Management's Report on Internal Control over Financial Reporting
Management of the company is responsible for establishing and maintaining adequate internal control over financial reporting.
Internal control over financial reporting is defined in Rule 13a-15(f) and 15 d-15(f) under the Securities Exchange Act of 1934, as amended, as a process designed by, or under the supervision of, the company's principal executive and principal financial officers and effected by the company's board of directors, management and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:
– pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company;
–provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and
–provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company's assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risks that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Management assessed the effectiveness of the Company's internal control over financial reporting as of December 31, 2005. In making this assessment, we used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control - Integrated Framework. Based on our assessment, we believe that, as of December 31, 2005, the Company's internal control over financial reporting is effective.
The Company's independent auditors – Ernst & Young AB, an independent registered public accounting firm – have issued an audit report on our assessment of the Company's internal control over financial reporting, which is included herein, see page 51.
The certification required pursuant to Section 303A 12(a) of the New York Stock Exchange Listed Company Manual has been filed with the New York Stock Exchange.
The Company has also filed the CEO/CFO certifications required pursuant to Section 302 of the Sarbanes Oxley Act of 2002 as exhibit 31 to the form 10-K filed with the Securities and Exchange Commission.
Consolidated Statements of Income
    Years ended December 31
(Dollars and shares in millions, except per share data)   2005 2004 2003

Net sales Note 19 $6,204.9 $6,143.9 $5,300.8
Cost of sales (4,936.9) (4,922.7) (4,298.1)
Gross profit 1,268.0 1,221.2 1,002.7
Selling, general and administrative expenses (331.0) (307.4) (273.2)
Research, development and engineering expenses (385.8) (368.4) (305.4)
Amortization of intangibles Note 9 (15.5) (21.1) (21.1)
Other income (expense), net (23.0) (11.2) 23.8
Operating income 512.7 513.1 426.8
Equity in earnings of affiliates 7.1 9.6 11.5
Interest income Note 12 6.7 4.0 3.9
Interest expense Note 12 (44.1) (40.2) (47.7)
Other financial items, net (0.4) (2.0) 2.5
Income before income taxes 482.0 484.5 397.0
Income taxes Note 4 (173.2) (149.0) (120.2)
Minority interests in subsidiaries   (16.2) (9.2) (8.4)
Net income 292.6 $326.3 $268.4
Earnings per common share
– basic $3.28 $3.49 $2.83
– assuming dilution $3.26 $3.46 $2.81
 
Weighted average number of shares (in millions)
 
– basic 89.1 93.6 94.8
– assuming dilution 89.7 94.2 95.4
Number of shares outstanding, net of treasury shares (in millions) 83.7 92.0 94.9

See Notes to Consolidated Financial Statements.