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BCE Announces Third Quarter Results Revenue up 6% - EBITDA up 7% - Cash baseline earnings up 11%
MONTREAL, (Québec),Oct. 24 2001 --BCE reported cash baseline earnings
of $322 million, $0.40 per common share, in the third quarter ended September
30, 2001, an 11% increase compared with proforma (see note 1) cash baseline
earnings for the same quarter last year. Total revenue was $5.4 billion, a 6%
increase over proforma revenue last year. Earnings before interest, taxes,
depreciation and amortization (EBITDA) were $1.9 billion, up 7% compared with
proforma EBITDA for the third quarter of 2000.
"BCE's results show solid growth in our key business drivers, despite a
continued softening of the economy," said Jean C. Monty, Chairman and Chief
Executive Officer of BCE Inc. "By remaining committed to the execution of our
plans, we delivered good performance both from a total company perspective and
from core operations."
OPERATIONAL HIGHLIGHTS (Q3 2001 vs Q3 2000 unless indicated)
- High Speed Internet (DSL) subscribers grew 18% over last quarter to
625,000;
- Bell Canada's data revenue was up 17% to $881 million;
- Cellular and PCS subscribers grew 25% to 3.2 million;
- Bell ExpressVu subscribers grew 57% to 930,000;
- Bell Globemedia revenue was $246 million;
- Teleglobe's EBITDA reached $38 million;
- BCE Emergis revenue grew 29% to $173 million.
"Bell Canada made strong gains in the quarter by significantly increasing
its subscriber base in wireless, High Speed Internet and satellite T.V.,"
commented Mr. Monty. "BCE Emergis was particularly successful in its
penetration of the U.S. market, signing significant agreements with key
players from the financial and health sectors. Bell Globemedia strengthened
its national reach through its interest in TQS, a Québec-based television
network. And as Teleglobe continues to build out its network, it is beginning
to see the economic benefits of serving clients from its own network
facilities."
"BCE also unveiled, as part of its convergence strategy, a series of
value-added products that leverage BCE's connectivity, commerce and content
capabilities. This first series of convergence products, which will be
launched through the remainder of the year, will give our customers more
choice, more control and more tools to personalize their information and
entertainment services and e-enable their businesses."
After baseline adjustments of $468 million, the net loss applicable to
common shares was $146 million in the quarter. Third quarter baseline
adjustments consisted mainly of losses at Bell Canada International, goodwill
expense and restructuring and other charges at Teleglobe.
OUTLOOK
BCE's financial guidance provided in February has been adjusted to
reflect the reclassification of Excel Communications as a discontinued
operation, following the announcement, in the third quarter, of an agreement
to sell Excel to VarTec. The accounting rules for discontinued operations
require the exclusion of Excel's operations from BCE's consolidated results
from continuing operations for all prior reporting periods as well as
prospectively. As a result the revenue range of BCE's guidance is reduced by
approximately $1.5 billion, which corresponds to Excel's planned 2001
contribution to BCE's revenue, to an adjusted range of $21.5 to $23.5 billion.
This change has no material impact on the EBITDA guidance range of $7.5 to
$8.0 billion and cash baseline earnings per share range of $1.57 to $1.62.
BCE's management continues to believe it is on track to meet the lower end of
this guidance.
RESULTS BY OPERATING GROUP (unaudited)
BCE's core activities include: Bell Canada (Canadian connectivity), Bell
Globemedia (content), Teleglobe (global connectivity) and BCE Emergis
(commerce). BCE Ventures consists of other BCE investments.
<<
_________________________________________________________________________
(C$ in millions, except per share amounts)
Third Quarter Nine Months
For the period ended September 30th 2001 2000(1) 2001 2000(1)
_________________________________________________________________________
Revenue
Bell Canada 4,337 4,063 12,692 11,624
Bell Globemedia 246 251 849 823
Teleglobe 491 518 1,539 1,507
BCE Emergis 173 134 475 327
BCE Ventures 412 337 1,172 1,071
Corporate, Intercompany eliminations,
and Other (280) (214) (764) (659)
_______ _______ _______ _______
Total revenue 5,379 5,089 15,963 14,693
_________________________________________________________________________
_________________________________________________________________________
Cash baseline earnings(2)
Bell Canada 310 318 888 829
Bell Globemedia (16) (13) (7) (6)
Teleglobe(3) (14) (42) (63) (137)
BCE Emergis 12 3 29 6
BCE Ventures(3) (4) 13 11 33
Corporate, Intercompany eliminations,
and Other 34 11 91 23
_______ _______ _______ _______
Cash baseline earnings applicable to
common shares 322 290 949 748
Cash baseline earnings per
common share 0.40 0.36 1.17 0.92
_________________________________________________________________________
(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 , and exclude Excel's results.
(2) BCE is reporting on a "cash baseline earnings" basis which excludes
baseline adjustments.
(3) In 2001, cash baseline earnings of Teleglobe consist of the results
of the Teleglobe Communications group. In 2000, however, cash
baseline earnings also included Teleglobe Marine's results and
interest expense on Excel's debt that will not be assumed by the
purchaser, which in 2001, are presented in BCE Ventures.
>>
THIRD QUARTER REVIEW (Q3 2001 vs Q3 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 third quarter was up 7% to $4.3 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 10% to
$663 million mainly due to lower rates. Data revenue increased 17% to
$881 million.
- DSL High Speed Internet net activations reached 96,000 in the third
quarter compared with 81,000 for the same period in 2000.
- Wireless revenue was up 21% to $490 million due primarily to strong
growth in cellular and PCS subscribers. There were 151,000 net
additions in the quarter. Bell continued to maintain its industry
leading churn reflecting its commitment to and focus on customer
service and innovation.
- Bell ExpressVu had revenue of $117 million in the quarter, a 44%
increase compared with the same period last year. Subscribers increased
by 83,000 over the previous quarter to reach 930,000. Subscriber
activations in urban areas accounted for 70% of total new activations
in the quarter compared with 65% in the previous quarter.
- Bell Canada's EBITDA grew 4% in the third quarter to $1.8 billion.
Excluding Bell ExpressVu, EBITDA was $1.9 billion, a 5% increase
compared with the third quarter of 2000.
BELL GLOBEMEDIA (Content)
Bell Globemedia includes CTV, The Globe and Mail and Bell Globemedia
Interactive.
- Bell Globemedia revenue was $246 million in the quarter compared with
proforma revenue of $251 million for the same period last year.
Advertising revenue decreased by 3% to $163 million, mostly
attributable to lower revenue in print as a result of a softening of
the economy. Subscriber revenue was up 5% to $64 million.
- Television represented 75% of the total revenue, print 19% and
Interactive 6%. The Interactive segment continued to expand, gaining a
2-percentage point compared with the previous quarter.
- EBITDA was $(6) million in the third quarter compared with $(4) million
for the same period last year.
- Bell Globemedia launched its first convergence product: TSNMAX.ca.
TELEGLOBE (Global Connectivity)
Teleglobe refers to the Teleglobe Communications group.
- Teleglobe contributed revenue of $491 million to BCE compared with
$518 million in the third quarter of last year and $542 million in the
previous quarter. Both data and voice revenues were lower as a result
of adverse market conditions.
- Data and hosting revenue was $139 million compared with $145 million in
the third quarter of 2000 and $168 million in the previous quarter.
- Voice revenue was $352 million compared with $373 million in the third
quarter of 2000 and $374 million in the previous quarter.
- EBITDA doubled over the third quarter of 2000 to $38 million and was up
58% compared with the previous quarter. The increase in EBITDA is
mainly attributable to the stabilization of voice margins and the
significant savings achieved in the quarter due to network migration
and cost control initiatives.
- In the third quarter, Teleglobe continued its GlobeSystem network
deployment increasing fibre capacity by 86% compared with the second
quarter of 2001.
BCE EMERGIS (Commerce)
- BCE Emergis' revenue reached $173 million in the quarter, up 29%
compared with the same period in 2000 with all three business units -
Canadian, U.S. and eHealth Solutions units - achieving strong results.
- EBITDA was $35 million in the quarter, up 35% compared with the third
quarter of 2000.
- BCE Emergis announced a series of significant agreements with key U.S.
and Canadian partners including The Principal Financial Group, Canada
Life and Bell Canada.
- In the quarter, 43% of BCE Emergis' total revenue originated from its
U.S. operations.
BCE VENTURES (Non-core Investments)
BCE Ventures includes the activities of BCI, CGI, Telesat and other
investments.
- BCE Ventures' revenue was $412 million in the quarter, up 22% compared
with the same period of 2000.
- EBITDA was $100 million in the quarter compared with $50 million in the
third quarter of 2000.
Following the announcement of the sale of Excel's North American
operations, subject to regulatory and other approvals, and the
discontinuation of its U.K. operations, BCE reclassified the results of
Excel as discontinued operations. Excel's results are therefore excluded
from BCE Ventures' revenue, EBITDA and cash baseline earnings.
OTHER
Bell Canada reported statutory revenue of $3.6 billion in the third
quarter compared with $3.4 billion in the same quarter of 2000. Statutory net
earnings applicable to common shares were $440 million in the quarter compared
with $293 million for the same period last year.
Teleglobe Inc. reported statutory revenue of US $311 million in the third
quarter compared with US $330 million in the third quarter of 2000. Statutory
net loss applicable to common shares was US $303 million in the quarter
compared with US $367 million for the same period in 2000.
BCE is Canada's largest communications company. It has close to
23 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 - CTV, Canada's leading private broadcaster, The Globe and Mail,
Canada's National Newspaper and Sympatico-Lycos, the leading Canadian Internet
portal. 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 third 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 Web site at www.bce.ca .
A replay of the conference call with analysts can be heard between
12:00 p.m. Eastern time Wednesday, October 24 and 12:00 p.m. Eastern time
Wednesday, October 31. To access the replay facility, dial (416) 695-5800
- access code: 866380. 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. The results or
events predicted in these statements may differ materially from actual results
or events. These statements do not reflect the potential impact of any
mergers, acquisitions, other business combinations or divestitures that may be
announced or completed after the date hereof. Other 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 purchasing 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 on schedule, 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; the impact of the CRTC's decision concerning the
review of the price caps regime for local services expected early in 2002; the
final outcome of pending or future litigation; and the risk that the
transaction for the sale of the North American operations of Excel to VarTec
Telecom will not close.
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 October 24, 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
Consolidated
Financial Statements
Third Quarter 2001
_________________________________________________________________________
Consolidated Statements of Operations (unaudited)
_________________________________________________________________________
($ millions, except per share amounts)
Three months Nine months
For the period ended September 30 2001 2000 2001 2000
_________________________________________________________________________
Operating revenues 5,379 4,386 15,963 12,562
Operating expenses (4,586) (3,456) (13,799) (9,972)
Restructuring and other
charges (Note 2) (130) - (369) -
________ ________ ________ _________
Operating income 663 930 1,795 2,590
Gains on reduction of ownership in
subsidiaries and joint ventures
(Note 3) 188 - 266 -
Equity in net losses of significantly
influenced companies (7) (107) (11) (153)
Other income (expense) (Note 4) (236) (108) 3,526 (126)
________ ________ ________ _________
Earnings from continuing operations
before the under-noted items 608 715 5,576 2,311
________ ________ ________ _________
Interest expense - long-term debt (303) (224) (896) (679)
- other debt (91) (96) (265) (232)
________ ________ ________ _________
Total interest expense (394) (320) (1,161) (911)
________ ________ ________ _________
Earnings from continuing operations
before income taxes and
non-controlling interest 214 395 4,415 1,400
Income taxes (305) (355) (1,601) (970)
Non-controlling interest 25 (30) (83) (140)
________ ________ ________ _________
Earnings (loss) from continuing
operations (66) 10 2,731 290
Discontinued operations (Note 5) (64) 649 (1,896) 4,584
________ ________ ________ _________
Net earnings (loss) (130) 659 835 4,874
Dividends on preferred shares (16) (19) (50) (61)
________ ________ ________ _________
Net earnings (loss) applicable
to common shares (146) 640 785 4,813
_________________________________________________________________________
Net earnings (loss) per common share
- basic (Note 6)
Continuing operations (0.10) (0.01) 3.32 0.36
Net earnings (loss) (0.18) 0.99 0.97 7.47
Net earnings (loss) per common share
- diluted (Note 6)
Continuing operations (0.10) (0.02) 3.29 0.33
Net earnings (loss) (0.18) 0.98 0.96 7.38
Dividends per common share 0.30 0.30 0.90 0.94
Average number of common shares
outstanding (millions) 807.9 644.7 807.8 644.4
_________________________________________________________________________
_________________________________________________________________________
Consolidated Statements of Retained Earnings (unaudited)
_________________________________________________________________________
($ millions)
Three months Nine months
For the period ended September 30 2001 2000 2001 2000
_________________________________________________________________________
Balance at beginning of period 1,847 1,554 1,521 7,894
Net earnings (loss) (130) 659 835 4,874
________ ________ ________ _________
1,717 2,213 2,356 12,768
Dividends - Preferred shares (16) (19) (50) (61)
- Common shares (243) (194) (727) (606)
- Distribution of Nortel
Networks common shares - - - (10,114)
________ ________ ________ _________
(259) (213) (777) (10,781)
Premium on redemption of common
shares (Note 8) - - (108) -
Other (2) 6 (15) 19
________ ________ ________ _________
(261) (207) (900) (10,762)
________ ________ ________ _________
Balance at end of period 1,456 2,006 1,456 2,006
_________________________________________________________________________
_________________________________________________________________________
Consolidated Balance Sheets (unaudited)
_________________________________________________________________________
($ millions)
September December
30 31
2001 2000
_________________________________________________________________________
ASSETS
Current assets
Cash and cash equivalents 1,088 260
Accounts receivable 4,758 4,344
Other current assets 1,372 2,096
________ _________
Total current assets 7,218 6,700
Investments in significantly influenced
and other companies 1,181 1,648
Capital assets 25,019 22,301
Future income taxes 845 1,117
Deferred charges and other assets 3,630 3,313
Goodwill 16,115 16,304
________ _________
Total assets 54,008 51,383
_________________________________________________________________________
LIABILITIES
Current liabilities
Accounts payable and accrued liabilities 5,669 5,486
Income and other taxes payable 655 144
Debt due within one year 4,525 5,884
________ _________
Total current liabilities 10,849 11,514
Long-term debt 15,199 14,044
Future income taxes 1,187 715
Other long-term liabilities 3,964 3,885
___________________________________________________ ________ _________
Total liabilities 31,199 30,158
___________________________________________________ ________ _________
Non-controlling interest 5,509 3,764
___________________________________________________ ________ _________
SHAREHOLDERS' EQUITY
Preferred shares 1,300 1,300
________ _________
Common shareholders' equity
Common shares (1) 13,822 13,833
Contributed surplus (Note 8) 980 985
Retained earnings 1,456 1,521
Currency translation adjustment (258) (178)
________ _________
Total common shareholders' equity 16,000 16,161
___________________________________________________ ________ _________
Total shareholders' equity 17,300 17,461
___________________________________________________ ________ _________
Total liabilities and shareholders' equity 54,008 51,383
_________________________________________________________________________
(1) At September 30, 2001, 808,143,000 (809,861,531 at December 31, 2000)
BCE Inc. common shares and 18,241,654 (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 September 30, 2001, the Teleglobe Inc. stock
options outstanding were exercisable into 12,335,640 BCE Inc. common
shares (18,934,537 at December 31, 2000).
_________________________________________________________________________
Consolidated Statements of Cash Flows (unaudited)
_________________________________________________________________________
($ millions)
Three months Nine months
For the period ended September 30 2001 2000 2001 2000
_________________________________________________________________________
Cash flows from operating activities
Earnings (loss) from continuing
operations (66) 10 2,731 290
Adjustments to reconcile earnings from
continuing operations to cash flows
from operating activities:
Depreciation and amortization 1,206 934 3,590 2,643
Restructuring and other charges 111 - 314 -
Gains on reduction of ownership in
subsidiaries and joint ventures (188) 1,113 (266) 1,113
Net gains on disposal of investments 139 (1,012) (3,637) (1,035)
Future income taxes 38 (55) 373 (50)
Dividends received in excess of equity
in net losses of significantly
influenced companies 5 85 18 152
Other items 19 (1) (370) (365)
Change in non-cash working capital
components (146) (87) (285) (855)
________ ________ ________ _________
1,118 987 2,468 1,893
________ ________ ________ _________
Cash flows from investing activities
Capital expenditures (1,408) (969) (5,088) (2,511)
Investments (489) (539) (997) (4,415)
Divestitures 14 399 4,820 467
Other items (118) 37 342 60
________ ________ ________ _________
(2,001) (1,072) (923) (6,399)
________ ________ ________ _________
Cash flows from financing activities
Dividends paid on common and
preferred shares (259) (213) (777) (667)
Dividends paid by subsidiaries to
non-controlling interest (128) (83) (293) (263)
Increase (decrease) of notes payable
and bank advances 197 (268) (1,871) 1,945
Issue of long-term debt 868 456 2,246 1,495
Repayment of long-term debt (415) (559) (1,377) (1,072)
Redemption of preferred shares by
subsidiaries (125) - (471) (295)
Issue of common shares 10 - 66 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 3 83 1,371 674
Other items (27) 12 7 64
________ ________ ________ _________
124 (572) (1,290) 1,912
________ ________ ________ _________
Effect of exchange rate changes on cash and
cash equivalents (47) (30) (6) (13)
________ ________ ________ _________
Cash (used in) provided by continuing
operations (806) (687) 249 (2,607)
Cash provided by discontinued operations 101 861 579 720
________ ________ ________ _________
Net (decrease) increase in cash and cash
equivalents (705) 174 828 (1,887)
Cash and cash equivalents at beginning
of period 1,793 334 260 2,395
________ ________ ________ _________
Cash and cash equivalents at end of
period 1,088 508 1,088 508
_________________________________________________________________________
_________________________________________________________________________
Segmented Information (unaudited)
_________________________________________________________________________
($ millions)
Three months Nine months
For the period ended September 30 2001 2000 2001 2000
_________________________________________________________________________
Operating revenues
Bell Canada 4,337 4,063 12,692 11,624
Bell Globemedia 246 6 849 13
Teleglobe 491 - 1,539 -
BCE Emergis 173 134 475 327
Corporate and other, including
intercompany eliminations (160) (123) (512) (365)
________ ________ ________ _________
Total core operating revenues 5,087 4,080 15,043 11,599
BCE Ventures 412 326 1,172 1,044
Intercompany eliminations (120) (20) (252) (81)
________ ________ ________ _________
Total operating revenues 5,379 4,386 15,963 12,562
_________________________________________________________________________
Earnings (loss) from continuing
operations
Bell Canada 298 301 789 790
Bell Globemedia (52) (42) (125) (62)
Teleglobe (186) (39) (449) (55)
BCE Emergis (70) (63) (236) (145)
Corporate and other, including
intercompany eliminations 51 31 3,006 116
________ ________ ________ _________
Total core earnings from
continuing operations 41 188 2,985 644
BCE Ventures (106) (178) (257) (348)
Intercompany eliminations (1) - 3 (6)
________ ________ ________ _________
Total earnings (loss) from
continuing operations (66) 10 2,731 290
_________________________________________________________________________
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
The 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 indicated. Certain
comparative figures in the 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 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.
The CICA recently issued new Handbook Sections 1581, "Business
Combinations", and 3062, "Goodwill and Other Intangible Assets". Effective
July 1, 2001, the standards require that all business combinations be
accounted for using the purchase method. Additionally, effective January 1,
2002, goodwill and intangible assets with an indefinite life will no longer be
amortized to earnings and will be assessed for impairment on an annual basis
in accordance with the new standards, including a transitional impairment test
whereby any resulting impairment will be charged to opening retained earnings.
BCE is currently evaluating the impact of the adoption of the new standards
and therefore has not yet assessed their effect on BCE's financial statements.
NOTE 2. RESTRUCTURING AND OTHER CHARGES
Teleglobe announced a pre-tax charge of $139 million ($87 million after
tax) in August 2001, of which $130 million was recorded in the third quarter,
representing restructuring and other charges related to the closing of certain
facilities and network costs as well as employee severance and other related
employee costs, for approximately 450 employees, which resulted primarily from
a decision to restructure portions of its business due to changing
international market conditions. The restructuring program is expected to be
substantially completed by the fourth quarter of 2001. As at September 30,
2001, the remaining unpaid balance of the restructuring provision was $122
million.
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 fourth
quarter of 2001. As at September 30, 2001, the remaining unpaid balance of the
restructuring provision relating to employee severance and other directly
related employee costs was $52 million. Other charges relate mainly to the
write-off of certain assets.
NOTE 3. GAINS ON REDUCTION OF OWNERSHIP IN SUBSIDIARIES AND JOINT
VENTURES
In July 2001, BCE recognized a gain of $132 million on the reduction of
its ownership in CGI Inc. (CGI) from 41% to 33% as a result of CGI's issuance
of shares to IMRglobal Corp. shareholders in exchange for all of IMRglobal's
common shares.
NOTE 4. OTHER INCOME (EXPENSE)
In September 2001, Bell Canada International Inc. (BCI) provided for a
$149 million (US $94 million) loss relating to a put option that may
potentially require BCI to repurchase a third party's indirect stake in
Comunicacion Celular S.A. Comcel S.A. (Comcel).
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 Corporation 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
$2.6 billion was used to repay short-term debt. The remaining proceeds are
being used to continue funding the company's growth strategy.
NOTE 5. DISCONTINUED OPERATIONS
_________________________________________________________________________
Three months Nine months
For the period ended September 30 2001 2000 2001 2000
($ millions)
_________________________________________________________________________
Excel Communications group (Excel) - (3) (2,115) (13)
BCI Latin American CLECs and
Asia Mobile segments (64) 719 219 622
Nortel Networks - - - 4,055
ORBCOMM Global, L.P. - (67) - (80)
________ ________ ________ _________
Discontinued operations (64) 649 (1,896) 4,584
_________________________________________________________________________
Excel provides retail telecommunications services such as long distance,
paging and Internet services to residential and business customers in North
America and the U.K. On August 26, 2001, Teleglobe Inc. and certain of its
subsidiaries entered into definitive agreements for the sale of Excel's North
American operations to an affiliate of VarTec Telecom, Inc. (VarTec). The U.K.
operations, which are not part of the transaction, are planned to be
discontinued before the end of the year. Consequently, the results of Excel
have been reported as discontinued operations. The gross proceeds, estimated
at approximately US $250 to $300 million, will be based on Excel's actual 2001
financial results and will be paid in the form of unsecured five-year interest-
bearing promissory notes. After accounting for the discount provision on the
notes receivable, closure costs of the U.K. operations, transaction costs,
estimated operating losses up to the expected date of disposal and related
items, it is estimated that the disposal of Excel will not result in any gain
or loss. The sale is subject to regulatory and other approvals and is expected
to be completed by the end of the first quarter of 2002. The results of
operations of Excel include an impairment charge of $2,049 million, recorded
in the first quarter of 2001, after completion of an assessment of the
carrying value of BCE's investment in Excel.
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. In September 2001, BCI wrote
off its carrying value of $86 million in Vésper S.A., Vésper Sao Paulo S.A.
and Vento S.A. Ltda.
Amounts included in the consolidated balance sheets relating to
discontinued operations are as follows:
_________________________________________________________________________
($ millions) September December
30 31
2001 2000
_________________________________________________________________________
Current assets 571 700
Non-current assets 700 3,569
Current liabilities (561) (902)
Non-current liabilities (213) (639)
________ _________
Net assets of discontinued operations 497 2,728
_________________________________________________________________________
The summarized statements of operations for the discontinued operations
are as follows:
_________________________________________________________________________
($ millions) Three months Nine months
For the period ended September 30 2001 2000 2001 2000
_________________________________________________________________________
Revenue 293 88 975 347
_________________________________________________________________________
Operating earnings (loss) from
discontinued operations, net of tax - (142) (2,234) 3,753
Gain (loss) on discontinued operations,
net of tax (86) 1,031 416 1,031
Non-controlling interest 22 (240) (78) (200)
________ ________ ________ _________
Net earnings (loss) from discontinued
operations (64) 649 (1,896) 4,584
_________________________________________________________________________
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 Nine months
For the period ended
September 30 2001 2000 2001 2000
_________________________________________________________________________
Earnings (loss) from continuing
operations (numerator) ($ millions)
Earnings (loss) from continuing
operations (66) 10 2,731 290
Dividends on preferred shares (16) (19) (50) (61)
________ ________ ________ _________
Earnings (loss) from continuing
operations - basic (82) (9) 2,681 229
Exercise of put options by
CGI shareholders - (5) (1) (14)
________ ________ ________ _________
Earnings (loss) from continuing
operations - diluted (82) (14) 2,680 215
_________________________________________________________________________
Weighted average number of common
shares outstanding (denominator)
(millions)
Weighted average number of common
shares outstanding - basic 807.9 644.7 807.8 644.4
Exercise of stock options 2.2 2.0 2.3 2.2
Exercise of put options by
CGI shareholders 5.6 3.8 5.6 3.8
________ ________ ________ _________
Weighted average number of common
shares outstanding - diluted 815.7 650.5 815.7 650.4
_________________________________________________________________________
NOTE 7. BUSINESS ACQUISITIONS
Acquisitions of CFCF-TV & CKY-TV
Effective September 1, 2001, Bell Globemedia completed the acquisitions
of all of the outstanding common shares of CFCF-TV and CKY-TV, two CTV
affiliated television stations in Montreal and Winnipeg, for a total aggregate
cash consideration of approximately $182 million. The acquisitions were
accounted for using the purchase method. The preliminary allocation of the
total purchase price was to tangible assets for $33 million, tangible
liabilities for $40 million (including $23 million of benefits and other costs
payable on the acquisition) and goodwill and other intangible assets for $189
million.
Acquisition of Tess S.A.
On April 9, 2001, Telecom Américas Ltd. (Telecom Américas), a joint
venture of BCI (BCI currently holds a 41.7% interest in Telecom Américas),
closed its previously announced agreement to acquire a 100% interest in Tess
S.A. (Tess), one of two B Band cellular companies operating in the Brazilian
state of Sao Paulo, for a total consideration of approximately US $950 million
($1,480 million, of which $617 million represents BCI's proportionate
interest). 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. 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 option expired 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.
Acquisition of additional interest in Algar Telecom Leste S.A (ATL)
On March 27, 2001, 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 13, 2001, Telecom Américas announced a number of agreements
which will collectively result in the acquisition of an approximate additional
65% economic interest in the Brazilian cellular companies Telet and Americel
(increasing Telecom Américas' economic interest to approximately 81% in both
companies) for an aggregate purchase price of approximately US $580 million.
At September 30, 2001, Telecom Américas had purchased an additional 60%
interest in Telet and Americel for approximately US $528 million.
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.
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 that 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 8. 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.
>>
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For further information: Jean-Charles Robillard, Communications, (514)
786-3908 ; Isabelle Morin, Investor Relations, (514) 786-3845, Web site:
www.bce.ca |
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