Nortel Provides Status Update
Nortel Files First and Second Quarter 2004 Financial StatementsTORONTO--(BUSINESS WIRE)--Feb. 1, 2005--Nortel Networks Corporation (NYSE:NT - News; TSX:NT - News) and its principal operating subsidiary, Nortel Networks Limited ("NNL"), today provided a status update pursuant to the alternative information guidelines of the Ontario Securities Commission. These guidelines contemplate that the Company and NNL will normally provide bi-weekly updates on their affairs until such time as they are current with their filing obligations under Canadian securities laws.
Phoenix Arizona
The Company and NNL reported that there have been no material developments in the matters reported in their status updates of June 2, 2004 through January 18, 2005 and the Company's press release "Nortel Appoints Peter Currie as Chief Financial Officer" dated January 27, 2005, with the exception of the matters described below.
First and Second Quarters of 2004
The Company and NNL have filed their unaudited financial statements for the first and second quarters of 2004 prepared in accordance with United States generally accepted accounting principles, and related Quarterly Reports on Form 10-Q and corresponding Canadian filings. Annexed to this press release is certain selected financial information of the Company for such quarterly periods prepared in accordance with United States generally accepted accounting principles.
The Company's and NNL's next bi-weekly status update is expected to be released during the week of February 14, 2005.
Bill Austin Famous Quotes
About Nortel
Nortel is a recognized leader in delivering communications capabilities that enhance the human experience, ignite and power global commerce, and secure and protect the world's most critical information. Serving both service provider and enterprise customers, Nortel delivers innovative technology solutions encompassing end-to-end broadband, Voice over IP, multimedia services and applications, and wireless broadband designed to help people solve the world's greatest challenges. Nortel does business in more than 150 countries. For more information, visit Nortel on the Web at www.nortel.com. For the latest Nortel news, visit www.nortel.com/news.
Certain information included in this press release is forward-looking and is subject to important risks and uncertainties. The results or events predicted in these statements may differ materially from actual results or events.
Factors which could cause results or events to differ from current expectations include, among other things: the outcome of regulatory and criminal investigations and civil litigation actions related to Nortel's restatements and the impact any resulting legal judgments, settlements, penalties and expenses could have on Nortel's results of operations, financial condition and liquidity; the findings of Nortel's independent review and implementation of recommended remedial measures; the outcome of the independent review with respect to revenues for specific identified transactions, which review will have a particular emphasis on the underlying conduct that led to the initial recognition of these revenues; the restatement or revisions of Nortel's previously announced or filed financial results and resulting negative publicity; the existence of material weaknesses in Nortel's internal controls over financial reporting; the impact of Nortel's and NNL's failure to timely file their financial statements and related periodic reports, including breach of its support facility and public debt obligations and Nortel's inability to access its shelf registration statement filed with the United States Securities and Exchange Commission ("SEC"); ongoing SEC reviews, which may result in changes to our public filings; the potential delisting or suspension of Nortel's and NNL's publicly traded securities; the impact of management changes, including the termination for cause of Nortel's former CEO, CFO and Controller in August 2004; the sufficiency of Nortel's restructuring activities, including the work plan announced on August 19, 2004 as updated on September 30, 2004, including the potential for higher actual costs to be incurred in connection with restructuring actions compared to the estimated costs of such actions;
cautious or reduced spending by Nortel's customers; fluctuations in Nortel's operating results and general industry, economic and market conditions and growth rates; fluctuations in Nortel's cash flow, level of outstanding debt and current debt ratings; Nortel's ability to recruit and retain qualified employees; the use of cash collateral to support Nortel's normal course business activities; the dependence on Nortel's subsidiaries for funding; the impact of Nortel's defined benefit plans and deferred tax assets on results of operations and Nortel's cash flow; the adverse resolution of class actions, litigation in the ordinary course of business, intellectual property disputes and similar matters; Nortel's dependence on new product development and its ability to predict market demand for particular products; Nortel's ability to integrate the operations and technologies of acquired businesses in an effective manner; the impact of rapid technological and market change; the impact of price and product competition; barriers to international growth and global economic conditions, particularly in emerging markets and including interest rate and currency exchange rate fluctuations; the impact of rationalization in the telecommunications industry; changes in regulation of the Internet; the impact of the credit risks of Nortel's customers and the impact of customer financing and commitments; stock market volatility generally and as a result of acceleration of the settlement date or early settlement, which is currently not available, of Nortel's forward purchase contracts; the impact of Nortel's supply and outsourcing contracts that contain delivery and installation provisions, which, if not met, could result in the payment of substantial penalties or liquidated damages; and the future success of Nortel's strategic alliances. For additional information with respect to certain of these and other factors, see the most recent Annual Report on Form 10-K and Quarterly Report on Form 10-Q filed by Nortel with the SEC.
Unless otherwise required by applicable securities laws, Nortel disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
Nortel, the Nortel logo and the Globemark are trademarks of Nortel.
NORTEL NETWORKS CORPORATION
Consolidated Statements of Operations
(unaudited)
----------------------------------------------------------------------
(US GAAP; millions of U.S. dollars, except per March 31, March 31,
share amounts) 2004 2003
----------------------------------------------------------------------
As
restated
Revenues $2,444 $2,298
Cost of revenues 1,391 1,403
----------------------------------------------------------------------
Gross profit 1,053 895
Selling, general and administrative expense 542 490
Research and development expense 471 477
Amortization of acquired technology and other 3 33
Deferred stock option compensation - 9
Special charges 7 140
(Gain) loss on sale of businesses and assets - (1)
----------------------------------------------------------------------
Operating earnings (loss) 30 (253)
Other income - net 86 94
Interest expense
Long-term debt (44) (46)
Other (8) (8)
----------------------------------------------------------------------
Earnings (loss) from continuing operations
before income taxes, minority interests and
equity in net loss of associated companies 64 (213)
Income tax benefit (expense) 9 26
----------------------------------------------------------------------
73 (187)
Minority interests - net of tax (14) (25)
Equity in net loss of associated companies -
net of tax (1) (22)
----------------------------------------------------------------------
Net earnings (loss) from continuing operations 58 (234)
Net earnings (loss) from discontinued operations
- net of tax 1 122
----------------------------------------------------------------------
Net earnings (loss) before cumulative effect of
accounting change 59 (112)
Cumulative effect of accounting change - net of
tax - (12)
----------------------------------------------------------------------
Net earnings (loss) $ 59 $ (124)
----------------------------------------------------------------------
Basic earnings (loss) per common share
- from continuing operations $0.01 $(0.06)
- from discontinued operations 0.00 0.03
----------------------------------------------------------------------
Basic earnings (loss) per common share $0.01 $(0.03)
----------------------------------------------------------------------
Diluted earnings (loss) per common share
- from continuing operations $0.01 $(0.06)
- from discontinued operations 0.00 0.03
----------------------------------------------------------------------
Diluted earnings (loss) per common share $0.01 $(0.03)
----------------------------------------------------------------------
Please refer to our Quarterly Report on Form 10-Q for the quarter
ended March 31, 2004 including the notes to the unaudited consolidated
financial statements.
NORTEL NETWORKS CORPORATION
Consolidated Balance Sheets (unaudited)
----------------------------------------------------------------------
March 31, Dec. 31,
(US GAAP; millions of U.S. dollars) 2004 2003
----------------------------------------------------------------------
ASSETS
Current assets
Cash and cash equivalents $ 3,599 $ 3,997
Restricted cash and cash equivalents 62 63
Accounts receivable - net 2,397 2,505
Inventories - net 1,246 1,190
Income taxes recoverable 85 90
Deferred income taxes - net 400 369
Other current assets 314 315
----------------------------------------------------------------------
Total current assets 8,103 8,529
Investments 217 244
Plant and equipment - net 1,598 1,656
Goodwill 2,303 2,305
Intangible assets - net 82 86
Deferred income taxes - net 3,336 3,397
Other assets 384 374
----------------------------------------------------------------------
Total assets $16,023 $16,591
----------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Notes payable $ 13 $ 17
Trade and other accounts payable 822 861
Payroll and benefit-related liabilities 523 764
Contractual liabilities 487 530
Restructuring 161 206
Other accrued liabilities 2,336 2,505
Long-term debt due within one year 23 119
----------------------------------------------------------------------
Total current liabilities 4,365 5,002
Long-term debt 3,883 3,891
Deferred income taxes - net 169 191
Other liabilities 2,962 2,945
----------------------------------------------------------------------
Total liabilities 11,379 12,029
----------------------------------------------------------------------
Minority interests in subsidiary companies 623 617
Commitments and contingencies
SHAREHOLDERS' EQUITY
Common shares, without par value - Authorized
shares: unlimited; Issued and outstanding
shares: 4,272,674,456 as of March 31, 2004
and 4,166,714,475 as of December 31, 2003 33,840 33,674
Additional paid-in capital 3,220 3,341
Accumulated deficit (32,473) (32,532)
Accumulated other comprehensive loss (566) (538)
----------------------------------------------------------------------
Total shareholders' equity 4,021 3,945
----------------------------------------------------------------------
Total liabilities and shareholders' equity $16,023 $16,591
----------------------------------------------------------------------
Please refer to our Quarterly Report on Form 10-Q for the quarter
ended March 31, 2004 including the notes to the unaudited consolidated
financial statements.
NORTEL NETWORKS CORPORATION
Consolidated Statements of Cash Flows (unaudited)
----------------------------------------------------------------------
March 31, March 31,
(US GAAP; millions of U.S. dollars) 2004 2003
----------------------------------------------------------------------
As
restated
Cash flows from (used in) operating activities
Net earnings (loss) from continuing operations $58 $(234)
Adjustments to reconcile net earnings (loss) from
continuing operations to net cash from (used in)
operating activities, net of effects from
acquisitions and divestitures of businesses:
Amortization and depreciation 90 150
Non-cash portion of special charges and related
asset write downs - 18
Equity in net loss of associated companies 1 22
Current and deferred stock option compensation 15 14
Deferred income taxes (4) (10)
Other liabilities 60 12
Gain on repurchases of outstanding debt securities - (4)
(Gain) loss on sale or write down of investments
and businesses (33) 6
Other - net (136) (146)
Change in operating assets and liabilities (391) 74
----------------------------------------------------------------------
Net cash from (used in) operating activities of
continuing operations (340) (98)
----------------------------------------------------------------------
Cash flows from (used in) investing activities
Expenditures for plant and equipment (43) (22)
Proceeds on disposals of plant and equipment 5 6
Acquisitions of investments and businesses - net
of cash acquired (3) (2)
Proceeds on sale of investments and businesses 55 7
----------------------------------------------------------------------
Net cash from (used in) investing activities of
continuing operations 14 (11)
----------------------------------------------------------------------
Cash flows from (used in) financing activities
Increase (decrease) in notes payable - net (3) (13)
Repayments of long-term debt (97) (43)
Repayments of capital leases payable (3) (3)
Dividends paid by subsidiaries to minority
interests (9) (8)
Issuance of common shares 30 -
----------------------------------------------------------------------
Net cash from (used in) financing activities of
continuing operations (82) (67)
----------------------------------------------------------------------
Effect of foreign exchange rate changes on cash
and cash equivalents 13 18
----------------------------------------------------------------------
Net cash from (used in) continuing operations (395) (158)
Net cash from (used in) discontinued operations (3) 301
----------------------------------------------------------------------
Net increase (decrease) in cash and cash
equivalents (398) 143
Cash and cash equivalents at beginning of period 3,997 3,790
----------------------------------------------------------------------
Cash and cash equivalents at end of period $3,599 $3,933
----------------------------------------------------------------------
Please refer to our Quarterly Report on Form 10-Q for the quarter
ended March 31, 2004 including the notes to the unaudited consolidated
financial statements.
Segment revenues - Q1 2004
The following table summarizes our unaudited revenues for the three
months ended March 31, 2004 and 2003, respectively, by segment:
----------------------------------------------------------------------
For the three months
ended March 31,
(US GAAP; 2004 2003 $ Change % Change
millions of U.S. dollars)
----------------------------------------------------------------------
Wireless Networks $1,225 $ 869 $356 41
Enterprise Networks 534 588 (54) (9)
Wireline Networks 439 515 (76) (15)
Optical Networks 245 317 (72) (23)
Other (a) 1 9 (8) (89)
----------------------------------------------------------------------
Consolidated $2,444 $2,298 $146 6
----------------------------------------------------------------------
(a) "Other" represented miscellaneous business activities and
corporate functions.
Geographic revenues
The following table summarizes our geographic unaudited revenues based
on the location of the customer:
----------------------------------------------------------------------
For the three months
ended March 31,
(US GAAP; 2004 2003 $ Change % Change
millions of U.S. dollars)
----------------------------------------------------------------------
United States $1,217 $1,163 $ 54 5
EMEA (a) 596 579 17 3
Canada 154 131 23 18
Asia Pacific 347 303 44 15
CALA (b) 130 122 8 7
----------------------------------------------------------------------
Consolidated $2,444 $2,298 $146 6
----------------------------------------------------------------------
(a) The Europe, Middle East and Africa region, or EMEA.
(b) The Caribbean and Latin America region, or CALA.
Please refer to our Quarterly Report on Form 10-Q for the quarter
ended March 31, 2004 including the notes to the unaudited consolidated
financial statements.
NORTEL NETWORKS CORPORATION
Consolidated Statements of
Operations (unaudited)
----------------------------------------------------------------------
Three months ended Six months ended
(US GAAP; millions of U.S. June 30, June 30,
dollars, except per share amounts) 2004 2003 2004 2003
----------------------------------------------------------------------
As As
restated restated
Revenues $2,590 $2,285 $5,034 $4,583
Cost of revenues 1,535 1,403 2,926 2,806
----------------------------------------------------------------------
Gross profit 1,055 882 2,108 1,777
Selling, general and administrative
expense 542 441 1,084 931
Research and development expense 493 508 964 985
Amortization of acquired technology
and other 2 33 5 66
Deferred stock option compensation - 6 - 15
Special charges (1) (22) 6 118
(Gain) loss on sale of businesses
and assets (75) 12 (75) 11
----------------------------------------------------------------------
Operating earnings (loss) 94 (96) 124 (349)
Other income (expense) - net (18) 60 68 154
Interest expense
Long-term debt (43) (45) (87) (91)
Other (7) (6) (15) (14)
----------------------------------------------------------------------
Earnings (loss) from continuing
operations before income taxes,
minority interests and equity in
net loss of associated companies 26 (87) 90 (300)
Income tax benefit (expense) (7) 14 2 40
----------------------------------------------------------------------
19 (73) 92 (260)
Minority interests - net of tax (8) (17) (22) (42)
Equity in net loss of associated
companies - net of tax (1) (3) (2) (25)
----------------------------------------------------------------------
Net earnings (loss) from continuing
operations 10 (93) 68 (327)
Net earnings (loss) from
discontinued operations - net of tax 6 (8) 7 114
----------------------------------------------------------------------
Net earnings (loss) before cumulative
effect of accounting change 16 (101) 75 (213)
Cumulative effect of accounting
change - net of tax - - - (12)
----------------------------------------------------------------------
Net earnings (loss) $ 16 $ (101) $ 75 $ (225)
----------------------------------------------------------------------
Basic earnings (loss) per common share
- from continuing operations $0.00 $(0.02) $0.02 $(0.08)
- from discontinued operations 0.00 (0.00) 0.00 0.03
----------------------------------------------------------------------
Basic earnings (loss) per common
share $0.00 $(0.02) $0.02 $(0.05)
----------------------------------------------------------------------
Diluted earnings (loss) per common
share
- from continuing operations $0.00 $(0.02) $0.02 $(0.08)
- from discontinued operations 0.00 (0.00) 0.00 0.03
----------------------------------------------------------------------
Diluted earnings (loss) per common
share $0.00 $(0.02) $0.02 $(0.05)
----------------------------------------------------------------------
Please refer to our Quarterly Report on Form 10-Q for the quarter
ended June 30, 2004 including the notes to the unaudited consolidated
financial statements.
NORTEL NETWORKS CORPORATION
Consolidated Balance Sheets (unaudited)
----------------------------------------------------------------------
June 30, Dec. 31,
(US GAAP; millions of U.S. dollars) 2004 2003
----------------------------------------------------------------------
ASSETS
Current assets
Cash and cash equivalents $3,709 $3,997
Restricted cash and cash equivalents 52 63
Accounts receivable - net 2,387 2,505
Inventories - net 1,282 1,190
Income taxes recoverable 86 90
Deferred income taxes - net 407 369
Other current assets 331 315
----------------------------------------------------------------------
Total current assets 8,254 8,529
Investments 156 244
Plant and equipment - net 1,540 1,656
Goodwill 2,301 2,305
Intangible assets - net 77 86
Deferred income taxes - net 3,272 3,397
Other assets 337 374
----------------------------------------------------------------------
Total assets $15,937 $16,591
----------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Notes payable $ 31 $ 17
Trade and other accounts payable 901 861
Payroll and benefit-related liabilities 485 764
Contractual liabilities 486 530
Restructuring 124 206
Other accrued liabilities 2,457 2,505
Long-term debt due within one year 21 119
----------------------------------------------------------------------
Total current liabilities 4,505 5,002
Long-term debt 3,862 3,891
Deferred income taxes - net 163 191
Other liabilities 2,843 2,945
----------------------------------------------------------------------
Total liabilities 11,373 12,029
----------------------------------------------------------------------
Minority interests in subsidiary companies 621 617
Commitments and contingencies
SHAREHOLDERS' EQUITY
Common shares, without par value -
Authorized shares: unlimited; Issued
and outstanding shares: 4,272,671,213
as of June 30, 2004 and 4,166,714,475
as of December 31, 2003 33,840 33,674
Additional paid-in capital 3,241 3,341
Deferred stock option compensation - -
Accumulated deficit (32,457) (32,532)
Accumulated other comprehensive loss (681) (538)
----------------------------------------------------------------------
Total shareholders' equity 3,943 3,945
----------------------------------------------------------------------
Total liabilities and shareholders' equity $15,937 $16,591
----------------------------------------------------------------------
Please refer to our Quarterly Report on Form 10-Q for the quarter
ended June 30, 2004 including the notes to the unaudited consolidated
financial statements.
NORTEL NETWORKS CORPORATION
Consolidated Statements of Cash Flows (unaudited)
----------------------------------------------------------------------
Six months ended
June 30,
(US GAAP; millions of U.S. dollars) 2004 2003
----------------------------------------------------------------------
As
restated
Cash flows from (used in) operating activities
Net earnings (loss) from continuing operations $ 68 $ (327)
Adjustments to reconcile net earnings (loss) from
continuing operations to net cash from (used
in) operating activities, net of effects from
acquisitions and divestitures of businesses:
Amortization and depreciation 171 285
Non-cash portion of special charges and related
asset write downs - 39
Equity in net loss of associated companies 2 25
Current and deferred stock option compensation 36 27
Deferred income taxes (2) (12)
Other liabilities 113 47
Gain on repurchases of outstanding debt securities - (4)
(Gain) loss on sale or write down of investments
and businesses (109) 20
Other - net (212) (321)
Change in operating assets and liabilities (314) 399
----------------------------------------------------------------------
Net cash from (used in) operating activities of
continuing operations (247) 178
----------------------------------------------------------------------
Cash flows from (used in) investing activities
Expenditures for plant and equipment (102) (64)
Proceeds on disposals of plant and equipment 10 21
Acquisitions of investments and businesses - net
of cash acquired (6) (2)
Proceeds on sale of investments and businesses 132 8
----------------------------------------------------------------------
Net cash from (used in) investing activities of
continuing operations 34 (37)
----------------------------------------------------------------------
Cash flows from (used in) financing activities
Increase (decrease) in notes payable - net 15 (14)
Proceeds from long-term debt - -
Repayments of long-term debt (98) (94)
Repayments of capital leases payable (8) (6)
Dividends paid by subsidiaries to minority
interests (16) (17)
Issuance of common shares 30 -
----------------------------------------------------------------------
Net cash from (used in) financing activities of
continuing operations (77) (131)
----------------------------------------------------------------------
Effect of foreign exchange rate changes on cash
and cash equivalents (9) 78
----------------------------------------------------------------------
Net cash from (used in) continuing operations (299) 88
Net cash from (used in) discontinued operations 11 324
----------------------------------------------------------------------
Net increase (decrease) in cash and cash
equivalents (288) 412
----------------------------------------------------------------------
Cash and cash equivalents at beginning of period 3,997 3,790
----------------------------------------------------------------------
Cash and cash equivalents at end of period $3,709 $4,202
----------------------------------------------------------------------
Please refer to our Quarterly Report on Form 10-Q for the year
ended June 30, 2004 including the notes to the unaudited consolidated
financial statements.
Segment revenues - Q2 2004
The following table summarizes our unaudited revenues for the
three months and six months ended June 30, 2004 and 2003,
respectively, by segment:
----------------------------------------------------------------------
(US GAAP; millions For the three months ended June 30,
of U.S. dollars) 2004 2003 $ Change % Change
----------------------------------------------------------------------
Wireless Networks $ 1,281 $ 973 $ 308 32
Enterprise Networks 578 517 61 12
Wireline Networks 444 495 (51) (10)
Optical Networks 280 288 (8) (3)
Other (a) 7 12 (5) (42)
----------------------------------------------------------------------
Consolidated $ 2,590 $ 2,285 $ 305 13
----------------------------------------------------------------------
----------------------------------------------------------------------
For the six months ended June 30,
2004 2003 $ Change % Change
----------------------------------------------------------------------
Wireless Networks $ 2,506 $ 1,842 $ 664 36
Enterprise Networks 1,112 1,105 7 1
Wireline Networks 883 1,010 (127) (13)
Optical Networks 525 605 (80) (13)
Other (a) 8 21 (13) (62)
----------------------------------------------------------------------
Consolidated $ 5,034 $ 4,583 $ 451 10
----------------------------------------------------------------------
Geographic revenues
The following table summarizes our geographic unaudited revenues based
on the location of the customer:
----------------------------------------------------------------------
(US GAAP; millions For the three months ended June 30,
of U.S. dollars) 2004 2003 $ Change % Change
----------------------------------------------------------------------
United States $ 1,322 $ 1,145 $ 177 15
EMEA (a) 643 556 87 16
Canada 137 134 3 2
Asia Pacific 330 329 1 0
CALA (b) 158 121 37 31
----------------------------------------------------------------------
Consolidated $ 2,590 $ 2,285 $ 305 13
----------------------------------------------------------------------
----------------------------------------------------------------------
For the six months ended June 30,
2004 2003 $ Change % Change
----------------------------------------------------------------------
United States $ 2,539 $ 2,308 $ 231 10
EMEA (a) 1,239 1,135 104 9
Canada 291 265 26 10
Asia Pacific 677 632 45 7
CALA (b) 288 243 45 19
----------------------------------------------------------------------
Consolidated $ 5,034 $ 4,583 $ 451 10
----------------------------------------------------------------------
(a) The Europe, Middle East and Africa region, or EMEA.
(b) The Caribbean and Latin America region, or CALA.
Please refer to our Quarterly Report on Form 10-Q for the quarter
ended June 30, 2004 including the notes to the unaudited consolidated
financial statements.
Nortel Networks Corporation Reported Unaudited Results Compared to
Previously Announced Estimates
The table below sets forth selected unaudited results for the
first and second quarters of 2004 as compared to previously announced
unaudited estimates for such periods.
(US GAAP; millions of U.S. dollars, except per share amounts)
Previously Announced Estimates As Reported in Form 10-Q
------------------------------ ------------------------
Q1 2004 Q2 2004 Q1 2004 Q2 2004
Revenue 2.46 2.59 2.444 2.590
Gross Margin $ 1.05 1.05 1.053 1.055
% 43% 41% 43% 41%
SG&A
1.02 1.04 1.013 1.035
R&D
(L)EPS Cont. Ops. 0.00 0.00 0.01 0.00
(L)EPS Disc. Ops. 0.00 0.00 0.00 0.00
(L)EPS 0.00 0.00 0.01 0.00
---------------------------------------------------------------------
Cash at end of period 3.6 3.7 3.599 3.709
---------------------------------------------------------------------
--------------------------------------------------------------------------------
Contact:
Nortel
Media
Tina Warren, 905-863-4702
email: tinawarr@nortel.com
or
Investors
888-901-7286 or 905-863-6049
email: investor@nortel.com
www.nortel.com
--------------------------------------------------------------------------------
Source: Nortel
Phoenix Arizona
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