Consolidated Balance Sheet as of December 31 | Reliant FORM 10-K

Consolidated Balance Sheet as of December 31, 2002

	As previously
		reported	Adjustments		As restated


ASSETS
Current assets
Cash and cash equivalents	$	3,791	$	(1)	$	3,790
Restricted cash and cash equivalents		249		–		249
Accounts receivable — net		2,163		65		2,228
Inventories — net		986		520		1,506
Income taxes recoverable		58		56		114
Deferred income taxes — net		790		–		790
Other current assets		681		(31)		650

Total current assets		8,718		609		9,327

Investments		248		(11)		237
Plant and equipment — net		1,467		225		1,692
Goodwill		2,201		(2)		2,199
Intangible assets — net		139		–		139
Deferred income taxes — net		2,579		3		2,582
Other assets		761		24		785


Total assets	$	16,113	$	848	$	16,961


LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Notes payable	$	30	$	–	$	30
Trade and other accounts payable		872		(69)		803
Payroll and benefit-related liabilities		507		(22)		485
Contractual liabilities		1,215		(321)		894
Restructuring		548		(41)		507
Other accrued liabilities		2,974		283		3,257
Long-term debt due within one year		233		10		243


Total current liabilities		6,379		(160)		6,219
Long-term debt		3,749		211		3,960
Deferred income taxes — net		345		(8)		337
Other liabilities		2,323		438		2,761


Total liabilities		12,796		481		13,277

Minority interests in subsidiary companies		665		(34)		631

SHAREHOLDERS’ EQUITY
Common shares, without par value		33,583		(349)		33,234
Additional paid-in capital		3,754		(1)		3,753
Deferred stock option compensation		(91)		74		(17)
Accumulated deficit		(33,239)		273		(32,966)
Accumulated other comprehensive loss		(1,355)		404		(951)


Total shareholders’ equity		2,652		401		3,053

Total liabilities and shareholders’ equity	$	16,113	$	848	$	16,961

4. Accounting changes

(a) Guarantees

In November 2002, the FASB issued FIN 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others — an interpretation of FASB Statements No. 5,

F-30

Image 147

Reliant FORM 10-K manual Consolidated Balance Sheet as of December 31, Accounting changes, Guarantees

Contents

For the transition period from Washington, D.CAnnual report pursuant to or 15d Securities Exchange Act Explanatory Note Table of Contents Item 9A Item 1. Business Overview Part Business environment Developments in 2003Page Strategic plan Other business developments2003 Network components Networking solutionsNetworking solutions Networking Products Wireless Networks Network access Product developmentCore networking Customers Markets Circuit and packet voice solutions Enterprise NetworksCompetition Data networking and security solutions Wireline Networks Circuit and packet voice solutions Markets Optical Networks Product development Markets Backlog Sales and distribution Sources and availability of materials Product standards, certification and regulations Strategic alliances, acquisitions and minority investments Seasonality Intellectual property Research and development Employee relations Financial information by geographic area Environmental matters Risk factors Working capital Geographic Locations Item 2. PropertiesType of Site Number of Sites Owned Leased Item 3. Legal Proceedings Page Page Environmental matters High Low Item 4. Submission of Matters to a Vote of Security Holders Dividends DividendsCanadian tax matters Sales of unregistered securities Item 6. Selected Financial Data Unaudited 2003 2002 2001 2000 Total Revenues and cost of revenues adjustments Other adjustments Business overview Accounting changes and recent accounting pronouncements Business overview Our businessOur segments Our business environment How we measure performance Our strategic plan and outlook Comprehensive Review and First Restatement Consolidated results summary Independent Review Second RestatementYears ended December 31, 2002 Revenues and cost of revenues Other Foreign exchangeIntercompany balances Special charges First, second and third quarters ReclassificationsDis operations Page Revenues and cost of revenues Intercompany balances Revenue Independent Review Personnel actionsEDC Support Facility Debt securities Credit facilities and security agreements Stock-based compensation plans Shelf registration statementCredit ratings Regulatory actions and pending litigation Evolution of our supply chain strategy Other business developmentsShareholder rights plan Real estate Ownership adjustment in our French and German operationsCustomer financing commitments Sale of Entrust shares Geographic revenues Results of operations continuing operationsCustomer financing arrangements Segment revenues 2003 vs 2002 vs2004 Wireless Networks revenues 2002 vs Enterprise Networks revenues 2002 vs Wireline Networks revenues Optical Networks revenues 2002 vs For the years ended December 2003 vs 2002 vs 2001 Wireless NetworksGross profit and gross margin Segment gross profit and gross margin Wireline Networks Enterprise NetworksOptical Networks For the years ended December 2003 vs 2002 vs 2001 $ Change Selling, general and administrative expenseSegment selling, general and administrative expense Operating expenses Research and development expense Segment research and development expense Deferred stock option compensation Segment contribution marginSegment Management EBT Amortization of intangibles Special charges Page Other income expense net Gain loss on sale of businesses and assets Net earnings loss from continuing operations Results of operations dis operationsInterest expense Income tax benefit expense Liquidity and capital resources Cash flows2003 2002 Page Uses of liquidity Obligations under special charges Contractual cash obligationsPurchase obligations Outsourcing contracts Other long-term liabilities reflected on the balance sheets JDS purchase arrangementCustomer financing Pension, post-retirement and post-employment obligations Credit facilities Joint ventures/minority interestsDis operations Sources of liquidity Shelf registration statement and base shelf prospectus Off-balance sheet arrangements Credit ratingsBid, performance related and other bonds Other indemnifications or guarantees Revenue recognition Application of critical accounting estimates Provisions for doubtful accounts Provisions for inventory Tax asset valuation Income taxes Goodwill valuation Tax contingencies Pension and post-retirement benefits Change in Assumption Special charges Accounting changes and recent accounting pronouncements Other contingenciesAccounting changes Recent accounting pronouncements Market risk Equity price risk Legal proceedings Risk factors/forward looking statementsRisks relating to our restatements and related matters 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 December Total comprehensive income loss for the year Cash flows from used in operating activities Principles of consolidation Nortel Networks CorporationSignificant accounting policies Basis of presentation Revenue recognition Translation of foreign currencies Research and development Restricted cash and cash equivalents Income taxesEarnings loss per common share Cash and cash equivalents Receivables sales InvestmentsPlant and equipment Goodwill Long-lived assets held and used Derivative financial instruments Warranty costsIntangible assets Pension, post-retirement and post-employment benefits Stock-based compensation 2003 2002 2001 Black-Scholes weighted-average assumptions Weighted-average stock option fair value per option granted2003 2002 2001 Recent accounting pronouncements Comparative figures Restatement First RestatementSecond Restatement Page Page 121 Total restatement adjustments 289 183 314 272 Page Revenues and cost of revenues Revenues Cost of revenues 2002 2001 Revenue recognition adjustmentsOther adjustments Application of SAB 101 or SOP Foreign exchange Other revenue recognition adjustmentsPresentation errors Reseller transactions Goodwill impairment 980 Nplc business acquisition Other errorsFunctional currency designation Intercompany transaction designation Goodwill impairment other acquisitions Other special chargesOther Research and development expense Selling, general and administrative expense2002 2001 Other adjustments Cost of revenues Reclassifications Other income expense netInterest expense Income taxes and minority interests Decrease to net loss on disposal of operations net of tax Dis operations Balance sheet Other adjustments Guarantees Consolidated Balance Sheet as of December 31Accounting changes Consolidation of variable interest entities Asset retirement obligationsPage Accounting for goodwill and other intangible assets Determining whether an arrangement contains a leasePensions and other post-retirement benefits Stock-based compensation 23,270 Derivative financial instruments Consolidated financial statement detailsConsolidated statements of operations Other current assets Consolidated balance sheetsAccounts receivable net Inventories net Other accrued liabilities Wireless Enterprise WirelineGoodwill Intangible assets net Change in operating assets and liabilities Interest and taxes paid recoveredOther liabilities Minority interests in subsidiary companies Segment information General description Receivables sales Contribution margin SegmentsProduct revenues 2003 2002 2001 Revenues Long-lived assets Geographic information Year ended December 31 Special charges Accrued Costs Payments Adjustments Balance as Incurred Made JanuaryDuring December 2003 Lease costs a Year ended December 31 Income taxes 2003 2002 2001 Employee benefit plans Net Operating Capital Tax LossesCredits b Total Page Change in plan assets 2003 2002 Change in benefit obligation 2003 2002 2001 Pension expense Allocation of net pension expenseDefined benefit plans 20032002 2003 2002 Target Actual 2003 2002 2001 Post-retirement benefit costPage Compensation Other acquisitionsNet tangible Deferred Closing date Purchase Acquisition Price Goodwill Technology High speed module operations Service commerce operationsDivestitures Sale of Arris Group, Inc. investment Long-term debt Sale of ClarifyClosures Long-term debt, credit and support facilities Credit facilities Foreign currency risk Support facilityFinancial instruments and hedging activities Risk management Cross currency coupon swap contracts Equity price riskFair value 2003 2002 Interest rate swap contracts Fair Credit riskOther derivatives Receivables sales Guarantees Business sale and business combination agreementsIntellectual property indemnification obligations Third party debt agreements Lease agreements Bid, performance related and other bonds Other indemnification agreementsProduct warranties Commitments Venture capital financing Customer financing Leases Contracts Charges Income Purchase commitmentsOperating leases and other commitments Operating Outsourcing Capital stock Common shares Restricted cash and cash equivalents Prepaid forward purchase contracts Earnings loss per common share Preferred sharesDividends Shareholder rights plan Stock-based compensation plans Stock options Accumulated other comprehensive loss Maximum Options Restricted stock unit plan Employee stock purchase plans Directors’ deferred share compensation plans Dis operations 2003 2002 2001 Cash flows from used in dis operations Activity Activity Contingencies Related party transactionsPage Page Environmental matters Subsequent events EDC Support Facility Credit facilities and security agreements Stock exchanges Directory and operator services businessDebt securities Stock-based compensation plans Evolution 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 Beginning To costs End Schedule ConsolidatedAdditions Charged Item 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 Year Subsequent appointment Code of ethics and other corporate governance matters Beneficial ownership reporting complianceAudit committee financial expert Audit committee Summary compensation table Item 11. Executive Compensation Salary Bonus Long Term Compensation Name Principal PositionYear Annual Compensation 147 148 149 150 Option grants in 2004 Annual cash incentive awards Realized $ Exercisable CommonValue of Unexercised In-the-Money 152 Exercisable Unexercisable Dunn Debon Spradley Bolouri DeRoma Maturation or Payout Threshold# Target# Maximum# #12 Long-term incentive plans awards in last two fiscal years Retirement plans Page Total Earnings Certain employment arrangements Page Compensation of directors Security ownership of directors and management Compensation committee interlocks and insider participation Title of Class of Security Name of Beneficial Owner 163 Plan category Equity compensation plan information Indebtedness of management Item 13. Certain Relationships and Related Transactions January 1 Item 14. Principal Accountant Fees and ServicesTable of Indebtedness of Directors and Executive Officers Audit Fees Audit-Related Fees Tax FeesAll Other Fees Reports on Form 8-K Page Page Page Exhibit Index ExhibitNumber Description 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 plans 192 Restatement Restated Second Pooling PreviouslyInterest Reported Interest Pooled Reported Accruals Net increase decrease of cost of revenues Accruals and provisionsNet increase decrease to net loss 2002 2001 Increase decrease of cost of revenues Net increase decrease of research and development Other expensesRelated party transactions 2002 2001 Increase decrease of research and development Plant and equipment Residual profit sharingRelated party revenues and cost of revenues Related party out of balances Interest on long- term debt Costs of revenues, research and development expense Consolidated Balance Sheets as of December 31 Guarantees Consolidation of variable interest entities Asset retirement obligations Determining whether an arrangement contains a lease Stock-based compensationAccounting for goodwill and other intangible assets Derivative financial instruments 204 Networks WirelessWireline Optical Investment at cost net Long-term debt Segment information General description Major customers Contract Geographic informationLong-lived assets 2003 2002 2001 External revenues Expected sublease revenue on leases Income taxes Matra Nortel Communication Distribution Acquisitions and divestitures AcquisitionsNorthern Telecom France Nortel Networks France Other profit sharing agreements Royalties Sale of investmentFinancing transactions Share pledge Financial instruments Joint ventures/minority interests/disposed business Leases Contracts Shareholders’ equity Plan a Outstanding Weighted Options Nortel Networks Company Savings Plan Security agreements Page Signatures Directors