SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN ISSUER
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934
July 17, 2015
LM ERICSSON TELEPHONE COMPANY
(Translation of registrant’s name into English)
Torshamnsgatan 21, Kista
SE-164 83, Stockholm, Sweden
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.
Form 20-F x Form 40-F ¨
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ¨
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ¨
Announcement of LM Ericsson Telephone Company, dated July17, 2015 regarding “Second Quarter Report 2015”
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| TELEFONAKTIEBOLAGET LM ERICSSON (publ) | ||
| By: | /S/ NINA MACPHERSON | |
| Nina Macpherson | ||
| Senior Vice President and | ||
| General Counsel | ||
| By: | /S/ HELENA NORRMAN | |
| Helena Norrman | ||
| Senior Vice President | ||
| Corporate Communications |
Date: July 17, 2015
ERICSSON
SECOND QUARTER REPORT 2015
Stockholm, July 17, 2015
SECOND QUARTER HIGHLIGHTS Read more (page)
> Reported sales increased by 11% YoY. Sales, adjusted for comparable units and currency, decreased by -6% YoY. 3
> The mobile broadband business in North America stabilized in the quarter, but remained at a lower level than a year ago. 3
> Professional Services continued to deliver strong sales growth YoY. 7
> Sales in segment Networks recovered and showed a growth QoQ of 18%. 6
> Gross margin decreased YoY to 33.2% (36.4%). Excluding restructuring charges, gross margin was 35.1% (36.6%) due to lower capacity business in North America and continued 4G coverage deployments in Mainland China, lower IPR revenues and higher share of services sales. 3
> The global cost and efficiency program is progressing according to plan and restructuring charges in the quarter were SEK 2.7 (0.2) b., mainly related to the reductions in Sweden. 3
> Operating income, excluding restructuring charges, improved in all segments YoY to SEK 6.3 (4.2) b. and segment Networks operating margin recovered from last quarter. 4
> Cash flow from operating activities recovered to SEK 3.1 (2.1) b., after a weak first quarter. 9
SEK b. Q2 Q2 YoY Q1 QoQ Six months Six months
2015 2014 change 2015 change 2015 2014
Net sales 60.7 54.8 11% 53.5 13% 114.2 102.4
Sales growth adj. for comparable units and currency - - -6% - 12% -6% -4%
Gross margin 33.2% 36.4% - 35.4% - 34.2% 36.4%
Gross margin excluding restructuring charges 35.1% 36.6% - 36.3% - 35.7% 36.6%
Operating income 3.6 4.0 -11% 2.1 67% 5.7 6.6
Operating income excluding restructuring charges 6.3 4.2 49% 2.7 129% 9.1 7.0
Operating margin 5.9% 7.3% - 4.0% - 5.0% 6.5%
Operating margin excluding restructuring charges 10.4% 7.7% - 5.1% - 7.9% 6.8%
Net income 2.1 2.7 -20% 1.5 46% 3.6 4.4
EPS diluted, SEK 0.64 0.79 -19% 0.40 60% 1.04 1.44
EPS (Non-IFRS), SEK 1) 1.45 1.07 36% 0.77 88% 2.22 1.98
Cash flow from operating activities 3.1 2.1 50% -5.9 -152% -2.8 11.5
Net cash, end of period 3.5 32.5 -89% 15.6 -78% 3.5 32.5
1) EPS, diluted, excl. amortizations and write-downs of acquired intangible assets, and restructuring.
1 Ericsson | Second Quarter Report 2015
CEO COMMENTS
Reported sales increased by 11%. Sales, adjusted for comparable units and currency, decreased by -6% YoY, mainly impacted by less capacity business in North America. Profitability improved sequentially, driven by a strong development in segment Networks.
Business
The mobile broadband business in North America stabilized in the quarter, but remained at a lower level than a year ago. The YoY decline in North America was partly off-set by an increased pace of 4G deployments in Mainland China. Sales growth was strong in the Middle East, India and South East Asia, while it continued to be weak in Japan. Professional Services sales increased YoY with continued strong global demand and growth in all ten regions.
The OSS & BSS business had a favorable development YoY, contributing to sales both in Professional Services and segment Support Solutions.
Segment Networks sales increased by 18% sequentially, supported by the stabilized mobile broadband sales in North America.
Profitability
Operating income, excluding restructuring charges, increased YoY by almost 50%, with improvements in all segments. After a weak first quarter, segment Networks profitability recovered, driven by increased sales and a positive currency hedge effect.
IPR revenues
Reported IPR revenues were slightly down YoY despite a positive currency effect as a majority of the licenses contracts are in USD. The decline was primarily due to the ongoing dispute with a major customer.
Cost and efficiency program
The global cost and efficiency program is progressing according to plan. The target, to achieve savings of approximately SEK 9 b. during 2017 relative to 2014, remains. During the quarter, numerous activities were implemented globally including a reduction of 2,100 positions in Sweden, resulting in higher than normal restructuring charges. Savings related to the activities will start to impact results towards the end of this year.
Cash flow
After a weak first quarter, cash flow from operating activities was positive in the quarter. As cash flow is volatile between quarters it should be viewed on a full-year basis. Our full-year cash conversion target of more than 70% remains.
Targeted growth areas
Our growth strategy builds on a combination of excelling in our core business and establishing leadership in targeted growth areas. We see good progress in the targeted areas and sales continued its strong development from the first quarter. This was mainly driven by a solid sales development in OSS & BSS.
The consolidation in the industry continues, both among vendors and customers, creating opportunities and challenges. Therefore we have, during the first half of 2015, accelerated our transformation journey towards becoming a true ICT company. With our ongoing strategic initiatives we are well positioned to continue to create value for our customers in a transforming market.
Hans Vestberg
President and CEO
2 Ericsson | Second Quarter Report 2015
FINANCIAL HIGHLIGHTS
Q2 Q2 YoY Q1 QoQ 6 months 6 months
SEK b. 2015 2014 change 2015 change 2015 2014
Net sales 60.7 54.8 11% 53.5 13% 114.2 102.4
Of which Networks 31.2 29.0 8% 26.4 18% 57.6 53.3
Of which Global Services 26.4 23.1 14% 23.9 10% 50.3 43.4
Of which Support Solutions 3.1 2.8 9% 3.1 1% 6.2 5.6
Of which Modems 0.0 0.0 - 0.1 - 0.1 0.0
Gross income 20.1 19.9 1% 19.0 6% 39.1 37.3
Gross margin (%) 33.2% 36.4% - 35.4% - 34.2% 36.4%
Research and development expenses -9.9 -9.1 9% -8.5 17% -18.4 -17.4
Selling and administrative expenses -7.8 -6.5 19% -7.1 9% -14.9 -13.0
Other operating income and expenses 1.1 -0.2 - -1.2 - -0.2 -0.2
Operating income 3.6 4.0 -11% 2.1 67% 5.7 6.6
Operating margin 5.9% 7.3% - 4.0% - 5.0% 6.5%
for Networks 8% 12% - 2% - 5% 11%
for Global Services 6% 6% - 7% - 7% 6%
for Support Solutions -8% -13% - 3% - -3% -7%
for Modems - - - 0% - - -
Financial net -0.5 -0.2 168% -0.1 - -0.6 -0.4
Taxes -0.9 -1.1 -20% -0.6 46% -1.5 -1.9
Net income 2.1 2.7 -20% 1.5 46% 3.6 4.4
Restructuring charges -2.7 -0.2 - -0.6 - -3.4 -0.4
Net sales
Reported sales increased by 11% YoY. Significant currency effects impacted sales positively, mainly due to a strengthened USD towards the SEK.
Sales, adjusted for comparable units and currency, decreased -6%. The mobile broadband business in North America stabilized in the second quarter. However, sales in North America are still at a lower level than a year ago. In addition, sales declined in Japan, parts of Latin America and Russia. This was partly offset by a continued fast pace of 4G deployments in Mainland China. Sales growth was also strong in regions Middle East, India and South East Asia. Professional Services sales increased YoY driven by Consulting and Systems Integration and Managed Services.
Sequentially, reported sales increased by 13%. As the second quarter progressed mobile broadband business in North America stabilized. The large scale 4G deployments in Mainland China continued at high pace and the activity level in region Middle East also remained high. This was partly offset by lower sales in Japan.
Reported IPR revenues were down both YoY and QoQ. The majority of the licenses contracts are in USD and the stronger USD supported the YoY comparison. The decline YoY was primarily due to the ongoing dispute with a major customer.
Gross margin
Gross margin decreased YoY mainly due to increased restructuring charges. Excluding restructuring charges, gross margin declined to 35.1% (36.6%) due to lower capacity business in North America and continued 4G coverage deployments in Mainland China.
In addition lower IPR revenues and higher share of services sales impacted gross margin negatively.
The gross margin decreased sequentially due to lower IPR revenues and increased share of hardware sales driven by mobile broadband coverage deployments.
Restructuring charges and cost and efficiency program
The global cost and efficiency program is progressing according to plan. The target, to achieve savings of approximately SEK 9 b. during 2017 relative to 2014, remains. During the quarter, numerous activities were implemented globally, including a reduction of 2,100 positions in Sweden, with approximately 1,700 employees leaving the company. Savings related to the activities will start to impact results towards the end of this year. The total restructuring charges increased YoY and QoQ following the implementation of the cost and efficiency program.
Efforts to identify and implement efficiency gains are progressing and total restructuring charges for full-year 2015 are expected to be SEK 4-5 b. The increase, compared with previous estimate of SEK 3-4 b., is a consequence of a somewhat higher implementation pace.
Operating expenses
Restructuring charges impacted operating expenses negatively by SEK 1.6 (0.1) b. Total operating expenses, excluding restructuring charges, were SEK 16.1 (15.5) b. The increase was due to negative currency effects. Excluding restructuring charges and currency effects, operating expenses were slightly down YoY.
3 Ericsson | Second Quarter Report 2015
Quarterly sales and reported sales growth year over year
SEK b. %
80 30
60 60.7 20
40 11% 10
20 0
0 -10
Q2 Q3 Q4 Q1 Q2
2014 2015
Quarterly sales
Reported sales growth
Operating expenses and operating expense, % of sales
SEK b. %
20 40
15 17.7 29% 30
10 20
5 10
0 0
Q2 Q3 Q4 Q1 Q2
2014 2015
Operating expenses
Operating expenses of sales
Operating income and operating margin
SEK b. %
10 10
8 8
6 6% 6
4 3.6 4
2 2
0 0
Q2 Q3 Q4 Q1 Q2
2014 2015
Operating income
Operating margin
Other operating income and expenses
Other operating income and expenses improved YoY following a positive currency hedge contracts effect and a capital gain of SEK 0.3 b. related to a real estate divestment in the US.
The revaluation and realization effects from currency hedge contracts were SEK 0.6 b. This is to be compared with hedge contract effects of SEK -1.4 b. in Q1 2015 and SEK -0.5 b. in Q2 2014.
The positive effect derives mainly from the hedge contract balance in USD. The SEK has strengthened towards the USD between March 31, 2015 (SEK/USD rate 8.64) and June 30, 2015 (SEK/USD rate 8.24).
Operating income
Operating income decreased YoY due to higher restructuring charges of SEK 2.7 (0.2) b. Operating income, excluding restructuring charges, improved to SEK 6.3 (4.2) b. with an operating margin of 10.4% (7.7%). The improvement was driven by higher sales and positive currency hedge effects, partly offset by a lower gross margin.
Despite higher restructuring charges, operating income increased QoQ driven by higher sales and positive other operating income and expenses.
Financial net
The negative financial net increased YoY and QoQ, mainly related to a lower cash position and negative interest revaluation effects.
Net income and EPS
Net income and EPS diluted decreased YoY following the lower operating income. Net income and EPS increased QoQ. EPS (Non-IFRS) was SEK 1.45 (1.07).
Employees
The number of employees on June 30, 2015 was 117,183 compared with 118,706 on March 31, 2015. The decrease is mainly related to implementation of the global cost and efficiency program outside Sweden. Effects from headcount reductions in Sweden will start impacting number of employees during the third quarter. The number of Ericsson services professionals on June 30, 2015 was 65,000 (66,000 March 31, 2015).
MODEMS
Net Sales
The discontinuation of the modems business is now almost completed. Net sales in the quarter was SEK 0.0 b.
Operating income for the modems business was SEK 0.0 b.
4 Ericsson | Second Quarter Report 2015
REGIONAL SALES
Second quarter 2015 Change
SEK b. Networks
Global Services Support Solutions
Total
YoY
QoQ
North America
6.7 7.1 0.8 14.6 -4% 19%
Latin America 2.3 2.6 0.2 5.1 -6% 11%
Northern Europe and Central Asia 1.5 0.9 0.1 2.6 -6% -6%
Western and Central Europe 1.9 3.1 0.1 5.1 12% 8%
Mediterranean 2.4 3.3 0.2 5.9 7% 18%
Middle East 4.0 2.1 0.3 6.5 44% 44%
Sub-Saharan Africa 1.2 1.3 0.2 2.7 41% 23%
India 1.8 1.1 0.2 3.0 85% -14%
North East Asia 4.8 2.0 0.2 6.9 8% 15%
South East Asia and Oceania 2.5 2.3 0.1 4.9 34% 15%
Other 1) 2.0 0.7 0.7 3.4 1% -10%
Total 31.2 26.4 3.1 60.7 11% 13%
1) Region “Other” includes licensing revenues, broadcast services, power modules, mobile broadband modules, Ericsson-LG Enterprise and other businesses.
North America
Mobile broadband sales in the quarter stabilized, driven by data traffic growth, while operators remained focused on cash flow optimization and consolidation. Business related to ICT transformation continued to develop favorably in the quarter.
Latin America
Sales decreased slightly YoY. Business in Professional Services showed a strong development driven by BSS transformation and Systems Integration projects. Currency restrictions and lower capex levels impacted mobile broadband investments in some parts of the region.
Northern Europe and Central Asia
Sales declined YoY, primarily driven by slower mobile broadband investments in Russia. Professional Services showed good momentum and Support Solutions continued to develop favorably, both TV & Media and OSS & BSS.
Western and Central Europe
Sales increased YoY driven by Global Services, as operators seek network quality and operational efficiencies. Mobile broadband deployments and investments in network quality continued.
Mediterranean
Sales growth YoY was mainly driven by Global Services, where Managed Services was the major contributor. Quality and capacity projects related to 3G and 4G contributed positively to Networks sales.
Middle East
Sales growth YoY was driven by continued high investments in mobile broadband. Support Solutions sales showed strong growth, especially in OSS.
Sub-Saharan Africa
Continued growth YoY in most markets, compared to a weak first half 2014, driven by strong data growth as well as positive development of managed services across the region.
India
Sales increased YoY, mainly due to continued mobile broadband investments, driven by growth in mobile data traffic. Global Services sales continued to show a strong development.
North East Asia
Sales growth continued, driven by 4G contracts in Mainland China, partly offset by lower operator investments in Japan.
South East Asia and Oceania
Sales increased YoY, primarily driven by continued mobile broadband projects. Important 4G contracts were signed in Indonesia in the quarter. Professional Services continued to show good momentum.
Other
Reported IPR revenues were slightly down YoY despite a positive currency effect, as a majority of the licenses contracts are in USD. The decline was primarily due to the ongoing dispute with a major customer.
Broadcast services sales continued to show good growth.
5 Ericsson | Second Quarter Report 2015
SEGMENT RESULTS
NETWORKS
Segment sales
Networks
Global Services
Support Solutions
Quarterly sales and sales growth year over year
SEK b.%
42 20
35 15
28 8% 31.2 10
21 5
14 0
7 -5
0 -10
Q2 Q3 Q4 Q1 Q2
2014 2015
Quarterly sales
Sales growth
Operating income and operating margin
SEK b.%
6 15
4 10
2 5
0 0
Q2 Q3 Q4 Q1 Q2
2014 2015
Operating income
Operating margin
SEK b. Q2 2015 Q2 2014 YoY change Q1 2015 QoQ change 6 months 2015 6 months 2014
Net sales 31.2 29.0 8% 26.4 18% 57.6 53.3
Sales growth adj. for comparable units and currency - - -9% - 16% -9% -3%
Operating income 2.4 3.6 -32% 0.6 313% 3.0 6.1
Operating income excluding restructuring charges 4.3 3.7 16% 0.8 460% 5.0 6.3
Operating margin 8% 12% - 2% - 5% 11%
Operating margin excluding restructuring charges 14% 13% - 3% - 9% 12%
EBITA margin 10% 14% - 5% - 7% 14%
Restructuring charges -1.8 -0.1 - -0.2 - -2.0 -0.2
Net sales
Reported sales increased by 8% YoY. Sales, adjusted for comparable units and currency, decreased by -9% YoY mainly due to lower business activity in North America and Japan. Sales growth related to mobile broadband deployments in Mainland China, the Middle East and India contributed positively.
Sales increased QoQ following stabilized mobile broadband business in North America. Increased sales in Mainland China and the Middle East also contributed positively in the quarter.
Operating income and margin
The operating income and margin recovered in the quarter. Excluding restructuring charges, operating income improved YoY, positively impacted by higher sales and positive currency effects. This was partly offset by a business mix with continued high share of coverage business in Mainland China and low share of capacity business in North America. Somewhat increased operating expenses and lower IPR revenues also had a negative impact on operating margin.
Reported operating income declined YoY due to restructuring charges of SEK 1.8 (0.1) b. Most of the charges are related to implementation of the global cost and efficiency program in Sweden. The effect from currency hedge contracts was positive at SEK 0.5 (-0.2) b.
Operating income and margin improved sequentially following higher sales, improved business mix with higher share of capacity business from North America and a positive effect from currency hedge contracts. Higher restructuring charges and lower IPR revenues impacted operating income negatively.
6 Ericsson | Second Quarter Report 2015
GLOBAL SERVICES
Segment sales
Networks
Global Services
Support Solutions
Quarterly sales and sales growth year over year
SEK b. %
45 20
30 14% 10
15 26.4 0
0 -10
Q2 Q3 Q4 Q1 Q2
2014 2015
Quarterly sales
Sales growth
Operating income and operating margin
SEK b. %
3 9
2 6% 6
1 1.6 3
0 0
Q2 Q3 Q4 Q1 Q2
2014 2015
Operating income
Operating margin
Q2 Q2 YoY Q1 QoQ 6 months 6 months
SEK b. 2015 2014 change 2015 change 2015 2014
Net sales 26.4 23.1 14% 23.9 10% 50.3 43.4
Of which Professional Services 20.0 16.6 21% 18.1 10% 38.1 31.7
Of which Managed Services 8.2 6.5 26% 7.5 9% 15.7 12.2
Of which Network Rollout 6.4 6.5 -2% 5.8 11% 12.2 11.8
Sales growth adj. for comparable units and currency - - -2% - 10% -2% -5%
Operating income 1.6 1.5 10% 1.7 -2% 3.3 2.5
Of which Professional Services 2.4 2.1 15% 2.1 14% 4.5 4.0
Of which Network Rollout -0.8 -0.6 25% -0.4 78% -1.2 -1.5
Operating margin 6% 6% - 7% - 7% 6%
for Professional Services 12% 13% - 12% - 12% 13%
for Network Rollout -12% -9% – -7% – -10% -12%
Operating income excluding restructuring charges 2.3 1.6 49% 2.1 11% 4.4 2.6
Operating margin excluding restructuring charges 9% 7% - 9% - 9% 6%
EBITA margin 7% 8% - 8% - 8% 7%
Restructuring charges -0.7 -0.1 – -0.4 - -1.1 -0.1
Net sales
Reported sales increased by 14% YoY. Sales, adjusted for comparable units and currency, decreased by -2% YoY due to continued reduced activities in Network Rollout. The good momentum in Professional Services continued, with growth in all ten regions.
Sales, adjusted for comparable units and currency, increased 10% QoQ driven by good growth in Consulting and Systems Integration.
Operating income and margin
Operating income improved in Global Services YoY. Operating margin, excluding restructuring charges, was 9% (7%), driven by increased sales in Professional Services and reduced losses in Network Rollout.
The effect from currency hedge contracts was SEK 0.1 (-0.2) b.
Operating margin in Professional Services declined slightly YoY due to increased restructuring charges and strong growth in Managed Services.
The work to return the Network Rollout business to profitability continues with good progress and operating margin, excluding restructuring charges, improved YoY to -4% (-9%).
Global Services operating income decreased slightly QoQ due to increased restructuring charges. Professional Services margin was flat QoQ.
Q2 Q1 Full year
SEK b. 2015 2015 2014
Number of signed Managed Services contracts 30 27 71
Number of signed significant consulting & systems integration contracts 1) 16 13 56
1) In the areas of OSS and BSS, IP, Service Delivery Platforms and data center build projects.
7
Ericsson | Second Quarter Report 2015
SUPPORT SOLUTIONS
Segment sales
Networks
Global Services
Support Solutions
Quarterly sales and sales growth year over year
SEK b. 6 5 4 3 2 1 0
9% 3.1
% 30 20 10 0 -10 -20 -30 Q2 2014 Q3 Q4 Q1 2015 Q2
Quarterly sales Sales growth
Operating income and operating margin
SEK b.
1,0 0,5 0,0 -0,5
-8% -0.2 Q2 2014 Q3 Q4 Q1 2015 Q2
% 20 10 0 -10 -20
Operating income Operating margin
SEK b. Q2 2015 Q2 2014 YoY change Q1 2015 QoQ change 6 months 2015 6 months 2014
Net sales 3.1 2.8 9% 3.1 1% 6.2 5.6
Sales growth adj. for comparable units and currency - - -13% - -3% -12% 4%
Operating income -0.2 -0.4 -37% 0.1 - -0.2 -0.4
Operating income excluding restructuring charges 0.0 -0.3 -87% 0.1 - 0.1 -0.3
Operating margin -8% -13% - 3% - -3% -7%
Operating margin excluding restructuring charges -2% -12% - 3% - 1% -6%
EBITA margin 0% -7% - 10% - 5% 0%
Restructuring charges -0.2 0.0 - 0.0 - -0.2 0.0
Net sales
Reported sales increased by 9% YoY. Sales, adjusted for comparable units and currency, decreased by -13% YoY. Sales of OSS & BSS continued to show strong growth while the TV & Media business declined due to lower software licensing sales.
Sales, adjusted for comparable units and currency, was flat QoQ.
Operating income and margin
Operating income and margin improved YoY. Operating margin excluding restructuring charges was -2% (-12%), driven primarily by sales growth in OSS & BSS. This was partly offset by lower IPR revenues.
Operating Income declined QoQ due to increased restructuring charges and lower IPR revenues.
8 Ericsson | Second Quarter Report 2015
CASH FLOW
SEK b. Q2 2015 Q2 2014 Q1 2015
Net income reconciled to cash 3.4 5.9 3.1
Changes in operating net assets -0.3 -3.8 -9.0
Cash flow from operating activities 3.1 2.1 -5.9
Cash flow from investing activities 7.0 3.7 -2.1
Cash flow from financing activities -10.6 -12.2 0.9
Net change in cash and cash equivalents -2.3 -5.0 -5.7
Cash conversion (%) 90% 35% -188%
Cash flow from operating activities recovered in the quarter after a weak first quarter. Working capital was benefiting from good collection of receivables and improved net income.
Investing activities in the quarter was impacted by the continued construction of new ICT centers in Sweden and Canada, with a total investment of approximately SEK 7 b., 2014-2018. This was more than offset by decreased short-term investments of SEK 9.7 b. and real estate divestment in the US generated a positive cash flow effect of SEK 0.8 b.
Cash flow from financing activities was negatively impacted by payments of dividends of SEK 11.0 b. in the quarter.
Payments related to restructuring charges already provisioned for, amounted to approximately SEK 0.5 b. in the quarter.
Working capital KPIs, number of days Jan-Jun 2015 Jan-Mar 2015 Jan-Dec 2014 Jan-Sep 2014 Jan-Jun 2014
Sales outstanding 112 125 105 111 113
Inventory 74 82 64 69 70
Payable 57 64 56 57 61
Days sales outstanding decreased as a result of good collection. Inventory days is trending down but is still on a high level due to the high share of coverage business in Mainland China. Payable days decreased after a seasonally strong Q1. Efforts, in order to reduce working capital through a better order-to-cash process, continue.
9 Ericsson | Second Quarter Report 2015
FINANCIAL POSITION
SEK b. Jun 30 2015 Jun 30 2014 Mar 31 2015
+ Short-term investments 20.8 35.3 30.8
+ Cash and cash equivalents 33.0 33.1 35.3
Gross cash 53.8 68.4 66.1
– Interest bearing liabilities and post-employment benefits 50.3 35.9 50.5
Net cash 3.5 32.5 15.6
Equity 136.7 138.0 149.1
Total assets 278.9 265.5 303.0
Capital turnover (times) 1.3 1.2 1.1
Return on capital employed (%) 6.9% 8.2% 5.8%
Equity ratio (%) 49% 52.0% 49.2%
Return on equity (%) 5.9% 6.8% 3.6%
Net cash decreased in the quarter as a result of the dividend payout and capex related to the construction of three global ICT centers in Sweden and Canada. This was partly offset by the positive cash flow from operating activities.
The net cash position, excluding post-employment benefits, was SEK 28.0 b.
The average maturity of long-term borrowings as of June 30, 2015, was 5.3 years, compared to 6.2 years 12 months earlier.
In the quarter a revolving Credit Facility of USD 2.0 b. was renewed. The new facility expires in 2020.
Debt maturity profile, Parent Company
SEK b.
9 6 3 0 2017 2018 2019 2020 2021 2022
Swedish Export Credit Corporation MTN Bond
Nordic Investment Bank
European Investment Bank
Notes and Bonds
10 Ericsson | Second Quarter Report 2015
PARENT COMPANY
Income after financial items was SEK 9.0 (2.9) b. The increase was mainly related to received dividends.
Major changes in the Parent Company’s financial position for the year; decreased cash, cash equivalents and short-term investments of SEK 20.8 b and decreased current and non-current liabilities to subsidiaries of SEK 5.9 b. At the end of the quarter, cash, cash equivalents and short-term investments amounted to SEK 34.2 (55.0) b.
During the quarter, the dividend payment of SEK 11.0 b., as decided by the Annual General Meeting, was made.
The Parent Company has during the quarter recognized dividends from subsidiaries of SEK 6.9 b.
In accordance with the conditions of the long-term variable compensation program (LTV) for Ericsson employees, 3.533.643 shares from treasury stock were sold or distributed to employees during the second quarter. The holding of treasury stock at June 30, 2015, was 56.607.183 Class B shares.
11 Ericsson | Second Quarter Report 2015
OTHER INFORMATION
Ericsson’s Nomination Committee appointed
On May 25, 2015, Ericsson announced that the Nomination Committee for the Annual General Meeting (AGM) 2016 has been appointed in accordance with the Instruction for the Nomination Committee, resolved by the Annual General Meeting 2012.
The Nomination Committee consists of: Petra Hedengran, Investor AB; Bengt Kjell, AB Industrivärden and Handelsbankens Pensionsstiftelse; Johan Held, AFA Försäkring; Marianne Nilsson, Swedbank Robur Fonder; and Leif Johansson, the Chairman of the Board of Director. Petra Hedengran is the Chairman of the Nomination Committee.
Apple litigations
A past global patent license agreement between Ericsson and Apple expired in January 2015 and Apple declined to take a new license on offered FRAND terms. Ericsson negotiated a renewal agreement with Apple for more than two years. During the negotiations, the companies were not able to reach an agreement on licensing of Ericsson’s patents that enable Apple’s mobile devices to connect with the world and power many of their applications.
On January 12, 2015, Apple initiated litigation with Ericsson by filing a lawsuit in the United States District Court for the Northern District of California, seeking a ruling that Apple does not infringe seven of Ericsson’s patents. Two days later, on January 14, 2015, Ericsson filed a complaint in the United States District Court for the Eastern District of Texas requesting a ruling that its proposed global licensing terms with Apple were fair and reasonable.
On February 26, 2015, after Apple refused Ericsson’s offer to have a court determine fair licensing terms by which both companies would be bound, Ericsson filed two complaints with the International Trade Commission (ITC) and seven complaints in the United States District Court for the Eastern District of Texas against Apple, asserting infringement of 41 additional Ericsson patents. Ericsson subsequently amended its complaints to assert two additional patents in the US. Ericsson seeks exclusion orders in the ITC proceedings and damages and injunctions in the District Court actions.
On May 8, 2015, Ericsson further announced that it has filed patent infringement suits against Apple in Germany, the United Kingdom and the Netherlands, seeking damages and injunctions. Ericsson has asserted both standard-essential patents related to the 2G and 4G/LTE standards and other patents that are critical to features and functionality of Apple devices, such as the design of semiconductor components, user interface software, location services and applications, as well as the iOS operating system.
Hearings and trials in the various cases are scheduled to begin in December 2015 and continue into 2016. Ericsson expects that the first court rulings will be issued by a German court in the first quarter of 2016.
Implementation of cost and efficiency program in Sweden
On June 24, 2015, Ericsson completed the redundancy process in Sweden, announced on March 11, 2015. The reduction of approximately 2,100 positions in Sweden, with some 1,700 employees leaving the company, is part of the global cost and efficiency program.
Adaptix litigations
In 2013, Adaptix Inc. (“Adaptix”), a US company, filed two lawsuits against Ericsson, AT&T, AT&T Mobility and MetroPCS Communications in the US District Court for Eastern District of Texas alleging that certain Ericsson products infringe five US patents purportedly assigned to Adaptix. Adaptix seeks damages and an injunction. The trial is scheduled for August 2015.
On May 20, 2014, Adaptix filed three patent infringement lawsuits against Ericsson, T-Mobile, Verizon and Sprint in the same court regarding three US patents. One of these lawsuits accuses Ericsson’s LTE products and Sprint’s use thereof of infringement, one accuses Ericsson’s LTE products and Verizon’s use thereof of infringement, and one accuses Ericsson’s LTE products and T-Mobile’s use thereof of infringement. In January 2015, Adaptix filed one more lawsuit in the same court alleging that Ericsson’s LTE products, and Sprint and Verizon’s use thereof, infringe another U.S. Patent.
In addition to a complaint filed in 2013 with the Tokyo District Court, Adaptix filed another lawsuit in Japan in September 2014 alleging that Ericsson’s LTE products infringe another Japanese patent. In the lawsuits in Japan, Adaptix is also seeking damages and an injunction.
WiLAN litigations
In 2012, Wi-LAN Inc., a Canadian patent licensing company, filed a complaint against Ericsson in the US District Court for the Southern District of Florida alleging that Ericsson’s LTE products infringe three of Wi-LAN’s US patents.
In June 2013, Ericsson’s motion for summary judgment was granted and in August 2014, the decision was reversed by the United States Court of Appeals for the Federal Circuit.
On May 22, the Florida Court granted a Motion for Summary Judgment in favor of Ericsson. WiLAN may still file a notice to appeal the decision.
12 Ericsson | Second Quarter Report 2015
RISK FACTORS
Ericsson’s operational and financial risk factors and uncertainties along with our strategies and tactics to mitigate risk exposures or limit unfavorable outcomes are described in our Annual Report 2014. Compared to the risks described in the Annual Report 2014, no material, new or changed risk factors or uncertainties have been identified in the year.
Risk factors and uncertainties in focus short-term for the Parent Company and the Ericsson Group include:
Potential negative effects on operators’ willingness to invest in network development due to uncertainty in the financial markets and a weak economic business environment, or reduced consumer telecom spending, or increased pressure on us to provide financing, or delayed auctions of spectrums;
Uncertainty regarding the financial stability of suppliers, for example due to lack of financing;
Effects on gross margins and/or working capital of the business mix in the Networks segment between capacity sales and new coverage buildouts;
Effects on gross margins of the business mix in the Global Services segment including proportion of new network build- outs and share of new managed services deals with initial transition costs;
Effects of the ongoing industry consolidation among our customers as well as between our largest competitors, e.g. with postponed investments and intensified price competition as a consequence;
Changes in foreign exchange rates, in particular USD;
Political unrest or instability in certain markets;
Effects on production and sales from restrictions with respect to timely and adequate supply of materials, components and production capacity and other vital services on competitive terms;
No guarantees that specific restructuring or cost-savings initiatives will be sufficient, successful or executed in time to deliver any improvements in short-term earnings.
Ericsson stringently monitors the compliance with all relevant trade regulations and trade embargos applicable to dealings with customers operating in countries where there are trade restrictions or trade restrictions are discussed. Moreover, Ericsson operates globally in accordance with Group policies and directives for business ethics and conduct.
This report has not been reviewed by Telefonaktiebolaget LM Ericsson’s auditors.
Date for next report: October 23, 2015
13 Ericsson | Second Quarter Report 2015
BOARD ASSURANCE
The Board of Directors and the CEO certify that the financial report for the six months gives a fair view of the performance of the business, position and profit or loss of the Company and the Group, and describes the principal risks and uncertainties that the Company and the companies in the Group face.
Stockholm, July 17, 2015
Telefonaktiebolaget LM Ericsson (publ)
Org. Nr. 556016-0680
Anders Nyrén
Deputy Chairman
Leif Johansson
Chairman
Jacob Wallenberg
Deputy Chairman
Roxanne S. Austin
Member of the Board
Nora Denzel
Member of the Board
Börje Ekholm
Member of the Board
Alexander Izosimov
Member of the Board
Ulf J. Johansson
Member of the Board
Kristin Skogen Lund
Member of the Board
Sukhinder Singh Cassidy
Member of the Board
Hans Vestberg
President, CEO and member of the Board
Pehr Claesson
Member of the Board
Kristina Davidsson
Member of the Board
Karin Åberg
Member of the Board
14 Ericsson | Second Quarter Report 2015
EDITOR’S NOTE
Ericsson invites media, investors and analysts to a press conference at the Ericsson Studio, Grönlandsgången 4, Stockholm, at 09.00 (CET), July 17, 2015. An analysts, investors and media conference call will begin at 14.00 (CET).
Live webcast of the press conference and conference call as well as supporting slides will be available at www.ericsson.com/press and www.ericsson.com/investors
Video material will be published during the day on www.ericsson.com/press
For further information, please contact:
Helena Norrman, Senior Vice President, Marketing and Communications
Phone: +46 10 719 34 72
E-mail: investor.relations@ericsson.com or media.relations@ericsson.com
Telefonaktiebolaget LM Ericsson
Org. number: 556016-0680
Torshamnsgatan 21
SE-164 83 Stockholm
Phone: +46 10 719 00 00
www.ericsson.com
Investors
Peter Nyquist, Vice President,
Investor Relations
Phone: +46 10 714 64 49, +46 70 575 29 06
E-mail: peter.nyquist@ericsson.com
Stefan Jelvin, Director,
Investor Relations
Phone: +46 10 714 20 39, +46 70 986 02 27
E-mail: stefan.jelvin@ericsson.com
Åsa Konnbjer, Director,
Investor Relations
Phone: +46 10 713 39 28, +46 73 082 59 28
E-mail: asa.konnbjer@ericsson.com
Rikard Tunedal, Director,
Investor Relations
Phone: +46 10 714 54 00, +46 761 005 400
E-mail: rikard.tunedal@ericsson.com
Media
Ola Rembe, Vice President,
Head of External Communications
Phone: +46 10 719 97 27, +46 73 024 48 73
E-mail: media.relations@ericsson.com
Corporate Communications
Phone: +46 10 719 69 92
E-mail: media.relations@ericsson.com
15 Ericsson | Second Quarter Report 2015
SAFE HARBOR STATEMENT
All statements made or incorporated by reference in this release, other than statements or characterizations of historical facts, are forward-looking statements. These forward-looking statements are based on our current expectations, estimates and projections about our industry, management’s beliefs and certain assumptions made by us. Forward-looking statements can often be identified by words such as “anticipates”, “expects”, “intends”, “plans”, “predicts”, “believes”, “seeks”, “estimates”, “may”, “will”, “should”, “would”, “potential”, “continue”, and variations or negatives of these words, and include, among others, statements regarding: (i) strategies, outlook and growth prospects; (ii) positioning to deliver future plans and to realize potential for future growth; (iii) liquidity and capital resources and expenditure, and our credit ratings; (iv) growth in demand for our products and services; (v) our joint venture activities; (vi) economic outlook and industry trends; (vii) developments of our markets; (viii) the impact of regulatory initiatives; (ix) research and development expenditures; (x) the strength of our competitors; (xi) future cost savings; (xii) plans to launch new products and services; (xiii) assessments of risks; (xiv) integration of acquired businesses; (xv) compliance with rules and regulations and (xvi) infringements of intellectual property rights of others.
In addition, any statements that refer to expectations, projections or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. These forward-looking statements speak only as of the date hereof and are based upon the information available to us at this time. Such information is subject to change, and we will not necessarily inform you of such changes. These statements are not guarantees of future performance and are subject to risks, uncertainties and assumptions that are difficult to predict. Therefore, our actual results could differ materially and adversely from those expressed in any forward-looking statements as a result of various factors. Important factors that may cause such a difference for Ericsson include, but are not limited to: (i) material adverse changes in the markets in which we operate or in global economic conditions; (ii) increased product and price competition; (iii) reductions in capital expenditure by network operators; (iv) the cost of technological innovation and increased expenditure to improve quality of service; (v) significant changes in market share for our principal products and services; (vi) foreign exchange rate or interest rate fluctuations; and (vii) the successful implementation of our business and operational initiatives.
16 Ericsson | Second Quarter Report 2015
FINANCIAL STATEMENTS AND
ADDITIONAL INFORMATION
Contents
Financial statements
Consolidated income statement 18
Statement of comprehensive income 18
Consolidated balance sheet 19
Consolidated statement of cash flows 20
Consolidated statement of changes in equity 21
Consolidated income statement – isolated quarters 21
Consolidated statement of cash flows – isolated quarters 22
Parent Company income statement 23
Parent Company statement of comprehensive income 23
Parent Company balance sheet 24
Additional information
Accounting policies 25
Net sales by segment by quarter 26
Sales growth adjusted for comparable units and currency 27
Operating income by segment by quarter 28
Operating margin by segment by quarter 28
EBITA by segment by quarter 29
EBITA margin by segment by quarter 29
Net sales by region by quarter 30
Net sales by region by quarter (cont.) 31
Top 5 countries in sales 31
Net sales by region by segment 32
Provisions 33
Information on investments 33
Reconciliation table, non-IFRS measurements 34
Net cash – end of period 34
Other information 35
Number of employees 35
Restructuring charges by function 36
Restructuring charges by segment 36
17 Ericsson | Second Quarter Report 2015
CONSOLIDATED INCOME STATEMENT
Apr–Jun Jan–Jun
SEK million 2015 2014 Change 2015 2014 Change
Net sales 60,671 54,849 11% 114,191 102,354 12%
Cost of sales –40,536 –34,910 16% –75,092 –65,094 15%
Gross income 20,135 19,939 1% 39,099 37,260 5%
Gross margin (%) 33.2% 36.4% 34.2% 36.4%
Research and development expenses –9,896 –9,084 9% –18,383 –17,359 6%
Selling and administrative expenses –7,765 –6,541 19% –14,896 –12,993 15%
Operating expenses –17,661 –15,625 13% –33,279 –30,352 10%
Other operating income and expenses 1,059 –206 –181 –185
Shares in earnings of JV and associated companies 27 –109 54 –94
Operating income 3,560 3,999 –11% 5,693 6,629 –14%
Financial income –238 268 446 669
Financial expenses –290 –465 –1,030 –1,077
Income after financial items 3,032 3,802 –20% 5,109 6,221 –18%
Taxes –909 –1,140 –1,532 –1,867
Net income 2,123 2,662 –20% 3,577 4,354 –18%
Net income attributable to:
Stockholders of the Parent Company 2,094 2,579 3,413 4,699
Non–controlling interests 29 83 164 –345
Other information
Average number of shares, basic (million) 3,247 3,235 3,246 3,234
Earnings per share, basic (SEK) 1) 0.64 0.80 1.05 1.45
Earnings per share, diluted (SEK) 1) 0.64 0.79 1.04 1.44
1) Based on Net income attributable to stockholders of the Parent Company.
STATEMENT OF COMPREHENSIVE INCOME
Apr–Jun Jan–Jun
SEK million 2015 2014 2015 2014
Net income 2,123 2,662 3,577 4,354
Other comprehensive income
Items that will not be reclassified to profit or loss
Remeasurements of defined benefits pension plans incl. asset ceiling –1,562 –574 –4,773 –2,196
Tax on items that will not be reclassified to profit or loss 610 114 1,304 443
Items that may be reclassified to profit or loss
Cash flow hedges
Gains/losses arising during the period – – – –
Reclassification adjustments for gains/losses included in profit or loss – – – –
Revaluation of other investments in shares and participations
Fair value remeasurement – – 181 –
Changes in cumulative translation adjustments –2,626 2,619 1,783 3,020
Share of other comprehensive income on JV and associated companies –92 117 –96 128
Tax on items that may be reclassified to profit or loss – – – –
Total other comprehensive income, net of tax –3,670 2,276 –1,601 1,395
Total comprehensive income –1,547 4,938 1,976 5,749
Total comprehensive income attributable to:
Stockholders of the Parent Company –1,515 4,792 1,790 6,032
Non–controlling interest –32 146 186 –283
18 Ericsson | Second Quarter Report 2015
CONSOLIDATED BALANCE SHEET
SEK million Jun 30 2015 Mar 31 2015 Dec 31 2014
ASSETS
Non–current assets
Intangible assets
Capitalized development expenses 4,032 3,522 3,570
Goodwill 39,872 41,140 38,330
Intellectual property rights, brands and other intangible assets 10,739 12,238 12,534
Property, plant and equipment 15,309 14,947 13,341
Financial assets
Equity in JV and associated companies 1,627 1,783 2,793
Other investments in shares and participations 855 836 591
Customer finance, non–current 1,919 2,311 1,932
Other financial assets, non–current 5,010 6,505 5,900
Deferred tax assets 14,054 14,274 12,778 93,417 97,556 91,769
Current assets
Inventories 32,327 33,657 28,175
Trade receivables 73,932 80,334 77,893
Customer finance, current 2,552 2,633 2,289
Other current receivables 22,919 22,700 21,273
Short–term investments 20,807 30,776 31,171
Cash and cash equivalents 32,962 35,311 40,988
185,499 205,411 201,789
Total assets 278,916 302,967 293,558
EQUITY AND LIABILITIES
Equity
Stockholders’ equity 135,565 147,855 144,306
Non–controlling interest in equity of subsidiaries 1,160 1,196 1,003
136,725 149,051 145,309
Non–current liabilities
Post–employment benefits 24,530 24,163 20,385
Provisions, non–current 139 198 202
Deferred tax liabilities 3,010 3,156 3,177
Borrowings, non–current 22,551 23,496 21,864
Other non–current liabilities 1,939 1,815 1,797
52,169 52,828 47,425
Current liabilities
Provisions, current 5,215 3,858 4,225
Borrowings, current 3,199 2,847 2,281
Trade payables 22,147 24,266 24,473
Other current liabilities 59,461 70,117 69,845
90,022 101,088 100,824
Total equity and liabilities 278,916 302,967 293,558
Of which interest–bearing liabilities and post–employment benefits 50,280 50,506 44,530
Of which net cash 3,489 15,581 27,629
Assets pledged as collateral 2,608 2,590 2,525
Contingent liabilities 693 721 737
19 Ericsson | Second Quarter Report 2015
CONSOLIDATED STATEMENT OF CASH FLOWS
Apr–Jun Jan–Jun Jan–Dec
SEK million 2015 2014 2015 2014 2014
Operating activities
Net income 2,123 2,662 3,577 4,354 11,143
Adjustments to reconcile net income to cash
Taxes –1,360 26 –3,281 –1,322 –1,235
Earnings/dividends in JV and associated companies 49 356 27 340 305
Depreciation, amortization and impairment losses 2,579 2,414 5,260 4,774 9,945
Other 22 404 966 953 2,185
3,413 5,862 6,549 9,099 22,343
Changes in operating net assets
Inventories 383 –1,188 –3,636 –3,287 –2,924
Customer finance, current and non–current 405 –341 147 217 –710
Trade receivables 3,630 –892 5,667 7,065 1,182
Trade payables –1,400 1,644 –3,068 1,534 1,265
Provisions and post–employment benefits 1,685 –225 1,519 –689 –859
Other operating assets and liabilities, net –5,038 –2,806 –10,000 –2,483 –1,595
–335 –3,808 –9,371 2,357 –3,641
Cash flow from operating activities 3,078 2,054 –2,822 11,456 18,702
Investing activities
Investments in property, plant and equipment –2,424 –1,320 –4,791 –2,354 –5,322
Sales of property, plant and equipment 1,075 53 1,150 327 522
Acquisitions/divestments of subsidiaries and other operations, net –169 –1,512 –227 –2,361 –4,394
Product development –843 –185 –1,137 –382 –1,523
Other investing activities –280 –388 –162 –557 –3,392
Short–term investments 9,678 7,012 10,077 222 6,596
Cash flow from investing activities 7,037 3,660 4,910 –5,105 –7,513
Cash flow before financing activities 10,115 5,714 2,088 6,351 11,189
Financing activities
Dividends paid –11,035 –9,828 –11,060 –9,828 –9,846
Other financing activities 431 –2,393 1,330 –7,462 –8,379
Cash flow from financing activities –10,604 –12,221 –9,730 –17,290 –18,225
Effect of exchange rate changes on cash –1,860 1,499 –384 1,932 5,929
Net change in cash and cash equivalents –2,349 –5,008 –8,026 –9,007 –1,107
Cash and cash equivalents, beginning of period 35,311 38,096 40,988 42,095 42,095
Cash and cash equivalents, end of period 32,962 33,088 32,962 33,088 40,988
20 Ericsson | Second Quarter Report 2015
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
SEK million Jan–Jun 2015 Jan–Jun 2014 Jan–Dec 2014
Opening balance 145,309 141,623 141,623
Total comprehensive income 1,976 5,749 12,709
Sale/repurchase of own shares 88 54 106
Stock purchase plan 414 360 717
Dividends paid –11,060 –9,828 –9,846
Transactions with non–controlling interests –2 – –
Closing balance 136,725 137,958 145,309
CONSOLIDATED INCOME STATEMENT - ISOLATED QUARTERS
2015 2014
Isolated quarters, SEK million Q2 Q1 Q4 Q3 Q2 Q1
Net sales 60,671 53,520 67,986 57,643 54,849 47,505
Cost of sales –40,536 –34,556 –43,100 –37,362 –34,910 –30,184
Gross income 20,135 18,964 24,886 20,281 19,939 17,321
Gross margin (%) 33.2% 35.4% 36.6% 35.2% 36.4% 36.5%
Research and development expenses –9,896 –8,487 –9,668 –9,281 –9,084 –8,275
Selling and administrative expenses –7,765 –7,131 –8,107 –6,000 –6,541 –6,452
Operating expenses –17,661 –15,618 –17,775 –15,281 –15,625 –14,727
Other operating income and expenses 1,059 –1,240 –837 –1,134 –206 21
Shares in earnings of JV and associated companies 27 27 28 10 –109 15
Operating income 3,560 2,133 6,302 3,876 3,999 2,630
Financial income –238 684 179 429 268 401
Financial expenses –290 –740 –639 –557 –465 –612
Income after financial items 3,032 2,077 5,842 3,748 3,802 2,419
Taxes –909 –623 –1,677 –1,124 –1,140 –727
Net income 2,123 1,454 4,165 2,624 2,662 1,692
Net income attributable to:
Stockholders of the Parent Company 2,094 1,319 4,223 2,646 2,579 2,120
Non–controlling interests 29 135 –58 –22 83 –428
Other information
Average number of shares, basic (million) 3,247 3,244 3,241 3,238 3,235 3,233
Earnings per share, basic (SEK) 1) 0.64 0.41 1.30 0.82 0.80 0.66
Earnings per share, diluted (SEK) 1) 0.64 0.40 1.29 0.81 0.79 0.65
1) Based on Net income attributable to stockholders of the Parent Company.
21 Ericsson | Second Quarter Report 2015
CONSOLIDATED STATEMENT OF CASH FLOWS - ISOLATED QUARTERS
2015 2014
Isolated quarters, SEK million Q2 Q1 Q4 Q3 Q2 Q1
Operating activities
Net income 2,123 1,454 4,165 2,624 2,662 1,692
Adjustments to reconcile net income to cash
Taxes –1,360 –1,921 475 –388 26 –1,348
Earnings/dividends in JV and associated companies 49 –22 –25 –10 356 –16
Depreciation, amortization and impairment losses 2,579 2,681 2,690 2,481 2,414 2,360
Other 22 944 965 267 404 549
3,413 3,136 8,270 4,974 5,862 3,237
Changes in operating net assets
Inventories 383 –4,019 1,203 –840 –1,188 –2,099
Customer finance, current and non–current 405 –258 174 –1,101 –341 558
Trade receivables 3,630 2,037 –4,661 –1,222 –892 7,957
Trade payables –1,400 –1,668 1,250 –1,519 1,644 –110
Provisions and post–employment benefits 1,685 –166 –152 –18 –225 –464
Other operating assets and liabilities, net –5,038 –4,962 2,512 –1,624 –2,806 323
–335 –9,036 326 –6,324 –3,808 6,165
Cash flow from operating activities 3,078 –5,900 8,596 –1,350 2,054 9,402
Investing activities
Investments in property, plant and equipment –2,424 –2,367 –1,553 –1,415 –1,320 –1,034
Sales of property, plant and equipment 1,075 75 56 139 53 274
Acquisitions/divestments of subsidiaries and other operations, net –169 –58 –1,747 –286 –1,512 –849
Product development –843 –294 –986 –155 –185 –197
Other investing activities –280 118 –1,533 –1,302 –388 –169
Short–term investments 9,678 399 4,066 2,308 7,012 –6,790
Cash flow from investing activities 7,037 –2,127 –1,697 –711 3,660 –8,765
Cash flow before financing activities 10,115 –8,027 6,899 –2,061 5,714 637
Financing activities
Dividends paid –11,035 –25 –15 –3 –9,828 –
Other financing activities 431 899 371 –1,288 –2,393 –5,069
Cash flow from financing activities –10,604 874 356 –1,291 –12,221 –5,069
Effect of exchange rate changes on cash –1,860 1,476 1,691 2,306 1,499 433
Net change in cash and cash equivalents –2,349 –5,677 8,946 –1,046 –5,008 –3,999
Cash and cash equivalents, beginning of period 35,311 40,988 32,042 33,088 38,096 42,095
Cash and cash equivalents, end of period 32,962 35,311 40,988 32,042 33,088 38,096
22 Ericsson | Second Quarter Report 2015
PARENT COMPANY INCOME STATEMENT
Apr–Jun Jan–Jun Jan–Dec
SEK million 2015 2014 2015 2014 2014
Net sales – – – – –
Cost of sales – – – – –
Gross income – – – – –
Operating expenses –191 –209 –480 –551 –1,209
Other operating income and expenses 645 658 1,338 1,323 3,088
Operating income 454 449 858 772 1,879
Financial net 6,736 2,023 8,187 2,140 23,684
Income after financial items 7,190 2,472 9,045 2,912 25,563
Transfers to (–) / from untaxed reserves – – – – –1,700
Taxes –92 –187 –211 –261 –263
Net income 7,098 2,285 8,834 2,651 23,600
PARENT COMPANY STATEMENT OF COMPREHENSIVE INCOME
Apr–Jun Jan–Jun Jan–Dec
SEK million 2015 2014 2015 2014 2014
Net income 7,098 2,285 8,834 2,651 23,600
Revaluation of other investments in shares and participations
Fair value remeasurement – – 181 – 46
Total other comprehensive income, net of tax – – 181 – 46
Total comprehensive income 7,098 2,285 9,015 2,651 23,646
23 Ericsson | Second Quarter Report 2015
PARENT COMPANY BALANCE SHEET
Jun 30 2015 Dec 31 2014
SEK million
ASSETS
Fixed assets
Intangible assets 1,008 1,193
Tangible assets 480 470
Financial assets 98,873 97,901
100,361 99,564
Current assets
Inventories 1 27
Receivables 34,749 24,819
Short–term investments 20,251 30,576
Cash and cash equivalents 13,990 24,443
68,991 79,865
Total assets 169,352 179,429
STOCKHOLDERS’ EQUITY, PROVISIONS AND LIABILITIES
Equity
Restricted equity 48,018 48,018
Non–restricted equity 35,951 37,871
83,969 85,889
Provisions 747 1,471
Non–current liabilities 46,261 45,512
Current liabilities 38,375 46,557
Total stockholders’ equity, provisions and liabilities 169,352 179,429
Assets pledged as collateral 608 525
Contingent liabilities 20,975 20,906
24 Ericsson | Second Quarter Report 2015
ACCOUNTING POLICIES
The Group
This interim report is prepared in accordance with IAS 34. The term “IFRS” used in this document refers to the application of IAS and IFRS as well as interpretations of these standards as issued by IASB’s Standards Interpretation Committee (SIC) and IFRS Interpretations Committee (IFRIC). The accounting policies adopted are consistent with those of the annual report for the year ended December 31, 2014, and should be read in conjunction with that annual report.
There is no significant difference between IFRS effective as per June 30, 2015 and IFRS as endorsed by the EU.
25 Ericsson | Second Quarter Report 2015
NET SALES BY SEGMENT BY QUARTER
2015 2014
Isolated quarters, SEK million Q2 Q1 Q4 Q3 Q2 Q1
Networks 31,163 26,436 34,110 30,030 28,964 24,383
Global Services 26,392 23,901 29,777 24,467 23,059 20,356
Of which Professional Services 20,001 18,131 21,405 17,794 16,554 15,078
Of which Managed Services 8,150 7,501 7,741 7,175 6,485 5,754
Of which Network Rollout 6,391 5,770 8,372 6,673 6,505 5,278
Support Solutions 3,092 3,074 4,009 3,057 2,824 2,765
Modems 24 109 90 89 2 1
Total 60,671 53,520 67,986 57,643 54,849 47,505
2015 2014
Sequential change, percent Q2 Q1 Q4 Q3 Q2 Q1
Networks 18% –22% 14% 4% 19% –30%
Global Services 10% –20% 22% 6% 13% –25%
Of which Professional Services 10% –15% 20% 7% 10% –20%
Of which Managed Services 9% –3% 8% 11% 13% –12%
Of which Network Rollout 11% –31% 25% 3% 23% –37%
Support Solutions 1% –23% 31% 8% 2% –46%
Modems – – – – – –
Total 13% –21% 18% 5% 15% –29%
2015 2014
Year over year change, percent Q2 Q1 Q4 Q3 Q2 Q1
Networks 8% 8% –2% 13% 3% –13%
Global Services 14% 17% 10% 2% –7% –5%
Of which Professional Services 21% 20% 14% 10% –1% 3%
Of which Managed Services 26% 30% 18% 15% –4% –2%
Of which Network Rollout –2% 9% 0% –14% –19% –23%
Support Solutions 9% 11% –21% 30% 21% 13%
Modems – – – – – –
Total 11% 13% 1% 9% –1% –9%
2015 2014
Year to date, SEK million Jan–Jun Jan–Mar Jan–Dec Jan–Sep Jan–Jun Jan–Mar
Networks 57,599 26,436 117,487 83,377 53,347 24,383
Global Services 50,293 23,901 97,659 67,882 43,415 20,356
Of which Professional Services 38,132 18,131 70,831 49,426 31,632 15,078
Of which Managed Services 15,651 7,501 27,155 19,414 12,239 5,754
Of which Network Rollout 12,161 5,770 26,828 18,456 11,783 5,278
Support Solutions 6,166 3,074 12,655 8,646 5,589 2,765
Modems 133 109 182 92 3 1
Total 114,191 53,520 227,983 159,997 102,354 47,505
2015 2014
Year to date, year over year change, percent Jan–Jun Jan–Mar Jan–Dec Jan–Sep Jan–Jun Jan–Mar
Networks 8% 8% 0% 1% –5% –13%
Global Services 16% 17% 0% –3% –6% –5%
Of which Professional Services 21% 20% 7% 4% 1% 3%
Of which Managed Services 28% 30% 7% 3% –3% –2%
Of which Network Rollout 3% 9% –14% –19% –21% –23%
Support Solutions 10% 11% 3% 21% 17% 13%
Modems – – – – – –
Total 12% 13% 0% 0% –5% –9%
26 Ericsson | Second Quarter Report 2015
SALES GROWTH ADJUSTED FOR COMPARABLE UNITS AND CURRENCY
2015 2014
Sequential change, percent Q2 Q1 Q4 Q3 Q2 Q1
Networks 16% –28% 7% –2% 16% –30%
Global Services 10% –26% 20% 5% 11% –25%
Support Solutions –3% –31% 25% 6% 1% –45%
Modems – – – – – –
Total 12% –28% 13% 2% 13% –28%
2015 2014
Isolated quarter, year over year change, percent Q2 Q1 Q4 1) Q3 Q2 Q1
Networks –9% –9% –7% 7% 5% –10%
Global Services –2% –2% 5% –2% –8% –3%
Support Solutions –13% –11% –5% 10% 5% 4%
Modems – – – – – –
Total –6% –6% –2% 3% –1% –7%
2015 2014
Year to date, year over year change, percent Jan–Jun Jan–Mar Jan–Dec Jan–Sep Jan–Jun Jan–Mar
Networks –9% –9% –3% 0% –3% –10%
Global Services –2% –2% –2% –4% –5% –3%
Support Solutions –12% –11% –2% 7% 4% 4%
Modems – – – – – –
Total –6% –6% –2% –2% –4% –7%
1) Partly adjusted for the initial IPR payment from Samsung in Q4 2013.
27 Ericsson | Second Quarter Report 2015
OPERATING INCOME BY SEGMENT BY QUARTER
2015 2014
Isolated quarters, SEK million Q2 Q1 Q4 Q3 Q2 Q1
Networks 2,435 590 4,319 3,175 3,574 2,476
Global Services 1,640 1,681 1,937 1,607 1,487 1,036
Of which Professional Services 2,403 2,109 2,472 2,059 2,095 1,893
Of which Network Rollout –763 –428 –535 –452 –608 –857
Support Solutions –240 82 443 –108 –378 12
Modems 7 0 –85 –739 –456 –745
Unallocated 1) –282 –220 –312 –59 –228 –149
Total 3,560 2,133 6,302 3,876 3,999 2,630
2015 2014
Year to date, SEK million Jan–Jun Jan–Mar Jan–Dec Jan–Sep Jan–Jun Jan–Mar
Networks 3,025 590 13,544 9,225 6,050 2,476
Global Services 3,321 1,681 6,067 4,130 2,523 1,036
Of which Professional Services 4,512 2,109 8,519 6,047 3,988 1,893
Of which Network Rollout –1,191 –428 –2,452 –1,917 –1,465 –857
Support Solutions –158 82 –31 –474 –366 12
Modems 7 0 –2,025 –1,940 –1,201 –745
Unallocated 1) –502 –220 –748 –436 –377 –149
Total 5,693 2,133 16,807 10,505 6,629 2,630
1) “Unallocated” consists mainly of costs for corporate staff, non–operational capital gains and losses.
OPERATING MARGIN BY SEGMENT BY QUARTER
2015 2014
As percentage of net sales, isolated quarters Q2 Q1 Q4 Q3 Q2 Q1
Networks 8% 2% 13% 11% 12% 10%
Global Services 6% 7% 7% 7% 6% 5%
Of which Professional Services 12% 12% 12% 12% 13% 13%
Of which Network Rollout –12% –7% –6% –7% –9% –16%
Support Solutions –8% 3% 11% –4% –13% 0%
Modems – – – – – –
Total 6% 4% 9% 7% 7% 6%
2015 2014
As percentage of net sales, year to date Jan–Jun Jan–Mar Jan–Dec Jan–Sep Jan–Jun Jan–Mar
Networks 5% 2% 12% 11% 11% 10%
Global Services 7% 7% 6% 6% 6% 5%
Of which Professional Services 12% 12% 12% 12% 13% 13%
Of which Network Rollout –10% –7% –9% –10% –12% –16%
Support Solutions –3% 3% 0% –5% –7% 0%
Modems – – – – – –
Total 5% 4% 7% 7% 6% 6%
28 Ericsson | Second Quarter Report 2015
EBITA BY SEGMENT BY QUARTER
2015 2014
Isolated quarters, SEK million Q2 Q1 Q4 Q3 Q2 Q1
Networks 3,014 1,218 4,914 3,773 4,156 3,052
Global Services 1,918 1,952 2,259 1,857 1,731 1,257
Of which Professional Services 2,635 2,344 2,711 2,254 2,289 2,073
Of which Network Rollout –717 –392 –452 –397 –558 –816
Support Solutions –4 308 647 95 –196 192
Modems 7 0 –44 –698 –416 –699
Unallocated 1) –281 –220 –312 –59 –226 –149
Total 4,654 3,258 7,464 4,968 5,049 3,653
2015 2014
Year to date, SEK million Jan–Jun Jan–Mar Jan–Dec Jan–Sep Jan–Jun Jan–Mar
Networks 4,232 1,218 15,895 10,981 7,208 3,052
Global Services 3,870 1,952 7,104 4,845 2,988 1,257
Of which Professional Services 4,979 2,344 9,327 6,616 4,362 2,073
Of which Network Rollout –1,109 –392 –2,223 –1,771 –1,374 –816
Support Solutions 304 308 738 91 –4 192
Modems 7 0 –1,857 –1,813 –1,115 –699
Unallocated 1) –501 –220 –746 –434 –375 –149
Total 7,912 3,258 21,134 13,670 8,702 3,653
1) “Unallocated” consists mainly of costs for corporate staff, non–operational capital gains and losses.
EBITA MARGIN BY SEGMENT BY QUARTER
2015 2014
As percentage of net sales, isolated quarters Q2 Q1 Q4 Q3 Q2 Q1
Networks 10% 5% 14% 13% 14% 13%
Global Services 7% 8% 8% 8% 8% 6%
Of which Professional Services 13% 13% 13% 13% 14% 14%
Of which Network Rollout –11% –7% –5% –6% –9% –15%
Support Solutions 0% 10% 16% 3% –7% 7%
Modems – – – – – –
Total 8% 6% 11% 9% 9% 8%
2015 2014
As percentage of net sales, year to date Jan–Jun Jan–Mar Jan–Dec Jan–Sep Jan–Jun Jan–Mar
Networks 7% 5% 14% 13% 14% 13%
Global Services 8% 8% 7% 7% 7% 6%
Of which Professional Services 13% 13% 13% 13% 14% 14%
Of which Network Rollout –9% –7% –8% –10% –12% –15%
Support Solutions 5% 10% 6% 1% 0% 7%
Modems – – – – – –
Total 7% 6% 9% 9% 9% 8%
29 Ericsson | Second Quarter Report 2015
NET SALES BY MARGIN BY QUARTER
2015 2014
Isolated quarters, SEK million Q2 Q1 Q4 Q3 Q2 Q1
North America 14,578 12,246 13,082 14,033 15,179 12,215
Latin America 5,067 4,574 6,564 5,882 5,414 4,710
Northern Europe & Central Asia 1) 2) 2,556 2,726 4,069 3,151 2,717 2,436
Western & Central Europe 2) 5,131 4,741 6,097 4,646 4,582 4,381
Mediterranean 2) 5,887 4,982 7,513 5,218 5,487 4,785
Middle East 6,515 4,517 6,865 6,039 4,514 3,859
Sub Saharan Africa 2,653 2,158 2,603 2,447 1,886 1,813
India 3,049 3,531 2,362 2,000 1,645 1,695
North East Asia 6,943 6,030 9,225 7,033 6,406 4,908
South East Asia & Oceania 4,897 4,259 4,956 3,794 3,662 3,446
Other 1) 2) 3,395 3,756 4,650 3,400 3,357 3,257
Total 60,671 53,520 67,986 57,643 54,849 47,505
1) Of which in Sweden 598 1,091 1,047 1,090 1,008 999
2) Of which in EU 11,453 10,904 14,325 10,736 10,320 9,720
2015 2014
Sequential change, percent Q2 Q1 Q4 Q3 Q2 Q1
North America 19% –6% –7% –8% 24% –11%
Latin America 11% –30% 12% 9% 15% –30%
Northern Europe & Central Asia 1) 2) –6% –33% 29% 16% 12% –34%
Western & Central Europe 2) 8% –22% 31% 1% 5% –16%
Mediterranean 2) 18% –34% 44% –5% 15% –32%
Middle East 44% –34% 14% 34% 17% –35%
Sub Saharan Africa 23% –17% 6% 30% 4% –30%
India –14% 49% 18% 22% –3% –14%
North East Asia 15% –35% 31% 10% 31% –43%
South East Asia & Oceania 15% –14% 31% 4% 6% –20%
Other 1) 2) –10% –19% 37% 1% 3% –55%
Total 13% –21% 18% 5% 15% –29%
1) Of which in Sweden –45% 4% –4% 8% 1% –25%
2) Of which in EU 5% –24% 33% 4% 6% –24%
2015 2014
Year–over–year change, percent Q2 Q1 Q4 Q3 Q2 Q1
North America –4% 0% –5% –3% –1% –23%
Latin America –6% –3% –3% 11% –3% 8%
Northern Europe & Central Asia 1) 2) –6% 12% 11% 7% 0% 7%
Western & Central Europe 2) 12% 8% 17% 6% 1% 1%
Mediterranean 2) 7% 4% 6% –8% –11% –9%
Middle East 44% 17% 16% 38% 13% 22%
Sub Saharan Africa 41% 19% 1% –9% –29% –15%
India 85% 108% 20% 56% 29% 6%
North East Asia 8% 23% 7% 16% –4% –19%
South East Asia & Oceania 34% 24% 16% 5% –3% –17%
Other 1) 2) 1% 15% –35% 55% 23% 12%
Total 11% 13% 1% 9% –1% –9%
1) Of which in Sweden –41% 9% –21% 37% –21% –2%
2) Of which in EU 11% 12% 12% 6% –5% –1%
30 Ericsson | Second Quarter Report 2015
NET SALES BY REGION BY QUARTER, CONT.
2015 2014
Year to date, SEK million Jan–Jun Jan–Mar Jan–Dec Jan–Sep Jan–Jun Jan–Mar
North America 26,824 12,246 54,509 41,427 27,394 12,215
Latin America 9,641 4,574 22,570 16,006 10,124 4,710
Northern Europe & Central Asia 1) 2) 5,282 2,726 12,373 8,304 5,153 2,436
Western & Central Europe 2) 9,872 4,741 19,706 13,609 8,963 4,381
Mediterranean 2) 10,869 4,982 23,003 15,490 10,272 4,785
Middle East 11,032 4,517 21,277 14,412 8,373 3,859
Sub Saharan Africa 4,811 2,158 8,749 6,146 3,699 1,813
India 6,580 3,531 7,702 5,340 3,340 1,695
North East Asia 12,973 6,030 27,572 18,347 11,314 4,908
South East Asia & Oceania 9,156 4,259 15,858 10,902 7,108 3,446
Other 1) 2) 7,151 3,756 14,664 10,014 6,614 3,257
Total 114,191 53,520 227,983 159,997 102,354 47,505
1) Of which in Sweden 1,689 1,091 4,144 3,097 2,007 999
2) Of which in EU 22,357 10,904 45,101 30,776 20,040 9,720
2015 2014
Year to date, year–over–year change, percent Jan–Jun Jan–Mar Jan–Dec Jan–Sep Jan–Jun Jan–Mar
North America –2% 0% –8% –9% –12% –23%
Latin America –5% –3% 3% 5% 2% 8%
Northern Europe & Central Asia 1) 2) 3% 12% 6% 5% 3% 7%
Western & Central Europe 2) 10% 8% 7% 3% 1% 1%
Mediterranean 2) 6% 4% –5% –9% –10% –9%
Middle East 32% 17% 22% 25% 17% 22%
Sub Saharan Africa 30% 19% –13% –18% –23% –15%
India 97% 108% 25% 28% 16% 6%
North East Asia 15% 23% 1% –2% –11% –19%
South East Asia & Oceania 29% 24% 0% –5% –10% –17%
Other 1) 2) 8% 15% –2% 28% 18% 12%
Total 12% 13% 0% 0% –5% –9%
1) Of which in Sweden –16% 9% –6% 0% –13% –2%
2) Of which in EU 12% 12% 4% 0% –3% –1%
TOP 5 COUNTRIES IN SALES
Q2 Jan–Jun
Country 2015 2014 2015 2014
United States 24% 28% 24% 27%
China 9% 6% 8% 5%
India 5% 3% 6% 3%
United Kingdom 3% 3% 3% 3%
Italy 3% 3% 3% 3%
31 Ericsson | Second Quarter Report 2015
NET SALES BY REGION BY SEGMENT
Q2 2015 Jan–Jun 2015
SEK milion Networks Global Services Support Solutions Modems Total Networks Global Services Support Solutions Modems Total
North America 6,664 7,067 847 – 14,578 11,815 13,367 1,642 – 26,824
Latin America 2,254 2,631 182 – 5,067 4,396 4,846 399 – 9,641
Northern Europe & Central Asia 1,544 945 67 – 2,556 3,358 1,783 141 – 5,282
Western & Central Europe 1,901 3,084 146 – 5,131 3,540 6,019 313 – 9,872
Mediterranean 2,403 3,292 192 – 5,887 4,318 6,212 339 – 10,869
Middle East 4,047 2,145 323 – 6,515 6,444 4,082 506 – 11,032
Sub Saharan Africa 1,241 1,256 156 – 2,653 1,998 2,420 393 – 4,811
India 1,828 1,063 158 – 3,049 3,931 2,167 482 – 6,580
North East Asia 4,796 1,953 194 – 6,943 8,757 3,962 254 – 12,973
South East Asia & Oceania 2,518 2,278 101 – 4,897 4,933 4,042 181 – 9,156
Other 1,967 678 726 24 3,395 4,109 1,393 1,516 133 7,151
Total 31,163 26,392 3,092 24 60,671 57,599 50,293 6,166 133 114,191
Share of Total 51% 44% 5% 0% 100% 51% 44% 5% 0% 100%
Q2 2015
Sequential change, percent Networks Global Services Support Solutions Modems Total
North America 29% 12% 7% – 19%
Latin America 5% 19% –16% – 11%
Northern Europe & Central Asia –15% 13% –9% – –6%
Western & Central Europe 16% 5% –13% – 8%
Mediterranean 25% 13% 31% – 18%
Middle East 69% 11% 77% – 44%
Sub Saharan Africa 64% 8% –34% – 23%
India –13% –4% –51% – –14%
North East Asia 21% –3% 223% – 15%
South East Asia & Oceania 4% 29% 26% – 15%
Other –8% –5% –8% – –10%
Total 18% 10% 1% – 13%
Q2 2015
Year over year change, percent Networks Global Services Support Solutions Modems Total
North America –14% 11% –23% – –4%
Latin America –14% 0% 17% – –6%
Northern Europe & Central Asia –12% 3% 37% – –6%
Western & Central Europe 4% 19% –9% – 12%
Mediterranean –2% 15% 8% – 7%
Middle East 59% 21% 64% – 44%
Sub Saharan Africa 45% 32% 114% – 41%
India 106% 50% 229% – 85%
North East Asia 11% –3% 120% – 8%
South East Asia & Oceania 39% 32% –19% – 34%
Other –10% 32% 12% – 1%
Total 8% 14% 9% – 11%
Jan–Jun 2015
Year over year change, percent Networks Global Services Support Solutions Modems Total
North America –17% 17% –6% – –2%
Latin America –13% 4% 2% – –5%
Northern Europe & Central Asia 7% –7% 31% – 3%
Western & Central Europe –2% 19% 8% – 10%
Mediterranean –3% 14% –8% – 6%
Middle East 48% 12% 35% – 32%
Sub Saharan Africa 26% 36% 19% – 30%
India 121% 54% 209% – 97%
North East Asia 24% –2% 26% – 15%
South East Asia & Oceania 34% 26% –16% – 29%
Other –6% 72% 7% – 8%
Total 8% 16% 10% – 12%
32 Ericsson | Second Quarter Report 2015
PROVISIONS
2015 2014
Isolated quarters, SEK million Q2 Q1 Q4 Q3 Q2 Q1
Opening balance 4,056 4,427 4,567 4,579 4,928 5,362
Additions 2,777 915 996 675 430 625
Utilization/Cash out –1,217 –1,204 –794 –648 –642 –977
Of which restructuring –472 –437 –213 –231 –246 –512
Reversal of excess amounts –161 –236 –420 –132 –298 –88
Reclassification, translation difference and other –101 154 78 93 161 6
Closing balance 5,354 4,056 4,427 4,567 4,579 4,928
2015 2014
Year to date, SEK million Jan–Jun Jan–Mar Jan–Dec Jan–Sep Jan–Jun Jan–Mar
Opening balance 4,427 4,427 5,362 5,362 5,362 5,362
Additions 3,692 915 2,726 1,730 1,055 625
Utilization/Cash out –2,421 –1,204 –3,061 –2,267 –1,619 –977
Of which restructuring –909 –437 –1,202 –989 –758 –512
Reversal of excess amounts –397 –236 –938 –518 –386 –88
Reclassification, translation difference and other 53 154 338 260 167 6
Closing balance 5,354 4,056 4,427 4,567 4,579 4,928
INFORMATION ON INVESTMENTS
Investments in assets subject to depreciation, amortization, impairment and write–downs
2015 2014
Isolated quarters, SEK million Q2 Q1 Q4 Q3 Q2 Q1
Additions
Property, plant and equipment 2,424 2,367 1,553 1,415 1,320 1,034
Capitalized development expenses 843 294 986 155 185 197
IPR, brands and other intangible assets 26 11 1,014 935 621 77
Total 3,293 2,672 3,553 2,505 2,126 1,308
Depreciation, amortization and impairment losses
Property, plant and equipment 1,152 1,214 1,187 1,078 1,048 1,004
Capitalized development expenses 333 342 342 311 315 333
IPR, brands and other intangible assets, etc. 1,094 1,125 1,161 1,092 1,051 1,023
Total 2,579 2,681 2,690 2,481 2,414 2,360
33 Ericsson | Second Quarter Report 2015
RECONCILIATION TABLE, NON-IFRS MEASUREMENTS – CASH CONVERSION
2015 2014
Isolated quarters, SEK million Q2 Q1 Q4 Q3 Q2 Q1
Net income 2,123 1,454 4,165 2,624 2,662 1,692
Net income reconciled to cash 3,413 3,136 8,270 4,974 5,862 3,237
Cash flow from operating activities 3,078 –5,900 8,596 –1,350 2,054 9,402
Cash conversion 90.2% –188.1% 103.9% –27.1% 35.0% 290.5%
NET CASH – END OF PERIOD
SEK million Jun 30 2015 Mar 31 2015 Dec 31 2014
Cash and cash equivalents 32,962 35,311 40,988
+ Short term investments 20,807 30,776 31,171
– Borrowings, non-current 22,551 23,496 21,864
– Borrowings, current 3,199 2,847 2,281
– Post employment benefits 24,530 24,163 20,385
Net cash, end of period 3,489 15,581 27,629
34 Ericsson | Second Quarter Report 2015
OTHER INFORMATION
SEK million Apr-Jun 2015 2014 Jan-Jun 2015 2014 Jan-Dec 2014
Number of shares and earnings per share
Number of shares, end of period (million) 3,305 3,305 3,305 3,305 3,305
Of which class A-shares (million) 262 262 262 262 262
Of which class B-shares (million) 3,043 3,043 3,043 3,043 3,043
Number of treasury shares, end of period (million) 57 69 57 69 63
Number of shares outstanding, basic, end of period (million) 3,248 3,236 3,248 3,236 3,242
Numbers of shares outstanding, diluted, end of period (million) 3,281 3,268 3,281 3,268 3,275
Average number of treasury shares (million) 58 70 59 71 68
Average number of shares outstanding, basic (million) 3,247 3,235 3,246 3,234 3,237
Average number of shares outstanding, diluted (million) 1) 3,280 3,268 3,278 3,266 3,270
Earnings per share, basic (SEK) 0.64 0.80 1.05 1.45 3.57
Earnings per share, diluted (SEK) 1) 0.64 0.79 1.04 1.44 3.54
Earnings per share (Non-IFRS), diluted (SEK) 2) 0.87 1.02 1.50 1.90 4.49
Earnings per share (Non-IFRS, excluding restructuring), diluted (SEK) 2) 1.45 1.07 2.22 1.98 4.80
Ratios
Days sales outstanding - - 112 113 105
Inventory turnover days 74 68 74 70 64
Payable days 52 57 57 61 56
Equity ratio (%) - - 49.0% 52.0% 49.5%
Return on equity (%) 5.9% 7.4% 4.9% 6.8% 8.1%
Return on capital employed (%) 6.9% 9.7% 6.5% 8.2% 9.8%
Capital turnover (times) 1.3 1.2 1.2 1.2 1.2
Cash conversion % 90.2% 35.0% -43.1% 125.9% 83.7%
Exchange rates used in the consolidation 3)
SEK/EUR-closing rate - - 9.22 9.18 9.47
SEK/USD-closing rate - - 8.24 6.72 7.79
Other
Regional inventory, end of period 18,778 17,339 18,778 17,339 17,142
Export sales from Sweden 29,813 28,157 55,964 52,235 113,734
1) Potential ordinary shares are not considered when their conversion to ordinary shares would increase earnings per share.
2) Excluding amortizations and write–downs of acquired intangibles.
3) Translation method changed from 2015. Monthly rates used to translate transactions are available on
www.ericsson.com/thecompany/investors
NUMBER OF EMPLOYEES
End of period 2015 Jun 30 Mar 31 Dec 31 2014 Sep 31 Jun 30 Mar 31
North America 14,975 15,156 15,516 15,554 15,306 14,902
Latin America 10,823 10,970 11,066 10,901 11,179 9,731
Northern Europe & Central Asia 1) 21,441 21,556 21,633 21,691 21,476 21,484
Western & Central Europe 12,400 12,575 12,617 12,606 12,624 11,455
Mediterranean 12,925 13,363 13,387 13,306 12,475 12,253
Middle East 3,717 3,813 3,858 3,831 3,736 3,749
Sub Saharan Africa 2,389 2,442 2,406 2,288 2,284 2,094
India 21,353 21,215 19,971 19,413 18,495 17,991
North East Asia 13,104 13,488 13,464 13,653 13,448 13,490
South East Asia & Oceania 4,056 4,128 4,137 4,265 4,359 4,234
Total 117,183 118,706 118,055 117,508 115,382 111,383
1) Of which in Sweden 17,560 17,569 17,580 17,655 17,497 17,545
35 Ericsson | Second Quarter Report 2015
RESTRUCTURING CHARGES BY FUNCTION
Isolated quarters, SEK million 2015 Q2 Q1 Q4 2014 Q3 Q2 Q1
Cost of sales -1,157 -484 -663 -168 -116 -82
Research and development expenses -1,118 -51 -113 -92 -80 -19
Selling and administrative expenses -469 -79 -28 -19 -47 -29
Total -2,744 -614 -804 -279 -243 -130
2015 2014
Year to date, SEK million Jan-Jun Jan-Mar Jan-Dec Jan-Sep Jan-Jun Jan-Mar
Cost of sales -1,641 -484 -1,029 -366 -198 -82
Research and development expenses -1,169 -51 -304 -191 -99 -19
Selling and administrative expenses -548 -79 -123 -95 -76 -29
Total -3,358 -614 -1,456 -652 -373 -130
RESTRUCTURING CHARGES BY SEGMENT
2015 2014
Isolated quarters, SEK million Q2 Q1 Q4 Q3 Q2 Q1
Networks -1,842 -173 -142 -80 -128 -93
Global Services -691 -419 -600 -122 -81 -32
Of which Professional Services -175 -140 -435 -85 -63 -25
Of which Network Rollout -516 -279 -165 -37 -18 -7
Support Solutions -194 -19 -30 -77 -34 -5
Modems -12 -3 -32 - - -
Unallocated -5 - - - - -
Total -2,744 -614 -804 -279 -243 -130
2015 2014
Year to date, SEK million Jan-Jun Jan-Mar Jan-Dec Jan-Sep Jan-Jun Jan-Mar
Networks -2,015 -174 -443 -301 -221 -93
Global Services -1,110 -419 -835 -235 -113 -32
Of which Professional Services -315 -140 -608 -173 -88 -25
Of which Network Rollout -795 -279 -227 -62 -25 -7
Support Solutions -213 -19 -146 -116 -39 -5
Modems -15 -3 -32 - - -
Unallocated -5 - - - - -
Total -3,358 -614 -1,456 -652 -373 -130
36 Ericsson | Second Quarter Report 2015