Alcatel Reports First Quarter 2003 Results.Business Editors/High-Tech Writers PARIS--(BUSINESS WIRE)--April 29, 2003 Alcatel (Paris:CGEP CGEP Commonwealth Graduate Engineering Program (Virginia) CGEP Center for Gifted Education Policy .PA)(NYSE NYSE See: New York Stock Exchange :ALA): -- First quarter sales at Euro 2,961 million reflect seasonality and currency exchange -- Year on year operating loss operating loss The excess of operating expenses over revenue. As with operating income, operating losses exclude revenues and expenses from operations that are not considered a regular part of the business. Also called deficit. Compare operating income. more than halved halve tr.v. halved, halv·ing, halves 1. To divide (something) into two equal portions or parts. 2. To lessen or reduce by half: halved the recipe to serve two. 3. to Euro (161) million -- Net cash positive at Euro 514 million Alcatel's Board of Directors (Paris:CGEP.PA)(NYSE:ALA) reviewed and approved first quarter 2003 results. First quarter sales decreased by 31.1% year over year and sequentially by 34.3% to Euro 2,961 million. Loss from operations was registered at Euro (161) million, and net loss at Euro (461) million or diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. Euro (0.39) per share ($(0.43) per ADS).
Quarterly
--------------------------
Key Figures First First Fourth
in millions of euros except for EPS Quarter Quarter Quarter
2003 2002 2002
------- -------- --------
Profit & Loss
Net Sales 2,961 4,296 4,508
Income from Operations (161) (343) 20
Net Income pre-Goodwill & MI (313) (720) (947)
Net Income (461) (836) (1,119)
EPS (Class A) Diluted (0.39) (0.72) (0.93)
E/ADS (Class A)(1) (0.43) (0.79) (1.01)
Number of Shares (in billions) 1.18 1.15 1.18
(1) E/ADS has been calculated using the US Federal Reserve Bank of New
York noon euro/dollar buying rate of $1.0900 as of March 31, 2003.
Serge Tchuruk Serge Tchurukdichian (born November 13, 1937), known as Serge Tchuruk, is a French businessman of Armenian descent. He was the Chief Executive Officer and chairman of Alcatel (a global telecommunications company) till the end of November 2006 and is now the chairman of , chairman and CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. , summarized the Board's observations: "The first quarter sales, being characterized char·ac·ter·ize tr.v. character·ized, character·iz·ing, character·iz·es 1. To describe the qualities or peculiarities of: characterized the warden as ruthless. 2. by strong seasonality, have experienced a significant currency exchange impact, which resulted in revenue at the low end of the forecast range. "On the other hand, our operating loss was reduced by more than half over the same period last year. This resulted from the continuous improvement of the gross margin, now at 29.7%, compared to 25.2% in the same period last year (and 27.3% in Q4), and fixed costs fixed costs, n.pl the costs that do not change to meet fluctuations in enrollment or in use of services (e.g., salaries, rent, business license fees, and depreciation). decreasing by 30%. Performance continued to be good in access and mobile infrastructure, given market circumstances CIRCUMSTANCES, evidence. The particulars which accompany a fact. 2. The facts proved are either possible or impossible, ordinary and probable, or extraordinary and improbable, recent or ancient; they may have happened near us, or afar off; they are public or and seasonality. The optical market continued to shrink shrink Vox populi noun A psychiatrist while our performance in mobile handsets suffered from the temporary lack of color not of the white race; - commonly meaning, esp. in the United States, of negro blood, pure or mixed. See also: Color screens. "The balance sheet structure continued to improve as we again reduced our working capital as a percentage of sales. Our 2003 divestiture The breakup of AT&T. By federal court order, AT&T divested itself on January 1, 1984 of its 23 operating companies, which became known as the Regional Bell Operating Companies (RBOCs). program during the first quarter also contributed to our net cash position which increased at Euro 514 million." Outlook Commenting on Alcatel's outlook, S. Tchuruk said: "The carrier markets continue to be soft, and the economic and geopolitical ge·o·pol·i·tics n. (used with a sing. verb) 1. The study of the relationship among politics and geography, demography, and economics, especially with respect to the foreign policy of a nation. 2. a. environmental may add a few points to the 15% degradation DEGRADATION, punishment, ecclesiastical law. A censure by which a clergy man is deprived of his holy orders, which he had as a priest or deacon. (in euros) which we had forecast earlier for 2003. The non-carrier market should resist better but for the same reasons may be a few points off from the expected stagnation Stagnation A period of little or no growth in the economy. Economic growth of less than 2-3% is considered stagnation. Sometimes used to describe low trading volume or inactive trading in securities. Notes: A good example of stagnation was the U.S. economy in the 1970s. . Overall we still expect the market in the second half of 2003 to be comparable to last year, at a constant exchange rate, with the first half absorbing the full year-on-year decline. "Given our restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). programs and the good control over our operations, we feel confident in reaching our operating breakeven breakeven 1. The level of output or sales necessary to cover fixed expenses. Companies in industries that have high fixed costs and, consequently, high breakevens, such as automobile and steel manufacturing, are likely to exhibit large fluctuations target for the full year. Before year-end we should also reach break-even in net income before goodwill amortization and one-time charges, with no material change in net debt versus year-end 2002. Second quarter sales are expected to increase sequentially at a single-digit rate with a substantial narrowing of the operating loss."
Business Highlights
Segment Breakdown Quarterly(1)
in millions of euros
-----------------------------
First First Fourth
Quarter Quarter Quarter
2003 2002 2002
------- -------- --------
Sales
Fixed Communications 1,317 2,132 2,011
Mobile Communications 798 1,176 1,283
Private Communications 952 1,141 1,330
Other & Eliminations (106) (153) (116)
Total 2,961 4,296 4,508
Income from Operations
Fixed Communications (105) (271) (188)
Mobile Communications 15 (5) 131
Private Communications (21) (10) 105
Other (50) (57) (28)
Total (161) (343) 20
(1) First and fourth quarters 2002 have been restated to reflect the
new organizational structure put into place Jan. 1, 2003.
Restatement of 2001 and 2002 sales and Income from Operations on a
quarterly basis are provided in the appendix to this press
release.
First Quarter Business Update The following comments are based on sequential comparisons. At this particular period of the year, sequential analysis In statistics, sequential analysis is statistical analysis where the sample size is not fixed in advance. Instead data is evaluated as it is collected, and further sampling is stopped in accordance with a pre-defined stopping rule as soon as significant results are observed. is somewhat distorted by seasonality when comparing Q1, which is the weakest quarter of the year, against Q4, which is the strongest quarter. Fixed Communications First quarter revenue decreased sequentially by 34.5% to Euro 1,317 million from Euro 2,011 million. Fixed networks registered a strong performance in DSL DSL in full Digital Subscriber Line Broadband digital communications connection that operates over standard copper telephone wires. It requires a DSL modem, which splits transmissions into two frequency bands: the lower frequencies for voice (ordinary worldwide, offset by the weakness in the carrier data market. Optical networks decreased substantially, particularly terrestrial Dealing with the earth. See terrestrial link. transmission where the good performance in traditional cross connects was offset by the continuing depressed WDM (1) (Wavelength Division Multiplexing) A technology that uses multiple lasers and transmits several wavelengths of light (lambdas) simultaneously over a single optical fiber. long-haul market, especially in the U.S. The decrease in voice networks was due mainly to the traditional seasonality effect. Loss from operations amounted to Euro (105) million, compared to a loss of Euro (188) million in Q4 2002. Optical networks significantly narrowed their losses due to the effects of restructuring and a normalized level of inventory depreciation. Mobile Communications First quarter revenue decreased sequentially by 37.8% to Euro 798 million from Euro 1,283 million. Mobile networks registered a satisfactory performance in a quarter that is generally not favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. . Mobile phone sales were hit by the temporary unavailability un·a·vail·a·ble adj. Not available, accessible, or at hand. un  a·vail of color
screens coupled with pricing pressures on mature monochrome Also called "mono." Refers to display screens that use one foreground and one background color; for example, black on white, white on black or green on black. The first terminals connected to mainframes and minicomputers were monochrome, and monochrome screens were widely used on early models.
Income from operations was Euro 15 million compared to Euro 131 million in Q4 2002. The mobile networks' profitability was partially offset by the negative results of mobile phones. Private Communications First quarter revenue decreased sequentially by 28.4% to Euro 952 million over Euro 1,330 million. This decrease is primarily attributed to space revenues, which were down due to timing effects of satellite deliveries compounding soft underlying market conditions. While enterprise activities were generally impacted by the continued depressed environment with large companies still postponing their investment decisions, voice systems and Genesys software business performed satisfactorily. Loss from operations was Euro (21) million compared to income from operations of Euro 105 million in a strong Q4 2002. Note: On April 17, 2003, the Annual Shareholders' Ordinary and Extraordinary Meetings approved Alcatel Class O shares conversion into Alcatel ordinary shares, effective immediately. As a result, Alcatel Optronics' financial statements will no longer be published after this announcement.
First Quarter 2003 Results (unaudited)
PROFIT AND LOSS STATEMENT:
-- Net Sales: Euro 2,961 million vs. Euro 4,296 million 1Q 02
(down 31.1%) and vs. Euro 4,508 million sequentially (down
34.3%).
-- Geographical distribution of sales:
W. Europe: 43%
Other Europe: 7%
North America: 15%
Asia: 17%
RoW: 18%
-- Gross margin: 29.7% (27.3% for Q4 2002).
-- Selling, general and administration ("SG&A") costs: Euro (607)
million (20.5% of sales)
-- Research and development ("R&D") expenses: Euro (433) million
(14.6% of sales)
-- Income (loss) from operations: Euro (161) million, which
included Euro (16) million in inventory depreciation vs. Euro
(152) million in Q4 02
-- Earnings before tax and amortization of goodwill: Euro (278)
million and included:
-- Interest paid on mandatory redeemable for Alcatel shares
Euro (12) million
-- Net financial loss of Euro (30) million
-- Restructuring costs of Euro (277) million
-- Net other revenue/(expenses) of Euro 202 million
-- Net Income Pre-Goodwill and Minority Interest: Euro (313)
million
-- Net Income: Euro (461) million and included a related tax
charge of Euro (32) million, share in net income of equity
affiliates and discontinued activities of Euro (3) million,
goodwill amortization of Euro (153) million, and minority
interests of Euro 5 million
-- Diluted A share EPS: Euro (0.39) ($(0.43) per ADS) based on an
average of 1.18 billion A shares
BALANCE SHEET ITEMS:
-- Operating working capital: Euro 1,260 million, a sequential
decrease of Euro 288 million
-- Cash and equivalents: Euro 6,206 million, compared to Euro
6,109 million at the end of Q4 2002
-- Net Cash: Euro 514 million
-- Gearing: (11%)
-- Operating Cash Flow: Euro (94) million
About Alcatel Alcatel provides end-to-end communications solutions, enabling carriers, service providers and enterprises to deliver contents to any type of user, anywhere in the world. Leveraging its long-term leadership in telecommunications networks A telecommunications network is a of telecommunications links and nodes arranged so that messages may be passed from one part of the network to another over multiple links and through various nodes. equipment as well as its expertise in innovative applications and network services, Alcatel enables its customers to focus on optimizing their service offerings and revenue streams. With sales of Euro 16.5 billion in 2002, Alcatel operates in more than 130 countries. For more information, http://www.alcatel.com. "Safe Harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. " statement under the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995: This press release contains forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc (i) Alcatel's performance in future periods, including without limitation, with respect to second quarter 2003 revenue, operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. and, and 2003 breakeven points (ii) Alcatel's ability to remain competitive and a leader in the industries in which it operates, and its future growth including without limitation growth in market share, the telecom industry and market conditions in general; and (iii) the benefits to Alcatel in 2003 from its restructuring efforts. These forward-looking statements are based on current expectations, forecasts and assumptions that involve risks and uncertainties that could cause actual outcomes and results to differ materially from those projected. These risks and uncertainties include: whether Alcatel can continue to implement its restructuring efforts and whether these efforts will achieve their expected benefits, including contributing to both improved gross margins and the achievement of breakeven targets, among other benefits; the economic slowdown For articles with similar titles, see Slow Down (disambiguation). A slowdown is an industrial action in which employees perform their duties but seek to reduce productivity or efficiency in their performance of these duties. , in general, and setbacks in Alcatel's customers' businesses in particular; customer demand for Alcatel's products and services; control of costs and expenses; international growth; conditions and growth rates Growth Rates The compounded annualized rate of growth of a company's revenues, earnings, dividends, or other figures. Notes: Remember, historically high growth rates don't always mean a high rate of growth looking into the future. in the telecommunications Communicating information, including data, text, pictures, voice and video over long distance. See communications. industry and general domestic and international economic conditions; and the impact of each of these factors on expected sales increases and realization of positive operating income. For a further list and description of such risks and uncertainties, see the reports filed by Alcatel with the Securities and Exchange Commission. Alcatel disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Upcoming Events/Announcements July 29, 2003 Q2 Earnings Announcement Oct. 30, 2003 Q3 Earnings Announcement
Appendix
Restatement of 2002 and 2001 Sales and Income from Operations
reflecting the new organizational structure as of January 1, 2003
2002
1) Net Sales
In millions of euros Full Year
Q1 Q2 Q3 Q4 2002
------ ------ ------ ------- ----------
Fixed Communications 2,132 2,096 1,583 2,011 7,822
Mobile Communications 1,176 1,110 973 1,283 4,542
Private Communications 1,141 1,151 1,042 1,330 4,664
Other and Eliminations (153) (122) (90) (116) (481)
Total Group 4,296 4,235 3,508 4,508 16,547
2) Income from operations
In millions of euros Full Year
Q1 Q2 Q3 Q4 2002
----- ----- ----- ----- ----------
Fixed Communications (271) (204) (293) (188) (956)
Mobile Communications (5) 28 50 131 204
Private Communications (10) 36 35 105 166
Other and Eliminations (57) (37) (19) (28) (141)
Total Group (343) (177) (227) 20 (727)
2001
1) Net Sales
In millions of euros Full Year
Q1 Q2 Q3 Q4 2001
------ ------ ------ ------ -----------
Fixed Communications 3,585 3,936 3,209 3,298 14,028
Mobile Communications 1,160 1,148 1,069 1,494 4,871
Private Communications 1,487 1,578 1,360 1,781 6,206
Other and Eliminations (441) (299) (297) (223) (1,260)
Total Group 5,791 6,363 5,341 6,350 23,845
2) Income from operations
In millions of euros Full Year
Q1 Q2 Q3 Q4 2001
------- ------ ------ ------ ----------
Fixed Communications 175 175 (89) (404) (143)
Mobile Communications (84) (103) (100) (67) (354)
Private Communications 14 84 15 43 156
Other and Eliminations 14 21 (29) 7 13
Total Group 119 177 (203) (421) (328)
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