currency
Overall the Grouprsquos key growth busi-
nessesmdashContent Services Network
Services Access Products for telecom
operators and our Broadcast amp Networks
businesses (Grass Valley and Network
Software)mdashincreased strongly year-on-
year and accounted for over a third of
Group revenues against less than a quar-
ter in 2005
Thomsonrsquos Core Business EBIT for 2006
was euro504 million representing a Core
Business EBIT margin of 88 Thisreflected growth in some key businesses
and cost actions across the Group off-
setting a significant investment in research
and development and some increase in
restructuring expenses
Increased spend on RampD
Research and development expenditure
charged in the Core Business (net of
external funding) rose from 991404221 million in
2005 to 991404279 million in 2006 an increase
of 26 principally in the Systems divi-
sion The Group expanded the number ofproducts and services in the development
phase across its businesses
Return to profit
Losses in Non-Core Continuing and Dis-
continued operations were substantially
lower year-on-year reflecting principally
the exit from heavily loss-making Displays
activities in 2005 and intensified cost-sav-
ing programs in 2006 A major revision
and harmonization of the Grouprsquos North
American healthcare obligations gave rise
to substantial one-time gains and Thom-
son also initiated significant restructuring
of its French Non-Core operations
The good performance of the Core Busi-
ness lower Non-Core and Discontinued
losses and a low reported tax chargeenabled the Group to return a net profit of
99140455 million in 2006 compared to a loss of
991404573 million in the previous year
Good cash flow
strengthened balance sheet
Thomson generated good free cash flow
and strengthened its balance sheet in
2006 Total net financial liabilities on the
balance sheet fell by 991404460 million reflect-
ing a 99140493 million fall in financial and acqui-
sition-related debts and a 991404367 million
reduction in retirement benefit obligations(including healthcare)
Increase in Net Dividend
The Board of Directors proposed a dis-
tribution to shareholders of 991404033 per
share (2005 dividend 991404030) reflecting
confidence in the prospects of the Group
going forward
Outlook 2007-2009
growth in revenues and net income
With the Grouprsquos transformation complete Thomsonrsquos financial focus over the 2007-
2009 period will be to grow revenues and
net income
Thomson serves growing Media Enter-
tainment amp Communications marketsmdashfor
which external estimates(1) indicate com-
pound growth of around 6 over the last
FINANCIAL AND
OPERATIONAL PERFORMANCE
Full year 2006 results
saw a return to profitability
and leave Thomson
well positioned at
the heart of convergence
and digital video
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59 Thomson Panorama 2006
five years Our digital and electronic busi-
nesses now represent two-thirds of rev-
enues and we believe they are growing
faster than the overall market offsetting
the maturing physical media businesses
Given this profile the Group expects its
revenue growth to be more modest in
2007 but to gather pace over the period
and our overall objective is to show com-pound growth over 2007-2009 in line with
or faster than the overall market
The 2007-2009 period is also expected
to see a sharply reduced impact from
residual Non-Core activities with an end
to losses from the Discontinued Activities
perimeter after 2007 Accordingly Thom-
sonrsquos ambition is to turn its Core Business
growth and profitability and lower impact
from Non-Core into strong growth in net
income over the period 2007-2009
Business operations
Continuous performance improvement is
fundamental to Thomsonrsquos commitment to
create sustainable business models and
long-term value for all stakeholders The
ambitious Group-wide programs launched
in 2004 to improve productivity and
enhance overall performance producedsubstantial results in 2006 and led to new
and strong initiatives for long-term growth
As of the second half of 2006 six ldquoKey
Programsrdquo are monitored at Group level
Clients Software Product Introduction
Operations Transformation and Talent
Management
KEY PROGRAMS IN PLACE
Program Focus
Clients Thomsonrsquos clientregional diversification and
growth of the existing business
through improved Sales amp Marketing
Software Development of integrated software platforms
in all markets (post-production distribution
delivery) and for all types of customer
(professional prosumerhellip)
Product Introduction Ensuring new product roadmaps are in line
with strategy and resource needs have been
identifiedOperations Improving the Grouprsquos cost base cash
generation and working capital
Transformation Multiple programs including initiatives to
improving customer relationship management
worldwide supply chain management
IT transformation as well as Thomsonrsquos RampD
footprint
Talent Management Leveraging human assets with a focus on
talent retention and acquisition
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60 Thomson Panorama 2006
SUMMARY RESULTS FULL YEAR 2006
In 991404 millions unless otherwise stated 2006(1) 2005(1)
Net revenues 5854 5591(1)
Core Business net revenues 5747 5335
Services 2489 2487
Systems 2684 2262
Technology 547 546
Corporate 27 40
Non-Core continuing operations net revenues 107 256
Core Business EBIT(2) 504 512
Services 160 205
Systems 132 109
Technology 289 277Corporate (77) (79)
EBIT from Non-Core continuing operations (25) (122)
(1) Restated with 2006 discontinued activities according to IFRS 5
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61 Thomson Panorama 2006
Year ended December 31in 991404 except number of shares 2006 2005 2004
Year ended December 31in 991404 millions 2006 2005(1) 2004(1)
CONSOLIDATED STATEMENTS OF OPERATIONS
(1) Restated with 2006 discontinued activities according to IFRS 5
(2) After deduction of the interests net of tax paid on the subordinated perpetual notes during the period
Continuing operations
Revenues 5854 5591 5980
Cost of sales (4474) (4240) (4594)
Gross margin 1380 1351 1386
Selling marketing general and administrative expenses (674) (638) (653)
Other income (expense) 52 (96) (69)
Research and development expenses (279) (227) (201)
Profit from continuing operations before tax and net finance costs 479 390 463
Interest income 19 30 52
Interest expense (108) (108) (54)
Other financial income (expense) (111) 36 (26)
Finance costs ndash net (200) (42) (28)
Share of profit (loss) from associates (86) (82) (20)
Income tax ndash (68) (93)
Profit from continuing operations 193 198 322
Discontinued operations
Profit (loss) from discontinued operations (138) (771) (883)
Net income (loss) 55 (573) (561)
Attributable to
Equity Holders 55 (574) (559)
Minority interests ndash 1 (2)
Weighted average number of shares
outstandingmdashbasic net of treasury stock 261188858 266539917 273646869
Earnings per share from continuing operations
Basic(2) 067 074 118
Diluted 063 042 111
Earnings per share from discontinued operations
Basic (053) (289) (323)
Diluted (048) (262) (296)Total earnings per share
Basic(2) 014 (215) (205)
Diluted 015 (220) (185)
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62 Thomson Panorama 2006
CONSOLIDATED BALANCE SHEETS
In 991404 millions December 31 December 31 January 1 December 31 2006 2005 2005(1) 2004
ASSETS
Non-current assets
Property plant and equipment 813 886 1051 1051
Goodwill 1714 1756 1186 1178
Other intangible assets 1071 1150 924 924
Investments in associates 12 204 260 260
Investments and financial assets available-for-sale 266 341 139 113
Derivative financial instruments 7 1 11 ndash
Contract advances 129 173 179 179
Deferred tax assets 397 379 307 301
Other non-current assets 110 182 133 136
Total non-current assets 4519 5072 4190 4142
Current assets
Inventories 366 333 503 568
Trade accounts and notes receivable 1018 1315 1232 1180
Current accounts with associates and joint ventures 97 115 143 143
Derivative financial instruments 8 9 115 ndash
Other current assets 535 644 483 616
Marketable securities ndash 7 58 58
Cash and cash equivalents 1311 996 1845 1848
Assets classified as held for sale 264 369 80 ndash
Total current assets 3599 3788 4459 4413
Total assets 8118 8860 8649 8555
(1) Including the impacts of the first-time application related to IAS 32 and 39 on financial instruments and IFRS 5 on non-current assets held for sale and
discontinued operations
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63 Thomson Panorama 2006
In 991404 millions December 31 December 31 January 1 December 31 2006 2005 2005(1) 2004
SHAREHOLDERSrsquo EQUITY AND LIABILITIES
Shareholdersrsquo equity
Common stock (273871296 shares at
December 31 2006
with nominal value of euro 375 per share) 1027 1025 1025 1025
Trade accounts and notes payable 1032 1164 1199 1226
Accrued employee expenses 165 166 158 163
Income tax payable 57 47 60 60
Other current liabilities 671 750 746 800
Payables on acquisition of companies 13 138 84 84
Liabilities directly associated with
assets classified as held for sale 232 470 88 ndash
Total current liabilities 3681 4393 3602 3459
Total liabilities 5999 6644 6251 6062
Total shareholderrsquos equity and liabilities 8118 8860 8649 8555
(1) Including the impacts of the first-time application related to IAS 32 and 39 on financial instruments and IFRS 5 on non-current assets held for sale and
discontinued operations
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Creation and lay-out
Photo credits Nathalie BerhingGAMMA ndash Steacutephane de Bourgies ndash Jean-Franccedilois DeroubaixGAMMA ndash Christine Donnier- ValentinGAMMA ndash Cars copy 2006 Disney Enterprises IncPixar All Rights Reserved ndash Dreamgirls copy 2006 DREAMWORKS
LLC and PARAMOUNT PICTURES All Rights Reserved ndash Poseidon copy 2006 Warner Bros Pictures ndash Sony Bravia Paint
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ldquoIrsquove always worked in video compression RampD for a number of hi-tech companies
but Thomson is different itrsquos truly video-centric Everyonemdashnot just the compression
research engineersmdashunderstands the importance of video technology to the core business
Irsquom in charge of our compression research activities worldwide a key technology
thatrsquos essential for distributing video over networks or storing video on physical media
But what I most enjoy is drawing on my experience in patents to mentor researchers on
preparing patent disclosures for new inventions Preparing patent disclosures is a pretty
unique skill and one thatrsquos key in strengthening the Grouprsquos intellectual property portfoliordquo
Jill Boyce Compression Domain Director Corporate Research
ADDING A NEW DIMENSION TO MUSIC
Movie-goers and people with home cinema installations are accustomed to
the three-dimensional sound that enables them to hear each instrument
voice or sound effect in a different place The concept is known as ldquoSurround
Soundrdquo and it now exists in mp3 format
Developed in cooperation with Germanyrsquos Fraunhofer Institute for Integrated
Circuits mp3 Surround takes the mp3 digital coding system one step furtherwithout making mp3 files larger The new technology is also backwards
compatible so that music with mp3 Surround sounds great with existing players
The technology can be applied in a broad spectrum of applications
including web-based music distribution broadcasting systems PC-related
audiovisual and gaming applications
This yearrsquos achievements covered multiple
domains of technology The businessrsquo
leading watermarking technology embedsinvisible indestructible and fully traceable
pieces of information into content so that
the owner origin or recipient can be identi-
fied The technology was launched for digi-
tal cinema applications and successfully
licensed to most server manufacturers
Thomson technologies also enabled for
example the development of an advanced
TV audience measurement system and a
solution allowing authentification of VIP
accreditation badges during Soccer World
Cup in Germany in 2006 The businessrsquo
consulting activity also implemented an
enterprise-wide security solution for a majorinternational broadcaster during the year
The Software amp Technology Solutions busi-
ness is now expanding from watermarking
into other promising technological areas
such as digital rights management (DRM)
to manage conditional access to content
in the context of professional workflows
content filtering to monitorfilter distribution
of copyrighted content or new protocols
to optimize and secure content distribution
platforms
TECHNOLOGY SYSTEMS SERVICES
22 Thomson Panorama 2006
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Silicon Solutions
As more and more system value and intel-
ligence is embedded onto silicon micro-
chips Thomson has placed increased
emphasis on in-house silicon design and
development efforts These range from
integrated circuits for communications and
set-top boxes to chips designed specifi-cally for broadcasting and mobile devices
The growing sophis tication of home
network access devices helps explain
why more than 200 Thomson engineers
are continuing to develop innovative
integrated circuits As with all Thomson
technology innovations our silicon invest-
ment is focused equally on increasing our
leadership in set-top boxes as much as
on providing integrated circuit solutions
to industry leaders
Intellectual Property amp Licensing
Thomsonrsquos extraordinarily rich intellectual
property assets include over 55000 pat-
ents derived from more than 7000 inven-
tions with some 600 new invention patent
applications filed in 2006
Thomsonrsquos patent portfolio remains a key
pillar for both the Technology division and
the Group as a whole with patented tech-
nologies including digital decoders high-
definition TV optical module patents for
Thomsonrsquos rich intellectual property
assets include over 55000 patents
CD and DVD players MPEG video com-
pression mp3 audio compression format
interactive TV and storage technologies
Having successfully migrated the propor-
tion of income derived from digital rather
than analogue technologies digital tech-
nology-based programs now account for
over 80 of the Grouprsquos large licensingrevenue stream with over 950 licensing
contracts in place worldwide at year-end
2006
TECHNOLOGY SYSTEMS SERVICES
23 Thomson Panorama 2006
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Thomsonrsquos Systems division provides video solutions and integrates video network systems for its customers in
the broadcast cable satellite terrestrial and telecoms markets The divisionrsquos offering spans image capture to
network distribution to the provision of access products enabling operators to enrich their service offerings to
subscribers
SYSTEMS
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Today people benefit from virtually instan-
taneous access to an increasingly custom-
ized range of content available through
a growing set of access possibilities As
internet and digital technologies con-
tinue to infuse the Media Entertainment
amp Communications industries Thomson
is focusing on opportunities arising from
this new paradigm alongside its traditionalcore markets These range from traditional
broadcast equipment to the growing mar-
ket for professional audio-video systems
mobile and IP (Internet Protocol) TV to
booming demand for residential broad-
band services
Strategy
Thomsonrsquos Systems division comprises
three activities Access Products and the
Broadcast amp Networks businesses The
Access Products business aims to deliver
key set-top box platforms for satellite andcable customers and gateway products
for telecom operators The Broadcast
amp Networks businesses are focused on
video network integration bringing to
market advanced products and solutions
to enable network operators broadcast-
ers and film-makers to benefit from the
latest technologies in image acquisition
compression switching and storage The
Network Software business aims to enable
the introduction of new multiple-play ser-
vices based on fixed-mobile convergence
IPTV and broadband telephony
Achievements
Overall the Systems division improved
diversified its customer base in 2006 In
Access Products Thomson consolidated
its leadership of worldwide markets forset-top boxes gateways and modems for
telecom satellite and cable network oper-
ators and service providers while achiev-
ing good growth in higher-end products
in the second half of the year In Grass
Valley demand for high-defin ition (HD)
acquisition production and distribution
systems combined with growing demand
for IT- and IP-based broadcast solutions to
drive growth while in Network Software
Thomsonrsquos SmartVis ion IPTV system
gained good ground with more than 30
IPTV and mobile TV deployments to date
and the worldrsquos largest installed base
Access Products
The Access Products business was driven
in 2006 by the ongoing rapid expansion of
triple (video voice and data) and quadru-
ple play services (also fixed-mobile con-
vergence) offered by cable and telecom
network operators and by the increasing
spread of high definition (HD) broadcasts
among satellite network operators
SYSTEMS
PROVIDING VIDEO SOLUTIONS
From image capture to
distribution via
all types of network
Thomson is reaping the benefits of
growing market demand for
video network integration
TECHNOLOGY SYSTEMS SERVICES
26 Thomson Panorama 2006
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Thomson further consolidated its market
leading position for dual and triple-play
gateways to telecom operators and inter-
net service providers The established mar-
ket leader for DSL modems and routers
since 1999 Thomson extended its lead
over the competition in 2006 shipping
more than 42 million DSL modems and
gateways during the first half of the yearand 10 million units overall in 2006
Growing market demand for sophisticated
home networking eco-systems able to
accommodate new services over time was
underlined by the success of Thomsonrsquos
Livebox gateway for France Telecom
Early in 2007 Thomson supported large-
scale deployment of the Livebox which
provides access to high-speed wireless
Internet Voice-over-IP IPTV network
gaming fixed-mobile convergence (unik)
and other services
An advanced Thomson gateway also
enabled the UKrsquos leading operator to
launch its innovative Total Broadband ser-
vice in June 2006 Bri tish Telecomrsquos BT
Home Hubtrade is a quadruple-play gateway
designed to support BTrsquos full range of ser-
vices including both BT Total Broadband
and BT Broadband Talk in addition to
providing wired and wireless broadband
connectivity for fixed and mobile phones
PCs and other networked devices It also
Mobile video in Italy
Thomsonrsquos product and service offering benefited in 2006 from increased interest from cable and
telecom operators to complete their offering for Video-on-Demand and mobile TV The Olympic Winter Games
notably provided a showcase for Thomsonrsquos capability to deliver video programming to cell phones and
other mobile devices In the wake of the successful Olympic trial Telecom Italia turned to Thomson
for the systems and technology that enabled it to commercially launch a mobile offering including TV and
sports programming in June 2006
incorporates the latest wideband audio
codec providing near CD-quality sound
for voice and video calls
As broadband services become more and
more of a mass-market service providers
must ensure that their services are both
differentiating and easy to consume This
trend calls for the emergence of simpleyet very technologically-advanced and
software-laden devices Such devices
connect to the home-networking gateway
and make it natural to consume a broad-
band-delivered service One example
is the Music Box first made available to
subscribers of AOLrsquos broadband service
in France which streams Internet-based
radio stations or locally stored music files
to a homersquos legacy Hi-Fi audio system
Strong growth in the cable network sys-
tems market which is projected to expand
another 20 in 2007 helped drive Thom-son toward two major sales milestones
in 2006 two million cable set-top boxes
and ten million cable modems Driven by
operatorsrsquo needs to provide more and
more sophisticated services Thomson
has extended its product range since
2005 to include interactive double- and
triple-play set-top boxes as well as HD
set-top boxes with advanced functions
such as personal video recorders (PVR)
Among the cable operators to have
TECHNOLOGY SYSTEMS SERVICES
27 Thomson Panorama 2006
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Total Broadband for BT
An advanced Thomson gateway enabled the UKrsquos leading telecommunications operator British Telecom
to launch its innovative Total Broadband service in June 2006 This quadruple-play gateway
known as the BT Home Hubtrade features video voice data and wireless capabilities
It is supporting BTrsquos full range of services including wired and wireless broadband connectivity
for fixed and mobile phones PCs and other networked devices
28 Thomson Panorama 2006
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Left Thomson Grass Valley branded
outside broadcast van under construction
Right Camera operator Kim Marks (left)
a camera first assistant Chris Blauvelt (center)
and a camera second assistant
Jason McCormick (right) line up a scene
with the Grass Valley Viper FilmStreamtrade
camera for the David Fincher feature Zodiac
Photo courtesy Paramount Pictures
selected Thomson in 2006 were Portu-
galrsquos leading Pay-TV Operator TV Cabo
UPC E-Vision Kabel Deutschland and
Premiegravere in Europe Net Serviccedilos in Latin America and StarHub and Dalian Cable
TV in Asia
Thomson expanded its footprint in satel-
lite in Europe notably in the UK and in
Asia where product deliveries began for
Tata Sky the Indian satellite broadcaster
In the UK Thomson delivered the Sky
HD box an MPEG-4 set-top box with
Personal Video Recorder which enabled
the successful launch of the countryrsquos first
high-definition TV service in May 2006
The largest satel li te television service
provider in the US DIRECTV also chose Thomson to expand its HD programming
offering with the delivery of the H20 satel-
lite receiver
Leveraging expertise in free-to-air digi-
tal terrestrial receivers and capabilities in
high-definition Thomson also delivered
the first MPEG-4 HDTV receivers for digital
terrestrial TV to French operators Canal +
and TPS during the year
In telephony Thomson remains a lead-
ing supplier of corded and cordless tele-
phones which are sold at retail outletsunder the RCA GE and Alcatel brands as
well as under third-party brands for opera-
tor sales In 2006 Thomson capitalized
on its leadership position in DECT (Digital
Enhanced Cordless Telecommunications)
in Europe by expanding into the American
retail market
Broadcast amp Networks
The Broadcast amp Networks businesses
gained market share in 2006 particularlyin networks and systems integration and
expanded in the promising Pro-AV (profes-
sional audio-video) market
Continuing trends in this market are high-
definition (HD) broadcasting the merging
of IT and broadcast technology the move
to a tape-less file-based approach to video
storage and management and power-
ful MPEG-4 HD compression technology
which allows content to be delivered to mul-
tiple audiences over multiple platforms
One highly visible application of ThomsonrsquosGrass Valley brand of HD image acquisi-
tion and production systems was the 2006
FIFA World Cup in Germany seen by a
billion viewers around the world Broad-
casters covering the event relied on more
than 182 Grass Valley brand cameras
10 Grass Valley video switching systems
12 large scale Grass Valley video routing
systems and hundreds of other devices to
provide faultless HD images
Leveraging its market leading position
Thomson est imates tha t Grass Valley
HD cameras now account for 50 of theglobal market Most major outside broad-
cast production companies in the world
use Grass Valley branded HD camera sys-
tems with more than 1500 in use
High-definition television is also about
news Based on internal Thomson esti-
mates Grass Valley solutions accounted
for nearly 80 of HD news installations
worldwide in 2006 including CBS Net-
work-owned amp operated stations in the
TECHNOLOGY SYSTEMS SERVICES
29 Thomson Panorama 2006
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IGNITE HD
TV news operations can work more quickly and efficiently by using information
technology The industryrsquos first and most complete link between the control room
and the newsroom HD Ignite enables a single technician to handle all
news production requirements During its initial months on the market in the US
HD Ignite was selected by such early adaptors as ABC Stations Group
customers in San Francisco and Chicago and Cox Broadcasting customers in
Atlanta San Francisco Charlotte North Carolina and Dayton Ohio
Telecom service providers are working to
provide more content and value-added
services over their broadband lines
Thomsonrsquos SmartVision and
Cirpack software solutions facilitate
their strategies for rapid deployment of
IPTV and triple-play services
US Al Jazeera Englishmdasha global channelbased in the Middle Eastmdashand Belgiumrsquos
VTM (Vlaamse Televisie Maatschappij )
Thomson is the only supplier to provide
an automated production system (Ignite
HD) a full suite of non-linear editing sys-
tems and a news playout systemmdashall of
which enable broadcasters to move to HD
affordably and to speed up and automate
their workflows
MPEG-4 is one of the enabling technolo-
gies which allows operators of telecom-
munications networks to bring TV to
their subscribers in addition to voice andinternet access This is one element in a
complete Thomson systems offering For
example Spanish operator Telefoacutenica
selected Thomson for a range of equip-
ment and systems to upgrade and expand
its rapidly growing ldquoImageniordquo service In
the US Falcon Communications a lead-
ing systems integrator offers a turnkey
IPTV solution featuring encoding content
delivery service management and access
products from Thomson
bull Professional Audio-Video
Thomson serves the rapidly growing mar-ket for professional audiovisual (ProAV)
solutions for corporate institutional wor-
ship and governmental media centers and
networks Thomsonrsquos expansion in ProAV
has been achieved through organic prod-
uct development as well as the integra-
tion of Pro-AV products from Canopus
the Japanese company acquired in early
2006
EDIUS desktop video
editing software part of
Thomsonrsquos growing rangeof professional
audiovisual and
broadcast solutions
TECHNOLOGY SYSTEMS SERVICES
30 Thomson Panorama 2006
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ldquoHaving started out in research today Irsquom responsible for our modemsrsquo roadmap
and strategy Our customersmdashthe telecoms operatorsmdashhave seen their business
transformed by technology like high-speed broadband And I find it fascinating
how these technologies have penetrated our daily lives the way we live and how
we communicate have changed dramatically over the last ten years
Even faster broadband (VDSL) fiber optics wireless technologies fixed-mobile
convergencehellip mean the pace of change is set to accelerate therersquos no doubt
wersquore living in exciting timesrdquo
Stan Claes Product Manager for IP-based Access Products
A key product introduction in 2006 was
the Grass Valley Indigo AV Presenta-
tion Switcher which combines features
normally found in separate devices in aunified powerful control interface simple
enough to be used by a single operator
Digital signage is also providing new mar-
ket opportunities combining the latest in
display delivery and storage technologies
Thomsonrsquos integrated digital media man-
agement solution Media Edge solves the
complex control distribution and archive
demands of customers Media Edge can
stream high-quality SD and HD content
over an IP network for example to the retail
store environment without the need to re-
invest in infrastructure
Broadcast amp Networksmdash
Network Software
2006 saw telecom service providers con-
tinue to build strategies to provide more
content and value-added services over
their broadband lines Thomsonrsquos Smart-
Vision TV service platforms and Cirpack
telephony switches are at the heart of sev-
eral of the worldrsquos largest IPTV and VoIP
services
In 2006 the launch of a pre-integrated mul-tiple play solution for telecom service provid-
ers illustrated Thomsonrsquos ability to leverage
skills across multiple business units The
solutions which enable telecom providers
to bring a myriad of services to broadband
subscribers are built around Thomsonrsquos
SmartVision and Cirpack software solu-
tions integrated with Thomsonrsquos Grass
Valley branded video head-end equipment
and Thomson home gateways and set-top
boxes This represents the first pre-inte-
grated solution on the market for rapid easy
deployment of triple play services including
voice video and internet access
More than 30 IPTV and mobile TV service
platforms have been deployed around the
world with SmartVision well-positioned
for convergent operators since it allows
video distribution over fixed and mobile
networks
Thomsonrsquos Cirpack softswitches which
help provide the core for the new inte-
grated platforms occupied the top mar-
ket position worldwide for residential
broadband telephony (VoIP) platforms in
2006 Over the course of 2006 Europersquoslargest primary line VoIP operator Freefr
upgraded its Cirpack switches to bring a
new seamless fixedmobile service to its
two million customers placing Thomson
at the forefront of new fixed-mobile con-
vergence solutions Signaling the rapid
expansion of sales outside traditional
Western European markets Thomsonrsquos
Cirpack switches were selected by many
telecom operators in Northern Africa Cen-
tral and Eastern Europe as well as Central
America to build or upgrade legacy voice
networks and deliver advanced telephone
services using IP technologies
TECHNOLOGY SYSTEMS SERVICES
31 Thomson Panorama 2006
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Thomsonrsquos Services division provides end-to-end management of business-critical services on behalf of Media
Entertainment amp Communications customers These include management of broadcast and network operations
centers on an outsourced basis and the provision of an array of content services to the creative community from
post-production to visual effects
SERVICES
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Thomsonrsquos Services division provides end-
to-end management of business-critical
services spanning physical media con-
tent services electronic content distribu-
tion and network services The division
is the worldrsquos leading provider of state-
of-the-art film-making post-production
visual effects and broadcast center man-
agement services
Strategy
The Services division continues to focus
on managing v ideo networks and
op er at io na l centers on behalf of its
customers who are able to concentrate
on their core business of content The
emphasis on high-growth opportunities
in newer market sectors such as retail
and corporate networks and gaming
has been sharpened
Achievements
New customers in fast-growing market
segments responded well to a range of
high value-added services from the Ser-
vices division in 2006 Network Services
showed particularly strong growth as net-
work operators in Europe Asia and North
America selected Technicolor-branded
management services The addition of
such leading customers as ITV in the
UK and France 24 and TV5 in France
substantially expanded Thomsonrsquos fast-
growing Network Services business
Noteworthy successes were also achieved
in Theatrical Services due in part to the
continued development of Thomsonrsquos digi-
tal cinema activity The Content Services
business continued to expand its post-
production services business by opening
a digital intermediate facility on the SonyPictures Entertainment studio lot In 2006
a new Home Entertainment Services unit
was created combining Thomsonrsquos DVD
business with electronic distribution to
develop new services to support emerging
lsquoon demand contentrsquo business models
Network Services
With a comprehensive portfolio of services
for broadcasters network and internet TV
operators movie theatres retailers and
corporations Network Services continued
to expand briskly in 2006 Broadcastersincreasingly selected Thomson as their
long-term network services partner By
year-end Network Services was providing
managed services under the Technicolor
brand to close to 200 channels from
17 facilities in France the Netherlands
Japan North America and the UK
Late in the year Thomson signed a long-
term agreement with ITV for network
transmission operations services for its six
From managing video
networks on an outsourced
basis to a broad range of
offerings in content services
Thomson is bringing its video
expertise to new markets
and geographies
Left Network Services for broadcasters
cable TV operators movie theaters
retailers and corporations is one of Servicesrsquo
fastest-growing business segments
Right Thomson provided film sound
DVD and digital cinema services for Cars
the DisneyPixar hitCars copy 2006 Disney Enterprises IncPixar All R ights Reserved
SERVICES
MANAGING VIDEO NETWORKS
TECHNOLOGY SYSTEMS SERVICES
34 Thomson Panorama 2006
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existing UK channels including the coun-
tryrsquos leading commercial channel In addi-
tion an agreement signed with NOB Cross
Media Facilities (NOB CMF) a subsidiary
of Nederlands Omroepproduktie Bedrijf
(NOB) likewise established Thomson as
a major supplier of network management
services in the Netherlands
In France Network Services added new
clients France 24 and TV5 which covers
203 countries and territories to move into
the market-leading position managing
more than 60 channels and 1500 hours
of programming daily The France 24 part-
nership also involves equipping their new
global TV news operation
Thomson drove expansion and innovation
in its retail media services over the course
of the year One of the most notable achie-
vements involves an ambitious in-store
network upgrade program piloted in2006 by Wal-Mart in the USA with Premier
Retail Networks (PRN) a subsidiary within
Thomsonrsquos Network Services operat ion
The in-store network platform was based
on Thomson IPTV technologies adapted
for the retail environment The system
the first pilot of IPTV in the retail environ-
ment delivered real impact on product
sales and improved customer satisfaction
in Wal-Mart stores PRN also expanded
capabilities into China early in 2007 with
Content Services revving up
Thomson provided a wide range of services for a number of major international film releases in 2006
such as Cars one of the three nominees for Best Animated Film at the Oscars Thomson Technicolor provided
film services sound services DVD compression and authoring replication and distribution
as well as digital cinema mastering and distribution for the DisneyPixar hit The Grouprsquos Content Services offering
has expanded in recent years to include the high-growth video-gaming advertising and broadcast markets
the signing of a joint venture with CGEN a
technology company leading the Chinese
in-store digital signage media industry
The two companies are currently collabo-
rating on the roll-out of an in-store media
network to 750 internet cafeacutes part of the
leading Chinese chain Big Cafeacute
Theatrical Services
Thomson signed Europersquos first large-scale
digital cinema rollout agreement in 2006
with the Kinepolis Group one of the conti-
nentrsquos most innovative theater circuits and
the leading exhibition chain in Belgium
The agreement to instal l and operate
digital cinema systems in 130 Kinepolis-
owned and operated screens passed a
first milestone in March 2007 with Thom-
sonrsquos first international distribution by sat-
ellite of an encrypted digital version of the
film Dreamgirls from the US to a Kinepolis
theater in Brussels Belgium
A series of new contracts were awarded
in the US For example in the fall of 2006
Technicolor Digital Cinema began installing
digital projection systems at 120 National
Amusements Inc screens in Boston Los
Angeles New York and elsewhere as part
of a strategic agreement National Amuse-
ments operates more than 1500 screens
in the US UK Latin America and Russia
Digital projection systems were also
TECHNOLOGY SYSTEMS SERVICES
35 Thomson Panorama 2006
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The growing market for Network Services
The decision by the UKrsquos leading commercial broadcaster to entrust its network services to
Thomsonrsquos Network Services operations illustrates a growing global trend as broadcasters focus increasingly on
programming and meeting customer needs they turn to highly-skilled specialists to handle technology
The long-term agreement with ITV means that the broadcaster will benefit from enhanced service and new technology
as well as more flexibility in launching new services
36 Thomson Panorama 2006
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Left Thomsonrsquos Technicolor
Interactive Services provided in-game
cinematics and voice recording for
Microsoft Game Studiosrsquo Gears of War
Right Thomsonrsquos London-based MPC
subsidiary carried out post-production
work including computer graphics
on Sony Braviarsquos award-wirring colorful
Paint commercial
installed at several landmark theatres in
Los Angeles in 2006 including Mann The-
atresrsquo Graumanrsquos Chinese and the Village
in Westwood
Thomson maintained a leading position in
film processing and printing in 2006 in a
market where volumes were stable Tech-
nicolor handled worldwide release printingfor two of the five 2007 Oscar nominees
for Best PicturemdashMartin Scorcesersquos The
Departed and Clint Eastwoodrsquos Letters
from Iwo Jimamdashas well as release print-
ing for two of the three Best Animated Film
nominees Cars and Happy Feet
As part of its ongoing commitment to meet
customer needs worldwide a state-of-the-
art film and post-production facility was inau-
gurated at Ciudad de la Imagen in Madrid in
2006 It is already becoming known as the
countryrsquos most comprehensive postproduc-
tion facility with advanced film processingand digital intermediate capabilities
Content Services
Thomson continued to leverage its long-
standing strength in post-production
skills and services through expansion into
emerging and high-growth market seg-
ments such as content services for the
video-gaming advertising and broadcast
markets
In order to better serve the growing mar-
ket for entertainment content for mobile
devices Thomson unveiled new mobile
content preparation and distribution capa-
bilities in the US and the UK in 2006 Facili-
ties equipped with state-of-the-art produc-
tion and post-production technologies will
handle the preparation and optimization
of a wide range of digital entertainmentcontentmdashincluding movies TV episodes
and music videosmdashfor distribution to
mobile devices The dedicated services
complement the Grouprsquos extensive global
electronic distribution infrastructure which
enables Thomson to deliver mobile con-
tent to online delivery services as well as
to network operators for final transmission
to mobile customers
Thomson also made progress in the
development of an integrated digital asset
management solution in 2006 known as
MIDAS (Media Ingest Distribution andStorage) MIDAS is a software and hard-
ware platform for digital content prepara-
tion storage security and distribution
From the first day of production planning
through every stage of post-production
and content distribution MIDAS creates
a digital workflow that allows customers
to manage projects remotely and provides
for rapid and seamless global file delivery
streaming and collaboration
TECHNOLOGY SYSTEMS SERVICES
37 Thomson Panorama 2006
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While expanding into newer markets
growing demand for post-production ser-
vices and visual effects continued to fuel
Thomsonrsquos ongoing content services activ-
ities Among the yearrsquos most noteworthy
achievements were portfolios of services
for such feature films as The Departed
Letters from Iwo Jima and Pirates of the
Caribbean Dead Manrsquos Chest ThomsonrsquosMoving Picture Company (MPC) also pro-
vided high-end visual effects for the three
films nominated for Achievement in Visual
Effects Pirates of the Caribbean Posei-
don and Superman Returns
Confirming the Grouprsquos solid growth in
content services for the video game indus-
try Thomson unveiled a new dedicated
Interactive Services facility in Burbank
California in 2006 Sierra Entertainment
a division of Vivendi Games selected
Thomson to prov ide cinemat ic anima-
tion voice casting and recording sound
design and mixing services for The Leg-
end of Spyrotrade A New Beginning Like-
wise Thomson provided a wide range of
services to support Konamirsquos The SilentHill Experience released simultaneously
with the motion picture
The strategic investment in one of Indiarsquos
leading animation and gaming cinemat-
ics firms announced in February 2007
strengthened Thomsonrsquos position in Asia
for a variety of content services Located in
Bangalore India Paprikaas provides cre-
ldquoIn 1998 I joined Thomson as a Plant Manager within Home Entertainment Services
and was eventually made responsible for the expansion and management of our
Guadalajara DVD operations In summary Irsquove had great opportunities to gain experience
in international operations strategic planning and operational excellence I recently
joined Content Services where Irsquoll be leading the start-up and integration of new activities
in Beijing Bangalore and other emerging markets Content Services is dynamic and
growing and Irsquom looking forward to expanding the business in Asia while improving
our operational performance in North America and Europerdquo
Mike Hayden Vice President Operations amp Strategic Projects Content Services
of the Grouprsquos divisions and profit centersIn the context of the budgetary procedure
performance measurement indicators are
calculated by the divisions analyzed and
reviewed monthly to serve as a reference
for the Grouprsquos monthly reporting
Management reporting and
closing period work
Th om so n uses a co mmon char t of
accounts which is regularly updated The
principal accounting and financial figures
of the operational and functional depart-
ments consolidated at Group level are
analyzed by the Grouprsquos management
control team and reviewed by the Grouprsquos
Executive Committee
The closing process for the half-year and
annual consolidated financial statementsoccurs in two steps The first step con-
sists of a ldquohard closerdquo completed in May
and September leading to a first review by
the statutory auditors The second step
occurs in July and in JanuaryFebruary and
involves the finalization of half-year and
annual consolidated financial statements
under IFRS The Group then proceeds
once a year with a reconciliation of these
results in accordance with US GAAP
Preparation of financial statements
The financial statements are prepared jointly by the finance department and the
General Secretary They are based on
information reported through the annual
reporting and accounting consolidation
processes and on operational and mar-
ket information which is specifically cen-
tralized for the preparation of Thomsonrsquos
Document de Reacutefeacuterence in France and
the submission of Form 20-F in the United
States Half-year and annual financial infor-
mation is reviewed by the Grouprsquos Audit
Committee
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58 Thomson Panorama 2006
(1) Source PriceWaterhouseCoopers ndash
ldquoGlobal Entertainment and Media Outlook 2006-10rdquo
Revenue growth
Thomson achieved consolidated 2006
net revenues of 9914045854 million up from
9914045591 million in 2005 Revenues for
the Core Business reached 9914045747 mil-
lion (9914045776 million at constant currency)
representing 83 growth over 2005 at
constant currency
Overall the Grouprsquos key growth busi-
nessesmdashContent Services Network
Services Access Products for telecom
operators and our Broadcast amp Networks
businesses (Grass Valley and Network
Software)mdashincreased strongly year-on-
year and accounted for over a third of
Group revenues against less than a quar-
ter in 2005
Thomsonrsquos Core Business EBIT for 2006
was euro504 million representing a Core
Business EBIT margin of 88 Thisreflected growth in some key businesses
and cost actions across the Group off-
setting a significant investment in research
and development and some increase in
restructuring expenses
Increased spend on RampD
Research and development expenditure
charged in the Core Business (net of
external funding) rose from 991404221 million in
2005 to 991404279 million in 2006 an increase
of 26 principally in the Systems divi-
sion The Group expanded the number ofproducts and services in the development
phase across its businesses
Return to profit
Losses in Non-Core Continuing and Dis-
continued operations were substantially
lower year-on-year reflecting principally
the exit from heavily loss-making Displays
activities in 2005 and intensified cost-sav-
ing programs in 2006 A major revision
and harmonization of the Grouprsquos North
American healthcare obligations gave rise
to substantial one-time gains and Thom-
son also initiated significant restructuring
of its French Non-Core operations
The good performance of the Core Busi-
ness lower Non-Core and Discontinued
losses and a low reported tax chargeenabled the Group to return a net profit of
99140455 million in 2006 compared to a loss of
991404573 million in the previous year
Good cash flow
strengthened balance sheet
Thomson generated good free cash flow
and strengthened its balance sheet in
2006 Total net financial liabilities on the
balance sheet fell by 991404460 million reflect-
ing a 99140493 million fall in financial and acqui-
sition-related debts and a 991404367 million
reduction in retirement benefit obligations(including healthcare)
Increase in Net Dividend
The Board of Directors proposed a dis-
tribution to shareholders of 991404033 per
share (2005 dividend 991404030) reflecting
confidence in the prospects of the Group
going forward
Outlook 2007-2009
growth in revenues and net income
With the Grouprsquos transformation complete Thomsonrsquos financial focus over the 2007-
2009 period will be to grow revenues and
net income
Thomson serves growing Media Enter-
tainment amp Communications marketsmdashfor
which external estimates(1) indicate com-
pound growth of around 6 over the last
FINANCIAL AND
OPERATIONAL PERFORMANCE
Full year 2006 results
saw a return to profitability
and leave Thomson
well positioned at
the heart of convergence
and digital video
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59 Thomson Panorama 2006
five years Our digital and electronic busi-
nesses now represent two-thirds of rev-
enues and we believe they are growing
faster than the overall market offsetting
the maturing physical media businesses
Given this profile the Group expects its
revenue growth to be more modest in
2007 but to gather pace over the period
and our overall objective is to show com-pound growth over 2007-2009 in line with
or faster than the overall market
The 2007-2009 period is also expected
to see a sharply reduced impact from
residual Non-Core activities with an end
to losses from the Discontinued Activities
perimeter after 2007 Accordingly Thom-
sonrsquos ambition is to turn its Core Business
growth and profitability and lower impact
from Non-Core into strong growth in net
income over the period 2007-2009
Business operations
Continuous performance improvement is
fundamental to Thomsonrsquos commitment to
create sustainable business models and
long-term value for all stakeholders The
ambitious Group-wide programs launched
in 2004 to improve productivity and
enhance overall performance producedsubstantial results in 2006 and led to new
and strong initiatives for long-term growth
As of the second half of 2006 six ldquoKey
Programsrdquo are monitored at Group level
Clients Software Product Introduction
Operations Transformation and Talent
Management
KEY PROGRAMS IN PLACE
Program Focus
Clients Thomsonrsquos clientregional diversification and
growth of the existing business
through improved Sales amp Marketing
Software Development of integrated software platforms
in all markets (post-production distribution
delivery) and for all types of customer
(professional prosumerhellip)
Product Introduction Ensuring new product roadmaps are in line
with strategy and resource needs have been
identifiedOperations Improving the Grouprsquos cost base cash
generation and working capital
Transformation Multiple programs including initiatives to
improving customer relationship management
worldwide supply chain management
IT transformation as well as Thomsonrsquos RampD
footprint
Talent Management Leveraging human assets with a focus on
talent retention and acquisition
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60 Thomson Panorama 2006
SUMMARY RESULTS FULL YEAR 2006
In 991404 millions unless otherwise stated 2006(1) 2005(1)
Net revenues 5854 5591(1)
Core Business net revenues 5747 5335
Services 2489 2487
Systems 2684 2262
Technology 547 546
Corporate 27 40
Non-Core continuing operations net revenues 107 256
Core Business EBIT(2) 504 512
Services 160 205
Systems 132 109
Technology 289 277Corporate (77) (79)
EBIT from Non-Core continuing operations (25) (122)
(1) Restated with 2006 discontinued activities according to IFRS 5
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61 Thomson Panorama 2006
Year ended December 31in 991404 except number of shares 2006 2005 2004
Year ended December 31in 991404 millions 2006 2005(1) 2004(1)
CONSOLIDATED STATEMENTS OF OPERATIONS
(1) Restated with 2006 discontinued activities according to IFRS 5
(2) After deduction of the interests net of tax paid on the subordinated perpetual notes during the period
Continuing operations
Revenues 5854 5591 5980
Cost of sales (4474) (4240) (4594)
Gross margin 1380 1351 1386
Selling marketing general and administrative expenses (674) (638) (653)
Other income (expense) 52 (96) (69)
Research and development expenses (279) (227) (201)
Profit from continuing operations before tax and net finance costs 479 390 463
Interest income 19 30 52
Interest expense (108) (108) (54)
Other financial income (expense) (111) 36 (26)
Finance costs ndash net (200) (42) (28)
Share of profit (loss) from associates (86) (82) (20)
Income tax ndash (68) (93)
Profit from continuing operations 193 198 322
Discontinued operations
Profit (loss) from discontinued operations (138) (771) (883)
Net income (loss) 55 (573) (561)
Attributable to
Equity Holders 55 (574) (559)
Minority interests ndash 1 (2)
Weighted average number of shares
outstandingmdashbasic net of treasury stock 261188858 266539917 273646869
Earnings per share from continuing operations
Basic(2) 067 074 118
Diluted 063 042 111
Earnings per share from discontinued operations
Basic (053) (289) (323)
Diluted (048) (262) (296)Total earnings per share
Basic(2) 014 (215) (205)
Diluted 015 (220) (185)
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62 Thomson Panorama 2006
CONSOLIDATED BALANCE SHEETS
In 991404 millions December 31 December 31 January 1 December 31 2006 2005 2005(1) 2004
ASSETS
Non-current assets
Property plant and equipment 813 886 1051 1051
Goodwill 1714 1756 1186 1178
Other intangible assets 1071 1150 924 924
Investments in associates 12 204 260 260
Investments and financial assets available-for-sale 266 341 139 113
Derivative financial instruments 7 1 11 ndash
Contract advances 129 173 179 179
Deferred tax assets 397 379 307 301
Other non-current assets 110 182 133 136
Total non-current assets 4519 5072 4190 4142
Current assets
Inventories 366 333 503 568
Trade accounts and notes receivable 1018 1315 1232 1180
Current accounts with associates and joint ventures 97 115 143 143
Derivative financial instruments 8 9 115 ndash
Other current assets 535 644 483 616
Marketable securities ndash 7 58 58
Cash and cash equivalents 1311 996 1845 1848
Assets classified as held for sale 264 369 80 ndash
Total current assets 3599 3788 4459 4413
Total assets 8118 8860 8649 8555
(1) Including the impacts of the first-time application related to IAS 32 and 39 on financial instruments and IFRS 5 on non-current assets held for sale and
discontinued operations
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63 Thomson Panorama 2006
In 991404 millions December 31 December 31 January 1 December 31 2006 2005 2005(1) 2004
SHAREHOLDERSrsquo EQUITY AND LIABILITIES
Shareholdersrsquo equity
Common stock (273871296 shares at
December 31 2006
with nominal value of euro 375 per share) 1027 1025 1025 1025
Trade accounts and notes payable 1032 1164 1199 1226
Accrued employee expenses 165 166 158 163
Income tax payable 57 47 60 60
Other current liabilities 671 750 746 800
Payables on acquisition of companies 13 138 84 84
Liabilities directly associated with
assets classified as held for sale 232 470 88 ndash
Total current liabilities 3681 4393 3602 3459
Total liabilities 5999 6644 6251 6062
Total shareholderrsquos equity and liabilities 8118 8860 8649 8555
(1) Including the impacts of the first-time application related to IAS 32 and 39 on financial instruments and IFRS 5 on non-current assets held for sale and
discontinued operations
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Creation and lay-out
Photo credits Nathalie BerhingGAMMA ndash Steacutephane de Bourgies ndash Jean-Franccedilois DeroubaixGAMMA ndash Christine Donnier- ValentinGAMMA ndash Cars copy 2006 Disney Enterprises IncPixar All Rights Reserved ndash Dreamgirls copy 2006 DREAMWORKS
LLC and PARAMOUNT PICTURES All Rights Reserved ndash Poseidon copy 2006 Warner Bros Pictures ndash Sony Bravia Paint
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Silicon Solutions
As more and more system value and intel-
ligence is embedded onto silicon micro-
chips Thomson has placed increased
emphasis on in-house silicon design and
development efforts These range from
integrated circuits for communications and
set-top boxes to chips designed specifi-cally for broadcasting and mobile devices
The growing sophis tication of home
network access devices helps explain
why more than 200 Thomson engineers
are continuing to develop innovative
integrated circuits As with all Thomson
technology innovations our silicon invest-
ment is focused equally on increasing our
leadership in set-top boxes as much as
on providing integrated circuit solutions
to industry leaders
Intellectual Property amp Licensing
Thomsonrsquos extraordinarily rich intellectual
property assets include over 55000 pat-
ents derived from more than 7000 inven-
tions with some 600 new invention patent
applications filed in 2006
Thomsonrsquos patent portfolio remains a key
pillar for both the Technology division and
the Group as a whole with patented tech-
nologies including digital decoders high-
definition TV optical module patents for
Thomsonrsquos rich intellectual property
assets include over 55000 patents
CD and DVD players MPEG video com-
pression mp3 audio compression format
interactive TV and storage technologies
Having successfully migrated the propor-
tion of income derived from digital rather
than analogue technologies digital tech-
nology-based programs now account for
over 80 of the Grouprsquos large licensingrevenue stream with over 950 licensing
contracts in place worldwide at year-end
2006
TECHNOLOGY SYSTEMS SERVICES
23 Thomson Panorama 2006
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Thomsonrsquos Systems division provides video solutions and integrates video network systems for its customers in
the broadcast cable satellite terrestrial and telecoms markets The divisionrsquos offering spans image capture to
network distribution to the provision of access products enabling operators to enrich their service offerings to
subscribers
SYSTEMS
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Today people benefit from virtually instan-
taneous access to an increasingly custom-
ized range of content available through
a growing set of access possibilities As
internet and digital technologies con-
tinue to infuse the Media Entertainment
amp Communications industries Thomson
is focusing on opportunities arising from
this new paradigm alongside its traditionalcore markets These range from traditional
broadcast equipment to the growing mar-
ket for professional audio-video systems
mobile and IP (Internet Protocol) TV to
booming demand for residential broad-
band services
Strategy
Thomsonrsquos Systems division comprises
three activities Access Products and the
Broadcast amp Networks businesses The
Access Products business aims to deliver
key set-top box platforms for satellite andcable customers and gateway products
for telecom operators The Broadcast
amp Networks businesses are focused on
video network integration bringing to
market advanced products and solutions
to enable network operators broadcast-
ers and film-makers to benefit from the
latest technologies in image acquisition
compression switching and storage The
Network Software business aims to enable
the introduction of new multiple-play ser-
vices based on fixed-mobile convergence
IPTV and broadband telephony
Achievements
Overall the Systems division improved
diversified its customer base in 2006 In
Access Products Thomson consolidated
its leadership of worldwide markets forset-top boxes gateways and modems for
telecom satellite and cable network oper-
ators and service providers while achiev-
ing good growth in higher-end products
in the second half of the year In Grass
Valley demand for high-defin ition (HD)
acquisition production and distribution
systems combined with growing demand
for IT- and IP-based broadcast solutions to
drive growth while in Network Software
Thomsonrsquos SmartVis ion IPTV system
gained good ground with more than 30
IPTV and mobile TV deployments to date
and the worldrsquos largest installed base
Access Products
The Access Products business was driven
in 2006 by the ongoing rapid expansion of
triple (video voice and data) and quadru-
ple play services (also fixed-mobile con-
vergence) offered by cable and telecom
network operators and by the increasing
spread of high definition (HD) broadcasts
among satellite network operators
SYSTEMS
PROVIDING VIDEO SOLUTIONS
From image capture to
distribution via
all types of network
Thomson is reaping the benefits of
growing market demand for
video network integration
TECHNOLOGY SYSTEMS SERVICES
26 Thomson Panorama 2006
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Thomson further consolidated its market
leading position for dual and triple-play
gateways to telecom operators and inter-
net service providers The established mar-
ket leader for DSL modems and routers
since 1999 Thomson extended its lead
over the competition in 2006 shipping
more than 42 million DSL modems and
gateways during the first half of the yearand 10 million units overall in 2006
Growing market demand for sophisticated
home networking eco-systems able to
accommodate new services over time was
underlined by the success of Thomsonrsquos
Livebox gateway for France Telecom
Early in 2007 Thomson supported large-
scale deployment of the Livebox which
provides access to high-speed wireless
Internet Voice-over-IP IPTV network
gaming fixed-mobile convergence (unik)
and other services
An advanced Thomson gateway also
enabled the UKrsquos leading operator to
launch its innovative Total Broadband ser-
vice in June 2006 Bri tish Telecomrsquos BT
Home Hubtrade is a quadruple-play gateway
designed to support BTrsquos full range of ser-
vices including both BT Total Broadband
and BT Broadband Talk in addition to
providing wired and wireless broadband
connectivity for fixed and mobile phones
PCs and other networked devices It also
Mobile video in Italy
Thomsonrsquos product and service offering benefited in 2006 from increased interest from cable and
telecom operators to complete their offering for Video-on-Demand and mobile TV The Olympic Winter Games
notably provided a showcase for Thomsonrsquos capability to deliver video programming to cell phones and
other mobile devices In the wake of the successful Olympic trial Telecom Italia turned to Thomson
for the systems and technology that enabled it to commercially launch a mobile offering including TV and
sports programming in June 2006
incorporates the latest wideband audio
codec providing near CD-quality sound
for voice and video calls
As broadband services become more and
more of a mass-market service providers
must ensure that their services are both
differentiating and easy to consume This
trend calls for the emergence of simpleyet very technologically-advanced and
software-laden devices Such devices
connect to the home-networking gateway
and make it natural to consume a broad-
band-delivered service One example
is the Music Box first made available to
subscribers of AOLrsquos broadband service
in France which streams Internet-based
radio stations or locally stored music files
to a homersquos legacy Hi-Fi audio system
Strong growth in the cable network sys-
tems market which is projected to expand
another 20 in 2007 helped drive Thom-son toward two major sales milestones
in 2006 two million cable set-top boxes
and ten million cable modems Driven by
operatorsrsquo needs to provide more and
more sophisticated services Thomson
has extended its product range since
2005 to include interactive double- and
triple-play set-top boxes as well as HD
set-top boxes with advanced functions
such as personal video recorders (PVR)
Among the cable operators to have
TECHNOLOGY SYSTEMS SERVICES
27 Thomson Panorama 2006
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Total Broadband for BT
An advanced Thomson gateway enabled the UKrsquos leading telecommunications operator British Telecom
to launch its innovative Total Broadband service in June 2006 This quadruple-play gateway
known as the BT Home Hubtrade features video voice data and wireless capabilities
It is supporting BTrsquos full range of services including wired and wireless broadband connectivity
for fixed and mobile phones PCs and other networked devices
28 Thomson Panorama 2006
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Left Thomson Grass Valley branded
outside broadcast van under construction
Right Camera operator Kim Marks (left)
a camera first assistant Chris Blauvelt (center)
and a camera second assistant
Jason McCormick (right) line up a scene
with the Grass Valley Viper FilmStreamtrade
camera for the David Fincher feature Zodiac
Photo courtesy Paramount Pictures
selected Thomson in 2006 were Portu-
galrsquos leading Pay-TV Operator TV Cabo
UPC E-Vision Kabel Deutschland and
Premiegravere in Europe Net Serviccedilos in Latin America and StarHub and Dalian Cable
TV in Asia
Thomson expanded its footprint in satel-
lite in Europe notably in the UK and in
Asia where product deliveries began for
Tata Sky the Indian satellite broadcaster
In the UK Thomson delivered the Sky
HD box an MPEG-4 set-top box with
Personal Video Recorder which enabled
the successful launch of the countryrsquos first
high-definition TV service in May 2006
The largest satel li te television service
provider in the US DIRECTV also chose Thomson to expand its HD programming
offering with the delivery of the H20 satel-
lite receiver
Leveraging expertise in free-to-air digi-
tal terrestrial receivers and capabilities in
high-definition Thomson also delivered
the first MPEG-4 HDTV receivers for digital
terrestrial TV to French operators Canal +
and TPS during the year
In telephony Thomson remains a lead-
ing supplier of corded and cordless tele-
phones which are sold at retail outletsunder the RCA GE and Alcatel brands as
well as under third-party brands for opera-
tor sales In 2006 Thomson capitalized
on its leadership position in DECT (Digital
Enhanced Cordless Telecommunications)
in Europe by expanding into the American
retail market
Broadcast amp Networks
The Broadcast amp Networks businesses
gained market share in 2006 particularlyin networks and systems integration and
expanded in the promising Pro-AV (profes-
sional audio-video) market
Continuing trends in this market are high-
definition (HD) broadcasting the merging
of IT and broadcast technology the move
to a tape-less file-based approach to video
storage and management and power-
ful MPEG-4 HD compression technology
which allows content to be delivered to mul-
tiple audiences over multiple platforms
One highly visible application of ThomsonrsquosGrass Valley brand of HD image acquisi-
tion and production systems was the 2006
FIFA World Cup in Germany seen by a
billion viewers around the world Broad-
casters covering the event relied on more
than 182 Grass Valley brand cameras
10 Grass Valley video switching systems
12 large scale Grass Valley video routing
systems and hundreds of other devices to
provide faultless HD images
Leveraging its market leading position
Thomson est imates tha t Grass Valley
HD cameras now account for 50 of theglobal market Most major outside broad-
cast production companies in the world
use Grass Valley branded HD camera sys-
tems with more than 1500 in use
High-definition television is also about
news Based on internal Thomson esti-
mates Grass Valley solutions accounted
for nearly 80 of HD news installations
worldwide in 2006 including CBS Net-
work-owned amp operated stations in the
TECHNOLOGY SYSTEMS SERVICES
29 Thomson Panorama 2006
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IGNITE HD
TV news operations can work more quickly and efficiently by using information
technology The industryrsquos first and most complete link between the control room
and the newsroom HD Ignite enables a single technician to handle all
news production requirements During its initial months on the market in the US
HD Ignite was selected by such early adaptors as ABC Stations Group
customers in San Francisco and Chicago and Cox Broadcasting customers in
Atlanta San Francisco Charlotte North Carolina and Dayton Ohio
Telecom service providers are working to
provide more content and value-added
services over their broadband lines
Thomsonrsquos SmartVision and
Cirpack software solutions facilitate
their strategies for rapid deployment of
IPTV and triple-play services
US Al Jazeera Englishmdasha global channelbased in the Middle Eastmdashand Belgiumrsquos
VTM (Vlaamse Televisie Maatschappij )
Thomson is the only supplier to provide
an automated production system (Ignite
HD) a full suite of non-linear editing sys-
tems and a news playout systemmdashall of
which enable broadcasters to move to HD
affordably and to speed up and automate
their workflows
MPEG-4 is one of the enabling technolo-
gies which allows operators of telecom-
munications networks to bring TV to
their subscribers in addition to voice andinternet access This is one element in a
complete Thomson systems offering For
example Spanish operator Telefoacutenica
selected Thomson for a range of equip-
ment and systems to upgrade and expand
its rapidly growing ldquoImageniordquo service In
the US Falcon Communications a lead-
ing systems integrator offers a turnkey
IPTV solution featuring encoding content
delivery service management and access
products from Thomson
bull Professional Audio-Video
Thomson serves the rapidly growing mar-ket for professional audiovisual (ProAV)
solutions for corporate institutional wor-
ship and governmental media centers and
networks Thomsonrsquos expansion in ProAV
has been achieved through organic prod-
uct development as well as the integra-
tion of Pro-AV products from Canopus
the Japanese company acquired in early
2006
EDIUS desktop video
editing software part of
Thomsonrsquos growing rangeof professional
audiovisual and
broadcast solutions
TECHNOLOGY SYSTEMS SERVICES
30 Thomson Panorama 2006
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ldquoHaving started out in research today Irsquom responsible for our modemsrsquo roadmap
and strategy Our customersmdashthe telecoms operatorsmdashhave seen their business
transformed by technology like high-speed broadband And I find it fascinating
how these technologies have penetrated our daily lives the way we live and how
we communicate have changed dramatically over the last ten years
Even faster broadband (VDSL) fiber optics wireless technologies fixed-mobile
convergencehellip mean the pace of change is set to accelerate therersquos no doubt
wersquore living in exciting timesrdquo
Stan Claes Product Manager for IP-based Access Products
A key product introduction in 2006 was
the Grass Valley Indigo AV Presenta-
tion Switcher which combines features
normally found in separate devices in aunified powerful control interface simple
enough to be used by a single operator
Digital signage is also providing new mar-
ket opportunities combining the latest in
display delivery and storage technologies
Thomsonrsquos integrated digital media man-
agement solution Media Edge solves the
complex control distribution and archive
demands of customers Media Edge can
stream high-quality SD and HD content
over an IP network for example to the retail
store environment without the need to re-
invest in infrastructure
Broadcast amp Networksmdash
Network Software
2006 saw telecom service providers con-
tinue to build strategies to provide more
content and value-added services over
their broadband lines Thomsonrsquos Smart-
Vision TV service platforms and Cirpack
telephony switches are at the heart of sev-
eral of the worldrsquos largest IPTV and VoIP
services
In 2006 the launch of a pre-integrated mul-tiple play solution for telecom service provid-
ers illustrated Thomsonrsquos ability to leverage
skills across multiple business units The
solutions which enable telecom providers
to bring a myriad of services to broadband
subscribers are built around Thomsonrsquos
SmartVision and Cirpack software solu-
tions integrated with Thomsonrsquos Grass
Valley branded video head-end equipment
and Thomson home gateways and set-top
boxes This represents the first pre-inte-
grated solution on the market for rapid easy
deployment of triple play services including
voice video and internet access
More than 30 IPTV and mobile TV service
platforms have been deployed around the
world with SmartVision well-positioned
for convergent operators since it allows
video distribution over fixed and mobile
networks
Thomsonrsquos Cirpack softswitches which
help provide the core for the new inte-
grated platforms occupied the top mar-
ket position worldwide for residential
broadband telephony (VoIP) platforms in
2006 Over the course of 2006 Europersquoslargest primary line VoIP operator Freefr
upgraded its Cirpack switches to bring a
new seamless fixedmobile service to its
two million customers placing Thomson
at the forefront of new fixed-mobile con-
vergence solutions Signaling the rapid
expansion of sales outside traditional
Western European markets Thomsonrsquos
Cirpack switches were selected by many
telecom operators in Northern Africa Cen-
tral and Eastern Europe as well as Central
America to build or upgrade legacy voice
networks and deliver advanced telephone
services using IP technologies
TECHNOLOGY SYSTEMS SERVICES
31 Thomson Panorama 2006
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Thomsonrsquos Services division provides end-to-end management of business-critical services on behalf of Media
Entertainment amp Communications customers These include management of broadcast and network operations
centers on an outsourced basis and the provision of an array of content services to the creative community from
post-production to visual effects
SERVICES
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Thomsonrsquos Services division provides end-
to-end management of business-critical
services spanning physical media con-
tent services electronic content distribu-
tion and network services The division
is the worldrsquos leading provider of state-
of-the-art film-making post-production
visual effects and broadcast center man-
agement services
Strategy
The Services division continues to focus
on managing v ideo networks and
op er at io na l centers on behalf of its
customers who are able to concentrate
on their core business of content The
emphasis on high-growth opportunities
in newer market sectors such as retail
and corporate networks and gaming
has been sharpened
Achievements
New customers in fast-growing market
segments responded well to a range of
high value-added services from the Ser-
vices division in 2006 Network Services
showed particularly strong growth as net-
work operators in Europe Asia and North
America selected Technicolor-branded
management services The addition of
such leading customers as ITV in the
UK and France 24 and TV5 in France
substantially expanded Thomsonrsquos fast-
growing Network Services business
Noteworthy successes were also achieved
in Theatrical Services due in part to the
continued development of Thomsonrsquos digi-
tal cinema activity The Content Services
business continued to expand its post-
production services business by opening
a digital intermediate facility on the SonyPictures Entertainment studio lot In 2006
a new Home Entertainment Services unit
was created combining Thomsonrsquos DVD
business with electronic distribution to
develop new services to support emerging
lsquoon demand contentrsquo business models
Network Services
With a comprehensive portfolio of services
for broadcasters network and internet TV
operators movie theatres retailers and
corporations Network Services continued
to expand briskly in 2006 Broadcastersincreasingly selected Thomson as their
long-term network services partner By
year-end Network Services was providing
managed services under the Technicolor
brand to close to 200 channels from
17 facilities in France the Netherlands
Japan North America and the UK
Late in the year Thomson signed a long-
term agreement with ITV for network
transmission operations services for its six
From managing video
networks on an outsourced
basis to a broad range of
offerings in content services
Thomson is bringing its video
expertise to new markets
and geographies
Left Network Services for broadcasters
cable TV operators movie theaters
retailers and corporations is one of Servicesrsquo
fastest-growing business segments
Right Thomson provided film sound
DVD and digital cinema services for Cars
the DisneyPixar hitCars copy 2006 Disney Enterprises IncPixar All R ights Reserved
SERVICES
MANAGING VIDEO NETWORKS
TECHNOLOGY SYSTEMS SERVICES
34 Thomson Panorama 2006
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existing UK channels including the coun-
tryrsquos leading commercial channel In addi-
tion an agreement signed with NOB Cross
Media Facilities (NOB CMF) a subsidiary
of Nederlands Omroepproduktie Bedrijf
(NOB) likewise established Thomson as
a major supplier of network management
services in the Netherlands
In France Network Services added new
clients France 24 and TV5 which covers
203 countries and territories to move into
the market-leading position managing
more than 60 channels and 1500 hours
of programming daily The France 24 part-
nership also involves equipping their new
global TV news operation
Thomson drove expansion and innovation
in its retail media services over the course
of the year One of the most notable achie-
vements involves an ambitious in-store
network upgrade program piloted in2006 by Wal-Mart in the USA with Premier
Retail Networks (PRN) a subsidiary within
Thomsonrsquos Network Services operat ion
The in-store network platform was based
on Thomson IPTV technologies adapted
for the retail environment The system
the first pilot of IPTV in the retail environ-
ment delivered real impact on product
sales and improved customer satisfaction
in Wal-Mart stores PRN also expanded
capabilities into China early in 2007 with
Content Services revving up
Thomson provided a wide range of services for a number of major international film releases in 2006
such as Cars one of the three nominees for Best Animated Film at the Oscars Thomson Technicolor provided
film services sound services DVD compression and authoring replication and distribution
as well as digital cinema mastering and distribution for the DisneyPixar hit The Grouprsquos Content Services offering
has expanded in recent years to include the high-growth video-gaming advertising and broadcast markets
the signing of a joint venture with CGEN a
technology company leading the Chinese
in-store digital signage media industry
The two companies are currently collabo-
rating on the roll-out of an in-store media
network to 750 internet cafeacutes part of the
leading Chinese chain Big Cafeacute
Theatrical Services
Thomson signed Europersquos first large-scale
digital cinema rollout agreement in 2006
with the Kinepolis Group one of the conti-
nentrsquos most innovative theater circuits and
the leading exhibition chain in Belgium
The agreement to instal l and operate
digital cinema systems in 130 Kinepolis-
owned and operated screens passed a
first milestone in March 2007 with Thom-
sonrsquos first international distribution by sat-
ellite of an encrypted digital version of the
film Dreamgirls from the US to a Kinepolis
theater in Brussels Belgium
A series of new contracts were awarded
in the US For example in the fall of 2006
Technicolor Digital Cinema began installing
digital projection systems at 120 National
Amusements Inc screens in Boston Los
Angeles New York and elsewhere as part
of a strategic agreement National Amuse-
ments operates more than 1500 screens
in the US UK Latin America and Russia
Digital projection systems were also
TECHNOLOGY SYSTEMS SERVICES
35 Thomson Panorama 2006
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The growing market for Network Services
The decision by the UKrsquos leading commercial broadcaster to entrust its network services to
Thomsonrsquos Network Services operations illustrates a growing global trend as broadcasters focus increasingly on
programming and meeting customer needs they turn to highly-skilled specialists to handle technology
The long-term agreement with ITV means that the broadcaster will benefit from enhanced service and new technology
as well as more flexibility in launching new services
36 Thomson Panorama 2006
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Left Thomsonrsquos Technicolor
Interactive Services provided in-game
cinematics and voice recording for
Microsoft Game Studiosrsquo Gears of War
Right Thomsonrsquos London-based MPC
subsidiary carried out post-production
work including computer graphics
on Sony Braviarsquos award-wirring colorful
Paint commercial
installed at several landmark theatres in
Los Angeles in 2006 including Mann The-
atresrsquo Graumanrsquos Chinese and the Village
in Westwood
Thomson maintained a leading position in
film processing and printing in 2006 in a
market where volumes were stable Tech-
nicolor handled worldwide release printingfor two of the five 2007 Oscar nominees
for Best PicturemdashMartin Scorcesersquos The
Departed and Clint Eastwoodrsquos Letters
from Iwo Jimamdashas well as release print-
ing for two of the three Best Animated Film
nominees Cars and Happy Feet
As part of its ongoing commitment to meet
customer needs worldwide a state-of-the-
art film and post-production facility was inau-
gurated at Ciudad de la Imagen in Madrid in
2006 It is already becoming known as the
countryrsquos most comprehensive postproduc-
tion facility with advanced film processingand digital intermediate capabilities
Content Services
Thomson continued to leverage its long-
standing strength in post-production
skills and services through expansion into
emerging and high-growth market seg-
ments such as content services for the
video-gaming advertising and broadcast
markets
In order to better serve the growing mar-
ket for entertainment content for mobile
devices Thomson unveiled new mobile
content preparation and distribution capa-
bilities in the US and the UK in 2006 Facili-
ties equipped with state-of-the-art produc-
tion and post-production technologies will
handle the preparation and optimization
of a wide range of digital entertainmentcontentmdashincluding movies TV episodes
and music videosmdashfor distribution to
mobile devices The dedicated services
complement the Grouprsquos extensive global
electronic distribution infrastructure which
enables Thomson to deliver mobile con-
tent to online delivery services as well as
to network operators for final transmission
to mobile customers
Thomson also made progress in the
development of an integrated digital asset
management solution in 2006 known as
MIDAS (Media Ingest Distribution andStorage) MIDAS is a software and hard-
ware platform for digital content prepara-
tion storage security and distribution
From the first day of production planning
through every stage of post-production
and content distribution MIDAS creates
a digital workflow that allows customers
to manage projects remotely and provides
for rapid and seamless global file delivery
streaming and collaboration
TECHNOLOGY SYSTEMS SERVICES
37 Thomson Panorama 2006
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While expanding into newer markets
growing demand for post-production ser-
vices and visual effects continued to fuel
Thomsonrsquos ongoing content services activ-
ities Among the yearrsquos most noteworthy
achievements were portfolios of services
for such feature films as The Departed
Letters from Iwo Jima and Pirates of the
Caribbean Dead Manrsquos Chest ThomsonrsquosMoving Picture Company (MPC) also pro-
vided high-end visual effects for the three
films nominated for Achievement in Visual
Effects Pirates of the Caribbean Posei-
don and Superman Returns
Confirming the Grouprsquos solid growth in
content services for the video game indus-
try Thomson unveiled a new dedicated
Interactive Services facility in Burbank
California in 2006 Sierra Entertainment
a division of Vivendi Games selected
Thomson to prov ide cinemat ic anima-
tion voice casting and recording sound
design and mixing services for The Leg-
end of Spyrotrade A New Beginning Like-
wise Thomson provided a wide range of
services to support Konamirsquos The SilentHill Experience released simultaneously
with the motion picture
The strategic investment in one of Indiarsquos
leading animation and gaming cinemat-
ics firms announced in February 2007
strengthened Thomsonrsquos position in Asia
for a variety of content services Located in
Bangalore India Paprikaas provides cre-
ldquoIn 1998 I joined Thomson as a Plant Manager within Home Entertainment Services
and was eventually made responsible for the expansion and management of our
Guadalajara DVD operations In summary Irsquove had great opportunities to gain experience
in international operations strategic planning and operational excellence I recently
joined Content Services where Irsquoll be leading the start-up and integration of new activities
in Beijing Bangalore and other emerging markets Content Services is dynamic and
growing and Irsquom looking forward to expanding the business in Asia while improving
our operational performance in North America and Europerdquo
Mike Hayden Vice President Operations amp Strategic Projects Content Services
of the Grouprsquos divisions and profit centersIn the context of the budgetary procedure
performance measurement indicators are
calculated by the divisions analyzed and
reviewed monthly to serve as a reference
for the Grouprsquos monthly reporting
Management reporting and
closing period work
Th om so n uses a co mmon char t of
accounts which is regularly updated The
principal accounting and financial figures
of the operational and functional depart-
ments consolidated at Group level are
analyzed by the Grouprsquos management
control team and reviewed by the Grouprsquos
Executive Committee
The closing process for the half-year and
annual consolidated financial statementsoccurs in two steps The first step con-
sists of a ldquohard closerdquo completed in May
and September leading to a first review by
the statutory auditors The second step
occurs in July and in JanuaryFebruary and
involves the finalization of half-year and
annual consolidated financial statements
under IFRS The Group then proceeds
once a year with a reconciliation of these
results in accordance with US GAAP
Preparation of financial statements
The financial statements are prepared jointly by the finance department and the
General Secretary They are based on
information reported through the annual
reporting and accounting consolidation
processes and on operational and mar-
ket information which is specifically cen-
tralized for the preparation of Thomsonrsquos
Document de Reacutefeacuterence in France and
the submission of Form 20-F in the United
States Half-year and annual financial infor-
mation is reviewed by the Grouprsquos Audit
Committee
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58 Thomson Panorama 2006
(1) Source PriceWaterhouseCoopers ndash
ldquoGlobal Entertainment and Media Outlook 2006-10rdquo
Revenue growth
Thomson achieved consolidated 2006
net revenues of 9914045854 million up from
9914045591 million in 2005 Revenues for
the Core Business reached 9914045747 mil-
lion (9914045776 million at constant currency)
representing 83 growth over 2005 at
constant currency
Overall the Grouprsquos key growth busi-
nessesmdashContent Services Network
Services Access Products for telecom
operators and our Broadcast amp Networks
businesses (Grass Valley and Network
Software)mdashincreased strongly year-on-
year and accounted for over a third of
Group revenues against less than a quar-
ter in 2005
Thomsonrsquos Core Business EBIT for 2006
was euro504 million representing a Core
Business EBIT margin of 88 Thisreflected growth in some key businesses
and cost actions across the Group off-
setting a significant investment in research
and development and some increase in
restructuring expenses
Increased spend on RampD
Research and development expenditure
charged in the Core Business (net of
external funding) rose from 991404221 million in
2005 to 991404279 million in 2006 an increase
of 26 principally in the Systems divi-
sion The Group expanded the number ofproducts and services in the development
phase across its businesses
Return to profit
Losses in Non-Core Continuing and Dis-
continued operations were substantially
lower year-on-year reflecting principally
the exit from heavily loss-making Displays
activities in 2005 and intensified cost-sav-
ing programs in 2006 A major revision
and harmonization of the Grouprsquos North
American healthcare obligations gave rise
to substantial one-time gains and Thom-
son also initiated significant restructuring
of its French Non-Core operations
The good performance of the Core Busi-
ness lower Non-Core and Discontinued
losses and a low reported tax chargeenabled the Group to return a net profit of
99140455 million in 2006 compared to a loss of
991404573 million in the previous year
Good cash flow
strengthened balance sheet
Thomson generated good free cash flow
and strengthened its balance sheet in
2006 Total net financial liabilities on the
balance sheet fell by 991404460 million reflect-
ing a 99140493 million fall in financial and acqui-
sition-related debts and a 991404367 million
reduction in retirement benefit obligations(including healthcare)
Increase in Net Dividend
The Board of Directors proposed a dis-
tribution to shareholders of 991404033 per
share (2005 dividend 991404030) reflecting
confidence in the prospects of the Group
going forward
Outlook 2007-2009
growth in revenues and net income
With the Grouprsquos transformation complete Thomsonrsquos financial focus over the 2007-
2009 period will be to grow revenues and
net income
Thomson serves growing Media Enter-
tainment amp Communications marketsmdashfor
which external estimates(1) indicate com-
pound growth of around 6 over the last
FINANCIAL AND
OPERATIONAL PERFORMANCE
Full year 2006 results
saw a return to profitability
and leave Thomson
well positioned at
the heart of convergence
and digital video
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59 Thomson Panorama 2006
five years Our digital and electronic busi-
nesses now represent two-thirds of rev-
enues and we believe they are growing
faster than the overall market offsetting
the maturing physical media businesses
Given this profile the Group expects its
revenue growth to be more modest in
2007 but to gather pace over the period
and our overall objective is to show com-pound growth over 2007-2009 in line with
or faster than the overall market
The 2007-2009 period is also expected
to see a sharply reduced impact from
residual Non-Core activities with an end
to losses from the Discontinued Activities
perimeter after 2007 Accordingly Thom-
sonrsquos ambition is to turn its Core Business
growth and profitability and lower impact
from Non-Core into strong growth in net
income over the period 2007-2009
Business operations
Continuous performance improvement is
fundamental to Thomsonrsquos commitment to
create sustainable business models and
long-term value for all stakeholders The
ambitious Group-wide programs launched
in 2004 to improve productivity and
enhance overall performance producedsubstantial results in 2006 and led to new
and strong initiatives for long-term growth
As of the second half of 2006 six ldquoKey
Programsrdquo are monitored at Group level
Clients Software Product Introduction
Operations Transformation and Talent
Management
KEY PROGRAMS IN PLACE
Program Focus
Clients Thomsonrsquos clientregional diversification and
growth of the existing business
through improved Sales amp Marketing
Software Development of integrated software platforms
in all markets (post-production distribution
delivery) and for all types of customer
(professional prosumerhellip)
Product Introduction Ensuring new product roadmaps are in line
with strategy and resource needs have been
identifiedOperations Improving the Grouprsquos cost base cash
generation and working capital
Transformation Multiple programs including initiatives to
improving customer relationship management
worldwide supply chain management
IT transformation as well as Thomsonrsquos RampD
footprint
Talent Management Leveraging human assets with a focus on
talent retention and acquisition
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60 Thomson Panorama 2006
SUMMARY RESULTS FULL YEAR 2006
In 991404 millions unless otherwise stated 2006(1) 2005(1)
Net revenues 5854 5591(1)
Core Business net revenues 5747 5335
Services 2489 2487
Systems 2684 2262
Technology 547 546
Corporate 27 40
Non-Core continuing operations net revenues 107 256
Core Business EBIT(2) 504 512
Services 160 205
Systems 132 109
Technology 289 277Corporate (77) (79)
EBIT from Non-Core continuing operations (25) (122)
(1) Restated with 2006 discontinued activities according to IFRS 5
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61 Thomson Panorama 2006
Year ended December 31in 991404 except number of shares 2006 2005 2004
Year ended December 31in 991404 millions 2006 2005(1) 2004(1)
CONSOLIDATED STATEMENTS OF OPERATIONS
(1) Restated with 2006 discontinued activities according to IFRS 5
(2) After deduction of the interests net of tax paid on the subordinated perpetual notes during the period
Continuing operations
Revenues 5854 5591 5980
Cost of sales (4474) (4240) (4594)
Gross margin 1380 1351 1386
Selling marketing general and administrative expenses (674) (638) (653)
Other income (expense) 52 (96) (69)
Research and development expenses (279) (227) (201)
Profit from continuing operations before tax and net finance costs 479 390 463
Interest income 19 30 52
Interest expense (108) (108) (54)
Other financial income (expense) (111) 36 (26)
Finance costs ndash net (200) (42) (28)
Share of profit (loss) from associates (86) (82) (20)
Income tax ndash (68) (93)
Profit from continuing operations 193 198 322
Discontinued operations
Profit (loss) from discontinued operations (138) (771) (883)
Net income (loss) 55 (573) (561)
Attributable to
Equity Holders 55 (574) (559)
Minority interests ndash 1 (2)
Weighted average number of shares
outstandingmdashbasic net of treasury stock 261188858 266539917 273646869
Earnings per share from continuing operations
Basic(2) 067 074 118
Diluted 063 042 111
Earnings per share from discontinued operations
Basic (053) (289) (323)
Diluted (048) (262) (296)Total earnings per share
Basic(2) 014 (215) (205)
Diluted 015 (220) (185)
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62 Thomson Panorama 2006
CONSOLIDATED BALANCE SHEETS
In 991404 millions December 31 December 31 January 1 December 31 2006 2005 2005(1) 2004
ASSETS
Non-current assets
Property plant and equipment 813 886 1051 1051
Goodwill 1714 1756 1186 1178
Other intangible assets 1071 1150 924 924
Investments in associates 12 204 260 260
Investments and financial assets available-for-sale 266 341 139 113
Derivative financial instruments 7 1 11 ndash
Contract advances 129 173 179 179
Deferred tax assets 397 379 307 301
Other non-current assets 110 182 133 136
Total non-current assets 4519 5072 4190 4142
Current assets
Inventories 366 333 503 568
Trade accounts and notes receivable 1018 1315 1232 1180
Current accounts with associates and joint ventures 97 115 143 143
Derivative financial instruments 8 9 115 ndash
Other current assets 535 644 483 616
Marketable securities ndash 7 58 58
Cash and cash equivalents 1311 996 1845 1848
Assets classified as held for sale 264 369 80 ndash
Total current assets 3599 3788 4459 4413
Total assets 8118 8860 8649 8555
(1) Including the impacts of the first-time application related to IAS 32 and 39 on financial instruments and IFRS 5 on non-current assets held for sale and
discontinued operations
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63 Thomson Panorama 2006
In 991404 millions December 31 December 31 January 1 December 31 2006 2005 2005(1) 2004
SHAREHOLDERSrsquo EQUITY AND LIABILITIES
Shareholdersrsquo equity
Common stock (273871296 shares at
December 31 2006
with nominal value of euro 375 per share) 1027 1025 1025 1025
Trade accounts and notes payable 1032 1164 1199 1226
Accrued employee expenses 165 166 158 163
Income tax payable 57 47 60 60
Other current liabilities 671 750 746 800
Payables on acquisition of companies 13 138 84 84
Liabilities directly associated with
assets classified as held for sale 232 470 88 ndash
Total current liabilities 3681 4393 3602 3459
Total liabilities 5999 6644 6251 6062
Total shareholderrsquos equity and liabilities 8118 8860 8649 8555
(1) Including the impacts of the first-time application related to IAS 32 and 39 on financial instruments and IFRS 5 on non-current assets held for sale and
discontinued operations
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Creation and lay-out
Photo credits Nathalie BerhingGAMMA ndash Steacutephane de Bourgies ndash Jean-Franccedilois DeroubaixGAMMA ndash Christine Donnier- ValentinGAMMA ndash Cars copy 2006 Disney Enterprises IncPixar All Rights Reserved ndash Dreamgirls copy 2006 DREAMWORKS
LLC and PARAMOUNT PICTURES All Rights Reserved ndash Poseidon copy 2006 Warner Bros Pictures ndash Sony Bravia Paint
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Thomsonrsquos Systems division provides video solutions and integrates video network systems for its customers in
the broadcast cable satellite terrestrial and telecoms markets The divisionrsquos offering spans image capture to
network distribution to the provision of access products enabling operators to enrich their service offerings to
subscribers
SYSTEMS
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8122019 Panorama 2006
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Today people benefit from virtually instan-
taneous access to an increasingly custom-
ized range of content available through
a growing set of access possibilities As
internet and digital technologies con-
tinue to infuse the Media Entertainment
amp Communications industries Thomson
is focusing on opportunities arising from
this new paradigm alongside its traditionalcore markets These range from traditional
broadcast equipment to the growing mar-
ket for professional audio-video systems
mobile and IP (Internet Protocol) TV to
booming demand for residential broad-
band services
Strategy
Thomsonrsquos Systems division comprises
three activities Access Products and the
Broadcast amp Networks businesses The
Access Products business aims to deliver
key set-top box platforms for satellite andcable customers and gateway products
for telecom operators The Broadcast
amp Networks businesses are focused on
video network integration bringing to
market advanced products and solutions
to enable network operators broadcast-
ers and film-makers to benefit from the
latest technologies in image acquisition
compression switching and storage The
Network Software business aims to enable
the introduction of new multiple-play ser-
vices based on fixed-mobile convergence
IPTV and broadband telephony
Achievements
Overall the Systems division improved
diversified its customer base in 2006 In
Access Products Thomson consolidated
its leadership of worldwide markets forset-top boxes gateways and modems for
telecom satellite and cable network oper-
ators and service providers while achiev-
ing good growth in higher-end products
in the second half of the year In Grass
Valley demand for high-defin ition (HD)
acquisition production and distribution
systems combined with growing demand
for IT- and IP-based broadcast solutions to
drive growth while in Network Software
Thomsonrsquos SmartVis ion IPTV system
gained good ground with more than 30
IPTV and mobile TV deployments to date
and the worldrsquos largest installed base
Access Products
The Access Products business was driven
in 2006 by the ongoing rapid expansion of
triple (video voice and data) and quadru-
ple play services (also fixed-mobile con-
vergence) offered by cable and telecom
network operators and by the increasing
spread of high definition (HD) broadcasts
among satellite network operators
SYSTEMS
PROVIDING VIDEO SOLUTIONS
From image capture to
distribution via
all types of network
Thomson is reaping the benefits of
growing market demand for
video network integration
TECHNOLOGY SYSTEMS SERVICES
26 Thomson Panorama 2006
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Thomson further consolidated its market
leading position for dual and triple-play
gateways to telecom operators and inter-
net service providers The established mar-
ket leader for DSL modems and routers
since 1999 Thomson extended its lead
over the competition in 2006 shipping
more than 42 million DSL modems and
gateways during the first half of the yearand 10 million units overall in 2006
Growing market demand for sophisticated
home networking eco-systems able to
accommodate new services over time was
underlined by the success of Thomsonrsquos
Livebox gateway for France Telecom
Early in 2007 Thomson supported large-
scale deployment of the Livebox which
provides access to high-speed wireless
Internet Voice-over-IP IPTV network
gaming fixed-mobile convergence (unik)
and other services
An advanced Thomson gateway also
enabled the UKrsquos leading operator to
launch its innovative Total Broadband ser-
vice in June 2006 Bri tish Telecomrsquos BT
Home Hubtrade is a quadruple-play gateway
designed to support BTrsquos full range of ser-
vices including both BT Total Broadband
and BT Broadband Talk in addition to
providing wired and wireless broadband
connectivity for fixed and mobile phones
PCs and other networked devices It also
Mobile video in Italy
Thomsonrsquos product and service offering benefited in 2006 from increased interest from cable and
telecom operators to complete their offering for Video-on-Demand and mobile TV The Olympic Winter Games
notably provided a showcase for Thomsonrsquos capability to deliver video programming to cell phones and
other mobile devices In the wake of the successful Olympic trial Telecom Italia turned to Thomson
for the systems and technology that enabled it to commercially launch a mobile offering including TV and
sports programming in June 2006
incorporates the latest wideband audio
codec providing near CD-quality sound
for voice and video calls
As broadband services become more and
more of a mass-market service providers
must ensure that their services are both
differentiating and easy to consume This
trend calls for the emergence of simpleyet very technologically-advanced and
software-laden devices Such devices
connect to the home-networking gateway
and make it natural to consume a broad-
band-delivered service One example
is the Music Box first made available to
subscribers of AOLrsquos broadband service
in France which streams Internet-based
radio stations or locally stored music files
to a homersquos legacy Hi-Fi audio system
Strong growth in the cable network sys-
tems market which is projected to expand
another 20 in 2007 helped drive Thom-son toward two major sales milestones
in 2006 two million cable set-top boxes
and ten million cable modems Driven by
operatorsrsquo needs to provide more and
more sophisticated services Thomson
has extended its product range since
2005 to include interactive double- and
triple-play set-top boxes as well as HD
set-top boxes with advanced functions
such as personal video recorders (PVR)
Among the cable operators to have
TECHNOLOGY SYSTEMS SERVICES
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Total Broadband for BT
An advanced Thomson gateway enabled the UKrsquos leading telecommunications operator British Telecom
to launch its innovative Total Broadband service in June 2006 This quadruple-play gateway
known as the BT Home Hubtrade features video voice data and wireless capabilities
It is supporting BTrsquos full range of services including wired and wireless broadband connectivity
for fixed and mobile phones PCs and other networked devices
28 Thomson Panorama 2006
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Left Thomson Grass Valley branded
outside broadcast van under construction
Right Camera operator Kim Marks (left)
a camera first assistant Chris Blauvelt (center)
and a camera second assistant
Jason McCormick (right) line up a scene
with the Grass Valley Viper FilmStreamtrade
camera for the David Fincher feature Zodiac
Photo courtesy Paramount Pictures
selected Thomson in 2006 were Portu-
galrsquos leading Pay-TV Operator TV Cabo
UPC E-Vision Kabel Deutschland and
Premiegravere in Europe Net Serviccedilos in Latin America and StarHub and Dalian Cable
TV in Asia
Thomson expanded its footprint in satel-
lite in Europe notably in the UK and in
Asia where product deliveries began for
Tata Sky the Indian satellite broadcaster
In the UK Thomson delivered the Sky
HD box an MPEG-4 set-top box with
Personal Video Recorder which enabled
the successful launch of the countryrsquos first
high-definition TV service in May 2006
The largest satel li te television service
provider in the US DIRECTV also chose Thomson to expand its HD programming
offering with the delivery of the H20 satel-
lite receiver
Leveraging expertise in free-to-air digi-
tal terrestrial receivers and capabilities in
high-definition Thomson also delivered
the first MPEG-4 HDTV receivers for digital
terrestrial TV to French operators Canal +
and TPS during the year
In telephony Thomson remains a lead-
ing supplier of corded and cordless tele-
phones which are sold at retail outletsunder the RCA GE and Alcatel brands as
well as under third-party brands for opera-
tor sales In 2006 Thomson capitalized
on its leadership position in DECT (Digital
Enhanced Cordless Telecommunications)
in Europe by expanding into the American
retail market
Broadcast amp Networks
The Broadcast amp Networks businesses
gained market share in 2006 particularlyin networks and systems integration and
expanded in the promising Pro-AV (profes-
sional audio-video) market
Continuing trends in this market are high-
definition (HD) broadcasting the merging
of IT and broadcast technology the move
to a tape-less file-based approach to video
storage and management and power-
ful MPEG-4 HD compression technology
which allows content to be delivered to mul-
tiple audiences over multiple platforms
One highly visible application of ThomsonrsquosGrass Valley brand of HD image acquisi-
tion and production systems was the 2006
FIFA World Cup in Germany seen by a
billion viewers around the world Broad-
casters covering the event relied on more
than 182 Grass Valley brand cameras
10 Grass Valley video switching systems
12 large scale Grass Valley video routing
systems and hundreds of other devices to
provide faultless HD images
Leveraging its market leading position
Thomson est imates tha t Grass Valley
HD cameras now account for 50 of theglobal market Most major outside broad-
cast production companies in the world
use Grass Valley branded HD camera sys-
tems with more than 1500 in use
High-definition television is also about
news Based on internal Thomson esti-
mates Grass Valley solutions accounted
for nearly 80 of HD news installations
worldwide in 2006 including CBS Net-
work-owned amp operated stations in the
TECHNOLOGY SYSTEMS SERVICES
29 Thomson Panorama 2006
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IGNITE HD
TV news operations can work more quickly and efficiently by using information
technology The industryrsquos first and most complete link between the control room
and the newsroom HD Ignite enables a single technician to handle all
news production requirements During its initial months on the market in the US
HD Ignite was selected by such early adaptors as ABC Stations Group
customers in San Francisco and Chicago and Cox Broadcasting customers in
Atlanta San Francisco Charlotte North Carolina and Dayton Ohio
Telecom service providers are working to
provide more content and value-added
services over their broadband lines
Thomsonrsquos SmartVision and
Cirpack software solutions facilitate
their strategies for rapid deployment of
IPTV and triple-play services
US Al Jazeera Englishmdasha global channelbased in the Middle Eastmdashand Belgiumrsquos
VTM (Vlaamse Televisie Maatschappij )
Thomson is the only supplier to provide
an automated production system (Ignite
HD) a full suite of non-linear editing sys-
tems and a news playout systemmdashall of
which enable broadcasters to move to HD
affordably and to speed up and automate
their workflows
MPEG-4 is one of the enabling technolo-
gies which allows operators of telecom-
munications networks to bring TV to
their subscribers in addition to voice andinternet access This is one element in a
complete Thomson systems offering For
example Spanish operator Telefoacutenica
selected Thomson for a range of equip-
ment and systems to upgrade and expand
its rapidly growing ldquoImageniordquo service In
the US Falcon Communications a lead-
ing systems integrator offers a turnkey
IPTV solution featuring encoding content
delivery service management and access
products from Thomson
bull Professional Audio-Video
Thomson serves the rapidly growing mar-ket for professional audiovisual (ProAV)
solutions for corporate institutional wor-
ship and governmental media centers and
networks Thomsonrsquos expansion in ProAV
has been achieved through organic prod-
uct development as well as the integra-
tion of Pro-AV products from Canopus
the Japanese company acquired in early
2006
EDIUS desktop video
editing software part of
Thomsonrsquos growing rangeof professional
audiovisual and
broadcast solutions
TECHNOLOGY SYSTEMS SERVICES
30 Thomson Panorama 2006
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ldquoHaving started out in research today Irsquom responsible for our modemsrsquo roadmap
and strategy Our customersmdashthe telecoms operatorsmdashhave seen their business
transformed by technology like high-speed broadband And I find it fascinating
how these technologies have penetrated our daily lives the way we live and how
we communicate have changed dramatically over the last ten years
Even faster broadband (VDSL) fiber optics wireless technologies fixed-mobile
convergencehellip mean the pace of change is set to accelerate therersquos no doubt
wersquore living in exciting timesrdquo
Stan Claes Product Manager for IP-based Access Products
A key product introduction in 2006 was
the Grass Valley Indigo AV Presenta-
tion Switcher which combines features
normally found in separate devices in aunified powerful control interface simple
enough to be used by a single operator
Digital signage is also providing new mar-
ket opportunities combining the latest in
display delivery and storage technologies
Thomsonrsquos integrated digital media man-
agement solution Media Edge solves the
complex control distribution and archive
demands of customers Media Edge can
stream high-quality SD and HD content
over an IP network for example to the retail
store environment without the need to re-
invest in infrastructure
Broadcast amp Networksmdash
Network Software
2006 saw telecom service providers con-
tinue to build strategies to provide more
content and value-added services over
their broadband lines Thomsonrsquos Smart-
Vision TV service platforms and Cirpack
telephony switches are at the heart of sev-
eral of the worldrsquos largest IPTV and VoIP
services
In 2006 the launch of a pre-integrated mul-tiple play solution for telecom service provid-
ers illustrated Thomsonrsquos ability to leverage
skills across multiple business units The
solutions which enable telecom providers
to bring a myriad of services to broadband
subscribers are built around Thomsonrsquos
SmartVision and Cirpack software solu-
tions integrated with Thomsonrsquos Grass
Valley branded video head-end equipment
and Thomson home gateways and set-top
boxes This represents the first pre-inte-
grated solution on the market for rapid easy
deployment of triple play services including
voice video and internet access
More than 30 IPTV and mobile TV service
platforms have been deployed around the
world with SmartVision well-positioned
for convergent operators since it allows
video distribution over fixed and mobile
networks
Thomsonrsquos Cirpack softswitches which
help provide the core for the new inte-
grated platforms occupied the top mar-
ket position worldwide for residential
broadband telephony (VoIP) platforms in
2006 Over the course of 2006 Europersquoslargest primary line VoIP operator Freefr
upgraded its Cirpack switches to bring a
new seamless fixedmobile service to its
two million customers placing Thomson
at the forefront of new fixed-mobile con-
vergence solutions Signaling the rapid
expansion of sales outside traditional
Western European markets Thomsonrsquos
Cirpack switches were selected by many
telecom operators in Northern Africa Cen-
tral and Eastern Europe as well as Central
America to build or upgrade legacy voice
networks and deliver advanced telephone
services using IP technologies
TECHNOLOGY SYSTEMS SERVICES
31 Thomson Panorama 2006
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Thomsonrsquos Services division provides end-to-end management of business-critical services on behalf of Media
Entertainment amp Communications customers These include management of broadcast and network operations
centers on an outsourced basis and the provision of an array of content services to the creative community from
post-production to visual effects
SERVICES
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Thomsonrsquos Services division provides end-
to-end management of business-critical
services spanning physical media con-
tent services electronic content distribu-
tion and network services The division
is the worldrsquos leading provider of state-
of-the-art film-making post-production
visual effects and broadcast center man-
agement services
Strategy
The Services division continues to focus
on managing v ideo networks and
op er at io na l centers on behalf of its
customers who are able to concentrate
on their core business of content The
emphasis on high-growth opportunities
in newer market sectors such as retail
and corporate networks and gaming
has been sharpened
Achievements
New customers in fast-growing market
segments responded well to a range of
high value-added services from the Ser-
vices division in 2006 Network Services
showed particularly strong growth as net-
work operators in Europe Asia and North
America selected Technicolor-branded
management services The addition of
such leading customers as ITV in the
UK and France 24 and TV5 in France
substantially expanded Thomsonrsquos fast-
growing Network Services business
Noteworthy successes were also achieved
in Theatrical Services due in part to the
continued development of Thomsonrsquos digi-
tal cinema activity The Content Services
business continued to expand its post-
production services business by opening
a digital intermediate facility on the SonyPictures Entertainment studio lot In 2006
a new Home Entertainment Services unit
was created combining Thomsonrsquos DVD
business with electronic distribution to
develop new services to support emerging
lsquoon demand contentrsquo business models
Network Services
With a comprehensive portfolio of services
for broadcasters network and internet TV
operators movie theatres retailers and
corporations Network Services continued
to expand briskly in 2006 Broadcastersincreasingly selected Thomson as their
long-term network services partner By
year-end Network Services was providing
managed services under the Technicolor
brand to close to 200 channels from
17 facilities in France the Netherlands
Japan North America and the UK
Late in the year Thomson signed a long-
term agreement with ITV for network
transmission operations services for its six
From managing video
networks on an outsourced
basis to a broad range of
offerings in content services
Thomson is bringing its video
expertise to new markets
and geographies
Left Network Services for broadcasters
cable TV operators movie theaters
retailers and corporations is one of Servicesrsquo
fastest-growing business segments
Right Thomson provided film sound
DVD and digital cinema services for Cars
the DisneyPixar hitCars copy 2006 Disney Enterprises IncPixar All R ights Reserved
SERVICES
MANAGING VIDEO NETWORKS
TECHNOLOGY SYSTEMS SERVICES
34 Thomson Panorama 2006
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existing UK channels including the coun-
tryrsquos leading commercial channel In addi-
tion an agreement signed with NOB Cross
Media Facilities (NOB CMF) a subsidiary
of Nederlands Omroepproduktie Bedrijf
(NOB) likewise established Thomson as
a major supplier of network management
services in the Netherlands
In France Network Services added new
clients France 24 and TV5 which covers
203 countries and territories to move into
the market-leading position managing
more than 60 channels and 1500 hours
of programming daily The France 24 part-
nership also involves equipping their new
global TV news operation
Thomson drove expansion and innovation
in its retail media services over the course
of the year One of the most notable achie-
vements involves an ambitious in-store
network upgrade program piloted in2006 by Wal-Mart in the USA with Premier
Retail Networks (PRN) a subsidiary within
Thomsonrsquos Network Services operat ion
The in-store network platform was based
on Thomson IPTV technologies adapted
for the retail environment The system
the first pilot of IPTV in the retail environ-
ment delivered real impact on product
sales and improved customer satisfaction
in Wal-Mart stores PRN also expanded
capabilities into China early in 2007 with
Content Services revving up
Thomson provided a wide range of services for a number of major international film releases in 2006
such as Cars one of the three nominees for Best Animated Film at the Oscars Thomson Technicolor provided
film services sound services DVD compression and authoring replication and distribution
as well as digital cinema mastering and distribution for the DisneyPixar hit The Grouprsquos Content Services offering
has expanded in recent years to include the high-growth video-gaming advertising and broadcast markets
the signing of a joint venture with CGEN a
technology company leading the Chinese
in-store digital signage media industry
The two companies are currently collabo-
rating on the roll-out of an in-store media
network to 750 internet cafeacutes part of the
leading Chinese chain Big Cafeacute
Theatrical Services
Thomson signed Europersquos first large-scale
digital cinema rollout agreement in 2006
with the Kinepolis Group one of the conti-
nentrsquos most innovative theater circuits and
the leading exhibition chain in Belgium
The agreement to instal l and operate
digital cinema systems in 130 Kinepolis-
owned and operated screens passed a
first milestone in March 2007 with Thom-
sonrsquos first international distribution by sat-
ellite of an encrypted digital version of the
film Dreamgirls from the US to a Kinepolis
theater in Brussels Belgium
A series of new contracts were awarded
in the US For example in the fall of 2006
Technicolor Digital Cinema began installing
digital projection systems at 120 National
Amusements Inc screens in Boston Los
Angeles New York and elsewhere as part
of a strategic agreement National Amuse-
ments operates more than 1500 screens
in the US UK Latin America and Russia
Digital projection systems were also
TECHNOLOGY SYSTEMS SERVICES
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The growing market for Network Services
The decision by the UKrsquos leading commercial broadcaster to entrust its network services to
Thomsonrsquos Network Services operations illustrates a growing global trend as broadcasters focus increasingly on
programming and meeting customer needs they turn to highly-skilled specialists to handle technology
The long-term agreement with ITV means that the broadcaster will benefit from enhanced service and new technology
as well as more flexibility in launching new services
36 Thomson Panorama 2006
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Left Thomsonrsquos Technicolor
Interactive Services provided in-game
cinematics and voice recording for
Microsoft Game Studiosrsquo Gears of War
Right Thomsonrsquos London-based MPC
subsidiary carried out post-production
work including computer graphics
on Sony Braviarsquos award-wirring colorful
Paint commercial
installed at several landmark theatres in
Los Angeles in 2006 including Mann The-
atresrsquo Graumanrsquos Chinese and the Village
in Westwood
Thomson maintained a leading position in
film processing and printing in 2006 in a
market where volumes were stable Tech-
nicolor handled worldwide release printingfor two of the five 2007 Oscar nominees
for Best PicturemdashMartin Scorcesersquos The
Departed and Clint Eastwoodrsquos Letters
from Iwo Jimamdashas well as release print-
ing for two of the three Best Animated Film
nominees Cars and Happy Feet
As part of its ongoing commitment to meet
customer needs worldwide a state-of-the-
art film and post-production facility was inau-
gurated at Ciudad de la Imagen in Madrid in
2006 It is already becoming known as the
countryrsquos most comprehensive postproduc-
tion facility with advanced film processingand digital intermediate capabilities
Content Services
Thomson continued to leverage its long-
standing strength in post-production
skills and services through expansion into
emerging and high-growth market seg-
ments such as content services for the
video-gaming advertising and broadcast
markets
In order to better serve the growing mar-
ket for entertainment content for mobile
devices Thomson unveiled new mobile
content preparation and distribution capa-
bilities in the US and the UK in 2006 Facili-
ties equipped with state-of-the-art produc-
tion and post-production technologies will
handle the preparation and optimization
of a wide range of digital entertainmentcontentmdashincluding movies TV episodes
and music videosmdashfor distribution to
mobile devices The dedicated services
complement the Grouprsquos extensive global
electronic distribution infrastructure which
enables Thomson to deliver mobile con-
tent to online delivery services as well as
to network operators for final transmission
to mobile customers
Thomson also made progress in the
development of an integrated digital asset
management solution in 2006 known as
MIDAS (Media Ingest Distribution andStorage) MIDAS is a software and hard-
ware platform for digital content prepara-
tion storage security and distribution
From the first day of production planning
through every stage of post-production
and content distribution MIDAS creates
a digital workflow that allows customers
to manage projects remotely and provides
for rapid and seamless global file delivery
streaming and collaboration
TECHNOLOGY SYSTEMS SERVICES
37 Thomson Panorama 2006
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While expanding into newer markets
growing demand for post-production ser-
vices and visual effects continued to fuel
Thomsonrsquos ongoing content services activ-
ities Among the yearrsquos most noteworthy
achievements were portfolios of services
for such feature films as The Departed
Letters from Iwo Jima and Pirates of the
Caribbean Dead Manrsquos Chest ThomsonrsquosMoving Picture Company (MPC) also pro-
vided high-end visual effects for the three
films nominated for Achievement in Visual
Effects Pirates of the Caribbean Posei-
don and Superman Returns
Confirming the Grouprsquos solid growth in
content services for the video game indus-
try Thomson unveiled a new dedicated
Interactive Services facility in Burbank
California in 2006 Sierra Entertainment
a division of Vivendi Games selected
Thomson to prov ide cinemat ic anima-
tion voice casting and recording sound
design and mixing services for The Leg-
end of Spyrotrade A New Beginning Like-
wise Thomson provided a wide range of
services to support Konamirsquos The SilentHill Experience released simultaneously
with the motion picture
The strategic investment in one of Indiarsquos
leading animation and gaming cinemat-
ics firms announced in February 2007
strengthened Thomsonrsquos position in Asia
for a variety of content services Located in
Bangalore India Paprikaas provides cre-
ldquoIn 1998 I joined Thomson as a Plant Manager within Home Entertainment Services
and was eventually made responsible for the expansion and management of our
Guadalajara DVD operations In summary Irsquove had great opportunities to gain experience
in international operations strategic planning and operational excellence I recently
joined Content Services where Irsquoll be leading the start-up and integration of new activities
in Beijing Bangalore and other emerging markets Content Services is dynamic and
growing and Irsquom looking forward to expanding the business in Asia while improving
our operational performance in North America and Europerdquo
Mike Hayden Vice President Operations amp Strategic Projects Content Services
of the Grouprsquos divisions and profit centersIn the context of the budgetary procedure
performance measurement indicators are
calculated by the divisions analyzed and
reviewed monthly to serve as a reference
for the Grouprsquos monthly reporting
Management reporting and
closing period work
Th om so n uses a co mmon char t of
accounts which is regularly updated The
principal accounting and financial figures
of the operational and functional depart-
ments consolidated at Group level are
analyzed by the Grouprsquos management
control team and reviewed by the Grouprsquos
Executive Committee
The closing process for the half-year and
annual consolidated financial statementsoccurs in two steps The first step con-
sists of a ldquohard closerdquo completed in May
and September leading to a first review by
the statutory auditors The second step
occurs in July and in JanuaryFebruary and
involves the finalization of half-year and
annual consolidated financial statements
under IFRS The Group then proceeds
once a year with a reconciliation of these
results in accordance with US GAAP
Preparation of financial statements
The financial statements are prepared jointly by the finance department and the
General Secretary They are based on
information reported through the annual
reporting and accounting consolidation
processes and on operational and mar-
ket information which is specifically cen-
tralized for the preparation of Thomsonrsquos
Document de Reacutefeacuterence in France and
the submission of Form 20-F in the United
States Half-year and annual financial infor-
mation is reviewed by the Grouprsquos Audit
Committee
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58 Thomson Panorama 2006
(1) Source PriceWaterhouseCoopers ndash
ldquoGlobal Entertainment and Media Outlook 2006-10rdquo
Revenue growth
Thomson achieved consolidated 2006
net revenues of 9914045854 million up from
9914045591 million in 2005 Revenues for
the Core Business reached 9914045747 mil-
lion (9914045776 million at constant currency)
representing 83 growth over 2005 at
constant currency
Overall the Grouprsquos key growth busi-
nessesmdashContent Services Network
Services Access Products for telecom
operators and our Broadcast amp Networks
businesses (Grass Valley and Network
Software)mdashincreased strongly year-on-
year and accounted for over a third of
Group revenues against less than a quar-
ter in 2005
Thomsonrsquos Core Business EBIT for 2006
was euro504 million representing a Core
Business EBIT margin of 88 Thisreflected growth in some key businesses
and cost actions across the Group off-
setting a significant investment in research
and development and some increase in
restructuring expenses
Increased spend on RampD
Research and development expenditure
charged in the Core Business (net of
external funding) rose from 991404221 million in
2005 to 991404279 million in 2006 an increase
of 26 principally in the Systems divi-
sion The Group expanded the number ofproducts and services in the development
phase across its businesses
Return to profit
Losses in Non-Core Continuing and Dis-
continued operations were substantially
lower year-on-year reflecting principally
the exit from heavily loss-making Displays
activities in 2005 and intensified cost-sav-
ing programs in 2006 A major revision
and harmonization of the Grouprsquos North
American healthcare obligations gave rise
to substantial one-time gains and Thom-
son also initiated significant restructuring
of its French Non-Core operations
The good performance of the Core Busi-
ness lower Non-Core and Discontinued
losses and a low reported tax chargeenabled the Group to return a net profit of
99140455 million in 2006 compared to a loss of
991404573 million in the previous year
Good cash flow
strengthened balance sheet
Thomson generated good free cash flow
and strengthened its balance sheet in
2006 Total net financial liabilities on the
balance sheet fell by 991404460 million reflect-
ing a 99140493 million fall in financial and acqui-
sition-related debts and a 991404367 million
reduction in retirement benefit obligations(including healthcare)
Increase in Net Dividend
The Board of Directors proposed a dis-
tribution to shareholders of 991404033 per
share (2005 dividend 991404030) reflecting
confidence in the prospects of the Group
going forward
Outlook 2007-2009
growth in revenues and net income
With the Grouprsquos transformation complete Thomsonrsquos financial focus over the 2007-
2009 period will be to grow revenues and
net income
Thomson serves growing Media Enter-
tainment amp Communications marketsmdashfor
which external estimates(1) indicate com-
pound growth of around 6 over the last
FINANCIAL AND
OPERATIONAL PERFORMANCE
Full year 2006 results
saw a return to profitability
and leave Thomson
well positioned at
the heart of convergence
and digital video
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59 Thomson Panorama 2006
five years Our digital and electronic busi-
nesses now represent two-thirds of rev-
enues and we believe they are growing
faster than the overall market offsetting
the maturing physical media businesses
Given this profile the Group expects its
revenue growth to be more modest in
2007 but to gather pace over the period
and our overall objective is to show com-pound growth over 2007-2009 in line with
or faster than the overall market
The 2007-2009 period is also expected
to see a sharply reduced impact from
residual Non-Core activities with an end
to losses from the Discontinued Activities
perimeter after 2007 Accordingly Thom-
sonrsquos ambition is to turn its Core Business
growth and profitability and lower impact
from Non-Core into strong growth in net
income over the period 2007-2009
Business operations
Continuous performance improvement is
fundamental to Thomsonrsquos commitment to
create sustainable business models and
long-term value for all stakeholders The
ambitious Group-wide programs launched
in 2004 to improve productivity and
enhance overall performance producedsubstantial results in 2006 and led to new
and strong initiatives for long-term growth
As of the second half of 2006 six ldquoKey
Programsrdquo are monitored at Group level
Clients Software Product Introduction
Operations Transformation and Talent
Management
KEY PROGRAMS IN PLACE
Program Focus
Clients Thomsonrsquos clientregional diversification and
growth of the existing business
through improved Sales amp Marketing
Software Development of integrated software platforms
in all markets (post-production distribution
delivery) and for all types of customer
(professional prosumerhellip)
Product Introduction Ensuring new product roadmaps are in line
with strategy and resource needs have been
identifiedOperations Improving the Grouprsquos cost base cash
generation and working capital
Transformation Multiple programs including initiatives to
improving customer relationship management
worldwide supply chain management
IT transformation as well as Thomsonrsquos RampD
footprint
Talent Management Leveraging human assets with a focus on
talent retention and acquisition
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60 Thomson Panorama 2006
SUMMARY RESULTS FULL YEAR 2006
In 991404 millions unless otherwise stated 2006(1) 2005(1)
Net revenues 5854 5591(1)
Core Business net revenues 5747 5335
Services 2489 2487
Systems 2684 2262
Technology 547 546
Corporate 27 40
Non-Core continuing operations net revenues 107 256
Core Business EBIT(2) 504 512
Services 160 205
Systems 132 109
Technology 289 277Corporate (77) (79)
EBIT from Non-Core continuing operations (25) (122)
(1) Restated with 2006 discontinued activities according to IFRS 5
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61 Thomson Panorama 2006
Year ended December 31in 991404 except number of shares 2006 2005 2004
Year ended December 31in 991404 millions 2006 2005(1) 2004(1)
CONSOLIDATED STATEMENTS OF OPERATIONS
(1) Restated with 2006 discontinued activities according to IFRS 5
(2) After deduction of the interests net of tax paid on the subordinated perpetual notes during the period
Continuing operations
Revenues 5854 5591 5980
Cost of sales (4474) (4240) (4594)
Gross margin 1380 1351 1386
Selling marketing general and administrative expenses (674) (638) (653)
Other income (expense) 52 (96) (69)
Research and development expenses (279) (227) (201)
Profit from continuing operations before tax and net finance costs 479 390 463
Interest income 19 30 52
Interest expense (108) (108) (54)
Other financial income (expense) (111) 36 (26)
Finance costs ndash net (200) (42) (28)
Share of profit (loss) from associates (86) (82) (20)
Income tax ndash (68) (93)
Profit from continuing operations 193 198 322
Discontinued operations
Profit (loss) from discontinued operations (138) (771) (883)
Net income (loss) 55 (573) (561)
Attributable to
Equity Holders 55 (574) (559)
Minority interests ndash 1 (2)
Weighted average number of shares
outstandingmdashbasic net of treasury stock 261188858 266539917 273646869
Earnings per share from continuing operations
Basic(2) 067 074 118
Diluted 063 042 111
Earnings per share from discontinued operations
Basic (053) (289) (323)
Diluted (048) (262) (296)Total earnings per share
Basic(2) 014 (215) (205)
Diluted 015 (220) (185)
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62 Thomson Panorama 2006
CONSOLIDATED BALANCE SHEETS
In 991404 millions December 31 December 31 January 1 December 31 2006 2005 2005(1) 2004
ASSETS
Non-current assets
Property plant and equipment 813 886 1051 1051
Goodwill 1714 1756 1186 1178
Other intangible assets 1071 1150 924 924
Investments in associates 12 204 260 260
Investments and financial assets available-for-sale 266 341 139 113
Derivative financial instruments 7 1 11 ndash
Contract advances 129 173 179 179
Deferred tax assets 397 379 307 301
Other non-current assets 110 182 133 136
Total non-current assets 4519 5072 4190 4142
Current assets
Inventories 366 333 503 568
Trade accounts and notes receivable 1018 1315 1232 1180
Current accounts with associates and joint ventures 97 115 143 143
Derivative financial instruments 8 9 115 ndash
Other current assets 535 644 483 616
Marketable securities ndash 7 58 58
Cash and cash equivalents 1311 996 1845 1848
Assets classified as held for sale 264 369 80 ndash
Total current assets 3599 3788 4459 4413
Total assets 8118 8860 8649 8555
(1) Including the impacts of the first-time application related to IAS 32 and 39 on financial instruments and IFRS 5 on non-current assets held for sale and
discontinued operations
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63 Thomson Panorama 2006
In 991404 millions December 31 December 31 January 1 December 31 2006 2005 2005(1) 2004
SHAREHOLDERSrsquo EQUITY AND LIABILITIES
Shareholdersrsquo equity
Common stock (273871296 shares at
December 31 2006
with nominal value of euro 375 per share) 1027 1025 1025 1025
Trade accounts and notes payable 1032 1164 1199 1226
Accrued employee expenses 165 166 158 163
Income tax payable 57 47 60 60
Other current liabilities 671 750 746 800
Payables on acquisition of companies 13 138 84 84
Liabilities directly associated with
assets classified as held for sale 232 470 88 ndash
Total current liabilities 3681 4393 3602 3459
Total liabilities 5999 6644 6251 6062
Total shareholderrsquos equity and liabilities 8118 8860 8649 8555
(1) Including the impacts of the first-time application related to IAS 32 and 39 on financial instruments and IFRS 5 on non-current assets held for sale and
discontinued operations
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Creation and lay-out
Photo credits Nathalie BerhingGAMMA ndash Steacutephane de Bourgies ndash Jean-Franccedilois DeroubaixGAMMA ndash Christine Donnier- ValentinGAMMA ndash Cars copy 2006 Disney Enterprises IncPixar All Rights Reserved ndash Dreamgirls copy 2006 DREAMWORKS
LLC and PARAMOUNT PICTURES All Rights Reserved ndash Poseidon copy 2006 Warner Bros Pictures ndash Sony Bravia Paint
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Today people benefit from virtually instan-
taneous access to an increasingly custom-
ized range of content available through
a growing set of access possibilities As
internet and digital technologies con-
tinue to infuse the Media Entertainment
amp Communications industries Thomson
is focusing on opportunities arising from
this new paradigm alongside its traditionalcore markets These range from traditional
broadcast equipment to the growing mar-
ket for professional audio-video systems
mobile and IP (Internet Protocol) TV to
booming demand for residential broad-
band services
Strategy
Thomsonrsquos Systems division comprises
three activities Access Products and the
Broadcast amp Networks businesses The
Access Products business aims to deliver
key set-top box platforms for satellite andcable customers and gateway products
for telecom operators The Broadcast
amp Networks businesses are focused on
video network integration bringing to
market advanced products and solutions
to enable network operators broadcast-
ers and film-makers to benefit from the
latest technologies in image acquisition
compression switching and storage The
Network Software business aims to enable
the introduction of new multiple-play ser-
vices based on fixed-mobile convergence
IPTV and broadband telephony
Achievements
Overall the Systems division improved
diversified its customer base in 2006 In
Access Products Thomson consolidated
its leadership of worldwide markets forset-top boxes gateways and modems for
telecom satellite and cable network oper-
ators and service providers while achiev-
ing good growth in higher-end products
in the second half of the year In Grass
Valley demand for high-defin ition (HD)
acquisition production and distribution
systems combined with growing demand
for IT- and IP-based broadcast solutions to
drive growth while in Network Software
Thomsonrsquos SmartVis ion IPTV system
gained good ground with more than 30
IPTV and mobile TV deployments to date
and the worldrsquos largest installed base
Access Products
The Access Products business was driven
in 2006 by the ongoing rapid expansion of
triple (video voice and data) and quadru-
ple play services (also fixed-mobile con-
vergence) offered by cable and telecom
network operators and by the increasing
spread of high definition (HD) broadcasts
among satellite network operators
SYSTEMS
PROVIDING VIDEO SOLUTIONS
From image capture to
distribution via
all types of network
Thomson is reaping the benefits of
growing market demand for
video network integration
TECHNOLOGY SYSTEMS SERVICES
26 Thomson Panorama 2006
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Thomson further consolidated its market
leading position for dual and triple-play
gateways to telecom operators and inter-
net service providers The established mar-
ket leader for DSL modems and routers
since 1999 Thomson extended its lead
over the competition in 2006 shipping
more than 42 million DSL modems and
gateways during the first half of the yearand 10 million units overall in 2006
Growing market demand for sophisticated
home networking eco-systems able to
accommodate new services over time was
underlined by the success of Thomsonrsquos
Livebox gateway for France Telecom
Early in 2007 Thomson supported large-
scale deployment of the Livebox which
provides access to high-speed wireless
Internet Voice-over-IP IPTV network
gaming fixed-mobile convergence (unik)
and other services
An advanced Thomson gateway also
enabled the UKrsquos leading operator to
launch its innovative Total Broadband ser-
vice in June 2006 Bri tish Telecomrsquos BT
Home Hubtrade is a quadruple-play gateway
designed to support BTrsquos full range of ser-
vices including both BT Total Broadband
and BT Broadband Talk in addition to
providing wired and wireless broadband
connectivity for fixed and mobile phones
PCs and other networked devices It also
Mobile video in Italy
Thomsonrsquos product and service offering benefited in 2006 from increased interest from cable and
telecom operators to complete their offering for Video-on-Demand and mobile TV The Olympic Winter Games
notably provided a showcase for Thomsonrsquos capability to deliver video programming to cell phones and
other mobile devices In the wake of the successful Olympic trial Telecom Italia turned to Thomson
for the systems and technology that enabled it to commercially launch a mobile offering including TV and
sports programming in June 2006
incorporates the latest wideband audio
codec providing near CD-quality sound
for voice and video calls
As broadband services become more and
more of a mass-market service providers
must ensure that their services are both
differentiating and easy to consume This
trend calls for the emergence of simpleyet very technologically-advanced and
software-laden devices Such devices
connect to the home-networking gateway
and make it natural to consume a broad-
band-delivered service One example
is the Music Box first made available to
subscribers of AOLrsquos broadband service
in France which streams Internet-based
radio stations or locally stored music files
to a homersquos legacy Hi-Fi audio system
Strong growth in the cable network sys-
tems market which is projected to expand
another 20 in 2007 helped drive Thom-son toward two major sales milestones
in 2006 two million cable set-top boxes
and ten million cable modems Driven by
operatorsrsquo needs to provide more and
more sophisticated services Thomson
has extended its product range since
2005 to include interactive double- and
triple-play set-top boxes as well as HD
set-top boxes with advanced functions
such as personal video recorders (PVR)
Among the cable operators to have
TECHNOLOGY SYSTEMS SERVICES
27 Thomson Panorama 2006
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Total Broadband for BT
An advanced Thomson gateway enabled the UKrsquos leading telecommunications operator British Telecom
to launch its innovative Total Broadband service in June 2006 This quadruple-play gateway
known as the BT Home Hubtrade features video voice data and wireless capabilities
It is supporting BTrsquos full range of services including wired and wireless broadband connectivity
for fixed and mobile phones PCs and other networked devices
28 Thomson Panorama 2006
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Left Thomson Grass Valley branded
outside broadcast van under construction
Right Camera operator Kim Marks (left)
a camera first assistant Chris Blauvelt (center)
and a camera second assistant
Jason McCormick (right) line up a scene
with the Grass Valley Viper FilmStreamtrade
camera for the David Fincher feature Zodiac
Photo courtesy Paramount Pictures
selected Thomson in 2006 were Portu-
galrsquos leading Pay-TV Operator TV Cabo
UPC E-Vision Kabel Deutschland and
Premiegravere in Europe Net Serviccedilos in Latin America and StarHub and Dalian Cable
TV in Asia
Thomson expanded its footprint in satel-
lite in Europe notably in the UK and in
Asia where product deliveries began for
Tata Sky the Indian satellite broadcaster
In the UK Thomson delivered the Sky
HD box an MPEG-4 set-top box with
Personal Video Recorder which enabled
the successful launch of the countryrsquos first
high-definition TV service in May 2006
The largest satel li te television service
provider in the US DIRECTV also chose Thomson to expand its HD programming
offering with the delivery of the H20 satel-
lite receiver
Leveraging expertise in free-to-air digi-
tal terrestrial receivers and capabilities in
high-definition Thomson also delivered
the first MPEG-4 HDTV receivers for digital
terrestrial TV to French operators Canal +
and TPS during the year
In telephony Thomson remains a lead-
ing supplier of corded and cordless tele-
phones which are sold at retail outletsunder the RCA GE and Alcatel brands as
well as under third-party brands for opera-
tor sales In 2006 Thomson capitalized
on its leadership position in DECT (Digital
Enhanced Cordless Telecommunications)
in Europe by expanding into the American
retail market
Broadcast amp Networks
The Broadcast amp Networks businesses
gained market share in 2006 particularlyin networks and systems integration and
expanded in the promising Pro-AV (profes-
sional audio-video) market
Continuing trends in this market are high-
definition (HD) broadcasting the merging
of IT and broadcast technology the move
to a tape-less file-based approach to video
storage and management and power-
ful MPEG-4 HD compression technology
which allows content to be delivered to mul-
tiple audiences over multiple platforms
One highly visible application of ThomsonrsquosGrass Valley brand of HD image acquisi-
tion and production systems was the 2006
FIFA World Cup in Germany seen by a
billion viewers around the world Broad-
casters covering the event relied on more
than 182 Grass Valley brand cameras
10 Grass Valley video switching systems
12 large scale Grass Valley video routing
systems and hundreds of other devices to
provide faultless HD images
Leveraging its market leading position
Thomson est imates tha t Grass Valley
HD cameras now account for 50 of theglobal market Most major outside broad-
cast production companies in the world
use Grass Valley branded HD camera sys-
tems with more than 1500 in use
High-definition television is also about
news Based on internal Thomson esti-
mates Grass Valley solutions accounted
for nearly 80 of HD news installations
worldwide in 2006 including CBS Net-
work-owned amp operated stations in the
TECHNOLOGY SYSTEMS SERVICES
29 Thomson Panorama 2006
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IGNITE HD
TV news operations can work more quickly and efficiently by using information
technology The industryrsquos first and most complete link between the control room
and the newsroom HD Ignite enables a single technician to handle all
news production requirements During its initial months on the market in the US
HD Ignite was selected by such early adaptors as ABC Stations Group
customers in San Francisco and Chicago and Cox Broadcasting customers in
Atlanta San Francisco Charlotte North Carolina and Dayton Ohio
Telecom service providers are working to
provide more content and value-added
services over their broadband lines
Thomsonrsquos SmartVision and
Cirpack software solutions facilitate
their strategies for rapid deployment of
IPTV and triple-play services
US Al Jazeera Englishmdasha global channelbased in the Middle Eastmdashand Belgiumrsquos
VTM (Vlaamse Televisie Maatschappij )
Thomson is the only supplier to provide
an automated production system (Ignite
HD) a full suite of non-linear editing sys-
tems and a news playout systemmdashall of
which enable broadcasters to move to HD
affordably and to speed up and automate
their workflows
MPEG-4 is one of the enabling technolo-
gies which allows operators of telecom-
munications networks to bring TV to
their subscribers in addition to voice andinternet access This is one element in a
complete Thomson systems offering For
example Spanish operator Telefoacutenica
selected Thomson for a range of equip-
ment and systems to upgrade and expand
its rapidly growing ldquoImageniordquo service In
the US Falcon Communications a lead-
ing systems integrator offers a turnkey
IPTV solution featuring encoding content
delivery service management and access
products from Thomson
bull Professional Audio-Video
Thomson serves the rapidly growing mar-ket for professional audiovisual (ProAV)
solutions for corporate institutional wor-
ship and governmental media centers and
networks Thomsonrsquos expansion in ProAV
has been achieved through organic prod-
uct development as well as the integra-
tion of Pro-AV products from Canopus
the Japanese company acquired in early
2006
EDIUS desktop video
editing software part of
Thomsonrsquos growing rangeof professional
audiovisual and
broadcast solutions
TECHNOLOGY SYSTEMS SERVICES
30 Thomson Panorama 2006
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ldquoHaving started out in research today Irsquom responsible for our modemsrsquo roadmap
and strategy Our customersmdashthe telecoms operatorsmdashhave seen their business
transformed by technology like high-speed broadband And I find it fascinating
how these technologies have penetrated our daily lives the way we live and how
we communicate have changed dramatically over the last ten years
Even faster broadband (VDSL) fiber optics wireless technologies fixed-mobile
convergencehellip mean the pace of change is set to accelerate therersquos no doubt
wersquore living in exciting timesrdquo
Stan Claes Product Manager for IP-based Access Products
A key product introduction in 2006 was
the Grass Valley Indigo AV Presenta-
tion Switcher which combines features
normally found in separate devices in aunified powerful control interface simple
enough to be used by a single operator
Digital signage is also providing new mar-
ket opportunities combining the latest in
display delivery and storage technologies
Thomsonrsquos integrated digital media man-
agement solution Media Edge solves the
complex control distribution and archive
demands of customers Media Edge can
stream high-quality SD and HD content
over an IP network for example to the retail
store environment without the need to re-
invest in infrastructure
Broadcast amp Networksmdash
Network Software
2006 saw telecom service providers con-
tinue to build strategies to provide more
content and value-added services over
their broadband lines Thomsonrsquos Smart-
Vision TV service platforms and Cirpack
telephony switches are at the heart of sev-
eral of the worldrsquos largest IPTV and VoIP
services
In 2006 the launch of a pre-integrated mul-tiple play solution for telecom service provid-
ers illustrated Thomsonrsquos ability to leverage
skills across multiple business units The
solutions which enable telecom providers
to bring a myriad of services to broadband
subscribers are built around Thomsonrsquos
SmartVision and Cirpack software solu-
tions integrated with Thomsonrsquos Grass
Valley branded video head-end equipment
and Thomson home gateways and set-top
boxes This represents the first pre-inte-
grated solution on the market for rapid easy
deployment of triple play services including
voice video and internet access
More than 30 IPTV and mobile TV service
platforms have been deployed around the
world with SmartVision well-positioned
for convergent operators since it allows
video distribution over fixed and mobile
networks
Thomsonrsquos Cirpack softswitches which
help provide the core for the new inte-
grated platforms occupied the top mar-
ket position worldwide for residential
broadband telephony (VoIP) platforms in
2006 Over the course of 2006 Europersquoslargest primary line VoIP operator Freefr
upgraded its Cirpack switches to bring a
new seamless fixedmobile service to its
two million customers placing Thomson
at the forefront of new fixed-mobile con-
vergence solutions Signaling the rapid
expansion of sales outside traditional
Western European markets Thomsonrsquos
Cirpack switches were selected by many
telecom operators in Northern Africa Cen-
tral and Eastern Europe as well as Central
America to build or upgrade legacy voice
networks and deliver advanced telephone
services using IP technologies
TECHNOLOGY SYSTEMS SERVICES
31 Thomson Panorama 2006
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Thomsonrsquos Services division provides end-to-end management of business-critical services on behalf of Media
Entertainment amp Communications customers These include management of broadcast and network operations
centers on an outsourced basis and the provision of an array of content services to the creative community from
post-production to visual effects
SERVICES
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Thomsonrsquos Services division provides end-
to-end management of business-critical
services spanning physical media con-
tent services electronic content distribu-
tion and network services The division
is the worldrsquos leading provider of state-
of-the-art film-making post-production
visual effects and broadcast center man-
agement services
Strategy
The Services division continues to focus
on managing v ideo networks and
op er at io na l centers on behalf of its
customers who are able to concentrate
on their core business of content The
emphasis on high-growth opportunities
in newer market sectors such as retail
and corporate networks and gaming
has been sharpened
Achievements
New customers in fast-growing market
segments responded well to a range of
high value-added services from the Ser-
vices division in 2006 Network Services
showed particularly strong growth as net-
work operators in Europe Asia and North
America selected Technicolor-branded
management services The addition of
such leading customers as ITV in the
UK and France 24 and TV5 in France
substantially expanded Thomsonrsquos fast-
growing Network Services business
Noteworthy successes were also achieved
in Theatrical Services due in part to the
continued development of Thomsonrsquos digi-
tal cinema activity The Content Services
business continued to expand its post-
production services business by opening
a digital intermediate facility on the SonyPictures Entertainment studio lot In 2006
a new Home Entertainment Services unit
was created combining Thomsonrsquos DVD
business with electronic distribution to
develop new services to support emerging
lsquoon demand contentrsquo business models
Network Services
With a comprehensive portfolio of services
for broadcasters network and internet TV
operators movie theatres retailers and
corporations Network Services continued
to expand briskly in 2006 Broadcastersincreasingly selected Thomson as their
long-term network services partner By
year-end Network Services was providing
managed services under the Technicolor
brand to close to 200 channels from
17 facilities in France the Netherlands
Japan North America and the UK
Late in the year Thomson signed a long-
term agreement with ITV for network
transmission operations services for its six
From managing video
networks on an outsourced
basis to a broad range of
offerings in content services
Thomson is bringing its video
expertise to new markets
and geographies
Left Network Services for broadcasters
cable TV operators movie theaters
retailers and corporations is one of Servicesrsquo
fastest-growing business segments
Right Thomson provided film sound
DVD and digital cinema services for Cars
the DisneyPixar hitCars copy 2006 Disney Enterprises IncPixar All R ights Reserved
SERVICES
MANAGING VIDEO NETWORKS
TECHNOLOGY SYSTEMS SERVICES
34 Thomson Panorama 2006
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existing UK channels including the coun-
tryrsquos leading commercial channel In addi-
tion an agreement signed with NOB Cross
Media Facilities (NOB CMF) a subsidiary
of Nederlands Omroepproduktie Bedrijf
(NOB) likewise established Thomson as
a major supplier of network management
services in the Netherlands
In France Network Services added new
clients France 24 and TV5 which covers
203 countries and territories to move into
the market-leading position managing
more than 60 channels and 1500 hours
of programming daily The France 24 part-
nership also involves equipping their new
global TV news operation
Thomson drove expansion and innovation
in its retail media services over the course
of the year One of the most notable achie-
vements involves an ambitious in-store
network upgrade program piloted in2006 by Wal-Mart in the USA with Premier
Retail Networks (PRN) a subsidiary within
Thomsonrsquos Network Services operat ion
The in-store network platform was based
on Thomson IPTV technologies adapted
for the retail environment The system
the first pilot of IPTV in the retail environ-
ment delivered real impact on product
sales and improved customer satisfaction
in Wal-Mart stores PRN also expanded
capabilities into China early in 2007 with
Content Services revving up
Thomson provided a wide range of services for a number of major international film releases in 2006
such as Cars one of the three nominees for Best Animated Film at the Oscars Thomson Technicolor provided
film services sound services DVD compression and authoring replication and distribution
as well as digital cinema mastering and distribution for the DisneyPixar hit The Grouprsquos Content Services offering
has expanded in recent years to include the high-growth video-gaming advertising and broadcast markets
the signing of a joint venture with CGEN a
technology company leading the Chinese
in-store digital signage media industry
The two companies are currently collabo-
rating on the roll-out of an in-store media
network to 750 internet cafeacutes part of the
leading Chinese chain Big Cafeacute
Theatrical Services
Thomson signed Europersquos first large-scale
digital cinema rollout agreement in 2006
with the Kinepolis Group one of the conti-
nentrsquos most innovative theater circuits and
the leading exhibition chain in Belgium
The agreement to instal l and operate
digital cinema systems in 130 Kinepolis-
owned and operated screens passed a
first milestone in March 2007 with Thom-
sonrsquos first international distribution by sat-
ellite of an encrypted digital version of the
film Dreamgirls from the US to a Kinepolis
theater in Brussels Belgium
A series of new contracts were awarded
in the US For example in the fall of 2006
Technicolor Digital Cinema began installing
digital projection systems at 120 National
Amusements Inc screens in Boston Los
Angeles New York and elsewhere as part
of a strategic agreement National Amuse-
ments operates more than 1500 screens
in the US UK Latin America and Russia
Digital projection systems were also
TECHNOLOGY SYSTEMS SERVICES
35 Thomson Panorama 2006
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The growing market for Network Services
The decision by the UKrsquos leading commercial broadcaster to entrust its network services to
Thomsonrsquos Network Services operations illustrates a growing global trend as broadcasters focus increasingly on
programming and meeting customer needs they turn to highly-skilled specialists to handle technology
The long-term agreement with ITV means that the broadcaster will benefit from enhanced service and new technology
as well as more flexibility in launching new services
36 Thomson Panorama 2006
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Left Thomsonrsquos Technicolor
Interactive Services provided in-game
cinematics and voice recording for
Microsoft Game Studiosrsquo Gears of War
Right Thomsonrsquos London-based MPC
subsidiary carried out post-production
work including computer graphics
on Sony Braviarsquos award-wirring colorful
Paint commercial
installed at several landmark theatres in
Los Angeles in 2006 including Mann The-
atresrsquo Graumanrsquos Chinese and the Village
in Westwood
Thomson maintained a leading position in
film processing and printing in 2006 in a
market where volumes were stable Tech-
nicolor handled worldwide release printingfor two of the five 2007 Oscar nominees
for Best PicturemdashMartin Scorcesersquos The
Departed and Clint Eastwoodrsquos Letters
from Iwo Jimamdashas well as release print-
ing for two of the three Best Animated Film
nominees Cars and Happy Feet
As part of its ongoing commitment to meet
customer needs worldwide a state-of-the-
art film and post-production facility was inau-
gurated at Ciudad de la Imagen in Madrid in
2006 It is already becoming known as the
countryrsquos most comprehensive postproduc-
tion facility with advanced film processingand digital intermediate capabilities
Content Services
Thomson continued to leverage its long-
standing strength in post-production
skills and services through expansion into
emerging and high-growth market seg-
ments such as content services for the
video-gaming advertising and broadcast
markets
In order to better serve the growing mar-
ket for entertainment content for mobile
devices Thomson unveiled new mobile
content preparation and distribution capa-
bilities in the US and the UK in 2006 Facili-
ties equipped with state-of-the-art produc-
tion and post-production technologies will
handle the preparation and optimization
of a wide range of digital entertainmentcontentmdashincluding movies TV episodes
and music videosmdashfor distribution to
mobile devices The dedicated services
complement the Grouprsquos extensive global
electronic distribution infrastructure which
enables Thomson to deliver mobile con-
tent to online delivery services as well as
to network operators for final transmission
to mobile customers
Thomson also made progress in the
development of an integrated digital asset
management solution in 2006 known as
MIDAS (Media Ingest Distribution andStorage) MIDAS is a software and hard-
ware platform for digital content prepara-
tion storage security and distribution
From the first day of production planning
through every stage of post-production
and content distribution MIDAS creates
a digital workflow that allows customers
to manage projects remotely and provides
for rapid and seamless global file delivery
streaming and collaboration
TECHNOLOGY SYSTEMS SERVICES
37 Thomson Panorama 2006
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While expanding into newer markets
growing demand for post-production ser-
vices and visual effects continued to fuel
Thomsonrsquos ongoing content services activ-
ities Among the yearrsquos most noteworthy
achievements were portfolios of services
for such feature films as The Departed
Letters from Iwo Jima and Pirates of the
Caribbean Dead Manrsquos Chest ThomsonrsquosMoving Picture Company (MPC) also pro-
vided high-end visual effects for the three
films nominated for Achievement in Visual
Effects Pirates of the Caribbean Posei-
don and Superman Returns
Confirming the Grouprsquos solid growth in
content services for the video game indus-
try Thomson unveiled a new dedicated
Interactive Services facility in Burbank
California in 2006 Sierra Entertainment
a division of Vivendi Games selected
Thomson to prov ide cinemat ic anima-
tion voice casting and recording sound
design and mixing services for The Leg-
end of Spyrotrade A New Beginning Like-
wise Thomson provided a wide range of
services to support Konamirsquos The SilentHill Experience released simultaneously
with the motion picture
The strategic investment in one of Indiarsquos
leading animation and gaming cinemat-
ics firms announced in February 2007
strengthened Thomsonrsquos position in Asia
for a variety of content services Located in
Bangalore India Paprikaas provides cre-
ldquoIn 1998 I joined Thomson as a Plant Manager within Home Entertainment Services
and was eventually made responsible for the expansion and management of our
Guadalajara DVD operations In summary Irsquove had great opportunities to gain experience
in international operations strategic planning and operational excellence I recently
joined Content Services where Irsquoll be leading the start-up and integration of new activities
in Beijing Bangalore and other emerging markets Content Services is dynamic and
growing and Irsquom looking forward to expanding the business in Asia while improving
our operational performance in North America and Europerdquo
Mike Hayden Vice President Operations amp Strategic Projects Content Services
of the Grouprsquos divisions and profit centersIn the context of the budgetary procedure
performance measurement indicators are
calculated by the divisions analyzed and
reviewed monthly to serve as a reference
for the Grouprsquos monthly reporting
Management reporting and
closing period work
Th om so n uses a co mmon char t of
accounts which is regularly updated The
principal accounting and financial figures
of the operational and functional depart-
ments consolidated at Group level are
analyzed by the Grouprsquos management
control team and reviewed by the Grouprsquos
Executive Committee
The closing process for the half-year and
annual consolidated financial statementsoccurs in two steps The first step con-
sists of a ldquohard closerdquo completed in May
and September leading to a first review by
the statutory auditors The second step
occurs in July and in JanuaryFebruary and
involves the finalization of half-year and
annual consolidated financial statements
under IFRS The Group then proceeds
once a year with a reconciliation of these
results in accordance with US GAAP
Preparation of financial statements
The financial statements are prepared jointly by the finance department and the
General Secretary They are based on
information reported through the annual
reporting and accounting consolidation
processes and on operational and mar-
ket information which is specifically cen-
tralized for the preparation of Thomsonrsquos
Document de Reacutefeacuterence in France and
the submission of Form 20-F in the United
States Half-year and annual financial infor-
mation is reviewed by the Grouprsquos Audit
Committee
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58 Thomson Panorama 2006
(1) Source PriceWaterhouseCoopers ndash
ldquoGlobal Entertainment and Media Outlook 2006-10rdquo
Revenue growth
Thomson achieved consolidated 2006
net revenues of 9914045854 million up from
9914045591 million in 2005 Revenues for
the Core Business reached 9914045747 mil-
lion (9914045776 million at constant currency)
representing 83 growth over 2005 at
constant currency
Overall the Grouprsquos key growth busi-
nessesmdashContent Services Network
Services Access Products for telecom
operators and our Broadcast amp Networks
businesses (Grass Valley and Network
Software)mdashincreased strongly year-on-
year and accounted for over a third of
Group revenues against less than a quar-
ter in 2005
Thomsonrsquos Core Business EBIT for 2006
was euro504 million representing a Core
Business EBIT margin of 88 Thisreflected growth in some key businesses
and cost actions across the Group off-
setting a significant investment in research
and development and some increase in
restructuring expenses
Increased spend on RampD
Research and development expenditure
charged in the Core Business (net of
external funding) rose from 991404221 million in
2005 to 991404279 million in 2006 an increase
of 26 principally in the Systems divi-
sion The Group expanded the number ofproducts and services in the development
phase across its businesses
Return to profit
Losses in Non-Core Continuing and Dis-
continued operations were substantially
lower year-on-year reflecting principally
the exit from heavily loss-making Displays
activities in 2005 and intensified cost-sav-
ing programs in 2006 A major revision
and harmonization of the Grouprsquos North
American healthcare obligations gave rise
to substantial one-time gains and Thom-
son also initiated significant restructuring
of its French Non-Core operations
The good performance of the Core Busi-
ness lower Non-Core and Discontinued
losses and a low reported tax chargeenabled the Group to return a net profit of
99140455 million in 2006 compared to a loss of
991404573 million in the previous year
Good cash flow
strengthened balance sheet
Thomson generated good free cash flow
and strengthened its balance sheet in
2006 Total net financial liabilities on the
balance sheet fell by 991404460 million reflect-
ing a 99140493 million fall in financial and acqui-
sition-related debts and a 991404367 million
reduction in retirement benefit obligations(including healthcare)
Increase in Net Dividend
The Board of Directors proposed a dis-
tribution to shareholders of 991404033 per
share (2005 dividend 991404030) reflecting
confidence in the prospects of the Group
going forward
Outlook 2007-2009
growth in revenues and net income
With the Grouprsquos transformation complete Thomsonrsquos financial focus over the 2007-
2009 period will be to grow revenues and
net income
Thomson serves growing Media Enter-
tainment amp Communications marketsmdashfor
which external estimates(1) indicate com-
pound growth of around 6 over the last
FINANCIAL AND
OPERATIONAL PERFORMANCE
Full year 2006 results
saw a return to profitability
and leave Thomson
well positioned at
the heart of convergence
and digital video
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59 Thomson Panorama 2006
five years Our digital and electronic busi-
nesses now represent two-thirds of rev-
enues and we believe they are growing
faster than the overall market offsetting
the maturing physical media businesses
Given this profile the Group expects its
revenue growth to be more modest in
2007 but to gather pace over the period
and our overall objective is to show com-pound growth over 2007-2009 in line with
or faster than the overall market
The 2007-2009 period is also expected
to see a sharply reduced impact from
residual Non-Core activities with an end
to losses from the Discontinued Activities
perimeter after 2007 Accordingly Thom-
sonrsquos ambition is to turn its Core Business
growth and profitability and lower impact
from Non-Core into strong growth in net
income over the period 2007-2009
Business operations
Continuous performance improvement is
fundamental to Thomsonrsquos commitment to
create sustainable business models and
long-term value for all stakeholders The
ambitious Group-wide programs launched
in 2004 to improve productivity and
enhance overall performance producedsubstantial results in 2006 and led to new
and strong initiatives for long-term growth
As of the second half of 2006 six ldquoKey
Programsrdquo are monitored at Group level
Clients Software Product Introduction
Operations Transformation and Talent
Management
KEY PROGRAMS IN PLACE
Program Focus
Clients Thomsonrsquos clientregional diversification and
growth of the existing business
through improved Sales amp Marketing
Software Development of integrated software platforms
in all markets (post-production distribution
delivery) and for all types of customer
(professional prosumerhellip)
Product Introduction Ensuring new product roadmaps are in line
with strategy and resource needs have been
identifiedOperations Improving the Grouprsquos cost base cash
generation and working capital
Transformation Multiple programs including initiatives to
improving customer relationship management
worldwide supply chain management
IT transformation as well as Thomsonrsquos RampD
footprint
Talent Management Leveraging human assets with a focus on
talent retention and acquisition
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60 Thomson Panorama 2006
SUMMARY RESULTS FULL YEAR 2006
In 991404 millions unless otherwise stated 2006(1) 2005(1)
Net revenues 5854 5591(1)
Core Business net revenues 5747 5335
Services 2489 2487
Systems 2684 2262
Technology 547 546
Corporate 27 40
Non-Core continuing operations net revenues 107 256
Core Business EBIT(2) 504 512
Services 160 205
Systems 132 109
Technology 289 277Corporate (77) (79)
EBIT from Non-Core continuing operations (25) (122)
(1) Restated with 2006 discontinued activities according to IFRS 5
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61 Thomson Panorama 2006
Year ended December 31in 991404 except number of shares 2006 2005 2004
Year ended December 31in 991404 millions 2006 2005(1) 2004(1)
CONSOLIDATED STATEMENTS OF OPERATIONS
(1) Restated with 2006 discontinued activities according to IFRS 5
(2) After deduction of the interests net of tax paid on the subordinated perpetual notes during the period
Continuing operations
Revenues 5854 5591 5980
Cost of sales (4474) (4240) (4594)
Gross margin 1380 1351 1386
Selling marketing general and administrative expenses (674) (638) (653)
Other income (expense) 52 (96) (69)
Research and development expenses (279) (227) (201)
Profit from continuing operations before tax and net finance costs 479 390 463
Interest income 19 30 52
Interest expense (108) (108) (54)
Other financial income (expense) (111) 36 (26)
Finance costs ndash net (200) (42) (28)
Share of profit (loss) from associates (86) (82) (20)
Income tax ndash (68) (93)
Profit from continuing operations 193 198 322
Discontinued operations
Profit (loss) from discontinued operations (138) (771) (883)
Net income (loss) 55 (573) (561)
Attributable to
Equity Holders 55 (574) (559)
Minority interests ndash 1 (2)
Weighted average number of shares
outstandingmdashbasic net of treasury stock 261188858 266539917 273646869
Earnings per share from continuing operations
Basic(2) 067 074 118
Diluted 063 042 111
Earnings per share from discontinued operations
Basic (053) (289) (323)
Diluted (048) (262) (296)Total earnings per share
Basic(2) 014 (215) (205)
Diluted 015 (220) (185)
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62 Thomson Panorama 2006
CONSOLIDATED BALANCE SHEETS
In 991404 millions December 31 December 31 January 1 December 31 2006 2005 2005(1) 2004
ASSETS
Non-current assets
Property plant and equipment 813 886 1051 1051
Goodwill 1714 1756 1186 1178
Other intangible assets 1071 1150 924 924
Investments in associates 12 204 260 260
Investments and financial assets available-for-sale 266 341 139 113
Derivative financial instruments 7 1 11 ndash
Contract advances 129 173 179 179
Deferred tax assets 397 379 307 301
Other non-current assets 110 182 133 136
Total non-current assets 4519 5072 4190 4142
Current assets
Inventories 366 333 503 568
Trade accounts and notes receivable 1018 1315 1232 1180
Current accounts with associates and joint ventures 97 115 143 143
Derivative financial instruments 8 9 115 ndash
Other current assets 535 644 483 616
Marketable securities ndash 7 58 58
Cash and cash equivalents 1311 996 1845 1848
Assets classified as held for sale 264 369 80 ndash
Total current assets 3599 3788 4459 4413
Total assets 8118 8860 8649 8555
(1) Including the impacts of the first-time application related to IAS 32 and 39 on financial instruments and IFRS 5 on non-current assets held for sale and
discontinued operations
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63 Thomson Panorama 2006
In 991404 millions December 31 December 31 January 1 December 31 2006 2005 2005(1) 2004
SHAREHOLDERSrsquo EQUITY AND LIABILITIES
Shareholdersrsquo equity
Common stock (273871296 shares at
December 31 2006
with nominal value of euro 375 per share) 1027 1025 1025 1025
Trade accounts and notes payable 1032 1164 1199 1226
Accrued employee expenses 165 166 158 163
Income tax payable 57 47 60 60
Other current liabilities 671 750 746 800
Payables on acquisition of companies 13 138 84 84
Liabilities directly associated with
assets classified as held for sale 232 470 88 ndash
Total current liabilities 3681 4393 3602 3459
Total liabilities 5999 6644 6251 6062
Total shareholderrsquos equity and liabilities 8118 8860 8649 8555
(1) Including the impacts of the first-time application related to IAS 32 and 39 on financial instruments and IFRS 5 on non-current assets held for sale and
discontinued operations
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Creation and lay-out
Photo credits Nathalie BerhingGAMMA ndash Steacutephane de Bourgies ndash Jean-Franccedilois DeroubaixGAMMA ndash Christine Donnier- ValentinGAMMA ndash Cars copy 2006 Disney Enterprises IncPixar All Rights Reserved ndash Dreamgirls copy 2006 DREAMWORKS
LLC and PARAMOUNT PICTURES All Rights Reserved ndash Poseidon copy 2006 Warner Bros Pictures ndash Sony Bravia Paint
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Today people benefit from virtually instan-
taneous access to an increasingly custom-
ized range of content available through
a growing set of access possibilities As
internet and digital technologies con-
tinue to infuse the Media Entertainment
amp Communications industries Thomson
is focusing on opportunities arising from
this new paradigm alongside its traditionalcore markets These range from traditional
broadcast equipment to the growing mar-
ket for professional audio-video systems
mobile and IP (Internet Protocol) TV to
booming demand for residential broad-
band services
Strategy
Thomsonrsquos Systems division comprises
three activities Access Products and the
Broadcast amp Networks businesses The
Access Products business aims to deliver
key set-top box platforms for satellite andcable customers and gateway products
for telecom operators The Broadcast
amp Networks businesses are focused on
video network integration bringing to
market advanced products and solutions
to enable network operators broadcast-
ers and film-makers to benefit from the
latest technologies in image acquisition
compression switching and storage The
Network Software business aims to enable
the introduction of new multiple-play ser-
vices based on fixed-mobile convergence
IPTV and broadband telephony
Achievements
Overall the Systems division improved
diversified its customer base in 2006 In
Access Products Thomson consolidated
its leadership of worldwide markets forset-top boxes gateways and modems for
telecom satellite and cable network oper-
ators and service providers while achiev-
ing good growth in higher-end products
in the second half of the year In Grass
Valley demand for high-defin ition (HD)
acquisition production and distribution
systems combined with growing demand
for IT- and IP-based broadcast solutions to
drive growth while in Network Software
Thomsonrsquos SmartVis ion IPTV system
gained good ground with more than 30
IPTV and mobile TV deployments to date
and the worldrsquos largest installed base
Access Products
The Access Products business was driven
in 2006 by the ongoing rapid expansion of
triple (video voice and data) and quadru-
ple play services (also fixed-mobile con-
vergence) offered by cable and telecom
network operators and by the increasing
spread of high definition (HD) broadcasts
among satellite network operators
SYSTEMS
PROVIDING VIDEO SOLUTIONS
From image capture to
distribution via
all types of network
Thomson is reaping the benefits of
growing market demand for
video network integration
TECHNOLOGY SYSTEMS SERVICES
26 Thomson Panorama 2006
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Thomson further consolidated its market
leading position for dual and triple-play
gateways to telecom operators and inter-
net service providers The established mar-
ket leader for DSL modems and routers
since 1999 Thomson extended its lead
over the competition in 2006 shipping
more than 42 million DSL modems and
gateways during the first half of the yearand 10 million units overall in 2006
Growing market demand for sophisticated
home networking eco-systems able to
accommodate new services over time was
underlined by the success of Thomsonrsquos
Livebox gateway for France Telecom
Early in 2007 Thomson supported large-
scale deployment of the Livebox which
provides access to high-speed wireless
Internet Voice-over-IP IPTV network
gaming fixed-mobile convergence (unik)
and other services
An advanced Thomson gateway also
enabled the UKrsquos leading operator to
launch its innovative Total Broadband ser-
vice in June 2006 Bri tish Telecomrsquos BT
Home Hubtrade is a quadruple-play gateway
designed to support BTrsquos full range of ser-
vices including both BT Total Broadband
and BT Broadband Talk in addition to
providing wired and wireless broadband
connectivity for fixed and mobile phones
PCs and other networked devices It also
Mobile video in Italy
Thomsonrsquos product and service offering benefited in 2006 from increased interest from cable and
telecom operators to complete their offering for Video-on-Demand and mobile TV The Olympic Winter Games
notably provided a showcase for Thomsonrsquos capability to deliver video programming to cell phones and
other mobile devices In the wake of the successful Olympic trial Telecom Italia turned to Thomson
for the systems and technology that enabled it to commercially launch a mobile offering including TV and
sports programming in June 2006
incorporates the latest wideband audio
codec providing near CD-quality sound
for voice and video calls
As broadband services become more and
more of a mass-market service providers
must ensure that their services are both
differentiating and easy to consume This
trend calls for the emergence of simpleyet very technologically-advanced and
software-laden devices Such devices
connect to the home-networking gateway
and make it natural to consume a broad-
band-delivered service One example
is the Music Box first made available to
subscribers of AOLrsquos broadband service
in France which streams Internet-based
radio stations or locally stored music files
to a homersquos legacy Hi-Fi audio system
Strong growth in the cable network sys-
tems market which is projected to expand
another 20 in 2007 helped drive Thom-son toward two major sales milestones
in 2006 two million cable set-top boxes
and ten million cable modems Driven by
operatorsrsquo needs to provide more and
more sophisticated services Thomson
has extended its product range since
2005 to include interactive double- and
triple-play set-top boxes as well as HD
set-top boxes with advanced functions
such as personal video recorders (PVR)
Among the cable operators to have
TECHNOLOGY SYSTEMS SERVICES
27 Thomson Panorama 2006
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Total Broadband for BT
An advanced Thomson gateway enabled the UKrsquos leading telecommunications operator British Telecom
to launch its innovative Total Broadband service in June 2006 This quadruple-play gateway
known as the BT Home Hubtrade features video voice data and wireless capabilities
It is supporting BTrsquos full range of services including wired and wireless broadband connectivity
for fixed and mobile phones PCs and other networked devices
28 Thomson Panorama 2006
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Left Thomson Grass Valley branded
outside broadcast van under construction
Right Camera operator Kim Marks (left)
a camera first assistant Chris Blauvelt (center)
and a camera second assistant
Jason McCormick (right) line up a scene
with the Grass Valley Viper FilmStreamtrade
camera for the David Fincher feature Zodiac
Photo courtesy Paramount Pictures
selected Thomson in 2006 were Portu-
galrsquos leading Pay-TV Operator TV Cabo
UPC E-Vision Kabel Deutschland and
Premiegravere in Europe Net Serviccedilos in Latin America and StarHub and Dalian Cable
TV in Asia
Thomson expanded its footprint in satel-
lite in Europe notably in the UK and in
Asia where product deliveries began for
Tata Sky the Indian satellite broadcaster
In the UK Thomson delivered the Sky
HD box an MPEG-4 set-top box with
Personal Video Recorder which enabled
the successful launch of the countryrsquos first
high-definition TV service in May 2006
The largest satel li te television service
provider in the US DIRECTV also chose Thomson to expand its HD programming
offering with the delivery of the H20 satel-
lite receiver
Leveraging expertise in free-to-air digi-
tal terrestrial receivers and capabilities in
high-definition Thomson also delivered
the first MPEG-4 HDTV receivers for digital
terrestrial TV to French operators Canal +
and TPS during the year
In telephony Thomson remains a lead-
ing supplier of corded and cordless tele-
phones which are sold at retail outletsunder the RCA GE and Alcatel brands as
well as under third-party brands for opera-
tor sales In 2006 Thomson capitalized
on its leadership position in DECT (Digital
Enhanced Cordless Telecommunications)
in Europe by expanding into the American
retail market
Broadcast amp Networks
The Broadcast amp Networks businesses
gained market share in 2006 particularlyin networks and systems integration and
expanded in the promising Pro-AV (profes-
sional audio-video) market
Continuing trends in this market are high-
definition (HD) broadcasting the merging
of IT and broadcast technology the move
to a tape-less file-based approach to video
storage and management and power-
ful MPEG-4 HD compression technology
which allows content to be delivered to mul-
tiple audiences over multiple platforms
One highly visible application of ThomsonrsquosGrass Valley brand of HD image acquisi-
tion and production systems was the 2006
FIFA World Cup in Germany seen by a
billion viewers around the world Broad-
casters covering the event relied on more
than 182 Grass Valley brand cameras
10 Grass Valley video switching systems
12 large scale Grass Valley video routing
systems and hundreds of other devices to
provide faultless HD images
Leveraging its market leading position
Thomson est imates tha t Grass Valley
HD cameras now account for 50 of theglobal market Most major outside broad-
cast production companies in the world
use Grass Valley branded HD camera sys-
tems with more than 1500 in use
High-definition television is also about
news Based on internal Thomson esti-
mates Grass Valley solutions accounted
for nearly 80 of HD news installations
worldwide in 2006 including CBS Net-
work-owned amp operated stations in the
TECHNOLOGY SYSTEMS SERVICES
29 Thomson Panorama 2006
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IGNITE HD
TV news operations can work more quickly and efficiently by using information
technology The industryrsquos first and most complete link between the control room
and the newsroom HD Ignite enables a single technician to handle all
news production requirements During its initial months on the market in the US
HD Ignite was selected by such early adaptors as ABC Stations Group
customers in San Francisco and Chicago and Cox Broadcasting customers in
Atlanta San Francisco Charlotte North Carolina and Dayton Ohio
Telecom service providers are working to
provide more content and value-added
services over their broadband lines
Thomsonrsquos SmartVision and
Cirpack software solutions facilitate
their strategies for rapid deployment of
IPTV and triple-play services
US Al Jazeera Englishmdasha global channelbased in the Middle Eastmdashand Belgiumrsquos
VTM (Vlaamse Televisie Maatschappij )
Thomson is the only supplier to provide
an automated production system (Ignite
HD) a full suite of non-linear editing sys-
tems and a news playout systemmdashall of
which enable broadcasters to move to HD
affordably and to speed up and automate
their workflows
MPEG-4 is one of the enabling technolo-
gies which allows operators of telecom-
munications networks to bring TV to
their subscribers in addition to voice andinternet access This is one element in a
complete Thomson systems offering For
example Spanish operator Telefoacutenica
selected Thomson for a range of equip-
ment and systems to upgrade and expand
its rapidly growing ldquoImageniordquo service In
the US Falcon Communications a lead-
ing systems integrator offers a turnkey
IPTV solution featuring encoding content
delivery service management and access
products from Thomson
bull Professional Audio-Video
Thomson serves the rapidly growing mar-ket for professional audiovisual (ProAV)
solutions for corporate institutional wor-
ship and governmental media centers and
networks Thomsonrsquos expansion in ProAV
has been achieved through organic prod-
uct development as well as the integra-
tion of Pro-AV products from Canopus
the Japanese company acquired in early
2006
EDIUS desktop video
editing software part of
Thomsonrsquos growing rangeof professional
audiovisual and
broadcast solutions
TECHNOLOGY SYSTEMS SERVICES
30 Thomson Panorama 2006
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ldquoHaving started out in research today Irsquom responsible for our modemsrsquo roadmap
and strategy Our customersmdashthe telecoms operatorsmdashhave seen their business
transformed by technology like high-speed broadband And I find it fascinating
how these technologies have penetrated our daily lives the way we live and how
we communicate have changed dramatically over the last ten years
Even faster broadband (VDSL) fiber optics wireless technologies fixed-mobile
convergencehellip mean the pace of change is set to accelerate therersquos no doubt
wersquore living in exciting timesrdquo
Stan Claes Product Manager for IP-based Access Products
A key product introduction in 2006 was
the Grass Valley Indigo AV Presenta-
tion Switcher which combines features
normally found in separate devices in aunified powerful control interface simple
enough to be used by a single operator
Digital signage is also providing new mar-
ket opportunities combining the latest in
display delivery and storage technologies
Thomsonrsquos integrated digital media man-
agement solution Media Edge solves the
complex control distribution and archive
demands of customers Media Edge can
stream high-quality SD and HD content
over an IP network for example to the retail
store environment without the need to re-
invest in infrastructure
Broadcast amp Networksmdash
Network Software
2006 saw telecom service providers con-
tinue to build strategies to provide more
content and value-added services over
their broadband lines Thomsonrsquos Smart-
Vision TV service platforms and Cirpack
telephony switches are at the heart of sev-
eral of the worldrsquos largest IPTV and VoIP
services
In 2006 the launch of a pre-integrated mul-tiple play solution for telecom service provid-
ers illustrated Thomsonrsquos ability to leverage
skills across multiple business units The
solutions which enable telecom providers
to bring a myriad of services to broadband
subscribers are built around Thomsonrsquos
SmartVision and Cirpack software solu-
tions integrated with Thomsonrsquos Grass
Valley branded video head-end equipment
and Thomson home gateways and set-top
boxes This represents the first pre-inte-
grated solution on the market for rapid easy
deployment of triple play services including
voice video and internet access
More than 30 IPTV and mobile TV service
platforms have been deployed around the
world with SmartVision well-positioned
for convergent operators since it allows
video distribution over fixed and mobile
networks
Thomsonrsquos Cirpack softswitches which
help provide the core for the new inte-
grated platforms occupied the top mar-
ket position worldwide for residential
broadband telephony (VoIP) platforms in
2006 Over the course of 2006 Europersquoslargest primary line VoIP operator Freefr
upgraded its Cirpack switches to bring a
new seamless fixedmobile service to its
two million customers placing Thomson
at the forefront of new fixed-mobile con-
vergence solutions Signaling the rapid
expansion of sales outside traditional
Western European markets Thomsonrsquos
Cirpack switches were selected by many
telecom operators in Northern Africa Cen-
tral and Eastern Europe as well as Central
America to build or upgrade legacy voice
networks and deliver advanced telephone
services using IP technologies
TECHNOLOGY SYSTEMS SERVICES
31 Thomson Panorama 2006
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Thomsonrsquos Services division provides end-to-end management of business-critical services on behalf of Media
Entertainment amp Communications customers These include management of broadcast and network operations
centers on an outsourced basis and the provision of an array of content services to the creative community from
post-production to visual effects
SERVICES
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Thomsonrsquos Services division provides end-
to-end management of business-critical
services spanning physical media con-
tent services electronic content distribu-
tion and network services The division
is the worldrsquos leading provider of state-
of-the-art film-making post-production
visual effects and broadcast center man-
agement services
Strategy
The Services division continues to focus
on managing v ideo networks and
op er at io na l centers on behalf of its
customers who are able to concentrate
on their core business of content The
emphasis on high-growth opportunities
in newer market sectors such as retail
and corporate networks and gaming
has been sharpened
Achievements
New customers in fast-growing market
segments responded well to a range of
high value-added services from the Ser-
vices division in 2006 Network Services
showed particularly strong growth as net-
work operators in Europe Asia and North
America selected Technicolor-branded
management services The addition of
such leading customers as ITV in the
UK and France 24 and TV5 in France
substantially expanded Thomsonrsquos fast-
growing Network Services business
Noteworthy successes were also achieved
in Theatrical Services due in part to the
continued development of Thomsonrsquos digi-
tal cinema activity The Content Services
business continued to expand its post-
production services business by opening
a digital intermediate facility on the SonyPictures Entertainment studio lot In 2006
a new Home Entertainment Services unit
was created combining Thomsonrsquos DVD
business with electronic distribution to
develop new services to support emerging
lsquoon demand contentrsquo business models
Network Services
With a comprehensive portfolio of services
for broadcasters network and internet TV
operators movie theatres retailers and
corporations Network Services continued
to expand briskly in 2006 Broadcastersincreasingly selected Thomson as their
long-term network services partner By
year-end Network Services was providing
managed services under the Technicolor
brand to close to 200 channels from
17 facilities in France the Netherlands
Japan North America and the UK
Late in the year Thomson signed a long-
term agreement with ITV for network
transmission operations services for its six
From managing video
networks on an outsourced
basis to a broad range of
offerings in content services
Thomson is bringing its video
expertise to new markets
and geographies
Left Network Services for broadcasters
cable TV operators movie theaters
retailers and corporations is one of Servicesrsquo
fastest-growing business segments
Right Thomson provided film sound
DVD and digital cinema services for Cars
the DisneyPixar hitCars copy 2006 Disney Enterprises IncPixar All R ights Reserved
SERVICES
MANAGING VIDEO NETWORKS
TECHNOLOGY SYSTEMS SERVICES
34 Thomson Panorama 2006
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existing UK channels including the coun-
tryrsquos leading commercial channel In addi-
tion an agreement signed with NOB Cross
Media Facilities (NOB CMF) a subsidiary
of Nederlands Omroepproduktie Bedrijf
(NOB) likewise established Thomson as
a major supplier of network management
services in the Netherlands
In France Network Services added new
clients France 24 and TV5 which covers
203 countries and territories to move into
the market-leading position managing
more than 60 channels and 1500 hours
of programming daily The France 24 part-
nership also involves equipping their new
global TV news operation
Thomson drove expansion and innovation
in its retail media services over the course
of the year One of the most notable achie-
vements involves an ambitious in-store
network upgrade program piloted in2006 by Wal-Mart in the USA with Premier
Retail Networks (PRN) a subsidiary within
Thomsonrsquos Network Services operat ion
The in-store network platform was based
on Thomson IPTV technologies adapted
for the retail environment The system
the first pilot of IPTV in the retail environ-
ment delivered real impact on product
sales and improved customer satisfaction
in Wal-Mart stores PRN also expanded
capabilities into China early in 2007 with
Content Services revving up
Thomson provided a wide range of services for a number of major international film releases in 2006
such as Cars one of the three nominees for Best Animated Film at the Oscars Thomson Technicolor provided
film services sound services DVD compression and authoring replication and distribution
as well as digital cinema mastering and distribution for the DisneyPixar hit The Grouprsquos Content Services offering
has expanded in recent years to include the high-growth video-gaming advertising and broadcast markets
the signing of a joint venture with CGEN a
technology company leading the Chinese
in-store digital signage media industry
The two companies are currently collabo-
rating on the roll-out of an in-store media
network to 750 internet cafeacutes part of the
leading Chinese chain Big Cafeacute
Theatrical Services
Thomson signed Europersquos first large-scale
digital cinema rollout agreement in 2006
with the Kinepolis Group one of the conti-
nentrsquos most innovative theater circuits and
the leading exhibition chain in Belgium
The agreement to instal l and operate
digital cinema systems in 130 Kinepolis-
owned and operated screens passed a
first milestone in March 2007 with Thom-
sonrsquos first international distribution by sat-
ellite of an encrypted digital version of the
film Dreamgirls from the US to a Kinepolis
theater in Brussels Belgium
A series of new contracts were awarded
in the US For example in the fall of 2006
Technicolor Digital Cinema began installing
digital projection systems at 120 National
Amusements Inc screens in Boston Los
Angeles New York and elsewhere as part
of a strategic agreement National Amuse-
ments operates more than 1500 screens
in the US UK Latin America and Russia
Digital projection systems were also
TECHNOLOGY SYSTEMS SERVICES
35 Thomson Panorama 2006
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The growing market for Network Services
The decision by the UKrsquos leading commercial broadcaster to entrust its network services to
Thomsonrsquos Network Services operations illustrates a growing global trend as broadcasters focus increasingly on
programming and meeting customer needs they turn to highly-skilled specialists to handle technology
The long-term agreement with ITV means that the broadcaster will benefit from enhanced service and new technology
as well as more flexibility in launching new services
36 Thomson Panorama 2006
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Left Thomsonrsquos Technicolor
Interactive Services provided in-game
cinematics and voice recording for
Microsoft Game Studiosrsquo Gears of War
Right Thomsonrsquos London-based MPC
subsidiary carried out post-production
work including computer graphics
on Sony Braviarsquos award-wirring colorful
Paint commercial
installed at several landmark theatres in
Los Angeles in 2006 including Mann The-
atresrsquo Graumanrsquos Chinese and the Village
in Westwood
Thomson maintained a leading position in
film processing and printing in 2006 in a
market where volumes were stable Tech-
nicolor handled worldwide release printingfor two of the five 2007 Oscar nominees
for Best PicturemdashMartin Scorcesersquos The
Departed and Clint Eastwoodrsquos Letters
from Iwo Jimamdashas well as release print-
ing for two of the three Best Animated Film
nominees Cars and Happy Feet
As part of its ongoing commitment to meet
customer needs worldwide a state-of-the-
art film and post-production facility was inau-
gurated at Ciudad de la Imagen in Madrid in
2006 It is already becoming known as the
countryrsquos most comprehensive postproduc-
tion facility with advanced film processingand digital intermediate capabilities
Content Services
Thomson continued to leverage its long-
standing strength in post-production
skills and services through expansion into
emerging and high-growth market seg-
ments such as content services for the
video-gaming advertising and broadcast
markets
In order to better serve the growing mar-
ket for entertainment content for mobile
devices Thomson unveiled new mobile
content preparation and distribution capa-
bilities in the US and the UK in 2006 Facili-
ties equipped with state-of-the-art produc-
tion and post-production technologies will
handle the preparation and optimization
of a wide range of digital entertainmentcontentmdashincluding movies TV episodes
and music videosmdashfor distribution to
mobile devices The dedicated services
complement the Grouprsquos extensive global
electronic distribution infrastructure which
enables Thomson to deliver mobile con-
tent to online delivery services as well as
to network operators for final transmission
to mobile customers
Thomson also made progress in the
development of an integrated digital asset
management solution in 2006 known as
MIDAS (Media Ingest Distribution andStorage) MIDAS is a software and hard-
ware platform for digital content prepara-
tion storage security and distribution
From the first day of production planning
through every stage of post-production
and content distribution MIDAS creates
a digital workflow that allows customers
to manage projects remotely and provides
for rapid and seamless global file delivery
streaming and collaboration
TECHNOLOGY SYSTEMS SERVICES
37 Thomson Panorama 2006
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While expanding into newer markets
growing demand for post-production ser-
vices and visual effects continued to fuel
Thomsonrsquos ongoing content services activ-
ities Among the yearrsquos most noteworthy
achievements were portfolios of services
for such feature films as The Departed
Letters from Iwo Jima and Pirates of the
Caribbean Dead Manrsquos Chest ThomsonrsquosMoving Picture Company (MPC) also pro-
vided high-end visual effects for the three
films nominated for Achievement in Visual
Effects Pirates of the Caribbean Posei-
don and Superman Returns
Confirming the Grouprsquos solid growth in
content services for the video game indus-
try Thomson unveiled a new dedicated
Interactive Services facility in Burbank
California in 2006 Sierra Entertainment
a division of Vivendi Games selected
Thomson to prov ide cinemat ic anima-
tion voice casting and recording sound
design and mixing services for The Leg-
end of Spyrotrade A New Beginning Like-
wise Thomson provided a wide range of
services to support Konamirsquos The SilentHill Experience released simultaneously
with the motion picture
The strategic investment in one of Indiarsquos
leading animation and gaming cinemat-
ics firms announced in February 2007
strengthened Thomsonrsquos position in Asia
for a variety of content services Located in
Bangalore India Paprikaas provides cre-
ldquoIn 1998 I joined Thomson as a Plant Manager within Home Entertainment Services
and was eventually made responsible for the expansion and management of our
Guadalajara DVD operations In summary Irsquove had great opportunities to gain experience
in international operations strategic planning and operational excellence I recently
joined Content Services where Irsquoll be leading the start-up and integration of new activities
in Beijing Bangalore and other emerging markets Content Services is dynamic and
growing and Irsquom looking forward to expanding the business in Asia while improving
our operational performance in North America and Europerdquo
Mike Hayden Vice President Operations amp Strategic Projects Content Services
of the Grouprsquos divisions and profit centersIn the context of the budgetary procedure
performance measurement indicators are
calculated by the divisions analyzed and
reviewed monthly to serve as a reference
for the Grouprsquos monthly reporting
Management reporting and
closing period work
Th om so n uses a co mmon char t of
accounts which is regularly updated The
principal accounting and financial figures
of the operational and functional depart-
ments consolidated at Group level are
analyzed by the Grouprsquos management
control team and reviewed by the Grouprsquos
Executive Committee
The closing process for the half-year and
annual consolidated financial statementsoccurs in two steps The first step con-
sists of a ldquohard closerdquo completed in May
and September leading to a first review by
the statutory auditors The second step
occurs in July and in JanuaryFebruary and
involves the finalization of half-year and
annual consolidated financial statements
under IFRS The Group then proceeds
once a year with a reconciliation of these
results in accordance with US GAAP
Preparation of financial statements
The financial statements are prepared jointly by the finance department and the
General Secretary They are based on
information reported through the annual
reporting and accounting consolidation
processes and on operational and mar-
ket information which is specifically cen-
tralized for the preparation of Thomsonrsquos
Document de Reacutefeacuterence in France and
the submission of Form 20-F in the United
States Half-year and annual financial infor-
mation is reviewed by the Grouprsquos Audit
Committee
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58 Thomson Panorama 2006
(1) Source PriceWaterhouseCoopers ndash
ldquoGlobal Entertainment and Media Outlook 2006-10rdquo
Revenue growth
Thomson achieved consolidated 2006
net revenues of 9914045854 million up from
9914045591 million in 2005 Revenues for
the Core Business reached 9914045747 mil-
lion (9914045776 million at constant currency)
representing 83 growth over 2005 at
constant currency
Overall the Grouprsquos key growth busi-
nessesmdashContent Services Network
Services Access Products for telecom
operators and our Broadcast amp Networks
businesses (Grass Valley and Network
Software)mdashincreased strongly year-on-
year and accounted for over a third of
Group revenues against less than a quar-
ter in 2005
Thomsonrsquos Core Business EBIT for 2006
was euro504 million representing a Core
Business EBIT margin of 88 Thisreflected growth in some key businesses
and cost actions across the Group off-
setting a significant investment in research
and development and some increase in
restructuring expenses
Increased spend on RampD
Research and development expenditure
charged in the Core Business (net of
external funding) rose from 991404221 million in
2005 to 991404279 million in 2006 an increase
of 26 principally in the Systems divi-
sion The Group expanded the number ofproducts and services in the development
phase across its businesses
Return to profit
Losses in Non-Core Continuing and Dis-
continued operations were substantially
lower year-on-year reflecting principally
the exit from heavily loss-making Displays
activities in 2005 and intensified cost-sav-
ing programs in 2006 A major revision
and harmonization of the Grouprsquos North
American healthcare obligations gave rise
to substantial one-time gains and Thom-
son also initiated significant restructuring
of its French Non-Core operations
The good performance of the Core Busi-
ness lower Non-Core and Discontinued
losses and a low reported tax chargeenabled the Group to return a net profit of
99140455 million in 2006 compared to a loss of
991404573 million in the previous year
Good cash flow
strengthened balance sheet
Thomson generated good free cash flow
and strengthened its balance sheet in
2006 Total net financial liabilities on the
balance sheet fell by 991404460 million reflect-
ing a 99140493 million fall in financial and acqui-
sition-related debts and a 991404367 million
reduction in retirement benefit obligations(including healthcare)
Increase in Net Dividend
The Board of Directors proposed a dis-
tribution to shareholders of 991404033 per
share (2005 dividend 991404030) reflecting
confidence in the prospects of the Group
going forward
Outlook 2007-2009
growth in revenues and net income
With the Grouprsquos transformation complete Thomsonrsquos financial focus over the 2007-
2009 period will be to grow revenues and
net income
Thomson serves growing Media Enter-
tainment amp Communications marketsmdashfor
which external estimates(1) indicate com-
pound growth of around 6 over the last
FINANCIAL AND
OPERATIONAL PERFORMANCE
Full year 2006 results
saw a return to profitability
and leave Thomson
well positioned at
the heart of convergence
and digital video
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59 Thomson Panorama 2006
five years Our digital and electronic busi-
nesses now represent two-thirds of rev-
enues and we believe they are growing
faster than the overall market offsetting
the maturing physical media businesses
Given this profile the Group expects its
revenue growth to be more modest in
2007 but to gather pace over the period
and our overall objective is to show com-pound growth over 2007-2009 in line with
or faster than the overall market
The 2007-2009 period is also expected
to see a sharply reduced impact from
residual Non-Core activities with an end
to losses from the Discontinued Activities
perimeter after 2007 Accordingly Thom-
sonrsquos ambition is to turn its Core Business
growth and profitability and lower impact
from Non-Core into strong growth in net
income over the period 2007-2009
Business operations
Continuous performance improvement is
fundamental to Thomsonrsquos commitment to
create sustainable business models and
long-term value for all stakeholders The
ambitious Group-wide programs launched
in 2004 to improve productivity and
enhance overall performance producedsubstantial results in 2006 and led to new
and strong initiatives for long-term growth
As of the second half of 2006 six ldquoKey
Programsrdquo are monitored at Group level
Clients Software Product Introduction
Operations Transformation and Talent
Management
KEY PROGRAMS IN PLACE
Program Focus
Clients Thomsonrsquos clientregional diversification and
growth of the existing business
through improved Sales amp Marketing
Software Development of integrated software platforms
in all markets (post-production distribution
delivery) and for all types of customer
(professional prosumerhellip)
Product Introduction Ensuring new product roadmaps are in line
with strategy and resource needs have been
identifiedOperations Improving the Grouprsquos cost base cash
generation and working capital
Transformation Multiple programs including initiatives to
improving customer relationship management
worldwide supply chain management
IT transformation as well as Thomsonrsquos RampD
footprint
Talent Management Leveraging human assets with a focus on
talent retention and acquisition
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60 Thomson Panorama 2006
SUMMARY RESULTS FULL YEAR 2006
In 991404 millions unless otherwise stated 2006(1) 2005(1)
Net revenues 5854 5591(1)
Core Business net revenues 5747 5335
Services 2489 2487
Systems 2684 2262
Technology 547 546
Corporate 27 40
Non-Core continuing operations net revenues 107 256
Core Business EBIT(2) 504 512
Services 160 205
Systems 132 109
Technology 289 277Corporate (77) (79)
EBIT from Non-Core continuing operations (25) (122)
(1) Restated with 2006 discontinued activities according to IFRS 5
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61 Thomson Panorama 2006
Year ended December 31in 991404 except number of shares 2006 2005 2004
Year ended December 31in 991404 millions 2006 2005(1) 2004(1)
CONSOLIDATED STATEMENTS OF OPERATIONS
(1) Restated with 2006 discontinued activities according to IFRS 5
(2) After deduction of the interests net of tax paid on the subordinated perpetual notes during the period
Continuing operations
Revenues 5854 5591 5980
Cost of sales (4474) (4240) (4594)
Gross margin 1380 1351 1386
Selling marketing general and administrative expenses (674) (638) (653)
Other income (expense) 52 (96) (69)
Research and development expenses (279) (227) (201)
Profit from continuing operations before tax and net finance costs 479 390 463
Interest income 19 30 52
Interest expense (108) (108) (54)
Other financial income (expense) (111) 36 (26)
Finance costs ndash net (200) (42) (28)
Share of profit (loss) from associates (86) (82) (20)
Income tax ndash (68) (93)
Profit from continuing operations 193 198 322
Discontinued operations
Profit (loss) from discontinued operations (138) (771) (883)
Net income (loss) 55 (573) (561)
Attributable to
Equity Holders 55 (574) (559)
Minority interests ndash 1 (2)
Weighted average number of shares
outstandingmdashbasic net of treasury stock 261188858 266539917 273646869
Earnings per share from continuing operations
Basic(2) 067 074 118
Diluted 063 042 111
Earnings per share from discontinued operations
Basic (053) (289) (323)
Diluted (048) (262) (296)Total earnings per share
Basic(2) 014 (215) (205)
Diluted 015 (220) (185)
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62 Thomson Panorama 2006
CONSOLIDATED BALANCE SHEETS
In 991404 millions December 31 December 31 January 1 December 31 2006 2005 2005(1) 2004
ASSETS
Non-current assets
Property plant and equipment 813 886 1051 1051
Goodwill 1714 1756 1186 1178
Other intangible assets 1071 1150 924 924
Investments in associates 12 204 260 260
Investments and financial assets available-for-sale 266 341 139 113
Derivative financial instruments 7 1 11 ndash
Contract advances 129 173 179 179
Deferred tax assets 397 379 307 301
Other non-current assets 110 182 133 136
Total non-current assets 4519 5072 4190 4142
Current assets
Inventories 366 333 503 568
Trade accounts and notes receivable 1018 1315 1232 1180
Current accounts with associates and joint ventures 97 115 143 143
Derivative financial instruments 8 9 115 ndash
Other current assets 535 644 483 616
Marketable securities ndash 7 58 58
Cash and cash equivalents 1311 996 1845 1848
Assets classified as held for sale 264 369 80 ndash
Total current assets 3599 3788 4459 4413
Total assets 8118 8860 8649 8555
(1) Including the impacts of the first-time application related to IAS 32 and 39 on financial instruments and IFRS 5 on non-current assets held for sale and
discontinued operations
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63 Thomson Panorama 2006
In 991404 millions December 31 December 31 January 1 December 31 2006 2005 2005(1) 2004
SHAREHOLDERSrsquo EQUITY AND LIABILITIES
Shareholdersrsquo equity
Common stock (273871296 shares at
December 31 2006
with nominal value of euro 375 per share) 1027 1025 1025 1025
Trade accounts and notes payable 1032 1164 1199 1226
Accrued employee expenses 165 166 158 163
Income tax payable 57 47 60 60
Other current liabilities 671 750 746 800
Payables on acquisition of companies 13 138 84 84
Liabilities directly associated with
assets classified as held for sale 232 470 88 ndash
Total current liabilities 3681 4393 3602 3459
Total liabilities 5999 6644 6251 6062
Total shareholderrsquos equity and liabilities 8118 8860 8649 8555
(1) Including the impacts of the first-time application related to IAS 32 and 39 on financial instruments and IFRS 5 on non-current assets held for sale and
discontinued operations
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Creation and lay-out
Photo credits Nathalie BerhingGAMMA ndash Steacutephane de Bourgies ndash Jean-Franccedilois DeroubaixGAMMA ndash Christine Donnier- ValentinGAMMA ndash Cars copy 2006 Disney Enterprises IncPixar All Rights Reserved ndash Dreamgirls copy 2006 DREAMWORKS
LLC and PARAMOUNT PICTURES All Rights Reserved ndash Poseidon copy 2006 Warner Bros Pictures ndash Sony Bravia Paint
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Thomson further consolidated its market
leading position for dual and triple-play
gateways to telecom operators and inter-
net service providers The established mar-
ket leader for DSL modems and routers
since 1999 Thomson extended its lead
over the competition in 2006 shipping
more than 42 million DSL modems and
gateways during the first half of the yearand 10 million units overall in 2006
Growing market demand for sophisticated
home networking eco-systems able to
accommodate new services over time was
underlined by the success of Thomsonrsquos
Livebox gateway for France Telecom
Early in 2007 Thomson supported large-
scale deployment of the Livebox which
provides access to high-speed wireless
Internet Voice-over-IP IPTV network
gaming fixed-mobile convergence (unik)
and other services
An advanced Thomson gateway also
enabled the UKrsquos leading operator to
launch its innovative Total Broadband ser-
vice in June 2006 Bri tish Telecomrsquos BT
Home Hubtrade is a quadruple-play gateway
designed to support BTrsquos full range of ser-
vices including both BT Total Broadband
and BT Broadband Talk in addition to
providing wired and wireless broadband
connectivity for fixed and mobile phones
PCs and other networked devices It also
Mobile video in Italy
Thomsonrsquos product and service offering benefited in 2006 from increased interest from cable and
telecom operators to complete their offering for Video-on-Demand and mobile TV The Olympic Winter Games
notably provided a showcase for Thomsonrsquos capability to deliver video programming to cell phones and
other mobile devices In the wake of the successful Olympic trial Telecom Italia turned to Thomson
for the systems and technology that enabled it to commercially launch a mobile offering including TV and
sports programming in June 2006
incorporates the latest wideband audio
codec providing near CD-quality sound
for voice and video calls
As broadband services become more and
more of a mass-market service providers
must ensure that their services are both
differentiating and easy to consume This
trend calls for the emergence of simpleyet very technologically-advanced and
software-laden devices Such devices
connect to the home-networking gateway
and make it natural to consume a broad-
band-delivered service One example
is the Music Box first made available to
subscribers of AOLrsquos broadband service
in France which streams Internet-based
radio stations or locally stored music files
to a homersquos legacy Hi-Fi audio system
Strong growth in the cable network sys-
tems market which is projected to expand
another 20 in 2007 helped drive Thom-son toward two major sales milestones
in 2006 two million cable set-top boxes
and ten million cable modems Driven by
operatorsrsquo needs to provide more and
more sophisticated services Thomson
has extended its product range since
2005 to include interactive double- and
triple-play set-top boxes as well as HD
set-top boxes with advanced functions
such as personal video recorders (PVR)
Among the cable operators to have
TECHNOLOGY SYSTEMS SERVICES
27 Thomson Panorama 2006
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Total Broadband for BT
An advanced Thomson gateway enabled the UKrsquos leading telecommunications operator British Telecom
to launch its innovative Total Broadband service in June 2006 This quadruple-play gateway
known as the BT Home Hubtrade features video voice data and wireless capabilities
It is supporting BTrsquos full range of services including wired and wireless broadband connectivity
for fixed and mobile phones PCs and other networked devices
28 Thomson Panorama 2006
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Left Thomson Grass Valley branded
outside broadcast van under construction
Right Camera operator Kim Marks (left)
a camera first assistant Chris Blauvelt (center)
and a camera second assistant
Jason McCormick (right) line up a scene
with the Grass Valley Viper FilmStreamtrade
camera for the David Fincher feature Zodiac
Photo courtesy Paramount Pictures
selected Thomson in 2006 were Portu-
galrsquos leading Pay-TV Operator TV Cabo
UPC E-Vision Kabel Deutschland and
Premiegravere in Europe Net Serviccedilos in Latin America and StarHub and Dalian Cable
TV in Asia
Thomson expanded its footprint in satel-
lite in Europe notably in the UK and in
Asia where product deliveries began for
Tata Sky the Indian satellite broadcaster
In the UK Thomson delivered the Sky
HD box an MPEG-4 set-top box with
Personal Video Recorder which enabled
the successful launch of the countryrsquos first
high-definition TV service in May 2006
The largest satel li te television service
provider in the US DIRECTV also chose Thomson to expand its HD programming
offering with the delivery of the H20 satel-
lite receiver
Leveraging expertise in free-to-air digi-
tal terrestrial receivers and capabilities in
high-definition Thomson also delivered
the first MPEG-4 HDTV receivers for digital
terrestrial TV to French operators Canal +
and TPS during the year
In telephony Thomson remains a lead-
ing supplier of corded and cordless tele-
phones which are sold at retail outletsunder the RCA GE and Alcatel brands as
well as under third-party brands for opera-
tor sales In 2006 Thomson capitalized
on its leadership position in DECT (Digital
Enhanced Cordless Telecommunications)
in Europe by expanding into the American
retail market
Broadcast amp Networks
The Broadcast amp Networks businesses
gained market share in 2006 particularlyin networks and systems integration and
expanded in the promising Pro-AV (profes-
sional audio-video) market
Continuing trends in this market are high-
definition (HD) broadcasting the merging
of IT and broadcast technology the move
to a tape-less file-based approach to video
storage and management and power-
ful MPEG-4 HD compression technology
which allows content to be delivered to mul-
tiple audiences over multiple platforms
One highly visible application of ThomsonrsquosGrass Valley brand of HD image acquisi-
tion and production systems was the 2006
FIFA World Cup in Germany seen by a
billion viewers around the world Broad-
casters covering the event relied on more
than 182 Grass Valley brand cameras
10 Grass Valley video switching systems
12 large scale Grass Valley video routing
systems and hundreds of other devices to
provide faultless HD images
Leveraging its market leading position
Thomson est imates tha t Grass Valley
HD cameras now account for 50 of theglobal market Most major outside broad-
cast production companies in the world
use Grass Valley branded HD camera sys-
tems with more than 1500 in use
High-definition television is also about
news Based on internal Thomson esti-
mates Grass Valley solutions accounted
for nearly 80 of HD news installations
worldwide in 2006 including CBS Net-
work-owned amp operated stations in the
TECHNOLOGY SYSTEMS SERVICES
29 Thomson Panorama 2006
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IGNITE HD
TV news operations can work more quickly and efficiently by using information
technology The industryrsquos first and most complete link between the control room
and the newsroom HD Ignite enables a single technician to handle all
news production requirements During its initial months on the market in the US
HD Ignite was selected by such early adaptors as ABC Stations Group
customers in San Francisco and Chicago and Cox Broadcasting customers in
Atlanta San Francisco Charlotte North Carolina and Dayton Ohio
Telecom service providers are working to
provide more content and value-added
services over their broadband lines
Thomsonrsquos SmartVision and
Cirpack software solutions facilitate
their strategies for rapid deployment of
IPTV and triple-play services
US Al Jazeera Englishmdasha global channelbased in the Middle Eastmdashand Belgiumrsquos
VTM (Vlaamse Televisie Maatschappij )
Thomson is the only supplier to provide
an automated production system (Ignite
HD) a full suite of non-linear editing sys-
tems and a news playout systemmdashall of
which enable broadcasters to move to HD
affordably and to speed up and automate
their workflows
MPEG-4 is one of the enabling technolo-
gies which allows operators of telecom-
munications networks to bring TV to
their subscribers in addition to voice andinternet access This is one element in a
complete Thomson systems offering For
example Spanish operator Telefoacutenica
selected Thomson for a range of equip-
ment and systems to upgrade and expand
its rapidly growing ldquoImageniordquo service In
the US Falcon Communications a lead-
ing systems integrator offers a turnkey
IPTV solution featuring encoding content
delivery service management and access
products from Thomson
bull Professional Audio-Video
Thomson serves the rapidly growing mar-ket for professional audiovisual (ProAV)
solutions for corporate institutional wor-
ship and governmental media centers and
networks Thomsonrsquos expansion in ProAV
has been achieved through organic prod-
uct development as well as the integra-
tion of Pro-AV products from Canopus
the Japanese company acquired in early
2006
EDIUS desktop video
editing software part of
Thomsonrsquos growing rangeof professional
audiovisual and
broadcast solutions
TECHNOLOGY SYSTEMS SERVICES
30 Thomson Panorama 2006
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ldquoHaving started out in research today Irsquom responsible for our modemsrsquo roadmap
and strategy Our customersmdashthe telecoms operatorsmdashhave seen their business
transformed by technology like high-speed broadband And I find it fascinating
how these technologies have penetrated our daily lives the way we live and how
we communicate have changed dramatically over the last ten years
Even faster broadband (VDSL) fiber optics wireless technologies fixed-mobile
convergencehellip mean the pace of change is set to accelerate therersquos no doubt
wersquore living in exciting timesrdquo
Stan Claes Product Manager for IP-based Access Products
A key product introduction in 2006 was
the Grass Valley Indigo AV Presenta-
tion Switcher which combines features
normally found in separate devices in aunified powerful control interface simple
enough to be used by a single operator
Digital signage is also providing new mar-
ket opportunities combining the latest in
display delivery and storage technologies
Thomsonrsquos integrated digital media man-
agement solution Media Edge solves the
complex control distribution and archive
demands of customers Media Edge can
stream high-quality SD and HD content
over an IP network for example to the retail
store environment without the need to re-
invest in infrastructure
Broadcast amp Networksmdash
Network Software
2006 saw telecom service providers con-
tinue to build strategies to provide more
content and value-added services over
their broadband lines Thomsonrsquos Smart-
Vision TV service platforms and Cirpack
telephony switches are at the heart of sev-
eral of the worldrsquos largest IPTV and VoIP
services
In 2006 the launch of a pre-integrated mul-tiple play solution for telecom service provid-
ers illustrated Thomsonrsquos ability to leverage
skills across multiple business units The
solutions which enable telecom providers
to bring a myriad of services to broadband
subscribers are built around Thomsonrsquos
SmartVision and Cirpack software solu-
tions integrated with Thomsonrsquos Grass
Valley branded video head-end equipment
and Thomson home gateways and set-top
boxes This represents the first pre-inte-
grated solution on the market for rapid easy
deployment of triple play services including
voice video and internet access
More than 30 IPTV and mobile TV service
platforms have been deployed around the
world with SmartVision well-positioned
for convergent operators since it allows
video distribution over fixed and mobile
networks
Thomsonrsquos Cirpack softswitches which
help provide the core for the new inte-
grated platforms occupied the top mar-
ket position worldwide for residential
broadband telephony (VoIP) platforms in
2006 Over the course of 2006 Europersquoslargest primary line VoIP operator Freefr
upgraded its Cirpack switches to bring a
new seamless fixedmobile service to its
two million customers placing Thomson
at the forefront of new fixed-mobile con-
vergence solutions Signaling the rapid
expansion of sales outside traditional
Western European markets Thomsonrsquos
Cirpack switches were selected by many
telecom operators in Northern Africa Cen-
tral and Eastern Europe as well as Central
America to build or upgrade legacy voice
networks and deliver advanced telephone
services using IP technologies
TECHNOLOGY SYSTEMS SERVICES
31 Thomson Panorama 2006
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Thomsonrsquos Services division provides end-to-end management of business-critical services on behalf of Media
Entertainment amp Communications customers These include management of broadcast and network operations
centers on an outsourced basis and the provision of an array of content services to the creative community from
post-production to visual effects
SERVICES
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Thomsonrsquos Services division provides end-
to-end management of business-critical
services spanning physical media con-
tent services electronic content distribu-
tion and network services The division
is the worldrsquos leading provider of state-
of-the-art film-making post-production
visual effects and broadcast center man-
agement services
Strategy
The Services division continues to focus
on managing v ideo networks and
op er at io na l centers on behalf of its
customers who are able to concentrate
on their core business of content The
emphasis on high-growth opportunities
in newer market sectors such as retail
and corporate networks and gaming
has been sharpened
Achievements
New customers in fast-growing market
segments responded well to a range of
high value-added services from the Ser-
vices division in 2006 Network Services
showed particularly strong growth as net-
work operators in Europe Asia and North
America selected Technicolor-branded
management services The addition of
such leading customers as ITV in the
UK and France 24 and TV5 in France
substantially expanded Thomsonrsquos fast-
growing Network Services business
Noteworthy successes were also achieved
in Theatrical Services due in part to the
continued development of Thomsonrsquos digi-
tal cinema activity The Content Services
business continued to expand its post-
production services business by opening
a digital intermediate facility on the SonyPictures Entertainment studio lot In 2006
a new Home Entertainment Services unit
was created combining Thomsonrsquos DVD
business with electronic distribution to
develop new services to support emerging
lsquoon demand contentrsquo business models
Network Services
With a comprehensive portfolio of services
for broadcasters network and internet TV
operators movie theatres retailers and
corporations Network Services continued
to expand briskly in 2006 Broadcastersincreasingly selected Thomson as their
long-term network services partner By
year-end Network Services was providing
managed services under the Technicolor
brand to close to 200 channels from
17 facilities in France the Netherlands
Japan North America and the UK
Late in the year Thomson signed a long-
term agreement with ITV for network
transmission operations services for its six
From managing video
networks on an outsourced
basis to a broad range of
offerings in content services
Thomson is bringing its video
expertise to new markets
and geographies
Left Network Services for broadcasters
cable TV operators movie theaters
retailers and corporations is one of Servicesrsquo
fastest-growing business segments
Right Thomson provided film sound
DVD and digital cinema services for Cars
the DisneyPixar hitCars copy 2006 Disney Enterprises IncPixar All R ights Reserved
SERVICES
MANAGING VIDEO NETWORKS
TECHNOLOGY SYSTEMS SERVICES
34 Thomson Panorama 2006
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existing UK channels including the coun-
tryrsquos leading commercial channel In addi-
tion an agreement signed with NOB Cross
Media Facilities (NOB CMF) a subsidiary
of Nederlands Omroepproduktie Bedrijf
(NOB) likewise established Thomson as
a major supplier of network management
services in the Netherlands
In France Network Services added new
clients France 24 and TV5 which covers
203 countries and territories to move into
the market-leading position managing
more than 60 channels and 1500 hours
of programming daily The France 24 part-
nership also involves equipping their new
global TV news operation
Thomson drove expansion and innovation
in its retail media services over the course
of the year One of the most notable achie-
vements involves an ambitious in-store
network upgrade program piloted in2006 by Wal-Mart in the USA with Premier
Retail Networks (PRN) a subsidiary within
Thomsonrsquos Network Services operat ion
The in-store network platform was based
on Thomson IPTV technologies adapted
for the retail environment The system
the first pilot of IPTV in the retail environ-
ment delivered real impact on product
sales and improved customer satisfaction
in Wal-Mart stores PRN also expanded
capabilities into China early in 2007 with
Content Services revving up
Thomson provided a wide range of services for a number of major international film releases in 2006
such as Cars one of the three nominees for Best Animated Film at the Oscars Thomson Technicolor provided
film services sound services DVD compression and authoring replication and distribution
as well as digital cinema mastering and distribution for the DisneyPixar hit The Grouprsquos Content Services offering
has expanded in recent years to include the high-growth video-gaming advertising and broadcast markets
the signing of a joint venture with CGEN a
technology company leading the Chinese
in-store digital signage media industry
The two companies are currently collabo-
rating on the roll-out of an in-store media
network to 750 internet cafeacutes part of the
leading Chinese chain Big Cafeacute
Theatrical Services
Thomson signed Europersquos first large-scale
digital cinema rollout agreement in 2006
with the Kinepolis Group one of the conti-
nentrsquos most innovative theater circuits and
the leading exhibition chain in Belgium
The agreement to instal l and operate
digital cinema systems in 130 Kinepolis-
owned and operated screens passed a
first milestone in March 2007 with Thom-
sonrsquos first international distribution by sat-
ellite of an encrypted digital version of the
film Dreamgirls from the US to a Kinepolis
theater in Brussels Belgium
A series of new contracts were awarded
in the US For example in the fall of 2006
Technicolor Digital Cinema began installing
digital projection systems at 120 National
Amusements Inc screens in Boston Los
Angeles New York and elsewhere as part
of a strategic agreement National Amuse-
ments operates more than 1500 screens
in the US UK Latin America and Russia
Digital projection systems were also
TECHNOLOGY SYSTEMS SERVICES
35 Thomson Panorama 2006
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The growing market for Network Services
The decision by the UKrsquos leading commercial broadcaster to entrust its network services to
Thomsonrsquos Network Services operations illustrates a growing global trend as broadcasters focus increasingly on
programming and meeting customer needs they turn to highly-skilled specialists to handle technology
The long-term agreement with ITV means that the broadcaster will benefit from enhanced service and new technology
as well as more flexibility in launching new services
36 Thomson Panorama 2006
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Left Thomsonrsquos Technicolor
Interactive Services provided in-game
cinematics and voice recording for
Microsoft Game Studiosrsquo Gears of War
Right Thomsonrsquos London-based MPC
subsidiary carried out post-production
work including computer graphics
on Sony Braviarsquos award-wirring colorful
Paint commercial
installed at several landmark theatres in
Los Angeles in 2006 including Mann The-
atresrsquo Graumanrsquos Chinese and the Village
in Westwood
Thomson maintained a leading position in
film processing and printing in 2006 in a
market where volumes were stable Tech-
nicolor handled worldwide release printingfor two of the five 2007 Oscar nominees
for Best PicturemdashMartin Scorcesersquos The
Departed and Clint Eastwoodrsquos Letters
from Iwo Jimamdashas well as release print-
ing for two of the three Best Animated Film
nominees Cars and Happy Feet
As part of its ongoing commitment to meet
customer needs worldwide a state-of-the-
art film and post-production facility was inau-
gurated at Ciudad de la Imagen in Madrid in
2006 It is already becoming known as the
countryrsquos most comprehensive postproduc-
tion facility with advanced film processingand digital intermediate capabilities
Content Services
Thomson continued to leverage its long-
standing strength in post-production
skills and services through expansion into
emerging and high-growth market seg-
ments such as content services for the
video-gaming advertising and broadcast
markets
In order to better serve the growing mar-
ket for entertainment content for mobile
devices Thomson unveiled new mobile
content preparation and distribution capa-
bilities in the US and the UK in 2006 Facili-
ties equipped with state-of-the-art produc-
tion and post-production technologies will
handle the preparation and optimization
of a wide range of digital entertainmentcontentmdashincluding movies TV episodes
and music videosmdashfor distribution to
mobile devices The dedicated services
complement the Grouprsquos extensive global
electronic distribution infrastructure which
enables Thomson to deliver mobile con-
tent to online delivery services as well as
to network operators for final transmission
to mobile customers
Thomson also made progress in the
development of an integrated digital asset
management solution in 2006 known as
MIDAS (Media Ingest Distribution andStorage) MIDAS is a software and hard-
ware platform for digital content prepara-
tion storage security and distribution
From the first day of production planning
through every stage of post-production
and content distribution MIDAS creates
a digital workflow that allows customers
to manage projects remotely and provides
for rapid and seamless global file delivery
streaming and collaboration
TECHNOLOGY SYSTEMS SERVICES
37 Thomson Panorama 2006
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While expanding into newer markets
growing demand for post-production ser-
vices and visual effects continued to fuel
Thomsonrsquos ongoing content services activ-
ities Among the yearrsquos most noteworthy
achievements were portfolios of services
for such feature films as The Departed
Letters from Iwo Jima and Pirates of the
Caribbean Dead Manrsquos Chest ThomsonrsquosMoving Picture Company (MPC) also pro-
vided high-end visual effects for the three
films nominated for Achievement in Visual
Effects Pirates of the Caribbean Posei-
don and Superman Returns
Confirming the Grouprsquos solid growth in
content services for the video game indus-
try Thomson unveiled a new dedicated
Interactive Services facility in Burbank
California in 2006 Sierra Entertainment
a division of Vivendi Games selected
Thomson to prov ide cinemat ic anima-
tion voice casting and recording sound
design and mixing services for The Leg-
end of Spyrotrade A New Beginning Like-
wise Thomson provided a wide range of
services to support Konamirsquos The SilentHill Experience released simultaneously
with the motion picture
The strategic investment in one of Indiarsquos
leading animation and gaming cinemat-
ics firms announced in February 2007
strengthened Thomsonrsquos position in Asia
for a variety of content services Located in
Bangalore India Paprikaas provides cre-
ldquoIn 1998 I joined Thomson as a Plant Manager within Home Entertainment Services
and was eventually made responsible for the expansion and management of our
Guadalajara DVD operations In summary Irsquove had great opportunities to gain experience
in international operations strategic planning and operational excellence I recently
joined Content Services where Irsquoll be leading the start-up and integration of new activities
in Beijing Bangalore and other emerging markets Content Services is dynamic and
growing and Irsquom looking forward to expanding the business in Asia while improving
our operational performance in North America and Europerdquo
Mike Hayden Vice President Operations amp Strategic Projects Content Services
of the Grouprsquos divisions and profit centersIn the context of the budgetary procedure
performance measurement indicators are
calculated by the divisions analyzed and
reviewed monthly to serve as a reference
for the Grouprsquos monthly reporting
Management reporting and
closing period work
Th om so n uses a co mmon char t of
accounts which is regularly updated The
principal accounting and financial figures
of the operational and functional depart-
ments consolidated at Group level are
analyzed by the Grouprsquos management
control team and reviewed by the Grouprsquos
Executive Committee
The closing process for the half-year and
annual consolidated financial statementsoccurs in two steps The first step con-
sists of a ldquohard closerdquo completed in May
and September leading to a first review by
the statutory auditors The second step
occurs in July and in JanuaryFebruary and
involves the finalization of half-year and
annual consolidated financial statements
under IFRS The Group then proceeds
once a year with a reconciliation of these
results in accordance with US GAAP
Preparation of financial statements
The financial statements are prepared jointly by the finance department and the
General Secretary They are based on
information reported through the annual
reporting and accounting consolidation
processes and on operational and mar-
ket information which is specifically cen-
tralized for the preparation of Thomsonrsquos
Document de Reacutefeacuterence in France and
the submission of Form 20-F in the United
States Half-year and annual financial infor-
mation is reviewed by the Grouprsquos Audit
Committee
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58 Thomson Panorama 2006
(1) Source PriceWaterhouseCoopers ndash
ldquoGlobal Entertainment and Media Outlook 2006-10rdquo
Revenue growth
Thomson achieved consolidated 2006
net revenues of 9914045854 million up from
9914045591 million in 2005 Revenues for
the Core Business reached 9914045747 mil-
lion (9914045776 million at constant currency)
representing 83 growth over 2005 at
constant currency
Overall the Grouprsquos key growth busi-
nessesmdashContent Services Network
Services Access Products for telecom
operators and our Broadcast amp Networks
businesses (Grass Valley and Network
Software)mdashincreased strongly year-on-
year and accounted for over a third of
Group revenues against less than a quar-
ter in 2005
Thomsonrsquos Core Business EBIT for 2006
was euro504 million representing a Core
Business EBIT margin of 88 Thisreflected growth in some key businesses
and cost actions across the Group off-
setting a significant investment in research
and development and some increase in
restructuring expenses
Increased spend on RampD
Research and development expenditure
charged in the Core Business (net of
external funding) rose from 991404221 million in
2005 to 991404279 million in 2006 an increase
of 26 principally in the Systems divi-
sion The Group expanded the number ofproducts and services in the development
phase across its businesses
Return to profit
Losses in Non-Core Continuing and Dis-
continued operations were substantially
lower year-on-year reflecting principally
the exit from heavily loss-making Displays
activities in 2005 and intensified cost-sav-
ing programs in 2006 A major revision
and harmonization of the Grouprsquos North
American healthcare obligations gave rise
to substantial one-time gains and Thom-
son also initiated significant restructuring
of its French Non-Core operations
The good performance of the Core Busi-
ness lower Non-Core and Discontinued
losses and a low reported tax chargeenabled the Group to return a net profit of
99140455 million in 2006 compared to a loss of
991404573 million in the previous year
Good cash flow
strengthened balance sheet
Thomson generated good free cash flow
and strengthened its balance sheet in
2006 Total net financial liabilities on the
balance sheet fell by 991404460 million reflect-
ing a 99140493 million fall in financial and acqui-
sition-related debts and a 991404367 million
reduction in retirement benefit obligations(including healthcare)
Increase in Net Dividend
The Board of Directors proposed a dis-
tribution to shareholders of 991404033 per
share (2005 dividend 991404030) reflecting
confidence in the prospects of the Group
going forward
Outlook 2007-2009
growth in revenues and net income
With the Grouprsquos transformation complete Thomsonrsquos financial focus over the 2007-
2009 period will be to grow revenues and
net income
Thomson serves growing Media Enter-
tainment amp Communications marketsmdashfor
which external estimates(1) indicate com-
pound growth of around 6 over the last
FINANCIAL AND
OPERATIONAL PERFORMANCE
Full year 2006 results
saw a return to profitability
and leave Thomson
well positioned at
the heart of convergence
and digital video
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59 Thomson Panorama 2006
five years Our digital and electronic busi-
nesses now represent two-thirds of rev-
enues and we believe they are growing
faster than the overall market offsetting
the maturing physical media businesses
Given this profile the Group expects its
revenue growth to be more modest in
2007 but to gather pace over the period
and our overall objective is to show com-pound growth over 2007-2009 in line with
or faster than the overall market
The 2007-2009 period is also expected
to see a sharply reduced impact from
residual Non-Core activities with an end
to losses from the Discontinued Activities
perimeter after 2007 Accordingly Thom-
sonrsquos ambition is to turn its Core Business
growth and profitability and lower impact
from Non-Core into strong growth in net
income over the period 2007-2009
Business operations
Continuous performance improvement is
fundamental to Thomsonrsquos commitment to
create sustainable business models and
long-term value for all stakeholders The
ambitious Group-wide programs launched
in 2004 to improve productivity and
enhance overall performance producedsubstantial results in 2006 and led to new
and strong initiatives for long-term growth
As of the second half of 2006 six ldquoKey
Programsrdquo are monitored at Group level
Clients Software Product Introduction
Operations Transformation and Talent
Management
KEY PROGRAMS IN PLACE
Program Focus
Clients Thomsonrsquos clientregional diversification and
growth of the existing business
through improved Sales amp Marketing
Software Development of integrated software platforms
in all markets (post-production distribution
delivery) and for all types of customer
(professional prosumerhellip)
Product Introduction Ensuring new product roadmaps are in line
with strategy and resource needs have been
identifiedOperations Improving the Grouprsquos cost base cash
generation and working capital
Transformation Multiple programs including initiatives to
improving customer relationship management
worldwide supply chain management
IT transformation as well as Thomsonrsquos RampD
footprint
Talent Management Leveraging human assets with a focus on
talent retention and acquisition
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60 Thomson Panorama 2006
SUMMARY RESULTS FULL YEAR 2006
In 991404 millions unless otherwise stated 2006(1) 2005(1)
Net revenues 5854 5591(1)
Core Business net revenues 5747 5335
Services 2489 2487
Systems 2684 2262
Technology 547 546
Corporate 27 40
Non-Core continuing operations net revenues 107 256
Core Business EBIT(2) 504 512
Services 160 205
Systems 132 109
Technology 289 277Corporate (77) (79)
EBIT from Non-Core continuing operations (25) (122)
(1) Restated with 2006 discontinued activities according to IFRS 5
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61 Thomson Panorama 2006
Year ended December 31in 991404 except number of shares 2006 2005 2004
Year ended December 31in 991404 millions 2006 2005(1) 2004(1)
CONSOLIDATED STATEMENTS OF OPERATIONS
(1) Restated with 2006 discontinued activities according to IFRS 5
(2) After deduction of the interests net of tax paid on the subordinated perpetual notes during the period
Continuing operations
Revenues 5854 5591 5980
Cost of sales (4474) (4240) (4594)
Gross margin 1380 1351 1386
Selling marketing general and administrative expenses (674) (638) (653)
Other income (expense) 52 (96) (69)
Research and development expenses (279) (227) (201)
Profit from continuing operations before tax and net finance costs 479 390 463
Interest income 19 30 52
Interest expense (108) (108) (54)
Other financial income (expense) (111) 36 (26)
Finance costs ndash net (200) (42) (28)
Share of profit (loss) from associates (86) (82) (20)
Income tax ndash (68) (93)
Profit from continuing operations 193 198 322
Discontinued operations
Profit (loss) from discontinued operations (138) (771) (883)
Net income (loss) 55 (573) (561)
Attributable to
Equity Holders 55 (574) (559)
Minority interests ndash 1 (2)
Weighted average number of shares
outstandingmdashbasic net of treasury stock 261188858 266539917 273646869
Earnings per share from continuing operations
Basic(2) 067 074 118
Diluted 063 042 111
Earnings per share from discontinued operations
Basic (053) (289) (323)
Diluted (048) (262) (296)Total earnings per share
Basic(2) 014 (215) (205)
Diluted 015 (220) (185)
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62 Thomson Panorama 2006
CONSOLIDATED BALANCE SHEETS
In 991404 millions December 31 December 31 January 1 December 31 2006 2005 2005(1) 2004
ASSETS
Non-current assets
Property plant and equipment 813 886 1051 1051
Goodwill 1714 1756 1186 1178
Other intangible assets 1071 1150 924 924
Investments in associates 12 204 260 260
Investments and financial assets available-for-sale 266 341 139 113
Derivative financial instruments 7 1 11 ndash
Contract advances 129 173 179 179
Deferred tax assets 397 379 307 301
Other non-current assets 110 182 133 136
Total non-current assets 4519 5072 4190 4142
Current assets
Inventories 366 333 503 568
Trade accounts and notes receivable 1018 1315 1232 1180
Current accounts with associates and joint ventures 97 115 143 143
Derivative financial instruments 8 9 115 ndash
Other current assets 535 644 483 616
Marketable securities ndash 7 58 58
Cash and cash equivalents 1311 996 1845 1848
Assets classified as held for sale 264 369 80 ndash
Total current assets 3599 3788 4459 4413
Total assets 8118 8860 8649 8555
(1) Including the impacts of the first-time application related to IAS 32 and 39 on financial instruments and IFRS 5 on non-current assets held for sale and
discontinued operations
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63 Thomson Panorama 2006
In 991404 millions December 31 December 31 January 1 December 31 2006 2005 2005(1) 2004
SHAREHOLDERSrsquo EQUITY AND LIABILITIES
Shareholdersrsquo equity
Common stock (273871296 shares at
December 31 2006
with nominal value of euro 375 per share) 1027 1025 1025 1025
Trade accounts and notes payable 1032 1164 1199 1226
Accrued employee expenses 165 166 158 163
Income tax payable 57 47 60 60
Other current liabilities 671 750 746 800
Payables on acquisition of companies 13 138 84 84
Liabilities directly associated with
assets classified as held for sale 232 470 88 ndash
Total current liabilities 3681 4393 3602 3459
Total liabilities 5999 6644 6251 6062
Total shareholderrsquos equity and liabilities 8118 8860 8649 8555
(1) Including the impacts of the first-time application related to IAS 32 and 39 on financial instruments and IFRS 5 on non-current assets held for sale and
discontinued operations
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Creation and lay-out
Photo credits Nathalie BerhingGAMMA ndash Steacutephane de Bourgies ndash Jean-Franccedilois DeroubaixGAMMA ndash Christine Donnier- ValentinGAMMA ndash Cars copy 2006 Disney Enterprises IncPixar All Rights Reserved ndash Dreamgirls copy 2006 DREAMWORKS
LLC and PARAMOUNT PICTURES All Rights Reserved ndash Poseidon copy 2006 Warner Bros Pictures ndash Sony Bravia Paint
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Total Broadband for BT
An advanced Thomson gateway enabled the UKrsquos leading telecommunications operator British Telecom
to launch its innovative Total Broadband service in June 2006 This quadruple-play gateway
known as the BT Home Hubtrade features video voice data and wireless capabilities
It is supporting BTrsquos full range of services including wired and wireless broadband connectivity
for fixed and mobile phones PCs and other networked devices
28 Thomson Panorama 2006
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Left Thomson Grass Valley branded
outside broadcast van under construction
Right Camera operator Kim Marks (left)
a camera first assistant Chris Blauvelt (center)
and a camera second assistant
Jason McCormick (right) line up a scene
with the Grass Valley Viper FilmStreamtrade
camera for the David Fincher feature Zodiac
Photo courtesy Paramount Pictures
selected Thomson in 2006 were Portu-
galrsquos leading Pay-TV Operator TV Cabo
UPC E-Vision Kabel Deutschland and
Premiegravere in Europe Net Serviccedilos in Latin America and StarHub and Dalian Cable
TV in Asia
Thomson expanded its footprint in satel-
lite in Europe notably in the UK and in
Asia where product deliveries began for
Tata Sky the Indian satellite broadcaster
In the UK Thomson delivered the Sky
HD box an MPEG-4 set-top box with
Personal Video Recorder which enabled
the successful launch of the countryrsquos first
high-definition TV service in May 2006
The largest satel li te television service
provider in the US DIRECTV also chose Thomson to expand its HD programming
offering with the delivery of the H20 satel-
lite receiver
Leveraging expertise in free-to-air digi-
tal terrestrial receivers and capabilities in
high-definition Thomson also delivered
the first MPEG-4 HDTV receivers for digital
terrestrial TV to French operators Canal +
and TPS during the year
In telephony Thomson remains a lead-
ing supplier of corded and cordless tele-
phones which are sold at retail outletsunder the RCA GE and Alcatel brands as
well as under third-party brands for opera-
tor sales In 2006 Thomson capitalized
on its leadership position in DECT (Digital
Enhanced Cordless Telecommunications)
in Europe by expanding into the American
retail market
Broadcast amp Networks
The Broadcast amp Networks businesses
gained market share in 2006 particularlyin networks and systems integration and
expanded in the promising Pro-AV (profes-
sional audio-video) market
Continuing trends in this market are high-
definition (HD) broadcasting the merging
of IT and broadcast technology the move
to a tape-less file-based approach to video
storage and management and power-
ful MPEG-4 HD compression technology
which allows content to be delivered to mul-
tiple audiences over multiple platforms
One highly visible application of ThomsonrsquosGrass Valley brand of HD image acquisi-
tion and production systems was the 2006
FIFA World Cup in Germany seen by a
billion viewers around the world Broad-
casters covering the event relied on more
than 182 Grass Valley brand cameras
10 Grass Valley video switching systems
12 large scale Grass Valley video routing
systems and hundreds of other devices to
provide faultless HD images
Leveraging its market leading position
Thomson est imates tha t Grass Valley
HD cameras now account for 50 of theglobal market Most major outside broad-
cast production companies in the world
use Grass Valley branded HD camera sys-
tems with more than 1500 in use
High-definition television is also about
news Based on internal Thomson esti-
mates Grass Valley solutions accounted
for nearly 80 of HD news installations
worldwide in 2006 including CBS Net-
work-owned amp operated stations in the
TECHNOLOGY SYSTEMS SERVICES
29 Thomson Panorama 2006
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IGNITE HD
TV news operations can work more quickly and efficiently by using information
technology The industryrsquos first and most complete link between the control room
and the newsroom HD Ignite enables a single technician to handle all
news production requirements During its initial months on the market in the US
HD Ignite was selected by such early adaptors as ABC Stations Group
customers in San Francisco and Chicago and Cox Broadcasting customers in
Atlanta San Francisco Charlotte North Carolina and Dayton Ohio
Telecom service providers are working to
provide more content and value-added
services over their broadband lines
Thomsonrsquos SmartVision and
Cirpack software solutions facilitate
their strategies for rapid deployment of
IPTV and triple-play services
US Al Jazeera Englishmdasha global channelbased in the Middle Eastmdashand Belgiumrsquos
VTM (Vlaamse Televisie Maatschappij )
Thomson is the only supplier to provide
an automated production system (Ignite
HD) a full suite of non-linear editing sys-
tems and a news playout systemmdashall of
which enable broadcasters to move to HD
affordably and to speed up and automate
their workflows
MPEG-4 is one of the enabling technolo-
gies which allows operators of telecom-
munications networks to bring TV to
their subscribers in addition to voice andinternet access This is one element in a
complete Thomson systems offering For
example Spanish operator Telefoacutenica
selected Thomson for a range of equip-
ment and systems to upgrade and expand
its rapidly growing ldquoImageniordquo service In
the US Falcon Communications a lead-
ing systems integrator offers a turnkey
IPTV solution featuring encoding content
delivery service management and access
products from Thomson
bull Professional Audio-Video
Thomson serves the rapidly growing mar-ket for professional audiovisual (ProAV)
solutions for corporate institutional wor-
ship and governmental media centers and
networks Thomsonrsquos expansion in ProAV
has been achieved through organic prod-
uct development as well as the integra-
tion of Pro-AV products from Canopus
the Japanese company acquired in early
2006
EDIUS desktop video
editing software part of
Thomsonrsquos growing rangeof professional
audiovisual and
broadcast solutions
TECHNOLOGY SYSTEMS SERVICES
30 Thomson Panorama 2006
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ldquoHaving started out in research today Irsquom responsible for our modemsrsquo roadmap
and strategy Our customersmdashthe telecoms operatorsmdashhave seen their business
transformed by technology like high-speed broadband And I find it fascinating
how these technologies have penetrated our daily lives the way we live and how
we communicate have changed dramatically over the last ten years
Even faster broadband (VDSL) fiber optics wireless technologies fixed-mobile
convergencehellip mean the pace of change is set to accelerate therersquos no doubt
wersquore living in exciting timesrdquo
Stan Claes Product Manager for IP-based Access Products
A key product introduction in 2006 was
the Grass Valley Indigo AV Presenta-
tion Switcher which combines features
normally found in separate devices in aunified powerful control interface simple
enough to be used by a single operator
Digital signage is also providing new mar-
ket opportunities combining the latest in
display delivery and storage technologies
Thomsonrsquos integrated digital media man-
agement solution Media Edge solves the
complex control distribution and archive
demands of customers Media Edge can
stream high-quality SD and HD content
over an IP network for example to the retail
store environment without the need to re-
invest in infrastructure
Broadcast amp Networksmdash
Network Software
2006 saw telecom service providers con-
tinue to build strategies to provide more
content and value-added services over
their broadband lines Thomsonrsquos Smart-
Vision TV service platforms and Cirpack
telephony switches are at the heart of sev-
eral of the worldrsquos largest IPTV and VoIP
services
In 2006 the launch of a pre-integrated mul-tiple play solution for telecom service provid-
ers illustrated Thomsonrsquos ability to leverage
skills across multiple business units The
solutions which enable telecom providers
to bring a myriad of services to broadband
subscribers are built around Thomsonrsquos
SmartVision and Cirpack software solu-
tions integrated with Thomsonrsquos Grass
Valley branded video head-end equipment
and Thomson home gateways and set-top
boxes This represents the first pre-inte-
grated solution on the market for rapid easy
deployment of triple play services including
voice video and internet access
More than 30 IPTV and mobile TV service
platforms have been deployed around the
world with SmartVision well-positioned
for convergent operators since it allows
video distribution over fixed and mobile
networks
Thomsonrsquos Cirpack softswitches which
help provide the core for the new inte-
grated platforms occupied the top mar-
ket position worldwide for residential
broadband telephony (VoIP) platforms in
2006 Over the course of 2006 Europersquoslargest primary line VoIP operator Freefr
upgraded its Cirpack switches to bring a
new seamless fixedmobile service to its
two million customers placing Thomson
at the forefront of new fixed-mobile con-
vergence solutions Signaling the rapid
expansion of sales outside traditional
Western European markets Thomsonrsquos
Cirpack switches were selected by many
telecom operators in Northern Africa Cen-
tral and Eastern Europe as well as Central
America to build or upgrade legacy voice
networks and deliver advanced telephone
services using IP technologies
TECHNOLOGY SYSTEMS SERVICES
31 Thomson Panorama 2006
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Thomsonrsquos Services division provides end-to-end management of business-critical services on behalf of Media
Entertainment amp Communications customers These include management of broadcast and network operations
centers on an outsourced basis and the provision of an array of content services to the creative community from
post-production to visual effects
SERVICES
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Thomsonrsquos Services division provides end-
to-end management of business-critical
services spanning physical media con-
tent services electronic content distribu-
tion and network services The division
is the worldrsquos leading provider of state-
of-the-art film-making post-production
visual effects and broadcast center man-
agement services
Strategy
The Services division continues to focus
on managing v ideo networks and
op er at io na l centers on behalf of its
customers who are able to concentrate
on their core business of content The
emphasis on high-growth opportunities
in newer market sectors such as retail
and corporate networks and gaming
has been sharpened
Achievements
New customers in fast-growing market
segments responded well to a range of
high value-added services from the Ser-
vices division in 2006 Network Services
showed particularly strong growth as net-
work operators in Europe Asia and North
America selected Technicolor-branded
management services The addition of
such leading customers as ITV in the
UK and France 24 and TV5 in France
substantially expanded Thomsonrsquos fast-
growing Network Services business
Noteworthy successes were also achieved
in Theatrical Services due in part to the
continued development of Thomsonrsquos digi-
tal cinema activity The Content Services
business continued to expand its post-
production services business by opening
a digital intermediate facility on the SonyPictures Entertainment studio lot In 2006
a new Home Entertainment Services unit
was created combining Thomsonrsquos DVD
business with electronic distribution to
develop new services to support emerging
lsquoon demand contentrsquo business models
Network Services
With a comprehensive portfolio of services
for broadcasters network and internet TV
operators movie theatres retailers and
corporations Network Services continued
to expand briskly in 2006 Broadcastersincreasingly selected Thomson as their
long-term network services partner By
year-end Network Services was providing
managed services under the Technicolor
brand to close to 200 channels from
17 facilities in France the Netherlands
Japan North America and the UK
Late in the year Thomson signed a long-
term agreement with ITV for network
transmission operations services for its six
From managing video
networks on an outsourced
basis to a broad range of
offerings in content services
Thomson is bringing its video
expertise to new markets
and geographies
Left Network Services for broadcasters
cable TV operators movie theaters
retailers and corporations is one of Servicesrsquo
fastest-growing business segments
Right Thomson provided film sound
DVD and digital cinema services for Cars
the DisneyPixar hitCars copy 2006 Disney Enterprises IncPixar All R ights Reserved
SERVICES
MANAGING VIDEO NETWORKS
TECHNOLOGY SYSTEMS SERVICES
34 Thomson Panorama 2006
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existing UK channels including the coun-
tryrsquos leading commercial channel In addi-
tion an agreement signed with NOB Cross
Media Facilities (NOB CMF) a subsidiary
of Nederlands Omroepproduktie Bedrijf
(NOB) likewise established Thomson as
a major supplier of network management
services in the Netherlands
In France Network Services added new
clients France 24 and TV5 which covers
203 countries and territories to move into
the market-leading position managing
more than 60 channels and 1500 hours
of programming daily The France 24 part-
nership also involves equipping their new
global TV news operation
Thomson drove expansion and innovation
in its retail media services over the course
of the year One of the most notable achie-
vements involves an ambitious in-store
network upgrade program piloted in2006 by Wal-Mart in the USA with Premier
Retail Networks (PRN) a subsidiary within
Thomsonrsquos Network Services operat ion
The in-store network platform was based
on Thomson IPTV technologies adapted
for the retail environment The system
the first pilot of IPTV in the retail environ-
ment delivered real impact on product
sales and improved customer satisfaction
in Wal-Mart stores PRN also expanded
capabilities into China early in 2007 with
Content Services revving up
Thomson provided a wide range of services for a number of major international film releases in 2006
such as Cars one of the three nominees for Best Animated Film at the Oscars Thomson Technicolor provided
film services sound services DVD compression and authoring replication and distribution
as well as digital cinema mastering and distribution for the DisneyPixar hit The Grouprsquos Content Services offering
has expanded in recent years to include the high-growth video-gaming advertising and broadcast markets
the signing of a joint venture with CGEN a
technology company leading the Chinese
in-store digital signage media industry
The two companies are currently collabo-
rating on the roll-out of an in-store media
network to 750 internet cafeacutes part of the
leading Chinese chain Big Cafeacute
Theatrical Services
Thomson signed Europersquos first large-scale
digital cinema rollout agreement in 2006
with the Kinepolis Group one of the conti-
nentrsquos most innovative theater circuits and
the leading exhibition chain in Belgium
The agreement to instal l and operate
digital cinema systems in 130 Kinepolis-
owned and operated screens passed a
first milestone in March 2007 with Thom-
sonrsquos first international distribution by sat-
ellite of an encrypted digital version of the
film Dreamgirls from the US to a Kinepolis
theater in Brussels Belgium
A series of new contracts were awarded
in the US For example in the fall of 2006
Technicolor Digital Cinema began installing
digital projection systems at 120 National
Amusements Inc screens in Boston Los
Angeles New York and elsewhere as part
of a strategic agreement National Amuse-
ments operates more than 1500 screens
in the US UK Latin America and Russia
Digital projection systems were also
TECHNOLOGY SYSTEMS SERVICES
35 Thomson Panorama 2006
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The growing market for Network Services
The decision by the UKrsquos leading commercial broadcaster to entrust its network services to
Thomsonrsquos Network Services operations illustrates a growing global trend as broadcasters focus increasingly on
programming and meeting customer needs they turn to highly-skilled specialists to handle technology
The long-term agreement with ITV means that the broadcaster will benefit from enhanced service and new technology
as well as more flexibility in launching new services
36 Thomson Panorama 2006
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Left Thomsonrsquos Technicolor
Interactive Services provided in-game
cinematics and voice recording for
Microsoft Game Studiosrsquo Gears of War
Right Thomsonrsquos London-based MPC
subsidiary carried out post-production
work including computer graphics
on Sony Braviarsquos award-wirring colorful
Paint commercial
installed at several landmark theatres in
Los Angeles in 2006 including Mann The-
atresrsquo Graumanrsquos Chinese and the Village
in Westwood
Thomson maintained a leading position in
film processing and printing in 2006 in a
market where volumes were stable Tech-
nicolor handled worldwide release printingfor two of the five 2007 Oscar nominees
for Best PicturemdashMartin Scorcesersquos The
Departed and Clint Eastwoodrsquos Letters
from Iwo Jimamdashas well as release print-
ing for two of the three Best Animated Film
nominees Cars and Happy Feet
As part of its ongoing commitment to meet
customer needs worldwide a state-of-the-
art film and post-production facility was inau-
gurated at Ciudad de la Imagen in Madrid in
2006 It is already becoming known as the
countryrsquos most comprehensive postproduc-
tion facility with advanced film processingand digital intermediate capabilities
Content Services
Thomson continued to leverage its long-
standing strength in post-production
skills and services through expansion into
emerging and high-growth market seg-
ments such as content services for the
video-gaming advertising and broadcast
markets
In order to better serve the growing mar-
ket for entertainment content for mobile
devices Thomson unveiled new mobile
content preparation and distribution capa-
bilities in the US and the UK in 2006 Facili-
ties equipped with state-of-the-art produc-
tion and post-production technologies will
handle the preparation and optimization
of a wide range of digital entertainmentcontentmdashincluding movies TV episodes
and music videosmdashfor distribution to
mobile devices The dedicated services
complement the Grouprsquos extensive global
electronic distribution infrastructure which
enables Thomson to deliver mobile con-
tent to online delivery services as well as
to network operators for final transmission
to mobile customers
Thomson also made progress in the
development of an integrated digital asset
management solution in 2006 known as
MIDAS (Media Ingest Distribution andStorage) MIDAS is a software and hard-
ware platform for digital content prepara-
tion storage security and distribution
From the first day of production planning
through every stage of post-production
and content distribution MIDAS creates
a digital workflow that allows customers
to manage projects remotely and provides
for rapid and seamless global file delivery
streaming and collaboration
TECHNOLOGY SYSTEMS SERVICES
37 Thomson Panorama 2006
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While expanding into newer markets
growing demand for post-production ser-
vices and visual effects continued to fuel
Thomsonrsquos ongoing content services activ-
ities Among the yearrsquos most noteworthy
achievements were portfolios of services
for such feature films as The Departed
Letters from Iwo Jima and Pirates of the
Caribbean Dead Manrsquos Chest ThomsonrsquosMoving Picture Company (MPC) also pro-
vided high-end visual effects for the three
films nominated for Achievement in Visual
Effects Pirates of the Caribbean Posei-
don and Superman Returns
Confirming the Grouprsquos solid growth in
content services for the video game indus-
try Thomson unveiled a new dedicated
Interactive Services facility in Burbank
California in 2006 Sierra Entertainment
a division of Vivendi Games selected
Thomson to prov ide cinemat ic anima-
tion voice casting and recording sound
design and mixing services for The Leg-
end of Spyrotrade A New Beginning Like-
wise Thomson provided a wide range of
services to support Konamirsquos The SilentHill Experience released simultaneously
with the motion picture
The strategic investment in one of Indiarsquos
leading animation and gaming cinemat-
ics firms announced in February 2007
strengthened Thomsonrsquos position in Asia
for a variety of content services Located in
Bangalore India Paprikaas provides cre-
ldquoIn 1998 I joined Thomson as a Plant Manager within Home Entertainment Services
and was eventually made responsible for the expansion and management of our
Guadalajara DVD operations In summary Irsquove had great opportunities to gain experience
in international operations strategic planning and operational excellence I recently
joined Content Services where Irsquoll be leading the start-up and integration of new activities
in Beijing Bangalore and other emerging markets Content Services is dynamic and
growing and Irsquom looking forward to expanding the business in Asia while improving
our operational performance in North America and Europerdquo
Mike Hayden Vice President Operations amp Strategic Projects Content Services
of the Grouprsquos divisions and profit centersIn the context of the budgetary procedure
performance measurement indicators are
calculated by the divisions analyzed and
reviewed monthly to serve as a reference
for the Grouprsquos monthly reporting
Management reporting and
closing period work
Th om so n uses a co mmon char t of
accounts which is regularly updated The
principal accounting and financial figures
of the operational and functional depart-
ments consolidated at Group level are
analyzed by the Grouprsquos management
control team and reviewed by the Grouprsquos
Executive Committee
The closing process for the half-year and
annual consolidated financial statementsoccurs in two steps The first step con-
sists of a ldquohard closerdquo completed in May
and September leading to a first review by
the statutory auditors The second step
occurs in July and in JanuaryFebruary and
involves the finalization of half-year and
annual consolidated financial statements
under IFRS The Group then proceeds
once a year with a reconciliation of these
results in accordance with US GAAP
Preparation of financial statements
The financial statements are prepared jointly by the finance department and the
General Secretary They are based on
information reported through the annual
reporting and accounting consolidation
processes and on operational and mar-
ket information which is specifically cen-
tralized for the preparation of Thomsonrsquos
Document de Reacutefeacuterence in France and
the submission of Form 20-F in the United
States Half-year and annual financial infor-
mation is reviewed by the Grouprsquos Audit
Committee
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58 Thomson Panorama 2006
(1) Source PriceWaterhouseCoopers ndash
ldquoGlobal Entertainment and Media Outlook 2006-10rdquo
Revenue growth
Thomson achieved consolidated 2006
net revenues of 9914045854 million up from
9914045591 million in 2005 Revenues for
the Core Business reached 9914045747 mil-
lion (9914045776 million at constant currency)
representing 83 growth over 2005 at
constant currency
Overall the Grouprsquos key growth busi-
nessesmdashContent Services Network
Services Access Products for telecom
operators and our Broadcast amp Networks
businesses (Grass Valley and Network
Software)mdashincreased strongly year-on-
year and accounted for over a third of
Group revenues against less than a quar-
ter in 2005
Thomsonrsquos Core Business EBIT for 2006
was euro504 million representing a Core
Business EBIT margin of 88 Thisreflected growth in some key businesses
and cost actions across the Group off-
setting a significant investment in research
and development and some increase in
restructuring expenses
Increased spend on RampD
Research and development expenditure
charged in the Core Business (net of
external funding) rose from 991404221 million in
2005 to 991404279 million in 2006 an increase
of 26 principally in the Systems divi-
sion The Group expanded the number ofproducts and services in the development
phase across its businesses
Return to profit
Losses in Non-Core Continuing and Dis-
continued operations were substantially
lower year-on-year reflecting principally
the exit from heavily loss-making Displays
activities in 2005 and intensified cost-sav-
ing programs in 2006 A major revision
and harmonization of the Grouprsquos North
American healthcare obligations gave rise
to substantial one-time gains and Thom-
son also initiated significant restructuring
of its French Non-Core operations
The good performance of the Core Busi-
ness lower Non-Core and Discontinued
losses and a low reported tax chargeenabled the Group to return a net profit of
99140455 million in 2006 compared to a loss of
991404573 million in the previous year
Good cash flow
strengthened balance sheet
Thomson generated good free cash flow
and strengthened its balance sheet in
2006 Total net financial liabilities on the
balance sheet fell by 991404460 million reflect-
ing a 99140493 million fall in financial and acqui-
sition-related debts and a 991404367 million
reduction in retirement benefit obligations(including healthcare)
Increase in Net Dividend
The Board of Directors proposed a dis-
tribution to shareholders of 991404033 per
share (2005 dividend 991404030) reflecting
confidence in the prospects of the Group
going forward
Outlook 2007-2009
growth in revenues and net income
With the Grouprsquos transformation complete Thomsonrsquos financial focus over the 2007-
2009 period will be to grow revenues and
net income
Thomson serves growing Media Enter-
tainment amp Communications marketsmdashfor
which external estimates(1) indicate com-
pound growth of around 6 over the last
FINANCIAL AND
OPERATIONAL PERFORMANCE
Full year 2006 results
saw a return to profitability
and leave Thomson
well positioned at
the heart of convergence
and digital video
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59 Thomson Panorama 2006
five years Our digital and electronic busi-
nesses now represent two-thirds of rev-
enues and we believe they are growing
faster than the overall market offsetting
the maturing physical media businesses
Given this profile the Group expects its
revenue growth to be more modest in
2007 but to gather pace over the period
and our overall objective is to show com-pound growth over 2007-2009 in line with
or faster than the overall market
The 2007-2009 period is also expected
to see a sharply reduced impact from
residual Non-Core activities with an end
to losses from the Discontinued Activities
perimeter after 2007 Accordingly Thom-
sonrsquos ambition is to turn its Core Business
growth and profitability and lower impact
from Non-Core into strong growth in net
income over the period 2007-2009
Business operations
Continuous performance improvement is
fundamental to Thomsonrsquos commitment to
create sustainable business models and
long-term value for all stakeholders The
ambitious Group-wide programs launched
in 2004 to improve productivity and
enhance overall performance producedsubstantial results in 2006 and led to new
and strong initiatives for long-term growth
As of the second half of 2006 six ldquoKey
Programsrdquo are monitored at Group level
Clients Software Product Introduction
Operations Transformation and Talent
Management
KEY PROGRAMS IN PLACE
Program Focus
Clients Thomsonrsquos clientregional diversification and
growth of the existing business
through improved Sales amp Marketing
Software Development of integrated software platforms
in all markets (post-production distribution
delivery) and for all types of customer
(professional prosumerhellip)
Product Introduction Ensuring new product roadmaps are in line
with strategy and resource needs have been
identifiedOperations Improving the Grouprsquos cost base cash
generation and working capital
Transformation Multiple programs including initiatives to
improving customer relationship management
worldwide supply chain management
IT transformation as well as Thomsonrsquos RampD
footprint
Talent Management Leveraging human assets with a focus on
talent retention and acquisition
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60 Thomson Panorama 2006
SUMMARY RESULTS FULL YEAR 2006
In 991404 millions unless otherwise stated 2006(1) 2005(1)
Net revenues 5854 5591(1)
Core Business net revenues 5747 5335
Services 2489 2487
Systems 2684 2262
Technology 547 546
Corporate 27 40
Non-Core continuing operations net revenues 107 256
Core Business EBIT(2) 504 512
Services 160 205
Systems 132 109
Technology 289 277Corporate (77) (79)
EBIT from Non-Core continuing operations (25) (122)
(1) Restated with 2006 discontinued activities according to IFRS 5
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61 Thomson Panorama 2006
Year ended December 31in 991404 except number of shares 2006 2005 2004
Year ended December 31in 991404 millions 2006 2005(1) 2004(1)
CONSOLIDATED STATEMENTS OF OPERATIONS
(1) Restated with 2006 discontinued activities according to IFRS 5
(2) After deduction of the interests net of tax paid on the subordinated perpetual notes during the period
Continuing operations
Revenues 5854 5591 5980
Cost of sales (4474) (4240) (4594)
Gross margin 1380 1351 1386
Selling marketing general and administrative expenses (674) (638) (653)
Other income (expense) 52 (96) (69)
Research and development expenses (279) (227) (201)
Profit from continuing operations before tax and net finance costs 479 390 463
Interest income 19 30 52
Interest expense (108) (108) (54)
Other financial income (expense) (111) 36 (26)
Finance costs ndash net (200) (42) (28)
Share of profit (loss) from associates (86) (82) (20)
Income tax ndash (68) (93)
Profit from continuing operations 193 198 322
Discontinued operations
Profit (loss) from discontinued operations (138) (771) (883)
Net income (loss) 55 (573) (561)
Attributable to
Equity Holders 55 (574) (559)
Minority interests ndash 1 (2)
Weighted average number of shares
outstandingmdashbasic net of treasury stock 261188858 266539917 273646869
Earnings per share from continuing operations
Basic(2) 067 074 118
Diluted 063 042 111
Earnings per share from discontinued operations
Basic (053) (289) (323)
Diluted (048) (262) (296)Total earnings per share
Basic(2) 014 (215) (205)
Diluted 015 (220) (185)
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62 Thomson Panorama 2006
CONSOLIDATED BALANCE SHEETS
In 991404 millions December 31 December 31 January 1 December 31 2006 2005 2005(1) 2004
ASSETS
Non-current assets
Property plant and equipment 813 886 1051 1051
Goodwill 1714 1756 1186 1178
Other intangible assets 1071 1150 924 924
Investments in associates 12 204 260 260
Investments and financial assets available-for-sale 266 341 139 113
Derivative financial instruments 7 1 11 ndash
Contract advances 129 173 179 179
Deferred tax assets 397 379 307 301
Other non-current assets 110 182 133 136
Total non-current assets 4519 5072 4190 4142
Current assets
Inventories 366 333 503 568
Trade accounts and notes receivable 1018 1315 1232 1180
Current accounts with associates and joint ventures 97 115 143 143
Derivative financial instruments 8 9 115 ndash
Other current assets 535 644 483 616
Marketable securities ndash 7 58 58
Cash and cash equivalents 1311 996 1845 1848
Assets classified as held for sale 264 369 80 ndash
Total current assets 3599 3788 4459 4413
Total assets 8118 8860 8649 8555
(1) Including the impacts of the first-time application related to IAS 32 and 39 on financial instruments and IFRS 5 on non-current assets held for sale and
discontinued operations
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63 Thomson Panorama 2006
In 991404 millions December 31 December 31 January 1 December 31 2006 2005 2005(1) 2004
SHAREHOLDERSrsquo EQUITY AND LIABILITIES
Shareholdersrsquo equity
Common stock (273871296 shares at
December 31 2006
with nominal value of euro 375 per share) 1027 1025 1025 1025
Trade accounts and notes payable 1032 1164 1199 1226
Accrued employee expenses 165 166 158 163
Income tax payable 57 47 60 60
Other current liabilities 671 750 746 800
Payables on acquisition of companies 13 138 84 84
Liabilities directly associated with
assets classified as held for sale 232 470 88 ndash
Total current liabilities 3681 4393 3602 3459
Total liabilities 5999 6644 6251 6062
Total shareholderrsquos equity and liabilities 8118 8860 8649 8555
(1) Including the impacts of the first-time application related to IAS 32 and 39 on financial instruments and IFRS 5 on non-current assets held for sale and
discontinued operations
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Creation and lay-out
Photo credits Nathalie BerhingGAMMA ndash Steacutephane de Bourgies ndash Jean-Franccedilois DeroubaixGAMMA ndash Christine Donnier- ValentinGAMMA ndash Cars copy 2006 Disney Enterprises IncPixar All Rights Reserved ndash Dreamgirls copy 2006 DREAMWORKS
LLC and PARAMOUNT PICTURES All Rights Reserved ndash Poseidon copy 2006 Warner Bros Pictures ndash Sony Bravia Paint
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Left Thomson Grass Valley branded
outside broadcast van under construction
Right Camera operator Kim Marks (left)
a camera first assistant Chris Blauvelt (center)
and a camera second assistant
Jason McCormick (right) line up a scene
with the Grass Valley Viper FilmStreamtrade
camera for the David Fincher feature Zodiac
Photo courtesy Paramount Pictures
selected Thomson in 2006 were Portu-
galrsquos leading Pay-TV Operator TV Cabo
UPC E-Vision Kabel Deutschland and
Premiegravere in Europe Net Serviccedilos in Latin America and StarHub and Dalian Cable
TV in Asia
Thomson expanded its footprint in satel-
lite in Europe notably in the UK and in
Asia where product deliveries began for
Tata Sky the Indian satellite broadcaster
In the UK Thomson delivered the Sky
HD box an MPEG-4 set-top box with
Personal Video Recorder which enabled
the successful launch of the countryrsquos first
high-definition TV service in May 2006
The largest satel li te television service
provider in the US DIRECTV also chose Thomson to expand its HD programming
offering with the delivery of the H20 satel-
lite receiver
Leveraging expertise in free-to-air digi-
tal terrestrial receivers and capabilities in
high-definition Thomson also delivered
the first MPEG-4 HDTV receivers for digital
terrestrial TV to French operators Canal +
and TPS during the year
In telephony Thomson remains a lead-
ing supplier of corded and cordless tele-
phones which are sold at retail outletsunder the RCA GE and Alcatel brands as
well as under third-party brands for opera-
tor sales In 2006 Thomson capitalized
on its leadership position in DECT (Digital
Enhanced Cordless Telecommunications)
in Europe by expanding into the American
retail market
Broadcast amp Networks
The Broadcast amp Networks businesses
gained market share in 2006 particularlyin networks and systems integration and
expanded in the promising Pro-AV (profes-
sional audio-video) market
Continuing trends in this market are high-
definition (HD) broadcasting the merging
of IT and broadcast technology the move
to a tape-less file-based approach to video
storage and management and power-
ful MPEG-4 HD compression technology
which allows content to be delivered to mul-
tiple audiences over multiple platforms
One highly visible application of ThomsonrsquosGrass Valley brand of HD image acquisi-
tion and production systems was the 2006
FIFA World Cup in Germany seen by a
billion viewers around the world Broad-
casters covering the event relied on more
than 182 Grass Valley brand cameras
10 Grass Valley video switching systems
12 large scale Grass Valley video routing
systems and hundreds of other devices to
provide faultless HD images
Leveraging its market leading position
Thomson est imates tha t Grass Valley
HD cameras now account for 50 of theglobal market Most major outside broad-
cast production companies in the world
use Grass Valley branded HD camera sys-
tems with more than 1500 in use
High-definition television is also about
news Based on internal Thomson esti-
mates Grass Valley solutions accounted
for nearly 80 of HD news installations
worldwide in 2006 including CBS Net-
work-owned amp operated stations in the
TECHNOLOGY SYSTEMS SERVICES
29 Thomson Panorama 2006
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IGNITE HD
TV news operations can work more quickly and efficiently by using information
technology The industryrsquos first and most complete link between the control room
and the newsroom HD Ignite enables a single technician to handle all
news production requirements During its initial months on the market in the US
HD Ignite was selected by such early adaptors as ABC Stations Group
customers in San Francisco and Chicago and Cox Broadcasting customers in
Atlanta San Francisco Charlotte North Carolina and Dayton Ohio
Telecom service providers are working to
provide more content and value-added
services over their broadband lines
Thomsonrsquos SmartVision and
Cirpack software solutions facilitate
their strategies for rapid deployment of
IPTV and triple-play services
US Al Jazeera Englishmdasha global channelbased in the Middle Eastmdashand Belgiumrsquos
VTM (Vlaamse Televisie Maatschappij )
Thomson is the only supplier to provide
an automated production system (Ignite
HD) a full suite of non-linear editing sys-
tems and a news playout systemmdashall of
which enable broadcasters to move to HD
affordably and to speed up and automate
their workflows
MPEG-4 is one of the enabling technolo-
gies which allows operators of telecom-
munications networks to bring TV to
their subscribers in addition to voice andinternet access This is one element in a
complete Thomson systems offering For
example Spanish operator Telefoacutenica
selected Thomson for a range of equip-
ment and systems to upgrade and expand
its rapidly growing ldquoImageniordquo service In
the US Falcon Communications a lead-
ing systems integrator offers a turnkey
IPTV solution featuring encoding content
delivery service management and access
products from Thomson
bull Professional Audio-Video
Thomson serves the rapidly growing mar-ket for professional audiovisual (ProAV)
solutions for corporate institutional wor-
ship and governmental media centers and
networks Thomsonrsquos expansion in ProAV
has been achieved through organic prod-
uct development as well as the integra-
tion of Pro-AV products from Canopus
the Japanese company acquired in early
2006
EDIUS desktop video
editing software part of
Thomsonrsquos growing rangeof professional
audiovisual and
broadcast solutions
TECHNOLOGY SYSTEMS SERVICES
30 Thomson Panorama 2006
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ldquoHaving started out in research today Irsquom responsible for our modemsrsquo roadmap
and strategy Our customersmdashthe telecoms operatorsmdashhave seen their business
transformed by technology like high-speed broadband And I find it fascinating
how these technologies have penetrated our daily lives the way we live and how
we communicate have changed dramatically over the last ten years
Even faster broadband (VDSL) fiber optics wireless technologies fixed-mobile
convergencehellip mean the pace of change is set to accelerate therersquos no doubt
wersquore living in exciting timesrdquo
Stan Claes Product Manager for IP-based Access Products
A key product introduction in 2006 was
the Grass Valley Indigo AV Presenta-
tion Switcher which combines features
normally found in separate devices in aunified powerful control interface simple
enough to be used by a single operator
Digital signage is also providing new mar-
ket opportunities combining the latest in
display delivery and storage technologies
Thomsonrsquos integrated digital media man-
agement solution Media Edge solves the
complex control distribution and archive
demands of customers Media Edge can
stream high-quality SD and HD content
over an IP network for example to the retail
store environment without the need to re-
invest in infrastructure
Broadcast amp Networksmdash
Network Software
2006 saw telecom service providers con-
tinue to build strategies to provide more
content and value-added services over
their broadband lines Thomsonrsquos Smart-
Vision TV service platforms and Cirpack
telephony switches are at the heart of sev-
eral of the worldrsquos largest IPTV and VoIP
services
In 2006 the launch of a pre-integrated mul-tiple play solution for telecom service provid-
ers illustrated Thomsonrsquos ability to leverage
skills across multiple business units The
solutions which enable telecom providers
to bring a myriad of services to broadband
subscribers are built around Thomsonrsquos
SmartVision and Cirpack software solu-
tions integrated with Thomsonrsquos Grass
Valley branded video head-end equipment
and Thomson home gateways and set-top
boxes This represents the first pre-inte-
grated solution on the market for rapid easy
deployment of triple play services including
voice video and internet access
More than 30 IPTV and mobile TV service
platforms have been deployed around the
world with SmartVision well-positioned
for convergent operators since it allows
video distribution over fixed and mobile
networks
Thomsonrsquos Cirpack softswitches which
help provide the core for the new inte-
grated platforms occupied the top mar-
ket position worldwide for residential
broadband telephony (VoIP) platforms in
2006 Over the course of 2006 Europersquoslargest primary line VoIP operator Freefr
upgraded its Cirpack switches to bring a
new seamless fixedmobile service to its
two million customers placing Thomson
at the forefront of new fixed-mobile con-
vergence solutions Signaling the rapid
expansion of sales outside traditional
Western European markets Thomsonrsquos
Cirpack switches were selected by many
telecom operators in Northern Africa Cen-
tral and Eastern Europe as well as Central
America to build or upgrade legacy voice
networks and deliver advanced telephone
services using IP technologies
TECHNOLOGY SYSTEMS SERVICES
31 Thomson Panorama 2006
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Thomsonrsquos Services division provides end-to-end management of business-critical services on behalf of Media
Entertainment amp Communications customers These include management of broadcast and network operations
centers on an outsourced basis and the provision of an array of content services to the creative community from
post-production to visual effects
SERVICES
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Thomsonrsquos Services division provides end-
to-end management of business-critical
services spanning physical media con-
tent services electronic content distribu-
tion and network services The division
is the worldrsquos leading provider of state-
of-the-art film-making post-production
visual effects and broadcast center man-
agement services
Strategy
The Services division continues to focus
on managing v ideo networks and
op er at io na l centers on behalf of its
customers who are able to concentrate
on their core business of content The
emphasis on high-growth opportunities
in newer market sectors such as retail
and corporate networks and gaming
has been sharpened
Achievements
New customers in fast-growing market
segments responded well to a range of
high value-added services from the Ser-
vices division in 2006 Network Services
showed particularly strong growth as net-
work operators in Europe Asia and North
America selected Technicolor-branded
management services The addition of
such leading customers as ITV in the
UK and France 24 and TV5 in France
substantially expanded Thomsonrsquos fast-
growing Network Services business
Noteworthy successes were also achieved
in Theatrical Services due in part to the
continued development of Thomsonrsquos digi-
tal cinema activity The Content Services
business continued to expand its post-
production services business by opening
a digital intermediate facility on the SonyPictures Entertainment studio lot In 2006
a new Home Entertainment Services unit
was created combining Thomsonrsquos DVD
business with electronic distribution to
develop new services to support emerging
lsquoon demand contentrsquo business models
Network Services
With a comprehensive portfolio of services
for broadcasters network and internet TV
operators movie theatres retailers and
corporations Network Services continued
to expand briskly in 2006 Broadcastersincreasingly selected Thomson as their
long-term network services partner By
year-end Network Services was providing
managed services under the Technicolor
brand to close to 200 channels from
17 facilities in France the Netherlands
Japan North America and the UK
Late in the year Thomson signed a long-
term agreement with ITV for network
transmission operations services for its six
From managing video
networks on an outsourced
basis to a broad range of
offerings in content services
Thomson is bringing its video
expertise to new markets
and geographies
Left Network Services for broadcasters
cable TV operators movie theaters
retailers and corporations is one of Servicesrsquo
fastest-growing business segments
Right Thomson provided film sound
DVD and digital cinema services for Cars
the DisneyPixar hitCars copy 2006 Disney Enterprises IncPixar All R ights Reserved
SERVICES
MANAGING VIDEO NETWORKS
TECHNOLOGY SYSTEMS SERVICES
34 Thomson Panorama 2006
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existing UK channels including the coun-
tryrsquos leading commercial channel In addi-
tion an agreement signed with NOB Cross
Media Facilities (NOB CMF) a subsidiary
of Nederlands Omroepproduktie Bedrijf
(NOB) likewise established Thomson as
a major supplier of network management
services in the Netherlands
In France Network Services added new
clients France 24 and TV5 which covers
203 countries and territories to move into
the market-leading position managing
more than 60 channels and 1500 hours
of programming daily The France 24 part-
nership also involves equipping their new
global TV news operation
Thomson drove expansion and innovation
in its retail media services over the course
of the year One of the most notable achie-
vements involves an ambitious in-store
network upgrade program piloted in2006 by Wal-Mart in the USA with Premier
Retail Networks (PRN) a subsidiary within
Thomsonrsquos Network Services operat ion
The in-store network platform was based
on Thomson IPTV technologies adapted
for the retail environment The system
the first pilot of IPTV in the retail environ-
ment delivered real impact on product
sales and improved customer satisfaction
in Wal-Mart stores PRN also expanded
capabilities into China early in 2007 with
Content Services revving up
Thomson provided a wide range of services for a number of major international film releases in 2006
such as Cars one of the three nominees for Best Animated Film at the Oscars Thomson Technicolor provided
film services sound services DVD compression and authoring replication and distribution
as well as digital cinema mastering and distribution for the DisneyPixar hit The Grouprsquos Content Services offering
has expanded in recent years to include the high-growth video-gaming advertising and broadcast markets
the signing of a joint venture with CGEN a
technology company leading the Chinese
in-store digital signage media industry
The two companies are currently collabo-
rating on the roll-out of an in-store media
network to 750 internet cafeacutes part of the
leading Chinese chain Big Cafeacute
Theatrical Services
Thomson signed Europersquos first large-scale
digital cinema rollout agreement in 2006
with the Kinepolis Group one of the conti-
nentrsquos most innovative theater circuits and
the leading exhibition chain in Belgium
The agreement to instal l and operate
digital cinema systems in 130 Kinepolis-
owned and operated screens passed a
first milestone in March 2007 with Thom-
sonrsquos first international distribution by sat-
ellite of an encrypted digital version of the
film Dreamgirls from the US to a Kinepolis
theater in Brussels Belgium
A series of new contracts were awarded
in the US For example in the fall of 2006
Technicolor Digital Cinema began installing
digital projection systems at 120 National
Amusements Inc screens in Boston Los
Angeles New York and elsewhere as part
of a strategic agreement National Amuse-
ments operates more than 1500 screens
in the US UK Latin America and Russia
Digital projection systems were also
TECHNOLOGY SYSTEMS SERVICES
35 Thomson Panorama 2006
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The growing market for Network Services
The decision by the UKrsquos leading commercial broadcaster to entrust its network services to
Thomsonrsquos Network Services operations illustrates a growing global trend as broadcasters focus increasingly on
programming and meeting customer needs they turn to highly-skilled specialists to handle technology
The long-term agreement with ITV means that the broadcaster will benefit from enhanced service and new technology
as well as more flexibility in launching new services
36 Thomson Panorama 2006
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Left Thomsonrsquos Technicolor
Interactive Services provided in-game
cinematics and voice recording for
Microsoft Game Studiosrsquo Gears of War
Right Thomsonrsquos London-based MPC
subsidiary carried out post-production
work including computer graphics
on Sony Braviarsquos award-wirring colorful
Paint commercial
installed at several landmark theatres in
Los Angeles in 2006 including Mann The-
atresrsquo Graumanrsquos Chinese and the Village
in Westwood
Thomson maintained a leading position in
film processing and printing in 2006 in a
market where volumes were stable Tech-
nicolor handled worldwide release printingfor two of the five 2007 Oscar nominees
for Best PicturemdashMartin Scorcesersquos The
Departed and Clint Eastwoodrsquos Letters
from Iwo Jimamdashas well as release print-
ing for two of the three Best Animated Film
nominees Cars and Happy Feet
As part of its ongoing commitment to meet
customer needs worldwide a state-of-the-
art film and post-production facility was inau-
gurated at Ciudad de la Imagen in Madrid in
2006 It is already becoming known as the
countryrsquos most comprehensive postproduc-
tion facility with advanced film processingand digital intermediate capabilities
Content Services
Thomson continued to leverage its long-
standing strength in post-production
skills and services through expansion into
emerging and high-growth market seg-
ments such as content services for the
video-gaming advertising and broadcast
markets
In order to better serve the growing mar-
ket for entertainment content for mobile
devices Thomson unveiled new mobile
content preparation and distribution capa-
bilities in the US and the UK in 2006 Facili-
ties equipped with state-of-the-art produc-
tion and post-production technologies will
handle the preparation and optimization
of a wide range of digital entertainmentcontentmdashincluding movies TV episodes
and music videosmdashfor distribution to
mobile devices The dedicated services
complement the Grouprsquos extensive global
electronic distribution infrastructure which
enables Thomson to deliver mobile con-
tent to online delivery services as well as
to network operators for final transmission
to mobile customers
Thomson also made progress in the
development of an integrated digital asset
management solution in 2006 known as
MIDAS (Media Ingest Distribution andStorage) MIDAS is a software and hard-
ware platform for digital content prepara-
tion storage security and distribution
From the first day of production planning
through every stage of post-production
and content distribution MIDAS creates
a digital workflow that allows customers
to manage projects remotely and provides
for rapid and seamless global file delivery
streaming and collaboration
TECHNOLOGY SYSTEMS SERVICES
37 Thomson Panorama 2006
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While expanding into newer markets
growing demand for post-production ser-
vices and visual effects continued to fuel
Thomsonrsquos ongoing content services activ-
ities Among the yearrsquos most noteworthy
achievements were portfolios of services
for such feature films as The Departed
Letters from Iwo Jima and Pirates of the
Caribbean Dead Manrsquos Chest ThomsonrsquosMoving Picture Company (MPC) also pro-
vided high-end visual effects for the three
films nominated for Achievement in Visual
Effects Pirates of the Caribbean Posei-
don and Superman Returns
Confirming the Grouprsquos solid growth in
content services for the video game indus-
try Thomson unveiled a new dedicated
Interactive Services facility in Burbank
California in 2006 Sierra Entertainment
a division of Vivendi Games selected
Thomson to prov ide cinemat ic anima-
tion voice casting and recording sound
design and mixing services for The Leg-
end of Spyrotrade A New Beginning Like-
wise Thomson provided a wide range of
services to support Konamirsquos The SilentHill Experience released simultaneously
with the motion picture
The strategic investment in one of Indiarsquos
leading animation and gaming cinemat-
ics firms announced in February 2007
strengthened Thomsonrsquos position in Asia
for a variety of content services Located in
Bangalore India Paprikaas provides cre-
ldquoIn 1998 I joined Thomson as a Plant Manager within Home Entertainment Services
and was eventually made responsible for the expansion and management of our
Guadalajara DVD operations In summary Irsquove had great opportunities to gain experience
in international operations strategic planning and operational excellence I recently
joined Content Services where Irsquoll be leading the start-up and integration of new activities
in Beijing Bangalore and other emerging markets Content Services is dynamic and
growing and Irsquom looking forward to expanding the business in Asia while improving
our operational performance in North America and Europerdquo
Mike Hayden Vice President Operations amp Strategic Projects Content Services
of the Grouprsquos divisions and profit centersIn the context of the budgetary procedure
performance measurement indicators are
calculated by the divisions analyzed and
reviewed monthly to serve as a reference
for the Grouprsquos monthly reporting
Management reporting and
closing period work
Th om so n uses a co mmon char t of
accounts which is regularly updated The
principal accounting and financial figures
of the operational and functional depart-
ments consolidated at Group level are
analyzed by the Grouprsquos management
control team and reviewed by the Grouprsquos
Executive Committee
The closing process for the half-year and
annual consolidated financial statementsoccurs in two steps The first step con-
sists of a ldquohard closerdquo completed in May
and September leading to a first review by
the statutory auditors The second step
occurs in July and in JanuaryFebruary and
involves the finalization of half-year and
annual consolidated financial statements
under IFRS The Group then proceeds
once a year with a reconciliation of these
results in accordance with US GAAP
Preparation of financial statements
The financial statements are prepared jointly by the finance department and the
General Secretary They are based on
information reported through the annual
reporting and accounting consolidation
processes and on operational and mar-
ket information which is specifically cen-
tralized for the preparation of Thomsonrsquos
Document de Reacutefeacuterence in France and
the submission of Form 20-F in the United
States Half-year and annual financial infor-
mation is reviewed by the Grouprsquos Audit
Committee
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58 Thomson Panorama 2006
(1) Source PriceWaterhouseCoopers ndash
ldquoGlobal Entertainment and Media Outlook 2006-10rdquo
Revenue growth
Thomson achieved consolidated 2006
net revenues of 9914045854 million up from
9914045591 million in 2005 Revenues for
the Core Business reached 9914045747 mil-
lion (9914045776 million at constant currency)
representing 83 growth over 2005 at
constant currency
Overall the Grouprsquos key growth busi-
nessesmdashContent Services Network
Services Access Products for telecom
operators and our Broadcast amp Networks
businesses (Grass Valley and Network
Software)mdashincreased strongly year-on-
year and accounted for over a third of
Group revenues against less than a quar-
ter in 2005
Thomsonrsquos Core Business EBIT for 2006
was euro504 million representing a Core
Business EBIT margin of 88 Thisreflected growth in some key businesses
and cost actions across the Group off-
setting a significant investment in research
and development and some increase in
restructuring expenses
Increased spend on RampD
Research and development expenditure
charged in the Core Business (net of
external funding) rose from 991404221 million in
2005 to 991404279 million in 2006 an increase
of 26 principally in the Systems divi-
sion The Group expanded the number ofproducts and services in the development
phase across its businesses
Return to profit
Losses in Non-Core Continuing and Dis-
continued operations were substantially
lower year-on-year reflecting principally
the exit from heavily loss-making Displays
activities in 2005 and intensified cost-sav-
ing programs in 2006 A major revision
and harmonization of the Grouprsquos North
American healthcare obligations gave rise
to substantial one-time gains and Thom-
son also initiated significant restructuring
of its French Non-Core operations
The good performance of the Core Busi-
ness lower Non-Core and Discontinued
losses and a low reported tax chargeenabled the Group to return a net profit of
99140455 million in 2006 compared to a loss of
991404573 million in the previous year
Good cash flow
strengthened balance sheet
Thomson generated good free cash flow
and strengthened its balance sheet in
2006 Total net financial liabilities on the
balance sheet fell by 991404460 million reflect-
ing a 99140493 million fall in financial and acqui-
sition-related debts and a 991404367 million
reduction in retirement benefit obligations(including healthcare)
Increase in Net Dividend
The Board of Directors proposed a dis-
tribution to shareholders of 991404033 per
share (2005 dividend 991404030) reflecting
confidence in the prospects of the Group
going forward
Outlook 2007-2009
growth in revenues and net income
With the Grouprsquos transformation complete Thomsonrsquos financial focus over the 2007-
2009 period will be to grow revenues and
net income
Thomson serves growing Media Enter-
tainment amp Communications marketsmdashfor
which external estimates(1) indicate com-
pound growth of around 6 over the last
FINANCIAL AND
OPERATIONAL PERFORMANCE
Full year 2006 results
saw a return to profitability
and leave Thomson
well positioned at
the heart of convergence
and digital video
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59 Thomson Panorama 2006
five years Our digital and electronic busi-
nesses now represent two-thirds of rev-
enues and we believe they are growing
faster than the overall market offsetting
the maturing physical media businesses
Given this profile the Group expects its
revenue growth to be more modest in
2007 but to gather pace over the period
and our overall objective is to show com-pound growth over 2007-2009 in line with
or faster than the overall market
The 2007-2009 period is also expected
to see a sharply reduced impact from
residual Non-Core activities with an end
to losses from the Discontinued Activities
perimeter after 2007 Accordingly Thom-
sonrsquos ambition is to turn its Core Business
growth and profitability and lower impact
from Non-Core into strong growth in net
income over the period 2007-2009
Business operations
Continuous performance improvement is
fundamental to Thomsonrsquos commitment to
create sustainable business models and
long-term value for all stakeholders The
ambitious Group-wide programs launched
in 2004 to improve productivity and
enhance overall performance producedsubstantial results in 2006 and led to new
and strong initiatives for long-term growth
As of the second half of 2006 six ldquoKey
Programsrdquo are monitored at Group level
Clients Software Product Introduction
Operations Transformation and Talent
Management
KEY PROGRAMS IN PLACE
Program Focus
Clients Thomsonrsquos clientregional diversification and
growth of the existing business
through improved Sales amp Marketing
Software Development of integrated software platforms
in all markets (post-production distribution
delivery) and for all types of customer
(professional prosumerhellip)
Product Introduction Ensuring new product roadmaps are in line
with strategy and resource needs have been
identifiedOperations Improving the Grouprsquos cost base cash
generation and working capital
Transformation Multiple programs including initiatives to
improving customer relationship management
worldwide supply chain management
IT transformation as well as Thomsonrsquos RampD
footprint
Talent Management Leveraging human assets with a focus on
talent retention and acquisition
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60 Thomson Panorama 2006
SUMMARY RESULTS FULL YEAR 2006
In 991404 millions unless otherwise stated 2006(1) 2005(1)
Net revenues 5854 5591(1)
Core Business net revenues 5747 5335
Services 2489 2487
Systems 2684 2262
Technology 547 546
Corporate 27 40
Non-Core continuing operations net revenues 107 256
Core Business EBIT(2) 504 512
Services 160 205
Systems 132 109
Technology 289 277Corporate (77) (79)
EBIT from Non-Core continuing operations (25) (122)
(1) Restated with 2006 discontinued activities according to IFRS 5
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61 Thomson Panorama 2006
Year ended December 31in 991404 except number of shares 2006 2005 2004
Year ended December 31in 991404 millions 2006 2005(1) 2004(1)
CONSOLIDATED STATEMENTS OF OPERATIONS
(1) Restated with 2006 discontinued activities according to IFRS 5
(2) After deduction of the interests net of tax paid on the subordinated perpetual notes during the period
Continuing operations
Revenues 5854 5591 5980
Cost of sales (4474) (4240) (4594)
Gross margin 1380 1351 1386
Selling marketing general and administrative expenses (674) (638) (653)
Other income (expense) 52 (96) (69)
Research and development expenses (279) (227) (201)
Profit from continuing operations before tax and net finance costs 479 390 463
Interest income 19 30 52
Interest expense (108) (108) (54)
Other financial income (expense) (111) 36 (26)
Finance costs ndash net (200) (42) (28)
Share of profit (loss) from associates (86) (82) (20)
Income tax ndash (68) (93)
Profit from continuing operations 193 198 322
Discontinued operations
Profit (loss) from discontinued operations (138) (771) (883)
Net income (loss) 55 (573) (561)
Attributable to
Equity Holders 55 (574) (559)
Minority interests ndash 1 (2)
Weighted average number of shares
outstandingmdashbasic net of treasury stock 261188858 266539917 273646869
Earnings per share from continuing operations
Basic(2) 067 074 118
Diluted 063 042 111
Earnings per share from discontinued operations
Basic (053) (289) (323)
Diluted (048) (262) (296)Total earnings per share
Basic(2) 014 (215) (205)
Diluted 015 (220) (185)
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62 Thomson Panorama 2006
CONSOLIDATED BALANCE SHEETS
In 991404 millions December 31 December 31 January 1 December 31 2006 2005 2005(1) 2004
ASSETS
Non-current assets
Property plant and equipment 813 886 1051 1051
Goodwill 1714 1756 1186 1178
Other intangible assets 1071 1150 924 924
Investments in associates 12 204 260 260
Investments and financial assets available-for-sale 266 341 139 113
Derivative financial instruments 7 1 11 ndash
Contract advances 129 173 179 179
Deferred tax assets 397 379 307 301
Other non-current assets 110 182 133 136
Total non-current assets 4519 5072 4190 4142
Current assets
Inventories 366 333 503 568
Trade accounts and notes receivable 1018 1315 1232 1180
Current accounts with associates and joint ventures 97 115 143 143
Derivative financial instruments 8 9 115 ndash
Other current assets 535 644 483 616
Marketable securities ndash 7 58 58
Cash and cash equivalents 1311 996 1845 1848
Assets classified as held for sale 264 369 80 ndash
Total current assets 3599 3788 4459 4413
Total assets 8118 8860 8649 8555
(1) Including the impacts of the first-time application related to IAS 32 and 39 on financial instruments and IFRS 5 on non-current assets held for sale and
discontinued operations
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63 Thomson Panorama 2006
In 991404 millions December 31 December 31 January 1 December 31 2006 2005 2005(1) 2004
SHAREHOLDERSrsquo EQUITY AND LIABILITIES
Shareholdersrsquo equity
Common stock (273871296 shares at
December 31 2006
with nominal value of euro 375 per share) 1027 1025 1025 1025
Trade accounts and notes payable 1032 1164 1199 1226
Accrued employee expenses 165 166 158 163
Income tax payable 57 47 60 60
Other current liabilities 671 750 746 800
Payables on acquisition of companies 13 138 84 84
Liabilities directly associated with
assets classified as held for sale 232 470 88 ndash
Total current liabilities 3681 4393 3602 3459
Total liabilities 5999 6644 6251 6062
Total shareholderrsquos equity and liabilities 8118 8860 8649 8555
(1) Including the impacts of the first-time application related to IAS 32 and 39 on financial instruments and IFRS 5 on non-current assets held for sale and
discontinued operations
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Creation and lay-out
Photo credits Nathalie BerhingGAMMA ndash Steacutephane de Bourgies ndash Jean-Franccedilois DeroubaixGAMMA ndash Christine Donnier- ValentinGAMMA ndash Cars copy 2006 Disney Enterprises IncPixar All Rights Reserved ndash Dreamgirls copy 2006 DREAMWORKS
LLC and PARAMOUNT PICTURES All Rights Reserved ndash Poseidon copy 2006 Warner Bros Pictures ndash Sony Bravia Paint
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IGNITE HD
TV news operations can work more quickly and efficiently by using information
technology The industryrsquos first and most complete link between the control room
and the newsroom HD Ignite enables a single technician to handle all
news production requirements During its initial months on the market in the US
HD Ignite was selected by such early adaptors as ABC Stations Group
customers in San Francisco and Chicago and Cox Broadcasting customers in
Atlanta San Francisco Charlotte North Carolina and Dayton Ohio
Telecom service providers are working to
provide more content and value-added
services over their broadband lines
Thomsonrsquos SmartVision and
Cirpack software solutions facilitate
their strategies for rapid deployment of
IPTV and triple-play services
US Al Jazeera Englishmdasha global channelbased in the Middle Eastmdashand Belgiumrsquos
VTM (Vlaamse Televisie Maatschappij )
Thomson is the only supplier to provide
an automated production system (Ignite
HD) a full suite of non-linear editing sys-
tems and a news playout systemmdashall of
which enable broadcasters to move to HD
affordably and to speed up and automate
their workflows
MPEG-4 is one of the enabling technolo-
gies which allows operators of telecom-
munications networks to bring TV to
their subscribers in addition to voice andinternet access This is one element in a
complete Thomson systems offering For
example Spanish operator Telefoacutenica
selected Thomson for a range of equip-
ment and systems to upgrade and expand
its rapidly growing ldquoImageniordquo service In
the US Falcon Communications a lead-
ing systems integrator offers a turnkey
IPTV solution featuring encoding content
delivery service management and access
products from Thomson
bull Professional Audio-Video
Thomson serves the rapidly growing mar-ket for professional audiovisual (ProAV)
solutions for corporate institutional wor-
ship and governmental media centers and
networks Thomsonrsquos expansion in ProAV
has been achieved through organic prod-
uct development as well as the integra-
tion of Pro-AV products from Canopus
the Japanese company acquired in early
2006
EDIUS desktop video
editing software part of
Thomsonrsquos growing rangeof professional
audiovisual and
broadcast solutions
TECHNOLOGY SYSTEMS SERVICES
30 Thomson Panorama 2006
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ldquoHaving started out in research today Irsquom responsible for our modemsrsquo roadmap
and strategy Our customersmdashthe telecoms operatorsmdashhave seen their business
transformed by technology like high-speed broadband And I find it fascinating
how these technologies have penetrated our daily lives the way we live and how
we communicate have changed dramatically over the last ten years
Even faster broadband (VDSL) fiber optics wireless technologies fixed-mobile
convergencehellip mean the pace of change is set to accelerate therersquos no doubt
wersquore living in exciting timesrdquo
Stan Claes Product Manager for IP-based Access Products
A key product introduction in 2006 was
the Grass Valley Indigo AV Presenta-
tion Switcher which combines features
normally found in separate devices in aunified powerful control interface simple
enough to be used by a single operator
Digital signage is also providing new mar-
ket opportunities combining the latest in
display delivery and storage technologies
Thomsonrsquos integrated digital media man-
agement solution Media Edge solves the
complex control distribution and archive
demands of customers Media Edge can
stream high-quality SD and HD content
over an IP network for example to the retail
store environment without the need to re-
invest in infrastructure
Broadcast amp Networksmdash
Network Software
2006 saw telecom service providers con-
tinue to build strategies to provide more
content and value-added services over
their broadband lines Thomsonrsquos Smart-
Vision TV service platforms and Cirpack
telephony switches are at the heart of sev-
eral of the worldrsquos largest IPTV and VoIP
services
In 2006 the launch of a pre-integrated mul-tiple play solution for telecom service provid-
ers illustrated Thomsonrsquos ability to leverage
skills across multiple business units The
solutions which enable telecom providers
to bring a myriad of services to broadband
subscribers are built around Thomsonrsquos
SmartVision and Cirpack software solu-
tions integrated with Thomsonrsquos Grass
Valley branded video head-end equipment
and Thomson home gateways and set-top
boxes This represents the first pre-inte-
grated solution on the market for rapid easy
deployment of triple play services including
voice video and internet access
More than 30 IPTV and mobile TV service
platforms have been deployed around the
world with SmartVision well-positioned
for convergent operators since it allows
video distribution over fixed and mobile
networks
Thomsonrsquos Cirpack softswitches which
help provide the core for the new inte-
grated platforms occupied the top mar-
ket position worldwide for residential
broadband telephony (VoIP) platforms in
2006 Over the course of 2006 Europersquoslargest primary line VoIP operator Freefr
upgraded its Cirpack switches to bring a
new seamless fixedmobile service to its
two million customers placing Thomson
at the forefront of new fixed-mobile con-
vergence solutions Signaling the rapid
expansion of sales outside traditional
Western European markets Thomsonrsquos
Cirpack switches were selected by many
telecom operators in Northern Africa Cen-
tral and Eastern Europe as well as Central
America to build or upgrade legacy voice
networks and deliver advanced telephone
services using IP technologies
TECHNOLOGY SYSTEMS SERVICES
31 Thomson Panorama 2006
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Thomsonrsquos Services division provides end-to-end management of business-critical services on behalf of Media
Entertainment amp Communications customers These include management of broadcast and network operations
centers on an outsourced basis and the provision of an array of content services to the creative community from
post-production to visual effects
SERVICES
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Thomsonrsquos Services division provides end-
to-end management of business-critical
services spanning physical media con-
tent services electronic content distribu-
tion and network services The division
is the worldrsquos leading provider of state-
of-the-art film-making post-production
visual effects and broadcast center man-
agement services
Strategy
The Services division continues to focus
on managing v ideo networks and
op er at io na l centers on behalf of its
customers who are able to concentrate
on their core business of content The
emphasis on high-growth opportunities
in newer market sectors such as retail
and corporate networks and gaming
has been sharpened
Achievements
New customers in fast-growing market
segments responded well to a range of
high value-added services from the Ser-
vices division in 2006 Network Services
showed particularly strong growth as net-
work operators in Europe Asia and North
America selected Technicolor-branded
management services The addition of
such leading customers as ITV in the
UK and France 24 and TV5 in France
substantially expanded Thomsonrsquos fast-
growing Network Services business
Noteworthy successes were also achieved
in Theatrical Services due in part to the
continued development of Thomsonrsquos digi-
tal cinema activity The Content Services
business continued to expand its post-
production services business by opening
a digital intermediate facility on the SonyPictures Entertainment studio lot In 2006
a new Home Entertainment Services unit
was created combining Thomsonrsquos DVD
business with electronic distribution to
develop new services to support emerging
lsquoon demand contentrsquo business models
Network Services
With a comprehensive portfolio of services
for broadcasters network and internet TV
operators movie theatres retailers and
corporations Network Services continued
to expand briskly in 2006 Broadcastersincreasingly selected Thomson as their
long-term network services partner By
year-end Network Services was providing
managed services under the Technicolor
brand to close to 200 channels from
17 facilities in France the Netherlands
Japan North America and the UK
Late in the year Thomson signed a long-
term agreement with ITV for network
transmission operations services for its six
From managing video
networks on an outsourced
basis to a broad range of
offerings in content services
Thomson is bringing its video
expertise to new markets
and geographies
Left Network Services for broadcasters
cable TV operators movie theaters
retailers and corporations is one of Servicesrsquo
fastest-growing business segments
Right Thomson provided film sound
DVD and digital cinema services for Cars
the DisneyPixar hitCars copy 2006 Disney Enterprises IncPixar All R ights Reserved
SERVICES
MANAGING VIDEO NETWORKS
TECHNOLOGY SYSTEMS SERVICES
34 Thomson Panorama 2006
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existing UK channels including the coun-
tryrsquos leading commercial channel In addi-
tion an agreement signed with NOB Cross
Media Facilities (NOB CMF) a subsidiary
of Nederlands Omroepproduktie Bedrijf
(NOB) likewise established Thomson as
a major supplier of network management
services in the Netherlands
In France Network Services added new
clients France 24 and TV5 which covers
203 countries and territories to move into
the market-leading position managing
more than 60 channels and 1500 hours
of programming daily The France 24 part-
nership also involves equipping their new
global TV news operation
Thomson drove expansion and innovation
in its retail media services over the course
of the year One of the most notable achie-
vements involves an ambitious in-store
network upgrade program piloted in2006 by Wal-Mart in the USA with Premier
Retail Networks (PRN) a subsidiary within
Thomsonrsquos Network Services operat ion
The in-store network platform was based
on Thomson IPTV technologies adapted
for the retail environment The system
the first pilot of IPTV in the retail environ-
ment delivered real impact on product
sales and improved customer satisfaction
in Wal-Mart stores PRN also expanded
capabilities into China early in 2007 with
Content Services revving up
Thomson provided a wide range of services for a number of major international film releases in 2006
such as Cars one of the three nominees for Best Animated Film at the Oscars Thomson Technicolor provided
film services sound services DVD compression and authoring replication and distribution
as well as digital cinema mastering and distribution for the DisneyPixar hit The Grouprsquos Content Services offering
has expanded in recent years to include the high-growth video-gaming advertising and broadcast markets
the signing of a joint venture with CGEN a
technology company leading the Chinese
in-store digital signage media industry
The two companies are currently collabo-
rating on the roll-out of an in-store media
network to 750 internet cafeacutes part of the
leading Chinese chain Big Cafeacute
Theatrical Services
Thomson signed Europersquos first large-scale
digital cinema rollout agreement in 2006
with the Kinepolis Group one of the conti-
nentrsquos most innovative theater circuits and
the leading exhibition chain in Belgium
The agreement to instal l and operate
digital cinema systems in 130 Kinepolis-
owned and operated screens passed a
first milestone in March 2007 with Thom-
sonrsquos first international distribution by sat-
ellite of an encrypted digital version of the
film Dreamgirls from the US to a Kinepolis
theater in Brussels Belgium
A series of new contracts were awarded
in the US For example in the fall of 2006
Technicolor Digital Cinema began installing
digital projection systems at 120 National
Amusements Inc screens in Boston Los
Angeles New York and elsewhere as part
of a strategic agreement National Amuse-
ments operates more than 1500 screens
in the US UK Latin America and Russia
Digital projection systems were also
TECHNOLOGY SYSTEMS SERVICES
35 Thomson Panorama 2006
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The growing market for Network Services
The decision by the UKrsquos leading commercial broadcaster to entrust its network services to
Thomsonrsquos Network Services operations illustrates a growing global trend as broadcasters focus increasingly on
programming and meeting customer needs they turn to highly-skilled specialists to handle technology
The long-term agreement with ITV means that the broadcaster will benefit from enhanced service and new technology
as well as more flexibility in launching new services
36 Thomson Panorama 2006
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Left Thomsonrsquos Technicolor
Interactive Services provided in-game
cinematics and voice recording for
Microsoft Game Studiosrsquo Gears of War
Right Thomsonrsquos London-based MPC
subsidiary carried out post-production
work including computer graphics
on Sony Braviarsquos award-wirring colorful
Paint commercial
installed at several landmark theatres in
Los Angeles in 2006 including Mann The-
atresrsquo Graumanrsquos Chinese and the Village
in Westwood
Thomson maintained a leading position in
film processing and printing in 2006 in a
market where volumes were stable Tech-
nicolor handled worldwide release printingfor two of the five 2007 Oscar nominees
for Best PicturemdashMartin Scorcesersquos The
Departed and Clint Eastwoodrsquos Letters
from Iwo Jimamdashas well as release print-
ing for two of the three Best Animated Film
nominees Cars and Happy Feet
As part of its ongoing commitment to meet
customer needs worldwide a state-of-the-
art film and post-production facility was inau-
gurated at Ciudad de la Imagen in Madrid in
2006 It is already becoming known as the
countryrsquos most comprehensive postproduc-
tion facility with advanced film processingand digital intermediate capabilities
Content Services
Thomson continued to leverage its long-
standing strength in post-production
skills and services through expansion into
emerging and high-growth market seg-
ments such as content services for the
video-gaming advertising and broadcast
markets
In order to better serve the growing mar-
ket for entertainment content for mobile
devices Thomson unveiled new mobile
content preparation and distribution capa-
bilities in the US and the UK in 2006 Facili-
ties equipped with state-of-the-art produc-
tion and post-production technologies will
handle the preparation and optimization
of a wide range of digital entertainmentcontentmdashincluding movies TV episodes
and music videosmdashfor distribution to
mobile devices The dedicated services
complement the Grouprsquos extensive global
electronic distribution infrastructure which
enables Thomson to deliver mobile con-
tent to online delivery services as well as
to network operators for final transmission
to mobile customers
Thomson also made progress in the
development of an integrated digital asset
management solution in 2006 known as
MIDAS (Media Ingest Distribution andStorage) MIDAS is a software and hard-
ware platform for digital content prepara-
tion storage security and distribution
From the first day of production planning
through every stage of post-production
and content distribution MIDAS creates
a digital workflow that allows customers
to manage projects remotely and provides
for rapid and seamless global file delivery
streaming and collaboration
TECHNOLOGY SYSTEMS SERVICES
37 Thomson Panorama 2006
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While expanding into newer markets
growing demand for post-production ser-
vices and visual effects continued to fuel
Thomsonrsquos ongoing content services activ-
ities Among the yearrsquos most noteworthy
achievements were portfolios of services
for such feature films as The Departed
Letters from Iwo Jima and Pirates of the
Caribbean Dead Manrsquos Chest ThomsonrsquosMoving Picture Company (MPC) also pro-
vided high-end visual effects for the three
films nominated for Achievement in Visual
Effects Pirates of the Caribbean Posei-
don and Superman Returns
Confirming the Grouprsquos solid growth in
content services for the video game indus-
try Thomson unveiled a new dedicated
Interactive Services facility in Burbank
California in 2006 Sierra Entertainment
a division of Vivendi Games selected
Thomson to prov ide cinemat ic anima-
tion voice casting and recording sound
design and mixing services for The Leg-
end of Spyrotrade A New Beginning Like-
wise Thomson provided a wide range of
services to support Konamirsquos The SilentHill Experience released simultaneously
with the motion picture
The strategic investment in one of Indiarsquos
leading animation and gaming cinemat-
ics firms announced in February 2007
strengthened Thomsonrsquos position in Asia
for a variety of content services Located in
Bangalore India Paprikaas provides cre-
ldquoIn 1998 I joined Thomson as a Plant Manager within Home Entertainment Services
and was eventually made responsible for the expansion and management of our
Guadalajara DVD operations In summary Irsquove had great opportunities to gain experience
in international operations strategic planning and operational excellence I recently
joined Content Services where Irsquoll be leading the start-up and integration of new activities
in Beijing Bangalore and other emerging markets Content Services is dynamic and
growing and Irsquom looking forward to expanding the business in Asia while improving
our operational performance in North America and Europerdquo
Mike Hayden Vice President Operations amp Strategic Projects Content Services
of the Grouprsquos divisions and profit centersIn the context of the budgetary procedure
performance measurement indicators are
calculated by the divisions analyzed and
reviewed monthly to serve as a reference
for the Grouprsquos monthly reporting
Management reporting and
closing period work
Th om so n uses a co mmon char t of
accounts which is regularly updated The
principal accounting and financial figures
of the operational and functional depart-
ments consolidated at Group level are
analyzed by the Grouprsquos management
control team and reviewed by the Grouprsquos
Executive Committee
The closing process for the half-year and
annual consolidated financial statementsoccurs in two steps The first step con-
sists of a ldquohard closerdquo completed in May
and September leading to a first review by
the statutory auditors The second step
occurs in July and in JanuaryFebruary and
involves the finalization of half-year and
annual consolidated financial statements
under IFRS The Group then proceeds
once a year with a reconciliation of these
results in accordance with US GAAP
Preparation of financial statements
The financial statements are prepared jointly by the finance department and the
General Secretary They are based on
information reported through the annual
reporting and accounting consolidation
processes and on operational and mar-
ket information which is specifically cen-
tralized for the preparation of Thomsonrsquos
Document de Reacutefeacuterence in France and
the submission of Form 20-F in the United
States Half-year and annual financial infor-
mation is reviewed by the Grouprsquos Audit
Committee
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58 Thomson Panorama 2006
(1) Source PriceWaterhouseCoopers ndash
ldquoGlobal Entertainment and Media Outlook 2006-10rdquo
Revenue growth
Thomson achieved consolidated 2006
net revenues of 9914045854 million up from
9914045591 million in 2005 Revenues for
the Core Business reached 9914045747 mil-
lion (9914045776 million at constant currency)
representing 83 growth over 2005 at
constant currency
Overall the Grouprsquos key growth busi-
nessesmdashContent Services Network
Services Access Products for telecom
operators and our Broadcast amp Networks
businesses (Grass Valley and Network
Software)mdashincreased strongly year-on-
year and accounted for over a third of
Group revenues against less than a quar-
ter in 2005
Thomsonrsquos Core Business EBIT for 2006
was euro504 million representing a Core
Business EBIT margin of 88 Thisreflected growth in some key businesses
and cost actions across the Group off-
setting a significant investment in research
and development and some increase in
restructuring expenses
Increased spend on RampD
Research and development expenditure
charged in the Core Business (net of
external funding) rose from 991404221 million in
2005 to 991404279 million in 2006 an increase
of 26 principally in the Systems divi-
sion The Group expanded the number ofproducts and services in the development
phase across its businesses
Return to profit
Losses in Non-Core Continuing and Dis-
continued operations were substantially
lower year-on-year reflecting principally
the exit from heavily loss-making Displays
activities in 2005 and intensified cost-sav-
ing programs in 2006 A major revision
and harmonization of the Grouprsquos North
American healthcare obligations gave rise
to substantial one-time gains and Thom-
son also initiated significant restructuring
of its French Non-Core operations
The good performance of the Core Busi-
ness lower Non-Core and Discontinued
losses and a low reported tax chargeenabled the Group to return a net profit of
99140455 million in 2006 compared to a loss of
991404573 million in the previous year
Good cash flow
strengthened balance sheet
Thomson generated good free cash flow
and strengthened its balance sheet in
2006 Total net financial liabilities on the
balance sheet fell by 991404460 million reflect-
ing a 99140493 million fall in financial and acqui-
sition-related debts and a 991404367 million
reduction in retirement benefit obligations(including healthcare)
Increase in Net Dividend
The Board of Directors proposed a dis-
tribution to shareholders of 991404033 per
share (2005 dividend 991404030) reflecting
confidence in the prospects of the Group
going forward
Outlook 2007-2009
growth in revenues and net income
With the Grouprsquos transformation complete Thomsonrsquos financial focus over the 2007-
2009 period will be to grow revenues and
net income
Thomson serves growing Media Enter-
tainment amp Communications marketsmdashfor
which external estimates(1) indicate com-
pound growth of around 6 over the last
FINANCIAL AND
OPERATIONAL PERFORMANCE
Full year 2006 results
saw a return to profitability
and leave Thomson
well positioned at
the heart of convergence
and digital video
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59 Thomson Panorama 2006
five years Our digital and electronic busi-
nesses now represent two-thirds of rev-
enues and we believe they are growing
faster than the overall market offsetting
the maturing physical media businesses
Given this profile the Group expects its
revenue growth to be more modest in
2007 but to gather pace over the period
and our overall objective is to show com-pound growth over 2007-2009 in line with
or faster than the overall market
The 2007-2009 period is also expected
to see a sharply reduced impact from
residual Non-Core activities with an end
to losses from the Discontinued Activities
perimeter after 2007 Accordingly Thom-
sonrsquos ambition is to turn its Core Business
growth and profitability and lower impact
from Non-Core into strong growth in net
income over the period 2007-2009
Business operations
Continuous performance improvement is
fundamental to Thomsonrsquos commitment to
create sustainable business models and
long-term value for all stakeholders The
ambitious Group-wide programs launched
in 2004 to improve productivity and
enhance overall performance producedsubstantial results in 2006 and led to new
and strong initiatives for long-term growth
As of the second half of 2006 six ldquoKey
Programsrdquo are monitored at Group level
Clients Software Product Introduction
Operations Transformation and Talent
Management
KEY PROGRAMS IN PLACE
Program Focus
Clients Thomsonrsquos clientregional diversification and
growth of the existing business
through improved Sales amp Marketing
Software Development of integrated software platforms
in all markets (post-production distribution
delivery) and for all types of customer
(professional prosumerhellip)
Product Introduction Ensuring new product roadmaps are in line
with strategy and resource needs have been
identifiedOperations Improving the Grouprsquos cost base cash
generation and working capital
Transformation Multiple programs including initiatives to
improving customer relationship management
worldwide supply chain management
IT transformation as well as Thomsonrsquos RampD
footprint
Talent Management Leveraging human assets with a focus on
talent retention and acquisition
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60 Thomson Panorama 2006
SUMMARY RESULTS FULL YEAR 2006
In 991404 millions unless otherwise stated 2006(1) 2005(1)
Net revenues 5854 5591(1)
Core Business net revenues 5747 5335
Services 2489 2487
Systems 2684 2262
Technology 547 546
Corporate 27 40
Non-Core continuing operations net revenues 107 256
Core Business EBIT(2) 504 512
Services 160 205
Systems 132 109
Technology 289 277Corporate (77) (79)
EBIT from Non-Core continuing operations (25) (122)
(1) Restated with 2006 discontinued activities according to IFRS 5
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61 Thomson Panorama 2006
Year ended December 31in 991404 except number of shares 2006 2005 2004
Year ended December 31in 991404 millions 2006 2005(1) 2004(1)
CONSOLIDATED STATEMENTS OF OPERATIONS
(1) Restated with 2006 discontinued activities according to IFRS 5
(2) After deduction of the interests net of tax paid on the subordinated perpetual notes during the period
Continuing operations
Revenues 5854 5591 5980
Cost of sales (4474) (4240) (4594)
Gross margin 1380 1351 1386
Selling marketing general and administrative expenses (674) (638) (653)
Other income (expense) 52 (96) (69)
Research and development expenses (279) (227) (201)
Profit from continuing operations before tax and net finance costs 479 390 463
Interest income 19 30 52
Interest expense (108) (108) (54)
Other financial income (expense) (111) 36 (26)
Finance costs ndash net (200) (42) (28)
Share of profit (loss) from associates (86) (82) (20)
Income tax ndash (68) (93)
Profit from continuing operations 193 198 322
Discontinued operations
Profit (loss) from discontinued operations (138) (771) (883)
Net income (loss) 55 (573) (561)
Attributable to
Equity Holders 55 (574) (559)
Minority interests ndash 1 (2)
Weighted average number of shares
outstandingmdashbasic net of treasury stock 261188858 266539917 273646869
Earnings per share from continuing operations
Basic(2) 067 074 118
Diluted 063 042 111
Earnings per share from discontinued operations
Basic (053) (289) (323)
Diluted (048) (262) (296)Total earnings per share
Basic(2) 014 (215) (205)
Diluted 015 (220) (185)
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62 Thomson Panorama 2006
CONSOLIDATED BALANCE SHEETS
In 991404 millions December 31 December 31 January 1 December 31 2006 2005 2005(1) 2004
ASSETS
Non-current assets
Property plant and equipment 813 886 1051 1051
Goodwill 1714 1756 1186 1178
Other intangible assets 1071 1150 924 924
Investments in associates 12 204 260 260
Investments and financial assets available-for-sale 266 341 139 113
Derivative financial instruments 7 1 11 ndash
Contract advances 129 173 179 179
Deferred tax assets 397 379 307 301
Other non-current assets 110 182 133 136
Total non-current assets 4519 5072 4190 4142
Current assets
Inventories 366 333 503 568
Trade accounts and notes receivable 1018 1315 1232 1180
Current accounts with associates and joint ventures 97 115 143 143
Derivative financial instruments 8 9 115 ndash
Other current assets 535 644 483 616
Marketable securities ndash 7 58 58
Cash and cash equivalents 1311 996 1845 1848
Assets classified as held for sale 264 369 80 ndash
Total current assets 3599 3788 4459 4413
Total assets 8118 8860 8649 8555
(1) Including the impacts of the first-time application related to IAS 32 and 39 on financial instruments and IFRS 5 on non-current assets held for sale and
discontinued operations
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63 Thomson Panorama 2006
In 991404 millions December 31 December 31 January 1 December 31 2006 2005 2005(1) 2004
SHAREHOLDERSrsquo EQUITY AND LIABILITIES
Shareholdersrsquo equity
Common stock (273871296 shares at
December 31 2006
with nominal value of euro 375 per share) 1027 1025 1025 1025
Trade accounts and notes payable 1032 1164 1199 1226
Accrued employee expenses 165 166 158 163
Income tax payable 57 47 60 60
Other current liabilities 671 750 746 800
Payables on acquisition of companies 13 138 84 84
Liabilities directly associated with
assets classified as held for sale 232 470 88 ndash
Total current liabilities 3681 4393 3602 3459
Total liabilities 5999 6644 6251 6062
Total shareholderrsquos equity and liabilities 8118 8860 8649 8555
(1) Including the impacts of the first-time application related to IAS 32 and 39 on financial instruments and IFRS 5 on non-current assets held for sale and
discontinued operations
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Creation and lay-out
Photo credits Nathalie BerhingGAMMA ndash Steacutephane de Bourgies ndash Jean-Franccedilois DeroubaixGAMMA ndash Christine Donnier- ValentinGAMMA ndash Cars copy 2006 Disney Enterprises IncPixar All Rights Reserved ndash Dreamgirls copy 2006 DREAMWORKS
LLC and PARAMOUNT PICTURES All Rights Reserved ndash Poseidon copy 2006 Warner Bros Pictures ndash Sony Bravia Paint
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 3366
ldquoHaving started out in research today Irsquom responsible for our modemsrsquo roadmap
and strategy Our customersmdashthe telecoms operatorsmdashhave seen their business
transformed by technology like high-speed broadband And I find it fascinating
how these technologies have penetrated our daily lives the way we live and how
we communicate have changed dramatically over the last ten years
Even faster broadband (VDSL) fiber optics wireless technologies fixed-mobile
convergencehellip mean the pace of change is set to accelerate therersquos no doubt
wersquore living in exciting timesrdquo
Stan Claes Product Manager for IP-based Access Products
A key product introduction in 2006 was
the Grass Valley Indigo AV Presenta-
tion Switcher which combines features
normally found in separate devices in aunified powerful control interface simple
enough to be used by a single operator
Digital signage is also providing new mar-
ket opportunities combining the latest in
display delivery and storage technologies
Thomsonrsquos integrated digital media man-
agement solution Media Edge solves the
complex control distribution and archive
demands of customers Media Edge can
stream high-quality SD and HD content
over an IP network for example to the retail
store environment without the need to re-
invest in infrastructure
Broadcast amp Networksmdash
Network Software
2006 saw telecom service providers con-
tinue to build strategies to provide more
content and value-added services over
their broadband lines Thomsonrsquos Smart-
Vision TV service platforms and Cirpack
telephony switches are at the heart of sev-
eral of the worldrsquos largest IPTV and VoIP
services
In 2006 the launch of a pre-integrated mul-tiple play solution for telecom service provid-
ers illustrated Thomsonrsquos ability to leverage
skills across multiple business units The
solutions which enable telecom providers
to bring a myriad of services to broadband
subscribers are built around Thomsonrsquos
SmartVision and Cirpack software solu-
tions integrated with Thomsonrsquos Grass
Valley branded video head-end equipment
and Thomson home gateways and set-top
boxes This represents the first pre-inte-
grated solution on the market for rapid easy
deployment of triple play services including
voice video and internet access
More than 30 IPTV and mobile TV service
platforms have been deployed around the
world with SmartVision well-positioned
for convergent operators since it allows
video distribution over fixed and mobile
networks
Thomsonrsquos Cirpack softswitches which
help provide the core for the new inte-
grated platforms occupied the top mar-
ket position worldwide for residential
broadband telephony (VoIP) platforms in
2006 Over the course of 2006 Europersquoslargest primary line VoIP operator Freefr
upgraded its Cirpack switches to bring a
new seamless fixedmobile service to its
two million customers placing Thomson
at the forefront of new fixed-mobile con-
vergence solutions Signaling the rapid
expansion of sales outside traditional
Western European markets Thomsonrsquos
Cirpack switches were selected by many
telecom operators in Northern Africa Cen-
tral and Eastern Europe as well as Central
America to build or upgrade legacy voice
networks and deliver advanced telephone
services using IP technologies
TECHNOLOGY SYSTEMS SERVICES
31 Thomson Panorama 2006
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 3466
Thomsonrsquos Services division provides end-to-end management of business-critical services on behalf of Media
Entertainment amp Communications customers These include management of broadcast and network operations
centers on an outsourced basis and the provision of an array of content services to the creative community from
post-production to visual effects
SERVICES
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 3566
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 3666
Thomsonrsquos Services division provides end-
to-end management of business-critical
services spanning physical media con-
tent services electronic content distribu-
tion and network services The division
is the worldrsquos leading provider of state-
of-the-art film-making post-production
visual effects and broadcast center man-
agement services
Strategy
The Services division continues to focus
on managing v ideo networks and
op er at io na l centers on behalf of its
customers who are able to concentrate
on their core business of content The
emphasis on high-growth opportunities
in newer market sectors such as retail
and corporate networks and gaming
has been sharpened
Achievements
New customers in fast-growing market
segments responded well to a range of
high value-added services from the Ser-
vices division in 2006 Network Services
showed particularly strong growth as net-
work operators in Europe Asia and North
America selected Technicolor-branded
management services The addition of
such leading customers as ITV in the
UK and France 24 and TV5 in France
substantially expanded Thomsonrsquos fast-
growing Network Services business
Noteworthy successes were also achieved
in Theatrical Services due in part to the
continued development of Thomsonrsquos digi-
tal cinema activity The Content Services
business continued to expand its post-
production services business by opening
a digital intermediate facility on the SonyPictures Entertainment studio lot In 2006
a new Home Entertainment Services unit
was created combining Thomsonrsquos DVD
business with electronic distribution to
develop new services to support emerging
lsquoon demand contentrsquo business models
Network Services
With a comprehensive portfolio of services
for broadcasters network and internet TV
operators movie theatres retailers and
corporations Network Services continued
to expand briskly in 2006 Broadcastersincreasingly selected Thomson as their
long-term network services partner By
year-end Network Services was providing
managed services under the Technicolor
brand to close to 200 channels from
17 facilities in France the Netherlands
Japan North America and the UK
Late in the year Thomson signed a long-
term agreement with ITV for network
transmission operations services for its six
From managing video
networks on an outsourced
basis to a broad range of
offerings in content services
Thomson is bringing its video
expertise to new markets
and geographies
Left Network Services for broadcasters
cable TV operators movie theaters
retailers and corporations is one of Servicesrsquo
fastest-growing business segments
Right Thomson provided film sound
DVD and digital cinema services for Cars
the DisneyPixar hitCars copy 2006 Disney Enterprises IncPixar All R ights Reserved
SERVICES
MANAGING VIDEO NETWORKS
TECHNOLOGY SYSTEMS SERVICES
34 Thomson Panorama 2006
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 3766
existing UK channels including the coun-
tryrsquos leading commercial channel In addi-
tion an agreement signed with NOB Cross
Media Facilities (NOB CMF) a subsidiary
of Nederlands Omroepproduktie Bedrijf
(NOB) likewise established Thomson as
a major supplier of network management
services in the Netherlands
In France Network Services added new
clients France 24 and TV5 which covers
203 countries and territories to move into
the market-leading position managing
more than 60 channels and 1500 hours
of programming daily The France 24 part-
nership also involves equipping their new
global TV news operation
Thomson drove expansion and innovation
in its retail media services over the course
of the year One of the most notable achie-
vements involves an ambitious in-store
network upgrade program piloted in2006 by Wal-Mart in the USA with Premier
Retail Networks (PRN) a subsidiary within
Thomsonrsquos Network Services operat ion
The in-store network platform was based
on Thomson IPTV technologies adapted
for the retail environment The system
the first pilot of IPTV in the retail environ-
ment delivered real impact on product
sales and improved customer satisfaction
in Wal-Mart stores PRN also expanded
capabilities into China early in 2007 with
Content Services revving up
Thomson provided a wide range of services for a number of major international film releases in 2006
such as Cars one of the three nominees for Best Animated Film at the Oscars Thomson Technicolor provided
film services sound services DVD compression and authoring replication and distribution
as well as digital cinema mastering and distribution for the DisneyPixar hit The Grouprsquos Content Services offering
has expanded in recent years to include the high-growth video-gaming advertising and broadcast markets
the signing of a joint venture with CGEN a
technology company leading the Chinese
in-store digital signage media industry
The two companies are currently collabo-
rating on the roll-out of an in-store media
network to 750 internet cafeacutes part of the
leading Chinese chain Big Cafeacute
Theatrical Services
Thomson signed Europersquos first large-scale
digital cinema rollout agreement in 2006
with the Kinepolis Group one of the conti-
nentrsquos most innovative theater circuits and
the leading exhibition chain in Belgium
The agreement to instal l and operate
digital cinema systems in 130 Kinepolis-
owned and operated screens passed a
first milestone in March 2007 with Thom-
sonrsquos first international distribution by sat-
ellite of an encrypted digital version of the
film Dreamgirls from the US to a Kinepolis
theater in Brussels Belgium
A series of new contracts were awarded
in the US For example in the fall of 2006
Technicolor Digital Cinema began installing
digital projection systems at 120 National
Amusements Inc screens in Boston Los
Angeles New York and elsewhere as part
of a strategic agreement National Amuse-
ments operates more than 1500 screens
in the US UK Latin America and Russia
Digital projection systems were also
TECHNOLOGY SYSTEMS SERVICES
35 Thomson Panorama 2006
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 3866
The growing market for Network Services
The decision by the UKrsquos leading commercial broadcaster to entrust its network services to
Thomsonrsquos Network Services operations illustrates a growing global trend as broadcasters focus increasingly on
programming and meeting customer needs they turn to highly-skilled specialists to handle technology
The long-term agreement with ITV means that the broadcaster will benefit from enhanced service and new technology
as well as more flexibility in launching new services
36 Thomson Panorama 2006
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 3966
Left Thomsonrsquos Technicolor
Interactive Services provided in-game
cinematics and voice recording for
Microsoft Game Studiosrsquo Gears of War
Right Thomsonrsquos London-based MPC
subsidiary carried out post-production
work including computer graphics
on Sony Braviarsquos award-wirring colorful
Paint commercial
installed at several landmark theatres in
Los Angeles in 2006 including Mann The-
atresrsquo Graumanrsquos Chinese and the Village
in Westwood
Thomson maintained a leading position in
film processing and printing in 2006 in a
market where volumes were stable Tech-
nicolor handled worldwide release printingfor two of the five 2007 Oscar nominees
for Best PicturemdashMartin Scorcesersquos The
Departed and Clint Eastwoodrsquos Letters
from Iwo Jimamdashas well as release print-
ing for two of the three Best Animated Film
nominees Cars and Happy Feet
As part of its ongoing commitment to meet
customer needs worldwide a state-of-the-
art film and post-production facility was inau-
gurated at Ciudad de la Imagen in Madrid in
2006 It is already becoming known as the
countryrsquos most comprehensive postproduc-
tion facility with advanced film processingand digital intermediate capabilities
Content Services
Thomson continued to leverage its long-
standing strength in post-production
skills and services through expansion into
emerging and high-growth market seg-
ments such as content services for the
video-gaming advertising and broadcast
markets
In order to better serve the growing mar-
ket for entertainment content for mobile
devices Thomson unveiled new mobile
content preparation and distribution capa-
bilities in the US and the UK in 2006 Facili-
ties equipped with state-of-the-art produc-
tion and post-production technologies will
handle the preparation and optimization
of a wide range of digital entertainmentcontentmdashincluding movies TV episodes
and music videosmdashfor distribution to
mobile devices The dedicated services
complement the Grouprsquos extensive global
electronic distribution infrastructure which
enables Thomson to deliver mobile con-
tent to online delivery services as well as
to network operators for final transmission
to mobile customers
Thomson also made progress in the
development of an integrated digital asset
management solution in 2006 known as
MIDAS (Media Ingest Distribution andStorage) MIDAS is a software and hard-
ware platform for digital content prepara-
tion storage security and distribution
From the first day of production planning
through every stage of post-production
and content distribution MIDAS creates
a digital workflow that allows customers
to manage projects remotely and provides
for rapid and seamless global file delivery
streaming and collaboration
TECHNOLOGY SYSTEMS SERVICES
37 Thomson Panorama 2006
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 4066
While expanding into newer markets
growing demand for post-production ser-
vices and visual effects continued to fuel
Thomsonrsquos ongoing content services activ-
ities Among the yearrsquos most noteworthy
achievements were portfolios of services
for such feature films as The Departed
Letters from Iwo Jima and Pirates of the
Caribbean Dead Manrsquos Chest ThomsonrsquosMoving Picture Company (MPC) also pro-
vided high-end visual effects for the three
films nominated for Achievement in Visual
Effects Pirates of the Caribbean Posei-
don and Superman Returns
Confirming the Grouprsquos solid growth in
content services for the video game indus-
try Thomson unveiled a new dedicated
Interactive Services facility in Burbank
California in 2006 Sierra Entertainment
a division of Vivendi Games selected
Thomson to prov ide cinemat ic anima-
tion voice casting and recording sound
design and mixing services for The Leg-
end of Spyrotrade A New Beginning Like-
wise Thomson provided a wide range of
services to support Konamirsquos The SilentHill Experience released simultaneously
with the motion picture
The strategic investment in one of Indiarsquos
leading animation and gaming cinemat-
ics firms announced in February 2007
strengthened Thomsonrsquos position in Asia
for a variety of content services Located in
Bangalore India Paprikaas provides cre-
ldquoIn 1998 I joined Thomson as a Plant Manager within Home Entertainment Services
and was eventually made responsible for the expansion and management of our
Guadalajara DVD operations In summary Irsquove had great opportunities to gain experience
in international operations strategic planning and operational excellence I recently
joined Content Services where Irsquoll be leading the start-up and integration of new activities
in Beijing Bangalore and other emerging markets Content Services is dynamic and
growing and Irsquom looking forward to expanding the business in Asia while improving
our operational performance in North America and Europerdquo
Mike Hayden Vice President Operations amp Strategic Projects Content Services
of the Grouprsquos divisions and profit centersIn the context of the budgetary procedure
performance measurement indicators are
calculated by the divisions analyzed and
reviewed monthly to serve as a reference
for the Grouprsquos monthly reporting
Management reporting and
closing period work
Th om so n uses a co mmon char t of
accounts which is regularly updated The
principal accounting and financial figures
of the operational and functional depart-
ments consolidated at Group level are
analyzed by the Grouprsquos management
control team and reviewed by the Grouprsquos
Executive Committee
The closing process for the half-year and
annual consolidated financial statementsoccurs in two steps The first step con-
sists of a ldquohard closerdquo completed in May
and September leading to a first review by
the statutory auditors The second step
occurs in July and in JanuaryFebruary and
involves the finalization of half-year and
annual consolidated financial statements
under IFRS The Group then proceeds
once a year with a reconciliation of these
results in accordance with US GAAP
Preparation of financial statements
The financial statements are prepared jointly by the finance department and the
General Secretary They are based on
information reported through the annual
reporting and accounting consolidation
processes and on operational and mar-
ket information which is specifically cen-
tralized for the preparation of Thomsonrsquos
Document de Reacutefeacuterence in France and
the submission of Form 20-F in the United
States Half-year and annual financial infor-
mation is reviewed by the Grouprsquos Audit
Committee
8122019 Panorama 2006
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58 Thomson Panorama 2006
(1) Source PriceWaterhouseCoopers ndash
ldquoGlobal Entertainment and Media Outlook 2006-10rdquo
Revenue growth
Thomson achieved consolidated 2006
net revenues of 9914045854 million up from
9914045591 million in 2005 Revenues for
the Core Business reached 9914045747 mil-
lion (9914045776 million at constant currency)
representing 83 growth over 2005 at
constant currency
Overall the Grouprsquos key growth busi-
nessesmdashContent Services Network
Services Access Products for telecom
operators and our Broadcast amp Networks
businesses (Grass Valley and Network
Software)mdashincreased strongly year-on-
year and accounted for over a third of
Group revenues against less than a quar-
ter in 2005
Thomsonrsquos Core Business EBIT for 2006
was euro504 million representing a Core
Business EBIT margin of 88 Thisreflected growth in some key businesses
and cost actions across the Group off-
setting a significant investment in research
and development and some increase in
restructuring expenses
Increased spend on RampD
Research and development expenditure
charged in the Core Business (net of
external funding) rose from 991404221 million in
2005 to 991404279 million in 2006 an increase
of 26 principally in the Systems divi-
sion The Group expanded the number ofproducts and services in the development
phase across its businesses
Return to profit
Losses in Non-Core Continuing and Dis-
continued operations were substantially
lower year-on-year reflecting principally
the exit from heavily loss-making Displays
activities in 2005 and intensified cost-sav-
ing programs in 2006 A major revision
and harmonization of the Grouprsquos North
American healthcare obligations gave rise
to substantial one-time gains and Thom-
son also initiated significant restructuring
of its French Non-Core operations
The good performance of the Core Busi-
ness lower Non-Core and Discontinued
losses and a low reported tax chargeenabled the Group to return a net profit of
99140455 million in 2006 compared to a loss of
991404573 million in the previous year
Good cash flow
strengthened balance sheet
Thomson generated good free cash flow
and strengthened its balance sheet in
2006 Total net financial liabilities on the
balance sheet fell by 991404460 million reflect-
ing a 99140493 million fall in financial and acqui-
sition-related debts and a 991404367 million
reduction in retirement benefit obligations(including healthcare)
Increase in Net Dividend
The Board of Directors proposed a dis-
tribution to shareholders of 991404033 per
share (2005 dividend 991404030) reflecting
confidence in the prospects of the Group
going forward
Outlook 2007-2009
growth in revenues and net income
With the Grouprsquos transformation complete Thomsonrsquos financial focus over the 2007-
2009 period will be to grow revenues and
net income
Thomson serves growing Media Enter-
tainment amp Communications marketsmdashfor
which external estimates(1) indicate com-
pound growth of around 6 over the last
FINANCIAL AND
OPERATIONAL PERFORMANCE
Full year 2006 results
saw a return to profitability
and leave Thomson
well positioned at
the heart of convergence
and digital video
8122019 Panorama 2006
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59 Thomson Panorama 2006
five years Our digital and electronic busi-
nesses now represent two-thirds of rev-
enues and we believe they are growing
faster than the overall market offsetting
the maturing physical media businesses
Given this profile the Group expects its
revenue growth to be more modest in
2007 but to gather pace over the period
and our overall objective is to show com-pound growth over 2007-2009 in line with
or faster than the overall market
The 2007-2009 period is also expected
to see a sharply reduced impact from
residual Non-Core activities with an end
to losses from the Discontinued Activities
perimeter after 2007 Accordingly Thom-
sonrsquos ambition is to turn its Core Business
growth and profitability and lower impact
from Non-Core into strong growth in net
income over the period 2007-2009
Business operations
Continuous performance improvement is
fundamental to Thomsonrsquos commitment to
create sustainable business models and
long-term value for all stakeholders The
ambitious Group-wide programs launched
in 2004 to improve productivity and
enhance overall performance producedsubstantial results in 2006 and led to new
and strong initiatives for long-term growth
As of the second half of 2006 six ldquoKey
Programsrdquo are monitored at Group level
Clients Software Product Introduction
Operations Transformation and Talent
Management
KEY PROGRAMS IN PLACE
Program Focus
Clients Thomsonrsquos clientregional diversification and
growth of the existing business
through improved Sales amp Marketing
Software Development of integrated software platforms
in all markets (post-production distribution
delivery) and for all types of customer
(professional prosumerhellip)
Product Introduction Ensuring new product roadmaps are in line
with strategy and resource needs have been
identifiedOperations Improving the Grouprsquos cost base cash
generation and working capital
Transformation Multiple programs including initiatives to
improving customer relationship management
worldwide supply chain management
IT transformation as well as Thomsonrsquos RampD
footprint
Talent Management Leveraging human assets with a focus on
talent retention and acquisition
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60 Thomson Panorama 2006
SUMMARY RESULTS FULL YEAR 2006
In 991404 millions unless otherwise stated 2006(1) 2005(1)
Net revenues 5854 5591(1)
Core Business net revenues 5747 5335
Services 2489 2487
Systems 2684 2262
Technology 547 546
Corporate 27 40
Non-Core continuing operations net revenues 107 256
Core Business EBIT(2) 504 512
Services 160 205
Systems 132 109
Technology 289 277Corporate (77) (79)
EBIT from Non-Core continuing operations (25) (122)
(1) Restated with 2006 discontinued activities according to IFRS 5
8122019 Panorama 2006
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61 Thomson Panorama 2006
Year ended December 31in 991404 except number of shares 2006 2005 2004
Year ended December 31in 991404 millions 2006 2005(1) 2004(1)
CONSOLIDATED STATEMENTS OF OPERATIONS
(1) Restated with 2006 discontinued activities according to IFRS 5
(2) After deduction of the interests net of tax paid on the subordinated perpetual notes during the period
Continuing operations
Revenues 5854 5591 5980
Cost of sales (4474) (4240) (4594)
Gross margin 1380 1351 1386
Selling marketing general and administrative expenses (674) (638) (653)
Other income (expense) 52 (96) (69)
Research and development expenses (279) (227) (201)
Profit from continuing operations before tax and net finance costs 479 390 463
Interest income 19 30 52
Interest expense (108) (108) (54)
Other financial income (expense) (111) 36 (26)
Finance costs ndash net (200) (42) (28)
Share of profit (loss) from associates (86) (82) (20)
Income tax ndash (68) (93)
Profit from continuing operations 193 198 322
Discontinued operations
Profit (loss) from discontinued operations (138) (771) (883)
Net income (loss) 55 (573) (561)
Attributable to
Equity Holders 55 (574) (559)
Minority interests ndash 1 (2)
Weighted average number of shares
outstandingmdashbasic net of treasury stock 261188858 266539917 273646869
Earnings per share from continuing operations
Basic(2) 067 074 118
Diluted 063 042 111
Earnings per share from discontinued operations
Basic (053) (289) (323)
Diluted (048) (262) (296)Total earnings per share
Basic(2) 014 (215) (205)
Diluted 015 (220) (185)
8122019 Panorama 2006
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62 Thomson Panorama 2006
CONSOLIDATED BALANCE SHEETS
In 991404 millions December 31 December 31 January 1 December 31 2006 2005 2005(1) 2004
ASSETS
Non-current assets
Property plant and equipment 813 886 1051 1051
Goodwill 1714 1756 1186 1178
Other intangible assets 1071 1150 924 924
Investments in associates 12 204 260 260
Investments and financial assets available-for-sale 266 341 139 113
Derivative financial instruments 7 1 11 ndash
Contract advances 129 173 179 179
Deferred tax assets 397 379 307 301
Other non-current assets 110 182 133 136
Total non-current assets 4519 5072 4190 4142
Current assets
Inventories 366 333 503 568
Trade accounts and notes receivable 1018 1315 1232 1180
Current accounts with associates and joint ventures 97 115 143 143
Derivative financial instruments 8 9 115 ndash
Other current assets 535 644 483 616
Marketable securities ndash 7 58 58
Cash and cash equivalents 1311 996 1845 1848
Assets classified as held for sale 264 369 80 ndash
Total current assets 3599 3788 4459 4413
Total assets 8118 8860 8649 8555
(1) Including the impacts of the first-time application related to IAS 32 and 39 on financial instruments and IFRS 5 on non-current assets held for sale and
discontinued operations
8122019 Panorama 2006
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63 Thomson Panorama 2006
In 991404 millions December 31 December 31 January 1 December 31 2006 2005 2005(1) 2004
SHAREHOLDERSrsquo EQUITY AND LIABILITIES
Shareholdersrsquo equity
Common stock (273871296 shares at
December 31 2006
with nominal value of euro 375 per share) 1027 1025 1025 1025
Trade accounts and notes payable 1032 1164 1199 1226
Accrued employee expenses 165 166 158 163
Income tax payable 57 47 60 60
Other current liabilities 671 750 746 800
Payables on acquisition of companies 13 138 84 84
Liabilities directly associated with
assets classified as held for sale 232 470 88 ndash
Total current liabilities 3681 4393 3602 3459
Total liabilities 5999 6644 6251 6062
Total shareholderrsquos equity and liabilities 8118 8860 8649 8555
(1) Including the impacts of the first-time application related to IAS 32 and 39 on financial instruments and IFRS 5 on non-current assets held for sale and
discontinued operations
8122019 Panorama 2006
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Creation and lay-out
Photo credits Nathalie BerhingGAMMA ndash Steacutephane de Bourgies ndash Jean-Franccedilois DeroubaixGAMMA ndash Christine Donnier- ValentinGAMMA ndash Cars copy 2006 Disney Enterprises IncPixar All Rights Reserved ndash Dreamgirls copy 2006 DREAMWORKS
LLC and PARAMOUNT PICTURES All Rights Reserved ndash Poseidon copy 2006 Warner Bros Pictures ndash Sony Bravia Paint
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 3466
Thomsonrsquos Services division provides end-to-end management of business-critical services on behalf of Media
Entertainment amp Communications customers These include management of broadcast and network operations
centers on an outsourced basis and the provision of an array of content services to the creative community from
post-production to visual effects
SERVICES
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 3566
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 3666
Thomsonrsquos Services division provides end-
to-end management of business-critical
services spanning physical media con-
tent services electronic content distribu-
tion and network services The division
is the worldrsquos leading provider of state-
of-the-art film-making post-production
visual effects and broadcast center man-
agement services
Strategy
The Services division continues to focus
on managing v ideo networks and
op er at io na l centers on behalf of its
customers who are able to concentrate
on their core business of content The
emphasis on high-growth opportunities
in newer market sectors such as retail
and corporate networks and gaming
has been sharpened
Achievements
New customers in fast-growing market
segments responded well to a range of
high value-added services from the Ser-
vices division in 2006 Network Services
showed particularly strong growth as net-
work operators in Europe Asia and North
America selected Technicolor-branded
management services The addition of
such leading customers as ITV in the
UK and France 24 and TV5 in France
substantially expanded Thomsonrsquos fast-
growing Network Services business
Noteworthy successes were also achieved
in Theatrical Services due in part to the
continued development of Thomsonrsquos digi-
tal cinema activity The Content Services
business continued to expand its post-
production services business by opening
a digital intermediate facility on the SonyPictures Entertainment studio lot In 2006
a new Home Entertainment Services unit
was created combining Thomsonrsquos DVD
business with electronic distribution to
develop new services to support emerging
lsquoon demand contentrsquo business models
Network Services
With a comprehensive portfolio of services
for broadcasters network and internet TV
operators movie theatres retailers and
corporations Network Services continued
to expand briskly in 2006 Broadcastersincreasingly selected Thomson as their
long-term network services partner By
year-end Network Services was providing
managed services under the Technicolor
brand to close to 200 channels from
17 facilities in France the Netherlands
Japan North America and the UK
Late in the year Thomson signed a long-
term agreement with ITV for network
transmission operations services for its six
From managing video
networks on an outsourced
basis to a broad range of
offerings in content services
Thomson is bringing its video
expertise to new markets
and geographies
Left Network Services for broadcasters
cable TV operators movie theaters
retailers and corporations is one of Servicesrsquo
fastest-growing business segments
Right Thomson provided film sound
DVD and digital cinema services for Cars
the DisneyPixar hitCars copy 2006 Disney Enterprises IncPixar All R ights Reserved
SERVICES
MANAGING VIDEO NETWORKS
TECHNOLOGY SYSTEMS SERVICES
34 Thomson Panorama 2006
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 3766
existing UK channels including the coun-
tryrsquos leading commercial channel In addi-
tion an agreement signed with NOB Cross
Media Facilities (NOB CMF) a subsidiary
of Nederlands Omroepproduktie Bedrijf
(NOB) likewise established Thomson as
a major supplier of network management
services in the Netherlands
In France Network Services added new
clients France 24 and TV5 which covers
203 countries and territories to move into
the market-leading position managing
more than 60 channels and 1500 hours
of programming daily The France 24 part-
nership also involves equipping their new
global TV news operation
Thomson drove expansion and innovation
in its retail media services over the course
of the year One of the most notable achie-
vements involves an ambitious in-store
network upgrade program piloted in2006 by Wal-Mart in the USA with Premier
Retail Networks (PRN) a subsidiary within
Thomsonrsquos Network Services operat ion
The in-store network platform was based
on Thomson IPTV technologies adapted
for the retail environment The system
the first pilot of IPTV in the retail environ-
ment delivered real impact on product
sales and improved customer satisfaction
in Wal-Mart stores PRN also expanded
capabilities into China early in 2007 with
Content Services revving up
Thomson provided a wide range of services for a number of major international film releases in 2006
such as Cars one of the three nominees for Best Animated Film at the Oscars Thomson Technicolor provided
film services sound services DVD compression and authoring replication and distribution
as well as digital cinema mastering and distribution for the DisneyPixar hit The Grouprsquos Content Services offering
has expanded in recent years to include the high-growth video-gaming advertising and broadcast markets
the signing of a joint venture with CGEN a
technology company leading the Chinese
in-store digital signage media industry
The two companies are currently collabo-
rating on the roll-out of an in-store media
network to 750 internet cafeacutes part of the
leading Chinese chain Big Cafeacute
Theatrical Services
Thomson signed Europersquos first large-scale
digital cinema rollout agreement in 2006
with the Kinepolis Group one of the conti-
nentrsquos most innovative theater circuits and
the leading exhibition chain in Belgium
The agreement to instal l and operate
digital cinema systems in 130 Kinepolis-
owned and operated screens passed a
first milestone in March 2007 with Thom-
sonrsquos first international distribution by sat-
ellite of an encrypted digital version of the
film Dreamgirls from the US to a Kinepolis
theater in Brussels Belgium
A series of new contracts were awarded
in the US For example in the fall of 2006
Technicolor Digital Cinema began installing
digital projection systems at 120 National
Amusements Inc screens in Boston Los
Angeles New York and elsewhere as part
of a strategic agreement National Amuse-
ments operates more than 1500 screens
in the US UK Latin America and Russia
Digital projection systems were also
TECHNOLOGY SYSTEMS SERVICES
35 Thomson Panorama 2006
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 3866
The growing market for Network Services
The decision by the UKrsquos leading commercial broadcaster to entrust its network services to
Thomsonrsquos Network Services operations illustrates a growing global trend as broadcasters focus increasingly on
programming and meeting customer needs they turn to highly-skilled specialists to handle technology
The long-term agreement with ITV means that the broadcaster will benefit from enhanced service and new technology
as well as more flexibility in launching new services
36 Thomson Panorama 2006
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 3966
Left Thomsonrsquos Technicolor
Interactive Services provided in-game
cinematics and voice recording for
Microsoft Game Studiosrsquo Gears of War
Right Thomsonrsquos London-based MPC
subsidiary carried out post-production
work including computer graphics
on Sony Braviarsquos award-wirring colorful
Paint commercial
installed at several landmark theatres in
Los Angeles in 2006 including Mann The-
atresrsquo Graumanrsquos Chinese and the Village
in Westwood
Thomson maintained a leading position in
film processing and printing in 2006 in a
market where volumes were stable Tech-
nicolor handled worldwide release printingfor two of the five 2007 Oscar nominees
for Best PicturemdashMartin Scorcesersquos The
Departed and Clint Eastwoodrsquos Letters
from Iwo Jimamdashas well as release print-
ing for two of the three Best Animated Film
nominees Cars and Happy Feet
As part of its ongoing commitment to meet
customer needs worldwide a state-of-the-
art film and post-production facility was inau-
gurated at Ciudad de la Imagen in Madrid in
2006 It is already becoming known as the
countryrsquos most comprehensive postproduc-
tion facility with advanced film processingand digital intermediate capabilities
Content Services
Thomson continued to leverage its long-
standing strength in post-production
skills and services through expansion into
emerging and high-growth market seg-
ments such as content services for the
video-gaming advertising and broadcast
markets
In order to better serve the growing mar-
ket for entertainment content for mobile
devices Thomson unveiled new mobile
content preparation and distribution capa-
bilities in the US and the UK in 2006 Facili-
ties equipped with state-of-the-art produc-
tion and post-production technologies will
handle the preparation and optimization
of a wide range of digital entertainmentcontentmdashincluding movies TV episodes
and music videosmdashfor distribution to
mobile devices The dedicated services
complement the Grouprsquos extensive global
electronic distribution infrastructure which
enables Thomson to deliver mobile con-
tent to online delivery services as well as
to network operators for final transmission
to mobile customers
Thomson also made progress in the
development of an integrated digital asset
management solution in 2006 known as
MIDAS (Media Ingest Distribution andStorage) MIDAS is a software and hard-
ware platform for digital content prepara-
tion storage security and distribution
From the first day of production planning
through every stage of post-production
and content distribution MIDAS creates
a digital workflow that allows customers
to manage projects remotely and provides
for rapid and seamless global file delivery
streaming and collaboration
TECHNOLOGY SYSTEMS SERVICES
37 Thomson Panorama 2006
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 4066
While expanding into newer markets
growing demand for post-production ser-
vices and visual effects continued to fuel
Thomsonrsquos ongoing content services activ-
ities Among the yearrsquos most noteworthy
achievements were portfolios of services
for such feature films as The Departed
Letters from Iwo Jima and Pirates of the
Caribbean Dead Manrsquos Chest ThomsonrsquosMoving Picture Company (MPC) also pro-
vided high-end visual effects for the three
films nominated for Achievement in Visual
Effects Pirates of the Caribbean Posei-
don and Superman Returns
Confirming the Grouprsquos solid growth in
content services for the video game indus-
try Thomson unveiled a new dedicated
Interactive Services facility in Burbank
California in 2006 Sierra Entertainment
a division of Vivendi Games selected
Thomson to prov ide cinemat ic anima-
tion voice casting and recording sound
design and mixing services for The Leg-
end of Spyrotrade A New Beginning Like-
wise Thomson provided a wide range of
services to support Konamirsquos The SilentHill Experience released simultaneously
with the motion picture
The strategic investment in one of Indiarsquos
leading animation and gaming cinemat-
ics firms announced in February 2007
strengthened Thomsonrsquos position in Asia
for a variety of content services Located in
Bangalore India Paprikaas provides cre-
ldquoIn 1998 I joined Thomson as a Plant Manager within Home Entertainment Services
and was eventually made responsible for the expansion and management of our
Guadalajara DVD operations In summary Irsquove had great opportunities to gain experience
in international operations strategic planning and operational excellence I recently
joined Content Services where Irsquoll be leading the start-up and integration of new activities
in Beijing Bangalore and other emerging markets Content Services is dynamic and
growing and Irsquom looking forward to expanding the business in Asia while improving
our operational performance in North America and Europerdquo
Mike Hayden Vice President Operations amp Strategic Projects Content Services
of the Grouprsquos divisions and profit centersIn the context of the budgetary procedure
performance measurement indicators are
calculated by the divisions analyzed and
reviewed monthly to serve as a reference
for the Grouprsquos monthly reporting
Management reporting and
closing period work
Th om so n uses a co mmon char t of
accounts which is regularly updated The
principal accounting and financial figures
of the operational and functional depart-
ments consolidated at Group level are
analyzed by the Grouprsquos management
control team and reviewed by the Grouprsquos
Executive Committee
The closing process for the half-year and
annual consolidated financial statementsoccurs in two steps The first step con-
sists of a ldquohard closerdquo completed in May
and September leading to a first review by
the statutory auditors The second step
occurs in July and in JanuaryFebruary and
involves the finalization of half-year and
annual consolidated financial statements
under IFRS The Group then proceeds
once a year with a reconciliation of these
results in accordance with US GAAP
Preparation of financial statements
The financial statements are prepared jointly by the finance department and the
General Secretary They are based on
information reported through the annual
reporting and accounting consolidation
processes and on operational and mar-
ket information which is specifically cen-
tralized for the preparation of Thomsonrsquos
Document de Reacutefeacuterence in France and
the submission of Form 20-F in the United
States Half-year and annual financial infor-
mation is reviewed by the Grouprsquos Audit
Committee
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 6066
58 Thomson Panorama 2006
(1) Source PriceWaterhouseCoopers ndash
ldquoGlobal Entertainment and Media Outlook 2006-10rdquo
Revenue growth
Thomson achieved consolidated 2006
net revenues of 9914045854 million up from
9914045591 million in 2005 Revenues for
the Core Business reached 9914045747 mil-
lion (9914045776 million at constant currency)
representing 83 growth over 2005 at
constant currency
Overall the Grouprsquos key growth busi-
nessesmdashContent Services Network
Services Access Products for telecom
operators and our Broadcast amp Networks
businesses (Grass Valley and Network
Software)mdashincreased strongly year-on-
year and accounted for over a third of
Group revenues against less than a quar-
ter in 2005
Thomsonrsquos Core Business EBIT for 2006
was euro504 million representing a Core
Business EBIT margin of 88 Thisreflected growth in some key businesses
and cost actions across the Group off-
setting a significant investment in research
and development and some increase in
restructuring expenses
Increased spend on RampD
Research and development expenditure
charged in the Core Business (net of
external funding) rose from 991404221 million in
2005 to 991404279 million in 2006 an increase
of 26 principally in the Systems divi-
sion The Group expanded the number ofproducts and services in the development
phase across its businesses
Return to profit
Losses in Non-Core Continuing and Dis-
continued operations were substantially
lower year-on-year reflecting principally
the exit from heavily loss-making Displays
activities in 2005 and intensified cost-sav-
ing programs in 2006 A major revision
and harmonization of the Grouprsquos North
American healthcare obligations gave rise
to substantial one-time gains and Thom-
son also initiated significant restructuring
of its French Non-Core operations
The good performance of the Core Busi-
ness lower Non-Core and Discontinued
losses and a low reported tax chargeenabled the Group to return a net profit of
99140455 million in 2006 compared to a loss of
991404573 million in the previous year
Good cash flow
strengthened balance sheet
Thomson generated good free cash flow
and strengthened its balance sheet in
2006 Total net financial liabilities on the
balance sheet fell by 991404460 million reflect-
ing a 99140493 million fall in financial and acqui-
sition-related debts and a 991404367 million
reduction in retirement benefit obligations(including healthcare)
Increase in Net Dividend
The Board of Directors proposed a dis-
tribution to shareholders of 991404033 per
share (2005 dividend 991404030) reflecting
confidence in the prospects of the Group
going forward
Outlook 2007-2009
growth in revenues and net income
With the Grouprsquos transformation complete Thomsonrsquos financial focus over the 2007-
2009 period will be to grow revenues and
net income
Thomson serves growing Media Enter-
tainment amp Communications marketsmdashfor
which external estimates(1) indicate com-
pound growth of around 6 over the last
FINANCIAL AND
OPERATIONAL PERFORMANCE
Full year 2006 results
saw a return to profitability
and leave Thomson
well positioned at
the heart of convergence
and digital video
8122019 Panorama 2006
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59 Thomson Panorama 2006
five years Our digital and electronic busi-
nesses now represent two-thirds of rev-
enues and we believe they are growing
faster than the overall market offsetting
the maturing physical media businesses
Given this profile the Group expects its
revenue growth to be more modest in
2007 but to gather pace over the period
and our overall objective is to show com-pound growth over 2007-2009 in line with
or faster than the overall market
The 2007-2009 period is also expected
to see a sharply reduced impact from
residual Non-Core activities with an end
to losses from the Discontinued Activities
perimeter after 2007 Accordingly Thom-
sonrsquos ambition is to turn its Core Business
growth and profitability and lower impact
from Non-Core into strong growth in net
income over the period 2007-2009
Business operations
Continuous performance improvement is
fundamental to Thomsonrsquos commitment to
create sustainable business models and
long-term value for all stakeholders The
ambitious Group-wide programs launched
in 2004 to improve productivity and
enhance overall performance producedsubstantial results in 2006 and led to new
and strong initiatives for long-term growth
As of the second half of 2006 six ldquoKey
Programsrdquo are monitored at Group level
Clients Software Product Introduction
Operations Transformation and Talent
Management
KEY PROGRAMS IN PLACE
Program Focus
Clients Thomsonrsquos clientregional diversification and
growth of the existing business
through improved Sales amp Marketing
Software Development of integrated software platforms
in all markets (post-production distribution
delivery) and for all types of customer
(professional prosumerhellip)
Product Introduction Ensuring new product roadmaps are in line
with strategy and resource needs have been
identifiedOperations Improving the Grouprsquos cost base cash
generation and working capital
Transformation Multiple programs including initiatives to
improving customer relationship management
worldwide supply chain management
IT transformation as well as Thomsonrsquos RampD
footprint
Talent Management Leveraging human assets with a focus on
talent retention and acquisition
8122019 Panorama 2006
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60 Thomson Panorama 2006
SUMMARY RESULTS FULL YEAR 2006
In 991404 millions unless otherwise stated 2006(1) 2005(1)
Net revenues 5854 5591(1)
Core Business net revenues 5747 5335
Services 2489 2487
Systems 2684 2262
Technology 547 546
Corporate 27 40
Non-Core continuing operations net revenues 107 256
Core Business EBIT(2) 504 512
Services 160 205
Systems 132 109
Technology 289 277Corporate (77) (79)
EBIT from Non-Core continuing operations (25) (122)
(1) Restated with 2006 discontinued activities according to IFRS 5
8122019 Panorama 2006
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61 Thomson Panorama 2006
Year ended December 31in 991404 except number of shares 2006 2005 2004
Year ended December 31in 991404 millions 2006 2005(1) 2004(1)
CONSOLIDATED STATEMENTS OF OPERATIONS
(1) Restated with 2006 discontinued activities according to IFRS 5
(2) After deduction of the interests net of tax paid on the subordinated perpetual notes during the period
Continuing operations
Revenues 5854 5591 5980
Cost of sales (4474) (4240) (4594)
Gross margin 1380 1351 1386
Selling marketing general and administrative expenses (674) (638) (653)
Other income (expense) 52 (96) (69)
Research and development expenses (279) (227) (201)
Profit from continuing operations before tax and net finance costs 479 390 463
Interest income 19 30 52
Interest expense (108) (108) (54)
Other financial income (expense) (111) 36 (26)
Finance costs ndash net (200) (42) (28)
Share of profit (loss) from associates (86) (82) (20)
Income tax ndash (68) (93)
Profit from continuing operations 193 198 322
Discontinued operations
Profit (loss) from discontinued operations (138) (771) (883)
Net income (loss) 55 (573) (561)
Attributable to
Equity Holders 55 (574) (559)
Minority interests ndash 1 (2)
Weighted average number of shares
outstandingmdashbasic net of treasury stock 261188858 266539917 273646869
Earnings per share from continuing operations
Basic(2) 067 074 118
Diluted 063 042 111
Earnings per share from discontinued operations
Basic (053) (289) (323)
Diluted (048) (262) (296)Total earnings per share
Basic(2) 014 (215) (205)
Diluted 015 (220) (185)
8122019 Panorama 2006
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62 Thomson Panorama 2006
CONSOLIDATED BALANCE SHEETS
In 991404 millions December 31 December 31 January 1 December 31 2006 2005 2005(1) 2004
ASSETS
Non-current assets
Property plant and equipment 813 886 1051 1051
Goodwill 1714 1756 1186 1178
Other intangible assets 1071 1150 924 924
Investments in associates 12 204 260 260
Investments and financial assets available-for-sale 266 341 139 113
Derivative financial instruments 7 1 11 ndash
Contract advances 129 173 179 179
Deferred tax assets 397 379 307 301
Other non-current assets 110 182 133 136
Total non-current assets 4519 5072 4190 4142
Current assets
Inventories 366 333 503 568
Trade accounts and notes receivable 1018 1315 1232 1180
Current accounts with associates and joint ventures 97 115 143 143
Derivative financial instruments 8 9 115 ndash
Other current assets 535 644 483 616
Marketable securities ndash 7 58 58
Cash and cash equivalents 1311 996 1845 1848
Assets classified as held for sale 264 369 80 ndash
Total current assets 3599 3788 4459 4413
Total assets 8118 8860 8649 8555
(1) Including the impacts of the first-time application related to IAS 32 and 39 on financial instruments and IFRS 5 on non-current assets held for sale and
discontinued operations
8122019 Panorama 2006
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63 Thomson Panorama 2006
In 991404 millions December 31 December 31 January 1 December 31 2006 2005 2005(1) 2004
SHAREHOLDERSrsquo EQUITY AND LIABILITIES
Shareholdersrsquo equity
Common stock (273871296 shares at
December 31 2006
with nominal value of euro 375 per share) 1027 1025 1025 1025
Trade accounts and notes payable 1032 1164 1199 1226
Accrued employee expenses 165 166 158 163
Income tax payable 57 47 60 60
Other current liabilities 671 750 746 800
Payables on acquisition of companies 13 138 84 84
Liabilities directly associated with
assets classified as held for sale 232 470 88 ndash
Total current liabilities 3681 4393 3602 3459
Total liabilities 5999 6644 6251 6062
Total shareholderrsquos equity and liabilities 8118 8860 8649 8555
(1) Including the impacts of the first-time application related to IAS 32 and 39 on financial instruments and IFRS 5 on non-current assets held for sale and
discontinued operations
8122019 Panorama 2006
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Creation and lay-out
Photo credits Nathalie BerhingGAMMA ndash Steacutephane de Bourgies ndash Jean-Franccedilois DeroubaixGAMMA ndash Christine Donnier- ValentinGAMMA ndash Cars copy 2006 Disney Enterprises IncPixar All Rights Reserved ndash Dreamgirls copy 2006 DREAMWORKS
LLC and PARAMOUNT PICTURES All Rights Reserved ndash Poseidon copy 2006 Warner Bros Pictures ndash Sony Bravia Paint
8122019 Panorama 2006
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8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 3666
Thomsonrsquos Services division provides end-
to-end management of business-critical
services spanning physical media con-
tent services electronic content distribu-
tion and network services The division
is the worldrsquos leading provider of state-
of-the-art film-making post-production
visual effects and broadcast center man-
agement services
Strategy
The Services division continues to focus
on managing v ideo networks and
op er at io na l centers on behalf of its
customers who are able to concentrate
on their core business of content The
emphasis on high-growth opportunities
in newer market sectors such as retail
and corporate networks and gaming
has been sharpened
Achievements
New customers in fast-growing market
segments responded well to a range of
high value-added services from the Ser-
vices division in 2006 Network Services
showed particularly strong growth as net-
work operators in Europe Asia and North
America selected Technicolor-branded
management services The addition of
such leading customers as ITV in the
UK and France 24 and TV5 in France
substantially expanded Thomsonrsquos fast-
growing Network Services business
Noteworthy successes were also achieved
in Theatrical Services due in part to the
continued development of Thomsonrsquos digi-
tal cinema activity The Content Services
business continued to expand its post-
production services business by opening
a digital intermediate facility on the SonyPictures Entertainment studio lot In 2006
a new Home Entertainment Services unit
was created combining Thomsonrsquos DVD
business with electronic distribution to
develop new services to support emerging
lsquoon demand contentrsquo business models
Network Services
With a comprehensive portfolio of services
for broadcasters network and internet TV
operators movie theatres retailers and
corporations Network Services continued
to expand briskly in 2006 Broadcastersincreasingly selected Thomson as their
long-term network services partner By
year-end Network Services was providing
managed services under the Technicolor
brand to close to 200 channels from
17 facilities in France the Netherlands
Japan North America and the UK
Late in the year Thomson signed a long-
term agreement with ITV for network
transmission operations services for its six
From managing video
networks on an outsourced
basis to a broad range of
offerings in content services
Thomson is bringing its video
expertise to new markets
and geographies
Left Network Services for broadcasters
cable TV operators movie theaters
retailers and corporations is one of Servicesrsquo
fastest-growing business segments
Right Thomson provided film sound
DVD and digital cinema services for Cars
the DisneyPixar hitCars copy 2006 Disney Enterprises IncPixar All R ights Reserved
SERVICES
MANAGING VIDEO NETWORKS
TECHNOLOGY SYSTEMS SERVICES
34 Thomson Panorama 2006
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 3766
existing UK channels including the coun-
tryrsquos leading commercial channel In addi-
tion an agreement signed with NOB Cross
Media Facilities (NOB CMF) a subsidiary
of Nederlands Omroepproduktie Bedrijf
(NOB) likewise established Thomson as
a major supplier of network management
services in the Netherlands
In France Network Services added new
clients France 24 and TV5 which covers
203 countries and territories to move into
the market-leading position managing
more than 60 channels and 1500 hours
of programming daily The France 24 part-
nership also involves equipping their new
global TV news operation
Thomson drove expansion and innovation
in its retail media services over the course
of the year One of the most notable achie-
vements involves an ambitious in-store
network upgrade program piloted in2006 by Wal-Mart in the USA with Premier
Retail Networks (PRN) a subsidiary within
Thomsonrsquos Network Services operat ion
The in-store network platform was based
on Thomson IPTV technologies adapted
for the retail environment The system
the first pilot of IPTV in the retail environ-
ment delivered real impact on product
sales and improved customer satisfaction
in Wal-Mart stores PRN also expanded
capabilities into China early in 2007 with
Content Services revving up
Thomson provided a wide range of services for a number of major international film releases in 2006
such as Cars one of the three nominees for Best Animated Film at the Oscars Thomson Technicolor provided
film services sound services DVD compression and authoring replication and distribution
as well as digital cinema mastering and distribution for the DisneyPixar hit The Grouprsquos Content Services offering
has expanded in recent years to include the high-growth video-gaming advertising and broadcast markets
the signing of a joint venture with CGEN a
technology company leading the Chinese
in-store digital signage media industry
The two companies are currently collabo-
rating on the roll-out of an in-store media
network to 750 internet cafeacutes part of the
leading Chinese chain Big Cafeacute
Theatrical Services
Thomson signed Europersquos first large-scale
digital cinema rollout agreement in 2006
with the Kinepolis Group one of the conti-
nentrsquos most innovative theater circuits and
the leading exhibition chain in Belgium
The agreement to instal l and operate
digital cinema systems in 130 Kinepolis-
owned and operated screens passed a
first milestone in March 2007 with Thom-
sonrsquos first international distribution by sat-
ellite of an encrypted digital version of the
film Dreamgirls from the US to a Kinepolis
theater in Brussels Belgium
A series of new contracts were awarded
in the US For example in the fall of 2006
Technicolor Digital Cinema began installing
digital projection systems at 120 National
Amusements Inc screens in Boston Los
Angeles New York and elsewhere as part
of a strategic agreement National Amuse-
ments operates more than 1500 screens
in the US UK Latin America and Russia
Digital projection systems were also
TECHNOLOGY SYSTEMS SERVICES
35 Thomson Panorama 2006
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 3866
The growing market for Network Services
The decision by the UKrsquos leading commercial broadcaster to entrust its network services to
Thomsonrsquos Network Services operations illustrates a growing global trend as broadcasters focus increasingly on
programming and meeting customer needs they turn to highly-skilled specialists to handle technology
The long-term agreement with ITV means that the broadcaster will benefit from enhanced service and new technology
as well as more flexibility in launching new services
36 Thomson Panorama 2006
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 3966
Left Thomsonrsquos Technicolor
Interactive Services provided in-game
cinematics and voice recording for
Microsoft Game Studiosrsquo Gears of War
Right Thomsonrsquos London-based MPC
subsidiary carried out post-production
work including computer graphics
on Sony Braviarsquos award-wirring colorful
Paint commercial
installed at several landmark theatres in
Los Angeles in 2006 including Mann The-
atresrsquo Graumanrsquos Chinese and the Village
in Westwood
Thomson maintained a leading position in
film processing and printing in 2006 in a
market where volumes were stable Tech-
nicolor handled worldwide release printingfor two of the five 2007 Oscar nominees
for Best PicturemdashMartin Scorcesersquos The
Departed and Clint Eastwoodrsquos Letters
from Iwo Jimamdashas well as release print-
ing for two of the three Best Animated Film
nominees Cars and Happy Feet
As part of its ongoing commitment to meet
customer needs worldwide a state-of-the-
art film and post-production facility was inau-
gurated at Ciudad de la Imagen in Madrid in
2006 It is already becoming known as the
countryrsquos most comprehensive postproduc-
tion facility with advanced film processingand digital intermediate capabilities
Content Services
Thomson continued to leverage its long-
standing strength in post-production
skills and services through expansion into
emerging and high-growth market seg-
ments such as content services for the
video-gaming advertising and broadcast
markets
In order to better serve the growing mar-
ket for entertainment content for mobile
devices Thomson unveiled new mobile
content preparation and distribution capa-
bilities in the US and the UK in 2006 Facili-
ties equipped with state-of-the-art produc-
tion and post-production technologies will
handle the preparation and optimization
of a wide range of digital entertainmentcontentmdashincluding movies TV episodes
and music videosmdashfor distribution to
mobile devices The dedicated services
complement the Grouprsquos extensive global
electronic distribution infrastructure which
enables Thomson to deliver mobile con-
tent to online delivery services as well as
to network operators for final transmission
to mobile customers
Thomson also made progress in the
development of an integrated digital asset
management solution in 2006 known as
MIDAS (Media Ingest Distribution andStorage) MIDAS is a software and hard-
ware platform for digital content prepara-
tion storage security and distribution
From the first day of production planning
through every stage of post-production
and content distribution MIDAS creates
a digital workflow that allows customers
to manage projects remotely and provides
for rapid and seamless global file delivery
streaming and collaboration
TECHNOLOGY SYSTEMS SERVICES
37 Thomson Panorama 2006
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 4066
While expanding into newer markets
growing demand for post-production ser-
vices and visual effects continued to fuel
Thomsonrsquos ongoing content services activ-
ities Among the yearrsquos most noteworthy
achievements were portfolios of services
for such feature films as The Departed
Letters from Iwo Jima and Pirates of the
Caribbean Dead Manrsquos Chest ThomsonrsquosMoving Picture Company (MPC) also pro-
vided high-end visual effects for the three
films nominated for Achievement in Visual
Effects Pirates of the Caribbean Posei-
don and Superman Returns
Confirming the Grouprsquos solid growth in
content services for the video game indus-
try Thomson unveiled a new dedicated
Interactive Services facility in Burbank
California in 2006 Sierra Entertainment
a division of Vivendi Games selected
Thomson to prov ide cinemat ic anima-
tion voice casting and recording sound
design and mixing services for The Leg-
end of Spyrotrade A New Beginning Like-
wise Thomson provided a wide range of
services to support Konamirsquos The SilentHill Experience released simultaneously
with the motion picture
The strategic investment in one of Indiarsquos
leading animation and gaming cinemat-
ics firms announced in February 2007
strengthened Thomsonrsquos position in Asia
for a variety of content services Located in
Bangalore India Paprikaas provides cre-
ldquoIn 1998 I joined Thomson as a Plant Manager within Home Entertainment Services
and was eventually made responsible for the expansion and management of our
Guadalajara DVD operations In summary Irsquove had great opportunities to gain experience
in international operations strategic planning and operational excellence I recently
joined Content Services where Irsquoll be leading the start-up and integration of new activities
in Beijing Bangalore and other emerging markets Content Services is dynamic and
growing and Irsquom looking forward to expanding the business in Asia while improving
our operational performance in North America and Europerdquo
Mike Hayden Vice President Operations amp Strategic Projects Content Services
of the Grouprsquos divisions and profit centersIn the context of the budgetary procedure
performance measurement indicators are
calculated by the divisions analyzed and
reviewed monthly to serve as a reference
for the Grouprsquos monthly reporting
Management reporting and
closing period work
Th om so n uses a co mmon char t of
accounts which is regularly updated The
principal accounting and financial figures
of the operational and functional depart-
ments consolidated at Group level are
analyzed by the Grouprsquos management
control team and reviewed by the Grouprsquos
Executive Committee
The closing process for the half-year and
annual consolidated financial statementsoccurs in two steps The first step con-
sists of a ldquohard closerdquo completed in May
and September leading to a first review by
the statutory auditors The second step
occurs in July and in JanuaryFebruary and
involves the finalization of half-year and
annual consolidated financial statements
under IFRS The Group then proceeds
once a year with a reconciliation of these
results in accordance with US GAAP
Preparation of financial statements
The financial statements are prepared jointly by the finance department and the
General Secretary They are based on
information reported through the annual
reporting and accounting consolidation
processes and on operational and mar-
ket information which is specifically cen-
tralized for the preparation of Thomsonrsquos
Document de Reacutefeacuterence in France and
the submission of Form 20-F in the United
States Half-year and annual financial infor-
mation is reviewed by the Grouprsquos Audit
Committee
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 6066
58 Thomson Panorama 2006
(1) Source PriceWaterhouseCoopers ndash
ldquoGlobal Entertainment and Media Outlook 2006-10rdquo
Revenue growth
Thomson achieved consolidated 2006
net revenues of 9914045854 million up from
9914045591 million in 2005 Revenues for
the Core Business reached 9914045747 mil-
lion (9914045776 million at constant currency)
representing 83 growth over 2005 at
constant currency
Overall the Grouprsquos key growth busi-
nessesmdashContent Services Network
Services Access Products for telecom
operators and our Broadcast amp Networks
businesses (Grass Valley and Network
Software)mdashincreased strongly year-on-
year and accounted for over a third of
Group revenues against less than a quar-
ter in 2005
Thomsonrsquos Core Business EBIT for 2006
was euro504 million representing a Core
Business EBIT margin of 88 Thisreflected growth in some key businesses
and cost actions across the Group off-
setting a significant investment in research
and development and some increase in
restructuring expenses
Increased spend on RampD
Research and development expenditure
charged in the Core Business (net of
external funding) rose from 991404221 million in
2005 to 991404279 million in 2006 an increase
of 26 principally in the Systems divi-
sion The Group expanded the number ofproducts and services in the development
phase across its businesses
Return to profit
Losses in Non-Core Continuing and Dis-
continued operations were substantially
lower year-on-year reflecting principally
the exit from heavily loss-making Displays
activities in 2005 and intensified cost-sav-
ing programs in 2006 A major revision
and harmonization of the Grouprsquos North
American healthcare obligations gave rise
to substantial one-time gains and Thom-
son also initiated significant restructuring
of its French Non-Core operations
The good performance of the Core Busi-
ness lower Non-Core and Discontinued
losses and a low reported tax chargeenabled the Group to return a net profit of
99140455 million in 2006 compared to a loss of
991404573 million in the previous year
Good cash flow
strengthened balance sheet
Thomson generated good free cash flow
and strengthened its balance sheet in
2006 Total net financial liabilities on the
balance sheet fell by 991404460 million reflect-
ing a 99140493 million fall in financial and acqui-
sition-related debts and a 991404367 million
reduction in retirement benefit obligations(including healthcare)
Increase in Net Dividend
The Board of Directors proposed a dis-
tribution to shareholders of 991404033 per
share (2005 dividend 991404030) reflecting
confidence in the prospects of the Group
going forward
Outlook 2007-2009
growth in revenues and net income
With the Grouprsquos transformation complete Thomsonrsquos financial focus over the 2007-
2009 period will be to grow revenues and
net income
Thomson serves growing Media Enter-
tainment amp Communications marketsmdashfor
which external estimates(1) indicate com-
pound growth of around 6 over the last
FINANCIAL AND
OPERATIONAL PERFORMANCE
Full year 2006 results
saw a return to profitability
and leave Thomson
well positioned at
the heart of convergence
and digital video
8122019 Panorama 2006
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59 Thomson Panorama 2006
five years Our digital and electronic busi-
nesses now represent two-thirds of rev-
enues and we believe they are growing
faster than the overall market offsetting
the maturing physical media businesses
Given this profile the Group expects its
revenue growth to be more modest in
2007 but to gather pace over the period
and our overall objective is to show com-pound growth over 2007-2009 in line with
or faster than the overall market
The 2007-2009 period is also expected
to see a sharply reduced impact from
residual Non-Core activities with an end
to losses from the Discontinued Activities
perimeter after 2007 Accordingly Thom-
sonrsquos ambition is to turn its Core Business
growth and profitability and lower impact
from Non-Core into strong growth in net
income over the period 2007-2009
Business operations
Continuous performance improvement is
fundamental to Thomsonrsquos commitment to
create sustainable business models and
long-term value for all stakeholders The
ambitious Group-wide programs launched
in 2004 to improve productivity and
enhance overall performance producedsubstantial results in 2006 and led to new
and strong initiatives for long-term growth
As of the second half of 2006 six ldquoKey
Programsrdquo are monitored at Group level
Clients Software Product Introduction
Operations Transformation and Talent
Management
KEY PROGRAMS IN PLACE
Program Focus
Clients Thomsonrsquos clientregional diversification and
growth of the existing business
through improved Sales amp Marketing
Software Development of integrated software platforms
in all markets (post-production distribution
delivery) and for all types of customer
(professional prosumerhellip)
Product Introduction Ensuring new product roadmaps are in line
with strategy and resource needs have been
identifiedOperations Improving the Grouprsquos cost base cash
generation and working capital
Transformation Multiple programs including initiatives to
improving customer relationship management
worldwide supply chain management
IT transformation as well as Thomsonrsquos RampD
footprint
Talent Management Leveraging human assets with a focus on
talent retention and acquisition
8122019 Panorama 2006
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60 Thomson Panorama 2006
SUMMARY RESULTS FULL YEAR 2006
In 991404 millions unless otherwise stated 2006(1) 2005(1)
Net revenues 5854 5591(1)
Core Business net revenues 5747 5335
Services 2489 2487
Systems 2684 2262
Technology 547 546
Corporate 27 40
Non-Core continuing operations net revenues 107 256
Core Business EBIT(2) 504 512
Services 160 205
Systems 132 109
Technology 289 277Corporate (77) (79)
EBIT from Non-Core continuing operations (25) (122)
(1) Restated with 2006 discontinued activities according to IFRS 5
8122019 Panorama 2006
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61 Thomson Panorama 2006
Year ended December 31in 991404 except number of shares 2006 2005 2004
Year ended December 31in 991404 millions 2006 2005(1) 2004(1)
CONSOLIDATED STATEMENTS OF OPERATIONS
(1) Restated with 2006 discontinued activities according to IFRS 5
(2) After deduction of the interests net of tax paid on the subordinated perpetual notes during the period
Continuing operations
Revenues 5854 5591 5980
Cost of sales (4474) (4240) (4594)
Gross margin 1380 1351 1386
Selling marketing general and administrative expenses (674) (638) (653)
Other income (expense) 52 (96) (69)
Research and development expenses (279) (227) (201)
Profit from continuing operations before tax and net finance costs 479 390 463
Interest income 19 30 52
Interest expense (108) (108) (54)
Other financial income (expense) (111) 36 (26)
Finance costs ndash net (200) (42) (28)
Share of profit (loss) from associates (86) (82) (20)
Income tax ndash (68) (93)
Profit from continuing operations 193 198 322
Discontinued operations
Profit (loss) from discontinued operations (138) (771) (883)
Net income (loss) 55 (573) (561)
Attributable to
Equity Holders 55 (574) (559)
Minority interests ndash 1 (2)
Weighted average number of shares
outstandingmdashbasic net of treasury stock 261188858 266539917 273646869
Earnings per share from continuing operations
Basic(2) 067 074 118
Diluted 063 042 111
Earnings per share from discontinued operations
Basic (053) (289) (323)
Diluted (048) (262) (296)Total earnings per share
Basic(2) 014 (215) (205)
Diluted 015 (220) (185)
8122019 Panorama 2006
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62 Thomson Panorama 2006
CONSOLIDATED BALANCE SHEETS
In 991404 millions December 31 December 31 January 1 December 31 2006 2005 2005(1) 2004
ASSETS
Non-current assets
Property plant and equipment 813 886 1051 1051
Goodwill 1714 1756 1186 1178
Other intangible assets 1071 1150 924 924
Investments in associates 12 204 260 260
Investments and financial assets available-for-sale 266 341 139 113
Derivative financial instruments 7 1 11 ndash
Contract advances 129 173 179 179
Deferred tax assets 397 379 307 301
Other non-current assets 110 182 133 136
Total non-current assets 4519 5072 4190 4142
Current assets
Inventories 366 333 503 568
Trade accounts and notes receivable 1018 1315 1232 1180
Current accounts with associates and joint ventures 97 115 143 143
Derivative financial instruments 8 9 115 ndash
Other current assets 535 644 483 616
Marketable securities ndash 7 58 58
Cash and cash equivalents 1311 996 1845 1848
Assets classified as held for sale 264 369 80 ndash
Total current assets 3599 3788 4459 4413
Total assets 8118 8860 8649 8555
(1) Including the impacts of the first-time application related to IAS 32 and 39 on financial instruments and IFRS 5 on non-current assets held for sale and
discontinued operations
8122019 Panorama 2006
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63 Thomson Panorama 2006
In 991404 millions December 31 December 31 January 1 December 31 2006 2005 2005(1) 2004
SHAREHOLDERSrsquo EQUITY AND LIABILITIES
Shareholdersrsquo equity
Common stock (273871296 shares at
December 31 2006
with nominal value of euro 375 per share) 1027 1025 1025 1025
Trade accounts and notes payable 1032 1164 1199 1226
Accrued employee expenses 165 166 158 163
Income tax payable 57 47 60 60
Other current liabilities 671 750 746 800
Payables on acquisition of companies 13 138 84 84
Liabilities directly associated with
assets classified as held for sale 232 470 88 ndash
Total current liabilities 3681 4393 3602 3459
Total liabilities 5999 6644 6251 6062
Total shareholderrsquos equity and liabilities 8118 8860 8649 8555
(1) Including the impacts of the first-time application related to IAS 32 and 39 on financial instruments and IFRS 5 on non-current assets held for sale and
discontinued operations
8122019 Panorama 2006
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Creation and lay-out
Photo credits Nathalie BerhingGAMMA ndash Steacutephane de Bourgies ndash Jean-Franccedilois DeroubaixGAMMA ndash Christine Donnier- ValentinGAMMA ndash Cars copy 2006 Disney Enterprises IncPixar All Rights Reserved ndash Dreamgirls copy 2006 DREAMWORKS
LLC and PARAMOUNT PICTURES All Rights Reserved ndash Poseidon copy 2006 Warner Bros Pictures ndash Sony Bravia Paint
8122019 Panorama 2006
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Thomsonrsquos Services division provides end-
to-end management of business-critical
services spanning physical media con-
tent services electronic content distribu-
tion and network services The division
is the worldrsquos leading provider of state-
of-the-art film-making post-production
visual effects and broadcast center man-
agement services
Strategy
The Services division continues to focus
on managing v ideo networks and
op er at io na l centers on behalf of its
customers who are able to concentrate
on their core business of content The
emphasis on high-growth opportunities
in newer market sectors such as retail
and corporate networks and gaming
has been sharpened
Achievements
New customers in fast-growing market
segments responded well to a range of
high value-added services from the Ser-
vices division in 2006 Network Services
showed particularly strong growth as net-
work operators in Europe Asia and North
America selected Technicolor-branded
management services The addition of
such leading customers as ITV in the
UK and France 24 and TV5 in France
substantially expanded Thomsonrsquos fast-
growing Network Services business
Noteworthy successes were also achieved
in Theatrical Services due in part to the
continued development of Thomsonrsquos digi-
tal cinema activity The Content Services
business continued to expand its post-
production services business by opening
a digital intermediate facility on the SonyPictures Entertainment studio lot In 2006
a new Home Entertainment Services unit
was created combining Thomsonrsquos DVD
business with electronic distribution to
develop new services to support emerging
lsquoon demand contentrsquo business models
Network Services
With a comprehensive portfolio of services
for broadcasters network and internet TV
operators movie theatres retailers and
corporations Network Services continued
to expand briskly in 2006 Broadcastersincreasingly selected Thomson as their
long-term network services partner By
year-end Network Services was providing
managed services under the Technicolor
brand to close to 200 channels from
17 facilities in France the Netherlands
Japan North America and the UK
Late in the year Thomson signed a long-
term agreement with ITV for network
transmission operations services for its six
From managing video
networks on an outsourced
basis to a broad range of
offerings in content services
Thomson is bringing its video
expertise to new markets
and geographies
Left Network Services for broadcasters
cable TV operators movie theaters
retailers and corporations is one of Servicesrsquo
fastest-growing business segments
Right Thomson provided film sound
DVD and digital cinema services for Cars
the DisneyPixar hitCars copy 2006 Disney Enterprises IncPixar All R ights Reserved
SERVICES
MANAGING VIDEO NETWORKS
TECHNOLOGY SYSTEMS SERVICES
34 Thomson Panorama 2006
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existing UK channels including the coun-
tryrsquos leading commercial channel In addi-
tion an agreement signed with NOB Cross
Media Facilities (NOB CMF) a subsidiary
of Nederlands Omroepproduktie Bedrijf
(NOB) likewise established Thomson as
a major supplier of network management
services in the Netherlands
In France Network Services added new
clients France 24 and TV5 which covers
203 countries and territories to move into
the market-leading position managing
more than 60 channels and 1500 hours
of programming daily The France 24 part-
nership also involves equipping their new
global TV news operation
Thomson drove expansion and innovation
in its retail media services over the course
of the year One of the most notable achie-
vements involves an ambitious in-store
network upgrade program piloted in2006 by Wal-Mart in the USA with Premier
Retail Networks (PRN) a subsidiary within
Thomsonrsquos Network Services operat ion
The in-store network platform was based
on Thomson IPTV technologies adapted
for the retail environment The system
the first pilot of IPTV in the retail environ-
ment delivered real impact on product
sales and improved customer satisfaction
in Wal-Mart stores PRN also expanded
capabilities into China early in 2007 with
Content Services revving up
Thomson provided a wide range of services for a number of major international film releases in 2006
such as Cars one of the three nominees for Best Animated Film at the Oscars Thomson Technicolor provided
film services sound services DVD compression and authoring replication and distribution
as well as digital cinema mastering and distribution for the DisneyPixar hit The Grouprsquos Content Services offering
has expanded in recent years to include the high-growth video-gaming advertising and broadcast markets
the signing of a joint venture with CGEN a
technology company leading the Chinese
in-store digital signage media industry
The two companies are currently collabo-
rating on the roll-out of an in-store media
network to 750 internet cafeacutes part of the
leading Chinese chain Big Cafeacute
Theatrical Services
Thomson signed Europersquos first large-scale
digital cinema rollout agreement in 2006
with the Kinepolis Group one of the conti-
nentrsquos most innovative theater circuits and
the leading exhibition chain in Belgium
The agreement to instal l and operate
digital cinema systems in 130 Kinepolis-
owned and operated screens passed a
first milestone in March 2007 with Thom-
sonrsquos first international distribution by sat-
ellite of an encrypted digital version of the
film Dreamgirls from the US to a Kinepolis
theater in Brussels Belgium
A series of new contracts were awarded
in the US For example in the fall of 2006
Technicolor Digital Cinema began installing
digital projection systems at 120 National
Amusements Inc screens in Boston Los
Angeles New York and elsewhere as part
of a strategic agreement National Amuse-
ments operates more than 1500 screens
in the US UK Latin America and Russia
Digital projection systems were also
TECHNOLOGY SYSTEMS SERVICES
35 Thomson Panorama 2006
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The growing market for Network Services
The decision by the UKrsquos leading commercial broadcaster to entrust its network services to
Thomsonrsquos Network Services operations illustrates a growing global trend as broadcasters focus increasingly on
programming and meeting customer needs they turn to highly-skilled specialists to handle technology
The long-term agreement with ITV means that the broadcaster will benefit from enhanced service and new technology
as well as more flexibility in launching new services
36 Thomson Panorama 2006
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Left Thomsonrsquos Technicolor
Interactive Services provided in-game
cinematics and voice recording for
Microsoft Game Studiosrsquo Gears of War
Right Thomsonrsquos London-based MPC
subsidiary carried out post-production
work including computer graphics
on Sony Braviarsquos award-wirring colorful
Paint commercial
installed at several landmark theatres in
Los Angeles in 2006 including Mann The-
atresrsquo Graumanrsquos Chinese and the Village
in Westwood
Thomson maintained a leading position in
film processing and printing in 2006 in a
market where volumes were stable Tech-
nicolor handled worldwide release printingfor two of the five 2007 Oscar nominees
for Best PicturemdashMartin Scorcesersquos The
Departed and Clint Eastwoodrsquos Letters
from Iwo Jimamdashas well as release print-
ing for two of the three Best Animated Film
nominees Cars and Happy Feet
As part of its ongoing commitment to meet
customer needs worldwide a state-of-the-
art film and post-production facility was inau-
gurated at Ciudad de la Imagen in Madrid in
2006 It is already becoming known as the
countryrsquos most comprehensive postproduc-
tion facility with advanced film processingand digital intermediate capabilities
Content Services
Thomson continued to leverage its long-
standing strength in post-production
skills and services through expansion into
emerging and high-growth market seg-
ments such as content services for the
video-gaming advertising and broadcast
markets
In order to better serve the growing mar-
ket for entertainment content for mobile
devices Thomson unveiled new mobile
content preparation and distribution capa-
bilities in the US and the UK in 2006 Facili-
ties equipped with state-of-the-art produc-
tion and post-production technologies will
handle the preparation and optimization
of a wide range of digital entertainmentcontentmdashincluding movies TV episodes
and music videosmdashfor distribution to
mobile devices The dedicated services
complement the Grouprsquos extensive global
electronic distribution infrastructure which
enables Thomson to deliver mobile con-
tent to online delivery services as well as
to network operators for final transmission
to mobile customers
Thomson also made progress in the
development of an integrated digital asset
management solution in 2006 known as
MIDAS (Media Ingest Distribution andStorage) MIDAS is a software and hard-
ware platform for digital content prepara-
tion storage security and distribution
From the first day of production planning
through every stage of post-production
and content distribution MIDAS creates
a digital workflow that allows customers
to manage projects remotely and provides
for rapid and seamless global file delivery
streaming and collaboration
TECHNOLOGY SYSTEMS SERVICES
37 Thomson Panorama 2006
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While expanding into newer markets
growing demand for post-production ser-
vices and visual effects continued to fuel
Thomsonrsquos ongoing content services activ-
ities Among the yearrsquos most noteworthy
achievements were portfolios of services
for such feature films as The Departed
Letters from Iwo Jima and Pirates of the
Caribbean Dead Manrsquos Chest ThomsonrsquosMoving Picture Company (MPC) also pro-
vided high-end visual effects for the three
films nominated for Achievement in Visual
Effects Pirates of the Caribbean Posei-
don and Superman Returns
Confirming the Grouprsquos solid growth in
content services for the video game indus-
try Thomson unveiled a new dedicated
Interactive Services facility in Burbank
California in 2006 Sierra Entertainment
a division of Vivendi Games selected
Thomson to prov ide cinemat ic anima-
tion voice casting and recording sound
design and mixing services for The Leg-
end of Spyrotrade A New Beginning Like-
wise Thomson provided a wide range of
services to support Konamirsquos The SilentHill Experience released simultaneously
with the motion picture
The strategic investment in one of Indiarsquos
leading animation and gaming cinemat-
ics firms announced in February 2007
strengthened Thomsonrsquos position in Asia
for a variety of content services Located in
Bangalore India Paprikaas provides cre-
ldquoIn 1998 I joined Thomson as a Plant Manager within Home Entertainment Services
and was eventually made responsible for the expansion and management of our
Guadalajara DVD operations In summary Irsquove had great opportunities to gain experience
in international operations strategic planning and operational excellence I recently
joined Content Services where Irsquoll be leading the start-up and integration of new activities
in Beijing Bangalore and other emerging markets Content Services is dynamic and
growing and Irsquom looking forward to expanding the business in Asia while improving
our operational performance in North America and Europerdquo
Mike Hayden Vice President Operations amp Strategic Projects Content Services
of the Grouprsquos divisions and profit centersIn the context of the budgetary procedure
performance measurement indicators are
calculated by the divisions analyzed and
reviewed monthly to serve as a reference
for the Grouprsquos monthly reporting
Management reporting and
closing period work
Th om so n uses a co mmon char t of
accounts which is regularly updated The
principal accounting and financial figures
of the operational and functional depart-
ments consolidated at Group level are
analyzed by the Grouprsquos management
control team and reviewed by the Grouprsquos
Executive Committee
The closing process for the half-year and
annual consolidated financial statementsoccurs in two steps The first step con-
sists of a ldquohard closerdquo completed in May
and September leading to a first review by
the statutory auditors The second step
occurs in July and in JanuaryFebruary and
involves the finalization of half-year and
annual consolidated financial statements
under IFRS The Group then proceeds
once a year with a reconciliation of these
results in accordance with US GAAP
Preparation of financial statements
The financial statements are prepared jointly by the finance department and the
General Secretary They are based on
information reported through the annual
reporting and accounting consolidation
processes and on operational and mar-
ket information which is specifically cen-
tralized for the preparation of Thomsonrsquos
Document de Reacutefeacuterence in France and
the submission of Form 20-F in the United
States Half-year and annual financial infor-
mation is reviewed by the Grouprsquos Audit
Committee
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58 Thomson Panorama 2006
(1) Source PriceWaterhouseCoopers ndash
ldquoGlobal Entertainment and Media Outlook 2006-10rdquo
Revenue growth
Thomson achieved consolidated 2006
net revenues of 9914045854 million up from
9914045591 million in 2005 Revenues for
the Core Business reached 9914045747 mil-
lion (9914045776 million at constant currency)
representing 83 growth over 2005 at
constant currency
Overall the Grouprsquos key growth busi-
nessesmdashContent Services Network
Services Access Products for telecom
operators and our Broadcast amp Networks
businesses (Grass Valley and Network
Software)mdashincreased strongly year-on-
year and accounted for over a third of
Group revenues against less than a quar-
ter in 2005
Thomsonrsquos Core Business EBIT for 2006
was euro504 million representing a Core
Business EBIT margin of 88 Thisreflected growth in some key businesses
and cost actions across the Group off-
setting a significant investment in research
and development and some increase in
restructuring expenses
Increased spend on RampD
Research and development expenditure
charged in the Core Business (net of
external funding) rose from 991404221 million in
2005 to 991404279 million in 2006 an increase
of 26 principally in the Systems divi-
sion The Group expanded the number ofproducts and services in the development
phase across its businesses
Return to profit
Losses in Non-Core Continuing and Dis-
continued operations were substantially
lower year-on-year reflecting principally
the exit from heavily loss-making Displays
activities in 2005 and intensified cost-sav-
ing programs in 2006 A major revision
and harmonization of the Grouprsquos North
American healthcare obligations gave rise
to substantial one-time gains and Thom-
son also initiated significant restructuring
of its French Non-Core operations
The good performance of the Core Busi-
ness lower Non-Core and Discontinued
losses and a low reported tax chargeenabled the Group to return a net profit of
99140455 million in 2006 compared to a loss of
991404573 million in the previous year
Good cash flow
strengthened balance sheet
Thomson generated good free cash flow
and strengthened its balance sheet in
2006 Total net financial liabilities on the
balance sheet fell by 991404460 million reflect-
ing a 99140493 million fall in financial and acqui-
sition-related debts and a 991404367 million
reduction in retirement benefit obligations(including healthcare)
Increase in Net Dividend
The Board of Directors proposed a dis-
tribution to shareholders of 991404033 per
share (2005 dividend 991404030) reflecting
confidence in the prospects of the Group
going forward
Outlook 2007-2009
growth in revenues and net income
With the Grouprsquos transformation complete Thomsonrsquos financial focus over the 2007-
2009 period will be to grow revenues and
net income
Thomson serves growing Media Enter-
tainment amp Communications marketsmdashfor
which external estimates(1) indicate com-
pound growth of around 6 over the last
FINANCIAL AND
OPERATIONAL PERFORMANCE
Full year 2006 results
saw a return to profitability
and leave Thomson
well positioned at
the heart of convergence
and digital video
8122019 Panorama 2006
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59 Thomson Panorama 2006
five years Our digital and electronic busi-
nesses now represent two-thirds of rev-
enues and we believe they are growing
faster than the overall market offsetting
the maturing physical media businesses
Given this profile the Group expects its
revenue growth to be more modest in
2007 but to gather pace over the period
and our overall objective is to show com-pound growth over 2007-2009 in line with
or faster than the overall market
The 2007-2009 period is also expected
to see a sharply reduced impact from
residual Non-Core activities with an end
to losses from the Discontinued Activities
perimeter after 2007 Accordingly Thom-
sonrsquos ambition is to turn its Core Business
growth and profitability and lower impact
from Non-Core into strong growth in net
income over the period 2007-2009
Business operations
Continuous performance improvement is
fundamental to Thomsonrsquos commitment to
create sustainable business models and
long-term value for all stakeholders The
ambitious Group-wide programs launched
in 2004 to improve productivity and
enhance overall performance producedsubstantial results in 2006 and led to new
and strong initiatives for long-term growth
As of the second half of 2006 six ldquoKey
Programsrdquo are monitored at Group level
Clients Software Product Introduction
Operations Transformation and Talent
Management
KEY PROGRAMS IN PLACE
Program Focus
Clients Thomsonrsquos clientregional diversification and
growth of the existing business
through improved Sales amp Marketing
Software Development of integrated software platforms
in all markets (post-production distribution
delivery) and for all types of customer
(professional prosumerhellip)
Product Introduction Ensuring new product roadmaps are in line
with strategy and resource needs have been
identifiedOperations Improving the Grouprsquos cost base cash
generation and working capital
Transformation Multiple programs including initiatives to
improving customer relationship management
worldwide supply chain management
IT transformation as well as Thomsonrsquos RampD
footprint
Talent Management Leveraging human assets with a focus on
talent retention and acquisition
8122019 Panorama 2006
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60 Thomson Panorama 2006
SUMMARY RESULTS FULL YEAR 2006
In 991404 millions unless otherwise stated 2006(1) 2005(1)
Net revenues 5854 5591(1)
Core Business net revenues 5747 5335
Services 2489 2487
Systems 2684 2262
Technology 547 546
Corporate 27 40
Non-Core continuing operations net revenues 107 256
Core Business EBIT(2) 504 512
Services 160 205
Systems 132 109
Technology 289 277Corporate (77) (79)
EBIT from Non-Core continuing operations (25) (122)
(1) Restated with 2006 discontinued activities according to IFRS 5
8122019 Panorama 2006
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61 Thomson Panorama 2006
Year ended December 31in 991404 except number of shares 2006 2005 2004
Year ended December 31in 991404 millions 2006 2005(1) 2004(1)
CONSOLIDATED STATEMENTS OF OPERATIONS
(1) Restated with 2006 discontinued activities according to IFRS 5
(2) After deduction of the interests net of tax paid on the subordinated perpetual notes during the period
Continuing operations
Revenues 5854 5591 5980
Cost of sales (4474) (4240) (4594)
Gross margin 1380 1351 1386
Selling marketing general and administrative expenses (674) (638) (653)
Other income (expense) 52 (96) (69)
Research and development expenses (279) (227) (201)
Profit from continuing operations before tax and net finance costs 479 390 463
Interest income 19 30 52
Interest expense (108) (108) (54)
Other financial income (expense) (111) 36 (26)
Finance costs ndash net (200) (42) (28)
Share of profit (loss) from associates (86) (82) (20)
Income tax ndash (68) (93)
Profit from continuing operations 193 198 322
Discontinued operations
Profit (loss) from discontinued operations (138) (771) (883)
Net income (loss) 55 (573) (561)
Attributable to
Equity Holders 55 (574) (559)
Minority interests ndash 1 (2)
Weighted average number of shares
outstandingmdashbasic net of treasury stock 261188858 266539917 273646869
Earnings per share from continuing operations
Basic(2) 067 074 118
Diluted 063 042 111
Earnings per share from discontinued operations
Basic (053) (289) (323)
Diluted (048) (262) (296)Total earnings per share
Basic(2) 014 (215) (205)
Diluted 015 (220) (185)
8122019 Panorama 2006
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62 Thomson Panorama 2006
CONSOLIDATED BALANCE SHEETS
In 991404 millions December 31 December 31 January 1 December 31 2006 2005 2005(1) 2004
ASSETS
Non-current assets
Property plant and equipment 813 886 1051 1051
Goodwill 1714 1756 1186 1178
Other intangible assets 1071 1150 924 924
Investments in associates 12 204 260 260
Investments and financial assets available-for-sale 266 341 139 113
Derivative financial instruments 7 1 11 ndash
Contract advances 129 173 179 179
Deferred tax assets 397 379 307 301
Other non-current assets 110 182 133 136
Total non-current assets 4519 5072 4190 4142
Current assets
Inventories 366 333 503 568
Trade accounts and notes receivable 1018 1315 1232 1180
Current accounts with associates and joint ventures 97 115 143 143
Derivative financial instruments 8 9 115 ndash
Other current assets 535 644 483 616
Marketable securities ndash 7 58 58
Cash and cash equivalents 1311 996 1845 1848
Assets classified as held for sale 264 369 80 ndash
Total current assets 3599 3788 4459 4413
Total assets 8118 8860 8649 8555
(1) Including the impacts of the first-time application related to IAS 32 and 39 on financial instruments and IFRS 5 on non-current assets held for sale and
discontinued operations
8122019 Panorama 2006
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63 Thomson Panorama 2006
In 991404 millions December 31 December 31 January 1 December 31 2006 2005 2005(1) 2004
SHAREHOLDERSrsquo EQUITY AND LIABILITIES
Shareholdersrsquo equity
Common stock (273871296 shares at
December 31 2006
with nominal value of euro 375 per share) 1027 1025 1025 1025
Trade accounts and notes payable 1032 1164 1199 1226
Accrued employee expenses 165 166 158 163
Income tax payable 57 47 60 60
Other current liabilities 671 750 746 800
Payables on acquisition of companies 13 138 84 84
Liabilities directly associated with
assets classified as held for sale 232 470 88 ndash
Total current liabilities 3681 4393 3602 3459
Total liabilities 5999 6644 6251 6062
Total shareholderrsquos equity and liabilities 8118 8860 8649 8555
(1) Including the impacts of the first-time application related to IAS 32 and 39 on financial instruments and IFRS 5 on non-current assets held for sale and
discontinued operations
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 6666
Creation and lay-out
Photo credits Nathalie BerhingGAMMA ndash Steacutephane de Bourgies ndash Jean-Franccedilois DeroubaixGAMMA ndash Christine Donnier- ValentinGAMMA ndash Cars copy 2006 Disney Enterprises IncPixar All Rights Reserved ndash Dreamgirls copy 2006 DREAMWORKS
LLC and PARAMOUNT PICTURES All Rights Reserved ndash Poseidon copy 2006 Warner Bros Pictures ndash Sony Bravia Paint
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 3766
existing UK channels including the coun-
tryrsquos leading commercial channel In addi-
tion an agreement signed with NOB Cross
Media Facilities (NOB CMF) a subsidiary
of Nederlands Omroepproduktie Bedrijf
(NOB) likewise established Thomson as
a major supplier of network management
services in the Netherlands
In France Network Services added new
clients France 24 and TV5 which covers
203 countries and territories to move into
the market-leading position managing
more than 60 channels and 1500 hours
of programming daily The France 24 part-
nership also involves equipping their new
global TV news operation
Thomson drove expansion and innovation
in its retail media services over the course
of the year One of the most notable achie-
vements involves an ambitious in-store
network upgrade program piloted in2006 by Wal-Mart in the USA with Premier
Retail Networks (PRN) a subsidiary within
Thomsonrsquos Network Services operat ion
The in-store network platform was based
on Thomson IPTV technologies adapted
for the retail environment The system
the first pilot of IPTV in the retail environ-
ment delivered real impact on product
sales and improved customer satisfaction
in Wal-Mart stores PRN also expanded
capabilities into China early in 2007 with
Content Services revving up
Thomson provided a wide range of services for a number of major international film releases in 2006
such as Cars one of the three nominees for Best Animated Film at the Oscars Thomson Technicolor provided
film services sound services DVD compression and authoring replication and distribution
as well as digital cinema mastering and distribution for the DisneyPixar hit The Grouprsquos Content Services offering
has expanded in recent years to include the high-growth video-gaming advertising and broadcast markets
the signing of a joint venture with CGEN a
technology company leading the Chinese
in-store digital signage media industry
The two companies are currently collabo-
rating on the roll-out of an in-store media
network to 750 internet cafeacutes part of the
leading Chinese chain Big Cafeacute
Theatrical Services
Thomson signed Europersquos first large-scale
digital cinema rollout agreement in 2006
with the Kinepolis Group one of the conti-
nentrsquos most innovative theater circuits and
the leading exhibition chain in Belgium
The agreement to instal l and operate
digital cinema systems in 130 Kinepolis-
owned and operated screens passed a
first milestone in March 2007 with Thom-
sonrsquos first international distribution by sat-
ellite of an encrypted digital version of the
film Dreamgirls from the US to a Kinepolis
theater in Brussels Belgium
A series of new contracts were awarded
in the US For example in the fall of 2006
Technicolor Digital Cinema began installing
digital projection systems at 120 National
Amusements Inc screens in Boston Los
Angeles New York and elsewhere as part
of a strategic agreement National Amuse-
ments operates more than 1500 screens
in the US UK Latin America and Russia
Digital projection systems were also
TECHNOLOGY SYSTEMS SERVICES
35 Thomson Panorama 2006
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 3866
The growing market for Network Services
The decision by the UKrsquos leading commercial broadcaster to entrust its network services to
Thomsonrsquos Network Services operations illustrates a growing global trend as broadcasters focus increasingly on
programming and meeting customer needs they turn to highly-skilled specialists to handle technology
The long-term agreement with ITV means that the broadcaster will benefit from enhanced service and new technology
as well as more flexibility in launching new services
36 Thomson Panorama 2006
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 3966
Left Thomsonrsquos Technicolor
Interactive Services provided in-game
cinematics and voice recording for
Microsoft Game Studiosrsquo Gears of War
Right Thomsonrsquos London-based MPC
subsidiary carried out post-production
work including computer graphics
on Sony Braviarsquos award-wirring colorful
Paint commercial
installed at several landmark theatres in
Los Angeles in 2006 including Mann The-
atresrsquo Graumanrsquos Chinese and the Village
in Westwood
Thomson maintained a leading position in
film processing and printing in 2006 in a
market where volumes were stable Tech-
nicolor handled worldwide release printingfor two of the five 2007 Oscar nominees
for Best PicturemdashMartin Scorcesersquos The
Departed and Clint Eastwoodrsquos Letters
from Iwo Jimamdashas well as release print-
ing for two of the three Best Animated Film
nominees Cars and Happy Feet
As part of its ongoing commitment to meet
customer needs worldwide a state-of-the-
art film and post-production facility was inau-
gurated at Ciudad de la Imagen in Madrid in
2006 It is already becoming known as the
countryrsquos most comprehensive postproduc-
tion facility with advanced film processingand digital intermediate capabilities
Content Services
Thomson continued to leverage its long-
standing strength in post-production
skills and services through expansion into
emerging and high-growth market seg-
ments such as content services for the
video-gaming advertising and broadcast
markets
In order to better serve the growing mar-
ket for entertainment content for mobile
devices Thomson unveiled new mobile
content preparation and distribution capa-
bilities in the US and the UK in 2006 Facili-
ties equipped with state-of-the-art produc-
tion and post-production technologies will
handle the preparation and optimization
of a wide range of digital entertainmentcontentmdashincluding movies TV episodes
and music videosmdashfor distribution to
mobile devices The dedicated services
complement the Grouprsquos extensive global
electronic distribution infrastructure which
enables Thomson to deliver mobile con-
tent to online delivery services as well as
to network operators for final transmission
to mobile customers
Thomson also made progress in the
development of an integrated digital asset
management solution in 2006 known as
MIDAS (Media Ingest Distribution andStorage) MIDAS is a software and hard-
ware platform for digital content prepara-
tion storage security and distribution
From the first day of production planning
through every stage of post-production
and content distribution MIDAS creates
a digital workflow that allows customers
to manage projects remotely and provides
for rapid and seamless global file delivery
streaming and collaboration
TECHNOLOGY SYSTEMS SERVICES
37 Thomson Panorama 2006
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 4066
While expanding into newer markets
growing demand for post-production ser-
vices and visual effects continued to fuel
Thomsonrsquos ongoing content services activ-
ities Among the yearrsquos most noteworthy
achievements were portfolios of services
for such feature films as The Departed
Letters from Iwo Jima and Pirates of the
Caribbean Dead Manrsquos Chest ThomsonrsquosMoving Picture Company (MPC) also pro-
vided high-end visual effects for the three
films nominated for Achievement in Visual
Effects Pirates of the Caribbean Posei-
don and Superman Returns
Confirming the Grouprsquos solid growth in
content services for the video game indus-
try Thomson unveiled a new dedicated
Interactive Services facility in Burbank
California in 2006 Sierra Entertainment
a division of Vivendi Games selected
Thomson to prov ide cinemat ic anima-
tion voice casting and recording sound
design and mixing services for The Leg-
end of Spyrotrade A New Beginning Like-
wise Thomson provided a wide range of
services to support Konamirsquos The SilentHill Experience released simultaneously
with the motion picture
The strategic investment in one of Indiarsquos
leading animation and gaming cinemat-
ics firms announced in February 2007
strengthened Thomsonrsquos position in Asia
for a variety of content services Located in
Bangalore India Paprikaas provides cre-
ldquoIn 1998 I joined Thomson as a Plant Manager within Home Entertainment Services
and was eventually made responsible for the expansion and management of our
Guadalajara DVD operations In summary Irsquove had great opportunities to gain experience
in international operations strategic planning and operational excellence I recently
joined Content Services where Irsquoll be leading the start-up and integration of new activities
in Beijing Bangalore and other emerging markets Content Services is dynamic and
growing and Irsquom looking forward to expanding the business in Asia while improving
our operational performance in North America and Europerdquo
Mike Hayden Vice President Operations amp Strategic Projects Content Services
of the Grouprsquos divisions and profit centersIn the context of the budgetary procedure
performance measurement indicators are
calculated by the divisions analyzed and
reviewed monthly to serve as a reference
for the Grouprsquos monthly reporting
Management reporting and
closing period work
Th om so n uses a co mmon char t of
accounts which is regularly updated The
principal accounting and financial figures
of the operational and functional depart-
ments consolidated at Group level are
analyzed by the Grouprsquos management
control team and reviewed by the Grouprsquos
Executive Committee
The closing process for the half-year and
annual consolidated financial statementsoccurs in two steps The first step con-
sists of a ldquohard closerdquo completed in May
and September leading to a first review by
the statutory auditors The second step
occurs in July and in JanuaryFebruary and
involves the finalization of half-year and
annual consolidated financial statements
under IFRS The Group then proceeds
once a year with a reconciliation of these
results in accordance with US GAAP
Preparation of financial statements
The financial statements are prepared jointly by the finance department and the
General Secretary They are based on
information reported through the annual
reporting and accounting consolidation
processes and on operational and mar-
ket information which is specifically cen-
tralized for the preparation of Thomsonrsquos
Document de Reacutefeacuterence in France and
the submission of Form 20-F in the United
States Half-year and annual financial infor-
mation is reviewed by the Grouprsquos Audit
Committee
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 6066
58 Thomson Panorama 2006
(1) Source PriceWaterhouseCoopers ndash
ldquoGlobal Entertainment and Media Outlook 2006-10rdquo
Revenue growth
Thomson achieved consolidated 2006
net revenues of 9914045854 million up from
9914045591 million in 2005 Revenues for
the Core Business reached 9914045747 mil-
lion (9914045776 million at constant currency)
representing 83 growth over 2005 at
constant currency
Overall the Grouprsquos key growth busi-
nessesmdashContent Services Network
Services Access Products for telecom
operators and our Broadcast amp Networks
businesses (Grass Valley and Network
Software)mdashincreased strongly year-on-
year and accounted for over a third of
Group revenues against less than a quar-
ter in 2005
Thomsonrsquos Core Business EBIT for 2006
was euro504 million representing a Core
Business EBIT margin of 88 Thisreflected growth in some key businesses
and cost actions across the Group off-
setting a significant investment in research
and development and some increase in
restructuring expenses
Increased spend on RampD
Research and development expenditure
charged in the Core Business (net of
external funding) rose from 991404221 million in
2005 to 991404279 million in 2006 an increase
of 26 principally in the Systems divi-
sion The Group expanded the number ofproducts and services in the development
phase across its businesses
Return to profit
Losses in Non-Core Continuing and Dis-
continued operations were substantially
lower year-on-year reflecting principally
the exit from heavily loss-making Displays
activities in 2005 and intensified cost-sav-
ing programs in 2006 A major revision
and harmonization of the Grouprsquos North
American healthcare obligations gave rise
to substantial one-time gains and Thom-
son also initiated significant restructuring
of its French Non-Core operations
The good performance of the Core Busi-
ness lower Non-Core and Discontinued
losses and a low reported tax chargeenabled the Group to return a net profit of
99140455 million in 2006 compared to a loss of
991404573 million in the previous year
Good cash flow
strengthened balance sheet
Thomson generated good free cash flow
and strengthened its balance sheet in
2006 Total net financial liabilities on the
balance sheet fell by 991404460 million reflect-
ing a 99140493 million fall in financial and acqui-
sition-related debts and a 991404367 million
reduction in retirement benefit obligations(including healthcare)
Increase in Net Dividend
The Board of Directors proposed a dis-
tribution to shareholders of 991404033 per
share (2005 dividend 991404030) reflecting
confidence in the prospects of the Group
going forward
Outlook 2007-2009
growth in revenues and net income
With the Grouprsquos transformation complete Thomsonrsquos financial focus over the 2007-
2009 period will be to grow revenues and
net income
Thomson serves growing Media Enter-
tainment amp Communications marketsmdashfor
which external estimates(1) indicate com-
pound growth of around 6 over the last
FINANCIAL AND
OPERATIONAL PERFORMANCE
Full year 2006 results
saw a return to profitability
and leave Thomson
well positioned at
the heart of convergence
and digital video
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 6166
59 Thomson Panorama 2006
five years Our digital and electronic busi-
nesses now represent two-thirds of rev-
enues and we believe they are growing
faster than the overall market offsetting
the maturing physical media businesses
Given this profile the Group expects its
revenue growth to be more modest in
2007 but to gather pace over the period
and our overall objective is to show com-pound growth over 2007-2009 in line with
or faster than the overall market
The 2007-2009 period is also expected
to see a sharply reduced impact from
residual Non-Core activities with an end
to losses from the Discontinued Activities
perimeter after 2007 Accordingly Thom-
sonrsquos ambition is to turn its Core Business
growth and profitability and lower impact
from Non-Core into strong growth in net
income over the period 2007-2009
Business operations
Continuous performance improvement is
fundamental to Thomsonrsquos commitment to
create sustainable business models and
long-term value for all stakeholders The
ambitious Group-wide programs launched
in 2004 to improve productivity and
enhance overall performance producedsubstantial results in 2006 and led to new
and strong initiatives for long-term growth
As of the second half of 2006 six ldquoKey
Programsrdquo are monitored at Group level
Clients Software Product Introduction
Operations Transformation and Talent
Management
KEY PROGRAMS IN PLACE
Program Focus
Clients Thomsonrsquos clientregional diversification and
growth of the existing business
through improved Sales amp Marketing
Software Development of integrated software platforms
in all markets (post-production distribution
delivery) and for all types of customer
(professional prosumerhellip)
Product Introduction Ensuring new product roadmaps are in line
with strategy and resource needs have been
identifiedOperations Improving the Grouprsquos cost base cash
generation and working capital
Transformation Multiple programs including initiatives to
improving customer relationship management
worldwide supply chain management
IT transformation as well as Thomsonrsquos RampD
footprint
Talent Management Leveraging human assets with a focus on
talent retention and acquisition
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 6266
60 Thomson Panorama 2006
SUMMARY RESULTS FULL YEAR 2006
In 991404 millions unless otherwise stated 2006(1) 2005(1)
Net revenues 5854 5591(1)
Core Business net revenues 5747 5335
Services 2489 2487
Systems 2684 2262
Technology 547 546
Corporate 27 40
Non-Core continuing operations net revenues 107 256
Core Business EBIT(2) 504 512
Services 160 205
Systems 132 109
Technology 289 277Corporate (77) (79)
EBIT from Non-Core continuing operations (25) (122)
(1) Restated with 2006 discontinued activities according to IFRS 5
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 6366
61 Thomson Panorama 2006
Year ended December 31in 991404 except number of shares 2006 2005 2004
Year ended December 31in 991404 millions 2006 2005(1) 2004(1)
CONSOLIDATED STATEMENTS OF OPERATIONS
(1) Restated with 2006 discontinued activities according to IFRS 5
(2) After deduction of the interests net of tax paid on the subordinated perpetual notes during the period
Continuing operations
Revenues 5854 5591 5980
Cost of sales (4474) (4240) (4594)
Gross margin 1380 1351 1386
Selling marketing general and administrative expenses (674) (638) (653)
Other income (expense) 52 (96) (69)
Research and development expenses (279) (227) (201)
Profit from continuing operations before tax and net finance costs 479 390 463
Interest income 19 30 52
Interest expense (108) (108) (54)
Other financial income (expense) (111) 36 (26)
Finance costs ndash net (200) (42) (28)
Share of profit (loss) from associates (86) (82) (20)
Income tax ndash (68) (93)
Profit from continuing operations 193 198 322
Discontinued operations
Profit (loss) from discontinued operations (138) (771) (883)
Net income (loss) 55 (573) (561)
Attributable to
Equity Holders 55 (574) (559)
Minority interests ndash 1 (2)
Weighted average number of shares
outstandingmdashbasic net of treasury stock 261188858 266539917 273646869
Earnings per share from continuing operations
Basic(2) 067 074 118
Diluted 063 042 111
Earnings per share from discontinued operations
Basic (053) (289) (323)
Diluted (048) (262) (296)Total earnings per share
Basic(2) 014 (215) (205)
Diluted 015 (220) (185)
8122019 Panorama 2006
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62 Thomson Panorama 2006
CONSOLIDATED BALANCE SHEETS
In 991404 millions December 31 December 31 January 1 December 31 2006 2005 2005(1) 2004
ASSETS
Non-current assets
Property plant and equipment 813 886 1051 1051
Goodwill 1714 1756 1186 1178
Other intangible assets 1071 1150 924 924
Investments in associates 12 204 260 260
Investments and financial assets available-for-sale 266 341 139 113
Derivative financial instruments 7 1 11 ndash
Contract advances 129 173 179 179
Deferred tax assets 397 379 307 301
Other non-current assets 110 182 133 136
Total non-current assets 4519 5072 4190 4142
Current assets
Inventories 366 333 503 568
Trade accounts and notes receivable 1018 1315 1232 1180
Current accounts with associates and joint ventures 97 115 143 143
Derivative financial instruments 8 9 115 ndash
Other current assets 535 644 483 616
Marketable securities ndash 7 58 58
Cash and cash equivalents 1311 996 1845 1848
Assets classified as held for sale 264 369 80 ndash
Total current assets 3599 3788 4459 4413
Total assets 8118 8860 8649 8555
(1) Including the impacts of the first-time application related to IAS 32 and 39 on financial instruments and IFRS 5 on non-current assets held for sale and
discontinued operations
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 6566
63 Thomson Panorama 2006
In 991404 millions December 31 December 31 January 1 December 31 2006 2005 2005(1) 2004
SHAREHOLDERSrsquo EQUITY AND LIABILITIES
Shareholdersrsquo equity
Common stock (273871296 shares at
December 31 2006
with nominal value of euro 375 per share) 1027 1025 1025 1025
Trade accounts and notes payable 1032 1164 1199 1226
Accrued employee expenses 165 166 158 163
Income tax payable 57 47 60 60
Other current liabilities 671 750 746 800
Payables on acquisition of companies 13 138 84 84
Liabilities directly associated with
assets classified as held for sale 232 470 88 ndash
Total current liabilities 3681 4393 3602 3459
Total liabilities 5999 6644 6251 6062
Total shareholderrsquos equity and liabilities 8118 8860 8649 8555
(1) Including the impacts of the first-time application related to IAS 32 and 39 on financial instruments and IFRS 5 on non-current assets held for sale and
discontinued operations
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 6666
Creation and lay-out
Photo credits Nathalie BerhingGAMMA ndash Steacutephane de Bourgies ndash Jean-Franccedilois DeroubaixGAMMA ndash Christine Donnier- ValentinGAMMA ndash Cars copy 2006 Disney Enterprises IncPixar All Rights Reserved ndash Dreamgirls copy 2006 DREAMWORKS
LLC and PARAMOUNT PICTURES All Rights Reserved ndash Poseidon copy 2006 Warner Bros Pictures ndash Sony Bravia Paint
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 3866
The growing market for Network Services
The decision by the UKrsquos leading commercial broadcaster to entrust its network services to
Thomsonrsquos Network Services operations illustrates a growing global trend as broadcasters focus increasingly on
programming and meeting customer needs they turn to highly-skilled specialists to handle technology
The long-term agreement with ITV means that the broadcaster will benefit from enhanced service and new technology
as well as more flexibility in launching new services
36 Thomson Panorama 2006
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 3966
Left Thomsonrsquos Technicolor
Interactive Services provided in-game
cinematics and voice recording for
Microsoft Game Studiosrsquo Gears of War
Right Thomsonrsquos London-based MPC
subsidiary carried out post-production
work including computer graphics
on Sony Braviarsquos award-wirring colorful
Paint commercial
installed at several landmark theatres in
Los Angeles in 2006 including Mann The-
atresrsquo Graumanrsquos Chinese and the Village
in Westwood
Thomson maintained a leading position in
film processing and printing in 2006 in a
market where volumes were stable Tech-
nicolor handled worldwide release printingfor two of the five 2007 Oscar nominees
for Best PicturemdashMartin Scorcesersquos The
Departed and Clint Eastwoodrsquos Letters
from Iwo Jimamdashas well as release print-
ing for two of the three Best Animated Film
nominees Cars and Happy Feet
As part of its ongoing commitment to meet
customer needs worldwide a state-of-the-
art film and post-production facility was inau-
gurated at Ciudad de la Imagen in Madrid in
2006 It is already becoming known as the
countryrsquos most comprehensive postproduc-
tion facility with advanced film processingand digital intermediate capabilities
Content Services
Thomson continued to leverage its long-
standing strength in post-production
skills and services through expansion into
emerging and high-growth market seg-
ments such as content services for the
video-gaming advertising and broadcast
markets
In order to better serve the growing mar-
ket for entertainment content for mobile
devices Thomson unveiled new mobile
content preparation and distribution capa-
bilities in the US and the UK in 2006 Facili-
ties equipped with state-of-the-art produc-
tion and post-production technologies will
handle the preparation and optimization
of a wide range of digital entertainmentcontentmdashincluding movies TV episodes
and music videosmdashfor distribution to
mobile devices The dedicated services
complement the Grouprsquos extensive global
electronic distribution infrastructure which
enables Thomson to deliver mobile con-
tent to online delivery services as well as
to network operators for final transmission
to mobile customers
Thomson also made progress in the
development of an integrated digital asset
management solution in 2006 known as
MIDAS (Media Ingest Distribution andStorage) MIDAS is a software and hard-
ware platform for digital content prepara-
tion storage security and distribution
From the first day of production planning
through every stage of post-production
and content distribution MIDAS creates
a digital workflow that allows customers
to manage projects remotely and provides
for rapid and seamless global file delivery
streaming and collaboration
TECHNOLOGY SYSTEMS SERVICES
37 Thomson Panorama 2006
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 4066
While expanding into newer markets
growing demand for post-production ser-
vices and visual effects continued to fuel
Thomsonrsquos ongoing content services activ-
ities Among the yearrsquos most noteworthy
achievements were portfolios of services
for such feature films as The Departed
Letters from Iwo Jima and Pirates of the
Caribbean Dead Manrsquos Chest ThomsonrsquosMoving Picture Company (MPC) also pro-
vided high-end visual effects for the three
films nominated for Achievement in Visual
Effects Pirates of the Caribbean Posei-
don and Superman Returns
Confirming the Grouprsquos solid growth in
content services for the video game indus-
try Thomson unveiled a new dedicated
Interactive Services facility in Burbank
California in 2006 Sierra Entertainment
a division of Vivendi Games selected
Thomson to prov ide cinemat ic anima-
tion voice casting and recording sound
design and mixing services for The Leg-
end of Spyrotrade A New Beginning Like-
wise Thomson provided a wide range of
services to support Konamirsquos The SilentHill Experience released simultaneously
with the motion picture
The strategic investment in one of Indiarsquos
leading animation and gaming cinemat-
ics firms announced in February 2007
strengthened Thomsonrsquos position in Asia
for a variety of content services Located in
Bangalore India Paprikaas provides cre-
ldquoIn 1998 I joined Thomson as a Plant Manager within Home Entertainment Services
and was eventually made responsible for the expansion and management of our
Guadalajara DVD operations In summary Irsquove had great opportunities to gain experience
in international operations strategic planning and operational excellence I recently
joined Content Services where Irsquoll be leading the start-up and integration of new activities
in Beijing Bangalore and other emerging markets Content Services is dynamic and
growing and Irsquom looking forward to expanding the business in Asia while improving
our operational performance in North America and Europerdquo
Mike Hayden Vice President Operations amp Strategic Projects Content Services
of the Grouprsquos divisions and profit centersIn the context of the budgetary procedure
performance measurement indicators are
calculated by the divisions analyzed and
reviewed monthly to serve as a reference
for the Grouprsquos monthly reporting
Management reporting and
closing period work
Th om so n uses a co mmon char t of
accounts which is regularly updated The
principal accounting and financial figures
of the operational and functional depart-
ments consolidated at Group level are
analyzed by the Grouprsquos management
control team and reviewed by the Grouprsquos
Executive Committee
The closing process for the half-year and
annual consolidated financial statementsoccurs in two steps The first step con-
sists of a ldquohard closerdquo completed in May
and September leading to a first review by
the statutory auditors The second step
occurs in July and in JanuaryFebruary and
involves the finalization of half-year and
annual consolidated financial statements
under IFRS The Group then proceeds
once a year with a reconciliation of these
results in accordance with US GAAP
Preparation of financial statements
The financial statements are prepared jointly by the finance department and the
General Secretary They are based on
information reported through the annual
reporting and accounting consolidation
processes and on operational and mar-
ket information which is specifically cen-
tralized for the preparation of Thomsonrsquos
Document de Reacutefeacuterence in France and
the submission of Form 20-F in the United
States Half-year and annual financial infor-
mation is reviewed by the Grouprsquos Audit
Committee
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 6066
58 Thomson Panorama 2006
(1) Source PriceWaterhouseCoopers ndash
ldquoGlobal Entertainment and Media Outlook 2006-10rdquo
Revenue growth
Thomson achieved consolidated 2006
net revenues of 9914045854 million up from
9914045591 million in 2005 Revenues for
the Core Business reached 9914045747 mil-
lion (9914045776 million at constant currency)
representing 83 growth over 2005 at
constant currency
Overall the Grouprsquos key growth busi-
nessesmdashContent Services Network
Services Access Products for telecom
operators and our Broadcast amp Networks
businesses (Grass Valley and Network
Software)mdashincreased strongly year-on-
year and accounted for over a third of
Group revenues against less than a quar-
ter in 2005
Thomsonrsquos Core Business EBIT for 2006
was euro504 million representing a Core
Business EBIT margin of 88 Thisreflected growth in some key businesses
and cost actions across the Group off-
setting a significant investment in research
and development and some increase in
restructuring expenses
Increased spend on RampD
Research and development expenditure
charged in the Core Business (net of
external funding) rose from 991404221 million in
2005 to 991404279 million in 2006 an increase
of 26 principally in the Systems divi-
sion The Group expanded the number ofproducts and services in the development
phase across its businesses
Return to profit
Losses in Non-Core Continuing and Dis-
continued operations were substantially
lower year-on-year reflecting principally
the exit from heavily loss-making Displays
activities in 2005 and intensified cost-sav-
ing programs in 2006 A major revision
and harmonization of the Grouprsquos North
American healthcare obligations gave rise
to substantial one-time gains and Thom-
son also initiated significant restructuring
of its French Non-Core operations
The good performance of the Core Busi-
ness lower Non-Core and Discontinued
losses and a low reported tax chargeenabled the Group to return a net profit of
99140455 million in 2006 compared to a loss of
991404573 million in the previous year
Good cash flow
strengthened balance sheet
Thomson generated good free cash flow
and strengthened its balance sheet in
2006 Total net financial liabilities on the
balance sheet fell by 991404460 million reflect-
ing a 99140493 million fall in financial and acqui-
sition-related debts and a 991404367 million
reduction in retirement benefit obligations(including healthcare)
Increase in Net Dividend
The Board of Directors proposed a dis-
tribution to shareholders of 991404033 per
share (2005 dividend 991404030) reflecting
confidence in the prospects of the Group
going forward
Outlook 2007-2009
growth in revenues and net income
With the Grouprsquos transformation complete Thomsonrsquos financial focus over the 2007-
2009 period will be to grow revenues and
net income
Thomson serves growing Media Enter-
tainment amp Communications marketsmdashfor
which external estimates(1) indicate com-
pound growth of around 6 over the last
FINANCIAL AND
OPERATIONAL PERFORMANCE
Full year 2006 results
saw a return to profitability
and leave Thomson
well positioned at
the heart of convergence
and digital video
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 6166
59 Thomson Panorama 2006
five years Our digital and electronic busi-
nesses now represent two-thirds of rev-
enues and we believe they are growing
faster than the overall market offsetting
the maturing physical media businesses
Given this profile the Group expects its
revenue growth to be more modest in
2007 but to gather pace over the period
and our overall objective is to show com-pound growth over 2007-2009 in line with
or faster than the overall market
The 2007-2009 period is also expected
to see a sharply reduced impact from
residual Non-Core activities with an end
to losses from the Discontinued Activities
perimeter after 2007 Accordingly Thom-
sonrsquos ambition is to turn its Core Business
growth and profitability and lower impact
from Non-Core into strong growth in net
income over the period 2007-2009
Business operations
Continuous performance improvement is
fundamental to Thomsonrsquos commitment to
create sustainable business models and
long-term value for all stakeholders The
ambitious Group-wide programs launched
in 2004 to improve productivity and
enhance overall performance producedsubstantial results in 2006 and led to new
and strong initiatives for long-term growth
As of the second half of 2006 six ldquoKey
Programsrdquo are monitored at Group level
Clients Software Product Introduction
Operations Transformation and Talent
Management
KEY PROGRAMS IN PLACE
Program Focus
Clients Thomsonrsquos clientregional diversification and
growth of the existing business
through improved Sales amp Marketing
Software Development of integrated software platforms
in all markets (post-production distribution
delivery) and for all types of customer
(professional prosumerhellip)
Product Introduction Ensuring new product roadmaps are in line
with strategy and resource needs have been
identifiedOperations Improving the Grouprsquos cost base cash
generation and working capital
Transformation Multiple programs including initiatives to
improving customer relationship management
worldwide supply chain management
IT transformation as well as Thomsonrsquos RampD
footprint
Talent Management Leveraging human assets with a focus on
talent retention and acquisition
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 6266
60 Thomson Panorama 2006
SUMMARY RESULTS FULL YEAR 2006
In 991404 millions unless otherwise stated 2006(1) 2005(1)
Net revenues 5854 5591(1)
Core Business net revenues 5747 5335
Services 2489 2487
Systems 2684 2262
Technology 547 546
Corporate 27 40
Non-Core continuing operations net revenues 107 256
Core Business EBIT(2) 504 512
Services 160 205
Systems 132 109
Technology 289 277Corporate (77) (79)
EBIT from Non-Core continuing operations (25) (122)
(1) Restated with 2006 discontinued activities according to IFRS 5
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 6366
61 Thomson Panorama 2006
Year ended December 31in 991404 except number of shares 2006 2005 2004
Year ended December 31in 991404 millions 2006 2005(1) 2004(1)
CONSOLIDATED STATEMENTS OF OPERATIONS
(1) Restated with 2006 discontinued activities according to IFRS 5
(2) After deduction of the interests net of tax paid on the subordinated perpetual notes during the period
Continuing operations
Revenues 5854 5591 5980
Cost of sales (4474) (4240) (4594)
Gross margin 1380 1351 1386
Selling marketing general and administrative expenses (674) (638) (653)
Other income (expense) 52 (96) (69)
Research and development expenses (279) (227) (201)
Profit from continuing operations before tax and net finance costs 479 390 463
Interest income 19 30 52
Interest expense (108) (108) (54)
Other financial income (expense) (111) 36 (26)
Finance costs ndash net (200) (42) (28)
Share of profit (loss) from associates (86) (82) (20)
Income tax ndash (68) (93)
Profit from continuing operations 193 198 322
Discontinued operations
Profit (loss) from discontinued operations (138) (771) (883)
Net income (loss) 55 (573) (561)
Attributable to
Equity Holders 55 (574) (559)
Minority interests ndash 1 (2)
Weighted average number of shares
outstandingmdashbasic net of treasury stock 261188858 266539917 273646869
Earnings per share from continuing operations
Basic(2) 067 074 118
Diluted 063 042 111
Earnings per share from discontinued operations
Basic (053) (289) (323)
Diluted (048) (262) (296)Total earnings per share
Basic(2) 014 (215) (205)
Diluted 015 (220) (185)
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 6466
62 Thomson Panorama 2006
CONSOLIDATED BALANCE SHEETS
In 991404 millions December 31 December 31 January 1 December 31 2006 2005 2005(1) 2004
ASSETS
Non-current assets
Property plant and equipment 813 886 1051 1051
Goodwill 1714 1756 1186 1178
Other intangible assets 1071 1150 924 924
Investments in associates 12 204 260 260
Investments and financial assets available-for-sale 266 341 139 113
Derivative financial instruments 7 1 11 ndash
Contract advances 129 173 179 179
Deferred tax assets 397 379 307 301
Other non-current assets 110 182 133 136
Total non-current assets 4519 5072 4190 4142
Current assets
Inventories 366 333 503 568
Trade accounts and notes receivable 1018 1315 1232 1180
Current accounts with associates and joint ventures 97 115 143 143
Derivative financial instruments 8 9 115 ndash
Other current assets 535 644 483 616
Marketable securities ndash 7 58 58
Cash and cash equivalents 1311 996 1845 1848
Assets classified as held for sale 264 369 80 ndash
Total current assets 3599 3788 4459 4413
Total assets 8118 8860 8649 8555
(1) Including the impacts of the first-time application related to IAS 32 and 39 on financial instruments and IFRS 5 on non-current assets held for sale and
discontinued operations
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 6566
63 Thomson Panorama 2006
In 991404 millions December 31 December 31 January 1 December 31 2006 2005 2005(1) 2004
SHAREHOLDERSrsquo EQUITY AND LIABILITIES
Shareholdersrsquo equity
Common stock (273871296 shares at
December 31 2006
with nominal value of euro 375 per share) 1027 1025 1025 1025
Trade accounts and notes payable 1032 1164 1199 1226
Accrued employee expenses 165 166 158 163
Income tax payable 57 47 60 60
Other current liabilities 671 750 746 800
Payables on acquisition of companies 13 138 84 84
Liabilities directly associated with
assets classified as held for sale 232 470 88 ndash
Total current liabilities 3681 4393 3602 3459
Total liabilities 5999 6644 6251 6062
Total shareholderrsquos equity and liabilities 8118 8860 8649 8555
(1) Including the impacts of the first-time application related to IAS 32 and 39 on financial instruments and IFRS 5 on non-current assets held for sale and
discontinued operations
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 6666
Creation and lay-out
Photo credits Nathalie BerhingGAMMA ndash Steacutephane de Bourgies ndash Jean-Franccedilois DeroubaixGAMMA ndash Christine Donnier- ValentinGAMMA ndash Cars copy 2006 Disney Enterprises IncPixar All Rights Reserved ndash Dreamgirls copy 2006 DREAMWORKS
LLC and PARAMOUNT PICTURES All Rights Reserved ndash Poseidon copy 2006 Warner Bros Pictures ndash Sony Bravia Paint
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 3966
Left Thomsonrsquos Technicolor
Interactive Services provided in-game
cinematics and voice recording for
Microsoft Game Studiosrsquo Gears of War
Right Thomsonrsquos London-based MPC
subsidiary carried out post-production
work including computer graphics
on Sony Braviarsquos award-wirring colorful
Paint commercial
installed at several landmark theatres in
Los Angeles in 2006 including Mann The-
atresrsquo Graumanrsquos Chinese and the Village
in Westwood
Thomson maintained a leading position in
film processing and printing in 2006 in a
market where volumes were stable Tech-
nicolor handled worldwide release printingfor two of the five 2007 Oscar nominees
for Best PicturemdashMartin Scorcesersquos The
Departed and Clint Eastwoodrsquos Letters
from Iwo Jimamdashas well as release print-
ing for two of the three Best Animated Film
nominees Cars and Happy Feet
As part of its ongoing commitment to meet
customer needs worldwide a state-of-the-
art film and post-production facility was inau-
gurated at Ciudad de la Imagen in Madrid in
2006 It is already becoming known as the
countryrsquos most comprehensive postproduc-
tion facility with advanced film processingand digital intermediate capabilities
Content Services
Thomson continued to leverage its long-
standing strength in post-production
skills and services through expansion into
emerging and high-growth market seg-
ments such as content services for the
video-gaming advertising and broadcast
markets
In order to better serve the growing mar-
ket for entertainment content for mobile
devices Thomson unveiled new mobile
content preparation and distribution capa-
bilities in the US and the UK in 2006 Facili-
ties equipped with state-of-the-art produc-
tion and post-production technologies will
handle the preparation and optimization
of a wide range of digital entertainmentcontentmdashincluding movies TV episodes
and music videosmdashfor distribution to
mobile devices The dedicated services
complement the Grouprsquos extensive global
electronic distribution infrastructure which
enables Thomson to deliver mobile con-
tent to online delivery services as well as
to network operators for final transmission
to mobile customers
Thomson also made progress in the
development of an integrated digital asset
management solution in 2006 known as
MIDAS (Media Ingest Distribution andStorage) MIDAS is a software and hard-
ware platform for digital content prepara-
tion storage security and distribution
From the first day of production planning
through every stage of post-production
and content distribution MIDAS creates
a digital workflow that allows customers
to manage projects remotely and provides
for rapid and seamless global file delivery
streaming and collaboration
TECHNOLOGY SYSTEMS SERVICES
37 Thomson Panorama 2006
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 4066
While expanding into newer markets
growing demand for post-production ser-
vices and visual effects continued to fuel
Thomsonrsquos ongoing content services activ-
ities Among the yearrsquos most noteworthy
achievements were portfolios of services
for such feature films as The Departed
Letters from Iwo Jima and Pirates of the
Caribbean Dead Manrsquos Chest ThomsonrsquosMoving Picture Company (MPC) also pro-
vided high-end visual effects for the three
films nominated for Achievement in Visual
Effects Pirates of the Caribbean Posei-
don and Superman Returns
Confirming the Grouprsquos solid growth in
content services for the video game indus-
try Thomson unveiled a new dedicated
Interactive Services facility in Burbank
California in 2006 Sierra Entertainment
a division of Vivendi Games selected
Thomson to prov ide cinemat ic anima-
tion voice casting and recording sound
design and mixing services for The Leg-
end of Spyrotrade A New Beginning Like-
wise Thomson provided a wide range of
services to support Konamirsquos The SilentHill Experience released simultaneously
with the motion picture
The strategic investment in one of Indiarsquos
leading animation and gaming cinemat-
ics firms announced in February 2007
strengthened Thomsonrsquos position in Asia
for a variety of content services Located in
Bangalore India Paprikaas provides cre-
ldquoIn 1998 I joined Thomson as a Plant Manager within Home Entertainment Services
and was eventually made responsible for the expansion and management of our
Guadalajara DVD operations In summary Irsquove had great opportunities to gain experience
in international operations strategic planning and operational excellence I recently
joined Content Services where Irsquoll be leading the start-up and integration of new activities
in Beijing Bangalore and other emerging markets Content Services is dynamic and
growing and Irsquom looking forward to expanding the business in Asia while improving
our operational performance in North America and Europerdquo
Mike Hayden Vice President Operations amp Strategic Projects Content Services
of the Grouprsquos divisions and profit centersIn the context of the budgetary procedure
performance measurement indicators are
calculated by the divisions analyzed and
reviewed monthly to serve as a reference
for the Grouprsquos monthly reporting
Management reporting and
closing period work
Th om so n uses a co mmon char t of
accounts which is regularly updated The
principal accounting and financial figures
of the operational and functional depart-
ments consolidated at Group level are
analyzed by the Grouprsquos management
control team and reviewed by the Grouprsquos
Executive Committee
The closing process for the half-year and
annual consolidated financial statementsoccurs in two steps The first step con-
sists of a ldquohard closerdquo completed in May
and September leading to a first review by
the statutory auditors The second step
occurs in July and in JanuaryFebruary and
involves the finalization of half-year and
annual consolidated financial statements
under IFRS The Group then proceeds
once a year with a reconciliation of these
results in accordance with US GAAP
Preparation of financial statements
The financial statements are prepared jointly by the finance department and the
General Secretary They are based on
information reported through the annual
reporting and accounting consolidation
processes and on operational and mar-
ket information which is specifically cen-
tralized for the preparation of Thomsonrsquos
Document de Reacutefeacuterence in France and
the submission of Form 20-F in the United
States Half-year and annual financial infor-
mation is reviewed by the Grouprsquos Audit
Committee
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 6066
58 Thomson Panorama 2006
(1) Source PriceWaterhouseCoopers ndash
ldquoGlobal Entertainment and Media Outlook 2006-10rdquo
Revenue growth
Thomson achieved consolidated 2006
net revenues of 9914045854 million up from
9914045591 million in 2005 Revenues for
the Core Business reached 9914045747 mil-
lion (9914045776 million at constant currency)
representing 83 growth over 2005 at
constant currency
Overall the Grouprsquos key growth busi-
nessesmdashContent Services Network
Services Access Products for telecom
operators and our Broadcast amp Networks
businesses (Grass Valley and Network
Software)mdashincreased strongly year-on-
year and accounted for over a third of
Group revenues against less than a quar-
ter in 2005
Thomsonrsquos Core Business EBIT for 2006
was euro504 million representing a Core
Business EBIT margin of 88 Thisreflected growth in some key businesses
and cost actions across the Group off-
setting a significant investment in research
and development and some increase in
restructuring expenses
Increased spend on RampD
Research and development expenditure
charged in the Core Business (net of
external funding) rose from 991404221 million in
2005 to 991404279 million in 2006 an increase
of 26 principally in the Systems divi-
sion The Group expanded the number ofproducts and services in the development
phase across its businesses
Return to profit
Losses in Non-Core Continuing and Dis-
continued operations were substantially
lower year-on-year reflecting principally
the exit from heavily loss-making Displays
activities in 2005 and intensified cost-sav-
ing programs in 2006 A major revision
and harmonization of the Grouprsquos North
American healthcare obligations gave rise
to substantial one-time gains and Thom-
son also initiated significant restructuring
of its French Non-Core operations
The good performance of the Core Busi-
ness lower Non-Core and Discontinued
losses and a low reported tax chargeenabled the Group to return a net profit of
99140455 million in 2006 compared to a loss of
991404573 million in the previous year
Good cash flow
strengthened balance sheet
Thomson generated good free cash flow
and strengthened its balance sheet in
2006 Total net financial liabilities on the
balance sheet fell by 991404460 million reflect-
ing a 99140493 million fall in financial and acqui-
sition-related debts and a 991404367 million
reduction in retirement benefit obligations(including healthcare)
Increase in Net Dividend
The Board of Directors proposed a dis-
tribution to shareholders of 991404033 per
share (2005 dividend 991404030) reflecting
confidence in the prospects of the Group
going forward
Outlook 2007-2009
growth in revenues and net income
With the Grouprsquos transformation complete Thomsonrsquos financial focus over the 2007-
2009 period will be to grow revenues and
net income
Thomson serves growing Media Enter-
tainment amp Communications marketsmdashfor
which external estimates(1) indicate com-
pound growth of around 6 over the last
FINANCIAL AND
OPERATIONAL PERFORMANCE
Full year 2006 results
saw a return to profitability
and leave Thomson
well positioned at
the heart of convergence
and digital video
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 6166
59 Thomson Panorama 2006
five years Our digital and electronic busi-
nesses now represent two-thirds of rev-
enues and we believe they are growing
faster than the overall market offsetting
the maturing physical media businesses
Given this profile the Group expects its
revenue growth to be more modest in
2007 but to gather pace over the period
and our overall objective is to show com-pound growth over 2007-2009 in line with
or faster than the overall market
The 2007-2009 period is also expected
to see a sharply reduced impact from
residual Non-Core activities with an end
to losses from the Discontinued Activities
perimeter after 2007 Accordingly Thom-
sonrsquos ambition is to turn its Core Business
growth and profitability and lower impact
from Non-Core into strong growth in net
income over the period 2007-2009
Business operations
Continuous performance improvement is
fundamental to Thomsonrsquos commitment to
create sustainable business models and
long-term value for all stakeholders The
ambitious Group-wide programs launched
in 2004 to improve productivity and
enhance overall performance producedsubstantial results in 2006 and led to new
and strong initiatives for long-term growth
As of the second half of 2006 six ldquoKey
Programsrdquo are monitored at Group level
Clients Software Product Introduction
Operations Transformation and Talent
Management
KEY PROGRAMS IN PLACE
Program Focus
Clients Thomsonrsquos clientregional diversification and
growth of the existing business
through improved Sales amp Marketing
Software Development of integrated software platforms
in all markets (post-production distribution
delivery) and for all types of customer
(professional prosumerhellip)
Product Introduction Ensuring new product roadmaps are in line
with strategy and resource needs have been
identifiedOperations Improving the Grouprsquos cost base cash
generation and working capital
Transformation Multiple programs including initiatives to
improving customer relationship management
worldwide supply chain management
IT transformation as well as Thomsonrsquos RampD
footprint
Talent Management Leveraging human assets with a focus on
talent retention and acquisition
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 6266
60 Thomson Panorama 2006
SUMMARY RESULTS FULL YEAR 2006
In 991404 millions unless otherwise stated 2006(1) 2005(1)
Net revenues 5854 5591(1)
Core Business net revenues 5747 5335
Services 2489 2487
Systems 2684 2262
Technology 547 546
Corporate 27 40
Non-Core continuing operations net revenues 107 256
Core Business EBIT(2) 504 512
Services 160 205
Systems 132 109
Technology 289 277Corporate (77) (79)
EBIT from Non-Core continuing operations (25) (122)
(1) Restated with 2006 discontinued activities according to IFRS 5
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 6366
61 Thomson Panorama 2006
Year ended December 31in 991404 except number of shares 2006 2005 2004
Year ended December 31in 991404 millions 2006 2005(1) 2004(1)
CONSOLIDATED STATEMENTS OF OPERATIONS
(1) Restated with 2006 discontinued activities according to IFRS 5
(2) After deduction of the interests net of tax paid on the subordinated perpetual notes during the period
Continuing operations
Revenues 5854 5591 5980
Cost of sales (4474) (4240) (4594)
Gross margin 1380 1351 1386
Selling marketing general and administrative expenses (674) (638) (653)
Other income (expense) 52 (96) (69)
Research and development expenses (279) (227) (201)
Profit from continuing operations before tax and net finance costs 479 390 463
Interest income 19 30 52
Interest expense (108) (108) (54)
Other financial income (expense) (111) 36 (26)
Finance costs ndash net (200) (42) (28)
Share of profit (loss) from associates (86) (82) (20)
Income tax ndash (68) (93)
Profit from continuing operations 193 198 322
Discontinued operations
Profit (loss) from discontinued operations (138) (771) (883)
Net income (loss) 55 (573) (561)
Attributable to
Equity Holders 55 (574) (559)
Minority interests ndash 1 (2)
Weighted average number of shares
outstandingmdashbasic net of treasury stock 261188858 266539917 273646869
Earnings per share from continuing operations
Basic(2) 067 074 118
Diluted 063 042 111
Earnings per share from discontinued operations
Basic (053) (289) (323)
Diluted (048) (262) (296)Total earnings per share
Basic(2) 014 (215) (205)
Diluted 015 (220) (185)
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 6466
62 Thomson Panorama 2006
CONSOLIDATED BALANCE SHEETS
In 991404 millions December 31 December 31 January 1 December 31 2006 2005 2005(1) 2004
ASSETS
Non-current assets
Property plant and equipment 813 886 1051 1051
Goodwill 1714 1756 1186 1178
Other intangible assets 1071 1150 924 924
Investments in associates 12 204 260 260
Investments and financial assets available-for-sale 266 341 139 113
Derivative financial instruments 7 1 11 ndash
Contract advances 129 173 179 179
Deferred tax assets 397 379 307 301
Other non-current assets 110 182 133 136
Total non-current assets 4519 5072 4190 4142
Current assets
Inventories 366 333 503 568
Trade accounts and notes receivable 1018 1315 1232 1180
Current accounts with associates and joint ventures 97 115 143 143
Derivative financial instruments 8 9 115 ndash
Other current assets 535 644 483 616
Marketable securities ndash 7 58 58
Cash and cash equivalents 1311 996 1845 1848
Assets classified as held for sale 264 369 80 ndash
Total current assets 3599 3788 4459 4413
Total assets 8118 8860 8649 8555
(1) Including the impacts of the first-time application related to IAS 32 and 39 on financial instruments and IFRS 5 on non-current assets held for sale and
discontinued operations
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 6566
63 Thomson Panorama 2006
In 991404 millions December 31 December 31 January 1 December 31 2006 2005 2005(1) 2004
SHAREHOLDERSrsquo EQUITY AND LIABILITIES
Shareholdersrsquo equity
Common stock (273871296 shares at
December 31 2006
with nominal value of euro 375 per share) 1027 1025 1025 1025
Trade accounts and notes payable 1032 1164 1199 1226
Accrued employee expenses 165 166 158 163
Income tax payable 57 47 60 60
Other current liabilities 671 750 746 800
Payables on acquisition of companies 13 138 84 84
Liabilities directly associated with
assets classified as held for sale 232 470 88 ndash
Total current liabilities 3681 4393 3602 3459
Total liabilities 5999 6644 6251 6062
Total shareholderrsquos equity and liabilities 8118 8860 8649 8555
(1) Including the impacts of the first-time application related to IAS 32 and 39 on financial instruments and IFRS 5 on non-current assets held for sale and
discontinued operations
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 6666
Creation and lay-out
Photo credits Nathalie BerhingGAMMA ndash Steacutephane de Bourgies ndash Jean-Franccedilois DeroubaixGAMMA ndash Christine Donnier- ValentinGAMMA ndash Cars copy 2006 Disney Enterprises IncPixar All Rights Reserved ndash Dreamgirls copy 2006 DREAMWORKS
LLC and PARAMOUNT PICTURES All Rights Reserved ndash Poseidon copy 2006 Warner Bros Pictures ndash Sony Bravia Paint
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 4066
While expanding into newer markets
growing demand for post-production ser-
vices and visual effects continued to fuel
Thomsonrsquos ongoing content services activ-
ities Among the yearrsquos most noteworthy
achievements were portfolios of services
for such feature films as The Departed
Letters from Iwo Jima and Pirates of the
Caribbean Dead Manrsquos Chest ThomsonrsquosMoving Picture Company (MPC) also pro-
vided high-end visual effects for the three
films nominated for Achievement in Visual
Effects Pirates of the Caribbean Posei-
don and Superman Returns
Confirming the Grouprsquos solid growth in
content services for the video game indus-
try Thomson unveiled a new dedicated
Interactive Services facility in Burbank
California in 2006 Sierra Entertainment
a division of Vivendi Games selected
Thomson to prov ide cinemat ic anima-
tion voice casting and recording sound
design and mixing services for The Leg-
end of Spyrotrade A New Beginning Like-
wise Thomson provided a wide range of
services to support Konamirsquos The SilentHill Experience released simultaneously
with the motion picture
The strategic investment in one of Indiarsquos
leading animation and gaming cinemat-
ics firms announced in February 2007
strengthened Thomsonrsquos position in Asia
for a variety of content services Located in
Bangalore India Paprikaas provides cre-
ldquoIn 1998 I joined Thomson as a Plant Manager within Home Entertainment Services
and was eventually made responsible for the expansion and management of our
Guadalajara DVD operations In summary Irsquove had great opportunities to gain experience
in international operations strategic planning and operational excellence I recently
joined Content Services where Irsquoll be leading the start-up and integration of new activities
in Beijing Bangalore and other emerging markets Content Services is dynamic and
growing and Irsquom looking forward to expanding the business in Asia while improving
our operational performance in North America and Europerdquo
Mike Hayden Vice President Operations amp Strategic Projects Content Services
of the Grouprsquos divisions and profit centersIn the context of the budgetary procedure
performance measurement indicators are
calculated by the divisions analyzed and
reviewed monthly to serve as a reference
for the Grouprsquos monthly reporting
Management reporting and
closing period work
Th om so n uses a co mmon char t of
accounts which is regularly updated The
principal accounting and financial figures
of the operational and functional depart-
ments consolidated at Group level are
analyzed by the Grouprsquos management
control team and reviewed by the Grouprsquos
Executive Committee
The closing process for the half-year and
annual consolidated financial statementsoccurs in two steps The first step con-
sists of a ldquohard closerdquo completed in May
and September leading to a first review by
the statutory auditors The second step
occurs in July and in JanuaryFebruary and
involves the finalization of half-year and
annual consolidated financial statements
under IFRS The Group then proceeds
once a year with a reconciliation of these
results in accordance with US GAAP
Preparation of financial statements
The financial statements are prepared jointly by the finance department and the
General Secretary They are based on
information reported through the annual
reporting and accounting consolidation
processes and on operational and mar-
ket information which is specifically cen-
tralized for the preparation of Thomsonrsquos
Document de Reacutefeacuterence in France and
the submission of Form 20-F in the United
States Half-year and annual financial infor-
mation is reviewed by the Grouprsquos Audit
Committee
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 6066
58 Thomson Panorama 2006
(1) Source PriceWaterhouseCoopers ndash
ldquoGlobal Entertainment and Media Outlook 2006-10rdquo
Revenue growth
Thomson achieved consolidated 2006
net revenues of 9914045854 million up from
9914045591 million in 2005 Revenues for
the Core Business reached 9914045747 mil-
lion (9914045776 million at constant currency)
representing 83 growth over 2005 at
constant currency
Overall the Grouprsquos key growth busi-
nessesmdashContent Services Network
Services Access Products for telecom
operators and our Broadcast amp Networks
businesses (Grass Valley and Network
Software)mdashincreased strongly year-on-
year and accounted for over a third of
Group revenues against less than a quar-
ter in 2005
Thomsonrsquos Core Business EBIT for 2006
was euro504 million representing a Core
Business EBIT margin of 88 Thisreflected growth in some key businesses
and cost actions across the Group off-
setting a significant investment in research
and development and some increase in
restructuring expenses
Increased spend on RampD
Research and development expenditure
charged in the Core Business (net of
external funding) rose from 991404221 million in
2005 to 991404279 million in 2006 an increase
of 26 principally in the Systems divi-
sion The Group expanded the number ofproducts and services in the development
phase across its businesses
Return to profit
Losses in Non-Core Continuing and Dis-
continued operations were substantially
lower year-on-year reflecting principally
the exit from heavily loss-making Displays
activities in 2005 and intensified cost-sav-
ing programs in 2006 A major revision
and harmonization of the Grouprsquos North
American healthcare obligations gave rise
to substantial one-time gains and Thom-
son also initiated significant restructuring
of its French Non-Core operations
The good performance of the Core Busi-
ness lower Non-Core and Discontinued
losses and a low reported tax chargeenabled the Group to return a net profit of
99140455 million in 2006 compared to a loss of
991404573 million in the previous year
Good cash flow
strengthened balance sheet
Thomson generated good free cash flow
and strengthened its balance sheet in
2006 Total net financial liabilities on the
balance sheet fell by 991404460 million reflect-
ing a 99140493 million fall in financial and acqui-
sition-related debts and a 991404367 million
reduction in retirement benefit obligations(including healthcare)
Increase in Net Dividend
The Board of Directors proposed a dis-
tribution to shareholders of 991404033 per
share (2005 dividend 991404030) reflecting
confidence in the prospects of the Group
going forward
Outlook 2007-2009
growth in revenues and net income
With the Grouprsquos transformation complete Thomsonrsquos financial focus over the 2007-
2009 period will be to grow revenues and
net income
Thomson serves growing Media Enter-
tainment amp Communications marketsmdashfor
which external estimates(1) indicate com-
pound growth of around 6 over the last
FINANCIAL AND
OPERATIONAL PERFORMANCE
Full year 2006 results
saw a return to profitability
and leave Thomson
well positioned at
the heart of convergence
and digital video
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59 Thomson Panorama 2006
five years Our digital and electronic busi-
nesses now represent two-thirds of rev-
enues and we believe they are growing
faster than the overall market offsetting
the maturing physical media businesses
Given this profile the Group expects its
revenue growth to be more modest in
2007 but to gather pace over the period
and our overall objective is to show com-pound growth over 2007-2009 in line with
or faster than the overall market
The 2007-2009 period is also expected
to see a sharply reduced impact from
residual Non-Core activities with an end
to losses from the Discontinued Activities
perimeter after 2007 Accordingly Thom-
sonrsquos ambition is to turn its Core Business
growth and profitability and lower impact
from Non-Core into strong growth in net
income over the period 2007-2009
Business operations
Continuous performance improvement is
fundamental to Thomsonrsquos commitment to
create sustainable business models and
long-term value for all stakeholders The
ambitious Group-wide programs launched
in 2004 to improve productivity and
enhance overall performance producedsubstantial results in 2006 and led to new
and strong initiatives for long-term growth
As of the second half of 2006 six ldquoKey
Programsrdquo are monitored at Group level
Clients Software Product Introduction
Operations Transformation and Talent
Management
KEY PROGRAMS IN PLACE
Program Focus
Clients Thomsonrsquos clientregional diversification and
growth of the existing business
through improved Sales amp Marketing
Software Development of integrated software platforms
in all markets (post-production distribution
delivery) and for all types of customer
(professional prosumerhellip)
Product Introduction Ensuring new product roadmaps are in line
with strategy and resource needs have been
identifiedOperations Improving the Grouprsquos cost base cash
generation and working capital
Transformation Multiple programs including initiatives to
improving customer relationship management
worldwide supply chain management
IT transformation as well as Thomsonrsquos RampD
footprint
Talent Management Leveraging human assets with a focus on
talent retention and acquisition
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60 Thomson Panorama 2006
SUMMARY RESULTS FULL YEAR 2006
In 991404 millions unless otherwise stated 2006(1) 2005(1)
Net revenues 5854 5591(1)
Core Business net revenues 5747 5335
Services 2489 2487
Systems 2684 2262
Technology 547 546
Corporate 27 40
Non-Core continuing operations net revenues 107 256
Core Business EBIT(2) 504 512
Services 160 205
Systems 132 109
Technology 289 277Corporate (77) (79)
EBIT from Non-Core continuing operations (25) (122)
(1) Restated with 2006 discontinued activities according to IFRS 5
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61 Thomson Panorama 2006
Year ended December 31in 991404 except number of shares 2006 2005 2004
Year ended December 31in 991404 millions 2006 2005(1) 2004(1)
CONSOLIDATED STATEMENTS OF OPERATIONS
(1) Restated with 2006 discontinued activities according to IFRS 5
(2) After deduction of the interests net of tax paid on the subordinated perpetual notes during the period
Continuing operations
Revenues 5854 5591 5980
Cost of sales (4474) (4240) (4594)
Gross margin 1380 1351 1386
Selling marketing general and administrative expenses (674) (638) (653)
Other income (expense) 52 (96) (69)
Research and development expenses (279) (227) (201)
Profit from continuing operations before tax and net finance costs 479 390 463
Interest income 19 30 52
Interest expense (108) (108) (54)
Other financial income (expense) (111) 36 (26)
Finance costs ndash net (200) (42) (28)
Share of profit (loss) from associates (86) (82) (20)
Income tax ndash (68) (93)
Profit from continuing operations 193 198 322
Discontinued operations
Profit (loss) from discontinued operations (138) (771) (883)
Net income (loss) 55 (573) (561)
Attributable to
Equity Holders 55 (574) (559)
Minority interests ndash 1 (2)
Weighted average number of shares
outstandingmdashbasic net of treasury stock 261188858 266539917 273646869
Earnings per share from continuing operations
Basic(2) 067 074 118
Diluted 063 042 111
Earnings per share from discontinued operations
Basic (053) (289) (323)
Diluted (048) (262) (296)Total earnings per share
Basic(2) 014 (215) (205)
Diluted 015 (220) (185)
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62 Thomson Panorama 2006
CONSOLIDATED BALANCE SHEETS
In 991404 millions December 31 December 31 January 1 December 31 2006 2005 2005(1) 2004
ASSETS
Non-current assets
Property plant and equipment 813 886 1051 1051
Goodwill 1714 1756 1186 1178
Other intangible assets 1071 1150 924 924
Investments in associates 12 204 260 260
Investments and financial assets available-for-sale 266 341 139 113
Derivative financial instruments 7 1 11 ndash
Contract advances 129 173 179 179
Deferred tax assets 397 379 307 301
Other non-current assets 110 182 133 136
Total non-current assets 4519 5072 4190 4142
Current assets
Inventories 366 333 503 568
Trade accounts and notes receivable 1018 1315 1232 1180
Current accounts with associates and joint ventures 97 115 143 143
Derivative financial instruments 8 9 115 ndash
Other current assets 535 644 483 616
Marketable securities ndash 7 58 58
Cash and cash equivalents 1311 996 1845 1848
Assets classified as held for sale 264 369 80 ndash
Total current assets 3599 3788 4459 4413
Total assets 8118 8860 8649 8555
(1) Including the impacts of the first-time application related to IAS 32 and 39 on financial instruments and IFRS 5 on non-current assets held for sale and
discontinued operations
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63 Thomson Panorama 2006
In 991404 millions December 31 December 31 January 1 December 31 2006 2005 2005(1) 2004
SHAREHOLDERSrsquo EQUITY AND LIABILITIES
Shareholdersrsquo equity
Common stock (273871296 shares at
December 31 2006
with nominal value of euro 375 per share) 1027 1025 1025 1025
Trade accounts and notes payable 1032 1164 1199 1226
Accrued employee expenses 165 166 158 163
Income tax payable 57 47 60 60
Other current liabilities 671 750 746 800
Payables on acquisition of companies 13 138 84 84
Liabilities directly associated with
assets classified as held for sale 232 470 88 ndash
Total current liabilities 3681 4393 3602 3459
Total liabilities 5999 6644 6251 6062
Total shareholderrsquos equity and liabilities 8118 8860 8649 8555
(1) Including the impacts of the first-time application related to IAS 32 and 39 on financial instruments and IFRS 5 on non-current assets held for sale and
discontinued operations
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Creation and lay-out
Photo credits Nathalie BerhingGAMMA ndash Steacutephane de Bourgies ndash Jean-Franccedilois DeroubaixGAMMA ndash Christine Donnier- ValentinGAMMA ndash Cars copy 2006 Disney Enterprises IncPixar All Rights Reserved ndash Dreamgirls copy 2006 DREAMWORKS
LLC and PARAMOUNT PICTURES All Rights Reserved ndash Poseidon copy 2006 Warner Bros Pictures ndash Sony Bravia Paint
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Left Behind the scenes
at a Thomson-managed broadcast
network operations center
Right The successful end-to-end
international satellite transmission of
the film Dreamgirls proves Thomsonrsquos
ability to distribute feature film content
across the globeDreamgirls copy 2006 Dreamworks LLC and Paramount Pictures
All Rights Reserved
ative technical and production capabilities
to design and produce computer anima-
tion and visual effects for films television
commercials and interactive video games
with a strong focus on digital 3D content
This effort will add new computer anima-
tion capabilities to Content Servicesrsquo list of
service offerings and provide a low-cost
center for continued growth
Home Entertainment Services
With demand developing for high-defini-
tion DVDs Thomson built capacity for
both next generation formats HD DVD
and Blu-Ray Disc By year-end multiple
manufacturing lines were in operation for
both formats The Group also achieved a
major manufacturing breakthrough when
it produced the worldrsquos first hybrid DVD
combining both high-definition and stan-
dard-definition versions of content on a
single disc
Adapting to slower DVD volume growth
rates Thomson continues to streamline its
DVD replication operations with an aim
towards maintaining its industry leading
low cost manufacturing platform At the
same time the Group maintained its world-
leading position in 2006 through ongoing
and new contracts with the industryrsquos
largest content owners An existing DVD
replication agreement with Paramount
was extended and enlarged in 2006 as
Paramount chose Thomson to provide
retail distribution and returns processing
services in the US and Canada
At the same time Thomson continues to
work with a wide range of Media amp Enter-
tainment industry leaders as they explore
new solutions and business models forelectronic content distribution such as
video-on-demand and Internet-based digi-
tal delivery systems Thomson is uniquely
positioned to develop and provide on-
going services to such content owners
as they seek to more rapidly distribute
and monetize their content via these new
alternate delivery platforms Specific focus
will be placed on addressing the security
and scalability challenges such customers
will face as these new business models
emerge
TECHNOLOGY SYSTEMS SERVICES
39 Thomson Panorama 2006
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COMMITMENTS
Thomson is committed to creating value for all its stakeholders by providing the technology systems
and services that enable a digital world The Group seeks to achieve the highest standards of ethical
behavior in its business operations and thus to implement best practice in the management of
human resources and environmental health and safety
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In 2006 human resources efforts focused
on key priorities linked to managing Thom-
sonrsquos evolving employee base These
include identifying and attracting new
talents and expertise motivating people
through involvement and empowerment
retaining critical talents by providing excit-
ing career opportunities and developing
the work force by creating opportunitiesfor operational exposure coaching mobil-
ity and training
Cementing the transformation
Human resources (HR) initiatives over the
course of the year helped cement the
transformation of Thomson into a focused
technology company serving the Media
Entertainment amp Communications indus-
tries With the Grouprsquos evolving needs for
support functions and skills that fit a soft-
ware driven market environment change
management has been the leitmotif of thepast two years
Throughout 2006 Thomson pursued
integration and realignment of its skills
base through development of transversal
policies and a strong corporate culture
thus reinforcing employee motivation and
synergies among subsidiaries
The transfer of the Internal Communi-
cations function to the HR Department
reinforced the impact of these efforts For
example the new Thomson HR Leader-
ship Model which led to the development
of new Management Principles Ethics
Charter and Values was widely cascaded
and conveyed Group-wide in 2006
Employee involvement
One hundred key managers now consti-
tute the Thomson Management Network
This body comprises nearly equal thirds
of managers who have been promoted
to senior positions managers who have
joined the Group through acquired com-
panies in which they held lead roles and
managers who were already in place as
key leaders They meet regularly (two to
three times a year) with the Chairman amp
CEO and his Executive Committee to dis-
cuss strategic and execution issues and
thus contribute toward Thomsonrsquos contin-
ued growth They also ensure sharing andunderstanding of the Grouprsquos strategy and
objectives by cascading critical informa-
tion In addition some 5000 managers
and employees enjoy extended access
to all corporate publications on a weekly
basis helping to ensure that employees
are directly involved in key issues
Open and constructive dialogue with
social partners continued in 2006 with
respect to the restructuring that was car-
HUMAN RESOURCES
DEVELOPING TALENT
Human resources amp internal
communications initiatives
have proved crucial
to successful implementation
of Thomsonrsquos
strategic objectives
ldquoSince I joined in November 2006 Irsquove been struck by how committed HR
professionals worldwide are about achieving Thomsonrsquos ambitionmdashto be
one of the 100 greatest companies to work for Itrsquos amazing what has been
achieved in a short time The Asia-Pacific region is particularly challenging
as our markets change and grow at seemingly lightning speed One of my
greatest challengesmdashhaving identified and recruited the right talentmdashwill be
to continue developing and nurturing the management and leadership skills
we need to develop the business in Asiardquo
Gao Lan Human Resources Vice-President Asia Pacific
42 Thomson Panorama 2006
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ried out to meet Thomsonrsquos business
objectives Notably through the Grouprsquos
European Works Forummdashwhich com-
prises 15 union representatives from the
countries where Thomson is presentmdashbut
also at local level the prime concern in this
dialogue was to ensure fair treatment for
all employees affected by restructuring or
disposals
Simplifying and
aligning the organization
Thomsonrsquos management development
blueprint known as the HR Leadership
Model continued to advance in 2006
The model is designed to simpli fy and
align the organization with business strat-
egy identify key resources following acqui-
sitions and recruit the highest caliber of
people needed by Thomson as a technol-
ogy-driven company The yearrsquos achieve-
ments included global mapping of theorganization and grading of jobs for the
Grouprsquos 350 senior managers This map-
ping allows harmonization of remuneration
across countries and activities ensuring
fair treatment based on the type of post
held and performance criteria A global
Compensation amp Benefits policy for these
executives was presented to the Board
of Directors and is expected to expand
throughout the organization during 2007
and 2008
Designed to identify and develop Thomsonrsquos
talents the bi-annual employee evaluation
and objectives evaluation known as the
ldquoContract of Progressrdquo was revised and
improved in 2006 Specific training pro-
grams in which over 300 people parti-
cipated over the year were developed
for HR personnel to ensure Group-wide
consistency in the assessment and moni-toring of employee performance
A centralized worldwide talent review policy
was implemented in 2006 to enable Thom-
son to better anticipate human resources
requirements Dedicated people manage-
ment tools are used to track potential risks
and define succession and development
plans at all levels of the organization The
talent review process which assessed
some 5000 managers and key employees
across the Grouprsquos divisions in 2006 also
helped identify promising individuals who
are likely to take on senior positions within Thomson in the next few years Person-
alized development plans were then built
for these high-potential individuals which
included training in business schools and
universities in the first half of 2007
Customized development programs
Increasingly close partnerships with some
of the worldrsquos leading engineering schools
business schools and universities in
In 2006 Thomson pursued integration and
realignment of its workforce through
development of transversal policies and
a strong corporate culture
43 Thomson Panorama 2006
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Thomson is committed to
attracting developing retaining and
energizing key talents
Europe Asia and North America contribute
to the growing awareness of Thomson and
serve as an outstanding source of new tal-
ent for the Group Every year Thomson
recruits more than 600 engineers and
managers categories of personnel which
have seen their numbers double over the
last two years
Significant progress was made in 2006
to diversify and expand the training pro-
grams on offer to Thomson employees
More than 300 managers in all Thomson
businesses participated in high-profile
training seminars ranging from Strategic
Execution and Project Dynamics to Value
Creation Training initiatives will expand
further in the future since they form an inte-
gral part of the Grouprsquos business evolution
and the Thomsonrsquos commitment to attract
develop retain and energize key talents
Pro-active approach
A pro-active approach to deploying the
human resources function has been
adopted with the transfer of the func-
tion in Asia from Hong Kong to Beijing in
2006 helping support Thomsonrsquos expan-
sion in this key region Managing human
resources for the region from Beijing
places the function close to many of its
internal customers as well as to one of the
Grouprsquos research centers Home to more
than 360 highly-skilled engineers the cen-
ter is near many of Chinarsquos leading univer-
sities and research institutes encouraging
exchanges with the academic and scien-
tific communities
In 2006 Thomson reiterated its corporate
beliefs externally by publishing the Grouprsquos
commitment to the 10 principles of theUnited Nations Global Compact on the
UNrsquos web site Such ldquoCommunication on
Progressrdquo underscores Thomsonrsquos pub-
lic accountability and transparency both
of which critical to the Grouprsquos abilities to
manage risks and opportunities
44 Thomson Panorama 2006
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Thomson employed 24465 people
as of December 31 2006 excluding
businesses held for sale
(1) Australia Latin America and United
Arab Emirates
(2) Manufacturing services 5 and
support functions 4
Services62
EMPLOYEES BY DIVISION
Technology
8
Others(2)
9
Systems21
Europe36
EMPLOYEES
BY GEOGRAPHIC AREA
North America
44 Asia9
Rest ofthe World(1)
11
TALENT MIX
Womenrepresent36 of all
employees
Women represent13 of managers
Women represen18 of ExecutiveCommittee memb
In an effort to ensure that the main elements of
Thomsonrsquos Ethics Charter and Values were conveyed and
understood throughout the organization an internal campaign
was launched in mid-2006 This involved the distribution of
posters in the appropriate local language to more than
a hundred sites around the world At Thomsonrsquos main sites
local managers often with an Executive Committee member
hosted briefing sessions and took the opportunity
to discuss these key issues with employees
45 Thomson Panorama 2006
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46 Thomson Panorama 2006
Thomson helps its customers to provide
people with broader access to media
entertainment and communications For
example by managing the broadcasting
of close to 200 TV channels the Group
enlarges the media and information
choices available to millions of people
throughout Europe Asia and North Amer-
ica By providing solutions and audio-visual products to support distance learn-
ing Thomson enables universities to reach
out to students who might not otherwise
enjoy access to such education
Expertise to preserve
film amp TV heritage
As an enabler of the digital world Thomson
contributes to cultural diversity and enrich-
ment and better understanding among
peoples Thomson supports the arts and
creativity by supplying the creative services
and products that make it possible for cre-ative minds to realize their projects and to
deliver them to audiences Contributing
to a richer cultural fabric worldwide the
Grouprsquos expertise enables emblematic cin-
ematographic works to retrieve their visual
glory through the provision of a variety of
film restoration techniques In 2006 the
Group took steps to place this expertise at
the disposal of the worldrsquos endangered film
and audiovisual archives with the setting
up of the Thomson Foundation for Film amp
TV Heritage
The Foundation working in coopera-
tion with local and international partners
helps to set up multi-disciplinary teams
comprised of experts from Thomson
businesses advanced archive institutions
and film preservation schools to restore
and promote what remains of the worldrsquos
cultural legacy recorded on film and TV
During its initial year the Foundation con-tributed to projects in Cambodia France
India Thailand and the US
Operating worldwide Thomson contributes
to improving economic and social welfare
and living standards As a good corporate
citizen the Group recognizes its responsi-
bilities to all of its stakeholders This means
ensuring that all of its business practices
meet the highest ethical standards It also
means that the Group is committed to
protecting and enhancing the environment
everywhere it does business to ensure that
all Thomson products are safe to use andthat all Thomson employees benefit from
a safe working environment Furthermore
Thomson fulfils its duty as a corporate citi-
zen by contributing to the quality of life in
many of the communities in which it does
business through a variety of local initia-
tives ranging from fund-raising in the com-
munity to events sponsorship
Through its technology
systems and services
Thomson contributes to
the dissemination of media
and entertainment
and a richer cultural fabric
for the world
The Bophana Archive Center
in Cambodia was set up in 2006
with the help of the Thomson Foundation
for Film amp TV Heritage
CORPORATE
SOCIAL RESPONSIBILITY ENABLING A DIGITAL WORLD
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47 Thomson Panorama 2006
Since its inception the Thomson Foundation has contributed to
a number of film and TV heritage projects Working in partnership with
local and international government agencies and non-profit groups
the Foundation helped create the Bophana Archive Center in Cambodia
at the end of 2006 The Center aims to save and enlarge access to
endangered film TV and photographic archives In India the first
session of a film heritage course designed by the Foundation took place in
the national film school of India in April 2007 Highlighting the critical role film
plays in the creative community the program of workshops conferences and
screenings was open to film students and professionals alike
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48 Thomson Panorama 2006
Global Compact and Vigeo
Vigeo the French social responsibility rat-
ings agency ranked Thomson as one of the
best performers of 20 companies assessed
in its 2006 European ldquoTechnology amp Hard-
warerdquo sector benchmark study
To advance responsible corporate citizen-ship and universal social and environmen-
tal principles Thomson has been a mem-
ber of the United Nations Global Compact
since 2003 Launched in 1999 the UN
Global Compact requires companies to
embrace support and enactmdashwithin their
sphere of influencemdasha set of values in the
areas of human rights labor the environ-
ment and anti-corruption Thomsonrsquos core
valuesmdashhigh ethical standards striving to
improve safety and environmental respon-
sibility initiatives and fair business prac-
ticesmdashmeet or exceed the goals embod-
ied in the UN Global Compact initiative
Thomsonrsquos Ethics Charter sets the foun-
dation for the Grouprsquos dedication to
act responsibly in all of its dealings with
employees suppliers customers and local
communities Updated and enhanced in
2006 the Ethics Charter covers a broad
range of issues from business practices
and human rights to the environment
health and safety All Thomson employees
are required to respect the conduct and
practices laid out in the Ethics Charter
This same universal obligation applies to all
Thomson suppliers and subcontractors
Suppliers and subcontractors are regularly
audited by Thomson to ensure compliance
with the Grouprsquos policies and standards
Initiated in 2002 the supplier ethics audit
program has resulted in hundreds of
supplier audits over the past four yearsIn addition the Social Accountabilities
8000 standard (SA 8000) is used as a
basis for evaluating those suppliers with
manufacturing facilities in high-risk areas
Established by an independent multi-dis-
ciplinary group of international experts the
SA 8000 standard is designed to ensure
humane workplaces
Human rights
Thomson aims to ensure that its business
practices align with key corporate values
The Grouprsquos Ethics Charter specificallyfocuses on the Global Compact standards
covering child labor forced labor health and
safety discrimination disciplinary practices
working hours and compensation
To he lp prevent the use of chi ld labor
for example the Ethics Charter prohibits
employing workers below the legal mini-
mum working age in any country
The Ethics Charter also helps combat
forced labor by prohibiting unfair practices
Thomson endeavours to protect
the environment wherever it does business
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49 Thomson Panorama 2006
such as requiring workers to deposit money
to obtain work withholding personal docu-
ments such as identity cards or passports
requiring workers to extend hours beyond
normal time or limiting workersrsquo movements
during non-working hours Prison labor and
indebted bondage are strictly prohibited
Non-discrimination and diversity
As an international Group doing business
in approximately 40 countries Thomsonrsquos
workforce is very diverse The Grouprsquos
headquarters in Paris for example counts
about a dozen different nationalities Dis-
crimination on the basis of race religion or
gender is strictly prohibited As of Decem-
ber 2006 women accounted for 36 of
Thomsonrsquos total employees
Thomson employed over 24000 people
in its core businesses as of end-2006 Of
these 44 were in North America 36in Europe 9 in Asia and 11 scattered
around the rest of the world Three-quar-
ters of the Grouprsquos current employees
joined Thomson within the last four years
including those from companies acquired
over that time period
Environment Health and Safety (EHampS)
The transformation of Thomsonrsquos business
model and market focus over the past few
years has reduced significantly the Grouprsquos
manufacturing activities Nevertheless
Thomson remains committed to ongoing
environmental health and safety policies
and goals This commitment is formalized
through the Corporate EHampS Charter
which defines key management principles
designed to protect human health and
the environment In this area the Group
embraces international standards for qual-ity and management systems in particular
the International Standards Organization
(ISO) 14001 standards for environmental
management In 2006 a total of 28 sites
held an ISO 14001 certification
Thomsonrsquos Corporate EHampS group devel-
ops directs and oversees the develop-
ment of global policies guidelines pro-
grams and initiatives reporting annually
to the Thomson Executive Committee
A corporate manager and three regional
managers direct the efforts of EHampS per-
sonnel worldwide Consistent internalbenchmarks have been in place for the
past decade to enable tracking of prog-
ress at all 41 of the Grouprsquos main industrial
locations Measured criteria include EHampS-
related employee training each locationrsquos
progress toward reducing work-related
injuries and lost workdays reducing envi-
ronmental impacts and reducing the con-
sumption of water and energy
The most notable achievement in 2006
was improved water use and conserva-
Clean industry
Thomsonrsquos Guadalajara DVD factory recently entered Mexicorsquos exclusive ldquoClean Industryrdquo program
managed by PROFEPA the federal environmental agency Sites achieving certification must go beyond
legal requirements by improving their performance in water usage minimizing hazardous waste and
controlling air noise and odor pollution Following four months of intense efforts the exhaustive
environmental audit required yielded excellent results and certification was achieved in November 2006
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50 Thomson Panorama 2006
tion within the film labs showing more
than a 25 improvement in water con-
sumption for every million feet of film pro-
cessed This helped Thomson achieve its
overall goal of reducing annual water con-
sumption by 15 Similarly good prog-
ress was achieved toward the long-term
goal of reduced landfill with almost 10
improvement in recycling rate comparedto 2005
As a corol lary to efforts to constant ly
improve the EHampS profile of ongoing activi-
ties Thomson reviews all newly acquired
businesses to ensure they meet Group
requirements and to define upgrade pro-
grams when necessary The EHampS reviews
include an evaluation of the status and
effectiveness of existing management
and control systems and a presentation
of Thomsonrsquos EHampS initiatives and require-
ments Newly acquired sites are now
encouraged to achieve ISO 14001 certi-fication within two years of their effective
date for joining the Group
Suppliers and subcontractors are required
to meet all legal requirements for environ-
mental protection including the elimina-
tion of hazardous substances Suppliers
are required to declare in writing that their
products are free of such substances as
cadmium chromium lead mercury and
asbestos and to provide laboratory test
data as proof
The transformation of Thomsonrsquos business
has reduced significantly
the Grouprsquos manufacturing activities
Overall local legislation and standards
form the foundation for Thomsonrsquos require-
ments concerning environmental health
safety employment child labor discrimi-
nation and human rights issues in each
country where it does business
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FINANCIAL INFORMATION
Thomson maintains the highest standards in compliance and risk management working continuously
to improve reporting and control as well as the quality of financial information made available to
its stakeholders
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54 Thomson Panorama 2006
Growing North American
investor base
The per iod 2004-2006 brought about
expansion in Thomsonrsquos international
shareholder base particularly in North
America Leading US-based investment
management funds Franklin Templeton
Investments and Brands Investment Part-ners hold over 10 and 5 respectively
of Thomsonrsquos share capital while Dodge amp
Cox increased its stake to over 10 during
the year The Group estimates that North
American institutional investors represent
over 50 of the institutional investor base
France around a quarter and other Euro-
pean investors account for the majority of
the remainder
Active communications
To keep Thomsonrsquos broad investor base
appraised of progress in implementing itsstrategic objectives senior management
devoted considerable time during the year
to investor meetings in both Europe and
North America
As part of its ongoing efforts to provide
investorsmdashparticularly individual share-
holdersmdashwith comprehensive up-to-date
information Thomson makes full use of
the internet Share price information press
releases as well as the Grouprsquos annual
report and reference documents (Docu-
ment de Reacutefeacuterence filed with the French
stock exchange regulator AMF and Form
20-F filed with the SEC) are available on
the site wwwthomsonnet
Annual General Shareholdersrsquo Meetings
are broadcast live over the internet with asimultaneous translation of the proceed-
ings provided from French to English to
enable the majority of shareholders to view
the event The results of the vote are dis-
closed in detail on the internet site imme-
diately following the Meeting
The Shareholder Relations department
organizes tours for individual shareholders
of the newly inaugurated Thomson Gal-
lery at the Grouprsquos headquarters in Paris
France Visits to the Gallery designed to
illustrate Thomsonrsquos activities through a
series of live technology demos and videopresentations allow participants to better
appreciate the Grouprsquos 2007-2009 strat-
egy and growth prospects
Dividend
The dividend ofeuro033 per share proposed
at the Annual Shareholdersrsquo Meeting on
15 May 2007 represented a 10 increase
over last yearrsquos dividend
SHAREHOLDER RELATIONS
Thomson aims to keep
investors and individual
shareholders informed of
progress in implementing
strategic objectives
Thomsonrsquos Annual General Meeting
provides an opportunity for debate and
exchange with individual shareholders
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55 Thomson Panorama 2006
Financial calendar 2007
bull April 26 First Quarter 2007 Sales
bull May 15 Shareholdersrsquo Meeting (on second notice)
bull July 26 First Half 2007 Results
bull October 18 Third Quarter 2007 Sales
These dates are subject to modification
Public904
CAPITAL STRUCTURE AS OF DECEMBER 31 2006
Employees25
Treasury Shares46
Other25
SHARE HIGHLIGHTS
2006 2005
Year high 1932 2142
Year low 1165 1526
Share price at year-end in euro 1481 1770
Average daily volume 2445176 2244879
Market capital at year-end in euro million 4056 4838
Number of shares outstanding at year end
(in thousands) 273871 273308
Net dividend per share in euro 033 030
Listed on the Paris and New York stock exchanges ndash Euronext code 18453 ndash NYSE ticker TMSN
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56 Thomson Panorama 2006
Maintaining the highest standards
in compliance and risk management
Extensive work was completed in 2006
in Thomsonrsquos main operational units and
at Corporate level to ensure alignment of
reporting and control procedures with the
requirements of the Sarbanes-Oxley Act in
the United States
Improving Internal Control Procedures
Building towards application of Section
404 of the Sarbanes-Oxley Act (ldquoSOX
404rdquo) for fiscal year 2006 which required
the Group to assess the effectiveness of
internal controls Thomson committed to
implementing the internal control frame-
work proposed by the Committee of
Sponsoring Organizations of the Treadway
Commission (ldquoCOSOrdquo)
Within this framework the Group seeks toachieve ldquoreasonable assurancerdquo regarding
the effectiveness and efficiency of opera-
tions the reliability of financial reporting
and compliance with applicable laws and
regulations
Group-wide initiatives were on-going in
2006 to achieve these objectives including
the Process Transformation Initiative (PTI)
to ensure operational excellence COM-
PASS (Controls Over Methods Processes
Applications Systems and Strategy) and
the Risk Committee and its enterprise risk
assessment and management programrun by the Internal Audit function
Following a full worldwide enterprise risk
assessment carried out in the second half
of 2005 and updated throughout 2006 a
second was planned for completion by May
2007 The process assesses risks in the
Grouprsquos distinct business units or profit cen-
ters with the goal of identifying assessing
validating and monitoring risks which could
impact or potentially impact the Grouprsquos
ability to achieve its short and long-term
objectives In 2007 the Risk Committee will
continue to regularly monitor action plans
put in place to mitigate the risks identified
During the year the Group also continued
implementation of a worldwide SOX 404
compliance software system to assist with
the documentation of significant financialprocesses provide consistent guidance
to management regarding controls and
better enable management to assess its
control structure
Managing Risk
Thomson has three main internal organiza-
tions that support and assist the Executive
Committee in control and risk monitoring
the Investment Committee and the Risk
Committee The Investment Committee
meets on an ad hoc basis throughout the
year generally once per week to reviewfinancial commitments including proposed
acquisitions capital equipment funding
and new ventures requiring capital The Risk
Committee which met nine times in 2006
evaluates the Grouprsquos financial operational
and compliance risks and identifies strate-
gic risks that could adversely affect different
activities within the framework of Grouprsquos
three-year plan scenarios The Corporate
Social Responsibility (CSR) Committee to
be set up in 2007 will oversee all CSR
compliance and ethics matters
Ethical values and principles of conductfor the Grouprsquos managers are defined in
of the Grouprsquos divisions and profit centersIn the context of the budgetary procedure
performance measurement indicators are
calculated by the divisions analyzed and
reviewed monthly to serve as a reference
for the Grouprsquos monthly reporting
Management reporting and
closing period work
Th om so n uses a co mmon char t of
accounts which is regularly updated The
principal accounting and financial figures
of the operational and functional depart-
ments consolidated at Group level are
analyzed by the Grouprsquos management
control team and reviewed by the Grouprsquos
Executive Committee
The closing process for the half-year and
annual consolidated financial statementsoccurs in two steps The first step con-
sists of a ldquohard closerdquo completed in May
and September leading to a first review by
the statutory auditors The second step
occurs in July and in JanuaryFebruary and
involves the finalization of half-year and
annual consolidated financial statements
under IFRS The Group then proceeds
once a year with a reconciliation of these
results in accordance with US GAAP
Preparation of financial statements
The financial statements are prepared jointly by the finance department and the
General Secretary They are based on
information reported through the annual
reporting and accounting consolidation
processes and on operational and mar-
ket information which is specifically cen-
tralized for the preparation of Thomsonrsquos
Document de Reacutefeacuterence in France and
the submission of Form 20-F in the United
States Half-year and annual financial infor-
mation is reviewed by the Grouprsquos Audit
Committee
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58 Thomson Panorama 2006
(1) Source PriceWaterhouseCoopers ndash
ldquoGlobal Entertainment and Media Outlook 2006-10rdquo
Revenue growth
Thomson achieved consolidated 2006
net revenues of 9914045854 million up from
9914045591 million in 2005 Revenues for
the Core Business reached 9914045747 mil-
lion (9914045776 million at constant currency)
representing 83 growth over 2005 at
constant currency
Overall the Grouprsquos key growth busi-
nessesmdashContent Services Network
Services Access Products for telecom
operators and our Broadcast amp Networks
businesses (Grass Valley and Network
Software)mdashincreased strongly year-on-
year and accounted for over a third of
Group revenues against less than a quar-
ter in 2005
Thomsonrsquos Core Business EBIT for 2006
was euro504 million representing a Core
Business EBIT margin of 88 Thisreflected growth in some key businesses
and cost actions across the Group off-
setting a significant investment in research
and development and some increase in
restructuring expenses
Increased spend on RampD
Research and development expenditure
charged in the Core Business (net of
external funding) rose from 991404221 million in
2005 to 991404279 million in 2006 an increase
of 26 principally in the Systems divi-
sion The Group expanded the number ofproducts and services in the development
phase across its businesses
Return to profit
Losses in Non-Core Continuing and Dis-
continued operations were substantially
lower year-on-year reflecting principally
the exit from heavily loss-making Displays
activities in 2005 and intensified cost-sav-
ing programs in 2006 A major revision
and harmonization of the Grouprsquos North
American healthcare obligations gave rise
to substantial one-time gains and Thom-
son also initiated significant restructuring
of its French Non-Core operations
The good performance of the Core Busi-
ness lower Non-Core and Discontinued
losses and a low reported tax chargeenabled the Group to return a net profit of
99140455 million in 2006 compared to a loss of
991404573 million in the previous year
Good cash flow
strengthened balance sheet
Thomson generated good free cash flow
and strengthened its balance sheet in
2006 Total net financial liabilities on the
balance sheet fell by 991404460 million reflect-
ing a 99140493 million fall in financial and acqui-
sition-related debts and a 991404367 million
reduction in retirement benefit obligations(including healthcare)
Increase in Net Dividend
The Board of Directors proposed a dis-
tribution to shareholders of 991404033 per
share (2005 dividend 991404030) reflecting
confidence in the prospects of the Group
going forward
Outlook 2007-2009
growth in revenues and net income
With the Grouprsquos transformation complete Thomsonrsquos financial focus over the 2007-
2009 period will be to grow revenues and
net income
Thomson serves growing Media Enter-
tainment amp Communications marketsmdashfor
which external estimates(1) indicate com-
pound growth of around 6 over the last
FINANCIAL AND
OPERATIONAL PERFORMANCE
Full year 2006 results
saw a return to profitability
and leave Thomson
well positioned at
the heart of convergence
and digital video
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59 Thomson Panorama 2006
five years Our digital and electronic busi-
nesses now represent two-thirds of rev-
enues and we believe they are growing
faster than the overall market offsetting
the maturing physical media businesses
Given this profile the Group expects its
revenue growth to be more modest in
2007 but to gather pace over the period
and our overall objective is to show com-pound growth over 2007-2009 in line with
or faster than the overall market
The 2007-2009 period is also expected
to see a sharply reduced impact from
residual Non-Core activities with an end
to losses from the Discontinued Activities
perimeter after 2007 Accordingly Thom-
sonrsquos ambition is to turn its Core Business
growth and profitability and lower impact
from Non-Core into strong growth in net
income over the period 2007-2009
Business operations
Continuous performance improvement is
fundamental to Thomsonrsquos commitment to
create sustainable business models and
long-term value for all stakeholders The
ambitious Group-wide programs launched
in 2004 to improve productivity and
enhance overall performance producedsubstantial results in 2006 and led to new
and strong initiatives for long-term growth
As of the second half of 2006 six ldquoKey
Programsrdquo are monitored at Group level
Clients Software Product Introduction
Operations Transformation and Talent
Management
KEY PROGRAMS IN PLACE
Program Focus
Clients Thomsonrsquos clientregional diversification and
growth of the existing business
through improved Sales amp Marketing
Software Development of integrated software platforms
in all markets (post-production distribution
delivery) and for all types of customer
(professional prosumerhellip)
Product Introduction Ensuring new product roadmaps are in line
with strategy and resource needs have been
identifiedOperations Improving the Grouprsquos cost base cash
generation and working capital
Transformation Multiple programs including initiatives to
improving customer relationship management
worldwide supply chain management
IT transformation as well as Thomsonrsquos RampD
footprint
Talent Management Leveraging human assets with a focus on
talent retention and acquisition
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60 Thomson Panorama 2006
SUMMARY RESULTS FULL YEAR 2006
In 991404 millions unless otherwise stated 2006(1) 2005(1)
Net revenues 5854 5591(1)
Core Business net revenues 5747 5335
Services 2489 2487
Systems 2684 2262
Technology 547 546
Corporate 27 40
Non-Core continuing operations net revenues 107 256
Core Business EBIT(2) 504 512
Services 160 205
Systems 132 109
Technology 289 277Corporate (77) (79)
EBIT from Non-Core continuing operations (25) (122)
(1) Restated with 2006 discontinued activities according to IFRS 5
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61 Thomson Panorama 2006
Year ended December 31in 991404 except number of shares 2006 2005 2004
Year ended December 31in 991404 millions 2006 2005(1) 2004(1)
CONSOLIDATED STATEMENTS OF OPERATIONS
(1) Restated with 2006 discontinued activities according to IFRS 5
(2) After deduction of the interests net of tax paid on the subordinated perpetual notes during the period
Continuing operations
Revenues 5854 5591 5980
Cost of sales (4474) (4240) (4594)
Gross margin 1380 1351 1386
Selling marketing general and administrative expenses (674) (638) (653)
Other income (expense) 52 (96) (69)
Research and development expenses (279) (227) (201)
Profit from continuing operations before tax and net finance costs 479 390 463
Interest income 19 30 52
Interest expense (108) (108) (54)
Other financial income (expense) (111) 36 (26)
Finance costs ndash net (200) (42) (28)
Share of profit (loss) from associates (86) (82) (20)
Income tax ndash (68) (93)
Profit from continuing operations 193 198 322
Discontinued operations
Profit (loss) from discontinued operations (138) (771) (883)
Net income (loss) 55 (573) (561)
Attributable to
Equity Holders 55 (574) (559)
Minority interests ndash 1 (2)
Weighted average number of shares
outstandingmdashbasic net of treasury stock 261188858 266539917 273646869
Earnings per share from continuing operations
Basic(2) 067 074 118
Diluted 063 042 111
Earnings per share from discontinued operations
Basic (053) (289) (323)
Diluted (048) (262) (296)Total earnings per share
Basic(2) 014 (215) (205)
Diluted 015 (220) (185)
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62 Thomson Panorama 2006
CONSOLIDATED BALANCE SHEETS
In 991404 millions December 31 December 31 January 1 December 31 2006 2005 2005(1) 2004
ASSETS
Non-current assets
Property plant and equipment 813 886 1051 1051
Goodwill 1714 1756 1186 1178
Other intangible assets 1071 1150 924 924
Investments in associates 12 204 260 260
Investments and financial assets available-for-sale 266 341 139 113
Derivative financial instruments 7 1 11 ndash
Contract advances 129 173 179 179
Deferred tax assets 397 379 307 301
Other non-current assets 110 182 133 136
Total non-current assets 4519 5072 4190 4142
Current assets
Inventories 366 333 503 568
Trade accounts and notes receivable 1018 1315 1232 1180
Current accounts with associates and joint ventures 97 115 143 143
Derivative financial instruments 8 9 115 ndash
Other current assets 535 644 483 616
Marketable securities ndash 7 58 58
Cash and cash equivalents 1311 996 1845 1848
Assets classified as held for sale 264 369 80 ndash
Total current assets 3599 3788 4459 4413
Total assets 8118 8860 8649 8555
(1) Including the impacts of the first-time application related to IAS 32 and 39 on financial instruments and IFRS 5 on non-current assets held for sale and
discontinued operations
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63 Thomson Panorama 2006
In 991404 millions December 31 December 31 January 1 December 31 2006 2005 2005(1) 2004
SHAREHOLDERSrsquo EQUITY AND LIABILITIES
Shareholdersrsquo equity
Common stock (273871296 shares at
December 31 2006
with nominal value of euro 375 per share) 1027 1025 1025 1025
Trade accounts and notes payable 1032 1164 1199 1226
Accrued employee expenses 165 166 158 163
Income tax payable 57 47 60 60
Other current liabilities 671 750 746 800
Payables on acquisition of companies 13 138 84 84
Liabilities directly associated with
assets classified as held for sale 232 470 88 ndash
Total current liabilities 3681 4393 3602 3459
Total liabilities 5999 6644 6251 6062
Total shareholderrsquos equity and liabilities 8118 8860 8649 8555
(1) Including the impacts of the first-time application related to IAS 32 and 39 on financial instruments and IFRS 5 on non-current assets held for sale and
discontinued operations
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Creation and lay-out
Photo credits Nathalie BerhingGAMMA ndash Steacutephane de Bourgies ndash Jean-Franccedilois DeroubaixGAMMA ndash Christine Donnier- ValentinGAMMA ndash Cars copy 2006 Disney Enterprises IncPixar All Rights Reserved ndash Dreamgirls copy 2006 DREAMWORKS
LLC and PARAMOUNT PICTURES All Rights Reserved ndash Poseidon copy 2006 Warner Bros Pictures ndash Sony Bravia Paint
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COMMITMENTS
Thomson is committed to creating value for all its stakeholders by providing the technology systems
and services that enable a digital world The Group seeks to achieve the highest standards of ethical
behavior in its business operations and thus to implement best practice in the management of
human resources and environmental health and safety
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In 2006 human resources efforts focused
on key priorities linked to managing Thom-
sonrsquos evolving employee base These
include identifying and attracting new
talents and expertise motivating people
through involvement and empowerment
retaining critical talents by providing excit-
ing career opportunities and developing
the work force by creating opportunitiesfor operational exposure coaching mobil-
ity and training
Cementing the transformation
Human resources (HR) initiatives over the
course of the year helped cement the
transformation of Thomson into a focused
technology company serving the Media
Entertainment amp Communications indus-
tries With the Grouprsquos evolving needs for
support functions and skills that fit a soft-
ware driven market environment change
management has been the leitmotif of thepast two years
Throughout 2006 Thomson pursued
integration and realignment of its skills
base through development of transversal
policies and a strong corporate culture
thus reinforcing employee motivation and
synergies among subsidiaries
The transfer of the Internal Communi-
cations function to the HR Department
reinforced the impact of these efforts For
example the new Thomson HR Leader-
ship Model which led to the development
of new Management Principles Ethics
Charter and Values was widely cascaded
and conveyed Group-wide in 2006
Employee involvement
One hundred key managers now consti-
tute the Thomson Management Network
This body comprises nearly equal thirds
of managers who have been promoted
to senior positions managers who have
joined the Group through acquired com-
panies in which they held lead roles and
managers who were already in place as
key leaders They meet regularly (two to
three times a year) with the Chairman amp
CEO and his Executive Committee to dis-
cuss strategic and execution issues and
thus contribute toward Thomsonrsquos contin-
ued growth They also ensure sharing andunderstanding of the Grouprsquos strategy and
objectives by cascading critical informa-
tion In addition some 5000 managers
and employees enjoy extended access
to all corporate publications on a weekly
basis helping to ensure that employees
are directly involved in key issues
Open and constructive dialogue with
social partners continued in 2006 with
respect to the restructuring that was car-
HUMAN RESOURCES
DEVELOPING TALENT
Human resources amp internal
communications initiatives
have proved crucial
to successful implementation
of Thomsonrsquos
strategic objectives
ldquoSince I joined in November 2006 Irsquove been struck by how committed HR
professionals worldwide are about achieving Thomsonrsquos ambitionmdashto be
one of the 100 greatest companies to work for Itrsquos amazing what has been
achieved in a short time The Asia-Pacific region is particularly challenging
as our markets change and grow at seemingly lightning speed One of my
greatest challengesmdashhaving identified and recruited the right talentmdashwill be
to continue developing and nurturing the management and leadership skills
we need to develop the business in Asiardquo
Gao Lan Human Resources Vice-President Asia Pacific
42 Thomson Panorama 2006
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ried out to meet Thomsonrsquos business
objectives Notably through the Grouprsquos
European Works Forummdashwhich com-
prises 15 union representatives from the
countries where Thomson is presentmdashbut
also at local level the prime concern in this
dialogue was to ensure fair treatment for
all employees affected by restructuring or
disposals
Simplifying and
aligning the organization
Thomsonrsquos management development
blueprint known as the HR Leadership
Model continued to advance in 2006
The model is designed to simpli fy and
align the organization with business strat-
egy identify key resources following acqui-
sitions and recruit the highest caliber of
people needed by Thomson as a technol-
ogy-driven company The yearrsquos achieve-
ments included global mapping of theorganization and grading of jobs for the
Grouprsquos 350 senior managers This map-
ping allows harmonization of remuneration
across countries and activities ensuring
fair treatment based on the type of post
held and performance criteria A global
Compensation amp Benefits policy for these
executives was presented to the Board
of Directors and is expected to expand
throughout the organization during 2007
and 2008
Designed to identify and develop Thomsonrsquos
talents the bi-annual employee evaluation
and objectives evaluation known as the
ldquoContract of Progressrdquo was revised and
improved in 2006 Specific training pro-
grams in which over 300 people parti-
cipated over the year were developed
for HR personnel to ensure Group-wide
consistency in the assessment and moni-toring of employee performance
A centralized worldwide talent review policy
was implemented in 2006 to enable Thom-
son to better anticipate human resources
requirements Dedicated people manage-
ment tools are used to track potential risks
and define succession and development
plans at all levels of the organization The
talent review process which assessed
some 5000 managers and key employees
across the Grouprsquos divisions in 2006 also
helped identify promising individuals who
are likely to take on senior positions within Thomson in the next few years Person-
alized development plans were then built
for these high-potential individuals which
included training in business schools and
universities in the first half of 2007
Customized development programs
Increasingly close partnerships with some
of the worldrsquos leading engineering schools
business schools and universities in
In 2006 Thomson pursued integration and
realignment of its workforce through
development of transversal policies and
a strong corporate culture
43 Thomson Panorama 2006
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Thomson is committed to
attracting developing retaining and
energizing key talents
Europe Asia and North America contribute
to the growing awareness of Thomson and
serve as an outstanding source of new tal-
ent for the Group Every year Thomson
recruits more than 600 engineers and
managers categories of personnel which
have seen their numbers double over the
last two years
Significant progress was made in 2006
to diversify and expand the training pro-
grams on offer to Thomson employees
More than 300 managers in all Thomson
businesses participated in high-profile
training seminars ranging from Strategic
Execution and Project Dynamics to Value
Creation Training initiatives will expand
further in the future since they form an inte-
gral part of the Grouprsquos business evolution
and the Thomsonrsquos commitment to attract
develop retain and energize key talents
Pro-active approach
A pro-active approach to deploying the
human resources function has been
adopted with the transfer of the func-
tion in Asia from Hong Kong to Beijing in
2006 helping support Thomsonrsquos expan-
sion in this key region Managing human
resources for the region from Beijing
places the function close to many of its
internal customers as well as to one of the
Grouprsquos research centers Home to more
than 360 highly-skilled engineers the cen-
ter is near many of Chinarsquos leading univer-
sities and research institutes encouraging
exchanges with the academic and scien-
tific communities
In 2006 Thomson reiterated its corporate
beliefs externally by publishing the Grouprsquos
commitment to the 10 principles of theUnited Nations Global Compact on the
UNrsquos web site Such ldquoCommunication on
Progressrdquo underscores Thomsonrsquos pub-
lic accountability and transparency both
of which critical to the Grouprsquos abilities to
manage risks and opportunities
44 Thomson Panorama 2006
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Thomson employed 24465 people
as of December 31 2006 excluding
businesses held for sale
(1) Australia Latin America and United
Arab Emirates
(2) Manufacturing services 5 and
support functions 4
Services62
EMPLOYEES BY DIVISION
Technology
8
Others(2)
9
Systems21
Europe36
EMPLOYEES
BY GEOGRAPHIC AREA
North America
44 Asia9
Rest ofthe World(1)
11
TALENT MIX
Womenrepresent36 of all
employees
Women represent13 of managers
Women represen18 of ExecutiveCommittee memb
In an effort to ensure that the main elements of
Thomsonrsquos Ethics Charter and Values were conveyed and
understood throughout the organization an internal campaign
was launched in mid-2006 This involved the distribution of
posters in the appropriate local language to more than
a hundred sites around the world At Thomsonrsquos main sites
local managers often with an Executive Committee member
hosted briefing sessions and took the opportunity
to discuss these key issues with employees
45 Thomson Panorama 2006
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46 Thomson Panorama 2006
Thomson helps its customers to provide
people with broader access to media
entertainment and communications For
example by managing the broadcasting
of close to 200 TV channels the Group
enlarges the media and information
choices available to millions of people
throughout Europe Asia and North Amer-
ica By providing solutions and audio-visual products to support distance learn-
ing Thomson enables universities to reach
out to students who might not otherwise
enjoy access to such education
Expertise to preserve
film amp TV heritage
As an enabler of the digital world Thomson
contributes to cultural diversity and enrich-
ment and better understanding among
peoples Thomson supports the arts and
creativity by supplying the creative services
and products that make it possible for cre-ative minds to realize their projects and to
deliver them to audiences Contributing
to a richer cultural fabric worldwide the
Grouprsquos expertise enables emblematic cin-
ematographic works to retrieve their visual
glory through the provision of a variety of
film restoration techniques In 2006 the
Group took steps to place this expertise at
the disposal of the worldrsquos endangered film
and audiovisual archives with the setting
up of the Thomson Foundation for Film amp
TV Heritage
The Foundation working in coopera-
tion with local and international partners
helps to set up multi-disciplinary teams
comprised of experts from Thomson
businesses advanced archive institutions
and film preservation schools to restore
and promote what remains of the worldrsquos
cultural legacy recorded on film and TV
During its initial year the Foundation con-tributed to projects in Cambodia France
India Thailand and the US
Operating worldwide Thomson contributes
to improving economic and social welfare
and living standards As a good corporate
citizen the Group recognizes its responsi-
bilities to all of its stakeholders This means
ensuring that all of its business practices
meet the highest ethical standards It also
means that the Group is committed to
protecting and enhancing the environment
everywhere it does business to ensure that
all Thomson products are safe to use andthat all Thomson employees benefit from
a safe working environment Furthermore
Thomson fulfils its duty as a corporate citi-
zen by contributing to the quality of life in
many of the communities in which it does
business through a variety of local initia-
tives ranging from fund-raising in the com-
munity to events sponsorship
Through its technology
systems and services
Thomson contributes to
the dissemination of media
and entertainment
and a richer cultural fabric
for the world
The Bophana Archive Center
in Cambodia was set up in 2006
with the help of the Thomson Foundation
for Film amp TV Heritage
CORPORATE
SOCIAL RESPONSIBILITY ENABLING A DIGITAL WORLD
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47 Thomson Panorama 2006
Since its inception the Thomson Foundation has contributed to
a number of film and TV heritage projects Working in partnership with
local and international government agencies and non-profit groups
the Foundation helped create the Bophana Archive Center in Cambodia
at the end of 2006 The Center aims to save and enlarge access to
endangered film TV and photographic archives In India the first
session of a film heritage course designed by the Foundation took place in
the national film school of India in April 2007 Highlighting the critical role film
plays in the creative community the program of workshops conferences and
screenings was open to film students and professionals alike
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48 Thomson Panorama 2006
Global Compact and Vigeo
Vigeo the French social responsibility rat-
ings agency ranked Thomson as one of the
best performers of 20 companies assessed
in its 2006 European ldquoTechnology amp Hard-
warerdquo sector benchmark study
To advance responsible corporate citizen-ship and universal social and environmen-
tal principles Thomson has been a mem-
ber of the United Nations Global Compact
since 2003 Launched in 1999 the UN
Global Compact requires companies to
embrace support and enactmdashwithin their
sphere of influencemdasha set of values in the
areas of human rights labor the environ-
ment and anti-corruption Thomsonrsquos core
valuesmdashhigh ethical standards striving to
improve safety and environmental respon-
sibility initiatives and fair business prac-
ticesmdashmeet or exceed the goals embod-
ied in the UN Global Compact initiative
Thomsonrsquos Ethics Charter sets the foun-
dation for the Grouprsquos dedication to
act responsibly in all of its dealings with
employees suppliers customers and local
communities Updated and enhanced in
2006 the Ethics Charter covers a broad
range of issues from business practices
and human rights to the environment
health and safety All Thomson employees
are required to respect the conduct and
practices laid out in the Ethics Charter
This same universal obligation applies to all
Thomson suppliers and subcontractors
Suppliers and subcontractors are regularly
audited by Thomson to ensure compliance
with the Grouprsquos policies and standards
Initiated in 2002 the supplier ethics audit
program has resulted in hundreds of
supplier audits over the past four yearsIn addition the Social Accountabilities
8000 standard (SA 8000) is used as a
basis for evaluating those suppliers with
manufacturing facilities in high-risk areas
Established by an independent multi-dis-
ciplinary group of international experts the
SA 8000 standard is designed to ensure
humane workplaces
Human rights
Thomson aims to ensure that its business
practices align with key corporate values
The Grouprsquos Ethics Charter specificallyfocuses on the Global Compact standards
covering child labor forced labor health and
safety discrimination disciplinary practices
working hours and compensation
To he lp prevent the use of chi ld labor
for example the Ethics Charter prohibits
employing workers below the legal mini-
mum working age in any country
The Ethics Charter also helps combat
forced labor by prohibiting unfair practices
Thomson endeavours to protect
the environment wherever it does business
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49 Thomson Panorama 2006
such as requiring workers to deposit money
to obtain work withholding personal docu-
ments such as identity cards or passports
requiring workers to extend hours beyond
normal time or limiting workersrsquo movements
during non-working hours Prison labor and
indebted bondage are strictly prohibited
Non-discrimination and diversity
As an international Group doing business
in approximately 40 countries Thomsonrsquos
workforce is very diverse The Grouprsquos
headquarters in Paris for example counts
about a dozen different nationalities Dis-
crimination on the basis of race religion or
gender is strictly prohibited As of Decem-
ber 2006 women accounted for 36 of
Thomsonrsquos total employees
Thomson employed over 24000 people
in its core businesses as of end-2006 Of
these 44 were in North America 36in Europe 9 in Asia and 11 scattered
around the rest of the world Three-quar-
ters of the Grouprsquos current employees
joined Thomson within the last four years
including those from companies acquired
over that time period
Environment Health and Safety (EHampS)
The transformation of Thomsonrsquos business
model and market focus over the past few
years has reduced significantly the Grouprsquos
manufacturing activities Nevertheless
Thomson remains committed to ongoing
environmental health and safety policies
and goals This commitment is formalized
through the Corporate EHampS Charter
which defines key management principles
designed to protect human health and
the environment In this area the Group
embraces international standards for qual-ity and management systems in particular
the International Standards Organization
(ISO) 14001 standards for environmental
management In 2006 a total of 28 sites
held an ISO 14001 certification
Thomsonrsquos Corporate EHampS group devel-
ops directs and oversees the develop-
ment of global policies guidelines pro-
grams and initiatives reporting annually
to the Thomson Executive Committee
A corporate manager and three regional
managers direct the efforts of EHampS per-
sonnel worldwide Consistent internalbenchmarks have been in place for the
past decade to enable tracking of prog-
ress at all 41 of the Grouprsquos main industrial
locations Measured criteria include EHampS-
related employee training each locationrsquos
progress toward reducing work-related
injuries and lost workdays reducing envi-
ronmental impacts and reducing the con-
sumption of water and energy
The most notable achievement in 2006
was improved water use and conserva-
Clean industry
Thomsonrsquos Guadalajara DVD factory recently entered Mexicorsquos exclusive ldquoClean Industryrdquo program
managed by PROFEPA the federal environmental agency Sites achieving certification must go beyond
legal requirements by improving their performance in water usage minimizing hazardous waste and
controlling air noise and odor pollution Following four months of intense efforts the exhaustive
environmental audit required yielded excellent results and certification was achieved in November 2006
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50 Thomson Panorama 2006
tion within the film labs showing more
than a 25 improvement in water con-
sumption for every million feet of film pro-
cessed This helped Thomson achieve its
overall goal of reducing annual water con-
sumption by 15 Similarly good prog-
ress was achieved toward the long-term
goal of reduced landfill with almost 10
improvement in recycling rate comparedto 2005
As a corol lary to efforts to constant ly
improve the EHampS profile of ongoing activi-
ties Thomson reviews all newly acquired
businesses to ensure they meet Group
requirements and to define upgrade pro-
grams when necessary The EHampS reviews
include an evaluation of the status and
effectiveness of existing management
and control systems and a presentation
of Thomsonrsquos EHampS initiatives and require-
ments Newly acquired sites are now
encouraged to achieve ISO 14001 certi-fication within two years of their effective
date for joining the Group
Suppliers and subcontractors are required
to meet all legal requirements for environ-
mental protection including the elimina-
tion of hazardous substances Suppliers
are required to declare in writing that their
products are free of such substances as
cadmium chromium lead mercury and
asbestos and to provide laboratory test
data as proof
The transformation of Thomsonrsquos business
has reduced significantly
the Grouprsquos manufacturing activities
Overall local legislation and standards
form the foundation for Thomsonrsquos require-
ments concerning environmental health
safety employment child labor discrimi-
nation and human rights issues in each
country where it does business
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FINANCIAL INFORMATION
Thomson maintains the highest standards in compliance and risk management working continuously
to improve reporting and control as well as the quality of financial information made available to
its stakeholders
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54 Thomson Panorama 2006
Growing North American
investor base
The per iod 2004-2006 brought about
expansion in Thomsonrsquos international
shareholder base particularly in North
America Leading US-based investment
management funds Franklin Templeton
Investments and Brands Investment Part-ners hold over 10 and 5 respectively
of Thomsonrsquos share capital while Dodge amp
Cox increased its stake to over 10 during
the year The Group estimates that North
American institutional investors represent
over 50 of the institutional investor base
France around a quarter and other Euro-
pean investors account for the majority of
the remainder
Active communications
To keep Thomsonrsquos broad investor base
appraised of progress in implementing itsstrategic objectives senior management
devoted considerable time during the year
to investor meetings in both Europe and
North America
As part of its ongoing efforts to provide
investorsmdashparticularly individual share-
holdersmdashwith comprehensive up-to-date
information Thomson makes full use of
the internet Share price information press
releases as well as the Grouprsquos annual
report and reference documents (Docu-
ment de Reacutefeacuterence filed with the French
stock exchange regulator AMF and Form
20-F filed with the SEC) are available on
the site wwwthomsonnet
Annual General Shareholdersrsquo Meetings
are broadcast live over the internet with asimultaneous translation of the proceed-
ings provided from French to English to
enable the majority of shareholders to view
the event The results of the vote are dis-
closed in detail on the internet site imme-
diately following the Meeting
The Shareholder Relations department
organizes tours for individual shareholders
of the newly inaugurated Thomson Gal-
lery at the Grouprsquos headquarters in Paris
France Visits to the Gallery designed to
illustrate Thomsonrsquos activities through a
series of live technology demos and videopresentations allow participants to better
appreciate the Grouprsquos 2007-2009 strat-
egy and growth prospects
Dividend
The dividend ofeuro033 per share proposed
at the Annual Shareholdersrsquo Meeting on
15 May 2007 represented a 10 increase
over last yearrsquos dividend
SHAREHOLDER RELATIONS
Thomson aims to keep
investors and individual
shareholders informed of
progress in implementing
strategic objectives
Thomsonrsquos Annual General Meeting
provides an opportunity for debate and
exchange with individual shareholders
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55 Thomson Panorama 2006
Financial calendar 2007
bull April 26 First Quarter 2007 Sales
bull May 15 Shareholdersrsquo Meeting (on second notice)
bull July 26 First Half 2007 Results
bull October 18 Third Quarter 2007 Sales
These dates are subject to modification
Public904
CAPITAL STRUCTURE AS OF DECEMBER 31 2006
Employees25
Treasury Shares46
Other25
SHARE HIGHLIGHTS
2006 2005
Year high 1932 2142
Year low 1165 1526
Share price at year-end in euro 1481 1770
Average daily volume 2445176 2244879
Market capital at year-end in euro million 4056 4838
Number of shares outstanding at year end
(in thousands) 273871 273308
Net dividend per share in euro 033 030
Listed on the Paris and New York stock exchanges ndash Euronext code 18453 ndash NYSE ticker TMSN
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56 Thomson Panorama 2006
Maintaining the highest standards
in compliance and risk management
Extensive work was completed in 2006
in Thomsonrsquos main operational units and
at Corporate level to ensure alignment of
reporting and control procedures with the
requirements of the Sarbanes-Oxley Act in
the United States
Improving Internal Control Procedures
Building towards application of Section
404 of the Sarbanes-Oxley Act (ldquoSOX
404rdquo) for fiscal year 2006 which required
the Group to assess the effectiveness of
internal controls Thomson committed to
implementing the internal control frame-
work proposed by the Committee of
Sponsoring Organizations of the Treadway
Commission (ldquoCOSOrdquo)
Within this framework the Group seeks toachieve ldquoreasonable assurancerdquo regarding
the effectiveness and efficiency of opera-
tions the reliability of financial reporting
and compliance with applicable laws and
regulations
Group-wide initiatives were on-going in
2006 to achieve these objectives including
the Process Transformation Initiative (PTI)
to ensure operational excellence COM-
PASS (Controls Over Methods Processes
Applications Systems and Strategy) and
the Risk Committee and its enterprise risk
assessment and management programrun by the Internal Audit function
Following a full worldwide enterprise risk
assessment carried out in the second half
of 2005 and updated throughout 2006 a
second was planned for completion by May
2007 The process assesses risks in the
Grouprsquos distinct business units or profit cen-
ters with the goal of identifying assessing
validating and monitoring risks which could
impact or potentially impact the Grouprsquos
ability to achieve its short and long-term
objectives In 2007 the Risk Committee will
continue to regularly monitor action plans
put in place to mitigate the risks identified
During the year the Group also continued
implementation of a worldwide SOX 404
compliance software system to assist with
the documentation of significant financialprocesses provide consistent guidance
to management regarding controls and
better enable management to assess its
control structure
Managing Risk
Thomson has three main internal organiza-
tions that support and assist the Executive
Committee in control and risk monitoring
the Investment Committee and the Risk
Committee The Investment Committee
meets on an ad hoc basis throughout the
year generally once per week to reviewfinancial commitments including proposed
acquisitions capital equipment funding
and new ventures requiring capital The Risk
Committee which met nine times in 2006
evaluates the Grouprsquos financial operational
and compliance risks and identifies strate-
gic risks that could adversely affect different
activities within the framework of Grouprsquos
three-year plan scenarios The Corporate
Social Responsibility (CSR) Committee to
be set up in 2007 will oversee all CSR
compliance and ethics matters
Ethical values and principles of conductfor the Grouprsquos managers are defined in
of the Grouprsquos divisions and profit centersIn the context of the budgetary procedure
performance measurement indicators are
calculated by the divisions analyzed and
reviewed monthly to serve as a reference
for the Grouprsquos monthly reporting
Management reporting and
closing period work
Th om so n uses a co mmon char t of
accounts which is regularly updated The
principal accounting and financial figures
of the operational and functional depart-
ments consolidated at Group level are
analyzed by the Grouprsquos management
control team and reviewed by the Grouprsquos
Executive Committee
The closing process for the half-year and
annual consolidated financial statementsoccurs in two steps The first step con-
sists of a ldquohard closerdquo completed in May
and September leading to a first review by
the statutory auditors The second step
occurs in July and in JanuaryFebruary and
involves the finalization of half-year and
annual consolidated financial statements
under IFRS The Group then proceeds
once a year with a reconciliation of these
results in accordance with US GAAP
Preparation of financial statements
The financial statements are prepared jointly by the finance department and the
General Secretary They are based on
information reported through the annual
reporting and accounting consolidation
processes and on operational and mar-
ket information which is specifically cen-
tralized for the preparation of Thomsonrsquos
Document de Reacutefeacuterence in France and
the submission of Form 20-F in the United
States Half-year and annual financial infor-
mation is reviewed by the Grouprsquos Audit
Committee
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58 Thomson Panorama 2006
(1) Source PriceWaterhouseCoopers ndash
ldquoGlobal Entertainment and Media Outlook 2006-10rdquo
Revenue growth
Thomson achieved consolidated 2006
net revenues of 9914045854 million up from
9914045591 million in 2005 Revenues for
the Core Business reached 9914045747 mil-
lion (9914045776 million at constant currency)
representing 83 growth over 2005 at
constant currency
Overall the Grouprsquos key growth busi-
nessesmdashContent Services Network
Services Access Products for telecom
operators and our Broadcast amp Networks
businesses (Grass Valley and Network
Software)mdashincreased strongly year-on-
year and accounted for over a third of
Group revenues against less than a quar-
ter in 2005
Thomsonrsquos Core Business EBIT for 2006
was euro504 million representing a Core
Business EBIT margin of 88 Thisreflected growth in some key businesses
and cost actions across the Group off-
setting a significant investment in research
and development and some increase in
restructuring expenses
Increased spend on RampD
Research and development expenditure
charged in the Core Business (net of
external funding) rose from 991404221 million in
2005 to 991404279 million in 2006 an increase
of 26 principally in the Systems divi-
sion The Group expanded the number ofproducts and services in the development
phase across its businesses
Return to profit
Losses in Non-Core Continuing and Dis-
continued operations were substantially
lower year-on-year reflecting principally
the exit from heavily loss-making Displays
activities in 2005 and intensified cost-sav-
ing programs in 2006 A major revision
and harmonization of the Grouprsquos North
American healthcare obligations gave rise
to substantial one-time gains and Thom-
son also initiated significant restructuring
of its French Non-Core operations
The good performance of the Core Busi-
ness lower Non-Core and Discontinued
losses and a low reported tax chargeenabled the Group to return a net profit of
99140455 million in 2006 compared to a loss of
991404573 million in the previous year
Good cash flow
strengthened balance sheet
Thomson generated good free cash flow
and strengthened its balance sheet in
2006 Total net financial liabilities on the
balance sheet fell by 991404460 million reflect-
ing a 99140493 million fall in financial and acqui-
sition-related debts and a 991404367 million
reduction in retirement benefit obligations(including healthcare)
Increase in Net Dividend
The Board of Directors proposed a dis-
tribution to shareholders of 991404033 per
share (2005 dividend 991404030) reflecting
confidence in the prospects of the Group
going forward
Outlook 2007-2009
growth in revenues and net income
With the Grouprsquos transformation complete Thomsonrsquos financial focus over the 2007-
2009 period will be to grow revenues and
net income
Thomson serves growing Media Enter-
tainment amp Communications marketsmdashfor
which external estimates(1) indicate com-
pound growth of around 6 over the last
FINANCIAL AND
OPERATIONAL PERFORMANCE
Full year 2006 results
saw a return to profitability
and leave Thomson
well positioned at
the heart of convergence
and digital video
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59 Thomson Panorama 2006
five years Our digital and electronic busi-
nesses now represent two-thirds of rev-
enues and we believe they are growing
faster than the overall market offsetting
the maturing physical media businesses
Given this profile the Group expects its
revenue growth to be more modest in
2007 but to gather pace over the period
and our overall objective is to show com-pound growth over 2007-2009 in line with
or faster than the overall market
The 2007-2009 period is also expected
to see a sharply reduced impact from
residual Non-Core activities with an end
to losses from the Discontinued Activities
perimeter after 2007 Accordingly Thom-
sonrsquos ambition is to turn its Core Business
growth and profitability and lower impact
from Non-Core into strong growth in net
income over the period 2007-2009
Business operations
Continuous performance improvement is
fundamental to Thomsonrsquos commitment to
create sustainable business models and
long-term value for all stakeholders The
ambitious Group-wide programs launched
in 2004 to improve productivity and
enhance overall performance producedsubstantial results in 2006 and led to new
and strong initiatives for long-term growth
As of the second half of 2006 six ldquoKey
Programsrdquo are monitored at Group level
Clients Software Product Introduction
Operations Transformation and Talent
Management
KEY PROGRAMS IN PLACE
Program Focus
Clients Thomsonrsquos clientregional diversification and
growth of the existing business
through improved Sales amp Marketing
Software Development of integrated software platforms
in all markets (post-production distribution
delivery) and for all types of customer
(professional prosumerhellip)
Product Introduction Ensuring new product roadmaps are in line
with strategy and resource needs have been
identifiedOperations Improving the Grouprsquos cost base cash
generation and working capital
Transformation Multiple programs including initiatives to
improving customer relationship management
worldwide supply chain management
IT transformation as well as Thomsonrsquos RampD
footprint
Talent Management Leveraging human assets with a focus on
talent retention and acquisition
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60 Thomson Panorama 2006
SUMMARY RESULTS FULL YEAR 2006
In 991404 millions unless otherwise stated 2006(1) 2005(1)
Net revenues 5854 5591(1)
Core Business net revenues 5747 5335
Services 2489 2487
Systems 2684 2262
Technology 547 546
Corporate 27 40
Non-Core continuing operations net revenues 107 256
Core Business EBIT(2) 504 512
Services 160 205
Systems 132 109
Technology 289 277Corporate (77) (79)
EBIT from Non-Core continuing operations (25) (122)
(1) Restated with 2006 discontinued activities according to IFRS 5
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61 Thomson Panorama 2006
Year ended December 31in 991404 except number of shares 2006 2005 2004
Year ended December 31in 991404 millions 2006 2005(1) 2004(1)
CONSOLIDATED STATEMENTS OF OPERATIONS
(1) Restated with 2006 discontinued activities according to IFRS 5
(2) After deduction of the interests net of tax paid on the subordinated perpetual notes during the period
Continuing operations
Revenues 5854 5591 5980
Cost of sales (4474) (4240) (4594)
Gross margin 1380 1351 1386
Selling marketing general and administrative expenses (674) (638) (653)
Other income (expense) 52 (96) (69)
Research and development expenses (279) (227) (201)
Profit from continuing operations before tax and net finance costs 479 390 463
Interest income 19 30 52
Interest expense (108) (108) (54)
Other financial income (expense) (111) 36 (26)
Finance costs ndash net (200) (42) (28)
Share of profit (loss) from associates (86) (82) (20)
Income tax ndash (68) (93)
Profit from continuing operations 193 198 322
Discontinued operations
Profit (loss) from discontinued operations (138) (771) (883)
Net income (loss) 55 (573) (561)
Attributable to
Equity Holders 55 (574) (559)
Minority interests ndash 1 (2)
Weighted average number of shares
outstandingmdashbasic net of treasury stock 261188858 266539917 273646869
Earnings per share from continuing operations
Basic(2) 067 074 118
Diluted 063 042 111
Earnings per share from discontinued operations
Basic (053) (289) (323)
Diluted (048) (262) (296)Total earnings per share
Basic(2) 014 (215) (205)
Diluted 015 (220) (185)
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62 Thomson Panorama 2006
CONSOLIDATED BALANCE SHEETS
In 991404 millions December 31 December 31 January 1 December 31 2006 2005 2005(1) 2004
ASSETS
Non-current assets
Property plant and equipment 813 886 1051 1051
Goodwill 1714 1756 1186 1178
Other intangible assets 1071 1150 924 924
Investments in associates 12 204 260 260
Investments and financial assets available-for-sale 266 341 139 113
Derivative financial instruments 7 1 11 ndash
Contract advances 129 173 179 179
Deferred tax assets 397 379 307 301
Other non-current assets 110 182 133 136
Total non-current assets 4519 5072 4190 4142
Current assets
Inventories 366 333 503 568
Trade accounts and notes receivable 1018 1315 1232 1180
Current accounts with associates and joint ventures 97 115 143 143
Derivative financial instruments 8 9 115 ndash
Other current assets 535 644 483 616
Marketable securities ndash 7 58 58
Cash and cash equivalents 1311 996 1845 1848
Assets classified as held for sale 264 369 80 ndash
Total current assets 3599 3788 4459 4413
Total assets 8118 8860 8649 8555
(1) Including the impacts of the first-time application related to IAS 32 and 39 on financial instruments and IFRS 5 on non-current assets held for sale and
discontinued operations
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63 Thomson Panorama 2006
In 991404 millions December 31 December 31 January 1 December 31 2006 2005 2005(1) 2004
SHAREHOLDERSrsquo EQUITY AND LIABILITIES
Shareholdersrsquo equity
Common stock (273871296 shares at
December 31 2006
with nominal value of euro 375 per share) 1027 1025 1025 1025
Trade accounts and notes payable 1032 1164 1199 1226
Accrued employee expenses 165 166 158 163
Income tax payable 57 47 60 60
Other current liabilities 671 750 746 800
Payables on acquisition of companies 13 138 84 84
Liabilities directly associated with
assets classified as held for sale 232 470 88 ndash
Total current liabilities 3681 4393 3602 3459
Total liabilities 5999 6644 6251 6062
Total shareholderrsquos equity and liabilities 8118 8860 8649 8555
(1) Including the impacts of the first-time application related to IAS 32 and 39 on financial instruments and IFRS 5 on non-current assets held for sale and
discontinued operations
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Creation and lay-out
Photo credits Nathalie BerhingGAMMA ndash Steacutephane de Bourgies ndash Jean-Franccedilois DeroubaixGAMMA ndash Christine Donnier- ValentinGAMMA ndash Cars copy 2006 Disney Enterprises IncPixar All Rights Reserved ndash Dreamgirls copy 2006 DREAMWORKS
LLC and PARAMOUNT PICTURES All Rights Reserved ndash Poseidon copy 2006 Warner Bros Pictures ndash Sony Bravia Paint
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COMMITMENTS
Thomson is committed to creating value for all its stakeholders by providing the technology systems
and services that enable a digital world The Group seeks to achieve the highest standards of ethical
behavior in its business operations and thus to implement best practice in the management of
human resources and environmental health and safety
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In 2006 human resources efforts focused
on key priorities linked to managing Thom-
sonrsquos evolving employee base These
include identifying and attracting new
talents and expertise motivating people
through involvement and empowerment
retaining critical talents by providing excit-
ing career opportunities and developing
the work force by creating opportunitiesfor operational exposure coaching mobil-
ity and training
Cementing the transformation
Human resources (HR) initiatives over the
course of the year helped cement the
transformation of Thomson into a focused
technology company serving the Media
Entertainment amp Communications indus-
tries With the Grouprsquos evolving needs for
support functions and skills that fit a soft-
ware driven market environment change
management has been the leitmotif of thepast two years
Throughout 2006 Thomson pursued
integration and realignment of its skills
base through development of transversal
policies and a strong corporate culture
thus reinforcing employee motivation and
synergies among subsidiaries
The transfer of the Internal Communi-
cations function to the HR Department
reinforced the impact of these efforts For
example the new Thomson HR Leader-
ship Model which led to the development
of new Management Principles Ethics
Charter and Values was widely cascaded
and conveyed Group-wide in 2006
Employee involvement
One hundred key managers now consti-
tute the Thomson Management Network
This body comprises nearly equal thirds
of managers who have been promoted
to senior positions managers who have
joined the Group through acquired com-
panies in which they held lead roles and
managers who were already in place as
key leaders They meet regularly (two to
three times a year) with the Chairman amp
CEO and his Executive Committee to dis-
cuss strategic and execution issues and
thus contribute toward Thomsonrsquos contin-
ued growth They also ensure sharing andunderstanding of the Grouprsquos strategy and
objectives by cascading critical informa-
tion In addition some 5000 managers
and employees enjoy extended access
to all corporate publications on a weekly
basis helping to ensure that employees
are directly involved in key issues
Open and constructive dialogue with
social partners continued in 2006 with
respect to the restructuring that was car-
HUMAN RESOURCES
DEVELOPING TALENT
Human resources amp internal
communications initiatives
have proved crucial
to successful implementation
of Thomsonrsquos
strategic objectives
ldquoSince I joined in November 2006 Irsquove been struck by how committed HR
professionals worldwide are about achieving Thomsonrsquos ambitionmdashto be
one of the 100 greatest companies to work for Itrsquos amazing what has been
achieved in a short time The Asia-Pacific region is particularly challenging
as our markets change and grow at seemingly lightning speed One of my
greatest challengesmdashhaving identified and recruited the right talentmdashwill be
to continue developing and nurturing the management and leadership skills
we need to develop the business in Asiardquo
Gao Lan Human Resources Vice-President Asia Pacific
42 Thomson Panorama 2006
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ried out to meet Thomsonrsquos business
objectives Notably through the Grouprsquos
European Works Forummdashwhich com-
prises 15 union representatives from the
countries where Thomson is presentmdashbut
also at local level the prime concern in this
dialogue was to ensure fair treatment for
all employees affected by restructuring or
disposals
Simplifying and
aligning the organization
Thomsonrsquos management development
blueprint known as the HR Leadership
Model continued to advance in 2006
The model is designed to simpli fy and
align the organization with business strat-
egy identify key resources following acqui-
sitions and recruit the highest caliber of
people needed by Thomson as a technol-
ogy-driven company The yearrsquos achieve-
ments included global mapping of theorganization and grading of jobs for the
Grouprsquos 350 senior managers This map-
ping allows harmonization of remuneration
across countries and activities ensuring
fair treatment based on the type of post
held and performance criteria A global
Compensation amp Benefits policy for these
executives was presented to the Board
of Directors and is expected to expand
throughout the organization during 2007
and 2008
Designed to identify and develop Thomsonrsquos
talents the bi-annual employee evaluation
and objectives evaluation known as the
ldquoContract of Progressrdquo was revised and
improved in 2006 Specific training pro-
grams in which over 300 people parti-
cipated over the year were developed
for HR personnel to ensure Group-wide
consistency in the assessment and moni-toring of employee performance
A centralized worldwide talent review policy
was implemented in 2006 to enable Thom-
son to better anticipate human resources
requirements Dedicated people manage-
ment tools are used to track potential risks
and define succession and development
plans at all levels of the organization The
talent review process which assessed
some 5000 managers and key employees
across the Grouprsquos divisions in 2006 also
helped identify promising individuals who
are likely to take on senior positions within Thomson in the next few years Person-
alized development plans were then built
for these high-potential individuals which
included training in business schools and
universities in the first half of 2007
Customized development programs
Increasingly close partnerships with some
of the worldrsquos leading engineering schools
business schools and universities in
In 2006 Thomson pursued integration and
realignment of its workforce through
development of transversal policies and
a strong corporate culture
43 Thomson Panorama 2006
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Thomson is committed to
attracting developing retaining and
energizing key talents
Europe Asia and North America contribute
to the growing awareness of Thomson and
serve as an outstanding source of new tal-
ent for the Group Every year Thomson
recruits more than 600 engineers and
managers categories of personnel which
have seen their numbers double over the
last two years
Significant progress was made in 2006
to diversify and expand the training pro-
grams on offer to Thomson employees
More than 300 managers in all Thomson
businesses participated in high-profile
training seminars ranging from Strategic
Execution and Project Dynamics to Value
Creation Training initiatives will expand
further in the future since they form an inte-
gral part of the Grouprsquos business evolution
and the Thomsonrsquos commitment to attract
develop retain and energize key talents
Pro-active approach
A pro-active approach to deploying the
human resources function has been
adopted with the transfer of the func-
tion in Asia from Hong Kong to Beijing in
2006 helping support Thomsonrsquos expan-
sion in this key region Managing human
resources for the region from Beijing
places the function close to many of its
internal customers as well as to one of the
Grouprsquos research centers Home to more
than 360 highly-skilled engineers the cen-
ter is near many of Chinarsquos leading univer-
sities and research institutes encouraging
exchanges with the academic and scien-
tific communities
In 2006 Thomson reiterated its corporate
beliefs externally by publishing the Grouprsquos
commitment to the 10 principles of theUnited Nations Global Compact on the
UNrsquos web site Such ldquoCommunication on
Progressrdquo underscores Thomsonrsquos pub-
lic accountability and transparency both
of which critical to the Grouprsquos abilities to
manage risks and opportunities
44 Thomson Panorama 2006
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Thomson employed 24465 people
as of December 31 2006 excluding
businesses held for sale
(1) Australia Latin America and United
Arab Emirates
(2) Manufacturing services 5 and
support functions 4
Services62
EMPLOYEES BY DIVISION
Technology
8
Others(2)
9
Systems21
Europe36
EMPLOYEES
BY GEOGRAPHIC AREA
North America
44 Asia9
Rest ofthe World(1)
11
TALENT MIX
Womenrepresent36 of all
employees
Women represent13 of managers
Women represen18 of ExecutiveCommittee memb
In an effort to ensure that the main elements of
Thomsonrsquos Ethics Charter and Values were conveyed and
understood throughout the organization an internal campaign
was launched in mid-2006 This involved the distribution of
posters in the appropriate local language to more than
a hundred sites around the world At Thomsonrsquos main sites
local managers often with an Executive Committee member
hosted briefing sessions and took the opportunity
to discuss these key issues with employees
45 Thomson Panorama 2006
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46 Thomson Panorama 2006
Thomson helps its customers to provide
people with broader access to media
entertainment and communications For
example by managing the broadcasting
of close to 200 TV channels the Group
enlarges the media and information
choices available to millions of people
throughout Europe Asia and North Amer-
ica By providing solutions and audio-visual products to support distance learn-
ing Thomson enables universities to reach
out to students who might not otherwise
enjoy access to such education
Expertise to preserve
film amp TV heritage
As an enabler of the digital world Thomson
contributes to cultural diversity and enrich-
ment and better understanding among
peoples Thomson supports the arts and
creativity by supplying the creative services
and products that make it possible for cre-ative minds to realize their projects and to
deliver them to audiences Contributing
to a richer cultural fabric worldwide the
Grouprsquos expertise enables emblematic cin-
ematographic works to retrieve their visual
glory through the provision of a variety of
film restoration techniques In 2006 the
Group took steps to place this expertise at
the disposal of the worldrsquos endangered film
and audiovisual archives with the setting
up of the Thomson Foundation for Film amp
TV Heritage
The Foundation working in coopera-
tion with local and international partners
helps to set up multi-disciplinary teams
comprised of experts from Thomson
businesses advanced archive institutions
and film preservation schools to restore
and promote what remains of the worldrsquos
cultural legacy recorded on film and TV
During its initial year the Foundation con-tributed to projects in Cambodia France
India Thailand and the US
Operating worldwide Thomson contributes
to improving economic and social welfare
and living standards As a good corporate
citizen the Group recognizes its responsi-
bilities to all of its stakeholders This means
ensuring that all of its business practices
meet the highest ethical standards It also
means that the Group is committed to
protecting and enhancing the environment
everywhere it does business to ensure that
all Thomson products are safe to use andthat all Thomson employees benefit from
a safe working environment Furthermore
Thomson fulfils its duty as a corporate citi-
zen by contributing to the quality of life in
many of the communities in which it does
business through a variety of local initia-
tives ranging from fund-raising in the com-
munity to events sponsorship
Through its technology
systems and services
Thomson contributes to
the dissemination of media
and entertainment
and a richer cultural fabric
for the world
The Bophana Archive Center
in Cambodia was set up in 2006
with the help of the Thomson Foundation
for Film amp TV Heritage
CORPORATE
SOCIAL RESPONSIBILITY ENABLING A DIGITAL WORLD
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47 Thomson Panorama 2006
Since its inception the Thomson Foundation has contributed to
a number of film and TV heritage projects Working in partnership with
local and international government agencies and non-profit groups
the Foundation helped create the Bophana Archive Center in Cambodia
at the end of 2006 The Center aims to save and enlarge access to
endangered film TV and photographic archives In India the first
session of a film heritage course designed by the Foundation took place in
the national film school of India in April 2007 Highlighting the critical role film
plays in the creative community the program of workshops conferences and
screenings was open to film students and professionals alike
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48 Thomson Panorama 2006
Global Compact and Vigeo
Vigeo the French social responsibility rat-
ings agency ranked Thomson as one of the
best performers of 20 companies assessed
in its 2006 European ldquoTechnology amp Hard-
warerdquo sector benchmark study
To advance responsible corporate citizen-ship and universal social and environmen-
tal principles Thomson has been a mem-
ber of the United Nations Global Compact
since 2003 Launched in 1999 the UN
Global Compact requires companies to
embrace support and enactmdashwithin their
sphere of influencemdasha set of values in the
areas of human rights labor the environ-
ment and anti-corruption Thomsonrsquos core
valuesmdashhigh ethical standards striving to
improve safety and environmental respon-
sibility initiatives and fair business prac-
ticesmdashmeet or exceed the goals embod-
ied in the UN Global Compact initiative
Thomsonrsquos Ethics Charter sets the foun-
dation for the Grouprsquos dedication to
act responsibly in all of its dealings with
employees suppliers customers and local
communities Updated and enhanced in
2006 the Ethics Charter covers a broad
range of issues from business practices
and human rights to the environment
health and safety All Thomson employees
are required to respect the conduct and
practices laid out in the Ethics Charter
This same universal obligation applies to all
Thomson suppliers and subcontractors
Suppliers and subcontractors are regularly
audited by Thomson to ensure compliance
with the Grouprsquos policies and standards
Initiated in 2002 the supplier ethics audit
program has resulted in hundreds of
supplier audits over the past four yearsIn addition the Social Accountabilities
8000 standard (SA 8000) is used as a
basis for evaluating those suppliers with
manufacturing facilities in high-risk areas
Established by an independent multi-dis-
ciplinary group of international experts the
SA 8000 standard is designed to ensure
humane workplaces
Human rights
Thomson aims to ensure that its business
practices align with key corporate values
The Grouprsquos Ethics Charter specificallyfocuses on the Global Compact standards
covering child labor forced labor health and
safety discrimination disciplinary practices
working hours and compensation
To he lp prevent the use of chi ld labor
for example the Ethics Charter prohibits
employing workers below the legal mini-
mum working age in any country
The Ethics Charter also helps combat
forced labor by prohibiting unfair practices
Thomson endeavours to protect
the environment wherever it does business
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49 Thomson Panorama 2006
such as requiring workers to deposit money
to obtain work withholding personal docu-
ments such as identity cards or passports
requiring workers to extend hours beyond
normal time or limiting workersrsquo movements
during non-working hours Prison labor and
indebted bondage are strictly prohibited
Non-discrimination and diversity
As an international Group doing business
in approximately 40 countries Thomsonrsquos
workforce is very diverse The Grouprsquos
headquarters in Paris for example counts
about a dozen different nationalities Dis-
crimination on the basis of race religion or
gender is strictly prohibited As of Decem-
ber 2006 women accounted for 36 of
Thomsonrsquos total employees
Thomson employed over 24000 people
in its core businesses as of end-2006 Of
these 44 were in North America 36in Europe 9 in Asia and 11 scattered
around the rest of the world Three-quar-
ters of the Grouprsquos current employees
joined Thomson within the last four years
including those from companies acquired
over that time period
Environment Health and Safety (EHampS)
The transformation of Thomsonrsquos business
model and market focus over the past few
years has reduced significantly the Grouprsquos
manufacturing activities Nevertheless
Thomson remains committed to ongoing
environmental health and safety policies
and goals This commitment is formalized
through the Corporate EHampS Charter
which defines key management principles
designed to protect human health and
the environment In this area the Group
embraces international standards for qual-ity and management systems in particular
the International Standards Organization
(ISO) 14001 standards for environmental
management In 2006 a total of 28 sites
held an ISO 14001 certification
Thomsonrsquos Corporate EHampS group devel-
ops directs and oversees the develop-
ment of global policies guidelines pro-
grams and initiatives reporting annually
to the Thomson Executive Committee
A corporate manager and three regional
managers direct the efforts of EHampS per-
sonnel worldwide Consistent internalbenchmarks have been in place for the
past decade to enable tracking of prog-
ress at all 41 of the Grouprsquos main industrial
locations Measured criteria include EHampS-
related employee training each locationrsquos
progress toward reducing work-related
injuries and lost workdays reducing envi-
ronmental impacts and reducing the con-
sumption of water and energy
The most notable achievement in 2006
was improved water use and conserva-
Clean industry
Thomsonrsquos Guadalajara DVD factory recently entered Mexicorsquos exclusive ldquoClean Industryrdquo program
managed by PROFEPA the federal environmental agency Sites achieving certification must go beyond
legal requirements by improving their performance in water usage minimizing hazardous waste and
controlling air noise and odor pollution Following four months of intense efforts the exhaustive
environmental audit required yielded excellent results and certification was achieved in November 2006
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50 Thomson Panorama 2006
tion within the film labs showing more
than a 25 improvement in water con-
sumption for every million feet of film pro-
cessed This helped Thomson achieve its
overall goal of reducing annual water con-
sumption by 15 Similarly good prog-
ress was achieved toward the long-term
goal of reduced landfill with almost 10
improvement in recycling rate comparedto 2005
As a corol lary to efforts to constant ly
improve the EHampS profile of ongoing activi-
ties Thomson reviews all newly acquired
businesses to ensure they meet Group
requirements and to define upgrade pro-
grams when necessary The EHampS reviews
include an evaluation of the status and
effectiveness of existing management
and control systems and a presentation
of Thomsonrsquos EHampS initiatives and require-
ments Newly acquired sites are now
encouraged to achieve ISO 14001 certi-fication within two years of their effective
date for joining the Group
Suppliers and subcontractors are required
to meet all legal requirements for environ-
mental protection including the elimina-
tion of hazardous substances Suppliers
are required to declare in writing that their
products are free of such substances as
cadmium chromium lead mercury and
asbestos and to provide laboratory test
data as proof
The transformation of Thomsonrsquos business
has reduced significantly
the Grouprsquos manufacturing activities
Overall local legislation and standards
form the foundation for Thomsonrsquos require-
ments concerning environmental health
safety employment child labor discrimi-
nation and human rights issues in each
country where it does business
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FINANCIAL INFORMATION
Thomson maintains the highest standards in compliance and risk management working continuously
to improve reporting and control as well as the quality of financial information made available to
its stakeholders
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54 Thomson Panorama 2006
Growing North American
investor base
The per iod 2004-2006 brought about
expansion in Thomsonrsquos international
shareholder base particularly in North
America Leading US-based investment
management funds Franklin Templeton
Investments and Brands Investment Part-ners hold over 10 and 5 respectively
of Thomsonrsquos share capital while Dodge amp
Cox increased its stake to over 10 during
the year The Group estimates that North
American institutional investors represent
over 50 of the institutional investor base
France around a quarter and other Euro-
pean investors account for the majority of
the remainder
Active communications
To keep Thomsonrsquos broad investor base
appraised of progress in implementing itsstrategic objectives senior management
devoted considerable time during the year
to investor meetings in both Europe and
North America
As part of its ongoing efforts to provide
investorsmdashparticularly individual share-
holdersmdashwith comprehensive up-to-date
information Thomson makes full use of
the internet Share price information press
releases as well as the Grouprsquos annual
report and reference documents (Docu-
ment de Reacutefeacuterence filed with the French
stock exchange regulator AMF and Form
20-F filed with the SEC) are available on
the site wwwthomsonnet
Annual General Shareholdersrsquo Meetings
are broadcast live over the internet with asimultaneous translation of the proceed-
ings provided from French to English to
enable the majority of shareholders to view
the event The results of the vote are dis-
closed in detail on the internet site imme-
diately following the Meeting
The Shareholder Relations department
organizes tours for individual shareholders
of the newly inaugurated Thomson Gal-
lery at the Grouprsquos headquarters in Paris
France Visits to the Gallery designed to
illustrate Thomsonrsquos activities through a
series of live technology demos and videopresentations allow participants to better
appreciate the Grouprsquos 2007-2009 strat-
egy and growth prospects
Dividend
The dividend ofeuro033 per share proposed
at the Annual Shareholdersrsquo Meeting on
15 May 2007 represented a 10 increase
over last yearrsquos dividend
SHAREHOLDER RELATIONS
Thomson aims to keep
investors and individual
shareholders informed of
progress in implementing
strategic objectives
Thomsonrsquos Annual General Meeting
provides an opportunity for debate and
exchange with individual shareholders
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55 Thomson Panorama 2006
Financial calendar 2007
bull April 26 First Quarter 2007 Sales
bull May 15 Shareholdersrsquo Meeting (on second notice)
bull July 26 First Half 2007 Results
bull October 18 Third Quarter 2007 Sales
These dates are subject to modification
Public904
CAPITAL STRUCTURE AS OF DECEMBER 31 2006
Employees25
Treasury Shares46
Other25
SHARE HIGHLIGHTS
2006 2005
Year high 1932 2142
Year low 1165 1526
Share price at year-end in euro 1481 1770
Average daily volume 2445176 2244879
Market capital at year-end in euro million 4056 4838
Number of shares outstanding at year end
(in thousands) 273871 273308
Net dividend per share in euro 033 030
Listed on the Paris and New York stock exchanges ndash Euronext code 18453 ndash NYSE ticker TMSN
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56 Thomson Panorama 2006
Maintaining the highest standards
in compliance and risk management
Extensive work was completed in 2006
in Thomsonrsquos main operational units and
at Corporate level to ensure alignment of
reporting and control procedures with the
requirements of the Sarbanes-Oxley Act in
the United States
Improving Internal Control Procedures
Building towards application of Section
404 of the Sarbanes-Oxley Act (ldquoSOX
404rdquo) for fiscal year 2006 which required
the Group to assess the effectiveness of
internal controls Thomson committed to
implementing the internal control frame-
work proposed by the Committee of
Sponsoring Organizations of the Treadway
Commission (ldquoCOSOrdquo)
Within this framework the Group seeks toachieve ldquoreasonable assurancerdquo regarding
the effectiveness and efficiency of opera-
tions the reliability of financial reporting
and compliance with applicable laws and
regulations
Group-wide initiatives were on-going in
2006 to achieve these objectives including
the Process Transformation Initiative (PTI)
to ensure operational excellence COM-
PASS (Controls Over Methods Processes
Applications Systems and Strategy) and
the Risk Committee and its enterprise risk
assessment and management programrun by the Internal Audit function
Following a full worldwide enterprise risk
assessment carried out in the second half
of 2005 and updated throughout 2006 a
second was planned for completion by May
2007 The process assesses risks in the
Grouprsquos distinct business units or profit cen-
ters with the goal of identifying assessing
validating and monitoring risks which could
impact or potentially impact the Grouprsquos
ability to achieve its short and long-term
objectives In 2007 the Risk Committee will
continue to regularly monitor action plans
put in place to mitigate the risks identified
During the year the Group also continued
implementation of a worldwide SOX 404
compliance software system to assist with
the documentation of significant financialprocesses provide consistent guidance
to management regarding controls and
better enable management to assess its
control structure
Managing Risk
Thomson has three main internal organiza-
tions that support and assist the Executive
Committee in control and risk monitoring
the Investment Committee and the Risk
Committee The Investment Committee
meets on an ad hoc basis throughout the
year generally once per week to reviewfinancial commitments including proposed
acquisitions capital equipment funding
and new ventures requiring capital The Risk
Committee which met nine times in 2006
evaluates the Grouprsquos financial operational
and compliance risks and identifies strate-
gic risks that could adversely affect different
activities within the framework of Grouprsquos
three-year plan scenarios The Corporate
Social Responsibility (CSR) Committee to
be set up in 2007 will oversee all CSR
compliance and ethics matters
Ethical values and principles of conductfor the Grouprsquos managers are defined in
of the Grouprsquos divisions and profit centersIn the context of the budgetary procedure
performance measurement indicators are
calculated by the divisions analyzed and
reviewed monthly to serve as a reference
for the Grouprsquos monthly reporting
Management reporting and
closing period work
Th om so n uses a co mmon char t of
accounts which is regularly updated The
principal accounting and financial figures
of the operational and functional depart-
ments consolidated at Group level are
analyzed by the Grouprsquos management
control team and reviewed by the Grouprsquos
Executive Committee
The closing process for the half-year and
annual consolidated financial statementsoccurs in two steps The first step con-
sists of a ldquohard closerdquo completed in May
and September leading to a first review by
the statutory auditors The second step
occurs in July and in JanuaryFebruary and
involves the finalization of half-year and
annual consolidated financial statements
under IFRS The Group then proceeds
once a year with a reconciliation of these
results in accordance with US GAAP
Preparation of financial statements
The financial statements are prepared jointly by the finance department and the
General Secretary They are based on
information reported through the annual
reporting and accounting consolidation
processes and on operational and mar-
ket information which is specifically cen-
tralized for the preparation of Thomsonrsquos
Document de Reacutefeacuterence in France and
the submission of Form 20-F in the United
States Half-year and annual financial infor-
mation is reviewed by the Grouprsquos Audit
Committee
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58 Thomson Panorama 2006
(1) Source PriceWaterhouseCoopers ndash
ldquoGlobal Entertainment and Media Outlook 2006-10rdquo
Revenue growth
Thomson achieved consolidated 2006
net revenues of 9914045854 million up from
9914045591 million in 2005 Revenues for
the Core Business reached 9914045747 mil-
lion (9914045776 million at constant currency)
representing 83 growth over 2005 at
constant currency
Overall the Grouprsquos key growth busi-
nessesmdashContent Services Network
Services Access Products for telecom
operators and our Broadcast amp Networks
businesses (Grass Valley and Network
Software)mdashincreased strongly year-on-
year and accounted for over a third of
Group revenues against less than a quar-
ter in 2005
Thomsonrsquos Core Business EBIT for 2006
was euro504 million representing a Core
Business EBIT margin of 88 Thisreflected growth in some key businesses
and cost actions across the Group off-
setting a significant investment in research
and development and some increase in
restructuring expenses
Increased spend on RampD
Research and development expenditure
charged in the Core Business (net of
external funding) rose from 991404221 million in
2005 to 991404279 million in 2006 an increase
of 26 principally in the Systems divi-
sion The Group expanded the number ofproducts and services in the development
phase across its businesses
Return to profit
Losses in Non-Core Continuing and Dis-
continued operations were substantially
lower year-on-year reflecting principally
the exit from heavily loss-making Displays
activities in 2005 and intensified cost-sav-
ing programs in 2006 A major revision
and harmonization of the Grouprsquos North
American healthcare obligations gave rise
to substantial one-time gains and Thom-
son also initiated significant restructuring
of its French Non-Core operations
The good performance of the Core Busi-
ness lower Non-Core and Discontinued
losses and a low reported tax chargeenabled the Group to return a net profit of
99140455 million in 2006 compared to a loss of
991404573 million in the previous year
Good cash flow
strengthened balance sheet
Thomson generated good free cash flow
and strengthened its balance sheet in
2006 Total net financial liabilities on the
balance sheet fell by 991404460 million reflect-
ing a 99140493 million fall in financial and acqui-
sition-related debts and a 991404367 million
reduction in retirement benefit obligations(including healthcare)
Increase in Net Dividend
The Board of Directors proposed a dis-
tribution to shareholders of 991404033 per
share (2005 dividend 991404030) reflecting
confidence in the prospects of the Group
going forward
Outlook 2007-2009
growth in revenues and net income
With the Grouprsquos transformation complete Thomsonrsquos financial focus over the 2007-
2009 period will be to grow revenues and
net income
Thomson serves growing Media Enter-
tainment amp Communications marketsmdashfor
which external estimates(1) indicate com-
pound growth of around 6 over the last
FINANCIAL AND
OPERATIONAL PERFORMANCE
Full year 2006 results
saw a return to profitability
and leave Thomson
well positioned at
the heart of convergence
and digital video
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59 Thomson Panorama 2006
five years Our digital and electronic busi-
nesses now represent two-thirds of rev-
enues and we believe they are growing
faster than the overall market offsetting
the maturing physical media businesses
Given this profile the Group expects its
revenue growth to be more modest in
2007 but to gather pace over the period
and our overall objective is to show com-pound growth over 2007-2009 in line with
or faster than the overall market
The 2007-2009 period is also expected
to see a sharply reduced impact from
residual Non-Core activities with an end
to losses from the Discontinued Activities
perimeter after 2007 Accordingly Thom-
sonrsquos ambition is to turn its Core Business
growth and profitability and lower impact
from Non-Core into strong growth in net
income over the period 2007-2009
Business operations
Continuous performance improvement is
fundamental to Thomsonrsquos commitment to
create sustainable business models and
long-term value for all stakeholders The
ambitious Group-wide programs launched
in 2004 to improve productivity and
enhance overall performance producedsubstantial results in 2006 and led to new
and strong initiatives for long-term growth
As of the second half of 2006 six ldquoKey
Programsrdquo are monitored at Group level
Clients Software Product Introduction
Operations Transformation and Talent
Management
KEY PROGRAMS IN PLACE
Program Focus
Clients Thomsonrsquos clientregional diversification and
growth of the existing business
through improved Sales amp Marketing
Software Development of integrated software platforms
in all markets (post-production distribution
delivery) and for all types of customer
(professional prosumerhellip)
Product Introduction Ensuring new product roadmaps are in line
with strategy and resource needs have been
identifiedOperations Improving the Grouprsquos cost base cash
generation and working capital
Transformation Multiple programs including initiatives to
improving customer relationship management
worldwide supply chain management
IT transformation as well as Thomsonrsquos RampD
footprint
Talent Management Leveraging human assets with a focus on
talent retention and acquisition
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60 Thomson Panorama 2006
SUMMARY RESULTS FULL YEAR 2006
In 991404 millions unless otherwise stated 2006(1) 2005(1)
Net revenues 5854 5591(1)
Core Business net revenues 5747 5335
Services 2489 2487
Systems 2684 2262
Technology 547 546
Corporate 27 40
Non-Core continuing operations net revenues 107 256
Core Business EBIT(2) 504 512
Services 160 205
Systems 132 109
Technology 289 277Corporate (77) (79)
EBIT from Non-Core continuing operations (25) (122)
(1) Restated with 2006 discontinued activities according to IFRS 5
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61 Thomson Panorama 2006
Year ended December 31in 991404 except number of shares 2006 2005 2004
Year ended December 31in 991404 millions 2006 2005(1) 2004(1)
CONSOLIDATED STATEMENTS OF OPERATIONS
(1) Restated with 2006 discontinued activities according to IFRS 5
(2) After deduction of the interests net of tax paid on the subordinated perpetual notes during the period
Continuing operations
Revenues 5854 5591 5980
Cost of sales (4474) (4240) (4594)
Gross margin 1380 1351 1386
Selling marketing general and administrative expenses (674) (638) (653)
Other income (expense) 52 (96) (69)
Research and development expenses (279) (227) (201)
Profit from continuing operations before tax and net finance costs 479 390 463
Interest income 19 30 52
Interest expense (108) (108) (54)
Other financial income (expense) (111) 36 (26)
Finance costs ndash net (200) (42) (28)
Share of profit (loss) from associates (86) (82) (20)
Income tax ndash (68) (93)
Profit from continuing operations 193 198 322
Discontinued operations
Profit (loss) from discontinued operations (138) (771) (883)
Net income (loss) 55 (573) (561)
Attributable to
Equity Holders 55 (574) (559)
Minority interests ndash 1 (2)
Weighted average number of shares
outstandingmdashbasic net of treasury stock 261188858 266539917 273646869
Earnings per share from continuing operations
Basic(2) 067 074 118
Diluted 063 042 111
Earnings per share from discontinued operations
Basic (053) (289) (323)
Diluted (048) (262) (296)Total earnings per share
Basic(2) 014 (215) (205)
Diluted 015 (220) (185)
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62 Thomson Panorama 2006
CONSOLIDATED BALANCE SHEETS
In 991404 millions December 31 December 31 January 1 December 31 2006 2005 2005(1) 2004
ASSETS
Non-current assets
Property plant and equipment 813 886 1051 1051
Goodwill 1714 1756 1186 1178
Other intangible assets 1071 1150 924 924
Investments in associates 12 204 260 260
Investments and financial assets available-for-sale 266 341 139 113
Derivative financial instruments 7 1 11 ndash
Contract advances 129 173 179 179
Deferred tax assets 397 379 307 301
Other non-current assets 110 182 133 136
Total non-current assets 4519 5072 4190 4142
Current assets
Inventories 366 333 503 568
Trade accounts and notes receivable 1018 1315 1232 1180
Current accounts with associates and joint ventures 97 115 143 143
Derivative financial instruments 8 9 115 ndash
Other current assets 535 644 483 616
Marketable securities ndash 7 58 58
Cash and cash equivalents 1311 996 1845 1848
Assets classified as held for sale 264 369 80 ndash
Total current assets 3599 3788 4459 4413
Total assets 8118 8860 8649 8555
(1) Including the impacts of the first-time application related to IAS 32 and 39 on financial instruments and IFRS 5 on non-current assets held for sale and
discontinued operations
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63 Thomson Panorama 2006
In 991404 millions December 31 December 31 January 1 December 31 2006 2005 2005(1) 2004
SHAREHOLDERSrsquo EQUITY AND LIABILITIES
Shareholdersrsquo equity
Common stock (273871296 shares at
December 31 2006
with nominal value of euro 375 per share) 1027 1025 1025 1025
Trade accounts and notes payable 1032 1164 1199 1226
Accrued employee expenses 165 166 158 163
Income tax payable 57 47 60 60
Other current liabilities 671 750 746 800
Payables on acquisition of companies 13 138 84 84
Liabilities directly associated with
assets classified as held for sale 232 470 88 ndash
Total current liabilities 3681 4393 3602 3459
Total liabilities 5999 6644 6251 6062
Total shareholderrsquos equity and liabilities 8118 8860 8649 8555
(1) Including the impacts of the first-time application related to IAS 32 and 39 on financial instruments and IFRS 5 on non-current assets held for sale and
discontinued operations
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Creation and lay-out
Photo credits Nathalie BerhingGAMMA ndash Steacutephane de Bourgies ndash Jean-Franccedilois DeroubaixGAMMA ndash Christine Donnier- ValentinGAMMA ndash Cars copy 2006 Disney Enterprises IncPixar All Rights Reserved ndash Dreamgirls copy 2006 DREAMWORKS
LLC and PARAMOUNT PICTURES All Rights Reserved ndash Poseidon copy 2006 Warner Bros Pictures ndash Sony Bravia Paint
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In 2006 human resources efforts focused
on key priorities linked to managing Thom-
sonrsquos evolving employee base These
include identifying and attracting new
talents and expertise motivating people
through involvement and empowerment
retaining critical talents by providing excit-
ing career opportunities and developing
the work force by creating opportunitiesfor operational exposure coaching mobil-
ity and training
Cementing the transformation
Human resources (HR) initiatives over the
course of the year helped cement the
transformation of Thomson into a focused
technology company serving the Media
Entertainment amp Communications indus-
tries With the Grouprsquos evolving needs for
support functions and skills that fit a soft-
ware driven market environment change
management has been the leitmotif of thepast two years
Throughout 2006 Thomson pursued
integration and realignment of its skills
base through development of transversal
policies and a strong corporate culture
thus reinforcing employee motivation and
synergies among subsidiaries
The transfer of the Internal Communi-
cations function to the HR Department
reinforced the impact of these efforts For
example the new Thomson HR Leader-
ship Model which led to the development
of new Management Principles Ethics
Charter and Values was widely cascaded
and conveyed Group-wide in 2006
Employee involvement
One hundred key managers now consti-
tute the Thomson Management Network
This body comprises nearly equal thirds
of managers who have been promoted
to senior positions managers who have
joined the Group through acquired com-
panies in which they held lead roles and
managers who were already in place as
key leaders They meet regularly (two to
three times a year) with the Chairman amp
CEO and his Executive Committee to dis-
cuss strategic and execution issues and
thus contribute toward Thomsonrsquos contin-
ued growth They also ensure sharing andunderstanding of the Grouprsquos strategy and
objectives by cascading critical informa-
tion In addition some 5000 managers
and employees enjoy extended access
to all corporate publications on a weekly
basis helping to ensure that employees
are directly involved in key issues
Open and constructive dialogue with
social partners continued in 2006 with
respect to the restructuring that was car-
HUMAN RESOURCES
DEVELOPING TALENT
Human resources amp internal
communications initiatives
have proved crucial
to successful implementation
of Thomsonrsquos
strategic objectives
ldquoSince I joined in November 2006 Irsquove been struck by how committed HR
professionals worldwide are about achieving Thomsonrsquos ambitionmdashto be
one of the 100 greatest companies to work for Itrsquos amazing what has been
achieved in a short time The Asia-Pacific region is particularly challenging
as our markets change and grow at seemingly lightning speed One of my
greatest challengesmdashhaving identified and recruited the right talentmdashwill be
to continue developing and nurturing the management and leadership skills
we need to develop the business in Asiardquo
Gao Lan Human Resources Vice-President Asia Pacific
42 Thomson Panorama 2006
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ried out to meet Thomsonrsquos business
objectives Notably through the Grouprsquos
European Works Forummdashwhich com-
prises 15 union representatives from the
countries where Thomson is presentmdashbut
also at local level the prime concern in this
dialogue was to ensure fair treatment for
all employees affected by restructuring or
disposals
Simplifying and
aligning the organization
Thomsonrsquos management development
blueprint known as the HR Leadership
Model continued to advance in 2006
The model is designed to simpli fy and
align the organization with business strat-
egy identify key resources following acqui-
sitions and recruit the highest caliber of
people needed by Thomson as a technol-
ogy-driven company The yearrsquos achieve-
ments included global mapping of theorganization and grading of jobs for the
Grouprsquos 350 senior managers This map-
ping allows harmonization of remuneration
across countries and activities ensuring
fair treatment based on the type of post
held and performance criteria A global
Compensation amp Benefits policy for these
executives was presented to the Board
of Directors and is expected to expand
throughout the organization during 2007
and 2008
Designed to identify and develop Thomsonrsquos
talents the bi-annual employee evaluation
and objectives evaluation known as the
ldquoContract of Progressrdquo was revised and
improved in 2006 Specific training pro-
grams in which over 300 people parti-
cipated over the year were developed
for HR personnel to ensure Group-wide
consistency in the assessment and moni-toring of employee performance
A centralized worldwide talent review policy
was implemented in 2006 to enable Thom-
son to better anticipate human resources
requirements Dedicated people manage-
ment tools are used to track potential risks
and define succession and development
plans at all levels of the organization The
talent review process which assessed
some 5000 managers and key employees
across the Grouprsquos divisions in 2006 also
helped identify promising individuals who
are likely to take on senior positions within Thomson in the next few years Person-
alized development plans were then built
for these high-potential individuals which
included training in business schools and
universities in the first half of 2007
Customized development programs
Increasingly close partnerships with some
of the worldrsquos leading engineering schools
business schools and universities in
In 2006 Thomson pursued integration and
realignment of its workforce through
development of transversal policies and
a strong corporate culture
43 Thomson Panorama 2006
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Thomson is committed to
attracting developing retaining and
energizing key talents
Europe Asia and North America contribute
to the growing awareness of Thomson and
serve as an outstanding source of new tal-
ent for the Group Every year Thomson
recruits more than 600 engineers and
managers categories of personnel which
have seen their numbers double over the
last two years
Significant progress was made in 2006
to diversify and expand the training pro-
grams on offer to Thomson employees
More than 300 managers in all Thomson
businesses participated in high-profile
training seminars ranging from Strategic
Execution and Project Dynamics to Value
Creation Training initiatives will expand
further in the future since they form an inte-
gral part of the Grouprsquos business evolution
and the Thomsonrsquos commitment to attract
develop retain and energize key talents
Pro-active approach
A pro-active approach to deploying the
human resources function has been
adopted with the transfer of the func-
tion in Asia from Hong Kong to Beijing in
2006 helping support Thomsonrsquos expan-
sion in this key region Managing human
resources for the region from Beijing
places the function close to many of its
internal customers as well as to one of the
Grouprsquos research centers Home to more
than 360 highly-skilled engineers the cen-
ter is near many of Chinarsquos leading univer-
sities and research institutes encouraging
exchanges with the academic and scien-
tific communities
In 2006 Thomson reiterated its corporate
beliefs externally by publishing the Grouprsquos
commitment to the 10 principles of theUnited Nations Global Compact on the
UNrsquos web site Such ldquoCommunication on
Progressrdquo underscores Thomsonrsquos pub-
lic accountability and transparency both
of which critical to the Grouprsquos abilities to
manage risks and opportunities
44 Thomson Panorama 2006
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Thomson employed 24465 people
as of December 31 2006 excluding
businesses held for sale
(1) Australia Latin America and United
Arab Emirates
(2) Manufacturing services 5 and
support functions 4
Services62
EMPLOYEES BY DIVISION
Technology
8
Others(2)
9
Systems21
Europe36
EMPLOYEES
BY GEOGRAPHIC AREA
North America
44 Asia9
Rest ofthe World(1)
11
TALENT MIX
Womenrepresent36 of all
employees
Women represent13 of managers
Women represen18 of ExecutiveCommittee memb
In an effort to ensure that the main elements of
Thomsonrsquos Ethics Charter and Values were conveyed and
understood throughout the organization an internal campaign
was launched in mid-2006 This involved the distribution of
posters in the appropriate local language to more than
a hundred sites around the world At Thomsonrsquos main sites
local managers often with an Executive Committee member
hosted briefing sessions and took the opportunity
to discuss these key issues with employees
45 Thomson Panorama 2006
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46 Thomson Panorama 2006
Thomson helps its customers to provide
people with broader access to media
entertainment and communications For
example by managing the broadcasting
of close to 200 TV channels the Group
enlarges the media and information
choices available to millions of people
throughout Europe Asia and North Amer-
ica By providing solutions and audio-visual products to support distance learn-
ing Thomson enables universities to reach
out to students who might not otherwise
enjoy access to such education
Expertise to preserve
film amp TV heritage
As an enabler of the digital world Thomson
contributes to cultural diversity and enrich-
ment and better understanding among
peoples Thomson supports the arts and
creativity by supplying the creative services
and products that make it possible for cre-ative minds to realize their projects and to
deliver them to audiences Contributing
to a richer cultural fabric worldwide the
Grouprsquos expertise enables emblematic cin-
ematographic works to retrieve their visual
glory through the provision of a variety of
film restoration techniques In 2006 the
Group took steps to place this expertise at
the disposal of the worldrsquos endangered film
and audiovisual archives with the setting
up of the Thomson Foundation for Film amp
TV Heritage
The Foundation working in coopera-
tion with local and international partners
helps to set up multi-disciplinary teams
comprised of experts from Thomson
businesses advanced archive institutions
and film preservation schools to restore
and promote what remains of the worldrsquos
cultural legacy recorded on film and TV
During its initial year the Foundation con-tributed to projects in Cambodia France
India Thailand and the US
Operating worldwide Thomson contributes
to improving economic and social welfare
and living standards As a good corporate
citizen the Group recognizes its responsi-
bilities to all of its stakeholders This means
ensuring that all of its business practices
meet the highest ethical standards It also
means that the Group is committed to
protecting and enhancing the environment
everywhere it does business to ensure that
all Thomson products are safe to use andthat all Thomson employees benefit from
a safe working environment Furthermore
Thomson fulfils its duty as a corporate citi-
zen by contributing to the quality of life in
many of the communities in which it does
business through a variety of local initia-
tives ranging from fund-raising in the com-
munity to events sponsorship
Through its technology
systems and services
Thomson contributes to
the dissemination of media
and entertainment
and a richer cultural fabric
for the world
The Bophana Archive Center
in Cambodia was set up in 2006
with the help of the Thomson Foundation
for Film amp TV Heritage
CORPORATE
SOCIAL RESPONSIBILITY ENABLING A DIGITAL WORLD
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47 Thomson Panorama 2006
Since its inception the Thomson Foundation has contributed to
a number of film and TV heritage projects Working in partnership with
local and international government agencies and non-profit groups
the Foundation helped create the Bophana Archive Center in Cambodia
at the end of 2006 The Center aims to save and enlarge access to
endangered film TV and photographic archives In India the first
session of a film heritage course designed by the Foundation took place in
the national film school of India in April 2007 Highlighting the critical role film
plays in the creative community the program of workshops conferences and
screenings was open to film students and professionals alike
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48 Thomson Panorama 2006
Global Compact and Vigeo
Vigeo the French social responsibility rat-
ings agency ranked Thomson as one of the
best performers of 20 companies assessed
in its 2006 European ldquoTechnology amp Hard-
warerdquo sector benchmark study
To advance responsible corporate citizen-ship and universal social and environmen-
tal principles Thomson has been a mem-
ber of the United Nations Global Compact
since 2003 Launched in 1999 the UN
Global Compact requires companies to
embrace support and enactmdashwithin their
sphere of influencemdasha set of values in the
areas of human rights labor the environ-
ment and anti-corruption Thomsonrsquos core
valuesmdashhigh ethical standards striving to
improve safety and environmental respon-
sibility initiatives and fair business prac-
ticesmdashmeet or exceed the goals embod-
ied in the UN Global Compact initiative
Thomsonrsquos Ethics Charter sets the foun-
dation for the Grouprsquos dedication to
act responsibly in all of its dealings with
employees suppliers customers and local
communities Updated and enhanced in
2006 the Ethics Charter covers a broad
range of issues from business practices
and human rights to the environment
health and safety All Thomson employees
are required to respect the conduct and
practices laid out in the Ethics Charter
This same universal obligation applies to all
Thomson suppliers and subcontractors
Suppliers and subcontractors are regularly
audited by Thomson to ensure compliance
with the Grouprsquos policies and standards
Initiated in 2002 the supplier ethics audit
program has resulted in hundreds of
supplier audits over the past four yearsIn addition the Social Accountabilities
8000 standard (SA 8000) is used as a
basis for evaluating those suppliers with
manufacturing facilities in high-risk areas
Established by an independent multi-dis-
ciplinary group of international experts the
SA 8000 standard is designed to ensure
humane workplaces
Human rights
Thomson aims to ensure that its business
practices align with key corporate values
The Grouprsquos Ethics Charter specificallyfocuses on the Global Compact standards
covering child labor forced labor health and
safety discrimination disciplinary practices
working hours and compensation
To he lp prevent the use of chi ld labor
for example the Ethics Charter prohibits
employing workers below the legal mini-
mum working age in any country
The Ethics Charter also helps combat
forced labor by prohibiting unfair practices
Thomson endeavours to protect
the environment wherever it does business
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49 Thomson Panorama 2006
such as requiring workers to deposit money
to obtain work withholding personal docu-
ments such as identity cards or passports
requiring workers to extend hours beyond
normal time or limiting workersrsquo movements
during non-working hours Prison labor and
indebted bondage are strictly prohibited
Non-discrimination and diversity
As an international Group doing business
in approximately 40 countries Thomsonrsquos
workforce is very diverse The Grouprsquos
headquarters in Paris for example counts
about a dozen different nationalities Dis-
crimination on the basis of race religion or
gender is strictly prohibited As of Decem-
ber 2006 women accounted for 36 of
Thomsonrsquos total employees
Thomson employed over 24000 people
in its core businesses as of end-2006 Of
these 44 were in North America 36in Europe 9 in Asia and 11 scattered
around the rest of the world Three-quar-
ters of the Grouprsquos current employees
joined Thomson within the last four years
including those from companies acquired
over that time period
Environment Health and Safety (EHampS)
The transformation of Thomsonrsquos business
model and market focus over the past few
years has reduced significantly the Grouprsquos
manufacturing activities Nevertheless
Thomson remains committed to ongoing
environmental health and safety policies
and goals This commitment is formalized
through the Corporate EHampS Charter
which defines key management principles
designed to protect human health and
the environment In this area the Group
embraces international standards for qual-ity and management systems in particular
the International Standards Organization
(ISO) 14001 standards for environmental
management In 2006 a total of 28 sites
held an ISO 14001 certification
Thomsonrsquos Corporate EHampS group devel-
ops directs and oversees the develop-
ment of global policies guidelines pro-
grams and initiatives reporting annually
to the Thomson Executive Committee
A corporate manager and three regional
managers direct the efforts of EHampS per-
sonnel worldwide Consistent internalbenchmarks have been in place for the
past decade to enable tracking of prog-
ress at all 41 of the Grouprsquos main industrial
locations Measured criteria include EHampS-
related employee training each locationrsquos
progress toward reducing work-related
injuries and lost workdays reducing envi-
ronmental impacts and reducing the con-
sumption of water and energy
The most notable achievement in 2006
was improved water use and conserva-
Clean industry
Thomsonrsquos Guadalajara DVD factory recently entered Mexicorsquos exclusive ldquoClean Industryrdquo program
managed by PROFEPA the federal environmental agency Sites achieving certification must go beyond
legal requirements by improving their performance in water usage minimizing hazardous waste and
controlling air noise and odor pollution Following four months of intense efforts the exhaustive
environmental audit required yielded excellent results and certification was achieved in November 2006
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50 Thomson Panorama 2006
tion within the film labs showing more
than a 25 improvement in water con-
sumption for every million feet of film pro-
cessed This helped Thomson achieve its
overall goal of reducing annual water con-
sumption by 15 Similarly good prog-
ress was achieved toward the long-term
goal of reduced landfill with almost 10
improvement in recycling rate comparedto 2005
As a corol lary to efforts to constant ly
improve the EHampS profile of ongoing activi-
ties Thomson reviews all newly acquired
businesses to ensure they meet Group
requirements and to define upgrade pro-
grams when necessary The EHampS reviews
include an evaluation of the status and
effectiveness of existing management
and control systems and a presentation
of Thomsonrsquos EHampS initiatives and require-
ments Newly acquired sites are now
encouraged to achieve ISO 14001 certi-fication within two years of their effective
date for joining the Group
Suppliers and subcontractors are required
to meet all legal requirements for environ-
mental protection including the elimina-
tion of hazardous substances Suppliers
are required to declare in writing that their
products are free of such substances as
cadmium chromium lead mercury and
asbestos and to provide laboratory test
data as proof
The transformation of Thomsonrsquos business
has reduced significantly
the Grouprsquos manufacturing activities
Overall local legislation and standards
form the foundation for Thomsonrsquos require-
ments concerning environmental health
safety employment child labor discrimi-
nation and human rights issues in each
country where it does business
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FINANCIAL INFORMATION
Thomson maintains the highest standards in compliance and risk management working continuously
to improve reporting and control as well as the quality of financial information made available to
its stakeholders
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54 Thomson Panorama 2006
Growing North American
investor base
The per iod 2004-2006 brought about
expansion in Thomsonrsquos international
shareholder base particularly in North
America Leading US-based investment
management funds Franklin Templeton
Investments and Brands Investment Part-ners hold over 10 and 5 respectively
of Thomsonrsquos share capital while Dodge amp
Cox increased its stake to over 10 during
the year The Group estimates that North
American institutional investors represent
over 50 of the institutional investor base
France around a quarter and other Euro-
pean investors account for the majority of
the remainder
Active communications
To keep Thomsonrsquos broad investor base
appraised of progress in implementing itsstrategic objectives senior management
devoted considerable time during the year
to investor meetings in both Europe and
North America
As part of its ongoing efforts to provide
investorsmdashparticularly individual share-
holdersmdashwith comprehensive up-to-date
information Thomson makes full use of
the internet Share price information press
releases as well as the Grouprsquos annual
report and reference documents (Docu-
ment de Reacutefeacuterence filed with the French
stock exchange regulator AMF and Form
20-F filed with the SEC) are available on
the site wwwthomsonnet
Annual General Shareholdersrsquo Meetings
are broadcast live over the internet with asimultaneous translation of the proceed-
ings provided from French to English to
enable the majority of shareholders to view
the event The results of the vote are dis-
closed in detail on the internet site imme-
diately following the Meeting
The Shareholder Relations department
organizes tours for individual shareholders
of the newly inaugurated Thomson Gal-
lery at the Grouprsquos headquarters in Paris
France Visits to the Gallery designed to
illustrate Thomsonrsquos activities through a
series of live technology demos and videopresentations allow participants to better
appreciate the Grouprsquos 2007-2009 strat-
egy and growth prospects
Dividend
The dividend ofeuro033 per share proposed
at the Annual Shareholdersrsquo Meeting on
15 May 2007 represented a 10 increase
over last yearrsquos dividend
SHAREHOLDER RELATIONS
Thomson aims to keep
investors and individual
shareholders informed of
progress in implementing
strategic objectives
Thomsonrsquos Annual General Meeting
provides an opportunity for debate and
exchange with individual shareholders
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55 Thomson Panorama 2006
Financial calendar 2007
bull April 26 First Quarter 2007 Sales
bull May 15 Shareholdersrsquo Meeting (on second notice)
bull July 26 First Half 2007 Results
bull October 18 Third Quarter 2007 Sales
These dates are subject to modification
Public904
CAPITAL STRUCTURE AS OF DECEMBER 31 2006
Employees25
Treasury Shares46
Other25
SHARE HIGHLIGHTS
2006 2005
Year high 1932 2142
Year low 1165 1526
Share price at year-end in euro 1481 1770
Average daily volume 2445176 2244879
Market capital at year-end in euro million 4056 4838
Number of shares outstanding at year end
(in thousands) 273871 273308
Net dividend per share in euro 033 030
Listed on the Paris and New York stock exchanges ndash Euronext code 18453 ndash NYSE ticker TMSN
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56 Thomson Panorama 2006
Maintaining the highest standards
in compliance and risk management
Extensive work was completed in 2006
in Thomsonrsquos main operational units and
at Corporate level to ensure alignment of
reporting and control procedures with the
requirements of the Sarbanes-Oxley Act in
the United States
Improving Internal Control Procedures
Building towards application of Section
404 of the Sarbanes-Oxley Act (ldquoSOX
404rdquo) for fiscal year 2006 which required
the Group to assess the effectiveness of
internal controls Thomson committed to
implementing the internal control frame-
work proposed by the Committee of
Sponsoring Organizations of the Treadway
Commission (ldquoCOSOrdquo)
Within this framework the Group seeks toachieve ldquoreasonable assurancerdquo regarding
the effectiveness and efficiency of opera-
tions the reliability of financial reporting
and compliance with applicable laws and
regulations
Group-wide initiatives were on-going in
2006 to achieve these objectives including
the Process Transformation Initiative (PTI)
to ensure operational excellence COM-
PASS (Controls Over Methods Processes
Applications Systems and Strategy) and
the Risk Committee and its enterprise risk
assessment and management programrun by the Internal Audit function
Following a full worldwide enterprise risk
assessment carried out in the second half
of 2005 and updated throughout 2006 a
second was planned for completion by May
2007 The process assesses risks in the
Grouprsquos distinct business units or profit cen-
ters with the goal of identifying assessing
validating and monitoring risks which could
impact or potentially impact the Grouprsquos
ability to achieve its short and long-term
objectives In 2007 the Risk Committee will
continue to regularly monitor action plans
put in place to mitigate the risks identified
During the year the Group also continued
implementation of a worldwide SOX 404
compliance software system to assist with
the documentation of significant financialprocesses provide consistent guidance
to management regarding controls and
better enable management to assess its
control structure
Managing Risk
Thomson has three main internal organiza-
tions that support and assist the Executive
Committee in control and risk monitoring
the Investment Committee and the Risk
Committee The Investment Committee
meets on an ad hoc basis throughout the
year generally once per week to reviewfinancial commitments including proposed
acquisitions capital equipment funding
and new ventures requiring capital The Risk
Committee which met nine times in 2006
evaluates the Grouprsquos financial operational
and compliance risks and identifies strate-
gic risks that could adversely affect different
activities within the framework of Grouprsquos
three-year plan scenarios The Corporate
Social Responsibility (CSR) Committee to
be set up in 2007 will oversee all CSR
compliance and ethics matters
Ethical values and principles of conductfor the Grouprsquos managers are defined in
of the Grouprsquos divisions and profit centersIn the context of the budgetary procedure
performance measurement indicators are
calculated by the divisions analyzed and
reviewed monthly to serve as a reference
for the Grouprsquos monthly reporting
Management reporting and
closing period work
Th om so n uses a co mmon char t of
accounts which is regularly updated The
principal accounting and financial figures
of the operational and functional depart-
ments consolidated at Group level are
analyzed by the Grouprsquos management
control team and reviewed by the Grouprsquos
Executive Committee
The closing process for the half-year and
annual consolidated financial statementsoccurs in two steps The first step con-
sists of a ldquohard closerdquo completed in May
and September leading to a first review by
the statutory auditors The second step
occurs in July and in JanuaryFebruary and
involves the finalization of half-year and
annual consolidated financial statements
under IFRS The Group then proceeds
once a year with a reconciliation of these
results in accordance with US GAAP
Preparation of financial statements
The financial statements are prepared jointly by the finance department and the
General Secretary They are based on
information reported through the annual
reporting and accounting consolidation
processes and on operational and mar-
ket information which is specifically cen-
tralized for the preparation of Thomsonrsquos
Document de Reacutefeacuterence in France and
the submission of Form 20-F in the United
States Half-year and annual financial infor-
mation is reviewed by the Grouprsquos Audit
Committee
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58 Thomson Panorama 2006
(1) Source PriceWaterhouseCoopers ndash
ldquoGlobal Entertainment and Media Outlook 2006-10rdquo
Revenue growth
Thomson achieved consolidated 2006
net revenues of 9914045854 million up from
9914045591 million in 2005 Revenues for
the Core Business reached 9914045747 mil-
lion (9914045776 million at constant currency)
representing 83 growth over 2005 at
constant currency
Overall the Grouprsquos key growth busi-
nessesmdashContent Services Network
Services Access Products for telecom
operators and our Broadcast amp Networks
businesses (Grass Valley and Network
Software)mdashincreased strongly year-on-
year and accounted for over a third of
Group revenues against less than a quar-
ter in 2005
Thomsonrsquos Core Business EBIT for 2006
was euro504 million representing a Core
Business EBIT margin of 88 Thisreflected growth in some key businesses
and cost actions across the Group off-
setting a significant investment in research
and development and some increase in
restructuring expenses
Increased spend on RampD
Research and development expenditure
charged in the Core Business (net of
external funding) rose from 991404221 million in
2005 to 991404279 million in 2006 an increase
of 26 principally in the Systems divi-
sion The Group expanded the number ofproducts and services in the development
phase across its businesses
Return to profit
Losses in Non-Core Continuing and Dis-
continued operations were substantially
lower year-on-year reflecting principally
the exit from heavily loss-making Displays
activities in 2005 and intensified cost-sav-
ing programs in 2006 A major revision
and harmonization of the Grouprsquos North
American healthcare obligations gave rise
to substantial one-time gains and Thom-
son also initiated significant restructuring
of its French Non-Core operations
The good performance of the Core Busi-
ness lower Non-Core and Discontinued
losses and a low reported tax chargeenabled the Group to return a net profit of
99140455 million in 2006 compared to a loss of
991404573 million in the previous year
Good cash flow
strengthened balance sheet
Thomson generated good free cash flow
and strengthened its balance sheet in
2006 Total net financial liabilities on the
balance sheet fell by 991404460 million reflect-
ing a 99140493 million fall in financial and acqui-
sition-related debts and a 991404367 million
reduction in retirement benefit obligations(including healthcare)
Increase in Net Dividend
The Board of Directors proposed a dis-
tribution to shareholders of 991404033 per
share (2005 dividend 991404030) reflecting
confidence in the prospects of the Group
going forward
Outlook 2007-2009
growth in revenues and net income
With the Grouprsquos transformation complete Thomsonrsquos financial focus over the 2007-
2009 period will be to grow revenues and
net income
Thomson serves growing Media Enter-
tainment amp Communications marketsmdashfor
which external estimates(1) indicate com-
pound growth of around 6 over the last
FINANCIAL AND
OPERATIONAL PERFORMANCE
Full year 2006 results
saw a return to profitability
and leave Thomson
well positioned at
the heart of convergence
and digital video
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59 Thomson Panorama 2006
five years Our digital and electronic busi-
nesses now represent two-thirds of rev-
enues and we believe they are growing
faster than the overall market offsetting
the maturing physical media businesses
Given this profile the Group expects its
revenue growth to be more modest in
2007 but to gather pace over the period
and our overall objective is to show com-pound growth over 2007-2009 in line with
or faster than the overall market
The 2007-2009 period is also expected
to see a sharply reduced impact from
residual Non-Core activities with an end
to losses from the Discontinued Activities
perimeter after 2007 Accordingly Thom-
sonrsquos ambition is to turn its Core Business
growth and profitability and lower impact
from Non-Core into strong growth in net
income over the period 2007-2009
Business operations
Continuous performance improvement is
fundamental to Thomsonrsquos commitment to
create sustainable business models and
long-term value for all stakeholders The
ambitious Group-wide programs launched
in 2004 to improve productivity and
enhance overall performance producedsubstantial results in 2006 and led to new
and strong initiatives for long-term growth
As of the second half of 2006 six ldquoKey
Programsrdquo are monitored at Group level
Clients Software Product Introduction
Operations Transformation and Talent
Management
KEY PROGRAMS IN PLACE
Program Focus
Clients Thomsonrsquos clientregional diversification and
growth of the existing business
through improved Sales amp Marketing
Software Development of integrated software platforms
in all markets (post-production distribution
delivery) and for all types of customer
(professional prosumerhellip)
Product Introduction Ensuring new product roadmaps are in line
with strategy and resource needs have been
identifiedOperations Improving the Grouprsquos cost base cash
generation and working capital
Transformation Multiple programs including initiatives to
improving customer relationship management
worldwide supply chain management
IT transformation as well as Thomsonrsquos RampD
footprint
Talent Management Leveraging human assets with a focus on
talent retention and acquisition
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60 Thomson Panorama 2006
SUMMARY RESULTS FULL YEAR 2006
In 991404 millions unless otherwise stated 2006(1) 2005(1)
Net revenues 5854 5591(1)
Core Business net revenues 5747 5335
Services 2489 2487
Systems 2684 2262
Technology 547 546
Corporate 27 40
Non-Core continuing operations net revenues 107 256
Core Business EBIT(2) 504 512
Services 160 205
Systems 132 109
Technology 289 277Corporate (77) (79)
EBIT from Non-Core continuing operations (25) (122)
(1) Restated with 2006 discontinued activities according to IFRS 5
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61 Thomson Panorama 2006
Year ended December 31in 991404 except number of shares 2006 2005 2004
Year ended December 31in 991404 millions 2006 2005(1) 2004(1)
CONSOLIDATED STATEMENTS OF OPERATIONS
(1) Restated with 2006 discontinued activities according to IFRS 5
(2) After deduction of the interests net of tax paid on the subordinated perpetual notes during the period
Continuing operations
Revenues 5854 5591 5980
Cost of sales (4474) (4240) (4594)
Gross margin 1380 1351 1386
Selling marketing general and administrative expenses (674) (638) (653)
Other income (expense) 52 (96) (69)
Research and development expenses (279) (227) (201)
Profit from continuing operations before tax and net finance costs 479 390 463
Interest income 19 30 52
Interest expense (108) (108) (54)
Other financial income (expense) (111) 36 (26)
Finance costs ndash net (200) (42) (28)
Share of profit (loss) from associates (86) (82) (20)
Income tax ndash (68) (93)
Profit from continuing operations 193 198 322
Discontinued operations
Profit (loss) from discontinued operations (138) (771) (883)
Net income (loss) 55 (573) (561)
Attributable to
Equity Holders 55 (574) (559)
Minority interests ndash 1 (2)
Weighted average number of shares
outstandingmdashbasic net of treasury stock 261188858 266539917 273646869
Earnings per share from continuing operations
Basic(2) 067 074 118
Diluted 063 042 111
Earnings per share from discontinued operations
Basic (053) (289) (323)
Diluted (048) (262) (296)Total earnings per share
Basic(2) 014 (215) (205)
Diluted 015 (220) (185)
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62 Thomson Panorama 2006
CONSOLIDATED BALANCE SHEETS
In 991404 millions December 31 December 31 January 1 December 31 2006 2005 2005(1) 2004
ASSETS
Non-current assets
Property plant and equipment 813 886 1051 1051
Goodwill 1714 1756 1186 1178
Other intangible assets 1071 1150 924 924
Investments in associates 12 204 260 260
Investments and financial assets available-for-sale 266 341 139 113
Derivative financial instruments 7 1 11 ndash
Contract advances 129 173 179 179
Deferred tax assets 397 379 307 301
Other non-current assets 110 182 133 136
Total non-current assets 4519 5072 4190 4142
Current assets
Inventories 366 333 503 568
Trade accounts and notes receivable 1018 1315 1232 1180
Current accounts with associates and joint ventures 97 115 143 143
Derivative financial instruments 8 9 115 ndash
Other current assets 535 644 483 616
Marketable securities ndash 7 58 58
Cash and cash equivalents 1311 996 1845 1848
Assets classified as held for sale 264 369 80 ndash
Total current assets 3599 3788 4459 4413
Total assets 8118 8860 8649 8555
(1) Including the impacts of the first-time application related to IAS 32 and 39 on financial instruments and IFRS 5 on non-current assets held for sale and
discontinued operations
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63 Thomson Panorama 2006
In 991404 millions December 31 December 31 January 1 December 31 2006 2005 2005(1) 2004
SHAREHOLDERSrsquo EQUITY AND LIABILITIES
Shareholdersrsquo equity
Common stock (273871296 shares at
December 31 2006
with nominal value of euro 375 per share) 1027 1025 1025 1025
Trade accounts and notes payable 1032 1164 1199 1226
Accrued employee expenses 165 166 158 163
Income tax payable 57 47 60 60
Other current liabilities 671 750 746 800
Payables on acquisition of companies 13 138 84 84
Liabilities directly associated with
assets classified as held for sale 232 470 88 ndash
Total current liabilities 3681 4393 3602 3459
Total liabilities 5999 6644 6251 6062
Total shareholderrsquos equity and liabilities 8118 8860 8649 8555
(1) Including the impacts of the first-time application related to IAS 32 and 39 on financial instruments and IFRS 5 on non-current assets held for sale and
discontinued operations
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Creation and lay-out
Photo credits Nathalie BerhingGAMMA ndash Steacutephane de Bourgies ndash Jean-Franccedilois DeroubaixGAMMA ndash Christine Donnier- ValentinGAMMA ndash Cars copy 2006 Disney Enterprises IncPixar All Rights Reserved ndash Dreamgirls copy 2006 DREAMWORKS
LLC and PARAMOUNT PICTURES All Rights Reserved ndash Poseidon copy 2006 Warner Bros Pictures ndash Sony Bravia Paint
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ried out to meet Thomsonrsquos business
objectives Notably through the Grouprsquos
European Works Forummdashwhich com-
prises 15 union representatives from the
countries where Thomson is presentmdashbut
also at local level the prime concern in this
dialogue was to ensure fair treatment for
all employees affected by restructuring or
disposals
Simplifying and
aligning the organization
Thomsonrsquos management development
blueprint known as the HR Leadership
Model continued to advance in 2006
The model is designed to simpli fy and
align the organization with business strat-
egy identify key resources following acqui-
sitions and recruit the highest caliber of
people needed by Thomson as a technol-
ogy-driven company The yearrsquos achieve-
ments included global mapping of theorganization and grading of jobs for the
Grouprsquos 350 senior managers This map-
ping allows harmonization of remuneration
across countries and activities ensuring
fair treatment based on the type of post
held and performance criteria A global
Compensation amp Benefits policy for these
executives was presented to the Board
of Directors and is expected to expand
throughout the organization during 2007
and 2008
Designed to identify and develop Thomsonrsquos
talents the bi-annual employee evaluation
and objectives evaluation known as the
ldquoContract of Progressrdquo was revised and
improved in 2006 Specific training pro-
grams in which over 300 people parti-
cipated over the year were developed
for HR personnel to ensure Group-wide
consistency in the assessment and moni-toring of employee performance
A centralized worldwide talent review policy
was implemented in 2006 to enable Thom-
son to better anticipate human resources
requirements Dedicated people manage-
ment tools are used to track potential risks
and define succession and development
plans at all levels of the organization The
talent review process which assessed
some 5000 managers and key employees
across the Grouprsquos divisions in 2006 also
helped identify promising individuals who
are likely to take on senior positions within Thomson in the next few years Person-
alized development plans were then built
for these high-potential individuals which
included training in business schools and
universities in the first half of 2007
Customized development programs
Increasingly close partnerships with some
of the worldrsquos leading engineering schools
business schools and universities in
In 2006 Thomson pursued integration and
realignment of its workforce through
development of transversal policies and
a strong corporate culture
43 Thomson Panorama 2006
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Thomson is committed to
attracting developing retaining and
energizing key talents
Europe Asia and North America contribute
to the growing awareness of Thomson and
serve as an outstanding source of new tal-
ent for the Group Every year Thomson
recruits more than 600 engineers and
managers categories of personnel which
have seen their numbers double over the
last two years
Significant progress was made in 2006
to diversify and expand the training pro-
grams on offer to Thomson employees
More than 300 managers in all Thomson
businesses participated in high-profile
training seminars ranging from Strategic
Execution and Project Dynamics to Value
Creation Training initiatives will expand
further in the future since they form an inte-
gral part of the Grouprsquos business evolution
and the Thomsonrsquos commitment to attract
develop retain and energize key talents
Pro-active approach
A pro-active approach to deploying the
human resources function has been
adopted with the transfer of the func-
tion in Asia from Hong Kong to Beijing in
2006 helping support Thomsonrsquos expan-
sion in this key region Managing human
resources for the region from Beijing
places the function close to many of its
internal customers as well as to one of the
Grouprsquos research centers Home to more
than 360 highly-skilled engineers the cen-
ter is near many of Chinarsquos leading univer-
sities and research institutes encouraging
exchanges with the academic and scien-
tific communities
In 2006 Thomson reiterated its corporate
beliefs externally by publishing the Grouprsquos
commitment to the 10 principles of theUnited Nations Global Compact on the
UNrsquos web site Such ldquoCommunication on
Progressrdquo underscores Thomsonrsquos pub-
lic accountability and transparency both
of which critical to the Grouprsquos abilities to
manage risks and opportunities
44 Thomson Panorama 2006
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Thomson employed 24465 people
as of December 31 2006 excluding
businesses held for sale
(1) Australia Latin America and United
Arab Emirates
(2) Manufacturing services 5 and
support functions 4
Services62
EMPLOYEES BY DIVISION
Technology
8
Others(2)
9
Systems21
Europe36
EMPLOYEES
BY GEOGRAPHIC AREA
North America
44 Asia9
Rest ofthe World(1)
11
TALENT MIX
Womenrepresent36 of all
employees
Women represent13 of managers
Women represen18 of ExecutiveCommittee memb
In an effort to ensure that the main elements of
Thomsonrsquos Ethics Charter and Values were conveyed and
understood throughout the organization an internal campaign
was launched in mid-2006 This involved the distribution of
posters in the appropriate local language to more than
a hundred sites around the world At Thomsonrsquos main sites
local managers often with an Executive Committee member
hosted briefing sessions and took the opportunity
to discuss these key issues with employees
45 Thomson Panorama 2006
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46 Thomson Panorama 2006
Thomson helps its customers to provide
people with broader access to media
entertainment and communications For
example by managing the broadcasting
of close to 200 TV channels the Group
enlarges the media and information
choices available to millions of people
throughout Europe Asia and North Amer-
ica By providing solutions and audio-visual products to support distance learn-
ing Thomson enables universities to reach
out to students who might not otherwise
enjoy access to such education
Expertise to preserve
film amp TV heritage
As an enabler of the digital world Thomson
contributes to cultural diversity and enrich-
ment and better understanding among
peoples Thomson supports the arts and
creativity by supplying the creative services
and products that make it possible for cre-ative minds to realize their projects and to
deliver them to audiences Contributing
to a richer cultural fabric worldwide the
Grouprsquos expertise enables emblematic cin-
ematographic works to retrieve their visual
glory through the provision of a variety of
film restoration techniques In 2006 the
Group took steps to place this expertise at
the disposal of the worldrsquos endangered film
and audiovisual archives with the setting
up of the Thomson Foundation for Film amp
TV Heritage
The Foundation working in coopera-
tion with local and international partners
helps to set up multi-disciplinary teams
comprised of experts from Thomson
businesses advanced archive institutions
and film preservation schools to restore
and promote what remains of the worldrsquos
cultural legacy recorded on film and TV
During its initial year the Foundation con-tributed to projects in Cambodia France
India Thailand and the US
Operating worldwide Thomson contributes
to improving economic and social welfare
and living standards As a good corporate
citizen the Group recognizes its responsi-
bilities to all of its stakeholders This means
ensuring that all of its business practices
meet the highest ethical standards It also
means that the Group is committed to
protecting and enhancing the environment
everywhere it does business to ensure that
all Thomson products are safe to use andthat all Thomson employees benefit from
a safe working environment Furthermore
Thomson fulfils its duty as a corporate citi-
zen by contributing to the quality of life in
many of the communities in which it does
business through a variety of local initia-
tives ranging from fund-raising in the com-
munity to events sponsorship
Through its technology
systems and services
Thomson contributes to
the dissemination of media
and entertainment
and a richer cultural fabric
for the world
The Bophana Archive Center
in Cambodia was set up in 2006
with the help of the Thomson Foundation
for Film amp TV Heritage
CORPORATE
SOCIAL RESPONSIBILITY ENABLING A DIGITAL WORLD
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47 Thomson Panorama 2006
Since its inception the Thomson Foundation has contributed to
a number of film and TV heritage projects Working in partnership with
local and international government agencies and non-profit groups
the Foundation helped create the Bophana Archive Center in Cambodia
at the end of 2006 The Center aims to save and enlarge access to
endangered film TV and photographic archives In India the first
session of a film heritage course designed by the Foundation took place in
the national film school of India in April 2007 Highlighting the critical role film
plays in the creative community the program of workshops conferences and
screenings was open to film students and professionals alike
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48 Thomson Panorama 2006
Global Compact and Vigeo
Vigeo the French social responsibility rat-
ings agency ranked Thomson as one of the
best performers of 20 companies assessed
in its 2006 European ldquoTechnology amp Hard-
warerdquo sector benchmark study
To advance responsible corporate citizen-ship and universal social and environmen-
tal principles Thomson has been a mem-
ber of the United Nations Global Compact
since 2003 Launched in 1999 the UN
Global Compact requires companies to
embrace support and enactmdashwithin their
sphere of influencemdasha set of values in the
areas of human rights labor the environ-
ment and anti-corruption Thomsonrsquos core
valuesmdashhigh ethical standards striving to
improve safety and environmental respon-
sibility initiatives and fair business prac-
ticesmdashmeet or exceed the goals embod-
ied in the UN Global Compact initiative
Thomsonrsquos Ethics Charter sets the foun-
dation for the Grouprsquos dedication to
act responsibly in all of its dealings with
employees suppliers customers and local
communities Updated and enhanced in
2006 the Ethics Charter covers a broad
range of issues from business practices
and human rights to the environment
health and safety All Thomson employees
are required to respect the conduct and
practices laid out in the Ethics Charter
This same universal obligation applies to all
Thomson suppliers and subcontractors
Suppliers and subcontractors are regularly
audited by Thomson to ensure compliance
with the Grouprsquos policies and standards
Initiated in 2002 the supplier ethics audit
program has resulted in hundreds of
supplier audits over the past four yearsIn addition the Social Accountabilities
8000 standard (SA 8000) is used as a
basis for evaluating those suppliers with
manufacturing facilities in high-risk areas
Established by an independent multi-dis-
ciplinary group of international experts the
SA 8000 standard is designed to ensure
humane workplaces
Human rights
Thomson aims to ensure that its business
practices align with key corporate values
The Grouprsquos Ethics Charter specificallyfocuses on the Global Compact standards
covering child labor forced labor health and
safety discrimination disciplinary practices
working hours and compensation
To he lp prevent the use of chi ld labor
for example the Ethics Charter prohibits
employing workers below the legal mini-
mum working age in any country
The Ethics Charter also helps combat
forced labor by prohibiting unfair practices
Thomson endeavours to protect
the environment wherever it does business
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49 Thomson Panorama 2006
such as requiring workers to deposit money
to obtain work withholding personal docu-
ments such as identity cards or passports
requiring workers to extend hours beyond
normal time or limiting workersrsquo movements
during non-working hours Prison labor and
indebted bondage are strictly prohibited
Non-discrimination and diversity
As an international Group doing business
in approximately 40 countries Thomsonrsquos
workforce is very diverse The Grouprsquos
headquarters in Paris for example counts
about a dozen different nationalities Dis-
crimination on the basis of race religion or
gender is strictly prohibited As of Decem-
ber 2006 women accounted for 36 of
Thomsonrsquos total employees
Thomson employed over 24000 people
in its core businesses as of end-2006 Of
these 44 were in North America 36in Europe 9 in Asia and 11 scattered
around the rest of the world Three-quar-
ters of the Grouprsquos current employees
joined Thomson within the last four years
including those from companies acquired
over that time period
Environment Health and Safety (EHampS)
The transformation of Thomsonrsquos business
model and market focus over the past few
years has reduced significantly the Grouprsquos
manufacturing activities Nevertheless
Thomson remains committed to ongoing
environmental health and safety policies
and goals This commitment is formalized
through the Corporate EHampS Charter
which defines key management principles
designed to protect human health and
the environment In this area the Group
embraces international standards for qual-ity and management systems in particular
the International Standards Organization
(ISO) 14001 standards for environmental
management In 2006 a total of 28 sites
held an ISO 14001 certification
Thomsonrsquos Corporate EHampS group devel-
ops directs and oversees the develop-
ment of global policies guidelines pro-
grams and initiatives reporting annually
to the Thomson Executive Committee
A corporate manager and three regional
managers direct the efforts of EHampS per-
sonnel worldwide Consistent internalbenchmarks have been in place for the
past decade to enable tracking of prog-
ress at all 41 of the Grouprsquos main industrial
locations Measured criteria include EHampS-
related employee training each locationrsquos
progress toward reducing work-related
injuries and lost workdays reducing envi-
ronmental impacts and reducing the con-
sumption of water and energy
The most notable achievement in 2006
was improved water use and conserva-
Clean industry
Thomsonrsquos Guadalajara DVD factory recently entered Mexicorsquos exclusive ldquoClean Industryrdquo program
managed by PROFEPA the federal environmental agency Sites achieving certification must go beyond
legal requirements by improving their performance in water usage minimizing hazardous waste and
controlling air noise and odor pollution Following four months of intense efforts the exhaustive
environmental audit required yielded excellent results and certification was achieved in November 2006
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50 Thomson Panorama 2006
tion within the film labs showing more
than a 25 improvement in water con-
sumption for every million feet of film pro-
cessed This helped Thomson achieve its
overall goal of reducing annual water con-
sumption by 15 Similarly good prog-
ress was achieved toward the long-term
goal of reduced landfill with almost 10
improvement in recycling rate comparedto 2005
As a corol lary to efforts to constant ly
improve the EHampS profile of ongoing activi-
ties Thomson reviews all newly acquired
businesses to ensure they meet Group
requirements and to define upgrade pro-
grams when necessary The EHampS reviews
include an evaluation of the status and
effectiveness of existing management
and control systems and a presentation
of Thomsonrsquos EHampS initiatives and require-
ments Newly acquired sites are now
encouraged to achieve ISO 14001 certi-fication within two years of their effective
date for joining the Group
Suppliers and subcontractors are required
to meet all legal requirements for environ-
mental protection including the elimina-
tion of hazardous substances Suppliers
are required to declare in writing that their
products are free of such substances as
cadmium chromium lead mercury and
asbestos and to provide laboratory test
data as proof
The transformation of Thomsonrsquos business
has reduced significantly
the Grouprsquos manufacturing activities
Overall local legislation and standards
form the foundation for Thomsonrsquos require-
ments concerning environmental health
safety employment child labor discrimi-
nation and human rights issues in each
country where it does business
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FINANCIAL INFORMATION
Thomson maintains the highest standards in compliance and risk management working continuously
to improve reporting and control as well as the quality of financial information made available to
its stakeholders
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54 Thomson Panorama 2006
Growing North American
investor base
The per iod 2004-2006 brought about
expansion in Thomsonrsquos international
shareholder base particularly in North
America Leading US-based investment
management funds Franklin Templeton
Investments and Brands Investment Part-ners hold over 10 and 5 respectively
of Thomsonrsquos share capital while Dodge amp
Cox increased its stake to over 10 during
the year The Group estimates that North
American institutional investors represent
over 50 of the institutional investor base
France around a quarter and other Euro-
pean investors account for the majority of
the remainder
Active communications
To keep Thomsonrsquos broad investor base
appraised of progress in implementing itsstrategic objectives senior management
devoted considerable time during the year
to investor meetings in both Europe and
North America
As part of its ongoing efforts to provide
investorsmdashparticularly individual share-
holdersmdashwith comprehensive up-to-date
information Thomson makes full use of
the internet Share price information press
releases as well as the Grouprsquos annual
report and reference documents (Docu-
ment de Reacutefeacuterence filed with the French
stock exchange regulator AMF and Form
20-F filed with the SEC) are available on
the site wwwthomsonnet
Annual General Shareholdersrsquo Meetings
are broadcast live over the internet with asimultaneous translation of the proceed-
ings provided from French to English to
enable the majority of shareholders to view
the event The results of the vote are dis-
closed in detail on the internet site imme-
diately following the Meeting
The Shareholder Relations department
organizes tours for individual shareholders
of the newly inaugurated Thomson Gal-
lery at the Grouprsquos headquarters in Paris
France Visits to the Gallery designed to
illustrate Thomsonrsquos activities through a
series of live technology demos and videopresentations allow participants to better
appreciate the Grouprsquos 2007-2009 strat-
egy and growth prospects
Dividend
The dividend ofeuro033 per share proposed
at the Annual Shareholdersrsquo Meeting on
15 May 2007 represented a 10 increase
over last yearrsquos dividend
SHAREHOLDER RELATIONS
Thomson aims to keep
investors and individual
shareholders informed of
progress in implementing
strategic objectives
Thomsonrsquos Annual General Meeting
provides an opportunity for debate and
exchange with individual shareholders
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55 Thomson Panorama 2006
Financial calendar 2007
bull April 26 First Quarter 2007 Sales
bull May 15 Shareholdersrsquo Meeting (on second notice)
bull July 26 First Half 2007 Results
bull October 18 Third Quarter 2007 Sales
These dates are subject to modification
Public904
CAPITAL STRUCTURE AS OF DECEMBER 31 2006
Employees25
Treasury Shares46
Other25
SHARE HIGHLIGHTS
2006 2005
Year high 1932 2142
Year low 1165 1526
Share price at year-end in euro 1481 1770
Average daily volume 2445176 2244879
Market capital at year-end in euro million 4056 4838
Number of shares outstanding at year end
(in thousands) 273871 273308
Net dividend per share in euro 033 030
Listed on the Paris and New York stock exchanges ndash Euronext code 18453 ndash NYSE ticker TMSN
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56 Thomson Panorama 2006
Maintaining the highest standards
in compliance and risk management
Extensive work was completed in 2006
in Thomsonrsquos main operational units and
at Corporate level to ensure alignment of
reporting and control procedures with the
requirements of the Sarbanes-Oxley Act in
the United States
Improving Internal Control Procedures
Building towards application of Section
404 of the Sarbanes-Oxley Act (ldquoSOX
404rdquo) for fiscal year 2006 which required
the Group to assess the effectiveness of
internal controls Thomson committed to
implementing the internal control frame-
work proposed by the Committee of
Sponsoring Organizations of the Treadway
Commission (ldquoCOSOrdquo)
Within this framework the Group seeks toachieve ldquoreasonable assurancerdquo regarding
the effectiveness and efficiency of opera-
tions the reliability of financial reporting
and compliance with applicable laws and
regulations
Group-wide initiatives were on-going in
2006 to achieve these objectives including
the Process Transformation Initiative (PTI)
to ensure operational excellence COM-
PASS (Controls Over Methods Processes
Applications Systems and Strategy) and
the Risk Committee and its enterprise risk
assessment and management programrun by the Internal Audit function
Following a full worldwide enterprise risk
assessment carried out in the second half
of 2005 and updated throughout 2006 a
second was planned for completion by May
2007 The process assesses risks in the
Grouprsquos distinct business units or profit cen-
ters with the goal of identifying assessing
validating and monitoring risks which could
impact or potentially impact the Grouprsquos
ability to achieve its short and long-term
objectives In 2007 the Risk Committee will
continue to regularly monitor action plans
put in place to mitigate the risks identified
During the year the Group also continued
implementation of a worldwide SOX 404
compliance software system to assist with
the documentation of significant financialprocesses provide consistent guidance
to management regarding controls and
better enable management to assess its
control structure
Managing Risk
Thomson has three main internal organiza-
tions that support and assist the Executive
Committee in control and risk monitoring
the Investment Committee and the Risk
Committee The Investment Committee
meets on an ad hoc basis throughout the
year generally once per week to reviewfinancial commitments including proposed
acquisitions capital equipment funding
and new ventures requiring capital The Risk
Committee which met nine times in 2006
evaluates the Grouprsquos financial operational
and compliance risks and identifies strate-
gic risks that could adversely affect different
activities within the framework of Grouprsquos
three-year plan scenarios The Corporate
Social Responsibility (CSR) Committee to
be set up in 2007 will oversee all CSR
compliance and ethics matters
Ethical values and principles of conductfor the Grouprsquos managers are defined in
of the Grouprsquos divisions and profit centersIn the context of the budgetary procedure
performance measurement indicators are
calculated by the divisions analyzed and
reviewed monthly to serve as a reference
for the Grouprsquos monthly reporting
Management reporting and
closing period work
Th om so n uses a co mmon char t of
accounts which is regularly updated The
principal accounting and financial figures
of the operational and functional depart-
ments consolidated at Group level are
analyzed by the Grouprsquos management
control team and reviewed by the Grouprsquos
Executive Committee
The closing process for the half-year and
annual consolidated financial statementsoccurs in two steps The first step con-
sists of a ldquohard closerdquo completed in May
and September leading to a first review by
the statutory auditors The second step
occurs in July and in JanuaryFebruary and
involves the finalization of half-year and
annual consolidated financial statements
under IFRS The Group then proceeds
once a year with a reconciliation of these
results in accordance with US GAAP
Preparation of financial statements
The financial statements are prepared jointly by the finance department and the
General Secretary They are based on
information reported through the annual
reporting and accounting consolidation
processes and on operational and mar-
ket information which is specifically cen-
tralized for the preparation of Thomsonrsquos
Document de Reacutefeacuterence in France and
the submission of Form 20-F in the United
States Half-year and annual financial infor-
mation is reviewed by the Grouprsquos Audit
Committee
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58 Thomson Panorama 2006
(1) Source PriceWaterhouseCoopers ndash
ldquoGlobal Entertainment and Media Outlook 2006-10rdquo
Revenue growth
Thomson achieved consolidated 2006
net revenues of 9914045854 million up from
9914045591 million in 2005 Revenues for
the Core Business reached 9914045747 mil-
lion (9914045776 million at constant currency)
representing 83 growth over 2005 at
constant currency
Overall the Grouprsquos key growth busi-
nessesmdashContent Services Network
Services Access Products for telecom
operators and our Broadcast amp Networks
businesses (Grass Valley and Network
Software)mdashincreased strongly year-on-
year and accounted for over a third of
Group revenues against less than a quar-
ter in 2005
Thomsonrsquos Core Business EBIT for 2006
was euro504 million representing a Core
Business EBIT margin of 88 Thisreflected growth in some key businesses
and cost actions across the Group off-
setting a significant investment in research
and development and some increase in
restructuring expenses
Increased spend on RampD
Research and development expenditure
charged in the Core Business (net of
external funding) rose from 991404221 million in
2005 to 991404279 million in 2006 an increase
of 26 principally in the Systems divi-
sion The Group expanded the number ofproducts and services in the development
phase across its businesses
Return to profit
Losses in Non-Core Continuing and Dis-
continued operations were substantially
lower year-on-year reflecting principally
the exit from heavily loss-making Displays
activities in 2005 and intensified cost-sav-
ing programs in 2006 A major revision
and harmonization of the Grouprsquos North
American healthcare obligations gave rise
to substantial one-time gains and Thom-
son also initiated significant restructuring
of its French Non-Core operations
The good performance of the Core Busi-
ness lower Non-Core and Discontinued
losses and a low reported tax chargeenabled the Group to return a net profit of
99140455 million in 2006 compared to a loss of
991404573 million in the previous year
Good cash flow
strengthened balance sheet
Thomson generated good free cash flow
and strengthened its balance sheet in
2006 Total net financial liabilities on the
balance sheet fell by 991404460 million reflect-
ing a 99140493 million fall in financial and acqui-
sition-related debts and a 991404367 million
reduction in retirement benefit obligations(including healthcare)
Increase in Net Dividend
The Board of Directors proposed a dis-
tribution to shareholders of 991404033 per
share (2005 dividend 991404030) reflecting
confidence in the prospects of the Group
going forward
Outlook 2007-2009
growth in revenues and net income
With the Grouprsquos transformation complete Thomsonrsquos financial focus over the 2007-
2009 period will be to grow revenues and
net income
Thomson serves growing Media Enter-
tainment amp Communications marketsmdashfor
which external estimates(1) indicate com-
pound growth of around 6 over the last
FINANCIAL AND
OPERATIONAL PERFORMANCE
Full year 2006 results
saw a return to profitability
and leave Thomson
well positioned at
the heart of convergence
and digital video
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59 Thomson Panorama 2006
five years Our digital and electronic busi-
nesses now represent two-thirds of rev-
enues and we believe they are growing
faster than the overall market offsetting
the maturing physical media businesses
Given this profile the Group expects its
revenue growth to be more modest in
2007 but to gather pace over the period
and our overall objective is to show com-pound growth over 2007-2009 in line with
or faster than the overall market
The 2007-2009 period is also expected
to see a sharply reduced impact from
residual Non-Core activities with an end
to losses from the Discontinued Activities
perimeter after 2007 Accordingly Thom-
sonrsquos ambition is to turn its Core Business
growth and profitability and lower impact
from Non-Core into strong growth in net
income over the period 2007-2009
Business operations
Continuous performance improvement is
fundamental to Thomsonrsquos commitment to
create sustainable business models and
long-term value for all stakeholders The
ambitious Group-wide programs launched
in 2004 to improve productivity and
enhance overall performance producedsubstantial results in 2006 and led to new
and strong initiatives for long-term growth
As of the second half of 2006 six ldquoKey
Programsrdquo are monitored at Group level
Clients Software Product Introduction
Operations Transformation and Talent
Management
KEY PROGRAMS IN PLACE
Program Focus
Clients Thomsonrsquos clientregional diversification and
growth of the existing business
through improved Sales amp Marketing
Software Development of integrated software platforms
in all markets (post-production distribution
delivery) and for all types of customer
(professional prosumerhellip)
Product Introduction Ensuring new product roadmaps are in line
with strategy and resource needs have been
identifiedOperations Improving the Grouprsquos cost base cash
generation and working capital
Transformation Multiple programs including initiatives to
improving customer relationship management
worldwide supply chain management
IT transformation as well as Thomsonrsquos RampD
footprint
Talent Management Leveraging human assets with a focus on
talent retention and acquisition
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60 Thomson Panorama 2006
SUMMARY RESULTS FULL YEAR 2006
In 991404 millions unless otherwise stated 2006(1) 2005(1)
Net revenues 5854 5591(1)
Core Business net revenues 5747 5335
Services 2489 2487
Systems 2684 2262
Technology 547 546
Corporate 27 40
Non-Core continuing operations net revenues 107 256
Core Business EBIT(2) 504 512
Services 160 205
Systems 132 109
Technology 289 277Corporate (77) (79)
EBIT from Non-Core continuing operations (25) (122)
(1) Restated with 2006 discontinued activities according to IFRS 5
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61 Thomson Panorama 2006
Year ended December 31in 991404 except number of shares 2006 2005 2004
Year ended December 31in 991404 millions 2006 2005(1) 2004(1)
CONSOLIDATED STATEMENTS OF OPERATIONS
(1) Restated with 2006 discontinued activities according to IFRS 5
(2) After deduction of the interests net of tax paid on the subordinated perpetual notes during the period
Continuing operations
Revenues 5854 5591 5980
Cost of sales (4474) (4240) (4594)
Gross margin 1380 1351 1386
Selling marketing general and administrative expenses (674) (638) (653)
Other income (expense) 52 (96) (69)
Research and development expenses (279) (227) (201)
Profit from continuing operations before tax and net finance costs 479 390 463
Interest income 19 30 52
Interest expense (108) (108) (54)
Other financial income (expense) (111) 36 (26)
Finance costs ndash net (200) (42) (28)
Share of profit (loss) from associates (86) (82) (20)
Income tax ndash (68) (93)
Profit from continuing operations 193 198 322
Discontinued operations
Profit (loss) from discontinued operations (138) (771) (883)
Net income (loss) 55 (573) (561)
Attributable to
Equity Holders 55 (574) (559)
Minority interests ndash 1 (2)
Weighted average number of shares
outstandingmdashbasic net of treasury stock 261188858 266539917 273646869
Earnings per share from continuing operations
Basic(2) 067 074 118
Diluted 063 042 111
Earnings per share from discontinued operations
Basic (053) (289) (323)
Diluted (048) (262) (296)Total earnings per share
Basic(2) 014 (215) (205)
Diluted 015 (220) (185)
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62 Thomson Panorama 2006
CONSOLIDATED BALANCE SHEETS
In 991404 millions December 31 December 31 January 1 December 31 2006 2005 2005(1) 2004
ASSETS
Non-current assets
Property plant and equipment 813 886 1051 1051
Goodwill 1714 1756 1186 1178
Other intangible assets 1071 1150 924 924
Investments in associates 12 204 260 260
Investments and financial assets available-for-sale 266 341 139 113
Derivative financial instruments 7 1 11 ndash
Contract advances 129 173 179 179
Deferred tax assets 397 379 307 301
Other non-current assets 110 182 133 136
Total non-current assets 4519 5072 4190 4142
Current assets
Inventories 366 333 503 568
Trade accounts and notes receivable 1018 1315 1232 1180
Current accounts with associates and joint ventures 97 115 143 143
Derivative financial instruments 8 9 115 ndash
Other current assets 535 644 483 616
Marketable securities ndash 7 58 58
Cash and cash equivalents 1311 996 1845 1848
Assets classified as held for sale 264 369 80 ndash
Total current assets 3599 3788 4459 4413
Total assets 8118 8860 8649 8555
(1) Including the impacts of the first-time application related to IAS 32 and 39 on financial instruments and IFRS 5 on non-current assets held for sale and
discontinued operations
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63 Thomson Panorama 2006
In 991404 millions December 31 December 31 January 1 December 31 2006 2005 2005(1) 2004
SHAREHOLDERSrsquo EQUITY AND LIABILITIES
Shareholdersrsquo equity
Common stock (273871296 shares at
December 31 2006
with nominal value of euro 375 per share) 1027 1025 1025 1025
Trade accounts and notes payable 1032 1164 1199 1226
Accrued employee expenses 165 166 158 163
Income tax payable 57 47 60 60
Other current liabilities 671 750 746 800
Payables on acquisition of companies 13 138 84 84
Liabilities directly associated with
assets classified as held for sale 232 470 88 ndash
Total current liabilities 3681 4393 3602 3459
Total liabilities 5999 6644 6251 6062
Total shareholderrsquos equity and liabilities 8118 8860 8649 8555
(1) Including the impacts of the first-time application related to IAS 32 and 39 on financial instruments and IFRS 5 on non-current assets held for sale and
discontinued operations
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Creation and lay-out
Photo credits Nathalie BerhingGAMMA ndash Steacutephane de Bourgies ndash Jean-Franccedilois DeroubaixGAMMA ndash Christine Donnier- ValentinGAMMA ndash Cars copy 2006 Disney Enterprises IncPixar All Rights Reserved ndash Dreamgirls copy 2006 DREAMWORKS
LLC and PARAMOUNT PICTURES All Rights Reserved ndash Poseidon copy 2006 Warner Bros Pictures ndash Sony Bravia Paint
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Thomson is committed to
attracting developing retaining and
energizing key talents
Europe Asia and North America contribute
to the growing awareness of Thomson and
serve as an outstanding source of new tal-
ent for the Group Every year Thomson
recruits more than 600 engineers and
managers categories of personnel which
have seen their numbers double over the
last two years
Significant progress was made in 2006
to diversify and expand the training pro-
grams on offer to Thomson employees
More than 300 managers in all Thomson
businesses participated in high-profile
training seminars ranging from Strategic
Execution and Project Dynamics to Value
Creation Training initiatives will expand
further in the future since they form an inte-
gral part of the Grouprsquos business evolution
and the Thomsonrsquos commitment to attract
develop retain and energize key talents
Pro-active approach
A pro-active approach to deploying the
human resources function has been
adopted with the transfer of the func-
tion in Asia from Hong Kong to Beijing in
2006 helping support Thomsonrsquos expan-
sion in this key region Managing human
resources for the region from Beijing
places the function close to many of its
internal customers as well as to one of the
Grouprsquos research centers Home to more
than 360 highly-skilled engineers the cen-
ter is near many of Chinarsquos leading univer-
sities and research institutes encouraging
exchanges with the academic and scien-
tific communities
In 2006 Thomson reiterated its corporate
beliefs externally by publishing the Grouprsquos
commitment to the 10 principles of theUnited Nations Global Compact on the
UNrsquos web site Such ldquoCommunication on
Progressrdquo underscores Thomsonrsquos pub-
lic accountability and transparency both
of which critical to the Grouprsquos abilities to
manage risks and opportunities
44 Thomson Panorama 2006
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Thomson employed 24465 people
as of December 31 2006 excluding
businesses held for sale
(1) Australia Latin America and United
Arab Emirates
(2) Manufacturing services 5 and
support functions 4
Services62
EMPLOYEES BY DIVISION
Technology
8
Others(2)
9
Systems21
Europe36
EMPLOYEES
BY GEOGRAPHIC AREA
North America
44 Asia9
Rest ofthe World(1)
11
TALENT MIX
Womenrepresent36 of all
employees
Women represent13 of managers
Women represen18 of ExecutiveCommittee memb
In an effort to ensure that the main elements of
Thomsonrsquos Ethics Charter and Values were conveyed and
understood throughout the organization an internal campaign
was launched in mid-2006 This involved the distribution of
posters in the appropriate local language to more than
a hundred sites around the world At Thomsonrsquos main sites
local managers often with an Executive Committee member
hosted briefing sessions and took the opportunity
to discuss these key issues with employees
45 Thomson Panorama 2006
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46 Thomson Panorama 2006
Thomson helps its customers to provide
people with broader access to media
entertainment and communications For
example by managing the broadcasting
of close to 200 TV channels the Group
enlarges the media and information
choices available to millions of people
throughout Europe Asia and North Amer-
ica By providing solutions and audio-visual products to support distance learn-
ing Thomson enables universities to reach
out to students who might not otherwise
enjoy access to such education
Expertise to preserve
film amp TV heritage
As an enabler of the digital world Thomson
contributes to cultural diversity and enrich-
ment and better understanding among
peoples Thomson supports the arts and
creativity by supplying the creative services
and products that make it possible for cre-ative minds to realize their projects and to
deliver them to audiences Contributing
to a richer cultural fabric worldwide the
Grouprsquos expertise enables emblematic cin-
ematographic works to retrieve their visual
glory through the provision of a variety of
film restoration techniques In 2006 the
Group took steps to place this expertise at
the disposal of the worldrsquos endangered film
and audiovisual archives with the setting
up of the Thomson Foundation for Film amp
TV Heritage
The Foundation working in coopera-
tion with local and international partners
helps to set up multi-disciplinary teams
comprised of experts from Thomson
businesses advanced archive institutions
and film preservation schools to restore
and promote what remains of the worldrsquos
cultural legacy recorded on film and TV
During its initial year the Foundation con-tributed to projects in Cambodia France
India Thailand and the US
Operating worldwide Thomson contributes
to improving economic and social welfare
and living standards As a good corporate
citizen the Group recognizes its responsi-
bilities to all of its stakeholders This means
ensuring that all of its business practices
meet the highest ethical standards It also
means that the Group is committed to
protecting and enhancing the environment
everywhere it does business to ensure that
all Thomson products are safe to use andthat all Thomson employees benefit from
a safe working environment Furthermore
Thomson fulfils its duty as a corporate citi-
zen by contributing to the quality of life in
many of the communities in which it does
business through a variety of local initia-
tives ranging from fund-raising in the com-
munity to events sponsorship
Through its technology
systems and services
Thomson contributes to
the dissemination of media
and entertainment
and a richer cultural fabric
for the world
The Bophana Archive Center
in Cambodia was set up in 2006
with the help of the Thomson Foundation
for Film amp TV Heritage
CORPORATE
SOCIAL RESPONSIBILITY ENABLING A DIGITAL WORLD
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47 Thomson Panorama 2006
Since its inception the Thomson Foundation has contributed to
a number of film and TV heritage projects Working in partnership with
local and international government agencies and non-profit groups
the Foundation helped create the Bophana Archive Center in Cambodia
at the end of 2006 The Center aims to save and enlarge access to
endangered film TV and photographic archives In India the first
session of a film heritage course designed by the Foundation took place in
the national film school of India in April 2007 Highlighting the critical role film
plays in the creative community the program of workshops conferences and
screenings was open to film students and professionals alike
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48 Thomson Panorama 2006
Global Compact and Vigeo
Vigeo the French social responsibility rat-
ings agency ranked Thomson as one of the
best performers of 20 companies assessed
in its 2006 European ldquoTechnology amp Hard-
warerdquo sector benchmark study
To advance responsible corporate citizen-ship and universal social and environmen-
tal principles Thomson has been a mem-
ber of the United Nations Global Compact
since 2003 Launched in 1999 the UN
Global Compact requires companies to
embrace support and enactmdashwithin their
sphere of influencemdasha set of values in the
areas of human rights labor the environ-
ment and anti-corruption Thomsonrsquos core
valuesmdashhigh ethical standards striving to
improve safety and environmental respon-
sibility initiatives and fair business prac-
ticesmdashmeet or exceed the goals embod-
ied in the UN Global Compact initiative
Thomsonrsquos Ethics Charter sets the foun-
dation for the Grouprsquos dedication to
act responsibly in all of its dealings with
employees suppliers customers and local
communities Updated and enhanced in
2006 the Ethics Charter covers a broad
range of issues from business practices
and human rights to the environment
health and safety All Thomson employees
are required to respect the conduct and
practices laid out in the Ethics Charter
This same universal obligation applies to all
Thomson suppliers and subcontractors
Suppliers and subcontractors are regularly
audited by Thomson to ensure compliance
with the Grouprsquos policies and standards
Initiated in 2002 the supplier ethics audit
program has resulted in hundreds of
supplier audits over the past four yearsIn addition the Social Accountabilities
8000 standard (SA 8000) is used as a
basis for evaluating those suppliers with
manufacturing facilities in high-risk areas
Established by an independent multi-dis-
ciplinary group of international experts the
SA 8000 standard is designed to ensure
humane workplaces
Human rights
Thomson aims to ensure that its business
practices align with key corporate values
The Grouprsquos Ethics Charter specificallyfocuses on the Global Compact standards
covering child labor forced labor health and
safety discrimination disciplinary practices
working hours and compensation
To he lp prevent the use of chi ld labor
for example the Ethics Charter prohibits
employing workers below the legal mini-
mum working age in any country
The Ethics Charter also helps combat
forced labor by prohibiting unfair practices
Thomson endeavours to protect
the environment wherever it does business
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49 Thomson Panorama 2006
such as requiring workers to deposit money
to obtain work withholding personal docu-
ments such as identity cards or passports
requiring workers to extend hours beyond
normal time or limiting workersrsquo movements
during non-working hours Prison labor and
indebted bondage are strictly prohibited
Non-discrimination and diversity
As an international Group doing business
in approximately 40 countries Thomsonrsquos
workforce is very diverse The Grouprsquos
headquarters in Paris for example counts
about a dozen different nationalities Dis-
crimination on the basis of race religion or
gender is strictly prohibited As of Decem-
ber 2006 women accounted for 36 of
Thomsonrsquos total employees
Thomson employed over 24000 people
in its core businesses as of end-2006 Of
these 44 were in North America 36in Europe 9 in Asia and 11 scattered
around the rest of the world Three-quar-
ters of the Grouprsquos current employees
joined Thomson within the last four years
including those from companies acquired
over that time period
Environment Health and Safety (EHampS)
The transformation of Thomsonrsquos business
model and market focus over the past few
years has reduced significantly the Grouprsquos
manufacturing activities Nevertheless
Thomson remains committed to ongoing
environmental health and safety policies
and goals This commitment is formalized
through the Corporate EHampS Charter
which defines key management principles
designed to protect human health and
the environment In this area the Group
embraces international standards for qual-ity and management systems in particular
the International Standards Organization
(ISO) 14001 standards for environmental
management In 2006 a total of 28 sites
held an ISO 14001 certification
Thomsonrsquos Corporate EHampS group devel-
ops directs and oversees the develop-
ment of global policies guidelines pro-
grams and initiatives reporting annually
to the Thomson Executive Committee
A corporate manager and three regional
managers direct the efforts of EHampS per-
sonnel worldwide Consistent internalbenchmarks have been in place for the
past decade to enable tracking of prog-
ress at all 41 of the Grouprsquos main industrial
locations Measured criteria include EHampS-
related employee training each locationrsquos
progress toward reducing work-related
injuries and lost workdays reducing envi-
ronmental impacts and reducing the con-
sumption of water and energy
The most notable achievement in 2006
was improved water use and conserva-
Clean industry
Thomsonrsquos Guadalajara DVD factory recently entered Mexicorsquos exclusive ldquoClean Industryrdquo program
managed by PROFEPA the federal environmental agency Sites achieving certification must go beyond
legal requirements by improving their performance in water usage minimizing hazardous waste and
controlling air noise and odor pollution Following four months of intense efforts the exhaustive
environmental audit required yielded excellent results and certification was achieved in November 2006
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50 Thomson Panorama 2006
tion within the film labs showing more
than a 25 improvement in water con-
sumption for every million feet of film pro-
cessed This helped Thomson achieve its
overall goal of reducing annual water con-
sumption by 15 Similarly good prog-
ress was achieved toward the long-term
goal of reduced landfill with almost 10
improvement in recycling rate comparedto 2005
As a corol lary to efforts to constant ly
improve the EHampS profile of ongoing activi-
ties Thomson reviews all newly acquired
businesses to ensure they meet Group
requirements and to define upgrade pro-
grams when necessary The EHampS reviews
include an evaluation of the status and
effectiveness of existing management
and control systems and a presentation
of Thomsonrsquos EHampS initiatives and require-
ments Newly acquired sites are now
encouraged to achieve ISO 14001 certi-fication within two years of their effective
date for joining the Group
Suppliers and subcontractors are required
to meet all legal requirements for environ-
mental protection including the elimina-
tion of hazardous substances Suppliers
are required to declare in writing that their
products are free of such substances as
cadmium chromium lead mercury and
asbestos and to provide laboratory test
data as proof
The transformation of Thomsonrsquos business
has reduced significantly
the Grouprsquos manufacturing activities
Overall local legislation and standards
form the foundation for Thomsonrsquos require-
ments concerning environmental health
safety employment child labor discrimi-
nation and human rights issues in each
country where it does business
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FINANCIAL INFORMATION
Thomson maintains the highest standards in compliance and risk management working continuously
to improve reporting and control as well as the quality of financial information made available to
its stakeholders
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54 Thomson Panorama 2006
Growing North American
investor base
The per iod 2004-2006 brought about
expansion in Thomsonrsquos international
shareholder base particularly in North
America Leading US-based investment
management funds Franklin Templeton
Investments and Brands Investment Part-ners hold over 10 and 5 respectively
of Thomsonrsquos share capital while Dodge amp
Cox increased its stake to over 10 during
the year The Group estimates that North
American institutional investors represent
over 50 of the institutional investor base
France around a quarter and other Euro-
pean investors account for the majority of
the remainder
Active communications
To keep Thomsonrsquos broad investor base
appraised of progress in implementing itsstrategic objectives senior management
devoted considerable time during the year
to investor meetings in both Europe and
North America
As part of its ongoing efforts to provide
investorsmdashparticularly individual share-
holdersmdashwith comprehensive up-to-date
information Thomson makes full use of
the internet Share price information press
releases as well as the Grouprsquos annual
report and reference documents (Docu-
ment de Reacutefeacuterence filed with the French
stock exchange regulator AMF and Form
20-F filed with the SEC) are available on
the site wwwthomsonnet
Annual General Shareholdersrsquo Meetings
are broadcast live over the internet with asimultaneous translation of the proceed-
ings provided from French to English to
enable the majority of shareholders to view
the event The results of the vote are dis-
closed in detail on the internet site imme-
diately following the Meeting
The Shareholder Relations department
organizes tours for individual shareholders
of the newly inaugurated Thomson Gal-
lery at the Grouprsquos headquarters in Paris
France Visits to the Gallery designed to
illustrate Thomsonrsquos activities through a
series of live technology demos and videopresentations allow participants to better
appreciate the Grouprsquos 2007-2009 strat-
egy and growth prospects
Dividend
The dividend ofeuro033 per share proposed
at the Annual Shareholdersrsquo Meeting on
15 May 2007 represented a 10 increase
over last yearrsquos dividend
SHAREHOLDER RELATIONS
Thomson aims to keep
investors and individual
shareholders informed of
progress in implementing
strategic objectives
Thomsonrsquos Annual General Meeting
provides an opportunity for debate and
exchange with individual shareholders
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55 Thomson Panorama 2006
Financial calendar 2007
bull April 26 First Quarter 2007 Sales
bull May 15 Shareholdersrsquo Meeting (on second notice)
bull July 26 First Half 2007 Results
bull October 18 Third Quarter 2007 Sales
These dates are subject to modification
Public904
CAPITAL STRUCTURE AS OF DECEMBER 31 2006
Employees25
Treasury Shares46
Other25
SHARE HIGHLIGHTS
2006 2005
Year high 1932 2142
Year low 1165 1526
Share price at year-end in euro 1481 1770
Average daily volume 2445176 2244879
Market capital at year-end in euro million 4056 4838
Number of shares outstanding at year end
(in thousands) 273871 273308
Net dividend per share in euro 033 030
Listed on the Paris and New York stock exchanges ndash Euronext code 18453 ndash NYSE ticker TMSN
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56 Thomson Panorama 2006
Maintaining the highest standards
in compliance and risk management
Extensive work was completed in 2006
in Thomsonrsquos main operational units and
at Corporate level to ensure alignment of
reporting and control procedures with the
requirements of the Sarbanes-Oxley Act in
the United States
Improving Internal Control Procedures
Building towards application of Section
404 of the Sarbanes-Oxley Act (ldquoSOX
404rdquo) for fiscal year 2006 which required
the Group to assess the effectiveness of
internal controls Thomson committed to
implementing the internal control frame-
work proposed by the Committee of
Sponsoring Organizations of the Treadway
Commission (ldquoCOSOrdquo)
Within this framework the Group seeks toachieve ldquoreasonable assurancerdquo regarding
the effectiveness and efficiency of opera-
tions the reliability of financial reporting
and compliance with applicable laws and
regulations
Group-wide initiatives were on-going in
2006 to achieve these objectives including
the Process Transformation Initiative (PTI)
to ensure operational excellence COM-
PASS (Controls Over Methods Processes
Applications Systems and Strategy) and
the Risk Committee and its enterprise risk
assessment and management programrun by the Internal Audit function
Following a full worldwide enterprise risk
assessment carried out in the second half
of 2005 and updated throughout 2006 a
second was planned for completion by May
2007 The process assesses risks in the
Grouprsquos distinct business units or profit cen-
ters with the goal of identifying assessing
validating and monitoring risks which could
impact or potentially impact the Grouprsquos
ability to achieve its short and long-term
objectives In 2007 the Risk Committee will
continue to regularly monitor action plans
put in place to mitigate the risks identified
During the year the Group also continued
implementation of a worldwide SOX 404
compliance software system to assist with
the documentation of significant financialprocesses provide consistent guidance
to management regarding controls and
better enable management to assess its
control structure
Managing Risk
Thomson has three main internal organiza-
tions that support and assist the Executive
Committee in control and risk monitoring
the Investment Committee and the Risk
Committee The Investment Committee
meets on an ad hoc basis throughout the
year generally once per week to reviewfinancial commitments including proposed
acquisitions capital equipment funding
and new ventures requiring capital The Risk
Committee which met nine times in 2006
evaluates the Grouprsquos financial operational
and compliance risks and identifies strate-
gic risks that could adversely affect different
activities within the framework of Grouprsquos
three-year plan scenarios The Corporate
Social Responsibility (CSR) Committee to
be set up in 2007 will oversee all CSR
compliance and ethics matters
Ethical values and principles of conductfor the Grouprsquos managers are defined in
of the Grouprsquos divisions and profit centersIn the context of the budgetary procedure
performance measurement indicators are
calculated by the divisions analyzed and
reviewed monthly to serve as a reference
for the Grouprsquos monthly reporting
Management reporting and
closing period work
Th om so n uses a co mmon char t of
accounts which is regularly updated The
principal accounting and financial figures
of the operational and functional depart-
ments consolidated at Group level are
analyzed by the Grouprsquos management
control team and reviewed by the Grouprsquos
Executive Committee
The closing process for the half-year and
annual consolidated financial statementsoccurs in two steps The first step con-
sists of a ldquohard closerdquo completed in May
and September leading to a first review by
the statutory auditors The second step
occurs in July and in JanuaryFebruary and
involves the finalization of half-year and
annual consolidated financial statements
under IFRS The Group then proceeds
once a year with a reconciliation of these
results in accordance with US GAAP
Preparation of financial statements
The financial statements are prepared jointly by the finance department and the
General Secretary They are based on
information reported through the annual
reporting and accounting consolidation
processes and on operational and mar-
ket information which is specifically cen-
tralized for the preparation of Thomsonrsquos
Document de Reacutefeacuterence in France and
the submission of Form 20-F in the United
States Half-year and annual financial infor-
mation is reviewed by the Grouprsquos Audit
Committee
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58 Thomson Panorama 2006
(1) Source PriceWaterhouseCoopers ndash
ldquoGlobal Entertainment and Media Outlook 2006-10rdquo
Revenue growth
Thomson achieved consolidated 2006
net revenues of 9914045854 million up from
9914045591 million in 2005 Revenues for
the Core Business reached 9914045747 mil-
lion (9914045776 million at constant currency)
representing 83 growth over 2005 at
constant currency
Overall the Grouprsquos key growth busi-
nessesmdashContent Services Network
Services Access Products for telecom
operators and our Broadcast amp Networks
businesses (Grass Valley and Network
Software)mdashincreased strongly year-on-
year and accounted for over a third of
Group revenues against less than a quar-
ter in 2005
Thomsonrsquos Core Business EBIT for 2006
was euro504 million representing a Core
Business EBIT margin of 88 Thisreflected growth in some key businesses
and cost actions across the Group off-
setting a significant investment in research
and development and some increase in
restructuring expenses
Increased spend on RampD
Research and development expenditure
charged in the Core Business (net of
external funding) rose from 991404221 million in
2005 to 991404279 million in 2006 an increase
of 26 principally in the Systems divi-
sion The Group expanded the number ofproducts and services in the development
phase across its businesses
Return to profit
Losses in Non-Core Continuing and Dis-
continued operations were substantially
lower year-on-year reflecting principally
the exit from heavily loss-making Displays
activities in 2005 and intensified cost-sav-
ing programs in 2006 A major revision
and harmonization of the Grouprsquos North
American healthcare obligations gave rise
to substantial one-time gains and Thom-
son also initiated significant restructuring
of its French Non-Core operations
The good performance of the Core Busi-
ness lower Non-Core and Discontinued
losses and a low reported tax chargeenabled the Group to return a net profit of
99140455 million in 2006 compared to a loss of
991404573 million in the previous year
Good cash flow
strengthened balance sheet
Thomson generated good free cash flow
and strengthened its balance sheet in
2006 Total net financial liabilities on the
balance sheet fell by 991404460 million reflect-
ing a 99140493 million fall in financial and acqui-
sition-related debts and a 991404367 million
reduction in retirement benefit obligations(including healthcare)
Increase in Net Dividend
The Board of Directors proposed a dis-
tribution to shareholders of 991404033 per
share (2005 dividend 991404030) reflecting
confidence in the prospects of the Group
going forward
Outlook 2007-2009
growth in revenues and net income
With the Grouprsquos transformation complete Thomsonrsquos financial focus over the 2007-
2009 period will be to grow revenues and
net income
Thomson serves growing Media Enter-
tainment amp Communications marketsmdashfor
which external estimates(1) indicate com-
pound growth of around 6 over the last
FINANCIAL AND
OPERATIONAL PERFORMANCE
Full year 2006 results
saw a return to profitability
and leave Thomson
well positioned at
the heart of convergence
and digital video
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59 Thomson Panorama 2006
five years Our digital and electronic busi-
nesses now represent two-thirds of rev-
enues and we believe they are growing
faster than the overall market offsetting
the maturing physical media businesses
Given this profile the Group expects its
revenue growth to be more modest in
2007 but to gather pace over the period
and our overall objective is to show com-pound growth over 2007-2009 in line with
or faster than the overall market
The 2007-2009 period is also expected
to see a sharply reduced impact from
residual Non-Core activities with an end
to losses from the Discontinued Activities
perimeter after 2007 Accordingly Thom-
sonrsquos ambition is to turn its Core Business
growth and profitability and lower impact
from Non-Core into strong growth in net
income over the period 2007-2009
Business operations
Continuous performance improvement is
fundamental to Thomsonrsquos commitment to
create sustainable business models and
long-term value for all stakeholders The
ambitious Group-wide programs launched
in 2004 to improve productivity and
enhance overall performance producedsubstantial results in 2006 and led to new
and strong initiatives for long-term growth
As of the second half of 2006 six ldquoKey
Programsrdquo are monitored at Group level
Clients Software Product Introduction
Operations Transformation and Talent
Management
KEY PROGRAMS IN PLACE
Program Focus
Clients Thomsonrsquos clientregional diversification and
growth of the existing business
through improved Sales amp Marketing
Software Development of integrated software platforms
in all markets (post-production distribution
delivery) and for all types of customer
(professional prosumerhellip)
Product Introduction Ensuring new product roadmaps are in line
with strategy and resource needs have been
identifiedOperations Improving the Grouprsquos cost base cash
generation and working capital
Transformation Multiple programs including initiatives to
improving customer relationship management
worldwide supply chain management
IT transformation as well as Thomsonrsquos RampD
footprint
Talent Management Leveraging human assets with a focus on
talent retention and acquisition
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60 Thomson Panorama 2006
SUMMARY RESULTS FULL YEAR 2006
In 991404 millions unless otherwise stated 2006(1) 2005(1)
Net revenues 5854 5591(1)
Core Business net revenues 5747 5335
Services 2489 2487
Systems 2684 2262
Technology 547 546
Corporate 27 40
Non-Core continuing operations net revenues 107 256
Core Business EBIT(2) 504 512
Services 160 205
Systems 132 109
Technology 289 277Corporate (77) (79)
EBIT from Non-Core continuing operations (25) (122)
(1) Restated with 2006 discontinued activities according to IFRS 5
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61 Thomson Panorama 2006
Year ended December 31in 991404 except number of shares 2006 2005 2004
Year ended December 31in 991404 millions 2006 2005(1) 2004(1)
CONSOLIDATED STATEMENTS OF OPERATIONS
(1) Restated with 2006 discontinued activities according to IFRS 5
(2) After deduction of the interests net of tax paid on the subordinated perpetual notes during the period
Continuing operations
Revenues 5854 5591 5980
Cost of sales (4474) (4240) (4594)
Gross margin 1380 1351 1386
Selling marketing general and administrative expenses (674) (638) (653)
Other income (expense) 52 (96) (69)
Research and development expenses (279) (227) (201)
Profit from continuing operations before tax and net finance costs 479 390 463
Interest income 19 30 52
Interest expense (108) (108) (54)
Other financial income (expense) (111) 36 (26)
Finance costs ndash net (200) (42) (28)
Share of profit (loss) from associates (86) (82) (20)
Income tax ndash (68) (93)
Profit from continuing operations 193 198 322
Discontinued operations
Profit (loss) from discontinued operations (138) (771) (883)
Net income (loss) 55 (573) (561)
Attributable to
Equity Holders 55 (574) (559)
Minority interests ndash 1 (2)
Weighted average number of shares
outstandingmdashbasic net of treasury stock 261188858 266539917 273646869
Earnings per share from continuing operations
Basic(2) 067 074 118
Diluted 063 042 111
Earnings per share from discontinued operations
Basic (053) (289) (323)
Diluted (048) (262) (296)Total earnings per share
Basic(2) 014 (215) (205)
Diluted 015 (220) (185)
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62 Thomson Panorama 2006
CONSOLIDATED BALANCE SHEETS
In 991404 millions December 31 December 31 January 1 December 31 2006 2005 2005(1) 2004
ASSETS
Non-current assets
Property plant and equipment 813 886 1051 1051
Goodwill 1714 1756 1186 1178
Other intangible assets 1071 1150 924 924
Investments in associates 12 204 260 260
Investments and financial assets available-for-sale 266 341 139 113
Derivative financial instruments 7 1 11 ndash
Contract advances 129 173 179 179
Deferred tax assets 397 379 307 301
Other non-current assets 110 182 133 136
Total non-current assets 4519 5072 4190 4142
Current assets
Inventories 366 333 503 568
Trade accounts and notes receivable 1018 1315 1232 1180
Current accounts with associates and joint ventures 97 115 143 143
Derivative financial instruments 8 9 115 ndash
Other current assets 535 644 483 616
Marketable securities ndash 7 58 58
Cash and cash equivalents 1311 996 1845 1848
Assets classified as held for sale 264 369 80 ndash
Total current assets 3599 3788 4459 4413
Total assets 8118 8860 8649 8555
(1) Including the impacts of the first-time application related to IAS 32 and 39 on financial instruments and IFRS 5 on non-current assets held for sale and
discontinued operations
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63 Thomson Panorama 2006
In 991404 millions December 31 December 31 January 1 December 31 2006 2005 2005(1) 2004
SHAREHOLDERSrsquo EQUITY AND LIABILITIES
Shareholdersrsquo equity
Common stock (273871296 shares at
December 31 2006
with nominal value of euro 375 per share) 1027 1025 1025 1025
Trade accounts and notes payable 1032 1164 1199 1226
Accrued employee expenses 165 166 158 163
Income tax payable 57 47 60 60
Other current liabilities 671 750 746 800
Payables on acquisition of companies 13 138 84 84
Liabilities directly associated with
assets classified as held for sale 232 470 88 ndash
Total current liabilities 3681 4393 3602 3459
Total liabilities 5999 6644 6251 6062
Total shareholderrsquos equity and liabilities 8118 8860 8649 8555
(1) Including the impacts of the first-time application related to IAS 32 and 39 on financial instruments and IFRS 5 on non-current assets held for sale and
discontinued operations
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Creation and lay-out
Photo credits Nathalie BerhingGAMMA ndash Steacutephane de Bourgies ndash Jean-Franccedilois DeroubaixGAMMA ndash Christine Donnier- ValentinGAMMA ndash Cars copy 2006 Disney Enterprises IncPixar All Rights Reserved ndash Dreamgirls copy 2006 DREAMWORKS
LLC and PARAMOUNT PICTURES All Rights Reserved ndash Poseidon copy 2006 Warner Bros Pictures ndash Sony Bravia Paint
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Thomson employed 24465 people
as of December 31 2006 excluding
businesses held for sale
(1) Australia Latin America and United
Arab Emirates
(2) Manufacturing services 5 and
support functions 4
Services62
EMPLOYEES BY DIVISION
Technology
8
Others(2)
9
Systems21
Europe36
EMPLOYEES
BY GEOGRAPHIC AREA
North America
44 Asia9
Rest ofthe World(1)
11
TALENT MIX
Womenrepresent36 of all
employees
Women represent13 of managers
Women represen18 of ExecutiveCommittee memb
In an effort to ensure that the main elements of
Thomsonrsquos Ethics Charter and Values were conveyed and
understood throughout the organization an internal campaign
was launched in mid-2006 This involved the distribution of
posters in the appropriate local language to more than
a hundred sites around the world At Thomsonrsquos main sites
local managers often with an Executive Committee member
hosted briefing sessions and took the opportunity
to discuss these key issues with employees
45 Thomson Panorama 2006
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46 Thomson Panorama 2006
Thomson helps its customers to provide
people with broader access to media
entertainment and communications For
example by managing the broadcasting
of close to 200 TV channels the Group
enlarges the media and information
choices available to millions of people
throughout Europe Asia and North Amer-
ica By providing solutions and audio-visual products to support distance learn-
ing Thomson enables universities to reach
out to students who might not otherwise
enjoy access to such education
Expertise to preserve
film amp TV heritage
As an enabler of the digital world Thomson
contributes to cultural diversity and enrich-
ment and better understanding among
peoples Thomson supports the arts and
creativity by supplying the creative services
and products that make it possible for cre-ative minds to realize their projects and to
deliver them to audiences Contributing
to a richer cultural fabric worldwide the
Grouprsquos expertise enables emblematic cin-
ematographic works to retrieve their visual
glory through the provision of a variety of
film restoration techniques In 2006 the
Group took steps to place this expertise at
the disposal of the worldrsquos endangered film
and audiovisual archives with the setting
up of the Thomson Foundation for Film amp
TV Heritage
The Foundation working in coopera-
tion with local and international partners
helps to set up multi-disciplinary teams
comprised of experts from Thomson
businesses advanced archive institutions
and film preservation schools to restore
and promote what remains of the worldrsquos
cultural legacy recorded on film and TV
During its initial year the Foundation con-tributed to projects in Cambodia France
India Thailand and the US
Operating worldwide Thomson contributes
to improving economic and social welfare
and living standards As a good corporate
citizen the Group recognizes its responsi-
bilities to all of its stakeholders This means
ensuring that all of its business practices
meet the highest ethical standards It also
means that the Group is committed to
protecting and enhancing the environment
everywhere it does business to ensure that
all Thomson products are safe to use andthat all Thomson employees benefit from
a safe working environment Furthermore
Thomson fulfils its duty as a corporate citi-
zen by contributing to the quality of life in
many of the communities in which it does
business through a variety of local initia-
tives ranging from fund-raising in the com-
munity to events sponsorship
Through its technology
systems and services
Thomson contributes to
the dissemination of media
and entertainment
and a richer cultural fabric
for the world
The Bophana Archive Center
in Cambodia was set up in 2006
with the help of the Thomson Foundation
for Film amp TV Heritage
CORPORATE
SOCIAL RESPONSIBILITY ENABLING A DIGITAL WORLD
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47 Thomson Panorama 2006
Since its inception the Thomson Foundation has contributed to
a number of film and TV heritage projects Working in partnership with
local and international government agencies and non-profit groups
the Foundation helped create the Bophana Archive Center in Cambodia
at the end of 2006 The Center aims to save and enlarge access to
endangered film TV and photographic archives In India the first
session of a film heritage course designed by the Foundation took place in
the national film school of India in April 2007 Highlighting the critical role film
plays in the creative community the program of workshops conferences and
screenings was open to film students and professionals alike
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48 Thomson Panorama 2006
Global Compact and Vigeo
Vigeo the French social responsibility rat-
ings agency ranked Thomson as one of the
best performers of 20 companies assessed
in its 2006 European ldquoTechnology amp Hard-
warerdquo sector benchmark study
To advance responsible corporate citizen-ship and universal social and environmen-
tal principles Thomson has been a mem-
ber of the United Nations Global Compact
since 2003 Launched in 1999 the UN
Global Compact requires companies to
embrace support and enactmdashwithin their
sphere of influencemdasha set of values in the
areas of human rights labor the environ-
ment and anti-corruption Thomsonrsquos core
valuesmdashhigh ethical standards striving to
improve safety and environmental respon-
sibility initiatives and fair business prac-
ticesmdashmeet or exceed the goals embod-
ied in the UN Global Compact initiative
Thomsonrsquos Ethics Charter sets the foun-
dation for the Grouprsquos dedication to
act responsibly in all of its dealings with
employees suppliers customers and local
communities Updated and enhanced in
2006 the Ethics Charter covers a broad
range of issues from business practices
and human rights to the environment
health and safety All Thomson employees
are required to respect the conduct and
practices laid out in the Ethics Charter
This same universal obligation applies to all
Thomson suppliers and subcontractors
Suppliers and subcontractors are regularly
audited by Thomson to ensure compliance
with the Grouprsquos policies and standards
Initiated in 2002 the supplier ethics audit
program has resulted in hundreds of
supplier audits over the past four yearsIn addition the Social Accountabilities
8000 standard (SA 8000) is used as a
basis for evaluating those suppliers with
manufacturing facilities in high-risk areas
Established by an independent multi-dis-
ciplinary group of international experts the
SA 8000 standard is designed to ensure
humane workplaces
Human rights
Thomson aims to ensure that its business
practices align with key corporate values
The Grouprsquos Ethics Charter specificallyfocuses on the Global Compact standards
covering child labor forced labor health and
safety discrimination disciplinary practices
working hours and compensation
To he lp prevent the use of chi ld labor
for example the Ethics Charter prohibits
employing workers below the legal mini-
mum working age in any country
The Ethics Charter also helps combat
forced labor by prohibiting unfair practices
Thomson endeavours to protect
the environment wherever it does business
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49 Thomson Panorama 2006
such as requiring workers to deposit money
to obtain work withholding personal docu-
ments such as identity cards or passports
requiring workers to extend hours beyond
normal time or limiting workersrsquo movements
during non-working hours Prison labor and
indebted bondage are strictly prohibited
Non-discrimination and diversity
As an international Group doing business
in approximately 40 countries Thomsonrsquos
workforce is very diverse The Grouprsquos
headquarters in Paris for example counts
about a dozen different nationalities Dis-
crimination on the basis of race religion or
gender is strictly prohibited As of Decem-
ber 2006 women accounted for 36 of
Thomsonrsquos total employees
Thomson employed over 24000 people
in its core businesses as of end-2006 Of
these 44 were in North America 36in Europe 9 in Asia and 11 scattered
around the rest of the world Three-quar-
ters of the Grouprsquos current employees
joined Thomson within the last four years
including those from companies acquired
over that time period
Environment Health and Safety (EHampS)
The transformation of Thomsonrsquos business
model and market focus over the past few
years has reduced significantly the Grouprsquos
manufacturing activities Nevertheless
Thomson remains committed to ongoing
environmental health and safety policies
and goals This commitment is formalized
through the Corporate EHampS Charter
which defines key management principles
designed to protect human health and
the environment In this area the Group
embraces international standards for qual-ity and management systems in particular
the International Standards Organization
(ISO) 14001 standards for environmental
management In 2006 a total of 28 sites
held an ISO 14001 certification
Thomsonrsquos Corporate EHampS group devel-
ops directs and oversees the develop-
ment of global policies guidelines pro-
grams and initiatives reporting annually
to the Thomson Executive Committee
A corporate manager and three regional
managers direct the efforts of EHampS per-
sonnel worldwide Consistent internalbenchmarks have been in place for the
past decade to enable tracking of prog-
ress at all 41 of the Grouprsquos main industrial
locations Measured criteria include EHampS-
related employee training each locationrsquos
progress toward reducing work-related
injuries and lost workdays reducing envi-
ronmental impacts and reducing the con-
sumption of water and energy
The most notable achievement in 2006
was improved water use and conserva-
Clean industry
Thomsonrsquos Guadalajara DVD factory recently entered Mexicorsquos exclusive ldquoClean Industryrdquo program
managed by PROFEPA the federal environmental agency Sites achieving certification must go beyond
legal requirements by improving their performance in water usage minimizing hazardous waste and
controlling air noise and odor pollution Following four months of intense efforts the exhaustive
environmental audit required yielded excellent results and certification was achieved in November 2006
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50 Thomson Panorama 2006
tion within the film labs showing more
than a 25 improvement in water con-
sumption for every million feet of film pro-
cessed This helped Thomson achieve its
overall goal of reducing annual water con-
sumption by 15 Similarly good prog-
ress was achieved toward the long-term
goal of reduced landfill with almost 10
improvement in recycling rate comparedto 2005
As a corol lary to efforts to constant ly
improve the EHampS profile of ongoing activi-
ties Thomson reviews all newly acquired
businesses to ensure they meet Group
requirements and to define upgrade pro-
grams when necessary The EHampS reviews
include an evaluation of the status and
effectiveness of existing management
and control systems and a presentation
of Thomsonrsquos EHampS initiatives and require-
ments Newly acquired sites are now
encouraged to achieve ISO 14001 certi-fication within two years of their effective
date for joining the Group
Suppliers and subcontractors are required
to meet all legal requirements for environ-
mental protection including the elimina-
tion of hazardous substances Suppliers
are required to declare in writing that their
products are free of such substances as
cadmium chromium lead mercury and
asbestos and to provide laboratory test
data as proof
The transformation of Thomsonrsquos business
has reduced significantly
the Grouprsquos manufacturing activities
Overall local legislation and standards
form the foundation for Thomsonrsquos require-
ments concerning environmental health
safety employment child labor discrimi-
nation and human rights issues in each
country where it does business
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FINANCIAL INFORMATION
Thomson maintains the highest standards in compliance and risk management working continuously
to improve reporting and control as well as the quality of financial information made available to
its stakeholders
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54 Thomson Panorama 2006
Growing North American
investor base
The per iod 2004-2006 brought about
expansion in Thomsonrsquos international
shareholder base particularly in North
America Leading US-based investment
management funds Franklin Templeton
Investments and Brands Investment Part-ners hold over 10 and 5 respectively
of Thomsonrsquos share capital while Dodge amp
Cox increased its stake to over 10 during
the year The Group estimates that North
American institutional investors represent
over 50 of the institutional investor base
France around a quarter and other Euro-
pean investors account for the majority of
the remainder
Active communications
To keep Thomsonrsquos broad investor base
appraised of progress in implementing itsstrategic objectives senior management
devoted considerable time during the year
to investor meetings in both Europe and
North America
As part of its ongoing efforts to provide
investorsmdashparticularly individual share-
holdersmdashwith comprehensive up-to-date
information Thomson makes full use of
the internet Share price information press
releases as well as the Grouprsquos annual
report and reference documents (Docu-
ment de Reacutefeacuterence filed with the French
stock exchange regulator AMF and Form
20-F filed with the SEC) are available on
the site wwwthomsonnet
Annual General Shareholdersrsquo Meetings
are broadcast live over the internet with asimultaneous translation of the proceed-
ings provided from French to English to
enable the majority of shareholders to view
the event The results of the vote are dis-
closed in detail on the internet site imme-
diately following the Meeting
The Shareholder Relations department
organizes tours for individual shareholders
of the newly inaugurated Thomson Gal-
lery at the Grouprsquos headquarters in Paris
France Visits to the Gallery designed to
illustrate Thomsonrsquos activities through a
series of live technology demos and videopresentations allow participants to better
appreciate the Grouprsquos 2007-2009 strat-
egy and growth prospects
Dividend
The dividend ofeuro033 per share proposed
at the Annual Shareholdersrsquo Meeting on
15 May 2007 represented a 10 increase
over last yearrsquos dividend
SHAREHOLDER RELATIONS
Thomson aims to keep
investors and individual
shareholders informed of
progress in implementing
strategic objectives
Thomsonrsquos Annual General Meeting
provides an opportunity for debate and
exchange with individual shareholders
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55 Thomson Panorama 2006
Financial calendar 2007
bull April 26 First Quarter 2007 Sales
bull May 15 Shareholdersrsquo Meeting (on second notice)
bull July 26 First Half 2007 Results
bull October 18 Third Quarter 2007 Sales
These dates are subject to modification
Public904
CAPITAL STRUCTURE AS OF DECEMBER 31 2006
Employees25
Treasury Shares46
Other25
SHARE HIGHLIGHTS
2006 2005
Year high 1932 2142
Year low 1165 1526
Share price at year-end in euro 1481 1770
Average daily volume 2445176 2244879
Market capital at year-end in euro million 4056 4838
Number of shares outstanding at year end
(in thousands) 273871 273308
Net dividend per share in euro 033 030
Listed on the Paris and New York stock exchanges ndash Euronext code 18453 ndash NYSE ticker TMSN
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56 Thomson Panorama 2006
Maintaining the highest standards
in compliance and risk management
Extensive work was completed in 2006
in Thomsonrsquos main operational units and
at Corporate level to ensure alignment of
reporting and control procedures with the
requirements of the Sarbanes-Oxley Act in
the United States
Improving Internal Control Procedures
Building towards application of Section
404 of the Sarbanes-Oxley Act (ldquoSOX
404rdquo) for fiscal year 2006 which required
the Group to assess the effectiveness of
internal controls Thomson committed to
implementing the internal control frame-
work proposed by the Committee of
Sponsoring Organizations of the Treadway
Commission (ldquoCOSOrdquo)
Within this framework the Group seeks toachieve ldquoreasonable assurancerdquo regarding
the effectiveness and efficiency of opera-
tions the reliability of financial reporting
and compliance with applicable laws and
regulations
Group-wide initiatives were on-going in
2006 to achieve these objectives including
the Process Transformation Initiative (PTI)
to ensure operational excellence COM-
PASS (Controls Over Methods Processes
Applications Systems and Strategy) and
the Risk Committee and its enterprise risk
assessment and management programrun by the Internal Audit function
Following a full worldwide enterprise risk
assessment carried out in the second half
of 2005 and updated throughout 2006 a
second was planned for completion by May
2007 The process assesses risks in the
Grouprsquos distinct business units or profit cen-
ters with the goal of identifying assessing
validating and monitoring risks which could
impact or potentially impact the Grouprsquos
ability to achieve its short and long-term
objectives In 2007 the Risk Committee will
continue to regularly monitor action plans
put in place to mitigate the risks identified
During the year the Group also continued
implementation of a worldwide SOX 404
compliance software system to assist with
the documentation of significant financialprocesses provide consistent guidance
to management regarding controls and
better enable management to assess its
control structure
Managing Risk
Thomson has three main internal organiza-
tions that support and assist the Executive
Committee in control and risk monitoring
the Investment Committee and the Risk
Committee The Investment Committee
meets on an ad hoc basis throughout the
year generally once per week to reviewfinancial commitments including proposed
acquisitions capital equipment funding
and new ventures requiring capital The Risk
Committee which met nine times in 2006
evaluates the Grouprsquos financial operational
and compliance risks and identifies strate-
gic risks that could adversely affect different
activities within the framework of Grouprsquos
three-year plan scenarios The Corporate
Social Responsibility (CSR) Committee to
be set up in 2007 will oversee all CSR
compliance and ethics matters
Ethical values and principles of conductfor the Grouprsquos managers are defined in
of the Grouprsquos divisions and profit centersIn the context of the budgetary procedure
performance measurement indicators are
calculated by the divisions analyzed and
reviewed monthly to serve as a reference
for the Grouprsquos monthly reporting
Management reporting and
closing period work
Th om so n uses a co mmon char t of
accounts which is regularly updated The
principal accounting and financial figures
of the operational and functional depart-
ments consolidated at Group level are
analyzed by the Grouprsquos management
control team and reviewed by the Grouprsquos
Executive Committee
The closing process for the half-year and
annual consolidated financial statementsoccurs in two steps The first step con-
sists of a ldquohard closerdquo completed in May
and September leading to a first review by
the statutory auditors The second step
occurs in July and in JanuaryFebruary and
involves the finalization of half-year and
annual consolidated financial statements
under IFRS The Group then proceeds
once a year with a reconciliation of these
results in accordance with US GAAP
Preparation of financial statements
The financial statements are prepared jointly by the finance department and the
General Secretary They are based on
information reported through the annual
reporting and accounting consolidation
processes and on operational and mar-
ket information which is specifically cen-
tralized for the preparation of Thomsonrsquos
Document de Reacutefeacuterence in France and
the submission of Form 20-F in the United
States Half-year and annual financial infor-
mation is reviewed by the Grouprsquos Audit
Committee
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58 Thomson Panorama 2006
(1) Source PriceWaterhouseCoopers ndash
ldquoGlobal Entertainment and Media Outlook 2006-10rdquo
Revenue growth
Thomson achieved consolidated 2006
net revenues of 9914045854 million up from
9914045591 million in 2005 Revenues for
the Core Business reached 9914045747 mil-
lion (9914045776 million at constant currency)
representing 83 growth over 2005 at
constant currency
Overall the Grouprsquos key growth busi-
nessesmdashContent Services Network
Services Access Products for telecom
operators and our Broadcast amp Networks
businesses (Grass Valley and Network
Software)mdashincreased strongly year-on-
year and accounted for over a third of
Group revenues against less than a quar-
ter in 2005
Thomsonrsquos Core Business EBIT for 2006
was euro504 million representing a Core
Business EBIT margin of 88 Thisreflected growth in some key businesses
and cost actions across the Group off-
setting a significant investment in research
and development and some increase in
restructuring expenses
Increased spend on RampD
Research and development expenditure
charged in the Core Business (net of
external funding) rose from 991404221 million in
2005 to 991404279 million in 2006 an increase
of 26 principally in the Systems divi-
sion The Group expanded the number ofproducts and services in the development
phase across its businesses
Return to profit
Losses in Non-Core Continuing and Dis-
continued operations were substantially
lower year-on-year reflecting principally
the exit from heavily loss-making Displays
activities in 2005 and intensified cost-sav-
ing programs in 2006 A major revision
and harmonization of the Grouprsquos North
American healthcare obligations gave rise
to substantial one-time gains and Thom-
son also initiated significant restructuring
of its French Non-Core operations
The good performance of the Core Busi-
ness lower Non-Core and Discontinued
losses and a low reported tax chargeenabled the Group to return a net profit of
99140455 million in 2006 compared to a loss of
991404573 million in the previous year
Good cash flow
strengthened balance sheet
Thomson generated good free cash flow
and strengthened its balance sheet in
2006 Total net financial liabilities on the
balance sheet fell by 991404460 million reflect-
ing a 99140493 million fall in financial and acqui-
sition-related debts and a 991404367 million
reduction in retirement benefit obligations(including healthcare)
Increase in Net Dividend
The Board of Directors proposed a dis-
tribution to shareholders of 991404033 per
share (2005 dividend 991404030) reflecting
confidence in the prospects of the Group
going forward
Outlook 2007-2009
growth in revenues and net income
With the Grouprsquos transformation complete Thomsonrsquos financial focus over the 2007-
2009 period will be to grow revenues and
net income
Thomson serves growing Media Enter-
tainment amp Communications marketsmdashfor
which external estimates(1) indicate com-
pound growth of around 6 over the last
FINANCIAL AND
OPERATIONAL PERFORMANCE
Full year 2006 results
saw a return to profitability
and leave Thomson
well positioned at
the heart of convergence
and digital video
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59 Thomson Panorama 2006
five years Our digital and electronic busi-
nesses now represent two-thirds of rev-
enues and we believe they are growing
faster than the overall market offsetting
the maturing physical media businesses
Given this profile the Group expects its
revenue growth to be more modest in
2007 but to gather pace over the period
and our overall objective is to show com-pound growth over 2007-2009 in line with
or faster than the overall market
The 2007-2009 period is also expected
to see a sharply reduced impact from
residual Non-Core activities with an end
to losses from the Discontinued Activities
perimeter after 2007 Accordingly Thom-
sonrsquos ambition is to turn its Core Business
growth and profitability and lower impact
from Non-Core into strong growth in net
income over the period 2007-2009
Business operations
Continuous performance improvement is
fundamental to Thomsonrsquos commitment to
create sustainable business models and
long-term value for all stakeholders The
ambitious Group-wide programs launched
in 2004 to improve productivity and
enhance overall performance producedsubstantial results in 2006 and led to new
and strong initiatives for long-term growth
As of the second half of 2006 six ldquoKey
Programsrdquo are monitored at Group level
Clients Software Product Introduction
Operations Transformation and Talent
Management
KEY PROGRAMS IN PLACE
Program Focus
Clients Thomsonrsquos clientregional diversification and
growth of the existing business
through improved Sales amp Marketing
Software Development of integrated software platforms
in all markets (post-production distribution
delivery) and for all types of customer
(professional prosumerhellip)
Product Introduction Ensuring new product roadmaps are in line
with strategy and resource needs have been
identifiedOperations Improving the Grouprsquos cost base cash
generation and working capital
Transformation Multiple programs including initiatives to
improving customer relationship management
worldwide supply chain management
IT transformation as well as Thomsonrsquos RampD
footprint
Talent Management Leveraging human assets with a focus on
talent retention and acquisition
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60 Thomson Panorama 2006
SUMMARY RESULTS FULL YEAR 2006
In 991404 millions unless otherwise stated 2006(1) 2005(1)
Net revenues 5854 5591(1)
Core Business net revenues 5747 5335
Services 2489 2487
Systems 2684 2262
Technology 547 546
Corporate 27 40
Non-Core continuing operations net revenues 107 256
Core Business EBIT(2) 504 512
Services 160 205
Systems 132 109
Technology 289 277Corporate (77) (79)
EBIT from Non-Core continuing operations (25) (122)
(1) Restated with 2006 discontinued activities according to IFRS 5
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61 Thomson Panorama 2006
Year ended December 31in 991404 except number of shares 2006 2005 2004
Year ended December 31in 991404 millions 2006 2005(1) 2004(1)
CONSOLIDATED STATEMENTS OF OPERATIONS
(1) Restated with 2006 discontinued activities according to IFRS 5
(2) After deduction of the interests net of tax paid on the subordinated perpetual notes during the period
Continuing operations
Revenues 5854 5591 5980
Cost of sales (4474) (4240) (4594)
Gross margin 1380 1351 1386
Selling marketing general and administrative expenses (674) (638) (653)
Other income (expense) 52 (96) (69)
Research and development expenses (279) (227) (201)
Profit from continuing operations before tax and net finance costs 479 390 463
Interest income 19 30 52
Interest expense (108) (108) (54)
Other financial income (expense) (111) 36 (26)
Finance costs ndash net (200) (42) (28)
Share of profit (loss) from associates (86) (82) (20)
Income tax ndash (68) (93)
Profit from continuing operations 193 198 322
Discontinued operations
Profit (loss) from discontinued operations (138) (771) (883)
Net income (loss) 55 (573) (561)
Attributable to
Equity Holders 55 (574) (559)
Minority interests ndash 1 (2)
Weighted average number of shares
outstandingmdashbasic net of treasury stock 261188858 266539917 273646869
Earnings per share from continuing operations
Basic(2) 067 074 118
Diluted 063 042 111
Earnings per share from discontinued operations
Basic (053) (289) (323)
Diluted (048) (262) (296)Total earnings per share
Basic(2) 014 (215) (205)
Diluted 015 (220) (185)
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62 Thomson Panorama 2006
CONSOLIDATED BALANCE SHEETS
In 991404 millions December 31 December 31 January 1 December 31 2006 2005 2005(1) 2004
ASSETS
Non-current assets
Property plant and equipment 813 886 1051 1051
Goodwill 1714 1756 1186 1178
Other intangible assets 1071 1150 924 924
Investments in associates 12 204 260 260
Investments and financial assets available-for-sale 266 341 139 113
Derivative financial instruments 7 1 11 ndash
Contract advances 129 173 179 179
Deferred tax assets 397 379 307 301
Other non-current assets 110 182 133 136
Total non-current assets 4519 5072 4190 4142
Current assets
Inventories 366 333 503 568
Trade accounts and notes receivable 1018 1315 1232 1180
Current accounts with associates and joint ventures 97 115 143 143
Derivative financial instruments 8 9 115 ndash
Other current assets 535 644 483 616
Marketable securities ndash 7 58 58
Cash and cash equivalents 1311 996 1845 1848
Assets classified as held for sale 264 369 80 ndash
Total current assets 3599 3788 4459 4413
Total assets 8118 8860 8649 8555
(1) Including the impacts of the first-time application related to IAS 32 and 39 on financial instruments and IFRS 5 on non-current assets held for sale and
discontinued operations
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63 Thomson Panorama 2006
In 991404 millions December 31 December 31 January 1 December 31 2006 2005 2005(1) 2004
SHAREHOLDERSrsquo EQUITY AND LIABILITIES
Shareholdersrsquo equity
Common stock (273871296 shares at
December 31 2006
with nominal value of euro 375 per share) 1027 1025 1025 1025
Trade accounts and notes payable 1032 1164 1199 1226
Accrued employee expenses 165 166 158 163
Income tax payable 57 47 60 60
Other current liabilities 671 750 746 800
Payables on acquisition of companies 13 138 84 84
Liabilities directly associated with
assets classified as held for sale 232 470 88 ndash
Total current liabilities 3681 4393 3602 3459
Total liabilities 5999 6644 6251 6062
Total shareholderrsquos equity and liabilities 8118 8860 8649 8555
(1) Including the impacts of the first-time application related to IAS 32 and 39 on financial instruments and IFRS 5 on non-current assets held for sale and
discontinued operations
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Creation and lay-out
Photo credits Nathalie BerhingGAMMA ndash Steacutephane de Bourgies ndash Jean-Franccedilois DeroubaixGAMMA ndash Christine Donnier- ValentinGAMMA ndash Cars copy 2006 Disney Enterprises IncPixar All Rights Reserved ndash Dreamgirls copy 2006 DREAMWORKS
LLC and PARAMOUNT PICTURES All Rights Reserved ndash Poseidon copy 2006 Warner Bros Pictures ndash Sony Bravia Paint
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46 Thomson Panorama 2006
Thomson helps its customers to provide
people with broader access to media
entertainment and communications For
example by managing the broadcasting
of close to 200 TV channels the Group
enlarges the media and information
choices available to millions of people
throughout Europe Asia and North Amer-
ica By providing solutions and audio-visual products to support distance learn-
ing Thomson enables universities to reach
out to students who might not otherwise
enjoy access to such education
Expertise to preserve
film amp TV heritage
As an enabler of the digital world Thomson
contributes to cultural diversity and enrich-
ment and better understanding among
peoples Thomson supports the arts and
creativity by supplying the creative services
and products that make it possible for cre-ative minds to realize their projects and to
deliver them to audiences Contributing
to a richer cultural fabric worldwide the
Grouprsquos expertise enables emblematic cin-
ematographic works to retrieve their visual
glory through the provision of a variety of
film restoration techniques In 2006 the
Group took steps to place this expertise at
the disposal of the worldrsquos endangered film
and audiovisual archives with the setting
up of the Thomson Foundation for Film amp
TV Heritage
The Foundation working in coopera-
tion with local and international partners
helps to set up multi-disciplinary teams
comprised of experts from Thomson
businesses advanced archive institutions
and film preservation schools to restore
and promote what remains of the worldrsquos
cultural legacy recorded on film and TV
During its initial year the Foundation con-tributed to projects in Cambodia France
India Thailand and the US
Operating worldwide Thomson contributes
to improving economic and social welfare
and living standards As a good corporate
citizen the Group recognizes its responsi-
bilities to all of its stakeholders This means
ensuring that all of its business practices
meet the highest ethical standards It also
means that the Group is committed to
protecting and enhancing the environment
everywhere it does business to ensure that
all Thomson products are safe to use andthat all Thomson employees benefit from
a safe working environment Furthermore
Thomson fulfils its duty as a corporate citi-
zen by contributing to the quality of life in
many of the communities in which it does
business through a variety of local initia-
tives ranging from fund-raising in the com-
munity to events sponsorship
Through its technology
systems and services
Thomson contributes to
the dissemination of media
and entertainment
and a richer cultural fabric
for the world
The Bophana Archive Center
in Cambodia was set up in 2006
with the help of the Thomson Foundation
for Film amp TV Heritage
CORPORATE
SOCIAL RESPONSIBILITY ENABLING A DIGITAL WORLD
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47 Thomson Panorama 2006
Since its inception the Thomson Foundation has contributed to
a number of film and TV heritage projects Working in partnership with
local and international government agencies and non-profit groups
the Foundation helped create the Bophana Archive Center in Cambodia
at the end of 2006 The Center aims to save and enlarge access to
endangered film TV and photographic archives In India the first
session of a film heritage course designed by the Foundation took place in
the national film school of India in April 2007 Highlighting the critical role film
plays in the creative community the program of workshops conferences and
screenings was open to film students and professionals alike
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48 Thomson Panorama 2006
Global Compact and Vigeo
Vigeo the French social responsibility rat-
ings agency ranked Thomson as one of the
best performers of 20 companies assessed
in its 2006 European ldquoTechnology amp Hard-
warerdquo sector benchmark study
To advance responsible corporate citizen-ship and universal social and environmen-
tal principles Thomson has been a mem-
ber of the United Nations Global Compact
since 2003 Launched in 1999 the UN
Global Compact requires companies to
embrace support and enactmdashwithin their
sphere of influencemdasha set of values in the
areas of human rights labor the environ-
ment and anti-corruption Thomsonrsquos core
valuesmdashhigh ethical standards striving to
improve safety and environmental respon-
sibility initiatives and fair business prac-
ticesmdashmeet or exceed the goals embod-
ied in the UN Global Compact initiative
Thomsonrsquos Ethics Charter sets the foun-
dation for the Grouprsquos dedication to
act responsibly in all of its dealings with
employees suppliers customers and local
communities Updated and enhanced in
2006 the Ethics Charter covers a broad
range of issues from business practices
and human rights to the environment
health and safety All Thomson employees
are required to respect the conduct and
practices laid out in the Ethics Charter
This same universal obligation applies to all
Thomson suppliers and subcontractors
Suppliers and subcontractors are regularly
audited by Thomson to ensure compliance
with the Grouprsquos policies and standards
Initiated in 2002 the supplier ethics audit
program has resulted in hundreds of
supplier audits over the past four yearsIn addition the Social Accountabilities
8000 standard (SA 8000) is used as a
basis for evaluating those suppliers with
manufacturing facilities in high-risk areas
Established by an independent multi-dis-
ciplinary group of international experts the
SA 8000 standard is designed to ensure
humane workplaces
Human rights
Thomson aims to ensure that its business
practices align with key corporate values
The Grouprsquos Ethics Charter specificallyfocuses on the Global Compact standards
covering child labor forced labor health and
safety discrimination disciplinary practices
working hours and compensation
To he lp prevent the use of chi ld labor
for example the Ethics Charter prohibits
employing workers below the legal mini-
mum working age in any country
The Ethics Charter also helps combat
forced labor by prohibiting unfair practices
Thomson endeavours to protect
the environment wherever it does business
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49 Thomson Panorama 2006
such as requiring workers to deposit money
to obtain work withholding personal docu-
ments such as identity cards or passports
requiring workers to extend hours beyond
normal time or limiting workersrsquo movements
during non-working hours Prison labor and
indebted bondage are strictly prohibited
Non-discrimination and diversity
As an international Group doing business
in approximately 40 countries Thomsonrsquos
workforce is very diverse The Grouprsquos
headquarters in Paris for example counts
about a dozen different nationalities Dis-
crimination on the basis of race religion or
gender is strictly prohibited As of Decem-
ber 2006 women accounted for 36 of
Thomsonrsquos total employees
Thomson employed over 24000 people
in its core businesses as of end-2006 Of
these 44 were in North America 36in Europe 9 in Asia and 11 scattered
around the rest of the world Three-quar-
ters of the Grouprsquos current employees
joined Thomson within the last four years
including those from companies acquired
over that time period
Environment Health and Safety (EHampS)
The transformation of Thomsonrsquos business
model and market focus over the past few
years has reduced significantly the Grouprsquos
manufacturing activities Nevertheless
Thomson remains committed to ongoing
environmental health and safety policies
and goals This commitment is formalized
through the Corporate EHampS Charter
which defines key management principles
designed to protect human health and
the environment In this area the Group
embraces international standards for qual-ity and management systems in particular
the International Standards Organization
(ISO) 14001 standards for environmental
management In 2006 a total of 28 sites
held an ISO 14001 certification
Thomsonrsquos Corporate EHampS group devel-
ops directs and oversees the develop-
ment of global policies guidelines pro-
grams and initiatives reporting annually
to the Thomson Executive Committee
A corporate manager and three regional
managers direct the efforts of EHampS per-
sonnel worldwide Consistent internalbenchmarks have been in place for the
past decade to enable tracking of prog-
ress at all 41 of the Grouprsquos main industrial
locations Measured criteria include EHampS-
related employee training each locationrsquos
progress toward reducing work-related
injuries and lost workdays reducing envi-
ronmental impacts and reducing the con-
sumption of water and energy
The most notable achievement in 2006
was improved water use and conserva-
Clean industry
Thomsonrsquos Guadalajara DVD factory recently entered Mexicorsquos exclusive ldquoClean Industryrdquo program
managed by PROFEPA the federal environmental agency Sites achieving certification must go beyond
legal requirements by improving their performance in water usage minimizing hazardous waste and
controlling air noise and odor pollution Following four months of intense efforts the exhaustive
environmental audit required yielded excellent results and certification was achieved in November 2006
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50 Thomson Panorama 2006
tion within the film labs showing more
than a 25 improvement in water con-
sumption for every million feet of film pro-
cessed This helped Thomson achieve its
overall goal of reducing annual water con-
sumption by 15 Similarly good prog-
ress was achieved toward the long-term
goal of reduced landfill with almost 10
improvement in recycling rate comparedto 2005
As a corol lary to efforts to constant ly
improve the EHampS profile of ongoing activi-
ties Thomson reviews all newly acquired
businesses to ensure they meet Group
requirements and to define upgrade pro-
grams when necessary The EHampS reviews
include an evaluation of the status and
effectiveness of existing management
and control systems and a presentation
of Thomsonrsquos EHampS initiatives and require-
ments Newly acquired sites are now
encouraged to achieve ISO 14001 certi-fication within two years of their effective
date for joining the Group
Suppliers and subcontractors are required
to meet all legal requirements for environ-
mental protection including the elimina-
tion of hazardous substances Suppliers
are required to declare in writing that their
products are free of such substances as
cadmium chromium lead mercury and
asbestos and to provide laboratory test
data as proof
The transformation of Thomsonrsquos business
has reduced significantly
the Grouprsquos manufacturing activities
Overall local legislation and standards
form the foundation for Thomsonrsquos require-
ments concerning environmental health
safety employment child labor discrimi-
nation and human rights issues in each
country where it does business
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FINANCIAL INFORMATION
Thomson maintains the highest standards in compliance and risk management working continuously
to improve reporting and control as well as the quality of financial information made available to
its stakeholders
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54 Thomson Panorama 2006
Growing North American
investor base
The per iod 2004-2006 brought about
expansion in Thomsonrsquos international
shareholder base particularly in North
America Leading US-based investment
management funds Franklin Templeton
Investments and Brands Investment Part-ners hold over 10 and 5 respectively
of Thomsonrsquos share capital while Dodge amp
Cox increased its stake to over 10 during
the year The Group estimates that North
American institutional investors represent
over 50 of the institutional investor base
France around a quarter and other Euro-
pean investors account for the majority of
the remainder
Active communications
To keep Thomsonrsquos broad investor base
appraised of progress in implementing itsstrategic objectives senior management
devoted considerable time during the year
to investor meetings in both Europe and
North America
As part of its ongoing efforts to provide
investorsmdashparticularly individual share-
holdersmdashwith comprehensive up-to-date
information Thomson makes full use of
the internet Share price information press
releases as well as the Grouprsquos annual
report and reference documents (Docu-
ment de Reacutefeacuterence filed with the French
stock exchange regulator AMF and Form
20-F filed with the SEC) are available on
the site wwwthomsonnet
Annual General Shareholdersrsquo Meetings
are broadcast live over the internet with asimultaneous translation of the proceed-
ings provided from French to English to
enable the majority of shareholders to view
the event The results of the vote are dis-
closed in detail on the internet site imme-
diately following the Meeting
The Shareholder Relations department
organizes tours for individual shareholders
of the newly inaugurated Thomson Gal-
lery at the Grouprsquos headquarters in Paris
France Visits to the Gallery designed to
illustrate Thomsonrsquos activities through a
series of live technology demos and videopresentations allow participants to better
appreciate the Grouprsquos 2007-2009 strat-
egy and growth prospects
Dividend
The dividend ofeuro033 per share proposed
at the Annual Shareholdersrsquo Meeting on
15 May 2007 represented a 10 increase
over last yearrsquos dividend
SHAREHOLDER RELATIONS
Thomson aims to keep
investors and individual
shareholders informed of
progress in implementing
strategic objectives
Thomsonrsquos Annual General Meeting
provides an opportunity for debate and
exchange with individual shareholders
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55 Thomson Panorama 2006
Financial calendar 2007
bull April 26 First Quarter 2007 Sales
bull May 15 Shareholdersrsquo Meeting (on second notice)
bull July 26 First Half 2007 Results
bull October 18 Third Quarter 2007 Sales
These dates are subject to modification
Public904
CAPITAL STRUCTURE AS OF DECEMBER 31 2006
Employees25
Treasury Shares46
Other25
SHARE HIGHLIGHTS
2006 2005
Year high 1932 2142
Year low 1165 1526
Share price at year-end in euro 1481 1770
Average daily volume 2445176 2244879
Market capital at year-end in euro million 4056 4838
Number of shares outstanding at year end
(in thousands) 273871 273308
Net dividend per share in euro 033 030
Listed on the Paris and New York stock exchanges ndash Euronext code 18453 ndash NYSE ticker TMSN
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56 Thomson Panorama 2006
Maintaining the highest standards
in compliance and risk management
Extensive work was completed in 2006
in Thomsonrsquos main operational units and
at Corporate level to ensure alignment of
reporting and control procedures with the
requirements of the Sarbanes-Oxley Act in
the United States
Improving Internal Control Procedures
Building towards application of Section
404 of the Sarbanes-Oxley Act (ldquoSOX
404rdquo) for fiscal year 2006 which required
the Group to assess the effectiveness of
internal controls Thomson committed to
implementing the internal control frame-
work proposed by the Committee of
Sponsoring Organizations of the Treadway
Commission (ldquoCOSOrdquo)
Within this framework the Group seeks toachieve ldquoreasonable assurancerdquo regarding
the effectiveness and efficiency of opera-
tions the reliability of financial reporting
and compliance with applicable laws and
regulations
Group-wide initiatives were on-going in
2006 to achieve these objectives including
the Process Transformation Initiative (PTI)
to ensure operational excellence COM-
PASS (Controls Over Methods Processes
Applications Systems and Strategy) and
the Risk Committee and its enterprise risk
assessment and management programrun by the Internal Audit function
Following a full worldwide enterprise risk
assessment carried out in the second half
of 2005 and updated throughout 2006 a
second was planned for completion by May
2007 The process assesses risks in the
Grouprsquos distinct business units or profit cen-
ters with the goal of identifying assessing
validating and monitoring risks which could
impact or potentially impact the Grouprsquos
ability to achieve its short and long-term
objectives In 2007 the Risk Committee will
continue to regularly monitor action plans
put in place to mitigate the risks identified
During the year the Group also continued
implementation of a worldwide SOX 404
compliance software system to assist with
the documentation of significant financialprocesses provide consistent guidance
to management regarding controls and
better enable management to assess its
control structure
Managing Risk
Thomson has three main internal organiza-
tions that support and assist the Executive
Committee in control and risk monitoring
the Investment Committee and the Risk
Committee The Investment Committee
meets on an ad hoc basis throughout the
year generally once per week to reviewfinancial commitments including proposed
acquisitions capital equipment funding
and new ventures requiring capital The Risk
Committee which met nine times in 2006
evaluates the Grouprsquos financial operational
and compliance risks and identifies strate-
gic risks that could adversely affect different
activities within the framework of Grouprsquos
three-year plan scenarios The Corporate
Social Responsibility (CSR) Committee to
be set up in 2007 will oversee all CSR
compliance and ethics matters
Ethical values and principles of conductfor the Grouprsquos managers are defined in
of the Grouprsquos divisions and profit centersIn the context of the budgetary procedure
performance measurement indicators are
calculated by the divisions analyzed and
reviewed monthly to serve as a reference
for the Grouprsquos monthly reporting
Management reporting and
closing period work
Th om so n uses a co mmon char t of
accounts which is regularly updated The
principal accounting and financial figures
of the operational and functional depart-
ments consolidated at Group level are
analyzed by the Grouprsquos management
control team and reviewed by the Grouprsquos
Executive Committee
The closing process for the half-year and
annual consolidated financial statementsoccurs in two steps The first step con-
sists of a ldquohard closerdquo completed in May
and September leading to a first review by
the statutory auditors The second step
occurs in July and in JanuaryFebruary and
involves the finalization of half-year and
annual consolidated financial statements
under IFRS The Group then proceeds
once a year with a reconciliation of these
results in accordance with US GAAP
Preparation of financial statements
The financial statements are prepared jointly by the finance department and the
General Secretary They are based on
information reported through the annual
reporting and accounting consolidation
processes and on operational and mar-
ket information which is specifically cen-
tralized for the preparation of Thomsonrsquos
Document de Reacutefeacuterence in France and
the submission of Form 20-F in the United
States Half-year and annual financial infor-
mation is reviewed by the Grouprsquos Audit
Committee
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58 Thomson Panorama 2006
(1) Source PriceWaterhouseCoopers ndash
ldquoGlobal Entertainment and Media Outlook 2006-10rdquo
Revenue growth
Thomson achieved consolidated 2006
net revenues of 9914045854 million up from
9914045591 million in 2005 Revenues for
the Core Business reached 9914045747 mil-
lion (9914045776 million at constant currency)
representing 83 growth over 2005 at
constant currency
Overall the Grouprsquos key growth busi-
nessesmdashContent Services Network
Services Access Products for telecom
operators and our Broadcast amp Networks
businesses (Grass Valley and Network
Software)mdashincreased strongly year-on-
year and accounted for over a third of
Group revenues against less than a quar-
ter in 2005
Thomsonrsquos Core Business EBIT for 2006
was euro504 million representing a Core
Business EBIT margin of 88 Thisreflected growth in some key businesses
and cost actions across the Group off-
setting a significant investment in research
and development and some increase in
restructuring expenses
Increased spend on RampD
Research and development expenditure
charged in the Core Business (net of
external funding) rose from 991404221 million in
2005 to 991404279 million in 2006 an increase
of 26 principally in the Systems divi-
sion The Group expanded the number ofproducts and services in the development
phase across its businesses
Return to profit
Losses in Non-Core Continuing and Dis-
continued operations were substantially
lower year-on-year reflecting principally
the exit from heavily loss-making Displays
activities in 2005 and intensified cost-sav-
ing programs in 2006 A major revision
and harmonization of the Grouprsquos North
American healthcare obligations gave rise
to substantial one-time gains and Thom-
son also initiated significant restructuring
of its French Non-Core operations
The good performance of the Core Busi-
ness lower Non-Core and Discontinued
losses and a low reported tax chargeenabled the Group to return a net profit of
99140455 million in 2006 compared to a loss of
991404573 million in the previous year
Good cash flow
strengthened balance sheet
Thomson generated good free cash flow
and strengthened its balance sheet in
2006 Total net financial liabilities on the
balance sheet fell by 991404460 million reflect-
ing a 99140493 million fall in financial and acqui-
sition-related debts and a 991404367 million
reduction in retirement benefit obligations(including healthcare)
Increase in Net Dividend
The Board of Directors proposed a dis-
tribution to shareholders of 991404033 per
share (2005 dividend 991404030) reflecting
confidence in the prospects of the Group
going forward
Outlook 2007-2009
growth in revenues and net income
With the Grouprsquos transformation complete Thomsonrsquos financial focus over the 2007-
2009 period will be to grow revenues and
net income
Thomson serves growing Media Enter-
tainment amp Communications marketsmdashfor
which external estimates(1) indicate com-
pound growth of around 6 over the last
FINANCIAL AND
OPERATIONAL PERFORMANCE
Full year 2006 results
saw a return to profitability
and leave Thomson
well positioned at
the heart of convergence
and digital video
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59 Thomson Panorama 2006
five years Our digital and electronic busi-
nesses now represent two-thirds of rev-
enues and we believe they are growing
faster than the overall market offsetting
the maturing physical media businesses
Given this profile the Group expects its
revenue growth to be more modest in
2007 but to gather pace over the period
and our overall objective is to show com-pound growth over 2007-2009 in line with
or faster than the overall market
The 2007-2009 period is also expected
to see a sharply reduced impact from
residual Non-Core activities with an end
to losses from the Discontinued Activities
perimeter after 2007 Accordingly Thom-
sonrsquos ambition is to turn its Core Business
growth and profitability and lower impact
from Non-Core into strong growth in net
income over the period 2007-2009
Business operations
Continuous performance improvement is
fundamental to Thomsonrsquos commitment to
create sustainable business models and
long-term value for all stakeholders The
ambitious Group-wide programs launched
in 2004 to improve productivity and
enhance overall performance producedsubstantial results in 2006 and led to new
and strong initiatives for long-term growth
As of the second half of 2006 six ldquoKey
Programsrdquo are monitored at Group level
Clients Software Product Introduction
Operations Transformation and Talent
Management
KEY PROGRAMS IN PLACE
Program Focus
Clients Thomsonrsquos clientregional diversification and
growth of the existing business
through improved Sales amp Marketing
Software Development of integrated software platforms
in all markets (post-production distribution
delivery) and for all types of customer
(professional prosumerhellip)
Product Introduction Ensuring new product roadmaps are in line
with strategy and resource needs have been
identifiedOperations Improving the Grouprsquos cost base cash
generation and working capital
Transformation Multiple programs including initiatives to
improving customer relationship management
worldwide supply chain management
IT transformation as well as Thomsonrsquos RampD
footprint
Talent Management Leveraging human assets with a focus on
talent retention and acquisition
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60 Thomson Panorama 2006
SUMMARY RESULTS FULL YEAR 2006
In 991404 millions unless otherwise stated 2006(1) 2005(1)
Net revenues 5854 5591(1)
Core Business net revenues 5747 5335
Services 2489 2487
Systems 2684 2262
Technology 547 546
Corporate 27 40
Non-Core continuing operations net revenues 107 256
Core Business EBIT(2) 504 512
Services 160 205
Systems 132 109
Technology 289 277Corporate (77) (79)
EBIT from Non-Core continuing operations (25) (122)
(1) Restated with 2006 discontinued activities according to IFRS 5
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61 Thomson Panorama 2006
Year ended December 31in 991404 except number of shares 2006 2005 2004
Year ended December 31in 991404 millions 2006 2005(1) 2004(1)
CONSOLIDATED STATEMENTS OF OPERATIONS
(1) Restated with 2006 discontinued activities according to IFRS 5
(2) After deduction of the interests net of tax paid on the subordinated perpetual notes during the period
Continuing operations
Revenues 5854 5591 5980
Cost of sales (4474) (4240) (4594)
Gross margin 1380 1351 1386
Selling marketing general and administrative expenses (674) (638) (653)
Other income (expense) 52 (96) (69)
Research and development expenses (279) (227) (201)
Profit from continuing operations before tax and net finance costs 479 390 463
Interest income 19 30 52
Interest expense (108) (108) (54)
Other financial income (expense) (111) 36 (26)
Finance costs ndash net (200) (42) (28)
Share of profit (loss) from associates (86) (82) (20)
Income tax ndash (68) (93)
Profit from continuing operations 193 198 322
Discontinued operations
Profit (loss) from discontinued operations (138) (771) (883)
Net income (loss) 55 (573) (561)
Attributable to
Equity Holders 55 (574) (559)
Minority interests ndash 1 (2)
Weighted average number of shares
outstandingmdashbasic net of treasury stock 261188858 266539917 273646869
Earnings per share from continuing operations
Basic(2) 067 074 118
Diluted 063 042 111
Earnings per share from discontinued operations
Basic (053) (289) (323)
Diluted (048) (262) (296)Total earnings per share
Basic(2) 014 (215) (205)
Diluted 015 (220) (185)
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62 Thomson Panorama 2006
CONSOLIDATED BALANCE SHEETS
In 991404 millions December 31 December 31 January 1 December 31 2006 2005 2005(1) 2004
ASSETS
Non-current assets
Property plant and equipment 813 886 1051 1051
Goodwill 1714 1756 1186 1178
Other intangible assets 1071 1150 924 924
Investments in associates 12 204 260 260
Investments and financial assets available-for-sale 266 341 139 113
Derivative financial instruments 7 1 11 ndash
Contract advances 129 173 179 179
Deferred tax assets 397 379 307 301
Other non-current assets 110 182 133 136
Total non-current assets 4519 5072 4190 4142
Current assets
Inventories 366 333 503 568
Trade accounts and notes receivable 1018 1315 1232 1180
Current accounts with associates and joint ventures 97 115 143 143
Derivative financial instruments 8 9 115 ndash
Other current assets 535 644 483 616
Marketable securities ndash 7 58 58
Cash and cash equivalents 1311 996 1845 1848
Assets classified as held for sale 264 369 80 ndash
Total current assets 3599 3788 4459 4413
Total assets 8118 8860 8649 8555
(1) Including the impacts of the first-time application related to IAS 32 and 39 on financial instruments and IFRS 5 on non-current assets held for sale and
discontinued operations
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63 Thomson Panorama 2006
In 991404 millions December 31 December 31 January 1 December 31 2006 2005 2005(1) 2004
SHAREHOLDERSrsquo EQUITY AND LIABILITIES
Shareholdersrsquo equity
Common stock (273871296 shares at
December 31 2006
with nominal value of euro 375 per share) 1027 1025 1025 1025
Trade accounts and notes payable 1032 1164 1199 1226
Accrued employee expenses 165 166 158 163
Income tax payable 57 47 60 60
Other current liabilities 671 750 746 800
Payables on acquisition of companies 13 138 84 84
Liabilities directly associated with
assets classified as held for sale 232 470 88 ndash
Total current liabilities 3681 4393 3602 3459
Total liabilities 5999 6644 6251 6062
Total shareholderrsquos equity and liabilities 8118 8860 8649 8555
(1) Including the impacts of the first-time application related to IAS 32 and 39 on financial instruments and IFRS 5 on non-current assets held for sale and
discontinued operations
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Creation and lay-out
Photo credits Nathalie BerhingGAMMA ndash Steacutephane de Bourgies ndash Jean-Franccedilois DeroubaixGAMMA ndash Christine Donnier- ValentinGAMMA ndash Cars copy 2006 Disney Enterprises IncPixar All Rights Reserved ndash Dreamgirls copy 2006 DREAMWORKS
LLC and PARAMOUNT PICTURES All Rights Reserved ndash Poseidon copy 2006 Warner Bros Pictures ndash Sony Bravia Paint
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47 Thomson Panorama 2006
Since its inception the Thomson Foundation has contributed to
a number of film and TV heritage projects Working in partnership with
local and international government agencies and non-profit groups
the Foundation helped create the Bophana Archive Center in Cambodia
at the end of 2006 The Center aims to save and enlarge access to
endangered film TV and photographic archives In India the first
session of a film heritage course designed by the Foundation took place in
the national film school of India in April 2007 Highlighting the critical role film
plays in the creative community the program of workshops conferences and
screenings was open to film students and professionals alike
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48 Thomson Panorama 2006
Global Compact and Vigeo
Vigeo the French social responsibility rat-
ings agency ranked Thomson as one of the
best performers of 20 companies assessed
in its 2006 European ldquoTechnology amp Hard-
warerdquo sector benchmark study
To advance responsible corporate citizen-ship and universal social and environmen-
tal principles Thomson has been a mem-
ber of the United Nations Global Compact
since 2003 Launched in 1999 the UN
Global Compact requires companies to
embrace support and enactmdashwithin their
sphere of influencemdasha set of values in the
areas of human rights labor the environ-
ment and anti-corruption Thomsonrsquos core
valuesmdashhigh ethical standards striving to
improve safety and environmental respon-
sibility initiatives and fair business prac-
ticesmdashmeet or exceed the goals embod-
ied in the UN Global Compact initiative
Thomsonrsquos Ethics Charter sets the foun-
dation for the Grouprsquos dedication to
act responsibly in all of its dealings with
employees suppliers customers and local
communities Updated and enhanced in
2006 the Ethics Charter covers a broad
range of issues from business practices
and human rights to the environment
health and safety All Thomson employees
are required to respect the conduct and
practices laid out in the Ethics Charter
This same universal obligation applies to all
Thomson suppliers and subcontractors
Suppliers and subcontractors are regularly
audited by Thomson to ensure compliance
with the Grouprsquos policies and standards
Initiated in 2002 the supplier ethics audit
program has resulted in hundreds of
supplier audits over the past four yearsIn addition the Social Accountabilities
8000 standard (SA 8000) is used as a
basis for evaluating those suppliers with
manufacturing facilities in high-risk areas
Established by an independent multi-dis-
ciplinary group of international experts the
SA 8000 standard is designed to ensure
humane workplaces
Human rights
Thomson aims to ensure that its business
practices align with key corporate values
The Grouprsquos Ethics Charter specificallyfocuses on the Global Compact standards
covering child labor forced labor health and
safety discrimination disciplinary practices
working hours and compensation
To he lp prevent the use of chi ld labor
for example the Ethics Charter prohibits
employing workers below the legal mini-
mum working age in any country
The Ethics Charter also helps combat
forced labor by prohibiting unfair practices
Thomson endeavours to protect
the environment wherever it does business
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49 Thomson Panorama 2006
such as requiring workers to deposit money
to obtain work withholding personal docu-
ments such as identity cards or passports
requiring workers to extend hours beyond
normal time or limiting workersrsquo movements
during non-working hours Prison labor and
indebted bondage are strictly prohibited
Non-discrimination and diversity
As an international Group doing business
in approximately 40 countries Thomsonrsquos
workforce is very diverse The Grouprsquos
headquarters in Paris for example counts
about a dozen different nationalities Dis-
crimination on the basis of race religion or
gender is strictly prohibited As of Decem-
ber 2006 women accounted for 36 of
Thomsonrsquos total employees
Thomson employed over 24000 people
in its core businesses as of end-2006 Of
these 44 were in North America 36in Europe 9 in Asia and 11 scattered
around the rest of the world Three-quar-
ters of the Grouprsquos current employees
joined Thomson within the last four years
including those from companies acquired
over that time period
Environment Health and Safety (EHampS)
The transformation of Thomsonrsquos business
model and market focus over the past few
years has reduced significantly the Grouprsquos
manufacturing activities Nevertheless
Thomson remains committed to ongoing
environmental health and safety policies
and goals This commitment is formalized
through the Corporate EHampS Charter
which defines key management principles
designed to protect human health and
the environment In this area the Group
embraces international standards for qual-ity and management systems in particular
the International Standards Organization
(ISO) 14001 standards for environmental
management In 2006 a total of 28 sites
held an ISO 14001 certification
Thomsonrsquos Corporate EHampS group devel-
ops directs and oversees the develop-
ment of global policies guidelines pro-
grams and initiatives reporting annually
to the Thomson Executive Committee
A corporate manager and three regional
managers direct the efforts of EHampS per-
sonnel worldwide Consistent internalbenchmarks have been in place for the
past decade to enable tracking of prog-
ress at all 41 of the Grouprsquos main industrial
locations Measured criteria include EHampS-
related employee training each locationrsquos
progress toward reducing work-related
injuries and lost workdays reducing envi-
ronmental impacts and reducing the con-
sumption of water and energy
The most notable achievement in 2006
was improved water use and conserva-
Clean industry
Thomsonrsquos Guadalajara DVD factory recently entered Mexicorsquos exclusive ldquoClean Industryrdquo program
managed by PROFEPA the federal environmental agency Sites achieving certification must go beyond
legal requirements by improving their performance in water usage minimizing hazardous waste and
controlling air noise and odor pollution Following four months of intense efforts the exhaustive
environmental audit required yielded excellent results and certification was achieved in November 2006
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50 Thomson Panorama 2006
tion within the film labs showing more
than a 25 improvement in water con-
sumption for every million feet of film pro-
cessed This helped Thomson achieve its
overall goal of reducing annual water con-
sumption by 15 Similarly good prog-
ress was achieved toward the long-term
goal of reduced landfill with almost 10
improvement in recycling rate comparedto 2005
As a corol lary to efforts to constant ly
improve the EHampS profile of ongoing activi-
ties Thomson reviews all newly acquired
businesses to ensure they meet Group
requirements and to define upgrade pro-
grams when necessary The EHampS reviews
include an evaluation of the status and
effectiveness of existing management
and control systems and a presentation
of Thomsonrsquos EHampS initiatives and require-
ments Newly acquired sites are now
encouraged to achieve ISO 14001 certi-fication within two years of their effective
date for joining the Group
Suppliers and subcontractors are required
to meet all legal requirements for environ-
mental protection including the elimina-
tion of hazardous substances Suppliers
are required to declare in writing that their
products are free of such substances as
cadmium chromium lead mercury and
asbestos and to provide laboratory test
data as proof
The transformation of Thomsonrsquos business
has reduced significantly
the Grouprsquos manufacturing activities
Overall local legislation and standards
form the foundation for Thomsonrsquos require-
ments concerning environmental health
safety employment child labor discrimi-
nation and human rights issues in each
country where it does business
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FINANCIAL INFORMATION
Thomson maintains the highest standards in compliance and risk management working continuously
to improve reporting and control as well as the quality of financial information made available to
its stakeholders
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54 Thomson Panorama 2006
Growing North American
investor base
The per iod 2004-2006 brought about
expansion in Thomsonrsquos international
shareholder base particularly in North
America Leading US-based investment
management funds Franklin Templeton
Investments and Brands Investment Part-ners hold over 10 and 5 respectively
of Thomsonrsquos share capital while Dodge amp
Cox increased its stake to over 10 during
the year The Group estimates that North
American institutional investors represent
over 50 of the institutional investor base
France around a quarter and other Euro-
pean investors account for the majority of
the remainder
Active communications
To keep Thomsonrsquos broad investor base
appraised of progress in implementing itsstrategic objectives senior management
devoted considerable time during the year
to investor meetings in both Europe and
North America
As part of its ongoing efforts to provide
investorsmdashparticularly individual share-
holdersmdashwith comprehensive up-to-date
information Thomson makes full use of
the internet Share price information press
releases as well as the Grouprsquos annual
report and reference documents (Docu-
ment de Reacutefeacuterence filed with the French
stock exchange regulator AMF and Form
20-F filed with the SEC) are available on
the site wwwthomsonnet
Annual General Shareholdersrsquo Meetings
are broadcast live over the internet with asimultaneous translation of the proceed-
ings provided from French to English to
enable the majority of shareholders to view
the event The results of the vote are dis-
closed in detail on the internet site imme-
diately following the Meeting
The Shareholder Relations department
organizes tours for individual shareholders
of the newly inaugurated Thomson Gal-
lery at the Grouprsquos headquarters in Paris
France Visits to the Gallery designed to
illustrate Thomsonrsquos activities through a
series of live technology demos and videopresentations allow participants to better
appreciate the Grouprsquos 2007-2009 strat-
egy and growth prospects
Dividend
The dividend ofeuro033 per share proposed
at the Annual Shareholdersrsquo Meeting on
15 May 2007 represented a 10 increase
over last yearrsquos dividend
SHAREHOLDER RELATIONS
Thomson aims to keep
investors and individual
shareholders informed of
progress in implementing
strategic objectives
Thomsonrsquos Annual General Meeting
provides an opportunity for debate and
exchange with individual shareholders
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55 Thomson Panorama 2006
Financial calendar 2007
bull April 26 First Quarter 2007 Sales
bull May 15 Shareholdersrsquo Meeting (on second notice)
bull July 26 First Half 2007 Results
bull October 18 Third Quarter 2007 Sales
These dates are subject to modification
Public904
CAPITAL STRUCTURE AS OF DECEMBER 31 2006
Employees25
Treasury Shares46
Other25
SHARE HIGHLIGHTS
2006 2005
Year high 1932 2142
Year low 1165 1526
Share price at year-end in euro 1481 1770
Average daily volume 2445176 2244879
Market capital at year-end in euro million 4056 4838
Number of shares outstanding at year end
(in thousands) 273871 273308
Net dividend per share in euro 033 030
Listed on the Paris and New York stock exchanges ndash Euronext code 18453 ndash NYSE ticker TMSN
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56 Thomson Panorama 2006
Maintaining the highest standards
in compliance and risk management
Extensive work was completed in 2006
in Thomsonrsquos main operational units and
at Corporate level to ensure alignment of
reporting and control procedures with the
requirements of the Sarbanes-Oxley Act in
the United States
Improving Internal Control Procedures
Building towards application of Section
404 of the Sarbanes-Oxley Act (ldquoSOX
404rdquo) for fiscal year 2006 which required
the Group to assess the effectiveness of
internal controls Thomson committed to
implementing the internal control frame-
work proposed by the Committee of
Sponsoring Organizations of the Treadway
Commission (ldquoCOSOrdquo)
Within this framework the Group seeks toachieve ldquoreasonable assurancerdquo regarding
the effectiveness and efficiency of opera-
tions the reliability of financial reporting
and compliance with applicable laws and
regulations
Group-wide initiatives were on-going in
2006 to achieve these objectives including
the Process Transformation Initiative (PTI)
to ensure operational excellence COM-
PASS (Controls Over Methods Processes
Applications Systems and Strategy) and
the Risk Committee and its enterprise risk
assessment and management programrun by the Internal Audit function
Following a full worldwide enterprise risk
assessment carried out in the second half
of 2005 and updated throughout 2006 a
second was planned for completion by May
2007 The process assesses risks in the
Grouprsquos distinct business units or profit cen-
ters with the goal of identifying assessing
validating and monitoring risks which could
impact or potentially impact the Grouprsquos
ability to achieve its short and long-term
objectives In 2007 the Risk Committee will
continue to regularly monitor action plans
put in place to mitigate the risks identified
During the year the Group also continued
implementation of a worldwide SOX 404
compliance software system to assist with
the documentation of significant financialprocesses provide consistent guidance
to management regarding controls and
better enable management to assess its
control structure
Managing Risk
Thomson has three main internal organiza-
tions that support and assist the Executive
Committee in control and risk monitoring
the Investment Committee and the Risk
Committee The Investment Committee
meets on an ad hoc basis throughout the
year generally once per week to reviewfinancial commitments including proposed
acquisitions capital equipment funding
and new ventures requiring capital The Risk
Committee which met nine times in 2006
evaluates the Grouprsquos financial operational
and compliance risks and identifies strate-
gic risks that could adversely affect different
activities within the framework of Grouprsquos
three-year plan scenarios The Corporate
Social Responsibility (CSR) Committee to
be set up in 2007 will oversee all CSR
compliance and ethics matters
Ethical values and principles of conductfor the Grouprsquos managers are defined in
of the Grouprsquos divisions and profit centersIn the context of the budgetary procedure
performance measurement indicators are
calculated by the divisions analyzed and
reviewed monthly to serve as a reference
for the Grouprsquos monthly reporting
Management reporting and
closing period work
Th om so n uses a co mmon char t of
accounts which is regularly updated The
principal accounting and financial figures
of the operational and functional depart-
ments consolidated at Group level are
analyzed by the Grouprsquos management
control team and reviewed by the Grouprsquos
Executive Committee
The closing process for the half-year and
annual consolidated financial statementsoccurs in two steps The first step con-
sists of a ldquohard closerdquo completed in May
and September leading to a first review by
the statutory auditors The second step
occurs in July and in JanuaryFebruary and
involves the finalization of half-year and
annual consolidated financial statements
under IFRS The Group then proceeds
once a year with a reconciliation of these
results in accordance with US GAAP
Preparation of financial statements
The financial statements are prepared jointly by the finance department and the
General Secretary They are based on
information reported through the annual
reporting and accounting consolidation
processes and on operational and mar-
ket information which is specifically cen-
tralized for the preparation of Thomsonrsquos
Document de Reacutefeacuterence in France and
the submission of Form 20-F in the United
States Half-year and annual financial infor-
mation is reviewed by the Grouprsquos Audit
Committee
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58 Thomson Panorama 2006
(1) Source PriceWaterhouseCoopers ndash
ldquoGlobal Entertainment and Media Outlook 2006-10rdquo
Revenue growth
Thomson achieved consolidated 2006
net revenues of 9914045854 million up from
9914045591 million in 2005 Revenues for
the Core Business reached 9914045747 mil-
lion (9914045776 million at constant currency)
representing 83 growth over 2005 at
constant currency
Overall the Grouprsquos key growth busi-
nessesmdashContent Services Network
Services Access Products for telecom
operators and our Broadcast amp Networks
businesses (Grass Valley and Network
Software)mdashincreased strongly year-on-
year and accounted for over a third of
Group revenues against less than a quar-
ter in 2005
Thomsonrsquos Core Business EBIT for 2006
was euro504 million representing a Core
Business EBIT margin of 88 Thisreflected growth in some key businesses
and cost actions across the Group off-
setting a significant investment in research
and development and some increase in
restructuring expenses
Increased spend on RampD
Research and development expenditure
charged in the Core Business (net of
external funding) rose from 991404221 million in
2005 to 991404279 million in 2006 an increase
of 26 principally in the Systems divi-
sion The Group expanded the number ofproducts and services in the development
phase across its businesses
Return to profit
Losses in Non-Core Continuing and Dis-
continued operations were substantially
lower year-on-year reflecting principally
the exit from heavily loss-making Displays
activities in 2005 and intensified cost-sav-
ing programs in 2006 A major revision
and harmonization of the Grouprsquos North
American healthcare obligations gave rise
to substantial one-time gains and Thom-
son also initiated significant restructuring
of its French Non-Core operations
The good performance of the Core Busi-
ness lower Non-Core and Discontinued
losses and a low reported tax chargeenabled the Group to return a net profit of
99140455 million in 2006 compared to a loss of
991404573 million in the previous year
Good cash flow
strengthened balance sheet
Thomson generated good free cash flow
and strengthened its balance sheet in
2006 Total net financial liabilities on the
balance sheet fell by 991404460 million reflect-
ing a 99140493 million fall in financial and acqui-
sition-related debts and a 991404367 million
reduction in retirement benefit obligations(including healthcare)
Increase in Net Dividend
The Board of Directors proposed a dis-
tribution to shareholders of 991404033 per
share (2005 dividend 991404030) reflecting
confidence in the prospects of the Group
going forward
Outlook 2007-2009
growth in revenues and net income
With the Grouprsquos transformation complete Thomsonrsquos financial focus over the 2007-
2009 period will be to grow revenues and
net income
Thomson serves growing Media Enter-
tainment amp Communications marketsmdashfor
which external estimates(1) indicate com-
pound growth of around 6 over the last
FINANCIAL AND
OPERATIONAL PERFORMANCE
Full year 2006 results
saw a return to profitability
and leave Thomson
well positioned at
the heart of convergence
and digital video
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59 Thomson Panorama 2006
five years Our digital and electronic busi-
nesses now represent two-thirds of rev-
enues and we believe they are growing
faster than the overall market offsetting
the maturing physical media businesses
Given this profile the Group expects its
revenue growth to be more modest in
2007 but to gather pace over the period
and our overall objective is to show com-pound growth over 2007-2009 in line with
or faster than the overall market
The 2007-2009 period is also expected
to see a sharply reduced impact from
residual Non-Core activities with an end
to losses from the Discontinued Activities
perimeter after 2007 Accordingly Thom-
sonrsquos ambition is to turn its Core Business
growth and profitability and lower impact
from Non-Core into strong growth in net
income over the period 2007-2009
Business operations
Continuous performance improvement is
fundamental to Thomsonrsquos commitment to
create sustainable business models and
long-term value for all stakeholders The
ambitious Group-wide programs launched
in 2004 to improve productivity and
enhance overall performance producedsubstantial results in 2006 and led to new
and strong initiatives for long-term growth
As of the second half of 2006 six ldquoKey
Programsrdquo are monitored at Group level
Clients Software Product Introduction
Operations Transformation and Talent
Management
KEY PROGRAMS IN PLACE
Program Focus
Clients Thomsonrsquos clientregional diversification and
growth of the existing business
through improved Sales amp Marketing
Software Development of integrated software platforms
in all markets (post-production distribution
delivery) and for all types of customer
(professional prosumerhellip)
Product Introduction Ensuring new product roadmaps are in line
with strategy and resource needs have been
identifiedOperations Improving the Grouprsquos cost base cash
generation and working capital
Transformation Multiple programs including initiatives to
improving customer relationship management
worldwide supply chain management
IT transformation as well as Thomsonrsquos RampD
footprint
Talent Management Leveraging human assets with a focus on
talent retention and acquisition
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60 Thomson Panorama 2006
SUMMARY RESULTS FULL YEAR 2006
In 991404 millions unless otherwise stated 2006(1) 2005(1)
Net revenues 5854 5591(1)
Core Business net revenues 5747 5335
Services 2489 2487
Systems 2684 2262
Technology 547 546
Corporate 27 40
Non-Core continuing operations net revenues 107 256
Core Business EBIT(2) 504 512
Services 160 205
Systems 132 109
Technology 289 277Corporate (77) (79)
EBIT from Non-Core continuing operations (25) (122)
(1) Restated with 2006 discontinued activities according to IFRS 5
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61 Thomson Panorama 2006
Year ended December 31in 991404 except number of shares 2006 2005 2004
Year ended December 31in 991404 millions 2006 2005(1) 2004(1)
CONSOLIDATED STATEMENTS OF OPERATIONS
(1) Restated with 2006 discontinued activities according to IFRS 5
(2) After deduction of the interests net of tax paid on the subordinated perpetual notes during the period
Continuing operations
Revenues 5854 5591 5980
Cost of sales (4474) (4240) (4594)
Gross margin 1380 1351 1386
Selling marketing general and administrative expenses (674) (638) (653)
Other income (expense) 52 (96) (69)
Research and development expenses (279) (227) (201)
Profit from continuing operations before tax and net finance costs 479 390 463
Interest income 19 30 52
Interest expense (108) (108) (54)
Other financial income (expense) (111) 36 (26)
Finance costs ndash net (200) (42) (28)
Share of profit (loss) from associates (86) (82) (20)
Income tax ndash (68) (93)
Profit from continuing operations 193 198 322
Discontinued operations
Profit (loss) from discontinued operations (138) (771) (883)
Net income (loss) 55 (573) (561)
Attributable to
Equity Holders 55 (574) (559)
Minority interests ndash 1 (2)
Weighted average number of shares
outstandingmdashbasic net of treasury stock 261188858 266539917 273646869
Earnings per share from continuing operations
Basic(2) 067 074 118
Diluted 063 042 111
Earnings per share from discontinued operations
Basic (053) (289) (323)
Diluted (048) (262) (296)Total earnings per share
Basic(2) 014 (215) (205)
Diluted 015 (220) (185)
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62 Thomson Panorama 2006
CONSOLIDATED BALANCE SHEETS
In 991404 millions December 31 December 31 January 1 December 31 2006 2005 2005(1) 2004
ASSETS
Non-current assets
Property plant and equipment 813 886 1051 1051
Goodwill 1714 1756 1186 1178
Other intangible assets 1071 1150 924 924
Investments in associates 12 204 260 260
Investments and financial assets available-for-sale 266 341 139 113
Derivative financial instruments 7 1 11 ndash
Contract advances 129 173 179 179
Deferred tax assets 397 379 307 301
Other non-current assets 110 182 133 136
Total non-current assets 4519 5072 4190 4142
Current assets
Inventories 366 333 503 568
Trade accounts and notes receivable 1018 1315 1232 1180
Current accounts with associates and joint ventures 97 115 143 143
Derivative financial instruments 8 9 115 ndash
Other current assets 535 644 483 616
Marketable securities ndash 7 58 58
Cash and cash equivalents 1311 996 1845 1848
Assets classified as held for sale 264 369 80 ndash
Total current assets 3599 3788 4459 4413
Total assets 8118 8860 8649 8555
(1) Including the impacts of the first-time application related to IAS 32 and 39 on financial instruments and IFRS 5 on non-current assets held for sale and
discontinued operations
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63 Thomson Panorama 2006
In 991404 millions December 31 December 31 January 1 December 31 2006 2005 2005(1) 2004
SHAREHOLDERSrsquo EQUITY AND LIABILITIES
Shareholdersrsquo equity
Common stock (273871296 shares at
December 31 2006
with nominal value of euro 375 per share) 1027 1025 1025 1025
Trade accounts and notes payable 1032 1164 1199 1226
Accrued employee expenses 165 166 158 163
Income tax payable 57 47 60 60
Other current liabilities 671 750 746 800
Payables on acquisition of companies 13 138 84 84
Liabilities directly associated with
assets classified as held for sale 232 470 88 ndash
Total current liabilities 3681 4393 3602 3459
Total liabilities 5999 6644 6251 6062
Total shareholderrsquos equity and liabilities 8118 8860 8649 8555
(1) Including the impacts of the first-time application related to IAS 32 and 39 on financial instruments and IFRS 5 on non-current assets held for sale and
discontinued operations
8122019 Panorama 2006
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Creation and lay-out
Photo credits Nathalie BerhingGAMMA ndash Steacutephane de Bourgies ndash Jean-Franccedilois DeroubaixGAMMA ndash Christine Donnier- ValentinGAMMA ndash Cars copy 2006 Disney Enterprises IncPixar All Rights Reserved ndash Dreamgirls copy 2006 DREAMWORKS
LLC and PARAMOUNT PICTURES All Rights Reserved ndash Poseidon copy 2006 Warner Bros Pictures ndash Sony Bravia Paint
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 5066
48 Thomson Panorama 2006
Global Compact and Vigeo
Vigeo the French social responsibility rat-
ings agency ranked Thomson as one of the
best performers of 20 companies assessed
in its 2006 European ldquoTechnology amp Hard-
warerdquo sector benchmark study
To advance responsible corporate citizen-ship and universal social and environmen-
tal principles Thomson has been a mem-
ber of the United Nations Global Compact
since 2003 Launched in 1999 the UN
Global Compact requires companies to
embrace support and enactmdashwithin their
sphere of influencemdasha set of values in the
areas of human rights labor the environ-
ment and anti-corruption Thomsonrsquos core
valuesmdashhigh ethical standards striving to
improve safety and environmental respon-
sibility initiatives and fair business prac-
ticesmdashmeet or exceed the goals embod-
ied in the UN Global Compact initiative
Thomsonrsquos Ethics Charter sets the foun-
dation for the Grouprsquos dedication to
act responsibly in all of its dealings with
employees suppliers customers and local
communities Updated and enhanced in
2006 the Ethics Charter covers a broad
range of issues from business practices
and human rights to the environment
health and safety All Thomson employees
are required to respect the conduct and
practices laid out in the Ethics Charter
This same universal obligation applies to all
Thomson suppliers and subcontractors
Suppliers and subcontractors are regularly
audited by Thomson to ensure compliance
with the Grouprsquos policies and standards
Initiated in 2002 the supplier ethics audit
program has resulted in hundreds of
supplier audits over the past four yearsIn addition the Social Accountabilities
8000 standard (SA 8000) is used as a
basis for evaluating those suppliers with
manufacturing facilities in high-risk areas
Established by an independent multi-dis-
ciplinary group of international experts the
SA 8000 standard is designed to ensure
humane workplaces
Human rights
Thomson aims to ensure that its business
practices align with key corporate values
The Grouprsquos Ethics Charter specificallyfocuses on the Global Compact standards
covering child labor forced labor health and
safety discrimination disciplinary practices
working hours and compensation
To he lp prevent the use of chi ld labor
for example the Ethics Charter prohibits
employing workers below the legal mini-
mum working age in any country
The Ethics Charter also helps combat
forced labor by prohibiting unfair practices
Thomson endeavours to protect
the environment wherever it does business
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49 Thomson Panorama 2006
such as requiring workers to deposit money
to obtain work withholding personal docu-
ments such as identity cards or passports
requiring workers to extend hours beyond
normal time or limiting workersrsquo movements
during non-working hours Prison labor and
indebted bondage are strictly prohibited
Non-discrimination and diversity
As an international Group doing business
in approximately 40 countries Thomsonrsquos
workforce is very diverse The Grouprsquos
headquarters in Paris for example counts
about a dozen different nationalities Dis-
crimination on the basis of race religion or
gender is strictly prohibited As of Decem-
ber 2006 women accounted for 36 of
Thomsonrsquos total employees
Thomson employed over 24000 people
in its core businesses as of end-2006 Of
these 44 were in North America 36in Europe 9 in Asia and 11 scattered
around the rest of the world Three-quar-
ters of the Grouprsquos current employees
joined Thomson within the last four years
including those from companies acquired
over that time period
Environment Health and Safety (EHampS)
The transformation of Thomsonrsquos business
model and market focus over the past few
years has reduced significantly the Grouprsquos
manufacturing activities Nevertheless
Thomson remains committed to ongoing
environmental health and safety policies
and goals This commitment is formalized
through the Corporate EHampS Charter
which defines key management principles
designed to protect human health and
the environment In this area the Group
embraces international standards for qual-ity and management systems in particular
the International Standards Organization
(ISO) 14001 standards for environmental
management In 2006 a total of 28 sites
held an ISO 14001 certification
Thomsonrsquos Corporate EHampS group devel-
ops directs and oversees the develop-
ment of global policies guidelines pro-
grams and initiatives reporting annually
to the Thomson Executive Committee
A corporate manager and three regional
managers direct the efforts of EHampS per-
sonnel worldwide Consistent internalbenchmarks have been in place for the
past decade to enable tracking of prog-
ress at all 41 of the Grouprsquos main industrial
locations Measured criteria include EHampS-
related employee training each locationrsquos
progress toward reducing work-related
injuries and lost workdays reducing envi-
ronmental impacts and reducing the con-
sumption of water and energy
The most notable achievement in 2006
was improved water use and conserva-
Clean industry
Thomsonrsquos Guadalajara DVD factory recently entered Mexicorsquos exclusive ldquoClean Industryrdquo program
managed by PROFEPA the federal environmental agency Sites achieving certification must go beyond
legal requirements by improving their performance in water usage minimizing hazardous waste and
controlling air noise and odor pollution Following four months of intense efforts the exhaustive
environmental audit required yielded excellent results and certification was achieved in November 2006
8122019 Panorama 2006
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50 Thomson Panorama 2006
tion within the film labs showing more
than a 25 improvement in water con-
sumption for every million feet of film pro-
cessed This helped Thomson achieve its
overall goal of reducing annual water con-
sumption by 15 Similarly good prog-
ress was achieved toward the long-term
goal of reduced landfill with almost 10
improvement in recycling rate comparedto 2005
As a corol lary to efforts to constant ly
improve the EHampS profile of ongoing activi-
ties Thomson reviews all newly acquired
businesses to ensure they meet Group
requirements and to define upgrade pro-
grams when necessary The EHampS reviews
include an evaluation of the status and
effectiveness of existing management
and control systems and a presentation
of Thomsonrsquos EHampS initiatives and require-
ments Newly acquired sites are now
encouraged to achieve ISO 14001 certi-fication within two years of their effective
date for joining the Group
Suppliers and subcontractors are required
to meet all legal requirements for environ-
mental protection including the elimina-
tion of hazardous substances Suppliers
are required to declare in writing that their
products are free of such substances as
cadmium chromium lead mercury and
asbestos and to provide laboratory test
data as proof
The transformation of Thomsonrsquos business
has reduced significantly
the Grouprsquos manufacturing activities
Overall local legislation and standards
form the foundation for Thomsonrsquos require-
ments concerning environmental health
safety employment child labor discrimi-
nation and human rights issues in each
country where it does business
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8122019 Panorama 2006
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8122019 Panorama 2006
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FINANCIAL INFORMATION
Thomson maintains the highest standards in compliance and risk management working continuously
to improve reporting and control as well as the quality of financial information made available to
its stakeholders
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54 Thomson Panorama 2006
Growing North American
investor base
The per iod 2004-2006 brought about
expansion in Thomsonrsquos international
shareholder base particularly in North
America Leading US-based investment
management funds Franklin Templeton
Investments and Brands Investment Part-ners hold over 10 and 5 respectively
of Thomsonrsquos share capital while Dodge amp
Cox increased its stake to over 10 during
the year The Group estimates that North
American institutional investors represent
over 50 of the institutional investor base
France around a quarter and other Euro-
pean investors account for the majority of
the remainder
Active communications
To keep Thomsonrsquos broad investor base
appraised of progress in implementing itsstrategic objectives senior management
devoted considerable time during the year
to investor meetings in both Europe and
North America
As part of its ongoing efforts to provide
investorsmdashparticularly individual share-
holdersmdashwith comprehensive up-to-date
information Thomson makes full use of
the internet Share price information press
releases as well as the Grouprsquos annual
report and reference documents (Docu-
ment de Reacutefeacuterence filed with the French
stock exchange regulator AMF and Form
20-F filed with the SEC) are available on
the site wwwthomsonnet
Annual General Shareholdersrsquo Meetings
are broadcast live over the internet with asimultaneous translation of the proceed-
ings provided from French to English to
enable the majority of shareholders to view
the event The results of the vote are dis-
closed in detail on the internet site imme-
diately following the Meeting
The Shareholder Relations department
organizes tours for individual shareholders
of the newly inaugurated Thomson Gal-
lery at the Grouprsquos headquarters in Paris
France Visits to the Gallery designed to
illustrate Thomsonrsquos activities through a
series of live technology demos and videopresentations allow participants to better
appreciate the Grouprsquos 2007-2009 strat-
egy and growth prospects
Dividend
The dividend ofeuro033 per share proposed
at the Annual Shareholdersrsquo Meeting on
15 May 2007 represented a 10 increase
over last yearrsquos dividend
SHAREHOLDER RELATIONS
Thomson aims to keep
investors and individual
shareholders informed of
progress in implementing
strategic objectives
Thomsonrsquos Annual General Meeting
provides an opportunity for debate and
exchange with individual shareholders
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55 Thomson Panorama 2006
Financial calendar 2007
bull April 26 First Quarter 2007 Sales
bull May 15 Shareholdersrsquo Meeting (on second notice)
bull July 26 First Half 2007 Results
bull October 18 Third Quarter 2007 Sales
These dates are subject to modification
Public904
CAPITAL STRUCTURE AS OF DECEMBER 31 2006
Employees25
Treasury Shares46
Other25
SHARE HIGHLIGHTS
2006 2005
Year high 1932 2142
Year low 1165 1526
Share price at year-end in euro 1481 1770
Average daily volume 2445176 2244879
Market capital at year-end in euro million 4056 4838
Number of shares outstanding at year end
(in thousands) 273871 273308
Net dividend per share in euro 033 030
Listed on the Paris and New York stock exchanges ndash Euronext code 18453 ndash NYSE ticker TMSN
8122019 Panorama 2006
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56 Thomson Panorama 2006
Maintaining the highest standards
in compliance and risk management
Extensive work was completed in 2006
in Thomsonrsquos main operational units and
at Corporate level to ensure alignment of
reporting and control procedures with the
requirements of the Sarbanes-Oxley Act in
the United States
Improving Internal Control Procedures
Building towards application of Section
404 of the Sarbanes-Oxley Act (ldquoSOX
404rdquo) for fiscal year 2006 which required
the Group to assess the effectiveness of
internal controls Thomson committed to
implementing the internal control frame-
work proposed by the Committee of
Sponsoring Organizations of the Treadway
Commission (ldquoCOSOrdquo)
Within this framework the Group seeks toachieve ldquoreasonable assurancerdquo regarding
the effectiveness and efficiency of opera-
tions the reliability of financial reporting
and compliance with applicable laws and
regulations
Group-wide initiatives were on-going in
2006 to achieve these objectives including
the Process Transformation Initiative (PTI)
to ensure operational excellence COM-
PASS (Controls Over Methods Processes
Applications Systems and Strategy) and
the Risk Committee and its enterprise risk
assessment and management programrun by the Internal Audit function
Following a full worldwide enterprise risk
assessment carried out in the second half
of 2005 and updated throughout 2006 a
second was planned for completion by May
2007 The process assesses risks in the
Grouprsquos distinct business units or profit cen-
ters with the goal of identifying assessing
validating and monitoring risks which could
impact or potentially impact the Grouprsquos
ability to achieve its short and long-term
objectives In 2007 the Risk Committee will
continue to regularly monitor action plans
put in place to mitigate the risks identified
During the year the Group also continued
implementation of a worldwide SOX 404
compliance software system to assist with
the documentation of significant financialprocesses provide consistent guidance
to management regarding controls and
better enable management to assess its
control structure
Managing Risk
Thomson has three main internal organiza-
tions that support and assist the Executive
Committee in control and risk monitoring
the Investment Committee and the Risk
Committee The Investment Committee
meets on an ad hoc basis throughout the
year generally once per week to reviewfinancial commitments including proposed
acquisitions capital equipment funding
and new ventures requiring capital The Risk
Committee which met nine times in 2006
evaluates the Grouprsquos financial operational
and compliance risks and identifies strate-
gic risks that could adversely affect different
activities within the framework of Grouprsquos
three-year plan scenarios The Corporate
Social Responsibility (CSR) Committee to
be set up in 2007 will oversee all CSR
compliance and ethics matters
Ethical values and principles of conductfor the Grouprsquos managers are defined in
of the Grouprsquos divisions and profit centersIn the context of the budgetary procedure
performance measurement indicators are
calculated by the divisions analyzed and
reviewed monthly to serve as a reference
for the Grouprsquos monthly reporting
Management reporting and
closing period work
Th om so n uses a co mmon char t of
accounts which is regularly updated The
principal accounting and financial figures
of the operational and functional depart-
ments consolidated at Group level are
analyzed by the Grouprsquos management
control team and reviewed by the Grouprsquos
Executive Committee
The closing process for the half-year and
annual consolidated financial statementsoccurs in two steps The first step con-
sists of a ldquohard closerdquo completed in May
and September leading to a first review by
the statutory auditors The second step
occurs in July and in JanuaryFebruary and
involves the finalization of half-year and
annual consolidated financial statements
under IFRS The Group then proceeds
once a year with a reconciliation of these
results in accordance with US GAAP
Preparation of financial statements
The financial statements are prepared jointly by the finance department and the
General Secretary They are based on
information reported through the annual
reporting and accounting consolidation
processes and on operational and mar-
ket information which is specifically cen-
tralized for the preparation of Thomsonrsquos
Document de Reacutefeacuterence in France and
the submission of Form 20-F in the United
States Half-year and annual financial infor-
mation is reviewed by the Grouprsquos Audit
Committee
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58 Thomson Panorama 2006
(1) Source PriceWaterhouseCoopers ndash
ldquoGlobal Entertainment and Media Outlook 2006-10rdquo
Revenue growth
Thomson achieved consolidated 2006
net revenues of 9914045854 million up from
9914045591 million in 2005 Revenues for
the Core Business reached 9914045747 mil-
lion (9914045776 million at constant currency)
representing 83 growth over 2005 at
constant currency
Overall the Grouprsquos key growth busi-
nessesmdashContent Services Network
Services Access Products for telecom
operators and our Broadcast amp Networks
businesses (Grass Valley and Network
Software)mdashincreased strongly year-on-
year and accounted for over a third of
Group revenues against less than a quar-
ter in 2005
Thomsonrsquos Core Business EBIT for 2006
was euro504 million representing a Core
Business EBIT margin of 88 Thisreflected growth in some key businesses
and cost actions across the Group off-
setting a significant investment in research
and development and some increase in
restructuring expenses
Increased spend on RampD
Research and development expenditure
charged in the Core Business (net of
external funding) rose from 991404221 million in
2005 to 991404279 million in 2006 an increase
of 26 principally in the Systems divi-
sion The Group expanded the number ofproducts and services in the development
phase across its businesses
Return to profit
Losses in Non-Core Continuing and Dis-
continued operations were substantially
lower year-on-year reflecting principally
the exit from heavily loss-making Displays
activities in 2005 and intensified cost-sav-
ing programs in 2006 A major revision
and harmonization of the Grouprsquos North
American healthcare obligations gave rise
to substantial one-time gains and Thom-
son also initiated significant restructuring
of its French Non-Core operations
The good performance of the Core Busi-
ness lower Non-Core and Discontinued
losses and a low reported tax chargeenabled the Group to return a net profit of
99140455 million in 2006 compared to a loss of
991404573 million in the previous year
Good cash flow
strengthened balance sheet
Thomson generated good free cash flow
and strengthened its balance sheet in
2006 Total net financial liabilities on the
balance sheet fell by 991404460 million reflect-
ing a 99140493 million fall in financial and acqui-
sition-related debts and a 991404367 million
reduction in retirement benefit obligations(including healthcare)
Increase in Net Dividend
The Board of Directors proposed a dis-
tribution to shareholders of 991404033 per
share (2005 dividend 991404030) reflecting
confidence in the prospects of the Group
going forward
Outlook 2007-2009
growth in revenues and net income
With the Grouprsquos transformation complete Thomsonrsquos financial focus over the 2007-
2009 period will be to grow revenues and
net income
Thomson serves growing Media Enter-
tainment amp Communications marketsmdashfor
which external estimates(1) indicate com-
pound growth of around 6 over the last
FINANCIAL AND
OPERATIONAL PERFORMANCE
Full year 2006 results
saw a return to profitability
and leave Thomson
well positioned at
the heart of convergence
and digital video
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59 Thomson Panorama 2006
five years Our digital and electronic busi-
nesses now represent two-thirds of rev-
enues and we believe they are growing
faster than the overall market offsetting
the maturing physical media businesses
Given this profile the Group expects its
revenue growth to be more modest in
2007 but to gather pace over the period
and our overall objective is to show com-pound growth over 2007-2009 in line with
or faster than the overall market
The 2007-2009 period is also expected
to see a sharply reduced impact from
residual Non-Core activities with an end
to losses from the Discontinued Activities
perimeter after 2007 Accordingly Thom-
sonrsquos ambition is to turn its Core Business
growth and profitability and lower impact
from Non-Core into strong growth in net
income over the period 2007-2009
Business operations
Continuous performance improvement is
fundamental to Thomsonrsquos commitment to
create sustainable business models and
long-term value for all stakeholders The
ambitious Group-wide programs launched
in 2004 to improve productivity and
enhance overall performance producedsubstantial results in 2006 and led to new
and strong initiatives for long-term growth
As of the second half of 2006 six ldquoKey
Programsrdquo are monitored at Group level
Clients Software Product Introduction
Operations Transformation and Talent
Management
KEY PROGRAMS IN PLACE
Program Focus
Clients Thomsonrsquos clientregional diversification and
growth of the existing business
through improved Sales amp Marketing
Software Development of integrated software platforms
in all markets (post-production distribution
delivery) and for all types of customer
(professional prosumerhellip)
Product Introduction Ensuring new product roadmaps are in line
with strategy and resource needs have been
identifiedOperations Improving the Grouprsquos cost base cash
generation and working capital
Transformation Multiple programs including initiatives to
improving customer relationship management
worldwide supply chain management
IT transformation as well as Thomsonrsquos RampD
footprint
Talent Management Leveraging human assets with a focus on
talent retention and acquisition
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60 Thomson Panorama 2006
SUMMARY RESULTS FULL YEAR 2006
In 991404 millions unless otherwise stated 2006(1) 2005(1)
Net revenues 5854 5591(1)
Core Business net revenues 5747 5335
Services 2489 2487
Systems 2684 2262
Technology 547 546
Corporate 27 40
Non-Core continuing operations net revenues 107 256
Core Business EBIT(2) 504 512
Services 160 205
Systems 132 109
Technology 289 277Corporate (77) (79)
EBIT from Non-Core continuing operations (25) (122)
(1) Restated with 2006 discontinued activities according to IFRS 5
8122019 Panorama 2006
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61 Thomson Panorama 2006
Year ended December 31in 991404 except number of shares 2006 2005 2004
Year ended December 31in 991404 millions 2006 2005(1) 2004(1)
CONSOLIDATED STATEMENTS OF OPERATIONS
(1) Restated with 2006 discontinued activities according to IFRS 5
(2) After deduction of the interests net of tax paid on the subordinated perpetual notes during the period
Continuing operations
Revenues 5854 5591 5980
Cost of sales (4474) (4240) (4594)
Gross margin 1380 1351 1386
Selling marketing general and administrative expenses (674) (638) (653)
Other income (expense) 52 (96) (69)
Research and development expenses (279) (227) (201)
Profit from continuing operations before tax and net finance costs 479 390 463
Interest income 19 30 52
Interest expense (108) (108) (54)
Other financial income (expense) (111) 36 (26)
Finance costs ndash net (200) (42) (28)
Share of profit (loss) from associates (86) (82) (20)
Income tax ndash (68) (93)
Profit from continuing operations 193 198 322
Discontinued operations
Profit (loss) from discontinued operations (138) (771) (883)
Net income (loss) 55 (573) (561)
Attributable to
Equity Holders 55 (574) (559)
Minority interests ndash 1 (2)
Weighted average number of shares
outstandingmdashbasic net of treasury stock 261188858 266539917 273646869
Earnings per share from continuing operations
Basic(2) 067 074 118
Diluted 063 042 111
Earnings per share from discontinued operations
Basic (053) (289) (323)
Diluted (048) (262) (296)Total earnings per share
Basic(2) 014 (215) (205)
Diluted 015 (220) (185)
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62 Thomson Panorama 2006
CONSOLIDATED BALANCE SHEETS
In 991404 millions December 31 December 31 January 1 December 31 2006 2005 2005(1) 2004
ASSETS
Non-current assets
Property plant and equipment 813 886 1051 1051
Goodwill 1714 1756 1186 1178
Other intangible assets 1071 1150 924 924
Investments in associates 12 204 260 260
Investments and financial assets available-for-sale 266 341 139 113
Derivative financial instruments 7 1 11 ndash
Contract advances 129 173 179 179
Deferred tax assets 397 379 307 301
Other non-current assets 110 182 133 136
Total non-current assets 4519 5072 4190 4142
Current assets
Inventories 366 333 503 568
Trade accounts and notes receivable 1018 1315 1232 1180
Current accounts with associates and joint ventures 97 115 143 143
Derivative financial instruments 8 9 115 ndash
Other current assets 535 644 483 616
Marketable securities ndash 7 58 58
Cash and cash equivalents 1311 996 1845 1848
Assets classified as held for sale 264 369 80 ndash
Total current assets 3599 3788 4459 4413
Total assets 8118 8860 8649 8555
(1) Including the impacts of the first-time application related to IAS 32 and 39 on financial instruments and IFRS 5 on non-current assets held for sale and
discontinued operations
8122019 Panorama 2006
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63 Thomson Panorama 2006
In 991404 millions December 31 December 31 January 1 December 31 2006 2005 2005(1) 2004
SHAREHOLDERSrsquo EQUITY AND LIABILITIES
Shareholdersrsquo equity
Common stock (273871296 shares at
December 31 2006
with nominal value of euro 375 per share) 1027 1025 1025 1025
Trade accounts and notes payable 1032 1164 1199 1226
Accrued employee expenses 165 166 158 163
Income tax payable 57 47 60 60
Other current liabilities 671 750 746 800
Payables on acquisition of companies 13 138 84 84
Liabilities directly associated with
assets classified as held for sale 232 470 88 ndash
Total current liabilities 3681 4393 3602 3459
Total liabilities 5999 6644 6251 6062
Total shareholderrsquos equity and liabilities 8118 8860 8649 8555
(1) Including the impacts of the first-time application related to IAS 32 and 39 on financial instruments and IFRS 5 on non-current assets held for sale and
discontinued operations
8122019 Panorama 2006
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Creation and lay-out
Photo credits Nathalie BerhingGAMMA ndash Steacutephane de Bourgies ndash Jean-Franccedilois DeroubaixGAMMA ndash Christine Donnier- ValentinGAMMA ndash Cars copy 2006 Disney Enterprises IncPixar All Rights Reserved ndash Dreamgirls copy 2006 DREAMWORKS
LLC and PARAMOUNT PICTURES All Rights Reserved ndash Poseidon copy 2006 Warner Bros Pictures ndash Sony Bravia Paint
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 5166
49 Thomson Panorama 2006
such as requiring workers to deposit money
to obtain work withholding personal docu-
ments such as identity cards or passports
requiring workers to extend hours beyond
normal time or limiting workersrsquo movements
during non-working hours Prison labor and
indebted bondage are strictly prohibited
Non-discrimination and diversity
As an international Group doing business
in approximately 40 countries Thomsonrsquos
workforce is very diverse The Grouprsquos
headquarters in Paris for example counts
about a dozen different nationalities Dis-
crimination on the basis of race religion or
gender is strictly prohibited As of Decem-
ber 2006 women accounted for 36 of
Thomsonrsquos total employees
Thomson employed over 24000 people
in its core businesses as of end-2006 Of
these 44 were in North America 36in Europe 9 in Asia and 11 scattered
around the rest of the world Three-quar-
ters of the Grouprsquos current employees
joined Thomson within the last four years
including those from companies acquired
over that time period
Environment Health and Safety (EHampS)
The transformation of Thomsonrsquos business
model and market focus over the past few
years has reduced significantly the Grouprsquos
manufacturing activities Nevertheless
Thomson remains committed to ongoing
environmental health and safety policies
and goals This commitment is formalized
through the Corporate EHampS Charter
which defines key management principles
designed to protect human health and
the environment In this area the Group
embraces international standards for qual-ity and management systems in particular
the International Standards Organization
(ISO) 14001 standards for environmental
management In 2006 a total of 28 sites
held an ISO 14001 certification
Thomsonrsquos Corporate EHampS group devel-
ops directs and oversees the develop-
ment of global policies guidelines pro-
grams and initiatives reporting annually
to the Thomson Executive Committee
A corporate manager and three regional
managers direct the efforts of EHampS per-
sonnel worldwide Consistent internalbenchmarks have been in place for the
past decade to enable tracking of prog-
ress at all 41 of the Grouprsquos main industrial
locations Measured criteria include EHampS-
related employee training each locationrsquos
progress toward reducing work-related
injuries and lost workdays reducing envi-
ronmental impacts and reducing the con-
sumption of water and energy
The most notable achievement in 2006
was improved water use and conserva-
Clean industry
Thomsonrsquos Guadalajara DVD factory recently entered Mexicorsquos exclusive ldquoClean Industryrdquo program
managed by PROFEPA the federal environmental agency Sites achieving certification must go beyond
legal requirements by improving their performance in water usage minimizing hazardous waste and
controlling air noise and odor pollution Following four months of intense efforts the exhaustive
environmental audit required yielded excellent results and certification was achieved in November 2006
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 5266
50 Thomson Panorama 2006
tion within the film labs showing more
than a 25 improvement in water con-
sumption for every million feet of film pro-
cessed This helped Thomson achieve its
overall goal of reducing annual water con-
sumption by 15 Similarly good prog-
ress was achieved toward the long-term
goal of reduced landfill with almost 10
improvement in recycling rate comparedto 2005
As a corol lary to efforts to constant ly
improve the EHampS profile of ongoing activi-
ties Thomson reviews all newly acquired
businesses to ensure they meet Group
requirements and to define upgrade pro-
grams when necessary The EHampS reviews
include an evaluation of the status and
effectiveness of existing management
and control systems and a presentation
of Thomsonrsquos EHampS initiatives and require-
ments Newly acquired sites are now
encouraged to achieve ISO 14001 certi-fication within two years of their effective
date for joining the Group
Suppliers and subcontractors are required
to meet all legal requirements for environ-
mental protection including the elimina-
tion of hazardous substances Suppliers
are required to declare in writing that their
products are free of such substances as
cadmium chromium lead mercury and
asbestos and to provide laboratory test
data as proof
The transformation of Thomsonrsquos business
has reduced significantly
the Grouprsquos manufacturing activities
Overall local legislation and standards
form the foundation for Thomsonrsquos require-
ments concerning environmental health
safety employment child labor discrimi-
nation and human rights issues in each
country where it does business
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 5366
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 5466
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 5566
FINANCIAL INFORMATION
Thomson maintains the highest standards in compliance and risk management working continuously
to improve reporting and control as well as the quality of financial information made available to
its stakeholders
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 5666
54 Thomson Panorama 2006
Growing North American
investor base
The per iod 2004-2006 brought about
expansion in Thomsonrsquos international
shareholder base particularly in North
America Leading US-based investment
management funds Franklin Templeton
Investments and Brands Investment Part-ners hold over 10 and 5 respectively
of Thomsonrsquos share capital while Dodge amp
Cox increased its stake to over 10 during
the year The Group estimates that North
American institutional investors represent
over 50 of the institutional investor base
France around a quarter and other Euro-
pean investors account for the majority of
the remainder
Active communications
To keep Thomsonrsquos broad investor base
appraised of progress in implementing itsstrategic objectives senior management
devoted considerable time during the year
to investor meetings in both Europe and
North America
As part of its ongoing efforts to provide
investorsmdashparticularly individual share-
holdersmdashwith comprehensive up-to-date
information Thomson makes full use of
the internet Share price information press
releases as well as the Grouprsquos annual
report and reference documents (Docu-
ment de Reacutefeacuterence filed with the French
stock exchange regulator AMF and Form
20-F filed with the SEC) are available on
the site wwwthomsonnet
Annual General Shareholdersrsquo Meetings
are broadcast live over the internet with asimultaneous translation of the proceed-
ings provided from French to English to
enable the majority of shareholders to view
the event The results of the vote are dis-
closed in detail on the internet site imme-
diately following the Meeting
The Shareholder Relations department
organizes tours for individual shareholders
of the newly inaugurated Thomson Gal-
lery at the Grouprsquos headquarters in Paris
France Visits to the Gallery designed to
illustrate Thomsonrsquos activities through a
series of live technology demos and videopresentations allow participants to better
appreciate the Grouprsquos 2007-2009 strat-
egy and growth prospects
Dividend
The dividend ofeuro033 per share proposed
at the Annual Shareholdersrsquo Meeting on
15 May 2007 represented a 10 increase
over last yearrsquos dividend
SHAREHOLDER RELATIONS
Thomson aims to keep
investors and individual
shareholders informed of
progress in implementing
strategic objectives
Thomsonrsquos Annual General Meeting
provides an opportunity for debate and
exchange with individual shareholders
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 5766
55 Thomson Panorama 2006
Financial calendar 2007
bull April 26 First Quarter 2007 Sales
bull May 15 Shareholdersrsquo Meeting (on second notice)
bull July 26 First Half 2007 Results
bull October 18 Third Quarter 2007 Sales
These dates are subject to modification
Public904
CAPITAL STRUCTURE AS OF DECEMBER 31 2006
Employees25
Treasury Shares46
Other25
SHARE HIGHLIGHTS
2006 2005
Year high 1932 2142
Year low 1165 1526
Share price at year-end in euro 1481 1770
Average daily volume 2445176 2244879
Market capital at year-end in euro million 4056 4838
Number of shares outstanding at year end
(in thousands) 273871 273308
Net dividend per share in euro 033 030
Listed on the Paris and New York stock exchanges ndash Euronext code 18453 ndash NYSE ticker TMSN
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 5866
56 Thomson Panorama 2006
Maintaining the highest standards
in compliance and risk management
Extensive work was completed in 2006
in Thomsonrsquos main operational units and
at Corporate level to ensure alignment of
reporting and control procedures with the
requirements of the Sarbanes-Oxley Act in
the United States
Improving Internal Control Procedures
Building towards application of Section
404 of the Sarbanes-Oxley Act (ldquoSOX
404rdquo) for fiscal year 2006 which required
the Group to assess the effectiveness of
internal controls Thomson committed to
implementing the internal control frame-
work proposed by the Committee of
Sponsoring Organizations of the Treadway
Commission (ldquoCOSOrdquo)
Within this framework the Group seeks toachieve ldquoreasonable assurancerdquo regarding
the effectiveness and efficiency of opera-
tions the reliability of financial reporting
and compliance with applicable laws and
regulations
Group-wide initiatives were on-going in
2006 to achieve these objectives including
the Process Transformation Initiative (PTI)
to ensure operational excellence COM-
PASS (Controls Over Methods Processes
Applications Systems and Strategy) and
the Risk Committee and its enterprise risk
assessment and management programrun by the Internal Audit function
Following a full worldwide enterprise risk
assessment carried out in the second half
of 2005 and updated throughout 2006 a
second was planned for completion by May
2007 The process assesses risks in the
Grouprsquos distinct business units or profit cen-
ters with the goal of identifying assessing
validating and monitoring risks which could
impact or potentially impact the Grouprsquos
ability to achieve its short and long-term
objectives In 2007 the Risk Committee will
continue to regularly monitor action plans
put in place to mitigate the risks identified
During the year the Group also continued
implementation of a worldwide SOX 404
compliance software system to assist with
the documentation of significant financialprocesses provide consistent guidance
to management regarding controls and
better enable management to assess its
control structure
Managing Risk
Thomson has three main internal organiza-
tions that support and assist the Executive
Committee in control and risk monitoring
the Investment Committee and the Risk
Committee The Investment Committee
meets on an ad hoc basis throughout the
year generally once per week to reviewfinancial commitments including proposed
acquisitions capital equipment funding
and new ventures requiring capital The Risk
Committee which met nine times in 2006
evaluates the Grouprsquos financial operational
and compliance risks and identifies strate-
gic risks that could adversely affect different
activities within the framework of Grouprsquos
three-year plan scenarios The Corporate
Social Responsibility (CSR) Committee to
be set up in 2007 will oversee all CSR
compliance and ethics matters
Ethical values and principles of conductfor the Grouprsquos managers are defined in
of the Grouprsquos divisions and profit centersIn the context of the budgetary procedure
performance measurement indicators are
calculated by the divisions analyzed and
reviewed monthly to serve as a reference
for the Grouprsquos monthly reporting
Management reporting and
closing period work
Th om so n uses a co mmon char t of
accounts which is regularly updated The
principal accounting and financial figures
of the operational and functional depart-
ments consolidated at Group level are
analyzed by the Grouprsquos management
control team and reviewed by the Grouprsquos
Executive Committee
The closing process for the half-year and
annual consolidated financial statementsoccurs in two steps The first step con-
sists of a ldquohard closerdquo completed in May
and September leading to a first review by
the statutory auditors The second step
occurs in July and in JanuaryFebruary and
involves the finalization of half-year and
annual consolidated financial statements
under IFRS The Group then proceeds
once a year with a reconciliation of these
results in accordance with US GAAP
Preparation of financial statements
The financial statements are prepared jointly by the finance department and the
General Secretary They are based on
information reported through the annual
reporting and accounting consolidation
processes and on operational and mar-
ket information which is specifically cen-
tralized for the preparation of Thomsonrsquos
Document de Reacutefeacuterence in France and
the submission of Form 20-F in the United
States Half-year and annual financial infor-
mation is reviewed by the Grouprsquos Audit
Committee
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 6066
58 Thomson Panorama 2006
(1) Source PriceWaterhouseCoopers ndash
ldquoGlobal Entertainment and Media Outlook 2006-10rdquo
Revenue growth
Thomson achieved consolidated 2006
net revenues of 9914045854 million up from
9914045591 million in 2005 Revenues for
the Core Business reached 9914045747 mil-
lion (9914045776 million at constant currency)
representing 83 growth over 2005 at
constant currency
Overall the Grouprsquos key growth busi-
nessesmdashContent Services Network
Services Access Products for telecom
operators and our Broadcast amp Networks
businesses (Grass Valley and Network
Software)mdashincreased strongly year-on-
year and accounted for over a third of
Group revenues against less than a quar-
ter in 2005
Thomsonrsquos Core Business EBIT for 2006
was euro504 million representing a Core
Business EBIT margin of 88 Thisreflected growth in some key businesses
and cost actions across the Group off-
setting a significant investment in research
and development and some increase in
restructuring expenses
Increased spend on RampD
Research and development expenditure
charged in the Core Business (net of
external funding) rose from 991404221 million in
2005 to 991404279 million in 2006 an increase
of 26 principally in the Systems divi-
sion The Group expanded the number ofproducts and services in the development
phase across its businesses
Return to profit
Losses in Non-Core Continuing and Dis-
continued operations were substantially
lower year-on-year reflecting principally
the exit from heavily loss-making Displays
activities in 2005 and intensified cost-sav-
ing programs in 2006 A major revision
and harmonization of the Grouprsquos North
American healthcare obligations gave rise
to substantial one-time gains and Thom-
son also initiated significant restructuring
of its French Non-Core operations
The good performance of the Core Busi-
ness lower Non-Core and Discontinued
losses and a low reported tax chargeenabled the Group to return a net profit of
99140455 million in 2006 compared to a loss of
991404573 million in the previous year
Good cash flow
strengthened balance sheet
Thomson generated good free cash flow
and strengthened its balance sheet in
2006 Total net financial liabilities on the
balance sheet fell by 991404460 million reflect-
ing a 99140493 million fall in financial and acqui-
sition-related debts and a 991404367 million
reduction in retirement benefit obligations(including healthcare)
Increase in Net Dividend
The Board of Directors proposed a dis-
tribution to shareholders of 991404033 per
share (2005 dividend 991404030) reflecting
confidence in the prospects of the Group
going forward
Outlook 2007-2009
growth in revenues and net income
With the Grouprsquos transformation complete Thomsonrsquos financial focus over the 2007-
2009 period will be to grow revenues and
net income
Thomson serves growing Media Enter-
tainment amp Communications marketsmdashfor
which external estimates(1) indicate com-
pound growth of around 6 over the last
FINANCIAL AND
OPERATIONAL PERFORMANCE
Full year 2006 results
saw a return to profitability
and leave Thomson
well positioned at
the heart of convergence
and digital video
8122019 Panorama 2006
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59 Thomson Panorama 2006
five years Our digital and electronic busi-
nesses now represent two-thirds of rev-
enues and we believe they are growing
faster than the overall market offsetting
the maturing physical media businesses
Given this profile the Group expects its
revenue growth to be more modest in
2007 but to gather pace over the period
and our overall objective is to show com-pound growth over 2007-2009 in line with
or faster than the overall market
The 2007-2009 period is also expected
to see a sharply reduced impact from
residual Non-Core activities with an end
to losses from the Discontinued Activities
perimeter after 2007 Accordingly Thom-
sonrsquos ambition is to turn its Core Business
growth and profitability and lower impact
from Non-Core into strong growth in net
income over the period 2007-2009
Business operations
Continuous performance improvement is
fundamental to Thomsonrsquos commitment to
create sustainable business models and
long-term value for all stakeholders The
ambitious Group-wide programs launched
in 2004 to improve productivity and
enhance overall performance producedsubstantial results in 2006 and led to new
and strong initiatives for long-term growth
As of the second half of 2006 six ldquoKey
Programsrdquo are monitored at Group level
Clients Software Product Introduction
Operations Transformation and Talent
Management
KEY PROGRAMS IN PLACE
Program Focus
Clients Thomsonrsquos clientregional diversification and
growth of the existing business
through improved Sales amp Marketing
Software Development of integrated software platforms
in all markets (post-production distribution
delivery) and for all types of customer
(professional prosumerhellip)
Product Introduction Ensuring new product roadmaps are in line
with strategy and resource needs have been
identifiedOperations Improving the Grouprsquos cost base cash
generation and working capital
Transformation Multiple programs including initiatives to
improving customer relationship management
worldwide supply chain management
IT transformation as well as Thomsonrsquos RampD
footprint
Talent Management Leveraging human assets with a focus on
talent retention and acquisition
8122019 Panorama 2006
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60 Thomson Panorama 2006
SUMMARY RESULTS FULL YEAR 2006
In 991404 millions unless otherwise stated 2006(1) 2005(1)
Net revenues 5854 5591(1)
Core Business net revenues 5747 5335
Services 2489 2487
Systems 2684 2262
Technology 547 546
Corporate 27 40
Non-Core continuing operations net revenues 107 256
Core Business EBIT(2) 504 512
Services 160 205
Systems 132 109
Technology 289 277Corporate (77) (79)
EBIT from Non-Core continuing operations (25) (122)
(1) Restated with 2006 discontinued activities according to IFRS 5
8122019 Panorama 2006
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61 Thomson Panorama 2006
Year ended December 31in 991404 except number of shares 2006 2005 2004
Year ended December 31in 991404 millions 2006 2005(1) 2004(1)
CONSOLIDATED STATEMENTS OF OPERATIONS
(1) Restated with 2006 discontinued activities according to IFRS 5
(2) After deduction of the interests net of tax paid on the subordinated perpetual notes during the period
Continuing operations
Revenues 5854 5591 5980
Cost of sales (4474) (4240) (4594)
Gross margin 1380 1351 1386
Selling marketing general and administrative expenses (674) (638) (653)
Other income (expense) 52 (96) (69)
Research and development expenses (279) (227) (201)
Profit from continuing operations before tax and net finance costs 479 390 463
Interest income 19 30 52
Interest expense (108) (108) (54)
Other financial income (expense) (111) 36 (26)
Finance costs ndash net (200) (42) (28)
Share of profit (loss) from associates (86) (82) (20)
Income tax ndash (68) (93)
Profit from continuing operations 193 198 322
Discontinued operations
Profit (loss) from discontinued operations (138) (771) (883)
Net income (loss) 55 (573) (561)
Attributable to
Equity Holders 55 (574) (559)
Minority interests ndash 1 (2)
Weighted average number of shares
outstandingmdashbasic net of treasury stock 261188858 266539917 273646869
Earnings per share from continuing operations
Basic(2) 067 074 118
Diluted 063 042 111
Earnings per share from discontinued operations
Basic (053) (289) (323)
Diluted (048) (262) (296)Total earnings per share
Basic(2) 014 (215) (205)
Diluted 015 (220) (185)
8122019 Panorama 2006
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62 Thomson Panorama 2006
CONSOLIDATED BALANCE SHEETS
In 991404 millions December 31 December 31 January 1 December 31 2006 2005 2005(1) 2004
ASSETS
Non-current assets
Property plant and equipment 813 886 1051 1051
Goodwill 1714 1756 1186 1178
Other intangible assets 1071 1150 924 924
Investments in associates 12 204 260 260
Investments and financial assets available-for-sale 266 341 139 113
Derivative financial instruments 7 1 11 ndash
Contract advances 129 173 179 179
Deferred tax assets 397 379 307 301
Other non-current assets 110 182 133 136
Total non-current assets 4519 5072 4190 4142
Current assets
Inventories 366 333 503 568
Trade accounts and notes receivable 1018 1315 1232 1180
Current accounts with associates and joint ventures 97 115 143 143
Derivative financial instruments 8 9 115 ndash
Other current assets 535 644 483 616
Marketable securities ndash 7 58 58
Cash and cash equivalents 1311 996 1845 1848
Assets classified as held for sale 264 369 80 ndash
Total current assets 3599 3788 4459 4413
Total assets 8118 8860 8649 8555
(1) Including the impacts of the first-time application related to IAS 32 and 39 on financial instruments and IFRS 5 on non-current assets held for sale and
discontinued operations
8122019 Panorama 2006
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63 Thomson Panorama 2006
In 991404 millions December 31 December 31 January 1 December 31 2006 2005 2005(1) 2004
SHAREHOLDERSrsquo EQUITY AND LIABILITIES
Shareholdersrsquo equity
Common stock (273871296 shares at
December 31 2006
with nominal value of euro 375 per share) 1027 1025 1025 1025
Trade accounts and notes payable 1032 1164 1199 1226
Accrued employee expenses 165 166 158 163
Income tax payable 57 47 60 60
Other current liabilities 671 750 746 800
Payables on acquisition of companies 13 138 84 84
Liabilities directly associated with
assets classified as held for sale 232 470 88 ndash
Total current liabilities 3681 4393 3602 3459
Total liabilities 5999 6644 6251 6062
Total shareholderrsquos equity and liabilities 8118 8860 8649 8555
(1) Including the impacts of the first-time application related to IAS 32 and 39 on financial instruments and IFRS 5 on non-current assets held for sale and
discontinued operations
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 6666
Creation and lay-out
Photo credits Nathalie BerhingGAMMA ndash Steacutephane de Bourgies ndash Jean-Franccedilois DeroubaixGAMMA ndash Christine Donnier- ValentinGAMMA ndash Cars copy 2006 Disney Enterprises IncPixar All Rights Reserved ndash Dreamgirls copy 2006 DREAMWORKS
LLC and PARAMOUNT PICTURES All Rights Reserved ndash Poseidon copy 2006 Warner Bros Pictures ndash Sony Bravia Paint
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 5266
50 Thomson Panorama 2006
tion within the film labs showing more
than a 25 improvement in water con-
sumption for every million feet of film pro-
cessed This helped Thomson achieve its
overall goal of reducing annual water con-
sumption by 15 Similarly good prog-
ress was achieved toward the long-term
goal of reduced landfill with almost 10
improvement in recycling rate comparedto 2005
As a corol lary to efforts to constant ly
improve the EHampS profile of ongoing activi-
ties Thomson reviews all newly acquired
businesses to ensure they meet Group
requirements and to define upgrade pro-
grams when necessary The EHampS reviews
include an evaluation of the status and
effectiveness of existing management
and control systems and a presentation
of Thomsonrsquos EHampS initiatives and require-
ments Newly acquired sites are now
encouraged to achieve ISO 14001 certi-fication within two years of their effective
date for joining the Group
Suppliers and subcontractors are required
to meet all legal requirements for environ-
mental protection including the elimina-
tion of hazardous substances Suppliers
are required to declare in writing that their
products are free of such substances as
cadmium chromium lead mercury and
asbestos and to provide laboratory test
data as proof
The transformation of Thomsonrsquos business
has reduced significantly
the Grouprsquos manufacturing activities
Overall local legislation and standards
form the foundation for Thomsonrsquos require-
ments concerning environmental health
safety employment child labor discrimi-
nation and human rights issues in each
country where it does business
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 5366
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 5466
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 5566
FINANCIAL INFORMATION
Thomson maintains the highest standards in compliance and risk management working continuously
to improve reporting and control as well as the quality of financial information made available to
its stakeholders
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 5666
54 Thomson Panorama 2006
Growing North American
investor base
The per iod 2004-2006 brought about
expansion in Thomsonrsquos international
shareholder base particularly in North
America Leading US-based investment
management funds Franklin Templeton
Investments and Brands Investment Part-ners hold over 10 and 5 respectively
of Thomsonrsquos share capital while Dodge amp
Cox increased its stake to over 10 during
the year The Group estimates that North
American institutional investors represent
over 50 of the institutional investor base
France around a quarter and other Euro-
pean investors account for the majority of
the remainder
Active communications
To keep Thomsonrsquos broad investor base
appraised of progress in implementing itsstrategic objectives senior management
devoted considerable time during the year
to investor meetings in both Europe and
North America
As part of its ongoing efforts to provide
investorsmdashparticularly individual share-
holdersmdashwith comprehensive up-to-date
information Thomson makes full use of
the internet Share price information press
releases as well as the Grouprsquos annual
report and reference documents (Docu-
ment de Reacutefeacuterence filed with the French
stock exchange regulator AMF and Form
20-F filed with the SEC) are available on
the site wwwthomsonnet
Annual General Shareholdersrsquo Meetings
are broadcast live over the internet with asimultaneous translation of the proceed-
ings provided from French to English to
enable the majority of shareholders to view
the event The results of the vote are dis-
closed in detail on the internet site imme-
diately following the Meeting
The Shareholder Relations department
organizes tours for individual shareholders
of the newly inaugurated Thomson Gal-
lery at the Grouprsquos headquarters in Paris
France Visits to the Gallery designed to
illustrate Thomsonrsquos activities through a
series of live technology demos and videopresentations allow participants to better
appreciate the Grouprsquos 2007-2009 strat-
egy and growth prospects
Dividend
The dividend ofeuro033 per share proposed
at the Annual Shareholdersrsquo Meeting on
15 May 2007 represented a 10 increase
over last yearrsquos dividend
SHAREHOLDER RELATIONS
Thomson aims to keep
investors and individual
shareholders informed of
progress in implementing
strategic objectives
Thomsonrsquos Annual General Meeting
provides an opportunity for debate and
exchange with individual shareholders
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 5766
55 Thomson Panorama 2006
Financial calendar 2007
bull April 26 First Quarter 2007 Sales
bull May 15 Shareholdersrsquo Meeting (on second notice)
bull July 26 First Half 2007 Results
bull October 18 Third Quarter 2007 Sales
These dates are subject to modification
Public904
CAPITAL STRUCTURE AS OF DECEMBER 31 2006
Employees25
Treasury Shares46
Other25
SHARE HIGHLIGHTS
2006 2005
Year high 1932 2142
Year low 1165 1526
Share price at year-end in euro 1481 1770
Average daily volume 2445176 2244879
Market capital at year-end in euro million 4056 4838
Number of shares outstanding at year end
(in thousands) 273871 273308
Net dividend per share in euro 033 030
Listed on the Paris and New York stock exchanges ndash Euronext code 18453 ndash NYSE ticker TMSN
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 5866
56 Thomson Panorama 2006
Maintaining the highest standards
in compliance and risk management
Extensive work was completed in 2006
in Thomsonrsquos main operational units and
at Corporate level to ensure alignment of
reporting and control procedures with the
requirements of the Sarbanes-Oxley Act in
the United States
Improving Internal Control Procedures
Building towards application of Section
404 of the Sarbanes-Oxley Act (ldquoSOX
404rdquo) for fiscal year 2006 which required
the Group to assess the effectiveness of
internal controls Thomson committed to
implementing the internal control frame-
work proposed by the Committee of
Sponsoring Organizations of the Treadway
Commission (ldquoCOSOrdquo)
Within this framework the Group seeks toachieve ldquoreasonable assurancerdquo regarding
the effectiveness and efficiency of opera-
tions the reliability of financial reporting
and compliance with applicable laws and
regulations
Group-wide initiatives were on-going in
2006 to achieve these objectives including
the Process Transformation Initiative (PTI)
to ensure operational excellence COM-
PASS (Controls Over Methods Processes
Applications Systems and Strategy) and
the Risk Committee and its enterprise risk
assessment and management programrun by the Internal Audit function
Following a full worldwide enterprise risk
assessment carried out in the second half
of 2005 and updated throughout 2006 a
second was planned for completion by May
2007 The process assesses risks in the
Grouprsquos distinct business units or profit cen-
ters with the goal of identifying assessing
validating and monitoring risks which could
impact or potentially impact the Grouprsquos
ability to achieve its short and long-term
objectives In 2007 the Risk Committee will
continue to regularly monitor action plans
put in place to mitigate the risks identified
During the year the Group also continued
implementation of a worldwide SOX 404
compliance software system to assist with
the documentation of significant financialprocesses provide consistent guidance
to management regarding controls and
better enable management to assess its
control structure
Managing Risk
Thomson has three main internal organiza-
tions that support and assist the Executive
Committee in control and risk monitoring
the Investment Committee and the Risk
Committee The Investment Committee
meets on an ad hoc basis throughout the
year generally once per week to reviewfinancial commitments including proposed
acquisitions capital equipment funding
and new ventures requiring capital The Risk
Committee which met nine times in 2006
evaluates the Grouprsquos financial operational
and compliance risks and identifies strate-
gic risks that could adversely affect different
activities within the framework of Grouprsquos
three-year plan scenarios The Corporate
Social Responsibility (CSR) Committee to
be set up in 2007 will oversee all CSR
compliance and ethics matters
Ethical values and principles of conductfor the Grouprsquos managers are defined in
of the Grouprsquos divisions and profit centersIn the context of the budgetary procedure
performance measurement indicators are
calculated by the divisions analyzed and
reviewed monthly to serve as a reference
for the Grouprsquos monthly reporting
Management reporting and
closing period work
Th om so n uses a co mmon char t of
accounts which is regularly updated The
principal accounting and financial figures
of the operational and functional depart-
ments consolidated at Group level are
analyzed by the Grouprsquos management
control team and reviewed by the Grouprsquos
Executive Committee
The closing process for the half-year and
annual consolidated financial statementsoccurs in two steps The first step con-
sists of a ldquohard closerdquo completed in May
and September leading to a first review by
the statutory auditors The second step
occurs in July and in JanuaryFebruary and
involves the finalization of half-year and
annual consolidated financial statements
under IFRS The Group then proceeds
once a year with a reconciliation of these
results in accordance with US GAAP
Preparation of financial statements
The financial statements are prepared jointly by the finance department and the
General Secretary They are based on
information reported through the annual
reporting and accounting consolidation
processes and on operational and mar-
ket information which is specifically cen-
tralized for the preparation of Thomsonrsquos
Document de Reacutefeacuterence in France and
the submission of Form 20-F in the United
States Half-year and annual financial infor-
mation is reviewed by the Grouprsquos Audit
Committee
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 6066
58 Thomson Panorama 2006
(1) Source PriceWaterhouseCoopers ndash
ldquoGlobal Entertainment and Media Outlook 2006-10rdquo
Revenue growth
Thomson achieved consolidated 2006
net revenues of 9914045854 million up from
9914045591 million in 2005 Revenues for
the Core Business reached 9914045747 mil-
lion (9914045776 million at constant currency)
representing 83 growth over 2005 at
constant currency
Overall the Grouprsquos key growth busi-
nessesmdashContent Services Network
Services Access Products for telecom
operators and our Broadcast amp Networks
businesses (Grass Valley and Network
Software)mdashincreased strongly year-on-
year and accounted for over a third of
Group revenues against less than a quar-
ter in 2005
Thomsonrsquos Core Business EBIT for 2006
was euro504 million representing a Core
Business EBIT margin of 88 Thisreflected growth in some key businesses
and cost actions across the Group off-
setting a significant investment in research
and development and some increase in
restructuring expenses
Increased spend on RampD
Research and development expenditure
charged in the Core Business (net of
external funding) rose from 991404221 million in
2005 to 991404279 million in 2006 an increase
of 26 principally in the Systems divi-
sion The Group expanded the number ofproducts and services in the development
phase across its businesses
Return to profit
Losses in Non-Core Continuing and Dis-
continued operations were substantially
lower year-on-year reflecting principally
the exit from heavily loss-making Displays
activities in 2005 and intensified cost-sav-
ing programs in 2006 A major revision
and harmonization of the Grouprsquos North
American healthcare obligations gave rise
to substantial one-time gains and Thom-
son also initiated significant restructuring
of its French Non-Core operations
The good performance of the Core Busi-
ness lower Non-Core and Discontinued
losses and a low reported tax chargeenabled the Group to return a net profit of
99140455 million in 2006 compared to a loss of
991404573 million in the previous year
Good cash flow
strengthened balance sheet
Thomson generated good free cash flow
and strengthened its balance sheet in
2006 Total net financial liabilities on the
balance sheet fell by 991404460 million reflect-
ing a 99140493 million fall in financial and acqui-
sition-related debts and a 991404367 million
reduction in retirement benefit obligations(including healthcare)
Increase in Net Dividend
The Board of Directors proposed a dis-
tribution to shareholders of 991404033 per
share (2005 dividend 991404030) reflecting
confidence in the prospects of the Group
going forward
Outlook 2007-2009
growth in revenues and net income
With the Grouprsquos transformation complete Thomsonrsquos financial focus over the 2007-
2009 period will be to grow revenues and
net income
Thomson serves growing Media Enter-
tainment amp Communications marketsmdashfor
which external estimates(1) indicate com-
pound growth of around 6 over the last
FINANCIAL AND
OPERATIONAL PERFORMANCE
Full year 2006 results
saw a return to profitability
and leave Thomson
well positioned at
the heart of convergence
and digital video
8122019 Panorama 2006
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59 Thomson Panorama 2006
five years Our digital and electronic busi-
nesses now represent two-thirds of rev-
enues and we believe they are growing
faster than the overall market offsetting
the maturing physical media businesses
Given this profile the Group expects its
revenue growth to be more modest in
2007 but to gather pace over the period
and our overall objective is to show com-pound growth over 2007-2009 in line with
or faster than the overall market
The 2007-2009 period is also expected
to see a sharply reduced impact from
residual Non-Core activities with an end
to losses from the Discontinued Activities
perimeter after 2007 Accordingly Thom-
sonrsquos ambition is to turn its Core Business
growth and profitability and lower impact
from Non-Core into strong growth in net
income over the period 2007-2009
Business operations
Continuous performance improvement is
fundamental to Thomsonrsquos commitment to
create sustainable business models and
long-term value for all stakeholders The
ambitious Group-wide programs launched
in 2004 to improve productivity and
enhance overall performance producedsubstantial results in 2006 and led to new
and strong initiatives for long-term growth
As of the second half of 2006 six ldquoKey
Programsrdquo are monitored at Group level
Clients Software Product Introduction
Operations Transformation and Talent
Management
KEY PROGRAMS IN PLACE
Program Focus
Clients Thomsonrsquos clientregional diversification and
growth of the existing business
through improved Sales amp Marketing
Software Development of integrated software platforms
in all markets (post-production distribution
delivery) and for all types of customer
(professional prosumerhellip)
Product Introduction Ensuring new product roadmaps are in line
with strategy and resource needs have been
identifiedOperations Improving the Grouprsquos cost base cash
generation and working capital
Transformation Multiple programs including initiatives to
improving customer relationship management
worldwide supply chain management
IT transformation as well as Thomsonrsquos RampD
footprint
Talent Management Leveraging human assets with a focus on
talent retention and acquisition
8122019 Panorama 2006
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60 Thomson Panorama 2006
SUMMARY RESULTS FULL YEAR 2006
In 991404 millions unless otherwise stated 2006(1) 2005(1)
Net revenues 5854 5591(1)
Core Business net revenues 5747 5335
Services 2489 2487
Systems 2684 2262
Technology 547 546
Corporate 27 40
Non-Core continuing operations net revenues 107 256
Core Business EBIT(2) 504 512
Services 160 205
Systems 132 109
Technology 289 277Corporate (77) (79)
EBIT from Non-Core continuing operations (25) (122)
(1) Restated with 2006 discontinued activities according to IFRS 5
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61 Thomson Panorama 2006
Year ended December 31in 991404 except number of shares 2006 2005 2004
Year ended December 31in 991404 millions 2006 2005(1) 2004(1)
CONSOLIDATED STATEMENTS OF OPERATIONS
(1) Restated with 2006 discontinued activities according to IFRS 5
(2) After deduction of the interests net of tax paid on the subordinated perpetual notes during the period
Continuing operations
Revenues 5854 5591 5980
Cost of sales (4474) (4240) (4594)
Gross margin 1380 1351 1386
Selling marketing general and administrative expenses (674) (638) (653)
Other income (expense) 52 (96) (69)
Research and development expenses (279) (227) (201)
Profit from continuing operations before tax and net finance costs 479 390 463
Interest income 19 30 52
Interest expense (108) (108) (54)
Other financial income (expense) (111) 36 (26)
Finance costs ndash net (200) (42) (28)
Share of profit (loss) from associates (86) (82) (20)
Income tax ndash (68) (93)
Profit from continuing operations 193 198 322
Discontinued operations
Profit (loss) from discontinued operations (138) (771) (883)
Net income (loss) 55 (573) (561)
Attributable to
Equity Holders 55 (574) (559)
Minority interests ndash 1 (2)
Weighted average number of shares
outstandingmdashbasic net of treasury stock 261188858 266539917 273646869
Earnings per share from continuing operations
Basic(2) 067 074 118
Diluted 063 042 111
Earnings per share from discontinued operations
Basic (053) (289) (323)
Diluted (048) (262) (296)Total earnings per share
Basic(2) 014 (215) (205)
Diluted 015 (220) (185)
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62 Thomson Panorama 2006
CONSOLIDATED BALANCE SHEETS
In 991404 millions December 31 December 31 January 1 December 31 2006 2005 2005(1) 2004
ASSETS
Non-current assets
Property plant and equipment 813 886 1051 1051
Goodwill 1714 1756 1186 1178
Other intangible assets 1071 1150 924 924
Investments in associates 12 204 260 260
Investments and financial assets available-for-sale 266 341 139 113
Derivative financial instruments 7 1 11 ndash
Contract advances 129 173 179 179
Deferred tax assets 397 379 307 301
Other non-current assets 110 182 133 136
Total non-current assets 4519 5072 4190 4142
Current assets
Inventories 366 333 503 568
Trade accounts and notes receivable 1018 1315 1232 1180
Current accounts with associates and joint ventures 97 115 143 143
Derivative financial instruments 8 9 115 ndash
Other current assets 535 644 483 616
Marketable securities ndash 7 58 58
Cash and cash equivalents 1311 996 1845 1848
Assets classified as held for sale 264 369 80 ndash
Total current assets 3599 3788 4459 4413
Total assets 8118 8860 8649 8555
(1) Including the impacts of the first-time application related to IAS 32 and 39 on financial instruments and IFRS 5 on non-current assets held for sale and
discontinued operations
8122019 Panorama 2006
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63 Thomson Panorama 2006
In 991404 millions December 31 December 31 January 1 December 31 2006 2005 2005(1) 2004
SHAREHOLDERSrsquo EQUITY AND LIABILITIES
Shareholdersrsquo equity
Common stock (273871296 shares at
December 31 2006
with nominal value of euro 375 per share) 1027 1025 1025 1025
Trade accounts and notes payable 1032 1164 1199 1226
Accrued employee expenses 165 166 158 163
Income tax payable 57 47 60 60
Other current liabilities 671 750 746 800
Payables on acquisition of companies 13 138 84 84
Liabilities directly associated with
assets classified as held for sale 232 470 88 ndash
Total current liabilities 3681 4393 3602 3459
Total liabilities 5999 6644 6251 6062
Total shareholderrsquos equity and liabilities 8118 8860 8649 8555
(1) Including the impacts of the first-time application related to IAS 32 and 39 on financial instruments and IFRS 5 on non-current assets held for sale and
discontinued operations
8122019 Panorama 2006
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Creation and lay-out
Photo credits Nathalie BerhingGAMMA ndash Steacutephane de Bourgies ndash Jean-Franccedilois DeroubaixGAMMA ndash Christine Donnier- ValentinGAMMA ndash Cars copy 2006 Disney Enterprises IncPixar All Rights Reserved ndash Dreamgirls copy 2006 DREAMWORKS
LLC and PARAMOUNT PICTURES All Rights Reserved ndash Poseidon copy 2006 Warner Bros Pictures ndash Sony Bravia Paint
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 5366
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 5466
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 5566
FINANCIAL INFORMATION
Thomson maintains the highest standards in compliance and risk management working continuously
to improve reporting and control as well as the quality of financial information made available to
its stakeholders
8122019 Panorama 2006
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54 Thomson Panorama 2006
Growing North American
investor base
The per iod 2004-2006 brought about
expansion in Thomsonrsquos international
shareholder base particularly in North
America Leading US-based investment
management funds Franklin Templeton
Investments and Brands Investment Part-ners hold over 10 and 5 respectively
of Thomsonrsquos share capital while Dodge amp
Cox increased its stake to over 10 during
the year The Group estimates that North
American institutional investors represent
over 50 of the institutional investor base
France around a quarter and other Euro-
pean investors account for the majority of
the remainder
Active communications
To keep Thomsonrsquos broad investor base
appraised of progress in implementing itsstrategic objectives senior management
devoted considerable time during the year
to investor meetings in both Europe and
North America
As part of its ongoing efforts to provide
investorsmdashparticularly individual share-
holdersmdashwith comprehensive up-to-date
information Thomson makes full use of
the internet Share price information press
releases as well as the Grouprsquos annual
report and reference documents (Docu-
ment de Reacutefeacuterence filed with the French
stock exchange regulator AMF and Form
20-F filed with the SEC) are available on
the site wwwthomsonnet
Annual General Shareholdersrsquo Meetings
are broadcast live over the internet with asimultaneous translation of the proceed-
ings provided from French to English to
enable the majority of shareholders to view
the event The results of the vote are dis-
closed in detail on the internet site imme-
diately following the Meeting
The Shareholder Relations department
organizes tours for individual shareholders
of the newly inaugurated Thomson Gal-
lery at the Grouprsquos headquarters in Paris
France Visits to the Gallery designed to
illustrate Thomsonrsquos activities through a
series of live technology demos and videopresentations allow participants to better
appreciate the Grouprsquos 2007-2009 strat-
egy and growth prospects
Dividend
The dividend ofeuro033 per share proposed
at the Annual Shareholdersrsquo Meeting on
15 May 2007 represented a 10 increase
over last yearrsquos dividend
SHAREHOLDER RELATIONS
Thomson aims to keep
investors and individual
shareholders informed of
progress in implementing
strategic objectives
Thomsonrsquos Annual General Meeting
provides an opportunity for debate and
exchange with individual shareholders
8122019 Panorama 2006
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55 Thomson Panorama 2006
Financial calendar 2007
bull April 26 First Quarter 2007 Sales
bull May 15 Shareholdersrsquo Meeting (on second notice)
bull July 26 First Half 2007 Results
bull October 18 Third Quarter 2007 Sales
These dates are subject to modification
Public904
CAPITAL STRUCTURE AS OF DECEMBER 31 2006
Employees25
Treasury Shares46
Other25
SHARE HIGHLIGHTS
2006 2005
Year high 1932 2142
Year low 1165 1526
Share price at year-end in euro 1481 1770
Average daily volume 2445176 2244879
Market capital at year-end in euro million 4056 4838
Number of shares outstanding at year end
(in thousands) 273871 273308
Net dividend per share in euro 033 030
Listed on the Paris and New York stock exchanges ndash Euronext code 18453 ndash NYSE ticker TMSN
8122019 Panorama 2006
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56 Thomson Panorama 2006
Maintaining the highest standards
in compliance and risk management
Extensive work was completed in 2006
in Thomsonrsquos main operational units and
at Corporate level to ensure alignment of
reporting and control procedures with the
requirements of the Sarbanes-Oxley Act in
the United States
Improving Internal Control Procedures
Building towards application of Section
404 of the Sarbanes-Oxley Act (ldquoSOX
404rdquo) for fiscal year 2006 which required
the Group to assess the effectiveness of
internal controls Thomson committed to
implementing the internal control frame-
work proposed by the Committee of
Sponsoring Organizations of the Treadway
Commission (ldquoCOSOrdquo)
Within this framework the Group seeks toachieve ldquoreasonable assurancerdquo regarding
the effectiveness and efficiency of opera-
tions the reliability of financial reporting
and compliance with applicable laws and
regulations
Group-wide initiatives were on-going in
2006 to achieve these objectives including
the Process Transformation Initiative (PTI)
to ensure operational excellence COM-
PASS (Controls Over Methods Processes
Applications Systems and Strategy) and
the Risk Committee and its enterprise risk
assessment and management programrun by the Internal Audit function
Following a full worldwide enterprise risk
assessment carried out in the second half
of 2005 and updated throughout 2006 a
second was planned for completion by May
2007 The process assesses risks in the
Grouprsquos distinct business units or profit cen-
ters with the goal of identifying assessing
validating and monitoring risks which could
impact or potentially impact the Grouprsquos
ability to achieve its short and long-term
objectives In 2007 the Risk Committee will
continue to regularly monitor action plans
put in place to mitigate the risks identified
During the year the Group also continued
implementation of a worldwide SOX 404
compliance software system to assist with
the documentation of significant financialprocesses provide consistent guidance
to management regarding controls and
better enable management to assess its
control structure
Managing Risk
Thomson has three main internal organiza-
tions that support and assist the Executive
Committee in control and risk monitoring
the Investment Committee and the Risk
Committee The Investment Committee
meets on an ad hoc basis throughout the
year generally once per week to reviewfinancial commitments including proposed
acquisitions capital equipment funding
and new ventures requiring capital The Risk
Committee which met nine times in 2006
evaluates the Grouprsquos financial operational
and compliance risks and identifies strate-
gic risks that could adversely affect different
activities within the framework of Grouprsquos
three-year plan scenarios The Corporate
Social Responsibility (CSR) Committee to
be set up in 2007 will oversee all CSR
compliance and ethics matters
Ethical values and principles of conductfor the Grouprsquos managers are defined in
of the Grouprsquos divisions and profit centersIn the context of the budgetary procedure
performance measurement indicators are
calculated by the divisions analyzed and
reviewed monthly to serve as a reference
for the Grouprsquos monthly reporting
Management reporting and
closing period work
Th om so n uses a co mmon char t of
accounts which is regularly updated The
principal accounting and financial figures
of the operational and functional depart-
ments consolidated at Group level are
analyzed by the Grouprsquos management
control team and reviewed by the Grouprsquos
Executive Committee
The closing process for the half-year and
annual consolidated financial statementsoccurs in two steps The first step con-
sists of a ldquohard closerdquo completed in May
and September leading to a first review by
the statutory auditors The second step
occurs in July and in JanuaryFebruary and
involves the finalization of half-year and
annual consolidated financial statements
under IFRS The Group then proceeds
once a year with a reconciliation of these
results in accordance with US GAAP
Preparation of financial statements
The financial statements are prepared jointly by the finance department and the
General Secretary They are based on
information reported through the annual
reporting and accounting consolidation
processes and on operational and mar-
ket information which is specifically cen-
tralized for the preparation of Thomsonrsquos
Document de Reacutefeacuterence in France and
the submission of Form 20-F in the United
States Half-year and annual financial infor-
mation is reviewed by the Grouprsquos Audit
Committee
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58 Thomson Panorama 2006
(1) Source PriceWaterhouseCoopers ndash
ldquoGlobal Entertainment and Media Outlook 2006-10rdquo
Revenue growth
Thomson achieved consolidated 2006
net revenues of 9914045854 million up from
9914045591 million in 2005 Revenues for
the Core Business reached 9914045747 mil-
lion (9914045776 million at constant currency)
representing 83 growth over 2005 at
constant currency
Overall the Grouprsquos key growth busi-
nessesmdashContent Services Network
Services Access Products for telecom
operators and our Broadcast amp Networks
businesses (Grass Valley and Network
Software)mdashincreased strongly year-on-
year and accounted for over a third of
Group revenues against less than a quar-
ter in 2005
Thomsonrsquos Core Business EBIT for 2006
was euro504 million representing a Core
Business EBIT margin of 88 Thisreflected growth in some key businesses
and cost actions across the Group off-
setting a significant investment in research
and development and some increase in
restructuring expenses
Increased spend on RampD
Research and development expenditure
charged in the Core Business (net of
external funding) rose from 991404221 million in
2005 to 991404279 million in 2006 an increase
of 26 principally in the Systems divi-
sion The Group expanded the number ofproducts and services in the development
phase across its businesses
Return to profit
Losses in Non-Core Continuing and Dis-
continued operations were substantially
lower year-on-year reflecting principally
the exit from heavily loss-making Displays
activities in 2005 and intensified cost-sav-
ing programs in 2006 A major revision
and harmonization of the Grouprsquos North
American healthcare obligations gave rise
to substantial one-time gains and Thom-
son also initiated significant restructuring
of its French Non-Core operations
The good performance of the Core Busi-
ness lower Non-Core and Discontinued
losses and a low reported tax chargeenabled the Group to return a net profit of
99140455 million in 2006 compared to a loss of
991404573 million in the previous year
Good cash flow
strengthened balance sheet
Thomson generated good free cash flow
and strengthened its balance sheet in
2006 Total net financial liabilities on the
balance sheet fell by 991404460 million reflect-
ing a 99140493 million fall in financial and acqui-
sition-related debts and a 991404367 million
reduction in retirement benefit obligations(including healthcare)
Increase in Net Dividend
The Board of Directors proposed a dis-
tribution to shareholders of 991404033 per
share (2005 dividend 991404030) reflecting
confidence in the prospects of the Group
going forward
Outlook 2007-2009
growth in revenues and net income
With the Grouprsquos transformation complete Thomsonrsquos financial focus over the 2007-
2009 period will be to grow revenues and
net income
Thomson serves growing Media Enter-
tainment amp Communications marketsmdashfor
which external estimates(1) indicate com-
pound growth of around 6 over the last
FINANCIAL AND
OPERATIONAL PERFORMANCE
Full year 2006 results
saw a return to profitability
and leave Thomson
well positioned at
the heart of convergence
and digital video
8122019 Panorama 2006
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59 Thomson Panorama 2006
five years Our digital and electronic busi-
nesses now represent two-thirds of rev-
enues and we believe they are growing
faster than the overall market offsetting
the maturing physical media businesses
Given this profile the Group expects its
revenue growth to be more modest in
2007 but to gather pace over the period
and our overall objective is to show com-pound growth over 2007-2009 in line with
or faster than the overall market
The 2007-2009 period is also expected
to see a sharply reduced impact from
residual Non-Core activities with an end
to losses from the Discontinued Activities
perimeter after 2007 Accordingly Thom-
sonrsquos ambition is to turn its Core Business
growth and profitability and lower impact
from Non-Core into strong growth in net
income over the period 2007-2009
Business operations
Continuous performance improvement is
fundamental to Thomsonrsquos commitment to
create sustainable business models and
long-term value for all stakeholders The
ambitious Group-wide programs launched
in 2004 to improve productivity and
enhance overall performance producedsubstantial results in 2006 and led to new
and strong initiatives for long-term growth
As of the second half of 2006 six ldquoKey
Programsrdquo are monitored at Group level
Clients Software Product Introduction
Operations Transformation and Talent
Management
KEY PROGRAMS IN PLACE
Program Focus
Clients Thomsonrsquos clientregional diversification and
growth of the existing business
through improved Sales amp Marketing
Software Development of integrated software platforms
in all markets (post-production distribution
delivery) and for all types of customer
(professional prosumerhellip)
Product Introduction Ensuring new product roadmaps are in line
with strategy and resource needs have been
identifiedOperations Improving the Grouprsquos cost base cash
generation and working capital
Transformation Multiple programs including initiatives to
improving customer relationship management
worldwide supply chain management
IT transformation as well as Thomsonrsquos RampD
footprint
Talent Management Leveraging human assets with a focus on
talent retention and acquisition
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60 Thomson Panorama 2006
SUMMARY RESULTS FULL YEAR 2006
In 991404 millions unless otherwise stated 2006(1) 2005(1)
Net revenues 5854 5591(1)
Core Business net revenues 5747 5335
Services 2489 2487
Systems 2684 2262
Technology 547 546
Corporate 27 40
Non-Core continuing operations net revenues 107 256
Core Business EBIT(2) 504 512
Services 160 205
Systems 132 109
Technology 289 277Corporate (77) (79)
EBIT from Non-Core continuing operations (25) (122)
(1) Restated with 2006 discontinued activities according to IFRS 5
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61 Thomson Panorama 2006
Year ended December 31in 991404 except number of shares 2006 2005 2004
Year ended December 31in 991404 millions 2006 2005(1) 2004(1)
CONSOLIDATED STATEMENTS OF OPERATIONS
(1) Restated with 2006 discontinued activities according to IFRS 5
(2) After deduction of the interests net of tax paid on the subordinated perpetual notes during the period
Continuing operations
Revenues 5854 5591 5980
Cost of sales (4474) (4240) (4594)
Gross margin 1380 1351 1386
Selling marketing general and administrative expenses (674) (638) (653)
Other income (expense) 52 (96) (69)
Research and development expenses (279) (227) (201)
Profit from continuing operations before tax and net finance costs 479 390 463
Interest income 19 30 52
Interest expense (108) (108) (54)
Other financial income (expense) (111) 36 (26)
Finance costs ndash net (200) (42) (28)
Share of profit (loss) from associates (86) (82) (20)
Income tax ndash (68) (93)
Profit from continuing operations 193 198 322
Discontinued operations
Profit (loss) from discontinued operations (138) (771) (883)
Net income (loss) 55 (573) (561)
Attributable to
Equity Holders 55 (574) (559)
Minority interests ndash 1 (2)
Weighted average number of shares
outstandingmdashbasic net of treasury stock 261188858 266539917 273646869
Earnings per share from continuing operations
Basic(2) 067 074 118
Diluted 063 042 111
Earnings per share from discontinued operations
Basic (053) (289) (323)
Diluted (048) (262) (296)Total earnings per share
Basic(2) 014 (215) (205)
Diluted 015 (220) (185)
8122019 Panorama 2006
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62 Thomson Panorama 2006
CONSOLIDATED BALANCE SHEETS
In 991404 millions December 31 December 31 January 1 December 31 2006 2005 2005(1) 2004
ASSETS
Non-current assets
Property plant and equipment 813 886 1051 1051
Goodwill 1714 1756 1186 1178
Other intangible assets 1071 1150 924 924
Investments in associates 12 204 260 260
Investments and financial assets available-for-sale 266 341 139 113
Derivative financial instruments 7 1 11 ndash
Contract advances 129 173 179 179
Deferred tax assets 397 379 307 301
Other non-current assets 110 182 133 136
Total non-current assets 4519 5072 4190 4142
Current assets
Inventories 366 333 503 568
Trade accounts and notes receivable 1018 1315 1232 1180
Current accounts with associates and joint ventures 97 115 143 143
Derivative financial instruments 8 9 115 ndash
Other current assets 535 644 483 616
Marketable securities ndash 7 58 58
Cash and cash equivalents 1311 996 1845 1848
Assets classified as held for sale 264 369 80 ndash
Total current assets 3599 3788 4459 4413
Total assets 8118 8860 8649 8555
(1) Including the impacts of the first-time application related to IAS 32 and 39 on financial instruments and IFRS 5 on non-current assets held for sale and
discontinued operations
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63 Thomson Panorama 2006
In 991404 millions December 31 December 31 January 1 December 31 2006 2005 2005(1) 2004
SHAREHOLDERSrsquo EQUITY AND LIABILITIES
Shareholdersrsquo equity
Common stock (273871296 shares at
December 31 2006
with nominal value of euro 375 per share) 1027 1025 1025 1025
Trade accounts and notes payable 1032 1164 1199 1226
Accrued employee expenses 165 166 158 163
Income tax payable 57 47 60 60
Other current liabilities 671 750 746 800
Payables on acquisition of companies 13 138 84 84
Liabilities directly associated with
assets classified as held for sale 232 470 88 ndash
Total current liabilities 3681 4393 3602 3459
Total liabilities 5999 6644 6251 6062
Total shareholderrsquos equity and liabilities 8118 8860 8649 8555
(1) Including the impacts of the first-time application related to IAS 32 and 39 on financial instruments and IFRS 5 on non-current assets held for sale and
discontinued operations
8122019 Panorama 2006
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Creation and lay-out
Photo credits Nathalie BerhingGAMMA ndash Steacutephane de Bourgies ndash Jean-Franccedilois DeroubaixGAMMA ndash Christine Donnier- ValentinGAMMA ndash Cars copy 2006 Disney Enterprises IncPixar All Rights Reserved ndash Dreamgirls copy 2006 DREAMWORKS
LLC and PARAMOUNT PICTURES All Rights Reserved ndash Poseidon copy 2006 Warner Bros Pictures ndash Sony Bravia Paint
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 5466
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 5566
FINANCIAL INFORMATION
Thomson maintains the highest standards in compliance and risk management working continuously
to improve reporting and control as well as the quality of financial information made available to
its stakeholders
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 5666
54 Thomson Panorama 2006
Growing North American
investor base
The per iod 2004-2006 brought about
expansion in Thomsonrsquos international
shareholder base particularly in North
America Leading US-based investment
management funds Franklin Templeton
Investments and Brands Investment Part-ners hold over 10 and 5 respectively
of Thomsonrsquos share capital while Dodge amp
Cox increased its stake to over 10 during
the year The Group estimates that North
American institutional investors represent
over 50 of the institutional investor base
France around a quarter and other Euro-
pean investors account for the majority of
the remainder
Active communications
To keep Thomsonrsquos broad investor base
appraised of progress in implementing itsstrategic objectives senior management
devoted considerable time during the year
to investor meetings in both Europe and
North America
As part of its ongoing efforts to provide
investorsmdashparticularly individual share-
holdersmdashwith comprehensive up-to-date
information Thomson makes full use of
the internet Share price information press
releases as well as the Grouprsquos annual
report and reference documents (Docu-
ment de Reacutefeacuterence filed with the French
stock exchange regulator AMF and Form
20-F filed with the SEC) are available on
the site wwwthomsonnet
Annual General Shareholdersrsquo Meetings
are broadcast live over the internet with asimultaneous translation of the proceed-
ings provided from French to English to
enable the majority of shareholders to view
the event The results of the vote are dis-
closed in detail on the internet site imme-
diately following the Meeting
The Shareholder Relations department
organizes tours for individual shareholders
of the newly inaugurated Thomson Gal-
lery at the Grouprsquos headquarters in Paris
France Visits to the Gallery designed to
illustrate Thomsonrsquos activities through a
series of live technology demos and videopresentations allow participants to better
appreciate the Grouprsquos 2007-2009 strat-
egy and growth prospects
Dividend
The dividend ofeuro033 per share proposed
at the Annual Shareholdersrsquo Meeting on
15 May 2007 represented a 10 increase
over last yearrsquos dividend
SHAREHOLDER RELATIONS
Thomson aims to keep
investors and individual
shareholders informed of
progress in implementing
strategic objectives
Thomsonrsquos Annual General Meeting
provides an opportunity for debate and
exchange with individual shareholders
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 5766
55 Thomson Panorama 2006
Financial calendar 2007
bull April 26 First Quarter 2007 Sales
bull May 15 Shareholdersrsquo Meeting (on second notice)
bull July 26 First Half 2007 Results
bull October 18 Third Quarter 2007 Sales
These dates are subject to modification
Public904
CAPITAL STRUCTURE AS OF DECEMBER 31 2006
Employees25
Treasury Shares46
Other25
SHARE HIGHLIGHTS
2006 2005
Year high 1932 2142
Year low 1165 1526
Share price at year-end in euro 1481 1770
Average daily volume 2445176 2244879
Market capital at year-end in euro million 4056 4838
Number of shares outstanding at year end
(in thousands) 273871 273308
Net dividend per share in euro 033 030
Listed on the Paris and New York stock exchanges ndash Euronext code 18453 ndash NYSE ticker TMSN
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 5866
56 Thomson Panorama 2006
Maintaining the highest standards
in compliance and risk management
Extensive work was completed in 2006
in Thomsonrsquos main operational units and
at Corporate level to ensure alignment of
reporting and control procedures with the
requirements of the Sarbanes-Oxley Act in
the United States
Improving Internal Control Procedures
Building towards application of Section
404 of the Sarbanes-Oxley Act (ldquoSOX
404rdquo) for fiscal year 2006 which required
the Group to assess the effectiveness of
internal controls Thomson committed to
implementing the internal control frame-
work proposed by the Committee of
Sponsoring Organizations of the Treadway
Commission (ldquoCOSOrdquo)
Within this framework the Group seeks toachieve ldquoreasonable assurancerdquo regarding
the effectiveness and efficiency of opera-
tions the reliability of financial reporting
and compliance with applicable laws and
regulations
Group-wide initiatives were on-going in
2006 to achieve these objectives including
the Process Transformation Initiative (PTI)
to ensure operational excellence COM-
PASS (Controls Over Methods Processes
Applications Systems and Strategy) and
the Risk Committee and its enterprise risk
assessment and management programrun by the Internal Audit function
Following a full worldwide enterprise risk
assessment carried out in the second half
of 2005 and updated throughout 2006 a
second was planned for completion by May
2007 The process assesses risks in the
Grouprsquos distinct business units or profit cen-
ters with the goal of identifying assessing
validating and monitoring risks which could
impact or potentially impact the Grouprsquos
ability to achieve its short and long-term
objectives In 2007 the Risk Committee will
continue to regularly monitor action plans
put in place to mitigate the risks identified
During the year the Group also continued
implementation of a worldwide SOX 404
compliance software system to assist with
the documentation of significant financialprocesses provide consistent guidance
to management regarding controls and
better enable management to assess its
control structure
Managing Risk
Thomson has three main internal organiza-
tions that support and assist the Executive
Committee in control and risk monitoring
the Investment Committee and the Risk
Committee The Investment Committee
meets on an ad hoc basis throughout the
year generally once per week to reviewfinancial commitments including proposed
acquisitions capital equipment funding
and new ventures requiring capital The Risk
Committee which met nine times in 2006
evaluates the Grouprsquos financial operational
and compliance risks and identifies strate-
gic risks that could adversely affect different
activities within the framework of Grouprsquos
three-year plan scenarios The Corporate
Social Responsibility (CSR) Committee to
be set up in 2007 will oversee all CSR
compliance and ethics matters
Ethical values and principles of conductfor the Grouprsquos managers are defined in
of the Grouprsquos divisions and profit centersIn the context of the budgetary procedure
performance measurement indicators are
calculated by the divisions analyzed and
reviewed monthly to serve as a reference
for the Grouprsquos monthly reporting
Management reporting and
closing period work
Th om so n uses a co mmon char t of
accounts which is regularly updated The
principal accounting and financial figures
of the operational and functional depart-
ments consolidated at Group level are
analyzed by the Grouprsquos management
control team and reviewed by the Grouprsquos
Executive Committee
The closing process for the half-year and
annual consolidated financial statementsoccurs in two steps The first step con-
sists of a ldquohard closerdquo completed in May
and September leading to a first review by
the statutory auditors The second step
occurs in July and in JanuaryFebruary and
involves the finalization of half-year and
annual consolidated financial statements
under IFRS The Group then proceeds
once a year with a reconciliation of these
results in accordance with US GAAP
Preparation of financial statements
The financial statements are prepared jointly by the finance department and the
General Secretary They are based on
information reported through the annual
reporting and accounting consolidation
processes and on operational and mar-
ket information which is specifically cen-
tralized for the preparation of Thomsonrsquos
Document de Reacutefeacuterence in France and
the submission of Form 20-F in the United
States Half-year and annual financial infor-
mation is reviewed by the Grouprsquos Audit
Committee
8122019 Panorama 2006
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58 Thomson Panorama 2006
(1) Source PriceWaterhouseCoopers ndash
ldquoGlobal Entertainment and Media Outlook 2006-10rdquo
Revenue growth
Thomson achieved consolidated 2006
net revenues of 9914045854 million up from
9914045591 million in 2005 Revenues for
the Core Business reached 9914045747 mil-
lion (9914045776 million at constant currency)
representing 83 growth over 2005 at
constant currency
Overall the Grouprsquos key growth busi-
nessesmdashContent Services Network
Services Access Products for telecom
operators and our Broadcast amp Networks
businesses (Grass Valley and Network
Software)mdashincreased strongly year-on-
year and accounted for over a third of
Group revenues against less than a quar-
ter in 2005
Thomsonrsquos Core Business EBIT for 2006
was euro504 million representing a Core
Business EBIT margin of 88 Thisreflected growth in some key businesses
and cost actions across the Group off-
setting a significant investment in research
and development and some increase in
restructuring expenses
Increased spend on RampD
Research and development expenditure
charged in the Core Business (net of
external funding) rose from 991404221 million in
2005 to 991404279 million in 2006 an increase
of 26 principally in the Systems divi-
sion The Group expanded the number ofproducts and services in the development
phase across its businesses
Return to profit
Losses in Non-Core Continuing and Dis-
continued operations were substantially
lower year-on-year reflecting principally
the exit from heavily loss-making Displays
activities in 2005 and intensified cost-sav-
ing programs in 2006 A major revision
and harmonization of the Grouprsquos North
American healthcare obligations gave rise
to substantial one-time gains and Thom-
son also initiated significant restructuring
of its French Non-Core operations
The good performance of the Core Busi-
ness lower Non-Core and Discontinued
losses and a low reported tax chargeenabled the Group to return a net profit of
99140455 million in 2006 compared to a loss of
991404573 million in the previous year
Good cash flow
strengthened balance sheet
Thomson generated good free cash flow
and strengthened its balance sheet in
2006 Total net financial liabilities on the
balance sheet fell by 991404460 million reflect-
ing a 99140493 million fall in financial and acqui-
sition-related debts and a 991404367 million
reduction in retirement benefit obligations(including healthcare)
Increase in Net Dividend
The Board of Directors proposed a dis-
tribution to shareholders of 991404033 per
share (2005 dividend 991404030) reflecting
confidence in the prospects of the Group
going forward
Outlook 2007-2009
growth in revenues and net income
With the Grouprsquos transformation complete Thomsonrsquos financial focus over the 2007-
2009 period will be to grow revenues and
net income
Thomson serves growing Media Enter-
tainment amp Communications marketsmdashfor
which external estimates(1) indicate com-
pound growth of around 6 over the last
FINANCIAL AND
OPERATIONAL PERFORMANCE
Full year 2006 results
saw a return to profitability
and leave Thomson
well positioned at
the heart of convergence
and digital video
8122019 Panorama 2006
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59 Thomson Panorama 2006
five years Our digital and electronic busi-
nesses now represent two-thirds of rev-
enues and we believe they are growing
faster than the overall market offsetting
the maturing physical media businesses
Given this profile the Group expects its
revenue growth to be more modest in
2007 but to gather pace over the period
and our overall objective is to show com-pound growth over 2007-2009 in line with
or faster than the overall market
The 2007-2009 period is also expected
to see a sharply reduced impact from
residual Non-Core activities with an end
to losses from the Discontinued Activities
perimeter after 2007 Accordingly Thom-
sonrsquos ambition is to turn its Core Business
growth and profitability and lower impact
from Non-Core into strong growth in net
income over the period 2007-2009
Business operations
Continuous performance improvement is
fundamental to Thomsonrsquos commitment to
create sustainable business models and
long-term value for all stakeholders The
ambitious Group-wide programs launched
in 2004 to improve productivity and
enhance overall performance producedsubstantial results in 2006 and led to new
and strong initiatives for long-term growth
As of the second half of 2006 six ldquoKey
Programsrdquo are monitored at Group level
Clients Software Product Introduction
Operations Transformation and Talent
Management
KEY PROGRAMS IN PLACE
Program Focus
Clients Thomsonrsquos clientregional diversification and
growth of the existing business
through improved Sales amp Marketing
Software Development of integrated software platforms
in all markets (post-production distribution
delivery) and for all types of customer
(professional prosumerhellip)
Product Introduction Ensuring new product roadmaps are in line
with strategy and resource needs have been
identifiedOperations Improving the Grouprsquos cost base cash
generation and working capital
Transformation Multiple programs including initiatives to
improving customer relationship management
worldwide supply chain management
IT transformation as well as Thomsonrsquos RampD
footprint
Talent Management Leveraging human assets with a focus on
talent retention and acquisition
8122019 Panorama 2006
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60 Thomson Panorama 2006
SUMMARY RESULTS FULL YEAR 2006
In 991404 millions unless otherwise stated 2006(1) 2005(1)
Net revenues 5854 5591(1)
Core Business net revenues 5747 5335
Services 2489 2487
Systems 2684 2262
Technology 547 546
Corporate 27 40
Non-Core continuing operations net revenues 107 256
Core Business EBIT(2) 504 512
Services 160 205
Systems 132 109
Technology 289 277Corporate (77) (79)
EBIT from Non-Core continuing operations (25) (122)
(1) Restated with 2006 discontinued activities according to IFRS 5
8122019 Panorama 2006
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61 Thomson Panorama 2006
Year ended December 31in 991404 except number of shares 2006 2005 2004
Year ended December 31in 991404 millions 2006 2005(1) 2004(1)
CONSOLIDATED STATEMENTS OF OPERATIONS
(1) Restated with 2006 discontinued activities according to IFRS 5
(2) After deduction of the interests net of tax paid on the subordinated perpetual notes during the period
Continuing operations
Revenues 5854 5591 5980
Cost of sales (4474) (4240) (4594)
Gross margin 1380 1351 1386
Selling marketing general and administrative expenses (674) (638) (653)
Other income (expense) 52 (96) (69)
Research and development expenses (279) (227) (201)
Profit from continuing operations before tax and net finance costs 479 390 463
Interest income 19 30 52
Interest expense (108) (108) (54)
Other financial income (expense) (111) 36 (26)
Finance costs ndash net (200) (42) (28)
Share of profit (loss) from associates (86) (82) (20)
Income tax ndash (68) (93)
Profit from continuing operations 193 198 322
Discontinued operations
Profit (loss) from discontinued operations (138) (771) (883)
Net income (loss) 55 (573) (561)
Attributable to
Equity Holders 55 (574) (559)
Minority interests ndash 1 (2)
Weighted average number of shares
outstandingmdashbasic net of treasury stock 261188858 266539917 273646869
Earnings per share from continuing operations
Basic(2) 067 074 118
Diluted 063 042 111
Earnings per share from discontinued operations
Basic (053) (289) (323)
Diluted (048) (262) (296)Total earnings per share
Basic(2) 014 (215) (205)
Diluted 015 (220) (185)
8122019 Panorama 2006
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62 Thomson Panorama 2006
CONSOLIDATED BALANCE SHEETS
In 991404 millions December 31 December 31 January 1 December 31 2006 2005 2005(1) 2004
ASSETS
Non-current assets
Property plant and equipment 813 886 1051 1051
Goodwill 1714 1756 1186 1178
Other intangible assets 1071 1150 924 924
Investments in associates 12 204 260 260
Investments and financial assets available-for-sale 266 341 139 113
Derivative financial instruments 7 1 11 ndash
Contract advances 129 173 179 179
Deferred tax assets 397 379 307 301
Other non-current assets 110 182 133 136
Total non-current assets 4519 5072 4190 4142
Current assets
Inventories 366 333 503 568
Trade accounts and notes receivable 1018 1315 1232 1180
Current accounts with associates and joint ventures 97 115 143 143
Derivative financial instruments 8 9 115 ndash
Other current assets 535 644 483 616
Marketable securities ndash 7 58 58
Cash and cash equivalents 1311 996 1845 1848
Assets classified as held for sale 264 369 80 ndash
Total current assets 3599 3788 4459 4413
Total assets 8118 8860 8649 8555
(1) Including the impacts of the first-time application related to IAS 32 and 39 on financial instruments and IFRS 5 on non-current assets held for sale and
discontinued operations
8122019 Panorama 2006
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63 Thomson Panorama 2006
In 991404 millions December 31 December 31 January 1 December 31 2006 2005 2005(1) 2004
SHAREHOLDERSrsquo EQUITY AND LIABILITIES
Shareholdersrsquo equity
Common stock (273871296 shares at
December 31 2006
with nominal value of euro 375 per share) 1027 1025 1025 1025
Trade accounts and notes payable 1032 1164 1199 1226
Accrued employee expenses 165 166 158 163
Income tax payable 57 47 60 60
Other current liabilities 671 750 746 800
Payables on acquisition of companies 13 138 84 84
Liabilities directly associated with
assets classified as held for sale 232 470 88 ndash
Total current liabilities 3681 4393 3602 3459
Total liabilities 5999 6644 6251 6062
Total shareholderrsquos equity and liabilities 8118 8860 8649 8555
(1) Including the impacts of the first-time application related to IAS 32 and 39 on financial instruments and IFRS 5 on non-current assets held for sale and
discontinued operations
8122019 Panorama 2006
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Creation and lay-out
Photo credits Nathalie BerhingGAMMA ndash Steacutephane de Bourgies ndash Jean-Franccedilois DeroubaixGAMMA ndash Christine Donnier- ValentinGAMMA ndash Cars copy 2006 Disney Enterprises IncPixar All Rights Reserved ndash Dreamgirls copy 2006 DREAMWORKS
LLC and PARAMOUNT PICTURES All Rights Reserved ndash Poseidon copy 2006 Warner Bros Pictures ndash Sony Bravia Paint
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 5566
FINANCIAL INFORMATION
Thomson maintains the highest standards in compliance and risk management working continuously
to improve reporting and control as well as the quality of financial information made available to
its stakeholders
8122019 Panorama 2006
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54 Thomson Panorama 2006
Growing North American
investor base
The per iod 2004-2006 brought about
expansion in Thomsonrsquos international
shareholder base particularly in North
America Leading US-based investment
management funds Franklin Templeton
Investments and Brands Investment Part-ners hold over 10 and 5 respectively
of Thomsonrsquos share capital while Dodge amp
Cox increased its stake to over 10 during
the year The Group estimates that North
American institutional investors represent
over 50 of the institutional investor base
France around a quarter and other Euro-
pean investors account for the majority of
the remainder
Active communications
To keep Thomsonrsquos broad investor base
appraised of progress in implementing itsstrategic objectives senior management
devoted considerable time during the year
to investor meetings in both Europe and
North America
As part of its ongoing efforts to provide
investorsmdashparticularly individual share-
holdersmdashwith comprehensive up-to-date
information Thomson makes full use of
the internet Share price information press
releases as well as the Grouprsquos annual
report and reference documents (Docu-
ment de Reacutefeacuterence filed with the French
stock exchange regulator AMF and Form
20-F filed with the SEC) are available on
the site wwwthomsonnet
Annual General Shareholdersrsquo Meetings
are broadcast live over the internet with asimultaneous translation of the proceed-
ings provided from French to English to
enable the majority of shareholders to view
the event The results of the vote are dis-
closed in detail on the internet site imme-
diately following the Meeting
The Shareholder Relations department
organizes tours for individual shareholders
of the newly inaugurated Thomson Gal-
lery at the Grouprsquos headquarters in Paris
France Visits to the Gallery designed to
illustrate Thomsonrsquos activities through a
series of live technology demos and videopresentations allow participants to better
appreciate the Grouprsquos 2007-2009 strat-
egy and growth prospects
Dividend
The dividend ofeuro033 per share proposed
at the Annual Shareholdersrsquo Meeting on
15 May 2007 represented a 10 increase
over last yearrsquos dividend
SHAREHOLDER RELATIONS
Thomson aims to keep
investors and individual
shareholders informed of
progress in implementing
strategic objectives
Thomsonrsquos Annual General Meeting
provides an opportunity for debate and
exchange with individual shareholders
8122019 Panorama 2006
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55 Thomson Panorama 2006
Financial calendar 2007
bull April 26 First Quarter 2007 Sales
bull May 15 Shareholdersrsquo Meeting (on second notice)
bull July 26 First Half 2007 Results
bull October 18 Third Quarter 2007 Sales
These dates are subject to modification
Public904
CAPITAL STRUCTURE AS OF DECEMBER 31 2006
Employees25
Treasury Shares46
Other25
SHARE HIGHLIGHTS
2006 2005
Year high 1932 2142
Year low 1165 1526
Share price at year-end in euro 1481 1770
Average daily volume 2445176 2244879
Market capital at year-end in euro million 4056 4838
Number of shares outstanding at year end
(in thousands) 273871 273308
Net dividend per share in euro 033 030
Listed on the Paris and New York stock exchanges ndash Euronext code 18453 ndash NYSE ticker TMSN
8122019 Panorama 2006
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56 Thomson Panorama 2006
Maintaining the highest standards
in compliance and risk management
Extensive work was completed in 2006
in Thomsonrsquos main operational units and
at Corporate level to ensure alignment of
reporting and control procedures with the
requirements of the Sarbanes-Oxley Act in
the United States
Improving Internal Control Procedures
Building towards application of Section
404 of the Sarbanes-Oxley Act (ldquoSOX
404rdquo) for fiscal year 2006 which required
the Group to assess the effectiveness of
internal controls Thomson committed to
implementing the internal control frame-
work proposed by the Committee of
Sponsoring Organizations of the Treadway
Commission (ldquoCOSOrdquo)
Within this framework the Group seeks toachieve ldquoreasonable assurancerdquo regarding
the effectiveness and efficiency of opera-
tions the reliability of financial reporting
and compliance with applicable laws and
regulations
Group-wide initiatives were on-going in
2006 to achieve these objectives including
the Process Transformation Initiative (PTI)
to ensure operational excellence COM-
PASS (Controls Over Methods Processes
Applications Systems and Strategy) and
the Risk Committee and its enterprise risk
assessment and management programrun by the Internal Audit function
Following a full worldwide enterprise risk
assessment carried out in the second half
of 2005 and updated throughout 2006 a
second was planned for completion by May
2007 The process assesses risks in the
Grouprsquos distinct business units or profit cen-
ters with the goal of identifying assessing
validating and monitoring risks which could
impact or potentially impact the Grouprsquos
ability to achieve its short and long-term
objectives In 2007 the Risk Committee will
continue to regularly monitor action plans
put in place to mitigate the risks identified
During the year the Group also continued
implementation of a worldwide SOX 404
compliance software system to assist with
the documentation of significant financialprocesses provide consistent guidance
to management regarding controls and
better enable management to assess its
control structure
Managing Risk
Thomson has three main internal organiza-
tions that support and assist the Executive
Committee in control and risk monitoring
the Investment Committee and the Risk
Committee The Investment Committee
meets on an ad hoc basis throughout the
year generally once per week to reviewfinancial commitments including proposed
acquisitions capital equipment funding
and new ventures requiring capital The Risk
Committee which met nine times in 2006
evaluates the Grouprsquos financial operational
and compliance risks and identifies strate-
gic risks that could adversely affect different
activities within the framework of Grouprsquos
three-year plan scenarios The Corporate
Social Responsibility (CSR) Committee to
be set up in 2007 will oversee all CSR
compliance and ethics matters
Ethical values and principles of conductfor the Grouprsquos managers are defined in
of the Grouprsquos divisions and profit centersIn the context of the budgetary procedure
performance measurement indicators are
calculated by the divisions analyzed and
reviewed monthly to serve as a reference
for the Grouprsquos monthly reporting
Management reporting and
closing period work
Th om so n uses a co mmon char t of
accounts which is regularly updated The
principal accounting and financial figures
of the operational and functional depart-
ments consolidated at Group level are
analyzed by the Grouprsquos management
control team and reviewed by the Grouprsquos
Executive Committee
The closing process for the half-year and
annual consolidated financial statementsoccurs in two steps The first step con-
sists of a ldquohard closerdquo completed in May
and September leading to a first review by
the statutory auditors The second step
occurs in July and in JanuaryFebruary and
involves the finalization of half-year and
annual consolidated financial statements
under IFRS The Group then proceeds
once a year with a reconciliation of these
results in accordance with US GAAP
Preparation of financial statements
The financial statements are prepared jointly by the finance department and the
General Secretary They are based on
information reported through the annual
reporting and accounting consolidation
processes and on operational and mar-
ket information which is specifically cen-
tralized for the preparation of Thomsonrsquos
Document de Reacutefeacuterence in France and
the submission of Form 20-F in the United
States Half-year and annual financial infor-
mation is reviewed by the Grouprsquos Audit
Committee
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 6066
58 Thomson Panorama 2006
(1) Source PriceWaterhouseCoopers ndash
ldquoGlobal Entertainment and Media Outlook 2006-10rdquo
Revenue growth
Thomson achieved consolidated 2006
net revenues of 9914045854 million up from
9914045591 million in 2005 Revenues for
the Core Business reached 9914045747 mil-
lion (9914045776 million at constant currency)
representing 83 growth over 2005 at
constant currency
Overall the Grouprsquos key growth busi-
nessesmdashContent Services Network
Services Access Products for telecom
operators and our Broadcast amp Networks
businesses (Grass Valley and Network
Software)mdashincreased strongly year-on-
year and accounted for over a third of
Group revenues against less than a quar-
ter in 2005
Thomsonrsquos Core Business EBIT for 2006
was euro504 million representing a Core
Business EBIT margin of 88 Thisreflected growth in some key businesses
and cost actions across the Group off-
setting a significant investment in research
and development and some increase in
restructuring expenses
Increased spend on RampD
Research and development expenditure
charged in the Core Business (net of
external funding) rose from 991404221 million in
2005 to 991404279 million in 2006 an increase
of 26 principally in the Systems divi-
sion The Group expanded the number ofproducts and services in the development
phase across its businesses
Return to profit
Losses in Non-Core Continuing and Dis-
continued operations were substantially
lower year-on-year reflecting principally
the exit from heavily loss-making Displays
activities in 2005 and intensified cost-sav-
ing programs in 2006 A major revision
and harmonization of the Grouprsquos North
American healthcare obligations gave rise
to substantial one-time gains and Thom-
son also initiated significant restructuring
of its French Non-Core operations
The good performance of the Core Busi-
ness lower Non-Core and Discontinued
losses and a low reported tax chargeenabled the Group to return a net profit of
99140455 million in 2006 compared to a loss of
991404573 million in the previous year
Good cash flow
strengthened balance sheet
Thomson generated good free cash flow
and strengthened its balance sheet in
2006 Total net financial liabilities on the
balance sheet fell by 991404460 million reflect-
ing a 99140493 million fall in financial and acqui-
sition-related debts and a 991404367 million
reduction in retirement benefit obligations(including healthcare)
Increase in Net Dividend
The Board of Directors proposed a dis-
tribution to shareholders of 991404033 per
share (2005 dividend 991404030) reflecting
confidence in the prospects of the Group
going forward
Outlook 2007-2009
growth in revenues and net income
With the Grouprsquos transformation complete Thomsonrsquos financial focus over the 2007-
2009 period will be to grow revenues and
net income
Thomson serves growing Media Enter-
tainment amp Communications marketsmdashfor
which external estimates(1) indicate com-
pound growth of around 6 over the last
FINANCIAL AND
OPERATIONAL PERFORMANCE
Full year 2006 results
saw a return to profitability
and leave Thomson
well positioned at
the heart of convergence
and digital video
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 6166
59 Thomson Panorama 2006
five years Our digital and electronic busi-
nesses now represent two-thirds of rev-
enues and we believe they are growing
faster than the overall market offsetting
the maturing physical media businesses
Given this profile the Group expects its
revenue growth to be more modest in
2007 but to gather pace over the period
and our overall objective is to show com-pound growth over 2007-2009 in line with
or faster than the overall market
The 2007-2009 period is also expected
to see a sharply reduced impact from
residual Non-Core activities with an end
to losses from the Discontinued Activities
perimeter after 2007 Accordingly Thom-
sonrsquos ambition is to turn its Core Business
growth and profitability and lower impact
from Non-Core into strong growth in net
income over the period 2007-2009
Business operations
Continuous performance improvement is
fundamental to Thomsonrsquos commitment to
create sustainable business models and
long-term value for all stakeholders The
ambitious Group-wide programs launched
in 2004 to improve productivity and
enhance overall performance producedsubstantial results in 2006 and led to new
and strong initiatives for long-term growth
As of the second half of 2006 six ldquoKey
Programsrdquo are monitored at Group level
Clients Software Product Introduction
Operations Transformation and Talent
Management
KEY PROGRAMS IN PLACE
Program Focus
Clients Thomsonrsquos clientregional diversification and
growth of the existing business
through improved Sales amp Marketing
Software Development of integrated software platforms
in all markets (post-production distribution
delivery) and for all types of customer
(professional prosumerhellip)
Product Introduction Ensuring new product roadmaps are in line
with strategy and resource needs have been
identifiedOperations Improving the Grouprsquos cost base cash
generation and working capital
Transformation Multiple programs including initiatives to
improving customer relationship management
worldwide supply chain management
IT transformation as well as Thomsonrsquos RampD
footprint
Talent Management Leveraging human assets with a focus on
talent retention and acquisition
8122019 Panorama 2006
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60 Thomson Panorama 2006
SUMMARY RESULTS FULL YEAR 2006
In 991404 millions unless otherwise stated 2006(1) 2005(1)
Net revenues 5854 5591(1)
Core Business net revenues 5747 5335
Services 2489 2487
Systems 2684 2262
Technology 547 546
Corporate 27 40
Non-Core continuing operations net revenues 107 256
Core Business EBIT(2) 504 512
Services 160 205
Systems 132 109
Technology 289 277Corporate (77) (79)
EBIT from Non-Core continuing operations (25) (122)
(1) Restated with 2006 discontinued activities according to IFRS 5
8122019 Panorama 2006
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61 Thomson Panorama 2006
Year ended December 31in 991404 except number of shares 2006 2005 2004
Year ended December 31in 991404 millions 2006 2005(1) 2004(1)
CONSOLIDATED STATEMENTS OF OPERATIONS
(1) Restated with 2006 discontinued activities according to IFRS 5
(2) After deduction of the interests net of tax paid on the subordinated perpetual notes during the period
Continuing operations
Revenues 5854 5591 5980
Cost of sales (4474) (4240) (4594)
Gross margin 1380 1351 1386
Selling marketing general and administrative expenses (674) (638) (653)
Other income (expense) 52 (96) (69)
Research and development expenses (279) (227) (201)
Profit from continuing operations before tax and net finance costs 479 390 463
Interest income 19 30 52
Interest expense (108) (108) (54)
Other financial income (expense) (111) 36 (26)
Finance costs ndash net (200) (42) (28)
Share of profit (loss) from associates (86) (82) (20)
Income tax ndash (68) (93)
Profit from continuing operations 193 198 322
Discontinued operations
Profit (loss) from discontinued operations (138) (771) (883)
Net income (loss) 55 (573) (561)
Attributable to
Equity Holders 55 (574) (559)
Minority interests ndash 1 (2)
Weighted average number of shares
outstandingmdashbasic net of treasury stock 261188858 266539917 273646869
Earnings per share from continuing operations
Basic(2) 067 074 118
Diluted 063 042 111
Earnings per share from discontinued operations
Basic (053) (289) (323)
Diluted (048) (262) (296)Total earnings per share
Basic(2) 014 (215) (205)
Diluted 015 (220) (185)
8122019 Panorama 2006
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62 Thomson Panorama 2006
CONSOLIDATED BALANCE SHEETS
In 991404 millions December 31 December 31 January 1 December 31 2006 2005 2005(1) 2004
ASSETS
Non-current assets
Property plant and equipment 813 886 1051 1051
Goodwill 1714 1756 1186 1178
Other intangible assets 1071 1150 924 924
Investments in associates 12 204 260 260
Investments and financial assets available-for-sale 266 341 139 113
Derivative financial instruments 7 1 11 ndash
Contract advances 129 173 179 179
Deferred tax assets 397 379 307 301
Other non-current assets 110 182 133 136
Total non-current assets 4519 5072 4190 4142
Current assets
Inventories 366 333 503 568
Trade accounts and notes receivable 1018 1315 1232 1180
Current accounts with associates and joint ventures 97 115 143 143
Derivative financial instruments 8 9 115 ndash
Other current assets 535 644 483 616
Marketable securities ndash 7 58 58
Cash and cash equivalents 1311 996 1845 1848
Assets classified as held for sale 264 369 80 ndash
Total current assets 3599 3788 4459 4413
Total assets 8118 8860 8649 8555
(1) Including the impacts of the first-time application related to IAS 32 and 39 on financial instruments and IFRS 5 on non-current assets held for sale and
discontinued operations
8122019 Panorama 2006
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63 Thomson Panorama 2006
In 991404 millions December 31 December 31 January 1 December 31 2006 2005 2005(1) 2004
SHAREHOLDERSrsquo EQUITY AND LIABILITIES
Shareholdersrsquo equity
Common stock (273871296 shares at
December 31 2006
with nominal value of euro 375 per share) 1027 1025 1025 1025
Trade accounts and notes payable 1032 1164 1199 1226
Accrued employee expenses 165 166 158 163
Income tax payable 57 47 60 60
Other current liabilities 671 750 746 800
Payables on acquisition of companies 13 138 84 84
Liabilities directly associated with
assets classified as held for sale 232 470 88 ndash
Total current liabilities 3681 4393 3602 3459
Total liabilities 5999 6644 6251 6062
Total shareholderrsquos equity and liabilities 8118 8860 8649 8555
(1) Including the impacts of the first-time application related to IAS 32 and 39 on financial instruments and IFRS 5 on non-current assets held for sale and
discontinued operations
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 6666
Creation and lay-out
Photo credits Nathalie BerhingGAMMA ndash Steacutephane de Bourgies ndash Jean-Franccedilois DeroubaixGAMMA ndash Christine Donnier- ValentinGAMMA ndash Cars copy 2006 Disney Enterprises IncPixar All Rights Reserved ndash Dreamgirls copy 2006 DREAMWORKS
LLC and PARAMOUNT PICTURES All Rights Reserved ndash Poseidon copy 2006 Warner Bros Pictures ndash Sony Bravia Paint
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 5666
54 Thomson Panorama 2006
Growing North American
investor base
The per iod 2004-2006 brought about
expansion in Thomsonrsquos international
shareholder base particularly in North
America Leading US-based investment
management funds Franklin Templeton
Investments and Brands Investment Part-ners hold over 10 and 5 respectively
of Thomsonrsquos share capital while Dodge amp
Cox increased its stake to over 10 during
the year The Group estimates that North
American institutional investors represent
over 50 of the institutional investor base
France around a quarter and other Euro-
pean investors account for the majority of
the remainder
Active communications
To keep Thomsonrsquos broad investor base
appraised of progress in implementing itsstrategic objectives senior management
devoted considerable time during the year
to investor meetings in both Europe and
North America
As part of its ongoing efforts to provide
investorsmdashparticularly individual share-
holdersmdashwith comprehensive up-to-date
information Thomson makes full use of
the internet Share price information press
releases as well as the Grouprsquos annual
report and reference documents (Docu-
ment de Reacutefeacuterence filed with the French
stock exchange regulator AMF and Form
20-F filed with the SEC) are available on
the site wwwthomsonnet
Annual General Shareholdersrsquo Meetings
are broadcast live over the internet with asimultaneous translation of the proceed-
ings provided from French to English to
enable the majority of shareholders to view
the event The results of the vote are dis-
closed in detail on the internet site imme-
diately following the Meeting
The Shareholder Relations department
organizes tours for individual shareholders
of the newly inaugurated Thomson Gal-
lery at the Grouprsquos headquarters in Paris
France Visits to the Gallery designed to
illustrate Thomsonrsquos activities through a
series of live technology demos and videopresentations allow participants to better
appreciate the Grouprsquos 2007-2009 strat-
egy and growth prospects
Dividend
The dividend ofeuro033 per share proposed
at the Annual Shareholdersrsquo Meeting on
15 May 2007 represented a 10 increase
over last yearrsquos dividend
SHAREHOLDER RELATIONS
Thomson aims to keep
investors and individual
shareholders informed of
progress in implementing
strategic objectives
Thomsonrsquos Annual General Meeting
provides an opportunity for debate and
exchange with individual shareholders
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 5766
55 Thomson Panorama 2006
Financial calendar 2007
bull April 26 First Quarter 2007 Sales
bull May 15 Shareholdersrsquo Meeting (on second notice)
bull July 26 First Half 2007 Results
bull October 18 Third Quarter 2007 Sales
These dates are subject to modification
Public904
CAPITAL STRUCTURE AS OF DECEMBER 31 2006
Employees25
Treasury Shares46
Other25
SHARE HIGHLIGHTS
2006 2005
Year high 1932 2142
Year low 1165 1526
Share price at year-end in euro 1481 1770
Average daily volume 2445176 2244879
Market capital at year-end in euro million 4056 4838
Number of shares outstanding at year end
(in thousands) 273871 273308
Net dividend per share in euro 033 030
Listed on the Paris and New York stock exchanges ndash Euronext code 18453 ndash NYSE ticker TMSN
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 5866
56 Thomson Panorama 2006
Maintaining the highest standards
in compliance and risk management
Extensive work was completed in 2006
in Thomsonrsquos main operational units and
at Corporate level to ensure alignment of
reporting and control procedures with the
requirements of the Sarbanes-Oxley Act in
the United States
Improving Internal Control Procedures
Building towards application of Section
404 of the Sarbanes-Oxley Act (ldquoSOX
404rdquo) for fiscal year 2006 which required
the Group to assess the effectiveness of
internal controls Thomson committed to
implementing the internal control frame-
work proposed by the Committee of
Sponsoring Organizations of the Treadway
Commission (ldquoCOSOrdquo)
Within this framework the Group seeks toachieve ldquoreasonable assurancerdquo regarding
the effectiveness and efficiency of opera-
tions the reliability of financial reporting
and compliance with applicable laws and
regulations
Group-wide initiatives were on-going in
2006 to achieve these objectives including
the Process Transformation Initiative (PTI)
to ensure operational excellence COM-
PASS (Controls Over Methods Processes
Applications Systems and Strategy) and
the Risk Committee and its enterprise risk
assessment and management programrun by the Internal Audit function
Following a full worldwide enterprise risk
assessment carried out in the second half
of 2005 and updated throughout 2006 a
second was planned for completion by May
2007 The process assesses risks in the
Grouprsquos distinct business units or profit cen-
ters with the goal of identifying assessing
validating and monitoring risks which could
impact or potentially impact the Grouprsquos
ability to achieve its short and long-term
objectives In 2007 the Risk Committee will
continue to regularly monitor action plans
put in place to mitigate the risks identified
During the year the Group also continued
implementation of a worldwide SOX 404
compliance software system to assist with
the documentation of significant financialprocesses provide consistent guidance
to management regarding controls and
better enable management to assess its
control structure
Managing Risk
Thomson has three main internal organiza-
tions that support and assist the Executive
Committee in control and risk monitoring
the Investment Committee and the Risk
Committee The Investment Committee
meets on an ad hoc basis throughout the
year generally once per week to reviewfinancial commitments including proposed
acquisitions capital equipment funding
and new ventures requiring capital The Risk
Committee which met nine times in 2006
evaluates the Grouprsquos financial operational
and compliance risks and identifies strate-
gic risks that could adversely affect different
activities within the framework of Grouprsquos
three-year plan scenarios The Corporate
Social Responsibility (CSR) Committee to
be set up in 2007 will oversee all CSR
compliance and ethics matters
Ethical values and principles of conductfor the Grouprsquos managers are defined in
of the Grouprsquos divisions and profit centersIn the context of the budgetary procedure
performance measurement indicators are
calculated by the divisions analyzed and
reviewed monthly to serve as a reference
for the Grouprsquos monthly reporting
Management reporting and
closing period work
Th om so n uses a co mmon char t of
accounts which is regularly updated The
principal accounting and financial figures
of the operational and functional depart-
ments consolidated at Group level are
analyzed by the Grouprsquos management
control team and reviewed by the Grouprsquos
Executive Committee
The closing process for the half-year and
annual consolidated financial statementsoccurs in two steps The first step con-
sists of a ldquohard closerdquo completed in May
and September leading to a first review by
the statutory auditors The second step
occurs in July and in JanuaryFebruary and
involves the finalization of half-year and
annual consolidated financial statements
under IFRS The Group then proceeds
once a year with a reconciliation of these
results in accordance with US GAAP
Preparation of financial statements
The financial statements are prepared jointly by the finance department and the
General Secretary They are based on
information reported through the annual
reporting and accounting consolidation
processes and on operational and mar-
ket information which is specifically cen-
tralized for the preparation of Thomsonrsquos
Document de Reacutefeacuterence in France and
the submission of Form 20-F in the United
States Half-year and annual financial infor-
mation is reviewed by the Grouprsquos Audit
Committee
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 6066
58 Thomson Panorama 2006
(1) Source PriceWaterhouseCoopers ndash
ldquoGlobal Entertainment and Media Outlook 2006-10rdquo
Revenue growth
Thomson achieved consolidated 2006
net revenues of 9914045854 million up from
9914045591 million in 2005 Revenues for
the Core Business reached 9914045747 mil-
lion (9914045776 million at constant currency)
representing 83 growth over 2005 at
constant currency
Overall the Grouprsquos key growth busi-
nessesmdashContent Services Network
Services Access Products for telecom
operators and our Broadcast amp Networks
businesses (Grass Valley and Network
Software)mdashincreased strongly year-on-
year and accounted for over a third of
Group revenues against less than a quar-
ter in 2005
Thomsonrsquos Core Business EBIT for 2006
was euro504 million representing a Core
Business EBIT margin of 88 Thisreflected growth in some key businesses
and cost actions across the Group off-
setting a significant investment in research
and development and some increase in
restructuring expenses
Increased spend on RampD
Research and development expenditure
charged in the Core Business (net of
external funding) rose from 991404221 million in
2005 to 991404279 million in 2006 an increase
of 26 principally in the Systems divi-
sion The Group expanded the number ofproducts and services in the development
phase across its businesses
Return to profit
Losses in Non-Core Continuing and Dis-
continued operations were substantially
lower year-on-year reflecting principally
the exit from heavily loss-making Displays
activities in 2005 and intensified cost-sav-
ing programs in 2006 A major revision
and harmonization of the Grouprsquos North
American healthcare obligations gave rise
to substantial one-time gains and Thom-
son also initiated significant restructuring
of its French Non-Core operations
The good performance of the Core Busi-
ness lower Non-Core and Discontinued
losses and a low reported tax chargeenabled the Group to return a net profit of
99140455 million in 2006 compared to a loss of
991404573 million in the previous year
Good cash flow
strengthened balance sheet
Thomson generated good free cash flow
and strengthened its balance sheet in
2006 Total net financial liabilities on the
balance sheet fell by 991404460 million reflect-
ing a 99140493 million fall in financial and acqui-
sition-related debts and a 991404367 million
reduction in retirement benefit obligations(including healthcare)
Increase in Net Dividend
The Board of Directors proposed a dis-
tribution to shareholders of 991404033 per
share (2005 dividend 991404030) reflecting
confidence in the prospects of the Group
going forward
Outlook 2007-2009
growth in revenues and net income
With the Grouprsquos transformation complete Thomsonrsquos financial focus over the 2007-
2009 period will be to grow revenues and
net income
Thomson serves growing Media Enter-
tainment amp Communications marketsmdashfor
which external estimates(1) indicate com-
pound growth of around 6 over the last
FINANCIAL AND
OPERATIONAL PERFORMANCE
Full year 2006 results
saw a return to profitability
and leave Thomson
well positioned at
the heart of convergence
and digital video
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 6166
59 Thomson Panorama 2006
five years Our digital and electronic busi-
nesses now represent two-thirds of rev-
enues and we believe they are growing
faster than the overall market offsetting
the maturing physical media businesses
Given this profile the Group expects its
revenue growth to be more modest in
2007 but to gather pace over the period
and our overall objective is to show com-pound growth over 2007-2009 in line with
or faster than the overall market
The 2007-2009 period is also expected
to see a sharply reduced impact from
residual Non-Core activities with an end
to losses from the Discontinued Activities
perimeter after 2007 Accordingly Thom-
sonrsquos ambition is to turn its Core Business
growth and profitability and lower impact
from Non-Core into strong growth in net
income over the period 2007-2009
Business operations
Continuous performance improvement is
fundamental to Thomsonrsquos commitment to
create sustainable business models and
long-term value for all stakeholders The
ambitious Group-wide programs launched
in 2004 to improve productivity and
enhance overall performance producedsubstantial results in 2006 and led to new
and strong initiatives for long-term growth
As of the second half of 2006 six ldquoKey
Programsrdquo are monitored at Group level
Clients Software Product Introduction
Operations Transformation and Talent
Management
KEY PROGRAMS IN PLACE
Program Focus
Clients Thomsonrsquos clientregional diversification and
growth of the existing business
through improved Sales amp Marketing
Software Development of integrated software platforms
in all markets (post-production distribution
delivery) and for all types of customer
(professional prosumerhellip)
Product Introduction Ensuring new product roadmaps are in line
with strategy and resource needs have been
identifiedOperations Improving the Grouprsquos cost base cash
generation and working capital
Transformation Multiple programs including initiatives to
improving customer relationship management
worldwide supply chain management
IT transformation as well as Thomsonrsquos RampD
footprint
Talent Management Leveraging human assets with a focus on
talent retention and acquisition
8122019 Panorama 2006
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60 Thomson Panorama 2006
SUMMARY RESULTS FULL YEAR 2006
In 991404 millions unless otherwise stated 2006(1) 2005(1)
Net revenues 5854 5591(1)
Core Business net revenues 5747 5335
Services 2489 2487
Systems 2684 2262
Technology 547 546
Corporate 27 40
Non-Core continuing operations net revenues 107 256
Core Business EBIT(2) 504 512
Services 160 205
Systems 132 109
Technology 289 277Corporate (77) (79)
EBIT from Non-Core continuing operations (25) (122)
(1) Restated with 2006 discontinued activities according to IFRS 5
8122019 Panorama 2006
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61 Thomson Panorama 2006
Year ended December 31in 991404 except number of shares 2006 2005 2004
Year ended December 31in 991404 millions 2006 2005(1) 2004(1)
CONSOLIDATED STATEMENTS OF OPERATIONS
(1) Restated with 2006 discontinued activities according to IFRS 5
(2) After deduction of the interests net of tax paid on the subordinated perpetual notes during the period
Continuing operations
Revenues 5854 5591 5980
Cost of sales (4474) (4240) (4594)
Gross margin 1380 1351 1386
Selling marketing general and administrative expenses (674) (638) (653)
Other income (expense) 52 (96) (69)
Research and development expenses (279) (227) (201)
Profit from continuing operations before tax and net finance costs 479 390 463
Interest income 19 30 52
Interest expense (108) (108) (54)
Other financial income (expense) (111) 36 (26)
Finance costs ndash net (200) (42) (28)
Share of profit (loss) from associates (86) (82) (20)
Income tax ndash (68) (93)
Profit from continuing operations 193 198 322
Discontinued operations
Profit (loss) from discontinued operations (138) (771) (883)
Net income (loss) 55 (573) (561)
Attributable to
Equity Holders 55 (574) (559)
Minority interests ndash 1 (2)
Weighted average number of shares
outstandingmdashbasic net of treasury stock 261188858 266539917 273646869
Earnings per share from continuing operations
Basic(2) 067 074 118
Diluted 063 042 111
Earnings per share from discontinued operations
Basic (053) (289) (323)
Diluted (048) (262) (296)Total earnings per share
Basic(2) 014 (215) (205)
Diluted 015 (220) (185)
8122019 Panorama 2006
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62 Thomson Panorama 2006
CONSOLIDATED BALANCE SHEETS
In 991404 millions December 31 December 31 January 1 December 31 2006 2005 2005(1) 2004
ASSETS
Non-current assets
Property plant and equipment 813 886 1051 1051
Goodwill 1714 1756 1186 1178
Other intangible assets 1071 1150 924 924
Investments in associates 12 204 260 260
Investments and financial assets available-for-sale 266 341 139 113
Derivative financial instruments 7 1 11 ndash
Contract advances 129 173 179 179
Deferred tax assets 397 379 307 301
Other non-current assets 110 182 133 136
Total non-current assets 4519 5072 4190 4142
Current assets
Inventories 366 333 503 568
Trade accounts and notes receivable 1018 1315 1232 1180
Current accounts with associates and joint ventures 97 115 143 143
Derivative financial instruments 8 9 115 ndash
Other current assets 535 644 483 616
Marketable securities ndash 7 58 58
Cash and cash equivalents 1311 996 1845 1848
Assets classified as held for sale 264 369 80 ndash
Total current assets 3599 3788 4459 4413
Total assets 8118 8860 8649 8555
(1) Including the impacts of the first-time application related to IAS 32 and 39 on financial instruments and IFRS 5 on non-current assets held for sale and
discontinued operations
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 6566
63 Thomson Panorama 2006
In 991404 millions December 31 December 31 January 1 December 31 2006 2005 2005(1) 2004
SHAREHOLDERSrsquo EQUITY AND LIABILITIES
Shareholdersrsquo equity
Common stock (273871296 shares at
December 31 2006
with nominal value of euro 375 per share) 1027 1025 1025 1025
Trade accounts and notes payable 1032 1164 1199 1226
Accrued employee expenses 165 166 158 163
Income tax payable 57 47 60 60
Other current liabilities 671 750 746 800
Payables on acquisition of companies 13 138 84 84
Liabilities directly associated with
assets classified as held for sale 232 470 88 ndash
Total current liabilities 3681 4393 3602 3459
Total liabilities 5999 6644 6251 6062
Total shareholderrsquos equity and liabilities 8118 8860 8649 8555
(1) Including the impacts of the first-time application related to IAS 32 and 39 on financial instruments and IFRS 5 on non-current assets held for sale and
discontinued operations
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 6666
Creation and lay-out
Photo credits Nathalie BerhingGAMMA ndash Steacutephane de Bourgies ndash Jean-Franccedilois DeroubaixGAMMA ndash Christine Donnier- ValentinGAMMA ndash Cars copy 2006 Disney Enterprises IncPixar All Rights Reserved ndash Dreamgirls copy 2006 DREAMWORKS
LLC and PARAMOUNT PICTURES All Rights Reserved ndash Poseidon copy 2006 Warner Bros Pictures ndash Sony Bravia Paint
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 5766
55 Thomson Panorama 2006
Financial calendar 2007
bull April 26 First Quarter 2007 Sales
bull May 15 Shareholdersrsquo Meeting (on second notice)
bull July 26 First Half 2007 Results
bull October 18 Third Quarter 2007 Sales
These dates are subject to modification
Public904
CAPITAL STRUCTURE AS OF DECEMBER 31 2006
Employees25
Treasury Shares46
Other25
SHARE HIGHLIGHTS
2006 2005
Year high 1932 2142
Year low 1165 1526
Share price at year-end in euro 1481 1770
Average daily volume 2445176 2244879
Market capital at year-end in euro million 4056 4838
Number of shares outstanding at year end
(in thousands) 273871 273308
Net dividend per share in euro 033 030
Listed on the Paris and New York stock exchanges ndash Euronext code 18453 ndash NYSE ticker TMSN
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 5866
56 Thomson Panorama 2006
Maintaining the highest standards
in compliance and risk management
Extensive work was completed in 2006
in Thomsonrsquos main operational units and
at Corporate level to ensure alignment of
reporting and control procedures with the
requirements of the Sarbanes-Oxley Act in
the United States
Improving Internal Control Procedures
Building towards application of Section
404 of the Sarbanes-Oxley Act (ldquoSOX
404rdquo) for fiscal year 2006 which required
the Group to assess the effectiveness of
internal controls Thomson committed to
implementing the internal control frame-
work proposed by the Committee of
Sponsoring Organizations of the Treadway
Commission (ldquoCOSOrdquo)
Within this framework the Group seeks toachieve ldquoreasonable assurancerdquo regarding
the effectiveness and efficiency of opera-
tions the reliability of financial reporting
and compliance with applicable laws and
regulations
Group-wide initiatives were on-going in
2006 to achieve these objectives including
the Process Transformation Initiative (PTI)
to ensure operational excellence COM-
PASS (Controls Over Methods Processes
Applications Systems and Strategy) and
the Risk Committee and its enterprise risk
assessment and management programrun by the Internal Audit function
Following a full worldwide enterprise risk
assessment carried out in the second half
of 2005 and updated throughout 2006 a
second was planned for completion by May
2007 The process assesses risks in the
Grouprsquos distinct business units or profit cen-
ters with the goal of identifying assessing
validating and monitoring risks which could
impact or potentially impact the Grouprsquos
ability to achieve its short and long-term
objectives In 2007 the Risk Committee will
continue to regularly monitor action plans
put in place to mitigate the risks identified
During the year the Group also continued
implementation of a worldwide SOX 404
compliance software system to assist with
the documentation of significant financialprocesses provide consistent guidance
to management regarding controls and
better enable management to assess its
control structure
Managing Risk
Thomson has three main internal organiza-
tions that support and assist the Executive
Committee in control and risk monitoring
the Investment Committee and the Risk
Committee The Investment Committee
meets on an ad hoc basis throughout the
year generally once per week to reviewfinancial commitments including proposed
acquisitions capital equipment funding
and new ventures requiring capital The Risk
Committee which met nine times in 2006
evaluates the Grouprsquos financial operational
and compliance risks and identifies strate-
gic risks that could adversely affect different
activities within the framework of Grouprsquos
three-year plan scenarios The Corporate
Social Responsibility (CSR) Committee to
be set up in 2007 will oversee all CSR
compliance and ethics matters
Ethical values and principles of conductfor the Grouprsquos managers are defined in
of the Grouprsquos divisions and profit centersIn the context of the budgetary procedure
performance measurement indicators are
calculated by the divisions analyzed and
reviewed monthly to serve as a reference
for the Grouprsquos monthly reporting
Management reporting and
closing period work
Th om so n uses a co mmon char t of
accounts which is regularly updated The
principal accounting and financial figures
of the operational and functional depart-
ments consolidated at Group level are
analyzed by the Grouprsquos management
control team and reviewed by the Grouprsquos
Executive Committee
The closing process for the half-year and
annual consolidated financial statementsoccurs in two steps The first step con-
sists of a ldquohard closerdquo completed in May
and September leading to a first review by
the statutory auditors The second step
occurs in July and in JanuaryFebruary and
involves the finalization of half-year and
annual consolidated financial statements
under IFRS The Group then proceeds
once a year with a reconciliation of these
results in accordance with US GAAP
Preparation of financial statements
The financial statements are prepared jointly by the finance department and the
General Secretary They are based on
information reported through the annual
reporting and accounting consolidation
processes and on operational and mar-
ket information which is specifically cen-
tralized for the preparation of Thomsonrsquos
Document de Reacutefeacuterence in France and
the submission of Form 20-F in the United
States Half-year and annual financial infor-
mation is reviewed by the Grouprsquos Audit
Committee
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 6066
58 Thomson Panorama 2006
(1) Source PriceWaterhouseCoopers ndash
ldquoGlobal Entertainment and Media Outlook 2006-10rdquo
Revenue growth
Thomson achieved consolidated 2006
net revenues of 9914045854 million up from
9914045591 million in 2005 Revenues for
the Core Business reached 9914045747 mil-
lion (9914045776 million at constant currency)
representing 83 growth over 2005 at
constant currency
Overall the Grouprsquos key growth busi-
nessesmdashContent Services Network
Services Access Products for telecom
operators and our Broadcast amp Networks
businesses (Grass Valley and Network
Software)mdashincreased strongly year-on-
year and accounted for over a third of
Group revenues against less than a quar-
ter in 2005
Thomsonrsquos Core Business EBIT for 2006
was euro504 million representing a Core
Business EBIT margin of 88 Thisreflected growth in some key businesses
and cost actions across the Group off-
setting a significant investment in research
and development and some increase in
restructuring expenses
Increased spend on RampD
Research and development expenditure
charged in the Core Business (net of
external funding) rose from 991404221 million in
2005 to 991404279 million in 2006 an increase
of 26 principally in the Systems divi-
sion The Group expanded the number ofproducts and services in the development
phase across its businesses
Return to profit
Losses in Non-Core Continuing and Dis-
continued operations were substantially
lower year-on-year reflecting principally
the exit from heavily loss-making Displays
activities in 2005 and intensified cost-sav-
ing programs in 2006 A major revision
and harmonization of the Grouprsquos North
American healthcare obligations gave rise
to substantial one-time gains and Thom-
son also initiated significant restructuring
of its French Non-Core operations
The good performance of the Core Busi-
ness lower Non-Core and Discontinued
losses and a low reported tax chargeenabled the Group to return a net profit of
99140455 million in 2006 compared to a loss of
991404573 million in the previous year
Good cash flow
strengthened balance sheet
Thomson generated good free cash flow
and strengthened its balance sheet in
2006 Total net financial liabilities on the
balance sheet fell by 991404460 million reflect-
ing a 99140493 million fall in financial and acqui-
sition-related debts and a 991404367 million
reduction in retirement benefit obligations(including healthcare)
Increase in Net Dividend
The Board of Directors proposed a dis-
tribution to shareholders of 991404033 per
share (2005 dividend 991404030) reflecting
confidence in the prospects of the Group
going forward
Outlook 2007-2009
growth in revenues and net income
With the Grouprsquos transformation complete Thomsonrsquos financial focus over the 2007-
2009 period will be to grow revenues and
net income
Thomson serves growing Media Enter-
tainment amp Communications marketsmdashfor
which external estimates(1) indicate com-
pound growth of around 6 over the last
FINANCIAL AND
OPERATIONAL PERFORMANCE
Full year 2006 results
saw a return to profitability
and leave Thomson
well positioned at
the heart of convergence
and digital video
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 6166
59 Thomson Panorama 2006
five years Our digital and electronic busi-
nesses now represent two-thirds of rev-
enues and we believe they are growing
faster than the overall market offsetting
the maturing physical media businesses
Given this profile the Group expects its
revenue growth to be more modest in
2007 but to gather pace over the period
and our overall objective is to show com-pound growth over 2007-2009 in line with
or faster than the overall market
The 2007-2009 period is also expected
to see a sharply reduced impact from
residual Non-Core activities with an end
to losses from the Discontinued Activities
perimeter after 2007 Accordingly Thom-
sonrsquos ambition is to turn its Core Business
growth and profitability and lower impact
from Non-Core into strong growth in net
income over the period 2007-2009
Business operations
Continuous performance improvement is
fundamental to Thomsonrsquos commitment to
create sustainable business models and
long-term value for all stakeholders The
ambitious Group-wide programs launched
in 2004 to improve productivity and
enhance overall performance producedsubstantial results in 2006 and led to new
and strong initiatives for long-term growth
As of the second half of 2006 six ldquoKey
Programsrdquo are monitored at Group level
Clients Software Product Introduction
Operations Transformation and Talent
Management
KEY PROGRAMS IN PLACE
Program Focus
Clients Thomsonrsquos clientregional diversification and
growth of the existing business
through improved Sales amp Marketing
Software Development of integrated software platforms
in all markets (post-production distribution
delivery) and for all types of customer
(professional prosumerhellip)
Product Introduction Ensuring new product roadmaps are in line
with strategy and resource needs have been
identifiedOperations Improving the Grouprsquos cost base cash
generation and working capital
Transformation Multiple programs including initiatives to
improving customer relationship management
worldwide supply chain management
IT transformation as well as Thomsonrsquos RampD
footprint
Talent Management Leveraging human assets with a focus on
talent retention and acquisition
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 6266
60 Thomson Panorama 2006
SUMMARY RESULTS FULL YEAR 2006
In 991404 millions unless otherwise stated 2006(1) 2005(1)
Net revenues 5854 5591(1)
Core Business net revenues 5747 5335
Services 2489 2487
Systems 2684 2262
Technology 547 546
Corporate 27 40
Non-Core continuing operations net revenues 107 256
Core Business EBIT(2) 504 512
Services 160 205
Systems 132 109
Technology 289 277Corporate (77) (79)
EBIT from Non-Core continuing operations (25) (122)
(1) Restated with 2006 discontinued activities according to IFRS 5
8122019 Panorama 2006
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61 Thomson Panorama 2006
Year ended December 31in 991404 except number of shares 2006 2005 2004
Year ended December 31in 991404 millions 2006 2005(1) 2004(1)
CONSOLIDATED STATEMENTS OF OPERATIONS
(1) Restated with 2006 discontinued activities according to IFRS 5
(2) After deduction of the interests net of tax paid on the subordinated perpetual notes during the period
Continuing operations
Revenues 5854 5591 5980
Cost of sales (4474) (4240) (4594)
Gross margin 1380 1351 1386
Selling marketing general and administrative expenses (674) (638) (653)
Other income (expense) 52 (96) (69)
Research and development expenses (279) (227) (201)
Profit from continuing operations before tax and net finance costs 479 390 463
Interest income 19 30 52
Interest expense (108) (108) (54)
Other financial income (expense) (111) 36 (26)
Finance costs ndash net (200) (42) (28)
Share of profit (loss) from associates (86) (82) (20)
Income tax ndash (68) (93)
Profit from continuing operations 193 198 322
Discontinued operations
Profit (loss) from discontinued operations (138) (771) (883)
Net income (loss) 55 (573) (561)
Attributable to
Equity Holders 55 (574) (559)
Minority interests ndash 1 (2)
Weighted average number of shares
outstandingmdashbasic net of treasury stock 261188858 266539917 273646869
Earnings per share from continuing operations
Basic(2) 067 074 118
Diluted 063 042 111
Earnings per share from discontinued operations
Basic (053) (289) (323)
Diluted (048) (262) (296)Total earnings per share
Basic(2) 014 (215) (205)
Diluted 015 (220) (185)
8122019 Panorama 2006
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62 Thomson Panorama 2006
CONSOLIDATED BALANCE SHEETS
In 991404 millions December 31 December 31 January 1 December 31 2006 2005 2005(1) 2004
ASSETS
Non-current assets
Property plant and equipment 813 886 1051 1051
Goodwill 1714 1756 1186 1178
Other intangible assets 1071 1150 924 924
Investments in associates 12 204 260 260
Investments and financial assets available-for-sale 266 341 139 113
Derivative financial instruments 7 1 11 ndash
Contract advances 129 173 179 179
Deferred tax assets 397 379 307 301
Other non-current assets 110 182 133 136
Total non-current assets 4519 5072 4190 4142
Current assets
Inventories 366 333 503 568
Trade accounts and notes receivable 1018 1315 1232 1180
Current accounts with associates and joint ventures 97 115 143 143
Derivative financial instruments 8 9 115 ndash
Other current assets 535 644 483 616
Marketable securities ndash 7 58 58
Cash and cash equivalents 1311 996 1845 1848
Assets classified as held for sale 264 369 80 ndash
Total current assets 3599 3788 4459 4413
Total assets 8118 8860 8649 8555
(1) Including the impacts of the first-time application related to IAS 32 and 39 on financial instruments and IFRS 5 on non-current assets held for sale and
discontinued operations
8122019 Panorama 2006
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63 Thomson Panorama 2006
In 991404 millions December 31 December 31 January 1 December 31 2006 2005 2005(1) 2004
SHAREHOLDERSrsquo EQUITY AND LIABILITIES
Shareholdersrsquo equity
Common stock (273871296 shares at
December 31 2006
with nominal value of euro 375 per share) 1027 1025 1025 1025
Trade accounts and notes payable 1032 1164 1199 1226
Accrued employee expenses 165 166 158 163
Income tax payable 57 47 60 60
Other current liabilities 671 750 746 800
Payables on acquisition of companies 13 138 84 84
Liabilities directly associated with
assets classified as held for sale 232 470 88 ndash
Total current liabilities 3681 4393 3602 3459
Total liabilities 5999 6644 6251 6062
Total shareholderrsquos equity and liabilities 8118 8860 8649 8555
(1) Including the impacts of the first-time application related to IAS 32 and 39 on financial instruments and IFRS 5 on non-current assets held for sale and
discontinued operations
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 6666
Creation and lay-out
Photo credits Nathalie BerhingGAMMA ndash Steacutephane de Bourgies ndash Jean-Franccedilois DeroubaixGAMMA ndash Christine Donnier- ValentinGAMMA ndash Cars copy 2006 Disney Enterprises IncPixar All Rights Reserved ndash Dreamgirls copy 2006 DREAMWORKS
LLC and PARAMOUNT PICTURES All Rights Reserved ndash Poseidon copy 2006 Warner Bros Pictures ndash Sony Bravia Paint
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 5866
56 Thomson Panorama 2006
Maintaining the highest standards
in compliance and risk management
Extensive work was completed in 2006
in Thomsonrsquos main operational units and
at Corporate level to ensure alignment of
reporting and control procedures with the
requirements of the Sarbanes-Oxley Act in
the United States
Improving Internal Control Procedures
Building towards application of Section
404 of the Sarbanes-Oxley Act (ldquoSOX
404rdquo) for fiscal year 2006 which required
the Group to assess the effectiveness of
internal controls Thomson committed to
implementing the internal control frame-
work proposed by the Committee of
Sponsoring Organizations of the Treadway
Commission (ldquoCOSOrdquo)
Within this framework the Group seeks toachieve ldquoreasonable assurancerdquo regarding
the effectiveness and efficiency of opera-
tions the reliability of financial reporting
and compliance with applicable laws and
regulations
Group-wide initiatives were on-going in
2006 to achieve these objectives including
the Process Transformation Initiative (PTI)
to ensure operational excellence COM-
PASS (Controls Over Methods Processes
Applications Systems and Strategy) and
the Risk Committee and its enterprise risk
assessment and management programrun by the Internal Audit function
Following a full worldwide enterprise risk
assessment carried out in the second half
of 2005 and updated throughout 2006 a
second was planned for completion by May
2007 The process assesses risks in the
Grouprsquos distinct business units or profit cen-
ters with the goal of identifying assessing
validating and monitoring risks which could
impact or potentially impact the Grouprsquos
ability to achieve its short and long-term
objectives In 2007 the Risk Committee will
continue to regularly monitor action plans
put in place to mitigate the risks identified
During the year the Group also continued
implementation of a worldwide SOX 404
compliance software system to assist with
the documentation of significant financialprocesses provide consistent guidance
to management regarding controls and
better enable management to assess its
control structure
Managing Risk
Thomson has three main internal organiza-
tions that support and assist the Executive
Committee in control and risk monitoring
the Investment Committee and the Risk
Committee The Investment Committee
meets on an ad hoc basis throughout the
year generally once per week to reviewfinancial commitments including proposed
acquisitions capital equipment funding
and new ventures requiring capital The Risk
Committee which met nine times in 2006
evaluates the Grouprsquos financial operational
and compliance risks and identifies strate-
gic risks that could adversely affect different
activities within the framework of Grouprsquos
three-year plan scenarios The Corporate
Social Responsibility (CSR) Committee to
be set up in 2007 will oversee all CSR
compliance and ethics matters
Ethical values and principles of conductfor the Grouprsquos managers are defined in
of the Grouprsquos divisions and profit centersIn the context of the budgetary procedure
performance measurement indicators are
calculated by the divisions analyzed and
reviewed monthly to serve as a reference
for the Grouprsquos monthly reporting
Management reporting and
closing period work
Th om so n uses a co mmon char t of
accounts which is regularly updated The
principal accounting and financial figures
of the operational and functional depart-
ments consolidated at Group level are
analyzed by the Grouprsquos management
control team and reviewed by the Grouprsquos
Executive Committee
The closing process for the half-year and
annual consolidated financial statementsoccurs in two steps The first step con-
sists of a ldquohard closerdquo completed in May
and September leading to a first review by
the statutory auditors The second step
occurs in July and in JanuaryFebruary and
involves the finalization of half-year and
annual consolidated financial statements
under IFRS The Group then proceeds
once a year with a reconciliation of these
results in accordance with US GAAP
Preparation of financial statements
The financial statements are prepared jointly by the finance department and the
General Secretary They are based on
information reported through the annual
reporting and accounting consolidation
processes and on operational and mar-
ket information which is specifically cen-
tralized for the preparation of Thomsonrsquos
Document de Reacutefeacuterence in France and
the submission of Form 20-F in the United
States Half-year and annual financial infor-
mation is reviewed by the Grouprsquos Audit
Committee
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 6066
58 Thomson Panorama 2006
(1) Source PriceWaterhouseCoopers ndash
ldquoGlobal Entertainment and Media Outlook 2006-10rdquo
Revenue growth
Thomson achieved consolidated 2006
net revenues of 9914045854 million up from
9914045591 million in 2005 Revenues for
the Core Business reached 9914045747 mil-
lion (9914045776 million at constant currency)
representing 83 growth over 2005 at
constant currency
Overall the Grouprsquos key growth busi-
nessesmdashContent Services Network
Services Access Products for telecom
operators and our Broadcast amp Networks
businesses (Grass Valley and Network
Software)mdashincreased strongly year-on-
year and accounted for over a third of
Group revenues against less than a quar-
ter in 2005
Thomsonrsquos Core Business EBIT for 2006
was euro504 million representing a Core
Business EBIT margin of 88 Thisreflected growth in some key businesses
and cost actions across the Group off-
setting a significant investment in research
and development and some increase in
restructuring expenses
Increased spend on RampD
Research and development expenditure
charged in the Core Business (net of
external funding) rose from 991404221 million in
2005 to 991404279 million in 2006 an increase
of 26 principally in the Systems divi-
sion The Group expanded the number ofproducts and services in the development
phase across its businesses
Return to profit
Losses in Non-Core Continuing and Dis-
continued operations were substantially
lower year-on-year reflecting principally
the exit from heavily loss-making Displays
activities in 2005 and intensified cost-sav-
ing programs in 2006 A major revision
and harmonization of the Grouprsquos North
American healthcare obligations gave rise
to substantial one-time gains and Thom-
son also initiated significant restructuring
of its French Non-Core operations
The good performance of the Core Busi-
ness lower Non-Core and Discontinued
losses and a low reported tax chargeenabled the Group to return a net profit of
99140455 million in 2006 compared to a loss of
991404573 million in the previous year
Good cash flow
strengthened balance sheet
Thomson generated good free cash flow
and strengthened its balance sheet in
2006 Total net financial liabilities on the
balance sheet fell by 991404460 million reflect-
ing a 99140493 million fall in financial and acqui-
sition-related debts and a 991404367 million
reduction in retirement benefit obligations(including healthcare)
Increase in Net Dividend
The Board of Directors proposed a dis-
tribution to shareholders of 991404033 per
share (2005 dividend 991404030) reflecting
confidence in the prospects of the Group
going forward
Outlook 2007-2009
growth in revenues and net income
With the Grouprsquos transformation complete Thomsonrsquos financial focus over the 2007-
2009 period will be to grow revenues and
net income
Thomson serves growing Media Enter-
tainment amp Communications marketsmdashfor
which external estimates(1) indicate com-
pound growth of around 6 over the last
FINANCIAL AND
OPERATIONAL PERFORMANCE
Full year 2006 results
saw a return to profitability
and leave Thomson
well positioned at
the heart of convergence
and digital video
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 6166
59 Thomson Panorama 2006
five years Our digital and electronic busi-
nesses now represent two-thirds of rev-
enues and we believe they are growing
faster than the overall market offsetting
the maturing physical media businesses
Given this profile the Group expects its
revenue growth to be more modest in
2007 but to gather pace over the period
and our overall objective is to show com-pound growth over 2007-2009 in line with
or faster than the overall market
The 2007-2009 period is also expected
to see a sharply reduced impact from
residual Non-Core activities with an end
to losses from the Discontinued Activities
perimeter after 2007 Accordingly Thom-
sonrsquos ambition is to turn its Core Business
growth and profitability and lower impact
from Non-Core into strong growth in net
income over the period 2007-2009
Business operations
Continuous performance improvement is
fundamental to Thomsonrsquos commitment to
create sustainable business models and
long-term value for all stakeholders The
ambitious Group-wide programs launched
in 2004 to improve productivity and
enhance overall performance producedsubstantial results in 2006 and led to new
and strong initiatives for long-term growth
As of the second half of 2006 six ldquoKey
Programsrdquo are monitored at Group level
Clients Software Product Introduction
Operations Transformation and Talent
Management
KEY PROGRAMS IN PLACE
Program Focus
Clients Thomsonrsquos clientregional diversification and
growth of the existing business
through improved Sales amp Marketing
Software Development of integrated software platforms
in all markets (post-production distribution
delivery) and for all types of customer
(professional prosumerhellip)
Product Introduction Ensuring new product roadmaps are in line
with strategy and resource needs have been
identifiedOperations Improving the Grouprsquos cost base cash
generation and working capital
Transformation Multiple programs including initiatives to
improving customer relationship management
worldwide supply chain management
IT transformation as well as Thomsonrsquos RampD
footprint
Talent Management Leveraging human assets with a focus on
talent retention and acquisition
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 6266
60 Thomson Panorama 2006
SUMMARY RESULTS FULL YEAR 2006
In 991404 millions unless otherwise stated 2006(1) 2005(1)
Net revenues 5854 5591(1)
Core Business net revenues 5747 5335
Services 2489 2487
Systems 2684 2262
Technology 547 546
Corporate 27 40
Non-Core continuing operations net revenues 107 256
Core Business EBIT(2) 504 512
Services 160 205
Systems 132 109
Technology 289 277Corporate (77) (79)
EBIT from Non-Core continuing operations (25) (122)
(1) Restated with 2006 discontinued activities according to IFRS 5
8122019 Panorama 2006
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61 Thomson Panorama 2006
Year ended December 31in 991404 except number of shares 2006 2005 2004
Year ended December 31in 991404 millions 2006 2005(1) 2004(1)
CONSOLIDATED STATEMENTS OF OPERATIONS
(1) Restated with 2006 discontinued activities according to IFRS 5
(2) After deduction of the interests net of tax paid on the subordinated perpetual notes during the period
Continuing operations
Revenues 5854 5591 5980
Cost of sales (4474) (4240) (4594)
Gross margin 1380 1351 1386
Selling marketing general and administrative expenses (674) (638) (653)
Other income (expense) 52 (96) (69)
Research and development expenses (279) (227) (201)
Profit from continuing operations before tax and net finance costs 479 390 463
Interest income 19 30 52
Interest expense (108) (108) (54)
Other financial income (expense) (111) 36 (26)
Finance costs ndash net (200) (42) (28)
Share of profit (loss) from associates (86) (82) (20)
Income tax ndash (68) (93)
Profit from continuing operations 193 198 322
Discontinued operations
Profit (loss) from discontinued operations (138) (771) (883)
Net income (loss) 55 (573) (561)
Attributable to
Equity Holders 55 (574) (559)
Minority interests ndash 1 (2)
Weighted average number of shares
outstandingmdashbasic net of treasury stock 261188858 266539917 273646869
Earnings per share from continuing operations
Basic(2) 067 074 118
Diluted 063 042 111
Earnings per share from discontinued operations
Basic (053) (289) (323)
Diluted (048) (262) (296)Total earnings per share
Basic(2) 014 (215) (205)
Diluted 015 (220) (185)
8122019 Panorama 2006
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62 Thomson Panorama 2006
CONSOLIDATED BALANCE SHEETS
In 991404 millions December 31 December 31 January 1 December 31 2006 2005 2005(1) 2004
ASSETS
Non-current assets
Property plant and equipment 813 886 1051 1051
Goodwill 1714 1756 1186 1178
Other intangible assets 1071 1150 924 924
Investments in associates 12 204 260 260
Investments and financial assets available-for-sale 266 341 139 113
Derivative financial instruments 7 1 11 ndash
Contract advances 129 173 179 179
Deferred tax assets 397 379 307 301
Other non-current assets 110 182 133 136
Total non-current assets 4519 5072 4190 4142
Current assets
Inventories 366 333 503 568
Trade accounts and notes receivable 1018 1315 1232 1180
Current accounts with associates and joint ventures 97 115 143 143
Derivative financial instruments 8 9 115 ndash
Other current assets 535 644 483 616
Marketable securities ndash 7 58 58
Cash and cash equivalents 1311 996 1845 1848
Assets classified as held for sale 264 369 80 ndash
Total current assets 3599 3788 4459 4413
Total assets 8118 8860 8649 8555
(1) Including the impacts of the first-time application related to IAS 32 and 39 on financial instruments and IFRS 5 on non-current assets held for sale and
discontinued operations
8122019 Panorama 2006
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63 Thomson Panorama 2006
In 991404 millions December 31 December 31 January 1 December 31 2006 2005 2005(1) 2004
SHAREHOLDERSrsquo EQUITY AND LIABILITIES
Shareholdersrsquo equity
Common stock (273871296 shares at
December 31 2006
with nominal value of euro 375 per share) 1027 1025 1025 1025
Trade accounts and notes payable 1032 1164 1199 1226
Accrued employee expenses 165 166 158 163
Income tax payable 57 47 60 60
Other current liabilities 671 750 746 800
Payables on acquisition of companies 13 138 84 84
Liabilities directly associated with
assets classified as held for sale 232 470 88 ndash
Total current liabilities 3681 4393 3602 3459
Total liabilities 5999 6644 6251 6062
Total shareholderrsquos equity and liabilities 8118 8860 8649 8555
(1) Including the impacts of the first-time application related to IAS 32 and 39 on financial instruments and IFRS 5 on non-current assets held for sale and
discontinued operations
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 6666
Creation and lay-out
Photo credits Nathalie BerhingGAMMA ndash Steacutephane de Bourgies ndash Jean-Franccedilois DeroubaixGAMMA ndash Christine Donnier- ValentinGAMMA ndash Cars copy 2006 Disney Enterprises IncPixar All Rights Reserved ndash Dreamgirls copy 2006 DREAMWORKS
LLC and PARAMOUNT PICTURES All Rights Reserved ndash Poseidon copy 2006 Warner Bros Pictures ndash Sony Bravia Paint
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 5966
57 Thomson Panorama 2006
which allows employees who believe that
financial accounting banking or anti-
bribery violations have been committed
to contact the Ethics Compliance Com-
mittee andor the Chairman of the Audit
Committee on a confidential basis
Internal audit
The Grouprsquos internal audit department con-
sists of 20 auditors located in three key
sites for the GroupmdashParis Indianapolis
(Indiana) and Camarillo (California) It was
responsible for testing Thomsonrsquos SOX 404
Compliance Program for 2006 In 2006
the internal audit department completed
30 audits a number of which were linked
to the implementation of Sarbanes-Oxley
and several projects for management that
covered the following domains key opera-
tional processes financial audits of subsid-
iariesrsquo key financial processes post-invest-
ment reviews and compliance audits
Financial reporting
The reliability of published accounting and
financial information is based on a variety
of financial procedures and controls includ-
ing the budgetary process management
reporting and closing period work and the
preparation of financial statements
Budgetary process
The budgetary process is mandatory for all
of the Grouprsquos divisions and profit centersIn the context of the budgetary procedure
performance measurement indicators are
calculated by the divisions analyzed and
reviewed monthly to serve as a reference
for the Grouprsquos monthly reporting
Management reporting and
closing period work
Th om so n uses a co mmon char t of
accounts which is regularly updated The
principal accounting and financial figures
of the operational and functional depart-
ments consolidated at Group level are
analyzed by the Grouprsquos management
control team and reviewed by the Grouprsquos
Executive Committee
The closing process for the half-year and
annual consolidated financial statementsoccurs in two steps The first step con-
sists of a ldquohard closerdquo completed in May
and September leading to a first review by
the statutory auditors The second step
occurs in July and in JanuaryFebruary and
involves the finalization of half-year and
annual consolidated financial statements
under IFRS The Group then proceeds
once a year with a reconciliation of these
results in accordance with US GAAP
Preparation of financial statements
The financial statements are prepared jointly by the finance department and the
General Secretary They are based on
information reported through the annual
reporting and accounting consolidation
processes and on operational and mar-
ket information which is specifically cen-
tralized for the preparation of Thomsonrsquos
Document de Reacutefeacuterence in France and
the submission of Form 20-F in the United
States Half-year and annual financial infor-
mation is reviewed by the Grouprsquos Audit
Committee
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 6066
58 Thomson Panorama 2006
(1) Source PriceWaterhouseCoopers ndash
ldquoGlobal Entertainment and Media Outlook 2006-10rdquo
Revenue growth
Thomson achieved consolidated 2006
net revenues of 9914045854 million up from
9914045591 million in 2005 Revenues for
the Core Business reached 9914045747 mil-
lion (9914045776 million at constant currency)
representing 83 growth over 2005 at
constant currency
Overall the Grouprsquos key growth busi-
nessesmdashContent Services Network
Services Access Products for telecom
operators and our Broadcast amp Networks
businesses (Grass Valley and Network
Software)mdashincreased strongly year-on-
year and accounted for over a third of
Group revenues against less than a quar-
ter in 2005
Thomsonrsquos Core Business EBIT for 2006
was euro504 million representing a Core
Business EBIT margin of 88 Thisreflected growth in some key businesses
and cost actions across the Group off-
setting a significant investment in research
and development and some increase in
restructuring expenses
Increased spend on RampD
Research and development expenditure
charged in the Core Business (net of
external funding) rose from 991404221 million in
2005 to 991404279 million in 2006 an increase
of 26 principally in the Systems divi-
sion The Group expanded the number ofproducts and services in the development
phase across its businesses
Return to profit
Losses in Non-Core Continuing and Dis-
continued operations were substantially
lower year-on-year reflecting principally
the exit from heavily loss-making Displays
activities in 2005 and intensified cost-sav-
ing programs in 2006 A major revision
and harmonization of the Grouprsquos North
American healthcare obligations gave rise
to substantial one-time gains and Thom-
son also initiated significant restructuring
of its French Non-Core operations
The good performance of the Core Busi-
ness lower Non-Core and Discontinued
losses and a low reported tax chargeenabled the Group to return a net profit of
99140455 million in 2006 compared to a loss of
991404573 million in the previous year
Good cash flow
strengthened balance sheet
Thomson generated good free cash flow
and strengthened its balance sheet in
2006 Total net financial liabilities on the
balance sheet fell by 991404460 million reflect-
ing a 99140493 million fall in financial and acqui-
sition-related debts and a 991404367 million
reduction in retirement benefit obligations(including healthcare)
Increase in Net Dividend
The Board of Directors proposed a dis-
tribution to shareholders of 991404033 per
share (2005 dividend 991404030) reflecting
confidence in the prospects of the Group
going forward
Outlook 2007-2009
growth in revenues and net income
With the Grouprsquos transformation complete Thomsonrsquos financial focus over the 2007-
2009 period will be to grow revenues and
net income
Thomson serves growing Media Enter-
tainment amp Communications marketsmdashfor
which external estimates(1) indicate com-
pound growth of around 6 over the last
FINANCIAL AND
OPERATIONAL PERFORMANCE
Full year 2006 results
saw a return to profitability
and leave Thomson
well positioned at
the heart of convergence
and digital video
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 6166
59 Thomson Panorama 2006
five years Our digital and electronic busi-
nesses now represent two-thirds of rev-
enues and we believe they are growing
faster than the overall market offsetting
the maturing physical media businesses
Given this profile the Group expects its
revenue growth to be more modest in
2007 but to gather pace over the period
and our overall objective is to show com-pound growth over 2007-2009 in line with
or faster than the overall market
The 2007-2009 period is also expected
to see a sharply reduced impact from
residual Non-Core activities with an end
to losses from the Discontinued Activities
perimeter after 2007 Accordingly Thom-
sonrsquos ambition is to turn its Core Business
growth and profitability and lower impact
from Non-Core into strong growth in net
income over the period 2007-2009
Business operations
Continuous performance improvement is
fundamental to Thomsonrsquos commitment to
create sustainable business models and
long-term value for all stakeholders The
ambitious Group-wide programs launched
in 2004 to improve productivity and
enhance overall performance producedsubstantial results in 2006 and led to new
and strong initiatives for long-term growth
As of the second half of 2006 six ldquoKey
Programsrdquo are monitored at Group level
Clients Software Product Introduction
Operations Transformation and Talent
Management
KEY PROGRAMS IN PLACE
Program Focus
Clients Thomsonrsquos clientregional diversification and
growth of the existing business
through improved Sales amp Marketing
Software Development of integrated software platforms
in all markets (post-production distribution
delivery) and for all types of customer
(professional prosumerhellip)
Product Introduction Ensuring new product roadmaps are in line
with strategy and resource needs have been
identifiedOperations Improving the Grouprsquos cost base cash
generation and working capital
Transformation Multiple programs including initiatives to
improving customer relationship management
worldwide supply chain management
IT transformation as well as Thomsonrsquos RampD
footprint
Talent Management Leveraging human assets with a focus on
talent retention and acquisition
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 6266
60 Thomson Panorama 2006
SUMMARY RESULTS FULL YEAR 2006
In 991404 millions unless otherwise stated 2006(1) 2005(1)
Net revenues 5854 5591(1)
Core Business net revenues 5747 5335
Services 2489 2487
Systems 2684 2262
Technology 547 546
Corporate 27 40
Non-Core continuing operations net revenues 107 256
Core Business EBIT(2) 504 512
Services 160 205
Systems 132 109
Technology 289 277Corporate (77) (79)
EBIT from Non-Core continuing operations (25) (122)
(1) Restated with 2006 discontinued activities according to IFRS 5
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 6366
61 Thomson Panorama 2006
Year ended December 31in 991404 except number of shares 2006 2005 2004
Year ended December 31in 991404 millions 2006 2005(1) 2004(1)
CONSOLIDATED STATEMENTS OF OPERATIONS
(1) Restated with 2006 discontinued activities according to IFRS 5
(2) After deduction of the interests net of tax paid on the subordinated perpetual notes during the period
Continuing operations
Revenues 5854 5591 5980
Cost of sales (4474) (4240) (4594)
Gross margin 1380 1351 1386
Selling marketing general and administrative expenses (674) (638) (653)
Other income (expense) 52 (96) (69)
Research and development expenses (279) (227) (201)
Profit from continuing operations before tax and net finance costs 479 390 463
Interest income 19 30 52
Interest expense (108) (108) (54)
Other financial income (expense) (111) 36 (26)
Finance costs ndash net (200) (42) (28)
Share of profit (loss) from associates (86) (82) (20)
Income tax ndash (68) (93)
Profit from continuing operations 193 198 322
Discontinued operations
Profit (loss) from discontinued operations (138) (771) (883)
Net income (loss) 55 (573) (561)
Attributable to
Equity Holders 55 (574) (559)
Minority interests ndash 1 (2)
Weighted average number of shares
outstandingmdashbasic net of treasury stock 261188858 266539917 273646869
Earnings per share from continuing operations
Basic(2) 067 074 118
Diluted 063 042 111
Earnings per share from discontinued operations
Basic (053) (289) (323)
Diluted (048) (262) (296)Total earnings per share
Basic(2) 014 (215) (205)
Diluted 015 (220) (185)
8122019 Panorama 2006
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62 Thomson Panorama 2006
CONSOLIDATED BALANCE SHEETS
In 991404 millions December 31 December 31 January 1 December 31 2006 2005 2005(1) 2004
ASSETS
Non-current assets
Property plant and equipment 813 886 1051 1051
Goodwill 1714 1756 1186 1178
Other intangible assets 1071 1150 924 924
Investments in associates 12 204 260 260
Investments and financial assets available-for-sale 266 341 139 113
Derivative financial instruments 7 1 11 ndash
Contract advances 129 173 179 179
Deferred tax assets 397 379 307 301
Other non-current assets 110 182 133 136
Total non-current assets 4519 5072 4190 4142
Current assets
Inventories 366 333 503 568
Trade accounts and notes receivable 1018 1315 1232 1180
Current accounts with associates and joint ventures 97 115 143 143
Derivative financial instruments 8 9 115 ndash
Other current assets 535 644 483 616
Marketable securities ndash 7 58 58
Cash and cash equivalents 1311 996 1845 1848
Assets classified as held for sale 264 369 80 ndash
Total current assets 3599 3788 4459 4413
Total assets 8118 8860 8649 8555
(1) Including the impacts of the first-time application related to IAS 32 and 39 on financial instruments and IFRS 5 on non-current assets held for sale and
discontinued operations
8122019 Panorama 2006
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63 Thomson Panorama 2006
In 991404 millions December 31 December 31 January 1 December 31 2006 2005 2005(1) 2004
SHAREHOLDERSrsquo EQUITY AND LIABILITIES
Shareholdersrsquo equity
Common stock (273871296 shares at
December 31 2006
with nominal value of euro 375 per share) 1027 1025 1025 1025
Trade accounts and notes payable 1032 1164 1199 1226
Accrued employee expenses 165 166 158 163
Income tax payable 57 47 60 60
Other current liabilities 671 750 746 800
Payables on acquisition of companies 13 138 84 84
Liabilities directly associated with
assets classified as held for sale 232 470 88 ndash
Total current liabilities 3681 4393 3602 3459
Total liabilities 5999 6644 6251 6062
Total shareholderrsquos equity and liabilities 8118 8860 8649 8555
(1) Including the impacts of the first-time application related to IAS 32 and 39 on financial instruments and IFRS 5 on non-current assets held for sale and
discontinued operations
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 6666
Creation and lay-out
Photo credits Nathalie BerhingGAMMA ndash Steacutephane de Bourgies ndash Jean-Franccedilois DeroubaixGAMMA ndash Christine Donnier- ValentinGAMMA ndash Cars copy 2006 Disney Enterprises IncPixar All Rights Reserved ndash Dreamgirls copy 2006 DREAMWORKS
LLC and PARAMOUNT PICTURES All Rights Reserved ndash Poseidon copy 2006 Warner Bros Pictures ndash Sony Bravia Paint
8122019 Panorama 2006
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58 Thomson Panorama 2006
(1) Source PriceWaterhouseCoopers ndash
ldquoGlobal Entertainment and Media Outlook 2006-10rdquo
Revenue growth
Thomson achieved consolidated 2006
net revenues of 9914045854 million up from
9914045591 million in 2005 Revenues for
the Core Business reached 9914045747 mil-
lion (9914045776 million at constant currency)
representing 83 growth over 2005 at
constant currency
Overall the Grouprsquos key growth busi-
nessesmdashContent Services Network
Services Access Products for telecom
operators and our Broadcast amp Networks
businesses (Grass Valley and Network
Software)mdashincreased strongly year-on-
year and accounted for over a third of
Group revenues against less than a quar-
ter in 2005
Thomsonrsquos Core Business EBIT for 2006
was euro504 million representing a Core
Business EBIT margin of 88 Thisreflected growth in some key businesses
and cost actions across the Group off-
setting a significant investment in research
and development and some increase in
restructuring expenses
Increased spend on RampD
Research and development expenditure
charged in the Core Business (net of
external funding) rose from 991404221 million in
2005 to 991404279 million in 2006 an increase
of 26 principally in the Systems divi-
sion The Group expanded the number ofproducts and services in the development
phase across its businesses
Return to profit
Losses in Non-Core Continuing and Dis-
continued operations were substantially
lower year-on-year reflecting principally
the exit from heavily loss-making Displays
activities in 2005 and intensified cost-sav-
ing programs in 2006 A major revision
and harmonization of the Grouprsquos North
American healthcare obligations gave rise
to substantial one-time gains and Thom-
son also initiated significant restructuring
of its French Non-Core operations
The good performance of the Core Busi-
ness lower Non-Core and Discontinued
losses and a low reported tax chargeenabled the Group to return a net profit of
99140455 million in 2006 compared to a loss of
991404573 million in the previous year
Good cash flow
strengthened balance sheet
Thomson generated good free cash flow
and strengthened its balance sheet in
2006 Total net financial liabilities on the
balance sheet fell by 991404460 million reflect-
ing a 99140493 million fall in financial and acqui-
sition-related debts and a 991404367 million
reduction in retirement benefit obligations(including healthcare)
Increase in Net Dividend
The Board of Directors proposed a dis-
tribution to shareholders of 991404033 per
share (2005 dividend 991404030) reflecting
confidence in the prospects of the Group
going forward
Outlook 2007-2009
growth in revenues and net income
With the Grouprsquos transformation complete Thomsonrsquos financial focus over the 2007-
2009 period will be to grow revenues and
net income
Thomson serves growing Media Enter-
tainment amp Communications marketsmdashfor
which external estimates(1) indicate com-
pound growth of around 6 over the last
FINANCIAL AND
OPERATIONAL PERFORMANCE
Full year 2006 results
saw a return to profitability
and leave Thomson
well positioned at
the heart of convergence
and digital video
8122019 Panorama 2006
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59 Thomson Panorama 2006
five years Our digital and electronic busi-
nesses now represent two-thirds of rev-
enues and we believe they are growing
faster than the overall market offsetting
the maturing physical media businesses
Given this profile the Group expects its
revenue growth to be more modest in
2007 but to gather pace over the period
and our overall objective is to show com-pound growth over 2007-2009 in line with
or faster than the overall market
The 2007-2009 period is also expected
to see a sharply reduced impact from
residual Non-Core activities with an end
to losses from the Discontinued Activities
perimeter after 2007 Accordingly Thom-
sonrsquos ambition is to turn its Core Business
growth and profitability and lower impact
from Non-Core into strong growth in net
income over the period 2007-2009
Business operations
Continuous performance improvement is
fundamental to Thomsonrsquos commitment to
create sustainable business models and
long-term value for all stakeholders The
ambitious Group-wide programs launched
in 2004 to improve productivity and
enhance overall performance producedsubstantial results in 2006 and led to new
and strong initiatives for long-term growth
As of the second half of 2006 six ldquoKey
Programsrdquo are monitored at Group level
Clients Software Product Introduction
Operations Transformation and Talent
Management
KEY PROGRAMS IN PLACE
Program Focus
Clients Thomsonrsquos clientregional diversification and
growth of the existing business
through improved Sales amp Marketing
Software Development of integrated software platforms
in all markets (post-production distribution
delivery) and for all types of customer
(professional prosumerhellip)
Product Introduction Ensuring new product roadmaps are in line
with strategy and resource needs have been
identifiedOperations Improving the Grouprsquos cost base cash
generation and working capital
Transformation Multiple programs including initiatives to
improving customer relationship management
worldwide supply chain management
IT transformation as well as Thomsonrsquos RampD
footprint
Talent Management Leveraging human assets with a focus on
talent retention and acquisition
8122019 Panorama 2006
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60 Thomson Panorama 2006
SUMMARY RESULTS FULL YEAR 2006
In 991404 millions unless otherwise stated 2006(1) 2005(1)
Net revenues 5854 5591(1)
Core Business net revenues 5747 5335
Services 2489 2487
Systems 2684 2262
Technology 547 546
Corporate 27 40
Non-Core continuing operations net revenues 107 256
Core Business EBIT(2) 504 512
Services 160 205
Systems 132 109
Technology 289 277Corporate (77) (79)
EBIT from Non-Core continuing operations (25) (122)
(1) Restated with 2006 discontinued activities according to IFRS 5
8122019 Panorama 2006
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61 Thomson Panorama 2006
Year ended December 31in 991404 except number of shares 2006 2005 2004
Year ended December 31in 991404 millions 2006 2005(1) 2004(1)
CONSOLIDATED STATEMENTS OF OPERATIONS
(1) Restated with 2006 discontinued activities according to IFRS 5
(2) After deduction of the interests net of tax paid on the subordinated perpetual notes during the period
Continuing operations
Revenues 5854 5591 5980
Cost of sales (4474) (4240) (4594)
Gross margin 1380 1351 1386
Selling marketing general and administrative expenses (674) (638) (653)
Other income (expense) 52 (96) (69)
Research and development expenses (279) (227) (201)
Profit from continuing operations before tax and net finance costs 479 390 463
Interest income 19 30 52
Interest expense (108) (108) (54)
Other financial income (expense) (111) 36 (26)
Finance costs ndash net (200) (42) (28)
Share of profit (loss) from associates (86) (82) (20)
Income tax ndash (68) (93)
Profit from continuing operations 193 198 322
Discontinued operations
Profit (loss) from discontinued operations (138) (771) (883)
Net income (loss) 55 (573) (561)
Attributable to
Equity Holders 55 (574) (559)
Minority interests ndash 1 (2)
Weighted average number of shares
outstandingmdashbasic net of treasury stock 261188858 266539917 273646869
Earnings per share from continuing operations
Basic(2) 067 074 118
Diluted 063 042 111
Earnings per share from discontinued operations
Basic (053) (289) (323)
Diluted (048) (262) (296)Total earnings per share
Basic(2) 014 (215) (205)
Diluted 015 (220) (185)
8122019 Panorama 2006
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62 Thomson Panorama 2006
CONSOLIDATED BALANCE SHEETS
In 991404 millions December 31 December 31 January 1 December 31 2006 2005 2005(1) 2004
ASSETS
Non-current assets
Property plant and equipment 813 886 1051 1051
Goodwill 1714 1756 1186 1178
Other intangible assets 1071 1150 924 924
Investments in associates 12 204 260 260
Investments and financial assets available-for-sale 266 341 139 113
Derivative financial instruments 7 1 11 ndash
Contract advances 129 173 179 179
Deferred tax assets 397 379 307 301
Other non-current assets 110 182 133 136
Total non-current assets 4519 5072 4190 4142
Current assets
Inventories 366 333 503 568
Trade accounts and notes receivable 1018 1315 1232 1180
Current accounts with associates and joint ventures 97 115 143 143
Derivative financial instruments 8 9 115 ndash
Other current assets 535 644 483 616
Marketable securities ndash 7 58 58
Cash and cash equivalents 1311 996 1845 1848
Assets classified as held for sale 264 369 80 ndash
Total current assets 3599 3788 4459 4413
Total assets 8118 8860 8649 8555
(1) Including the impacts of the first-time application related to IAS 32 and 39 on financial instruments and IFRS 5 on non-current assets held for sale and
discontinued operations
8122019 Panorama 2006
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63 Thomson Panorama 2006
In 991404 millions December 31 December 31 January 1 December 31 2006 2005 2005(1) 2004
SHAREHOLDERSrsquo EQUITY AND LIABILITIES
Shareholdersrsquo equity
Common stock (273871296 shares at
December 31 2006
with nominal value of euro 375 per share) 1027 1025 1025 1025
Trade accounts and notes payable 1032 1164 1199 1226
Accrued employee expenses 165 166 158 163
Income tax payable 57 47 60 60
Other current liabilities 671 750 746 800
Payables on acquisition of companies 13 138 84 84
Liabilities directly associated with
assets classified as held for sale 232 470 88 ndash
Total current liabilities 3681 4393 3602 3459
Total liabilities 5999 6644 6251 6062
Total shareholderrsquos equity and liabilities 8118 8860 8649 8555
(1) Including the impacts of the first-time application related to IAS 32 and 39 on financial instruments and IFRS 5 on non-current assets held for sale and
discontinued operations
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 6666
Creation and lay-out
Photo credits Nathalie BerhingGAMMA ndash Steacutephane de Bourgies ndash Jean-Franccedilois DeroubaixGAMMA ndash Christine Donnier- ValentinGAMMA ndash Cars copy 2006 Disney Enterprises IncPixar All Rights Reserved ndash Dreamgirls copy 2006 DREAMWORKS
LLC and PARAMOUNT PICTURES All Rights Reserved ndash Poseidon copy 2006 Warner Bros Pictures ndash Sony Bravia Paint
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 6166
59 Thomson Panorama 2006
five years Our digital and electronic busi-
nesses now represent two-thirds of rev-
enues and we believe they are growing
faster than the overall market offsetting
the maturing physical media businesses
Given this profile the Group expects its
revenue growth to be more modest in
2007 but to gather pace over the period
and our overall objective is to show com-pound growth over 2007-2009 in line with
or faster than the overall market
The 2007-2009 period is also expected
to see a sharply reduced impact from
residual Non-Core activities with an end
to losses from the Discontinued Activities
perimeter after 2007 Accordingly Thom-
sonrsquos ambition is to turn its Core Business
growth and profitability and lower impact
from Non-Core into strong growth in net
income over the period 2007-2009
Business operations
Continuous performance improvement is
fundamental to Thomsonrsquos commitment to
create sustainable business models and
long-term value for all stakeholders The
ambitious Group-wide programs launched
in 2004 to improve productivity and
enhance overall performance producedsubstantial results in 2006 and led to new
and strong initiatives for long-term growth
As of the second half of 2006 six ldquoKey
Programsrdquo are monitored at Group level
Clients Software Product Introduction
Operations Transformation and Talent
Management
KEY PROGRAMS IN PLACE
Program Focus
Clients Thomsonrsquos clientregional diversification and
growth of the existing business
through improved Sales amp Marketing
Software Development of integrated software platforms
in all markets (post-production distribution
delivery) and for all types of customer
(professional prosumerhellip)
Product Introduction Ensuring new product roadmaps are in line
with strategy and resource needs have been
identifiedOperations Improving the Grouprsquos cost base cash
generation and working capital
Transformation Multiple programs including initiatives to
improving customer relationship management
worldwide supply chain management
IT transformation as well as Thomsonrsquos RampD
footprint
Talent Management Leveraging human assets with a focus on
talent retention and acquisition
8122019 Panorama 2006
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60 Thomson Panorama 2006
SUMMARY RESULTS FULL YEAR 2006
In 991404 millions unless otherwise stated 2006(1) 2005(1)
Net revenues 5854 5591(1)
Core Business net revenues 5747 5335
Services 2489 2487
Systems 2684 2262
Technology 547 546
Corporate 27 40
Non-Core continuing operations net revenues 107 256
Core Business EBIT(2) 504 512
Services 160 205
Systems 132 109
Technology 289 277Corporate (77) (79)
EBIT from Non-Core continuing operations (25) (122)
(1) Restated with 2006 discontinued activities according to IFRS 5
8122019 Panorama 2006
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61 Thomson Panorama 2006
Year ended December 31in 991404 except number of shares 2006 2005 2004
Year ended December 31in 991404 millions 2006 2005(1) 2004(1)
CONSOLIDATED STATEMENTS OF OPERATIONS
(1) Restated with 2006 discontinued activities according to IFRS 5
(2) After deduction of the interests net of tax paid on the subordinated perpetual notes during the period
Continuing operations
Revenues 5854 5591 5980
Cost of sales (4474) (4240) (4594)
Gross margin 1380 1351 1386
Selling marketing general and administrative expenses (674) (638) (653)
Other income (expense) 52 (96) (69)
Research and development expenses (279) (227) (201)
Profit from continuing operations before tax and net finance costs 479 390 463
Interest income 19 30 52
Interest expense (108) (108) (54)
Other financial income (expense) (111) 36 (26)
Finance costs ndash net (200) (42) (28)
Share of profit (loss) from associates (86) (82) (20)
Income tax ndash (68) (93)
Profit from continuing operations 193 198 322
Discontinued operations
Profit (loss) from discontinued operations (138) (771) (883)
Net income (loss) 55 (573) (561)
Attributable to
Equity Holders 55 (574) (559)
Minority interests ndash 1 (2)
Weighted average number of shares
outstandingmdashbasic net of treasury stock 261188858 266539917 273646869
Earnings per share from continuing operations
Basic(2) 067 074 118
Diluted 063 042 111
Earnings per share from discontinued operations
Basic (053) (289) (323)
Diluted (048) (262) (296)Total earnings per share
Basic(2) 014 (215) (205)
Diluted 015 (220) (185)
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62 Thomson Panorama 2006
CONSOLIDATED BALANCE SHEETS
In 991404 millions December 31 December 31 January 1 December 31 2006 2005 2005(1) 2004
ASSETS
Non-current assets
Property plant and equipment 813 886 1051 1051
Goodwill 1714 1756 1186 1178
Other intangible assets 1071 1150 924 924
Investments in associates 12 204 260 260
Investments and financial assets available-for-sale 266 341 139 113
Derivative financial instruments 7 1 11 ndash
Contract advances 129 173 179 179
Deferred tax assets 397 379 307 301
Other non-current assets 110 182 133 136
Total non-current assets 4519 5072 4190 4142
Current assets
Inventories 366 333 503 568
Trade accounts and notes receivable 1018 1315 1232 1180
Current accounts with associates and joint ventures 97 115 143 143
Derivative financial instruments 8 9 115 ndash
Other current assets 535 644 483 616
Marketable securities ndash 7 58 58
Cash and cash equivalents 1311 996 1845 1848
Assets classified as held for sale 264 369 80 ndash
Total current assets 3599 3788 4459 4413
Total assets 8118 8860 8649 8555
(1) Including the impacts of the first-time application related to IAS 32 and 39 on financial instruments and IFRS 5 on non-current assets held for sale and
discontinued operations
8122019 Panorama 2006
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63 Thomson Panorama 2006
In 991404 millions December 31 December 31 January 1 December 31 2006 2005 2005(1) 2004
SHAREHOLDERSrsquo EQUITY AND LIABILITIES
Shareholdersrsquo equity
Common stock (273871296 shares at
December 31 2006
with nominal value of euro 375 per share) 1027 1025 1025 1025
Trade accounts and notes payable 1032 1164 1199 1226
Accrued employee expenses 165 166 158 163
Income tax payable 57 47 60 60
Other current liabilities 671 750 746 800
Payables on acquisition of companies 13 138 84 84
Liabilities directly associated with
assets classified as held for sale 232 470 88 ndash
Total current liabilities 3681 4393 3602 3459
Total liabilities 5999 6644 6251 6062
Total shareholderrsquos equity and liabilities 8118 8860 8649 8555
(1) Including the impacts of the first-time application related to IAS 32 and 39 on financial instruments and IFRS 5 on non-current assets held for sale and
discontinued operations
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 6666
Creation and lay-out
Photo credits Nathalie BerhingGAMMA ndash Steacutephane de Bourgies ndash Jean-Franccedilois DeroubaixGAMMA ndash Christine Donnier- ValentinGAMMA ndash Cars copy 2006 Disney Enterprises IncPixar All Rights Reserved ndash Dreamgirls copy 2006 DREAMWORKS
LLC and PARAMOUNT PICTURES All Rights Reserved ndash Poseidon copy 2006 Warner Bros Pictures ndash Sony Bravia Paint
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 6266
60 Thomson Panorama 2006
SUMMARY RESULTS FULL YEAR 2006
In 991404 millions unless otherwise stated 2006(1) 2005(1)
Net revenues 5854 5591(1)
Core Business net revenues 5747 5335
Services 2489 2487
Systems 2684 2262
Technology 547 546
Corporate 27 40
Non-Core continuing operations net revenues 107 256
Core Business EBIT(2) 504 512
Services 160 205
Systems 132 109
Technology 289 277Corporate (77) (79)
EBIT from Non-Core continuing operations (25) (122)
(1) Restated with 2006 discontinued activities according to IFRS 5
8122019 Panorama 2006
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61 Thomson Panorama 2006
Year ended December 31in 991404 except number of shares 2006 2005 2004
Year ended December 31in 991404 millions 2006 2005(1) 2004(1)
CONSOLIDATED STATEMENTS OF OPERATIONS
(1) Restated with 2006 discontinued activities according to IFRS 5
(2) After deduction of the interests net of tax paid on the subordinated perpetual notes during the period
Continuing operations
Revenues 5854 5591 5980
Cost of sales (4474) (4240) (4594)
Gross margin 1380 1351 1386
Selling marketing general and administrative expenses (674) (638) (653)
Other income (expense) 52 (96) (69)
Research and development expenses (279) (227) (201)
Profit from continuing operations before tax and net finance costs 479 390 463
Interest income 19 30 52
Interest expense (108) (108) (54)
Other financial income (expense) (111) 36 (26)
Finance costs ndash net (200) (42) (28)
Share of profit (loss) from associates (86) (82) (20)
Income tax ndash (68) (93)
Profit from continuing operations 193 198 322
Discontinued operations
Profit (loss) from discontinued operations (138) (771) (883)
Net income (loss) 55 (573) (561)
Attributable to
Equity Holders 55 (574) (559)
Minority interests ndash 1 (2)
Weighted average number of shares
outstandingmdashbasic net of treasury stock 261188858 266539917 273646869
Earnings per share from continuing operations
Basic(2) 067 074 118
Diluted 063 042 111
Earnings per share from discontinued operations
Basic (053) (289) (323)
Diluted (048) (262) (296)Total earnings per share
Basic(2) 014 (215) (205)
Diluted 015 (220) (185)
8122019 Panorama 2006
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62 Thomson Panorama 2006
CONSOLIDATED BALANCE SHEETS
In 991404 millions December 31 December 31 January 1 December 31 2006 2005 2005(1) 2004
ASSETS
Non-current assets
Property plant and equipment 813 886 1051 1051
Goodwill 1714 1756 1186 1178
Other intangible assets 1071 1150 924 924
Investments in associates 12 204 260 260
Investments and financial assets available-for-sale 266 341 139 113
Derivative financial instruments 7 1 11 ndash
Contract advances 129 173 179 179
Deferred tax assets 397 379 307 301
Other non-current assets 110 182 133 136
Total non-current assets 4519 5072 4190 4142
Current assets
Inventories 366 333 503 568
Trade accounts and notes receivable 1018 1315 1232 1180
Current accounts with associates and joint ventures 97 115 143 143
Derivative financial instruments 8 9 115 ndash
Other current assets 535 644 483 616
Marketable securities ndash 7 58 58
Cash and cash equivalents 1311 996 1845 1848
Assets classified as held for sale 264 369 80 ndash
Total current assets 3599 3788 4459 4413
Total assets 8118 8860 8649 8555
(1) Including the impacts of the first-time application related to IAS 32 and 39 on financial instruments and IFRS 5 on non-current assets held for sale and
discontinued operations
8122019 Panorama 2006
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63 Thomson Panorama 2006
In 991404 millions December 31 December 31 January 1 December 31 2006 2005 2005(1) 2004
SHAREHOLDERSrsquo EQUITY AND LIABILITIES
Shareholdersrsquo equity
Common stock (273871296 shares at
December 31 2006
with nominal value of euro 375 per share) 1027 1025 1025 1025
Trade accounts and notes payable 1032 1164 1199 1226
Accrued employee expenses 165 166 158 163
Income tax payable 57 47 60 60
Other current liabilities 671 750 746 800
Payables on acquisition of companies 13 138 84 84
Liabilities directly associated with
assets classified as held for sale 232 470 88 ndash
Total current liabilities 3681 4393 3602 3459
Total liabilities 5999 6644 6251 6062
Total shareholderrsquos equity and liabilities 8118 8860 8649 8555
(1) Including the impacts of the first-time application related to IAS 32 and 39 on financial instruments and IFRS 5 on non-current assets held for sale and
discontinued operations
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 6666
Creation and lay-out
Photo credits Nathalie BerhingGAMMA ndash Steacutephane de Bourgies ndash Jean-Franccedilois DeroubaixGAMMA ndash Christine Donnier- ValentinGAMMA ndash Cars copy 2006 Disney Enterprises IncPixar All Rights Reserved ndash Dreamgirls copy 2006 DREAMWORKS
LLC and PARAMOUNT PICTURES All Rights Reserved ndash Poseidon copy 2006 Warner Bros Pictures ndash Sony Bravia Paint
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 6366
61 Thomson Panorama 2006
Year ended December 31in 991404 except number of shares 2006 2005 2004
Year ended December 31in 991404 millions 2006 2005(1) 2004(1)
CONSOLIDATED STATEMENTS OF OPERATIONS
(1) Restated with 2006 discontinued activities according to IFRS 5
(2) After deduction of the interests net of tax paid on the subordinated perpetual notes during the period
Continuing operations
Revenues 5854 5591 5980
Cost of sales (4474) (4240) (4594)
Gross margin 1380 1351 1386
Selling marketing general and administrative expenses (674) (638) (653)
Other income (expense) 52 (96) (69)
Research and development expenses (279) (227) (201)
Profit from continuing operations before tax and net finance costs 479 390 463
Interest income 19 30 52
Interest expense (108) (108) (54)
Other financial income (expense) (111) 36 (26)
Finance costs ndash net (200) (42) (28)
Share of profit (loss) from associates (86) (82) (20)
Income tax ndash (68) (93)
Profit from continuing operations 193 198 322
Discontinued operations
Profit (loss) from discontinued operations (138) (771) (883)
Net income (loss) 55 (573) (561)
Attributable to
Equity Holders 55 (574) (559)
Minority interests ndash 1 (2)
Weighted average number of shares
outstandingmdashbasic net of treasury stock 261188858 266539917 273646869
Earnings per share from continuing operations
Basic(2) 067 074 118
Diluted 063 042 111
Earnings per share from discontinued operations
Basic (053) (289) (323)
Diluted (048) (262) (296)Total earnings per share
Basic(2) 014 (215) (205)
Diluted 015 (220) (185)
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 6466
62 Thomson Panorama 2006
CONSOLIDATED BALANCE SHEETS
In 991404 millions December 31 December 31 January 1 December 31 2006 2005 2005(1) 2004
ASSETS
Non-current assets
Property plant and equipment 813 886 1051 1051
Goodwill 1714 1756 1186 1178
Other intangible assets 1071 1150 924 924
Investments in associates 12 204 260 260
Investments and financial assets available-for-sale 266 341 139 113
Derivative financial instruments 7 1 11 ndash
Contract advances 129 173 179 179
Deferred tax assets 397 379 307 301
Other non-current assets 110 182 133 136
Total non-current assets 4519 5072 4190 4142
Current assets
Inventories 366 333 503 568
Trade accounts and notes receivable 1018 1315 1232 1180
Current accounts with associates and joint ventures 97 115 143 143
Derivative financial instruments 8 9 115 ndash
Other current assets 535 644 483 616
Marketable securities ndash 7 58 58
Cash and cash equivalents 1311 996 1845 1848
Assets classified as held for sale 264 369 80 ndash
Total current assets 3599 3788 4459 4413
Total assets 8118 8860 8649 8555
(1) Including the impacts of the first-time application related to IAS 32 and 39 on financial instruments and IFRS 5 on non-current assets held for sale and
discontinued operations
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 6566
63 Thomson Panorama 2006
In 991404 millions December 31 December 31 January 1 December 31 2006 2005 2005(1) 2004
SHAREHOLDERSrsquo EQUITY AND LIABILITIES
Shareholdersrsquo equity
Common stock (273871296 shares at
December 31 2006
with nominal value of euro 375 per share) 1027 1025 1025 1025
Trade accounts and notes payable 1032 1164 1199 1226
Accrued employee expenses 165 166 158 163
Income tax payable 57 47 60 60
Other current liabilities 671 750 746 800
Payables on acquisition of companies 13 138 84 84
Liabilities directly associated with
assets classified as held for sale 232 470 88 ndash
Total current liabilities 3681 4393 3602 3459
Total liabilities 5999 6644 6251 6062
Total shareholderrsquos equity and liabilities 8118 8860 8649 8555
(1) Including the impacts of the first-time application related to IAS 32 and 39 on financial instruments and IFRS 5 on non-current assets held for sale and
discontinued operations
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 6666
Creation and lay-out
Photo credits Nathalie BerhingGAMMA ndash Steacutephane de Bourgies ndash Jean-Franccedilois DeroubaixGAMMA ndash Christine Donnier- ValentinGAMMA ndash Cars copy 2006 Disney Enterprises IncPixar All Rights Reserved ndash Dreamgirls copy 2006 DREAMWORKS
LLC and PARAMOUNT PICTURES All Rights Reserved ndash Poseidon copy 2006 Warner Bros Pictures ndash Sony Bravia Paint
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 6466
62 Thomson Panorama 2006
CONSOLIDATED BALANCE SHEETS
In 991404 millions December 31 December 31 January 1 December 31 2006 2005 2005(1) 2004
ASSETS
Non-current assets
Property plant and equipment 813 886 1051 1051
Goodwill 1714 1756 1186 1178
Other intangible assets 1071 1150 924 924
Investments in associates 12 204 260 260
Investments and financial assets available-for-sale 266 341 139 113
Derivative financial instruments 7 1 11 ndash
Contract advances 129 173 179 179
Deferred tax assets 397 379 307 301
Other non-current assets 110 182 133 136
Total non-current assets 4519 5072 4190 4142
Current assets
Inventories 366 333 503 568
Trade accounts and notes receivable 1018 1315 1232 1180
Current accounts with associates and joint ventures 97 115 143 143
Derivative financial instruments 8 9 115 ndash
Other current assets 535 644 483 616
Marketable securities ndash 7 58 58
Cash and cash equivalents 1311 996 1845 1848
Assets classified as held for sale 264 369 80 ndash
Total current assets 3599 3788 4459 4413
Total assets 8118 8860 8649 8555
(1) Including the impacts of the first-time application related to IAS 32 and 39 on financial instruments and IFRS 5 on non-current assets held for sale and
discontinued operations
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 6566
63 Thomson Panorama 2006
In 991404 millions December 31 December 31 January 1 December 31 2006 2005 2005(1) 2004
SHAREHOLDERSrsquo EQUITY AND LIABILITIES
Shareholdersrsquo equity
Common stock (273871296 shares at
December 31 2006
with nominal value of euro 375 per share) 1027 1025 1025 1025
Trade accounts and notes payable 1032 1164 1199 1226
Accrued employee expenses 165 166 158 163
Income tax payable 57 47 60 60
Other current liabilities 671 750 746 800
Payables on acquisition of companies 13 138 84 84
Liabilities directly associated with
assets classified as held for sale 232 470 88 ndash
Total current liabilities 3681 4393 3602 3459
Total liabilities 5999 6644 6251 6062
Total shareholderrsquos equity and liabilities 8118 8860 8649 8555
(1) Including the impacts of the first-time application related to IAS 32 and 39 on financial instruments and IFRS 5 on non-current assets held for sale and
discontinued operations
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 6666
Creation and lay-out
Photo credits Nathalie BerhingGAMMA ndash Steacutephane de Bourgies ndash Jean-Franccedilois DeroubaixGAMMA ndash Christine Donnier- ValentinGAMMA ndash Cars copy 2006 Disney Enterprises IncPixar All Rights Reserved ndash Dreamgirls copy 2006 DREAMWORKS
LLC and PARAMOUNT PICTURES All Rights Reserved ndash Poseidon copy 2006 Warner Bros Pictures ndash Sony Bravia Paint
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 6566
63 Thomson Panorama 2006
In 991404 millions December 31 December 31 January 1 December 31 2006 2005 2005(1) 2004
SHAREHOLDERSrsquo EQUITY AND LIABILITIES
Shareholdersrsquo equity
Common stock (273871296 shares at
December 31 2006
with nominal value of euro 375 per share) 1027 1025 1025 1025
Trade accounts and notes payable 1032 1164 1199 1226
Accrued employee expenses 165 166 158 163
Income tax payable 57 47 60 60
Other current liabilities 671 750 746 800
Payables on acquisition of companies 13 138 84 84
Liabilities directly associated with
assets classified as held for sale 232 470 88 ndash
Total current liabilities 3681 4393 3602 3459
Total liabilities 5999 6644 6251 6062
Total shareholderrsquos equity and liabilities 8118 8860 8649 8555
(1) Including the impacts of the first-time application related to IAS 32 and 39 on financial instruments and IFRS 5 on non-current assets held for sale and
discontinued operations
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 6666
Creation and lay-out
Photo credits Nathalie BerhingGAMMA ndash Steacutephane de Bourgies ndash Jean-Franccedilois DeroubaixGAMMA ndash Christine Donnier- ValentinGAMMA ndash Cars copy 2006 Disney Enterprises IncPixar All Rights Reserved ndash Dreamgirls copy 2006 DREAMWORKS
LLC and PARAMOUNT PICTURES All Rights Reserved ndash Poseidon copy 2006 Warner Bros Pictures ndash Sony Bravia Paint
8122019 Panorama 2006
httpslidepdfcomreaderfullpanorama-2006 6666
Creation and lay-out
Photo credits Nathalie BerhingGAMMA ndash Steacutephane de Bourgies ndash Jean-Franccedilois DeroubaixGAMMA ndash Christine Donnier- ValentinGAMMA ndash Cars copy 2006 Disney Enterprises IncPixar All Rights Reserved ndash Dreamgirls copy 2006 DREAMWORKS
LLC and PARAMOUNT PICTURES All Rights Reserved ndash Poseidon copy 2006 Warner Bros Pictures ndash Sony Bravia Paint