Nortel Networks Reports Record Second Quarter Results,...
Raises Outlook for 2000 and Sets Outlook for 2001
- Revenues up 48% to US$7.8 Billion
- EPS from Operations up 64% to US$0.18
- Increases Outlook for 2000 - Percentage Revenue Growth in low 40's and
Percentage Growth in EPS from Operations in high 30's
BRAMPTON, ONT., July 25 /CNW/ - Nortel Networks(x) Corporation(a)
(NYSE/TSE: NT) today reported results for the second quarter and first six
months of 2000 prepared in accordance with U.S. generally accepted accounting
principles.
Revenues increased 48 percent to US$7.82 billion for the second quarter
of 2000 from US$5.28 billion in the same period in 1999. Net earnings from
operations applicable to common shares(b) for the quarter were US$561 million,
or US$0.18 per share on a diluted basis, compared to US$320 million, or
US$0.11 per share on a diluted basis, for the same period in 1999, an increase
in earnings per share from operations of 64 percent. Including Acquisition
Related Costs(b) and one-time gains and charges, Nortel Networks recorded a
net loss applicable to common shares in the second quarter of 2000 of US$745
million or US$0.26 per share.
"Nortel Networks had another quarter of outstanding growth which
reflected our continued market leadership in key growth segments. In
particular, our Optical Internet, Wireless Internet and high speed Local
Internet solutions revenues grew at rates of: more than 150%; 18%; and 80%
respectively, over the second quarter of 1999," said John Roth, president and
chief executive officer, Nortel Networks. "We continued to experience
tremendous demand for our optical solutions as customers around the world
choose to deploy our solutions in backbone and metropolitan networks."
"We also made significant strides in our Wireless Internet business in
the quarter with over US$1 billion in customer announcements and we were
selected the principal supplier to the BT Cellnet 3rd generation wireless
network. We launched our "Wings of Light" strategy that marries the optical
backbone, internet protocol (IP) and high speed wireless capabilities to
deliver Internet access and applications for the Wireless Internet."
Mr. Roth also credits the transformation of Nortel Networks supply chain
during the past 18 months as a major factor contributing to the tremendous
success in the first half of 2000. "We now have one of the industry's most
effective supply chains. It's a key execution engine driving our success in
the rapid deployment of our high-performance Internet network solutions around
the globe," said Mr. Roth.
"With the momentum we have been experiencing during the first half of
this year, supported by an 85 percent increase in order input and a 1.35 book
to bill in the quarter, we are revising our outlook for full year 2000
performance. We expect that our percentage revenue growth in 2000 over 1999
will be in the low 40's, up from our previous view of 30 to 35 percent, and
that our percentage growth in EPS from operations in 2000 compared with 1999
will be in the high 30's," said John Roth.
Looking forward to 2001, Frank Dunn, chief financial officer, Nortel
Networks said, "We expect to continue to grow significantly faster than the
market growth rate of 20 to 21 percent, with anticipated growth in revenues
and EPS from operations in the 30 to 35 percent range."
Revenue Breakdown
-----------------
Segment revenues for the second quarter of 2000 increased 63 percent for
the Service Provider and Carrier ("SP&C") segment and increased 4 percent for
the Enterprise segment over the same period in 1999.
SP&C segment revenues reflected strong growth in sales of Optical
Internet solutions across all geographic regions. High speed Local Internet
and core switching sales were up significantly in the United States, Europe
and Latin America, more than offsetting declines in Canada. Revenues from
mobility solutions were also substantially higher in the United States, Latin
America and Europe, offsetting a decline in Asia.
Overall, Enterprise segment revenues were up in the second quarter of
2000 compared to the same period last year due to the consolidation of certain
joint ventures beginning January 1, 2000. Strong growth in eBusiness
application solutions sales in the United States and Europe were offset by a
general decline in sales of enterprise voice and data networking
infrastructure solutions.
Geographic revenues for the second quarter of 2000 compared to the same
period in 1999 increased 58 percent in the United States, 43 percent outside
the United States and Canada, and declined 1 percent in Canada.
Six-Month Results
-----------------
For the first half of 2000, revenues increased 48 percent to US$14.14
billion from US$9.57 billion for the same period in 1999. Net earnings from
operations applicable to common shares(b) for the first half of 2000 were
US$908 million, or US$0.30 per share on a diluted basis, compared to US$513
million, or US$0.18 per share on a diluted basis, for the same period in 1999,
an increase in earnings per share from operations of 67 percent. Including
Acquisition Related Costs(b) and one-time gains and charges, Nortel Networks
recorded a net loss of US$1.48 billion, or US$0.52 per share, for the first
half of 2000.
Expenses
--------
Selling, general and administrative ("SG&A") expenses in the second
quarter of 2000 were US$1.48 billion, or 18.9 percent of revenue, compared
with US$1.01 billion, or 19.1 percent of revenue, in the second quarter of
1999. The SG&A expenses in the quarter reflected investments to support Nortel
Networks global growth and to simplify and streamline business processes.
Research and development ("R&D") expenses were US$1.01 billion, or 12.9
percent of revenue, in the second quarter of 2000, compared with US$728
million, or 13.8 percent of revenue, in the second quarter of 1999. The
increased R&D expenses in the quarter reflected planned expenses in the SP&C
and Enterprise segments focused on optical, high performance network
architecture and eBusiness solutions.
Nortel Networks is a global Internet and communications leader with
capabilities spanning Optical, Wireless, Local Internet and eBusiness. The
Company had 1999 U.S. GAAP revenues of US$21.3 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, promising 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 make
acquisitions and/or 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; the impact of consolidations in the
telecommunications industry, the uncertainties of the Internet; stock market
volatility; the ability of Nortel Networks to recruit and retain qualified
employees; and the impact of increased provision of customer financing by
Nortel Networks. 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) On May 1, 2000, Nortel Networks Corporation acquired all of the
outstanding common shares of Nortel Networks Limited (formerly called
Nortel Networks Corporation) by way of a Canadian court-approved plan
of arrangement. Nortel Networks Limited has preferred shares
outstanding which are publicly traded. Nortel Networks Limited's
financial results have been consolidated into the results reported
for Nortel Networks Corporation. Holders of Nortel Networks Limited
preferred shares will receive separate financial disclosure from
Nortel Networks Limited in accordance with the requirements of
applicable law.
(b) Net earnings from operations applicable to common shares is defined
as reported net earnings applicable to common shares before
"Acquisition Related Costs" (in-process research and development
expense related to acquisitions, the amortization of acquired
technology, and the amortization of goodwill from the acquisition of
Bay Networks, Inc. ("Bay Networks") and all subsequent acquisitions)
and one-time gains and charges.
(x) Nortel Networks, the Nortel Networks logo and the Globemark are
trademarks of Nortel Networks.
<<
U.S. GAAP
NORTEL NETWORKS CORPORATION
Consolidated Results (unaudited)
(millions of U.S. dollars, except per share figures)
For the three months ended
6/30/00 6/30/99 6/30/00 6/30/99 %
Change
------- ------- ------- ------- ------
Reported Reported Oper- Oper-
ating ating
A B C
Revenues ............................ $7,821 $5,281 $7,821 $5,281 48%
Cost of revenues .................... 4,485 3,001 4,485 2,999 50%
------- ------- ------- -------
Gross profit ........................ 3,336 2,280 3,336 2,282 46%
Selling, general and administrative
expense ........................... 1,481 1,014 1,481 1,007
Research and development expense .... 1,011 728 1,011 728
In-process research and development
expense............................. 367 184 - -
Amortization of intangibles
Acquired technology ............... 209 171 - -
Goodwill .......................... 810 300 19 18
Special charges .................... 67 53 - -
Gain on sale of businesses .......... (174) - - -
------- ------- ------- -------
(435) (170) 825 529
Equity in net loss of associated
companies ......................... (3) (8) (3) (8)
Other income - net .................. 59 61 59 4
Interest expense
Long-term debt .................... (24) (20) (24) (20)
Other ............................. (16) (14) (16) (14)
------- ------- ------- -------
Earnings (loss) before income taxes (419) (151) 841 491 71%
Income tax provision ................ 326 107 280 171
------- ------- ------- -------
Net earnings (loss) applicable to
common shares ...................... $ (745) $ (258) $ 561 $ 320 75%
------- ------- ------- -------
------- ------- ------- -------
Earnings (loss) per common share
- basic ........................... $ (.26) $ (.10) $ .19 $ .12 58%
------- ------- ------- -------
------- ------- ------- -------
- diluted ......................... $ (.26) $ (.10) $ .18 $ .11 64%
------- ------- ------- -------
------- ------- ------- -------
Dividends declared per common share 0.0188 0.0188 0.0188 0.0188
Effective tax rate ................. 33.0%(x) 34.6%(x) 33.0%(x) 34.6%(x)
Weighted average number of common
shares outstanding (millions)
- basic .......................... 2,920 2,700 2,920 2,700
- diluted ........................ 3,086 2,796 3,086 2,796
(x) Excludes the impact of after-tax charges of Acquisition Related Costs
(in-process research and development expense related to acquisitions,
the amortization of acquired technology, and the amortization of
goodwill from the acquisition of Bay Networks, Inc. ("Bay
Networks") and all subsequent acquisitions) and, where applicable,
certain of the one-time gains and charges.
A - Excludes a total of $1,260 pre-tax ($1,306 after-tax) charges of
Acquisition Related Costs and one-time gains and charges. Acquisition
Related Costs of $1,367 pre-tax ($1,290 after-tax) were primarily
associated with the acquisitions of Bay Networks, Xros, Inc., Qtera
Corporation and CoreTek, Inc. One-time gains of $174 pre-tax ($51
after-tax) represented a net gain on sale of businesses, primarily
related to the divestiture of certain manufacturing operations and
assets. One-time charges of $67 pre-tax were associated with the BCE
Inc. divestiture of its Nortel Networks investment and certain Nortel
Networks divestitures.
B - Excludes a total of $642 pre-tax ($578 after-tax) charges of
Acquisition Related Costs and one-time gains and charges.
C - Represents the percentage change in the operating results for the
three months ended June 30, 2000 (A) compared to the three months
ended June 30, 1999 (B).
All references to earnings (loss) per common share, dividends declared
per common share, and weighted average number of common shares outstanding
have been restated to reflect the impact of the two-for-one stock split with
respect to the issued and outstanding common shares of the Corporation on May
5, 2000, and the stock dividend of one Nortel Networks Limited common share
paid on each of the issued and outstanding common shares of Nortel Networks
Limited on August 17, 1999.
The comparative financial statements results and financial results up to
May 1, 2000 represent the financial results of Nortel Networks Limited,
formerly known as Nortel Networks Corporation. Certain comparative figures
have been reclassified to conform to the current period's presentation.
U.S. GAAP
NORTEL NETWORKS CORPORATION
Consolidated Results (unaudited)
(millions of U.S. dollars, except per share figures)
For the six
months ended
6/30/00 6/30/99 6/30/00 6/30/99
-------- -------- --------- --------- %
Reported Reported Operating Operating Change
------
A B C
Revenues .................... $14,143 $9,567 $14,143 $9,567 48%
Cost of revenues ............ 8,203 5,416 8,201 5,414 51%
-------- -------- -------- -------
Gross profit ................ 5,940 4,151 5,942 4,153 43%
Selling, general and
administrative expense ..... 2,673 1,837 2,673 1,830
Research and development
expense .................... 1,862 1,411 1,862 1,411
In-process research
and development expense .... 1,040 184 - -
Amortization of intangibles
Acquired technology ....... 390 342 - -
Goodwill .................. 1,289 587 41 35
Special charges ............. 262 53 - -
Gain on sale of businesses .. (174) - - -
-------- -------- -------- -------
(1,402) (263) 1,366 877
Equity in net loss of
associated companies ....... (6) (29) (6) (29)
Other income - net .......... 594 76 81 19
Interest expense
Long-term debt ............ (47) (47) (47) (47)
Other ..................... (32) (29) (32) (29)
-------- -------- -------- -------
Earnings (loss) before
income taxes ............... (893) (292) 1,362 791 72%
Income tax provision ........ 582 152 454 278
-------- -------- -------- -------
Net earnings (loss)
applicable to common
shares ..................... $(1,475) $(444) $908 $513 77%
-------- -------- -------- -------
Earnings (loss) per common
share - basic .... $(.52) $(.17) $.32 $.19 68%
-------- -------- -------- -------
-------- -------- -------- -------
- diluted .. $(.52) $(.17) $.30 $.18 67%
-------- -------- -------- -------
-------- -------- -------- -------
Dividends declared per
common share ............... 0.0375 0.0375 0.0375 0.0375
Effective tax rate .......... 33.0%(x) 34.6%(x) 33.0%(x) 34.6%(x)
Weighted average number
of common shares
outstanding (millions)
- basic .... 2,865 2,682 2,865 2,682
- diluted .. 3,027 2,778 3,027 2,778
(x) Excludes the impact of after-tax charges of Acquisition Related Costs
(in-process research and development expense related to acquisitions,
the amortization of acquired technology, and the amortization of
goodwill from the acquisition of Bay Networks, Inc. ("Bay Networks")
and all subsequent acquisitions) and, where applicable, certain of
the one-time gains and charges.
A - Excludes a total of $2,255 pre-tax ($2,383 after-tax) charges of
Acquisition Related Costs and one-time gains and charges.
Acquisition Related Costs were $2,678 pre-tax ($2,535 after-tax).
One-time gains were $687 pre-tax ($395 after-tax), and one-time
charges were $264 pre-tax ($243 after-tax)
B - Excludes a total of $1,083 pre-tax ($957 after-tax) charges of
Acquisition Related Costs and one-time gains and charges.
C - Represents the percentage change in the operating results for the
six months ended June 30, 2000 (A) compared to the six months
ended June 30, 1999 (B).
All references to earnings (loss) per common share, dividends declared
per common share, and weighted average number of common shares
outstanding have been restated to reflect the impact of the two-for-one
stock split with respect to the issued and outstanding common shares of
the Corporation on May 5, 2000, and the stock dividend of one Nortel
Networks Limited common share paid on each of the issued and outstanding
common shares of Nortel Networks Limited on August 17, 1999.
The comparative financial statements results and financial results up to
May 1, 2000 represent the financial results of Nortel Networks Limited,
formerly known as Nortel Networks Corporation. Certain comparative
figures have been reclassified to conform to the current period's
presentation.
NORTEL NETWORKS CORPORATION U.S. GAAP
Consolidated Results (unaudited)
Supplementary Information
(U.S. dollars, millions) (U.S. dollars, millions)
------------------------ ------------------------
Three months ended Six months ended
Revenues June 30, June 30,
------------------------ ------ ------------- ------
2000 1999 % 2000 1999 %
Change Change
--------------- ------- ------ ------ ----- ------
By Geographic Areas: (1)
United States ............. $4,893 $3,103 58% $8,853 $5,679 56%
Canada .................... 422 426 (1%) 747 740 1%
Other countries ........... 2,506 1,752 43% 4,543 3,148 44%
------- ------- ------- -------
Total ..................... $7,821 $5,281 48% $14,143 $9,567 48%
------- ------- -------- -------
------- ------- -------- -------
By Segment: (2)
Service Provider and
Carrier .................. $6,512 $4,002 63% $11,607 $7,101 63%
Enterprise ................ 1,307 1,259 4% 2,532 2,422 5%
Corporate and other ....... 2 20 (90%) 4 44 (91%)
------- ------- ------- -------
Total ..................... $7,821 $5,281 48% $14,143 $9,567 48%
------- ------- -------- -------
------- ------- -------- -------
(1) Revenues are attributable to geographic areas based on the location
of the customer.
(2) Revenues by segment have been reclassified to reflect the evolution
of certain businesses within the management structure. The primary
effect of this reclassification was to move certain businesses
between the segments to more closely align the businesses with their
primary customers.
(U.S. dollars, billions)
------------------------
As at As at
June 30, December 31,
Balance Sheet Items 2000 1999
----------- ------------
Cash and cash equivalents ...................... $ 3.33 $ 2.15
---------- -----------
---------- -----------
Accounts receivable ............................ $ 6.94 $ 5.82
---------- -----------
---------- -----------
Inventories .................................... $ 3.36 $ 2.82
Jul-25-2000 20:01 GMT
Symbols:
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