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Reliant FORM 10-K manual

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Page 137

Consolidated Statement of Operations for the year ended December 31, 2001

	As previously
		reported			Adjustments		As restated


Revenues	$	17,408			$	1,492	$	18,900
Cost of revenues		14,014				598		14,612


Gross profit		3,394				894		4,288
Selling, general and administrative expense		5,809				302		6,111
Research and development expense		3,202				(86)		3,116
In-process research and development expense		15				–		15
Amortization of intangibles
Acquired technology and other		806				–		806
Goodwill		4,149				(91)		4,058
Deferred stock option compensation		109				139		248
Special charges
Goodwill impairment		12,121				(695)		11,426
Other special charges		3,540				(150)		3,390
(Gain) loss on sale of businesses and assets		112				26		138


Operating earnings (loss)		(26,469)				1,449		(25,020)
Other income (expense) — net		(388)				(118)		(506)
Interest expense
Long-term debt		(204)				(4)		(208)
Other		(115)				12		(103)

Earnings (loss) from continuing operations before income taxes, minority interests and equity in net loss of associated
companies		(27,176)				1,339		(25,837)
Income tax benefit (expense)		3,152				(401)		2,751

		(24,024)				938		(23,086)
Minority interests — net of tax		–				(34)		(34)
Equity in net loss of associated companies — net of tax		(150)				–		(150)


Net earnings (loss) from continuing operations		(24,174)				904		(23,270)
Net earnings (loss) from discontinued operations — net of tax		(2,996)				529		(2,467)


Net earnings (loss) before cumulative effect of accounting changes		(27,170)				1,433		(25,737)
Cumulative effect of accounting change — net of tax		15				–		15


Net earnings (loss)	$	(27,155)			$	1,433	$	(25,722)


Basic earnings (loss) per common share
— from continuing operations	$	(7.58)			$	0.28	$	(7.30)
— from discontinued operations		(0.94)				0.16		(0.78)


Basic earnings (loss) per common share	$	(8.52)			$	0.44	$	(8.08)


Diluted earnings (loss) per common share
— from continuing operations	$	(7.58)			$	0.28	$	(7.30)
— from discontinued operations		(0.94)				0.16		(0.78)


Diluted earnings (loss) per common share	$	(8.52)			$	0.44	$	(8.08)

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Reliant FORM 10-K manual

Contents

Annual report pursuant to or 15d Washington, D.CSecurities Exchange Act For the transition period fromExplanatory Note Table of Contents Item 9A Item 1. Business Overview PartBusiness environment Developments in 2003Page 2003 Strategic planOther business developments Networking solutions Networking solutionsNetworking Network componentsProducts Wireless NetworksCore networking Network accessProduct development Customers MarketsCompetition Circuit and packet voice solutionsEnterprise Networks Data networking and security solutions Wireline Networks Circuit and packet voice solutions Markets Optical Networks Product development Markets Backlog Sales and distributionSources and availability of materials Product standards, certification and regulationsStrategic alliances, acquisitions and minority investments SeasonalityIntellectual property Research and developmentEmployee relations Financial information by geographic area Environmental mattersRisk factors Working capitalType of Site Item 2. PropertiesNumber of Sites Owned Leased Geographic LocationsItem 3. Legal Proceedings Page Page Environmental matters High Low Item 4. Submission of Matters to a Vote of Security HoldersCanadian tax matters DividendsSales of unregistered securities DividendsItem 6. Selected Financial Data Unaudited 2003 2002 2001 2000 Total Revenues and cost of revenues adjustmentsOther adjustments Business overview Accounting changes and recent accounting pronouncements Our segments Business overviewOur business Our business environment How we measure performance Our strategic plan and outlook Comprehensive Review and First Restatement Consolidated results summaryYears ended December 31, 2002 Independent ReviewSecond Restatement Revenues and cost of revenues Intercompany balances Foreign exchangeSpecial charges OtherDis operations First, second and third quartersReclassifications Page Revenues and cost of revenues Intercompany balances EDC Support Facility Revenue Independent ReviewPersonnel actions Debt securities Credit facilities and security agreementsCredit ratings Shelf registration statementRegulatory actions and pending litigation Stock-based compensation plansShareholder rights plan Evolution of our supply chain strategyOther business developments Customer financing commitments Ownership adjustment in our French and German operationsSale of Entrust shares Real estateCustomer financing arrangements Results of operations continuing operationsSegment revenues Geographic revenues2004 2003 vs2002 vs Wireless Networks revenues 2002 vs Enterprise Networks revenues 2002 vs Wireline Networks revenues Optical Networks revenues 2002 vs Gross profit and gross margin Wireless NetworksSegment gross profit and gross margin For the years ended December 2003 vs 2002 vs 2001Optical Networks Wireline NetworksEnterprise Networks Segment selling, general and administrative expense Selling, general and administrative expenseOperating expenses For the years ended December 2003 vs 2002 vs 2001 $ ChangeResearch and development expense Segment research and development expense Segment Management EBT Segment contribution marginAmortization of intangibles Deferred stock option compensationSpecial charges Page Other income expense net Gain loss on sale of businesses and assetsInterest expense Results of operations dis operationsIncome tax benefit expense Net earnings loss from continuing operations2003 2002 Liquidity and capital resourcesCash flows Page Uses of liquidity Purchase obligations Contractual cash obligationsOutsourcing contracts Obligations under special chargesCustomer financing JDS purchase arrangementPension, post-retirement and post-employment obligations Other long-term liabilities reflected on the balance sheetsDis operations Joint ventures/minority interestsSources of liquidity Credit facilitiesShelf registration statement and base shelf prospectus Bid, performance related and other bonds Off-balance sheet arrangementsCredit ratings Other indemnifications or guarantees Revenue recognition Application of critical accounting estimatesProvisions for doubtful accounts Provisions for inventory Tax asset valuation Income taxesGoodwill valuation Tax contingenciesPension and post-retirement benefits Change in Assumption Special chargesAccounting changes Accounting changes and recent accounting pronouncementsOther contingencies Recent accounting pronouncements Market risk Equity price risk Risks relating to our restatements and related matters Legal proceedingsRisk factors/forward looking statements Page Operations, financial condition and liquidity Page Page Page Page Risks relating to our business Page Page Page Page 104 Page Page Page Page Page Page Page Index to Consolidated Financial Statements Report of Independent Registered Chartered Accountants Nortel Networks Corporation Assets Consolidated Balance Sheets as of DecemberTotal comprehensive income loss for the year Cash flows from used in operating activities Significant accounting policies Nortel Networks CorporationBasis of presentation Principles of consolidationRevenue recognition Translation of foreign currenciesResearch and development Earnings loss per common share Income taxesCash and cash equivalents Restricted cash and cash equivalentsPlant and equipment Receivables salesInvestments Goodwill Long-lived assets held and usedIntangible assets Warranty costsPension, post-retirement and post-employment benefits Derivative financial instrumentsStock-based compensation 2003 2002 2001 2003 2002 2001 Black-Scholes weighted-average assumptionsWeighted-average stock option fair value per option granted Recent accounting pronouncements Comparative figuresSecond Restatement RestatementFirst Restatement Page Page 121 Total restatement adjustments 289 183 314 272 Page Revenues and cost of revenues Other adjustments Revenue recognition adjustmentsApplication of SAB 101 or SOP Revenues Cost of revenues 2002 2001Presentation errors Other revenue recognition adjustmentsReseller transactions Foreign exchangeFunctional currency designation Other errorsIntercompany transaction designation Goodwill impairment 980 Nplc business acquisitionOther Goodwill impairment other acquisitionsOther special charges 2002 2001 Other adjustments Selling, general and administrative expenseCost of revenues Research and development expenseInterest expense Other income expense netIncome taxes and minority interests ReclassificationsDecrease to net loss on disposal of operations net of tax Dis operationsBalance sheet Other adjustmentsAccounting changes GuaranteesConsolidated Balance Sheet as of December 31 Consolidation of variable interest entities Asset retirement obligationsPage Pensions and other post-retirement benefits Determining whether an arrangement contains a leaseStock-based compensation Accounting for goodwill and other intangible assets23,270 Consolidated statements of operations Derivative financial instrumentsConsolidated financial statement details Accounts receivable net Consolidated balance sheetsInventories net Other current assetsGoodwill Wireless Enterprise WirelineIntangible assets net Other accrued liabilitiesOther liabilities Interest and taxes paid recoveredMinority interests in subsidiary companies Change in operating assets and liabilitiesSegment information General description Receivables salesProduct revenues Segments2003 2002 2001 Revenues Contribution marginLong-lived assets Geographic informationYear ended December 31 Special chargesDuring December 2003 Lease costs a Accrued Costs Payments Adjustments Balance as Incurred MadeJanuary Year ended December 31 Income taxes 2003 2002 2001 Credits b Total Employee benefit plansNet Operating Capital Tax Losses Page Change in plan assets 2003 2002 Change in benefit obligationDefined benefit plans 20032002 2003 2002 2001 Pension expenseAllocation of net pension expense 2003 2002 Target Actual 2003 2002 2001 Post-retirement benefit costPage Net tangible Deferred Closing date Purchase Other acquisitionsAcquisition Price Goodwill Technology CompensationDivestitures Service commerce operationsSale of Arris Group, Inc. investment High speed module operationsClosures Sale of ClarifyLong-term debt, credit and support facilities Long-term debtCredit facilities Financial instruments and hedging activities Support facilityRisk management Foreign currency riskFair value Equity price risk2003 2002 Interest rate swap contracts Cross currency coupon swap contractsOther derivatives Credit riskReceivables sales FairIntellectual property indemnification obligations GuaranteesBusiness sale and business combination agreements Third party debt agreements Lease agreementsProduct warranties Other indemnification agreementsCommitments Bid, performance related and other bondsVenture capital financing Customer financingOperating leases and other commitments Purchase commitmentsOperating Outsourcing Leases Contracts Charges IncomeCapital stock Common shares Restricted cash and cash equivalentsPrepaid forward purchase contracts Dividends Preferred sharesShareholder rights plan Earnings loss per common shareStock-based compensation plans Stock options Accumulated other comprehensive lossMaximum Options Restricted stock unit planEmployee stock purchase plans Directors’ deferred share compensation plansDis operations 2003 2002 2001 Cash flows from used in dis operations ActivityActivity Contingencies Related party transactionsPage Page Environmental matters Subsequent events EDC Support Facility Credit facilities and security agreements Debt securities Directory and operator services businessStock-based compensation plans Stock exchangesEvolution of Nortel Networks supply chain strategy Supplemental consolidating financial information Nortel Non Nortel Non 612 450 15,364 380 Supplemental Consolidating Balance Sheets as of December 31 182 240 413 388 262 16,961 Nortel Non Networks 818 592 487 525 768 572 111 648 206 Quarterly Financial Data Unaudited Report of Independent Registered Chartered Accountants Additions Schedule ConsolidatedCharged Beginning To costs EndItem 9A. Controls and Procedures 114 Scope of the Independent Review Summary of Findings of the Independent Review Page Page Page Governing Principles for Remedial Measures Page Page Page Page Additional Background Page Second Restatement Independent Review Second Restatement Process Page Fixed or determinable fees-An increase of $133 million Page Principal Adjustments Page Page Revenue Independent Review Remedial Measures Page Name Age Position with the Company Page Page Page Name and age Office and position currently held Appointment YearSubsequent appointment Audit committee financial expert Beneficial ownership reporting complianceAudit committee Code of ethics and other corporate governance mattersSummary compensation table Item 11. Executive CompensationYear Long Term Compensation Name Principal PositionAnnual Compensation Salary Bonus147 148 149 150 Option grants in 2004 Annual cash incentive awardsValue of Unexercised CommonIn-the-Money Realized $ Exercisable152 Exercisable Unexercisable Dunn Debon Spradley Bolouri DeRomaMaturation or Payout Threshold# Target# Maximum# #12 Long-term incentive plans awards in last two fiscal yearsRetirement plans Page Total Earnings Certain employment arrangements Page Compensation of directors Security ownership of directors and management Compensation committee interlocks and insider participationTitle of Class of Security Name of Beneficial Owner163 Plan category Equity compensation plan informationIndebtedness of management Item 13. Certain Relationships and Related TransactionsTable of Indebtedness of Directors and Executive Officers Item 14. Principal Accountant Fees and ServicesAudit Fees January 1All Other Fees Audit-Related FeesTax Fees Reports on Form 8-K Page Page Page Number Description Exhibit IndexExhibit Number Description Number Description Number Description Number Description Number Description Subsidiary of Nortel Networks Limited Report of Independent Registered Public Accounting Firm 182 183 184 Nortel Networks S.A Nortel Networks S.A Use of estimates Research and development Cash and cash equivalents Plant and equipment Financial instruments State sponsored pension plans192 Restatement Interest Second Pooling PreviouslyReported RestatedInterest Pooled Reported AccrualsNet increase decrease to net loss Accruals and provisions2002 2001 Increase decrease of cost of revenues Net increase decrease of cost of revenuesRelated party transactions Other expenses2002 2001 Increase decrease of research and development Net increase decrease of research and developmentRelated party revenues and cost of revenues Residual profit sharingRelated party out of balances Plant and equipmentInterest on long- term debt Costs of revenues, research and development expenseConsolidated Balance Sheets as of December 31 GuaranteesConsolidation of variable interest entities Asset retirement obligationsAccounting for goodwill and other intangible assets Determining whether an arrangement contains a leaseStock-based compensation Derivative financial instruments 204 Wireline Optical WirelessInvestment at cost net NetworksLong-term debt Segment information General description Major customers Long-lived assets Geographic information2003 2002 2001 External revenues ContractExpected sublease revenue on leases Income taxes Northern Telecom France Acquisitions and divestitures AcquisitionsNortel Networks France Matra Nortel Communication DistributionOther profit sharing agreements Financing transactions RoyaltiesSale of investment Share pledge Financial instrumentsJoint ventures/minority interests/disposed business Leases Contracts Shareholders’ equityPlan a Outstanding Weighted Options Nortel Networks Company Savings Plan Security agreements Page Signatures Directors