2016-04-22 07:47:14 CEST
2016-04-22 07:47:14 CEST
REGULATED INFORMATION
Nokia - Company Announcement
Nokia provides recast segment results for 2015 reflecting new financial reporting structure
Nokia Corporation
Stock Exchange Release
April 22, 2016 at 08:45 (CET +1)
Nokia provides recast segment results for 2015 reflecting new financial
reporting structure
Espoo, Finland - Nokia today provided recast segment results for 2015 reflecting
the company's new financial reporting and organizational structure, following
the acquisition of Alcatel-Lucent. Nokia's organizational structure is intended
to enable the company to create an innovation leader in next generation
technology and services. With state-of-the-art software, hardware and services
for any type of network, Nokia is at the forefront of creating and licensing the
technologies that are increasingly at the heart of our connected lives.
Three reportable segments
To support Nokia's strategic objectives and reflect the way the company
evaluates operational performance and allocates resources, Nokia will revise its
financial reporting structure. As of the first quarter 2016, Nokia will have
three reportable segments: The (i) Ultra Broadband Networks and (ii) IP Networks
and Applications reportable segments within Nokia's Networks business and the
(iii) Nokia Technologies reportable segment within the Nokia Technologies
business. In addition, Nokia will disclose segment-level data for Group Common
and Other.
Ultra Broadband Networks
Ultra Broadband Networks is composed of the Mobile Networks and Fixed Networks
business groups.
* The Mobile Networks business group offers an industry-leading portfolio of
end-to-end mobile networking solutions comprising hardware, software and
services for telecommunications operators, enterprises and related
markets/verticals such as public safety and Internet of Things.
* The Fixed Networks business group provides copper and fiber access products,
solutions, and services. The portfolio allows for a customized combination
of technologies that brings fiber to the most economical point for the
customer.
IP Networks and Applications
IP Networks and Applications is composed of the IP/Optical Networks and
Applications & Analytics business groups.
* The IP/Optical Networks business group provides the key IP routing and
optical transport systems, software and services to build high capacity
network infrastructure for the internet and global connectivity.
* The Applications & Analytics business group offers software solutions
spanning customer experience management, network operations and management,
communications and collaboration, policy and charging, as well as Cloud,
IoT, security, and analytics platforms that enable digital services
providers and enterprises to accelerate innovation, monetize services, and
optimize their customer experience.
Nokia Technologies
The Nokia Technologies business group has two main objectives:
* To drive growth and renewal in its existing patent licensing business; and
* to build new businesses for Nokia, based on breakthrough innovation in key
technologies and products, in the areas of Digital Media and Digital Health.
As of the first quarter 2016, the majority of net sales and the related costs
and expenses attributable to licensing and patenting the separate patent
portfolios of Nokia Technologies, Nokia's Networks business, and Bell Labs will
be recorded in Nokia Technologies. Each reportable segment will continue to
separately record its research and development expenses.
Group Common and Other
As of the first quarter 2016, Group Common and Other includes the Alcatel
Submarine Networks and Radio Frequency Systems businesses, both of which are
being managed as separate entities. In addition, Group Common and Other includes
Bell Labs' operating expenses, as well as certain corporate-level and centrally-
managed operating expenses.
Supplementary financial information
As of the first quarter 2016, Nokia will additionally provide supplementary net
sales information on a quarterly basis for:
* Services (part of Nokia's Networks business);
* Each of the four business groups that comprise Nokia's Networks business;
* IP Routing (part of the IP Networks and Applications reportable segment
within Nokia's Networks business); and
* Optical Networks (part of the IP Networks and Applications reportable
segment within Nokia's Networks business).
This disclosure will be presented in the footnotes of the "Segment information
and eliminations" table.
Recast combined company segment financial results
To provide a basis for comparison, the following tables present a recasting of
combined company segment financial results on an unaudited basis for all four
quarters of 2015 separately, as well as for full year 2015. This financial
information has been prepared to reflect the financial results of the continuing
operations of the combined company as if it had been operating as such for the
full financial year of 2015. Certain accounting policy alignments, adjustments
and reclassifications have been necessary in order to combine the financial
information of Nokia and Alcatel-Lucent, and these are explained below in the
"Basis of preparation" section of this stock exchange release.
Segment information and eliminations (comparable combined company information,
unaudited)
-------------------------------------------------------------------------------
IP
Ultra Networks Networks Group
Q1'15 Broadband and business Nokia Common Elimi- Nokia
Networks Appli- Total Technologies and nations Total
(1) cations (3) Other
(2)
EUR million non-IFRS non-IFRS non-IFRS non-IFRS non- non- non-
IFRS IFRS IFRS
-------------------------------------------------------------------------------
Net sales 4 227 1 435 5 662 273 203 (8) 6 129
Cost of sales (2 815) (872) (3 686) (2) (185) 8 (3
865)
-------------------------------------------------------------------------------
Gross profit 1 413 563 1 976 271 18 0 2 264
% of net 33.4% 39.3% 34.9% 99.3% 8.8% 36.9%
sales
Research and (1
development (702) (321) (1 023) (72) (70) 0 165)
expenses
% of net 17% 22% 18% 27% 34% 19%
sales
Selling,
general and (514) (191) (705) (21) (48) 0 (774)
administrative
expenses
% of net 12% 13% 12% 8% 23% 13%
sales
Other income (29) (10) (38) 1 (11) 0 (49)
and expenses
-------------------------------------------------------------------------------
Operating 168 42 209 178 (111) 0 276
profit
% of net 4.0% 2.9% 3.7% 65.1% (54.5)% 4.5%
sales
-------------------------------------------------------------------------------
(1)Mobile Networks net sales of EUR 3 686 million, Fixed Networks net sales of
EUR 541 million.
(2)IP Networks net sales of EUR 729 million, Optical Networks net sales of EUR
320 million, Applications & Analytics net sales of EUR 385 million.
(3)Services net sales of EUR 2 122 million.
Segment information and eliminations (comparable combined company information,
unaudited)
-------------------------------------------------------------------------------
IP
Ultra Networks Networks Group
Q2'15 Broadband and business Nokia Common Elimi- Nokia
Networks Appli- Total Technologies and nations Total
(1) cations (3) Other
(2)
EUR million non-IFRS non-IFRS non-IFRS non-IFRS non- non- non-
IFRS IFRS IFRS
-------------------------------------------------------------------------------
Net sales 4 303 1 593 5 895 219 254 (5) 6 363
Cost of sales (2 775) (885) (3 661) (2) (211) 5 (3
868)
-------------------------------------------------------------------------------
Gross profit 1 527 707 2 235 217 43 0 2 495
% of net 35.5% 44.4% 37.9% 99.1% 17.0% 39.2%
sales
Research and (1
development (668) (307) (975) (70) (73) 0 118)
expenses
% of net 16% 19% 17% 32% 29% 18%
sales
Selling,
general and (523) (190) (712) (28) (61) 0 (801)
administrative
expenses
% of net 12% 12% 12% 13% 24% 13%
sales
Other income (29) (8) (36) 0 110 0 74
and expenses
-------------------------------------------------------------------------------
Operating 308 203 511 120 18 0 649
profit
% of net 7.2% 12.7% 8.7% 54.6% 7.2% 10.2%
sales
-------------------------------------------------------------------------------
(1)Mobile Networks net sales of EUR 3 722 million, Fixed Networks net sales of
EUR 580 million.
(2)IP Networks net sales of EUR 769 million, Optical Networks net sales of EUR
407 million, Applications & Analytics net sales of EUR 417 million.
(3)Services net sales of EUR 2 220 million.
Segment information and eliminations (comparable combined company information,
unaudited)
-------------------------------------------------------------------------------
IP
Ultra Networks Networks Group
Q3'15 Broadband and business Nokia Common Elimi- Nokia
Networks Appli- Total Technologies and nations Total
(1) cations (3) Other
(2)
EUR million non-IFRS non-IFRS non-IFRS non-IFRS non- non- non-
IFRS IFRS IFRS
-------------------------------------------------------------------------------
Net sales 4 469 1 552 6 020 169 211 (6) 6 395
Cost of sales (2 918) (874) (3 792) (3) (195) 6 (3
984)
-------------------------------------------------------------------------------
Gross profit 1 551 678 2 228 166 16 0 2 410
% of net 34.7% 43.7% 37.0% 98.3% 7.4% 37.7%
sales
Research and (1
development (604) (301) (904) (55) (64) 0 024)
expenses
% of net 14% 19% 15% 33% 30% 16%
sales
Selling,
general and (490) (180) (670) (27) (51) 0 (748)
administrative
expenses
% of net 11% 12% 11% 16% 24% 12%
sales
Other income 21 4 25 0 19 0 44
and expenses
-------------------------------------------------------------------------------
Operating 478 200 678 84 (80) 0 682
profit
% of net 10.7% 12.9% 11.3% 49.6% (38.0)% 10.7%
sales
-------------------------------------------------------------------------------
(1)Mobile Networks net sales of EUR 3 903 million, Fixed Networks net sales of
EUR 566 million.
(2)IP Networks net sales of EUR 783 million, Optical Networks net sales of EUR
345 million, Applications & Analytics net sales of EUR 424 million.
(3)Services net sales of EUR 2 184 million.
Segment information and eliminations (comparable combined company information,
unaudited)
-------------------------------------------------------------------------------
IP
Ultra Networks Networks Group
Q4'15 Broadband and business Nokia Common Elimi- Nokia
Networks Appli- Total Technologies and nations Total
(1) cations (3) Other
(2)
EUR million non-IFRS non-IFRS non-IFRS non-IFRS non- non- non-
IFRS IFRS IFRS
-------------------------------------------------------------------------------
Net sales 5 081 1 976 7 057 413 254 (4) 7 719
Cost of sales (3 161) (1 065) (4 226) (4) (222) 4 (4
447)
-------------------------------------------------------------------------------
Gross profit 1 920 911 2 830 409 32 0 3 272
% of net 37.8% 46.1% 40.1% 99.1% 12.5% 42.4%
sales
Research and (1
development (682) (329) (1 011) (73) (77) 0 161)
expenses
% of net 13% 17% 14% 18% 30% 15%
sales
Selling,
general and (552) (209) (761) (33) (58) 0 (852)
administrative
expenses
% of net 11% 11% 11% 8% 23% 11%
sales
Other income 16 23 39 7 (25) 0 20
and expenses
-------------------------------------------------------------------------------
Operating 702 396 1 097 311 (129) 0 1 279
profit
% of net 13.8% 20.0% 15.6% 75.2% (50.7)% 16.6%
sales
-------------------------------------------------------------------------------
(1)Mobile Networks net sales of EUR 4 382, Fixed Networks net sales of EUR
698 million.
(2)IP Networks net sales of EUR 930 million, Optical Networks net sales of EUR
512 million, Applications & Analytics net sales of EUR 535 million.
(3)Services net sales of EUR 2 500 million.
Segment information and eliminations (comparable combined company information,
unaudited)
-------------------------------------------------------------------------------
IP
Ultra Networks Networks Group
Q1-Q4'15 Broadband and business Nokia Common Elimi- Nokia
Networks Appli- Total Technologies and nations Total
(1) cations (3) Other
(2)
EUR million non-IFRS non-IFRS non-IFRS non-IFRS non- non- non-
IFRS IFRS IFRS
-------------------------------------------------------------------------------
Net sales 18 079 6 555 24 634 1 074 921 (24) 26 606
Cost of sales (11 669) (3 696) (15 365) (10) (813) 24 (16
164)
-------------------------------------------------------------------------------
Gross profit 6 410 2 859 9 269 1 064 108 0 10 441
% of net 35.5% 43.6% 37.6% 99.0% 11.8% 39.2%
sales
Research and (4
development (2 655) (1 258) (3 914) (270) (284) 0 468)
expenses
% of net 15% 19% 16% 25% 31% 17%
sales
Selling,
general and (2 078) (770) (2 848) (109) (219) 0 (3
administrative 175)
expenses
% of net 11% 12% 12% 10% 24% 12%
sales
Other income (20) 9 (11) 7 93 0 89
and expenses
-------------------------------------------------------------------------------
Operating 1 656 840 2 496 692 (301) 0 2 887
profit
% of net 9.2% 12.8% 10.1% 64.4% (32.7)% 10.8%
sales
-------------------------------------------------------------------------------
(1)Mobile Networks net sales of EUR 15 694 million, Fixed Networks net sales
of EUR 2 385 million.
(2)IP Networks net sales of EUR 3 211 million, Optical Networks net sales of
EUR 1 584 million, Applications & Analytics net sales of EUR 1 760 million.
(3)Services net sales of EUR 9 026 million.
Recast combined company net sales by geographic area for Nokia's Networks
business
The geographic exposure for Nokia's Networks business has changed significantly,
following the acquisition of Alcatel-Lucent. The following table provides a
recasting of combined company net sales for Nokia's Networks business by
geographic area on an unaudited basis for all four quarters of 2015 separately,
as well as for full year 2015.
NET SALES BY GEOGRAPHIC AREA (comparable combined company information,
unaudited)
NOKIA'S NETWORKS BUSINESS
-------------------------------------------------------------------------------
EUR million Q1'15 Q2'15 Q3'15 Q4'15 Q1-Q4'15
-------------------------------------------------------------------------------
Asia-Pacific 1 155 1 033 1 080 1 198 4 465
Europe 1 242 1 364 1 374 1 617 5 597
Greater China 604 707 895 916 3 122
Latin America 320 421 431 594 1 766
Middle East & Africa 443 539 507 596 2 085
North America 1 899 1 831 1 733 2 136 7 599
-------------------------------------------------------------------------------
Total 5 662 5 895 6 020 7 057 24 634
-------------------------------------------------------------------------------
Recast Nokia standalone segment financial results
In addition, to fulfill external reporting requirements, the following tables
include a recasting of Nokia's standalone historical financial results, on an
unaudited basis for all four of the quarters of 2015 separately, as well as for
full year 2015. This financial information has been prepared to reflect the
financial results of the continuing operations of Nokia on a standalone basis.
Certain accounting policy alignments, adjustments and reclassifications have
been necessary, and these are explained below in the "Basis of preparation"
section of this stock exchange release.
Segment information and eliminations (Nokia standalone historicals,
unaudited)
--------------------------------------------------------------------------------
IP Non-
Ultra Networks Networks Nokia Group IFRS
Q1'15 Broadband and business Techno- Common Elimi- Nokia exclu- Nokia
Networks Appli- Total logies and nations Total sions Total
(1) cations (3) Other (4)
(2)
EUR non-IFRS non-IFRS non-IFRS non- non- non- non-
million IFRS IFRS IFRS IFRS
--------------------------------------------------------------------------------
Net sales 2 355 317 2 671 267 0 (4) 2 935 0 2 935
Cost of (1 556) (194) (1 750) (2) (1) 4 (1 (2) (1
sales 749) 751)
--------------------------------------------------------------------------------
Gross 799 122 922 265 (1) 0 1 186 (2) 1 184
profit
% of 33.9% 38.7% 34.5% 99.3% 40.5% 40.4%
net sales
Research
and
develop- (383) (75) (458) (58) (19) 0 (536) (7) (543)
ment
expenses
% of 16% 24% 17% 22% 18% 19%
net sales
Selling,
general
and (277) (67) (344) (21) (18) 0 (383) (10) (393)
admin-
istrative
expenses
% of 12% 21% 13% 8% 13% 13%
net sales
Other
income (6) (3) (9) 1 (11) 0 (19) 0 (19)
and
expenses
--------------------------------------------------------------------------------
Operating 133 (22) 111 186 (49) 0 248 (20) 228
profit
% of 5.7% (7.0)% 4.2% 69.6% 8.5% 7.8%
net sales
--------------------------------------------------------------------------------
(1)Mobile Networks net sales of EUR 2 317 million, Fixed Networks
net sales of EUR 38 million.
(2)IP Networks net sales of EUR 136 million, Applications &
Analytics net sales of EUR 180 million.
(3)Services net sales of EUR 1 266 million.
(4)Non-IFRS measures exclude goodwill impairment charges, intangible asset
amortization and items related to purchase price allocation, as well as
restructuring-related costs, costs related to the Alcatel-Lucent transaction
and certain other items that may not be indicative of the Group's underlying
business.
Segment information and eliminations (Nokia standalone historicals,
unaudited)
--------------------------------------------------------------------------------
IP Non-
Ultra Networks Networks Nokia Group IFRS
Q2'15 Broadband and business Techno- Common Elimi- Nokia exclu- Nokia
Networks Appli- Total logies and nations Total sions Total
(1) cations (3) Other (4)
(2)
EUR non-IFRS non-IFRS non-IFRS non- non- non- non-
million IFRS IFRS IFRS IFRS
--------------------------------------------------------------------------------
Net sales 2 440 289 2 729 194 0 (4) 2 919 0 2 919
Cost of (1 477) (139) (1 615) (2) 1 4 (1 37 (1
sales 612) 575)
--------------------------------------------------------------------------------
Gross 963 150 1 113 193 1 0 1 306 37 1 343
profit
% of 39.5% 51.9% 40.8% 99.0% 44.8% 46.0%
net sales
Research
and
develop- (360) (64) (424) (57) (22) 0 (503) (13) (516)
ment
expenses
% of 15% 22% 16% 29% 17% 18%
net sales
Selling,
general
and (296) (69) (365) (28) (29) 0 (421) (27) (448)
admin-
istrative
expenses
% of 12% 24% 13% 14% 14% 15%
net sales
Other
income 4 2 7 0 107 0 114 0 114
and
expenses
--------------------------------------------------------------------------------
Operating 312 19 331 108 57 0 496 (3) 493
profit
% of 12.8% 6.6% 12.1% 55.5% 17.0% 16.9%
net sales
--------------------------------------------------------------------------------
(1)Mobile Networks net sales of EUR 2 407 million, Fixed Networks
net sales of EUR 33 million.
(2)IP Networks net sales of EUR 103 million, Applications &
Analytics net sales of EUR 185 million.
(3)Services net sales of EUR 1 359 million.
(4)Non-IFRS measures exclude goodwill impairment charges, intangible asset
amortization and items related to purchase price allocation, as well as
restructuring-related costs, costs related to the Alcatel-Lucent transaction
and certain other items that may not be indicative of the Group's underlying
business.
Segment information and eliminations (Nokia standalone historicals,
unaudited)
--------------------------------------------------------------------------------
IP Non-
Ultra Networks Networks Nokia Group IFRS
Q3'15 Broadband and business Techno- Common Elimi- Nokia exclu- Nokia
Networks Appli- Total logies and nations Total sions Total
(1) cations (3) Other (4)
(2)
EUR non-IFRS non-IFRS non-IFRS non- non- non- non-
million IFRS IFRS IFRS IFRS
--------------------------------------------------------------------------------
Net sales 2 548 329 2 877 163 0 (4) 3 036 0 3 036
Cost of (1 573) (149) (1 722) (2) 0 4 (1 0 (1
sales 720) 720)
--------------------------------------------------------------------------------
Gross 975 180 1 155 161 0 0 1 316 0 1 316
profit
% of 38.3% 54.7% 40.1% 98.9% 43.4% 43.4%
net sales
Research
and
develop- (346) (63) (410) (45) (18) 0 (473) (8) (481)
ment
expenses
% of 14% 19% 14% 28% 16% 16%
net sales
Selling,
general
and (271) (65) (336) (27) (22) 0 (385) (37) (422)
admin-
istrative
expenses
% of 11% 20% 12% 16% 13% 14%
net sales
Other
income 3 0 3 0 17 0 20 (100) (80)
and
expenses
--------------------------------------------------------------------------------
Operating 360 52 412 89 (23) 0 478 (145) 333
profit
% of 14.1% 15.8% 14.3% 54.7% 15.8% 11.0%
net sales
--------------------------------------------------------------------------------
(1)Mobile Networks net sales of EUR 2 522 million, Fixed Networks
net sales of EUR 26 million.
(2)IP Networks net sales of EUR 128 million, Applications &
Analytics net sales of EUR 201 million.
(3)Services net sales of EUR 1 304 million.
(4)Non-IFRS measures exclude goodwill impairment charges, intangible asset
amortization and items related to purchase price allocation, as well as
restructuring-related costs, costs related to the Alcatel-Lucent transaction
and certain other items that may not be indicative of the Group's underlying
business.
Segment information and eliminations (Nokia standalone historicals,
unaudited)
--------------------------------------------------------------------------------
IP Non-
Ultra Networks Networks Nokia Group IFRS
Q4'15 Broadband and business Techno- Common Elimi- Nokia exclu- Nokia
Networks Appli- Total logies and nations Total sions Total
(1) cations (3) Other (4)
(2)
EUR non-IFRS non-IFRS non-IFRS non- non- non- non-
million IFRS IFRS IFRS IFRS
--------------------------------------------------------------------------------
Net sales 2 815 395 3 210 403 0 (4) 3 609 0 3 609
Cost of (1 748) (170) (1 918) (2) 0 4 (1 0 (1
sales 916) 916)
--------------------------------------------------------------------------------
Gross 1 067 224 1 292 401 0 0 1 693 0 1 693
profit
% of 37.9% 56.8% 40.2% 99.5% 46.9% 46.9%
net sales
Research
and
develop- (380) (67) (447) (60) (24) 0 (531) (9) (540)
ment
expenses
% of 14% 17% 14% 15% 15% 15%
net sales
Selling,
general
and (303) (73) (376) (33) (29) 0 (437) (70) (507)
admin-
istrative
expenses
% of 11% 18% 12% 8% 12% 14%
net sales
Other
income 21 5 26 7 (22) 0 11 (14) (3)
and
expenses
--------------------------------------------------------------------------------
Operating 405 90 495 316 (74) 0 736 (93) 643
profit
% of 14.4% 22.7% 15.4% 78.3% 20.4% 17.8%
net sales
--------------------------------------------------------------------------------
(1)Mobile Networks net sales of EUR 2 776 million, Fixed Networks
net sales of EUR 39 million.
(2)IP Networks net sales of EUR 147 million, Applications &
Analytics net sales of EUR 247 million.
(3)Services net sales of EUR 1 495 million.
(4)Non-IFRS measures exclude goodwill impairment charges, intangible asset
amortization and items related to purchase price allocation, as well as
restructuring-related costs, costs related to the Alcatel-Lucent transaction
and certain other items that may not be indicative of the Group's underlying
business.
Segment information and eliminations (Nokia standalone historicals,
unaudited)
-------------------------------------------------------------------------------
Ultra IP Net-
Broad- Net- works Group Non-
band works busi- Nokia Common Elimi- Nokia IFRS Nokia
Q1-Q4'15 Net- and ness Techno- and na- Total exclu- Total
works Appli- Total logies Other tions sions
(1) cations (3) (4)
(2)
EUR million non- non- non- non- non- non- non-
IFRS IFRS IFRS IFRS IFRS IFRS IFRS
-------------------------------------------------------------------------------
Net sales 10 158 1 328 11 486 1 027 0 (15) 12 499 0 12 499
Cost (6 353) (652) (7 005) (7) 0 15 (6 36 (6
of sales 998) 962)
-------------------------------------------------------------------------------
Gross 3 805 676 4 481 1 020 0 0 5 501 35 5 536
profit
% of 37.5% 50.9% 39.0% 99.3% 44.0% 44.3%
net sales
Research
and (2 (2
develop- (1 470) (269) (1 739) (220) (84) 0 042) (38) 080)
ment
expenses
% of 14% 20% 15% 21% 16% 17%
net sales
Selling,
general (1 (1
and admi- (1 147) (274) (1 421) (108) (97) 0 626) (144) 771)
nistrative
expenses
% of 11% 21% 12% 11% 13% 14%
net sales
Other
income 22 4 26 7 92 0 126 (114) 12
and
expenses
-------------------------------------------------------------------------------
Operating 1 210 138 1 349 698 (89) 0 1 958 (261) 1 697
profit
% of 11.9% 10.4% 11.7% 68.0% 15.7% 13.6%
net sales
-------------------------------------------------------------------------------
(1)Mobile Networks net sales of EUR 10 022 million, Fixed
Networks net sales of EUR 136 million.
(2)IP Networks net sales of EUR 514 million, Applications &
Analytics net sales of EUR 813 million.
(3)Services net sales of EUR 5 424 million.
(4)Non-IFRS measures exclude goodwill impairment charges, intangible asset
amortization and items related to purchase price allocation, as well as
restructuring-related costs, costs related to the Alcatel-Lucent transaction
and certain other items that may not be indicative of the Group's underlying
business.
Basis of preparation
The recast combined company financial results presented in this press release
are derived from the unaudited condensed financial information presented in the
interim reports of Nokia and Alcatel-Lucent for all quarters of 2015 and from
the audited financial information presented in the annual report for 2015 for
Nokia. Nokia financial information includes only continuing operations, which
means that all periods presented exclude the historical operating results
attributable to the divested HERE business. The accounting impact of the
purchase price allocation done on Alcatel-Lucent, upon acquisition by Nokia, is
not reflected in the combined company financial results.
The following tables provide a summary of the adjustments and reclassifications
that have been made to align Alcatel-Lucent's and Nokia's historical income
statement information with the combined company's accounting policies and
financial statement presentation. These include the:
* Reclassification of certain items from net sales to offset R&D expenses or
to be included in other income as these do not reflect the ordinary
activities of the combined company;
* reclassification of items, such as change in the bad debt reserve, expenses
related to field trials and gains on sales of assets from cost of sales to
R&D expenses and to offset SG&A expenses and other expenses to meet the
definitions of these line items in the combined company;
* reclassification of withholding taxes to income taxes instead of presenting
them within the operational income statement items;
* reclassification of discounting costs & hedging, bonds & guarantees,
litigation costs and capital gain/loss on disposal of entities from below
operating profit to other expenses to reflect the application of the
combined company accounting policy;
* some R&D expenses and cost of development work on internal use software that
were previously capitalized by Alcatel-Lucent and have now been expensed as
incurred due to adoption of the combined company accounting policy;
* reclassification of net interest expenses related to defined benefit pension
plans from operational income statement items to financial items below
operating profit; and
* reallocation of items of costs and expenses based on their nature and the
definition of the line items in the combined company accounting policies.
These reallocations relate to procurement, order management, project
financial controllers, learning solution management, product line management
and communications.
The recast combined company financial information has been prepared by
management for illustrative purposes only and is not necessarily indicative of
the financial position or results of Nokia's operations that would have been
realized had the acquisition of Alcatel-Lucent or the sale of the HERE business
occurred earlier, nor is it meant to be indicative of any anticipated future
results of operations.
Accounting reclassifications and accounting policy alignments
------------------------------------------------------------------------------
Nokia Alcatel- Accounting Eliminations Total
historical Lucent reclassifications Nokia
Q1'15 non-IFRS historical and accounting non-
EUR million non-IFRS policy alignments IFRS
------------------------------------------------------------------------------
Net sales 2 935 3 235 (33) (8) 6 129
Cost of sales (1 769) (2 116) 12 8 (3
865)
------------------------------------------------------------------------------
Gross profit 1 165 1 119 (20) 0 2 264
Research and (1
development (547) (609) (9) 0 165)
expenses
Selling,
general and (353) (428) 7 0 (774)
administrative
expenses
Other income (19) - (30) 0 (49)
and expenses
------------------------------------------------------------------------------
Operating 246 82 (52) 0 276
profit
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Nokia Alcatel- Accounting Eliminations Total
historical Lucent reclassifications Nokia
Q2'15 non-IFRS historical and accounting non-
EUR million non-IFRS policy alignments IFRS
------------------------------------------------------------------------------
Net sales 2 919 3 450 (1) (5) 6 363
Cost of sales (1 637) (2 248) 12 5 (3
868)
------------------------------------------------------------------------------
Gross profit 1 282 1 202 11 0 2 495
Research and (1
development (516) (591) (11) 0 118)
expenses
Selling,
general and (386) (436) 21 0 (801)
administrative
expenses
Other income 114 - (40) 0 74
and expenses
------------------------------------------------------------------------------
Operating 494 175 (20) 0 649
profit
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Nokia Alcatel- Accounting Eliminations Total
historical Lucent reclassifications Nokia
Q3'15 non-IFRS historical and accounting non-
EUR million non-IFRS policy alignments IFRS
------------------------------------------------------------------------------
Net sales 3 036 3 429 (64) (6) 6 395
Cost of sales (1 738) (2 247) (5) 6 (3
984)
------------------------------------------------------------------------------
Gross profit 1 297 1 182 (69) 0 2 410
Research and (1
development (484) (548) 8 0 024)
expenses
Selling,
general and (358) (422) 32 0 (748)
administrative
expenses
Other income 20 - 24 0 44
and expenses
------------------------------------------------------------------------------
Operating 475 212 (5) 0 682
profit
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Nokia Alcatel- Accounting Eliminations Total
historical Lucent reclassifications Nokia
Q4'15 non-IFRS historical and accounting non-
EUR million non-IFRS policy alignments IFRS
------------------------------------------------------------------------------
Net sales 3 609 4 161 (47) (4) 7 719
Cost of sales (1 936) (2 521) 6 4 (4
447)
------------------------------------------------------------------------------
Gross profit 1 673 1 640 (41) 0 3 272
Research and (1
development (541) (603) (17) 0 161)
expenses
Selling,
general and (410) (477) 35 0 (852)
administrative
expenses
Other income 11 - 9 0 20
and expenses
------------------------------------------------------------------------------
Operating 734 560 (15) 0 1 279
profit
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Nokia Alcatel- Accounting Eliminations Total
historical Lucent reclassifications Nokia
Q1-Q4'15 non-IFRS historical and accounting non-
EUR million non-IFRS policy alignments IFRS
------------------------------------------------------------------------------
Net sales 12 499 14 275 (144) (24) 26 606
Cost of sales (7 081) (9 132) 25 24 (16
164)
------------------------------------------------------------------------------
Gross profit 5 418 5 143 (120) 0 10 441
Research and (4
development (2 088) (2 351) (29) 0 468)
expenses
Selling,
general and (1 507) (1 763) 95 0 (3
administrative 175)
expenses
Other income 126 - (37) 0 89
and expenses
------------------------------------------------------------------------------
Operating 1 949 1 029 (91) 0 2 887
profit
------------------------------------------------------------------------------
About Nokia
Nokia is a global leader in the technologies that connect people and things.
Powered by the innovation of Bell Labs and Nokia Technologies, the company is at
the forefront of creating and licensing the technologies that are increasingly
at the heart of our connected lives.
With state-of-the-art software, hardware and services for any type of network,
Nokia is uniquely positioned to help communication service providers,
governments, and large enterprises deliver on the promise of 5G, the Cloud and
the Internet of Things. http://nokia.com
Media Enquiries:
Nokia
Communications
Tel. +358 (0) 10 448 4900
Email: press.services@nokia.com
Investor Enquiries:
Nokia
Investor Relations
Tel. +358 4080 3 4080
Email: investor.relations@nokia.com
RISKS AND FORWARD-LOOKING STATEMENTS
It should be noted that Nokia and its businesses are exposed to various risks
and uncertainties and certain statements herein that are not historical facts
are forward-looking statements, including, without limitation, those regarding:
A) our ability to integrate Alcatel Lucent into our operations and achieve the
targeted business plans and benefits, including targeted synergies in relation
to the acquisition of Alcatel Lucent announced on April 15, 2015 and closed in
early 2016; B) expectations, plans or benefits related to our strategies and
growth management; C) expectations, plans or benefits related to future
performance of our businesses; D) expectations, plans or benefits related to
changes in our management and other leadership, operational structure and
operating model, financial reporting structure and reportable segments,
including the expected characteristics, business, organizational structure,
management and operations following the acquisition of Alcatel Lucent; E) the
accounting policy alignments, adjustments and reclassifications related to the
recast combined company financial information; F) expectations regarding market
developments, general economic conditions and structural changes; G)
expectations and targets regarding financial performance, results, operating
expenses, taxes, cost savings and competitiveness, as well as results of
operations including targeted synergies and those related to market share,
prices, net sales, income and margins; and H) statements preceded by or
including "believe," "expect," "anticipate," "foresee," "sees," "target,"
"estimate," "designed," "aim," "plans," "intends," "focus," "continue,"
"project," "should," "will" or similar expressions. These statements are based
on the management's best assumptions and beliefs in light of the information
currently available to it. Because they involve risks and uncertainties, actual
results may differ materially from the results that we currently expect.
Factors, including risks and uncertainties, that could cause such differences
include, but are not limited to: 1) our ability to execute our strategy, sustain
or improve the operational and financial performance of our business or
correctly identify or successfully pursue business opportunities or growth; 2)
our ability to achieve the anticipated business and operational benefits and
synergies from the Alcatel Lucent transaction, including our ability to
integrate Alcatel Lucent into our operations and within the timeframe targeted,
and our ability to implement our organization and operational structure
efficiently; and 3) our ability to manage and improve our financial and
operating performance, cost savings, competitiveness and synergy benefits after
the acquisition of Alcatel Lucent, as well as the risk factors specified on
pages 69 to 87 of our annual report on Form 20-F filed on April 1, 2016 under
"Operating and financial review and prospects-Risk factors", as well as in
Nokia's other filings with the U.S. Securities and Exchange Commission. Other
unknown or unpredictable factors or underlying assumptions subsequently proven
to be incorrect could cause actual results to differ materially from those in
the forward-looking statements. We do not undertake any obligation to publicly
update or revise forward-looking statements, whether as a result of new
information, future events or otherwise, except to the extent legally required.
[HUG#2005798]
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