The telecommunications industry suffered a severe business downturn during the early part of this decade. Lucent Technologies is one of the major equipment providers to this industry. At the top of the next page are the comparative income statements for Lucent Technologies for the fiscal years ended September 30, 2001 and 2000.
1. Prepare a horizontal analysis income statement for Lucent Technologies.
2. Interpret your analysis.
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Lucent Technologies Inc.
Consolidated Statements of Income
For the Years Ended September 30, 2000 and 2001
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In millions
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9/30/01
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9/30/00
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Revenues
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$ 21,294
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$28,904
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Costs
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19,236
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17,190
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Gross profit
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$ 2,058
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$11,714
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Operating expenses:
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Selling, general and administrative
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$ 7,410
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$ 5,610
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Research and development
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3,520
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3,179
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Other operating and restructuring expenses
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10,157
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559
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Total operating expenses
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$ 21,087
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$ 9,348
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Operating income (loss)
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$(19,029)
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$ 2,366
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Other income (expense)-net
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(357)
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333
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Interest expense
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518
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342
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Income (loss) from continuing operations before
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income tax expense (benefit)
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$(19,904)
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$ 2,357
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Income tax expense (benefit)
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(5,734)
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924
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Income (loss) from continuing operations
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$(14,170)
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$ 1,433
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