Nortels filing
CAN SOME ONE PLEASE EXPLAIN THE PORTION I HAVE COPIED IN BOLD.
DOES THIS ONLY APPLY TO THE CANADIAN COMMON STOCK.
NORTEL NETWORKS CORP NEW
Symbol NRTL
Nortel Reports Financial Results for the Fourth Quarter and Full Year 2009
2010-03-12 18:53 ET - News Release
TORONTO, ONTARIO -- (MARKET WIRE) -- 03/12/10
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
-- ES, NGS and DiamondWare businesses sold in Q4 2009 presented as
discontinued operations
-- CDMA business sold in Q4 2009 reported as continuing operations, as did
not qualify for presentation as discontinued operations
Financial Results
-- Fourth quarter consolidated Revenues of $794 million, which excludes
fourth quarter revenues of $367 million related to Equity Investees and
$300 million related to discontinued operations
-- Fourth quarter SG&A and R&D expenses of $307 million
-- Excludes expenses of $128 million related to Equity Investees
-- Includes $26 million related to workforce and other cost reduction
activities and pension curtailment losses that historically would
have been recorded in special charges
-- Consolidated cash balance as of December 31, 2009 was $2.0 billion and
excluded Equity Investees cash of $815 million and restricted cash of
$1.93 billion related to divestiture proceeds. The cash balance reported
as of September 30, 2009 was $1.81 billion and excluded Equity Investees
cash of $798 million
-- Completed the divestiture of CDMA business to Ericsson in the fourth
quarter and recorded a gain of $1.20 billion
-- Completed the divestiture of ES, NGS and DiamondWare businesses to
Avaya in the fourth quarter and recorded a gain in discontinued
operations of $756 million
-- Focus remains on maximizing value for stakeholders, including creditors,
customers and employees
Nortel(1) Networks Corporation (OTCBB: NRTLQ) announced its results for the fourth quarter and full year 2009. Results were prepared in accordance with United States generally accepted accounting principles (GAAP) in U.S. dollars.
As previously announced on November 16, 2009 following discussions with the U.S. Securities and Exchange Commission (SEC), Nortel no longer combines the results of the Europe, Middle East and Africa (EMEA) subsidiaries, and entities they control (Equity Investees), with its consolidated results. Nortel has determined that, as of the Petition Date, it is appropriate to present its Equity Investees under the equity method of accounting based on the conclusion that Nortel exercises significant influence over those entities. 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. The comparative periods have not been recast for this change in presentation. As a result, analysis using the comparative periods may be difficult, and may not provide meaningful comparisons.
The Enterprise Solutions (ES) business as well as the Nortel Government Solutions (NGS) and DiamondWare businesses are presented as discontinued operations for the fourth quarter and year ended December 31, 2009. Accordingly, comparative periods have been recast to give effect for the change in accounting.
The Code Division Multiple Access (CDMA) business did not qualify for treatment as discontinued operations and as a result is included in continuing operations.
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 from continuing operations 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.
As part of Nortel's ongoing cost reduction activities, on March 11, 2010, Nortel Networks Corporation (NNC), Nortel Networks Limited (NNL), Nortel Networks Inc. and Nortel Networks Capital Corporation each filed a Form 15 related to their respective debt securities and all related guarantees, as applicable, reflecting the automatic suspension of reporting requirements under the U.S. Securities Exchange Act of 1934 (Act) as there were less than 300 holders of each series of securities as of January 1, 2010. NNL also intends to terminate the registration of its common stock under the Act shortly and suspend its obligations to file periodic reports with the SEC, including Forms 10-K, 10-Q and 8-K. Following the deregistration of its common shares, NNL will continue to be a "reporting issuer" under Canadian securities laws and, as a result, will remain subject to continuous disclosure requirements, including the filing of annual and quarterly financial statements and managements' discussion and analysis of financial results under applicable Canadian securities laws. NNC will continue to be a "reporting issuer" under both Canadian and U.S. securities laws and will continue to remain subject to applicable continuous disclosure requirement.
Financial Summary
Nortel's overall financial performance in the fourth quarter of 2009 was impacted by continued ongoing negative economic conditions and the uncertainty created by the Company's Creditor Protection Proceedings which resulted in a decrease in customers' spending levels, as well as the sale of the CDMA/LTE Access and Enterprise, NGS and DiamondWare businesses in December 2009.
-- Revenues in the fourth quarter of $794 million, with declines year over
year in all segments and in all regions. These revenues exclude fourth
quarter revenues related to Equity Investees of $367 million
and $300 million related to discontinued operations. Full year revenues
were $4.09 billion, with declines year over year in all segments and in
all regions. These revenues exclude full year revenues related to Equity
Investees of $1.46 billion and $1.37 billion related to
discontinued operations. Total revenues were $2.07
billion in the fourth quarter of 2008 and $7.62 billion for the full
year 2008 excluding revenues related to discontinued operations of $650
million the fourth quarter of 2008 and $2.80 billion for the full year
2008.
-- Gross margin of 38.3 percent in the fourth quarter, a decrease of 2.7
percentage points from the year ago quarter, and full year gross margin
of 42.4 percent, an increase of 1.0 percentage point from full year
2008, includes charges related to workforce and other cost reduction
activities and pension curtailment losses that historically would have
been recorded in special charges. Excluding these charges, gross margin
would have been 39.4 percent(a) for the fourth quarter of 2009 and 43.5
percent(a) for the full year 2009.
-- SG&A expense in the fourth quarter of $158 million, a decrease of 32.2
percent from the year ago quarter and SG&A expense for the full year of
$698 million, a decrease of 39.4 percent from 2008. Excluding $13
million for the fourth quarter and $67 for the full year related to
workforce and other cost reduction activities and pension curtailment
losses that historically would have been recorded in special charges,
SG&A for the fourth quarter would have decreased by 37.8 percent year
over year(a) and for the full year would have decreased 45.2 percent
from 2008(a). SG&A expense in the fourth quarter and full year excludes
$112 million and $511 million, respectively, related to Equity
Investees.
-- R&D expense in the fourth quarter of $149 million, a decrease of 36.9
percent from the year ago quarter and R&D expense for the full year of
$757 million, a decrease of 33.7 percent from 2008. Excluding $13
million for the fourth quarter and $41 for the full year related to
workforce and other cost reduction activities and pension curtailment
losses that historically would have been recorded in special charges,
SG&A for the fourth quarter would have decreased by 43.2 percent year
over year(a) and for the full year would have decreased 37.2 percent
from 2008(a). R&D expense in the fourth quarter and full year excludes
$16 million and $118 million, respectively, related to Equity Investees.
-- Cash balance as of December 31, 2009 was $2.0 billion and excluded
Equity Investees cash of $815 million and restricted cash of $1,928
related to divestiture proceeds. The consolidated cash balance
exceeded the September 30, 2009 consolidated cash balance of $1.81
billion, which excluded Equity Investees cash of $798 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. Commencing with the third quarter of 2009, Nortel began reporting its CVAS business unit as a separate reportable segment. Prior to that time, the results of CVAS were included in the Wireless Networks (WN) reportable segment, which prior to the third quarter of 2009 was called the Carrier Networks (CN) reportable segment.
Segment revenues were $1.1 billion for the fourth quarter of 2009 compared to $2.07 billion for the fourth quarter of 2008, reflecting a reduction of 49.2% percent due to declines across all business segments. The reduction was primarily a result of the continuing economic downturn, the uncertainty created by the Creditor Protection Proceedings, the recognition of previously deferred revenue in the fourth quarter of 2008 not repeated to the same extent in the fourth quarter of 2009 and the divestitures of the CDMA/LTE Access and Enterprise businesses in the fourth quarter of 2009.
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