Filter
Top Products
F-44
Fair value was determined using quoted market prices or the anticipated cash flows discounted at a rate commensurate with the risks
involved. Offsetting these charges were revisions of $55 to prior write downs of assets held for sale related primarily to additional
proceeds from disposals of equipment from Optical Networks and other segments in excess of amounts previously expected and
adjustments to original plans or estimated amounts for certain facility closures across all segments.
Within Optical Networks, Nortel Networks performed assessments of certain plant and equipment due to the then current market
conditions and the delay in the anticipated recovery of that segment and concluded that the assets’ carrying values were not fully
recoverable from estimated future cash flows. As a result, Nortel Networks recorded a charge to income of $358 to write down the value
of this equipment to its fair value less costs to sell. Included in the $358 write down was $34 related to equipment held for sale, which
was part of the Bookham Technology plc (“Bookham”) transaction (see note 10).
Intangible asset impairments of $27 reflected write downs in acquired technology associated with Xros, Inc. (“Xros”), the 980 NPLC
business and CoreTek.
Goodwill impairment charges were $595. As a result of the continued decline during 2002, in both Nortel Networks overall market value
generally and within Optical Networks specifically, Nortel Networks as part of its review of financial results during the year ended
December 31, 2002, evaluated the goodwill associated with the businesses within Optical Networks for potential impairment. The
conclusion of those evaluations was that the fair value associated with the businesses within Optical Networks could no longer support
the carrying value of the remaining goodwill associated with them. As a result, Nortel Networks recorded a goodwill impairment charge
of $595. Fair value was estimated using the then expected present value of discounted future cash flows of the businesses within Optical
Networks. The discount rate used ranged from 12 to 16 percent and the terminal values were estimated based on terminal growth rates
ranging from 3 to 5 percent. The assumptions supporting the estimated future cash flows, including the discount rate and estimated
terminal values, reflected management’s best estimates.
Year ended December 31, 2001
For the year ended December 31, 2001, Nortel Networks recorded total special charges of $14,816, which were net of revisions of $127
relatedtoprioraccruals.
Workforce reduction charges of $1,174 were related to the cost of severance and benefits associated with approximately 36,100
employees notified of termination. The workforce reduction was primarily in the U.S., Canada and EMEA and extended across all
segments. In addition to these charges were revisions to prior accruals of $42 which were primarily related to termination benefits where
actual costs were higher than the estimated amounts across all segments. During the year ended December 31, 2001, the workforce
reduction provision balance was drawn down by cash payments of $1,003 and offset by $14 of non-cash pension settlement and
curtailment costs attributable to the notified employee group charged against the provision.
Contract settlement and lease costs of $897 related to negotiated settlements to cancel or renegotiate contracts and net lease charges
related to a number of leased facilities (comprised of office, warehouse and manufacturing space) and leased manufacturing equipment
that were no longer required, across all segments. Offsetting these charges were revisions to prior accruals of $108 primarily related to
contract settlement costs which were lower than the estimated amounts across all segments. During the year ended December 31, 2001,
the provision balance for contract settlement and lease costs was drawn down by cash payments of $110. The remaining provision
balance was net of approximately $496 in estimated sublease revenues.
Plant and equipment charges of $1,000 included write downs of $167 for owned facilities, $435 for leasehold improvements and certain
information technology equipment associated with the exiting of leased and owned facilities and $398 for certain plant and
manufacturing related equipment. Owned facility write downs of $167 included $76 for specific owned facilities across all segments
primarily within the U.S., Canada and EMEA and $91 for a specialized manufacturing facility in the U.S. within Optical Networks. The
carrying values of the above owned facilities have been reflected at their net realizable value based on market assessments for general
purpose facilities. Offsetting these charges were revisions of $59 to prior write downs resulting primarily from adjustments to original
plans or estimated amounts for certain facility closures. These revisions related primarily to global operations and Optical Networks.
Plant and manufacturing related equipment write downs of $398 included $103 for equipment within global operations, and $295 for
specialized plant infrastructure and equipment within Optical Networks.