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Technology Stocks : Lucent Technologies (LU) -- Ignore unavailable to you. Want to Upgrade?

To: Anonymous who wrote (21592)	3/29/2004 6:40:18 AM
From: AV8R	Respond to of 21876

March 26, 2004 (AXcess News) New York - Moody's Investors Service affirmed the Caa1 senior implied and the SGL-2 short term ratings of Lucent Technologies Inc., and revised the ratings outlook to positive from negative. The outlook change reflects a trend towards stabilization of the company's revenue base, improvements resulting from a reduced cost structure, and expectations that internal liquidity will be sufficient to fund moderating negative cash flows over the intermediate term. The outlook change to positive considers the progress that Lucent has made to realign its operations and cost structure to address its current revenue opportunity, and reflects a modest pick up of spending within the telecommunications industry. The SGL-2 rating reflects Moody's expectation that, while Lucent lacks committed sources of external financing, balance sheet liquidity is more than sufficient to cover projected cash burn as well as other commitments over the next 12 months. As the bulk of Lucent's restructuring activity has been completed, revenue has begun to stabilize at around $2 billion per quarter. Aided by some one-time items, gross margins have risen 19 percentage points over the last five quarters to 41 percent in the December 2003 quarter. In the last twelve months ended December 31, 2003, the company generated $1.2 billion of EBITDA from $8.7 billion of revenue. Cash consumption, while high at $630 million in LTM December 2003, has moderated from $1.2 billion of negative free cash flow (cash flow from operations less capital expenditures) in the fiscal year ended September 30, 2002. Liquidity remains sufficient to fund operations and scheduled financial obligations over the intermediate term. As of December 31, 2003, the company had $4.3 billion of unrestricted cash and marketable securities. Debt and preferred securities stood at $6.5 billion, while adjusted debt (including the present value of operating leases) totaled $9.1 billion. Lucent does not have access to any committed credit facility that provides direct liquidity; however, it does maintain two senior secured credit facilities totaling approximately $600 million that allow for the issuance of letters of credit. These facilities are secured by substantially all the domestic assets of the company and have cash collateral requirements that may increase, should the company fail to maintain minimum balances of $2 billion in unrestricted cash and marketable securities and minimum specified EBITDA targets (adjusted for certain non-recurring items). If Lucent fails to meet these financial requirements on or after December 31, 2004, it will be required to provide cash collateral to secure 100 percent of the exposure under the pre-existing letters of credit outstanding. Recent equity-linked financings have enabled Lucent to increase internal liquidity and extend its debt maturity profile. Moody's notes that the company's $817 million outstanding balance of 8% convertible subordinated notes is subject to a potential put by noteholders in August 2004, which Lucent may settle in cash, common stock, or a combination of the two. Lucent's next scheduled debt maturity occurs in 2006, when $561 million of 7.25% senior notes matures. For the remainder of FY2004, the company will expect to make $350 million of cash payments related to prior restructuring charges and the funding of post retirement healthcare benefits. In December 2003, Lucent received final approval of its settlement of its class action securities and related litigation. The settlement requires the company to pay $315 million in common stock, cash or a combination of both, at its option. Lucent funded the first $100 million of the settlement through the deposit of 33 million shares of its common stock into escrow. The remaining settlement payment is not due until distribution of the settlement proceeds, which is not expected to occur until late fiscal 2004 or early fiscal 2005. The company will also issue warrants to purchase 200 million shares of its common stock at $2.75 per share as part of the settlement. Moody's expects that Lucent's cash consumption will continue to moderate over the near term, given stabilizing revenue trends and profitability improvements. Ratings could be positively influenced to the extent the revenue profile of its core customer base improves, the company is able to sustain revenue growth on a profitable basis, and the company demonstrates credible progress within the next 12 months towards achieving breakeven free cash flow while maintaining near present levels of balance sheet liquidity. Alternatively, ratings could be negatively influenced to the extent revenue experiences material decline, the company is unable to sustain improvements in profitability, cash consumption over the next 12 months increases materially beyond the $630 million level of negative free cash flow experienced over the past 12 months, future acquisitions consume a substantial amount of cash, or the company adopts a materially less conservative approach towards the use of vendor financing. Lucent Technologies Inc., headquartered in Murray Hill, New Jersey, is a leading global provider of telecommunications equipment and services.

To: Anonymous who wrote (21592)	3/29/2004 1:28:34 PM
From: George the Greek	Read Replies (1) \| Respond to of 21876

You're always welcome here, anon. Interesting (but not for retirees) article in WSJ today (3.29.04) about how Lucent leaned on the ample pension and retiree health care funds provided by AT&T at spin-off, never having to fund them from operating cashflow with one thin dime, yet reaping accounting profits from excess income from those funds, but now that times are tight, the retirees are being screwed, err, squeezed.