8-K 1 t08757e8vk.txt FORM 8-K SECURITIES AND EXCHANGE COMMISSION ---------------------------------------------------------- WASHINGTON, D.C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (date of earliest event reported) January 23, 2003 NORTEL NETWORKS CORPORATION ---------------------------------------------------------- (Exact name of registrant as specified in its charter) CANADA 001-07260 not applicable ---------------------------- ----------- ------------------- (State or other jurisdiction (Commission (IRS Employer of incorporation) File Number) Identification No.) 8200 Dixie Road, Suite 100, Brampton, Ontario, Canada L6T 5P6 ----------------------------------------------------- ---------- (address of principal executive offices) (Zip code) Registrant's telephone number, including area code (905) 863-0000. ITEM 5. OTHER EVENTS On January 23, 2003, the Registrant issued its financial results for the fourth quarter of 2002 and the year 2002. The Registrant stated that revenues from continuing operations were US$2.52 billion for the fourth quarter of 2002 compared to US$3.46 billion in the same period in 2001. The Registrant reported a net loss in the fourth quarter of 2002 of US$248 million, or US$0.06 per common share, compared to a net loss of US$1.83 billion, or US$0.57 per common share, in the fourth quarter of 2001(a). For the year 2002, revenues from continuing operations were US$10.56 billion compared to US$17.51 billion for the year 2001. The Registrant reported a net loss for the year 2002 of US$3.59 billion, or US$0.93 per common share, compared to US$27.30 billion, or US$7.62 per common share, for the year 2001(a). The Registrant reported a cash balance at the end of the fourth quarter of 2002 of approximately US$4.11 billion, which included approximately US$249 million of restricted cash. The Registrant also had positive cash flow from operations and significantly reduced debt. The Registrant stated that in connection with its restructuring program, previously announced employee reductions are nearing completion. As a result of changes in certain outsourcing plans, the Registrant now expects to have approximately 36,000 employees by the end of the first quarter of 2003, compared to its previous estimate of approximately 35,000. Entering 2003, the Registrant expects the overall telecommunications equipment market to be down modestly in 2003 compared to 2002. Anticipating cautious spending by its customers in the near term and the seasonal softness traditionally typical of its first quarter, the Registrant expects that revenues in the first quarter of 2003 will be lower than the revenues in the fourth quarter of 2002. In line with its previous expectations, the Registrant recorded a non-cash charge in the fourth quarter of 2002 to shareholders' equity of approximately US$692 million (US$559 million after-tax), related to the minimum required recognizable deficit associated with the Registrant's registered pension plans. The Registrant has adopted fair value accounting for stock options, on a prospective basis for U.S. GAAP reporting, effective January 1, 2003. As a result, all stock option grants in 2003 and beyond will be expensed over the stock option vesting period based on the fair value at the date the options are granted. If the Registrant were to grant options in 2003 at a similar level to 2002, the expected impact would be an expense of approximately US$0.01 per common share for 2003. NORTEL NETWORKS CORPORATION CONSOLIDATED RESULTS (UNAUDITED) (MILLIONS OF U.S. DOLLARS, EXCEPT PER SHARE AMOUNTS)
THREE MONTHS ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, 2002 (1) 2001 2002 (1) 2001 --------- -------- -------- --------- Revenues.................................................... $ 2,520 $ 3,456 $ 10,560 $ 17,511 Cost of revenues............................................ 1,530 2,417 6,953 14,167 --------- -------- -------- --------- Gross profit................................................ 990 1,039 3,607 3,344 Selling, general and administrative expense................. 482 1,009 2,675 5,911 Research and development expense............................ 491 563 2,230 3,224 In-process research and development expense................. - - - 15 Amortization of intangibles Acquired technology..................................... 35 63 157 807 Goodwill (2)............................................ - 463 - 4,148 Stock option compensation from acquisitions and divestitures 23 18 91 109 Special charges Goodwill impairment..................................... - 42 595 12,121 Other special charges................................... 214 790 1,703 3,660 (Gain) loss on sale of businesses........................... (26) 157 (40) 112 --------- -------- -------- --------- Operating loss.............................................. (229) (2,066) (3,804) (26,763) Equity in net loss of associated companies.................. 10 4 (9) (134) Other income (expense) - net................................ 26 (83) 6 (351) Interest expense Long-term debt.......................................... (47) (58) (215) (196) Other................................................... (8) (33) (41) (115) --------- -------- -------- --------- Loss from continuing operations before income taxes......... (248) (2,236) (4,063) (27,559) Income tax benefit (provision).............................. - 410 478 3,252 --------- -------- -------- --------- Net loss from continuing operations......................... (248) (1,826) (3,585) (24,307) Net loss from discontinued operations (net of tax) (3)...... - - - (3,010) --------- -------- -------- --------- Net loss before cumulative effect of accounting change...... (248) (1,826) (3,585) (27,317) --------- -------- -------- --------- Cumulative effect of accounting change (net of tax of $9)... - - - 15 Net loss.................................................... $ (248) $ (1,826) $ (3,585) $(27,302) ========= ======== ======== ========= Basic and diluted loss per common share (4) From continuing operations................................ $ (0.06) $ (0.57) $ (0.93) $ (7.62) From discontinued operations.............................. - - - (0.94) --------- -------- -------- --------- $ (0.06) $ (0.57) $ (0.93) $ (8.56) ========= ======== ======== ========= Dividends declared per common share......................... - - - $0.03750 Weighted average number of common shares (millions) - basic (5)................................... 4,335 3,211 3,838 3,189 - diluted (4)................................. 4,335 3,211 3,838 3,189
(1) These unaudited consolidated results for the three months and year ended December 31, 2002 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 reported results for the year ended December 31, 2002. (2) Effective January 1, 2002, Nortel Networks adopted the provisions of Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets" ("SFAS 142"). SFAS 142 changed the accounting for goodwill from an amortization method to an impairment-only approach. Thus, the amortization of goodwill, including goodwill recorded in past business combinations, and the amortization of intangibles with an indefinite life ceased upon adoption of SFAS 142. The impact of the SFAS 142 requirement to cease amortization would be to reduce the reported net loss by $463 and $4,347 for the three months and year ended December 31, 2001, respectively, and the reported basic and diluted loss per common share by 15 cents and $1.36 per common share for the three months and year ended December 31, 2001, respectively, had SFAS 142 been in effect beginning January 1, 2001. (3) Reported results for the year ended December 31, 2001 is net of an applicable income tax recovery of $723. (4) As a result of the reported net losses for the periods presented, approximately 205 and 190 of potentially dilutive securities (in millions) for the three months ended December 31, 2002 and 2001, respectively, and approximately 195 and 98 of potentially dilutive securities (in millions) for the year ended December 31, 2002 and 2001, respectively, 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. (5) The basic weighted average number of common shares includes the minimum number of common shares to be issued upon settlement of the prepaid forward purchase contracts issued on June 12, 2002. The minimum number of common shares to be issued on a weighted basis is 485 million for the three months ended December 31, 2002, and 270 million for the year ended December 31, 2002. NORTEL NETWORKS CORPORATION CONSOLIDATED BALANCE SHEETS (MILLIONS OF U.S. DOLLARS)
U.S. GAAP ---------------------------------------------- (UNAUDITED) (UNAUDITED) (AUDITED) DECEMBER 31, SEPTEMBER 30, DECEMBER 31, 2002 (1) 2002 (3) 2001 (3) ------------ ------------- ------------ ASSETS Current assets Cash and cash equivalents................................................. $ 3,861 $ 4,170 $ 3,513 Restricted cash and cash equivalents...................................... 249 420 - Accounts receivable (less provisions of $477 at December 31, 2002; $528 at September 30, 2002; $655 at December 31, 2001).......................... 1,910 2,007 2,923 Inventories - net......................................................... 889 1,132 1,579 Income taxes recoverable.................................................. 58 58 796 Deferred income taxes - net............................................... 791 1,162 1,386 Other current assets...................................................... 495 673 857 Current assets of discontinued operations................................. 223 293 708 ---------- ---------- ---------- Total current assets........................................................ 8,476 9,915 11,762 Investments at cost and associated companies at equity...................... 246 176 253 Plant and equipment - net................................................... 1,444 1,670 2,571 Goodwill.................................................................... 2,201 2,200 2,810 Intangible assets - net..................................................... 98 133 285 Deferred income taxes - net................................................. 2,723 2,333 2,077 Other assets (2)............................................................ 783 1,013 1,379 ---------- ---------- ---------- Total assets................................................................ 15,971 $ 17,440 $ 21,137 ========== ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Notes payable............................................................. $ 100 $ 128 $ 426 Trade and other accounts payable.......................................... 902 901 1,378 Payroll and benefit-related liabilities................................... 521 646 636 Contractual liabilities................................................... 1,547 1,715 1,846 Restructuring............................................................. 785 797 872 Other accrued liabilities................................................. 2,894 2,815 3,915 Long-term debt due within one year........................................ 233 516 384 ---------- ---------- ---------- Total current liabilities................................................... 6,982 7,518 9,457 Long-term debt.............................................................. 3,719 4,111 4,094 Deferred income taxes - net................................................. 344 499 518 Other liabilities........................................................... 2,352 1,687 1,607 Minority interest in subsidiary companies................................... 614 611 637 ---------- ---------- ---------- 14,011 14,426 16,313 ---------- ---------- ---------- SHAREHOLDERS' EQUITY Common shares, without par value - Authorized shares: unlimited; Issued and outstanding shares: 3,850,284,146 at December 31, 2002, 3,849,891,442 at September 30, 2002, and 3,213,742,169 at December 31, 2001................ 33,587 33,872 32,899 Additional paid-in capital.................................................. 3,734 3,753 3,257 Deferred stock option compensation.......................................... (96) (118) (205) Deficit..................................................................... (33,736) (33,488) (30,151) Accumulated other comprehensive loss........................................ (1,529) (1,005) (976) ---------- ---------- ---------- Total shareholders' equity.................................................. 1,960 3,014 4,824 ---------- ---------- ---------- Total liabilities and shareholders' equity.................................. $ 15,971 $ 17,440 $ 21,137 ========== ========== ==========
(1) The unaudited consolidated balance sheet as at December 31, 2002 is preliminary and is subject to change. Nortel Networks disclaims any intention or obligation to update or revise such balance sheet prior to the filing of its reported results for the year ended December 31, 2002. (2) Included in other assets are provisions related to long-term accounts receivable of $781 at December 31, 2002; $877 at September 30, 2002; and $828 at December 31, 2001. (3) Certain figures for the three months ended September 30, 2002 and for the year ended December 31, 2001 in the consolidated balance sheets have been reclassified to conform to the year ended December 31, 2002 presentation. NORTEL NETWORKS CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (MILLIONS OF U.S. DOLLARS)
U.S. GAAP ------------------------------------------ THREE MONTHS YEAR THREE MONTHS ENDED ENDED ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, 2002 (1) 2002 (1) 2001 ------------ ------------ ------------ Cash flows from (used in) operating activities Net loss from continuing operations..................................................... $ (248) $ (3,585) $ (1,826) Adjustments to reconcile net loss from continuing operations to net cash from (used in) operating activities, net of effects from acquisitions and divestitures of businesses: Amortization and depreciation....................................................... 163 705 722 Non-cash portion of special charges and related asset write downs................... 23 1,315 150 Equity in net earnings (loss) of associated companies............................... (10) 9 (4) Stock option compensation........................................................... 23 91 18 Deferred income taxes............................................................... (40) (85) (781) Other liabilities................................................................... 26 12 16 Gain on repurchases of outstanding debt securities.................................. (60) (60) - (Gain) loss on sale or write down of investments and businesses..................... (19) (11) 551 Other - net......................................................................... 57 376 (433) Change in operating assets and liabilities: Accounts receivable............................................................... 115 1,008 1,137 Inventories....................................................................... 280 687 299 Income taxes...................................................................... (17) 694 14 Accounts payable and accrued liabilities.......................................... (184) (1,612) (25) Other operating assets and liabilities............................................ (100) (133) 162 -------- -------- -------- Net cash from (used in) operating activities of continuing operations................... 9 (589) - -------- -------- -------- Cash flows from (used in) investing activities Expenditures for plant and equipment.................................................... (46) (335) (187) Proceeds on disposals of plant and equipment............................................ 50 236 57 (Increase) decrease in restricted cash and cash equivalents............................. 189 (231) - Increase in long-term receivables....................................................... (20) (267) (29) Decrease in long-term receivables....................................................... 49 302 280 Acquisitions of investments and businesses - net of cash acquired....................... - (29) 8 Proceeds on sale of investments and businesses.......................................... 25 104 372 -------- -------- -------- Net cash from (used in) investing activities of continuing operations................... 247 (220) 501 -------- -------- -------- Cash flows from (used in) financing activities Decrease in notes payable - net......................................................... (29) (318) (215) Proceeds from long-term debt............................................................ 1 33 8 Repayment of long-term debt............................................................. (456) (478) (7) Decrease in capital leases payable...................................................... (172) (10) (2) Issuance of common shares............................................................... - 863 10 Issuance of prepaid forward purchase contracts.......................................... - 623 - -------- -------- -------- Net cash from (used in) financing activities of continuing operations................... (656) 713 (206) -------- -------- -------- Effect of foreign exchange rate changes on cash and cash equivalents.................... 58 74 (5) -------- -------- -------- Net cash from (used in) continuing operations........................................... (342) (22) 290 Net cash from (used in) discontinued operations......................................... 33 370 (132) -------- -------- -------- Net increase (decrease) in cash and cash equivalents...................................... (309) 348 158 -------- -------- -------- Cash and cash equivalents at beginning of period - net.................................... 4,170 3,513 3,355 -------- -------- -------- Cash and cash equivalents at end of period - net.......................................... $ 3,861 $ 3,861 $ 3,513 ======== ======== ========
(1) The unaudited consolidated statements of cash flows for the three months and year ended December 31, 2002 are preliminary and are subject to change. Nortel Networks disclaims any intention or obligation to update or revise such statements of cash flows prior to the filing of its reported results for the year ended December 31, 2002. NORTEL NETWORKS CORPORATION CONSOLIDATED RESULTS (UNAUDITED) (1) SUPPLEMENTARY INFORMATION (MILLIONS OF U.S. DOLLARS)
REVENUES FROM CONTINUING OPERATIONS THREE MONTHS ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, ------------------------- -------- -------------------------- -------- By Segments: 2002 2001 % CHANGE 2002 2001 % CHANGE ------------------------- -------- -------------------------- -------- Wireless networks.............. $ 1,012 $ 1,204 (16%) $ 4,211 $ 5,714 (26%) Enterprise networks............ 654 799 (18%) 2,582 3,320 (22%) Wireline networks.............. 506 921 (45%) 2,254 4,447 (49%) Optical networks............... 344 465 (26%) 1,465 3,370 (57%) Other.......................... 4 67 (94%) 48 660 (93%) ------- ------- ------- ------- Total.......................... 2,520 3,456 10,560 17,511 ======= ======= ======= =======
THREE MONTHS ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, ------------------------- -------- -------------------------- -------- By Geographic Regions: (2) 2002 2001 % CHANGE 2002 2001 % CHANGE ------------------------- -------- -------------------------- -------- United States.................. $ 1,239 $ 1,741 (29%) $ 5,336 $ 8,591 (38%) EMEA *......................... 636 801 (21%) 2,574 4,355 (41%) Canada......................... 143 241 (41%) 675 940 (28%) Other regions.................. 502 673 (25%) 1,975 3,625 (46%) ------- ------- ------- ------- Total.......................... 2,520 3,456 10,560 17,511 ======= ======= ======= =======
HISTORICAL INFORMATION THREE MONTHS ENDED ------------------------------------------- SEPTEMBER 30, JUNE 30, MARCH 31, By Geographic Regions: (2) (3) 2002 2002 2002 ------------------------------------------- United States.................. $ 1,201 $ 1,490 $ 1,406 EMEA *......................... 582 632 724 Canada......................... 112 201 219 Other regions.................. 460 450 563 -------- -------- -------- Total.......................... 2,355 2,773 2,912 ======== ======== ========
* the Europe, Middle East and Africa region (1) These unaudited consolidated results are preliminary and are subject to change. Nortel Networks disclaims any intention or obligation to update or revise these preliminary consolidated results prior to the filing of its reported results for the year ended December 31, 2002. (2) Revenues are attributable to geographic regions based on the location of the customer. (3) Certain historical revenues by geographic regions have been revised to reflect a reclassification of revenues from the United States to Canada. Overall consolidated Nortel Networks revenues and revenues by segment for the relevant periods were not impacted by these reclassifications. (a) Effective January 1, 2002, the Registrant adopted Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets". Footnote (2) to the attached consolidated results (unaudited) tables discloses the effect on both the reported net loss and reported basic and diluted loss per common share for the three months and year ended December 31, 2001 of the Statement's requirement to cease amortization of goodwill had the Statement been in effect beginning January 1, 2001. Certain information included in this report 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 severity and duration of the industry adjustment; the sufficiency of our restructuring activities, including 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 market conditions and growth rates; the ability to recruit and retain qualified employees; fluctuations in cash flow; the level of outstanding debt and debt ratings; the ability to meet financial covenants contained in our credit agreements; 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, particularly in emerging markets and including interest rate and currency exchange rate fluctuations; the impact of rationalization in the telecommunications industry; the dependence on new product development; the uncertainties of the Internet; the impact of the credit risks of our customers and the impact of customer financing and commitments; stock market volatility; the entrance into an increased number of supply and outsourcing contracts which contain delivery and installation provisions, which, if not met, could result in the payment of substantial penalties 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 resolution of litigation. For additional information with respect to certain of these and other factors, see the reports filed by the Registrant and Nortel Networks Limited with the United States Securities and Exchange Commission. Unless otherwise required by applicable securities laws, the Registrant and Nortel Networks Limited disclaim any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS (c) Exhibits. None SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. NORTEL NETWORKS CORPORATION By: /s/ DEBORAH J. NOBLE -------------------------------- Deborah J. Noble Corporate Secretary By: /s/ BLAIR F. MORRISON -------------------------------- Blair F. Morrison Assistant Secretary Dated: January 24, 2003