Lucent to cut 10,000 staff in restructuring
11 October 2002 -- Lucent Technologies, Murray Hill, NJ, US, today announced a further 10,000 job cuts as part of a "more aggressive" restructuring plan.
-- to lower quarterly EPS revenue breakeven point to USD2.5bn
-- reaffirms sequential revenue decline of 20 - 25% for Q4
-- Q4 loss per share will be significantly larger than previously
announced USD0.45 due to "additional charges"
-- cancels USD1.5bn credit facility with no outstanding balance
11 October 2002 -- Lucent Technologies, Murray Hill, NJ, US, today announced a further 10,000 job cuts as part of a more aggressive restructuring plan. It hopes the changes will take its quarterly earnings per share (EPS) breakeven revenue level to USD2.5bn. The company had previously set a target range of USD2.5-USD3.0bn.
"Despite the market challenges, we intend to return to profitability in fiscal 2003 and we are taking more aggressive restructuring actions to bring our breakeven down even further," said Lucent Technologies CEO Patricia Russo.
The company indicated it still expects a 20-25% sequential decline from third fiscal quarter revenues of USD2.95bn, consistent with its previous guidance.
"In the light of our revised forecasts for fiscal 2003 and our new breakeven plan developed in the last few weeks, we re-evaluated several balance sheet items, including inventory," said Lucent's Chief Financial Officer Frank D'Amelio.
"The resulting charges will significantly increase the previously forecasted pro forma loss of USD0.45 per share for Q4. Although we have not finalised our results at this point, we anticipate an increase in the pro forma loss of up to USD0.20 per share." In addition, the company will record a restructuring charge of approximately USD1bn.
The company will also record a charge to equity of about USD3bn due to a decline in pension assets in its management pension plan, primarily as a result of declines in the equity markets. While the plan meets the requirements of ERISA's funding rules and does not require cash contributions at this time, accounting standards dictate that the charge be taken now.
Based on the current set of plans and actions, the company expects its employee headcount to reach approximately 35,000 by the end of fiscal 2003. This is a reduction of an additional 10,000 employees from the previously anticipated level of 45,000 employees at the end of calendar year 2002. The company said it would provide further details on these restructuring actions and their financial impact when it announces earnings on Oct. 23.
"Lucent continues to have sufficient liquidity to fund its operations and business plans," said D'Amelio. With the company's new restructuring plan and a lower breakeven level, the company expects to have more than USD2bn in cash at the end of fiscal 2003 without utilizing any new credit facility.
The company said it had cash and marketable securities of approximately USD4.4bn as of 30 September. The USD1bn decline from the prior period includes about USD200m in cash that was part of previously announced business restructuring charges and about USD200m associated with a previously announced lawsuit.
Company cancelled credit facilities
The company also announced that it has cancelled its USD1.5bn credit facility and its $500 million accounts receivable (AR) securitisation vehicle in order to avoid an anticipated default on the financial covenants. Lucent had no outstanding balance on the credit facility, which was scheduled to expire in February 2003, and nothing drawn against the AR securitization vehicle.
"Since we didn't expect to draw on our existing credit facility before it expired in February, we thought it made the most sense to cancel the facility now instead of risking the anticipated default on our covenants," said D'Amelio. "We are in discussions with our bankers concerning a new and smaller credit facility."
Furthermore, the company has notified lenders that it will exercise its right to re-purchase certain real estate properties, for approximately USD100m, under existing lease agreements. These facilities will be sold as part of the restructuring efforts. The company is taking this action given the high probability of defaulting on the terms of the agreement.
Lucent held an investor's conference call today, which will available on the website www.lucent.com/investor/conference/webcast2. It will be maintained on the site for replay through October 18.