20-F
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
x |
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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For the fiscal year ended December 31, 2015 |
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: 1-11130
(Exact name of Registrant as specified in its charter)
N/A
(Translation of Registrants
name into English)
Republic of France
(Jurisdiction of incorporation or organization)
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148/152 route de la Reine |
92100 Boulogne-Billancourt, France |
(Address of principal executive offices)
Marisa BALDO
Telephone Number 33 (1) 55 14 10 10
Facsimile Number 33 (1) 55 14 14 05
148/152 Route de la Reine
92100 Boulogne-Billancourt FRANCE
(Name, Telephone, E-mail and/or Facsimile Number and Address of Company Contact Person)
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class |
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Name of each exchange on which registered |
None |
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Securities registered or to be registered pursuant to Section 12(g) of the Act:
Ordinary Shares, nominal value
0.05 per share
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.
3,036,337,359 ordinary shares, nominal value 0.05 per share
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes x 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 x
Note checking the box above
will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those sections.
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 x
No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of accelerated filer and large accelerated filer in Rule
12b-2 of the Exchange Act. (Check one):
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Large accelerated filer x |
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Accelerated filer ¨ |
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Non-accelerated filer ¨ |
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
x 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:
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 x
Table of contents
Selected financial data |
1 |
1
Our consolidated financial statements have been prepared in accordance with International Financial
Reporting Standards (IFRS) as adopted by the European Union. IFRS, as adopted by the European Union, differs in certain respects from the International Financial Reporting Standards issued by the International Accounting Standards Board.
However, our consolidated financial statements presented in this document in accordance with IFRS would be no different if we had applied International Financial Reporting Standards issued by the International Accounting Standards Board. As
permitted by U.S. securities laws, we no longer provide a reconciliation of our net income and shareholders equity as reflected in our consolidated financial statements to U.S. GAAP.
On November 30, 2006, historical Alcatel and Lucent Technologies Inc. (Lucent)
completed a business combination pursuant to which Lucent became a wholly owned subsidiary of Alcatel and was renamed Alcatel-Lucent USA Inc.
As a result of the purchase accounting treatment of the Lucent business combination required by IFRS, our results for 2015, 2014, 2013, 2012 and 2011 included several negative, non-cash impacts of purchase accounting entries.
In 2015, we changed our accounting treatment for the recognition of certain deferred tax assets. In accordance with IAS 8
Accounting policies, changes in accounting estimates and errors, we have retroactively applied this accounting change and restated prior years (see Note 4 to our consolidated financial statements included elsewhere in this annual
report).
2
SELECTED FINANCIAL DATA
Condensed consolidated income statement and statement of financial position data
1.1 |
Condensed consolidated income statement and statement of financial position data |
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For the year ended December 31, |
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(In millions, except per share data) |
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2015 (1) |
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2015 |
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2014 (2) |
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2013 (2)(3) |
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2012 (2)(3) |
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2011 (2)(3) |
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Income Statement Data |
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Revenues |
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U.S.$15,501 |
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14,275 |
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13,178 |
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13,813 |
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13,764 |
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14,637 |
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Income (loss) from operating activities before restructuring costs, litigations, gain/(loss) on disposal of consolidated entities, transaction-related costs, impairment of assets and post-retirement benefit
plan amendments |
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1,090 |
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1,004 |
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572 |
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192 |
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(480) |
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241 |
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Restructuring costs |
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(435) |
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(401) |
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(574) |
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(518) |
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(479) |
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(202) |
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Impairment of assets |
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(210) |
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(193) |
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- |
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(548) |
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(894) |
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- |
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Income (loss) from operating activities |
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736 |
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678 |
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137 |
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(739) |
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(1,636) |
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108 |
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Income (loss) from continuing operations |
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272 |
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251 |
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(23) |
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(1,336) |
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(2,854) |
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298 |
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Net income (loss) |
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255 |
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235 |
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(72) |
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(1,361) |
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(2,215) |
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720 |
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Net income (loss) attributable to equity owners of the parent |
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224 |
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206 |
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(107) |
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(1,371) |
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(2,138) |
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671 |
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Earnings per ordinary share |
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Net income (loss) before discontinued operations attributable to the equity owners of the parent per share |
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· basic (4) |
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U.S.$0.09 |
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0.08 |
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(0.02) |
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(0.55) |
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(1.16) |
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0.11 |
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· diluted (5) |
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U.S.$0.09 |
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0.08 |
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(0.02) |
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(0.55) |
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(1.16) |
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0.10 |
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Dividend per ordinary share (6) |
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- |
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- |
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- |
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- |
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- |
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- |
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Dividend per ADS (6) |
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- |
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- |
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- |
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- |
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- |
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- |
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At December 31, |
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(In millions) |
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2015 (1) |
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2015 |
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2014 (2) |
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2013 (2)(3) |
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2012 (2)(3) |
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2011 (2)(3) |
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Statement of Financial Position Data |
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Total assets |
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U.S.$ |
25,826 |
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23,783 |
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22,005 |
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22,638 |
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22,011 |
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24,995 |
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Marketable securities and cash and cash equivalents |
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7,092 |
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6,531 |
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5,550 |
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6,355 |
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4,929 |
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4,472 |
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Bonds, notes issued and other debt - long-term portion |
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5,030 |
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4,632 |
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4,875 |
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4,922 |
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3,954 |
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4,290 |
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Current portion of long-term debt and short-term debt |
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629 |
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579 |
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402 |
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1,240 |
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851 |
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323 |
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Capital stock |
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165 |
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152 |
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141 |
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140 |
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4,653 |
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4,651 |
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Equity attributable to the equity owners of the parent after appropriation (7) |
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4,643 |
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4,276 |
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2,406 |
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3,675 |
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2,595 |
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4,643 |
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Non-controlling interests |
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982 |
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904 |
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833 |
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730 |
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745 |
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747 |
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(1) |
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Translated solely for convenience into dollars at the noon buying rate of 1.00 = U.S.$1.0859 on December 31, 2015. |
(2) |
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2014, 2013, 2012 and 2011 amounts are restated to reflect the impact of a change in accounting treatment (see Note 4). 2012 and 2011 are not audited. |
(3) |
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2013, 2012 and 2011 amounts are re-presented to reflect the impacts of discontinued operations (see Note 9 to the consolidated financial statements for the year ended December 31, 2014).
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(4) |
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Based on the weighted average number of shares issued after deduction of the weighted average number of shares owned by our
consolidated subsidiaries at December 31, without adjustment for any share equivalent: |
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ordinary shares: 2,808,608,666 in 2015, 2,767,026,349 in 2014, 2,431,168,718 in 2013, 2,396,818,408 in 2012 and 2,393,578,923 in 2011. |
(5) |
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Diluted earnings per share takes into account share equivalents having a dilutive effect after deduction of the weighted average number of share equivalents owned by our consolidated
subsidiaries. Net income is adjusted for after-tax interest expense related to our convertible bonds. The dilutive effect of stock option plans is calculated using the treasury stock method. The number of shares taken into account is as follows:
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ordinary shares: 2,852,673,640 in 2015, 2,767,026,349 in 2014, 2,431,168,718 in 2013, 2,396,818,408 in 2012 and 2,701,421,886 in 2011. |
(6) |
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Under French company law, payment of annual dividends must be made within nine months following the end of the fiscal year to which they relate. Our Board of Directors has announced that it will
propose not to pay a dividend for 2015 at our Annual Shareholders Meeting to be held in 2016. ADS: American Depositary Share. |
(7) |
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Amounts presented are net of dividends distributed. No dividend was proposed and distributed as of December 31, 2015, 2014, 2013, 2012 and 2011. |
3
SELECTED FINANCIAL DATA
Exchange rate information
1.2 |
Exchange rate information |
The table below shows the average noon buying rate of euro for each year from 2011 to 2015. As used
in this document, the term noon buying rate refers to the rate of exchange for the euro, expressed in U.S. dollars per euro, as certified by the Federal Reserve Bank of New York for customs purposes or, from 2014, the European Central
Bank fixing at 3:00 pm Paris time.
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Year |
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Average rate (1) |
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2015 |
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U.S.$ |
1.1095 |
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2014 |
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U.S.$ |
1.3211 |
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2013 |
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U.S.$ |
1.3303 |
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2012 |
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U.S.$ |
1.2909 |
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2011 |
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U.S.$ |
1.4002 |
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(1) |
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The average of the noon buying rate for euro on the last business day of each month during the year.
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The table below shows the high and low noon buying rates expressed in U.S. dollars per euro for the
previous six months.
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Period |
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High |
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Low |
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April 2016 |
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U.S.$ |
1.1432 |
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U.S.$ |
1.1252 |
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March 2016 |
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U.S.$ |
1.1385 |
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U.S.$ |
1.0856 |
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February 2016 |
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U.S.$ |
1.1347 |
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U.S.$ |
1.0884 |
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January 2016 |
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U.S.$ |
1.0920 |
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U.S.$ |
1.0742 |
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December 2015 |
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U.S.$ |
1.0990 |
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U.S.$ |
1.0600 |
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November 2015 |
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U.S.$ |
1.1032 |
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U.S.$ |
1.0579 |
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October 2015 |
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U.S.$ |
1.1439 |
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U.S.$ |
1.0930 |
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September 2015 |
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U.S.$ |
1.1419 |
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U.S.$ |
1.1138 |
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On April 25, 2016, the noon buying rate was
1.00 = U.S.$1.1264.
4
5
ACTIVITY OVERVIEW
Core Networking Segment
2.1 |
Core Networking Segment |
Our Core Networking segment includes three business divisions: IP
Routing, IP Transport and IP Platforms. In 2015, revenues in our Core Networking segment were 6,780 million, representing 47% of our total revenues. Within Core Networking,
IP Routing revenues were 2,669 million in 2015, representing 39% of segment revenues, IP Transport revenues were
2,450 million, representing 36% of segment revenues and IP Platforms revenues were 1,661 million,
representing 24% of segment revenues.
IP Routing
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Description |
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Activities |
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Market positions |
We are a world leader and privileged partner of service providers, cable/multi-system operators (MSOs), large enterprises and vertical markets including transportation,
energy, governments in transforming their networks to an all-IP (Internet Protocol) architecture. |
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We deliver IP routing, Carrier ethernet, Network Function Virtualization (NFV) and Software Defined Networking (SDN) applications and infrastructure required to meet the
challenges of sustaining massive network traffic growth while supporting the efficient delivery of cloud-enabled business, mobile and residential services. Our technology allows our customers to create a more efficient network infrastructure that
enables new services to enrich the end-user experience and create sustainable value. |
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· #2 in Global IP Services Edge Routing with 25% market share based on revenues in 2015 (1)
· #3 in total routing (global) with 20% market share based on revenues in 2015 (1)
· #4 in Global IP Services Core Routing with 7% market share based on revenues in 2015 (1) |
IP Transport
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Description |
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Activities |
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Market positions |
As a leader in optical networking, we help more than 1,000 service providers, cable/MSOs, large enterprises and vertical markets including transportation, energy,
governments and large enterprises to transform their optical transmission infrastructures, ensuring reliable transport of data at the lowest cost per bit and enabling new revenue generating services and applications. |
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We design, manufacture and market optical networking equipment to transport information over fiber optic connections over long distances on land (terrestrial) or under
sea (submarine), as well as for short distances in metropolitan and regional areas. The portfolio also includes related professional services and microwave wireless transmission equipment. |
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· #4 in optical networking with 11% market share based on revenues in 2015 (1) |
6
ACTIVITY OVERVIEW
Core Networking Segment
IP Platforms
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Description |
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Activities |
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Market positions |
Our IP Platforms portfolio provides software and service offerings that help service providers and large enterprises deliver, manage, charge for, and optimize voice and
data communications services. Our products and services help customers accelerate their innovation, monetize services and improve customer care. |
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We develop products and solutions focused on: communications, collaboration, Network Function Virtualization (NFV), customer experience, device management, policy,
charging, network intelligence, operations support systems, and related professional services. |
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· Proven capability with the #3 IMS/NGN portfolio based on revenues
(1).
· Strong field
experience with early NFV deployments acquired from 42 CloudBand proof of concepts and trials. |
Our Access segment includes four business divisions: Wireless, Fixed
Access, Licensing and Managed Services. In 2015, revenues in our Access segment were 7,482 million, representing 52% of our total revenues. Within Access, Wireless revenues
were 4,896 million in 2015, representing 65% of segment revenues, Fixed Access revenues were
2,268 million, representing 30% of segment revenues, Licensing revenues were 56 million,
representing 1% of segment revenues and Managed Services revenues were 262 million, representing 4% of segment revenues.
Wireless
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Description |
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Activities |
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Market positions |
We are one of the worlds leading suppliers of wireless communications infrastructure. Our focus is on delivering high capacity, next generation wireless access
solutions for our customers, enabling them to move faster to meet demand, deliver the highest quality of experience for the end user and be first to capture new market opportunities. |
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We are committed to a wireless access portfolio that is best suited to operators who are focused on constructing next generation wireless networks based on the most
advanced technologies. As such, our primary activities focus on delivering 4G/Long Term Evolution (LTE)/Long Term Evolution-Advanced (LTE-A) overlay solutions and 3G/4G/multi-standard small cell solutions along with related professional services. We
are developing industry leading portfolios in foundational 5G technologies such as Networks Function Virtualization (NFV), including vRAN, and Software Defined Networks (SDN) as well as working with operators considered to be leaders of 5G
principles. In addition, our wireless access portfolio includes 2G/3G wireless products and related professional services as well as our Radio Frequency Systems (RFS) portfolio. |
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· #4 in Total Wireless Radio Access Networks (RAN) with 12% market share based on revenues in
2015 (1)
· #3 in LTE with
15% market share based on revenues in 2015 (1)
· Small cell
industry leader with 87 customer contracts through the end of 2015 (2) |
(2) |
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Alcatel-Lucent estimate |
7
ACTIVITY OVERVIEW
Access Segment
Fixed access
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Description |
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Activities |
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Market positions |
We are a worldwide leader in the fixed broadband access market, supporting the largest deployments of video, voice and data services over broadband. We are the largest
global supplier of digital subscriber line (or DSL) technology, the second largest supplier of GPON technology and a leader in VDSL2 Vectoring (1). |
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Our family of IP-based fixed access products and related professional services provides support for both DSL and fiber, allowing service providers to extend
Ultra-Broadband access to the customers premise regardless of technology and to seamlessly combine copper and fiber access technologies and FTTx deployment models to achieve the fastest return-on-investment and time-to-market. |
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· #1 in broadband access with 41% DSL market share based on ports shipped in 2015 (1)
· #1 in very-high-bit-rate digital subscriber line (VDSL2) with 47% market share based on ports shipped in 2015.
(1)(2) · #3 in gigabit passive optical network (GPON) technology based on ports shipped with 17% market share in
2015 (1) |
(2) |
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Alcatel-Lucent estimate |
Licensing
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Description |
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Activities |
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Market positions |
We are one the largest patent owners in the telecommunications industry. While we have particular strengths in the wireless, optical, and data networking segments, our
patents cover a diverse range of technologies. |
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The Licensing business works to monetize our patent portfolio through licensing and patent sales while also maintaining and prosecuting patents. |
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· Over 34,000 active patents worldwide
· Over 2,600 newly
granted patents in 2015 · Over 13,000 pending patent applications |
Managed services
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Description |
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Activities |
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Market positions |
We are a leader in providing innovative managed services solutions in both the carrier and strategic industries markets. Our solutions help customers by delivering
accelerated time to market, continuous improvement in service quality and a sustainable lower total cost of operations. |
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Our managed services portfolio includes Build-Operate-Manage-Transfer (BOMT) Solutions, Operations Transformation Solutions, and Network Operations Services. These
services can be delivered across a wide array of network technologies including Network Access (FTTx), next generation wireless (LTE, Small Cells, 4G), and IP networks. |
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· Managed Services contracts in approximately 90
networks that cover over 100 million subscribers (1) |
(1) |
|
Alcatel-Lucent estimate |
8
9
RISK FACTORS
Risks relating to the business
Our business, financial condition or results of operations could suffer material adverse effects
due to any of the following risks. We have described the specific risks that we consider material to our business, including the additional risks that could potentially arise from Nokias acquisition of Alcatel-Lucent (detailed in Section 4.2
History and Development, sub-section Highlights of transactions during 2015 and Recent Events - Update on the Nokia transaction and related matters). But the risks described
below are not the only ones we face. We do not discuss risks that would generally be equally applicable to companies in other industries, due to the general state of the economy or the markets,
or other factors. Additional risks not known to us or that we now consider immaterial may also impair our business operations.
3.1 |
Risks relating to the business |
Following the success of the Nokia Offer (as defined in Section 4.2 History and
Development - sub-section Recent events - Update on the Nokia transaction and related matters), we have begun, and we will continue, to allocate significant resources, including management attention, to integrate the business of
the Nokia Group and the Alcatel Lucent Group. The integration process involves certain risks and uncertainties, and there can be no assurance that the integration will take place in the manner or within the timeframe currently anticipated, or that
the planned new structure will result in the intended benefits.
Such risks and uncertainties include potentially, among others, the
distraction of our managements attention from important issues resulting in performance shortfalls, the disruption caused to our ongoing business, and inconsistencies in our services, standards, controls, procedures and policies, any of which
could have a material adverse effect on our ability to maintain relationships with customers, vendors, regulators and employees or could otherwise have a material adverse effect on our business, financial condition and/or results of operations.
Potential challenges that we might encounter due to the integration process include the following:
· |
|
the challenges relating to the consolidation of corporate, financial, control and administrative functions, including cash management, foreign exchange/hedging operations, internal and other
financing, insurance, financial control and reporting, information technology (IT), communications, compliance and other administrative functions; |
· |
|
contractual issues with respect to various agreements with third parties, including joint venture agreements, pension funds agreements, contracts for the performance of engineering and related
work/services, IT contracts, and technology and intellectual property rights licenses, that may arise as a result of the integration process; |
· |
|
the inability to retain or motivate key employees and recruit needed resources; |
· |
|
disruptions caused by reorganizations triggered by the integration process may result in inefficiency within the new organization; |
· |
|
the inability to achieve the targeted organizational changes, efficiencies or synergies in the targeted time or extent or within the budgeted costs associated with implementing such changes;
|
· |
|
the inability to rationalize as required product lines or retire legacy products and related after-sales services as a result of pre-existing customer commitments; |
· |
|
loss of, or lower volume of business from, key customers, or the inability to renew agreements with existing customers or achieve new customer relationships; |
· |
|
new or additional conditions and regulatory burden imposed by laws, regulators or industry standards on businesses or adverse regulatory or industry developments or litigation may affect us as a
result of the integration ; and |
· |
|
the coordination of research and development, marketing and other support functions may fail or cause inefficiencies or other administrative burdens. |
The telecommunications industry fluctuates and is affected by many factors, including the economic environment, decisions by service providers and
other customers that buy our products and services regarding their deployment of technology and their timing of purchases and roll-out, as well as demand and spending for communications services by businesses and consumers.
Spending trends in the global telecommunications industry were mixed in 2015. During the year, the continued growth in smartphone penetration,
mobile data and all-IP network transformation led to improved spending in certain technologies, as evidenced by increased revenues in businesses such as IP Routing and IP Transport. From a regional perspective, investments in ultra-broadband
access technologies, such as LTE, led to robust investments in the U.S. notably in the second half of the year, while spending in China continued to be focused on 4G LTE deployments, accelerating from 2014 levels. On the other hand, the
telecommunications equipment market in Europe continued to show signs of easing. Actual market conditions could be very different from what we expect and are planning for due to the uncertainty that exists about the recovery in the global economy.
Moreover, market conditions could vary geographically and across different technologies, and are subject to substantial fluctuations. Conditions in the specific industry segments in which we participate may be weaker than in other segments. In that
case, the results of our operations may be adversely affected.
If capital investment by service providers and other customers that buy
our products and services is weaker than we anticipate, our revenues and profitability may be adversely affected. The
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Risks relating to the business
level of demand by service providers and other customers that buy our products and services can
change quickly and can vary over short periods of time, including from month to month. As a result of the uncertainty and variations in the telecommunications industry, accurately forecasting revenues, results and cash flow remains difficult.
In addition, our sales volume as well as product and geographic mix will affect our gross margin. Therefore, if reduced demand for our
products results in lower than expected sales volume, or if we have an unfavorable product or geographic mix, we may not achieve the expected gross margin, resulting in lower than expected profitability. These factors may fluctuate from quarter to
quarter.
Our business requires a significant amount of cash, and we may require additional sources of funds if our sources of
liquidity are unavailable or insufficient to fund our operations.
Our working capital requirements and cash flows historically have
been, and they are expected to continue to be, subject to quarterly and yearly fluctuations, depending on a number of factors. If we are unable to manage fluctuations in cash flow, our business, operating results and financial condition may be
materially adversely affected. Factors which could lead us to suffer cash flow fluctuations include:
· |
|
the level of sales and profitability; |
· |
|
the effectiveness of inventory management; |
· |
|
the collection of receivables and the payment terms variations; |
· |
|
the timing and size of capital expenditures; |
· |
|
costs associated with potential restructuring actions; and |
Over time, we may derive our capital resources
from a variety of sources, including the generation of positive cash flow from on-going operations, proceeds from asset sales, the issuance of debt in various forms and credit facilities, including the US$ 2 billion Nokia Corporation
Revolving Liquidity Support Facility and the 1 billion Nokia Corporation Revolving Credit Facility. Our ability to continue to draw upon these resources is dependent upon a
variety of factors, including our customers ability to make payments on outstanding accounts receivable, who may ask for extended payment terms during the year; the perception of our credit quality by lenders and investors, and the debt market
conditions generally. Given current conditions, access to the debt markets may not be relied upon at any given time. Based on our current view of our business and capital resources (including an Alcatel Lucent net cash position and cash equivalents
and marketable securities of 1.409 million euros at the end of 2015, the two Nokia revolving facilities and the recent upgrade by Standard & Poors of Alcatel Lucents credit rating) and the overall market environment, we
believe we have sufficient resources to fund our operations for the next twelve months. If, however, the business environment were to materially worsen, or the credit markets were to limit our access to bid and performance bonds, or our customers
were to dramatically pull back on their spending plans, our liquidity situation could
deteriorate. If we cannot generate sufficient cash flow from operations to meet cash requirements in excess of our current expectations, we might be required to obtain supplemental funds through
additional operating improvements or through further recourse to external sources, such as capital market proceeds, asset sales or financing from third parties or Nokia Corporation, beyond those funds already obtained. We cannot provide any
assurance that such funding will be available on terms satisfactory to us. In addition, Nokia has stated its intention to cause us to reduce materially our discounting of accounts receivable, which has been a source of liquidity for us in the past.
If we were to incur higher levels of debt, this would require a larger portion of our operating cash flow to be used to pay principal and interest on our indebtedness. The increased use of cash to pay indebtedness could leave us with insufficient
funds to finance our operating activities, such as Research and Development expenses and capital expenditures, which could have a material adverse effect on our business.
Also, as part of the integration of the Alcatel Lucent Group into the Nokia Group, we redeemed a substantial portion of our long term debt,
financed in part by our cash resources and in part by the Nokia Corporation Revolving Liquidity Support Facility. This resulted in a reduction of our immediately available cash on our balance sheet, making us more dependent on the Nokia facility,
the availability of which is a function of Nokias own financial health.
Our ability to have access to the capital markets and
our financing costs is, in part, dependent on Standard & Poors, Moodys or similar agencies ratings with respect to our debt and corporate credit and their outlook with respect to our business. Our current short-term and
long-term credit ratings, as well as any possible future lowering of our ratings, may result in higher financing costs and reduced access to the capital markets. We cannot provide any assurance that our credit ratings will continue to be sufficient
to give us access to the capital markets on acceptable terms, or that such credit ratings will not be reduced by Standard & Poors, Moodys or similar rating agencies.
Credit and commercial risks and exposures could increase if the financial condition of our customers declines.
A substantial portion of our sales are to customers in the telecommunications industry. Some of these customers require their suppliers to provide
extended payment terms, direct loans or other forms of financial support as a condition to obtaining commercial contracts. We have provided and in the future we expect that we will provide or commit to provide financing where appropriate for our
business. Our ability to arrange or provide financing for our customers will depend on a number of factors, including our credit rating, our level of available credit, and our ability to sell off commitments on acceptable terms. More generally, we
expect to routinely enter into long-term contracts involving significant amounts to be paid by our customers over time. Pursuant to these contracts, we may deliver products and services representing an important portion of the contract price before
receiving any significant payment from the customer. As a result of the financing that may be provided to customers and our commercial risk exposure under long-term contracts, our business could be adversely affected if the financial condition of
our customers erodes. In the past, certain of our customers
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Risks relating to the business
have sought protection under the bankruptcy or reorganization laws of the applicable jurisdiction,
or have experienced financial difficulties. We cannot predict how that situation may evolve in 2016, when we expect uncertain economic conditions to continue. Upon the financial failure of a customer, we may experience losses on credit extended and
loans made to such customer, losses relating to our commercial risk exposure, and the loss of the customers ongoing business. If customers fail to meet their obligations to us, we may experience reduced cash flows and losses in excess of
reserves, which could materially adversely impact our results of operations and financial position.
Our financial condition and
results of operations may be harmed if we do not successfully reduce market risks, including through the use of derivative financial instruments.
Since we conduct operations throughout the world, a substantial portion of our assets, liabilities, revenues and expenses are denominated in various currencies other than the euro and the U.S. dollar. Because our financial
statements are denominated in euros, fluctuations in currency exchange rates, especially the U.S. dollar, or currencies linked to the U.S. dollar, against the euro, could have a material impact on our reported results on a quarterly or annual
basis.
We also experience other market risks, including changes in interest rates and in prices of marketable securities that we own.
We may use derivative financial instruments to reduce certain of these risks. If our strategies to reduce market risks are not successful, our financial condition and operating results may be harmed.
An impairment of other intangible assets or goodwill would adversely affect our financial condition or results of operations.
We have a significant amount of goodwill and intangible assets, including acquired intangibles, development costs for software to be sold, leased
or otherwise marketed and internal use software development costs, notably in connection with the combination between Alcatel and Lucent. Goodwill and intangible assets with indefinite useful lives are not amortized but are tested for impairment
annually, or more often, if an event or circumstance indicates that an impairment loss may have been incurred. Other intangible assets are amortized on a straight-line basis over their estimated useful lives and reviewed for impairment whenever
events such as product discontinuances, plant closures, product dispositions or other changes in circumstances indicate that the carrying amount may not be wholly recoverable.
Historically, we have recognized significant impairment charges due to various reasons, including some of those noted above as well as
restructuring actions or adverse market conditions that are either specific to us or the broader telecommunications industry or more general in nature.
More details on past impairment charges can be found in Note 11 to our consolidated financial statements.
If any
material unfavorable change in any of the key assumptions used to determine the recoverable value of our Product Divisions,
as described in Chapter 6 Operating and Financial Review and Prospects, under the heading Critical Accounting Policies, were to occur, additional impairment charges may be
incurred in the future that could be significant and that could have an adverse effect on our results of operations or financial condition.
We operate in a highly competitive industry with many participants. Our failure to compete effectively would harm our business.
We operate in a highly competitive environment in each of our businesses, competing on the basis of product offerings, technical capabilities, quality, service and pricing. Competition for new service provider and enterprise
customers as well as for new infrastructure deployments is particularly intense and increasingly focused on price. We offer customers and prospective customers many benefits in addition to competitive pricing, including strong support and integrated
services for quality, technologically-advanced products; however, in some situations, we may not be able to compete effectively if purchasing decisions are based solely on the lowest price.
We have a number of competitors, many of which currently compete with us and some of which are very large, with substantial technological and
financial resources and established relationships with global service providers. Some of these competitors have very low cost structures, which allow them to be very competitive in terms of pricing. In addition, new competitors may enter the
industry as a result of acquisitions or shifts in technology. These new competitors, as well as existing competitors, may include entrants from the telecommunications, computer software, computer services and data networking industries. We cannot
assure you that we will be able to compete successfully with these companies. Competitors may be able to offer lower prices, additional products or services or a more attractive mix of products or services, or services or other incentives that we
cannot or will not match or offer. These competitors may be in a stronger position to respond quickly to new or emerging technologies and may be able to undertake more extensive marketing campaigns, adopt more aggressive pricing policies and make
more attractive offers to customers, prospective customers, employees and strategic partners.
Technology drives our products and
services. If we fail to keep pace with technological advances in the industry, or if we pursue technologies that do not become commercially accepted, customers may not buy our products or use our services.
The telecommunications industry uses numerous and varied technologies and large service providers often invest in several and, sometimes,
incompatible technologies. The industry also demands frequent and, at times, significant technology upgrades. Furthermore, enhancing our services revenues requires that we develop and maintain leading tools. We will not have the resources to invest
in all of these existing and potential technologies. As a result, we concentrate our resources on those technologies that we believe have or will achieve substantial customer acceptance and in which we will have appropriate technical expertise.
However, existing products often have short product life cycles characterized by declining prices over their lives. In addition, our choices for developing
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RISK FACTORS
Risks relating to the business
technologies may prove incorrect if customers do not adopt the products that we develop or if those
technologies ultimately prove to be unviable. Our revenues and operating results will depend, to a significant extent, on our ability to maintain a product portfolio and service capability that is attractive to our customers; to enhance our existing
products; to continue to introduce new products successfully and on a timely basis and to develop new or enhance existing tools for our services offerings.
The development of new technologies remains a significant risk to us, due to the efforts that we still need to make to achieve technological
feasibility, due as mentioned above to rapidly changing customer markets; and due to significant competitive threats.
Our failure to bring these products to market in a timely manner could result in a loss of market share or a lost opportunity to capitalize on new markets for emerging technologies, and could have a material adverse impact on our
business and operating results.
We depend on a limited number of internal and external manufacturing organizations, distribution
centers and suppliers. Their failure to deliver or to perform according to our requirements may adversely affect our ability to deliver our products, services and solutions on time and in sufficient volume, while meeting our quality, safety or
security standards.
Our manufacturing strategy is built upon two primary sources of production: predominantly, external manufacturing
suppliers, and also internal manufacturing locations. When we resort to external manufacturing, the primary owner of inventory, standard manufacturing equipment and common test equipment is the external manufacturer, but in the vast majority of
cases we own the custom-made test equipment, which would allow us to change manufacturing locations more easily if this became necessary. The manufacturing equipment and common and custom-made test equipment in our internal manufacturing locations
are owned by us.
Our business continuity plans also involve the implementation of a regional sourcing strategy where economically
feasible, to ensure there is a supply chain to support and optimize our supply and delivery within the given region. For both our internal and external manufacturing locations such plans include the capability to move to alternate locations for
production in case of a disruption at a given facility. In addition, we perform audits in all facilities, internal and external, to identify the actions required to reduce our overall business disruption risk.
However, despite the above measures, in the event of a disruptive event we may not be able to mitigate entirely the disruption risks for all of
our products and, depending on the nature of such event, we may be required to prioritize our manufacturing and as a result, the supply of some of our products may be more affected than that of others.
Sourcing strategies are developed and updated annually to identify primary technologies and supply sources used in the selection of purchased
components, finished goods, services and solutions. We multisource a large number of component
and material families that are standard for the industry to the largest extent possible. For a number of components and finished goods families, we use multiple, predefined sources which allow us
to have access to additional inventories in case of a disruptive event or to satisfy increased end customer demand. On the other hand, supply chain risks may arise with respect to components that are single-sourced or that have a long lead-time for
a variety of reasons, such as non-forecasted upside demand, unusual allocation of components to competitors leading to shortages, discontinuance by the supplier, quality problems, etc, that may have an adverse impact on our ability to deliver our
products. In addition, for certain specific parts, an alternative source may not be technologically feasible. In addition to the multisource strategy, we further seek to mitigate sourcing disruptions by concentrating the supplier base for new
products and for volume production among a group mostly made of preferred suppliers who satisfy our requirements. These preferred suppliers are under quality and performance monitoring, and are subject to periodic business review and
executive management meetings.
Despite the steps we have taken with respect to our manufacturing and sourcing strategies, our business
continuity plans and our logistics network, we can provide no assurance that such steps will be sufficient to avoid any disruption in the various stages of our supply chain. A disruption in any of those stages may materially adversely affect our
ability to deliver our products, services and solutions on time and in sufficient volume, while meeting our quality, safety or security standards.
We continued the process of outsourcing a significant portion of our finance and human resources (HR) processes and services, increasing our dependence on the reliability of external providers. Interruptions in the availability of
these processes and services could have a material adverse impact on the responsiveness and quality of these processes and services that are crucial to our business operations, and on our future ability to adapt to changing business needs.
Due to the customized nature of the services outsourced in the area of finance and HR, a failure to structure an efficient
relationship with the outsourcing company we have selected may lead to on-going operational problems or even to severe business disruptions. In addition, as managements focus shifts from a direct to an indirect operational control in these
areas, there is a risk that without active management and monitoring of the relationship, the services provided may be below appropriate quality standards. There is the added risk that the outsourcing company may not meet the agreed service levels,
in which case, depending on the impacted service, the contractual remedies may not fully cure all of the damages we may suffer. This is particularly true for any deficiencies that would impact the reporting requirements applicable to us as a company
listed on Euronext NYSE in Paris.
In order to implement this outsourcing, changes in our business practices and processes were
required to capture economies of scale and operational efficiencies, and to reflect a different way of doing business. Consequently, business processes that were customized for individual business units or for the Group were
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Risks relating to the business
converted to a more standardized format. Throughout the transition to outsourcing, our employees
had to train the outsourcing companys staff or get trained on the outsourcing companys systems. Future similar training could potentially result in the distraction of our human resources. Adjustments to staff size and transfer of
employees to the outsourcing companies could impact morale and raise complex labor law issues, which we would seek to address, but the adverse effects of which might impact the business case for this outsourcing. If inadequately handled, the
transition may result in the loss of certain personnel who are highly skilled and familiar with our practices and requirements.
There
is also a risk that, in spite of our independent validation of the control procedures, we may not be able to determine whether controls have been effectively implemented, and whether the outsourcing companys performance monitoring reports are
accurate. Concerns equally could arise from giving third parties access to confidential data, strategic technology applications, and the books and records of the Alcatel-Lucent Group.
In the longer term, this type of organization potentially creates a dependency on the outsourcing company. This dependency may increase over time,
since our ability to learn from day-to-day responsibilities and hands-on experience, and from responding to changing business needs, may be diminished.
Although we have selected a reputable company to provide the outsourced finance and HR services, and are working closely with it to identify risks and implement measures to minimize them, we cannot give assurances that the
availability of the processes and services upon which we rely will not be interrupted, which could result in a material adverse impact on our business operations, in particular during the transition phase. Recurring performance problems may result
in missed reporting deadlines, financial losses, missed business opportunities and reputational concerns.
As most of these activities
were transferred in the beginning of 2015, the risks described above have decreased, and to date we have not experienced any interruption to the business. However, in the context of the transaction with Nokia, there is a separate risk relating to
the ability of our outsourced company to timely adapt to the tools and process changes that are being defined by the new Nokia organization.
Information system risks, data protection breaches, cyber-attacks and industrial espionage may result in unauthorized access to or modification, misappropriation or loss of, the intellectual property and confidential information
that we own or that has been entrusted to us by third parties as well as interruptions to the availability of our systems or the systems that we manage for third parties.
Valuable intellectual property essential to our business operations and competitiveness, as well as other confidential and proprietary information
(our own and that of customers, suppliers and other third parties including our customers end user customers) are stored in or accessible through our information systems, a large part of which is managed by a third party to whom we have
outsourced a significant portion of our IT
operations, as well as through the network and information systems that we manage for or sell to third parties or for whose security and reliability we may otherwise be accountable. Unauthorized
access to or modification, misappropriation or loss of, such information could have a material adverse impact on our business and results of operations. As we expand our use of cloud-based providers and services, the amount of information outside of
our direct control increases, resulting in increasing risk. Also, increased business activities such as divestitures, outsourcing and downsizing raises the likelihood that critical information could be compromised by external or internal factors.
Unauthorized outside parties have targeted our information systems, using sophisticated methods and tools, referred to as advanced
persistent threats (APTs). APTs use phishing attacks, and download exploits as main vectors of attacks. Such attempts to access our information systems have been successful on one occasion in 2013, on two occasions in 2014,
and on one occasion in 2015. We investigated the impact of these attacks. Although we have no reason to believe that sensitive information was actually compromised by these attacks, we are not in a position to be conclusive, since the investigations
showed that some data were extracted. As the overall number of attacks grows around the world and since our industry has been designated as a targeted industry, we have continued to take corrective actions that we believe will substantially mitigate
the risk that such attacks will materially impact our business or operations, or that of our customers. However, we cannot rule out that there may have been other cyber-attacks that have been successful and have evaded detection. Our business is
also vulnerable to theft, fraud, trickery or other forms of deception, sabotage and intentional acts of vandalism by outside parties, as well as parties inside the organization.
We have procedures in place for responding to known or suspected data breaches. In addition, we conduct periodic assessments of our system
vulnerabilities and the effectiveness of our security protections and have undertaken and will continue to undertake information security improvement programs ourselves and in coordination with our suppliers and business partners. We are also
increasing the resources allocated in this area. However, there is no guarantee that our existing procedures or the improvement programs will be sufficient to prevent future security breaches or cyber attacks. In addition, as we have outsourced a
significant portion of our information technology operations and other operations, we are also subject to vulnerabilities attributable to such third parties. Information technology is rapidly evolving, the techniques used to obtain unauthorized
access or sabotage systems change frequently and the parties behind cyber attacks and other industrial espionage are believed to be sophisticated and well funded, and it is not commercially or technically feasible to mitigate all known
vulnerabilities in a timely manner or to eliminate all risk of cyber attacks and data breaches. Unauthorized access to or modification, misappropriation or loss of, our intellectual property and confidential information could result in litigation
and potential liability to customers, suppliers and other third parties, harm our competitive position, reduce the value of our investment in research and development and
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Risks relating to the business
other strategic initiatives or damage our brand and reputation, which could materially adversely
affect our business, results of operations or financial condition. In addition, the cost and operational consequences of implementing further information system protection measures could be significant. We may not be successful in implementing such
measures, which could cause business disruptions and be more expensive, time consuming and resource-intensive. Such disruptions could adversely impact our business.
Because our business operations, including those we have outsourced, rely on our complex IT systems and networks (and related services), our
reliance on the precautions taken by external companies to insure the reliability of our and their IT systems, networks and related services is increasing.
Despite these precautions, our business is susceptible to disruption from IT equipment failure, vandalism, cyber attacks, natural disasters, power
outages and other events affecting the IT systems, networks and related services we manage, as well as third party systems. Although we have selected reputable companies to provide outsourced IT systems and services, and have worked closely with
them to identify risks and implement countermeasures and controls, we cannot be sure that interruptions will not occur in the availability of the IT systems and services upon which we rely, with material adverse impacts on our business operations.
Many of our current and planned products are highly complex and may contain defects or errors that are detected only after deployment
in telecommunications networks. If that occurs, our reputation may be harmed.
Our products are highly complex, and we cannot
assure you that our extensive product development, manufacturing and integration testing is, or will be, adequate to detect all defects, errors, failures and quality issues that could affect customer satisfaction or result in claims against us. As a
result, we might have to replace certain components and/or provide remediation in response to the discovery of defects in products that have been shipped.
The occurrence of any defects, errors, failures or quality issues could result in cancellation of orders, product returns, diversion of our resources, legal actions by customers or customers end users and other losses to us or
to our customers or end users. These occurrences could also result in the loss of or delay in market acceptance of our products, in the loss of sales, or in the need to create provisions, which would harm our business and adversely affect our
revenues and profitability. From time to time, we have experienced such occurrences.
Rapid changes to existing regulations or
technical standards or the implementation of new regulations or technical standards for products and services not previously regulated could be disruptive, time-consuming and costly to us.
We develop many of our products and services based on existing regulations and technical standards, our interpretation of unfinished technical
standards or the lack of such regulations and standards. Changes to existing regulations and technical standards, or the implementation of new regulations and technical standards relating to products and services not
previously regulated, could adversely affect our development efforts by increasing compliance costs and causing delay. Demand for those products and services could also decline.
Our ten largest customers accounted for 53% of our revenues in 2015 (among which Verizon, AT&T and Sprint represented 15%, 14% and 5% of our
revenues, respectively), and most of our revenues come from telecommunications service providers. The loss of one or more key customers, or reduced spending by these service providers, or inability to expand and diversify our customer base to non
service providers could significantly reduce our revenues, profitability and cash flow.
Our ten largest customers accounted for 53% of
our revenues in 2015 (among which Verizon, AT&T and Sprint represented 15%, 14% and 5% of our revenues, respectively). As service providers increase in size, it is possible that an even greater portion of our revenues will be attributable to a
smaller number of large service providers going forward. Our existing customers are typically not obliged to purchase a fixed amount of products or services over any period of time from us and usually have the right to reduce, delay or even cancel
previous orders, which could impact revenues from one reporting period to the next. We, therefore, have difficulty projecting future revenues from existing customers with certainty. Although historically our customers have not made sudden supplier
changes, our customers could vary their purchases from period to period, even significantly. Combined with our reliance on a small number of large customers, this could have an adverse effect on our revenues, profitability and cash flow. In
addition, our concentration of business in the telecommunications service provider industry makes us extremely vulnerable to a downturn or delays in spending in that industry. Although we are continuing to focus on expanding and diversifying our
customer base to new emerging customer segments such as cable service providers, web-scale, large tech enterprises or vertical businesses, which are also investing in carrier-grade networks we may not succeed in achieving such expansion and
diversification.
As a result of the transaction with Nokia, we may lose certain other existing contracts, or be unable to renew or
gain new contracts due to customer diversity policies that limit the ability for the same network provider to exceed a certain threshold of business in a given market with such customer. Policies or practices in certain countries may also limit the
possibility for foreign vendors to participate in the provision of networks business over a certain threshold.
We have long-term sales
agreements with a number of our customers. Some of these agreements may prove unprofitable as our costs and product mix shift over the lives of the agreements.
We have entered into long-term sales agreements with a number of our large customers, and we expect that we will continue to enter into long-term
sales agreements in the future. Some of these existing sales agreements require us to sell products and services at fixed prices over the lives of the agreements, and some require, or may in the future require us to sell products and services that
we would otherwise discontinue, thereby diverting our resources from developing more profitable or strategically
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important products. Since former restructuring actions entail a streamlined set of product
offerings, it may increase the likelihood that we may have to sell products that we would otherwise discontinue. The costs incurred in fulfilling some of these sales agreements may vary substantially from our initial cost estimates. Any cost
overruns that cannot be passed on to customers could adversely affect our results of operations.
We have significant international
operations and a significant amount of our revenues is earned in emerging markets and regions.
In addition to the currency risks
described elsewhere in this section, our international operations are subject to a variety of risks arising out of the economy, the political outlook and the language and cultural barriers in countries where we have operations or do business. We
expect to continue expanding business in emerging markets in Asia, Africa, Middle East, Latin America and Eastern Europe. In these emerging markets, we are faced with several risks that are more significant than in other countries, such as the local
economies being dependent on only a few products (more specifically those economies that almost exclusively export raw materials such as oil and minerals), weak legal systems that can affect our ability to enforce contractual rights, possible
exchange controls, international trade restrictions, unstable governments and privatization actions or other government actions affecting the flow of goods and currency. Also, it is possible that political developments in certain countries may have,
at least temporarily, a negative impact on our operations in those countries, with an increased risk of heightened conflicts and terrorism. For this reason, potentially we may not be able to enter into, manage or terminate contracts for a particular
country or to work in a particular country during a period of time.
Alcatel Lucent Groups U.S. pension and post-retirement
benefit plans are large and have funding requirements that fluctuate based on how their assets are invested, the performance of financial markets worldwide, interest rates, assumptions regarding the life expectancy of covered employees and retirees,
medical price increases, and changes in legal requirements. Even if these plans are currently fully funded, they are costly, and our efforts to satisfy further funding requirements or control these costs may be ineffective.
Many former and current employees and retirees of the Alcatel Lucent Group in the U.S. participate in one or more of its major defined benefit
pension and post-retirement welfare benefit plans that provide pension, healthcare, and group life insurance benefits. Such defined benefit pension and post-retirement welfare benefit plans have funding requirements based on a variety of criteria,
including asset allocation, performance of financial markets, interest rates, assumptions regarding life expectancy, medical prices, and changes in legal requirements. To the extent that any of the aforementioned criteria or other criteria change,
the funding requirements of our major defined benefit pension and post-retirement plans may increase. We may be unsuccessful in our ability to control costs resulting from the increased funding requirements, and such inability to control costs could
materially adversely impact our results of operations or financial position.
Volatility in discount rates and asset values will affect the funded status of Alcatel
Lucents pension plans.
The U.S. Internal Revenue Code provides a number of methods to use for measuring plan assets and for
determining the discount rate to be applied for measuring defined benefit pension plan liabilities for regulatory funding purposes. For measuring plan assets, we can choose between the fair market value at the valuation date or a smoothed fair value
of assets (based on a prior period of time not to exceed two years, with the valuation date as the last date in the prior period). For determining the discount rate, we can opt for the spot discount rate at the valuation date (effectively, the
average yield curve of the daily rates for the month preceding the valuation date) or a 24-month average of the rates for each time segment (any 24-month period as long as the 24-month period ends no later than five months before the valuation
date). To measure the 2014 funding valuation, we selected the two-year asset fair value smoothing method for the U.S. management pension plan and the U.S. occupational pension plans (active and inactive). Alcatel Lucent is generally required to
use this same asset valuation method to measure the 2015 funding valuation. With respect to the discount rate to be applied for measuring plan liabilities, the Moving Ahead for Progress in the 21st Century Act, enacted on July 6, 2012 and
thereafter modified and extended by The Highway and Transportation Funding Act, enacted on August 8, 2014, and the Bipartisan Budget Act of 2015, enacted on November 2, 2015 (collectively, MAP-21/HATFA/BBA), affects U.S.
tax-qualified pension plan funding requirements for plans that use time segment interest rates for measuring plan liabilities for regulatory funding purposes. For such plans, MAP-21/HATFA/BBA, stabilizes such interest rates by establishing
corridors around a 25-year average rate. MAP-21/HATFA/BBA, is applicable to the Alcatel Lucent Groups U.S. management and active occupational pension plans, which use time segment interest rates for purposes of determining
regulatory funding requirements, but not to the U.S. inactive occupational pension plan, which uses a full yield curve for such purposes. For the U.S. management and active occupational pension plans, MAP-21/HATFA/BBA, increases the interest
rates used for regulatory funding purposes. A preliminary assessment of those plans under MAP-21/HATFA/BBA suggests no required funding contribution through at least 2017. Although MAP-21/HATFA/BBA, is currently not applicable to the Alcatel Lucent
Groups U.S. inactive occupational pension plan, the Group does not foresee any required funding contribution for that plan, given the level of assets compared to liabilities for regulatory funding purposes.
Pension and post-retirement health plan participants may live longer than has been assumed, which would result in an increase in our benefit
obligation.
If our pension and retiree healthcare plan participants live longer than assumed, pension and retiree healthcare benefits
obligations would likely increase. We cannot be certain that the longevity of the participants in its pension plans or retiree healthcare plan will not exceed that indicated by the mortality tables we currently use or that future updates to those
tables will not reflect materially longer life expectancies.
16
RISK FACTORS
Risks relating to the business
For pension funding purposes, we use the mortality tables issued by the Internal Revenue Service
(IRS), which includes fifteen years of projected improvements in life span for active and former employees not yet receiving pension payments, and seven years for retirees receiving payments. These tables determine the period of time over which
Alcatel Lucent assumes that benefit payments will be made. The longer the period, the larger the benefit obligation and the amount of assets required to cover that obligation. For accounting purposes, until September 30, 2014, we used the
RP-2000 Combined Health Mortality table with Generational Projection based on the U.S. Society of Actuaries (SOA) Scale AA. Starting December 31, 2014, we changed these assumptions to the
RP-2014 White Collar table with MP-2014 mortality improvement scale for management records and the RP-2014 Blue Collar table with MP-2014 mortality improvement scale for
occupational records. On October 8, 2015, the SOA released an updated set of mortality improvement assumptionsscale MP-2015. This new mortality improvement scale reflects two additional years of
data that the U.S. Social Security Administration has released since the development of the MP-2014 mortality improvement. These two additional years of data show a lower degree of mortality improvement than
in previous years. For pension accounting purposes, starting December 31, 2015, we changed the MP-2014 mortality improvement scale for the MP-2015 mortality improvement scale for both management and occupational records.
To estimate our future U.S. retiree healthcare plan obligations, until September 30, 2014, we used the same RP-2000 Combined Health Mortality
table with Generational Projection based on the SOA Scale AA that we used for pension funding purposes. Starting December 31, 2014, we similarly changed these assumptions to the RP-2014 White Collar table with
MP-2014 mortality improvement scale for management records and the RP-2014 Blue Collar table with MP-2014 mortality improvement scale for occupational records. For U.S. retiree healthcare plan obligations,
starting December 31, 2015, we changed the MP-2014 mortality improvement scale by the MP-2015 mortality improvement scale for both management and occupational records. As with pension benefits, longer
lives of our participants would likely increase our retiree healthcare benefit obligation. We cannot be certain that the longevity of our participants in our retiree healthcare plans or pension plans will not exceed that indicated by the mortality
tables we currently use, or that future updates to these tables will not reflect materially longer life expectancies.
The new
mortality rates (RP-2014 White Collar and Blue Collar) were published on October 27, 2014 and new mortality improvement scale (MP-2015) was published on October 8, 2015. The new assumptions are not expected to become effective for
regulatory (pension) funding purposes before at least the 2017 plan year.
We may not be able to fund the healthcare and group life
insurance costs of our formerly represented retirees with excess pension assets.
In accordance with Section 420 of the U.S.
Internal Revenue Code, we currently fund, and expect to continue to fund, our
healthcare and group life insurance costs for retirees who were represented by the Communications Workers of America and the International Brotherhood of Electrical Workers with transfers of
excess pension assets from our U.S. inactive occupational pension plan. Excess assets are defined by Section 420 as those assets in excess of either 120% or 125% of the plans funding obligation (without the application of
MAP-21/HATFA/BBA), depending on the type of transfer selected. Based on current actuarial assumptions and based on the present level and structure of benefits and of our benefit plans, we believe that we can continue to fund healthcare and group
life insurance for retirees who were represented by the Communications Workers of America and the International Brotherhood of Electrical Workers through Section 420 transfers from its U.S. inactive occupational pension plan. However, a
deterioration in the funded status of that plan could negatively affect our ability to make future Section 420 transfers. Section 420 is currently set to expire on December 31, 2025.
Healthcare cost increases and an increase in the use of services may significantly increase our retiree healthcare costs.
Our current healthcare plans cap the subsidy that we provide to those persons who retired after February 1990 and all future retirees,
representing almost half of the retiree healthcare obligation, on a per capita basis. We may take steps in the future to reduce the overall cost of our current retiree healthcare plans, and the share of the cost borne by us, consistent with legal
requirements and any collective bargaining obligations. However, cost increases may exceed our ability to reduce these costs. In addition, the reduction or elimination of U.S. retiree healthcare benefits by us has, in the past, led to lawsuits
against us. Any initiatives that we might undertake to control these costs may lead to additional claims against us.
The activities of
our IP Transport division include the installation and maintenance of undersea telecommunications cable networks, and in the course of this activity we may cause damage to existing undersea infrastructure, for which we may ultimately be
held responsible.
Our subsidiary Alcatel-Lucent Submarine Networks is an industry leader in the supply of submarine optical fiber
cable networks linking mainland to islands, island to island or several points along a coast, with activities also expanding to the supply of broadband infrastructure to oil and gas platforms and other offshore installations. Although thorough
surveys, permit processes and safety procedures are implemented during the planning and deployment phases of all of these activities, there is a risk that previously-laid infrastructure, such as electric cables or oil pipelines, may go undetected
despite such precautions, and be damaged during the process of installing the telecommunications cable, potentially causing business interruption to third parties operating in the same area and/or accidental pollution. While we have in place
contractual limitations and maintain insurance coverage to limit its exposure, we cannot provide any assurance that these protections will be sufficient to cover such exposure fully.
17
We are involved in lawsuits which, if determined against us, could require us to pay substantial
damages.
We are defendants in various lawsuits including in connection with commercial, intellectual property, environmental and labor
matters. We cannot predict the extent to which any of the pending or future actions will be resolved in our favor, or whether significant monetary judgments will be rendered against us. Any material damages resulting from these lawsuits could
adversely affect our profitability and cash flow.
We have been, and continue to be, involved in investigations concerning alleged
violations of anti-corruption laws, and have been, and could again be, subject to material fines, penalties and other sanctions as a result of such investigations.
Anti-corruption laws in effect in many countries prohibit companies and their intermediaries from making improper payments to public officials for
the purpose of obtaining new business or maintaining existing business relationships. Certain anti-corruption laws such as the U.S. Foreign Corrupt Practices Act (the FCPA) also require the maintenance of proper books and records, and
the implementation of controls and procedures in order to ensure that a companys operations do not involve corrupt payments. Since we conduct operations throughout the world, and given that some of our clients are government-owned entities and
that our projects and contracts often require approvals from public officials, there is a risk that our employees, consultants or agents may take actions that are in violation of our Groups policies and of anti-corruption laws.
In the past, we have already experienced actual or alleged violations of anti-corruption laws, including of the FCPA. As a result, we had to pay
substantial amounts to the U.S. Securities and Exchange Commission in disgorgement of profits and interest, and to the U.S. Department of Justice in criminal fines. (See Section 4.2 History and Development, subsection
Highlights of Transactions during 2014Other MattersFCPA Investigations).
We also had to make certain payments
to the Costa Rican Attorney General and the Instituto Costarricense de Electricidad in settlement of anticorruption claims in Costa Rica. Further, we are subject to certain other ongoing investigations and proceedings in France and
Nigeria, as described in Section 6.7 Legal Matters, which may result in further material damages, fines, penalties and other sanctions, and in our inability to participate in certain public procurement contracts in those
countries.
In addition, our training and compliance programs may not be sufficient to prevent our employees, consultants or agents
from further engaging in activities for which entities of our Group or their relevant corporate officers could be held liable under anti-corruption laws. Any further breaches or alleged breaches of such laws could have a material adverse effect on
the reputation of our Group or on our operations and financial condition.
If we fail to protect our intellectual property rights, our business and prospects may be harmed.
Intellectual property rights, such as patents, are vital to our business and developing new products and technologies that are unique
is critical to our success. We have numerous French, U.S. and foreign patents and numerous pending patents. However, we cannot predict whether any patents, issued or pending, will provide us with any competitive advantage or whether such
patents will be challenged by third parties. Moreover, our competitors may already have applied for patents that, once issued, could prevail over our patent rights or otherwise limit our ability to sell our products. Our competitors also may attempt
to design around our patents or copy or otherwise obtain and use our proprietary technology. In addition, patent applications currently pending may not be granted. If we do not receive the patents that we seek or if other problems arise with our
intellectual property, our competitiveness could be significantly impaired, which would limit our future revenues and harm our prospects.
We are subject to intellectual property litigation and infringement claims, which could cause us to incur significant expenses or prevent us from selling certain products.
From time to time, we receive notices or claims from third parties of potential infringement in connection with products or software. We also may
receive such notices or claims when we attempt to license our intellectual property to others. Intellectual property litigation can be costly and time consuming and can divert the attention of management and key personnel from other business issues.
The complexity of the technology involved and the uncertainty of intellectual property litigation increase these risks. A successful claim by a third party of patent or other intellectual property infringement by us could compel us to enter into
costly royalty or license agreements or force us to pay significant damages and could even require us to stop selling certain products. Further, if one of our important patents or other intellectual property rights is invalidated, we may suffer
losses of licensing revenues and be prevented from attempting to block others, including competitors, from using the related technology.
We are involved in significant joint ventures and are exposed to problems inherent to companies under joint management.
We are involved in significant joint venture companies. The related joint venture agreements may require unanimous consent or the affirmative vote of a qualified majority of the shareholders to take certain actions, thereby possibly
slowing down the decision-making process. Our largest joint venture, Alcatel-Lucent Shanghai Bell Co., Ltd, has this type of requirement. We own 50% plus one share of Alcatel-Lucent Shanghai Bell Co., Ltd, the remainder being owned by the Chinese
government.
18
RISK FACTORS
Legal Risks
We are subject to environmental, health and safety laws that restrict our operations.
Our operations are subject to a wide range of environmental, health and safety laws, including laws relating to the use, disposal and clean-up of,
and human exposure to, hazardous substances. In the United States, these laws often require parties to fund remedial action regardless of fault. Although we believe our aggregate reserves are adequate to cover our environmental liabilities, factors
such as the discovery of additional contaminants, the extent of required remediation and the imposition of additional cleanup obligations could cause our capital expenditures and other expenses relating to remediation activities to exceed the amount
reflected in our environmental reserves and adversely affect our results of operations and cash flows. Compliance with existing or future environmental, health and safety laws could subject us to future liabilities, cause the suspension of
production, restrict our ability to utilize facilities or require us to acquire costly pollution control equipment or incur other significant expenses.
Despite measures taken to protect the best interests of our Company, the minority shareholders of our Company may bring actions alleging that the Alcatel Lucent share value has been negatively impacted by decisions taken by our
management and our Board of Directors favoring Nokia.
As a result of the success of the Nokia Offer, Nokia held on February 10, 2016,
90.34% of our ordinary shares. Our Company therefore is now controlled by Nokia, and five members (out of a total of nine) of our Board of Directors are Nokia employees.
Despite holding this high percentage of our capital, Nokia did not achieve the level of ownership
necessary, under French law, to be able to implement a squeeze-out of the remaining shareholders of our Company, and approximately 9 % of our capital is still publicly-held. (This percentage will decrease upon the consummation of the sale of
ordinary Alcatel Lucent shares, mentioned below in Section 3.3 Risks relating to the ownership of our ADSs and our ordinary shares, by the Depositary (defined in Section 3.3 below) to Nokia).
Although all the members of our Board share the same fiduciary duty to act in the best interest of our Company, and although a Committee of
Independent Directors has been created within our Board (see Section 7.1.4.5 Committee of Independent Directors) and a Master Services Agreement has been put in place between Nokia and our Company (see Section 4.5 Material
Contracts, subsection Master Services Agreement and Framework Agreement), to safeguard the interests of the Company, and of the minority shareholders, our minority shareholders may allege that decisions taken by our management and
by our Board of Directors favor Nokia to their detriment and have a negative impact on the Company and on shareholder value at the Alcatel Lucent level, and may commence legal proceedings (including class actions) against our Company and the members
of our Board, seeking damages. The defense of any such actions could entail significant costs and distraction of management.
3.3 |
Risks relating to the ownership of our ADSs and of our ordinary shares |
Due to the delisting of our ADSs from the New York Stock Exchange and the termination of our ADR
program, ADR holders who do not timely surrender their ADRs in exchange for our ordinary shares will only be entitled to the proceeds from the sale of Nokia shares, representing the proceeds of the sale of the underlying shares by the Depositary.
On March 7, 2016, our American Depositary Shares (ADSs) were delisted from the New York Stock Exchange. Following the
notification we sent on January 18, 2016 to JPMorgan Chase Bank, N.A. as the Depositary under our American depositary receipts (ADR) program, the Depositary provided notice of termination of the program to the holders of the ADRs on
January 26, 2016. The Deposit Agreement terminated on February 24, 2016.
ADR holders had the right to surrender their
ADRs in exchange for our ordinary shares until April 25, 2016. Following that date, the Depositary has agreed to sell to Nokia, pursuant to a Share Purchase Agreement dated March 16, 2016 (the Nokia SPA) all of our ordinary shares
that underlie remaining outstanding ADRs. The Depositary will receive 0.55 Nokia shares for each of
our ordinary shares, which is the same exchange ratio offered in the Nokia Offer for our ordinary shares. Thereafter, the Depositary will sell the Nokia shares received by it. Accordingly,
holders of ADRs who did not exchange their ADRs by April 25, 2016 will only be entitled to their pro rata portion of the proceeds from the sale of the Nokia shares by the Depositary. If the transaction contemplated by the Nokia SPA is not
consummated or if for any reason the Depositary does not effect such sale, the underlying shares could be registered with Alcatel Lucent in registered form (nominatif pur).
The deposit agreement for the ADSs expressly limits our obligations and the obligations of the Depositary, and it limits our liability and their
liability. Among such limitations, the deposit agreement provides that the Depositary will not be liable for the price received in connection with the sale of securities, the timing thereof, or any error, delay in action, omission to act, default or
negligence on the part of the parties retained in connection with any such sale.
Please see Section 10.2.6 American
Depositary Shares (ADSs) for more information on the termination of the ADR program.
19
RISK FACTORS
Risks relating to the ownership of
our ADSs and of our ordinary shares
There is no longer a regulated market on which the remaining Alcatel Lucent ADS holders may
trade their ADSs, and there may be a limited market and a lack of liquidity for the holders of Alcatel Lucent ordinary shares.
Because
our ADSs have been delisted from the New York Stock Exchange, there is no longer a U.S. market for our ADSs. As noted above, until April 25, 2016, holders of our ADRs had the right to exchange them for our ordinary shares, which are
currently listed on the Euronext Paris. However, as a result of the success of the Nokia Offer, Nokia held on February 22, 2016, 90.34% of our ordinary shares. Due to this level of concentrated
ownership, there may be a limited market for our ordinary shares on the Euronext Paris, and the ability for an Alcatel Lucent shareholder to sell the ordinary shares owned by it at a price and
time acceptable to it may be substantially limited.
Further, there is no guarantee that our ordinary shares will continue to be listed
on the Euronext Paris. Additionally, if and when Nokia meets the required conditions under French law to allow it to acquire the remaining publicly-held Alcatel Lucent ordinary shares in a squeeze-out , Nokia intends to purchase all such remaining
outstanding ordinary shares under the conditions prescribed by law.
20
Information about the Group |
4 |
21
INFORMATION ABOUT THE GROUP
General
Alcatel-Lucent is a French société anonyme, established in 1898, originally as
a listed company named Compagnie Générale dÉlectricité. Our corporate existence will continue until June 30, 2086, which date may be extended by shareholder vote. We are subject to all laws governing
business corporations in France, specifically the provisions of the commercial code and the financial and monetary code.
As a result
of the Nokia Offer, our Company is controlled by Nokia Corporation.
Effective as of May 19, 2014, our registered office and principal place of business is 148/150
route de la Reine 92100 Boulogne-Billancourt, France. Our telephone number is +33 (0)1 55 14 10 10 and our website address is www.alcatel-lucent.com. The contents of our website are not
incorporated into this document.
The address for Barbara Larsen, our authorized representative in the United States, is Alcatel-Lucent
USA Inc., 600 Mountain Avenue, Murray Hill, New Jersey 07974.
4.2 |
History and development |
Recent events
Update on the Nokia transaction and related matters
Initial and reopened Nokia Offer. As an update to the information regarding the Nokia transaction provided below in Highlights of
Transactions during 2015, on January 5, 2016, the French Autorité des marchés financiers (the AMF) published the final results of the initial public exchange offer initiated by Nokia for all outstanding
ordinary shares, American depositary shares (ADSs) and OCEANE convertible bonds of Alcatel Lucent (collectively, the Alcatel Lucent Securities), in exchange for Nokia shares or Nokia American depositary shares, described in
more detail under Highlights of Transactions during 2015 below (we refer to this initial exchange offer, together with the reopened offer described below, as the Nokia Offer), and declared that, since more than 50% of Alcatel
Lucents outstanding securities (on a fully-diluted basis) had been tendered into the initial offer, the condition required to be satisfied for Nokia to have to consummate the exchange offer in fact had been satisfied. On January 7, 2016,
the exchange of the Alcatel Lucent Securities tendered during the initial offer period of the Nokia Offer for Nokia shares was completed. On January 14, 2016 Nokia reopened its offer until February 3, 2016. On February 10, 2016, the
exchange of the Alcatel Lucent Securities tendered during the reopened offer period of the Nokia Offer for Nokia shares was completed. As a result of the Nokia Offer, as of February 12, 2016 Nokia held 90.34% of the Alcatel Lucent share capital
and at least 90.25% of the voting rights, 99.62% of the outstanding OCEANE 2018 convertible bonds, 37.18% of the outstanding OCEANE 2019 convertible bonds, and 68.17% of the outstanding OCEANE 2020 convertible bonds. As of the same date, Nokia held
87.33% of the share capital of Alcatel Lucent on a fully diluted basis. Nokia and our company started operations as a combined entity on January 14, 2016.
Governance. At its meeting of January 8, 2016, our Board of Directors modified its composition to reflect the new ownership structure of our
Company following the success of the initial
Nokia Offer: Jean C. Monty, Louis R. Hughes, Olivier Piou, Stuart E. Eizenstat, Kim Crawford Goodman and Francesco Caio resigned from their position as Directors and Risto Siilasmaa, Rajeev
Suri, Timo Ihamuotila, Maria Varsellona and Samih Elhage were coopted to the Board, subject to ratification by the shareholders at the Shareholders Meeting to be held in 2016. Nokia has stated that it will vote in favor of such ratification.
Philippe Camus was confirmed in his position of Chairman of the Board and CEO of our Company.
Termination of our ADS program.
Subsequent to the Nokia Offer, our Board of Directors resolved to terminate our ADS program. We instructed JPMorgan Chase Bank N.A., as the depositary of our ADS program (the Depositary), to terminate our ADS program in accordance with
the terms of the deposit agreement. Notice of the termination of our ADS program was provided by the Depositary to holders of our ADSs evidenced by the Alcatel Lucent ADRs on January 26, 2016. The deposit agreement terminated on
February 24, 2016.
Following the termination of the deposit agreement, and except as described in the paragraph below, neither
the Depositary nor any of its agents will perform any further acts under the deposit agreement or the ADRs evidencing our ADSs, except to receive and hold (or sell) distributions on our ordinary shares and deliver deposited securities being
withdrawn upon the cancellation of our ADSs in the manner required under the deposit agreement.
The option for holders of ADRs
representing ADSs to surrender their ADRs to the Depositary in exchange for our ordinary shares expired on April 25, 2016. According to the notice provided by the Depositary to holders of our ADRs on January 26, 2016, a cancellation fee
will be charged for ADSs surrendered (U.S. $5.00 per 100 ADSs or portion thereof, plus a $20.00 cable fee). In addition, holders of our ADRs are responsible for any taxes or other governmental charges which may be owing. On March 16, 2016, the
Depositary and Nokia entered into a Share Purchase Agreement (the Nokia SPA). Pursuant to the Nokia SPA, the Depositary will sell to Nokia all of our ordinary shares underlying remaining outstanding ADRs after April 25, 2016. The
Depositary will receive 0.55 Nokia shares for each of our ordinary shares,
22
INFORMATION ABOUT THE GROUP
History and development
which is the same exchange ratio offered in the Nokia Offer for our ordinary shares. The closing of
the sale of our ordinary shares contemplated by the Nokia SPA is subject to customary closing conditions, and the parties to the Nokia SPA expect the settlement of the transacted shares to occur during the first half of May 2016. Thereafter, the
Depositary will sell the Nokia shares received by it at closing. Holders of ADRs who did not exchange their ADRs by April 25, 2016 will only be entitled to their pro rata portion of the proceeds from the sale of the Nokia shares by the Depositary.
After consummating the sale, the Depositary will be discharged from all obligations in respect of the deposit agreement and the ADRs evidencing our ADSs, except to account for the proceeds held for the benefit of the ADR holders who do not exchange
their ADRs. If the transaction contemplated by the Nokia SPA is not consummated or if for any reason the Depositary does not sell the ordinary shares underlying our ADSs as described above, the Depositary may (a) instruct its custodian acting
under the Deposit Agreement to register all ordinary shares with Alcatel Lucent in registered form (nominatif pur) and (b) provide Alcatel Lucent with a copy of the ADS register. Upon receipt of the ADS register, Alcatel Lucent is
required to register or cause to be registered in registered form the ordinary shares represented by our ADSs reflected on the ADS register in each such holders name and to notify such registration to the holder of ADSs at the address set
forth on the ADS register. In accordance with the terms of the deposit agreement, each holder authorized the Depositary, its custodian and Alcatel Lucent to take any and all necessary action to effect such registration.
Delisting of ADSs from NYSE. Following completion of the Nokia Offer and termination of our ADR program, our ADSs have been delisted from the
NYSE. On February 25, 2016, the NYSE filed a Form 25 Notification of Removal from Listing and/or Registration under Section 12(b) of the Exchange Act with the SEC. The delisting of our ADSs from the NYSE pursuant to the Form 25 became
effective on March 7, 2016. The NYSE had previously suspended trading of our ADSs after the market closed on February 25, 2016, and our ADSs are no longer traded on the NYSE. We have not arranged for the listing or registration of our ADSs
on another U.S. national securities exchange or for their quotation in a quotation medium in the United States.
Intention to Terminate
US Reporting Obligations. Following satisfaction of the relevant deregistration conditions under the U.S. securities laws, we intend to deregister all classes of our registered securities under U.S. securities laws, thereby terminating our reporting
obligations under the U.S. securities laws. Following the termination of our reporting obligations under the U.S. securities laws, much less information would be made available about Alcatel Lucent pursuant to the U.S. securities laws.
Other Recent Events
Change in credit
rating. On March 21, 2016, Standard & Poors raised its long-term corporate ratings on Alcatel-Lucent and Alcatel-Lucent USA Inc. to BB+ from B+, with positive outlook. The ratings on the debt issued by Alcatel-Lucent and Alcatel-Lucent USA
Inc. were also raised to BB+ from B+, and the B short-term corporate credit rating on Alcatel-Lucent was affirmed.
2015 dividend. Our Board has determined not to pay a dividend on our ordinary shares based on 2015
results (there will no longer be any ADSs outstanding at the time of our Annual Shareholders Meeting - see Section 10.2.6 American Depositary Shares (ADSs). Our Board will present this proposal at our Shareholders
Meeting to be held in 2016.
Termination of our revolving credit facility. On February 4, 2016, we sent a termination notice, effective
February 9, 2016, on the 504 million revolving credit facility we entered into on December 17, 2013 with a syndicate of twelve international banks, which had remained undrawn.
Termination of Qualcomm license. On February 4, 2016, Qualcomm notified us that they were exercising their right to terminate one
of our two license agreements (that were signed on April 1, 2015) with immediate effect upon the closing of the Nokia Offer. Pursuant to the license agreement, Qualcomm had the right to terminate the license agreement upon a change of control. The
termination resulted in the acceleration of all remaining unpaid quarterly royalty payments of 278 million (U.S. $302.5 million) payable to Qualcomm within 30 days of
termination. The full carrying amount of the patent rights recognized in other intangible assets will be impaired for 287 million in the first quarter ended
March 31, 2016. With respect to our rights under the terminated license, we will now be covered by rights previously negotiated between Nokia and Qualcomm.
Repayment of 8.50% Senior Notes. On January 15, 2016, we repaid the
190 million remaining outstanding under our 8.50% Senior Notes, on the maturity date of these notes.
Redemption in full of Senior Notes due 2017 and 2020. On January 11, 2016, in connection with the success of the initial Nokia Offer, we
announced that our wholly-owned subsidiary, Alcatel-Lucent USA Inc., exercised its option to redeem early in full the entire outstanding $700 million principal amount of its 6.750% Senior Notes due 2020, the entire outstanding $500 million
principal amount of its 8.875% Senior Notes due 2020 and the entire outstanding $650 million principal amount of its 4.625% Senior Notes due 2017, in accordance with the terms of the Notes and of the respective Indentures. The redemption was
completed February 10, 2016.
Nokia Revolving Liquidity Support Facility. On February 3, 2016, Nokia and Alcatel Lucent USA
Inc. entered into a U.S. $2 billion Revolving Liquidity Support Facility, divided in the following three tranches: Facility A, for U.S. $686 million, with a maturity date of June 30, 2017; Facility B for U.S. $546 million, with a
maturity date of December 31, 2019; and Facility C, for U.S.$768 million, with a maturity date of November 15, 2020. This Facility was available for the financing of the redemption of 2017 and 2020 Senior Notes, and is also available for
the general purposes of the Alcatel Lucent Group.
Nokia Revolving Facility. On April 13, 2016, Nokia Corporation and Alcatel-Lucent
Participations entered into a 1 billion Revolving Credit Facility for a two-year term. This Revolving Credit Facility is available for the general purposes of Alcatel-Lucent Participations.
23
INFORMATION ABOUT THE GROUP
History and development
Redemption of the 2018 OCEANE. Following the announcement by the AMF of the results of the reopened
Nokia Offer on February 10, 2016, and the conversion by Nokia of all the OCEANE 2018 it held on February 12, 2016, less than 15% of the OCEANE 2018 initially issued remained outstanding. Consequently, and pursuant to the prospectus of the
2018 OCEANE, we informed the holders of OCEANE 2018 that we would redeem at par plus accrued and unpaid interest all of the outstanding OCEANE 2018. The redemption was completed on March 21, 2016.
Highlights of transactions during 2015
The
Nokia Transaction
On April 15, 2015, Alcatel Lucent and Nokia announced their intention to combine to create an innovation leader in
next generation technology and services. According to the Memorandum of Understanding entered into by them on that date, Nokia would acquire Alcatel Lucent through a public exchange offer in France and in the United States. The all-share transaction
was valued at EUR 15.6 billion on a fully diluted basis, on the basis of EUR 0.55 per new Nokia share for every Alcatel Lucent share. On June 4, Alcatel Lucent announced the completion of the required consultation of its Works Council,
which indicated that it did not oppose the proposed combination with Nokia. On July 30, our Company announced the governance structure to lead our Group as it prepared for the proposed combination with Nokia, with Mr. Philippe Camus taking
over the office of Chief Executive Officer, in addition to his position of Chairman of the Board of Directors, further to Mr. Michel Combes resignation (see Governance below). On August 14, Nokia filed a Form F-4
Registration Statement containing its preliminary Exchange Offer/Prospectus with the U.S. Securities and Exchange Commission (the SEC), concerning the offer in the United States. On October 7, 2015, Nokia announced the planned
leadership and organizational structure for the combined Nokia and Alcatel Lucent. On October 21, Nokia announced that all regulatory approvals required to allow Nokia to proceed with its acquisition of Alcatel Lucent had been received. On
October 28, our Board of Directors issued a favorable opinion on the public exchange offer. On October 29, Nokia filed its draft French offer document (projet de note dinformation) with the AMF. On November 12, Alcatel
Lucent filed its draft response offer document (projet de note en réponse) with the AMF. On November 18, Nokia launched its public exchange offer for the Alcatel Lucent Securities in both France and the United States. On
December 2, Nokias shareholders approved the issuance of the Nokia shares to be exchanged in the context of the offer. On December 23, the initial offer period closed in both France and the United States.
Other Matters
Changes in credit ratings. On
August 28, 2015, Moodys upgraded Alcatel-Lucents Corporate Family rating to B2 from B3, the convertible notes (OCEANE) ratings to B3 from Caa1, and the senior unsecured ratings to B2 from B3. All ratings
remain on review for upgrade. On April 20, 2015, Moodys had placed on review for upgrade all of Alcatel-Lucents ratings.
On August 5, 2015, Standard and Poors raised its long-term corporate credit ratings on Alcatel-Lucent and Alcatel-Lucent USA Inc. to B+
from B, as well as the debt issued by Alcatel-Lucent and Alcatel-Lucent USA. All ratings remain on CreditWatch with positive implications. On April 17, 2015, Standard & Poors had placed Alcatel-Lucent ratings on CreditWatch with
positive implications.
Tender offer on Senior Notes due 2020. Pursuant to a tender offer launched on July 31, 2015, on
September 4, 2015, Alcatel-Lucent USA Inc. repurchased an aggregate of U.S. $300 million (268 million) nominal amount of 6.75% Senior Notes due 2020 for a total cash
amount of U.S. $324 million (289 million) excluding accrued interest. The Notes tendered in the offer were cancelled.
Amendments to the terms of the long-term compensation schemes of the Group employees and of the CEO in the context of the contemplated Nokia
Offer. In the context of the contemplated combination, the Alcatel-Lucent Board of Directors, at its meetings of April 14, July 29, October 28 and December 1st,
2015, approved several amendments to the existing long-term compensation schemes of the Group employees and the CEO including particularly (i) the acceleration of the vesting of all stock options held by Group employees, (ii) the
opportunity for beneficiaries holding performance shares not vested prior to the completion of the Nokia Offer, to waive their rights under their unvested performance shares, under certain conditions, in exchange for a number of Alcatel-Lucent
shares equal to the number of performance shares they would have been entitled to receive under the relevant plans and (iii) the grant of unrestricted shares for compensation of the stock options commitment taken in 2014 to the beneficiaries
concerned. The benefit of these amendments was subject notably to the beneficiaries undertaking to sell the shares thus received on the market two trading days at the latest before the last day of the reopened Nokia Offer. Beneficiaries of certain
plans which could not be accelerated were offered a liquidity mechanism by Nokia. For more information, see Section 8.1.8 Mechanisms put in place with respect to long-term compensation instruments in the context of the Nokia Offer.
Governance. At its meeting of July 29, 2015, our Board of Directors accepted the resignation of Mr. Michel Combes from his
position of CEO and Director of Alcatel-Lucent, effective on September 1, 2015. Mr. Philippe Camus, then Chairman of the Board of our Company, was appointed as Chairman and Interim CEO, effective September 1, 2015, for the transition
period pending the completion of the Nokia transaction. For more information, see Section 7.1.2 Principles of organization of our Companys management. Mr. Philippe Guillemot, Chief Operating Officer, was put in charge of
leading the operational management of the Alcatel Lucent Group. Mr. Jean Raby, Chief Finance and Legal Officer, was given the responsibility for completing the proposed transaction with Nokia. Messrs. Philippe Guillemot and Basil Alwan
(President of the IP Routing & Transport business line) were designated to jointly lead the integration team. During the transition period pending
24
INFORMATION ABOUT THE GROUP
History and development
completion of the Nokia transaction, the leadership team was given the responsibility for achieving
Alcatel-Lucents 2015 targets under The Shift Plan, closing the proposed transaction with Nokia and preparing for the integration with Nokia. For more information, see Section 7.1 Chairmans corporate governance report.
Upon recommendation of the Compensation Committee and the Corporate Governance and Nominations Committee, the Board approved the terms
and conditions of the departure of Mr. Michel Combes, as well as the execution of a non-compete agreement with him in order to ensure the protection of the Companys business going forward, given Michel Combes level of expertise in
the telecom sector and his involvement in the business of the Company. For more information, see Section 8.2 Status of the Executive Directors and Officers.
Significant shareholding. According to the notification filed with the AMF, and sent to Alcatel-Lucent on April 23, 2015, Odey Asset
Management LLP (UK), acting on behalf of funds it manages, exceeded the 5% thresholds of the share capital and voting rights, respectively, and then declared that it went below, on July 3, 2015, the 5% thresholds of the share capital and voting
rights. Odey Asset Management LLP (UK) held, at July 3, 2015, 139,392,474 Alcatel-Lucent shares representing 4.92% of the share capital and 4.84% of the voting rights of Alcatel-Lucent. It is
Alcatel-Lucents understanding that Odey Asset Management LLP (UK) tendered substantially all of their shares into the Nokia Offer. According to an AMF filing, dated January 7, 2016, Odey Asset Management LLP (UK) owned 161,791
Alcatel-Lucent shares as of that date.
2014 dividend. Our Board determined not to pay a dividend on our ordinary shares and ADSs based
on the 2014 results. This proposal was approved at our Annual Shareholders Meeting on May 26, 2015.
Appointment of a new
Director. The shareholders approved the appointment of Mrs. Sylvia Summers as Director of our Company at the Shareholders Meeting held May 26, 2015, for a period of three years. Mrs. Sylvia Summers, 63 years old, is both a
French and U.S. citizen, and has a strong expertise in the high tech industry sector.
Acquisition of the remaining shareholding of
Alda Marine. On March 18, 2015, our subsidiary Alcatel-Lucent Submarine Networks acquired all of the shares of Alda Marine, our former joint-venture with Louis Dreyfus Armateurs (LDA), previously held by LDA, for 76 million in cash. LDA remains our strategic marine partner. In conjunction with such acquisition, Alcatel-Lucent Submarine Networks
entered into a 86 million credit facility agreement with a seven year-maturity that was fully drawn at that date. This 86 million also partially covered the acquisition by Alcatel-Lucent Submarine Networks of a cable vessel.
Highlights of transactions during 2014
Disposals
Disposal of cyber-security services. On
December 31, 2014, we completed the disposal of our cyber-security services &
solutions and communications security activities to Thales for a cash price of 41 million.
Disposal of Alcatel Lucent Enterprise. On September 30, 2014, Alcatel Lucent completed the disposal of 85% of its Enterprise business to
China Huaxin, following the binding offer received early February 2014, for a cash price of 205 million.
Disposal of LGS. On March 31, 2014, we completed the disposal of LGS Innovations LLC to a U.S.-based company owned by a Madison Dearborn
Partners-led investor group that includes CoVant, for a cash price of U.S.$110 million (81 million) after working capital adjustment. The agreement includes an earnout
of up to U.S.$100 million, based on the divested companys results of operations for the 2014 fiscal year, but for which we are not expecting to receive a significant amount.
Other matters
Repayment of Senior Secured Credit
Facility. On August 19, 2014, using the proceeds of the Oceane 2019 and 2020 described below, together with cash, we repaid the remaining U.S.$1,724 million outstanding of the Senior Secured Credit Facility due 2019.
Tender offer on Senior Notes 2016. On June 24, 2014, we launched a tender offer on our Alcatel-Lucent 8.50% Senior Notes due 2016. On
July 4, 2014, we accepted for purchase an aggregate nominal amount of Senior Notes 2016 of 210 million for a total cash amount of 235 million. The notes tendered in the offer were cancelled. In addition, during the second quarter of 2014, a nominal amount of
19 million of the Senior Notes 2016 was bought back and cancelled for a cash amount of
22 million. Similarly, during the fourth quarter of 2014, a 3 million nominal amount of the
Senior Notes 2016 was also bought back and cancelled for a cash amount of 3 million. As a result, the outstanding aggregate nominal amount for the Senior Notes 2016 is 192 million as of December 31, 2014.
Issuance of OCEANE
2019 and 2020. On June 2, 2014, we launched an offering of OCEANE (OCEANE are bonds convertible into, and/or exchangeable for, new or existing shares of Alcatel Lucent). On June 10, 2014, we issued convertible / exchangeable bonds in two
tranches:
· |
|
The first tranche due January 30, 2019 for a nominal value of 688 million. The conversion price per bond was set at 4.11, giving a conversion premium of approximately 40% over Alcatel-Lucents reference share price on the regulated market Euronext in Paris; |
· |
|
The second tranche due January 30, 2020 for a nominal value of 460 million. The conversion price per bond was set
at 4.02, giving a conversion premium of approximately 37% over Alcatel-Lucents reference share price on the regulated market Euronext in Paris
|
The bonds bear interest at an annual rate of 0.00% and 0.125% respectively, payable semi-annually in arrears on
January 30th, and July 30th, commencing January 30, 2015. At our option, the bonds may be subject to early redemption under certain
25
INFORMATION ABOUT THE GROUP
History and development
conditions. The proceeds were used, together with available cash, to reimburse the remaining
tranche of the 2013 Senior Secured Credit Facility entered into by Alcatel-Lucent USA Inc. as borrower. The purpose of the issuance was also to contribute to the extension of the maturity of our debt and to reduce the cost of indebtedness.
Repayment of 6.375% Senior Notes. On April 7, 2014, we repaid on the maturity date the remaining 274 million outstanding of the 6.375% Senior Notes.
Repayment of
convertible trust preferred securities. On January 13, 2014, we repaid in full the U.S.$931 million principal amount outstanding of the Lucent Technologies Capital Trust I 7.75% convertible trust preferred securities due 2017.
Changes in credit ratings. On November 17, 2014, Moodys changed the outlook on Alcatel-Lucent and Alcatel-Lucent USA Inc. to Positive
from Stable, and affirmed the B3 ratings.
On August 18, 2014, Standard & Poors raised its corporate credit ratings
on Alcatel-Lucent and Alcatel-Lucent USA Inc. from B- to B. The unsecured bonds issued by the Group were also upgraded, from CCC+/B- to B. The Outlook was changed from Positive to Stable.
FCPA investigations. In December 2010 we entered into final settlement agreements with the SEC and the DOJ regarding violations and alleged
violations of the FCPA. We signed a deferred prosecution agreement (DPA) with the DOJ, pursuant to which the prosecution would be deferred for a term of three years and seven days, with the possibility of a one-year extension at the sole
discretion of the DOJ. The DPA entered into effect on December 27, 2010, the date the DOJ filed the charging document with the court. Among other things, the DPA contained provisions requiring the engagement of a French anticorruption
compliance monitor (the Monitor) for three years. Similarly, under the agreement with the SEC, we agreed, among other things, to engage a Monitor for three years. In June 2014, following discussions with the Monitor, the DOJ and the SEC,
we agreed to a six-month extension of the monitorship until December 31, 2014 to provide the Monitor with additional time to confirm certain improvements to our compliance systems. On December 8, 2014, the Monitor submitted his final
report and certified that Alcatel Lucents compliance program, including its policies and procedures, is reasonably designed and implemented to prevent and detect violations of anti-corruption laws within Alcatel Lucent as defined in and
required by the DPA. Following receipt of the Monitors final report, the DOJ filed a motion to dismiss with prejudice the FCPA charges underlying the DPA, which the court granted on February 9, 2015.
Outsourcing agreement with HCL. On July 1, 2014, in connection with the targeted cost savings of The Shift Plan, we entered into a 7-year
Master Service Agreement with HCL Technologies Limited regarding the transfer of a part of our R&D department for certain wireless legacy technologies. For further details, please refer to Section 6.5 Contractual obligations and
off-balance sheet contingent commitments, sub-section Outsourcing transactions, of our 2014 20-F and to Note 28 to our 2014 consolidated financial statements.
Outsourcing agreement with Accenture. On February 28, 2014, in connection with the targeted
cost savings of The Shift Plan, we entered into a 7-year service implementation agreement with Accenture regarding the business transformation of our finance function, including the outsourcing of our accounting function. This agreement supplements
two similar service agreements with Accenture regarding human resources and information technology. For further details, please refer to Section 6.5 Contractual obligations and off-balance sheet contingent commitments, sub-section
Outsourcing transactions, of our 2014 20-F and to Note 28 to our 2014 consolidated financial statements.
Significant
shareholding. According to the notification filed with the French securities market authorities and sent to Alcatel-Lucent on April 21, 2014, the Capital Group Companies, Inc.- (USA) holds, after
acquiring a significant shareholding in Alcatel Lucent, a total of 290,280,811 shares of Alcatel Lucent, representing 10.31% of our capital and 10.14% of the voting rights.
Highlights of transactions during 2013
Appointment of new CEO, CFO, and Vice-Chairman of the Board of Directors. On February 22, 2013, we announced the nomination of Mr. Michel Combes as Chief Executive Officer (CEO) effective on April 1, 2013. His
nomination as Director was approved at our Annual Shareholders Meeting on May 7, 2013. He succeeded Mr. Ben Verwaayen, who had decided not to seek re-election as a Director at such meeting and stepped down as CEO.
On February 22, 2013, our Board of Directors approved the appointment of Mr. Jean C. Monty as Vice-Chairman of the Board, effective
immediately.
On August 28, 2013, we announced the nomination of Mr. Jean Raby as Chief Financial & Legal Officer
effective on September 1, 2013.
Launch of The Shift Plan. On June 19, 2013, we launched The Shift Plan which, upon
implementation, is designed to transform our Company into an IP and cloud networking and ultra-broadband specialist refocused on innovation, transformation and unlocking growth to become a cash generative business from 2015. The details and
objectives of The Shift Plan are described in Section 6.6 Strategy and Outlook, of our 2013 20-F.
As part of The
Shift Plan, a new organization comprised of three reportable segments, Core Networking, Access and Other, became effective as of July 1, 2013. For further details on the breakdown about the new organization, please refer to Section 5.1
Business Organization, sub-section Organization, of our 2013 20-F and to Note 5 to our 2013 consolidated financial statements.
Completion, repricing and termination of multi-year financing commitments. On January 30, 2013, we entered into three Senior Secured Credit Facilities totaling approximately 2 billion. In connection with that transaction, our then existing unsecured
26
INFORMATION ABOUT THE GROUP
History and development
revolving credit facility was terminated. We later terminated all of these facilities, as
discussed in further detail under Section 6.4 Liquidity and capital resources of our 2013 20-F.
Rights issuance. As
part of the implementation of The Shift Plan, in December 2013 we increased our capital with a rights offering guaranteed by a bank syndicate. The rights offering raised
957 million (including the issue premium), through the issuance of 455,568,488 new ordinary shares.
Issuance of notes and convertible bonds, and repurchases of notes and convertible bonds. On April 30, 2013, we made a cash tender offer to
repurchase our 6.375% Senior Notes due 2014, our 2015 OCEANE, and our 8.50% Senior Notes due 2016. (OCEANE are bonds convertible into, and/or exchangeable for, new or existing shares of Alcatel Lucent). As a result, in May and June 2013, we
repurchased and cancelled notes and OCEANE having an aggregate nominal value of 446 million.
On May 14, 2013, Alcatel-Lucent USA Inc. launched an offer to purchase its 2.875% Series B convertible debentures due in 2025, as required
under the terms of the indenture, due to the June 15, 2013 optional redemption date. On June 15, 2013, Alcatel-Lucent USA Inc. repurchased and cancelled a principal amount of U.S.$764 million of such debentures, representing approximately
99.8% of the debentures outstanding. On June 26, 2013, as a first measure under The Shift Plan toward the objective of reprofiling our debt, we launched an offering of OCEANE. The OCEANE mature on July 1, 2018, bear a 4.25% annual interest
rate, and have an initial conversion price of 1.80, equivalent to a conversion premium of approximately 37% over the reference share price of Alcatel-Lucent. The proceeds of this
offering, closed on July 3, 2013, were approximately 621 million, with a nominal value of
629 million. We used the proceeds of this offering to repurchase and cancel some of our existing 5.00% OCEANE due 2015. We paid approximately 780 million in total for such repurchases. In December 2013, a portion of the then outstanding 2015 OCEANE was converted into 48 million of Alcatel-Lucent ordinary shares, and we repaid the remaining part of the 2015 OCEANE for 11
million. Following the rights offering described above, due to the anti-dilution provisions of the OCEANE 2018, the exchange ratio, which was one Alcatel-Lucent share with a nominal value of
2.00 for one OCEANE 2018, was adjusted to 1.06 Alcatel-Lucent shares with a nominal value of 0.05 for one
OCEANE 2018, effective December 9, 2013. The conversion price remained unchanged at 1.80.
Between July and December, 2013, Alcatel-Lucent USA Inc. issued the following series of bonds: U.S.$500 million Senior
Notes due January 1, 2020, with an 8.875% coupon; U.S.$1,000 million Senior Notes due November 15, 2020 with a 6.750% coupon; and U.S.$650 million Senior Notes due July 1, 2017
with a 4.625% coupon. The proceeds of these offerings were used to (i) repay the U.S.$500 million Asset Sale Facility and the remaining outstanding amount of the
300 million Credit Facility which were two of the three Senior Secured Credit Facilities mentioned above; (ii) repay or redeem Alcatel-Lucent USA Inc.s
outstanding Series A and Series B convertible debentures and Lucent Technologies Capital Trust I convertible trust preferred securities; and (iii) prefund the maturity of
274 million principal amount of Alcatel Lucents 6.375% Senior Notes due in 2014. The offerings made in the United States were limited to qualified institutional
buyers.
Capital decrease. Effective as of June, 2013, Alcatel-Lucents capital was reduced to 116,471,561.65 by reducing the nominal value of its shares from 2.00 to 0.05 per share, pursuant to the capital decrease approved at the Extraordinary Shareholders Meeting held on May 29, 2013.
Revolving Credit Facility. On December 17, 2013, Alcatel-Lucent closed a 504 million three-year revolving credit facility with a syndicate of 12 international banks. As of the date hereof, this facility remains undrawn.
Strategic partnership with Qualcomm. On September 30, 2013, we entered into a strategic partnership agreement with Qualcomm Incorporated to
develop small cells for ultra-broadband wireless access. As a result, Qualcomm may purchase up to U.S.$20 million of our shares per year, in four tranches, over the period from 2013 to 2016. Each tranche is subject to a minimum lock-up period of six
months. On September 30, 2013, Qualcomm Incorporated purchased approximately six million treasury shares (representing approximately 0.25% of our share capital) for U.S.$20 million.
End of joint venture with Bharti Airtel. In February 2013, we decided to discontinue our joint venture with Bharti Airtel formed in 2009 for the
management of Bharti Airtels pan-India broadband and telephone services and to help Bharti Airtels transition to a next generation network across India. As a result, the former joint ventures operations were absorbed into a new
business entity set up by Bharti Airtel.
Termination of agreement with RPX. On March 7, 2013, we terminated our contract with RPX
by mutual agreement, resulting in the extinguishment of all obligations of the parties, except for continuing obligations under certain non-disclosure provisions of the contract.
27
INFORMATION ABOUT THE GROUP
History and development
Set forth below is an outline of certain significant events of Alcatel-Lucent beginning in 2006,
the year of the merger of historical Alcatel and Lucent, until 2012:
|
|
|
2006 |
|
Business combination between historical Alcatel and Lucent Technologies Inc., completed on November 30,
2006 Acquisition of VoiceGenie, a leader in voice self-service
solutions development by both enterprises and carriers Acquisition
of a 27.5% interest in 2Wire, a pioneer in home broadband network product offerings Buy-out of Fujitsus interest in Evolium 3G our wireless infrastructure joint venture |
|
2007 |
|
Acquisition of Informiam, pioneer in software that optimizes customer service operations through real-time business performance
management (now a business unit within Genesys) Acquisition of
NetDevices (enterprise networking technology designed to facilitate the management of branch office networks)
Acquisition of Tropic Networks (regional and metro-area optical networking equipment for use in telephony, data, and cable
applications) Sale of our 49.9 % interest in Draka Comteq to Draka
Holding NV, our joint venture partner in this company Sale of our
12.4 % interest in Avanex to Pirelli, and supply agreements with both Pirelli and Avanex for related components
Sale of our 67% interest in the capital of Alcatel Alenia Space and our 33% interest in the capital of Telespazio (a worldwide leader in satellite
services) to Thales. Completion of the contribution to Thales of our railway signaling business and our integration and services activities for mission-critical systems not dedicated to operators or suppliers of telecommunications
services |
|
2008 |
|
Acquisition of Motive Networks, a U.S-based company developing and selling remote management software solutions for automating the deployment, configuration and support of advanced home
networking devices called residential gateways |
|
2009 |
|
Sale of our 20.8% stake in Thales to Dassault Aviation
Sale of Dunkermotoren GmbH, our electrical fractional horsepower motors and
drives subsidiary, to Triton Joint announcement with
Hewlett-Packard (HP) of a 10-year co-sourcing agreement expected to help improve the efficiency of IS/IT infrastructure and create a joint go-to-market approach |
|
2010 |
|
Sale of our 26.7% stake in 2Wire, a U.S.-based provider of advanced residential gateways for the broadband
service provider market, to Pace plc Sale of our Vacuum pump
solutions and instruments business to Pfeiffer Vacuum Technology AG |
|
2011 |
|
- |
|
2012 |
|
Sale of our Genesys business to a company owned by the Permira funds (Permira is a European private equity firm) and Technology Crossover Ventures (a venture capital firm) |
|
28
INFORMATION ABOUT THE GROUP
Structure of the main consolidated companies as of December 31, 2015
4.3 |
Structure of the main consolidated companies as of December 31, 2015 |
The
organization chart below reflects the main companies consolidated in the Group as of December 31, 2015, such as listed in note 33 of the consolidated financial statements. Percentages of shares capitals interest equal 100% unless
otherwise specified.
29
INFORMATION ABOUT THE GROUP
Real estate and equipment
4.4 |
Real estate and equipment |
We occupy, as an owner or tenant, a large number of buildings, production sites, laboratories and
service sites around the world. There are two distinct types of sites with the following features:
· |
|
production and assembly sites dedicated to our various businesses; |
· |
|
sites that house research and innovation activities and support functions, which cover a specific region and all businesses. |
A significant portion of production, assembly and research activities are carried out in Europe, in the United States and in China for all of our
businesses.
Most of our production and assembly is outsourced, while the remaining portion is carried out in our production sites. At
December 31, 2015 our total production capacity was equal to approximately 180 000 sq. meters and the table below shows
the breakdown by region for the Core Networking and Access segments, where our production capacity is concentrated.
We believe that these properties are in good condition and meet the needs and requirements of the Groups current and future activity and do
not present an exposure to major environmental risks that could impact the Groups earnings.
The environmental issues that could
affect how these properties are used are mentioned in Section 9.2 Environment of this annual report.
The sites
mentioned in the tables below were selected among our portfolio of 390 sites to illustrate the diversity of the real estate we use, applying four main criteria: region, business segment, type of use (production/assembly, research/innovation or
support function), and whether the property is owned or leased.
|
|
|
Alcatel-Lucent, production capacity at December 31, 2015 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands of sq. meters) |
|
EMEA |
|
|
Americas |
|
|
APAC |
|
|
Total |
|
|
|
|
|
|
|
Core Networking |
|
|
61 |
|
|
|
0 |
|
|
|
5 |
|
|
|
66 |
|
Access |
|
|
37 |
|
|
|
30 |
|
|
|
47 |
|
|
|
114 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL |
|
|
98 |
|
|
|
30 |
|
|
|
52 |
|
|
|
180 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Production/Assembly sites |
|
|
|
|
|
|
|
|
|
|
|
Country |
|
Site |
|
|
Ownership |
|
|
|
China |
|
|
Shanghai Pudong |
|
|
|
Full ownership |
|
China |
|
|
Shanghai Songjiang |
|
|
|
Full ownership |
|
France |
|
|
Calais |
|
|
|
Full ownership |
|
United Kingdom |
|
|
Greenwich |
|
|
|
Full ownership |
|
United States |
|
|
Meriden |
|
|
|
Full ownership |
|
|
|
The main features of our production sites are as follows:
· |
|
site of Shanghai Pudong (China): 142,000 sq. meters, of which 23,000 sq. meters is used for the production for Fixed Access and Wireless Access activities, the remainder of the site is used mainly
for offices and laboratories; |
· |
|
site of Shanghai Songjiang (China): 22 340 sq. meters used for the manufacturing of products for RFS (Radio Frequency Systems); |
· |
|
site of Calais (France): 45,000 sq. meters is used for the production of submarine cables; |
· |
|
site of Greenwich (United Kingdom): 16 000 sq. meters is used for the production of submarine cables; |
· |
|
site of Meriden (United States): 21 000 sq. meters, used for the manufacturing of products for RFS (Radio Frequency Systems);
|
30
INFORMATION ABOUT THE GROUP
Real estate and equipment
|
|
|
Research and innovation and support sites |
|
|
|
|
|
|
|
|
|
|
|
Country |
|
Site |
|
|
Ownership |
|
|
|
Germany |
|
|
Stuttgart |
|
|
|
Lease |
|
Germany |
|
|
Nuremberg |
|
|
|
Lease |
|
Austria |
|
|
Vienna |
|
|
|
Full ownership |
|
Belgium |
|
|
Anvers |
|
|
|
Lease |
|
Brazil |
|
|
São Paulo |
|
|
|
Full ownership |
|
Canada |
|
|
Ottawa |
|
|
|
Full ownership |
|
China |
|
|
Shanghai Pudong |
|
|
|
Full ownership |
|
Spain |
|
|
Madrid |
|
|
|
Lease |
|
United States |
|
|
Plano |
|
|
|
Full ownership |
|
United States |
|
|
Naperville |
|
|
|
Full ownership |
|
United States |
|
|
Murray Hill |
|
|
|
Full ownership |
|
France |
|
|
Villarceaux |
|
|
|
Lease |
|
France |
|
|
Lannion |
|
|
|
Full ownership |
|
France |
|
|
Boulogne Billancourt Headquarters |
|
|
|
Lease |
|
France |
|
|
Orvault |
|
|
|
Lease |
|
India |
|
|
Bangalore |
|
|
|
Lease |
|
India |
|
|
Chennai |
|
|
|
Lease |
|
Italy |
|
|
Vimercate |
|
|
|
Lease |
|
Mexico |
|
|
Cuautitlan Izcalli |
|
|
|
Full ownership |
|
Netherlands |
|
|
Hoofddorp |
|
|
|
Lease |
|
Poland |
|
|
Bydgoszcz |
|
|
|
Full ownership |
|
Romania |
|
|
Timisoara |
|
|
|
Full ownership |
|
United Kingdom |
|
|
Swindon |
|
|
|
Lease |
|
Singapore |
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|
Singapore |
|
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|
Lease |
|
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|
The occupation rate of these sites varies between 50 and 100 % (average rate is 77%); the
space which is not occupied by Alcatel-Lucent is leased to other companies or remains vacant.
The average rate of 77% is based on the global portfolio of Alcatel-Lucent. The facilities presented are the major sites and form a representative sample of our activities.
National security agreement
On November 17, 2006, the Committee on Foreign Investment in the United States
(CFIUS) approved our business combination with Lucent. In the final phase of the approval process CFIUS recommended to the President of the United States that he not suspend or prohibit our business combination with Lucent, provided that
we execute a National Security Agreement (NSA) and Special Security Agreement (SSA) with certain U.S. Government agencies within a specified time period. As part of the CFIUS approval process, we entered into a NSA with the
Department of Justice, the Department of Homeland Security, the Department of Defense and the Department of Commerce (collectively, the USG Parties) effective on November 30, 2006. As of November 20, 2012, the Department of
Commerce ceased to be a party to the NSA. The NSA provides for, among other things, certain undertakings with
respect to our U.S. businesses relating to the work done by Bell Labs and to the communications infrastructure in the United States. Under the NSA, in the event that we materially fail to comply
with any of its terms, and the failure to comply threatens to impair the national security of the United States, the parties to the NSA have agreed that CFIUS, at the request of the USG Parties at the cabinet level and the Chairman of CFIUS, may
reopen review of the business combination with Lucent and revise any recommendations or make new recommendations to the President of the United States, which could lead to new commitments for Alcatel Lucent. In addition, we agreed to establish a
separate subsidiary, LGS Innovations LLC (LGS), to perform certain work for the U.S. government, and hold government contracts and certain sensitive assets associated with Bell Labs. The SSA, effective December 20, 2006, that
31
INFORMATION ABOUT THE GROUP
Material contracts
governs this subsidiary contains provisions with respect to the separation of certain employees,
operations and facilities, as well as limitations on control and influence by the parent company and restrictions on the flow of certain information.
Disposal of LGS. On March 31, 2014, Alcatel-Lucent sold LGS to a U.S. based company. Alcatel-Lucent worked with the U.S. Government to receive the necessary approvals and amend the NSA to allow Alcatel-Lucent to continue
to sell products and services to the U.S. Government through LGS. In addition, by virtue of the sale of LGS, Alcatel-Lucent no longer is a party to the referenced SSA or has directors on the LGS board.
Combination with Nokia and CFIUS. Nokia and Alcatel Lucent entered into an Amended and Restated National Security Agreement (the Amended
NSA) with the three remaining USG Parties. The Amended NSA amends a pre-existing national security agreement between Nokia and certain U.S. Government agencies and replaces the original Alcatel Lucent NSA. The Amended NSA became effective on
January 7, 2016 with Nokias acquisition of the majority of shares of Alcatel Lucent. The Amended NSA is substantively similar to the former Alcatel Lucent NSA, which terminated at that time. The Amended NSA continues to provide for, among
other things, certain undertakings with respect to our U.S. businesses relating to the work done by Bell Labs and to the communications infrastructure in the United States. There is no provision for reopening review of the business combination
between Alcatel Lucent and Nokia in the Amended NSA.
Master Services Agreement and Framework Agreement
On January 8, 2016, Alcatel Lucent and Nokia entered into a Master Services Agreement (the MSA) and a Framework Agreement (the
FA), which set the terms and conditions of intra-group services to be provided between the two companies (and their respective subsidiaries), and of joint activities, in order among other things to ensure the corporate
interest of Alcatel-Lucent and of its minority shareholders.
The MSA covers management services, brand cross-licensing and transfer of
intellectual property rights, and the FA covers human resources, marketing and IT services. The transactions covered by the MSA qualify as regulated transactions pursuant to Article L. 225-38 of the French Commercial Code, and consequently will be
submitted to the approval of Alcatel-Lucents shareholders at the next Annual Shareholders Meeting (with shares of our Company held by Nokia excluded from quorum and majority calculations), whereas the transactions covered by the FA do
not fall within the scope of that article. Our Board of Directors approved the execution of the MSA, upon the recommendation of the Committee of Independent Directors, and of the FA. The Nokia-appointed directors, that is, Messrs. Risto
Siilasmaa, Rajeev Suri, Timo Ihamuotila and Samih Elhage, and Ms. Maria Varsellona, did not participate in the vote concerning the approval of the MSA. (See Section 7.1.4.5
Committee of Independent Directors The Committees work in early 2016, and Section 7.2 Regulated Agreements Other commitments and related party
transactions).
Both agreements state that services are to be provided at arms length conditions, including fair and
proportional allocation of commitments and revenues between Alcatel-Lucent and Nokia (and their respective subsidiaries), and of synergies realized by the parties, including synergies achieved through product portfolio decisions. The pricing
mechanisms applicable under both agreements are in line with the Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations issued by the Organization for Economic Co-operation and Development (OECD). Both agreements also
contain provisions protecting the Alcatel-Lucent Group from any significant increase in costs or fees incurred in connection with the agreements. In addition, the MSA provides for specific information rights to the members of our Companys
Committee of Independent Directors.
A Steering Committee comprised of top managers of Alcatel-Lucent and Nokia, equally represented,
supervises the overall performance of these agreements. If a dispute arises under the MSA or the FA that cannot be resolved by the Steering Committee, the matter is escalated to the Nokia Board of Directors and to the Alcatel-Lucent Board of
Directors, but in the case of the latter, if the dispute concerns the MSA, with the participation only of the independent directors.
The MSA and the FA were entered into for a twelve-month period, and are automatically renewable for similar periods, except that they may be
terminated by either party at any time with three-months prior notice.
Nokia Liquidity Support Facility
On February 3, 2016, Nokia Corporation and Alcatel Lucent USA Inc. entered into a U.S.$2 billion Revolving Liquidity Support Facility (the
Facility), which comprises:
· |
|
Facility A, for U.S.$686 million, with a maturity date of June 30, 2017; |
· |
|
Facility B, for U.S.$546 million, with a maturity date of December 31, 2019; and |
· |
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Facility C, for U.S.$768 million, with a maturity date November 15, 2020. |
Applicable interest rate is 2.40% per annum on drawn amounts. The commitment fee is 30% of 2.40% on available undrawn amounts.
The Facility was made available to Alcatel Lucent USA Inc. to finance the redemption of U.S.$700 million of its 6.750% Senior Notes due 2020, U.S.$500 million of its 8.875% Senior Notes due 2020, and U.S.$650 million of its 4.625%
Senior Notes due 2017 (together, the Notes), including any related fees, costs and expenses, as well as for general purposes of the Alcatel Lucent Group. The Notes were redeemed in February, 2016 (see Section 6.4 Liquidity and
Capital Resources).
32
INFORMATION ABOUT THE GROUP
Material contracts
Borrowings under the Facility rank pari passu with all other unsecured and unsubordinated
indebtedness of Alcatel Lucent USA Inc. The Facility does not contain any financial covenants. It does contain certain undertakings of Alcatel Lucent USA Inc. (including, for example, certain negative covenants, such as with respect to guarantees,
indemnities and financial indebtedness), but none of these undertakings prevent Alcatel Lucent USA Inc. from engaging in any activities which would have been permitted under the indentures relating to the Notes.
The description of the Facility set forth in this subheading is qualified in its entirety by reference to the Facility, a copy of which is filed
as Exhibit 4.1 to this Annual Report on Form 20-F, and is incorporated herein by reference.
Nokia Revolving Credit
Facility
On April 13, 2016, Nokia Corporation and Alcatel-Lucent Participations entered into a 1 billion Revolving Credit Facility for a two-year term.
Applicable interest rate is EURIBOR plus a 0.95% margin per annum on drawn amounts. A utilization
fee of 0.10%, 0.20% or 0.40% per annum depending on the level of use of the facility, is also applicable. There is a commitment fee of 35% of 2.40% on available undrawn amounts.
This Revolving Credit Facility is available for the general purposes of Alcatel-Lucent Participations.
Borrowings under the Revolving Credit Facility rank pari passu with all other unsecured and unsubordinated indebtedness of Alcatel-Lucent
Participations. The Facility does not contain any financial covenants.
The description of the Revolving Credit Facility set forth in
this subheading is qualified in its entirety by reference to the Revolving Credit Facility, a copy of which is filed as Exhibit 4.2 to this Annual Report on Form 20-F, and is incorporated herein by reference.
33
INFORMATION ABOUT THE GROUP
34
Description of the Groups activities |
5 |
35
DESCRIPTION OF THE GROUPS ACTIVITIES
Business Organization
5.1 |
Business Organization |
The operating segments of our business in 2015 were as follows:
· |
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Core Networking which includes: |
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IP Routing, comprised of our IP routing portfolio and Nuage Networks |
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IP Transport, comprised of our terrestrial optics, submarine optics and wireless transmission portfolios |
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IP Platforms, which includes software as well as services |
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Wireless Access, which includes all of our mobile radio access products and technologies (LTE, CDMA, W-CDMA, GSM/EDGE, small cells) |
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Fixed Networks, focusing on copper and fiber access technologies |
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Managed Services, which includes Network Operations and other focused solutions for the carrier and strategic industries market, |
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Licensing, positioned around the monetization of our patent portfolio. |
In addition, we have three organizations with specific focuses:
· |
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Operations: the operations organization includes delivery, operations and critical functions to help drive and monitor the implementation of The Shift Plan. |
· |
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Sales: our sales organization focuses on driving customer relationships and serving as the face of the company to the customer. |
· |
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Strategy and Innovation: responsible for shaping the agenda of the future of the company. This organization oversees Bell Labs and manages our intellectual property. |
We also have the following corporate functions: Finance and Legal, Human Resources, and Marketing.
Impact of Nokia transaction: On April 15, 2015, we and Nokia Corporation announced the signing of a memorandum of understanding under
which Nokia would make an offer for all of Alcatel-Lucents securities through a public exchange offer in France and in the United States, subject to certain conditions. More information regarding the transaction can be found in Chapter 4.2
History and development - Recent events - Update on the Nokia transaction and related Matters - Initial and reopened Nokia Offer of this Annual Report.
On October 7, 2015 Nokia announced the planned leadership and organizational structure that it intends to implement to create an innovation
leader in next generation technology and services for an IP connected world, and to position the combined company to create the foundation of seamless connectivity for people and things wherever they are.
Under the new organizational structure, the Networks business of the combined company is being
conducted through four business groups: Mobile Networks, Fixed Networks, Applications & Analytics and IP/Optical Networks. These business groups provide an end-to-end portfolio of products, software and services to enable the combined company to
deliver the next generation of leading networks solutions and services to customers. Alongside these, Nokia Technologies, which focuses on advanced technology development and licensing, continues to operate as a separate business group. Each
business group has strategic, operational and financial responsibility for its portfolio and is fully accountable for meeting its targets. The four Networks business groups have a common Integration and Transformation Office to drive synergies and
to lead integration activities.
The combined company has a common sales organization across the business groups, except for Nokia
Technologies. In addition, since the closing of the exchange offer, there are additional units within the combined company, who report directly to the President and CEO.
For financial reporting purposes, from the first quarter 2016, Alcatel-Lucent intends to align its financial reporting under three reportable
segments: (i) Ultra Broadband Networks comprising Mobile Networks and Fixed Networks, (ii) IP Networks and Applications comprising IP/Optical Networks and Applications & Analytics, all within the Networks business, and (iii) Other, which
comprises Group-wide support functions and certain unallocated businesses.
Strategic focus of the combined company: As a result
of the Nokia acquisition, the combined company has the innovation capability, the portfolio, and the global scale to lead in shaping and deploying the technologies that are at the heart of an increasingly connected world. We are well positioned to
lead the change in our industry, which is undergoing rapid technological development and continuous disruption, driven by some key trends:
· |
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Unprecedented increase of data, driven by consumer demand for video, social networking, and other Cloud-based services that are increasingly accessed through mobile devices;
|
· |
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Ongoing digitization of business processes as well as peoples lives, generating vast quantities of data that need to be analyzed and managed, as services and entire industries become ever
more connected through Cloud-based applications, and Internet of Things (IoT) becomes a reality; |
· |
|
Demand and stricter guidelines for enhanced network and application security and privacy to protect individuals, businesses, public services, and national interests that are all increasingly
reliant on connectivity and data; |
· |
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The convergence of disparate network technologies - across mobile, fixed, and IP and optical networks - to enhance network performance and profitability, and simplify networking services; and
|
36
DESCRIPTION OF THE GROUPS ACTIVITIES
Business Organization
· |
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The convergence of telecommunications and IT domains, as networks become increasingly virtual, managed through software applications and platforms via the Cloud, decoupled from hardware, and
increasingly connected to open-source ecosystems through application programming interfaces (APIs). |
As the
industry changes, so does the market opportunity. Operators are facing slowing growth of wireless subscribers, declining revenues per user from connectivity services, and ever-increasing demand for data that is driving traffic on their networks.
While driving network efficiency is key, scaling the subscriber base and diversifying service provision is also critical.
In parallel,
enterprises and webscale players are requiring greater flexibility with network infrastructures to adjust to the convergence of IT and telecommunications technologies, and to take advantage of the scalability and efficiency that Cloud-based software
platforms offer.
To address these challenges, we are focusing our strategy in four areas:
1. Leading in network infrastructure, converging mobile, fixed, IP and optical networks, optimized by and for the Cloud
With a complete portfolio spanning mobile, fixed and IP and optical networks, we are a global market leader in network infrastructure for
telecommunications operators. We will continue to drive profitability by extracting cost through our ultra-lean operating model. We will also enhance network efficiency and performance by converging technologies from across our business groups to
create one seamless network for all services. By maximizing the synergies across our products and services - e.g., copper, fiber, LTE, and in the future, 5G - we will give our customers the flexibility to create customized broadband access solutions
to the most economical point. Other areas in which we will leverage our converged portfolio are Software Defined Networks (SDN), Cloud transformation, and backhaul solutions. Furthermore, we will enhance our leadership through innovation
in next-generation technologies: 5G in mobile networks, TWDM-PON and XG-FAST in fixed networks, and 400G/1TB-transport in optical networks.
2. Expanding
in adjacencies and gaining software leadership for network optimization, service innovation, and customer experience enhancement
Our goal
is to lead in the network software platforms that will help our customers extract greater value from their network infrastructure. We are building a coherent suite of software and services that bring together Network Function Virtualization
(NFV), SDN, and advanced applications and analytics, to enable customers to more easily manage, scale, automate, secure, and monetize their networks through intuitive Cloud-based applications. We have strong products and services in this
area including subscriber management, device management, IP Multimedia Subsystems, and Customer Experience Management, which further build our strong operator
customer relationships and leverage our infrastructure expertise; and with CloudBand and Nuage Networks products, our software expertise extends into the enterprise market. Furthermore, we are
developing transversal platforms for security in IoT for connectivity management and application enablement, as well as for analytics to provide network, customer, and business intelligence.
3. Diversifying by providing network performance and flexibility for large-scale enterprises
The increasing digitization of enterprises offers growth opportunities beyond a core customer base of telecommunications operators. We are focused
on serving the needs of webscale players, technology-centric fortune 500 enterprises, and public sector bodies that require high performance networks and seek to take advantage of the convergence of telecommunications and IT technologies. More
specifically, we are building on the SDN expertise of Nuage Networks to further enter the enterprise datacenter business, leveraging our IP and optical assets to increase our presence in key industry verticals, such as utilities and transport. We
are also deploying our expertise in LTE to capture a greater share of mobile networks in the public safety market, and offering our software platforms to enterprise customers.
4. Leveraging new business opportunities created through the Internet of Things
Our strategy is guided by our vision of the Programmable World a world in which connectivity will greatly expand and, link
people and billions of physical objects. In this world automated analytics will both improve and simplify peoples lives, reduce costs and optimize business operations. For instance, we envision widespread use of autonomous driving cars that
offer the promise of reducing road fatalities significantly and optimizing traffic flows; smart monitoring systems for utilities, decreasing the waste of precious resources such as water and energy; smart cities, optimizing traffic flows and energy
consumption; digital health applications to offer patients remote monitoring and preventive care benefits; increasing the well-being of humans, traffic management systems for drones to increase public safety and drone reliability; public safety
applications for positioning and augmented reality, to improve first responders work processes and, thus, increase the chances of survival of accident victims and the safety of the first responders; and virtual reality, enabling unprecedented
experiences.
The IoT plays a pivotal role in translating our vision into a reality. It creates new opportunity in all customer and
technology segments, and we have a two-fold strategy to capitalize on these opportunities. Firstly, we are designing, building, and optimizing network infrastructure to meet the increased and diverse performance requirements that will enable the
IoT: scalable, flexible, Cloud-based, efficient, and secure. To meet the requirements of IoT, mass communication and low-latency communication are critical. Hence, we are creating a strong portfolio of IoT connectivity solutions that adapt to
specific customer needs, from LTE-based mobile edge computing, to
37
DESCRIPTION OF THE GROUPS ACTIVITIES
Business Organization
narrowband IoT, LTE-M, and 5G. Moreover, we provide solutions for IoT core, security and platforms,
to enable a broad array of uses. Secondly, we are building an ecosystem of products and services that will enable the specific use cases in the areas of connected mobility, public safety, digital health, connected industry, and smart cities.
All of these use cases outlined will provide opportunities for new business models for the players in the IoT ecosystem and create
new pockets of revenue growth for network vendors such as us. We believe we can leverage the strength of our complete and converged portfolio of network infrastructure, software, services and
advanced technologies, to help our customers telecommunications operators, governments, enterprises and webscale players to capitalize on the opportunities from an industry in transition.
5.2 |
Core Networking Segment |
Overview
Profound changes in the telecommunications market are impacting service providers networks.
Mobile broadband data traffic -particularly video - continues to grow rapidly due to affordable smartphones, tablets and mobile devices, higher-speed wireless connectivity and more compelling services, content and applications. Mobile
network operators are also deploying an increasing number of small cell sites to increase wireless capacity and coverage. In addition, increasing competition and next-generation broadband initiatives continue to place demands on fixed network
operators. Together, these factors indicate that service providers operating either fixed or mobile networks must continue to invest in core networking infrastructure and Internet Protocol (IP) applications to keep up with data demands, as users
expect high speed, high quality connections at any time and from anywhere.
Although service providers continue to sell network
connectivity services, competition is robust and prices remain under constant pressure. In addition, service providers have found it difficult to sell value-added services that generate additional revenue streams, such as enterprise communications
services and consumer entertainment services. Alternative web-based applications and services from Internet companies are becoming more appealing to consumers and cost effective for enterprises. Web scale companies, such as Google and Amazon, are
successfully delivering web-based applications and services to end users from large global data centers and related interconnected networks that are simpler to operate and more cost effective than traditional service provide infrastructure.
To support the growth in these web-based applications and services and to make communication within and between data centers more
efficient, new platforms are rapidly emerging. These new platforms integrate telecommunications-oriented IP networking and IT-oriented data center systems using a next generation approach to networking known as Software Defined Networking (SDN). SDN
aims to make networking easier to deploy, more scalable, less prone to error and cheaper to operate by automating many of the processes used to configure, manage and maintain networks and deliver services today. In addition, Network Functions
Virtualization (NFV), in which certain network functions are implemented in software running on commercial off-the-shelf hardware, is emerging as an alternative deployment approach for select IP applications and services. By placing these
virtualized functions in data centers, NFV aims to
significantly increase the efficiency and flexibility of telecommunications networks and services which are critical for success in a cloud-based world.
In response to these changes in the telecommunications market, we have positioned ourselves as a specialist provider of Internet Protocol (IP)
Networking, Cloud, and Ultra-Broadband Access. Our Core Networking segment includes the following divisions: IP Routing, IP Transport and IP Platforms. In 2015, the Core Networking segment continued to invest in a
next-generation network product portfolio spanning each of this segments divisions as well as related professional services. Our next-generation Core Networking product portfolio continues to address the
key challenge of how to simultaneously deliver innovative, revenue-generating services and provide scalable, low-cost bandwidth. In addition, we are investing in our Core Networking portfolio to help service providers to evolve to a more efficient,
cloud-based network infrastructure that embraces Software Defined Networks (SDN) and Network Function Virtualization (NFV) operational models and enables them to launch services faster, generate new revenue and increase business efficiency.
In 2015, the Core Networking segment focused its R&D efforts on:
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New and enhanced IP routing platforms for the core, edge, metro and access parts of the network enabling the transformation to an all-IP network across a range of mobile, residential, business and
network infrastructure applications; |
· |
|
The expansion of our virtualized IP edge routing applications for deployment in NFV environments. |
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The introduction of the Network Services Platform (NSP), a carrier SDN-based software platform that will allow communication service providers in delivering on-demand network services more rapidly,
cost-effectively, and at scale. |
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Optical switching and transport systems and technologies, including 100 Gbps and 200 Gbps WDM, metro platform enhancements, wavelength routing and IP/Optical integration; |
· |
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SDN platforms and solutions that help service providers become more flexible, open and responsive to enterprise networking needs within the data center, between data centers and across the service
provider Wide Area Network (WAN); |
38
DESCRIPTION OF THE GROUPS ACTIVITIES
Core Networking Segment
· |
|
The introduction of Rapport, a software-based, open platform that gives large enterprises and service providers a new and more flexible way to deliver communications and collaboration
services. |
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Enriched NFV capabilities including the ability to operationalize a fully virtualized environment. |
In 2015 our Core Networking segment revenues were 6,780 million,
representing 47% of our total revenues.
IP Routing
Our IP Routing division is focused on delivering the IP routing infrastructure and applications required to meet the challenges of sustaining
massive network traffic growth while supporting the efficient delivery of cloud-enabled business, mobile and residential services. Our IP routing portfolio is targeted to service providers, mobile network operators, cable/multiple system operators
(MSOs), transportation operators, utilities and large-scale enterprises worldwide.
The main product families within our IP routing
portfolio are:
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Internet Protocol/Multiprotocol Label Switching (or IP/MPLS) access, aggregation, edge and core routers. These products direct traffic within and between carriers national and international
networks to enable delivery of a broad range of IP-based services across the residential services (including Internet access, Internet Protocol TV (IPTV), Voice over IP) mobile services (mobile phone and data) and business services (VPNs, business
Internet access) on a single common network infrastructure with superior scalability, performance, reliability and application intelligence; |
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Carrier Ethernet access and aggregation switch/routers. These platforms and devices enable carriers to deliver advanced residential, business and mobile backhaul services, which connect end users
to core networks. These products are mainly used in metropolitan area networks, which span across a city or large campus; |
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Service Aggregation Routers. These platforms facilitate the transition from legacy networking technologies to next generation Carrier Ethernet/packet networking, and are deployed for mobile
backhauling, business services and fixed network aggregation; |
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Service Aware Management. These products help manage all parts of the IP/MPLS network and help service providers with simplified processes to allow new services, proactive troubleshooting, and
streamlined integration within their existing networks; |
· |
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Content Delivery Networks (CDN). These products distribute and store web and video content. They deliver a wide variety of video and other content to businesses and consumers in cost-effective
ways, as well as providing opportunities for new business relationships between service providers and content providers; and
|
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Software Defined Networking (SDN). SDN enables service providers, web-scale operators and large enterprises to build robust, automated and highly scalable data center and networking infrastructures
that deliver secure virtual compute, storage and networking resources for multiple tenants and user groups. |
The
applicability of our IP Routing portfolio continues to expand to meet the needs of service providers. The following are some of our key areas of focus and investment in 2015:
· |
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Network Services Platform (NSP) In 2015, Alcatel-Lucent introduced the NSP, a carrier SDN-based software platform that will allow communication service providers to deliver on-demand network
services more rapidly, cost-effectively, and at scale. |
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7750 Service Router In 2015, we expanded our portfolio of IP/MPLS edge routers to deliver more performance, features and flexibility for our IP/MPLS networks with a range of new compact,
high-density, power efficient platforms. |
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Virtualized Services Platform (VSP) The Nuage Networks VSP enables cloud providers, large enterprises and service providers to virtualize and automate networks in accordance with established
policies in order to provide secure connectivity to multiple users. In 2015, we saw strong customer momentum for the Nuage VSP platform across these customer types in all regions. We also enhanced the offering by introducing the Virtualized Networks
Services (VNS) solution which will help enterprises and service providers extend the benefits of SDN to branch locations anywhere. |
· |
|
Virtualized Service Router (VSR) In 2015 we continued to expand our portfolio of virtualized IP edge routing applications for deployment in NFV environments. The VSR enables rapid service
innovation, extends service reach, opens new markets, and accelerates time to market for our customers. |
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Core router platform We created advanced features for the 7950 Extensible Routing System (XRS), a next-generation core IP router designed to help service providers address the rapid growth
of data traffic on core networks. |
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|
Enhanced IP edge routing features We continue to develop advanced features for our IP edge routers such as policy and subscriber management, advanced video delivery, carrier Wi-Fi, security,
and datacenter interconnect. |
· |
|
Mobile backhaul We expanded our broad IP mobile backhaul portfolio to address the challenges of deploying mobile backhaul for small cell networks while, at the same time, ensuring seamless
backhaul management and operations across the broader 3G or 4G/LTE mobile network. |
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|
Mobile packet core Our mobile packet core solution supports LTE Evolved Packet Core (EPC) and next-generation packet core functionality to seamlessly deliver mobile traffic across all
wireless technologies. In 2015, we delivered to market a virtualized evolved Packet Core (vEPC) product suite including virtualized mobile gateways and virtualized mobility management.
|
39
DESCRIPTION OF THE GROUPS ACTIVITIES
Core Networking Segment
Our service routers and carrier Ethernet service switches share a single network management system
that provides consistency of features, quality of service, and operations, administration and maintenance capabilities from the network core to the customer edge. These capabilities are critical as service providers transform their networks
to support new types of IP-based services. Our service routers enable service providers to deliver personalized services to business, residential and mobile users, ensuring high capacity, reliability and high performance with enhanced quality of
experience.
IP Transport
Our IP Transport division designs equipment for the transmission of high-speed data over fiber optic connections. The division focuses on terrestrial optical equipment for land (terrestrial) and undersea (submarine), for short
distances in metropolitan and regional areas, and for traffic aggregation of fixed and mobile multi-service networks. Our transport portfolio also includes microwave wireless transmission equipment.
Terrestrial optics
Our terrestrial optical products
offer a portfolio designed to support service growth from the metro access to the network core. With our products, service providers can manage voice, data and video traffic patterns based on different applications or platforms. Service providers
that use our products can offer a wide variety of managed data services, including multiple service quality capabilities, variable service rates and traffic congestion management by leveraging their existing network infrastructure to offer new
services and to support ultra-broadband services.
As a leader in optical networking, we play a key role in the transformation of
optical transport networks. Our wavelength-division multiplexing (WDM) products address a variety of markets, from the enterprise to the ultra-long-haul, and meet service provider requirements for cost-effective, scalable networks that can handle
their increased data networking needs. Our WDM product portfolio is based on an intelligent photonics approach which eliminates the need for frequent on-site configuration. The 100 Gbps, 200 Gbps and 400 Gbps technology available in our WDM products
along with 10 Gbps, 40 Gbps, 100 Gbps, and 200 Gbps high speed WDM uplinks allow operators to solve bandwidth bottlenecks, while offering the lowest cost per transported bit. This approach facilitates the design and installation of a more flexible
WDM network that is easier to operate, manage and monitor.
In 2015, the terrestrial optics division expanded the scalability, agility,
versatility and performance features of our optical networking product portfolio, allowing service providers to more efficiently transport increasing volumes of IP-based traffic. During 2015, the terrestrial optics division continued and expanded
its R&D efforts on:
· |
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Wavelength Routing. This capability, known in the industry as CDC-F for colorless, directionless, contentionless with flex spectrum, allows service providers to re-route transport wavelengths in an
automated manner, enabling the
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|
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provisioning and reconfiguration of operations that previously required the on-site presence of a technician. |
· |
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Metro platform enhancements. Two new versions of our flagship 1830 PSS platform accommodate the space and cost constraints of service provider metro networks, and support any mix of packet, OTN,
and photonic services via a suite of new compact, highly integrated line cards. |
· |
|
100 Gbps and 200 Gbps WDM. We continue to make investments to enable wider adoption of 100 Gbps WDM in the core network and metro network as well in increasingly more challenging and complex use
cases. We were the first to deliver a programmable 100 Gbps/200 Gbps DWDM line card solution that allows service providers to meet todays bandwidth demands and seamlessly grow capacity when needed without additional investment.
|
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IP / Optical integration. By implementing an enhanced version of the standards-based generalized multiprotocol label switching (GMPLS) User Network Interface, our IP and optical
platforms can share information, automate service creation, and optimize network resources across IP and optical networks. This functionality is a critical building block of software-defined networking (SDN) management, and allows
service providers to architect combined IP and optical networks that operate more efficiently and thus require significantly fewer resources than separately designed and managed networks. |
These optical products and technologies provide cost-effective, managed platforms that support a wide variety of services and are suitable for
many different network configurations.
Submarine
With over 575,000 km of submarine cables already installed and 330,000 km of submarine cables under maintenance agreements, we are the industry leader in installing and maintaining undersea telecommunications cable networks using
optical fiber transmission. According to industry analysts, we have an approximately 40% market share. Our submarine cable networks connect continents, mainland to islands and between islands or several points along a coast. The market is mainly
driven by capacity demand in response to surging broadband traffic volumes, and connectivity demand. Competition between service providers and need for routes redundancy are secondary drivers.
Customers in this market are primarily service providers grouped into consortiums. We also see an increasing level of investment from webscale
content providers such as Google, Microsoft and Facebook. As a unique integrated player, we provide to our customers design, development, manufacturing, marine survey, marine lay, civil works, installation, commissioning and maintenance of cables.
Our submarine activity includes:
· |
|
Repeatered cables, which are turnkey systems for distances that exceed 500 km, using repeaters to amplify the signal over trans-oceanic distances,
|
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DESCRIPTION OF THE GROUPS ACTIVITIES
Core Networking Segment
· |
|
Unrepeatered cables, for distances of less than 500 km, |
· |
|
Upgrades of terminal equipment at both ends of a cable to increase the capacity of the systems (typically to 100G gigabits per second), |
· |
|
Marine maintenance to repair damaged systems when needed, and after sales services. |
We have also started to broaden our customer base by entering the oil and gas market, notably to connect oil and gas offshore platforms to the coast, and to provide permanent reservoir monitoring solutions.
This market is characterized by relatively few large contracts that often require more than a year to complete.
Amidst the on-going upward cycle market recovery, telecom projects have been developing on links between North and South America (like Seabras),
between Europe and Asia through India and Middle-East (like Sea-Me-We-5), on the African coasts (like ACE Phase II), as well as in South Asia, Pacific and Australia routes (like Moana).
In the oil and gas market, we started the construction of a project to connect off-shore platforms along the northwest Australian coast.
In 2015, we sold our 40% ownership interest in Apollo submarine cable.
Wireless transmission
We offer a comprehensive
portfolio of microwave radio products meeting both the European Telecommunications Standards (ETSI) and the American standards-based (ANSI) requirements. These products provide high-capactiy microwave transmission systems for mobile backhaul
applications, fixed broadband access applications, and private applications in markets like digital television broadcasting, defense and security, energy and utilities.
In 2015, the Wireless Transmission unit focused its R&D efforts on continuing to support ultra-broadband networks, including new capabilities
to provide higher capacity across both air and network interfaces, increase performance and prepare for the support of 5G technology.
IP Platforms
Our IP
Platforms portfolio provides systems hardware, software platforms and applications that help service providers and large enterprises accelerate innovation, monetize services and perfect customer care. These IP Platforms solutions include:
Communications and Collaboration
Our
Rapport portfolio of cloud communications and collaboration software allows service providers to reduce the cost and complexity of delivering services, improve retail services, and grow new revenues with enterprises and wholesale markets.
Network Function Virtualization (NFV)
Our CloudBand portfolio combines the power of telecom networks with the flexibility and cost efficiencies of cloud and IT services for service
providers. CloudBand is an NFV platform which supports a wide variety of virtual network functions including IP Multimedia Subsystem and Evolved Packet Core. We established the first open community advancing NFV, which we call the CloudBand
Ecosystem. It involves almost 60 partners across the supply chain, with global service providers engaged in innovative co-creation projects.
Motive® Customer Experience Management (CEM)
Our products offer analytics and reporting
data regarding customer care, home devices, applications, and networking equipment. We manage over 800 million devices and hold the lead position in this market. Our Motive portfolio of products includes Customer Care, Service Management
Platform, Care and Support Applications, Dynamic Operations and Network Intelligence.
Policy and Charging
Over 100 service providers around the world are using our policy, charging and diameter control portfolio which we call our Smart Plan, to
generate new revenue and enhance the customer experience.
Consulting Services
We work with customers to address their strategic and business issues by enabling them to transform and harness their network as a business
platform, as well as accelerate innovation. IP Platforms Services has embraced the future of the NFV and Cloud technologies. During 2015, we rolled out the NFV enablement framework focused on successful implementation of Cloud/NFV. This framework
includes application onboarding, hardware validation, operationalization of Cloud/NFV environments and Cloud transformation.
Mformation
In 2015, we acquired Mformation, a pioneer and leader in mobility management solutions with more than 20 service provider customers around the
world, managing more than 500 million devices. Mformation provides service providers with a secure, scalable, application-independent Internet of Things (IoT) control platform that provides control and security across multiple
industries including automotive, healthcare, utilities, manufacturing and the digital home.
As part of The Shift Plan, we have
continued our effort to stream-lined our payment and OSS business and disposed of certain portfolios within IP Platforms. In addition, we continued to phase out business support system (BSS) business.
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DESCRIPTION OF THE GROUPS ACTIVITIES
Access Segment
Overview
Smartphones, tablets, and other mobile, intelligent devices are increasingly pervasive, connecting people, businesses and societies in new and
exciting ways. Service providers are challenged with connecting users and their devices to networks, services and applications. Demand for faster broadband services reflect a market environment in which both fixed and mobile broadband traffic is
growing exponentially. More and more data, applications and services are moving to the cloud, stored in massive data centers. The access network is now the essential bridge between users and the cloud, making content, services and applications
accessible on any device, at any time and from any location. The role of the access network is changing to deliver the highest capacity at the lowest cost without compromising performance and functionality.
As such, our wireless and fixed access portfolios are focused on Ultra-Broadband Access, providing our customers with high-speed, high capacity,
high performance access solutions which deliver exceptional quality of experience for end users. These ultra-broadband solutions leverage the latest innovations in fixed and wireless access technologies and build on our leadership position in the
fixed and wireless access markets.
In 2015, the Access segment focused its R&D efforts on:
· |
|
Ultra-fast fixed broadband solutions using copper and fiber technologies such as VDSL2, vectoring, G.fast and next-generation passive optical networking (NG-PON2 ); |
· |
|
Ultra-fast mobile broadband solutions which include wireless technologies such as LTE and LTE Advanced (LTE-A) as well as LTE and multi-standard small cells; |
· |
|
Pioneering the path to 5G, focusing on foundational technologies like LTE/LTE-A and carrier aggregation, small cells, Networks Function Virtualization (NFV) and Software Defined Networking (SDN);
and |
· |
|
Highly distributed architectures for fixed access (also known as fiber-to-the-x, or FTTx) and wireless access (small cells, LTE overlay) that often require scalable approaches to aggregation and
backhaul. |
In addition to the Wireless Access and Fixed Access divisions, the Access Segment also includes our Licensing
and Managed Services divisions.
In 2015 our Access segment revenues were
7,482 million, representing 52% of our total revenues.
Wireless
Our wireless
access portfolio is focused on those products and services which deliver the best possible capacity, coverage, speed and flexibility of deployment for our customers, enabling them to move faster to meet demand, deliver the highest quality of
experience for the end user and be first to capture new
market opportunities. Our primary activities focus on delivering 4G/LTE/LTE-A overlay solutions and 3G/4G/multi-standard small cell solutions along with related professional services. We are
blazing the path to 5G; developing industry leading portfolios in foundational 5G technologies such as Networks Function Virtualization (NFV), including vRAN, and Software Defined Networks (SDN) as well as working with operators considered to be
leaders of 5G principles. We continue to transition the portfolio away from legacy 2G/3G wireless technologies in line with our business and investment strategy.
LTE (Long-Term Evolution)
Fuelled by the continuing
surge of mobile broadband data traffic, the market for 4G LTE has reached maturity faster than any previous wireless technology. According to the GSA (Global Mobile Suppliers Association), through October 2015, there were 442 commercial LTE networks
launched in 147 countries and during the year, LTE subscriptions grew faster than any other mobile technology, closing in on one billion subscribers worldwide.
Our focus is on LTE/LTE-A Overlay solutions, the opportunity for which continues to grow as more and more operators recognize the need to move to
LTE quickly. We believe that LTE/LTE-A Overlay is faster, safer and its dedicated network resources perform better. Of particular note this year, we launched a new portfolio of LTE radio access network technologies that will enable operators to make
a smooth transition to next-generation network architectures. Our refreshed LTE RAN portfolio aims to address what we believe is the biggest challenge mobile operators will face in the near-future the ability to meet demand for
capacity-consuming data services such as video, particularly in urban environments in a sustainable and cost effective way. This new platform also provides a smooth transition to a virtualized RAN and, ultimately, to a 5G family of
solutions. In 2015 we announced the global availability of an LTE software release which delivers key performance enhancements including carrier aggregation.
Our LTE portfolio of services allow our customers to implement LTE networks more quickly through end-to-end pre-testing, design tools, remote
integration and proactive trouble shooting.
Small cells
Small cells cost-effectively extend wireless network coverage and capacity, and improve the quality of experience for end users wherever there are capacity hotspots and coverage holes.
Our small cells portfolio is a comprehensive, end to end solution targeted at operators who want to extend 3G/4G network coverage and increase
capacity in home, in-building or in the public domain. Our portfolio encompasses a full suite of small cell access points, including multi-standard home and enterprise small cells as well as new LTE compact outdoor metro cells and metro radios. We
also offer a 3G/4G multi-standard gateway, an
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DESCRIPTION OF THE GROUPS ACTIVITIES
Access Segment
operations, administration and management system and a set of wireless services that address
operator challenges including access to sites, power, backhaul, and the need for rapid network design and installation.
During 2015,
we announced the commercial availability of our multi-standard home and enterprise small cells and we launched our new compact outdoor metro cell, a high capacity small cell which can be deployed in challenging environments to improve LTE capacity
and performance. We also launched our new Wireless Unified Networks strategy to enhance the users wireless experience in the home, at work, and in dense venue networks by combining existing Wi-Fi and cellular networks into one high performance
network. And finally, we announced the expansion of our Small Cell Site Certification Program with the addition of new member companies who will increase support for outdoor small cell deployment while adding expertise to solve the challenges
related to indoor deployment often in the workplace. The Site Certification Program has already successfully accelerated the deployment of outdoor small cells and the number of program members has tripled since launch at the end of
2013.
Legacy wireless
Investment in the
W-CDMA, GSM and CDMA portfolios has continued to reduce as we focus R&D on the growth segments within Wireless (LTE and Small Cells) as well as on longer term network advancements like vRAN and 5G.
RFS (Radio Frequency Systems)
RFS is a global designer
and manufacturer of cable and antenna systems plus active and passive RF conditioning modules, providing end-to-end packaged solutions for wireless and broadcast infrastructure. RFS serves original equipment manufacturers (OEMs), distributors,
system integrators, operators and installers in the broadcast, wireless communications, land-mobile and microwave market sectors. RFS provides RF systems for various uses including cell-based mobile communications, in-building and in-tunnel radio
coverage, microwave links, TV & radio.
Fixed access
Our Fixed Access division designs and develops fixed access products that allow service providers to offer ultra-broadband connectivity over
digital subscriber lines (DSL) and fiber connections. Also known as fiber-to-the-x (FTTx) equipment, these products provide internet access and other services to residential and business customers around the world. These products also help complete
the transformation of legacy networks to IP by providing IP connectivity for the last mile.
We are the worldwide leader in
the fixed broadband access market supporting the largest mass deployments of voice, video and data services. According to industry analysts, we are the largest global supplier of DSL technology, with 41% of global DSL market share based on ports
shipped, and the third largest
global supplier of Gigabit Passive Optical Networking (or GPON) technology, with 17% of global market share. We are the leader in VDSL2 technology with 47% market share based on ports shipped. In
2015, we concluded the largest trial in the world for our newest DSL innovation G.fast, with British Telecom. Additionally, we have shown record speeds of 5.6Gbps over the British Telecom copper network using our XG-FAST Bell Labs Technology.
We are one of the leading suppliers to the Chinese market, which is the fastest growing broadband market in the world. We have the
highest capacity fiber access platform on the market and the most advanced vectoring solution. Our strong position in both fiber and DSL technologies is key to providing service providers with the solutions they need to increase their revenue and
reduce operational costs while improving the quality and experience for end-user customers. We have built solutions that allow operators to select among diverse technologies and deployment models (such as FTTN with vectoring to FTTH) to achieve the
fastest possible return-on-investment and time-to-market and to connect more users, faster.
In 2015, the Fixed Access division focused
its R&D efforts on:
· |
|
Fixed access products that support both copper and fiber access. The breadth of products and technologies supported by our fixed access portfolio allows service providers to deploy a mix of both
copper and fiber technologies efficiently and in the most cost-effective way to suit whatever deployment model they need. |
· |
|
High end micro-nodes portfolio with VDSL2 vectoring or Vplus technology. The new micro-nodes give operators the opportunity to bring fiber deeper into the network and make use of technologies to
boost network speed without having to invest in bringing fiber completely into the home. |
· |
|
Continued investment in VDSL2 vectoring that increases data speeds to 100 Mbps or more and G.Fast which can increase the speed to 1Gbps over existing copper infrastructure to homes and businesses.
|
· |
|
Continued investments in FTTH, focusing on being first on the market with next generation passive optical networking solutions (NG-PON2). |
· |
|
DPoE (Docsis Provisioning of EPON) and 10G EPON on the high capacity 7360 ISAM FX platform. DPoE is a very important feature for cable Multiple System Operators (MSOs) as it supports the greater
scale required for fiber-based service offerings, while bringing higher speeds. |
· |
|
Developed the PSTN Smart Transform solution, consisting of expertise and tools to quickly and efficiently migrate legacy PSTN networks and services to all-IP Ultra-Broadband FTTH/FTTx
infrastructure. With equipment fast approaching end-of-life and cost-to-serve increasing, service providers are looking to decommission legacy PSTN networks without disrupting profitable services. |
· |
|
Development of an Optical Network Terminal (ONT) that can be used as the digital home hub. With more and more Internet of Things devices
in the home, there is an increasing |
43
DESCRIPTION OF THE GROUPS ACTIVITIES
Access Segment
|
|
need to have more and better connectivity inside the home. By integrating the newest Wi-Fi capabilities and various interfaces into the ONT, service providers can offer all services from one device.
|
Licensing
The Licensing division actively pursues a strategy of licensing patents to generate revenues. We also license selected technologies to third parties to generate revenues. Additional revenues are generated through the sale of
selected patents when that path best serves our needs.
Managed services
Our Managed Services division delivers innovative solutions for both the carrier and strategic industries markets. Our solutions help customers
by delivering accelerated time to market, continuous improvement in service quality and a sustainable lower total cost of operations. Our portfolio primarily offers two segments to cover the multi-vendor, multi-technology and multi-services
environment, which are:
· |
|
Network Management Services: |
|
|
|
The Operations Transformation Solution. We control a customers network operations and transform their multivendor network operation functions. We manage any legacy infrastructure a customer
may have, and adapt the pace of the transformation to the customers needs. Finally, at the end of the contract, we transfer the operations back to the customer, with options to license our intellectual property. |
|
|
|
Network Operations Services. We provide a cost-efficient approach to network monitoring and surveillance by delivering basic network operations fault management service and problem resolution from
our global network operations centers. This includes services management and customer experience management offerings. |
· |
|
The BOMT (Build-Operate-Manage-Transfer) Solution. We help customers deploy and operate our new products, technologies and solutions faster. As part of the BOMT program, we operate and manage a
customers network and at the end of our contract we transfer the operations to the customer, with options to license our intellectual property.
|
5.4 |
Marketing, sales and distribution of our products |
We sell most of our products and services to the worlds largest telecommunications service
providers through our direct sales force. In some countries, such as China, our direct sales force may operate in joint ventures with local partners and through indirect channels. Over the last two years, we have made a significant investment in
diversifying our customer base by focusing on growth segment markets large enterprise, government, utilities, transportation and oil and gas. We invested in a direct sales force for these markets along with an expanded partnership program to
build our indirect business. We also
expanded partnerships with companies such as HP and Accenture to sell various products to service providers as well as other non-telecommunications segments.
In 2015, we continued to expand our go-to-market capabilities, with an increased investment in partner marketing, digital channels and marketing
automation. These investments have resulted in stronger market presence and a solid foundation for direct marketing programs. More information about our organization can be found in Chapter 5.1 Business Organization.
We have one of the broadest portfolios of product and services offerings in the telecommunications
equipment and related services market, both for the carrier and non-carrier markets. Our addressable market segment is very broad and our competitors include large companies, such as Cisco Systems, Ericsson, Fujitsu, Huawei, Nokia (our new parent
company from 2016), Samsung and ZTE as well as more specialized competitors such as Adtran, Calix, Ciena and Juniper. Some of our competitors, such as Ericsson and Huawei, compete across many of our product lines while others - including a
number of smaller companies - compete in one segment or another. In recent years, consolidation has reduced the number of networking equipment vendors, and the list of our competitors may continue to change as the intensely competitive
environment drives more consolidation.
We believe that technological advancement, product and service quality, reliable on-time delivery,
product cost, flexible manufacturing capacities, local field presence and long-standing customer relationships are the main factors that distinguish competitors within each of our segments in their respective markets. Another factor that may serve
to differentiate competitors, particularly in emerging markets, is the ability and willingness to offer some form of financing.
We
expect that the level of competition in the global telecommunications networking industry will remain intense for several reasons. First, although consolidation among vendors results in a smaller set of competitors, it also triggers competitive
attacks to increase established positions and market share, pressuring margins.
44
DESCRIPTION OF THE GROUPS ACTIVITIES
Competition
Consolidation or partnerships also allow some vendors to enter new markets with acquired technology
and capabilities, effectively backed by their size, relationships and resources. In addition, carrier consolidation is continuing in both developed and emerging markets, resulting in fewer customers overall. Elsewhere, some service providers are
considering network asset sharing or joint ventures to reduce overall costs. In areas where capital expenditures remain under pressure, the competitive impact of a smaller set of customers may be compounded. Most vendors are also targeting the same
set of the worlds largest service providers because they account for
the bulk of carrier spending for new equipment. Competition is also accelerating around IP network technologies as carriers continue to shift capital to areas that support the migration to
next-generation networks. Furthermore, competitors providing low-priced products and services from Asia have gained significant market share worldwide. They have gained share both in developed markets and in emerging markets, which account for a
growing share of the overall market and which are particularly well-suited for those vendors low-cost, basic communications offerings. As a result, we continue to operate in an environment of intensely competitive pricing.
5.6 |
Technology, research and development |
Our research and development efforts have two primary focuses: research conducted by Bell Labs to
lay the foundation for new and disruptive market opportunities; and product-focused development that transitions concepts to fully viable commercial offerings and enhances existing product lines with unique differentiators that enable us to
distinguish our offerings from those of our competitors.
In 2015, our R&D community expanded on our historic record of innovation
with achievements that keep us at the technological forefront of key market segments, from IP routing, transport and platforms to the cloud to ultra-broadband access technologies. Some highlights for 2015 are identified below, both in terms of
products that are available to customers today, and research activities that have a longer horizon.
Product innovations
· |
|
We introduced the 400G IP line card for IP networks. This technology allows data transmission between our existing IP routers at speeds of 400 gigabits-per-second (400G) over hundreds of
kilometers. This speed allows operators, who are facing increasing pressure from the explosive demand for Internet and cloud data, a greater ability to utilize their IP network capabilities. |
· |
|
We extended our 1830 Photonic Service Switch (PSS) optical transport platform with the addition of new products specifically for deployment in metro networks. The new platforms support
communications network services such as access aggregation, content delivery, and mobile backhaul to meet the needs of service providers. In addition, the multi-functional technology supports the network services needed by large enterprises,
including data center interconnectivity and wide area networking. |
· |
|
We introduced our Network Services Platform, which allows service providers to deliver on-demand network services more rapidly, cost-effectively and at scale. |
· |
|
We introduced innovative scalable wavelength routing technology, that provides operators with new flexibilities in the deployment of optical transport networks. Verizon is deploying the technology
on its ultra-longhaul optical network.
|
· |
|
We expanded our 7750 Service Router portfolio, offering full IP edge routing capabilities to deliver more performance, features and flexibility for our IP/MPLS networks with a range of new compact,
high-density, power efficient platforms. |
· |
|
Our Nuage Networks group introduced the Virtualized Services Assurance Platform (VSAP), which provides relevant and accurate information about the operational state of SDN overlays and the
underlying physical IP network infrastructure. |
· |
|
We launched the Rapport software portfolio that gives large enterprises and service providers a new and more flexible way to deliver communications and collaboration services.
|
· |
|
At the Broadband World Forum, we showcased first-to-market fixed access technologies across fiber and copper to support operators in meeting demand for ultra-broadband services, including a new
G.fast multi-port micronode, the first commercially available Vplus products and an expansion of our TWDM-PON portfolio. |
· |
|
We demonstrated the NFV-based vRAN at Mobile World Congress 2015 with Intel, China Mobile and Telefonica and conducted the industrys first field trial with China Mobile at a university in
Beijing. In December we announced collaborations with Red Hat, Advantech and 6WIND to accelerate delivery of the technology, while a 5G collaboration agreement with KT saw initial testing focusing on the vRAN. |
· |
|
In small cells, we launched the Compact Metro Cell Outdoor (CMCO) family, offering more deployment flexibility with the ability to be integrated into street furniture, while an expanded site
certification program offers greater support for deployments. |
· |
|
We introduced the Distributed Antenna System (DAS) Radio Frequency Module, a radio interface for distributed antenna systems (DAS) to allow mobile operators to improve signal performance while
reducing power consumption, space and operational costs by as much as 90% when connecting subscribers at large public venues, such as shopping malls, hotels and office blocks. |
Research activities
Bell Labs Research published its first book in 2015, outlining its vision for the network of the future, in The Future X Network, A
45
DESCRIPTION OF THE GROUPS ACTIVITIES
Technology, research and development
Bell Labs Perspective. The book represents the vision of its top experts in communications
and information, and touches on virtually all aspects of communications, from the home to the enterprise, from the cloud to the internet-of-things (IoT), and from sustainability to operations. The book describes todays vision, and other
research activities listed below describe some of the efforts aimed at changing the future of technology.
Sustainability
We are one of the founding members of the GreenTouch Consortium, an industry effort with the explicit goal of reducing the effective energy
consumption in ICT networks by a factor of 1000. GreenTouch ended its five year mission according to schedule in 2015, and publicly announced that the sustainability goals were met and exceeded by a large factor.
Fixed Networks
Bell Labs continues to lead in
Turning Copper into Gold with research improving the capacity and usability of existing copper networks in multiple ways. G.Fast has led to XG.Fast, a 10Gbps transmission method over existing DSL links that offers an affordable way
forward for broadband operators to improve their services for years to come. Researchers are extending the technologies into diverse environments, including multiple-dwelling unit (MDU) applications.
Software Defined Networks (SDN) and Network Function Virtualization (NFV)
As a pioneer in the areas of SDN and NFV, Bell Labs has increased its focus on SDN efficiency, control, implementation, and security. It is addressing SDN across all parts of the network and exploring different methods and
algorithms to improve responsiveness and predictability. Researchers are developing prototypes to place network functions into the cloud with NFV, and demonstrating better performance with virtualized services.
Data analytics and Customer Care
Bell Labs is defining
algorithms and data visualization techniques to improve the customer care of service providers. Researchers have developed tools to identify successful customer care interactions and to highlight opportunities for improving such engagements. The
tools help service providers analyze records so that they can greatly reduce the cost of customer care. This research is also paving the way towards real-time optimization of customer care workflows.
Network Algorithms, Network Applications and Software Platforms
Now that the cloud has become ubiquitous, dynamic deployment is also becoming a mainstream requirement. Bell Labs continues to develop systems and algorithms to predictively cache, deploy, and tear-down application instances.
Algorithm research is also leading to major improvement in
natural language processing, especially with massive datasets. Research is aimed at not only improving ways to deal with Big Data, but in also in ways of transforming Big Data
problems though realistic and intelligent approaches.
Bell Labs is developing new optimizations for communications networks. Methods
of improving network resource utilization using multipath Transmission Control Protocol (TCP) are being developed and validated, achieving large factors of improved utilization. Optimal path computation is an area of active research because it is
immediately relevant to SDN control.
Multimedia services
As video is the dominant traffic over networks, Bell Labs researchers continue to improve effective delivery of multimedia services with wireless-optimized quality assurance in the form of an adaptive-guaranteed-bit-rate delivery
mechanism that provides a fair and network-friendly experience. Other research looks at the interplay of media delivery and network protocols to optimize the end-to-end performance.
Bell Labs is also exploring ways of reducing the network load for massive security video, where security analytics can be computed locally,
improving the performance of both the network and the application.
Optics
Researchers continue to set new speed records in optical transmission. Research spans across devices, modulation, fiber, protocols, and control.
Researchers have developed new laser technology (e.g., quantum dash lasers) for application in significantly improved multiple wavelength sources. Further progress is being made in greatly advancing transmission rates with
spatial-division-multiplexing in multiple-mode fibers, and also in development of optical amplifiers that are compatible with these unique fibers. Optical protocol research has resulted in an advanced TWDM-PON system that can support both
residential and enterprise services, and has the potential for another leap forward in bandwidth.
Small cells and 5G wireless
Bell Labs plays a leading role in 5G in several ways. Researchers are looking at millimeter wave spectrum, new flexible filter designs that work
better with small cells, and advances in multiple input, multiple output (MIMO) technology. They have developed a new 5G air interface to simultaneously address traffic diversity from multiple classes of access, from IoT to mobile video and web
traffic.
European public policy initiatives
Bell Labs participates in the European Unions Horizon 2020 (H2020) industry-wide consortium. H2020 aligns enterprises and academia to focus
on common technology roadmaps to spur innovation and network commerce, along with driving EU network
46
DESCRIPTION OF THE GROUPS ACTIVITIES
Technology, research and development
improvements. The EU H2020 is addressing many areas, including ICT (Information and Computing
Technologies) and Sustainability.
Standards
Throughout 2015, representatives of our R&D community played leading roles in telecommunication standards bodies, helping foster and steer
the development and advancement of key technologies. Researchers, engineers and developers from Bell Labs and our development teams participated in many dozens of standards organizations and an even greater number of working groups such as the 3GPP,
3GPP2, ATIS, Broadband Forum, CCSA, ETSI, IEEE, IETF, OMA, and TIA.
Partnerships and collaborations
As part of The Shift Plan, we were committed to refocusing and expanding innovation by redefining and leveraging our research capacities. We aim
to implement a new engagement model for Bell Labs Research that is closer to its portfolio life cycle. We also focused on in-house start-ups, as well as on industry partnerships, collaborations and co-developments with leading-edge customers. To
exemplify this new model, the following announcements were made during 2015:
· |
|
With HP: We continued our partnership and expanded it to deliver technology solutions to enterprises providing data center networking, data replication and new storage architectures connected with
IP and optical backbones. |
· |
|
With Mirantis: Nuage Networks announced a partnership to accelerate the adoption and deployment of OpenStack clouds that fulfill the demanding needs of enterprises and cloud providers.
|
· |
|
With Arista: Nuage aims to maximize the benefits of open networking while expanding cloud infrastructure to address growing IT application demands. |
· |
|
With Sequans Communications S.A.: We announced a collaboration to enable key technologies for the Internet of Things (IoT) by providing the 4G Kit for IoT, a principal
building block in the new Internet of Things prototyping platform launched by communications operator Orange in order to stimulate interest by the IoT market in 4G connectivity. |
· |
|
With Technische Universität Dresden: Bells Labs will collaborate to advance the development of 5G networks. |
· |
|
With IBM: The consortium formed by IBM brings together the world leaders in information technology, construction and design, network infrastructure, wireless and telecommunications to modernize
stadiums and sports experiences in the future. Collectively, consortium members already are working with more than 250 of the worlds top venues. |
· |
|
With Red Hat, Advantech and 6WIND: We announced a collaboration to accelerate the delivery of commercial virtualized radio access network (vRAN) products. |
· |
|
With NCR and Camusat: We formed partnerships with NCR and Camusat to strengthen our position and presence worldwide in managed services by reducing time-to-market and generating new revenue
opportunities. |
· |
|
With Partech Shaker: We announced a technology partnership with the worlds first campus dedicated to digital open innovation.
|
5.7 |
Intellectual Property |
In 2015, we obtained more than 2,600 patents worldwide, resulting in a portfolio of more than
34,000 active patents and over 13,000 patent applications totaling over 47,000 issued and pending patents worldwide across a vast array of technologies. We also continued to actively pursue a strategy of licensing selected technologies to expand the
reach of our technologies and to generate licensing revenues.
We rely on patent, trademark, trade secret and copyright laws both to protect our proprietary
technology and to protect us against claims from others. We believe that we have intellectual property rights or rights under licensing arrangements covering all of our material technologies.
We consider patent protection to be critically important to our businesses due to the emphasis on Research and Development and intense competition
in our markets.
5.8 |
Sources and availability of materials |
We make significant purchases of electronic components and other material from many
sources. While we have experienced some temporary shortages in components and other commodities used across the industry, we have generally been
able to obtain sufficient materials and components from various sources around the world to meet our needs. We continue to develop and maintain alternative sources of supply where
technologically feasible for essential materials and components.
47
DESCRIPTION OF THE GROUPS ACTIVITIES
Sources and availability of materials
The typical quarterly pattern in our revenues - a weak first quarter, a strong fourth quarter and
second and third quarter results that fall between those two extremes - generally reflects the traditional seasonal pattern of service providers capital
expenditures. In 2015, our revenues were in-line with the typical seasonal pattern. This seasonality could differ depending on varying business trends in any given quarter.
5.10 |
Our activities in certain countries |
We operate in a large number of countries, some of which have been accused of human rights
violations, are subject to economic sanctions and export controls by the U.S. Treasury Departments Office of Foreign Assets Control or have been identified by the U.S. State Department as state sponsors of terrorism. Our net revenues in 2015
attributable to Iran, Sudan, and Syria, listed as state sponsors of terrorism, represent much less than one percent of our total net revenues. Though we are not aware of any significant shareholder intending to divest the shares it owns in Alcatel
Lucent on the basis of our activities in these countries, some U.S.-based pension funds and endowments have in the past announced their intention to divest the securities of companies doing business in these countries and some state and local
governments have adopted, or are considering adopting, legislation that would require their state and local pension funds to divest their ownership of securities of companies doing business in these countries.
Disclosure of activities under Section 13(r) of the Securities Exchange Act of 1934
Under Section 219 of the Iran Threat Reduction and Syria Human Rights Act of 2012, which added Section 13(r) to the Securities Exchange Act of
1934, as amended, we are required to disclose whether Alcatel Lucent or any of its affiliates knowingly engaged in certain activities, transactions or dealings relating to Iran or certain designated individuals or entities. Disclosure is required
even when the activities were conducted outside the United States by non-U.S. entities and even when such activities were conducted in compliance with applicable law. The following information is disclosed pursuant to Section 13(r). None of
these activities involved U.S. affiliates of Alcatel-Lucent.
1. Alcatel-Lucent has provided certain telecommunications network
equipment and related services for end use by the Telecommunication Infrastructure Company of I.R. Iran (TIC). TIC is a government-owned telecommunications infrastructure provider in Iran that serves as Irans intercity,
interprovincial and international telecom network operator. These export sales, and the associated financial transactions, were licensed by EU authorities.
Prior to 2015, Alcatel-Lucent had a contract for the provision of technical support services to, or
for the benefit of, TIC in support of telecommunications network equipment that was sold previously to customers in Iran for end-use by TIC.
2. In 2013, Alcatel-Lucent Deutschland AG, an Alcatel-Lucent subsidiary, reached a settlement agreement with Iranian Telecommunication Manufacturing Company Public Stock Corporation (ITMC) on claims raised by ITMC
related to contracts that were completed prior to 2007 for the delivery of telecommunications equipment and services. In the course of these contracts, performance bonds had been opened between 2001 and 2006 at Bank Tejarat, Bank Saderat and Bank
Mellat and had been retained by ITMC as security against their claims. The settlement agreement stipulates that Alcatel-Lucent Deutschland AG shall pay 1,600,000 to ITMC as
settlement for the claims and that, in return, performance bonds held by ITMC shall be released. In December 2014, the German Federal Bank approved payment of the settlement amount by Alcatel-Lucent Deutschland AG to a third party named as
beneficiary by ITMC. No payments were made under the settlement agreement in 2015. Payment of the settlement amount remains pending.
3. Alcatel-Lucent has two frame agreements for the supply of telecommunications network equipment and related services to two private companies in
Iran, PATSA and Elmatco. The PATSA agreement is for end-use by the Shiraz Urban Rail Organization (SURO) in support of operations of the Shiraz city metro rail system. We understand that SURO is owned by the government of the city of
Shiraz. The Elmatco agreement is for end-use by a group of state-owned regional electricity companies, including Esfahan Regional Electric Company, Iran Power Distribution Company and Gharb Regional Electric Company.
4. Gross revenues received during 2015 from the activities described above, all of which involve the supply of telecommunications equipment and/or
related services to Iranian governmental entities, were approximately 47,728,000 and the net profits for 2015 relating to such activities were approximately 27,939,000. We intend to fulfill our remaining obligations under existing contracts, subject to compliance with applicable laws.
5. Two non-U.S. subsidiaries of Alcatel-Lucent have branches in Iran that maintain bank accounts at Bank Tejarat for purposes of carrying out
financial transactions in connection with their general business activities.
48
Operating and financial review and prospects |
6
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49
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
Forward looking information
This Form 20-F, including the discussion of our Operating and Financial Review and Prospects, contains forward-looking statements based on
beliefs of our management. We use the words anticipate, believe, expect, aim, may, target, seek, estimate, predict, potential,
intend, should, plan, project, strive or the negative of these terms or similar expressions to identify forward-looking statements. Such statements reflect our current views with respect to
future events and are subject to risks and uncertainties. Many factors could cause the actual results to be materially different, including, among others, changes in general economic and business conditions. A detailed description of such risks and
uncertainties is set forth in Chapter 3 Risk Factors in this Form 20-F. Such forward-looking statements also include the statements regarding the amount we would be required to pay in the future pursuant to our existing contractual
obligations and off-balance sheet contingent commitments that can be found under the heading Contractual obligations and off-balance sheet contingent commitments. These and similar statements are based on managements current views,
estimates and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those anticipated by such statements. We caution readers not to place undue influence on
these statements, which speak only as of the date of this report.
Presentation of financial information
The following discussion of our financial condition and results of operations should be read in conjunction with our consolidated financial
statements and the related notes presented elsewhere in this document. Our consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union (EU).
As of December 31, 2015, all IFRSs that the International Accounting Standards Board (IASB) had published and that are mandatory
are the same as those endorsed by the EU and mandatory in the EU, with the exception of IAS 39 Financial Instruments: Recognition and Measurement (revised December 2003), which the EU only partially adopted. The part not adopted by
the EU has no impact on our financial statements.
As a result, our consolidated financial statements for the years presented in this
document in accordance with IFRS would be no different if we had applied International Financial Reporting Standards issued by the IASB. References to IFRS in this Form 20-F refer to IFRS as issued by the IASB and as adopted by the
EU.
As a result of the purchase accounting treatment of the Lucent business combination required by IFRS, our results for 2015, 2014,
2013 and 2012 included several negative and non-cash impacts of purchase accounting entries.
Changes in accounting standards as of January 1, 2015
Published IASB financial reporting standards, amendments and interpretations applicable to the Group that the EU has endorsed, that are
mandatory in the EU for annual periods beginning on or after July 1, 2014, and that the Group has adopted in 2015:
· |
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Amendments to IAS 19 Defined Benefit Plans: Employee Contributions (issued November 2013); and |
· |
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Annual improvements to IFRSs (2010-2012) and Annual improvements to IFRSs (2011-2013) issued December 2013. |
These new IFRS standards and amendments had no material impact on our consolidated financial statements.
Critical accounting policies
Our Operating and Financial Review and Prospects is based on our consolidated financial statements, which are prepared in accordance with IFRS as described in Note 1 to our consolidated financial statements. Some of the accounting
methods and policies used in preparing our consolidated financial statements under IFRS are based on complex and subjective assessments by our management or on estimates based on past experience and assumptions deemed realistic and reasonable based
on the circumstances concerned. The actual value of our assets, liabilities and shareholders equity and of our earnings could differ from the value derived from these estimates if conditions changed and these changes had an impact on the
assumptions adopted.
We believe that the accounting methods and policies listed below are the most likely to be affected by these
estimates and assessments:
a/ Valuation allowance for inventories and work in progress (see Note 18 to our consolidated
financial statements)
Inventories and work in progress are measured at the lower of cost or net realizable value. Valuation
allowances for inventories and work in progress are calculated based on an analysis of foreseeable changes in demand, technology or the market, in order to determine obsolete or excess inventories and work in progress.
b/ Impairment of customer receivables (see Note 19 to our consolidated financial statements)
An impairment loss is recorded for customer receivables if the expected present value of the future receipts is lower than the carrying value.
The amount of the impairment loss reflects both the customers ability to honor their debts and the age of the debts in question. A higher default rate than estimated or deterioration in our major customers creditworthiness could have an
adverse impact on our future results.
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OPERATING AND FINANCIAL REVIEW AND PROSPECTS
c/ Goodwill, other intangible assets and capitalized development costs
Goodwill (see Note 11 to our consolidated financial statements)
Goodwill net, is allocated, where applicable, to cash generating units that are equivalent to a product division or groups of product divisions within our reporting structure. Product divisions are two levels below our three
reportable segments. In assessing whether goodwill should be subject to impairment, the carrying value of each cash generating unit is compared to its recoverable value. Recoverable value is the greater of the value in use and the fair value less
costs to sell.
The value in use of each cash generating unit is calculated using a five-year discounted cash flow analysis with a
discounted residual value, corresponding to the capitalization to perpetuity of the normalized cash flows of year 5 (also called the Gordon Shapiro approach).
The fair value less costs to sell of each cash generating unit is determined based upon the weighted average of the Gordon Shapiro approach
described above and the following two approaches, being additional inputs that represent assumptions that a market participant would use when pricing the asset:
· |
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five-year discounted cash flow analysis with a Sales Multiple (Enterprise Value/Sales) to measure discounted residual value; and |
· |
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five-year discounted cash flow analysis with an Operating Profit Multiple (Enterprise Value/Earnings Before Interest, Tax, Depreciation and AmortizationEBITDA) to measure
discounted residual value. |
The discount rates used for the annual impairment tests are based on the Groups
weighted average cost of capital (WACC). A single discount rate is used on the basis that risks specific to certain products or markets have been reflected in determining the cash flows.
Growth and perpetual growth rates used are based on expected market trends.
Other intangible assets (see Note 12 to our consolidated financial statements)
Impairment tests are performed if we have indications of a potential reduction in the value of our intangible assets due to change in market
trends or new technologies. The recoverable amounts are based on discounted future cash flows or fair values of the assets concerned.
Capitalized
development costs (see Note 12 to our consolidated financial statements)
The Group evaluates the commercial and technical feasibility of
these development projects, for which costs are capitalized, and estimates the useful lives of the products resulting from the projects. Should a product fail to substantiate these evaluations, the Group may be required to impair some of the net
capitalized development costs in the future.
d/ Provision for warranty costs and other product sales reserves (see Note 25 to our
consolidated financial statements)
These provisions are calculated based on historical return rates and warranty costs expensed
as well as on estimates. Costs and penalties ultimately paid can differ considerably from the amounts initially reserved and could therefore have a significant impact on future results.
e/ Provisions for litigations (see Notes 25 and 31 to our consolidated financial statements)
Certain legal proceedings are pending and cover a wide range of matters. Due to the inherent nature of litigation, the outcome or the cost of
settlement may materially vary from estimates.
f/ Deferred tax assets (see Note 8 to our consolidated financial statements)
The evaluation of the Groups capacity to utilize tax loss carry-forwards relies on significant judgment. The Group analyzes
past events and the positive and negative elements of certain economic factors that may affect its business in the foreseeable future to determine the probability of its future utilization of these tax loss carry-forwards. This analysis is carried
out regularly in each tax jurisdiction where significant deferred tax assets are recorded.
If future taxable results are considerably
different from those forecasted that support recording deferred tax assets, the Group will be obliged to revise downwards or upwards the amount of the deferred tax assets, which would have a significant impact on our financial results.
g/ Pension and retirement obligations and other employee and post-employment benefit obligations (see Note 23 to our consolidated
financial statements)
Actuarial assumptions
Our results of operations include the impact of significant pension and post-retirement benefits that are measured using actuarial valuations. Inherent in these valuations is a key assumption concerning discount rates in retirement
plans and healthcare plans. This assumption is updated on an annual basis at the beginning of each fiscal year or more frequently upon the occurrence of significant events. In addition, discount rates are updated quarterly for those plans for which
changes in these assumptions would have a material impact on our financials.
Discount rates
Discount rates for our U.S. plans are determined using the values published in the original CitiGroup Pension Discount Curve, which is
based on AA-rated corporate bonds. Each future years expected benefit payments are discounted by the
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OPERATING AND FINANCIAL REVIEW AND PROSPECTS
discount rate for the applicable year listed in the CitiGroup Curve, and for those years beyond the
last year presented in the CitiGroup Curve for which we have expected benefit payments, we apply the discount rate of the last year presented in the Curve. After applying the discount rates to all future years benefits, we calculate a single
discount rate that results in the same interest cost for the next period as the application of the individual rates would have produced. Discount rates for our non U.S. plans were determined based on Bloomberg AA Corporate yields until
December 31, 2012. Since Bloomberg stopped publishing these yields, discount rates for our non U.S. plans are determined based on Iboxx AA Corporate yields starting January 1, 2013.
Holding all other assumptions constant, a 0.5% increase or decrease in the discount rate would have increased or decreased the 2015 net pension
and post-retirement benefits costs (determined in accordance with IAS 19 Employee Benefits (revised)) by approximately 70 million and (38) million, respectively.
Healthcare cost trends
Regarding healthcare cost trends for our U.S. plans, our external actuaries annually review expected cost trends from numerous healthcare
providers, recent developments in medical treatments, the utilization of medical services, and Medicare future premium rates published by the U.S. Governments Center for Medicare and Medicaid Services (CMS) as these premiums are reimbursed for
some retirees. They apply these findings to the specific provisions and experience of our U.S. post-retirement healthcare plans in making their recommendations. In determining our assumptions, we review our recent experience together with our
actuaries recommendations.
Expected participation rates in retirement healthcare plans
Our U.S. post-retirement healthcare plans allow participants to opt out of coverage at each annual enrollment period, and for almost all to opt
back in at any future annual enrollment. An assumption is developed for the number of eligible retirees who will elect to participate in our plans at each future enrollment period. Our actuaries develop a recommendation based on the expected
increases in the cost to be paid to a retiree participating in our U.S. plans and recent participation history. We review this recommendation annually after the annual enrollment has been completed and update it if necessary.
Mortality assumptions
Until September 30, 2014,
we retained the RP-2000 Combined Health Mortality table with Generational Projection based on the U.S. Society of Actuaries Scale AA. On October 27, 2014, the U.S. Society of Actuaries (SOA) issued new mortality tables. Starting
December 31, 2014, we changed these assumptions to the RP-2014 White Collar table with MP-2014 mortality improvement scale for Management records and the RP-2014
Blue Collar table with MP-2014 mortality improvement scale for Occupational records. This update had a U.S.$2.6 billion negative effect on the benefit obligation of our U.S. plans. These
effects were recognized in our 2014 Statement of Comprehensive Income.
On October 8, 2015, the U.S. SOA released an updated set
of mortality improvement assumptions: scale MP-2015. This new mortality improvement scale reflects two additional years of data that the Social Security Administration has released since the development of the MP-2014 mortality
improvement. These two additional years of data show a lower degree of mortality improvement than in previous years. The change to scale MP-2015 reduced the liabilities by $218 million of our U.S. plans. These effects were recognized in the
2015 Statement of Comprehensive Income.
Plan assets investment
Plan assets are invested in many different asset categories (such as cash, equities, bonds, real estate and private equity). In the quarterly update of plan asset fair values, approximately 84% are based on closing date fair values
and 16% have a one to three-month delay, as the fair values of private equity, venture capital, real estate and absolute return investments are not available in a short period. This is standard practice in the investment management industry.
Assuming that the December 31, 2015 actual fair values of private equity, venture capital, real estate and absolute return investments were confirmed to be, after the one to three-month delay, 10% lower than the ones used for accounting
purposes as of December 31, 2015, and since our U.S. Management pension plan has a material investment in these asset classes (and the asset ceiling described below is not applicable to this plan), other comprehensive income would be negatively
impacted by approximately 344 million.
Asset ceiling
For retirees who were represented by the Communications Workers of America and the International Brotherhood of Electrical Workers, we expect to
fund our current retiree healthcare and group life insurance obligations with Section 420 transfers from our U.S. Occupational pension plans. Section 420 of the U.S. Internal Revenue Code provides for transfers of certain excess pension
plan assets held by a defined benefit pension plan into a retiree health benefits account established to pay retiree health benefits and into a group life insurance account established to pay retiree life insurance benefits. This is considered as a
refund from the pension plan when setting the asset ceiling.
Depending on the type of Section 420 transfer, assets in excess of
120% or 125% of the funding obligation can be transferred. Using the methodology we selected to value plan assets and obligations for funding purposes (see Note 23 to our consolidated financial statements), we estimated that, as of December 31,
2015, the excess of assets above 120% of the plan obligations was U.S.$1.1 billion (1.0 billion), and the excess above 125% of plan obligations was U.S.$0.9 billion (0.8 billion).
52
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
h/ Revenue recognition (see Note 6 to our consolidated financial statements)
Most of the Groups sales are generated from complex contractual arrangements that require significant revenue recognition judgments,
particularly in the areas of the sale of goods and equipment with related services constituting multiple-element arrangements, construction contracts and contracts including software. Judgment is also needed in assessing the ability to collect the
corresponding receivables.
For revenues and expenses generated from construction contracts, the Group applies the percentage of
completion method of accounting, provided certain specified conditions are met, based either on the achievement of contractually defined milestones or on costs incurred compared with total estimated costs. The determination of the stage of
completion and the revenues to be recognized rely on numerous estimations based on costs incurred and acquired experience. Adjustments of initial estimates can, however, occur throughout the life of the contract, which can have significant impacts
on our financial condition.
Although estimates inherent in construction contracts are subject to uncertainty, certain situations exist
whereby management is unable to reliably estimate the outcome of a construction contract. These situations can occur during the early stages of a contract due to a lack of historical experience or throughout the contract as significant uncertainties
develop related to additional costs, claims and performance obligations, particularly with new technologies.
Contracts that are
multiple-element arrangements can include hardware products, stand-alone software, installation and/or integration services, extended warranty, and product roadmaps, as examples. Revenue for each unit of accounting is recognized when earned based on
the relative fair value of each unit of accounting as determined by internal or third-party analyses of market-based prices. Significant judgment is required to allocate contract consideration to each unit of accounting and determine whether the
arrangement is a single unit of accounting or a multiple-element arrangement. Depending upon how such judgment is exercised, the timing and amount of revenue recognized could differ significantly.
For multiple-element arrangements that are based principally on licensing, selling or otherwise marketing software solutions, judgment is required
as to whether such arrangements are accounted for under IAS 18 or IAS 11. Software arrangements requiring significant production, modification or customization are accounted for as a construction contract under IAS 11. All other software
arrangements are accounted for under IAS 18 and we require fair value to separate the multiple software elements. Significant judgment is required to determine the most
appropriate accounting model to be applied in this environment and whether VSOE of fair value exists to allow separation of multiple software elements.
For product sales made through distributors, product returns that are estimated according to contractual obligations and past sales statistics are
recognized as a reduction of sales. Again, if the actual product returns were considerably different from those estimated, the resulting impact on the net income (loss) could be significant.
i/ Restructuring reserve and impact on goodwill impairment test
On June 19, 2013, we announced the launch of the Shift Plan. Through this plan and the remainder of the Performance Program, we aimed at
(i) reducing our fixed-cost base by 1 billion between 2013 and 2015 (including fixed cost savings to be realized under the Performance Program) through the
adoption of direct-channel operations, additional consolidation of SG&A (selling, general and administrative) functions, and by refocusing our R&D capacity, (ii) generating revenues for the Core Networking segment of more than 7 billion with an operating margin exceeding 12.5% in 2015, and (iii) generating segment operating cash flow from the Access segment exceeding 200 million by the end of 2015.
The total restructuring costs
related to The Shift Plan were 944 million for all actions taken between 2013 and 2015 compared to the initial estimate of 950 million. For the year ended December 31, 2015, the restructuring costs for these actions were
358 million of which 306 million was expensed. The remaining restructuring reserves related to
The Shift Plan will be used in future quarters.
In compliance with sections 44 and 45 of IAS 36 Impairment of Assets and
considering that we believe we are not committed to a restructuring program as long as we have not been able to expense it, we exclude future restructuring costs (and corresponding cost savings), if they are not expensed, from the value in use
determined for the annual impairment test of goodwill. On the other hand, we fully took into account these future cash outflows and inflows in assessing the recoverability of our deferred tax assets and in determining the fair value less costs to
sell of cash generating units (CGU), corresponding to the methodology described in Note 2c to our consolidated financial statements. We arrive at fair value less costs to sell of a CGU by basing it on a weighted average of three discounted cash flow
approaches (two of the three using discounted residual values that are based respectively on a Sales multiple and an Operating Profit multiple), to arrive at a fair value that reflects assumptions that market participants would use when pricing a
CGU.
53
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
Overview of 2015
In 2015, the telecommunications equipment and related services market witnessed mixed trends across
different regions. Investments in ultra-broadband access technologies, such as LTE, led to robust investments in the U.S. notably in the second half of the year. Spending in China continued to be focused on 4G LTE deployments, accelerating from 2014
levels, while the telecommunications equipment market in Europe continued to show signs of easing.
In addition to regional trends,
industry trends also played a significant role in shaping the spending for telecommunications equipment and related services in 2015. The telecommunications industry continues to experience fast changes driven by the massive adoption of new mobile
devices and of new applications and services. Growth of data traffic has put significant pressure on telecommunications providers to improve their networks in terms of coverage, capacity and quality. To meet these demands, network operators continue
their transition to all-IP architectures, with an emphasis on fast access to their networks through copper, fiber, LTE and new digital services delivery. We are also seeing similar trends with cable operators, who are investing to deploy high-speed
networks. Additionally, network and cloud infrastructure are intersecting, allowing for the hosting of enterprise and consumer applications. Web scale companies, such as Amazon and Google, and large enterprises are driving the development of huge
data centers, providing seamless IP interconnection and digital services delivery on a large scale. IP routing is at the heart of the telecommunications equipment and related services industry transformation, impacting fixed and mobile broadband as
well as cloud services.
This combination of regional and industry trends resulted in mixed spending in the market for
telecommunications equipment and related services in 2015. These trends, in addition to other factors, such as changes in foreign exchange rates, were drivers of how our own businesses performed in 2015, with total sales increasing 8.3% compared to
2014. Details on segment performance can be found in Chapter 6.2 Consolidated and segment results of operations for the year ended December 31, 2015 compared to the year ended December 31, 2014.
To better align ourselves with these industry trends, on June 19, 2013 we announced The Shift Plan, a detailed three-year plan to reposition
our Company as a specialist provider of IP and Cloud Networking and Ultra-Broadband Access, the high-value equipment and services that are essential to high-performance networks.
As of December 31, 2015, the Group successfully completed The Shift Plan, with an update of key elements below:
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Investing in our Core Networking businesses (which include IP Routing, IP Transport, IP Platforms and associated services). We are expecting that these businesses will be our growth engines in the
future. We originally aimed to generate revenues at or above 7 billion from our Core Networking
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segment in 2015, and to improve Core Networking segments contribution to our segment operating margin to at or above 12.5% in 2015. As part of our third quarter 2015 earnings presentation,
the Group updated these targets, expecting revenues from our Core Networking segment for 2015 to be in a range of 6.8-7.0 billion and segment operating margin as a percentage of
segment revenues to be at a level similar to 2014, which was 10.6%. We define segment operating margin as income (loss) from operating activities before restructuring costs, litigations, transaction related costs, gain/loss on disposal of
consolidated entities, impairment of assets and post-retirement benefit plan amendments (excluding the negative non-cash impacts of Lucents purchase price allocation) divided by revenues. In 2015, Core Networking revenues were 6,780 million and segment operating margin was 10.0% of revenues; |
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Increasing segment operating cash flow from our Access segment. We defined segment operating cash flow as income (loss) from operating activities before restructuring costs, litigations,
transaction related costs, gain/loss on disposal of consolidated entities, impairment of assets and post-retirement benefit plan amendments (excluding the negative non-cash impacts of Lucents purchase price allocation) plus the change in
operating working capital (as defined in Note 17 to our consolidated financial statements). Our objective was to generate operating cash flow from the Access segment at or above
200 million in 2015 (We had previously set a target of 250 million which we adjusted to take into
account the sale of the Enterprise business and LGS Innovations in 2014). As part of our third quarter 2015 earnings presentation, the Group updated this target, expecting to largely exceed the target of 200 million of operating cash flow in 2015. Operating cash flow for the Access segment
was 627 million in 2015, which represented an increase of 579 million compared to 2014,
stemming primarily from improved profitability as well as improved operating working capital; |
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Market diversification: We believed that a successful implementation of The Shift Plan would enable us to improve the way we access the market, resulting in a business that is better leveraged, by
addressing new customers including cable operators, webscale and large technology enterprises. In 2015, approximately 9% of our revenues were with non-telecommunications customers. Furthermore, market diversification has led us to redesign our sales
and marketing strategy to leverage our new focused product and services portfolio and help us to identify new market segments such as data centers; |
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Rightsizing of the cost structure: Through successful implementation of The Shift Plan, the Group
targeted 950 million of fixed cost savings in 2015 compared to our 2012 cost base at constant exchange rates (we had previously set a target of 1 billion which we adjusted to take into account the sale of the Enterprise business and LGS
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54
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
Overview of 2015
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Innovations in 2014), by significantly reducing SG&A expenses, optimizing research and development investments, refocusing and unlocking innovation, implementing delivery and supply chain/manufacturing
efficiencies and reducing product complexity while improving quality. As of December 31, 2015, 1,031 million of fixed cost savings had been generated compared to our
2012 base, of which 356 million was generated in 2015, 340 million in 2014, and 335 million in 2013; |
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Generating cash from dispositions: We targeted at least 1 billion of cash over the 2013-2015 period through asset
dispositions. We announced the following closed disposals: |
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the sale of LGS Innovations Inc., our Government business, to a U.S.-based company owned by a Madison Dearborn Partners-led investor group that includes CoVant which was completed on March 31,
2014; |
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the sale of 85% of Alcatel-Lucent Enterprise to China Huaxin, a technology investment company which was completed on September 30, 2014; |
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the sale of our cyber-security services and communications security activities to Thales, which was completed on December 31, 2014; |
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the sale of our 40% ownership interest in Apollo submarine cable in 2015; and |
In 2014, we also announced our intent to explore the capital opening of our subsidiary Alcatel-Lucent Submarine Networks (ASN) through an IPO. However, in October 2015, we announced that we would continue to operate ASN as a
wholly-owned subsidiary and would continue to execute on ASNs strategic roadmap.
Given the contemplated transaction with Nokia, no other asset disposals were
considered.
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Self-funded plan and financial sustainability: We successfully completed The Shift Plans goal to strengthen our balance sheet from 2013 through 2015. By the end of 2014, our debt was
reprofiled, maturity was lengthened and interest costs were reduced. At the end of 2015, the Group had a net cash position of 1,409 million compared to a net debt position
of 794 million at the end of the second quarter of 2013, when The Shift Plan started. |
Through the efforts mentioned above, enabling the company to generate free cash flow on a sustainable basis, with a target of being free cash flow
positive overall in 2015 was the most important goal of The Shift Plan. We largely exceeded our target, as we had free cash flow of 626 million in 2015, compared to an outflow of
668 million in 2012, prior to implementing The Shift Plan. Management believes that providing our investors with our free cash flow calculation facilitates the understanding of
the companys ability to generate cash on a sustainable basis in addition to the operational cost savings realized as part of The Shift Plan. The operating model we implemented as part of The Shift Plan allowed for a cost structure that was
more aligned with our peers and provided a lower breakeven point, primarily through sales and marketing efficiency, R&D resource allocation and procurement optimization. The reconciliation of net cash provided (used) by operating activities,
which is the most comparable financial measure to free cash flow found on the cash flow statement (1,177 million in 2015 as compared to (144) million in 2012) can be found in Note 27 to our consolidated financial statements in this 2015 annual report and in our 2014 annual report for 2012 information).
6.2 |
Consolidated and segment results of operations for the year ended December 31, 2015 compared to the year ended December 31, 2014 |
The following discussion takes into account our results of operations for the year ended
December 31, 2015 and December 31, 2014, including the impact of the sale of 85% of the Enterprise business in September 2014, which was treated as a discontinued operation in 2014. The 2014 results have been restated to take into account
the retroactive impact of a change in accounting treatment for the recognition of certain deferred tax assets, the details of which can be found in Note 4 to our consolidated financial statements in this 2015 annual report.
Revenues. Revenues totaled 14,275 million in 2015, an increase
of 8.3% from 13,178 million in 2014. Approximately 69% of our revenues for 2015 were denominated in or linked to the U.S. dollar. When we translate our non-euro sales into
euros for accounting purposes, there is an exchange rate impact
based on the relative value of the euro versus other currencies, including the U.S. dollar. If there had been constant exchange rates in 2015 as compared to 2014 our consolidated revenues would
have decreased by approximately 3.7% instead of the 8.3% increase actually reported. This is based on applying (i) to our sales made directly in currencies other than the euro effected during 2015, the average exchange rate that applied for
2014, instead of the average exchange rate that applied for 2015, and (ii) to our exports (mainly from Europe) effected during 2015 which are denominated in other currencies and for which we enter into hedging transactions, our average hedging
rates that applied for 2014. Our management believes that providing our investors with our revenues for 2015 at a constant exchange rate facilitates the comparison of the evolution of our revenues with that of our competitors in the industry.
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OPERATING AND FINANCIAL REVIEW AND PROSPECTS
Consolidated and segment results of operations for the year ended December 31, 2015 compared to the year ended December 31, 2014
The table below sets forth our revenues as reported, the conversion and hedging impact of the
euro/other currencies and our revenues at a constant rate and constant perimeter:
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(In millions of euros) |
|
Year ended
December 31, 2015 |
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Year ended
December 31, 2014 |
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% Change |
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Revenues as reported |
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14,275 |
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|
|
13,178 |
|
|
|
8.3% |
|
Conversion impact euro/other currencies |
|
|
(1,425) |
|
|
|
|
|
|
|
|
|
Hedging impact euro/other currencies |
|
|
(157) |
|
|
|
|
|
|
|
|
|
Revenues at constant rate and constant perimeter |
|
|
12,693 |
|
|
|
13,178 |
|
|
|
-3.7% |
|
|
|
Revenues by Segment and division
The following table sets forth revenues by segment and division:
|
|
|
|
|
|
|
|
|
(In millions of euros) |
|
2015 |
|
|
2014 |
|
|
|
|
|
|
|
|
|
|
Core Networking |
|
|
6,780 |
|
|
|
5,966 |
|
|
|
IP Routing |
|
|
2,669 |
|
|
|
2,368 |
|
IP Transport |
|
|
2,450 |
|
|
|
2,114 |
|
IP Platforms |
|
|
1,661 |
|
|
|
1,484 |
|
|
|
Access |
|
|
7,482 |
|
|
|
7,157 |
|
|
|
Wireless |
|
|
4,896 |
|
|
|
4,685 |
|
Fixed |
|
|
2,268 |
|
|
|
2,048 |
|
Managed Services |
|
|
262 |
|
|
|
369 |
|
Licensing |
|
|
56 |
|
|
|
55 |
|
|
|
|
|
|
|
|
|
|
|
|
Other and Unallocated |
|
|
13 |
|
|
|
55 |
|
|
|
|
|
|
|
|
|
|
TOTAL |
|
|
14,275 |
|
|
|
13,178 |
|
|
|
Core Networking segment
Revenues in our Core Networking segment, which consists of our IP Routing, IP Transport and IP Platforms divisions, were 6,780 million in 2015, an increase
of 13.6% from 5,966 million in 2014, using current exchange rates. When we translate the non-euro portion of Core Networking sales into euros for accounting purposes, there
is an exchange rate impact based on the relative value of the euro versus other currencies, including the U.S. dollar. If there had been constant exchange rates in 2015 as compared to 2014, our Core Networking segment revenues would have increased
by 4.1% instead of the 13.6% increase actually reported.
Revenues in our IP Routing division were 2,669 million in 2015, an increase of 12.7% from 2,368 million in 2014. Excluding the impact from
foreign exchange rates, this business would have grown approximately 2.0%, driven primarily by strength in Europe, Middle East and Africa (EMEA) and Central and Latin America (CALA), which were slightly offset by declines in other regions, notably
North America and Asia Pacific (APAC). Our IP Core router, the 7950 XRS, grew at a strong rate, albeit from a small base, and continued to build market momentum throughout the year, with 55 total contracts as of the end of 2015. Nuage
Networks, our wholly owned subsidiary focused on software defined networking (SDN) solutions, continued to register wins across various customers beyond our traditional service providers, closing 2015 with 50 customers.
Revenues in our IP Transport division, which includes our Terrestrial and Submarine Optics
businesses, were 2,450 million in 2015, an increase of 15.9% from 2,114 million in 2014.
Excluding the impact from foreign exchange rates, this business would have grown approximately 9.6% in 2015. Within IP Transport, 2015 marked a year of recovery for our terrestrial business, as revenue growth was driven by our WDM portfolio, notably
in EMEA, Asia Pacific excluding China, and CALA. Our 1830 Photonic Service Switch continued to grow as a percentage of total optical revenues in 2015, reaching 61% in 2015, compared to 49% in 2014. Our 100 Gigabit optical single carrier coherent
technology continues to be one of the growth drivers in our WDM portfolio, as its relative share of port shipments continues to increase, to 46% in 2015 from 34% in 2014. Our Submarine Optics business showed strong growth in 2015 as the upward cycle
recovery started to occur and our order backlog prepared us positively for 2016.
Revenues in our IP Platforms division, which includes
software and related services, were 1,661 million in 2015, an increase of 11.9% from
1,484 million in 2014. Excluding the impact from foreign exchange rates, this business would have declined 0.3%, as growth in next-generation technologies such as IP
Multimedia Subsystems (IMS) for Voice over LTE (VoLTE), particularly in North America, was more than offset by declines related to the tail-end of the phase-out of legacy businesses. We also experienced strong commercial traction in IP Platforms
such as IMS for VoLTE as we exited 2015, notably in EMEA and APAC.
56
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
Consolidated and segment results of operations for the year ended December 31, 2015 compared to the year ended December 31,
2014
Access segment
Revenues in our Access segment, which consists of our Wireless Access, Fixed Access, Managed Services and Licensing divisions, were 7,482 million in 2015,
an increase of 4.5% from 7,157 million in 2014, using current exchange rates. When we translate the non-euro portion of Access sales into euros for accounting purposes,
there is an exchange rate impact based on the relative value of the euro versus other currencies, including the U.S. dollar. If there had been constant exchange rates in 2015 as compared to 2014, our Access segment revenues would have decreased by
7.6% instead of the 4.5% increase actually reported.
Revenues in our Wireless Access division increased 4.5% in 2015, to 4,896 million from 4,685 million in 2014. Excluding the impact from foreign exchange rates, this
business would have declined 10.0% as strength in 4G LTE, which was concentrated in the U.S. and in China, was more than offset by declines in legacy technologies and services. We continued to expand our global footprint in LTE in 2015, ending the
year with 90 customers in 48 countries. In 2015, we also expanded our focus on small cell adoption across our residential, enterprise and metrocell portfolio, now with 87 operators.
Revenues in our Fixed Access division were
2,268 million in 2015, an increase of 10.7% from 2,048 million in 2014. Excluding the impact from
foreign exchange rates, this business would have increased 2.3% in 2015, as growth in broadband access technologies, including copper and fiber, was driven by Asia Pacific, notably in Australia, and in CALA, but was partially offset by declines in
Europe and North America. Next generation technologies, such as G.fast, Vplus and TWDM-PON, continued to see market traction as evidenced by numerous commercial deployments and trials announced during the year.
Revenues in our Managed Services division were 262 million in 2015
compared to 369 million in 2014, a decrease of 29.0%, as this business continued to be impacted by our strategy to terminate or restructure margin-dilutive contracts. Excluding
the impact from foreign exchange rates, this business would have declined 32.8%.
Revenues in our Licensing division were 56 million in 2015 compared to 55 million in 2014, an increase of 1.8%. Excluding the impact from foreign
exchange rates, this business would have declined 1.8%.
Revenues by geographical market
Revenues in 2015 and in 2014 by geographical market (calculated based upon the location of the customer) are as shown in the table below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions of euros) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues by geographical market |
|
France |
|
|
Other
Western Europe |
|
|
Rest of
Europe |
|
|
China |
|
|
Other
Asia Pacific |
|
|
U.S. |
|
|
Other
Americas |
|
|
Rest of
world |
|
|
Consolidated |
|
|
|
|
|
|
2015 |
|
|
817 |
|
|
|
2,101 |
|
|
|
281 |
|
|
|
1,459 |
|
|
|
1,499 |
|
|
|
5,913 |
|
|
|
1,192 |
|
|
|
1,013 |
|
|
|
14,275 |
|
|
|
2014 |
|
|
771 |
|
|
|
1,929 |
|
|
|
282 |
|
|
|
1,342 |
|
|
|
1,289 |
|
|
|
5,488 |
|
|
|
1,009 |
|
|
|
1,068 |
|
|
|
13,178 |
|
|
|
% Change 2015 vs. 2014 |
|
|
6% |
|
|
|
9% |
|
|
|
0% |
|
|
|
9% |
|
|
|
16% |
|
|
|
8% |
|
|
|
18% |
|
|
|
-5% |
|
|
|
8% |
|
|
|
In 2015, the United States accounted for 41.4% of revenues, down from 41.6% in 2014. Revenues
increased 8% in the U.S. as sales benefitted from a stronger US dollar despite an overall tougher spending environment compared to 2014, with some pockets of growth, including 4G LTE. Europe accounted for 22.4% of revenues in 2015 (5.7% in France,
14.7% in Other Western Europe and 2.0% in Rest of Europe), down from 22.6% in 2014 (5.9% in France, 14.6% in Other Western Europe and 2.1% in Rest of Europe). Europe witnessed full year growth driven primarily by strength in both IP Routing and IP
Transport. Within Europe, revenues increased 6% in France, 9% in Other Western Europe and were flat in Rest of Europe. Asia-Pacific accounted for 20.7% of revenues in 2015 (10.2% in China and 10.5% in Other Asia Pacific), up from 20.0% in 2014
(10.2% in China and 9.8% in Other Asia Pacific), as growth in 4G LTE in China in addition to overall strength in Australia and India were partially offset by declines in Japan. Revenues in Other Americas were driven by strength in Central and Latin
America in 2015 as revenues grew 18% from 2014 and its share of total revenue increased from 7.7% to 8.4%. The Rest of World share of total revenue decreased to 7.1% in 2015 compared to 8.1% in 2014, as revenues decreased 5% in the region, driven by
weakness in the Middle East and Africa.
Gross Profit. In 2015, gross profit as a percentage of revenues increased to 36.0% of
revenues compared to 33.4% in 2014, and increased in absolute terms, to 5,143 million in 2015 from
4,408 million in 2014. The increase in gross profit was mainly attributable to improved profitability in addition to favorable product mix, notably related to software
sales, in several business lines.
We sell a wide variety of products in many geographic markets. Profitability per product can vary
based on a products maturity, the required intensity of R&D and our overall competitive position. In addition, profitability can be impacted by geographic area, depending on the local competitive environment, our market share and the
procurement policy of our customers. In 2015, we witnessed trends, where, as noted above, a shift in product mix positively impacted gross profit.
Administrative and selling expenses. In 2015, administrative and selling expenses were 1,761 million or 12.3% of revenues compared to 1,621 million or 12.3% of revenues in 2014. The 8.6% increase in administrative and selling expenses year-over-year reflects the impact of a stronger US dollar on our expenses in
2015, which were partially offset by efforts to reduce fixed costs as part of The Shift Plan. Included in administrative and
57
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
Consolidated and segment results of operations for the year ended December 31, 2015 compared to the
year ended December 31, 2014
selling expenses for 2014 are non-cash purchase accounting entries resulting from the Lucent
business combination of 27 million.
Research and
development costs. Research and development costs were 2,378 million or 16.7% of revenues in 2015, after the net impact of capitalization of 31 million of development expense, an increase of 7.4% from 2,215 million or 16.8% of revenues after
the net impact of capitalization of (2) million of development expense in 2014. The 7.4% increase in research and development costs reflects the impact of a stronger US
dollar on our R&D expenses in 2015, which were partially offset by efforts to reduce fixed costs as part of The Shift Plan. Capitalization of R&D expense had a positive impact of
31 million in 2015 compared to 2014, reflecting the fact that new R&D costs capitalized were greater than the amortization of our capitalized R&D costs during this
period. Included in research and development costs are non-cash purchase accounting (PPA) entries resulting from the Lucent business combination of 27 million in 2015 and 24 million in 2014.
Income (loss) from operating activities before restructuring costs, litigations, transaction
related costs, gain/(loss) on disposal of consolidated entities, impairment of assets and post-retirement benefit plan amendments. In 2015, income from operating activities before restructuring costs, litigations, transaction related costs,
gain/(loss) on disposal of consolidated entities, impairment of assets and post-retirement benefit plan amendments was 1,004 million in 2015 compared to income of 572 million in 2014. The improvement in 2015 reflects higher gross profits partially offset by higher administrative and selling expenses and research and development costs, the
increase of which was due to the impact of the stronger US dollar on our operating expenses. Non-cash purchase accounting (PPA) entries resulting from the Lucent business combination had a negative impact of 25 million in 2015, which was lower than the impact of 51 million in 2014 mainly due to the phasing out
of amortization related to R&D expenses in 2015.
The tables below set forth our
revenues and segment operating income (loss) for the years ended December 31, 2015 and December 31, 2014:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions of euros) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Twelve months ended December 31, 2015 |
|
Core
Networking |
|
|
Access |
|
|
Total Reportable Segments |
|
|
Other and
unallocated amounts |
|
|
Total |
|
|
|
|
|
|
Revenues |
|
|
6,780 |
|
|
|
7,482 |
|
|
|
14,262 |
|
|
|
13 |
|
|
|
14,275 |
|
|
|
Segment Operating Income (Loss) |
|
|
678 |
|
|
|
423 |
|
|
|
1,101 |
|
|
|
(72) |
|
|
|
1,029 |
|
|
|
PPA Adjustments (excluding restructuring costs and impairment of assets) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(25) |
|
|
|
Income (loss) from operating activities before restructuring costs, litigations, transaction related costs, gain/(loss) on disposal of consolidated entities, impairment of assets and post-retirement benefit
plan amendments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,004 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions of euros) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Twelve months ended December 31, 2014 |
|
Core
Networking |
|
|
Access |
|
|
Total Reportable Segments |
|
|
Other and
unallocated amounts |
|
|
Total |
|
|
|
|
|
|
Revenues |
|
|
5,966 |
|
|
|
7,157 |
|
|
|
13,123 |
|
|
|
55 |
|
|
|
13,178 |
|
|
|
Segment Operating Income (Loss) |
|
|
630 |
|
|
|
42 |
|
|
|
672 |
|
|
|
(49) |
|
|
|
623 |
|
|
|
|
|
|
|
|
|
PPA Adjustments (excluding restructuring costs and impairment of assets) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(51) |
|
|
|
Income (loss) from operating activities before restructuring costs, litigations, transaction related costs, gain/(loss) on disposal of consolidated entities, impairment of assets and post-retirement benefit
plan amendments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
572 |
|
|
|
In 2015, a segment operating income of
1,029 million for the Group, adjusted for 25 million in PPA yielded income from operating
activities before restructuring costs, litigations, transaction related costs, gain/(loss) on disposal of consolidated entities, impairment of assets and post-retirement benefit plan amendments of 1,004 million. In 2014, a segment operating income of 623 million for the Group, adjusted for 51 million in PPA yielded an income from operating activities before restructuring costs, litigations, gain/(loss) on disposal of
consolidated entities, impairment of assets and post-retirement benefit plan amendments of 572 million.
Operating income in our Core Networking segment was 678 million or
10.0% of revenues in 2015, compared with an operating income of 630 million or 10.6% of revenues in 2014. The year-over-year improvement in Core Networking segment operating
income reflects the efforts we have made to improve our cost structure, leading to higher operating income contributions from both IP Transport and IP Platforms.
58
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
Consolidated and segment results of operations for the year ended December 31, 2015 compared to the
year ended December
31, 2014
Operating income in our Access segment was
423 million or 5.7% of revenues in 2015, compared with an operating income of 42 million or 0.6%
of revenues in 2014. The year-over-year improvement in our Access segment operating income reflects the work accomplished to improve our cost structure to achieve profitability in our Wireless Access division as part of The Shift Plan in addition to
continued strong contribution from our Fixed Networks division.
Restructuring Costs. Restructuring costs were 401 million in 2015, compared to 574 million in 2014. The lower amount of restructuring costs in 2015
reflects a reduction in costs as a number of restructuring and outsourcing initiatives under The Shift Plan began in 2014, driving costs higher.
Litigations. In 2015, we booked a litigation charge of 31 million mainly related to environmental litigations compared to 2014, when we booked a litigation
credit of 7 million.
Gain/(loss) on disposal of
consolidated entities. In 2015, we recognized a loss on the disposal of consolidated entities of 1 million, compared to 2014, when we recognized a gain on the disposal
of consolidated entities of 20 million mainly related to a 39 million gain from the sale of our
cyber-security services and solutions and communications services activities partially offset by an 11 million loss recognized related to the sale of LGS Innovations LLC.
Transaction-related costs. In 2015, we recognized
104 million of costs related to the Nokia exchange offer that was announced in April, 2015. There were no transaction-related costs in 2014.
Impairment of assets. In the third quarter of 2015, we booked an impairment of assets charge of 193 million related to the goodwill of Alcatel-Lucent Submarine Networks, taking into account all relevant circumstances, in connection with our announcement that we would
continue to operate this business as a wholly-owned subsidiary. In 2014, we did not book any charges related to the impairment of assets.
Post-retirement benefit plan amendments. In 2015, we booked a 404 million credit related to the resulting gain arising out of the lump-sum payments
that we made to those U.S. Management Pension Plan and U.S. Inactive Occupational Pension Plan beneficiaries who opted to accept our one-time offer to convert their current monthly pension payment to a lump-sum payment. In 2014, we booked a 112 million credit that included (i) an 80 million gain related to a reduction in our obligation
to pay for formerly represented retirees who are subject to annual dollar caps in exchange for a three year extension of post-retirement healthcare benefits, (ii) a
25 million gain related to the discontinuation of the subsidy for retiree healthcare benefits for former Management retirees who retired on or after March 1, 1990 and
who are under 65 years old and (iii) a 7 million gain related to the conversion of defined benefit pension plans for current active Dutch employees into a defined
contribution pension plan under which the Group no longer guarantees any pension increase.
Income (loss) from operating
activities. Income (loss) from operating activities was 678 million in 2015, compared to
137 million in 2014. The improvement in income (loss) from operating activities in 2015 is due to higher gross profits,
lower restructuring costs and higher contributions from post-retirement benefit plan amendments, partially offset by higher operating expenses, an impairment of assets charge, transaction related costs, a loss on disposal of consolidated entities
and higher litigation charges.
Finance costs. Finance costs were
269 million in 2015, a decrease from 291 million in 2014. The decrease in finance costs in 2015
is mainly related to the full effect of the refinancing and the repayment prior to maturity of certain debt in the first half of 2014.
Other financial income (loss). Other financial losses were
136 million in 2015, compared to 211 million in 2014. In 2015, other financial loss consisted
primarily of a loss of 121 million related to the financial component of pension and post-retirement benefit costs, mainly reflecting the impact from new mortality tables
implemented in the U.S. at the end of 2014 and, to a lesser extent, from the updated mortality assumptions implemented in the fourth quarter of 2015 and a 25 million loss
related to the partial repurchase of our Senior Notes due 2020. These losses were partially offset by a 102 million capital gain corresponding to the re-evaluation of the
value of our 51% ownership interest in Alda Marine, a joint venture with Louis Dreyfus Armateurs, in connection with our buyout of Louis Dreyfus Armateurs interest in Alda Marine and a
26 million capital gain on the disposal of our 40% stake in a joint venture held by Alcatel-Lucent Submarine Networks. In 2014, other financial loss consisted primarily of
(i) a 101 million loss related to the impact of the re-evaluation of the Alcatel-Lucent USA, Inc. Senior Secured Credit Facility that we repaid on August 19, 2014,
(ii) a loss of 44 million related to the financial component of pension and post-retirement benefit costs and (iii) a loss of 30 million related to partial repurchase of our Senior Notes due 2016. These losses were partially offset by a reversal of impairment loss of 15 million.
Share in net income (losses) of associates and joint
ventures. Share in net income of equity affiliates was 2 million in 2015, compared with
15 million in 2014.
Income (loss) before income tax and
discontinued operations. Income (loss) before income tax and discontinued operations was an income of 275 million in 2015 compared to a loss of 350 million in 2014.
Income tax (expense) benefit. We had
an income tax expense of 24 million in 2015, compared to an income tax benefit of 327 million in
2014. The income tax expense for 2015 resulted from a current income tax charge of 82 million which was partially offset by a net deferred income tax benefit of 57 million. The 57 million net deferred income tax benefit was mainly related to the reassessment of
the recoverability of deferred tax assets in the United States. The income tax benefit for 2014 resulted from a current income tax charge of 61 million which was offset by a
net deferred income tax benefit of 388 million. The 388 million net deferred income tax benefit
mainly includes 363 million of deferred tax assets recognized due to the reassessment of the recoverability of deferred tax assets in the United States.
59
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
Consolidated and segment results of operations for the year ended December 31, 2015 compared to the year ended December 31, 2014
Income (loss) from continuing operations. We had an income from continuing operations of 251 million in 2015 compared to a loss of 23 million in 2014.
Income (loss) from discontinued operations. We had a loss from discontinued operations of 16 million in 2015 mainly related to additional carve-out costs for the Enterprise business we disposed of in 2014. We had a loss from discontinued operations of 49 million in 2014 mainly related to the disposal of our Enterprise business.
Non-controlling Interests. Non-controlling interests accounted for an income of 29 million in 2015, compared to an income of 35 million in 2014. Non-controlling interests for both
periods are due largely to income from our operations in China through Alcatel-Lucent Shanghai Bell, Co. Ltd. and its subsidiaries.
Net income (loss) attributable to equity holders of the parent. A net income of
206 million was attributable to equity holders of the parent in 2015, compared to a net loss of
107 million in 2014.
6.3 |
Consolidated and segment results of operations for the year ended December 31, 2014 compared to the year ended December 31, 2013 |
The following discussion takes into account our results of operations for the year ended
December 31, 2014 and December 31, 2013, on the following basis:
· |
|
Due to the sale of 85% of the Enterprise business in 2014, results pertaining to this business for 2014 were treated as discontinued operations and results for 2013 have been re-presented
accordingly. Results for 2013 have also been re-presented to reflect the subsequent immaterial perimeter adjustments resulting from the sale of Enterprise. |
· |
|
The results for both periods have been restated to take into account the retroactive impact of a change in accounting treatment for the recognition of certain deferred tax assets, the details of
which can be found in Note 4 to our consolidated financial statements in this 2015 annual report. |
Revenues.
Revenues totaled 13,178 million in 2014, a decline of 4.6% from 13,813 million in 2013.
Approximately 64% of our revenues for 2014 were denominated in or linked to the U.S. dollar. When we translate our non-euro sales into euros for accounting purposes, there is an exchange rate impact based on the relative value of the euro versus
other currencies, including the U.S. dollar. If there had been constant exchange rates in 2014 as compared to 2013 our consolidated revenues would have decreased by approximately 4.2% instead of the
4.6% decrease actually reported. This is based on applying (i) to our sales made directly in currencies other than the euro effected during 2014, the average exchange rate that applied for
2013, instead of the average exchange rate that applied for 2014, and (ii) to our exports (mainly from Europe) effected during 2014 which are denominated in other currencies and for which we enter into hedging transactions, our average hedging
rates that applied for 2013. In the fourth quarter of 2014, the strengthening in the value of other currencies including the U.S. dollar, relative to the euro had a positive effect on our reported revenues. Our management believes that providing our
investors with our revenues for 2014 at a constant exchange rate facilitates the comparison of the evolution of our revenues with that of our competitors in the industry.
Additionally, if there had been constant exchange rates in 2014 as compared to 2013 and a constant perimeter, meaning that we would exclude
revenues related to LGS Innovations that was sold at the end of the first quarter of 2014, our consolidated revenues would have decreased by approximately 3.0% instead of the 4.6% decrease actually reported. Our management uses our revenues for 2014
at a constant exchange rate and constant perimeter internally and they believe that providing our investors with this information facilitates the comparison of the evolution of our revenues with that of our competitors in the industry.
The table below sets forth our
revenues as reported, the conversion and hedging impact of the euro/other currencies, the perimeter adjustment for LGS and our revenues at a constant rate and constant perimeter:
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions of euros) |
|
Year ended
December 31, 2014 |
|
|
Year ended
December 31, 2013 |
|
|
% Change |
|
|
|
|
|
|
|
|
|
|
Revenues as reported |
|
|
13,178 |
|
|
|
13,813 |
|
|
|
-4.6% |
|
|
|
|
|
Conversion impact euro/other currencies |
|
|
60 |
|
|
|
|
|
|
|
0.5% |
|
|
|
|
|
Hedging impact euro/other currencies |
|
|
(1) |
|
|
|
|
|
|
|
0.0% |
|
|
|
|
|
Perimeter (LGS) |
|
|
(41) |
|
|
|
(210) |
|
|
|
|
|
|
|
|
|
Revenues at constant rate and constant perimeter |
|
|
13,196 |
|
|
|
13,603 |
|
|
|
-3.0% |
|
|
|
60
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
Consolidated and segment results of operations for the year ended December 31, 2014 compared to the
year ended December 31, 2013
Revenues by Segment and
division
The following table sets forth revenues by segment and division:
|
|
|
|
|
|
|
|
|
(In millions of euros) |
|
2014 |
|
|
2013 |
|
|
|
Core Networking |
|
|
5,966 |
|
|
|
6,151 |
|
|
|
IP Routing |
|
|
2,368 |
|
|
|
2,253 |
|
|
|
|
IP Transport |
|
|
2,114 |
|
|
|
2,120 |
|
|
|
|
IP Platforms |
|
|
1,484 |
|
|
|
1,778 |
|
|
|
Access |
|
|
7,157 |
|
|
|
7,447 |
|
|
|
Wireless |
|
|
4,685 |
|
|
|
4,510 |
|
|
|
|
Fixed |
|
|
2,048 |
|
|
|
2,069 |
|
|
|
|
Managed Services |
|
|
369 |
|
|
|
791 |
|
|
|
|
Licensing |
|
|
55 |
|
|
|
77 |
|
|
|
Other |
|
|
41 |
|
|
|
210 |
|
|
|
Other and Unallocated |
|
|
14 |
|
|
|
5 |
|
|
|
TOTAL |
|
|
13,178 |
|
|
|
13,813 |
|
|
|
Core Networking segment
Revenues in our Core Networking segment, which consists of our IP Routing, IP Transport and IP Platforms divisions, were 5,966 million in 2014, a decrease
of 3.0% from 6,151 million in 2013, using current exchange rates. When we translate the non-euro portion of Core Networking sales into euros for accounting purposes, there
is an exchange rate impact based on the relative value of the euro versus other currencies, including the U.S. dollar. If there had been constant exchange rates in 2014 as compared to 2013, our Core Networking segment revenues would have decreased
by 2.4 % instead of the 3.0% decrease actually reported.
Revenues in our IP Routing division were 2,368 million in 2014, an increase of 5.1% from 2,253 million in 2013. The year-over-year growth was
driven by the continued success of our IP/MPLS service router portfolio, as service providers invest to keep up with the growing demand for bandwidth for services such as video. In 2014, we expanded our portfolio with the introduction of the
Virtualized Service Router (VSR) which allows service providers and large enterprises to build a flexible network and operate service router software on standard servers. Our IP Core router, the 7950 XRS, continued to build momentum through 2014,
with 36 total contracts as of the end of 2014. Nuage Networks, our wholly owned subsidiary focused on software defined networking (SDN) solutions, continued its traction in the marketplace, closing 2014 with 16 customers. Nuage Networks also
introduced its Virtualized Networks Services (VNS) solution which will help enterprises and service providers extend the benefits of SDN to branch locations.
Revenues in our IP Transport division, which includes our Terrestrial and Submarine Optics businesses, were 2,114 million in 2014, a decrease of 0.2% from 2,120 million in 2013. Within IP Transport, we witnessed
mixed trends as revenues in our terrestrial business increased in 2014, driven by our strength in our WDM portfolio. This increase was offset by declines in our Submarine Optics business, which showed signs
of an upward cycle recovery and order backlog build-up as we exited 2014. Within our WDM portfolio, our 1830 Photonic Service Switch continues to grow as a percentage of total optical revenues,
reaching 49% in 2014, compared to 38% in 2013. Our 100 Gigabit optical single carrier coherent technology continues to be one of the growth drivers in our WDM portfolio, as its relative share of port shipments continues to increase, to 34% in 2014
from 26% in 2013.
Revenues in our IP Platforms division, which includes software and related services, were 1,484 million in 2014, a decrease of 16.5% from 1,778 million in 2013. 2014 was a transitional phase
for the IP Platforms business, reflecting our strategy to rationalize the portfolio and leverage on growth engines such as IP Communications (including IMS and Subscriber Data Management), Motive Customer Experience and Policy & Charging.
Our portfolio rationalization drove the decline in revenues in 2014, as well as weaker revenues from legacy platforms. These trends were partially offset by growth in our Motive portfolio and resilience in our IMS portfolio which was impacted by
delayed VoLTE rollouts in the latter part of the year.
Access segment
Revenues in our Access segment, which consists of our Wireless Access, Fixed Access, Managed Services and Licensing divisions, were 7,157 million in 2014, a decrease of 3.9% from 7,447 million in 2013, using current exchange rates.
When we translate the non-euro portion of Access sales into euros for accounting purposes, there is an exchange rate impact based on the relative value of the euro versus other currencies, including the U.S. dollar. If there had been constant
exchange rates in 2014 as compared to 2013, our Access segment revenues would have decreased by 3.6% instead of the 3.9% increase actually reported.
Revenues in our Wireless Access division increased 3.9% in 2014, to 4,685 million from
4,510 million in 2013. Within the Wireless Access business, we witnessed strong year-over-year
61
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
Consolidated and segment results of operations for the year ended December 31, 2014 compared to the year ended December 31, 2013
growth in our LTE revenues, driven by strong U.S. investments throughout the year and LTE
deployments in China, notably in the first half of the year. This growth overcame declines in legacy technologies. Throughout 2014, we continued to diversify our LTE customer base, now with over 70 contracts. In 2014, we also expanded our focus on
small cell adoption, with 76 total customers and the announcement of our Multi-Standard Enterprise Small Cell device, in collaboration with Qualcomm that will allow operators to extend 3G, 4G LTE and Wi-Fi connectivity and coverage into the office
for in-building coverage.
Revenues in our Fixed Access division were
2,048 million in 2014, a decrease of 1.0% from 2,069 million in 2013, as growth in VDSL2
vectoring and fiber, notably in Europe and Asia Pacific, excluding China, was offset by declines in legacy products and the slowdown in specific customer rollouts in North America in the latter part of the year. During 2014, we launched the
industrys first Time and Wavelength Division Multiplexed Passive Optical Networks (TWDM-PON) solution,
also known as NG-PON2, which can converge residential, business and mobile traffic onto one network. We also introduced our G.fast solution that allows operators to place fiber closer to
subscribers homes, with 10 trials concluded in 2014.
Revenues in our Managed Services division were 369 million in 2014 compared to 791 million in 2013, a decrease of 53.4%, as this business continued to
be impacted by our strategy to terminate or restructure margin-dilutive contracts.
Revenues in our Licensing division were 55 million in 2014 compared to 77 million in 2013, a decrease of 28.6%.
Other segment
Revenues in our Other segment, which
included our Government business which was sold in the first quarter of 2014, were 41 million in 2014 compared to
210 million in 2013, which included a full year of results.
Revenues by geographical market
Revenues in 2014 and in 2013 by geographical market (calculated based upon the location of the customer) are as shown in the table below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions of euros) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues by geographical market |
|
France |
|
|
Other
Western Europe |
|
|
Rest of
Europe |
|
|
China |
|
|
Other
Asia Pacific |
|
|
U.S. |
|
|
Other
Americas |
|
|
Rest of
world |
|
|
Consolidated |
|
|
|
|
|
|
2014 |
|
|
771 |
|
|
|
1,929 |
|
|
|
282 |
|
|
|
1,342 |
|
|
|
1,289 |
|
|
|
5,488 |
|
|
|
1,009 |
|
|
|
1,068 |
|
|
|
13,178 |
|
|
|
2013 |
|
|
798 |
|
|
|
2,125 |
|
|
|
361 |
|
|
|
1,097 |
|
|
|
1,230 |
|
|
|
5,986 |
|
|
|
1,209 |
|
|
|
1,007 |
|
|
|
13,813 |
|
|
|
% Change 2014 vs. 2013 |
|
|
-3% |
|
|
|
-9% |
|
|
|
-22% |
|
|
|
22% |
|
|
|
5% |
|
|
|
-8% |
|
|
|
-17% |
|
|
|
6% |
|
|
|
-4.6% |
|
|
|
In 2014, the United States accounted for 41.6% of revenues, down from 43.3% in 2013. Revenues
declined 8% in the U.S. as investments in LTE were not enough to offset declines in other technologies, mainly in legacy optical and Fixed Access. Europe accounted for 22.6% of revenues in 2014 (5.9% in France, 14.6% in Other Western Europe and 2.1%
in Rest of Europe), down from 23.8% in 2013 (5.8% in France, 15.4% in Other Western Europe and 2.6% in Rest of Europe). Europe witnessed encouraging trends in 2014, particularly in IP Routing, IP Transport and Fixed Networks, while revenues were
tempered by the impact of the implementation of our strategy in Managed Services. Within Europe, revenues declined in each area: 3% in France, 9% in Other Western Europe and 22% in Rest of Europe. Asia-Pacific accounted for 20.0% of revenues in 2014
(10.2% in China and 9.8% in Other Asia Pacific), up from 16.8% in 2013 (7.9% in China and 8.9% in Other Asia Pacific), with growth mainly attributable to increased spending in China as LTE was deployed in the country. Revenues in Other Americas were
negatively impacted by a slowdown in Central and Latin America in 2014 driving revenues to decline 17% from 2013, as its share of total revenue declined from 8.8% to 7.7%. The Rest of World share of total revenue increased to 8.1% in 2014 compared
to 7.3% in 2013, as revenues increased 6% in the region.
Gross Profit. In 2014, gross profit as a percentage of revenues increased to 33.4% of
revenues compared to 31.2% in 2013, and increased in absolute terms, to 4,408 million in 2014 from
4,322 million in 2013. The increase in gross profit was mainly attributable to a favorable product mix, operational improvements and reduced fixed costs.
We sell a wide variety of products in many geographic markets. Profitability per product can vary based on a products maturity and our
overall competitive position. In addition, profitability can be impacted by geographic area, depending on the local competitive environment, our market share and the procurement policy of our customers. During 2014, we witnessed trends, where, as
noted above, a shift in product mix positively impacted gross profit.
Administrative and selling expenses. In 2014,
administrative and selling expenses were 1,621 million or 12.3% of revenues compared to
1,862 million or 13.4% of revenues in 2013. The 12.9% decline in administrative and selling expenses year-over-year reflects the progress we have made in reducing fixed
costs as part of The Shift Plan launched in 2013. Included in administrative and selling expenses are non-cash purchase accounting entries resulting from the Lucent business combination of
27 million in 2014 and 32 million in 2013.
62
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
Consolidated and segment results of operations for the year ended December 31, 2014 compared to the
year ended December 31, 2013
Research and development costs. Research and development costs were 2,215 million or 16.8% of revenues in 2014, after the net impact of capitalization of (2) million of
development expense, a decrease of 2.3% from 2,268 million or 16.4% of revenues after the net impact of capitalization of (34) million of development expense in 2013. The 2.3% decrease in research and development costs reflects a reduction in the overall level of R&D, notably for legacy
technologies. Capitalization of R&D expense was negative in both 2014 and 2013, reflecting the fact that the amortization of our capitalized R&D costs was greater than new R&D costs capitalized during this period. Included in research
and development costs are non-cash purchase accounting (PPA) entries resulting from the Lucent business combination of 24 million in 2014 and 54 million in 2013 with the decline due mainly to the phasing out of the amortization of certain in-process R&D.
Income (loss) from operating activities before restructuring costs, litigations, gain/(loss) on
disposal of consolidated entities, impairment of assets and post-retirement benefit plan amendments. We recorded income from operating activities before restructuring costs, litigations, gain/(loss) on disposal of consolidated entities,
impairment of assets and post-retirement benefit plan amendments of 572 million in 2014 compared to income of
192 million in 2013. The improvement in 2014 reflects higher gross profits in addition to lower administrative and selling expenses and research and development costs.
Non-cash purchase accounting (PPA) entries resulting from the Lucent business combination had a negative impact of 51 million in 2014, which was lower than the impact of 86 million in 2013 mainly due to the phasing out of the amortization of certain in-process R&D.
The tables below set forth our
revenues and segment operating income (loss) for the years ended December 31, 2014 and December 31, 2013:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions of euros) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Twelve months ended December 31, 2014 |
|
Core
Networking |
|
|
Access |
|
|
Other |
|
|
Total Reportable Segments |
|
|
Other and
unallocated amounts |
|
|
Total |
|
|
|
|
|
|
Revenues |
|
|
5,966 |
|
|
|
7,157 |
|
|
|
41 |
|
|
|
13,164 |
|
|
|
14 |
|
|
|
13,178 |
|
|
|
Segment Operating Income (Loss) |
|
|
630 |
|
|
|
42 |
|
|
|
- |
|
|
|
672 |
|
|
|
(49) |
|
|
|
623 |
|
|
|
PPA Adjustments (excluding restructuring costs and impairment of assets) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(51) |
|
|
|
Income (loss) from operating activities before restructuring costs, litigations, gain/(loss) on disposal of consolidated entities, impairment of assets and post-retirement benefit plan amendments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
572 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions of euros) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Twelve months ended December 31, 2013 |
|
Core
Networking |
|
|
Access |
|
|
Other |
|
|
Total Reportable Segments |
|
|
Other and
unallocated amounts |
|
|
Total |
|
|
|
|
|
|
Revenues |
|
|
6,151 |
|
|
|
7,447 |
|
|
|
210 |
|
|
|
13,808 |
|
|
|
5 |
|
|
|
13,813 |
|
|
|
Segment Operating Income (Loss) |
|
|
479 |
|
|
|
(85) |
|
|
|
5 |
|
|
|
399 |
|
|
|
(121) |
|
|
|
278 |
|
|
|
PPA Adjustments (excluding restructuring costs and impairment of assets) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(86) |
|
|
|
Income (loss) from operating activities before restructuring costs, litigations, gain/(loss) on disposal of consolidated entities, impairment of assets and post-retirement benefit plan amendments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
192 |
|
|
|
In 2014, a segment operating income of
623 million for the Group, adjusted for 51 million in PPA yielded income from operating
activities before restructuring costs, litigations, gain/(loss) on disposal of consolidated entities, impairment of assets and post-retirement benefit plan amendments of
572 million. In 2013, a segment operating income of 278 million for the Group, adjusted for 86 million in PPA yielded an income from operating activities before restructuring costs, litigations, gain/(loss) on disposal of consolidated entities, impairment of assets and
post-retirement benefit plan amendments of 192 million.
Operating income in our Core Networking segment was 630 million or 10.6% of revenues in 2014, compared with an operating income of 479 million or 7.8% of
revenues in 2013. The year-over-year improvement in Core Networking segment operating income reflects the efforts we have made to improve our cost structure, notably with operating expenses, leading to higher operating income contributions from
certain divisions.
Operating income in our Access segment was
42 million in 2014, compared with an operating loss of 85 million in 2013. The year-over-year
improvement in our Access segment
63
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
Consolidated and segment results of operations for the year ended December 31, 2014 compared to the year ended December 31, 2013
operating income reflects the work we are doing to improve our cost structure to achieve
profitability in our Wireless Access division as part of The Shift Plan in addition to continued strong contribution from our Fixed Networks division.
Segment operating income in the Other segment was 0 million in 2014, as this business was sold in the first quarter of 2014, compared with an income of 5 million or 2.4% of revenues in 2013, which included a full year of results.
Restructuring Costs. Restructuring costs were 574 million in 2014, compared to
518 million in 2013. The cost of new restructuring plans increased in 2014 compared to 2013 due to the implementation of The Shift Plan and primarily related to severance
payments, early retirement payments, costs for notice periods not worked, training costs of terminated employees, costs linked with the closure of facilities or the discontinuance of product lines and costs arising from plans that materially change
the scope of business undertaken by the Group.
Litigations. In 2014, we booked a litigation credit of 7 million compared to 2013, when we booked a litigation charge of 2 million.
Gain/(loss) on disposal of consolidated entities. In 2014, we recognized a gain on the disposal of consolidated entities of 20 million mainly related to a 39 million gain from the sale of our cyber-security services and
solutions and communications services activities partially offset by an 11 million loss recognized related to the sale of LGS Innovations LLC, compared to 2013, when we
booked a gain on the disposal of consolidated entities of 2 million.
Impairment of assets. In 2014, we did not book any charges related to the impairment of assets. In 2013, we booked an impairment of assets charge of
548 million, mainly related to our Wireless product division goodwill.
Post-retirement benefit plan amendments. In 2014, we booked a 112 million credit that included (i) an 80 million gain related to a reduction in our obligation to pay for formerly represented retirees who are subject to annual dollar caps in exchange for a three year extension of
post-retirement healthcare benefits, (ii) a 25 million gain related to the discontinuation of the subsidy for retiree healthcare benefits for former Management retirees
who retired on or after March 1, 1990 and who are under 65 years old and (iii) a 7 million gain related to the conversion of defined benefit pension plans for
current active Dutch employees into a defined contribution pension plan under which the Group no longer guarantees any pension increase. In 2013, we booked a 135 million
credit that included (i) a 55 million gain related to the change in retiree healthcare benefits for formerly represented retirees resulting from the extension of
benefits until December 31, 2016 and a reduction in our obligation to pay for retirees who are subject to annual dollar caps, (ii) a 41 million gain related to the
amendment of AUXAD, a French supplemental pension plan, to align it with the conditions of the French AGIRC (General Association of Pension Institutions for Managerial Staff) scheme, (iii) a 35 million gain related to an amendment of German pension plans where the traditional pension plans of most active
German employees have been transferred into a new cash balance plan whose benefits are lower than in previous plans and (iv) a gain of
4 million related to the amendment of our U.S. long term disability plan, where long-term medical benefits for disabled U.S. former employees will be provided by the retiree
medical plan.
Income (loss) from operating activities. Income (loss) from operating activities was an income of 137 million in 2014, compared to a loss of 739 million in 2013. The improvement in income (loss) from
operating activities in 2014 is due to no impairment charge, higher gross profits, lower administrative and selling expenses and research and development costs and a gain on disposal of consolidated entities, partially offset by higher restructuring
costs and lower contributions from post-retirement benefit plan amendments.
Finance costs. Finance costs were 291 million in 2014, a decrease from 392 million in 2013. The decrease in finance costs was mainly due
to a decrease in interest paid, from 462 million in 2013 to 359 million in 2014, slightly offset
by a decrease in interest earned from 70 million in 2013 to 68 million in 2014. The 2014 decrease
in interest paid is mainly due to the refinancing and balance sheet restructuring activities leading to a decrease in our gross financial debt, notably attributable to the early repayment in January 2014 of the outstanding U.S.$931 million on the
7.75% convertible trust preferred securities issued by Lucent Technologies Capital Trust I.
Other financial income (loss).
Other financial losses were 211 million in 2014, compared to 318 million in 2013. In 2014, other
financial loss consisted primarily of (i) a 101 million loss related to the impact of the re-evaluation of the Alcatel-Lucent USA, Inc. Senior Secured Credit Facility
that we repaid on August 19, 2014, (ii) a loss of 44 million related to the financial component of pension and post-retirement benefit costs and (iii) a loss
of 30 million related to partial repurchase of our Senior Notes due 2016. These losses were partially offset by a reversal of impairment loss of 15 million. In 2013, other financial losses consisted primarily of (i) 134 million related to a net
loss on convertible bonds and notes repurchased in 2013, (ii) a loss of 84 million related to the financial component of pension and post-retirement benefit costs,
(iii) a loss of 39 million related to the change of estimated future cash flows in respect of the irrevocable commitment we made to repay in January 2014 the 7.75%
convertible trust preferred securities issued by Lucent Technologies Capital Trust I, (iv) a loss of 24 million related to the amortization of outstanding costs arising
from the repayment of the Alcatel-Lucent USA, Inc. U.S.$500 million asset sale facility established in 2013, (v) a net loss of 24 million on foreign exchange and
(vi) a loss of 21 million related to the accelerated amortization of outstanding costs related to the repayment of the Alcatel-Lucent USA, Inc euro tranche Senior
Secured Credit Facility established in 2013.
Share in net income (losses) of equity affiliates. Share in net income of equity
affiliates was 15 million in 2014, compared with 7 million in 2013.
64
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
Consolidated and segment results of operations for the year ended December 31, 2014 compared to the
year ended December 31, 2013
Income (loss) before income tax and discontinued operations. Income (loss) before income tax
and discontinued operations was a loss of 350 million in 2014 compared to a loss of 1,442 million
in 2013.
Income tax (expense) benefit. We had an income tax benefit of
327 million in 2014, compared to an income tax benefit of 106 million in 2013. The income tax
benefit for 2014 resulted from a current income tax charge of 61 million which was offset by a net deferred income tax benefit of 388 million. The 388 million net deferred income tax benefit mainly includes 363 million of deferred tax assets recognized due to the reassessment of the recoverability of deferred tax assets in the United States. The income tax benefit for 2013 resulted from a
current income tax charge of 56 million in addition to a net deferred income tax benefit of
162 million. The 162 million net deferred income tax benefit included: (i) 85 million in deferred tax benefits related to Alcatel-Lucent USA, Inc.s post-retirement benefit plans,
(ii) 64 million related to the reversal of deferred tax liabilities mainly related to the repayment of the Alcatel-Lucent USA, Inc. 2.875% Series A and B convertible
debentures, the irrevocable commitment to repay the Lucent Technologies Capital Trust Is 7.75% convertible trust preferred securities and the repayment of the 2015 OCEANE
(iii) 58 million of other deferred income tax benefits, net, primarily related to the re-assessment of the recoverability of certain deferred tax assets in the U.S. and
(iv) 45 million of deferred income tax benefits related to the reversal of deferred
tax liabilities accounted for in the purchase price allocation of Lucent. These benefits were slightly offset by a deferred tax charge of
23 million related to the post-retirement benefit plan amendments we implemented in 2013.
Income (loss) from continuing operations. We had a loss from continuing operations of 23 million in 2014 compared to a loss of 1,336 million in 2013.
Income (loss) from discontinued operations. We had a loss from discontinued operations of 49 million in 2014 mainly related to the disposal of our Enterprise business. We had a loss from discontinued operations of
25 million in 2013 mainly related to settlements of litigations related to businesses disposed of in prior periods and a post-closing purchase price adjustment in connection
with the Genesys business disposal.
Non-controlling Interests. Non-controlling interests accounted for an income of 35 million in 2014, compared to an income of 10 million in 2013. The improvement in 2014 compared to
2013 is due largely to income from our operations in China through Alcatel-Lucent Shanghai Bell, Co. Ltd. and its subsidiaries.
Net
income (loss) attributable to equity holders of the parent. A net loss of 107 million was attributable to equity holders of the parent in 2014, compared to a net loss of
1,371 million in 2013.
6.4 |
Liquidity and capital resources |
Liquidity
Cash flow for the years ended December 31, 2015 and 2014
Overview. Cash and cash equivalents increased 1,027 million in
2015 from 3,878 million as of December 31, 2014 to 4,905 million as of December 31,
2015, mainly due to a significant increase of 1,050 million of our net cash generated by operating activities. This increase was the result of the actions taken as part of
The Shift Plan since 2013.
Net cash provided (used) by operating activities. Net cash provided by operating activities was 1,177 million in 2015 compared to net cash provided of 127 million in 2014. Net cash provided by
operating activities before changes in working capital, interest and taxes increased from 609 million in 2014 to
1,015 million for 2015. This increase was primarily due to a significant increase in profitability driven by an improved gross margin at 36.0% in 2015 compared to 33.4% in
2014.
Changes in working capital favorably impacted our net cash from operating activities before interest and taxes by 435 million in 2015 compared to a negative impact of 164 million in 2014 due to several factors.
Changes in inventories and work in progress had a strong positive effect on the operating cash flow of 342 million in 2015 compared to a negative impact 72 million in 2014, mainly due to strong
revenues, particularly during the fourth quarter of 2015. Also, the change in trade receivables amounted to 93 million
in 2015 compared to 18 million in 2014, mainly driven by good collections and the increased sale of receivables without recourse, principally in the U.S. Changes in accounts
payable were negative at 227 million, due to a higher level of activity in 2015, compared to a negative effect of
167 million in 2014. Changes in other current assets and liabilities were significant at 275 million
compared to a negative amount of 35 million in 2014 mainly driven by VAT collection and the increase in wage accruals.
Net interest and taxes paid amounted to 273 million in 2015 compared
to 318 million in 2014. Interest paid decreased to 264 million in 2015 from 290 million in 2014. This decrease was primarily due to the full effect over 2015 of the refinancing and the repayment prior to maturity of certain debt in the first half of 2014.
Net cash provided (used) by investing activities. Net cash used by investing activities was 485 million in 2015 compared to net cash provided of 235 million in 2014. This change was mainly due to
much less significant sales of marketable securities in 2015 than in 2014 (68 million in 2015 compared to
617 million in 2014). Capital expenditures slightly increased from 556 million in 2014 to 580 million in 2015. In 2015, we
65
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
Liquidity and capital resources
acquired the 49% interest in Alda Marine previously held by our joint-venture partner Louis Dreyfus
Armateurs for 76 million and a cable vessel for 26 million. This was the main reason for an increase
in cash expenditures for obtaining control of consolidated companies or equity affiliates, from 14 million in 2014 to
109 million in 2015, which also contributed to the increased cash used by investing activities.
Net cash provided (used) by financing activities. Net cash used by financing activities amounted to 211 million in 2015 compared to 1,383 million in 2014.
On March 18, 2015, in connection with the acquisition of the 49% equity interest in Alda Marine and a cable vessel, Alcatel-Lucent Submarine
Networks entered into a 85 million credit facility agreement with a seven-year maturity, which was fully drawn at that date.
On September 4, 2015, we repurchased an aggregate U.S.$300 million nominal amount of 6.75% Senior Notes due 2020.
In 2014 we issued convertible notes (OCEANE) in two tranches for an aggregate amount of
1,148 million. With the proceeds of these issuances, we repaid our remaining outstanding Senior Secured Credit Facility for a total nominal value of U.S.$1,724 million.
We also repaid in 2014 (i) at the maturity date the remaining 274 million outstanding 6.375% Senior Notes, (ii) in full the outstanding principal amount of
U.S.$931 million on the 7.75% Convertible Trust Preferred Securities due 2017 and (iii) an aggregate 232 million nominal amount of Senior Notes 2016.
The net positive effect of exchange rate changes was 505 million in
2015 compared to 633 million in 2014.
Disposed of or
discontinued operations. Cash provided by discontinued operations was 41 million in 2015 compared to
170 million of cash used in 2014, both related to the disposal of our Enterprise business in 2014.
Capital resources
Resources. Over time, we may derive our capital resources from a variety of sources, including the generation of positive cash flow from
on-going operations, proceeds from asset sales, the issuance of debt in various forms and credit facilities, including the Nokia Revolving Liquidity Support Facility and the Nokia Revolving Credit Facility. Our ability to continue to draw upon these
resources is dependent upon a variety of factors, including our customers ability to make payments on outstanding accounts receivable, who may ask for extended payment terms during the year; the perception of our credit quality by lenders and
investors; and the debt market conditions generally.
Given current conditions, access to the debt markets may not be relied upon at
any given time. Also, although our on-going operations generated positive cash flow in 2015, this had not been the case in the previous years. Our cash, cash equivalents and marketable securities, including short-term investments, amounted to 6,531 million as of December 31, 2015. Although approximately 1,700 million of this cash,
cash equivalents and
marketable securities are subject to exchange control restrictions in certain countries (primarily China) that may limit the use of such funds by our subsidiaries outside of the local
jurisdiction, we do not expect that such restrictions will have an impact on our ability to meet our cash obligations.
Nokia Revolving Liquidity Support
Facility.
On February 3, 2016, Nokia Corporation and Alcatel Lucent USA Inc. entered into a U.S.$2 billion Facility, which comprises:
· |
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Facility A, for U.S.$686 million, with a maturity date of June 30, 2017; |
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Facility B, for U.S.$546 million, with a maturity date of December 31, 2019; and |
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Facility C, for U.S.$768 million, with a maturity date of November 15, 2020. |
Applicable interest rate is 2.40% per annum on drawn amounts. The commitment fee is 30% of 2.40% on available undrawn amounts.
The Facility was made available to Alcatel Lucent USA Inc. to finance the redemption of U.S.$700 million of its 6.750% Senior Notes due 2020, U.S.$500 million of its 8.875% Senior Notes due 2020, and U.S.$650 million of its 4.625%
Senior Notes due 2017 (together, the Notes), including any related fees, costs and expenses, as well as for general purposes of the Alcatel Lucent Group. The Notes were redeemed in February, 2016.
Borrowings under the Facility rank pari passu with all other unsecured and unsubordinated indebtedness of Alcatel Lucent USA Inc.. The
Facility does not contain any financial covenants. It does contain certain undertakings of Alcatel Lucent USA Inc. (including, for example, certain negative covenants, such as with respect to guarantees, indemnities and financial indebtedness), but
none of these undertakings prevent the Borrower from engaging in any activities which would have been permitted under the indentures relating to the Notes.
Nokia Revolving Credit Facility
On April 13, 2016,
Nokia Corporation and Alcatel-Lucent Participations entered into a 1 billion Revolving Credit Facility for a two-year term.
Applicable interest rate is EURIBOR plus a 0.95% margin per annum on drawn amounts. A utilization fee of 0.10%, 0.20% or 0.40% per annum depending
on the level of use of the facility, is also applicable. The commitment fee is 35% of 2.40% on available undrawn amounts.
This
Revolving Credit Facility is available for the general purposes of Alcatel-Lucent Participations.
Borrowings under the Revolving
Credit Facility rank pari passu with all other unsecured and unsubordinated indebtedness of Alcatel-Lucent Participations. The Facility does not contain any financial covenants.
66
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
Liquidity and capital resources
2013 Syndicated Bank Credit Facility.
On December 17, 2013, we had obtained a 504 million three-year
revolving credit facility with a syndicate of 12 international banks. The availability of funds under the credit facility was not dependent upon Alcatel Lucents credit ratings. Alcatel Lucents ability to draw on the credit facility was
conditioned upon compliance with a financial covenant linked to the Groups capacity to cover its interest charges. Alcatel-Lucent USA Inc. and some subsidiaries of the Group had provided senior unsecured guarantees in respect of this revolving
credit facility.
This revolving credit facility was cancelled on February 9, 2016. It had never been drawn prior to its
termination.
March 2015 Credit Facility Agreement.
On March 18, 2015, in conjunction with the acquisition of the equity in ALDA Marine owned by our joint venture partner, Alcatel-Lucent Submarine Networks (ASN) entered into a 86 million credit facility agreement with a seven year maturity that was fully drawn at that date. Three vessels are subject to a mortgage under the credit facility.
6.75% Senior Notes due November 2020.
On
September 2, 2015, Alcatel Lucent USA Inc. accepted for purchase an aggregate principal amount of U.S.$300 million of its 6.75% Senior Notes due November 2020, pursuant to its offer to purchase for cash up to U.S.$300 million. The purchase
price of the Notes was U.S.$1,080 per U.S.$1,000 principal amount of Notes, plus accrued and unpaid interest. The Notes repurchased by Alcatel Lucent USA Inc. were cancelled. Consequently, the outstanding principal amount for these 6.750% Notes was
U.S.$700 million as of December 31, 2015.
On February 10, 2016, Alcatel Lucent USA Inc. completed the redemption in full of
the outstanding U.S.$700 million principal amount of the 6.75% Senior Notes due 2020. The redemption payment was U.S.$765 million, including the applicable premium of U.S.$54 million and accrued and unpaid interest of U.S.$11 million.
8.875% Senior Notes due January 2020.
On February 10, 2016, Alcatel Lucent USA Inc. completed the redemption in full the outstanding U.S.$500 million principal amount of its
8.875% Senior Notes due 2020. The redemption payment was U.S.$542 million, including the applicable premium of U.S.$37 million and accrued and unpaid interest of U.S.$5 million.
OCEANE Convertible Bonds due 2018 / 2019 / 2020.
On
July 3, 2013, we issued convertible/exchangeable bonds (OCEANE) due July 1, 2018 for a nominal value of 629 million. The bonds bore interest at an annual rate of 4.25%,
payable semi-annually in arrears on January 1, and July 1, commencing January 1, 2014. At our option, the bonds were subject to early redemption under certain conditions. These bonds are no longer outstanding (see below).
On June 10, 2014, we issued convertible/exchangeable bonds (OCEANE) in two tranches:
· |
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Tranche 1 due January 30, 2019 for a nominal value of 688 million. The conversion price per bond was set at 4.11, giving a conversion premium of approximately 40% over Alcatel Lucents reference share price on the regulated market Euronext in Paris. |
· |
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Tranche 2 due January 30, 2020 for a nominal value of 460 million. The conversion price per bond was set at 4.02, giving a conversion premium of approximately 37% over Alcatel Lucents reference share price on the regulated market Euronext in Paris. |
The bonds due 2019 and 2020 bear interest at an annual rate of 0.00% and 0.125% respectively, payable semi-annually in arrears on
January 30th, and July 30th, commencing January 30, 2015. At our option, the bonds may be subject to early redemption under certain conditions.
On January 22, 2016, we informed the holders of OCEANE 2018, OCEANE 2019 and OCEANE 2020 of their right to request an early redemption of
their OCEANE in the context of the Nokia Offer, the result of which constitutes a change of control within the meaning of the OCEANE prospectuses. Holders of 7,393,369 OCEANE 2019 and 1,751,000 OCEANE 2020 requested early repayment.
In addition, in late 2015 and early 2016, 206,784,349 OCEANE 2018, 37,880,652 OCEANE 2019 and 16,138,206 OCEANE 2020 were tendered into the Nokia
Offer, and in early 2016 4,795,096 OCEANE 2018, 19,971,720 OCEANE 2019 and 56,644,832 OCEANE 2020 were tendered into the reopened Nokia Offer. On February 12, 2016, Nokia converted all of the OCEANE tendered in the offer into Nokia Corporation
shares.
On March 21, 2016, the 421,910 OCEANE 2018 remaining outstanding were redeemed. As of the date of this report, there are no
OCEANE 2018 outstanding.
As of March 31, 2016, as a result of the transactions described above, the remaining outstanding OCEANE 2019
amount to 367 million, and the remaining outstanding OCEANE 2020 amount to 109 million.
4.625% Senior Notes due July 2017.
On February 10, 2016, Alcatel Lucent USA Inc. completed the redemption in full of the outstanding U.S.$650 million principal amount of its 4.625% Senior Notes due 2017. The redemption payment for the 4.625% Notes was U.S.$685
million, including the applicable premium of U.S.$31 million and accrued and unpaid interest of U.S.$3 million.
8.50% Senior Notes due January 15,
2016.
In March 2015, a nominal amount of 2 million of
our Senior Notes due 2016 was bought back and cancelled for a cash amount of 2 million. As a result, the outstanding principal amount for these 8.50% Notes was 190 million as of December 31, 2015. On January 15, 2016, we repaid on the maturity date the
190 million outstanding under our 8.50% Senior Notes.
67
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
Liquidity and capital resources
Credit rating
As of the date of filing of this report, the credit ratings of Alcatel-Lucent and Alcatel-Lucent USA Inc. were as follows:
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Rating Agency |
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Corporate Family rating |
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Long-term debt |
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Short-term debt |
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Outlook |
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Last update of CFR/Debt rating |
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Last update of the outlook |
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Moodys: |
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Alcatel-Lucent S.A. |
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B2 |
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B2/B3 (1) |
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Not Prime |
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Review for upgrade |
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August 28, 2015 |
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April 20, 2015 |
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Alcatel-Lucent USA Inc. |
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n.a. |
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B2 (2) |
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n.a |
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Review for upgrade |
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August 28, 2015 |
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April 20, 2015 |
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Standard & Poors: |
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Alcatel-Lucent S.A. |
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BB+ |
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BB+ |
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B |
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Positive |
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March 21, 2016 |
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March 21, 2016 |
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Alcatel-Lucent USA Inc. |
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BB+ |
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BB+ |
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n.a |
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Positive |
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March 21, 2016 |
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March 21, 2016 |
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(1) |
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The OCEANE due 2018, the OCEANE due 2019 and the OCEANE due 2020 are rated B3; all other long-term debt issued by Alcatel-Lucent is rated B2. |
(2) |
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The 8.875% Senior Notes, the 6.75% Senior Notes and the 4.625% Senior Notes were each rated B2 at the time of their redemption. Ratings were withdrawn on January 20, 2012 for the
Alcatel-Lucent USA Inc. 6.50% Notes due 2028 and 6.45% Notes due 2029. |
Moodys: On August 28, 2015, Moodys upgraded Alcatel-Lucents Corporate Family
rating to B2 from B3, the convertible notes (OCEANE) ratings to B3 from Caa1, and the senior unsecured ratings to B2 from B3. All ratings remain on review for upgrade.
On April 20, 2015, Moodys placed on review for upgrade all of Alcatel-Lucents ratings.
On November 17, 2014, Moodys changed the outlook on Alcatel-Lucent and Alcatel-Lucent USA Inc to positive from stable, and affirmed the
B3 ratings.
The rating grid of Moodys ranges from Aaa, which is the highest rated class, to C, which is the lowest rated class.
Alcatel-Lucents Corporate Family rating, the Alcatel-Lucent long-term debt, the OCEANE 2019 and 2020, and the Alcatel-Lucent USA Inc. rated long-term debt, are rated in the B category, which
includes B1, B2 and B3 ratings.
Moodys gives the following definition of its B category: obligations rated B are
considered speculative and are subject to high credit risk.
Standard & Poors: On March 21, 2016, Standard &
Poors raised its long-term corporate ratings on Alcatel-Lucent and Alcatel-Lucent USA Inc. to BB+ from B+, with positive outlook. The ratings on the debt issued by Alcatel-Lucent and Alcatel-Lucent USA Inc. were also raised to BB+ from B+, and
the B short-term corporate credit rating on Alcatel-Lucent was affirmed.
On August 5, 2015, Standard and Poors raised its
long-term corporate credit ratings on Alcatel-Lucent and Alcatel-Lucent USA Inc. to B+ from B, as well as on the debt issued by Alcatel-Lucent and Alcatel-Lucent USA. All ratings remain on CreditWatch with positive implications.
On April 17, 2015, Standard & Poors placed Alcatel-Lucent ratings on CreditWatch with positive implications.
On August 18, 2014, Standard & Poors raised its corporate credit ratings on Alcatel-Lucent and Alcatel-Lucent USA Inc. from B-
to B. The unsecured bonds issued by the Group were
also upgraded from CCC+ /B- to B. At the same date, and as a consequence of the rating upgrade, the outlook was changed from Positive to Stable.
The rating grid of Standard & Poors ranges from AAA (the strongest rating) to D (the weakest rating).
Alcatel-Lucents and Alcatel-Lucent USA Inc.s Corporate Family rating, as well as their long term debt are rated B+, which is in the B
category.
Standard & Poors gives the following definition to the BB category: An obligation rated BB is
less vulnerable to nonpayment than other speculative issues. However, it faces major ongoing uncertainties or exposure to adverse business, financial, or economic conditions which could lead to the obligors inadequate capacity to meet its
financial commitment on the obligation.
Standard & Poors gives the following definition to the B category:
An obligation rated B is more vulnerable to non-payment than obligations rated BB but the obligor currently has the capacity to meet its financial commitment on the obligation. Adverse business, financial or economic
conditions will likely impair the obligors capacity or willingness to meet its financial commitment on the obligation.
Short-term cash
requirements.
Our short-term cash requirements are primarily related to funding our operations, including our restructuring
plans, capital expenditures and short-term debt repayments.
Restructuring plans.
Through The Shift Plan, we reduced our fixed-cost base by 1,031
million in 2015 compared to our 2012 cost base through the adoption of direct-channel operations, additional consolidation of SG&A (selling, general and administrative) functions, and by refocusing our R&D capacity. For the year ended
December 31, 2015, we expensed 306 million of restructuring costs for these actions.
68
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
Liquidity and capital resources
Short-term debt.
As of December 31, 2015, we had 579 million of short-term financial debt outstanding.
Long-term debt and total financial debt.
As
of December 31, 2015, we had 4,632 million of long-term financial debt outstanding and therefore a total gross financial debt at that date of 5,211 million, compared to 5,277 million as of December 31, 2014.
Cash flow outlook.
We believe that our
cash, cash equivalents and marketable securities, including short-term investments, aggregating 6,531 million as of December 31, 2015, are sufficient to fund
our cash requirements for the next 12 months and to pursue our capital expenditures program as planned.
To the extent that the business environment materially deteriorates or our customers reduce their spending plans, or if the credit markets were to
limit our access to bid and performance bonds, with a resulting deterioration of our liquidity, we will need to re-evaluate our capital expenditure priorities appropriately. We may also be required to engage in additional restructuring efforts and
seek additional sources of capital, which may be difficult under such circumstance.
Rating clauses affecting our debt
Alcatel Lucent and Alcatel-Lucent USA Inc.s outstanding notes and convertible debentures do not contain clauses that could
trigger an accelerated repayment in the event of a lowering of their respective credit ratings.
6.5 |
Contractual obligations and off-balance sheet contingent commitments |
Contractual obligations
We have certain contractual obligations that extend beyond 2015. Among these obligations, we have long-term debt and interest thereon, finance leases, operating leases, commitments to purchase fixed assets and other unconditional
purchase obligations. Our total contractual cash obligations as of December 31, 2015 for these items are presented below based upon the minimum payments we will have to make in the future under such contracts and firm commitments. Amounts
related to financial debt, finance lease obligations and the equity component of our convertible bonds are fully reflected in our consolidated statement of financial position included in this annual report.
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(In millions of euros) |
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Payment deadline |
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Contractual payment obligations |
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Before December 31, 2016 |
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2017-2018 |
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2019-2020 |
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2021 and after |
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Total |
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Financial debt (excluding finance leases) |
|
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559 |
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|
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1,103 |
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|
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2,037 |
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1,484 |
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|
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5,183 |
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Finance lease obligations |
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|
20 |
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|
|
8 |
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- |
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|
- |
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28 |
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Equity component of convertible bonds |
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|
- |
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46 |
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|
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139 |
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|
- |
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185 |
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Unconditional purchase obligations (1) |
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27 |
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|
|
94 |
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173 |
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53 |
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347 |
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Sub-total - included in statement of financial position |
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606 |
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1,251 |
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2,349 |
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1,537 |
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5,743 |
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Finance costs on financial debt |
|
|
241 |
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|
|
396 |
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276 |
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2 |
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915 |
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Operating leases |
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151 |
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|
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200 |
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|
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138 |
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|
|
135 |
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|
|
624 |
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|
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Commitments to purchase fixed assets |
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|
33 |
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|
|
- |
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- |
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|
|
- |
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|
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33 |
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|
|
|
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|
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Other unconditional purchase obligations (2) |
|
|
737 |
|
|
|
566 |
|
|
|
290 |
|
|
|
110 |
|
|
|
1,703 |
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Sub-total - commitments not included in statement of financial position |
|
|
1,162 |
|
|
|
1,162 |
|
|
|
704 |
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|
|
247 |
|
|
|
3,275 |
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|
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Total contractual obligations (3) |
|
|
1,768 |
|
|
|
2,413 |
|
|
|
3,053 |
|
|
|
1,784 |
|
|
|
9,018 |
|
|
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(1) |
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On April 1, 2015, we terminated certain existing license agreements and entered into two new license agreements with Qualcomm with terms ranging from 6 to 10 years, which were accounted for as
intangible assets at their discounted value. Total commitments amounted to 347 million as of December 31, 2015. On February 4, 2016, Qualcomm notified us that they were exercising their right to terminate one of these two license agreements
with immediate effect upon the closing of the Nokia Offer. The termination resulted in the acceleration of all remaining unpaid quarterly royalty payments of 278 million (U.S.302.5 million) payable to Qualcomm within 30 days of termination.
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(2) |
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Of which 425 million relate to commitments made to HP pursuant to the sales cooperation agreement and the IT outsourcing transaction entered into with HP and 438 million
relate to commitments made to Accenture as part of several outsourcing transactions mentioned below. Other unconditional purchase obligations result mainly from obligations under multi-year supply contracts linked to the sale of businesses to third
parties. |
(3) |
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Obligations related to pensions, post-retirement health and welfare benefits and post-employment benefit obligations are excluded from the table (refer to Note 23 to our consolidated financial
statements). |
69
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
Contractual obligations and off-balance sheet contingent commitments
Off-balance sheet commitments
On December 31, 2015, our off-balance sheet commitments and contingencies amounted to 2,056 million, consisting primarily of 1,368 million in guarantees on long-term contracts for the
supply of telecommunications equipment and services by our consolidated and non-consolidated subsidiaries. Generally, we provide these guarantees to back performance bonds issued to customers through financial institutions. These performance bonds
and counter-guarantees are standard industry practice and are routinely provided in long-term supply contracts. If certain events occur subsequent to our including these commitments within our off-balance sheet contingencies, such
as delays in promised delivery or claims related to an alleged failure by us to perform on our long-term contracts, or the failure by one of our customers to meet its payment obligations, we
reserve the estimated risk on our consolidated statement of financial position under the line items Provisions or Amounts due to/from our customers on construction contracts, or in inventory reserves. Not included in the 2,056 million is approximately 184 million in customer financing commitments provided by us.
With respect to guarantees given for contract performance, only those issued by us to back guarantees granted by financial
institutions are presented in the table below.
Off-balance sheet contingent commitments given in the
normal course of business are as follows:
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(In millions of euros) |
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2015 |
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2014 |
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2013 |
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Guarantees given on contracts made by the Group |
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1,368 |
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|
|
1,637 |
|
|
|
1,180 |
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|
|
|
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Discounted notes receivable with recourse (1) |
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|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
Other contingent commitments (2) |
|
|
688 |
|
|
|
737 |
|
|
|
671 |
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|
|
Sub-total -contingent commitments |
|
|
2,056 |
|
|
|
2,374 |
|
|
|
1,851 |
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|
|
Secured borrowings (3) |
|
|
- |
|
|
|
2 |
|
|
|
8 |
|
|
|
Total (4) |
|
|
2,056 |
|
|
|
2,376 |
|
|
|
1,859 |
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|
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(1) |
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Amounts reported in this line item are related to discounting of receivables with recourse only. Total amounts of receivables discounted without recourse are disclosed in Note 20 to our
consolidated financial statements. |
(2) |
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Excluding the guarantee given to Louis Dreyfus Armateurs described below. |
(3) |
|
Excluding the subordinated guarantees described below on certain bonds. |
(4) |
|
Obligations related to pensions, post-retirement health and welfare benefits and post-employment benefit obligations are excluded from the table. Refer to Note 23 to our consolidated financial
statements for a summary of our expected contributions to these plans. |
The amounts of guarantees given on contracts reflected in the preceding tables represent the
maximum potential amounts of future payments (undiscounted) that the Group could be required to make under current guarantees granted by the Group. The maximum potential amount reflects the undiscounted reliable best estimate of the highest payment
that could effectively be made, even if the likelihood of occurrence of such payment is remote, and without taking into account any reduction related to potential recovery through recourse or collateralization provisions. If such a reliable best
estimate is not available, the amount disclosed is the maximum amount the Group could be required to pay, with all the other characteristics remaining the same. In addition, most of the parent company guarantees and performance bonds given to our
customers are insured; therefore, the estimated exposure related to the guarantees set forth in the preceding table may be reduced by insurance proceeds that we may receive in case of a claim.
Commitments related to product warranties and pension and post-retirement benefits are not included in the preceding table. These commitments are
fully reflected in our 2015 consolidated financial statements. Contingent liabilities arising out of litigation, arbitration or regulatory actions are not included in the preceding
table either, with the exception of those linked to the guarantees given on our long-term contracts.
Commitments related to contracts that have been cancelled or interrupted due to the default or bankruptcy of the customer are included in the above-mentioned Guarantees given on contracts made by the Group as long as the
legal release of the guarantee has not been obtained. For more information concerning contingencies, see Note 31 to our consolidated financial statements.
Guarantees given on third-party long-term contracts could require us to make payments to the guaranteed party based on a non-consolidated
companys failure to perform under an agreement. The fair value of these contingent liabilities, corresponding to the premium to be received by the guarantor for issuing the guarantee, was nil as of December 31, 2015 (nil as of
December 31, 2014 and as of December 31, 2013).
Outsourcing transactions
No significant outsourcing agreement was signed in 2015.
70
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
Contractual obligations and off-balance sheet contingent commitments
Outsourcing transaction with Accenture
On February 28, 2014, in conjunction with the targeted cost savings of The Shift Plan, we entered into a 7-year Service Implementation
Agreement with Accenture regarding the business transformation of our finance function, including the outsourcing of our accounting functions. This agreement supplements two similar service agreements regarding human resources and information
technology. Each of the three corporate functions covered by our agreements with Accenture is called a tower. The Accenture agreements are expected to generate cost savings over the contract period, and cover: data processing services
(back office) in finance, accounting and human resources, as well as IT services, support and maintenance of IT applications in the countries in which we operate.
Overall, we are committed to purchase approximately 757 million of
Accenture goods and services until the end of 2020. As of December 31, 2015, the remaining total purchase commitment was 438 million, which amount is included in the
contractual payment obligations table above in the line Unconditional purchase obligations.
Outsourcing transaction with HCL Technologies
On July 1, 2014, in conjunction with the targeted cost savings of The Shift Plan, we entered into a 7-year Master Service Agreement
with HCL Technologies Limited regarding the transfer of a part of our R&D department for certain legacy technologies. This contract is expected to generate cost savings over the contract period in R&D development and in the maintenance
domain. As part of an initial three year transition and transformation phase, we are committed to restructuring those activities, which is estimated to cost 40 million.
Overall, we are committed to purchase approximately
276 million of HCL services until 2021, of which 186 million remained to be purchased as of
December 31, 2015, and such remaining amount is included in the contractual payment obligations table above in the line Unconditional purchase obligations.
Outsourcing transaction with Hewlett Packard
On
October 29, 2009, we entered into a major IT outsourcing transaction with Hewlett Packard Company (HP), with an effective date of December 1, 2009, and at the same time we entered into a ten-year sales cooperation agreement with HP.
The IT outsourcing transaction provides for HP to transform and manage a large part of our IT infrastructure. As part of an initial
transition and transformation phase (referred to as the T&T phase), HP invested its own resources to transform our global IT/IS platforms. As a result, we committed to restructure our IT/IS operations and in this connection we
recognised restructuring costs of 263 million between 2010 and 2015. All related restructuring projects were completed by the end of 2015.
As part of the transfer of resources, in 2010 we sold to HP IT infrastructure assets under a sale and finance leaseback
arrangement, the payment obligations for which are included in Finance lease obligations in the contractual payments obligations table above, representing a 10 million finance lease obligation as of December 31, 2015 (3 million as of December 31, 2014 and
10 million as of December 31, 2013).
The overall
arrangement with HP included our commitment to purchase approximately 514 million of HP goods and services. We satisfied this commitment by the end of 2014.
Also as part of the overall arrangement, the following commitments with remaining balances were included in the HP agreement:
· |
|
a minimum value commitment regarding the amount of IT managed services to be purchased or procured by us from HP and/or any HP affiliates over ten years, for a total amount revised to 1,422 million (previously 1,408 million) and with a remaining commitment of 411 million as of December 31, 2015; and |
· |
|
a commitment to make certain commercial efforts related to the development of sales pursuant to the sales cooperation agreement, including through the establishment of dedicated teams, with a
remaining commitment of 14 million as of December 31, 2015 |
These two commitments are included in the contractual payment obligations table above in the line Unconditional purchase obligations for the remaining balance as of December 31, 2015.
Other Commitments - Contract Manufacturers / Electronic Manufacturing Services (EMS) providers
We outsource a significant amount of manufacturing activity to a limited number of electronic manufacturing service (EMS) providers. The EMSs
manufacture products using Alcatel-Lucents design specifications and they test platforms in line with quality assurance programs and standards established by Alcatel-Lucent. EMSs are required to procure components and sub-assemblies that are
used to manufacture products based on our demand forecasts from suppliers in our approved supplier lists.
Generally, we do not own the
components and sub-assemblies purchased by the EMS and title to the products is generally transferred from the EMS providers to us upon delivery. We record the inventory purchases upon transfer of title from the EMS to us. We establish provisions
for excess and obsolete inventory based on historical trends and future expected demand. This analysis includes excess and obsolete inventory owned by EMSs that is manufactured on our behalf, and excess and obsolete inventory that will result from
non-cancellable, non-returnable (NCNR) component and sub-assembly orders that the EMSs have with their suppliers for parts meant to be integrated into our products. In 2015, we recorded a charge of 3 million for excess inventory commitments with our EMS providers compared to a charge of 32 million in
2014 (and a charge of 26 million in 2013).
We generally do
not have minimum purchase obligations in our contract-manufacturing relationships with EMS providers and
71
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
Contractual obligations and off-balance sheet contingent commitments
therefore the contractual payment obligations table presented above under the heading
Contractual Obligations does not include any commitments related to EMS providers.
Letter of Indemnity in favor of
Louis Dreyfus Armateurs
During the first half of 2011, we provided a letter of Indemnity (LOI) in favor of Louis Dreyfus
Armateurs (LDA), our former co-venturer in Alda Marine at the time, pursuant to which we agreed to indemnify LDA in respect of any losses arising out of exposure of crews to radiation from the nuclear power plant at Fukushima, in connection with the
repairs conducted by Alcatel-Lucent during the second quarter of 2011 on a submarine cable system, which required the use of vessels managed by LDA.
Our aggregate potential liability under this LOI may not exceed 50 million, as increased annually by the lower of (i) 5% and (ii) the percentage
rate of revaluation of crew salaries awarded by LDA. This LOI expires on April 15, 2081.
As the levels of radiation measured
during the repairs were always below the critical level as defined by the IRSN (Institut de Radioprotection et de Sûreté Nucléaire), the risk of payment pursuant to the indemnity is considered remote as of December 31, 2015.
Specific commitments - Alcatel-Lucent USA Inc.
Alcatel-Lucent USA Inc.s separation agreements
Alcatel-Lucent USA Inc. is party to various agreements that were entered into in connection with the separation of Alcatel-Lucent USA Inc. and
former affiliates, including AT&T, Avaya, LSI Corporation (formerly Agere Systems, before its merger with LSI corporation in April 2007) and NCR Corporation. Pursuant to these agreements, Alcatel-Lucent USA Inc. and the former affiliates
agreed to allocate certain liabilities related to each others business, and have agreed to share liabilities based on certain allocations and thresholds. Alcatel-Lucent USA Inc. has a provision of 2 million as of December 31, 2015 for a claim asserted by NCR Corporation relating to NCR Corporations liabilities for the environmental clean-up of the Fox
River in Wisconsin, USA. Future developments in connection with the Fox River claim may warrant additional adjustments of existing provisions. We are not aware of any material liabilities to Alcatel-Lucent USA Inc.s former affiliates as a
result of the separation agreements that are not otherwise reflected in the 2015 consolidated financial statements. Nevertheless, it is possible that potential liabilities for which the former affiliates bear primary responsibility may lead to
contributions by Alcatel-Lucent USA Inc. beyond amounts currently reserved.
Alcatel-Lucent USA Inc.s guarantees and indemnification agreements
Alcatel-Lucent USA Inc. divested certain businesses and assets through sales to third-party purchasers and spin-offs to the other common
shareowners of the businesses spun off. In connection with these transactions, certain direct or indirect indemnifications
were provided to the buyers or other third parties doing business with the divested entities. These indemnifications include secondary liability for certain leases of real property and equipment
assigned to the divested entity and specific indemnifications for certain legal and environmental contingencies, as well as vendor supply commitments. The durations of such indemnifications vary but are standard for transactions of this nature.
Alcatel-Lucent USA Inc. remains secondarily liable for approximately U.S.$7 million of lease obligations as of December 31,
2015 (U.S.$7 million of lease obligations as of December 31, 2014 and U.S.$23 million of lease obligations as of December 31, 2013), that were assigned to Avaya, LSI Corporation and purchasers of other businesses that were
divested. The remaining terms of these assigned leases and the corresponding guarantees range from one month to eight years. The primary obligor of the assigned leases may terminate or restructure the lease before its original maturity and thereby
relieve Alcatel-Lucent USA Inc. of its secondary liability. Alcatel-Lucent USA Inc. generally has the right to receive indemnity or reimbursement from the assignees and we have not reserved for losses on this form of guarantee.
Alcatel-Lucent USA Inc. is party to a tax-sharing agreement to indemnify AT&T and is liable for tax adjustments that are attributable to its
lines of business, as well as a portion of certain other shared tax adjustments, during the years prior to its separation from AT&T. Alcatel-Lucent USA Inc. has similar agreements with Avaya and LSI Corporation. Certain proposed or assessed tax
adjustments are subject to these tax-sharing agreements. We do not expect that the outcome of these other matters will have a material adverse effect on our consolidated results of operations, consolidated financial position or near-term liquidity.
Customer financing
Based on standard industry practice, from time to time we extend financing to our customers by granting extended payment terms, making direct loans, and providing guarantees to third-party financing sources. More generally, as part
of our business, we routinely enter into long-term contracts involving significant amounts to be paid by our customers over time.
As
of December 31, 2015, net of reserves, we had an exposure of 84 million under drawn customer-financing arrangements. In addition, as of December 31, 2015, we had
further commitments to provide customer financing for 89 million. It is possible that these further commitments will expire without our having to actually provide the committed
financing.
Outstanding customer financing and undrawn commitments are monitored by assessing, among other things, each customers
short-term and long-term liquidity positions, the customers current operating performance versus plan, the execution challenges faced by the customer, changes in the competitive landscape, and the customers management experience and
depth. When we detect potential problems, we take mitigating actions, which may include the cancellation of undrawn commitments. Although by taking such actions we may be able
72
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
Contractual obligations and off-balance sheet contingent commitments
to limit the total amount of our exposure, we still may suffer losses to the extent of the drawn
and guaranteed amounts.
Capital expenditures
Each year we incur a certain level of capital expenditures in maintenance and innovation. In 2015, our capital expenditures amounted to 580 million, including 203 million of capitalization of development costs. We believe that our current
cash, cash equivalents and marketable securities and funding arrangements provide us with adequate flexibility to pursue our capital expenditure program as planned. To the extent that the
business environment materially deteriorates or our customers reduce their spending plans, we will need to reevaluate our capital expenditure priorities appropriately.
As of December 31, 2015, our contractual obligations for capital expenditures amounted to 33 million.
6.6 |
Qualitative and quantitative disclosures about market risks |
Financial instruments
We enter into derivative financial instruments primarily to manage our exposure to fluctuations in interest rates and foreign currency exchange
rates. Our policy is not to take speculative positions. Our strategies to reduce exchange and interest rate risk have served to mitigate, but not eliminate, the positive or negative impact of exchange and interest rate fluctuations.
Derivative financial instruments held by us at December 31, 2015 were mostly hedges of existing or future financial or commercial
transactions or were related to issued debt.
The largest portion of our issued debt is in euro and U.S. dollar. We use cross-currency
interest rate derivatives to convert a part of our U.S. dollar fixed rate debt into euro fixed rate debt in order to cover the currency risk.
Counterparty risk
For our marketable securities, cash, cash equivalents and financial derivative instruments,
we are exposed to credit risk if a counterparty defaults on its financial commitments to us. This risk is monitored daily, with strict limits based on the counterparties rating. More than 95% of our counterparties were classified in the
investment grade category as of
December 31, 2015. The exposure of each market counterparty is calculated taking into account the fair value of the underlying market instruments.
Foreign currency risk
Since we conduct commercial and industrial operations throughout the world, we are exposed to foreign currency risk. We use derivative financial
instruments to protect ourselves against fluctuations of foreign currencies which have an impact on our assets, liabilities, revenues and expenses.
Future transactions mainly relate to firm commercial contracts and forecasted transactions. Firm commercial contracts and forecasted transactions are hedged by forward foreign exchange transactions. The duration of future
transactions that are not firmly committed does not usually exceed 18 months.
Interest rate risk on financial debt, net
In the event of an interest rate decrease, the fair value of our fixed-rate debt would increase and it would be more costly for
us to repurchase it (not taking into account that an increased credit spread reduces the value of the debt).
73
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
Qualitative and quantitative disclosures about market risks
In the table below, the potential change in fair value for interest rate sensitive instruments is
based on a hypothetical and immediate 1% fall or rise for 2015 and 2014, in interest rates across all maturities and for all currencies. Interest rate sensitive instruments are fixed-rate, long-term debt or swaps and marketable securities.
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|
|
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|
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|
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|
December 31, 2015 |
|
|
December 31, 2014 |
|
|
|
|
|
|
|
|
|
|
(In millions of euros) |
|
Booked
value |
|
|
Fair value |
|
|
Fair value variation if rates fall by 1% (1) |
|
|
Fair value variation if rates rise by 1% |
|
|
Booked
value |
|
|
Fair value |
|
|
Fair value variation if rates fall by 1% (1) |
|
|
Fair value variation if rates rise by 1% |
|
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|
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|
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|
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|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketable securities |
|
|
1,626 |
|
|
|
1,626 |
|
|
|
(4) |
|
|
|
4 |
|
|
|
1,672 |
|
|
|
1,672 |
|
|
|
(2) |
|
|
|
2 |
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents (2) |
|
|
4,905 |
|
|
|
4,905 |
|
|
|
- |
|
|
|
- |
|
|
|
3,878 |
|
|
|
3,878 |
|
|
|
- |
|
|
|
- |
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible bonds |
|
|
(1,302) |
|
|
|
(2,270) |
|
|
|
(32) |
|
|
|
31 |
|
|
|
(1,498) |
|
|
|
(2,346) |
|
|
|
(55) |
|
|
|
53 |
|
|
|
|
|
|
|
|
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|
Non convertible bonds |
|
|
(3,283) |
|
|
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(3,509) |
|
|
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(218) |
|
|
|
196 |
|
|
|
(3,198) |
|
|
|
(3,372) |
|
|
|
(229) |
|
|
|
205 |
|
|
|
|
|
|
|
|
|
|
Other financial debt |
|
|
(626) |
|
|
|
(625) |
|
|
|
- |
|
|
|
- |
|
|
|
(581) |
|
|
|
(581) |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
Derivative interest rate instruments - other current and non-current assets |
|
|
4 |
|
|
|
4 |
|
|
|
93 |
|
|
|
115 |
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|
|
1 |
|
|
|
1 |
|
|
|
37 |
|
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|
13 |
|
|
|
|
|
|
|
|
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|
Derivative interest rate instruments - other current and non-current liabilities |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
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|
Loan to co-venturer - financial asset |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
Debt/cash position before FX derivatives |
|
|
1,325 |
|
|
|
131 |
|
|
|
(161) |
|
|
|
346 |
|
|
|
274 |
|
|
|
(748) |
|
|
|
(249) |
|
|
|
273 |
|
|
|
|
|
|
|
|
|
|
|
|
Derivative FX instruments on financial debt - other current and non-current assets |
|
|
158 |
|
|
|
158 |
|
|
|
- |
|
|
|
- |
|
|
|
123 |
|
|
|
123 |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
Derivative FX instruments on financial debt - other current and non-current liabilities |
|
|
(74) |
|
|
|
(74) |
|
|
|
- |
|
|
|
- |
|
|
|
(71) |
|
|
|
(71) |
|
|
|
- |
|
|
|
- |
|
|
|
DEBT/CASH POSITION |
|
|
1,409 |
|
|
|
217 |
|
|
|
(161) |
|
|
|
346 |
|
|
|
326 |
|
|
|
(696) |
|
|
|
(249) |
|
|
|
273 |
|
|
|
(1) |
|
If the interest rate is negative after the decrease of 1%, the sensitivity is calculated with an interest rate equal to 0%. |
(2) |
|
For cash and cash equivalents, the booked value is considered as a good estimation of the fair value. |
The fair value of the instruments in the table above is calculated with market standard financial
software according to the market parameters prevailing on December 31, 2015.
Fair value hedge and cash flow hedge
The ineffective portion of changes in fair value hedges and cash flow hedges was nil at December 31, 2015, as was the case
at December 31, 2014.
Net investment hedge
At each of December 31, 2015 and 2014, there were no derivatives that qualified as investment hedges.
Equity risks
We may use derivative instruments to manage the equity investments in listed companies that we hold in our portfolio. We may sell call options on
shares held in our portfolio and any profit would be measured by the difference between our book value for such securities and the exercise price of the option, plus the premium received.
We may also use derivative instruments on our shares held in treasury. Such transactions are authorized as part of the stock repurchase program
approved at our Shareholders Meeting held on May 26, 2015.
We do not currently have any derivative instruments in place on
investments in listed companies or on our shares held in treasury.
Additional information regarding market and credit risks, including
the hedging instruments used, is provided in Note 26 to our consolidated financial statements.
74
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
Legal Matters
In addition to legal proceedings incidental to the conduct of its business (including
employment-related collective actions in France and the United States) which management believes are adequately reserved against in the financial statements (see Note 25e to our consolidated financial statements) or will not result in any
significant costs to the Group, Alcatel-Lucent is involved in the following legal proceedings.
a/ Governmental actions and
investigations
Costa Rican actions
In early October 2004, Alcatel-Lucent learned that investigations had been launched in Costa Rica by the Costa Rican prosecutors and the National
Congress, regarding payments made by consultants allegedly on behalf of Alcatel CIT (CIT), a French subsidiary now called Alcatel-Lucent International, or other Alcatel-Lucent subsidiaries to various public officials in Costa Rica, two political
parties in Costa Rica and representatives of Instituto Costarricense de Electricidad (ICE), the state-owned telephone company, in connection with the procurement by CIT of several contracts for network equipment and services from ICE.
Alcatel-Lucent settled the Attorney Generals social damages claims in return for a payment by CIT of approximately U.S.$10 million.
On June 30, 2015, Alcatel-Lucent, Alcatel-Lucent International (that is, the former CIT) and Alcatel-Lucent Trade International
AG signed a settlement agreement with ICE in full and final settlement of all litigation between the parties, and more specifically the following court proceedings:
· |
|
civil claim filed by ICE against CIT, among others, in the context of the criminal proceedings brought against various Costa Rican individuals as a consequence of the 2004 bribery allegations;
|
· |
|
claim filed by CIT against ICE in October 2008 regarding ICEs termination of the contract for CIT to install 400,000 GSM cellular telephone lines (the 400KL GSM contract);
and |
· |
|
civil claim filed by ICE in May 2012 against Alcatel-Lucent, CIT and Alcatel-Lucent Trade International AG for damages on the basis of the corruption matter that was investigated by and settled
with the Costa Rican and the United States authorities. |
As part of the settlement agreement, Alcatel-Lucent
International agreed to pay ICE a total settlement amount of U.S.$10 million, through a combination of a cash payment and of set-off against certain accounts receivable. ICE and Alcatel-Lucent filed joint requests with the various Costa Rican
Courts seeking dismissal of the three cases.
The parties also requested the Court handling the claim relating to the 400KL GSM
contract to release and transfer to
Alcatel-
Lucent International the U.S.$ 15 million performance bond posted by it that had been held in an escrow account by the Court. This amount was fully paid to Alcatel-Lucent International in
August 2015. All three cases were dismissed by the respective competent Court. There is no longer any pending litigation with ICE concerning the 2004 bribery allegations in Costa Rica or anywhere else.
Investigation and action in France
French
authorities are carrying out investigations into certain conduct by Alcatel-Lucent and/or its subsidiaries in Costa Rica and French Polynesia.
With respect to Costa Rica, the French authorities are conducting an investigation with regard to alleged acts of corruption prior to 2004 (the same events that gave rise to criminal procedures in both Costa Rica and the United
States and that were settled prior to 2012).
The matter with respect to French Polynesia concerns the conduct of Alcatel-Lucents
telecommunication submarine system subsidiary, Alcatel-Lucent Submarine Networks (ASN), and certain former employees of Alcatel-Lucent in relation to a project for a telecommunication submarine cable between Tahiti and Hawaii awarded to ASN in 2007
by the state-owned telecom agency of French Polynesia (OPT). The matter went to trial in early February of 2016 and by a decision of March 22, 2016, the Tribunal of Papeete acquitted all defendants for lack of evidence as to the existence of any
unlawful act. The prosecutor has filed an appeal of the decision.
Investigations in Nigeria
On February 21, 2013, we were advised that the Nigerian anticorruption authorities had commenced an investigation regarding the alleged
mismanagement of the National Rural Telephony Project and the involvement of Alcatel-Lucent Nigeria Ltd (ALU Nigeria) and other vendors in such project. Our Chinese joint venture, Alcatel-Lucent Shanghai Bell (ASB), entered into a contract with the
Nigerian government for Phase I of this project on June 5, 2002. By an amendment dated April 4, 2003, the contract was assigned to a consortium including ASB and a state-owned Chinese engineering company named China National Machinery and
Equipment Import and Export Corporation (CMEC). ALU Nigeria was not a party to the consortium, but acted as a subcontractor for the project. Phase I of this project was accepted by the Nigerian government. On December 27, 2006, ASB and CMEC
entered into a contract with the Nigerian government for Phase II of this project, and our portion of the contract was assigned to CMEC on February 1, 2007. Phase II of the project was never performed due to a lack of financing. We still do not
have any more detail as to the nature of the alleged mismanagement. We are cooperating with this investigation and we conducted an internal review into this matter.
75
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
Legal Matters
b/ Other proceedings
Legal proceeding on the pension fund in the Netherlands
Upon termination of the administration agreement relating to the pension fund for the Alcatel-Lucent employees in the Netherlands on December 31, 2011, the pension fund administrator filed a claim against our Dutch subsidiary
with the District Court in The Hague for up to 182 million in damages to compensate it for the wind-up costs allegedly to be incurred due to such termination. On
October 11, 2012, the District Court dismissed the claim entirely. The pension fund filed an appeal with the Court of Justice in The Hague on January 8, 2013, increasing its principal claim to a maximum amount of 276 million, and asserting several alternative claims for lower amounts, the lowest amount being 14 million.
On September 9, 2014, the Court of Justice upheld the District Courts decision to dismiss the lawsuit. On December 9, 2014 the pension fund filed a cassation request (to set aside the decision) with the Dutch High Council. A decision
by the Council is expected in the second quarter of 2016. No reserve has been booked in this matter.
c/ Effect of the various proceedings
Governmental investigations and legal proceedings are subject to uncertainties and the outcomes thereof are difficult to predict. Consequently,
Alcatel-Lucent is unable to estimate the ultimate aggregate amount of monetary liability or financial impact with respect to these matters. Because of the uncertainties of government investigations and legal proceedings, one or more of these matters
could ultimately result in material monetary payments by Alcatel-Lucent beyond those to be made by reason of the various settlement agreements described in this Section 6.8.
Except for these governmental investigations and legal proceedings and their possible consequences as set forth above, the Company is not aware,
as of the date this document is being published, of any legal proceeding or governmental investigation (including any suspended or threatened proceeding) against Alcatel-Lucent and/or its subsidiaries that could have a material impact on the
financial situation or profitability of the Group.
No significant new litigation has been commenced since December 31, 2015.
6.8 |
Research and development - expenditures |
In 2015, 16.9% of revenues were spent in innovation and in supporting our various product lines.
These expenditures amounted to 2,406 million before capitalization of development expenses and capital gain (loss) on disposal of fixed assets, and excluding the impact of
the purchase price allocation entries of the business combination with Lucent, which represents an
increase of 9.4% from the 2,200 million spent in 2014, and an increase as a percent of revenues, from 16.7% in 2014. In
2015, legacy R&D spending represented 13% of total R&D, compared to 17% in 2014, exceeding our target of 15% by 2015 as part of The Shift Plan.
76
77
CORPORATE GOVERNANCE
Chairmans corporate governance report
The report of the Chairman of the Board of Directors governed by the provisions of Article L.
225-37 of the French Commercial Code, describes among other things the composition of the Board and how it prepares and organizes its work. The following topics required to be included in the report are dealt with in Chapter 7 Corporate
governance or elsewhere, as indicated:
· |
|
the composition of the Board of Directors, the limitations of the powers of the Chief Executive Officer and the preparation and organization of the work of the Board of Directors and of the
Committees, in Section 7.1 Chairmans corporate governance report; |
· |
|
the compensation of the Chairman of the Board of Directors and of the Chief Executive Officer (Executive Directors), in Chapter 8 Compensation and long-term incentives
relating
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to the compensation policy and commitments concerning retirement for the Executive Directors and long-term compensation mechanisms for the Executive Directors; |
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the attendance of shareholders at the Shareholders Meetings and the information required by
Article L. 225-100-3 of the French Commercial Code which may have an effect in the event of a takeover bid, in Sections 10.1.2 Specific provisions of the
bylaws and of law, 10.1.3 Elements which could have an impact in case of public tender offer (information required by Article L. 225-100-3 of the French Commercial Code), 10.2 Capital and
10.5 Shareholders Meetings. |
7.1 |
Chairmans corporate governance report |
7.1.1 |
Management bodies of the Company |
7.1.1.1 The Board of Directors
Following the success of the Nokia Offer (as defined in Section 4.2
History and development, sub-section Recent events Update on the Nokia transaction and related matters Initial and Reopened Offer), the composition of our Board of Directors was modified on January 8, 2016
to reflect the new ownership of the capital of the Company.
Mr. Jean C. Monty, Mr. Louis R. Hughes, Mr. Olivier Piou, Mr. Stuart E.
Eizenstat, Mrs. Kim Crawford Goodman and Mr. Francesco Caio resigned as Directors of Alcatel Lucent.
Mr. Risto Siilasmaa, Mr. Rajeev
Suri, Mr. Timo Ihamuotila, Ms. Maria Varsellona and Mr. Samih Elhage were co-opted to the Board of Directors, in accordance with the recommendation of the Corporate Governance and Nominating Committee. Such co-optations are subject to the
ratification of the shareholders of the Company at the coming 2016 Shareholders Meeting.
The new Board is thus composed of:
Philippe Camus
Chairman of the Board of Directors and interim Chief Executive Officer (since September 1, 2015)
Director (not independent)
Jean-Cyril Spinetta
Independent
Director
Honorary Chairman of Air-France KLM
Carla Cico
Independent Director
Sylvia Summers
Independent Director
Risto
Siilasmaa (1)
Director (not independent)
Chairman of the Board of Directors of Nokia Corporation
Rajeev Suri (2)
Director (not independent)
President and Chief Executive Officer (CEO) of Nokia Corporation
Maria Varsellona (3)
Director (not independent)
Chief Legal Officer of Nokia Corporation
Samih Elhage (4)
Director (not independent)
President of Mobile Networks of Nokia Corporation
Timo Ihamuotila (5)
Director (not independent)
Chief Financial Officer of Nokia Corporation
(1) |
Mr. Risto Siilasmaa was co-opted as member of the Board of Directors on January 8, 2016 to replace Mr. Stuart E. Eizenstat. |
(2) |
Mr. Rajeev Suri was co-opted as member of the Board of Directors on January 8, 2016 to replace Mr. Louis R. Hughes. |
(3) |
Ms. Maria Varsellona was co-opted as member of the Board of Directors on January 8, 2016 to replace Mrs. Kim Crawford Goodman. |
(4) |
Mr. Samih Elhage was co-opted as member of the Board of Directors on January 8, 2016 to replace Mr. Francesco Caio. |
(5) |
Mr. Timo Ihamuotila was co-opted as member of the Board of Directors on January 8, 2016 to replace Mr. Olivier Piou. |
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Laurent du Mouza (1)(2)
Board Observer
Member of the Supervisory Board of the FCP AN Actionnariat Nokia (formerly FCP 2AL
Actionnariat Alcatel-Lucent)
Gilles Le Dissez (2)
Board Observer
Chairman of the
Supervisory Board of the FCP AN Actionnariat Nokia (formerly FCP 2AL Actionnariat Alcatel-Lucent)
Barbara Larsen
Secretary to the Board of Directors
General Counsel
Nathalie Trolez Mazurier
Deputy Secretary to the Board of Directors
Director Securities & Corporate Law
(1) |
The mandate of Mr. Bertrand Lapraye expiring at the end of the Shareholders Meeting held on May 26, 2015, at that meeting Mr. Laurent du Mouza was appointed as Board Observer for a
three-year term, that is, until the end of the Shareholders Meeting which will consider the approval of the financial statements for the year ending on December 31, 2017. |
(2) |
Messrs. Laurent Du Mouza and Gilles Le Dissez are deemed to have resigned on January 7, 2016, since they were no longer members of a mutual fund formed in connection with a Company savings plan
in which the Company or an affiliate is a participant and with Company shares constituting at least 75% of its portfolio. Indeed, the Company shares held by the FCP 2AL were tendered to the initial Nokia Offer and the FCP 2AL does not hold any
shares of the Company since January 7, 2016. However, until the status of the Board Observers is reconsidered at the next Shareholders Meeting, Messrs. Laurent Du Mouza and Gilles Le Dissez still participate in the meetings of the Board of
Directors on a consultative basis. |
Until January 8, 2016, our Board of Directors consisted of 10 Directors (1) appointed for 3 years, 9 of whom were independent according to the criteria of the AFEP-MEDEF code of corporate governance for listed companies, as amended in November 2015 (AFEP-MEDEF
Code; see Section 7.1.2.3 AFEP-MEDEF Code for more information), and 2 Board Observers who participate in the meetings on a consultative basis.
Philippe Camus
Chairman of the Board of Directors, interim CEO (since September 1, 2015 (2)) and
Director (not independent)
Jean C. Monty
Vice-Chairman of the Board of Directors and Independent Director
Francesco Caio
Independent Director
Chief
Executive Officer of Poste Italiane
Carla Cico
Independent Director
Stuart E.
Eizenstat
Independent Director
Chair International Trade & Finance of Covington & Burling LLP
Kim Crawford Goodman
Independent Director
Louis R.
Hughes
Independent Director
Chairman of InZero System
Sylvia Summers (3)
Independent Director
Olivier
Piou
Independent Director
CEO of Gemalto
Jean-Cyril Spinetta
Independent Director
Honorary
Chairman of Air-France KLM
Laurent du Mouza
Board Observer
Member of the Supervisory Board of the
FCP 2AL Actionnariat Alcatel-Lucent
Gilles Le Dissez
Board Observer
Chairman of the
Supervisory Board of the
FCP 2AL Actionnariat Alcatel-Lucent
Barbara Larsen
Secretary to the Board of Directors
General Counsel
Nathalie Trolez Mazurier
Deputy Secretary to the Board of Directors
Director Securities & Corporate Law
(1) |
Mrs. Véronique Morali resigned as Director on July 15, 2015. |
(2) |
Mr. Michel Combes was Chief Executive Officer until August 31, 2015. |
(3) |
Mrs. Sylvia Summers was appointed as Director at the Shareholders Meeting of May 26, 2015. |
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Following the Board meeting of January 8, 2016, our Board of Directors consists of
9 Directors, 3 of whom are women, representing 7 different nationalities and with an average of 55 years of age. The term of office is three years and, in compliance with the AFEP-MEDEF Code, the renewal of the terms of office as Director is
staggered. One third of the members of the Board of Directors has been renewed each year since 2013 (see
Section 7.1.4.2 Corporate Governance and Nominating Committee).
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The Board of Directors consists of 9 Directors, 3 of whom are women, representing 7 different nationalities |
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Directors |
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Positions |
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Age |
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Independence (1) |
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Nationality |
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Expiration of mandate |
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Mr. Camus |
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Chairman - CEO |
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67 |
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No |
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French |
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SM 2016 |
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Mr. Spinetta |
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Director |
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72 |
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Yes |
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French |
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SM 2017 |
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Mrs. Cico |
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Director |
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55 |
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Yes |
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Italian |
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SM 2016 |
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Mrs. Summers |
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Director |
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63 |
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Yes |
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French-American |
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SM 2018 |
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Mr. Suri |
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Director (2) |
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48 |
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No |
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Singaporean |
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SM 2018 |
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Mr. Elhage |
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Director (2) |
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54 |
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No |
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Lebanese-Canadian |
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SM 2017 |
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Mr. Siilasmaa |
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Director (2) |
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No |
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Finnish |
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SM 2018 |
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Ms. Varsellona |
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Director (2) |
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45 |
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No |
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Italian |
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SM 2017 |
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Mr. Ihamuotila |
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Director (2) |
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49 |
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No |
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Finnish |
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SM 2018 |
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Independence of the Directors pursuant to the AFEP-MEDEF Code. |
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Co-optation subject to ratification by the shareholders at the Shareholders Meeting to be held in 2016. |
7.1.1.2 The Committees of the Board of Directors
Due to the changes made to the composition of our Board of Directors on January 8, 2016, our Board of Directors now has five specialized
Committees which examine matters falling within the competence of the Board and provide their views and proposals to the Board. These Committees are composed as follows:
Committee of Independent Directors
(1)
Jean-Cyril Spinetta, Chairman of the Committee
Carla Cico
Sylvia Summers
Audit and Finance Committee
Sylvia Summers, Chairman of the Committee
Carla Cico
Jean-Cyril Spinetta
Corporate Governance and Nominating Committee
Jean-Cyril Spinetta, Chairman of the Committee
Carla Cico
Maria Varsellona
Compensation Committee
Jean-Cyril Spinetta, Chairman of the Committee
Sylvia Summers
Risto Siilasmaa
Technology Committee
Rajeev Suri, Chairman of the Committee
Philippe Camus
Risto Siilasmaa
The role and the organization of these five Committees are detailed in Section 7.1.4 Powers and activity of the Board of
Directors Committees.
(1) |
The Committee of Independent Directors was created by decision of the Board of Directors on January 8, 2016. |
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7.1.1.3 The Management Committee and the Leadership team
Following the success of the Nokia Offer, the composition of the Management Committee was modified.
As of April 26, 2016, the Management Committee includes the managers from the transversal functions and corporate functions, that is:
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Philippe Camus, Chief Executive Officer |
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Olivier Durand, Chief Financial Officer |
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Barbara Larsen, General Counsel |
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Philippe Guillemot, Chief Operating Officer
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The Management Committee is mainly responsible for the strategy and organization of the Alcatel
Lucent Group, the policies to be implemented, the long-term financial planning and the human resources strategy. It is responsible for supervising the implementation of the Group plans and projects, monitoring the performance of each segment of
activity and allocating the resources between these different segments.
Until January 8, 2016 the Leadership team included:
The Chief Executive Officer: Michel Combes, followed from September 1, 2015, by Philippe Camus
The managers of the business lines:
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Basil Alwan (IP Routing & Transport) |
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Bhaskar Gorti (IP Platforms) |
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Frederico Guillén (Fixed Networks) |
The managers of transversal functions:
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Philippe Guillemot (Operations) |
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Philippe Keryer (Strategy & Innovation) |
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Michel Combes (Sales) (until August 31, 2015 (1))
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The managers of corporate functions:
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Nicole Gionet (Human Resources) |
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Jean Raby (Finance and Legal). |
The managers of the transversal
functions and corporate functions, together with the Chief Executive Officer, formed the Management Committee, which consisted of 6 members. Since January 8, 2016, there is no longer a Leadership team identified as such, but only a Management
Committee.
Appointments as members of the Leadership and of the Management Committee during fiscal year 2015 and in 2016
Mr. Philippe Camus replaced Mr. Michel Combes as interim CEO as from September 1, 2015.
Mr. Bhaskar Gorti became manager of IP Platforms on January 12, 2015, to replace Mr. Andrew McDonald.
Mr. Olivier Durand replaced Mr. Jean Raby as Chief Financial Officer since March 1, 2016.
Outgoing members of the Leadership team and of the Management Committee during fiscal year 2015 and in 2016
Mr. Michel Combes was a member of the Leadership team and of the Management Committee until August 31, 2015.
Mr. Andrew McDonald was a member of the Management Committee until January 12, 2015 and was replaced by Mr. Bhaskar Gorti.
Mr. Jean Raby was a member of the Management Committee until February 29, 2016.
(1) |
As from September 1, 2015, this position ceased to exist as a separate function and the Operations division took charge of the sales functions. |
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Information on the Current Directors and Board Observers
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Philippe CAMUS
Chairman of the Board of Directors - interim CEO (1) Born on June 28, 1948, French citizen
First appointment: 2008 - Term of the mandate: 2016
Alcatel Lucent shareholding: 28,083 ordinary shares |
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Business Address:
Alcatel Lucent 148/152 route de
la Reine 92100 Boulogne-Billancourt France |
Current directorships and professional positions
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In France: Chairman of the Board of Directors and interim CEO(1) and Member of the Technology Committee of Alcatel Lucent*, Honorary Chairman of
Groupement des Industries Françaises Aéronautiques et Spatiales (GIFAS). |
· |
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Abroad: Chief Executive Officer of Keynolt Inc., Chairman of the Board of Directors of Aptamir Inc., Senior Advisor of Evercore Partners Inc.* |
Directorships and executive positions held over the last 5 years, now ended
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In France: Co-managing Partner of Lagardère Group*, Member of the Supervisory Board of Lagardère Active and of Lagardère Services, Director of Éditions P. Amaury,
Permanent Representative of Lagardère SCA to the Board of Directors of Hachette SA, Permanent Representative of Hachette SA to the Board of Directors of Lagardère Services, Vice-Chairman, Deputy Chief Executive Officer of Arjil
Commanditée - Arco. |
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Abroad: Director of Cellfish Media LLC (2), Chairman and CEO of Lagardère North America Inc., Director of Schlumberger* and Director of
Lagardère Unlimited Inc. |
Career
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Philippe Camus was appointed Chairman of the Board of Alcatel Lucent in October 2008. In view of the proposed combination with Nokia and for the duration of the transition period, Philippe Camus
was appointed Chairman and interim CEO as from September 1, 2015. Philippe Camus is Senior Advisor of Evercore Partners. Philippe Camus left the Lagardère Group in 2012. He was co-managing partner
of the Lagardère Group and Chairman and CEO of Lagardère North America. He began his career in 1972 in the Finance Department of the Caisse des Dépôts et Consignations. After being Financial Analyst and Portfolio
Manager, he was appointed Head of the Fixed Income Directorate in 1976. Under his leadership, the Caisse des Dépôts et Consignations improved its operating efficiency on the bond market generating higher profit and modernizing the
French bond market. He joined the Lagardère Group in 1982 as Executive Chairman of the Finance Committee of the Matra Group until 1992 and Chairman of the Supervisory Board of Banque Arjil until 1993. He was appointed Managing Director of the
Lagardère Group in 1993 and was co-managing partner of Lagardère SCA from 1998 to June 2012. As Managing Director of Lagardère, he managed the restructuring of the Matra Group (Aerospace and High Technology) by implementing a
tight financial and reporting governance structure and by divesting units to focus the activities on the core business. He personally managed every acquisition, merger, partnership or divestiture realized by Matra from 1982 until 1998. Starting in
1986, he led the transformation of Matra and Hachette into an integrated company, thus founding the Lagardère Group. As part of this, he managed the rescue of the Hachette Group after the bankruptcy of one of its ventures in television
broadcasting (La Cinq). His expertise in international negotiations and management, led him to conduct and oversee the work bringing to the creation of EADS (now Airbus Group), the 2nd largest aerospace company worldwide. First named Chief Operating
Officer, then Chief Executive Officer of Aérospatiale - Matra in 1999, he was Chief Executive Officer of EADS from 2000 until 2005. Philippe Camus was a member of the French supervisory authority for the financial markets from 1996 to 2001.
He is a board member of the Institut dExpertise et de Prospective of the Ecole Normale Supérieure and has been President of GIFAS (French Aerospace Industries Association) from 2001 to 2005. He was a director of Crédit Agricole SA
from 2005 to 2009 and of the Accor Group from 2006 to 2008. He was a director of Schlumberger from 2007 to April 2012. In July 2005, Philippe Camus was made Officier of the French Légion dHonneur and in May 2004, he was awarded the
Cross of the German Merit Order (Verdienstkreuz - 1 Klasse). Philippe Camus has an Economics and Finance degree from the Institut dEtudes Politiques de Paris, a Physics degree from the Ecole Normale Supérieure (rue
dUlm) and a doctorate in Actuarial Sciences. |
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Expertise: 44 years in banking, finance, insurance and 17 years in the industrial sector. |
(1) |
Appointed as interim CEO as from September 1, 2015. |
(2) |
Mandate expired in 2015. |
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Carla CICO
Independent Director
Born on February 21, 1961, Italian citizen First appointment: 2010 - Term of the mandate: 2016 Alcatel Lucent shareholding: 36,786 ordinary
shares |
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Business Address:
Strada Castellana 30/A 37128
Verona Italy |
Current directorships and professional positions
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In France: Independent Director, Member of the Committee of the Independent Directors, Member of the Audit and Finance Committee and Member of the Corporate Governance and Nominating Committee of
Alcatel Lucent*. |
· |
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Abroad: Independent Director and Member of the Corporate Governance and Nomination Committee of Allegion*. |
Directorships and executive positions held over the last 5 years, now ended
· |
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In France: Member of the Technology Committee of Alcatel Lucent*(1). |
· |
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Abroad: Chief Executive Officer of Ambrosetti Consulting (China), Independent Director, Member of the Corporate Governance Committee and Member of the Related Party Committee of World Duty Free*,
Chief Executive Officer of Rivoli S.p.A. (Italy), Director of EPTA (2). |
Career
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Graduate from London Business School (MBA), University of London (MSE) and University of Venice, Italy (Oriental languages), from 1987 to 1992, she led the expansion of Italtel, the Italian telecom
equipment provider into Chinas market as its Beijing-based Chief Representative and from 1993 to 1994, she was a representative of IRI (Istituto per la Ricostruzione Industriale) in its Beijing office. From 1995 to 1999, she was an
international director of business operations for Stet International. She was cited as one of the Most Powerful Women in International Business, Forbes (1994) and Fortune (1995). From 2001 to 2005, she was CEO of Brazil Telecom. In Reuters
Institutional Investor Research (2003), she was selected as the Best Chief Executive Officer in the Telecommunications Sector in Latin America. From 2007 to 2009, she was CEO of the Chinese subsidiary of Ambrosetti Consulting based in Beijing. Carla
Cico was from 2010 to 2012, the CEO of Rivoli S.p.A, an infrastructure Company with operations both in Italy and abroad. |
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Expertise: 29 years in the industry sector. |
(1) |
Position held until January 7, 2016. |
(2) |
Mandate expired in 2015. |
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Jean-Cyril SPINETTA
Independent Director
Born on October 4, 1943, French citizen First appointment: 2006 - Term of the mandate: 2017 Alcatel Lucent shareholding: 36,622 ordinary
shares |
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Business Address:
Alcatel Lucent 148/152 route de
la Reine 92100 Boulogne-Billancourt France |
Current directorships and professional positions
· |
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In France: Independent Director, Chairman of the Committee of Independent Directors, Chairman of the Corporate Governance and Nominating Committee, Chairman of the Compensation Committee and Member
of the Audit and Finance Committee of Alcatel Lucent*, Honorary Chairman of Air France-KLM*. |
Directorships and executive positions held over
the last 5 years, now ended
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In France: CEO and Chairman of the Board of Directors of Air France-KLM*, Chairman of Air France, Director of the Compagnie de Saint-Gobain*, Chairman of the Supervisory Board of Areva*, Director
of La Poste and Director of Gaz de France Suez*, Chairman of the Conseil National Education Economie, Member of the Advisory Board of Paris Europlace. |
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Abroad: Director of Alitalia CAI, Member of the Board of Governors of IATA. |
Career
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A graduate in public law and from the Institut détudes politiques of Paris, Jean-Cyril Spinetta began his career as assistant lecturer and later central administration attaché
(1961-70). After moving to the École nationale dadministration (Charles de Gaulle class, 1970-1972), he held a number of positions within the National Education Ministry. He was several times seconded to other Departments, as Auditor of
the Conseil dÉtat (1976-1978), chargé de mission to the General Secretariat of the Government (1978-1981), head of the Information Department of Prime Minister Pierre Mauroy (1981-1983), chief of staff to Michel Delebarre when
Minister for Employment, Minister of Social Affairs, Minister of Transport and later Minister of Equipment (1984-1986 and 1988-1990), chargé de mission and industrial advisor to the Office of the President of the Republic (1994-1995),
préfet (1995), technical advisor to the cabinet of Édith Cresson, EU Commissioner (1996), and expert for France seconded to the European Commission (1997). After a period as Chairman and CEO of Compagnie Air Inter (1990-1993), he was
Chairman and CEO of Air France (1997-2008), as well as Chairman and CEO of Air France-KLM (2004-2008), and then Chairman of the Board of Directors of Air France-KLM and CEO once again from 2011 to 2013. Mr. Spinetta has also been Chairman of
the Board of Governors of the International Association of Air Transport (IATA), a Director of Compagnie de Saint-Gobain (2005-2013), a Director of Alitalia CAI (2009-2014) and Chairman of the Supervisory Board of Areva (2009-2013).
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Expertise: 22 years in air transport and 23 years in public service. |
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Sylvia SUMMERS
Independent Director
Born on January 13, 1953, U.S. and French citizen
First appointment: 2015 - Term of the mandate: 2018
Alcatel Lucent shareholding: 3,538 ordinary shares |
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Business Address:
19 Hernandez Avenue Los Gatos,
CA 95030 USA |
Current directorships and professional positions
· |
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In France: Independent Director, Chairman of the Audit and Finance Committee, Member of the Committee of the Independent Directors and Member of the Compensation Committee of Alcatel Lucent*.
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Abroad: Director, Member of the Corporate Governance Committee and Member of the Audit Committee of Semtech Corporation*, Director, Member of the Compensation Committee, Member of the Nominating
and Corporate Governance Committee of Headwater Inc*. |
Directorships and executive positions held over the last 5 years, now ended
· |
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Abroad: President, CEO and Director of Trident Micro Systems*. |
Career
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Sylvia Summers received a B.S. degree in electrical engineering from Ecole Polytechnique Feminine (France), a M.S. degree in electrical engineering from the University of California at
Berkeley, and a M.B.A. degree from Thomson CSF (France). Sylvia Summers has worked in the high tech industry for 38 years, where she held a variety of management positions in research and development, operations, and marketing while residing
both in Europe and the U.S. She has 18 years of general management experience in the technology industry having held a variety of senior positions in France, in China, and in the Unites States of America. Sylvia Summers has held senior
positions at Bull and Thomson. Between 1999 and 2001, Sylvia Summers held several positions at Cisco and focused on growth creation, including Group Vice-President of Public Access Managed Network Services, and Vice-President of Internet Access
Group. From 2003 to 2007, Sylvia Summers was also Executive Vice-President of Spansion. Sylvia Summers was most recently CEO of Trident Microsystems, where she was responsible for turning around and restructuring the company.
Sylvia Summers is currently a member of the boards of Semtech Corp and Headwaters. |
· |
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Expertise: 39 years in the high tech industry sector and 3 years in construction product sector. |
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Rajeev Suri
Director
President and Chief Executive Officer of Nokia Corporation
Born on October 10, 1967, Singaporean citizen First appointment: 2016 - Term of the mandate: 2018 Alcatel Lucent shareholding (1) |
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Business Address:
Karaportti 3, 02610
Espoo, Finland |
Current directorships and professional positions
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In France: Director and Chairman of the Technology Committee of Alcatel Lucent*. |
· |
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Abroad: President and Chief Executive Officer (CEO) of Nokia Corporation*. |
Directorships
and executive positions held over the last 5 years, now ended
Career
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Previously CEO of Nokia Solutions and Networks (previously Nokia Siemens Networks), Rajeev Suri joined Nokia in 1995, and has held numerous executive level positions in the company. He received a
Bachelor of Engineering (Electronics and Communications) from the Manipal Institute of Technology, Karnataka (India). Rajeev Suri is a leader with a passion for creating value, generating growth, and delivering technologies that have a positive
impact on peoples lives. He has deep expertise in many areas of technology, particularly mobile networks and related topics such as big data analytics, cloud computing, internet business models and more. As CEO of Nokia Solutions and Networks,
he delivered a complete turnaround, taking non-IFRS operating profitability from significant losses to among the highest quality in the sector; cash flow from rapid burn to strongly positive; and, based on external analyst estimates, increasing the
value of the business from in the range of 1 billion to 9-10 billion. In his earlier roles as head of the
Global Services unit and APAC region, he delivered both strong growth and profitability improvements. In his more than 26 years of international experience, Rajeev Suri has worked in roles comprising strategy and M&A, product marketing, sales,
major account leadership, regional and business unit leadership and has lived in Middle East, Asia, Africa and Europe. |
· |
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Expertise: 26 years in the technology sector of which 24 years in the telecommunications sector. |
(1) |
In accordance with article L.225-25 of the French Commercial Code, the Companys bylaws require each Director to hold at least 500 shares of the Company, within six months from his/her
appointment, that is, with respect to Mr. Rajeev Suri, at the latest by July 8, 2016. |
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Risto Siilasmaa
Director
Born on April 17, 1966, Finnish citizen First appointment: 2016 - Term of the mandate: 2018 Alcatel Lucent shareholding (1) |
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Business Address :
Nokia Corporation Karaportti
3 02610 Espoo
Finland |
Current directorships and professional positions
· |
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In France: Director, Member of the Compensation Committee and Member of the Technology Committee of Alcatel Lucent*. |
· |
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Abroad: Chairman of the Board of Directors of Nokia Corporation*, Chairman of the Corporate Governance and Nomination Committee of Nokia Corporation*, Founder & Chairman of the Board of
Directors of F-Secure Corporation, Vice Chairman of the Board of Directors of the Federation of Finnish Technology Industries, Member of the Board of Directors of the Confederation of Finnish Industries EK, Member of European Roundtable of
Industrialists, Co-founder of Nexit Ventures. |
Directorships and executive positions held over the last 5 years, now ended
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Abroad: Chairman of the Board of Directors of Elisa Corporation, Member of the Board of Directors of Mendor Oy, Member of the Board of Directors of Blyk, Chairman of Fruugo, Member of the Board of
Directors of Efecte, Member of the Organizing Committee of EBLC (European Business Leaders Convention), Member of the Board of Directors of Ekahau Inc., Chairman of working group Vigo, Chairman of working group The future of the Finnish
general conscription system. |
Career
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Risto Siilasmaa is the Chairman of the Board of Directors of Nokia Corporation. He joined the Nokia Board in 2008 and became Chairman of the Board in May, 2012. As
Chairman and Interim CEO, he led Nokia through its transformation from an ailing devices company to a successful network infrastructure player through the divestiture of the Nokia device business to Microsoft and the acquisition of Nokia Siemens
Networks and then of Alcatel Lucent. Risto Siilasmaa is the founder of F-Secure Corporation, a Finnish internet security and content cloud service provider and served as the President and CEO of the company between 1988 - 2006. Since then, he has
held the position of Chairman of the Board of Directors. He is also a member of the Board of Directors of the Confederation of Finnish Industries, Chairman of the Federation of Finnish Technology Industries and member of the European Round Table
ERT, Tsinghua SEM Advisory Board and Council for the Mayor of Beijing. Risto Siilasmaa has received several awards including Nordic Chairman of the year 2009, the Most Influential IT Leader 2007, The Leader of the Decade 2003 and Innovation Luminary
Award 2015 granted by EU Open Innovation Strategy and Policy Group. He holds a Master of Science (Eng.) degree from the Helsinki University of Technology. |
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Expertise: 27 years in the entrepreneurial sector. |
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In accordance with article L.225-25 of the French Commercial Code, the Companys bylaws require each Director to hold at least 500 shares of the Company, within six months from his/her
appointment, that is, with respect to Mr. Risto Siilasmaa, at the latest by July 8, 2016. |
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Timo Ihamuotila
Director
Born on April 21 1966, Finnish citizen First appointment: 2016 - Term of the mandate: 2018 Alcatel Lucent shareholding (1) |
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Business Address:
Nokia Corporation Karaportti
3 02610 Espoo
Finland |
Current directorships and professional positions
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In France: Director of Alcatel Lucent*. |
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Abroad: Chief Financial Officer of Nokia Corporation*, Member of the Board of Directors of Uponor Corporation, Member of the Board of Directors of Central Chamber of Commerce of Finland.
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Directorships and executive positions held over the last 5 years, now ended
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Timo Ihamuotila has been in his current position for more than five years and did not hold any other position that ended in the last five years. |
Career
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Timo Ihamuotila received a Master of Science (Economics) and a bachelor (Finance) from the Helsinski School of Economis (Finland). Timo Ihamuotila is responsible for financial matters of the Nokia
Group including external and internal reporting, business performance reviews and capital allocation. He also oversees Investor relations, M&A, Treasury and Nokia Growth Partners. He has been a member of the Nokia Leadership team since 2007.
Timo Ihamuotila joined Nokia in 1993 as a manager in the Dealing and Risk Management unit. In 1999, after three years away, he rejoined Nokia as director of Corporate Finance, and the following year was named Vice President, Finance and Corporate
Treasurer. In 2004, he was appointed senior vice president of Nokias CDMA business, based in San Diego, California. In 2007, he moved to New York to lead sales and portfolio management in Mobile Phones, and was named Nokias Head of
Global Sales the following year. Before joining Nokia, Timo Ihamuotila worked as an analyst for Kansallis Bank in Helsinki and for Citibank as Vice President of Nordic Derivatives Sales in London. Timo Ihamuotila holds graduate degrees in economics
and finance, having completed all doctoral courses in finance at the Helsinki School of Economics. |
(1) |
In accordance with article L.225-25 of the French Commercial Code, the Companys bylaws require each Director to hold at least 500 shares of the Company, within six months from his/her
appointment, that is, with respect to Mr. Timo Ihamuotila, at the latest by July 8, 2016. |
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Maria Varsellona
Director
Born on August 28, 1970, Italian citizen First appointment: 2016 - Term of the mandate: 2017 Alcatel Lucent shareholding (1) |
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Business Address:
Nokia Corporation Karaportti
3 02610 Espoo
Finland |
Current directorships and professional positions
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In France: Director, Member of the Corporate Governance and Nominating Committee of Alcatel Lucent*. |
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Abroad: Chief Legal Officer of Nokia Corporation*. |
Directorships and executive positions
held over the last 5 years, now ended
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Abroad: Executive Vice President of Nokia Corporation*, General Counsel of NSN, Tetra Pak Group General Counsel, General Counsel of Sidel Group, Tetra Laval Group. |
Career
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Maria Varsellona joined NSN in 2013 from Tetra Pak, where she was the Group General Counsel. Previously, Maria Varsellona held senior legal positions in GE Oil & Gas for many years, with a
specific focus on managing legal affairs for commercial operations and global services. As an admitted lawyer in Italy and England, Maria Varsellona started her career in private practice in both countries, and she also lectured international
contract law at the University of Florence, Italy. |
(1) |
In accordance with article L.225-25 of the French Commercial Code, the Companys bylaws require each Director to hold at least 500 shares of the Company, within six months from his/her
appointment, that is, with respect to Ms. Maria Varsellona, at the latest by July 8, 2016. |
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Samih Elhage
Director
Born on September 30, 1961, Canadian and Lebanese citizen
First appointment: 2016 - Term of the mandate: 2017
Alcatel Lucent shareholding (1) |
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Business Address:
Nokia Corporation Karaportti
3 02610 Espoo
Finland |
Current directorships and professional positions
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In France: Director of Alcatel Lucent*. |
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Abroad: President of Mobile Networks of Nokia Corporation*, Member of the Board of Directors of Quickplay Media Inc. |
Directorships and executive positions held over the last 5 years, now ended
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Abroad: Chief Financial and Operating Officer of NSN, Chief Operating Officer of NSN, Senior Advisor for leading private equity and global management consulting firms, President, Carrier Voice over
IP and Applications Solutions (CVAS) division of Nortel. |
Career
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Samih Elhage received a Bachelor in electric engineering (telecommunications) from the University of Ottawa (Canada), a bachelor in Economics from the University of Ottawa (Canada) and a Master in
electric engineering (telecommunications) from the Polytechnic School of Montreal (Canada). With extensive experience in business transformation, in establishing operational excellence in diverse global market, and in creating and implementing
strategies for growth and sustained profitability, Samih Elhage is known as a strategic and results-oriented senior executive. Since assuming the role of Chief Financial and Operating Officer at Nokia Solutions and Networks, Samih Elhage presided
over the companys ongoing turnaround and transformation, enabling the company to over-deliver on its original cost-savings target and to establish sound profitability, cash management and operating cost control. Samih Elhage has more than two
decades of senior experience in the telecommunications industry. Before joining Nokia Solutions and Networks, he served as a senior advisor to leading private equity and global management consulting firms, focusing on investments and improving
operational performance within the telecommunications sector. |
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Expertise: 20 years in the telecommunications sector. |
(1) |
In accordance with article L.225-25 of the French Commercial Code, the Companys bylaws require each Director to hold at least 500 shares of the Company, within six months from his/her
appointment, that is, with respect to Mr. Samih Elhage, at the latest by July 8, 2016. |
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Laurent du Mouza
Board Observer
Born on November 18, 1974, French citizen First appointment: 2015 - Term of the mandate: 2018 Alcatel Lucent shareholding: 456 ordinary shares
and 1,311 units in FCP AN |
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Business Address:
Alcatel Lucent Submarine Networks
Centre de Villarceaux Route de
Villejust 91620 Nozay
France |
Current directorships and professional positions
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In France: Engineer, Board Observer of the Board of Directors of Alcatel Lucent*, Member of the Supervisory Board of Actionnariat Nokia mutual fund (FCP AN). |
Career
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Laurent du Mouza has a PhD in telecommunications. He graduated from Pierre and Marie Curie University (Paris) and the Ecole Nationale Supérieure des Télécommunications (1999).
He is an auditor of the 35th cycle in Economic Intelligence at the IHEDN (Institut des hautes études de Défense nationale, Institute for High Studies on National Security) and a certified director by the IFA (Institut Français
des Administrateurs, French Corporate Directors Institute). In 2000, he joined the Alcatel CIT research center as a team leader in charge of development of high speed optical transmission (40Gb/s). Then, in 2001, in order to follow the
implementation of technologies within the Alcatel-Lucent group, he entered Alcatel Submarine Networks so as to work on optical configurations of submarine cable networks. Since 2007, he has held the position of Customer Support Manager, that is,
following customers during the entire lifecycle of submarine cable systems. In this context, he mainly deals with supplying international customers with maintenance and evolution of their installed devices. Beside his functions, Laurent du Mouza has
also been in charge of staff representations tasks, as an elected ASN board member and a Secretary of the French Alcatel Group, and then of Alcatel-Lucent Committee until 2011. Since March 2013, he is an elected member of the Supervisory Board of
the FCP AN (formerly FCP 2AL), the mutual fund which manages the various shareholdings belonging to employees of Alcatel Lucent and its subsidiaries. |
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Expertise: 19 years in the telecommunications sector. |
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Gilles LE DISSEZ
Board Observer
Born on May 8, 1958, French citizen First appointment: 2013 - Term of the mandate: 2016 Alcatel Lucent shareholding: 15 ordinary shares
and 5,641 units in FCP AN |
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Business Address:
Alcatel Lucent International 4,
rue Louis de Broglie 22304 Lannion France |
Current directorships and professional positions
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In France: Engineer, Board Observer of the Board of Directors of Alcatel Lucent*, Chairman of the Supervisory Board of Actionnariat Nokia mutual fund (FCP AN). |
Career
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Gilles Le Dissez graduated from the Institut Universitaire de Technologie en Génie Electrique in electrical engineering (1978). He joined the R&D center Alcatel-Lucent France at Lannion
as software developer from 1980 to 1994. He worked on the call-processing software for China, specializing on the E10 and OCB283 products. He then worked on various products of the Company and was a correspondent for Technical Center (CTE RSA)
abroad. Since 2008, he is engineer gestion de configuration for Wireless WCDMA activity and participates to the ongoing integration of NodeB. In parallel, he is staff representative. |
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Expertise: 36 years in telecommunications. |
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7.1.2 |
Principles of organization of our Companys management |
7.1.2.1 Principles of corporate governance
Executive Directors
Combining of functions and powers as from September 1, 2015
Alcatel Lucent operates according to
the monist system (meaning that it is managed by a Board of Directors). Since 2006, the duties of the Chairman of the Board of Directors and of the Chief Executive Officer had been separated. In view of the contemplated Nokia Offer and
the decision of Mr. Michel Combes to resign from his position as Chief Executive Officer, the Directors decided that the reasons that justified a separation of the functions of Chief Executive Officer and Chairman since 2006 have evolved and
that the unification of the functions of Chairman and Chief Executive Officer as of the effectiveness of the resignation of Mr. Michel Combes on September 1, 2015 would be more appropriate given the circumstances. Upon recommendation of
the Corporate Governance and Nominating Committee, and in agreement with the Chairman of the Board, the Board of Directors appointed Mr. Philippe Camus, for a transition period ending at the expiration of his mandate as Director at the end of
the Shareholders Meeting which will consider the approval of the financial statements for the year ending on December 31, 2015, as Chairman and interim Chief Executive Officer as from September 1, 2015. Mr. Jean-Cyril Spinetta
was appointed as Lead Director (Administrateur référent). See sub-section Lead Director, and as from January 8, 2016, Committee of Independent Directors of this
sub-section 7.1.2.1.
Chairman of the Board and CEO
The Board of Directors reappointed
Mr. Philippe Camus as Chairman of the Board of Directors following the renewal of his appointment as Director at the Shareholders Meeting of May 7, 2013, for a three-year period, that will expire at the end of the Shareholders
Meeting to be held in 2016.
Following his appointment as interim CEO, Mr. Philippe Camus has continued to perform his duties as
Chairman of the Board of Directors as before. His functions as CEO are carried out in accordance with the same terms that applied to his predecessor, including in particular certain decisions subject to the prior authorization of the Board of
Directors pursuant to Article 2 of the Operating Rules of the Board of Directors (Board Operating Rules), as detailed below.
In his capacity as Chairman of the Board, Mr. Philippe Camus chairs the Board of Directors, and organizes and manages the tasks of the Board of Directors and reports on the outcome thereof at the annual Shareholders
Meeting. He oversees the
operation of the Companys corporate bodies and especially those of the Committees of the Board and, more generally, ensures that the Company complies with the best corporate governance
practices.
Following the success of the Nokia Offer, Mr. Philippe Camus was confirmed in his position as Chairman and CEO by the
Board of Directors on January 8, 2016.
As Chairman and CEO of the Company, Mr. Philippe Camus has wide powers to act in all
situations on behalf of the Company, within the limits of the corporate purpose and subject to any powers that are expressly granted by law to the shareholders and to the Board of Directors. The Board Operating Rules as amended by the Board of
Directors on January 8, 2016 and April 26, 2016, provide limitations to his powers for certain decisions which are subject to the prior approval of the Board of Directors, by reason of their purpose or the amount involved:
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the update of the Alcatel Lucent Groups annual strategic plans, and any significant strategic operation not envisaged by these plans; |
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the Alcatel Lucent Groups annual budget and annual capital expenditure plan; |
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acquisitions or divestitures in an amount higher than 100 million (enterprise value); |
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capital expenditures in an amount higher than 100 million; |
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offers and commercial contracts of strategic importance in an amount higher than 500 million; |
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any significant strategic alliances and industrial and financial cooperation agreements with annual projected revenues in excess of
100 million, in particular if they imply a significant shareholding by a third party in the capital of the Company; |
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financial transactions having a significant impact on the accounts of the Alcatel Lucent Group, including in particular long term credits and the issuance of debt securities, in amounts greater
than 200 million; |
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since January 8, 2016, any transaction, agreement or undertaking between (i) the Company and/or its direct or indirect subsidiaries and (ii) any other entity which directly or indirectly,
through one or more intermediaries, controls or is under the common control of the entity which controls the Company in an amount per transaction, agreement or undertaking higher than
100 million (such as, but not limited to, the setting up of a joint venture, cash pooling agreements, services agreements, the setting up of a consortium to submit a
bid in the context of a tender offer process, license or transfer agreements concerning know-how or patent
), and in the case such transactions, agreements or undertakings relate to a merger or spin-off, in an amount per transaction, agreement
or undertaking higher than 100 million, except with respect to any transaction, agreement or undertaking covered by the following paragraph; and
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since January 8, 2016, acquisitions or divestitures of asset(s) between (i) the Company and/or its direct or indirect subsidiaries and (ii) any other entity that directly or indirectly,
through one or more intermediaries, controls or is under the common control of the entity which controls the Company in an amount higher than EUR100 million. |
Lead Director, and as from January 8, 2016, Committee of Independent Directors
In the context of the cumulation by
Mr. Philippe Camus of the roles of Chairman and CEO, the Board of Directors at its meeting held on July 29, 2015 appointed Mr. Jean-Cyril Spinetta as Lead Director.
Following the success of the Nokia Offer, the role of Lead Director was not renewed under the new composition of the Board of Directors resulting
from the appointments decided on January 8, 2016.
Instead, a Committee of Independent Directors was created, the role of which is
detailed under Section 7.1.4.5 Committee of Independent Directors.
Separation of functions and powers until
August 31, 2015
Until August 31, 2015, the duties of the Chairman of the Board of Directors and of the Chief Executive
Officer were separated. The Board of Directors had considered that this corporate governance mode was at the time the best suited to the Companys situation, which was confirmed by the conclusions of the annual evaluations of the Board.
The functions of Chairman of the Board of Directors and Chief Executive Officer were performed, respectively, by Mr. Philippe
Camus, since October 1, 2008, and by Mr. Michel Combes, since April 1, 2013.
Chairman of the Board of Directors
The role of
the Chairman of the Board of Directors when the functions of Chairman of the Board of Directors and Chief Executive Officer were separated was to chair the Board of Directors, and organize and manage the tasks of the Board of Directors and report on
the outcome thereof at the annual Shareholders Meeting. He also oversaw the operation of the Companys corporate bodies and especially those of the Committees of the Board and, more generally, ensured that the Company complied with the
best corporate governance practices. In addition, the Chairman of the Board of Directors had a delegation of authority enabling him to represent the Alcatel Lucent Group at high-level meetings, in particular with government representatives, on a
national and international basis.
Vice-Chairman of the Board of Directors
The Board of Directors had appointed
on February 21, 2013 Mr. Jean C. Monty as Vice-Chairman of the Board of Directors in
order to assist the Chairman for certain matters, including representing the Alcatel-Lucent Group at high-level meetings on the American continent, pursuant to specific requests of the Board of
Directors. This appointment had been confirmed following the renewal of his appointment as Director at the Shareholders Meeting of May 7, 2013, for a three-year period, that was to expire at the end of the Shareholders Meeting
called to approve the financial statements for the fiscal year ending December 31, 2015. Following the resignation of Mr. Jean C. Monty on January 8, 2016, there is no longer a Vice-Chairman of the Board.
Chief Executive Officer
Following his appointment as Chief
Executive Officer by the Board of Directors as of April 1, 2013, Mr. Michel Combes was appointed Director at the Shareholders Meeting of May 7, 2013, for a three-year period, that was to expire at the end of the
Shareholders Meeting called to approve the financial statements for the fiscal year ending December 31, 2015. The resignation of Mr. Michel Combes became effective on September 1, 2015.
Composition of the Board of Directors
The Board of Directors aims to combine a range of diverse skills capable of bringing to it an expertise in the Alcatel Lucent Groups high-technology businesses but also a telecom expertise and knowledge of the various
geographic markets, the business environment in which the Company operates, and sufficient financial expertise. These financial skills enable the Board of Directors to make informed and independent decisions with respect to the financial statements
and compliance with accounting standards.
Resignations and co-optations to reflect the success of the Nokia Offer
Following the success of the Nokia
Offer, the composition of the Board of Directors was modified to reflect the new structure of the capital of the Company. In accordance with Article 9.2 of the AFEP-MEDEF Code, as long as the Companys shares are listed on Euronext Paris, the
Board of Directors must have at least one third of independent Directors. Directors who would have certain ties (in particular as an executive officer or employee, etc.) with the new majority shareholder of the Company, Nokia, may not be considered
as independent.
To meet this requirement, it was agreed that six Directors would resign, five new Directors representing the interests
of Nokia would be co-opted and four Directors would retain their mandates. Thus, on January 8, 2016:
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Messrs. Jean C. Monty, Louis R. Hughes, Olivier Piou, Stuart E. Eizenstat, and Francesco Caio and Mrs. Kim Crawford Goodman resigned as Directors of Alcatel Lucent; Messrs. Jean C. Monty,
Louis R. Hughes and Olivier Piou were appointed as Directors of Nokia Corporation at the Nokia Corporation Shareholders Meeting of December 2, 2015.
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Messrs. Risto Siilasmaa (Chairman of the Board of Directors of Nokia Corporation), Rajeev Suri (Chief Executive Officer of Nokia Corporation), Timo Ihamuotila (Chief Financial Officer of Nokia
Corporation) and Samih Elhage (President of Mobile Networks at Nokia Corporation) and Ms. Maria Varsellona (Chief Legal Officer of Nokia Corporation) were co-opted to the Board of Directors, in accordance with the Corporate Governance and
Nominating Committees recommendation, and subject to ratification by the shareholders of Alcatel-Lucent at the next Shareholders Meeting; Nokia has stated that it intends to vote in favor of such ratification. |
Mr. Jean-Cyril Spinetta, Mrs. Sylvia Summers and Mrs. Carla Cico, who the Board of Directors has determined are independent
Directors under its Board Operating Rules, together compose the newly-created Committee of Independent Directors.
Selection of the
Directors
The
Corporate Governance and Nominating Committee provides the Board of Directors with an annual update on the selection of future Directors of the Company and the composition of the Board of Directors.
In February 2015, with the aim of making progress towards compliance with the new statutory requirement for Boards of listed companies to include
at least 40% of women among their members by June 2017, the Committee recommended to the Board of Directors to propose the appointment of Mrs. Sylvia Summers for a 3-year term to the approval of the shareholders at the Shareholders
Meeting of May 26, 2015. For that purpose, it had conducted its own research on potential candidates beginning in July 2014. Then, with the assistance of an external advisor, it developed a short list of potential female candidates, who have a
technology background and are American citizens, in order to enhance the diversity within the Board. The short-listed candidates were interviewed by the members of the Committee as well as by the Chairman of the Board of Directors and the Chief
Executive Officer to evaluate their interest and their individual skills. At the Shareholders Meeting of May 26, 2015, the shareholders appointed Mrs. Sylvia Summers, increasing the number of women from 3 to 4, that is, for a Board
of Directors then composed of 12 members, 33% of the members of the Board of Directors.
In January 2016, following the success of the
Nokia Offer, the Board reviewed more particularly its overall composition. Prior to the co-optation of 5 Directors affiliated with Nokia, the Corporate Governance and Nominating Committee stressed the diversity of the new Directors skills,
especially in the technological, financial, legal and emerging market areas. There are currently 3 women on our Board of Directors, representing, on a Board of 9 members, the same proportion of 33% of the members of the Board.
Renewal of the Directors
The Corporate Governance and
Nominating Committee meets every year to review the situation of the Directors whose
mandate is about to expire and proposes whether to renew certain Directors, taking into account various criteria (in particular, skills, effective contribution to the Boards work,
availability and personal commitment) and the appointment of new Directors.
Representation of employees
In the absence of a Director
representing the Companys employees (administrateur salarié), the representation of the employees at the Board of Directors is ensured by the two Board Observers. Alcatel Lucent does not fulfill the conditions of the
French law of June 14, 2013, and is therefore not covered by the provisions requiring the nomination of a Director representing the Companys employees.
The two Board Observers (Censeurs) are both employees of Alcatel Lucent, or of one of its affiliates, and members of the Actionnariat
Nokia mutual fund (FCP AN) (in French Fonds Commun de Placement or FCP) (formerly the Actionnariat Alcatel Lucent Fonds Commun de Placement (FCP 2AL)). Until the settlement of the Nokia Offer on January 7, 2016,
the FCP held Alcatel Lucent shares, in accordance with Article 14 of the Companys bylaws. The FCPs supervisory board having decided to tender the Alcatel Lucent shares owned by the FCP into the Nokia Offer, the FCP today no longer holds
shares of the Company, and holds Nokia shares. This change was reflected in the bylaws of the FCP as of their approval by the AMF on January 22, 2016. The status of the Board Observers will have to be reconsidered at the next Shareholders
Meeting (extraordinary part of the agenda) as a result of the completion of the Nokia Offer and of the change in the Companys governance.
The mutual fund designates, among its members, a number of candidates representing twice the number of Board Observers seats to be filled in at the Board of Directors of the Company. This list is addressed to the Chairman of the
Board of Directors and then, upon recommendation of the Corporate Governance and Nominating Committee, the Board of Directors submits to the Shareholders Meeting the appointment of one or several Board Observers, as the case may be, for a
three-year mandate pursuant to Article 14 of the bylaws.
At the Shareholders Meeting of May 26, 2015, since
Mr. Bertrand Laprayes mandate was expiring, Mr. Laurent du Mouza, engineer, employee of Alcatel-Lucent Submarine Networks and member of the FCP, was appointed as Board Observer for a three-year term, that is, until the end of the
Shareholders Meeting that will be called to approve the financial statements for the fiscal year ended December 31, 2017.
The two Board Observers, Messrs. Laurent Du Mouza and Gilles Le Dissez, are deemed to have resigned on January 7, 2016, since following the tender
by the FCP of its Alcatel Lucent shares in the Nokia Offer, they were no longer members of a mutual fund holding shares of the Company. However, until the status of the Board Observers is reconsidered at the next Shareholders Meeting, Messrs.
Laurent Du Mouza and Gilles Le Dissez still participate in the meetings of the Board of Directors on a consultative basis.
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Independence of the Directors
The independence criteria selected are based on the recommendations of the AFEP-MEDEF Code.
Following the delisting of Alcatel Lucent from the New York Stock Exchange (NYSE), which became effective on
March 7, 2016, Alcatel Lucent is no longer subject to NYSE rules.
According to the AFEP-MEDEF Code, at least half of the members of the board in companies with a widely-spread share capital and without
controlling shareholders, and at least a third of the members of the board in controlled companies must be independent. The Board of Directors must determine whether the independence criteria are met.
Annual review for all the Directors
On January 8, 2016, the Board of
Directors, after modifying its composition carried out the annual assessment of the situation of each Director and of the relationships which might exist between him or her and the Alcatel Lucent Group and, as of this year, the Nokia Group. It
assessed the situation on a case-by-case basis, in accordance with the independence criteria of the AFEP-MEDEF Code, based on the declarations made and questionnaires completed by the Directors.
The Board of Directors relied upon the following AFEP-MEDEF Code independence criteria, as expanded by the Board Operating Rules as amended on
January 8, 2016 (see sub-section 7.1.3.2 The Operating Rules of the Board of Directors):
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the Director is not an employee or executive officer (mandataire social) of the Company, nor an employee or Director of its parent or of one of its consolidated subsidiaries, and has not
been one during the last five years; |
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the Director is not an executive officer of a company in which the Company holds, either directly or indirectly, a Directorship, or in which a Directorship is held by an employee of the Company
designated as such or by a current or former (going back five years) corporate officer of the Company; |
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the Director is none of the following (whether directly or indirectly): a customer, supplier, investment banker or commercial banker, in each case: (i) which is material for the Company or its
Group, or (ii) for which the Company or its group represents a material proportion of the entitys activity; |
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the Director does not have any close family ties with an executive officer (mandataire social) of the Company or the Group; |
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the Director has not been an auditor of the Company or a company of the Group over the past five years; |
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the Director has not been a Director of the Company or its parent or of one of its consolidated subsidiaries for more than twelve years;
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the Director has not received significant amounts of compensation from the Company or the Group in addition to Directors fees, including, but not limited to, participation in any
performance-related compensation plan; |
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the Director is not an executive officer of a company, of which an executive officer of the Company is a Director (cross-ties); |
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the Director has not temporarily managed the Company during the preceding twelve months while executive officers were absent or unable to fulfil their duties. |
The Board of Directors determined that:
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Messrs. Risto Siilasmaa, Rajeev Suri, Timo Ihamuotila, and Samih Elhage and Ms. Maria Varsellona cannot be considered as independent within the meaning given to this term in the Board
Operating Rules, as amended, because they are either employees, executive officers (mandataires sociaux) or Directors of Nokia Corporation, Alcatel-Lucents parent company; |
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Mr. Philippe Camus cannot be considered as independent either, since he is an officer of the Company in his capacity as CEO; |
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Mr. Jean-Cyril Spinetta, Mrs. Sylvia Summers and Mrs. Carla Cico are independent under the Board Operating Rules, as amended; and |
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as a result, the minimum number of independent Directors required (three independent Directors out of nine Directors) is met. |
Review of independence of Mrs. Sylvia Summers in the context of her proposed nomination by the shareholders at the Shareholders
Meeting of May 26, 2015
In the context of the proposal to appoint Mrs. Sylvia Summers as a new Director at the 2015 Annual Shareholders Meeting, the Board of Directors, upon recommendation of the Corporate Governance and Nominating Committee,
reviewed at its meeting of February 5, 2015 the situation of Mrs. Sylvia Summers with regard to the independence criteria of the AFEP-MEDEF Code.
The Board noted that Mrs. Sylvia Summers has no relationship of any kind whatsoever with the Company, the Alcatel Lucent Group or its management which may affect her exercise of independent judgment.
Since Mrs. Sylvia Summers meets the criteria of the AFEP-MEDEF Code, she is considered as an independent Director.
Review of the independence of the members of the Committee of Independent Directors created on January 8, 2016
In the context of the creation of the
Committee of Independent Directors resulting from the adoption by the Board of Directors of the amended Board Operating Rules on January 8, 2016, the
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Board of Directors, on the recommendation of the Corporate Governance and Nominating Committee,
reviewed the situation of the Directors to be appointed as members of this Committee in view of all the independence criteria set forth in Article 4 of the Board Operating Rules, as amended.
In light of these criteria, the Board of Directors concluded that Mr. Jean-Cyril Spinetta, Mrs. Sylvia Summers and Mrs. Carla Cico
are independent under the criteria set forth by the AFEP-MEDEF Code and the Board Operating Rules.
Chairman of the Board of
Directors
On
March 13, 2015, the Board of Directors had examined the situation of Mr. Philippe Camus in light of the provisions of the AFEP-MEDEF Code as revised in June 2013, which state that the Chairman of the Board of Directors, who is an Executive
Director, may be considered as an independent Director subject to the satisfaction of the independence criteria provided by this Code. The Board of Directors noted that the Chairman of the Board of Directors did not have any relationship of any kind
whatsoever with the Company, the Alcatel Lucent Group or its management that may affect his independent judgment. Therefore, Mr. Philippe Camus, who met the criteria of the AFEP-MEDEF Code, was considered as an independent Director according to
the criteria of the Code.
Following his appointment as interim Chairman and CEO as from September 1, 2015, Mr. Philippe
Camus no longer meets the criteria to be considered as an independent Director under the AFEP-MEDEF Code.
Independence within the
Committees
Since
January 8, 2016, all members of the Audit and Finance Committee and of the Independent Directors Committee on the one hand, and two thirds of the members of the Corporate Governance and Nominating Committee and of the Compensation Committee on
the other hand, are independent. Alcatel-Lucent therefore complies with the new rules adopted by the Board of Directors, which go beyond the recommendations of the AFEP-MEDEF Code.
Until January 8, 2016, all members of the Audit and Finance Committee and more than two-thirds of the Directors who composed the Corporate
Governance and Nominating Committee, the Compensation Committee and the Technology Committee were independent in accordance with the Operating Rules of the Board of Directors that were then in force (See Section 7.1.2.1 Principles of
corporate governance, sub-section Independence of the Directors). The number of independent Directors within each Committee exceeded the recommendations of the AFEP-MEDEF Code.
Board of Directors evaluation
Pursuant to the AFEP-MEDEF Code and our Board Operating Rules, the Board of Directors agenda calls for an annual discussion on its composition and organization. This translates
into a self-assessment based on individual questionnaires, and, once every two years, into an evaluation performed with the support of an outside consultant.
At the beginning of 2015, the Board performed an annual assessment of its own work, based on a report of our Corporate Governance and Nominating
Committee. The results of this assessment were examined by the Board of Directors at its meeting held on March 13, 2015.
The
Board of Directors expressed a very favorable overall view, and noted significant progress since its last self-evaluation.
The Board
of Directors benefited from a satisfactory level of diversity, skills and a high-level of experience of its members. The environment favored constructive debates and communication, and the interactions between the Board and its Committees, its
Chairman and the Chief Executive Officer were balanced. The Board of Directors remained highly involved in the Groups strategy, both in its development and in the follow-up of its implementation. This good understanding of the Groups
strategy allowed the Directors to act in the Groups interests.
As a result of this self-evaluation, the Board of Directors
suggested certain improvements, such as a specific focus on the way the members of the Leadership team operate and how they manage their teams in terms of organization, resources, key processes and interfaces; an increased variety in the information
made available to the Board of Directors, such as reports of industry analysts, and the organization of exchanges during dedicated sessions of the Board of Directors, between the Directors and the sector analysts, clients and significant
shareholders, so that they can share their views on the Company and its positioning; and lastly, access of the Board of Directors to more specific information on certain activities of the Alcatel Lucent Group depending on the Boards agenda.
Considering the specific context of the Nokia Offer, the Board of Directors decided to postpone the annual assessment of its
operation.
Ethics
Each Director and Board Observer undertakes to comply with the rules of conduct set out in the Directors Charter, in particular concerning the compliance with any applicable securities laws, as well as with the rules
Alcatel Lucent Insider Trading Policy, designed by Alcatel Lucent to prevent insider trading. This policy sets limited periods during which transactions involving the Companys shares are not authorized, the minimum number of shares
that each Director must hold, and the obligation to notify the Autorité des Marchés Financiers (the French securities regulator) of any personal transactions involving Alcatel Lucent shares.
Conflicts of interest
In accordance with Article 3 of the Directors Charter: a Director has the obligation to inform the Chairman of the Board of
Directors of any situation potentially resulting for them in a conflict of interest and, if such conflict relates to a particular subject, they
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must refrain from participating in the vote of the corresponding resolution. In
addition, since the amendment of the Operating Rules of the Board of Directors on January 8, 2016, in accordance with Article 8 of such Rules: The director shall inform the Board of Directors and the Committee of Independent Directors
of any actual or potential conflict of interests of which he or she would become aware with the Company or any company of the group, and shall abstain from related discussions and votes.
Until the appointment of the five Directors linked to Nokia on January 8, 2016, to the knowledge of the Board, no Director was in a situation
of conflict of interest.
Since January 8, 2016, the five Directors linked to Nokia have informed the Chairman of the Board of
potential conflicts of interest stemming from their concurrent management positions (executive officer or employee) within Nokia. These five Directors are Messrs. Risto Siilasmaa, Rajeev Suri, Samih Elhage, and Timo Ihamuotila and
Ms. Maria Varsellona. To remedy this situation, when conflicts of interest, even potential, come into play for certain decisions, the Board Operating Rules provide in Article 8 that the concerned Directors must abstain from taking part in the
debates and voting on the matter concerned.
To the knowledge of the Board of Directors:
· |
|
There is no family relationship between the members of our Board of Directors and our Companys senior management; |
· |
|
There is no arrangement or agreement with a shareholder, client, supplier, or any third party pursuant to which a member of our Board of Directors or of our Management Committee was appointed in
such capacity or as Chief Executive Officer;
|
· |
|
No Director has been convicted of fraud during the last five years; |
· |
|
No Director has been charged and/or received an official public sanction pronounced by a statutory or regulatory authority; or has been banned by a court from holding office as a member of an
administrative, management or supervisory body of an issuer, or from being involved in the management or conduct of the business of an issuer in the last five years; |
· |
|
No Director has been an executive director of a company involved in a bankruptcy, court escrow or liquidation in the past five years. |
7.1.2.2 Attendance fees
Except for the Chairman of the Board of Directors and the Chief Executive Officer, the Directors receive directors fees, consisting of (i) a fixed portion, for performing their duties on the Board of Directors and, where
relevant, on one of the Boards Committees, and (ii) a variable portion, for their attendance at the various meetings, in compliance with the AFEP-MEDEF Code. Additional directors fees are equally allocated among the Directors,
subject to the investment in Alcatel Lucent shares of the amount granted as additional fees after taxes, and to the holding of the acquired shares for the duration of the term of office as Director.
Until 2015, Directors fees were paid each semester. The additional attendance fees tied to a commitment to acquire and hold shares in the
Company were paid at the time of the second payment of the attendance fees.
|
|
|
Breakdown of attendance fees |
|
|
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The overall amount of Directors fees paid to Directors for the fiscal
year 2015 was 990,000, that is, an average of 110,000 per Director:
|
|
|
|
|
|
|
Fixed portion |
|
|
395,000 |
|
|
|
|
|
Chairman of the Audit and Finance Committee |
|
|
25,000 |
|
|
|
Chairman of the Compensation Committee, of the Corporate Governance and Nominating Committee, and of the Technology Committee, and member of the Audit and Finance Committee |
|
|
15,000 |
|
|
|
Committee member (other than member of the Audit and Finance Committee) who is a member of the Board of Directors |
|
|
10,000 |
|
|
|
Allocated equally among the directors |
|
|
balance |
|
|
|
Variable portion allocated according to attendance at meetings |
|
|
395,000 |
|
|
|
Additional portion |
|
|
200,000 |
|
|
|
|
|
|
TOTAL |
|
|
990,000 |
|
|
|
|
|
|
The total fees paid to the Board Observers for fiscal year 2015 were 100,000.
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In application of the rules provided above, the Directors fees and other compensation
received by each Director and by each Board Observer during fiscal years 2014 and 2015, and their total compensation during fiscal years 2014 and 2015 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In Euro |
|
2014 |
|
|
2015 |
|
Directors |
|
Total Gross |
|
|
Total Gross |
|
|
Amount received as member of a Committee |
|
|
Amount received as Chairman of a Committee |
|
|
|
|
|
|
|
Mr. Bernard |
|
|
44,238 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
Mr. Caio |
|
|
52,789 |
|
|
|
72,276 |
|
|
|
10,000 |
|
|
|
- |
|
|
|
|
|
|
Mrs. Cico |
|
|
86,373 |
|
|
|
83,574 |
|
|
|
10,000 |
|
|
|
- |
|
|
|
|
|
|
Mr. Eizenstat |
|
|
110,426 |
|
|
|
111,725 |
|
|
|
20,000 |
|
|
|
- |
|
|
|
|
|
|
Mrs. Goodman |
|
|
97,905 |
|
|
|
109,408 |
|
|
|
22,500 |
|
|
|
- |
|
|
|
|
|
|
Mr. Hughes |
|
|
125,426 |
|
|
|
136,170 |
|
|
|
25,000 |
|
|
|
15,000 |
|
|
|
|
|
|
Lady Jay |
|
|
44,576 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
Mr. Monty |
|
|
109,042 |
|
|
|
119,872 |
|
|
|
10,000 |
|
|
|
25,000 |
|
|
|
|
|
|
Mrs. Morali |
|
|
52,789 |
|
|
|
21,611 |
|
|
|
6,071 |
|
|
|
- |
|
|
|
|
|
|
Mr. Piou |
|
|
131,810 |
|
|
|
132,650 |
|
|
|
30,000 |
|
|
|
- |
|
|
|
|
|
|
Mrs. Summers |
|
|
N/A |
|
|
|
55,436 |
|
|
|
7,500 |
|
|
|
- |
|
|
|
|
|
|
Mr. Spinetta |
|
|
134,626 |
|
|
|
147,278 |
|
|
|
15,000 |
|
|
|
30,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL |
|
|
990,000 |
|
|
|
990,000 |
|
|
|
156,071 |
|
|
|
70,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Board Observers |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mr. Lapraye |
|
|
50,000 |
|
|
|
25,000 |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
Mr. Le Dissez |
|
|
50,000 |
|
|
|
50,000 |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
Mr. du Mouza |
|
|
N/A |
|
|
|
25,000 |
|
|
|
- |
|
|
|
- |
|
The compensation specified in the table above is the only compensation paid to the Directors by
Alcatel Lucent and its subsidiaries during fiscal years 2014 and 2015, except for the amounts paid to the Executive Directors described in Section 8.2 Status of the Executive Directors and Officers. No Director, except the Chairman
of the Board of Directors and CEO, holds any stock options, performance shares or other securities giving access to the capital of the Company.
In addition, there are no commitments towards the Directors, except for the former Chief Executive Officer, that constitute compensation, allowances or benefits due or likely to be due as a result of the termination or change of
duties.
The Directors also benefit from the Nokia Groups Directors and Officers civil liability insurance that
covers all the executive officers and members of Boards of Directors of the Nokia Group.
Following the success of the Nokia Offer and in the context of the new governance implemented, the
Board of Directors approved in the amendment of the Board Operating Rules, on January 8, 2016, a new allocation of attendance fees according to attendance at meetings of the four following Committees: Committee of Independent Directors, Corporate
Governance and Nominating Committee, Compensation Committee and Audit and Finance Committee. The Chairman of the Board of Directors, the Chief Executive Officer and any other Directors who are executive officers of the Company or of the Nokia Group
do not receive any Directors fees. The additional attendance fees, allocated equally among the Directors and tied to a commitment to acquire and hold shares of the Company will be reviewed in view of the Nokia Offer for the securities of the
Company, at the next Shareholders Meeting to be held in 2016.
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|
|
|
|
|
|
|
Fixed portion |
|
|
|
|
|
|
|
|
Chairman of the Committee of Independent Directors |
|
|
120,000 |
|
|
|
Other members of the Committee of Independent Directors |
|
|
50,000 |
|
|
|
Chairman of the Corporate Governance and Nominating Committee, Chairman of the Compensation Committee |
|
|
15,000 |
|
|
|
Other members of the Corporate Governance and Nominating Committee, other members of the Compensation Committee |
|
|
5,000 |
|
|
|
Chairman of the Audit and Finance Committee |
|
|
25,000 |
|
|
|
Other members of the Audit and Finance Committee |
|
|
10,000 |
|
|
|
Variable portion allocated according to attendance at meetings |
|
|
|
|
|
|
|
|
Chairman of the Committee of Independent Directors |
|
|
10,000 |
|
|
|
Other members of the Committee of Independent Directors |
|
|
5,000 |
|
|
|
Members of the Corporate Governance and Nominating Committee, members of the Compensation Committee, members of the Audit and Finance Committee |
|
|
2,000 |
|
|
|
Additional portion tied to a commitment to acquire and hold shares (1) |
|
|
200,000 |
|
|
|
(1) |
|
Subject to the cancellation of such required commitment, either at the next Shareholders Meeting to be held in 2016 or subsequently, or unless the shares of the Company are squeezed out or
delisted at any time. |
Attendance fees are paid quarterly. Since the effectiveness of the amendment to the Board
Operating Rules, with respect to the fixed portion, each started quarter is due.
The attendance fees tied to a commitment to acquire
and hold shares in the Company are paid at the same time as the payment of the fourth instalment of attendance fees.
7.1.2.3 AFEP-MEDEF Code
Alcatel Lucent is compliant with the AFEP-MEDEF Code (see MEDEF website: www.medef.fr). At
its meetings on October 29 and December 11, 2008, the Board of Directors confirmed, and then published its adherence to these principles, which govern, among other things, the Board Operating Rules and the operating rules of its
Committees, as described in the Board Operating Rules.
Our corporate governance policy reflects the principles of the AFEP-MEDEF Code to the extent that
those principles are in line with the organization, the situation and the means of the Company. In fiscal year 2015, this was not the case with respect to Mr. Michel Combes compensation package, on the two following points:
|
|
|
AFEP-MEDEF Code |
|
Alcatel Lucents position |
Reasonable requirements of seniority within the company, for at least two years, to benefit from payments from a pension plan with defined benefits |
|
The pension plan from which Mr. Michel Combes benefits does not include any provision regarding the seniority but the rights vest gradually by year of seniority (with
respect to Mr. Michel Combes, the reference period for the calculation of the pensions benefit was the total duration of one or more terms of office of Mr. Michel Combes as Chief Executive Officer) and represent, each year, only a limited
percentage of his compensation (approximately 1% per year for a compensation of 1.2 million per year; beyond this amount the potential pension would amount to approximately
1.2%). |
|
|
Criterion according to which the benefit of an additional pension scheme shall be conditioned to the completion of the career of the beneficiary in the
company |
|
In line with what is provided for the other beneficiaries of the additional pension
scheme, the benefit of an additional pension scheme for the Chief Executive Officer was not subject to his presence in the Company. However, the Board of Directors had determined three quantitative performance criteria which conditioned the rights
of the Chief Executive Officer under the pension plan for 75% (individually 25%) and two qualitative criteria which conditioned the rights of the Chief Executive Officer under the pension plan for 25% (individually 12.5%).
Upon the departure of Mr. Michel Combes, the Board of Directors determined
that 100% of the rights accrued by Mr. Michel Combes under the pension plan were definitively attributed to him (see Section 8.2.4 Chief Executive Officer, sub-section Pension plan). |
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The Chairman of the Board and CEO since September 1, 2015, Mr. Philippe Camus, does not
benefit from any supplemental pension scheme. Since that date, the Company has therefore been fully in compliance with the AFEP-MEDEF Code.
When our securities were listed on the NYSE, we made every effort to reconcile the principles of
the AFEP-MEDEF Code with the NYSE rules on corporate governance that were applicable to us, as well as with the provisions of the U.S. Sarbanes-Oxley Act, which came into force in 2002.
7.1.3 |
Powers and activity of the Board of Directors |
7.1.3.1 The Board of Directors
In addition to matters related to its legal or regulatory function, the Board of Directors
regularly decides upon the Alcatel Lucent Groups strategic orientations and the main decisions affecting its activities. It also analyzes the outlook resulting from the research and development activities of Alcatel Lucent and gives input on
the main technology options chosen. Furthermore, the Board of Directors monitors the economic and financial management of the Alcatel Lucent Group and authorizes the financial transactions which have a significant impact on its accounts.
The Board Operating Rules specify the conditions according to which the Directors exercise their functions and, in particular, the thresholds
above which the decisions of the Chief Executive Officer are subject to the prior approval of the Board of Directors.
7.1.3.2 The Operating Rules of the Board of Directors
The Directors of Alcatel Lucent have enacted the following which constitutes the internal regulation of the Board of Directors (Board Operating
Rules), in order to define its operating procedures and its role according to the rules of corporate governance in force. These rules are purely for internal use and are not intended to be a substitute for the applicable provisions of the law or the
Companys bylaws, but, rather, are intended to implement them in a practical manner, and consequently may not be held against the Company, third parties or the shareholders.
These rules, approved by the Board of Directors, are primarily intended to:
· |
|
define the role of the Board vis-à-vis the Shareholders Meeting on the one hand, and the Chairman and Chief Executive Officer on the other hand, by clarifying the existing provisions
of the law and of the Companys bylaws and the position of its members; |
· |
|
maximize the efficiency of meetings and debates, in particular by specifying the role of the Chairman, and develop the proper procedures of the bodies that oversee the administration of the
Company, in the spirit of the Companys corporate governance policy. |
Following the success of the Nokia Offer, the
Alcatel-Lucents Board of Directors modified the terms of the Board Operating Rules on January 8, 2016 and on April 26, 2016 (see Section 7.1.3.4 Activity of the Board of Directors in 2015 and early 2016, sub-section
Corporate governance).
The Board Operating Rules are available on the Companys website and will be disclosed to the
shareholders as part of the report of the Board at the Shareholders Meeting.
The following is a full transcription of the Board
Operating Rules as they stand following the modifications adopted by the Board of Directors at its meeting of April 26, 2016:
Section I The Boards role
Article 1 Deliberations of the Board
In addition to matters related to its legal or regulatory function, the Board shall regularly decide upon, among other things, the groups
strategic orientations and the main decisions affecting its activities. This relates in particular to the projects of important investments of organic growth and the operations of internal reorganizations, major acquisitions and divestitures of
shares and assets, transactions or commitments that may significantly affect the financial results of the group or considerably modify the structure of its balance sheet and the strategic alliances and financial cooperation agreements.
Article 2 |
|
Decisions subjected to the prior approval of the Board |
The
Chief Executive Officer must submit to the prior approval of the Board the following decisions:
1. |
the update of the groups annual strategic plans, and any significant strategic operation not envisaged by these plans; |
2. |
the groups annual budget and annual capital expenditure plan; |
3. |
acquisitions or divestitures in an amount higher than 100 million euro (enterprise value);
|
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4. |
capital expenditures in an amount higher than 100 million euro; |
5. |
offers and commercial contracts of strategic importance in an amount higher than 500 million euro; |
6. |
any significant strategic alliances and industrial and financial cooperation agreements with annual projected revenues in excess of 100 million euro, in particular if they imply a significant
shareholding by a third party in the capital of the Company; |
7. |
financial transactions having a significant impact on the accounts of the group, including in particular long term credits and the issuance of debt securities, in amounts greater than
200 million euro; |
8. |
any transaction, agreement or undertaking between (i) the Company and/or its direct or indirect subsidiaries and (ii) any other entity that directly, or indirectly through one or more
intermediaries, controls or is under the control of the entity which controls the Company in an amount higher than 100 million euro (such as, but not limited to, the setting up of joint venture(s), cash pooling agreements, services agreements,
the setting up of a consortium to submit a bid in the context of a tender offer process, transfers of know-how or patent, license agreements), and in the case such transaction, agreement or undertaking relates to an amalgamation, merger or division
in an amount higher than 100 million euro, but in each case excluding any transaction, agreement or undertaking covered by (9) below; and
|
9. |
acquisitions or divestitures of asset(s) between (i) the Company and/or its direct or indirect subsidiaries and (ii) any other entity that directly, or indirectly through one or more
intermediaries, controls or is under the control of the entity which controls the Company in an amount higher than 100 million euro. |
Article 3 Information of the Board
The Board of Directors shall be regularly
informed, either by its President or through its committees, of any significant occurrence in the Companys operations.
The Board
is also entitled at all times, including between meetings focused on the review of the financial statements, to become acquainted with any significant change affecting the Companys financial condition, cash position and commitments.
Board materials should be received and at the disposal of the Board members before each meeting and no later than the Friday (COB)
preceding the Board meeting.
The management should give a regular read-out to the Board on execution of previous Board decisions.
Section II The Members
Article 4 Independence
By definition, an independent director has no direct or indirect relationships of any nature whatsoever with the Company, its group or
its management of a nature that could compromise the free exercise of his or her judgment.
The independence of a director is
determined by the Board of Directors. The criteria that the Board of Directors should examine in order to determine whether a director is independent and to help avoid the risk of a conflict of interests between the director and
executive management, the Company or its group, is as follows:
· |
|
the director is not an employee or corporate officer (mandataire social) of the Company, nor an employee or director of its parent or of one of its consolidated subsidiaries, and has not been one
during the previous five years; |
· |
|
the director is not a corporate officer of a company in which the Company holds, either directly or indirectly, a directorship, or in which a directorship is held by an employee of the Company
designated as such or by a current or former (going back five years) corporate officer of the Company; |
· |
|
the director is none of the following (whether directly or indirectly): a customer, supplier, investment banker or commercial banker in each case: (i) which is material for the Company
or its group, or (ii) for which the Company or its group represents a material proportion of the entitys activity;
|
· |
|
the director does not have any close family ties with a corporate officer (mandataire social) of the Company or the group; |
· |
|
the director has not been an auditor of the Company or a company of the group over the past five years; |
· |
|
the director has not been a director of the Company or its parent or of one of its consolidated subsidiaries for more than twelve years; |
· |
|
the director has not received significant amounts of compensation from the Company or the group in addition to directors fees, including, but not limited to, participation in any
performance-related compensation plan; |
· |
|
the director is not an executive officer of a company, of which an executive officer of the Company (that he/she supervises) is a director (cross-ties); |
· |
|
the director has not temporarily managed the Company during the preceding twelve months while executive officers were absent or unable to fulfil their duties. |
The Board of Directors may consider that, although a particular director meets all of the above criteria, he or she cannot be held to be
independent owing to the specific circumstances of the person or the Company, due to its ownership structure or for any other reason. Conversely, the Board may consider that a director who does not meet the above criteria is nevertheless an
independent director.
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The Board of Directors shall ensure that the proportion of independent directors is at
all times equal to at least a third of the members of the Board and shall take action as soon as possible to replace directors, if necessary.
Article 5 Expertise
Board members will be selected so as to bring a diversity of
competencies, especially with respect to technology, finance, human resources, the emerging markets, as well as a connection with academia and the government agencies community (in view of the Companys highly classified work). At least one of
the independent members of the Board of Directors shall have financial expertise.
The members of the Board will
participate in training programs regarding the specificities of the Company, its activities and its industry sector that may be arranged by the Company from time to time.
An annual briefing on new technologies is included in the agenda of the Board of Directors.
An induction program is presented to new Board members with an emphasis on finance, technology and governance.
Article 6 Other Directorships
In order for the Directors to have and dedicate the time and attention necessary to carry out their responsibilities, the Board of Directors shall
ensure that none of its members violates the legal restrictions regarding the holding of multiple offices. A non-executive Director should not hold more than four other directorships in listed corporations, including foreign corporations, not
affiliated with his or her group.
The Director should keep the Board informed of directorships held in other companies, including
his/her participation on committees of the Board of these companies, both in France and abroad.
By exception, an executive director
should not hold more than two other directorships in listed corporations not affiliated with the group. He/she must also seek the opinion of the Board of Directors, which is based on a recommendation of the Corporate Governance and Nominating
Committee, before accepting a new directorship in a listed corporation.
Article 7 Compensation
The Directors will receive attendance fees. The annual amount to be received is determined by the Shareholders Meeting. This amount
comprises the components described in Annex 1 hereof.
Board Observers
The Board Observers will receive a compensation as determined by the annual shareholders meeting, to be divided between them and paid according to
the same rules as applicable to the Directors fees.
Article 8 Conflicts of interests
Each director is required to prepare a sworn statement concerning the existence of a conflict of interests, or even a potential
one:
· |
|
upon assuming his/her duties; and |
· |
|
each year in response to a request made by the Company as it drafts its Registration Document; and |
· |
|
within 10 business days following the occurrence of any event making the previous sworn statement issued by a director totally or partially inaccurate. |
Each director shall consult with the Chairman of the Board (or, if the director is the Chairman, with the Chairman of the Corporate Governance and
Nominating Committee) and the Committee of Independent Directors before engaging in any activity or accepting any duty or position that he or she believes may create such an actual or potential conflict of interests.
The Committee of Independent Directors may, at any time, seize itself of any actual or potential conflict of interest of which it would become
aware and lead any necessary investigations in order to identify and prevent such actual or potential conflict of interests, as further detailed below in Article 21.
The director shall inform the Board of Directors and the Committee of Independent Directors of any actual or potential conflict of interests of
which he or she would become aware with the Company or any company of the group, and shall abstain from related discussions and votes.
Section III The Chairman
Article 9 Role of the Chairman
The Chairman of the Board (hereafter the Chairman) shall prepare the agenda and the Board meeting calendar, request any document
and/or information in order to prepare the Board meetings, organize and manage the tasks of the Board and announce the outcome thereof at the general Shareholders
Meeting. He shall watch over the correct operations of the corporate bodies of the Company and especially those of the Boards Committees.
He shall ensure that the Directors are able to perform their assignments, in particular those that stem from the committees to which they belong.
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He shall take care that the formulation and implementation of the principles of the corporate
governance of Company are of the highest standard.
The Chairman is the only person who can act and speak on behalf of the Board of
Directors. With the approval of the Chief Executive Officer, he may represent the group in high level relationships, in particular with the authorities, in national and international arenas.
Article 10 |
|
Information of the Chairman Office of the Chairman |
The Chairman shall be regularly informed by the Chief Executive Officer of the significant events and positions regarding the
activities of the group; he shall receive all useful information for the performance of the Boards tasks and those necessary for the establishment of the internal audits report.
The Chairman may meet with the external auditors.
The Chairman may attend as advisor the meetings of the Committees of the Board in which he is not member, and may seek their advice on any
question that falls within their jurisdiction.
The General Counsel, in his Board Secretary mission, will report to the Chairman. He or
she will assist the Chairman in organizing board meetings, Shareholders Meetings and discharging any other duties associated with governance items linked to the nationality of the Company. The Secretary and the Deputy Secretary to the Board
permanently attend the Board meetings.
Section IV Operating procedures of the Board
Article 11 Meetings
The Board of Directors shall meet on notice of the Chairman, at least once during each quarter, at the registered office of the Company or at any
other place, in France or abroad, as shall be set forth in the applicable notice of meeting, in order to consider collectively the matters that are submitted to it.
In principle, there will be six main board meetings, four of them primarily dedicated to the review of financial statements, one to strategy
matters and one to the yearly budget. On a regular basis, the Board will meet in executive sessions attended by non-executive Directors only.
The Board Observers are convened and participate on a consultative basis to the meetings of the Board of Directors as well as of the Committees.
Members of the management can participate, if invited by the CEO, to the Board meetings except during the session dedicated to the reports of the
Chairman of the Corporate Governance and Nominating Committee and of the Chairman of the Compensation Committee.
Article
12 Participation
The Directors may participate in the meetings of the Board by means of telecommunication
as authorized by the articles of association and by-laws. In such event, they will be considered to be present for the purpose of calculating the applicable quorum and majority requirements except with respect to votes regarding the Companys
statutory financial statements, the yearly consolidated financial statements and the annual report.
As prescribed by the applicable
legal requirements, board meetings that are held by video-conference or other telecommunication media must be carried through technical means that ensure the proper identification of the parties, the
confidentiality of the discussions and the real-time effective participation of all the Directors present at any such meetings of the Board, and the transmission of the discussions shall be done
in a continuous manner.
The Secretary of the Board of Directors shall initial the attendance sheet on behalf of the directors who
attend meetings of the Board via video-conference or other telecommunication media (as well as for the Directors for whom they act as proxy).
Article 13 Annual evaluations
The Board shall meet once a year to discuss its operating
procedures, after each Board member having answered an evaluation questionnaire. The Board of Directors shall also meet once a year to consider the performance of the executive officers of the Company, and no Director who are either officer or
employee of the Company shall attend such meetings.
To this effect, the Chairman shall report back to the Board on the CEO annual
evaluation according to a model previously determined.
The Board of Directors or the Committee of Independent Directors may, at any
time, and at least once every two years, engage an outside consultant to evaluate its performance.
The Board of Directors will be
presented with an annual evaluation of the Leadership team members including as to their succession and compensation.
Article
14 Expenses
The members of the Board shall be reimbursed, upon presentation of receipts signed by the Chief
Financial Officer for travel expenses as well as for other expenses incurred by them in the interests of the Company.
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Section V Information of the Board
Article 15 The Committees
In the course of carrying out its various responsibilities, the Board of Directors may create specialized Committees, composed of Directors
appointed by the Board, that review matters within the scope of the Boards responsibilities and submit to the Board their opinions and proposals, in accordance with the internal rules governing such committees. The Board of Directors shall
have the following standing committees: the Corporate Governance and Nominating Committee, the Compensation Committee, the Audit and Finance Committee, the Technology Committee and the Committee of Independent Directors.
Each committee shall have no less than three directors, and shall be chaired by such director among the members of the committee as shall be
appointed by the Board of Directors.
Each committee shall submit reports regarding the matters reviewed by it to the Board of
Directors, which is the only body that can make any decision regarding such matters.
The Chairman and the Chief Executive Officer may
attend as advisors the meetings of the committees of the Board in which they are not members (except meetings of the Committees dealing with their personal situations).
The meetings of the Committees are open to all directors who are not members of the Committees subject to informing the President of each
Committee beforehand.
Article 16 |
|
Right to information from the Executive Officers |
In order to
efficiently oversee the management of the Company, the members of the Board may, through the Chairman or after
having informed him, request the opinion of the executive officers or any relevant officer of the group on any matter they deem appropriate. They may, under the same conditions, meet such
officers without the presence of any directors who are executive officers.
The members of the Board shall have the right to require
the Chief Executive Officer, through the Chairman or after having informed him, to provide them, within a reasonable period of time, with such information as shall be necessary to permit such members to comply with their assignment.
The members of the Board may visit a group site in order to obtain the information required to perform their duties. In order to do so, the
members of the Board must submit a written request explaining the purpose of such a visit to the Chairman of the Board of Directors, via the Secretary of the Board of Directors.
In order to assist them in the fulfilment of their duties, the members of the Board shall receive all reasonably required information regarding
the Company, including press articles and reports by financial analysts, and may, after prior consultation with the Chairman in each case, request to obtain information or to seek advice from external advisors or experts of the Company.
Article 17 Transparency
The Board of Directors shall ensure the openness of its activities to the shareholders of the Company by presenting each year, in the annual
report, a statement regarding its activities during the fiscal year just ended, and regarding the operation of the Board and its Committees.
Section VI Role and actions of the Committees
Article 18 |
|
Corporate Governance and Nominating Committee |
The mission of
the Corporate Governance and Nominating Compensation Committee shall be to review matters relating to the composition, organization and operation of the Board of Directors and its Committees, to identify and make proposals to the Board regarding
individuals qualified to serve as directors of the Company and on Committees of the Board of Directors; to develop and recommend to the Board of Directors a set of corporate governance principles applicable to the Company; and to oversee the
evaluations of the Board of Directors and Committees thereof.
The Corporate Governance and Nominating Committee will also review
succession plans for the Chief Executive Officer as well as for members of the Leadership team.
At least half of the members of the Corporate Governance and Nominating Committee and its Chairman
are independent directors.
Article 19 Compensation Committee
The mission of the Compensation Committee shall be to review matters relating to and make proposals to the Board regarding the compensation of the
Directors, the executive Directors, that is the Chairman and the Chief Executive Officer, to consider the long-term compensation mechanisms and specifically the grants of performance shares and stock-options, and to examine any proposal to increase
the share capital of the Company by an offering made exclusively to its employees.
At least half of the members of the Compensation
Committee and its Chairman are independent directors.
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Article 20 Audit and Finance Committee
The Audit and Finance Committee shall review the accounts to be submitted to the Board, the accounting norms used by the Company and shall ensure
the proper and consistent use of accounting methods. It shall verify the internal control mechanisms and shall examine significant risks including off-balance sheet obligations as well as any other matter of a financial or accounting nature that
shall be submitted to the committee by the Chief Executive Officer or the Chief Financial Officer of the Company.
The Audit and
Finance Committee shall carry out the procedure for the selection of the Companys auditors and any reappointment of such auditors, and shall decide what engagements may be undertaken by the auditors in addition to auditing the accounts of the
Company.
The Audit and Finance Committee shall examine the Companys debt and equity capitalization and any significant changes
related to it.
One director of the Company, upon request of the Board of Directors to the Audit and Finance Committee, may attend the
meetings of the Audit and Finance Committee.
At least two thirds of the members of the Audit and Finance Committee are
independent Directors and as long as the Company is listed on the New York Stock Exchange all the members of the Committee shall be independent.
Article 21 Committee of Independent Directors
The missions of the Committee of Independent Directors shall be:
· |
|
it examines the choice of general management organization, the review of changes in and the application of the rules of corporate governance, the preparation of the evaluation of the functioning of
the Board, the review of ethical issues, the attention paid to the proper functioning of the governance bodies, and in particular the transmission of the information requested by independent directors; |
· |
|
it may ask the Chairman of the Board of Directors to convene a meeting of the Board of Directors on any specified agenda and/or recommend including additional matters to the agenda of a meeting of
the Board already scheduled, in each case, at any time and in relation to its mission; |
· |
|
it reviews the requests made by shareholders with regard to governance and makes sure that they are answered;
|
· |
|
it receives, prior to the vote by the Board of Directors, all the reasonably required information regarding the decisions subject to the prior approval of the Board of Directors pursuant to
(8) and (9) of Article 2; |
· |
|
it submits to the Board of Directors, prior to its vote, its recommendations regarding the decisions subject to the prior approval of the Board of Directors pursuant to (8) and (9) of
Article 2; |
· |
|
it plays a preventive role to raise the awareness of all directors with respect to conflict of interests; it seizes itself of any actual or potential conflict of interests of which it would become
aware and leads any necessary investigations in order to identify and prevent such actual or potential conflict of interests. It informs the Board on actual or potential conflict of interests it may have identified or which may be brought to its
attention concerning executive officers or members of the Board and submits its recommendations to the Board; |
· |
|
it may request any information related to the execution of the Master Services Agreement to be entered into between Nokia and the Company; |
· |
|
it shall be provided with the minutes of any meeting of the Steering Committee in charge of supervising the execution of the Master Services Agreement to be entered into between Nokia and the
Company; |
· |
|
it arbitrates any disputes escalated by the Steering Committee established under such Master Services Agreement in accordance with its terms, as the case may be; and |
· |
|
it reports on its activities to the Board every year on a date determined by the Board. |
To that end, the Committee may consult the members of the other committees of the Company for any matter related to conflicts of interests, related party agreements and agreements between the Company and affiliated companies which
shall be reviewed by the Committee.
All the members of the Committee of Independent Directors are independent directors.
Article 22 Technology Committee
The mission of the Technology Committee is to review, on behalf of the Board, the major technological options that are the basis of R&D work
and the launching of new products. The Technology Committee will be kept informed of the development of Alcatel-Lucents scientific and technical co-operation projects with the academic and research environment.
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Annex 1 Compensation
The Directors will receive quarterly attendance fees, it being specified that the Nokia group
policy regarding directors fees for its employees and officers provides that said individuals will not receive any directors fees, including fees relating to the attendance of committee meetings in listed subsidiaries.
Attendance fees are paid quarterly, it being specified that, with respect to the fixed element, each quarter begun is due.
The annual amount to be received is determined by the Shareholders Meeting. This amount comprises the following components:
Fixed element
The first portion will be a fixed
amount and will be divided according to the following rules:
· |
|
the chairman of the Committee of Independent Directors will receive an annual amount of 120,000; |
· |
|
the other members of the Committee of Independent Directors will receive an annual amount of 50,000; |
· |
|
the chairman of the Corporate Governance and Nominating Committee will receive an annual amount of 15,000;
|
· |
|
the other members of the Corporate Governance and Nominating Committee will receive an annual amount of 5,000;
|
· |
|
the chairman of the Compensation Committee will receive an annual amount of 15,000; |
· |
|
the other members of the Compensation Committee will receive an annual amount of 5,000; |
· |
|
the chairman of the Audit & Finance Committee will receive an annual amount of 25,000; and |
· |
|
the other members of the Audit & Finance Committee will receive an annual amount of 10,000. |
Variable element
The second portion is a variable
amount and will be divided among the Directors in accordance with their attendance at Board meetings and at any meetings of the committees of which they are member.
The amount to be received is determined as follows:
· |
|
the chairman of the Committee of Independent Directors will receive an amount of 10,000 per attended meeting;
|
· |
|
the other members of the Committee of Independent Directors will receive an amount of 5,000 per attended meeting;
|
· |
|
the members of the Corporate Governance and Nominating Committee will receive an amount of 2,000 per attended meeting;
|
· |
|
the members of the Compensation Committee will receive an amount of 2,000 per attended meeting; and
|
· |
|
the members of the Audit & Finance Committee will receive an amount of 2,000 per attended meeting.
|
Attendance fees tied to a commitment to acquire and hold Company shares
The following provisions of this paragraph shall apply unless the shareholders decide to withdraw such mechanism, either at the annual general
meeting to be held in 2016 or subsequently, or unless the Companys shares are squeezed out or delisted at any time.
The amount
of the additional element is to be divided equally among the Directors and payment is tied to a commitment by each director to acquire and retain shares in the Company.
Each Director shall use the amount received, after taxes calculated on a flat rate of a 40%, to acquire shares in the Company and shall hold the
same throughout the term of office of the director with the Company.
The acquisition of the shares must be accomplished as soon as
possible following each payment, subject to the rules of conduct regarding insider trading prevention.
The shares acquired shall be
held in a separate account, registered in the name of the director. The Secretary shall receive from the holder of the Companys registered securities a copy of each directors avis dopéré which indicates the
conditions of the execution of the order and the payment modalities.
A copy of the declaration of the share transaction is to be sent
to the French Financial Market Authority (AMF), within the prescribed statutory period. The Secretary then posts said declaration on the companys website.
The attendance fees tied to a commitment to acquire and hold shares in the Company shall be paid at the same time as the payment of the fourth
instalment of attendance fees.
The Chairman, the Chief Executive Officer and any Directors who are executive officers of the Company
will not receive any attendance fees.
7.1.3.3 Organization of Board meetings
Pursuant to the Board Operating Rules, the Board of Directors meets at least once every quarter. However, in practice, the Board of Directors
meets more frequently, illustrating the commitment of its Chairman and the Directors to the Company.
To facilitate attendance, the
Directors may attend the meetings by video conference or other means of telecommunication, and in such event, they are taken into account in the calculation of the quorum and majority, except where otherwise provided by
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law (see Article 12 of the Board Operating Rules in Section 7.1.3.2 The Operating Rules
of the Board of Directors).
If a Director considers that he/she is actually or potentially in a conflict of interest situation,
he/she must notify the Chairman of the Board and refrain from voting the corresponding resolution.
|
|
|
Attendance at Board and Committee Meetings in 2015 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Meetings of the Board of Directors and Committees in 2015 |
|
Board |
|
|
Audit and Finances Committee |
|
|
Corporate Governance and Nominating Committee |
|
|
Compensation Committee |
|
|
Technology Committee |
|
|
|
Mr. Caio |
|
|
8 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
2 |
|
|
|
|
|
|
|
Mr. Camus |
|
|
12 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
Mrs. Cico |
|
|
11 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
4 |
|
|
|
|
|
|
|
Mr. Combes (1) |
|
|
9 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
Mr. Eizenstat |
|
|
11 |
|
|
|
- |
|
|
|
5 |
|
|
|
7 |
|
|
|
- |
|
|
|
|
|
|
|
Mrs. Goodman |
|
|
12 |
|
|
|
5 |
|
|
|
- |
|
|
|
- |
|
|
|
4 |
|
|
|
|
|
|
|
Mr. Hughes |
|
|
11 |
|
|
|
5 |
|
|
|
5 |
|
|
|
- |
|
|
|
4 |
|
|
|
|
|
|
|
Mr. Monty |
|
|
12 |
|
|
|
5 |
|
|
|
3 |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
Mr. Piou |
|
|
12 |
|
|
|
- |
|
|
|
5 |
|
|
|
7 |
|
|
|
4 |
|
|
|
|
|
|
|
Mrs. Summers (2) |
|
|
5 |
|
|
|
2 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
Mr. Spinetta |
|
|
11 |
|
|
|
5 |
|
|
|
5 |
|
|
|
7 |
|
|
|
- |
|
|
|
|
|
|
|
Mrs. Morali (3) |
|
|
1 |
|
|
|
- |
|
|
|
- |
|
|
|
1 |
|
|
|
- |
|
|
|
|
|
|
|
Mr. du Mouza (4) |
|
|
5 |
|
|
|
2 |
|
|
|
3 |
|
|
|
3 |
|
|
|
2 |
|
|
|
|
|
|
|
Mr. Lapraye |
|
|
7 |
|
|
|
3 |
|
|
|
2 |
|
|
|
4 |
|
|
|
2 |
|
|
|
|
|
|
|
Mr. Le Dissez |
|
|
12 |
|
|
|
5 |
|
|
|
5 |
|
|
|
7 |
|
|
|
4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL NUMBERS OF MEETINGS |
|
|
12 |
|
|
|
5 |
|
|
|
5 |
|
|
|
7 |
|
|
|
4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OVERALL ATTENDANCE RATE TO DECEMBER 31, 2015 (5) |
|
|
88% |
|
|
|
100% |
|
|
|
92% |
|
|
|
88% |
|
|
|
90% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Mr. Michel Combes resigned as a Director and Chief Executive Officer effective as of September 1, 2015. |
(2) |
|
Mrs. Sylvia Summers was appointed as Director at the Shareholders Meeting of May 26, 2015. |
(3) |
|
Mrs. Véronique Morali resigned from her position as Director on July 15, 2015, date on which her position as member of the Compensation Committee also ended.
|
(4) |
|
Mr. Laurent du Mouza was appointed as Board Observer at the Shareholders Meeting of May 26, 2015. |
(5) |
|
The Board Observers are not taken into account in the calculation of the overall attendance rate. |
Board meetings are usually held at the Companys head office in Boulogne-Billancourt, or in
the United States, in Murray Hill (New Jersey), at the head office of Alcatel-Lucent USA Inc. However, meetings can also be held regularly at other sites of the Alcatel Lucent Group with a view of facilitating the dialog between the executives,
employees and Directors and enabling the Directors to better understand the wide range of business activities of the Alcatel Lucent Group, as well as the specific challenges the Group is facing in its main markets.
For the same purpose, the Directors may also seek the opinion of the senior management within the Alcatel Lucent Group on any subject they deem
appropriate, and meet with them in an informal way at the meetings held most of the time before the Board of Directors meetings. The Directors also regularly meet with the employees of the Alcatel Lucent Group, in particular with those with strong
career potential. To assist them in the performance of their duties, the members of the Board receive all relevant information regarding the Company, in particular, the financial analysis reports. This information is made available to the Directors
via a secured Intranet site dedicated to the Board members.
In addition, the meetings of the Board of Directors are usually preceded by a meeting of one or
more of the five specialized Committees. In particular, the quarterly Board meetings that prepare the year-end, half-year and quarterly financial statements are systematically preceded by a review of the financial statements by the Audit and Finance
Committee.
The Audit and Finance Committee may invite to its meetings the Chief Financial Officer of the Company and members of his
team, as well as the members of the Disclosure Committee, in or out of the presence of the Chairman of the Board of Directors (or, when the position of Chairman of the Board of Directors and Chief Executive Officer were not cumulated, the Chairman
of the Board of Directors or the Chief Executive Officer) or of the executives of the Group. It may also convene, at the end of each meeting and separately, the head of internal audit and the Statutory Auditors, without the attendance of the
executives of the Alcatel Lucent Group.
Due to scheduling issues and the distant location of certain Directors, the Board of Directors
tries to arrange for the Audit and Finance Committee meetings and the Board of Directors
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meetings to take place within two consecutive days, while making sure that the Directors have
sufficient time to adequately review the documents and information.
Until August 31, 2015, in compliance with the AFEP-MEDEF
Code, at the end of most of the Board of Directors meetings, the Chairman led a discussion among the Directors without the attendance of the Chief Executive Officer and of the executives and employees invited to attend the meetings.
Further, Article 13 of the Board Operating Rules provides that the Board of Directors shall meet without the Directors who are also
executives or employees of the Company in order to assess the performance of the Executive Directors. The Chairman of the Board and interim CEO does not participate in such meetings.
Participation in the Committee meetings
The Chairman of the Board of Directors
and interim CEO (or, when the position of Chairman of the Board of Directors and Chief Executive Officer were not cumulated, the Chairman of the Board of Directors and the Chief Executive Officer) and the Directors who are not members of a Committee
may attend the meetings with a consultative vote, except for the meetings of the Compensation Committee and the Corporate Governance and Nominating Committee during which their personal situation is being discussed.
Participation of the Board Observers
In accordance with Article 14 of the
Alcatel Lucent bylaws, the Board Observers are convened to the meetings of the Board of Directors and they participate on a consultative basis including in the meetings of the Corporate Governance and Nominating Committee and of the Compensation
Committee. Upon the recommendations of the Corporate Governance and Nominating Committee, the Board of Directors extended the participation of the Board Observers to the meetings of all the Committees. The Board Observers already participated in the
meetings of the Audit and Finance Committee and of the Technology Committee. This participation is in line with the provisions of the AFEP-MEDEF Code which recommend that a director representing the employees participate in the meetings of the
compensation committee.
7.1.3.4 Activity of the Board of Directors in 2015 and early 2016
The Board of Directors met twelve times during fiscal year 2015, with an average attendance rate of 88 % and six times in early 2016, with an
attendance rate of 93 %. The main topics addressed by the Board of Directors were as follows:
Group strategy and
transformation
The Board of Directors examined the implementation of the strategic guidelines previously decided, and of the
guidelines underlying the action plans adopted by the Group for 2015. It
made sure of the continued transformation of the Group in accordance with The Shift Plan announced on June 19, 2013 and discussed the main measures taken to ensure the adaptation and
rationalization of the Groups structures, procedures and production tool.
During fiscal year 2015, the Boards activity
focused on the transaction with Nokia, which was discussed at each meeting. It received presentations from the Groups management on the progress of the negotiations. The meetings in which significant stages were reached are briefly summarized
below.
In connection with the transaction with Nokia, the Board was assisted in its analyses by the financial experts Zaoui &
Co, who were engaged by the Company to carry out various assessments. Zaoui & Co gave numerous briefings and submitted numerous written opinions. The law firm Sullivan & Cromwell assisted the Company with the legal aspects of the
transaction and with drafting of the Memorandum of Understanding entered into between the Company and Nokia.
At the meeting of
February 5, 2015, the Board of Directors considered the financial and operational aspects of a potential sale of the Companys wireless business to Nokia as well as a valuation analysis, an analysis of potential value creation, the
potential execution risks and likely timetable for the transaction. The Board of Directors also considered the strategic rationale for a sale of Alcatel-Lucent to Nokia as well as the industrial, operational and market factors that supported a full
combination of the two groups and the financial aspects of such a combination.
The combination of the two groups by means of a public
exchange offer was considered at the meeting of March 13, 2015 together with the valuation analyses regarding the possible exchange ratios based on the share prices of the Company and of Nokia, as well as the likelihood of this offer being
completed. However, the Board of Directors also considered alternatives to a strategic transaction with Nokia, including the sale of Alcatel-Lucents wireless business, another possible business combination or a strategic partnership, and
concluded that no strategic alternative was feasible at such time. The Board of Directors considered the possible reaction of Alcatel Lucents significant customers.
At the meeting held on March 29, 2015, the Board of Directors received a financial presentation prepared by Zaoui & Co and addressed
the questions of the process for the proposed transaction, the fairness of the proposed exchange ratio, and the possibility of renegotiating the exchange ratio. The Board of Directors gave its support and authorized the management team to continue
the discussions with Nokia. At the Board meeting of April 14, 2015 senior management presented an update on the discussions with Nokia. The Board of Directors considered the Memorandum of Understanding and the terms and conditions of the Nokia
Offer, financial and legal aspects of which were earlier reviewed by Zaoui & Co and Sullivan & Cromwell. The Board of Directors unanimously approved the Memorandum of Understanding and the press release announcing the transaction
on April 15, 2015.
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After the signature of the Memorandum of Understanding, the Board of Directors also reviewed the
approaches made to various authorities and the responses obtained from those authorities, including the French government, financial regulators such as the AMF and the SEC, and the regulatory and administrative authorities in the countries where
such procedures were required, particularly in the USA, China and the European Union.
At the Board meeting of October 28, 2015,
senior management presented a further update on the discussions with Nokia, after review by Zaoui & Co and Sullivan & Cromwell of the final financial and legal terms of the Memorandum of Understanding. Zaoui & Co presented
its updated opinion on the financial terms of the Memorandum of Understanding to the Board of Directors. According to this opinion, based upon and subject to the assumptions made, procedures followed, matters considered, and qualifications and
limitations described in it, the exchange ratio proposed to be paid to the holders of the Alcatel Lucent shares, including ADSs, pursuant to the offer was fair from a financial point of view to such holders. The Board of Directors also acknowledged
the independent expert report from Associés en Finance, which was appointed by the Board of Directors at the meeting of June 4, 2015 to produce a report on the financial terms of the transaction in accordance with Article 261-1 et
seq. of the AMF General Regulation and the Memorandum of Understanding signed between the two groups. Following additional discussion and in consideration of the terms and conditions of the Nokia Offer, the Board of Directors again voted in
favor of continuing the transaction and issued a reasoned opinion in compliance with the provisions of article 231-19 of the AMF regulations and unanimously determined that the Nokia Offer was in the best interest of Alcatel-Lucent, its employees
and stakeholders including shareholders and holders of ADSs (it being noted that the three Directors who were proposed to join Nokias board of directors did not participate in the discussions and did not vote on the reasoned opinion).
Operational aspects were also monitored by the Board of Directors, which took steps to set up the integration team in charge of
implementing the operational combination of the two groups, and monitored this teams activity. The Board of Directors also took an interest in the new operational model, including that in China.
For further information, please refer to the draft response offer document (projet de note en réponse) filed by Alcatel Lucent with
the AMF.
Financial statements and financial position
The Board of Directors reviewed and approved the consolidated financial statements for the fiscal year 2014, which were then approved at the
Shareholders Meeting of May 26, 2015. Moreover, at the Board meeting of February 10, 2016, in accordance with the Audit and Finance Committees recommendations and in the presence of the Statutory Auditors, the Board of
Directors reviewed the financial and consolidated financial statements not audited for the fiscal year 2015. The Board of Directors, at its meeting of April 26, 2016, approved
the consolidated financial statements, which will be submitted to the shareholders for approval at the next Shareholders Meeting, in 2016. The Board of Directors proposed to allocate
the results to the retained earnings account and to maintain the suspension of the distribution of dividends for the fiscal year ended December 31, 2015.
Moreover, after having been informed thereon by the Audit and Finance Committee, the Board of Directors reviewed the cash flow, pension fund
management, and the Groups overall financial situation, as well as the contemplated evolution of the situation.
It examined the
risks that the Alcatel Lucent Group is facing and the measures implemented under the Enterprise Risk Management program, and also approved the Chairmans corporate governance and internal control and risk management report produced for the
fiscal year 2015.
Corporate governance
The Board of Directors continued to oversee the functioning of the Companys management bodies and to ensure that the Company complies with
best corporate governance practices. In 2015, the Board submitted to the Shareholders Meeting the nomination of Mrs. Sylvia Summers as a new Director and also proposed to renew the directorships of Messrs. Stuart E. Eizenstat, Olivier
Piou and Louis R. Hughes.
At its meeting of July 29, 2015, the Board of Directors duly noted the resignation of Mr. Michel
Combes as Chief Executive Officer and Director of the Company. Because of the Board of Directors desire to initiate the integration process with Nokia and to ensure a smooth transition with the new senior management team which was put in place at
the same meeting, it was agreed that Mr. Michel Combes resignation would become effective only on September 1, 2015.
After being briefed jointly by the Compensation Committee and the Corporate Governance Committee, the Board of Directors considered that it would
be more appropriate to combine the roles of Chairman and Chief Executive Officer, and accordingly decided to appoint Mr. Philippe Camus as Chairman and CEO on an interim basis for the duration of his directorship, namely until the
Shareholders Meeting that will approve the financial statements for the period ending December 31, 2015.
The Board of
Directors also considered the impact of the proposed combination with Nokia on the governance of Alcatel-Lucent, the composition of the Board of Directors after the transaction and the executive management of the group which would result from a
successful Nokia Offer.
Following the success of the Nokia Offer, the composition of the Board of Directors was substantially modified
on January 8, 2016, to reflect the new shareholdings. On the one hand, the Board of Directors acknowledged the resignations of Messrs. Jean C. Monty, Louis R. Hughes, Olivier Piou, Stuart E. Eizenstat, and Francesco Caio and Mrs. Kim
Crawford Goodman. On the other hand, in order to replace the resigning directors, the Board of Directors co-opted Messrs Risto Siilasmaa, Rajeev Suri, Timo Ihamuotila, and Samih Elhage and
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Ms. Maria Varsellona, all of whom hold either directorships or operational roles within the
Nokia group. The co-optation of these members will be submitted to the shareholders at the coming 2016 Shareholders Meeting for ratification, on the understanding that Nokia has expressed its intention to vote in favor of such ratification.
The Corporate Governance & Nominating Committee emphasized the range of skills of the new Directors, particularly in the fields of technology, finance, law and emerging countries.
The new Board of Directors is composed, in compliance with the recommendations of the AFEP-MEDEF Code of corporate governance, of one third of
independent Directors, namely three of nine Directors (Mr. Jean-Cyril Spinetta, Mrs. Sylvia Summers and Mrs. Carla Cico) who form the newly-created Committee of Independent Directors (see Section 7.1.4.5 Committee of Independent
Directors).
The Board of Directors also confirmed Mr. Philippe Camus in his position as Chairman and Chief Executive
Officer.
Additionally, the Board of Directors modified the Board Operating Rules to enhance the governance of the Board, strengthen
the independence criteria, supplement the information made available to the independent Directors, and set up a Committee of Independent Directors. The role of the newly-formed Committee of Independent Directors is to ensure that decisions are taken
in the corporate interest of the Company, safeguarding the interests of the minority shareholders, and that the Board of Directors functions correctly. The members of the Committee of Independent Directors were appointed on January 8, 2016. The
Committee of Independent Directors submitted its first report during the meeting of the Board of Directors of February 10, 2016, on the reopened Nokia Offer, the MSA (Master Service Agreement) (see Section 4.5 Material contracts) and an
update on the organization in China.
Considering the specific context of the Nokia Offer, the Board of Directors decided to postpone
the annual assessment of its operation that will be carried out under the supervision of the Corporate Governance and Nominating Committee.
The Board of Directors made sure, at the Shareholders Meeting of May 26, 2015, that the shareholders were duly informed, specifically through a detailed report delivered by the Chairman and Chief Executive Officer on the
Groups situation and corporate governance, including the governance measures to be adopted following the transaction with Nokia, in the event the public exchange offer were to be successful. The Board of Directors also made sure that investors
and the public were duly informed, in compliance with the requirements of the French and U.S. stock market regulations.
Moreover, as
in the previous years, the Board of Directors endeavored to ensure that the Company complies with the strictest principles regarding ethics and professional conduct and abides by the rules and regulations applicable in the countries in which it
operates. At the Chief Executive Officers initiative, like last year, all the employees throughout the Group
were asked to acknowledge individually the principles set forth in the Groups Code of Conduct.
Human resources and compensation policy
The Board was regularly informed of the main orientations of the Groups policy regarding human resources and compensation. In particular, it approved the performance criteria relating to the determination of the variable
compensation of employees and key executives, and reviewed the global amounts paid as a result.
Also, the Board of Directors
determined the performance reviews for the employees performance share plans and for the stock option plans for Executive Directors and officers and set the Groups performance criteria and the targets related to the performance criteria
(see Chapter 8 Compensation and long term incentives). Pursuant to the new authorization granted by the shareholders at the Shareholders Meeting of May 26, 2015 to allocate performance shares, the Board of Directors decided,
at its meeting of July 29, 2015, to authorize a performance-based share plan (see Section 8.1.2 Performance shares).
In the context of the contemplated combination between Alcatel-Lucent and Nokia, the Board of Directors, approved several amendments to the existing long-term compensation schemes of the Groups employees and of the Chief
Executive Officer. Given the exceptional circumstances of the contemplated transaction between Nokia and Alcatel-Lucent, the Board of Directors decided that all stock options held by Group employees would, subject to certain conditions, be deemed
definitively vested and furthermore, in order to replace the 2014 stock option plan which could not be implemented, the Board of Directors approved the principle of a grant of unrestricted shares to the concerned employees. With respect to
performance shares which had been granted before April 14, 2015 and which, at the time of the public offer, had not been vested, the Board granted their beneficiaries the possibility, subject to certain conditions, to waive their rights under
such performance shares. In exchange for this waiver of rights, these beneficiaries received a number of Alcatel Lucent shares equal to the number of performance shares they were entitled to receive under the relevant plans, subject to, in
particular, the undertaking to sell the shares thus received on the market two trading days at the latest before the last day of the reopened Nokia Offer, (see Section 8.1.8 Mechanisms put in place with respect to long-term compensation
instruments in the context of the Nokia Offer).
The Board of Directors, after taking into account the exceptional circumstances
of the contemplated transaction with Nokia and the waiver of vesting and holding conditions applicable to long-term compensation plans of Group employees, decided to waive the presence condition applicable to the Performance Units granted to
Mr. Michel Combes and decided to replace the 2014 undertaking to grant him stock options (which could not be implemented) by a grant of unrestricted Alcatel Lucent shares, subject to some conditions, mainly the completion of the Nokia Offer.
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Following the termination by Mr. Michel Combes of his position as Chief Executive Officer, the
Board of Directors decided, on one hand to execute a non-compete agreement with Mr. Michel Combes and to adjust on a pro-rata basis his long-term compensation, as a function of (i) the presence of Mr. Michel Combes during fiscal year
2015 and (ii) the level of satisfaction of the initial economic performance criteria, which were evaluated by the Board of Directors at its meeting of February 10, 2016 (see Section 8.2.4 The Chief Executive Officer (until
August 31, 2015), sub-section Terms and conditions of Mr. Michel Combes compensation in the context of the Nokia Offer and of the termination of his position as Chief Executive Officer).
With respect to Mr. Philippe Camus, the Board of Directors acknowledged, upon the recommendations of the Compensation
Committee, the achievement level of the performance criteria attached to his 2014 Performance Units and considering the work performed by Mr. Philippe Camus as part of the strategic
combination of the Company and Nokia and the work relating to the transition with the new management, the Board decided to grant an exceptional compensation to Mr. Philippe Camus, in compliance with Article 23.2.3 of the AFEP-MEDEF Code, which
provides that an exceptional compensation may be granted to an officer under very exceptional circumstances. Following the success of the Nokia Offer, the Board of Director confirmed Mr. Philippe Camus in his office as Chairman and
CEO and modified the structure of Mr. Philippe Camus compensation as a consequence of the modification in the Companys governance (see Section 8.2.3 Chairman of the Board of Directors and Chief Executive Officer (as from
January 8, 2016)).
7.1.4 |
Powers and activity of the Board of Directors Committees |
The Board of Directors has five specialized Committees: the Audit and Finance Committee, the
Corporate Governance and Nominating Committee, the Compensation Committee, the Technology Committee and the Committee of Independent Directors. Each Committee has its own operating rules approved by the Board. Each Committee reports to the Board of
Directors, which has sole authority to take decisions concerning the subjects presented to it.
7.1.4.1 Audit and
Finance Committee
The Audit and Finance Committee met five times during fiscal year 2015, with an average attendance rate of 100%,
and twice in early 2016, with an attendance rate of 100%.
Members
This Committee comprises no less than three members, at least one of whom must have recognized financial or accounting expertise.
Beyond the requirements of the AFEP-MEDEF Code, the Committees operating rules provide that all the Directors who serve on the Committee
must be independent and that the Committee may not include any executive director (in French, mandataire social). Similarly, Directors who hold other executive positions within the Company may not be members of this
Committee.
In the context of the modifications to our governance approved on January 8, 2016 by the Board of Directors following
the success of the Nokia Offer, the composition of the Audit and Finance Committee was modified. Since that date, the Committee is comprised of Mrs. Sylvia Summers (Chairman), Mrs. Carla Cico and Mr. Jean-Cyril Spinetta. All members
are
independent according to the criteria retained by the Board of Directors, which are based on the recommendations of the AFEP-MEDEF Code (See Section 7.1.2 Principles of organization of
our Companys Management).
Until January 8, 2016, the Audit and Finance Committee was comprised of
Mr. Jean C. Monty, Mrs. Kim Crawford Goodman, Mr. Louis R. Hughes, Mr. Jean-Cyril Spinetta and Mrs. Sylvia Summers (1).
Mr. Laurent du Mouza and Mr. Gilles Le Dissez, Board Observers, also participate in the works of the Committee. On January 8, 2016,
the Board of Directors appointed Mrs. Sylvia Summers as the financial expert of the Audit and Finance Committee to replace Mr. Jean C. Monty who resigned as a Director and Chairman of the Audit and Finance Committee on January 8,
2016.
Role
The main areas of activity of the Committee relate to:
· |
|
the financial statements, |
· |
|
the internal control and risk management, |
· |
|
the financial situation, as well as the relations with our Statutory Auditors. |
It keeps the Board of Directors apprised of the performance of its duties and informs it promptly of any issue it may encounter.
The Audit and Finance Committees role and method of operation meet the requirements of Article L. 823-19 of the French Commercial Code as well as the best practices recommended by various French reports on corporate
governance.
(1) |
Mrs. Sylvia Summers was appointed as Director at the Shareholders Meeting of May 26, 2015. |
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Financial statements
The role of the Audit and Finance Committee, as defined by the Board Operating Rules, is to review the accounting standards used by the Company,
the Companys risks and significant off-balance sheet commitments, and any financial or accounting matters presented to it by the Chief Executive Officer or the Chief Financial Officer.
The Committee reviews and approves the appropriateness and consistency of the accounting methods used to prepare the consolidated and parent
company financial statements, as well as the proper accounting treatment of the significant transactions at the Alcatel Lucent Group level.
The Committee reviews the scope of consolidation and, where relevant, the reasons why certain companies should not be consolidated.
It reviews the accounting standards which are applicable to and applied by the Alcatel Lucent Group, both according to IFRS and French GAAP (the latter with respect to the parent companys financial statements), as well as
their effects and the resulting differences in accounting treatment.
It examines the Alcatel Lucent and the consolidated quarterly,
half-year and year-end financial statements and the Alcatel Lucent Groups budgets.
Internal control and risk management
The Audit and Finance Committee verifies that internal procedures for collecting and reviewing financial information are in place
to ensure the reliability of this information. This Committee ensures that a process to identify and analyze risks exists, in particular for risks that are likely to have a material impact on accounting and financial reporting. The head of the
Internal Audit Department within the Alcatel Lucent Group periodically reports to the Committee on the results of the work of his/her department. In addition, twice a year, the Committee reviews the Alcatel Lucent Groups internal audit plan
and the method of operation and organization of the Internal Audit Department. This Committee is consulted on the selection of the head of the Internal Audit Department and on his/her potential replacement.
This Committee reviews any complaint, alert or other report, including those submitted anonymously, that reveal a potential malfunction in the
financial and consolidation process set up within the Alcatel Lucent Group.
The Audit and Finance Committee meets periodically with
our Chief Compliance Officer to check the adequacy of our compliance programs, any potential significant violations of these programs and the corrective measures taken by us.
Financial information
The Audit and Finance Committee also reviews the Alcatel Lucent Groups indebtedness, its capitalization and any possible changes to this
capitalization, as well as any financial or accounting matters presented to it by the Chairman of the Board
of Directors or the Chief Financial Officer (such as risk coverage and centralized treasury management).
It also reviews any financial transactions having a significant impact on the Alcatel Lucent Groups financial statements, such as any
issuance of securities in excess of 400 million, which must be approved by the Board of Directors.
Statutory Auditors
Our
Audit and Finance Committee oversees the selection process for the Statutory Auditors, in compliance with the AFEP-MEDEF Code and makes recommendations on the choice of such Auditors to the Board of Directors.
Assignments, if any, that do not pertain to the audit of the accounts, or that are neither incidental nor directly supplemental to such audit, but
which are not incompatible with the functions of the Statutory Auditors, must be authorized by the Audit and Finance Committee, regardless of their significance. The Committee ensures that these assignments do not violate, in particular, the
provisions of Article L. 822-11 of the French Commercial Code.
The Audit and Finance Committee also reviews and determines the
independence of the Statutory Auditors and issues an opinion on the fees due for their audit of the financial statements.
Based on the
total amount of fees paid for the audit of the financial statements during a given fiscal year, the Committee sets the limit(s) of fees beyond which the Committee must give a specific authorization for previously authorized assignments.
The Committees work in 2015 and early 2016
At each meeting, the Committee was briefed by the Chief Financial Officer and the Statutory Auditors and reviewed, in the Statutory Auditors
presence, the key points discussed with the Chief Financial Officer during the preparation of the financial statements.
The Committee
conducted a review of the Company and consolidated financial statements for fiscal years 2014 and 2015 and the half-year and quarterly consolidated financial statements for fiscal year 2015. To prepare for this review, the Committee relied in
particular on the work of the Disclosure Committee created to ensure the reliability of the information disclosed by the Alcatel Lucent Group.
On several occasions, the Committee has considered the consequences of the main agreements and other commitments of the Alcatel Lucent Group, and the major elements of its financial position, in particular its capitalization, its
debt and the status of its pension funds.
The Committee reviewed in detail the documentation related to the Nokia Offer, in particular
the reports issued by the independent expert. The Committee more particularly reviewed the issues related to the costs generated by this transaction, the potential impact of the change of control on the year-end financial statements closing process
and the risks of the transaction. On the basis of these elements, the Committee
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recommended to the Board of Directors that it issue a reasoned opinion recommending to the holders
of shares of the Company and the holders of other securities of the Company that they tender their securities to the Nokia Offer.
The
Committee also reviewed the Alcatel Lucent Groups budget for 2015 and the draft resolutions relating to the financial authorizations to be submitted to the shareholders at the Shareholders Meeting on May 26, 2015. As such, the
Committee discussed several times the exposure to exchange rates and the impact of the depreciation of the Euro against the U.S. dollar and the impact on the budget. It also reviewed the financial sections of the reference document and the 20-F Form
for 2014 and for 2015, as well as parts of the report of the Chairman of the Board of Directors on internal control and risk management, particularly those related to accounting and financial reporting.
In the context of the monitoring of the financial reporting process, the Committee took note of the change in the Group accounting methods and
principles, in particular, with respect to the accounting treatment of certain deferred tax assets, which led to the restatement of the consolidated financial statements of the two prior fiscal years (2013 and 2014). The Committee reviewed Note 4 to
the consolidated financial statements, which reflects these changes (see Section 12.1 Consolidated financial statements, Note 4 Change in accounting treatment and presentation) and recommended that the Board approve the 2015
consolidated financial statements as modified compared with the preliminary unaudited financial statements.
In the context of its
mission of monitoring the effectiveness of internal control and risk management procedures, the Committee heard the Groups senior managers and took note of their findings, in particular with regard to the certification process required by
Section 404 of the Sarbanes-Oxley Act. These findings evidenced two material weaknesses in our internal controls over financial reporting, which related, first, to the controls over the process of recognizing deferred tax assets, and, second, to the
controls over the revenue recognition process in the United States (see Section 11.1 Controls and procedures).
The
Committee also received the Internal Audit Departments annual report for 2014 and for 2015, as well as the internal audit plans for 2015 and 2016. It reviewed the internal and external auditors report. The Committee also reviewed, at its
meeting of March 13, 2015, the Enterprise Risk Management (ERM) process.
Finally, the Committee reviewed the Statutory Auditors
reports and participated in the determination of the Statutory Auditors fees. The Committee was also briefed by the Chief Compliance Officer on the compliance programs set up for 2014 and 2015 and on the objectives set for 2016.
7.1.4.2 Corporate Governance and Nominating Committee
The Corporate Governance and Nominating Committee met five times during fiscal year 2015, with an attendance rate of 92 %, and once in
early 2016, with an attendance rate of 100%.
Members
The operating rules of the Corporate Governance and Nominating Committee provide that the Committee must comprise no less than three members, and
that its Chairman and at least half of its members must be independent Directors. Since January 8, 2016, its members are Mr. Jean-Cyril Spinetta, Chairman since July 30, 2014, Mrs. Carla Cico and Ms. Maria Varsellona.
Mr. Jean-Cyril Spinetta and Mrs. Carla Cico qualify as independent Directors according to the criteria established by the AFEP-MEDEF Code.
Until January 8, 2016, the Committee had to consist of no less than four members, at least two-thirds of whom had to be independent. The members of the Committee were Mr. Jean- Cyril Spinetta,
Mr. Stuart E. Eizenstat, Mr. Louis R. Hughes, Mr. Jean C. Monty, and Mr. Olivier Piou.
The
Chairman of the Board, the Chief Executive Officer or the Chairman and CEO (when these functions are combined) may attend the meetings of the Committee and participate in the discussions on a consultative basis except when their personal situation
is discussed.
Role
The role of our Corporate Governance and Nominating Committee, as defined by the Board of Directors Operating Rules, is to:
· |
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review questions related to the composition, organization and operation of the Board of Directors and its Committees; |
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identify and propose to the Board individuals who are qualified to hold the position of Director and serve on Committees; |
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develop and recommend to the Board a set of corporate governance principles applicable to the Company; |
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oversee the evaluations of the Board and of its Committees; |
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study matters of compliance in joint session with the Audit and Finance Committee; |
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review different elements of the Human Resources policy and the Groups corporate social responsibility (CSR) policy in joint session with the Compensation Committee; and
|
· |
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review succession plans for the Chief Executive Officer.
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The Committees work in 2015 and early 2016
Pursuant to its operating rules, the Committee was in charge of a number of issues during the fiscal year 2015 and early 2016 with respect, in
particular, to the renewal of the Directors mandates, the Boards annual assessment, the change of management following the departure of Mr. Michel Combes, and the changes in the composition of the Board of Directors and the rules
applicable to it, due to the success of the Nokia Offer.
In the context of the Shareholders Meeting of May 26, 2015, the
Committee studied the situation of the Directors whose term of office was due to end and of candidates to a first appointment. It thus proposed: (i) the renewal of the terms of office of Messrs. Stuart E. Eizenstat, Louis R. Hughes and Olivier
Piou and (ii) the appointment of Mrs. Sylvia Summers as Director for a three-year term, that is, until the end of the Shareholders Meeting which will be called to approve the financial statements for fiscal year ending
December 31, 2017. The Committee also reviewed the profile of the candidates proposed by the FCP 2AL (former name of the FCP AN) for the role of Board Observer. Consequently, it proposed the appointment of Mr. Laurent du Mouza as Board
Observer for a period of three years, that is, until the end of the Shareholders Meeting which will be called to approve the financial statements for the fiscal year ending December 31, 2017.
Given the use of the entire limit authorized by the May 28, 2014
Shareholders Meeting for the share capital increase without any preferential subscription rights, the Board of Directors proposed the early renewal of the dilutive financial delegations as well as of the non-dilutive ones in order to ensure
that all of the financial delegations comply with the latest legal and regulatory developments.
The renewal of these delegations also
allowed to take into account the provisions of the Law no. 2014-384 of March 29, 2014 Florange Law aimed to recapture the real economy, which put an end to the mandatory application of the neutrality principle of the
management bodies during a public offer for the Companys shares. Notwithstanding this change, the Board of Directors decided to keep the neutrality principle of management bodies during a public offer for the Companys shares. As a
consequence, the Board of Directors may not use the financial delegations for the duration of the public tender offer without the prior approval of the Shareholders Meeting.
The Committee also reviewed the independence of the Directors in light of the AFEP-MEDEF Code (see Section 7.1.2.1 Principles of
corporate governance).
In the context of the termination by Mr. Michel Combes of his position as Chief Executive Officer,
the Committee reviewed the conditions of his departure (jointly with the Compensation Committee) and the establishment of an interim management until after the end of the public exchange offer announced by Nokia. The Committee thus recommended
entering into a non-compete agreement with Mr. Michel Combes, the combination of the positions of Chairman of the Board of Directors and CEO in the person of Mr. Philippe Camus and the appointment of Mr. Jean-Cyril Spinetta as Lead
Director.
As part of the Nokia Offer, the Committee also analyzed Mr. Philippe Camus situation
with respect to his obligation to keep the Alcatel Lucent shares granted or acquired during his term of office as Chairman of the Board of Directors until the end of his functions. On December 1, 2015, the Committee recommended to remove
Mr. Philippe Camus obligation to keep Alcatel Lucent shares to allow him to tender his shares into the Nokia Offer.
The
Committee also analyzed the situation of the Directors with regard to their obligation to keep the shares that they purchase with their additional attendance fees until their mandates expire. The Committee found that the resigning Directors would be
able, after their resignation, to tender the corresponding shares into the reopened Nokia Offer, provided that they did not hold any insider information. With respect to the three remaining Directors, the Committee recommended maintaining the
obligation to keep the shares purchased with additional attendance fee.
In the context of the Nokia Offer, the Committee reviewed the
governance mechanisms put in place to ensure compliance with the corporate governance rules of the AFEP MEDEF Code and the NYSE while Alcatel-Lucent shares and ADSs remain listed on the regulated markets of Euronext Paris and NYSE, respectively,
and, also, to protect the interests of minority shareholders. The Committee recommended, in particular, the strengthening of the independence criteria and the establishment of a Committee of Independent Directors, mainly responsible for the
prevention of conflicts of interest. In addition, the Committee recommended the implementation of a Master Services Agreement between Alcatel-Lucent and Nokia to enable the integration of the two companies while respecting the interests of minority
shareholders.
After the success of the Nokia Offer, the Committee also considered, on January 8, 2016, the status of the
candidates proposed by Nokia for nomination by co-optation as Directors to replace the resigning Directors. The Committee noted the diversity of skills of the new Directors and recommended their nomination. It conducted a review of independence of
all Directors who would compose the Board of Directors.
7.1.4.3 Compensation Committee
The Compensation Committee met seven times during fiscal year 2015 with an attendance rate of 88% and three times in 2016 with an attendance rate
of 100%.
Members
The operating rules of the Compensation Committee provide that the Committee must comprise no less than three members, and that its Chairman and at least half of its members must be independent Directors. Since January 8, 2016,
its members are Mr. Jean-Cyril Spinetta (Chairman), Mrs. Sylvia Summers and Mr. Risto Siilasmaa. Mr. Jean-Cyril Spinetta and Mrs. Sylvia Summers qualify as independent Directors according to the criteria established by the
AFEP-MEDEF Code.
Until January 8, 2016, the Compensation Committee had to consist of no less than four members, at least
two-thirds of whom had to be independent. The members of the Committee were Mr. Jean-Cyril Spinetta (Chairman), Mrs. Véronique Morali (until
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July 15, 2015), Mr. Stuart E. Eizenstat and Mr. Olivier Piou. All members were
independent Directors according to the criteria applicable in France.
The Chairman of the Board and the Chief Executive Officer, or
the Chairman and CEO (when these functions are combined), may attend the meetings of the Committee and participate in the discussions on a consultative basis except when their personal situation is discussed.
Role
The role of the
Compensation Committee, as defined by the Board Operating Rules, is as follows:
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To develop and make proposals to the Board of Directors, with respect to the compensation of the Directors, the Chairman, the Chief Executive Officer, and, when applicable, of the Chairman and CEO;
|
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To review the proposals of the Senior Management concerning long-term compensation including, in particular, performance share grants and grants of stock options and other profit-sharing schemes
linked to the Companys share price to employees and senior officers of the Alcatel Lucent Group; |
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To propose to the Board the implementation of plans and to make recommendations on the conditions of these long-term instruments (vesting conditions, attendance and performance);
|
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To review the performance of the implemented long-term compensation instruments and provide a situation update to the Committee; |
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To review any proposal to increase the capital of the Company reserved to employees; |
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To review the different sections of the Human Resources policy and the Alcatel Lucent Groups CSR policy in joint session with the Corporate Governance and Nominating Committee.
|
The Committees work in 2015 and early 2016
The Committee reviewed the components of the Companys long-term compensation policy, which consists of performance shares and stock option
grants. It reviewed the performance criteria applicable to the previous performance share and stock option plans. It recommended the early renewal, at the Shareholders Meeting of May 26, 2015, of the authorization to issue performance
shares in order to take advantage of the flexibility provided by the draft law for growth and activity, which was effectively adopted thereafter (Law n°2015-990 of August 6, 2015 for growth, activity and equality of economic opportunity).
In July 2015, it recommended the implementation of a performance share plan to grant performance shares to 3,745 beneficiaries.
The
Committee also approved the criteria and the objectives related to the Companys new variable compensation plan (Achievement Bonus Plan ABP) for fiscal year 2015, as defined by the management of the Company. The Committee reviewed
and acknowledged the level of the Companys overall 2015 performance level based on the Segment Operating Cash Flow, and the level of customer satisfaction measured through a customer
satisfaction survey.
In the context of the Nokia Offer, the Committee recommended adopting acceleration and liquidity mechanisms for
beneficiaries of stock options and performance shares not yet vested or available. It also recommended replacing the stock option plan approved in 2014 but not implemented with a share grant plan. In view of the reduced liquidity that may affect the
Alcatel Lucent shares following the Nokia Offer, the Committee also recommended the waiver of the obligation for Mr. Philippe Camus and the members of the Leadership team to hold their Alcatel Lucent shares.
The Committee also reviewed the components of the compensation of the Chairman of the Board of Directors and of the Chief Executive Officer for
fiscal years 2014 and 2015, in particular concerning the Chief Executive Officers variable compensation, and the performance criteria which condition the vesting of their Performance Units. It recommended, in particular, postponing until the
end of the vesting period of 2 years the assessment of the performance criteria for the Performance Units allocated to the Chairman of the Board in 2014.
In the context of the combination between Alcatel Lucent and Nokia and given the amendments made to the instruments of long-term compensation
benefiting to the employees of the Group, the Compensation Committee recommended the amendments of certain components of Mr. Michel Combes compensation, and particularly the Performance Units and the replacement of the 2014 stock option
plan (which could not be implemented), in line with the principles applicable to employees as described in Chapter 8 (Sections 8.1.8 Mechanisms put in place with respect to long-term compensation instruments in the context of the Nokia
Offer and 8.2.4 The Chief Executive Officer (until August 31, 2015). Following the decision of Mr. Michel Combes to step down as Chief Executive Officer, the Committee recommended the signature of a non-compete agreement
and the acknowledgement that his pension rights are subject to a performance review, as well as the acknowledgement that the payment conditions of the severance pay were not met.
On January 8, 2016, in light of the work accomplished by Mr. Philippe Camus in the context of the strategic combination between our
Company and Nokia, and specially of the work done in the context of the transition with the new management team, the Committee recommended the grant to Mr. Philippe Camus of an exceptional remuneration on the basis of the very exceptional
circumstances referred to in Article 23.2.3 of the AFEP-MEDEF Code. Considering the confirmation of Mr. Philippe Camus as CEO of the Company in the context of the success of the Nokia Offer, the Committee also recommended the amendment of
Mr. Philippe Camuss annual fixed compensation as described in Chapter 8 (see Section 8.2.3 Chairman of the Board of Directors and Chief Executive Officer (as from January 8, 2016)).
The Committee analyzed certain Alcatel-Lucent Group-level human resources matters such as compensation policy and,
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Chairmans corporate governance report
during joint sessions with the Corporate Governance and Nominating Committee, looked at development
strategy for key individuals and policy concerning professional and compensation equality.
Finally, the Committee analyzed the
information related to the compensation of the Executive Directors prior to the publication of this information in this document (see Section 8.2 Status of the Executive Directors and Officers).
7.1.4.4 Technology Committee
The Technology Committee met four times during the fiscal year 2015 with an attendance rate of the Directors of 90%.
Members
Since
January 8, 2016, the Technology Committee consists of Mr. Rajeev Suri (Chairman), Mr. Philippe Camus and Mr. Risto Siilasmaa.
Until January 7, 2016, the Technology Committee consisted of Mr. Louis R. Hughes (Chairman), Mrs. Carla Cico, Mrs. Kim Crawford Goodman, Mr. Francesco Caio, Mr. Olivier Piou and Mr. Philippe
Keryer (member who was not a Director, in charge of the Group strategy and innovation).
Mr. Lapraye (until May 26, 2015),
Mr. Laurent du Mouza (as from May 27, 2015) and Mr. Le Dissez participate in the meetings of the Committee as Board Observers.
Role
The roles of the Committee, as defined by the Board Operating Rules, are as follows:
· |
|
to review the major technological options that are the basis of the research and development work (R&D) and the launch of new products; |
· |
|
to be kept informed of the development of Alcatel Lucents scientific and technical cooperation projects put in place by Alcatel Lucent with academia and research groups;
|
· |
|
to review R&D expenses, the risks associated with the R&D programs and the associated mitigation plans, technology trends and disruptive threats or opportunities; |
· |
|
to benchmark competitors to evaluate the Groups R&D efficiency and cost. |
The Committee makes recommendations to the Board of Directors on the following points:
· |
|
Product strategy and performance (market share, quality of service and action plan);
|
· |
|
Allocation of funds for research and development; |
· |
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Long-term technology strategy and opportunities for innovation. |
The Committees work in 2015
During its meetings, the Committee discussed the strategic vision for Alcatel Lucent, topics such as gaps and possible growth acceleration in IP and cloud, and industry dynamics following the announcement of the transaction with
Nokia. It reviewed the Alcatel Lucent Groups product portfolio and its annual quality program. Particular attention was given to the alignment and divergence with Nokia on key technology topics based on public data. The Committee reviewed in
detail some of the Alcatel Lucent Groups key projects such as partnership strategy, diversification and network services platforms. Finally, the Committee undertook a series of profile reviews and reviews of the strategic positioning of some
of our competitors.
7.1.4.5 Committee of Independent Directors
The Committee of Independent Directors was created by a decision of our Board of Directors dated January 8, 2016, which established its
composition, terms of operation and mission.
The Committee of Independent Directors met three times since its creation, with an
attendance rate of 100%.
Members
The Committee of Independent Directors comprises no less than three members appointed by the Board of Directors. All the members of the Committee
must be independent (1). The Board of Directors designates a chairman among the members of the Committee. No director holding executive functions in the Company may be a member of the Committee.
The members of the Committee may be members of another Committee of the Board.
The Committee is comprised of Mr. Jean-Cyril
Spinetta (Chairman), Mrs. Sylvia Summers and Mrs. Carla Cico, who were all determined to be independent by our Board of Directors, in accordance with the Board Operating Rules.
In accordance with the operating rules of the Committee, the Chairman of the Board and CEO (or when the roles of Chairman of the Board and Chief
Executive Officer are not cumulated, the Chairman of the Board of Directors and the Chief Executive Officer) may attend the meetings of the Committee and participate in the discussions but may not vote. However, the Chairman of the Board and the
Chief Executive Officer may not attend a meeting of the Committee that concerns them.
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(1) |
As defined in the Board Operating Rules. |
CORPORATE GOVERNANCE
Chairmans corporate governance report
Role
The missions of the Committee of Independent Directors, as defined by the Board Operating Rules are:
· |
|
to examine the choice of general management organization, the review of changes in and the application of the rules of corporate governance, the preparation of the evaluation of the functioning of
the Board, the review of ethical issues, the attention paid to the proper functioning of the governance bodies, and in particular the transmission of the information requested by independent Directors; |
· |
|
may ask the Chairman of the Board of Directors to convene a meeting of the Board of Directors on any specified agenda and/or to propose that additional matters be included on the agenda of a
meeting of the Board already scheduled, in each case, at any time and in relation to its mission; |
· |
|
to review the requests made by shareholders with regard to governance and to make sure that an answer is provided to them; |
· |
|
to receive, prior to the vote of the Board of Directors, all the reasonably required information regarding the decisions subject to the prior approval of the Board of Directors pursuant to
(8) and (9) of Article 2 of the Board Operating Rules; |
· |
|
to submit to the Board of Directors, its recommendation as to the decisions subject to the prior approval of the Board of Directors pursuant to (8) and (9) of Article 2 of the Board
Operating Rules; |
· |
|
to play a preventive role to raise the awareness of all Directors with respect to conflict of interests; to seize itself of any actual or potential conflict of interests of which it would become
aware and to lead any necessary investigations in order to identify and prevent such actual or potential conflict of interests; to inform the Board on actual or potential conflict of interests it may have identified or which may be brought to its
attention concerning executive officers or members of the Board and to submit its recommendations to the Board; |
· |
|
may request any information related to the execution of the Master Services Agreement entered into between Nokia and the Company; |
· |
|
shall be provided with the minutes of any meeting of the Steering Committee in charge of supervising the execution of the Master Services Agreement entered into between Nokia and the Company;
|
· |
|
to arbitrate any disputes escalated by the Steering Committee established under the Master Services Agreement, in accordance with its terms; and |
· |
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to report on its activities to the Board every year on a date determined by the Board. |
To that end, the Committee may consult the members of any of the other Committees of the Company on any matter related to
conflicts of interests, related party agreements and agreements entered into between the Company and affiliated companies which are subject to a prior review of the Committee.
The Committee provides advice and recommendations, and reports to the Board of Directors, which remains the sole body competent to take decisions
on the matters submitted to it.
The Committees work in early 2016
In the context of the implementation of the strategic combination pursued by Nokia and Alcatel Lucent, the Committee of Independent Directors
issued certain recommendations with respect to the approval of the Master Services Agreement and the Framework Agreement governing any future services agreements to be entered into between Nokia and the Company: a Master Services Agreement with
respect to related-party transactions and a Framework Agreement with respect to non-related party transactions. To this end, the Committee of Independent Directors reviewed the draft agreements. The Committee acknowledged the interest of the Master
Services Agreement for the Company and, more broadly, for the Alcatel Lucent Group, with respect to related-party transactions, which is subject to the regulated agreements approval procedure described in Section 7.2 Regulated
Agreements, and the interest of the Framework Agreement with respect to non-related-party transactions, which is not subject to this procedure. In particular, the Committee considered the financial conditions of both Agreements to be fair and
reasonable for the Company and, when applicable, for its subsidiaries. Consequently, the Committee approved the terms and conditions of these agreements, and recommended to the Board of Directors that it acknowledge the interest of both agreements
for the Company and its subsidiaries, and that it approve their terms and conditions.
Moreover, the Committee reviewed the main terms
of the new Revolving Liquidity Support Facility proposed to be made available by Nokia Corporation to Alcatel Lucent USA Inc. for the financing of the redemption of 2017 and 2020 Senior Notes, as well as for general purposes of the Alcatel Lucent
Group and its subsidiaries (see Section 4.5 Material Contracts). The Committee considered that the terms of this Facility are in the corporate interest of the Alcatel Lucent Group, in the context of the Groups indebtedness.
Consequently, the Committee recommended that the Board approve this new revolving facility.
Finally, the Committee reviewed the main
terms of the Revolving Credit Facility entered into between Nokia Corporation and Alcatel Lucent Participations, available for the general purposes of Alcatel-Lucent Participations. The Committee considered that this Revolving Credit Facility is in
the corporate interest (intérêt social) of Alcatel Lucent Participations and, more broadly, in the interest of the Alcatel-Lucent group. Consequently, it recommended that the Board of Directors approve the Revolving Credit Facility.
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CORPORATE GOVERNANCE
Regulated agreements
Regulated agreements, commitments
and related party transactions
Regulated agreements under French law are agreements between a company and its Chief
Executive Officer or a deputy Chief Executive Officer, if any, a director, or a shareholder holding more than 10% of the voting rights, that, while authorized by French law, do not involve transactions in the ordinary course of business under normal
terms and conditions.
These agreements, as well as, for example, any new commitment made to the Chairman of the Board of Directors or
the Chief Executive Officer in the event of termination of his duties, must be authorized in advance by the Board of Directors through a specific legal procedure, reported on in a special Statutory Auditors report and presented for
consultation at the Shareholders Meeting.
Related party agreements and transactions (under U.S. law) include, among others,
agreements entered into with the Companys Directors and senior management, shareholders holding more than 5% of the Companys capital, and close family members of the aforementioned parties. They are not subject to the prior authorization
procedure required by French law, unless they fall under the rules applicable to regulated agreements.
Commitments of
the Company made in year 2015 in favor of Mr. Michel Combes, who resigned as Chief Executive Officer, effective September 1, 2015
Non-compete
indemnity.
At its meeting on July 29, 2015, in order to protect the Companys interests, the Board of Directors decided, upon
the recommendation of the Compensation Committee and the Corporate Governance and Nominating Committee, in consideration of Mr. Michel Combes expertise in the field of telecommunications and the experience he acquired during his time at
the Company, to ask for the signature of a non-compete agreement with Mr. Michel Combes, in the context of the termination of his functions as CEO.
The Board of Directors, at its meeting held on September 10, 2015, decided the following:
· |
|
The amount of the non-compete indemnity was set at 3,100,000, to be paid in three installments over a period of three years
and with a first payment in November 2015. |
· |
|
The non-compete agreement has a term of 40 months, that is, until December 31, 2018. |
· |
|
The amount of the indemnity will be reduced by an amount corresponding to the employment portion of the social
|
|
|
security contributions owed on the date of payment by the Company on behalf of Mr. Michel Combes. |
Waiver of the presence and performance conditions attached to the Performance Units granted to Mr. Michel Combes
In connection with the Nokia Offer, the Board of Directors, at its meeting of April 14, 2015, had decided the principle of the acceleration of the
Performance Units granted to Mr. Michel Combes and their payment in shares of the Company, similar to the mechanism put in place for the long-term compensation of employees of the Alcatel Lucent Group, by waiving the presence condition and the
future performance conditions related to this compensation, subject to the completion of the Nokia Offer.
At its meeting of September
10, 2015, the Board of Directors reviewed the elements of Mr. Michel Combes long-term compensation in light of the recommendations issued by the High Committee for Corporate Governance. Consequently, the Board of Directors reconsidered the
treatment of the 2013 and 2014 Performance Units and decided that the Performance Units would only be acquired with respect to periods prior to Mr. Michel Combes departure, that is, prorata temporis, and that payments would be made in cash
instead of shares. The Performance Units were valued at 4,167,085 euros (see Section 8.2.4 The Chief Executive Officer (until August 31, 2015), subsection Long-term compensation).
At its meeting of September 10, 2015, the Board of Directors also decided that the partial or total acquisition of the 2015 Performance Units
could not be contemplated, since these Performance Units pertained to future fiscal years (2016 to 2018), after the end of the functions of Mr. Michel Combes as Chief Executive Officer (see Section 8.2.4 The Chief Executive Officer (until
August 31, 2015))
These commitments must be approved by the shareholders at the coming 2016 Shareholders Meeting in order
to comply with articles L.225-38 et seq of the French commercial code.
The commitments of the Company in favor of
Mr. Michel Combes at the time of his appointment were approved by the shareholders at the Shareholders Meeting on May 7, 2013 in order to comply with articles L.225-38 et seq of the French Commercial Code, and these
commitments ended on the day on which Mr. Michel Combes stepped down as Chief Executive Officer, that is, on September 1, 2015 (see Section 8.2.4 « The Chief Executive Officer (until August 31, 2015), subsections
Pension plan and Benefits after termination of functions, for more details).
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CORPORATE GOVERNANCE
Alcatel Lucent Code of Conduct
Other commitments and related party transactions
Transaction entered into in 2016 with a shareholder holding more than 10% of the Companys voting rights
On January 8, 2016, upon a recommendation made by the Committee of Independent Directors, and in order to preserve the corporate interest of
the Company and of its minority shareholders, the Board of Directors approved the signature of a
Master Services Agreement with Nokia
dated January 8, 2016, to implement integration plans, and specifying that each company commits to provide the other company, or to ensure that their respective subsidiaries provide the other company or
its subsidiaries, with management services and other services according to the terms and conditions of the agreement. (See Section 4.5 Material Contracts, subsection Master
Services Agreement and Framework Agreement).
Other related party transactions
Details about related party transactions, as defined by IAS 24, entered into by the Alcatel Lucent Group companies in 2013, 2014 and 2015 are
presented in Note 29 to the consolidated financial statements Related party transactions.
These transactions mainly
concern jointly controlled entities (consolidated using proportional consolidation) and companies consolidated using the equity method.
7.3 |
Alcatel Lucent Code of Conduct |
In July 2009, Alcatel Lucent published a revised Alcatel Lucent Code of Conduct, which establishes, in a
streamlined manner, the Companys standards for ethical business conduct. The Code of Conduct is
binding on all employees globally in their daily operations
and on the Company in its relations with competitors, suppliers, shareholders, partners and customers. The standards set forth in the Code of Conduct are based upon the laws and regulations in force, as well as the notions of integrity, respect,
equity, diversity and ethics. The Code of Conduct is available on the Alcatel Lucent Intranet site in twenty-two languages, as well as on the Alcatel Lucent external website.
In 2015, in order to continue to enhance our employees awareness of international good conduct rules, we requested each employee to get
acquainted/reacquainted with and approve the Code of Conduct. This requirement was extended to non-employee contract workers (temporary workers, interns and apprentices).
During the first quarter of 2015, the Company put in place a new program called Conducting our business with integrity, which sets out
the guiding rules of conduct and emphasizes the importance of conducting our business with integrity. The program requires that all employees and temporary workers, interns and apprentices review the Code of Conduct, the applicable laws and the
procedures and policies of the Company in order to comply with their responsibility in the name and on behalf of the Company.
The Code of Ethics for Senior Financial Officers of 2004, which applies to our CEO or Chairman and CEO, Chief Financial Officer and
Corporate Controller, is available on our website. This Code supplements the Code of Conduct mentioned above, which also applies to these senior financial officers.
In addition, we implemented an Ethics and Compliance Program involving a set of processes, principles and controls to ensure compliance with the
law as well as the respect of the Companys directives and policies. Alcatel Lucents Chief Compliance Officer supervises the implementation and ongoing adoption of this program to reflect evolving legal requirements, international
standards and the standards of behavior set forth in the Alcatel Lucent Code of Conduct.
The Alcatel Lucent Ethics and Compliance
Council was established in February 2007 and is comprised of the Chief Compliance Officer and the representatives of the following departments: Law, Audit and Finance, Human Resources & Transformation, Communications,
Business & Information Technology Transformation, Procurement & Design-To-Cost, Public Affairs, Corporate Security, Global Delivery and the Office of Business Integrity & Compliance. This Council meets on a quarterly basis
and is responsible for overseeing the strategic design and implementation at the Group level of an integrated and robust ethics and compliance system.
121
122
Compensation and long-term incentives |
8 |
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COMPENSATION AND LONG-TERM INCENTIVES
Long-term compensation instruments used prior to the success of the Nokia Offer
Section 8.1 Long-term compensation instruments used prior to the success of the Nokia
Offer deals with the general principles with respect to the long-term benefits for employees and management of the Alcatel Lucent Group, as they applied prior to the success of the Nokia Offer (as defined in Section 4.2 History and
development, subsection Recent events - Update on the Nokia transaction and related matters). The compensation of the Officers and Executive Directors is more specifically dealt with in Section 8.2 Status of the
Executive Directors and Officers.
Long-term compensation arrangements as adapted following the success of the Nokia Offer
Following the success of the Nokia Offer, Alcatel Lucent became a subsidiary of Nokia in early January 2016. The
employees of Alcatel Lucent are now entitled to the long-term incentive schemes agreed and implemented within the Nokia Group and, in particular, to receive Nokia Corporation shares.
In the context of the Nokia Offer, the Company proposed to the Companys stock option and performance shares recipients the acceleration
mechanism described in Section 8.1.8 Mechanisms put in place with respect to long-term compensation instruments in the context of the Nokia Offer.
In addition, the stock options and the performance shares with respect to which the acceleration mechanism was not implemented may benefit, under
certain conditions, from a liquidity agreement proposed by Nokia, also described in Section 8.1.8 Mechanisms put in place with respect to long-term compensation instruments in the context of the Nokia Offer.
8.1 |
Long-term compensation instruments used prior to the success of the Nokia Offer |
The purpose of the compensation and long-term profit-sharing mechanisms in the Companys
capital was to involve employees and managers in the development goals of Alcatel Lucent, in the interest of the Alcatel Lucent Group and its shareholders. The main instruments used in this context were the grant of performance shares and stock
options, as well as the implementation of profit-sharing agreements and employee savings plans in France.
Grant policy for
performance shares and stock options
The grants of performance shares and stock options were decided each year by the Board of
Directors at the recommendation of the Senior Management and after review by the Compensation Committee. They were part of the long-term compensation policy of the Company, which served several purposes: to involve employees in the Alcatel Lucent
Groups results; to encourage and reward individual performance; to attract and retain talent in a highly competitive industry, where recourse to such incentives is widespread.
This compensation policy applied globally, but took into account the different practices and
specificities of the regulations applicable in each country. Following changes in French legislation in 2014, the Alcatel Lucent Group had aligned since that year the rules and conditions applicable in France and in the other countries. The main
characteristics of the plans satisfied the increased demands from the market.
Performance conditions
Every year, the Board of Directors determined the terms and conditions of the plans, and in particular the performance criteria attached to the
grants of performance shares and stock options.
The Board of Directors chose to subordinate the grant of performance shares to a
single quantitative criterion. This criterion referred to the comparison between the evolution of the Alcatel Lucent share price and the share price of a representative panel of 10 solution and service providers in the telecommunications equipment
sector. With respect to the grant of stock options to the Executive Directors and Officers, a single performance criterion had also been selected and was based on the Free Cash Flow.
The table below reflects the
most recent performance criteria applicable to performance share and stock option plans.
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Employees |
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Leadership team |
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Performance shares |
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Performance of Alcatel Lucents share |
|
Performance of Alcatel Lucents share |
Stock options (1) |
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Not subject to performance condition |
|
Free Cash Flows evolution |
(1) |
|
No grant of stock options to employees since 2013 or to the Leadership team since 2012. |
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COMPENSATION AND LONG-TERM INCENTIVES
Long-term compensation instruments used prior to the success of the Nokia Offer
Gradual vesting and presence
The vesting conditions of stock options and performance shares were reconsidered in 2014 in order to meet new challenges of a telecommunications
industry which continues to be particularly competitive, specially in the United States where the compensation practices of the Silicon Valley companies are particularly aggressive.
In this context, the Company had proceeded to make two major changes, on the one hand by harmonizing the conditions between the French employees
and those in other countries, and, on the other hand, by adopting the principle of a gradual vesting for 50% of the rights at the end of an initial 2-year period, in order to reinforce the notion of loyalty and long-term encouragement.
Therefore, with regard to stock options, the vesting period was to be now 3 years for all
recipients regardless of the Alcatel Lucent Group company that employed them (see Section 8.1.5 Stock options):
· |
|
An initial vesting period of 2 years at the end of which the recipient would acquire 50% of the rights provided that he/she was present in the Company at the end of these two years;
|
· |
|
followed by a second vesting period, which corresponded to the third year, and at the end of which the recipient would acquire the remaining 50% of the rights provided that he/she was present in
the Company at the end of this third year. |
Given the strategic evolution of our Company, no stock option plan was put in
place since 2013 and these new conditions were never implemented.
|
|
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Stock option plans authorized as from 2014* |
* |
No plan subject to these conditions was put in place, the date of the last plan being July 12, 2013.
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Stock option plans prior to 2014 |
With regard to performance
shares, the total vesting period is 4 years for all recipients regardless of the Alcatel Lucent Group company that employs them (see Section 8.1.2 Performance shares):
· |
|
The satisfaction of the presence condition is determined at the end of the first period of 2 years (years 1 and 2) for 50% of the initial grant, and at the end of the second period of 2 years
(years 3 and 4) for the remaining 50%; |
· |
|
the satisfaction of the performance condition is determined at the end of the same first 2-year period, as well as at the end of the 4-year vesting period. |
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COMPENSATION AND LONG-TERM INCENTIVES
Long-term compensation instruments used prior to the success of the Nokia Offer
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|
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Performance share plans 2015 and 2014 |
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Performance share plans prior to 2014 |
Use of authorizations
The Board of Directors of Alcatel Lucent was given an authorization by the shareholders at the Shareholders Meeting of May 26, 2015 to
grant performance shares over a period of 26 months in an amount limited to 1.5% of the share capital. It was also given an authorization by the shareholders at the Shareholders Meeting of May 28, 2014 to grant stock options over a period
of 38 months, in an amount limited to 2% of the share capital.
Regarding the plans implemented pursuant to these authorizations, all
grants of performance shares for all recipients have to be subject to performance criteria; the same principle applies to all stock options granted to the members of the Leadership team.
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Use: 0.35% of the overall authorization of 3.5% of the capital1 |
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9,8 million performance shares were granted during fiscal year 2015 pursuant to the authorization adopted by
the shareholders at the Shareholders Meeting of May 26, 2015. This represents 0.35% of the Companys capital1. No member of the Leadership team benefitted from this plan.
Readjustment of the grants and stabilization of the dilutive effects
During recent years, the Company has gradually given priority to the grant of performance shares over stock options.
As of December 31, 2015, the volume of stock options and performance shares in circulation, that is, 87.6 million securities (after
adjustment), represented 2.32% of the diluted capital of Alcatel Lucent (see Section 10.2 Capital) and 2.88% of its capital.
Following the capital increase with preferential subscription rights completed on December 9, 2013, the conversion mechanism of the securities was adjusted in order to preserve the rights of the recipients of stock options and
of the owners of securities giving access to the Companys capital. This Chapter therefore reports on the number of securities and the exercise price of the stock options before and/or after adjustment for plans prior to the above-mentioned
capital increase.
With respect to the flows, the total volume of annual grants of performance shares and stock options was 26.2
million in 2013 (after adjustment), 10.47 million in 2014 and 9.81 million in 2015. The average grant rate, or average burn rate, corresponds to the average number of grants of performance shares and stock options within one
year. The historical burn rate is calculated on the average of the last three grants and represents 15.03 million shares annually, that is, approximately 0.49 % of the capital at December 31, 2015.
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COMPENSATION AND LONG-TERM INCENTIVES
Long-term compensation instruments used prior to the success of the Nokia Offer
|
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Average annual grant rate in percentage of the share capital |
|
|
Preliminary note
Section 8.1.8 Mechanisms put in place with respect to long-term compensation instruments in the context of the Nokia Offer
describes the mechanism which applied to performance shares in the context of the Nokia Offer.
Characteristics of the grants
For all recipients, the acquisition of performance shares is subject to the recipients presence in the Group and to a
performance condition, over a gradual vesting period of 4 years. Performance shares are no longer subject to a minimum holding period.
Plan of July 29, 2015
The Board of Directors authorized the granting of 10 million performance
shares to 3,745 employees and officers of the Alcatel Lucent Group, subject to the fulfillment of a presence condition and the performance criterion based on the Alcatel Lucent share price. This grant did not include any grant of performance shares
to the members of the Leadership team, including the Chief Executive Officer. The number of performance shares actually granted was reduced to 9,807,615 to 3,664 employees, due to legal constraints in certain countries, and the beneficiaries of the
cancelled performance shares were instead granted Performance Units.
Presence and performance conditions, gradual vesting: The rights
of the recipient are acquired at the end of an overall vesting period of 4 years, subject to a presence condition and a performance condition:
· |
|
the satisfaction of the presence condition is determined at the end of a first period of 2 years (years 1 and 2) for 50% of the initial grant, and at the end of the second period of 2 years
(years 3 and 4) for the remaining 50%;
|
· |
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the satisfaction of the performance condition is determined at the end of the same first 2 year period, as well as at the end of the 4-year vesting period; if the performance level at the end of
the 4 years is greater than that noted at the end of the first 2 year period, this performance level at the end of the 4 years will be applied to the entire grant. |
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The shares are available at the end of the fourth year following the grant. |
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Performance criterion of the Alcatel Lucent share price: At the time of the grant, the Board of Directors set the
criterion usually applicable to all performance share plans, except that the Board of Directors decided that the composition of the reference panel would be adapted and the Alcatel Lucent share price performance replaced by the Nokia share price
performance, in the event of Reduced Liquidity, following the success of the Nokia Offer. There is Reduced Liquidity if, after the success of the Nokia Offer, at least one of the following conditions is met:
· |
|
the Companys shares are no longer listed in any regulated market within the meaning of Article L. 421-1 of the French Monetary and Financial Code; |
· |
|
Nokia holds directly or indirectly at least 85% of the Companys shares; or |
· |
|
the average daily trading volume of the Companys shares on Euronext Paris falls below 5,000,000 shares during the previous 20 consecutive trading days. |
The second of these conditions having been met, there currently is Reduced Liquidity.
If there was no Reduced Liquidity, the evolution of the Alcatel Lucent share price would be measured against a representative panel of 10
solutions and services providers in the telecommunication equipment sector. The reference panel may be revised based on changes to these companies, especially in
127
COMPENSATION AND LONG-TERM INCENTIVES
Long-term compensation instruments used prior to the success of the Nokia Offer
case of transactions concerning their structure that may affect their listing. Since the
September 15, 2014 plan, the panel has been composed of the following companies: Adtran, Amdocs, Arris, Ciena, Cisco, CommScope, Ericsson, Juniper, Nokia and ZTE. Amdocs and CommScope replaced F5 Networks and Motorola Solutions Inc., the
activities of which now differ more from those of the Group. The number of shares definitely acquired depends on the performance of the Alcatel Lucent share price compared with the shares of the companies in the reference panel over the same period.
For the adjustment of this mechanism in light of Reduced Liquidity, see below heading Rights of the recipients in the context of the Nokia Offer.
Determination of performance level: At the time of the grant, the initial reference share price of Alcatel Lucent and of each of the companies of
the panel is determined as being equal to the average of the 20 opening prices preceding the grant date (the Initial Reference Share Price). At the end of each comparison period, the reference share price will be determined using the
same method for Alcatel Lucent and for the companies of the panel, that is, the average of the 20 opening prices preceding the end date of the comparison period (the Final Reference Share Price). For Alcatel Lucent as well as for each
company of the reference panel, the ratio used to assess the performance condition is calculated by dividing the Final Reference Share Price by the Initial Reference Share Price.
Evaluation of the performance for the recipients who are Group employees: The performance is evaluated at the end of each 2-year period, the
definitive acquisition being subject to the satisfaction of the presence condition and to the final evaluation at the end of the 4-year vesting period mentioned above:
· |
|
if the Alcatel Lucent share price significantly underperforms compared to the share prices of the companies in the panel (difference of at least 40% compared to the median), no shares will be
vested for the relevant period; |
· |
|
if the Alcatel Lucent share price performs as well as the share prices of the companies in the panel, measured based on the median, 100% of the shares relating to the relevant period will be
vested; |
· |
|
between these two limits, the number of shares vested will be linearly proportional. |
The Board of Directors will determine, on the basis of an analysis validated by an audit firm contracted for this purpose, whether or not the performance conditions described above have been satisfied.
Achievement level. No performance review has been done for this plan yet, the first performance review being scheduled on the second anniversary
date of the plan, that is, July 29, 2017.
Rights of the recipients in the context of the Nokia Offer. The recipients of this plan
will benefit, under certain conditions and to the extent allowed by applicable regulations, from a liquidity mechanism (see Section 8.1.8 Mechanisms put in place with respect to long-term compensation instruments in the context of the
Nokia Offer).
In addition, given the Reduced Liquidity, the share price performance criteria was adjusted as
follows: the Initial Reference Share Price is replaced by the Alcatel Lucent share price at the time of the grant, adjusted on the basis of the exchange ratio of the Nokia Offer (0.55 Nokia share for 1 Alcatel Lucent share, subject to adjustments);
at the end of the comparison period, the Final Reference Share Price will be determined based on the Nokia share price, with Nokia being excluded from the reference panel.
Plan of September 15, 2014
The Board of Directors authorized the granting of 10,466,473 performance shares to 4,641 employees and officers of the Alcatel Lucent Group, subject to the fulfillment of a presence condition and the performance criterion based on
the Alcatel Lucent share price. This plan includes a grant of 495,000 performance shares to recipients who were members of the Leadership team at the time of the grant, excluding the Chief Executive Officer.
Presence and performance conditions, gradual vesting. The presence condition and the share price performance criterion applicable to the plan of
July 29, 2015 also apply to the plan of September 15, 2014.
Evaluation of the performance for recipients who were members of
the Leadership team at the date of the grant: The performance is evaluated at the end of each 2-year period, the definitive acquisition being subject to the satisfaction of the presence condition and to the final evaluation at the end of the 4-year
vesting period mentioned above. The calculation method is the same as that used for employees of the Alcatel Lucent Group, with a higher performance condition:
· |
|
if the Alcatel Lucent share price underperforms compared to the share prices of the companies in the panel (its evolution is below the median of the panel), no rights vest;
|
· |
|
if the Alcatel Lucent share price performs as well as the share prices of the companies in the panel (its evolution is equal to the median of the panel), 75% of the rights relating to the relevant
period vest; |
· |
|
if the Alcatel Lucent share price outperforms the share price of the companies in the panel by at least 10% compared with the median, 100% of the rights granted with respect to the relevant period
vest; |
· |
|
between these two limits (median and median + 10%), the number of shares vested is linearly proportional, from 75% to 100%. |
Achievement level. No performance review has been done for this plan yet, the first performance review being scheduled on the second anniversary
date of the plan, that is, September 15, 2016.
Rights of the recipients in the context of the Nokia Offer. The recipients of this
plan were able to benefit from the acceleration mechanisms, or, if applicable, the liquidity mechanisms described in Section 8.1.8 Mechanisms put in place with respect to long-term compensation instruments in the
128
COMPENSATION AND LONG-TERM INCENTIVES
Long-term compensation instruments used prior to the success of the Nokia Offer
context of the Nokia Offer. In addition, the conditions of the share price performance and
the composition of the representative panel were modified in accordance with the same principles as for the July 29, 2015 plan.
Plans from 2011 to 2013
Presence and performance conditions. The vesting depends on the presence of the recipient as an employee after a 2-year period from the date of
the grant and on the performance of the Alcatel Lucent share price, measured against the share price of a representative panel of 10 solutions and services providers in the telecommunication equipment sector (Adtran, Arris, Ciena, Cisco, Ericsson,
F5 Networks, Juniper, Motorola Solutions Inc., Nokia and ZTE).
As a reminder, the initial list of 14 providers as defined in 2009 was
revised as a result of structuring transactions that ended the listing of the shares of Nortel in 2009, ADC Telecom in late 2010, Comverse in early 2013 and Tellabs at the end of 2013.
The reference price is calculated based on the average opening price on the Euronext Paris exchange for the 20 trading days preceding the end of
each 1-year period, and for the shares of the other issuers, on a similar basis on the main exchange where they are listed.
For all
recipients who are Alcatel Lucent Group employees regardless of which legal entity employs them vested performance shares are available at the end of the fourth year following the grant.
Performance review, gradual vesting. The evolution of the Alcatel Lucent share price and that of the other issuers is measured after each of the
two initial 1-year periods for all recipients (Periods 1 to 2). For recipients employed by one of the Groups companies based outside France, a third review of the performance of the Alcatel Lucent share price is conducted at the end of the
fourth year to determine whether the rights calculated with respect to the first 2 years are definitively acquired at the end of the vesting period, that is, at the end of the fourth year. For recipients employed by one of the Groups companies
based in France, there is no additional performance review but an additional holding period of 2 years is required so that the performance shares become available at the end of the fourth year following the grant, as for recipients who are employees
of one of the Groups companies based outside of France.
Reference Periods 1 to 2. Depending on the Alcatel Lucent share
prices ranking compared with that of other issuers in the panel, a coefficient ranging from 0% to 100% is used to calculate the number of shares vested during the first and the second periods. The Board of Directors determines, on the basis of
an analysis validated each year by an audit firm contracted for this purpose, whether or not the performance condition has been satisfied (see Section 8.1.3 Performance reviews for the performance share plans).
The coefficient used for the second period applies to the balance of rights that have not vested during the first period. No rights
vest if the Alcatel Lucent share price is the last in this ranking. The number of performance shares finally vested for recipients who are Alcatel Lucent Group employees in France at the end of
the 2-year vesting period amounts to the total number of the vested shares in the 1st and the 2nd years.
Reference Periods 1 to 4.
With respect to recipients who are employees of the Alcatel Lucent Groups companies based outside France, the final number of shares vested will be determined at the end of the 4-year vesting period. The reference price of the Alcatel Lucent
share (or Nokia share, as a result of the Nokia Offer and as described in the last heading below Rights of the recipients in the context of the Nokia Offer) and of the shares of the other issuers in the representative panel, will be
compared to the average of their reference share prices measured at each anniversary date of the grant date in order to establish a ranking of the performance of the Alcatel Lucent share price and of the share prices of the other issuers. If the
Alcatel Lucent share price is not ranked in last position, the total number of shares as determined at the end of the reference periods 1 to 2 will be definitively vested.
Achievement levels observed in fiscal years 2015 and 2016. With respect to the March 16, 2011 plan, which includes 9,939,786 performance
shares (before adjustment) for 8,177 recipients, it is noted that 816,552 Alcatel Lucent shares (before adjustment) were previously issued to 956 employees of the Alcatel Lucent Groups companies based in France and who were present on the
second anniversary date of the plan (except in case of death or disability), based on an achievement level of 50%. For recipients who are employees of the Alcatel Lucent Groups companies based outside France, the last performance review was
scheduled on the 4th anniversary date of the plan and determined whether the rights acquired at the end of the first two periods (50%) were definitively vested at the end of the vesting period.
At its meeting of March 13, 2015, the Board of Directors determined, consistent with the provisions mentioned above, that the Alcatel Lucent
share price ranked 8th in comparison with the shares of the issuers in the panel, and that consequently, since the Alcatel Lucent share was not ranked last, the achievement level of 50% obtained at the end of Period 2 was to be used to determine the
number of rights of the 6,109 recipients who were employees of Alcatel Lucent Group companies based outside France, which results in a total of 3,771,094 performance shares definitively vested for the benefit of those employees.
With respect to the March 14, 2012 plan which included 10,474,215 performance shares (before adjustment) granted to 7,936 recipients, after
the second performance review that was conducted in 2014, a total of 1,830,056 Alcatel Lucent shares (after adjustment) were issued to 885 recipients who were employees of the Alcatel Lucent Group companies based in France and who were present on
the second anniversary date of the plan (except in case of death or disability). For the 936 recipients who were employees of the Alcatel Lucent Group companies based outside France and who did not accept the acceleration mechanism, the Board of
Directors on March 16, 2016 determined, in accordance with the provisions set forth above, that the ranking of the Alcatel Lucent share price was
129
COMPENSATION AND LONG-TERM INCENTIVES
Long-term compensation instruments used prior to the success of the Nokia Offer
2nd compared with the other issuers composing the panel, and, consequently, since the Alcatel
Lucent share was not last in the ranking, the achievement level of 100% reached on the second anniversary date of the plan was used to determine the rights of the recipients, that is, a total of 974,121 performance shares definitively acquired by
them.
With respect to the July 12, 2013 plan, which included 2,368,500 performance shares (before adjustment) granted to 47
recipients, the Board of Directors on July 29, 2015 determined that the ranking of the Alcatel Lucent share price was 2nd compared with the other issuers composing the panel, and, consequently, that an achievement level of 100% was reached on
the second anniversary of the plan and was used to determine the rights of the 9 employees of the Alcatel Lucent Groups companies based in France and present on the second anniversary of the plan (except in case of death or disability). This
resulted in a total of 464,977 performance shares definitely
acquired by these recipients. All of the recipients who were employees of the Alcatel Lucent Groups companies based outside France having accepted the acceleration mechanism described in
Section 8.1.8 Mechanisms put in place with respect to long-term compensation instruments in the context of the Nokia Offer, there will not be any performance review on the fourth anniversary date of the plan.
Rights of the recipients in the context of the Nokia Offer. The recipients of this plan were able to benefit from the acceleration mechanisms or,
if applicable, the liquidity mechanisms, described in Section 8.1.8 Mechanisms put in place with respect to long-term compensation instruments in the context of the Nokia Offer. In addition, the conditions of the share price
performance and the composition of the representative panel were modified in accordance with the same principles as for the July 29, 2015 plan.
8.1.3 |
Performance reviews for the performance share plans |
The
following plans were subject to a performance review during fiscal years 2015 or early 2016, or will be subject to a performance review in the coming fiscal years:
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Performance review |
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Level of achievement |
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Date of plan |
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Performance criterion |
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Weighting |
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Period 1 |
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Period 2 |
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Period 3 |
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Period 4 |
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Periods 1 to 2 |
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Periods 1 to 4 |
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03/16/2011 |
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Alcatel Lucent share price performance |
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100% |
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0% Rank 13 |
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50%
Rank 10 |
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_ |
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50% Rank 8 |
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50% |
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50% |
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03/14/2012 |
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Alcatel Lucent share price performance |
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100% |
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50% Rank 9 |
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100% Rank 1 |
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_ |
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100% Rank 2 |
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100% |
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100% |
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07/12/2013 |
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Alcatel Lucent share price performance |
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100% |
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75% Rank 3 |
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100% Rank 2 |
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_ |
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_(1) |
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100% |
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_ |
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09/15/2014 |
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Alcatel Lucent share price performance |
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100% |
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_ |
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Review September
2016 |
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_ |
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Review September
2018 |
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_ |
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_ |
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07/29/2015 |
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Alcatel Lucent share price performance |
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100% |
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_ |
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Review July 2017 |
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_ |
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Review July 2019 |
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_ |
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_ |
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(1) |
|
Since all of the recipients who were employees of the Alcatel Lucent Group companies based outside France accepted the acceleration mechanism described in Section 8.1.8 Mechanisms put
in place with respect to long-term compensation instruments in the context of the Nokia Offer, there will not be any performance review on the fourth anniversary date of the plan. |
For details on the performance criteria, performance monitoring and the level achieved: See Section 8.1.2 Performance shares.
130
COMPENSATION AND LONG-TERM INCENTIVES
Long-term compensation instruments used prior to the success of the Nokia Offer
8.1.4 |
Summary table for the performance share plans |
History of the
performance share plans at December 31, 2015
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Number of performance shares |
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Total number of recipients |
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Performance conditions |
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Vesting date of shares(2) |
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Adjusted number of vested shares |
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Availability date |
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Total number of shares |
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Shares granted to Executive Directors |
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Shares granted to Leadership team |
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Date du plan |
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before adjustment |
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after adjustment(1) |
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before
adjustment |
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after adjustment(1) |
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before adjustment |
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after adjustment(1) |
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09/17/2008 |
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100,000 |
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100,000 (Chairman of Board of Directors) |
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1 |
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2 financial criteria and 1 qualitative
criterion |
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3/11/2010 |
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100,000 |
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3/11/2012 |
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10/29/2008 |
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250,000 |
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250,000 (CEO) |
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1 |
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2 financial criteria and 1 qualitative
criterion |
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02/10/2011 |
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250,000 |
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02/10/2013 |
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03/18/2009 |
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200,000 |
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200,000 (Chairman of Board of Directors) |
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1 |
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3 financial criteria and 1 qualitative
criterion |
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03/18/2011 |
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200,000 |
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03/18/2013 |
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03/18/2009 |
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6,782,956 |
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6,795,154 |
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866,658 |
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- |
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11,075 |
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3 financial criteria |
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03/18/2011 or 03/18/2013 |
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2,198,373 |
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03/18/2013 |
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03/17/2010 |
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200,000 |
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200,000 (Chairman of Board of Directors) |
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1 |
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1 financial criterion and 1 qualitative criterion |
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03/17/2012 |
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200,000 |
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03/17/2014 |
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03/17/2010 |
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7,114,502 |
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7,439,815 |
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806,663 |
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835,822 |
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10,952 |
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1 financial criterion |
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03/17/2012 or 03/17/2014 |
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3,377,414 |
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03/17/2014 |
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03/16/2011 |
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200,000 |
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200,000 (Chairman of Board of
Directors) |
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1 |
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Share price performance and 1 qualitative criterion |
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03/16/2013 |
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170,000 |
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03/16/2015 |
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03/16/2011 |
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9,939,786 |
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10,386,596 |
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1,400,000 |
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1,451,112 |
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8,177 |
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Share price performance |
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03/16/2013 or 03/16/2015 |
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827,730 |
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03/16/2015 |
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03/14/2012 |
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200,000 |
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211.352 |
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200,000 (Chairman of Board of Directors) |
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211.352 |
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1 |
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Share price performance and 1 qualitative criterion |
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03/14/2014 |
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211,352 |
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03/14/2016 |
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03/14/2012 |
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10,474,215 |
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11,033,036 |
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1,000,000 |
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1,051,100 |
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7,936 |
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Share price performance |
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03/14/2014 or 03/14/2016 |
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1,842,528 |
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03/14/2016 |
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07/12/2013 |
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2,368,500 |
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2,502,997 |
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966,000 |
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1,020,858 |
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47 |
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Share price performance |
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07/12/2015 or 07/12/2017 |
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464,977 |
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12/07/2017 |
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09/15/2014 |
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- |
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10,466,473 |
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- |
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495,000 |
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4,641 |
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Share price performance |
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09/15/2016 or 09/15/2018 |
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(3) |
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09/15/2018 |
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07/29/2015 |
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- |
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9,645,510 |
(4) |
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3,566 |
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Share price performance |
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07/29/2019 |
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(5) |
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07/29/2019 |
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Total |
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37,829,959 |
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58,480,933 |
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1,150,000 |
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1,161,352 |
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5,039,321 |
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4,853,892 |
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46,400 |
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9,842,374 |
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|
(1) |
|
In the context of the capital increase with preferential subscription rights dated December 9, 2013, the rights of the recipients of stock options and performance shares were preserved
through an adjustment of the conversion mechanism. The principle of the adjustment is based on the application of an adjustment ratio of 1.056756449 (i) to the number of securities granted to each recipient, rounded up to the next whole number
and (ii) to the exercise price of the stock option plans, by division, rounded up to three decimal places. Depending on system constraints specific to banks in charge of managing the plans, the number of securities initially granted is adjusted
by taking into account the securities that have already been vested or cancelled. |
(2) |
|
This is the earliest date at which performance shares can become fully vested, with full ownership to be acquired on the first working day following acknowledgment, at the end of the vesting
period provided that the presence and performance conditions have been met, except for the recipients who chose the acceleration mechanism. |
(3) |
|
The results of the 2016 performance review will be released on the anniversary date of the grant (a date which is after the filing of this annual report) and will be reported on the Alcatel
Lucent internet website. |
(4) |
|
The first performance review further to which recipients may vest part of the performance shares under this plan will occur on July 29, 2017. |
(5) |
|
The Board of Directors had initially decided to grant 10 million performance shares but, due to legal constraints in some countries, only 9.8 million were granted in the end, and
beneficiaries of the cancelled performance shares were granted Performance Units instead. |
131
COMPENSATION AND LONG-TERM INCENTIVES
Long-term compensation instruments used prior to the success of the Nokia Offer
Preliminary note
Section 8.1.8 Mechanisms put in place with respect to long-term compensation instruments in the context of the Nokia Offer
describes the mechanism which applied to stock options in the context of the Nokia Offer.
Characteristics of the grants
Plans from March 16, 2011 to the 2013 annual plans
Gradual vesting. Recipients acquire
rights to stock options granted to them gradually over a period of 4 years, subject to their presence at the end of each vesting period. The rights to the stock options vest at a rate of 25% per year for recipients who are employees of the
Alcatel Lucent Group companies based outside France. For recipients who are employees of the Alcatel Lucent Group companies based in France, the vesting period of 4 years includes an initial vesting period of 2 years after which the recipient
acquires 50% of the rights, followed by a gradual vesting of 25% at the end of the 3rd year and 25% at the end of the 4th year. Recipients of
the plans put in place in 2012 and 2013 were able to benefit from the acceleration mechanisms or, if applicable, from the liquidity mechanisms described in Section 8.1.8 Mechanisms put in place with respect to long-term compensation
instruments in the context of the Nokia Offer, sub-section Stock options.
Exercise of the rights. Stock options may
be exercised once related rights are definitively vested, subject to any holding period that may be imposed by law in certain countries. For instance, recipients who are employees of the Alcatel Lucent Groups companies based in France may not
exercise their stock options granted before September 28, 2012, before the end of the holding period, which is 4 years from the grant date of the stock options. Pursuant to the new French tax regime applicable to stock options granted after
September 28, 2012, the capital gains on acquisition are subject to the progressive income tax scale with no benefit related to the holding period. For all Alcatel Lucent Group employees regardless of which legal entity employs them
in view of the gradual vesting, all stock options granted can only be eventually available at the end of the 4th year following the grant. The stock options as so vested must be exercised
before the end of the plan, that is, within 8 years from the grant.
No discount. The exercise price for the stock options does not
include any discount or reduction and is equal to the average opening price for the Alcatel Lucent share on the Euronext Paris stock exchange for the 20 trading days preceding the Board of Directors meeting at which the stock options are
granted, and the exercise price cannot be lower than the par value of the Alcatel Lucent share, that is, 0.05 since June 2013 (2.00 before this date).
Performance conditions for recipients who
were members of the Leadership team at the date of the grant. The vesting of stock options for Executive Directors and members of the
Leadership team is governed by the same principles as those applicable to all employees, but is also subject to performance criteria. These criteria apply to 100% of the stock options granted to
the Executive Directors of the Alcatel Lucent Group, consistent with the recommendations of the AFEP-MEDEF Code, and to 50% of the stock options granted to members of the Leadership team (except for the Chief Executive Officer). There was no grant
of stock options to the members of the Leadership team since 2012.
The financial criterion selected for the 2011 and 2012 grants to
members of the Leadership team is the evolution of the Free Cash Flow. Performance is assessed at the end of each fiscal year over a 4-year period.
Depending on the performance achieved, a coefficient ranging from 0% to 100% is used to calculate the number of vested rights for each period (see Section 8.1.6 Performance reviews for the stock option plans).
All recipients who were members of the Leadership team on the date of the grant having chosen the acceleration of their rights
pursuant to the mechanism described in Section 8.1.8 Mechanisms put in place with respect to long-term compensation instruments in the context of the Nokia Offer, there is no longer any stock option concerned by this performance
condition.
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Leadership Team: The performance criterion is a financial criterion, the evolution of the Free Cash Flow |
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Achievement levels observed in fiscal years 2015 and 2016. With respect to the March 16, 2011 plan (1,400,000
stock options initially granted, before adjustment), the coefficients obtained at the end of the annual performance reviews carried out on March 14, 2014 and March 13, 2015 are 0% and 89%, respectively. Therefore, the overall achievement
level obtained at the end of the vesting period of the plan is 30.5%.
With respect to the March 14, 2012 plan (1,100,000 stock
options initially granted, before adjustment), the coefficient obtained at the end of the annual performance review carried out on March 13, 2015 is 89%. Due to the fact that all recipients took advantage of the acceleration mechanism, there
was no performance review for this plan in 2016. Therefore, the overall achievement level of the plan is 73.7%.
Rights of the
recipients in the context of the Nokia Offer. The recipients of the plans put in place in 2012 and 2013 were able to benefit from the acceleration mechanisms or, if applicable, the liquidity mechanisms, described in Section 8.1.8
Mechanisms put in place with respect to long-term compensation instruments in the context of the Nokia Offer.
132
COMPENSATION AND LONG-TERM INCENTIVES
Long-term compensation instruments used prior to the success of the Nokia Offer
8.1.6 |
Performance reviews for the stock option plans |
The following
plans were subject to a performance review during fiscal years 2015 or early 2016:
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Number of options granted |
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Exercise price in Euros |
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Performance review |
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Date of plan |
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before adjustment |
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after adjustment |
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before adjustment |
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after adjustment |
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Exercise period |
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Performance conditions |
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Period 1 |
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Period 2 |
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Period 3 |
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Period 4 |
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Global level of achievement |
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03/16/2011 |
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1,400,000 |
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1,472,625 |
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3.70 |
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3.501 |
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03/16/2012 to 03/15/2019 |
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Financial performance criterion applied to 50% of the grant |
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33% |
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0% |
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0% |
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89% |
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30.5% |
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03/14/2012 |
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1,100,000 |
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1,157,486 |
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2.00 |
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1.893 |
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03/14/2013 to 03/13/2020 |
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Financial performance criterion applied to 50% of the grant |
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0% |
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0% |
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89% |
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* |
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73.7% |
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* |
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Due to the acceleration mechanism, there were no longer any recipients on the fourth anniversary date of the plan. |
For details on the performance conditions, performance monitoring and the level achieved, see Section 8.1.5 Stock options.
8.1.7 |
Summary tables for the stock option plans |
AMF Table
No. 9: Information on the largest grants or exercises for fiscal year 2015
Pursuant to the provisions of Article L. 225-184
of the French Commercial Code, the table below provides information for fiscal year 2015 with respect to the employees who are not Executive Directors, and who received the ten largest grants or were issued the ten largest numbers of shares upon
exercise of stock options:
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Number of stock options granted |
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Weighted average price |
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Plans |
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10 largest employees stock options grants |
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No grant for fiscal year 2015 |
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10 largest employees stock options exercices |
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1,886,112 |
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2.495 |
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Plan of March 25, 2008 Plan of
March 18, 2009 Plan of March 17, 2010 Plan of October 1, 2010 Plan of March 16, 2011 Plan of March 14, 2012 |
133
COMPENSATION AND LONG-TERM INCENTIVES
Long-term compensation instruments used prior to the success of the Nokia Offer
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History of Alcatel Lucent stock option plans at December 31, 2015 |
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Total potential
number of shares (4) |
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Exercise price (in Euros) |
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Total number of
options granted |
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Granted to Executive Directors (2) |
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Granted to Leadership team (3) |
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Options exercise period |
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Date of the Board of Directors Meeting |
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before
adjustment(1) |
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after adjustment(1) |
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before
adjustment(1) |
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after
adjustment(1) |
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before
adjustment(1) |
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Total
number of recipients |
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From |
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To |
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Adjusted
number of options exercised |
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Adjusted
number of options cancelled |
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Adjusted outstanding
options as of 12/31/2015 |
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2007 |
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03/01/2007 |
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10.00 |
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9.463 |
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204,584 |
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216,078 |
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42 |
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03/01/2008-03/01/2011 |
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02/28/2015 |
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- |
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216,078 |
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- |
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03/28/2007(3) |
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9.10 |
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8.611 |
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40,078,421 |
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42,039,910 |
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800,000 |
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|
2,130,000 |
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15,779 |
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03/28/2008-03/28/2011 |
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03/27/2015 |
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- |
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42,039,910 |
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- |
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08/16/2007 |
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9.00 |
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8.517 |
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339,570 |
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357,285 |
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119 |
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08/16/2008-08/16/2011 |
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08/15/2015 |
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- |
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357,285 |
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- |
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11/15/2007(3) |
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6.30 |
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5.962 |
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294,300 |
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306,308 |
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210,000 |
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33 |
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11/15/2008-11/15/2011 |
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11/14/2015 |
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- |
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306,308 |
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- |
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2008 |
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03/25/2008(3) |
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3.80 |
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3.596 |
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47,987,716 |
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50,294,368 |
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2,050,000 |
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14,414 |
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03/25/2009-03/25/2012 |
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03/24/2016 |
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5,513,776 |
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26,756,459 |
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18,024,133 |
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04/04/2008 |
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3.80 |
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3.596 |
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800,000 |
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800,000 |
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800,000 |
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1 |
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04/04/2009-04/04/2012 |
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04/03/2016 |
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- |
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800,000 |
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- |
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07/01/2008 |
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4.40 |
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4.164 |
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223,700 |
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235,935 |
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64 |
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07/01/2009-07/01/2012 |
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06/30/2016 |
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- |
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166,232 |
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69,703 |
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09/17/2008 |
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3.90 |
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3.691 |
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250,000 |
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258,869 |
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250,000 |
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1 |
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09/17/2009-09/17/2012 |
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09/16/2016 |
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- |
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258,869 |
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- |
|
12/31/2008(3) |
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2.00 |
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1.893 |
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2,052,400 |
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2,128,464 |
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|
1,700,000 |
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88 |
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|
12/31/2009-12/31/2012 |
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12/30/2016 |
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1 415 154 |
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686,624 |
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26,686 |
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2009 |
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03/18/2009 |
|
|
2.00 |
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|
1.893 |
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|
30,656,400 |
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31 986 463 |
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|
76,641 |
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|
|
03/18/2010-03/18/2011 |
|
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|
03/17/2017 |
|
|
|
14 819 902 |
|
|
|
4,727,157 |
|
|
|
12,439,404 |
|
03/18/2009(3) |
|
|
2.00 |
|
|
|
1.893 |
|
|
|
21,731,110 |
|
|
|
22,762,455 |
|
|
|
1,000,000 |
|
|
|
2,600,000 |
|
|
|
11,113 |
|
|
|
03/18/2010-03/18/2013 |
|
|
|
03/17/2017 |
|
|
|
12 566 805 |
|
|
|
7,275,305 |
|
|
|
2,920,345 |
|
07/01/2009 |
|
|
2.00 |
|
|
|
1.893 |
|
|
|
443,500 |
|
|
|
467,229 |
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|
|
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|
54 |
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|
|
07/01/2010-07/01/2013 |
|
|
|
06/30/2017 |
|
|
|
270 537 |
|
|
|
181,322 |
|
|
|
15,370 |
|
10/01/2009 |
|
|
2.90 |
|
|
|
2.744 |
|
|
|
282,500 |
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|
|
292,589 |
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|
25 |
|
|
|
10/01/2010-10/01/2013 |
|
|
|
09/30/2017 |
|
|
|
83 681 |
|
|
|
181,429 |
|
|
|
27,479 |
|
12/01/2009 |
|
|
2.50 |
|
|
|
2.366 |
|
|
|
108,400 |
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|
|
114,562 |
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16 |
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|
|
12/01/2010-12/01/2013 |
|
|
|
11/30/2017 |
|
|
|
55 483 |
|
|
|
40,055 |
|
|
|
19,024 |
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|
2010 |
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|
03/17/2010(3) |
|
|
2.40 |
|
|
|
2.271 |
|
|
|
18,734,266 |
|
|
|
19,690,026 |
|
|
|
1,000,000 |
|
|
|
1,980,000 |
|
|
|
10,994 |
|
|
|
03/17/2011-03/17/2014 |
|
|
|
03/16/2018 |
|
|
|
10 855 816 |
|
|
|
5,778,505 |
|
|
|
3,055,705 |
|
07/01/2010(3) |
|
|
2.20 |
|
|
|
2.082 |
|
|
|
721,000 |
|
|
|
746,293 |
|
|
|
|
|
|
|
400,000 |
|
|
|
65 |
|
|
|
07/01/2011-07/01/2014 |
|
|
|
06/30/2018 |
|
|
|
304 114 |
|
|
|
418,398 |
|
|
|
23,781 |
|
10/01/2010(3) |
|
|
2.30 |
|
|
|
2.176 |
|
|
|
851,000 |
|
|
|
896,493 |
|
|
|
|
|
|
|
400,000 |
|
|
|
54 |
|
|
|
10/01/2011-10/01/2014 |
|
|
|
09/30/2018 |
|
|
|
270 868 |
|
|
|
365,657 |
|
|
|
259,968 |
|
12/09/2010 |
|
|
2.20 |
|
|
|
2.082 |
|
|
|
125,000 |
|
|
|
132,637 |
|
|
|
|
|
|
|
|
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|
27 |
|
|
|
12/09/2011-12/09/2014 |
|
|
|
12/08/2018 |
|
|
|
19 848 |
|
|
|
91,122 |
|
|
|
21,667 |
|
|
|
|
|
|
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|
2011 |
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|
|
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|
|
03/01/2011(3) |
|
|
3.20 |
|
|
|
3.028 |
|
|
|
605,500 |
|
|
|
637,681 |
|
|
|
|
|
|
|
400,000 |
|
|
|
39 |
|
|
|
03/01/2012-03/01/2015 |
|
|
|
02/28/2019 |
|
|
|
21 842 |
|
|
|
529,351 |
|
|
|
86,488 |
|
03/16/2011(3) |
|
|
3.70 |
|
|
|
3.501 |
|
|
|
11,251,125 |
|
|
|
11,821,386 |
|
|
|
1,300,000 |
|
|
|
1,400,000 |
|
|
|
8,178 |
|
|
|
03/16/2012-03/16/2015 |
|
|
|
03/15/2019 |
|
|
|
1 568 677 |
|
|
|
4,669,931 |
|
|
|
5,582,778 |
|
06/01/2011 |
|
|
4.20 |
|
|
|
3.974 |
|
|
|
414,718 |
|
|
|
434,371 |
|
|
|
|
|
|
|
|
|
|
|
61 |
|
|
|
06/01/2012-06/01/2015 |
|
|
|
05/31/2019 |
|
|
|
- |
|
|
|
283,196 |
|
|
|
151,175 |
|
09/01/2011 |
|
|
2.50 |
|
|
|
2.366 |
|
|
|
171,000 |
|
|
|
179,479 |
|
|
|
|
|
|
|
|
|
|
|
44 |
|
|
|
09/01/2012-09/01/2015 |
|
|
|
08/31/2019 |
|
|
|
57 930 |
|
|
|
49,879 |
|
|
|
71,670 |
|
12/01/2011 |
|
|
2.00 |
|
|
|
1.893 |
|
|
|
145,500 |
|
|
|
153,791 |
|
|
|
|
|
|
|
|
|
|
|
45 |
|
|
|
12/01/2012-12/01/2015 |
|
|
|
11/30/2019 |
|
|
|
70 548 |
|
|
|
40,435 |
|
|
|
42,808 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2012 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
03/14/2012(3) |
|
|
2.00 |
|
|
|
1.893 |
|
|
|
10,770,255 |
|
|
|
11,343,749 |
|
|
|
|
|
|
|
1,100,000 |
|
|
|
7,950 |
|
|
|
03/14/2013-03/14/2016 |
|
|
|
03/13/2020 |
|
|
|
3 938 687 |
|
|
|
2,990,011 |
|
|
|
4,415,051 |
|
08/13/2012 |
|
|
2.00 |
|
|
|
1.893 |
|
|
|
390,400 |
|
|
|
401,185 |
|
|
|
|
|
|
|
|
|
|
|
41 |
|
|
|
08/13/2013-08/13/2016 |
|
|
|
08/12/2020 |
|
|
|
45 178 |
|
|
|
279,906 |
|
|
|
76,101 |
|
12/17/2012 |
|
|
2.00 |
|
|
|
1.893 |
|
|
|
94,500 |
|
|
|
99,885 |
|
|
|
|
|
|
|
|
|
|
|
27 |
|
|
|
12/17/2013-12/17/2016 |
|
|
|
12/16/2020 |
|
|
|
31 043 |
|
|
|
44,261 |
|
|
|
24,581 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
07/12/2013 |
|
|
1.50 |
|
|
|
1.419 |
|
|
|
22,417,900 |
|
|
|
23,685,235 |
|
|
|
|
|
|
|
|
|
|
|
2,051 |
|
|
|
07/12/2014-07/12/2017 |
|
|
|
07/11/2021 |
|
|
|
7 099 727 |
|
|
|
4,302,418 |
|
|
|
12,283,090 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
|
|
|
|
|
212,144,765 |
|
|
|
222,482,726 |
|
|
|
5,150,000 |
|
|
|
14,370,000 |
|
|
|
147,966 |
|
|
|
|
|
|
|
|
|
|
|
59,009,616 |
|
|
|
103,836,103 |
|
|
|
59,637,007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
In the context of the capital increase with preferential subscription rights dated December 9, 2013, the rights of the recipients of stock options and performance shares were preserved
through an adjustment mechanism of conversion rules. The principle of the adjustment is based on the application of an adjustment ratio of 1.056756449 (i) to the number of securities granted to each recipients, rounded up to the next whole
number and (ii) to the exercise price of the stock option plans, by division, rounded up to three decimal places. Depending on system constraints specific to the banks in charge of managing the plans, the number of securities initially granted
is adjusted by taking into account the securities that have already vested or been cancelled. |
(2) |
|
2007 and 2008: Mrs. Russo, 2008 to 2013: Mr. Verwaayen. |
(3) |
|
Members of the Leadership team at the date of the grant 2007: 9 members, 2008: 11 members, 2009: 14 members, 2010: 16 members, 2011: 15 members, 2012: 11 members, 2013: 0 member.
|
(4) |
|
The number of shares that may be acquired depends on the level of satisfaction of certain performance conditions. For an annual performance review, see Section 8.1.6 Performance
reviews for the stock option plans. |
134
COMPENSATION AND LONG-TERM INCENTIVES
Long-term compensation instruments used prior to the success of the Nokia Offer
8.1.8 |
Mechanisms put in place with respect to long-term compensation instruments in the context of the Nokia Offer |
In accordance with the acceleration mechanism, around 51.1 million shares were delivered to
the recipients of the eligible plans (20 million shares were shares held by subsidiaries, with respect to performance share plans and the grant of shares in lieu of the 2014 stock-option plan, and 31.1 million shares were newly issued shares,
with respect to the exercise of the eligible stock-option plans), and as many shares were sold on the market two trading days at the latest before the last day of the reopened Nokia Offer.
Performance shares
The
Company granted performance shares under several plans between 2008 and 2014, the main features of which are set out in Sections 8.1.2 Performance shares above. An additional performance shares plan was implemented on July 29, 2015,
also described in Section 8.1.2.
The Company offered to the recipients of performance shares granted before the execution of the
Memorandum of Understanding, on April 15, 2015, and still subject to a vesting period, to waive their rights under the performance shares plans in exchange for shares of the Company free from any presence condition beyond the last day of the
initial Nokia Offer and from any performance condition, provided notably that the Nokia Offer be successful, that the recipients satisfy the presence condition on the last day of the initial Nokia Offer and that they undertake to sell the shares
thus received on the market two trading days at the latest before the last day of the reopened Nokia Offer.
16,689,074 shares were
granted under this performance share acceleration mechanism and as many shares were sold on the market between January 11, 2016 and January 20, 2016. The concerned recipients received an amount of 3.7228 per share sold, which corresponds to the average sale price on the market of the 51,191,586 shares resulting from the mechanisms described under this subsection and the
subsections Stock options and Situation of the recipients of the stock option plan 2014 of this Section 8.1.8. In certain jurisdictions, the mechanisms described above were adapted to comply with applicable statutory,
regulatory or other type of constraints.
With respect to the performance shares of the recipients who did not accept such a waiver,
the terms and conditions of their performance shares have remained unchanged, including the presence and performance conditions, provided that the Companys Board of Directors decided, with respect to the performance conditions, to change them,
in case of Reduced Liquidity (as defined above under Section 8.1.2 « Performance shares »), in order to adjust the Alcatel Lucent share price on the basis of the exchange ratio of the Nokia Offer as the
reference share price and to adjust the representative reference sample. In addition, some recipients benefit from a liquidity mechanism, under certain conditions and to the extent allowed by the applicable regulations (see the subsection
Liquidity offered to holders of stock options and recipients of performance shares below).
With respect to the unvested performance shares granted in 2015 pursuant to the July 29, 2015
plan (therefore after the execution of the Memorandum of Understanding), the recipients benefit from a liquidity mechanism, under certain conditions and to the extent allowed by the applicable regulations (see the heading Liquidity offered to
holders of stock options and recipients of performance shares below).
At March 31, 2016, and to the Companys knowledge,
the number of unvested performance shares was 10,173,400.
Stock options
The Company granted stock options under several plans between 2006 and 2013, the main features of which are set out under section 8.1.5
Stock options above.
The Company offered to the holders of stock options granted before the execution of the Memorandum of
Understanding, on April 15, 2015 and still subject to a vesting or tax holding period, the acceleration of their right to exercise their stock options, provided notably that the Nokia Offer be successful, that the recipients satisfy the
presence condition on the last day of the initial Nokia Offer and that they undertake to exercise their stock options covered by the acceleration as well as all their vested stock options (except those which were then subject to a tax holding period
under French or Belgian law, if their beneficiaries did not accept the acceleration mechanism in respect of such stock-options) and to sell the shares resulting from the exercise of such stock options on the market two trading days at the latest
before the last day of the reopened Nokia Offer.
The recipients were, however, released from their undertaking to exercise their stock
options and to sell the underlying shares if the sum of the exercise price of such stock options and the costs and expenses relating to this exercise and to the sale of the underlying shares was higher than the sale price of the underlying shares.
When accepting the acceleration of their rights, these recipients irrevocably accepted the terms and conditions of the liquidity agreement described below in respect of these stock options not exercised. These recipients also irrevocably accepted
the terms and conditions of the liquidity agreement described below in respect of their stock options which are subject to a tax holding period under French or Belgian law, unless they opted for an acceleration agreement covering such stock options.
31,115,833 stock options were exercised under this acceleration mechanism for the stock options and as many shares were sold on the
market between January 11 and January 20, 2016. The concerned recipients received an amount of 3.7228 per share sold, which corresponds to the average sale price
on the market of the 51,191,586 shares resulting from the mechanisms described under this subsection and the subsections Performance shares and Situation of the recipients of the stock option plan 2014 of this
Section 8.1.8.
135
COMPENSATION AND LONG-TERM INCENTIVES
Long-term compensation instruments used prior to the success of the Nokia Offer
In certain jurisdictions, these mechanisms were adapted to comply with possible statutory,
regulatory or other type of constraints which are applicable in such jurisdictions.
With respect to stock option holders who did not
accept such acceleration, the terms and conditions of their stock options have remained unchanged, including the presence condition and, if applicable, the performance conditions. Certain holders may benefit from a liquidity mechanism, under certain
conditions and to the extent allowed by the applicable regulations.
At March 31, 2016, and to the Companys knowledge, the number
of vested stock options was 299,300 and the number of unvested stock options was 16,550,948.
Situation of the recipients of the
2014 stock option plan
The Company had considered putting in place a stock option plan for the financial year 2014, but this plan
finally was not implemented. In lieu of this stock option plan, the Company decided to grant shares to the recipients with a ratio of one share for every two stock options. Such grant of shares remained subject, in particular, to the Nokia Offer
being successful, the recipients satisfying the presence condition on the last day of the initial Nokia Offer and their undertaking to sell the shares thus received on the market two trading days at the latest before the last day of the reopened
Nokia Offer.
3,386,679 shares were granted under this replacement plan and as many shares was sold on the market between
January 11, 2016 and January 20, 2016. The concerned recipients received an amount of 3,7228 per share sold, which corresponds to the average sale price on the market
of the 51,191,586 shares resulting from the mechanisms described under this subsection and the subsections Performance shares and Stock options of this Section 8.1.8.
In certain jurisdictions, these mechanisms were adapted to comply with applicable statutory, regulatory or other type of constraints.
Liquidity offered to holders of stock options and recipients of performance shares
Liquidity offered to holders of stock options and recipients of performance shares granted before 2015
Pursuant to the Memorandum of
Understanding, Nokia offered a liquidity agreement to the recipients of the following plans who are French tax residents, because of the requirement that they satisfy a holding period for tax purposes:
· |
|
performance shares plan dated September 15, 2014; |
· |
|
stock options plan dated August 13, 2012; |
· |
|
stock options plan dated March 14, 2012. |
This liquidity
agreement was also offered to Belgian tax residents who are recipients of the following plan, provided that they opted
for the taxation of these stock options upon their grant on a reduced tax basis and that they undertook to hold these stock options:
· |
|
stock options plan dated July 12, 2013. |
Pursuant to this
liquidity agreement, in the event of Reduced Liquidity (as defined in Section 8.1.2 Performance shares), the shares received by the holders of stock options will automatically be exchanged for Nokia shares, or the cash equivalent of
the market value of such Nokia shares, upon exercise of these stock options after expiration of the holding period. This liquidity agreement also provides that the relevant performance shares will be automatically exchanged by Nokia for Nokia
shares, or for the cash equivalent of the market value of such Nokia shares, shortly after expiration of the holding period.
The
exchange ratio will be aligned with the exchange ratio of the Nokia Offer, subject to some adjustments in the event of financial transactions of Nokia or Alcatel Lucent, to allow the holders of stock options or the recipients of performance shares
to obtain the same value in Nokia shares or in cash which they would have obtained had such transactions not taken place.
At March 31,
2016 and to the Companys knowledge, 179,405 stock options and 75,323 performance shares were subject to these liquidity agreements. Since February 12, 2016, following the settlement of the reopened Nokia Offer, Nokia holds more than 85%
of the shares of the Company, and therefore the shares of the Company are now subject to a Reduced Liquidity.
In addition, a liquidity
agreement was also offered by Nokia in relation to vested stock options not covered by the selling undertaking related to the acceleration mechanisms described above and in respect of which the sum of the exercise price and the costs and expenses
relating to such exercise and to the sale of the underlying shares was above 90% of the stock price of the share of the Company at the end of the last day of the reopened Nokia Offer on Euronext Paris.
The vested and unvested stock options of recipients who requested the acceleration of their rights but which were not exercised because the sum of
the exercise price of such stock options and the costs and expenses relating to this exercise and to the sale of the underlying shares was higher than the sale price of the underlying shares are automatically covered by a liquidity agreement. At
March 31, 2016 and to the Companys knowledge, 353,892 stock options are covered by this agreement.
These liquidity agreements
will be settled, as described above, in Nokia shares or in the cash equivalent of the market value of such shares.
In certain
jurisdictions, these mechanisms were or will be adapted to comply with applicable statutory, regulatory or other type of constraints.
Liquidity offered to recipients of performance shares granted in 2015
Nokia and the Company agreed to enter
into a liquidity agreement with all the recipients of performance shares granted
136
COMPENSATION AND LONG-TERM INCENTIVES
Long-term compensation instruments used prior to the success of the Nokia Offer
in 2015, pursuant to which, in the event of Reduced Liquidity at the date of expiration of the
applicable vesting period, all of the performance shares, representing, to the Companys knowledge, a maximum number of 9.645 million shares of the Company on March 31, 2016, will be automatically exchanged by Nokia for Nokia shares, or for the
cash equivalent of the market value of such Nokia shares, shortly after expiration of such vesting period.
The exchange ratio will be
aligned with the exchange ratio of the Nokia Offer, subject to certain adjustments, in the event of
financial transactions by Nokia or Alcatel Lucent, to allow the recipients of performance shares to obtain the same value in Nokia shares or in cash that they would have obtained had such
transactions not taken place.
In certain jurisdictions, these mechanisms were or will be adapted to comply with applicable statutory,
regulatory or other type of constraints.
8.1.9 |
Collective profit-sharing agreement and collective pension savings plan (PERCO) |
The Alcatel Lucent Groups French companies have set up in France collective profit-sharing
agreements and employee savings plans based on the recommendations of the senior management. Furthermore, foreign subsidiaries have introduced profit-sharing plans for their employees in compliance with the relevant local laws, when such laws allow
it.
On February 23, 2009, the Alcatel Lucent Groups French companies and the trade unions representing these companies
signed a collective agreement concerning the creation of a Collective Pension Savings Plan (PERCO). PERCO may be used by employees of the Alcatel Lucent Groups French companies to top up their future pensions or to assist them, for example, in
the purchase of their home. This plan allows them to make payments into a long-term savings plan and to receive matching contributions from Alcatel Lucent. PERCO is an addition to the existing employee savings plans.
Until June 25, 2009, only payments made into Alcatel Lucents Employee Shareholder Fund (Fonds Actionnariat Alcatel Lucent) could be
matched by employer contributions (with a holding period of 5 years). To encourage employees to contribute to the pension savings plan, the signatories of the PERCO agreement decided to set up a joint matching contribution allowance for the PERCO
and the Alcatel Lucent Employee Shareholder Fund for
all of the Alcatel Lucent Groups French companies. Alcatel Lucent will top up any profit-sharing or voluntary payments made into the plan.
Each year an employee may invest up to 3,000 in PERCO and/or the Alcatel
Lucent Employee Shareholder Fund, and benefit from a maximum employer gross contribution of 2,000. The employer contribution is calculated as follows:
· |
|
100% of the employees payments up to 1,000 of accumulated payments; |
· |
|
70% of the employees payments, when the accumulated payments are between 1,001 and 2,000; |
· |
|
30% of the employees payments, when the accumulated payments are between 2,001 and 3,000. |
In the context of the Nokia Offer, the
Supervisory Board of the FCP 2AL (in French: Fonds Commun de Placement Actionnariat Alcatel-Lucent) decided at its meeting held on November 30, 2015, to tender all of the Alcatel Lucent shares owned at December 23,
2015. The Supervisory Board also decided to change the name of the FCP which, as of the AMF approval obtained on January 22, 2016, was renamed FCP AN (in French: Fonds Commun de Placement Actionnariat Nokia).
8.2 |
Status of the Executive Directors and officers |
8.2.1 |
Compensation policy for the Executive Directors and Officers |
The compensation policy for the Executive Directors follows the recommendations of the AFEP-MEDEF
Code. Upon the recommendation of the Compensation Committee, the Board of Directors determines all compensation and long-term benefits awarded to the Chairman of the Board and the Chief Executive Officer when these functions are dissociated, and to
the Chairman and Chief Executive Officer when they are cumulated.
Role of the Board of Directors and of the Compensation
Committee
The Board of Directors ensures a balance between the various components of the Executive Directors compensation
(fixed and
variable compensation, grants of stock options, performance shares, Performance Units, severance pay and additional pension benefits, if any). It also ensures that these components comply with
the principles of comprehensiveness and clarity, balance and reasonableness, benchmarking and consistency, as set forth in the AFEP-MEDEF Code.
Proposals for the compensation of the Executive Directors, as well as of the Directors, are established under the responsibility of the Compensation Committee. The Compensation Committee evaluates all compensation paid or attributed
to them, including benefits relating to retirement, severance pay, non-compete payment, if applicable, and other benefits of any nature.
137
COMPENSATION AND LONG-TERM INCENTIVES
Status of the executive directors and officers
The Committees recommendations relate to the annual evaluation of the Alcatel Lucent
Groups management and the setting of the fixed and variable compensation paid to the Executive Directors. This includes the proposals of base salary and its potential increase, the rules for determining the variable compensation, the targets
against which performance is measured and the review of the achievement level of these targets.
The Compensation Committee also
reviews the policies relating to the grant of stock options and performance shares to the employees of the Alcatel Lucent Group.
General principles applied to the long-term compensation of the Executive Directors
Pursuant to the AFEP-MEDEF Code, all grants of performance shares and stock options to the Executive Directors are subject to the satisfaction of
one or more performance conditions as determined by the Board of Directors. According to the authorizations given by the shareholders at the Shareholders Meetings of May 28, 2014 and May 26, 2015, these grants must account for less
than 6% of the total number of employee grants over the period covered by the authorization. The Board of Directors also determines specific conditions pertaining to the holding periods for shares allocated to the Executive Directors, in accordance
with Article L. 225-197-1 of the French Commercial Code, and to the obligation to purchase Alcatel Lucent shares related to the grant of performance shares as provided in the AFEP-MEDEF Code.
Pursuant to the Law of December 3, 2008 to promote earnings from employment, these grants were accompanied by a mechanism providing an
interest in the Alcatel Lucent Groups performance for more than 90% of the staff of the French companies of the Alcatel Lucent Group, by way of a supplemental profit-sharing payment.
Compensation policy for the Executive Directors
In 2015, the Board of Directors determined the compensation policy for the Executive Directors upon proposal of the Compensation Committee, and
consistent with, in particular, the Companys strategy and the transformation objectives of the Alcatel Lucent Group, as defined by the Shift Plan.
The performance criteria applicable to the variable and long-term compensation of the Chief Executive Officer were consistent with those principles. For fiscal year 2015, the performance criteria applicable to his variable
compensation depended for 50% on achieving the Shift Plan targets. As regards his long-term compensation, it was composed of Performance Units subject to a presence condition and performance criteria, related to the performance of the share price
compared with a panel (weighted at 50%), and the implementation of the Companys strategy (weighted at 50%).
The Chairmans
compensation consisted of a fixed portion and long-term compensation subject to performance criteria, with evaluation criteria that are specific to the role and responsibilities of the Chairman of the Board of Directors.
Since September 1, 2015, Mr. Philippe Camus has been interim CEO in addition to his position as Chairman of the Board. Given the very
specific circumstances and the temporary nature of this mandate, Mr. Philippe Camus remuneration remained at the level of his remuneration as Chairman of the Board of Directors, until the confirmation of the success of the Nokia Offer.
After this confirmation, since Mr. Philippe Camus remained as Chairman of the Board and CEO, his compensation was modified as described under Section 8.2.3 The Chairman and CEO (as from January 8, 2016).
The table below reflects the
main criteria adopted with respect to the compensation of the Executive Directors for fiscal year 2015:
|
|
|
|
|
|
|
|
|
Fixed compensation |
|
Variable compensation |
|
Performance Units |
|
|
|
Chairman
(until August 31, 2015) then Chairman and CEO (as from September 1, 2015) |
|
Individual skills |
|
|
|
50% Qualitative criteria related to the
position of Chairman of the Board 50% Contribution to the Companys
strategy |
CEO until August 31, 2015 |
|
Individual skills |
|
50% Financial criterion (Segment
Operating Cash Flow and level of customer satisfaction) 50% Achievement of the targets of the Shift Plan |
|
50% Share price performance
50% Implementation of the Companys strategy |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term performance |
|
Long-term performance |
138
COMPENSATION AND LONG-TERM INCENTIVES
Status of the executive directors and officers
8.2.2 |
Chairman of the Board of Directors (until August 31, 2015) and Chairman and CEO (from September 1, 2015 until January 7, 2016) |
The compensation of Mr. Philippe Camus as Chairman of the Board of Directors consisted of a
fixed annual compensation and a long-term compensation in the form of Performance Units subject to a presence condition at the end of a 2-year vesting period, and to the satisfaction of performance criteria linked to his position. This compensation
remained unchanged after the appointment of Mr. Philippe Camus as Chairman and CEO until the confirmation of the success of the Nokia Offer by the Board of Directors at its meeting held on January 8, 2016.
Annual compensation in cash
At the time he took office in 2008, the gross compensation of Mr. Philippe Camus was set at 200,000. This compensation
represented twice the average compensation of the Directors of the Company and did not include any cash variable component. It remained unchanged until the success of the Nokia Offer.
Variable compensation
Mr. Philippe Camus did not receive any variable compensation.
Directors fees and benefits in kind
Mr. Philippe Camus did not receive any Directors fee, nor any benefit in kind.
AMF Table N°2: Table
summarizing the compensation of the Chairman of the Board of Directors and of the Chairman and CEO with respect to fiscal years 2014 and 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mr. Philippe Camus Chairman of the Board of Directors (until August 31, 2015) and Chairman and CEO (as from September 1, 2015) |
|
Fiscal year 2014 |
|
|
Fiscal year 2015 |
|
(amounts in Euros) |
|
Due |
|
|
Paid |
|
|
Due |
|
|
Paid |
|
|
|
|
|
|
|
|
|
|
|
|
Fixed compensation |
|
|
_ |
|
|
|
200,000 |
|
|
|
_ |
|
|
|
200,000 |
|
|
|
|
|
|
Variable compensation |
|
|
_ |
|
|
|
N/A |
|
|
|
_ |
|
|
|
N/A |
|
|
|
|
|
|
Exceptional compensation* |
|
|
_ |
|
|
|
N/A |
|
|
|
_ |
|
|
|
N/A |
|
|
|
|
|
|
Directors fees |
|
|
_ |
|
|
|
N/A |
|
|
|
_ |
|
|
|
N/A |
|
|
|
|
|
|
Benefits in kind |
|
|
_ |
|
|
|
N/A |
|
|
|
_ |
|
|
|
N/A |
|
|
|
TOTAL |
|
|
_ |
|
|
|
200,000 |
|
|
|
_ |
|
|
|
200,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
On January 8, 2016, the Board of Directors decided to grant an exceptional payment to Mr. Philippe Camus in consideration of his work in 2015 in the context of the strategic
combination between the Company and Nokia (See Section 8.2.3 Chairman of the Board of Directors and Chief Executive Officer (as from January 8, 2016)). |
Long-term compensation
Stock options
Mr. Philippe Camus did not benefit from any Alcatel Lucent stock option.
Performance shares
Mr. Philippe Camus did not benefit from any grant of performance shares in 2015. As a reminder, in order to show his personal commitment
toward the Alcatel Lucent Groups
recovery, Mr. Philippe Camus relinquished, in 2013, any performance share grant. The Board of Directors duly noted this decision. Mr. Philippe Camus benefitted from performance share
grants prior to 2013, which were all subject to performance criteria and which are detailed below in AMF Table N°6: History of performance shares granted to Mr. Philippe Camus. The obligation to hold the performance shares
acquired until the end of his functions is detailed below in sub-section Treatment of Mr. Philippe Camus share holding obligations in the context of the Nokia Offer of this Section 8.2.2.
139
COMPENSATION AND LONG-TERM INCENTIVES
Status of the executive directors and officers
AMF Table N°6: History of performance shares granted to Mr. Philippe Camus
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of shares granted |
|
|
Number of shares vested |
|
|
|
Date of plan |
|
before
adjustment |
|
after adjustment |
|
|
Vesting date(1) |
|
|
after adjustment |
|
|
Availability date |
|
|
Mixed performance conditions |
|
Unit
valuation(2) |
|
|
|
|
|
9/17/2008 |
|
100,000 |
|
|
|
|
|
|
03/11/2010 |
|
|
|
100,000 |
|
|
|
03/11/2012 |
|
|
2 financial criteria and 1 qualitative criterion |
|
|
3.05 |
|
|
|
|
|
3/18/2009 |
|
200,000 |
|
|
|
|
|
|
03/18/2011 |
|
|
|
200,000 |
|
|
|
03/18/2013 |
|
|
3 financial criteria and 1 qualitative criterion |
|
|
1.19 |
|
|
|
|
|
3/17/2010 |
|
200,000 |
|
|
|
|
|
|
03/17/2012 |
|
|
|
200,000 |
|
|
|
03/17/2014 |
|
|
1 financial criterion and 1 qualitative criterion |
|
|
2.40 |
|
|
|
|
|
3/16/2011 |
|
200,000 |
|
|
|
|
|
|
03/16/2013 |
|
|
|
170,000 |
|
|
|
03/16/2015 |
|
|
Alcatel Lucents share price performance and 1 qualitative criterion |
|
|
3.48 |
|
|
|
|
|
3/14/2012 |
|
200,000 |
|
|
211,352 |
|
|
|
03/14/2014 |
|
|
|
211,352 |
|
|
|
03/14/2016 |
|
|
Alcatel Lucents share price performance and 3 qualitative criteria |
|
|
1.64 |
|
|
|
|
|
Total |
|
900,000 |
|
|
|
|
|
|
|
|
|
|
881,352 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
This is the earliest date on which performance shares can become fully vested, with full ownership to be acquired on the first working day following acknowledgment at the end of the vesting
period, provided that the presence and performance conditions have been met. |
(2) |
|
The unit value (rounded to the nearest tenth of a Euro) corresponds to the value in the consolidated financial statements on the date of grant. This value results from theoretical computations,
and the actual gains that may be made will depend on the share price on the date of sale of Alcatel Lucent shares. The unit value for the 03/14/2012 plan was calculated on the basis of a share price of 1.80 on the same date.
|
Treatment of Mr. Philippe Camus share holding obligations in the context of the Nokia
Offer
Until such time
as Mr. Philippe Camus ceases his functions as Executive Director, he is required to hold all of the Companys shares acquired during his term of office as a result of the grant of performance shares pursuant to his share-based
compensation, in accordance with applicable law (the Specific Holding Obligation) and, more generally, in accordance with a decision of the Company, all of the Alcatel Lucent shares acquired by him during his term of office as Chairman
of the Board, including those acquired by him on the market (the General Holding Obligation).
Given the reduced liquidity which could affect the Company shares held by Mr. Philippe Camus
following the Nokia Offer, the Board of Directors decided on December 1, 2015, upon recommendation of the Corporate Governance and Nominating Committee, to waive the General Holding Obligation to allow Mr. Philippe Camus to tender his
Alcatel Lucent shares into the Nokia Offer, provided that the Nokia shares received in exchange of the Alcatel Lucent shares subject to the Specific Holding Obligation would in turn be subject to a holding obligation until such time as
Mr. Philippe Camus ceases his functions as Executive Director of the Company.
Mr. Philippe Camus
tendered into the initial Nokia Offer a total of 1,103,269 shares of the Company, which breaks down into 250,000 shares acquired by him on the market on September 12, 2008 (50,000), August 2, 2011 (50,000) and November 25, 2013
(150,000) and 853,269 shares granted to him pursuant to performance shares plans, as detailed below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Date of plan |
|
Number of shares vested |
|
|
Number of shares tendered into the Nokia Offer |
|
|
Number of Nokia shares received and subject to holding obligation |
|
|
Number of Alcatel Lucent shares remaining and subject to holding obligation(1) |
|
|
|
09/17/2008 |
|
|
100,000 |
|
|
|
100,000 |
|
|
|
78,710 |
|
|
|
|
|
|
|
03/18/2009 |
|
|
200,000 |
|
|
|
200,000 |
|
|
|
54,720 |
|
|
|
|
|
|
|
03/17/2010 |
|
|
200,000 |
|
|
|
200,000 |
|
|
|
108,874 |
|
|
|
|
|
|
|
03/16/2011 |
|
|
170,000 |
|
|
|
170,000 |
|
|
|
170,000 |
|
|
|
|
|
|
|
03/14/2012 |
|
|
211,352 |
|
|
|
183,269 |
|
|
|
70,176 |
|
|
|
28,083 |
|
|
|
TOTAL |
|
|
881,352 |
|
|
|
853,269 |
|
|
|
482,480 |
|
|
|
28,083 |
|
|
|
(1) |
|
Mr. Philippe Camus did not tender the following Alcatel Lucent shares granted to him pursuant to the 2012 performance share plan: (i) 12 shares, corresponding to the difference between the
211,340 shares tendered and the total number of Alcatel Lucent shares granted, that is, 211,352, given the requirement to tender into the Nokia Offer a multiple of 20 Alcatel Lucent shares, and (ii) 28,071 Alcatel Lucent shares that
Mr. Philippe Camus is required to hold pursuant to the 2012 performance share plan in order to benefit from the suspension of the purchase obligation contained in such plan, which requires Mr. Philippe Camus to purchase two Alcatel Lucent
shares for five performance shares received. This obligation is suspended as long as Mr. Philippe Camus holds Alcatel Lucent shares the value of which is at least equal to 40% of his annual compensation, net of tax.
|
Performance Units
After noting that Mr. Philippe
Camus had waived in 2013 his performance share grant, the Board of Directors, considering that the remuneration of the Chairman did not reflect the
intensity and quality of his contribution to the governance of the Company, decided in 2014 to grant him, on the recommendation of the Compensation Committee, in addition to his fixed annual
remuneration of 200,000, a long-term compensation comprised of Performance Units. On March 19,
140
COMPENSATION AND LONG-TERM INCENTIVES
Status of the executive directors and officers
2014, the Board of Directors therefore decided to grant Mr. Philippe Camus 400,000 Performance
Units subject to a 2-year vesting period and to a presence condition as the Chairman of the Board at the end of the vesting period (March 19, 2016), and to the achievement of performance criteria.
Mr. Philippe Camus did not receive any Performance Units in 2015 and early 2016.
Performance Units are conditional rights which grant the beneficiary the right to receive compensation in cash. The level of satisfaction of the
performance objectives is assessed at the end of the vesting period, in accordance with the decision of the Board of Directors at its meeting of March 13, 2015. Initially, the achievement level of the performance criteria was to be assessed at
the end of the first year of the vesting period as well as at the end of the vesting period.
The vesting of the Performance Units is
subject to the satisfaction of two performance criteria:
· |
|
50% based on the implementation of the recommendations resulting from the evaluation of the Board of Directors conducted at the beginning of 2014, as approved by the Board of Directors;
|
· |
|
50% based on the Chairmans contribution with respect to the Companys strategy. |
Vesting period. The rights to the Performance Units vest over a period of 2 years subject to the satisfaction of the performance criteria. At the
end of the 2-year vesting period, the value of each Performance Unit is determined based on the average price of the Alcatel Lucent share for the 20 trading days preceding March 19, 2016, each Unit being valued at this average of the share
price.
Presence condition. The rights attached to the Performance Units are definitively vested if Mr. Philippe Camus is still
the
Chairman of the Board of Directors at the end of the 2-year vesting period, that is, on March 19, 2016.
Achievement levels observed during the vesting period (fiscal years 2014 and 2015). At its meeting of January 8, 2016, the Board of Directors
determined that Mr. Philippe Camus had successfully implemented the recommendations resulting from the evaluation of the Board of Directors conducted at the beginning of 2014 relating to: (i) the special focus on the operating mode of the
Leadership team and the management of its teams in terms of organization, resources, key processes and interfaces, (ii) a broader variety of information made available to the Board of Directors of the Company, such as reports of industry
analysts, the organization of debates during specific Board meetings between the Directors and industry analysts, clients, and significant shareholders in order to hear their point of view on the Company and its positioning, and (iii) the
availability of more detailed information to the Board of Directors regarding certain activities of the Alcatel Lucent Group depending on the agenda of the Board of Directors.
The Board of Directors also determined that Mr. Philippe Camuss contribution with respect to the Companys strategy was extremely
satisfactory, notably with respect to the strategic combination of the Company and Nokia.
Given the successful implementation of the
aforementioned recommendations of the Board of Directors and the strong involvement of Mr. Philippe Camus with respect to the Companys strategy, the Committee considered that the performance criteria of the 2014 Performance Units plan
were met and that the global achievement rate for the fiscal years 2014 and 2015 is 100%, resulting in the grant of 400,000 Performance Units. The presence condition pursuant to which Mr. Philippe Camus had to remain Chairman of the Board of
Directors until the end of the vesting period of the 2014 Performance Units, that is, March 19, 2016, has also been satisfied.
AMF Table N°1: Table
summarizing the compensation, stock options and performance shares granted to the Chairman of the Board of Directors and to the Chairman and CEO with respect to fiscal years 2014 and 2015*
|
|
|
|
|
|
|
|
|
Mr. Philippe Camus Chairman of the Board of Directors (until August 31, 2015) and Chairman and CEO (as from
September 1, 2015) (amounts in Euros) |
|
Fiscal year 2014 |
|
|
Fiscal year 2015 |
|
|
|
|
|
|
|
|
|
|
Fixed compensation related to the fiscal year |
|
|
200,000 |
|
|
|
200,000 |
|
|
|
|
Variable compensation related to the fiscal year |
|
|
_ |
|
|
|
_ |
|
|
|
|
Benefits in kind |
|
|
_ |
|
|
|
_ |
|
|
|
Subtotal Actual compensation |
|
|
200,000 |
|
|
|
200,000 |
|
|
|
|
|
|
Valuation of the stock-options granted related to the fiscal year(1) |
|
|
_ |
|
|
|
_ |
|
|
|
|
Valuation of the performance shares granted related to the fiscal year(1) |
|
|
_ |
|
|
|
_ |
|
|
|
|
Valuation of the Performance Units granted related to the fiscal year(2) |
|
|
1,157,600 |
|
|
|
_ |
|
|
|
TOTAL |
|
|
1,357,600 |
|
|
|
200,000 |
|
|
|
(1) |
|
No performance shares or stock options were granted to Mr. Philippe Camus during fiscal years 2014 or 2015. |
(2) |
|
The number of Performance Units granted to Mr. Philippe Camus during fiscal year 2014 is 400,000. This grant was valued at 1,157,600, calculated based on the Alcatel Lucent share
price on March 19, 2014, the date on which it was granted by the Board of Directors. Based on the average Alcatel Lucent share price over the 20 trading days preceding March 19, 2016 of 3.11, an amount of 1,244,000 was paid
pursuant to this grant. |
* |
|
On January 8, 2016, the Board of Directors decided to grant an exceptional payment of 350,000 to Mr. Philippe Camus in consideration of his work in 2015 in the context of the
strategic combination between the Company and Nokia (See Section 8.2.3 Chairman of the Board of Directors and Chief Executive Officer (as from January 8, 2016)). |
141
COMPENSATION AND LONG-TERM INCENTIVES
Status of the executive directors and officers
Benefits after termination of functions
Mr. Philippe Camus has not received any commitment from the Company or any other Alcatel Lucent Group company with respect to the termination
of his duties as Chairman of the Board or as Chairman and CEO or the period following termination. He does not benefit from any compensation related to a non-compete undertaking. Furthermore, he is not entitled to any supplemental pension scheme.
Exceptional remuneration
Upon the recommendation of the Compensation Committee and considering the work accomplished by Mr. Philippe Camus in the context of the strategic combination between Alcatel Lucent and Nokia, and specially the work accomplished
in the context of the transition with the new management, the Board of Directors decided on January 8, 2016, to grant an exceptional payment to Mr. Philippe Camus as permitted by article 23.2.3 of the AFEP MEDEF Code which provides that an
exceptional compensation may be granted to an executive officer under highly special circumstances.
Indeed, since the
beginning of his term of office as Chairman and CEO of the Company, Mr. Philippe Camus has notably worked on the implementation of a new organization of the Board of Directors of the Company in order to facilitate the strategic combination of
the Company and Nokia.
In particular, Mr. Philippe Camus has played an interface role between the management team of Nokia and
the Alcatel Lucent teams. He also worked on the implementation of a new corporate governance of the Company which guarantees the appropriate protection of the interests of the minority shareholders as long as there are such shareholders in the
capital of the Company. Mr. Philippe Camus also worked on the
creation of a Committee of Independent Directors to play the reinforced role of a Lead Director and on the implementation of rules relating to the organization and functioning of this Committee
in order to guarantee the protection of the corporate interests of the Company and the interests of the minority shareholders.
The
amount of this exceptional payment is 350,000.
8.2.3 |
Chairman of the Board of Directors and Chief Executive Officer (as from January 8, 2016) |
Annual compensation in cash
Following the success of the Nokia Offer, the Board of Directors, at its meeting of January 8, 2016, confirmed Mr. Philippe Camus as Chairman and CEO of the Company following the change of control of the Company and
reconsidered the structure of his compensation in the new context. The Board of Directors decided to set his compensation at the fixed annual amount of 900,000, to be paid on a
prorata basis effective from January 8, 2016.
Other elements of remuneration
The other elements of remuneration of Mr. Philippe Camus remain unchanged. Mr. Philippe Camus does not receive any variable
compensation, Directors fees, or benefit in kind.
In addition, the compensation of Mr. Philippe Camus does not include any
long-term incentive compensation of any kind.
AMF Table N°11: Table
summarizing the situation of the Chairman and CEO at December 31, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mr. Philippe Camus |
|
Employment contract |
|
|
Supplemental pension scheme |
|
|
Termination payment or benefits owed or likely to become owed resulting from the termination
or change of position |
|
|
Compensation paid pursuant to a non-compete clause |
|
|
|
|
|
|
|
|
|
|
|
Chairman of the Board of Directors appointed on October 1, 2008. Term renewed at the Shareholders Meeting of 05/07/2013. Chairman and CEO since September 1, 2015 |
|
|
None |
|
|
|
None |
|
|
|
None |
|
|
|
None |
|
|
|
Summary of compensation due or granted to the Chairman of the Board of Directors and Chairman
and CEO for fiscal year 2015, submitted to the opinion of the shareholders
Pursuant to the AFEP-MEDEF Code (article 24.3), Code
which the Company complies with pursuant to Article L. 225-37 of the French Commercial Code, the following components of the compensation due or granted with respect to the then ended fiscal year to each Executive Director are subject to the
consultative opinion of the shareholders:
· |
|
annual variable portion and, as the case may be, the multi-annual variable portion, with the targets that are used to determine this variable portion; |
· |
|
exceptional compensation; |
· |
|
stock options, performance shares and any other components of long-term compensation; |
· |
|
welcome bonus and severance pay ; |
· |
|
supplemental pension scheme; |
142
COMPENSATION AND LONG-TERM INCENTIVES
Status of the executive directors and officers
|
|
|
|
|
Compensation due or granted during the past fiscal year |
|
|
|
|
|
Nature |
|
Amount
(in euros) |
|
Presentation |
|
|
|
Fixed annual compensation |
|
200,000 |
|
Gross fixed annual compensation decided by the Board of Directors meeting held on
September 17, 2008, and which remained unchanged until January 7, 2016, even for the part of fiscal year 2015 during which Mr. Philippe Camus held office as Chairman and interim CEO further to the combining of these functions on September 1,
2015. Mr. Philippe Camus gross fixed annual compensation has been of
900,000 since January 8, 2016. |
|
|
|
Annual variable compensation |
|
N/A |
|
Mr. Philippe Camus has not received any annual variable compensation. |
|
|
|
Annual deferred variable compensation |
|
N/A |
|
Mr. Philippe Camus has not received any annual deferred variable compensation. |
|
|
|
Multi-annual
variable compensation |
|
N/A |
|
No Performance Unit grant in 2015.
The Board of Directors, during its meeting held on March 19, 2014 decided to award 400,000 Performance Units with a two-year vesting period subject
to a presence condition as the Chairman of the Board at the end of the vesting period and to the satisfaction of two performance conditions listed below. These conditions have not been modified following the appointment of Mr. Philippe Camus as
Chairman and interim CEO on September 1, 2015.
· Corporate
governance: 50% based on the implementation of the recommendations resulting from the evaluation of the Board of Directors conducted at the beginning of 2014, as approved by the Board of Directors;
· Contribution to the
Companys strategy: 50% based on the contribution of the Chairman to the Companys strategy. The achievement level of the
targets was assessed at the end of the vesting period, in accordance with the decision of the Board of Directors at its meeting of March 13, 2015. Initially, the level of achievement was to be assessed at the end of the first year and at the end of
the vesting period. Performance Units are conditional rights which grant the beneficiary the right to receive a compensation in cash. At its meeting of January 8, 2016, the Board of Directors determined that the achievement rate was 100% resulting
in the grant of 400,000 Performance Units, the presence condition being also satisfied. The value of the grant calculated based on the average share price of Alcatel Lucent for the 20 trading days preceding March 19, 2016 of 3.11, is 1,244,000. |
|
|
|
Exceptional compensation |
|
N/A |
|
Mr. Philippe Camus did not receive any exceptional compensation during fiscal year
2015. However, on January 8, 2016, he was granted an exceptional compensation of EUR 350,000 in consideration of his work in 2015 in the
context of the strategic combination between the Company and Nokia. |
|
|
|
Stock-options, performance shares or any other long-term compensation |
|
N/A |
|
Mr. Philippe Camus has not received any stock-options or performance shares. |
|
|
|
Directors fees |
|
N/A |
|
Like other Executive Directors, Mr. Philippe Camus has not received any attendance fees. |
|
|
|
Benefits of any nature |
|
N/A |
|
Mr. Philippe Camus has not received any benefits of any nature. |
|
Compensation due or granted during the past fiscal year and on which shareholders have expressed or must express their opinion with respect to the regulated agreements and commitments
rules |
|
|
|
|
|
Nature |
|
Amount
(in euros) |
|
Presentation |
|
|
|
Severance pay |
|
N/A |
|
Mr. Philippe Camus has not received any severance pay. |
|
|
|
Non-compete clause |
|
N/A |
|
Mr. Philippe Camus does not benefit from any non-compete indemnity. |
|
|
|
Supplemental pension schemes |
|
N/A |
|
Mr. Philippe Camus does not benefit from any supplemental pension schemes. |
143
COMPENSATION AND LONG-TERM INCENTIVES
Status of the executive directors and officers
8.2.4 |
The Chief Executive Officer (until August 31, 2015) |
Mr. Michel Combes was the Companys Chief Executive Officer until August 31, 2015, his resignation having become effective on
September 1, 2015. The Board of Directors defined the compensation elements related to his departure at its meetings of July 29, 2015 and September 10, 2015.
The total annual compensation of Mr. Michel Combes consisted of a fixed portion and a variable portion, plus long-term compensation and
benefits. His compensation was determined each year by the Board of Directors upon the recommendation of the Compensation Committee.
The variable compensation of the Chief Executive Officer was determined each year according to pre-defined performance criteria. These performance
criteria, as well as those applicable to his long-term compensation, reflected the Alcatel Lucent Groups strategy and transformation objectives and the implementation of the Companys strategy, as reflected by the Shift Plan.
In light of the proposed Nokia Offer, the Board of Directors had decided, on April 14, 2015, the acceleration of Mr. Michel Combes
long-term compensation, similar to the mechanism put in place for the employees of the Alcatel Lucent Group. This mechanism provides for the waiver of the presence condition and of the future performance conditions related to this compensation given
the existence of specific circumstances, as referred to in Article 23.2.3 of the AFEP-MEDEF Code, subject, in particular, to the completion of the Nokia Offer.
In the context of the termination of Mr. Michel Combes duties as Chief Executive Officer, the Board of Directors decided to ask him to
execute a non-compete agreement, and also to reconsider his long-term compensation by applying to it a principle of acquisition pro rata temporis, based on (i) the presence of Mr. Michel Combes during fiscal year 2015 and
(ii) the level of achievement of the initial economic performance criteria which were reviewed by the Board of Directors on February 10, 2016 (See sub-section below Terms and conditions of Mr. Michel Combes compensation in
the context of the Nokia Offer and of the termination of his position as Chief Executive Officer).
Annual compensation
The criteria for determining the compensation of the Chief Executive Officer were specific and pre-established, in accordance with
the AFEP-MEDEF Code. The Board of
Directors, at its meeting of March 13, 2015, determined the components of the compensation of Mr. Michel Combes, as Chief Executive Officer.
2015 fixed annual compensation. Mr. Michel Combes benefitted from a gross fixed annual compensation of 1.2 million, which had not changed since he took office on April 1, 2013. For fiscal year 2015, this fixed compensation, calculated on a pro rata temporis basis until
the date of termination of his duties on August 31, 2015, amounted to 800,000.
2015 variable compensation. The Chief Executive Officer also benefitted from a variable compensation which could range from 0% to 200% of his fixed compensation, with a target bonus of 100% when targets were reached, these targets
being set at the beginning of the fiscal year.
The level of achievement for fiscal year 2015 was determined according to the two
following performance criteria:
· |
|
50% based on the achievement of Corporate targets, namely the Segment Operating Cash Flow and the level of customer satisfaction, which are the same targets as those applicable to all employees of
the Alcatel Lucent Group, under the terms of the Achievement Bonus Plan (ABP). |
· |
|
50% based on the satisfaction of the objectives of the Shift Plan for fiscal year 2015, mainly focusing on reducing fixed costs. |
The Corporate performance indicator was broken down as follows: the Segment Operating Cash Flow accounted for 40 % of the total performance
criteria and the level of customer satisfaction accounted for 10% of the total performance criteria (accounting together for 50% of the performance criteria). The level of customer satisfaction was measured through a customer survey of the thirteen
most important customers of the Company.
At its meeting of February 10, 2016, the Board of Directors, upon the recommendation of
the Compensation Committee, and after approval of the financial elements by the Audit and Finance Committee, determined the level of achievement for 2015 of each of the criteria, that is, 154% based on the Segment Operating Cash Flow, 133% based on
customer satisfaction, and 149% based on the achievement of the Shift Plan targets. As a result, the variable compensation for Mr. Michel Combes for fiscal year 2015 was
1,195,000, which corresponds to 149,4% of his fixed compensation pro rata to his presence with the Company during fiscal year 2015.
Benefits in kind. A company car with a driver was made available to him as part of his functions.
144
COMPENSATION AND LONG-TERM INCENTIVES
Status of the executive directors and officers
AMF Table N°2: Table summarizing the compensation of the Chief
Executive Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mr. Michel Combes CEO until August 31, 2015 |
|
Fiscal year 2014 |
|
|
Fiscal year 2015 |
|
(amount in Euros) |
|
Due |
|
|
Paid |
|
|
Due |
|
|
Paid |
|
|
|
|
|
|
|
Fixed compensation |
|
|
_ |
|
|
|
1,200,000 |
|
|
|
_ |
|
|
|
800,000 |
|
Variable compensation |
|
|
804,000 |
|
|
|
616,500 |
|
|
|
1,195,000 |
|
|
|
804,000 |
(1) |
Exceptional compensation |
|
|
_ |
|
|
|
_ |
|
|
|
_ |
|
|
|
_ |
|
Directors fee |
|
|
_ |
|
|
|
_ |
|
|
|
_ |
|
|
|
_ |
|
Benefits in kind(2) |
|
|
_ |
|
|
|
_ |
|
|
|
_ |
|
|
|
_ |
|
|
|
TOTAL |
|
|
804,000 |
|
|
|
1,816,500 |
|
|
|
1,195,000 |
|
|
|
1,604,000 |
|
|
|
Non compete |
|
|
_ |
|
|
|
_ |
|
|
|
_ |
|
|
|
1,033,333 |
(3) |
(1) |
|
2014 due variable compensation, paid in 2015. |
(2) |
|
A company car with a driver was made available to Mr. Michel Combes as part of his functions. |
(3) |
|
Non-compete payment payable in three equal installments, the first payment having been made in November 2015. |
Long-term compensation
The Board of Directors had decided in 2013 the principle of the annual grant of Performance Units to Mr. Michel Combes, with a vesting
period of 3 years and subject to presence and performance conditions. Performance Units are conditional rights which grant the beneficiary the right to receive compensation in cash. The grants decided by the Board of Directors between 2013 and 2015
are described below in this section. Moreover, the Board of Directors had decided in 2014 the principle of the grant of stock options to Mr. Michel Combes.
In the context of the proposed Nokia Offer and considering the termination by Mr. Michel Combes of his position, the Board of Directors decided to accelerate the vesting of all of his Performance Units, similar to the mechanism
put in place for the long-term compensation of employees of the Alcatel Lucent Group, by waiving the presence condition and taking into account only the periods prior to his departure to determine the vesting of his rights (pro rata temporis), as
well as to replace the undertaking of March 2014 toward Mr. Michel Combes to grant him stock options by a grant of shares, under the conditions described below, and notably subject to the success of the Nokia Offer (see sub-section below
Terms and conditions of Mr. Michel Combes compensation in the context of the Nokia Offer and of the termination of his position as Chief Executive Officer).
2015 Grant of Performance Units
The Board of Directors, at its meeting
of March 13, 2015 decided to grant Mr. Michel Combes 685,000 Performance Units with respect to fiscal year 2015, subject to the presence condition that he remain Chief Executive Officer until the end of the 3-year vesting period (2018),
and to the achievement of performance criteria applicable to the entire grant. The Board of Directors ultimately decided, at its meeting of September 10, 2015, that, subsequent to the termination by Mr. Michel Combes of his position as
Chief Executive Officer, the partial or total acquisition of the 2015 Performance Units could not be contemplated, since these Performance Units pertained to future fiscal years (2016 to 2018) (see sub-section below Terms and conditions of Mr.
Michel Combes compensation in the context
of the Nokia Offer and of the termination of his position as Chief Executive Officer).
The two performance criteria were the following:
· |
|
Implementation of the Companys strategy: 50% of the vesting of the rights was based on the implementation and achievement of the Shift Plan, and more specifically, for fiscal year 2015, the
cost reductions. |
· |
|
Share performance: 50% of the vesting of the rights was based on the evolution of the Alcatel Lucent share price compared with a representative panel of 10 solution and service providers in the
telecommunication equipment sector (Adtran, Amdocs, Arris, Ciena, Cisco, CommScope, Ericsson, Juniper, Nokia and ZTE), it being noted that the evolution of the Alcatel Lucent share price was to be assessed using the same evaluation method as the one
applicable to the 2014 grant of Performance Units mentioned below. |
Characteristics of the grant: the satisfaction of
these performance conditions was to be assessed at the end of the 3-year vesting period. The value of each Performance Unit was to be determined based on the average of the Alcatel Lucent share price for the
20 trading days preceding March 13, 2018. The Board of Directors had decided to cap the resulting amount at 200% of the total target compensation (fixed and variable target), subject to presence and performance conditions, in compliance with
the AFEP-MEDEF Code.
2014 grant of Performance Units
The Board of Directors, at its
March 19, 2014 meeting, decided to grant Mr. Michel Combes 700,000 Performance Units with a 3-year vesting period, subject to the presence condition that he remain Chief Executive Officer until the end of the 3-year vesting period (2017),
and to the achievement of performance criteria applicable to the entire grant, which are described below.
Implementation of the
Companys strategy: 50% of the vesting of the rights was based on the achievement of the strategic targets of the Company as set forth in its financial plan for the vesting period, it being specified that the reference plan was the Shift Plan
for fiscal year 2014. The achievement level of the targets was to be assessed each year.
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COMPENSATION AND LONG-TERM INCENTIVES
Status of the executive directors and officers
The Board determined the performance targets attached to the implementation of the Companys
strategy, applicable for 2015, which were based on diversification, measured according to the growth of sales achieved outside the traditional business of the Company (Service Providers), such as sales to Governments and Large Enterprises (sectors
such as Oil & Gas, Transport, Utilities).
Share price performance: 50% of the vesting of the rights was based on the
performance of the Alcatel Lucent share price measured each year on March 19th against the share price of a panel of 10 solution and service providers in the telecommunication equipment sector (Adtran, Amdocs, Arris, Ciena, Cisco, CommScope,
Ericsson, Juniper, Nokia and ZTE), with similar evaluation grids and methodology as those used for the performance shares granted to employees under the new authorization of the Shareholders Meeting of May 28, 2014. The performance rate
was based on the Alcatel Lucent share price compared with the panel, according to the method applicable to the evaluation of performance for the members of the Leadership Team and varied between 0% and 100%. At each anniversary date of the grant,
the performance rate applied to one third of the grant, the final vesting being conditioned by the achievement of the presence condition at the end of the 3-year vesting period:
· |
|
if the Alcatel Lucent share price underperformed compared to those of the companies in the panel (its evolution was less than that of the panel median), no rights vested; |
· |
|
if the Alcatel Lucent share price performed as well as those of the companies in the panel (its evolution was equal to that of the panel median), 75% of the rights relating to the period considered
vested; |
· |
|
if the Alcatel Lucent share price overperformed compared to those of the companies in the panel by at least 10% with regard to the median, 100% of the rights granted relating to the period
considered vested; |
· |
|
between these two limits (median and median + 10%), the number of rights that vested was linearly proportional, from 75% to 100%. |
The Board of Directors would determine, on the basis of an analysis validated by an audit firm contracted for this purpose, whether or not the
performance conditions described above had been satisfied.
Gradual vesting period. The rights to these Performance Units vested over a
period of three years subject to the satisfaction of the performance criteria. At the end of the 3-year vesting period, the value of each Performance Unit was to be determined based on the average share price of the Alcatel Lucent share for the 20
trading days preceding March 19, 2017, each Unit being equal to the average of the share price.
Level of achievement for fiscal
year 2015. See sub-section below Terms and conditions of Mr. Michel Combes compensation in the context of the Nokia Offer and of the termination of his position as Chief Executive Officer.
Level of achievement for fiscal year 2014. The Board of Directors, upon the recommendation of the
Compensation Committee, and after approval of the financial elements by the Audit and Finance Committee, determined the level of achievement with respect to fiscal year 2014 of the first criterion, namely, the implementation of the Companys
strategy, that is 100% based on the achievement of the targets of the Shift Plan. The results of the Company for the fiscal year 2014 reflected all the progress made during the year.
The achievement level of the targets with respect to the second criterion, that is, the performance of the Alcatel Lucent share price, was
assessed on the anniversary date of the grant, that is, March 19, 2015. The Alcatel Lucent share price having ranked 3.1% above the reference panel median, the achievement level of this condition is 82.7%. Considering the achievement level of
the two performance conditions, the global achievement rate for fiscal year 2014 is 91.35% (which represents 213,150 vested Performance Units).
Presence condition. The rights attached to the Performance Units were to be definitively vested if Mr. Michel Combes was still the Chief Executive Officer at the end of the 3-year vesting period, that is, on March 19,
2017. This condition was waived by the Board of Directors given the proposed Nokia Offer and considering the termination by Mr. Michel Combes of his position as Chief Executive Officer in this context.
2013 grant of Performance Units
The Board of Directors, at its
March 7, 2013 meeting, decided to grant Mr. Michel Combes 1,300,000 Performance Units with a 3-year vesting period from the date on which he took office, on April 1, 2013, subject to the presence condition that he remain Chief
Executive Officer until the end of the 3-year vesting period (2016), and to the achievement of performance criteria applicable to the entire grant, which are described below.
Implementation of the Companys strategy: With respect to fiscal year 2013, 50% of the vesting of the rights was based on the definition and
the implementation of the Companys strategy in order to achieve the Performance Program as described in the information memorandum to lenders made available on December 14, 2012.
Upon the recommendation of the Compensation Committee, the Board of Directors decided to update the performance criterion relating to the
definition and the implementation of the Companys strategy for fiscal year 2014 in order to take into account the components of the Shift Plan announced on June 19, 2013, and more particularly, the divestments to be made in 2014 in
execution of the Plan. The achievement level of the targets was to be assessed each year.
The Board determined the performance targets
attached to the implementation of the Companys strategy, applicable for 2015, which were based on profitability, measured according to the Gross Margin indicator.
146
COMPENSATION AND LONG-TERM INCENTIVES
Status of the executive directors and officers
Share price performance: 50% of the vesting of the rights was based on the performance of the
Alcatel Lucent share price measured each year on April 1st against the share price of a panel of 10 solution and service providers in the telecommunication equipment sector (Adtran, Arris, Ciena, Cisco, Ericsson, F5 Networks Juniper, Motorola
Solutions Inc., Nokia and ZTE), with the same evaluation grids and methodology as those used for the performance shares granted to employees. The performance rate varied according to the ranking of the Alcatel Lucent share price within this panel,
that is: 100% if the Alcatel Lucent share price ranked among the top two; 75% if it ranked from rank 3 to rank 5; 50% if it ranked from rank 6 to rank 9; 0% if it ranked last.
Gradual vesting period. The rights to these Performance Units vested over a period of 3 years subject to the satisfaction of the performance
criteria. At the end of the 3-year vesting period, the value of each Performance Unit was to be determined based on the average share price of the Alcatel Lucent share for the 20 trading days preceding April 1, 2016, each Unit being equal to
the average of the share price.
Level of achievement for fiscal year 2015. See sub-section below Terms and conditions of Mr.
Michel Combes compensation in the context of the Nokia Offer and of the termination of his position as Chief Executive Officer.
Level of achievement for fiscal year 2014. The Board of Directors, upon the recommendation of the Compensation Committee, and after approval of the financial elements by the Audit and Finance Committee, determined the level of
achievement with respect to fiscal year 2014 of the first criterion, namely, the definition and the implementation of the Companys strategy, that is, 100% based on the achievement of the targets of the Shift Plan and, in particular, for fiscal
year 2014, on the basis of the progress in the divestments against the 1 billion
target. At the end of fiscal year 2014, the divestment operations completed or announced had reached over 70% of the Shift Plan target. The achievement level of the targets with respect to the
second criterion, that is, the performance of the Alcatel Lucent share price, was determined on the anniversary date of the grant, that is, April 1, 2015. The Alcatel Lucent share price having ranked in the fourth position, the condition was
achieved at 75%. Considering the achievement level of the two performance conditions, the global achievement rate for fiscal year 2014 was 87.5%, which represents 379,166 vested Performance Units.
Level of achievement for fiscal year 2013. The Board of Directors, upon the recommendation of the Compensation Committee, and after the approval
by the Audit and Finance Committee of the financial elements, determined the level of achievement with respect to fiscal year 2013 of the first criterion, namely, the definition and the implementation of the Companys strategy, that is, 100%
based on the achievement of the targets of the Performance Program. The achievement level of the targets with respect to the second criterion, that is, the performance of the Alcatel Lucent share price, was assessed on the anniversary date of the
grant, that is, April 1, 2014. The Alcatel Lucent share price having ranked in the first position, the condition was achieved at 100%. Considering the achievement level of 100% of the two performance conditions, the global achievement rate for
fiscal year 2013 was 100%, which represents 433,333 vested Performance Units.
Presence condition. The rights attached to the
Performance Units were to be definitively vested if Mr. Michel Combes was still the Chief Executive Officer at the end of the 3-year vesting period, on April 1, 2016. This condition was waived by the Board of Directors given the proposed
Nokia Offer and considering the termination by Mr. Michel Combes of his position as Chief Executive Officer in this context.
147
COMPENSATION AND LONG-TERM INCENTIVES
Status of the executive directors and officers
AMF Table N°1: Table summarizing the compensation, and the stock options and performance
shares granted to the Chief Executive Officer
|
|
|
|
|
|
|
|
|
Mr. Michel Combes CEO until August 31, 2015
(amount in Euros) |
|
Fiscal year 2014 |
|
|
Fiscal year 2015 |
|
|
|
|
|
|
|
|
|
|
Fixed compensation related to the fiscal year |
|
|
1,200,000 |
|
|
|
800,000 |
|
|
|
|
Variable compensation related to the fiscal year (1) |
|
|
804,000 |
|
|
|
1,195,000 |
|
|
|
|
Benefits in kind (2) |
|
|
_ |
|
|
|
_ |
|
|
|
Subtotal - Actual compensation |
|
|
2,004,000 |
|
|
|
1,995,000 |
|
|
|
|
|
|
Valuation of the stock-options granted related to the fiscal year (3) |
|
|
_ |
|
|
|
_ |
|
|
|
|
Valuation of the share grant in lieu of the 2014 stock-option plan |
|
|
_ |
|
|
|
184,915 |
|
|
|
|
Valuation of the performance shares granted related to the fiscal year (3) |
|
|
_ |
|
|
|
_ |
|
|
|
|
Valuation of the Performance Units granted related to the fiscal year (4) |
|
|
2,025,800 |
|
|
|
2,548,200 (5) |
|
|
|
|
The vesting period of the variable multi-annual compensation is three years, subject to presence and
performance conditions. |
|
|
|
|
|
|
|
|
|
|
TOTAL |
|
|
4,029,800 |
|
|
|
4,728,115 |
|
|
|
|
|
|
Non-compete |
|
|
_ |
|
|
|
1,033,333 (6) |
|
(1) |
|
Related to the fiscal year and paid in the following year, after the publication of the annual results on the basis of which the achievement level of the annual performance targets was
determined. The variable compensation of Mr. Michel Combes for fiscal year 2015 corresponds to the compensation he was entitled to, reduced pro rata of his presence with the Company during fiscal year 2015. |
(2) |
|
A company car with a driver was made available to Mr. Michel Combes as part of his functions. |
(3) |
|
No performance shares or stock options were granted to Mr. Michel Combes. See, however, the paragraph Concerning the compensation in lieu of the stock options in the sub-section
below Terms and conditions of Mr. Michel Combes compensation in the context of the Nokia Offer and of the termination of his position as Chief Executive Officer. |
(4) |
|
2014: The number of Performance Units granted to Mr. Michel Combes in 2014 was 700,000. This grant was valued at 2,025,800, calculated on the basis of the Alcatel Lucent share price
on March 19, 2014, the date on which it was granted by the Board of Directors. |
|
|
2015: The number of Performance Units granted to Mr. Michel Combes in 2015 was 685,000. This grant was valued at 2,548,200, calculated on the basis of the Alcatel Lucent share price
on March 13, 2015, the date on which it was granted by the Board of Directors. |
(5) |
|
Upon the departure of Mr. Michel Combes, the Board of Directors considered that since these Performance Units related to future fiscal years (2016 to 2018), they could not become vested.
|
|
|
For more information, see the paragraph Concerning the Performance Units in the sub-section below Terms and conditions of Mr. Michel Combes compensation in the
context of the Nokia Offer and of the termination of his position as Chief Executive Officer. |
(6) |
|
Non-compete payment payable in three equal installments, the first payment having been made in November 2015. |
Terms and conditions of Mr. Michel Combes compensation in the context of the Nokia
Offer and of the termination of his position as Chief Executive Officer
In connection with the Nokia Offer, the Companys Board of Directors had decided, at its meeting of April 14, 2015, the principle of the
acceleration of the Performance Units granted to Mr. Michel Combes and their payment with Company shares, as well as of the grant of shares to him instead of the 2014 stock option plan, similar to the mechanism put in place for the long-term
compensation of employees of the Alcatel Lucent Group, which included the waiver of the presence condition and of the future performance conditions related to this compensation, subject, in particular, to the completion of the Nokia Offer.
At its meeting of July 29, 2015, the Board of Directors had requested the execution of a non-compete agreement to protect the
Companys interests, in the context of the termination by Mr. Michel Combes of his position as Chief Executive Officer. Pursuant to this non-compete agreement, Mr. Michel Combes was entitled to a non-compete compensation payable in
shares of the Company or of Nokia, depending on the status of the proposed combination with Nokia.
On September 10, 2015, the Board of Directors reviewed the elements of Mr. Michel
Combes long-term compensation and the terms of the non-compete agreement in light of the recommendations issued by the High Committee for Corporate Governance. Consequently, the Board of Directors reconsidered the treatment of the Performance
Units and the non-compete compensation and decided that the acquisition of the Performance Units would be prorated and that the non-compete payments would be made in cash instead of shares.
I. Concerning the Performance Units
Level of achievement of the 2013 and
2014 plans for the 2013 and 2014 fiscal years. The 2013 and 2014 allotments of the 2013 and 2014 plans have already vested, representing 1,025,649 Performance Units. Based on the ratio of one share for one Performance Unit and the share being valued
at August 31, 2015 (on the basis of the average opening price of the Alcatel Lucent share over the twenty trading days preceding this date) at 3.17, this represents an
amount of 3,251,307, paid in cash.
Level of achievement of the
2013 and 2014 plans for fiscal year 2015. The 2015 allotments for the 2013 plan, that is, 433,333 Performance Units, and for the 2014 plan, that is, 233,333 Performance Units were pro-rated based on
148
COMPENSATION AND LONG-TERM INCENTIVES
Status of the executive directors and officers
(i) Mr. Michel Combes presence during fiscal year 2015, that is, two thirds, and
(ii) the level of achievement of the initial economic performance criteria applicable to these Performance Units, determined at the beginning of fiscal year 2016 by the Board of Directors for each of these plans, excluding the criterion related
to the Alcatel Lucent share price performance, since the evolution of the Alcatel Lucent share price performance was directly impacted by the combination with Nokia.
The Board of Directors, at its February 10, 2016 meeting, upon the recommendation of the Compensation Committee, and after the approval by
the Audit and Finance Committee of the financial elements, determined the level of achievement with respect to fiscal year 2015 of the economic performance criteria, namely:
· |
|
With respect to the 2013 plan, the definition and the implementation of the Companys strategy, and, more particularly, the evolution of the profitability measured according to the Gross
Margin indicator, that is, 100%. The global achievement rate for fiscal year 2015 is 100%. Given the pro rata principle based on the presence of Mr. Michel Combes during fiscal year 2015, the number of vested 2013 Performance Units amounts to
288,889 for that fiscal year. |
· |
|
With respect to the 2014 plan, the implementation of the Companys strategy: The growth objective of the sales done outside of the traditional activity of the Company was not reached,
resulting in a performance rate of 0%. No 2014 Performance Units were therefore vested for fiscal year 2015. |
Given the
level of achievement (that is, 100% for the criterion linked to the 2013 plan and 0% for the criterion linked to the 2014 plan), 288,889 Performance Units were vested for an amount of
915,778 paid in cash according to a ratio of one share for one Performance Unit, the share being valued at August 31, 2015 (on the basis of the average opening price of the
Alcatel Lucent share over the twenty trading days preceding this date) at 3.17. This amount was reduced by an amount corresponding to the employee portion of the social charges
owed on the date of payment by Alcatel Lucent on behalf of Mr. Michel Combes.
Level of achievement of the 2015 plan for fiscal
year 2015. The 2015 Performance Units corresponding to future fiscal years (2016 to 2018) will not be allotted, given that Mr. Michel Combes will no longer be part of the Company during those years.
II. Concerning the compensation in lieu of the stock option plan
On April 14, 2015 and similar to
what it had decided for all of the employee beneficiaries, the Board decided to replace the undertaking of March 2014 toward Mr. Michel Combes to grant him 700,000 stock options by a grant of 350,000 Alcatel Lucent shares.
In accordance with the decision of the Board of Directors of September 10, 2015, the grant to the benefit of Mr. Michel Combes of these
Alcatel Lucent shares is prorated based on (i) his presence in the Company, that is, two-thirds of the first
year, such first year corresponding to 25% of the grant, and (ii) the level of achievement of the initially-determined performance criteria. The principles of the stock option plans
applicable since 2014 provide for a partial and progressive vesting of 50% on each of two successive periods, 50% at the end of the first two years and 50% at the end of the third year, this vesting being also conditioned on a performance condition
based on the level of Free Cash Flow.
Consequently, two-thirds of the 87,500 shares of the Company, that is, 58,333 shares of the
Company, were reviewed based on the level of achievement of the performance criteria that was evaluated at the beginning of fiscal year 2016. At its meeting of February 10, 2016, the Board of Directors determined that the performance condition
had been met, since the level of Free Cash Flow was positive over fiscal year 2015. Consequently, Mr. Michel Combes was entitled to all of the 58,333 shares and therefore received a compensation equal to 184,915 (58.333 x 3.17). This amount was paid to him in March 2016 and was reduced by an amount corresponding
to the employee portion of the social charges owed by the Company on behalf of Mr. Michel Combes on the date of the payment.
III. Concerning the non-compete agreement
At its meeting of July 29, 2015,
the Board of Directors acknowledged the decision of Mr. Michel Combes to end his mandate as Chief Executive Officer and Director of the Company effective as of September 1, 2015. Considering his expertise in the telecommunication sector and the
experience he had acquired at the Company, the Board of Directors, upon the recommendation of the Compensation Committee and the Corporate Governance and Nominating Committee, requested the signature of a non-compete agreement to protect the
Companys interests, in the context of the termination by Mr. Michel Combes of his position as Chief Executive Officer. At its meeting of September 10, 2015, the Board of Directors confirmed the importance of the non-compete
undertaking.
Pursuant to the non-compete agreement, Mr. Michel Combes may not have any role whatsoever with a competitor of the
Company, as employee or officer, or be a director or advisor of a competitor. The agreement also includes a non-solicitation obligation. The quantum of the payment was set at an amount of
3,100,000, the payment of which is to be made in three installments over three years. The duration of the non-compete undertaking was set at forty months, until
December 31, 2018. A first payment was made in November 2015, reduced by an amount corresponding to the employee portion of the social charges owed by the Company on behalf of Mr. Michel Combes on the date of the payment.
This non-compete agreement will be submitted to the approval by the shareholders at the next Shareholders Meeting of Alcatel Lucent pursuant
to Articles L. 225-38 and following of the French commercial Code.
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COMPENSATION AND LONG-TERM INCENTIVES
Status of the Executive Directors and officers
AMF Table no. 4: History of stock options granted to Mr. Michel Combes
The Chief Executive Officer did not receive any stock options.
AMF Table no. 6: History of performance shares granted to Mr. Michel Combes
The Chief Executive Officer did not receive any performance shares.
Pension plan
Since he
took office, the Chief Executive Officer benefitted from the private pension plan applicable to all corporate executives of the Alcatel Lucent Groups French subsidiaries (AUXAD plan) for the portion of compensation that exceeds eight times the
annual French Social Security limit beyond which there is no legal or contractual pension scheme, subject to performance conditions pursuant to applicable law. The system and the method of calculation of the AUXAD plan are similar to those of the
AGIRC plan. This pension scheme, established in 1976, has 322 beneficiaries, including approximately 25 executives of the Alcatel Lucent Group who are currently employed by Alcatel Lucent and by its French subsidiaries more than 50%-owned by Alcatel
Lucent. AUXAD does not require the beneficiary to be present in the Company at the time of retirement in order to receive the benefit.
Reference compensation and potential rights. The reference compensation includes the basic annual compensation (annual fixed and variable),
excluding extraordinary items and variable items pursuant to the long-term compensation plan. On the assumption that performance criteria are reached at 100%, the AUXAD plan would generate a potential annuity of approximately 1% per year for
compensation of approximately 1.2 million. Beyond this, this potential annuity could rise to 1.2%. This mechanism does not provide eventual potential rights above 45% of the
reference income.
The reference period to calculate the pension benefit is the total period of office(s) of Mr. Michel Combes as
Chief Executive Officer.
Performance criteria. The benefit of the pension plan was based on three quantitative performance criteria
collectively weighted at 75% (25% each) and two qualitative criteria collectively weighted at 25% (12.5% each):
· |
|
The three quantitative criteria corresponded to the evolution of (i) revenue, (ii) operating income (loss) and (iii) the Alcatel Lucent share price in the previous fiscal years, in
each case, as compared with a representative sample of companies in the sector consistent with the panel used for the stock option and performance share plans (see the list of companies in Section 8.1.2 Performance shares).
|
· |
|
The two qualitative criteria corresponded to the implementation of the Performance Program and to the evolution of the index reflecting the customer satisfaction.
|
Achievement level of the quantitative criteria. A performance rate was to be determined based on
the achievement level of the three quantitative performance criteria as follows: 100% if Alcatel Lucent was ranked in the first two (1st-2nd)
places, 75% if Alcatel Lucent was ranked between the third and the fifth (3rd-5th) places, 50% if Alcatel Lucent was ranked between the sixth
and the tenth places (6th-10th) and 0% if Alcatel Lucent was ranked below the tenth
(10th) place.
Global performance rate. Over the reference period, a global
performance rate was to be calculated based on the achievement level of the quantitative and qualitative criteria in order to determine the rights of the Chief Executive Officer pursuant to this pension plan. If the global performance rate was
(i) greater than 85%, 100% of the rights would vest (ii) between 50% and 85%, 75% of the rights would vest (iii) between 25% and 50%, 50% of the rights would vest, and if the global performance rate was less than 25%, no rights would
vest pursuant to this plan.
Performance review upon termination of the office of Mr. Michel Combes. Upon the departure of
Mr. Michel Combes, the Board of Directors measured the overall performance rate against these criteria and considered that, in view of the annual results of the Company and its competitors, 100% of the rights accrued by Mr. Michel Combes
under the AUXAD plan were definitively attributed to him.
Rights definitively acquired. The final number of points will only be
calculated after the payment of the variable compensation for 2015 and will amount to a maximum annuity of approximately 36,000 per year. These points will only be
converted into an annuity when Mr. Michel Combes settles his rights under French supplementary pension schemes.
Benefits
after termination of functions
When Mr. Michel Combes took office in March 2013, it was agreed that he would receive a
termination benefit, the amount of which would be equal to one year of the total target compensation (fixed and variable target), subject to performance conditions as required by applicable law. This termination benefit was subject to a performance
condition regarding the Companys situation, consisting in the Free Cash Flow, as reported in the Companys audited financial statements, being positive for at least one fiscal year before the end of Mr. Michel Combes term of
office as Chief Executive Officer. The Free Cash Flow corresponded to the net cash generated (or used) for operating activities (including restructuring cash outlays and the financing of pensions and post-employment benefits), less investments in
tangible and intangible assets. This performance condition could only be entirely fulfilled (at 100%) or not fulfilled (0%).
In
compliance with the AFEP-MEDEF Code, this termination benefit would only be paid if the following conditions were met: (a) the Board of Directors terminates the Chief Executive Officer in the context of a change of control or strategy and
(b) the above-described performance condition is met.
No termination benefit was to be due in the following cases: if
Mr. Michel Combes (a) is responsible for gross negligence or has
150
COMPENSATION AND LONG-TERM INCENTIVES
Status of the executive directors and officers
engaged in gross misconduct, (b) leaves the Company on his own initiative, (c) changes
position within the Alcatel Lucent Group, or (d) is entitled to claim his pension rights within a short time period.
Determination upon the resignation of Mr. Michel Combes. At its meeting on July 29, 2015, the Board of Directors determined that none of
the above conditions were satisfied at
the time of the resignation of Mr. Michel Combes and concluded that no termination benefit should be paid to Mr. Michel Combes.
Employment Contract. No employment contract existed between Mr. Michel Combes and Alcatel Lucent or its subsidiaries, in accordance with the
AFEP-MEDEF Code.
AMF Table N°10: Table
summarizing the situation of the Chief Executive Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mr. Michel Combes |
|
Employment contract |
|
|
Supplemental pension scheme |
|
|
Termination payment or benefits owed resulting from the termination of position |
|
|
Compensation paid pursuant to a non-compete clause |
|
|
|
|
|
|
|
|
|
|
|
Chief Executive Officer In office from April 1, 2013 to August 31, 2015 |
|
|
None |
|
|
|
Yes. Please refer to Section 8.2.4 Chief Executif Officer, paragraph Pension plan for more details |
|
|
|
Yes (not applicable). Please refer to Section 8.2.4 Chief Executive Officer, paragraph Benefits after
termination of functions for more details. |
|
|
|
Yes. Please refer to Section 8.2.4 Chief Executive Officer, paragraph Non-compete agreement for more details. |
|
|
|
Apart from the above-described contractual commitments, there is no other commitment concerning the
Chief Executive Officer with respect to compensation, indemnities or benefits owed by reason of the termination or change of his position or following such termination or change of position.
Summary of compensation due or granted to the Chief Executive Officer for fiscal year 2015, submitted to the opinion of the shareholders
Pursuant to the AFEP-MEDEF Code (recommendation 24.3), Code which the Company uses as reference pursuant to Article L. 225-37 of
the French Commercial Code, the following components of the compensation due or granted with respect to
the then ended fiscal year to each Executive Director are subject to the consultative opinion of the shareholders:
· |
|
annual variable portion and, as the case may be, the multi-annual variable portion, with targets that are used to determine this variable portion; |
· |
|
exceptional compensation; |
· |
|
stock options, performance shares and any other components of long-term compensation; |
· |
|
welcome bonus and severance pay; |
· |
|
supplemental pension scheme; |
151
COMPENSATION AND LONG-TERM INCENTIVES
Status of the executive directors and officers
|
Compensation due or granted during the past fiscal year |
|
|
|
|
|
Nature |
|
Amount (in euros) |
|
Presentation |
|
|
|
Fixed annual compensation |
|
1,200,000 |
|
The gross fixed annual compensation of Mr. Michel Combes as CEO amounted to 1.2M, which had not
changed since he took office on April 1, 2013. For fiscal year 2015, this fixed compensation, calculated on a pro rata temporis basis until the date of termination of his duties on August 31, 2015, amounted to 800,000. |
|
|
|
Annual variable compensation |
|
1,195,000 |
|
The variable compensation of Mr. Michel Combes compensation for fiscal year 2015
was conditioned upon the achievement of certain performance targets. It could range from 0 to 200% of his fixed annual compensation, with a target bonus at 100% for targets reached. The applicable performance criteria determined by the Board of
Directors were the following:
· 50% based on
Corporate targets, namely the Segment Operating Cash Flow and the level of customer satisfaction, which are the same targets as those applicable to all employees of the Group, according to the terms of the Achievement Bonus Plan or
ABP. · 50%
based on the satisfaction of the objectives of the Shift Plan for fiscal year 2015, mainly focusing on fixed costs. The Corporate
performance indicator breaks down as follows: the Segment Operating Cash Flow accounts for 40% of the total performance criteria and the level of customer satisfaction accounts for 10 % of the total performance criteria (accounting together for 50%
of the performance criteria). The level of customer satisfaction is measured through a customer survey. At its meeting of February 10,
2016, the Board of Directors, upon the recommendation of the Compensation Committee, and after approval of the financial elements by the Audit and Finance Committee, determined the level of achievement for 2015 of each of the criteria, that is, 154%
based on the Segment Operating Cash Flow, 133% based on customer satisfaction, and 149% based on the achievement of the Shift Plan targets. As a result, the variable compensation of Mr. Michel Combes for fiscal year 2015 was 1,195,000, which corresponds to 149,4% of his fixed compensation, pro rata to his presence with the Company during fiscal year 2015. |
|
|
|
Annual deferred variable compensation |
|
N/A |
|
Mr. Michel Combes did not receive any deferred variable compensation. |
|
|
|
Multi-annual variable compensation |
|
3,251,307
915,778 |
|
Performance Units are conditional rights which grant the beneficiary the right to
receive a compensation in cash. In connection with the Nokia Offer, the Companys Board of Directors, at its meeting of April 14, 2015, decided the principle of the acceleration of the Performance Units granted to Mr. Michel Combes,
similar to the mechanism put in place for the long-term compensation of employees of the Alcatel Lucent Group, including the waiver of the presence condition and of the future performance conditions related to this compensation, subject to the
success of the Nokia Offer. At its meeting of September 10, 2015, the Board of Directors reviewed the Performance Units of
Mr. Michel Combes by taking into account for the vesting of his rights only the periods prior to his departure, as follows:
· Level of
achievement of the 2013 and 2014 plans for the 2013 and 2014 fiscal years. The 2013 and 2014 allotments of the 2013 and 2014 plans had already vested, representing, 1,025,649 Performance Units. Based on the ratio of one share for one Performance
Unit and the share being valued at August 31, 2015 (on the basis of the average opening price of the Alcatel Lucent share over the twenty trading days preceding this date) at
3.17, this represents an amount of 3,251,307 paid in cash.
· Level of
achievement of the 2013 and 2014 plans for fiscal year 2015. The 2015 allotments for the 2013 plan, that is, 433,333 Performance Units, and for the 2014 plan, that is, 233,333 Performance Units were pro-rated based on (i) Mr. Michel
Combes presence during fiscal year 2015, that is, two thirds, and (ii) the level of achievement of the initial economic performance criteria applicable to these Performance Units, determined at the beginning of fiscal year 2016 by the Board of
Directors for each of these plans, excluding the criterion related to the Alcatel Lucent share price performance, since the evolution of the Alcatel Lucent share price performance was directly impacted by the contemplated combination with
Nokia. |
152
COMPENSATION AND LONG-TERM INCENTIVES
Status of the executive directors and officers
|
|
|
|
|
Nature |
|
Amount (in euros) |
|
Presentation |
|
|
|
|
|
|
|
The Board of Directors, at its meeting of February 10, 2016, upon the recommendation of
the Compensation Committee, and after the approval by the Audit and Finance Committee of the financial elements, determined the level of achievement with respect to fiscal year 2015 of the economic performance criteria, namely:
· With respect to
the 2013 plan, the definition and the implementation of the Companys strategy, and, more particularly, the evolution of the profitability measured according to the Gross Margin indicator, that is, 100%. The global achievement rate for
fiscal year 2015 is 100%. Given the pro rata principle based on the presence of Mr. Michel Combes during fiscal year 2015, the number of vested 2013 Performance Units amounts of to 288,889 for that fiscal year.
· With respect to
the 2014 plan, the implementation of the Companys strategy: The growth objective of the sales done outside of the traditional activity of the Company was not reached, resulting in a performance rate of 0%. No 2014 Performance Units were
therefore vested for fiscal year 2015. Given the level of achievement (that is, 100% for the criterion linked to the 2013 plan and 0% for
the criterion linked to the 2014 plan), 288,889 Performance Units were vested for an amount of 915,778 paid in cash in March 2016 according to a ratio of one share for one
Performance Unit, the share being valued at August 31, 2015 (on the basis of the average opening price of the Alcatel Lucent share over the twenty trading days preceding this date) at
3.17. This amount was reduced by an amount corresponding to the employee portion of the social charges owed on the date of payment by Alcatel Lucent on behalf of Mr. Michel
Combes. Level of achievement of the 2015 plan for fiscal year 2015. The 2015 Performance Units corresponding to future fiscal
years (2016 to 2018) cannot become vested, given that Mr. Michel Combes will no longer be part of the Company during those years. |
|
|
|
Exceptional compensation |
|
N/A |
|
Mr. Michel Combes did not receive any exceptional compensation. |
|
|
|
Stock-options, performance shares or any other element of long-term compensation |
|
184,915 |
|
At its meeting of April 14, 2015 and similar to what it decided for all of the employee
beneficiaries, the Board of Directors decided to replace the undertaking of March 2014 toward Mr. Michel Combes to grant him 700,000 stock options by a grant of 350,000 Alcatel Lucent shares.
In accordance with the decision of the Board of Directors of September 10, 2015, the grant to the benefit of Mr. Michel Combes of these Alcatel
Lucent shares is prorated based on (i) his presence in the Company, that is, two-thirds of the first year, such first year corresponding to 25% of the grant, and (ii) the level of achievement of the initially-determined performance criteria. The
principles of the stock options plans applicable since 2014 provide for a partial and progressive vesting of 50% on each of two successive periods, 50% at the end of the first two years and 50% at the end of the third year, this vesting being also
conditioned on a performance condition based on the level of Free Cash Flow. Consequently, two-thirds of the 87,500 shares of the
Company, that is, 58,333 shares of the Company, were reviewed based on the level of achievement of the performance criteria that was evaluated at the beginning of fiscal year 2016. At its meeting of February 10, 2016, the Board of Directors
determined that the performance condition had been met, since the level of Free Cash Flow was positive over fiscal year 2015. Consequently, Mr. Michel Combes was entitled to all of the 58,333 shares and would therefore receive a compensation equal
to 184,915 (58.333 x 3,17). This amount was paid to him in March 2016 and was reduced by an amount
corresponding to the employee portion of the social charges owed on the date of the payment by the Company on behalf of Mr. Michel Combes. |
|
|
|
Directors fees |
|
N/A |
|
Like other Executive Directors, Mr. Michel Combes did not receive any attendance fees. |
|
|
|
Benefits of any nature |
|
N/A |
|
Mr. Michel Combes benefitted from a car with a driver as part of its functions. |
153
COMPENSATION AND LONG-TERM INCENTIVES
Status of the executive directors and officers
|
|
|
Compensation due or granted during the past fiscal year and on which shareholders have expressed or must express their opinion with respect to the regulated
agreements and commitments rules |
|
|
|
|
|
Nature |
|
Amount |
|
Presentation |
|
|
|
Severance pay |
|
No amount due for fiscal year 2015 |
|
In compliance with the AFEP-MEDEF Code, Mr. Michel Combes could benefit from a
termination benefit equal to one year of the total target compensation (fixed and variable target), if the following conditions were met: (a) the Board of Directors terminated Mr. Michel Combes mandate as CEO in connection with a change of
control or strategy and (b) the performance condition in relation to the situation of the Company consisting in the Free Cash Flow (as reported in the Companys audited financial statements) being positive for at least one fiscal year before
the end of Mr. Michel Combess term of office was fulfilled. At its meeting of July 29, 2015, the Board of Directors determined that
none of the above conditions was satisfied at the time of the resignation of Mr. Michel Combes and concluded that no termination benefit should be paid to Mr. Michel Combes. |
|
|
|
Non-compete clause |
|
3,100,000 |
|
Considering Mr. Michel Combes expertise in the telecommunication sector and the
experience he had acquired at the Company, the Board of Directors requested the execution of a non-compete agreement to protect the Companys interests, in the context of the termination by Mr. Michel Combes of his position as Chief Executive
Officer. The quantum of the payment was set at an amount of
3,100,000, the payment of which is to be made in three installments over three years. This amount will be reduced by an amount corresponding to the employee portion of the social charges owed by the Company on behalf of Mr. Michel Combes on the date
of the payment. The duration of the non-compete undertaking was set at forty months, until December 31, 2018. A first payment was made in November 2015. This non-compete agreement will be submitted to the approval of the shareholders at the next Shareholders Meeting of Alcatel Lucent pursuant to Articles L. 225-38 et seq. of the French commercial Code. |
|
|
|
Supplemental pension schemes |
|
No amount due for fiscal year 2015 |
|
· Mr. Michel Combes benefits from the private pension plan applicable to all corporate executives employed by the Groups subsidiaries incorporated in France (AUXAD
plan) for the portion of their income that exceeds eight times the annual French Social Security limit, beyond which there is no legal or contractual pension scheme, subject to performance conditions as required by law.
· The pension plan
was subject, for 75%, to three quantitative criteria (25% each), corresponding to the evolution of (i) revenues, (ii) operating income and (iii) the evolution of the Alcatel Lucent share price compared with previous fiscal years and a
representative sample of companies in the sector consistent with the sample used for the stock option and performance shares plans, and, for 25%, two qualitative criteria (12.5% each), corresponding to the implementation of the Performance Program
and the evolution of the customer satisfaction index. · Over the reference period, the global performance rate will be calculated to determine the rights with respect to this plan. The pension was calculated based on the
achievement level of the quantitative and qualitative criteria in order to determine the rights of the Chief Executive Officer pursuant to this pension plan. If the global performance rate was (i) greater than 85%, 100% of the rights would be vested
(ii) between 50% and 85%, 75% of the rights would be vested (iii) between 25% and 50%, 50% of the rights would be vested, and if the global performance rate was less than 25%, no right would be vested pursuant to this plan.
· The reference
compensation includes the annual compensation (fixed and variable compensation), excluding exceptional compensation and excluding variable components of a long term incentive plan. Based on performance conditions achieved at 100%, the Auxad pension
plan would generate a potential life annuity of |
154
COMPENSATION AND LONG-TERM INCENTIVES
Status of the executive directors and officers
|
|
|
|
|
Nature |
|
Amount |
|
Presentation |
|
|
|
|
|
|
|
approximately 1% per year for a remuneration of approximately 1.2M. Above, such potential life annuity would amount to approximately 1.2%. Potential rights under this scheme could not exceed 45% of the reference compensation.
· This commitment was
authorised at the Board of Directors meeting held on March 7, 2013 and was approved by the Shareholders Meeting of May 7, 2013 (resolution n°10) as part of the regulated agreements and commitments rules.
· Upon the departure of Mr.
Michel Combes, the Board of Directors measured the overall performance rate against these criteria and considered that, in view of the annual results of the Company and its competitors, 100% of the rights accrued by Mr. Michel Combes under the AUXAD
plan were definitively attributed to him. |
8.2.5 Management committee
The compensation of the members of the Management Committee1 consists of a fixed portion, a
variable portion (except for the Chairman and CEO) and long-term compensation and benefits based on Alcatel Lucent Group performance criteria reviewed by the Compensation Committee, similar to those applicable to a large number of Alcatel Lucent
Group managers, and on their individual performance.
The aggregate amount of fixed and variable compensations of the Management
Committee for fiscal year 2015 amounts to 9 million, including fixed compensation of 4 million. The fixed part of the compensation may also include, where applicable, benefits in kind and expatriation or repatriation allowances as well as housing allowances for
expatriates. The variable part for each fiscal year, payable the following year, is defined by the Achievement Bonus Plan (ABP).
Note
29 to the financial statements included elsewhere in this annual report entitled Related party transactions summarizes the total compensation and other benefits provided to senior management.
In addition, Directors fees, if any, received by senior managers for their participation in
meetings of the Board of Directors of companies within the Alcatel Lucent Group are deducted from the salaries paid.
Further, upon the
recommendation of the Compensation Committee, since April 2014 and until January 8, 2016, each member of the Management Committee had the obligation to hold Alcatel Lucent shares is an amount equal to one years salary, until such time as such
person ceased to be a member of the Management Committee. The members of the Management Committee had a 3-year period in order to fulfill this obligation. This obligation also applied to the members of the Leadership team who were not members of the
Management Committee, for the duration of their functions within the Leadership team. In the context of the Nokia Offer, given the Reduced Liquidity that might affect the Alcatel Lucent shares following the success of the Nokia Offer, the Board of
Directors decided, upon recommendation of the Compensation Committee, to waive that holding requirement in order to allow members of the Leadership team to participate in the Nokia Offer.
Global amounts reserved for pensions
The aggregate commitments relating to pensions (taking into account total benefits obligation: vested and non-vested rights) and other benefits
granted to members of the Board of Directors and the Management Committee as of December 31, 2015
amounted to 7.1 million (compared with
5.9 million as of December 31, 2014). This amount is broken down as follows: 0 million relates to the Directors2
(compared to 0.7 million in 20143) and 7.1
million relate to the members of the Management Committee (compared to 5.2 million in 2014).
155
1 |
Until January 8, 2016, the Management Committee included 6 members, including until August 31, 2015, the Chief Executive Officer and, as from September 1, 2015, the Chairman
and CEO. Since January 8, 2016, it includes 3 members (see Section 7.1.1.3 The Leadership team and the Management Committee). |
2 |
Since September 1, 2015, no Director benefits from a pension commitment. Prior to September 1, 2015, Mr. Michel Combes was the only Director of the Company benefitting from the private pension
plan applicable to all corporate executives of the Alcatel Lucent Groups French subsidiaries (AUXAD plan). |
3 |
Including Mr. Michel Combes. |
COMPENSATION AND LONG-TERM INCENTIVES
156
157
SUSTAINABILITY
Approach to sustainability
9.1 |
Approach to sustainability |
Sustainability at Alcatel-Lucent means
responsible business innovation. It was integrated in all of our activities in 2015. As the leading specialist in IP networking, ultra-broadband access and cloud technology, Alcatel-Lucent remained focused on making global communications more
innovative, sustainable and accessible for people, businesses and governments worldwide.
9.1.1 |
Alcatel-Lucent sustainability priorities |
Our sustainability activities in 2015 focused on five core priorities, aligned with the results of
our materiality assessment in 2014 of the key issues related to sustainability and validated by our Chief Executive Officer and the Leadership Team. Those priorities were:
Eco-sustainability
· |
|
Lead in eco-innovation by providing energy efficient, environmentally sustainable networks and technologies that meet growing bandwidth demands |
Ethical business
· |
|
Reinforce ethical business in every action by every employee, contractor and subcontractor, with zero tolerance for compliance violations
|
Supply chain
· |
|
Do business with suppliers and contractors who meet our sustainability requirements and work to improve performance |
Our people
· |
|
Create a diverse and highly skilled global workforce that is able to meet customer demands for reliable, quality service |
Digital inclusion | The Alcatel-Lucent Foundation
· |
|
Help youth innovate in a digital world |
9.1.2 |
Our sustainability strategy and reporting framework |
Alcatel-Lucents sustainability strategy and reporting framework conformed to the following
key regulatory, investor and customer requirements and globally recognized sustainability frameworks in 2015:
· |
|
Article 225 of French Grenelle II law (July 10, 2010): Grenelle II requires companies annual reports to include information on the environmental, social and societal
impacts of their business activities and on their commitments to sustainable development, with independent, third-party verification of the information published. |
· |
|
Global Reporting Initiative (GRI): Our sustainability report is prepared according to the GRI sustainability reporting guidelines. The 2010 report was prepared according to the GRI Guidelines, at
Application Level B+. The 2011, 2012 and 2013 reports were prepared according to the GRI Guidelines, at Application Level A+. All these reports were submitted for the GRI Application Level Service. The 2014 report was prepared following GRI G4 Core
Guidelines. The 2015 report will only focus on the Grenelle II legal requirements and the Principles of the United Nations Global Compact. |
· |
|
United Nations Global Compact (UNGC): In 2015, Alcatel-Lucent based its sustainability activities and reporting on the 10 Principles of the UNGC. |
· |
|
EcoVadis: Our sustainability strategy follows the EcoVadis framework, which is a mandatory annual evaluation of
|
|
|
customer and supplier corporate social responsibility. It is based on the GRI, UNGC and ISO 26000 standards. In 2013, we were granted Gold Recognition with a score of 71/100, placing us in the
top two percent of suppliers assessed in all industrial categories. In early 2015, we were granted Gold Recognition for the third year in a row with a score of 81/100 placing us in the top 1% of suppliers assessed in all industrial categories.
|
· |
|
Dow Jones Sustainability Indices (DJSI): Our sustainability strategy is closely based on the RobecoSAM DJSI framework. In 2015, for the fourth year in a row, we were named Industry Group Leader for
the Communication Equipment Industry with a score of 92/100. This follows being named Leader of the Technology Supersectors CMT Communications Technology Sector in 2011, and recognized Group Leader for the Communication Equipment Industry in
2012, 2013, 2014 with scores of 86/100, 87/100 and 91/100, respectively. |
· |
|
Carbon Disclosure Project (CDP): Alcatel-Lucent referred to the CDP framework relating to climate change strategy, governance, performance as well as supplier requirements, in preparing its 2015
sustainability report. In 2015, Alcatel-Lucent received a score of 100A for transparency and performance placing us in the A-List of companies. Alcatel-Lucent was also classified in the CDP Supplier Climate A-List.
|
158
SUSTAINABILITY
Approach to sustainability
· |
|
International Integrated Reporting Framework (IIRC): In 2014, Alcatel-Lucent performed a gap assessment to incorporate the IIRC framework into its corporate reporting. In 2015 we launched a
dedicated analysis on quantifying value for one major product solution set based on energy efficiency requirements. The findings are being finalized at the time of the publication of this report. |
Provisions and guarantees for environmental risks
We continued to comply with all applicable environmental requirements and maintained our commitment to provide safe, environmentally sound
workplaces that will not adversely affect the health or safety of the communities in which we operate. The Group believes it is in material compliance with all environmental, health and safety laws and regulations, and that it has obtained all
material environmental permits and authorizations required for its operations and products.
However, we may need to incur future
expenditures significantly in excess of current expectations and forecasts to cover environmental liabilities, maintain compliance with current or future environmental, health and safety laws and regulations, or undertake any necessary remediation.
The future impact of environmental matters, including potential liabilities, changes in carbon and environmental reporting requirements and the pricing of carbon emissions, is often difficult to estimate. We modeled the potential pricing of carbon
on our financial statements and, while it is not possible to predict the outcome of remedial and investigatory activities with absolute certainty, we believe the ultimate financial impact of these activities net of applicable reserves
will not have a material adverse effect on our consolidated financial position or our income (loss) from operating activities.
As of
December 31, 2015, Alcatel-Lucents remaining outstanding balance related to its main provisions for environmental risks was 67 million.
Laws and regulations
Alcatel-Lucents operations, facilities and products remained subject to international, national and local laws and regulations in every
jurisdiction where it operated last year. These laws and regulations impose various limits (including on the discharge of pollutants into the air and water) and establish standards for
treating, storing and disposing of solid and hazardous waste that required the Alcatel-Lucent Group to remediate certain sites. We continued to incur annual costs to comply with these laws and
regulations in 2015.
Throughout 2015, Alcatel-Lucent monitored legal, regulatory and other developments that might affect the
environmental, health and safety aspects of its activities, products or services. Compliance reviews were performed regularly and appropriate remedial measures were implemented once applicable legal, regulatory and other requirements were
identified.
Remedial and investigative activities
Remedial and investigative activities continued in 2015 at numerous current and former facilities owned or operated by the former Alcatel and
Lucent entities. In 2015, Lucent Technologies Inc. (Alcatel-Lucent USA Inc.) remained a potentially responsible party at numerous Superfund sites, pursuant to the U.S. Comprehensive Environmental Response, Compensation and Liability Act of
1980 (CERCLA) or comparable state statutes in the United States (Lucent Technologies Inc. had been named as a successor to AT&T with respect to certain Superfund sites liabilities, as described below).
Under a Separation and Distribution Agreement with AT&T and NCR Corporation (a former subsidiary of AT&T), Alcatel-Lucent USA Inc. agreed
to assume responsibility for certain liabilities resulting primarily from or relating to its assets and the operation of its business as conducted at any time before or after separating from AT&T, including related businesses discontinued or
disposed of prior to its separation from AT&T. Under the Separation and Distribution Agreement, Alcatel-Lucent USA Inc. is required to pay a portion of contingent liabilities in excess of certain amounts paid out by AT&T and NCR, including
environmental liabilities.
For more information, including our anticipated remedial costs associated with the cleanup of the Fox River
Superfund Site in Wisconsin, please see Section 6.5 Contractual obligations and off-balance sheet contingent commitments, subtitle Specific commitments Alcatel-Lucent USA Inc.. In Alcatel-Lucent USA Inc.s
Separation Agreements with Agere and Avaya, those companies have agreed, subject to certain exceptions, to assume all environmental liabilities related to their respective businesses.
9.2.1 |
Overall environmental policy |
Our approach to
eco-sustainability
The information and communications technology (ICT) sector has the potential to play a critical role in
addressing challenges related to climate change. In 2015, Alcatel-Lucent continued to leverage its technological innovations to help customers
respond to their environmental challenges, while reducing its own direct environmental impact following a three-part approach:
· |
|
Developing eco-sustainable networks: Creating and bringing to market products, services and solutions that contribute to environmentally responsible end-to-end networks.
|
159
SUSTAINABILITY
Environment
· |
|
Leading the telecoms industry: Finding new responses to todays climate change challenges through open, collaborative research partnerships and forums (such as the GreenTouch consortium)
as well as our own Bell Labs research on energy efficiency.
|
· |
|
Reducing our carbon footprint: Decreasing our absolute carbon footprint from operations by 50% by 2020 compared to our 2008 baseline. By the end of 2015, our carbon footprint had decreased by 46%
compared to the 2008 baseline. |
9.2.2 |
Developing networks with sustainable use of resources |
Managing materials: Measures to improve efficiency of raw materials use
We use a life cycle assessment (LCA) approach to evaluate the consumption of raw materials throughout the life cycles of our products. Data and
results from LCA assessments inform continual improvements to achieve more efficient use of raw materials and energy at every stage of product life: raw material extraction, pre-processing, intermediate material and component manufacturing, final
manufacturing and assembly, packaging, distribution and installation, use, and end-of-life reuse and recycling. These improvements are then incorporated into our best practices for environmentally conscious product design.
Restricted substances
Our EHS design policies outlines our global mandates, requirements and standards related to the use of hazardous substances. We also maintain
similar standards for our suppliers: our contracts included clauses mandating specific requirements for substances that are banned, restricted, to be avoided or reportable to us. (For further information, please refer to
Section Responsible purchasing).
We make eco-declarations for all new product introductions available to our
customers. These include information on hazardous substances affected by regulations such as the
Restriction of Certain Hazardous Substances (RoHS) Directive and the Restriction, Evaluation and Authorization of Chemicals (REACH) Regulation. Each eco-declaration also states the availability
of relevant information on the treatment of pertinent parts at recycling facilities.
We regularly update our hazardous substances
requirements to include new requirements and voluntary targets.
We invest in R&D, partnerships and externally-funded projects to
identify and evaluate alternative materials with reduced environmental impact (whether through reduced toxicity or prolonged product life cycle). These included PVC alternatives, halogen- and lead-free materials, fluxes and corrosion protection. Our
history of leading-edge, lead-free R&D both internally and via industry partnerships was crucial in establishing a critical understanding of lead-free assembly reliability, and addressing key risk areas such as device attachment,
surface finishes, solder alloys and tin whiskers.
Product energy efficiency
The rapid increase of broadband traffic, along with the skyrocketing number of connected consumers, end-user devices and services, is putting
pressure on the ICT sector to introduce more power-efficient technologies. At Alcatel-Lucent, increased energy efficiency is an ongoing objective that covers our entire product portfolio.
Bell Labs
Network energy consumption is one of the major industrial challenges facing customers and the ICT industry at large. With exponential traffic
growth predicted for communication networks accompanied by increased energy costs service providers operational expenses will increase significantly without the development of more energy efficient technologies. A further concern
is access to stable, reliable power, which cannot be taken for granted in the case of off-grid or poor-grid deployments in developing countries and rural areas, or where massive deployments of network equipment like small cells present significant
operational challenges and expenses.
The Network Energy Research program of Bell Labs, Alcatel-Lucents research arm, focused on
optimizing network energy utilization and on developing innovative solutions for
Alcatel-
Lucent products. The programs research efforts spanned all major areas of the network, including wireless and fixed access, metro and core networks, and optical transmission. It
investigated technologies, architectures and solutions aiming at:
· |
|
reducing required energy per bit (that is, increase energy efficiency) for data transmission, processing or storage; |
· |
|
reducing power wastage from inefficiencies and overhead (for example, through more efficient thermal management and cooling); and |
· |
|
enabling off-grid deployments through new energy harvesting solutions and high-density energy storage technologies. |
This program also investigated innovative applications of ICT technologies such as connected and smart city applications (e.g., smart grids,
electric mobility, etc.).
160
SUSTAINABILITY
Environment
In January 2015, Bell Labs launched the second version of the GWATT (Global What if
Analyzer of NeTwork Energy ConsumpTion) application, which forecasts the impact future network traffic volume will have on ICT networks energy consumption. GWATT aims to drive intelligent dialogue about the sustainability potential of new
technologies and the relative importance of different architectures and technologies on end-to-end energy consumption. It is based on forecasts and network modeling from:
· |
|
Cisco Visual Networking Index (VNI); and |
· |
|
Global e-Sustainability Initiative (GeSI). |
More than 28,000 users
have accessed the second version of GWATT since its launch. It offers several new features compared with the original GWATT, including the modeling of applications traffic flows and network transformations (such as software-defined networking
and network functions virtualization).
GreenTouch consortium
Given that network energy consumption and carbon emissions affect the entire ICT industry, the Bell Labs vision of zero-power networking is based
on extensive collaboration with service providers, equipment manufacturers, research institutes and universities. This kind of collaboration was at the core of the
GreenTouch consortium founded under Bell Labs leadership in 2010 as a pre-competitive research initiative to improve network energy efficiency by a factor 1,000 compared to a
state-of-the-art 2010 reference network.
GreenTouchs five-year mission concluded at a public meeting in June 2015 with the
presentation of final results for all of its research projects and a comprehensive roadmap of technologies that will dramatically improve the energy efficiency of mobile access, fixed access and core networks. The proposed architectures,
technologies, algorithms and protocols along with the underlying modeling and evaluation methods developed by GreenTouch will set the stage for a more sustainable ICT infrastructure that can support future applications, services and
traffic growth while consuming less overall energy than conventional networks today. Two interactive applications were also publicly launched to help industry stakeholders better understand and build on the GreenTouch technologies.
The results presented by GreenTouch show it is possible to improve network energy efficiency by: a factor of 254 in fixed access networks, a
factor of 316 in core networks and a factor of 10,000 in mobile networks (compared to the 2010 reference networks). In practical terms, this means the net energy consumption of communication networks can be cut by 98% equivalent to the
greenhouse gas (GHG) emissions from 5.8 million passenger vehicles, even accounting for the tremendous network traffic growth since 2010.
The findings from the GreenTouch research projects are publicly available at www.greentouch.org.
9.2.4 |
Reducing our carbon footprint and the environmental impact of our operations |
Tracking and reporting on carbon emissions
We continue to report emissions from all sources including facilities, fleet operations, mobile sources of combustion and all other Scope 1 and 2
sources resulting directly from our business operations. We also report Scope 3 emissions from outsourced activities such as leased vehicles and vessels, product logistics, company business travel, contract manufacturing, employee commuting, product
use and purchased goods and services.
In 2015, we consolidated facilities to utilize resources more efficiently this action
along with our efforts to implement energy efficiency projects and conduct energy efficiency awareness programs for employees resulted in obtaining over a 9% reduction in CO2e emission levels
from our facilities compared to 2014.
Alcatel-Lucent followed the Greenhouse Gas Protocol (GHGP) to determine which elements to
measure, reporting on 10 of the 15 GHGP categories (four categories were not applicable to our business activities and with respect to Scope 3 category 2 Capital Goods is currently being evaluated for future addition).
We committed to reduce our absolute carbon footprint (CO2e) from Scope 1 and Scope 2 operations by 50% by 2020 (compared to our 2008
baseline of 827 tCO2e). According to the 2015 operational data available at the time of filing this report, the carbon footprint associated with our operations showed an approximate 46% reduction from 2008 levels.
Carbon Disclosure Project
In 2015, Alcatel-Lucent participated in the Carbon Disclosure Project (CDP) supply chain and investor questionnaires, scoring 100 out of a possible 100 points on disclosure and being assigned to the A band on
performance. Alcatel-Lucent was also classified in the CDP Supplier Climate A-List.
We also continue to utilize an
enterprise carbon accounting tool that helps streamline and automate our GHG data-collection process, identify additional opportunities for reductions, and reveal best practices for reducing the carbon footprint of our operations and supply chain
partners. All of this helps maintain our leadership position in carbon footprint measurement and reporting.
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Reducing the environmental impact of our operations: Energy consumption
Electricity accounted for 81% of our worldwide operational carbon footprint. In 2015, we decreased our worldwide total
electricity consumption by 7%, with an associated 11% reduction in CO2e from the previous year. Despite these noticeable reductions, our energy usage by building area increased by 6% (from 0.38
MWh/m2 to 0.41 MWh/m2).
Employees
Our total worldwide employee headcount at the end of 2015 was 50,047 in more than 100 countries worldwide. The figures take into account all
employees who worked for fully consolidated companies (including long-term absences/notice period) as well as for companies in which we own 50% or more of the equity.
The numbers were restated for the last two years due to the sale of our Enterprise activities on September 30, 2014. Enterprise headcount was
2,795 in 2013, and 463 in 2014.
Contractors and temporary workers
In 2015, the average number of contractors and temporary workers was 2,607 in the aggregate. The number of
contractors is composed of employees of third parties performing work subcontracted by Alcatel-Lucent.
The number of temporary workers is, in general, composed of employees of third parties seconded to perform work at our premises due, for example,
to a short-term shortfall in our employees or in the availability of a certain expertise.
Pursuing our commitment to create a diverse
and highly skilled global workforce, in 2015 we provided a stimulating work environment and continuous learning opportunities, fostering diversity and open dialogue by sharing knowledge and celebrating differences. Our goals last year were to
continue to drive the transformation of human resources and the expansion of Alcatel-Lucent University, enhance the effectiveness of our leadership programs and further diversify our workforce to foster future growth.
9.3.2 |
Work organization and management |
Strategic workforce planning
In 2015, we continued to execute The Shift Plan, our three-year strategic plan launched in 2013. For workforce evolution this meant strengthening
our capacity for short- and long-term workforce planning across different business segments. With respect to our product portfolio and financial performance, it was strategically essential that we align our workforce by:
· |
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translating the strategy behind The Shift Plan into an executable workforce plan; |
· |
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adopting a bottom-up approach that took into account country-specific legal and social constraints as well as business needs, leading to a realistic and feasible implementation plan in the
countries in which we operate; |
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controlling and monitoring the evolution of each countrys net headcount (through recruitment, attrition, transfer, mobility etc.); and |
· |
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planning our future geographic distribution in a consistent way (and in line with our real estate plan) at the global, country and sites levels. |
For further information on our strategic plan, please refer to Section 6.1 Overview of 2015.
Leadership Pipeline
Alcatel-Lucent continued to invest in the identification and development of leadership potential to support succession management. This included
conducting business talent reviews to identify future leaders and refresh our existing pipeline of high-potential talent (e.g., emerging leaders, high potentials and future top leaders). In 2015, a total of 1,080 future leaders and 3,203 critical
talents were identified to support our talent needs moving forward.
Focused on preparing future leaders and bringing diversity to our
top 200 leadership roles, the Leadership Pipeline relied on three pillars:
· |
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consistent identification of leadership talent; |
· |
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movement of talent across geographical, functional or business boundaries; and |
· |
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development of leaders using a broad variety of methods. |
Compensation
Alcatel-Lucent continued its policy to pay all employees fairly regardless of gender, ethnic origin or disability. We remain
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committed to provide a competitive compensation package in line with other major companies in the
technology sector and place particular emphasis on ensuring employee development, rewarding the skills that drive innovation and ensuring long-term employee engagement through appropriate policies, processes and recognition tools.
A new variable incentive plan (excluding the sales population) was implemented in 2014. It included corporate, business unit and individual key
performance indicators to enable employees to have greater visibility into and influence over their achievement and rewards. In 2015, our compensation strategy was aligned with The Shift Plan to strike a balance among the following elements: speed,
simplicity, trust and accountability. This included the implementation of common bonus plans, sales incentives and equity grants to ensure a consistent, global approach to compensation; the clear communication of performance achievement levels and
policies; and having employees set and review yearly performance targets with their managers.
The grants of long-term incentives
(e.g., stock options and performance shares) are decided by our Board of Directors upon recommendation of the Compensation Committee. The implementation of long-term incentives serves several purposes, including:
· |
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involving employees in Alcatel-Lucents results and in the achievement of The Shift Plan; |
· |
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encouraging and rewarding performance; and |
· |
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attracting and retaining talent in a highly competitive industry where quality and employee motivation are key factors for success. |
Long-term incentives were typically subject to presence and/or performance conditions. In the context of our combination with Nokia, the Board of
Directors decided, in April 2015, to waive the presence and performance criteria under certain conditions. This was subject to the success of the Nokia Offer. For further information, please refer to Section 8.1.8 Mechanisms put in place
with respect to long-term compensation instruments in the context of the Nokia Offer.
Employee compensation evolution (that is,
wages and salaries) over the past three years is set forth in Note 23 to our consolidated financial statements.
Training: Alcatel-Lucent University
The mission of Alcatel-Lucent University is to improve the performance of our employees, partners and customers and build the skills required for
business success through:
· |
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learning and development initiatives aligned with Alcatel-Lucents strategic priorities; |
· |
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state-of-the-art learning facilities and e-learning components; |
· |
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technical certifications for customers, partners and employees that offer professional standing in key technologies; |
· |
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programs targeting key Alcatel-Lucent jobs; |
· |
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a learner-centric approach that enables individuals to achieve proficiency in areas relevant to their particular organization, job role and career interests. |
All learning hours are tracked through a formal learning management system that provides auditable learning volume reports. Alcatel-Lucent
University leverages a personal, community-based learning application called My Personal Learning Experience (or My PLE), which allows students to better drive and manage their own learning programs. Designed around learning communities and the
sharing of best practices, My PLE makes it easier for students to learn from their peers and from content experts which, in turn, makes learning more relevant to the job.
Achievements
In 2015,
Alcatel-Lucent University delivered a total of 1.2 million hours of training to approximately 80,000 students from 136 countries. Of these hours, 43% were delivered to external learners (that is, customers and partners) and 57% were delivered
to internal learners (that is, employees and contractors).
In 2015, the University delivered an average of 11 hours of training per
internal learner. About 74.3% of internal learning was delivered online in 2015, an increase of 1.3% compared with the previous year. In addition, 373 employees received IP/service routing certification and 399 received LTE certification.
In June 2015, the University launched the Learning Store, making it easier for employees to find and access relevant training to
foster their development. By the end of the year, the Learning Store had received 25,000 visitors.
9.3.3 |
Promotion and enforcement of ILO core conventions |
Alcatel-Lucent Global Human Rights Policy
Our Global Human Rights Policy addresses the four primary roles we play in our business operations and ecosystem: employer, supplier of
telecommunications infrastructure, business partner and corporate citizen.
Following the 2012 update to this policy to ensure alignment with the UN Guiding Principles on
Business and Human Rights (the so-called Ruggie Principles), in 2015 we dedicated our efforts to implementing company measures according to the 10 Guiding Principles of the Telecommunications Industry Dialogue on Human Rights, Freedom of
Expression and Privacy. These
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principles are designed to ensure proper treatment of our workforce and external stakeholders
around the world, and to address our corporate role as a supplier of telecommunications infrastructure which supports transparency on freedom of
expression and privacy. In parallel, we continued to dialogue with key industry stakeholders, including our customers as well as civil society, on our common responsibilities to human rights
around the world.
9.3.4 |
Diversity and equal opportunity |
As a global enterprise, we actively seek to ensure our employees reflect the diversity of our
business environment. Our Global Human Rights Policy confirms our responsibility to provide equal opportunities for all employees and to recognize and respect the diversity of people and ideas. Our commitment to advancing equality and
non-discrimination is also reflected in specific initiatives against harassment and discrimination.
Global strategy for gender
diversity
Although women comprised 24% of our workforce in 2015 (+3% points since 2013), they did not have comparable
representation on our management teams. We make it a business imperative to nurture the skills and talents of women and to build management teams that reflect the diversity of our Company.
In 2015, we continued to implement a global strategy and action plan put in place in 2014 that assigned responsibility for gender diversity at the
organizational, corporate and country levels, and identified actions to be carried out in two main focus areas:
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For managers: In 2015 we continued our series of interactive sessions on gender diversity, addressing around 250 managers and leaders to help them understand why diversity is a business imperative
for Alcatel-Lucent and to build their awareness of workplace gender dynamics all with the aim to better tap our existing talent and improve organizational performance. |
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For employees: We continued to support the worldwide StrongHer employee network in 2015. In addition, our employees could attend events organized at Alcatel-Lucent and in collaboration with partner
networks and institutions
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such as UNESCO, the European Professional Women Network in Madrid, Arevas WE Network, HPEs WoMen@Work, Women@HP, Printemps des Femmes BP Petrochemicals Womens
Network, and Sodexo : Diverse and Unis-vers networks. |
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Supporting female leaders: In 2015, we renewed the TOP10 Women Program, which supports womens career development by offering to 10 participants in each region a mix of business sponsorship,
executive coaching, mentoring and networking over a one-year period. Participants were mentored in finance, strategy and business practices as well as personal branding, executive communications, leadership styles and organizational savviness. As a
result of this coaching and mentoring, 40% of our 2014-2015 TOP10 Women Program participants have already grown in their professional careers. |
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Leadership Pipeline: As of December 2015, women accounted for 23% of our Leadership Pipeline. |
Commitment to non-discrimination
Our commitment to advancing equality and non-discrimination was reflected in specific initiatives against harassment and discrimination in several countries (in particular, France and the United States).
In 2015, we continued to offer to our employees and managers resources and best practices to support lesbian, gay, bisexual and transgender (LGBT)
people in the workplace. For the fourteenth consecutive year, Alcatel-Lucent was recognized by the Human Rights Campaign Foundation with a perfect score on the Corporate Equality Index, which rates American workplaces on LGBT equality.
Responsible |
purchasing: Requirements for suppliers and subcontractors |
As a mandatory element of all agreements, Alcatel-Lucent requires suppliers to comply with clearly
defined principles based on international and sector standards. Our key references are the United Nations Global Compacts Ten Principles and the Electronics Industry Citizenship Coalition (EICC) Code of Conduct. Specifically, all suppliers
have to commit to the EICC Code of Conduct and to ensure that their supply chains meet the
associated requirements. All new suppliers are required to adhere to the Ten Principles of the UNGC.
We encourage suppliers to meet international standards for environment, safety and sustainability including ISO 14001 and OHSAS 18001. As part of our risk analysis and assessment processes, we track supplier compliance with these
standards.
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10.1 |
Information concerning our Company |
Company name and head office
Alcatel Lucent
148/152 route de la Reine, 92100 Boulogne-Billancourt.
Telephone: +33 1 55 14 10 10
Commercial name
Alcatel-Lucent
Corporate
structure and applicable law
French limited liability company subject to all the regulations governing commercial entities in
France, particularly the provisions of the French Commercial Code.
Date of incorporation and expiry date
The Company was incorporated on June 18, 1898 and will expire on June 30, 2086, unless there is an early dissolution or extension.
Corporate purpose
The Companys corporate purpose is the design, manufacture, operation and sale of all equipment, material and software
related to domestic, industrial, civil, military or other applications concerning electricity, telecommunications, computers, electronics, aerospace industry, nuclear energy, metallurgy, and, in
general, of all the means of production or transmission of energy or communications (cables, batteries and other components), as well as, secondarily, all activities relating to operations and services in connection with the above-mentioned means
worldwide. It may acquire interests in any company, regardless of its form, in associations, French or foreign business groups, whatever their corporate purpose and activity may be and, in general, may carry out any industrial, commercial,
financial, assets or real estate transactions, in connection, directly or indirectly, totally or partially, with any of the corporate purposes set out in Article 2 of the articles of association and with all similar or related purposes.
Registration number at the registry of commerce
The Company is registered at the Nanterre Commerce and Companies Registry under number 542 019 096. Its APE business activity code is 7010 Z.
Fiscal year
Our fiscal year begins on January 1st and ends on December 31st.
10.1.2 |
Specific provisions of the bylaws and of law |
The data set out below are extracts from our bylaws (Articles 7, 9, 12, 13, 14, 16, 17, 18, 21, 22
and 24), and a summary of certain legal and regulatory provisions applicable to companies having their registered office in France and whose securities are listed on a regulated market. Some of the provisions of the bylaws (articles 12 and 14) need
to be amended as a result of the success of the Nokia Offer (as defined in Section 4.2 History and development, sub-section Recent events - Update on the Nokia transaction and related matters - Initial and reopened
Nokia Offer). The modifications will be submitted to the vote of the shareholders at the coming 2016 Shareholders Meeting.
Holding of shares and obligations of the shareholders
A) Form
The shares are not represented by a
certificate.
Bearer shares are recorded in the books of the financial intermediary (bank or broker) in the name of the shareholder
with Euroclear.
Shares are registered until the nominal value is fully paid.
Fully paid shares may be in registered or bearer form at the shareholders choice up until the shareholder reaches a threshold of 3% of the
total number of shares. Once the threshold of 3% of the Companys total number of shares is reached, the shares must be registered as described in paragraph B) below. The obligation to register shares applies to all the shares already held as
well as to any shares which may be acquired subsequently in excess of this threshold.
B) Exceeding the thresholds of our articles of association
In accordance with the provisions of the articles of association, any individual or legal entity and/or shareholder that comes to own a number of
shares in the Company equal to or above 2% of the total number of shares must, within a period of five trading days from the date on which this share ownership threshold is
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exceeded, inform the Company of the total number of shares owned, by letter or fax. A further
notification must be sent in the same manner each time a new threshold of 1% is exceeded.
If the threshold of 3% of the total number
of shares is exceeded, the shareholder must, within a period of five trading days from the date on which this share ownership threshold is reached, request the registration of the shares. The copy of the request for registration, sent by letter or
fax to the Company within fifteen days from the date on which this share ownership threshold is exceeded, is deemed to be a notification that the threshold has been reached. A further request must be sent in the same manner each time a further
threshold of 1% is exceeded, up to 50%.
For purposes of the calculation of those thresholds, indirectly held shares and shares which
are considered to be owned pursuant to Articles L. 233-7 et seq. of the French Commercial Code must be taken into account.
In
each notification referred to above, the shareholder must certify that all securities held indirectly as well as the shares considered to be owned are included. The notification must also indicate the date(s) of acquisition.
These obligations of share notification and registration apply to the holders who own shares through American Depositary Shares
(ADSs).
If a shareholder fails to comply with the provisions relating to notification that the thresholds have been
exceeded, the voting rights for the shares exceeding the thresholds are, at the request of one or more shareholders holding at least 3% of the share capital, suspended under the conditions provided by law.
Any shareholder whose shareholding falls below either of the thresholds provided for above must also inform the Company thereof, within the same
period of five trading days and in the same manner.
C) Exceeding the legal thresholds
Beyond the notification obligations provided for in our articles of association, French law requires that any individual or legal entity, acting
alone or in concert, which comes to hold (including through ADSs), directly or indirectly, a total number of shares above 5%, 10%, 15%, 20%, 25%, 30%, 331/3%, 50%, 662/3%, 90% or 95% of the capital or of the voting rights of a company, notify the company and the AMF. The same notification obligation applies to any individual or legal entity holding a total number
of shares representing between 30% and 50% of the capital or voting rights, and that, within less than twelve consecutive months, increases such shareholding by at least 1% of the capital or voting right of the company (referred to as the
speed-limit excess rule). The 30% threshold and the speed-limit excess create an obligation for the concerned shareholder to launch a tender offer, as described below at paragraph E).
Pursuant to Article L.233-9 I 4° and 4° bis of the French Commercial Code, the issued shares or the voting rights that the reporting
entity is entitled to acquire at its sole initiative,
immediately or in the future, under the terms of an agreement or a financial instrument and the shares already issued or the voting rights covered by an agreement or a financial instrument to be
paid exclusively in cash which has economic effect for the reporting entity or individual similar to holding shares (e.g., cash-settled equity swaps, knock-in options), must also be taken into account for the calculation of the thresholds subject to
notification. Moreover, the separate disclosure requirement imposes an obligation to disclose additional information on the following agreements and financial instruments: (i) securities giving access to shares in the future and
(ii) shares already issued that the shareholder is entitled to acquire under the terms of an agreement or a financial instrument, based on the initiative of a third party.
The deadline to notify the AMF and the issuer is of four trading days (before the market or the trading system closes), after the day on which the
threshold is reached.
A notification must also be made within the same timeframe when the holding in capital or voting rights falls
below the above-mentioned thresholds, but not in the event the speed-limit excess occurs downwards due to sale(s) of shares or dilution of the shareholding.
In the event of a failure to appropriately notify that these thresholds have been exceeded, the voting rights of the shares in excess of the
threshold that should have been notified are suspended for any Shareholders Meeting that might be held up to the expiration of a period of two years from the date when the notification is eventually filed.
Four thresholds of respectively 10%, 15%, 20% and 25% create an obligation of declaration of intent as defined under Article L.233-7 of the French
Commercial Code. The deadline to notify the Company and the AMF is of five trading days (before the market closes).
D) Shareholders agreements
Any clause of a shareholders agreement which includes preferential conditions to transfer or to acquire shares listed on a
regulated market and relating to at least 0.5% of the Companys capital or voting rights, must be disclosed to the Company and to the AMF within five trading days from the date of the signature of such agreement.
E) Holdings triggering the mandatory filing of a tender offer
When an individual or legal entity, acting alone or in concert, comes to hold 30% of the capital or voting rights of the Company, or, while holding a total number of shares between 30% and 50%, comes to increase such holding by at
least 1% within less than 12 months, it must immediately inform the AMF and launch a tender offer for all of the equity securities and securities giving access to the capital or voting rights of the Company.
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F) Information on the number of voting rights
To allow shareholders to determine whether they have exceeded an ownership threshold, we publish the total number of voting rights monthly on our
Internet site.
G) Cross-shareholdings
In
accordance with French legislation relating to cross-shareholdings, a limited liability company may not own shares in another company if the latter holds more than 10% of the share capital of the former. In the event of cross-shareholdings that
violate this rule and unless an agreement is reached, the company owning the smaller percentage of shares in the other company must sell its stake. Until sold, the voting rights of these shares are suspended.
In the case where the cross-shareholding is held by a subsidiary, the shares are simply deprived of voting rights.
H) Identity of the holders
In accordance with the laws
and regulations in effect, and subject to the penalties provided therein, the Company may request from all organizations or authorized intermediaries any information concerning shareholders or holders of securities giving access, immediately or in
the future, to voting rights, their identity, the number of securities held and any restrictions eventually applicable to the securities.
Rights and obligations relating to the shares
Shareholders are liable only up to the nominal amount of
each share held. Any call for payment in excess of such amount is prohibited.
Each share gives right to a portion of the
Companys profits, in the proportion prescribed by the articles of association.
Dividends and other income from shares issued by
the Company are paid under the conditions authorized or provided for under the regulations in effect and in such a manner as the Shareholders Meeting, or, alternatively, the Board of Directors may decide.
A double voting right is granted to fully paid shares which have been held in registered form by the same person for at least three years.
Rights and obligations remain attached to a share regardless of who holds the share. Ownership of a share entails automatic acceptance
of the Companys articles of association and resolutions of the Shareholders Meeting.
Shares are indivisible
vis-à-vis the Company: joint owners of shares must be represented by a single person. Shares subject to usufruct must be identified as such in the share registration.
Changes in the capital
A) Capital increases
In accordance with applicable law,
our capital may be increased by cash or in-kind contributions, pursuant to a resolution of the Extraordinary Shareholders Meeting approved by two-thirds of the shareholders present or represented. This power may also be delegated to the Board
of Directors. In the event of a delegation to the Board of Directors, the Chief Executive Officer may be granted specific powers to complete the capital increase.
The capital may also be increased:
· |
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by the capitalization of reserves, profits or issuance premium pursuant to a decision of the shareholders at an Ordinary Shareholders Meeting taken with the approval of a simple majority of
the shareholders present or represented; |
· |
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in case of payment of a dividend in shares decided by an Ordinary Shareholders Meeting; or |
· |
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upon tender of securities or rights giving access to the Companys capital (bonds convertible into shares, bonds repayable in shares, warrants to purchase shares or other securities).
|
B) Capital decreases
The
capital may be decreased pursuant to a decision of two-thirds of the shareholders present or represented at an Extraordinary Shareholders Meeting, either by decreasing the nominal value of the shares or by reducing the number of shares
outstanding.
Management of the Company
Our Company is managed by a Board of Directors consisting of at least six and not more than fourteen members.
Each Director must hold at least 500 Alcatel Lucent shares.
Directors term of office - age limit
The Directors are elected for a period of three years. Exceptionally, the shareholders may appoint a Director for a period of one or two years in order to stagger the Directors terms of office. Outgoing Directors may be
re-elected subject to the following provisions.
A Director appointed to replace another Director holds office only for the remainder
of his predecessors term of office.
The maximum age for holding a directorship is 70. This age limit does not apply if less than
one third rounded up to the nearest whole number, of serving Directors have reached the age of 70.
No Director over 70 may be
appointed if, as a result, more than one third of the serving Directors rounded up as defined above, are over 70.
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If for any reason whatsoever the number of serving Directors over 70 should exceed one third as
defined above, the oldest Director(s) shall automatically be deemed to have retired at the ordinary Shareholders Meeting called to approve the accounts of the fiscal year in which the proportion of Directors over 70 years was exceeded,
unless the proportion was re-established in the meantime.
Directors representing legal entities are taken into account when
calculating the number of Directors to which the age limit does not apply.
Legal entities that are represented on the Board must
replace any 70 year-old representative no later than at the ordinary Shareholders Meeting called to approve the accounts of the fiscal year in which such representative reached the age of 70.
The age limitations apply to any Chairman of the Board of Directors, provided that such Chairman is not at the same time the Chief Executive
Officer of the Company, in which case the age limitation of 68 shall apply.
Powers and responsibilities of the Board of Directors
The Board of Directors is vested with all the powers granted to it by the current legislation.
The Board determines the business strategies of the Company and ensures their implementation.
Subject to the authority expressly reserved for the Shareholders Meeting, and within the limits of the corporate purpose, the Board of
Directors addresses any question that affects the Companys operations and governs the affairs of the Company through its deliberations.
The Board of Directors decides whether the management of the Company will be performed by the Chairman of the Board of Directors or by a Chief Executive Officer.
Chairman, Vice-Chairmen, Chief Executive Officer, Executive Vice-Presidents and Secretary
The Chief Executive Officer is responsible for the general management of the Company, unless the Board of Directors decides to entrust the general
management to the Chairman of the Board of Directors.
The Board of Directors appoints from among its members, upon the affirmative
vote of the majority of the Directors present or represented, a Chairman for a term not exceeding the term of his or her position as a Director. The Board of Directors may remove the Chairman at any time, upon the affirmative vote of the majority of
the Directors present or represented.
The Chairman of the Board of Directors performs the missions assigned to him by law and notably
must ensure the proper functioning of the Companys governing bodies. He chairs the meetings of the Board of Directors, organizes the work of the Board and ensures that the Directors are able to fulfill their mission.
The Board of Directors may appoint, if it so wishes, one or more Vice-Chairmen, and set their term
of office, which may not exceed their term as Director. The Vice-Chairman, or the most senior Vice-Chairman, performs the duties of the Chairman when the Chairman is unable to do so.
If it does not assign the general management of the Company to the Chairman, the Board of Directors appoints, whether among its members or not,
upon the affirmative vote of the majority of the Directors present or represented, a Chief Executive Officer for a term determined by it, not to exceed the term of his or her position as a Director, if applicable. The Board of Directors may remove
the Chief Executive Officer at any time, upon the affirmative vote of the majority of the Directors present or represented.
The Chief
Executive Officer is vested with the fullest power to act in all circumstances in the name of the Company, within the limits of the corporate purpose, the limitations set by the Board of Directors (as previously described in Section 7.1.2
Principles of organization of our Companys management) and subject to the powers that the law expressly bestows on the Shareholders Meetings and on the Board of Directors.
The Chief Executive Officer represents the Company in its relations with third parties. He represents the Company before the courts.
When the Chairman of the Board of Directors assumes the management of the Company, the provisions of this section and the law governing the Chief
Executive Officer apply to him.
Upon the proposal of the Chief Executive Officer, the Board of Directors may authorize one or more
persons to assist him, as Executive Vice-Presidents.
The maximum number of Executive Vice-Presidents that may be appointed has been
set at five.
The scope and term of the powers delegated to Executive Vice-Presidents is determined by the Board of Directors in
agreement with the Chief Executive Officer.
In their relations with third parties, Executive Vice-Presidents have the same authority
as the Chief Executive Officer.
In the event the office of Chief Executive Officer becomes vacant, the functions and powers of the
Executive Vice-Presidents continue until the appointment of a new Chief Executive Officer, unless otherwise decided by the Board of Directors.
The Board of Directors, on the recommendation of the Chairman or Chief Executive Officer, the Chairman or the Chief Executive Officer themselves and the Executive Vice-Presidents may, within the limits set by law, delegate such
powers as they deem fit, either for the management or conduct of the Companys business or for one or more specific purposes, to all authorized agents, whether members of the Board or not or part of the Company or not, individually or as
committees. Such powers may be permanent or temporary and may or may not be delegated to deputies.
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The Board must appoint a secretary and may also appoint a deputy secretary on the same terms.
Age limit for corporate executives
The Chief Executive Officer and Executive Vice-Presidents may hold office for the period set by the Board of Directors, but this period may not
exceed their term of office as Directors, if applicable, nor in any event may such period extend beyond the date of the Ordinary Shareholders Meeting called to approve the financial statements for the fiscal year in which they shall have
reached 68 years of age. The same age limit applies to the Chairman when he is also the Chief Executive Officer.
When the Chairman
does not also occupy the position of Chief Executive Officer, he may hold the office of Chairman for the period set by the Board of Directors, but this period shall not exceed his term as Director, as well as the age limit set for the Directors.
Board Observers
Upon the proposal of the Chairman, the Board of Directors must in turn propose to the Ordinary Shareholders Meeting the appointment of two Board Observers satisfying the conditions described below. The Board Observers are
invited and participate in Board meetings, but have no vote. They are appointed for three years. Exceptionally the shareholders may appoint a Board Observer for a period of two years in order to stagger the Board Observers terms of office.
Outgoing Board Observers may be renewed.
Article 14 of our bylaws provide that the Board Observers have to be, at the time of their
appointment, both employees of Alcatel Lucent or a Group company and members of a mutual investment fund as described below. Any mutual investment fund which satisfies the conditions defined below may propose to the Board candidates with a view to
their being appointed as Board Observers.
For purposes of the preceding requirements:
· |
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a company of the Alcatel Lucent Group is a company in which Alcatel Lucent holds directly or indirectly at least one half of the voting rights and/or any company in which a company of the Group
holds directly or indirectly at least one half of the voting rights; |
· |
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the mutual investment funds referred to above are those created pursuant to a corporate savings plan in which the Company or a Group company participates, and where the portfolio includes at least
75% of Alcatel Lucent shares. |
Upon the Chairmans recommendation, the Board of Directors may propose to the
Ordinary Shareholders Meeting the appointment of one or several additional Observers who do not fulfill the conditions above, who may or may not be shareholders, but the total number of Board Observers may not exceed six.
The Board Observers receive an annual remuneration, set at the Ordinary Shareholders Meeting and allocated by the Board of Directors.
The status of the Board Observers will be subject to a vote of the shareholders, as a result of the
completion of the Nokia Offer, at the next Shareholders Meeting (extraordinary part of the agenda).
Shareholders
Meetings
The General or Special Shareholders Meeting are convened and held under the conditions provided by law.
The decisions of the Shareholders Meeting are binding on all shareholders, including those not present or who dissent.
Meetings take place at the registered office or any other place specified in the notice of meeting.
All shareholders may attend the meeting in person, or vote by mail or by proxy, upon presentation of proof of identity and upon proof of
registration of the securities in their name on the beginning (0:00 hour, Paris time) of the second working day preceding the Shareholders Meeting, either in the Companys accounts of registered securities, or in the bearer share accounts
held by a duly authorized intermediary.
Subject to the conditions defined by regulations and in accordance with the procedures defined
beforehand by the Board of Directors, the shareholders may participate and vote in all General or Special Shareholders Meetings by video-conference or any electronic communication method, including Internet, that allows for their
identification.
Subject to the conditions set by the regulations in effect, the shareholders may send their proxy or mail voting form
for any General or Special Shareholders Meeting either in paper form or, upon decision of the Board reflected in the notices of the meeting, by electronic transmission. The electronic signature of the form consists, upon prior decision of the
Board of Directors, in a process of identifying which safeguards its link with the electronic form to which it relates by a login and password or any other process in the conditions defined by regulations in force.
In order to be considered, all necessary forms for votes by mail or by proxy must be received at the Companys registered office or at the
location stated in the notice of the meeting at least three days before any Shareholders Meeting. This time limit may be shortened by decision of the Board of Directors. Instructions given electronically that include a proxy or power of
attorney may be accepted by the Company under the conditions and within the deadlines set by the regulations in effect.
The meeting
may be broadcasted by video-conference and/or electronic transmission. If applicable, this should be mentioned in the notices of meeting.
All shareholders having expressed their vote electronically, sent a power of attorney or asked for their admission card or a certificate of participation may nevertheless transfer all or part of the shares for which they have voted
electronically, sent a power of attorney or asked for an admission card or a confirmation. However, if the transfer of ownership is made between the day on which the vote has been electronically expressed, or the power of attorney sent, or the
admission card or a confirmation
170
LISTING AND SHAREHOLDINGS
Information concerning our Company
of participation requested, and the beginning (0:00 hour, Paris time) of the second working day
preceding the meeting, the Company, upon notification of the intermediary authorized to hold the account, will invalidate or modify as a result, as the case may be, the electronic vote, the power of attorney, the admission card or confirmation. No
transfer of ownership or any transaction made after the second working day preceding the meeting, 0:00 hour, Paris time, whatever the means used, shall be notified by the authorized intermediary or taken into account by the Company, notwithstanding
any agreement to the contrary.
The Shareholders Meeting is chaired either by the Chairman or one of the Vice-Chairmen of the
Board of Directors, or by a Director appointed by the Board or by the Chairman.
The shareholders appoint the officers of the meeting,
that is, the Chairman, two scrutineers and a secretary.
The scrutineers are the two shareholders attending the meeting representing
the largest number of votes or, should they refuse, those who come after in descending order until the duties are accepted.
Copies or
extracts of the minutes may be authenticated by the Chairman of the Board, the secretary of the Shareholders Meeting, or the Director appointed to chair the meeting.
The Ordinary Shareholders Meeting may deliberate on a first call only if the shareholders present or represented hold at least one-fifth of
the shares with voting rights. No quorum is required for a meeting held upon a second call.
The Extraordinary Shareholders
Meeting may deliberate on a first call only if the shareholders present or represented hold at least one-quarter of the shares with voting rights, and one-fifth of the shares with voting rights in the event of a second call.
Voting rights
At the
General Shareholders Meeting held on June 1, 2007, the shareholders voted to eliminate the statutory limitation on voting rights at Shareholders Meetings; as a result and subject to what is described below, each member at every
meeting has the right to as many votes as the number of shares that he owns or represents.
However, fully paid registered shares,
registered in the name of the same holder for at least three years, have double voting rights.
In accordance with Article L. 225-99, paragraph 2 of the French Commercial Code, the elimination of
double voting rights must be decided by the Extraordinary Shareholders Meeting, with the authorization of a special meeting of holders of these rights.
Double voting rights are cancelled automatically for any share that is converted into a bearer share or the ownership of which is transferred.
However, the period mentioned above is interrupted, and the right acquired is preserved, in the event of a transfer from registered to registered form, as a result of intestate or testamentary succession, the division between spouses of a common
estate, or donation inter vivos in favor of a spouse or heirs.
Voting rights in all Ordinary, Extraordinary or Special
Shareholders Meetings belong to the usufructuary.
Appropriation of the result - dividend
The difference between the proceeds and the expenses of the fiscal year, after provisions, constitutes the profits or losses for the fiscal year.
An amount equal to 5% of the profits, minus previous losses, if any, is deducted in order to create the legal reserve, until such legal reserve is at least equal to 1/10th of the capital.
Additional contributions to the legal reserve are required if the legal reserve falls below that fraction for any reason.
The
distributable profits, that is, the profits for the fiscal year minus the previous losses and the deduction mentioned above, plus income carried over, is available to the Shareholders Meeting which, upon proposal of the Board, may decide to
carry over some or all of the profits, to allocate them to general or special reserve funds or to distribute them to the shareholders as a dividend.
In addition, the Shareholders Meeting may decide the distribution of sums deducted from the optional reserves, either as a dividend or as a supplemental dividend, or as a special distribution. In this case, the decision must
clearly indicate the reserves from which said sums are deducted. However, the dividends must be deducted first from the distributable profits of the fiscal year.
The Ordinary Shareholders Meeting may grant each shareholder, for all or part of the dividend distributed or the interim dividend, the
option to receive payment of the dividend or interim dividend in cash or in shares.
The Shareholders Meeting or the Board of
Directors, in the event of an interim dividend, must determine the date as of which the dividend is paid.
171
LISTING AND SHAREHOLDINGS
Information concerning our Company
10.1.3 |
Elements which could have an impact in case of public tender offer (information required by Article L. 225-100-3 of the French Commercial Code) |
Article L. 225-100-3 of the French Commercial Code requires disclosure of those elements which
could have an impact in case of a public tender offer. The following elements could have such an impact with respect to Alcatel Lucent:
· |
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the breakdown of capital and voting rights set forth below in Section 10.3.4 Shareholding and change in its structure; |
· |
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to ensure the stability in all circumstances of the Groups business and employees essential to its development, our Board of Directors is authorized, in the event of a takeover bid for
Alcatel Lucent, a tender offer for our shares or a procedure to delist our shares, to decide to accelerate the vesting of all outstanding options (other than those held by individuals who were Executive Directors on the option grant date or on the
date of the Boards decision), and give the right to exercise the options immediately, notwithstanding any
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holding period. Further, the members of the Leadership team, excluding the Chief Executive Officer, benefit from an acceleration of the vesting of the rights attached to their stock options in
case of a change in control (for more details about the acceleration mechanism, see Section 10.2.2 Purchase of Alcatel Lucent shares by the Company); |
· |
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the manner in which the employee shareholding system functions when the employees do not exercise their rights directly: pursuant to Article L. 214-40 of the French Monetary and Financial Code, the
Supervisory Board of the FCP AN Mutual Fund (previously FCP 2AL) decides whether to tender the shares to the tender or exchange offer. The FCP 2AL tendered Alcatel Lucent shares into the Nokia Offer (for more details about the FCP AN, see
Section 10.3.4 Shareholding and change in its structure, sub-section Employees and managements shareholding).
|
10.2.1 |
Amount of the capital and categories of shares |
Capital at year end. On January 8, 2016, the Board of Directors determined that the amount of
the capital at December 31, 2015,
amounted to 151,816,867.95, represented by 3,036,337,359 fully paid ordinary shares, each with a nominal value of 0.05.
10.2.2 |
Purchase of Alcatel Lucent shares by the Company |
In 2015, we did not effect any transactions pursuant to our share repurchase program. At
December 31, 2015, Alcatel Lucent held directly 13,005,087 shares, representing 0.43% of the capital. At that date, our subsidiaries held 27,110,613 shares, representing 0.89% of our capital. At December 31, 2015, these shares were booked
as a deduction from consolidated shareholders equity.
Following a resolution of the Board of Directors on October 28, 2015,
and as acknowledged by the Board of Directors on January 8, 2016, the treasury shares were allocated to the following objectives:
· |
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to comply with the obligations resulting from the performance shares acceleration mechanism in the context of the Nokia Offer (approximately 16.6 million of treasury shares);
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· |
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to comply with the obligations resulting from the substitution of the undertaking to put in place a stock option plan taken in 2014 (which plan had not been implemented), by a share grant
(approximately 3.3 million of treasury shares); |
· |
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to tender all the remaining treasury shares into the Nokia Offer (approximately 20 million of treasury shares).
|
At the Shareholders Meeting of May 26, 2015, the shareholders authorized the Board of
Directors with a right of sub-delegation in accordance with law, for a period of 18 months, to repurchase Alcatel Lucent shares up to a maximum of 10% of the capital of the Company.
The maximum purchase price per share may not exceed 20 and the
minimum selling price may not be less than the nominal value of the share, that is, 0.05. This program has not been implemented since the approval by the shareholders of the
corresponding resolution at the Shareholders Meeting of May 26, 2015.
Description of the repurchase program pursuant to articles 241-1 and
following of the AMF rules
Date of the Shareholders Meeting authorizing the program. At the Shareholders Meeting of
May 26, 2015, the shareholders authorized the Board of Directors to repurchase Alcatel Lucent shares up to a maximum of 10% of the capital of the Company for a period of 18 months.
172
LISTING AND SHAREHOLDINGS
Capital
Number of shares and percentage of capital held directly or indirectly by the Company. At
December 31, 2015, the Company held 13,005,087 shares directly and 27,110,613 shares indirectly. As of February 10, 2016 (date of the release of the definitive results of the subsequent Nokia Offer), the Company and its affiliates tendered
all treasury shares to the subsequent Nokia Offer. Therefore, the Company held no share of the Company, directly or indirectly, and currently does not hold any such share.
Goals of the repurchase program. The goals of the current repurchase program are:
· |
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to cancel some or all of the shares so purchased by decreasing the Companys share capital under the conditions provided by law; |
· |
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to grant or sell purchased shares to employees and officers (dirigeants) of the Company or its affiliates or organizations under the terms and conditions provided by law (stock
options, participation of employees in the Companys profit, allocation of performance-related shares, etc.); |
· |
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to comply with the Companys obligations in respect of stock option plans or other allocations of shares to employees or corporate officers of the Company or of a related company;
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· |
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to deliver shares upon the exercise of rights attached to securities giving access to the Companys share capital and to carry out related hedging transactions pursuant to commitments
undertaken by the Company (or any of its subsidiaries) with respect to such securities; |
· |
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to hold and deliver shares (as exchange consideration, payment, or other) in particular in connection with external growth transactions carried out by the Company, or mergers, spin-offs or
contributions; |
· |
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to engage in market making in the secondary market or maintenance of the liquidity of the Alcatel Lucent share through an investment services provider pursuant to a liquidity contract that complies
with the ethical code recognized by the AMF. |
The repurchase program is also intended to allow the implementation of any
market practice that may be permitted by the AMF in the future and more generally, the conclusion of any transaction that complies with applicable laws and regulations. In such a case, the Company would inform its shareholders through a press
release.
Repurchase terms and conditions. Acquisitions, sales and transfers of shares may be made at any
time subject to the limits, in particular relating to volume and price, authorized under applicable laws and regulations (except during the period of a public tender offer on Alcatel Lucent shares) and by any means, either through regulated markets,
multilateral trading systems, systematic internalizers or by way of a private placement or otherwise, including by block purchases or sales, by public tender offer or public exchange offer, or through the use of options or other derivative financial
instruments whether traded on regulated markets or through multilateral trading systems, via a systematic internalizer or by way of a private placement or otherwise or by delivery of shares arising from the issuance of securities giving access to
the capital of the Company by conversion, exchange, redemption, presentation of a warrant or any other means, either directly or through an investment services provider, under the conditions set forth by the market authorities.
Maximum share of capital, maximum number and characteristics of shares, maximum purchase price. The program concerns the shares of Alcatel Lucent
(ISIN FR0000130007) listed on Euronext Paris stock exchange -Compartment A.
The maximum percentage that may be purchased
under each of the current authorizations is 10% of the total number of shares comprising the capital on the date of purchase. In view of the number of shares that comprised our capital at December 31, 2015, for information purposes, this limit
represents 303,633,735 shares or, based on the maximum authorized purchase price ( 20), a maximum theoretical amount of
6,072,674,700, not including the shares already held by the Company.
However, in the event of transactions affecting the Companys share capital, and in particular, of a capital increase through the capitalization of reserves, the allocation of free shares, in particular performance-related
shares, a stock split or reverse stock split, a change in nominal value or any other transaction affecting the equity capital, the Board of Directors may adjust the maximum purchase price set forth above in order to take into account the impact of
these transactions on the value of the shares.
Duration of the program. The current share repurchase program as approved by the
shareholders at the Shareholders Meeting held on May 26, 2015 is in place for a duration of 18 months as of its approval, that is, until November 26, 2016.
173
LISTING AND SHAREHOLDINGS
Capital
10.2.3 |
Authorizations related to the capital |
Outstanding
authorizations
Currently, we have the following authorizations to issue capital and repurchase and/or cancel our shares, which
authorizations were approved at our Shareholders Meeting on May 28, 2014 and May 26, 2015.
OUTSTANDING AUTHORIZATIONS
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Nature |
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Characteristics
(ceiling, discount) |
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% capital |
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Utilization |
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Remaining % Capital |
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Shareholders Meeting held on May 28, 2014 |
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ISSUANCE RESERVED TO EMPLOYEES AND EXECUTIVE DIRECTORS - VALIDITY: 38 MONTHS |
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Stock-options (resolution 21) |
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Executive Directors : limit of 6% of the grants (that is, less than 0.12% of capital) ; Without discount |
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2% |
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None |
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2% |
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Shareholders Meeting held on May 26, 2015 |
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AUTHORIZATIONS - VALIDITY: 18 MONTHS |
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Share repurchase (resolution 11) |
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- |
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10% |
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None |
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10% |
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Share cancellation (resolution 12) |
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- |
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10% |
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None |
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10% |
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ISSUANCE OF SECURITIES - VALIDITY: 26 MONTHS |
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Maximum global amount applicable to all
dilutive and non-dilutive issuances:
56.5 million |
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Capital increase WITH PSR (resolution 13 ) |
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Global ceiling : 56.5 million (1,130 million shares) ; Maximum nominal amount of debt
securities : 5 billion |
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40% (1) |
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None |
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40% |
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Capital increase WITHOUT PSR (resolution 14 to 17 and 19) |
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Public offer WITH priority subscription period (resolution 14 ) |
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Ceiling : 28.25 million (565 million shares) ; Maximum nominal amount of debt securities : 5 billion; Maximum discount of 5% Priority subscription period of at least 5 days |
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20% (1) |
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None |
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20% |
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Maximum amount applicable to dilutive
issuances and without priority subscription
period: 14.1 million |
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Public offer WITHOUT priority subscription period (resolution 14 ) |
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Ceiling: 14.1 million (282 million shares) ; Maximum nominal amount of debt securities: 5 billion; Maximum discount of 5% |
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10% (1) |
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None |
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10% |
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Private placement (Art L. 411-2 II of the French Monetary and Financial Code) (resolution 15) |
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Maximum discount of 5% |
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10% (1) |
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None |
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10% |
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Greenshoe (resolution 16) |
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15% of the initial issue |
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15%
of the initial issue (1) |
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None |
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N/A |
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Contributions in kind (resolution 17) |
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- |
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10% (1) |
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None |
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10% |
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Determination of price under public offer and private placement (resolution 19) |
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Flexibility of the reference period; Maximum discount of 5% |
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10% (1) |
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None |
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N/A |
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Capital increase by capitalization of reserves, profits, premiums (resolution 18) |
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5 billion |
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5 billion |
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None |
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- |
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ISSUANCE RESERVED TO EMPLOYEES AND EXECUTIVE DIRECTORS - VALIDITY: 26 MONTHS |
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Capital increase reserved to employees
(resolution 20) |
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Maximum discount of 5% |
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2% |
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None |
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2% |
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Performance shares (resolution 21) |
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Executive Directors : limit of 6% of the grants (that is, less than 0.09% of the share capital) |
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1.5% |
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0.35% |
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1.15% |
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(1) |
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Based on the share capital at December 31, 2014: 141 million, that is, 2,820.4 million shares with a nominal value of 0.05. |
PSR |
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: Preferential Subscription Right. |
174
LISTING AND SHAREHOLDINGS
Capital
Use of authorizations
Issuance with cancellation of preferential subscription rights of shareholders. The Board of
Directors was granted a delegation of authority by the Shareholders Meeting of May 26, 2015, for a period of 26 months, to issue ordinary shares and any securities conferring a right to the capital of the Company, with cancellation
of the preferential subscription rights of the shareholders of Alcatel Lucent, within the limit of 14.1 million, that is, approximately 10% of our capital. These
authorizations were not used during the fiscal year ended on December 31, 2015.
Performance shares, Our Board of Directors was given authorizations by the shareholders at the
Shareholders Meeting held on May 26, 2015, which allowed it to grant performance shares. The grants effected in July 2015 represented 0.35% of the capital, compared to an overall ceiling of 1.5% of the capital for issuance of performance
shares.
The status of the use of the authorizations related to performance shares, stock options and options to purchase shares
granted to the Board of Directors is detailed in Chapter 8 Compensation and long-term incentives.
Our capital at December 31, 2015 was 151,816,867.95, represented by 3,036,337,359 fully paid up ordinary shares, each with a nominal value of 0.05.
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Total number of shares |
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Capital at December 31, 2015 |
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3,036,337,359 |
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Alcatel Lucent stock options |
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59,637,007 |
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Performance shares (1) |
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27,963,795 |
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OCEANE 2018 (2) |
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292,302,573 |
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OCEANE 2019 (2) |
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199,179,372 |
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OCEANE 2020 (2) |
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136,665,629 |
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Diluted capital at December 31, 2015 |
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3,752,085,735 |
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(1) |
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For more details, see Section 8.1.4 Summary table for the performance share plans. |
(2) |
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For a description of the dilutive instruments, see Section 10.2.5 Shares or rights granting access to the capital. |
10.2.5 |
Shares or rights granting access to the capital |
Stock options and other stock-based compensation instruments issued by Lucent Technologies Inc.
As part of the business combination with Lucent, we agreed to issue Alcatel Lucent shares to holders of stock options and other
stock-based compensation instruments (restricted stock units, performance shares and Directors deferrals) granted by Lucent Technologies Inc., in the event of such holders exercise or conversion of the rights attached to
their instruments.
As of November 30, 2006, the date of the business combination between historical Alcatel and Lucent, these
instruments entitled their holders to a total of 311,307,596 common shares of Lucent Technologies Inc.
Consequently, and in
accordance with the decision made by our Board of Directors on November 30, 2006, acting on the authority granted by the shareholders at the Shareholders
Meeting of September 7, 2006, Alcatel Lucents Coralec subsidiary issued to Lucent Technologies Inc., 60,767,243 bonds, each of which may be converted into one Alcatel Lucent
share.
When the Lucent stock options or other stock-based compensation instruments are exercised by their holders, Alcatel-Lucent USA
Inc. (formerly named Lucent Technologies Inc.) requests conversion of the corresponding number of convertible bonds and immediately delivers the number of Alcatel Lucent shares resulting from the conversion to those holders who have exercised their
rights.
At December 31, 2015, there were a total of 55,669,199 outstanding bonds convertible into Alcatel Lucent shares. However,
none of these bonds may still be converted, given the cancellation of stock-options as of that same date.
These bonds are not listed
on any stock exchange.
175
LISTING AND SHAREHOLDINGS
Capital
Bonds with a conversion and/or exchange option for new or existing shares (OCEANE)
OCEANE 2018. Pursuant to the authorization granted at the Shareholders Meeting of June 8, 2012, Alcatel-Lucent issued,
on July 3, 2013, debt represented by bonds with a conversion and/or exchange option for new or existing shares (OCEANE). The issue concerned a principal amount of
628,946,424, represented by 349,414,680 OCEANE with a unit value of 1.80 (see Note 24 to the consolidated financial statements).
The bonds, which were due on January 1, 2018, bore an annual interest rate of 4.25%.
The principal purpose of the issue was to refinance the Groups debt and the extension of its debts maturity.
In the context of the capital increase resulting from the rights offering completed on December 9, 2013, the holders of OCEANE 2018 were
informed that the conversion/exchange ratio of the OCEANE 2018, which was originally of 1 Alcatel Lucent share with a nominal value of 0.05 for 1 OCEANE 2018, was adjusted
and fixed at 1.06 Alcatel Lucent share with a nominal value of 0.05 for 1 OCEANE 2018.
In the context of the Nokia Offer and given that the Nokia Offer would result in a change in the control of Alcatel Lucent if it was successful,
the holders of OCEANE 2018 were informed that during the adjustment in the event of a public offer period, that is, between November 18, 2015 to February 24, 2016, and in accordance with the terms of the OCEANE 2018, the
conversion/exchange ratio was adjusted and fixed at 1.26 Alcatel Lucent share with a nominal value of 0.05 for 1 OCEANE 2018. Since February 25, 2016, the
conversion/exchange ratio went back to 1.06 Alcatel Lucent share with a nominal value of 0.05 for 1 OCEANE 2018.
On December 31, 2015, 231,986,169 OCEANE 2018 remained outstanding, given that during fiscal year 2015, 117,427,511 of these bonds were
converted into Alcatel Lucent shares. The remaining outstanding OCEANE 2018 amounting to 1 million as of February 26, 2016 were redeemed early by our Company on
March 21, 2016.
OCEANE 2019 and 2020. On June 10, 2014, pursuant to the authorization granted by the shareholders at the
Shareholders Meeting on May 28, 2014, we launched an offering of bonds
convertible into and/or exchangeable for new and/or existing shares (OCEANE) in two tranches (2019 OCEANE and 2020 OCEANE). The amount of the 2019 OCEANE issuance was of 688,425,000, corresponding to 167,500,000 2019 OCEANE of a nominal value of 4.11 each. The amount of the 2020
OCEANE issuance was of 460,289,979.90 corresponding to 114,499,995 2020 OCEANE of a nominal value of 4.02
each (see Note 24 to the consolidated financial statements).
The 2019 OCEANE do not bear interest. The 2020 OCEANE bear interest at an
annual rate of 0.125%, payable semi-annually in arrears on January 30th and July 30th of each year.
The purpose of that
issuance was to allow the early repayment of the Senior Secured Credit Facility of an initial principal amount of US$1,750 million entered into by Alcatel-Lucent USA Inc., to extend the Groups debt maturity and to reduce the cost of
indebtedness.
In the context the Nokia Offer and given that the Nokia Offer would result in a change in the control of Alcatel Lucent
if it was successful, the holders of OCEANE 2019 and OCEANE 2020 were informed that during the adjustment in the event of a public offer period, that is, between November 18, 2015 to February 24, 2016 and in accordance with the
terms of the OCEANE 2019 and OCEANE 2020, the conversion/exchange ratio was adjusted and fixed at 1.28 Alcatel Lucent share for 1 OCEANE 2019 or OCEANE 2020. Since February 25, 2016, the conversion/exchange ratio went back to 1 Alcatel
Lucent share with a nominal value of 0,05 for 1 OCEANE 2019 or OCEANE 2020.
On December 31, 2015, 155,608,884 OCEANE 2019 and 106,770,023 OCEANE 2020 remained outstanding, given that during fiscal year 2015, 11,891,116 OCEANE 2019 and 7,729,972 OCEANE 2020 were converted into Alcatel Lucent shares. On
February 26, 2016, the outstanding OCEANE 2019 amounted to 367 million, and the outstanding OCEANE 2020 amounted to 110 million.
Securities not convertible into equity
At December 31, 2015, only one bond issue of Alcatel Lucent (parent company) remained outstanding, that is the 8.5% senior
notes issue in the amount of 190 million (maturing in January 2016) traded on the Luxembourg Stock Exchange.
10.2.6 |
American Depositary Shares (ADS) |
Each of our American
Depositary Shares, or ADSs, represents one of our ordinary shares.
ADR Program Termination
Subsequent to the Nokia Offer, our Board of Directors resolved to terminate our American depository receipts (ADR) program. We
subsequently instructed JPMorgan Chase Bank, N.A., (the Depositary) to terminate our ADR program in accordance with the terms of the deposit agreement. Notice of the termination of our ADR program was provided by the Depositary to
holders of our ADSs evidenced by the Alcatel Lucent ADRs on January 26, 2016. The deposit agreement terminated on February 24, 2016.
Following the termination of the deposit agreement and except as described in the paragraph below,
neither the Depositary nor any of its agents will perform any further acts under the deposit agreement or the ADRs evidencing our ADSs, except to receive and hold (or sell) distributions on our ordinary shares and deliver deposited securities being
withdrawn upon the cancellation of our ADSs in the manner required under the deposit agreement.
The option for holders of ADRs
representing ADSs to surrender their ADRs to the Depositary in exchange for our ordinary shares
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LISTING AND SHAREHOLDINGS
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expired on April 25, 2016. According to the notice provided by the Depositary to holders of
our ADRs on January 26, 2016, a cancellation fee will be charged for ADSs surrendered (US$5.00 per 100 ADSs or portion thereof, plus a US$20.00 cable fee). In addition, holders of our ADRs are responsible for any taxes or other governmental
charges which they may owe. According to the notice, if a holder of our ADRs chose not to surrender their ADSs for delivery of the underlying ordinary shares by April 25, 2016, according to the terms and conditions set forth in the deposit
agreement, then, following such date, the Depositary may sell any remaining deposited ordinary shares in such manner as it may determine, and may thereafter hold the net proceeds of any such sale or sales together with any dividends received prior
to such sale or the U.S. dollars received on conversion thereof, without liability for any interest thereon, for the pro rata benefit of the registered holders of our ADSs which have not been surrendered for cancellation. On March 16, 2016, the
Depositary and Nokia entered into a Share Purchase Agreement (the Nokia SPA). Pursuant to the Nokia SPA, the Depositary will sell to Nokia all of our ordinary shares underlying remaining outstanding ADRs after April 25, 2016. The
Depositary will receive 0.55 Nokia shares for each of our ordinary shares, which is the same exchange ratio offered in the Nokia Offer for our ordinary shares. The closing of the sale of our ordinary shares contemplated by the Nokia SPA is subject
to customary closing conditions, and the parties to the Nokia SPA expect the settlement of the transacted shares to occur during the first half of May 2016. Thereafter, the Depositary will sell the Nokia shares received by it at closing. Holders of
ADRs who did not exchange their ADRs by April 25, 2016 will only be entitled to their pro rata portion of the proceeds from the sale of the Nokia shares by the Depositary. After consummating the sale contemplated by the Nokia SPA, the Depositary
will be discharged from all obligations in respect of the deposit agreement and the ADRs evidencing our ADSs, except to account for the proceeds held for the benefit of the ADR holders who do not exchange their ADRs. If the transaction contemplated
by the SPA is not consummated or if for any reason the Depositary does not sell the ordinary shares underlying our ADSs as described above, the Depositary may (a) instruct its custodian acting under the deposit agreement to register all ordinary
shares with Alcatel Lucent in registered form (nominatif pur) and (b) provide Alcatel Lucent with a copy of the ADS register. Upon the receipt of the ADS register, Alcatel Lucent is required to register or cause to be registered in registered
form the ordinary shares represented by our ADSs reflected on the ADS register in each such holders name and to notify such registration to the holder of ADSs at the address set forth on the ADS register. In accordance with the terms of the
deposit agreement, each holder authorized the Depositary, its custodian and Alcatel Lucent to take any and all necessary action to effect such registration.
The deposit agreement for the ADSs expressly limits our obligations and the obligations of the Depositary, and it limits our liability and the
liability of the Depositary. Among such limitations, the deposit agreement provides that the Depositary will not be liable for the price received in connection with the sale of securities, the timing thereof, any error, delay in action, omission to
act, default or negligence on the part of the parties retained in connection with any such sale.
ADR holders who surrendered their ADRs for cancelation and receipt of ordinary shares had to
provide instructions as to where to deliver the ordinary shares, along with the appropriate cancelation fees (US$5.00 per 100 ADRs), a US $20.00 cable fee and any taxes or other governmental charges they might owe. ADR holders who surrendered their
ADRs for cancelation will receive one ordinary share for every one ADR canceled.
Delisting of ADSs from NYSE
Following completion of the Nokia Offer and termination of our ADR program, our ADSs have been delisted from the NYSE. On February 25, 2016,
the NYSE filed a Form 25 Notification of Removal from Listing and/or Registration under Section 12(b) of the Exchange Act with the SEC. The delisting of our ADSs from the NYSE pursuant to the Form 25 became effective on March 7, 2016. The
NYSE had previously suspended trading of our ADSs after the market closed on February 24, 2016, and our ADSs are no longer traded on the NYSE. We have not arranged for the listing or registration of our ADSs on another U.S. national securities
exchange or for their quotation in a quotation medium in the United States.
Intention to Terminate US Reporting Obligations
Following satisfaction of the relevant deregistration conditions under the U.S. securities laws, we intend to deregister all
classes of our registered securities under U.S. securities laws thereby terminating our reporting obligations under the U.S. securities laws. Following the termination of our reporting obligations under the U.S. securities laws, Alcatel Lucent will
not be required to provide any periodic information about itself pursuant to the U.S. securities laws.
Fees and payments from the
Depositary to us
JPMorgan Chase Bank, N.A., has agreed to reimburse us annually for certain expenses (subject to certain
limitations) in connection with the ADR facility and to pay us annually a further amount which is a function of the issuance and cancellation fees and depositary service fees charged by the Depositary to our ADS holders.
In this context, and for the fiscal year ended December 31, 2015, the Company received about US$ 12.18 million from JPMorgan Chase Bank
N.A.
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Ownership of shares by non-French persons
Under French law and our bylaws, no limitation exists on the right of non-French residents or non-French shareholders to own or vote our
securities.
Any non-French resident (both E.U. and non-E.U.) must file an administrative notice (déclaration
administrative) with the French authorities in connection with any transaction which, in the aggregate, would result in the direct or indirect holding by such non-French resident of at least 33.33% of the capital or the voting rights of a
French company.
The payment of all dividends to foreign shareholders must be effected through an accredited intermediary. All
registered banks and credit establishments in France are accredited intermediaries.
You should refer to Section 10.1.2
Specific provisions of the bylaws and of law for a description of the filings required based on shareholdings.
Exchange controls
Under current French exchange control regulations, no limits exist on the amount of payments that we may remit to residents of the United States.
Laws and regulations concerning foreign exchange controls do require, however, that an accredited intermediary handle all payments or transfer of funds made by a French resident to a non-resident.
Taxation
The following
is a general summary of the material U.S. federal income tax and French tax consequences to you of acquiring, holding or disposing of our ordinary shares or ADSs. It does not address all aspects of U.S. and French tax laws that may be relevant to
you in light of your particular situation. It is based on the applicable tax laws, regulations and judicial decisions as of the date of this annual report, and on the Convention between the United States of America and the Republic of France for the
Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income and Capital dated as of August 31, 1994 entered into force on December 30, 1995, along with the 2004 Protocol thereto entered into force on
December 21, 2006, and the 2009 Protocol thereto entered into force on December 23, 2009, all of which are subject to change (collectively, the Treaty), possibly with retroactive effect, or different interpretations.
· |
|
With respect to the U.S. tax matters discussed, this summary only applies to you if all of the following five points apply to you: you own, directly or indirectly, less than 10% of our capital
stock; |
· |
|
you are any one of (a), (b), (c) or (d) below: |
(a) an individual who is a citizen or resident of the United States for U.S. federal income tax purposes,
(b) a corporation, or other entity taxable as a corporation, that is created in or organized under the laws of the United States or any political subdivision thereof,
(c) an estate, the income of which is subject to U.S. federal income tax
regardless of its source, or
(d) a trust, if a court within the United States is able to exercise primary
supervision over its administration and one or more U.S. persons have the authority to control all of the substantial decisions of such trust, or certain electing trusts that were in existence on August 20, 1996 and were treated as domestic
trusts on August 19, 1996;
· |
|
you are entitled to the benefits of the Treaty under the Limitations on Benefits article contained in the Treaty; |
· |
|
you hold our ordinary shares or ADSs as capital assets; and |
· |
|
your functional currency is the U.S. dollar. |
You generally will not
be eligible for the reduced withholding tax rates under the Treaty if you hold our ordinary shares or ADSs in connection with the conduct of business through a permanent establishment or the performance of services through a fixed base in France, or
you are a non-resident in the United States for U.S. tax purposes, in either case within the meaning of the Treaty.
The following
description of tax consequences should be considered only as a summary and does not purport to be a complete analysis of all potential tax effects of owning or disposing of our ordinary shares or ADSs. Special rules may apply to U.S. expatriates,
insurance companies, tax-exempt organizations, regulated investment companies, real estate investment trusts, real estate mortgage investment conduits, financial institutions, persons subject to the alternative minimum tax, securities
broker-dealers, traders in securities that elect to use a mark-to-market method of accounting for the securities holdings, and persons holding their ordinary shares or ADSs as part of a hedging, straddle, conversion transaction or other
integrated investment, among others. Those special rules are not discussed in this annual report. This summary does not address all potential tax implications that may be relevant to you as a holder, in light of your particular circumstances. You
should consult your tax advisor concerning the overall U.S. federal, state and local tax consequences, as well as the French tax consequences, of your ownership of our ordinary shares or ADRs and ADSs represented thereby.
For purposes of the Treaty and the U.S. Internal Revenue Code of 1986, as amended (the Code), if you own ADSs evidenced by ADRs, you
will be treated as the owner of the ordinary shares represented by such ADSs.
Taxation of dividends
Income Tax at the Progressive Rate or Withholding Tax. French resident individuals will be subject to taxation at the income tax
progressive rate on only 60% of the dividends received by them from both French and foreign companies. This exemption will apply to any dividend distributed by a company that is subject to corporation tax or an equivalent tax and that is located in
an EU member state or a country that has signed a tax treaty (which has an administrative assistance clause with the purpose of combating fraud and tax evasion) with France.
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LISTING AND SHAREHOLDINGS
Capital
Dividends paid to French resident individuals on or after January 1, 2013, are subject to a
compulsory withholding tax at a flat rate of 21% as an installment payment against the final tax.
French companies normally must
deduct a 30% French withholding tax from dividends paid to non-resident of France. Under the Treaty, this withholding tax is reduced to 15% if your ownership of our ordinary shares or ADSs is not effectively connected with a permanent establishment
or a fixed base that you have in France.
Dividends paid to a resident in a non-cooperative state or territory (NCST) are subject to a
withholding tax at a rate of 75%.
If your ownership of our ordinary shares or ADSs is not effectively connected with a permanent
establishment or a fixed base that you have in France, we will withhold tax from your dividend at the reduced rate of 15%, provided that you (i) complete the French Treasury Form 5000-EN (Certificate of Residence), which establishes that you
are a resident of the U.S. under the Treaty, (ii) have it certified either by the Internal Revenue Service or the financial institution that is in charge of the administration of the ordinary shares or ADSs, and (iii) send it to us before
the date of payment of the dividend.
If you have not completed and sent the Certificate of Residence before the dividend payment date
under the simplified procedure, we will deduct French withholding tax at the rate of 30%. In that case, you may claim a refund from the French tax authorities under the normal procedure, provided that you (i) duly
complete the Certificate of Residence and the French Treasury Form 5001-EN (ii) have the forms certified either by the Internal Revenue Service or the financial institution that is in charge of the administration of the ordinary shares or ADSs,
and (iii) send both forms to us early enough to enable us to file them with the French tax authorities before December 31 of the second calendar year following the year during which the dividend is paid.
You can obtain the Certificate of Residence, the Form 5001-EN and their respective instructions from the Depositary, the Internal Revenue Service
or the French Centre des impôts des non-résidents, the address of which is 10 rue du Centre, TSA, 93465 Noisy-Le-Grand, France. Copies of the Certificate of Residence and Form 5001-EN may also be
downloaded from the French tax authorities website (www.impots.gouv.fr).
Any French withholding tax refund is generally expected
to be paid within 12 months after you file the relevant French Treasury Form. However, it will not be paid before January 15, following the end of the calendar year in which the related dividend is paid.
For U.S. federal income tax purposes, the gross amount of any distribution will be included in your gross income as dividend income to the extent
paid or deemed paid out of our current or accumulated earnings and profits as calculated for U.S. federal income tax purposes. You must include the gross amount treated as a dividend in income in the year payment is received by you, which, if you
hold ADSs, will be the year payment is received by the Depositary. Dividends paid by us will not give rise to any dividends-received deduction generally allowed to a U.S. corporation under Section 243 of the Code. Dividends paid
by us generally will constitute foreign source passive category income for U.S. foreign tax credit purposes or, for some holders, general category income.
Generally, a maximum U.S. federal income tax rate of 20% will apply to dividend income received by an individual (as well as certain trusts and
estates) from a U.S. corporation or from a qualified foreign corporation provided certain holding period requirements are met. A non-U.S. corporation (other than a passive foreign investment company) generally will be considered to be a
qualified foreign corporation if (i) the shares of the non-U.S. corporation are readily tradable on an established securities market in the United States, or (ii) the non-U.S. corporation is eligible for the benefits of a comprehensive
U.S. income tax treaty determined to be satisfactory to the United States Department of the Treasury. The United States Department of the Treasury and the Internal Revenue Service have determined that the Treaty is satisfactory for this purpose. In
addition, the United States Department of the Treasury and the Internal Revenue Service have determined that ordinary shares, or an ADR in respect of such shares (which would include the ADSs), are considered readily tradable on an established
securities market if they are listed on an established securities market in the United States such as The New York Stock Exchange. Information returns reporting dividends paid to U.S. persons will identify the amount of dividends eligible for the
reduced tax rates.
Also, for U.S. federal income tax purposes, the amount of any dividend paid in a foreign currency such as Euros,
including any French withholding taxes withheld from such payment, will be equal to the U.S. dollar value of the Euros on the date the dividend is included in your taxable income, regardless of whether you convert the payment into U.S. dollars. If
you hold ADSs, this date will be the date the payment is received by the Depositary. You generally will be required to recognize U.S. source ordinary income or loss when you sell or dispose of the Euros you are deemed to receive. You may also be
required to recognize foreign currency gain or loss if you receive a refund of French tax withheld from a dividend in excess of the 15% rate provided for under the Treaty. In either case, this foreign currency gain or loss generally will be U.S.
source ordinary income or loss.
To the extent that any distributions paid exceed our current and accumulated earnings and profits as
calculated for U.S. federal income tax purposes, the distribution will be treated as follows:
· |
|
First, as a tax-free return of capital to the extent of your basis (determined for U.S. federal income tax purposes) in your ordinary shares or ADSs, which will reduce your adjusted tax basis of
such ordinary shares or ADSs. This adjustment will increase the amount of gain, or decrease the amount of loss, which you will recognize if you later dispose of those ordinary shares or ADSs. |
· |
|
Second, the balance of the distribution in excess of your adjusted tax basis will be taxed as capital gain. |
French withholding tax imposed on the dividends you receive on your ordinary shares or ADSs at 15% under the Treaty is treated as payment of a
foreign income tax generally eligible for credit
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LISTING AND SHAREHOLDINGS
Capital
against your U.S. federal income tax liability. Under the Code, in general, the limitation on
foreign taxes eligible for credit is not calculated with respect to all worldwide income, but instead is calculated separately with respect to specific classes of income. For this purpose, the dividends you receive on your ordinary shares or ADSs
generally will constitute passive income, or, for some holders, general category income. In general, U.S. foreign tax credits allowable with respect to each of these categories of income cannot exceed the U.S. federal income
tax otherwise payable with respect to such category of income. The consequences of this separate limitation calculation to you will depend in general on the nature and sources of your income and deductions.
Alternatively, a U.S. person may claim all foreign taxes paid as an itemized deduction in lieu of claiming a U.S. foreign tax credit, provided
that such person does not choose to take a U.S. foreign tax credit to any extent. Generally, a deduction does not reduce U.S. tax on a dollar-for-dollar basis like a tax credit; however, generally the deduction for foreign taxes paid is not subject
to the limitations described above.
The U.S. foreign tax credit issues described above, including the possibility of taking a
deduction for foreign taxes paid in the alternative, are very complex and depend on your individual circumstances. You are urged to consult your own tax advisor on the U.S. tax consequences of any French taxes paid in respect of your owning or
disposing of our ordinary shares or ADSs.
Taxation of capital gains
If you are a resident of the United States for purposes of the Treaty, you will not be subject to French tax on any gain if you sell your ordinary
shares or ADSs unless you have a permanent establishment or fixed base in France and such ordinary shares or ADSs were part of the business property of that permanent establishment or fixed base. Special rules apply to individuals who are residents
of more than one country.
In general, for U.S. federal income tax purposes, you will recognize capital gain or loss if you sell or
otherwise dispose of your ordinary shares or ADSs based on the difference between the amount realized on the disposition and your adjusted tax basis in the ordinary shares or ADSs. Any gain or loss generally will be U.S. source gain or loss. If you
are a non-corporate holder, and you satisfy certain minimum holding period requirements, any capital gain generally will be treated as long-term capital gain that generally is subject to U.S. federal income tax at preferential rates. Long-term
capital gains realized upon a sale or other disposition of our ordinary shares or ADSs generally will be subject to a maximum U.S. federal income tax rate of 20%.
Medicare contribution tax on unearned income
A U.S. holder that is an individual is subject to an additional 3.8% tax on the lesser of (1) such U.S. holders net investment
income for the relevant taxable year and (2) the excess of such U.S. holders modified adjusted gross income for the taxable
year over a certain threshold (between US $125,000 and US$250,000, depending on the individuals circumstances). A U.S. Holder that is an estate, or a trust that does not fall into a special
class of trusts that is exempt from such tax, is subject to a 3.8% tax on the lesser of (1) such U.S. holders undistributed net investment income for the relevant taxable year and (2) the excess of such U.S. holders
adjusted gross income for the taxable year over the amount at which the highest tax bracket begins for that taxable year A U.S. holders net investment income will generally include, among other items, the amount of gross dividend income and
the amount of any net gains from such U.S. holders disposition of your shares or ADSs, unless such dividends or net gains are derived in the ordinary course of the conduct of a trade or business (other than a trade or business that consists of
certain passive or trading activities). U.S. holders that are individuals, estates or trusts should consult their own tax advisors regarding the applicability of this tax to income and gains in respect of their investment in the shares or ADSs.
Financial transaction tax on acquisitions of ordinary shares or ADSs
Since August 1, 2012 a financial transaction tax applies to acquisitions giving rise to ownership transfer of shares or ADSs of
French-listed companies with a global capitalization of at least 1 billion. The tax rate is 0.2% of the share acquisition value. The tax is due by the financial services
provider that undertakes the acquisition, irrespective of whether it is acting in a principal or agency capacity (or, if no financial services provider is involved in the acquisition, by the financial institution that holds the purchasers
account).
Taxable transactions are broadly construed but several exceptions may apply.
Transfer tax on sale of ordinary shares or ADSs
Certain transfers of shares or ADSs of publicly traded companies that are evidenced by a written agreement, and which are not subject to the
financial transaction tax described above, are subject to a 0.1% transfer tax.
The financial transaction tax and transfer tax may not
be creditable in the United States for foreign tax credit purposes. U.S. holders should consult their tax advisors as to the tax consequences to them of the financial transaction tax and the transfer tax.
French estate and gift taxes
Under The Convention Between the United States of America and the French Republic for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Estates, Inheritance and Gifts of
November 24, 1978, and the 2004 Protocol amending this 1978 Convention which became effective on December 21, 2006, if you transfer your ordinary
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LISTING AND SHAREHOLDINGS
Capital
shares or ADSs by gift, or if they are transferred by reason of your death, that transfer will be
subject to French gift or inheritance tax only if one of the following applies:
· |
|
you are domiciled in France at the time of making the gift, or at the time of your death, or |
· |
|
you used the ordinary shares or ADSs in conducting a business through a permanent establishment or fixed base in France, or you held the ordinary shares or ADSs for that use.
|
The French gift or inheritance tax may be credited against the U.S. gift or inheritance tax. This tax credit is limited,
however, to the amount of the U.S. gift or inheritance tax due on the shares.
French wealth tax
The French wealth tax generally does not apply to our ordinary shares or ADSs if held by a U.S. holder who is a resident of the United States for
purposes of the Treaty.
U.S. information reporting and backup withholding
In general, if you are a non-corporate U.S. holder of our ordinary shares or ADSs (or do not come within certain other exempt categories),
information reporting requirements will apply to distributions paid to you and proceeds from the sale, exchange, redemption or disposal of your ordinary shares or ADSs. U.S. holders that are corporations generally are excluded from these information
reporting and backup withholding tax rules.
Additionally, if you are a non-corporate U.S. holder of our ordinary shares or ADSs (or do
not come within certain other exempt categories) you may be subject to backup withholding at the current applicable rate with respect to such payments, unless you provide a correct taxpayer identification number (your social security number or
employer identification number), and with respect to dividend payments, certify that you are not subject to backup withholding and otherwise comply with applicable requirements of the backup withholding rules. Generally, you will be required to
provide such certification on Internal Revenue Service Form W-9 (Request for Taxpayer Identification Number and Certification) or a substitute Form W-9.
If you do not provide your correct taxpayer identification number, you may be subject to penalties imposed by the Internal Revenue Service, as
well as backup withholding. Backup withholding is not an additional tax. In general, any amount
withheld under the backup withholding rules should be allowable as a credit against your U.S. federal income tax liability (which might entitle you to a refund), provided that you timely furnish
the required information to the Internal Revenue Service.
U.S. reportable transactions
A U.S. holder that participates in any reportable transaction (as defined in U.S. Treasury regulations), which includes certain losses
related to nonfunctional currency transactions, must attach to its U.S. federal income tax return a disclosure statement on Internal Revenue Service Form 8886 (Reportable Transaction Disclosure Statement). U.S. holders are urged to
consult their own tax advisors as to the possible obligation to file Internal Revenue Service Form 8886 with respect to the sale, exchange or other disposition of any non-U.S. currency (including euros) received as a dividend on, or as proceeds from
the sale of, our ordinary shares or ADSs.
Disclosure of information with respect to foreign financial assets
Certain U.S. holders are required to report information with respect to their investment in our ordinary shares or ADSs not held through a
custodial account with a U.S. financial institution to the Internal Revenue Service. In general, U.S. taxpayers holding specified foreign financial assets (which generally would include our ordinary shares or ADSs) with an aggregate
value exceeding US$ 50,000 will report information about those assets on Internal Revenue Service Form 8938 (Statement of Specified Foreign Financial Assets), which must be attached to the taxpayers annual income tax return. Higher
asset thresholds apply to U.S. taxpayers who file a joint tax return or who reside abroad. Investors who fail to report required information could become subject to substantial penalties. You should consult your own tax advisor concerning the
effect, if any, of holding your ordinary shares or ADSs on your obligation to file Form 8938.
U.S. State and local taxes
In addition to U.S. federal income tax, you may be subject to U.S. state and local taxes with respect to your ordinary shares or
ADSs. You should consult your own tax advisor concerning the U.S. state and local tax consequences of holding your ordinary shares or ADSs.
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LISTING AND SHAREHOLDINGS
Capital
10.2.7 |
Changes in our capital over the last five years |
|
|
|
|
|
|
|
|
|
|
|
|
|
Type of transaction |
|
Number of shares |
|
|
Amount of capital (in Euros) |
|
|
Share premium (in Euros) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital at 12/31/2010 |
|
|
2,318,385,548 |
|
|
|
4,636,771,096.00 |
|
|
|
15,411,661,988.91 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible securities issued by Lucent Technologies Inc. |
|
|
20,632 |
|
|
|
41,264.00 |
|
|
|
165,881.28 |
|
|
|
|
|
Redemption into Alcatel Lucent shares of bonds issued by Coralec in the context of the acquisition of Spatial Wireless |
|
|
100,000 |
|
|
|
200,000.00 |
|
|
|
991,200.00 |
|
|
|
|
|
Stock options exercised |
|
|
6,109,985 |
|
|
|
12,219,970.00 |
|
|
|
2,601,551.30 |
|
|
|
|
|
Issuance of Alcatel Lucent shares in accordance with the Alcatel Lucent performance shares plan |
|
|
767,163 |
|
|
|
1,534,326.00 |
|
|
|
(1,534,326.00) |
(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital at 12/31/2011 |
|
|
2,325,383,328 |
|
|
|
4,650,766,656.00 |
|
|
|
15,413,886,295.49 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of Alcatel Lucent shares in accordance with the Alcatel Lucent performance shares plan |
|
|
1,180,498 |
|
|
|
2,360,996.00 |
|
|
|
(2,360,996.00) |
(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital at 12/31/2012 |
|
|
2,326,563,826 |
|
|
|
4,653,127,652.00 |
|
|
|
15,411,525,299.49 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of Alcatel Lucent shares in accordance with the Alcatel Lucent performance shares plan |
|
|
2,870,871 |
|
|
|
5,734,987.20 |
|
|
|
(5,734,987.20) |
(1) |
|
|
|
|
Stock options exercised |
|
|
7,890,275 |
|
|
|
394,513.75 |
|
|
|
15,684,927.04 |
|
|
|
|
|
Convertible securities issued by Lucent Technologies Inc. |
|
|
2,475 |
|
|
|
123.75 |
|
|
|
24,725.25 |
|
|
|
|
|
OCEANE 2015 conversion |
|
|
15,658,262 |
|
|
|
782,913.10 |
|
|
|
46,691,918.25 |
|
|
|
|
|
Capital reduction by reducing of nominal value from EUR 2 to 0.05 |
|
|
|
|
|
|
(4,542,390,904.35) |
|
|
|
4,542,390,904.35 |
(2) |
|
|
|
|
Issuance of Alcatel Lucent shares resulting from the capital increase with preferential subscription rights |
|
|
455,568,488 |
|
|
|
22,778,424.40 |
|
|
|
903,431,902.60 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital at 12/31/2013 |
|
|
2,808,554,197 |
|
|
|
140,427,709.85 |
|
|
|
20,914,014,689.78 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of Alcatel Lucent shares in accordance with the Alcatel Lucent performance shares plan |
|
|
4,435,355 |
|
|
|
221,767.75 |
|
|
|
(221,767.75) |
(1) |
|
|
|
|
Stock options exercised |
|
|
7,438,828 |
|
|
|
371,941.40 |
|
|
|
14,284,118.22 |
|
|
|
|
|
Convertible securities issued by Lucent Technologies Inc. |
|
|
2,830 |
|
|
|
141.50 |
|
|
|
28,271.70 |
|
|
|
|
|
OCEANE 2018 conversion |
|
|
1,060 |
|
|
|
53.00 |
|
|
|
1,747.00 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital at 12/31/2014 |
|
|
2,820,432,270 |
|
|
|
141,021,613.50 |
|
|
|
20,928,107,058.95 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of Alcatel Lucent shares in accordance with the Alcatel Lucent performance shares plan |
|
|
4,236,071 |
|
|
|
211,803.55 |
|
|
|
(211,803.55) |
(1) |
|
|
|
|
Stock options exercised |
|
|
38,595,369 |
|
|
|
1,929,768.45 |
|
|
|
80,365,319.20 |
|
|
|
|
|
Convertible securities issued by Lucent Technologies Inc. |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
OCEANE 2018 conversion |
|
|
147,958,658 |
|
|
|
7,397,932.90 |
|
|
|
203,971,568.90 |
|
|
|
|
|
OCEANE 2019 conversion |
|
|
15,220,628 |
|
|
|
761,031.40 |
|
|
|
48,111,455.36 |
|
|
|
|
|
OCEANE 2020 conversion |
|
|
9,894,363 |
|
|
|
494,718.15 |
|
|
|
30,579,769.29 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital at 12/31/2015 |
|
|
3,036,337,359 |
|
|
|
151,816,867.95 |
|
|
|
21,290,923,368.15 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Debit corresponding to the issuance of Alcatel Lucent shares. |
(2) |
|
The amount of the capital decrease was allocated to the share premium account. |
182
LISTING AND SHAREHOLDINGS
Shareholding
10.3.1 |
Administration of our Securities |
Custodian
The shares are in registered or bearer form, at the shareholders choice, and are fully
negotiable, except when otherwise provided by legal or regulatory provisions.
Our shares are traded on the European regulated market
of Euronext Paris, which represents the principal trading market for our ordinary shares. Our ordinary shares have been traded on Euronext Paris since June 3, 1987.
Since 2010, we have entrusted BNP Paribas Securities Services with the provision of services relating to our securities and, notably, with the
administration of our registered shares.
Securities listed on the New York Stock Exchange
Following the notification sent in January 2016 by Alcatel-Lucent, JPMorgan Chase Bank, N.A. provided notice of termination of
the Alcatel-Lucent American depositary receipts (ADR) program to the holders of its ADRs (see Section 10.2.6 American Depositary Shares (ADS). On
February 11, 2016, Alcatel-Lucent gave notice of its intention to voluntarily delist its ADSs from the NYSE. The delisting became effective on March 7, 2016.
Since May 1992, our shares had been listed on the New York Stock Exchange (NYSE) in the form of American Depository Shares (ADSs).
The shares underlying the ADSs (see Section 10.2.6 American Depositary Shares (ADS)) were deposited with a custodian.
The ADSs were negotiated on the U.S. stock markets in the same way as shares issued by U.S. listed corporations.
10.3.2 |
Shareholders agreements - concerted action |
At April 26, 2016, to our knowledge, there are no shareholders agreements or agreements
concerning our shares which, if implemented at a later date, would have an impact on
the control of our Company. As a result of the Nokia Offer, our Company is currently controlled by Nokia Corporation.
10.3.3 |
Share ownership threshold |
On January 7, 2016, Nokia announced the settlement of the initial Nokia Offer Alcatel Lucent
securities. As a result, Nokia Corporation held 76.31% of the share capital and 76.01% of the voting rights of Alcatel Lucent and Nokia Corporation declared exceeding the following legal thresholds: 5%, 10%, 15%, 20%, 25%, 30%, 1/3, 50% and 2/3 of
the share capital and voting rights.
On February 12, 2016, Nokia announced the settlement of the reopened Nokia Offer. As a result
of the settlement, Nokia Corporation held 91.51 % of the share capital and 91.44% of the voting rights of Alcatel-Lucent following the settlement of the reopened Nokia Offer and Nokia Corporation declared exceeding the following legal
threshold: 90% of the share capital and voting rights.
183
LISTING AND SHAREHOLDINGS
Shareholding
During 2015 and until April 26, 2016, a certain number of shareholders and registered
intermediaries acting primarily on behalf of their customers, informed us of declarations concerning the reaching of the following legal thresholds and thresholds set forth in our bylaws (see Section 10.1.2 Specific provisions of the
bylaws and of law):
NC means non communicated
(1) |
|
Declaration amending the declaration made on February 17, 2016; the trend remained determined based on the previous January 7, 2016 declaration |
Article L.233-9 I 4 of the French Commercial Code provides that the reporting entity is deemed
to hold, in addition to shares it effectively holds, the shares that it is entitled to acquire at its sole
initiative, immediately or in the future, under the terms of an agreement or a financial instrument.
184
LISTING AND SHAREHOLDINGS
Shareholding
Pledges of Alcatel Lucent shares
At December 31, 2015, 4,681 Alcatel Lucent shares, held by a total of 25 shareholders in registered form, both directly and through an
administered account, were the subject of a pledge.
Information on the share capital of any entity member of the Group which is under or is subject
to an option or a conditional or unconditional agreement
None
10.3.4 |
Shareholding and change in its structure |
|
Breakdown of the capital and voting rights at January 8, 2016 (after the settlement of the initial Nokia Offer) on the basis of the outstanding shares at December 31,
2015 |
Following the initial Nokia Offer, the settlement of which took place on January 7, 2016, the breakdown of
capital and voting rights is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital on January 8, 2016 following the settlement of
the initial Nokia Offer on the basis of outstanding shares at 12.31.2015 |
|
|
THEORETICAL voting rights on January 8, 2016 following
the settlement of the initial Nokia Offer on the basis of outstanding shares at 12.31.2015 (3) |
|
|
Voting rights
EXERCISABLE AT SHAREHOLDERS MEETING on January 8, 2016 following the settlement of the initial Nokia Offer on the basis of outstanding shares at 12.31.2015 (4) |
|
Shareholders |
|
Number of shares |
|
|
% capital |
|
|
Double voting rights |
|
|
Total number of votes |
|
|
% of votes |
|
|
Total number of votes |
|
|
% of votes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nokia Corporation (1) (7) |
|
|
2,316,995,879 |
|
|
|
76.31% |
|
|
|
- |
|
|
|
2,316,995,879 |
|
|
|
76.01% |
|
|
|
2,316,995,879 |
|
|
|
76.56% |
|
|
|
|
|
|
|
|
|
Blackrock Inc. (7) |
|
|
26,688,400 |
|
|
|
0.88% |
|
|
|
- |
|
|
|
26,688,400 |
|
|
|
0.88% |
|
|
|
26,688,400 |
|
|
|
0.88% |
|
|
|
|
|
|
|
|
|
The Capital Group Companies, Inc. (1) (7) |
|
|
20,675,600 |
|
|
|
0.68% |
|
|
|
- |
|
|
|
20,675,600 |
|
|
|
0.68% |
|
|
|
20,675,600 |
|
|
|
0.68% |
|
|
|
|
|
|
|
|
|
Caisse des Dépôts et Consignations (1) (2) (7) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
Amundi (1) (7) |
|
|
7,731,200 |
|
|
|
0.25% |
|
|
|
- |
|
|
|
7,731,200 |
|
|
|
0.25% |
|
|
|
7,731,200 |
|
|
|
0.26% |
|
|
|
|
|
|
|
|
|
DNCA Finance (1) (7) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
FCP 2AL (1) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
Institutional investors in France (5) (7) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
Treasury stocks held by Alcatel Lucent (6) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
Treasury stock held by subsidiaries (6) |
|
|
22,000,000 |
|
|
|
0.72% |
|
|
|
- |
|
|
|
22,000,000 |
|
|
|
0.72% |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
Public |
|
|
642,246,280 |
|
|
|
21.15% |
|
|
|
12,111,300 |
|
|
|
654,357,580 |
|
|
|
21.47% |
|
|
|
654,357,580 |
|
|
|
21.62% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL |
|
|
3,036,337,359 |
|
|
|
100.00% |
|
|
|
12,111,300 |
|
|
|
3,048,448,659 |
|
|
|
100.00% |
|
|
|
3,026,448,659 |
|
|
|
100.00% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Source: Shareholders declaration. |
(2) |
|
Including the shares held by BPI Participations France. |
(3) |
|
The theoretical voting rights include the shares held by the Company and its subsidiaries which do not have voting rights. |
(4) |
|
The voting rights exercisable at Shareholders Meeting do not include shares which have no voting rights. |
(5) |
|
Institutional investors in France holding, individually, more than 0.50% of the share capital. |
(6) |
|
These shares do not have voting rights pursuant to French applicable law, while held as treasury stock. |
(7) |
|
Source: Alcatel Lucent (TPI as of January 8, 2016). |
At November 30, 2015, the treasury shares amounted to 40,115,700 (327,958 shares held by
Alcatel Lucent USA Inc, 26,782,655 shares held by Florelec and 13, 005,087 shares held by Alcatel Lucent). 18,115,700 treasury shares were tendered into the initial Nokia Offer (14,949,360 ordinary shares and 3,166,340 ADSs). Following the
settlement of the initial Nokia
Offer, the 22,000,000 treasury shares held by subsidiaries were used as follows: 16,689,074 treasury shares were used for the performance shares acceleration mechanism; 3,386,679 treasury shares
were used for the grant of unrestricted shares; and 1,924,247 remaining treasury shares were tendered into the subsequent Nokia Offer.
185
LISTING AND SHAREHOLDINGS
Shareholding
The Capital Group Companies, Inc. and Odey Asset Management LLP informed us several times during
fiscal year 2015, to have exceeded thresholds resulting in holding indirectly more than 5% of the capital and of the voting rights of our Company (see Section 10.3.3 Share ownership threshold).
|
Breakdown of the capital and voting rights at March 8, 2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital on March 8, 2016 on the basis of outstanding shares at 02.29.2016 |
|
|
THEORETICAL voting rights on March 8, 2016 on the basis of outstanding shares at
02.29.2016(3) |
|
|
Voting rights EXERCISABLE AT SHAREHOLDERS MEETING on March 8, 2016 on the basis of outstanding shares at 02.29.2016(4) |
|
Shareholders |
|
Number of shares |
|
|
% capital |
|
|
Double voting rights |
|
|
Total number of votes |
|
|
% of votes |
|
|
Total number of votes |
|
|
% of votes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nokia Corporation (1) (7) |
|
|
3,241,602,305 |
|
|
|
91.64% |
|
|
|
- |
|
|
|
3,241,602,305 |
|
|
|
91.58% |
|
|
|
3,241,602,305 |
|
|
|
91.58% |
|
|
|
|
|
|
|
|
|
Blackrock Inc. (7) |
|
|
9,742,900 |
|
|
|
0.27% |
|
|
|
- |
|
|
|
9,742,900 |
|
|
|
0.27% |
|
|
|
9,742,900 |
|
|
|
0.27% |
|
|
|
|
|
|
|
|
|
Amundi (1) (7) |
|
|
1,109,000 |
|
|
|
0.03% |
|
|
|
- |
|
|
|
1,109,000 |
|
|
|
0.03% |
|
|
|
1,109,000 |
|
|
|
0.03% |
|
|
|
|
|
|
|
|
|
The Capital Group Companies, Inc. (1) (7) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
Caisse des Dépôts et Consignations (1) (2) (7) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
DNCA Finance (1) (7) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
FCP AN (1) (8) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
Institutional investors in France (5) (7) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
Other institutional investors in North America (7) |
|
|
9,531,300 |
|
|
|
0.27% |
|
|
|
- |
|
|
|
9,531,300 |
|
|
|
0.27% |
|
|
|
9,531,300 |
|
|
|
0.27% |
|
|
|
|
|
|
|
|
|
Treasury stocks held by Alcatel Lucent (6) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
Treasury stock held by subsidiaries (6) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
Public |
|
|
275,294,232 |
|
|
|
7.78% |
|
|
|
2,533,623 |
|
|
|
277,827,855 |
|
|
|
7.85% |
|
|
|
277,827,855 |
|
|
|
7.85% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL |
|
|
3,537,279,737 |
|
|
|
100.00% |
|
|
|
2,533,623 |
|
|
|
3,539,813,360 |
|
|
|
100.00% |
|
|
|
3,539,813,360 |
|
|
|
100.00% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Source: Shareholders declaration. |
(2) |
|
Including the shares held by BPI Participations France. |
(3) |
|
The theoretical voting rights include the shares held by the Company and its subsidiaries which do not have voting rights. |
(4) |
|
The voting rights exercisable at Shareholders Meeting do not include shares which have no voting rights. |
(5) |
|
Institutional investors in France holding, individually, more than 0.50% of the share capital. |
(6) |
|
These shares do not have voting rights pursuant to French applicable law, while held as treasury stock. |
(7) |
|
Source: Alcatel Lucent ( TPI as of March 8, 2016 ). |
Voting rights
The total number of voting rights, as published by Alcatel Lucent pursuant to Article L. 233-8-II of the French Commercial Code, and
Article 223-16 of the General Regulations of the AMF, was 3,048,448,659 at December 31, 2015 (including the treasury shares held by the parent company and by its subsidiaries which were tendered in the Nokia Offer).
To allow shareholders to determine whether they have exceeded an ownership threshold, we post the total number of voting rights monthly on our
website. For the discussion of ownership
thresholds, see Section 10.1.2 Specific provisions of the by-laws and of law.
Information on voting rights, which is considered regulated information under the General Regulation of the AMF, may be viewed at the following address: www.alcatel-lucent.com, heading Investors, then Regulated
Information.
At December 31, 2015, shareholders benefiting from double voting rights had a total of 12,111,300 votes,
representing 0,39% of the voting rights.
186
LISTING AND SHAREHOLDINGS
Shareholding
|
|
|
Breakdown of capital and voting rights over the past 3 years |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders |
|
Number of shares |
|
|
% of capital |
|
|
Theoretical voting rights (3) |
|
|
% of theoretical voting rights |
|
|
Voting rights exercisable at Shareholders
Meeting (4) |
|
|
%
of voting rights
exercisable at
Shareholders Meeting |
|
|
|
|
|
|
at January 8, 2016 (following the settlement of the initial Nokia Offer) on the basis of shares outstanding at December 31, 2015 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nokia Corporation (1) (7) |
|
|
2,316,995,879 |
|
|
|
76.31% |
|
|
|
2,316,995,879 |
|
|
|
76.01% |
|
|
|
2,316,995,879 |
|
|
|
76.56% |
|
|
|
|
|
|
|
|
Blackrock Inc. (7) |
|
|
26,688,400 |
|
|
|
0.88% |
|
|
|
26,688,400 |
|
|
|
0.88% |
|
|
|
26,688,400 |
|
|
|
0.88% |
|
|
|
|
|
|
|
|
The Capital Group Companies, Inc. (1) (7) |
|
|
20,675,600 |
|
|
|
0.68% |
|
|
|
20,675,600 |
|
|
|
0.68% |
|
|
|
20,675,600 |
|
|
|
0.68% |
|
|
|
|
|
|
|
|
Caisse des Dépôts et Consignations (1) (2) (7) |
|
|
- |
|
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
Amundi (1) (7) |
|
|
7,731,200 |
|
|
|
0.25% |
|
|
|
7,731,200 |
|
|
|
0.25% |
|
|
|
7,731,200 |
|
|
|
0.26% |
|
|
|
|
|
|
|
|
DNCA Finance (1) (7) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
FCP 2AL (1) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
Institutional investors in France (5) (7) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
Treasury stocks held by Alcatel Lucent (6) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
Treasury stock held by subsidiaries (6) |
|
|
22,000,000 |
|
|
|
0.72% |
|
|
|
22,000,000 |
|
|
|
0.72% |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
Public |
|
|
642,246,280 |
|
|
|
21.15% |
|
|
|
654,357,580 |
|
|
|
21.47% |
|
|
|
654,357,580 |
|
|
|
21.62% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL |
|
|
3,036,337,359 |
|
|
|
100.00% |
|
|
|
3,048,448,659 |
|
|
|
100.00% |
|
|
|
3,026,448,659 |
|
|
|
100.00% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
at December 31, 2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Capital Group Companies, Inc. (1) |
|
|
290,280,811 |
|
|
|
10.29% |
|
|
|
290,280,811 |
|
|
|
10.11% |
|
|
|
290,280,811 |
|
|
|
10.26% |
|
|
|
|
|
|
|
|
Blackrock Inc. (1) |
|
|
136,616,484 |
|
|
|
4.84% |
|
|
|
136,616,484 |
|
|
|
4.76% |
|
|
|
136,616,484 |
|
|
|
4.83% |
|
|
|
|
|
|
|
|
Caisse des Dépôts et Consignations (1) (2) (7) |
|
|
100,901,700 |
|
|
|
3.58% |
|
|
|
109,145,322 |
|
|
|
3.80% |
|
|
|
109,145,322 |
|
|
|
3.86% |
|
|
|
|
|
|
|
|
Amundi (1) |
|
|
84,642,286 |
|
|
|
3.00% |
|
|
|
84,642,286 |
|
|
|
2.95% |
|
|
|
84,642,286 |
|
|
|
2.99% |
|
|
|
|
|
|
|
|
DNCA Finance (1) (7) |
|
|
83,884,900 |
|
|
|
2.97% |
|
|
|
83,884,900 |
|
|
|
2.92% |
|
|
|
83,884,900 |
|
|
|
2.96% |
|
|
|
|
|
|
|
|
FCP 2AL (1) |
|
|
34,418,607 |
|
|
|
1.22% |
|
|
|
68,387,822 |
|
|
|
2.38% |
|
|
|
68,387,822 |
|
|
|
2.42% |
|
|
|
|
|
|
|
|
Other institutional investors in France (5) (7) |
|
|
107,521,500 |
|
|
|
3.81% |
|
|
|
107,521,500 |
|
|
|
3.75% |
|
|
|
107,521,500 |
|
|
|
3.80% |
|
|
|
|
|
|
|
|
Treasury stocks held by Alcatel Lucent (6) |
|
|
13,010,214 |
|
|
|
0.46% |
|
|
|
13,010,214 |
|
|
|
0.45% |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
Treasury stock held by subsidiaries (6) |
|
|
27,110,113 |
|
|
|
0.96% |
|
|
|
27,110,113 |
|
|
|
0.94% |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
Public |
|
|
1,942,045,655 |
|
|
|
68.86% |
|
|
|
1,949,993,330 |
|
|
|
67.93% |
|
|
|
1,949,993,330 |
|
|
|
68.89% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL |
|
|
2,820,432,270 |
|
|
|
100.00% |
|
|
|
2,870,592,782 |
|
|
|
100.00% |
|
|
|
2,830,472,455 |
|
|
|
100.00% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
at December 31, 2013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Capital Group Companies, Inc. (1) |
|
|
277,075,415 |
|
|
|
9.87% |
|
|
|
277,075,415 |
|
|
|
9.71% |
|
|
|
277,075,415 |
|
|
|
9.88% |
|
|
|
|
|
|
|
|
Blackrock Inc. (1) |
|
|
145,789,330 |
|
|
|
5.19% |
|
|
|
145,789,330 |
|
|
|
5.11% |
|
|
|
145,789,330 |
|
|
|
5.20% |
|
|
|
|
|
|
|
|
Caisse des Dépôts et Consignations (1) (2) |
|
|
91,830,871 |
|
|
|
3.27% |
|
|
|
100,074,493 |
|
|
|
3.51% |
|
|
|
100,074,493 |
|
|
|
3.57% |
|
|
|
|
|
|
|
|
Amundi |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
DNCA Finance |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
FCP 2AL (1) |
|
|
35,608,766 |
|
|
|
1.27% |
|
|
|
69,340,712 |
|
|
|
2.43% |
|
|
|
69,340,712 |
|
|
|
2.47% |
|
|
|
|
|
|
|
|
Other institutional investors in France (5) (7) |
|
|
125,259,100 |
|
|
|
4.46% |
|
|
|
125,259,100 |
|
|
|
4.39% |
|
|
|
125,259,100 |
|
|
|
4.47% |
|
|
|
|
|
|
|
|
Treasury stocks held by Alcatel Lucent (6) |
|
|
19,205,701 |
|
|
|
0.68% |
|
|
|
19,205,701 |
|
|
|
0.67% |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
Treasury stock held by subsidiaries (6) |
|
|
32,688,710 |
|
|
|
1.16% |
|
|
|
32,688,710 |
|
|
|
1.15% |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
Public |
|
|
2,081,096,304 |
|
|
|
74.10% |
|
|
|
2,085,454,870 |
|
|
|
73.03% |
|
|
|
2,085,454,870 |
|
|
|
74.41% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL |
|
|
2,808,554,197 |
|
|
|
100.00% |
|
|
|
2,854,888,331 |
|
|
|
100.00% |
|
|
|
2,802,993,920 |
|
|
|
100.00% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Source: Shareholders declaration. |
(2) |
|
Including the shares held by BPI Participations France. |
(3) |
|
The theoretical voting rights include the shares held by the Company and its subsidiaries which do not have voting rights. |
(4) |
|
The voting rights exercisable at Shareholders Meeting do not include shares which have no voting rights. |
(5) |
|
Institutional investors in France holding, individually, more than 0.50% of the share capital. |
(6) |
|
These shares do not have voting rights pursuant to French applicable law, while held as treasury stock. |
(7) |
|
Source: Alcatel Lucent (TPI as of January 8, 2016 and IPREO shareholders report as of December 31, 2015; 2014: TPI as of June 30, 2014 and IPREO shareholders report as of
December 31, 2014; 2013: TPI as of June 30, 2013 and IPREO shareholders report as of December 31, 2013). |
187
LISTING AND SHAREHOLDINGS
Shareholding
Employees and managements shareholding
FCP 2AL Mutual Fund (in French: Fonds Commun de Placement Actionnariat Alcatel-Lucent). The FCP 2AL tendered all of its
Alcatel-Lucent shares in the Nokia Offer and was renamed Fonds Commun de Placement Actionnariat Nokia (« FCP AN ») since the approval of the AMF on January 22, 2016.
At December 31, 2015, the employee shareholdings were managed collectively through the FCP 2AL Mutual Fund.
The FCP 2AL was the Groups special Mutual Fund put in place for the implementation of the incentive agreements and the corporate savings
plans, and entered into between the companies of the Alcatel Lucent Group and their employees.
The FCP 2AL was categorized as a mutual
fund invested in listed securities of the company (in French: FCPE investi en titres cotés de lentreprise). The FCP 2ALs management objective was to enable the unit holders to participate in the Groups development by
investing a minimum of 95% of his or her assets in the Mutual Fund in Alcatel Lucent shares, the remainder being invested in Euro monetary UCITS (in French: OPCVM Monétaire Euro)
and/
or liquidities. The Mutual Funds performance mirrored the performance of the Alcatel Lucents share both upwards and downwards.
At December 31, 2015, FCP 2AL unit holders held a total of 31 474 287 shares, representing 1.04% of the capital, of which
31 474 287 shares gave the shareholders double voting rights.
The FCP 2ALs percentage shareholding decreased from
1.54% at December 31, 2012 to 1.04% at December 31, 2015.
The voting rights at Alcatel Lucent Shareholders
Meetings were exercised by the FCP 2AL Supervisory Board.
Board of Directors and Management Committee : At April 26, 2016, the members
of the Board of Directors and of the Management Committee together held 105,042 Alcatel Lucent shares, that is, 0,003% of Alcatel Lucent capital and voting rights (see Section 7.1.2 Principles of organization of our
Companys management, subsection 7.1.2.2 Attendance fees).
|
|
|
|
|
|
|
|
|
|
|
04/26/2016 |
|
Alcatel Lucent
ordinary shares |
|
|
ADS |
|
Total |
|
|
|
|
|
|
Board of Directors (1)(2) |
|
|
105,029 |
|
|
0 |
|
|
105,029 |
|
Management Committee |
|
|
13 |
|
|
0 |
|
|
13 |
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
105,042 |
|
|
0 |
|
|
105,042 |
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Not including the two Board Observers. |
(2) |
|
Securities held directly or indirectly by the Directors. |
Directors transactions
During fiscal year 2015 and early 2016, the Directors effected transactions in Alcatel Lucent shares, in particular pursuant to their
investment obligation related to the grant of their additional Directors fees (see Section 7.1.2 Principles of organization of our Companys management, Subsection 7.1.2.2 Attendance fees) and the tendering of
their shares in the Nokia Offer.
The purchases of shares by the Directors are made outside the blackout periods, as defined by the
rules of conduct concerning the prevention of insider trading. These rules apply to our Directors and Management Committee members, and to any person with similar functions, as well as to any person who has access on a regular or occasional basis to
insider information.
Since 2013, the duration of the blackout periods is of 30 days. From 2013 to 2015, the blackout
periods started 30 calendar days before the release date of the annual, bi-annual and quarterly accounts and ended at the beginning of the second working day following the release date, provided, however, that in exceptional circumstances, trading
in Alcatel Lucent shares may occur during the blackout periods, subject to the prior written agreement of the General Counsel of the Company. In order to align Alcatel-Lucents policy with Nokias policy, Alcatel-Lucents rules of
conduct concerning the prevention of insider trading have been amended to provide that the blackout periods start 30 calendar days before the release date of the annual, bi-annual and quarterly accounts and end at the beginning of the first working
day following the release date.
188
LISTING AND SHAREHOLDINGS
Shareholding
Summary of transactions carried out by some of the Directors during fiscal year 2015 and up to April 26, 2016, reported in application of Article
223-26 of the General Regulation of the AMF:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Directors |
|
Type of transaction |
|
|
Date of the transaction |
|
|
Number of shares |
|
|
Unit price |
|
|
Total amount |
|
|
|
Philippe Camus |
|
|
Tender to the Offer |
(1) |
|
|
01/07/2016 |
|
|
|
1,103,269 |
|
|
|
exchange ratio |
|
|
|
|
|
Jean C. Monty (6) |
|
|
Acquisition |
(2) |
|
|
05/12/2015 |
|
|
|
3,705 |
|
|
|
3.41 |
|
|
|
12,634.05 |
|
|
|
|
Acquisition |
(2) |
|
|
12/10/2015 |
|
|
|
3,726 |
|
|
|
3.558 |
|
|
|
13,257.11 |
|
|
|
|
Tender to the Offer |
(1) |
|
|
01/07/2016 |
|
|
|
2,399,997 |
|
|
|
exchange ratio |
|
|
|
|
|
|
|
|
Tender to the Offer |
(3) |
|
|
01/07/2016 |
|
|
|
2,600,003 |
|
|
|
exchange ratio |
|
|
|
|
|
Francesco Caio (6) |
|
|
Acquisition |
(2) |
|
|
05/12/2015 |
|
|
|
3,703 |
|
|
|
3.41 |
|
|
|
12,627.23 |
|
|
|
|
Acquisition |
(2) |
|
|
12/10/2015 |
|
|
|
3,724 |
|
|
|
3.558 |
|
|
|
13,249.99 |
|
|
|
|
Tender to the Offer |
(1) |
|
|
01/07/2016 |
|
|
|
2,100 |
|
|
|
exchange ratio |
|
|
|
|
|
Carla Cico |
|
|
Acquisition |
(2) |
|
|
05/12/2015 |
|
|
|
3,703 |
|
|
|
3.41 |
|
|
|
12,627.23 |
|
|
|
|
Acquisition |
(2) |
|
|
12/10/2015 |
|
|
|
3,724 |
|
|
|
3.558 |
|
|
|
13,249.99 |
|
Stuart E. Eizenstat (6) |
|
|
Acquisition |
(2) |
|
|
05/12/2015 |
|
|
|
3,705 |
|
|
|
3.41 |
|
|
|
12,634.05 |
|
|
|
|
Acquisition |
(2) |
|
|
12/10/2015 |
|
|
|
3,726 |
|
|
|
3.558 |
|
|
|
13,257.11 |
|
Kim Crawford Goodman (6) |
|
|
Acquisition |
(2) |
|
|
05/12/2015 |
|
|
|
3,705 |
|
|
|
3.41 |
|
|
|
12,634.05 |
|
|
|
|
Acquisition |
(2) |
|
|
12/10/2015 |
|
|
|
3,726 |
|
|
|
3.558 |
|
|
|
13,257.11 |
|
|
|
|
Tender to the Offer |
(1) |
|
|
01/07/2016 |
|
|
|
2,500 |
|
|
|
exchange ratio |
|
|
|
|
|
Louis R. Hughes (6) |
|
|
Acquisition |
(2) |
|
|
05/12/2015 |
|
|
|
3,705 |
|
|
|
3.41 |
|
|
|
12,634.05 |
|
|
|
|
Acquisition |
(2) |
|
|
12/10/2015 |
|
|
|
3,726 |
|
|
|
3.558 |
|
|
|
13,257.11 |
|
|
|
|
Tender to the Offer |
(1) |
|
|
07/01/2016 |
|
|
|
5,000 |
|
|
|
exchange ratio |
|
|
|
|
|
Véronique Morali (4) |
|
|
Acquisition |
(2) |
|
|
05/12/2015 |
|
|
|
3,703 |
|
|
|
3.41 |
|
|
|
12,627.23 |
|
Olivier Piou (6) |
|
|
Acquisition |
(2) |
|
|
05/12/2015 |
|
|
|
3,703 |
|
|
|
3.41 |
|
|
|
12,627.23 |
|
|
|
|
Acquisition |
(2) |
|
|
12/10/2015 |
|
|
|
3,724 |
|
|
|
3.558 |
|
|
|
13,249.99 |
|
|
|
|
Tender to the Offer |
(1) |
|
|
07/01/2016 |
|
|
|
59,760 |
|
|
|
exchange ratio |
|
|
|
|
|
Jean-Cyril Spinetta |
|
|
Acquisition |
(2) |
|
|
05/12/2015 |
|
|
|
3,703 |
|
|
|
3.41 |
|
|
|
12,627.23 |
|
|
|
|
Acquisition |
(2) |
|
|
12/10/2015 |
|
|
|
3,724 |
|
|
|
3.558 |
|
|
|
13,249.99 |
|
|
|
|
Tender to the Offer |
(1) |
|
|
01/07/2016 |
|
|
|
596 |
|
|
|
exchange ratio |
|
|
|
|
|
Sylvia Summers (5) |
|
|
Acquisition |
(2) |
|
|
06/29/2015 |
|
|
|
500 |
|
|
|
$3.7527 |
|
|
|
$1,882.96 |
|
|
|
|
Tender to the Offer |
(1) |
|
|
01/07/2016 |
|
|
|
500 |
|
|
|
exchange ratio |
|
|
|
|
|
|
|
|
Acquisition |
(2) |
|
|
01/11/2016 |
|
|
|
3,538 |
|
|
|
3.78 |
|
|
|
13,396.96 |
|
|
|
(1) |
|
Tender in the initial Nokia Offer the definitive result of which was published on January 5, 2016. The transaction was completed on January 7, 2016 at which point Nokia shares were
delivered in exchange for Alcatel Lucent shares according to the exchange ratio of the Nokia Offer. |
(2) |
|
Acquired with the portion of the Directors fees subject to the requirement to purchase and hold shares. The shares acquired pursuant to this commitment must be held throughout the term of
office as Director of the Company. |
(4) |
|
Resigned on July 15, 2015. |
(5) |
|
Appointed at the Shareholders Meeting held on May 26, 2015. |
(6) |
|
Resigned on January 8, 2016. |
189
LISTING AND SHAREHOLDINGS
Stock exchange information
10.4 |
Stock exchange information |
Our shares are traded on the European regulated market of Euronext Paris, which represents the
principal trading market for our ordinary shares. Our ordinary shares have been traded on Euronext Paris since June 3, 1987.
Since May 1992, our shares were listed on the New York Stock Exchange (NYSE) in the form of American Depositary Shares (ADSs). On
February 11, 2016, Alcatel-Lucent gave notice of its intention to voluntarily delist its ADSs from the NYSE. The delisting became effective on March 7, 2016.
ISIN Code
Since June 30, 2003, all securities traded on the Euronext Paris stock market are identified by an International Securities Identification
Number (ISIN).
Alcatel Lucent: FR0000130007.
Mnemo: ALU.
Index
Our shares were included in the CAC 40 index until January 7, 2016.
10.4.2 |
Changes in price per share |
The following table sets forth,
for the periods indicated, the high and low prices, at the close of the trading day, on Euronext Paris SA for our ordinary shares:
|
|
|
|
|
|
|
|
|
(in ) Price per share |
|
High |
|
|
Low |
|
|
|
2011 |
|
|
4.43 |
|
|
|
1.11 |
|
|
|
|
2012 |
|
|
1.95 |
|
|
|
0.72 |
|
|
|
|
2013 |
|
|
3.36 |
|
|
|
0.96 |
|
|
|
|
2014 |
|
|
3.40 |
|
|
|
1.88 |
|
|
|
|
First Quarter |
|
|
3.40 |
|
|
|
2.70 |
|
|
|
|
Second Quarter |
|
|
3.04 |
|
|
|
2.61 |
|
|
|
|
Third Quarter |
|
|
2.85 |
|
|
|
2.38 |
|
|
|
|
Fourth Quarter |
|
|
3.00 |
|
|
|
1.88 |
|
|
|
|
2015 |
|
|
4.48 |
|
|
|
2.77 |
|
|
|
|
First Quarter |
|
|
3.72 |
|
|
|
2.78 |
|
|
|
|
Second Quarter |
|
|
4.48 |
|
|
|
3.10 |
|
|
|
|
Third Quarter |
|
|
3.45 |
|
|
|
2.77 |
|
|
|
|
Fourth Quarter |
|
|
3.86 |
|
|
|
3.23 |
|
|
|
|
October |
|
|
3.70 |
|
|
|
3.23 |
|
|
|
|
November |
|
|
3.81 |
|
|
|
3.64 |
|
|
|
|
December |
|
|
3.86 |
|
|
|
3.38 |
|
|
|
|
2016 |
|
|
|
|
|
|
|
|
|
|
|
January |
|
|
3.78 |
|
|
|
3.54 |
|
|
|
|
February |
|
|
3.23 |
|
|
|
2.90 |
|
|
|
|
March |
|
|
3.28 |
|
|
|
3.05 |
|
|
|
|
April (as of April 26, 2016) |
|
|
3.31 |
|
|
|
3.20 |
|
|
|
190
LISTING AND SHAREHOLDINGS
Stock exchange information
The following table sets forth, for the periods indicated, the high and low prices, at the close of the trading day, on The New York Stock
Exchange for our ADSs:
|
|
|
|
|
|
|
|
|
(in U.S. $) Price per share |
|
High |
|
|
Low |
|
|
|
2011 |
|
|
6.54 |
|
|
|
1.39 |
|
|
|
|
2012 |
|
|
2.6 |
|
|
|
0.94 |
|
|
|
|
2013 |
|
|
4.57 |
|
|
|
1.28 |
|
|
|
|
2014 |
|
|
4.61 |
|
|
|
2.36 |
|
|
|
|
First Quarter |
|
|
4.61 |
|
|
|
3.69 |
|
|
|
|
Second Quarter |
|
|
4.16 |
|
|
|
3.53 |
|
|
|
|
Third Quarter |
|
|
3.84 |
|
|
|
3.03 |
|
|
|
|
Fourth Quarter |
|
|
3.71 |
|
|
|
2.36 |
|
|
|
|
2015 |
|
|
4.93 |
|
|
|
3.13 |
|
|
|
|
First Quarter |
|
|
3.92 |
|
|
|
3.24 |
|
|
|
|
Second Quarter |
|
|
4.93 |
|
|
|
3.40 |
|
|
|
|
Third Quarter |
|
|
3.75 |
|
|
|
3.13 |
|
|
|
|
Fourth Quarter |
|
|
4.11 |
|
|
|
3.56 |
|
|
|
|
October |
|
|
4.03 |
|
|
|
3.56 |
|
|
|
|
November |
|
|
4.11 |
|
|
|
3.86 |
|
|
|
|
December |
|
|
4.05 |
|
|
|
3.73 |
|
|
|
|
2016 |
|
|
|
|
|
|
|
|
|
|
|
January |
|
|
4.07 |
|
|
|
3.83 |
|
|
|
|
February (February 1 - February 24)(1) |
|
|
3.48 |
|
|
|
3.17 |
|
|
|
(1) |
|
The NYSE suspended trading of our ADS after the market closed on February 24, 2016 and our ADS are no longer traded on the NYSE. |
10.4.3 |
Shareholder structure |
|
|
|
Breakdown of the capital by shareholder category at January 8, 2016 and March 8, 2016 |
|
|
191
LISTING AND SHAREHOLDINGS
Stock exchange information
|
|
|
Breakdown of the capital by location at January 8, 2016 (1) and March 8, 2016 (1) |
|
|
(1) Applicable to institutional investors, excluding Nokia.
Number of shares at January 8, 2016: 3,036,337,359.
Number of shares at March 8, 2016: 3,537,279,737.
Source: IPREO.
10.4.4 |
Dividends and performance |
Trend of dividend per share
over 5 years
No dividends have been distributed in the five previous fiscal years.
Dividends not claimed within five years are turned over to the French Treasury.
The dividend policy is defined by our Board of Directors following an analysis, in particular, of the Groups financial position and earnings
and taking into account its capital
requirements and performance, current and future returns, and market practices in relation to distribution of dividends, especially in the sector of activity within which we operate. In the light
of our financial results, investment needs and requirements in terms of debt management, we may decide to adjust a dividend distribution, or to not distribute a dividend.
At its meeting of April 26, 2016, our Board of Directors recommended that no dividend be paid for fiscal year 2015.
192
LISTING AND SHAREHOLDINGS
Shareholders meetings
10.5 |
Shareholders Meetings |
History |
of main decisions taken at Shareholders Meetings during the last 3 years |
2015 Shareholders Meeting
At the Shareholders Meeting of May 26, 2015, the shareholders mainly:
· |
|
appointed Mrs. Sylvia Summers as Director for a period of three years expiring at the end of the Shareholders Meeting which will consider the approval of the financial statements for the
fiscal year ending December 31, 2017; |
· |
|
renewed the term of office as Directors of Messrs. Stuart E. Eizenstat, Louis R. Hughes and Olivier Piou for a period of three years expiring at the end of the Shareholders Meeting which
will consider the approval of the financial statements for the fiscal year ending December 31, 2017; |
· |
|
submitted to the shareholders the elements of compensation due or granted to Mr. Philippe Camus as Chairman of the Board and to Mr. Michel Combes as CEO during fiscal year 2014 to obtain
their advisory opinion thereon (Say on pay); |
· |
|
renewed for a period of 26 months, that is, until July 2017, all of the financial authorizations granted to our Board of Directors regarding the Companys financial management, in particular
by authorizing our Board to increase the capital, in accordance with various terms and conditions and for various reasons; |
· |
|
renewed for a period of 26 months, that is, until July 2017, the specific authorization concerning the grant of performance shares for the benefit of employees and executive directors.
|
2014 Shareholders Meeting
At the Shareholders Meeting of May 28, 2014, the shareholders mainly:
· |
|
appointed Mrs. Véronique Morali and Mr. Francesco Caio as Directors for a period of three years expiring at the end of the Shareholders Meeting which will consider the
approval of the financial statements for the fiscal year ending December 31, 2016; |
· |
|
renewed the term of office as Directors of Mrs. Kim Crawford Goodman and Mr. Jean-Cyril Spinetta for a period of three
|
|
|
years expiring at the end of the Shareholders Meeting which will consider the approval of the financial statements for the fiscal year ending December 31, 2016;
|
· |
|
submitted to the shareholders the elements of compensation due or granted to Mr. Philippe Camus as Chairman of the Board and to Mr. Michel Combes as CEO during fiscal year 2013 to obtain
their advisory opinion thereon (Say on pay); |
· |
|
renewed for a period of 26 months, that is, until July 2016, all of the financial authorizations granted to our Board of Directors regarding the Companys financial management, in particular
by authorizing our Board to increase the capital, in accordance with various terms and conditions and for various reasons; |
· |
|
renewed for a period of 38 months, that is, until July 2017, the specific authorizations concerning the grant of performance shares and stock options for the benefit of employees and executive
directors. |
2013 Shareholders Meetings
At the Shareholders Meeting of May 7, 2013, the shareholders mainly:
· |
|
appointed Mr. Michel Combes as Director for a period of three years expiring at the end of the Shareholders Meeting which will consider the approval of the financial statements for the
fiscal year ending December 31, 2015; |
· |
|
renewed the term of office as Directors of Mr. Philippe Camus, Mrs. Carla Cico and Mr. Jean C. Monty, for a period of three years expiring at the end of the Shareholders
Meeting which will consider the financial statements for the fiscal year ending December 31, 2015. |
At the
Shareholders Meeting of May 29, 2013, the shareholders decided to authorize the Board of Directors to reduce the Companys capital by decreasing the nominal value of our shares. The nominal value of the shares was therefore reduced
from 2 to 0.05.
193
LISTING AND SHAREHOLDINGS
194
Controls and procedures, Statutory Auditors fees and other matters
|
11 |
195
CONTROLS AND PROCEDURES, STATUTORY AUDITORS FEES AND OTHER MATTERS
Controls and procedures
11.1 |
Controls and procedures |
Disclosure controls and
procedures
We performed an evaluation of the effectiveness of our disclosure controls and procedures as
required by Exchange Act Rule 13a-15(b) as of the end of the period covered by this report. Based on this evaluation, our management, including our Chief Executive Officer and our Chief Financial Officer concluded that, as of December 31, 2015,
these disclosure controls and procedures were not effective because of material weaknesses in our internal controls over financial reporting, relating to the
controls over the process of recognizing deferred tax assets on certain taxable temporary differences and tax losses carried forward in certain jurisdictions, and controls over the revenue
recognition process in the US.
Management believes that the consolidated financial statements fairly present in all material respects
the Companys financial position results of operation and cash flows.
Managements annual
report on internal control over financial reporting
We are responsible for establishing and maintaining adequate internal control over financial
reporting for Alcatel Lucent. Internal control over financial reporting is defined in Rule 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended, as a process designed by, or under the supervision of, our principal executive
and principal financial officers and effected by our Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements
in accordance with generally accepted accounting principles and includes those policies and procedures that (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the
assets of the issuer; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the
issuer are being made only in accordance with authorizations of management and directors of the issuer; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the
issuers assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal
control over financial reporting may not prevent or detect misstatements and even when determined to be effective can only provide reasonable assurance with respect to financial statements. Also, projections of any evaluation of effectiveness to
future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
We assessed the effectiveness of our internal control over financial reporting as of December 31, 2015. In making this assessment, we used the
criteria established in Internal Control -Integrated Framework 2013 issued by the Committee of Sponsoring Organizations (COSO) of the Treadway Commission.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Companys annual or interim
financial statements will not be prevented or detected on a timely basis. Based on the criteria
established by COSO, management identified the following material weaknesses: (i) ineffective controls over the recognition and measurement of certain deferred tax assets and
(ii) ineffective controls over the revenue recognition process in the US.
Deferred Tax
Control deficiencies have been identified over the recognition of certain deferred tax assets on existing taxable temporary differences where
deferred tax liabilities were recorded. This misstatement resulted in the restatement of our previously issued consolidated financial statements for the years ended December 31, 2013 and 2014.
Revenue recognition
Control deficiencies were
identified related to revenue recognition in the US, in particular on client acceptance, customer credits, and accounting for construction contracts and multiple-element arrangements. The process is characterized by a complex environment with
hundreds of thousands of immaterial transactions requiring significant manual input and several layers of controls. Errors were identified; however there was no correction required of the consolidated financial statements.
Management has assessed that these control deficiencies constitute material weaknesses, and concluded that the Companys internal controls
over financial reporting were not effective as of December 31, 2015 based on the 2013 Internal Control Integrated Framework issued by the COSO.
Deloitte & Associés and Ernst & Young et Autres, the independent registered public accounting firms that audited the consolidated financial statements in this annual report, have issued a report on the Companys
internal control over financial reporting, as stated in their report which is in Section 11.1.1 Report of independent registered public accounting firms of this annual report.
196
CONTROLS AND PROCEDURES, STATUTORY AUDITORS FEES AND OTHER MATTERS
Controls and procedures
Management is pursuing the implementation of corrective measures to address the material weaknesses
described above. In an effort to remediate these deficiencies and enhance our internal controls, we have initiated the implementation of several improvements.
Regarding deferred tax, the group accounting policy, which has been regularly subject to the review of our external auditors, considered that
given the volatility of results and past losses of the Company, it was appropriate not to recognize deferred tax assets on existing taxable temporary differences when deferred tax liabilities were recorded. In the context of the closing of the 2015
financial statements, further specific reviews on deferred tax assets have been performed and it has been identified in April 2016 that certain IAS 12 guidance requires the recognition of deferred tax assets in such a situation even in loss-making
entities. The group accounting policy has been immediately amended as reflected in our 2015 consolidated financial statements and prior periods (2013 and 2014) consolidated financial statements were restated accordingly in this Form 20-F filing.
Regarding revenue recognition in our US subsidiary, the following actions have been identified:
· |
|
assess, validate and document any necessary changes in the internal control framework, including IT systems; |
· |
|
further enhance policies and procedures relating to revenue recognition for our US subsidiary, Alcatel Lucent USA Inc., and analysis; |
· |
|
further enhance training and instruction of accounting staff and customer teams; |
· |
|
reinforce our controls on construction contracts and multiple-element arrangements. |
We believe the measures described above will remediate the material weaknesses we have identified and strengthen our
Planned Remediation of Material Weaknesses
internal control over financial reporting. We are committed to continuing to improve our internal control processes and will continue to diligently and vigorously review our financial reporting
controls and procedures. As we continue to evaluate and work to improve our internal control over financial reporting, we may determine to take additional measures to address control deficiencies or determine to modify, or in appropriate
circumstances not to complete, certain of the remediation measures described above.
In light of the material weaknesses described
above, additional analyses and other procedures were performed to ensure that our consolidated financial statements included in this Annual Report on Form 20-F were prepared in accordance with IFRS. These measures included expanded year-end closing
procedures, the dedication of significant internal resources to scrutinize account analyses and reconciliations and managements own internal reviews and efforts to remediate the material weaknesses in internal control over financial reporting
described above.
For deferred tax, these measures lead to the above-mentioned change in accounting treatment and restatement of the
accounts allowing for the remediation of the related material weakness at the date of issuance of this report.
For US revenue
recognition, the additional control procedures covered a substantial portion of transactions and included all large amount transactions. Errors identified were trivial both individually and in aggregate; in particular no errors were identified on
the individually significant transactions.
As a result of these measures, management concluded that the Companys consolidated
financial statements included in this Annual Report on Form 20-F present fairly, in all material respects, the Companys financial position, results of operations and cash flows as of the dates, and for the periods, presented in conformity with
IFRS as issued by the IASB.
Changes in internal
control over financial reporting
There have not been any changes in the Companys internal control over financial reporting (as
such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the year
ended December 31, 2015 that have materially affected, or are reasonably likely to materially affect, the Companys internal control over financial reporting.
197
CONTROLS AND PROCEDURES, STATUTORY AUDITORS FEES AND OTHER MATTERS
Controls and procedures
11.1.1 |
Report of Independent Registered Public Accounting Firms |
To
the Shareholders and the Board of Directors of Alcatel Lucent (and subsidiaries)
We have audited Alcatel Lucent and its
subsidiaries (the Group) internal control over financial reporting as at December 31, 2015, based on criteria established in Internal Control Integrated Framework (2013) issued by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO). The Groups management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control
over financial reporting included in the accompanying managements annual report on internal control over financial reporting. Our responsibility is to express an opinion on the Groups internal control over financial reporting based on
our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of
internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we
considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A companys
internal control over financial reporting is a process designed 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. A companys internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit the preparation of financial statements in accordance with generally accepted accounting principles, and that receipts
and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or
disposition of the companys assets that could have a material effect on the financial statements.
Because of its inherent
limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies or procedures may deteriorate.
A material weakness is a deficiency, or
combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the companys annual or interim financial statements will not be prevented or detected on a
timely basis. The following material weaknesses have been identified and included in managements assessment: the recognition and measurement of certain deferred tax assets and the revenue recognition process in the United States.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated
statements of financial position of the Group as of December 31, 2015, 2014 and 2013, and the related consolidated statements of income, comprehensive income, changes in equity, and cash flows for each of the three years in the period ended December
31, 2015. These material weaknesses were considered in determining the nature, timing and extent of audit tests applied in our audit of the consolidated financial statements as of and for the year ended December 31, 2015, and this report does not
affect our report dated April 27, 2016, which expressed an unqualified opinion on those financial statements and included an explanatory paragraph regarding the misstatement related to the recognition of certain deferred tax assets.
In our opinion, because of the effect of the material weaknesses described above on the achievement of the objectives of the control criteria, the
Group has not maintained effective internal control over financial reporting as of December 31, 2015, based on the COSO criteria.
|
|
|
s/ DELOITTE & ASSOCIES |
|
s/ ERNST & YOUNG et Autres |
|
|
Represented by Frédéric
Martineau |
Neuilly-sur-Seine and Paris-La Défense, April 27, 2016
198
CONTROLS AND PROCEDURES, STATUTORY AUDITORS FEES AND OTHER MATTERS
Controls and procedures
11.1.2 |
Statutory Auditors |
Our Statutory Auditors who report on our
parent company and consolidated accounts and our Alternate Auditors are:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Appointment (1) |
|
|
Most recent renewals (1) |
|
|
Expiration of mandate |
|
|
|
Statutory Auditors |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deloitte & Associés, represented by Mr. Bertrand Boisselier
185, avenue Charles de Gaulle 92524 Neuilly-sur-Seine Cedex |
|
|
06/18/1998 |
|
|
|
06/08/2012 |
|
|
|
12/31/2017 |
|
|
|
|
|
Ernst & Young et Autres, represented by Mr. Frédéric Martineau
Tour First, 1-2, place des Saisons 92400 Courbevoie-Paris La Défense 1 |
|
|
06/23/1994 |
|
|
|
06/08/2012 |
|
|
|
12/31/2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alternate Auditors |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BEAS 195, avenue
Charles de Gaulle 92200 Neuilly sur Seine |
|
|
09/07/2006 |
|
|
|
06/08/2012 |
|
|
|
12/31/2017 |
|
|
|
|
|
Auditex 1-2, place
des Saisons 92400 Courbevoie-Paris La Défense 1 |
|
|
09/07/2006 |
|
|
|
06/08/2012 |
|
|
|
12/31/2017 |
|
|
|
(1) |
|
Date of the Annual Shareholders Meeting. |
Change in
Statutory Auditors
Not applicable.
11.1.3 |
Statutory Auditors fees |
Fees of our Statutory Auditors
and their international networks in 2014 and in 2015:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deloitte & Associés |
|
|
Ernst & Young |
|
|
|
(Deloitte Touche Tohmastu network) |
|
|
(Ernst & Young network) |
|
(in thousands of euros) |
|
2014 |
|
|
2015 |
|
|
2014 |
|
|
2015 |
|
|
|
|
|
|
|
|
|
|
|
|
1. Audit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Audit fees (statutory audit, audit of consolidated financial statements and certification) |
|
|
7,372 |
|
|
|
81% |
|
|
|
8,544 |
|
|
|
75% |
|
|
|
6,795 |
|
|
|
78% |
|
|
|
7,256 |
|
|
|
74% |
|
|
|
|
|
|
|
|
|
|
Issuer |
|
|
2,438 |
|
|
|
27% |
|
|
|
2,877 |
|
|
|
25% |
|
|
|
2,398 |
|
|
|
28% |
|
|
|
2,822 |
|
|
|
29% |
|
|
|
|
|
|
|
|
|
|
Consolidated entities |
|
|
4,934 |
|
|
|
54% |
|
|
|
5,667 |
|
|
|
50% |
|
|
|
4,397 |
|
|
|
50% |
|
|
|
4,434 |
|
|
|
45% |
|
|
|
|
|
|
|
|
|
|
Audit-related fees |
|
|
1,638 |
|
|
|
18% |
|
|
|
2,331 |
|
|
|
21% |
|
|
|
1,723 |
|
|
|
20% |
|
|
|
1,614 |
|
|
|
17% |
|
|
|
|
|
|
|
|
|
|
Issuer |
|
|
140 |
|
|
|
2% |
|
|
|
2,268 |
|
|
|
20% |
|
|
|
1,289 |
|
|
|
15% |
|
|
|
1,322 |
|
|
|
14% |
|
|
|
|
|
|
|
|
|
|
Consolidated entities |
|
|
1,498 |
|
|
|
16% |
|
|
|
63 |
|
|
|
1% |
|
|
|
434 |
|
|
|
5% |
|
|
|
292 |
|
|
|
3% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SUB-TOTAL |
|
|
9,010 |
|
|
|
99% |
|
|
|
10,875 |
|
|
|
96% |
|
|
|
8,518 |
|
|
|
98% |
|
|
|
8,870 |
|
|
|
91% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2. Other services (not audit-related) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax services |
|
|
123 |
|
|
|
1% |
|
|
|
195 |
|
|
|
2% |
|
|
|
122 |
|
|
|
1% |
|
|
|
36 |
|
|
|
0% |
|
|
|
|
|
|
|
|
|
|
Other services |
|
|
25 |
|
|
|
0% |
|
|
|
299 |
|
|
|
3% |
|
|
|
98 |
|
|
|
1% |
|
|
|
865 |
|
|
|
9% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SUB-TOTAL |
|
|
148 |
|
|
|
1% |
|
|
|
494 |
|
|
|
4% |
|
|
|
220 |
|
|
|
2% |
|
|
|
901 |
|
|
|
9% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL |
|
|
9,158 |
|
|
|
100% |
|
|
|
11,369 |
|
|
|
100% |
|
|
|
8,738 |
|
|
|
100% |
|
|
|
9,771 |
|
|
|
100% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The table above provides the fees of Alcatel Lucents independent auditors and their
international networks for the consolidated entities of the Group relating to the periods 2014 and 2015.
In accordance with U.S. regulatory requirements around external auditors independence, the
Audit and Finance Committee has a policy regarding pre-approval of certain audit services and permissible non-audit services provided by our independent auditors. Our independent auditors may only be engaged to provide such services after having
received confirmation that
199
CONTROLS AND PROCEDURES, STATUTORY AUDITORS FEES AND OTHER MATTERS
Controls and procedures
these services are included in the list of pre-approved services by the Audit and Finance
Committee. Non-prohibited services which are however not included in the pre-approved services must be specifically approved by the Audit and Finance Committee.
Note 1 Audit fees (statutory audit, audit of consolidated financial statements and certification)
The services included are those imposed by applicable law or regulations. More specifically, the services envisaged by the CNCC guide on
professional standards in its Chapters 2, 5 and 6 are included. Audit fees consist of fees billed for the annual audit of the Groups consolidated financial statements and the statutory accounts of all consolidated entities (both French and
foreign). They also include the review of documents filed with the SEC and which encompasses procedures on internal controls in accordance with Section 404 of the Sarbanes-Oxley Act.
Note 2 Audit-related fees
Audit related fees consist of fees billed by the independent auditors or by their networks for services that are reasonably related to the performance of the audit of the Companys (or its affiliates) financial
statements. Such services fall within
Articles 10, 23 and 24, respectively, of the Code of Ethics of IFAC (International Federation of Accountants). Such procedures or services are generally non-recurrent and may only reasonably
be provided by the independent auditors.
Note 3 Other services (non-audit related)
Non-audit related services are services provided by the independent auditors. Those services are carried out in accordance with Article 24 of the
Code of Ethics of IFAC. Non-audit services include tax services and other services mostly to be categorized as consultancy.
Note
4 Tax services
Tax services include tax compliance, tax advice and tax planning. They can include general expatriate services.
Such services are generally non-recurrent.
Note 5 Other services
Other services are all services provided by our independent auditors and which do not fall under one of the above specific categories. Such
services are mostly specific and non-recurrent.
11.2 |
Documents on display |
We file reports with the Securities and Exchange Commission that contain financial information
about us and our results of operations. You may read or copy any document that we file with the Securities and Exchange Commission at the Securities and Exchange Commissions Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549.
You may obtain information about the Public Reference Room by calling the Securities and Exchange Commission at 1-800-SEC-0330. All of our Securities and Exchange Commission filings made after February 4, 2002 are available to the public at the
SEC web site at www.sec.gov. Our web site at www.alcatel-lucent.com includes information about our business and also includes some of our Securities and Exchange Commission filings prior to February 4, 2002. The contents of our website are not
incorporated by reference into this document.
The articles of association of Alcatel Lucent as well as reports from the Board of
Directors to the Shareholders Meeting, auditors reports, historical financial statements of the Company for the last three fiscal years and any other document sent to or required by law to be made available to shareholders, may be reviewed at
the Companys registered head office at 148-152 Route de la Reine - 92100 Boulogne Billancourt - France.
Any shareholder can also consult/download from our website under the heading Regulated
information, the 2015 reference document filed with the AMF, which includes:
· |
|
the annual financial report; |
· |
|
the Statutory Auditors reports on the parent company and consolidated accounts; |
· |
|
the special report of the Statutory Auditors concerning regulated agreements and commitments; |
· |
|
the report from the Chairman of the Board of Directors on the corporate governance and on internal control and risk management required under French law; |
· |
|
the Statutory Auditors report on the report prepared by the Chairman of the Board of Directors; and |
· |
|
the information relating to the Statutory Auditors fees (which is also set forth in Section 11.1.3 Statutory Auditors fees of this document).
|
200
CONTROLS AND PROCEDURES, STATUTORY AUDITORS FEES AND OTHER MATTERS
Audit Committee financial expert
11.3 |
Audit Committee financial expert |
Our Board of Directors has determined that Mrs. Sylvia Summers is an audit committee
financial expert and that she is independent under the applicable rules promulgated by the
Securities and Exchange Commission and The New York Stock Exchange.
On February 4, 2004, our Board of Directors adopted a Code of Ethics for Senior Financial
Officers that applies to our Chief Executive Officer, Chief Operating Officer, Chief Financial Officer, and Corporate Controller. On May 24, 2012, we made some non-substantive changes to the Code of Ethics to reflect changes made to some
of the terms used in relevant legislation or documents referred to in this Code of Ethics since the initial
adoption by our Board of Directors in 2004 (see Section 7.3, Alcatel Lucent Code of Conduct). A copy of our Code of Ethics for Senior Financial Officers has been posted on our
website, www.alcatel-lucent.com. This Code of Ethics is in addition to our Alcatel Lucent Code of Conduct, which also applies to our senior financial officers.
11.5 |
Financial statements |
The following consolidated financial
statements of Alcatel Lucent, together with the report of Deloitte & Associés and Ernst & Young et Autres for the years ended December 31, 2015, 2014 and 2013 are filed as part of this annual report.
All schedules have been omitted since they are not required under the applicable instructions or the substance of
the required information is shown in the financial statements.
201
CONTROLS AND PROCEDURES, STATUTORY AUDITORS FEES AND OTHER MATTERS
Exhibits
|
|
|
|
|
1.1 |
|
Statuts (articles of association and bylaws) of Alcatel Lucent (English translation), dated March 18, 2016. |
|
|
2.1 |
|
Form of Second Amended and Restated Deposit Agreement, among Alcatel-Lucent, JPMorgan Chase Bank N.A., as Depositary, and the holders from time to time of the
ADSs issued thereunder, including the form of ADR (incorporated by reference to Exhibit (a) to Alcatel-Lucents Registration Statement on Form F-6 filed January 4, 2013). (File No. 333-185880). |
|
|
4.1 |
|
Revolving Facilities Agreement dated February 3, 2016 by and between Nokia Corporation and Alcatel-Lucent USA |
|
|
4.2 |
|
Revolving Credit Facility Agreement dated April 13, 2016 by and between Nokia Corporation and Alcatel-Lucent Participations |
|
|
8. |
|
List of subsidiaries (see Note 33 to our consolidated financial statements included elsewhere herein). |
|
|
12.1 |
|
Certification of the Chief Executive Officer pursuant to §302 of the Sarbanes-Oxley Act of 2002. |
|
|
12.2 |
|
Certification of the Chief Financial Officer pursuant to §302 of the Sarbanes-Oxley Act of 2002. |
|
|
13.1 |
|
Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350. |
|
|
13.2 |
|
Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350. |
|
|
15.1 |
|
Consent of Independent Registered Public Accounting Firm - Deloitte & Associés. |
|
|
15.2 |
|
Consent of Independent Registered Public Accounting Firm - Ernst & Young et Autres. |
Alcatel-Lucent and its consolidated subsidiaries are party to several long-term debt instruments under which the
total amount of securities authorized does not exceed 10% of the total assets of the company and its subsidiaries on a consolidated basis. Pursuant to paragraph 2(b)(i) of Item 19 to Form 20-F, Alcatel-Lucent agrees to furnish a copy of such
instruments to the SEC upon request.
202
CONTROLS AND PROCEDURES, STATUTORY AUDITORS FEES AND OTHER MATTERS
Cross-reference table between Form 20-F and this document
11.7 |
Cross-reference table between Form 20-F and this document |
|
|
|
FORM 20-F |
|
2015 ANNUAL REPORT ON 20-F |
Item 1: Identity of Directors, Senior Management and Advisers |
|
N/A |
Item 2: Offer Statistics and Expected Timetable |
|
N/A |
Item 3: Key Information |
|
|
A. Selected financial data |
|
Chapter 1 Selected financial data |
B. Capitalization and indebtedness |
|
N/A |
C. Reasons for the offer and use of proceeds |
|
N/A |
D. Risk factors |
|
Chapter 3 Risk factors |
Item 4: Information On The Company |
|
|
A. History and development of the Company |
|
Chapter 4 Information about the Group |
B. Business overview |
|
Chapter 2 Activity overview, Chapter 5 Description of the Groups activities and Chapter 6 Operating and financial review and prospects, Sections 6.1 through
6.3 |
C. Organizational structure |
|
Section 4.3 Structure of the main consolidated companies as of December 31, 2015 |
D. Property, plants and equipment |
|
Section 4.4 Real estate and equipment |
Item 4A: Unresolved Staff Comments |
|
N/A |
Item 5: Operating and Financial Review and Prospects |
|
|
A. Operating results (significant factors materially affecting the Companys income from operations) |
|
Chapter 6 Operating and financial review and prospects: Introduction and Sections 6.2 through 6.3 |
B. Liquidity and capital resources |
|
Section 6.4 Liquidity and capital resources |
C. Research and development, patents and licenses, etc. |
|
Section 6.8 Research and development - expenditures, headings Research and Development costs of Section 6.2 and Section 6.3 |
D. Trend information |
|
Section 6.1 Overview of 2015 |
E. Off-Balance sheet arrangements |
|
Section 6.5 Contractual obligations and off-balance sheet contingent commitments |
F. Tabular disclosure of contractual obligations |
|
Heading Contractual obligations of Section 6.5 Contractual obligations and off-balance sheet contingent commitments |
G. Safe harbor |
|
|
Item 6: Directors, Senior Management and Employees |
|
|
A. Directors and senior management |
|
Section 7.1 Chairmans corporate governance report |
B. Compensation |
|
Section 7.1 Chairmans corporate governance report, Section 7.2 Regulated agreements and Chapter 8 Compensation and long-term incentives |
C. Board practices |
|
Section 7.1 Chairmans corporate governance report, Section 7.3 Alcatel Lucent Code of Conduct and Section 11.4 Code of ethics |
1. Date of expiration of the current term of office and the period during which the person has served it that office |
|
Subsection 7.1.1 Management bodies of the Company |
2. Directors service contracts with the Company or any of its subsidiaries |
|
Section 7.2 Regulated agreements and Chapter 8 Compensation and long-term incentives |
3. Companys audit committee and remuneration committee |
|
Subsection 7.1.3 Powers and activity of the Board of Directors |
D. Employees |
|
Section 9.3 Human resources |
203
CONTROLS AND PROCEDURES, STATUTORY AUDITORS FEES AND OTHER MATTERS
Cross-reference table between Form 20-F and this document
|
|
|
FORM 20-F |
|
2015 ANNUAL REPORT ON 20-F |
E. Share ownership (with respect to the persons listed in Item 6.B.2) |
|
|
1. Disclosure on an individual basis of the number of shares and percent of shares outstanding of that class, and their voting rights; options granted to these
persons on the Companys shares (title and amount of securities called for by the options, exercise price, purchase price if any, expiration date of the options) |
|
Subsection 7.1.1 Management bodies of the Company, Chapter 8 Compensation and long-term incentives and heading Employees and managements
shareholding of Subsection 10.3.4 |
2. Any arrangements for involving the employees in the capital of the Company, including any arrangement that involves the issue
or grant of options or shares or securities of the Company |
|
Chapter 8 Compensation and long-term incentives |
Item 7: Major Shareholders and Related Party Transactions Employees |
|
|
A. Major shareholders |
|
Subsection 10.3.3 Share ownership threshold, Subsection 10.4.3 Shareholder structure and Subsection 10.3.4 Shareholding and change in its
structure |
B. Related party transactions |
|
Section 7.2 Regulated agreements |
C. Interests of experts and counsel |
|
N/A |
Item 8: Financial Information |
|
|
A. Consolidated statements and other financial information |
|
Section 1.1 Condensed consolidated income statement and statement of financial position data, Chapter 12 Alcatel-Lucent consolidated financial statements at December 31,
2015, Section 6.7 Legal Matters and Subsection 10.4.4 Dividends and performance |
B. Significant changes since the date of the annual financial statements |
|
N/A |
Item 9: The Offer and Listing |
|
|
A. Offer and listing details |
|
Subsection 10.4.1 Listing and Subsection 10.4.2 Changes in price per share |
B. Plan of distribution |
|
N/A |
C. Markets |
|
Subsection 10.4.1 Listing |
D. Selling shareholders |
|
N/A |
E. Dilution |
|
N/A |
F. Expenses of the issue |
|
N/A |
Item 10: Additional Information |
|
|
A. Share capital |
|
Chapter 10 Listing and shareholdings and Chapter 8 Compensation and long-term incentives |
B. Memorandum and articles of association |
|
Section 7.1.2 Principles of organization of our Companys management, Section 7.1.3 Powers and activity of the Board of Directors, Subsection 10.1.1 Legal
information, Subsection 10.1.2 Specific provisions of the bylaws and of law, heading Ownership of shares by non-French persons of Subsection 10.2.6 American Depositary Shares (ADS) and Section 10.5 Shareholders
Meetings |
C. Material contracts |
|
Section 4.5 Material contracts |
D. Exchange controls |
|
Heading Exchange controls of Subsection 10.2.6 American Depositary Shares (ADS) |
E. Taxation |
|
Heading Taxation of Subsection 10.2.6 American Depositary Shares |
F. Dividends and paying agents |
|
N/A |
204
CONTROLS AND PROCEDURES, STATUTORY AUDITORS FEES AND OTHER MATTERS
Cross-reference table between Form 20-F and this document
|
|
|
FORM 20-F |
|
2015 ANNUAL REPORT ON 20-F |
G. Statement by experts |
|
N/A |
H. Documents on display |
|
Section 11.2 Documents on display |
I. Subsidiary information |
|
No information in this regard |
Item 11: Quantitative and Qualitative Disclosures About Market Risk |
|
Section 6.6 Qualitative and quantitative disclosures about market risk |
Item 12: Description of Securities Other than Equity Securities |
|
|
D. American Depositary Shares |
|
Subsection 10.2.6 American Depositary Shares (ADS) |
Item 13: Defaults, Dividends Arrearages and Delinquencies |
|
N/A |
Item 14: Market Modifications to the Rights of Security Holders and Use of Proceeds |
|
Subsection 8.1.8 Mechanisms put in place with respect to long-term compensation instruments in the context of the Nokia Offer |
Item 15: Controls and Procedures |
|
Chapter 11 Controls and procedures, Statutory auditors fees and other matters |
(a) Disclosure controls and procedures |
|
Heading Disclosure controls and procedures of Section 11.1 Controls and procedures |
(b) Managements annual report on internal control over financial reporting |
|
Heading Managements annual report on internal control over financial reporting of Section 11.1 Controls and procedures |
(c) Attestation report of the registered public accounting firm on managements assessment of the issuers internal control
over financial reporting. |
|
Subsection 11.1.1 Report of independent registered public accounting firms |
(d) Changes in internal control over financial reporting |
|
Heading Managements annual report on internal control over financial reporting of Section 11.1 Controls and procedures |
Item 16: Reserved |
|
(Reserved) |
Item 16A: Audit Committee Financial Expert |
|
Section 11.3 Audit Committee financial expert |
Item 16B: Code of Ethics |
|
Section 11.4 Code of ethics |
Item 16C: Principal Accountant Fees and Services |
|
Subsection 11.1.2 Statutory Auditors and Subsection 11.1.3 Statutory Auditors fees |
Item 16D: Exemptions from the Listing Standards for Audit Committee |
|
N/A |
Item 16E: Purchases of Equity Securities by the Issuer and Affiliated Purchasers |
|
Subsection 10.2.2 Purchase of Alcatel Lucent shares by the Company |
Item 16F: Change in Registrants Certifying Accountant |
|
Subsection 11.1.2 Statutory Auditors |
Item 16G: Corporate Governance |
|
N/A |
Item 16H: Mine Safety Disclosure |
|
N/A |
Item 17: Financial Statements |
|
See Section 11.5 Financial statements |
Item 18: Financial Statements |
|
See Section 11.5 Financial statements |
Item 19: Exhibits |
|
Section 11.6 Exhibits |
205
Signature
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.
|
|
|
|
|
ALCATEL-LUCENT |
|
|
|
|
|
|
|
By: |
|
/s/ Olivier DURAND |
|
|
|
|
|
Name: |
|
Olivier DURAND |
|
|
|
|
|
Title: |
|
Chief Financial Officer |
|
|
|
April 28, 2016
206
Alcatel-Lucent consolidated financial statements at December 31, 2015
|
12
|
207
Report of Independent Registered Public Accounting Firms
Reportof Independent Registered
Public Accounting Firms
To the Shareholders and the Board of Directors of Alcatel Lucent (and subsidiaries)
We have audited the accompanying consolidated statements of financial position of Alcatel Lucent and subsidiaries (the Group) as of
December 31, 2015, 2014 and 2013, and the related consolidated statements of income, comprehensive income, changes in equity, and cash flows for each of the three years in the period ended December 31, 2015. These financial statements are the
responsibility of the Groups management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial
position of the Group as of December 31, 2015, 2014 and 2013, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2015, in conformity with International Financial
Reporting Standards as issued by the International Accounting Standards Board.
As discussed in Note 4 to the consolidated financial
statements, the consolidated financial statements for the years ended December 31, 2014 and December 31, 2013 have been restated to correct a misstatement related to the recognition of certain deferred tax assets.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Groups internal
control over financial reporting as of December 31, 2015, based on the criteria established in Internal Control Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission
and our report dated April 27, 2016 expressed an adverse opinion thereon.
|
|
|
/s/ DELOITTE & ASSOCIES |
|
/s/ ERNST & YOUNG et Autres |
|
|
Represented by |
|
|
Frédéric Martineau |
Neuilly-sur-Seine and Paris-La Défense, April 27, 2016
208
CONSOLIDATED FINANCIAL STATEMENTS
|
|
|
Consolidated income statements |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions except per share data) |
|
Notes |
|
|
2015 (1) |
|
|
2015 |
|
|
2014 (2) |
|
|
2013 (2) |
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
|
(5) & (6) |
|
|
U.S.$ |
15,501 |
|
|
|
14,275 |
|
|
|
13,178 |
|
|
|
13,813 |
|
|
|
Cost of sales |
|
|
|
|
|
|
(9,916) |
|
|
|
(9,132) |
|
|
|
(8,770) |
|
|
|
(9,491) |
|
|
|
Gross profit |
|
|
|
|
|
|
5,585 |
|
|
|
5,143 |
|
|
|
4,408 |
|
|
|
4,322 |
|
|
|
Administrative and selling expenses |
|
|
|
|
|
|
(1,912) |
|
|
|
(1,761) |
|
|
|
(1,621) |
|
|
|
(1,862) |
|
Research and development costs |
|
|
|
|
|
|
(2,583) |
|
|
|
(2,378) |
|
|
|
(2,215) |
|
|
|
(2,268) |
|
|
|
Income (loss) from operating activities before restructuring costs, litigations, transaction-related costs, gain/(loss) on disposal of consolidated entities, impairment of assets and post-retirement benefit
plan amendments |
|
|
(5) |
|
|
|
1,090 |
|
|
|
1,004 |
|
|
|
572 |
|
|
|
192 |
|
|
|
Restructuring costs |
|
|
(25) |
|
|
|
(435) |
|
|
|
(401) |
|
|
|
(574) |
|
|
|
(518) |
|
Litigations |
|
|
|
|
|
|
(34) |
|
|
|
(31) |
|
|
|
7 |
|
|
|
(2) |
|
Gain/(loss) on disposal of consolidated entities |
|
|
|
|
|
|
(1) |
|
|
|
(1) |
|
|
|
20 |
|
|
|
2 |
|
Transaction-related costs |
|
|
(3) |
|
|
|
(113) |
|
|
|
(104) |
|
|
|
- |
|
|
|
- |
|
Impairment of assets |
|
|
(11) |
|
|
|
(210) |
|
|
|
(193) |
|
|
|
- |
|
|
|
(548) |
|
Post-retirement benefit plan amendments |
|
|
(23) |
|
|
|
439 |
|
|
|
404 |
|
|
|
112 |
|
|
|
135 |
|
|
|
Income (loss) from operating activities |
|
|
|
|
|
|
736 |
|
|
|
678 |
|
|
|
137 |
|
|
|
(739) |
|
|
|
Finance cost |
|
|
(7) |
|
|
|
(292) |
|
|
|
(269) |
|
|
|
(291) |
|
|
|
(392) |
|
Other financial income (loss) |
|
|
(7) |
|
|
|
(147) |
|
|
|
(136) |
|
|
|
(211) |
|
|
|
(318) |
|
Share in net income (losses) of associates & joint ventures |
|
|
|
|
|
|
2 |
|
|
|
2 |
|
|
|
15 |
|
|
|
7 |
|
|
|
Income (loss) before income tax and discontinued operations |
|
|
|
|
|
|
299 |
|
|
|
275 |
|
|
|
(350) |
|
|
|
(1,442) |
|
|
|
Income tax (expense) benefit |
|
|
(8) |
|
|
|
(27) |
|
|
|
(24) |
|
|
|
327 |
|
|
|
106 |
|
|
|
Income (loss) from continuing operations |
|
|
|
|
|
|
272 |
|
|
|
251 |
|
|
|
(23) |
|
|
|
(1,336) |
|
|
|
Income (loss) from discontinued operations |
|
|
(9) |
|
|
|
(17) |
|
|
|
(16) |
|
|
|
(49) |
|
|
|
(25) |
|
|
|
NET INCOME (LOSS) |
|
|
|
|
|
|
255 |
|
|
|
235 |
|
|
|
(72) |
|
|
|
(1,361) |
|
|
|
Attributable to: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
· Equity owners of
the parent |
|
|
|
|
|
|
224 |
|
|
|
206 |
|
|
|
(107) |
|
|
|
(1,371) |
|
· Non-controlling
interests |
|
|
|
|
|
|
31 |
|
|
|
29 |
|
|
|
35 |
|
|
|
10 |
|
Earnings (loss) per share (in euros) |
|
|
(10) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
· Basic earnings
(loss) per share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
from continuing operations |
|
|
|
|
|
|
0.09 |
|
|
|
0.08 |
|
|
|
(0.02) |
|
|
|
(0.55) |
|
|
|
|
|
|
|
from discontinued operations |
|
|
|
|
|
|
(0.01) |
|
|
|
(0.01) |
|
|
|
(0.02) |
|
|
|
(0.01) |
|
|
|
|
|
|
|
attributable to the equity owners of the
parent |
|
|
|
|
|
|
0.08 |
|
|
|
0.07 |
|
|
|
(0.04) |
|
|
|
(0.56) |
|
· Diluted earnings
(loss) per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
from continuing operations |
|
|
|
|
|
|
0.09 |
|
|
|
0.08 |
|
|
|
(0.02) |
|
|
|
(0.55) |
|
|
|
|
|
|
|
from discontinued operations |
|
|
|
|
|
|
(0.01) |
|
|
|
(0.01) |
|
|
|
(0.02) |
|
|
|
(0.01) |
|
|
|
|
|
|
|
attributable to the equity owners of the
parent |
|
|
|
|
|
|
0.08 |
|
|
|
0.07 |
|
|
|
(0.04) |
|
|
|
(0.56) |
|
|
|
(1) |
|
Translation of amounts from euros into U.S. dollars has been made merely for the convenience of the reader at Noon Buying Rate of 1 = U.S.$1.0859 on December 31, 2015.
|
(2) |
|
2013 and 2014 amounts are restated to reflect the impact of a change in accounting treatment (see Note 4). |
209
CONSOLIDATED FINANCIAL STATEMENTS
|
|
|
Consolidated statements of comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions of euros) |
|
Notes |
|
|
2015 (1) |
|
|
2015 |
|
|
2014 (2) |
|
|
2013 (2) |
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) for the year |
|
|
|
|
|
U.S.$ |
255 |
|
|
|
235 |
|
|
|
(72) |
|
|
|
(1,361) |
|
|
|
|
|
|
|
|
|
Items to be subsequently reclassified to Income Statement |
|
|
|
|
|
|
455 |
|
|
|
419 |
|
|
|
551 |
|
|
|
(242) |
|
|
|
|
|
|
|
Financial assets available for sale |
|
|
(15) |
|
|
|
2 |
|
|
|
2 |
|
|
|
8 |
|
|
|
11 |
|
|
|
|
|
|
|
Cumulative translation adjustments |
|
|
|
|
|
|
453 |
|
|
|
417 |
|
|
|
544 |
|
|
|
(253) |
|
|
|
|
|
|
|
Cash flow hedging |
|
|
(26b/iii) |
|
|
|
- |
|
|
|
- |
|
|
|
(1) |
|
|
|
- |
|
|
|
|
|
|
|
Tax on items recognized directly in equity |
|
|
(8) |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
Items that will not be subsequently reclassified to Income Statement |
|
|
|
|
|
|
1,001 |
|
|
|
922 |
|
|
|
(1,817) |
|
|
|
1,584 |
|
|
|
|
|
|
|
Actuarial gains (losses) and adjustments arising from asset ceiling limitation and IFRIC 14 |
|
|
(23c) |
|
|
|
1,013 |
|
|
|
933 |
|
|
|
(1,822) |
|
|
|
1,667 |
|
|
|
|
|
|
|
Tax on items recognized directly in equity |
|
|
(8) |
|
|
|
(12) |
|
|
|
(11) |
|
|
|
5 |
|
|
|
(83) |
|
|
|
Total other comprehensive income (loss) for the year |
|
|
|
|
|
|
1,444 |
|
|
|
1,330 |
|
|
|
(1,266) |
|
|
|
1,342 |
|
|
|
TOTAL COMPREHENSIVE INCOME (LOSS) FOR THE YEAR |
|
|
|
|
|
|
1,711 |
|
|
|
1,576 |
|
|
|
(1,338) |
|
|
|
(19) |
|
|
|
Attributable to: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
· Equity owners of
the parent |
|
|
|
|
|
|
1,621 |
|
|
|
1,493 |
|
|
|
(1,453) |
|
|
|
(14) |
|
|
|
|
|
|
|
· Non-controlling
interests |
|
|
|
|
|
|
90 |
|
|
|
83 |
|
|
|
115 |
|
|
|
(5) |
|
|
|
(1) |
|
Translation of amounts from euros into U.S. dollars has been made merely for the convenience of the reader at Noon Buying Rate of 1 = U.S.$1.0859 on December 31, 2015.
|
(2) |
|
2013 and 2014 amounts are restated to reflect the impact of a change in accounting treatment (see Note 4). |
210
CONSOLIDATED FINANCIAL STATEMENTS
|
|
|
Consolidated statements of financial position |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions of euros)
ASSETS |
|
Notes |
|
|
December 31, 2015 (1) |
|
|
December 31, 2015 |
|
|
December 31, 2014 (2) |
|
|
December 31, 2013 (2) |
|
|
|
|
|
|
|
|
|
|
|
Non-current assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill |
|
|
(11) |
|
|
U.S.$ |
3,491 |
|
|
|
3,215 |
|
|
|
3,181 |
|
|
|
3,156 |
|
Intangible assets, net |
|
|
(12) |
|
|
|
1,558 |
|
|
|
1,435 |
|
|
|
1,011 |
|
|
|
1,001 |
|
Goodwill and intangible assets, net |
|
|
|
|
|
|
5,049 |
|
|
|
4,650 |
|
|
|
4,192 |
|
|
|
4,157 |
|
Property, plant and equipment, net |
|
|
(13) |
|
|
|
1,501 |
|
|
|
1,382 |
|
|
|
1,132 |
|
|
|
1,075 |
|
Investments in associates & joint ventures |
|
|
(14) |
|
|
|
22 |
|
|
|
20 |
|
|
|
51 |
|
|
|
35 |
|
Other non-current financial assets, net |
|
|
(15) |
|
|
|
392 |
|
|
|
361 |
|
|
|
406 |
|
|
|
322 |
|
Deferred tax assets |
|
|
(8) |
|
|
|
2,534 |
|
|
|
2,334 |
|
|
|
2,061 |
|
|
|
1,742 |
|
Prepaid pension costs |
|
|
(23) |
|
|
|
3,187 |
|
|
|
2,935 |
|
|
|
2,636 |
|
|
|
3,150 |
|
Other non-current assets |
|
|
(21) |
|
|
|
553 |
|
|
|
509 |
|
|
|
429 |
|
|
|
413 |
|
|
|
Total non-current assets |
|
|
|
|
|
|
13,238 |
|
|
|
12,191 |
|
|
|
10,907 |
|
|
|
10,894 |
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Inventories and work in progress, net |
|
|
(17) & (18) |
|
|
|
1,737 |
|
|
|
1,600 |
|
|
|
1,971 |
|
|
|
1,935 |
|
Trade receivables and other receivables, net |
|
|
(17) & (19) |
|
|
|
2,753 |
|
|
|
2,535 |
|
|
|
2,528 |
|
|
|
2,482 |
|
Advances and progress payments |
|
|
(17) |
|
|
|
49 |
|
|
|
45 |
|
|
|
43 |
|
|
|
46 |
|
Other current assets |
|
|
(21) |
|
|
|
845 |
|
|
|
778 |
|
|
|
877 |
|
|
|
751 |
|
Current income taxes |
|
|
|
|
|
|
69 |
|
|
|
64 |
|
|
|
64 |
|
|
|
33 |
|
Marketable securities, net |
|
|
(15) & (24) |
|
|
|
1,766 |
|
|
|
1,626 |
|
|
|
1,672 |
|
|
|
2,259 |
|
Cash and cash equivalents |
|
|
(16) & (24) |
|
|
|
5,326 |
|
|
|
4,905 |
|
|
|
3,878 |
|
|
|
4,096 |
|
Current assets before assets held for sale |
|
|
|
|
|
|
12,545 |
|
|
|
11,553 |
|
|
|
11,033 |
|
|
|
11,602 |
|
Assets held for sale and assets included in disposal groups held for sale |
|
|
(9) |
|
|
|
43 |
|
|
|
39 |
|
|
|
65 |
|
|
|
142 |
|
|
|
Total current assets |
|
|
|
|
|
|
12,588 |
|
|
|
11,592 |
|
|
|
11,098 |
|
|
|
11,744 |
|
|
|
TOTAL ASSETS |
|
|
|
|
|
|
25,826 |
|
|
|
23,783 |
|
|
|
22,005 |
|
|
|
22,638 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions of euros)
EQUITY AND LIABILITIES |
|
Notes |
|
|
December 31,
2015 (1) |
|
|
December 31, 2015 |
|
|
December 31, 2014 (2) |
|
|
December 31, 2013 (2) |
|
|
|
|
|
|
|
|
|
|
|
Equity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital stock |
|
|
|
|
|
U.S.$ |
165 |
|
|
|
152 |
|
|
|
141 |
|
|
|
140 |
|
Additional paid-in capital |
|
|
|
|
|
|
23,056 |
|
|
|
21,232 |
|
|
|
20,869 |
|
|
|
20,855 |
|
Less treasury stock at cost |
|
|
|
|
|
|
(1,177) |
|
|
|
(1,084) |
|
|
|
(1,084) |
|
|
|
(1,428) |
|
Accumulated deficit, fair value and other reserves |
|
|
|
|
|
|
(17,680) |
|
|
|
(16,281) |
|
|
|
(17,043) |
|
|
|
(13,931) |
|
Other items recognized directly in equity |
|
|
|
|
|
|
37 |
|
|
|
34 |
|
|
|
(24) |
|
|
|
218 |
|
Cumulative translation adjustments |
|
|
|
|
|
|
18 |
|
|
|
17 |
|
|
|
(345) |
|
|
|
(808) |
|
Net income (loss) - attributable to the equity owners of the parent |
|
|
|
|
|
|
224 |
|
|
|
206 |
|
|
|
(107) |
|
|
|
(1,371) |
|
Equity attributable to equity owners of the parent |
|
|
|
|
|
|
4,643 |
|
|
|
4,276 |
|
|
|
2,406 |
|
|
|
3,675 |
|
Non-controlling interests |
|
|
(14d) |
|
|
|
982 |
|
|
|
904 |
|
|
|
833 |
|
|
|
730 |
|
|
|
Total equity |
|
|
(22) |
|
|
|
5,625 |
|
|
|
5,180 |
|
|
|
3,239 |
|
|
|
4,405 |
|
|
|
Non-current liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pensions, retirement indemnities and other post-retirement benefits |
|
|
(23) |
|
|
|
4,893 |
|
|
|
4,506 |
|
|
|
5,163 |
|
|
|
3,854 |
|
Convertible bonds and other bonds, long-term |
|
|
(24) |
|
|
|
4,771 |
|
|
|
4,394 |
|
|
|
4,696 |
|
|
|
4,711 |
|
Other long-term debt |
|
|
(24) |
|
|
|
259 |
|
|
|
238 |
|
|
|
179 |
|
|
|
211 |
|
Deferred tax liabilities |
|
|
(8) |
|
|
|
1,027 |
|
|
|
946 |
|
|
|
872 |
|
|
|
990 |
|
Other non-current liabilities |
|
|
(21) |
|
|
|
609 |
|
|
|
561 |
|
|
|
175 |
|
|
|
188 |
|
|
|
Total non-current liabilities |
|
|
|
|
|
|
11,559 |
|
|
|
10,645 |
|
|
|
11,085 |
|
|
|
9,954 |
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provisions |
|
|
(25) |
|
|
|
1,237 |
|
|
|
1,139 |
|
|
|
1,364 |
|
|
|
1,416 |
|
Current portion of long-term debt and short-term debt |
|
|
(24) |
|
|
|
629 |
|
|
|
579 |
|
|
|
402 |
|
|
|
1,240 |
|
Customers deposits and advances |
|
|
(17) & (19) |
|
|
|
862 |
|
|
|
794 |
|
|
|
810 |
|
|
|
681 |
|
Trade payables and other payables |
|
|
(17) |
|
|
|
3,885 |
|
|
|
3,578 |
|
|
|
3,571 |
|
|
|
3,518 |
|
Current income tax liabilities |
|
|
|
|
|
|
71 |
|
|
|
65 |
|
|
|
73 |
|
|
|
93 |
|
Other current liabilities |
|
|
(21) |
|
|
|
1,943 |
|
|
|
1,789 |
|
|
|
1,429 |
|
|
|
1,237 |
|
Current liabilities before liabilities related to disposal groups held for sale |
|
|
|
|
|
|
8,615 |
|
|
|
7,933 |
|
|
|
7,649 |
|
|
|
8,185 |
|
Liabilities related to disposal groups held for sale |
|
|
(9) |
|
|
|
15 |
|
|
|
14 |
|
|
|
32 |
|
|
|
94 |
|
|
|
Total current liabilities |
|
|
|
|
|
|
8,642 |
|
|
|
7,958 |
|
|
|
7,681 |
|
|
|
8,279 |
|
|
|
TOTAL EQUITY AND LIABILITIES |
|
|
|
|
|
|
25,826 |
|
|
|
23,783 |
|
|
|
22,005 |
|
|
|
22,638 |
|
|
|
(1) |
|
Translation of amounts from euros into U.S. dollars has been made merely for the convenience of the reader at Noon Buying Rate of 1 = U.S.$1.0859 on December 31, 2015.
|
(2) |
|
2013 and 2014 amounts are restated to reflect the impact of a change in accounting treatment (see Note 4). |
211
CONSOLIDATED FINANCIAL STATEMENTS
|
Consolidated statements of cash flows |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions of euros) |
|
Notes |
|
|
2015 (1) |
|
|
2015 |
|
|
2014 (2) |
|
|
2013 (2) |
|
|
|
|
|
|
|
|
|
Cash flows from operating activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) - attributable to the equity owners of the parent |
|
|
|
|
|
U.S.$ |
224 |
|
|
|
206 |
|
|
|
(107) |
|
|
|
(1,371) |
|
Non-controlling interests |
|
|
|
|
|
|
31 |
|
|
|
29 |
|
|
|
35 |
|
|
|
10 |
|
Adjustments |
|
|
(27) |
|
|
|
847 |
|
|
|
780 |
|
|
|
681 |
|
|
|
1,546 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided (used) by operating activities before changes in working capital, interest and taxes |
|
|
(27) |
|
|
|
1,102 |
|
|
|
1,015 |
|
|
|
609 |
|
|
|
185 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change in current assets and liabilities (excluding financing): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Inventories and work in progress |
|
|
(17) |
|
|
|
371 |
|
|
|
342 |
|
|
|
(72) |
|
|
|
(216) |
|
Trade receivables and other receivables |
|
|
(17) |
|
|
|
101 |
|
|
|
93 |
|
|
|
18 |
|
|
|
138 |
|
Advances and progress payments |
|
|
(17) |
|
|
|
5 |
|
|
|
5 |
|
|
|
4 |
|
|
|
5 |
|
Trade payables and other payables |
|
|
(17) |
|
|
|
(246) |
|
|
|
(227) |
|
|
|
(167) |
|
|
|
25 |
|
Customers deposits and advances |
|
|
(17) |
|
|
|
(57) |
|
|
|
(53) |
|
|
|
88 |
|
|
|
(19) |
|
Other current assets and liabilities |
|
|
|
|
|
|
299 |
|
|
|
275 |
|
|
|
(35) |
|
|
|
34 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash provided (used) by operating activities before interest and taxes |
|
|
|
|
|
|
1,575 |
|
|
|
1,450 |
|
|
|
445 |
|
|
|
152 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest received |
|
|
|
|
|
|
72 |
|
|
|
66 |
|
|
|
65 |
|
|
|
66 |
|
Interest paid |
|
|
|
|
|
|
(287) |
|
|
|
(264) |
|
|
|
(290) |
|
|
|
(362) |
|
Taxes (paid)/received |
|
|
|
|
|
|
(82) |
|
|
|
(75) |
|
|
|
(93) |
|
|
|
(77) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided (used) by operating activities |
|
|
|
|
|
|
1,278 |
|
|
|
1,177 |
|
|
|
127 |
|
|
|
(221) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from disposal of tangible and intangible assets |
|
|
|
|
|
|
84 |
|
|
|
77 |
|
|
|
92 |
|
|
|
36 |
|
Capital expenditures |
|
|
|
|
|
|
(630) |
|
|
|
(580) |
|
|
|
(556) |
|
|
|
(463) |
|
Decrease (increase) in loans and other non-current financial assets |
|
|
|
|
|
|
28 |
|
|
|
26 |
|
|
|
19 |
|
|
|
19 |
|
Cash expenditures for obtaining control of consolidated companies or equity affiliates |
|
|
(27) |
|
|
|
(119) |
|
|
|
(109) |
|
|
|
(14) |
|
|
|
- |
|
Cash proceeds/(outgoings) from losing control of consolidated companies |
|
|
(27) |
|
|
|
(1) |
|
|
|
(1) |
|
|
|
84 |
|
|
|
- |
|
Cash proceeds from sale of previously consolidated and non-consolidated companies |
|
|
|
|
|
|
37 |
|
|
|
34 |
|
|
|
(7) |
|
|
|
3 |
|
Cash proceeds from sale (cash expenditure for acquisition) of marketable securities |
|
|
|
|
|
|
74 |
|
|
|
68 |
|
|
|
617 |
|
|
|
(723) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided (used) by investing activities |
|
|
|
|
|
|
(527) |
|
|
|
(485) |
|
|
|
235 |
|
|
|
(1,128) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance/(repayment) of short-term debt |
|
|
|
|
|
|
(79) |
|
|
|
(73) |
|
|
|
117 |
|
|
|
(643) |
|
Issuance of long-term debt |
|
|
|
|
|
|
92 |
|
|
|
85 |
|
|
|
1,143 |
|
|
|
4,087 |
|
Repayment/repurchase of long-term debt |
|
|
|
|
|
|
(293) |
|
|
|
(270) |
|
|
|
(2,575) |
|
|
|
(2,062) |
|
Cash proceeds (expenditures) related to changes in ownership interests in consolidated companies without loss of control |
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Net effect of exchange rate changes on inter-unit borrowings |
|
|
|
|
|
|
(25) |
|
|
|
(23) |
|
|
|
(86) |
|
|
|
9 |
|
Capital increase (3) |
|
|
|
|
|
|
89 |
|
|
|
82 |
|
|
|
30 |
|
|
|
965 |
|
Dividends paid |
|
|
|
|
|
|
(13) |
|
|
|
(12) |
|
|
|
(12) |
|
|
|
(6) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided (used) by financing activities |
|
|
|
|
|
|
(229) |
|
|
|
(211) |
|
|
|
(1,383) |
|
|
|
2,350 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash provided (used) by operating activities of discontinued operations |
|
|
(9) |
|
|
|
12 |
|
|
|
11 |
|
|
|
34 |
|
|
|
65 |
|
Cash provided (used) by investing activities of discontinued operations |
|
|
(9) |
|
|
|
33 |
|
|
|
30 |
|
|
|
71 |
|
|
|
(64) |
|
Cash provided (used) by financing activities of discontinued operations |
|
|
(9) |
|
|
|
- |
|
|
|
- |
|
|
|
65 |
|
|
|
(15) |
|
Net effect of exchange rate changes |
|
|
|
|
|
|
548 |
|
|
|
505 |
|
|
|
633 |
|
|
|
(292) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS |
|
|
|
|
|
|
1,115 |
|
|
|
1,027 |
|
|
|
(218) |
|
|
|
695 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at beginning of period / year |
|
|
|
|
|
|
4,211 |
|
|
|
3,878 |
|
|
|
4,096 |
|
|
|
3,401 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period / year (4) |
|
|
|
|
|
|
5,326 |
|
|
|
4,905 |
|
|
|
3,878 |
|
|
|
4,096 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period / year classified as assets held for sale |
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents including cash and cash equivalents classified as assets held for sale at end of period / year |
|
|
|
|
|
|
5,326 |
|
|
|
4,905 |
|
|
|
3,878 |
|
|
|
4,096 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Translation of amounts from euros into U.S. dollars has been made merely for the convenience of the reader at Noon Buying Rate of 1 = U.S.$1.0859 on December 31, 2015.
|
(2) |
|
2013 and 2014 amounts are restated to reflect the impact of a change in accounting treatment (see Note 4). |
(3) |
|
Of which 82 million, 15 million and 16 million related to stock options exercised during 2015, 2014 and 2013 respectively (see Note 22c).
|
(4) |
|
Includes 1,505 million of cash and cash equivalents held in countries subject to exchange control restrictions as of December 31, 2015 (1,019 million as of
December 31, 2014 and 756 million as of December 31, 2013). |
212
CONSOLIDATED FINANCIAL STATEMENTS
|
|
|
Consolidated statements of changes in equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions of euros except number of shares) |
|
Number of shares (1) |
|
|
Capital stock |
|
|
Additional
paid-in capital |
|
|
Accumulated deficit and other reserves |
|
|
Other items recognized directly in equity |
|
|
Treasury stock |
|
|
Cumulative translation adjustments |
|
|
Net income (loss) |
|
|
Total attributable
to the owners of the parent |
|
|
Non- controlling interests |
|
|
TOTAL |
|
BALANCE AT DECEMBER 31, 2012 AFTER APPROPRIATION AS PREVIOUSLY REPORTED |
|
|
2,268,383,604 |
|
|
|
4,653 |
|
|
|
15,352 |
|
|
|
(15,963) |
|
|
|
34 |
|
|
|
(1,567) |
|
|
|
(571) |
|
|
|
- |
|
|
|
1,938 |
|
|
|
745 |
|
|
|
2,683 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments (see note 4) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
657 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
657 |
|
|
|
- |
|
|
|
657 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE AT DECEMBER 31, 2012 AFTER APPROPRIATION AS RESTATED |
|
|
2,268,383,604 |
|
|
|
4,653 |
|
|
|
15,352 |
|
|
|
(15,306) |
|
|
|
34 |
|
|
|
(1,567) |
|
|
|
(571) |
|
|
|
- |
|
|
|
2,595 |
|
|
|
745 |
|
|
|
3,340 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in equity for 2013 |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income (loss) for 2013(2) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,410 |
|
|
|
184 |
|
|
|
- |
|
|
|
(237) |
|
|
|
(1,371) |
|
|
|
(14) |
|
|
|
(5) |
|
|
|
(19) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital reduction |
|
|
- |
|
|
|
(4,542) |
|
|
|
4,542 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Capital increase |
|
|
455,568,488 |
|
|
|
23 |
|
|
|
903 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
926 |
|
|
|
- |
|
|
|
926 |
|
Conversion of OCEANE 2015 |
|
|
15,658,262 |
|
|
|
1 |
|
|
|
47 |
|
|
|
(1) |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
47 |
|
|
|
- |
|
|
|
47 |
|
Other capital changes |
|
|
10,763,621 |
|
|
|
5 |
|
|
|
11 |
|
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
16 |
|
|
|
- |
|
|
|
16 |
|
Share-based payments |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
19 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
19 |
|
|
|
- |
|
|
|
19 |
|
Treasury stock |
|
|
6,285,811 |
|
|
|
- |
|
|
|
- |
|
|
|
(116) |
|
|
|
- |
|
|
|
139 |
|
|
|
- |
|
|
|
- |
|
|
|
23 |
|
|
|
- |
|
|
|
23 |
|
Dividends |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(10) |
|
|
|
(10) |
|
Equity component of OCEANE 2018 issued in 2013, net of tax |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
66 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
66 |
|
|
|
- |
|
|
|
66 |
|
Other adjustments |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(3) |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(3) |
|
|
|
- |
|
|
|
(3) |
|
Appropriation |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(1,371) |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,371 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE AT DECEMBER 31, 2013 AFTER APPROPRIATION AS RESTATED |
|
|
2,756,659,786 |
|
|
|
140 |
|
|
|
20,855 |
|
|
|
(15,302) |
|
|
|
218 |
|
|
|
(1,428) |
|
|
|
(808) |
|
|
|
- |
|
|
|
3,675 |
|
|
|
730 |
|
|
|
4,405 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in equity for 2014 |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income (loss) for 2014(2) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(1,566) |
|
|
|
(242) |
|
|
|
- |
|
|
|
462 |
|
|
|
(107) |
|
|
|
(1,453) |
|
|
|
115 |
|
|
|
(1,338) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other capital changes |
|
|
11,878,073 |
|
|
|
1 |
|
|
|
14 |
|
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
15 |
|
|
|
- |
|
|
|
15 |
|
Share-based payments |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
16 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
16 |
|
|
|
- |
|
|
|
16 |
|
Treasury stock |
|
|
11,774,084 |
|
|
|
- |
|
|
|
- |
|
|
|
(314) |
|
|
|
- |
|
|
|
344 |
|
|
|
- |
|
|
|
- |
|
|
|
30 |
|
|
|
- |
|
|
|
30 |
|
Equity component of OCEANE 2019 and 2020 issued in 2014, net of tax |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
121 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
121 |
|
|
|
|
|
|
|
121 |
|
Dividends |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(12) |
|
|
|
(12) |
|
Other adjustments |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
2 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
2 |
|
|
|
- |
|
|
|
2 |
|
Appropriation |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(107) |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
107 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE AT DECEMBER 31, 2014 AFTER APPROPRIATION AS RESTATED |
|
|
2,780,311,943 |
|
|
|
141 |
|
|
|
20,869 |
|
|
|
(17,150) |
|
|
|
(24) |
|
|
|
(1,084) |
|
|
|
(345) |
|
|
|
- |
|
|
|
2,406 |
|
|
|
833 |
|
|
|
3,239 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in equity for 2015 |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income (loss) for 2015(2) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
866 |
|
|
|
58 |
|
|
|
- |
|
|
|
362 |
|
|
|
206 |
|
|
|
1,493 |
|
|
|
83 |
|
|
|
1,576 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other capital changes(3) |
|
|
42,831,440 |
|
|
|
2 |
|
|
|
80 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
82 |
|
|
|
- |
|
|
|
82 |
|
Treasury stock |
|
|
4,627 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Conversion of OCEANE 2018 (4) |
|
|
147,958,658 |
|
|
|
7 |
|
|
|
204 |
|
|
|
(15) |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
196 |
|
|
|
- |
|
|
|
196 |
|
Conversion of OCEANE 2019 (5) |
|
|
15,220,628 |
|
|
|
1 |
|
|
|
48 |
|
|
|
(3) |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
46 |
|
|
|
- |
|
|
|
46 |
|
Conversion of OCEANE 2020 (6) |
|
|
9,894,363 |
|
|
|
1 |
|
|
|
31 |
|
|
|
(4) |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
28 |
|
|
|
- |
|
|
|
28 |
|
Share-based payments |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
26 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
26 |
|
|
|
|
|
|
|
26 |
|
Dividends |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(12) |
|
|
|
(12) |
|
Other adjustments |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(1) |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(1) |
|
|
|
- |
|
|
|
(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE AT DECEMBER 31, 2015 BEFORE APPROPRIATION |
|
|
2,996,221,659 |
|
|
|
152 |
|
|
|
21,232 |
|
|
|
(16,281) |
|
|
|
34 |
|
|
|
(1,084) |
|
|
|
17 |
|
|
|
206 |
|
|
|
4,276 |
|
|
|
904 |
|
|
|
5,180 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proposed appropriation |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
206 |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
(206) |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE AT DECEMBER 31, 2015 AFTER APPROPRIATION |
|
|
2,996,221,659 |
|
|
|
152 |
|
|
|
21,232 |
|
|
|
(16,075) |
|
|
|
34 |
|
|
|
(1,084) |
|
|
|
17 |
|
|
|
- |
|
|
|
4,276 |
|
|
|
904 |
|
|
|
5,180 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2) |
|
See Consolidated Statements of Comprehensive Income. |
(3) |
|
42,831,440 shares were issued mainly due to exercise of options and the vesting of performance shares (see Note 22). |
(4) |
|
147,958,658 shares were issued as a result of the conversion of the outstanding OCEANE convertible bonds due 2018 (see Note 22). |
(5) |
|
15,220,628 shares were issued as a result of the conversion of the outstanding OCEANE convertible bonds due 2019 (see Note 22). |
(6) |
|
9,894,363 shares were issued as a result of the conversion of the outstanding OCEANE convertible bonds due 2020 (see Note 22). |
213
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
214
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Notes |
to consolidated financial statements |
Alcatel Lucent S.A. (Alcatel-Lucent) is a French public limited liability company that is subject
to the French Commercial Code and to all the legal requirements governing commercial companies in France. Alcatel-Lucent was incorporated on June 18, 1898 and will be dissolved on June 30, 2086, unless its existence is extended or
shortened by shareholder vote. Alcatel-Lucent is listed principally on the Paris and New York stock exchanges.
The consolidated
financial statements reflect the results and financial position of Alcatel-Lucent and its subsidiaries (the
Group) as well as its investments in associates (equity affiliates) and joint ventures. They are presented in Euros rounded to the nearest million.
The Group develops and integrates technologies, applications and services to offer innovative global communications solutions.
On February 10, 2016, Alcatel-Lucents Board of Directors approved for issuance these preliminary consolidated financial statements at
December 31, 2015.
Note 1 Summary of accounting policies
Due to the listing of Alcatel-Lucents securities on the Euronext Paris and in accordance with
the European Unions regulation No. 1606/2002 of July 19, 2002, the consolidated financial statements of the Group are prepared in accordance with IFRSs (International Financial Reporting Standards), as adopted by the European
Union (EU), as of the date when our Board of Directors authorized these consolidated financial statements for issuance.
IFRSs can be
found at: http://ec.europa.eu/finance/accounting/index_en.htm.
IFRSs include the standards approved by the International Accounting
Standards Board (IASB), that is, International Accounting Standards (IASs) and accounting interpretations issued by the IFRS Interpretations Committee (IFRIC) or the former Standing Interpretations Committee (SIC).
As of December 31, 2015, all IFRSs that the IASB had published and that are mandatory are the same as those endorsed by the EU
and mandatory in the EU, with the exception of:
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IAS 39 Financial Instruments: Recognition and Measurement (revised December 2003), which the EU only partially adopted. The part not adopted by the EU has no impact on
Alcatel-Lucents financial statements. |
As a result, the Groups consolidated financial statements comply with
International Financial Reporting Standards as published by the IASB.
The accounting policies and measurement principles adopted for
the consolidated financial statements as of and for the year ended December 31, 2015 are the same as those used in the audited consolidated financial statements as of and for the year ended December 31, 2014 included in our annual report
on Form 20-F for fiscal year 2014 (the 2014 audited consolidated financial statements), with the exception of the adoption of the following amendment and improvements to IFRSs, that are mandatory for annual periods beginning on or after
July 1, 2014, that the EU has endorsed, and that have no impact on Alcatel-Lucents financial statements or are already being applied:
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Amendments to IAS 19 Defined Benefit Plans: Employee Contributions (issued November 2013); and
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Annual improvements to IFRSs (2010-2012) and Annual improvements to IFRSs (2011-2013) issued December 2013. |
In Q1 2014, the IASB published the following IFRS that is only applicable with effect from January 1, 2016, which the EU has decided not to
launch the endorsement process of this interim standard and to wait for the final standard. This interim standard would have no impact on the Groups financial statements:
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IFRS 14 Regulatory Deferral Accounts (issued January 2014). |
In Q2 2014, the IASB published IFRS 15 Revenue from Contracts with Customers and proposed several clarifications in July 2015. In September 2015 the IASB issued an amendment to IFRS 15 and deferred the effective date by
one year to January 1, 2018. This new IFRS contains a single five-step revenue recognition model that applies to contracts with customers and requires revenue to be recognized as control over goods and services is transferred to the customer.
This standard replaces all existing IFRS revenue recognition guidance. We have not determined the effect of this new IFRS on the Groups consolidated financial statements at this time and are currently evaluating its impact to ensure that the
reporting procedures and systems are adapted and ready in accordance with the future mandatory effective date. The EU has not yet endorsed this standard.
In Q2 2014, the IASB published also two amendments to existing IFRSs that are only applicable with effect from January 1, 2016, that the EU has endorsed, and that, once effective, will have no impact on the Groups
financial statements:
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Amendments to IFRS 11 Accounting for Acquisitions of Interests in Joint Operations (issued May 2014); and |
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Amendments to IAS 16 and IAS 38 Clarification of Acceptable Methods of Depreciation and Amortisation (issued May 2014). |
With regard to the Amendment to IAS 38, the Group currently amortizes capitalized software development costs at the greater of the amount computed
using (a) the ratio that current gross
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1
revenues for a product bear to the total of current and anticipated future gross revenues for that
product and (b) the straight-line method over the remaining estimated economic life of the software or the product they are incorporated within. However, under the Amendment, there is a rebuttable presumption that an amortization method that is
based on revenue generated by an activity that includes the use of an intangible asset is inappropriate. The use of this method has been limited and the change in our amortization method will be immaterial to the Groups financial statements.
In Q3 2014, the IASB published the following IFRS that is only applicable with effect from January 1, 2018, that the EU has not
yet endorsed, and that, once effective, may have an impact on the amount and timing of the Groups reported assets, liabilities and income; mainly marketable securities will be classified as long term assets, and expected credit losses that
will be calculated with a different method; the extent of the impact is not yet known or reasonably estimable at this stage:
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IFRS 9 Financial Instruments (issued July 2014). |
In Q3
2014, the IASB published two amendments to existing IFRSs that are only applicable with effect from January 1, 2016, that the EU has endorsed, and that, once effective, are not expected to have any impact on the Groups financial
statements:
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Amendments to IAS 27 Equity Method in Separate Financial Statements (issued August 2014); and |
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Annual improvements to IFRSs (2012-2014) (issued September 2014). |
In
Q4 2014, the IASB published an amendment to existing IFRSs that is only applicable with effect from January 1, 2016, that the EU has endorsed, and that, once effective, is not expected to have any impact on the Groups financial
statements:
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Amendments to IAS 1 Disclosure Initiative (issued December 2014). |
In Q4 2014, the IASB published an amendment to existing IFRSs that is only applicable with effect from January 1, 2016, that the EU has not yet endorsed, and that, once effective, is not expected to have any impact on the
Groups financial statements:
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Amendments to IFRS 10, IFRS 12 and IAS 28 Investment Entities: Applying the Consolidation Exception (issued December 2014). |
a/ Basis of preparation
The consolidated financial statements have been prepared in accordance with IFRSs under the historical cost convention, with the exception of
certain categories of assets and liabilities. The categories concerned are detailed in the following notes.
b/ Consolidation methods and changes in ownership interests
Companies over which the Group has control are fully consolidated.
Companies over which the Group has joint control are either accounted for as a joint operation or as a joint venture, in accordance with IFRS 11
Joint Arrangements. When the Group is a joint operator, the right to assets, the obligation for liabilities and the right to corresponding revenues and expenses arising from the arrangement are accounted for. Investments in joint
ventures are accounted for under IAS 28.
In accordance with IAS 28 Investments in Associates and Joint Ventures, companies
over which the Group has significant influence (investments in associates or equity affiliates) are accounted for under the equity method. Significant influence is presumed when the Groups interest in the voting rights is 20% or
more.
In accordance with IFRS 10 Consolidated Financial Statements, structured entities are consolidated when the
substance of the relationship between the Group and the structured entities indicates that it is controlled by the Group. All intra-group balances, transactions, unrealized gains and losses resulting from intra-group transactions and dividends are
eliminated in full.
Any changes in Alcatel-Lucents ownership interest in a subsidiary that do not result in loss of control are
accounted for within equity. When Alcatel-Lucent loses control of a subsidiary, the assets (including any goodwill) and liabilities, related equity components, and the carrying amount of any non-controlling interests of the former subsidiary are
derecognized. Any gain or loss and any amounts previously recognized in other comprehensive income in relation to that subsidiary are recognized in profit or loss (to the extent that the items can be reclassified to profit or loss). Any investment
retained in the former subsidiary is measured at its fair value at the date when control is lost.
c/ Business combinations
Business combinations are accounted for in accordance with the purchase method required by IFRS 3. Once control is obtained over a
target, its assets and liabilities are measured at their fair value at the acquisition date in accordance with IFRS requirements. Under IFRS 3 (revised), when control over the target is obtained, the non-controlling interest may be valued either at
fair value or at its share of the targets identifiable net assets. The Group has not yet measured any non-controlling interests in a target in which the Group acquired control at fair value, because all business combinations recorded to date
occurred before the effective date of January 1, 2010 for IFRS 3 (revised). Under the previous version of IFRS 3, non-controlling interests were always valued at their proportion of the net fair values of the identifiable net assets of the
target. Accordingly, the Group has measured all non-controlling interests at their share of a targets identifiable net assets. Any excess between
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1
consideration transferred of the business combination and the Groups interest in the fair
value of the net assets acquired is recognized as goodwill (see intangible and tangible assets).
If the initial accounting for a
business combination cannot be completed before the end of the annual period in which the business combination is effected, the initial accounting must be completed within twelve months from the acquisition date. Transaction costs attributable to
the acquisition are expensed as incurred, except for the costs of issuing debt or equity instruments in connection with the business combination, which are included in the carrying value of the instrument.
The accounting treatment of deferred taxes related to business combinations is described in Note 1l below.
The accounting treatment of stock options of companies acquired in the context of a business combination is described in Note 1s below.
d/ Translation of financial statements denominated in foreign currencies
The statements of financial position of consolidated entities having a functional currency different from the euro are translated into euros at
the closing exchange rate (spot exchange rate at the statement of financial position date), and the income statements, statements of comprehensive income and statements of cash flows of such consolidated entities are translated at the average period
to date exchange rate. The resulting translation adjustments are included in equity under the caption Cumulative translation adjustments.
Goodwill and fair value adjustments arising from the acquisition of a foreign entity are considered as assets and liabilities of that entity. They are therefore expressed in the entitys functional currency and translated into
euros using the closing exchange rate.
e/ Translation of foreign currency transactions
Foreign currency transactions are translated at the rate of exchange applicable on the transaction date. At period-end, foreign currency monetary
assets and liabilities are translated at the rate of exchange prevailing on that date. The resulting exchange gains or losses are recorded in the income statement in other financial income (loss).
Foreign currency denominated non-monetary assets and liabilities recognized at historical cost are translated using the exchange rate prevailing
as of the transaction date. Foreign currency denominated non-monetary assets and liabilities recognized at fair value are translated using the exchange rate prevailing as of the date the fair value is determined.
Exchange gains or losses on foreign currency financial instruments that represent an economic hedge of a net investment in a subsidiary whose
functional currency is not the euro are reported as translation adjustments in equity under the caption Cumulative translation adjustments until the disposal of the investment.
f/ Research and development expenses and capitalized development costs
In accordance with IAS 38 Intangible Assets, research and development expenses are recorded as expenses in the year in which they
are incurred, except for:
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development costs, which are capitalized as an intangible asset when the following criteria are met: |
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the project is clearly defined, and the costs are separately identified and reliably measured, |
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the technical feasibility of the project is demonstrated, |
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the ability to use or sell the products created during the project is demonstrated, |
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the intention exists to finish the project and use or sell the products created during the project, |
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a potential market for the products created during the project exists or their usefulness, in case of internal use, is demonstrated, leading one to believe that the project will generate probable
future economic benefits, and |
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adequate resources are available to complete the project. |
These
development costs are amortized over the estimated useful lives of the projects or the products they are incorporated within. The amortization of capitalized development costs begins as soon as the related product is released.
Specifically for software, useful life is determined as follows:
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in case of internal use: over its probable service lifetime, and |
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in case of external use: rates of technical, technological or commercial obsolescence in the industry and according to prospects for sale, rental or other forms of distribution.
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Capitalized software development costs are those incurred during the programming, codification and testing phases. Costs
incurred during the design and planning, product definition and product specification stages are accounted for as expenses.
The
amortization of capitalized software development costs during a reporting period is the greater of the amount computed using (a) the ratio that current gross revenues for a product bear to the total of current and anticipated future gross
revenues for that product and (b) the straight-line method over the remaining estimated economic life of the software or the product they are incorporated within.
The amortization of internal use software capitalized development costs is accounted for by function depending on the beneficiary function.
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Customer design engineering costs (recoverable amounts disbursed under the terms of contracts with customers), are included in work in progress on construction contracts.
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With regard to business combinations, a portion of the purchase price is allocated to in-process research and
development projects that may be significant. As part of the process of analyzing these business combinations, Alcatel-Lucent may
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1
decide to buy technology that has not yet been commercialized rather than develop the technology
internally. Decisions of this nature consider existing opportunities for Alcatel-Lucent to stay at the forefront of rapid technological advances in the telecommunications-data networking industry.
The fair value of in-process research and development acquired in business combinations is usually based on present value calculations of income,
an analysis of the projects accomplishments and an evaluation of the overall contribution of the project, and the projects risks, all inputs that represent the assumptions that a market participant would use when pricing the asset.
The revenue projection used to value in-process research and development is based on estimates of relevant market sizes and growth
factors, expected trends in technology, and the nature and expected timing of new product introductions by Alcatel-Lucent and its competitors. Future net cash flows from such projects are based on managements estimates of such projects
cost of sales, operating expenses and income taxes.
The value assigned to purchased in-process research and development is also
adjusted to reflect the stage of completion, the complexity of the work completed to date, the difficulty of completing the remaining development, costs already incurred, and the projected cost to complete the projects.
Such value is determined by discounting the net cash flows to their present value. The selection of the discount rate is based on
Alcatel-Lucents weighted average cost of capital, adjusted upward to reflect additional risks inherent in the development life cycle.
Capitalized development costs considered as assets (either generated internally and capitalized or reflected in the purchase price of a business combination) are generally amortized over 3 to 10 years.
Impairment tests are carried out using the methods described in Note 1g.
g/ Goodwill, intangible assets and property, plant and equipment
In accordance with IAS 16 Property, Plant and Equipment and with IAS 38 Intangible Assets, only items whose cost
can be reliably measured and for which future economic benefits are likely to flow to the Group are recognized as assets.
In
accordance with IAS 36 Impairment of Assets, whenever events or changes in market conditions indicate a risk of impairment of intangible assets and property, plant and equipment, a detailed review is carried out in order to
determine whether the net carrying amount of such assets remains lower than their recoverable amount, which is defined as the greater of fair value (less costs to sell) and value in use. Value in use is measured by discounting the expected future
cash flows from continuing use of the asset and its ultimate disposal. Intangible assets with indefinite useful lives (such as trade names) are tested for impairment, at least annually.
If the recoverable value is lower than the net carrying value, the difference between the two
amounts is recorded as an impairment loss. Impairment losses for property, plant and equipment or intangible assets can be reversed if the recoverable amount becomes higher than the net carrying amount (but not exceeding the loss initially
recorded).
Goodwill
The goodwill arising
from a business combination is equal to the difference between the sum of the consideration paid, the value of any non-controlling interest that remains outstanding after the business combination and, where applicable, the acquisition-date fair
value of the acquirers previously-held equity interest in the target, minus the net of the acquisition-date amounts of the identifiable assets acquired and liabilities assumed. This goodwill is recognized in assets in the Consolidated
Statement of Financial Position.
Goodwill is tested for impairment at least annually, such test is carried out during the fourth
quarter of the year. The impairment test methodology is based on a comparison between the recoverable amounts of each of the Groups cash generating units (CGU) (considered as a Product Division or groups of Product Divisions at which level the
impairment test is performed) and the CGUs net asset carrying amounts (including goodwill). All goodwill is allocated to CGUs. Within Alcatel-Lucents reporting structure, Product Divisions are two levels below our two reportable segments
(Core Networking and Access). Such recoverable amounts are mainly determined using discounted cash flows over five years and a discounted residual value.
An additional impairment test is also performed when events indicating a potential decrease of the recoverable value of a CGU occur (see Note 2c and Note 11). Goodwill impairment losses cannot be reversed.
Equity affiliate goodwill is included with the related investment in associate. The requirements of IAS 39 are applied to determine whether
any impairment loss must be recognized with respect to the net investment in associates. The impairment loss is calculated according to IAS 36 requirements.
When the reporting structure is reorganized in a way that changes the composition of one or more CGUs to which goodwill was allocated, a new
impairment test is performed on the goodwill for which the underlying CGU has changed. Such reallocations were made on January 1, 2013 using a relative value approach similar to the one used when an entity disposes of an operation within a CGU.
Intangible assets
Intangible assets are
identifiable non-monetary assets without physical substance. They are recorded at cost less accumulated amortization and any accumulated impairment losses. They are recognized if, and only if, it is probable that the expected future economic
benefits that are attributable to the asset will flow to the Group, and the cost of the asset can be measured reliably.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1
Intangible assets mainly include capitalized development costs and those assets acquired in
business combinations, being primarily acquired technologies or customer relationships. Intangible assets, other than certain trade names, are generally amortized on a straight-line basis over their estimated useful lives (i.e. 3 to
10 years). Amortization is taken into account within cost of sales, research and development costs (acquired technology, in-process research and development (IPR&D), etc.) or administrative and selling expenses (customer relationships),
depending on the designation of the asset. Impairment losses are accounted for in a similar manner or in restructuring costs if they occur as part of a restructuring plan or in a specific line item if very material (refer to Note 1n). IPR&D
capitalization of development costs begins once technical feasibility is reached, and amortization of capitalized development costs begins once the related product is released. Certain trade names are considered to have indefinite useful lives and
therefore are not amortized.
Capital gains/losses from disposals of intangible assets are accounted for in the corresponding cost line
items in the income statement depending on where in the income statement the underlying asset would normally be expensed (i.e. cost of sales, administrative and selling expenses or research and development costs).
Property, plant and equipment
Property, plant and
equipment are valued at historical cost for the Group less accumulated depreciation expense and any impairment losses. Depreciation expense is generally calculated over the following useful lives:
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Buildings and building improvements |
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5-50 years |
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Infrastructure and fixtures |
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5-20 years |
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Plant and equipment |
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1-10 years |
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Depreciation expense is determined using the straight-line method.
Assets acquired through finance lease arrangements or long-term rental arrangements that transfer substantially all the risks and rewards
associated with ownership of the asset to the Group (as tenant) are capitalized.
Residual value, if considered to be significant, is
included when calculating the depreciable amount. Property, plant and equipment are segregated into their separate components if there is a significant difference in their expected useful lives, and depreciated accordingly.
Depreciation and impairment losses are accounted for in the income statement under cost of sales, research and development costs or administrative
and selling expenses, depending on the nature of the asset or in restructuring costs if they occur as part of a restructuring plan or in a specific line item if very material (see Note 1n).
In addition, capital gains/losses from disposals of property, plant and equipment are accounted for in the corresponding cost line items in the
income statement depending on where in the income statement the underlying asset would normally be
expensed (i.e. cost of sales, administrative and selling expenses, research and development costs or restructuring costs).
h/ Inventories and work in progress
In accordance with IAS 2 Inventories, inventories and work in progress are valued at the lower of cost (including indirect production costs where applicable) or net realizable value. Cost is assigned by using generally
the weighted average cost formula, or the first-in, first-out (FIFO) cost formula in certain cases.
Net realizable value is the
estimated sales revenue for a normal period of activity less expected selling costs and any estimated costs of completion.
i/
Treasury stock
Treasury shares owned by Alcatel-Lucent or its subsidiaries are accounted for at cost and are deducted from equity.
Proceeds from the sale of such shares are recognized directly in equity.
j/ Pension and retirement obligations and other employee
and post-employment benefit obligations
In accordance with the laws and practices of each country where Alcatel-Lucent is
established, the Group participates in employee benefit plans.
For defined contribution plans, the Group expenses contributions as and
when they are due. As the Group is not liable for any legal or constructive obligations under such plans beyond the contributions paid, no provision is made. Provisions for defined benefit plans and other long-term employee benefits are determined
as follows: using the Projected Unit Credit Method (with projected final salary), each period of service gives rise to an additional unit of benefit entitlement and each unit is measured separately to calculate the final obligation. Actuarial
assumptions, such as mortality rates, rates of employee turnover and projection of future salary levels, are used to calculate the obligation. Changes in actuarial assumptions are recognized in equity in the statement of financial position.
The service cost is recognized in income from operating activities and the net interest on the defined benefit liability
(asset) is recognized in financial income (loss). The impact of plan amendments is presented in a specific line item of the income statement if material (see Note 1n).
Certain other post-employment benefits, such as life insurance and health insurance (particularly in the United States) or long-service medals
(bonuses awarded to employees for extended service particularly in France and Germany), are also recognized as provisions, which are determined by means of an actuarial calculation similar to the one used for retirement provisions.
The accounting treatment used for employee stock options is detailed in Note 1s below.
219
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1
k/ Provisions for restructuring and restructuring costs
In accordance with IAS 37 Provisions, Contingent Liabilities and Contingent Assets, the recognition criteria for accounting for a
restructuring reserve are (i) the company has an obligation towards a third party at the statement of financial position date, (ii) it is probable (more likely than not) that a liability (future outflow to settle the obligation) has been
incurred, and (iii) this liability can be reasonably estimated.
To meet such criteria when reserving for restructuring actions,
we consider that the appropriate level of management has to approve the restructuring plan and has to announce it by the date of the statement of financial position, specifically identifying the restructuring actions to be taken (for example, the
number of employees concerned, their job classifications or functions and their locations). Before the statement of financial position date, detailed conditions of the plan have to be communicated to employees, in such a manner as to allow an
employee to estimate reasonably the type and amount of benefits he/she will receive. Also, the related restructuring actions that are required to be completed must be estimated to be achievable in a relatively short (generally less than 1 year)
timeframe without likelihood of change.
Restructuring costs primarily relate to severance payments, early retirement, costs for notice
periods not worked, training costs of terminated employees, costs linked to the closure of facilities or the discontinuance of product lines and any costs arising from plans that materially change the scope of the business undertaken by the Group or
the manner in which such business is conducted.
Other costs (removal costs, training costs of transferred employees, etc.) and
write-offs of fixed assets, inventories, work in progress and other assets, directly linked to restructuring measures, are accounted for as incurred (as linked to ongoing activities), in restructuring costs in the income statement.
The amounts reserved for anticipated payments made in the context of restructuring programs are valued at their present value in cases where the
settlement date is beyond the normal operating cycle of the company and the time value of money is deemed to be significant. The impact of the passage of time on the present value of the payments is included in other financial income
(loss).
l/ Taxes
Current
income tax
Current income tax assets and liabilities for the current period are established based upon the amount expected to be
recovered from or paid to the taxation authorities and reflected in the statement of financial position. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted at the reporting date in the countries
where the Group operates and generates taxable income.
Current income tax relating to items recognized directly in equity or in other
comprehensive income is recognized respectively in equity or in other comprehensive income, and not in the income
statement. Management periodically evaluates positions taken in the Groups tax returns with respect to situations in which applicable tax regulations are subject to interpretation and
establishes provisions where appropriate.
Deferred taxes
Deferred taxes are computed in accordance with the liability method for all temporary differences arising between the tax basis of assets and liabilities and their carrying amounts, including the reversal of entries recorded in
individual accounts of subsidiaries solely for tax purposes. All amounts resulting from changes in tax rates are recorded in equity, net income (loss), or other comprehensive income for the year in which the tax rate change is enacted.
Deferred tax assets are recorded in the consolidated statement of financial position when it is probable that the tax benefit will be realized in
the future. Deferred tax assets and liabilities are not discounted.
To assess the ability of the Group to recover deferred tax assets,
the following factors are taken into account:
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existence of deferred tax liabilities that are expected to generate taxable income, or limit tax deductions upon reversal; |
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forecasts of future tax results; |
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the impact of non-recurring costs included in income or loss in recent years that are not expected to be repeated in the future; |
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historical data concerning recent years tax results; and |
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if required, tax planning strategy, such as the planned disposal whose values are higher than their book values. |
As a result of a business combination, an acquirer may consider it probable that it will recover its own deferred tax assets that were not
recognized before the business combination. For example, an acquirer may be able to utilize the benefit of its unused tax losses against the future taxable profit of the acquiree. In such cases, the acquirer recognizes a deferred tax asset, but does
not include it as part of the accounting for the business combination, and therefore does not take it into account in determining the goodwill or the amount of any excess of the acquirers interest in the net fair value of the acquirees
identifiable assets, liabilities and contingent liabilities over the cost of the combination.
If the potential benefits of the
acquirees income tax loss carry-forwards or other deferred tax assets do not satisfy the criteria in IFRS 3 (revised) for separate recognition when a business combination is initially accounted for, but are subsequently realized, the acquirer
will recognize the resulting deferred tax income in profit or loss. If any deferred tax assets related to the business combination with Lucent are recognized in future financial statements of the combined company, the impact will be accounted for in
the income statement (for the tax losses not yet recognized related to both historical Alcatel and Lucent entities).
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1
Penalties recognized on tax claims are accounted for in the income tax line item in the
income statement.
m/ Revenues
Revenues include net goods, equipment, and services sales from the Groups principal business activities and income due from licensing fees and from grants, net of value added taxes (VAT).
The majority of revenues from the sale of goods and equipment are recognized under IAS 18 Revenues when persuasive evidence of an
arrangement with the customer exists, delivery has occurred, the significant risks and rewards of ownership of a product have been transferred to the customer, the amount of revenue can be measured reliably and it is probable that the economic
benefits associated with the transaction will flow to the Group. For arrangements in which the customer specifies formal substantive acceptance of the goods, equipment, services or software, revenue is deferred until all the acceptance criteria have
been met.
Product rebates or quantity discounts are deducted from revenues, even in the case of promotional activities giving rise to
free products.
Revenue in general is measured at the fair value of the consideration received or to be received. Where a deferred
payment has a significant impact on the calculation of fair value, it is accounted for by discounting future payments.
The assessment
of the ability to collect is critical in determining whether revenue or expense should be recognized. As part of the revenue recognition process, the Group assesses whether it is probable that economic benefits associated with the transaction will
flow to the Group. If the Group is uncertain as to whether economic benefits will flow to the Group, revenue is deferred and recognized on a cash basis. However, if uncertainty arises about the ability to collect an amount already included in
revenue, the amount with respect to which recovery has ceased to be probable is recognized as an expense in cost of sales.
Revenues from contracts that are multiple-element arrangements, such as those including products with installation and integration services, are
recognized as the revenue for each unit of accounting is earned based on the relative fair value of each unit of accounting as determined by internal or third-party analyses of market-based prices or by deferring the fair value associated with
undelivered elements. A delivered element is considered a separate unit of accounting if it has value to the customer on a stand-alone basis, and delivery or performance of the undelivered elements is considered probable and substantially under the
Groups control. If these criteria are not met, revenue for the arrangement as a whole is accounted for as a single unit of accounting in accordance with the criteria described in the preceding paragraph.
The remaining revenues are recognized from construction contracts under IAS 11 Construction Contracts. Construction contracts are
defined as contracts specifically negotiated for the
construction of an asset or a combination of assets that are closely interrelated or interdependent in terms of their design, technology and function or their ultimate purpose of use (primarily
those related to customized network solutions and network build-outs with a duration of more than two quarters). For revenues generated from construction contracts, the Group applies the percentage of completion method of accounting in application
of the above principles, provided certain specified conditions are met, based either on the achievement of contractually defined milestones or on costs incurred compared with total estimated costs. Any probable construction contract losses are
recognized immediately in cost of sales. If uncertainty exists regarding customer acceptance, or the contracts duration is relatively short, revenues are recognized only to the extent of costs incurred that are recoverable, or on completion of
the contract. Construction contract costs are recognized as incurred when the outcome of a construction contract cannot be estimated reliably. In this situation, revenues are recognized only to the extent of the costs incurred that are probable of
recovery. Work in progress on construction contracts is stated at production cost, excluding administrative and selling expenses. Changes in provisions for penalties for delayed delivery or poor contract execution are reported in revenues and not in
cost of sales.
Advance payments received on construction contracts, before corresponding work has been carried out, are recorded in
customers deposits and advances. Costs incurred to date plus recognized profits less the sum of recognized losses (in the case of provisions for contract losses) and progress billings are determined on a contract-by-contract basis. If the
amount is positive, it is disclosed in Note 17 as an asset under amount due from customers on construction contracts. If the amount is negative, it is disclosed in Note 17 as a liability under amount due to customers on
construction contracts.
When software is embedded in the Groups hardware and the software and hardware function together
to deliver the products essential functionality, the transaction is considered a hardware transaction and guidance from IAS 18 is applied. For revenues generated from licensing, selling or otherwise marketing software solutions or stand-alone
software sales, the Group also applies the guidance from IAS 18 and requires fair value to separate multiple software elements. Vendor specific objective evidence (VSOE) of fair value to separate multiple software elements may be used in certain
case. In addition, if any undelivered element in these transactions is essential to the functionality of delivered elements, revenue is deferred until such element is delivered or the last element is delivered. If the last undelivered element is a
service, revenue for such transactions is recognized ratably over the service period.
For arrangements to sell services only, revenue
from training or consulting services is recognized when the services are performed. Maintenance service revenue, including post-contract customer support, is deferred and recognized ratably over the contracted service period. Revenue from other
services is generally recognized at the time of performance.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1
For product sales made through retailers and distributors, assuming all other revenue recognition
criteria have been met, revenue is recognized upon shipment to the distribution channel, if such sales are not contingent on the distributor selling the product to third parties and the distribution contracts contain no right of return. Otherwise,
revenue is recognized when the reseller or distributor sells the product to the end user.
n/ Income (loss) from operating
activities before restructuring costs, litigations, gain/(loss) on disposal of consolidated entities, impairment of assets and post-retirement benefit plan amendments
Alcatel-Lucent has considered relevant to the understanding of the Groups financial performance to present on the face of the income
statement a subtotal inside the income (loss) from operating activities.
This subtotal, named Income (loss) from operating
activities before restructuring costs, litigations, gain/(loss) on disposal of consolidated entities, impairment of assets and post-retirement benefit plan amendments, excludes those elements that are difficult to predict due to their nature,
frequency and/or materiality.
Those elements can be divided in two categories:
· |
|
elements that are both very infrequent and material, such as a major impairment of an asset, a disposal of investments, the settlement of litigation having a material impact or a major amendment of
a pension or other post-retirement plan; and |
· |
|
elements that are by nature unpredictable in their amount and/or in their frequency, if they are material. Alcatel-Lucent considers that materiality must be assessed not only by comparing the
amount concerned with the income (loss) from operating activities of the period, but also in terms of changes in the item from one period to another. For example, restructuring charges have shown significant changes from one period to another.
|
Income (loss) from operating activities includes gross profit, administrative and selling expenses and
research and development costs (see Note 1f) and, in particular, pension costs (except for the financial component, see Note 1j), employee profit sharing, valuation allowances on receivables (including the two categories of vendor financing as
described in Note 1q) and capital gains (losses) from the disposal of intangible assets and property, plant and equipment, and all other operating expenses or income regardless of their predictive value in terms of nature, frequency and/or
materiality.
Income (loss) from operating activities is calculated before Finance cost and Other
financial income (loss), which includes the financial component of retirement expenses, financing costs and capital gains (losses) from disposal of financial assets (shares in a non-consolidated company or company consolidated under the equity
method and other non-current financial assets, net), and before share in net income
(losses) of equity affiliates, income tax (expense) benefit and income (loss) from discontinued operations.
o/ Finance costs and other financial income (loss)
Finance costs include interest charges relating to net consolidated debt, which consists of bonds, the liability component of compound financial
instruments such as OCEANE and other convertible bonds, other long-term debt (including finance lease obligations) and interest income on all cash and similar items (cash, cash equivalents and marketable securities) and the changes in fair values of
marketable securities accounted for at fair value through profit or loss.
Borrowing costs that are directly attributable to the
acquisition, construction or production of an asset are capitalized as part of the cost of that asset.
When tax law requires interest
to be paid (received) on an underpayment (overpayment) of income taxes, this interest is accounted for in the other financial income (loss) line item in the income statement.
p/ Structure of consolidated statement of financial position
Most of the Groups activities in the various business segments have long-term operating cycles, and, as a result, current assets and current
liabilities include certain elements that are due after one year.
q/ Financial instruments
i. Financial assets and liabilities
Financial assets
include assets classified as available-for-sale and held-to-maturity, assets at fair value through profit and loss, asset derivative instruments, loans and receivables and cash and cash equivalents.
Financial liabilities include borrowings, other financing and bank overdrafts, liability derivative instruments and payables.
The recognition and measurement of financial assets and liabilities is governed by IAS 39.
The Group determines the classification of its financial assets and liabilities at initial recognition. In the statement of financial position,
financial assets are classified in Other non-current financial assets, net, Marketable securities and Other current and non-current assets, and financial liabilities are classified in Convertible bonds and
other bonds, long-term, Other long-term debt, Other current and non-current liabilities and Current portion of long-term and short-term debt.
Financial assets and liabilities at fair value through profit or loss
Financial assets and liabilities at fair value through profit or loss include financial assets and liabilities held for trading and financial
222
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1
assets and liabilities designated upon initial recognition at fair value through profit or loss.
Financial assets and liabilities are classified as held for trading if they are acquired for the purpose of selling or repurchasing in the near term. Derivatives are also classified as held for trading unless they are designated as effective hedging
instruments as defined by IAS 39.
Financial assets and liabilities at fair value through profit and loss are carried in the statement
of financial position at fair value with net changes in fair value recognized in finance costs in the income statement.
Loans,
receivables and borrowings
After initial measurement, loans, receivables and borrowings are measured at amortized cost using the
Effective Interest Rate method (EIR), less impairment, if any. Amortized cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the transaction. Amortization, calculated using
the EIR, is included in finance costs in the income statement. The impairment of loans and receivables, which is represented by the difference between net carrying amount and recoverable value, is recognized in the income statement and can be
reversed if recoverable value rises in the future.
Certain financial instruments that are part of financial debt contain both a
liability and an equity component, including bonds that can be converted into or exchanged for new or existing shares and notes mandatorily redeemable for new or existing shares. The different components of compound financial instruments are
accounted for in equity and in bonds and notes issued according to their classification, as defined in IAS 32 Financial Instruments: Presentation.
In accordance with IAS 32 AG33 and AG34 requirements, the consideration paid in connection with an early redemption of a compound financial
instrument is allocated at the date of redemption between the liability and the equity components with an allocation method consistent with the method used initially. The amount of gain or loss relating to the liability component is recognized in
other financial income (loss) and the amount of consideration relating to the equity component is recognized in equity.
Held-to-maturity investments
The Group did not have any held-to-maturity investments during the years ended December 31, 2015, 2014 and 2013.
Available-for-sale financial assets
Available-for-sale financial assets include investments in non-consolidated companies and are recorded at cost upon acquisition including transaction costs.
After initial measurement, available-for-sale financial assets are subsequently measured at their fair value. The fair value for listed securities
on an active market is their market price. If a reliable fair value cannot be established, securities are valued at cost. Fair value changes are accounted for directly in other
comprehensive income. When a decline in the fair value of an available-for-sale financial asset has been recognized in other comprehensive income and objective evidence of impairment of that
financial asset exists (for instance, a significant or prolonged decline in the value of the asset), an irreversible impairment loss is recorded in the income statement. This loss can only be released upon the sale of the securities concerned.
The portfolio of non-consolidated securities and other financial assets is assessed at each quarter-end for objective evidence of
impairment.
Derecognition of financial assets
A financial asset as defined under IAS 32 Financial Instruments: Presentation is totally derecognized (removed from the statement of
financial position) when, for instance, the Group expects no further cash flow to be generated by it and transfers substantially all risks and rewards attached to it.
In the case of trade receivables, a transfer without recourse in case of payment default by the debtor is regarded as a transfer of substantially
all risks and rewards of ownership, thus making such receivables eligible for derecognition under IAS 39 Financial Instruments: Recognition and Measurement, on the basis that risk of late payment is considered marginal. A more
restrictive interpretation of the concept of substantial transfer of risks and rewards could put into question the accounting treatment that has been adopted. The amount of receivables sold without recourse is given in Note 20.
Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount is reported in the consolidated statement of financial position, if there
is a currently enforceable legal right to offset the recognized amounts and there is an intention to settle on a net basis, to realize the assets and settle the liabilities simultaneously.
ii. Fair value of financial instruments
The fair value
of financial instruments that are traded in active markets at each reporting date is determined by reference to quoted market prices or dealer price quotations (bid price for long positions and ask price for short positions), without any deduction
for transaction costs.
For financial instruments not traded in an active market, the fair value is determined using appropriate
valuation techniques. Such techniques may include:
· |
|
using recent arms length market transactions; |
· |
|
reference to the current fair value of another instrument that is substantially the same; and |
· |
|
a discounted cash flow analysis or other valuation models. |
An
analysis of fair values of financial instruments and further details as to how they are measured is provided in Note 26.
223
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1
The fair values of financial instruments are categorized into a fair value hierarchy of three
levels. The levels depend on the type of input used for the valuation of the instruments:
Level 1: quoted prices (unadjusted) in
active markets for identical assets or liabilities.
Level 2: inputs other than quoted prices included under Level 1 that are
observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
Level 3: inputs for
the asset or liability that are not based on observable market data (unobservable input).
iii. Cash and Cash equivalents
In accordance with IAS 7 Statement of Cash Flows, cash and cash equivalents in the consolidated statements of cash flows include cash
(cash funds) and cash equivalents (term deposits and short-term investments that are very liquid and readily convertible to known amounts of cash and are only subject to negligible risks of changes in value). Cash and cash equivalents in the
statement of cash flows do not include investments in listed securities, investments with an initial maturity date exceeding three months and without an early exit clause, or bank accounts restricted in use, other than restrictions due to
regulations applied in a specific country (exchange controls) or sector of activities.
Bank overdrafts are considered as financing
liabilities and are excluded from cash and cash equivalents.
Cash and cash equivalents in the consolidated statements of financial
position correspond to the cash and cash equivalents defined above.
iv. Derivative financial instruments and hedge accounting
The Group uses derivative financial instruments, such as forward currency contracts and interest rate swaps, to hedge its foreign currency risks
and interest rate risks. Such derivative financial instruments are initially recognized at fair value on the date on which a derivative contract is entered into and are subsequently remeasured at fair value. Derivatives are carried as financial
assets when the fair value is positive and as financial liabilities when the fair value is negative.
Any gains or losses arising from
changes in the fair value of derivatives are taken directly to the income statement, except for the effective portion of cash flow hedges, which is recognized in other comprehensive income.
For the purpose of hedge accounting, hedges are classified as:
· |
|
fair value hedges, when hedging the exposure to changes in the fair value of a recognized asset or liability; |
· |
|
cash flow hedges, when hedging the exposure to variability in cash flows that is either attributable to a particular risk associated with a recognized asset or liability or a highly probable
forecast transaction; and |
· |
|
hedges of a net investment in a foreign operation.
|
The Group did not have any derivatives qualified as hedges of a net investment in a foreign
operation during the years ended December 31, 2015, 2014 and 2013.
At the inception of a hedge relationship, the Group formally
designates and documents the hedge relationship to which the Group wishes to apply hedge accounting and the risk management objective and strategy for undertaking the hedge. The documentation includes identification of the hedging instrument, the
hedged item or transaction, the nature of the risk being hedged and how the entity will assess the effectiveness of changes in the hedging instruments fair value in offsetting the exposure to changes in the hedged items fair value or
cash flows attributable to the hedged risk. Such hedges are expected to be highly effective in achieving offsetting changes in fair value or cash flows and are assessed on an ongoing basis to determine that they actually have been highly effective
throughout the financial reporting periods for which they were designated.
Hedges that meet the strict criteria for hedge accounting
are accounted for as described below.
Fair value hedges
The change in the fair value of a hedging derivative is recognized in the income statement. The change in the fair value of the hedged item
attributable to the risk hedged is recorded as part of the carrying value of the hedged item and is also recognized in the income statement.
For fair value hedges relating to items carried at amortized cost, any adjustment to carrying value is amortized through the income statement over the remaining term of the hedge using the effective interest rate (EIR) method. EIR
amortization may begin as soon as an adjustment exists and shall terminate when the hedged item ceases to be adjusted for changes in its fair value attributable to the risk being hedged.
If the hedged item is derecognized, the unamortized fair value of the hedging instrument is recognized immediately in the income statement.
See Note 26 for more details.
Cash flow hedges
The effective portion of the gain or loss on the hedging instrument is recognized directly in
equity (other comprehensive income in the cash flow hedge reserve), while any ineffective portion is recognized immediately in the income statement in other financial income (loss).
Amounts recognized as other comprehensive income are transferred to the income statement when the hedged transaction affects profit or loss, such
as when the hedged financial income or financial expense is recognized or when a forecast sale occurs.
If the forecast transaction or
firm commitment is no longer expected to occur, the cumulative gain or loss previously recognized in equity is transferred to the income statement. If the
224
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1
hedging instrument expires or is sold, terminated or exercised without replacement or rollover, or
if its designation as a hedge is revoked, any cumulative gain or loss previously recognized in other comprehensive income remains in other comprehensive income until the forecast transaction or firm commitment affects profit or loss.
Refer to Note 26 for more details.
r/ Customer financing
The Group undertakes two types of customer financing:
· |
|
financing relating to the operating cycle and directly linked to actual contracts; and |
· |
|
longer-term financing (beyond the operating cycle) through customer loans, minority investments or other forms of financing. |
Both categories of financing are accounted for in Other current or non-current assets, net.
Changes in these two categories of assets are included in cash flows from operating activities in the consolidated statement of cash flows.
Furthermore, the Group may give guarantees to banks in connection with customer financing. These are included in commitments that are
not in the statement of financial position.
s/ Stock options
In accordance with the requirements of IFRS 2 Share-based Payment, stock options granted to employees are included in the financial
statements using the following principles: the stock options fair value, which is considered to be a reflection of the fair value of the services provided by the employee in exchange for the option, is determined on the grant date. It is
accounted for in accumulated deficit (credit) at grant date, with a counterpart in deferred compensation (debit). During the vesting period, deferred compensation is amortized in the income statement as an expense.
Stock option fair value is calculated at grant date (i.e. date of approval of the plan by the Board of Directors) using the Cox-Ross-Rubinstein
binomial model. This model permits consideration of the options characteristics, such as exercise price and expiry date, market data at the time of issuance, the interest rate on risk-free securities, share price, expected volatility at grant
date and expected dividends, and behavioral factors of the beneficiary, such as expected early exercise. It is considered that a beneficiary will exercise his/her option once the potential gain becomes higher than 50% of the exercise price.
The impact of applying IFRS 2 on net income (loss) is accounted for in cost of sales, research and development
costs or administrative and selling expenses depending on the functions of the beneficiaries.
Outstanding stock options at the acquisition date of a company acquired by Alcatel-Lucent in a
business combination are usually converted into options to purchase Alcatel-Lucent shares using the same exchange ratio as for the acquired shares of the target company. In accordance with IFRS 3 Business Combinations and IFRS 2
Share-based Payment requirements, the fair value of vested stock options at the time of acquisition is taken into account in the cost of the business combination.
t/ Assets held for sale and discontinued operations
IFRS 5 Non-Current Assets Held for Sale and Discontinued Operations, sets out the accounting treatment applicable to assets held for
sale and presentation and disclosure requirements for discontinued operations.
A non-current asset or disposal group (group of assets
or a cash generating unit) to be sold is considered as held for sale if its carrying amount will be recovered through a sale transaction rather than through continuing use. For this to be the case, the asset must be available for sale and its sale
must be highly probable. These assets or disposal groups classified as held for sale are measured at the lower of carrying amount and fair value less costs to sell.
A discontinued operation is a separate major line of business or geographical area of operations for the Group that is either being sold or is
being held for sale. The net income (loss) and statement of cash flow elements relating to such discontinued operations are presented in specific captions in the consolidated financial statements for all periods presented.
Property, plant and equipment and intangible assets are not depreciated or amortized once classified as held for sale.
u/ Earnings per share
Basic earnings per share is computed using the number of shares issued, after deduction of the weighted average number of shares owned by
consolidated subsidiaries and the weighting effect of shares issued during the year.
The dilutive effects of stock option and stock
purchase plans are calculated using the treasury stock method, which provides that proceeds to be received from the exercise of options or purchase of stock are assumed to be used first to purchase shares at market price. The dilutive
effects of convertible bonds are calculated on the assumption that the bonds and notes will be systematically redeemed for shares (the if converted method).
Diluted earnings per share takes into account share equivalents having a dilutive effect, after deducting the weighted average number of share
equivalents owned by consolidated subsidiaries, but not share equivalents that do not have a dilutive effect. Net income (loss) is adjusted for after-tax interest expense relating to convertible bonds.
225
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 2
Note 2 Principal uncertainties regarding the use of estimates
The preparation of consolidated financial statements in accordance with IFRSs requires that the
Group makes a certain number of estimates and assumptions that are considered realistic and reasonable. In the context of the current global economic environment, the degree of volatility and subsequent lack of visibility remain high as of
December 31, 2015. Future facts and circumstances could lead to changes in these estimates or assumptions, which would affect the Groups financial condition, results of operations and cash flows.
a/ Valuation allowance for inventories and work in progress (see Note 18)
Inventories and work in progress are measured at the lower of cost or net realizable value. Valuation allowances for inventories and work in
progress are calculated based on an analysis of foreseeable changes in demand, technology or the market, in order to determine obsolete or excess inventories and work in progress.
b/ Impairment of customer receivables (see Note 19)
An impairment loss is recorded for customer receivables if the expected present value of the future receipts is lower than the carrying value. The
amount of the impairment loss reflects both the customers ability to honor their debts and the age of the debts in question. A higher default rate than estimated or deterioration in our major customers creditworthiness could have an
adverse impact on our future results.
c/ Goodwill, other intangible assets and capitalized development costs
Goodwill (see Note 11)
Goodwill net, is allocated,
where applicable, to cash generating units that are equivalent to a product division or groups of product divisions within Alcatel-Lucents reporting structure. Product divisions are two levels below our two reportable segments. In assessing
whether goodwill should be subject to impairment, the carrying value of each cash generating unit is compared to its recoverable value. Recoverable value is the greater of the value in use and the fair value less costs to sell.
The value in use of each cash generating unit is calculated using a five-year discounted cash flow analysis with a discounted residual value,
corresponding to the capitalization to perpetuity of the normalized cash flows of year 5 (also called the Gordon Shapiro approach).
The fair value less costs to sell of each cash generating unit is determined based upon the weighted average of the Gordon Shapiro approach
described above and the following two approaches, being additional inputs that represent assumptions that a market participant would use when pricing the asset:
· |
|
five-year discounted cash flow analysis with a Sales Multiple (Enterprise Value/Sales) to measure discounted residual value; and
|
· |
|
five-year discounted cash flow analysis with an Operating Profit Multiple (Enterprise Value/Earnings Before Interest, Tax, Depreciation and AmortizationEBITDA) to measure
discounted residual value. |
The discount rates used for the annual impairment tests are based on the Groups
weighted average cost of capital (WACC). A single discount rate is used on the basis that risks specific to certain products or markets have been reflected in determining the cash flows.
Growth and perpetual growth rates used are based on expected market trends.
Other intangible assets (see Note 12)
Impairment tests
are performed if we have indications of a potential reduction in the value of our intangible assets due to change in market trends or new technologies. The recoverable amounts are based on discounted future cash flows or fair values of the assets
concerned.
Capitalized development costs (see Note 12)
The Group evaluates the commercial and technical feasibility of development projects for which costs are capitalized, and estimates the useful lives of the products resulting from the projects. Should a product fail to substantiate
these evaluations, the Group may be required to impair some of the net capitalized development costs in the future.
d/ Provisions
for warranty costs and other product sales reserves (see Note 25)
These provisions are calculated based on historical return rates
and warranty costs expensed as well as on estimates. Costs and penalties ultimately paid can differ considerably from the amounts initially reserved and could therefore have a significant impact on future results.
e/ Provisions for litigations (see Notes 25 and 31)
Certain legal proceedings are pending and cover a wide range of matters. Due to the inherent nature of litigation, the outcome or the cost of
settlement may materially vary from estimates.
f/ Deferred tax assets (see Note 8)
The evaluation of the Groups capacity to utilize tax loss carry-forwards relies on significant judgment. The Group analyzes past events and
certain economic factors that may affect its business in the foreseeable future to determine the probability of its future utilization of these tax loss carry-forwards. This analysis is carried out regularly in each tax jurisdiction where
significant deferred tax assets, mainly in the U.S., are recorded.
226
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 2
If future taxable results are considerably different from those forecasted that support recording
deferred tax assets, the Group will be obliged to revise downwards or upwards the amount of the deferred tax assets, which would have a significant impact on our financial results.
g/ Pension and retirement obligations and other employee and post-employment benefit obligations (see Note 23)
Actuarial assumptions
Our results of operations include
the impact of significant pension and post-retirement benefits that are measured using actuarial valuations. Inherent in these valuations is a key assumption concerning discount rates in retirement plans and healthcare plans. This assumption is
updated on an annual basis at the beginning of each fiscal year or more frequently upon the occurrence of significant events. In addition, discount rates are updated quarterly for those plans for which changes in these assumptions would have a
material impact on our financials.
Discount rates
Discount rates for our U.S. plans are determined using the values published in the original CitiGroup Pension Discount Curve, which is based on AA-rated corporate bonds. Each future years expected benefit payments
are discounted by the discount rate for the applicable year listed in the CitiGroup Curve, and for those years beyond the last year presented in the CitiGroup Curve for which we have expected benefit payments, we apply the discount rate of the last
year presented in the Curve. After applying the discount rates to all future years benefits, we calculate a single discount rate that results in the same interest cost for the next period as the application of the individual rates would have
produced. Discount rates for our non U.S. plans were determined based on Bloomberg AA Corporate yields until December 31, 2012. Since Bloomberg stopped publishing these yields, discount rates for our non U.S. plans are determined based on Iboxx
AA Corporate yields starting January 1, 2013.
Holding all other assumptions constant, a 0.5% increase or decrease in the discount
rate would have increased or decreased the 2015 net pension and post-retirement benefits costs (determined in accordance with IAS 19 Employee Benefits (revised)) by approximately
70 million and (38) million, respectively.
Healthcare cost trends
Regarding healthcare cost
trends for our U.S. plans, our external actuaries annually review expected cost trends from numerous healthcare providers, recent developments in medical treatments, the utilization of medical services, and Medicare future premium rates published by
the U.S. Governments Center for Medicare and Medicaid Services (CMS) as these premiums are reimbursed for some retirees. They apply these
findings to the specific provisions and experience of our U.S. post-retirement healthcare plans in making their recommendations. In determining our assumptions, we review our recent experience
together with our actuaries recommendations.
Expected participation rates in retirement healthcare plans
Our U.S. post-retirement healthcare plans allow participants to opt out of coverage at each annual enrollment period, and for almost all to opt
back in at any future annual enrollment. An assumption is developed for the number of eligible retirees who will elect to participate in our plans at each future enrollment period. Our actuaries develop a recommendation based on the expected
increases in the cost to be paid to a retiree participating in our U.S. plans and recent participation history. We review this recommendation annually after the annual enrollment has been completed and update it if necessary.
Mortality assumptions
Until September 30, 2014,
we used the RP-2000 Combined Health Mortality table with Generational Projection based on the U.S. Society of Actuaries Scale AA. On October 27, 2014, the U.S. Society of Actuaries (SOA) issued new mortality tables. Starting December 31,
2014, we changed these assumptions to the RP-2014 White Collar table with MP-2014 mortality improvement scale for Management records and the RP-2014 Blue Collar table with MP-2014 mortality improvement scale for Occupational records. These changes
had a U.S.$2.6 billion negative effect on the benefit obligation of our U.S. plans. These effects were recognized in the 2014 Statement of Comprehensive Income.
On October 8, 2015, the U.S. SOA released an updated set of mortality improvement assumptions: scale MP-2015. This new mortality improvement
scale reflects two additional years of data that the Social Security Administration has released since the development of the MP-2014 mortality improvement. These two additional years of data show a lower degree of mortality improvement than in
previous years. The change to scale MP-2015 reduced the liabilities by $218 million of our U.S. plans. These effects were recognized in the 2015 Statement of Comprehensive Income.
Plan assets investment
Plan assets are invested in
many different asset categories (such as cash, equities, bonds, real estate and private equity). In the quarterly update of plan asset fair values, approximately 84% are based on closing date fair values and 16% have a one to three-month delay, as
the fair values of private equity, venture capital, real estate and absolute return investments are not available in a short period. This is standard practice in the investment management industry. Assuming that the December 31, 2015 actual
fair values of private equity, venture capital, real estate and absolute return investments were confirmed to be, after the one
227
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 2
to three-month delay, 10% lower than the ones used for accounting purposes as of December 31,
2015, and since our U.S. Management pension plan has a material investment in these asset classes (and the asset ceiling described below is not applicable to this plan), other comprehensive income would be negatively impacted by approximately 344 million.
Asset ceiling
For retirees who were represented by the Communications Workers of America union and the International Brotherhood of Electrical Workers union, we
expect to fund our current retiree healthcare and group life insurance obligations with Section 420 transfers from our U.S. Occupational pension plans. Section 420 of the U.S. Internal Revenue Code provides for transfers of certain excess
pension plan assets held by a defined benefit pension plan into a retiree health benefits account established to pay retiree health benefits and into a group life insurance account established to pay retiree life insurance benefits. This is
considered as a refund from the pension plan when setting the asset ceiling.
Depending on the type of Section 420 transfer,
assets in excess of 120% or 125% of the funding obligation can be transferred. Using the methodology we selected to value plan assets and obligations for funding purposes (see Note 23), we estimated that, as of December 31, 2015, the excess of
assets above 120% of the plan obligations was US$1.1 billion (1.0 billion), and the excess above 125% of plan obligations was US$0.9 billion (0.8 billion).
h/ Revenue recognition (see Note 6)
Most of the Groups sales are generated from complex contractual arrangements that require significant revenue recognition
judgments, particularly in the areas of the sale of goods and equipment with related services constituting multiple-element arrangements, construction contracts and contracts including software. Judgment is also needed in assessing the ability to
collect the corresponding receivables.
For revenues and expenses generated from construction contracts, the Group applies the
percentage of completion method of accounting, provided certain specified conditions are met, based either on the achievement of contractually defined milestones or on costs incurred compared with total estimated costs. The determination of the
stage of completion and the revenues to be recognized rely on numerous estimations based on costs incurred and acquired experience. Adjustments of initial estimates can, however, occur throughout the life of the contract, which can have significant
impacts on financial condition.
Although estimates inherent in construction contracts are subject to uncertainty, certain situations
exist whereby management is unable to reliably estimate the outcome of a construction contract. These situations can occur during the early stages of a contract due to a lack of historical experience or throughout the contract as significant
uncertainties develop related to additional costs, claims and performance obligations, particularly with new technologies.
Contracts that are multiple-element arrangements can include hardware products, stand-alone
software, installation and/or integration services, extended warranty, and product roadmaps, as examples. Revenue for each unit of accounting is recognized when earned based on the relative fair value of each unit of accounting as determined by
internal or third-party analyses of market-based prices. Significant judgment is required to allocate contract consideration to each unit of accounting and determine whether the arrangement is a single unit of accounting or a multiple-element
arrangement. Depending upon how such judgment is exercised, the timing and amount of revenue recognized could differ significantly.
For multiple-element arrangements that are based principally on licensing, selling or otherwise marketing software solutions, judgment is required
as to whether such arrangements are accounted for under IAS 18 or IAS 11. Software arrangements requiring significant production, modification or customization are accounted for as a construction contract under IAS 11. All other software
arrangements are accounted for under IAS 18and we require fair value to separate the multiple software elements. Significant judgment is required to determine the most appropriate accounting model to be applied in this environment and whether VSOE
of fair value exists to allow separation of multiple software elements.
For product sales made through distributors, product returns
that are estimated according to contractual obligations and past sales statistics are recognized as a reduction of sales. Again, if the actual product returns were considerably different from those estimated, the resulting impact on the net income
(loss) could be significant.
i/ Restructuring costs and impact on the recoverable value of goodwill (see Note 11)
On June 19, 2013, we announced the launch of The Shift Plan. Through this plan and the remainder of the Performance Program, we aimed at
(i) reducing our fixed-cost base by 950 million in 2015 compared to our 2012 cost base (including fixed cost savings to be realized under the Performance Program)
through the adoption of direct-channel operations, additional consolidation of SG&A (selling, general and administrative) functions, and by refocusing our R&D capacity, (ii) generating revenues from the Core Networking segment at or
above 7 billion with an operating margin at or above 12.5% in 2015, and (iii) generating segment operating cash flow from the Access segment at or above 200 million by the end of 2015.
The total restructuring costs
related to The Shift Plan were 944 million for all actions taken between 2013 and 2015 compared to the initial estimate of 950 million. For the year ended December 31, 2015, the restructuring costs for these actions were
358 million of which 306 million was expensed. The remaining restructuring reserves related to
The Shift Plan will be used in future quarters.
In compliance with sections 44 and 45 of IAS 36 Impairment of Assets and
considering that we believe we are not committed to a restructuring program as long as we have not been able to
228
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 2
expense it, we exclude future restructuring costs (and corresponding cost savings), if they have
not been expensed, when we determine the value in use for the annual impairment test of goodwill. On the other hand, we fully took into account these future cash outflows and inflows in assessing the recoverability of our deferred tax assets and in
determining the fair value less costs to sell of cash generating units (CGU),
corresponding to the methodology described in Note 2c. We arrive at fair value less costs to sell of a CGU by basing it on a weighted average of three discounted cash flow approaches (two of the
three using discounted residual values that are based respectively on a Sales multiple and an Operating Profit multiple), to arrive at a fair value that reflects assumptions that market participants would use when pricing a CGU.
Note 3 Acquisitions and divestitures
2015
Public exchange offer by Nokia (Nokia Offer) for Alcatel-Lucents securities
On April 15, 2015, Nokia and Alcatel-Lucent announced their intention to combine to create an innovation leader in next generation technology
and services for an IP connected world. The two companies entered into a memorandum of understanding under which Nokia would make an offer for all of the equity securities issued by Alcatel-Lucent, through a public exchange offer in France and in
the United States, subject to certain conditions, on the basis of 0.55 new Nokia shares for every Alcatel-Lucent share. The all-share transaction valued Alcatel-Lucent at 15.6
billion on a fully diluted basis, corresponding to a fully diluted premium of 34% (equivalent to 4.48 per share), and a premium to shareholders of 28% (equivalent to 4.27 per share), on the weighted average share price of Alcatel-Lucent for the three months preceding the announcement. This was based on Nokias closing share price of 7.77 on April 13, 2015. Each companys Board of Directors approved the terms of the proposed transaction.
On November 18, 2015, following the clearance decision of Nokia Offer by the AMF, Nokia launched its public exchange offer for all
outstanding shares, American depositary shares and OCEANE of Alcatel-Lucent. The deadline for tendering Alcatel-lucent shares and OCEANE was December 23, 2015.
Stock-options and performance shares
During the second quarter of 2015, Alcatel-Lucent informed employees that the conditions attached to the stock-option and performance shares plans granted to them would be modified so that all vesting and performance conditions
would be deemed satisfied at the closing date of the exchange offer, should the employees agree to tender their Alcatel-Lucent shares into the exchange offer to be launched by Nokia. Since these modifications have been made in the context of the
proposed Nokia Offer, no related financial impact according to IFRS 2 has been accounted for as of December 31, 2015.
A specific
share package contingent upon the closing of the Nokia Offer was also granted to Mr. Michel Combes, the Group CEO until September 1, 2015. On September 10, 2015, the Board of Directors modified the initial share package and made the
following decisions:
· |
|
performance units: the performances criteria of the 2013 and 2014 years under the 2013 and 2014 plans have already
|
|
|
been assessed and represent 1,025,649 vested performance units. 2015 level of achievement was evaluated at the beginning of 2016 by the Board of Directors and the number of units to be awarded
was pro-rated for the period of Mr. Michel Combes working time during 2015 (i.e. 2/3) representing a maximum of 444,444 performance units; and |
· |
|
stock-options: the March 2014 agreement to grant Mr. Michel Combes 700,000 stock-options was replaced by the right to receive up to 350,000 Alcatel-Lucent shares, subject to presence and
performance criteria. 2015 level of achievement was evaluated at the beginning of 2016 by the Board of Directors and the number of share to be awarded was pro-rated for the period of Mr. Michel Combes working time during 2015 (i.e. 2/3)
representing a maximum of 58,333 shares. |
Both performance units and stock options were settled in cash within the month
following the assessment of the performance criteria at the beginning of 2016.
On July 29, 2015, the Board of Directors, upon
recommendation of the Compensation Committee and the Corporate Governance and Nominations Committee, in order to ensure the protection of the Company, requested the execution of a non-compete agreement with Mr. Michel Combes.
On September 10, 2015, the Board of Directors maintained the main terms of the non-compete agreement but the payment was reduced to 3.1 million which will be paid in three installments with the first payment in November 2015. An expense of
4.1 million, including payroll taxes, was recorded as of September 30, 2015 in the line item Transaction-related costs.
Total transaction-related costs for 2015 amounted to 104 million.
Other changes
On March 18, 2015, we entered into a new partnership agreement with Louis Dreyfus Armateurs (LDA) for our submarine cable activity. Our subsidiary, Alcatel-Lucent Submarine Networks, acquired the 49% shareholding interest
in ALDA Marine, previously held by LDA, for 76 million in cash. LDA remains our strategic marine partner. A
102 million capital gain, corresponding to the re-measurement of our historical 51% stake in ALDA Marine, was recognized in the line item Other financial income
(loss) of our Income Statement. Alcatel-Lucent Submarine Networks also acquired a cable vessel Ile dAix for 26 million.
229
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 3
ALDA Marine has been fully consolidated since the acquisition. Corresponding goodwill was not
significant.
No other material change in consolidated companies occurred during 2015.
2014
On March 31, 2014, Alcatel-Lucent completed
the disposal of LGS Innovations LLC to a U.S.-based company owned by a Madison Dearborn Partners-led investor group that includes CoVant, for a cash selling price of U.S.$110 million
(81 million) after taking into account all working capital adjustments. The agreement included an earnout of up to U.S.$100 million, based on the divested companys results
of operations for the 2014 fiscal year, for which we did not receive any amount. An 11 million loss was recognized in the line item Gain/(loss) on disposal of
consolidated companies.
On September 30, 2014, Alcatel-Lucent completed the disposal of 85% of its Enterprise business to
China Huaxin, for cash
proceeds of 205 million, of which
61 million was paid at closing and 141 million on October 9, 2014 (see Note 9).
On December 31, 2014, Alcatel-Lucent completed the disposal of its cyber-security services & solutions and communications security
activities to Thales for a cash selling price of 41 million, subject to usual working capital adjustments. A
39 million gain was recognized in the line item Gain/(loss) on disposal of consolidated companies.
No other material change in consolidated companies occurred during 2014.
2013
No material change in consolidated companies
occurred during 2013 except for the agreement signed on December 20, 2013 to sell our subsidiary LGS Innovations LLC (see above).
Note 4 Change in accounting treatment and presentation
In 2015, we changed our accounting treatment for the recognition of certain deferred tax assets
based on recent publications about IAS 12 Income taxes, in particular the May 2014 IFRS Interpretations Committee Agenda Decision on IAS 12 Income Taxes: recognition and measurement of deferred tax assets when an entity is
loss-making.
Previously reversals of certain types of taxable temporary differences were not considered as a suitable source
of taxable profit supporting the recognition of deferred tax assets. In particular, taxable temporary differences related to over-funded pension and post-employment benefit plans in the US and in Belgium were disregarded for the recognition of
deferred tax assets due to the difficulty in predicting the timing of their reversal and/or the very long-term profile of their potential reversals, even in the case of existence of loss carry-forwards
with no expiration date. Therefore, no deferred tax assets were recognized, on the basis of such deferred tax liabilities.
In 2015, a deferred tax asset is now recognized for (i) the carry-forward of unused tax losses to the
extent the reversal of those taxable temporary differences enables the utilization of the unused tax losses, and (ii) deductible temporary differences as long as there are sufficient existing taxable temporary differences of the appropriate type
expected to reverse in the same period as these deductible differences. This treatment applies regardless of the entitys expectations of future tax losses.
In accordance with IAS 8 Accounting policies, changes in accounting estimates and errors, we have retrospectively applied this
accounting treatment and restated our previously issued consolidated financial statements, including the related notes.
The impact of this correction
is presented below:
|
|
|
|
|
|
|
|
|
|
|
(in millions of euros) |
|
2014 |
|
|
2013 |
|
Jan. 1, 2013 |
|
|
|
|
|
|
|
|
|
Total Equity as published |
|
|
2,694 |
|
|
3,663 |
|
|
2,683 |
|
Adjustments |
|
|
545 |
|
|
742 |
|
|
657 |
|
|
|
|
|
|
|
|
|
|
|
|
Total Equity as restated |
|
|
3,239 |
|
|
4,405 |
|
|
3,340 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions of euros) |
|
2014 |
|
|
2013 |
|
|
|
|
|
|
|
Deferred tax assets as published |
|
|
1,516 |
|
|
1,000 |
Adjustments |
|
|
545 |
|
|
742 |
|
|
|
|
|
|
|
Deferred tax assets as restated |
|
|
2,061 |
|
|
1,742 |
|
|
|
|
|
|
|
230
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 4
|
|
|
|
|
|
|
(In millions of euros) |
|
2014 |
|
|
2013 |
|
|
|
|
|
|
|
Total comprehensive income (loss) as published |
|
|
(1,141) |
|
|
(104) |
Adjustments |
|
|
(197) |
|
|
85 |
|
|
|
|
|
|
|
Total comprehensive income (loss) as restated |
|
|
(1,338) |
|
|
(19) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions of euros) |
|
2014 |
|
|
2013 |
|
|
|
|
|
|
|
|
|
|
Income tax as published |
|
|
316 |
|
|
|
173 |
|
Adjustments |
|
|
11 |
|
|
|
(67) |
|
|
|
|
|
|
|
|
|
|
Income tax (loss) as restated |
|
|
327 |
|
|
|
106 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions of euros) |
|
2014 |
|
|
2013 |
|
|
|
|
|
|
|
Net income (loss) as published |
|
|
(83) |
|
|
(1,294) |
Adjustments |
|
|
11 |
|
|
(67) |
|
|
|
|
|
|
|
Net income (loss) as restated |
|
|
(72) |
|
|
(1,361) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in euros) |
|
2014 |
|
|
2013 |
|
|
|
|
|
|
|
Earnings (loss) per share attributable to equity owners of the parent (basic) as published |
|
|
(0.04) |
|
|
(0.54) |
Adjustments |
|
|
|
|
|
(0.02) |
|
|
|
|
|
|
|
Earnings (loss) per share attributable to equity owners of the parent (basic) as restated |
|
|
(0.04) |
|
|
(0.56) |
|
|
|
|
|
|
|
Note 5 Information by operating segment and by geographical segment
In accordance with IFRS 8 Operating Segments, the information by operating segment
comes from the business organization and activities of Alcatel-Lucent.
As a part of The Shift Plan announced on June 19, 2013, a
new organization was put in place effective July 1, 2013. It was composed of three reportable segments: Core Networking, Access and Other. Due to the sale of LGS Innovations, our Government business, in March 2014 and the sale of our Enterprise
business in September 2014, we no longer have an Other segment. This Other segment had been included in Other and unallocated. Our reportable segments are composed as follows:
· |
|
Core Networking is composed of the following product divisions: IP Routing, Terrestrial Optics, Wireless Transmission, Submarine, Network Build & Implementation IP, IP
Platforms & Platform Professional Services, and Strategic Industries; and
|
· |
|
Access is composed of the following product divisions: Wireless and Network Build & Implementation Wireless, RFS (Radio Frequency Systems), Fixed Access and Network
Build & Implementation Fixed, Multivendor Maintenance, Licensing and Managed Services. |
The comparable period of
2014 and 2013 was re-presented accordingly.
The information by reportable segment follows the same accounting policies as those used
and described in these consolidated financial statements.
All inter-segment commercial relations are conducted on an arms length
basis on terms and conditions identical to those prevailing for the supply of goods and services to third parties.
231
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 5
a/ Information by reportable segment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions of euros)
2015 |
|
|
Core Networking |
|
|
|
Access |
|
|
|
Total reportable segments |
|
|
|
Other and unallocated (1) |
|
|
|
Total |
|
|
|
PPA adjustment (2) |
|
|
|
Total consolidated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues from external customers |
|
|
6,780 |
|
|
|
7,482 |
|
|
|
14,262 |
|
|
|
13 |
|
|
|
14,275 |
|
|
|
- |
|
|
|
14,275 |
|
Revenues from transactions with other reportable segments |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Revenues from reportable segments |
|
|
6,780 |
|
|
|
7,482 |
|
|
|
14,262 |
|
|
|
13 |
|
|
|
14,275 |
|
|
|
- |
|
|
|
14,275 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss) (3) |
|
|
678 |
|
|
|
423 |
|
|
|
1,101 |
|
|
|
(72) |
|
|
|
1,029 |
|
|
|
(25) |
|
|
|
1,004 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts included in the operating income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
· depreciation and
amortization |
|
|
328 |
|
|
|
260 |
|
|
|
588 |
|
|
|
1 |
|
|
|
589 |
|
|
|
26 |
|
|
|
615 |
|
· material non-cash
items other than depreciation and amortization |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(1) |
|
Includes revenues from our non-core businesses and 17 million of share-based compensation expense that are not allocated to reportable segments. |
(2) |
|
Represents purchase price allocation adjustments (excluding restructuring costs and impairment of assets) related to the Lucent business combination. |
(3) |
|
Operating income (loss) means Income (loss) from operating activities before restructuring costs, litigations, transaction-related costs, gain/(loss) on disposal of consolidated entities,
impairment of assets and post-retirement benefit plan amendments. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions of euros)
2014 |
|
|
Core Networking |
|
|
|
Access |
|
|
|
Total reportable segments |
|
|
|
Other and unallocated (1) |
|
|
|
Total |
|
|
|
PPA adjustment (2) |
|
|
|
Total consolidated |
|
|
|
Revenues from external customers |
|
|
5,959 |
|
|
|
7,151 |
|
|
|
13,110 |
|
|
|
68 |
|
|
|
13,178 |
|
|
|
- |
|
|
|
13,178 |
|
Revenues from transactions with other reportable segments |
|
|
7 |
|
|
|
6 |
|
|
|
13 |
|
|
|
(13) |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Revenues from reportable segments |
|
|
5,966 |
|
|
|
7,157 |
|
|
|
13,123 |
|
|
|
55 |
|
|
|
13,178 |
|
|
|
- |
|
|
|
13,178 |
|
|
|
Operating income (loss) (3) |
|
|
630 |
|
|
|
42 |
|
|
|
672 |
|
|
|
(49) |
|
|
|
623 |
|
|
|
(51) |
|
|
|
572 |
|
|
|
Amounts included in the operating income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
· depreciation and
amortization |
|
|
290 |
|
|
|
204 |
|
|
|
494 |
|
|
|
1 |
|
|
|
495 |
|
|
|
50 |
|
|
|
545 |
|
· material non-cash
items other than depreciation and amortization |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(1) |
|
Includes revenues from a non-core business of 41 million and 21 million of share-based compensation expense that are not allocated to reportable segments.
|
(2) |
|
Represents purchase price allocation adjustments (excluding restructuring costs and impairment of assets) related to the Lucent business combination. |
(3) |
|
Operating income (loss) means Income (loss) from operating activities before restructuring costs, litigations, transaction-related costs, gain/(loss) on disposal of consolidated entities,
impairment of assets and post-retirement benefit plan amendments. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions of euros)
2013 |
|
|
Core Networking |
|
|
|
Access |
|
|
|
Total reportable segments |
|
|
|
Other and unallocated (1) |
|
|
|
Total |
|
|
|
PPA adjustment (2) |
|
|
|
Total consolidated |
|
|
|
|
|
|
Revenues from external customers |
|
|
6,130 |
|
|
|
7,437 |
|
|
|
13,567 |
|
|
|
246 |
|
|
|
13,813 |
|
|
|
- |
|
|
|
13,813 |
|
Revenues from transactions with other reportable segments |
|
|
21 |
|
|
|
10 |
|
|
|
31 |
|
|
|
(31) |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Revenues from reportable segments |
|
|
6,151 |
|
|
|
7,447 |
|
|
|
13,598 |
|
|
|
215 |
|
|
|
13,813 |
|
|
|
- |
|
|
|
13,813 |
|
|
|
Operating income (loss) (3) |
|
|
479 |
|
|
|
(85) |
|
|
|
394 |
|
|
|
(116) |
|
|
|
278 |
|
|
|
(86) |
|
|
|
192 |
|
|
|
Amounts included in the operating income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
· depreciation and
amortization |
|
|
293 |
|
|
|
208 |
|
|
|
501 |
|
|
|
15 |
|
|
|
516 |
|
|
|
84 |
|
|
|
600 |
|
· material non-cash
items other than depreciation and amortization |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(1) |
|
Includes revenues from a non-core business of 210 million and 26 million of share-based compensation expense that are not allocated to reportable segments.
|
(2) |
|
Represents purchase price allocation adjustments (excluding restructuring costs and impairment of assets) related to the Lucent business combination. |
(3) |
|
Operating income (loss) means Income (loss) from operating activities before restructuring costs, litigations, transaction-related costs, gain/(loss) on disposal of consolidated entities,
impairment of assets and post-retirement benefit plan amendments. |
232
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 5
b/ Information by geographical segment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions of euros) |
|
|
France |
|
|
|
Other Western Europe |
|
|
|
Rest of Europe |
|
|
|
China |
|
|
|
Other Asia
Pacific |
|
|
|
U.S.A. |
|
|
|
Other Americas |
|
|
|
Rest of world |
|
|
|
Conso- lidated |
|
|
|
|
|
|
2015 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues by customer location |
|
|
817 |
|
|
|
2,101 |
|
|
|
281 |
|
|
|
1,459 |
|
|
|
1,499 |
|
|
|
5,913 |
|
|
|
1,192 |
|
|
|
1,013 |
|
|
|
14,275 |
|
Non-current assets (1) |
|
|
872 |
|
|
|
193 |
|
|
|
25 |
|
|
|
292 |
|
|
|
43 |
|
|
|
1,321 |
|
|
|
60 |
|
|
|
11 |
|
|
|
2,817 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues by customer location |
|
|
771 |
|
|
|
1,929 |
|
|
|
282 |
|
|
|
1,342 |
|
|
|
1,289 |
|
|
|
5,488 |
|
|
|
1,009 |
|
|
|
1,068 |
|
|
|
13,178 |
|
Non-current assets (1) |
|
|
315 |
|
|
|
202 |
|
|
|
24 |
|
|
|
266 |
|
|
|
47 |
|
|
|
1,222 |
|
|
|
56 |
|
|
|
11 |
|
|
|
2,143 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues by customer location |
|
|
798 |
|
|
|
2,125 |
|
|
|
361 |
|
|
|
1,097 |
|
|
|
1,230 |
|
|
|
5,986 |
|
|
|
1,209 |
|
|
|
1,007 |
|
|
|
13,813 |
|
Non-current assets (1) |
|
|
280 |
|
|
|
215 |
|
|
|
28 |
|
|
|
213 |
|
|
|
45 |
|
|
|
1,137 |
|
|
|
51 |
|
|
|
14 |
|
|
|
1,983 |
|
|
|
(1) |
|
Represents intangible and tangible assets. |
c/
Concentrations
A few large telecommunications service providers account for a significant portion of our revenues. In 2015,
Verizon, AT&T and Sprint represented respectively 15%, 14% and 5% of our revenues (respectively 14%, 11% and 10% in 2014 and 12%, 11% and 10% in 2013).
Note 6 Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions of euros) |
|
2015 |
|
|
2014 |
|
|
2013 |
|
|
|
|
|
|
|
|
|
|
Construction contract revenues |
|
|
2,060 |
|
|
|
2,314 |
|
|
|
2,643 |
|
Other product revenues |
|
|
7,743 |
|
|
|
7,440 |
|
|
|
6,922 |
|
Other service revenues |
|
|
4,305 |
|
|
|
3,234 |
|
|
|
4,087 |
|
License revenues |
|
|
22 |
|
|
|
22 |
|
|
|
41 |
|
Rental income and other income |
|
|
145 |
|
|
|
168 |
|
|
|
120 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL REVENUES |
|
|
14,275 |
|
|
|
13,178 |
|
|
|
13,813 |
|
|
|
233
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 7
Note 7 Financial income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions of euros) |
|
2015 |
|
|
2014 |
|
|
2013 |
|
|
|
|
|
|
|
|
|
|
Interest expense related to gross financial debt |
|
|
(327) |
|
|
|
(359) |
|
|
|
(462) |
|
|
|
|
|
Interest income related to cash and marketable securities |
|
|
58 |
|
|
|
68 |
|
|
|
70 |
|
|
|
|
|
Finance costs (net) |
|
|
(269) |
|
|
|
(291) |
|
|
|
(392) |
|
|
|
|
|
Reversal of impairment losses/ (impairment losses) on financial assets |
|
|
(4) |
|
|
|
15 |
|
|
|
(3) |
|
|
|
|
|
Net exchange gain (loss) |
|
|
7 |
|
|
|
2 |
|
|
|
(24) |
|
|
|
|
|
Financial component of pension and post-retirement benefit costs |
|
|
(121) |
|
|
|
(44) |
|
|
|
(84) |
|
|
|
|
|
Capital gain/(loss) on financial assets (shares of equity affiliates or non-consolidated securities and financial receivables) and marketable securities
(1) |
|
|
131 |
|
|
|
- |
|
|
|
3 |
|
|
|
|
|
Other (2) |
|
|
(149) |
|
|
|
(184) |
|
|
|
(210) |
|
Other financial income (loss) |
|
|
(136) |
|
|
|
(211) |
|
|
|
(318) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL FINANCIAL INCOME (LOSS) |
|
|
(405) |
|
|
|
(502) |
|
|
|
(710) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
2015: includes 102 million capital gain, corresponding to the revaluation of our historical 51% stake in ALDA Marine and 26 million capital gain on the disposal of our 40%
stake in a joint-venture held by Alcatel-Lucent Submarine Networks. |
(2) |
|
2015: mainly includes the change in fair value of a put option on specific shares for 21 million, a 25 million loss related to the partial repurchase of our Senior Notes
due 2020 and 29 million arising out of the reevaluation to the present value of the liability with Qualcomm under certain license agreements. |
|
|
2014: mainly includes a 30 million loss related to the partial repurchase of our Senior Notes due 2016 (see Note 24) and a 101 million loss related to the impact of the
re-evaluation of our Senior Secured Credit Facility repaid on August 19, 2014 (see Note 24). |
|
|
2013: of which 134 million related to a net loss on bonds repurchased (26 million during the second quarter of 2013 and 87 million during the third quarter of 2013
and 21 million during the fourth quarter of 2013), 24 million related to the accelerated amortization of outstanding costs related to the asset sale facility repaid by Alcatel-Lucent USA Inc. during the third quarter of 2013,
(21) million related to the accelerated amortization of outstanding costs related to the euro denominated senior secured facility repaid by Alcatel-Lucent USA Inc. during the fourth quarter of 2013 and 39 million (U.S.$52
million) related to the change of estimated future cash flows in respect of Lucent Technologies Capital Trust Is 7.75% convertible trust preferred securities in the fourth quarter of 2013 (see Note 24a). |
Note 8 Income tax
a/ Analysis of income tax (expense) benefit
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions of euros) |
|
2015 |
|
|
2014(1) |
|
|
2013 (1) |
|
|
|
|
|
|
|
|
|
|
Current income tax (expense) benefit |
|
|
(82) |
|
|
|
(61) |
|
|
|
(56) |
|
|
|
|
|
Deferred taxes on temporary differences |
|
|
3 |
|
|
|
(6) |
|
|
|
43 |
|
|
|
|
|
Deferred taxes recognized/(reversed) |
|
|
54 |
|
|
|
394 |
|
|
|
119 |
|
|
|
|
|
Deferred income tax benefit (expense), net |
|
|
57 |
|
|
|
388 |
|
|
|
162 |
|
|
|
|
|
|
|
|
|
|
INCOME TAX BENEFIT (EXPENSE) |
|
|
(24) |
|
|
|
327 |
|
|
|
106 |
|
|
|
|
|
|
|
|
|
|
(1) |
|
2013 and 2014 amounts are restated to reflect the impact of a change in accounting treatment (see Note 4). |
Deferred taxes recognized/(reversed) in 2015 result mainly from a re-assessment of the recoverability of prior-year net operating losses, and of
prior-year deductible temporary differences to a lesser extent.
b/ Disclosure of tax effects relating to each component of other
comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2015 |
|
|
2014(1) |
|
|
2013(1) |
|
(In millions of euros) |
|
Value before
tax |
|
|
Tax (expense) benefit |
|
|
Value net of
tax |
|
|
Value before
tax |
|
|
Tax (expense) benefit |
|
|
Value
net of tax |
|
|
Value before
tax |
|
|
Tax (expense) benefit |
|
|
Value net of
tax |
|
|
|
|
|
|
|
|
|
|
Financial assets available for sale |
|
|
2 |
|
|
|
- |
|
|
|
2 |
|
|
|
8 |
|
|
|
- |
|
|
|
8 |
|
|
|
11 |
|
|
|
- |
|
|
|
11 |
|
|
|
|
|
|
|
|
|
|
|
Cumulative translation adjustments |
|
|
417 |
|
|
|
- |
|
|
|
417 |
|
|
|
544 |
|
|
|
- |
|
|
|
544 |
|
|
|
(253) |
|
|
|
- |
|
|
|
(253) |
|
|
|
|
|
|
|
|
|
|
|
Cash flow hedging |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(1) |
|
|
|
- |
|
|
|
(1) |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
Actuarial gains (losses) |
|
|
933 |
|
|
|
(11) |
|
|
|
922 |
|
|
|
(1,822) |
|
|
|
5 |
|
|
|
(1,817) |
|
|
|
1,667 |
|
|
|
(83) |
|
|
|
1,584 |
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER COMPREHENSIVE INCOME |
|
|
1,352 |
|
|
|
(11) |
|
|
|
1,341 |
|
|
|
(1,271) |
|
|
|
5 |
|
|
|
(1,266) |
|
|
|
1,425 |
|
|
|
(83) |
|
|
|
1,342 |
|
|
|
(1) |
|
2013 and 2014 amounts are restated to reflect the impact of a change in accounting treatment (see Note 4). |
234
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 8
c/ Effective income tax rate
The effective tax rate can be analyzed as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions of euros except for percentage) |
|
2015 |
|
|
2014(1) |
|
|
2013 (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income tax and discontinued operations |
|
|
275 |
|
|
|
(350) |
|
|
|
(1,442) |
|
|
|
|
|
Corporate income tax rate (France) |
|
|
38% |
|
|
|
38% |
|
|
|
38% |
|
|
|
|
|
Expected tax (charge) benefit |
|
|
(105) |
|
|
|
133 |
|
|
|
548 |
|
|
|
|
|
Impact on tax (charge) benefit of: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
· difference in tax
rates (2) |
|
|
24 |
|
|
|
35 |
|
|
|
20 |
|
|
|
|
|
· reduced taxation
of certain revenues |
|
|
9 |
|
|
|
|
|
|
|
8 |
|
|
|
|
|
· non deductible
impairment of assets |
|
|
(73)(3) |
|
|
|
|
|
|
|
(209) |
|
|
|
|
|
· permanent
differences and utilization of previously unrecognized tax losses |
|
|
215(4) |
|
|
|
230 |
|
|
|
136 |
|
|
|
|
|
· adjustment to
prior years current tax charge |
|
|
(23) |
|
|
|
(14) |
|
|
|
11 |
|
|
|
|
|
· recognition of
previously unrecognized deferred tax assets |
|
|
539(5) |
|
|
|
395 |
|
|
|
162 |
|
|
|
|
|
· deferred tax
assets no longer recognized |
|
|
(73)(6) |
|
|
|
7 |
|
|
|
(76) |
|
|
|
|
|
· non-recognition
of tax losses |
|
|
(536)(7) |
|
|
|
(519) |
|
|
|
(506) |
|
|
|
|
|
· tax
credits |
|
|
19 |
|
|
|
41 |
|
|
|
25 |
|
|
|
|
|
·
other |
|
|
(20) |
|
|
|
19 |
|
|
|
(13) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ACTUAL INCOME TAX (CHARGE) BENEFIT |
|
|
(24) |
|
|
|
327 |
|
|
|
106 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective tax rate |
|
|
(8)% |
|
|
|
93% |
|
|
|
7% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
2013 and 2014 amounts are restated to reflect the impact of a change in accounting treatment (see Note 4). |
(2) |
|
Alcatel-Lucents presence in jurisdictions in which tax rates differ from the French statutory tax rate generates the differences in tax amounts. |
(3) |
|
Related to the impairment of goodwill of our Submarine division. |
(4) |
|
Mainly related to the use of tax losses and tax expiration in the United States. |
(5) |
|
Related to the reassessment of the recoverability of our deferred tax assets in the United States (Alcatel-Lucent USA Inc). At year end 2015, based on our improved history of earnings in the
United States and our updated five-year business plan (2016-2020), we revised our estimates from a three-year to a five-year tax planning for the recognition of deferred tax assets (loss carry-forwards). As
result of the combined effects, we recognized in 2015 an additional 97 million leading to a total amount of 1,526 million as of December 31, 2015. We considered that, on a stand-alone basis, the Group lacks convincing evidence that
sufficient taxable profit will be available against which the unused tax losses can be utilized beyond the 5-year horizon. Specifically, that given the Groups current market share in Wireless and limitation in scale and capacity in the coming
5G, the level of revenue streams from Wireless, which is key to our business in the US, beyond 2020 represents a significant uncertainty. |
(6) |
|
Mainly related to impairment of deferred tax assets of Alcatel-Lucent Submarine Networks UK. |
(7) |
|
Mainly related to the French tax group. |
d/ Deferred tax
balances
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions of euros) Balances |
|
2015 |
|
|
2014 (1) |
|
|
2013 (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred tax assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
· deferred tax
assets recognizable |
|
|
13,936 |
|
|
|
13,758 |
|
|
|
12,460 |
|
|
|
|
|
· of which not
recognized |
|
|
(11,602) |
|
|
|
(11,697) |
|
|
|
(10,718) |
|
Net deferred tax assets recognized |
|
|
2,334 |
|
|
|
2,061 |
|
|
|
1,742 |
|
Deferred tax liabilities |
|
|
(946) |
|
|
|
(872) |
|
|
|
(990) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET DEFERRED TAX ASSETS (LIABILITIES) |
|
|
1,388 |
|
|
|
1,189 |
|
|
|
752 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
2013 and 2014 amounts are restated to reflect the impact of a change in accounting treatment (see Note 4). |
235
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 8
Change during the period
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions of euros) |
|
December 31, 2014 (1) |
|
|
Income tax benefit (expense) |
|
|
Translation adjustments |
|
|
Other |
|
|
December 31, 2015 |
|
|
|
|
|
|
|
Deferred tax assets recognized |
|
|
2,061 |
|
|
|
24 |
|
|
|
192 |
|
|
|
57 |
|
|
|
2,334 |
|
|
|
|
|
|
|
Deferred tax liabilities |
|
|
(872) |
|
|
|
33 |
|
|
|
(55) |
|
|
|
(52) |
|
|
|
(946) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET DEFERRED TAX ASSETS (LIABILITIES) |
|
|
1,189 |
|
|
|
57 |
|
|
|
137 |
|
|
|
5 |
|
|
|
1,388 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
2014 amounts are restated to reflect the impact of a change in accounting treatment (see Note 4). |
Analysis of deferred tax assets and liabilities by temporary differences
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions of euros) |
|
December 31, 2014 (1) |
|
|
Impact on net income (loss) |
|
|
Translation adjustments |
|
|
Reclassification and Other |
|
|
December 31, 2015 |
|
|
|
|
|
|
|
Fair value adjustments of tax assets and liabilities resulting from business combinations |
|
|
(300) |
|
|
|
68 |
|
|
|
(35) |
|
|
|
- |
|
|
|
(267) |
|
|
|
|
|
|
|
Provisions |
|
|
265 |
|
|
|
(17) |
|
|
|
5 |
|
|
|
(3) |
|
|
|
250 |
|
|
|
|
|
|
|
Pension reserves |
|
|
1,578 |
|
|
|
(36) |
|
|
|
156 |
|
|
|
(323) |
|
|
|
1,375 |
|
|
|
|
|
|
|
Prepaid pensions |
|
|
(983) |
|
|
|
(35) |
|
|
|
(79) |
|
|
|
4 |
|
|
|
(1,093) |
|
|
|
|
|
|
|
Property, plant and equipment and intangible assets |
|
|
588 |
|
|
|
(174) |
|
|
|
47 |
|
|
|
1 |
|
|
|
462 |
|
|
|
|
|
|
|
Temporary differences arising from other statement of financial position captions |
|
|
271 |
|
|
|
(139) |
|
|
|
11 |
|
|
|
18 |
|
|
|
161 |
|
|
|
|
|
|
|
Tax loss carry-forwards and tax credits |
|
|
11,467 |
|
|
|
84 |
|
|
|
560 |
|
|
|
(9) |
|
|
|
12,102 |
|
|
|
|
|
|
|
Deferred tax assets (liabilities), gross |
|
|
12,886 |
|
|
|
(249) |
|
|
|
665 |
|
|
|
(312) |
|
|
|
12,990 |
|
|
|
|
|
|
|
Deferred tax assets not recognized |
|
|
(11,697) |
|
|
|
306 |
|
|
|
(528) |
|
|
|
317 |
|
|
|
(11,602) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET DEFERRED TAX ASSETS (LIABILITIES) |
|
|
1,189 |
|
|
|
57 |
|
|
|
137 |
|
|
|
5 |
|
|
|
1,388 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
2014 amounts are restated to reflect the impact of a change in accounting treatment (see Note 4). |
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions of euros)
Deferred tax assets recognized |
|
December 31,
2015 |
|
|
December 31,
2014 (1) |
|
|
December 31,
2013 (1) |
|
|
|
|
|
|
|
|
|
|
Related to the United States |
|
|
1,870 |
|
|
|
1,549 |
|
|
|
1,254 |
|
|
|
|
|
Related to other tax jurisdictions |
|
|
464 |
|
|
|
512 |
|
|
|
488 |
|
|
|
TOTAL |
|
|
2,334 |
|
|
|
2,061 |
|
|
|
1,742 |
|
|
|
(1) |
|
2013 and 2014 amounts are restated to reflect the impact of a change in accounting treatment (see Note 4). |
Deferred taxes not recognized relating to temporary differences on investments in subsidiaries,
equity affiliates and joint ventures were zero at December 31, 2015, December 31, 2014 and December 31, 2013.
e/
Tax losses carried forward and temporary differences
Tax losses carried forward
Total tax losses carried forward represent a potential tax saving of
12,102 million at December 31, 2015 (11,467 million at December 31, 2014 and 10,618 million at December 31,
2013). The increase of tax losses carried forward between 2015 and 2014 is due to new tax losses (not recognized) of which
523 million arose in the French tax group, partly offset by the use of previously recognized or unrecognized losses mainly in the U.S. tax group for 417 million. Tax losses in Germany for 620 million, previously reported as indefinite, are shown in the table
below for 2016. Exchange rate impacts on tax losses between 2015 and 2014 concerning the United States represented an increase of tax losses carried forward of 505 million.
The potential tax savings relate to tax losses carried forward that expire as follows:
236
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 8
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions of euros) Years |
|
Recognized |
|
|
Unrecognized |
|
|
Total |
|
|
|
|
|
|
2016 |
|
|
39 |
|
|
|
632 |
|
|
|
671 |
|
|
|
|
|
2017 |
|
|
136 |
|
|
|
22 |
|
|
|
158 |
|
|
|
|
|
2018 |
|
|
152 |
|
|
|
15 |
|
|
|
167 |
|
|
|
|
|
2019 |
|
|
275 |
|
|
|
3 |
|
|
|
278 |
|
|
|
|
|
2020 |
|
|
147 |
|
|
|
15 |
|
|
|
162 |
|
|
|
|
|
2021 and thereafter |
|
|
880 |
|
|
|
3,025 |
|
|
|
3,905 |
|
|
|
|
|
Indefinite |
|
|
292 |
|
|
|
6,469 |
|
|
|
6,761 |
|
|
|
TOTAL |
|
|
1,921 |
|
|
|
10,181 |
|
|
|
12,102 |
|
|
|
Temporary differences
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions of euros) |
|
Recognized |
|
|
Unrecognized |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2013 |
|
|
263 |
|
|
|
589 |
|
|
|
852 |
|
|
|
|
|
At December 31, 2014 |
|
|
(295) |
|
|
|
1,714 |
|
|
|
1,419 |
|
|
|
|
|
At December 31, 2015 |
|
|
(533) |
|
|
|
1,421 |
|
|
|
888 |
|
|
|
Recognized net taxable temporary differences of
533 million in 2015 mainly related to deferred tax liabilities in respect of pre-paid pensions, purchase price allocation and the equity component of the OCEANE.
Note 9 Discontinued operations, assets held for sale and liabilities related to disposal groups held for
sale
Discontinued operations for 2015, 2014 and 2013 were as follows:
· |
|
In 2015: relates to additional Enterprise carve-out costs. |
· |
|
in 2014: on February 6, 2014, Alcatel-Lucent announced that it had received a binding offer from China Huaxin, an existing partner of Alcatel-Lucents Alcatel-Lucent Shanghai Bell (ASB)
joint venture in China, for 85% of the Enterprise business. After having obtained the requisite approvals, the deal closed
|
|
|
on September 30, 2014, with most of the Enterprise business transferred. The transferred Enterprise business is presented in discontinued operations in the consolidated income statements and
statements of cash flows for all periods presented; and |
· |
|
in 2013: settlements of litigations related to businesses disposed of in prior periods and a post-closing purchase price adjustment in connection with the Genesys business disposal.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions of euros) Income statement of discontinued operations |
|
2015 |
|
|
2014 |
|
|
2013 |
|
|
|
|
|
|
|
|
|
|
Revenues |
|
|
5 |
|
|
|
437 |
|
|
|
623 |
|
Cost of sales |
|
|
(5) |
|
|
|
(222) |
|
|
|
(302) |
|
Gross profit |
|
|
- |
|
|
|
216 |
|
|
|
321 |
|
Administrative and selling expenses |
|
|
(2) |
|
|
|
(169) |
|
|
|
(203) |
|
|
|
|
|
Research and development costs |
|
|
- |
|
|
|
(33) |
|
|
|
(106) |
|
|
|
|
|
Income (loss) from operating activities before restructuring costs, litigations, transaction-related costs, gain/(loss) on disposal of consolidated entities, impairment of assets and post-retirement benefit
plan amendments |
|
|
(2) |
|
|
|
14 |
|
|
|
12 |
|
|
|
|
|
Restructuring costs |
|
|
- |
|
|
|
(1) |
|
|
|
(20) |
|
|
|
|
|
Gain/(loss) on disposal of consolidated entities |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
Post-retirement benefit plan amendments |
|
|
- |
|
|
|
- |
|
|
|
2 |
|
|
|
|
|
Income (loss) from operations |
|
|
(2) |
|
|
|
12 |
|
|
|
(6) |
|
|
|
|
|
Financial income (loss) |
|
|
- |
|
|
|
(3) |
|
|
|
(1) |
|
|
|
|
|
Income tax (expense) benefit |
|
|
- |
|
|
|
(1) |
|
|
|
(2) |
|
|
|
|
|
Income (loss) from discontinued operations before capital gains (losses) |
|
|
(2) |
|
|
|
8 |
|
|
|
(9) |
|
|
|
|
|
Net capital gain (loss) on disposal of discontinued operations |
|
|
(14) |
|
|
|
1 |
|
|
|
(17) |
|
|
|
|
|
Capital gain on disposal of Enterprise net of related costs and taxes |
|
|
- |
|
|
|
(58) |
|
|
|
- |
|
Capital gain on disposal of Genesys net of related costs and taxes |
|
|
- |
|
|
|
- |
|
|
|
1 |
|
|
|
INCOME (LOSS) FROM DISCONTINUED OPERATIONS |
|
|
(16) |
|
|
|
(49) |
|
|
|
(25) |
|
|
|
237
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 9
Assets held for sale
For 2013, assets and liabilities of disposal groups held for sale include (i) Alcatel-Lucent
Networks Services GmbH, the disposal of which was completed on January 7, 2014 in the context of the transfer of the E-Plus managed services business to ZTE, and (ii) LGS Innovations (discussed below).
On December 20, 2013, Alcatel-Lucent signed a definitive agreement for the sale of its subsidiary, LGS Innovations LLC, to a US-based company
owned by a Madison Dearborn Partners-led investor group that includes CoVant. On March 31, 2014, we completed the disposal for a cash selling price of U.S.$110 million
(81 million) after taking into account all working capital adjustments. The agreement includes an earnout of up to U.S.$100 million based on the divested companys results
of operations for the 2014 fiscal year, but for which we are not expecting to receive significant amount.
Other assets held for sale are composed of real estate property sales that were in progress at
December 31, 2015, 2014 and 2013.
At December 31, 2014, assets and liabilities of disposal groups held for sale include only
the remaining, not yet transferred Enterprise assets and liabilities that are expected to be transferred within one year from the date the deal was closed (September 30, 2014). Alcatel-Lucent Networks Services GmbH and LGS Innovations, which were
presented in assets and liabilities of disposal groups held for sale as of December 31, 2013, were disposed of on January 7, 2014 and on March 31, 2014, respectively.
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions of euros) Statement of financial position |
|
December 31, 2015 |
|
|
December 31, 2014 |
|
|
December 31, 2013 |
|
|
|
|
|
|
|
|
|
|
Goodwill |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
Intangible and tangible assets |
|
|
- |
|
|
|
2 |
|
|
|
21 |
|
|
|
|
|
Operating working capital (1) |
|
|
- |
|
|
|
13 |
|
|
|
38 |
|
|
|
|
|
Cash |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
Pension reserves |
|
|
- |
|
|
|
- |
|
|
|
(7) |
|
|
|
|
|
Other assets and liabilities |
|
|
(14) |
|
|
|
(20) |
|
|
|
(13) |
|
|
|
|
|
Assets and liabilities of disposal groups held for sale |
|
|
(14) |
|
|
|
(5) |
|
|
|
39 |
|
|
|
|
|
Assets of disposal groups held for sale (A) |
|
|
- |
|
|
|
20 |
|
|
|
133 |
|
|
|
|
|
Liabilities related to disposal groups held for sale (B) |
|
|
(14) |
|
|
|
(25) |
|
|
|
(94) |
|
|
|
|
|
Real estate properties and other assets held for sale (C) |
|
|
39 |
|
|
|
45 |
|
|
|
9 |
|
|
|
|
|
Other liabilities held for sale (D) |
|
|
- |
|
|
|
(7) |
|
|
|
- |
|
|
|
TOTAL ASSETS HELD FOR SALE AND ASSETS INCLUDED IN DISPOSAL GROUPS HELD FOR SALE (A) + (C) |
|
|
39 |
|
|
|
65 |
|
|
|
142 |
|
|
|
TOTAL LIABILITIES RELATED TO DISPOSAL GROUPS HELD FOR SALE (B) + (D) |
|
|
(14) |
|
|
|
(32) |
|
|
|
(94) |
|
|
|
(1) |
|
As defined in Note 17. |
The cash flows of discontinued
operations were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions of euros) |
|
Year ended December 31, 2015 |
|
|
Year ended December 31, 2014 |
|
|
Year ended December 31, 2013 |
|
|
|
|
|
|
|
|
|
|
Net income (loss) from discontinued operations |
|
|
(16) |
|
|
|
(49) |
|
|
|
(25) |
|
|
|
|
|
Net cash provided (used) by operating activities before changes in working capital |
|
|
11 |
|
|
|
11 |
|
|
|
60 |
|
|
|
|
|
Other net increase (decrease) in net cash provided (used) by operating activities |
|
|
- |
|
|
|
23 |
|
|
|
5 |
|
|
|
|
|
Net cash provided (used) by operating activities (A) |
|
|
11 |
|
|
|
34 |
|
|
|
65 |
|
|
|
|
|
Capital expenditures (B) |
|
|
- |
|
|
|
(48) |
|
|
|
(65) |
|
|
|
|
|
Free cash flow: (A) + (B) |
|
|
11 |
|
|
|
(14) |
|
|
|
- |
|
|
|
|
|
Net cash provided (used) by investing activities excluding capital expenditures (C) |
|
|
30 |
|
|
|
119 |
|
|
|
1 |
|
|
|
|
|
Net cash provided (used) by financing activities (D) |
|
|
- |
|
|
|
65 |
|
|
|
(15) |
|
|
|
TOTAL (A) + (B) + (C) + (D) |
|
|
41 |
|
|
|
170 |
|
|
|
(14) |
|
|
|
238
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 10
Note 10 Earnings per share
The tables below provide the elements used in arriving at the basic earnings (loss) per share and diluted earnings (loss) per share for the
periods presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of shares |
|
2015 |
|
|
2014 |
|
|
2013 |
|
|
|
|
|
|
|
|
|
|
Number of ordinary shares issued (share capital) |
|
|
3,036,337,359 |
|
|
|
2,820,432,270 |
|
|
|
2,808,554,197 |
|
|
|
|
|
Treasury shares |
|
|
(40,115,700) |
|
|
|
(40,120,327) |
|
|
|
(51,894,411) |
|
|
|
Number of shares in circulation |
|
|
2,996,221,659 |
|
|
|
2,780,311,943 |
|
|
|
2,756,659,786 |
|
|
|
Weighting effect of share issues (of which stock options exercised) |
|
|
(187,611,934) |
|
|
|
(3,867,299) |
|
|
|
(317,578,166) |
|
|
|
|
|
Weighting effect of treasury shares |
|
|
(1,059) |
|
|
|
(9,418,294) |
|
|
|
(7,912,902) |
|
|
|
Weighted average number of shares outstanding - basic number of shares used for calculating basic earnings per share |
|
|
2,808,608,666 |
|
|
|
2,767,026,349 |
|
|
|
2,431,168,718 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dilutive effects: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
· Equity plans
(stock options, RSU) |
|
|
44,064,974 |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
·
Alcatel-Lucents convertible bonds (OCEANE) issued on June 12, 2003 and on September 10, 2009 |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
·
Alcatel-Lucents convertible bonds (OCEANE) issued on July 3, 2013 |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
·
Alcatel-Lucents convertible bonds (OCEANE) 1st and 2nd tranche issued on June 10, 2014 |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
· 7.75% convertible
trust preferred securities |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
· 2.875% Series A
convertible securities |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
· 2.875% Series B
convertible securities |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
Weighted average number of shares outstanding - diluted |
|
|
2,852,673,640 |
|
|
|
2,767,026,349 |
|
|
|
2,431,168,718 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As our net result was a loss in 2014 and 2013, stock-options and performance shares plans had
an anti-dilutive effect; as a consequence, potential shares linked to those instruments were not taken into account in the diluted weighted average number of shares or in the calculation of diluted earnings (loss) per share.
Additionally, convertible bonds had an anti-dilutive effect; as a consequence, potential shares linked to those instruments were not taken into account in the diluted weighted average number of
shares or in the calculation of diluted earnings (loss) per share.
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions of euros)
Net income (loss) |
|
2015 |
|
|
2014 (1) |
|
|
2013 (1) |
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to the equity owners of the parent - basic |
|
|
206 |
|
|
|
(107) |
|
|
|
(1,371) |
|
|
|
|
|
Adjustment for dilutive securities on net income: Interest expense related to convertible securities |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
Net income (loss) - diluted |
|
|
206 |
|
|
|
(107) |
|
|
|
(1,371) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
2013 and 2014 amounts are restated to reflect the impacts of the change in accounting treatment (see Note 4). |
239
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 10
The following table summarizes the number of potential ordinary shares that were excluded from the
diluted per share calculation because the effect of including these potential shares would be anti-dilutive:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2015 |
|
|
2014 |
|
|
2013 |
|
|
|
|
|
|
|
|
|
|
Equity plans (stock options, RSU) |
|
|
- |
|
|
|
48,335,993 |
|
|
|
25,156,350 |
|
|
|
|
|
Alcatel-Lucents convertible bonds (OCEANE) issued on June 12, 2003 and on September 10, 2009 |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
Alcatel-Lucents convertible bonds (OCEANE) issued on July 3, 2013 |
|
|
245,905,350 |
|
|
|
370,378,501 |
|
|
|
370,379,561 |
|
|
|
|
|
Alcatel-Lucents convertible bonds (OCEANE) 1st and 2nd tranche issued on June 10, 2014 |
|
|
262,378,907 |
|
|
|
281,999,995 |
|
|
|
- |
|
|
|
|
|
7.75% convertible trust preferred securities |
|
|
- |
|
|
|
- |
|
|
|
37,557,287 |
|
|
|
|
|
2.875% Series A convertible securities |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
2.875% Series B convertible securities |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
Note 11 Goodwill and impairment losses
a/ Goodwill
|
|
|
|
|
(In millions of euros) |
|
Net |
|
|
|
|
|
|
GOODWILL AT DECEMBER 31, 2012 |
|
|
3,820 |
|
|
|
|
|
Additions |
|
|
- |
|
|
|
Disposals and discontinued operations |
|
|
- |
|
|
|
Changes during goodwill allocation period |
|
|
- |
|
|
|
Impairment losses for the period |
|
|
(568) |
|
|
|
Net effect of exchange rate changes |
|
|
(99) |
|
|
|
Other changes |
|
|
3 |
|
|
|
GOODWILL AT DECEMBER 31, 2013 |
|
|
3,156 |
|
|
|
|
|
Additions |
|
|
10 |
|
|
|
Disposals and discontinued operations |
|
|
(222) |
|
|
|
Changes during goodwill allocation period |
|
|
- |
|
|
|
Impairment losses for the period |
|
|
- |
|
|
|
Net effect of exchange rate changes |
|
|
237 |
|
|
|
Other changes |
|
|
- |
|
|
|
GOODWILL AT DECEMBER 31, 2014 |
|
|
3,181 |
|
|
|
|
|
Additions |
|
|
9 |
|
|
|
Disposals and discontinued operations |
|
|
- |
|
|
|
Changes during goodwill allocation period |
|
|
- |
|
|
|
Impairment losses for the period |
|
|
(193) |
|
|
|
Net effect of exchange rate changes |
|
|
218 |
|
|
|
Other changes |
|
|
- |
|
|
|
GOODWILL AT DECEMBER 31, 2015 |
|
|
3,215 |
|
|
|
Main changes accounted for
· |
|
2015: The impairment loss of 193 million was related to Alcatel-Lucent Submarine Networks following an impairment test
performed in the third quarter of 2015.
|
· |
|
2014: The decrease of 222 million was related to the disposal of the Enterprise business. The increase of 10 million was attributable to the acquisition of Optoplan, a Norwegian company; and |
· |
|
2013: Impairment losses amounting to 568 million were accounted for during 2013.
|
240
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 11
Key assumptions used in determining the recoverable values
The recoverable values of our CGUs are based on key assumptions, which could have a significant
impact on our
consolidated financial statements. The key assumptions used were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2015 |
|
|
2014 |
|
|
2013 |
|
|
|
|
|
|
|
|
|
|
Source |
|
|
Business plan |
|
|
|
Business plan Shift plan |
|
|
|
Business plan Shift plan |
|
|
|
|
|
Basis of recoverable amount |
|
|
Fair value (1) and value in use |
|
|
|
Fair value (1) |
|
|
|
Fair value (1) |
|
|
|
|
|
Discount rates (WACC) |
|
|
9.5% |
|
|
|
9.8% |
|
|
|
11% |
|
|
|
|
|
Perpetual growth rates (2) |
|
|
0% to 2.0% |
|
|
|
0% to 2.0% |
|
|
|
0% to 2.5% |
|
|
|
(1) |
|
Fair value less costs to sell. |
(2) |
|
As defined in Note 2c, growth rates used for the cash flow analysis are those used in the Groups budgets and industry rates for the subsequent periods. Perpetual growth rate used for the
residual values are between +0% and +2.5% depending on the Groups CGUs. |
The methods used to determine recoverable amounts are described in Note 2c.
2015 Annual impairment test
The annual impairment test assumptions that were used were derived from our 5-year Business Plan.
As a result of the 2015 annual impairment test, no impairment loss on goodwill was accounted for.
As a result of a selective impairment test performed during the third quarter of 2015, a 193 million impairment loss on goodwill pertaining to our Submarine CGU was
recognized.
In those cash generating units (Note 1g) in which there is significant goodwill, data and specific assumptions used for
the annual goodwill impairment test were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions of euros) |
|
Net carrying amount of goodwill as of
December 31, 2015 |
|
|
Difference between recoverable value (A) and carrying value of the net assets (B)
(A) (B) |
|
|
Perpetual
Growth rate |
|
|
|
|
|
|
IP Routing |
|
|
903 |
|
|
|
4,762 |
|
|
|
1.5% |
|
|
|
|
|
Fixed Networks |
|
|
758 |
|
|
|
2,157 |
|
|
|
1.0% |
|
|
|
|
|
Submarine |
|
|
422 |
|
|
|
31 |
|
|
|
1.5% |
|
|
|
|
|
IP Platform |
|
|
588 |
|
|
|
1,132 |
|
|
|
1.0% |
|
|
|
|
|
IP Transport |
|
|
323 |
|
|
|
416 |
|
|
|
1.5% |
|
|
|
|
|
Other CGUs |
|
|
221 |
|
|
|
|
|
|
|
0% to 2.0% |
|
|
|
TOTAL NET |
|
|
3,215 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sensitivity analysis
Holding all other assumptions constant, a 0.5% increase or decrease in the discount rate would have decreased or increased the 2015 recoverable
value of all CGUs or groups of CGUs that include goodwill and intangible assets by 606 million and
681 million, respectively. An increase of 0.5% in the discount rate would have led to no impairment loss.
Holding all other assumptions constant related to our Submarine CGU:
· |
|
an increase in the discount rate of 0.7% would have led to the recoverable values being equal to the carrying amount; |
· |
|
a 0.5% decrease in the perpetual growth rate would have decreased the recoverable values by 10 million; and
|
· |
|
a 5% increase or decrease in the normative free cash-flow would have increased or decreased the recoverable value by 10
million. |
Selective impairment test of Alcatel-Lucent Submarine Network as of September 30, 2015
In the wake of our decision to retain Alcatel-Lucent Submarine Networks as a wholly-owned subsidiary and terminate the sale
process that had been initiated, in Q3 2015 we performed an impairment test of our Submarine cash generating unit taking into account all relevant circumstances. This impairment test resulted in a 193 million impairment of goodwill with a corresponding charge.
The recoverable value of our Submarine cash generating unit, included in our Core reporting segment, was assessed according to the fair value less
costs to sell methodology. The following key assumptions were used:
· |
|
updated business plan, mostly in relation with a revised normative year reflecting high cyclicality of the Submarine business;
|
241
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 11
· |
|
discount rate of 9.8% (after tax); and |
· |
|
perpetual growth rate of 1.5%, compared to 2% used for the 2014 annual impairment test. |
2014 Annual impairment test
The 2014 annual impairment test of goodwill did not result in any impairment
loss. The annual impairment test assumptions that were used were derived from The Shift Plan. Significant development of our Wavelength-Division Multiplexing (WDM) revenues for Optical Products was also used as a key assumption for IP Transport.
2013 Annual impairment test
The 2013 annual impairment test of goodwill did not result in any impairment loss that was additional to the 568 million derived from the selective
impairment test performed in June 2013 (see below).
The annual impairment test assumptions that were used were derived from The Shift
Plan that we launched in June 2013, as detailed in Note 2i, which caused a revision of the five-year forecasted cash flows and terminal values used to determine the recoverable values of certain CGUs.
We also applied the following key assumptions related to the recoverable value for the IP Transport CGU: (i) perpetual growth rate of 1.5%,
and (ii) significant development of our WDM revenues in the coming years.
Due to the change in organization effective
July 1, 2013 (see Note 5), as from this date, goodwill was reallocated to the new Product Divisions or groups of Product Divisions, corresponding to the CGUs at which level goodwill is monitored and tested for impairment.
Six-month period ended June 30, 2013 selective additional impairment test
The June 19, 2013 announcement concerning the Groups new strategy embodied in The Shift Plan leads to additional restructuring costs.
Such additional costs had and could have a negative impact on the recoverable value of our goodwill in certain CGUs, principally in the Wireless product division.
Although all of the goodwill and a significant proportion of the intangible assets of the Wireless product division were impaired at the time of
the annual goodwill impairment test carried out during the fourth quarter of 2012, as a result of the implementation of the new organizational structure starting on January 1, 2013 resulting from the announcement of the Performance Plan, and,
more particularly, as a result of the inclusion of the Maintenance activity in each product division instead of in a stand-alone product division, we allocated a significant amount of additional goodwill to the Wireless product division. The Shift
Plan further adjusted the organizational structure starting July 1, 2013, although it did not change the allocation of the Maintenance activities among the product divisions.
Based on the estimated impact of The Shift Plan on the recoverable value of certain CGUs, management decided to perform a selective impairment
test as of June 30, 2013 on three product divisions (i.e. Wireless, Terrestrial Optics and Enterprise). Assumptions made in the 2012 annual impairment test performed in December 2012 were updated based on the assumptions taken into account in
The Shift Plan.
As a result of this selective additional impairment test, all the goodwill related to the Wireless product division
was impaired, representing an impairment loss of 568 million.
b/ Impairment losses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2015 (In millions of euros) |
|
|
Core Networking |
|
|
|
Access |
|
|
|
Other |
|
|
|
Not allocated |
|
|
|
Total Group |
|
|
|
|
|
|
Impairment losses on goodwill |
|
|
(193) |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(193) |
|
Impairment losses on capitalized development costs |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Impairment losses on other intangible assets |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Impairment losses on property, plant and equipment |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total - Net |
|
|
(193) |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(193) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
of which reversal of impairment losses |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2014 (In millions of euros) |
|
|
Core Networking |
|
|
|
Access |
|
|
|
Other |
|
|
|
Not allocated |
|
|
|
Total Group |
|
|
|
|
|
|
Impairment losses on goodwill |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
Impairment losses on capitalized development costs |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
Impairment losses on other intangible assets |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
Impairment losses on property, plant and equipment |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total - Net |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
of which reversal of impairment losses |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
242
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2013 (In millions of euros) |
|
|
Core Networking |
|
|
|
Access |
|
|
|
Other |
|
|
|
Not allocated |
|
|
|
Total Group |
|
|
|
|
|
|
Impairment losses on goodwill |
|
|
- |
|
|
|
(568) |
|
|
|
- |
|
|
|
- |
|
|
|
(568) |
|
|
|
|
|
|
|
Impairment losses on capitalized development costs |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
Impairment losses on other intangible assets |
|
|
- |
|
|
|
4 |
|
|
|
- |
|
|
|
- |
|
|
|
4 |
|
Impairment losses on property, plant and equipment |
|
|
- |
|
|
|
18 |
|
|
|
- |
|
|
|
(2) |
|
|
|
16 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total - Net |
|
|
- |
|
|
|
(546) |
|
|
|
- |
|
|
|
(2) |
|
|
|
(548) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
of which reversal of impairment losses |
|
|
- |
|
|
|
22 |
|
|
|
- |
|
|
|
- |
|
|
|
22 |
|
|
|
Note 12 Intangible assets
a/ Intangible assets
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions of euros) |
|
Capitalized development costs |
|
|
Other intangible assets |
|
|
Total |
|
|
|
|
|
|
At December 31, 2013 |
|
|
|
|
|
|
|
|
|
|
|
|
At cost or valuation |
|
|
2,380 |
|
|
|
5,358 |
|
|
|
7,738 |
|
|
|
|
|
Amortization and impairment |
|
|
(2,002) |
|
|
|
(4,735) |
|
|
|
(6,737) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET BOOK VALUE |
|
|
378 |
|
|
|
623 |
|
|
|
1,001 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2014 |
|
|
|
|
|
|
|
|
|
|
|
|
At cost or valuation |
|
|
2,370 |
|
|
|
6,048 |
|
|
|
8,418 |
|
Amortization and impairment |
|
|
(2,041) |
|
|
|
(5,366) |
|
|
|
(7,407) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET BOOK VALUE |
|
|
329 |
|
|
|
682 |
|
|
|
1,011 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2015 |
|
|
|
|
|
|
|
|
|
|
|
|
At cost or valuation |
|
|
2,630 |
|
|
|
7,061 |
|
|
|
9,691 |
|
Amortization and impairment |
|
|
(2,239) |
|
|
|
(6,017) |
|
|
|
(8,256) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET BOOK VALUE |
|
|
391 |
|
|
|
1,044 |
|
|
|
1,435 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other intangible assets include primarily intangible assets acquired in business combinations (acquired
technologies, in-process research and development and customer relationships), patents, trademarks and licenses.
243
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 12
b/ Changes in intangible assets, net
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions of euros) |
|
Capitalized development costs |
|
|
Other intangible assets |
|
|
Total |
|
|
|
|
|
|
AT DECEMBER 31, 2012 |
|
|
421 |
|
|
|
754 |
|
|
|
1,175 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capitalization |
|
|
189 |
|
|
|
32 |
|
|
|
221 |
|
|
|
|
|
Additions |
|
|
- |
|
|
|
7 |
|
|
|
7 |
|
|
|
|
|
Amortization |
|
|
(223) |
|
|
|
(148) |
|
|
|
(371) |
|
|
|
|
|
Impairment losses |
|
|
- |
|
|
|
4 |
|
|
|
4 |
|
|
|
|
|
Assets held for sale, discontinued operations and disposals |
|
|
- |
|
|
|
(2) |
|
|
|
(2) |
|
|
|
|
|
Net effect of exchange rate changes |
|
|
(9) |
|
|
|
(27) |
|
|
|
(36) |
|
Other changes |
|
|
- |
|
|
|
3 |
|
|
|
3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AT DECEMBER 31, 2013 |
|
|
378 |
|
|
|
623 |
|
|
|
1,001 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capitalization |
|
|
162 |
|
|
|
73 |
|
|
|
235 |
|
|
|
|
|
Additions |
|
|
- |
|
|
|
5 |
|
|
|
5 |
|
|
|
|
|
Amortization |
|
|
(164) |
|
|
|
(97) |
|
|
|
(261) |
|
|
|
|
|
Impairment losses |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
Assets held for sale, discontinued operations and disposals |
|
|
(77) |
|
|
|
(3) |
|
|
|
(80) |
|
|
|
|
|
Net effect of exchange rate changes |
|
|
30 |
|
|
|
74 |
|
|
|
104 |
|
Other changes |
|
|
- |
|
|
|
7 |
|
|
|
7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AT DECEMBER 31, 2014 |
|
|
329 |
|
|
|
682 |
|
|
|
1,011 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capitalization |
|
|
203 |
|
|
|
55 |
|
|
|
258 |
|
|
|
|
|
Additions(1) |
|
|
- |
|
|
|
354 |
|
|
|
354 |
|
|
|
|
|
Amortization |
|
|
(172) |
|
|
|
(113) |
|
|
|
(285) |
|
|
|
|
|
Impairment losses |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
Assets held for sale, discontinued operations and disposals |
|
|
- |
|
|
|
2 |
|
|
|
2 |
|
|
|
|
|
Net effect of exchange rate changes |
|
|
25 |
|
|
|
69 |
|
|
|
94 |
|
Other changes |
|
|
6 |
|
|
|
(5) |
|
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AT DECEMBER 31, 2015 |
|
|
391 |
|
|
|
1,044 |
|
|
|
1,435 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
On April 1, 2015, we terminated certain existing license agreements and entered into two new license agreements with Qualcomm for an amount of 335 million, corresponding to the
discounted amount of the quarterly payments, accounted for as intangible assets. |
Note 13 Property, plant and equipment
a/ Property, plant and equipment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions of euros) |
|
Land |
|
|
Buildings & vessels |
|
|
Plant, equipment and tools |
|
|
Other |
|
|
Total |
|
|
|
|
|
|
At December 31, 2013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At cost or valuation |
|
|
90 |
|
|
|
931 |
|
|
|
2,716 |
|
|
|
768 |
|
|
|
4,505 |
|
Amortization and impairment |
|
|
(10) |
|
|
|
(558) |
|
|
|
(2,277) |
|
|
|
(585) |
|
|
|
(3,430) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET BOOK VALUE |
|
|
80 |
|
|
|
373 |
|
|
|
439 |
|
|
|
183 |
|
|
|
1,075 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At cost or valuation |
|
|
88 |
|
|
|
943 |
|
|
|
2,867 |
|
|
|
709 |
|
|
|
4,607 |
|
Amortization and impairment |
|
|
(11) |
|
|
|
(545) |
|
|
|
(2,362) |
|
|
|
(557) |
|
|
|
(3,475) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET BOOK VALUE |
|
|
77 |
|
|
|
398 |
|
|
|
505 |
|
|
|
152 |
|
|
|
1,132 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2015 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At cost or valuation |
|
|
79 |
|
|
|
1,247 |
|
|
|
3,027 |
|
|
|
728 |
|
|
|
5,081 |
|
Amortization and impairment |
|
|
(12) |
|
|
|
(616) |
|
|
|
(2,507) |
|
|
|
(564) |
|
|
|
(3,699) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET BOOK VALUE |
|
|
67 |
|
|
|
631 |
|
|
|
520 |
|
|
|
164 |
|
|
|
1,382 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
244
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 13
b/ Changes in property, plant and equipment, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions of euros) |
|
Land |
|
|
Buildings & vessels |
|
|
Plant, equipment and tools |
|
|
Other |
|
|
Total |
|
|
|
|
|
|
AT DECEMBER 31, 2012 |
|
|
107 |
|
|
|
427 |
|
|
|
456 |
|
|
|
143 |
|
|
|
1,133 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions |
|
|
- |
|
|
|
13 |
|
|
|
90 |
|
|
|
220 |
|
|
|
323 |
|
|
|
|
|
|
|
Amortization charge |
|
|
(1) |
|
|
|
(51) |
|
|
|
(206) |
|
|
|
(37) |
|
|
|
(295) |
|
|
|
|
|
|
|
Impairment losses (1) |
|
|
(4) |
|
|
|
- |
|
|
|
(1) |
|
|
|
- |
|
|
|
(5) |
|
|
|
|
|
|
|
Reversals of impairment losses (1) |
|
|
4 |
|
|
|
2 |
|
|
|
12 |
|
|
|
- |
|
|
|
18 |
|
|
|
|
|
|
|
Assets held for sale, discontinued operations and disposals |
|
|
(28) |
|
|
|
(15) |
|
|
|
(8) |
|
|
|
- |
|
|
|
(51) |
|
|
|
|
|
|
|
Changes in consolidated group |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(2) |
|
|
|
(2) |
|
|
|
|
|
|
|
Net effect of exchange rate changes |
|
|
(4) |
|
|
|
(13) |
|
|
|
(13) |
|
|
|
(5) |
|
|
|
(35) |
|
Other changes |
|
|
6 |
|
|
|
10 |
|
|
|
109 |
|
|
|
(136) |
|
|
|
(11) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AT DECEMBER 31, 2013 |
|
|
80 |
|
|
|
373 |
|
|
|
439 |
|
|
|
183 |
|
|
|
1,075 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions |
|
|
- |
|
|
|
32 |
|
|
|
96 |
|
|
|
199 |
|
|
|
327 |
|
|
|
|
|
|
|
Amortization charge |
|
|
(1) |
|
|
|
(49) |
|
|
|
(208) |
|
|
|
(36) |
|
|
|
(294) |
|
|
|
|
|
|
|
Impairment losses (1) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
Reversals of impairment losses (1) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
Assets held for sale, discontinued operations and disposals |
|
|
(9) |
|
|
|
(20) |
|
|
|
(20) |
|
|
|
(11) |
|
|
|
(60) |
|
|
|
|
|
|
|
Changes in consolidated group |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
Net effect of exchange rate changes |
|
|
9 |
|
|
|
33 |
|
|
|
35 |
|
|
|
7 |
|
|
|
84 |
|
Other changes |
|
|
(2) |
|
|
|
29 |
|
|
|
163 |
|
|
|
(190) |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AT DECEMBER 31, 2014 |
|
|
77 |
|
|
|
398 |
|
|
|
505 |
|
|
|
152 |
|
|
|
1,132 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions |
|
|
- |
|
|
|
24 |
|
|
|
87 |
|
|
|
213 |
|
|
|
324 |
|
|
|
|
|
|
|
Amortization charge |
|
|
(1) |
|
|
|
(59) |
|
|
|
(232) |
|
|
|
(38) |
|
|
|
(330) |
|
|
|
|
|
|
|
Impairment losses (1) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
Reversals of impairment losses (1) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
Assets held for sale, discontinued operations and disposals |
|
|
(19) |
|
|
|
9 |
|
|
|
56 |
|
|
|
(2) |
|
|
|
44 |
|
|
|
|
|
|
|
Changes in consolidated group |
|
|
- |
|
|
|
223 |
|
|
|
(1) |
|
|
|
(1) |
|
|
|
221 |
|
|
|
|
|
|
|
Net effect of exchange rate changes |
|
|
7 |
|
|
|
30 |
|
|
|
27 |
|
|
|
8 |
|
|
|
72 |
|
Other changes |
|
|
3 |
|
|
|
5 |
|
|
|
80 |
|
|
|
(168) |
|
|
|
(80) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AT DECEMBER 31, 2015 |
|
|
67 |
|
|
|
631 |
|
|
|
520 |
|
|
|
164 |
|
|
|
1,382 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
c/ Finance leases
Property, plant and equipment held under finance leases have a net carrying amount of
41 million at December 31, 2015 (45 million at December 31, 2014 and 51 million at
December 31, 2013). Such finance leases relate primarily to IS/IT equipment sold and leased back in connection with the Hewlett Packard co-sourcing agreement (refer to Note 28).
Future minimum lease payments under non-cancellable finance leases are shown in Note 28a - Off balance sheet commitments.
245
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 14
Note 14 Investments in associates, joint ventures and interests in subsidiaries
a/ Investments in associates and joint ventures
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value |
|
(In millions of euros) |
|
2015 |
|
|
2014 |
|
|
2013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity affiliates of Alcatel-Lucent Shanghai Bell |
|
|
9 |
|
|
|
9 |
|
|
|
9 |
|
|
|
|
|
Alda Marine (1) |
|
|
- |
|
|
|
16 |
|
|
|
13 |
|
|
|
|
|
AMIRIB (1) |
|
|
- |
|
|
|
12 |
|
|
|
7 |
|
|
|
|
|
Tetron |
|
|
10 |
|
|
|
8 |
|
|
|
5 |
|
|
|
|
|
Other (less than 5 million each) |
|
|
1 |
|
|
|
6 |
|
|
|
1 |
|
|
|
INVESTMENTS IN ASSOCIATES AND JOINT VENTURES |
|
|
20 |
|
|
|
51 |
|
|
|
35 |
|
|
|
(1) |
|
Alda Marine and AMIRIB have been fully consolidated since March 18, 2015 (see note 3). |
b/ Change in investments in associates and joint ventures
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions of euros) |
|
2015 |
|
|
2014 |
|
|
2013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying amount at January 1 |
|
|
51 |
|
|
|
35 |
|
|
|
29 |
|
|
|
|
|
Change in equity affiliates accounted for under the equity method (1) |
|
|
(34) |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
Share of net income (loss) |
|
|
2 |
|
|
|
15 |
|
|
|
7 |
|
|
|
|
|
Net effect of exchange rate changes |
|
|
1 |
|
|
|
1 |
|
|
|
- |
|
|
|
|
|
Other changes |
|
|
- |
|
|
|
- |
|
|
|
(1) |
|
|
|
CARRYING AMOUNT AT DECEMBER 31 |
|
|
20 |
|
|
|
51 |
|
|
|
35 |
|
|
|
(1) |
|
Relates to the full consolidation of Alda Marine (see note 3). |
c/ Summarized financial information for associates and joint ventures
Aggregated financial information for
associates and joint ventures as if those entities were consolidated at 100%:
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions of euros) |
|
2015 |
|
|
2014 |
|
|
2013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
|
230 |
|
|
|
305 |
|
|
|
234 |
|
|
|
|
|
Liabilities (excluding equity) |
|
|
177 |
|
|
|
186 |
|
|
|
148 |
|
|
|
|
|
Equity |
|
|
53 |
|
|
|
119 |
|
|
|
86 |
|
|
|
|
|
Revenues |
|
|
63 |
|
|
|
118 |
|
|
|
107 |
|
|
|
|
|
Net income (loss) attributable to equity owners of the parent |
|
|
(3) |
|
|
|
24 |
|
|
|
19 |
|
|
|
d/ Interests in subsidiaries
The Group has a material non-wholly owned subsidiary, Alcatel-Lucent Shanghai Bell Co. Ltd, which
has material non-controlling interests (50% less one share). Alcatel-Lucent Shanghai Bell Co. Ltd and its subsidiaries in China and in the rest of the world, including the RFS Group, make up the Alcatel-Lucent Shanghai
Bell Group. Materiality of the non-controlling interests was determined based on the significance of the Alcatel-Lucent Shanghai Bell Groups revenues and statement of financial
position to the Groups financial statements. Non-controlling interests in other subsidiaries are individually immaterial.
246
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions of euros) |
|
|
|
|
Of which Alcatel-Lucent Shanghai Bell Group |
|
|
Non - controlling interests |
|
|
Net contribution |
|
|
Eliminations |
|
|
Before intragroup eliminations |
|
|
|
|
|
|
|
|
|
|
BALANCE AT DECEMBER 31, 2012 |
|
|
745 |
|
|
|
666 |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
Non-controlling interests in 2013 income |
|
|
10 |
|
|
|
2 |
|
|
|
(4) |
|
|
|
6 |
|
|
|
|
|
|
Other changes (1) |
|
|
(25) |
|
|
|
(13) |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
BALANCE AT DECEMBER 31, 2013 |
|
|
730 |
|
|
|
655 |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
Non-controlling interests in 2014 income |
|
|
35 |
|
|
|
18 |
|
|
|
5 |
|
|
|
13 |
|
|
|
|
|
|
Other changes (1) |
|
|
68 |
|
|
|
75 |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
BALANCE AT DECEMBER 31, 2014 |
|
|
833 |
|
|
|
748 |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
Non-controlling interests in 2015 income |
|
|
29 |
|
|
|
16 |
|
|
|
1 |
|
|
|
15 |
|
|
|
|
|
|
Other changes (1) |
|
|
42 |
|
|
|
53 |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
BALANCE AT DECEMBER 31, 2015 |
|
|
904 |
|
|
|
816 |
|
|
|
- |
|
|
|
- |
|
|
|
(1) |
|
This amount primarily relates to net gains (losses) recognized directly in equity attributable to non-controlling interests, dividends paid and the currency translation impact.
|
Alcatel-Lucent Shanghai Bell Group - Summarized financial information
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions of euros) |
|
2015 |
|
|
|
|
|
|
|
Amounts before intragroup eliminations |
|
|
|
2014 |
|
|
|
2013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income statement |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
|
2,486 |
|
|
|
2,949 |
|
|
|
2,130 |
|
|
|
|
|
Income (loss) from operations |
|
|
4 |
|
|
|
35 |
|
|
|
(8) |
|
|
|
|
|
Net Income (loss) |
|
|
30 |
|
|
|
26 |
|
|
|
3 |
|
|
|
|
|
Attributable to: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
● Equity owners of the parent |
|
|
15 |
|
|
|
13 |
|
|
|
(3) |
|
|
|
|
|
● Non-controlling interests |
|
|
15 |
|
|
|
13 |
|
|
|
6 |
|
|
|
|
|
Statement of financial position |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-current assets |
|
|
552 |
|
|
|
517 |
|
|
|
430 |
|
|
|
|
|
Non-current liabilities |
|
|
(35) |
|
|
|
(127) |
|
|
|
(115) |
|
|
|
|
|
Operating working capital (1) |
|
|
(214) |
|
|
|
76 |
|
|
|
(10) |
|
|
|
|
|
Cash and cash equivalents (2) (4) |
|
|
1,648 |
|
|
|
1,217 |
|
|
|
1,139 |
|
|
|
|
|
Financial debt |
|
|
(134) |
|
|
|
(142) |
|
|
|
(44) |
|
|
|
|
|
Statement of cash flows |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided (used) by operating activities |
|
|
446 |
|
|
|
(30) |
|
|
|
101 |
|
|
|
|
|
Free cash flow (3) |
|
|
351 |
|
|
|
(139) |
|
|
|
19 |
|
|
|
|
|
Net cash provided (used) by investing activities |
|
|
(137) |
|
|
|
28 |
|
|
|
(28) |
|
|
|
|
|
Net cash provided (used) by financing activities |
|
|
8 |
|
|
|
83 |
|
|
|
(76) |
|
|
|
|
|
Of which dividends paid to non-controlling interests |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(1) |
|
As defined in Note 17. |
(2) |
|
As defined in Note 24. |
(3) |
|
As defined in Note 27b. |
(4) |
|
Includes 1,505 million cash and cash equivalents held in countries subject to exchange control restrictions as of December 31, 2015 (988 million as of
December 31, 2014 and 652 million as of December 31, 2013). |
247
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 15
Note 15 Financial assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2015 |
|
|
December 31, 2014 |
|
|
December 31, 2013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions of euros) |
|
Other
non-current financial assets, net (1) |
|
|
Marketable securities (2) |
|
|
Total |
|
|
Other
non-current financial assets, net (1) |
|
|
Marketable securities (2) |
|
|
Total |
|
|
Other
non-current financial assets, net (1) |
|
|
Marketable securities (2) |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial assets available for sale |
|
|
228 |
|
|
|
159 |
|
|
|
387 |
|
|
|
226 |
|
|
|
167 |
|
|
|
393 |
|
|
|
172 |
|
|
|
158 |
|
|
|
330 |
|
|
|
|
|
|
|
|
|
|
|
Financial assets at fair value through profit or loss |
|
|
103 |
|
|
|
1,467 |
|
|
|
1,570 |
|
|
|
100 |
|
|
|
1,505 |
|
|
|
1,605 |
|
|
|
91 |
|
|
|
2,101 |
|
|
|
2,192 |
|
|
|
|
|
|
|
|
|
|
|
Financial assets at amortized cost (3) |
|
|
30 |
|
|
|
- |
|
|
|
30 |
|
|
|
80 |
|
|
|
- |
|
|
|
80 |
|
|
|
59 |
|
|
|
- |
|
|
|
59 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL |
|
|
361 |
|
|
|
1,626 |
|
|
|
1,987 |
|
|
|
406 |
|
|
|
1,672 |
|
|
|
2,078 |
|
|
|
322 |
|
|
|
2,259 |
|
|
|
2,581 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Of which 18 million matures within one year as of December 31, 2015 (22 million as of December 31, 2014 and 22 million as of December 31, 2013).
|
(2) |
|
All of which is current as of December 31, 2015, 2014 and 2013. |
(3) |
|
Of which 32 million relates to a loan to the former Enterprise business as of December 31, 2014, reimbursed in 2015. The loans to Alda Marine and AMIRIB that represented
7 million as of December 31, 2013 and 24 million as of December 31, 2012 respectively were reimbursed in 2014. |
No financial asset is considered as being held to maturity.
The cumulated fair value changes of financial assets available for sale represented a potential gain of 50 million as of
December 31, 2015 that was booked directly in equity (48 million as of December 31, 2014 and 40 million as of December 31, 2013).
a/ Financial assets available for sale
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2015 |
|
|
December 31, 2014 |
|
|
December 31, 2013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions of euros) |
|
Other non-current financial assets |
|
|
Marketable securities |
|
|
Total |
|
|
Other non-current financial assets |
|
|
Marketable securities |
|
|
Total |
|
|
Other non-current financial assets |
|
|
Marketable securities |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET CARRYING AMOUNT AT JANUARY 1 |
|
|
226 |
|
|
|
167 |
|
|
|
393 |
|
|
|
172 |
|
|
|
158 |
|
|
|
330 |
|
|
|
181 |
|
|
|
146 |
|
|
|
327 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions/(disposals) |
|
|
(3) |
|
|
|
(10) |
|
|
|
(13) |
|
|
|
43 |
|
|
|
- |
|
|
|
43 |
|
|
|
(3) |
|
|
|
- |
|
|
|
(3) |
|
|
|
|
|
|
|
|
|
|
|
Fair value changes |
|
|
(1) |
|
|
|
2 |
|
|
|
1 |
|
|
|
(1) |
|
|
|
9 |
|
|
|
8 |
|
|
|
(1) |
|
|
|
12 |
|
|
|
11 |
|
|
|
|
|
|
|
|
|
|
|
Impairment losses (1) |
|
|
(1) |
|
|
|
- |
|
|
|
(1) |
|
|
|
(1) |
|
|
|
- |
|
|
|
(1) |
|
|
|
(1) |
|
|
|
- |
|
|
|
(1) |
|
|
|
|
|
|
|
|
|
|
|
Change in consolidated group |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
Other changes |
|
|
7 |
|
|
|
- |
|
|
|
7 |
|
|
|
13 |
|
|
|
- |
|
|
|
13 |
|
|
|
(4) |
|
|
|
- |
|
|
|
(4) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET CARRYING AMOUNT AT DECEMBER 31 |
|
|
228 |
|
|
|
159 |
|
|
|
387 |
|
|
|
226 |
|
|
|
167 |
|
|
|
393 |
|
|
|
172 |
|
|
|
158 |
|
|
|
330 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Of which: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
at fair value (2) |
|
|
8 |
|
|
|
159 |
|
|
|
167 |
|
|
|
9 |
|
|
|
167 |
|
|
|
176 |
|
|
|
7 |
|
|
|
158 |
|
|
|
165 |
|
|
|
|
|
|
|
|
|
|
|
at cost |
|
|
220 |
|
|
|
- |
|
|
|
220 |
|
|
|
217 |
|
|
|
- |
|
|
|
217 |
|
|
|
165 |
|
|
|
- |
|
|
|
165 |
|
|
|
(1) |
|
Included in the amounts reported in Note 11b. |
(2) |
|
Fair value hierarchy is presented in Note 1q-ii and Note 26c. |
Financial assets available for sale are stated at fair value, except for non-listed financial assets, which are stated at amortized cost, if no
reliable fair value exists.
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions of euros) Fair value changes: |
|
2015 |
|
|
2014 |
|
|
2013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value changes recognized directly in other comprehensive income |
|
|
2 |
|
|
|
8 |
|
|
|
11 |
|
|
|
|
|
Changes resulting from gains (losses) previously recognized in other comprehensive income now recognized in net income (loss) due to disposals |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL |
|
|
2 |
|
|
|
8 |
|
|
|
11 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
248
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 15
b/ Financial assets at fair value through profit or loss
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions of euros) |
|
2015 |
|
|
2014 |
|
|
2013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net carrying amount at January 1 |
|
|
1,605 |
|
|
|
2,192 |
|
|
|
1,480 |
|
|
|
|
|
|
|
Additions/(disposals) |
|
|
(63) |
|
|
|
(626) |
|
|
|
715 |
|
|
|
|
|
Fair value changes |
|
|
- |
|
|
|
6 |
|
|
|
6 |
|
|
|
|
|
Other changes (CTA revaluation) |
|
|
28 |
|
|
|
33 |
|
|
|
(9) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET CARRYING AMOUNT AT DECEMBER 31 |
|
|
1,570 |
|
|
|
1,605 |
|
|
|
2,192 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
c/ Financial assets at amortized cost
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions of euros) |
|
2015 |
|
|
2014 |
|
|
2013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net carrying amount at January 1 |
|
|
80 |
|
|
|
59 |
|
|
|
62 |
|
|
|
|
|
|
|
Additions/(disposals) |
|
|
(45) |
|
|
|
23 |
|
|
|
(16) |
|
|
|
|
|
Impairment losses (1) |
|
|
(2) |
|
|
|
16 |
|
|
|
(2) |
|
|
|
|
|
Change in consolidated group |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
Other changes (reclassifications) |
|
|
(3) |
|
|
|
(18) |
|
|
|
15 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET CARRYING AMOUNT AT DECEMBER 31 |
|
|
30 |
|
|
|
80 |
|
|
|
59 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Included in the amounts reported in Note 11b. |
Note 16 Cash and cash equivalents
Cash and Cash Equivalents
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions of euros) |
|
December 31, 2015 |
|
|
December 31, 2014 |
|
|
December 31, 2013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash |
|
|
3,355 |
|
|
|
2,399 |
|
|
|
2,473 |
|
|
|
|
|
Cash equivalents |
|
|
1,550 |
|
|
|
1,479 |
|
|
|
1,623 |
|
|
|
|
|
Of which money market mutual funds |
|
|
1,170 |
|
|
|
1,096 |
|
|
|
1,476 |
|
|
|
|
|
Of which Other (certificates of deposit, treasury bills, etc) |
|
|
380 |
|
|
|
383 |
|
|
|
147 |
|
Cash and Cash Equivalents - excluding discontinued operations |
|
|
4,905 |
|
|
|
3,878 |
|
|
|
4,096 |
|
Cash in discontinued operations |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
CASH AND CASH EQUIVALENTS - INCLUDING DISCONTINUED OPERATIONS |
|
|
4,905 |
|
|
|
3,878 |
|
|
|
4,096 |
|
|
|
As of December 31, 2015,
1,505 million of cash and cash equivalents were held in countries subject to exchange control restrictions (mainly China) (1,019 million as of December 31, 2014 and 756 million as of December 31, 2013).
249
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 17
Note 17 Operating working capital
a/ Operating working capital
Operating working capital represents the working capital resulting from current operating assets and liabilities, as presented below. We define operating working capital by excluding other current assets and other current
liabilities from working capital.
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions of euros) |
|
December 31, 2015 |
|
|
December 31, 2014 |
|
|
December 31, 2013 |
|
|
|
|
|
|
|
|
|
|
Inventories and work in progress, net |
|
|
1,600 |
|
|
|
1,971 |
|
|
|
1,935 |
|
Trade receivables and other receivables, net (1) |
|
|
2,535 |
|
|
|
2,528 |
|
|
|
2,482 |
|
Advances and progress payments, net |
|
|
45 |
|
|
|
43 |
|
|
|
46 |
|
Customers deposits and advances |
|
|
(794) |
|
|
|
(810) |
|
|
|
(681) |
|
Trade payables and other payables |
|
|
(3,578) |
|
|
|
(3,571) |
|
|
|
(3,518) |
|
|
|
OPERATING WORKING CAPITAL, NET |
|
|
(192) |
|
|
|
161 |
|
|
|
264 |
|
|
|
(1) |
|
Amounts of trade receivables sold without recourse and the impact of these transfers on the cash flow statement are detailed in Note 20. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions of euros) |
|
December 31,
2014 |
|
|
Cash flow |
|
|
Change in consolidated group (1) |
|
|
Translation adjustments and other |
|
|
December 31, 2015 |
|
|
|
|
|
|
|
Inventories and work in progress |
|
|
2,366 |
|
|
|
(342) |
|
|
|
10 |
|
|
|
(41) |
|
|
|
1,993 |
|
Trade receivables and other receivables (2) |
|
|
2,721 |
|
|
|
(93) |
|
|
|
7 |
|
|
|
68 |
|
|
|
2,703 |
|
Advances and progress payments |
|
|
43 |
|
|
|
(5) |
|
|
|
4 |
|
|
|
3 |
|
|
|
45 |
|
Customers deposits and advances |
|
|
(810) |
|
|
|
53 |
|
|
|
- |
|
|
|
(37) |
|
|
|
(794) |
|
|
|
|
|
|
|
Trade payables and other payables |
|
|
(3,571) |
|
|
|
227 |
|
|
|
(2) |
|
|
|
(232) |
|
|
|
(3,578) |
|
|
|
Operating working capital, gross |
|
|
749 |
|
|
|
(160) |
|
|
|
19 |
|
|
|
(239) |
|
|
|
369 |
|
|
|
|
|
|
|
|
|
Cumulated valuation allowances |
|
|
(588) |
|
|
|
- |
|
|
|
(3) |
|
|
|
30 |
|
|
|
(561) |
|
|
|
OPERATING WORKING CAPITAL, NET |
|
|
161 |
|
|
|
(160) |
|
|
|
16 |
|
|
|
(209) |
|
|
|
(192) |
|
|
|
(1) |
|
Mainly related to the Enterprise business that was reclassified to Discontinued operations as of December 31, 2013 (see Note 9). |
(2) |
|
Amounts of trade receivables sold without recourse and the impact of these transfers on the cash flow statement are detailed in Note 20. |
b/ Amounts due from / to customers on construction contracts
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions of euros)
Analysis of amounts due from/to customers on construction contracts |
|
December 31, 2015 |
|
|
December 31, 2014 |
|
|
December 31, 2013 |
|
|
|
|
|
|
|
|
|
|
Amounts due from customers on construction contracts |
|
|
382 |
|
|
|
613 |
|
|
|
757 |
|
Amounts due to customers on construction contracts |
|
|
(75) |
|
|
|
(96) |
|
|
|
(82) |
|
|
|
TOTAL |
|
|
307 |
|
|
|
517 |
|
|
|
675 |
|
|
|
Work in progress on construction contracts, gross |
|
|
314 |
|
|
|
499 |
|
|
|
487 |
|
Work in progress on construction contracts, depreciation |
|
|
(3) |
|
|
|
(7) |
|
|
|
(2) |
|
Accrued receivables on construction contracts |
|
|
87 |
|
|
|
117 |
|
|
|
270 |
|
Product sales reservesconstruction contracts |
|
|
(91) |
|
|
|
(92) |
|
|
|
(80) |
|
|
|
TOTAL |
|
|
308 |
|
|
|
517 |
|
|
|
675 |
|
|
|
250
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 18
Note 18 Inventories and work in progress
a/ Analysis of net value
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions of euros) |
|
2015 |
|
|
2014 |
|
|
2013 |
|
|
|
|
|
|
|
|
|
|
Raw materials and goods |
|
|
184 |
|
|
|
231 |
|
|
|
265 |
|
Work in progress excluding construction contracts |
|
|
728 |
|
|
|
842 |
|
|
|
817 |
|
Work in progress on construction contracts, gross |
|
|
314 |
|
|
|
499 |
|
|
|
487 |
|
|
|
|
|
Finished products |
|
|
767 |
|
|
|
794 |
|
|
|
761 |
|
Gross value |
|
|
1,993 |
|
|
|
2,366 |
|
|
|
2,330 |
|
Valuation allowance |
|
|
(393) |
|
|
|
(395) |
|
|
|
(395) |
|
|
|
TOTAL, NET |
|
|
1,600 |
|
|
|
1,971 |
|
|
|
1,935 |
|
|
|
b/ Change in valuation allowance
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions of euros) |
|
2015 |
|
|
2014 |
|
|
2013 |
|
|
|
|
|
|
|
|
|
|
At January 1 |
|
|
(395) |
|
|
|
(395) |
|
|
|
(448) |
|
(Additions)/ reversals |
|
|
(144) |
|
|
|
(139) |
|
|
|
(106) |
|
Utilization |
|
|
28 |
|
|
|
54 |
|
|
|
45 |
|
Changes in consolidated group |
|
|
(3) |
|
|
|
9 |
|
|
|
9 |
|
Net effect of exchange rate changes and other changes |
|
|
121 |
|
|
|
76 |
|
|
|
105 |
|
|
|
AT DECEMBER 31 |
|
|
(393) |
|
|
|
(395) |
|
|
|
(395) |
|
|
|
Note 19 Trade receivables and related accounts
a/ Trade receivables and other receivables, net
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions of euros) |
|
2015 |
|
|
2014 |
|
|
2013 |
|
|
|
|
|
|
|
|
|
|
Receivables bearing interest |
|
|
5 |
|
|
|
1 |
|
|
|
5 |
|
Other trade receivables |
|
|
2,698 |
|
|
|
2,720 |
|
|
|
2,634 |
|
Gross value |
|
|
2,703 |
|
|
|
2,721 |
|
|
|
2,639 |
|
|
|
|
|
Accumulated impairment losses |
|
|
(168) |
|
|
|
(193) |
|
|
|
(157) |
|
|
|
TOTAL, NET |
|
|
2,535 |
|
|
|
2,528 |
|
|
|
2,482 |
|
|
|
Of which due after one year on the net value |
|
|
99 |
|
|
|
108 |
|
|
|
39 |
|
|
|
b/ Customers deposits and advances
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions of euros) |
|
2015 |
|
|
2014 |
|
|
2013 |
|
|
|
|
|
|
|
|
|
|
Advance payments received on construction contracts |
|
|
63 |
|
|
|
57 |
|
|
|
68 |
|
|
|
|
|
Other deposits and advances received from customers |
|
|
731 |
|
|
|
753 |
|
|
|
613 |
|
|
|
TOTAL CUSTOMERS DEPOSITS AND ADVANCES |
|
|
794 |
|
|
|
810 |
|
|
|
681 |
|
|
|
Of which: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
· portion due within one year |
|
|
742 |
|
|
|
767 |
|
|
|
640 |
|
|
|
|
|
· portion due after one year |
|
|
52 |
|
|
|
43 |
|
|
|
41 |
|
|
|
251
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 20
Note 20 Financial assets transferred
a/ Receivables sold without recourse
Balances
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions of euros) |
|
December 31, 2015 |
|
|
December 31, 2014 |
|
|
December 31, 2013 |
|
|
|
|
|
|
|
|
|
|
Outstanding amounts of receivables sold without recourse (1) |
|
|
1,978 |
|
|
|
1,678 |
|
|
|
1,343 |
|
|
|
(1) |
|
Without recourse in case of payment default by the debtor. We have no material continuing involvement in the receivables sold without recourse which are derecognized in their entirety.
|
Changes in receivables sold without recourse
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions of euros) |
|
2015 |
|
|
2014 |
|
|
2013 |
|
|
|
|
|
|
|
|
|
|
Impact on cash flows from operating activities |
|
|
300 |
|
|
|
335 |
|
|
|
232 |
|
|
|
b/ Receivables transferred that are not derecognized in their entirety
Receivables related to French R&D tax credits (i.e. Crédits dImpôt Recherche) were sold to banks but not
derecognized from the statement of financial position as we are keeping substantially all risks and rewards related to those receivables, due to the ability of the buyer to retroactively cancel the sale in
certain circumstances and to the existence of a selling price adjustment if the receivable is redeemed before or after its contractual maturity (i.e. three years) by the French State.
These receivables represented an amount of 230 million as of
December 31, 2015 (233 million as of December 31, 2014 and 248 million as of
December 31, 2013) included in our financial debt (other financial debt).
Note 21 Other assets and liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions of euros)
Other assets |
|
December 31, 2015 |
|
|
December 31, 2014 |
|
|
December 31, 2013 |
|
Other current assets |
|
|
778 |
|
|
|
877 |
|
|
|
751 |
|
|
|
|
|
Other non-current assets |
|
|
509 |
|
|
|
429 |
|
|
|
413 |
|
|
|
TOTAL |
|
|
1,287 |
|
|
|
1,306 |
|
|
|
1,164 |
|
|
|
Of which: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
· Currency
derivatives |
|
|
174 |
|
|
|
149 |
|
|
|
18 |
|
|
|
|
|
· Interest-rate
derivatives - hedging |
|
|
4 |
|
|
|
2 |
|
|
|
11 |
|
|
|
|
|
· Interest-rate
derivatives - other |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
· Commodities
derivatives |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
· Other tax
receivables |
|
|
716 |
|
|
|
730 |
|
|
|
747 |
|
|
|
|
|
· Other current
and non-current assets |
|
|
393 |
|
|
|
425 |
|
|
|
388 |
|
|
|
252
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 21
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions of euros)
Other liabilities |
|
December 31, 2015 |
|
|
December 31, 2014 |
|
|
December 31, 2013 |
|
|
|
|
|
|
|
|
|
|
Other current liabilities |
|
|
(1,789) |
|
|
|
(1,429) |
|
|
|
(1,237) |
|
|
|
|
|
Other non-current liabilities |
|
|
(561) |
|
|
|
(175) |
|
|
|
(188) |
|
|
|
TOTAL |
|
|
(2,350) |
|
|
|
(1,604) |
|
|
|
(1,425) |
|
|
|
Of which: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
· Currency derivatives |
|
|
(108) |
|
|
|
(51) |
|
|
|
(54) |
|
|
|
|
|
· Interest-rate derivatives - hedging |
|
|
- |
|
|
|
- |
|
|
|
(21) |
|
|
|
|
|
· Interest-rate derivatives - other |
|
|
(11) |
|
|
|
(9) |
|
|
|
- |
|
|
|
|
|
· Commodities derivatives |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
· Other tax payables (1) |
|
|
(434) |
|
|
|
(352) |
|
|
|
(287) |
|
|
|
|
|
· Accrued wages and social charges |
|
|
(1,092) |
|
|
|
(850) |
|
|
|
(794) |
|
|
|
|
|
· Other current and non-current liabilities |
|
|
(705) |
|
|
|
(343) |
|
|
|
(269) |
|
|
|
(1) |
|
As of December 31, 2015 and 2014, 131 million and 64 million, respectively, of VAT that was due to the French tax administration had not been declared. A provision for
late payment interests was recorded as of December 31, 2015 for 6 million. |
Note 22 Equity
a/ Capital stock and additional paid-in capital
At December 31, 2015, the capital stock consisted of 3,036,337,359 ordinary shares of nominal value 0.05 (of 2,820,432,270 ordinary shares of nominal value 0.05 at December 31, 2014 and 2,808,554,197 ordinary
shares of nominal value 0.05 at December 31, 2013).
During
2015, increases in capital stock and additional paid-in capital amounted to 374 million. These net increases resulted from the following transactions:
· |
|
issuance of 42,831,440 shares for 82 million, mainly as a result of the exercise of stock options and the vesting of
performance shares (including additional paid-in capital of 80 million); |
· |
|
conversion of the outstanding OCEANE due 2018 into 147,958,658 Alcatel-Lucent shares generating a capital increase of
211 million (including additional paid-in capital of 204 million); |
· |
|
conversion of the outstanding OCEANE due 2019 into 15,220,628 Alcatel-Lucent shares generating a capital increase of
49 million (including additional paid-in capital of 48 million); and |
· |
|
conversion of the outstanding OCEANE due 2020 into 9,894,363 Alcatel-Lucent shares generating a capital increase of
32 million (including additional paid-in capital of 31 million). |
During 2014, increases in capital stock and additional paid-in capital amounted to
15 million. These net increases resulted from the following transactions:
· |
|
issuance of 11,878,073 shares for 15 million, mainly as a result of the exercise of options and the vesting of
performance shares (including additional paid-in capital of 14 million).
|
During 2013, net increases in capital stock and additional paid-in capital amounted to 990 million. These increases resulted from the following transactions:
· |
|
issuance of 455,568,488 shares for 926 million (including additional paid-in capital of 903 million); |
· |
|
issuance of 10,763,621 shares for 16 million, mainly as a result of the exercise of stock options and the vesting of
performance shares (including additional paid-in capital of 11 million); |
· |
|
conversion of the outstanding OCEANE due 2015 into 15,658,262 Alcatel-Lucent shares generating a capital increase of
48 million (including additional paid-in capital of 47 million); and |
· |
|
capital reduction of 1.95 per share from a nominal value of
2 to 0.05 generating a decrease in the nominal value of capital stock of 4,542 million and an increase in additional paid-in capital of 4,542 million. |
In order to maintain or adjust the capital structure, the Group can adjust the amount of dividends paid to shareholders (see Note 22d), or
repurchase its own shares (see Note 22c) or issue new shares, or issue convertible bonds or similar instruments.
The Group is not
party to any contract restricting the issuance of additional equity.
b/ Stock options, performance shares and share-based
payments
Share-based payments
During
the vesting period, estimated annual forfeiture rates of 5% for share-based payments granted are applied when determining compensation expense. The estimated forfeiture rate is ultimately adjusted to actual.
253
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 22
Share-based payments cancelled after the vesting period and share-based payments not exercised do
not result in correcting charges previously recognized.
Impact on income (loss) from operating activities of share-based payments resulting from stock
options, stock purchase plans and restricted stock and cash units
Compensation expense recognized for share-based payments in accordance
with IFRS 2 is analyzed as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions of euros) |
|
2015 |
|
|
2014 |
|
|
2013 |
|
|
|
|
|
|
|
|
|
|
Compensation expense for share-based payments |
|
|
30 |
|
|
|
23 |
|
|
|
27 |
|
Of which equity settled (1) |
|
|
26 |
|
|
|
16 |
|
|
|
19 |
|
|
|
|
|
Of which cash settled (2) |
|
|
4 |
|
|
|
7 |
|
|
|
8 |
|
|
|
(1) |
|
Of which 11 million corresponding to a retention plan classified in Transaction-related costs of the income statement. |
(2) |
|
Includes grants of phantom shares and French taxes paid at the grant date by Alcatel-Lucent for stock options, restricted stock units and performance shares granted from January 1, 2008
onwards. |
The reserve for cash settled instruments is
14 million at December 31, 2015 (12 million at December 31, 2014 and 6 million at December 31, 2013).
Stock options
Details of stock options at December 31, 2015 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Grant date |
|
Exercise period |
|
|
Exercise price (1) |
|
|
Number of stock options granted (1) |
|
|
Number of outstanding stock options (1) |
|
|
Number of vested stock options (1) |
|
|
|
|
|
|
3/25/08 |
|
|
3/25/09 to 3/24/16 |
|
|
|
3.596 |
|
|
|
49,601,042 |
|
|
|
18,024,133 |
|
|
|
18,024,133 |
|
|
|
|
|
|
|
7/1/08 |
|
|
7/1/09 to 6/30/16 |
|
|
|
4.164 |
|
|
|
229,515 |
|
|
|
69,703 |
|
|
|
69,703 |
|
|
|
|
|
|
|
12/31/08 |
|
|
12/31/09 to 12/30/16 |
|
|
|
1.893 |
|
|
|
2,099,746 |
|
|
|
26,686 |
|
|
|
26,686 |
|
|
|
|
|
|
|
3/18/09 |
|
|
3/18/10 to 3/17/17 |
|
|
|
1.893 |
|
|
|
54,344,640 |
|
|
|
15,359,749 |
|
|
|
15,359,749 |
|
|
|
|
|
|
|
7/1/09 |
|
|
7/1/10 to 6/30/17 |
|
|
|
1.893 |
|
|
|
458,597 |
|
|
|
15,370 |
|
|
|
15,370 |
|
|
|
|
|
|
|
10/1/09 |
|
|
10/1/10 to 9/30/17 |
|
|
|
2.744 |
|
|
|
287,390 |
|
|
|
27,479 |
|
|
|
27,479 |
|
|
|
|
|
|
|
12/1/09 |
|
|
12/1/10 to 11/30/17 |
|
|
|
2.366 |
|
|
|
110,985 |
|
|
|
19,024 |
|
|
|
19,024 |
|
|
|
|
|
|
|
3/17/10 |
|
|
3/17/11 to 3/16/18 |
|
|
|
2.271 |
|
|
|
19,492,023 |
|
|
|
3,055,705 |
|
|
|
3,055,705 |
|
|
|
|
|
|
|
7/1/10 |
|
|
7/1/11 to 6/30/18 |
|
|
|
2.082 |
|
|
|
739,569 |
|
|
|
23,781 |
|
|
|
23,781 |
|
|
|
|
|
|
|
10/1/10 |
|
|
10/1/11 to 9/30/18 |
|
|
|
2.176 |
|
|
|
892,366 |
|
|
|
259,968 |
|
|
|
259,968 |
|
|
|
|
|
|
|
12/9/10 |
|
|
12/9/11 to 12/8/18 |
|
|
|
2.082 |
|
|
|
130,655 |
|
|
|
21,667 |
|
|
|
21,667 |
|
|
|
|
|
|
|
3/1/11 |
|
|
3/1/12 to 2/28/19 |
|
|
|
3.028 |
|
|
|
635,597 |
|
|
|
86,488 |
|
|
|
86,488 |
|
|
|
|
|
|
|
3/16/11 |
|
|
3/16/12 to 3/15/19 |
|
|
|
3.501 |
|
|
|
11,738,649 |
|
|
|
5,582,778 |
|
|
|
5,582,778 |
|
|
|
|
|
|
|
6/1/11 |
|
|
6/1/12 to 5/31/19 |
|
|
|
3.974 |
|
|
|
427,713 |
|
|
|
151,175 |
|
|
|
151,175 |
|
|
|
|
|
|
|
9/1/11 |
|
|
9/1/12 to 8/31/19 |
|
|
|
2.366 |
|
|
|
178,297 |
|
|
|
71,670 |
|
|
|
71,670 |
|
|
|
|
|
|
|
12/1/11 |
|
|
12/1/12 to 11/30/19 |
|
|
|
1.893 |
|
|
|
152,467 |
|
|
|
42,808 |
|
|
|
42,808 |
|
|
|
|
|
|
|
3/14/12 |
|
|
3/14/13 to 3/13/20 |
|
|
|
1.893 |
|
|
|
11,286,981 |
|
|
|
4,415,051 |
|
|
|
2,763,011 |
|
|
|
|
|
|
|
8/13/12 |
|
|
8/13/13 to 8/12/20 |
|
|
|
1.893 |
|
|
|
399,202 |
|
|
|
76,101 |
|
|
|
51,784 |
|
|
|
|
|
|
|
12/17/12 |
|
|
12/17/13 to 12/16/20 |
|
|
|
1.893 |
|
|
|
99,628 |
|
|
|
24,581 |
|
|
|
17,438 |
|
|
|
|
|
|
|
7/12/13 |
|
|
7/12/14 to 7/11/21 |
|
|
|
1.419 |
|
|
|
23,655,950 |
|
|
|
12,283,090 |
|
|
|
3,078,771 |
|
|
|
(1) |
|
Values have been updated to reflect the capital increase. |
254
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 22
Conditions of settlement
All stock options granted by historical Alcatel or historical Lucent (each prior to the business combination) or Alcatel-Lucent are exclusively settled in shares, except those for which the vesting will be accelerated contingent
upon success of the offer as further described in Note 3 above.
For those Alcatel-Lucent stock options that are remain outstanding after the Nokia Offer, the
options will be settled in Nokia shares and will remain subject to the following vesting conditions.
Vesting conditions for plans covered by IFRS 2
|
|
|
|
|
|
|
|
|
|
|
Vesting |
|
Options granted before May 2010 (except for the March 2009 grant to all employees and options granted after May 2008
to Management Committee members) |
|
Options granted after May 2008 and before December 2010 to Management Committee members |
|
Options granted after January 2011
to Management Committee members |
|
Options granted in March 2009 to all employees |
|
Options granted after June 2010 to employees (ex Management Committee
members) |
|
Service conditions |
|
Successive portions over 4 years: 25% of the options are vested after 12 months and, for each month after the first year, 1/48. |
|
For employees with a French employment contract:
Successive portions over 4 years: 50% after 2 years, 25% after 3 years and 25% after 4 years.
For other employees: linearly over 4 years (25% per year). |
|
For employees with a French employment contract:
Successive portions over 4 years: 50% after 2 years, 25% after 3 years and 25% after 4 years.
For other employees: linearly over 4 years (25% per year). |
|
Two successive tranches, at 50% per year over two years. |
|
For employees with a French employment contract:
Successive portions over 4 years: 50% after 2 years, 25% after 3 years and 25% after 4 years.
For other employees: linearly over 4 years (25% per year). |
|
Performance |
|
Not applicable. |
|
Applied to 50% of the grant.
Alcatel-Lucent shares will be measured yearly in relation to a representative sample of 14 peer group companies that are solution and service
providers in the telecommunications equipment sector. Vesting depends on the Alcatel-Lucent ranking compared to its peers. |
|
Applied to 50% of the grant.
Performance condition is linked to a financial criterion based on the Free Cash Flow. At the end of each period, depending on the
performance level achieved, a coefficient of 100%, 75%, 50%, 20% or 0% is used to calculate the number of rights vested for each period. |
|
Not applicable. |
|
Not applicable. |
|
255
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 22
Number of options and exercise prices
Information on the number of stock options and exercise prices is presented below:
|
|
|
|
|
|
|
|
|
|
|
All plans |
|
|
|
Number of stock options |
|
|
Weighted average exercise price
(in euros) |
|
|
|
|
|
|
|
|
|
At January 1, 2012 |
|
|
175,879,780 |
|
|
|
5.58 |
|
|
|
|
Granted |
|
|
11,255,155 |
|
|
|
2.00 |
|
|
|
|
Exercised |
|
|
(46,596) |
|
|
|
0.76 |
|
|
|
|
Forfeited |
|
|
(10,926,218) |
|
|
|
4.91 |
|
|
|
|
Expired |
|
|
(12,437,061) |
|
|
|
13.20 |
|
|
|
|
|
|
|
|
|
|
AT DECEMBER 31, 2012 |
|
|
163,725,060 |
|
|
|
4.80 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted until December 9, 2013 |
|
|
22,417,900 |
|
|
|
1.50 |
|
|
|
|
Exercised until December 9, 2013 |
|
|
(5,396,922) |
|
|
|
2.06 |
|
|
|
|
Forfeited until December 9, 2013 |
|
|
(18,274,115) |
|
|
|
4.46 |
|
|
|
|
Expired until December 9, 2013 |
|
|
(12,636,462) |
|
|
|
9.76 |
|
|
|
|
|
|
|
|
|
|
AT DECEMBER 9, 2013 BEFORE CAPITAL INCREASE |
|
|
149,835,461 |
|
|
|
4.03 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital increase effect |
|
|
8,553,374 |
|
|
|
(0.22) |
|
|
|
|
|
|
|
|
|
|
AT DECEMBER 9, 2013 AFTER CAPITAL INCREASE |
|
|
158,388,835 |
|
|
|
3.81 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised from December 10, 2013 to December 31, 2013 |
|
|
(2,537,051) |
|
|
|
1.97 |
|
|
|
|
Forfeited from December 10, 2013 to December 31, 2013 |
|
|
(1,693,337) |
|
|
|
4.68 |
|
|
|
|
Expired from December 10, 2013 to December 31, 2013 |
|
|
(1,422) |
|
|
|
1.19 |
|
|
|
|
|
|
|
|
|
|
AT DECEMBER 31, 2013 |
|
|
154,157,025 |
|
|
|
3.83 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised |
|
|
(7,500,665) |
|
|
|
1.96 |
|
|
|
|
Forfeited |
|
|
(12,631,995) |
|
|
|
3.91 |
|
|
|
|
Expired |
|
|
(9,568,388) |
|
|
|
10.99 |
|
|
|
|
|
|
|
|
|
|
OUTSTANDING AT DECEMBER 31, 2014 |
|
|
124,455,977 |
|
|
|
3.38 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised |
|
|
(38,595,366) |
|
|
|
2.13 |
|
|
|
|
Forfeited |
|
|
(6,295,635) |
|
|
|
2.98 |
|
|
|
|
Expired |
|
|
(19,927,969) |
|
|
|
8.61 |
|
|
|
|
|
|
|
|
|
|
OUTSTANDING AT DECEMBER 31, 2015 |
|
|
59,637,007 |
|
|
|
2.49 |
|
|
|
Fair value
The fair value of stock options is measured at granting date using the Cox-Ross-Rubinstein binomial model. This allows behavioral factors governing the exercise of stock options to be
taken into consideration and to consider that all options will not be systematically exercised by the end of the exercise period. The expected volatility is determined as being the implied
volatility at the grant date.
256
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 22
Assumptions and fair values for the main plans are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan |
|
|
Grant date |
|
|
|
Share price at grant date (in euros) |
|
|
|
Expected volatility |
|
|
|
Risk-free rate |
|
|
|
Distribution rate on future income |
|
|
|
Fair value (in euros) |
|
|
|
|
|
|
March 2009 |
|
|
03/18/2009 |
|
|
|
1.228 |
|
|
|
64% |
|
|
|
3.00% |
|
|
|
0.8% per year |
|
|
|
0.49 |
|
|
|
March 2009 All employees |
|
|
03/18/2009 |
|
|
|
1.228 |
|
|
|
64% |
|
|
|
3.00% |
|
|
|
0.8% per year |
|
|
|
0.46 |
|
|
|
March 2010 |
|
|
03/17/2010 |
|
|
|
2.400 |
|
|
|
45% |
|
|
|
3.00% |
|
|
|
0.8% per year |
|
|
|
0.95 |
|
|
|
March 2011 |
|
|
03/16/2011 |
|
|
|
3.700 |
|
|
|
40% |
|
|
|
3.00% |
|
|
|
0.8% per year |
|
|
|
1.40 |
|
|
|
March 2012 |
|
|
03/14/2012 |
|
|
|
1.800 |
|
|
|
60% |
|
|
|
1.50% |
|
|
|
0.8% per year |
|
|
|
0.82 |
|
|
|
July 2013 |
|
|
07/12/2013 |
|
|
|
1.500 |
|
|
|
58% |
|
|
|
1.50% |
|
|
|
0.8% per year |
|
|
|
0.68 |
|
|
|
Other plans have fair values between 0.28
and 2.13 and a weighted average fair value of 1.04.
Plans related to acquired companies
Certain plans that existed at companies acquired in business combinations were converted into historical Alcatel or Alcatel-Lucent subscription
stock option plans or stock purchase plans. For plans of companies acquired, the vesting conditions and the option lives of the original plans remain in place.
The option plans of companies that were acquired by Alcatel provide for the issuance of Alcatel-Lucent shares or ADSs upon exercise of options
granted under such plans in an amount determined by applying the exchange ratio used in the acquisition to the number of shares of the acquired company that were the subject of the options.
Upon exercise, Alcatel-Lucent will issue new ADSs (and, consequently, shares).
Performance shares
Conditions of settlement
Performance shares granted by Alcatel-Lucent will be settled in cash upon closing of the Nokia Offer for those employees who
agreed to tender their shares into the offer in exchange for the Company waiving the service and performance conditions of such performance shares. Otherwise, performance shares will be settled according to a liquidity agreement.
The following rules are applicable to all performance share plans granted by Alcatel-Lucent in 2009 and 2010:
· |
|
service condition: For a beneficiary who is an employee and/or Executive Officer of a company within the Group with its registered office in France, his/her performance shares will vest at the end
of a two-year vesting period. Such performance shares will be available following the expiration of a two-year holding period. For a beneficiary who is an employee and/or Executive Officer of a company within the Group with its registered office
outside of France, the vesting period is four years, with no additional holding period; and |
· |
|
performance condition: Evaluation of the Groups performance must be based on the same criteria as those used for the Global Annual Incentive Plan. For each of the criteria, quantified targets
will be fixed at the start of each year for the current fiscal year. At the end of the two or four-year
|
|
|
vesting periods, so long as the beneficiary has been an employee of the Group for two years (with limited exceptions) the number of performance shares that will vest will depend on the
achievement, based on an average, of the annual Group performance targets set by our Board for the two or four-year periods. |
Vesting conditions for Performance Shares granted in 2011
The following rules are applicable to all
performance share plans granted by Alcatel-Lucent in 2011:
· |
|
service condition: For a beneficiary who is an employee and/or Executive Officer of a company within the Group with its registered office in France, his/her performance shares will vest at the end
of a two-year vesting period. Such performance shares will be available following the expiration of a two-year holding period. For a beneficiary who is an employee and/or Executive Officer of a company within the Group with its registered office
outside of France, the vesting period is four years, with no additional holding period; and |
· |
|
performance condition: It is based on the Alcatel-Lucent share price performance measured over two
years against a representative sample of 12 other solution and service providers in the telecommunications equipment sector. The sample was chosen to obtain Alcatel-Lucents ranking among the following issuers: F5 Networks, Ciena, Juniper, ZTE,
Tellabs, Arris, Cisco, ADTRAN, Comverse, Nokia, Ericsson and Motorola Solutions Inc. This sample of providers may be revised as the companies included evolve (due to mergers, bankruptcies, etc). The reference share price is calculated on the basis
of the opening price for Alcatel-Lucent shares on the Euronext Paris market for the 20 trading days preceding the end of each one-year period. The changes in the share price of Alcatel-Lucent and the other issuers in the sample are measured at the
end of the two reference periods of one year, which each counts for 50% of the rights granted. Depending on Alcatel-Lucents share price performance, a different coefficient is used to calculate the number of rights acquired during each period.
The coefficient may be 100%, 70%, 50%, 20% or 0%, the latter corresponding to the case where Alcatel-Lucent is last in this ranking. The coefficient used for the second period applies to the balance of rights that are not acquired during the first
period. For the purposes |
257
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 22
|
|
of determining the final number of vested performance shares at the expiration of the vesting period, with respect to the employees in Group companies having their registered office outside France, the
performance of the Companys share price and of the other issuers, who form part of the representative selection, will be calculated once again on the fourth anniversary date of the Grant Date. All issuers reference share prices at the
Grant date will be compared to the average of all issuers reference share prices determined at each anniversary date of the Grant date during the 4-year vesting period, in order to establish a ranking of the Company and the other issuers in
accordance with the performance of their share price for the whole four-year period. If the Company is not ranked in last position, the total number of performance shares as determined at the end of the second period will finally vest at the end of
the vesting period. |
Vesting conditions for Performance Shares granted in 2014 and 2015
· |
|
service condition: 50% of the performance shares vest at the end of a two-year vesting period and the remaining 50% vest at the end of a four-year period; and |
· |
|
performance condition: it is based on the Alcatel-Lucent share price measured over a two-year period and a four year period against a representative sample of 10 other solution and service
providers in the telecommunications equipment sector. The sample was chosen to obtain Alcatel-Lucents share price performance compared to the share price
|
|
|
performance median among the following group: ADTRAN, Amdocs, Arris, Ciena, Cisco, CommScope, Ericsson, Juniper, Nokia and ZTE. This sample may be revised based on changes at these companies,
especially in case of transactions concerning their structure that may affect their listing. Each period counts for 50% of the rights granted. |
|
|
|
tranche 1: two-year period from year 1 to 2: depending on AlcatelLucents share price performance, a coefficient ranging from 0 to 100%, based on the Alcatel-Lucent share price
performance compared with the median of the sample group, is used to calculate the number of shares vested during the first tranche, |
|
|
|
tranche 2: four-year period from year 1 to 4: depending on AlcatelLucents share price performance, a coefficient ranging from 0 to 100%, based on the Alcatel-Lucent share price
performance compared with the median of the sample group, is used to calculate the number of shares vested during the second tranche. For purposes of determining the final number of performance shares vested at the end of the vesting period, a
minimum condition is considered: if the Alcatel-Lucent share performance is below 60% of the sample group, no rights are vested even those that could have been acquired at the end of the Tranche 1 period. Also, if the level of realization of the
performance condition at the end of Tranche 2 is superior to the one at the end of Tranche 1, the level of realization of the performance condition at the end of Tranche 2 shall apply to the whole vesting of performance shares.
|
258
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 22
Number of performance shares granted and changes in number of performance shares
The change in number of performance shares is shown below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In number of performance shares)
Grant date |
|
03/18/09 |
|
|
03/17/10 |
|
|
03/16/11 |
|
|
03/14/12 |
|
|
07/12/13 |
|
|
09/15/14 |
|
|
07/29/15 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OUTSTANDING AT DECEMBER 31, 2012 |
|
|
5,222,867 |
|
|
|
5,448,012 |
|
|
|
9,245,341 |
|
|
|
10,289,863 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
Granted until December 9, 2013 |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
2,368,500 |
|
|
|
- |
|
|
|
- |
|
Acquired until December 9, 2013 |
|
|
(1,880,603) |
|
|
|
(3,716) |
|
|
|
(988,790) |
|
|
|
(10,350) |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Forfeited until December 9, 2013 |
|
|
(3,342,264) |
|
|
|
(17,496) |
|
|
|
(1,085,897) |
|
|
|
(1,227,938) |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
AT DECEMBER 9, 2013 BEFORE CAPITAL INCREASE |
|
|
- |
|
|
|
5,426,800 |
|
|
|
7,170,654 |
|
|
|
9,051,575 |
|
|
|
2,368,500 |
|
|
|
- |
|
|
|
- |
|
|
|
Capital increase effect |
|
|
- |
|
|
|
312,876 |
|
|
|
410,201 |
|
|
|
517,299 |
|
|
|
134,497 |
|
|
|
- |
|
|
|
- |
|
|
|
At December 9, 2013 after capital increase |
|
|
- |
|
|
|
5,739,676 |
|
|
|
7,580,855 |
|
|
|
9,568,874 |
|
|
|
2,502,997 |
|
|
|
- |
|
|
|
- |
|
|
|
Acquired from December 10, 2013 to December 31, 2013 |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Forfeited from December 10, 2013 to December 31, 2013 |
|
|
- |
|
|
|
(2,617) |
|
|
|
(1,639) |
|
|
|
(194,254) |
|
|
|
(84,544) |
|
|
|
- |
|
|
|
- |
|
|
|
OUTSTANDING AT DECEMBER 31, 2013 |
|
|
- |
|
|
|
5,737,059 |
|
|
|
7,579,216 |
|
|
|
9,374,620 |
|
|
|
2,418,453 |
|
|
|
- |
|
|
|
- |
|
|
|
Granted |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
10,466,473 |
|
|
|
- |
|
Acquired |
|
|
- |
|
|
|
(2,393,947) |
|
|
|
(1,797) |
|
|
|
(2,041,408) |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Forfeited |
|
|
- |
|
|
|
(3,343,112) |
|
|
|
(13,022) |
|
|
|
(364,375) |
|
|
|
(126,813) |
|
|
|
(96,865) |
|
|
|
- |
|
|
|
OUTSTANDING AT DECEMBER 31, 2014 |
|
|
- |
|
|
|
- |
|
|
|
7,564,397 |
|
|
|
6,968,837 |
|
|
|
2,291,640 |
|
|
|
10,369,608 |
|
|
|
- |
|
|
|
Granted |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
9,807,615 |
|
Acquired |
|
|
- |
|
|
|
- |
|
|
|
(3,771,623) |
|
|
|
(4,598) |
|
|
|
(464,977) |
|
|
|
- |
|
|
|
- |
|
Forfeited |
|
|
- |
|
|
|
- |
|
|
|
(3,792,774) |
|
|
|
(22,781) |
|
|
|
(314,921) |
|
|
|
(666,628) |
|
|
|
- |
|
|
|
OUTSTANDING AT DECEMBER 31, 2015 |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
6,941,458 |
|
|
|
1,511,742 |
|
|
|
9,702,980 |
|
|
|
9,807,615 |
|
|
|
Fair value of Performance shares granted by Alcatel-Lucent
The fair value of performance shares with service conditions only is measured at granting date as being the Alcatel-Lucent share price discounted
by the assumed distribution rate on future income, set at 0.8% per year. The fair value of other performance shares is measured at granting date using some stochastic models.
Based on this assumption, the fair values of Alcatel-Lucent performance shares used in the calculation of compensation expense for share-based
payments are as follows:
· |
|
March 18, 2009 plan: fair value of 1.19; |
· |
|
March 17, 2010 plan: fair value of 2.40; |
· |
|
March 16, 2011 plan: fair value of 3.05; |
· |
|
March 14, 2012 plan: fair value of 1.41; |
· |
|
July 12, 2013 plan: fair value of 1.09; |
· |
|
September 15, 2014 plan: fair value of 1.82; and |
· |
|
July 29, 2015 plan: faire value of 2.61.
|
c/ Treasury stock
Alcatel-Lucent established a buy-back program for the ordinary shares, which was renewed at the shareholders annual general meeting held on
May 7, 2013, for the purpose of allocating those shares to employees of the Group under the terms provided by law, of honoring obligations arising from the issuance of securities conferring a right to the capital of the company or for use in an
exchange or as payment for acquisitions. The purchases are limited to a maximum of 10% of the capital stock, and the authorization expires 18 months from the most recent shareholders general meeting at which authorization was given. As
part of this program, no shares were purchased through December 31, 2015 (no shares were purchased in 2014 or 2013).
The carrying
value of Alcatel-Lucent shares owned by Group consolidated subsidiaries was 1,084 million at December 31, 2015
(1,084 million at December 31, 2014 and 1,428 million at December 31, 2013). They are
deducted at cost from equity.
259
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 23
Note 23 Pensions, retirement indemnities and other post-retirement benefits
In accordance with the laws and customs of each country, the Group provides to its employees a
significant number of pension plans, group life plans and reimbursement of medical expenses. Features of the plans also depend upon local legislation, the business and the historical practice of the subsidiary concerned.
State plans
In certain
countries, and more particularly in Western Europe, the Group participates in mandatory social security plans organized at state or industry level, for which contributions expensed correspond to the contributions due to such state or equivalent
organizations. Such plans are considered to be defined contribution plans. However, in certain countries, the element of social security contributions paid that relates to pension plans is not clearly identifiable.
Other defined contribution plans
The benefits paid out depend solely on the amount of contributions paid into the plan and the investment returns arising from the contributions. The Groups obligation is limited to the amount of contributions that are
expensed.
Contributions made to defined contribution plans (excluding mandatory social security plans organized at state or industry
level) were 55 million for 2015 (58 million for 2014 and 103 million for 2013).
Defined benefit plans
The pension and other post-employment benefits for the countries described below represent 99% of our benefit obligation at December 31,
2015.
79% of our total defined benefit obligation relates to retirees. Therefore, our plans are very mature and sensitive to mortality
risk and discount rate changes. If life expectancy increased by one year, the benefit obligation at December 31, 2015 would increase from (27,370) million to (28,414) million. Also, a 50 basis point increase or decrease in the discount rate would decrease or increase the benefit obligation at December 31, 2015 by 1,311 million and 1,440 million, respectively.
Pensions and retirement obligations are determined in accordance with the accounting policies presented in Note 1j.
United States of America
For U.S. employees of the former Lucent group, Alcatel-Lucent maintains defined benefit pension plans covering employees and retirees, as well as
other post-retirement benefit plans for U.S. retirees that include health care, dental benefits and group life insurance coverage. These pension plans feature traditional service-based programs, as well as a cash balance program. The legacy Lucent
cash balance program was added to the defined benefit pension plan for U.S. management employees
hired after December 31, 1998; however, no employees were transitioned from the traditional program to the cash balance program. Additionally, participants in the legacy Lucent cash balance
program are not eligible to receive company-paid post-retirement health and group life insurance coverage. U.S. management employees with less than 15 years of service as of June 30, 2001 are not eligible to receive company-paid
post-retirement group life insurance and health care benefits. Starting January 1, 2008, the defined benefit pension plan for U.S. management employees no longer accepted new entrants. On October 21, 2009, Alcatel-Lucent USA Inc. froze
both the defined benefit pension plan for U.S. management employees and the U.S. supplemental pension plan effective January 1, 2010. For participants in this plan who continued to work for the Group, no additional benefits accrued based on
years of service or compensation earned after December 31, 2009. Starting January 1, 2014, the Group adopted a new cash balance program for U.S. management employees.
Germany
With a few
exceptions, all traditional plans (final salary-based plans and career average salary-based plans) were frozen at December 31, 2012 and replaced by a cash balance program in which contributions are 0.75% of the pay that is eligible to be
included in the pension calculation below the security contribution ceiling and 3.0% for such pay above the security contribution ceiling. Benefits are paid as a lump sum upon retirement in an amount equal to accrued pensions which are collected in
a separate account plus guaranteed interest.
The Netherlands
Starting December 31, 2011, the career average salary-based plan was frozen and replaced by a cash balance program in which contributions are
paid to an insurance company and pensions are indexed to inflation. Starting 2014, this plan was converted into a defined contribution plan. This plan is no longer reserved and the annual contribution is recognized in the consolidated income
statements.
Belgium
Active employees benefit from a final salary-based pension plan in which the benefits are paid as a lump sum amount upon retirement.
France
In addition to the mandatory retirement indemnity plan, we provide a private pension plan (AUXAD plan)
to all corporate executives of Group companies incorporated in France. This pension scheme supplements the benefits under the French AGIRC (General Association of Pensions Institutions for Managerial Staff) plan for the portion of income that
exceeds eight times the annual French social security pension limit,
260
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 23
beyond which there is no legal or contractual pension scheme. The system and the method of
calculation of the AUXAD plan are similar to those of the AGIRC plan. The AUXAD plan does not require the beneficiary to be employed by the Company at the time of retirement.
United Kingdom
There
are two defined benefit pension plans that we offer in the United Kingdom: the Alcatel Pension Plan and the Lucent Technologies Retirement Benefits Plan. Both plans were closed
to new entrants in 2002 and 2001 respectively but active employees still accrue benefits. These plans are both final salary-based programs.
a/ Actuarial assumptions
To determine actuarial valuations, actuaries have determined general assumptions on a country-by-country basis and specific assumptions (rate of employee turnover, salary increases) company by company. The assumptions for 2015, 2014
and 2013 are as follows (the rates indicated are weighted average rates):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2015 |
|
|
2014 |
|
|
2012 |
|
|
|
|
|
|
|
|
|
|
Discount rate |
|
|
3.56% |
|
|
|
3.31% |
|
|
|
4.07% |
|
|
|
|
|
Future salary increases |
|
|
2.49% |
|
|
|
2.56% |
|
|
|
3.36% |
|
Post-retirement cost trend rate |
|
|
6.00% to 4.90% |
|
|
|
6.60% to 4.90% |
|
|
|
5.90% to 4.90% |
|
|
|
The above rates are broken down by geographical segment as follows for 2015, 2014 and 2013:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2015 |
|
|
2014 |
|
|
2013 |
|
|
|
Discount rate |
|
|
Future salary increases |
|
|
Discount rate |
|
|
Future salary increases |
|
|
Discount rate |
|
|
Future salary increases |
|
France |
|
|
2.00% |
|
|
|
2.00% |
|
|
|
1.75% |
|
|
|
1.99% |
|
|
|
3.25% |
|
|
|
2.00% |
|
|
|
|
|
|
|
|
Belgium |
|
|
2.00% |
|
|
|
3.00% |
|
|
|
1.75% |
|
|
|
3.00% |
|
|
|
3.25% |
|
|
|
3.25% |
|
|
|
|
|
|
|
|
United Kingdom |
|
|
3.75% |
|
|
|
4.50% |
|
|
|
3.42% |
|
|
|
4.27% |
|
|
|
4.50% |
|
|
|
4.56% |
|
|
|
|
|
|
|
|
Germany |
|
|
2.00% |
|
|
|
3.00% |
|
|
|
1.75% |
|
|
|
3.00% |
|
|
|
3.25% |
|
|
|
3.00% |
|
|
|
|
|
|
|
|
Rest of Europe |
|
|
1.57% |
|
|
|
0.43% |
|
|
|
1.48% |
|
|
|
0.35% |
|
|
|
2.94% |
|
|
|
2.45% |
|
|
|
|
|
|
|
|
United States of America |
|
|
3.78% |
|
|
|
2.11% |
|
|
|
3.49% |
|
|
|
2.12% |
|
|
|
4.53% |
|
|
|
2.67% |
|
|
|
|
|
|
|
|
Other |
|
|
4.04% |
|
|
|
3.72% |
|
|
|
4.35% |
|
|
|
3.92% |
|
|
|
5.63% |
|
|
|
4.22% |
|
The discount rates are obtained by reference to market yields on high quality bonds (government and
prime-rated corporationsAA or AAA) in each country having maturity dates equivalent to those of the plans.
For the Euro zone and
United Kingdom, the discount rates used are the Bloomberg Corporate AA yields and, for the U.S., the original CitiGroup pension discount yield curve was used.
These references comply with IAS 19 requirements and have been used consistently by us until December 31, 2012. As Bloomberg stopped publishing these yields starting 2013, discount
rates for the Euro zone and United Kingdom are now determined based on Iboxx AA Corporate yields.
261
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 23
b/ Components of net periodic cost of post-employment benefit
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions of euros) |
|
2015 |
|
|
2014 |
|
|
2013 |
|
|
|
|
|
|
|
|
|
|
Service cost and prior service cost |
|
|
(112) |
|
|
|
(100) |
|
|
|
(68) |
|
|
|
|
|
Interest cost on the benefit obligation |
|
|
(1,067) |
|
|
|
(1,026) |
|
|
|
(927) |
|
|
|
|
|
Interest income on plan assets net of administrative expense |
|
|
989 |
|
|
|
1,037 |
|
|
|
886 |
|
|
|
|
|
Interest cost on unrecognized surplus |
|
|
(43) |
|
|
|
(55) |
|
|
|
(43) |
|
|
|
|
|
Effect of curtailments and settlements |
|
|
(69) |
|
|
|
(44) |
|
|
|
(19) |
|
|
|
|
|
Plan amendments |
|
|
396 |
|
|
|
112 |
|
|
|
133 |
|
|
|
NET PERIODIC BENEFIT (COST) |
|
|
94 |
|
|
|
(76) |
|
|
|
(38) |
|
|
|
|
|
|
|
Of which: |
|
|
|
|
|
|
|
|
|
|
|
|
· Recognized in Income (loss) from operating activities before restructuring costs, litigations, gain/(loss) on disposal of consolidated entities and post-retirement benefit plan
amendments |
|
|
(112) |
|
|
|
(99) |
|
|
|
(68) |
|
· Recognized in restructuring costs |
|
|
(69) |
|
|
|
(44) |
|
|
|
(19) |
|
· Post-retirement benefit plan amendments |
|
|
396 |
|
|
|
112 |
|
|
|
133 |
|
· Recognized in other financial income (loss) |
|
|
(121) |
|
|
|
(44) |
|
|
|
(84) |
|
· Recognized in income (loss) from discontinued operations |
|
|
- |
|
|
|
(1) |
|
|
|
- |
|
|
|
c/ Change in the obligation recorded in the statement of financial position
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions of euros) |
|
2015 |
|
|
2014 |
|
|
2013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in benefit obligation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefit obligation at January 1 |
|
|
(31,570) |
|
|
|
(25,398) |
|
|
|
(30,104) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service cost |
|
|
(112) |
|
|
|
(100) |
|
|
|
(68) |
|
|
|
|
|
Interest cost on the benefit obligation |
|
|
(1,067) |
|
|
|
(1,026) |
|
|
|
(927) |
|
|
|
|
|
Plan participants contributions |
|
|
(151) |
|
|
|
(138) |
|
|
|
(150) |
|
|
|
|
|
Amendments |
|
|
(23) |
|
|
|
112 |
|
|
|
133 |
|
|
|
|
|
Business combinations |
|
|
- |
|
|
|
- |
|
|
|
(8) |
|
|
|
|
|
Disposals |
|
|
6 |
|
|
|
46 |
|
|
|
7 |
|
|
|
|
|
Curtailments |
|
|
(12) |
|
|
|
(14) |
|
|
|
6 |
|
|
|
|
|
Settlements |
|
|
5,184 |
|
|
|
43 |
|
|
|
28 |
|
|
|
|
|
Special termination benefits |
|
|
(57) |
|
|
|
(29) |
|
|
|
(24) |
|
|
|
|
|
Actuarial gains and (losses) due to changes in financial assumptions |
|
|
896 |
|
|
|
(2,276) |
|
|
|
2,092 |
|
|
|
|
|
Actuarial gains and (losses) due to changes in demographic assumptions |
|
|
184 |
|
|
|
(1,905) |
|
|
|
(29) |
|
|
|
|
|
Actuarial gains and (losses) - Other |
|
|
(187) |
|
|
|
(10) |
|
|
|
221 |
|
|
|
|
|
Benefits paid from plan assets |
|
|
2,614 |
|
|
|
2,304 |
|
|
|
2,329 |
|
|
|
|
|
Benefits paid from the employer |
|
|
60 |
|
|
|
73 |
|
|
|
86 |
|
|
|
|
|
Medicare Part D Subsidy |
|
|
(20) |
|
|
|
- |
|
|
|
(19) |
|
|
|
|
|
Foreign currency translation and other |
|
|
(3,116) |
|
|
|
(3,252) |
|
|
|
1,029 |
|
|
|
Benefit obligation at December 31 |
|
|
(27,370) |
|
|
|
(31,570) |
|
|
|
(25,398) |
|
|
|
Benefit obligation excluding effect of future salary increases |
|
|
(27,136) |
|
|
|
(31,331) |
|
|
|
(25,148) |
|
|
|
|
|
Effect of future salary increases |
|
|
(234) |
|
|
|
(239) |
|
|
|
(250) |
|
|
|
BENEFIT OBLIGATION |
|
|
(27,370) |
|
|
|
(31,570) |
|
|
|
(25,398) |
|
|
|
Pertaining to retirement plans |
|
|
(24,127) |
|
|
|
(28,583) |
|
|
|
(22,766) |
|
|
|
|
|
Pertaining to other post-employment plans |
|
|
(3,243) |
|
|
|
(2,987) |
|
|
|
(2,632) |
|
|
|
262
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 23
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions of euros) |
|
2015 |
|
|
2014 |
|
|
2013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in plan assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of plan assets at January 1 |
|
|
30,220 |
|
|
|
25,944 |
|
|
|
28,796 |
|
|
|
|
|
Interest income on plan assets net of administrative expense |
|
|
989 |
|
|
|
1,037 |
|
|
|
886 |
|
|
|
|
|
Actuarial gains and (losses) |
|
|
(982) |
|
|
|
2,113 |
|
|
|
(596) |
|
|
|
|
|
Employers contributions |
|
|
82 |
|
|
|
118 |
|
|
|
120 |
|
|
|
|
|
Plan participants contributions |
|
|
151 |
|
|
|
138 |
|
|
|
150 |
|
|
|
|
|
Amendments |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
Business combinations |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
Disposals |
|
|
- |
|
|
|
(6) |
|
|
|
- |
|
|
|
|
|
Curtailments |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
Settlements |
|
|
(4,765) |
|
|
|
(42) |
|
|
|
(27) |
|
|
|
|
|
Benefits paid/Special termination benefits |
|
|
(2,614) |
|
|
|
(2,304) |
|
|
|
(2,329) |
|
|
|
|
|
Foreign currency translation and other |
|
|
(3,022) |
|
|
|
3,222 |
|
|
|
(1,056) |
|
|
|
FAIR VALUE OF PLAN ASSETS AT DECEMBER 31 |
|
|
26,099 |
|
|
|
30,220 |
|
|
|
25,944 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions of euros) |
|
2015 |
|
|
2014 |
|
|
2013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in unrecognized surplus (due to application of asset ceiling and IFRIC14) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrecognized surplus at January 1 |
|
|
(1,177) |
|
|
|
(1,250) |
|
|
|
(1,233) |
|
|
|
|
|
Interest cost on unrecognized surplus |
|
|
(43) |
|
|
|
(55) |
|
|
|
(43) |
|
|
|
|
|
Change in the unrecognized surplus |
|
|
1,023 |
|
|
|
256 |
|
|
|
(21) |
|
|
|
|
|
Foreign currency translation |
|
|
(103) |
|
|
|
(128) |
|
|
|
47 |
|
|
|
UNRECOGNIZED SURPLUS AT DECEMBER 31 |
|
|
(300) |
|
|
|
(1,177) |
|
|
|
(1,250) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions of euros) |
|
2015 |
|
|
2014 |
|
|
2013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Present value of defined benefit obligations that are wholly or partly funded |
|
|
(25,893) |
|
|
|
(29,971) |
|
|
|
(23,979) |
|
|
|
|
|
Fair value of plan assets |
|
|
26,099 |
|
|
|
30,220 |
|
|
|
25,944 |
|
|
|
|
|
Funded (unfunded) status of defined benefit obligations that are wholly or partly funded |
|
|
206 |
|
|
|
249 |
|
|
|
1,965 |
|
|
|
|
|
Present value of defined benefit obligations that are wholly unfunded |
|
|
(1,477) |
|
|
|
(1,599) |
|
|
|
(1,419) |
|
|
|
|
|
(Unfunded) / funded status |
|
|
(1,271) |
|
|
|
(1,350) |
|
|
|
546 |
|
|
|
|
|
Unrecognized surplus (due to application of asset ceiling and IFRIC14) |
|
|
(300) |
|
|
|
(1,177) |
|
|
|
(1,250) |
|
|
|
NET AMOUNT RECOGNIZED |
|
|
(1,571) |
|
|
|
(2,527) |
|
|
|
(704) |
|
|
|
|
|
|
|
Of which: |
|
|
|
|
|
|
|
|
|
|
|
|
· prepaid pension costs |
|
|
2,935 |
|
|
|
2,636 |
|
|
|
3,150 |
|
· pensions, retirement indemnities and other post-retirement benefit obligations |
|
|
(4,506) |
|
|
|
(5,163) |
|
|
|
(3,854) |
|
|
|
263
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 23
Change in pension and post-retirement net asset (liability) recognized
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2015 |
|
|
December 31, 2014 |
|
|
December 31, 2013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions of euros) |
|
Pension
benefits |
|
|
Post- retirement
benefits |
|
|
Total |
|
|
Pension
benefits |
|
|
Post- retirement
benefits |
|
|
Total |
|
|
Pension
benefits |
|
|
Post- retirement
benefits |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
NET ASSET (LIABILITY) RECOGNIZED AT THE BEGINNING OF THE PERIOD |
|
|
(132) |
|
|
|
(2,395) |
|
|
|
(2,527) |
|
|
|
1,392 |
|
|
|
(2,096) |
|
|
|
(704) |
|
|
|
95 |
|
|
|
(2,636) |
|
|
|
(2,541) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operational charge |
|
|
(111) |
|
|
|
(1) |
|
|
|
(112) |
|
|
|
(97) |
|
|
|
(2) |
|
|
|
(99) |
|
|
|
(66) |
|
|
|
(2) |
|
|
|
(68) |
|
|
|
|
|
|
|
|
|
|
|
Financial income |
|
|
(28) |
|
|
|
(93) |
|
|
|
(121) |
|
|
|
39 |
|
|
|
(83) |
|
|
|
(44) |
|
|
|
(3) |
|
|
|
(81) |
|
|
|
(84) |
|
|
|
|
|
|
|
|
|
|
|
Curtailment (1) |
|
|
(65) |
|
|
|
(4) |
|
|
|
(69) |
|
|
|
(41) |
|
|
|
(3) |
|
|
|
(44) |
|
|
|
(18) |
|
|
|
(1) |
|
|
|
(19) |
|
|
|
|
|
|
|
|
|
|
|
Pension and healthcare plan amendments (2) |
|
|
395 |
|
|
|
1 |
|
|
|
396 |
|
|
|
7 |
|
|
|
105 |
|
|
|
112 |
|
|
|
78 |
|
|
|
55 |
|
|
|
133 |
|
|
|
|
|
|
|
|
|
|
|
Discontinued operations (Genesys business) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(1) |
|
|
|
- |
|
|
|
(1) |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total recognized in profits (losses) |
|
|
191 |
|
|
|
(97) |
|
|
|
94 |
|
|
|
(93) |
|
|
|
17 |
|
|
|
(76) |
|
|
|
(9) |
|
|
|
(29) |
|
|
|
(38) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Actuarial gains and (losses) for the period |
|
|
(31) |
|
|
|
(59) |
|
|
|
(90) |
|
|
|
(1,870) |
|
|
|
(208) |
|
|
|
(2,078) |
|
|
|
1,417 |
|
|
|
271 |
|
|
|
1,688 |
|
|
|
|
|
|
|
|
|
|
|
Asset ceiling limitation and IFRIC14 effect |
|
|
1,023 |
|
|
|
- |
|
|
|
1,023 |
|
|
|
256 |
|
|
|
- |
|
|
|
256 |
|
|
|
(21) |
|
|
|
- |
|
|
|
(21) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total recognized in Statement of comprehensive income (3) |
|
|
992 |
|
|
|
(59) |
|
|
|
933 |
|
|
|
(1,614) |
|
|
|
(208) |
|
|
|
(1,822) |
|
|
|
1,396 |
|
|
|
271 |
|
|
|
1,667 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contributions and benefits paid |
|
|
120 |
|
|
|
2 |
|
|
|
122 |
|
|
|
182 |
|
|
|
10 |
|
|
|
192 |
|
|
|
177 |
|
|
|
12 |
|
|
|
189 |
|
|
|
|
|
|
|
|
|
|
|
420 transfer |
|
|
(180) |
|
|
|
180 |
|
|
|
- |
|
|
|
(169) |
|
|
|
169 |
|
|
|
- |
|
|
|
(196) |
|
|
|
196 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
Change in consolidated companies |
|
|
6 |
|
|
|
- |
|
|
|
6 |
|
|
|
40 |
|
|
|
- |
|
|
|
40 |
|
|
|
7 |
|
|
|
- |
|
|
|
7 |
|
|
|
|
|
|
|
|
|
|
|
Other (reclassifications and exchange rate changes) |
|
|
96 |
|
|
|
(295) |
|
|
|
(199) |
|
|
|
130 |
|
|
|
(287) |
|
|
|
(157) |
|
|
|
(78) |
|
|
|
90 |
|
|
|
12 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET ASSET (LIABILITY) RECOGNIZED AT THE END OF THE PERIOD |
|
|
1,073 |
|
|
|
(2,644) |
|
|
|
(1,571) |
|
|
|
(132) |
|
|
|
(2,395) |
|
|
|
(2,527) |
|
|
|
1,392 |
|
|
|
(2,096) |
|
|
|
(704) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Of which: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
· Prepaid pension costs |
|
|
2,935 |
|
|
|
- |
|
|
|
2,935 |
|
|
|
2,636 |
|
|
|
- |
|
|
|
2,636 |
|
|
|
3,150 |
|
|
|
- |
|
|
|
3,150 |
|
|
|
|
|
|
|
|
|
|
|
· Pension, retirement indemnities and post-retirement benefits liability |
|
|
(1,862) |
|
|
|
(2,644) |
|
|
|
(4,506) |
|
|
|
(2,768) |
|
|
|
(2,395) |
|
|
|
(5,163) |
|
|
|
(1,758) |
|
|
|
(2,096) |
|
|
|
(3,854) |
|
|
|
(1) |
|
Accounted for in restructuring costs. |
(2) |
|
Accounted for on a specific line item Post-retirement benefit plan amendments in the income statement. |
(3) |
|
The amounts recognized directly in the Statement of Comprehensive Income indicated in the table above differ from those disclosed in the Statement of Comprehensive Income, due to the amounts
related to discontinued operations, which are excluded in the above schedule. |
Funding requirements are usually
determined for each individual plan, and as a result excess plan assets for overfunded plans cannot be used for underfunded plans. Our main underfunded plans are our U.S. post-retirement benefits and our French and German pension plans. Decisions on
funding the benefit obligations are taken based on each countrys legal requirements and the tax-deductibility of the contributions made. In France and Germany, the funding of pension obligations relies primarily on defined contribution plans;
setting up other funding arrangements is not common practice. Furthermore, in Germany, the benefits accruing to employees are guaranteed in the event of bankruptcy through a system of mutual insurance common to all companies involved in similar
plans. See Note 23f below for information on U.S. plans.
264
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 23
The benefit obligation, the fair value of the plan assets and the actuarial gains (losses) generated for the current year and the previous years
are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions of euros) |
|
Benefit obligation |
|
|
Plan assets |
|
|
Funded (underfunded) status |
|
|
Experience adjustments generated on the benefit obligation |
|
|
Experience adjustments generated on the plan assets |
|
|
|
|
|
Amount |
|
|
In percentage of the benefit obligation |
|
|
Amount |
|
|
In percentage of the plan assets |
|
|
|
|
|
|
2013 |
|
|
(25,398) |
|
|
|
25,944 |
|
|
|
546 |
|
|
|
221 |
|
|
|
0.87% |
|
|
|
(596) |
|
|
|
2.30% |
|
|
|
|
|
|
|
|
|
2014 |
|
|
(31,570) |
|
|
|
30,220 |
|
|
|
(1,350) |
|
|
|
(10) |
|
|
|
0.03% |
|
|
|
2,113 |
|
|
|
6.99% |
|
|
|
|
|
|
|
|
|
2015 |
|
|
(27,370) |
|
|
|
26,099 |
|
|
|
(1,271) |
|
|
|
(172) |
|
|
|
0.63% |
|
|
|
(982) |
|
|
|
3.76% |
|
|
|
With respect to the health care plans, a change of one percentage point in the assumed health costs has the
following impact:
|
|
|
|
|
|
|
|
|
(In millions of euros) |
|
Increase of 1% |
|
|
Decrease of 1% |
|
|
|
|
|
|
|
|
|
|
Impact on the current service cost and interest costs |
|
|
4 |
|
|
|
(3) |
|
|
|
|
Impact on the benefit obligation |
|
|
95 |
|
|
|
(85) |
|
|
|
The plan assets of retirement plans are invested as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions of euros) |
|
|
|
|
|
|
|
|
|
|
|
|
Asset allocation at December 31, 2015 |
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equities (US market) |
|
|
891 |
|
|
|
128 |
|
|
|
- |
|
|
|
1,019 |
|
Equities (Other markets) |
|
|
1,138 |
|
|
|
138 |
|
|
|
- |
|
|
|
1,276 |
|
Government and Treasury bonds |
|
|
4,407 |
|
|
|
1,466 |
|
|
|
- |
|
|
|
5,873 |
|
Corporate bonds |
|
|
382 |
|
|
|
10,056 |
|
|
|
12 |
|
|
|
10,450 |
|
Real estate (properties) |
|
|
16 |
|
|
|
- |
|
|
|
984 |
|
|
|
1,000 |
|
Real estate (investments) |
|
|
414 |
|
|
|
- |
|
|
|
- |
|
|
|
414 |
|
Cash and cash equivalents |
|
|
443 |
|
|
|
816 |
|
|
|
- |
|
|
|
1,259 |
|
Alternative (Private equity) |
|
|
- |
|
|
|
- |
|
|
|
1,716 |
|
|
|
1,716 |
|
Alternative (Absolute return and other) |
|
|
10 |
|
|
|
335 |
|
|
|
1,185 |
|
|
|
1,530 |
|
Insurance company products |
|
|
55 |
|
|
|
797 |
|
|
|
710 |
|
|
|
1,562 |
|
|
|
FAIR VALUE OF PLAN ASSETS AT DECEMBER 31, 2015 |
|
|
7,756 |
|
|
|
13,736 |
|
|
|
4,607 |
|
|
|
26,099 |
|
|
|
Level 1 Unadjusted quoted prices in active markets that are accessible at the measurement date for
identical, unrestricted assets or liabilities.
Level 2 Quoted prices in markets that are not considered to be active or
financial instruments for which all significant inputs are observable, either directly or indirectly (inputs include quoted prices for similar assets or liabilities in active markets, interest rates and yield curves, credit risk assessments, etc.).
Level 3 Significant unobservable inputs for assets or liabilities.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions of euros) |
|
|
|
|
|
|
|
|
|
|
|
|
Asset allocation at December 31, 2014 |
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
|
|
|
|
|
Equities (US market) |
|
|
910 |
|
|
|
124 |
|
|
|
- |
|
|
|
1,034 |
|
Equities (Other markets) |
|
|
1,218 |
|
|
|
156 |
|
|
|
- |
|
|
|
1,374 |
|
Government and Treasury bonds |
|
|
4,373 |
|
|
|
2,405 |
|
|
|
- |
|
|
|
6,778 |
|
Corporate bonds |
|
|
499 |
|
|
|
10,710 |
|
|
|
17 |
|
|
|
11,226 |
|
Real estate (properties) |
|
|
16 |
|
|
|
- |
|
|
|
911 |
|
|
|
927 |
|
Real estate (investments) |
|
|
427 |
|
|
|
- |
|
|
|
- |
|
|
|
427 |
|
Cash and cash equivalents |
|
|
395 |
|
|
|
3,515 |
|
|
|
- |
|
|
|
3,910 |
|
Alternative (Private equity) |
|
|
- |
|
|
|
- |
|
|
|
1,700 |
|
|
|
1,700 |
|
Alternative (Absolute return and other) |
|
|
31 |
|
|
|
320 |
|
|
|
1,007 |
|
|
|
1,358 |
|
Insurance company products |
|
|
116 |
|
|
|
1,040 |
|
|
|
330 |
|
|
|
1,486 |
|
|
|
|
|
|
FAIR VALUE OF PLAN ASSETS AT DECEMBER 31, 2014 |
|
|
7,985 |
|
|
|
18,270 |
|
|
|
3,965 |
|
|
|
30,220 |
|
|
|
|
|
|
265
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions of euros) |
|
|
|
|
|
|
|
|
|
|
|
|
Asset allocation at December 31, 2013 |
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equities (US market) |
|
|
864 |
|
|
|
135 |
|
|
|
- |
|
|
|
999 |
|
|
|
|
|
|
Equities (Other markets) |
|
|
1,259 |
|
|
|
171 |
|
|
|
- |
|
|
|
1,430 |
|
|
|
|
|
|
Government and Treasury bonds |
|
|
4,438 |
|
|
|
2,759 |
|
|
|
- |
|
|
|
7,197 |
|
|
|
|
|
|
Corporate bonds |
|
|
427 |
|
|
|
9,049 |
|
|
|
43 |
|
|
|
9,519 |
|
|
|
|
|
|
Real estate (properties) |
|
|
13 |
|
|
|
- |
|
|
|
1,089 |
|
|
|
1,102 |
|
|
|
|
|
|
Real estate (investments) |
|
|
408 |
|
|
|
- |
|
|
|
- |
|
|
|
408 |
|
|
|
|
|
|
Cash and cash equivalents |
|
|
329 |
|
|
|
933 |
|
|
|
- |
|
|
|
1,262 |
|
|
|
|
|
|
Alternative (Private equity) |
|
|
- |
|
|
|
- |
|
|
|
1,503 |
|
|
|
1,503 |
|
|
|
|
|
|
Alternative (Absolute return and other) |
|
|
1 |
|
|
|
268 |
|
|
|
867 |
|
|
|
1,136 |
|
|
|
|
|
|
Insurance company products |
|
|
141 |
|
|
|
947 |
|
|
|
300 |
|
|
|
1,388 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FAIR VALUE OF PLAN ASSETS AT DECEMBER 31, 2013 |
|
|
7,880 |
|
|
|
14,262 |
|
|
|
3,802 |
|
|
|
25,944 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For historical Alcatel companies, the investment policy relating to plan assets within the Group
depends upon local practices. In all cases, the proportion of equity securities cannot exceed 80% of plan assets and no individual equity security may represent more than 5% of total equity securities within the plan. The equity securities held by
the plan must be listed on a recognized
exchange. The bonds held by the plan must have a minimum A rating according to Standard & Poors or Moodys rating criteria.
The expected contributions and benefits paid directly by the Group to retirees for 2016 are 145 million for the pension and
other post-retirement benefit plans.
Expected benefit payments to
be made to beneficiaries from defined benefit plans through 2025 are as follows:
|
|
|
|
|
(In millions of euros) Total |
|
Expected benefit payments |
|
|
|
|
|
|
2016 |
|
|
2,127 |
|
2017 |
|
|
1,993 |
|
2018 |
|
|
1,942 |
|
2019 |
|
|
1,903 |
|
2020 |
|
|
1,882 |
|
|
|
2021 - 2025 |
|
|
8,657 |
|
|
|
d/ Funded status
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions of euros) |
|
December 31, 2015 |
|
|
December 31, 2014 |
|
|
December 31, 2013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefit obligation |
|
|
(27,370) |
|
|
|
(31,570) |
|
|
|
(25,398) |
|
Fair value of plan assets |
|
|
26,099 |
|
|
|
30,220 |
|
|
|
25,944 |
|
Funded (underfunded) status |
|
|
(1,271) |
|
|
|
(1,350) |
|
|
|
546 |
|
Unrecognized prior service cost and surplus (due to application of asset ceiling and IFRIC14) |
|
|
(300) |
|
|
|
(1,177) |
|
|
|
(1,250) |
|
|
|
NET LIABILITY RECOGNIZED AT END OF PERIOD |
|
|
(1,571) |
|
|
|
(2,527) |
|
|
|
(704) |
|
|
|
Detail of funded status by country
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions of euros) |
|
2015 |
|
|
2014 |
|
|
2013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
USA (1) |
|
|
(1,023) |
|
|
|
(990) |
|
|
|
823 |
|
Belgium |
|
|
890 |
|
|
|
866 |
|
|
|
842 |
|
United Kingdom |
|
|
236 |
|
|
|
225 |
|
|
|
137 |
|
Germany |
|
|
(1,050) |
|
|
|
(1,124) |
|
|
|
(979) |
|
Other |
|
|
(324) |
|
|
|
(327) |
|
|
|
(277) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL (UNDERFUNDED) FUNDED STATUS |
|
|
(1,271) |
|
|
|
(1,350) |
|
|
|
546 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
See detailed information by plans in Note 23f. |
266
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 23
e/ Pension and healthcare plan amendments
Lump sum offer in 2015
On June 26, 2015, Alcatel-Lucent began mailing to about 85,000 retirees, former employees and surviving beneficiaries who are currently
receiving monthly pension payments from either the U.S. Management Pension Plan or the U.S. Inactive Occupational Pension Plan information regarding a one-time opportunity to convert their current monthly pension payment to a lump-sum
payment. This offer, called the Alcatel-Lucent Retiree Lump-Sum Window Program, formally began on July 20, 2015 and ended on September 25, 2015. The program was entirely voluntary. In all, about 26,000 eligible individuals about 30%
elected to convert their existing pension benefit to a lump-sum payment, representing about 4.8 billion in total payments. Payments occurred on November 2, 2015 and
December 1, 2015, and came entirely from existing plan assets. Payments constituted a complete settlement of our pension obligations with respect to those individuals electing this offer. Corresponding benefit obligation of the 4.8 billion payments is 5.2 billion. The
405 million gain difference was accounted for in the line item Post-retirement benefit plan amendments of the 2015 consolidated income statement.
2014 U.S. formerly represented healthcare plan amendment
Alcatel-Lucent has a collective bargaining agreement with the Communication Workers of America (CWA) and International Brotherhood of Electrical
Workers (IBEW) to provide post-retirement medical and dental benefits, for formerly represented retirees until December 31, 2016. On July 31, 2014, Alcatel-Lucent agreed to a three-year extension of post-retirement healthcare benefits
until December 31, 2019 in exchange for a reduction in the Groups obligation to pay for retirees, who are subject to annual dollar caps, of 30 million for 2017, 30 million for 2018 and 30 million for 2019. Reductions of 81 million in the existing obligation were accounted for in the Post-retirement benefit plan amendments line item of the consolidated income statement.
2014 U.S. management healthcare plan amendment
Alcatel-Lucent currently subsidizes retiree healthcare benefits for formerly Management retirees who retired on or after March 1, 1990 and
who are under 65 years old. Starting January 1, 2015, Alcatel-Lucent will discontinue this subsidy, resulting in a gain of 25 million. This plan amendment was accounted for
in the Post-retirement benefit plan amendments line item of the 2014 consolidated income statement.
2014 Dutch pension
plan amendment
In 2014, Alcatel-Lucent converted the defined benefit pension plan of current active employees into a defined
contribution
pension plan under which Alcatel-Lucent no longer guarantees any increases in pensions. This plan amendment resulted in a gain of
7 million and was accounted for in the Post-retirement benefit plan amendments line item of the 2014 consolidated income statement.
2013 French AUXAD pension plan amendment
AUXAD is a French supplemental pension plan for the portion of income that exceeds eight times the annual French social security pension limit, beyond which there is no legal or contractual pension scheme. Starting January 1,
2013, the plan was amended to be fully aligned with the conditions of the French AGIRC scheme (General Association of Pension Institutions for Managerial Staff). Amendments included changes in the contribution rate, in the pensions for beneficiaries
having a certain number of children, in certain technical elements and in the retirement age. During 2013, these changes were accounted for as a 41 million gain in the line
item Post-retirement benefit plan amendments of the consolidated income statement.
2013 German pension plans amendment
Most of our German active employees have been transferred out of their traditional pension plans into a new cash balance plan
whose benefits are lower than in the previous plans. The reductions in the obligation were accounted for as a 35 million gain in the line item Post-retirement benefit
plan amendments of the consolidated income statement.
2013 U.S. represented healthcare plan amendment
Alcatel-Lucent USA, Inc.s 2004 U.S. collective bargaining agreement with the Communication Workers of America and the International
Brotherhood of Electrical Workers provides for retiree healthcare benefits, among other items, for formerly represented retirees. The collective bargaining agreement expired on May 24, 2014. On February 15, 2013, Alcatel-Lucent USA, Inc.
and its unions agreed to a two-year extension of retiree healthcare benefits until December 31, 2016, although the Groups obligation to pay for retirees, who are subject to annual dollar caps, was reduced by 30 million for 2015 and by 30 million for 2016. Reductions of 55 million in our existing obligation were accounted for in the Post-retirement benefit plan amendments line item of the consolidated income statement.
f/ Alcatel-Lucents U.S. pension and post-retirement obligations (Supplementary information)
All the following tables and information relate only to our U.S. pension and post-retirement plans. All these data are included in the figures
presented on a consolidated basis in Notes 23a, b, c and d and are presented below in U.S. dollars.
267
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 23
Key assumptions
|
|
|
|
|
|
|
|
|
|
|
|
|
Assumptions used to determine: |
|
December
2015 |
|
|
December 2014 |
|
|
December
2013 |
|
|
|
|
|
|
|
|
|
|
Benefit obligations - discount rate |
|
|
|
|
|
|
|
|
|
|
|
|
Pension |
|
|
3.79% |
|
|
|
3.49% |
|
|
|
4.19% |
|
|
|
|
|
Post-retirement health care and other |
|
|
3.44% |
|
|
|
3.21% |
|
|
|
3.72% |
|
|
|
|
|
Post-retirement group life |
|
|
4.02% |
|
|
|
3.69% |
|
|
|
4.49% |
|
|
|
|
|
Rate of compensation increase |
|
|
2.11% |
|
|
|
2.12% |
|
|
|
2.44% |
|
|
|
|
|
Net benefit cost or credit - discount rate |
|
|
|
|
|
|
|
|
|
|
|
|
Pension |
|
|
3.49% |
|
|
|
4.19% |
|
|
|
3.30% |
|
|
|
|
|
Post-retirement health care and other |
|
|
3.21% |
|
|
|
3.72% |
|
|
|
2.84% |
|
|
|
|
|
Post-retirement group life |
|
|
3.69% |
|
|
|
4.49% |
|
|
|
3.60% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2015 |
|
|
December 31, 2014 |
|
|
December 31, 2013 |
|
|
|
|
|
|
|
|
|
|
Assumed health care cost trend rates |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Health care cost trend rate assumed for next year |
|
|
5.90% |
|
|
|
6.50% |
|
|
|
5.80% |
|
|
|
|
|
Health care cost trend rate assumed for next year (excluding post-retirement dental benefits) |
|
|
6.00% |
|
|
|
6.60% |
|
|
|
5.90% |
|
|
|
|
|
Rate that the cost trend rate gradually declines to |
|
|
4.90% |
|
|
|
4.90% |
|
|
|
4.90% |
|
|
|
|
|
Year that the rate reaches the rate it is assumed to remain at |
|
|
2028 |
|
|
|
2024 |
|
|
|
2024 |
|
|
|
The assumed health care cost trend rate has a significant effect on the amounts reported. A one-percentage-point
change in the assumed health care cost trend rate would have the following effects:
|
|
|
|
|
|
|
|
|
(In millions of U.S. dollars) |
|
1 percentage point |
|
|
Increase |
|
|
Decrease |
|
|
|
|
|
|
Effect on total of service and interest cost components |
|
|
4 |
|
|
|
(3) |
|
|
|
|
Effect on post-retirement benefit obligation |
|
|
103 |
|
|
|
(92) |
|
|
|
Discount rates for Alcatel-Lucents U.S. plans are determined using the values published in
the original CitiGroup Pension Discount Curve which is based on AA-rated corporate bonds. Each future years expected benefit payments are discounted by the corresponding value in the CitiGroup Curve, and for those years not
presented in the CitiGroup Curve, we use the value of the last year presented for benefit payments expected to occur beyond the final year of the Curve. Then a single discount rate is selected that results in the same interest cost for the next
period as the application of the individual rates would have produced. Unique rates are developed for each major plan; some very small plans are grouped for this process. The average durations of Alcatel-Lucents major U.S. pension obligations
and post-retirement health care obligations were 10.06 years and 7.70 years, respectively, as of December 31, 2015 (10.43 years and 7.96 years, respectively, as of December 31, 2014 and 9.30 years and 7.09 years, respectively, as of
December 31, 2013).
Until September 30, 2014, we retained the RP-2000 Combined Health Mortality table with Generational
Projection based on the
U.S. Society of Actuaries Scale AA. On October 27, 2014, the U.S. Society of Actuaries (SOA) issued new mortality tables. Starting December 31, 2014, we changed these assumptions to the
RP-2014 White Collar table with MP-2014 mortality improvement scale for Management records and the RP-2014 Blue Collar table with MP-2014 mortality improvement scale for Occupational records. This update had a U.S.$2.6 billion negative effect
on the benefit obligation of our U.S. plans. These effects were recognized in the 2014 Statement of Comprehensive Income.
On
October 8, 2015, the U.S. SOA released an updated set of mortality improvement assumptions: scale MP-2015. This new mortality improvement scale reflects two additional years of data that the Social Security Administration has released since the
development of the MP-2014 mortality improvement. These two additional years of data show a lower degree of mortality improvement than in previous years. The change to scale MP-2015 reduced the liabilities by U.S.$218 million of our U.S. plans.
These effects were recognized in the 2015 Statement of Comprehensive Income.
268
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 23
Components of net periodic cost of post-employment benefit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions of U.S. dollars) |
|
Pension benefits |
|
|
Post-retirement benefits |
|
Pension credit/post-retirement benefit (cost) |
|
2015 |
|
|
2014 |
|
|
2013 |
|
|
2015 |
|
|
2014 |
|
|
2013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service cost |
|
|
(77) |
|
|
|
(77) |
|
|
|
(9) |
|
|
|
(1) |
|
|
|
(2) |
|
|
|
(3) |
|
|
|
|
|
|
|
|
Interest cost on the benefit obligation |
|
|
(960) |
|
|
|
(1,058) |
|
|
|
(949) |
|
|
|
(125) |
|
|
|
(137) |
|
|
|
(125) |
|
|
|
|
|
|
|
|
Interest income on plan assets |
|
|
980 |
|
|
|
1,188 |
|
|
|
1,018 |
|
|
|
21 |
|
|
|
26 |
|
|
|
18 |
|
|
|
|
|
|
|
|
Interest cost on unrecognized surplus |
|
|
(36) |
|
|
|
(53) |
|
|
|
(41) |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal |
|
|
(92) |
|
|
|
- |
|
|
|
19 |
|
|
|
(105) |
|
|
|
(113) |
|
|
|
(110) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Special termination benefits |
|
|
(55) |
|
|
|
(36) |
|
|
|
|
|
|
|
(8) |
|
|
|
(3) |
|
|
|
|
|
|
|
|
|
|
|
|
Curtailments |
|
|
(17) |
|
|
|
(53) |
|
|
|
(22) |
|
|
|
4 |
|
|
|
(2) |
|
|
|
3 |
|
|
|
|
|
|
|
|
Settlements |
|
|
465 |
|
|
|
- |
|
|
|
(27) |
|
|
|
- |
|
|
|
- |
|
|
|
(5) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension credit/post-retirement benefit (cost) |
|
|
300 |
|
|
|
(89) |
|
|
|
(30) |
|
|
|
(109) |
|
|
|
(118) |
|
|
|
(112) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan amendments |
|
|
(26) |
|
|
|
|
|
|
|
- |
|
|
|
1 |
|
|
|
140 |
|
|
|
73 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PENSION CREDIT/POST-RETIREMENT BENEFIT (COST) |
|
|
274 |
|
|
|
(89) |
|
|
|
(30) |
|
|
|
(108) |
|
|
|
22 |
|
|
|
(39) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in the obligation recorded in the statement of financial position
The following tables summarize changes in the benefit obligation, the plan assets and the funded status of Alcatel-Lucents U.S. pension and
post-retirement benefit plans as well as the components of net periodic benefit costs, including key assumptions. The measurement dates for plan assets and obligations were December 31, 2015, December 31, 2014 and December 31, 2013.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions of U.S. dollars) |
|
Pension benefits |
|
|
Post-retirement benefits |
|
Change in benefit obligation |
|
2015 |
|
|
2014 |
|
|
2013 |
|
|
2015 |
|
|
2014 |
|
|
2013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefit obligation at January 1 |
|
|
(29,512) |
|
|
|
(26,166) |
|
|
|
(29,973) |
|
|
|
(3,627) |
|
|
|
(3,630) |
|
|
|
(4,150) |
|
|
|
|
|
|
|
|
Service cost |
|
|
(77) |
|
|
|
(77) |
|
|
|
(9) |
|
|
|
(1) |
|
|
|
(2) |
|
|
|
(3) |
|
|
|
|
|
|
|
|
Interest cost on the benefit obligation |
|
|
(960) |
|
|
|
(1,058) |
|
|
|
(949) |
|
|
|
(125) |
|
|
|
(137) |
|
|
|
(125) |
|
|
|
|
|
|
|
|
Plan participants contributions |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(166) |
|
|
|
(182) |
|
|
|
(192) |
|
|
|
|
|
|
|
|
Amendments |
|
|
(26) |
|
|
|
- |
|
|
|
- |
|
|
|
1 |
|
|
|
140 |
|
|
|
73 |
|
|
|
|
|
|
|
|
Business combinations |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(9) |
|
|
|
|
|
|
|
|
Disposals |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
Curtailments |
|
|
(17) |
|
|
|
(53) |
|
|
|
(22) |
|
|
|
4 |
|
|
|
(2) |
|
|
|
3 |
|
|
|
|
|
|
|
|
Settlements |
|
|
5,745 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
Special termination benefits |
|
|
(55) |
|
|
|
(36) |
|
|
|
(27) |
|
|
|
(8) |
|
|
|
(3) |
|
|
|
(5) |
|
|
|
|
|
|
|
|
Actuarial gains and (losses) due to changes in financial assumptions |
|
|
743 |
|
|
|
(1,910) |
|
|
|
2,237 |
|
|
|
107 |
|
|
|
(245) |
|
|
|
311 |
|
|
|
|
|
|
|
|
Actuarial gains and (losses) due to changes in demographic assumptions |
|
|
201 |
|
|
|
(2,505) |
|
|
|
(37) |
|
|
|
17 |
|
|
|
(38) |
|
|
|
- |
|
|
|
|
|
|
|
|
Actuarial gains and (losses) Other |
|
|
(15) |
|
|
|
(154) |
|
|
|
169 |
|
|
|
(165) |
|
|
|
1 |
|
|
|
(9) |
|
|
|
|
|
|
|
|
Benefits paid from plan assets |
|
|
2,287 |
|
|
|
2,415 |
|
|
|
2,412 |
|
|
|
455 |
|
|
|
494 |
|
|
|
502 |
|
|
|
|
|
|
|
|
Benefits paid from the employer |
|
|
- |
|
|
|
32 |
|
|
|
33 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
Medicare Part D subsidy |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(22) |
|
|
|
(23) |
|
|
|
(26) |
|
|
|
|
|
|
|
|
Foreign currency translations and other |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BENEFIT OBLIGATION AT DECEMBER 31 |
|
|
(21,686) |
|
|
|
(29,512) |
|
|
|
(26,166) |
|
|
|
(3,530) |
|
|
|
(3,627) |
|
|
|
(3,630) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
269
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions of U.S. dollars) |
|
Pension benefits |
|
|
Post-retirement benefits |
|
Change in plan assets |
|
2015 |
|
|
2014 |
|
|
2013 |
|
|
2015 |
|
|
2014 |
|
|
2013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of plan assets at January 1 |
|
|
31,218 |
|
|
|
30,192 |
|
|
|
32,705 |
|
|
|
719 |
|
|
|
739 |
|
|
|
672 |
|
|
|
|
|
|
|
|
Interest income on plan assets net of administrative expense |
|
|
980 |
|
|
|
1,188 |
|
|
|
1,018 |
|
|
|
21 |
|
|
|
26 |
|
|
|
18 |
|
|
|
|
|
|
|
|
Actuarial gains and (losses) |
|
|
(1,013) |
|
|
|
2,476 |
|
|
|
(861) |
|
|
|
(23) |
|
|
|
5 |
|
|
|
58 |
|
|
|
|
|
|
|
|
Employers contributions |
|
|
33 |
|
|
|
2 |
|
|
|
2 |
|
|
|
24 |
|
|
|
36 |
|
|
|
41 |
|
|
|
|
|
|
|
|
Plan participants contributions |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
166 |
|
|
|
182 |
|
|
|
192 |
|
|
|
|
|
|
|
|
Amendments |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
Business combinations |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
Disposals |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
Curtailments |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
Settlements |
|
|
(5,280) |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
Benefits paid/Special termination benefits |
|
|
(2,287) |
|
|
|
(2,415) |
|
|
|
(2,412) |
|
|
|
(455) |
|
|
|
(494) |
|
|
|
(502) |
|
|
|
|
|
|
|
|
420 transfer |
|
|
(200) |
|
|
|
(225) |
|
|
|
(260) |
|
|
|
200 |
|
|
|
225 |
|
|
|
260 |
|
|
|
|
|
|
|
|
Other (external transfer and exchange rate changes) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FAIR VALUE OF PLAN ASSETS AT DECEMBER 31 |
|
|
23,451 |
|
|
|
31,218 |
|
|
|
30,192 |
|
|
|
652 |
|
|
|
719 |
|
|
|
739 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions of U.S. dollars) |
|
Pension benefits |
|
|
Post-retirement benefits |
|
Change in unrecognized surplus (due to application of asset ceiling and IFRIC14) |
|
2015 |
|
|
2014 |
|
|
2013 |
|
|
2015 |
|
|
2014 |
|
|
2013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrecognized surplus at January 1 |
|
|
(1,044) |
|
|
|
(1,260) |
|
|
|
(1,250) |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
Interest cost on unrecognized surplus |
|
|
(36) |
|
|
|
(53) |
|
|
|
(41) |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
Change in the unrecognized surplus |
|
|
1,080 |
|
|
|
269 |
|
|
|
31 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
Foreign currency translation |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
UNRECOGNIZED SURPLUS AT DECEMBER 31 |
|
|
- |
|
|
|
(1,044) |
|
|
|
(1,260) |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions of U.S. dollars) |
|
Pension benefits |
|
|
Post-retirement benefits |
|
Change in unrecognized surplus (due to application of asset ceiling and IFRIC14) |
|
2015 |
|
|
2014 |
|
|
2013 |
|
|
2015 |
|
|
2014 |
|
|
2013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unfunded) / funded status |
|
|
1,765 |
|
|
|
1,706 |
|
|
|
4,026 |
|
|
|
(2,878) |
|
|
|
(2,908) |
|
|
|
(2,891) |
|
|
|
|
|
|
|
|
Unrecognized surplus (due to application of asset ceiling and IFRIC14) |
|
|
- |
|
|
|
(1,044) |
|
|
|
(1,260) |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET AMOUNT RECOGNIZED |
|
|
1,765 |
|
|
|
662 |
|
|
|
2,766 |
|
|
|
(2,878) |
|
|
|
(2,908) |
|
|
|
(2,891) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Of which: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prepaid pension costs |
|
|
2,225 |
|
|
|
2,146 |
|
|
|
3,176 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
Pensions, retirement indemnities and other post-retirement benefit obligations |
|
|
(460) |
|
|
|
(1,484) |
|
|
|
(410) |
|
|
|
(2,878) |
|
|
|
(2,908) |
|
|
|
(2,891) |
|
270
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 23
Additional Information
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions of U.S. dollars)
December 31, 2015 |
|
Obligations |
|
|
Assets |
|
|
Funded Status |
|
|
|
|
|
|
Pension Benefits |
|
|
|
|
|
|
|
|
|
U.S. management (1) |
|
|
(17,246) |
|
|
|
17,587 |
|
|
|
341 |
|
|
|
|
|
U.S. occupational (1) |
|
|
(4,007) |
|
|
|
5,864 |
|
|
|
1,857 |
|
|
|
|
|
Supplemental |
|
|
(433) |
|
|
|
- |
|
|
|
(433) |
|
|
|
TOTAL PENSION BENEFITS |
|
|
(21,686) |
|
|
|
23,451 |
|
|
|
1,765 |
|
|
|
Post-retirement Benefits |
|
|
|
|
|
|
|
|
|
Non-represented health |
|
|
(187) |
|
|
|
- |
|
|
|
(187) |
|
|
|
|
|
Formerly represented health |
|
|
(1,681) |
|
|
|
300 |
|
|
|
(1,381) |
|
|
|
|
|
Non-represented group life |
|
|
(1,060) |
|
|
|
259 |
|
|
|
(801) |
|
|
|
|
|
Formerly represented group life |
|
|
(601) |
|
|
|
93 |
|
|
|
(508) |
|
|
|
|
|
Other |
|
|
(1) |
|
|
|
- |
|
|
|
(1) |
|
|
|
TOTAL POST-RETIREMENT BENEFITS |
|
|
(3,530) |
|
|
|
652 |
|
|
|
(2,878) |
|
|
|
(1) |
|
On December 1, 2015, we transferred about 20,000 beneficiaries from the U.S. occupational pension plan to the U.S. management pension plan. We transferred about U.S.$2,864 million in assets
and U.S.$1,773 million in obligations determined in accordance with IFRSs. |
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions of U.S. dollars)
December 31, 2014 |
|
Obligations |
|
|
Assets |
|
|
Funded Status |
|
|
|
|
|
|
|
Pension Benefits |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. management |
|
|
(21,095) |
|
|
|
20,111 |
|
|
|
(984) |
|
|
|
|
|
U.S. occupational |
|
|
(7,952) |
|
|
|
11,107 |
|
|
|
3,155 |
|
|
|
|
|
Supplemental |
|
|
(465) |
|
|
|
- |
|
|
|
(465) |
|
|
|
TOTAL PENSION BENEFITS |
|
|
(29,512) |
|
|
|
31,218 |
|
|
|
1,706 |
|
|
|
|
|
|
|
Post-retirement Benefits |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-represented health |
|
|
(259) |
|
|
|
- |
|
|
|
(259) |
|
|
|
|
|
Formerly represented health |
|
|
(1,764) |
|
|
|
322 |
|
|
|
(1,442) |
|
|
|
|
|
Non-represented group life |
|
|
(979) |
|
|
|
301 |
|
|
|
(678) |
|
|
|
|
|
Formerly represented group life |
|
|
(624) |
|
|
|
96 |
|
|
|
(528) |
|
|
|
|
|
Other |
|
|
(1) |
|
|
|
- |
|
|
|
(1) |
|
|
|
TOTAL POST-RETIREMENT BENEFITS |
|
|
(3,627) |
|
|
|
719 |
|
|
|
(2,908) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions of U.S. dollars)
December 31, 2013 |
|
Obligations |
|
|
Assets |
|
|
Funded Status |
|
|
|
|
|
|
|
Pension Benefits |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. management (1) |
|
|
(18,296) |
|
|
|
19,287 |
|
|
|
991 |
|
|
|
|
|
U.S. occupational (1) |
|
|
(7,475) |
|
|
|
10,905 |
|
|
|
3,430 |
|
|
|
|
|
Supplemental |
|
|
(395) |
|
|
|
- |
|
|
|
(395) |
|
|
|
TOTAL PENSION BENEFITS |
|
|
(26,166) |
|
|
|
30,192 |
|
|
|
4,026 |
|
|
|
Post-retirement Benefits |
|
|
|
|
|
|
|
|
|
Non-represented health |
|
|
(276) |
|
|
|
- |
|
|
|
(276) |
|
|
|
|
|
Formerly represented health |
|
|
(1,765) |
|
|
|
327 |
|
|
|
(1,438) |
|
|
|
|
|
Non-represented group life |
|
|
(987) |
|
|
|
321 |
|
|
|
(666) |
|
|
|
|
|
Formerly represented group life |
|
|
(600) |
|
|
|
91 |
|
|
|
(509) |
|
|
|
|
|
Other |
|
|
(2) |
|
|
|
- |
|
|
|
(2) |
|
|
|
TOTAL POST-RETIREMENT BENEFITS |
|
|
(3,630) |
|
|
|
739 |
|
|
|
(2,891) |
|
|
|
(1) |
|
On December 1, 2013, we transferred about 30,000 beneficiaries from the U.S. occupational pension plan to the U.S. management pension plan. We transferred about U.S.$1,813 million in assets
and U.S.$1,173 million in obligations determined in accordance with IFRSs. |
271
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 23
Plan Assets
The following table summarizes the target asset allocation ranges and our actual allocation of our pension and post-retirement trusts by asset
category.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension target allocation range |
|
|
Percentage of pension plan assets |
|
|
Post-retirement target allocation |
|
|
Percentage of post-retirement plan assets |
|
|
|
|
|
|
December 31, 2013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset category |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity securities |
|
|
7% - 13% |
|
|
|
9% |
|
|
|
46% |
|
|
|
46% |
|
Fixed income securities |
|
|
62% - 85% |
|
|
|
74% |
|
|
|
16% |
|
|
|
16% |
|
Real estate |
|
|
4% - 8% |
|
|
|
7% |
|
|
|
- |
|
|
|
- |
|
Private equity and other |
|
|
7% - 13% |
|
|
|
10% |
|
|
|
- |
|
|
|
- |
|
Cash |
|
|
- |
|
|
|
- |
|
|
|
38% |
|
|
|
38% |
|
|
|
|
|
|
|
TOTAL |
|
|
|
|
|
|
100% |
|
|
|
|
|
|
|
100% |
|
|
|
|
|
|
|
December 31, 2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset category |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity securities |
|
|
7% - 13% |
|
|
|
8% |
|
|
|
46% |
|
|
|
46% |
|
Fixed income securities |
|
|
64% - 84% |
|
|
|
67% |
|
|
|
15% |
|
|
|
15% |
|
Real estate |
|
|
4% - 8% |
|
|
|
5% |
|
|
|
- |
|
|
|
- |
|
Private equity and other |
|
|
7% - 13% |
|
|
|
10% |
|
|
|
- |
|
|
|
- |
|
Cash |
|
|
- |
|
|
|
10% |
|
|
|
39% |
|
|
|
39% |
|
|
|
|
|
|
|
TOTAL |
|
|
|
|
|
|
100% |
|
|
|
|
|
|
|
100% |
|
|
|
|
|
|
|
December 31, 2015 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset category |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity securities |
|
|
7% - 13% |
|
|
|
8% |
|
|
|
45% |
|
|
|
45% |
|
Fixed income securities |
|
|
62% - 83% |
|
|
|
73% |
|
|
|
15% |
|
|
|
15% |
|
Real estate |
|
|
5% - 9% |
|
|
|
7% |
|
|
|
- |
|
|
|
- |
|
Private equity and other |
|
|
8% - 15% |
|
|
|
12% |
|
|
|
- |
|
|
|
- |
|
Cash |
|
|
- |
|
|
|
-% |
|
|
|
40% |
|
|
|
40% |
|
|
|
|
|
|
|
TOTAL |
|
|
|
|
|
|
100% |
|
|
|
|
|
|
|
100% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The majority of Alcatel-Lucents U.S. pension plan assets are held in a master pension trust.
Alcatel-Lucents U.S. post-retirement plan assets are held in two separate trusts in addition to the amount set aside in the master pension trust for retiree healthcare. Plan assets are managed by independent investment advisors with the
objective of maximizing surplus returns with a prudent level of surplus risk. Alcatel-Lucent periodically completes asset-liability studies to assure that the optimal asset allocation is maintained in order to meet future benefit obligations. The
Board of Directors formally approves the target allocation ranges every two to three years upon completion of a study by the external advisors and internal investment management. The overall pension plan asset portfolio reflects a balance of
investments split about 27.0/73.0 between equity (which includes alternative investments for this purpose) and fixed income securities. Investment advisors managing plan assets may use derivative financial instruments including futures contracts,
forward contracts, options and interest rate swaps to manage market risk.
Pension plan assets included U.S.$0.0 million of
Alcatel-Lucent ordinary shares and U.S.$8.5 million of Alcatel-Lucent bonds as of December 31, 2015 (U.S.$0.0 million of Alcatel-Lucent ordinary shares and U.S.$8.1 million of Alcatel-Lucent bonds as
of December 31, 2014 and U.S.$0.0 million of Alcatel-Lucent ordinary shares and U.S.$7.8 million of Alcatel-Lucent bonds as of December 31, 2013).
Contributions
Alcatel-Lucent contributes to its pension and post-retirement benefit plans to make benefit payments to plan participants and to pre-fund some
benefits by means of trust funds. For Alcatel-Lucents U.S. pension plans, the funding policy is to contribute amounts to the trusts sufficient to meet minimum funding requirements as set forth in employee benefit and tax laws plus such
additional amounts as Alcatel-Lucent may determine to be appropriate. Contributions are made to benefit plans for the sole benefit of plan participants.
U.S. pension plan funding methods
Funding requirements for our major U.S. pension plans are determined by
applicable statutes, namely the Employee Retirement Income Security Act of 1974 (ERISA), the Internal Revenue Code of 1986 (the Code), and regulations issued by the Internal Revenue Service (the IRS). The Pension Protection
272
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 23
Act of 2006 (the PPA) increased the funding target for determining required
contributions, from 90% to 100% of the funding obligation, in 2% annual increments at each January 1 valuation date beginning in 2008 and ending with a 4% increment on January 1, 2011. The PPA was amended by the Worker, Retiree, and
Employer Recovery Act of 2008 (WRERA) and provided additional alternative methods for determining the funding obligation and the value of plan assets that included look-back averaging periods of up to twenty-four months. The IRS provides a number of
methods to use for measuring plan assets and for determining the discount rate. For measuring plan assets, we can choose between the fair market value at the valuation date or a smoothed fair value of assets (based on any prior period of time up to
a maximum of two years, with the valuation date being the last date in the prior period). For determining the discount rate, we can opt for the spot discount rate at the valuation date (in effect the average yield curve of the daily rates for the
month preceding the valuation date) or a twenty-four month average of the rates for each time segment (any twenty-four month period as long as the twenty-four month period ends no later than five months before the valuation date). The Moving Ahead
for Progress in the 21st Century Act (MAP-21), enacted on July 6, 2012, affects U.S. tax-qualified pension plan funding requirements for plans that use segment interest rates for measuring plan liabilities for regulatory funding purposes. For
such plans, commencing in 2012, MAP-21 stabilizes such interest rates by establishing corridors around a 25-year average rate. MAP-21 is applicable to the Groups U.S. management and active occupational pension plans, which use
segment interest rates for purposes of determining regulatory funding requirements, but not the U.S. inactive occupational pension plan, which, beginning in 2013 (for 2012), uses a full yield curve for such purposes. The Highway and
Transportation Funding Act, enacted on August 8, 2014 (HATFA), modified and extended the interest rate corridors. The Bipartisan Budget Act (BBA), enacted on November 2, 2015, extended the interest rate stabilization for an
additional three years. For the U.S. management and active occupational pension plans, MAP-21, modified and extended by HATFA/BBA, increases the interest rates used for funding valuations. According to our assessment of those plans, MAP-21, modified
and extended by HATFA/BBA, is expected to result in an increase in the interest rates used for regulatory funding purposes and suggests no required funding contribution through at least 2017. Although MAP-21/HATFA/BBA is currently not applicable to
the Groups U.S. inactive occupational pension plan, the Group does not foresee any required funding contribution for that plan, given the level of assets compared to liabilities for regulatory funding purposes.
U.S. Section 420 Transfer
Prior to the PPA, Section 420 of the Code provided for the transfer of pension assets (Section 420 Transfer) in excess of 125% of a pension plans funding obligation to be used to fund the healthcare costs of
that plans retired participants. The Code permitted only one transfer in a tax year with transferred amounts being fully used in the year of the transfer. It also required the company to continue providing healthcare benefits to those retirees
for a period of five years beginning with the year of the
transfer (cost maintenance period), at the highest per-person cost it had experienced during either of the two years immediately preceding the year of the transfer. With some limitations,
benefits could be eliminated for up to 20% of the retiree population, or reduced for up to 20% for 100% of the retiree population, during the five-year period. The PPA as amended by the U.S. Troop Readiness, Veterans Care, Katrina Recovery,
and Iraq Accountability Appropriations Act of 2007, expanded the types of transfers to include transfers covering a period of more than one year from assets in excess of 120% of the funding obligation, with the cost maintenance period extended
through the end of the fourth year following the transfer period, and the funded status being maintained at a minimum of 120% during each January 1 valuation date in the transfer period. The PPA also provided for collectively bargained
transfers, both single year and multi-year, wherein an enforceable labor agreement is substituted for the cost maintenance period. On July 6, 2012, the provisions of Section 420 of the Code were extended to life insurance benefits (in
addition to healthcare costs) and extended until December 31, 2021. On July 31, 2015, the provisions of Section 420 of the Code were extended until December 31, 2025.
On December 2, 2015, Alcatel-Lucent made a Section 420 collectively bargained transfer of excess pension assets from the
U.S. occupational-inactive pension plan in the amount of U.S.$200 million to fund healthcare benefits for retirees who were represented by the Communications Workers of America and the International Brotherhood of Electrical Workers for the period
beginning December 1, 2015 through about November 30, 2016 and group life insurance benefits for the period beginning December 1, 2015 through about December 30, 2016. Alcatel-Lucent expects to make a collectively bargained
transfer during 2016 from the U.S. occupational-inactive pension plan to fund healthcare and group life insurance benefits for retirees who were represented by the Communications Workers of America and the International Brotherhood of
Electrical Workers for the remainder of 2016 through the first nine months of 2017.
Contributions
The following table summarizes expected contributions (net of Medicare Part D subsidies) to its various pension and post-retirement plans
through calendar 2025. Alcatel-Lucent did not have to make contributions to its qualified U.S. pension plans during the 2015 calendar year. Although certain data, such as the December 31, 2015 private equity and real estate values and the
January 1, 2016 census data, will not be final until the second quarter of 2016, Alcatel-Lucent does not expect to make any contribution through early 2018. Alcatel-Lucent is unable to reliably estimate the expected contributions to its
qualified U.S. pension plans (Management & Occupational pension plans) beyond the 2018 calendar year. Actual contributions may differ from expected contributions, due to various factors, including performance of plan assets, interest rates
and potential legislative changes. The table below reflects the use of excess pension assets to fund healthcare costs and group life insurance payments for formerly union-represented retirees for the period 2016 to 2021 (Section 420 of the Code was
extended in 2015 until December 31, 2025).
273
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension |
|
|
Post-retirement |
|
(In millions of U.S. dollars) |
|
Non-qualified pension plans |
|
|
Formerly union- represented retiree health plans (1) |
|
|
Non-
represented retiree health plans |
|
|
Other benefit plans (2) |
|
|
|
|
|
|
2016 |
|
|
30 |
|
|
|
(21) |
|
|
|
14 |
|
|
|
3 |
|
|
|
|
|
|
2017 |
|
|
30 |
|
|
|
(21) |
|
|
|
15 |
|
|
|
3 |
|
|
|
|
|
|
2018 |
|
|
30 |
|
|
|
(20) |
|
|
|
15 |
|
|
|
3 |
|
|
|
|
|
|
2019 |
|
|
29 |
|
|
|
(19) |
|
|
|
16 |
|
|
|
3 |
|
|
|
|
|
|
2020 |
|
|
29 |
|
|
|
(19) |
|
|
|
17 |
|
|
|
3 |
|
|
|
|
|
|
2021 - 2025 |
|
|
139 |
|
|
|
(83) |
|
|
|
84 |
|
|
|
203 |
|
|
|
(1) |
|
Estimates take into account that Section 420 transfers are made to finance healthcare costs until December 31, 2025 (current expiration date of Section 420 of the Code). These
estimates are net of Medicare Part D subsidies. |
(2) |
|
Estimates take into account that Section 420 transfers are made to finance group life insurance payments until December 31, 2025 (current expiration date of Section 420 of the
Code). |
Certain of the actuarial assumptions used to determine if pension plan funding is required differ
from those used for accounting purposes in a way that becomes significant in volatile markets. While the basis for developing discount rates in both cases is corporate bond yields, for accounting purposes we use a yield curve developed by CitiGroup
as of the close of the last business day of December of the current calendar year, whereas the PPA allows either a daily average yield curve for the month of December or a two-year average yield curve. Also, available fair values of assets as of the
close of the last business day of December must be used for accounting purposes, but the PPA provides for asset smoothing options that average fair values over periods as long as two years with limited expected returns included in the
averaging. Both of these sets of options minimize the impact of sharp changes in asset values and corporate bond yields in volatile markets. A preliminary evaluation of the funded status of the U.S. management pension plan for regulatory funding
valuation purposes indicates that this plan is over 100% funded at year-end 2015. In addition, under the PPA target, we would only need to fund this plan if the funded ratio were to decline below 100%.
Regarding healthcare benefits, it is important to note that such benefits for both management and
formerly union-represented retirees benefits are capped for those who retired after February 28, 1990 (the benefit obligation associated with this retiree group approximated 46% of the total U.S. retiree healthcare obligation as of
December 31, 2015); and Medicare is the primary payer (pays first) for those aged 65 and older, who make up almost all of uncapped retirees.
Benefit Payments
The following table summarizes expected benefit payments from Alcatel-Lucents various
U.S. pension and post-retirement plans through calendar 2025. Actual benefit payments may differ from expected benefit payments. These amounts are reflected net of expected plan participant contributions and the annual Medicare Part D subsidy
of approximately U.S.$24 million.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension |
|
|
Post-retirement |
|
(In millions of U.S. dollars) |
|
Qualified U.S. management pension plans |
|
|
Qualified U.S. occupational pension plans |
|
|
Non-qualified pension plans |
|
|
Formerly union- represented retiree health plans |
|
|
Non-represented retiree health plans |
|
|
Other benefit plans |
|
|
|
|
|
|
2016 |
|
|
1,410 |
|
|
|
400 |
|
|
|
30 |
|
|
|
169 |
|
|
|
14 |
|
|
|
89 |
|
|
|
|
|
|
|
|
2017 |
|
|
1,329 |
|
|
|
347 |
|
|
|
30 |
|
|
|
158 |
|
|
|
15 |
|
|
|
90 |
|
|
|
|
|
|
|
|
2018 |
|
|
1,297 |
|
|
|
334 |
|
|
|
30 |
|
|
|
140 |
|
|
|
15 |
|
|
|
91 |
|
|
|
|
|
|
|
|
2019 |
|
|
1,265 |
|
|
|
321 |
|
|
|
29 |
|
|
|
132 |
|
|
|
16 |
|
|
|
92 |
|
|
|
|
|
|
|
|
2020 |
|
|
1,231 |
|
|
|
307 |
|
|
|
29 |
|
|
|
162 |
|
|
|
17 |
|
|
|
93 |
|
|
|
|
|
|
|
|
2021 - 2025 |
|
|
5,632 |
|
|
|
1,336 |
|
|
|
139 |
|
|
|
656 |
|
|
|
84 |
|
|
|
478 |
|
|
|
274
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 24
Note 24 Financial debt
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions of euros) |
|
2015 |
|
|
2014 |
|
|
2013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketable securities - short term, net |
|
|
1,626 |
|
|
|
1,672 |
|
|
|
2,259 |
|
|
|
|
|
Cash and cash equivalents |
|
|
4,905 |
|
|
|
3,878 |
|
|
|
4,096 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash, cash equivalents and marketable securities |
|
|
6,531 |
|
|
|
5,550 |
|
|
|
6,355 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible bonds and other bonds - long-term portion |
|
|
(4,394) |
|
|
|
(4,696) |
|
|
|
(4,711) |
|
|
|
|
|
Other long-term debt |
|
|
(238) |
|
|
|
(179) |
|
|
|
(211) |
|
|
|
|
|
Current portion of long-term debt and short-term debt |
|
|
(579) |
|
|
|
(402) |
|
|
|
(1,240) |
|
|
|
|
|
of which (Bonds and credit facilities - short-term portion |
|
|
(190) |
|
|
|
- |
|
|
|
(964) |
|
|
|
|
|
of which (current portion of other long-term debt and short-term debt |
|
|
(389) |
|
|
|
(402) |
|
|
|
(276) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial debt, gross |
|
|
(5,211) |
|
|
|
(5,277) |
|
|
|
(6,162) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative interest rate instruments - other current and non-current assets |
|
|
4 |
|
|
|
1 |
|
|
|
11 |
|
|
|
|
|
Derivative interest rate instruments - other current and non-current liabilities |
|
|
- |
|
|
|
- |
|
|
|
(21) |
|
|
|
|
|
Loan to joint venturer - financial asset (loan to co-venturer) |
|
|
- |
|
|
|
- |
|
|
|
7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash (financial debt), net before FX derivatives |
|
|
1,325 |
|
|
|
274 |
|
|
|
190 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative FX instruments on financial debt - other current and non-current assets (1) |
|
|
158 |
|
|
|
123 |
|
|
|
5 |
|
|
|
|
|
Derivative FX instruments on financial debt - other current and non-current liabilities (1) |
|
|
(20) |
|
|
|
(4) |
|
|
|
(46) |
|
|
|
|
|
Net amount paid/(received) in respect of credit support arrangements (CSA) for derivative instruments - other current assets/liabilities |
|
|
(54) |
|
|
|
(67) |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash (financial debt), net - excluding discontinued operations |
|
|
1,409 |
|
|
|
326 |
|
|
|
149 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash (financial debt), net - assets held for sale |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH (FINANCIAL DEBT), NET - INCLUDING DISCONTINUED OPERATIONS |
|
|
1,409 |
|
|
|
326 |
|
|
|
149 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Foreign exchange (FX) derivatives are FX swaps (primarily U.S.$/) related to inter-unit loans. |
a/ Nominal value at maturity date of bonds and credit facilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions of euros) |
|
|
|
|
|
|
|
Carrying amount at December 31, 2015 |
|
|
Equity component and fair value adjustments |
|
|
Nominal value at maturity date |
|
|
|
|
|
|
December 31, 2015 |
|
|
December 31, 2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8.50% Senior Notes (1) |
|
|
190 M |
|
|
|
January 2016 |
|
|
|
190 |
|
|
|
- |
|
|
|
190 |
|
|
|
192 |
|
4.625% Senior Notes (2) |
|
|
U.S.$650 M |
|
|
|
July 2017 |
|
|
|
595 |
|
|
|
3 |
|
|
|
598 |
|
|
|
535 |
|
4.25% OCEANE |
|
|
417 M |
|
|
|
July 2018 |
|
|
|
372 |
|
|
|
45 |
|
|
|
417 |
|
|
|
629 |
|
0.00% OCEANE |
|
|
640 M |
|
|
|
January 2019 |
|
|
|
568 |
|
|
|
72 |
|
|
|
640 |
|
|
|
688 |
|
0.125% OCEANE |
|
|
429 M |
|
|
|
January 2020 |
|
|
|
362 |
|
|
|
67 |
|
|
|
429 |
|
|
|
460 |
|
8.875% Senior Notes (2) |
|
|
U.S.$500 M |
|
|
|
January 2020 |
|
|
|
451 |
|
|
|
8 |
|
|
|
459 |
|
|
|
412 |
|
6.75% Senior Notes (2)(3) |
|
|
U.S.$ 700 M |
|
|
|
November 2020 |
|
|
|
636 |
|
|
|
7 |
|
|
|
643 |
|
|
|
824 |
|
6.50 % Senior Notes (2) |
|
|
U.S.$300 M |
|
|
|
January 2028 |
|
|
|
255 |
|
|
|
19 |
|
|
|
274 |
|
|
|
247 |
|
|
|
|
|
|
|
|
6.45 % Senior Notes |
|
|
U.S.$1,360 M |
|
|
|
March 2029 |
|
|
|
1,156 |
|
|
|
94 |
|
|
|
1,250 |
|
|
|
1,120 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL BONDS |
|
|
|
|
|
|
|
|
|
|
4,585 |
|
|
|
315 |
|
|
|
4,900 |
|
|
|
5,108 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ASN Credit Facility (4) |
|
|
86 M |
|
|
|
March 2022 |
|
|
|
80 |
|
|
|
1 |
|
|
|
4 |
|
|
|
- |
|
|
|
TOTAL BONDS AND CREDIT FACILITIES |
|
|
|
|
|
|
|
|
|
|
4,665 |
|
|
|
316 |
|
|
|
4,904 |
|
|
|
5,108 |
|
|
|
(1) |
|
Guaranteed by Alcatel-Lucent USA Inc. and certain subsidiaries of Alcatel-Lucent. |
(2) |
|
These Senior Notes were subject to a tender offer in July 2014 and September 2015, see below. |
(3) |
|
Guaranteed by Alcatel-Lucent and certain of its subsidiaries. |
(4) |
|
This facility requires quarterly repayments until March 2022. |
275
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 24
Changes in 2015
December 2015 - Conversion of OCEANE
As part of the Nokia Offer 117,427,511 OCEANE due 2018, 11,891,116 OCEANE due 2019 and 7,729,972 OCEANE due 2020 were converted for a total amount of 291
million.
September 2015 - Tender offer on Senior Notes due 2020
Pursuant to a tender offer launched in August 2015, on September 4, 2015 Alcatel-Lucent USA Inc. repurchased an aggregate of $300 million
nominal (268 million) amount of 6.75% Senior Notes due 2020 for a total cash amount of $324 million (289
million) excluding accrued interest. The Notes tendered in the offer were cancelled.
Changes in 2014
November / December 2014 - Partial buy-backs of Senior Notes 2016
During the fourth quarter of 2014, a 3 million nominal amount of
Senior Notes 2016 was bought back and cancelled for a cash amount of 3 million excluding accrued interest.
August 2014 - Repayment of Senior Secured Credit Facility
The proceeds of the issuance of OCEANE 2019 and 2020 (see below) were used together with available cash to fully repay the outstanding amount of
the Senior Secured Facility on August 19, 2014 for a nominal value of U.S.$1,724 million. The carrying amount of this facility had already been adjusted in accordance with IAS 39 §AG 8 requirements at end of June 2014 in order to take into
account this anticipated repayment. Therefore on August 19, 2014, the nominal value of this facility was equal to its carrying value. The change in estimate during the second quarter of 2014 represented an other financial loss of 101 million (US$133 million, see Note 7) and a corresponding increase in the carrying value of the financial debt.
July 2014 - Tender offer on Senior Notes 2016
Pursuant to a tender offer we launched on June 24, 2014, we agreed to purchase, on July 4, 2014, an aggregate of 210 million nominal amount of Senior Notes 2016 for a total cash amount of 235 million. The Notes tendered
in the offer were cancelled.
During the second quarter of 2014, a
19 million nominal amount of Senior Notes 2016 was bought back and cancelled for a cash amount of
22 million excluding accrued interest.
June 2014 -
Issuance of OCEANE 2019 and 2020 and planned repayment of Senior Secured Credit Facility
On June 10, 2014, Alcatel-Lucent
issued convertible/exchangeable bonds (OCEANE) in two tranches:
· |
|
tranche 1 due January 30, 2019 for a nominal value of 688 million, and
|
· |
|
tranche 2 due January 30, 2020 for a nominal value of 460 million. |
The bonds bear interest at an annual rate of 0.00% and 0.125% respectively, payable semi-annually in arrears on January 30, and July 30,
commencing January 30, 2015. At the option of Alcatel-Lucent, the bonds may be subject to early redemption under certain conditions.
The carrying values of the debt components at the date of issuance were 576 million and
364 million respectively. The difference between the nominal value and the carrying value of the debt component at the date of issuance was 208 million and is amortized to finance costs over the term of the bonds.
April 2014 - Repayment of 6.375% Senior Notes
On April 7, 2014, Alcatel-Lucent repaid on the maturity
date the remaining 274 million outstanding under its 6.375% Senior Notes.
February 2014 - Senior Secured Credit Facility amendment
On December 20, 2013, Alcatel-Lucent USA Inc.
amended its U.S.$1,750 million Senior Secured Credit Facility, which lowered the credit spread on the facility from 4.75% to 3.50% effective February 18, 2014. As a result, and after taking into account the Libor 1% floor, the applicable
interest rate decreased from 5.75% to 4.50%. In accordance with IAS 39, this amendment to the terms of the Senior Secured Credit Facility did not lead to recording an extinguishment of the original facility and recognizing a new one, because the
change in interest rate did not constitute a substantial modification of the terms of the original facility.
January 2014 -
Repayment of 7.75% Convertible Trust Preferred Securities (Liability to Subsidiary Trust Issuing Preferred Securities)
On
January 13, 2014, the outstanding principal amount of U.S.$931 million on the 7.75% Convertible Trust Preferred Securities due 2017 was repaid in full. As of December 31, 2013, the carrying value of this debt was already equal to its
nominal value (see Note 25 of our 2013 audited consolidated financial statements), because we had already anticipated beginning December 12, 2013 that the debt would be redeemed in full.
Changes in 2013
6.75% Senior Notes due November 15, 2020
On November 15 and December 4, 2013, Alcatel-Lucent USA Inc. issued U.S.$750 million and U.S.$250 million, respectively, in Senior Notes due November 15, 2020. The Senior Notes bear interest at an annual rate of
6.75%, payable semi-annually in arrears on May 15, and November 15, commencing May 15, 2014. They are guaranteed by Alcatel-Lucent and certain of its subsidiaries.
276
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 24
The proceeds of this issuance were used to repay and retire the following debts:
· |
|
the 2.875% Series A convertible debentures: |
|
|
|
outstanding nominal value repurchased: U.S.$95 million, and |
|
|
|
cash amount paid by the Company, excluding accrued interest: U.S.$95 million; |
· |
|
the 2.875% Series B convertible debentures: |
|
|
|
outstanding nominal value repurchased: U.S.$1 million, and |
|
|
|
cash amount paid by the Company, excluding accrued interest: U.S.$1 million; |
· |
|
the 298 million Senior Secured Facility entered into on January 30, 2013 (see below): |
|
|
|
outstanding nominal value repaid: 298 million, and |
|
|
|
cash amount paid by the Company, excluding accrued interest: 298 million. |
On December 27, 2013, 14,772,054 OCEANE 2015 having a nominal value of
3.23 each and representing a total nominal value of 48 million were converted into 15,658,262 new
Alcatel Lucent ordinary shares. The impact on the equity was 45 million, corresponding to the carrying value of the debt component just before the conversion (no profit or
loss impact was accounted for). On December 27, 2013, the entire outstanding nominal value of 11 million after the conversion was repurchased for 11 million in cash (without accrued interest).
A total net loss
of 42 million related to the above repurchases (20 million for the Series A convertible bonds, 21 million for the euro denominated Senior Secured Facility and 1 million for the OCEANE due 2015) that
occurred in the fourth quarter of 2013 was recorded in other financial income (loss) (see Note 7).
4.625% Senior Notes
due July 1, 2017
On December 12, 2013, Alcatel-Lucent USA Inc. issued U.S.$650 million in Senior Notes due on
July 1, 2017. The Senior Notes bear interest at an annual rate of 4.625%, payable semi-annually in arrears on January 1, and July 1, commencing July 1, 2014. The proceeds of this issuance were applied, together with available
cash, to repay in full as of January 13, 2014 the U.S.$931 million principal amount outstanding of the 7.75% Convertible Trust Preferred Securities due 2017.
Senior Secured Credit Facility amendment
On December 20, 2013, Alcatel-Lucent USA Inc. signed an amendment relating to its U.S.$1,750 million Senior Secured Credit Facility, which became effective as of February 2014 and had the effect of lowering the credit spread
from 4.75% to 3.50%. As a result, and taking into account the Libor 1% floor, the applicable interest rate decreases from 5.75% to 4.50%.
8.875 % Senior Notes due January 1, 2020
On August 7, 2013, Alcatel-Lucent USA Inc. issued U.S.$500 million in Senior Notes due on January 1, 2020. The Senior Notes bear
interest at an annual rate of 8.875%, payable semi-annually in arrears on January 1, and July 1, commencing January 1, 2014. They are guaranteed by Alcatel Lucent and certain of its subsidiaries. The proceeds of this issuance were
used to repay and terminate the U.S.$500 million Asset Sale Facility entered into on January 30, 2013 (see below), which involved a cash payment of U.S.$505 million. The outstanding balance of unamortized issuance costs of the Asset Sale
Facility were expensed in Other financial income (loss) during the third quarter of 2013, representing a loss of 24 million (see Note 7).
Senior Secured Credit Facility amendment
On August 16, 2013, Alcatel-Lucent USA Inc. amended the outstanding Senior Secured Credit Facilities entered into on January 30, 2013. The amendments had the effect of changing certain covenants governing the facilities,
including lowering the credit spread on the U.S.$1,750 million Senior Secured Credit Facility due 2019 from 6.25% to 4.75% (total interest rate lowered to 5.75%) and lowering the credit spread on the 300 million Senior Secured Credit Facility due 2019 from 6.50% to 5.25% (total interest rate lowered to 6.25%).
OCEANE 2018
On
July 3, 2013, Alcatel-Lucent issued convertible/exchangeable bonds (OCEANE) due July 1, 2018 for a nominal value of 629 million. The bonds bear interest at an annual
rate of 4.25%, payable semi-annually in arrears on January 1, and July 1, commencing January 1, 2014. At the option of Alcatel-Lucent, the bonds may be subject to early redemption under certain conditions. The carrying value of the
debt component at the date of issuance was 505 million. The difference between the nominal value and the carrying value of the debt component at the date of issuance was 124 million and is amortized in finance costs over the term of the bonds.
The proceeds of this issuance were used to repurchase and cancel 748 million in nominal value of the 5.00% OCEANE due January 2015 (carrying value of 691 million) for a cash payment of 780 million (without accrued interest). The negative impact on the income
statement, which was accounted for in Other financial income (loss) during the third quarter of 2013, represented an 87 million loss (see Note 7).
2.875 % Series B convertible debentures mandatory offer to purchase
At the holders option, the Alcatel-Lucent USA, Inc. 2.875% Series B convertible debentures were redeemable at 100% of the principal amount
plus any accrued and unpaid interest at the first optional redemption date, June 15, 2013.
277
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 24
The outstanding nominal value of the 2.875% Series B convertible debentures was equal to US$
765 million just before June 15, 2013. At this date, US$ 764 million in nominal value of these debentures were redeemed and cancelled for US$ 764 million in cash, plus accrued interest.
Because of the new accounting treatment applied in the second quarter of 2012 (see Note 2i to our consolidated financial statements for the
year ended December 31, 2013 filed as part of our Annual Report on Form 20-F), the carrying amount of the 2.875% Series B convertible debentures was equal to the nominal value of the debentures as of June 15, 2013. No gain or loss related
to the partial redemption, therefore, was recorded.
Buy-backs of debt
On May 21, 2013, the following bonds and notes were partially bought back and cancelled:
· |
|
6.375% Notes due April 2014 issued by Alcatel-Lucent: |
|
|
|
nominal value repurchased: 172 million, and |
|
|
|
cash amount paid by Alcatel-Lucent, excluding accrued interest: 180 million. |
The 6.375% Notes due April 2014 issued by Alcatel-Lucent were the subject of additional repurchases during the second and the third quarters of
2013 for an additional nominal amount of 16 million and a cash amount paid by Alcatel-Lucent, excluding accrued interest, of 17 million. In addition, the interest rate swaps, which were hedging part of the debt repurchased, were cancelled, generating a cash gain of 7 million.
· |
|
5.00% OCEANE 2015 issued by Alcatel-Lucent: |
|
|
|
nominal value repurchased: 193 million, and |
|
|
|
cash amount paid by Alcatel-Lucent, excluding accrued interest: 196 million. |
The consideration paid in connection with an early redemption of a convertible bond is allocated at the date of redemption between the liability
and the equity components with an allocation method consistent with the method used initially. The amount of gain or loss relating to the liability component is recognized in other financial income (loss) and the amount of consideration
relating to the equity component is recognized in equity.
An additional nominal amount of 748 million was repurchased in August 2013 (see above).
· |
|
8.50% due January 2016 Senior Notes issued by Alcatel-Lucent: |
|
|
|
nominal value repurchased: 75 million, and |
|
|
|
cash amount paid by Alcatel-Lucent, excluding accrued interest: 80 million. |
A total net loss of 26 million related to all the above listed
repurchases that occurred in the second quarter of 2013 was recorded in other financial income (loss) (see Note 7).
Senior Secured Credit Facilities
On January 30, 2013, Alcatel-Lucent USA Inc., as borrower, Alcatel-Lucent and most of the subsidiaries of the Group as guarantors, entered
into senior secured credit facilities that were syndicated in January 2013 and which comprised:
· |
|
An asset sale facility with a total nominal value of U.S.$500 million, with a coupon of the lower of Libor (with a 1.00% floor) plus 525 basis points, and the Alternate Base Rate (ABR) (the
greatest of the Crédit Suisse Prime Rate, the Federal Funds Effective Rate plus 0.5% and one month Libor plus 1% after some adjustments) plus 425 basis points (as the borrower may choose at certain intervals), maturing in August 2016;
|
· |
|
A credit facility with a total nominal value of U.S.$1,750 million, with a coupon of the lower of Libor (with a 1.00% floor) plus 625 basis points, and the ABR plus 525 basis points (as the
borrower may choose at certain intervals), maturing in January 2019; with a quarterly amortization of 0.25% of nominal value; and |
· |
|
A credit facility with a total nominal value of 300 million, with a coupon of Libor (with a 1.00% floor) plus 650 basis
points, also maturing in January 2019 and also with a quarterly amortization of 0.25% of nominal value. |
These facilities
were secured by a first-priority pledge of (i) the equity interests held by Alcatel-Lucent USA Inc., Alcatel-Lucent Holdings Inc. and the other guarantors in most of their subsidiaries, (ii) substantially all patents and other intellectual
property rights of Alcatel-Lucent USA Inc., Alcatel-Lucent and the other guarantors, (iii) substantially all intercompany loans due to Alcatel-Lucent USA Inc., Alcatel-Lucent Holdings Inc. and the other guarantors, and (iv) substantially
all other tangible and intangible personal property of Alcatel-Lucent USA Inc. and the U.S. guarantors.
The agreement relating to
these facilities did not include any financial maintenance covenants (that is, a covenant the calculation of which is usually tested quarterly and that measures, for instance, the capacity of the borrower to repay debt) but included covenants
restricting, among other things, the Groups ability to: (i) incur or guarantee additional debt or issue preferred stock, (ii) create certain liens, (iii) sell assets and monetize patents, (iv) pay dividends, buy back
equity, or make certain investments, and (v) dispose of, or transfer within the Group, assets constituting the collateral of the secured financing.
In accordance with IAS 39, the floor conditions on the variable interest rate of these facilities were accounted for as embedded derivatives and separated from the host contracts (the credit facilities). The fair values at inception
of the three floors were valued at U.S.$10 million for the asset sale facility of U.S.$500 million, U.S.$46 million for the credit facility of U.S.$1,750 million, and
7 million for the credit facility of 300 million. These fair values were subtracted from the nominal
value of the facilities and recorded as interest rate derivatives and included in the Cash (financial debt), net as disclosed above. The change in these fair values representing a gain of
26 million for the year ended December 31, 2013 was recorded in other financial income (loss).
278
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 24
In addition, fees related to the issuance of these credit facilities were also subtracted from the
nominal value, giving the following carrying values of the facilities: U.S.$470 million for the asset sale facility of U.S.$500 million, U.S.$1,633 million for the credit facility of U.S.$1,750 million and 283 million for the credit facility of 300 million. The net cash proceeds were reported in
the cash flow statement for the year ended December 31, 2013 on the line item issuance of long-term debt for an aggregate amount of 1,917 million. The difference between the nominal value and the carrying value of the facilities is amortized to finance costs over the term of the debt.
b/ Analysis of financial
debt, gross by type
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions of euros) |
|
2015 |
|
|
2014 |
|
|
2013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible bonds |
|
|
1,302 |
|
|
|
1,498 |
|
|
|
1,191 |
|
|
|
|
|
Other bonds |
|
|
3,283 |
|
|
|
3,198 |
|
|
|
4,485 |
|
|
|
|
|
Receivables transferred that are not derecognized in their entirety (1) |
|
|
230 |
|
|
|
233 |
|
|
|
248 |
|
|
|
|
|
Bank loans, overdrafts and other financial debt |
|
|
279 |
|
|
|
239 |
|
|
|
119 |
|
|
|
|
|
Finance lease obligations |
|
|
28 |
|
|
|
18 |
|
|
|
24 |
|
|
|
|
|
Accrued interest |
|
|
89 |
|
|
|
91 |
|
|
|
95 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FINANCIAL DEBT, GROSS |
|
|
5,211 |
|
|
|
5,277 |
|
|
|
6,162 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
See Note 20 Financial Assets Transferred. |
c/
Analysis by maturity date and type of rate
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions of euros) |
|
2015 |
|
|
2014 |
|
|
2013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current portion of long-term debt |
|
|
190 |
|
|
|
- |
|
|
|
1,054 |
|
|
|
|
|
Short-term debt (1) |
|
|
389 |
|
|
|
402 |
|
|
|
186 |
|
|
|
|
|
Financial debt due within one year (3) |
|
|
579 |
|
|
|
402 |
|
|
|
1,240 |
|
|
|
|
|
Of which: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
· within 3
months |
|
|
463 |
|
|
|
274 |
|
|
|
791 |
|
|
|
|
|
· between 3 and 6
months |
|
|
92 |
|
|
|
104 |
|
|
|
406 |
|
|
|
|
|
· between 6 and 9
months |
|
|
12 |
|
|
|
12 |
|
|
|
22 |
|
|
|
|
|
· over 9
months |
|
|
12 |
|
|
|
11 |
|
|
|
21 |
|
|
|
|
|
2015 |
|
|
- |
|
|
|
- |
|
|
|
114 |
|
|
|
|
|
2016 |
|
|
- |
|
|
|
280 |
|
|
|
515 |
|
|
|
|
|
2017 |
|
|
675 |
|
|
|
604 |
|
|
|
494 |
|
|
|
|
|
2018 |
|
|
435 |
|
|
|
539 |
|
|
|
401 |
|
|
|
|
|
2019 |
|
|
588 |
|
|
|
588 |
|
|
|
1,154 |
|
|
|
|
|
2020 |
|
|
1,450 |
|
|
|
1,589 |
|
|
|
1,068 |
|
|
|
|
|
2021 and thereafter |
|
|
1,484 |
|
|
|
1,275 |
|
|
|
1,176 |
|
|
|
|
|
Financial debt due after one year (2)(3) |
|
|
4,632 |
|
|
|
4,875 |
|
|
|
4,922 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL |
|
|
5,211 |
|
|
|
5,277 |
|
|
|
6,162 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Amount as of December 31, 2015 included 89 million of accrued interest (91 million as of December 31, 2014 and 95 million as of December 31, 2013).
|
(2) |
|
The convertible securities may be retired earlier based on early redemption or buy-back options. In case of optional redemption periods/dates occurring before the contractual maturity of the
debenture, the likelihood of the redemption before the contractual maturity could lead to a change in the estimated payments. As prescribed by IAS 39, if an entity revises the estimates of payment, due to reliable new estimates, it shall adjust the
carrying amount of the instrument by computing the present value of remaining cash flows at the original effective interest rate of the financial liability to reflect the revised estimated cash flows. The adjustment is recognized as income or
expense in profit or loss. |
(3) |
|
Contractual cash flows of financial debt are disclosed in Note 28. |
279
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 24
d/ Debt analysis by rate
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions of euros) |
|
Amounts |
|
|
Effective interest rate |
|
|
Interest rate after hedging |
|
|
|
|
|
|
2013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible bonds |
|
|
1,191 |
|
|
|
9.50% |
|
|
|
9.50% |
|
Other bonds |
|
|
4,485 |
|
|
|
7.50% |
|
|
|
7.28% |
|
Bank loans, overdrafts and finance lease obligations |
|
|
391 |
|
|
|
2.66% |
|
|
|
2.66% |
|
Accrued interest |
|
|
95 |
|
|
|
NA |
|
|
|
NA |
|
|
|
FINANCIAL DEBT, GROSS |
|
|
6,162 |
|
|
|
7.58% |
|
|
|
7.42% |
|
|
|
2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible bonds |
|
|
1,498 |
|
|
|
5.83% |
|
|
|
5.83% |
|
Other bonds |
|
|
3,198 |
|
|
|
7.27% |
|
|
|
7.27% |
|
Bank loans, overdrafts and finance lease obligations |
|
|
490 |
|
|
|
2.02% |
|
|
|
2.02% |
|
Accrued interest |
|
|
91 |
|
|
|
NA |
|
|
|
NA |
|
|
|
FINANCIAL DEBT, GROSS |
|
|
5,277 |
|
|
|
6.36% |
|
|
|
6.36% |
|
|
|
2015 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible bonds |
|
|
1,302 |
|
|
|
5.46% |
|
|
|
5.46% |
|
Other bonds |
|
|
3,283 |
|
|
|
7.27% |
|
|
|
7.27% |
|
Bank loans, overdrafts and finance lease obligations |
|
|
537 |
|
|
|
2.01% |
|
|
|
2.01% |
|
Accrued interest |
|
|
89 |
|
|
|
NA |
|
|
|
NA |
|
|
|
FINANCIAL DEBT, GROSS |
|
|
5,211 |
|
|
|
6.26% |
|
|
|
6.26% |
|
|
|
e/ Debt analysis by type of rate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2015 |
|
|
2014 |
|
|
2013 |
|
|
|
|
|
|
|
|
|
(In millions of euros) |
|
|
Before hedging |
|
|
|
After hedging |
|
|
|
Before hedging |
|
|
|
After hedging |
|
|
|
Before hedging |
|
|
|
After hedging |
|
|
|
|
|
|
|
|
|
|
Total fixed rate debt |
|
|
5,207 |
|
|
|
5,207 |
|
|
|
5,269 |
|
|
|
5,269 |
|
|
|
6,154 |
|
|
|
5,880 |
|
Total floating rate debt |
|
|
4 |
|
|
|
4 |
|
|
|
8 |
|
|
|
8 |
|
|
|
8 |
|
|
|
282 |
|
|
|
TOTAL |
|
|
5,211 |
|
|
|
5,211 |
|
|
|
5,277 |
|
|
|
5,277 |
|
|
|
6,162 |
|
|
|
6,162 |
|
|
|
f/ Debt analysis by currency
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2015 |
|
|
2014 |
|
|
2013 |
|
|
|
|
|
|
|
|
|
(In millions of euros) |
|
|
Before hedging |
|
|
|
After hedging |
|
|
|
Before hedging |
|
|
|
After hedging |
|
|
|
Before hedging |
|
|
|
After hedging |
|
|
|
|
|
|
|
|
|
|
Euro |
|
|
1,827 |
|
|
|
2,286 |
|
|
|
1,976 |
|
|
|
2,388 |
|
|
|
1,544 |
|
|
|
1,544 |
|
U.S. Dollar |
|
|
3,242 |
|
|
|
2,783 |
|
|
|
3,150 |
|
|
|
2,738 |
|
|
|
4,608 |
|
|
|
4,608 |
|
Other |
|
|
142 |
|
|
|
142 |
|
|
|
151 |
|
|
|
151 |
|
|
|
10 |
|
|
|
10 |
|
|
|
TOTAL |
|
|
5,211 |
|
|
|
5,211 |
|
|
|
5,277 |
|
|
|
5,277 |
|
|
|
6,162 |
|
|
|
6,162 |
|
|
|
g/ Fair value of debt
The fair value of the Groups debt is determined for each loan by discounting the future cash flows using a discount rate corresponding to
bond yields, adjusted by the Groups credit rate risk. The fair value of debt and bank overdrafts at floating interest rates approximates the net carrying amounts. The fair
value of the financial instruments that hedge the debt is calculated in accordance with the same method, based on the net present value of the future cash flows:
· |
|
at December 31, 2015, the fair value of debt before hedging (including credit spread) was 6,405 million and the fair
value of the debt after hedging (including credit spread) was 6,401 million;
|
280
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 24
· |
|
at December 31, 2014, the fair value of debt before hedging (including credit spread) was 6,299 million and the fair
value of the debt after hedging (including credit spread) was 6,297 million; |
· |
|
at December 31, 2013, the fair value of debt before hedging (including credit spread) was 7,221 million and the fair
value of the debt after hedging (including credit spread) was 7,231 million; and
|
h/ Credit rating
Credit ratings of Alcatel-Lucent and Alcatel-Lucent USA Inc.
At December 31, 2015, the credit ratings of Alcatel-Lucent and Alcatel-Lucent USA Inc. were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rating Agency |
|
Corporate Family rating |
|
|
Long-term debt |
|
|
Short-term debt |
|
|
Outlook |
|
|
Last update of CFR/Debt rating |
|
|
Last update of the outlook |
|
|
|
|
|
|
Moodys: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alcatel-Lucent S.A. |
|
|
B2 |
|
|
|
B2/B3 |
(1) |
|
|
Not Prime |
|
|
|
Review for upgrade |
|
|
|
August 28, 2015 |
|
|
|
April 20, 2015 |
|
Alcatel-Lucent USA Inc. |
|
|
n.a. |
|
|
|
B2 |
(2) |
|
|
n.a |
|
|
|
Review for upgrade |
|
|
|
August 28, 2015 |
|
|
|
April 20, 2015 |
|
|
|
Standard & Poors: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alcatel-Lucent S.A. |
|
|
B+ |
|
|
|
B+ |
|
|
|
B |
|
|
|
Cr. Watch Positive |
|
|
|
August 5, 2015 |
|
|
|
April 17, 2015 |
|
Alcatel-Lucent USA Inc. |
|
|
B+ |
|
|
|
B+ |
|
|
|
n.a |
|
|
|
Cr. Watch Positive |
|
|
|
August 5, 2015 |
|
|
|
April 17, 2015 |
|
|
|
(1) |
The OCEANE 2018, the OCEANE 2019 and the OCEANE 2020 are rated B3; all other long-term debt issued by Alcatel-Lucent is rated B2. |
(2) |
The 8.875% Senior Notes, the 6.75% Senior Notes and the 4.625% Senior Notes were each rated B2 at the time of their redemption. Ratings were withdrawn on January 20, 2012 for the
Alcatel-Lucent USA Inc. 6.50% Notes due 2028 and 6.45% Notes due 2029. |
Moodys: On August 28, 2015, Moodys upgraded Alcatel-Lucents Corporate Family
rating to B2 from B3, the convertible notes (OCEANE) ratings to B3 from Caa1, and the senior unsecured ratings to B2 from B3. All ratings remain on review for upgrade.
On April 20, 2015, Moodys placed on review for upgrade all of Alcatel-Lucents ratings.
On November 17, 2014, Moodys changed the outlook on Alcatel-Lucent and Alcatel-Lucent USA Inc to positive from stable, and affirmed the
B3 ratings.
On December 19, 2013, Moodys upgraded the rating of the 8.50% Senior Notes due 2016 issued by Alcatel-Lucent
from Caa1 to B3.
On November 7, 2013, Moodys changed the outlook on Alcatel-Lucents Corporate Family B3 rating from
Negative to Stable, and affirmed the existing ratings of the Groups debt.
On August 23, 2013, Moodys assigned a
definitive B3 rating to the 8.875% Senior Notes due 2020 issued by Alcatel-Lucent USA Inc. and affirmed Alcatel-Lucents B3 Corporate Family rating.
On June 26, 2013, Moodys assigned a provisional Caa1 rating to the OCEANE due 2018 issued by Alcatel-Lucent and converted the provisional B1 rating of the Senior Secured Credit Facilities into a definitive B1 rating.
The rating grid of Moodys ranges from Aaa, which is the highest rated class, to C, which is the lowest rated class.
Alcatel-Lucents Corporate Family rating, the Alcatel-Lucent long-term debt, the OCEANE 2018, 2019 and 2020, and the Alcatel-Lucent USA Inc. rated long-term debt, are rated in the B category, which includes B1, B2 and B3 ratings.
Moodys gives the following definition of its B category: obligations rated B are
considered speculative and are subject to high credit risk.
Standard & Poors: On August 5, 2015, Standard
and Poors raised its long-term corporate credit ratings on Alcatel-Lucent and Alcatel-Lucent USA Inc. to B+ from B, as on well as the debt issued by Alcatel-Lucent and Alcatel-Lucent USA. All ratings remain on CreditWatch with positive
implications.
On April 17, 2015, Standard & Poors placed Alcatel-Lucent ratings on CreditWatch with positive
implications.
On August 18, 2014, Standard & Poors raised its corporate credit ratings on Alcatel-Lucent and
Alcatel-Lucent USA Inc. from B- to B. The unsecured bonds issued by the Group were also upgraded, from CCC+/B- to B. At the same date, and as a consequence of the rating upgrade, the outlook was changed from Positive to Stable.
On November 7, 2013, Standard & Poors revised its outlook on Alcatel-Lucent and on Alcatel-Lucent USA Inc. from Stable to
Positive, and affirmed its B- Corporate Credit rating on both companies. On November 7, 2013, Standard & Poors also affirmed the B short-term rating on Alcatel-Lucent.
On September 3, 2013, Standard & Poors raised to CCC+ from CCC the ratings of the senior unsecured notes issued by
Alcatel-Lucent and by Alcatel-Lucent USA Inc.
On June 26, 2013, Standard & Poors assigned the credit rating CCC to
the OCEANE 2018 issued by Alcatel-Lucent on that date.
On June 21, 2013, Standard & Poors lowered the long-term
corporate credit ratings of Alcatel-Lucent and Alcatel-Lucent USA Inc from B to B- with a stable outlook. Standard & Poors
281
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 24
affirmed the B short-term ranking of Alcatel-Lucent, and lowered the rating on the Senior Secured
Credit Facilities from BB- to B+, as well as the rating of the Group long-term unsecured debt from CCC+ to CCC. The rating of the trust preferred securities issued by Lucent Technologies Capital Trust I was lowered from CCC to CCC-.
On February 18, 2013, Standard & Poors affirmed its B long-term credit ratings of Alcatel-Lucent and Alcatel-Lucent USA Inc.
and removed them from Credit Watch with Negative implications. The outlook was negative. At the same time, the BB- issue rating on the Senior Secured Credit Facilities was affirmed. The other ratings were also affirmed.
The rating grid of Standard & Poors ranges from AAA (the strongest rating) to D (the weakest rating).
Alcatel-Lucents and Alcatel-Lucent USA Incs Corporate Family Rating, as well as their long term debt are rated B+, which is in the B
category.
Standard & Poors gives the following definition to the B category: An obligation rated B is
more vulnerable to non-payment than obligations rated BB but the obligor currently has the capacity to meet its financial commitment on the obligation. Adverse business, financial or economic conditions will likely impair the
obligors capacity or willingness to meet its financial commitment on the obligation.
Rating clauses affecting
Alcatel-Lucent and Alcatel-Lucent USA Inc. debt at December 31, 2015
Given its current short-term ratings and the lack
of liquidity of the French commercial paper/billets de trésorerie market, Alcatel-Lucent has decided not to participate in this market for the time being.
Alcatel-Lucent and Alcatel-Lucent USA Inc.s outstanding bonds do not contain clauses that
could trigger an accelerated repayment in the event of a lowering of their respective credit ratings.
i/ Bank credit agreements
Alcatel-Lucent syndicated bank credit facility
On December 17, 2013, Alcatel-Lucent closed a 504 million
three-year revolving credit facility with a syndicate of 12 international banks. The availability of this instrument is not dependent upon Alcatel-Lucents Credit Ratings. The availability of this facility is dependent upon Alcatel-Lucent
meeting a financial covenant linked to its capacity to cover its interest charges. As of December 31, 2015, the credit facility was undrawn.
A syndicated bank facility signed on April 5, 2007 was terminated following the closing of the Senior Secured Facilities in January 2013.
March 2015 - Credit facility agreement
On March 18, 2015, in conjunction with the acquisition of the equity in ALDA Marine owned by our joint venture partner, Alcatel-Lucent Submarine Networks (ASN) entered into a 86 million credit facility agreement with a seven year-maturity that was fully drawn at that date. Three vessels are subject to a mortgage under the credit facility agreement.
Note 25 Provisions
a/ Balance at closing
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions of euros) |
|
2015 |
|
|
2014 |
|
|
2013 |
|
|
|
|
|
|
|
|
|
|
Provisions for product sales |
|
|
376 |
|
|
|
387 |
|
|
|
402 |
|
|
|
|
|
Provisions for restructuring |
|
|
291 |
|
|
|
439 |
|
|
|
433 |
|
|
|
|
|
Provisions for litigation |
|
|
106 |
|
|
|
122 |
|
|
|
122 |
|
|
|
|
|
Other provisions |
|
|
366 |
|
|
|
416 |
|
|
|
459 |
|
|
|
TOTAL (1) |
|
|
1,139 |
|
|
|
1,364 |
|
|
|
1,416 |
|
|
|
|
|
|
|
(1) Of which: portion expected to be used within one year |
|
|
897 |
|
|
|
959 |
|
|
|
966 |
|
|
|
|
|
portion expected to be used after one year |
|
|
242 |
|
|
|
405 |
|
|
|
450 |
|
282
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 25
b/ Change during 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions of euros) |
|
December 31, 2014 |
|
|
Appropriation |
|
|
Utilization |
|
|
Reversals |
|
|
Change in consolidated companies |
|
|
Other |
|
|
December 31, 2015 |
|
|
|
|
|
|
|
Provisions for product sales |
|
|
387 |
|
|
|
393 |
|
|
|
(361) |
|
|
|
(41) |
|
|
|
- |
|
|
|
(2) |
|
|
|
376 |
|
|
|
|
|
|
|
|
|
Provisions for restructuring |
|
|
439 |
|
|
|
170 |
|
|
|
(298) |
|
|
|
(31) |
|
|
|
1 |
|
|
|
10 |
|
|
|
291 |
|
|
|
|
|
|
|
|
|
Provisions for litigation |
|
|
122 |
|
|
|
45 |
|
|
|
(30) |
|
|
|
(16) |
|
|
|
- |
|
|
|
(15) |
|
|
|
106 |
|
|
|
|
|
|
|
|
|
Other provisions |
|
|
416 |
|
|
|
206 |
|
|
|
(212) |
|
|
|
(63) |
|
|
|
- |
|
|
|
19 |
|
|
|
366 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
1,364 |
|
|
|
814 |
|
|
|
(901) |
|
|
|
(151) |
|
|
|
1 |
|
|
|
12 |
|
|
|
1,139 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect on the income statement: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operating activities before restructuring costs, litigations,
gain/(loss) on disposal of consolidated entities and post-retirement benefit plan amendments |
|
|
|
|
|
|
(602) |
|
|
|
|
|
|
|
106 |
|
|
|
|
|
|
|
|
|
|
|
(496) |
|
Restructuring costs |
|
|
|
|
|
|
(164) |
|
|
|
|
|
|
|
25 |
|
|
|
|
|
|
|
|
|
|
|
(139) |
|
Litigations |
|
|
|
|
|
|
(32) |
|
|
|
|
|
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
(31) |
|
Gain (loss) on disposal of consolidated entities |
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
- |
|
Post-retirement benefit plan amendments |
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
- |
|
Other financial income (loss) |
|
|
|
|
|
|
(10) |
|
|
|
|
|
|
|
6 |
|
|
|
|
|
|
|
|
|
|
|
(4) |
|
Income taxes |
|
|
|
|
|
|
(5) |
|
|
|
|
|
|
|
13 |
|
|
|
|
|
|
|
|
|
|
|
8 |
|
Income (loss) from discontinued operations |
|
|
|
|
|
|
(1) |
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL |
|
|
|
|
|
|
(814) |
|
|
|
|
|
|
|
151 |
|
|
|
|
|
|
|
|
|
|
|
(663) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At year-end, contingent liabilities exist with regards to ongoing tax disputes and outstanding
litigations. For certain of these disputes, neither the financial impact nor the timing of any cash payment that could result from an unfavorable outcome can be estimated at present and therefore nothing was reserved for those disputes as of
December 31, 2015.
In particular, we received a tax audit report during the third quarter of 2012 confirming the German tax
authoritys position with regard to the tax impact of the contribution to Thales of our former railway signaling business in 2006. This tax audit report
could represent a potential negative impact of 140 million before interest and penalties (194 million including interest and penalties as of December 31, 2015). Nothing was reserved, as our position is that it is more likely than not that we will not have to pay these
taxes. If we were to reserve anything in the future in relation to this tax litigation, it would be classified in discontinued operations, since the business was sold in 2006. In accordance with applicable law, we have declined to make the payment,
although interest continues to accrue on the obligation, and therefore our cash flow statements were not impacted.
c/ Analysis of
restructuring provisions
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions of euros) |
|
December 31, 2015 |
|
|
December 31, 2014 |
|
|
December 31, 2013 |
|
|
|
|
|
|
|
|
|
|
Opening balance |
|
|
439 |
|
|
|
433 |
|
|
|
456 |
|
Utilization during period |
|
|
(298) |
|
|
|
(364) |
|
|
|
(522) |
|
|
|
|
|
Restructuring costs (social costs and other monetary costs) |
|
|
139 |
|
|
|
373 |
|
|
|
473 |
|
|
|
|
|
Reversal of discounting impact (financial loss) |
|
|
1 |
|
|
|
1 |
|
|
|
1 |
|
|
|
|
|
Effect of acquisition (disposal) of consolidated subsidiaries |
|
|
- |
|
|
|
(16) |
|
|
|
- |
|
|
|
|
|
Cumulative translation adjustments and other changes |
|
|
10 |
|
|
|
12 |
|
|
|
25 |
|
|
|
|
|
|
|
|
|
|
CLOSING BALANCE |
|
|
291 |
|
|
|
439 |
|
|
|
433 |
|
|
|
283
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 25
d/ Restructuring costs
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions of euros) |
|
2015 |
|
|
2014 |
|
|
2013 |
|
|
|
|
|
|
|
|
|
|
Social costs Restructuring reserves |
|
|
(121) |
|
|
|
(245) |
|
|
|
(302) |
|
|
|
|
|
Other monetary costs Restructuring reserves |
|
|
(18) |
|
|
|
(128) |
|
|
|
(171) |
|
|
|
|
|
Other monetary costs Payables |
|
|
(172) |
|
|
|
(156) |
|
|
|
(25) |
|
|
|
|
|
Other monetary costs Pension reserve |
|
|
(69) |
|
|
|
(32) |
|
|
|
(19) |
|
|
|
|
|
Valuation allowances or write-offs of assets and other |
|
|
(21) |
|
|
|
(13) |
|
|
|
(1) |
|
|
|
|
|
|
|
|
|
|
TOTAL RESTRUCTURING COSTS |
|
|
(401) |
|
|
|
(574) |
|
|
|
(518) |
|
|
|
e/ Analysis of litigation provisions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions of euros) |
|
December 31, 2014 |
|
|
Appropriation |
|
|
Utilization |
|
|
Reversals |
|
|
Change in consolidated companies |
|
|
Other |
|
|
December 31, 2015 |
|
|
|
|
|
|
|
Passaic River litigation |
|
|
- |
|
|
|
18 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
18 |
|
|
|
|
|
|
|
|
|
Fox River litigation |
|
|
7 |
|
|
|
- |
|
|
|
(3) |
|
|
|
(1) |
|
|
|
- |
|
|
|
1 |
|
|
|
4 |
|
|
|
|
|
|
|
|
|
Other |
|
|
- |
|
|
|
14 |
|
|
|
(1) |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
13 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sub-total material litigations (1) |
|
|
7 |
|
|
|
32 |
|
|
|
(4) |
|
|
|
(1) |
|
|
|
- |
|
|
|
1 |
|
|
|
35 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other provisions |
|
|
115 |
|
|
|
13 |
|
|
|
(26) |
|
|
|
(15) |
|
|
|
- |
|
|
|
(16) |
|
|
|
71 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL |
|
|
122 |
|
|
|
45 |
|
|
|
(30) |
|
|
|
(16) |
|
|
|
- |
|
|
|
(15) |
|
|
|
106 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
The Fox River litigation is disclosed in Note 33 of our 2012 audited consolidated financial statements (under the heading Lucents separation agreements).
|
Note 26 Market-related exposures
The Group has a centralized treasury management in order to minimize the Groups exposure to
market risks, including interest rate risk, foreign exchange risk, and counterparty risk. The Group uses derivative financial instruments to manage and reduce its exposure to fluctuations in interest rates and foreign exchange rates.
The Groups debt is issued in euros and in U.S. dollars. Interest-rate derivatives are used primarily to convert fixed rate debt into
floating rate debt.
Estimated future cash flows (for example, firm commercial contracts or commercial bids) are hedged
by forward foreign exchange transactions.
a/ Interest rate risk
Derivative financial instruments held at December 31, 2015 are intended to reduce the cost of debt and to hedge interest rate risk. At
December 31, 2015, 2014 and 2013, outstanding interest-rate derivatives have the following characteristics:
284
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 26
i. Outstanding interest-rate derivatives at December 31
Analysis by type and maturity date
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions of euros) |
|
2015 |
|
|
2014 |
|
|
2013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contract notional amounts Maturity date |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than one year |
|
|
1 to 5 years |
|
|
After 5 years |
|
|
Total |
|
|
Market value |
|
|
Total |
|
|
Market value |
|
|
Total |
|
|
Market value |
|
|
|
|
|
|
|
|
|
|
Interest-rate swaps |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pay fixed rate |
|
|
- |
|
|
|
459 |
|
|
|
4 |
|
|
|
463 |
|
|
|
- |
|
|
|
416 |
|
|
|
- |
|
|
|
9 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
Pay floating rate |
|
|
- |
|
|
|
462 |
|
|
|
- |
|
|
|
462 |
|
|
|
(7) |
|
|
|
416 |
|
|
|
(6) |
|
|
|
272 |
|
|
|
11 |
|
|
|
|
|
|
|
|
|
|
|
Floors |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Buy |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
Sell |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,256 |
|
|
|
(21) |
|
|
|
|
|
|
|
|
|
|
|
Options on interest-rate swaps U.S.$ Libor |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Buy |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
Sell |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL MARKET VALUE |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7) |
|
|
|
|
|
|
|
(6) |
|
|
|
|
|
|
|
(10) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Analysis by accounting category
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions of euros) |
|
Market value |
|
|
|
2015 |
|
|
2014 |
|
|
2013 |
|
|
|
|
|
|
|
|
|
|
Fair value hedges |
|
|
(7) |
|
|
|
2 |
|
|
|
11 |
|
|
|
|
|
Cash flow hedges |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
Instruments not qualifying for hedge accounting |
|
|
- |
|
|
|
(8) |
|
|
|
(21) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL |
|
|
(7) |
|
|
|
(6) |
|
|
|
(10) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Analysis by market value and maturity date
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions of euros) |
|
Maturity date |
|
|
|
|
|
|
Less than 1 year |
|
|
1 to 5 years |
|
|
After 5 years |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
Market Value of derivatives as assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value hedges |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
Cash flow hedges |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
Instruments not qualifying for hedge accounting |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions of euros) |
|
Maturity date |
|
|
|
|
|
|
Less than 1 year |
|
|
1 to 5 years |
|
|
After 5 years |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
Market Value of derivatives as liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value hedges |
|
|
- |
|
|
|
(7) |
|
|
|
- |
|
|
|
(7) |
|
|
|
|
|
|
Cash flow hedges |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
Instruments not qualifying for hedge accounting |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL |
|
|
- |
|
|
|
(7) |
|
|
|
- |
|
|
|
(7) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
285
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 26
ii. Interest rate sensitivity
Interest rate sensitivity in terms of financial cost
An immediate increase in interest rates of 1%, applied to financial liabilities of which the impact is accounted for in the income statement after
taking into account the hedging instruments, would not have a significant impact on interest expense for 2015 (no impact for 2014 and for 2013).
An immediate increase in interest rates of 1%, applied to financial assets of which the impact is accounted for in the income statement after taking into account the hedging instruments, would decrease interest expense by 62 million for 2015 (52 million for 2014 and
59 million for 2013).
Financial assets are mainly
short-term, and we assume that they are reinvested in assets of the same nature.
Interest rate sensitivity in terms of mark-to-market
An increase of 1% of the interest rate curve, applied to marketable securities of which the impact is accounted for in equity after taking into
account the hedging instruments, would increase equity by 5 million in 2015 (increase by
4 million in 2014 and decrease by 2 million in 2013).
An increase of 1% of the interest rate curve, applied to marketable securities of which the impact is accounted for in the income statement after
taking into account the hedging instruments, would have a negative impact of 1 million in 2015
(2 million in 2014 and 4 million in 2013).
An increase of 1% of the interest rate curve, applied to interest-rate derivatives qualified as a fair value hedge, would have a positive impact
of 115 million in 2015 (a positive impact of 13 million in 2014 and a negative impact of 1 million in 2013).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions of euros) |
|
2015 |
|
|
2014 |
|
|
2013 |
|
|
|
Booked
value |
|
|
Fair
value |
|
|
Fair
value change if rates fall
by 1% (1) |
|
|
Fair
value change if rates rise by 1% |
|
|
Booked
value |
|
|
Fair
value |
|
|
Fair
value change if rates fall by
1% (1) |
|
|
Fair
value change if rates rise by 1% |
|
|
Booked
value |
|
|
Fair value |
|
|
Fair value change if rates fall by 1% (1) |
|
|
Fair value change if rates rise by 1% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketable securities |
|
|
1,626 |
|
|
|
1,626 |
|
|
|
(4) |
|
|
|
4 |
|
|
|
1,672 |
|
|
|
1,672 |
|
|
|
(2) |
|
|
|
2 |
|
|
|
2,259 |
|
|
|
2,259 |
|
|
|
6 |
|
|
|
(6) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash & cash equivalents (2) |
|
|
4,905 |
|
|
|
4,905 |
|
|
|
- |
|
|
|
- |
|
|
|
3,878 |
|
|
|
3,878 |
|
|
|
- |
|
|
|
- |
|
|
|
4,096 |
|
|
|
4,096 |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal |
|
|
6,531 |
|
|
|
6,531 |
|
|
|
(4) |
|
|
|
4 |
|
|
|
5,550 |
|
|
|
5,550 |
|
|
|
(2) |
|
|
|
2 |
|
|
|
6,355 |
|
|
|
6,355 |
|
|
|
6 |
|
|
|
(6) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible bonds |
|
|
(1,302) |
|
|
|
(2,270) |
|
|
|
(32) |
|
|
|
31 |
|
|
|
(1,498) |
|
|
|
(2,346) |
|
|
|
(55) |
|
|
|
53 |
|
|
|
(1,191) |
|
|
|
(1,988) |
|
|
|
(21) |
|
|
|
20 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non convertible bonds |
|
|
(3,283) |
|
|
|
(3,509) |
|
|
|
(218) |
|
|
|
196 |
|
|
|
(3,198) |
|
|
|
(3,372) |
|
|
|
(229) |
|
|
|
205 |
|
|
|
(4,485) |
|
|
|
(4,745) |
|
|
|
(269) |
|
|
|
244 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other financial debt |
|
|
(626) |
|
|
|
(625) |
|
|
|
- |
|
|
|
- |
|
|
|
(581) |
|
|
|
(581) |
|
|
|
- |
|
|
|
- |
|
|
|
(486) |
|
|
|
(486) |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal |
|
|
(5,211) |
|
|
|
(6,404) |
|
|
|
(250) |
|
|
|
227 |
|
|
|
(5,277) |
|
|
|
(6,299) |
|
|
|
(284) |
|
|
|
258 |
|
|
|
(6,162) |
|
|
|
(7,219) |
|
|
|
(290) |
|
|
|
264 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative interest rate instruments other current and non-current assets |
|
|
4 |
|
|
|
4 |
|
|
|
93 |
|
|
|
115 |
|
|
|
1 |
|
|
|
1 |
|
|
|
37 |
|
|
|
13 |
|
|
|
11 |
|
|
|
11 |
|
|
|
- |
|
|
|
(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative interest rate instruments other current and non-current liabilities |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(21) |
|
|
|
(21) |
|
|
|
(3) |
|
|
|
17 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loan to co-venturer-financial asset |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
7 |
|
|
|
7 |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Debt)/cash position before FX derivatives |
|
|
1,325 |
|
|
|
131 |
|
|
|
(161) |
|
|
|
346 |
|
|
|
274 |
|
|
|
(748) |
|
|
|
(249) |
|
|
|
273 |
|
|
|
190 |
|
|
|
(867) |
|
|
|
(287) |
|
|
|
274 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative FX instruments on financial debtother current and non-current assets |
|
|
158 |
|
|
|
158 |
|
|
|
- |
|
|
|
- |
|
|
|
123 |
|
|
|
123 |
|
|
|
- |
|
|
|
- |
|
|
|
5 |
|
|
|
5 |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative FX instruments on financial debtother current and non-current liabilities |
|
|
(74) |
|
|
|
(74) |
|
|
|
- |
|
|
|
- |
|
|
|
(71) |
|
|
|
(71) |
|
|
|
- |
|
|
|
- |
|
|
|
(46) |
|
|
|
(46) |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(DEBT)/CASH POSITION |
|
|
1,409 |
|
|
|
217 |
|
|
|
(161) |
|
|
|
346 |
|
|
|
326 |
|
|
|
(696) |
|
|
|
(249) |
|
|
|
273 |
|
|
|
149 |
|
|
|
(908) |
|
|
|
(287) |
|
|
|
274 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
If the interest rate is negative after the decrease of 1%, the sensitivity is calculated with an interest rate equal to 0%. |
(2) |
|
For cash & cash equivalents, the carrying value is considered as a good estimate of the fair value. |
286
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 26
An increase of 1% of the interest rate curve, applied to the hedged debt qualified as a fair value
hedge, would have a corresponding negative impact of 5 million in 2015 (a negative impact of
13 million in 2014 and 1 million in 2013).
The impact on the income statement would be zero.
An increase of 1% of the interest rate curve, applied to interest-rate derivatives that do not qualify for hedge accounting, would have a positive impact of
9 million in 2015 (a positive impact of 18 million in 2014 and of 13 million in 2013).
An increase of 1% of the interest rate curve, applied to financial debt after taking into account
derivatives qualified for hedge accounting, would have a positive impact of 346 million on its market value for 2015
(273 million in 2014 and 263 million in 2013). However, this impact would not be accounted for,
as the debt is reassessed to its fair value only when it is hedged. As a result, it would have no impact on either the income statement or on equity.
b/ Currency risk
i. Outstanding currency derivatives at December 31
Analysis by type and currency
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions of euros) |
|
2015 |
|
|
2014 |
|
|
2013 |
|
|
|
U.S.
dollar |
|
|
British
pound |
|
|
Other |
|
|
Total |
|
|
Market
value |
|
|
Total |
|
|
Market
value |
|
|
Total |
|
|
Market
value |
|
|
|
|
|
|
|
|
|
|
Buy/Lend foreign currency |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forward exchange contracts |
|
|
238 |
|
|
|
157 |
|
|
|
153 |
|
|
|
548 |
|
|
|
1 |
|
|
|
963 |
|
|
|
10 |
|
|
|
222 |
|
|
|
(5) |
|
|
|
|
|
|
|
|
|
|
|
Short-term exchange swaps |
|
|
3,370 |
|
|
|
639 |
|
|
|
211 |
|
|
|
4,220 |
|
|
|
22 |
|
|
|
2,866 |
|
|
|
63 |
|
|
|
4,614 |
|
|
|
(42) |
|
|
|
|
|
|
|
|
|
|
|
Cross currency swaps |
|
|
459 |
|
|
|
- |
|
|
|
- |
|
|
|
459 |
|
|
|
108 |
|
|
|
412 |
|
|
|
56 |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
Currency option contracts: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
· Buy
call |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
· Sell
put |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL |
|
|
4,067 |
|
|
|
796 |
|
|
|
364 |
|
|
|
5,227 |
|
|
|
131 |
|
|
|
4,241 |
|
|
|
129 |
|
|
|
4,836 |
|
|
|
(47) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sell/Borrow foreign currency |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forward exchange contracts |
|
|
298 |
|
|
|
135 |
|
|
|
160 |
|
|
|
593 |
|
|
|
(1) |
|
|
|
366 |
|
|
|
(15) |
|
|
|
350 |
|
|
|
2 |
|
|
|
|
|
|
|
|
|
|
|
Short-term exchange swaps |
|
|
771 |
|
|
|
112 |
|
|
|
188 |
|
|
|
1,071 |
|
|
|
(58) |
|
|
|
944 |
|
|
|
(16) |
|
|
|
1,214 |
|
|
|
9 |
|
|
|
|
|
|
|
|
|
|
|
Cross currency swaps |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
Currency option contracts: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
· Sell
call |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
· Buy
put |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
39 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL |
|
|
1,069 |
|
|
|
247 |
|
|
|
348 |
|
|
|
1,664 |
|
|
|
(59) |
|
|
|
1,349 |
|
|
|
(31) |
|
|
|
1,564 |
|
|
|
11 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL MARKET VALUE |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
72 |
|
|
|
|
|
|
|
98 |
|
|
|
|
|
|
|
(36) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Analysis by type and maturity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions of euros) |
|
Maturity date |
|
|
|
|
|
|
Less than 1 year |
|
|
1 to 5 years |
|
|
After 5 years |
|
|
Total |
|
|
|
|
|
|
Buy/Lend |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forward exchange contracts |
|
|
548 |
|
|
|
- |
|
|
|
- |
|
|
|
548 |
|
|
|
|
|
|
Short-term exchange swaps |
|
|
4,220 |
|
|
|
- |
|
|
|
- |
|
|
|
4,220 |
|
|
|
|
|
|
Cross currency swaps |
|
|
- |
|
|
|
459 |
|
|
|
- |
|
|
|
459 |
|
|
|
|
|
|
Currency option contracts: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
· Buy
call |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
· Sell
put |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL |
|
|
4,768 |
|
|
|
459 |
|
|
|
- |
|
|
|
5,227 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
287
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 26
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions of euros) |
|
Maturity date |
|
|
|
|
|
|
Less than 1 year |
|
|
1 to 5 years |
|
|
After 5 years |
|
|
Total |
|
|
|
|
|
|
Sell/Borrow |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forward exchange contracts |
|
|
593 |
|
|
|
- |
|
|
|
- |
|
|
|
593 |
|
|
|
|
|
|
Short-term exchange swaps |
|
|
1,071 |
|
|
|
- |
|
|
|
- |
|
|
|
1,071 |
|
|
|
|
|
|
Cross currency swaps |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
Currency option contracts: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
· Buy
call |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
· Sell
put |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL |
|
|
1,664 |
|
|
|
- |
|
|
|
- |
|
|
|
1,664 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Analysis by market value and maturity date
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maturity date |
|
|
Total |
|
(In millions of euros) |
|
Less than 1 year |
|
|
1 to 5 years |
|
|
After 5 years |
|
|
|
|
|
|
|
TOTAL MARKET VALUE OF DERIVATIVES AS ASSETS |
|
|
- |
|
|
|
119 |
|
|
|
- |
|
|
|
119 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maturity date |
|
|
|
|
(In millions of euros) |
|
Less than 1 year |
|
|
1 to 5 years |
|
|
After 5 years |
|
|
Total |
|
|
|
|
|
|
TOTAL MARKET VALUE OF DERIVATIVES AS LIABILITIES |
|
|
(58) |
|
|
|
- |
|
|
|
- |
|
|
|
(58) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Analysis by accounting category
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market value |
|
(In millions of euros) |
|
2015 |
|
|
2014 |
|
|
2013 |
|
|
|
|
|
|
|
|
|
|
Fair value hedges |
|
|
119 |
|
|
|
112 |
|
|
|
(39) |
|
|
|
|
|
Cash flow hedges |
|
|
(12) |
|
|
|
1 |
|
|
|
(1) |
|
|
|
|
|
Instruments not qualifying for hedge accounting |
|
|
(46) |
|
|
|
(15) |
|
|
|
4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL |
|
|
61 |
|
|
|
98 |
|
|
|
(36) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ii. Exchange rate sensitivity
The most used cross currencies in the Group are U.S.$ against EUR, GBP against EUR and GBP against U.S.$. The sensitivity is calculated by
increasing or decreasing the value of the U.S.$ by 6% against other currencies.
An increase of foreign currency exchange rates versus
EUR of 6%, applied to foreign exchange derivatives, would have a positive impact of 173 million in 2015 (against a positive impact of 101 million in 2014 and a positive impact of 201 million in 2013). This impact would affect the income
statement only for foreign exchange derivatives which do not qualify for hedge accounting.
For foreign exchange derivatives qualified as a fair value hedge, an increase of 6% in the foreign
currency exchange rate would have a positive impact of 185 million in 2015 (against a positive impact of
138 million in 2014 and a positive impact of 245 million in 2013). However, this positive effect
would be offset by a negative impact due to the re-evaluation of the underlying items. The impact on the income statement would therefore be zero.
For foreign exchange derivatives qualified as a cash flow hedge, a 6% increase in the foreign currency exchange rate would have a negative impact of
19 million on equity in 2015 (against a positive impact of 1 million on equity in 2014 and a
negative impact of 1 million on equity in 2013).
288
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 26
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions of euros) |
|
2015 |
|
|
2014 |
|
|
2013 |
|
|
|
Fair
value |
|
|
Fair value change if
U.S.$ falls by 6% |
|
|
Fair value change if
U.S.$ rises by 6% |
|
|
Fair
value |
|
|
Fair value change if
U.S.$ falls by 6% |
|
|
Fair value change if
U.S.$ rises by 6% |
|
|
Fair
value |
|
|
Fair value change if
U.S.$ falls by 6% |
|
|
Fair value change if
U.S.$ rises by 6% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding foreign exchange derivatives |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value hedges |
|
|
119 |
|
|
|
(182) |
|
|
|
185 |
|
|
|
112 |
|
|
|
(135) |
|
|
|
138 |
|
|
|
(39) |
|
|
|
(244) |
|
|
|
245 |
|
|
|
|
|
|
|
|
|
|
|
Cash flow hedges |
|
|
(12) |
|
|
|
19 |
|
|
|
(19) |
|
|
|
1 |
|
|
|
(1) |
|
|
|
1 |
|
|
|
(1) |
|
|
|
1 |
|
|
|
(1) |
|
|
|
|
|
|
|
|
|
|
|
Derivatives not qualifying for hedge accounting |
|
|
(46) |
|
|
|
(8) |
|
|
|
7 |
|
|
|
(15) |
|
|
|
39 |
|
|
|
(38) |
|
|
|
4 |
|
|
|
44 |
|
|
|
(43) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL OUTSTANDING DERIVATIVES |
|
|
61 |
|
|
|
(171) |
|
|
|
173 |
|
|
|
98 |
|
|
|
(97) |
|
|
|
101 |
|
|
|
(36) |
|
|
|
(199) |
|
|
|
201 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impact of outstanding derivatives on financial result |
|
|
(46) |
|
|
|
7 |
|
|
|
(8) |
|
|
|
(15) |
|
|
|
39 |
|
|
|
(38) |
|
|
|
4 |
|
|
|
44 |
|
|
|
(43) |
|
|
|
|
|
|
|
|
|
|
|
Impact of outstanding derivatives on income (loss) from operating activities |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
Impact of outstanding derivatives on equity |
|
|
(12) |
|
|
|
19 |
|
|
|
(19) |
|
|
|
1 |
|
|
|
(1) |
|
|
|
1 |
|
|
|
(1) |
|
|
|
1 |
|
|
|
(1) |
|
|
|
iii. Reclassification to income statement of gains or losses on hedging transactions that were originally
recognized in equity
|
|
|
|
|
(In millions of euros) |
|
|
|
|
|
CASH FLOW HEDGES ACCOUNTED FOR IN EQUITY AT DECEMBER 31, 2012 |
|
|
1 |
|
|
|
|
|
|
|
|
Changes in fair value |
|
|
(1) |
|
|
|
Reclassification of gains or losses to income statement (1) |
|
|
1 |
|
|
|
|
|
|
CASH FLOW HEDGES ACCOUNTED FOR IN EQUITY AT DECEMBER 31, 2013 |
|
|
1 |
|
|
|
|
|
|
|
|
Changes in fair value |
|
|
(1) |
|
|
|
Reclassification of gains or losses to income statement (1) |
|
|
- |
|
|
|
|
|
|
CASH FLOW HEDGES ACCOUNTED FOR IN EQUITY AT DECEMBER 31, 2014 |
|
|
- |
|
|
|
|
|
|
|
|
Changes in fair value |
|
|
(11) |
|
|
|
Reclassification of gains or losses to income statement (1) |
|
|
8 |
|
|
|
|
|
CASH FLOW HEDGES ACCOUNTED FOR IN EQUITY AT DECEMBER 31, 2015 |
|
|
(3) |
|
|
|
(1) |
|
The amounts recognized directly in equity indicated in this table differ from those disclosed in the statement of comprehensive income, due to the amounts related to discontinued operations and
commodities derivatives, which are excluded in the above table. |
289
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 26
c/ Fair value hierarchy
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2015 |
|
|
2014 |
|
|
2013 |
|
(In millions of euros) |
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial assets available for sale at fair value |
|
|
- |
|
|
|
159 |
|
|
|
7 |
|
|
|
166 |
|
|
|
3 |
|
|
|
167 |
|
|
|
6 |
|
|
|
176 |
|
|
|
- |
|
|
|
158 |
|
|
|
7 |
|
|
|
165 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial assets at fair value through profit or loss (1) |
|
|
- |
|
|
|
1,570 |
|
|
|
- |
|
|
|
1,570 |
|
|
|
- |
|
|
|
1,605 |
|
|
|
- |
|
|
|
1,605 |
|
|
|
- |
|
|
|
2,192 |
|
|
|
- |
|
|
|
2,192 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Currency derivatives (2) |
|
|
- |
|
|
|
175 |
|
|
|
- |
|
|
|
175 |
|
|
|
- |
|
|
|
149 |
|
|
|
- |
|
|
|
149 |
|
|
|
- |
|
|
|
18 |
|
|
|
- |
|
|
|
18 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-rate derivatives hedging (2) |
|
|
- |
|
|
|
4 |
|
|
|
- |
|
|
|
4 |
|
|
|
- |
|
|
|
2 |
|
|
|
- |
|
|
|
2 |
|
|
|
- |
|
|
|
11 |
|
|
|
- |
|
|
|
11 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-rate derivatives other (2) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash equivalents (3) |
|
|
1,170 |
|
|
|
380 |
|
|
|
- |
|
|
|
1,550 |
|
|
|
1,096 |
|
|
|
383 |
|
|
|
- |
|
|
|
1,479 |
|
|
|
1,476 |
|
|
|
147 |
|
|
|
- |
|
|
|
1,623 |
|
|
|
TOTAL |
|
|
1,170 |
|
|
|
2,288 |
|
|
|
7 |
|
|
|
3,464 |
|
|
|
1,099 |
|
|
|
2,306 |
|
|
|
6 |
|
|
|
3,411 |
|
|
|
1,476 |
|
|
|
2,526 |
|
|
|
7 |
|
|
|
4,009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Currency derivatives (2) |
|
|
- |
|
|
|
(108) |
|
|
|
- |
|
|
|
(108) |
|
|
|
- |
|
|
|
(51) |
|
|
|
- |
|
|
|
(51) |
|
|
|
- |
|
|
|
(54) |
|
|
|
- |
|
|
|
(54) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-rate derivatives hedging (2) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(21) |
|
|
|
- |
|
|
|
(21) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-rate derivatives other (2) |
|
|
- |
|
|
|
(11) |
|
|
|
- |
|
|
|
(11) |
|
|
|
- |
|
|
|
(9) |
|
|
|
- |
|
|
|
(9) |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
TOTAL |
|
|
- |
|
|
|
(119) |
|
|
|
- |
|
|
|
(119) |
|
|
|
- |
|
|
|
(60) |
|
|
|
- |
|
|
|
(60) |
|
|
|
- |
|
|
|
(75) |
|
|
|
- |
|
|
|
(75) |
|
|
|
(3) |
|
See Note 16. Actively traded money market funds are measured at their net asset value and classified as Level 1. The Groups remaining cash equivalents are classified as
Level 2 and measured at amortized cost, which is a reasonable estimate of fair value because of the short time between the purchase of the instrument and its expected realization. |
Financial assets at fair value through profit or loss and marketable securities that are included
in financial assets available for sale at fair value classified in Level 2 are priced using quoted market prices for similar instruments or non-binding market prices that are corroborated by observable market data. The Group uses inputs such as
actual trade data, benchmark yields, broker/dealer quotes, and other similar data, which are obtained from quoted market prices, independent pricing vendors, or other sources, to determine the ultimate fair value of these assets.
The Groups derivative instruments are classified as Level 2, as they are not actively traded
and are valued using pricing models that use observable market inputs (foreign currency exchange rates, volatility indices and interest rates).
There have been no transfers between Level 1 and Level 2 of the fair value hierarchy for assets and liabilities that are measured at fair value on a recurring basis between 2015 and 2014, and between 2014 and 2013.
The financial assets categorized within Level 3 of the fair value hierarchy correspond to investments in non-consolidated companies. Amounts
at stake are not material.
290
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 26
|
|
|
|
|
(In millions of euros) |
|
|
|
|
|
AMOUNT IN LEVEL 3 AT DECEMBER 31, 2013 |
|
|
7 |
|
|
|
|
|
Additions / (disposals) |
|
|
- |
|
|
|
Fair value changes through equity |
|
|
(1) |
|
|
|
Impairment losses |
|
|
- |
|
|
|
Change in consolidated group |
|
|
- |
|
|
|
Other changes |
|
|
- |
|
|
|
|
|
|
AMOUNT IN LEVEL 3 AT DECEMBER 31, 2014 |
|
|
6 |
|
|
|
|
|
|
|
|
Additions / (disposals) |
|
|
- |
|
|
|
Fair value changes through equity |
|
|
1 |
|
|
|
Impairment losses |
|
|
- |
|
|
|
Change in consolidated group |
|
|
- |
|
|
|
Other changes |
|
|
- |
|
|
|
|
|
|
AMOUNT IN LEVEL 3 AT DECEMBER 31, 2015 |
|
|
7 |
|
|
|
Assets and Liabilities measured at Fair Value on a non-recurring basis:
The assets and liabilities that are remeasured at fair value on a non-recurring basis can include:
· |
|
loans and long-lived assets that have been reduced to fair value when they are held for sale; |
· |
|
investments retained in formerly-consolidated subsidiaries (where we have sold a controlling stake but retained a non-controlling stake in the entity, resulting in the subsidiarys
deconsolidation); and |
· |
|
identifiable tangible and intangible assets and liabilities (excluding goodwill) resulting from business combinations. |
The Group did not have any assets and liabilities measured at fair value on a non-recurring basis as of December 31, 2015, 2014 or 2013.
d/ Stock market risk
Alcatel-Lucent and its subsidiaries are not engaged in speculative trading in the stock markets. Subject to approval by Alcatel-Lucent, subsidiaries may make equity investments in selected companies.
e/ Credit risk
i. Maximum exposure to credit risk
The
Group considers that its exposure is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions of euros) |
|
2015 |
|
|
2014 |
|
|
2013 |
|
|
|
|
|
|
|
|
|
|
Trade receivables and other receivables (1) |
|
|
2,535 |
|
|
|
2,528 |
|
|
|
2,482 |
|
|
|
|
|
Marketable securities (2) |
|
|
1,626 |
|
|
|
1,672 |
|
|
|
2,259 |
|
|
|
|
|
Cash and cash equivalents (3) |
|
|
4,905 |
|
|
|
3,878 |
|
|
|
4,096 |
|
|
|
|
|
Other financial assets (2) |
|
|
361 |
|
|
|
406 |
|
|
|
322 |
|
|
|
|
|
Foreign exchange derivative assets (4) |
|
|
174 |
|
|
|
149 |
|
|
|
18 |
|
|
|
|
|
Interest-rate derivative assets (4) |
|
|
4 |
|
|
|
2 |
|
|
|
11 |
|
|
|
|
|
Other assets (4) |
|
|
1,106 |
|
|
|
1,120 |
|
|
|
1,135 |
|
|
|
|
|
Financial guarantees and off balance sheet commitments (5) |
|
|
2 |
|
|
|
2 |
|
|
|
8 |
|
|
|
MAXIMUM EXPOSURE TO CREDIT RISK |
|
|
10,713 |
|
|
|
9,757 |
|
|
|
10,331 |
|
|
|
291
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 26
ii. Credit risk concentration
Due to the diversification of its customers and their geographical dispersion, management considers that there is no significant credit risk
concentration. The credit risk for the top five customers does not exceed 30% of trade receivables.
iii. Outstanding
financial assets not impaired
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions of euros) |
|
Carrying value at December 31, 2015 |
|
|
Of which amounts neither overdue nor impaired |
|
|
Of which amounts not impaired but overdue at closing date |
|
|
|
|
|
|
|
< 1 month |
|
|
From 1 to 6 months |
|
|
From 6 months
to 1 year |
|
|
> 1 year |
|
|
Total |
|
|
|
|
|
|
Trade receivables and other receivables |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing receivables |
|
|
5 |
|
|
|
5 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
Other trade receivables |
|
|
2,703 |
|
|
|
2,262 |
|
|
|
75 |
|
|
|
106 |
|
|
|
56 |
|
|
|
37 |
|
|
|
274 |
|
|
|
|
|
|
|
|
|
Gross value |
|
|
2,708 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
Valuation allowance |
|
|
(168) |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET VALUE |
|
|
2,541 |
|
|
|
2,267 |
|
|
|
75 |
|
|
|
106 |
|
|
|
56 |
|
|
|
37 |
|
|
|
274 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions of euros) |
|
Carrying value at December 31, 2014 |
|
|
Of which amounts neither overdue nor impaired |
|
|
Of which amounts not impaired but overdue at closing date |
|
|
|
|
|
|
|
< 1 month |
|
|
From 1 to 6 months |
|
|
From 6 months
to 1 year |
|
|
> 1 year |
|
|
Total |
|
|
|
Trade receivables and other receivables |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing receivables |
|
|
1 |
|
|
|
1 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
Other trade receivables |
|
|
2,720 |
|
|
|
2,144 |
|
|
|
109 |
|
|
|
154 |
|
|
|
72 |
|
|
|
49 |
|
|
|
384 |
|
|
|
|
|
|
|
|
|
Gross value |
|
|
2,721 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
Valuation allowance |
|
|
(193) |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
NET VALUE |
|
|
2,528 |
|
|
|
2,145 |
|
|
|
109 |
|
|
|
154 |
|
|
|
72 |
|
|
|
49 |
|
|
|
384 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions of euros) |
|
Carrying value at December 31, 2013 |
|
|
Of which amounts neither overdue nor impaired |
|
|
Of which amounts not impaired but overdue at closing date |
|
|
|
|
|
|
|
< 1 month |
|
|
From 1 to 6 months |
|
|
From 6 months
to 1 year |
|
|
> 1 year |
|
|
Total |
|
|
|
Trade receivables and other receivables |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing receivables |
|
|
5 |
|
|
|
5 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
Other trade receivables |
|
|
2,634 |
|
|
|
2,190 |
|
|
|
82 |
|
|
|
130 |
|
|
|
45 |
|
|
|
30 |
|
|
|
287 |
|
|
|
|
|
|
|
|
|
Gross value |
|
|
2,639 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
Valuation allowance |
|
|
(157) |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
Net value |
|
|
2,482 |
|
|
|
2,195 |
|
|
|
82 |
|
|
|
130 |
|
|
|
45 |
|
|
|
30 |
|
|
|
287 |
|
|
|
We do not consider other financial assets that are overdue but not impaired to be material.
292
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 26
iv. Changes to trade receivable valuation allowances
|
|
|
|
|
(In millions of euros) |
|
Amounts |
|
|
|
|
|
|
VALUATION ALLOWANCE AT DECEMBER 31, 2012 |
|
|
(120) |
|
|
|
|
|
|
|
|
Net result impact |
|
|
(62) |
|
|
|
Write-offs |
|
|
20 |
|
|
|
Translation adjustments |
|
|
4 |
|
|
|
Other changes |
|
|
1 |
|
|
|
|
|
|
VALUATION ALLOWANCE AT DECEMBER 31, 2013 |
|
|
(157) |
|
|
|
|
|
|
|
|
Net result impact |
|
|
(24) |
|
|
|
Write-offs |
|
|
4 |
|
|
|
Translation adjustments |
|
|
(8) |
|
|
|
Other changes |
|
|
(8) |
|
|
|
|
|
|
VALUATION ALLOWANCE AT DECEMBER 31, 2014 |
|
|
(193) |
|
|
|
|
|
|
|
|
Net result impact |
|
|
20 |
|
|
|
Write-offs |
|
|
33 |
|
|
|
Translation adjustments |
|
|
(2) |
|
|
|
Other changes |
|
|
(26) |
|
|
|
|
|
|
VALUATION ALLOWANCE AT DECEMBER 31, 2015 |
|
|
(168) |
|
|
|
|
|
|
v. Credit risk on marketable securities, cash, cash equivalents and financial derivative
instruments
The Group is exposed to credit risk on its marketable securities, cash, cash equivalents and financial derivative
instruments if the counterparty defaults on its commitments. The Group diversifies the counterparties in order to dilute the credit risk. This risk is followed daily, with strict limits based on the counterparties rating. More than 95% of our
counterparties are classified in the investment grade category as of December 31, 2015, December 31, 2014 and December 31, 2013. The exposure, with regard to each counterparty, is calculated by taking into account the fair value
of the marketable securities, cash, cash equivalents and financial derivative instruments.
f/ Liquidity risk
i. Liquidity risk on the financial debt
As of December 31, 2015, the Group considers that its available marketable securities, cash and cash equivalents and the
available syndicated bank credit facility (refer to Note 24) are sufficient to cover its operating expenses and capital expenditures and its financial debt requirements for the next twelve
months.
ii. Liquidity risk on foreign exchange derivatives
The mark-to-market of foreign exchange derivatives (see part b/, paragraph i. Outstanding currency derivatives at December 31) appropriately
conveys the liquidity risk.
Assets and liabilities related to foreign exchange derivatives are given in Note 21 Other assets and
liabilities.
iii. Liquidity risk on guarantees and off balance sheet commitments
See Note 28 Contractual obligations and disclosures related to off balance sheet commitments.
293
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 27
Note 27 Notes to the consolidated statement of cash flows
a/ Net cash provided (used) by operating activities before changes in working capital, interest and taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions of euros) |
|
2015 |
|
|
2014 (1) |
|
|
2013 (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to the equity owners of the parent |
|
|
206 |
|
|
|
(107) |
|
|
|
(1,371) |
|
|
|
|
|
Non-controlling interests |
|
|
29 |
|
|
|
35 |
|
|
|
10 |
|
|
|
|
|
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
· Depreciation and
amortization of tangible and intangible assets |
|
|
615 |
|
|
|
545 |
|
|
|
600 |
|
|
|
|
|
Of which impact of capitalized development costs |
|
|
172 |
|
|
|
164 |
|
|
|
163 |
|
|
|
|
|
· Impairment of
assets |
|
|
193 |
|
|
|
- |
|
|
|
548 |
|
|
|
|
|
· Post-retirement
benefit plan amendment |
|
|
(404) |
|
|
|
(112) |
|
|
|
(135) |
|
|
|
|
|
· Changes in
pension and other post-retirement benefit obligations, net |
|
|
119 |
|
|
|
(50) |
|
|
|
(38) |
|
|
|
|
|
· Provisions, other
impairment losses and fair value changes |
|
|
107 |
|
|
|
252 |
|
|
|
53 |
|
|
|
|
|
· Repurchase of
bonds and change of estimates related to convertible debentures (2) |
|
|
- |
|
|
|
132 |
|
|
|
226 |
|
|
|
|
|
· Net (gain) loss
on disposal of assets |
|
|
(176) |
|
|
|
(88) |
|
|
|
(31) |
|
|
|
|
|
· Share in net
income (losses) of equity affiliates (net of dividends received) |
|
|
(2) |
|
|
|
(15) |
|
|
|
(6) |
|
|
|
|
|
· (Income) loss
from discontinued operations |
|
|
16 |
|
|
|
49 |
|
|
|
25 |
|
|
|
|
|
· Finance costs and
interest on tax litigations |
|
|
273 |
|
|
|
279 |
|
|
|
391 |
|
|
|
|
|
· Share-based
payments |
|
|
15 |
|
|
|
16 |
|
|
|
19 |
|
|
|
|
|
· Income
tax |
|
|
24 |
|
|
|
(327) |
|
|
|
(106) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sub-total of adjustments |
|
|
780 |
|
|
|
681 |
|
|
|
1,546 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES BEFORE CHANGES IN WORKING CAPITAL, INTEREST AND TAXES |
|
|
1,015 |
|
|
|
609 |
|
|
|
185 |
|
|
|
|
|
|
|
|
|
|
(1) |
|
2013 and 2014 amounts are restated to reflect the impact of a change in accounting treatment (see Note 4). |
b/ Free cash flow
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions of euros) |
|
2015 |
|
|
2014 |
|
|
2013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided (used) by operating activities before changes in working capital, interest and income taxes |
|
|
1,015 |
|
|
|
609 |
|
|
|
185 |
|
Change in operating working capital (1) |
|
|
160 |
|
|
|
(129) |
|
|
|
(67) |
|
|
|
|
|
Other current assets and liabilities (2) |
|
|
275 |
|
|
|
(35) |
|
|
|
34 |
|
|
|
|
|
Net cash provided (used) by operating activities before interest and taxes |
|
|
1,450 |
|
|
|
445 |
|
|
|
152 |
|
|
|
|
|
Of which |
|
|
|
|
|
|
|
|
|
|
|
|
restructuring cash outlays |
|
|
(424) |
|
|
|
(463) |
|
|
|
(511) |
|
contribution and benefits paid on pensions & other post-employment benefits |
|
|
(122) |
|
|
|
(192) |
|
|
|
(189) |
|
|
|
|
|
Interest received/(paid) |
|
|
(198) |
|
|
|
(225) |
|
|
|
(296) |
|
|
|
|
|
Taxes received/(paid) |
|
|
(75) |
|
|
|
(93) |
|
|
|
(77) |
|
|
|
|
|
Net cash provided (used) by operating activities |
|
|
1,177 |
|
|
|
127 |
|
|
|
(221) |
|
|
|
|
|
Capital expenditures |
|
|
(580) |
|
|
|
(556) |
|
|
|
(463) |
|
|
|
|
|
Disposal of Intellectual Property |
|
|
29 |
|
|
|
9 |
|
|
|
27 |
|
|
|
|
|
Free cash flow - excluding discontinued operations (3) |
|
|
626 |
|
|
|
(420) |
|
|
|
(657) |
|
|
|
|
|
Free cash flow from discontinued operations |
|
|
11 |
|
|
|
10 |
|
|
|
9 |
|
|
|
|
|
|
|
|
|
|
FREE CASH FLOW |
|
|
637 |
|
|
|
(410) |
|
|
|
(648) |
|
|
|
|
|
|
|
|
|
|
(1) |
|
Including amounts received from discounted receivables (refer to Note 20). |
(2) |
|
Including amounts received from the sale of French R&D tax credits (crédits dimpôt recherche) disclosed in Note 20 |
(3) |
|
Free cash flow before transaction-related costs was 660 million in 2015. |
294
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 27
c/ Cash (expenditure) / proceeds from obtaining / losing control of consolidated entities
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions of euros) |
|
2015 |
|
|
2014 |
|
|
2013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Obtaining control of consolidated entities |
|
|
|
|
|
|
|
|
|
|
|
|
Cash (expenditure) on acquisition of newly consolidated entities |
|
|
(109) |
|
|
|
(14) |
|
|
|
- |
|
|
|
|
|
Cash and cash equivalents of newly consolidated entities |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
TOTAL - NET IMPACT ON CASH FLOWS OF OBTAINING CONTROL (1) |
|
|
(109) |
|
|
|
(14) |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Losing control of consolidated entities |
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash proceeds from disposal of formerly consolidated entities |
|
|
- |
|
|
|
113 |
|
|
|
- |
|
|
|
|
|
Cash and cash equivalents of formerly consolidated entities |
|
|
(1) |
|
|
|
(29) |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
TOTAL - NET IMPACT ON CASH FLOWS OF LOSING CONTROL |
|
|
(1) |
|
|
|
84 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
(1) |
|
For 2015, related to the acquisition of the equity in ALDA Marine owned by our joint venture partner, Louis Dreyfus Armateurs (LDA) for 76 million as well as the cable vessel Ile
dAix and equipment for 26 million as part of a new partnership agreement entered into on March 18, 2015 (see note 3). |
Note 28 Contractual obligations and off balance sheet commitments
a/ Contractual obligations
The following table presents minimum payments that the Group will have to make in the future under
contracts and firm commitments as of December 31, 2015. Amounts related to
financial debt, finance lease obligations and the equity component of Alcatel-Lucents convertible bonds are fully reflected in the consolidated statement of financial position.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions of euros) |
|
Payment deadline |
|
|
|
|
Contractual payment obligations |
|
Before December 31, 2016 |
|
|
2017-2018 |
|
|
2019-2020 |
|
|
2021 and after |
|
|
Total |
|
|
|
|
|
|
Financial debt (excluding finance leases) |
|
|
559 |
|
|
|
1,103 |
|
|
|
2,037 |
|
|
|
1,484 |
|
|
|
5,183 |
|
|
|
|
|
|
|
Finance lease obligations |
|
|
20 |
|
|
|
8 |
|
|
|
- |
|
|
|
- |
|
|
|
28 |
|
|
|
|
|
|
|
Equity component of convertible bonds |
|
|
- |
|
|
|
46 |
|
|
|
139 |
|
|
|
- |
|
|
|
185 |
|
|
|
|
|
|
|
Unconditional purchase obligations (1) |
|
|
27 |
|
|
|
94 |
|
|
|
173 |
|
|
|
53 |
|
|
|
347 |
|
|
|
Sub-total - included in statement of financial position |
|
|
606 |
|
|
|
1,251 |
|
|
|
2,349 |
|
|
|
1,537 |
|
|
|
5,743 |
|
|
|
Finance costs on financial debt |
|
|
241 |
|
|
|
396 |
|
|
|
276 |
|
|
|
2 |
|
|
|
915 |
|
|
|
|
|
|
|
Operating leases |
|
|
151 |
|
|
|
200 |
|
|
|
138 |
|
|
|
135 |
|
|
|
624 |
|
|
|
|
|
|
|
Commitments to purchase fixed assets |
|
|
33 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
33 |
|
|
|
|
|
|
|
Other unconditional purchase obligations (2) |
|
|
737 |
|
|
|
566 |
|
|
|
290 |
|
|
|
110 |
|
|
|
1,703 |
|
|
|
Sub-total - commitments not included in statement of financial position |
|
|
1,162 |
|
|
|
1,162 |
|
|
|
704 |
|
|
|
247 |
|
|
|
3,275 |
|
|
|
Total contractual obligations (3) |
|
|
1,768 |
|
|
|
2,413 |
|
|
|
3,053 |
|
|
|
1,784 |
|
|
|
9,018 |
|
|
|
(1) |
|
On April 1, 2015, we terminated certain existing license agreements and entered into two new license agreements with Qualcomm with terms ranging from 6 to 10 years, which were accounted for
as intangible assets at their discounted value. Total commitments amounted to 347 million as of December 31, 2015. |
(2) |
|
Of which 425 million relate to commitments made to HP pursuant to the sales cooperation agreement and the IT outsourcing transaction entered into with HP and 438 million relate to
commitments made to Accenture as part of several outsourcing transactions mentioned below. Other unconditional purchase obligations result mainly from obligations under multi-year supply contracts linked to the sale of businesses to third parties.
|
(3) |
|
Obligations related to pensions, post-retirement health and welfare benefits and post-employment benefit obligations are excluded from the table (refer to Note 23).
|
Future minimum sublease rental income expected to be received under non-cancellable operating subleases was
101 million at December 31, 2015 (97 million at December 31, 2014 and
81 million at December 31, 2013), of which 21 million is reflected in the statement of
financial position.
295
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 28
Net lease payments under operating leases recognized as an expense in the income statement are
analyzed as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions of euros) |
|
2015 |
|
|
2014 |
|
|
2013 |
|
|
|
Lease paymentsminimum |
|
|
181 |
|
|
|
204 |
|
|
|
232 |
|
|
|
|
|
Lease paymentsconditional |
|
|
6 |
|
|
|
4 |
|
|
|
2 |
|
|
|
|
|
Sublease rental income |
|
|
(35) |
|
|
|
(30) |
|
|
|
(26) |
|
|
|
|
|
|
|
|
|
|
TOTAL RECOGNIZED IN THE INCOME STATEMENT |
|
|
152 |
|
|
|
178 |
|
|
|
208 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
b/ Off balance sheet commitments - commitments given
Off balance sheet commitments of the Group were primarily related to guarantees given to the Groups customers for
contract execution (performance bonds, guarantees on advances received issued by financial institutions). Alcatel-Lucent does not rely on special purpose entities to deconsolidate these risks.
Guarantees given in the normal
course of the Groups business are presented below. For guarantees given for contract performance, only those issued by the Group to back guarantees granted by financial institutions are presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions of euros) |
|
2015 |
|
|
2014 |
|
|
2013 |
|
|
|
|
|
|
|
|
|
|
Guarantees given on contracts made by the Group |
|
|
1,368 |
|
|
|
1,637 |
|
|
|
1,180 |
|
|
|
|
|
Discounted notes receivable with recourse (1) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
Other contingent commitments (2) |
|
|
688 |
|
|
|
737 |
|
|
|
671 |
|
|
|
|
|
|
|
|
|
|
Sub-totalcontingent commitments |
|
|
2,056 |
|
|
|
2,374 |
|
|
|
1,851 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Secured borrowings (3) |
|
|
- |
|
|
|
2 |
|
|
|
8 |
|
|
|
|
|
|
|
|
|
|
TOTAL (4) |
|
|
2,056 |
|
|
|
2,376 |
|
|
|
1,859 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Amounts reported in this line item are related to discounting of receivables with recourse only. Total amounts of receivables discounted without recourse are disclosed in Note 20.
|
(2) |
|
Excluding the guarantee given to Louis Dreyfus Armateurs described below. |
(3) |
|
Excluding the subordinated guarantees described below on certain bonds. |
(4) |
|
Obligations related to pensions, post-retirement health and welfare benefits and post-employment benefit obligations are excluded from the table. Refer to Note 23 for a summary of our expected
contributions to these plans. |
Contingent commitments at December 31, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions of euros) |
|
Maturity date |
|
|
Total |
|
Contingent commitments |
|
Less than one year |
|
|
2 to 3 years |
|
|
4 to 5 years |
|
|
After
5 years |
|
|
|
|
|
|
|
Guarantees on Group contracts |
|
|
934 |
|
|
|
95 |
|
|
|
33 |
|
|
|
288 |
|
|
|
1,350 |
|
|
|
|
|
|
|
Guarantees on third-party contracts |
|
|
13 |
|
|
|
4 |
|
|
|
- |
|
|
|
1 |
|
|
|
18 |
|
|
|
|
|
|
|
Discounted notes receivable and other |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
Other contingent commitments(1) |
|
|
68 |
|
|
|
215 |
|
|
|
208 |
|
|
|
197 |
|
|
|
688 |
|
|
|
TOTAL |
|
|
1,015 |
|
|
|
314 |
|
|
|
241 |
|
|
|
486 |
|
|
|
2,056 |
|
|
|
COUNTER GUARANTEES RECEIVED |
|
|
23 |
|
|
|
34 |
|
|
|
31 |
|
|
|
10 |
|
|
|
98 |
|
|
|
(1) |
|
Reflected in statement of financial position: 68 million. |
The amounts of guarantees given on contracts reflected in the preceding tables represent the
maximum potential amounts of future payments (undiscounted) that the Group could be required to make under current guarantees granted by the Group. The maximum potential amount reflects the undiscounted reliable best estimate of the highest payment
that could effectively be made, even if the likelihood of occurrence of such payment is remote, and without taking into account any reduction related to potential recovery through recourse or
collateralization provisions. If such a reliable best estimate is not available, the amount disclosed is the maximum amount the Group could be required to pay, with all the other characteristics
remaining the same. In addition, most of the parent company guarantees and performance bonds given to our customers are insured; therefore, the estimated exposure related to the guarantees set forth in the preceding table may be reduced by insurance
proceeds that we may receive in case of a claim.
296
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 28
Commitments related to product warranties and pension and post-retirement benefits are not included
in the preceding table. These commitments are fully reflected in the consolidated financial statements. Contingent liabilities arising out of litigation, arbitration or regulatory actions are not included in the preceding table either, with the
exception of those linked to the guarantees given on our long-term contracts. For more information concerning contingencies, see Note 31.
Guarantees given on our long-term contracts consist of performance bonds issued by financial institutions to customers and bank guarantees given to secure advance payments received from customers (excluding security interests and
restricted cash which are included in the table below Guarantees granted on debt, advance payments received, contingencies and security interests granted at December 31, 2015 of this note). Alcatel-Lucent gives guarantees related to
advances and payments received from customers, or commits to indemnify the customer, if the contractor does not perform the contract in compliance with the terms of the contract. In the event that, due to occurrences, such as delay in delivery or
litigation related to failure in performance on the underlying contracts, it becomes likely that Alcatel-Lucent will be liable for such guarantees, the estimated risk is reserved for in the consolidated statement of financial position under the
caption provisions (see Note 25) or in inventory reserve. The amounts concerned are given in the preceding table in the specific caption (1) Reflected in statement of financial position.
Commitments related to contracts that have been cancelled or interrupted due to the default or bankruptcy of the customer are included in the
above-mentioned Guarantees given on
contracts made by the Group as long as the legal release of the guarantee has not been obtained.
Guarantees given on third-party long-term contracts could require the Group to make payments to the guaranteed party based on a non-consolidated
companys failure to perform under an agreement. The fair value of these contingent liabilities, corresponding to the premium to be received by the guarantor for issuing the guarantee, was nil as of December 31, 2015 (nil as of
December 31, 2014 and as of December 31, 2013).
Alcatel-Lucent licenses to its customers software and rights to use
intellectual property that might provide the licensees with indemnification against any liability arising from third-party claims of patent, copyright or trademark infringement. Alcatel-Lucent cannot determine the maximum amount of losses that
Alcatel-Lucent could incur under this type of indemnification, because Alcatel-Lucent often may not have enough information about the nature and scope of an infringement claim until it has been submitted.
Alcatel-Lucent indemnifies its directors and certain of its current and former officers for third-party claims alleging certain breaches of their
fiduciary duties as directors or officers. Certain costs incurred for providing such indemnification may be recovered under various insurance policies. Alcatel-Lucent is unable to reasonably estimate the maximum amount that could be payable under
these arrangements, since these exposures are not capped, due to the conditional nature of its obligations and the unique facts and circumstances involved in each agreement. Historically, payments made under these agreements have not had a material
effect on Alcatel-Lucents business, financial condition, results of operations or cash flows.
Guarantees granted on debt,
advance payments received, contingencies and security interests granted at December 31, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions of euros) |
|
Maturity date |
|
|
|
|
|
Total of the statement of financial position caption |
|
|
% of the statement of financial position caption |
|
Guarantees on borrowings and advance payments received |
|
Less than
one year |
|
|
2 to
3 years |
|
|
4 to
5 years |
|
|
After
5 years |
|
|
Total |
|
|
|
|
|
|
|
|
Security interests granted |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other guarantees given |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net book value of assets given in guarantee: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
· intangible
assets |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,435 |
|
|
|
0.00% |
|
|
|
|
|
|
|
|
|
· tangible
assets |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,381 |
|
|
|
0.00% |
|
|
|
|
|
|
|
|
|
· financial
assets |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
361 |
|
|
|
0.00% |
|
|
|
|
|
|
|
|
|
· inventories and
work in progress |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,600 |
|
|
|
0.00% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
4,777 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
297
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 28
Outsourcing transactions
No significant outsourcing agreement was signed in 2015.
Outsourcing transaction with Accenture
On February 28, 2014, in conjunction with the targeted cost savings of The Shift Plan, we entered into a 7-year Service Implementation Agreement with Accenture regarding the business transformation of our finance and accounting
functions. This agreement supplements two similar agreements regarding human resources and information technology. The Accenture agreements are expected to generate cost savings over the contract period, and cover: data processing services (back
office) in finance, accounting and human resources, as well as IT services, support and maintenance of IT applications in the countries in which Alcatel-Lucent operates.
Overall, Alcatel-Lucent committed to purchase approximately
757 million of Accenture goods and services until the end of 2020. As of December 31, 2015, the remaining purchase commitment was 438 million, which amount is included in the contractual payment obligations table above in the line Unconditional purchase obligations.
Outsourcing transaction with HCL Technologies
On July 1, 2014, in conjunction with the targeted cost savings of The Shift Plan, Alcatel-Lucent entered into a 7-year Master Service
Agreement with HCL Technologies Limited regarding the transfer of a part of our R&D department for certain legacy technologies. This contract is expected to generate cost savings over the contract period in R&D development and in the
maintenance domain. As part of an initial three year transition and transformation phase, Alcatel-Lucent is committed to restructuring those activities, which is estimated to cost
40 million.
Overall, Alcatel-Lucent is committed to purchase
approximately 276 million of HCL services until 2021, of which 186 million remained to be
purchased as of December 31, 2015, and such remaining amount is included in the contractual payment obligations table above in the line Unconditional purchase obligations.
Outsourcing transaction with Hewlett Packard
On October 29, 2009, Alcatel-Lucent entered into a major IT outsourcing transaction with Hewlett Packard Company (HP), with an effective date of December 1, 2009, and at the same time entered into a ten-year sales
cooperation agreement with HP.
The IT outsourcing transaction provides for HP to transform and manage a large part of
Alcatel-Lucents IT infrastructure. As part of an initial transition and transformation phase (referred to as the T&T phase), HP invested its own resources to transform Alcatel-Lucents global IT/IS platforms. As a result,
Alcatel-Lucent committed to restructure its IT/IS operations and in this connection Alcatel-Lucent recognised restructuring costs of 263 million between 2010 and 2015. All
related restructuring projects were completed by the end of 2015.
As part of the transfer of resources, in 2010 Alcatel-Lucent sold to HP IT infrastructure assets
under a sale and finance leaseback arrangement, the payment obligations for which are included in Finance lease obligations in the contractual payments obligations table above representing a 10 million finance lease obligation as of December 31, 2015 (3 million as of December 31, 2014 and
10 million as of December 31, 2013).
The overall
arrangement with HP included Alcatel-Lucent commitment to purchase approximately 514 million of HP goods and services. The Group satisfied this commitment by the end of
2014.
Also as part of the overall arrangement, the following commitments with remaining balances were included in the HP agreement:
· |
|
a minimum value commitment regarding the amount of IT managed services to be purchased or procured by Alcatel-Lucent from HP and/or any HP affiliates over ten years, for a total amount revised to 1,422 million (previously 1,408 million) and with a remaining commitment of 411 million as of December 31, 2015; and |
· |
|
a commitment to make certain commercial efforts related to the development of sales pursuant to the sales cooperation agreement, including through the establishment of dedicated teams, with a
remaining commitment of 14 million as of December 31, 2015. |
These two commitments are included in the contractual payment obligations table above in the line Unconditional purchase obligations for the remaining balance as of December 31, 2015.
Other CommitmentsContract Manufacturers/Electronic Manufacturing Services (EMS) providers
Alcatel-Lucent outsources a significant amount of manufacturing activity to a limited number of electronic manufacturing service (EMS) providers.
The EMSs manufacture products using Alcatel-Lucents design specifications and they test platforms in line with quality assurance programs, and standards established by Alcatel-Lucent. EMSs are required to procure components and subassemblies
that are used to manufacture products based on Alcatel-Lucents demand forecasts from suppliers in Alcatel-Lucents approved supplier lists.
Generally, Alcatel-Lucent does not own the components and sub-assemblies purchased by the EMS and title to the products is generally transferred from the EMS providers to Alcatel-Lucent upon delivery. Alcatel-Lucent records the
inventory purchases upon transfer of title from the EMS to Alcatel-Lucent. Alcatel-Lucent establishes provisions for excess and obsolete inventory based on historical trends and future expected demand. This analysis includes excess and obsolete
inventory owned by EMSs that is manufactured on Alcatel-Lucents behalf, and excess and obsolete inventory that will result from non-cancellable, non-returnable (NCNR) component and sub-assembly orders that the EMSs have with their suppliers
for parts meant to be integrated into Alcatel-Lucent products. In 2015, Alcatel-Lucent recorded a charge of 3 million for excess inventory commitments with our EMS providers
compared to a charge of 32 million in 2014 (and a charge of 26 million in 2013).
298
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 28
Alcatel-Lucent generally does not have minimum purchase obligations in its contract-manufacturing
relationships with EMS providers and therefore the contractual payment obligations table presented above under the heading Contractual Obligations, does not include any commitments related to EMS providers.
Guaranties provided in respect of some Alcatel-Lucent and Alcatel-Lucent USA Inc. debt instruments
Alcatel-Lucent USA Inc.s subordinated guaranty of Alcatel-Lucent 6.375% Notes due 2014
The guaranty linked to the 6.375% notes has been released as part of the full repayment of these notes in April 2014.
Alcatel-Lucent USA Inc.s senior guaranty of Alcatel-Lucent 8.50% Senior Notes due 2016
On November 15, 2013, Alcatel-Lucent USA Inc., as well as other subsidiaries of Alcatel-Lucent, issued a full and unconditional guaranty of
Alcatel-Lucents 8.50% Senior Notes due 2016 (the principal amount of which was 190 million on December 31, 2015). The guaranty is given on a senior unsecured
basis and will rank pari passu in right of payment with all existing and future senior indebtedness of Alcatel-Lucent USA Inc. and senior in right of payment to all its existing and future indebtedness that is by its terms expressly
subordinated to the guaranty. The guaranty will be effectively subordinated in right of payment to all debt secured by the assets of Alcatel-Lucent USA Inc.
Alcatel-Lucent USA Inc.s senior guaranty of Alcatel-Lucent Revolving Credit Facility
On December 17, 2013, Alcatel-Lucent USA Inc., as well as other subsidiaries of Alcatel-Lucent, issued a full and unconditional guaranty of
Alcatel-Lucents 504 million Revolving Credit Facility (which was undrawn on December 31, 2015). The guaranty is given on a senior unsecured basis and will rank
pari passu in right of payment with all existing and future senior indebtedness of Alcatel-Lucent USA Inc. and senior in right of payment to all its existing and future indebtedness that is by its terms expressly subordinated to the guaranty
should the Revolving Credit Facility be drawn. The guaranty will be effectively subordinated in right of payment to all debt secured by the assets of Alcatel-Lucent USA Inc.
Alcatel-Lucents senior guaranties of certain Alcatel-Lucent USA Inc. Senior Notes
Alcatel-Lucent USA Inc. issued (i) in August 2013 8.875% Senior Notes due January 1, 2020 (the principal amount of which was 459 million on December 31, 2015), (ii) in November 2013 6.750% Senior Notes due November 15, 2020 (the principal amount of which was 643 million on December 31, 2015) and (iii) in December 2013, 4.625% Senior Notes due July 1, 2017 (the principal amount of which was 598 million on December 31, 2015). These Notes are fully and unconditionally guaranteed, on a senior unsecured basis, by Alcatel-Lucent and
other subsidiaries of Alcatel-Lucent. Alcatel-Lucents guaranty will rank pari passu in right of payment with all existing and future senior indebtedness of Alcatel-Lucent and senior
in right of payment to all its existing and future indebtedness that is by its terms expressly subordinated to the guaranty. The guaranty will be effectively subordinated in right of payment to all debt secured by the assets of Alcatel-Lucent.
Specific commitments
Alcatel-Lucent USA Inc.s Separation Agreements
Alcatel-Lucent USA Inc. is party to various agreements
that were entered into in connection with the separation of Alcatel-Lucent USA Inc. and former affiliates, including AT&T, Avaya, LSI Corporation (formerly Agere Systems, before its merger with LSI corporation in April 2007) and NCR
Corporation. Pursuant to these agreements, Alcatel-Lucent USA Inc. and the former affiliates agreed to allocate certain liabilities related to each others business, and have agreed to share liabilities based on certain allocations and
thresholds. Alcatel-Lucent USA Inc. has a provision of 2 million as of December 31, 2015 for a claim asserted by NCR Corporation relating to NCR
Corporations liabilities for the environmental clean-up of the Fox River in Wisconsin, USA. Future developments in connection with the Fox River claim may warrant additional adjustments of existing provisions. We are not aware of any material
liabilities to Alcatel-Lucent USA Inc.s former affiliates as a result of the separation agreements that are not otherwise reflected in the 2015 consolidated financial statements. Nevertheless, it is possible that potential liabilities for
which the former affiliates bear primary responsibility may lead to contributions by Alcatel-Lucent USA Inc. beyond amounts currently reserved.
Alcatel-Lucent USA Inc.s Guarantees and Indemnification Agreements
Alcatel-Lucent USA Inc. divested
certain businesses and assets through sales to third-party purchasers and spin-offs to the other common shareowners of the businesses spun off. In connection with these transactions, certain direct or indirect indemnifications were provided to the
buyers or other third parties doing business with the divested entities. These indemnifications include secondary liability for certain leases of real property and equipment assigned to the divested entity and specific indemnifications for certain
legal and environmental contingencies, as well as vendor supply commitments. The durations of such indemnifications vary but are standard for transactions of this nature.
Alcatel-Lucent USA Inc. remains secondarily liable for approximately U.S.$7 million of lease obligations as of December 31, 2015
(U.S.$7 million of lease obligations as of December 31, 2014 and U.S.$23 million of lease obligations as of December 31, 2013), that were assigned to Avaya, LSI Corporation and purchasers of other businesses that were divested.
The remaining terms of these assigned leases and the corresponding guarantees range from one month to eight years. The primary obligor of the assigned leases may terminate or restructure the lease before its original maturity and thereby
299
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 28
relieve Alcatel-Lucent USA Inc. of its secondary liability. Alcatel-Lucent USA Inc. generally has
the right to receive indemnity or reimbursement from the assignees and we have not reserved for losses on this form of guarantee.
Alcatel-Lucent USA Inc. is party to a tax-sharing agreement to indemnify AT&T and is liable for tax adjustments that are attributable to its
lines of business, as well as a portion of certain other shared tax adjustments during the years prior to its separation from AT&T. Alcatel-Lucent USA Inc. has similar agreements with Avaya and LSI Corporation. Certain proposed or assessed tax
adjustments are subject to these tax-sharing agreements. We do not expect that the outcome of these other matters will have a material adverse effect on our consolidated results of operations, consolidated financial position or near-term liquidity.
Letter of Indemnity in favor of Louis Dreyfus Armateurs.
During the first half of 2011, we provided a letter of Indemnity (LOI) in favor of Louis Dreyfus Armateurs (LDA), our co-venturer
in Alda Marine at the time, pursuant to which we agreed to indemnify LDA in respect of any losses arising out of exposure of crews to radiation from the nuclear power plant at Fukushima, in
connection with the repairs conducted by Alcatel-Lucent during the second quarter of 2011 on a submarine cable system, which required the use of vessels managed by LDA.
Our aggregate potential liability under this LOI may not exceed
50 million, as increased annually by the lower of (i) 5% and (ii) the percentage rate of revaluation of crew salaries awarded by LDA. This LOI expires on
April 15, 2081.
As the levels of radiation measured during the repairs were always below the critical level as defined by the
IRSN (Institut de Radioprotection et de Sûreté Nucléaire), the risk of payment pursuant to the indemnity is considered remote as of December 31, 2015.
c/ Off balance sheet
commitmentscommitments received
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions of euros) |
|
2015 |
|
|
2014 |
|
|
2013 |
|
|
|
|
|
|
|
|
|
|
Guarantees received or security interests received on lendings |
|
|
- |
|
|
|
- |
|
|
|
46 |
|
|
|
|
|
Counter-guarantees received on guarantees given on contracts |
|
|
1 |
|
|
|
1 |
|
|
|
1 |
|
|
|
|
|
Other commitments received (1) |
|
|
97 |
|
|
|
90 |
|
|
|
94 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL |
|
|
98 |
|
|
|
91 |
|
|
|
141 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Mainly future minimum sublease rental income (see note 28a). |
Note 29 Related party transactions
Related parties are mainly:
· |
|
shareholders of Alcatel-Lucent; |
· |
|
jointly-controlled entities (accounted for using equity method); |
· |
|
investments in associates (accounted for using equity method);
|
· |
|
non-consolidated entities; and |
· |
|
key management personnel. |
To the Groups knowledge, Odey Asset
Management LLP and The Capital Group Companies, Inc. were the only shareholder holding more than 5% of the parent companys share capital as of December 31, 2015.
Transactions with related
parties (as defined by IAS 24 Related Party Disclosures) during 2015, 2014 and 2013 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions of euros) Revenues |
|
2015 |
|
|
2014 |
|
|
2013 |
|
|
|
|
|
|
|
|
|
|
Non-consolidated affiliates |
|
|
- |
|
|
|
5 |
|
|
|
15 |
|
|
|
|
|
Joint operations |
|
|
6 |
|
|
|
9 |
|
|
|
5 |
|
|
|
|
|
Joint ventures |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
Equity affiliates |
|
|
19 |
|
|
|
2 |
|
|
|
9 |
|
|
|
|
|
Cost of sales |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-consolidated affiliates |
|
|
(7) |
|
|
|
(32) |
|
|
|
(48) |
|
|
|
|
|
Joint operations |
|
|
(4) |
|
|
|
(7) |
|
|
|
(5) |
|
|
|
|
|
Joint ventures |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
Equity affiliates |
|
|
(46) |
|
|
|
(98) |
|
|
|
(104) |
|
|
|
300
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 29
Outstanding balances arising from related party transactions at December 31, 2015, 2014 and 2013 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions of euros) Other assets |
|
2015 |
|
|
2014 |
|
|
2013 |
|
|
|
|
|
|
|
|
|
|
Non-consolidated affiliates |
|
|
4 |
|
|
|
6 |
|
|
|
7 |
|
|
|
|
|
Joint operations |
|
|
5 |
|
|
|
2 |
|
|
|
- |
|
|
|
|
|
Joint ventures |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
Equity affiliates (1) |
|
|
9 |
|
|
|
11 |
|
|
|
21 |
|
|
|
|
|
Other liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-consolidated affiliates |
|
|
(4) |
|
|
|
(5) |
|
|
|
(10) |
|
|
|
|
|
Joint operations |
|
|
(18) |
|
|
|
(6) |
|
|
|
- |
|
|
|
|
|
Joint ventures |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
Equity affiliates (1) |
|
|
(1) |
|
|
|
(22) |
|
|
|
(17) |
|
|
|
|
|
Cash (financial debt), net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-consolidated affiliates |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
Joint operations |
|
|
3 |
|
|
|
- |
|
|
|
(2) |
|
|
|
|
|
Joint ventures |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
Equity affiliates |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(1) |
|
Loan to a co-venturer has been reimbursed in 2014 (refer to Notes 15 and 24). |
Members of the Board of Directors and members of the Groups executive committee are those present during the year and listed in the Corporate Governance section of the Annual Report. In 2015, 2014 and 2013, compensation,
benefits and social security contributions attributable to members of the Board of Directors and to the executive committee members (Key management personnel) were as follows:
Recorded expense in respect of compensation and related benefits attributable to Key management personnel during the year
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions of euros)
Short-term benefits |
|
2015 |
|
|
2014 |
|
|
2013 (1) |
|
|
|
|
|
|
|
|
|
|
Fixed remuneration |
|
|
4 |
|
|
|
4 |
|
|
|
5 |
|
|
|
|
|
Variable remuneration (2) |
|
|
5 |
|
|
|
3 |
|
|
|
2 |
|
|
|
|
|
Directors fees |
|
|
1 |
|
|
|
1 |
|
|
|
1 |
|
|
|
|
|
Employers social security contributions |
|
|
7 |
|
|
|
2 |
|
|
|
2 |
|
|
|
|
|
Termination benefits and retirement indemnities (3) |
|
|
14 |
|
|
|
- |
|
|
|
3 |
|
|
|
|
|
Other benefits |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Post-employment benefits |
|
|
2 |
|
|
|
1 |
|
|
|
(1) |
(4) |
|
|
|
|
Share-based payments |
|
|
1 |
|
|
|
5 |
|
|
|
8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL |
|
|
34 |
|
|
|
16 |
|
|
|
20 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
The 2013 French exceptional additional income tax on personal income above 1 million has been reported as an operating expense in the 2013 income statement (above figures do not
include the potential impact of such exceptional tax). |
(2) |
|
Including retention bonuses. |
(3) |
|
Including non compete bonus and change in control provisions. |
(4) |
|
The positive effect is mainly due to the French Auxad pension plan amendment (refer to Note 23e). |
301
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 30
Note 30 Employee benefit expenses and audit fees
a/ Employee benefit expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions of euros) |
|
2015 |
|
|
2014 |
|
|
2013 |
|
|
|
|
|
|
|
|
|
|
Wages and salaries (1) |
|
|
4,388 |
|
|
|
4,148 |
|
|
|
4,630 |
|
|
|
|
|
Restructuring costs (2) |
|
|
121 |
|
|
|
245 |
|
|
|
302 |
|
|
|
|
|
Post-retirement benefit plan amendments (3) |
|
|
(396) |
|
|
|
(112) |
|
|
|
(133) |
|
|
|
|
|
Financial component of pension and post-retirement benefit costs (4) |
|
|
121 |
|
|
|
44 |
|
|
|
84 |
|
|
|
NET EMPLOYEE BENEFIT EXPENSES |
|
|
4,234 |
|
|
|
4,325 |
|
|
|
4,883 |
|
|
|
(1) |
|
Including social security expenses and operational pension costs. This is reported in Income (loss) from operating activities before restructuring costs, impairment of assets,
transaction-related costs, gain/(loss) on disposal of consolidated entities, litigations and post-retirement benefit plan amendments. |
b/ Audit fees
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deloitte & Associés |
|
|
Ernst & Young |
|
|
|
(Deloitte Touche Tohmastu network) |
|
|
(Ernst & Young network) |
|
(in thousands of euros) |
|
2015 |
|
|
2014 |
|
|
2013 |
|
|
2015 |
|
|
2014 |
|
|
2013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1. Audit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Audit fees (statutory audit, audit of consolidated financial statements and certification) |
|
|
8,544 |
|
|
|
74% |
|
|
|
7,372 |
|
|
|
81% |
|
|
|
7,270 |
|
|
|
63% |
|
|
|
7,272 |
|
|
|
74% |
|
|
|
6,795 |
|
|
|
78% |
|
|
|
7,121 |
|
|
|
7,% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuer |
|
|
2,827 |
|
|
|
24% |
|
|
|
2,438 |
|
|
|
27% |
|
|
|
2,365 |
|
|
|
20% |
|
|
|
2,822 |
|
|
|
29% |
|
|
|
2,398 |
|
|
|
28% |
|
|
|
2,445 |
|
|
|
25%, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated entities |
|
|
5,717 |
|
|
|
49% |
|
|
|
4,934 |
|
|
|
54% |
|
|
|
4,905 |
|
|
|
42% |
|
|
|
4,450 |
|
|
|
45% |
|
|
|
4,397 |
|
|
|
50% |
|
|
|
4,676 |
|
|
|
48%, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Audit-related fees |
|
|
2,402 |
|
|
|
21% |
|
|
|
1,638 |
|
|
|
18% |
|
|
|
3,874 |
|
|
|
33% |
|
|
|
1,637 |
|
|
|
17% |
|
|
|
1,723 |
|
|
|
20% |
|
|
|
2,447 |
|
|
|
25%, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuer |
|
|
2,383 |
|
|
|
21% |
|
|
|
140 |
|
|
|
2% |
|
|
|
578 |
|
|
|
5% |
|
|
|
1,322 |
|
|
|
13% |
|
|
|
1,289 |
|
|
|
15% |
|
|
|
2,123 |
|
|
|
22%, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated entities |
|
|
19 |
|
|
|
0% |
|
|
|
1,498 |
|
|
|
16% |
|
|
|
3,296 |
|
|
|
28% |
|
|
|
315 |
|
|
|
3% |
|
|
|
434 |
|
|
|
5% |
|
|
|
324 |
|
|
|
3%, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SUB-TOTAL |
|
|
10,946 |
|
|
|
95% |
|
|
|
9,010 |
|
|
|
99% |
|
|
|
11,144 |
|
|
|
96% |
|
|
|
8,909 |
|
|
|
91% |
|
|
|
8,518 |
|
|
|
98% |
|
|
|
9,568 |
|
|
|
97%, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2. Other services (not audit-related) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax services |
|
|
132 |
|
|
|
1% |
|
|
|
123 |
|
|
|
1% |
|
|
|
101 |
|
|
|
1% |
|
|
|
36 |
|
|
|
0% |
|
|
|
122 |
|
|
|
1% |
|
|
|
64 |
|
|
|
1%, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other services |
|
|
487 |
|
|
|
4% |
|
|
|
25 |
|
|
|
0% |
|
|
|
325 |
|
|
|
3% |
|
|
|
865 |
|
|
|
9% |
|
|
|
98 |
|
|
|
1% |
|
|
|
212 |
|
|
|
2%, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SUB-TOTAL |
|
|
619 |
|
|
|
5% |
|
|
|
148 |
|
|
|
1% |
|
|
|
426 |
|
|
|
4% |
|
|
|
901 |
|
|
|
9% |
|
|
|
220 |
|
|
|
2% |
|
|
|
276 |
|
|
|
3%, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL |
|
|
11,565 |
|
|
|
100% |
|
|
|
9,158 |
|
|
|
100% |
|
|
|
11,570 |
|
|
|
100% |
|
|
|
9,810 |
|
|
|
100% |
|
|
|
8,738 |
|
|
|
100% |
|
|
|
9,844 |
|
|
|
100%, |
|
|
|
|
|
|
|
|
|
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Note 31 Contingencies
In addition to legal proceedings incidental to the conduct of its business (including
employment-related collective actions in France and the United States) which management believes are adequately reserved against in the financial statements (see Note 25e) or will not result in any significant costs to the Group, Alcatel-Lucent is
involved in the following legal proceedings.
a/ Governmental actions and investigations
Costa Rican Actions
In
early October 2004, Alcatel-Lucent learned that investigations had been launched in Costa Rica by the Costa Rican prosecutors and the National Congress, regarding payments made by consultants allegedly on behalf of Alcatel CIT (CIT), a French
subsidiary now called Alcatel-Lucent International, or
302
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 31
other Alcatel-Lucent subsidiaries to various public officials in Costa Rica, two political parties
in Costa Rica and representatives of Instituto Costarricense de Electricidad (ICE), the state-owned telephone company, in connection with the procurement by CIT of several contracts for network equipment and services from ICE.
Alcatel-Lucent settled the Attorney Generals social damages claims in return for a payment by CIT of approximately U.S.$10 million.
On June 30, 2015, Alcatel-Lucent, Alcatel-Lucent International (that is, the former CIT) and Alcatel-Lucent Trade International
AG signed a settlement agreement with ICE in full and final settlement of all litigation between the parties, and more specifically the following court proceedings:
· |
|
civil claim filed by ICE against CIT, among others, in the context of the criminal proceedings brought against various Costa Rican individuals as a consequence of the 2004 bribery allegations;
|
· |
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claim filed by CIT against ICE in October 2008 regarding ICEs termination of the contract for CIT to install 400,000 GSM cellular telephone lines (the 400KL GSM contract); and
|
· |
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civil claim filed by ICE in May 2012 against Alcatel-Lucent, CIT and Alcatel-Lucent Trade International AG for damages on the basis of the corruption matter that was investigated by and settled
with the Costa Rican and the United States authorities. |
As part of the settlement agreement, Alcatel-Lucent
International agreed to pay ICE a total settlement amount of U.S.$10 million, through a combination of a cash payment and of set-off against certain accounts receivable. ICE and Alcatel-Lucent filed joint requests with the various Costa Rican
Courts seeking dismissal of the three cases.
The parties also requested the Court handling the claim relating to the 400KL GSM
contract to release and transfer to Alcatel-Lucent International the U.S.$ 15 million performance bond posted by it that had been held in an escrow account by the Court. This amount was fully paid to Alcatel-Lucent International in August 2015.
All three cases were dismissed by the respective competent Court. There is no longer any pending litigation with ICE concerning the 2004 bribery allegations in Costa Rica or anywhere else.
Investigation and action in France
French authorities are carrying out investigations into certain conduct by Alcatel-Lucent and/or its subsidiaries in Costa Rica and French Polynesia.
With respect to Costa Rica, the French authorities are conducting an investigation with regard to alleged acts of corruption prior to 2004 (the
same events that gave rise to criminal procedures in both Costa Rica and the United States and that were settled prior to 2012).
The
matter with respect to French Polynesia concerns the conduct of Alcatel-Lucents telecommunication submarine
system subsidiary, Alcatel-Lucent Submarine Networks (ASN), and certain former employees of Alcatel-Lucent in relation to a project for a telecommunication submarine cable between Tahiti and
Hawaii awarded to ASN in 2007 by the state-owned telecom agency of French Polynesia (OPT). On September 23, 2009, four of those former employees were placed under formal investigation on suspicion of being accomplices to alleged favoritism in
connection with the award by OPT of this public procurement project. On November 23, 2009, ASN was placed under formal investigation on suspicion of benefitting from favoritism. In March 2011, several current or former public officials of
French Polynesia were placed under formal investigation on suspicion of either favoritism or being accomplices to favoritism. In a decision dated February 6, 2014, the investigating magistrate determined that ASN has to stand trial for
allegedly benefitting from favoritism, which trial took place in early February of 2016. A decision is expected by the end of March 2016.
If ASN were convicted of a criminal violation, the French court could, among other things, fine ASN and/or ban it from participating in French public procurement contracts for a certain period. ASN generated 8 million of revenues from French public procurement contracts in 2015. Accordingly, Alcatel-Lucent does not believe that a loss of business as a result of such a ban would have a
material effect on the Alcatel-Lucent group as a whole.
Investigations in Nigeria
On February 21, 2013, we were advised that the Nigerian anticorruption authorities had commenced an investigation regarding the alleged
mismanagement of the National Rural Telephony Project and the involvement of Alcatel-Lucent Nigeria Ltd (ALU Nigeria) and other vendors in such project. Our Chinese joint venture, Alcatel-Lucent Shanghai Bell (ASB), entered into a contract with the
Nigerian government for Phase I of this project on June 5, 2002. By an amendment dated April 4, 2003, the contract was assigned to a consortium including ASB and a state-owned Chinese engineering company named China National Machinery and
Equipment Import and Export Corporation (CMEC). ALU Nigeria was not a party to the consortium, but acted as a subcontractor for the project. Phase I of this project was accepted by the Nigerian government. On December 27, 2006, ASB and CMEC
entered into a contract with the Nigerian government for Phase II of this project, and our portion of the contract was assigned to CMEC on February 1, 2007. Phase II of the project was never performed due to a lack of financing. We still do not
have any more detail as to the nature of the alleged mismanagement. We are cooperating with this investigation and we conducted an internal review into this matter.
b/ Other proceedings
Legal proceeding on the pension fund in the Netherlands
Upon termination of the administration agreement relating to the pension fund for the Alcatel-Lucent employees in the Netherlands on
December 31, 2011, the pension fund administrator filed a claim against our Dutch subsidiary with the District Court in The Hague for up to 182 million in damages to
303
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 31
compensate it for the wind-up costs allegedly to be incurred due to such termination. On
October 11, 2012, the District Court dismissed the claim entirely. The pension fund filed an appeal with the Court of Justice in The Hague on January 8, 2013, increasing its principal claim to a maximum amount of 276 million, and asserting several alternative claims for lower amounts, the lowest amount being 14 million.
On September 9, 2014, the Court of Justice upheld the District Courts decision to dismiss the lawsuit. On December 9, 2014 the pension fund filed a cassation request (to set aside the decision) with the Dutch High Council. A decision
by the Council is expected in the second quarter of 2016. No reserve has been booked in this matter.
c/ Effect of the various
proceedings
Governmental investigations and legal proceedings are subject to uncertainties and the outcomes thereof are difficult
to predict.
Consequently, Alcatel-Lucent is unable to estimate the ultimate aggregate amount of monetary liability or financial impact with respect to these matters. Because of the uncertainties of
government investigations and legal proceedings, one or more of these matters could ultimately result in material monetary payments by Alcatel-Lucent beyond those to be made by reason of the various settlement agreements described in this Note 31.
Except for these governmental investigations and legal proceedings and their possible consequences as set forth above, the Company is
not aware, as of the date this document is being published, of any legal proceeding or governmental investigation (including any suspended or threatened proceeding) against Alcatel-Lucent and/or its subsidiaries that could have a material impact on
the financial situation or profitability of the Group.
No significant new litigation has been commenced since December 31, 2015.
Note 32 Events after the statement of financial position date
On January 4, 2016, the French financial regulator, the Autorité des marchés
financiers (the AMF), published the interim results of the public exchange offer initiated by Nokia for all outstanding ordinary shares, ADSs and OCEANE convertible bonds of Alcatel-Lucent, in exchange for Nokia shares or Nokia American
depositary shares (the Nokia Offer) and declared that the Nokia Offer was successful.
On January 7, 2016, Nokia
announced that its public exchange offer for Alcatel-Lucent securities in France and in the United States closed, that its new shares were entered into the Finnish Trade Register and that Nokia was included in the CAC 40 index.
On January 8, 2016, the newly constituted Board of Directors of Alcatel-Lucent decided to terminate Alcatel-Lucents program for ADSs
following the closing of the initial Nokia Offer and to seek the delisting of Alcatel-Lucents ADSs from The New York Stock Exchange following the closing of the reopened Offer.
On January 11, 2016, Alcatel-Lucent announced that Alcatel-Lucent USA Inc. will exercise its option to redeem in full the entire outstanding
$700 million principal amount of its 6.750% Senior Notes due 2020, the entire outstanding $500 million principal amount of its 8.875% Senior Notes due 2020, and the entire outstanding $650 million principal amount of its 4.625% Senior Notes due
2017. The Notes will be redeemed in full on February 10, 2016 at a make-whole redemption price. The make-whole amount is 110 million (U.S.$120
million). Nokia will provide a revolving credit liquidity support facility to Alcatel-Lucent concurrently with the redemption of the Notes.
On January 15, 2016, which was the maturity date, Alcatel-Lucent repaid the 190 million outstanding under its 8.50% Senior Notes.
On February 3, 2016, Nokia Corporation and Alcatel Lucent USA Inc. entered into a U.S.$2 billion Revolving Liquidity Support Facility divided in
the following three tranches: Facility A, for
U.S.$686 million with a maturity date of June 30, 2017, Facility B for U.S.$546 million, with a maturity date of December 31, 2019; and Facility C for U.S.$768 million, with a maturity date
November 15, 2020. Applicable interest rate is 2.40% per annum on drawn amounts. The commitment fee is 30% of 2.40% on undrawn amounts available for drawing.
On February 4, 2016, we sent a termination notice on our
504 million revolving credit facility we entered into December 17, 2013.
On February 4, 2016, Qualcomm notified us that they were exercising their right to terminate one of our two license agreements (that were signed on April 1, 2015) with immediate effect upon the closing of the Nokia Offer.
Pursuant to the license agreement, Qualcomm had the right to terminate the license agreement upon a change of control. The termination resulted in the acceleration of all remaining unpaid quarterly royalty payments of 278 million (U.S.$302.5 million) payable to Qualcomm within 30 days of termination. The full carrying amount of the patent rights recognized in other intangible
assets will be impaired for 287 million in the first quarter ended March 31, 2016. We will now be covered by the license agreement in effect between Nokia and
Qualcomm.
On February 10, 2016, the AMF published the results of the reopened Nokia Offer for Alcatel-Lucent securities in France and
in the United States. 426,695,572 Alcatel-Lucent ordinary shares, 52,286,499 ADSs, 4,795,096 OCEANE 2018 convertible bonds, 19,971,720 OCEANE 2019 convertible bonds, and 56,644,832 OCEANE 2020 convertible bonds were tendered into the reopened Nokia
Offer in France and/or in the U.S. The settlement of the reopened Nokia Offer occurred on February 12, 2016. The ownership of Nokia in Alcatel-Lucent corresponding to the numbers initially announced as resulting in Nokia holding 91.25% of the
Alcatel-Lucent share capital and at least 91.17% of the voting rights, 99.62% of the outstanding OCEANE 2018 convertible bonds, 37.18% of the outstanding
304
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 32
OCEANE 2019 convertible bonds, and 68.17% of the outstanding OCEANE 2020 convertible bonds, and on
a fully diluted basis 88.07% of the share capital, was corrected afterwards. As a result, immediately following the settlement of the reopened Nokia Offer, Nokia held 90.34% of the share capital and at least 90.25% of the voting rights of
Alcatel-Lucent, corresponding to 87.33% of Alcatel-Lucents shares on a fully diluted basis.
On March 21, 2016, the 421,910
OCEANE 2018 remaining outstanding were redeemed in full.
On March 22, 2016, with respect to French Polynesia concerns, the Tribunal of
Papeete acquitted all defendants for lack of evidence as to the existence of any unlawful act. The prosecutor has filed an appeal of the decision.
Further to the reopened Nokia Offer, 207,585,358 OCEANE 2018, 46,274,021 OCEANE 2019 and 22,899,206
OCEANE 2020 were converted or repaid. As of March 31, 2016, the remaining outstanding OCEANE 2019 amount to 367 million and the remaining outstanding OCEANE 2020 amount to 109 million.
On April 13, 2016, Nokia Corporation and
Alcatel-Lucent Participations entered into a 1 billion Revolving Credit Facility for a two-year term. Applicable interest rate is EURIBOR plus a 0.95% margin per annum on drawn
amounts. A utilization fee of 0.10%, 0.20% or 0.40% per annum depending on the level of use of the facility, is also applicable. There is a commitment fee of 35% of 2.40% on available undrawn amounts.
Note 33 Main consolidated Companies
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Company |
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Country |
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% interest |
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Consolidation method |
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Alcatel-Lucent (2) (3) |
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France |
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Parent company |
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Operating companies (1) |
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Alcatel-Lucent Australia Limited |
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Australia |
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Full consolidation |
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Alcatel-Lucent Austria AG |
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Austria |
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Full consolidation |
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Alcatel-Lucent Bell NV |
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Belgium |
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Full consolidation |
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Alcatel-Lucent Brasil S/A |
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Brazil |
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Full consolidation |
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Alcatel-Lucent Canada Inc. |
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Canada |
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Full consolidation |
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Alcatel-Lucent Deutschland AG |
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Germany |
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Full consolidation |
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Alcatel-Lucent España S.A. |
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Spain |
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Full consolidation |
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Alcatel-Lucent India Limited |
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India |
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Full consolidation |
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Alcatel-Lucent International |
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France |
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Full consolidation |
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Alcatel-Lucent Italia S.p.A. |
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Italy |
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Full consolidation |
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Alcatel-Lucent Mexico S.A. de C.V. |
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Mexico |
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Full consolidation |
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Alcatel-Lucent Nederland B.V. |
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The Netherlands |
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Full consolidation |
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Alcatel-Lucent Polska Sp Z.o.o. |
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Poland |
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Full consolidation |
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Alcatel-Lucent Portugal, S.A. |
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Portugal |
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Full consolidation |
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Alcatel-Lucent Schweiz AG |
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Switzerland |
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Full consolidation |
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Alcatel-Lucent Shanghai Bell Co., Ltd |
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China |
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50 |
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Full consolidation |
(4) |
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Alcatel-Lucent Submarine Networks |
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France |
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Full consolidation |
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Alcatel-Lucent Telecom Limited |
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U.K. |
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Full consolidation |
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Alcatel-Lucent USA Inc. |
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U.S.A. |
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Full consolidation |
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Holdings |
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Financial Holdings |
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Alcatel-Lucent Holdings Inc. |
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U.S.A. |
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Full consolidation |
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Alcatel-Lucent Participations |
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France |
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Full consolidation |
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Florelec |
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France |
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Full consolidation |
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Financial Services |
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Electro Banque |
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France |
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Full consolidation |
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Electro Ré |
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Luxemburg |
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Full consolidation |
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(1) |
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Percentages of interest equal 100% unless otherwise specified. |
(3) |
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The activities of Alcatel-Lucent, as the parent company, are included under the business segment Other. |
(4) |
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Entity fully controlled by the Group holding 50% plus one share. |
305