Nokia 2005 Annual Report Download - page 72

primarily due to higher net sales, a product mix favoring high-margin products, overall
profitability of 3G contracts, and a streamlined cost structure as a result of restructuring actions
taken in 2003.
Networks 2004 operating profit included impairments of capitalized R&D costs of EUR 115 million.
In 2003 Networks operating profit included a positive adjustment of EUR 226 million as a result of
the customer finance impairment recorded in 2002 related to Mobilcom, and R&D related costs
totaling EUR 470 million, other restructuring costs of EUR 80 million, as well as a goodwill
impairment of EUR 151 million related to Nokia Networks’ core networks business, with a total
net impact of EUR 475 million.
Common Group Expenses
Common Group expenses totaled EUR 309 million in 2004 compared with EUR 378 million in 2003.
In 2004, this included a positive item of EUR 160 million representing the premium return under
our multi-line, multi-year insurance program, which expired during 2004. The return was due to
our low claims experience during the policy period. It also included a EUR 12 million negative
impact from the divestiture of Nextrom Holding S.A. In 2003, Common Group expenses included
the gain of EUR 56 million on the sale of the remaining shares of Nokian Tyres Ltd.
Net Financial Income
Net financial income totaled EUR 405 million in 2004 compared with EUR 352 million in 2003. Net
financial income in 2004 resulted from a continued strong cash position reflected in the negative
net debt to equity ratio of -79% at December 31, 2004 compared with a net debt to equity ratio of
-71% at December 31, 2003. See ‘‘—Exchange Rates’’ below. During 2004, Nokia sold approximately
69% of the original holdings in its subordinated convertible perpetual bonds issued by France
Telecom. As a result, the company booked a total net gain of EUR 106 million. The bonds had been
classified as available-for-sale investments and fair valued through shareholders’ equity.
Profit Before Taxes
Profit before tax and minority interests decreased 11% to EUR 4 705 million in 2004 compared
with EUR 5 294 million in 2003. Taxes amounted to EUR 1 446 million and EUR 1 697 million in
2004 and 2003, respectively. Effective tax rate changed slightly to 30.7% in 2004 compared with
32.1% in 2003. Excluding the impact of non-deductible goodwill impairments the tax rate in 2003
would have been 31.2%.
Minority Interests
Minority shareholders’ interest in our subsidiaries’ profits totaled EUR 67 million in 2004 compared
with EUR 54 million in 2003.
Net Profit and Earnings per Share
Net profit in 2004 totaled to EUR 3 192 million compared with EUR 3 543 million in 2003,
representing a year-on-year decrease in net profit of 10% in 2004. Earnings per share in 2004
decreased to EUR 0.69 (basic and diluted), compared with EUR 0.74 (basic and diluted) in 2003.
Related Party Transactions
There have been no material transactions during the last three fiscal years to which any director,
executive officer or 5% shareholder, or any relative or spouse of any of them, was party. There is
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