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TORONTO, ONTARIO--(Marketwire - May 14, 2010) - Nortel (OTCBB: NRTLQ) -
Financial Presentation
-- EMEA subsidiaries and entities they control (Equity Investees) continue
to be presented using the equity method of accounting
-- financial position and results of operations of the Equity Investees
presented net on a single line in the balance sheet and statement of
operations, respectively, versus being combined gross into each
individual line item
-- Discontinued operations in the first quarter of 2010 included residual
ES contracts not included in the sale to Avaya; comparative periods
included ES, NGS and DiamondWare businesses
-- Optical Networking and Carrier Ethernet and GSM/GSM-R businesses, to
their respective divestiture dates, and residual CDMA contracts not
included in the sale to Ericsson, reported as continuing operations as
did not qualify for presentation as discontinued operations
-- In Q2 2010, reportable segments will be: WN, consisting of residual CDMA
and GSM/GSM-R contracts; MEN, consisting of residual contracts not
included in the sale to Ciena and the MSS business; CVAS; and LGN
Financial Results
-- First quarter consolidated revenues of $484 million, which excluded
first quarter revenues of $180 million related to Equity Investees and
$10 million related to discontinued operations
-- First quarter SG&A and R&D expenses of $280 million
-- Excluded expenses of $77 million related to Equity Investees
-- Consolidated cash balance as of March 31, 2010 was $1.9 billion and
excluded Equity Investees cash of $788 million and restricted cash of
$2.7 billion related to divestiture proceeds
-- Completed the divestiture of Optical Networking and Carrier Ethernet
business to Ciena in the first quarter and recorded a gain of $549
million
-- Completed the divestiture of GSM/GSM-R business to Ericsson and Kapsch
in the first quarter and recorded a gain of $93 million
-- Focus remains on maximizing value for stakeholders, including creditors,
customers and employees
Nortel(1) Networks Corporation (OTCBB: NRTLQ) announced its results for the first quarter 2010. Results were prepared in accordance with United States generally accepted accounting principles (GAAP) in U.S. dollars.
As previously announced, Nortel accounts for the results of the Europe, Middle East and Africa (EMEA) subsidiaries, and entities they control (Equity Investees), by the equity method of accounting in its consolidated results. The equity method of accounting results in the financial position and results of operations of the Equity Investees being presented net on a single line in the balance sheet and statement of operations, respectively, versus being combined gross into each individual line item. All periods in this release are presented using the equity method of accounting as described above.
The Enterprise Solutions (ES) business as well as the Nortel Government Solutions (NGS) and DiamondWare businesses are presented as discontinued operations for the periods presented. The ES business for the first quarter was comprised of the residual contracts not transferred to Avaya.
The Code Division Multiple Access (CDMA), and Optical Networking and Carrier Ethernet, and Global System for Mobile communications (GSM)/GSM for Railways (GSM-R) businesses did not qualify for treatment as discontinued operations and as a result are included in continuing operations. The CDMA business for the first quarter was comprised of the residual contracts not transferred to Ericsson.
Except in the Segment Revenues section, the discussion below relates to Results from Continuing Operations under U.S. GAAP and excludes the financial results of the Equity Investees. Consistent with the way we manage our business segments, the financial information in the Segment Revenues section includes the results of the Equity Investees within each segment. Therefore, in order to reconcile the financial information for the business segments discussed below to our consolidated financial information, the net financial results of the Equity Investees must be removed.
Financial Summary
Nortel's overall financial performance in the first quarter of 2010 was impacted by the sale of the CDMA, LTE Access and ES, NGS and DiamondWare businesses.
-- Revenues in the first quarter of $484 million, with declines year over
year in all segments and in all regions. These revenues excluded first
quarter revenues related to Equity Investees of $180 million and $10
million related to discontinued operations.
-- Gross margin of 27.5 percent in the first quarter, a decrease of 13.8
percentage points from the year ago quarter.
-- SG&A expense in the first quarter of $184 million, a decrease of 21.0
percent from the year ago quarter. SG&A expense in the first quarter
excluded $70 million related to Equity Investees.
-- R&D expense in the first quarter of $96 million, a decrease of 58.3
percent from the year ago quarter. R&D expense in the first quarter
excluded $7 million related to Equity Investees.
-- Cash balance as of March 31, 2010 was $1.9 billion and excluded Equity
Investees cash of $788 million. The consolidated cash balance decreased
slightly from the December 31, 2009 consolidated cash balance of $2.0
billion, which excluded Equity Investees cash of $815 million.
Segment Revenues
The financial information for our business segments includes the results of the Equity Investees as if they were consolidated, which is consistent with the way we manage our business segments, but does not include the results of discontinued operations.
As a result of the divestitures of the CDMA/LTE Access and ES businesses in the fourth quarter of 2009, beginning in the first quarter of 2010, only the residual contracts related to those businesses are included in the respective reportable segments. Beginning in the second quarter of 2010, as a result of the divestitures of the Optical Networking and Carrier Ethernet and GSM/GSM-R businesses in the first quarter of 2010, only the residual contracts related to those businesses will remain in the respective reportable segments. The MEN reportable segment will also include the multiservice switching products and related services (MSS) business. The CVAS and LGN reportable segments will continue.
Segment revenues from continuing operations were $662 million in the first quarter of 2010 compared to $1.3 billion for the first quarter of 2009, reflecting a reduction of 48.6% percent due to declines across all business segments. The reduction was primarily a result of the divestitures of the CDMA/LTE Access and ES businesses in the fourth quarter of 2009.
Segment Revenues B/(W)
---------------------------------------------------------------------
Q1 2010 YoY
---------------------------------------------------------------------
Wireless Networks $ 168 (70%)
Carrier VoIP and Application Solutions 154 (9%)
Metro Ethernet Networks 216 (40%)
LGN 122 (35%)
Other 4 75%
---------------------------------------------------------------------
Total Segment Revenues from Continuing
Operations $ 664 (48%)
---------------------------------------------------------------------
---------------------------------------------------------------------
Discontinued Operations (i) $ 10 (98%)
---------------------------------------------------------------------
---------------------------------------------------------------------
---------------------------------------------------------------------
(i) Includes revenues related to the discontinued operations of Equity Investees
WN revenues in the first quarter of 2010 were $168 million, a decrease of 70 percent compared with the year ago quarter with declines in all businesses. CDMA solutions revenues were significantly impacted by the divestiture of the CDMA business in the fourth quarter of 2009.
CVAS revenues in the first quarter of 2010 were $154 million, a decrease of 9 percent compared with the year ago quarter primarily due to lower sales volumes from certain customers, partially offset by favorable foreign exchange fluctuations and an increase in services contracts in the first quarter of 2010.
Metro Ethernet Networks (MEN) revenues in the first quarter of 2010 were $216 million, a decrease of 40 percent compared with the year ago quarter. Revenues were impacted by the divestiture of the Optical Networking and Carrier Ethernet business in the first quarter of 2010 and certain projects in the first quarter of 2009 that did not repeat to the same extent in 2010.
LG-Nortel Co. Ltd. (LGN) revenues in the first quarter of 2010 were $122 million, a decrease of 35 percent compared with the year ago quarter. The year over year decline was primarily in LGN Carrier, mainly due to higher sales volumes related to our 3G wireless products in the first quarter of 2009 not repeated to the same extent in 2010.
Discontinued operations revenues in the first quarter of 2010 were $10 million, a decrease of 98 percent compared with the year ago quarter as a result of the divesture of the ES, NGS and DiamondWare businesses in the fourth quarter of 2009.
Gross Margin
Gross margin was 27.5 percent of revenues in the first quarter of 2010. This compared to gross margin of 41.3 percent for the first quarter of 2009. This decrease was primarily a result of the divestiture of the CDMA/LTE Access business in the fourth quarter of 2009 and the unfavorable impacts of inventory provisions and warranty costs, partially offset by favorable foreign exchange fluctuations.
Operating Expenses
Operating Expenses B/(W)
----------------------------------------------------------------------------
Q1 2010 YoY
----------------------------------------------------------------------------
SG&A $ 184 21%
R&D 96 58%
----------------------------------------------------------------------------
Total Operating Expenses $ 280 40%
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
A focus on reducing costs, and the divestiture of the CDMA/LTE Access and ES businesses in the fourth quarter of 2009, resulted in lower operating expenses compared to the year ago quarter. Operating expenses were $280 million in the first quarter of 2010 compared to $463 million for the first quarter of 2009.
SG&A expenses were $184 million in the first quarter of 2010, compared to $233 million for the first quarter of 2009. SG&A expenses excluded $70 million in the first quarter of 2010 and $132 million in the first quarter of 2009 related to Equity Investees.
R&D expenses were $96 million in the first quarter of 2010, compared to $230 million for the first quarter of 2009. R&D expenses excluded $7 million in the first quarter of 2010 and $27 million in the first quarter of 2009 related to Equity Investees.
Net Earnings
The Company reported net earnings in the first quarter of 2010 of $355 million compared to a net loss of $507 million in the first quarter of 2009.
The net earnings in the first quarter of 2010 of $355 million included reorganization items of $497 million primarily related to the gains on the divestitures of the Optical Networking and Carrier Ethernet assets to Ciena of $549 million and the GSM/GSM-R assets to Ericsson and Kapsch of $93 million, other operating income of $60 million comprised primarily of billings under transaction services agreements and other income of $61 comprised primarily of a currency exchange gain of $44 million, partially offset by interest expense of $75 million and $12 million in income tax expense.
The net loss in the first quarter of 2009 of $507 million included a loss from discontinued operations of $197 million, $122 million equity in net loss of Equity Investees, interest expense of $76 million, other expense - net of $55 million comprised primarily of a loss of $46 million due to changes in foreign exchange rates, and a loss of $22 million due to income attributable to non-controlling interests.
Cash
Consolidated cash balance as of March 31, 2010 was $1.9 billion and excluded Equity Investees' cash of $788 million and restricted cash of $2.7 billion related to the divestiture proceeds. The consolidated cash balance decreased slightly from the December 31, 2009 consolidated cash balance of $2.0 billion, which excluded Equity Investees cash of $815 million. The decrease in the consolidated cash balance was primarily due to cash used in operating activities of $76 million, the reduction of cash and cash equivalents of deconsolidated entities of $24 million, cash used in financing activities of $13 million primarily related to dividends paid by subsidiaries to non controlling interests, partially offset by cash from in investing activities of $27 million, which included proceeds from sales of businesses largely offset by proceeds from those sales recorded as restricted cash, and a net favorable foreign exchange impact of $13 million.
As previously announced, Nortel does not expect that the Company's common shareholders or the NNL preferred shareholders will receive any value from the creditor protection proceedings and expects that the proceedings will result in the cancellation of these equity interests.
About Nortel
For more information, visit Nortel on the Web at www.nortel.com. For the latest Nortel news, visit www.nortel.com/news.
About Nortel
Certain statements in this press release may contain words such as "could", "expects", "may", "should", "will", "anticipates", "believes", "intends", "estimates", "targets", "plans", "envisions", "seeks" and other similar language and are considered forward-looking statements or information under applicable securities laws. These statements are based on Nortel's current expectations, estimates, forecasts and projections about the operating environment, economies and markets in which Nortel operates. These statements are subject to important assumptions, risks and uncertainties that are difficult to predict, and the actual outcome may be materially different. Nortel's assumptions, although considered reasonable by Nortel at the date of this press release, may prove to be inaccurate and consequently Nortel's actual results could differ materially from the expectations set out herein.
Actual results or events could differ materially from those contemplated in forward-looking statements as a result of the following: (i) risks and uncertainties relating to the Creditor Protection Proceedings including: (a) risks associated with Nortel's ability to: stabilize the business and maximize the value of Nortel's businesses; obtain required approvals and successfully consummate pending and future divestitures; ability to satisfy transition services agreement obligations in connection with divestiture of operations; successfully conclude ongoing discussions for the sale of Nortel's other assets or businesses; develop, obtain required approvals for, and implement a court approved plan; resolve ongoing issues with creditors and other third parties whose interests may differ from Nortel's; generate cash from operations and maintain adequate cash on hand in each of its jurisdictions to fund operations within the jurisdiction during the Creditor Protection Proceedings; access the EDC Facility given the current discretionary nature of the facility, or arrange for alternative funding; if necessary, arrange for sufficient debtor-in-possession or other financing; continue to have cash management arrangements and obtain any further required approvals from the Canadian Monitor, the U.K. Administrators, the French Administrator, the Israeli Administrators, the U.S. Creditors' Committee, or other third parties; raise capital to satisfy claims, including Nortel's ability to sell assets to satisfy claims against Nortel; maintain R&D investments; realize full or fair value for any assets or business that are divested; utilize net operating loss carryforwards and certain other tax attributes in the future; avoid the substantive consolidation of NNI's assets and liabilities with those of one or more other U.S. Debtors; attract and retain customers or avoid reduction in, or delay or suspension of, customer orders as a result of the uncertainty caused by the Creditor Protection Proceedings; maintain market share, as competitors move to capitalize on customer concerns; operate Nortel's business effectively under the new organizational structure, and in consultation with the Canadian Monitor, and the U.S. Creditors' Committee and work effectively with the U.K. Administrators, French Administrator and Israeli Administrators in their respective administration of the EMEA businesses subject to the Creditor Protection Proceedings; continue as a going concern; actively and adequately communicate on and respond to events, media and rumors associated with the Creditor Protection Proceedings that could adversely affect Nortel's relationships with customers, suppliers, partners and employees; retain and incentivize key employees and attract new employees as may be needed; retain, or if necessary, replace major suppliers on acceptable terms and avoid disruptions in Nortel's supply chain;
maintain current relationships with reseller partners, joint venture partners and strategic alliance partners; obtain court orders or approvals with respect to motions filed from time to time; resolve claims made against Nortel in connection with the Creditor Protection Proceedings for amounts not exceeding Nortel's recorded liabilities subject to compromise; prevent third parties from obtaining court orders or approvals that are contrary to Nortel's interests; reject, repudiate or terminate contracts; and (b) risks and uncertainties associated with: limitations on actions against any Debtor during the Creditor Protection Proceedings; the values, if any, that will be prescribed pursuant to any court approved plan to outstanding Nortel securities and, in particular, that Nortel does not expect that any value will be prescribed to the NNC common shares or the NNL preferred shares in any such plan; the delisting of NNC common shares from the NYSE; and the delisting of NNC common shares and NNL preferred shares from the TSX; and (ii) risks and uncertainties relating to Nortel's business including: the sustained economic downturn and volatile market conditions and resulting negative impact on Nortel's business, results of operations and financial position and its ability to accurately forecast its results and cash position; cautious capital spending by customers as a result of factors including current economic uncertainties; fluctuations in foreign currency exchange rates; any requirement to make larger contributions to defined benefit plans in the future;
a high level of debt, arduous or restrictive terms and conditions related to accessing certain sources of funding; the sufficiency of workforce and cost reduction initiatives; any negative developments associated with Nortel's suppliers and contract manufacturers including Nortel's reliance on certain suppliers for key optical networking solutions components and on one supplier for most of its manufacturing and design functions; potential penalties, damages or cancelled customer contracts from failure to meet contractual obligations including delivery and installation deadlines and any defects or errors in Nortel's current or planned products; significant competition, competitive pricing practices, industry consolidation, rapidly changing technologies, evolving industry standards, frequent new product introductions and short product life cycles, and other trends and industry characteristics affecting the telecommunications industry; any material, adverse affects on Nortel's performance if its expectations regarding market demand for particular products prove to be wrong; potential higher operational and financial risks associated with Nortel's international operations; a failure to protect Nortel's intellectual property rights; any adverse legal judgments, fines, penalties or settlements related to any significant pending or future litigation actions; failure to maintain integrity of Nortel's information systems; changes in regulation of the Internet or other regulatory changes; and Nortel's potential inability to maintain an effective risk management strategy.
For additional information with respect to certain of these and other factors, see Nortel's Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and other securities filings 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.
(1) Nortel, the Nortel logo and the Globemark are trademarks of Nortel Networks.
Note that Nortel will not be hosting a teleconference/audio webcast to discuss first quarter 2010 results.
NORTEL NETWORKS CORPORATION
(Under Creditor Protection Proceedings as of January 14, 2009)
Condensed Consolidated Statements of Operations (unaudited)
(U.S. GAAP; Millions of U.S. dollars, except per share amounts)
Three months ended
-----------------------------------
March 31, December 31, March 31,
2010 2009 2009
-----------------------------------
Revenues:
Products $ 408 $ 698 $ 967
Services 76 96 74
-----------------------------------
484 794 1,041
-----------------------------------
Cost of revenues
Products 325 468 582
Services 26 22 29
-----------------------------------
351 490 611
-----------------------------------
Gross profit 133 304 430
27.5% 38.3% 41.3%
Selling, general and administrative
expense 184 158 233
Research and development expense 96 149 230
-----------------------------------
Management operating margin (147) (3) (33)
-30.4% -0.4% -3.2%
Amortization of intangible assets 4 4 3
Gain on sale of businesses and assets 2 1
Other operating expense (income) - net (60) 59 (10)
-----------------------------------
Total operating expenses 226 371 456
-----------------------------------
Operating earnings (loss) (93) (67) (26)
Other income (expense) - net 61 35 (55)
Interest expense
Long-term debt (75) (74) (75)
Other - - (1)
-----------------------------------
Earnings (loss) from operations before
reorganization items, income taxes,
equity in net earnings of associated
companies and Equity Investees (107) (106) (157)
Reorganization items - net 497 1,263 (5)
-----------------------------------
Earnings (loss) from operations before
incomes taxes and equity in net earnings
of associated companies and Equity
Investees 390 1,157 (162)
Income tax expense (12) (75) (3)
-----------------------------------
Earnings (loss) from continuing
operations before equity in net earnings
of associated companies and Equity
Investees 378 1,082 (165)
Equity in net earnings (loss) of
associated companies - net of tax (1) 1 (1)
Equity in net earnings (loss) of Equity
Investee (a) (20) 3 (122)
-----------------------------------
Net earnings (loss) from continuing
operations 357 1,086 (288)
Net earnings (loss) from discontinued
operations - net of tax (b) - 689 (197)
-----------------------------------
Net earnings (loss) 357 1,775 (485)
Income attributable to noncontrolling
interests (2) 2 (22)
-----------------------------------
Net earnings (loss) attributable to
Nortel Networks Corporation $ 355 $ 1,777 $ (507)
-----------------------------------
-----------------------------------
Average shares outstanding (millions) -
Basic 499 499 499
Average shares outstanding (millions) -
Diluted 535 535 499
Basic earnings (loss) per common share -
continuing operations $0.71 $2.18 ($0.63)
Basic earnings (loss) per common share -
discontinued operations $0.00 $1.38 ($0.39)
-----------------------------------
Total basic earnings (loss) per common
share $0.71 $3.56 ($1.02)
-----------------------------------
-----------------------------------
Diluted earnings (loss) per common share
- continuing operations $0.67 $2.05 ($0.63)
Diluted earnings (loss) per common share
- discontinued operations $0.00 $1.29 ($0.39)
-----------------------------------
Total diluted earnings (loss) per common
share $0.67 $3.34 ($1.02)
-----------------------------------
-----------------------------------
(a) Nortel has determined that, as of the Petition Date, the presentation of
the Equity Investees under the equity method of accounting was more
appropriate based on the conclusion that Nortel exercises significant
influence over those entities. The equity method of accounting will
result in the financial position and results of operations of the Equity
Investees being presented net on a single line on the balance sheet and
statement of operations, respectively, versus being combined gross into
each individual line item.
(b) The ES business as well as the shares of NGS and DiamondWare are
presented as discontinued operations beginning with the quarter ended
September 30, 2009. Accordingly, comparative periods have been recast to
give effect for the changes in presentation.
NORTEL NETWORKS CORPORATION
(Under Creditor Protection Proceedings as of January 14, 2009)
Condensed Consolidated Balance Sheets (unaudited)
(U.S. GAAP; Millions of U.S. dollars, except per share amounts)
-----------------------
March 31, December
2010 31, 2009
-----------------------
ASSETS
Current assets
Cash and cash equivalents $ 1,925 $ 1,998
Short-term investments - 18
Restricted cash and cash equivalents 95 92
Accounts receivable - net 486 625
Inventories - net 144 183
Deferred income taxes - net 15 24
Other current assets 272 348
Assets held for sale 117 272
Assets of discontinued operations 47 148
-----------------------
Total current assets 3,101 3,708
Restricted cash 2,695 1,928
Investments 118 117
Plant and equipment - net 548 688
Goodwill 10 9
Intangible assets - net 48 51
Deferred income taxes - net 14 10
Other assets 222 177
-----------------------
Total assets $ 6,756 $ 6,688
-----------------------
-----------------------
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities
Trade and other accounts payable $ 179 $ 294
Payroll and benefit-related liabilities 154 128
Contractual liabilities 95 93
Restructuring liabilities 4 4
Other accrued liabilities 489 660
Liabilities held for sale 112 205
Liabilities of discontinued operations 46 53
-----------------------
Total current liabilities 1,079 1,437
Long-term liabilities
Long-term debt 41 41
Investment in net liabilities of Equity Investees 514 534
Deferred income taxes - net 7 7
Other liabilities 156 226
-----------------------
Total long-term liabilities 718 808
Liabilities subject to compromise 7,565 7,358
Liabilities subject to compromise of discontinued
operations 116 129
-----------------------
Total liabilities 9,478 9,732
-----------------------
SHAREHOLDERS' DEFICIT
Common shares, without par value - Authorized shares:
unlimited; 35,604 35,604
Issued and outstanding shares: 498,206,366 as of
March 31, 2010 and December 31, 2009 respectively
Additional paid-in capital 3,623 3,623
Accumulated deficit (41,522) (41,876)
Accumulated other comprehensive income (1,167) (1,124)
-----------------------
Total Nortel Networks Corporation shareholders'
deficit (3,462) (3,773)
-----------------------
Noncontrolling interest 740 729
-----------------------
Total shareholders' deficit (2,722) (3,044)
-----------------------
Total liabilities and shareholders' deficit $ 6,756 $ 6,688
-----------------------
-----------------------
NORTEL NETWORKS CORPORATION
(Under Creditor Protection Proceedings as of January 14, 2009)
Condensed Consolidated Statements of Cash Flows
(U.S. GAAP; Millions of U.S. dollars)
Three months ended
----------------------------------
March 31, December 31, March 31,
2010 2009 2009
----------------------------------
Cash flows from (used in) operating
activities
Net earnings (loss) attributable to
Nortel Networks Corporation $ 355 $ 1,777 $ (507)
Net (earnings) loss from discontinued
operations - net of tax - (689) 197
Adjustments to reconcile net earnings
(loss) to net cash from (used in)
operating activities, net of effects
from acquisitions and divestitures of
businesses:
Amortization and depreciation 29 34 60
Non-cash portion of cost reduction
activities - - 5
Equity in net earnings of associated
companies - net of tax 1 (1) 1
Equity in net (earnings) loss of Equity
Investees 20 (3) 122
Share-based compensation expense - (30) 73
Deferred income taxes 5 (6) 5
Pension and other accruals 30 107 18
Loss on sales of business and impairment
of assets - net 2 - -
Income (loss) attributable to
noncontrolling interests - net of tax 2 (2) 22
Reorganization items - non cash (530) (1,323) 4
Other - net 53 876 (79)
Change in operating assets and
liabilities: Other (18) 297 227
----------------------------------
Net cash from (used in) operating
activities of continuing operations (51) 1,037 148
Net cash from (used in) operating
activities of discontinued operations (25) (923) (28)
----------------------------------
Net cash from (used in) operating
activities (76) 114 120
----------------------------------
Cash flows from (used in) investing
activities
Expenditures for plant and equipment (7) (8) (11)
Proceeds on disposals of plant and
equipment - 9 1
Change in restricted cash and cash
equivalents (770) (1,901) (29)
Decrease in short-term and long-term
investments 24 6 24
Acquisitions of investments and
businesses - net of cash acquired 1 (1) -
Proceeds from sales of investments and
businesses and assets - net 754 1,085 6
----------------------------------
Net cash from (used in) investing
activities of continuing operations 2 (810) (9)
Net cash from (used in) investing
activities of discontinued operations 25 885 14
----------------------------------
Net cash from (used in) investing
activities 27 75 5
----------------------------------
Cash flows from (used in) financing
activities
Dividends paid, including paid by
subsidiaries to noncontrolling interests (11) - -
Capital repayment to minority owners - (42) -
Increase in notes payable 9 15 7
Decrease in notes payable (9) (17) (48)
Repayment of capital leases (2) (2) (2)
----------------------------------
Net cash from (used in) financing
activities of continuing operations (13) (46) (43)
Net cash from (used in) financing
activities of discontinued operations - - (1)
----------------------------------
Net cash from (used in) financing
activities (13) (46) (44)
----------------------------------
Effect of foreign exchange rate changes on
cash and cash equivalents 13 (1) (34)
Reduction of cash and cash equivalents of
deconsolidated subsidiaries (24) - -
----------------------------------
Net cash from (used in) continuing
operations (73) 180 62
Net cash from (used in) discontinued
operations - (38) (15)
----------------------------------
Net increase (decrease) in cash and cash
equivalents (73) 142 47
Cash and cash equivalents at beginning of
period 1,998 1,856 2,397
Less cash and cash equivalents of Equity
Investees - - (761)
----------------------------------
Adjusted cash and cash equivalents at
beginning of period 1,998 1,856 1,636
----------------------------------
Cash and cash equivalents at end of period 1,925 1,998 1,683
Less cash and cash equivalents of
discontinued operations at end of period - - (29)
----------------------------------
Cash and cash equivalents of continuing
operations at end of period $ 1,925 $ 1,998 $ 1,654
----------------------------------
----------------------------------
NORTEL NETWORKS CORPORATION
(Under Creditor Protection Proceedings as of January 14, 2009)
Consolidated Financial Information (unaudited)
(U.S. GAAP; Millions of U.S. dollars)
Segmented revenues
The following table summarizes our revenue and management operating margin
by segment. The financial information for our business segments includes the
results of the Equity Investees as if they were consolidated, which is
consistent with the way we manage our business segments.
Three months ended
----------------------------------
March 31, December 31, March 31,
2010 2009 2009
----------------------------------
Segment Revenues
Wireless Networks $ 168 $ 375 $ 568
Carrier VoIP and Application Systems 154 194 169
Metro Ethernet Networks 216 327 360
LG-Nortel 122 154 188
----------------------------------
Total reportable segments 660 1,050 1,285
Other 4 2 1
----------------------------------
Total segment revenues 664 1,052 1,286
Less: Equity Investees revenues $ (180) (258) $ (245)
----------------------------------
Total consolidated revenues $ 484 $ 794 $ 1,041
----------------------------------
----------------------------------
Management Operating Margin
Wireless Networks 55 93 60
Carrier VoIP and Application Systems (8) 23 (18)
Metro Ethernet Networks (9) 35 42
LG-Nortel 1 (11) 48
----------------------------------
Total reportable segments 39 140 132
Other (218) (169) (246)
----------------------------------
Total Management Operating Margin (179) (29) (114)
-26.96% -2.76% -8.79%
Impact of deconsolidation of Equity
Investees (32) (26) (81)
Amortization of intangible assets 4 4 3
Loss on sales of businesses and assets 2 1 -
Other operating expense (income) - net (60) 59 (10)
----------------------------------
Total operating loss (93) (67) (26)
Other income (expense) - net 61 35 (55)
Interest expense (75) (74) (76)
Reorganization items - net 497 1,263 (5)
Income tax expense (12) (75) (3)
Equity in net earnings (loss) of
associated companies - net of tax (1) 1 (1)
Equity in net earnings (loss) of Equity
Investees (20) 3 (122)
----------------------------------
Net earnings (loss) attributable to Nortel
Networks Corporation from continuing
operations $ 357 $ 1,086 $ (288)
----------------------------------
----------------------------------
Geographic revenues
The following table summarizes our geographic revenues based on the
location of the customer for:
Three months ended
----------------------------------
March 31, December 31, March 31,
2010 2009 2009
----------------------------------
Revenues
United States $ 245 $ 403 $ 571
EMEA (a) 13 16 6
Canada 38 97 83
Asia 158 222 301
CALA (b) 30 56 80
----------------------------------
Total revenues $ 484 $ 794 $ 1,041
----------------------------------
----------------------------------
(a) Europe, Middle East and Africa
(b) Caribbean and Latin America
Network Solutions revenues
The following table summarizes our revenue by segment. The financial
information for our business segments includes the results of the Equity
Investees as if they were consolidated, which is consistent with the way we
manage our business segments.
Three months ended
----------------------------------
March 31, December 31, March 31,
2010 2009 2009
----------------------------------
Revenues
Wireless Networks
CDMA solutions $ 12 $ 174 $ 393
GSM and UMTS solutions 156 201 175
----------------------------------
168 375 568
Carrier VoIP and Application Systems
Circuit and packet voice solutions 154 194 169
----------------------------------
154 194 169
Metro Ethernet Networks
Optical networking solutions 155 244 276
Data networking and security solutions 61 83 84
----------------------------------
216 327 360
LG-Nortel
LGN Carrier 75 96 155
LGN Enterprise 47 58 33
----------------------------------
122 154 188
Other 4 2 1
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Total revenues $ 664 $ 1,052 $ 1,286
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