BCE Emergis Meets Targets and Reports Sustained Profitability for the First Quarter 2003.Business Editors MONTREAL--(BUSINESS WIRE)--April 22, 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 Inc. (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 of $124.1 million -- EBITDA of $18.3 million -- Net income of $4.8 million; EPS of $0.05 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 quarterly financial results for the three-month period ended March 31, 2003. Sustained profitability marked the quarter, as per targets previously announced, with core revenue rising year over year. Total revenue for the first quarter came in at $124.1 million compared with $132.0 million for the first quarter 2002 and $130.9 million for the fourth quarter 2002. The decreases are due mainly to lower revenue from the distribution agreement 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 for legacy products (Bell legacy contract) and other non-core and exited products, as well as the negative impact of foreign exchange translation of U.S.-sourced revenue. Core revenue (excluding the revenue from the Bell legacy contract and other non-core and exited products) for the current period were $94.4 million compared with $89.6 million in the first quarter of 2002 and $96.9 million in the fourth quarter of 2002. EBITDA(1) came in at $18.3 million compared with a loss of $20.5 million in the corresponding period in 2002 and $19.2 million in the fourth quarter (before an 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). Net income for the first quarter 2003 was $4.8 million compared to a loss of $27.9 million in the first quarter 2002 and compared with $6.4 million in the fourth quarter 2002 (before an adjustment to restructuring and other charges). EPS was $0.05 compared with a loss per share of $0.28 in the first quarter 2002 and $0.06 in the fourth quarter 2002 (before an adjustment to restructuring and other charges). Reported net income and EPS in the fourth quarter of 2002 were $8.6 million and $0.08, respectively. "BCE Emergis has begun the year on a positive note and should continue to benefit from the effects of restructuring initiatives and our 2003 business plan throughout the year," declared 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. FINANCIAL HIGHLIGHTS As announced in December December: see month. 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: 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 Solutions, 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. and eFinance Solutions. The objective of this reorganization 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 accordingly: eHealth Solutions, North America 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; eFinance Solutions 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 (BCE Emergis-Canada and BCE Emergis-U.S.). Product lines within eFinance Solutions are eBusiness Solutions, ePayment Solutions and eLending Solutions. Three-month periods ended March 31, 2003, December 31, 2002 and March 31, 2002 in millions of Canadian dollars Noun 1. Canadian dollar - the basic unit of money in Canada; "the Canadian dollar has the image of loon on one side of the coin" loonie dollar - the basic monetary unit in many countries; equal to 100 cents :
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Q1 2003 Q4 2002 Q1 2002
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Core eHealth Solutions 59.0 58.1 62.2
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Core eFinance Solutions 35.4 38.8 27.4
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Total core revenue 94.4 96.9 89.6
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Non-core revenue 29.7 34.0 42.4
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Total revenue 124.1 130.9 132.0
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Following is an overview of results for the current quarter: -- Revenue totalled $124.1 million in the first quarter compared with $132.0 million in the first quarter of 2002 and $130.9 million in the fourth quarter of 2002. -- 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 stood at $112.4 million or 91 per cent of total revenue compared with $122.1 million or 92 per cent of total revenue in the first quarter of 2002. -- U.S.-sourced revenue was 46 per cent of total revenue in the current quarter compared with 41 per cent in the corresponding quarter of 2002. -- Related party revenue was $24.4 million, or 20 per cent of total revenue, compared with $38.9 million, or 29 per cent of total revenue, in the first quarter of 2002. -- Core revenue for the period was $94.4 million compared to $89.6 for the first quarter of 2002, representing an increase of 5 per cent. The increase in core revenue was mainly the result of increases in core eFinance revenue from all product lines and from the Canadian operations of eHealth Solutions, partly offset by lower eHealth Solutions (U.S.) revenue due mainly to the loss of a customer contract and the impact of a stronger Canadian dollar. On a sequential basis, core revenue declined slightly from $96.9 million due to a lower contribution from eFinance Solutions' point-of-sale point of sale n. pl. points of sale A business or place where a product or service can be purchased. Also called point of purchase. point product and to the impact of foreign exchange. -- Core recurring revenue was $83.7 million in the first quarter of 2003, compared with $81.3 million for the first quarter of 2002 and $84.2 million for the fourth quarter of 2002. The year-over-year growth was generated by the eFinance Solutions unit, partly offset by a lower contribution from eHealth Solutions. A lower contribution from eFinance Solutions was responsible for the slight sequential quarterly decrease. -- Total non-core revenue for the first quarter of 2003 was $29.7 million compared with $42.4 million in the first quarter of 2002, representing a decrease in overall revenue of $12.7 million year over year. -- Total quarterly operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. have decreased nearly $40 million or 33 per cent from the first quarter of 2002 as a result of the Company's success in aligning a·lign v. a·ligned, a·lign·ing, a·ligns v.tr. 1. To arrange in a line or so as to be parallel: align the tops of a row of pictures; aligned the car with the curb. operating costs operating costs npl → gastos mpl operacionales with its core recurring revenue base. The Company continues to maintain a good financial position with $106.9 million cash on hand as at March 31, 2003 as well as combined cash flows generated from operations in the amount of $12.2 million, compared with $13.6 million in the fourth quarter of 2002 and to cash used for operations of $29.1 million in the first quarter of last year. In the last 12 months, the Company has generated $56.5 million in cash flow from operations Cash flow from operations A firm's net cash inflow resulting directly from its regular operations (disregarding extraordinary items such as the sale of fixed assets or transaction costs associated with issuing securities), calculated as the sum of net income plus noncash expenses . OPERATING HIGHLIGHTS "I am pleased with the gains in both business units this quarter as the Company continues to make progress in the areas of customer focus and sales," stated 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. . The eFinance Solutions business unit The eFinance Solutions business unit saw progress. On the ePayment Solutions side, there was a substantial increase in overall revenue, compared with the same period last year, due to higher revenue from the Visa Commerce project and to continued customer adoption of eInvoicing. By the end of March, the Company had also completed and delivered the Visa Commerce 2.0 solution. The new Java/Unix-based solution supports the secure and flexible messaging of electronic payment and remittance Money sent from one individual to another in the form of cash, check, or some other manner. Financial statements sent by a creditor to a debtor frequently refer to the process of submitting a monthly remittance. REMITTANCE, comm. law. information in and out of Visa Commerce. The Company's leading electronic invoice An itemized statement or written account of goods sent to a purchaser or consignee by a vendor that indicates the quantity and price of each piece of merchandise shipped. A consular invoice is one used in foreign trade. presentment presentment: see indictment. and payment solution suite, Emergis(R) e-Invoicing, will be extended to payors in the second quarter of 2003. The new solution, called Emergis(R) e-Invoicing for Payables Payables Related: Accounts payable , targets large businesses seeking to streamline account payable cycles, reduce costs, improve vendor relationships and enhance cash management practices. In eLending Solutions, the Company announced two agreements relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc Emergis(R) Vendor Services Exchange in the first quarter, with a la mode and TALX, which enhance the utility of the solution. The two agreements bring the total number of eLending customers implemented to 64 vendors and 16 lenders. Revenue for this line of business should remain a significant part of non-recurring revenue in 2003, primarily because of professional fees related to implementation of mortgage service vendors and lenders onto the platform. Higher revenue from our eSecurity solutions, sold through Bell Canada, contributed to a 20 per cent increase in core recurring revenue in the eBusiness Solutions line of business compared to the same period in 2002. The main source of this increase came from the continual addition of new services to the Secure Channel project with the federal government of Canada The Government of Canada is the federal government of Canada. The powers and structure of the federal government are set out in the Constitution of Canada. In modern Canadian use, the term "government" (or "federal government") refers broadly to the cabinet of the day and . The eHealth Solutions business unit This business unit saw slight gains in revenues as well as in transaction volumes in the first quarter compared with the fourth quarter 2002. 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 , a new five-year preferred supplier agreement with the 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. Chiropractic chiropractic (kīrəprăk`tĭk) [Gr.,=doing by hand], medical practice based on the theory that all disease results from a disruption of the functions of the nerves. Association has extended the Company's reach in the country's health-care market. The agreement will also facilitate provider adoption of electronic claims submission to the Workplace Safety and Insurance Board of Ontario (WSIB WSIB Workplace Safety and Insurance Board WSIB Washington State Investment Board ), the largest payor payor (payer) n. The one who must make payment on a promissory note. of work-related health claims in Canada. Continued adoption of services at the WSIB saw claims transactions revenues increase as transaction volumes rose, in part due to the addition of 1,200 new providers. The result was a 20 per cent sequential increase in core recurring revenue for this line of business. 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. , we saw revenue improve over last quarter, notwithstanding an unfavourable foreign exchange rate in the first quarter 2003. Concluded Blouin: "We are pleased with our progress to date. By continuing to focus on execution, delivering strong customer service and stepping up sales efforts, we should be able to mitigate mit·i·gate v. To moderate in force or intensity. mit  i·ga tion n. the effects
of soft IT markets, as well as the exiting of products in 2002 and
declining non-core revenue from the Bell legacy contract. Going forward,
we will continue to review our product lines to ensure they continue to
meet our strategic objectives and operating performance targets."As previously announced, the Company is taking a longer-term perspective on the business and accordingly, is not providing further quarterly guidance in 2003. APRIL April: see month. 22, 2003 CONFERENCE CALL AND WEBCAST The Company will hold a conference call and live webcast today, April 22, 2003, at 5:30 p.m., to discuss its financial results for the first quarter 2003. 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 first quarter 2003 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. , April 22, 2003. The news release will also be available through CCNMatthews. The instant replay of the webcast will begin at 7:30 p.m. on April 22, 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 supplies eBusiness solutions to the 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. and health industries in North America, automating transactions between companies and allowing them to interact 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 electronically. The Company also provides cost containment cost containment, n the features of a dental benefits program or of the administration of the program designed to reduce or eliminate certain charges to the plan. services for medical claims, mainly through its preferred provider network. Its leading technologies are centred on claims and loan-related document processing Processing text documents, which includes indexing methods for text retrieval based on content. See document imaging. , 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, 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: general and economic factors; adoption of eBusiness, the adoption rate of our solutions by customers; the response to industry's rapid pace of change; competition; operating results; the success of U.S.-based operations; control by BCE; acquisitions; strategic relationships; dependance on contracting medical service providers; exposure to professional liability; defects in software or failures in the processing of transactions; security and privacy breaches; key personnel; protection of intellectual property; 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; integrity of public key cryptography An encryption method that uses a two-part key: a public key and a private key. To send an encrypted message to someone, you use the recipient's public key, which can be sent to you via regular e-mail or made available on any public Web site or venue. technology; industry and government regulation. For additional information with respect to certain of these and other factors, see the 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 APRIL 22, 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, 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, other expenses or income and income taxes. No reconciliation is provided in the Interim Consolidated Statement of Earnings.
BCE Emergis Consolidated statements of earnings
For the three For the three
month period month period
(millions of Canadian dollars, ended ended
except income (loss) per share March 31, 2003 March 31, 2002
and number of shares) (unaudited) (unaudited)
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Revenue 124.1 132.0
Direct costs 25.5 32.5
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Gross margin 98.6 99.5
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Expenses
Operations 42.8 53.1
Sales and marketing 11.9 22.5
Research and development, net 14.3 28.4
General and administrative 11.3 16.0
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80.3 120.0
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Earnings (loss) before under-noted items 18.3 (20.5)
Depreciation 5.7 6.8
Amortization of intangibles 8.0 16.0
Interest income (3.7) (0.8)
Interest on long-term debt 1.1 1.1
Other (0.3) 0.3
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Income (loss) before income taxes 7.5 (43.9)
Income taxes
Current 0.7 2.8
Future 2.0 (18.8)
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Net income (loss) 4.8 (27.9)
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Basic income (loss) per share ($) 0.05 (0.28)
Diluted income (loss) per share ($) (note 3) 0.05 (0.28)
Weighted average number of shares
outstanding used in computing basic
income (loss) per share 101,896,647 101,341,474
Weighted average number of shares
outstanding used in computing diluted
income (loss) per share 104,984,811 101,341,474
The accompanying notes are an integral part of the Interim
Consolidated Financial Statements.
BCE Emergis Consolidated statements of deficit
For the three For the three
month period month period
ended ended
(millions of Canadian dollars) March 31, 2003 March 31, 2002
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(unaudited) (unaudited)
Deficit - beginning of period (1,080.1) (786.4)
Net income (loss) 4.8 (27.9)
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Deficit - end of period (1,075.3) (814.3)
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The accompanying notes are an integral part of the Interim
Consolidated Financial Statements.
BCE Emergis Consolidated balance sheets
As at As at
March 31 December 31,
(millions of Canadian dollars) 2003 2002
-------------------------------------------------------------------
(unaudited) (audited)
ASSETS
Current
Cash and cash equivalents 106.9 107.0
Accounts receivable 53.9 57.8
Future income taxes (note 7) 5.3 7.5
Other current assets 13.1 10.4
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179.2 182.7
Fixed assets 44.0 46.9
Intangible assets 75.6 87.0
Goodwill, net 272.6 291.2
Future income taxes 126.4 131.4
Other long-term assets 68.7 74.0
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766.5 813.2
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LIABILITIES
Current
Accounts payable and accrued liabilities 113.6 120.2
Deferred revenue 15.5 22.1
Long-term debt 25.1 26.1
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154.2 168.4
Deferred credits and other 6.9 7.0
Long-term debt 31.7 35.9
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192.8 211.3
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SHAREHOLDERS' EQUITY (note 5)
Capital stock 1,562.6 1,562.6
Contributed surplus 64.2 64.2
Deficit (1,075.3) (1,080.1)
Foreign currency translation adjustment 22.2 55.2
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573.7 601.9
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766.5 813.2
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The accompanying notes are an integral part of the Interim
Consolidated Financial Statements.
BCE Emergis Consolidated statements of cash flows
For the three For the three
month period month period
ended ended
(millions of Canadian dollars) March 31, 2003 March 31, 2002
--------------------------------------------------------------------
(unaudited) (unaudited)
Operating activities
Net income (loss) 4.8 (27.9)
Depreciation and amortization 13.7 22.8
Future income taxes 2.0 (18.8)
Other 0.8 0.8
Changes in working capital (9.1) (6.0)
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Cash flows from (used for)
operating activities 12.2 (29.1)
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Investing activities
Additions to capital assets (3.5) (5.1)
Acquisitions - (0.7)
Proceeds on sale of marketable securities - 2.1
Loan receivable - 0.3
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Cash flows used for investing activities (3.5) (3.4)
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Financing activities
Repayment of long-term debt (6.1) (6.0)
Issue of common shares - 0.4
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Cash flows used for financing activities (6.1) (5.6)
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Foreign exchange loss on cash held in
foreign currencies (2.7) -
Cash and cash equivalents
Decrease (0.1) (38.1)
Balance, beginning of period 107.0 183.3
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Balance, end of period 106.9 145.2
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Supplemental disclosure of cash
flow information
Interest paid 0.7 1.1
Income taxes paid 0.5 4.3
The accompanying notes are an integral part of the Interim Consolidated Financial Statements Consolidated Financial Statements The combined financial statements of a parent company and its subsidiaries. Notes: Because consolidated financial statements present an aggregated look at the financial position of a parent and its subsidiaries, they enable you to gauge . NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS As at March 31, 2003 (In millions of Canadian dollars except share data) (unaudited) These interim consolidated financial statements have been prepared in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. 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, 2002 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, 2002, as set out in the 2002 Annual Report. 1. Summary of significant accounting policies Basis of presentation The consolidated financial statements of BCE Emergis have been prepared in accordance with Canadian generally accepted accounting principles and include the accounts of all its subsidiaries. Certain prior period figures have been reclassified to conform with the current period's presentation. Fixed assets fixed assets npl → activo sg fijo fixed assets npl → immobilisations fpl fixed assets fix npl → Effective January January: see month. 1, 2003, the Company reviewed the useful lives of certain of its fixed assets. As a result, the useful life of certain computer equipment and assets under capital lease have been extended from 3 years to a maximum of 5 years. This change in estimate has been accounted for prospectively in the current period with no restatement Restatement A revision in a company's earlier financial statements. Notes: The need for restating financial figures can result from fraud, misrepresentation, or a simple clerical error. of prior period amounts. The impact of this change in estimate resulted in a $0.5M reduction in depreciation expense in the current period. Disclosure of guarantees Effective January 1, 2003, the Company adopted Accounting Guideline guideline Medtalk A series of recommendations by a body of experts in a particular discipline. See Cancer screening guidelines, Cardiac profile guidelines, Gatekeeper guidelines, Harvard guidelines, Transfusion guidelines. 14 (AcG-14) Disclosure of guarantees. The purpose of this Guideline is to improve the transparency (1) The quality of being able to see through a material. The terms transparency and translucency are often used synonymously; however, transparent would technically mean "seeing through clear glass," while translucent would mean "seeing through frosted glass." See alpha blending. of the guarantor's disclosures relating to obligations and risks arising from guarantees given regardless of whether it will have to make payments under the guarantees. Disclosure of this new accounting guideline has been provided in note 8 to the financial statements. Future accounting changes The Canadian Institute of Chartered Accountants The Canadian Institute of Chartered Accountants (CICA) is the umbrella body for the Chartered Accountant profession in Canada and Bermuda. Membership of the CICA totals 70,000 Chartered Accountants and 8,500 students. (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) ) issued new Handbook
This article is about reference works. For the subnotebook computer, see .
1. A reduction in a company's stated capital. 2. The total capital that is less than the par value of the company's capital stock. Notes: 1. This is usually reduced because of poorly estimated losses or gains. 2. of long-lived long-lived adj. 1. Having a long life: a long-lived aunt. 2. Lasting a long time; persistent: a long-lived rumor. 3. assets. This section provides guidance on recognizing, measuring and disclosing the impairment of long-lived assets. This section also replaces the write-down provisions in Section 3061, Property, plant and equipment. Effective January 1, 2004, the Company will adopt the standard requiring the recognition of an impairment loss for a long-lived asset to be held and used when events or changes in circumstances CIRCUMSTANCES, evidence. The particulars which accompany a fact. 2. The facts proved are either possible or impossible, ordinary and probable, or extraordinary and improbable, recent or ancient; they may have happened near us, or afar off; they are public or cause its carrying value Carrying Value Also know as "book value," it is a company's total assets minus intangible assets and liabilities, such as debt. Notes: This is different than market value, as it can be higher or lower depending on the circumstances. to exceed the total undiscounted cash flows expected from its use and eventual disposition. The impairment loss is calculated by deducting the fair value of the asset from its carrying value. Management does not expect the adoption of the new standard to have an impact on the financial statements. In addition, the CICA also issued new Handbook Section 3475, Disposal of long-lived assets and discontinued operations Discontinued operations Divisions of a business that have been sold or written off and that no longer are maintained by the business. . This section provides guidance on recognizing, measuring, presenting, and disclosing long-lived assets to be disposed dis·pose v. dis·posed, dis·pos·ing, dis·pos·es v.tr. 1. To place or set in a particular order; arrange. 2. of. This section also replaces the disposal provisions in Section 3061, Property, plant and equipment, and Section 3475, Discontinued operations. This new section provides criteria for classifying assets as held for sale. It requires an asset classified as held for sale to be measured at its fair value less disposal costs. The section also provides criteria for classifying a disposal as a discontinued operation discontinued operation A segment of a business that has been abandoned or sold or for which plans for one or another of these actions have been approved. See also continuing operations. and specifies the presentation of and disclosures for discontinued operations and other disposals of long-lived assets. This section comes info effect for disposal activities started on or after May 1, 2003. Based on its current business plan, management does not expect the adoption of the new standard to have an impact on the financial statements. 2. Stock-based compensation Effective January 1, 2002 the Company adopted the recommendations of CICA Handbook Section 3870, Stock-based compensation and other stock-based payments. 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 In economics, economic output is divided into physical goods and intangible services. Consumption of goods and services is assumed to produce utility (unless the "good" is a "bad"). It is often used when referring to a Goods and Services Tax. 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. In accordance with Handbook Section 3870, the Company 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 total number of outstanding stock options granted to employees and included in note 5 was 6,178,990 at March 31, 2003. The following outlines the impact and underlying assumptions had the Company used the fair value based method of accounting for awards granted on or after January 1, 2002 to determine the compensation cost for the Company's stock-based employee compensation plans.
For the three-month
period ended
----------------------------------------------------------------------
March 31, March 31,
2003 2002
----------------------------------------------------------------------
----------------------------------------------------------------------
Net income (loss), as reported ($ millions) 4.8 (27.9)
----------------------------------------------------------------------
Adjustment to net income (loss) ($ millions) (1.8) (0.4)
----------------------------------------------------------------------
Proforma net income (loss) ($ millions) 3.0 (28.3)
----------------------------------------------------------------------
Proforma basic and diluted income (loss)
per share ($) 0.03 (0.28)
----------------------------------------------------------------------
Assumptions used in the Black-Scholes
option pricing model for awards granted
during the period:
Dividend yield 0.0% 0.0%
----------------------------------------------------------------------
Expected volatility 75.0% 92.1%
----------------------------------------------------------------------
Risk-free interest rate 4.00% 4.35%
----------------------------------------------------------------------
Expected life (years) 4 4
----------------------------------------------------------------------
Weighted-average grant date
fair value ($) $4.40 $33.98
----------------------------------------------------------------------
3. Net income per share
The reconciliation of diluted income per share in the current
period is presented below:
----------------------------------------------------------------------
For the three-month period ended
----------------------------------------------------------------------
March 31, 2003
----------------------------------------------------------------------
$ $
Net income Number of shares Per share
(numerator) (denominator) amount
----------------------------------------------------------------------
----------------------------------------------------------------------
Net income attributable to
common shareholders 4.8 101,896,647 0.05
----------------------------------------------------------------------
Dilutive options 89,579
----------------------------------------------------------------------
Dilutive common shares to be issued
related to acquisitions 2,998,585
----------------------------------------------------------------------
Net income attributable to common
shareholders and assumed
conversions 4.8 104,984,811 0.05
----------------------------------------------------------------------
For the three-month period ended March 31, 2002, no dilution
impact was calculated due to the net loss incurred in the period. The
following securities were excluded from the computation of dilutive
net loss per share as their effect would have been antidilutive. Such
securities consist of the following:
----------------------------------------------------------------------
For the three-month period ended
----------------------------------------------------------------------
March 31, 2002
----------------------------------------------------------------------
Number of Shares
----------------------------------------------------------------------
----------------------------------------------------------------------
Options 4,968,426
----------------------------------------------------------------------
Warrants 1,650,000
----------------------------------------------------------------------
Common shares to be issued related
to acquisitions 6,201,480
----------------------------------------------------------------------
4. Restructuring and other charges In April 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 its service offerings and reduce its operating cost structure. A review of the product suite identified services that were considered non-core and that the Company has exited or plans to exit. In addition, in light of the announcement, the Company re-evaluated the carrying value of certain assets. As at March 31, 2003 this restructuring process is substantially complete. This review and evaluation resulted in a pre-tax pre-tax adj → anterior al impuesto pre-tax adj → avant impôt(s) pre-tax adj → al lordo d'imposta charge to earnings totaling $116.8 million for the year ended December 31, 2002. The charge included restructuring charges restructuring charge The expense of reorganizing a company's operations. A restructuring charge is an infrequent expense that generally results from asset writedowns or facility closings. totaling $92.5 million, and other charges (asset write-downs) totaling $24.3 million. Included in other charges was a write-down of the intangible asset Intangible Asset 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. related to the e-route acquisition in April, 2002. The restructuring charge included cash charges totaling $44.2 million and asset write-downs related to exited product lines in the amount of $48.3 million. The cash charge includes employee severance The act of dividing, or the state of being divided. The term severance has unique meanings in different branches of the law. Courts use the term in both civil and criminal litigation in two ways: first, when dividing a lawsuit into two or more parts, and second, when and other employee costs, contract settlements and costs related to leased premises no longer in use, net of recoveries. As part of the restructuring, the net proceeds Net Proceeds The amount received after all costs are deducted from the sale of a piece of property or security. Notes: In the case of an investor selling a security, net proceeds represent the proceeds from the sale minus any trading costs (i.e. commissions). received from the sale of the assets of its wire services (eNews) and proceeds received upon the liquidation The collection of assets belonging to a debtor to be applied to the discharge of his or her outstanding debts. A type of proceeding pursuant to federal Bankruptcy of a company accounted for as a portfolio investment were recorded against restructuring charges. At March 31, 2003, the remaining unpaid balance of the restructuring provision was $17.9 million of which $12.3 million is included in accounts payable and accrued liabilities Accrued liabilities are liabilities which have occurred, but have not been paid or logged under accounts payable during an accounting period; in other words, obligations for goods and services provided to a company for which invoices have not yet been received. , and $5.6 million in deferred credits and other. The following table displays the balance of the restructuring and other provision accounts as at March 31, 2003.
--------------------------------------------------------------------
Total charge Cumulative draw
for the year downs (recovery)
ended Balance
Restructuring costs Dec. 31, Cash March 31,
and credits 2002 (credits) Non-cash 2003
--------------------------------------------------------------------
--------------------------------------------------------------------
$ $ $ $
--------------------------------------------------------------------
Asset write-downs 48.3 - 48.3 -
--------------------------------------------------------------------
Severance and other
employee costs 25.2 17.8 - 7.4
--------------------------------------------------------------------
Contract settlements 16.0 9.5 - 6.5
--------------------------------------------------------------------
Lease costs 3.0 1.5 - 1.5
--------------------------------------------------------------------
Other 6.4 3.3 - 3.1
--------------------------------------------------------------------
Proceeds, net (6.4) (5.8) - (0.6)
--------------------------------------------------------------------
92.5 26.3 48.3 17.9
--------------------------------------------------------------------
--------------------------------------------------------------------
Other charges
--------------------------------------------------------------------
Asset write-downs 24.3 - 24.3 -
--------------------------------------------------------------------
--------------------------------------------------------------------
Total 116.8 26.3 72.6 17.9
--------------------------------------------------------------------
--------------------------------------------------------------------
5. Equity components
The stated capital stock as at March 31, 2003 is detailed as
follows:
--------------------------------------------------------------------
Options
Issued and Not issued and issued as part
fully paid not fully paid of acquisition
--------------------------------------------------------------------
Common
shares $ $
Number ($ Millions) Millions Millions
--------------------------------------------------------------------
--------------------------------------------------------------------
Balance
beginning
of period 101,896,418 1,514.0 34.0 14.6
--------------------------------------------------------------------
Issue of
common
shares (a) 917 - - -
--------------------------------------------------------------------
Balance at
March 31,
2003 101,897,335 1,514.0 34.0 14.6
--------------------------------------------------------------------
(a) 917 stock options were exercised to purchase 917 common
shares for cash consideration of $610.
Contributed surplus: $ Millions
--------------------------------------------------------------------
--------------------------------------------------------------------
Balance at March 31, 2003 64.2
--------------------------------------------------------------------
--------------------------------------------------------------------
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. 6,308,990 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:
--------------------------------------------------------------------
March 31, 2003
--------------------------------------------------------------------
Number of Number of Exercise
warrants warrants price
outstanding exercisable of warrants
(1) (1) exercisable
--------------------------------------------------------------------
--------------------------------------------------------------------
Outstanding - beginning
of period 900,000 550,000 $59.20
--------------------------------------------------------------------
Expiration of warrants (2) (250,000) (250,000) $73.55
--------------------------------------------------------------------
Outstanding - end of period 650,000 300,000 $47.24
--------------------------------------------------------------------
(1) Warrants are convertible into common shares of the Company on a 1:1 basis. (2) The warrants granted to shareholders of a company in which BCE Emergis had an investment accounted for as a portfolio investment were extinguished ex·tin·guish tr.v. ex·tin·guished, ex·tin·guish·ing, ex·tin·guish·es 1. To put out (a fire, for example); quench. 2. To put an end to (hopes, for example); destroy. See Synonyms at abolish. 3. due to the liquidation of this company in 2002. The remaining 250,000 warrants expired ex·pire v. ex·pired, ex·pir·ing, ex·pires v.intr. 1. To come to an end; terminate: My membership in the club has expired. 2. during the current period as a result of the termination of contractual relationships with that 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 expire /ex·pire/ (ek-spi´er) 1. to exhale. 2. to die. ex·pire v. 1. To breathe one's last breath; die. 2. To exhale. on December 31, 2006. 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 two business units (eHealth Solutions and eFinance Solutions), offering a full suite of products to companies in transaction-intensive, financial services and Health sectors. The following table shows the activities of each of the two business units:
For the three-month period ended
--------------------------------------------------------------------
eHealth eFinance Total
Solutions Solutions
--------------------------------------------------------------------
$ March March March March March March
Millions 31, 31, 31, 31, 31, 31,
2003 2002 2003 2002 2003 2002
--------------------------------------------------------------------
--------------------------------------------------------------------
Revenues 62.5 67.1 61.6 64.9 124.1 132.0
--------------------------------------------------------------------
Direct
costs 9.5 8.6 16.0 23.9 25.5 32.5
--------------------------------------------------------------------
Gross
margin 53.0 58.5 45.6 41.0 98.6 99.5
--------------------------------------------------------------------
Goodwill
(as
restated) 255.8 275.5 16.8 18.2 272.6 293.7
--------------------------------------------------------------------
The goodwill in 2002 was restated due to the transitional impairment of $183.4M charged to opening retained earnings Retained Earnings The percentage of net earnings not paid out in dividends, but retained by the company to be reinvested in its core business or to pay debt. It is recorded under shareholders equity on the balance sheet. in 2002. 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 Asset Allocation The process of dividing a portfolio among major asset categories such as bonds, stocks or cash. The purpose of asset allocation is to reduce risk by diversifying the portfolio. 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 three For the three
Revenue month period month period
$ ended ended
Millions March 31, 2003 March 31, 2002
--------------------------------------------------------------------
--------------------------------------------------------------------
Canada 67.6 78.3
--------------------------------------------------------------------
United States 56.5 53.7
--------------------------------------------------------------------
--------------------------------------------------------------------
124.1 132.0
--------------------------------------------------------------------
--------------------------------------------------------------------
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 three For the three
month period month period
ended ended
$ March 31, March 31,
Millions 2003 2002
--------------------------------------------------------------------
--------------------------------------------------------------------
Revenue (a) 24.4 38.9
--------------------------------------------------------------------
Direct costs 16.6 23.5
--------------------------------------------------------------------
Expenses 14.4 15.2
--------------------------------------------------------------------
Interest Income 3.1 -
--------------------------------------------------------------------
(a) Includes services for resale resale n. selling again, particularly at retail. In many states a "resale license" or "resale number" is required so that the state can monitor the collection of sales tax on retail sales. 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 $11.6 million for the three month period ended March 31, 2003 ($19.1 million for the three month period ended March 31, 2002). Under the distribution agreement the amount derived from other customers with Bell Canada acting as an agent is $14.2 million for the three month period ended March 31, 2003 ($16.0 for the three month period ended March 31, 2002). Included in direct costs and expenses is $21.5 million for the three month period ended March 31, 2003 ($29.1 million for the three month period ended March 31, 2002) related to the extended service agreement signed with BCE Nexxia in 2001. The balance sheet includes the following balances with BCE Inc. and other companies in the BCE group subject to common control: -------------------------------------------------------------------- $ As at As at Millions March 31, 2003 Dec. 31, 2002 -------------------------------------------------------------------- -------------------------------------------------------------------- Accounts receivable 16.1 28.1 -------------------------------------------------------------------- Other current assets 3.1 - -------------------------------------------------------------------- Accounts payable and accrued liabilities 43.6 53.7 -------------------------------------------------------------------- Long term debt - 0.1 -------------------------------------------------------------------- From time to time the Company undertakes short-term Short-term Any investments with a maturity of one year or less. short-term 1. Of or relating to a gain or loss on the value of an asset that has been held less than a specified period of time. investments with BCE Inc., and other companies in the BCE group, in order to benefit from preferential pref·er·en·tial adj. 1. Of, relating to, or giving advantage or preference: preferential treatment. 2. interest rates. As at March 31, 2003 the Company had no amount invested with the BCE Group ($115.0 million as at March 31, 2002). Tax loss monetization Monetization The securitization of the gross revenues of a contract. structure As part of a tax loss consolidation strategy subject to an advance income tax ruling, the Company recorded accrued interest Accrued Interest The interest that has accumulated on a bond since the last interest payment up to but not including the settlement date. There are two methods for calculating accrued interest: 1) 360-day year method, used for corporate and municipal bonds. income of $10.2 million and incurred accrued interest expense of $7.1 million during the period. For income tax purposes, the $10.2 million of interest income increases the taxable income Under the federal tax law, gross income reduced by adjustments and allowable deductions. It is the income against which tax rates are applied to compute an individual or entity's tax liability. The essence of taxable income is the accrual of some gain, profit, or benefit to a taxpayer. of the Company and accelerates the use of the Company's tax attributes resulting in a $3.1 million reduction in future income tax assets in Canada. The net amount of $3.1 million has been recorded as interest revenue for the period and is included in other current assets Other Current Assets A balance sheet item that includes the value of non-cash assets due within one year. Notes: Examples are things like prepaid expenses and accounts receivable. on the balance sheet. The accrued interest income and accrued interest expense are to be received and paid respectively on the last business day of February February: see month. 2004. The capital arrangements associated with the tax structure were initiated by the Company with a temporary loan of $1.0 billion from its banker. The funds were then advanced to Bell Canada through a subordinated demand loan at a rate of interest equal to 5.567%. The loan is unsecured Unsecured A loan or equity interest that is given without any guarantee of payment, performance, satisfaction or opportunity for return from the recipient. No property, interest or security is used as collateral in either a guarantee or a pledge. and subordinated, is payable on demand and may be repaid at any time. A wholly owned subsidiary Wholly Owned Subsidiary A subsidiary whose parent company owns 100% of its common stock. Notes: In other words, the parent company owns the company outright and there are no minority owners. of the Company then issued preferred shares Preferred shares Preferred shares give investors a fixed dividend from the company's earnings and entitle them to be paid before common shareholders. See: Preferred stock. to Bell Canada in exchange for $1.0 billion in cash. The preferred shares are non-voting non-voting adj non-voting shares → azioni fpl senza diritto di voto , cumulative, redeemable Redeemable Eligible for redemption under the terms of an indenture. and retractable re·tract v. re·tract·ed, re·tract·ing, re·tracts v.tr. 1. To take back; disavow: refused to retract the statement. 2. at any time. They currently pay a dividend of 3.870% per annum Per annum Yearly. . The interest rate on the loan to Bell Canada and the dividend rate on the preferred shares are reset at the beginning of each year. Subsequently, the wholly owned subsidiary loaned the preferred share issue proceeds of $1.0 billion to its parent company, on an interest-free interest-free adj → libre de interés interest-free adj → sans intérêt interest-free interest adj, adv → basis. This loan is payable on demand and may be repaid at any time. The Company then repaid the temporary loan of $1.0 billion to its banker. Either party may terminate these agreements at any time. The Company has the legal right to offset the demand loan receivable from Bell Canada against the preferred shares issued to Bell Canada and intends to do so. As a result, these items, as well as the related interest income and interest expense representing the dividend payable on the preferred shares have been presented on a net basis. 8. Guarantees In the normal course of business, the Company enters into numerous agreements that may contain features that meet the AcG-14 definition of an indemnification Indemnification Used in insurance policy agreements as to compensation for damage or loss. In the context of corporate governance, Director Indemnification uses the bylaws and/or charter to indemnify officers and directors from certain legal expenses and judgements resulting from and guarantees to counterparties Counterparties The parties on either side of an interest rate swap or a currency, equity or commodity swap, or to an options or futures position. in transactions such as business dispositions, the sale of assets, the sale of services and licenses. These indemnification undertakings and guarantees may require the Company to compensate the counterparties for costs and losses incurred as a result of various events, including breaches of representations and warranties, intellectual property right infringement, valuation differences, claims that may arise while providing services, or as a result of litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. that may be suffered by the counterparties. In the context of business dispositions or the sale of assets, the Company may from time to time agree to compensate the purchaser for the resolution of contingent liabilities Contingent Liability 1. The possibility of an obligation to pay certain sums dependent on future events. 2. Defined obligations by a company that must be met, but the probability of payment is minimal. Notes: 1. of the disposed businesses or assets or the reassessment Reassessment The process of re-determining the value of property or land for tax purposes. Notes: Property is usually reassessed on an annual basis. You may request a "reassessment" if you disagree with your assessment. of prior tax filings of the corporations carrying on the business. The term and amount of such indemnification will generally be limited by the agreement. The maximum potential exposure, under these guarantees represented a cumulative amount of approximately $121.0 million. However, based on the Company's experience, the Company believes that any potential payment will not be significant. During the course of our operations the Company provides indemnification agreements to counterparties in transactions such as the sale of services, purchase and licenses. These indemnification agreements require the Company to compensate the counterparties for costs incurred as a result of litigation claims or statutory sanctions Sanctions is the plural of sanction. Depending on context, a sanction can be either a punishment or a permission. The word is a contronym. Sanctions involving countries: The other participant, including intermediaries, in a swap or contract. as a consequence of the agreement. The term of these indemnification agreements will vary based upon the contract. The nature of the indemnification agreements prevent the Company from making a reasonable estimate of the maximum potential amounts that the Company could be required to pay the counterparties. The amounts are dependent upon the outcome of future contingent events, the nature and likelihood of which cannot be determined at this time. Historically, the Company has not made any significant payments under such indemnification agreements. |
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