KONE Corporation, Stock Exchnage Release, 26 January, 2007 at 12:30 p.m. Finnish time KONE Corporations Review: JanuaryDecember 2006 (with Pro Forma Comparison Figures for January-December, 2005) KONE achieved 10 percent operating income (EBIT) already in 2006 - Order intake growth for January-December 2006 exceptionally strong at 18 percent. - Net sales grew by 11 percent and totaled EUR 3,601 (3,242) million for January-December 2006. - Operating income (EBIT) improved by 32 percent to EUR 360.1 (272.0) million, corresponding to a 10.0 (8.4) percent operating income (EBIT) margin. - KONEs target for 2007 is to achieve an approximate 10 percent increase in net sales, calculated at comparable exchange rates, compared to 2006. The operating income (EBIT) target is to achieve growth of approximately 20 percent from the comparable 2006 figure of EUR 360 million. - In 2008, KONEs objective is to achieve an about 12 percent operating income (EBIT) margin. - The Board of Directors proposes a dividend of EUR 1.00 per class B share. Key Figures accounting pro previous forma period 10-12/ 10-12/ 1-12/ 1-12/ 6-12/ 2006 2005 2006 2005 2005 Orders MEUR 712.1 702.5 3,116.3 2,639.2 1,622.1 Order book MEUR 2,762.1 2,326.8 2,762.1 2,326.8 2,326.8 Sales MEUR 1,145.6 1,013.4 3,600.8 3,242.2 2,101.4 Operating MEUR 123.4 93.6 360.1 272.0 1) 194.7 income Cash flow from MEUR 97.7 111.3 371.7 329.4 215.4 operations (before financial items and taxes) Net income MEUR 80.2 53.8 234.4 108.8 124.0 Net debt MEUR 124.9 99.3 124.9 99.3 99.3 Total equity/ % 30.5 31.2 30.5 31.2 31.2 total assets Gearing % 17.9 14.8 17.9 14.8 14.8 1) Excluding a EUR 89.2 million provision for the development and restructuring program. Operating income including the provision was EUR 182.8 million in 2005. Matti Alahuhta, President & CEO, says: I am very satisfied with KONEs performance last year. In comparison with competition, we succeeded very well in increasing our orders and especially our profitability. We strengthened our market position in the Asia-Pacific region, continued to improve the profitability of our U.S. operations and also advanced strongly in many European markets. Our comprehensive development program has progressed well and produced results. KONE Corporations first financial reporting period was 1 June31 December, 2005. KONEs reporting period follows the calendar year as of 2006. In order to facilitate evaluation of the financial performance and status of the company KONE has, in addition to the Financial Statements Bulletin, published this separate pro forma review, in which the company has used 1 January31 December 2005 data for comparison. KONE Corporations audited Financial Statements are available on the companys website at www.kone.com. Analyst and Media Conferences and Conference Call A meeting for the press, conducted in Finnish, will be held on Friday 26 January, 2007 at 2:00 p.m. Finnish time at KONE Building, address Keilasatama 3, 02150 Espoo. A telephone conference and a meeting for analysts, conducted in English, will begin on Friday 26 January, 2007 at 3:30 p.m. Finnish time at KONE Building, address Keilasatama 3, 02150 Espoo. The telephone conference will also be available as webcast on the company website. Callers may access the conference directly at the following telephone numbers: US callers: +1 334 323 6201 Non-US callers: +44 (0)20 7162 0025 Participant code: KONE On demand version of the conference will be available on the companys website www.kone.com later the same day. KONEs Financial Statement Bulletin and Pro Forma Report for 2006, and presentation material will be available in the meetings. The presentation material and KONEs Annual Report for 2006 will be available in pdf-format on the companys website as of 2:00 p.m. The printed Annual Report will be published in the week starting 5 February. Sender: KONE Corporation Aimo Rajahalme Minna Mars Executive Vice President, Senior Vice President, Finance Corporate Communications & IR For further information please contact: Aimo Rajahalme, Executive Vice President, Finance, tel. +358 (0)204 75 4484 KONE is one of the worlds leading elevator and escalator companies. It provides its customers with industry-leading elevators and escalators and innovative solutions for their maintenance and modernization. KONE also provides maintenance of automatic building doors. In 2006, KONE had annual net sales of EUR 3.6 billion and about 29,000 employees. Its class B shares are listed on the Helsinki Stock Exchange in Finland. www.kone.com KONEs Operating Environment The operating environment remained good in most markets throughout the year. The need to modernize equipment and cater for ageing populations is driving demand in Europe and North America, while urbanization and economic growth are continuing to increase the demand for elevators and escalators and the related service in Asia. In Europe, the Middle East and Africa (EMEA), the business environment continued to be favorable. Despite tough competition, KONE succeeded in strengthening its position even further. The residential market was the main driver of Europes new equipment business in most countries, although commercial construction progressed at a fairly lively rate especially in the U.K. The Southern European market slowed down at the end of the year. The Middle East market was buoyant due to energetic construction growth in most segments. In North America, the new equipment market continued to progress strongly. The market for hotel and leisure building solutions was especially active, whereas growth in the U.S. residential segment slowed down during the second half of the year. The Asia-Pacific region developed well, with most markets maintaining a high level of activity. Rapid urbanization and economic growth were the main factors affecting the new equipment and modernization markets in the region. In China, the central government made several consecutive controlling actions particularly to guide residential construction towards more affordable housing for people migrating to the cities, which temporarily slowed down growth somewhat. The pricing environment for new elevators and escalators continued to be competitive in all market areas. The maintenance market progressed well under continuous tough price competition. A high level of demand continued for the modernization of elevators and escalators in both Europe and North America, but also in some markets in Asia-Pacific. The growing modernization market became an increasingly important market for KONE, even though it is attracting the attention of both global and local players. During the fourth quarter, the market environment for new equipment remained similar to the previous quarter in North America and the Asia-Pacific region. The EMEA market exhibited contrasting trends, with many of the Central and North European markets and the Middle East growing rather well, but several South European markets continuing to weaken. The maintenance market continued to develop favorably despite the tough price competition. The modernization market remains important for growth, especially in those countries that have adopted SNEL (Safety Norms for Existing Lifts) in Europe, but also in North America and in some markets in Asia. Orders Received and Order Book The value of orders received during 2006, excluding the value of maintenance contracts, increased exceptionally strongly by approximately 18 percent and totaled EUR 3,116 (January-December 2005: 2,639) million. At comparable exchange rates, the growth was also approximately 18 percent. The order book was EUR 2,762 (31 December, 2005: 2,327) million at the end of December. This represents an increase of nearly 19 percent on the year-end order book. At comparable exchange rates this corresponded 24 percent. The order intake for new equipment and modernizations in the EMEA region was strong. Modernization order growth was good particularly in countries that have adopted SNEL in their legislation. In North America, order intake growth was strong. The success of the KONE extended machine-room-less (MRL) elevators and encouraging escalator demand in the public sector resulted in good order intake growth. The demand for modernizations continued to grow also in the U.S. The Asia-Pacific region continued to be characterized by high demand for new equipment. KONEs market share grew rapidly especially in China, where progress has been especially good. KONEs position has strengthened in the whole Asia-Pacific region. KONEs largest orders of the financial year were orders to supply all elevators for the old London Stock Exchange Building, to modernize escalators and walkways in the Roman metro system and major projects for the Madrid Metro. KONE also received an order for the Vienna International Airport, a service contract for the London Underground, and a major order for the retail sector from Tesco PLC to supply ramps and elevators for stores across the U.K. In addition, KONE received orders to design, supply and install all elevators on four cruise ships. In China, KONE was able to gain ground by signing orders with the China National Stadium in Beijing, for example. Orders received during October - December 2006 totaled EUR 712.1 (10-12/2005: 702.5) million, an increase of approximately 1.4 percent. At comparable exchange rates, the growth was 4 percent. The main reason for the lower order intake during the fourth quarter was that several major project awards were postponed to the next quarter in the EMEA region. During the fourth quarter, North America recorded the highest growth in new orders. Sales by geographical areas MEUR previous pro accounting forma period 10-12/ % 10-12/ % 1-12/ % 1-12/ % 6-12/ % 2006 2005 2006 2005 2005 EMEA 1) 762.1 67 670.3 66 2,319.4 65 2,149.4 66 1,388.6 66 Americas 232.1 20 219.1 22 805.1 22 696.8 22 452.7 22 Asia-Pacific 151.4 13 124.0 12 476.3 13 396.0 12 260.1 12 Total 1,145.6 1,013.4 3,600.8 3,242.2 2,101.4 1) EMEA = Europe, Middle East, Africa Net Sales In comparison to 2005, KONEs net sales increased by approximately 11 percent and totaled EUR 3,601 (January-December 2005: 3,242) million. Growth at comparable exchange rates was also approximately 11 percent. New equipment sales accounted for EUR 1,491 (1,301) million of the total and represented an approximate 15 percent increase compared to the same period in 2005. Service sales increased by approximately 9 percent and totaled EUR 2,110 (1,942) million. Net sales growth was almost totally organic and resulted from favorable market conditions and good progress in the companys development programs, i.e. programs to increase customer focus and competitiveness through a better product portfolio. In 2006, the annual sales for closed acquisitions amounted to approximately EUR 50 million. Net sales grew in all geographical areas. In 2006, growth was strongest in Asia-Pacific, and especially in China. In the fourth quarter, KONEs net sales totaled EUR 1,146 (1,013) million, an approximate 13 percent improvement over the same period in 2005. At comparable exchange rates, the growth was approximately 16 percent. New equipment sales accounted for EUR 527.7 (435.0) million. Service sales continued to increase and totaled EUR 617.9 (578.4) million. Result KONEs operating income improved in comparison to 2005 and stood at EUR 360.1 (January-December 2005: 272.0) million or 10.0 (8.4) percent of net sales (the 2005 figures exclude the EUR 89.2 million provision made in the first quarter of 2005). Net financial items were EUR -3.5 (-6.4) million. The increase in operating income compared to the corresponding period of 2005 was driven by continued productivity improvements, which resulted from ongoing development programs. KONEs profit before taxes was EUR 356.3 (177.9) million. Taxes totaled EUR 121.9 (69.1) million, representing a 34.2 (38.8) percent tax rate. Net income for January-December was EUR 234.4 (108.8) million. Earnings per share were EUR 1.86 (0.87). Fourth quarter operating income was EUR 123.4 (93.6) million, or 10.8 (9.2) percent of net sales. The negative impact of higher raw material costs increased towards the end of the year. Net financial items in the fourth quarter were EUR 0.3 (-1.4) million. Fourth quarter profit before taxes was EUR 123.9 (92.5) million. Taxes totaled EUR 43.7 (38.7) million. In the fourth quarter, net income was EUR 80.2 (53.8) million and earnings per share were EUR 0.64 (0.43). Cash Flow and Financing Cash flow from operations (before financial items and taxes) for 2006 was EUR 371.7 (January-December 2005: 329.4) million. At the end of December, net working capital was negative at EUR -139.5 (31 December, 2005: -158.0) million, including financial items and taxes. Although the record net sales of the last quarter increased receivables, the overall cash flow was in accord with the result. Net debt totaled EUR 124.9 (31 December, 2005: 99.3) million. Gearing was 17.9 percent compared to 14.8 percent at the end of December, 2005. KONEs total equity/total assets ratio was 30.5 (31 December, 2005: 31.2) percent at the end of December. Capital Expenditure, Acquisitions and Cooperation Agreements In 2006, KONEs capital expenditure, including acquisitions, totaled EUR 150.5 (January-December 2005: 173.7) million. Acquisitions accounted for EUR 90.1 (93.2) million of this figure. KONE continued its acquisition policy of buying small local elevator or door service companies. Acquisitions were made mainly in Europe and the U.S. in 2006. In Germany, KONE increased its shareholding in Lödige Aufzugstechnik to 85 percent. The company has 5,500 units under maintenance and employs approximately 100 people. KONE signed an agreement to acquire Evin SAS, an elevator company located in France. Evin SAS was consolidated into KONE in September 2006. The company recorded sales of EUR 14 million in 2005 and employed somewhat over 100 persons. Evin SAS installed, maintained and modernized elevators and automatic building doors in several regions in France. In November, KONE Corporation and KMZ Karacharovo Mechanical Factory agreed to withdraw from their plans to set up a joint venture elevator company in Russia, which was announced by the parties in April 2005. KONE and KMZ will, however, continue their cooperation on the local Russian elevator market. KONE and Marimekko signed an agreement to start cooperation under license concerning the decoration of elevator car interiors. Research and Product Development Product development expenses totaled EUR 50.3 (January-December 2005: 50.8) million, representing 1.4 (1.6) percent of net sales. R&D expenses include development of new product concepts and further development of existing products and services. During the year the focus was on developing KONEs product portfolio even further in order to maximize the accessible markets. In Europe, a preferred offering for the new equipment market was released, providing better flexibility in fulfilling customer needs. It included a new set of visual outlooks for the car interiors and improved performance, such as the more efficient use of space. KONEs machine-room-less (MRL) product offering for the North American market now covers most hydraulic elevator segments. Further performance improvements were also released during the year, including the possibility for bigger loads. In the Asian market, KONE continued to increase the flexibility of its product offerings and the coverage of its visual offering. In 2006, the first escalator product from KONEs subsidiary, KONE TELC Industries Co., Ltd, was released in most Asian markets, including India, and in Australia, South Africa and some European markets. With respect to modernizations, a solution featuring enhancements in accessibility, safety (optimized for the European Standard Safety Norm for Existing Lifts, SNEL), visual outlook and performance was released in 2006. KONE also announced that it has developed the worlds flattest autowalk technology, which makes designing locations for and installing autowalks considerably easier. Due to the innovative pallet return mechanism and a new kind of motor solution, each KONE InnoTrack autowalk is so flat that, unlike conventional solutions, it can be installed entirely on the floor level. During 2005 and 2006 product creation at KONE has been developed to become much more cross-functional. This has significantly reduced the time to market in R&D. Significant Events KONE and Hewlett Packard (HP) signed a seven-year agreement covering IT infrastructure services. Under this agreement, HP will consolidate and maintain KONEs servers, local area networks and operating help desks, and will harmonize desk-top computing environments in KONEs global network. The production of elevator doors and cars for the North American market started in the second quarter in KONEs purpose-built facility in Torreón, Mexico. KONE also decided to build the capability to deliver all elevators for the North American markets from Torreón by the middle of 2007. In line with KONEs global manufacturing processes, the new factory in Mexico employs the same modern production technology as other KONE component plants. European Commission Investigation In March 2006, KONE submitted its reply to the European Commission concerning that bodys investigation of localized anticompetitive practices in the elevator and escalator industry in Belgium, Germany, Luxembourg and the Netherlands. KONE received a Statement of Objections on 10 October, 2005. Since the initiation of the investigation in January 2004, KONE has fully cooperated with the European Commission. KONE has not made a provision in this respect. Personnel KONEs personnel are professional and specialized. As an employer the company focuses on securing the availability, commitment and continuous development of its human resources. KONE had 29,321 (31 December, 2005: 27,238) employees at the end of December 2006. The average number of employees during January - December 2006 was 28,366 (January-December 2005: 26,405). Most of the personnel growth was in the fastest growing geographical markets, such as Asia-Pacific and the Middle East, with additional recruitment being carried out in service and installation operations due to growing volumes. The geographical distribution of KONE employees was 58 (59) percent in EMEA, 18 (19) percent in the Americas and 24 (22) percent in Asia-Pacific. Operational Risks KONEs business activities are exposed to risks, of which the most significant are fluctuations in currency rates and increases in raw material prices and personnel costs. A rise in raw material prices is reflected directly in the production costs of components made by KONE, such as doors and cars, and indirectly in the prices of purchased components. The price of oil affects maintenance costs. Subsidiary investments are hedged from currency risks in accordance with the hedging policy to ensure that the total effect of foreign exchange rates on the Corporations gearing is neutral. As the expenses and income of the elevator and escalator business occur mainly in the same currency, exchange rate movements are reflected mostly in the translation of the achieved result into euros. Environment Elevators and escalators are durable and give long-lasting service when appropriately maintained. The environmental impact of maintenance is chiefly related to the disposal of replaced components, the cleaning of equipment, and exhaust from service vehicles. KONE takes care of the environment not only by its own proactive initiatives, but also by complying with the laws and recommendations related to its business and by continuously monitoring the changes made to them. KONE strives to develop its products, manufacturing processes and operating procedures so that their environmental impact will remain as small as possible throughout the products entire life cycle. Title Changes within KONE Corporation The Board of Directors announced that, from December 18, 2006, Antti Herlin's title will be Chairman of the Board of KONE Corporation, while Matti Alahuhta's title will be President and CEO of KONE Corporation. Previously, Herlin was the CEO in addition to serving as Chairman of the Board. Appointment to the Executive Board KONE Corporation appointed Juho Malmberg, M.Sc. (Computer Science), as Executive Vice President, Development and as a member of the Executive Board as of 1 February, 2006. Annual General Meeting and Board of Directors KONE Corporations Annual General Meeting held in Helsinki on 27 February, 2006 decided to maintain the number of members of the Board of Directors at eight (8). Sirpa Pietikäinen was elected as a new member of the Board. Re-elected as full members of the Board were Matti Alahuhta, Jean-Pierre Chauvarie, Reino Hanhinen, Antti Herlin, Sirkka Hämäläinen-Lindfors, Masayuki Shimono and Iiro Viinanen. The Boards term expires at the next Annual General Meeting. At its meeting held after the Annual General Meeting, the Board of Directors elected Antti Herlin as its Chairman and Sirkka Hämäläinen-Lindfors as Vice Chairman of the Board. In addition, the Board of Directors proposal that the Annual General Meeting authorize it to repurchase KONEs own shares with assets distributable as profit was approved. Altogether no more than 12,785,000 shares may be repurchased, of which no more than 1,905,000 are to be class A shares and 10,880,000 class B shares, taking into consideration the provisions of the Companies Act regarding the maximum amount of own shares that the Company is allowed to possess. The proposed amount corresponds to nearly 10 percent of both the share capital of the Company and the total voting rights. In addition, the Board of Directors was authorized, with respect to the distribution of the repurchased shares, to decide to whom and in which order the repurchased shares will be distributed. The Board of Directors may decide on the distribution of repurchased shares otherwise than in proportion to the existing pre-emptive right of shareholders to purchase the Companys own shares. The repurchased shares may be used as compensation in acquisitions and in other arrangements, as well as to implement the Companys share- based incentive plans in the manner and to the extent decided by the Board of Directors. These authorizations shall remain in effect for a period of one (1) year from the date of the Annual General Meetings decision. The Annual General Meeting elected PricewaterhouseCoopers Oy and Heikki Lassila, Authorized Public Accountant, as the auditors of the company. The Annual General Meeting approved the Boards proposal for a dividend for the reporting period, 1 June31 December, 2005, of EUR 0.99 per class A share and EUR 1.00 per class B share, making a total of EUR 127.3 million. The date of the dividend payment was set at 9 March, 2006. The rest of the distributable equity, EUR 1,078 million, was retained and carried forward. Incentive Programs, Share Capital and Market Capitalization KONE Corporation has two classes of shares: the un-listed class A share and the listed class B share. KONE Corporations Articles of Association state that the minimum share capital is EUR 60 million and the maximum share capital is EUR 260 million. The share capital can be raised or reduced within these limits without an amendment to the Articles of Association. At the end of December 2006, the share capital was EUR 64,033,314. The share capital was increased by EUR 105,594 due to subscriptions of shares with KONE 2005A and 2005B options during the financial year. KONE 2005A and 2005B option rights based on the KONE Corporation option program 2005 were listed on the main list of the Helsinki Stock Exchange on 1 June, 2005. Each option right entitles its holder to subscribe for six (6) class B shares at a price of EUR 8.04 per share. As of 31 December 2006, 557,118 shares have been subscribed for with the option rights, raising KONEs share capital to EUR 64,033,314, comprising 109,014,450 listed class B shares and 19,052,178 unlisted class A shares. The remaining 2005A option rights entitle their holders to subscribe for 226,572 class B shares, while the remaining 2005B option rights entitle their holders to subscribe for 524,820 class B shares. The share subscription period for series A option rights share subscription period ends on 31 March, 2008 and the for series B option rights on 31 March, 2009. The remaining number of shares that can be subscribed for is 751,392. The subscription price is EUR 8.04 per share. In addition, KONE has granted in 2005 a conditional option program, 2005C, and a conditional share based incentive plan. KONEs market capitalization grew by approximately 28 percent during 2006 and was EUR 5,382 million on 31 December, 2006, disregarding own shares in the groups possession. Repurchase of KONE Shares On the basis of the Annual General Meetings authorization, KONE Corporations Board of Directors decided to commence repurchasing shares on 7 March, 2006 at the earliest. During the financial year, KONE Corporation repurchased 1,963,913 class B shares at an average price of EUR 35.29. At the end of December, the group possessed 2,738,753 of its own class B shares, representing 2.5 percent of the total number of class B shares. This corresponds to 0.9 percent of the total voting rights. At the end of the reporting period, KONEs Board of Directors had no current authorization to raise the share capital or to issue convertible or warrant loans. The Boards proposal of distributable equity The parent companys non-restricted equity on 31 December 2006 is EUR 1,271,423,830.92 of which net profit from the financial year is EUR 262,326,865.64. The Board of Directors proposes to the Annual General Meeting that a dividend of EUR 0,99 be paid on the 19,052,178 class A shares and EUR 1,00 on the outstanding 106,675,697 class B shares. The total amount of proposed dividends will be EUR 125,537,353.22. The Board of Directors further proposes that the rest, EUR 1,145,886,477.70 be retained and carried forward. The Board proposes that the dividends be payable from 8 March, 2007. Outlook We estimate that market growth will not be equally strong in all markets this year as in 2006. This will be the case especially in North America and Southern Europe. However, market development in e.g. Asia-Pacific will continue to be strong. KONEs target for 2007 is to achieve an approximate 10 percent increase in net sales, calculated at comparable exchange rates, compared to 2006. The operating income (EBIT) target is to achieve growth of approximately 20 percent from the comparable 2006 figure of EUR 360 million. In 2008, KONEs objective is to achieve an about 12 percent operating income (EBIT) margin. Helsinki, 26 January, 2007 KONE Corporation Enclosures 1 Consolidated Statement of Income 2 Consolidated Balance Sheet and Consolidated Statement of Changes in Equity 3 Consolidated Cash Flow 4 Notes on the Consolidated Financial Statements KONE Corporations audited Financial Statements are available on the company web site at www.kone.com. KONE Corporation will release its Interim Report for 1 January31 March on Tuesday, 24 April 2007. The presentation used in the Analyst and Media Conference is available on the company web site at www.kone.com. This bulletin contains forward-looking statements that are based on the current expectations, known factors, decisions and plans of the management of KONE. Although management believes that the expectations reflected in such forward-looking statements are reasonable, no assurance can be given that such expectations will prove to be correct. Accordingly, results could differ materially from those implied in the forward-looking statements as a result of, among other factors, changes in economic, market and competitive conditions, changes in the regulatory environment and other government actions and fluctuations in exchange rates. Consolidated statement of income previous account- pro ing forma period MEUR 10-12 % 10-12 % 1-12 % 1-12 % 6-12 % /2006 /2005 /2006 /2005 /2005 Sales 1,145.6 1,013.4 3,600.8 3,242.2 2,101.4 Costs and expenses -1,007.9 -905.3 -3,182.4 -3,000.4 -1,871.9 Depreciation -14.3 -14.5 -58.3 -59.0 -34.8 Operating 123.4 10.8 93.6 9.2 360.1 10.0 182.8 5.6 194.7 9.3 income Share of 0.2 0.3 -0.3 1.5 0.9 associated companies' income Financing 0.3 -1.4 -3.5 -6.4 -2.1 income and expenses Income before 123.9 10.8 92.5 9.1 356.3 9.9 177.9 5.5 193.5 9.2 taxes Taxes -43.7 -38.7 -121.9 -69.1 -69.5 Net income 80.2 7.0 53.8 5.3 234.4 6.5 108.8 3.4 124.0 5.9 Net income attributable to: Shareholders of 80.1 54.3 234.8 110.2 124.8 the parent company Minority 0.1 -0.5 -0.4 -1.4 -0.8 interests Total 80.2 53.8 234.4 108.8 124.0 Earnings per share for profit attributable to the shareholders of the parent company, EUR Basic earnings 0.64 0.43 1.86 0.87 0.98 per share Diluted 0.63 0.42 1.85 - 0.97 earnings per share Consolidated balance sheet previous accounting Assets period MEUR 31 Dec. 31 Dec. 2006 2005 Non-current assets Intangible assets 615.7 551.6 Tangible assets 217.7 217.7 Loans receivable and other interest-bearing 5.1 53.1 assets Deferred tax assets 134.1 130.1 Investments 129.6 157.2 Total 1,102.2 1,109.7 Current assets Inventories 668.8 584.9 Advance payments received -552.1 -464.2 Loans receivable and other interest-bearing 44.6 0.6 assets Accounts receivable and other non interest- 805.1 706.7 bearing assets Cash, cash equivalents and financial assets 223.8 206.8 Total 1,190.2 1,034.8 Total assets 2,292.4 2,144.5 previous accounting Equity and liabilities period MEUR 31 Dec.2006 31 Dec.2005 Equity 698.6 669.2 Non-current liabilities Loans 100.2 144.2 Deferred tax liabilities 30.3 24.7 Employee benefits 145.0 148.9 Total 275.5 317.8 Provisions 71.8 112.0 Current liabilities Loans 298.2 215.6 Accounts payable 948.3 829.9 Total 1,246.5 1,045.5 Total equity and liabilities 2,292.4 2,144.5 Consolidated Statement of Changes in Equity MEUR Share Fair Translat- Own Retained Minority Total Share prem- value ion shares earnings interests equity capit- ium and differen- tal ac- other ces count eserves 1 Jan, 2006 63.9 96.4 -5.1 9.9 -21.9 523.2 2.8 669.2 Net income 234.8 -0.4 234.4 for the period Items booked directly into equity: Transaction s with shareholder s and minority shareholder s: Dividends paid -126.9 -126.9 Issue of 0.1 1.6 1.7 shares (option rights) Purchase of own shares -69.3 -69.3 Sales of - own shares Change in 1.1 1.1 minority interests Cash flow 4.6 4.6 hedge Translation -30.4 -30.4 differences Hedging of 8.8 8.8 foreign subsidiarie s Tax impact -2.3 -2.3 of hedging Option and 7.7 7.7 share based compensation 31 Dec, 64.0 98.0 -0.5 -14.0 -91.2 638.8 3.5 698.6 2006 Pro forma MEUR Share Share Fair Trans- Own Retained Minority Total capital premium value lation shares earnings interests equity account and differ- other ences reserves 1 Jan, 2005 63.7 91.6 11.0 -1.7 0.0 539.6 22.6 726.8 Dividends -127.3 -127.3 paid Issue of 0.2 4.8 5.0 shares (option rights) Purchase of -21.9 -21.9 own shares Sales of own shares Cash flow -16.1 -16.1 hedge Change in 11.8 11.8 translation differences Change in -18.4 -18.4 minority interests Option and 0.5 0.5 share based compensation Net income 110.2 -1.4 108.8 for the period 31 Dec, 63.9 96.4 -5.1 10.1 -21.9 523.0 2.8 669.2 2005 MEUR Share Share Fair Trans- Own Retained Minority Total capital premium value lation shares earnings interests equity account and differ- other ences reserves 1 Jun, 2005 63.8 93.8 -2.2 0.0 0.0 397.9 22.9 576.2 Net income for the 124.8 -0.8 124.0 period Items booked directly into equity: Transactions with shareholders and minority shareholders: Dividends paid - Issue of shares 0.1 2.6 2.7 (option rights) Purchase of own -21.9 -21.9 shares Sales of own - shares Change in minority -19.3 -19.3 interests Cash flow hedge -2.9 -2.9 Translation 15.2 15.2 differences Hedging of foreign -7.1 -7.1 subsidiaries Tax impact of 1.8 1.8 hedging Option and share 0.5 0.5 based compensation 31 Dec, 2005 63.9 96.4 -5.1 9.9 -21.9 523.2 2.8 669.2 Consolidated cash flow previous accounting pro period forma MEUR 1-12/2006 1-12/2005 6-12/2005 Operating income 360.1 182.8 194.7 Change in working -46.7 87.6 -14.1 capital Depreciation 58.3 59.0 34.8 Cash flow from 371.7 329.4 215.4 operations Cash flow from -105.9 -163.4 -140.7 financial items and taxes Cash flow from 265.8 166.0 74.7 operating activities Cash flow from -97.0 -182.5 -65.6 investing activities Purchase and sales of -69.3 -21.9 -22.0 own shares Share issue 1.7 5.0 2.7 Dividends paid -126.8 -127.3 - Change in net debt -25.6 -160.7 -10.2 Net debt in the 99.3 -61.4 89.1 beginning of period Net debt in the end of 124.9 99.3 99.3 period Change in net debt -25.6 -160.7 -10.2 Key figures pro previous forma accounting period 1-12/2006 1-12/2005 6-12/2005 Basic earnings per share EUR 1.86 0.87 0.98 Diluted earnings per share EUR 1.85 - 0.97 Equity per share EUR 5.55 5.24 5.24 Interest bearing net debt MEUR 124.9 99.3 99.3 Total equity/total assets % 30.5 31.2 31.2 Gearing % 17.9 14.8 14.8 Return on equity % 34.3 15.6 34.1 Return on capital employed % 35.4 18.3 36.4 Total assets MEUR 2,292.4 2,144.5 2,144.5 Assets employed MEUR 823.5 768.5 768.5 Working capital (including MEUR -139.5 -158.0 -158.0 financing and tax items) pro previous forma accounting period Sales by geographical % % % areas MEUR 1-12/2006 1-12/2005 6-12/2005 EMEA 1) 2,319.4 65 2,149.4 6 1,388.6 66 Americas 805.1 22 696.8 22 452.7 22 Asia Pacific 476.3 13 396.0 12 260.1 12 Total 3,600.8 3,242.2 2,101.4 1) EMEA = Europe, Middle East, Africa pro previous forma accounting period Orders received MEUR 1-12/2006 1-12/2005 6-12/2005 3,116.3 2,639.2 1,622.1 previous accounting period Order book MEUR 31 Dec. 31 Dec. 2006 2005 2,762.1 2,326.8 pro previous forma accounting period Capital expenditure MEUR 1-12/2006 1-12/2005 6-12/2005 In fixed assets 51.3 47.5 26.4 In leasing agreements 9.1 10.0 3.0 Total 60.4 57.5 29.4 pro previous forma accounting period Expenditure for R&D MEUR 1-12/2006 1-12/2005 6-12/2005 50.3 50.8 29.7 Expenditure for R&D as 1.4 1.6 1.4 percentage of sales pro previous forma accounting period Number of employees 1-12/2006 1-12/2005 6-12/2005 Average 28,366 26,405 27,016 In the end of the period 29,321 27,238 27,238 Notes Commitments previous accounting period MEUR 31 Dec. 2006 31 Dec. 2005 Mortgages Group and parent company 30.7 30.7 Pledged assets Group and parent company 5.4 5.8 Guarantees Associated companies 1.8 2.0 Others 3.4 23.6 Operating leases 115.8 118.9 Total 157.1 181.0 The future minimum lease payments under non-cancellable operating leases previous accounting period 31 Dec. 31 Dec. 2006 2005 Less than 1 year 34.6 31.2 1-5 years 72.5 72.2 Over 5 years 8.7 15.5 Total 115.8 118.9 The European Comission initiated an investigation In January 2004 concerning alleged anticompetitive practices in the elevator and escalator market in Europe. As a result of the Commission's investigations, KONE received at the end of 2005 a Statement of the Objections from the Comission concerning localized anticompetititive practices in Belgium, Germany, Luxemburg and the Netherlands.KONE submitted its reply to the Statement of Objections to the Comission in 2006. Since the initiation of the investigation, KONE has fully cooperated with the European Commission. The European Commission has not issued a decision nor decided on possible fines yet. KONE has not made a provision in this respect. Net fair value previo us Derivatives Positi Negati Net accoun ve ve ting fair fair fair value value value period Fair values of derivative 31Dec. 31Dec. 31Dec. 31Dec. financial instruments 2006 2006 2006 2005 MEUR FX Forward contracts 3.9 2.7 1.2 -6.1 Currency options 0.1 0.1 0.0 0.0 Cross-currency swaps, due 43.2 - 43.2 - under one year Cross-currency swaps, due 2.8 - 2.8 32.6 in 1-3 years Electricity derivatives 0.5 0.2 0.3 0.7 Total 50.5 3.0 47.5 27.2 previous accounting period Nominal values of derivative 31Dec. 31Dec. financial instruments MEUR 2006 2005 FX Forward contracts 392.8 859.3 Currency options 32.3 7.4 Cross-currency swaps, due under 153.8 - one year Cross-currency swaps, due in 1-3 43.6 173.8 years Electricity derivatives 2.9 2.4 Total 625.4 1,042.9 Quarterly Figures pro pro forma forma Q4/2006 Q3/2006 Q2/2006 Q1/2006 Q4/2005 Q3/2005 Q2/2005 Q1/2005 Orders MEUR 712.1 742.0 821.9 840.3 702.5 649.4 688.3 604.1 received Order book MEUR 2,762.1 2,951.0 2,818.0 2,654.0 2,326.8 2,371.7 2,264.7 2,023.1 Sales MEUR 1,145.6 879.8 840.4 735.0 1,013.4 804.7 783.1 649.3 Operating MEUR 123.4 101.1 83.9 51.7 93.6 79.1 60.8 39.0 1) income Operating % 10.8 11.5 10.0 7.0 9.2 9.8 7.8 6.0 1) income 1) excluding MEUR 89.2 provision for the development and restructuring program Share and shareholders 31 December 2006 Class A Class B Total shares shares Number of shares 19,052,178 109,014,450 128,066,628 Own shares in possession 1) 2,738,753 Share capital, EUR 64,033,314 Market capitalization, MEUR 5,382 Number of shares traded, million 75.5 2006 Value of shares traded MEUR, 2,662 2006 Number of shareholders 3 13,673 13,673 Close High Low Class B share price, EUR, Jan- 42.94 43.41 27.80 Dec, 2006 1) During the reporting period 1 January31 December, 2006, KONE Corporation repurchased a total of 1,963,913 own class B shares. During the accounting period 1 June31 December, 2005, KONE Corporation repurchased a total of 374,840 own class B shares. In addition, relating to the shares-based incentive plan, a company included in the consolidated financial statements acquired 400,000 KONE class B shares in December 2005.
KONE Corporations Review: JanuaryDecember 2006 (with Pro Forma Comparison Figures for January-Dece
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