* Sales SEK 49.2 (43.5) b., 13% growth, SEK 141.9 (133.3) b. first
nine months
* Operating income SEK 5.7 (5.6) b., excl. restructuring charges of
SEK 2.0 b 1).,
SEK 14.72) (23.0) b. first nine months, excl. restructuring charges
of SEK 4.6 b. 1)
* Operating margin 11.5% (12.9%), excl. restructuring charges,
10.3% 2) (17.3%) first nine months, excl. restructuring charges
* Cash flow SEK 3.8 (-1.6) b., SEK 17.0 (7.2) b. first nine months
* Net income 3) SEK 2.8 (4.0) b., SEK 7.4 2) (16.2) b. first nine
months
* Earnings per share 3) SEK 0.89 (1.25) 4), SEK 2.32 2) (5.10) 4)
first nine months
1) The restructuring charges include SEK 0.2 b in Sony Ericsson
2) Includes a capital gain of SEK 0.2 b. from divested enterprise PBX
operations in Q208
3) Attributable to stockholders of the Parent Company, excluding
minority interests
4) A reverse split 1:5 was made in June 2008. Comparable figures
restated accordingly
CEO COMMENTS"During the quarter, sales grew by 13% with strong development in all
regions except Western Europe," said Carl-Henric Svanberg, President
and CEO of Ericsson (NASDAQ:ERIC). "Gross margin increased
year-over-year and was stable sequentially. We are seeing initial
positive effects from our ongoing cost adjustments. Our financial
position is strong with healthy net cash and high payment readiness.
Our business in the quarter has not been impacted by the financial
turmoil. Our customers are generally financially strong. In addition,
networks are loaded and traffic shows strong increase. In the present
financial turmoil, it is however hard to predict how operators will
act and to what extent consumer telecom spending will be affected.
In this environment, we continue to adjust our cost base. Our cost
adjustment program is running according to plan. The charges we
announced earlier have now been exceeded. However, given the present
market conditions, we will continue with cost adjustment activities
in the fourth quarter, although at a slightly lower pace.
We have a positive longer-term view for our industry, however, as we
look into 2009, we continue to plan for a flattish market, and we
have measures in place also for tougher conditions," said Carl-Henric
Svanberg.
FINANCIAL HIGHLIGHTS
Income statement and cash flow
Second
Third quarter quarter Nine months
2008 2008
SEK b. 2008 1) 2007 Change 1) Change 1) 2007 Change
Net sales 49.2 43.5 13% 48.5 1% 141.9 133.3 6%
Gross margin 37.0% 35.6% - 37.0% - 37.5% 40.6% -
EBITDA margin 15.3% 17.4% - 14.9% - 15.0% 21.8% -
Operating
income 5.7 5.6 1% 4.7 20% 14.7 23.0 -36%
Operating
margin 11.5% 12.9% - 9.7% - 10.3% 17.3% -
Operating
margin
excl Sony
Ericsson 11.5% 9.0% - 9.7% - 9.7% 13.7% -
Income after
financial
items 6.2 5.6 10% 4.7 31% 15.3 23.1 -34%
Net income 3) 2.8 2) 4.0 -28% 1.9 2) 50% 7.4 2) 16.2 -54%
0.60 2.32
EPS, SEK 3) 4) 0.89 2) 1.25 -29% 2) 48% 2) 5.10 -55%
Cash flow from
operating
activities 3.8 -1.6 - 8.5 - 17.0 7.2 -
Cash flow
excl.
Sony Ericsson 2.4 -3.0 - 8.5 - 13.4 3.2 -
1) Excluding restructuring charges of SEK 2.0 b.in the third quarter
2008, SEK 1.8 b. in the second quarter and SEK 0.8 b. in the first
quarter
2) Including restructuring charges
3) Attributable to stockholders of the Parent Company, excluding
minority interests
4) A reverse split 1:5 was made in June 2008. Comparable figures are
restated accordingly
Sales were up 13% year-over-year, mainly driven by healthy growth in
Networks across all regions except Western Europe. In constant
currencies, growth amounted to some 17%. Acquisitions and
divestitures had a limited net effect.
Gross margin, excluding restructuring charges, amounted to 37.0%
(35.6%) and was stable sequentially. The year-over-year improvement
reflects a better business mix outside Western Europe and improved
margins in Professional Services.
Operating expenses, excluding restructuring charges, amounted to SEK
12.9 (12.0) b. in the quarter. Operating expenses decreased
sequentially affected by seasonality and some initial effects of the
cost adjustments.
Operating income, excluding restructuring charges, amounted to SEK
5.7 (5.6) b. in the quarter. Sony Ericsson showed a small profit,
excluding restructuring charges. Excluding Sony Ericsson, Group
operating margin improved year-over-year to 11.5% (9.0%).
Financial net amounted to SEK 0.5 (-0.1) b. with positive effects
from foreign exchange as well as interest rates.
Cash flow from operating activities reached SEK 3.8 (-1.6) b. in the
quarter, including a dividend of SEK 1.4 b. from Sony Ericsson. The
increase in working capital reflects the strong sales and customary
build-up of inventories ahead of the fourth quarter. The cash
conversion rate year-to-date amounted to 102% (30%).
Cash flow from investing activities was SEK -5.5 (-3.6) b. in the
quarter of which
SEK -4.6 b are related to increased short-term investments.
Balance sheet and other performance indicators
Three Full
Nine months Six months months year
SEK b. 2008 2008 2008 2007
Net cash 30.2 27.9 28.3 24.3
Interest-bearing
provisions
and post-employment
benefits 35.4 29.2 32.0 33.4
Trade receivables 62.6 56.7 56.4 60.5
Days sales outstanding 115 107 110 102
Inventory 29.7 26.6 24.5 22.5
Of which work in
progress 18.4 16.3 13.8 12.5
Inventory turnover 4.5 1) 4.7 1) 4.6 1) 5.2
Payable days 57 56 57 57
Customer financing, net 2.2 2.4 2.7 3.4
Return on capital
employed 13% 1) 12% 1) 12% 1) 21%
Equity ratio 52% 55% 56% 55%
1) Excluding restructuring costs
The net cash position increased sequentially to SEK 30.2 (27.9) b.
Cash, cash equivalents and short-term investments amounted to SEK
65.6 (57.1) b. This includes effects from a seven-year loan of SEK
4.0 b. with the European Investment Bank to support the development
of LTE in Sweden. Of a total debt position of SEK 27.6 b., SEK 5.0 b.
matures in the next twelve months.
During the quarter, approximately SEK 1.6 b. of provisions were
utilized related to warranty and project commitments and other items,
of which SEK 0.3 b. were related to restructuring. Additions of SEK
3.4 b. were made, of which SEK 1.5 b. related to restructuring.
Reversals of SEK 0.1 b. were made. The net impact on operating
income, excluding restructuring charges, was negative by SEK 1.9 b.
Days sales outstanding increased in the quarter to 115 days due to
high business activity, especially in high-growth markets where
payment terms are longer. Inventory increased due to customary fourth
quarter build-up.
Cost reductions
In February 2008, a cost reduction plan of SEK 4 b. in annual savings
was announced, including estimated charges of the same size. In the
quarter, charges of SEK 1.8 b. have been recognized of which SEK 1.5
have been added to provisions. Year-to-date, charges of SEK 4.4 b.
have been recognized of which SEK 3.1 b. have been added to
provisions. The cost reductions should have full effect from 2009.
Further charges will be taken in the fourth quarter with expected
annual savings increasing accordingly. Ericsson's share in Sony
Ericsson's restructuring charges were SEK 0.2 b. in the quarter.
Restructuring charges 2008
Isolated quarters, SEK b. Accumulated Q3 Q2 Q1
Cost of sales -1.4 -0.6 -0.6 -0.2
Research and development expenses -2.0 -0.3 -1.1 -0.6
Selling and administrative expenses -1.0 -0.9 -0.1 -0.0
Share in Sony Ericsson -0.2 -0.2 - -
Total -4.6 -2.0 -1.8 -0.8
SEGMENT RESULTS
Second
Third quarter quarter Nine months
2008 2008 2008 1)
SEK b. 1) 2007 Change 1) Change 2) 2007 Change
Networks sales 33.0 28.5 16% 33.3 -1% 96.3 91.5 5%
Of which
network rollout 4.7 4.0 17% 4.8 -2% 14.0 12.1 16%
Operating margin 11% 8% - 10% - 10% 15% -
EBITDA margin 15% 13% - 15% - 15% 20% -
Professional
Services sales 11.8 11.0 7% 11.0 7% 32.8 30.8 7%
Of which
managed services 3.5 3.4 3% 3.4 1% 10.0 8.9 13%
Operating margin 16% 15% - 14% - 15% 15% -
EBITDA margin 19% 17% - 16% - 17% 16% -
Multimedia sales 4.4 4.0 10% 4.2 5% 12.8 11.0 16%
Operating margin 3% 1% - -1% - -3% 3% -
13%
EBITDA margin 12% 6% - 3) - 7% 3) 7% -
Total sales 49.2 43.5 13% 48.5 1% 141.9 133.3 6%
1) Excluding restructuring costs
2) First quarter 2008 is restated for the transfer of the IPX
operations from Professional Services to Multimedia
3) Affected by SEK 0.2 b. due to changed allocation of capitalized
development expenses
Networks
Sales in Networks were up 16% year-over-year and 5% year-to-date.
Network rollout services grew in line with equipment sales. Build-out
of new networks as well as network expansions across all markets
except Western Europe continues with particularly strong growth in
India, Indonesia, Russia and Brazil,. Margins improved sequentially
as well as year-over-year due to improved business mix and lower
operating expenses.
Redback shows strong sales growth as a result of increased
international sales while sales in the US were down.
Professional Services
Sales in Professional Services grew by 7% both year-over-year as well
as year-to-date. Adjusted for the transfer of IPX and local
currencies, sales growth amounted to 11% year-to-date. Operating
margin improved sequentially, as a result of efficiency gains and a
lower proportion of new managed services contracts in early phase.
Compared to a strong third quarter 2007, managed services sales
increased year-over-year by 3% and by 13% year-to-date. During the
quarter, six new contracts were signed. The total number of
subscribers in managed operations now amount to 225 million, of which
60% are in high-growth markets.
Multimedia
Sales growth was 10% year-over-year and 16% year-to-date. Organic
growth, excluding acquisitions and divestitures, amounted to 23%
year-over-year. Revenue management, including LHS, and Tandberg
Television showed particularly strong development.
Operating margin showed an encouraging improvement and reached 3% in
the quarter. Multimedia is still in its build-up phase and sales and
results will fluctuate between quarters.
Sony Ericsson Mobile Communications
For information on transactions with Sony Ericsson Mobile
Communications, please see Financial statements and Additional
information.
Third quarter Second quarter Nine months
EUR m. 2008 2007 Change 2008 Change 2008 2007 Change
Number of
units shipped
(m.) 25.7 25.9 -1% 24.4 6% 72.5 72.6 0%
Average selling
price (EUR) 109 120 -9% 116 -6% 115 126 -9%
Net sales 2,808 3,108 -10% 2,820 0% 8,330 9,145 -9%
Gross margin 22% 31% - 23% - 25% 30% -
Operating margin -1% 13% - 0% - 2% 12% -
Income before
taxes -23 384 - 8 - 179 1,073 --
Income before
taxes,
excl
restructuring
charges 12 384 - 19 - 225 1,073 -
Net income -25 267 - 6 - 114 741 -
Units shipped in the quarter were 25.7 million, a sequential
increase, but a year-on-year decrease. Sales for the quarter were EUR
2,808 million, a decrease of 10% compared to the third quarter 2007.
Gross margin decreased year-on-year as well as sequentially due to
continued price pressure at a time of adverse cost trends in the
supplier base. New products launched, such as the C902 Cyber-shot(TM)
camera phone, have been well received. Income before taxes for the
quarter was EUR 12 (384) million, excluding restructuring charges of
EUR 35 million.
The target to reduce operating expenses by EUR 300 million annually
by the end of the second quarter 2009 remains, with the full effects
expected to appear in the second half of 2009. The plans are
progressing in line with expectations.
Ericsson's share in Sony Ericsson's income before tax, excluding
restructuring charges, was SEK 0.1 (1.7) b. in the quarter.
REGIONAL OVERVIEW
Third quarter Second quarter Nine months
Sales, SEK b. 2008 2007 Change 2008 Change 2008 2007 Change
Western Europe 11.6 12.3 -6% 12.1 -4% 35.4 37.3 -5%
Central and Eastern
Europe,
Middle East and
Africa 13.1 12.0 9% 11.2 16% 35.4 34.4 3%
Asia Pacific 14.1 12.0 17% 15.8 -11% 42.8 40.9 5%
Latin America 6.1 4.2 43% 5.0 23% 15.2 11.6 31%
North America 4.3 3.0 44% 4.4 -2% 13.0 9.1 43%
Sales in Western Europe declined by 6% year-over-year and is down 5%
year-to-date. Spain, Italy and UK were particularly slow while
Germany and the Nordic region showed good development. 3G accelerates
while spending on GSM is decreasing.
Sales in Central and Eastern Europe, Middle East and Africa increased
9% year-over-year and by 3% year-to-date. The business activity is
increasing throughout the region. Russia and Africa showed
particularly good development. Roll out of 2G network coverage in
rural areas and deployments of 3G in urban areas characterize the
region.
Asia Pacific sales were up 17% year-over-year and 5% year-to-date.
The business activity is generally high in the region although there
are uncertainties in some countries. India and Indonesia showed
particularly strong growth with major new network rollouts. Japan was
up strongly after a temporary slow down. China was down sequentially,
reflecting the temporary effects of the Beijing Olympics.
Latin American sales were up 43% year-over-year and 31% year-to-date.
The development was particularly strong in Brazil, presently leading
the rollout of mobile broadband in the region. Mexico and Central
America also contributed to the positive development. Professional
Services show positive development throughout the region.
North American sales were up 44% year-over-year and 43% year-to-date
with sales stabilizing on a higher level. The positive development is
a result of the continued build-out and expansion of mobile
broadband. Smart phones and other new devices as well as
broadband-connected laptops are generating demand for fast and
efficient networks.
MARKET DEVELOPMENT
Growth rates are based on Ericsson and market estimates.
We believe that the fundamentals for longer-term positive development
for our industry are solid. The need for communication continues to
grow and plays a vital role for the development for a prosperous
society. Ericsson is well positioned to lead this development.
The demand for broadband is strong. We expect traffic in mobile and
fixed networks to increase tenfold in the next five years mainly
driven by internet applications and the introduction of interactive
HD-TV. Data traffic in WCDMA networks measured by Ericsson is now
four times the volume of voice versus close to three times in the
previous quarter. With major 3G rollouts in Brazil, Russia, China,
India and Africa, consumers across the world will soon benefit from
broadband services and connection to Internet.
Mobile subscriptions grew by some 178 million in the quarter to a
total of 3.8 billion. 260 million are WCDMA subscriptions, up by 24
million in the third quarter. There are 239 WCDMA networks in 101
countries, of which 221 networks are upgraded to HSPA. In the
twelve-month period ending June 30, 2008, fixed broadband connections
grew by 21% to more than 370 million.
PLANNING ASSUMPTIONS
For 2008 we have found it prudent to plan for a flattish global
mobile infrastructure market and for good growth of the professional
services market.
The major macro economic trends are negative but the present
financial turmoil has so far no impact on Ericsson's business.
Operators are generally financially sound, networks are loaded and
traffic shows strong growth. In the present financial environment, it
is however hard to predict how operators will act and to what extent
consumer telecom spending will be affected.
In this environment, as we look into 2009, we find it prudent to plan
for a flattish development in the global mobile infrastructure market
and good growth in the professional services market.
PARENT COMPANY INFORMATION
Net sales for the nine-month period amounted to SEK 4.1 (2.5) b. and
income after financial items was SEK 17.6 (13.2) b. During the
quarter, dividends to the Parent Company have impacted financial net
with SEK 8.9 (1.8) b.
Major changes in the Parent Company's financial position for the
nine-month period include decreased current and non-current
receivables from subsidiaries of SEK 9.0 b. and increased cash and
bank and short-term investments of SEK 11.1 b. Current and
non-current liabilities to subsidiaries decreased by SEK 9.5 b. and
other current liabilities increased by SEK 3.7 b. As per September
30, 2008, cash and bank and short-term investments amounted to SEK
56.7 (45.6) b.
Major transactions and balances with related parties include the
following with Sony Ericsson Mobile Communications: revenues of SEK
1.4 (1.8) b.; receivables of SEK 0.5 (0.9) b.; dividend of SEK 3.6
(3.9) b.
In the third quarter, as decided by the Annual General Meeting 2008,
a stock issue and a subsequent stock repurchase of 19,900,000 shares
was carried out related to Ericsson's Long-Term Variable Compensation
Program (LTV) 2008. In accordance with the conditions of the Stock
Purchase Plans and Option Plans for Ericsson employees, 1,061,485
shares from treasury stock were sold or distributed to employees
during the third quarter. The holding of treasury stock at September
30, 2008, was 62,237,216 shares of Class B.
OTHER INFORMATION
Joint venture Ericsson Mobile Platforms and ST-NXP Wireless
On August 20, Ericsson and STMicroelectronics announced an agreement
to merge Ericsson Mobile Platforms and ST-NXP Wireless into a joint
venture. The 50/50 joint venture will have the industry's strongest
product offering in semiconductors and platforms for mobile
applications. Regulatory approvals are still pending.
Change in number of total shares and votes
On August 29, Ericsson changed the total number of shares and votes
due to the issue of shares to expand the treasury stock as part of
the financing of Ericsson's long-term variable compensation program.
Assessment of risk environment
Ericsson's operational and financial risk factors and exposures are
described under "Risk factors" in our Annual Report 2007. However,
the increased activities related to the new Multimedia segment may
result in a more volatile quarterly sales pattern. Specific
additional risks for the near term are associated with the
acquisitions made during 2007, as a timely and effective integration
of these is essential to make them accretive as planned.
Risk factors and exposures in focus for the Parent Company and the
Ericsson Group for the forthcoming six-month period include:
potential negative effects due to the present serious turmoil in the
financial markets on operators' willingness to invest in network
development, for example due to lack of borrowing facilities, or
increased pressure on us to provide financing; unfavorable product
mix in the Networks segment with reduced sales of software, upgrades
and extensions and an increased proportion of new network build-outs
and break-in contracts, which may result in lower gross margins
and/or working capital build-up, which in turn puts pressure on our
cash conversion rate; variability in the seasonality could make it
more difficult to forecast future sales; effects of the ongoing
industry consolidation among the Company's customers as well as
between our largest competitors, e.g. intensified price competition;
changes in foreign exchange rates, in particular USD and EUR;
fluctuations in interest rates and the potential effect on operators'
willingness to invest in network development; and continued political
unrest or instability in certain markets.
Ericsson conducts business in certain countries which are subject to
trade restrictions or which are focused on by certain investors. We
stringently follow all relevant regulations and trade embargos
applicable to us in our dealings with customers operating in such
countries. Moreover, Ericsson operates globally in accordance with
Group level policies and directives for business ethics and conduct.
In no way should our business activities in these countries be
construed as supporting a particular political agenda or regime. We
have activities in such countries mainly due to that certain
customers with multi-country operations put demands on us to support
them in all of their markets.
Please refer further to Ericsson's Annual Report 2007, where we
describe our risks and uncertainties along with our strategies and
tactics to mitigate the risk exposures or limit unfavorable outcomes.
Stockholm, October 20, 2008
Carl-Henric Svanberg
President and CEO
Telefonaktiebolaget LM Ericsson (publ)
Date for next report: January 29, 2009
AUDITORS' REVIEW REPORT
We have reviewed this report for the period January 1 to September
30, 2008, for Telefonaktiebolaget LM Ericsson (publ). The board of
directors and the CEO are responsible for the preparation and
presentation of this interim financial information in accordance with
IAS 34 and the Annual Accounts Act. Our responsibility is to express
a conclusion on this interim financial information based on our
review.
We conducted our review in accordance with the Standard on Review
Engagements SÖG 2410, Review of Interim Financial Information
Performed by the Independent Auditor of the Entity, issued by FAR
SRS. A review consists of making inquiries, primarily of persons
responsible for financial and accounting matters, and applying
analytical and other review procedures. A review is substantially
less in scope than an audit conducted in accordance with Standards on
Auditing in Sweden, RS, and other generally accepted auditing
practices. The procedures performed in a review do not enable us to
obtain a level of assurance that would make us aware of all
significant matters that might be identified in an audit. Therefore,
the conclusion expressed based on a review does not give the same
level of assurance as a conclusion expressed based on an audit.
Based on our review, nothing has come to our attention that causes us
to believe that the accompanying interim financial information is
not, in all material respects, in accordance with IAS 34 and the
Annual Accounts Act.
Stockholm, October 20, 2008
PricewaterhouseCoopers AB
Bo Hjalmarsson
Peter Clemedtson
Authorized Public
Accountant
Authorized Public Accountant
Lead
partner
EDITOR'S NOTE
To read the complete report with tables, please go to:
www.ericsson.com/investors/financial_reports/2008/9month08-en.pdf
Ericsson invites media, investors and analysts to a press conference
at the Ericsson headquarters, Torshamnsgatan 23, Stockholm, at 09.00
(CET), October 20.
An analysts, investors and media conference call will begin at 14.00
(CET).
Live webcasts of the press conference and conference call as well as
supporting slides will be available at www.ericsson.com/press and
www.ericsson.com/investors.
Video material will be made available during the day on
www.ericsson.com/broadcast_room
FOR FURTHER INFORMATION, PLEASE CONTACT
Henry Sténson, Senior Vice President, Communications
Phone: +46 8 719 4044
E-mail: investor.relations@ericsson.com or
press.relations@ericsson.com
Investors
Gary Pinkham, Vice President,
Investor Relations
Phone: +46 8 719 0000
E-mail: investor.relations@ericsson.com
Susanne Andersson,
Investor Relations
Phone: +46 8 719 4631
E-mail: investor.relations@ericsson.com
Andreas Hedemyr,
Investor Relations
Phone: +46 8 404 37 48
E-mail: investor.relations@ericsson.com
Media
Åse Lindskog, Vice President,
Head of Media Relations
Phone: +46 8 719 9725, +46 730 244 872 E-mail:
press.relations@ericsson.com
Ola Rembe, Vice President,
Phone: +46 8 719 9727, +46 730 244 873
E-mail: press.relations@ericsson.com
Telefonaktiebolaget LM Ericsson (publ)
Org. number: 556016-0680
Torshamnsgatan 23
SE-164 83 Stockholm
Phone: +46 8 719 00 00
www.ericsson.com
Disclosure Pursuant to the Swedish Securities Markets Act
Ericsson discloses the information provided herein pursuant to the
Securities Markets Act. The information was submitted for publication
at 06.45 CET, on October 20, 2008.
Safe Harbor Statement of Ericsson under the US Private Securities
Litigation Reform Act of 1995;
All statements made or incorporated by reference in this release,
other than statements or characterizations of historical facts, are
forward-looking statements. These forward-looking statements are
based on our current expectations, estimates and projections about
our industry, management's beliefs and certain assumptions made by
us. Forward-looking statements can often be identified by words such
as "anticipates", "expects", "intends", "plans", "predicts","believes", "seeks", "estimates", "may", "will", "should", "would","potential", "continue", and variations or negatives of these words,
and include, among others, statements regarding: (i) strategies,
outlook and growth prospects; (ii) positioning to deliver future
plans and to realize potential for future growth; (iii) liquidity and
capital resources and expenditure, and our credit ratings; (iv)
growth in demand for our products and services; (v) our joint venture
activities; (vi) economic outlook and industry trends; (vii)
developments of our markets; (viii) the impact of regulatory
initiatives; (ix) research and development expenditures; (x) the
strength of our competitors; (xi) future cost savings; (xii) plans to
launch new products and services; (xiii) assessments of risks; (xiv)
integration of acquired businesses; (xv) compliance with rules and
regulations and (xvi) infringements of intellectual property rights
of others.
In addition, any statements that refer to expectations, projections
or other characterizations of future events or circumstances,
including any underlying assumptions, are forward-looking statements.
These forward-looking statements speak only as of the date hereof and
are based upon the information available to us at this time. Such
information is subject to change, and we will not necessarily inform
you of such changes. These statements are not guarantees of future
performance and are subject to risks, uncertainties and assumptions
that are difficult to predict. Therefore, our actual results could
differ materially and adversely from those expressed in any
forward-looking statements as a result of various factors. Important
factors that may cause such a difference for Ericsson include, but
are not limited to: (i) material adverse changes in the markets in
which we operate or in global economic conditions; (ii) increased
product and price competition; (iii) reductions in capital
expenditure by network operators; (iv) the cost of technological
innovation and increased expenditure to improve quality of service;
(v) significant changes in market share for our principal products
and services; (vi) foreign exchange rate or interest rate
fluctuations; and (vii) the successful implementation of our business
and operational initiatives.
