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Bell Nordiq Group Inc. Comments on CRTC Decision (CRTC Decision 2005-4) - Fourth Quarter 2004 Results and 2005 Guidance Revised for Télébec and NorthernTel Combined - CRTC decision increases Télébec's subsidy by $7.1M in 2004 and $4.3M
in 2005
- 2004 results revised upwards to reflect positive outcome of CRTC
decision
- 2005 Revenue and EBITDA guidance raised
MONTREAL,Feb. 3 2005 --
Bell Nordiq Group Inc. ("Bell Nordiq"),
administrator of Bell Nordiq Income Fund (the "Fund") (TSX: BNQ.UN) and
general partner of Telebec, Limited Partnership ("Télébec") and NorthernTel,
Limited Partnership ("NorthernTel") released its position today on the
Canadian Radio-television and Telecommunications Commission's ("CRTC") recent
decision on the implementation of competition in the local exchange and local
payphone markets in Télébec's territory.
"Overall, we are pleased with the decision and believe that it will
benefit our customers by contributing to the continued advancement of
telecommunications in our territory, particularly in the high cost serving
areas," commented Roch Dubé, President and Chief Executive Officer, Bell
Nordiq. Although the CRTC did not agree with all of Télébec's requests, they
did recognize the higher cost of providing telecom services in rural areas. As
a result, several changes to the subsidy calculation were made, culminating in
a net increase to Télébec's subsidy of $7.1 million in 2004 and $4.3 million
in 2005.
In accordance with the requirements of generally accepted accounting
principles ("GAAP"), fourth quarter 2004 results for Télébec and NorthernTel
combined have been revised. In addition, 2005 revenue and earnings before
interest, taxes, depreciation and amortization (EBITDA(*)) guidance for
Télébec and NorthernTel combined have increased, with revenues now estimated
at $338 to $341 million (previously $334 to $337 million) and EBITDA at $176
to $179 million (previously $172 to $175 million). The decision had no direct
impact on the Fund's fourth quarter 2004 results.
(*) See definitions under sections titled "EBITDA" and "Available
Distributable Cash"
<<
Fourth Quarter Financial Highlights Revised (Unaudited)
Q4 2004 versus Q4 2003
In thousands of dollars except distributions per Fund unit and Fund units
outstanding
---------------------------- -------------------------------------------
Q4 Q4
Bell Nordiq ------------- Télébec and NorthernTel ------------------
Income Fund 2004 2003 (Combined) 2004 2003
---------------------------- -------------------------------------------
Net Earnings $8,142 $7,820 Operating Revenues
(revised) $94,081 $87,052
EBITDA (revised) $50,222 $43,771
Net Earnings
(revised) $29,384 $18,904
Distributions Available Distributable
Declared $8,158 $7,826 Cash (revised) $25,182 $15,328
Distributions Distributions
per Fund unit $ 0.25 $ 0.24 Declared $22,313 $21,403
Bell Nordiq Group
Inc. $14,155 $13,577
Fund Units Bell Nordiq Income
Outstanding Fund $ 8,158 $ 7,826
(000) 32,605 32,605
Debt Refinancing Charge $ 1,015
Reserve:
increase/(decrease)
(revised) $ 2,869 ($ 7,090)
Reserve Balance
September 30 $34,882 $25,471
Total Reserve ------------------
December 31
(revised) $37,751 $18,381
---------------------------- -------------------------------------------
---------------------------- -------------------------------------------
For the quarter ended December 31, 2004, results for the Fund remain
unchanged with net earnings of $8.1 million and cash distributions declared of
$8.2 million ($0.25 per unit). Total distributions declared in 2004 were up
4.4% over 2003, reaching $32.5 million ($1.00 per unit).
For the quarter, Télébec and NorthernTel revised results include combined
operating revenues of $94.1 million, EBITDA of $50.2 million, net earnings of
$29.4 million and available distributable cash(*) of $25.2 million. As
anticipated, cash distributions declared were $22.3 million, consisting of
$8.2 million to the Fund and $14.1 million to Bell Nordiq. Capital
expenditures came in at $17.8 million, 8.1% lower than Q4, 2003.
For the year ended December 31, 2004, Télébec and NorthernTel achieved
revised combined revenues of $341.2 million and EBITDA of $178.7 million.
Total available distributable cash was $108.3 million, which exceeded cash
distributions declared of $88.9 million. This resulted in a revised year-end
reserve balance of $37.8 million, up $19.4 million or 105% over the closing
balance for 2003. Annual capital expenditures were $50.7 million, resulting in
a capital intensity ratio (capital expenditures as a percentage of revenues)
of 14.9%.
(*) See definitions under sections titled "EBITDA" and "Available
Distributable Cash"
Fourth Quarter Review: Télébec and NorthernTel Revised (Unaudited)
Q4 2004 versus Q4 2003
-------------------------------------------------------------------------
Q4
Operating Revenues (Combined) ------------------
(In thousands of dollars) 2004 2003
-------------------------------------------------------------------------
Local and Access (revised) $48,383 $39,287
Data and Cable $17,082 $15,258
Long Distance $10,747 $12,430
Wireless $10,835 $10,226
IS/IT, Terminal, Directory and other $ 7,034 $ 9,851
------------------
Total Revenues (revised) $94,081 $87,052
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Total revised revenues for the quarter were $94.1 million, 8.1% higher
than Q4 2003:
- Revised Local and Access revenues came in 23.2% better, largely
reflecting the positive impact resulting from CRTC decisions 2005-4
(changes to Télébec's subsidy calculation to reflect the higher cost
of providing telecom services in rural areas) and 2004-77 (Service
Improvement Plan funding associated with providing telecom services
to underserved areas). Adding to the positive variance was the
reversal of a provision made in the event CRTC decision 2005-4 was
not favourable. Network access services (NAS) remained essentially
unchanged from last year coming in at 251,470.
- Data and Cable revenues continued to show healthy increases, coming
in 12.0% higher. The driving force behind this was a 23.0% increase
in high-speed subscribers and higher demand for data applications
requiring greater bandwidth.
- Long distance revenues decreased largely due to a $1.0 million
one-time adjustment in Q4 2003 to recognize revenues originally
thought to be at risk and competitive pressures. If you exclude the
one-time adjustment, revenues decreased by 6% versus Q4, 2003. Higher
revenues at NorthernTel helped to partially offset the decline.
- Wireless revenues grew by 6.0% due to on-going subscriber growth and
higher usage. Fourth quarter 2004 revenue growth was reduced by a
full year adjustment in Q4 2003 to account for a change in the
revenue recognition of certain wireless services that were previously
recorded net of expenses. Excluding this adjustment, revenues would
have been 13.4% higher. The continued footprint expansion and
wireless network enhancements permit new value added product
offerings and stimulate usage. Postpaid subscribers were up 16.9%
over Q4 2003, while postpaid churn came in at 1.5%. Total subscribers
ended the year at 63,780, comfortably surpassing guidance of 62,000.
- IS/IT and other revenues decreased 28.6%, reflecting the sale of one
of the equipment divisions and lower gateway revenues. During 2004,
Télébec and NorthernTel have repositioned their IS/IT business to
focus on integrated IS/IT and telecom services, which have higher
margins than equipment sales.
2005 Guidance Revised
---------------------
Télébec and NorthernTel Combined (unless otherwise indicated)
-------------------------------------------------------------------------
2005 Targets Revised Previous Target
-------------------------------------------------------------------------
Revenue (revised) $338 - $341 million $334 - $337 million
EBITDA (revised) $176 - $179 million $172 - $175 million
Capital Expenditures $ 48 - $ 51 million $ 48 - $ 51 million
Cash Distributions/unit
(The Fund) $ 1.07(1) $ 1.07(1)
High Speed Internet subscribers 30 thousand 30 thousand
Wireless subscribers 69 thousand 69 thousand
(1) Commencing with the distribution to the Fund's unitholders of record
on February 28, 2005
The revised fourth quarter financial statements of Télébec and
NorthernTel combined as well as the fourth quarter financial results of the
Fund are available on the Fund's Web site at www.bellnordiq.ca . These
quarterly financial statements will also be available on the website
maintained by the Canadian Securities Regulators at www.sedar.com . These
documents can also be obtained from Bell Nordiq's Investor Relations
Department at (514) 493-5531.
About Bell Nordiq Group Inc.
Bell Nordiq Group Inc. holds a 63.4% interest in and is the general
partner of both Télébec and NorthernTel. Bell Nordiq Group Inc. manages the
business and affairs of Télébec and NorthernTel, as well as those of Bell
Nordiq Income Fund and Bell Nordiq Trust. Bell Canada indirectly owns 100% of
Bell Nordiq Group Inc.
About Bell Nordiq Income Fund
Bell Nordiq Income Fund is an unincorporated limited purpose trust
created to indirectly acquire and hold the outstanding partnership units of
Télébec and NorthernTel. Currently, the Fund indirectly holds a 36.6% interest
in both Télébec and NorthernTel, while Bell Canada, indirectly through Bell
Nordiq Group Inc., holds the remaining 63.4%. More information on Bell Nordiq
Income Fund may be found at www.bellnordiq.ca
About Télébec, Limited Partnership
With the help of its 757 employees, Télébec, Limited Partnership and its
subsidiaries provide innovative integrated telecommunications solutions to
customers in 300 municipalities across Québec. Its territory, which spans
750,000 square kilometres, extends North as far as James Bay, South to Venise-
en-Québec near the U.S. border, West to Shawville in the Outaouais, and East
to the Magdalen Islands. For more information about Télébec, Limited
Partnership and its subsidiaries, visit www.telebec.com
About NorthernTel, Limited Partnership
With the help of its 210 employees, NorthernTel, Limited Partnership
provides innovative integrated telecommunications solutions to customers
across Northeastern Ontario. Its territory, which spans 83,000 square
kilometres, stretches from Calstock to Latchford and from Virginiatown to
Timmins. For more information about NorthernTel, Limited Partnership visit
www.northerntel.ca
Caution Concerning Forward-Looking Statements
Certain statements in this news release, including, but not limited to,
those under the "2005 Guidance Revised" section, may constitute
forward-looking statements and are subject to important risks,
uncertainties and other assumptions that may cause the actual results or
achievements of the Fund, Télébec and NorthernTel to be materially
different from any future results or achievements expressed or implied by
such forward-looking statements. When used in this news release, such
forward-looking statements use words such as "may", "will", "expect",
"estimate", "believe", "plan" and other similar expressions. These risks,
uncertainties and other assumptions include, but are not limited to: the
ability of our strategies and plans to produce the expected benefits,
including targets for revised revenue, revised EBITDA, capital
expenditures, cash distributions/unit, high-speed Internet subscribers
and wireless subscribers; the impact of any future CRTC decisions, such
as 2005-4, on the amount of subsidies Télébec or NorthernTel are entitled
to; the ability to continue generating strong cash flows and maintain a
strong balance sheet; the ability to maintain low management costs; the
ability to maintain leading market shares; the ability to continue
declaring anticipated cash distributions over time; the ability to
continue to protect and grow our existing services, the ability to
complete suitable cash accretive acquisitions; the ability to meet our
customers' evolving needs; the ability to maintain disciplined
operational and financial management; the ability to lay the groundwork
for future growth, expansion, and profitability; the ability to continue
building a reserve balance and keep our current stability ratings; demand
for services; regulatory environment; competition; technology; economic
fluctuations; dependence on Bell Canada and potential conflicts of
interest; nature of units; income tax matters; dependence on key
personnel; and the fact that cash distributions to unitholders are not
guaranteed and will fluctuate with the performance of Télébec's and
NorthernTel's businesses. The forward-looking statements contained in
this news release reflect current beliefs, expectations, estimates and
assumptions regarding future events and operating performance, and speak
only as of the date of this news release. Bell Nordiq Group Inc., in its
capacity as Administrator of the Fund, and General Partner of Télébec and
NorthernTel, disclaims any intention or obligation to update or revise
any forward-looking statements as a result of new information or
otherwise.
(*) Canadian GAAP Terminology
EBITDA Revised
The term EBITDA (earnings before interest, taxes, depreciation and
amortization) does not have a standardized meaning under Canadian generally
accepted accounting principles (GAAP). We define it as operating revenues less
operating expenses, which means it represents operating income before
amortization expense, net benefit plans expense, integration charges and other
charges. The way we define EBITDA may be different from the way other publicly
traded companies define it. EBITDA should not be confused with net cash flows
from operating activities. We use EBITDA, amongst other measures, to assess
the operating performance of our ongoing businesses. The most comparable
Canadian GAAP earnings measure is operating income. The following table shows
a reconciliation of EBITDA to operating income for Télébec and NorthernTel
Combined.
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Three months Twelve months
------------------------ ----------------------------
For the
periods ended
December 31 2004 2003 % Change 2004 2003 % Change
-------------------------------------------------------------------------
EBITDA (revised) 50,222 43,771 15 % 178,738 169,432 5.5 %
Amortization
expense 13,244 14,629 (9.5)% 52,173 55,050 (5.2)%
Net benefit
plans expense 1,545 2,947 (47.6)% 4,865 6,234 (22.0)%
Integration
charges 751 1,226 (38.7)% 1,683 2,278 (26.1)%
Other charges 198 688 (71.2)% 452 1,540 (70.6)%
-------------------------------------------------------------------------
Operating income
(revised) 34,484 24,281 42.0 % 119,565 104,330 14.6 %
Goodwill
impairment charge 1,030 363 184 % 1,030 363 184 %
Interest expense 3,656 5,421 (32.6)% 14,872 17,666 (15.8)%
-------------------------------------------------------------------------
Pre-tax earnings
from operations
(revised) 29,798 18,497 61.1 % 103,663 86,301 20.1 %
Income taxes 425 (257) (265.4)% 761 (63) (1307.9)%
Non-controlling
interest (11) (150) (92.7)% (35) (250) (86.0)%
-------------------------------------------------------------------------
Net earnings
(revised) 29,384 18,904 55.4 % 102,937 86,614 18.8 %
-------------------------------------------------------------------------
--------------------------------------------------------------------------
Available Distributable Cash Revised
The following table details the components of our distributable cash. We
define distributable cash as:
Net earnings for Télébec and NorthernTel , adjusted for elements such as:
- amortization
- non-controlling interest
- future income taxes
- net benefit plans expense
- capital expenditures
- other miscellaneous adjustments which may or may not directly impact
cash
- reserves considered appropriate.
A reserve account has been set up to capture available cash in excess of
distributions. The reserve can be used for such things as acquisitions, the
repayment of debt and the smoothing out of any variability in cash flows.
Télébec and NorthernTel distribute this cash to Bell Nordiq and
indirectly to the Fund. The Fund distributes the majority of this cash to its
own unitholders.
-------------------------------------------------------------------------
Three months Twelve months
---------------- ------------------
For the periods ended
December 31 ($ thousands) 2004 2003 2004 2003
-------------------------------------------------------------------------
Net earnings (revised) 29,384 18,904 102,937 86,614
Amortization 13,244 14,629 52,173 55,050
Net benefit plans expense 1,545 2,947 4,865 6,234
Redemption penalty on
long-term debt financing - 1,015 - 1,015
Goodwill impairment charge 1,030 363 1,030 363
Future income taxes (31) (600) (89) (373)
Non-controlling interest (11) (150) (35) (250)
Other (245) 550 (120) 113
-------------------------------------------------------------------------
Adjusted net earnings (revised) 44,916 37,658 160,761 148,766
-------------------------------------------------------------------------
Capital expenditures and
deferred charges (17,758) (19,746) (50,722) (48,314)
Proceeds on distribution
of capital assets 24 16 279 44
Pension contribution
in cash(*) (2,000) (2,600) (2,000) (2,600)
-------------------------------------------------------------------------
Available distributable
cash (revised) 25,182 15,328 108,318 97,896
-------------------------------------------------------------------------
Reserve account, beginning
of period 34,882 25,471 18,381 6,667
Available distributable cash
(revised) 25,182 15,328 108,318 97,896
Distributions declared (22,313) (21,403) (88,948) (85,167)
Redemption penalty on long-term
debt financing - (1,015) - (1,015)
-------------------------------------------------------------------------
Reserve account, end of period
(revised) 37,751 18,381 37,751 18,381
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(*) $1.0 million contribution to be made in January 2005
Distributable cash is not defined under Canadian GAAP and there is no
standardized measure for distributable cash. As a result, the way we define
distributable cash may be different from the way other limited partnerships or
income funds define it.
Enclosure: Financial Statements
Revised interim combined financial statements of
Télébec and NorthernTel Limited Partnerships
For the three and twelve month period ended
December 31, 2004
(unaudited)
REVISED COMBINED STATEMENTS OF EARNINGS
-------------------------------------------------------------------------
Three months Twelve months
--------------------------------------
Unaudited Unaudited Unaudited Audited
--------------------------------------
For the periods ended
December 31 ($ thousands) 2004 2003 2004 2003
-------------------------------------------------------------------------
Operating revenues
Local and access 48,383 39,287 164,878 158,062
Data and cable 17,082 15,258 67,512 62,255
Long distance 10,747 12,430 44,666 46,006
Wireless 10,835 10,226 40,654 35,715
ISIT, terminal, directory
and other 7,034 9,851 23,465 29,045
-------------------------------------------------------------------------
Total operating revenues 94,081 87,052 341,175 331,083
-------------------------------------------------------------------------
Operating expenses 43,859 43,281 162,437 161,651
Amortization expense 13,244 14,629 52,173 55,050
Net benefit plans expense 1,545 2,947 4,865 6,234
Integration charges 751 1,226 1,683 2,278
Other charges 198 688 452 1,540
-------------------------------------------------------------------------
Total operating expenses 59,597 62,771 221,610 226,753
-------------------------------------------------------------------------
Operating income 34,484 24,281 119,565 104,330
Goodwill impairment charge 1,030 363 1,030 363
Interest expense 3,656 5,421 14,872 17,666
-------------------------------------------------------------------------
Earnings before income taxes
and non-controlling interest 29,798 18,497 103,663 86,301
Income taxes 425 (257) 761 (63)
Non-controlling interest (11) (150) (35) (250)
-------------------------------------------------------------------------
Net earnings 29,384 18,904 102,937 86,614
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Basic earnings per unit
(weighted-average number of units
outstanding of 178, 360, 002) 0.16 0.11 0.58 0.49
-------------------------------------------------------------------------
REVISED COMBINED STATEMENTS OF CHANGES IN PARTNERS' EQUITY
-------------------------------------------------------------------------
Three months Twelve months
--------------------------------------
Unaudited Unaudited Unaudited Audited
--------------------------------------
For the periods ended
December 31 ($ thousands) 2004 2003 2004 2003
-------------------------------------------------------------------------
Balance at beginning of period 224,847 221,667 218,927 218,421
Net earnings 29,384 18,904 102,937 86,614
Distributions
- Class A and B unitholders (22,313) (21,403)(88,948) (85,167)
- Class C unitholders (306) (338) (1,346) (1,038)
Compensation cost 12 97 54 97
-------------------------------------------------------------------------
Balance at end of period 231,624 218,927 231,624 218,927
-------------------------------------------------------------------------
-------------------------------------------------------------------------
REVISED COMBINED BALANCE SHEETS
-------------------------------------------------------------------------
December December
31 31
2004 2003
-------------------------------------------------------------------------
($ thousands) Unaudited Audited
-------------------------------------------------------------------------
ASSETS
Current assets
Cash and cash equivalents 35,531 33,465
Accounts receivable 56,762 50,337
Other current assets 7,348 5,589
-------------------------------------------------------------------------
Total current assets 99,641 89,391
Capital assets 369,957 371,194
Goodwill 28,204 29,234
Indefinite-life intangible assets 15,733 15,733
Other long-term assets 7,745 10,112
-------------------------------------------------------------------------
Total assets 521,280 515,664
-------------------------------------------------------------------------
-------------------------------------------------------------------------
LIABILITIES
Current liabilities
Accounts payable
and accrued liabilities 39,312 47,051
Other current liabilities 19,275 16,600
Debt due within one year 40,514 5,017
-------------------------------------------------------------------------
Total current liabilities 99,101 68,668
Long-term debt 176,555 213,451
Other long-term liabilities 13,842 14,425
Total liabilities 289,498 296,544
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Non-controlling interest 158 193
-------------------------------------------------------------------------
Partners' equity 231,624 218,927
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Total liabilities
and partners' equity 521,280 515,664
-------------------------------------------------------------------------
-------------------------------------------------------------------------
REVISED COMBINED STATEMENTS OF CASH FLOWS
-------------------------------------------------------------------------
Three months Twelve months
--------------------------------------
Unaudited Unaudited Unaudited Audited
-------------------------------------------------------------------------
For the periods ended 2004 2003 2004 2003
December 31 ($ thousands)
-------------------------------------------------------------------------
Cash flows from
operating activities
Net earnings 29,384 18,904 102,937 86,614
Adjustments to reconcile
net earnings to cash flows
from operating activities:
Amortization expense 13,244 14,629 52,173 55,050
Amortization of debt issue costs 17 - 79 -
Net benefit plans expense 1,545 2,947 4,865 6,234
Goodwill impairment charge 1,030 363 1,030 363
Future income taxes (31) (600) (89) (373)
Non-controlling interest (11) (150) (35) (250)
Other items (1,111) 12 (3,432) 822
Changes in non-cash working
capital components (1,107) 3,165 (13,533) (6,907)
-------------------------------------------------------------------------
42,960 39,270 143,995 141,553
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Cash flows from
investing activities
Capital expenditures (17,842) (19,408) (50,746) (48,046)
Proceeds on disposition
of capital assets 24 16 279 44
-------------------------------------------------------------------------
(17,818) (19,392) (50,467) (48,002)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Cash flows from financing activities
(Decrease) increase
in bank advances (640) 195 (2,050) 1,500
Issuance of long-term debt 3,645 70,000 3,645 70,000
Repayment of long-term debt (897) (71,055) (2,994) (74,812)
Debt issue costs - (665) (8) (673)
Distributions paid to unitholders (22,517) (21,481) (90,055) (85,605)
-------------------------------------------------------------------------
(20,409) (23,006) (91,462) (89,590)
-------------------------------------------------------------------------
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Net increase (decrease)
in cash and cash equivalents 4,733 (3,128) 2,066 3,961
Cash and cash equivalents
at beginning of period 30,798 36,593 33,465 29,504
-------------------------------------------------------------------------
Cash and cash equivalents
at end of period 35,531 33,465 35,531 33,465
-------------------------------------------------------------------------
-------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURE FOR STATEMENTS OF CASH FLOWS
-------------------------------------------------------------------------
Three months Twelve months
----------------------------------
For the periods
ended December 31 2004 2003 2004 2003
-------------------------------------------------------------------------
Interest paid 5,810 8,292 14,247 17,578
Income taxes paid (received) 330 (75) 736 479
-------------------------------------------------------------------------
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>>
For further information: John R. Ripplinger, Investor Relations,
(514) 493-5531 |
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