Nortel reports:
Tuesday April 21, 7:31 am Eastern Time
Company Press Release
SOURCE: Northern Telecom Limited
Nortel (Northern Telecom) Reports First Quarter Results
TORONTO, April 21 /PRNewswire/ - Northern Telecom Limited today reported results for the first
quarter of 1998.
Revenues increased 9 percent in the first quarter of 1998 compared to the same period last year, after
primarily adjusting for the impact of the disposition of certain distribution businesses in the second
quarter of 1997. Unadjusted for these dispositions, revenues increased 5 percent to US$3.51 billion for
the first quarter of 1998 versus US$3.35 billion for the same period in 1997.
Net earnings applicable to common shares in the first quarter of 1998 was US$141 million, representing
an earnings per share increase of 29 percent to US$0.27 per share, excluding the purchased in-process
research and development expense associated with the acquisition of Broadband Networks Inc.
(''BNI'') in January 1998. This compares to net earnings of US$108 million, or US$0.21 per share, in
the first quarter of 1997. Including the BNI purchased in-process research and development expense,
Nortel reported a net loss applicable to common shares in the first quarter of 1998 of US$63 million or
US$0.12 per share.
Order input for the first quarter of 1998 was US$3.59 billion, compared with US$3.57 billion for the
same period last year. After adjusting for the impact of the disposition of the distribution businesses,
order input grew 3 percent on a year-over-year basis.
Commenting on the quarter, John A. Roth, president and chief executive officer, said: ''We are pleased
with our overall financial performance. We are especially pleased with the year-over-year revenue
growth of 29 percent in Broadband Networks, 20 percent in Wireless Networks, and 29 percent in our
Data and Multimedia Communications portfolio, primarily driven by Enterprise Data Networks. The first
quarter was also significant due to the completion of the acquisition of BNI, which positions us well for
the emerging broadband wireless market, and the announced agreement to purchase Aptis
Communications, which will enhance our position in the growing remote access market. Both of these
investments are part of Nortel's move to build rugged, reliable and secure networks for the Internet and
Intranet markets.''
Geographic revenues for the first quarter of 1998 increased significantly in Europe over the same period
last year. Revenues in Caribbean and Latin America (CALA) increased substantially, while Asia Pacific
revenues increased significantly, year-over-year. In United States and Canada, revenues in the first
quarter declined moderately. After adjusting for the impact of the disposition of the distribution
businesses, United States revenues slightly increased over the same period last year.
Revenues by product line (x) for the first quarter increased substantially for Broadband Networks and
Wireless Networks over the first quarter of 1997. Enterprise Networks revenues declined and Public
Carrier Networks revenues declined slightly, in the first quarter compared to the first quarter of 1997.
Other revenues decreased substantially in the first quarter of 1998 compared to the same period last
year primarily due to the impact of the disposition of the distribution businesses.
Selling, general and administrative expenses declined to US$613 million, or 17.5 percent of revenue, for
the first quarter of 1998, compared with US$616 million, or 18.4 percent of revenue, for the same
period last year primarily reflecting the impact of the disposition of the distribution businesses. SG&A
expenses continue to reflect investments to support Nortel's global growth and investments in computer
systems infrastructure.
Research and development expenses increased to US$575 million, or 16.4 percent of revenue, in the
quarter, compared with US$474 million, or 14.1 percent of revenue, in the first quarter of 1997,
reflecting planned and ongoing investments across all Nortel's lines of business.
Mr. Roth remarked on the outlook for Nortel: ''Recent contract announcements across our network
businesses echo the strength of the global telecom market and Nortel's prospects. These contracts,
coupled with our announced acquisitions which position Nortel well for new growing markets, support
our optimism for Nortel's long term growth opportunities.''
Nortel's common shares are listed on the New York, Toronto, Montreal, Vancouver and London stock
exchanges.
Nortel had 1997 revenues of US$15.5 billion and has approximately 73,000 employees worldwide.
(x) Certain products have been reclassified to reflect the repositioning of certain businesses, primarily
divested businesses, within Nortel's management structure. See supplementary information.
Northern Telecom Limited
First Quarter Consolidated Results (unaudited)
(U.S. dollars, millions except per share figures)
Three months ended
March 31,
1998 1997
------ ------
Revenues ................................ $3,510 $3,353
Cost of revenues ........................ 2,046 2,038
------ ------
Gross profit ............................ 1,464 1,315
41.7% 39.2%
Selling, general and administrative
expense ............................... 613 616
Research and development expense ........ 575 474
Purchased in-process research and
development expense ................... 204 -
Goodwill amortization ................... 13 12
------ ------
Operating earnings ...................... 59 213
Investment and other income (expense)
- net ................................ 14 (3)
Interest expense
Long-term debt ........................ (31) (31)
Other ................................. (15) (5)
------ ------
Earnings before income taxes ............ 27 174
Income tax provision .................... 82 62
------ ------
Net earnings (loss) ..................... (55) 112
Dividends on preferred shares ........... 8 4
------ ------
Net earnings (loss) applicable to
common shares ......................... $ (63) $ 108
------ ------
------ ------
Earnings (loss) per common share (x) + $ (.12) $ .21
Net earnings applicable to common
shares excluding purchased
in-process research and
development expense ................. $ 141 $ 108
------ ------
------ ------
Earnings per common share excluding
purchased in-process
research and development
expense (x) + ....................... $ .27 $ .21
Dividends declared per common share+ .... $ .075 $ .065
Effective tax rate excluding purchased
in-process research and
development expense .................. 35.5% 35.5%
(x) Based on weighted average number
of common shares outstanding (millions)+ 524 522
+ All references to 1997 per share amounts have been restated
to reflect the two-for-one stock split effective January 7, 1998.
Northern Telecom Limited
First Quarter Consolidated Results (unaudited)
Supplementary Information
(U.S. dollars, millions)
Three months ended
Revenues March 31,
-----------------------------------
% Change
1998 1997 from 1997
-------- ------- ---------
By Geographic Areas:
United States ................ $ 1,876 $ 1,918 (2)%
Europe ....................... 828 722 15%
Canada ....................... 305 325 (6)%
Other ........................ 501 388 29%
-------- ------- ---------
Total ........................ $ 3,510 $ 3,353 5%++
-------- ------- ---------
-------- ------- ---------
By Principal Product Lines: +
Enterprise Networks .......... $ 842 $ 888 (5)%
Public Carrier Networks ...... 836 858 (3)%
Wireless Networks ............ 883 735 20%
Broadband Networks ........... 829 642 29%
Other ........................ 120 230 (48)%
-------- ------- ---------
Total (x) $ 3,510 $ 3,353 5%++
-------- ------- ---------
-------- ------- ---------
(x) Data and Multimedia $ 196 $ 152 29%
Communications portfolio
of products (Revenues
included in product line
revenues above)
(U.S. dollars, billions)
As at As at
March 31, 1998 March 31, 1997
-------------- --------------
Balance Sheet Items
Accounts Receivable .............. $ 4.72 $ 3.90
-------- --------
-------- --------
Inventories ...................... $ 2.02 $ 1.78
-------- --------
-------- --------
Total Assets ..................... $ 12.06 $ 10.82
-------- --------
-------- --------
Long-term Debt (excluding Notes
Payable) ....................... $ 1.58 $ 1.75
-------- --------
-------- --------
Shareholders' Equity ............. $ 5.52 $ 4.95
-------- --------
-------- --------
+ Nortel has reclassified its 1997 revenues by product line to reflect the repositioning of certain
businesses, primarily divested businesses, within its management structure. The primary effect of this
reclassification is to move revenues from Enterprise Networks to Other as a result of the disposition of
certain distribution businesses in the second quarter of 1997.
++ On a comparative basis, primarily adjusting for the impact of the disposition of certain distribution
businesses, revenues increased by 9%. |
