On March 16, communications infrastructure specialist Nortel Networks (NYSE:NT) released full-year earnings for the 2006 fiscal year, a period ended Dec. 31.

  • Legal costs and benefits, along with restructuring charges, added to up $114 million this year and a whopping $2.6 billion in 2005. Back out these one-time costs, and the tables are turned -- last year's $0.08 profits per share turned into this year's $0.20 loss.
  • I'd respect the increased cash position more if it wasn't matched by a larger debt load.
  • Nearly 9% higher sales sounds great, until you glance at what the competition is doing. LM Ericsson (NASDAQ:ERIC) grows trailing revenues at a 17% clip; Nokia (NYSE:NOK) musters 20%; archrival Cisco Systems (NASDAQ:CSCO) presents a 23% top-line growth rate; and JDS Uniphase (NASDAQ:JDSU) came up with a 45% year-over-year sales increase.
  • If this sounds negative, you should check out the company's Motley Fool CAPS page, where it has earned our lowest rating of one star. Too harsh? Get a 100% free CAPS account and chime in with your own analysis today.

(Figures in millions, except per-share data)

Income Statement Highlights

FY 2006

FY 2005

Change

Sales

$11,418

$10,509

8.6%

Net Profit

$28.0

($2,610)

N/A

EPS

$0.06

($6.02)

N/A

Diluted Shares

434.0

433.8

0.0%


Get back to basics with the income statement.

Margin Checkup

FY 2006

FY 2005

Change*

Gross Margin

38.9%

40.7%

(1.8)

Operating Margin

2.4%

(26.0%)

28.4

Net Margin

0.3%

(24.8%)

25.1
*Expressed in percentage points.

Margins are the earnings engine.

Balance Sheet Highlights

Assets

FY 2006

FY 2005

Change

Cash + ST Invest.

$3,492

$2,951

18.3%

Accounts Rec.

$2,785

$2,826

(1.5%)

Inventory

$1,989

$2,080

(4.4%)


Liabilities

FY 2006

FY 2005

Change

Accounts Payable

$1,125

$1,181

(4.7%)

Long-Term Debt

$4,464

$3,885

14.9%


The balance sheet reflects the company's health.

Cash Flow Highlights

FY 2006

FY 2005

Change

Cash From Ops.

$237

($179)

N/A

Capital Expenditures

$173

$248

(30.2%)

Free Cash Flow

$64

($427)

N/A

Owner Earnings

($74)

($657)

88.7%


Free cash flow is a Fool's best friend.

Related Foolishness:

Fool by Numbers is designed to give you the raw earnings information in a timely fashion, putting all the numbers you need in one easy-to-read place. But at The Motley Fool, we believe numbers tell only part of the story, so check Fool.com for more of our in-depth discussion of what the numbers mean.

At the time of publication, Anders Bylund had no position in any company mentioned. Fool rules are here.