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BCE Announces Second Quarter Results - Total company: revenue up 7% - EBITDA up 11%
- Core operations: revenue up 10% - EBITDA up 8%
Montréal (Québec),July 25 2001 --BCE reported cash baseline earnings of
$304 million, $0.38 per common share, in the second quarter ended June 30,
2001, a 38% increase compared with proforma (see note 1) cash baseline
earnings for the same quarter last year. Total revenue was $5.7 billion, a 7%
increase over proforma revenue last year. Earnings before interest, taxes,
depreciation and amortization (EBITDA) were $1.9 billion, up 11% compared with
proforma EBITDA for the second quarter of 2000.
"BCE's results in the second quarter are in line with expectations," said
Jean C. Monty, Chairman and Chief Executive Officer of BCE Inc. "With the
continued focus on the execution of our business plans, our core operations
achieved revenue growth of 10%, EBITDA growth of 8%, and cash baseline
earnings growth of 42%, despite continuing indications of a softer economy."
OPERATIONAL HIGHLIGHTS (Q2 2001 vs Q2 2000)
- High Speed Internet (DSL) subscribers grew to 529,000;
- Bell Canada's data revenue was up 27% to $878 million;
- Cellular and PCS subscribers grew 26% to surpass 3 million;
- Bell ExpressVu subscribers grew 61% to 847,000;
- Bell Globemedia revenue was $297 million;
- Teleglobe data revenue grew 49% to $168 million;
- BCE Emergis revenue grew 33% to $159 million.
Mr. Monty commented. "At Bell Canada, we experienced solid subscriber
growth in the key growth areas of wireless, High Speed Internet (DSL) and
satellite T.V. BCE Emergis continued to drive its expansion into the U.S. and
that revenue now represents over 40% of the total. Bell Globemedia combined
its Interactive businesses under a single leadership to provide greater
opportunities for leveraging our on-line properties. And Teleglobe made
significant progress in the completion of its network deployment."
"Finally, BCE's convergence strategy of enhancing our core connectivity
with value-added services such as e-commerce and content is gaining momentum
with numerous initiatives underway, many of which will be launched this fall."
After baseline adjustments of $335 million mostly attributable to
goodwill expense, mainly for Teleglobe and BCE Emergis, and losses at Bell
Canada International, the net loss applicable to common shares was $31 million
in the second quarter of 2001.
OUTLOOK
In February, BCE provided the following guidance for 2001: revenue in the
range of $23 to $25 billion; EBITDA in the range of $7.5 to $8.0 billion; and
cash baseline earnings per share in the $1.57 to $1.62 range. BCE's management
continues to believe it is on track to meet the lower end of this guidance.
For the third quarter, BCE expects revenue in the $5.8 billion to $6.2
billion range; EBITDA in the $1.9 billion to $2.1 billion range and cash
baseline earnings per share in the $0.39 to $0.42 range.
RESULTS BY OPERATING GROUP (unaudited)
BCE's activities include: Bell Canada (Canadian connectivity), Bell
Globemedia (content), Teleglobe (global connectivity), BCE Emergis (commerce)
and BCE Ventures (other BCE investments).
<<
_________________________________________________________________________
($ millions, except per share amounts)
______________________________________
Second Quarter Six Months
For the period ended June 30th 2001 2000(1) 2001 2000(1)
_________________________________________________________________________
_________________________________________________________________________
Revenue
Bell Canada 4,248 3,875 8,355 7,561
Bell Globemedia 297 296 603 572
Teleglobe 542 488 1,048 989
BCE Emergis 159 120 302 193
BCE Ventures 764 812 1,422 1,713
Corporate, Intercompany
eliminations, and Other (303) (235) (517) (486)
______ ______ _______ _______
Total revenue 5,707 5,356 11,213 10,542
_________________________________________________________________________
_________________________________________________________________________
Cash baseline earnings(2)
Bell Canada 306 267 578 511
Bell Globemedia 6 10 9 7
Teleglobe(3) (46) (76) (49) (99)
BCE Emergis 11 6 17 3
BCE Ventures (6) 5 (6) 20
Corporate, Intercompany
eliminations, and Other 33 8 57 12
______ ______ _______ _______
Cash baseline earnings
applicable to
common shares 304 220 606 454
Cash baseline earnings per
common share 0.38 0.27 0.75 0.56
_________________________________________________________________________
>>
(1) Proforma results for 2000 reflect BCE's new organizational structure
and consolidate Teleglobe Inc., CTV (including NetStar), The Globe
and Mail and Globe Interactive.
(2) BCE is reporting on a "cash baseline earnings" basis which excludes
baseline adjustments.
(3) Beginning in 2001, cash baseline earnings for Teleglobe (Teleglobe
Communications group) are reflected in the Teleglobe segment and cash
baseline earnings for Excel are reflected in BCE Ventures. For 2000,
cash baseline earnings for Teleglobe Inc., which includes Teleglobe,
Excel and Corporate, are presented in the Teleglobe segment.
SECOND QUARTER REVIEW (Q2 2001 vs Q2 2000, unless indicated)
BELL CANADA (Canadian Connectivity)
The Bell Canada segment includes Bell Canada, Aliant, Bell ExpressVu and
Bell Canada's interests in other Canadian telcos.
- Revenue in the second quarter was up 10% to $4.2 billion due mainly to
strong growth in data operations, local and access services, wireless
services and Bell ExpressVu. Local and access services revenues were up
7% at $1.6 billion. Long distance services revenue decreased by 7% to
$645 million mainly due to lower prices. Data revenue increased 27% to
$878 million.
- DSL High Speed Internet net activations reached 63,000 in the second
quarter compared with 49,000 for the same period in 2000.
- Wireless revenue was up 26% to $447 million due primarily to growth in
new activations and higher average revenue per subscriber. There were
151,000 net additions in the quarter. Bell maintained industry leading
churn demonstrating its continued commitment to and focus on customer
service.
- Bell ExpressVu had revenue of $115 million in the quarter, a 69%
increase compared with the same period last year. Subscribers increased
by 51,000 to reach 847,000. Subscriber activations in urban areas
accounted for 65% of total new activations in the quarter.
- Bell's EBITDA grew 7% in the second quarter to $1.7 billion. Excluding
Bell ExpressVu, EBITDA was $1.8 billion.
Bell Canada reported statutory revenue of $3.5 billion in the second
quarter compared with $3.2 billion in the same quarter of 2000. Statutory net
earnings applicable to common shares were $426 million in the quarter compared
with $383 million for the same period last year.
BELL GLOBEMEDIA (Content)
Bell Globemedia includes CTV, The Globe and Mail and Bell Globemedia
Interactive.
- Bell Globemedia revenue was $297 million in the quarter essentially
flat compared with proforma revenue for the same period last year.
Advertising revenue decreased by 1% to $213 million as a result of the
general slowdown in advertising demand. Subscriber revenue was up 3% to
$63 million. Production revenue in the quarter reached $21 million
compared with $19 million in the second quarter of 2000.
- Television represented 75% of the total revenue while print and new
media represented 21% and 4% respectively.
- EBITDA was $41 million in the second quarter compared with $54 million
for the same period last year.
TELEGLOBE (Global Connectivity)
Teleglobe refers to the Teleglobe Communications group.
- Teleglobe contributed revenue of $542 million to BCE, up 11% compared
with the second quarter of last year.
- Data and hosting revenue reached $168 million, a 49% increase compared
with the second quarter of 2000 and a 10% increase compared with the
previous quarter.
- Voice revenue was $374 million, essentially flat compared with the
second quarter of 2000 and represented a 6% increase from the previous
quarter.
- EBITDA was $24 million in the second quarter compared with $(9) million
in the same period last year and $29 million in the first quarter of
2001.
- During the quarter, Teleglobe announced the purchase of additional
wavelengths (lit fiber) from Williams, Broadwing and KPNQwest to
accelerate the deployment of its network.
BCE EMERGIS (Commerce)
- BCE Emergis' revenue reached $159 million in the quarter, up 33%
compared with the same period in 2000 with all three business units -
Canadian, U.S. and eHealth Solutions units - achieving strong results.
- EBITDA was $31 million in the quarter, up 55% compared with the second
quarter of 2000.
- BCE Emergis announced a partnership with Visa U.S.A. that significantly
expands the penetration of its electronic invoice presentment and
payment technology in the U.S. and beyond. Emergis' eHealth Solution
unit also expanded its U.S. presence and reach mainly with the
acquisition of Associates for Health Care (AHC), a leader in health
care cost management.
BCE VENTURES (Non-core Investments)
BCE Ventures includes the activities of BCI, CGI, Telesat, Excel and
other investments.
- BCE Ventures' revenue was $764 million in the quarter compared with
$812 million in the same period of 2000. The decrease is primarily
attributable to lower revenue at Excel.
- EBITDA was $119 million in the quarter compared with $43 million in the
second quarter of 2000.
OTHER
Teleglobe Inc. reported statutory revenue of US $547 million in the
second quarter compared with US $599 million in the second quarter of 2000.
Statutory net loss applicable to common shares was US $104 million in the
quarter compared with US $258 million for the same period in 2000.
BCE is Canada's largest communications company. It has more than 22
million customer connections through the wireline, wireless, data/Internet and
satellite services it provides, largely under the Bell brand. BCE leverages
those connections with extensive content creation capabilities through Bell
Globemedia which features some of the strongest brands in the industry 3/4
CTV, Canada's leading private broadcaster, The Globe and Mail, Canada's
National Newspaper, and Sympatico-Lycos and Globe Interactive, leading
Canadian Internet portals. As well, BCE has extensive e-commerce capabilities
provided under the BCE Emergis brand and serves international customers
through Teleglobe, a global connectivity, content distribution and Internet
hosting company. BCE shares are listed in Canada, the United States and
Europe.
Supplementary financial information is available in the "Investors"
section of BCE's Web site at www.bce.ca.
BCE's second quarter 2001 conference call with analysts is scheduled for
8:30 a.m. Eastern time today. You may participate by phone, dial (416) 695-
5801 or via an audio webcast from our Internet site at www.bce.ca.
A replay of the conference call with analysts can be heard between
12:00 p.m. Eastern time Wednesday, July 25 and 12:00 p.m. Eastern time
Wednesday, August 1. To access the replay facility, dial (416) 695-5800 -
access code: 775558. The audio webcast will also be archived over the same
period on BCE's Web site.
CAUTION CONCERNING FORWARD-LOOKING STATEMENTS
Certain statements made in this press release, including, but not limited
to, the financial guidance appearing under the "Outlook" section, are forward-
looking and are subject to important risks and uncertainties. These statements
do not reflect the potential impact of any mergers, acquisitions, other
business combinations or divestitures that may be completed after the date
hereof. The results or events predicted in these statements may differ
materially from actual results or events. Factors which could cause results or
events to differ materially from current expectations include, among other
things: current negative trends in global market and economic conditions which
impact the demand for, and costs of, products and services; changes in
customer purchase patterns and, more specifically, the fact that the purchase
of certain services provided by the BCE group of companies is more subject to
be adversely affected by economic slowdowns; the financial condition and
credit risk of customers; uncertainties regarding collectibility of
receivables; uncertainty as to whether BCE's strategies (including its
convergence strategy) will yield the expected benefits, synergies and growth
prospects; the intensity of competitive activity and its resulting impact on
the ability to retain existing, and attract new, customers, and the consequent
impact on pricing strategies, revenues, new product offerings and network
capacity; the ability to reduce operating costs; the level of expenditures
necessary to expand operations, increase the number of subscribers, provide
new services, build and update networks and maintain or improve quality of
service, and the availability and cost of capital required to fund such
expenditures; unanticipated higher capital spending for, or delays in
deployment of, new technologies and initiatives; Teleglobe's GlobeSystem
initiative requiring more capital than anticipated to complete, or not being
completed in time, or insufficient financing being available to complete
GlobeSystem; the ability to increase revenues from business segments other
than voice services (such as data and Internet services); uncertainties
related to the transformation of Teleglobe from a voice-driven global carrier
to a global data and Internet provider; loss of network capacity or other
interruption in service resulting from the failure by key suppliers to
continue to provide to Teleglobe network capacity; the uncertainties of the
Internet including its impact on network capacity and the Internet economy
growing at a slower pace than is currently anticipated; the level of adoption
of e-commerce and BCE Emergis' ability to expand its operations in the United
States; the impact of rapid technological and market change and the resulting
potential technological obsolescence of current networks and equipment and the
ability to deploy new technologies; the ability to make acquisitions and/or
integrate the operations of acquired businesses in an effective manner; the
impact of consolidations in the telecommunications and media industries; stock
market volatility; the availability of, and ability to retain, key personnel;
the impact of adverse changes in laws or regulations or of adverse regulatory
initiatives or proceedings; and the final outcome of pending or future
litigation.
For additional information with respect to certain of these and other
factors, see the reports on Forms 6-K and 40-F filed by BCE with the U.S.
Securities and Exchange Commission and BCE's filings with the Canadian
securities commissions. The forward-looking statements contained in this press
release represent BCE's expectations as of July 25, 2001 and, accordingly, are
subject to change after such date. However, BCE disclaims any intention or
obligation to update or revise any forward-looking statements, whether as a
result of new information, future events or otherwise.
BCE Inc.
Consolidated
Financial Statements
<<
Second Quarter 2001
________________________________________________________________________
Consolidated Statements of Operations (unaudited)
________________________________________________________________________
($ millions, except per share amounts)
Three months Six months
For the period ended June 30 2001 2000 2001 2000
________________________________________________________________________
Operating revenues 5,707 4,199 11,213 8,176
Operating expenses (5,016) (3,372) (9,884) (6,516)
Restructuring and other charges
(Note 2) - - (239) -
_______ _______ _______ _______
Operating income 691 827 1,090 1,660
Gains on reduction of ownership
in subsidiary and significantly
influenced companies 14 - 78 -
Equity in net losses of significantly
influenced companies (1) (51) (4) (63)
Other income (Note 3) 7 (30) 3,725 (18)
Impairment charge (Note 4) - - (2,049) -
_______ _______ _______ _______
Earnings from continuing operations
before the under-noted items 711 746 2,840 1,579
_______ _______ _______ _______
Interest expense - long-term debt (303) (249) (595) (455)
- other debt (87) (71) (174) (136)
_______ _______ _______ _______
Total interest expense (390) (320) (769) (591)
_______ _______ _______ _______
Earnings from continuing operations
before income taxes and
non-controlling interest 321 426 2,071 988
Income taxes (286) (288) (1,284) (610)
Non-controlling interest (50) (44) (105) (108)
_______ _______ _______ _______
Earnings (loss) from continuing
operations (15) 94 682 270
Discontinued operations (Note 5) - (51) 283 3,945
_______ _______ _______ _______
Net earnings (loss) (15) 43 965 4,215
Dividends on preferred shares (16) (19) (34) (42)
_______ _______ _______ _______
Net earnings (loss) applicable to
common shares (31) 24 931 4,173
________________________________________________________________________
Net earnings (loss) per common share
- basic (Note 6)
Continuing operations (0.04) 0.12 0.80 0.35
Discontinued operations - (0.08) 0.35 6.13
Net earnings (loss) (0.04) 0.04 1.15 6.48
Net earnings (loss) per common share
- diluted (Note 6)
Continuing operations (0.04) 0.11 0.79 0.34
Discontinued operations - (0.08) 0.35 6.06
Net earnings (loss) (0.04) 0.03 1.14 6.40
Dividends per common share 0.30 0.30 0.60 0.64
Average number of common shares
outstanding (millions) 807.4 644.5 807.7 644.3
________________________________________________________________________
________________________________________________________________________
Consolidated Statements of Retained Earnings (unaudited)
________________________________________________________________________
($ millions)
Three months Six months
For the period ended June 30 2001 2000 2001 2000
________________________________________________________________________
Balance at beginning of period 2,118 11,822 1,521 7,894
Net earnings (loss) (15) 43 965 4,215
_______ _______ _______ _______
2,103 11,865 2,486 12,109
Dividend - Preferred shares (16) (19) (34) (42)
- Common shares (242) (193) (484) (412)
- Distribution of
Nortel Networks
common shares - (10,114) - (10,114)
_______ _______ _______ _______
(258)(10,326) (518) (10,568)
Premium on redemption of common
shares (Note 10) - - (108) -
Other 2 15 (13) 13
_______ _______ _______ _______
(256)(10,311) (639) (10,555)
_______ _______ _______ _______
Balance at end of period 1,847 1,554 1,847 1,554
________________________________________________________________________
________________________________________________________________________
Consolidated Balance Sheets (unaudited)
________________________________________________________________________
($ millions)
June 30 December 31
2001 2000
ASSETS
Current assets
Cash and cash equivalents 1,793 260
Accounts receivable 4,312 4,344
Other current assets 1,511 2,096
________ _______
Total current assets 7,616 6,700
Investments in significantly influenced
and other companies 1,087 1,648
Capital assets 24,862 22,301
Future income taxes 683 1,117
Deferred charges and other assets 3,539 3,313
Goodwill 15,766 16,304
_________ ________
Total assets 53,553 51,383
________________________________________________________________________
LIABILITIES
Current liabilities
Accounts payable and accrued liabilities 4,975 5,486
Income and other taxes payable 603 144
Debt due within one year 4,615 5,884
_________ ________
Total current liabilities 10,193 11,514
Long-term debt 15,076 14,044
Future income taxes 1,008 715
Other long-term liabilities 3,975 3,885
_________________________________________ _________ ________
Total liabilities 30,252 30,158
_________________________________________ _________ ________
Non-controlling interest 5,593 3,764
_________________________________________ _________ ________
SHAREHOLDERS' EQUITY
Preferred shares 1,300 1,300
_________ ________
Common shareholders' equity
Common shares (1) 13,811 13,833
Contributed surplus (Note 10) 980 985
Retained earnings 1,847 1,521
Currency translation adjustment (230) (178)
_________ ________
Total common shareholders' equity 16,408 16,161
_________________________________________ _________ ________
Total shareholders' equity 17,708 17,461
_________________________________________ _________ ________
Total liabilities and shareholders' equity 53,553 51,383
________________________________________________________________________
(1) At June 30, 2001, 807,623,266 (809,861,531 at December 31, 2000) BCE
Inc. common shares and 18,462,776 (9,114,695 at December 31, 2000)
BCE Inc. stock options were outstanding. The stock options were
issued under BCE's Long-Term Incentive Stock Option Programs and are
exercisable on a one-for-one basis for common shares of BCE Inc.
Additionally, as a result of the acquisition of Teleglobe Inc. on
November 1, 2000, Teleglobe Inc. stock option holders will receive,
upon exercise of their stock options, 0.91 of a BCE Inc. common share
for each Teleglobe Inc. stock option held. At June 30, 2001, the
Telegobe Inc. stock options outstanding were exercisable into
13,566,663 BCE Inc. common shares (18,934,537 at December 31, 2000).
________________________________________________________________________
Consolidated Statements of Cash Flows (unaudited)
________________________________________________________________________
($ millions)
Three months Six months
For the period ended June 30 2001 2000 2001 2000
________________________________________________________________________
Cash flows from operating activities
Earnings (loss) from continuing
operations (15) 94 682 270
Adjustments to reconcile earnings
from continuing operations to cash
flows from operating activities:
Depreciation and amortization 1,279 910 2,435 1,709
Restructuring and other charges (28) - 203 -
Gains on reduction of ownership
in subsidiary and significantly
influenced companies (14) - (78) -
Impairment charge - - 2,049 -
Net gains on disposal of investments (20) (7) (3,776) (23)
Future income taxes (69) 8 282 5
Dividends received in excess of
equity in net losses of
significantly influenced companies 3 55 13 79
Other items (322) (245) (386) (366)
Change in non-cash working capital
components (66) (176) (229) (768)
_______ _______ _______ _______
748 639 1,195 906
______________________________________ _______ _______ _______ _______
Cash flows from investing activities
Capital expenditures (1,703) (971) (3,699) (1,542)
Decrease of notes receivable 340 - 556 -
Investments (233) (2,615) (508) (3,876)
Divestitures 198 68 4,806 68
Other items (56) (30) (101) 23
_______ _______ _______ _______
(1,454) (3,548) 1,054 (5,327)
______________________________________ _______ _______ _______ _______
Cash flows from financing activities
Dividends paid on common and
preferred shares (258) (212) (518) (454)
Dividends paid by subsidiaries to
non-controlling interest (84) (80) (165) (180)
Increase (decrease) of notes payable
and bank advances (380) 530 (2,071) 2,213
Issue of long-term debt 393 807 1,379 1,039
Repayment of long-term debt (475) (363) (964) (513)
Redemption of preferred shares
by subsidiaries (210) - (346) (295)
Issue of common shares 9 17 56 31
Purchase of common shares
for cancellation - - (191) -
Issue of common shares,
preferred shares, convertible
debentures and equity-settled notes
by subsidiaries to
non-controlling interest 591 157 1,368 591
Other items 32 50 34 52
_______ _______ _______ _______
(382) 906 (1,418) 2,484
_______________________________________ _______ _______ _______ _______
Effect of exchange rate changes
on cash and cash equivalents (2) (8) 36 17
______________________________________ _______ _______ _______ _______
Cash (used in) provided by
continuing operations (1,090) (2,011) 867 (1,920)
Cash (used in) provided by
discontinued operations (15) (65) 666 (141)
_______ _______ _______ _______
Net (decrease) increase in
cash and cash equivalents (1,105) (2,076) 1,533 (2,061)
Cash and cash equivalents at
beginning of period 2,898 2,410 260 2,395
_______ _______ _______ _______
Cash and cash equivalents at
end of period 1,793 334 1,793 334
________________________________________________________________________
________________________________________________________________________
Segmented Information (unaudited)
________________________________________________________________________
($ millions)
Three Months Six Months
________________________________________________________________________
For the period ended June 30 2001 2000 2001 2000
________________________________________________________________________
________________________________________________________________________
Operating revenues
Bell Canada 4,248 3,875 8,355 7,561
Bell Globemedia 297 5 603 7
Teleglobe 542 - 1,048 -
BCE Emergis 159 120 302 193
Corporate and other, including
intercompany eliminations (189) (114) (352) (242)
_______ _______ _______ _______
Total core operating revenues 5,057 3,886 9,956 7,519
BCE Ventures 764 349 1,422 718
Intercompany eliminations (114) (36) (165) (61)
_______ _______ _______ _______
Total operating revenues 5,707 4,199 11,213 8,176
________________________________________________________________________
________________________________________________________________________
Earnings (loss) from continuing operations
Bell Canada 296 259 491 489
Bell Globemedia (40) (20) (73) (20)
Teleglobe (147) (20) (263) (26)
BCE Emergis (75) (54) (166) (82)
Corporate and other, including
intercompany eliminations 33 31 2,915 85
_______ _______ _______ _______
Total core earnings from continuing
operations 67 196 2,904 446
BCE Ventures (83) (100) (2,226) (170)
Intercompany eliminations 1 (2) 4 (6)
_______ _______ _______ _______
Total earnings (loss) from
continuing operations (15) 94 682 270
________________________________________________________________________
________________________________________________________________________
>>
"Notes to the Consolidated Financial Statements (unaudited)"
These interim consolidated financial statements should be read in
conjunction with the consolidated financial statements for the year ended
December 31, 2000, as set out on pages 36 to 60 of BCE Inc.'s (BCE) 2000
Annual Report.
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES
These interim consolidated financial statements have been prepared in
accordance with Canadian generally accepted accounting principles, using the
same accounting policies as outlined in Note 1 of the consolidated financial
statements for the year ended December 31, 2000, except as noted below. All
amounts are in Canadian dollars, except where otherwise noted. Certain
comparative figures in these consolidated financial statements have been
reclassified to conform to the current period presentation.
Effective January 1, 2001, BCE adopted the revised recommendations of the
Canadian Institute of Chartered Accountants (CICA) Handbook section 3500,
"Earnings Per Share" (EPS). The revised Handbook section requires the
presentation of both basic and diluted EPS on the face of the income statement
regardless of the materiality of the difference between them. In addition, the
treasury stock method is used to compute the dilutive effect of options,
warrants and similar instruments as opposed to the previously used imputed
earnings approach. The section also requires that a reconciliation of the
calculation of the basic and diluted EPS computations be disclosed.
In the first quarter of 2001, BCE also adopted the new recommendations of
the CICA Handbook section 1751, "Interim Financial Statements", which changes
the requirements for the presentation and disclosure of interim financial
statements and the accompanying notes.
NOTE 2. RESTRUCTURING AND OTHER CHARGES
During the first quarter of 2001, Bell Canada recorded a pre-tax charge
of $239 million ($143 million after tax) representing restructuring and other
charges of $210 million and $29 million, respectively. The restructuring
charge is related to employee severance, including enhanced pension benefits
and other directly related employee costs, for approximately 1,900 employees,
which resulted primarily from a decision to streamline support functions. The
restructuring program is expected to be substantially completed by the third
quarter of 2001. As at June 30, 2001, the remaining balance of the
restructuring provision relating to employee severance and other directly
related employee costs was $62 million. Other charges relate mainly to the
write-off of certain assets.
NOTE 3. OTHER INCOME
"Sale of Nortel Networks Corporation (Nortel Networks) Shares and
Settlement of Forward Contracts"
In March 2001, BCE recorded a gain of approximately $3.7 billion relating
to the settlement of short-term forward contracts on approximately 47.9
million Nortel Networks common shares as well as the sale of an equivalent
number of Nortel Networks common shares. These transactions resulted in total
proceeds of approximately $4.4 billion, of which $2.6 billion was used to
repay short-term debt. The remaining proceeds will be used to continue funding
the company's growth strategy.
NOTE 4. IMPAIRMENT CHARGE
In March 2001, after completion of an assessment of the carrying value of
BCE's investment in the Excel Communications group (Excel), an impairment
charge of $2,049 million was recorded. The assets of Excel were written down
to their estimated net recoverable amount, which was determined using the
undiscounted net future cash flows to be generated by these assets. The
primary factor contributing to the impairment is a lower than expected
operating profit due to a reduction in Excel's forecasted minute volumes and
average revenue per minute which are expected to continue in the foreseeable
future. As a result of this impairment charge, goodwill was reduced by $1,621
million and capital and other assets were reduced by $428 million.
<<
NOTE 5. DISCONTINUED OPERATIONS
________________________________________________________________________
________________________________________________________________________
Three months Six months
For the period ended June 30
($ millions) 2001 2000 2001 2000
________________________________________________________________________
Bell Canada International
(BCI) Latin American
CLECs and Asia Mobile segments - (44) 283 (97)
Nortel Networks - - - 4,055
ORBCOMM Global, L.P. - (7) - (13)
_______ _______ _______ _______
Total Discontinued operations - (51) 283 3,945
________________________________________________________________________
Effective February 23, 2001, BCI sold its 20% equity interest in KG
Telecommunications Co. Ltd. (KG Telecom) for an aggregate cash consideration
of approximately $785 million. KG Telecom represented BCI's last remaining
operation in its Asia Mobile business segment. Additionally, effective March
31, 2001, BCI adopted a formal plan of disposal for all of its operations in
its Latin American Competitive Local Exchange Carriers (CLECs) business
segment, composed of Axtel S.A. de C.V., Vésper S.A., Vésper Sao Paulo S.A.
and Vento S.A. Ltda. Consequently, the results of these segments have been
reported as discontinued operations.
The summarized balance sheets for the discontinued operations are as
follows:
________________________________________________________________________
________________________________________________________________________
($ millions) June 30 December 31
2001 2000
________________________________________________________________________
Current assets 87 204
Non-current assets 897 1,267
Current liabilities (360) (416)
Non-current liabilities (476) (637)
_______ _______
Net assets of discontinued operations 148 418
________________________________________________________________________
________________________________________________________________________
The summarized statements of operations for the discontinued operations
are as follows:
________________________________________________________________________
Three months Six months
For the period ended June 30 ($ millions) 2001 2000 2001 2000
________________________________________________________________________
Revenue - 135 53 258
______________________________________ _______ _______ _______ _______
Operating earnings from
discontinued operations, net of tax - (69) (118) 3,907
Gain on sale of discontinued operations,
net of tax - - 502 -
Non-controlling interest - 18 (101) 38
_______ _______ _______ _______
Net earnings (loss) from
discontinued operations - (51) 283 3,945
________________________________________________________________________
Note 6. EARNINGS PER SHARE
The following is a reconciliation of the numerators and the denominators
of the basic and diluted earnings per common share computations for earnings
from continuing operations:
________________________________________________________________________
________________________________________________________________________
Three months Six months
For the period ended June 30 2001 2000 2001 2000
________________________________________________________________________
Earnings (loss) from continuing
operations (numerator) ($ millions)
Earnings (loss) from
continuing operations (15) 94 682 270
Dividends on preferred shares (16) (19) (34) (42)
_______ _______ _______ _______
Earnings (loss) from
continuing operations - basic (31) 75 648 228
Exercise of put options by
CGI shareholders - (5) (1) (9)
_______ _______ _______ _______
Earnings (loss) from
continuing operations - diluted (31) 70 647 219
________________________________________________________________________
Weighted average number of common shares
outstanding (denominator) (millions)
Weighted average number of common shares
outstanding - basic 807.4 644.5 807.7 644.3
Exercise of stock options 2.6 2.3 3.2 2.3
Exercise of put options by
CGI shareholder 4.6 3.8 4.6 3.8
_______ _______ _______ _______
Weighted average number of common shares
outstanding - diluted 814.6 650.6 815.5 650.4
________________________________________________________________________
________________________________________________________________________
>>
Note 7. TELEGLOBE INC. ACQUISITION
During the first quarter of 2001, the purchase price allocation relating
to the BCE acquisition of Teleglobe Inc. on November 1, 2000 was finalized.
The final allocation of the purchase price was to tangible assets for $3.6
billion, tangible liabilities for $4.4 billion and goodwill for $8.1 billion.
As a result of the finalization of the purchase price allocation and the
finalization of the fiscal 2000 year-end financial statements of Teleglobe
Inc., BCE recorded a charge of $60 million relating to its share of asset
write-downs and one-time charges recorded by Teleglobe Inc. in the fourth
quarter of 2000.
Note 8. CREATION OF BELL GLOBEMEDIA INC.
On January 9, 2001, Bell Globemedia Inc. (Bell Globemedia), a Canadian
multi-media company in the fields of broadcasting, print and new media, was
created. BCE owns 70.1% of Bell Globemedia which includes CTV Inc. (CTV), The
Globe and Mail, Globe Interactive and Sympatico-Lycos Inc. (Sympatico-Lycos).
BCE transferred its interests in CTV, Sympatico-Lycos and other miscellaneous
media interests to Bell Globemedia. This transaction was accounted for at fair
value resulting in the recognition of a $33 million gain on reduction of
ownership in subsidiary companies. The acquisition of The Globe and Mail and
Globe Interactive was accounted for using the purchase method. The allocation
of the purchase price was to tangible assets for $172 million, tangible
liabilities for $63 million and goodwill for $668 million. Goodwill is being
amortized on a straight-line basis over 20 years.
Note 9. BUSINESS ACQUISITIONS
"Acquisition of additional interest in Algar Telecom Leste S.A (ATL)"
On March 27, 2001, Telecom Américas Ltd. (Telecom Américas), a joint
venture of BCI (BCI currently holds a 41.67% interest in Telecom Américas),
invested $470 million (US $300 million) in ATL, increasing Telecom Américas'
total economic ownership in ATL from 50% to 59%. Consequently, the accounting
for ATL was changed from proportionate consolidation to full consolidation as
of that date. As a result of this transaction, BCI indirectly invested $208
million (US $133 million) in ATL and increased its effective economic interest
from 22.1% to 26.1%. The acquisition of ATL was accounted for using the
purchase method. The allocation of BCI's proportionate interest of the
purchase price was to tangible assets for $483 million, tangible liabilities
and minority interest for $360 million and goodwill for $85 million. Goodwill
is being amortized on a straight-line basis over 12 years.
"Acquisition of additional economic interest in Americel S.A. (Americel)
and Telet S.A. (Telet)"
On March 30, 2001, Telecom Américas closed a transaction to purchase an
additional interest in the Brazilian cellular companies Telet and Americel for
US $153 million increasing its effective economic interest from 16.3% to
32.6%. This agreement represents one of the agreements announced on March 13,
2001, which will collectively result in the acquisition of an approximate
additional 65% economic interest in Telet and Americel (increasing Telecom
Américas' economic interest to approximately 81% in both companies) for an
aggregate purchase price of approximately US $580 million. The remaining
agreements are expected to close by the end of the third quarter of 2001.
"Acquisition of Tess S.A."
On April 9, 2001, Telecom Américas closed its previously announced
agreement to acquire, for total consideration of approximately US $950
million, a 100% interest in Tess S.A. (Tess), one of two B Band cellular
companies operating in the Brazilian state of Sao Paulo. The consideration
consisted of US $319 million in cash and US $631 million in notes payable,
which had, a fair value of US $571 million, making the effective purchase
price US $890 million. A majority of the voting rights will continue to be
held by the sellers, in accordance with regulations governing ownership of B-
Band licenses. Subsequently, on April 10, 2001, Telecom Américas announced
that it had granted to Bell South International Inc. (Bell South), an option
to purchase 50% of Telecom Américas stake in Tess. The exercise of the option
is subject to a number of conditions, including regulatory approval and lender
consents, and expires in October 2001. The acquisition of Tess was accounted
for using the purchase method. The preliminary allocation of BCI's
proportionate interest of the purchase price of $617 million was to tangible
assets for $793 million, tangible liabilities for $638 million and goodwill
for $462 million. Goodwill is being amortized on a straight-line basis over 12
years.
NOTE 10. NORMAL COURSE ISSUER BID
Under its Normal Course Issuer Bid program, during the first quarter of
2001, BCE purchased and cancelled approximately 4.5 million of its common
shares for an aggregate price of $191 million, of which $108 million was
charged to retained earnings as a premium on redemption of common shares and
$5 million was charged to contributed surplus. BCE may purchase from time to
time, no later than November 9, 2001, an additional 26.3 million of its common
shares at market prices.
-30-
For further information: Jean-Charles Robillard, Communications,
(514) 786-3908, Web site: www.bce.ca; George Walker, Investor
Relations,
(514) 870-2488 |
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