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2009-10-28 08:00:00 CET 2009-10-28 08:03:06 CET REGULATED INFORMATION Elcoteq - Interim report (Q1 and Q3)Elcoteq SE's Interim Report January - September 2009 (Unaudited)Elcoteq SE Interim Report October 28, 2009, at 9.00 am (EET) Elcoteq's third-quarter net sales totaled 331.7 million euros (436.0 million euros in April-June 2009). Operating income continued to improve and totaled -3.3 million euros, and excluding restructuring costs amounted to -1.6 million euros (-11.5 in April-June 2009). Cash flow after investing activities in July-September was positive at 42.7 million euros (72.2 in April - June 2009 and -66.7 July-September 2008). Interest bearing net debt decreased by 114.2 million euros compared to July - September 2008. The equity project proceeded, and Elcoteq signed a Letter of Intent with Videocon. The company is also continuing to restructure its balance sheet. July - September - Net sales 331.7 million euros (740.5 in July - September 2008) - Operating loss -3.3 million euros (0.3), and excluding restructuring costs -1.6 million euros (0.3) - Loss before taxes -7.5 million euros (-6.8) - Earnings per share (EPS) -0.19 euros (-0.35) - Cash flow after investing activities 42.7 million euros (-66.7) - Rolling 12-month return on capital employed (ROCE) -14.4% (-5.6%) - Gearing 2.6 (1.7) January - September - Net sales 1,237.7 million euros (2,554.1 in January - September 2008) - Operating loss -53.1 million euros (-8.6), and excluding restructuring costs -37.4 million euros (-8.6) - Loss before taxes -80.8 million euros (-27.7) - Earnings per share (EPS) -2.26 euros (-1.13) - Cash flow after investing activities 64.2 million euros (-146.3) - Interest-bearing net debt 173.2 million euros (287.4)This interim report has been prepared using IFRS recognition and measuring principles. Tables have been prepared in compliance with the IAS 34 requirements approved by the EU. The comparative figures given in the body text of this report are figures for the corresponding period in the previous year, unless stated otherwise. July - September Elcoteq recorded net sales of 331.7 million euros (740.5 in July - September 2008) between July and September. Operating loss continued to decrease from the previous quarter, and totaled -3.3 million euros, excluding restructuring costs -1.6 million euros (0.3 in July - September 2008 and -11.5 in April-June 2009). The company has continued to adjust its operations to lower volumes, but it has at the same time maintained its global platform to serve customers close to their end markets. There are good business opportunities and demand for the services Elcoteq provides, but customers have withheld their orders until the company's balance sheet has been restructured and the existing credit facility is refinanced. In the light of the current volatile market situation, the company will continue to seek further potential for cost base improvements. The Group's net financial expenses were 4.1 million euros (7.0). Loss before taxes was -7.5 million euros (-6.8) and net loss totaled -6.3 million euros (-11.5). Earnings per share (EPS) were -0.19 euros (-0.35). The Group's gross capital expenditures on fixed assets between July and September were 1.1 million euros (17.2), or 0.3% of net sales. Depreciation amounted to 13.5 million euros (20.5). Investments have been reduced to a minimum to increase existing asset capacity utilization ratios. Cash flow after investing activities remained positive and was 42.7 million euros (-66.7). Elcoteq had no sold accounts receivable at the end of September (115.4). The company has continued actions to lower its working capital level, especially by optimizing material flows. At the end of September 2009, Elcoteq had cash and unused but immediately available credit lines totaling 231.0 million euros (187.0). These credit limits included a 230 million euro syndicated, committed credit facility. The refinancing of the existing 230 million euro credit facility, the debenture conversion to equity and the completion of the equity increase are seamlessly linked to each other. Thus a new re-financing solution for the existing 230 million euro credit facility is now under negotiation. At the end of September, the Group's interest-bearing net debt amounted to 173.2 million euros (287.4). Net debt decreased by 20% from the second quarter of 2009. The solvency ratio was 9.7% (15.9% at the end of September 2008) and gearing was 2.6 (1.7). Rolling 12-month return on capital employed (ROCE) was -14.4% (-5.6%). January - September Net sales in January - September decreased significantly compared to the same period last year, standing at 1.237,7 million euros (2.554,1 in January - September 2008). Operating loss was -53.1 million euros (-8.6), excluding restructuring costs -37.4 million euros. Loss before taxes was -80.8 million euros (-27.7). Earnings per share (EPS) were -2.26 euros (-1.13). Cash flow after investing activities improved significantly from last year's comparable period and was positive at 64.2 million euros (-146.3). Gross capital expenditures on fixed assets in January - September amounted to 4.6 million euros (61.5), 0.3% of net sales. Depreciation totaled 48.4 million euros (55.8). Strategic Business Units Since the beginning of 2008, Elcoteq's segment reporting has covered three Business Areas: Personal Communications, Home Communications and Communications Networks. During the third quarter of 2009 the company changed its organization and combined Personal Communications and Home Communications under one new segment. Elcoteq now has only two Strategic Business Units (SBUs) as its segments: Consumer Electronics and System Solutions. In the third quarter of 2009, Consumer Electronics contributed 73% (76%) and System Solutions contributed 27% (24%) of the Group's net sales. Net sales of the Consumer Electronics SBU in the third quarter were 243.5 million euros (564.2). The segment's operating income was -2.3 million euros (1.0), and -0.8 million euros excluding restructuring costs (1.0). Net sales of the System Solutions SBU were 88.2 million euros (176.3). The segment's operating income was 6.9 million euros (7.6). Net sales were affected by the divestment of Ericsson-related operations in Estonia. At the same time, the segment has been able to further reduce costs to offset the volume decline. The segment's profitability was affected by a number of positive one-time items arising from restructuring. Elcoteq's third-quarter net sales were derived from the geographical areas as follows: Europe 49% (49%), Asia-Pacific 18% (23%) and Americas 33% (28%). Personnel At the end of September 2009, the Group employed 10,770 (21,404) people. The geographical distribution of the workforce was as follows: Europe 4,068 (9,118), Asia-Pacific 3,347 (6,060) and Americas 3,355 (6,226). The average number of employees on Elcoteq's direct payroll between January and September was 12,014 (17,598). Changes in the Organization Since the beginning of 2008, Elcoteq has had three Business Areas: Personal Communications, Home Communications and Communications Networks. They have been reported as separate segments. The Personal Communications and Home Communications Business Areas were combined during the third quarter, and the company now has only two Strategic Business Units (SBUs): Consumer Electronics and System Solutions. Both SBUs are responsible for managing and developing their existing customer relationships and applicable service offerings, while Group Operations and Sourcing is responsible for supply chain and production. Consumer Electronics covers products such as mobile and wireless phones, their parts and accessories, set-top boxes, flat panel TVs and other consumer products. System Solutions covers wireless and wireline infrastructure systems and modules, enterprise network products and various other industrial segment products. By combining the Home Communications and Personal Communications segments under the Consumer Electronics SBU, the company can better utilize the synergies between these businesses. The company also aims to reduce costs further by streamlining and simplifying the organization by removing organizational layers and overlapping roles. More emphasis is also put on new sales activities which are now under a separate global function, New Sales and Business Development. The function focuses on identifying new business opportunities, acquiring new customers and exploring new service segments for the company. As of August 27, 2009 the Management Team consists of the following persons: Mr. Jouni Hartikainen, President and CEO Mr. Sándor Hajnal, Senior Vice President, Human Resources Mr. Vesa Keränen, Senior Vice President, Consumer Electronics Mr. Markus Kivimäki, Senior Vice President, Legal Affairs Mr. Tommi Pettersson, Senior Vice President, System Solutions Mr. Mikko Puolakka, CFO Mr. Tomi Saario, Senior Vice President, New Sales and Business Development Mr. Roger Taylor, Senior Vice President, Group Operations and Sourcing As a result of streamlining the organization, the company has implemented personnel reductions in its Group and former Business Area functions. Equity Project Equity investment negotiations with Shenzhen Kaifa Technology Company Limited ended in September. On October 2, Elcoteq announced the signing of a non-binding Letter of Intent with Videocon Industries Ltd (Videocon). Elcoteq's Board of Directors has given authorization to proceed with the due diligence and contract negotiations with Videocon. The parties are aiming at a rapid process to conclude the negotiations and sign the definitive Agreement. The transaction is expected to close by the end of the year. The signing of the Agreement is subject to successful senior and subordinate debt restructuring and complete due diligence. The closing of the transaction will be subject to all the requisite and applicable regulatory, statutory and corporate approvals of both Videocon and Elcoteq. Elcoteq stated in July 2009 that it is the company's intention, in agreement with its relevant creditors, to restructure its interest-bearing debt as an integral part of the project to strengthen its balance sheet. This planned restructuring will require, among other things, measures to be taken with respect to the company's outstanding debentures. The company held a meeting with its debenture holders on September 3, 2009 to amend the terms and conditions of its debentures. These amendments were made in order to be able to carry out the needed actions. Pohjola Corporate Finance as the advisor of Elcoteq will approach debenture holders with a concrete proposal whereby the debenture holders would be requested to make an irrevocable commitment to sell the holder's debentures at a price of 25% of the nominal value plus the accrued interest. Elcoteq is planning a structure in which a potential investor would buy the debentures and possibly subsequently convert the debentures to shares in Elcoteq. According to the plan, Elcoteq shall retain the right to withdraw its proposal. Restructuring Plan Elcoteq SE and Ericsson completed a transaction on July 31, 2009 whereby the majority of the machinery, equipment and materials of Elcoteq's Tallinn manufacturing operations were sold to Ericsson. Cost-saving measures have continued at other factories as well. Incentive Schemes The company has a share subscription plan from 2007 that allows the company to issue shares to key personnel on the basis of the improvement of the profit before taxes for the full financial year 2008. According to the plan, the actual number of new series A shares to be transferred to the personnel on November 12, 2009 is 336,266. Elcoteq SE's Board of Directors has amended the 2009 Share Subscription Plan. The amendments concern the issuance of shares in case of a public tender offer and secondly, a situation where the company's registered share capital value would increase at least 50% during the second half of 2009. If such situations occur, a maximum of 750,000 shares will be issued. Exact details about the Share Subscription Plan can be found on the company's website. Shares and Shareholders At the end of September 2009, the company had 127,795,919 shares divided into 22,025,919 series A shares and 105,770,000 series K Founders' shares. All the series K Founders' shares are held by the company's three principal owners. Elcoteq had 10,306 shareholders on September 30, 2009. There were a total of 5,225,083 foreign and nominee registered shares, representing 4.1% of the votes. Short-Term Risks and Uncertainty Factors The company's key short-term challenges are to conclude both the planned debt restructuring, including the extension of the revolving credit facility, and the equity project as well as to ensure customer satisfaction and maximize sales. In the changing market circumstances, the company must continue to maintain the right service offering, optimized cost level and ability to react rapidly to demand changes. Prospects Fourth-quarter net sales are expected to decline further compared to the third quarter of 2009. Operating income is expected to be negative. Cash flow is expected to be positive. Securing the company's long-term financing in the future is expected by the new and existing customers. This will speed up the signing of several new programs that are under negotiations. Elcoteq's customers are giving continuous positive feedback as regards the company's operational performance. Elcoteq plans its material purchases and capacity based on the forecasts received from customers and market analysis. Such forecasts may fluctuate during the forecast period, causing uncertainty in the company's own forecasts. October 27, 2009 Board of Directors Further information: Jouni Hartikainen, President and CEO, +358 10 413 11 Mikko Puolakka, CFO, tel. +358 10 413 1287 Minna Aila, Director, Communications and Corporate Responsibility, tel. +358 10 413 1908 Press Conference and Webcast Elcoteq will arrange a combined press conference, conference call and audio webcast for media and analysts on Wednesday, October 28, at 2.30 pm (EET). The event will be held in English and it will be hosted at the Scandic Hotel Simonkenttä, Bulsa-Freda room (Simonkatu 9, Helsinki, Finland). To listen to the press conference either live or as an on-demand version, please visit www.elcoteq.com. To participate via a conference call, please dial in 5-10 minutes before the beginning of the event: +44 (0)20 7162 0125 (Europe) or +1 334 323 6203 (USA). When dialing in, the participants should quote 848165 as the conference ID. The password is Elcoteq. Enclosures: 1 Income statement 2 Balance sheet 3 Cash flow statement 4 Statement of changes in shareholders' equity 5 Formulas for the calculation of key figures 6 Key figures 7 Strategic Business Units 8 Restructuring expenses 9 Assets and liabilities classified as held for sale 10 Impact of business combinations of the consolidated financial statements 11 Assets pledged and contingent liabilities 12 Quarterly figures The Group adopted the following standards on January 1, 2009: - IFRS 8 Operating Segments. The adoption of the standard does not have an impact on the Interim Report. - Revised IFRS 23 Borrowing Costs. The adaptation of the standard causes a change in the accounting principles used in the consolidated financial statements. The adoption of the standard does not have a material impact on the Group currently. - Revised IAS 1 Presentation of Financial Statements. The change of the standard has impact on the presentation of Income Statement and Statement of Changes in Shareholders' Equity. The following changes in the accounting principles do not have an impact on the consolidated financial statements: - IFRS 2 Share-based Payments - IFRS 1 First-Time adoption and IAS 27 Consolidated and Separate Financial Statements - IFRIC 15 Agreements for the Construction of Real Estate APPENDIX 1 INCOME STATEMENT, Q3/ Q3/ Change, 1-9/ 1-9/ Change, 1-12/ MEUR 2009 2008 % 2009 2008 % 2008 NET SALES 331.7 740.5 -55.2 1,237.7 2,554.1 -51.5 3,443.2 Change in work in progress and finished goods -8.2 -4.4 -34.5 -11.7 195.6 -35.5 Other operating income 5.5 4.4 25.2 9.1 9.0 1.0 11.2 Operating expenses -317.2 -719.7 -55.9 -1,201.3 -2,504.2 -52.0 -3,346.8 Restructuring expenses -1.7 - -15.7 - -13.5 Depreciation and impairment -13.5 -20.5 -34.1 -48.4 -55.8 -13.2 -78.9 OPERATING PROFIT/LOSS -3.3 0.3 -53.1 -8.6 519.3 -20.4 % of net sales -1.0 0.0 -4.3 -0.3 1 178.0 -0.6 Financial income and expenses -4.1 -7.0 -41.0 -27.6 -19.1 44.7 -32.4 Share of profits and losses of associates -0.1 -0.1 -0.1 - -0.1 LOSS BEFORE TAXES -7.5 -6.8 10.4 -80.8 -27.7 191.1 -52.9 Income taxes 0.7 -4.0 6.0 -7.1 -184.3 -11.1 NET LOSS -6.8 -10.7 -36.8 -74.8 -34.8 114.6 -64.0 Other comprehensive income Cash flow hedges 0.3 1.2 3.6 0.3 -2.5 Net gain/loss on hedges of net investments in foreign operations 0.6 -4.7 3.8 -5.4 -6.4 Foreign currency translation differences for foreign operations -0.1 2.1 0.3 7.6 11.2 Income tax relating to components of other comprehensive income -0.2 1.2 -1.4 1.4 0.4 Other comprehensive income for the period, net of tax 0.6 -0.2 6.3 3.9 2.7 TOTAL COMPREHENSIVE LOSS FOR THE PERIOD -6.2 -10.9 -68.5 -30.9 -61.3 LOSS FOR THE PERIOD ATTRIBUTABLE TO: Equity holders of the parent company * -6.3 -11.5 -73.7 -36.8 -65.9 Minority interests -0.5 0.8 -1.1 2.0 1.9 -6.8 -10.7 -74.8 -34.8 -64.0 TOTAL COMPREHENSIVE LOSS ATTRIBUTABLE TO: Equity holders of the parent company * -5.9 -12.9 -66.9 -34.0 -64.8 Minority interests -0.3 2.0 -1.6 3.1 3.5 -6.2 -10.9 -68.5 -30.9 -61.3 Earnings per share (EPS), A shares EUR -0.19 -0.35 -2.26 -1.13 -2.02 Earnings per share (EPS), K founders' shares EUR -0.02 -0.04 -0.23 -0.11 -0.20 Income tax is the amount corresponding to the actual effective rate based on year-to-date actual tax calculation. * The Group's reported net income for the period. APPENDIX 2 Sept. 30, Dec. 31, BALANCE SHEET, MEUR 2009 2008 Change, % ASSETS Non-current assets Intangible assets 25.9 27.6 -6.2 Tangible assets 110.3 167.8 -34.3 Investments 2.1 2.2 -6.5 Long-term receivables 46.8 46.4 0.9 Non-current assets, total 185.1 244.0 -24.2 Current assets Inventories 101.1 256.2 -60.5 Current receivables 193.4 336.3 -42.5 Cash and equivalents 201.0 95.1 111.4 Current assets, total 495.5 687.5 -27.9 Assets classified as held for sale 21.0 23.9 -12.2 ASSETS, TOTAL 701.6 955.4 -26.6 SHAREHOLDERS' EQUITY AND LIABILITIES Equity attributable to equity holders of the parent company Share capital* 13.0 13.0 Other shareholders' equity 43.5 109.4 -60.2 Equity attributable to equity holders of the parent company, total 56.6 122.5 -53.8 Minority interests 11.1 12.7 -12.4 Total equity 67.7 135.2 -49.9 Long-term liabilities Long-term loans 110.1 159.3 -30.9 Other long-term debt 2.8 5.6 -49.5 Long-term liabilities, total 113.0 165.0 -31.5 Current liabilities Current loans 263.8 173.9 51.7 Other current liabilities 250.2 473.9 -47.2 Provisions 6.9 7.5 -8.1 Current liabilities, total 520.9 655.3 -20.5 Liabilities classified as held for sale - - - SHAREHOLDERS' EQUITY AND LIABILITIES, TOTAL 701.6 955.4 -26.6 * Share capital includes both A-shares listed in Nasdaq OMX Helsinki Exchange and K-founders' shares. APPENDIX 3 CONSOLIDATED CASH FLOW STATEMENT, MEUR 1-9/2009 1-9/2008 Change, % 1-12/2008 Cash flow before change in working capital -6.5 50.3 71.9 Change in working capital * 76.3 -106.8 -60.2 Financial items and taxes -14.7 -20.8 -29.4 -33.7 Cash flow from operating activities 55.1 -77.3 -22.0 Purchases of non-current assets -3.6 -57.4 -93.7 -61.9 Acquisitions - -15.5 -23.9 Disposals of non-current assets 12.7 3.9 225.8 8.1 Cash flow before financing activities 64.2 -146.3 -143.9 -99.7 Change in current debt 44.4 110.8 -60.0 119.7 Repayment of long-term debt - -0.2 -20.4 Dividends paid - -1.0 -2.0 Cash flow from financing activities 44.4 109.6 -59.5 97.3 Change in cash and equivalents 108.6 -36.7 -395.8 -2.5 Cash and equivalents on January 1 95.1 92.7 2.6 92.7 Cash and equivalents classified as held for sale - - - Effect of exchange rate changes on cash held -2.6 3.5 4.9 Cash and equivalents at the end of the period 201.0 59.5 237.9 95.1 * The company had no sold accounts receivable at the end of September 2009. APPENDIX 4 STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY, MEUR Attributable to equity holders of the parent Addi- Mino tional Re- rity paid- Hed- Trans- tained inte- Total Share in Other ging lation Re- ear- rests equity serve ca- ca- reser- reser- diffe- for nings own pital pital ves ve rences shares Total BALANCE AT JAN. -124.0 1, 2009 13.0 225.0 8.4 -3.1 3.2 -0.1 122.5 12.7 135.2 Other comprehensive income 3.2 3.5 -73.7 -66.9 -1.6 -68.5 Share-based payments 1.0 1.0 1.0 BALANCE AT SEPT. 30, 2009 13.0 225.0 8.4 0.1 6.8 -0.1 -196.6 56.6 11.1 67.7 BALANCE AT JAN. 1, 2008 13.0 225.0 8.4 -1.0 0.0 -0.1 -58.7 186.6 11.3 197.9 Other comprehensive income 0.3 2.4 -36.8 -34.0 3.1 -30.9 Share-based payments 0.2 0.2 0.2 Dividends -1.0 -1.0 BALANCE AT SEPT.30, 2008 13.0 225.0 8.4 -0.7 2.4 -0.1 -95.3 152.8 13.4 166.2 *) The Group has applied hedge accounting to derivative instruments related to purchases from June 30,2007 and related to personnel expenses from October 15, 2008. APPENDIX 5 FORMULAS FOR THE CALCULATION OF KEY FIGURES Return on equity (ROE) = Net income x 100 ---------------------------------------------------------------- Total equity, average of opening and closing balances Return on investments (ROI/ROCE) = (Income before taxes + interest and other financial expenses + income from discontinued operations before taxes and financial expenses) x 100 -------------------------------------------------------------------------------------- Total assets - non-interest bearing liabilities, average of opening and closing balances Return on investment (ROI/ROCE) for trailing 12 months = (Income before taxes + interest and other financial expenses + income from discontinued operations before taxes and financial expenses) x 100 ------------------------------------------------------------------------------------ Total assets - non interest-bearing liabilities, average of opening and closing balances Current ratio = Current assets + assets classified as held for sale -------------------------------------------------------------- Current liabilities + liabilities classified as held for sale Solvency = Total equity x 100 -------------------------------------------- Total assets - advance payments received Gearing = Interest-bearing liabilities - cash and equivalents ------------------------------------------------------------------- Total equity Equity per share = Equity attributable to equity holders of the parent company -------------------------------------------------------------------------------- Adjusted average number of A shares outstanding end of the period + (adjusted average number of K founders' shares outstanding end of the period/10) Earnings per share, A shares (EPS) = Net income attributable to equity holders of the parent, A shares ------------------------------------------------------------------------------------- Adjusted average number of A shares outstanding during the period Earnings per shares, K founders' shares (EPS) = Net income attributable to equity holders of the parent, K founders' shares -------------------------------------------------------------------------- Adjusted average number of K founders' shares outstanding during the period APPENDIX 6 1-9/ 1-9/ 1-12/ KEY FIGURES 2009 2008 Change, % 2008 Personnel on average during the period 12,014 17,598 -31.7 17,401 Gross capital expenditures, MEUR 4.6 61.5 -92.6 71.4 Return on equity (ROE), % -73.7 -19.1 -38.4 Return on investment (ROI/ROCE), % -12.7 -0.7 -3.1 From 12 preceding months: Return on equity (ROE), % -88.9 -34.8 -38.4 Return on investment (ROI/ROCE), % -14.4 -5.6 -3.1 Earnings per share (EPS), A-shares, EUR -2.26 -1.13 100.1 -2.02 Earnings per share (EPS), K-founders' shares, EUR -0.23 -0.11 105.6 -0.20 Current ratio 1.0 1.1 1.1 Solvency, % 9.7 15.9 14.2 Gearing 2.6 1.7 1.8 Shareholders' equity per share, A-shares, EUR 1.74 4.69 3.76 Shareholders' equity per share, K-founders' shares, EUR 0.17 0.47 0.38 Interest-bearing liabilities, MEUR 387.6 346.9 11.7 333.6 Interest-bearing net debt, MEUR 173.2 287.4 -39.7 238.5 Non-interest-bearing liabilities, MEUR 384.0 529.5 -27.5 486.7 APPENDIX 7 STRATEGIC BUSINESS UNITS From 2009, Elcoteq has applied IFRS 8 Operating Segments in its segment reporting. The transfer to IFRS 8 has not changed the previously reported information. The presented segment reporting is based on the figures provided to the company's management. Since the beginning of 2008, Elcoteq has had three Business Areas: Personal Communications, Home Communications and Communications Networks. They have been reported as separate segments. Personal Communications and Home Communications Business Areas were combined during the third quarter under a new Strategic Business Unit, Consumer Electronics. Communications Networks business has been included into a new Staregic Business Unit, System Solutions. The company now only has two Strategic Business Units (SBUs): Consumer Electronics and System Solutions. Both SBUs are responsible for managing and developing their existing customer relationships and applicable service offerings, while Group Operations and Sourcing is responsible for supply chain and production. Strategic Business Unit Consumer Electronics covers products such as mobile and wireless phones, their parts and accessories, set-top boxes flat panel TVs and other consumer products. Strategic Business Unit System Solutions covers wireless and wire line infrastructure products like complete cellular base stations, further enterprise products like switches as well as infrastructure products like complex controllers. STRATEGIC BUSINESS UNITS, MEUR 1-9/2009 1-9/2008 1-12/2008 Net sales Consumer Electronics 916.2 2,055.5 2,739.5 System Solutions 321.5 498.5 703.7 Net sales, total 1,237.7 2,554.1 3,443.2 Segment's operating income Consumer Electronics -27.0 12.3 15.0 System Solutions -1.9 6.7 1.6 Group's non-allocated expenses/income General & Administrative expenses -23.0 -27.6 -37.1 Other expenses -1.2 -0.1 0.2 Operating income, total -53.1 -8.6 -20.4 Group's financial income and expenses -27.6 -19.1 -32.4 Share of profits and losses of associates -0.1 - -0.1 Income before taxes -80.8 -27.7 -52.9 Segments' operating income for January-September 2009 includes following restructuring expenses: Consumer Electronics 8.7 million euros and System Solutions 6.2 million euros. Group's non-allocated expenses/income includes restructuring costs of 0.8 million euros. APPENDIX 8 RESTRUCTURING EXPENSES During the first quarter of 2009, Elcoteq launched a restructuring plan that applies to whole Group. Some part of the costs relating to the plan were recognized already in 2008. The plan targets to prepare the company for the exceptionally uncertain market situation and general economic development. This plan is the next step in the company's drive to increase profitability, cost-efficiency and operational excellence. The plan has contained several elements such as the closure of the plants in Arad (Romania), Richardson (USA) and St. Petersburg (Russia) as well as to consolidate the plant in Shenzhen (China) to the plant in Beijing. Processes with the target to reduce personnel at several plants globally have been carried out. In addition the company has reduced other operative costs. In August 2009, Elcoteq announced further organizational changes (see Appendix 7). The target is to better utilize the synergies between businesses and to aim for further cost reductions. Consequently personnel reductions have been and will be carried out at several Elcoteq sites. The Group's restructuring expenses 15,723 thousand euros, comprise the following items: EUR 1, 000 2009 Personnel expenses 9,437 Impairments 2,829 Production materials and services 1,124 Other operating expenses 2,333 Restructuring expenses, total 15,723 Impairments of non-current assets: EUR 1, 000 2009 Intangible rights - Goodwill - Buildings 1,231 Machinery and equipment 1,598 ADP software - Other financial assets - Impairments, total 2,829 Impairments of buildings as well as machinery and equipment are primarily due to plant closures. APPENDIX 9 ASSETS AND LIABILITIES CLASSIFIED AS HELD FOR SALE Assets classified as held for sale amounting to 21.0 million euros relate to real estates on sale. The company did not have liabilities classified as held for sale at the end of the reporting period. APPENDIX 10 IMPACT OF BUSINESS COMBINATIONS OF THE CONSOLIDATED FINANCIAL STATEMENTS Elcoteq SE signed in September 4, 2008 an agreement to purchase Philips' flat panel TV (FTV) assembly operations in Juarez, Mexico. The deal includes a long-term cooperation agreement with Philips to provide manufacturing services to Philips for its Latin American FTV business and its Philips Business Services business in the Americas. The deal includes also a long term cooperation agreement with Funai Electric Co., Ltd to provide manufacturing services to Funai's FTV business in North America. The acquisition includes certain fixed assets and inventories of Philips' Juarez manufacturing operation and will be used in the manufacturing of products to be supplied to Philips. The assets and liabilities were acquired at fair value.The impact of acquisition to the group's net profit in 2008, had the agreement been signed at the beginning of 2008, cannot be reliably determined. Acquisition cost include 0.5 million euros legal service fees. The assets and liabilities acquired in business combinations are valued at their fair values. The final acquisition price was confirmed in 2009. Purchase price allocation and the values of the acquired the assets and liabilities are as follows: Assets and liabilities acquired in business combinations in: 2008 2008 EUR 1,000 Fair Value Book Value Non-current assets Intangible assets 364 - Tangible assets 5,235 5 235 Current assets Inventories 15,181 15,181 Current receivables 7,021 7,021 Cash and equivalents 406 406 Assets, total 28,207 28,004 Liabilities Current liabilities 5,033 5,033 Acquisition cost 23,174 - Acquisition price paid in cash 24,094 - Cash and equivalents of acquired subsidiary -406 - Impact on cash flow 23,688 - The acquisition in 2008 was made in US dollars. The acquisition cost was translated into euros using the exchange rate of the acquisition date. The acquisition price paid in cash was translated into euros using the payment date's rate of the acquisition. APPENDIX 11 ASSETS PLEDGED AND CONTINGENT Sept. 30, Sept. 30, Dec. 31, LIABILITIES, MEUR 2009 2008 Change, % 2008 PLEDGED SALES RECEIVABLE 0.0 - 26.9 PLEDGED LOAN RECEIVABLES 0.1 - 0.8 ON BEHALF OF OTHERS Guarantees 1.0 1.0 1.0 LEASING COMMITMENTS Operating leases. production machinery (excl. VAT) 2.4 14.2 -82.8 9.0 Rental commitments. real-estate (excl. VAT) 11.0 15.1 -27.1 15.4 DERIVATIVE CONTRACTS Currency forward contracts, transaction risk, hedge accounting not applied Nominal value 218.3 116.1 88.0 118.3 Fair value 0.0 4.2 -99.1 -0.2 Currency forward contracts, transaction risk, hedge accounting applied Nominal value 7.6 97.1 -92.2 69.4 Fair value 0.1 -0.7 -118.1 -3.5 Currency option contracts, transaction risk, hedge accounting applied, bought options Nominal value - - 17.0 Fair value - - 0.3 Currency forward contracts, translation risk Nominal value 20.0 46.2 -56.8 20.2 Fair value 0.0 -1.2 -0.8 Currency forward contracts, financial risk Nominal value 109.5 228.5 -52.1 172.3 Fair value 0.1 -0.8 -3.1 Interest rate and foreign exchange swap contracts Nominal value - 1.5 1.5 Fair value - 0.2 0.2 The derivative contracts have been valued using the market prices and the exchange reference rates of the European Central Bank on the balance sheet date. The figures also include closed positions. APPENDIX 12 QUARTERLY FIGURES INCOME STATEMENT, Q3/ Q2/ Q1/ Q4/ Q3/ Q2/ Q1 MEUR 2009 2009 2009 2008 2008 2008 /2008 NET SALES 331.7 436.0 470.0 889.1 740.5 904.8 908.7 Change in work in progress and finished goods -8.2 -4.4 -21.9 -23.9 -4.4 -10.1 2.9 Other operating income 5.5 1.4 2.3 2.2 4.4 3.1 1.6 Operating expenses -317.2 -428.0 -456.1 -842.6 -719.7 -878.9 -905.6 Restructuring expenses -1.7 -0.4 -13.6 -13.5 - - - Depreciation and impairments -13.5 -16.0 -18.9 -23.2 -20.5 -18.2 -17.1 OPERATING INCOME -3.3 -11.5 -38.3 -11.8 0.3 0.6 -9.5 % of net sales -1.0 -2.6 -8.2 -1.3 0.0 0.1 -1.0 Financial income and expenses -4.1 -11.9 -11.5 -13.3 -7.0 -6.1 -6.0 Share of profits and losses of associates -0.1 0.0 0.0 0.0 -0.1 - - INCOME BEFORE TAXES -7.5 -23.4 -49.9 -25.2 -6.8 -5.5 -15.4 Income taxes 0.7 1.5 3.7 -4.0 -4.0 -7.3 4.2 NET INCOME FOR THE PERIOD -6.8 -21.8 -46.1 -29.2 -10.7 -12.8 -11.3 ATTRIBUTABLE TO: Equity holders of the parent company -6.3 -21.8 -45.6 -29.1 -11.5 -13.7 -11.6 Minority interests -0.5 0.0 -0.5 -0.1 0.8 0.9 0.3 -6.8 -21.8 -46.1 -29.2 -10.7 -12.8 -11.3 Q3/ Q2/ Q1/ Q4/ Q3/ Q2/ Q1/ BALANCE SHEET, MEUR 2009 2009 2009 2008 2008 2008 2008 ASSETS Non-current assets Intangible assets 25.9 26.6 27.4 27.6 28.4 28.5 29.5 Tangible assets 110.3 129.8 149.7 167.8 190.0 184.0 182.0 Investments 2.1 2.2 2.3 2.2 2.2 2.1 2.1 Long-term receivables 46.8 45.8 53.0 46.4 49.2 48.5 47.3 Non-current assets, total 185.1 204.3 232.4 244.0 269.8 263.2 260.9 Current assets Inventories 101.1 113.7 174.2 256.2 358.2 322.5 321.7 Current receivables 193.4 221.4 221.9 336.3 326.4 320.0 271.7 Cash and equivalents 201.0 154.8 98.0 95.1 59.5 50.5 91.9 Current assets, total 495.5 489.8 494.1 687.5 744.0 692.9 685.3 Assets classified as held for sale 21.0 41.0 20.7 23.9 28.7 30.5 30.2 ASSETS, TOTAL 701.6 735.1 747.1 955.4 1,042.6 986.6 976.4 SHAREHOLDERS' EQUITY AND LIABILITIES Equity attributable to equity holders of the parent company Share capital 13.0 13.0 13.0 13.0 13.0 13.0 13.0 Other shareholders' equity 43.5 48.7 64.5 109.4 139.7 152.4 162.8 Equity attributable to equity holders of the parent company, total 56.6 61.8 77.5 122.5 152.8 165.4 175.9 Minority interests 11.1 12.0 12.8 12.7 13.4 12.5 11.3 Total equity 67.7 73.7 90.3 135.2 166.2 177.9 187.2 Long-term liabilities Long-term loans 110.1 159.6 158.9 159.3 159.4 159.3 159.4 Other long-term debt 2.8 5.7 6.7 5.6 5.5 5.2 5.0 Long-term liabilities, total 113.0 165.2 165.6 165.0 164.9 164.5 164.4 Current liabilities Current loans 263.8 210.7 225.4 173.9 187.2 111.2 75.7 Other current liabilities 250.2 279.0 257.4 473.9 519.9 526.8 544.7 Provisions 6.9 5.7 8.4 7.5 4.4 4.8 3.7 Current liabilities, total 520.9 495.4 491.2 655.3 711.5 642.8 624.1 Liabilities classified as held for sale - 0.8 - - - 1.4 0.7 SHAREHOLDERS' EQUITY AND LIABILITIES, TOTAL 701.6 735.1 747.1 955.4 1,042.6 986.6 976.4 Personnel on average during the period 9,877 11,693 14,446 17,050 17,304 17,543 17,894 Gross capital expenditures, MEUR 1.1 1.5 2.0 9.9 17.2 16.6 27.7 ROI/ROCE from 12 preceding months, % -14.4 -14.4 -11.3 -3.1 -5.6 -6.2 -10.7 Earnings per share (EPS), A-shares, EUR -0.19 -0.67 -1.40 -0.89 -0.35 -0.42 -0.35 Solvency, % 9.7 10.0 12.1 14.2 15.9 18.0 19.2 CONSOLIDATED CASH Q3/ Q2/ Q1/ Q4/ Q3/ Q2/ Q1/ FLOW STATEMENT, MEUR 2009 2009 2009 2008 2008 2008 2008 Cash flow before change in working capital 7.0 -6.4 -7.1 21.5 32.8 16.2 1.3 Change in working capital 34.1 81.1 -38.8 46.6 -65.2 -66.3 24.7 Financial items and taxes -5.0 -3.9 -5.8 -13.0 -7.6 -5.6 -7.5 Cash flow from operating activities 36.1 70.7 -51.7 55.2 -39.9 -55.8 18.4 Purchases of non-current assets -1.1 -0.4 -2.1 -4.4 -12.8 -24.6 -20.0 Acquisitions - - - -8.4 -15.5 - - Disposals of non-current assets 7.8 1.8 3.1 4.1 1.5 1.8 0.5 Cash flow before financing activities 42.7 72.2 -50.7 46.6 -66.7 -78.5 -1.1 Change in current debt 5.2 -12.2 51.4 8.9 72.2 36.3 2.4 Repayment of long-term debt - - - -20.2 - -0.2 - Dividends paid - - - -1.0 -1.0 - - Cash flow from financing activities 5.2 -12.2 51.4 -12.3 71.1 36.1 2.4 Change in cash and equivalents 48.0 59.9 0.7 34.2 4.4 -42.4 1.3 Cash and equivalents at the beginning of the period 154.8 98.0 95.1 59.5 50.5 91.9 92.7 Cash and cash equivalents classified as held for sale - - - - - 0.2 -0.2 Effect of exchange rate changes on cash held -1.7 -3.1 2.2 1.4 4.6 0.9 -1.9 Cash and equivalents at the end of period 201.0 154.8 98.0 95.1 59.5 50.5 91.9 STRATEGIC BUSINESS Q3/ Q2/ Q1/ Q4/ Q3/ Q2/ Q1/ UNITS, MEUR 2009 2009 2009 2008 2008 2008 2008 Net sales Consumer Electronics 243.5 328.1 344.6 684.0 564.2 721.5 769.8 System Solutions 88.2 107.9 125.3 205.2 176.3 183.3 139.0 Net sales, total 331.7 436.0 470.0 889.1 740.5 904.8 908.7 Segment's operating income Consumer Electronics -2.3 -4.6 -20.1 2.7 1.0 6.5 4.8 System Solutions 6.9 1.5 -10.3 -5.1 7.6 3.3 -4.2 Group's non-allocated expenses/income -7.6 -8.2 -7.2 -9.5 -8.3 -9.2 -10.1 -0.3 -0.1 -0.7 0.2 -0.1 - - Operating income, total -3.3 -11.5 -38.3 -11.8 0.3 0.6 -9.5 Group's financial income and expenses -4.1 -11.9 -11.5 -13.3 -7.0 -6.1 -6.0 Share of profits and losses of associates -0.1 0.0 0.0 0.0 -0.1 - - Income before taxes -7.5 -23.4 -49.9 -25.2 -6.8 -5.5 -15.4 Restructuring expenses recognized in segment's operating income Consumer Electronics -1.5 0.0 -7.2 -8.1 - - - System Solutions 0.0 -0.4 -5.8 -5.4 - - - Group's non-allocated expenses/income -0.2 0.0 -0.6 - - - - Restructuring expenses, total -1.7 -0.4 -13.6 -13.5 - - - |
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