UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 20-F
☐ | REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934 |
OR
☒ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the Fiscal Year Ended December 31, 2020
OR
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
OR
☐ | SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission file number 000-12033
TELEFONAKTIEBOLAGET LM ERICSSON
(Exact Name of Registrant as Specified in its Charter)
LM ERICSSON TELEPHONE COMPANY
(Translation of Registrants name into English)
Kingdom of Sweden
(Jurisdiction of incorporation or organization)
SE-164 83 Stockholm, Sweden
(Address of principal executive offices)
Jonas Stringberg, Vice President, Head of Financial Control and Business Services
Telephone: +46 10 716 53 20, jonas.stringberg@ericsson.com
SE-164 83 Stockholm, Sweden
(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)
Securities registered or to be registered pursuant to Section 12(b) of the Act:
Title of Each Class |
Trading symbol(s) |
Name of Each Exchange on which Registered | ||
American Depositary Shares (each representing one B share) B Shares * |
ERIC | The NASDAQ Stock Market LLC |
* | Not for trading, but only in connection with the registration of the American Depositary Shares representing such B Shares pursuant to the requirements of the Securities and Exchange Commission. |
Securities registered pursuant to Section 12(g) of the Act:
None
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:
None
Indicate the number of outstanding shares of each of the issuers classes of capital or common stock as of the close of the period covered by the annual report:
B shares (SEK 5.00 nominal value) |
3,072,395,752 | |||
A shares (SEK 5.00 nominal value) |
261,755,983 | |||
C shares (SEK 5.00 nominal value) |
0 |
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d)of the Securities Exchange Act of 1934. Yes ☐ No ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files) Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or an emerging growth company. See the definitions of large accelerated filer and accelerated filer and emerging growth company in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☒ | Accelerated filer | ☐ | |||
Non-accelerated filer | ☐ | Emerging growth company | ☐ |
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13 (a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its managements assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
☐ U.S. GAAP |
☒ | International Financial Reporting Standards as issued by the International Accounting Standards Board | ☐ Other |
If Other has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.
Item 17 ☐ Item 18 ☐
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
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INTRODUCTION
Unless otherwise indicated, all references herein to Ericsson, the Company, the Group, we, us, or our or our company are references to Telefonaktiebolaget LM Ericsson and its consolidated subsidiaries.
This document is our Annual Report on Form 20-F for the year ended December 31, 2020 (the 2020 Form 20-F). Reference is made to the English version of our Swedish Annual Report for 2020, with certain adjustments made to comply with U.S. requirements, which is attached hereto as Exhibit 15.1 (the 2020 Swedish Annual Report). Only (i) the information included in this 2020 Form 20-F, (ii) the information in the 2020 Swedish Annual Report that is incorporated by reference in this 2020 Form 20-F, and (iii) the exhibits to the 2020 Form 20-F that are required to be filed pursuant to the Form 20-F shall be deemed to be filed with the Securities and Exchange Commission for any purpose, including incorporation by reference into the Registration Statement on Form F-3 filed on March 27, 2018 (File No. 333-223954) and any other document filed by us pursuant to the Securities Act of 1933, as amended, which incorporates by reference the 2020 Form 20-F. Any information in the 2020 Swedish Annual Report that is not referenced in the 2020 Form 20-F or filed as an exhibit thereto shall not be deemed to be so incorporated by reference. Certain industry, technical and financial terms used in this 2020 Form 20-F are defined in the subsections entitled Glossary and Financial Terminology of the 2020 Swedish Annual Report, which are incorporated herein by reference.
Market data and certain industry forecasts used herein were obtained from internal surveys, market research, publicly available information and industry publications. While we believe that market research, publicly available information and industry publications we use are reliable, we have not independently verified market and industry data from third-party sources. Moreover, while we believe our internal surveys are reliable, they have not been verified by any independent source.
The information included on http://www.ericsson.com/ and other websites that appear in this 2020 Form 20-F is not incorporated by reference herein. From time to time, we may use our website as a channel of distribution of material company information. Financial and other material information regarding our company is routinely posted on and accessible at http://www.ericsson.com/.
Forward-Looking Statements
This 2020 Form 20-F includes forward-looking statements, including statements reflecting managements current views relating to the growth of the market, future market conditions, future events, financial condition, and expected operational and financial performance, including, in particular the following:
| Our goals, strategies, planning assumptions and operational or financial performance expectations |
| Industry trends, future characteristics and development of the markets in which we operate |
| Our future liquidity, capital resources, capital expenditures, cost savings and profitability |
| The expected demand for our existing and new products and services as well as plans to launch new products and services including research and development expenditures |
| The ability to deliver on future plans and to realize potential for future growth |
| The expected operational or financial performance of strategic cooperation activities and joint ventures |
| The time until acquired entities and businesses will be integrated and accretive to income |
| Technology and industry trends including the regulatory and standardization environment in which we operate, competition and our customer structure. |
The words believe, expect, foresee, anticipate, assume, intend,likely, projects, may, could, plan, estimate, forecast, will, should, would, predict, aim, ambition, seek, potential, target,might, continue, or, in each case, their negative or variations, and similar words or expressions are used to identify forward-looking statements. Any statement that refers to expectations, projections or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements.
We caution investors that these statements are subject to risks and uncertainties many of which are difficult to predict and generally beyond our control that could cause actual results to differ materially from those expressed in, or implied or projected by, the forward-looking information and statements.
Important factors that could affect whether and to what extent any of our forward-looking statements materialize include but are not limited to the factors described in the section Risk Factors.
These forward-looking statements also represent our estimates and assumptions only as of the date that they were made. We expressly disclaim a duty to provide updates to these forward-looking statements, and the estimates and assumptions associated with them, after the date of this 20-F , to reflect events or changes in circumstances or changes in expectations or the occurrence of anticipated events, whether as a result of new information, future events or otherwise, except as required by applicable law or stock exchange regulation.
ITEM 1. IDENTITY | OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS |
Not applicable.
ITEM 2. OFFER | STATISTICS AND EXPECTED TIMETABLE |
Not applicable.
ITEM 3. KEY | INFORMATION |
The selected financial data previously required this Item has been omitted in reliance on SEC Release No. 33-10890, Managements Discussion and Analysis, Selected Financial Data, and Supplementary Financial Information.
B. Capitalization and Indebtedness
Not applicable.
C. Reasons for the Offer and Use of Proceeds
Not applicable.
The information set forth under the heading Financial Report Risk Factors of the 2020 Swedish Annual Report is incorporated herein by reference.
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ITEM 4. INFORMATION ON THE COMPANY
A. History and Development of the Company
General facts on the company
Legal and commercial name of the Parent Company: Telefonaktiebolaget LM Ericsson (publ).
Organization number: 556016-0680
Legal form of the Parent Company: A Swedish limited liability company, organized under the Swedish Companies Act.
Country of incorporation: Sweden.
Date of incorporation: The Parent Company was incorporated on August 18, 1918, as a result of a merger between AB LM Ericsson & Co. and Stockholms Allmänna Telefon AB.
Domicile: Our registered office is Telefonaktiebolaget LM Ericsson, SE164 83 Stockholm, Sweden. Our headquarters are located at Torshamnsgatan 21, Kista, Sweden.
Telephone number: +46 10 719 0000
Website: www.ericsson.com. The information included on our website is not incorporated herein by reference.
In addition, the SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC: http://www.sec.gov.
Agent in the US: Ericsson Inc., Vice President Legal Affairs, 6300 Legacy Drive, Plano, Texas 75024. Telephone number: +1 972 583 0000.
Shares: Ericssons Class A and Class B shares are traded on Nasdaq Stockholm. In the US, our American Depository Shares (ADS), each representing one underlying Class B share, are traded on NASDAQ New York.
Parent company operations: The business of the parent company, Telefonaktiebolaget LM Ericsson, consists mainly of corporate management, holding company functions and internal banking activities. Our parent company operations also include customer credit management activities performed by Ericsson Credit AB on a commission basis.
Subsidiaries and associated companies: For a list of our significant subsidiaries, please see Item 4C. Shares owned directly by the Parent Company . We are engaged in a number of minor joint ventures and cooperative arrangements. For more information regarding risks associated with joint ventures, strategic alliances and third-party agreements, please see Item 3D. Financial ReportRisk Factors.
Company history and development
Innovating to empower people, business and society
Our origins date back to 1876 when Alexander Graham Bell filed a patent application in the United States for the telephone. The same year, Lars Magnus Ericsson opened a small workshop in Stockholm to repair telegraph instruments and sell his own telephone equipment.
Today, Ericsson enables communications service providers to capture the full value of connectivity. The companys portfolio spans Networks, Digital Services, Managed Services, and Emerging Business and is designed to help our customers go digital, increase efficiency and find new revenue streams. Ericssons investments in innovation have delivered the benefits of telephony and mobile broadband to billions of people around the world.
The information set forth under the following headings of the 2020 Swedish Annual Report is incorporated herein by reference:
| Financial Report |
| This is Ericsson |
| Business strategy |
| Business model |
| Board of Directors Report |
| Business in 2020 |
| Financial Highlights Capital expenditures |
For capital expenditures we usually use available cash from operations.
| Notes to the Consolidated financial statements |
| Note E2 Business combinations |
| Note H6 Events after the reporting period |
The information set forth under the following headings of the 2020 Swedish Annual Report is incorporated herein by reference:
| Financial Report |
| This is Ericsson |
| Business strategy |
| Business model |
| Board of Directors report |
| Business in 2020 |
| Financial highlights Research and development, patents and licensing |
| Financial highlights Seasonality |
| Business results Segments |
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| Business results Market Areas |
| Sourcing and supply |
| Sustainability and Corporate Responsibility |
| Notes to the consolidated financial statements |
| Note B1 Segment information |
| Risk factors |
| Risks related to business activities and industry |
| Risks related to Ericssons financial situation |
| Legal and regulatory risk |
| Internal control risk |
| Environmental, social and governance risk |
| Corporate Governance Report |
| Regulation and compliance |
Disclosure pursuant to Section 219 of the Iran Threat Reduction and Syria Human Rights Act of 2012 (ITRA)
Ericsson has conducted business in Iran/Persia since the late nineteenth century, opened an office in Iran in 1973 and later established a local subsidiary in the country. Ericsson strongly believes in enabling communication for all and believes that access to communications can enable the right to health, education and freedom of expression. Ericssons business activities in Iran principally involve the sale of communications infrastructure related products and services, including support, installation and maintenance services. Ericssons exports from the European Union (the EU) to Iran are performed under export licenses from the Swedish Inspectorate of Strategic Products and in compliance with applicable economic sanctions and export controls.
Due to its operations in Iran, and having staff permanently in the country, Ericsson has contacts with its local customers and retains certain local suppliers, including banks, and service providers. In addition, Ericsson has other dealings incidental to its local activities, such as making payments for taxes, customs related services, salaries, rents, utilities, local accommodation, transportation, office and similar supplies. As a result, Ericsson has contact with companies and public functions that may be owned or controlled by the government of Iran. While Ericsson seeks to obtain information regarding the actual business names and ownership of customers and other counterparties in Iran through its policies and procedures designed to ensure that Ericsson knows its customers, it is challenging to determine ownership and control with certainty, particularly with respect to determining whether an entity engaged in commercial activities is owned or controlled by the government.
Ericsson always strives to honor its engagements with existing customers in compliance with applicable export controls, sanctions and other laws, rules and regulations, carefully evaluates the implications of any sanctions and continues to monitor developments in this area as it relates to the ability to continue delivering products and services to customers. As a result of the US withdrawal from the Joint Comprehensive Plan of Action (the JCPOA) in 2018, Ericsson has reduced its business and organization in Iran significantly but still continues to provide critical services and support to its customers in order for their networks to function. As Ericsson provides such services and support, it may need to interact with other counterparties. Ericsson continues to explore, including with EU and US authorities, whether and how the last years disruptive impact on the overall ability to support its customers can be reduced and, by doing so endeavor to avoid undue impacts on the access of the people of Iran to humanitarian items/basic services such as telecommunications.
During 2020, Ericsson sold communications infrastructure related products and services in Iran to the following telecommunications companies operating in the country: Mobile Communication Company of Iran (MCCI), and MTN Irancell. During 2020, Ericssons gross revenue (reported as net sales) related to sales to MCCI and MTN Irancell in Iran was approximately SEK 168 million. Ericsson does not normally allocate net profit (reported as net income) on a country-by-country or activity-by-activity basis, other than as set forth in Ericssons consolidated financial statements prepared in accordance with IFRS as issued by the IASB. However, Ericsson has estimated that its operating income (income before taxes and financial net) from such sales was, after internal cost allocation approximately SEK 90 million during 2020.
Ericsson uses the local banks Saman Bank and Pasargad Bank for local transactions in local currency, cash management and deposits. In some instances, Ericsson has had to arrange performance bonds or similar financial guarantees to secure Ericssons performance of obligations under the commercial agreements Ericsson has entered into relating to the business in Iran. In such instances, Ericsson usually engages its banks outside Iran, who in turn engage local banks in the country. These local banks include Tejarat Bank, Melli Bank, Parsian Bank, Saman Bank and Saderat Bank. Although some bonds and guarantees are still in place, no new performance bonds or similar guarantees involving these five banks with respect to Ericssons business activities in Iran were issued during 2020. During 2020, existing bank guarantees issued by Maskan Bank, Parsian Bank, Post Bank of Iran, Bank Mellat and Tejarat Bank (local banks in Iran) to secure Iranian customer payment obligations to Ericsson were renewed. Further, some payments made to Ericssons local subsidiary and payments required to be made by the local subsidiary to suppliers involve banks that may be controlled by the government of Iran.
The following list shows certain shareholdings owned directly and indirectly by our parent company as of December 31, 2020. A complete list of shareholdings, prepared in accordance with the Swedish Annual Accounts Act and filed with the Swedish Companies Registration Office (Bolagsverket), may be obtained upon request to: Telefonaktiebolaget LM Ericsson, External Reporting, SE-164 83 Stockholm, Sweden.
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Shares owned directly by the Parent Company
Company |
Reg. No. | Domicile | Percentage of ownership |
Par value in local currency, million |
Carrying value, SEK million |
|||||||||||||||
Subsidiary companies |
||||||||||||||||||||
Ericsson AB |
556056-6258 | Sweden | 100 | 50 | 20,731 | |||||||||||||||
Ericsson Shared Services AB |
556251-3266 | Sweden | 100 | 361 | 2,216 | |||||||||||||||
Ericsson Software Technology Holding AB |
559094-8963 | Sweden | 100 | | 6 | |||||||||||||||
Datacenter i Rosersberg AB |
556895-3748 | Sweden | 100 | | 88 | |||||||||||||||
Datacenter i Mjärdevi Aktiebolag |
556366-2302 | Sweden | 100 | 10 | 69 | |||||||||||||||
AB Aulis |
556030-9899 | Sweden | 100 | 14 | 6 | |||||||||||||||
Ericsson Credit AB |
556326-0552 | Sweden | 100 | 5 | 5 | |||||||||||||||
Other (Sweden) |
| | 1,709 | |||||||||||||||||
Ericsson Austria GmbH |
Austria | 100 | 4 | 94 | ||||||||||||||||
Ericsson Danmark A/S |
Denmark | 100 | 90 | 216 | ||||||||||||||||
Oy LM Ericsson Ab |
Finland | 100 | 13 | 196 | ||||||||||||||||
Ericsson France SAS |
France | 100 | 21 | 524 | ||||||||||||||||
Ericsson Antenna Technology Germany GmbH |
Germany | 100 | 2 | 21 | ||||||||||||||||
Ericsson Germany GmbH |
Germany | 100 | 1 | 4,232 | ||||||||||||||||
Ericsson Hungary Ltd. |
Hungary | 100 | 1,301 | 120 | ||||||||||||||||
L M Ericsson Limited |
Ireland | 100 | 4 | 34 | ||||||||||||||||
Ericsson Telecomunicazioni S.p.A. |
Italy | 100 | 44 | 3,857 | ||||||||||||||||
Ericsson Holding International B.V. |
The Netherlands | 100 | 222 | 3,200 | ||||||||||||||||
Ericsson A/S |
Norway | 100 | 75 | 114 | ||||||||||||||||
Ericsson Television AS |
Norway | 100 | 161 | 270 | ||||||||||||||||
Ericsson Corporatia AO |
Russia | 100 | 5 | 5 | ||||||||||||||||
Ericsson España S.A. |
Spain | 100 | 43 | 14 | ||||||||||||||||
Ericsson AG |
Switzerland | 100 | | | ||||||||||||||||
Ericsson Holdings Ltd. |
United Kingdom | 100 | 328 | 10 | ||||||||||||||||
Other (Europe, excluding Sweden) |
| | 664 | |||||||||||||||||
Ericsson Holding II Inc. |
United States | 100 | | 25,907 | ||||||||||||||||
Ericsson Smart Factory Inc. |
United States | 100 | | 191 | ||||||||||||||||
Companía Ericsson S.A.C.I. |
Argentina | 95 | 1) | 193 | 99 | |||||||||||||||
Ericsson Canada Inc. |
Canada | 100 | 8 | 51 | ||||||||||||||||
Belair Networks |
Canada | 100 | 108 | 170 | ||||||||||||||||
Ericsson Telecom S.A. de C.V. |
Mexico | 100 | 939 | 363 | ||||||||||||||||
Other (United States, Latin America) |
| | 121 | |||||||||||||||||
Teleric Pty Ltd. |
Australia | 100 | 20 | 100 | ||||||||||||||||
Ericsson Ltd. |
China | 100 | 2 | 2 | ||||||||||||||||
Ericsson (China) Company Ltd. |
China | 100 | 65 | 475 | ||||||||||||||||
P.T. Ericsson Indonesia |
Indonesia | 95 | 3,279 | 10 | ||||||||||||||||
Ericsson India Global Services PVT. Ltd |
India | 100 | 291 | 51 | ||||||||||||||||
Ericsson Kenya Limited |
Kenya | 100 | | 69 | ||||||||||||||||
Ericsson-LG CO Ltd. |
Korea | 75 | 285 | 2,279 | ||||||||||||||||
Ericsson (Malaysia) Sdn. Bhd. |
Malaysia | 70 | 2 | 4 | ||||||||||||||||
Ericsson Telecommunications Pte. Ltd. |
Singapore | 100 | 2 | 1 | ||||||||||||||||
Ericsson South Africa PTY. Ltd |
South Africa | 70 | | 135 | ||||||||||||||||
Ericsson Taiwan Ltd. |
Taiwan | 90 | 270 | 36 | ||||||||||||||||
Ericsson (Thailand) Ltd. |
Thailand | 49 | 2) | 90 | 17 | |||||||||||||||
Other countries (the rest of the world) |
| | 316 | |||||||||||||||||
Total |
68,798 | |||||||||||||||||||
Joint ventures and associated companies |
||||||||||||||||||||
Concealfab Co |
USA | 28 | 7 | 64 | ||||||||||||||||
Leone Media Inc. |
USA | 49 | 134 | 790 | ||||||||||||||||
Rockstar Consortium Group |
Canada | 21 | 1 | | ||||||||||||||||
Ericsson Nikola Tesla d.d. |
Croatia | 49 | 65 | 330 | ||||||||||||||||
Total |
1,184 |
1) | Through subsidiary holdings, total holdings amount to 100% of Compania Ericsson S.A.C.I. |
2) | Through subsidiary holdings, total holdings amount to 74% of Ericsson (Thailand) Ltd. |
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Shares owned by subsidiary companies
Company |
Reg. No. | Domicile | Percentage of ownership |
|||||||||
Subsidiary companies |
||||||||||||
Ericsson Cables Holding AB |
556044-9489 | Sweden | 100 | |||||||||
Ericsson France SAS |
France | 100 | ||||||||||
Ericsson Telekommunikation GmbH 1) |
Germany | 100 | ||||||||||
Ericsson Telecommunicatie B.V. |
The Netherlands | 100 | ||||||||||
Ericsson Telekomunikasyon A.S. |
Turkey | 100 | ||||||||||
Ericsson Ltd. |
United Kingdom | 100 | ||||||||||
Creative Broadcast Services Holdings Ltd. |
United Kingdom | 100 | ||||||||||
Ericsson Inc. |
United States | 100 | ||||||||||
Ericsson Wifi Inc. |
United States | 100 | ||||||||||
Redback Networks Inc. |
United States | 100 | ||||||||||
Telcordia Technologies Inc. |
United States | 83 | ||||||||||
Ericsson Telecomunicações S.A. |
Brazil | 100 | ||||||||||
Ericsson Australia Pty. Ltd. |
Australia | 100 | ||||||||||
Ericsson (China) Communications Co. Ltd. |
China | 100 | ||||||||||
Nanjing Ericsson Panda Communication Co. Ltd. |
China | 51 | ||||||||||
Ericsson Japan K.K. |
Japan | 100 | ||||||||||
Ericsson Communication Solutions Pte Ltd. |
Singapore | 100 |
1) | Disclosures Pursuant to Section 264b of the German Commercial Code (Handelsgesetzbuch HGB) Applying Section 264b HGB, Ericsson Holding GmbH and Ericsson Telekommunikation GmbH, located in Frankfurt am Main/Germany, are exempted from the obligation to prepare, have audited and disclose financial statements and a management report in accordance with the legal requirements being applicable for German corporations. |
D. Property, Plant and Equipment
Primary manufacturing and assembly facilities
We continuously adjust our production capacity to meet expected customer demand. During 2020, our overall capacity utilization** was around 62%.
The table below summarizes where we have major sites and the total floor space at year-end. All facilities are leased, other than Nanjing (China). The majority of the floor space within our production facilities is used for assembly and test.
2020 | 2019 | 2018 | 2017 | |||||||||||||||||||||||||||||
Sites | Thousands of sq meters * |
Sites | Thousands of sq meters * |
Sites | Thousands of sq meters * |
Sites | Thousands of sq meters * |
|||||||||||||||||||||||||
Sweden |
1 | 5 | 1 | 5 | 1 | 5 | 1 | 5 | ||||||||||||||||||||||||
China |
1 | 13.9 | 1 | 13.9 | 1 | 13.9 | 1 | 10 | ||||||||||||||||||||||||
Estonia |
1 | 9 | 1 | 9 | 1 | 8 | 1 | 6 | ||||||||||||||||||||||||
Brazil |
1 | 6.5 | 1 | 6.7 | 1 | 4.3 | 1 | 4.5 | ||||||||||||||||||||||||
USA |
1 | 6 | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||||||
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|
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Total |
5 | 40.4 | 4 | 34.6 | 4 | 31.2 | 4 | 25.5 | ||||||||||||||||||||||||
|
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|
|
|
|
|
|
|
|
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|
|
* | Floor space in square meters does not include any warehouses or transportation areas. |
** | Test capacity utilization. |
In March 2020, the Company opened its first fully-automated smart factory in Lewisville, TX, United States. The 300,000 square-foot smart factory began commercial operations producing millimeter-wave Street Macro base stations, which is key to Ericssons 5G portfolio for its North American customers. The companys direct investment in the factory was approximately USD $100 million.
In September 2019, the Company announced that its 269,000 square-foot factory in Tallinn, Estonia, was nearing completion of its two-year digitalization transformation, in the amount of SEK 500 million, to become a 5G manufacturing facility utilizing Ericssons own 5G technology. The factory became fully operational during the first quarter of 2020.
The investments were financed by cash flow from operations or by the financing activities described in our Swedish Annual Report 2019 and 2020.
The information set forth under the following headings of the 2020 Swedish Annual Report is incorporated herein by reference:
| Financial Report |
| Board of Directors report |
| Financial highlights Capital expenditures |
| Notes to the consolidated financial statements |
| Note C2 Property, plant and equipment |
| Note C3 Leases |
| Risk factors |
| Legal and regulatory risk |
| Environmental, social and governance risk |
ITEM 4A. Unresolved | Staff Comments |
None.
ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
Year-to-year comparisons between 2019 and 2018 have been omitted from this 2020 Form 20-F but may be found in Item 5. Operating and Financial Review and Prospects in our Form 20-F for the fiscal year ended December 31, 2019, which discussion is incorporated herein by reference.
https://www.sec.gov/Archives/edgar/data/717826/000119312520078974/0001193125-20-078974-index.htm
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The information set forth under the following headings of the 2020 Swedish Annual Report is incorporated herein by reference:
| Financial Report |
| This is Ericsson |
| Business strategy |
| Business model |
| Board of Directors report |
| Business in 2020 |
| Financial highlights |
| Business results Segments |
| Business results Market Areas |
| Risk management |
| Notes to the consolidated financial statements |
| Note A1 Significant accounting policies |
| Note F1 Financial risk management Foreign exchange risk |
| Risk Factors |
| Five-year summary Financial information |
| Five-year summary Non-Financial |
| Alternative performance measures |
B. Liquidity and Capital Resources
The information set forth under the following headings of the 2020 Swedish Annual Report is incorporated herein by reference:
| Financial Report |
| Board of Directors report |
| Financial highlights Cash flow |
| Financial highlights Financial position |
| Financial highlights Seasonality |
| Financial highlights Capital expenditures |
| Notes to the consolidated financial statements |
| Note B9 Other current liabilities |
| Note D2 Contingent liabilities |
| Note F1 Financial risk management |
| Note F4 Interest-bearing liabilities |
| Note H3 Statement of cash flows |
See Item 8.B. Financial Information Significant Changes herein.
C. Research and Development, Patents and Licenses
The information set forth under the following headings of the 2020Swedish Annual Report is incorporated herein by reference:
| Financial Report |
| Business Strategy technology leadership |
| Board of DirectorsResearch and development, patents and licensing |
| Risk factors Risks related to busines activities and industry |
The information set forth under the following headings of the 2020 Swedish Annual Report is incorporated herein by reference:
| Financial Report |
| CEO Comment |
| Board of Directors Report |
| Business in 2020 |
| Financial highlights Seasonality |
| Business results Segments |
| Business results Market Areas |
See Item 8.B. Financial Information Significant Changes herein.
E. Off-Balance Sheet Arrangements
The information set forth under the following headings of the 2020 Swedish Annual Report is incorporated herein by reference:
| Financial Report |
| Board of Directors report |
| Financial highlights Off-balance sheet arrangements |
| Notes to the consolidated financial statements |
| Note A1 Significant accounting policies |
| Note F1 Financial Risk Management |
| Note D2 Contingent liabilities |
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F. Tabular Disclosure of Contractual Obligations
| Financial Report |
| Notes to the consolidated financial statements |
| Note D4 Contractual obligations |
ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
A. Directors and Senior Management
The information set forth under the following headings of the 2020 Swedish Annual Report is incorporated herein by reference:
| Corporate Governance Report |
| Members of the Board of Directors |
| Members of the Executive Team |
See Item 8.B. Financial Information Significant Changes herein.
The information set forth under the following headings of the 2020 Swedish Annual Report is incorporated herein by reference:
| Financial Report |
| Board of Directors report |
| Corporate governance Remuneration |
| Guidelines for Remuneration to Group Management |
| Notes to the consolidated financial statements |
| Note G1 Post-employment benefits |
| Note G2 Information regarding members of the Board of Directors and Group management |
| Note G3 Share-based compensation |
| Corporate Governance Report |
| Remuneration to Board members |
| Remuneration report |
| Remuneration report 2020 |
See Item 8.B. Financial Information Significant Changes herein.
The information set forth under the following headings of the 2020 Swedish Annual Report is incorporated herein by reference:
| Financial Report |
| Notes to the consolidated financial statements |
| Note G2 Information regarding members of the Board of Directors and Group management Comments to the table |
| Corporate Governance Report |
| Board of Directors Composition of the Board of Directors and diversity |
| Committees of the Board of Directors Audit and Compliance Committee |
| Committees of the Board of Directors Remuneration Committee |
See Item 8.B. Financial Information Significant Changes herein.
The information set forth under the following headings of the 2020 Swedish Annual Report is incorporated herein by reference:
| Financial Report |
| Board of Directors report |
| Financial Highlights Employees |
| Notes to the Consolidated financial statements |
| Note G4 Employee Information |
| Five-year summary Financial information Statistical data, year-end |
| Five-year summary Non-financial information Statistical data, year-end |
We consider that our relationship with the labor unions that represent our employees is good.
7
Number of employees by market area at year-end
2020 | 2019 | 2018 | ||||||||||
South East Asia, Oceania and India |
25,869 | 24,559 | 23,959 | |||||||||
North East Asia |
13,944 | 13,783 | 12,788 | |||||||||
North America |
10,175 | 9,643 | 9,727 | |||||||||
Europe and Latin America 1) |
46,580 | 47,135 | 44,621 | |||||||||
Middle East and Africa |
4,256 | 4,297 | 4,264 | |||||||||
|
|
|
|
|
|
|||||||
Total |
100,824 | 99,417 | 95,359 | |||||||||
|
|
|
|
|
|
|||||||
1) Of which in EU |
35,552 | 37,989 | 35,268 | |||||||||
Of which in Sweden |
13,173 | 12,730 | 12,502 |
The information set forth under the following headings of the 2020 Swedish Annual Report is incorporated herein by reference:
| Financial Report |
| The Ericsson share Shareholders |
| Notes to the consolidated financial statements |
| Notes G2 Information regarding members of the Board of Directors and Group Management |
| Corporate Governance Report |
| Members of the Board of Directors |
| Members of the Executive Team |
| Remuneration report |
| Remuneration report 2020 |
ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
The information set forth under the following headings of the 2020 Swedish Annual Report is incorporated herein by reference:
| Financial Report |
| The Ericsson Share Shareholders |
| Corporate Governance Report |
| Governance structure Ownership structure |
The information set forth under the following heading of the 2020 Swedish Annual Report is incorporated herein by reference.
| Financial Report |
| Notes to the consolidated financial statements |
| Note H4 Related party transactions |
C. Interests of Experts and Counsel.
Not applicable.
ITEM 8. FINANCIAL | INFORMATION |
A. Consolidated Statements and Other Financial Information.
The information set forth under the following headings of the 2020 Swedish Annual Report is incorporated herein by reference:
| Financial Report |
| Board of Directors report |
| Legal proceedings |
| Parent Company Proposed disposition of earnings |
| Consolidated financial statements |
| Notes to the consolidated financial statements |
| Report of independent registered public accounting firm |
| Five-year summary Financial informationStatistical data, year-end |
See Item 8.B. Financial Information Significant Changes, Item 10.B. Memorandum and Articles of Association Dividends and Item 17. Financial Statements, herein.
Refer also to item 8.B herein
Not applicable.
ITEM 9. | THE OFFER AND LISTING |
The information set forth in Exhibit 2.[3], Description of Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934. is incorporated herein by reference.
8
Not applicable.
The information set forth in Exhibit 2.[3], Description of Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934. is incorporated herein by reference.
Not applicable.
Not applicable.
Not applicable.
ITEM 10. ADDITIONAL INFORMATION
Not applicable.
B. Memorandum and Articles of Association
The information set forth in Exhibit 2.[3], Description of Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934. is incorporated herein by reference.
The information set forth under the following headings of the 2020 Swedish Annual Report is incorporated herein by reference:
| Financial Report |
| Board of Directors report |
| Material contracts |
There is no Swedish legislation affecting the import or export of capital or the remittance of dividends, interest or other payments to non-resident holders of our securities, except that, subject to the provisions in any tax treaty, dividends are subject to withholding tax.
General
The taxation discussion set forth below does not purport to be a complete analysis or listing of all potential tax effects relevant to the acquisition, ownership or disposition of Class B shares or ADSs. The statements of United States and Swedish tax laws set forth below are based on the laws in force as of the date of this report and may be subject to any changes in United States or Swedish law, and in any double taxation convention or treaty between the United States and Sweden, occurring after that date, which changes may then have retroactive effect.
Specific tax provisions may apply for certain categories of taxpayers. Your tax treatment if you are a holder of Class B shares or ADSs depends in part on your particular situation. If you are a holder of Class B shares or ADSs, you should therefore consult a tax advisor as to the tax consequences relating to your particular circumstances resulting from the ownership of Class B shares or ADSs.
The tax consequences to holders of ADSs, as discussed below, apply equally to holders of Class B shares.
Certain Swedish Tax Considerations
This section describes the material Swedish income and net wealth tax consequences for a holder of ADSs or Class B shares who is not considered to be a Swedish resident for Swedish tax purposes. This section applies to you only if you are a holder of portfolio investments representing less than 10% of capital and votes and is not applicable if the ADSs or Class B shares pertain to a permanent establishment or fixed place of business in Sweden.
Taxation on Capital Gains
Generally, non-residents of Sweden are not liable for Swedish capital gains taxation with respect to the sale of ADSs or Class B shares. However, under Swedish tax law, capital gains from the sale of shares in Swedish companies and certain other securities by an individual may be taxed in Sweden at a rate of 30% if the seller has been a resident of Sweden or has lived permanently in Sweden at any time during the year of the sale or the 10 calendar years preceding the year of the sale (absent treaty provisions to the contrary). The provision is applicable to ADSs or Class B shares. From January 1, 2008, the rule has been extended so that it also applies to shares in foreign companies, provided that the shares were acquired during the time that the person was liable to tax in Sweden.
This provision may, however, be limited by tax treaties that Sweden has concluded with other countries. Under the tax treaty between Sweden and the United States (the U.S. Tax Treaty), this provision applies for ten years from the date the individual became a non-resident of Sweden.
Taxation on Dividends
A Swedish dividend withholding tax at a rate of 30% is imposed on dividends paid by a Swedish corporation, such as us, to non-residents of Sweden. The same withholding tax applies to certain other payments made by a Swedish corporation, including payments as a result of redemption of shares and repurchase of stock through an offer directed to its shareholders. Exemption from the withholding tax or a lower tax rate may apply by virtue of a tax treaty. Under the U.S. Tax Treaty, the withholding tax on dividends paid on portfolio investments to eligible U.S. holders is reduced to 15%.
Under all Swedish tax treaties, except the tax treaty with Switzerland, withholding tax at the applicable treaty rate should be withheld by the payer of the dividends. With regard to dividends paid from shares in corporations registered with the Euroclear Sweden (such as our shares), a reduced rate of dividend withholding tax under a tax treaty is generally applied at the source by the Euroclear Sweden or, if the shares are registered with a nominee, the nominee, as long as the person entitled to the dividend is registered as a non-resident and sufficient information regarding the tax residency of the beneficial owner is available to the Euroclear Sweden or the nominee.
9
In those cases where Swedish withholding tax is withheld at the rate of 30% and the person who received the dividends is entitled to a reduced rate of withholding tax under a tax treaty, a refund may be claimed from the Swedish tax authorities before the end of the fifth calendar year following the year that the distribution was made.
Taxation on Interest
No Swedish withholding tax is payable on interest paid to non-residents of Sweden.
Net Wealth Taxation
The Swedish net wealth tax has been abolished from January 1, 2007.
Certain United States Federal Income Tax Consequences
The following discussion is a summary of the material United States federal income tax consequences relevant to the ownership and disposition of ADSs or Class B shares. This discussion is based on the tax laws of the United States (including the Internal Revenue Code of 1986, as amended (the Code), its legislative history, existing and proposed regulations thereunder, published rulings and court decisions) as in effect on the date hereof, all of which are subject to change, possibly with retroactive effect. The discussion is not a full discussion of all tax considerations that may be relevant to the ownership and disposition of ADSs or Class B shares, and does not address the Medicare tax on net investment income or the effects of any state, local or foreign tax laws. The discussion applies only if you will hold the ADSs and/or the Class B shares as capital assets and you use the USD as your functional currency. It does not deal with the tax treatment of investors subject to special rules, such as grantor trusts, real estate investment trusts, regulated investment companies, banks, brokers or dealers in securities or currencies, traders in securities that elect to use a mark-to-market method of recording for their securities holdings, financial institutions, insurance companies, persons required to accelerate the recognition of any item of gross income with respect to our ADSs or Class B shares as a result of such income being recognized on an applicable financial statement, tax-exempt entities, investors liable for alternative minimum tax, holders (either actually or constructively) of 10% or more of the voting power or the value of our shares, persons holding ADSs and/or Class B shares as part of a hedging, straddle, conversion or constructive sale transaction and persons who are resident or ordinarily resident in Sweden. In addition, investors holding ADSs and/or Class B shares indirectly through partnerships are subject to special rules not discussed below. You should consult your own tax advisors about the United States federal, state, local and foreign tax consequences to you of the ownership and disposition of the ADSs or Class B shares.
The discussion below applies to you only if you are a beneficial owner of ADSs and/or Class B shares not resident in Sweden for purposes of the U.S. Tax Treaty and you are, for United States federal income tax purposes, (1) a citizen or resident of the United States, (2) a corporation or any other entity treated as a corporation that is organized in or under the laws of the United States or its political subdivisions, including the District of Columbia, (3) a trust if all of the trusts substantial decisions are subject to the control of one or more United States persons and the primary supervision of the trust is subject to a United States court, or if a valid election is in effect with respect to the trust to be taxed as a United States person, or (4) an estate the income of which is subject to United States federal income taxation regardless of its source.
The discussion below assumes that the representations contained in the deposit agreement governing the ADSs are true and that the obligations in the deposit agreement and any related agreement will be complied with in accordance with the terms. If you hold ADSs, you will be treated as the holder of the underlying Class B shares represented by those ADSs for United States federal income tax purposes.
Dividends
Subject to the passive foreign investment company rules discussed below, the gross amount of dividends paid (before reduction for any Swedish withholding taxes) with respect to the ADSs or Class B shares generally will be included in your gross income as ordinary income from foreign sources to the extent paid out of our current or accumulated earnings and profits (as determined for United States federal income tax purposes). Distributions in excess of earnings and profits will be treated as a non-taxable return of capital to the extent of your adjusted tax basis in the ADSs or Class B shares and thereafter as capital gain. The dividends will not be eligible for the dividends received deduction available to corporations in respect of dividends received from other U.S. corporations. The amount of any dividend paid in SEK will be the USD value of the dividend payment based on the exchange rate in effect on the date of receipt (or constructive receipt) by you, in the case of Class B shares, or by the depositary, in the case of ADSs, whether or not the payment is converted into USD at that time. Your tax basis in the SEK received will equal such USD amount. Gain or loss, if any, recognized on a subsequent sale or conversion of the SEK will be U.S. source ordinary income or loss.
If you are a non-corporate holder of ADSs or Class B shares, dividends you receive on the ADSs or Class B shares may be taxed at the lower applicable long-term capital gains rate provided that (1) we are not a passive foreign investment company (as discussed below) for either our taxable year in which the dividend was paid or the preceding taxable year, (2) certain holding period requirements are met, (3) you are not under any obligation to make related payments with respect to substantially similar or related property and (4) either (a) in the case of ADSs our ADSs continue to be listed on the Nasdaq Stock Market (or a national securities exchange that is registered under section 6 of the Securities Exchange Act of 1934, as amended) or (b) we are eligible for the benefits of the U.S. Tax Treaty. You should consult your own tax advisors regarding the availability of the lower rate for dividends paid with respect to ADSs or Class B shares.
Subject to certain limitations, you will generally be entitled to receive credit against your United States federal income tax liability (or a deduction against your United States federal taxable income) with respect to any Swedish tax withheld in accordance with the U.S. Tax Treaty and paid over to Sweden. If a refund of the tax withheld is available to you under the laws of Sweden or under the U.S. Tax Treaty, the amount of tax withheld that is refundable will not be eligible for such credit against your United States federal income tax liability (and will not be eligible for the deduction in computing your United States federal taxable income). For foreign tax credit limitation purposes, dividends will be income from sources without the United States, and will generally be treated as passive category income (or, in the case of certain holders, general category income).
Sale or Exchange of ADSs or Class B shares
Subject to the passive foreign investment company rules discussed below, you will generally recognize capital gain or loss on the sale or other disposition of the ADSs or Class B shares equal to the difference between the USD value of the amount realized and your adjusted tax basis (determined in USD) in the ADSs or Class B shares. Such gain or loss will generally be long-term capital gain or loss if you have held the ADSs or Class B shares for more than one year, and will generally be treated as arising from U.S. sources for foreign tax credit limitation purposes. If you are a non-corporate holder of ADSs or Class B Shares, long-term capital gains are eligible for reduced rates of taxation. The deductibility of capital losses is subject to limitations.
The amount realized on a disposition of ADSs or Class B shares for cash will generally be the amount of cash you receive for the ADSs or Class B shares (which, in the case of payment in a non-U.S. currency, will equal the USD value of the payment received determined on (a) the date of receipt of payment if you are a cash basis taxpayer and (b) the date of disposition if you are an accrual basis taxpayer). If the ADSs or Class B shares are treated as traded on an established securities market and you are a cash basis taxpayer (or, if you are an accrual basis taxpayer, if you so elect), you will determine the USD value of the amount realized by translating the amount received at the spot rate of exchange on the settlement date of the sale.
You will have a tax basis in any foreign currency received equal to the USD value thereof on the date of receipt. Any gain or loss you realize on a subsequent sale or conversion of foreign currency will be U.S. source ordinary income or loss.
Passive Foreign Investment Company Status
A non-U.S. corporation is a passive foreign investment company (a PFIC) in any taxable year in which, after taking into account the income and assets of certain subsidiaries, either (a) at least 75% of its gross income is passive income or (b) at least 50% of the quarterly average value of its assets is attributable to assets that produce or are held to produce passive income. Based on the market value of our shares, the composition of our assets and income and our operations, we believe we were not a PFIC during the year 2020. However, whether or not we will be considered a PFIC will depend on the nature and source of our income and the composition and value of our assets, as determined from time to time. If we are treated as a PFIC, we will not provide information necessary for the qualified electing fund election as the term is defined in the relevant provisions of the Code. You should consult your own tax advisors about the consequences of our potential classification as a PFIC.
10
If we were classified as a PFIC with respect to your ADSs or Class B shares for any taxable year, we would generally continue to be a PFIC (unless certain conditions are met), and you would be subject to special rules with respect to:
| any gain realized on the sale or other disposition of ADSs or Class B shares; or |
| any other excess distribution made to you (generally, any distributions to you in respect of ADSs or Class B shares during a single taxable year that are, in the aggregate, greater than 125% of the average annual distributions received by you in respect of ADSs or Class B shares during the three preceding taxable years or, if shorter, your holding period for ADSs or Class B shares). |
Under these rules:
| the gain or any other excess distribution would be allocated ratably over your holding period for ADSs or Class B shares; |
| the amount allocated to the taxable year in which the gain or excess distribution was realized and any year before we became a PFIC would be taxable as ordinary income; |
| the amount allocated to each prior year, other than the current year and any taxable year prior to the first taxable year in which we were a PFIC, would be subject to tax at the highest applicable marginal tax rate in effect for each such year; and |
| an interest charge would be imposed. |
If we are a PFIC for any taxable year, you will also be deemed to own shares in any of our subsidiaries that are also PFICs in such a year. As an alternative to the special rules described above, holders of marketable stock in a PFIC may elect mark-to-market treatment with respect to their ADSs or Class B shares. ADSs or Class B shares will not be considered marketable stock unless they are regularly traded on a qualified exchange or other market. If the mark-to-market election is available and you elect mark-to-market treatment you will, in general, include as ordinary income each year an amount equal to the increase in value of your ADSs or Class B shares for that year (measured at the close of your taxable year) and will generally be allowed a deduction for any decrease in the value of your ADSs or Class B shares for the year but only to the extent of previously included mark-to-market income. In addition, any gain you recognize upon the sale or other disposition of the ADSs or Class B shares will be treated as ordinary income and any loss will be treated as ordinary loss but only to the extent of previously included mark-to-market income. Any loss in excess of previously included mark-to-market income will be treated as a capital loss. However, a mark-to-market election would likely be unavailable with respect to your proportionate share in any of our subsidiaries that are PFICs.
If you own ADSs or Class B shares during any year in which we are a PFIC, you will generally be required to make an annual return on IRS Form 8621.
Information Reporting and Backup Withholding
In general, information reporting requirements will apply to dividends paid in respect of ADSs or Class B shares and the proceeds received on the sale or exchange of the ADSs or Class B shares within the United States or by a broker with certain United States connections. Backup withholding may apply to payments to you of dividends paid in respect of ADSs or Class B shares or the proceeds of a sale or other disposition of ADSs or Class B shares if you fail to provide an accurate taxpayer identification number (certified on IRS Form W9) or, upon request, to certify that you are not subject to backup withholding or otherwise to comply with the applicable requirements of the backup withholding rules. The amount of any backup withholding from a payment to you will be allowed as a credit against your United States federal income tax liability, and a refund of any excess amount withheld under the backup withholding rules may be obtained by filing the appropriate claim for refund with the Internal Revenue Service and furnishing any required information.
Additional Reporting Requirements
Certain holders who are individuals may be required to report information relating to an interest in ADSs or Class B shares, subject to certain exceptions (including an exception for ADSs or Class B shares held in accounts maintained by certain financial institutions). Holders should consult their tax advisors regarding the effects, if any, of these requirements on their ownership and disposition of ADSs or Class B shares.
F. Dividends and Paying Agents
Not applicable.
Not applicable.
Annual reports and other information are filed with, or furnished to, the SEC in the United States, pursuant to the rules and regulations that apply to foreign private issuers. Electronic access to these documents may be obtained from the SECs website, www.sec.gov, where they are stored in the EDGAR database.
See Item 4.C. Information on the Company Organizational Structure.
ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
A. Quantitative information about market risk
The information set forth under the following heading of the 2020 Swedish Annual Report is incorporated herein by reference.
| Financial Report |
| Board of Directors report |
| Risk management |
| Notes to the consolidated financial statements |
| Note F1 Financial risk management |
11
B. Qualitative information about market risk
The information set forth under the following headings of the 2020 Swedish Annual Report is incorporated herein by reference:
| Financial Report |
| Board of Directors report |
| Risk management |
| Notes to the consolidated financial statements |
| Note F1 Financial risk management |
| Corporate Governance Report |
| Management |
| Risk management |
C. Interim periods
Not applicable.
D. Safe harbor
Not applicable.
E. Small business issuers
Not applicable.
12
ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
Not applicable.
Not applicable.
Not applicable.
Depositary fees, charges and payments
During 2020, an annual service fee of $0.02 was charged per ADS, for the operation and maintenance costs in administering the ADS program. The Depositary, Deutsche Bank Trust Company Americas (Deutsche Bank), established October 20, 2020 as the record date for payment of annual servicing fees. During 2020, an annual dividend fee of $0.01 was charged per ADS. The Depositary, Deutsche Bank, established April 2, 2020 and October 2, 2020 as the record dates for payments of the dividend fee.
Fees and charges payable by ADS holders
Service |
Rate |
By whom paid | ||||
1) | Deposit of shares and issuance of receipts | Up to USD 5 per 100 American Depositary Shares or fraction thereof | Party to whom receipts are issued | |||
2) | Delivery of deposited shares against surrender of receipts | Up to USD 5 per 100 American Depositary Shares or fraction thereof | Party surrendering receipts | |||
3) | Distribution of Cash Dividends and Cash Proceeds processing | Up to USD 3 per 100 American Depositary Shares | All holders of American Depositary Shares | |||
4) | Administration of the ADSs | Up to USD 3 per 100 American Depositary Shares per annum | All holders of American Depositary Shares |
In addition to the fees of the Depositary enumerated above, ADS holders are required under the terms of the Deposit Agreement to bear the following: (i) taxes and other governmental charges, (ii) share transfer registration fees on deposits, (iii) certain cable and facsimile transmission and delivery charges, and (iv) such expenses as are incurred by Deutsche Bank in the conversion of foreign currency into dollars.
Fees payable by the Depositary to the Issuer
Effective January 2019, Deutsche Bank agreed to pay Ericsson an amount equal to a fixed percentage of the net revenues, if any, collected by it as a result of charging ADS holders issuance and cancellation fees, and dividend processing and annual servicing fees. In 2020, such amount totaled approximately USD11.5 million.
Effective January 2019, Deutsche Bank waived the cost of providing the ADS program administrative and reporting services to the extent provided by Deutsche Bank, and has agreed to bear the cost of certain third-party out-of-pocket costs related to the ADS program up to USD 50,000 per year. These costs include costs for the local custodians administration of matters relating to meetings of shareholders and costs of certain transfer agent administration services, such as the registration and transfer of depositary receipts. In 2020, such amount totaled approximately USD 76,200.
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ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
None.
ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
None.
ITEM 15. CONTROLS AND PROCEDURES
A. Disclosure Controls and Procedures
The information set forth under the following heading of the 2020 Swedish Annual Report is incorporated herein by reference:
| Corporate Governance Report |
| Internal control over financial reporting Disclosure controls and procedures |
B. Managements Annual Report on Internal Control Over Financial Reporting
The information set forth under the section Financial Report Managements report on internal control over financial reporting of the 2020 Swedish Annual Report is incorporated herein by reference.
C. Attestation Report of the Registered Public Accounting Firm
The information set forth under the section Financial Report Report of independent registered public accounting firm of the 2020 Swedish Annual Report is incorporated herein by reference.
D. Changes in Internal Control Over Financial Reporting
The information set forth under the following heading of the 2020 Swedish Annual Report is incorporated herein by reference:
| Corporate Governance Report |
| Internal control over financial reporting Internal control over financial reporting |
ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT
The information set forth under the following heading of the 2020 Swedish Annual Report is incorporated herein by reference.
| Corporate Governance Report |
| Committees of the Board of Directors |
| Audit Committee Members of the Audit Committee |
Our Code of Business Ethics is available on our website at https://www.ericsson.com/en/about-us/corporate-governance/code-of-ethics. The Company will promptly disclose to our shareholders, if required by applicable laws or stock exchange requirements, any amendments to or waivers from the Code of Business Ethics applicable to our directors or officers by posting such information on our website at https://www.ericsson.com/en/about-us/corporate-governance/code-of-ethics.
The information set forth under the following headings of the 2020 Swedish Annual Report is incorporated herein by reference:
| Corporate Governance Report |
| Regulation and Compliance Code of business ethics |
ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information set forth under the Section Financial Report Notes to the consolidated financial statementsNote H5 Fees to auditors of the 2020 Swedish Annual Report is incorporated herein by reference.
Audit and Compliance Committee Pre-Approval Policies and Procedures
The Audit and Compliance Committee reviews and approves the scope of audits to be performed by external and internal auditors and analyzes their results and costs. The Audit and Compliance Committee keeps the Board of Directors informed about the external and internal auditors performance. It also makes recommendations to the Nomination Committee regarding the external auditors election and fees. In order to ensure the external auditors independence, the Audit and Compliance Committee has established pre-approval policies and procedures for audit and non-audit services to be performed by the external auditor. Pre-approval authority may not be delegated to management. The policies and procedures include a list of prohibited services, and audit and non-audit services that require pre-approval by the Committee. Such services fall into two broad categories:
| General pre-approval certain services regarding taxes, transactions, risk management, business improvement, attestation and accounting services and the so called general services (other than prohibited services) have received general pre-approval by the Audit and Compliance Committee, provided that the estimated fee for each project does not exceed SEK 1 million. The external auditor must advise the Audit and Compliance Committee with a quarterly summary of ongoing projects related to audit and non-audit services and an annual report of fees and expenses for all audit and non-audit services. |
| Specific pre-approval all other non-audit services and services subject to general pre-approval exceeding SEK 1 million must receive specific pre-approval. The external auditor submits an application in writing to the Parent Company for final approval by the Audit and Compliance Committee, including a statement as to whether, in the view of the external auditor, the contemplated services are consistent with applicable rules on their independence. The Audit and Compliance Committee Chairman has the delegated authority for specific pre-approval in between Committee meetings, provided that the estimated fee in each case does not exceed SEK 2.5 million. The Chairman reports any pre-approval to the Audit and Compliance Committee at its next meeting. |
All services provided in 2020 by the independent auditors were pre-approved in accordance with the pre-approval policies and procedures described above.
ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
All members of the Audit Committee of a NASDAQ New York-listed company must be independent in accordance with NASDAQ New York and SEC rules. SEC Rule 10A-3(b)(1)(iv)(C) under the Exchange Act includes a specific exemption from these independence requirements for Audit Committee members of foreign private issuers who are non-executive employee representatives appointed to the Audit Committee pursuant to local law. The Company relies on this exemption, and does not consider that such reliance materially adversely affects the ability of the Audit and Compliance Committee to act independently or to satisfy other SEC requirements applicable to Audit Committees.
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ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
None.
ITEM 16F. CHANGE IN REGISTRANTS CERTIFYING ACCOUNTANT
The Nomination Committee, which is comprised of the Chair of the Board of Directors and representatives of Ericssons largest shareholders by voting power, is responsible for proposing the external auditor for election by the shareholders, upon recommendation from the Audit and Compliance Committee of the Board of Directors. Under applicable auditor rotation rules, Ericsson was required to change auditors from its previous auditor Pricewaterhouse Coopers AB no later than in 2021. In light of the foregoing and to secure a timely auditor relation, in 2018, Ericsson initiated a tendering process, overseen by the Audit and Compliance Committee, for appointment of Ericssons auditor for the financial year 2020 to be elected by the shareholders at the 2020 Annual General Meeting of shareholders, held on March 31, 2020 (2020 AGM). Based on the results of this tendering process, the Audit and Compliance Committee recommended the Nomination Committee to propose that Deloitte AB (Deloitte) be elected new auditor at the 2020 AGM. The Nomination Committees proposal to elect Deloitte as new auditor, was made public by the Company on February 21, 2020. During the 2020 AGM, Deloitte was elected new auditor for the fiscal year ending December 31, 2020 and after the 2020 AGM, PwC resigned as auditors.
In respect of fiscal years 2018 and 2019 and the subsequent interim period through March 31, 2020:
| PwC did not issue any report on Ericssons consolidated financial statements or on the effectiveness of Ericssons internal control over financial reporting that contained an adverse opinion or a disclaimer of opinion. The relevant PwC auditors reports were not qualified or modified as to uncertainty, audit scope or accounting principles. |
| there has not been any disagreement with PwC on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreement, if not resolved to PwCs satisfaction, would have caused PwC to make reference to the subject matter of the disagreement in connection with its auditors reports, or any reportable event as described in Item 16F(a)(1)(v) of Form 20-F. |
Ericsson provided PwC with a copy of the foregoing disclosure in connection with its Annual Report on Form 20-F for the year ended December 31, 2020, and requested that they furnish it with a letter addressed to the US Securities and Exchange Commission stating whether it agrees with such disclosure and, if not, stating the respects in which it does not agree. A copy of PwCs letter dated March 25, 2021, in which they stated that they agree with such disclosure, is incorporated by reference as Exhibit 16.1.
In respect of fiscal years 2018 and 2019 and the subsequent interim period through March 31, 2020, neither:
the Company nor anyone on its behalf consulted Deloitte regarding either the application of accounting principles to a specific transaction, either completed or proposed; or the type of audit opinion that might be rendered on the Companys consolidated financial statements, and either a written report was provided to the Company or oral advice was provided that Deloitte concluded was an important factor considered by the Company in reaching a decision as to the accounting, auditing or financial reporting issue, or regarding any matter that was either the subject of a disagreement (as defined in Item 16F(a)(1)(iv)) or a reportable event (as defined in Item 16F(a)(1)(v)).
ITEM 16G. CORPORATE GOVERNANCE
Ericsson, as a company whose shares are listed on NASDAQ New York, is subject to the listing requirements and certain of the corporate governance requirements of NASDAQ New York and to certain rules of the SEC.
Under NASDAQ New York rules, all members of the audit committee of a NASDAQ New York- listed company must be independent in accordance with SEC rules. SEC rules include a specific exemption from these independence requirements for an employee of a foreign private issuer who is not an executive officer if the employee is elected or named to the board of directors or audit committee pursuant to the issuers governing law or documents, or other home country legal or listing requirements. The Company relies on this exemption and does not consider that such reliance materially adversely affects the ability of the Audit and Compliance Committee to act independently or to satisfy other SEC requirements applicable to audit committees.
Under NASDAQ New York rules, Ericsson is permitted to follow home country practices in lieu of certain NASDAQ corporate governance requirements that would apply to US companies listed on NASDAQ New York. The rules require disclosures regarding the ways in which Ericssons corporate governance practices differ from those required of US companies under the rules of NASDAQ New York.
These differences include the following:
| Employee representatives are appointed to Ericssons Board of Directors and serve on Committees (including the Audit and Compliance Committee and the Remuneration Committee) in accordance with Swedish law. |
| Employee representatives on the Ericsson Board and committees may attend all meetings of the Board and committees on which they serve (including those of the Audit and Compliance Committee and the Remuneration Committee) in accordance with Swedish law. |
| In accordance with Swedish market practices, the Nomination Committee is not fully comprised of Board members. In addition to the Chair of the Board, representatives of the four largest shareholders are members of the current Nomination Committee of Ericsson. |
| The determination regarding independence of Board members is made by the Nomination Committee (instead of the Board) prior to the Annual General Meeting of Shareholders (AGM). Before the AGM 2020, the Nomination Committee determined that the following Board members were independent under all applicable independence requirements, including the NASDAQ New York rules: Jon Fredrik Baksaas, Jan Carlson, Nora Denzel, Eric A. Elzvik, Kurt Jofs and Kristin S. Rinne. When appointing members to the committees of the Board, the Board makes determinations regarding committee member independence. |
| The Board holds non-executive directors sessions but does not have regularly scheduled meetings with only independent directors present. |
| Under applicable Swedish rules, Ericsson is not required to publicly disclose the material terms of all agreements and arrangements between its directors or nominees for director and any person or entity (other than Ericsson) relating to compensation or other payment in connection with such persons candidacy or service as a director of the company. |
| The external auditor is elected by the shareholders and is proposed by the Nomination Committee upon recommendation from the Audit and Compliance Committee. |
| NASDAQ New York rules applicable to US companies require the consideration of six factors relating to the independence of compensation consultants, legal counsel or other advisers retained by compensation or remuneration committees. Consistent with Swedish practices, the Remuneration Committees procedures addressing independence of advisers do not expressly require the consideration of those six factors. |
| Ericsson does not solicit proxies for shareholder meetings, which is in accordance with Swedish practices and rules. |
| There are no minimum quorum requirements for shareholder meetings under Swedish law, except under certain limited circumstances. Certain resolutions requiring special quorums and majorities are described under Memorandum and Articles of Association. |
| Some of the requirements addressed by NASDAQ New York rules are included in the Swedish Corporate Governance Code or the work procedure for the Board instead of committee charters. The work procedure establishes the attribution of various responsibilities among the Board, its committees and the President and CEO. The work procedure for the Board is reviewed, evaluated and amended as required or appropriate, and adopted by the Board at least once a year. |
See Item 8.B. Financial Information Significant Changes herein.
15
ITEM 16H. MINE SAFETY DISCLOSURE
Not applicable.
See our consolidated financial statements and accompanying notes of the 2020 Swedish Annual Report.
| Consolidated income statement and Consolidated statement of comprehensive income |
| Consolidated balance sheet |
| Consolidated statement of cash flows |
| Consolidated statement of changes in equity |
| Notes to the consolidated financial statements |
| Report of independent registered public accounting firm |
Not applicable.
16
EXHIBIT INDEX
The agreements and other documents filed as exhibits to this 2020 Form 20-F are not intended to provide factual information or other disclosure other than with respect to the terms of the agreements or other documents themselves, and you should not rely on them for that purpose. In particular, any representations and warranties made by the registrant in these agreements or other documents were made solely within the specific context of the relevant agreement or document and may not describe the actual state of affairs as of the date they were made or at any other time.
Securities Exhibit
17
Exhibit Number |
Description | |
101.INS*** | XBRL Instance Document. | |
101.SCH*** | XBRL Taxonomy Extension Schema Document. | |
101.CAL*** | XBRL Taxonomy Extension Calculation Linkbase Document. | |
101.DEF*** | XBRL Taxonomy Definition Linkbase Document. | |
101.LAB*** | XBRL Taxonomy Extension Label Linkbase Document. | |
101.PRE*** | XBRL Taxonomy Extension Presentation Linkbase Document. |
* | This certification will not be deemed filed for purposes of Section 18 of the Exchange Act (15 U.S.C. §78r), or otherwise subject to the liability of that section. Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent that the Registrant specifically incorporates it by reference. |
** | Certain of the information included in Exhibit 15.1 is incorporated by reference into this 2020 Form 20-F, as specified elsewhere in this report, in accordance with Rule 12b-23(a)(3) of the Securities Exchange Act of 1934, as amended. With the exception of the items so specified, the 2019 Swedish Annual Report is not deemed to be filed as part of this 2020 Form 20-F. |
*** | In accordance with Rule 406T(b)(2) of Regulation S-T, such XBRL information will be furnished and not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, will be deemed not filed for purposes of Section 18 of the Exchange Act of 1934, as amended, and otherwise will not be subject to liability under those sections. |
18
SIGNATURES
The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this Annual Report on Form 20-F on its behalf.
TELEFONAKTIEBOLAGET LM ERICSSON | ||
By: | /s/ JONAS STRINGBERG | |
Name: | Jonas Stringberg | |
Title: | Vice President, Head of Financial Control and Business Services |
By: | /s/ XAVIER DEDULLEN | |
Name: | Xavier Dedullen | |
Title: | Senior Vice President, Chief Legal Officer |
Date March 25, 2021
19
Exhibit 2.3
Description of Securities
Registered Pursuant to Section 12 of the
Securities Exchange Act of 1934
All references below to Ericsson, the Company, we, our or us refer to Telefonaktiebolaget LM Ericsson, and not to its subsidiaries.
As of December 31, 2020, Ericsson had one class of securities registered under Section 12 of the Securities Exchange Act of 1934, as amended: American Depositary Shares, each representing one Class B share. Ericssons Class A and Class B Shares are listed on Nasdaq Stockholm. In the United States, the American Depositary Shares representing Class B Shares are listed on NASDAQ New York under the symbol ERIC.
The following description of our share capital and American Depositary Shares is a summary and does not purport to be complete. It is subject to and qualified in its entirety by reference to our Articles of Association, as amended (our Articles), the Second Amended and Restated Deposit Agreement, dated as of January 7, 2014, among Ericsson and Deutsche Bank Trust Company Americas, as amended (deposit agreement), and the form of American Depositary Receipt, which are incorporated by reference as exhibits to the Annual Report on Form 20-F of which this Exhibit is a part. We encourage you to read our Articles, and the applicable provisions of the Swedish Companies Act for additional information.
DESCRIPTION OF SHARE CAPITAL
REGISTER AND COMPANY PURPOSE
Telefonaktiebolaget LM Ericsson is registered under no. 5560160680 in the Company Register kept by the Swedish Companies Registration Office.
Our Companys objective and purposes are described in article 2 of the Articles, as follows: The objects of the Company are to, directly or indirectly, develop, construct, produce, sell and deliver and in other forms carry on trade and other commercial business related to goods, products and other equipment as well as maintenance and other services based on telecommunication and radio technology and other technologies for transference, transmission and other communications of speech, data, images, text, other kinds of information and means of payment and to carry on other activities consistent therewith.
SUMMARY OF PROVISIONS RELATING TO CERTAIN
POWERS AND INTERESTS OF DIRECTORS
Our Articles do not stipulate anything regarding:
| a directors power to vote on a proposal, arrangement, or contract in which the director is materially interested; |
| our directors power to vote for compensation to themselves; |
| our directors borrowing powers; |
| retirement rules for our directors; or |
| the number of shares required for a directors qualification. |
Applicable provisions are found in the Swedish Companies Act (2005:551) (the Swedish Companies Act).
Other than being of legal age, there are no age limit restrictions for directors and they are not required to own any shares in the Company.
SHARE CAPITAL
As of December 31, 2020, our Articles provide that our share capital may not be less than SEK 6,000,000,000 nor more than SEK 24,000,000,000, and that the number of shares in Ericsson shall amount to no less than 3,000,000,000 and no more than 12,000,000,000. All of our outstanding shares are validly issued, fully paid and non-assessable, and are not redeemable and do not have any preemptive rights other than under the Swedish Companies Act and our Articles, as described below. In accordance with our Articles, Ericssons shares are divided into three classes of shares, denoted as Class A shares, Class B Shares and Class C shares; however, as of December 31, 2020, no Class C shares were outstanding.
ADDITIONAL SHARE ISSUANCES; PREEMPTIVE RIGHTS
Under the Swedish Companies Act, shareholders must approve each issue of additional shares either by deciding on the share issue at a shareholders meeting, or by a shareholders approval of a decision on a share issue by our Board of Directors (the Board), or by giving an authorization to the Board to decide about a share issue. If we decide to issue new Class A, Class B or Class C shares by means of a cash issue, or an issue against payment through set-off of claims, Class A, Class B and Class C shareholders (except for Ericsson and its subsidiaries, in the event they hold shares in Ericsson) have a primary preferential right to subscribe for new shares of the same type in relation to the number of shares previously held by them. Shares not subscribed for through a preferential right shall be offered to all shareholders for subscription on a pro rata basis. If we decide to issue new shares of only one series by means of a cash issue or an issue against payment through set-off of claims, all shareholders, regardless of whether their shares are Class A, Class B or Class C, are entitled to a preferential right to subscribe for new shares in proportion to the number of shares previously held by them. Shareholders may vote to waive shareholders preferential rights at a general meeting of shareholders.
If we decide to issue warrants or convertibles through a cash issue or an issue against payment through set-off of claims, the shareholders have preferential rights to subscribe to warrants as if the issue were of the shares that may be subscribed to pursuant to the warrant and, respectively, preferential rights to subscribe to convertibles as if the issue were of the shares that the convertibles may be converted to.
The above does not constitute any restriction to waive the shareholders preferential rights when deciding on either an issue of shares, warrants or convertibles by means of a cash issue or an issue against payment through set-off of claims.
DIVIDENDS AND OTHER DISTRIBUTIONS
Our Class A and Class B shareholders have the same right to dividends. Class C shareholders do not have any right to dividends, as described in article 6 of our Articles. No Class C shares are currently outstanding.
Under Swedish law, only a general meeting of shareholders may decide on payment of dividends, which may not exceed the amount proposed by the Board (except in certain limited circumstances), and may only be paid from funds legally available for that purpose. Under Swedish law, no interim dividends may be paid in respect of any fiscal period for which audited financial statements of the company have not yet been adopted by the annual general meeting of shareholders. The market practice in Sweden is most often for dividends to be paid annually. Under the Swedish Companies Act, dividends to shareholders and other transfers of value from a company - such as purchases of its own shares (see below) - may only be made in case the companys restricted equity remains fully covered after the transfer of value has been made. The calculation shall be based upon the most recently adopted balance sheet, and any changes in the restricted equity that has occurred after the balance sheet date shall be taken into account. In addition, dividends to shareholders and other transfers of value from the company may only be made if this is justifiable taking into account the type of business activities of the company, the scope and risks related thereto and the companys need for financial resources, its liquidity and financial position. In respect of parent companies, also the business activities of the group, their scope and risks related thereto and the groups need for financial resources, its liquidity and financial position shall be taken into account.
The Companys shares are registered in the computerized book-entry share registration system administered by Euroclear Sweden AB (Euroclear). The rights attached to shares eligible for dividends accrue to those persons whose names are recorded in the register of shareholders on the record day. The dividends are then sent to a specified account as directed by the person registered with Euroclear. The relevant record day must, in most circumstances, be specified in the resolution declaring a dividend or resolving upon a capital increase or any similar matter in which shareholders have preferential rights, or the Board must be authorized to determine the relevant record day.
Where the registered holder is a nominee, the nominee receives, for the account of the beneficial owner, dividends and, on issues of shares with preferential rights for the shareholders, shares, as well as rights. Dividends are remitted in a single payment to the nominee who is responsible for the distribution of such dividends to the beneficial owner. A similar procedure is adopted for share issues. Specific authority to act as a nominee must be obtained from Euroclear. At the request of Euroclear, the nominee must provide information about all beneficial holders of shares to Euroclear. Euroclear is required to keep a register with regard to any holding on behalf of a single beneficial owner in excess of 500 shares in any one company. This list is prepared every third month and must reveal the names of the beneficial owner and be open to public inspection.
RIGHTS IN A LIQUIDATION
On a return of capital on winding up or liquidation , any assets available for distribution amongst our shareholders at the commencement of the winding up (i.e. any surplus after paying off all the creditors of the company), will be equally distributed amongst our shareholders in proportion to the par value of the shares held by them.
ANNUAL GENERAL MEETINGS: VOTING RIGHTS
In a general meeting of shareholders of Ericsson, each Class A share shall carry one vote, each Class B share one tenth of one vote and each Class C share one-thousandth of one vote.
We are required to publish notices to attend annual general meetings no earlier than six weeks and no later than four weeks prior to the annual general meeting and the same notice period requirements apply regarding extraordinary general meetings concerning changes in our Articles. Notices to attend other types of extraordinary general meetings at Ericsson must be published no earlier than six weeks and no later than three weeks prior to the general meeting. Due to the COVID-19 pandemic, the Swedish Government has issued temporary rules which allow for the collection of proxies and postal voting (advance voting) even if a company has not included such provisions in its articles of association. If a company choses to apply proxy solicitation or postal voting, the proxy form or the postal voting form must be made available on the companys website together with information on how to participate in the general meeting prior to the meeting. The temporary rules have been issued in order to facilitate the conducting of general meetings during the pandemic and are valid until year-end 2021.
Directors are elected during the annual general meeting for a period of one year at a time and do not stand for reelection at staggered intervals.
A shareholder may attend and vote at the meeting in person or by proxy. For companies whose shares are registered in a central securities depositary register, proxies are valid for up to five years from the date of issuance. Any shareholder wishing to attend a general meeting must notify us no later than on the day specified in the notice. We are required to accept all notifications of attendance received at least five business days (Saturdays normally included) prior to the meeting. A person designated in the register as a nominee (including the depositary of the ADSs) is not entitled to vote at a general meeting, nor is a beneficial owner whose share is registered in the name of a nominee (including the depositary of the ADSs) unless the beneficial owner first arranges to have such owners own name entered in the register of shareholders maintained by Euroclear no later than the designated record day, which is six banking days prior to the general meeting (however, a voting right registration requested by an owner (as per the record date) in such time that the voting right registration has been made by the relevant nominee no later than four banking days prior to the general meeting, will be taken into account in Euroclears compilation of the register of shareholders for the general meeting). Under the Swedish Companies Act, elections are determined by a plurality vote. Resolutions, other than elections, are passed by a simple majority of votes cast at the meeting with the chairman of the meeting having a decisive vote, unless otherwise required by law or a companys Articles. Under the Swedish Companies Act, certain resolutions require special quorums and majorities, including, but not limited to, the following:
a) | a resolution to amend our Articles requires a majority of two-thirds of the votes cast as well as two-thirds of the shares represented at the meeting, except in those circumstances described in b) - d) below; |
b) | a resolution to amend our Articles which reduces any shareholders rights to profits or assets, restricts the transferability of shares or alters the legal relationship between shares, normally requires the unanimous approval of the shareholders present at the meeting and who hold nine-tenths of all outstanding shares; |
c) | a resolution to amend our Articles for the purpose of limiting the number of shares with which a shareholder may vote at a general meeting or allocating part of the net profit for the fiscal year to a restricted fund or limiting the use of the companys profits or assets in a liquidation or dissolution, normally requires the approval of shareholders representing two-thirds of the votes cast and nine-tenths of the shares represented at the meeting; |
d) | a resolution of the kind referred to under b) or c) above may, however, be taken with a lower supermajority requirement if the amendments referred to therein will only adversely affect specific shares or classes of shares. In such cases, the requirement under a above will apply together with the following separate supermajority: (a) where only a class of shares is adversely affected, approval of the owners of one-half of all shares of such class and nine-tenths of the shares of such class represented at the meeting, or (b) where the shares adversely affected do not constitute a class of shares, the unanimous approval of all such affected outstanding shares present at the meeting and who hold nine-tenths of all outstanding shares adversely affected; |
e) | a resolution to issue, approve or authorize the issuance for cash of new shares, warrants or convertibles with a deviation from the preferential right for existing shareholders requires a two-thirds majority of votes cast at the meeting as well as two-thirds of the shares represented at the meeting; |
f) | a resolution to reduce the outstanding share capital requires a two-thirds majority of votes cast at the meeting as well as two-thirds of the shares represented at the meeting. In case there are several classes of shares in a company, the above described majority requirement shall apply also within each share class represented at the meeting and for which the rights of the shares are adversely affected; and |
g) | a resolution to approve a merger requires a two-thirds majority of the votes cast at the meeting and two-thirds of the shares represented at the meeting (however, under certain circumstances a higher majority is required). |
At a general meeting of shareholders, a shareholder or proxy for one or more shareholders may cast full number of votes represented by the holders shares.
AMENDMENTS TO THE ARTICLES
Under the Swedish Companies Act, an amendment of our Articles requires a resolution passed at a shareholders meeting. The number of votes required for a valid resolution depends on the type of amendment, however, any amendment must be approved by not less than two-thirds of the votes cast and represented at the meeting. The board is not allowed to make amendments to the Articles absent shareholder approval.
PROVISIONS RESTRICTING CHANGE IN CONTROL OF OUR COMPANY
Neither our Articles nor the Swedish Companies Act contains any restrictions on change of control. However, mandatory bid requirements under the Swedish Stock Market (Takeover Bids) Act (2006:451) may apply under certain circumstances.
REDEMPTION, REPURCHASE AND SURRENDER OF SHARES
A Swedish public limited liability company whose shares are traded on a regulated market place within the European Economic Area (EEA) or a market place comparable to a regulated market place outside the EEA is entitled to purchase its own shares under certain conditions. A purchase by us of our own shares may take place only if (a) the purchase has been decided upon by a general meeting of shareholders or the Board has been authorized by a general meeting of shareholders, in both cases by a two thirds majority of votes cast at the meeting as well as two-thirds of the shares represented at the meeting, (b) the purchase is effected on a regulated market place within the EEA or a market place comparable to a regulated market place outside the EEA (in the latter case with the approval of the Swedish Financial Supervisory Authority the SFSA) or pursuant to an offer to all shareholders or holders of a specific class of shares, (c) the Companys restricted equity will still be fully covered and the purchase is justifiable taken into account the type of business activities of the Company and the group, their scope and risks related thereto and the Companys and the groups need for financial resources, their liquidity and financial position, and (d) we and our subsidiaries do not hold or, as a result of purchase, will not hold in excess of 10% of all our outstanding shares.
LIMITATION ON OWNING SECURITIES
There are no limitations imposed by Swedish law or by our Articles in respect of the rights of non-residents or foreign persons to purchase, own or sell securities issued by us.
There are, however, certain flagging and ownership examination rules that apply, irrespective of nationality.
Pursuant to the Swedish Financial Instruments Trading Act any change in a holding of shares, depository receipts with voting rights or financial instruments that entitle the holder to acquire shares in issue in a Swedish limited liability company whose shares are admitted for trading on a regulated market place within the EEA shall be reported by the holder to the company and the SFSA, where the change entails that the holders portion of all shares or votes in the company reaches, exceeds or falls below any of the limits of 5, 10, 15, 20, 25, 30, 50, 66 2/3 or 90 per cent. Such a change should, as a main rule, be reported not later than three trading days following the day on which the party with a duty to report has entered into an agreement for the acquisition or transfer of shares or any other change to the shareholding has occurred.
In addition, the EU Market Abuse Regulation requires, among other things, that the Company holds a register of all persons discharging managerial responsibilities and of persons closely associated with them. The Company and the SFSA must be notified of certain transactions conducted by the aforementioned persons. Such notifications shall be made no later than three business days after the date of the transaction.
DESCRIPTION OF AMERICAN DEPOSITARY SHARES
Deutsche Bank Trust Company Americas, as depositary, has registered and delivered the ADSs. Each ADS represent ownership of one B share (or a right to receive one Class B share), deposited with Nordea Bank AB (publ), having its principal office at Nordea Bank Abp, Satamaradankatu 5, Helsinki, Finland, FI-00020 NORDEA, as custodian for the depositary. Each ADS will also represent ownership of any other securities, cash or other property which may be held by the depositary. The depositarys principal office at which the ADSs are administered is located at 60 Wall Street, New York, NY 10005, USA. The principal executive office of the depositary is located at 60 Wall Street, New York, NY 10005, USA.
The Direct Registration System, or DRS, is a system administered by The Depository Trust Company, or DTC, pursuant to which the depositary may register the ownership of uncertificated ADSs, which ownership shall be evidenced by periodic statements issued by the depositary to the ADS holders entitled thereto.
We do not treat ADS holders as our shareholders and accordingly, you, as an ADS holder, will not have shareholder rights. Swedish law governs shareholder rights. The depositary is the holder of the Class B Shares underlying your ADSs. As a holder of ADSs, you have ADS holder rights. A deposit agreement among us, the depositary and you, as an ADS holder, and the beneficial owners of ADSs sets out ADS holder rights as well as the rights and obligations of the depositary. The laws of the State of New York govern the deposit agreement and the ADSs.
HOLDING THE ADSs
How may you hold your ADSs?
You may hold ADSs either (1) directly (a) by having an American Depositary Receipt, or ADR, which is a certificate evidencing a specific number of ADSs, registered in your name, or (b) by holding ADSs in uncertificated form in DRS, or (2) indirectly through your broker or other financial institution. If you hold ADSs directly, you are an ADS holder. This description assumes you hold your ADSs directly. ADSs will be issued through DRS, unless you specifically request certificated ADRs. If you hold the ADSs indirectly, you must rely on the procedures of your broker or other financial institution to assert the rights of ADS holders described in this summary. You should consult with your broker or financial institution to find out what those procedures are.
DIVIDENDS AND OTHER DISTRIBUTIONS
How may you receive dividends and other distributions on the shares?
The depositary has agreed to pay to you the cash dividends or other distributions it or the custodian receives on shares or other deposited securities, after deducting its fees and expenses. You will receive these distributions in proportion to the number of shares your ADSs represent as of the record date (which will be as close as practicable to the record date for our shares) set by the depositary with respect to the ADSs.
| Cash. The depositary will convert or cause to be converted any cash dividend or other cash distribution we pay on the shares or any net proceeds from the sale of any shares, rights, securities or other entitlements under the terms of the deposit agreement into U.S. dollars if it can do so on a practicable basis, and can transfer the U.S. dollars to the United States and will distribute promptly the amount thus received. If the depositary determines in its judgment that such conversions or transfers are not practical or lawful or if any government approval or license is needed and cannot be obtained at a reasonable cost within a reasonable period or otherwise sought, the deposit agreement allows the depositary to distribute the foreign currency only to those ADS holders to whom it is possible to do so. It will hold or |
cause the custodian to hold the foreign currency it cannot convert for the account of the ADS holders who have not been paid and such funds will be held for the respective accounts of the ADS holders. It will not invest the foreign currency and it will not be liable for any interest for the respective accounts of the ADS holders. |
Before making a distribution, any taxes or other governmental charges, together with fees and expenses of the depositary, that must be paid, will be deducted. The depositary will distribute only whole U.S. dollars and cents and will round fractional cents to the nearest whole cent. If the exchange rates fluctuate during a time when the depositary cannot convert the foreign currency, you may lose some or all of the value of the distribution.
| Shares. For any shares we distribute as a dividend or free distribution, either (1) the depositary will, with our approval or at our request, distribute additional ADSs representing such shares or (2) existing ADSs as of the applicable record date will represent rights and interests in the additional shares distributed, in either case, net of applicable fees, charges and expenses incurred by the depositary and taxes and/or other governmental charges. The depositary will only distribute whole ADSs. It will sell shares which would require it to deliver a fractional ADS and distribute the net proceeds in the same way as it does with cash. |
| Elective Distributions in Cash or Shares. If we offer our shareholders the option to receive dividends in either cash or shares, we will notify the depositary at least 30 days prior to the proposed distribution stating whether or not we want such distribution to be made available to ADR holders. Following such notice, the depositary will consult with us to determine, with our assistance, whether it is lawful and reasonably practicable to make such elective distribution available to ADR holders. The depositary will make such elective distribution available to ADR holders only if (i) we have timely requested that the elective distribution is available to ADR holders, (ii) the depositary has determined that such distribution is reasonably practicable and (iii) the depositary has received satisfactory legal opinions of counsel as provided in the deposit agreement. If these conditions are not satisfied, the depositary will, on the basis of the same determination as is made in respect of the shares for which no election is made, distribute either cash in the same way as it does in a cash distribution, or additional ADSs representing shares in the same way as it does in a share distribution. The depositary is not obligated to make available to you a method to receive the elective distribution in shares rather than in ADSs. There can be no assurance that you will be given the opportunity to receive elective distributions on the same terms and conditions as our shareholders. |
| Rights to Purchase Additional Shares. If we offer our shareholders any rights to subscribe for additional shares or any rights of any other nature, the depositary will establish procedures to either (i) distribute such rights and enable you to exercise the rights or (ii) dispose of such rights on your behalf and making the net proceeds available in dollars, each upon your payment of applicable fees, charges and expenses incurred by the depositary and taxes and/or other governmental charges. At our request, however: |
| if the depositary determines that it is lawful and feasible to make such rights available to you by means of warrants or otherwise, it will distribute warrants or other instruments to you, or employ such other method as it may deem feasible in order to facilitate the exercise, sale or transfer of rights by you; or |
| if the depositary determines that it is not lawful or not feasible to make such rights available to you by means of warrants or otherwise, or if the rights represented by such warrants or such other instruments are not exercised and appear to be about to lapse, the depositary may sell the rights, at such place and upon such terms (including public or private sale) as it may deem proper and distribute the net proceeds in the same way as it does with cash. The depositary will allow rights that are not distributed or sold to lapse. In that case, you will receive no value for them. |
If the depositary makes rights available to you, U.S. securities laws may restrict transfers and cancellation of the ADSs represented by shares purchased upon exercise of rights. For example, you may not be able to trade these ADSs freely in the United States. In this case, the depositary may deliver restricted depositary shares that have the same terms as the ADSs described in this summary except for changes needed to put the necessary restrictions in place.
There can be no assurance that you will be given the opportunity to exercise rights on the same terms and conditions as our shareholders or be able to exercise such rights.
| Other Distributions. The depositary will distribute to you anything else we distribute on deposited securities by any means it may deem equitable and practicable, upon your payment of applicable fees, charges and expenses incurred by the depositary and taxes and/or other governmental charges. If the depositary determines that such distribution cannot be made proportionately, or if for any other reason the depositary deems such distribution not to be feasible, the depositary may adopt such method as it may deem equitable and practicable for the purpose of effecting such distribution, including the sale of the property we distributed, and the net proceeds of any such sale will be distributed. |
The depositary is not responsible if it decides that it is unlawful or impractical to make a distribution available to any ADS holders. We have no obligation to register ADSs, shares, rights or other securities under the US Securities Act of 1933, as amended (the Securities Act). We also have no obligation to take any other action to permit the distribution of ADSs, shares, rights or any other property to ADS holders. This means that you may not receive the distributions we make on our shares or any value for them if we and/or the depositary determines that it is illegal or not practicable for us or the depositary to make them available to you.
DEPOSIT, WITHDRAWAL AND CANCELLATION
How are ADSs issued?
The depositary will deliver ADSs if you or your broker deposit shares or evidence of rights to receive shares with the custodian. Upon payment of its applicable fees and expenses and of any taxes or charges, such as stamp taxes or stock transfer taxes or fees, the depositary will register the appropriate number of ADSs in the names you request and will deliver the ADSs to or upon the order of the person or persons entitled thereto.
How do ADS holders cancel an ADS?
You may turn in your ADSs at the depositarys principal office or by providing appropriate instructions to your broker. Upon payment of its applicable fees and expenses and of any taxes or charges, such as stamp taxes or stock transfer taxes or fees, the depositary will deliver the shares and any other deposited securities underlying the ADSs to you or a person you designate at the office of the custodian. Or, at your request, risk and expense, the depositary will deliver the deposited securities at its principal office, to the extent permitted by law and the deposit agreement. See Requirements for Depositary Actions below.
How do ADS holders interchange between Certificated ADSs and Uncertificated ADSs?
You may surrender your ADR to the depositary for the purpose of exchanging your ADR for uncertificated ADSs. The depositary will cancel that ADR and will send you a statement confirming that you are the owner of uncertificated ADSs. Alternatively, upon receipt by the depositary of a proper instruction from a holder of uncertificated ADSs requesting the exchange of uncertificated ADSs for certificated ADSs, the depositary will execute and deliver to you an ADR evidencing those ADSs.
How do ADS holders vote?
You may instruct the depositary to vote the shares or other deposited securities underlying your ADSs at any meeting at which you are entitled to vote pursuant to Swedish law, the provisions of our Articles, and the deposit agreement. Otherwise, you could exercise your right to vote directly if you withdraw the shares. However, you may not know about the meeting sufficiently enough in advance to withdraw the shares.
The depositary will notify you of any meeting at which you are entitled to vote, and arrange to deliver our voting materials to you. The materials will contain (a) such information as is contained in our notice of meeting, solicitation of consent or proxy, (b) a statement that the ADS holders at the close of business in New York on the specified record date will be entitled, subject to Swedish law, our Articles and the deposit agreement, to instruct the depositary as to the exercise of the voting rights, if any, pertaining to the shares or other deposited securities represented by such holders ADSs; and (c) a brief statement as to the
manner in which blocking or voting instructions may be given to the depositary. Blocking or voting instructions may be given only in respect of a number of ADSs representing an integral number of shares or other deposited securities. For instructions to be valid, the depositary must receive them in writing on or before the date specified. The depositary will try, in so far as practicable and as permitted under Swedish law, our Articles, and the deposit agreement,, to vote or to have its agents block or vote the shares or other deposited securities (in person or by proxy) as you instruct. If the depositary timely receives blocking and voting instructions from you that fails to specify the manner in which the depositary is to vote the ADSs on one or more matters presented at the relevant meeting, the depositary will abstain on those items for which you failed to specify the manner in which the depositary is to vote.
We cannot assure you that you will receive the voting materials in time to ensure that you can instruct the depositary to vote the shares underlying your ADSs. In addition, there can be no assurance that ADS holders and beneficial owners generally, or any holder or beneficial owner in particular, will be given the opportunity to vote or cause the depositary or the custodian, as applicable, to vote on the same terms and conditions as our shareholders.
COMPLIANCE WITH REGULATIONS
Disclosure of Interests
Each ADR holder is required to comply with our Articles, as they may be amended from time to time, and the laws of Sweden with respect to disclosure requirements, if any, regarding ownership of ADSs and shares in and other securities and debt obligations of the Company, all as if such ADRs were to the extent practicable the Class B Shares represented thereby. This may include providing information as to whether any ADSs represented by any of the ADRs held by or registered in the name of such holder are being held, directly or indirectly, for some person other than such holder and, if so, the name, address and citizenship of such other person or persons.
How may the deposit agreement be amended?
We may agree with the depositary to amend the deposit agreement and the form of ADR without your consent for any reason. If an amendment adds or increases fees or charges, except for taxes and other governmental charges or expenses of the depositary for registration fees, facsimile costs, delivery charges or similar items, including expenses incurred in connection with foreign exchange control regulations and other charges specifically payable by ADS holders under the deposit agreement, or prejudice any substantial existing right of ADS holders, it will not become effective for outstanding ADSs until one month after the depositary notifies ADS holders of the amendment. At the time an amendment becomes effective, you are considered, by continuing to hold your ADSs, to agree to the amendment and to be bound by the ADRs and the deposit agreement as amended. If any new laws are adopted which would require the deposit agreement to be amended in order to comply therewith, we and the depositary may amend the deposit agreement in accordance with such laws and such amendment may become effective before notice thereof is given to ADS holders.
How may the deposit agreement be terminated?
The depositary will terminate the deposit agreement if we ask it to do so, in which case the depositary will give notice to you at least 30 days prior to termination. The depositary may also terminate the deposit agreement if the depositary has told us that it would like to resign, and we have not appointed a new depositary within 90 days.
After termination, the depositary and its agents will do the following under the deposit agreement but nothing else: continue to collect dividends and other distributions pertaining to ADSs, sell rights as provided in the deposit agreement, and continue to deliver ADSs, together with any dividends or other distributions received and the net proceeds of the sale of any rights or other property, in exchange for ADRs surrendered to the depositary. Six months or more after the date of termination, the depositary may sell any remaining deposited securities by public or private sale. After that, the depositary will hold the money it received on the sale, as well as any other cash it is holding under the deposit agreement, for the pro rata benefit of the ADS holders that have not surrendered their ADSs. It will not invest the money and has no liability for interest. After such sale, the depositarys only obligations will be to account for the money and other cash. After termination, we shall be discharged from all obligations under the deposit agreement except for our obligations to the depositary thereunder.
BOOKS OF DEPOSITARY
The depositary will maintain ADS holder records at its depositary office. You may inspect such records at such office during regular business hours, provided that such inspection is not for the purpose of communicating with ADR holders in the interest of a business or object other than the business of the Company or a matter related to the deposit agreement or the ADRs.
The depositary will maintain facilities in the Borough of Manhattan, The City of New York for the execution and delivery, registration, registration of transfers and surrender of ADRs.
These facilities may be closed at any time or from time to time when such action is deemed necessary or advisable by the depositary in connection with the performance of its duties under the deposit agreement or at our reasonable request.
LIMITATIONS ON OBLIGATIONS AND LIABILITY OF DEPOSITARY
The deposit agreement expressly limits our obligations and the obligations of the depositary and the custodian. It also limits our liability and the liability of the depositary. The depositary:
| is only obligated to take the actions specifically set forth in the deposit agreement without gross negligence or willful misconduct; |
| is not obligated to appear in, prosecute or defend any action, suit or other proceeding in respect of any ADSs or ADRs, which in its opinion may involve it in expense or liability, unless indemnity satisfactory to it against all expense and liability is furnished as often as may be required; |
| is not liable for (i) any action or non-action by it in reliance on the advice of or information from legal counsel, accountants, any person presenting Class B Shares for deposit, any ADR holder, or any other person believed by it in good faith to be competent to give such advice or information, (ii) the inability by an ADS holder to benefit from any distribution, offering, right or other benefit which is made available to shareholders but is not, under the terms of the deposit agreement, made available to ADS holders or (ii) any special, consequential, indirect or punitive damages for any breach of the terms of the deposit agreement or otherwise; and |
| is not responsible for any failure to carry out any instructions to vote any of the ADSs, or for the manner in which any such vote is cast or effect of any such vote, provided that any such action or non-action is in good faith. |
The custodian is not under any obligation whatsoever with respect to any action, suit or other proceeding in respect of any ADSs or ADRs, the responsibility of the custodian being solely to the depositary.
In the deposit agreement, we agree to indemnify the depositary under certain circumstances.
Requirements for Depositary Actions
Before the depositary will issue, deliver or register a transfer of an ADS, split-up, subdivide or combine ADSs, make a distribution on an ADS, or permit withdrawal of shares, the depositary may require:
| reimbursement for any applicable tax or other governmental charge and any applicable stock transfer or registration fee (including any such tax or charge and fee with respect to deposits or withdrawn) and payment of any applicable fees, expenses and charges of the depositary; |
| satisfactory proof of the identity and genuineness of any signature or any other matters contemplated in the deposit agreement; and |
| compliance with any regulations, if any, that the depositary may establish consistent with the provisions of the deposit agreement. |
The depositary may refuse to issue and deliver ADSs or register transfers of ADSs during any period when the transfer books of the depositary are closed, or if we or the depositary deem such refusal to be necessary or advisable because of compliance with any requirement of applicable law or regulation. The depositary is not permitted to knowingly accept for deposit under the deposit agreement any shares or other deposited securities required to be registered under the provisions of the Securities Act, unless a registration statement is in effect as to such shares.
Exhibit 12.1
Certification of Chief Executive Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Börje Ekholm, certify that:
1. | I have reviewed this annual report on Form 20-F of Telefonaktiebolaget LM Ericsson (publ) (the Company); |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report; |
4. | The Companys other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company and have: |
(a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | evaluated the effectiveness of the Companys disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | disclosed in this report any change in the Companys internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the Companys internal control over financial reporting; and |
5. | The Companys other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Companys auditors and the audit committee of the Companys board of directors (or persons performing the equivalent functions): |
(a) | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Companys ability to record, process, summarize and report financial information; and |
(b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the Companys internal control over financial reporting. |
Dated March 25, 2021
/s/ Börje Ekholm |
Börje Ekholm President and Chief Executive Officer |
Exhibit 12.2
Certification of Chief Financial Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Carl Mellander, certify that:
1. | I have reviewed this annual report on Form 20-F of Telefonaktiebolaget LM Ericsson (publ) (the Company); |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report; |
4. | The Companys other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company and have: |
(a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | evaluated the effectiveness of the Companys disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | disclosed in this report any change in the Companys internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the Companys internal control over financial reporting; and |
5. | The Companys other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Companys auditors and the audit committee of the Companys board of directors (or persons performing the equivalent functions): |
(a) | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Companys ability to record, process, summarize and report financial information; and |
(b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the Companys internal control over financial reporting. |
Dated March 25, 2021
/s/ Carl Mellander |
Carl Mellander Executive Vice President and Chief Financial Officer |
Exhibit 13.1
Certification of Chief Executive Officer
Pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of Telefonaktiebolaget LM Ericsson (publ) (the Company) hereby certifies, to such officers knowledge, that:
(i) | the Annual Report on Form 20-F of the Company for the period ended December 31, 2020 (the Report) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and |
(ii) | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Dated March 25, 2021
/s/ Börje Ekholm |
Börje Ekholm President and Chief Executive Officer |
The foregoing certification is being furnished solely to accompany the Report pursuant to 18 U.S.C. § 1350, and is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.
Exhibit 13.2
Certification of Chief Financial Officer
Pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of Telefonaktiebolaget LM Ericsson (publ) (the Company) hereby certifies, to such officers knowledge, that:
(i) | the Annual Report on Form 20-F of the Company for the period ended December 31, 2020 (the Report) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and |
(ii) | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Dated March 25, 2021
/s/ Carl Mellander |
Carl Mellander Executive Vice President and Chief Financial Officer |
The foregoing certification is being furnished solely to accompany the Report pursuant to 18 U.S.C. § 1350, and is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.
Exhibit 15.1
Swedish annual report for 2020
in English (adjusted version)
Ericsson Annual Report 2020
1 Financial report 2020
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Ericsson Annual Report on Form 20-F 2020
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This is Ericsson
Ericsson provides high-performing solutions to enable its customers to capture the full value of connectivity. The Company supplies communication infrastructure, services and software to the telecom industry and other sectors. Ericsson has approximately 100,000 employees and serves customers in more than 180 countries. Ericsson is listed on Nasdaq Stockholm and the Ericsson ADS trade on NASDAQ New York. The Companys headquarters are located in Stockholm, Sweden.
It all started in a mechanical workshop in Stockholm in 1876 where Lars Magnus Ericsson designed telephones and his wife Hilda manufactured them by winding copper wire coils. With 5G now a commercial reality, we continue to invest to strengthen our 5G leadership. Our portfolio is designed to help our customers digitalize and to increase efficiency in an intelligent and sustainable way, while finding new revenue streams.
The business is divided into four segments with the telecom operators as the main customer group. The segments are Networks, Digital Services, Managed Services and Emerging Business and Other. The market is divided into five geographical market areas: North America, Europe and Latin America, Middle East and Africa, South East Asia, Oceania and India and North East Asia.
2
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Financial report 2020 | CEO comment
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Ericsson Annual Report on Form 20-F 2020
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Entering a new chapter of growth and profitability
Börje Ekholm President and CEO |
Despite a challenging environment in 2020, we completed our turnaround, delivered on our financial targets, and established a leadership position in 5G. More importantly, our people continued to deliver and to serve our customers with no disruptions. The pandemic showed the criticality of the digital infrastructure for society. Looking ahead, this infrastructure will increasingly drive global sustainable growth and Ericsson is well positioned to create value from the ongoing digital transformation. |
3
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Financial report 2020 | CEO comment
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Ericsson Annual Report on Form 20-F 2020
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4
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Financial report 2020 | Business Strategy
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Ericsson Annual Report on Form 20-F 2020
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Business strategy
Ericsson business strategy
5
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Financial report 2020 | Business Strategy
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Ericsson Annual Report on Form 20-F 2020
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6
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Financial report 2020 | Business model
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Ericsson Annual Report on Form 20-F 2020
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Business model
Our business model is constructed to manage changing market requirements and to capture new business opportunities. Customer focus and motivated employees are key to driving our business, creating stakeholder value and building a stronger company long term.
We develop innovative and cost competitive solutions for our customers. |
Motivated and talented employees drive our business. |
7
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Financial report 2020 | Business model
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Ericsson Annual Report on Form 20-F 2020
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We create value for our stakeholders by building a stronger company long term.
8
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Financial report 2020 | Business model
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Ericsson Annual Report on Form 20-F 2020
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The four segments
9
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Financial report 2020 | Board of Directors report
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Ericsson Annual Report on Form 20-F 2020
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Letter from the Chair of the Board
10
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Financial report 2020 | Board of Directors report
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Ericsson Annual Report on Form 20-F 2020
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11
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Financial report 2020 | Board of Directors report
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Ericsson Annual Report on Form 20-F 2020
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12
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Financial report 2020 | Board of Directors report
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Ericsson Annual Report on Form 20-F 2020
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13
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Financial report 2020 | Board of Directors report
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Ericsson Annual Report on Form 20-F 2020
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14
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Financial report 2020 | Board of Directors report
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Ericsson Annual Report on Form 20-F 2020
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15
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Financial report 2020 | Board of Directors report
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Ericsson Annual Report on Form 20-F 2020
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16
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Financial report 2020 | Board of Directors report
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Ericsson Annual Report on Form 20-F 2020
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17
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Financial report 2020 | Board of Directors report
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Ericsson Annual Report on Form 20-F 2020
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|
18
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Financial report 2020 | Board of Directors report
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Ericsson Annual Report on Form 20-F 2020
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19
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Financial report 2020 | Board of Directors report
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Ericsson Annual Report on Form 20-F 2020
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20
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Financial report 2020 | Board of Directors report
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Ericsson Annual Report on Form 20-F 2020
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21
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Financial report 2020 | Board of Directors report
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Ericsson Annual Report on Form 20-F 2020
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Element and purpose | Operation | Opportunity | Performance measures | |||
Fixed salary
Fixed compensation paid at set times.
Purpose:
attract and retain the executive talent required to implement Ericssons strategy,
deliver part of the annual compensation in a predictable format. |
Salaries shall normally be reviewed annually in January. Salaries shall be set taking into account:
Ericssons overall business performance,
business performance of the Unit that the individual leads,
year-on-year performance of the individual,
external economic environment,
size and complexity of the position,
external market data,
pay and conditions for other employees based in locations considered to be relevant to the role.
When setting fixed salaries, the impact on total remuneration, including pensions and associated costs, shall be taken into consideration. |
There is no maximum salary level; however, salary increases (as a % of existing salary) for most Group Management members would normally be in line with the external market practices, employees in relevant locations and performance of the individual.
There are circumstances where higher salary increases could be awarded. For example, where:
a new Group Management member has been appointed at a below-market salary, in which case larger increases may be awarded in following years, subject to strong individual performance,
the Group Management member has been promoted or has had an increase in responsibilities,
an individuals salary has fallen significantly behind market practice. |
This element of the package does not require achievement of any specific performance targets.
However, individual performance and capability shall be taken into account along with business performance when determining fixed salary levels and any salary increases. | |||
Short-term variable compensation (STV)
STV is a variable compensation plan that shall be measured and paid over a single year.
Purpose:
align members of Group Management with clear and relevant targets to Ericssons strategy and sustainable long-term interests,
provide individuals an earning opportunity for performance at flexible cost to the Company. |
The STV shall be paid in cash every year after the Committee and, as applicable, the Board have reviewed and approved performance against targets which are normally determined at the start of each year for each member of Group Management.
The Board and the Committee reserve the right to:
revise any or all of the STV targets at any time,
adjust the STV targets retroactively under extraordinary circumstances,
reduce or cancel STV if Ericsson faces severe economic difficulties, for instance in circumstances as serious as no dividend being paid,
adjust STV in the event that the results of the STV targets are not a true reflection of business performance,
reduce or cancel STV for individuals either whose performance evaluation or whose documented performance feedback is below an acceptable level or who are on performance counselling. |
Target pay-out opportunity for any financial year may be up to 150% of annual fixed salary of the individual. This shall normally be determined in line with the external market practices of the country of employment.
Maximum pay-out shall be up to two times the target pay-out opportunity (i.e. 300% of annual fixed salary).1) 2) |
The STV shall be based on measures linked to the annual business plan which in itself is linked to Ericssons long-term strategy and sustainability.
Measures shall include financial targets at Group, Business Area or Market Area level (for relevant members of Group Management). Other potential measures may include strategic targets, operational targets, employee engagement targets, customer satisfaction targets, sustainability and corporate responsibility targets or other lead indicator targets.
A maximum of four STV targets shall be assigned to an individual in total for a financial year. Financial targets shall comprise at least 75% of the target bonus opportunity with a minimum of 40% being defined at Group level. The minimum weighting for an STV target shall be 20%.
Performance of all STV targets shall be tested over a one-year performance period (financial year).
The STV measures and targets shall be determined by the Committee for the members of Group Management other than the President and CEO. | |||
Malus and clawback
The Board and the Committee shall have the right in their discretion to:
deny, in whole or in part, the entitlement of an individual to the STV payout in case an individual has acted in breach of Ericssons Code of Business Ethics,
claim repayment in whole or in part the STV paid in case an individual has acted in breach of Ericssons Code of Business Ethics.
to reclaim STV paid to an individual on incorrect grounds such as restatement of financial results due to incorrect financial reporting, noncompliance with a financial reporting requirement etc. |
The Board has the mandate to define STV measures and targets for the President and CEO, should STV be introduced for the President and CEO. | |||||
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Financial report 2020 | Board of Directors report
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Ericsson Annual Report on Form 20-F 2020
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Element and purpose | Operation | Opportunity | Performance measures | |||
Pension
Contributions paid towards retirement fund.
Purpose:
attract and retain the executive talent required to implement Ericssons strategy,
facilitate planning for retirement by way of providing competitive retirement arrangements in line with local market practices. |
The operation of the pension plan shall follow competitive practice in the individuals home country and may contain various supplementary plans in addition to any national system for social security.
Pension plans should be defined contribution plans unless the individual concerned is subject to defined benefit pension plan under mandatory collective agreement provisions or mandatory local regulations.
In some special circumstances where individuals cannot participate in the local pension plans of their home countries of employment:
cash equivalent to pension may be provided as a taxable benefit, or
contributions may be made to an international pension fund on behalf of the individual on a cost-neutral basis. |
Since 2011, members of Group Management in Sweden participate in the defined contribution plan (ITP1) which applies for the wider workforce in Sweden. The pension contribution for ITP1 is capped at 30% of pensionable salary which includes fixed salary and STV paid in cash.
According to the local collective bargaining agreement in Sweden, the members of Group Management are also entitled to an additional pension contribution for part-time retirement for which the cap is determined during the union negotiations for all the local employees.
Members of Group Management employed outside of Sweden may participate in the local market competitive pension arrangements that apply in their home countries in line with what is offered to other employees in the same country.
In all cases the annual pension contributions shall be capped at 70% of annual fixed salary.3) |
None | |||
Other benefits
Additional tangible or intangible compensation paid annually which do not fall under fixed salary, short-term and long-term variable compensation or pension.
Purpose:
attract and retain the executive talent required to implement Ericssons strategy,
deliver part of the annual compensation in a predictable format. |
Benefits offered shall take into account the competitive practices in the individuals country of employment and should be in line with what is offered to other senior employees in the same country and may evolve year on year.
Benefits may for example include company phones, company cars, medical and other insurance benefits, tax support, travel, Company gifts and any international relocation and/or commuting benefits if the individual is required to relocate and/or commute internationally to execute the requirements of the role. |
Benefit opportunities shall be set in line with competitive market practices and shall reflect what is offered to other senior employees in the individuals country of employment.
The levels of benefits provided may vary year on year depending on the cost of the provision of benefits to the Company.
Other benefits shall be capped at 10% of annual fixed salary for members of Group Management located in Sweden.
Additional benefits and allowances for members of Group Management who are commuters into Sweden or who are on long-term assignment (LTA) in countries other than their home countries of employment, shall be determined in line with the Companys international mobility policy which may include (but is not limited to) commuting or relocation costs; cost of living adjustment, housing, home travel or education allowance; tax and social security equalization assistance. |
None |
1) | For most of the current members of Group Management, the current STV target opportunity is below 50% of the annual fixed salary. |
2) | At present the President & CEO does not participate in STV. The Board has the mandate to decide to include the President and CEO in STV in the future. In doing so the Board shall: |
| determine the STV opportunity for the President and CEO within the ranges mentioned above and in line with the external market practices of the country of employment, keeping the STV opportunity of the other members of Group Management under consideration, |
| reduce the LTV opportunity in relation to the STV opportunity, keeping the total target cash compensation consisting of fixed salary, STV and LTV unchanged. |
Should the Board decide to introduce STV for the President and CEO, the details will be disclosed in the Remuneration Report for the relevant year.
3) | Since most of the current members of Group Management are currently under ITP1 coverage, their pension contributions are currently capped at 30% of pensionable salary and the additional pension contribution for part-time retirement mandated by the local collective bargaining agreement in Sweden. |
23
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Financial report 2020 | Board of Directors report
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Ericsson Annual Report on Form 20-F 2020
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24
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Financial report 2020 | Board of Directors report
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Ericsson Annual Report on Form 20-F 2020
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25
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Financial report 2020 | Board of Directors report
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Ericsson Annual Report on Form 20-F 2020
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26
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Financial report 2020 | Report of independent registered public accounting firm
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Ericsson Annual Report on Form 20-F 2020
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Report of independent
registered public accounting firm
To the shareholders of Telefonaktiebolaget
LM Ericsson (publ):
27
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Financial report 2020 | Report of independent registered public accounting firm
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Ericsson Annual Report on Form 20-F 2020
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Report of independent
registered public accounting firm
To the shareholders of Telefonaktiebolaget
LM Ericsson (publ):
28
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Financial report 2020 | Report of independent registered public accounting firm
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Ericsson Annual Report on Form 20-F 2020
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29
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Financial report 2020 | Consolidated financial statements with notes
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Ericsson Annual Report on Form 20-F 2020
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Consolidated financial statement
Consolidated income statement
JanuaryDecember, SEK million |
Notes | 2020 | 2019 | 2018 | ||||||||||||
Net sales |
B1, B2 | 232,390 | 227,216 | 210,838 | ||||||||||||
Cost of sales |
138,666 | 142,392 | 142,638 | |||||||||||||
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Gross income |
93,724 | 84,824 | 68,200 | |||||||||||||
Research and development expenses |
39,714 | 38,815 | 38,909 | |||||||||||||
Selling and administrative expenses |
26,684 | 26,137 | 27,519 | |||||||||||||
Impairment losses on trade receivables |
F1 | 118 | 737 | 420 | ||||||||||||
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|
|
|
|
|||||||||||
Operating expenses |
66,280 | 64,215 | 66,848 | |||||||||||||
Other operating income |
B4 | 1,161 | 2,350 | 497 | ||||||||||||
Other operating expenses |
B4 | 499 | 12,060 | 665 | ||||||||||||
Share in earnings of joint ventures and associated companies |
B1, E3 | 298 | 335 | 58 | ||||||||||||
|
|
|
|
|
|
|||||||||||
Operating income |
B1 | 27,808 | 10,564 | 1,242 | ||||||||||||
Financial income and expenses, net |
F2 | 596 | 1,802 | 2,705 | ||||||||||||
|
|
|
|
|
|
|||||||||||
Income after financial items (loss) |
27,212 | 8,762 | 1,463 | |||||||||||||
Income tax |
H1 | 9,589 | 6,922 | 4,813 | ||||||||||||
|
|
|
|
|
|
|||||||||||
Net income (loss) |
17,623 | 1,840 | 6,276 | |||||||||||||
|
|
|
|
|
|
|||||||||||
Net income (loss) attributable to: |
||||||||||||||||
Owners of the Parent Company |
17,483 | 2,223 | 6,530 | |||||||||||||
Non-controlling interests |
140 | 383 | 254 | |||||||||||||
Other information |
||||||||||||||||
Average number of shares, basic (million) |
H2 | 3,323 | 3,306 | 3,291 | ||||||||||||
Earnings (loss) per share attributable to owners of the Parent Company, basic (SEK)1) |
H2 | 5.26 | 0.67 | 1.98 | ||||||||||||
Earnings (loss) per share attributable to owners of the Parent Company, diluted (SEK)1) |
H2 | 5.26 | 0.67 | 1.98 |
1) | Based on Net income (loss) attributable to owners of the Parent Company. |
Consolidated statement of comprehensive income (loss)
JanuaryDecember, SEK million |
2020 | 2019 | 2018 | |||||||||
Net income (loss) |
17,623 | 1,840 | 6,276 | |||||||||
Other comprehensive income (loss) |
||||||||||||
Items that will not be reclassified to profit or loss |
||||||||||||
Remeasurements of defined benefits pension plans including asset ceiling |
4,618 | 6,182 | 2,453 | |||||||||
Revaluation of borrowings due to change in credit risk |
99 | 651 | 207 | |||||||||
Tax on items that will not be reclassified to profit or loss |
880 | 1,363 | 285 | |||||||||
Items that have been or may be reclassified to profit or loss |
||||||||||||
Cash flow hedge reserve |
||||||||||||
Gains/losses arising during the period |
136 | 290 | | |||||||||
Reclassification adjustments on gains/losses included in profit or loss |
281 | | | |||||||||
Translation reserves |
||||||||||||
Changes in translation reserves |
5,376 | 1,925 | 2,011 | |||||||||
Reclassification to profit and loss |
124 | 54 | 36 | |||||||||
Share of other comprehensive income of JV and associated companies |
81 | 131 | 14 | |||||||||
Tax on items that have been or may be reclassified to profit or loss |
86 | 60 | | |||||||||
|
|
|
|
|
|
|||||||
Other comprehensive income (loss), net of tax |
8,641 | 3,590 | 100 | |||||||||
|
|
|
|
|
|
|||||||
Total comprehensive income (loss) |
8,982 | 1,750 | 6,176 | |||||||||
|
|
|
|
|
|
|||||||
Total comprehensive income (loss) attributable to: |
||||||||||||
Owners of the Parent Company |
8,787 | 1,403 | 6,470 | |||||||||
Non-controlling interests |
195 | 347 | 294 |
30
|
Financial report 2020 | Consolidated financial statements with notes
|
Ericsson Annual Report on Form 20-F 2020
|
Consolidated balance sheet
SEK million |
Notes | Dec 31 2020 |
Dec 31 2019 |
Dec 31 2018 |
||||||||||||
Assets |
||||||||||||||||
Non-current assets |
||||||||||||||||
Intangible assets |
C1 | |||||||||||||||
Capitalized development expenses |
3,857 | 4,040 | 4,237 | |||||||||||||
Goodwill |
34,945 | 31,200 | 30,035 | |||||||||||||
Intellectual property rights, brands and other intangible assets |
4,805 | 2,491 | 3,474 | |||||||||||||
Property, plant and equipment |
C2 | 13,383 | 13,850 | 12,849 | ||||||||||||
Right-of-use assets |
C3 | 7,980 | 8,487 | | ||||||||||||
Financial assets |
||||||||||||||||
Equity in joint ventures and associated companies |
E3 | 1,274 | 1,565 | 611 | ||||||||||||
Other investments in shares and participations |
F3 | 1,519 | 1,432 | 1,515 | ||||||||||||
Customer finance, non-current |
B6, F1 | 1,221 | 2,262 | 1,180 | ||||||||||||
Interest-bearing securities, non-current |
F1, F3 | 21,613 | 20,354 | 23,982 | ||||||||||||
Other financial assets, non-current |
F3 | 4,842 | 5,614 | 6,559 | ||||||||||||
Deferred tax assets |
H1 | 26,296 | 31,174 | 23,152 | ||||||||||||
|
|
|
|
|
|
|||||||||||
121,735 | 122,469 | 107,594 | ||||||||||||||
Current assets |
||||||||||||||||
Inventories |
B5 | 28,097 | 30,863 | 29,255 | ||||||||||||
Contract assets |
B6, F1 | 11,273 | 12,171 | 13,178 | ||||||||||||
Trade receivables |
B6, F1 | 42,063 | 43,069 | 51,172 | ||||||||||||
Customer finance, current |
B6, F1 | 1,916 | 1,494 | 1,704 | ||||||||||||
Other current receivables |
B7 | 16,014 | 14,479 | 20,844 | ||||||||||||
Interest-bearing securities, current |
F1 | 6,820 | 6,759 | 6,625 | ||||||||||||
Cash and cash equivalents |
H3 | 43,612 | 45,079 | 38,389 | ||||||||||||
|
|
|
|
|
|
|||||||||||
149,795 | 153,914 | 161,167 | ||||||||||||||
|
|
|
|
|
|
|||||||||||
Total assets |
271,530 | 276,383 | 268,761 | |||||||||||||
|
|
|
|
|
|
|||||||||||
Equity and liabilities |
||||||||||||||||
Equity |
||||||||||||||||
Capital stock |
E1 | 16,672 | 16,672 | 16,672 | ||||||||||||
Additional paid in capital |
E1 | 24,731 | 24,731 | 24,731 | ||||||||||||
Other reserves |
E1 | 2,689 | 2,292 | 965 | ||||||||||||
Retained earnings |
E1 | 47,960 | 38,864 | 44,610 | ||||||||||||
Equity attributable to owners of the Parent Company |
E1 | 86,674 | 82,559 | 86,978 | ||||||||||||
Non-controlling interests |
E1 | 1,497 | 681 | 792 | ||||||||||||
|
|
|
|
|
|
|||||||||||
85,177 | 81,878 | 87,770 | ||||||||||||||
Non-current liabilities |
||||||||||||||||
Post-employment benefits |
G1 | 37,353 | 35,817 | 28,720 | ||||||||||||
Provisions, non-current |
D1 | 2,886 | 2,679 | 5,471 | ||||||||||||
Deferred tax liabilities |
H1 | 1,089 | 1,224 | 670 | ||||||||||||
Borrowings, non-current |
F4 | 22,218 | 28,257 | 30,870 | ||||||||||||
Lease liabilities, non-current |
C3 | 7,104 | 7,595 | | ||||||||||||
Other non-current liabilities |
1,383 | 2,114 | 4,346 | |||||||||||||
|
|
|
|
|
|
|||||||||||
72,033 | 77,686 | 70,077 | ||||||||||||||
Current liabilities |
||||||||||||||||
Provisions, current |
D1 | 7,580 | 8,244 | 10,537 | ||||||||||||
Borrowings, current |
F4 | 7,942 | 9,439 | 2,255 | ||||||||||||
Lease liabilities, current |
C3 | 2,196 | 2,287 | | ||||||||||||
Contract liabilities |
B6 | 26,440 | 29,041 | 29,348 | ||||||||||||
Trade payables |
B8 | 31,988 | 30,403 | 29,883 | ||||||||||||
Other current liabilities |
B9 | 38,174 | 37,405 | 38,891 | ||||||||||||
|
|
|
|
|
|
|||||||||||
114,320 | 116,819 | 110,914 | ||||||||||||||
|
|
|
|
|
|
|||||||||||
Total equity and liabilities |
271,530 | 276,383 | 268,761 | |||||||||||||
|
|
|
|
|
|
31
|
Financial report 2020 | Consolidated financial statements with notes
|
Ericsson Annual Report on Form 20-F 2020
|
Consolidated statement of cash flows
JanuaryDecember, SEK million |
Notes | 2020 | 2019 | 2018 | ||||||||||||
Operating activities |
||||||||||||||||
Net income (loss) |
17,623 | 1,840 | 6,276 | |||||||||||||
Adjustments to reconcile net income to cash |
H3 | 14,915 | 12,226 | 7,830 | ||||||||||||
|
|
|
|
|
|
|||||||||||
32,538 | 14,066 | 1,554 | ||||||||||||||
Changes in operating net assets |
||||||||||||||||
Inventories |
384 | 261 | 4,807 | |||||||||||||
Customer finance, current and non-current |
370 | 858 | 1,085 | |||||||||||||
Trade receivables and contract assets |
3,185 | 10,995 | 2,047 | |||||||||||||
Trade payables |
4,303 | 372 | 2,436 | |||||||||||||
Provisions and post-employment benefits |
2,669 | 3,729 | 6,696 | |||||||||||||
Contract liabilities |
560 | 1,579 | 808 | |||||||||||||
Other operating assets and liabilities, net |
2,248 | 1,911 | 5,233 | |||||||||||||
|
|
|
|
|
|
|||||||||||
3,605 | 2,807 | 7,788 | ||||||||||||||
|
|
|
|
|
|
|||||||||||
Cash flow from operating activities |
28,933 | 16,873 | 9,342 | |||||||||||||
Investing activities |
||||||||||||||||
Investments in property, plant and equipment |
C2 | 4,493 | 5,118 | 3,975 | ||||||||||||
Sales of property, plant and equipment |
254 | 744 | 334 | |||||||||||||
Acquisitions of subsidiaries and other operations |
H3, E2 | 9,657 | 1,753 | 1,618 | ||||||||||||
Divestments of subsidiaries and other operations |
H3, E2 | 59 | 248 | 333 | ||||||||||||
Product development |
C1 | 817 | 1,545 | 925 | ||||||||||||
Other investing activities |
801 | 331 | 523 | |||||||||||||
Interest-bearing securities |
1,348 | 4,214 | 2,242 | |||||||||||||
|
|
|
|
|
|
|||||||||||
Cash flow from investing activities |
15,201 | 3,541 | 4,132 | |||||||||||||
Financing activities |
||||||||||||||||
Proceeds from issuance of borrowings |
F4 | 4,400 | 4,851 | 911 | ||||||||||||
Repayment of borrowings |
F4 | 8,643 | 4,476 | 1,748 | ||||||||||||
Sale of own shares |
163 | 197 | 107 | |||||||||||||
Dividends paid |
5,996 | 4,450 | 3,425 | |||||||||||||
Repayment of lease liabilities |
F4 | 2,417 | 2,990 | | ||||||||||||
Other financing activities |
1 | 32 | 78 | |||||||||||||
|
|
|
|
|
|
|||||||||||
Cash flow from financing activities |
12,492 | 6,900 | 4,077 | |||||||||||||
Effect of exchange rate changes on cash |
2,707 | 258 | 1,372 | |||||||||||||
|
|
|
|
|
|
|||||||||||
Net change in cash and cash equivalents |
1,467 | 6,690 | 2,505 | |||||||||||||
Cash and cash equivalents, beginning of period |
45,079 | 38,389 | 35,884 | |||||||||||||
|
|
|
|
|
|
|||||||||||
Cash and cash equivalents, end of period |
H3 | 43,612 | 45,079 | 38,389 | ||||||||||||
|
|
|
|
|
|
32
|
Financial report 2020 | Consolidated financial statements with notes
|
Ericsson Annual Report on Form 20-F 2020
|
Consolidated statement of changes in equity
Equity and Other comprehensive income (loss) 2020
SEK million |
Capital stock |
Additional paid in capital |
Other reserves |
Retained earnings |
Stockholders equity |
Non-controlling interests |
Total equity |
|||||||||||||||||||||
January 1, 2020 |
16,672 | 24,731 | 2,292 | 38,864 | 82,559 | 681 | 81,878 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Net income (loss) |
| | | 17,483 | 17,483 | 140 | 17,623 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Other comprehensive income (loss) |
||||||||||||||||||||||||||||
Items that will not be reclassified to profit or loss |
||||||||||||||||||||||||||||
Remeasurements related to post-employment benefits |
| | | 4,614 | 4,614 | 4 | 4,618 | |||||||||||||||||||||
Revaluation of borrowings due to change in credit risk |
| | 99 | | 99 | | 99 | |||||||||||||||||||||
Tax on items that will not be reclassified to profit or loss |
| | 20 | 899 | 879 | 1 | 880 | |||||||||||||||||||||
Items that have been or may be reclassified to profit or loss |
||||||||||||||||||||||||||||
Cash flow hedge reserve |
||||||||||||||||||||||||||||
Gains/losses arising during the period |
| | 136 | | 136 | | 136 | |||||||||||||||||||||
Reclassification to profit and loss |
| | 281 | | 281 | | 281 | |||||||||||||||||||||
Translation reserves 1) |
||||||||||||||||||||||||||||
Changes in translation reserves |
| | 5,434 | | 5,434 | 58 | 5,376 | |||||||||||||||||||||
Reclassification to profit and loss |
| | 124 | | 124 | | 124 | |||||||||||||||||||||
Share of other comprehensive income of JV and associated companies |
| | 81 | | 81 | | 81 | |||||||||||||||||||||
Tax on items that have been or may be reclassified to profit or loss |
| | 86 | | 86 | | 86 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Other comprehensive income (loss), net of tax |
| | 4,981 | 3,715 | 8,696 | 55 | 8,641 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total comprehensive income (loss) |
| | 4,981 | 13,768 | 8,787 | 195 | 8,982 | |||||||||||||||||||||
Transactions with owners |
||||||||||||||||||||||||||||
Sale of own shares |
| | | 163 | 163 | | 163 | |||||||||||||||||||||
Long-term variable compensation plans |
| | | 150 | 150 | | 150 | |||||||||||||||||||||
Dividends paid 2) |
| | | 4,985 | 4,985 | 1,011 | 5,996 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
December 31, 2020 |
16,672 | 24,731 | 2,689 | 47,960 | 86,674 | 1,497 | 85,177 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1) | Changes in cumulative translation adjustments include changes regarding revaluation of goodwill in local currency of SEK 3,359 million (SEK 966 million in 2019 and SEK 1,584 million in 2018), and realized gain/losses net from sold/liquidated companies, SEK 124 million (SEK 54 million in 2019 and SEK 36 million in 2018). |
2) | Dividends paid per share amounted to SEK 1.50 (SEK 1.00 in 2019 and SEK 1.00 in 2018). |
33
|
Financial report 2020 | Consolidated financial statements with notes
|
Ericsson Annual Report on Form 20-F 2020
|
Equity and Other comprehensive income (loss) 2019
SEK million |
Capital stock |
Additional paid in capital |
Other reserves |
Retained earnings |
Stockholders equity |
Non-controlling interests |
Total equity |
|||||||||||||||||||||
January 1, 2019 |
16,672 | 24,731 | 965 | 44,610 | 86,978 | 792 | 87,770 | |||||||||||||||||||||
Opening balance adjustment due to IFRS 16 |
| | | 249 | 249 | | 249 | |||||||||||||||||||||
January 1, 2019, adjusted |
16,672 | 24,731 | 965 | 44,361 | 86,729 | 792 | 87,521 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Net income (loss) |
| | | 2,223 | 2,223 | 383 | 1,840 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Other comprehensive income (loss) |
||||||||||||||||||||||||||||
Items that will not be reclassified to profit or loss |
||||||||||||||||||||||||||||
Remeasurements related to post-employment benefits |
| | | 6,182 | 6,182 | | 6,182 | |||||||||||||||||||||
Revaluation of borrowings due to change in credit risk |
| | 651 | | 651 | | 651 | |||||||||||||||||||||
Tax on items that will not be reclassified to profit or loss |
| | 134 | 1,229 | 1,363 | | 1,363 | |||||||||||||||||||||
Items that have been or may be reclassified to profit or loss |
||||||||||||||||||||||||||||
Cash flow hedge reserve |
||||||||||||||||||||||||||||
Gains/losses arising during the period |
| | 290 | | 290 | | 290 | |||||||||||||||||||||
Translation reserves |
||||||||||||||||||||||||||||
Changes in translation reserves |
| | 1,889 | | 1,889 | 36 | 1,925 | |||||||||||||||||||||
Reclassification to profit and loss |
| | 54 | | 54 | | 54 | |||||||||||||||||||||
Share of other comprehensive income of JV and associated companies |
| | 131 | | 131 | | 131 | |||||||||||||||||||||
Tax on items that have been or may be reclassified to profit or loss |
| | 60 | | 60 | | 60 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Other comprehensive income (loss), net of tax |
| | 1,327 | 4,953 | 3,626 | 36 | 3,590 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total comprehensive income (loss) |
| | 1,327 | 2,730 | 1,403 | 347 | 1,750 | |||||||||||||||||||||
Transactions with owners |
||||||||||||||||||||||||||||
Sale of own shares |
| | | 197 | 197 | | 197 | |||||||||||||||||||||
Long-term variable compensation plans |
| | | 377 | 377 | | 377 | |||||||||||||||||||||
Dividends paid |
| | | 3,301 | 3,301 | 1,149 | 4,450 | |||||||||||||||||||||
Transactions with non-controlling interests |
| | | 40 | 40 | 23 | 17 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
December 31, 2019 |
16,672 | 24,731 | 2,292 | 38,864 | 82,559 | 681 | 81,878 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
34
|
Financial report 2020 | Consolidated financial statements with notes
|
Ericsson Annual Report on Form 20-F 2020
|
Equity and Other comprehensive income (loss) 2018
SEK million |
Capital stock |
Additional paid in capital |
Other reserves |
Retained earnings |
Stockholders equity |
Non-controlling interests |
Total equity |
|||||||||||||||||||||
January 1, 2018 |
16,672 | 24,731 | 334 | 55,866 | 96,935 | 636 | 97,571 | |||||||||||||||||||||
Opening balance adjustment due to IFRS 9 |
| | 888 | 95 | 983 | | 983 | |||||||||||||||||||||
January 1, 2018, adjusted |
16,672 | 24,731 | 1,222 | 55,771 | 95,952 | 636 | 96,588 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Net income (loss) |
| | | 6,530 | 6,530 | 254 | 6,276 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Other comprehensive income (loss) |
||||||||||||||||||||||||||||
Items that will not be reclassified to profit or loss |
||||||||||||||||||||||||||||
Remeasurements related to post-employment benefits |
| | | 2,457 | 2,457 | 4 | 2,453 | |||||||||||||||||||||
Revaluation of borrowings due to change in credit risk |
| | 207 | | 207 | | 207 | |||||||||||||||||||||
Tax on items that will not be reclassified to profit or loss |
| | 44 | 330 | 286 | 1 | 285 | |||||||||||||||||||||
Items that have been or may be reclassified to profit or loss |
||||||||||||||||||||||||||||
Translation reserves |
||||||||||||||||||||||||||||
Changes in translation reserves |
| | 1,974 | | 1,974 | 37 | 2,011 | |||||||||||||||||||||
Reclassification to profit and loss |
| | 36 | | 36 | | 36 | |||||||||||||||||||||
Share of other comprehensive income of JV and associated companies |
| | 14 | | 14 | | 14 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Other comprehensive income (loss), net of tax |
| | 2,187 | 2,127 | 60 | 40 | 100 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total comprehensive income (loss) |
| | 2,187 | 8,657 | 6,470 | 294 | 6,176 | |||||||||||||||||||||
Transactions with owners |
||||||||||||||||||||||||||||
Sale of own shares |
| | | 107 | 107 | | 107 | |||||||||||||||||||||
Long-term variable compensation plans |
| | | 677 | 677 | | 677 | |||||||||||||||||||||
Dividends paid |
| | | 3,287 | 3,287 | 138 | 3,425 | |||||||||||||||||||||
Transactions with non-controlling interests |
| | | 1 | 1 | | 1 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
December 31, 2018 |
16,672 | 24,731 | 965 | 44,610 | 86,978 | 792 | 87,770 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
35
|
Financial report 2020 | Notes to the consolidated financial statements
|
Ericsson Annual Report on Form 20-F 2020
|
36
|
Financial report 2020 | Notes to the consolidated financial statements
|
Ericsson Annual Report on Form 20-F 2020
|
Note A1, cont.
37
|
Financial report 2020 | Notes to the consolidated financial statements
|
Ericsson Annual Report on Form 20-F 2020
|
Note A1, cont.
38
|
Financial report 2020 | Notes to the consolidated financial statements
|
Ericsson Annual Report on Form 20-F 2020
|
Note A1, cont.
39
|
Financial report 2020 | Notes to the consolidated financial statements
|
Ericsson Annual Report on Form 20-F 2020
|
Note A1, cont.
40
|
Financial report 2020 | Notes to the consolidated financial statements
|
Ericsson Annual Report on Form 20-F 2020
|
Note A1, cont.
41
|
Financial report 2020 | Notes to the consolidated financial statements
|
Ericsson Annual Report on Form 20-F 2020
|
Note A1, cont.
42
|
Financial report 2020 | Notes to the consolidated financial statements
|
Ericsson Annual Report on Form 20-F 2020
|
Note A1, cont.
43
|
Financial report 2020 | Notes to the consolidated financial statements
|
Ericsson Annual Report on Form 20-F 2020
|
Note A2, cont.
44
|
Financial report 2020 | Notes to the consolidated financial statements
|
Ericsson Annual Report on Form 20-F 2020
|
Note A2, cont.
45
|
Financial report 2020 | Notes to the consolidated financial statements
|
Ericsson Annual Report on Form 20-F 2020
|
Operating segments 2020
Networks | Digital Services |
Managed Services |
Emerging Business and Other |
Total Segments |
Group | |||||||||||||||||||
Segment sales |
165,978 | 37,324 | 22,600 | 6,488 | 232,390 | 232,390 | ||||||||||||||||||
Net sales |
165,978 | 37,324 | 22,600 | 6,488 | 232,390 | 232,390 | ||||||||||||||||||
Gross income |
72,413 | 15,637 | 4,012 | 1,662 | 93,724 | 93,724 | ||||||||||||||||||
Gross margin (%) |
43.6 | % | 41.9 | % | 17.8 | % | 25.6 | % | 40.3 | % | 40.3 | % | ||||||||||||
Operating income (loss) |
30,851 | 2,206 | 1,563 | 2,400 | 27,808 | 27,808 | ||||||||||||||||||
Operating margin (%) |
18.6 | % | 5.9 | % | 6.9 | % | 37.0 | % | 12.0 | % | 12.0 | % | ||||||||||||
Financial income and expenses, net |
596 | |||||||||||||||||||||||
|
|
|||||||||||||||||||||||
Income after financial items |
27,212 | |||||||||||||||||||||||
Income tax |
9,589 | |||||||||||||||||||||||
|
|
|||||||||||||||||||||||
Net income |
17,623 | |||||||||||||||||||||||
|
|
|||||||||||||||||||||||
Other segment items |
||||||||||||||||||||||||
Share in earnings of JV and associated companies |
37 | 28 | 5 | 368 | 298 | 298 | ||||||||||||||||||
Amortizations |
775 | 607 | 5 | 602 | 1,989 | 1,989 | ||||||||||||||||||
Depreciations |
3,764 | 1,252 | 386 | 587 | 5,989 | 5,989 | ||||||||||||||||||
Impairment losses |
494 | 119 | 25 | 58 | 696 | 696 | ||||||||||||||||||
Restructuring expenses |
746 | 19 | 258 | 283 | 1,306 | 1,306 | ||||||||||||||||||
Gains/losses on sale of investments and operations |
129 | 12 | 5 | 29 | 141 | 141 |
46
|
Financial report 2020 | Notes to the consolidated financial statements
|
Ericsson Annual Report on Form 20-F 2020
|
Note B1, cont.
Operating segments 2019
Networks | Digital Services |
Managed Services |
Emerging Business and Other |
Total Segments |
Group | |||||||||||||||||||
Segment sales |
155,009 | 39,857 | 25,565 | 6,785 | 227,216 | 227,216 | ||||||||||||||||||
Net sales |
155,009 | 39,857 | 25,565 | 6,785 | 227,216 | 227,216 | ||||||||||||||||||
Gross income |
64,717 | 14,836 | 3,990 | 1,281 | 84,824 | 84,824 | ||||||||||||||||||
Gross margin (%) |
41.8 | % | 37.2 | % | 15.6 | % | 18.9 | % | 37.3 | % | 37.3 | % | ||||||||||||
Operating income (loss) |
24,767 | 4,027 | 2,309 | 12,485 | 10,564 | 10,564 | ||||||||||||||||||
Operating margin (%) 1) |
16.0 | % | 10.1 | % | 9.0 | % | 184.0 | % | 4.6 | % | 4.6 | % | ||||||||||||
Financial income and expenses, net |
1,802 | |||||||||||||||||||||||
|
|
|||||||||||||||||||||||
Income after financial items |
8,762 | |||||||||||||||||||||||
Income tax |
6,922 | |||||||||||||||||||||||
|
|
|||||||||||||||||||||||
Net income |
1,840 | |||||||||||||||||||||||
|
|
|||||||||||||||||||||||
Other segment items |
||||||||||||||||||||||||
Share in earnings of JV and associated companies |
26 | 41 | 3 | 405 | 335 | 335 | ||||||||||||||||||
Amortizations |
517 | 1,413 | 5 | 603 | 2,538 | 2,538 | ||||||||||||||||||
Depreciations |
3,604 | 1,478 | 413 | 566 | 6,061 | 6,061 | ||||||||||||||||||
Impairment losses |
295 | 128 | 24 | 43 | 490 | 490 | ||||||||||||||||||
Restructuring expenses |
68 | 614 | 45 | 71 | 798 | 798 | ||||||||||||||||||
Gains/losses on sale of investments and operations |
225 | 2 | 12 | 936 | 697 | 697 |
1) | Includes costs of SEK 10.7 billion in 2019 related to the resolution of the US SEC and DOJ investigations. |
Operating segments 2018
Networks | Digital Services |
Managed Services |
Emerging Business and Other |
Total Segments |
Group | |||||||||||||||||||
Segment sales |
138,570 | 38,089 | 25,770 | 8,409 | 210,838 | 210,838 | ||||||||||||||||||
Net sales |
138,570 | 38,089 | 25,770 | 8,409 | 210,838 | 210,838 | ||||||||||||||||||
Gross income |
55,153 | 8,318 | 2,886 | 1,843 | 68,200 | 68,200 | ||||||||||||||||||
Gross margin (%) |
39.8 | % | 21.8 | % | 11.2 | % | 21.9 | % | 32.3 | % | 32.3 | % | ||||||||||||
Operating income (loss) |
19,421 | 13,852 | 1,093 | 5,420 | 1,242 | 1,242 | ||||||||||||||||||
Operating margin (%) |
14.0 | % | 36.4 | % | 4.2 | % | 64.5 | % | 0.6 | % | 0.6 | % | ||||||||||||
Financial income and expenses, net |
2,705 | |||||||||||||||||||||||
|
|
|||||||||||||||||||||||
Income after financial items |
1,463 | |||||||||||||||||||||||
Income tax |
4,813 | |||||||||||||||||||||||
|
|
|||||||||||||||||||||||
Net income (loss) |
6,276 | |||||||||||||||||||||||
|
|
|||||||||||||||||||||||
Other segment items |
||||||||||||||||||||||||
Share in earnings of JV and associated companies |
28 | 27 | 3 | | 58 | 58 | ||||||||||||||||||
Amortizations |
830 | 2,295 | 14 | 807 | 3,946 | 3,946 | ||||||||||||||||||
Depreciations |
1,717 | 933 | 169 | 456 | 3,275 | 3,275 | ||||||||||||||||||
Impairment losses |
308 | 406 | 29 | 354 | 1,097 | 1,097 | ||||||||||||||||||
Restructuring expenses |
1,781 | 5,366 | 276 | 592 | 8,015 | 8,015 | ||||||||||||||||||
Gains/losses on sale of investments and operations |
132 | 36 | 57 | | 225 | 225 |
Products and Services by Segments
Networks | Digital Services |
Managed Services |
Emerging Business and Other |
Total Segment |
||||||||||||||||
2020 |
||||||||||||||||||||
Products |
122,229 | 20,447 | 81 | 3,429 | 146,186 | |||||||||||||||
Services |
43,749 | 16,877 | 22,519 | 3,059 | 86,204 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total |
165,978 | 37,324 | 22,600 | 6,488 | 232,390 | |||||||||||||||
2019 |
||||||||||||||||||||
Products |
109,122 | 21,480 | 11 | 3,553 | 134,166 | |||||||||||||||
Services |
45,887 | 18,377 | 25,554 | 3,232 | 93,050 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total |
155,009 | 39,857 | 25,565 | 6,785 | 227,216 | |||||||||||||||
2018 |
||||||||||||||||||||
Products |
96,931 | 20,458 | | 4,036 | 121,425 | |||||||||||||||
Services |
41,639 | 17,631 | 25,770 | 4,373 | 89,413 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total |
138,570 | 38,089 | 25,770 | 8,409 | 210,838 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
47
|
Financial report 2020 | Notes to the consolidated financial statements
|
Ericsson Annual Report on Form 20-F 2020
|
Note B1, cont.
Market area 2020
Non-current | ||||||||||||||||||||||||
Net sales | assets 4) | |||||||||||||||||||||||
Networks | Digital Services |
Managed Services |
Emerging Business and Other |
Total | Total | |||||||||||||||||||
South East Asia, Oceania and India |
21,464 | 4,329 | 4,219 | 36 | 30,048 | 812 | ||||||||||||||||||
North East Asia 3) |
27,120 | 5,124 | 831 | 259 | 33,334 | 2,648 | ||||||||||||||||||
North America 2) |
62,199 | 7,979 | 3,529 | 68 | 73,775 | 12,749 | ||||||||||||||||||
Europe and Latin America 1) |
33,257 | 11,954 | 10,167 | 367 | 55,745 | 49,895 | ||||||||||||||||||
Middle East and Africa |
13,281 | 6,144 | 3,854 | 19 | 23,298 | 140 | ||||||||||||||||||
Other 1) 2) 3) 5) |
8,657 | 1,794 | | 5,739 | 16,190 | | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total |
165,978 | 37,324 | 22,600 | 6,488 | 232,390 | 66,244 | ||||||||||||||||||
1) Of which in EU 5) |
29,501 | 48,133 | ||||||||||||||||||||||
Of which in Sweden 5) |
1,123 | 43,627 | ||||||||||||||||||||||
2) Of which in the United States 5) |
77,835 | 11,533 | ||||||||||||||||||||||
3) Of which in China 5) |
18,745 | 2,136 |
4) | Total non-current assets excluding financial instruments, deferred tax assets, and post-employment benefit assets. |
5) | Including IPR licensing revenue reported under Other above. |
Market area 2019
Non-current | ||||||||||||||||||||||||
Net sales | assets 4) | |||||||||||||||||||||||
Networks | Digital Services |
Managed Services |
Emerging Business and Other |
Total | Total | |||||||||||||||||||
South East Asia, Oceania and India |
21,850 | 4,033 | 3,836 | 57 | 29,776 | 1,199 | ||||||||||||||||||
North East Asia 3) |
20,339 | 4,857 | 1,026 | 178 | 26,400 | 2,881 | ||||||||||||||||||
North America 2) |
55,808 | 9,646 | 4,673 | 96 | 70,223 | 11,570 | ||||||||||||||||||
Europe and Latin America 1) |
33,884 | 12,571 | 12,149 | 402 | 59,006 | 45,832 | ||||||||||||||||||
Middle East and Africa |
14,604 | 7,015 | 3,881 | 25 | 25,525 | 151 | ||||||||||||||||||
Other 1) 2) 3) 5) |
8,524 | 1,735 | | 6,027 | 16,286 | | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total |
155,009 | 39,857 | 25,565 | 6,785 | 227,216 | 61,633 | ||||||||||||||||||
1) Of which in EU 5) |
35,729 | 44,306 | ||||||||||||||||||||||
Of which in Sweden 5) |
589 | 38,313 | ||||||||||||||||||||||
2) Of which in the United States 5) |
73,279 | 10,176 | ||||||||||||||||||||||
3) Of which in China 5) |
15,860 | 2,402 |
4) | Total non-current assets excluding financial instruments, deferred tax assets, and post-employment benefit assets. |
5) | Including IPR licensing revenue reported under Other above. |
Market area 2018
Non-current | ||||||||||||||||||||||||
Net sales | assets 4) | |||||||||||||||||||||||
Networks | Digital Services |
Managed Services |
Emerging Business and Other |
Total | Total | |||||||||||||||||||
South East Asia, Oceania and India |
21,337 | 4,824 | 3,388 | 40 | 29,589 | 445 | ||||||||||||||||||
North East Asia 3) |
15,915 | 4,849 | 1,465 | 80 | 22,309 | 1,833 | ||||||||||||||||||
North America 2) |
46,452 | 8,358 | 3,680 | 96 | 58,586 | 9,397 | ||||||||||||||||||
Europe and Latin America 1) 6) |
33,887 | 12,172 | 13,191 | 313 | 59,563 | 39,481 | ||||||||||||||||||
Middle East and Africa 6) |
13,826 | 6,451 | 4,046 | 15 | 24,338 | 50 | ||||||||||||||||||
Other 1) 2) 3) 5) |
7,153 | 1,435 | | 7,865 | 16,453 | | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total |
138,570 | 38,089 | 25,770 | 8,409 | 210,838 | 51,206 | ||||||||||||||||||
1) Of which in EU 5) |
35,941 | 38,423 | ||||||||||||||||||||||
Of which in Sweden 5) |
2,315 | 34,434 | ||||||||||||||||||||||
2) Of which in the United States 5) |
61,446 | 8,349 | ||||||||||||||||||||||
3) Of which in China 5) |
14,601 | 1,525 |
4) | Total non-current assets excluding financial instruments, deferred tax assets, and post-employment benefit assets. |
5) | Including IPR licensing revenue reported under Other above. |
6) | 2018 is restated due to a change in 2019 where sales reported on Morocco is reported on market area Middle East and Africa (earlier Europe and Latin America). |
48
|
Financial report 2020 | Notes to the consolidated financial statements
|
Ericsson Annual Report on Form 20-F 2020
|
49
|
Financial report 2020 | Notes to the consolidated financial statements
|
Ericsson Annual Report on Form 20-F 2020
|
Note B6, cont.
Section C Long-term assets
C1 Intangible assets
Intangible assets
2020 | 2019 | |||||||||||||||||||||||
Capitalized development expenses |
Goodwill | IPR1), brands and other intangible assets |
Capitalized development expenses |
Goodwill | IPR1), brands and other intangible assets |
|||||||||||||||||||
Cost |
||||||||||||||||||||||||
Opening balance |
18,681 | 37,847 | 52,912 | 23,719 | 43,294 | 58,101 | ||||||||||||||||||
Acquisitions/capitalization |
817 | | 396 | 1,545 | | 4 | ||||||||||||||||||
Balances regarding acquired/divested business 2) |
| 7,104 | 3,500 | 2,099 | 7,093 | 6,049 | ||||||||||||||||||
Sales/disposals |
1,256 | | 48 | 4,551 | | 112 | ||||||||||||||||||
Translation differences |
193 | 3,359 | 2,847 | 67 | 1,646 | 968 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Closing balance |
18,049 | 41,592 | 53,913 | 18,681 | 37,847 | 52,912 | ||||||||||||||||||
Accumulated amortizations |
||||||||||||||||||||||||
Opening balance |
10,896 | | 43,018 | 14,768 | | 47,277 | ||||||||||||||||||
Amortizations |
906 | | 1,083 | 1,519 | | 1,019 | ||||||||||||||||||
Balances regarding divested business 2) |
| 35 | 843 | | 5,922 | |||||||||||||||||||
Sales/disposals |
1,256 | | 48 | 4,551 | | 112 | ||||||||||||||||||
Translation differences |
99 | | 2,297 | 3 | | 756 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Closing balance |
10,447 | | 41,721 | 10,896 | | 43,018 | ||||||||||||||||||
Accumulated impairment losses |
||||||||||||||||||||||||
Opening balance |
3,745 | 6,647 | 7,403 | 4,714 | 13,259 | 7,350 | ||||||||||||||||||
Balances regarding divested business 2) |
| | | 1,005 | 7,292 | 55 | ||||||||||||||||||
Impairment losses |
| | 137 | 36 | | 19 | ||||||||||||||||||
Translation differences |
| | 153 | | 680 | 89 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Closing balance |
3,745 | 6,647 | 7,387 | 3,745 | 6,647 | 7,403 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net carrying value |
3,857 | 34,945 | 4,805 | 4,040 | 31,200 | 2,491 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
1) | Intellectual property rights. |
2) | For more information on acquired/divested businesses, see note E2 Business combinations. |
50
|
Financial report 2020 | Notes to the consolidated financial statements
|
Ericsson Annual Report on Form 20-F 2020
|
Note C1, cont.
51
|
Financial report 2020 | Notes to the consolidated financial statements
|
Ericsson Annual Report on Form 20-F 2020
|
C2 Property, plant and equipment
Property, plant and equipment 2020
Real estate |
Machinery and other technical assets |
Other equipment, tools and installations |
Construction in progress and advance payments |
Total | ||||||||||||||||
Cost |
||||||||||||||||||||
Opening balance |
6,755 | 3,512 | 33,790 | 1,015 | 45,072 | |||||||||||||||
Additions |
78 | 163 | 2,184 | 2,068 | 4,493 | |||||||||||||||
Balances regarding acquired/divested business |
2 | 4 | 59 | 10 | 55 | |||||||||||||||
Sales/disposals |
567 | 475 | 2,534 | 173 | 3,749 | |||||||||||||||
Reclassifications |
720 | 92 | 1,009 | 1,821 | | |||||||||||||||
Translation differences |
485 | 266 | 1,618 | 84 | 2,453 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Closing balance |
6,503 | 3,030 | 32,890 | 995 | 43,418 | |||||||||||||||
Accumulated depreciations |
||||||||||||||||||||
Opening balance |
3,745 | 2,843 | 23,291 | | 29,879 | |||||||||||||||
Depreciations |
425 | 241 | 2,936 | | 3,602 | |||||||||||||||
Balances regarding divested business |
| | 1 | | 1 | |||||||||||||||
Sales/disposals |
537 | 470 | 2,165 | | 3,172 | |||||||||||||||
Reclassifications |
1 | 11 | 12 | | | |||||||||||||||
Translation differences |
227 | 210 | 1,210 | | 1,647 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Closing balance |
3,405 | 2,393 | 22,863 | | 28,661 | |||||||||||||||
Accumulated impairment losses |
||||||||||||||||||||
Opening balance |
295 | 43 | 1,005 | | 1,343 | |||||||||||||||
Impairment losses |
11 | 65 | 434 | 2 | 512 | |||||||||||||||
Sales/disposals |
9 | 28 | 348 | 2 | 387 | |||||||||||||||
Translation differences |
22 | 5 | 67 | | 94 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Closing balance |
275 | 75 | 1,024 | | 1,374 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net carrying value |
2,823 | 562 | 9,003 | 995 | 13,383 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
Contractual commitments for the acquisition of property, plant and equipment as per December 31, 2020, amounted to SEK 499 (548) million.
In 2020 impairment losses have been made of SEK 0.5 (0.4) billion. The impairment losses by segment was Networks SEK 0.3 (0.2) billion, Digital Services SEK 0.1 (0.1) billion.
Property, plant and equipment 2019
Real estate |
Machinery and other technical assets |
Other equipment, tools and installations |
Construction in progress and advance payments |
Total | ||||||||||||||||
Cost |
||||||||||||||||||||
Opening balance |
6,844 | 3,372 | 32,469 | 871 | 43,556 | |||||||||||||||
Additions |
81 | 272 | 2,650 | 2,115 | 5,118 | |||||||||||||||
Balances regarding acquired/divested business |
167 | 173 | 317 | 27 | 284 | |||||||||||||||
Sales/disposals |
568 | 346 | 2,941 | 514 | 4,369 | |||||||||||||||
Reclassifications |
369 | 24 | 1,178 | 1,523 | | |||||||||||||||
Translation differences |
196 | 65 | 751 | 39 | 1,051 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Closing balance |
6,755 | 3,512 | 33,790 | 1,015 | 45,072 | |||||||||||||||
Accumulated depreciation |
||||||||||||||||||||
Opening balance |
3,703 | 2,948 | 22,769 | | 29,420 | |||||||||||||||
Depreciations |
406 | 203 | 2,978 | | 3,587 | |||||||||||||||
Balances regarding divested business |
97 | 12 | 355 | | 464 | |||||||||||||||
Sales/disposals |
379 | 323 | 2,692 | | 3,394 | |||||||||||||||
Reclassification |
| 34 | 34 | | | |||||||||||||||
Translation differences |
112 | 61 | 557 | | 730 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Closing balance |
3,745 | 2,843 | 23,291 | | 29,879 | |||||||||||||||
Accumulated impairment losses |
||||||||||||||||||||
Opening balance |
292 | 66 | 929 | | 1,287 | |||||||||||||||
Impairment losses |
56 | 6 | 280 | 30 | 360 | |||||||||||||||
Balances regarding divested business |
1 | | 1 | | 2 | |||||||||||||||
Sales/disposals |
61 | 19 | 235 | 30 | 345 | |||||||||||||||
Translation differences |
9 | 2 | 32 | | 43 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Closing balance |
295 | 43 | 1,005 | | 1,343 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net carrying value |
2,715 | 626 | 9,494 | 1,015 | 13,850 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
52
|
Financial report 2020 | Notes to the consolidated financial statements
|
Ericsson Annual Report on Form 20-F 2020
|
C3 Leases
Leases with the Company as lessee
Right-of-use assets
2020 | 2019 | |||||||||||||||||||||||||||||||
Real estate | Vehicles | Other | Total | Real estate | Vehicles | Other | Total | |||||||||||||||||||||||||
Cost |
||||||||||||||||||||||||||||||||
Opening balance |
11,263 | 698 | 126 | 12,087 | 9,151 | 452 | 126 | 9,729 | ||||||||||||||||||||||||
Additions |
2,220 | 339 | 45 | 2,604 | 2,035 | 265 | | 2,300 | ||||||||||||||||||||||||
Balances regarding acquired/divested business |
126 | | | 126 | 21 | | | 21 | ||||||||||||||||||||||||
Terminations |
926 | 130 | | 1,056 | 127 | 29 | | 156 | ||||||||||||||||||||||||
Translation differences |
899 | 84 | | 983 | 225 | 10 | | 235 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Closing balance |
11,784 | 823 | 171 | 12,778 | 11,263 | 698 | 126 | 12,087 | ||||||||||||||||||||||||
Accumulated depreciations |
||||||||||||||||||||||||||||||||
Opening balance |
2,126 | 260 | 28 | 2,414 | | | | | ||||||||||||||||||||||||
Depreciations |
2,082 | 277 | 28 | 2,387 | 2,162 | 284 | 28 | 2,474 | ||||||||||||||||||||||||
Balances regarding divested business |
1 | | | 1 | 1 | | | 1 | ||||||||||||||||||||||||
Terminations |
238 | 109 | | 347 | 14 | 22 | | 36 | ||||||||||||||||||||||||
Translation differences |
269 | 38 | 1 | 308 | 21 | 2 | | 23 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Closing balance |
3,700 | 390 | 55 | 4,145 | 2,126 | 260 | 28 | 2,414 | ||||||||||||||||||||||||
Accumulated impairment losses |
||||||||||||||||||||||||||||||||
Opening balance |
872 | | | 872 | 767 | | | 767 | ||||||||||||||||||||||||
Impairment losses |
47 | | | 47 | 75 | | | 75 | ||||||||||||||||||||||||
Terminations |
553 | | | 553 | | | | | ||||||||||||||||||||||||
Translation differences |
26 | | | 26 | 30 | | | 30 | ||||||||||||||||||||||||
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Closing balance |
340 | | | 340 | 872 | | | 872 | ||||||||||||||||||||||||
Financial sublease |
||||||||||||||||||||||||||||||||
Opening balance |
314 | | | 314 | 311 | | | 311 | ||||||||||||||||||||||||
Derecognition |
42 | | | 42 | 2 | | | 2 | ||||||||||||||||||||||||
Translation differences |
43 | | | 43 | 5 | | | 5 | ||||||||||||||||||||||||
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Closing balance |
313 | | | 313 | 314 | | | 314 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Net carrying value |
7,431 | 433 | 116 | 7,980 | 7,951 | 438 | 98 | 8,487 | ||||||||||||||||||||||||
|
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|
|
|
|
|
|
|
|
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|
|
|
53
|
Financial report 2020 | Notes to the consolidated financial statements
|
Ericsson Annual Report on Form 20-F 2020
|
Section D Obligations
D1 Provisions
Provisions
Restructuring | Customer related |
Suppliers related |
Warranty | Other | Total | |||||||||||||||||||
2020 |
||||||||||||||||||||||||
Opening balance |
1,095 | 3,738 | 1,309 | 941 | 3,840 | 10,923 | ||||||||||||||||||
Additions |
1,144 | 1,108 | 535 | 248 | 2,212 | 5,247 | ||||||||||||||||||
Reversal of excess amounts |
149 | 83 | 438 | 99 | 392 | 1,161 | ||||||||||||||||||
Negative effect on Income statement |
4,086 | |||||||||||||||||||||||
Utilization/Cash out |
815 | 766 | 595 | 105 | 1,694 | 3,975 | ||||||||||||||||||
Reclassifications |
9 | 4 | 14 | 3 | 21 | 27 | ||||||||||||||||||
Translation differences |
84 | 143 | 6 | 1 | 307 | 541 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Closing balance |
1,200 | 3,850 | 791 | 987 | 3,638 | 10,466 | ||||||||||||||||||
|
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|
|
|
|
|
|
|
|
|
|
|||||||||||||
2019 |
||||||||||||||||||||||||
Opening balance |
3,309 | 8,916 | 1,559 | 363 | 1,861 | 16,008 | ||||||||||||||||||
Additions |
436 | 1,323 | 1,641 | 906 | 2,866 | 7,172 | ||||||||||||||||||
Reversal of excess amounts |
290 | 86 | 739 | 43 | 25 | 1,183 | ||||||||||||||||||
Negative effect on Income statement |
5,989 | |||||||||||||||||||||||
Utilization/Cash out |
1,788 | 3,247 | 1,052 | 288 | 1,201 | 7,576 | ||||||||||||||||||
Reclassifications |
659 | 3,217 | 101 | | 358 | 3,619 | ||||||||||||||||||
Translation differences |
87 | 49 | 1 | 3 | 19 | 121 | ||||||||||||||||||
|
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|
|
|
|
|
|
|
|
|
|
|||||||||||||
Closing balance |
1,095 | 3,738 | 1,309 | 941 | 3,840 | 10,923 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
54
|
Financial report 2020 | Notes to the consolidated financial statements
|
Ericsson Annual Report on Form 20-F 2020
|
55
|
Financial report 2020 | Notes to the consolidated financial statements
|
Ericsson Annual Report on Form 20-F 2020
|
Other reserves
2020 | 2019 | |||||||||||||||||||||||||||||||
SEK million |
Translation reserves |
Cash flow hedge reserve |
Revaluation of borrowings |
Total other reserves |
Translation reserves |
Cash flow hedge reserve |
Revaluation of borrowings |
Total other reserves |
||||||||||||||||||||||||
Opening balance |
2,967 | 230 | 445 | 2,292 | 893 | | 72 | 965 | ||||||||||||||||||||||||
Other comprehensive income |
||||||||||||||||||||||||||||||||
Items that will not be reclassified to profit or loss |
||||||||||||||||||||||||||||||||
Revaluation of borrowings due to change in credit risk |
| | 99 | 99 | | | 651 | 651 | ||||||||||||||||||||||||
Tax on items that will not be reclassified to profit or loss |
| | 20 | 20 | | | 134 | 134 | ||||||||||||||||||||||||
Items that have been or may be reclassified to profit or loss |
||||||||||||||||||||||||||||||||
Cash flow hedges |
||||||||||||||||||||||||||||||||
Gains/losses arising during the period |
| 136 | | 136 | | 290 | | 290 | ||||||||||||||||||||||||
Reclassification to profit and loss |
| 281 | | 281 | | | | | ||||||||||||||||||||||||
Translation reserves |
||||||||||||||||||||||||||||||||
Changes in translation reserves |
5,434 | | | 5,434 | 1,943 | | | 1,943 | ||||||||||||||||||||||||
Reclassification to profit and loss |
124 | | | 124 | 54 | | | 54 | ||||||||||||||||||||||||
Share of other comprehensive income of |
||||||||||||||||||||||||||||||||
JV and associated companies |
81 | | | 81 | 77 | | | 77 | ||||||||||||||||||||||||
Tax on items that have been or may be reclassified to profit or loss |
| 86 | | 86 | | 60 | | 60 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Other comprehensive income, net of tax |
5,391 | 331 | 79 | 4,981 | 2,074 | 230 | 517 | 1,327 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Total comprehensive income |
5,391 | 331 | 79 | 4,981 | 2,074 | 230 | 517 | 1,327 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Closing balance |
2,424 | 101 | 366 | 2,689 | 2,967 | 230 | 445 | 2,292 | ||||||||||||||||||||||||
|
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56
|
Financial report 2020 | Notes to the consolidated financial statements
|
Ericsson Annual Report on Form 20-F 2020
|
57
|
Financial report 2020 | Notes to the consolidated financial statements
|
Ericsson Annual Report on Form 20-F 2020
|
Note E2, cont.
Acquisitions 20182020
Company |
Description |
Transaction date | ||
Cradlepoint | A US company providing Wireless WAN Edge 4G and 5G solutions for the enterprise market. | Nov 2020 | ||
Genaker | A Spanish provider of Mission Critical Push-to-talk (MC-PTT) solutions. | Mar 2020 | ||
ST-Ericsson | The remaining shares were acquired in ST-Ericsson (previously a joint venture). | Dec 2019 | ||
Kathrein | A German provider of antenna and filter technologies. | Oct 2019 | ||
CSF | A US based company related to the iconectiv business. | Aug 2019 | ||
CENX | A US based service assurance technology company. | Sep 2018 | ||
VidScale | A US company providing cloud-based Content Delivery Network (CDN) solutions. | Mar 2018 | ||
Placecast | A US company that leverages deterministic carrier data to deliver better audience, verification, and insight solutions. | Feb 2018 | ||
Divestments 20182020 | ||||
Company |
Description |
Transaction date | ||
MediaKind | A divestment of 51% of its MediaKind business. | Feb 2019 | ||
Ericsson Local Services AB (LSS) | A divestment of the Local Services company in Sweden. | Aug 2018 | ||
Excellence Field Factory | A divestment of the Spanish fiber service operations. | Jun 2018 | ||
E3 Associated companies
Equity in associated companies
2020 | 2019 | |||||||
Opening balance |
1,565 | 611 | ||||||
Investments |
167 | 1,310 | ||||||
Share in earnings |
298 | 335 | ||||||
Distribution of capital stock |
3 | | ||||||
Taxes |
33 | 5 | ||||||
Dividends |
43 | 66 | ||||||
Divested business |
| 5 | ||||||
Translation differences |
81 | 55 | ||||||
|
|
|
|
|||||
Closing balance |
1,274 | 1,565 | ||||||
|
|
|
|
The Company owns 49% of MediaKind with an investment of SEK 0.8 (1.2) billion. The Companys share in earnings of MediaKind was SEK 0.4 (0.4) billion and the remaining investment is SEK 0.4 (0.8) billion. The Company has provided a loan to MediaKind of SEK 0.5 (0.2) billion.
58
|
Financial report 2020 | Notes to the consolidated financial statements
|
Ericsson Annual Report on Form 20-F 2020
|
59
|
Financial report 2020 | Notes to the consolidated financial statements
|
Ericsson Annual Report on Form 20-F 2020
|
Note F1, cont.
60
|
Financial report 2020 | Notes to the consolidated financial statements
|
Ericsson Annual Report on Form 20-F 2020
|
Note F1, cont.
61
|
Financial report 2020 | Notes to the consolidated financial statements
|
Ericsson Annual Report on Form 20-F 2020
|
Note F1, cont.
62
|
Financial report 2020 | Notes to the consolidated financial statements
|
Ericsson Annual Report on Form 20-F 2020
|
Note F1, cont.
Financial instruments
2020 | 2019 | |||||||||||||||||||||||||||||||||||||||
Amortized | Fair | Fair value hierarchy level | Amortized | Fair | Fair value hierarchy level | |||||||||||||||||||||||||||||||||||
SEK billion |
cost | value | Level 1 | Level 2 | Level 3 | cost | value | Level 1 | Level 2 | Level 3 | ||||||||||||||||||||||||||||||
Assets at fair value through profit or loss |
||||||||||||||||||||||||||||||||||||||||
Customer finance |
| 3.1 | | | 3.1 | | 3.8 | | | 3.8 | ||||||||||||||||||||||||||||||
Interest bearing securities |
| 28.1 | 28.1 | | | | 26.6 | 26.6 | | | ||||||||||||||||||||||||||||||
Cash equivalents 3) |
| 23.6 | | 23.6 | | | 23.9 | | 23.9 | | ||||||||||||||||||||||||||||||
Other financial assets 1) |
| 1.5 | | | 1.5 | | 1.4 | 0.2 | | 1.2 | ||||||||||||||||||||||||||||||
Other current assets 2) |
| 1.5 | | 1.5 | | | 1.3 | | 0.1 | 1.2 | ||||||||||||||||||||||||||||||
Assets at fair value through OCI |
||||||||||||||||||||||||||||||||||||||||
Trade receivable |
| 42.1 | | | 42.1 | | 43.1 | | | 43.1 | ||||||||||||||||||||||||||||||
Assets at amortized cost |
||||||||||||||||||||||||||||||||||||||||
Interest bearing securities |
0.4 | | | | | 0.5 | | | | | ||||||||||||||||||||||||||||||
Cash equivalents 3) |
3.6 | | | | | 3.8 | | | | | ||||||||||||||||||||||||||||||
Other financial assets |
0.5 | | | | | 0.2 | | | | | ||||||||||||||||||||||||||||||
|
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|
|
|
|
|
|
|||||||||||||||||||||||||||||||||
Financial assets |
4.5 | 99.9 | 4.5 | 100.1 | ||||||||||||||||||||||||||||||||||||
|
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|
|
|
|
|
|
|||||||||||||||||||||||||||||||||
Financial liabilities at designated FVTPL |
||||||||||||||||||||||||||||||||||||||||
Parent Company borrowings |
| 27.2 | 18.9 | 8.3 | | | 35.9 | 20.5 | 15.4 | | ||||||||||||||||||||||||||||||
Financial liabilities at FVTPL |
||||||||||||||||||||||||||||||||||||||||
Other current liabilities |
| 0.2 | | 0.2 | | | 1.0 | | 1.0 | | ||||||||||||||||||||||||||||||
Liabilities at amortized cost |
||||||||||||||||||||||||||||||||||||||||
Trade payables |
32.0 | | | | | 30.4 | | | | | ||||||||||||||||||||||||||||||
Borrowings |
2.9 | | | | | 1.8 | | | | | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||
Financial liabilities |
34.9 | 27.4 | 32.2 | 36.9 | ||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
1) | Other financial assets in Level 3 relate to investment in equity interests which are included in Other investments in shares and participants within note F3 Financial assets, non-current. |
2) | Oher current asset in Level 3 at the end of 2019 relates to a financial investment which was fully redeemed in 2020. |
3) | Total Cash and cash equivalent is SEK 43.6 (45.1) billion, of which SEK 27.2 (27.7) billion relating to Cash equivalents are presented in the table above. |
63
|
Financial report 2020 | Notes to the consolidated financial statements
|
Ericsson Annual Report on Form 20-F 2020
|
Note F1, cont.
F2 Financial income and expenses
Financial income and expenses
2020 | 2019 | 2018 | ||||||||||
Contractual interest on financial assets |
796 | 1,395 | 580 | |||||||||
of which on financial assets at amortized cost |
279 | 591 | 422 | |||||||||
Net revaluation gains and losses on financial assets |
103 | 100 | 429 | |||||||||
|
|
|
|
|
|
|||||||
Financial income |
693 | 1,295 | 151 | |||||||||
Contractual interest on financial liabilities |
1,104 | 1,392 | 1,430 | |||||||||
of which on financial liabilities at amortized cost |
383 | 302 | 474 | |||||||||
Net revaluation gains and losses on financial liabilities |
9 | 69 | 27 | |||||||||
Lease interest expense |
490 | 551 | | |||||||||
Other financial expenses 1) |
531 | 690 | 575 | |||||||||
|
|
|
|
|
|
|||||||
Financial expenses |
2,116 | 2,702 | 2,032 | |||||||||
Net foreign exchange gains/losses |
827 | 395 | 824 | |||||||||
|
|
|
|
|
|
|||||||
Financial income and expenses, net |
596 | 1,802 | 2,705 | |||||||||
|
|
|
|
|
|
|||||||
Net gains and losses on financial instruments below includes foreign exchange gains and losses: |
||||||||||||
Financial instruments at fair value through profit or loss 2) |
2,159 | 758 | 887 | |||||||||
Financial liabilities designated at fair value through profit or loss |
2,893 | 1,322 | 2,087 | |||||||||
Financial assets at fair value through OCI |
| | 81 |
1) | Includes gain of SEK 93 (258) million relating to partial settlement of pension plan liabilities. |
2) | Excludes net loss from revaluation of customer finance receivables of SEK 197 million (net loss of SEK 650 million in 2019 and net loss of SEK 1,059 million in 2018), reported as Selling and administrative expenses. |
F3 Financial assets, non-current
Financial assets, non-current
2020 | 2019 | |||||||||||||||||||||||
Other investments in shares and participations |
Interest- bearing securities, non-current |
Other financial assets, non-current |
Other investments in shares and participations |
Interest- bearing securities, non-current |
Other financial assets, non-current |
|||||||||||||||||||
Opening balance |
1,432 | 20,354 | 5,614 | 1,515 | 23,982 | 6,870 | ||||||||||||||||||
Additions |
123 | 11,091 | 893 | 62 | 18,484 | 523 | ||||||||||||||||||
Disposals/repayments/deductions |
43 | 5,021 | 913 | | 19,995 | 703 | ||||||||||||||||||
Change in value in funded pension plans 1) |
| | 51 | | | 133 | ||||||||||||||||||
Revaluation |
12 | 72 | 53 | 149 | 33 | 154 | ||||||||||||||||||
Reclassification |
| 4,739 | 271 | | 2,084 | 1,155 | ||||||||||||||||||
Translation differences |
5 | | 479 | 4 | | 58 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Closing balance |
1,519 | 21,613 | 4,842 | 1,432 | 20,354 | 5,614 | ||||||||||||||||||
|
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|
|
|
|
|
|
|
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|
|
1) | This amount includes asset ceiling. For further information, see note G1 Post-employment benefits. |
64
|
Financial report 2020 | Notes to the consolidated financial statements
|
Ericsson Annual Report on Form 20-F 2020
|
Notes, bonds and bilateral loans
Issued-maturing |
Nominal amount |
Coupon | Currency | Maturity date | Carrying value (SEK million) 2020 |
Changes in fair value due to changes in credit risk 2020 |
Cumulative changes in fair value due to changes in credit risk 2020 |
Carrying value (SEK million) 2019 |
||||||||||||||||||||||||
Notes and bond loans |
||||||||||||||||||||||||||||||||
20202030 1) |
200 | 3.02 | % | USD | Dec 30, 2030 | 1,698 | 68 | 68 | | |||||||||||||||||||||||
20102020 1) |
170 | USD | Dec 23, 2020 | | 16 | | 1,601 | |||||||||||||||||||||||||
20122022 |
1,000 | 4.125 | % | USD | May 15, 2022 | 8,537 | 165 | 144 | 9,695 | |||||||||||||||||||||||
20172021 |
500 | 0.875 | % | EUR | Mar 1, 2021 | 5,034 | 38 | 3 | 5,267 | |||||||||||||||||||||||
20172024 |
500 | 1.875 | % | EUR | Mar 1, 2024 | 5,290 | 63 | 145 | 5,512 | |||||||||||||||||||||||
20172025 1) |
150 | 2.741 | % | USD | Dec 22, 2025 | 1,278 | 22 | 50 | 1,424 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
Total notes and bond loans |
21,837 | 192 | 410 | 23,499 | ||||||||||||||||||||||||||||
Bilateral loans |
||||||||||||||||||||||||||||||||
20192025 2) |
150 | USD | Dec 18, 2025 | 1,237 | 35 | 9 | 1,371 | |||||||||||||||||||||||||
20132020 3) |
684 | USD | Nov 6, 2020 | | 32 | | 6,345 | |||||||||||||||||||||||||
20172023 2) |
220 | USD | Jun 15, 2023 | 1,826 | 5 | 27 | 2,078 | |||||||||||||||||||||||||
20192024 3) |
281 | USD | July 31, 2024 | 2,320 | 31 | 15 | 2,606 | |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
Total bilateral loans |
5,383 | 93 | 51 | 12,400 | ||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
1) | Private Placement, Swedish Export Credit Corporation (SEK). In December 2020, the Company refinanced Swedish Export Credit Corporation (SEK) of USD 170 million with a new bond loan of USD 200 million, net increase in funding of USD 30 million. The new facility is set to mature in 2030. The terms of the existing loan note (USD 150 million) maturing in December 2025 was modified from a floating interest to a fixed coupon with the same maturity date. |
2) | Nordic Investment Bank (NIB), R&D project financing. |
3) | European Investment Bank (EIB), R&D project financing. |
65
|
Financial report 2020 | Notes to the consolidated financial statements
|
Ericsson Annual Report on Form 20-F 2020
|
Section G Employee related
G1 Post-employment benefits
66
|
Financial report 2020 | Notes to the consolidated financial statements
|
Ericsson Annual Report on Form 20-F 2020
|
Note G1, cont.
Amount recognized in the Consolidated balance sheet
Amount recognized in the Consolidated balance sheet
Sweden | US | UK | Other | Total | ||||||||||||||||
2020 |
||||||||||||||||||||
Defined benefit obligation (DBO) |
56,138 | 17,921 | 15,788 | 18,341 | 108,188 | |||||||||||||||
Fair value of plan assets |
26,967 | 17,327 | 17,326 | 11,991 | 73,611 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Deficit/surplus (+/) |
29,171 | 594 | 1,538 | 6,350 | 34,577 | |||||||||||||||
Plans with net surplus, excluding asset ceiling 1) |
| 92 | 2,090 | 594 | 2,776 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Provision for post-employment benefits 2) |
29,171 | 686 | 552 | 6,944 | 37,353 | |||||||||||||||
2019 |
||||||||||||||||||||
Defined benefit obligation (DBO) |
50,257 | 20,897 | 15,352 | 15,928 | 102,434 | |||||||||||||||
Fair value of plan assets |
22,809 | 20,102 | 16,919 | 9,829 | 69,659 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Deficit/surplus (+/) |
27,448 | 795 | 1,567 | 6,099 | 32,775 | |||||||||||||||
Plans with net surplus, excluding asset ceiling 1) |
| | 2,137 | 905 | 3,042 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Provision for post-employment benefits 2) |
27,448 | 795 | 570 | 7,004 | 35,817 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
1) | Plans with a net surplus, i.e., where plan assets exceed DBO, are reported as Other financial assets, non-current, see note F3 Financial assets, non-current. The asset ceiling decreased during the year to SEK 518 (833) million. Asset ceiling at 2019 is not restated for the Provident Fund plan in India. |
2) | Plans with net liabilities are reported in the balance sheet as Post-employment benefits, non-current. |
Total pension cost recognized in the Consolidated income statement
The costs for post-employment benefits within the Company are distributed between defined contribution plans and defined benefit plans.
Pension costs for defined contribution plans and defined benefit plans
Sweden | US | UK | Other | Total | ||||||||||||||||
2020 |
||||||||||||||||||||
Pension cost for defined contribution plans |
963 | 415 | 136 | 664 | 2,178 | |||||||||||||||
Pension cost for defined benefit plans 1) |
1,783 | 13 | 4 | 993 | 2,785 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total |
2,746 | 428 | 132 | 1,657 | 4,963 | |||||||||||||||
Total pension cost expressed as a percentage of wages and salaries |
8.1 | % | ||||||||||||||||||
2019 |
||||||||||||||||||||
Pension cost for defined contribution plans |
953 | 456 | 132 | 1,193 | 2,734 | |||||||||||||||
Pension cost for defined benefit plans |
1,704 | 110 | 47 | 889 | 2,436 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total |
2,657 | 346 | 85 | 2,082 | 5,170 | |||||||||||||||
Total pension cost expressed as a percentage of wages and salaries |
8.8 | % | ||||||||||||||||||
2018 |
||||||||||||||||||||
Pension cost for defined contribution plans |
937 | 473 | 145 | 1,170 | 2,725 | |||||||||||||||
Pension cost for defined benefit plans |
1,350 | 175 | 75 | 557 | 2,157 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total |
2,287 | 648 | 220 | 1,727 | 4,882 | |||||||||||||||
Total pension cost expressed as a percentage of wages and salaries |
9.2 | % |
1) | The cost for the US plans included settlement gain of SEK 93 million. For the UK plans, negative cost was due to interest income of SEK 327 million exceeding interest cost of SEK 295 million during the year. |
67
|
Financial report 2020 | Notes to the consolidated financial statements
|
Ericsson Annual Report on Form 20-F 2020
|
Note G1, cont.
Change in the net defined benefit obligation
Change in the net defined benefit obligation
Present value of obligation 2020 2) |
Fair value of plan assets 2020 |
Total 2020 |
Present value of obligation 2019 2) |
Fair value of plan assets 2019 |
Total 2019 |
|||||||||||||||||||
Opening balance |
102,434 | 69,659 | 32,775 | 90,320 | 64,322 | 25,998 | ||||||||||||||||||
Adjustment 1) |
2,654 | 2,776 | 122 | | | | ||||||||||||||||||
Opening balance adjusted |
105,088 | 72,435 | 32,653 | 90,320 | 62,322 | 25,998 | ||||||||||||||||||
Included in the income statement 3) |
||||||||||||||||||||||||
Current service cost |
2,424 | | 2,424 | 1,977 | | 1,977 | ||||||||||||||||||
Past service cost and gains and losses on settlements 4) |
76 | | 76 | 266 | | 266 | ||||||||||||||||||
Interest cost/income (+/) |
1,759 | 1,454 | 305 | 2,577 | 1,938 | 639 | ||||||||||||||||||
Taxes and administrative expenses |
| 29 | 29 | | 49 | 49 | ||||||||||||||||||
Other |
51 | 2 | 53 | 1 | 2 | 1 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
4,158 | 1,423 | 2,735 | 4,287 | 1,887 | 2,400 | |||||||||||||||||||
Remeasurements |
||||||||||||||||||||||||
Return on plan assets excluding amounts in interest expense/income |
| 4,734 | 4,734 | | 5,758 | 5,758 | ||||||||||||||||||
Actuarial gains/losses (/+) arising from changes in demographic assumptions |
10 | | 10 | 775 | | 775 | ||||||||||||||||||
Actuarial gains/losses (/+) arising from changes in financial assumptions |
9,247 | | 9,247 | 12,443 | | 12,443 | ||||||||||||||||||
Experience-based gains/losses (/+) |
320 | | 320 | 126 | | 126 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
9,577 | 4,734 | 4,843 | 11,542 | 5,758 | 5,784 | |||||||||||||||||||
Other changes |
||||||||||||||||||||||||
Translation difference |
5,373 | 5,249 | 124 | 2,079 | 2,076 | 3 | ||||||||||||||||||
Contributions and payments from: |
||||||||||||||||||||||||
Employers 5) |
1,921 | 3,612 | 5,533 | 1,183 | 321 | 1,504 | ||||||||||||||||||
Plan participants |
223 | 223 | | 28 | 26 | 2 | ||||||||||||||||||
Payments from plans: |
||||||||||||||||||||||||
Benefit payments |
1,834 | 1,834 | | 2,044 | 2,044 | | ||||||||||||||||||
Settlements |
1,745 | 1,733 | 12 | 2,722 | 2,687 | 35 | ||||||||||||||||||
Business combinations and divestments |
15 | | 15 | 127 | | 127 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Closing balance |
108,188 | 73,611 | 34,577 | 102,434 | 69,659 | 32,775 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
1) | Adjustment relates to an existing defined benefit plan in India (Provident Fund) previously accounted for as a defined contribution pension plan. |
2) | The weighted average duration of DBO is 20.8 (21.1) years. |
3) | Excludes the impact of the asset ceiling of SEK 50 million in 2020 and SEK 36 million in 2019. |
4) | Settlement gain of SEK 93 (258) million is reported in Other financial expenses, see note F2 Financial income and expenses. |
5) | The expected contribution to the plans is SEK 1.8 billion during 2021. |
Actuarial losses of SEK 9.2 billion from changes in financial assumption are attributable to the decrease in discount rates in the larger pension plans in Sweden, US and UK.
Cash contribution made during the year to the Swedish pension trust of SEK 3.0 billion was mainly negotiated from 2019, prior to the COVID-19 pandemic. The Company does not expect material changes to planned cash contribution to defined benefit pension plans in the foreseeable future due to COVID-19 impact.
Present value of the defined benefit obligation
Sweden | US | UK | Other | Total | ||||||||||||||||
2020 |
||||||||||||||||||||
DBO, closing balance |
56,138 | 17,921 | 15,788 | 18,341 | 108,188 | |||||||||||||||
Of which partially or fully funded |
56,138 | 17,235 | 15,788 | 14,811 | 103,972 | |||||||||||||||
Of which unfunded |
| 686 | | 3,530 | 4,216 | |||||||||||||||
2019 |
||||||||||||||||||||
DBO, closing balance |
50,257 | 20,897 | 15,352 | 15,928 | 102,434 | |||||||||||||||
Of which partially or fully funded |
50,257 | 20,138 | 15,352 | 12,211 | 97,958 | |||||||||||||||
Of which unfunded |
| 759 | | 3,717 | 4,476 |
68
|
Financial report 2020 | Notes to the consolidated financial statements
|
Ericsson Annual Report on Form 20-F 2020
|
Note G1, cont.
Asset allocation by asset type and geography 1)
Sweden | US | UK | Other | Total | Of which unquoted 2) |
|||||||||||||||||||
2020 |
||||||||||||||||||||||||
Cash and cash equivalents |
1,117 | 575 | 911 | 34 | 2,637 | 0 | % | |||||||||||||||||
Equity securities |
5,635 | 655 | 3,469 | 2,235 | 11,994 | 18 | % | |||||||||||||||||
Debt securities |
13,570 | 14,557 | 11,745 | 6,985 | 46,857 | 7 | % | |||||||||||||||||
Real estate |
4,338 | | 152 | 531 | 5,021 | 100 | % | |||||||||||||||||
Investment funds |
2,153 | 1,495 | 274 | 419 | 4,341 | 50 | % | |||||||||||||||||
Assets held by insurance company |
| | | 1,409 | 1,409 | 100 | % | |||||||||||||||||
Other |
154 | 45 | 775 | 378 | 1,352 | 0 | % | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total |
26,967 | 17,327 | 17,326 | 11,991 | 73,611 | |||||||||||||||||||
Of which real estate occupied by the Company |
| | | | | |||||||||||||||||||
Of which securities issued by the Company |
| | | | | |||||||||||||||||||
2019 |
||||||||||||||||||||||||
Cash and cash equivalents |
1,319 | 1,013 | 1,309 | 86 | 3,727 | 0 | % | |||||||||||||||||
Equity securities |
3,784 | 773 | 3,368 | 2,422 | 10,347 | 15 | % | |||||||||||||||||
Debt securities |
11,969 | 17,050 | 10,994 | 4,774 | 44,787 | 7 | % | |||||||||||||||||
Real estate |
4,489 | | 169 | 550 | 5,208 | 100 | % | |||||||||||||||||
Investment funds |
1,248 | 1,261 | 296 | 242 | 3,047 | 65 | % | |||||||||||||||||
Assets held by insurance company |
| | | 1,404 | 1,404 | 100 | % | |||||||||||||||||
Other |
| 5 | 783 | 351 | 1,139 | 6 | % | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total |
22,809 | 20,102 | 16,919 | 9,829 | 69,659 | |||||||||||||||||||
Of which real estate occupied by the Company |
| | | | | |||||||||||||||||||
Of which securities issued by the Company |
| | | | |
1) | Asset class is presented based on the underlying exposure of the investment. This includes direct investment in securities or investment through pooled funds that invests in an asset class. |
2) | Unquoted refers to assets classified as fair value level 3. |
Actuarial assumptions
Financial and demographic actuarial assumptions
2020 | 2019 | |||||||||||||||||||||||
Sweden | US | UK | Sweden | US | UK | |||||||||||||||||||
Financial assumptions |
||||||||||||||||||||||||
Discount rate |
0.5 | % | 2.3 | % | 1.5 | % | 0.9 | % | 3.2 | % | 2.1 | % | ||||||||||||
Inflation rate |
1.8 | % | 2.5 | % | 2.8 | % | 1.8 | % | 2.5 | % | 3.0 | % | ||||||||||||
Salary increase rate |
2.8 | % | 3.5 | % | | 2.8 | % | 3.5 | % | | ||||||||||||||
Demographic assumptions |
||||||||||||||||||||||||
Life expectancy after age 65 in years |
23 | 23 | 23 | 22 | 23 | 23 |
69
|
Financial report 2020 | Notes to the consolidated financial statements
|
Ericsson Annual Report on Form 20-F 2020
|
G2 Information regarding members of the Board of Directors and Group management
Remuneration to the Board of Directors
Remuneration to members of the Board of Directors
SEK |
Board fees | Number of synthetic shares/ portion of Board fee |
Value at grant date of synthetic shares allocated in 2020 |
Number of previously allocated synthetic shares outstanding |
Net change in value of synthetic shares 1) |
Committee fees |
Total fees paid in cash 2) |
Total remuneration 2020 |
||||||||||||||||||||||||
A | B | C | (A+B+C) | |||||||||||||||||||||||||||||
Board member |
||||||||||||||||||||||||||||||||
Ronnie Leten |
4,075,000 | 24,625/50 | % | 2,404,385 | 52,525 | 543,924 | 375,000 | 2,412,500 | 5,360,809 | |||||||||||||||||||||||
Helena Stjernholm |
1,020,000 | 6,163/50 | % | 601,755 | 32,672 | 254,900 | 175,000 | 685,000 | 1,541,655 | |||||||||||||||||||||||
Jacob Wallenberg |
1,020,000 | 9,245/75 | % | 902,682 | 39,765 | 295,558 | 175,000 | 430,000 | 1,628,240 | |||||||||||||||||||||||
Jon Fredrik Baksaas |
1,020,000 | 6,163/50 | % | 601,755 | 32,370 | 6,009 | 200,000 | 710,000 | 1,305,746 | |||||||||||||||||||||||
Jan Carlson |
1,020,000 | 9,245/75 | % | 902,682 | 32,370 | 39,913 | 425,000 | 680,000 | 1,622,595 | |||||||||||||||||||||||
Nora Denzel |
1,020,000 | 3,081/25 | % | 300,829 | 10,788 | 65,016 | 175,000 | 940,000 | 1,305,845 | |||||||||||||||||||||||
Börje Ekholm |
| | | 8,319 | 326,399 | | | 326,399 | ||||||||||||||||||||||||
Eric A. Elzvik |
1,020,000 | 3,081/25 | % | 300,829 | 10,788 | 13,298 | 400,000 | 1,165,000 | 1,479,127 | |||||||||||||||||||||||
Kurt Jofs |
1,020,000 | | | 19,378 | 65,602 | 600,000 | 1,620,000 | 1,685,602 | ||||||||||||||||||||||||
Kristin S. Rinne |
1,020,000 | 3,081/25 | % | 300,829 | 22,514 | 111,003 | 200,000 | 965,000 | 1,376,832 | |||||||||||||||||||||||
Employee Representatives |
||||||||||||||||||||||||||||||||
Torbjörn Nyman |
19,500 | | | | | 10,500 | 30,000 | 30,000 | ||||||||||||||||||||||||
Kjell-Åke Soting |
19,500 | | | | | 10,500 | 30,000 | 30,000 | ||||||||||||||||||||||||
Roger Svensson |
19,500 | | | | | 10,500 | 30,000 | 30,000 | ||||||||||||||||||||||||
Per Holmberg (deputy) |
19,500 | | | | | | 19,500 | 19,500 | ||||||||||||||||||||||||
Anders Ripa (deputy) |
19,500 | | | | | | 19,500 | 19,500 | ||||||||||||||||||||||||
Loredana Roslund (deputy) |
19,500 | | | | | | 19,500 | 19,500 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Total |
12,352,000 | 64,684 | 6,315,746 | 261,489 | 1,709,604 | 2,756,500 | 9,756,000 | 17,781,350 | 3) | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1) | The difference in value as of the time for payment, compared to December 31, 2019, for synthetic shares allocated in 2015 (for which payment was made in 2020). The difference in value as of December 31, 2020 compared to December 31, 2019, for synthetic shares allocated in 2016, 2017, 2018 and 2019. Calculated on a share price of SEK 97.64. The difference in value as of December 31, 2020, compared to grant date for synthetic shares allocated in 2020. The value of synthetic shares allocated in 2016, 2017, 2018 and 2019 includes respectively SEK 1.00, SEK 1.00, SEK 1.00 and SEK 1.50 per share in compensation for dividends resolved by the Annual General Meetings 2017, 2018, 2019 and 2020 and the value of the synthetic shares allocated in 2015 includes dividend compensation for dividends resolved in 2016, 2017, 2018 and 2019. |
2) | Committee fee and cash portion of the Board fee. |
3) | Excluding social security charges in the amount of SEK 3,740,020. |
Comments to the table
70
|
Financial report 2020 | Notes to the consolidated financial statements
|
Ericsson Annual Report on Form 20-F 2020
|
Note G2, cont.
Remuneration costs for the President and CEO and other members of Executive Team (ET)
SEK |
President and CEO 2020 |
President and CEO 2019 |
Other members of ET 2020 |
Other members of ET 2019 |
Total 2020 | Total 2019 | ||||||||||||||||||
Salary1) |
17,727,726 | 16,299,080 | 98,063,266 | 86,342,359 | 115,790,992 | 102,641,439 | ||||||||||||||||||
Termination benefits |
| | | | | | ||||||||||||||||||
Annual variable remuneration provision earned for the year |
| | 37,992,529 | 28,289,319 | 37,992,529 | 28,289,319 | ||||||||||||||||||
Long-term variable compensation provision 2) |
41,110,656 | 31,491,325 | 41,237,506 | 31,149,752 | 82,348,162 | 62,641,077 | ||||||||||||||||||
Pension costs 3) |
9,113,376 | 8,284,891 | 39,685,920 | 33,389,234 | 48,799,296 | 41,674,125 | ||||||||||||||||||
Other benefits |
770,276 | 600,572 | 17,064,089 | 21,765,983 | 17,834,365 | 22,366,555 | ||||||||||||||||||
Social charges and taxes |
21,592,463 | 17,807,558 | 52,496,382 | 43,244,590 | 74,088,845 | 61,052,148 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total |
90,314,497 | 74,483,426 | 286,539,692 | 244,181,237 | 376,854,189 | 318,664,663 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
1) | Includes compensation for unused vacation days. |
2) | Includes pro-rated long-term variable compensation provisions for other members of ET for the individuals who left ET during the year. |
3) | Includes cash payments to the President and CEO in lieu of defined contribution payment in a cost neutral way to Ericsson. |
71
|
Financial report 2020 | Notes to the consolidated financial statements
|
Ericsson Annual Report on Form 20-F 2020
|
LTV and EPP performance criteria
Program Year |
Target |
Criteria |
Weight | Performance Period |
Vesting Opportunity (linear pro-rata) |
Achievement |
Achieved | |||||||||||
2020 |
2020 Group operating income | Range (SEK billion): 19.1 27.9 | 50 | % | Jan 1, 2020Dec 31, 2020 | 0%200% | SEK 29.1 billion 2) | 200% | ||||||||||
2020 |
Absolute TSR | Range: 6%14% | 30 | % | Jan 1, 2020Dec 31, 2022 | 0%200% | ||||||||||||
2020 |
Relative TSR | Ranking of Ericsson: 62 | 20 | % | Jan 1, 2020Dec 31, 2022 | |
0%200% 1) |
|
||||||||||
2020 Total |
100 | % | 0%200% | |||||||||||||||
2019 |
2019 Group operating income | Range (SEK billion): 10.0 20.0 | 50 | % | Jan 1, 2019Dec 31, 2019 | 0%200% | SEK 20.4 billion 3) | 200% | ||||||||||
2019 |
Absolute TSR | Range: 6%14% | 30 | % | Jan 1, 2019Dec 31, 2021 | 0%200% | ||||||||||||
2019 |
Relative TSR | Ranking of Ericsson: 72 | 20 | % | Jan 1, 2019Dec 31, 2021 | |
0%200% 1) |
|
||||||||||
2019 Total |
100 | % | 0%200% | |||||||||||||||
2018 |
2018 Group operating income | Range (SEK billion): 4.69.6 | 50 | % | Jan 1, 2018Dec 31, 2018 | 0%200% | SEK 11.5 billion 4) | 200% | ||||||||||
2018 |
Absolute TSR | Range: 6%14% | 30 | % | Jan 1, 2018Dec 31, 2020 | 0%200% | 26.92% | 200% | ||||||||||
2018 |
Relative TSR | Ranking of Ericsson: 72 | 20 | % | Jan 1, 2018Dec 31, 2020 | |
0%200% 1) |
|
1.94 out of 12 | 200% | ||||||||
2018 Total |
100 | % | 0%200% | 200% | ||||||||||||||
2017 |
Absolute TSR | Range: 6%14% | 50 | % | Jan 1, 2017Dec 31, 2019 | 0%200% | 21.34% | 200% | ||||||||||
2017 |
Relative TSR | Ranking of Ericsson: 125 | 50 | % | Jan 1, 2017Dec 31, 2019 | |
0%200% 1) |
|
5.45 out of 18 | 191.04% | ||||||||
2017 Total |
100 | % | 0%200% | 195.52% |
1) | The portion of the Performance Share Awards granted to a participant based on the relative TSR performance condition is subject to fulfilment of the related performance criteria over the performance period compared to Peer Groups consisting of 11 companies for the program year 2020, 12 companies for the program years 2019 and 2018, and 18 companies for the program year 2017. The vesting of the Performance Share Awards under this performance condition will vary depending on the Companys TSR performance ranking versus the other companies in the peer group at the end of the performance period. |
2) | Excludes restructuring charges. |
3) | Excludes fines and similar related to the United States Department of Justice (DOJ) / Securities and Exchange Commission (SEC) investigation. |
4) | Excludes restructuring charges and the provisions taken in Q4 2018 related to the revised BSS strategy. |
72
|
Financial report 2020 | Notes to the consolidated financial statements
|
Ericsson Annual Report on Form 20-F 2020
|
Note G3, cont.
73
|
Financial report 2020 | Notes to the consolidated financial statements
|
Ericsson Annual Report on Form 20-F 2020
|
Note G3, cont.
Number of shares and synthetic shares
Executive team programs | Of which the President and CEO | |||||||||||||||||||||||||||||||||||||||
Share-settled programs (million) |
LTV 2020 | LTV 2019 | LTV 2018 | LTV 2017 | Total | LTV 2020 | LTV 2019 | LTV 2018 | LTV 2017 | Total | ||||||||||||||||||||||||||||||
Maximum shares required |
2.5 | 3.0 | 3.0 | 3.0 | 11.5 | | | | | | ||||||||||||||||||||||||||||||
Granted shares |
0.9 | 0.6 | 0.8 | 0.7 | 3.0 | 0.4 | 0.3 | 0.4 | 0.4 | 1.5 | ||||||||||||||||||||||||||||||
Outstanding number of shares beginning of 2020 |
| 0.9 | 1.2 | 1.3 | 3.4 | | 0.4 | 0.6 | 0.9 | 1.9 | ||||||||||||||||||||||||||||||
Exercised during 2020 |
| | | 1.3 | 1.3 | | | | 0.9 | 0.9 | ||||||||||||||||||||||||||||||
Forfeited during 2020 |
| | | | | | | | | | ||||||||||||||||||||||||||||||
Increase due to performance condition 2020 |
0.4 | | 0.4 | | 0.8 | 0.2 | | | | 0.2 | ||||||||||||||||||||||||||||||
Outstanding number of shares end of 2020 |
1.3 | 0.9 | 1.6 | | 3.8 | 0.6 | 0.4 | 0.6 | | 1.6 | ||||||||||||||||||||||||||||||
Executive performance program | Key contributors plans | |||||||||||||||||||||||||||||||||||||||
Cash-settled plan |
EPP 2020 | EPP 2019 | EPP 2018 | EPP 2017 | Total | KC 2020 | KC 2019 | KC 2018 | KC 2017 | Total | ||||||||||||||||||||||||||||||
Synthetic shares |
1.7 | 1.0 | 1.6 | | 4.3 | 11.3 | 6.2 | 8.3 | | 25.8 |
74
|
Financial report 2020 | Notes to the consolidated financial statements
|
Ericsson Annual Report on Form 20-F 2020
|
Note G3, cont.
Compensation expense LTV 20172020
Share-settled programs |
2020 | 2019 | 2018 | 2017 | Total | |||||||||||||||
LTV 2020 |
23 | | | | 23 | |||||||||||||||
LTV 2019 |
28 | 17 | | | 45 | |||||||||||||||
LTV 2018 |
28 | 28 | 18 | | 74 | |||||||||||||||
LTV 2017 |
4 | 13 | 14 | 10 | 41 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total executive team programs |
83 | 58 | 32 | 10 | 183 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Of which the President and CEO |
41 | 32 | 18 | 6 | 97 | |||||||||||||||
Cash-settled plans |
||||||||||||||||||||
EPP 2020 |
34 | | | | 34 | |||||||||||||||
EPP 2019 |
50 | 11 | | | 61 | |||||||||||||||
EPP 2018 |
76 | 53 | 20 | | 149 | |||||||||||||||
EPP 2017 |
25 | 116 | 110 | 31 | 282 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total executive performance plans |
185 | 180 | 130 | 31 | 526 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
KC 2020 |
523 | | | | 523 | |||||||||||||||
KC 2019 |
335 | 248 | | | 583 | |||||||||||||||
KC 2018 |
368 | 245 | 156 | | 769 | |||||||||||||||
KC 2017 |
72 | 273 | 323 | 139 | 807 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total key contributor plans |
1,298 | 766 | 479 | 139 | 2,682 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total cash-settled plans |
1,483 | 946 | 609 | 170 | 3,208 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total compensation expense |
1,566 | 1,004 | 641 | 180 | 3,391 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
Fair value
Fair values (SEK)
Executive team programs |
LTV 2020 | LTV 2019 | LTV 2018 | LTV 2017 | ||||||||||||
Share price at grant |
78.88 | 90.70 | 65.79 | 57.15 | ||||||||||||
Fair value Absolute TSR |
54.69 | 87.92 | 80.40 | 54.40 | ||||||||||||
Fair value Relative TSR |
98.06 | 94.63 | 78.66 | 76.95 | ||||||||||||
Fair value Group operating income |
74.22 | 86.94 | 62.93 | | ||||||||||||
Executive performance plans |
EPP 2020 | EPP 2019 | EPP 2018 | EPP 2017 | ||||||||||||
Fair value Absolute TSR |
98.37 | 113.49 | 198.56 | 84.12 | ||||||||||||
Fair value Relative TSR |
125.35 | 130.59 | 198.56 | 84.12 | ||||||||||||
Fair value Group operating income |
96.54 | 97.71 | 99.29 | | ||||||||||||
Key contributor plans |
KC 2020 | KC 2019 | KC 2018 | KC 2017 | ||||||||||||
Fair value Tranche 1 |
99.68 | 84.12 | | | ||||||||||||
Fair value Tranche 2 |
98.10 | 99.29 | | | ||||||||||||
Fair value Tranche 3 |
96.54 | 97.71 | | | ||||||||||||
Fair value |
| | 99.29 | 84.12 |
75
|
Financial report 2020 | Notes to the consolidated financial statements
|
Ericsson Annual Report on Form 20-F 2020
|
Note G3, cont.
Shares for LTV 2016
Stock Purchase Plan, Key Contributor Retention Plan and Executive Performance Stock Plans |
||||||
Plan (million shares) |
2016 | |||||
Originally designated |
A | 21.6 | ||||
Outstanding beginning of 2020 1) |
B | 10.9 | ||||
Awarded during 2020 |
C | | ||||
Exercised/matched during 2020 |
D | 10.8 | ||||
Forfeited/expired during 2020 |
E | 0.1 | ||||
Outstanding end of 2020 |
F=B+CDE | | ||||
Compensation costs charged during 2020 (SEK million) 2) 3) |
G | 65.6 |
1) | Shares under the Executive Performance Stock Plans were based on the fact that the 2016 plan came out at 22%, in casu 78% lapsed. |
2) | Fair value was calculated as the share price on the investment date, reduced by the net present value of the dividend expectations during the three-year vesting period. Net present value calculations are based on data from external party. |
3) | Total compensation costs charged during 2019: SEK 256 million, 2018: SEK 645 million. |
76
|
Financial report 2020 | Notes to the consolidated financial statements
|
Ericsson Annual Report on Form 20-F 2020
|
Note G3, cont.
G4 Employee information
Employee numbers, wages and salaries
Average number of employees by gender and market area
2020 | 2019 | |||||||||||||||||||||||
Women | Men | Total | Women | Men | Total | |||||||||||||||||||
South East Asia, Oceania and India |
5,025 | 20,306 | 25,331 | 4,821 | 19,230 | 24,051 | ||||||||||||||||||
North East Asia |
4,532 | 9,344 | 13,876 | 4,376 | 9,003 | 13,379 | ||||||||||||||||||
North America |
2,075 | 7,635 | 9,710 | 1,980 | 7,381 | 9,361 | ||||||||||||||||||
Europe and Latin America 1) |
11,205 | 34,226 | 45,431 | 10,180 | 33,262 | 43,442 | ||||||||||||||||||
Middle East and Africa |
807 | 3,434 | 4,241 | 739 | 3,531 | 4,270 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total |
23,644 | 74,945 | 98,589 | 22,096 | 72,407 | 94,503 | ||||||||||||||||||
1) Of which in EU |
8,462 | 25,811 | 34,273 | 8,069 | 26,257 | 34,326 | ||||||||||||||||||
Of which in Sweden |
2,911 | 9,709 | 12,620 | 2,723 | 9,324 | 12,047 |
77
|
Financial report 2020 | Notes to the consolidated financial statements
|
Ericsson Annual Report on Form 20-F 2020
|
78
|
Financial report 2020 | Notes to the consolidated financial statements
|
Ericsson Annual Report on Form 20-F 2020
|
Note H1, cont.
79
|
Financial report 2020 | Notes to the consolidated financial statements
|
Ericsson Annual Report on Form 20-F 2020
|
Note H3, cont.
80
|
Financial report 2020 | Report of Independent Registered Public Accounting Firm
|
Ericsson Annual Report on Form 20-F 2020
|
Report of independent
registered public accounting firm
To the shareholders of Telefonaktiebolaget
LM Ericsson (publ):
81
|
Financial report 2020 | Managements report on internal control over financial reporting
|
Ericsson Annual Report on Form 20-F 2020
|
Managements report on internal control over financial reporting
82
|
Financial report 2020 | Risk factors
|
Ericsson Annual Report on Form 20-F 2020
|
Risk factors
83
|
Financial report 2020 | Risk factors
|
Ericsson Annual Report on Form 20-F 2020
|
84
|
Financial report 2020 | Risk factors
|
Ericsson Annual Report on Form 20-F 2020
|
85
|
Financial report 2020 | Risk factors
|
Ericsson Annual Report on Form 20-F 2020
|
86
|
Financial report 2020 | Risk factors
|
Ericsson Annual Report on Form 20-F 2020
|
87
|
Financial report 2020 | Risk factors
|
Ericsson Annual Report on Form 20-F 2020
|
88
|
Financial report 2020 | Risk factors
|
Ericsson Annual Report on Form 20-F 2020
|
89
|
Financial report 2020 | Risk factors
|
Ericsson Annual Report on Form 20-F 2020
|
90
|
Financial report 2020 | Risk factors
|
Ericsson Annual Report on Form 20-F 2020
|
91
|
Financial report 2020 | Risk factors
|
Ericsson Annual Report on Form 20-F 2020
|
92
|
Financial report 2020 | Risk factors
|
Ericsson Annual Report on Form 20-F 2020
|
93
|
Financial report 2020 | Risk factors
|
Ericsson Annual Report on Form 20-F 2020
|
94
|
Financial report 2020 | Forward-looking statements
|
Ericsson Annual Report on Form 20-F 2020
|
Forward-looking statements
95
|
Financial report 2020 | Five-year summary Financial information
|
Ericsson Annual Report on Form 20-F 2020
|
Five-year summary Financial information
For definitions of certain financial terms used, see Alternative performance measures and Financial terminology.
Five-year summary
2020 | Change | 2019 | 2018 | 2017 | 2016 | |||||||||||||||||||
Income statement and cash flow items, SEK million |
||||||||||||||||||||||||
Net sales 1) |
232,390 | 2 | % | 227,216 | 210,838 | 205,378 | 220,316 | |||||||||||||||||
Operating expenses 1) |
66,280 | | 64,215 | 66,848 | 70,563 | 60,501 | ||||||||||||||||||
Operating income (loss) 1) |
27,808 | 163 | % | 10,564 | 1,242 | 34,743 | 5,187 | |||||||||||||||||
Net income (loss) 1) |
17,623 | 858 | % | 1,840 | 6,276 | 32,433 | 1,012 | |||||||||||||||||
Cash flow from operating activities |
28,933 | 71 | % | 16,873 | 9,342 | 9,601 | 14,010 | |||||||||||||||||
Year-end position, SEK million |
||||||||||||||||||||||||
Total assets 1) |
271,530 | 2 | % | 276,383 | 268,761 | 259,882 | 284,150 | |||||||||||||||||
Property, plant and equipment |
13,383 | 3 | % | 13,850 | 12,849 | 12,857 | 16,734 | |||||||||||||||||
Stockholders equity 1) |
86,674 | 5 | % | 82,559 | 86,978 | 96,935 | 134,582 | |||||||||||||||||
Non-controlling interests |
1,497 | | 681 | 792 | 636 | 675 | ||||||||||||||||||
Per share indicators |
||||||||||||||||||||||||
Earnings (loss) per share, basic, SEK 1) |
5.26 | 685 | % | 0.67 | 1.98 | 9.94 | 0.26 | |||||||||||||||||
Earnings (loss) per share, diluted, SEK 1) |
5.26 | 685 | % | 0.67 | 1.98 | 9.94 | 0.25 | |||||||||||||||||
Dividends per share, SEK 2) |
2.00 | 33 | % | 1.50 | 1.00 | 1.00 | 1.00 | |||||||||||||||||
Dividends per share, USD 2) |
0.16 | 0 | % | 0.16 | 0.11 | 0.12 | 0.11 | |||||||||||||||||
Number of shares outstanding (in millions) |
||||||||||||||||||||||||
end of period, basic |
3,328 | 0 | % | 3,314 | 3,297 | 3,284 | 3,269 | |||||||||||||||||
average, basic |
3,323 | 1 | % | 3,306 | 3,291 | 3,277 | 3,263 | |||||||||||||||||
average, diluted |
3,326 | 0 | % | 3,320 | 3,318 | 3,317 | 3,303 | |||||||||||||||||
Other information, SEK million |
||||||||||||||||||||||||
Additions to property, plant and equipment |
4,493 | 12 | % | 5,118 | 3,975 | 3,877 | 6,129 | |||||||||||||||||
Depreciations and write-downs/impairments of property, plant and equipment |
4,114 | 4 | % | 3,947 | 3,843 | 6,314 | 4,569 | |||||||||||||||||
Acquisitions/capitalization/divestments of intangible assets |
11,817 | | 13,692 | 2,315 | 1,759 | 5,260 | ||||||||||||||||||
Amortizations and write-downs/impairments of intangible assets |
2,126 | 18 | % | 2,593 | 4,475 | 21,578 | 4,550 | |||||||||||||||||
Research and development expenses 1) |
39,714 | 2 | % | 38,815 | 38,909 | 37,887 | 31,631 | |||||||||||||||||
as percentage of net sales |
17.1 | % | | 17.1 | % | 18.5 | % | 18.4 | % | 14.4 | % | |||||||||||||
Inventory turnover days |
78 | 1 | % | 77 | 70 | 66 | 71 | |||||||||||||||||
Alternative Performance Measures (APMs) 3) |
||||||||||||||||||||||||
Sales growth adjusted for comparable units and currency |
5 | % | | 4 | % | 1 | % | | | |||||||||||||||
Gross margin 1) |
40.3 | % | | 37.3 | % | 32.3 | % | 23.3 | % | 29.6 | % | |||||||||||||
Gross margin excluding restructuring 1) |
40.6 | % | | 37.5 | % | 35.2 | % | 25.9 | % | 31.2 | % | |||||||||||||
Operating margin 1) |
12.0 | % | | 4.6 | % | 0.6 | % | 16.9 | % | 2.4 | % | |||||||||||||
Operating margin excluding restructuring 1) |
12.5 | % | | 5.0 | % | 4.4 | % | 12.8 | % | 5.8 | % | |||||||||||||
EBITA margin |
12.5 | % | | 5.1 | % | 1.4 | % | 8.8 | % | 3.6 | % | |||||||||||||
Restructuring charges, SEK million |
1,306 | 64 | % | 798 | 8,015 | 8,501 | 7,567 | |||||||||||||||||
Free cash flow, SEK million |
12,663 | 107 | % | 6,128 | 2,968 | 5,109 | 254 | |||||||||||||||||
Free cash flow before M&A, SEK million |
22,261 | 192 | % | 7,633 | 4,253 | 4,833 | 876 | |||||||||||||||||
Capital employed, SEK million 1) |
161,990 | 2 | % | 165,273 | 149,615 | 155,625 | 185,666 | |||||||||||||||||
Return on equity 1) |
20.7 | % | | 2.6 | % | 7.1 | % | 28.1 | % | 0.6 | % | |||||||||||||
Return on capital employed 1) |
17.0 | % | | 6.7 | % | 0.8 | % | 20.4 | % | 2.8 | % | |||||||||||||
Equity ratio 1) |
31.4 | % | | 29.6 | % | 32.7 | % | 37.5 | % | 47.6 | % | |||||||||||||
Capital turnover 1) |
1.4 | | 1.4 | 1.4 | 1.2 | 1.2 | ||||||||||||||||||
Adjusted working capital, SEK million 1) |
45,613 | 7 | % | 48,821 | 52,508 | 56,439 | 82,327 | |||||||||||||||||
Gross cash, SEK million |
72,045 | 0 | % | 72,192 | 68,996 | 67,702 | 57,877 | |||||||||||||||||
Net cash, SEK million |
41,885 | 21 | % | 34,496 | 35,871 | 34,657 | 31,191 | |||||||||||||||||
Adjusted earnings (loss) per share, SEK |
5.83 | 445 | % | 1.07 | 0.27 | 3.24 | 2.39 | |||||||||||||||||
Statistical data, year-end |
||||||||||||||||||||||||
Number of employees |
100,824 | 1 | % | 99,417 | 95,359 | 100,735 | 111,464 | |||||||||||||||||
of which in Sweden |
13,173 | 3 | % | 12,730 | 12,502 | 13,864 | 15,303 | |||||||||||||||||
Export sales from Sweden, SEK million 1) |
132,269 | 9 | % | 120,822 | 109,969 | 87,463 | 105,552 |
1) | 2017 and 2016 are restated due to implementation of IFRS 15 Revenue from Contracts with Customers. |
2) | For 2020, as proposed by the Board of Directors. |
3) | A reconciliation to the most directly reconcilable line items in the financial statements for 2020 and five comparison years is available on pages 97101. |
96
|
Financial report 2020 | Five-year summary Non-financial information
|
Ericsson Annual Report on Form 20-F 2020
|
Five-year summary Non-financial information
For additional information, see Consolidated non-financial statements and notes.
Five-year summary
2020 | Change | 2019 | 2018 | 2017 | 2016 | |||||||||||||||||||
Employees |
||||||||||||||||||||||||
Employee headcount at year-end |
100,824 | 1 | % | 99,417 | 95,359 | 100,735 | 111,464 | |||||||||||||||||
Average number of employees |
98,589 | 4 | % | 94,503 | 97,843 | 107,369 | 114,302 | |||||||||||||||||
Employees who have left the Company |
7,839 | 29 | % | 11,078 | 16,630 | 21,791 | 18,998 | |||||||||||||||||
Employees who have joined the Company |
9,246 | 39 | % | 15,136 | 11,254 | 11,062 | 15,048 | |||||||||||||||||
Employee diversity by age at year-end (%) |
||||||||||||||||||||||||
Under 25 years old |
3 | 0 | % | 3 | 3 | 4 | 4 | |||||||||||||||||
2535 years old |
33 | 6 | % | 35 | 36 | 37 | 38 | |||||||||||||||||
3645 years old |
34 | 6 | % | 32 | 32 | 32 | 31 | |||||||||||||||||
4655 years old |
22 | 0 | % | 22 | 22 | 21 | 20 | |||||||||||||||||
Over 55 years old |
8 | 0 | % | 8 | 7 | 7 | 6 | |||||||||||||||||
Female representation (%) |
||||||||||||||||||||||||
All employees |
25 | 0 | % | 25 | 23 | 25 | 23 | |||||||||||||||||
Line managers |
21 | 5 | % | 20 | 20 | 20 | 20 | |||||||||||||||||
Executive Team |
20 | 0 | % | 20 | 27 | 36 | 1) | 35 | ||||||||||||||||
Board of Directors |
23 | 0 | % | 23 | 1) | 23 | 43 | 1) | 46 | 1) | ||||||||||||||
Compliance concerns, sensitive business and information security |
||||||||||||||||||||||||
Total number of reported compliance concerns |
933 | 73 | % | 538 | 445 | 412 | 145 | |||||||||||||||||
Total number of cases reviewed in the Sensitive business process |
828 | 27 | % | 651 | 587 | 846 | 604 | |||||||||||||||||
Total number of information security and privacy incidents reported |
2,533 | 34 | % | 3,840 | 3,312 | 3,235 | 2,525 | |||||||||||||||||
Occupational health and safety |
||||||||||||||||||||||||
Number of fatalities Ericsson employees |
0 | | 0 | 0 | 0 | 0 | ||||||||||||||||||
Number of fatalities Supply chain and public |
7 | 36 | % | 11 | 14 | 23 | 17 | |||||||||||||||||
Number of major incidents Ericsson employees |
66 | 46 | % | 122 | 83 | 1) | 2 | ) | 2 | ) | ||||||||||||||
Number of major incidents Supply chain and public |
36 | 37 | % | 57 | 33 | 2 | ) | 2 | ) | |||||||||||||||
Number of lost-time incidents - Ericsson employees |
90 | 50 | % | 180 | 143 | 2 | ) | 2 | ) | |||||||||||||||
Number of lost-time incidents - Supply chain and public |
53 | 39 | % | 87 | 61 | 2 | ) | 2 | ) | |||||||||||||||
Responsible management of suppliers |
||||||||||||||||||||||||
Tier one suppliers risk assessed (%) |
99 | 1 | % | 98 | 47 | | | |||||||||||||||||
Audited suppliers compliant with the CoC, after follow-up (%) 3) |
89 | 7 | % | 83 | 86 | 80 | 94 | |||||||||||||||||
Energy consumption (facility energy usage) (GWh) |
||||||||||||||||||||||||
Electricity |
572 | 3 | % | 588 | 634 | 704 | 788 | |||||||||||||||||
of which renewable |
390 | 17 | % | 333 | 335 | 357 | 351 | |||||||||||||||||
District heating |
23 | 12 | % | 26 | 33 | 33 | 34 | |||||||||||||||||
Other energy |
33 | 34 | % | 50 | 49 | 45 | 60 | |||||||||||||||||
Energy intensity (GWh/SEK Billion) |
2.7 | 7 | % | 2.9 | 3.4 | 3.8 | 4.0 | |||||||||||||||||
Waste and water |
||||||||||||||||||||||||
Waste generated at facilities (tonnes) |
6,916 | 37 | % | 11,013 | 10,217 | 11,755 | 13,665 | |||||||||||||||||
of which recycled (%) |
49 | 11 | % | 44 | 34 | 38 | 37 | |||||||||||||||||
Product take-back (tonnes) |
10,204 | 21 | % | 8,403 | 8,380 | 12,252 | 14,009 | |||||||||||||||||
of which recycled or re-used (%) |
95 | 2 | % | 93 | 93 | 94 | 93 | |||||||||||||||||
Total water consumption (Mm3) |
1.5 | 0 | % | 1.5 | 1.6 | 1.8 | 2.7 | |||||||||||||||||
Green House Gas Emissions (CO2e) (Ktonne) |
||||||||||||||||||||||||
Direct emissions Scope 1 |
40 | 18 | % | 49 | 54 | 73 | 75 | |||||||||||||||||
Indirect emissions Scope 2 (Market based) |
74 | 40 | % | 124 | 134 | 156 | 185 | |||||||||||||||||
Other indirect emissions Scope 3 |
34,159 | 3 | % | 33,313 | 32,386 | 34,321 | 34,373 | |||||||||||||||||
of which business travel |
17 | 85 | % | 114 | 110 | 123 | 154 | |||||||||||||||||
of which product transport |
112 | 19 | % | 139 | 215 | 129 | 146 | |||||||||||||||||
of which employee commuting |
30 | 50 | % | 60 | 61 | 69 | 73 | |||||||||||||||||
of which use of sold products |
34,000 | 3 | % | 33,000 | 32,000 | 34,000 | 34,000 | |||||||||||||||||
Emissions intensity (Ktonnes/Net sales billion SEK) |
||||||||||||||||||||||||
Scope 1 |
0.17 | 21 | % | 0.22 | 0.26 | 0.36 | 0.34 | |||||||||||||||||
Scope 2 (Market based) |
0.32 | 42 | % | 0.55 | 0.64 | 0.76 | 0.84 |
1) | Nominal discrepancies with previous reporting. |
2) | Due to limitations in data availability, reporting on major incidents and lost-time incident broken down on employees and supply chain/public for 2017 and 2016 is not possible. |
3) | CoC: Ericsson Code of Conduct for Business Partners. |
97
|
Financial report 2020 | Alternative performance measures
|
Ericsson Annual Report on Form 20-F 2020
|
Alternative performance measures
Adjusted earnings (loss) per share 1)
SEK |
2020 | 2019 | 2018 | 2017 | 2016 | |||||||||||||||
Earnings (loss) per share, diluted |
5.26 | 0.67 | 1.98 | 9.94 | 0.25 | |||||||||||||||
Restructuring charges |
0.30 | 0.18 | 1.88 | 1.93 | 1.59 | |||||||||||||||
Amortizations and write-downs of acquired intangibles |
0.27 | 0.22 | 0.37 | 4.77 | 0.55 | |||||||||||||||
Adjusted earnings (loss) per share |
5.83 | 1.07 | 0.27 | 3.24 | 2.39 |
1) | 2017 and 2016 are restated due to implementation of IFRS 15 Revenue from Contracts with Customers. |
Definition | Reason to use | |
Adjusted earnings (loss) per shahre (EPS), diluted, excluding amortizations and write-downs of acquired intangible assets and excluding restructuring charges. | Restructuring charges vary between years. This measurement gives an indication of the performance without restructuring and without the impact of amortizations and write-down of acquired intangible assets from acquired companies. |
Adjusted working capital 1) | ||||||||||||||||||||
SEK million |
2020 | 2019 | 2018 | 2017 | 2016 | |||||||||||||||
Current assets |
149,795 | 153,914 | 161,167 | 153,423 | 175,097 | |||||||||||||||
Current non-interest-bearing provisions and liabilities |
||||||||||||||||||||
Provisions, current |
7,580 | 8,244 | 10,537 | 6,283 | 5,374 | |||||||||||||||
Contract liabilities |
26,440 | 29,041 | 29,348 | 29,076 | 24,930 | |||||||||||||||
Trade payables |
31,988 | 30,403 | 29,883 | 26,320 | 25,844 | |||||||||||||||
Other current liabilities |
38,174 | 37,405 | 38,891 | 35,305 | 36,622 | |||||||||||||||
Adjusted working capital |
45,613 | 48,821 | 52,508 | 56,439 | 82,327 |
1) | 2017 and 2016 are restated due to implementation of IFRS 15 Revenue from Contracts with Customers. |
Definition | Reason to use | |
Current assets less current non-interest-bearing provisions and liabilities (which include: current provisions, contract liabilities, trade payables and other current liabilities). | Due to the need to optimize cash generation to create value for Ericssons shareholders, management focuses on working capital and reducing lead times between orders booked and cash received. |
98
|
Financial report 2020 | Alternative performance measures
|
Ericsson Annual Report on Form 20-F 2020
|
Capital employed 1)
SEK million |
2020 | 2019 | 2018 | 2017 | 2016 | |||||||||||||||
Total assets |
271,530 | 276,383 | 268,761 | 259,882 | 284,150 | |||||||||||||||
Non-interest-bearing provisions and liabilities |
||||||||||||||||||||
Provisions, non-current |
2,886 | 2,679 | 5,471 | 3,596 | 946 | |||||||||||||||
Deferred tax liabilities |
1,089 | 1,224 | 670 | 901 | 2,147 | |||||||||||||||
Other non-current liabilities |
1,383 | 2,114 | 4,346 | 2,776 | 2,621 | |||||||||||||||
Provisions, current |
7,580 | 8,244 | 10,537 | 6,283 | 5,374 | |||||||||||||||
Contract liabilities |
26,440 | 29,041 | 29,348 | 29,076 | 24,930 | |||||||||||||||
Trade payables |
31,988 | 30,403 | 29,883 | 26,320 | 25,844 | |||||||||||||||
Other current liabilities |
38,174 | 37,405 | 38,891 | 35,305 | 36,622 | |||||||||||||||
Capital employed |
161,990 | 165,273 | 149,615 | 155,625 | 185,666 |
1) | 2017 and 2016 are restated due to implementation of IFRS 15 Revenue from Contracts with Customers. |
Definition | Reason to use | |
Total assets less non-interest-bearing provisions and liabilities. | Capital employed represents the value of the balance sheet assets that contributes to revenue and profit generation. It is also used in the calculation of return on capital employed. |
Capital turnover 1)
SEK million |
2020 | 2019 | 2018 | 2017 | 2016 | |||||||||||||||
Net sales |
232,390 | 227,216 | 210,838 | 205,378 | 220,316 | |||||||||||||||
Average capital employed |
||||||||||||||||||||
Capital employed at beginning of period |
165,273 | 149,615 | 155,625 | 185,666 | 190,797 | |||||||||||||||
Capital employed at end of period |
161,990 | 165,273 | 149,615 | 155,625 | 185,666 | |||||||||||||||
Average capital employed |
163,632 | 157,444 | 152,620 | 170,646 | 188,232 | |||||||||||||||
Capital turnover (times) |
1.4 | 1.4 | 1.4 | 1.2 | 1.2 |
1) | 2017 and 2016 are restated due to implementation of IFRS 15 Revenue from Contracts with Customers. |
Definition | Reason to use | |
Net sales divided by average capital employed. | Capital turnover indicates how effectively investment capital is used to generate revenues. |
EBITA margin 1)
SEK million |
2020 | 2019 | 2018 | 2017 | 2016 | |||||||||||||||
Net income (loss) |
17,623 | 1,840 | 6,276 | 32,433 | 1,012 | |||||||||||||||
Income tax |
9,589 | 6,922 | 4,813 | 3,525 | 1,882 | |||||||||||||||
Financial income and expenses, net |
596 | 1,802 | 2,705 | 1,215 | 2,293 | |||||||||||||||
Amortizations and write-downs of acquired intangibles |
1,220 | 1,038 | 1,662 | 16,652 | 2,650 | |||||||||||||||
EBITA |
29,028 | 11,602 | 2,904 | 18,091 | 7,837 | |||||||||||||||
Net sales |
232,390 | 227,216 | 210,838 | 205,378 | 220,316 | |||||||||||||||
EBITA margin (%) |
12.5 | % | 5.1 | % | 1.4 | % | 8.8 | % | 3.6 | % |
1) | 2017 and 2016 are restated due to implementation of IFRS 15 Revenue from Contracts with Customers. |
Definition | Reason to use | |
Earnings (loss) before interest, taxes, amortizations and write-downs of acquired intangibles, as a percentage of net sales. | Amortizations and write-downs of intangible assets are normally non-cash items in the annual income statement, EBITA margin % gives an indication of the financial performance without the impact from acquired companies. |
Equity ratio 1)
SEK million |
2020 | 2019 | 2018 | 2017 | 2016 | |||||||||||||||
Total equity |
85,177 | 81,878 | 87,770 | 97,571 | 135,257 | |||||||||||||||
Total assets |
271,530 | 276,383 | 268,761 | 259,882 | 284,150 | |||||||||||||||
Equity ratio (%) |
31.4 | % | 29.6 | % | 32.7 | % | 37.5 | % | 47.6 | % |
1) | 2017 and 2016 are restated due to implementation of IFRS 15 Revenue from Contracts with Customers. |
Definition | Reason to use | |
Equity expressed as a percentage of total assets. | An equity ratio above 40% is one of the companys capital targets. This supports financial flexibility and independence to operate and manage variations in working capital needs as well as to capitalize on business opportunities. |
99
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Financial report 2020 | Alternative performance measures
|
Ericsson Annual Report on Form 20-F 2020
|
Free cash flow and Free cash flow before M&A | ||||||||||||||||||||
SEK million |
2020 | 2019 | 2018 | 2017 | 2016 | |||||||||||||||
Cash flow from operating activities |
28,933 | 16,873 | 9,342 | 9,601 | 14,010 | |||||||||||||||
Net capital expenditures and other investments (excluding M&A) |
||||||||||||||||||||
Investments in property, plant and equipment |
4,493 | 5,118 | 3,975 | 3,877 | 6,129 | |||||||||||||||
Sales of property, plant and equipment |
254 | 744 | 334 | 1,016 | 482 | |||||||||||||||
Product development |
817 | 1,545 | 925 | 1,444 | 4,483 | |||||||||||||||
Other investing activities |
801 | 331 | 523 | 463 | 3,004 | |||||||||||||||
Repayment of lease liabilities |
2,417 | 2,990 | | | | |||||||||||||||
Free cash flow before M&A |
22,261 | 7,633 | 4,253 | 4,833 | 876 | |||||||||||||||
Acquisitions of subsidiaries and other operations |
9,657 | 1,753 | 1,618 | 289 | 984 | |||||||||||||||
Divestments of subsidiaries and other operations |
59 | 248 | 333 | 565 | 362 | |||||||||||||||
Free cash flow |
12,663 | 6,128 | 2,968 | 5,109 | 254 |
Definition | Reason to use | |
Free cash flow: Cash flow from operating activities less net capital expenditures, other investments and repayment of lease liabilities.
Free cash flow before M&A: Cash flow from operating activities less net capital expenditures, other investments (excluding M&A) and repayment of lease liabilities. |
Free cash flow represents the cash that the Company generates after capital expenditures, other investments, repayment of lease liabilities and acquisitions/divestments of subsidiaries. The Company believes that free cash flow is a good way of reflecting the cash flows generated by the company that can be used to expand the business, pay dividends and reduce debt.
Free cash flow before M&A represents the cash that the Company generates after capital expenditures, other investments and repayment of lease liabilities. The Company believes that free cash flow before M&A is a good way of reflecting the cash flows generated by the Company that can be used to expand the business, invest in subsidiaries, pay dividends and reduce debt. |
Gross cash | ||||||||||||||||||||
SEK million |
2020 | 2019 | 2018 | 2017 | 2016 | |||||||||||||||
Cash and cash equivalents |
43,612 | 45,079 | 38,389 | 35,884 | 36,966 | |||||||||||||||
Interest-bearing securities, current |
6,820 | 6,759 | 6,625 | 6,713 | 13,325 | |||||||||||||||
Interest-bearing securities, non-current |
21,613 | 20,354 | 23,982 | 25,105 | 7,586 | |||||||||||||||
Gross cash |
72,045 | 72,192 | 68,996 | 67,702 | 57,877 |
Definition | Reason to use | |
Cash and cash equivalents plus interest-bearing securities (current and non-current). | Gross cash is showing total available cash and interest-bearing securities and is a parameter for calculating the net cash position. |
Gross margin and Gross margin excluding restructuring 1) | ||||||||||||||||||||
SEK million |
2020 | 2019 | 2018 | 2017 | 2016 | |||||||||||||||
Gross income |
93,724 | 84,824 | 68,200 | 47,927 | 65,254 | |||||||||||||||
Net sales |
232,390 | 227,216 | 210,838 | 205,378 | 220,316 | |||||||||||||||
Gross margin (%) |
40.3 | % | 37.3 | % | 32.3 | % | 23.3 | % | 29.6 | % | ||||||||||
Restructuring charges included in cost of sales |
725 | 337 | 5,938 | 5,242 | 3,475 | |||||||||||||||
Gross income excluding restructuring charges |
94,449 | 85,161 | 74,138 | 53,169 | 68,729 | |||||||||||||||
Gross margin excluding restructuring charges (%) |
40.6 | % | 37.5 | % | 35.2 | % | 25.9 | % | 31.2 | % |
1) | 2017 and 2016 are restated due to implementation of IFRS 15 Revenue from Contracts with Customers. |
Definition | Reason to use | |
Reported gross income as a percentage of net sales. Reported gross income excluding restructuring charges as a percentage of net sales. | Gross margin shows the difference between net sales and cost of sales, in percentage of net sales. Gross margin is impacted by several factors such as business mix, service share, price development and cost reductions. Gross margin is an important internal measure and this number is also provided in the income statement as the Company believes that it provides users of the financial statements with a better understanding of the Groups business development. The Companys view is that gross margin excluding restructuring charges gives a fair view of the profitability of the ongoing business. |
100
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Financial report 2020 | Alternative performance measures
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Ericsson Annual Report on Form 20-F 2020
|
Net cash | ||||||||||||||||||||
SEK million |
2020 | 2019 | 2018 | 2017 | 2016 | |||||||||||||||
Cash and cash equivalents |
43,612 | 45,079 | 38,389 | 35,884 | 36,966 | |||||||||||||||
+ Interest-bearing securities, current |
6,820 | 6,759 | 6,625 | 6,713 | 13,325 | |||||||||||||||
+ Interest-bearing securities, non-current |
21,613 | 20,354 | 23,982 | 25,105 | 7,586 | |||||||||||||||
Borrowings, current |
7,942 | 9,439 | 2,255 | 2,545 | 8,033 | |||||||||||||||
Borrowings, non-current |
22,218 | 28,257 | 30,870 | 30,500 | 18,653 | |||||||||||||||
Net cash |
41,885 | 34,496 | 35,871 | 34,657 | 31,191 |
Definition | Reason to use | |
Cash and cash equivalents plus interest-bearing securities (current and non-current) less borrowings (current and non-current). | A positive net cash position that is larger than the pension liability is one of the companys capital targets. This creates financial flexibility and independence to operate and manage variations in working capital needs. |
Operating expenses, excluding restructuring charges | ||||||||||||||||||||
SEK million |
2020 | 2019 | 2018 | 2017 | 2016 | |||||||||||||||
Operating expenses |
66,280 | 64,215 | 66,848 | 70,563 | 60,501 | |||||||||||||||
Restructuring charges included in R&D expenses |
411 | 344 | 1,293 | 2,307 | 2,739 | |||||||||||||||
Restructuring charges included in selling and administrative expenses |
170 | 117 | 784 | 952 | 1,353 | |||||||||||||||
Operating expenses, excluding restructuring charges |
65,699 | 63,754 | 64,771 | 67,304 | 56,409 |
Definition | Reason to use | |
Reported operating expenses, excluding restructuring charges. | Restructuring charges vary between years and in order to analyse trends in reported expenses overtime, restructuring charges are excluded. |
Operating margin and Operating margin excluding restructuring 1) | ||||||||||||||||||||
SEK million |
2020 | 2019 | 2018 | 2017 | 2016 | |||||||||||||||
Operating income (loss) |
27,808 | 10,564 | 1,242 | 34,743 | 5,187 | |||||||||||||||
Net sales |
232,390 | 227,216 | 210,838 | 205,378 | 220,316 | |||||||||||||||
Operating margin (%) |
12.0 | % | 4.6 | % | 0.6 | % | 16.9 | % | 2.4 | % | ||||||||||
Restructuring charges |
1,306 | 798 | 8,015 | 8,501 | 7,567 | |||||||||||||||
Operating income (loss) excluding restructuring charges |
29,114 | 11,362 | 9,257 | 26,242 | 12,754 | |||||||||||||||
Operating margin excluding restructuring charges (%) |
12.5 | % | 5.0 | % | 4.4 | % | 12.8 | % | 5.8 | % |
1) | 2017 and 2016 are restated due to implementation of IFRS 15 Revenue from Contracts with Customers. |
Definition | Reason to use | |
Reported operating income (loss) as a percentage of net sales.
Reported operating income (loss) excluding restructuring charges as a percentage of net sales. |
Operating margin shows the operating income in percentage of net sales. Operating margin is a key internal measure as the Company believes that it provides users of the financial statements with a better understanding of the Groups financial performance both short and long term. The Companys view is that operating margin excluding restructuring charges gives a fair view of the profitability of the ongoing business. |
101
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Financial report 2020 | Alternative performance measures
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Ericsson Annual Report on Form 20-F 2020
|
Return on capital employed 1) | ||||||||||||||||||||
SEK million |
2020 | 2019 | 2018 | 2017 | 2016 | |||||||||||||||
Operating income (loss) |
27,808 | 10,564 | 1,242 | 34,743 | 5,187 | |||||||||||||||
Average capital employed |
||||||||||||||||||||
Capital employed at beginning of period |
165,273 | 149,615 | 155,625 | 185,667 | 190,797 | |||||||||||||||
Capital employed at end of period |
161,990 | 165,273 | 149,615 | 155,625 | 185,666 | |||||||||||||||
Average capital employed |
163,632 | 157,444 | 152,620 | 170,646 | 188,232 | |||||||||||||||
Return on capital employed (%) |
17.0 | % | 6.7 | % | 0.8 | % | 20.4 | % | 2.8 | % |
1) | 2017 and 2016 are restated due to implementation of IFRS 15 Revenue from Contracts with Customers. |
Definition | Reason to use | |
The total of operating income (loss) as a percentage of average capital employed. | Return on capital employed is a measure of the profitability after taking into account the amount of capital used. A higher return on capital employed indicates a more efficient use of capital. |
Return on equity 1) | ||||||||||||||||||||
SEK million |
2020 | 2019 | 2018 | 2017 | 2016 | |||||||||||||||
Net income (loss) attributable to owners of the Parent Company |
17,483 | 2,223 | 6,530 | 32,576 | 833 | |||||||||||||||
Average stockholders equity |
||||||||||||||||||||
Stockholders equity, beginning of period 2) |
82,559 | 86,729 | 95,952 | 134,582 | 142,172 | |||||||||||||||
Stockholders equity, end of period |
86,674 | 82,559 | 86,978 | 96,935 | 134,582 | |||||||||||||||
Average stockholders equity |
84,617 | 84,644 | 91,465 | 115,759 | 138,377 | |||||||||||||||
Return on equity (%) |
20.7 | % | 2.6 | % | 7.1 | % | 28.1 | % | 0.6 | % |
1) | 2017 and 2016 are restated due to implementation of IFRS 15 Revenue from Contracts with Customers. |
2) | For 2019, adjusted opening balance due to implementation of IFRS 16 Leases, for 2018, adjusted opening balance due to implementation of IFRS 9 Financial instruments and for 2016, adjusted opening balance due to implementation of IFRS 15 Revenue from Contracts with Customers. |
Definition | Reason to use | |
Net income (loss) attributable to owners of the Parent Company as a percentage of average stockholders equity. | Return on equity is a measure of the profitability in relation to the book value of shareholder equity. Return on equity is a measure of how investments are used to generate earnings growth. |
Sales growth adjusted for comparable units and currency | ||||||||||||
SEK million |
2020 | 2019 | 2018 | |||||||||
Net sales |
232,390 | 227,216 | 210,838 | |||||||||
Acquired/divested business |
1,362 | 96 | | |||||||||
Net FX impact |
7,796 | 10,675 | 4,232 | |||||||||
Comparable net sales, excluding FX impact |
238,824 | 216,445 | 206,606 | |||||||||
Comparable net sales adjusted for acquired/divested business 1) |
227,132 | 208,130 | | |||||||||
Sales growth adjusted for comparable units and currency (%) |
5 | % | 4 | % | 1 | % |
1) | Adjusted for divestment of MediaKind in 2019, acquisition of Kathrein in 2019 and acquisition of Cradlepoint in 2020. |
Definition | Reason to use | |
Sales growth adjusted for the impact of acquisitions and divestments as well as the effects of foreign currency fluctuations. Also named as organic growth. | Ericssons presentation currency is SEK while the total revenues are mainly in other currencies. Reported sales growth is dependent on fluctuations in SEK versus other currencies and in addition acquired or divested business can have an impact on reported net sales. Sales growth adjusted for comparable units and currency shows the underlying sales development without these parameters. |
102
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Financial report 2020 | The Ericsson share
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Ericsson Annual Report on Form 20-F 2020
|
The Ericsson share
Changes in number of shares and capital stock 20162020 |
||||||||||
Number of shares | Share capital (SEK) | |||||||||
2016 | December 31 |
3,331,151,735 | 16,655,758,678 | |||||||
2017 | May 10, new issue (Class C shares, later converted to Class B-shares) 1) |
3,000,000 | 15,000,000 | |||||||
2017 | December 31 |
3,334,151,735 | 16,670,758,678 | |||||||
2018 | December 31 |
3,334,151,735 | 16,670,758,678 | |||||||
2019 | December 31 |
3,334,151,735 | 16,670,758,678 | |||||||
2020 | December 31 |
3,334,151,735 | 16,670,758,678 |
1) | The AGM 2017 resolved to issue 3,000,000 Class C shares for the Long-Term Variable Compensation Program 2017. In accordance with an authorization from the AGM, in the second quarter 2017, the Board of Directors resolved to repurchase the new issued shares, which were subsequently converted into Class B shares. The quotient value of the repurchased shares was SEK 5, totaling MSEK 15, representing less than 0.1% of capital stock, and the acquisition cost was approximately SEK 15.1 million. |
Share performance indicators
|
||||||||||||||||||||
2020 | 2019 | 2018 | 20174) | 20164) | ||||||||||||||||
Earnings (loss) per share, diluted (SEK) 1) |
5.26 | 0.67 | 1.98 | 9.94 | 0.25 | |||||||||||||||
Adjusted earnings (loss) per share (SEK) 2) |
5.83 | 1.07 | 0.27 | 3.24 | 2.39 | |||||||||||||||
Dividend per share (SEK) 3) |
2.00 | 1.50 | 1.00 | 1.00 | 1.00 | |||||||||||||||
Total shareholder return (%) |
22 | 6 | 47 | 3 | 32 | |||||||||||||||
P/E ratio |
19 | 122 | n/a | n/a | 101 |
1) | Calculated on average number of shares outstanding, diluted. |
2) | EPS, diluted, excluding amortizations and write-downs of acquired intangible assets, and excluding restructuring charges, SEK. |
A reconcilation of Alternative performance measures is available on pages 97101.
3) | For 2020 as proposed by the Board of Directors. |
4) | 2017 and 2016 are restated due to implementation of IFRS 15 Revenue from Contracts with Customers. |
For definitions of the financial terms used including a description of alternative performance measure, see Glossary and Financial Terminology.
103
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Financial report 2020 | The Ericsson share
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Ericsson Annual Report on Form 20-F 2020
|
Share prices on Nasdaq Stockholm and NASDAQ New York
Nasdaq Stockholm | NASDAQ New York | |||||||||||||||||||||||
SEK per Class A share | SEK per Class B share | USD per ADS 1) | ||||||||||||||||||||||
Period |
High | Low | High | Low | High | Low | ||||||||||||||||||
Annual high and low |
||||||||||||||||||||||||
2016 |
80.80 | 45.20 | 83.60 | 43.19 | 10.20 | 4.83 | ||||||||||||||||||
2017 |
64.80 | 44.17 | 64.95 | 43.75 | 7.47 | 5.52 | ||||||||||||||||||
2018 |
85.20 | 49.05 | 85.66 | 49.04 | 9.45 | 6.00 | ||||||||||||||||||
2019 |
96.80 | 74.70 | 96.74 | 74.02 | 10.45 | 7.58 | ||||||||||||||||||
2020 |
119.00 | 64.10 | 110.15 | 59.54 | 12.61 | 6.15 | ||||||||||||||||||
Quarterly high and low |
||||||||||||||||||||||||
2019 First Quarter |
92.50 | 74.70 | 90.66 | 74.70 | 9.89 | 8.26 | ||||||||||||||||||
2019 Second Quarter |
96.80 | 86.20 | 96.74 | 85.46 | 10.46 | 9.00 | ||||||||||||||||||
2019 Third Quarter |
92.60 | 75.00 | 91.24 | 74.02 | 9.71 | 7.58 | ||||||||||||||||||
2019 Fourth Quarter |
90.30 | 75.20 | 90.48 | 75.22 | 9.32 | 7.64 | ||||||||||||||||||
2020 First Quarter |
96.10 | 64.10 | 89.22 | 59.54 | 9.24 | 6.15 | ||||||||||||||||||
2020 Second Quarter |
100.60 | 77.40 | 91.78 | 77.60 | 9.88 | 7.62 | ||||||||||||||||||
2020 Third Quarter |
114.80 | 92.50 | 105.10 | 85.40 | 12.10 | 9.20 | ||||||||||||||||||
2020 Fourth Quarter |
119.00 | 100.40 | 110.15 | 93.42 | 12.61 | 10.50 | ||||||||||||||||||
Monthly high and low |
||||||||||||||||||||||||
August 2020 |
114.20 | 109.00 | 104.85 | 98.98 | 12.10 | 11.30 | ||||||||||||||||||
September 2020 |
111.80 | 102.40 | 102.85 | 94.52 | 11.72 | 10.30 | ||||||||||||||||||
October 2020 |
119.00 | 100.40 | 110.15 | 93.42 | 12.52 | 10.50 | ||||||||||||||||||
November 2020 |
116.80 | 106.20 | 106.40 | 103.85 | 12.61 | 11.14 | ||||||||||||||||||
December 2020 |
116.00 | 101.00 | 106.50 | 95.90 | 12.53 | 11.59 | ||||||||||||||||||
January 2021 |
120.80 | 105.40 | 109.35 | 96.90 | 12.25 | 11.65 |
1) One ADS = 1 Class B share. |
Source: Nasdaq Stockholm and NASDAQ New York. |
104
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Financial report 2020 | The Ericsson share
|
Ericsson Annual Report on Form 20-F 2020
|
Number of shares 1) | ||||||||||||||||||||||||
Holding |
No. of shareholders |
No. of shares A |
No. of shares B |
Percentage of share capital |
Percentage of voting rights |
Market value (MSEK) |
||||||||||||||||||
1500 |
342,782 | 1,447,251 | 42,781,322 | 1.33 | % | 1.01 | % | 4,330 | ||||||||||||||||
5011,000 |
37,833 | 976,213 | 27,688,871 | 0.86 | % | 0.66 | % | 2,806 | ||||||||||||||||
1,0015,000 |
36,509 | 2,721,398 | 76,310,840 | 2.37 | % | 1.82 | % | 7,738 | ||||||||||||||||
5,00110,000 |
4,359 | 1,038,488 | 30,090,956 | 0.93 | % | 0.71 | % | 3,048 | ||||||||||||||||
10,00115,000 |
1,140 | 416,133 | 13,638,818 | 0.42 | % | 0.31 | % | 1,376 | ||||||||||||||||
15,00120,000 |
512 | 314,204 | 8,807,105 | 0.27 | % | 0.21 | % | 893 | ||||||||||||||||
20,001 |
1,560 | 254,842,293 | 2,872,693,759 | 93.80 | % | 95.28 | % | 307,350 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total, December 31, 2020 2) |
424,696 | 261,755,983 | 3,072,395,752 | 100.00 | % | 100.00 | % | 327,578 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
1) | Source: Euroclear. |
2) | Includes a nominee reporting discrepancy of 384,081 shares. |
The following table shows share information as of December 31 2020 with respect to the 15 largest shareholders ranked by voting rights as well as their percentage of voting rights as of December 31 2020, 2019 and 2018.
Largest shareholders December 31, 2020 and percentage of voting rights December 31, 2020, 2019 and 2018
Of total Class | Of total Class | Of total Class | ||||||||||||||||||||||||||||||
Identity of person or group 1) |
Number of Class A shares |
A shares percent |
Number of Class B shares |
B shares percent |
A+B shares percent |
2020 Voting rights percent |
2019 Voting rights percent |
2018 Voting rights percent |
||||||||||||||||||||||||
Investor AB |
115,762,803 | 44.23 | 140,341,961 | 4.57 | 7.68 | 22.81 | 22.53 | 22.53 | ||||||||||||||||||||||||
AB Industrivärden |
86,052,615 | 32.88 | 1,000,000 | 0.03 | 2.61 | 15.14 | 15.14 | 15.14 | ||||||||||||||||||||||||
Svenska Handelsbankens Pensionsstiftelse |
23,430,790 | 8.95 | 0 | 0.00 | 0.70 | 4.12 | 4.12 | 4.12 | ||||||||||||||||||||||||
Cevian Capital |
339,228 | 0.13 | 181,408,885 | 5.90 | 5.45 | 3.25 | 4.99 | 5.38 | ||||||||||||||||||||||||
AMF Pensionsförsäkring AB |
8,560,000 | 3.27 | 59,798,213 | 1.95 | 2.05 | 2.56 | 2.71 | 2.78 | ||||||||||||||||||||||||
BlackRock Institutional Trust Company, N.A. |
0 | 0.00 | 133,523,967 | 4.35 | 4.00 | 2.35 | 2.16 | 2.11 | ||||||||||||||||||||||||
Swedbank Robur Fonder AB 2) |
4,214 | 0.00 | 131,582,663 | 4.28 | 3.95 | 2.31 | 2.33 | 2.35 | ||||||||||||||||||||||||
PRIMECAP Management Company |
0 | 0.00 | 123,879,882 | 4.03 | 3.72 | 2.18 | 2.32 | 2.34 | ||||||||||||||||||||||||
AFA Försäkring AB |
10,723,000 | 4.10 | 5,862,596 | 0.19 | 0.50 | 1.99 | 2.06 | 1.98 | ||||||||||||||||||||||||
The Vanguard Group, Inc. |
0 | 0.00 | 80,836,899 | 2.63 | 2.42 | 1.42 | 1.46 | 1.58 | ||||||||||||||||||||||||
Livförsäkringsbolaget Skandia, ömsesidigt |
4,400,675 | 1.68 | 22,386,363 | 0.73 | 0.80 | 1.17 | 1.18 | 1.13 | ||||||||||||||||||||||||
Norges Bank Investment Management (NBIM) |
65 | 0.00 | 58,872,160 | 1.92 | 1.77 | 1.03 | 1.49 | 1.22 | ||||||||||||||||||||||||
State Street Global Advisors (US) |
0 | 0.00 | 54,921,908 | 1.79 | 1.65 | 0.97 | 1.03 | 1.10 | ||||||||||||||||||||||||
Handelsbanken Asset Management |
7,370 | 0.00 | 50,437,868 | 1.64 | 1.51 | 0.89 | 1.25 | 1.13 | ||||||||||||||||||||||||
Fidelity Management & Research Company |
0 | 0.00 | 31,238,957 | 1.02 | 0.94 | 0.55 | 1.17 | 0.71 | ||||||||||||||||||||||||
Others |
12,475,223 | 4.77 | 1,996,303,430 | 64.98 | 60.25 | 37.28 | 34.05 | 34.41 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Total |
261,755,983 | 3,072,395,752 | 100 | 100 | 100 | 100 | 100 | |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1) | Source: Nasdaq |
2) | In 2019 Annual report, Folksams holdings were included in Swedbank Robur Fonder ABs holdings for 2019, which is why Swedbank Robur Fonder ABs holdings were then stated as 3.07% of the voting rights and 5.24% of the number of shares for 2019. |
105
|
Financial report 2020 | The Ericsson share
|
Ericsson Annual Report on Form 20-F 2020
|
Share trend
In 2020, Ericssons total market capitalization increased by 19.7% to SEK 326 billion, compared to an increase by 4.7% reaching SEK 272 billion in 2019. In 2020, the index, OMX Stockholm, on Nasdaq Stockholm increased by 5.8%, the Nasdaq composite index increased by 43.6 % and the S&P 500 Index increased by 16.3%.
|
1) EPS, diluted, excl. restructuring charges, amortizations and write-downs of acquired intangible assets, SEK. A reconciliation of Alternative performance measures is available on pages 97101. 2) 2017 and 2016 are restated due to implementation of IFRS 15 Revenue from Contracts with Customers.
1) For 2020 as proposed by the Board of Directors. |
106
|
Financial report 2020 | Shareholder information
|
Ericsson Annual Report on Form 20-F 2020
|
Shareholder information
107
|
Financial report 2020 | Financial terminology
|
Ericsson Annual Report on Form 20-F 2020
|
Financial terminology
108
|
Financial report 2020 | Glossary
|
Ericsson Annual Report on Form 20-F 2020
|
Glossary
The terms Ericsson, the Company, the Group, us, we, and our all refer to Telefonaktiebolaget LM Ericsson and its subsidiaries.
About Ericsson Ericsson provides high-performing solutions to enable its customers to capture the full value of connectivity. The Company supplies communication infrastructure, services and software to the telecom industry and other sectors. Ericsson has approximately 100,000 employees and serves customers in more than 180 countries. Ericsson is listed on Nasdaq Stockholm and the Ericsson ADS trade on NASDAQ New York. The Companys headquarters are located in Stockholm, Sweden. It all started in a mechanical workshop in Stockholm in 1876 where Lars Magnus Ericsson designed telephones and his wife Hilda manufactured them by winding copper wire coils. With 5G now a commercial reality, we continue to invest to strengthen our 5G leadership. Our portfolio is designed to help our customers digitalize and to increase efficiency in an intelligent and sustainable way, while finding new revenue streams. Telefonaktiebolaget LM Ericsson SE-164 83 Stockholm, Sweden Telephone +46 10 719 00 00 EN/LZT 138 2297/1 www.ericsson.com © Telefonaktiebolaget LM Ericsson 2021
Corporate Governance report Part of Ericsson Annual Report 2020
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Governance Structure
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Contact the Board of Directors
Telefonaktiebolaget LM Ericsson The Board of Directors Secretariat SE-164 83 Stockholm Sweden boardsecretariat@ericsson.com |
Annual General Meeting 2021
Ericssons AGM 2021 will take place on March 30, 2021. Further information is available on Ericssons website. |
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Contact the Nomination Committee
Telefonaktiebolaget LM Ericsson The Nomination Committee c/o The Board of Directors Secretariat SE-164 83 Stockholm Sweden nomination.committee@ericsson.com |
Proposals to the Nomination Committee
Shareholders may submit proposals to the Nomination Committee at any time but should do so in due time before the AGM to ensure that the proposals can be considered by the Committee. Further information is available on Ericssons website. |
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The Boards annual work cycle 2020
The annual cycle applied to the Boards work allows the Board to appropriately address its duties during the year. It also facilitates the organization in aligning its global processes to allow appropriate Board involvement. |
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Organization of the Board work
Number of Committee members as of December 31, 2020
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Members of the Committees as of December 31, 2020
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Directors attendance and fees 2020
Fees resolved by the AGM 2020 | Number of Board/Committee meetings attended in 2020 | |||||||||||||||||||||||||||
Board member |
Board fees, SEK1) |
Committee fees, SEK |
Board | Audit and Compliance- Committee |
Finance Committee |
Remun. Committee |
Tech. and Science Committee |
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Ronnie Leten |
4,075,000 | 375,000 | 13 | 3 | 7 | |||||||||||||||||||||||
Helena Stjernholm |
1,020,000 | 175,000 | 13 | 3 | ||||||||||||||||||||||||
Jacob Wallenberg |
1,020,000 | 175,000 | 13 | 3 | ||||||||||||||||||||||||
Jon Fredrik Baksaas |
1,020,000 | 200,000 | 12 | 7 | ||||||||||||||||||||||||
Jan Carlson |
1,020,000 | 425,000 | 13 | 7 | 4 | |||||||||||||||||||||||
Nora Denzel 4) |
1,020,000 | 175,000 | 13 | 2 | 4 | |||||||||||||||||||||||
Börje Ekholm |
| 2) | | 13 | ||||||||||||||||||||||||
Eric A. Elzvik |
1,020,000 | 400,000 | 13 | 7 | ||||||||||||||||||||||||
Kurt Jofs 5) |
1,020,000 | 600,000 | 13 | 5 | 7 | 4 | ||||||||||||||||||||||
Kristin S. Rinne |
1,020,000 | 200,000 | 13 | 4 | ||||||||||||||||||||||||
Torbjörn Nyman |
19,500 | 3) | 10,500 | 13 | 7 | |||||||||||||||||||||||
Kjell-Åke Soting |
19,500 | 3) | 10,500 | 13 | 7 | |||||||||||||||||||||||
Roger Svensson |
19,500 | 3) | 10,500 | 13 | 3 | 4 | ||||||||||||||||||||||
Per Holmberg |
19,500 | 3) | | 13 | ||||||||||||||||||||||||
Anders Ripa |
19,500 | 3) | | 13 | ||||||||||||||||||||||||
Loredana Roslund |
19,500 | 3) | | 13 | ||||||||||||||||||||||||
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Total number of meetings |
13 | 7 | 3 | 7 | 4 | |||||||||||||||||||||||
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1) | Non-employee Directors can choose to receive part of their Board fee (exclusive of Committee fees) in the form of synthetic shares. |
2) | Board member remuneration resolved by the AGM is only for non-employee Directors elected by the shareholders. |
3) | Employee representative Board members and their deputies are not entitled to a Board fee, but instead get paid compensation in the amount of SEK 1,500 per attended Board and Committee meeting. |
4) | Resigned from the Audit and Compliance Committee as of March 31, 2020. |
5) | Appointed member of the Audit and Compliance Committee as of March 31, 2020. |
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Members of the Board of Directors
Board members elected by the AGM 2020
The Board memberships and holdings in Ericsson reported above are as of December 31, 2020.
1) | The number of shares and ADS includes holdings by related persons, if applicable. |
2) | Call options issued by Investor AB entitling to purchase Ericsson Class B shares. |
3) | Since 2008, the AGM has each year resolved that part of the Board fee may be received in the form of synthetic shares. A synthetic share is a right to receive in the future a payment corresponding to the value of the Class B share in Ericsson at the time of payment. Please see page 11 for further information. |
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The Board memberships and holdings in Ericsson reported above are as of December 31, 2020.
1) | The number of shares and ADS includes holdings by related persons, if applicable. |
2) | Since 2008, the AGM has each year resolved that part of the Board fee may be received in the form of synthetic shares. A synthetic share is a right to receive in the future a payment corresponding to the value of the Class B share in Ericsson at the time of payment. Please see page 11 for further information. |
3) | Call options issued by AB Industrivärden (1,000,000 call options) and Investor AB (1,000,000 call options), each entitling the purchase of one Ericsson B share from AB Industrivärden/Investor AB respectively (further information is available in the Notes to the consolidated financial statements note G2 Information regarding members of the Board of Directors and Group management in the Financial Report). |
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Board members elected by the AGM 2020, contd.
The Board memberships and holdings in Ericsson reported above are as of December 31, 2020.
1) | The number of shares and ADS includes holdings by related person, if applicable. |
2) | Since 2008, the AGM has each year resolved that part of the Board fee may be received in the form of synthetic shares. A synthetic share is a right to receive in the future a payment corresponding to the value of the Class B share in Ericsson at the time of payment. Please see page 11 for further information. |
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Board members and deputies appointed by the trade unions
Börje Ekholm was the only Director who held an operational management position at Ericsson in 2020.
1) | The number of shares and ADS reflects ownership as of December 31, 2020 and includes holdings by related persons, if applicable. |
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Ericsson Group Management System
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ERM Process
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Risk Description
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Treatment plan
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Risk Universe
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Members of the Executive Team
Changes in the Executive Team
| Effective June 10, 2020, Arun Bansal was appointed Executive Vice President. |
| The Board memberships and Ericsson holdings reported above are as of December 31, 2020. |
1) | The number of shares and ADS includes holdings by related persons, if applicable. |
2) | Call options issued by AB Industrivärden (1,000,000 call options) and Investor AB (1,000,000 call options), each entitling the purchase of one Ericsson B share from AB Industrivärden/Investor AB respectively (further information is available in the Notes to the consolidated financial statements note G2 Information regarding members of the Board of Directors and the Group management in the Financial Report). |
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The Board memberships and Ericsson holdings reported above are as of December 31, 2020.
1) | The number of shares and ADS includes holdings by related persons, if applicable. |
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Members of the Executive Team, contd.
The Board memberships and Ericsson holdings reported above are as of December 31, 2020.
1) | The number of shares and ADS includes holdings by related persons, if applicable. |
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The Board memberships and Ericsson holdings reported above are as of December 31, 2020.
1) | The number of shares and ADS includes holdings by related persons, if applicable. |
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Board of Directors
Stockholm, March 3, 2021
Telefonaktiebolaget LM Ericsson (publ)
Org. no. 556016-0680
About Ericsson
Ericsson provides high-performing
solutions to enable its customers to capture the full value of connectivity. The Company supplies communication infrastructure, services and software to the telecom industry and other sectors. Ericsson has approximately 100,000 employees and serves
customers in more than 180 countries. Ericsson is listed on Nasdaq Stockholm and the Ericsson ADS trade on NASDAQ New York. The Companys headquarters are located in Stockholm, Sweden.
It all started in a mechanical workshop in Stockholm in 1876 where Lars Magnus Ericsson designed telephones and his wife Hilda manufactured them by winding copper wire coils. With
5G now a commercial reality, we continue to invest to strengthen our 5G leadership. Our portfolio is designed to help our customers digitalize and to increase efficiency in an intelligent and sustainable way, while finding new revenue streams.
Telefonaktiebolaget LM Ericsson | ||
SE-164 83 Stockholm, Sweden | ||
Telephone +46 10 719 00 00 | EN/LZT 138 2297/2 | |
www.ericsson.com | © Telefonaktiebolaget LM Ericsson 2021 |
1 Remuneration report 2020
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Ericsson Annual Report on Form 20-F 2020
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Remuneration report 2020
Statement from the Chair of
the Remuneration Committee
2 Remuneration report 2020
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Introduction
3 Remuneration report 2020
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Remuneration 2020 at a glance
Total remuneration
The table below summarizes how the remuneration elements outlined in the Guidelines have been applied in relation to the President and CEO and the Executive Vice Presidents. The table also summarizes information on LTV, as approved by the shareholders.
Purpose and link to strategy | Key features | Implementation during the financial year that ended on December 31, 2020 | ||||
Fixed salary | Support the attraction and retention of executive talent required to implement Ericssons strategy. | Deliver part of the annual compensation in a predictable format.
Salaries are normally reviewed annually in January taking into account:
Ericssons overall business performance,
business performance of the unit that the individual leads,
year-on-year performance of the individual,
external economic environment,
size and complexity of the position,
external market data,
pay and conditions for other employees based in locations considered to be relevant to the role.
When setting fixed salaries, the impact on total remuneration is also taken into consideration. |
President and CEO: fixed annual salary of SEK 16,876,629 corresponding to an increase of 10% since 2019.
EVP Head of Business Area Networks: fixed annual salary of SEK 7,942,375, corresponding to an increase of 29% since 2019.
EVP Head of Market Area Europe and Latin America fixed salary of SEK 8,673,843 (appointed EVP in June 2020). | |||
Other benefits | Provide market competitive benefits to support the attraction and retention of executive talent required to implement Ericssons strategy. | Benefits are set in line with competitive market practices in the individuals country of employment.
The levels of benefits provided may vary year on year depending on the cost of the provision of benefits to the Company.
Benefits are capped at 10% of the annual fixed salary for members of the Executive Team located in Sweden.
Benefits for members of the Executive Team who are on long-term international assignment (LTA) in countries other than their home countries of employment, are determined in line with the Companys global international mobility policy which may include (but is not limited to) commuting or relocation costs; cost of living adjustment, housing, home travel or education allowance; tax and social security equalization assistance. |
President and CEO: other benefits to a value of SEK 770,276.
EVP Head of Business Area Networks: other benefits to a value of SEK 22,110.
EVP Head of Market Area Europe and Latin America: other benefits to a value of SEK 840,273. | |||
Pension | Offer long term financial security and planning for retirement by way of providing competitive retirement arrangements in line with local market practices. | The pension plans follow competitive practice in the individuals home country.
Pension plans for the President and CEO and the Executive Vice Presidents are defined contribution plans. |
Company pension contribution:
President and CEO: SEK 9,113,376
EVP Head of Business Area Networks: SEK 3,457,409,
EVP Head of Market Area Europe and Latin America: SEK 516,344. | |||
Short term variable compensation (STV) | Set clear and relevant targets for the Executive Team that are aligned with Ericssons strategy and sustainable long-term interests.
Provide individuals an earning opportunity for performance at flexible cost to the Company. |
The President and CEO is not entitled to any STV.
Target opportunity is at 30% of fixed salary and maximum is 60% of fixed salary for the Executive Vice Presidents.
Performance measures, weightings and target levels are set annually.
Subject to malus and clawback. |
Outcome of STV 2020:
EVP Head of Business Area Networks: 100% of the maximum opportunity
EVP Head of Market Area Europe and Latin America: 81,2% of the maximum opportunity. | |||
Long term variable compensation (LTV) | Align the long-term interests of the members of the Executive Team with those of shareholders.
Rewards consistent with long-term performance in line with Ericssons business strategy.
Provide individuals with long-term compensation for long-term commitment and value creation in alignment with shareholder interests. |
Awards granted after AGM approval.
Award levels are determined as percentage of fixed salary:
For the President and CEO 180% of fixed salary.
For the Executive Vice Presidents 50% of fixed salary.
Performance measures, weightings and targets levels are presented to the AGM for approval. Three-year vesting period.
Subject to malus and clawback. |
Achieved vesting of LTV 2018 at 200% of target. |
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Remuneration earned in 2020
Performance outcome in 2020
To support the execution of Ericssons business strategy and achievement of the financial targets of the Group, the Companys variable compensation programs focus on targets relating to economic profit, Group operating income and TSR. The variable remuneration is thereby designed to create incentives for the contribution to Ericssons short- and long-term strategic plan and business objectives.
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Total remuneration to the President
and CEO and Executive Vice Presidents
The table below sets out total remuneration to the President and CEO and the Executive Vice Presidents of Ericsson during 2019 and 2020.
Total remuneration to the President and CEO and Executive Vice Presidents
Fixed remuneration | Variable remuneration | |||||||||||||||||||||||||||||||||||||||
Name and position |
Financial year |
Fixed salary (incl. vacation pay) |
Other benefits1) |
One-year variable2) |
Multi-year variable3) |
Additional arrangements4) |
Pension5) | Total remuneration6) |
Proportion of fixed remuneration7) |
Proportion of variable remuneration8) |
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Börje Ekholm |
2020 | 17,727,726 | 770,276 | | 78,475,833 | | 9,113,376 | 106,087,211 | 26 | % | 74 | % | ||||||||||||||||||||||||||||
President and CEO |
2019 | 16,299,080 | 600,572 | | 72,397,175 | | 8,284,891 | 97,581,719 | 26 | % | 74 | % | ||||||||||||||||||||||||||||
Fredrik Jejdling |
2020 | 7,925,971 | 22,110 | 4,415,425 | 9,025,678 | | 3,457,409 | 24,846,592 | 46 | % | 54 | % | ||||||||||||||||||||||||||||
Executive Vice President and Head of Business Area Networks |
2019 | 6,933,652 | 142,305 | 3,085,500 | 3,724,945 | | 3,282,635 | 17,169,037 | 60 | % | 40 | % | ||||||||||||||||||||||||||||
Arun Bansal Executive |
2020 | 8,673,843 | 840,273 | 2,253,084 | 9,844,590 | | 516,344 | 22,128,134 | 45 | % | 55 | % | ||||||||||||||||||||||||||||
Vice President and Head of Market Area Europe & Latin America 9,10) |
2019 | 10) | | | | | | | | | |
1) | For further information about other benefits, see table regarding the Implementation of fixed remuneration and pension to the President and CEO and the Executive Vice Presidents. |
2) | Amounts represent STV that was earned during the financial year that is paid the following year, i.e. for 2020 amounts represent STV 2020 and for 2019 amount represents STV 2019. |
3) | Amounts represent the LTV for which all performance periods lapsed during the financial year and the EPSP share matching that took place during the financial year. For 2020 amounts represent LTV 2018 and for 2019 amounts represent LTV 2017. Amounts are calculated based on the numbers of Performance Share Awards that will vest at the end of the vesting period multiplied by the volume weighted average of the five last trading days of each financial year. The 2016 EPSP was settled and closed with the final delivery of the remaining performance matching shares to the participants on August 17, 2020. The 2016 EPSP performance period ended December 31, 2018, and since 2016 no EPSP has been introduced for members of the ET. The details of the EPSP are explained in the notes to the consolidated financial statements note G3 share-based compensation, page 71 in the Financial report. |
4) | Amounts represent discretionary additional arrangements approved by the Remuneration Committee or the Board of Directors that was made during the financial year |
5) | Amounts represent cash in lieu of pension (for the President and CEO) or pension contributions (for the Executive Vice Presidents) paid during the financial year. |
6) | Amounts represent the sum of Fixed remuneration, Variable remuneration, Additional arrangements and Pension. |
7) | Amounts represent the sum of Fixed remuneration and Pension divided by Total remuneration. |
8) | Amounts represent the sum of Variable remuneration and Additional arrangements divided by Total remuneration. |
9) | Any remuneration in foreign currency has been translated to SEK at average exchange rates for the year. |
10) | Arun Bansal was appointed Executive Vice President in June 2020. Fixed salary, Other benefits, One-year variable, Additional arrangements and Pension are calculated on a pro-rata basis for the time period June 1 December 31, 2020. With regards to Multi-year variable, it constitutes LTV 2018 and EPSP share matching for the time period June 1 December 31, 2020. |
Implementation of fixed remuneration and pension to the President and CEO and the Executive Vice Presidents
The table below sets out the implementation of fixed remuneration and pension to the President and CEO and the Executive Vice Presidents.
Fixed Salary | Other Benefits | Pension | ||||
Börje Ekholm President and CEO | When Börje Ekholm was appointed President and CEO, he had a fixed salary at par with the previous incumbent, which reflects Ericssons relative size and importance in Sweden. The Company has made a major turnaround since 2017 implementing the focused strategy under Börje Ekholms leadership, coupled with a shift in the Companys culture. The new research and development (R&D) strategy delivers significant progress and the Companys technology and pipeline have been strengthened by targeted business development. As a result, Ericsson delivers strong financial and operating performance despite fines related to the settlement with the US Department of Justice (DoJ) and Securities and Exchange Commission (SEC) investigation during 2019. To reflect the performance of the President and CEO up until the end of 2019, he was awarded a salary increase of 10% from January 1, 2020. The fixed salary level of 2020 is deemed appropriate in relation to the responsibility of being the President and CEO of a leading global ICT solutions provider compared to the compensation packages of President and CEOs of similar international companies. | In accordance with the Companys Swedish benefits policy, Börje Ekholm is entitled to a company car or a cash allowance and other ordinary benefits as other employees in Sweden. Due to Börje Ekholm being resident in the USA he is also entitled to a US medical insurance as well as tax advisory services with regards to his income statement. | Börje Ekholm receives a cash payment in lieu of a defined contribution pension, because it is not possible to enroll him in the Swedish defined contribution pension plan (ITP1) due to his residency in the USA. The cash payment is treated as salary for the purposes of tax and social security and is made in a way which is cost neutral for Ericsson. Because Börje Ekholms remuneration package does not include an STV component, and because incentive payments in cash are included as part of the pensionable income under Swedish rules, it was agreed in his employment contract that his pension contribution would include an additional premium over annual fixed salary to take into account an assumed STV on-target opportunity. | |||
Fredrik Jejdling Executive Vice President and Head of Business Area Networks | The salary level reflects Fredrik Jejdlings responsibility as head of Ericssons largest segment Networks. The salary level is deemed competitive with regards to the external market of both other Executive Vice Presidents of leading global ICT solutions providers as well as smaller sized companies President and CEOs. Except from the fixed salary increase on January 1, 2020, Fredrik also received an extra salary increase of 14,4% for exceptional performance effective from August 1, 2020, which is reflected above. | In accordance with the Companys Swedish benefits policy, Fredrik Jejdling is entitled to a company car or a cash allowance and other ordinary benefits as other employees in Sweden. | In accordance with Ericssons pension guidelines, Fredrik Jejdling participates in the defined contribution plan ITP1. He is not entitled to any other retirement benefit outside of the rules and regulations in the ITP. | |||
Arun Bansal Executive Vice President and Head of Market Area Europe & Latin America | The fixed salary reflects Arun Bansals responsibility as head of two major geographies, both Europe and Latin America. His salary level is deemed competitive to reflect his responsibility. Arun Bansal is currently on LTA in the United Kingdom from his original employment in India. In accordance with best practice for international assignments, his compensation is set with a home base approach. | As Arun Bansal is on LTA, he is entitled to benefits in line with Ericssons international mobility policy such as housing allowance, transportation allowance, home travel, tax and social security equalization assistance and medical insurance. | In accordance with Ericssons pension guidelines and according to his employment contract, Arun Bansal is eligible for Ericssons LTA pension plan, International Pension Plan (IPP) and annual pension contribution is paid into Interben Trustees Limited in 2020. |
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Variable remuneration
The tables below set out the outcome of STV 2020 for each Executive Vice President, determined by reference to performance against applicable financial measures.
Executive Vice President and Head of Business Area Networks Fredrik Jejdling (STV 2020)
Threshold performance level (as % of Target) |
Target performance level |
Maximum performance level (as % of target) |
Actual Performance (as % of target) |
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Measure |
Weighting | SEK outcome at threshold performance |
SEK outcome at target performance |
SEK outcome at maximum performance |
SEK outcome at actual performance |
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Group Economic Profit 1) |
40 | % | 61 | % | 100 | % | 139 | % | 157 | % | ||||||||||
SEK | 0 | SEK | 883,085 | SEK | 1,766,170 | SEK | 1,766,170 | |||||||||||||
Business Area Networks |
60 | % | 84 | % | 100 | % | 125 | % | 152 | % | ||||||||||
Economic Profit1) |
SEK | 0 | SEK | 1,324,627 | SEK | 2,649,255 | SEK | 2,649,255 | ||||||||||||
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Total |
100 | % | SEK | 0 | SEK | 2,207,712 | SEK | 4,415,425 | SEK | 4,415,425 | ||||||||||
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1) | Economic Profit means operating profit less cost of capital. |
Executive Vice President and Head of Market Area Europe and Latin America Arun Bansal (STV 2020)1)
Threshold performance level (as % of Target) |
Target performance level |
Maximum performance level (as % of target) |
Actual Performance (as % of target) |
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Measure |
Weighting | SEK outcome at threshold performance1) |
SEK outcome at target performance1) |
SEK outcome at maximum performance1) |
SEK outcome at actual performance1) |
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Group Economic Profit 2) |
40 | % | 61 | % | 100 | % | 139 | % | 157 | % | ||||||||||
SEK | 0 | SEK | 554,954 | SEK | 1,109,907 | SEK | 1,109,907 | |||||||||||||
Market Area Europe and Latin America Economic Profit 2) |
60 | % | 71 | % | 100 | % | 129 | % | 111 | % | ||||||||||
SEK | 0 | SEK | 832,431 | SEK | 1,664,861 | SEK | 1,143,176 | |||||||||||||
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Total |
100 | % | SEK | 0 | SEK | 1,387,384 | SEK | 2,774,769 | SEK | 2,253,084 | ||||||||||
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1) | Arun Bansal was appointed Executive Vice President in June 2020. SEK outcome at threshold performance, SEK outcome at target performance, SEK outcome at maximum performance and SEK outcome at actual performance, respectively, are calculated on a pro-rata basis for the time period June 1 December 31, 2020. |
2) | Economic Profit means operating profit less cost of capital. |
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Grant information Long-Term Variable compensation program 2020 (LTV 2020)
Participant |
Grant value1) | Grant value as percentage of annual base salary2) |
Number of Performance Share Awards granted3) |
Percentage of grant subject to performance condition4) |
Maximum number of possible performance awards vesting5) |
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Börje Ekholm |
30,377,932 | 180 | % | 389,660 | 100 | % | 779,320 | |||||||||||||
Fredrik Jejdling |
3,471,188 | 50 | % | 44,525 | 100 | % | 89,050 | |||||||||||||
Arun Bansal6) |
4,272,052 | 50 | % | 54,797 | 100 | % | 109,594 |
1) | Amounts represent base entitlement amount in SEK. |
2) | Numbers represent base entitlement amount as percentage of the annual base salary at grant date. |
3) | Calculated as the respective grant value divided by the volume weighted average of the market price of Ericsson B shares on Nasdaq Stockholm during the five trading days immediately following the publication of the Companys interim report for the fourth quarter 2019. |
4) | All Performance Share Awards are subject to challenging performance criteria that are measured over pre-determined performance periods, ranging from one to three years. Performance criteria for LTV 2020 are: (i) Group operating income target (weight 50%) that is measured over the period January 1, 2020 to December 31, 2020; (ii) Absolute TSR development (weight 30%) ranging from 614% compounded annual growth rate; (iii) Relative TSR development (weight 20%) for the Ericsson B share, ranking 62 against 11 peer companies, measured over the period January 1, 2020 to December 31, 2022. The performance criteria for LTV 2020 along with the details on how the performance criteria will be calculated and measured are explained in minutes from the AGM 2020 under Item 17. |
5) | The maximum number of shares that could vest will result in a dilution of less than 0.1% of the total number of outstanding shares. The effect on important key figures is only marginal. |
6) | The grant of LTV 2020 took place April 1, 2020, i.e. prior to Arun Bansal being appointed Executive Vice President in June 2020. The numbers presented represent his total grant under LTV 2020, since the program is ongoing. |
8
|
Remuneration report 2020
|
Ericsson Annual Report on Form 20-F 2020
|
Performance outcome under LTV 2018 and Group operating income target for LTV 2020
LTV 2018 and LTV 2020 had targets with performance periods ending December 31, 2020, which are summarized in the tables below. LTV 2018 will vest during 2021 since all performance periods under the program have now ended. LTV 2020 will not vest until 2023, but the performance period for the one-year Group operating income target of LTV 2020 ended on December 31, 2020.
LTV 2020 performance criteria
Program |
Target |
Criteria |
Weight | Performance Period |
Vesting opportunity (linear pro rata) |
Achievement | Achieved vesting level1) |
|||||||||||||||
LTV 2020 |
2020 Group Operating Income |
Range (SEK billion) 19.127.9 |
50 | % |
Jan 1, 2020 - Dec 31, 2020 |
0200 | % | SEK 29.1 billion2) | 200.00 | % | ||||||||||||
LTV 2020 |
Absolute TSR |
Range 614% |
30 | % |
Jan 1, 2022 - Dec 31, 2022 |
0200 | % | | | |||||||||||||
LTV 2020 |
Relative TSR |
Ranking of Ericsson 62 |
20 | % | Jan 1, 2022 - Dec 31, 2022 |
0200 | % | | | |||||||||||||
|
|
|
|
|||||||||||||||||||
Total |
100 | % | 0200 | % | ||||||||||||||||||
|
|
|
|
1) | The Board of Directors resolved on the achieved vesting level for the 2020 Group operating income performance criteria as 200% for this portion of the Performance Share Awards granted based on a 2020 Group operating income outcome. For further information regarding the number or Performance Share Awards earned for each of the President and CEO and the Executive Vice Presidents, see table Long-Term Variable compensation (LTV) to the President and CEO and the Executive Vice Presidents. Vesting of the Performance Share Awards will occur at the end of the vesting period in 2023. |
2) | Excludes restructuring charges. |
LTV 2018 performance criteria
Program |
Target1) |
Criteria |
Weight | Performance Period |
Vesting opportunity (linear pro rata) |
Achievement | Achieved vesting level2) |
|||||||||||||||
LTV 2018 |
2018 Group Operating Income |
Range (SEK billion) 4.69.6 |
50 | % |
Jan 1, 2018 - Dec 31, 2018 |
0200 | % | SEK 11.5 billion | 200.00 | %1) | ||||||||||||
LTV 2018 |
Absolute TSR |
Range 6%14% |
30 | % | Jan 1, 2018 - Dec 31, 2020 |
0200 | % | 26.92% | 200.00 | %2) | ||||||||||||
LTV 2018 |
Relative TSR |
Ranking of Ericsson 72 |
20 | % | Jan 1, 2018 - Dec 31, 2020 |
0200 | % | 1.94 out of 12 | 200.00 | %2) | ||||||||||||
|
|
|
|
|
|
|||||||||||||||||
Total |
100 | % | 0200 | % | 200.00 | % | ||||||||||||||||
|
|
|
|
|
|
1) | As communicated in the Annual Report 2018, the Board of Directors resolved on the achieved vesting level for the 2018 Group operating income performance criteria as 200% for this portion of the Performance Share Awards granted based on a 2018 Group operating income outcome excluding restructuring charges and the provisions taken in Q4 2018 related to the revised BSS strategy. |
2) | The Board of Directors resolved on the achieved vesting levels for the absolute TSR and relative TSR development performance criteria as 200% and 200% respectively based on the achievement results of 26.92% absolute TSR and 1.94 ranking for relative TSR, which resulted in an overall achieved vesting level of 200% for LTV 2018. Vesting of Performance Share Awards will occur at the end of the vesting period in 2021. For further information regarding the number or Performance Share Awards earned for each of the President and CEO and the Executive Vice Presidents, see table Long-Term Variable compensation (LTV) to the President and CEO and the Executive Vice Presidents. |
9
|
Remuneration report 2020
|
Ericsson Annual Report on Form 20-F 2020
|
Long term variable compensation (LTV) to the President and CEO and the Executive Vice Presidents
The table below sets out relevant information of LTV 2017, 2018, 2019 and 2020 with regards to the President and CEO and the Executive Vice Presidents.
Long-Term Variable compensation (LTV) to the President and CEO and the Executive Vice Presidents
Main conditions of share award plans |
Information regarding reported financial year | |||||||||||||||||||||||||||||||||||||||||||||||||||
Name and position |
Program | Target (weight)1) |
Grant date2) | Performance period3) |
Performance period end date4) |
Vesting Date5) |
Performance share awards granted (value in SEK)6) |
Maximum number of possible performance awards vesting (value in SEK)7) |
Opening balance (value in SEK)8) |
Performance Share Awards earned during the year (value in SEK)9) |
Performance Share Awards still subject to performance condition (value in SEK)10) |
Performance Share Awards vested during the year (value in SEK)11) |
Year-end balance, earned performance share awards unvested (value in SEK)12) |
|||||||||||||||||||||||||||||||||||||||
Börje Ekholm President and CEO |
LTV 2020 | |
Group Operating Income |
|
2020-04-01 | 1 year | 2020-12-31 | 2023-04-01 | |
194 830 (15,188,966 |
) |
|
389,660 (30,377,932 |
) |
|
389,660 (38,245,129 |
) |
|
389,660 (38,245,129 |
) | ||||||||||||||||||||||||||||||||
|
TSR performance criteria |
|
2020-04-01 | 3 years | 2022-12-31 | 2023-04-01 | |
194,830 (15,188,966 |
) |
|
389,660 (30,377,932 |
) |
|
389,660 (38,245,129 |
) |
|||||||||||||||||||||||||||||||||||||
LTV 2019 | |
Group Operating Income |
|
2019-05-18 | 1 year | 2019-12-31 | 2022-05-18 | |
146,087 (13,808,151 |
) |
|
291,174 (27,616,302 |
) |
|
291,174 (24,192,007 |
) |
|
291,174 (28,676,878 |
) | |||||||||||||||||||||||||||||||||
|
TSR performance criteria |
|
2019-05-18 | 3 years | 2021-12-31 | 2022-05-18 | |
146,087 (13,808,151 |
) |
|
291,174 (27,616,302 |
) |
|
291,174 28,676,878 |
) |
|||||||||||||||||||||||||||||||||||||
LTV 2018 | |
Group Operating Income |
|
2018-05-18 | 1 year | 2018-12-31 | 2021-05-18 | |
199,888 (13,150,620 |
|
|
399,776 (26,301,240 |
) |
|
399,776 (33,101,453 |
) |
|
399,776 (39,238,014 |
) | |||||||||||||||||||||||||||||||||
|
TSR performance criteria |
|
2018-05-18 | 3 years | 2020-12-31 | 2021-05-18 | |
199,887 (13,150,620 |
) |
|
399,774 (26,301,240 |
) |
|
399,774 (39,237,818 |
) |
|
399,774 (39,237,818 |
) | ||||||||||||||||||||||||||||||||||
LTV 2017 | |
TSR performance criteria |
|
2017-05-18 | 3 years | 2019-12-31 | 2020-05-18 | |
447,244 (25,560,000 |
) |
|
894 488 (51,120,000 |
) |
|
874,362 (72,397,175 |
) |
|
874,362 (72,507,054 |
) |
|||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||
1,528,853 | 3,057,706 | 1,566,312 | 789,434 | 681,834 | 874,362 | 1,481,384 | ||||||||||||||||||||||||||||||||||||||||||||||
Total | (109,855,474 | ) | (219,710,948 | ) | (129,690,635 | ) | (77,482,947 | ) | (66,922,007 | ) | (72,507,054 | ) | (145,397,840 | ) | ||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Main conditions of share award plans |
Information regarding reported financial year | |||||||||||||||||||||||||||||||||||||||||||||||||
Name and position |
Program |
Target (weight)1) |
Grant date2) | Performance period3) |
Performance period end date4) |
Vesting Date5) |
Performance share awards granted (value in SEK)6) |
Maximum number of possible performance awards vesting (value in SEK)7) |
Opening balance (value in SEK)8) |
Performance Share Awards earned during the year (value in SEK)9) |
Performance Share Awards still subject to performance condition (value in SEK)10) |
Performance Share Awards vested during the year (value in SEK)11) |
Year-end balance, earned performance share awards unvested (value in SEK)12) |
|||||||||||||||||||||||||||||||||||||
Fredrik Jejdling Executive Vice President and Head of Business Area Networks |
LTV 2020 | |
Group Operating Income |
|
2020-04-01 | 1 year | 2020-12-31 | 2023-04-01 | |
22,262 (1,735,594 |
) |
|
44,524 (3,471,188 |
) |
|
44,524 (4,370,031 |
) |
|
44,524 (4,370,031 |
) | ||||||||||||||||||||||||||||||
|
TSR performance criteria |
|
2020-04-01 | 3 years | 2022-12-31 | 2023-04-01 | |
22,263 (1,735,594 |
|
|
44,526 (3,471,188 |
) |
|
44,526 (4,370,227 |
) |
|||||||||||||||||||||||||||||||||||
LTV 2019 | |
Group Operating Income |
|
2019-05-18 | 1 year | 2019-12-31 | 2022-05-18 | |
16,321 (1,542,750 |
) |
|
32,642 (3,085,500 |
) |
|
32,642 (2,702,758 |
) |
|
32,642 (3,203,812 |
) | |||||||||||||||||||||||||||||||
|
TSR performance criteria |
|
2019-05-18 | 3 years | 2021-12-31 | 2022-05-18 | |
16,322 (1,542,750 |
) |
|
32,644 (3,085,500 |
) |
|
32,644 (3,204,009 |
) |
|||||||||||||||||||||||||||||||||||
LTV 2018 | |
Group Operating Income |
|
2018-05-18 | 1 year | 2018-12-31 | 2021-05-18 | |
22,991 (1,512,500 |
) |
|
45,982 (3,025,000 |
) |
|
45,982 (3,807,310 |
) |
|
45,982 (4,513,133 |
) | |||||||||||||||||||||||||||||||
|
TSR performance criteria |
|
2018-05-18 | 3 years | 2020-12-31 | 2021-05-18 | |
22,988 (1,512,500 |
) |
|
45,976 (3,025,000 |
) |
|
45 976 (4,512,544 |
) |
|
45 976 (4,512,544 |
) | ||||||||||||||||||||||||||||||||
LTV 2017 | |
TSR performance criteria |
|
2017-05-18 | 3 years | 2019-12-31 | 2020-05-18 | |
21,653 (1,237,500 |
) |
|
43,302 (2,475,000 |
) |
|
42,332 (3,505,058 |
) |
|
42,332 (3,510,409 |
) |
|||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||
144,800 | 289,600 | 120,956 | 90,500 | 77,170 | 42,322 | 169,124 | ||||||||||||||||||||||||||||||||||||||||||||
Total | (10,189,188 | ) | (21,638,376 | ) | (10,015,125 | ) | (8,882,575 | ) | (7,574,236 | ) | (3,510,409 | ) | (16,599,521 | ) | ||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1) | The TSR performance criteria includes both the absolute and the relative performance criteria for each respective program. |
2) | Grant date represents the date at which the initial grant was made. |
3) | Performance period represents the period over which the performance criteria will be measured. |
4) | Performance period end date represents the date when the performance period ends. |
5) | Vesting date represents the date of which the Performance Share Awards, if any, will vest and entitle the participants to receive shares free of charge. |
6) | Numbers represent the number of initial Performance Share Awards that were granted at the grant date. SEK values represent the equivalent value at the grant date. |
7) | Numbers represent the maximum number of Performance Share Awards that could be earned for each performance criteria. |
8) | Numbers represent the balance at the beginning of the year, which includes earned Performance Share Awards for previous year(s) that are yet to vest. SEK values are calculated as the number of earned Performance Share Awards multiplied by the volume weighted average share price of the five last trading days for the previous financial year. |
9) | Numbers represent the number of Performance Share Awards earned that had a performance period ending during the financial year. SEK values are calculated as the number of earned Performance Share Awards multiplied by the volume weighted average share price of the five last trading days for the financial year. |
10) | Numbers represent the maximum number of outstanding Performance Share Awards that are still subject to an ongoing performance period. |
11) | Numbers represent the number of Performance Share Awards that had a vesting period ending during the financial year and which entitled the participant to receive shares free of charge. SEK values represent the actual value of shares given to the participant at the vesting date. |
12) | Numbers represent the balance at the end of the year, which includes earned Performance Share Awards for the financial year and previously earned Performance Share Awards that are yet to vest. SEK values are calculated as the number of earned Performance Share Awards multiplied by the volume weighted average share price of the five last trading days for the financial year. |
10
|
Remuneration report 2020
|
Ericsson Annual Report on Form 20-F 2020
|
Long term variable compensation (LTV) to the President and CEO and the Executive Vice Presidents, contd.
Main conditions of share award plans |
Information regarding reported financial year | |||||||||||||||||||||||||||||||||||||||||||||||||||
Name and position |
Program | Target (weight)1) |
Grant date2) | Performance period3) |
Performance period end date4) |
Vesting Date5) |
Performance share awards granted (value in SEK)6) |
Maximum number of possible performance awards vesting (value in SEK)7) |
Opening balance (value in SEK)8) |
Performance Share Awards earned during the year (value in SEK)9) |
Performance Share Awards still subject to performance condition (value in SEK)10) |
Performance Share Awards vested during the year (value in SEK)11) |
Year-end balance, earned performance share awards unvested (value in SEK)12) |
|||||||||||||||||||||||||||||||||||||||
Arun Bansal Executive Vice President and Head of Market Area Europe & Latin America13) |
LTV 2020 | |
Group Operating Income |
|
2020-04-01 | 1 year | 2020-12-31 | 2023-04-01 | |
27,399 (2,136,026 |
) |
|
54,798 (4,272,052 |
) |
|
54,798 (5,378,424 |
) |
|
54,798 (5,378,424 |
) | ||||||||||||||||||||||||||||||||
|
TSR performance criteria |
|
2020-04-01 | 3 years | 2022-12-31 | 2023-04-01 | |
27,398 (2,136,026 |
) |
|
54,796 (4,272,052 |
) |
|
54,796 (5,378,227 |
) |
|||||||||||||||||||||||||||||||||||||
LTV 2019 | |
Group Operating Income |
|
2019-05-18 | 1 year | 2019-12-31 | 2022-05-18 | |
18,909 (1,787,323 |
) |
|
37,818 (3,574,646 |
) |
|
37,818 (3,131,330 |
) |
|
37,818 (3,711,837 |
) | |||||||||||||||||||||||||||||||||
|
TSR performance criteria |
|
2019-05-18 | 3 years | 2021-12-31 | 2022-05-18 | |
18,909 (1,787,323 |
) |
|
37,818 (3,574,646 |
) |
|
37,818 (3,711,837 |
) |
|||||||||||||||||||||||||||||||||||||
LTV 2018 | |
Group Operating Income |
|
2018-05-18 | 1 year | 2018-12-31 | 2021-05-18 | |
24,745 (1,627,930 |
) |
|
49,490 (3,255,860 |
) |
|
49,490 (4,097,772 |
) |
|
49,490 (4,857,444 |
) | |||||||||||||||||||||||||||||||||
|
TSR performance criteria |
|
2018-05-18 | 3 years | 2020-12-31 | 2021-05-18 | |
24,743 (1,627,930 |
) |
|
49,486 (3,255,860 |
) |
|
49 486 (4,857,051 |
) |
|
49 486 (4,857,051 |
) | ||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||||
142,103 | 284,206 | 87,308 | 104,284 | 92,614 | 191,592 | |||||||||||||||||||||||||||||||||||||||||||||||
Total | (11,102,558 | ) | (22,205,116 | ) | (7,229,102 | ) | (10,235,475 | ) | (9,090,064 | ) | (18,804,755 | ) | ||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
1) | The TSR performance criteria includes both the absolute and the relative performance criteria for each respective program. |
2) | Grant date represents the date at which the initial grant was made. |
3) | Performance period represents the period over which the performance criteria will be measured. |
4) | Performance period end date represents the date when the performance period ends. |
5) | Vesting date represents the date of which the Performance Share Awards, if any, will vest and entitle the participants to receive shares free of charge. |
6) | Numbers represent the number of initial Performance Share Awards that were granted at the grant date. SEK values represent the equivalent value at the grant date. |
7) | Numbers represent the maximum number of Performance Share Awards that could be earned for each performance criteria. |
8) | Numbers represent the balance at the beginning of the year, which includes earned Performance Share Awards for previous year(s) that are yet to vest. SEK values are calculated as the number of earned Performance Share Awards multiplied by the volume weighted average share price of the five last trading days for the previous financial year. |
9) | Numbers represent the number of Performance Share Awards earned that had a performance period ending during the financial year. SEK values are calculated as the number of earned Performance Share Awards multiplied by the volume weighted average share price of the five last trading days for the financial year. |
10) | Numbers represent the maximum number of outstanding Performance Share Awards that are still subject to an ongoing performance period. |
11) | Numbers represent the number of Performance Share Awards that had a vesting period ending during the financial year and which entitled the participant to receive shares free of charge. SEK values represent the actual value of shares given to the participant at the vesting date. |
12) | Numbers represent the balance at the end of the year, which includes earned Performance Share Awards for the financial year and previously earned Performance Share Awards that are yet to vest. SEK values are calculated as the number of earned Performance Share Awards multiplied by the volume weighted average share price of the five last trading days for the financial year. |
13) | Information disclosed for Arun Bansal covers ongoing LTV programs with vesting dates occurring after the date of his appointment as Executive Vice President in June 2020, i.e. LTV 2018, LTV 2019 and LTV 2020. |
11
|
Remuneration report 2020
|
Ericsson Annual Report on Form 20-F 2020
|
Comparative information on the change
of remuneration and Company performance
Comparative table on the change of remuneration and company performance over the last two reported financial years
2020 (% change) | 2019 | |||||||||||||||||
Remuneration for the President and CEO and Executive Vice Presidents |
Fixed remuneration1) |
Variable remuneration2) |
Fixed remuneration1) |
Variable remuneration2) |
Comments | |||||||||||||
President and CEO Börje Ekholm |
18,498,002 (13% | ) | 72,507,054 | 16,299,080 | 0 | LTV 2017 vested and shares were transferred in May 2020 | ||||||||||||
Executive Vice President Fredrik Jejdling |
7,948,081 (15% | ) | 6,595,909 (103% | ) | 6,933,652 | 3,244,887 | LTV 2017 vested and shares were transferred in May 2020 | |||||||||||
Executive Vice President Arun Bansal3) |
9,514,116 | 130,096 | | | Only remuneration received after his appointment as EVP in June 2020 are included | |||||||||||||
Ericsson performance |
||||||||||||||||||
Group Operating Income |
27,808 (163% | ) | 10,564 | |||||||||||||||
Group Net Sales |
232,390 (2,28% | ) | 227,216 | |||||||||||||||
Share price as per December 31 of the financial year |
97,64 (19,72% | ) | 81,56 | |||||||||||||||
Average remuneration to employees on a full-time equivalent basis |
||||||||||||||||||
Employees of the Company4) |
790,295 (23% | ) | 299,589 (25% | ) | 1,030,185 | 238,913 | Annual salary review for the employees of the company was postponed as a result of the union negotiations. The number of employees increased from 322 to 343, approximately 65% of employees in the parent company does not have variable remuneration |
1) | Fixed remuneration includes fixed salary and other benefits. |
2) | Variable remuneration for the President and CEO and the Executive Vice Presidents include STV and LTV, as applicable. For the employees of the Company, the variable remuneration includes short- and long-term variable compensation. For comparability reasons, the variable remuneration represents numbers vested during the financial year, since performance evaluations and long-term variable compensation programs for other employees that have performance periods ending during the financial year 2020 are yet to be finalized. |
3) | Arun Bansal was appointed Executive Vice President in June, 2020. Information disclosed covers the time period June 1 December 31, 2020. |
4) | Employees of Telefonaktiebolaget LM Ericsson, excluding the President and CEO and the other members of the Executive Team employed within the Company. |
Board of Directors
Stockholm, March 3, 2021
Telefonaktiebolaget LM Ericsson (publ)
Org. no. 556016-0680
Ericsson Annual Report on Form 20-F 2020
|
Signatures
The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this Annual Report on its behalf.
TELEFONAKTIEBOLAGET LM ERICSSON
March 25, 2021
By: | /s/ Jonas Stringberg | |
Jonas Stringberg | ||
Vice President, Head of Financial Control and Business Services | ||
By: | /s/ Xavier Dedullen | |
Xavier Dedullen | ||
Senior Vice President, Chief Legal Officer |
Exhibit 15.2
We consent to the incorporation by reference in the Registration Statements on Form F-3 (No. 333-223954) and Form S-8 (Nos. 333-81524, 333-100472, 333-107160, 333-122785, 333-125978, 333-135116, 333-151490, 333-161683, 333-161684, 333-167643 and 333-196453) of our reports dated March 25, 2021, relating to the financial statements of Telefonaktiebolaget LM Ericsson (the Company), and the effectiveness of the Companys internal control over financial reporting appearing in this Annual Report on Form 20-F for the year ended 31 December 2020.
/s/ Deloitte AB |
Stockholm, Sweden |
March 25, 2021 |
Exhibit 15.3
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (Nos. 333-81524, 333-100472, 333-107160, 333-122785, 333-125978, 333-135116, 333-151490, 333-161683, 333-161684, 333-167643 and 333-196453) and on Form F-3 (No. 333-223954) of Telefonaktiebolaget LM Ericsson of our report dated March 19, 2020, relating to the financial statements, which appears in the Annual Report on Form 20-F.
/s/ PricewaterhouseCoopers AB |
Stockholm, Sweden |
March 25, 2021 |
Exhibit 16.1
March 25, 2021
Securities and Exchange
Commission 100 F Street, N.E.
Washington, DC 20549
Commissioners:
We have read the statements made by Telefonaktiebolaget LM Ericsson (copy attached), which we understand will be filed with the Securities and Exchange Commission, pursuant to Exhibit 16.1 of the 20-F of Telefonaktiebolaget LM Ericsson dated March 25, 2021. We agree with the statements concerning our Firm contained therein.
Very truly yours, |
/s/ PricewaterhouseCoopers AB |
Stockholm, Sweden |
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