NT Earnings Information

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=09 NT 5.92 -0.03 Nortel Networks Reports Results for Third Quarte=
r 2001 TORONTO, Oct 18, 2001 (BUSINESS WIRE) -- Nortel Networks Corporati=
on(b) (NYSE:NT)(TSE:NT.): -- Revenues from continuing operations: =
US$3.7 billion -- Pro forma net loss(a) per share: US$0.68; before inc=
remental charges: US$0.27 -- Net loss from continuing operatio=
ns: US$3.5 billion -- Positive operating cashflow contributes to incre=
ase in cash to US$3.4 billion Nortel Networks Corporation(b) (NY=
SE:NT)(TSE:NT.) today reported results for the third quarter and first nine=
months of 2001 prepared in accordance with US generally accepted accountin=
g principles. Revenues from continuing operations were US$3.69 billion fo=
r the third quarter of 2001 compared to US$6.73 billion in the same period =
in 2000. Pro forma net loss from continuing operations(a) for the third qua=
rter of 2001, excluding incremental provisions and other charges, was US$85=
4 million or US$0.27 per common share. Including the incremental provisions=
and other charges, pro forma net loss from continuing operations(a) for th=
e third quarter of 2001 was US$2.18 billion, or US$0.68 per common share, c=
ompared to pro forma net earnings of US$597 million, or US$0.19 per common =
share on a diluted basis, for the same period in 2000. In the quarter, in=
cremental charges included in the pro forma net loss from continuing operat=
ions(a) were comprised of: US$750 million (pre-tax) for excess and obsolete=
inventory, primarily related to Optical Inter-City; US$767 million (pre-ta=
x) for increased provisions related to trade receivables and customer finan=
cing; and US$380 million (pre-tax) primarily related to charges associated =
with certain third party investments. The Company also recorded: a US$801 m=
illion (pre-tax) charge for restructuring associated with the completion of=
the workforce reductions and facilities closures announced in June 2001; a=
nd a US$223 million (pre-tax) charge primarily related to the approximately=
50 percent reduction in manufacturing capacity of its Photonics Components=
business. Including Acquisition Related Costs(a), stock option compensat=
ion from acquisitions and divestitures, and one-time gains and charges, Nor=
tel Networks recorded a net loss from continuing operations in the third qu=
arter of 2001 of US$3.47 billion or US$1.08 per common share. "Revenues f=
or the quarter reflected the challenges presented as the telecom industry a=
djusted to new levels of spending," said John Roth, president and chief exe=
cutive officer Nortel Networks. "Our bottom line results reflected the impa=
ct of actions we have taken to adjust to the new business levels. During th=
e third quarter of 2001, Nortel Networks continued to aggressively implemen=
t its work plan to reduce its cost structure and streamline operations. The=
Company is in the final stages of implementing a cost structure to drive b=
reak even at a quarterly revenue level well below US$4 billion. The structu=
re is expected to be in place in the first quarter of 2002." Frank Dunn, =
the Company's new president and chief executive officer effective November =
1, 2001, said, "Nortel Networks is focusing its investments and its organiz=
ation to drive continued leadership across three businesses: Metro Networks=
, which encompasses metro optical networking, IP networking, IP services an=
d voice over IP solutions for service providers and enterprises; Wireless N=
etworks; and Optical Long Haul Networks. In the quarter, our product progra=
ms continued to advance as we focused on building on our industry-leading p=
ortfolio of solutions. We also continued to work with our customers to help=
them plan and deploy the solutions that will position them to drive reduct=
ions in their cost of operations and enable them to take advantage of oppor=
tunities for new revenue streams. Some key milestones over the past 120 day=
s included: -- the First North American ILEC began the circuit to =
packet transition with the deployment of our carrier-grade =
softswitch; -- Announced Metro DWDM wins in the United States, Europe =
and Japan; -- Announced Multiservice backbone awards (ATM, IP,=
MPLS) in China, Germany and Asia; -- Continued progress on 3G=
Wireless Internet infrastructure deployments and completed the fir=
st commercial UMTS test calls and the first CDMA2000 1X mobile IP c=
all; -- Introduced advances in IP solutions, including an integrated =
Layer 4-7 content switching capability on our Layer 2-3 Edge =
Switch Router; and -- Completed hardware design, significantly advanc=
ed software integration and began production of OPTera Connect HDX =
solution." As announced on October 2, 2001, the Company expects =
to have an overall workforce of approximately 45,000 after the completion o=
f its work plan. Notifications to employees impacted by workforce reduction=
s are expected to be substantially completed by the end of October 2001. A =
workforce reduction and related charge will be recorded in the fourth quart=
er of 2001. Over the next few quarters, the Company also expects to continu=
e to divest non-core businesses in accordance with its work plan. The numbe=
r of positions which will be impacted by this divesture activity (including=
the impact of divestures announced or completed to date) is expected to ul=
timately approach 10,000 positions. Commenting on cash management in the =
quarter, Frank Dunn said, "We are extremely pleased with the results that h=
ave been generated from our focus on cash management, which drove a signifi=
cant improvement in cash and contributed to positive cashflow from operatio=
ns. In addition, the Company further increased its financial flexibility by=
completing a highly successful US$1.8 billion convertible debt issue which=
, combined with positive operating cash performance from continuing operati=
ons and a significant reduction in short term debt, has significantly enhan=
ced our strong liquidity position. Given the industry correction and action=
s we have taken over the last two quarters, Nortel Networks balance sheet i=
s well positioned." "While we believe we are beginning to see early indic=
ations that capital spending by service providers is approaching sustainabl=
e levels, it still remains difficult to predict. In light of this and the u=
ncertainty regarding the potential impacts of events taking place in the wa=
ke of the September 11, 2001 tragedies and their effect on economies and bu=
sinesses around the world, we are not providing guidance for the fourth qua=
rter of 2001 or the full year 2002 at this time," concluded Dunn. R=
evenue Breakdown from Continuing Operations Network Infrastructure reven=
ues decreased 48 percent in the third quarter of 2001 compared to the third=
quarter of 2000. Wireless Internet solutions grew substantially in Canada =
and slightly in Asia, which was more than offset by a considerable decline =
in Latin America, a slight decline in the United States and a decline in Eu=
rope. Optical Inter-city revenues were down sharply in the United States, E=
urope and Latin America, minimally offset by growth in Asia. Local Internet=
revenues were down substantially in the United States, Europe, Canada and =
Latin America, which were minimally offset by an increase in Asia. Photon=
ic Components segment revenues were down 93 percent in the third quarter co=
mpared to the same period last year. The sharp decline in the segment was l=
argely due to considerably lower sales of Nortel Networks Optical Inter-cit=
y solutions compared to the third quarter of 2000. Other revenues decline=
d 29 percent in the third quarter compared to the same period last year. Su=
bstantial growth in Global Professional Services in Europe and Asia, and st=
rong growth in the United States, was more than offset by considerable decl=
ines in legacy voice solutions for corporations across all regions and wire=
less OEM revenues in most regions. Commensurate with its announcement on =
October 2, 2001 to align its resources around three businesses (Metro Netwo=
rks, Wireless Networks and Optical Long Haul Networks), Nortel Networks wil=
l evolve its financial reporting to reflect the new organization beginning =
in the fourth quarter of 2001. Geographic revenues for the third quarter =
of 2001 compared to the same period in 2000 decreased 54 percent in the Uni=
ted States, 53 percent in Canada and 30 percent outside the United States a=
nd Canada. Nine-Month Results For the first nine months of 2001,=
revenues from continuing operations were US$14.06 billion compared to US$1=
9.75 billion for the same period in 2000. Pro forma net loss from continuin=
g operations(a) for the first nine months of 2001 was US$4.01 billion, or U=
S$1.26 per common share, compared to pro forma net earnings of US$1.57 bill=
ion, or US$0.51 per common share on a diluted basis, for the same period in=
2000. Including the net loss from discontinued access solutions operations=
, Acquisition Related Costs(a), stock option compensation from acquisitions=
and divestitures, one-time gains and charges, and the write down of intang=
ible assets, Nortel Networks recorded a net loss of US$25.48 billion, or US=
$8.01 per common share, for the first nine months of 2001. Spending=
Management The Company continued to make rapid progress to reduce its c=
ost structure. Compared to the Company's year-end 2000 cost structure, excl=
usive of incremental provisions and charges, the Company's cost structure a=
t the end of the third quarter of 2001 is lower by approximately US$1 billi=
on. Gross Margin Gross margin for the third quarter of 2001 was =
approximately 1 percent reflecting incremental charges of approximately US$=
750 million related to excess and obsolete inventory resulting from the exp=
ected decrease in sales due to the continued downturn in the market. Exclud=
ing the impact of these incremental and other contract-related charges, gro=
ss margin for the third quarter of 2001 was approximately 25 percent, compa=
red to approximately 26 percent in the second quarter of 2001. Expe=
nses Selling, general and administrative ("SG&A") expenses in the third =
quarter of 2001 were US$1.92 billion. The continued impact of the market ad=
justments and further decline in some of our of customers' financial condit=
ion resulted in incremental provisions of US$767 million in the quarter rel=
ated to customer receivables and financings. Excluding the incremental prov=
isions in both periods, SG?expenses in the third quarter of 2001, compared =
to second quarter of 2001, were down by approximately US$190 million. Res=
earch and development ("R&D") expenses were US$808 million in the third qua=
rter of 2001. The R?expenses in the quarter reflected focused investments t=
o drive continued market leadership in our core businesses and the eliminat=
ion of spending in all other areas. Compared to the second quarter of 2001,=
R? expenses in the third quarter of 2001 were down by approximately US$100=
million, reflecting the impact of restructuring and streamlining operation=
s. The financial results of Nortel Networks Limited(b) ("NNL"), Nortel Ne=
tworks Corporation's principal operating subsidiary, are fully consolidated=
into Nortel Networks results. NNL has preferred shares which are publicly =
traded in Canada. For the third quarter of 2001, NNL took a restructuring c=
harge of US$793 million (pre-tax) associated with the completion of workfor=
ce reductions and the closure of certain facilities related to business str=
eamlining; and recorded US$207 million (pre-tax) primarily related to the a=
pproximately 50 percent reduction in manufacturing capacity of the Photonic=
s Components business. All such amounts are included in the consolidated No=
rtel Networks amounts described above. Nortel Networks is a global leader=
in networking and communications solutions and infrastructure for service =
providers and corporations. The Company is at the forefront of transforming=
how the world communicates, exchanges information and profits from the hig=
h-performance Internet through capabilities spanning Metro Networks, Wirele=
ss Networks and Optical Long Haul Networks. Nortel Networks does business i=
n more than 150 countries and can be found on the Web at www.nortelnetworks=
.com. Certain information included in this press release is forward-looki=
ng and is subject to important risks and uncertainties. The results or even=
ts predicted in these statements may differ materially from actual results =
or events. Factors which could cause results or events to differ from curre=
nt expectations include, among other things: the severity and duration of t=
he industry adjustment; the sufficiency of our restructuring activities, in=
cluding the potential for higher actual costs to be incurred in connection =
with restructuring actions compared to the estimated costs of such actions;=
fluctuations in operating results and general industry, economic and marke=
t conditions and growth rates; the ability to recruit and retain qualified =
employees; fluctuations in cash flow, the level of outstanding debt and deb=
t ratings; the ability to make acquisitions and/or 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; international growth and global economic conditions, particula=
rly in emerging markets and including interest rate and currency exchange r=
ate fluctuations; the impact of rationalization in the telecommunications i=
ndustry; the dependence on new product development; the uncertainties of th=
e Internet; the impact of the credit risks of our customers and the impact =
of increased provision of customer financing and commitments; stock market =
volatility; the entrance into an increased number of supply, turnkey, and o=
utsourcing contracts which contain delivery, installation, and performance =
provisions, which, if not met, could result in the payment of substantial p=
enalties or liquidated damages; the ability to obtain timely, adequate and =
reasonably priced component parts from suppliers and internal manufacturing=
capacity; the future success of our strategic alliances; and the adverse r=
esolution of litigation. For additional information with respect to certain=
of these and other factors, see the reports filed by Nortel Networks Corpo=
ration and Nortel Networks Limited with the United States Securities and Ex=
change Commission. Unless otherwise required by applicable securities laws,=
Nortel Networks Corporation and Nortel Networks Limited disclaim any inten=
tion or obligation to update or revise any forward-looking statements, whet=
her as a result of new information, future events or otherwise. (a)=
Pro forma net earnings/loss from continuing operations is defined =
as reported net loss from continuing operations before "Acquisition=
Related Costs" (in-process research and development expense, and t=
he amortization of acquired technology and goodwill from all acquis=
itions subsequent to July 1998), stock option compensation from acq=
uisitions and divestitures, and one-time gains and charges. (b)=
On May 1, 2000, Nortel Networks Corporation acquired all of the ou=
tstanding common shares of Nortel Networks Limited (formerly called=
Nortel Networks Corporation) by way of a Canadian court-approved p=
lan of arrangement. Nortel Networks Limited has preferred shares ou=
tstanding, which are publicly traded in Canada. Nortel Networks Lim=
ited's financial results have been consolidated into the results re=
ported for Nortel Networks Corporation. Nortel Networks will hos=
t a teleconference/audio webcast to discuss Q3 Results. TIME: 5:00 p.m. =
- 6:00 p.m. EDT on Thursday, October 18, 2001 To participate, please call t=
he following at least 15 minutes prior to the start of the event Teleconfer=
ence: Webcast: North America: 888/363-8644 http://w=
ww.nortelnetworks.com/3q2001 International: 212/231-6044 Replay: (Availa=
ble one hour after the conference until 5:00 p.m. EDT, Oct 28, 2001) North =
America: 800/633-8625 Passcode: 18244243# International: 416/626-4=
100 Passcode: 18244243# Webcast: http://www.nortelnetworks.com/=
3q2001 Note to Editors: The code for the replay of the conference call ends=
with a pound sign. Passcode 18244243(pound sign). Nortel Networks, the Nor=
tel Networks logo, the Globemark and OPTera are trademarks of Nortel Networ=
ks. NORTEL NETWORKS CORPORATION U.S. GAAP =
Consolidated Results (unaudited) (1) (millions of U.S. dollars, e=
xcept per share amounts) For the three months =
ended Pro forma 09/30/01 09/30/00 09/30/01 09=
/30/00 % Change ------------------- --------- -------=
-- --------- Reported Reported Pro forma Pro forma =
A B Revenues =
$3,694 $6,726 $3,694 $6,726 (45%) Cost of revenues =
3,673 3,617 3,673 3,617 2% --------=
--------- -------- --------- Gross profit 21 3,109 =
21 3,109 (99%) Selling, general and administrative expense 1,91=
9 1,309 1,919 1,309 47% Research and development expense =
808 917 808 917 (12%) In-process research and deve=
lopment expense -- 22 -- -- Amortization of in=
tangibles Acquired technology 185 217 -- -- Good=
will 454 1,028 8 13 Stock option comp=
ensation from acquisitions and divestitures 32 31 =
-- -- Special charges 1,024 -- -- =
-- Gain on sale of businesses (45) -- -- =
-- -------- --------- -------- --------- =
(4,356) (415) (2,714) 870 Equity in net loss of=
associated companies (6) (16) (6) (1) Other income=
(expense) - net (318) 200 (318) 31 Int=
erest expense Long-term debt (54) (22) (54) (22)=
Other (23) (17) (23) (17) =
-------- --------- -------- --------- Earnings (loss) before i=
ncome taxes (4,757) (270) (3,115) 861 (462%) Income =
tax recovery (provision) 1,289 (237) 933 (264) =
-------- --------- -------- --------- Net earnings =
(loss) from continuing operations (3,468) (507) (2,182) =
597 Net loss from discontinued operations (net of tax) (2) =
-- (79) -- -- -------=
- --------- -------- --------- Net earnings (loss) $(3,468) $ (586) $=
(2,182) $597 (465%) =3D=3D=3D=3D=3D=3D=3D=3D =
=3D=3D=3D=3D=3D=3D=3D=3D=3D =3D=3D=3D=3D=3D=3D=3D=3D =3D=3D=3D=3D=3D=3D=3D=
=3D=3D Basic earnings (loss) per common share From continuing operations =
$ (1.08) $ (0.17) $(0.68) $0.20 From discontinued operati=
ons -- (0.03) N/A N/A =
-------- --------- -------- --------- $ (1.08) $ =
(0.20) $(0.68) $0.20 (440%) =3D=3D=3D=3D=3D=
=3D=3D=3D =3D=3D=3D=3D=3D=3D=3D=3D=3D =3D=3D=3D=3D=3D=3D=3D=3D =3D=3D=3D=
=3D=3D=3D=3D=3D=3D Diluted earnings (loss) per common share (3) From conti=
nuing operations $ (1.08) $ (0.17) $(0.68) $0.19 From dis=
continued operations -- (0.03) N/A N/A =
-------- --------- -------- --------- =
$ (1.08) $ (0.20) $(0.68) $0.19 (458%) =
=3D=3D=3D=3D=3D=3D=3D=3D =3D=3D=3D=3D=3D=3D=3D=3D=3D =3D=3D=3D=3D=3D=3D=3D=
=3D =3D=3D=3D=3D=3D=3D=3D=3D=3D Dividends declared per common share =
$ -- $0.01875 $ -- $0.01875 Effective tax rate (4) N/A =
N/A 30.0% 30.4% Weighted average number of common shares outs=
tanding (in millions) - basic 3,203 2,991 3,203 =
2,991 - diluted (3) 3,203 2,991 3,203 3,172 (=
1) These unaudited consolidated results for the three months ended =
September 30, 2001 are preliminary and are subject to change. Norte=
l Networks disclaims any intention or obligation to update or revis=
e these preliminary results prior to the filing of its reported res=
ults for the three months ended September 30, 2001. (2) Reporte=
d results for the three months ended September 30, 2000 is net of a=
n applicable income tax recovery of $12. (3) As a result of the reporte=
d net losses for the three months ended September 30, 2001 and 2000=
, and the pro forma net loss for the three months ended September 3=
0, 2001, approximately 101, 181, and 101, respectively, of potentia=
lly dilutive securities (in millions) have not been included in the=
calculation of diluted loss per common share for the periods =
presented because to do so would have been anti-dilutive. (4) Exclud=
es the impact oafter-tax charges associated with discontinued opera=
tions, Acquisition Related Costs (in-process research and developme=
nt expense and the amortization of acquired technology and goodwill=
from all acquisitions subsequent to July 1998), stock option compe=
nsation from acquisitions and divestitures, and, where applicable, =
certain of the one-time gains and charges. A - Excludes a tot=
al of $1,642 pre-tax ($1,286 after-tax) associated with Acquisition=
Related Costs, stock option compensation from acquisitions and div=
estitures, and one-time gains and charges. Acquisition Related Cost=
s of $631 pre-tax ($558 after-tax) were primarily associated with t=
he acquisitions of Bay Networks, Inc., Xros, Inc., Alteon W=
ebSystems, Inc., and Clarify Inc. Stock option compensation from ac=
quisitions and divestitures was $32. One-time gains were $45 pre-ta=
x ($21 after-tax) and one-time charges were $1,024 pre-tax ($717 af=
ter-tax). B - Excludes a total of $1,222 pre-tax ($1,183 after-tax) f=
or discontinued operations, Acquisition Related Costs, stock =
option compensation from acquisitions and divestitures, and one-t=
ime gains. NORTEL NETWORKS CORPORATION U.S. GAAP =
Consolidated Results (unaudited) (1) (millions of U.S. doll=
ars, except per share amounts) =
Pro =
forma For the nine months en=
ded % 09/30/01 09/30/00 09/30/01 09/30/=
00 Change ---------- -------- --------- -------- -=
----- Reported Reported Pro forma Pro forma =
A B Revenues =
$14,055 $19,750 $14,055 $19,750 (29%) Cost of revenues =
11,750 10,898 11,750 10,896 8% -----=
--- ------- -------- ------- Gross profit 2,305 8,85=
2 2,305 8,854 (74%) Selling, general and administrative expense =
4,902 3,847 4,902 3,847 27% Research and development expens=
e 2,661 2,616 2,661 2,616 2% In-process re=
search and development expense 15 1,012 -- -- A=
mortization of intangibles Acquired technology 744 602 =
-- -- Goodwill 3,685 2,244 25 =
38 Stock option compensation from acquisitions and divestitures =
91 98 -- -- Special charges 14,949 =
195 -- -- Gain on sale of businesses =
(45) (174) -- -- -------- ------=
- -------- ------- (24,697) (1,588) (5,283)=
2,353 Equity in net loss of associated companies (138) (22)=
(19) (7) Other income - net (268) 775 (268) =
93 Interest expense Long-term debt (138) (69) (=
138) (69) Other (82) (49) (82) (4=
9) -------- ------- -------- ------- Earnings =
(loss) before income taxes (25,323) (953) (5,790) 2,32=
1 (349%) Income tax recovery (provision) 2,842 (853) =
1,784 (750) -------- ------- -------- -=
------ Net earnings (loss) from continuing operations (22,481) (1,806=
) (4,006) 1,571 Net loss from discontinued operations (net of taxes)(=
2) (3,010) (255) -- -- ---=
----- ------- -------- ------- Net earnings (loss) before accounting c=
hange (25,491) (2,061) (4,006) 1,571 Cumulative effect of accounting=
change (net of taxes of $9) (3) 15 -- -- --=
-------- ------- -------- ------- Net earning=
s (loss) $(25,476) $(2,061) $(4,006) $1,571 (355%) =
=3D=3D=3D=3D=3D=3D=3D=3D =3D=3D=3D=3D=3D=3D=3D =3D=3D=3D=3D=
=3D=3D=3D=3D =3D=3D=3D=3D=3D=3D=3D Basic earnings (loss) per common share:=
From continuing operations $ (7.07) $ (0.62) $ (1.26) $ =
0.54 From discontinued operations (0.94) (0.09) N/=
A N/A -------- ------- -------- ------- =
$ (8.01) $ (0.71) $ (1.26) $ 0.54 (333%) =
=3D=3D=3D=3D=3D=3D=3D=3D =3D=3D=3D=3D=3D=3D=3D =3D=
=3D=3D=3D=3D=3D=3D=3D =3D=3D=3D=3D=3D=3D=3D Diluted earnings (loss) per co=
mmon share (4) From continuing operations $ (7.07) $ (0.62)=
$ (1.26) $ 0.51 From discontinued operations (0.94) =
(0.09) N/A N/A -------- ------- ----=
---- ------- $ (8.01) $ (0.71) $ (1.26) $ 0.51 (347%) =
=3D=3D=3D=3D=3D=3D=3D=3D =3D=3D=3D=3D=3D=3D=3D =3D=3D=3D=
=3D=3D=3D=3D=3D =3D=3D=3D=3D=3D=3D=3D Dividends declared per common share =
$0.03750 $0.05625 $0.03750 $0.05625 Effective tax rate (5) =
N/A N/A 30.9% 32.0% Weighted average number of common sha=
res outstanding (millions) - basic 3,181 2,907 =
3,181 2,907 - diluted (4) 3,181 2,907 3,181 3,=
069 (1) These unaudited consolidated results for the nine months ended =
September 30, 2001 are preliminary and are subject to change. =
Nortel Networks disclaims any intention or obligation to update =
or revise these preliminary results prior to the filing of its repo=
rted results for the three months ended September 30, 2001. (2)=
Reported results for the nine months ended September 30, 2001 and =
2000 are net of applicable income tax recoveries of $723 and $46, r=
espectively. (3) Impact of the adoption of Statement of Financial Accou=
nting Standards ("SFAS") No. 133, "Accounting for Derivative =
Instruments and Hedging Activities", and the corresponding amendm=
ents under SFAS No. 138, "Accounting for Certain Derivative Instrum=
ents and Certain Hedging Activities" ("SFAS 133"). The adoption of =
SFAS 133 did not affect either basic or diluted earnings (loss) per=
common share after giving effect to the accounting change. (4)=
As a result of the reported net losses for the nine months ended S=
eptember 30, 2001 and 2000, and the pro forma net loss for the nine=
months ended September 30, 2001, approximately 71, 162, and 71, re=
spectively, of potentially dilutive securities (in millions) have n=
ot been included in the calculation of diluted loss per common shar=
e for the periods presented because to do so would have been anti-d=
ilutive. (5) Excludes the impact of after-tax charges associated with =
discontinued operations, Acquisition Related Costs (in-process =
research and development expense and the amortization of acquire=
d technology and goodwill from all acquisitions subsequent to July =
1998), stock option compensation from acquisitions and divestitures=
, and where applicable, certain of the one-time gains and charges. =
A - Excludes a total of $23,242 pre-tax ($21,470 after-tax) a=
ssociated with discontinued operations, Acquisition Related Costs, =
stock option compensation from acquisitions and divestitures, and o=
ne-time gains and charges. The loss from discontinued operations wa=
s $3,733 pre-tax ($3,010 afelatedx). Acquisition Related Costs of $=
4,433 pre-tax ($4,164 after-tax) were primarily associated with the=
acquisitions of Bay Networks, Inc., Alteon WebSystems, Inc., Xros,=
Inc., Qtera Corporation, Clarify Inc., and the 980 nanometer pump-=
laser chip business. Stock option compensation from acquisitions an=
d divestitures was $91. Cumulative effect of accounting change =
was a $24 pre-tax ($15 after-tax) gain. One-time gains were $45=
pre-tax ($21 after-tax) and one-time charges were $15,054 pre-tax =
($14,241 after-tax), primarily related to the write down of intangi=
ble assets of $12,486 pre-tax ($12,400 after-tax) and restructuring=
costs of $2,463 pre-tax ($1,748 after-tax). The write down of inta=
ngible assets primarily r B - Excludes a total of $3,575 pre-tax ($3,=
632 after-tax) associated with discontinued operations, Acquisition=
Related Costs, stock option compensation from acquisitions and =
divestitures, and one-time gains and charges. The comparative financia=
l statements results and financial results up to May 1, 2000 represent the =
financial results of Nortel Networks Limited, formerly known as Nortel Netw=
orks Corporation. NORTEL NETWORKS CORPORATION U.S. GAAP =
Consolidated Balance Sheets (1) (mi=
llions of U.S. dollars) (unaudited)(=
unaudited)(audited) Sept. 30, Jun=
e 30, Dec. 31, 2001 2001 =
2000 (2) ---------- --------- ---=
------ ASSETS Current assets Cash and cash equivalents $3,=
355 $1,929 $1,644 Accounts receivable (less provisions of - $684 at =
September 30, 2001; $528 at June 30, 2001; $363 at December 31, 2000) =
3,859 5,587 7,275 Inventories =
1,991 2,633 3,827 Income taxes recoverable =
667 576 -- Deferred income taxes - net =
1,286 505 644 Other current asets =
997 1,118 1,618 Current assets of discontinued operations 1,28=
4 1,340 1,522 ------- -=
------ ------- Total current assets 13,439 13,68=
8 16,530 Long-term receivables (less provisions of - $968 at September =
30, 2001; $545 at June 30, 2001; $383 at December 31, 2000) 549 8=
55 1,117 Investments at cost and associated companies at equity =
237 464 773 Plant and equipment - net =
2,804 3,387 3,357 Intangible assets - net =
4,023 4,685 17,958 Deferred income taxes - net =
1,512 1,109 283 Other assets 8=
65 922 556 Long-term assets of discontinued operations =
412 393 1,606 =
------- ------- ------- Total assets =
$23,841 $25,503 $42,180 =
=3D=3D=3D=3D=3D=3D=3D =3D=3D=3D=3D=3D=3D=3D =3D=3D=3D=3D=3D=3D=
=3D LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Notes payable =
$647 $1,731 $315 Trade and other acc=
ounts payable 1,923 2,042 3,005 Payroll and benefit-rela=
ted liabilities 823 704 916 Other accrued liabilities =
5,586 4,531 3,885 Income taxes payable =
-- -- 306 Long-term debt due within one year =
39 79 445 Current liabilities of discontinued operati=
ons 1,257 1,422 186 =
------- ------- ------- Total current liab=
ilities 10,275 10,509 9,058 Deferred income =
120 129 93 Long-term debt =
4,437 2,618 1,178 Deferred income taxes - net =
626 489 874 Other liabilities =
1,099 1,022 1,024 Minority interest in subsidiary companies =
610 728 770 Long-term liabilities of discontinued operation=
s 12 20 74 =
------- ------- ------- =
17,179 15,515 13,071 =
------- ------- ------- SHAREHOLDERS' EQUITY Common sh=
ares, without par value - Authorized shares: unlimited; Issued and outsta=
nding shares: 3,209,016,631 at September 30, 2001, 3,197,161,690 at June =
30, 2001, and 3,095,772,260 at December 31, 2000 =
32,801 32,626 29,141 Additional paid-in capital 3,37=
2 3,402 3,636 Deferred stock option compensation (260) =
(329) (413) Deficit (28,325) (24,8=
57) (2,726) Accumulated other comprehensive loss (926) (854) =
(529) ------- ------- ---=
---- Total shareholders' equity 6,662 9,988 29,109 =
------- ------- ------- Total=
liabilities and shareholders' equity $2=
3,841 $25,503 $42,180 =3D=3D=
=3D=3D=3D=3D=3D =3D=3D=3D=3D=3D=3D=3D =3D=3D=3D=3D=3D=3D=3D (1) The=
unaudited consolidated balance sheet as at September 30, 2001 is p=
reliminary and is subject to change. Nortel Networks disclaims any =
intention or obligation to update or revise such balance sheet prio=
r to the filing of its reported results for the three months ended =
September 30, 2001. (2) Restated for discontinued operations. =
NORTEL NETWORKS CORPORATION Consolidated Resu=
lts (unaudited) (1) Supplementary Information =
(millions of U.S. dollars) Revenues from continuing operati=
ons Three months ended Nine months ended =
September 30, September 30, =
------------------- ------------------- By Segments:(2) 2=
001 2000 % Change 2001 2000 % Change -------=
------ ------- ----- ----- -------- Network Infrastructure $ =
2,802 $ 5,360 (48%) $10,917 $ 15,849 (31%) Photonics Components =
45 674 (93%) 477 1,611 (70%) Other =
864 1,224 (29%) 2,951 3,575 (17%) Intersegment adjust=
ment (17) (532) (290) (1,285) =
-------- -------- -------- ---------- Total 3,694 =
6,726 14,055 19,750 =3D=3D=3D=3D=3D=3D=
=3D=3D =3D=3D=3D=3D=3D=3D=3D=3D =3D=3D=3D=3D=3D=3D=3D=3D =3D=3D=3D=
=3D=3D=3D=3D=3D=3D=3DThree months ended Nine months ended =
September 30, September 30, ---=
-------------- ------------------- By Customer Solutions:(2) =
2001 2000 % Change 2001 2000 % Change ----=
--- ------ ------- ----- ----- ------- Optical inter-city $ 350 =
$ 1,577 (78%) $ 1,635 $ 4,800 (66%) Local internet 1,198 2=
,413 (50%) 5,041 7,349 (31%) Wireless internet 1,254 1,370=
(8%) 4,241 3,700 15% Other (3) 892 1,366 (3=
5%) 3,138 3,901 (20%) -------- -------- =
-------- ---------- Total 3,694 6,726 14,055 =
19,750 =3D=3D=3D=3D=3D=3D=3D=3D =3D=3D=3D=3D=3D=3D=3D=
=3D =3D=3D=3D=3D=3D=3D=3D=3D =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D =
Three months ended Nine months ended =
September 30, September 30, --------------=
--- ------------------- By Geographic Regions:(4) 2001 =
2000 % Change 2001 2000 % Change ------- ----=
-- ------- ----- ----- ------- United States $ 1,761 $ 3,826 =
(54%) $ 6,850 11,994 (43%) Canada 183 389 (5=
3%) 699 1,030 (32%) Other countries 1,750 2,511 (30%) =
6,506 6,726 (3%) -------- -------- ----=
---- ---------- Total 3,694 6,726 14,055 19=
,750 =3D=3D=3D=3D=3D=3D=3D=3D =3D=3D=3D=3D=3D=3D=3D=3D =
=3D=3D=3D=3D=3D=3D=3D=3D =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D (1) Thes=
e unaudited consolidated results for the three months and nine mont=
hs ended September 30, 2001 are preliminary and are subject to chan=
ge. Nortel Networks disclaims any intention or obligation to update=
or revise these preliminary results prior to the filing of its rep=
orted results for the three months ended September 30, 2001. (2=
) In response to the continued evolution of Nortel Networks custome=
rs, markets and solutions, Nortel Networks changed the way it manag=
es its business to reflect a focus on providing seamless networking=
solutions and service capabilities to its customers. As a result, =
financial information by segment and customer solution has been res=
tated and reported on a new basis commencing with the three months =
ended March 31, 2001. (3) Other includes the external customer solution=
s revenues of $28 and $142 of the Photonics Components segment for =
the three months ended September 30, 2001 and 2000, respectively, a=
nd $187 and $326 for the nine months ended September 30, 2001 and =
2000, respectively. (4) Revenues are attributable to geographic =
regions based on the location of the customer. The comparative fina=
ncial statements results and financial results up to May 1, 2000 represent =
the financial results of Nortel Networks Limited, formerly known as Nortel =
Networks Corporation. CONTACT: Nortel Networks =
Investors: 888/901-7286 or 905/863-6049 investor@nortel=
networks.com or Business media: =
David Chamberlin, 972/685-4648 ddchamb@norteln=
etworks.com URL: http://www.businesswire.com =09
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