BCE Emergis Meets Targets and Reports Improved EBITDA and Earnings for the Fourth Quarter.Business Editors MONTREAL--(BUSINESS WIRE)--Jan. 28, 2003 BCE BCE abbr. 1. Bachelor of Chemical Engineering 2. Bachelor of Civil Engineering BCE Abbreviation for before the Common Era. Emergis Emergis Incorporated (TSX: EME) is a Canadian e-Business company dealing with interactions between companies and electronic commerce. The company is linked to the merger of Bell Canada's Electronic Business Solutions and MPACT Immedia (TSX TSX Toronto Stock Exchange (TSE before April, 2002) TSX Transfer from Stack Pointer to Index TSX True Space Extension :IFM IFM Institut Français de la Mode (French Fashion Institute) IfM Institute for Micromanufacturing (Louisiana Tech University) IFM Interface Module IFM Instantaneous Frequency Measurement ) Revenue, EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) A metric used to show a company's profitability, but not its cash flow. EBITDA became popular in the 1980s to show the potential profitability of leveraged buyouts, but has become and EPS (Encapsulated PostScript) A PostScript file format used to transfer a graphic image between applications and platforms. EPS files contain PostScript code as well as an optional preview image in TIFF, WMF, PICT or EPSI, the latter being an ASCII-only format. in line with targets: -- Revenue is targeted to be in the range of $120 million to $128 million, reflecting lower revenue from the distribution agreements of legacy products with Bell Canada. -- EBITDA is targeted to be in the range of $16 million to $20 million. -- EPS is targeted to be in the range of $0.04 to $0.08 BCE Emergis Inc. (TSX: IFM), a leading North American North American named after North America. North American blastomycosis see North American blastomycosis. North American cattle tick see boophilusannulatus. eBusiness See e-business. company, today announced its fourth quarter financial results for the period ended December December: see month. 31, 2002. The Company ended 2002 on a positive note with two consecutive quarters of profitability and positive cash flow from operating activities. Revenue for the fourth quarter came in at $130.9 million compared with $135.1 million for the third quarter and $181.4 million for the fourth quarter of 2001. EBITDA 1 came in at $21.4 million ($19.2 million before adjustment to restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). and other charges), from $18.5 million in the third quarter, and $35.2 million for the fourth quarter of 2001. A year-end year-end also year·end n. The end of a year. adj. Occurring or done at the end of the year: a year-end audit. Noun 1. review of the restructuring and other charges taken in the second quarter has resulted in a $2.2 million downward revision (programming) revision - A release of a piece of software which is not a major release or a bugfix, but only introduces small changes or new features. to the total charges. Reported net income increased to $8.6 million ($6.4 million before adjustment to restructuring and other charges) compared with $4.8 million in the third quarter and a loss of $101.3 million in the fourth quarter of 2001. EPS is $0.08 ($0.06 before adjustment to restructuring and other charges) up from $0.05 in the third quarter and up from the reported loss per share of $1.03 in the fourth quarter of 2001. On January January: see month. 1, 2002, the Company adopted section 3062 of the CICA CICA Competition In Contracting Act of 1984 (USA) CICA Canadian Institute of Chartered Accountants CICA Competition In Contracting Act CICA Criminal Injuries Compensation Authority (UK) Handbook
This article is about reference works. For the subnotebook computer, see .
An asset that is not physical in nature. Notes: Examples are things like copyrights, patents, intellectual property, and goodwill. These are the opposite of tangible assets. ". Accordingly, reported results for the fourth quarter and fiscal year ended December 31, 2002 do not include any goodwill amortization. Fourth quarter 2001 net loss and loss per share, excluding goodwill amortization, were respectively, $12.2 million and $0.12. "I am encouraged with the results we delivered this quarter. We met our previously announced fourth quarter targets and I believe they position us well to deliver on our 2003 targets," stated Pierre Pierre (pēr), city (1990 pop. 12,906), state capital (since 1889) and seat of Hughes co., central S.Dak., on the east bank of the Missouri River, opposite Fort Pierre; inc. 1883. Blouin, BCE Emergis chief executive officer. "This was nonetheless the most demanding year BCE Emergis has had to face and everyone worked hard to serve and attract customers, tightly manage costs and streamline streamline, path of a fluid flowing steadily and without appreciable turbulence. A body is said to be streamlined if its shape offers the least possible resistance to a current of air, water, or other fluid. our suite of solutions. Continued Christian Christian flees the City of Destruction. [Br. Lit.: Pilgrim’s Progress] See : Escape Christian travels to Celestial City with cumbrous burden on back. [Br. Lit. Trudeau Tru·deau , Pierre Elliott 1919-2000. Canadian prime minister (1968-1979 and 1980-1984) whose administration was marked by efforts to contain the French separatist movement in Quebec and by the Constitution Act of 1982, which granted Canada full , president and chief operating officer Chief Operating Officer (COO) The officer of a firm responsible for day-to-day management, usually the president or an executive vice-president. : "While we had our share of challenges in 2002, including the softness of markets in North America North America, third largest continent (1990 est. pop. 365,000,000), c.9,400,000 sq mi (24,346,000 sq km), the northern of the two continents of the Western Hemisphere. , we were successful in signing and renewing re·new v. re·newed, re·new·ing, re·news v.tr. 1. To make new or as if new again; restore: renewed the antique chair. 2. large contracts throughout our product lines. We are confident that our renewed re·new v. re·newed, re·new·ing, re·news v.tr. 1. To make new or as if new again; restore: renewed the antique chair. 2. focus on customer service and execution should enable us to generate increased recurring re·cur intr.v. re·curred, re·cur·ring, re·curs 1. To happen, come up, or show up again or repeatedly. 2. To return to one's attention or memory. 3. To return in thought or discourse. revenue in our core business in 2003." FINANCIAL HIGHLIGHTS "We continue to improve operating results and the overall financial performance of the Company," commented John Valentini, chief financial officer. "We are comfortable with the strength of our balance sheet with $107 million cash on hand and positive cash flow from operating activities, for the second consecutive quarter, at $13.6 million." The Company has also made the decision in 2002 to exit a number of its products and put in place a leaner lean 1 v. leaned, lean·ing, leans v.intr. 1. To bend or slant away from the vertical. 2. , more agile organization focused on two key verticals, health and financial services The examples and perspective in this article or section may not represent a worldwide view of the subject. Please [ improve this article] or discuss the issue on the talk page. , across North America.
Fourth quarter results:
-- Revenue totaled $130.9 million in the fourth quarter compared
with $181.4 million for the fourth quarter in 2001. The
year-over-year revenue decline reflects mainly the impact of
lower non-recurring revenue of $31 million, as well as lower
recurring revenue of $17 million representing the fixed
revenue reduction related to the distribution agreement for
legacy products with Bell Canada.
-- The eHealth business unit accounted for $63.2 million or
48 per cent of total revenue compared with $83.0 million
or 46 per cent in 2001.
-- The Canadian business unit recorded $58.5 million or 45
per cent of total revenue compared with $82.7 million or
46 per cent in 2001.
-- The U.S. business unit generated $9.2 million or 7 per
cent of total revenue compared with $15.7 million or 8 per
cent in 2001.
-- Recurring revenue stood at $117.0 million or 89 per cent of
total revenue compared with $136.5 million or 75 per cent of
total revenue in the fourth quarter of 2001.
-- Related party revenue was $31.6 million, or 24 per cent of
total revenue, compared with $76.6 million in the fourth
quarter of 2001, which represented 42 per cent of total
revenue.
Full year results:
-- Revenue in 2002 totaled $539.9 million compared with $656.4
million in 2001. Revenue for the year felt the impact of a $93
million decline in non-recurring revenue, and lower recurring
revenue of $34 million representing the fixed revenue
reduction related to the distribution agreement for legacy
products with Bell Canada.
-- The eHealth business unit accounted for $276.9 million or
51 per cent of total revenue compared with $307.0 million
or 47 per cent in 2001;
-- The Canadian business unit recorded $235.6 million or 44
per cent of total revenue compared with $296.4 million or
45 per cent in 2001;
-- The U.S. business unit generated $27.4 million or 5 per
cent of total revenue compared with $53.0 million or 8 per
cent in 2001.
-- Recurring revenue was $489.9 million or 91 per cent of total
revenue compared with $513.1 million or 78 per cent in 2001.
-- Related party revenue was $141.3 million or 26 per cent of
total revenue compared with $205.4 million in 2001, which
represented 31 per cent of total revenue.
-- EBITDA amounted to $28.6 million compared with $126.8 million
in the previous year. The 2002 total excludes restructuring
and other charges of $116.8 million taken in the year.
-- The reported net loss totaled $110.3 million (net loss of
$15.4 million excluding the after-tax effect of restructuring
and other charges) compared with a reported net loss of $414.4
million in 2001. Fiscal 2001 net loss excluding goodwill
amortization was $49.3 million.
-- The reported net loss per share was $1.09 (loss per share of
$0.15 excluding the after-tax effect of restructuring and
other charges) compared with a loss per share of $4.35 in
2001. Excluding goodwill amortization, the loss per share in
2001 was $0.52.
OPERATING HIGHLIGHTS The eHealth eHealth (also written e-health) is a relatively recent term for healthcare practice which is supported by electronic processes and communication. The term is inconsistently used: some would argue it is interchangeable with health care informatics, while others use it in the business unit renewed a number of long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. agreements with current clients in the fourth quarter, in both Canada and the United States The United States and Canada share a unique legal relationship. U.S. law looks northward with a mixture of optimism and cooperation, viewing Canada as an integral part of U.S. economic and environmental policy. . In Canada Canada (kăn`ədə), independent nation (2001 pop. 30,007,094), 3,851,787 sq mi (9,976,128 sq km), N North America. Canada occupies all of North America N of the United States (and E of Alaska) except for Greenland and the French islands of , eHealth's higher claims' volume translated into higher recurring revenue, growing 13 per cent from the third quarter. Strong adoption of services at both Sun Life and the Workplace Safety and Insurance Board (WSIB WSIB Workplace Safety and Insurance Board WSIB Washington State Investment Board ) in Ontario Ontario, city, United States Ontario, city (1990 pop. 133,179), San Bernardino co., S Calif., near Los Angeles, in a region of vineyards; inc. 1891. also saw claims transactions increase respectively by 33 per cent and 60 per cent. In the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. , the Company experienced a decline in business volume of 9 per cent from the third quarter. The U.S. business unit also saw significant progress in both eInvoicing and eLending products. On the eInvoicing side, there was a 17 per cent increase in trading partners as well as a 6 per cent increase in transactions in the fourth quarter compared with the third quarter. In addition, following the launch in December of the eLending service with Freddie Mac Freddie Mac: see Federal Home Loan Mortgage Corporation. , systems integration began with some 12 national vendors, bringing the total number of customers implemented to 40 vendors and 5 lenders, which exceeded the Company's expectations. VISA See VESA. Commerce is one step closer to becoming available to the market as the next generation electronic eBusiness payment solution; it has been running live transactions through the U.S. Bank Corp.-VISA Commerce program. Two major Visa member financial institutions are participating in the VISA Commerce pilot program: U.S. Bank Corp and CitiGroup Citigroup U.S. holding company formed in 1998 from the merger of Citicorp (itself a holding company incorporated in 1967) and Travelers Group, Inc. The $70 billion merger included one of the largest U.S. investment banks, Salomon Smith Barney Inc. . The Canadian business Canadian Business is the longest-publishing business magazine in Canada. It was founded in 1928 as The Commerce of the Nation, the organ of the Canadian Chamber of Commerce. The magazine was renamed Canadian Business in 1933. unit strengthened its relationship with Bell Canada Bell Canada Enterprises (TSX: BCE, NYSE: BCE), legally BCE Inc., is a major Canadian telecommunications company. Through its subsidiaries including Bell Canada, Bell Aliant, Northwestel, Télébec, and NorthernTel, it is the incumbent local exchange carrier for in the fourth quarter. The Company will be Bell Canada's preferred supplier of a new suite of network-centric eSecurity services. The three-year arrangement will enable both Bell Canada and BCE Emergis to leverage their expertise acquired through their joint work in the federal government Secure Channel project for Bell Canada customers. The National Bank also chose the BCE Emergis eLending Interchange An interchange is a location where two things meet, usually perform some kind of exchange, and possibly go on their ways again. It is most commonly used in four contexts:
Quebec, Fr. Québec, city (1991 pop. 167,517), provincial capital, S Que., Canada, at the confluence of the St. Lawrence and St. Charles rivers. . 2003 REPORTING STRUCTURE As announced on December 18, 2002, the Company has reorganized re·or·gan·ize v. re·or·gan·ized, re·or·gan·iz·ing, re·or·gan·iz·es v.tr. To organize again or anew. v.intr. To undergo or effect changes in organization. into two reporting units: health and financial services. The objective of this reorganization The process of carrying out, through agreements and legal proceedings, a business plan for winding up the affairs of, or foreclosing a mortgage upon, the property of a corporation that has become insolvent. is to align align (  līn),v to move the teeth into their proper positions to conform to the line of occlusion. the operating structure with its major product lines and North American target market segments in which the Company operates. Results will be consolidated con·sol·i·date v. con·sol·i·dat·ed, con·sol·i·dat·ing, con·sol·i·dates v.tr. 1. To unite into one system or whole; combine: accordingly: health will include the Company's American American, river, 30 mi (48 km) long, rising in N central Calif. in the Sierra Nevada and flowing SW into the Sacramento River at Sacramento. The discovery of gold at Sutter's Mill (see Sutter, John Augustus) along the river in 1848 led to the California gold rush of and Canadian Canadian (kənā`dēən), river, 906 mi (1,458 km) long, rising in NE New Mexico. and flowing E across N Texas and central Oklahoma into the Arkansas River in E Oklahoma. eHealth businesses; financial services will regroup re·group v. re·grouped, re·group·ing, re·groups v.tr. To arrange in a new grouping. v.intr. 1. To come back together in a tactical formation, as after a dispersal in a retreat. what were previously defined as U.S. and Canadian business unit activities. The new reorganization will be reflected in the Company's financial reporting beginning with the first quarter results for fiscal 2003. BUSINESS OUTLOOK In 2002, the Company generated profit and positive cash flow for two consecutive quarters in spite of in opposition to all efforts of; in defiance or contempt of; notwithstanding. See also: Spite industry turmoil and uncertain market conditions. However, total revenue targets for 2003 reflect the impact of both the fixed revenue reduction in the distribution agreement of legacy products with Bell Canada and divestitures. Through 2003, the Company expects to deliver sustained profitability as it begins to execute To run a program, which causes the computer to carry out its instructions. See executable code, instruction and EXE file. execute - execution on its 2003 business strategy and to see the impact of agreements signed in 2002. Management offers the following targets for the quarter ending March 31, 2003: -- Revenue is targeted to be in the range of $120 million to $128 million, reflecting lower revenue from the distribution agreements of legacy products with Bell Canada. -- EBITDA is targeted to be in the range of $16 million to $20 million. -- EPS is targeted to be in the range of $0.04 to $0.08 As announced on December 18, 2002, targets for the year 2003 are as follows: -- Revenue is targeted to be in the range of $510 to $550 million. -- EBITDA is targeted to be in the range of $71 and $85 million. -- EPS is targeted to be in the range of $0.20 to $0.28. The Company is taking a mid- mid- pref. Middle: midbrain. to long-term perspective on the business and accordingly, beginning with the announcement of its first quarter results, will not provide further quarterly guidance in 2003. JANUARY 28, 2003 CONFERENCE CALL AND WEBCAST The Company will hold a conference call and live webcast today, January 28, 2003, at 5:30 p.m., to discuss its financial results for the fourth quarter and year-end 2002. To participate, interested stakeholders Stakeholders All parties that have an interest, financial or otherwise, in a firm-stockholders, creditors, bondholders, employees, customers, management, the community, and the government. can dial the following toll-free number, 1 800 273-9672; in Toronto Toronto (tərŏn`tō), city (1998 est pop. 2,400,000), provincial capital, S Ont., Canada, on Lake Ontario. Toronto is the largest city in Canada and since the 1970s has been one of the fastest-changing cities in North America, experiencing , (416) 695-5806. The fourth quarter 2002 news release, as well as an additional information package, will be posted on www.emergis.com after 4:00 p.m. on Tuesday Tuesday: see week. , January 28, 2003. The news release will also be available via CCNMatthews. The instant replay of the webcast will begin at 7:30 p.m. on January 28, 2003 and be available during 48 hours. To listen, interested participants should dial the following toll-free number, 1 800 408-3053; in Toronto, (416) 695-5800. The access code is 1354508. About BCE Emergis BCE Emergis is a leading North American eBusiness company enabling specialized spe·cial·ize v. spe·cial·ized, spe·cial·iz·ing, spe·cial·iz·es v.intr. 1. To pursue a special activity, occupation, or field of study. 2. transaction processes for the health and finance sectors. BCE Emergis supplies solutions to businesses that automate To turn a set of manual steps into an operation that goes by itself. See automation. transactions between companies and allows them to interact Interact can refer to:
Fall of Interact While the Game Boy device was first released, Interact acquired the rights to sell Datel's Action Replay and transact An earlier e-commerce system for the Web from Open Market that included order capture and secure order fulfillment using credit cards, ecash and other payment systems. It included customer service and subscription administration capabilities as well as an integrated database for reporting in real-time 1. real-time - Describes an application which requires a program to respond to stimuli within some small upper limit of response time (typically milli- or microseconds). Process control at a chemical plant is the classic example. . Its leading technologies are centred on claims processing, electronic bill presentment and payment See EBPP. solutions. BCE Emergis customers include 14 leading North American health insurers, three of the top five U.S. banks, five of the top six Canadian banks, and a number of North America's largest enterprises. The Company's shares (TSX: IFM) are included in the S&P/TSX Composite Index Composite Index A grouping of equities, indexes or other factors combined in a standardized way, providing a useful statistical measure of overall market or sector performance over time. Also known simply as a "composite". . For more information, visit the company's web site at www.emergis.com. This news release contains forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. , which are subject to a number of risks, uncertainties and assumptions. Actual results and events may vary significantly. Factors which could cause actual results or events to differ materially from current expectations include, among other things: the ability of the Company's strategies to produce the expected benefits and growth prospects; the uncertainty of the Canadian and U.S. economies; fluctuations in the currency exchange rates between the Canadian and U.S. dollar; the extent of the adoption of eBusiness; the adoption rate of our solutions by our customers and their channel partners; the Company's ability to respond to the industry's rapid pace of change; competition; the ability of the Company to continue to grow its revenues; the volatility Volatility 1. A statistical measure of the tendency of a market or security to rise or fall sharply within a period of time. 2. A variable in option pricing formulas that denotes the extent to which the return of the underlying asset will fluctuate between now and the of the Company's quarterly operating results; the ability of the Company to manage and expand its U.S. operations; the ability of the Company to integrate acquisitions; the Company's reliance on strategic relationships, including its relationship with BCE Inc.; the Company's dependence on contracting medical service providers and the risk of professional liability relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc its medical management services; the possibility of defects in software or failures in the processing of transactions; the possibility of security and privacy breaches; the ability of the Company to attract and retain highly trained personnel; the ability of the Company to develop and maintain its intellectual property; the risk of intellectual property infringement The encroachment, breach, or violation of a right, law, regulation, or contract. The term is most frequently used in reference to the invasion of rights secured by Copyright, patent, or trademark. claims against the Company; the integrity of public key cryptology The science of developing secret codes and/or the use of those codes in encryption systems. See cryptography. cryptology - The study of cryptography and cryptanalysis. technology used by the Company; and the risk of increased government regulation of the Company's operations. For additional information with respect to certain of these and other factors, see the Annual Information Form and Annual Report (Management Discussion and Analysis) of the Company filed with Canadian securities commissions. THE FORWARD-LOOKING STATEMENTS CONTAINED IN THIS PRESS RELEASE REPRESENT BCE EMERGIS EXPECTATIONS AS AT JANUARY 28, 2003 AND, ACCORDINGLY, ARE SUBJECT TO CHANGE AFTER SUCH DATE. HOWEVER BCE EMERGIS DISCLAIMS ANY INTENTION OR OBLIGATION TO UPDATE OR REVISE ANY FORWARD-LOOKING STATEMENTS, WHETHER AS A RESULT OF NEW INFORMATION, FUTURE EVENTS OR OTHERWISE. (1) EBITDA used in this quarterly report does not have a meaning under Canadian Generally Accepted Accounting Principles The standard accounting rules, regulations, and procedures used by companies in maintaining their financial records. Generally accepted accounting principles (GAAP) provide companies and accountants with a consistent set of guidelines that cover both broad accounting (GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). ) and therefore may not be comparable to similar measures presented by other publicly traded companies publicly traded company A company whose shares of common stock are held by the public and are available for purchase by investors. The shares of publicly traded firms are bought and sold on the organized exchanges or in the over-the-counter market. . It is defined as earnings before depreciation, amortization of intangibles Property that is a "right" such as a patent, Copyright, or trademark, or one that is lacking physical existence, such as good will. , interest, write-down Write-Down Reducing the book value of an asset because it is overvalued compared to the market value. Notes: This is usually reflected in the company's income statement as an expense, thereby reducing net income. of assets, gains of sale of exited activities and other expenses. No reconciliation is provided in the Interim Consolidated Statement of Earnings.
Consolidated Statements of Earnings
----------------------------------------------------------------------
For the three For the three
month period month period For the year For the year
ended ended ended ended
December December December December
(millions of 31, 2002 31, 2001 31, 2002 31, 2001
Canadian dollars,
except income
(loss) per share
and number of
shares)
----------------------------------------------------------------------
(unaudited) (unaudited) (unaudited) (audited)
Revenue 130.9 181.4 539.9 656.4
Direct costs 28.4 41.7 123.5 148.6
----------------------------------------------------------------------
Gross margin 102.5 139.7 416.4 507.8
----------------------------------------------------------------------
Expenses
Operations 39.5 49.1 176.5 178.3
Sales and marketing 13.3 22.1 66.3 77.1
Research and
development 11.7 16.5 72.1 58.3
General and
administrative 18.8 16.8 72.9 67.3
Restructuring
and other
charges (note 3) (2.2) - 116.8 -
----------------------------------------------------------------------
81.1 104.5 504.6 381.0
----------------------------------------------------------------------
Earnings (loss) before
under-noted items 21.4 35.2 (88.2) 126.8
Depreciation 12.5 13.2 52.8 45.4
Amortization of
intangibles (note 1) 1.7 97.1 13.4 407.1
Interest income (0.6) (0.7) (3.3) (4.7)
Interest on
long-term debt 1.3 2.3 4.5 12.2
Accretion on convertible
debenture due to parent,
related to the option - 10.5 - 21.0
Writedown of marketable
securities and
other assets - 2.1 0.1 41.3
Other (0.5) (0.5) (0.8) (2.2)
----------------------------------------------------------------------
Net income (loss)
before income taxes 7.0 (88.8) (154.9) (393.3)
Income taxes
Current 0.7 3.0 14.4 17.5
Future (2.3) 9.5 (59.0) 3.6
----------------------------------------------------------------------
Net income (loss) 8.6 (101.3) (110.3) (414.4)
----------------------------------------------------------------------
----------------------------------------------------------------------
Basic income (loss)
per share ($) 0.08 (1.03) (1.09) (4.35)
Diluted income (loss)
per share ($) (note 2) 0.08 (1.03) (1.09) (4.35)
Weighted average
number of shares
outstanding used
in computing
basic income
(loss) per share 101,896,418 98,049,409 101,534,509 95,186,035
Weighted average
number of shares
outstanding used
in computing
diluted income
(loss) per share 105,124,010 98,049,409 101,534,509 95,186,035
The accompanying notes are an integral part of the Interim
Consolidated Financial Statements.
Consolidated Statements of Deficit
----------------------------------------------------------------------
For the year For the year
ended ended
December December
(millions of Canadian dollars) 31, 2002 31, 2001
----------------------------------------------------------------------
(unaudited) (audited)
Deficit - beginning of period (786.4) (372.0)
Adjustment related to the adoption of new
accounting recommendations relating to
goodwill and other intangible assets (note 1) (183.4) -
Net loss (110.3) (414.4)
----------------------------------------------------------------------
Deficit - end of period (1,080.1) (786.4)
----------------------------------------------------------------------
The accompanying notes are an integral part of the Interim
Consolidated Financial Statements.
Consolidated Balance Sheets
----------------------------------------------------------------------
As at As at
December 31, December 31,
(millions of Canadian dollars) 2002 2001
----------------------------------------------------------------------
(unaudited) (audited)
ASSETS
Current
Cash and temporary cash investments 107.0 183.3
Marketable securities (market value nil
as at December 31, 2002 and
$3.1M as at December 31, 2001) - 1.9
Accounts receivable 57.8 98.6
Future income taxes 7.5 5.6
Other 10.4 9.6
----------------------------------------------------------------------
182.7 299.0
Capital assets 133.9 172.1
Goodwill, net 291.2 477.2
Future income taxes 131.4 68.7
Other assets 74.0 89.9
----------------------------------------------------------------------
813.2 1,106.9
----------------------------------------------------------------------
LIABILITIES
Current
Accounts payable and accrued liabilities 120.2 100.2
Deferred revenue 22.1 12.3
Deferred credits - 12.0
Long-term debt 26.1 28.7
----------------------------------------------------------------------
168.4 153.2
Deferred credits and other 7.0 1.9
Long-term debt 35.9 36.9
----------------------------------------------------------------------
211.3 192.0
----------------------------------------------------------------------
SHAREHOLDERS' EQUITY (note 5)
Capital stock 1,562.6 1,596.0
Contributed surplus 64.2 46.2
Deficit (1,080.1) (786.4)
Foreign currency translation adjustment 55.2 59.1
----------------------------------------------------------------------
601.9 914.9
----------------------------------------------------------------------
813.2 1,106.9
----------------------------------------------------------------------
The accompanying notes are an integral part of the Interim
Consolidated Financial Statements.
Consolidated Statements of Cash Flows
----------------------------------------------------------------------
For the three For the three
month period month period For the year For the year
ended ended ended ended
(millions of December December December December
Canadian dollars) 31, 2002 31, 2001 31, 2002 31, 2001
----------------------------------------------------------------------
(unaudited) (unaudited) (unaudited) (audited)
Operating activities
Net income (loss) 8.6 (101.3) (110.3) (414.4)
Depreciation and
amortization 14.2 110.3 66.2 452.5
Accretion on
convertible
debenture due
to parent - 10.5 - 21.0
Writedown of
marketable
securities and
other assets - 2.1 0.1 41.3
Future income taxes (2.3) 9.5 (59.0) 3.6
Non-cash portion
of restructuring
and other
charges (note 3) 5.4 - 72.6 -
Long-term portion
of restructuring
and other charges
(note 3) (5.6) - (5.6) -
Other (3.1) (4.3) (2.8) (1.9)
Changes in
working capital (3.6) 36.1 54.0 3.6
----------------------------------------------------------------------
Cash flows from
operating activities 13.6 62.9 15.2 105.7
----------------------------------------------------------------------
Investing activities
Additions to
capital assets (9.8) (35.7) (23.8) (57.0)
Acquisitions (10.7) (13.6) (42.0) (59.2)
Cash acquired
on acquisition - - - 0.8
Proceeds on sale
of marketable
securities - 4.8 2.7 26.0
Loan receivable - (12.0) 0.7 (12.0)
Settlement of a
note payable - - - (1.5)
----------------------------------------------------------------------
Cash flows used for
investing activities (20.5) (56.5) (62.4) (102.9)
----------------------------------------------------------------------
Financing activities
Repayment of
long-term debt (6.9) (9.9) (29.7) (30.2)
Issue of long-term debt - 8.0 - 15.7
Issue of common shares - 246.9 0.4 252.4
Repayment of convertible
debenture due to parent - (150.0) - (150.0)
----------------------------------------------------------------------
Cash flows used for
financing activities (6.9) 95.0 (29.3) 87.9
----------------------------------------------------------------------
Foreign exchange gain
(loss) on cash held
in foreign currencies (0.2) 0.0 0.2 0.4
Cash and cash equivalents
Increase (decrease) (14.0) 101.4 (76.3) 91.1
Balance, beginning
of period 121.0 81.9 183.3 92.2
----------------------------------------------------------------------
Balance, end
of period 107.0 183.3 107.0 183.3
----------------------------------------------------------------------
Supplemental disclosure
of cash flow information
Interest paid 1.5 4.6 4.8 14.5
Income taxes paid 0.9 4.4 9.8 10.7
The accompanying notes are an integral part of the Interim
Consolidated Financial Statements.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS As at December
31, 2002 (In millions of Canadian dollars except share data)
(unaudited)
These interim consolidated financial statements have been prepared
in accordance with Canadian generally accepted accounting principles,
using the same accounting policies as were used for the consolidated
financial statements for the year ended December 31, 2001 except as
discussed below. These interim consolidated financial statements
should be read in conjunction with the consolidated financial
statements for the year ended December 31, 2001, as set out in the
2001 Annual Report.
1. Summary of Significant Accounting Policies
Business Combinations/Goodwill and Other Intangible Assets The
CICA issued new Handbook Sections 1581, Business Combinations, and
3062, Goodwill and Other Intangible Assets. Effective January 1, 2002,
goodwill and intangible assets with an indefinite life are no longer
amortized to earnings and are assessed for impairment on an annual
basis in accordance with the new standards, including a transitional
impairment test whereby any resulting impairment is charged to opening
retained earnings. As of June 30, 2002, the Company's management had
allocated its existing goodwill and intangible assets with an
indefinite life to its reporting units and completed the assessment of
the quantitative impact of the transitional impairment test on its
financial statements. An impairment of $183.4 million was charged to
opening retained earnings in the second quarter of 2002 relating to
impaired goodwill of the e-Health Solutions Group business unit ($86.0
million), BCE Emergis - U.S.A business unit ($71.7 million) and BCE
Emergis - Canada business unit ($25.7 million).
During the period the Company re-allocated $15.2 million of future
income taxes to goodwill related to the AHC acquisition in June, 2001.
The remaining change in goodwill relates mostly to the foreign
exchange impact of the self-sustaining operations.
The new recommendation also requires that a reconciliation of net
loss excluding the impact of goodwill amortization be disclosed.
----------------------------------------------------------------------
For the three-month period ended
Dec. 31, 2002 Dec. 31, 2001
----------------------------------------------------------------------
----------------------------------------------------------------------
Net income (loss), as
reported 8.6 (101.3)
Goodwill
amortization
expense, net of
tax - 89.1
----------------------------------------------------------------------
Net income (loss), adjusted 8.6 (12.2)
----------------------------------------------------------------------
----------------------------------------------------------------------
Adjusted basic and diluted
income (loss) per share ($) 0.08 (0.12)
----------------------------------------------------------------------
----------------------------------------------------------------------
For the year ended
Dec. 31, 2002 Dec. 31, 2001
----------------------------------------------------------------------
Net loss, as reported (110.3) (414.4)
Goodwill amortization
expense, net of tax - 365.1
----------------------------------------------------------------------
Net loss, adjusted (110.3) (49.3)
----------------------------------------------------------------------
----------------------------------------------------------------------
Adjusted basic and diluted loss
per share ($) (1.09) (0.52)
----------------------------------------------------------------------
Stock-based Compensation
The Company also adopted the new recommendations of CICA Handbook
Section 3870, Stock-based compensation and other stock-based payments,
effective January 1, 2002. This Section establishes standards for the
recognition, measurement and disclosure of stock-based compensation
and other stock-based payments made in exchange for goods and services
and applies to transactions, including non-reciprocal transactions, in
which an enterprise grants shares of common stock, stock options, or
other equity instruments, or incurs liabilities based on the price of
common stock or other equity instruments. This Section sets out a fair
value based method of accounting and is required for certain stock-
based transactions and applied to awards granted on or after January
1, 2002. The Company, as permitted by Handbook Section 3870, has
elected to continue to account for employee stock options by measuring
compensation cost for these options as the excess, if any, of the
quoted market price of the Company's common shares at the date of
grant over the amount an employee must pay to acquire the common
shares.
The following outlines the impact and assumptions used if the
compensation cost for the Company's stock-based employee compensation
plans was determined under the fair value based method of accounting
for awards granted on or after January 1, 2002.
----------------------------------------------------------------------
For the
three-months For the year
ended ended
Dec. 31, 2002 Dec. 31, 2002
----------------------------------------------------------------------
----------------------------------------------------------------------
Net income (loss), as reported
($millions) 8.6 (110.3)
Adjustment to net income (loss)
($millions) 1.0 (5.7)
Proforma net income (loss)
($millions) 9.6 (116.0)
Proforma basic and diluted income
(loss) per share ($) 0.09 (1.14)
Assumptions used in the Black-
Scholes option pricing model:
Dividend yield 0.0% 0.0%
Expected volatility 75.0% 75.0%
Risk-free interest rate 3.99% 4.42%
Expected life (years) 4 4
Weighted-average grant date fair
value ($) $4.31 $10.95
----------------------------------------------------------------------
2. Net income per share
The reconciliation of diluted income per share in the current
period is presented below:
----------------------------------------------------------------------
For the three-month period ended
Dec. 31, 2002
----------------------------------------------------------------------
$
Net income Number of shares $
(numerator) (denominator) Per share
amount
----------------------------------------------------------------------
----------------------------------------------------------------------
Net income attributable to
common shareholders 8.6 101,896,418 0.08
Dilutive options 100,577
Dilutive common shares
to be issued related
to acquisitions 3,127,015
Net income
attributable to
common
shareholders and
assumed
conversions 8.6 105,124,010 0.08
----------------------------------------------------------------------
For the following periods, the Company had securities outstanding
which could potentially dilute basic earnings per share in the future.
These securities were excluded from the computation of dilutive net
loss per share in the periods presented, as their effect would have
been antidilutive. Such outstanding securities consist of the
following:
----------------------------------------------------------------------
For the
three-month
period ended For the year ended
----------------------------------------------------------------------
----------------------------------------------------------------------
Dec. 31, 2001 Dec. 31, 2002 Dec. 31, 2001
Number of Number of Number of
Shares Shares Shares
----------------------------------------------------------------------
Options 5,009,600 6,299,114 5,052,783
Warrants 1,650,000 900,000 1,650,000
Common shares to be
issued related to
acquisitions 1,909,507 3,127,015 1,658,231
----------------------------------------------------------------------
3. Restructuring and Other Charges
On April 5, 2002, the Company announced its plan to focus on key
growth areas, drive recurring revenue growth and streamline its
service offerings and operating costs. Concurrent with the focus on
key areas of growth, the Company developed a restructuring program to
streamline the service offerings and reduce the operating cost
structure. A review of the product suite identified services that were
considered non-core and that the Company plans to exit. In addition,
in light of the announcement, the Company re-evaluated the carrying
value of certain assets. This review and evaluation resulted in a pre-
tax charge to earnings totaling $116.8 million for the year ended
December 31, 2002. The charge included restructuring charges totaling
$92.5 million, and asset write-downs totaling $24.3 million. Included
in other charges is a write-down of the intangible asset related to
the e-route acquisition discussed in note 4. The restructuring charge
includes cash charges totaling $44.2 million and asset write-downs
related to our exited product lines in the amount of $48.3 million.
The cash charge includes employee severance and other employee costs,
contract settlements and costs related to leased premises no longer in
use.
As part of the restructuring, the net proceeds received from the
sale of the assets of its wire services (eNews) and proceeds received
upon the liquidation of a company accounted for as a portfolio
investment were recorded against restructuring charges.
At December 31, 2002, the remaining unpaid balance of the
restructuring provision was $22.6 million of which $17.0 million is
included in accounts payable and accrued liabilities, and $5.6 million
in deferred credits and other.
The following table displays the activity and balance of the
restructuring and other provision accounts for the year ended December
31, 2002.
----------------------------------------------------------------------
Restructuring Cumulative draw downs
Costs and (recovery) Balance
Credits Cash Non-Cash Dec. 31,
Total Charge (Credits) 2002
----------------------------------------------------------------------
$ $ $ $
Millions Millions Millions Millions
----------------------------------------------------------------------
Asset write-downs 48.3 - 48.3 -
Severance and other
employee costs 25.2 13.4 - 11.8
Contract settlements 16.0 9.5 - 6.5
Lease costs 3.0 1.2 - 1.8
Other 6.4 3.3 - 3.1
Proceeds, net (6.4) (5.8) - (0.6)
92.5 21.6 48.3 22.6
----------------------------------------------------------------------
----------------------------------------------------------------------
Other Charges
Asset write-downs 16.7 - 16.7 -
Acquisition of e-route 7.6 - 7.6 -
----------------------------------------------------------------------
24.3 - 24.3 -
----------------------------------------------------------------------
----------------------------------------------------------------------
Total 116.8 21.6 72.6 22.6
----------------------------------------------------------------------
----------------------------------------------------------------------
4. Acquisitions and Exited Activities
Acquisitions
Freddie Mac
On September 27, 2002, the Company acquired, through a
wholly-owned subsidiary, (the "subsidiary") the on-line mortgage
processing and closing technology tools from The Federal Home Loan
Mortgage Corporation ("Freddie Mac") for cash and other consideration
of $18.3 million USD including $0.5 million USD of professional
services. Pursuant to the Asset Purchase Agreement the purchase price
includes an initial payout of $5.8 million USD, a note payable
totalling $12.0 million USD, warrants issued to Freddie Mac which,
upon their exercise, grant ownership of 49.9% of the subsidiary
subject to certain conditions, and other considerations dependent on
future performance. The fair value of these warrants at the time of
acquisition was negligible. The subsidiary is required to pay interest
of 8% per annum on the note payable which is to be settled in two
equal instalments on December 30, 2004 and December 30, 2005. The
warrants will be exercisable for a one-year period commencing December
31, 2011.
The total purchase price has been allocated to acquired
technologies and will be amortized over a 5 year period beginning upon
the commencement of commercial activities.
Pursuant to the transaction, the Company also entered into a
marketing agreement with Freddie Mac for the promotion and marketing
of the on- line mortgage processing and closing technology tools to
its lenders in the United States mortgage market. Under the terms of
this agreement, the Company is entitled to receive $14.0 million USD
from Freddie Mac to fund customer implementations on to the platform.
As at December 31, 2002, $9.0 million USD had been received from
Freddie Mac. These payments are included as deferred revenue on the
Company's balance sheet until the implementation services are
completed, at which time they are recognized as revenue.
e-route
On April 19, 2002, the Company acquired the outstanding common
shares of e-route inc. for $26.3 million; $6.9 million in cash and
$19.4 million in assumed liabilities to the Company. The Company also
incurred transaction costs in the amount of $0.7 million relating
mostly to professional fees. e-route was owned by six of Canada's
leading financial institutions and is involved in the creation of new
services for their on-line banking customers. The transaction was
accounted for using the purchase method.
The results of operations of e-route have been included in the
Company's results since April 19, 2002, the date of acquisition.
The intangible asset related to the acquisition was written down
to reflect the fair value of the existing service offerings. This
resulted in a $7.6 million write-down to the intangible asset. The
remaining amount was allocated to customer acquisition costs and will
be amortized over a period of 8 years. No value was assigned to the
service offerings still in the development stage.
Admar
On April 1, 2002, the Company acquired the outstanding common
shares of Admar Group Inc. (Admar), a wholly owned subsidiary of the
Principal Financial Group Inc. for a total cash consideration of $3.0
million USD. The acquisition was for Admar's preferred provider
organization network services and utilization management services.
Pursuant to the Stock Purchase Agreement, $1.25 million USD was paid
at closing and the balance was paid on December 31, 2002. The Company
also incurred integration and transaction costs in the amount of $0.7
million USD relating mostly to professional services.
The acquisition cost of $3.7 million USD ($5.8 million CAD) was
allocated to Customer acquisition costs ($5.5 million CAD) and current
assets ($0.3 million CAD).
Exited Activities
eNews
On July 22, 2002, the Company sold the assets of its wire services
(eNews) to CCNMatthews, an affiliate of Pims Holdings Ltd. of London,
England for $5.6 million, of which $4.3 million was paid at closing,
$0.3 million was paid in the current period and the balance of $1.0
million will be payable in July 2003. The agreement was in line with
the plan announced in April, 2002 to exit non-core activities.
5. Equity Components
The stated capital stock as at December 31, 2002 is detailed as
follows:
----------------------------------------------------------------------
Options
Not issued issued as
Issued and and not part of
fully paid fully paid acquisition
----------------------------------------------------------------------
Number Common
Shares $ $
($Millions) Millions Millions
----------------------------------------------------------------------
Balance beginning
of year 101,308,517 1,510.5 70.9 14.6
----------------------------------------------------------------------
Issue of common
shares (a) 102,270 0.7 - -
Common shares to
be issued (b) - - (10.1) -
Issue of common
shares (C) 485,631 3.1 - -
Common shares to
be issued (C) - - (26.8) -
Share issue costs (0.3)
----------------------------------------------------------------------
Balance at December
31, 2002 101,896,418 1,514.0 34.0 14.6
----------------------------------------------------------------------
----------------------------------------------------------------------
Contributed Surplus: $ Millions
Balance beginning of year 46.2
Amount relating to InvoiceLink acquisition (C) 18.0
Balance at December 31, 2002 64.2
(a) 102,270 stock options were exercised to purchase 102,270
common shares for cash consideration of $711,818.
(b) During the second quarter of 2002 the Company paid the first
of three instalments relating to the AHC acquisition in June
2001. The Company exercised its option to settle this first
instalment with a cash payment of $6.7 million USD ($10.1
million CAD)
(C) 485,631 additional common shares were issued for the second of
three instalment payments relating to the acquisition of
InvoiceLink Corporation (renamed BCE Emergis Technologies,
Inc). The Company settled 20% of the instalment balance with a
cash payment of $3.6 million USD ($5.7 million CAD). An amount
of $18.0 million, representing the differential between the
current share price and the estimated share price at September
30, 2001, was attributed to contributed surplus.
Stock option plans:
Stock option plans for common shares
at prices ranging from $0.44 to $172.80
per share and expiry dates up to 2010. 6,299,114 options
Warrants:
From time to time, the Company enters into formal business
arrangements for the use and distribution of certain technology
solutions with strategic partners. Under the terms of such
arrangements, the partners may acquire warrants to purchase shares of
the Company.
The following table summarizes warrant activity:
----------------------------------------------------------------------
December 31, 2002
----------------------------------------------------------------------
Number of Number of Exercise
Warrants Warrants price of
Outstanding Exercisable Warrants
(1) (1) Exercisable
----------------------------------------------------------------------
($)
Outstanding -
beginning of
year 1,650,000 550,000 $59.20
Warrants (2) - 11,675 $25.50
Expiration of
Warrants (3) (750,000) (11,675) $25.50
----------------------------------------------------------------------
Outstanding -
end of year 900,000 550,000 $59.20
----------------------------------------------------------------------
(1) Warrants are convertible into common shares of the Company on a
1:1 basis.
(2) The warrants that became exercisable in the second quarter of
2002 were granted to shareholders of a company in which BCE
Emergis had an investment accounted for as a portfolio
investment.
(3) The warrants granted to shareholders of a company in which BCE
Emergis had an investment accounted for as a portfolio
investment were extinguished due to the liquidation of this
company.
The non-exercised warrants will become exercisable upon the
attainment of certain contractual arrangements and the exercise price
will be determined at this time and expire five years thereafter. No
amount has been recorded in the financial statements as a result of
these arrangements.
6. Operating Segment Information
The Company focuses its activities in three business units
(eHealth Solutions Group, BCE Emergis - Canada, and BCE - Emergis
U.S.A.), offering a full suite of products to companies in
transaction- intensive, eHealth and financial services sectors. The
following table shows the activities of each of the three business
units:
For the three-month period ended
----------------------------------------------------------------------
e-Health BCE BCE
Solutions Emergis - Emergis -
Group Canada U.S.A Total
----------------------------------------------------------------------
Dec. Dec. Dec. Dec. Dec. Dec. Dec. . Dec.
$ 31, 31, 31, 31, 31, 31, 31, 31,
Millions 2002 2001 2002 2001 2002 2001 2002 2001
----------------------------------------------------------------------
Revenues 63.2 83.0 58.5 82.7 9.2 15.7 130.9 181.4
----------------------------------------------------------------------
Direct
Costs 8.7 14.4 18.6 25.8 1.1 1.5 28.4 41.7
----------------------------------------------------------------------
Gross
Margin 54.5 68.6 39.9 56.9 8.1 14.2 102.5 139.7
----------------------------------------------------------------------
For the year ended
----------------------------------------------------------------------
e-Health BCE BCE
Solutions Emergis - Emergis -
Group Canada U.S.A Total
----------------------------------------------------------------------
Dec. Dec. Dec. Dec. Dec. Dec. Dec. . Dec.
$ 31, 31, 31, 31, 31, 31, 31, 31,
Millions 2002 2001 2002 2001 2002 2001 2002 2001
----------------------------------------------------------------------
Revenues 276.9 307.0 235.6 296.4 27.4 53.0 539.9 656.4
----------------------------------------------------------------------
Direct
Costs 33.6 49.4 86.2 96.1 3.7 3.1 123.5 148.6
----------------------------------------------------------------------
Gross
Margin 243.3 257.6 149.4 200.3 23.7 49.9 416.4 507.8
----------------------------------------------------------------------
There are no inter-segment transactions or significant differences
between segment and corporate accounting policies.
All of the Company's business units share in the use of its
capital asset infrastructure. As a result, the Company does not
disclose a measure of total assets by business unit. In addition, the
asset allocation is not used by the Company in its management
reporting for decision making purposes.
Geographic information
The following table sets out certain geographical information
relative to the Company which differs from the business units of the
Company:
----------------------------------------------------------------------
For the For the
three month three month For the For the
period period year year
Revenue ended ended ended ended
$ Dec. 31, Dec. 31, Dec. 31, Dec. 31,
Millions 2002 2001 2002 2001
----------------------------------------------------------------------
Canada 76.6 110.8 316.1 385.5
United States 54.3 70.6 223.8 270.2
Other - - - 0.7
----------------------------------------------------------------------
----------------------------------------------------------------------
130.9 181.4 539.9 656.4
----------------------------------------------------------------------
7. Related Party Information
The following transactions occurred in the normal course of
operations with BCE Inc., the parent company, and other companies in
the BCE group subject to common control during the respective periods
and were measured at the exchange value, which is the amount
established and agreed to by the related parties:
----------------------------------------------------------------------
For the For the
three month three month For the For the
period period year year
ended ended ended ended
$ Dec. 31, Dec. 31, Dec. 31, Dec. 31,
Millions 2002 2001 2002 2001
----------------------------------------------------------------------
Revenue (a) 31.6 76.6 141.3 205.4
Direct costs 23.1 44.3 90.6 99.9
Expenses 12.2 15.5 54.2 61.0
Interest expense
on convertible
debenture due to
parent - 1.4 - 8.5
----------------------------------------------------------------------
(a) Includes services for resale to third parties and for internal
use.
As part of the extended exclusive distribution agreement signed in
2001 with Bell Canada, the Company derives revenue from Bell Canada
and directly from other customers with Bell Canada acting as an agent.
Included in related party revenue is the amount derived directly from
Bell Canada in the amount of $17.7 million ($32.0 million) and $69.2
million ($105.2 million) for the three-month period and year ended
December 31, 2002 (2001). Under the distribution agreement the amount
derived from other customers with Bell Canada acting as an agent is
$11.8 million ($14.5 million) and $57.0 million ($43.4 million) for
the three-month period and year ended December 31, 2002 (2001).
Included in direct costs and expenses is $24.5 million ($37.3
million) and $104.7 million ($118.3 million) for the three-month
period and year ended December 31, 2002 (2001) related to the extended
service agreement signed with BCE Nexxia in 2001.
The balance sheet includes the following balances with BCE Inc.,
the parent company, and other companies in the BCE group subject to
common control:
----------------------------------------------------------------------
$ As at As at
Millions Dec. 31, 2002 Dec. 31, 2001
----------------------------------------------------------------------
----------------------------------------------------------------------
Accounts receivable 28.1 23.0
Accounts payable and accrued
liabilities 53.7 17.8
Long term debt 0.1 1.1
----------------------------------------------------------------------
8. Subsequent Event
On January 24, 2003, the Company entered into agreements with Bell
Canada, a company subject to common control, in order to accelerate
the realization of certain future income tax assets.
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