● Through the creditor protection process, Nortel has sold all of its businesses and remaining patents and patent applications generating approximately $7.7 billion in net proceeds for the benefit of its creditors, and preserving 16,000 jobs for employees with the purchasers of the businesses and assets
● Focus remains on maximizing value for stakeholders, including the sale of remaining assets, wind down of global operations and entities, ongoing cost reduction, creditor claims process, allocation of sales proceeds amongst the Nortel estates, and other significant work toward the conclusion of the Creditor Protection Proceedings
Financial Presentation and Q4 2011 Results
● Consolidated results include the results of operations and financial position of Nortel Networks Corporation, its principal operating subsidiary Nortel Networks Limited, and their subsidiaries in the Asia, CALA, and EMEA regions other than those included in the U.S. or EMEA deconsolidated subsidiaries
● Cash balance as of December 31, 2011 was $751 million, compared to $792 million as of September 30, 2011, plus restricted cash balance of $7.6 billion consisting primarily of divestiture and IP proceeds
● Minimal revenues in the fourth quarter of 2011 related to customer contracts not transferred with the sales of businesses. We expect minimal revenues in 2012.
TORONTO – Nortel* Networks Corporation [OTC: NRTLQ] announced its results for the fourth quarter and full year of 2011. Results were prepared in accordance with United States generally accepted accounting principles (GAAP) in U.S. dollars.
Nortel’s consolidated results include the results of operations and financial position of Nortel Networks Corporation, its principal operating subsidiary Nortel Networks Limited, and their subsidiaries in the Asia, CALA, and EMEA regions other than those included in the U.S. or EMEA deconsolidated subsidiaries. As of June 1, 2010, and October 1, 2010, the EMEA Subsidiaries and U.S. Subsidiaries, respectively, were deconsolidated and accounted for under the cost method of accounting. In the context of the Creditor Protection Proceedings, Nortel continues to evaluate the method of accounting for all of its subsidiaries. As a result of and following the divestitures of our businesses, only the residual contracts not transferred with the businesses are included in Nortel’s financial results. As a result of the business sales, Nortel currently has one reportable segment, being the consolidated entity, as its chief operating decision maker reviews financial and operating results on that basis.
Our historical financial performance is not indicative of our future financial performance.
Financial Summary
Nortel’s overall financial performance in the fourth quarter of 2011 reflects the sale of all of its businesses in prior quarters.
- Revenues in the fourth quarter of $3 million.
- SG&A expense in the fourth quarter of $38 million, a decrease of 64.2 percent from the year ago quarter.
- R&D expense in the fourth quarter of nil. Nortel does not expect to incur further R&D expenses.
- Cash balance as of December 31, 2011 was $751 million, compared to $792 million as of September 30, 2011. Restricted cash balance of $7.6 billion consisting primarily of divestiture and patents and patent applications sales proceeds.
Revenues
Revenues were $3 million in the fourth quarter of 2011 related to remaining customer contracts, compared to $28 million for the fourth quarter of 2010 related to the multiservice switching products and related services business and remaining customer contracts. The decrease resulted from the business divestitures and the deconsolidation of the U.S. subsidiaries.
Operating Expenses
Operating Expenses B/(W)
|
Q4 2011 |
YoY |
|
| SG&A |
$ 38 |
64.2% |
| R&D |
0 |
100.0% |
| Total Operating Expenses |
$ 38 |
64.5% |
A focus on reducing costs, the divesting of our businesses and the deconsolidation of the U.S. subsidiaries resulted in lower operating expenses compared to the year ago quarter. SG&A expense was $38 million in the fourth quarter of 2011, compared to $106 million for the fourth quarter of 2010. R&D expense was nil in the fourth quarter of 2011, compared to $1 million for the fourth quarter of 2010.
Net Loss
The Company reported a net loss in the fourth quarter of 2011 of $170 million compared to a net loss of $2.3 billion in the fourth quarter of 2010.
The net loss in the fourth quarter of 2011 included interest expense of $83 million and reorganization items of $46 million, partially offset by other operating income of $8 million comprised primarily of a settlement related to a customer contract and other income – net of $9 million comprised primarily of a foreign exchange gain of $7 million.
Reorganization items of $46 million were primarily comprised of professional fees of $13 million and $25 million due to certain settlements related to the Creditor Protection Proceedings.
The net loss in the fourth quarter of 2010 included reorganization items of $2.2 billion and interest expense of $79 million, partially offset by other operating income of $31 million primarily related to billings under transition services agreements and other income – net of $48 million.
Reorganization items of $2.2 billion primarily related to a charge of $2.2 billion resulting from the deconsolidation of the U.S. Subsidiaries. Other income – net of $48 million was comprised primarily of a currency exchange gain of $43 million and rental income of $9 million.
Cash
The cash balance as of December 31, 2011 was $751 million, compared to a cash balance of $792 million as of September 30, 2011. Restricted cash was $7.6 billion primarily related to the business divestiture and IP proceeds. The cash balance decreased primarily due to cash outflows related to general operations.
Full Year 2011 Results
For 2011, revenues were $27 million compared to $620 million for 2010. Nortel reported net earnings for 2011 of $3.7 billion, compared to a net loss of $4.2 billion for the year 2010.
Net earnings for 2011 included reorganization items of $4.2 billion and other operating income of $57 million comprised primarily of billings under transition services agreements, partially offset by interest expense of $324 million and other expense – net of $45 million comprised primarily of a foreign exchange loss of $35 million.
Reorganization items of $4.2 billion were comprised primarily of $4.5 billion related to a gain on the sale of remaining patents and patent applications, partially offset by employee-related expenses of $190 million resulting from the court approval of employee claims, $70 million for professional fees, and reimbursements from escrow to non-Canadian estates no longer consolidated of $59 million.
The net loss for 2010 included reorganization items of $3.7 billion and interest expense of $306 million, partially offset by other operating income of $281 million primarily related to billings under transition services agreements and other income – net of $57 million.
Reorganization items of $3.7 billion primarily related to a charge of $3.6 billion resulting from the deconsolidation of the U.S. and EMEA Subsidiaries. Other income – net of $57 million was comprised primarily of rental income of $59 million.
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As previously announced, Nortel does not expect that the Company’s common shareholders or the NNL preferred shareholders will receive any value from the creditor protection proceedings and expects that the proceedings will result in the cancellation of these equity interests.
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About Nortel
For more information, please visit Nortel Networks Corporation’s website at www.nortel-canada.com.
Contact Information
Contact Nortel at MediaRelations@nortel-canada.com.
Legal Disclaimer
Certain statements in this press release may contain words such as “could”, “expects”, “may”, “should”, “will”, “anticipates”, “believes”, “intends”, “estimates”, “targets”, “plans”, “envisions”, “seeks” and other similar language and are considered forward-looking statements or information under applicable securities laws. These statements are based on Nortel’s current expectations, estimates, forecasts and projections about the operating environment, economies and markets in which Nortel operates. These statements are subject to important assumptions, risks and uncertainties that are difficult to predict, and the actual outcome may be materially different. Nortel’s assumptions, although considered reasonable by Nortel at the date of this press release, may prove to be inaccurate and consequently Nortel’s actual results could differ materially from the expectations set out herein.
Actual results or events could differ materially from those contemplated in forward-looking statements as a result of the following: (i) risks and uncertainties relating to the Creditor Protection Proceedings including: (a) risks associated with Nortel’s ability to: obtain required approvals and successfully consummate remaining divestitures; successfully conclude ongoing discussions for the sale of Nortel’s remaining assets; develop, obtain required approvals for, and implement a court approved plan; allocation of the sale proceeds of our businesses and assets among the various Nortel entities participating in these sales may take considerable time to resolve; resolve ongoing issues with creditors and other third parties whose interests may differ from Nortel’s; maintain adequate cash on hand in each of its jurisdictions to fund remaining work within the jurisdiction during the Creditor Protection Proceedings; obtain any further required approvals from the Canadian Monitor, the U.K. Administrators, the U.S. Principal Officer, the U.S. Creditors’ Committee, or other third parties; utilize net operating loss carryforwards and certain other tax attributes in the future; avoid the substantive consolidation of NNI’s assets and liabilities with those of one or more other U.S. Debtors; operate effectively, and in consultation with the Canadian Monitor, the Canadian creditors’ committee, the U.S. Creditors’ Committee, the U.S. Principal Officer,and work effectively with the U.K. Administrators and French Administrator in their respective administration of the EMEA businesses subject to the Creditor Protection Proceedings; continue as a going concern; actively and adequately communicate on and respond to events, media and rumors associated with the Creditor Protection Proceedings; retain and incentivize key employees as may be needed; retain, or if necessary, obtain court orders or approvals with respect to motions filed from time to time; resolve claims made against Nortel in connection with the Creditor Protection Proceedings for amounts not exceeding Nortel’s recorded liabilities subject to compromise; prevent third parties from obtaining court orders or approvals that are contrary to Nortel’s interests; and (b) risks and uncertainties associated with: limitations on actions against any Debtor during the Creditor Protection Proceedings; the values, if any, that will be prescribed pursuant to any court approved plan to outstanding Nortel securities and, in particular, that Nortel does not expect that any value will be prescribed to the NNC common shares or the NNL preferred shares in any such plan; the delisting of NNC common shares from the NYSE; the delisting of NNC common shares and NNL preferred shares from the TSX and; any cease trade orders that are expected to be issued by Canadian Securities Administers to prohibit trading in securities of NNC and NNL following the third quarter filing deadlines applicable to NNC and NNL’s quarterly reporting obligations under Canadian securities laws; and (ii) risks and uncertainties relating to Nortel’s remaining restructuring work including fluctuations in foreign currency exchange rates; the sufficiency of workforce and cost reduction initiatives; any adverse legal judgments, fines, penalties or settlements related to any significant pending or future litigation actions; failure to maintain integrity of Nortel’s information systems; and Nortel’s potential inability to maintain an effective risk management strategy.
For additional information with respect to certain of these and other factors, see Nortel’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and other securities filings with the SEC. Unless otherwise required by applicable securities laws, Nortel disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
*Nortel, the Nortel logo and the Globemark are trademarks of Nortel Networks.