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
April 24, 2007
LM ERICSSON TELEPHONE COMPANY
(Translation of registrant’s name into English)
Torshamnsgatan 23, 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 whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934. Yes ¨ No x
Announcement of LM Ericsson Telephone company, dated April 24, 2007 regarding “Ericsson changes financial reporting structure”.
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Press Release April 24, 2007 |
Ericsson changes financial reporting structure
Ericsson (NASDAQ:ERIC) will change its financial reporting to reflect a new business segment structure and today publishes restated information for comparative prior year interim periods.
As previously announced, Ericsson has from January 1, 2007, reorganized its operating structure. From the first quarter report 2007, the company’s financial reporting will be adapted to reflect this new structure. Ericsson will also take this opportunity to make other modifications to further enhance transparency with additional disclosures.
Ericsson will report the following business segments: Networks, Professional Services and Multimedia.
Phones, represented by the share in earnings of Sony Ericsson will be reported as before. However, Sony Ericsson have increased its disclosure as of the first quarter report 2007.
The changed segment reporting is in accordance with the objectives set forth in IAS 14 Segment reporting. The business activities previously reported in Other Operations have been merged into the new segments to better leverage the opportunities provided by internal business combinations.
Business segment Networks includes products for mobile and fixed broadband access, core networks, transmission and next-generation IP-networks. Related network rollout services are also included. In addition, the power modules and cables operations, previously reported under Other Operations, are now included within Networks, as well as the acquired operations of Redback and Entrisphere.
Business segment Professional Services includes all service operations, excluding Network rollout reported under Networks. Services for system integration of IP and core networks previously reported as network rollout are now reclassified as Professional Services. Sales of managed services as a part of the total Professional Services will be disclosed since this represents service revenues of a recurring nature.
Business segment Multimedia includes multimedia systems, previously reported under segment Systems, and enterprise solutions and mobile platforms, previously included in Other Operations. The operations of Tandberg TV and Mobeon will also be included in Multimedia once these acquisitions are concluded.
For each of the business segments, we will report net sales and operating margin quarterly. In addition, sales of Mobile Systems, including relevant parts of Networks and Multimedia, will continue to be disclosed.
Within the consolidated income statement, royalty revenues for intellectual property rights related to products will be included as part of net sales instead of other operating income. Accordingly, the related costs, previously reported as part of operating expenses, will now be reported within cost of sales.
Changes within the consolidated statement of cash flows include additional breakdown of “Adjustments to reconcile net income to cash”, “Operating net assets” and “Investing activities”. Cash flow from operations will be disclosed as before. The subtotals “Cash flow from operating investing activities” and “Cash flow before financial investing activities” will no longer be reported.
The table “Customer financing risk exposure” will no longer be separately disclosed quarterly due to the decrease in activity compared to prior years. However, significant changes to risk and exposure will be commented within the text of interim reports.
Ericsson reports first quarter results on April 26, 2007, at 7:30 CET.
Restated 2006 Financial Statements are attached.
Ericsson is shaping the future of Mobile and Broadband Internet communications through its continuous technology leadership. Providing innovative solutions in more than 140 countries, Ericsson is helping to create the most powerful communication companies in the world.
Read more at www.ericsson.com
FOR FURTHER INFORMATION, PLEASE CONTACT
Ericsson Media Relations
Phone: +46 8 719 6992
E-mail: press.relations@ericsson.com
Ericsson Investor Relations
Phone: + 46 8 719 4631
E-mail: investor.relations.se@ericsson.com
ERICSSON
CONSOLIDATED INCOME STATEMENT—ISOLATED QUARTERS
| 2006 | 2006 | ||||||||||||||
| SEK million |
Q4 | Q3 | Q2 | Q1 | Jan-Dec | ||||||||||
| Net sales |
54,211 | 41,271 | 44,768 | 39,571 | 179,821 | ||||||||||
| Cost of sales |
-31,331 | -25,506 | -25,692 | -22,346 | -104,875 | ||||||||||
| Gross margin |
22,880 | 15,765 | 19,076 | 17,225 | 74,946 | ||||||||||
| Gross margin % |
42.2 | % | 38.2 | % | 42.6 | % | 43.5 | % | 41.7 | % | |||||
| Research and development expenses |
-7,155 | -6,990 | -6,767 | -6,621 | -27,533 | ||||||||||
| Selling and administrative expenses |
-6,071 | -5,296 | -5,263 | -4,792 | -21,422 | ||||||||||
| Operating expenses |
-13,226 | -12,286 | -12,030 | -11,413 | -48,955 | ||||||||||
| Other operating income |
321 | 3,252 | 215 | 115 | 3,903 | ||||||||||
| Share in earnings of JVs and associated companies |
2,210 | 2,035 | 992 | 697 | 5,934 | ||||||||||
| Operating income |
12,185 | 8,766 | 8,253 | 6,624 | 35,828 | ||||||||||
| Operating margin % |
22.5 | % | 21.2 | % | 18.4 | % | 16.7 | % | 19.9 | % | |||||
| Financial income |
366 | 499 | 567 | 522 | 1,954 | ||||||||||
| Financial expenses |
-396 | -397 | -529 | -467 | -1,789 | ||||||||||
| Income after financial items |
12,155 | 8,868 | 8,291 | 6,679 | 35,993 | ||||||||||
| Taxes |
-2,352 | -2,572 | -2,559 | -2,074 | -9,557 | ||||||||||
| Net income |
9,803 | 6,296 | 5,732 | 4,605 | 26,436 | ||||||||||
| Net income attributable to: |
|||||||||||||||
| Stockholders of the parent company |
9,731 | 6,233 | 5,712 | 4,575 | 26,251 | ||||||||||
| Minority interest |
72 | 63 | 20 | 30 | 185 | ||||||||||
| Other information |
|||||||||||||||
| Average number of shares, basic (million) |
15,877 | 15,872 | 15,869 | 15,866 | 15,871 | ||||||||||
| Earnings per share, basic (SEK)1) |
0.61 | 0.39 | 0.36 | 0.29 | 1.65 | ||||||||||
| Earnings per share, diluted (SEK)1) |
0.61 | 0.39 | 0.36 | 0.29 | 1.65 | ||||||||||
1) Based on Net income attributable to stockholders of the parent company
1
ERICSSON
CONSOLIDATED BALANCE SHEET
| SEK million |
Dec 31 2006 |
Dec 311) 2005 | ||
| ASSETS |
||||
| Non-current assets |
||||
| Intangible assets |
||||
| Capitalized development expenses |
4,995 | 6,161 | ||
| Goodwill |
6,824 | 7,362 | ||
| Intellectual property rights |
15,649 | 939 | ||
| Property, plant and equipment |
7,881 | 6,966 | ||
| Financial assets |
||||
| Equity in JVs and associated companies |
9,409 | 6,313 | ||
| Other investments in shares and participations |
721 | 805 | ||
| Customer financing, non-current |
1,921 | 1,322 | ||
| Other financial assets, non-current |
2,409 | 2,796 | ||
| Deferred tax assets |
13,564 | 18,519 | ||
| 63,373 | 51,183 | |||
| Current assets |
||||
| Inventories |
21,470 | 19,208 | ||
| Trade receivables |
51,070 | 41,242 | ||
| Customer financing, current |
1,735 | 3,624 | ||
| Other current receivables |
15,012 | 12,574 | ||
| Short-term investments |
32,311 | 39,767 | ||
| Cash and cash equivalents |
29,969 | 41,738 | ||
| 151,567 | 158,153 | |||
| Total assets |
214,940 | 209,336 | ||
| EQUITY AND LIABILITIES |
||||
| Equity |
||||
| Stockholders’ equity |
120,113 | 101,622 | ||
| Minority interest in equity of consolidated subsidiaries |
782 | 850 | ||
| 120,895 | 102,472 | |||
| Non-current liabilities |
||||
| Post-employment benefits |
6,968 | 5,891 | ||
| Provisions, non-current |
602 | 904 | ||
| Deferred tax liabilities |
382 | 391 | ||
| Borrowings, non-current |
12,904 | 14,185 | ||
| Other non-current liabilities |
2,868 | 2,740 | ||
| 23,724 | 24,111 | |||
| Current liabilities |
||||
| Provisions, current |
13,280 | 17,764 | ||
| Borrowings, current |
1,680 | 10,784 | ||
| Trade payables |
18,183 | 12,584 | ||
| Other current liabilities |
37,178 | 41,621 | ||
| 70,321 | 82,753 | |||
| Total equity and liabilities |
214,940 | 209,336 | ||
| Of which interest-bearing liabilities and post-employment benefits |
21,552 | 30,860 | ||
| Net cash |
40,728 | 50,645 | ||
| Assets pledged as collateral |
285 | 549 | ||
| Contingent liabilities |
1,392 | 1,708 | ||
| 1) |
Ericsson has adopted the new option in IAS 19 as from January 1, 2006. Earlier periods have been restated accordingly. The net effect on equity per December 31, 2005 was SEK -3,055 million. |
2
ERICSSON
CONSOLIDATED STATEMENT OF CASH FLOWS
| 2006 | 2006 | |||||||||
| SEK million |
Q4 | Q3 | Q2 | Q1 | Jan - Dec | |||||
| Net income |
9,803 | 6,296 | 5,732 | 4,605 | 26,436 | |||||
| Adjustments to reconcile net income to cash |
||||||||||
| - taxes |
1,671 | 737 | 1,397 | 477 | 4,282 | |||||
| - undistributed earnings in JVs and associated companies |
-1,751 | -1,462 | -514 | 756 | -2,971 | |||||
| - depreciation, amortization and impairment losses |
2,068 | 1,735 | 1,723 | 1,997 | 7,523 | |||||
| - other |
89 | -2,885 | 32 | -10 | -2,774 | |||||
| 11,880 | 4,421 | 8,370 | 7,825 | 32,496 | ||||||
| Operating net assets |
||||||||||
| Inventories |
2,972 | -2,622 | -433 | -2,470 | -2,553 | |||||
| Customer financing, current and non-current |
1,242 | -302 | -1,586 | 1,832 | 1,186 | |||||
| Trade receivables |
-4,077 | -1,981 | -3,269 | -1,236 | -10,563 | |||||
| Provisions and post-employment benefits |
-1,935 | 2,546 | -2,427 | -1,913 | -3,729 | |||||
| Other operating assets and liabilities, net |
927 | 2,779 | -422 | -1,632 | 1,652 | |||||
| -871 | 420 | -8,137 | -5,419 | -14,007 | ||||||
| Cash flow from operating activities |
11,009 | 4,841 | 233 | 2,406 | 18,489 | |||||
| Investing activities |
||||||||||
| Investments in property, plant and equipment |
-925 | -825 | -1,377 | -700 | -3,827 | |||||
| Sales of property, plant and equipment |
34 | 91 | 46 | 14 | 185 | |||||
| Acquisitions and divestments of subsidiaries and other operations, net |
-193 | 2,833 | -21 | -17,611 | -14,992 | |||||
| Product development |
-373 | -210 | -412 | -358 | -1,353 | |||||
| Other investing activities |
-636 | -169 | -456 | 191 | -1,070 | |||||
| Short-term investments |
3,136 | -3,818 | 9,700 | -2,838 | 6,180 | |||||
| Cash flow from investing activities |
1,043 | -2,098 | 7,480 | -21,302 | -14,877 | |||||
| Cash flow before financing activities |
12,052 | 2,743 | 7,713 | -18,896 | 3,612 | |||||
| Financing activities |
||||||||||
| Dividends paid |
0 | -183 | -7,154 | -6 | -7,343 | |||||
| Other financing activities |
-271 | -576 | -8,147 | 898 | -8,096 | |||||
| Cash flow from financing activities |
-271 | -759 | -15,301 | 892 | -15,439 | |||||
| Effect of exchange rate changes on cash |
-326 | -116 | 485 | 15 | 58 | |||||
| Net change in cash |
11,455 | 1,868 | -7,103 | -17,989 | -11,769 | |||||
| Cash and cash equivalents, beginning of period |
18,514 | 16,646 | 23,749 | 41,738 | 41,738 | |||||
| Cash and cash equivalents, end of period |
29,969 | 18,514 | 16,646 | 23,749 | 29,969 | |||||
3
NET SALES BY SEGMENT BY QUARTER
| SEK million |
|||||||||||
| 2006 | |||||||||||
| Isolated quarters |
Q4 | Q3 | Q2 | Q1 | |||||||
| Networks |
39,035 | 29,155 | 31,448 | 28,056 | |||||||
| - Of which Network rollout |
5,558 | 3,498 | 3,430 | 3,924 | |||||||
| Professional Services |
10,566 | 8,722 | 9,252 | 8,307 | |||||||
| - Of which Managed services |
2,514 | 2,238 | 2,414 | 2,325 | |||||||
| Multimedia |
4,548 | 3,066 | 3,449 | 2,831 | |||||||
| Unallocated 1) |
— | 372 | 764 | 479 | |||||||
| Less: Intersegment sales |
62 | -44 | -145 | -102 | |||||||
| Total Ericsson |
54,211 | 41,271 | 44,768 | 39,571 | |||||||
| 1) Including the Defense business |
|||||||||||
| 2006 | |||||||||||
| Sequential change |
Q4 | Q3 | Q2 | Q1 2) | |||||||
| Networks |
34 | % | -7 | % | 12 | % | — | ||||
| - Of which Network rollout |
59 | % | 2 | % | -13 | % | — | ||||
| Professional Services |
21 | % | -6 | % | 11 | % | — | ||||
| - Of which Managed services |
12 | % | -7 | % | 4 | % | — | ||||
| Multimedia |
48 | % | -11 | % | 22 | % | — | ||||
| Unallocated 1) |
— | -51 | % | 59 | % | — | |||||
| Less: Intersegment sales |
-241 | % | -70 | % | 42 | % | — | ||||
| Total Ericsson |
31 | % | -8 | % | 13 | % | — | ||||
| 1) Including the Defense business |
|||||||||||
| 2) Sequential change not calculated since 2005 is not restated according to new organization |
|||||||||||
| 2006 | |||||||||||
| Year to Date |
0612 | 0609 | 0606 | 0603 | |||||||
| Networks |
127,694 | 88,659 | 59,504 | 28,056 | |||||||
| - Of which Network rollout |
16,410 | 10,852 | 7,354 | 3,924 | |||||||
| Professional Services |
36,847 | 26,281 | 17,559 | 8,307 | |||||||
| - Of which Managed services |
9,491 | 6,977 | 4,739 | 2,325 | |||||||
| Multimedia |
13,894 | 9,346 | 6,280 | 2,831 | |||||||
| Unallocated 1) |
1,615 | 1,615 | 1,243 | 479 | |||||||
| Less: Intersegment sales |
-229 | -291 | -247 | -102 | |||||||
| Total Ericsson |
179,821 | 125,610 | 84,339 | 39,571 | |||||||
| 1) |
Including the Defense business |
4
OPERATING MARGIN BY SEGMENT BY QUARTER
| SEK million |
||||||||||||
| OPERATING MARGIN | ||||||||||||
| 2006 | ||||||||||||
| As percentage of net sales |
Q4 | Q3 3) | Q2 | Q1 | ||||||||
| Networks |
21 | % | 9 | % | 19 | % | 17 | % | ||||
| Professional services |
15 | % | 12 | % | 16 | % | 15 | % | ||||
| Multimedia |
12 | % | 3 | % | 1 | % | 3 | % | ||||
| Phones 1) |
— | — | — | — | ||||||||
| Unallocated 2) |
— | — | — | — | ||||||||
| Total |
22 | % | 21 | % | 18 | % | 17 | % | ||||
| 2006 | ||||||||||||
| As percentage of net sales |
0612 | 06093) | 0606 | 0603 | ||||||||
| Networks |
17 | % | 15 | % | 18 | % | 17 | % | ||||
| Professional services |
14 | % | 14 | % | 15 | % | 15 | % | ||||
| Multimedia |
5 | % | 2 | % | 2 | % | 3 | % | ||||
| Phones 1) |
— | — | — | — | ||||||||
| Unallocated 2) |
— | — | — | — | ||||||||
| Total |
20 | % | 19 | % | 18 | % | 17 | % | ||||
| 1) |
Calculation not applicable |
| 2) |
"Unallocated" consists mainly of costs for corporate staffs, non-operational capital gains and losses and the Defense business that was divested in 2006 |
| 3) |
Including restructuring charges of SEK 2.9 b. |
5
NET SALES BY MARKET AREA BY QUARTER
| SEK million |
|||||||||||
| 2006 | |||||||||||
| Isolated quarters |
Q4 | Q3 | Q2 | Q1 | |||||||
| Western Europe 1) |
17,166 | 11,675 | 12,852 | 11,488 | |||||||
| Eastern Europe, Middle East & Africa |
15,225 | 11,702 | 12,908 | 10,466 | |||||||
| North America |
3,960 | 2,895 | 3,726 | 5,281 | |||||||
| Latin America |
4,803 | 4,206 | 3,819 | 3,652 | |||||||
| Asia Pacific |
13,057 | 10,793 | 11,463 | 8,684 | |||||||
| Total 2) |
54,211 | 41,271 | 44,768 | 39,571 | |||||||
| 1) Of which Sweden |
2,287 | 1,882 | 2,008 | 1,632 | |||||||
| 2) Of EU * |
18,705 | 13,040 | 14,834 | 12,404 | |||||||
| 2006 | |||||||||||
| Sequential change (%) |
Q4 | Q3 | Q2 | Q1 | |||||||
| Western Europe 1) |
47 | % | -9 | % | 12 | % | — | ||||
| Eastern Europe, Middle East & Africa |
30 | % | -9 | % | 23 | % | — | ||||
| North America |
37 | % | -22 | % | -29 | % | — | ||||
| Latin America |
14 | % | 10 | % | 5 | % | — | ||||
| Asia Pacific |
21 | % | -6 | % | 32 | % | — | ||||
| Total 2) |
31 | % | -8 | % | 13 | % | — | ||||
| 1) Of which Sweden |
22 | % | -6 | % | 23 | % | — | ||||
| 2) Of which EU * |
43 | % | -12 | % | 20 | % | — | ||||
| 2006 | |||||||||||
| Year to date |
0612 | 0609 | 0606 | 603 | |||||||
| Western Europe 1) |
53,181 | 36,015 | 24,340 | 11,488 | |||||||
| Eastern Europe, Middle East & Africa |
50,301 | 35,076 | 23,374 | 10,466 | |||||||
| North America |
15,862 | 11,902 | 9,007 | 5,281 | |||||||
| Latin America |
16,480 | 11,677 | 7,471 | 3,652 | |||||||
| Asia Pacific |
43,997 | 30,940 | 20,147 | 8,684 | |||||||
| Total 2) |
179,821 | 125,610 | 84,339 | 39,571 | |||||||
| 1) Of which Sweden |
7,809 | 5,522 | 3,640 | 1,632 | |||||||
| 2) Of which EU * |
58,983 | 40,278 | 27,238 | 12,404 | |||||||
| *) | For the purpose of comparison 2006 has been restated including Bulgaria and Romania which entered into the European Union as from 2007. |
6
ERICSSON
OTHER INFORMATION
| 2006 | |||
| SEK million | Jan-Dec | ||
| Number of shares and earnings per share |
|||
| Number of shares, end of period (million) |
16,132 | ||
| Of which A-shares (million) |
1,309 | ||
| Of which B-shares (million) |
14,823 | ||
| Number of treasury shares, end of period (million) |
251 | ||
| Number of shares outstanding, basic, end of period (million) |
15,881 | ||
| Numbers of shares outstanding, diluted, end of period (million) |
15,953 | ||
| Average number of treasury shares (million) |
262 | ||
| Average number of shares outstanding, basic (million) |
15,871 | ||
| Average number of shares outstanding, diluted (million) 1) |
15,943 | ||
| Earnings per share, basic (SEK) |
1.65 | ||
| Earnings per share, diluted (SEK)1) |
1.65 | ||
| Ratios |
|||
| EBITDA % |
24.1 | % | |
| Equity ratio, percent |
56.2 | % | |
| Capital turnover (times) |
1.3 | ||
| Accounts receivable turnover (times) |
3.9 | ||
| Inventory turnover (times) |
5.2 | ||
| Return on equity, percent |
23.7 | % | |
| Return on capital employed, percent |
27.4 | % | |
| Days Sales Outstanding |
85 | ||
| Payment readiness, end of period |
67,454 | ||
| Payment readiness, as percentage of sales |
37.5 | % | |
| Exchange rates used in the consolidation |
|||
| SEK / EUR - average rate |
9.27 | ||
| - closing rate |
9.04 | ||
| SEK / USD - average rate |
7.38 | ||
| - closing rate |
6.85 | ||
| Other |
|||
| Additions to property, plant and equipment |
3,827 | ||
| - Of which in Sweden |
999 | ||
| Additions to capitalized development expenses |
1,353 | ||
| Capitalization of development expenses, net |
-1,166 | ||
| Amortization of development expenses |
2,519 | ||
| Depreciation of property, plant and equipment and amortization of other intangible assets |
4,997 | ||
| Total depreciation and amortization |
7,516 | ||
| Export sales from Sweden |
98,694 | ||
| 1) |
Potential ordinary shares are not considered when their conversion to ordinary shares would increase earnings per share |
7
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/ CARL OLOF BLOMQVIST | |
| Carl Olof Blomqvist Senior Vice President and General councel | ||
| By: | /S/ HENRY STÉNSON | |
| Henry Sténson Senior Vice President Corporate Communications | ||
Date: April 24, 2007