Blow Out!
Tuesday January 25, 4:04 pm Eastern Time
Company Press Release
SOURCE: Nortel Networks Corporation
Nortel Networks Reports Record Revenues and Operating Results for the Fourth Quarter and the year 1999
- Revenues up 21% in the quarter and 26% for 1999
- Net Earnings from Operations up 58% in the quarter and 62% for 1999
- EPS From Operations up 53% in the quarter and 38% for 1999
BRAMPTON, ONT., Jan. 25 /PRNewswire/ - Nortel Networks(x) (NYSE/TSE: NT) today reported results for the fourth quarter and the year 1999
Fourth Quarter Results
----------------------
Revenues increased 21% to US$6.99 billion for the fourth quarter of 1999 from US$5.77 billion for the same period in 1998. Net earnings from operations applicable to common shares(a) for the quarter were US$755 million, or US$0.55 per share, compared to US$477 million, or US$0.36 per share, for the same period in 1998, an increase in earnings per share from operations of 53 percent. Including Acquisition Related Costs(a) and one-time gains and charges, Nortel Networks recorded net earnings applicable to common shares in the fourth quarter of 1999 of US$417 million or US$0.30 per share.
The overall increase in net earnings from operations in the quarter was driven by higher revenues and gross profit and a decrease in the effective tax rate.
``We are extremely pleased with our strong growth in the fourth quarter,' said John Roth, president and chief executive officer, Nortel Networks. ``Our strong financial performance with carrier and service provider customers reflected our leadership position in creating the high-performance Internet.'
1999 Results
------------
For the year 1999, revenues increased 26 percent to US$22.22 billion from US$17.58 billion for the year 1998. Net earnings from operations applicable to common shares(a) for the year 1999 were US$1.73 billion, or US$1.28 per share, compared to US$1.07 billion, or US$0.93 per share for 1998, an increase in earnings per share from operations of 38 percent. Including Acquisition Related Costs(a) and one-time gains and charges, Nortel Networks recorded a net loss of US$197 million, or US$0.15 per share, for 1999.
``We are extremely pleased with the strength in our optical and high-speed Internet access capabilities as well as the success of our wireless solutions which overcame volatility in South America early in the year,' said John Roth, president and chief executive officer. ``We are proud of our record results which reflect success in several key Internet markets and geographic areas while continuing to lay the foundation for continued strong growth at the heart of the Internet in 2000.'
``Highlights for 1999 included:
- Our Optical Internet business grew more than 80% over 1998, driven
by explosive customer demand. We moved into the No. 1 market share
position globally in SONET/SDH and DWDM, according to Ryan Hankin
Kent.
- We made significant inroads in the rapidly growing high-speed
Internet access market. With one of the broadest portfolios
available, we were selected by a variety of service providers for
our solutions using copper, cable or wireless technologies.
- We experienced strong momentum in the wireless infrastructure
business in the second half of the year as customers endorsed our
strategy for the Wireless Internet resulting in several key
contract wins and third generation trials.
- Our ATM/IP carrier routing/switching portfolio built momentum as we
exited the year and overall, we made significant market share gains
as reported by Cahners In-Stat.
- We completed or announced key product introductions and
acquisitions that continue to enhance our market leading Internet
capabilities, including OPTera(x) 1600G 160 channel optical
amplification system, OPTera(x) LH open optical platform and the
proposed acquisition of Qtera's(x) extra long haul regeneration
capabilities for the Optical Internet; OPTera(x) Packet Solution to
deliver highly reliable optical switching and routing capabilities
for carrier networks; Internet Communications Architecture and Open
IP strategies for Enterprise networking solutions; and
Periphonics'(x) web-enabled Interactive Voice Response capabilities
and our proposed acquisition of Clarify's(x) customer relationship
management capabilities for second generation eBusiness solutions.
``Overall, 1999 was a great year. We announced a record number of acquisitions; entered into more than 20 commitments for Internet backbone networks globally; began the realignment of our manufacturing to leverage the capabilities of the outsourcing industry and committed to tripling our Optical Internet manufacturing capacity. We are extremely pleased with how we have been able to better serve our customers through our strengths, agility and execution.'
Commenting on his outlook for 2000, Mr. Roth said: ``Our strong customer relationships and industry leading position in high-growth Internet markets reinforces my confidence in our continued success in 2000. We will continue to optimize our operations model and realign our workforce throughout 2000 around the Internet growth engines. We enter the new millennium with a strong order book and customer momentum across the high-growth segments of our business.'
Revenue Breakdown
-----------------
Segment revenues for the fourth quarter of 1999 increased 31 percent for the Carrier segment and decreased 5 percent for the Enterprise segment over the same period in 1998. For the full year 1999, Carrier segment revenues increased 26 percent and Enterprise segment revenues increased 33 percent compared to 1998.
Carrier segment revenues reflected strong growth in both Optical Internet and high-speed Internet access solutions in the United States, Europe and Latin America in the quarter and for the year compared to the same periods in 1998. Mobility revenues were strong in the quarter in the United States, Europe, Latin America and Asia Pacific and, overall, grew significantly in the year.
Enterprise segment revenues decreased in the quarter compared to the same period in 1998 primarily due to lower data networking revenues. For the full year 1999, Enterprise segment revenues increased, primarily driven by the increase in data networking revenues due to the Bay Networks merger.
Geographic revenues for the fourth quarter of 1999 compared to the fourth quarter of 1998 increased 30 percent outside the United States and Canada, and 20 percent in the United States, while revenues in Canada declined 12 percent. For the full year 1999, revenues increased 30 percent in the United States, 26 percent outside the United States and Canada, and 5 percent in Canada.
Expenses
--------
Selling, general and administrative (``SG&A') expenses in the quarter were US$1.23 billion, or 17.6 percent of revenue, compared with US$1.03 billion, or 17.8 percent of revenue, in the fourth quarter of 1998. For the full year 1999, SG&A expenses were US$4.10 billion, or 18.5 percent of revenue, compared with US$3.09 billion, or 17.6 percent of revenue, for 1998. The SG&A expenses in the quarter reflected investments to support Nortel Networks global growth and, as a percentage of revenues, reflected the impact of ongoing workforce realignment.
Research and development (``R&D') expenses were US$786 million, or 11.2 percent of revenue, in the quarter, compared with US$652 million, or 11.3 percent of revenue, in the fourth quarter of 1998. For the full year 1999, R&D expenses were US$2.91 billion, or 13.1 percent of revenue, compared with US$2.45 billion, or 14 percent of revenue, for 1998. The increased R&D expenses in the quarter reflected planned expenses in the Carrier and Enterprise segments focused on data networking and IP technologies.
Nortel Networks is a global leader in telephony, data, wireless and wireline solutions for the Internet. The Company had 1999 revenues of US$22.2 billion and serves carrier, service provider and enterprise customers globally. Today, Nortel Networks is creating a high-performance Internet that is more reliable and faster than ever before. It is redefining the economics and quality of networking and the Internet through Unified Networks(x) that promise a new era of collaboration, communications and commerce. Visit us at www.nortelnetworks.com.
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 impact of price and product competition; the dependence on new product development; the impact of rapid technological and market change; the ability of Nortel Networks to integrate the operations and technologies of acquired businesses in an effective manner; general industry and market conditions and growth rates; international growth and global economic conditions, particularly in emerging markets and including interest rate and currency exchange rate fluctuations; unanticipated impact of Year 2000 issues; and the impact of consolidations in the telecommunications industry. For additional information with respect to certain of these and other factors, see the reports filed by Nortel Networks with the United States Securities and Exchange Commission. Nortel Networks disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
(a) Net earnings from operations applicable to common shares is defined
as reported net earnings applicable to common shares before
``Acquisition Related Costs' (the amortization of intangible assets
from the acquisition of Bay Networks, Inc. (``Bay Networks') and all
subsequent acquisitions, and the amortization of any purchased
in-process research and development from prior acquisitions) and
one-time gains and charges.
(x) Nortel Networks, the Nortel Networks logo, the Globemark, Unified
Networks, OPTera and How the world shares ideas are trademarks of
Nortel Networks. Qtera is a trademark of Qtera Corporation. Clarify
is a trademark of Clarify Inc. Periphonics is a trademark of
Periphonics Corporation.
NORTEL NETWORKS CORPORATION
Consolidated Results (unaudited)
(millions of U.S. dollars except per share figures)
CDN GAAP CDN GAAP
----------------- ------------------
Three months Twelve months
ended ended
December 31, December 31,
----------------- ------------------
1999 1998 1999 1998
------- -------- -------- --------
Revenues....................... $ 6,993 $ 5,768 $ 22,217 $ 17,575
Cost of revenues............... 3,928 3,239 12,597 10,050
------- -------- -------- --------
Gross profit................... 3,065 2,529 9,620 7,525
Selling, general and
administrative expense........ 1,229 1,029 4,102 3,093
Research and development
expense....................... 786 652 2,908 2,453
Amortization of intangibles
Purchased in-process
research and development.... 50 528 722 1,241
Acquired technology.......... 173 171 686 228
Goodwill..................... 177 141 639 240
Special charges................ 44 27 209 447
------- -------- -------- --------
606 (19) 354 (177)
Equity in net loss
of associated companies....... - (22) (13) (19)
Other income - net............. 122 42 357 492
Interest expense
Long-term debt............... (24) (30) (101) (117)
Other........................ (31) (34) (71) (115)
------- -------- -------- --------
Earnings (loss) before
income taxes.................. 673 (63) 526 64
Income tax provision........... 250 269 696 601
------- -------- -------- --------
Net earnings (loss)............ 423 (332) (170) (537)
Dividends on preferred shares.. 6 9 27 32
------- -------- -------- --------
Net earnings (loss) applicable
to common shares.............. $ 417 $ (341) $ (197) $ (569)
------- -------- -------- --------
------- -------- -------- --------
Earnings (loss) per common
share......................... $ .30 $ (.26) $ (.15) $ (.50)
------- -------- -------- --------
------- -------- -------- --------
Net earnings applicable
to common shares
from operations(x)............ $ 755 $ 477 $ 1,725 $ 1,065
------- -------- -------- --------
------- -------- -------- --------
Earnings per common share
from operations(x)............ $ .55 $ .36 $ 1.28 $ .93
------- -------- -------- --------
------- -------- -------- --------
Dividends declared per
common share................. $ .0375 $ .0375 $ .15 $ .15
------- -------- -------- --------
------- -------- -------- --------
Effective tax rate(+)........ 23.9%(++) 35.5% 28.0%(++) 35.5%
Weighted average number
of common shares
outstanding (millions)....... 1,370 1,327 1,353 1,144
(x) Excludes the impact of Acquisition Related Costs (the amortization
of intangible assets from Bay Networks, Inc. ("Bay Networks"), and
all subsequent acquisitions, and the amortization of purchased
in-process research and development from prior acquisitions) and
one-time gains and charges.
(+) Excludes the impact of Acquisition Related Costs.
(++) The decrease in the effective tax rate for the three months and
twelve months ended December 31, 1999, compared to the same
periods for 1998, was a consequence of a higher United States tax
deduction related to the exercise of stock options.
All references to earnings (loss) per common share, earnings per
common share from operations, dividends declared per common share,
and weighted average number of common shares outstanding, have
been restated to reflect the impact of the stock dividend of one
common share paid to shareholders of record as of the close of
business on August 17, 1999.
Certain comparative figures have been reclassified to conform to
the current period's presentation.
NORTEL NETWORKS CORPORATION
Consolidated Results (unaudited)
Supplementary Information
(millions of U.S. dollars except per share figures)
CDN GAAP
---------------------------------------
For the three months ended
---------------------------------------
12/31/99 12/31/99 12/31/98 Change
-------- -------- -------- ------
(As Reported) A B C
Revenues....................... $ 6,993 $ 6,993 $ 5,768 21%
Cost of revenues............... 3,928 3,928 3,239 21%
-------- -------- --------
Gross profit................... 3,065 3,065 2,529 21%
Selling, general and
administrative expense........ 1,229 1,229 1,029
Research and development
expense....................... 786 786 652
Amortization of intangibles
Purchased in-process research
and development............. 50 - -
Acquired technology.......... 173 - -
Goodwill..................... 177 24 20
Special charges................ 44 - -
-------- -------- --------
606 1,026 828
Equity in net loss of
associated companies.......... - - (22)
Other income - net............. 122 25 12
Interest expense
Long-term debt............... (24) (24) (30)
Other........................ (31) (31) (34)
-------- -------- --------
Earnings before income taxes... 673 996 754 32%
Income tax provision........... 250 235 268
-------- -------- --------
Net earnings................... 423 761 486 57%
Dividends on preferred shares.. 6 6 9
-------- -------- --------
Net earnings applicable to
common shares................. $ 417 $ 755 $ 477 58%
-------- -------- --------
-------- -------- --------
Earnings per common share...... $ .30 $ .55 $ .36 53%
-------- -------- --------
-------- -------- --------
A - Excludes net charges of $338 for the impact of Acquisition
Related Costs and after tax one-time gains and charges.
B - Excludes net charges of $818 for the impact of Acquisition
Related Costs and after tax one-time gains and charges.
C - Represents the change between the three month periods ended
December 31, 1999 and December 31, 1998, which exclude the
adjustments discussed in points A and B above.
NORTEL NETWORKS CORPORATION
Consolidated Results (unaudited)
Supplementary Information
(millions of U.S. dollars except per share figures)
CDN GAAP
---------------------------------------
For the twelve months ended
---------------------------------------
12/31/99 12/31/99 12/31/98 Change
-------- -------- -------- ------
(As Reported) A B C
Revenues....................... $22,217 $22,217 $17,575 26%
Cost of revenues............... 12,597 12,597 10,050 25%
-------- -------- --------
Gross profit................... 9,620 9,620 7,525 28%
Selling, general and
administrative expense........ 4,102 4,102 3,093
Research and development
expense....................... 2,908 2,908 2,453
Amortization of intangibles
Purchased in-process research
and development............. 722 - -
Acquired technology.......... 686 - -
Goodwill..................... 639 86 79
Special charges................ 209 - -
-------- -------- --------
354 2,524 1,900
Equity in net loss of
associated companies.......... (13) (13) (19)
Other income - net............. 357 93 51
Interest expense
Long-term debt............... (101) (101) (117)
Other........................ (71) (71) (115)
-------- -------- --------
Earnings before income taxes... 526 2,432 1,700 43%
Income tax provision........... 696 680 603
-------- -------- --------
Net earnings (loss)............ (170) 1,752 1,097 60%
Dividends on preferred shares.. 27 27 32
-------- -------- --------
Net earnings (loss) applicable
to common shares.............. $ (197) $ 1,725 $ 1,065 62%
-------- -------- --------
-------- -------- --------
Earnings (loss) per common
share - basic................. $ (.15) $ 1.28 $ .93 38%
-------- -------- --------
-------- -------- --------
A - Excludes net charges of $1,922 for the impact of Acquisition
Related Costs and after tax one-time gains and charges.
B - Excludes net charges of $1,634 for the impact of Acquisition
Related Costs and after tax one-time gains and charges.
C - Represents the change between the twelve month periods ended
December 31, 1999 and December 31, 1998, which exclude the
adjustments discussed in points A and B above.
NORTEL NETWORKS CORPORATION
Consolidated Results (unaudited)
(millions of U.S. dollars except per share figures)
U.S. GAAP U.S. GAAP
-------------------- -------------------------------
Three months ended Twelve months ended
December 31, December 31,
-------------------- -------------------------------
1999 1998 1999 1998 1997
--------- --------- --------- --------- ---------
Revenues.......... $ 6,573 $ 5,522(x) $21,287(x) $16,857(x) $14,581
Cost of revenues.. 3,662 3,082 12,063(x) 9,645(x) 8,501(x)
--------- --------- --------- --------- ---------
Gross profit...... 2,911 2,440 9,224 7,212 6,080
Selling, general
and
administrative
expense.......... 1,190 990 3,979(x) 2,961 2,564
Research and
development
expense.......... 814 703 2,992 2,532 2,221
Amortization of
intangibles
Purchased in-
process
research and
development.... 68 209 252 1,756 -
Acquired
technology..... 173 171 686 228 -
Goodwill........ 314 287 1,207 423 32
Special charges... 44 (1)(x) 160(x) 313(x) 12(x)
--------- --------- --------- --------- ---------
308 81 (52) (1,001) 1,251
Equity in net loss
of associated
companies........ (2) (4) (2) (48) (54)
Other income
- net............ 186 1(x) 420 441(x) 53(x)
Interest expense
Long-term debt.. (19) (26) (93) (107) (119)
Other........... (31) (34) (71) (115) (38)
--------- --------- --------- --------- ---------
Earnings (loss)
before income
taxes............ 442 18 202 (830) 1,093
Income tax
provision........ 264 161(xx) 526 420 381
--------- --------- --------- --------- ---------
Net earnings
(loss)........... 178 (143) (324) (1,250) 712
Dividends on
preferred
shares........... 6 9 27 32 17
--------- --------- --------- --------- ---------
Net earnings
(loss) applicable
to common shares. $ 172 $ (152) $ (351) $(1,282) $ 695
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Earnings (loss)
per common share
- basic...... $ .13 $ (.11) $ (.26) $ (1.12) $ .67
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
- diluted.... $ .12 $ (.11) $ (.26) $ (1.12) $ .65
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Net earnings
applicable to
common shares
from
operations(xxx).. $ 607 $ 434 $ 1,434 $ 980 $ 687
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Earnings per
common share from
operations(xxx)
- basic...... $ .44 $ .33 $ 1.06 $ .86 $ .66
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
- diluted.... $ .43 $ .32 $ 1.04 $ .83 $ .64
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Dividends declared
per common share. $ .0375 $ .0375 $ .15 $ .15 $ .15
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Effective tax
rate(+).......... 33.8% 33.3% 34.3% 33.3% 35.2%
Weighted average
number of common
shares
outstanding
(millions)
- basic..... 1,370 1,327 1,353 1,144 1,044
- diluted... 1,428 1,364 1,382 1,181 1,067
(x) Represents reclassifications in accordance with United States GAAP.
In addition, revenues for the first, second, and third quarters of
1999 and 1998 have been adjusted to $4,286, $5,281, and $5,147,
and to $3,341, $4,004, and $3,990, respectively. These revenue
adjustments were reflected in cost of revenues.
(xx) For the purposes of reporting under United States GAAP, companies
are required to estimate the annual tax rate and apply this rate to
their earnings or loss on a quarterly basis. For 1999 and 1998, the
quarterly financial statement profile was adjusted to reflect this
practice. This adjustment impacts the income tax provision on the
statements of operations with an offset to income taxes payable on
the balance sheets. The adjustment had a $19 impact on the
Corporation's income tax provision for the fourth quarter of 1998
and a nil impact on net earnings (loss) on the statements of
operations and the balance sheets for the fiscal periods ended, and
as at, December 31, 1999 and 1998.
(xxx) Excludes the impact of Acquisition Related Costs and one-time gains
and charges.
(+) Excludes the impact of Acquisition Related Costs.
All references to earnings (loss) per common share, earnings per
common share from operations, dividends declared per common share,
and weighted average number of common shares outstanding, have been
restated to reflect the impact of the stock dividend of one common
share paid to shareholders of record as of the close of business on
August 17, 1999.
Certain comparative figures have been reclassified to conform to
the current period's presentation.
NORTEL NETWORKS CORPORATION
Consolidated Results (unaudited)
Supplementary Information
(millions of U.S. dollars except per share figures)
U.S. GAAP
-------------------------------------
For the three months ended
-------------------------------------
12/31/99 12/31/99 12/31/98 Change
--------- --------- --------- -------
As A B C
Reported
Revenues.......................... $ 6,573 $ 6,573 $ 5,522 19%
Cost of revenues.................. 3,662 3,662 3,082 19%
--------- --------- ---------
Gross profit...................... 2,911 2,911 2,440 19%
Selling, general and
administrative expense........... 1,190 1,190 990
Research and development
expense.......................... 814 814 703
Amortization of intangibles
Purchased in-process research
and development................ 68 - -
Acquired technology............. 173 - -
Goodwill........................ 314 18 17
Special charges................... 44 - -
--------- --------- ---------
308 889 730
Equity in net loss of
associated companies............. (2) (2) (3)
Other income (expense) - net...... 186 89 (2)
Interest expense
Long-term debt.................. (19) (19) (26)
Other........................... (31) (31) (34)
--------- --------- ---------
Earnings before income taxes...... 442 |
