2013-09-19 15:05:02 CEST
2013-09-19 15:06:04 CEST
REGULATED INFORMATION
Nokia - Company Announcement
Nokia publishes proxy materials for its Extraordinary General Meeting 2013 and notifies a new date for its Q3 2013 results announcement
Nokia Corporation
Stock Exchange Release
September 19, 2013 at 16.05 (CET+1)
Espoo, Finland - As outlined in the notice to the Nokia Extraordinary General
Meeting 2013 (EGM) published earlier today, Nokia is making available proxy
materials with more detailed information on the proposed transaction, announced
on September 3, 2013, in which Nokia has agreed to sell substantially all of
its Devices & Services business to Microsoft (the “Sale of the D&S Business”).
Additionally, Nokia today announces a new publication date for its third
quarter 2013 results announcement.
New publication date for Nokia's Q3 2013 results announcement
Nokia informs that it plans to publish its third quarter 2013 and January -
September 2013 interim report on October 29, 2013. The postponement from the
previously announced date is driven by Nokia's acquisition of Siemens AG's
entire stake in NSN and the announcement of the Sale of the D&S Business, both
of which have taken place during the third quarter of 2013.
Proxy materials for the EGM
The proxy materials relating to the Sale of the D&S Business are available at
www.nokia.com/gm. Additionally, the material is attached to the Nokia stock
exchange release in pdf format and will be furnished to the U.S. Securities and
Exchange Commission.
The proxy materials contain detailed information on the proposal to be voted
on, and we strongly encourage our shareholders to read the materials in their
entirety. The proxy materials include, for instance, a letter from Risto
Siilasmaa, Chairman and interim CEO of Nokia as well as Nokia Group unaudited
pro forma financial information for certain periods. These sections are also
included below in this release.
Nokia Board recommendation
Nokia's Board of Directors recommends that Nokia shareholders vote to confirm
and approve the Sale of the D&S Business at the Extraordinary General Meeting.
September 18, 2013
Shareholders of Nokia Corporation
Re: Notice of Extraordinary General Meeting of Shareholders
Dear Shareholder:
Shareholder:
You are cordially invited to attend an Extraordinary General Meeting of
shareholders of Nokia Corporation to be held on November 19, 2013, at 2:00 p.m.
(Helsinki time) at Barona Areena, Urheilupuistontie 3, Espoo, Finland. The
attached notice of the Extraordinary General Meeting and proxy materials
provide information regarding the proposed resolution to be considered and
voted on at the Extraordinary General Meeting. We hope that you can attend
either by voting in advance, issuing a proxy to a representative or at the
Extraordinary General Meeting in person.
The purpose of the Extraordinary General Meeting is for you and our other
shareholders to consider and vote on a proposal to confirm and approve the
transactions contemplated by the Stock and Asset Purchase Agreement, dated as
of September 2, 2013 (the “Purchase Agreement”), by and between Nokia
Corporation and Microsoft International Holdings B.V. (“Microsoft
International”), a wholly owned subsidiary of Microsoft Corporation
(“Microsoft”). Under the Purchase Agreement, Nokia will sell substantially all
of its Devices & Services business (the “D&S Business”), including assets and
liabilities to the extent primarily related thereto, to Microsoft International
(the transactions contemplated by the Purchase Agreement, the “Sale of the D&S
Business”) for an aggregate purchase price of EUR 3.79 billion in cash, subject
to certain adjustments.
Nokia has also entered into a mutual licensing agreement (the “Patent License
Agreement”) with Microsoft that will become effective upon consummation of the
Sale of the D&S Business and a payment to Nokia of EUR 1.55 billion, and, as
consideration for Microsoft's unilateral right to extend the term of the Patent
License Agreement to perpetuity, an additional payment of EUR 100 million to
Nokia. Under the Patent License Agreement, Nokia will grant Microsoft a 10-year
license to certain of Nokia's patents and Microsoft will grant Nokia reciprocal
rights to certain of Microsoft's patents for use in Nokia's HERE business. Upon
consummation of the Sale of the D&S Business, Microsoft will also become a
strategic licensee of the HERE location platform and will pay Nokia separately
for the services provided under this license. Microsoft is expected to become
one of the top three customers of HERE. Nokia will retain the Nokia brand and
all of its patents and patent applications worldwide, provided that certain
registered design rights that are specific to the D&S Business will be included
in the assets transferred to Microsoft.
The Sale of the D&S Business and the licensing arrangements described above are
expected to be significantly accretive to Nokia's earnings as each of Nokia's
continuing businesses, NSN, HERE and Advanced Technologies are global leaders
in enabling mobility in their respective areas. The Sale of the D&S Business
and the licensing arrangements described above are also expected to
significantly strengthen Nokia's financial position and provide a solid basis
for future investment in the continuing businesses. During the first half of
2013, we estimate that the non-IFRS result of the business proposed to be sold,
“substantially all of Devices & Services business” would have been a loss of
EUR 395 million and net sales of that business would have been EUR 5.3 billion.
For the same period of time (on a pro forma basis) the non-IFRS result of
Nokia's continuing businesses would have been a profit of EUR 436 million and
the net sales of Nokia's continuing businesses would have been EUR 6.3 billion.
On a pro forma basis Nokia had EUR 12.8 billion of gross cash and EUR 7.5
billion of net cash at the end of the first half of 2013.
More information about the Sale of the D&S Business and the Purchase Agreement
is contained in the accompanying proxy materials, which we strongly encourage
you to read in their entirety. These proxy materials are also available on
Nokia's website at www.nokia.com/gm.
After a thorough assessment of how to maximize shareholder value, including
considering a variety of strategic alternatives, Nokia's Board of Directors
decided to approve Nokia's entry into the Purchase Agreement and the Sale of
the D&S Business contemplated thereby and determined that Nokia's entry into
the Purchase Agreement and the Sale of the D&S Business are in the best
interests of Nokia and our shareholders. The Board of Directors recommends that
Nokia shareholders vote to confirm and approve the Sale of the D&S Business at
the Extraordinary General Meeting.
The Purchase Agreement requires that shareholders representing a majority of
the votes cast at the Extraordinary General Meeting confirm and approve the
Sale of the D&S Business. The consummation of the Sale of the D&S Business is
also subject to the satisfaction of certain other conditions to consummation of
the Sale of the D&S Business as set forth in the Purchase Agreement and
described in the accompanying proxy materials.
Regardless of the number of Nokia shares or American Depositary Shares you own,
your vote is very important. The accompanying notice to convene the
Extraordinary General Meeting and proxy materials provide you with detailed
information about the Sale of the D&S Business and the Extraordinary General
Meeting.
On behalf of Nokia Corporation, we would like to thank all of our shareholders
for their ongoing support as we prepare for this important event in Nokia's
history.
Sincerely,
/s/ Risto Siilasmaa
Risto Siilasmaa
Chairman of the Board and interim CEO
NOKIA GROUP UNAUDITED PRO FORMA FINANCIAL INFORMATION
Basis of compilation of the unaudited pro forma financial information
The following unaudited pro forma financial information (“pro forma”, “pro
forma information”) is presented to illustrate the financial impact of the
following transactions (collectively, the “Transactions”):
- Nokia's acquisition of Siemens AG's (“Siemens”) 50% stake in Nokia Solutions
and Networks, also referred to as NSN (formerly Nokia Siemens Networks), for
EUR 1.7 billion, completed on August 7, 2013 (the “NSN Acquisition”);
- The sale of substantially all of Nokia's Devices & Services business (the
“D&S Business”) to Microsoft International Holdings B.V. (“Microsoft
International”), a wholly owned subsidiary of Microsoft Corporation
(“Microsoft”) for EUR 3.79 billion (the transactions contemplated by the Stock
and Asset Purchase Agreement, dated as of September 2, 2013 (the “Purchase
Agreement”), by and between Nokia and Microsoft International (the “Sale of the
D&S Business”);
- Nokia's granting Microsoft a 10-year license to certain of Nokia's patents
and Microsoft granting Nokia reciprocal right to use Microsoft's patents in
HERE services upon consummation of the Sale of the D&S Business for a license
payment of EUR 1.55 billion in cash to Nokia and, as consideration for the
unilateral right to extend the term of the Patent License Agreement to
perpetuity, an additional EUR 100 million payment to Nokia (the “Patent License
Agreement”);
- Microsoft's payment to Nokia for services provided in connection with
Microsoft becoming a strategic licensee of Nokia's HERE location platform; and
- The sale of EUR 1.5 billion in senior unsecured convertible bonds to
Microsoft (the “Convertible Bonds”) pursuant to a bond purchase agreement,
dated as of September 2, 2013, by and between Nokia and Microsoft International
(the “Bond Purchase Agreement”). The Convertible Bonds will be issued in three
equal tranches of EUR 500 million each, bearing interest of 1.125%, 2.500% and
3.625% and maturing in 2018, 2019 and 2020, respectively.
The pro forma financial information also illustrates the financial impact of
certain other items described below, including the divestment of our luxury
phone business Vertu, which was completed in October 2012.
This unaudited pro forma information is presented for illustrative purposes
only. Because of its nature, the unaudited pro forma information illustrates
what the hypothetical impact would have been if the Transactions and certain
other items described below had been consummated at an earlier point in time
and therefore, does not represent the actual results of operations or financial
position of Nokia and its consolidated subsidiaries (“Nokia Group”). The
unaudited pro forma information is not intended to project the results of
operations or financial position of Nokia Group as of any future date.
For the purposes of this pro forma information, the D&S Business has been
treated as a discontinued operation. Accordingly, the results for the D&S
Business for the year ended December 31, 2012 and for the six month period
ended June 30, 2013 have been presented separately from the results of
continuing operations and on a separate line at the bottom of the pro forma
income statements.
The pro forma adjustments are based upon available information and assumptions,
which are described in the accompanying notes. There can be no assurance that
the assumptions used in the preparations of the unaudited pro forma financial
information will prove to be correct. Hence, the final amounts at the
consummation of the Sale of the D&S Business are likely to differ from the
amounts presented here.
The unaudited pro forma financial information has been derived from Nokia's
unaudited consolidated financial information as at and for the year ended
December 31, 2012 and Nokia's unaudited consolidated interim report as at and
for the six month period ended June 30, 2013. Nokia adopted the revised “IAS 19
- Employee Benefits” standard (“IAS 19R”) as of January 1, 2013. The historical
financial information as at and for the year ended December 31, 2012 presented
has been revised to comply with the new accounting principles, and due to the
revision, is unaudited. For more information on the impact of the retrospective
application of IAS 19R, see Nokia's published 2013 interim reports available at
www.nokia.com.
The unaudited pro forma financial information included in the proxy materials
should be read in conjunction with our consolidated financial statements and
consolidated interim financial statements available at www.nokia.com.
Pro forma periods
The pro forma consolidated income statements for the year ended December 31,
2012 and for the six month period ended June 30, 2013, have been compiled
assuming that the Transactions and certain other items described below had been
completed on January 1, 2012. The pro forma statement of financial position as
at June 30, 2013 has been compiled assuming that such transactions had been
completed on June 30, 2013.
Nokia Group's operating results for the six months ended June 30, 2013
The following table sets forth consolidated income statements of Nokia Group
for six months ended June 30, 2013 as follows:
- Nokia Group's consolidated income statement as reported in Nokia's interim
report dated July 18, 2013 (column titled “Reported 1-6/2013”);
- Nokia Group's consolidated income statement adjusted to reflect the
Transactions and certain other items as if the Transactions and such other
items had been consummated as of January 1, 2012 (column titled “Pro forma
Reported 1-6/2013”); and
- Nokia Group's consolidated income statement, on a non-IFRS basis, further
adjusted to exclude the impact of special items and purchase price adjustments
(column titled “Pro forma non-IFRS 1-6/2013”).
In the first half of 2013, Nokia Group's reported net sales were EUR 11,547
million. On a pro forma basis, Nokia Group's reported net sales were EUR 6,304
million and Nokia Group's non-IFRS net sales were EUR 6,305 million, reflecting
the hypothetical impact of the Transactions and certain other items described
in Notes 3 and 4 below. The most significant item explaining the difference
between Nokia Group's reported net sales and Nokia Group's pro forma reported
net sales is the hypothetical impact of the Sale of the D&S Business, as the
D&S Business generated reported net sales of EUR 5,344 million in the first
half 2013.
In the first half of 2013, Nokia Group's reported operating loss was EUR 265
million, or negative 2.3%. On a pro forma basis, Nokia Group's reported
operating profit was EUR 19 million, or positive 0.3% and Nokia Group's
non-IFRS operating profit was EUR 721 million or positive 11.4%. The most
significant item explaining the difference between Nokia Group's reported
operating loss and Nokia Group's pro forma reported operating profit is the
hypothetical impact of the Sale of the D&S Business, as the D&S Business
generated reported operating losses of EUR 273 million in the first half 2013.
CONSOLIDATED INCOME STATEMENTS First half 2013, EUR million (unaudited)
Reported Pro Pro forma Other Pro forma Pro Pro forma
1-6/2013 forma adjustmen pro Reported forma Non-IFRS
adjustm ts Sale forma 1-6/2013 non-IF 1-6/2013
ents of the adjust RS
NSN D&S ments exclus
Acquisi Business( (3) ions
tion 2) (4)
(1)
--------------------------------------------------------------------
Continuing
operations
:
Net sales 11,547 -5,344 101 6,304 1 6,305
Cost of -7,801 4,213 -90 -3,678 -3,678
sales
--------------------------------------------------------------------
Gross 3,746 - -1,131 11 2,626 1 2,627
profit
Research -1,983 579 -1,404 176 -1,228
and
developmen
t expenses
Selling and -1,151 638 -513 73 -440
marketing
expenses.
Administrat -440 121 -319 -319
ive and
general
expenses
Other -437 66 -371 452 81
income and
expenses
--------------------------------------------------------------------
Operating -265 - 273 11 19 702 721
loss/profi
t
Share of -4 -4 -4
results of
associated
companies
Financial -163 20 -143 -143
income and
expenses
--------------------------------------------------------------------
Loss/profit -432 - 293 11 -128 702 574
before tax
Tax -185 102 11 -72 -66 -138
--------------------------------------------------------------------
Loss/profit -617 - 395 22 -200 636 436
from
continuing
operations
====================================================================
Discontinue
d
operations
:
Loss for -395 -395 67 -328
the period
--------------------------------------------------------------------
Gain on
disposal,
net
Loss from - -395 - -395 67 -328
discontinu
ed
operations
====================================================================
Loss/profit -617 - - 22 -595 703 108
for the
period
--------------------------------------------------------------------
Loss/profit -499 -131 7 22 -601 703 102
attributab
le to
equity
holders of
the parent
--------------------------------------------------------------------
Loss/profit -118 131 -7 6 6
attributab
le to
non-contro
lling
interests
--------------------------------------------------------------------
-617 - - 22 -595 703 108
====================================================================
Earnings
per share,
EUR
(for
loss/profi
t
attributab
le to the
equity
holders of
the
parent)
Basic -0.13 -0.16 0.03
From -0.13 -0.06 0.12
continuing
operations
From - -0.11 -0.09
discontinu
ed
operations
Diluted -0.13 -0.16 0.03
From -0.13 -0.06 0.11
continuing
operations
From - -0.11 -0.09
discontinu
ed
operations
Average
number of
shares
(1,000
shares)
Basic 3,711,827 3,711,827 3,711,827
Diluted, 3,711,827 3,711,827 3,998,986
Continued
operations
Diluted, - 3,711,827 3,711,827
Discontinu
ed
operations
(1) The reported income statement for the period has been adjusted for the
portion of NSN's results that were previously attributed to Siemens'
non-controlling interest.
(2) The adjustments in this column reclassify the results of the D&S Business
for the period to discontinued operations.
(3) The other pro forma adjustments include:
- EUR 101 million net increase in revenue related to the Patent License
Agreement and the HERE location platform licensing agreement with Microsoft.
Revenue for the Patent License Agreement is estimated to be recognized over 10
years and revenue for the HERE location platform licensing agreement is
estimated to be recognized over four years;
- An adjustment of EUR 90 million in inter-company charges between HERE and the
D&S Business; and
- The estimated tax impact of the adjustments in the two bullet points above.
(4) Pro forma non-IFRS exclusions related to continuing operations include the
following:
- The reversal of EUR 249 million in amortization on acquired intangible assets
(EUR 176 million recorded in Research and development expenses and EUR 73
million in Selling and marketing expenses);
- The reversal of EUR 301 million in restructuring charges (recorded in Other
income and expenses);
- The reversal of EUR 151 million in losses related to the divestment of
certain NSN businesses (recorded in Other income and expenses); and
- The reversal of EUR 46 million tax benefits related to the items and
adjustments noted above as well as of prior year tax benefits in the amount of
EUR 20 million (recorded in Tax).
Additionally, the discontinued operations non-IFRS exclusions include the
following:
- The reversal of restructuring charges of EUR 72 million;
- The reversal of EUR 27 million for a benefit from a cartel claim settlement;
and
- Certain prior year tax expenses of EUR 20 million
Nokia Group's operating results for the full year 2012
In the full year 2012, Nokia Group's reported net sales were EUR 30,176
million. On a pro forma basis, Nokia Group's reported net sales were EUR 15,220
million and on a pro forma basis, Nokia Group's non-IFRS net sales were EUR
15,221 million, reflecting the hypothetical impact of the Transactions, the
divestment of Vertu, and certain other adjustments described in Notes 3 and 4
below. The most significant item explaining the difference between Nokia
Group's reported net sales and Nokia Group's pro forma reported net sales is
the hypothetical impact of the Sale of the D&S Business, as the D&S Business
generated net sales of EUR 14,937 million in the full year 2012.
In the full year 2012, Nokia Group's reported operating loss was EUR 2,299
million, or negative 7.6%. On a pro forma basis, Nokia Group's reported
operating loss was EUR 925 million, or negative 6.1% and on a pro forma basis,
Nokia Group's non-IFRS operating profit was EUR 1,033 million, or positive
6.8%. The most significant item explaining the difference between Nokia Group's
reported operating loss and Nokia Group's pro forma reported operating profit
is the hypothetical impact of the Sale of the D&S Business, as the D&S Business
generated operating losses of EUR 1,603 million in the full year 2012 and was
also a significant driver of the difference between Nokia Group's non-IFRS
operating loss and Nokia Group's pro forma non-IFRS operating profit.
The following table sets forth Nokia Group's consolidated income statements for
the twelve months ended December 31, 2012 as follows:
- Nokia Group's consolidated income statement as reported in Nokia's Form 20-F
for the year ended December 31, 2012, adjusted for the adoption of “IAS 19 -
Employee Benefits” (column titled “Reported 1-12/2012”);
- Nokia Group's consolidated income statement adjusted to reflect the
Transactions, certain other items and the divestment of Vertu, as if the
Transactions, such other items and the divestment of Vertu had been consummated
as of January 1, 2012 (column titled “Pro forma Reported 1-12/2012”); and
- Nokia Group's consolidated income statement, on a non-IFRS basis, further
adjusted to exclude the impact of special items and purchase price adjustments
(column titled “Pro forma Non-IFRS 1-12/2012”)
CONSOLIDATED INCOME STATEMENTS Full year 2012, EUR million (unaudited)
Reported Pro Pro Other Pro forma Pro Pro forma
1-12/2012 forma forma pro Reported forma Non-IFRS
adjust adjustm forma 1-12/2012 non-IF 1-12/2012
ments ents adjust RS
NSN Sale of ments exclus
Acquis the (3) ions
ition D&S (4)
(1) Busines
s(2)
-----------------------------------------------------------------
Continuing
operations:
Net sales 30,176 -14,937 -19 15,220 1 15,221
Cost of sales -21,786 12,242 -276 -9,820 65 -9,755
-----------------------------------------------------------------
Gross profit 8,390 -2,695 -295 5,400 66 5,466
Research and -4,782 1,779 28 -2,975 375 -2,600
development
expenses
Selling and -3,205 1,657 72 -1,476 313 -1,163
marketing
expenses.
Administrative -955 287 15 -653 -653
and general
expenses
Other income -1,747 575 -49 -1,221 1,204 -17
and expenses
-----------------------------------------------------------------
Operating -2,299 1,603 -229 -925 1,958 1,033
loss/profit
Share of -1 -1 -1
results of
associated
companies
Financial -340 -46 57 -329 -329
income and
expenses
-----------------------------------------------------------------
Loss/profit -2,640 -46 1,660 -229 -1,255 1,958 703
before tax
Tax -1,145 890 18 -237 69 -168
-----------------------------------------------------------------
Loss/profit -3,785 -46 2,550 -211 -1,492 2,027 535
from
continuing
operations
=================================================================
Discontinued
operations:
Loss for the -2,550 -1 -2,551 1,339 -1,212
period
Gain on 3,003 52 3,055 -3,055 -
disposal, net
-----------------------------------------------------------------
Profit/loss 453 51 504 -1,716 -1,212
from
discontinued
operations
=================================================================
-----------------------------------------------------------------
Loss for the -3,785 -46 3,003 -160 -988 311 -677
period
-----------------------------------------------------------------
-----------------------------------------------------------------
Loss -3,104 -776 3,033 -160 -1,007 311 -696
attributable
to equity
holders of
the parent
Loss/profit -681 730 -30 19 19
attributable
to
non-controlli
ng interests
-----------------------------------------------------------------
-3,785 -46 3,003 -160 -988 311 -677
-----------------------------------------------------------------
-----------------------------------------------------------------
Earnings per
share, EUR
(for
loss/profit
attributable
to the equity
holders of
the parent)
Basic -0.84 -0.27 -0.19
From -0.84 -0.41 0.14
continuing
operations
From - 0.14 -0.33
discontinued
operations
Diluted -0.84 -0.27 -0.19
From -0.84 -0.41 0.14
continuing
operations
From - 0.14 -0.33
discontinued
operations
Average number
of shares
(1,000 shares)
Basic 3,710,845 3,710,845 3,710,845
Diluted, 3,710,845 3,710,845 3,763,561
Continuing
operations
Diluted, - 3,763,561 3,710,845
Discontinued
operations
(1) The reported income statement for the period has been adjusted for the
portion of NSN's results that were previously attributed to Siemens'
non-controlling interest. In addition, the adjustment reflects the estimated
financing charges related to the NSN Acquisition funded through an initial bank
facility and a secured loan from Siemens, which will be terminated early using
the cash proceeds of the sale of Convertible Bonds to Microsoft International.
The estimated one-time charges and interest expenses related to an early
repayment of the bank facilities and secured loan from Siemens together with
estimated accrued interest on the Convertible Bonds, amounting to EUR 46
million, have been reflected as a cash interest charge in the pro forma income
statement for the year ended December 31, 2012.
(2) The adjustments in this column reclassify the results of the D&S Business
for the period to discontinued operations. The adjustment also includes the
estimated gain on the Sale of the D&S Business calculated as the difference
between the carrying amount of the net assets of the D&S Business using the
balances as of June 30, 2013 and the estimated net proceeds to be received. In
accordance with the Purchase Agreement, the purchase price of EUR 3.79 billion
for the Sale of D&S Business is subject to certain adjustments. However, these
adjustments are not reflected in the pro forma financial information as their
estimated impact is deemed to be zero. Additionally, as the final gain on the
Sale of the D&S Business will be calculated using the carrying amount of the
net assets at the consummation of the Sale of the D&S Business, such final gain
will vary, possibly significantly, from the pro forma gain estimate presented
here.
(3) The other pro forma adjustments include:
- EUR 196 million net increase in revenue related to the Patent License
Agreement and the HERE location platform licensing agreement with Microsoft.
Revenue for the Patent License Agreement is estimated to be recognized over 10
years and revenue from the HERE location platform licensing agreement is
estimated to be recognized over four years;
- The elimination of EUR 374 million in inter-company charges between HERE and
the D&S Business;
- Elimination of EUR 215 million in revenue and, EUR 216 million in costs
related to the Vertu business as well as EUR 52 million gain related to the
divestment of the Vertu; and
- The estimated tax impact of the adjustments in the three bullet points above.
(4) Pro forma non-IFRS exclusions related to continuing operations include the
following:
- The reversal of a EUR 65 million charge to country and contract exits based
on NSN's new strategy that focuses on key markets and product segments
(recorded in Cost of sales);
- The reversal of EUR 688 million in amortization on acquired intangible assets
(EUR 375 million recorded in Research and development expenses and EUR 313
million in Selling and marketing expenses);
- The reversal of EUR 1,220 million of restructuring charges and associated
items, EUR 42 million related to country and contract exits, impairments of
assets of EUR 2 million, a negative adjustment of EUR 4 million to purchase
price allocation related to the final payment from Motorola, as well as
amortization of acquired intangible assets EUR 23 million in 2012, EUR 79
million of net gain on sale of real estate (recorded in Other income and
expenses); and
- The reversal of EUR 159 million net tax benefits related to the above as well
as certain prior year tax benefit in the amount of EUR 64 million, valuation
allowance for NSN deferred tax assets of EUR 135 million and EUR 157 million
non-cash deferred tax expense related to legal reorganizations arising from
HERE business integration (recorded in Tax).
Additionally, the discontinued operation non-IFRS exclusions include the
following:
- Amortization of acquired intangible assets of EUR 4 million, restructuring
charges of EUR 545 million, impairments of assets of EUR 30 million, a EUR 56
million benefit from settlement of cartel claims, valuation allowance related
to Devices & Services tax assets in Finland of EUR 800 million, certain prior
year tax expenses of EUR 64 million and the net tax benefit on special items
and PPA of EUR 48 million in 2012; and
- Gain on Sale of the D&S Business of EUR 3,003 million and gain on the
divestment of Vertu of EUR 52 million in 2012.
Nokia Group financial position as of June 30, 2013
The following table sets forth Nokia Group's consolidated financial position as
of June 30, 2013 as follows:
- Nokia Group's consolidated statement of financial position as reported in
Nokia's interim report dated July 18, 2013 (column titled “Nokia Group Reported
30.06.2013”); and
- Nokia Group's consolidated statement of financial position adjusted to
reflect the Transactions as if the Transactions had been consummated as of June
30, 2013 (column titled “Pro forma Nokia Group 30.06.2013”).
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION 30.06.2013, IFRS, EUR million
(unaudited)
Nokia Pro Pro forma Other Pro
Group forma adjustments pro forma
Report adjustme Sale of forma Nokia
ed nts the D&S adjust Group
30.06. NSN Business(2) ments 30.06.
2013 Acquisit (3) 2013
ion(1)
----------------------------------------------
ASSETS
Non-current assets
Goodwill 4,813 -1,416 3,397
Other intangible assets 369 -30 339
Property, plant and equipment 1,336 -602 734
Investments in associated 58 -6 52
companies
Available-for-sale investments 740 -7 733
Deferred tax assets 1,007 -328 170 849
Long-term loans receivable 114 -1 113
Other non-current assets 168 -120 137 185
----------------------------------------------
8,605 - -2,510 307 6,402
----------------------------------------------
Current assets
Inventories 1,420 -496 924
Accounts receivable 3,789 -990 75 2,874
Prepaid expenses and accrued 2,920 -1,935 63 1,048
income
Current portion of long-term 47 47
loans receivable
Other financial assets 313 -70 243
Investments at fair value through 389 389
profit and loss, liquid assets
Available-for-sale investments, 982 -207 775
liquid assets
Available-for-sale investments, 4,590 -2,056 2,534
cash equivalents
Bank and cash 3,492 -1,752 5,757 1,650 9,147
----------------------------------------------
17,942 -1,752 3 1,788 17,981
----------------------------------------------
Total assets 26,547 -1,752 -2,507 2,095 24,383
==============================================
SHAREHOLDERS' EQUITY AND Nokia Pro Pro forma Other Pro forma
LIABILITIES Group forma adjustments pro Nokia
30.06.201 adjust Sale of the forma Group
3 ments D&S adjust 30.06.201
NSN Business(2) ments 3 Acquis (3)
ition
(1)
---------------------------------------------------
Capital and reserves
attributable to equity
holders of the parent
Share capital 246 246
Share issue premium 450 -42 408
Treasury shares -607 -607
Translation differences 638 48 53 739
Fair value and other 119 -15 25 129
reserves
Reserve for invested 3,118 3,118
non-restricted equity
Retained earnings 3,500 -830 2,848 137 5,655
---------------------------------------------------
7,464 -797 2,885 137 9,689
Non-controlling interests 1,164 -955 -111 98
---------------------------------------------------
Total equity 8,628 -1,752 2,774 137 9,787
---------------------------------------------------
Non-current liabilities
Long-term interest-bearing 3,375 3,375
liabilities
Deferred tax liabilities 380 -215 170 335
Other long-term liabilities 402 -44 358
---------------------------------------------------
4,157 - -259 170 4,068
---------------------------------------------------
Current liabilities
Current portion of long-term 1,839 -8 1,831
loans
Short-term borrowing 172 -1 171
Other financial liabilities 70 -30 40
Accounts payable 3,595 -1,685 75 1,985
Accrued expenses and other 5,681 -2,247 1,831 5,265
liabilities
Provisions 2,405 -1,051 -118 1,236
---------------------------------------------------
13,762 - -5,022 1,788 10,528
---------------------------------------------------
Total shareholders' equity 26,547 -1,752 -2,507 2,095 24,383
and liabilities
===================================================
Interest-bearing liabilities 5,386 - -9 - 5,377
Shareholders' equity per 2.01 2.61
share, EUR
Number of shares (1,000 3,712,192 3,712,192
shares)*
* Shares owned by Nokia Group companies are excluded.
As of June 30, 2013, Nokia Group's total cash and other liquid assets was EUR
9,453 million, and net cash and other liquid assets was EUR 4,067 million. On a
pro forma basis, Nokia Group's total cash and other liquid assets was EUR
12,845 million, and net cash and other liquid assets was EUR 7,468 million,
reflecting the hypothetical impact of the Transactions.
(1) The adjustments in this column reflect the impact of the NSN Acquisition as
if it had occurred on June 30, 2013. The adjustments eliminate the recorded
Siemens' non-controlling interest against the related capital accounts
attributable to the equity shareholders of the parent, Nokia Group, and reflect
the estimated loss that will be incurred as a result of the NSN Acquisition.
Although the NSN Acquisition was financed through a secured loan from Siemens
and bank financing, the adjustments reflect a cash transaction as the secured
loan and the bank financing is expected to be repaid with the cash proceeds
from the Sale of the D&S Business.
(2) The adjustments in this column reflect the impact of the Sale of the D&S
Business. The pro forma adjustments eliminate all of the assets and liabilities
attributable to the D&S Business, reflect the net proceeds expected to be
received from Microsoft International and reflect the estimated gain that would
result if the Sale of the D&S Business was consummated on June 30, 2013. These
adjustments and the estimated gain are based on the reported assets and
liabilities as of June 30, 2013 and the estimated net proceeds, while the
actual adjustments and gain to be recognized upon consummation of the Sale of
the D&S Business will be based on the assets and liabilities that exist on that
date and on the final purchase price paid to Nokia. Accordingly, the final gain
and related adjustments may differ significantly from the estimated adjustments
presented here.
(3) Other pro forma adjustments include:
- EUR 1.65 billion in cash to be received in connection with the Patent License
Agreement;
- An increase of EUR 1.65 billion in accrued expenses and other liabilities
related to deferred revenue under the Patent License Agreement; and
- Tax related and other miscellaneous adjustments to reflect the conversion of
certain inter-segment receivables and payables into external receivables and
payables between the D&S Business and the continuing operations of Nokia Group.
Presentation of pro forma non-IFRS results from continuing operations
In addition to information on Nokia's reported IFRS results, Nokia provides
certain information on a non-IFRS, or underlying business performance, basis.
Non-IFRS results exclude all material special items for all periods. In
addition, non-IFRS results exclude intangible asset amortization, other
purchase price accounting related items and inventory value adjustments arising
from (1) the formation of Nokia Siemens Networks and (2) all business
acquisitions completed after June 30, 2008. Nokia believes that its non-IFRS
results provide meaningful supplemental information to both management and
investors regarding Nokia and its underlying business performance by excluding
the above-described items that may not be indicative of Nokia's business
operating results. In this pro forma information Nokia's non-IFRS results as
described above are also presented on a pro forma basis.
These non-IFRS financial measures should not be viewed in isolation or as
substitutes to the equivalent IFRS measure(s), but should be used in
conjunction with the most directly comparable IFRS measure(s) in the reported
results. More information, including a reconciliation of our January - June
2013 and full year 2012 non-IFRS results to our reported results, can be found
in our complete January - June 2013 interim report and in our complete interim
report for the fourth quarter 2012.
The following table sets forth information on Nokia's non-IFRS results as
previously reported and on a pro forma basis for the six month period ended
June 30, 2013 and for the year ended December 31, 2012.
Consolidated income statements (unaudited)
First half 2013, EUR Full year 2012, EUR
million million
-----------------------------------------------------
Non-IFRS as Pro forma Non-IFRS as Pro forma
published for Non-IFRS published for Non-IFRS
1-6/2013 Continuin 1-12/2012 Continuin
g g
operation operation
s s
1-6/2013 1-12/2012
-----------------------------------------------------
Net sales 11,548 6,305 30,177 15,221
Cost of sales -7,801 -3,678 -21,721 -9,755
-----------------------------------------------------
Gross profit 3,747 2,627 8,456 5,466
Research and development -1,805 -1,228 -4,404 -2,600
expenses
Selling and marketing -1,078 -440 -2,891 -1,163
expenses
Administrative and general -440 -319 -955 -653
expenses
Other income and expenses 60 81 -76 -17
-----------------------------------------------------
Operating profit 484 721 130 1,033
Share of results of -4 -4 -1 -1
associated companies
Financial income and -163 -143 -340 -329
expenses
-----------------------------------------------------
Profit/loss before tax 317 574 -211 703
Tax -231 -138 -260 -168
-----------------------------------------------------
Profit/loss 86 436 -471 535
=====================================================
Profit/loss attributable -53 430 -646 516
to equity holders of the
parent.
Profit/loss attributable 139 6 175 19
to non-controlling
interests
86 436 -471 535
Earnings per share, EUR
(for loss/profit
attributable to the
equity holders of the
parent)
Basic -0.01 0.12 -0.17 0.14
Diluted -0.01 0.11 -0.17 0.14
Average number of shares
(1,000 shares)
Basic 3,711,827 3,711,827 3,710,845 3,710,845
Diluted 3,711,827 3,998,986 3,710,845 3,763,561
Evaluation of other assets and liabilities
In connection with the Sale of the D&S Business, Nokia Group will be required
to evaluate whether the impact of the Sale of the D&S Business on future cash
flows or operating results requires changes in the carrying values of any of
Nokia's remaining assets or liabilities. This evaluation will include, among
other things, a review of existing goodwill balances for impairment and the
potential recoverability of deferred tax assets currently subject to valuation
allowance. Nokia will conduct this review during the third quarter and the
results of the review are planned to be disclosed in connection with the
announcement of our third quarter 2013 results, scheduled for October 29, 2013.
Income Taxes
Pro forma income taxes reflect tax for continuing operations and estimated tax
consequences for divesting discontinued operations. After the Sale of the D&S
Business, Nokia Group continues to have unrecorded material deferred tax assets
including deferred tax benefits available in Finland for both the NSN and
Advanced Technologies businesses.
Other items
In addition to the pro forma adjustments reflected in the pro forma information
above, Nokia Group has determined during the third quarter of 2013 that certain
properties of the continuing business will meet the criteria of assets held for
sale. The assets held for sale reclassification is not reflected in the tables
above, but it will be presented in the third quarter 2013 interim report. As
part of the reclassification, Nokia Group expects to record impairment charges
of approximately EUR 5 million to the third quarter 2013 income statement,
after which the properties' carrying values will be approximately EUR 113
million.
FORWARD-LOOKING STATEMENTS
It should be noted that Nokia and its business 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)
the planned sale by Nokia of substantially all of Nokia's Devices & Services
business, including Smart Devices and Mobile Phones (referred to below as "Sale
of the D&S Business") pursuant to the Stock and Asset Purchase Agreement, dated
as of September 2, 2013, between Nokia and Microsoft International Holdings
B.V.(referred to below as the "Agreement"); B) the closing of the Sale of the
D&S Business; C) obtaining the confirmation and approval of our shareholders
for the Sale of the D&S Business; D) receiving timely (if at all), necessary
regulatory approvals for the Sale of the D&S Business; E) expectations, plans
or benefits related to or caused by the Sale of the D&S Business; F)
expectations, plans or benefits related to Nokia's strategies, including plans
for Nokia with respect to its continuing businesses that will not be divested
in connection with the Sale of the D&S Business; G) expectations, plans or
benefits related to changes in leadership and operational structure; H)
expectations and targets regarding our operational priorities, financial
performance or position, results of operations and use of proceeds from the
Sale of the D&S Business; and I) statements preceded by "believe,""expect,""anticipate,""foresee,""sees,""target,""estimate,""designed,""aim","plans,""intends,""focus,""will" or similar expressions. These statements
are based on 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
these differences include, but are not limited to: 1) the inability to close
the Sale of the D&S Business in a timely manner, or at all, for instance due to
the inability or delays in obtaining the shareholder approval or necessary
regulatory approvals for the Sale of the D&S Business, or the occurrence of any
event, change or other circumstance that could give rise to the termination of
the Agreement; 2) the potential adverse effect on the sales of our mobile
devices, business relationships, operating results and business generally
resulting from the announcement of the Sale of the D&S Business or from the
terms that we have agreed for the Sale of the D&S Business; 3) any negative
effect from the implementation of the Sale of the D&S Business, as we may
forego other competitive alternatives for strategies or partnerships that would
benefit our Devices & Services business and if the Sale of the D&S Business is
not closed, we may have limited options to continue the Devices & Services
business or enter into another transaction on terms favorable to us, or at all;
4) our ability to effectively and smoothly implement planned changes to our
leadership and operational structure or maintain an efficient interim
governance structure and preserve or hire key personnel; 5) any negative effect
from the implementation of the Sale of the D&S Business, including our internal
reorganization in connection therewith, which will require significant time,
attention and resources of our senior management and others within the company
potentially diverting their attention from other aspects of our business; 6)
disruption and dissatisfaction among employees caused by the plans and
implementation of the Sale of the D&S Business reducing focus and productivity
in areas of our business; 7) the amount of the costs, fees, expenses and
charges related to or triggered by the Sale of the D&S Business; 8) any
impairments or charges to carrying values of assets or liabilities related to
or triggered by the Sale of the D&S Business; 9) potential adverse effects on
our business, properties or operations caused by us implementing the Sale of
the D&S Business; 10) the initiation or outcome of any legal proceedings,
regulatory proceedings or enforcement matters that may be instituted against us
relating to the Sale of the D&S Business; and, as well as the risk factors
specified on pages 12-47 of Nokia's annual report on Form 20-F for the year
ended December 31, 2012 under Item 3D. "Risk Factors." and risks outlined in
our most recent interim report. Other unknown or unpredictable factors or
underlying assumptions subsequently proving to be incorrect could cause actual
results to differ materially from those in the forward-looking statements.
Nokia does 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.
About Nokia
Nokia is a global leader in mobile communications whose products have become an
integral part of the lives of people around the world. Every day, more than 1.3
billion people use their Nokia to capture and share experiences, access
information, find their way or simply to speak to one another. Nokia's
technological and design innovations have made its brand one of the most
recognized in the world. For more information, visit
http://www.nokia.com/about-nokia.
Media and Investor Contacts:
Nokia
Communications
Tel. +358 7180 34900
Email: press.services@nokia.com
Investor Relations Europe
Tel. +358 7180 34927
Investor Relations US
Tel. +1 914 368 0555
www.nokia.com
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