BCE Emergis Reports Second Quarter Financial Results.MONTREAL Montreal (mŏn'trēôl`), Fr. Montréal (môNrāäl`), city (1991 pop. 1,017,666), S Que., Canada, on Montreal island, surrounded by St. Lawrence River and Rivière des Prairies. -- 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 ): --Q2 revenue at $62.5 M --Q2 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 at $17.5 M ($6.1 million excluding one-time one-time adj. 1. or one·time a. Occurring or undertaken only once: a one-time winner in 1995. b. items) --Q2 net loss from continuing operations continuing operations Parts of a business that are expected to be maintained as an ongoing segment of an overall business operation. Income and losses from continuing operations are reported separately if any segments have been discontinued during the at $40.3 million (including $56.0 million tax asset 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. ) --Updates 2004 financial targets mainly to reflect impacts of acquisitions and BCE sale transactions 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 financial results for the three-month period ended June June: see month. 30, 2004. "During the quarter we evolved to become an independent, widely held eBusiness company with a new shareholder base that has recognized our unique leadership and the significant growth opportunities in our markets," said Tony Gaffney Gaffney, city (1990 pop. 13,145), seat of Cherokee co., NW S.C., near the N.C. line, in a cotton, grain, and peach region; settled in the early 1800s, inc. 1873. , President and Chief Executive Officer of Emergis. "Since the beginning of 2004, we have made significant progress in the execution of our business plan, particularly in our 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 segment where we have enhanced our offering and extended our capabilities through the acquisition of three companies.In addition, Emergis continues to position itself to benefit from the significant opportunities being created as a result of government moves to outsource outsource verb To assign specific work to a 3rd party for a specific length of time at an set price and service level Managed care To use outside labor to perform functions–billing and collections, accounting, janitorial services, ER the processing of medicare and workers' compensation workers' compensation, payment by employers for some part of the cost of injuries, or in some cases of occupational diseases, received by employees in the course of their work. claims, and from moves by governments at both the federal and provincial Provincial has several meanings and may refer to:
"In our eFinance segment, we are continuing to build on our long-standing long-stand·ing adj. Of long duration or existence: a long-standing friendship. long-standing Adjective existing for a long time relationships with financial institutions," said Gaffney. "We are making good progress in positioning the Company to take advantage of the considerable growth opportunities in our markets while benefiting from a stable base of 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. revenues from many of our blue-chip blue chip also blue-chip·per n. 1. A stock that sells at a high price because of public confidence in its long record of steady earnings. 2. An extremely valuable asset or property. 3. customers." The presentation of the Company's financial results, including both the current and historical periods, reflects the sale of the following operations: U.S. Health in March 2004, eSecurity practice in June 2004 and webdoxs electronic bill presentment See EBPP. operations in July July: see month. 2004.As a result, these operations were reported as discontinued operations Discontinued operations Divisions of a business that have been sold or written off and that no longer are maintained by the business. and their total contribution to Emergis' 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: results of operations is included as a single line item above net income, and both revenue and EBITDA(i) exclude their contribution. Total revenue for the second quarter of 2004 came in at $62.5 million compared to $62.1 million for the first quarter of 2004 and to $74.6 million for the second quarter of 2003.The sequential One after the other in some consecutive order such as by name or number. quarterly increase was mainly due to an increase of $3.3 million in eHealth revenue related to the pharmacy pharmacy, art of compounding and dispensing drugs and medication. The term is also applied to an establishment used for such purposes. Until modern times medication was prepared and dispensed by the physician himself. In the 18th cent. back-office acquisitions completed in the first quarter and to growth in claims processing, partly offset by a decrease of $3.0 million in non-core revenue. Non-core revenue includes 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 from other non-core and exited products.The Bell legacy contract was terminated ter·mi·nate v. ter·mi·nat·ed, ter·mi·nat·ing, ter·mi·nates v.tr. 1. To bring to an end or halt: as of June 30, 2004 as a result of the sale by BCE Inc. of its holdings in Emergis.In the year-over-year comparison, lower non-core revenue from the Bell legacy contract and lower eFinance revenue related to eLending implementations and mature solutions were partly offset by higher revenue associated with the eHealth acquisitions mentioned above. During the quarter, the Company received contract settlements totalling $13.8 million, relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc termination fees termination fee The one-time charge for terminating or transferring an individual retirement account. If a financial institution charges a termination fee, the fee must be spelled out in the original agreement that is signed when the account is opened. for the Bell legacy contract and the settlement of a dispute with a technology supplier for a product the Company no longer provides. Core revenue for the current period was $44.2 million compared to $40.8 million in the first quarter of 2004 (increase of 8%) and to $46.4 million in the second quarter of 2003 (decrease of 5%).As mentioned above, the sequential quarterly increase was due to acquisitions and growth in claims processing in the eHealth segment, and the year-over-year revenue decrease was due to a lower contribution from eFinance, partly offset by a higher contribution from eHealth. Reported EBITDA for the current quarter, which included a contribution from contract settlements received during the quarter and 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, was $17.5 million compared to $6.5 million in the first quarter of 2004, and to $2.6 million in the second quarter of 2003. Excluding the impact of the contract settlements and the restructuring and other charges, EBITDA would have been $6.1 million (10% of revenue) in the current quarter and $0.2 million in the first quarter of 2004.The increase was due to higher contributions from both core eFinance and eHealth, partly offset by declining non-core activity. EBITDA from core eFinance and eHealth operations, excluding one-time items, was $3.8 million (9% of revenue) in the second quarter of 2004, compared to an EBITDA loss of $1.6 million ((3%) of revenue) during the same period last year, reflecting progress in the realignment re·a·lign tr.v. re·a·ligned, re·a·lign·ing, re·a·ligns 1. To put back into proper order or alignment. 2. To make new groupings of or working arrangements between. of the Company's cost structure and growth in its eHealth operations. During the first quarter of 2004, $6.3 million of a $38.2 million provision for restructuring and other charges taken in the fourth quarter of 2003 were reversed. The reversal reversal n. the decision of a court of appeal ruling that the judgment of a lower court was incorrect and is reversed. The result is that the lower court which tried the case is instructed to dismiss the original action, retry the case, or is ordered to change its was due to the postponement of certain charges beyond the end of the first quarter. Some $2.4 million of restructuring and other charges were taken in the second quarter. It is expected that charges equivalent to the remaining balance of the reversal will be taken in the second half. The Company recorded a gain on sale of assets of $11.6 million in the second quarter, of which $10.3 million related to the Bell legacy contract and $1.2 million related to its legacy messaging and translation operations. Revenue from all of these assets was considered non-core. Reported net loss from continuing operations was $40.3 million ($(0.39) per share) compared to net loss of $6.7 million in the first quarter of 2004 ($(0.06) per share) and a net loss of $5.6 million in the second quarter of 2003 ($(0.05) per share).The current quarter's figure reflects the $56.0 million write-down for accounting purposes of the Company's future income tax asset which resulted from the unwinding of the tax loss monetization Monetization The securitization of the gross revenues of a contract. arrangement with Bell Canada.Emergis retains significant tax attributes, which are available to shelter A general term used in statutes that relates to the provision of food, clothing, and housing for specified individuals; a home with a proper environment that affords protection from the weather. future 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. .The second quarter 2004 net loss included: the write-down of future income tax asset, the $11.6 million gain on sale of assets, the $13.8 million contribution from contract settlements and the $2.4 million in restructuring and other charges. In the first quarter of 2004, the reversal of restructuring and other charges contributed $4.1 million to net income from continuing operations.Excluding these one-time items, the current quarter's net loss from continuing operations would have been $7.3 million ($(0.07) per share) and that for the first quarter of 2004 would have been $10.8 million ($(0.10) per share). Reported net income from discontinued operations was $3.1 million.Discontinued operations consisted of: the Company's U.S. health operations, its eSecurity practice and its webdoxs bill presentment operations.Details of the discontinued operations are contained in the notes to the 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 . Total net loss for the second quarter of 2004 was $37.2 million, compared to a net loss of $0.1 million in the first quarter of 2004 and to net income of $5.9 million in the second quarter of 2003. Fully diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. loss per share (LPS LPS - Sets with restricted universal quantifiers. ["Logic Programming with Sets", G. Kuper, J Computer Sys Sci 41:44-64 (1990)]. ) was $(0.36) per share compared to a LPS of $(0.00) in the first quarter of 2004 and with fully diluted earnings per share diluted earnings per share An earnings measure calculated by dividing net income less preferred stock dividends for a period by the average number of shares of common stock that would be outstanding if all convertible securities were converted into shares of of $0.06 in the second quarter of 2003. Revenue summary for the quarter Three-month periods ended June 30, 2004, March 31, 2004, and June 30, 2003 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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Q2 2004 Q1 2004 Q2 2003
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Core eFinance 26.5 26.4 31.6
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Core eHealth 17.7 14.4 14.8
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Total core revenue 44.2 40.8 46.4
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Non-core 18.3 21.3 28.2
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Total revenue 62.5 62.1 74.6
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- Revenue totalled $62.5 million in the second quarter of 2004
compared to $62.1 million in the first quarter of 2004 and to $74.6
million in the second quarter of 2003.
- Core recurring revenue was $37.0 million in the second quarter of
2004, compared to $31.9 million for the first quarter of 2004
(increase of 16%) and to $35.6 million for the second quarter of
2003 (increase of 4%). In the sequential quarterly comparison,
higher eHealth revenue from acquisitions and higher eFinance
revenue from eLending Canada transactions contributed to the
increase. The year-over-year increase was due to higher eHealth
revenue, partly offset by a lower contribution from mature eFinance
solutions.
- Total non-core revenue for the second quarter of 2004 was $18.3
million compared to $28.2 million in the second quarter of 2003,
representing a decrease in overall revenue of $9.9 million year
over year, of which $7.5 million related to the Bell legacy
contract. Committed revenue from this contract generated $17.6
million in the current quarter. As a result of the termination of
the contract at the end of June and the sale of the legacy
messaging and translations operations, non-core revenue is expected
to be minimal going forward.
- U.S.-sourced revenue was 17% of total revenue in the current
quarter compared to 19% in the corresponding quarter of 2003.
EBITDA summary for the quarter
Three-month periods ended June 30, 2004, March 31, 2004, and June 30,
2003 in millions of Canadian dollars:
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Q2 2004 Q1 2004 Q2 2003
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Core eFinance 9.8 (5.8) (2.9)
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Core eHealth 3.1 1.6 1.3
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Non-core 7.0 4.4 4.2
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Restructuring and other (2.4) 6.3 -
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Total EBITDA 17.5 6.5 2.6
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- Before contract settlements, restructuring and other charges and
related adjustments, EBITDA in the current quarter was $6.1 million
compared to $0.2 million in the first quarter of 2004 and to $2.6
million in the second quarter of 2003, reflecting cost containment
efforts initiated in the first quarter.
- Core eFinance EBITDA, excluding the impact of contract settlements,
was $0.7 million, a significant improvement over the $5.8 million
loss in the first quarter.
- Core eHealth EBITDA nearly doubled to $3.1 million (17.5% of
revenue) compared to the first quarter of 2004 due to the pharmacy
back-office acquisitions completed in the first quarter and to a
higher contribution from claims processing.
- Non-core EBITDA increased from the first quarter due to the
settlement related to the Bell legacy contract, partly offset by
lower non-core activity.
Financial highlights for the six months
Six-month periods ended June 30, 2004 and 2003 in millions of
Canadian dollars:
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Revenue EBITDA
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6 months 6 months 6 months 6 months
2004 2003 2004 2003
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Core eFinance Solutions 52.9 59.9 4.0 (8.1)
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Core eHealth Solutions 32.1 28.7 4.7 3.0
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Total core 85.0 88.6 8.7 (5.1)
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Non-core 39.6 57.8 11.4 9.2
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Restructuring and other charges - - 3.9 -
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Total 124.6 146.4 24.0 4.1
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- Revenue for the six months ended June 30, 2004 totalled $124.6
million compared to $146.4 million in 2003. Lower non-core revenue
and lower eFinance revenue from eLending implementations and mature
products was partly offset by an increase in eHealth revenue
relating to acquisitions.
- Core recurring revenue was $68.9 million compared to $69.2 million
in 2003. The year-over-year decrease was due to lower mature
product revenue in eFinance offset by higher eHealth revenue
relating to acquisitions.
- U.S.-sourced revenue was 18% of total revenue in the first half
compared with 17% in the corresponding period in 2003.
- Reported EBITDA in the first half of 2004 was $24.0 million
compared to $4.1 million in the prior year. Excluding the one-time
items that appeared above the EBITDA line on the statement of
earnings in each year, EBITDA for the six months in the current
year would have reached $6.3 million (7% of revenue) compared to
$4.1 million in 2003 (4% of revenue).
- Reported net loss from continuing operations for the six months was
$47.0 million (fully diluted LPS of $(0.46)) compared to a loss of
$12.3 million (fully diluted LPS of $(0.12)).
Financial position at June 30, 2004 Cash on hand at quarter-end was $242.4 million, down from $375.4 million at March 31, 2004 mainly as a result of payment of a special cash distribution of $150 million. Other significant cash flows and uses of cash during the second quarter included the receipt of the proceeds of sales of the eSecurity practice ($30.3 million) and the Bell legacy contract ($10.3 million), contract settlements received ($13.8 million) and an outflow of funds associated with a reduction in trade accounts with the BCE group ($24.5 million).Total long-term debt Long-Term Debt Loans and financial obligations lasting over one year. Notes: For example debts obligations such as bonds and notes which have maturities greater than one year would be considered long-term debt. at quarter-end was $11.0 million. Subsequent to the quarter-end, Emergis received a first payment of $8.0 million related to the sale of the webdoxs consumer bill presentment operations.The sale price for the operations was $14.5 million. Corporate highlights for the quarter Emergis becomes a widely held company and pays special cash distribution Effective June 16, 2004, BCE sold its common equity holdings in Emergis to the public, resulting in the Company becoming widely held. On the same date, the shareholders of Emergis approved, with 99.9% of votes in favour Favor or favour (see spelling differences) may be
See legal capital. in order to effect a special cash distribution of $1.45 per share, representing in aggregate approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $150 million.The distribution was paid on June 30 to shareholders of record as of June 25. The Company believes that this special cash distribution represented an appropriate use of its financial resources to rebalance its capital structure. New Chairman and directors elected e·lect v. e·lect·ed, e·lect·ing, e·lects v.tr. 1. To select by vote for an office or for membership. 2. To pick out; select: elect an art course. to the Emergis Board Following the sale of BCE's holdings in Emergis, the Board of Directors appointed ap·point tr.v. ap·point·ed, ap·point·ing, ap·points 1. To select or designate to fill an office or a position: appointed her the chief operating officer of the company. 2. Peter C. Maurice Maurice, Byzantine emperor Maurice (môr`ĭs), c.539–602, Byzantine emperor (582–602). He was a successful general when, on his deathbed, Tiberius II, his father-in-law and the successor of Justin II, proclaimed him , Jean C. Monty (programming, abuse) monty - /mon'tee/ Any program with a ludicrously complex user interface that performs a trivial task. An example would be a menu-driven, button clicking, pulldown, pop-up windows program for listing directories. and Ron Noun 1. Ron - a Chadic language spoken in northern Nigeria Bokkos, Daffo West Chadic - a group of Chadic languages spoken in northern Nigeria; Hausa in the most important member Zambonini as directors to replace BCE's representatives on the Board.Mr. Monty was elected Chairman, replacing Michael Sabia Michael John Sabia BA, MA, MPhil (born 1953 in St. Catharines, Ontario) is the CEO of Bell Canada and Bell Canada Enterprises [1]. Sabia, the son of the feminist Laura Sabia, held a number of senior positions in Canada's federal public service during the 1980s and .Mr. Monty is a corporate director, a former Chairman of Emergis and a former Chairman and CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. of BCE.Mr. Maurice is a corporate director and a former President and CEO of Canada Trust CT Financial Services Inc. was a financial services holding company that was founded in London, Ontario and later had its headquarters in Toronto, Ontario and operated in Canada through subsidiaries including Canada Trustco Mortgage Company and The Canada Trust Company . Mr. Zambonini is Chairman of the Board of Cognos (Cognos Inc., Ottawa, Ontario, www.cognos.com) A leading business intelligence software company specializing in application development and 4GL tools. Founded in 1969 as a consulting firm, its PowerHouse 4GL was introduced in the late 1970s for midrange systems. .In June, Calin Ca´lin n. 1. An alloy of lead and tin, of which the Chinese make tea canisters. Rovinescu, formerly a senior executive with Air 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 , joined the Board.After the end of the quarter, Eric Rosenfeld Eric Rosenfeld was a trader and principal in the Long-Term Capital Management hedgefund that almost went bankrupt in 1998 when the Russian government defaulted on its debt payments on August 17, 1998, triggering a devaluation of the Russian ruble. , President and CEO of Crescendo cres·cen·do n. pl. cres·cen·dos or cres·cen·di 1. Abbr. cr. Music a. A gradual increase, especially in the volume or intensity of sound in a passage. b. Partners, L.P., also joined the Board. Shareholder rights plan Emergis adopted a shareholder rights plan to provide the Board of Directors and shareholders adequate time to assess any unsolicited un·so·lic·it·ed adj. Not looked for or requested; unsought: an unsolicited manuscript; unsolicited opinions. unsolicited Adjective takeover bid Noun 1. takeover bid - an offer to buy shares in order to take over the company two-tier bid - a takeover bid where the acquirer offers to pay more for the shares needed to gain control than for the remaining shares , and where appropriate, give the Board of Directors sufficient time to pursue other alternatives for maximizing max·i·mize tr.v. max·i·mized, max·i·miz·ing, max·i·miz·es 1. To increase or make as great as possible: shareholder value.It is subject to shareholder ratification The confirmation or adoption of an act that has already been performed. A principal can, for example, ratify something that has been done on his or her behalf by another individual who assumed the authority to act in the capacity of an agent. at a special meeting to be held on December December: see month. 1, 2004.It will remain in effect for three years, with one renewal option, subject to shareholder approval.Emergis' rights plan is similar to shareholder rights plans recently adopted by many other Canadian companies This is a list of companies from Canada.
Directory: A B C D E F G H I J K L M N O P Q R S T U V W X Y Z Current Companies . Sale of eSecurity practice and termination The point where a line, channel or circuit ends. See SCSI termination and hybrid. of Bell legacy contract Emergis sold its eSecurity practice and the remaining intellectual property under the Bell legacy contract to Bell Canada. The total price for the sale of these assets and early termination of the Bell legacy contract was $45.3 million, of which $4.7 million has been accounted for as a contract settlement. The Emergis eSecurity practice consisted of government and industry contracts for access, authentication (1) Verifying the integrity of a transmitted message. See message integrity, e-mail authentication and MAC. (2) Verifying the identity of a user logging into a network. and authorization The right or permission to use a system resource; the process of granting access. See access control. services distributed by Bell and delivered by Emergis.Other security-related services underlying Emergis' electronic claims, lending and payment service delivery platforms and solutions remain within the Company. The Bell legacy contract was a three-year agreement with Bell Canada for the distribution by Emergis of Internet access See how to access the Internet. services and extranet A Web site for customers rather than the general public. It can provide access to research, current inventories and internal databases, virtually any information that is private and not published for everyone. services to Bell's business customers and was to terminate Terminate (terminat.exe) was a shareware modem terminal and host program for MS-DOS and compatible operating systems developed from the early to the late 1990s by the Dane Bo Bendtsen. The last release (5. on December 31 of this year. Reciprocal Bilateral; two-sided; mutual; interchanged. Reciprocal obligations are duties owed by one individual to another and vice versa. A reciprocal contract is one in which the parties enter into mutual agreements. preferred supplier agreement with Bell Canada Bell Canada and its subsidiaries are and will continue to be important customers of Emergis. To better define their on-going Adj. 1. on-going - currently happening; "an ongoing economic crisis" ongoing current - occurring in or belonging to the present time; "current events"; "the current topic"; "current negotiations"; "current psychoanalytic theories"; "the ship's current position" relationship, Emergis and Bell Canada entered into a five-year reciprocal commercial agreement whereby Emergis is the preferred supplier for the provision of eFinance and eHealth services to Bell Canada and its subsidiaries, both for internal use and 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. . In turn, Bell Canada is the preferred supplier of telecommunications Communicating information, including data, text, pictures, voice and video over long distance. See communications. and other services comprised in Bell Canada's suite of enterprise products and services to Emergis, both for internal use and for resale. Sale of webdoxs bill presentment operations Subsequent to the quarter-end, the Company sold its online consumer bill presentment operations, webdoxs, to Canada Post's epost. epost will combine the existing epost and webdoxs operations. The total purchase price for the webdoxs assets is $14.5 million. The decision to sell webdoxs was in line with Emergis' strategy to move eFinance towards profitability. Updated 2004 financial targets Emergis today set financial targets for 2004 that include the impact of acquisitions completed during the first quarter of 2004, the transactions surrounding sur·round tr.v. sur·round·ed, sur·round·ing, sur·rounds 1. To extend on all sides of simultaneously; encircle. 2. To enclose or confine on all sides so as to bar escape or outside communication. n. the sale by BCE Inc. of its common equity holdings in Emergis, contract settlements and the Company's current view of the business going forward.Preliminary estimates of the impact of these factors were disclosed dis·close tr.v. dis·closed, dis·clos·ing, dis·clos·es 1. To expose to view, as by removing a cover; uncover. 2. To make known (something heretofore kept secret). in its news release of May 6, 2004. Overall, the revenue target range is narrowed, with the lower end of the range increased, that for EBITDA is significantly higher due to contract settlements, and that for the loss per share is greater than previous targets principally due to the write-down of the Company's future tax asset.The financial targets for 2004 are as follows:
$ millions,
except per share
Total revenue 210 to 230
eFinance revenue 100 to 115
eHealth revenue 70 to 75
Non-core revenue 40
Total EBITDA 24 to 28
EPS from continuing ops. $(0.60) to $(0.52)
None of the financial targets assumes the impact of future acquisitions. Revenue target range The updated revenue target range of $210 million to $230 million reflects the revenue impact of acquisitions completed in the latter part of the first quarter 2004, the reclassification Reclassification The process of changing the class of mutual funds once certain requirements have been met. These requirements are generally placed on load mutual funds. Reclassification is not considered to be a taxable event. to discontinued operations of revenue from the Company's eSecurity business which was sold to Bell Canada as of June 30, and revenue foregone fore·gone v. Past participle of forego1. adj. Having gone before; previous. Usage Note: The word foregone has recently developed a new meaning as a truncation of the phrase as a result of the early termination of the Bell legacy contract.The previous target range, which took into account the estimated impact of these transactions, was $200 million to $230 million. EBITDA target range The increased EBITDA target range of $24 million to $28 million includes the impact of contract settlements received in the second quarter.The range also assumes that 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. of some $3.9 million will be taken in the second half of 2004 to complete the offset of the $6.3 million reversal recorded in the first quarter. The previous target range was $10 million to $18 million. LPS target range The loss per share target range for 2004 of $(0.08) to $(0.00), which was issued at the beginning of 2004, has been impacted by a number of significant accounting adjustments associated with the transactions surrounding BCE's sale of its holdings in Emergis.In addition to their impact on EBITDA, they include gains on sale related to the early termination of the Bell legacy contract and the sale of the Company legacy messaging and translation operations, and the write-down of the Company's future income tax asset. The target range does not include a potential gain associated with an adjustment to the sale price of our U.S. health operations due to the exercise of options held in a public company by our former U.S. Health subsidiary.As a result, Emergis is now targeting a LPS of from $(0.60) to $(0.52) for 2004. Conference call, webcast and supplemental financial information The Company will hold a conference call and live webcast today at 8:30 a.m. ET to discuss its financial results for the second quarter of 2004.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 toll-free 1 800 273-9672, and 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 second quarter 2004 news release, a supplemental information package and historical quarterly financial results using the current basis of presentation are posted on www.emergis.com. The instant replay of the conference call will be available for a week starting at 10:30 a.m. today. To listen, interested participants should dial toll-free 1 800 408-3053, and from Toronto (416) 695-5800.The access code is 1522710#.The archive (1) A file that contains one or more compressed files. Most archive formats are also capable of storing folders in order to reconstruct the file/folder relationship when decompressed. See archive formats. version of the webcast will also be available starting at 10:30 a.m. today at www.emergis.com. About BCE Emergis BCE Emergis Inc. is a leading North American eBusiness company. Its operations consist of supplying eBusiness solutions to the North American 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 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. health care industries, automating transactions between companies and allowing 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 electronically. Its leading solutions are centred on claims, loans and payments processing. BCE Emergis customers include leading Canadian health insurers, top 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". . Certain statements made in this press release are forward-looking for·ward-look·ing adj. Concerned with or making provision for the future: forward-looking educators; a forward-looking corporate plan. Adj. 1. and are subject to important risks, uncertainties and assumptions. The results or events predicted in these 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. may differ materially from actual results or events. These statements do not reflect the potential impact of any non-recurring items or of any dispositions, monetizations, mergers, acquisitions, other business combinations or other transactions that may be announced or that may occur after the date hereof here·of adv. Of this. hereof Adverb Formal or law of or concerning this Adv. 1. hereof - of or concerning this; "the twigs hereof are physic" .Other factors that could cause results or events to differ materially from current expectations include, among other things: general economic factors, adoption of eBusiness, adoption rate of our solutions by customers, response to industry's rapid pace of change, competition, operating results, success of U.S.-based operations, the change in control following the exchange of BCE Inc.'s subscription receipts for common shares, integration of past acquisitions, failure or material change in our strategic relationships including our relationship with Bell Canada, exposure under contract indemnities, 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, and industry and government regulation. For additional information with respect to certain of these and other factors, refer to BCE Emergis Inc.'s Annual Report (Management Discussion and Analysis) and the BCE Emergis Inc. Annual Information Form (Risks and Uncertainties) filed with the Canadian securities commissions. THE FORWARD-LOOKING STATEMENTS CONTAINED IN THIS PRESS RELEASE REPRESENT THE EXPECTATIONS OF BCE EMERGIS INC. AND ITS SUBSIDIARIES AS AT JULY 28, 2004 AND, ACCORDINGLY, ARE SUBJECT TO CHANGE AFTER SUCH DATE. HOWEVER, BCE EMERGIS INC. AND ITS SUBSIDIARIES DISCLAIM dis·claim v. dis·claimed, dis·claim·ing, dis·claims v.tr. 1. To deny or renounce any claim to or connection with; disown. 2. To deny the validity of; repudiate. 3. ANY INTENTION OR OBLIGATION TO UPDATE OR REVISE ANY FORWARD-LOOKING STATEMENTS, WHETHER AS A RESULT OF NEW INFORMATION, FUTURE EVENTS OR OTHERWISE. (i) EBITDA used in this news release 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 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, loss or gain on foreign exchange, other expenses or income and income taxes.No reconciliation is provided in the Interim Consolidated Statement of Earnings.EBITDA is presented on a basis that is consistent from period to period and agrees, on a consolidated basis, with the amount disclosed as "Earnings before under-noted items" in the financial statements.
Consolidated Statements of Earnings
---------------------------------------------------------------------
For the For the For the For the
three three six six
month month month month
period period period period
(millions of Canadian ended ended ended ended
dollars, except income June 30, June 30, June 30, June 30,
(loss) per share and 2004 2003 2004 2003
number of shares) (unaudited) (unaudited) (unaudited) (unaudited)
---------------------------------------------------------------------
Revenue 62.5 74.6 124.6 146.4
Direct costs 16.4 21.8 32.0 42.4
---------------------------------------------------------------------
Gross margin 46.1 52.8 92.6 104.0
---------------------------------------------------------------------
Contract settlements
(note 8) 13.8 - 13.8 -
Expenses
Operations 20.4 23.7 40.5 47.4
Sales and marketing 6.4 9.4 13.1 18.1
Research and development,
net (note 18) 7.6 7.0 19.2 17.2
General and administrative 5.6 10.1 13.5 17.2
Restructuring and other
charges (note 13) 2.4 - (3.9) -
---------------------------------------------------------------------
42.4 50.2 82.4 99.9
Earnings before under noted
items 17.5 2.6 24.0 4.1
Depreciation 3.5 3.3 5.9 7.0
Amortization of intangible
assets 4.6 5.6 8.7 11.1
Interest income (3.6) (4.7) (8.8) (8.4)
Interest on long-term
debt 0.6 1.2 1.2 2.2
Gain on sale of assets
(notes 6 and 7) (11.6) - (12.1) -
Loss on foreign exchange - 0.7 3.5 0.7
Other - (0.1) - -
---------------------------------------------------------------------
Income (loss) from
continuing
operations before
income taxes 24.0 (3.4) 25.6 (8.5)
Income taxes (note 17)
Current 0.5 0.4 1.0 0.7
Future 63.8 1.8 71.6 3.1
---------------------------------------------------------------------
64.3 2.2 72.6 3.8
Net loss from continuing
operations (40.3) (5.6) (47.0) (12.3)
Net income from
discontinued
operations -
net of income taxes
(note 11) 3.1 11.5 9.7 23.0
---------------------------------------------------------------------
Net (loss) income (37.2) 5.9 (37.3) 10.7
---------------------------------------------------------------------
---------------------------------------------------------------------
Basic loss per share
($)
from continuing
operations (0.39) (0.05) (0.46) (0.12)
Basic income per
share ($)
from discontinued
operations 0.03 0.11 0.09 0.23
Basic (loss) income
per share ($) (0.36) 0.06 (0.36) 0.10
Diluted loss per
share ($)
from continuing
operations (0.39) (0.05) (0.46) (0.12)
Diluted income per
share ($)
from discontinued
operations 0.03 0.11 0.09 0.22
Diluted (loss)
income per share ($) (0.36) 0.06 (0.36) 0.10
Weighted average
number of shares
outstanding used in
computing basic
income (loss) per
share 103,310,217 101,978,223 103,271,366 101,943,164
Weighted average
number of shares
outstanding used in
computing diluted
income (loss) per
share 103,311,524 104,835,135 103,287,552 104,815,216
The accompanying notes are an integral part of the Interim
Consolidated Financial Statements.
Consolidated Statements of Deficit
---------------------------------------------------------------------
For the six For the six
month period month period
ended ended
June 30, 2004 June 30, 2003
(millions of Canadian dollars) (unaudited) (unaudited)
---------------------------------------------------------------------
Deficit - beginning of period (1,176.9) (1,080.1)
Net (loss) income (37.3) 10.7
---------------------------------------------------------------------
Deficit - end of period (1,214.2) (1,069.4)
---------------------------------------------------------------------
The accompanying notes are an integral part of the Interim
Consolidated Financial Statements.
Consolidated Balance Sheets
---------------------------------------------------------------------
As at As at
June 30, December 31,
2004 2003
(millions of Canadian dollars) (unaudited) (audited)
---------------------------------------------------------------------
ASSETS
Current
Cash and cash equivalents (note 9) 242.4 128.6
Accounts receivable 29.7 25.4
Other current assets (note 18) 20.2 31.1
Current assets held for sale (note 11) 12.1 272.7
---------------------------------------------------------------------
304.4 457.8
Fixed assets 25.0 26.1
Intangible assets 40.1 24.2
Goodwill 48.1 38.6
Future income taxes - 77.3
Other long-term assets 2.6 3.6
Long-term assets held for sale (note 11) - 13.1
---------------------------------------------------------------------
420.2 640.7
---------------------------------------------------------------------
LIABILITIES
Current
Accounts payable and accrued liabilities 87.8 144.9
Deferred revenue 14.9 27.9
Deferred credits 7.2 8.9
Current portion of long-term debt (note 10) 34.7 17.4
Current liabilities related to assets held for
sale (note 11) - 7.7
---------------------------------------------------------------------
144.6 206.8
Deferred credits and other 6.0 6.9
Future income taxes 3.7 -
Long-term debt 11.0 11.7
---------------------------------------------------------------------
165.3 225.4
---------------------------------------------------------------------
SHAREHOLDERS' EQUITY
Capital stock (note 14) 175.3 1,546.7
Contributed surplus (note 14) 1,289.2 76.8
Deficit (1,214.2) (1,176.9)
Foreign currency translation adjustment 4.6 (31.3)
---------------------------------------------------------------------
254.9 415.3
---------------------------------------------------------------------
420.2 640.7
---------------------------------------------------------------------
The accompanying notes are an integral part of the Interim
Consolidated Financial Statements.
Consolidated Statements of Cash Flows
---------------------------------------------------------------------
For the For the For the For the
three three six six
month month month month
period period period period
ended ended ended ended
(millions of Canadian June 30, June 30, June 30, June 30,
dollars) (unaudited)(unaudited) (unaudited)(unaudited)
---------------------------------------------------------------------
Operating activities
Net loss from continuing
operations (40.3) (5.6) (47.0) (12.3)
Depreciation and
amortization 8.1 8.9 14.6 18.1
Gain on sale of assets (11.6) - (12.1) -
Future income taxes 63.8 1.8 71.6 3.1
Non-cash foreign exchange
loss on derivative
financial instruments - - 5.0 -
Non-cash portion of
restructuring and other
charges - 0.6 - 0.4
Non-cash stock based
compensation (note 2) 0.2 - 0.4 -
Other 3.3 (1.4) 0.3 (1.3)
Changes in working capital (39.7) (12.7) (63.1) (21.4)
---------------------------------------------------------------------
Cash flows used for
operating activities (16.2) (8.4) (30.3) (13.4)
---------------------------------------------------------------------
Investing activities
Additions to fixed and
intangible assets (1.7) (1.2) (8.2) (4.0)
Acquisitions (note 12) - - (22.0) -
Cash acquired on acquisition
of businesses 0.2 - 0.3 -
Proceeds on sale of
businesses 34.8 - 320.2 -
---------------------------------------------------------------------
Cash flows from (used for)
investing activities 33.3 (1.2) 290.3 (4.0)
---------------------------------------------------------------------
Financing activities
Repayment of long-term debt (8.2) (5.7) (12.6) (11.1)
Net reduction of share
capital (149.5) - (149.2) -
---------------------------------------------------------------------
Cash flows used for
financing activities (157.7) (5.7) (161.8) (11.1)
---------------------------------------------------------------------
Foreign exchange gain (loss)
on cash held in foreign
currencies 7.6 (1.4) 4.1 (3.3)
Cash flows from continuing
operations (133.0) (16.7) 102.3 (31.8)
Cash flows from discontinued
operations (note 11) - 12.7 2.7 27.7
Cash and cash equivalents
Increase (decrease) (133.0) (4.0) 105.0 (4.1)
Balance, beginning of
period 375.4 106.9 137.4 107.0
---------------------------------------------------------------------
Balance, end of period (1) 242.4 102.9 242.4 102.9
---------------------------------------------------------------------
Supplemental disclosure of
cash flow information
Interest paid 0.6 1.3 1.0 1.8
Income taxes paid 1.0 0.7 1.1 0.9
(1) Includes the following:
Cash and cash equivalents
related to:
Continuing operations 242.4 92.6 242.4 92.6
Discontinued operations
(note 11) - 10.3 - 10.3
---------------------------------------------------------------------
242.4 102.9 242.4 102.9
Non-cash investing and
financing activities
Additions to fixed and
intangible assets financed 0.8 7.1 4.7 8.3
The accompanying notes are an integral part of the Interim
Consolidated Financial Statements.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS As at June 30, 2004 (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, 2003, except as discussed below. These interim consolidated financial statements should be read in conjunction conjunction, in astronomy conjunction, in astronomy, alignment of two celestial bodies as seen from the earth. Conjunction of the moon and the planets is often determined by reference to the sun. with the consolidated financial statements for the year ended December 31, 2003 and the notes thereto there·to adv. 1. To that, this, or it. 2. Archaic In addition to that; furthermore. thereto Adverb Formal 1. to that or it 2. in the 2003 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 as well as presenting the US Health, eSecurity and webdoxs operations as discontinued operations. Impairment Impairment 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 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 .
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 Act of disposing; transferring to the care or possession of another. The parting with, alienation of, or giving up of property. The final settlement of a matter and, with reference to decisions announced by a court, a judge's ruling is commonly referred to as disposition, regardless of . The impairment loss is calculated by deducting the fair value of the asset from its carrying value. The adoption of this new standard did not have an impact on the consolidated financial statements. Asset retirement obligations Asset Retirement Obligations provide for future disposal of assets as required by SFAS 143 [1]. Firms must recognize the ARO liability in the period it was acquired, generally acquisition. Effective January 1, 2004 the Company adopted new Handbook section 3110, Asset retirement obligations. This section provides guidance on recognizing and measuring liabilities related to the legal obligations of retiring property, plant and equipment. These obligations are initially measured at fair value and are adjusted for any changes resulting from the passage of time and any changes to the timing or the amount of the original estimate of undiscounted cash flows. The asset retirement cost is capitalized Capitalized Recorded in asset accounts and then depreciated or amortized, as is appropriate for expenditures for items with useful lives longer than one year. as part of the related asset and is amortized into income over time. This section is effective for fiscal years beginning on or after January 1, 2004 and the adoption of this new standard did not have an impact on the consolidated financial statements. Hedging relationships Effective January 1, 2004 the Company adopted Accounting Guideline 13 (AcG-13), Hedging relationships. This guideline establishes the following criteria for the application of hedge accounting in a hedging transaction: - the nature of the specific risk exposures being hedged in accordance with the risk management objective and strategy must be identified at the inception of the hedging relationship - application of hedge accounting to the hedging relationship must be designated at the inception of the hedging relationship - formal documentation must be in place at the inception of the hedging relationship identifying the risk management objective and strategy for establishing the relationship, the specific asset or liability being hedged, the risk that is being hedged, the intended term of the hedging relationship, the type of derivative used, the method for assessing effectiveness and the related accounting treatment - the derivative must meet certain effectiveness criteria in offsetting either changes in the fair value or cash flows attributable to the risk being hedged, both at the inception and throughout the term of the hedging relationship. Disclosure required by this new 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. has been provided in note 19 to the consolidated financial statements. Future accounting changes The CICA also recently made revisions ReVisions is a 2004 anthology of alternate history short-stories. It is edited by Julie E. Czerneda and Isaac Szpindel. Contents Title Author The Resonance of Light James Alan Gardner Out of China Julie E. to Handbook Section 3860 of the CICA Handbook, Financial Instruments - Disclosure and Presentation. This section now clarifies how to account for certain financial instruments that have liability characteristics and equity characteristics. It requires instruments that meet specific criteria criteria (krītēr´ē  ),n. to be classified as liabilities in the balance sheet. Many of these financial instruments were previously classified as equities. These revisions come into effect for fiscal years beginning on or after November November: see month. 1, 2004. Management is currently evaluating the impact of these revisions on the consolidated 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 applies to awards granted on or after January 1, 2002. In 2003, and in accordance with Handbook Section 3870, the Company elected to adopt the prospective application of the fair value based method for measuring the compensation cost of employee stock options granted in 2003 and beyond. As a result the Company recorded an expense of $0.2 million and $0.4 million for the three and six-month periods ended June 30, 2004. The Company has also elected to continue to account for employee stock options granted in 2002 by measuring the 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 14 was 4,085,404 as at June 30, 2004. On July 2, 2004, following the $1.45 special cash distribution on June 30, 2004, and regulatory reg·u·late tr.v. reg·u·lat·ed, reg·u·lat·ing, reg·u·lates 1. To control or direct according to rule, principle, or law. 2. approval, the Company reduced the exercise price for all outstanding options granted by $1.47 in accordance with regulatory requirements Regulatory requirements are part of the process of drug discovery and drug development. Regulatory requirements describe what is necessary for a new drug to be approved for marketing in any particular country. . The following outlines the assumptions used in the Black-Scholes option-pricing model Black-Scholes option-pricing model A model for pricing call options based on arbitrage arguments. Uses the stock price, the exercise price, the risk-free interest rate, the time to expiration, and the expected standard deviation of the stock return. for awards granted during the period:
For the three-month For the six-month
period ended period ended
June 30 June 30
2004 2003 2004 2003
---------------------------------------------------------------------
Dividend yield 0.0% 0.0% 0.0% 0.0%
Expected volatility 60.0% 75.0% 60.0% 75.0%
Risk-free interest rate 3.65% 3.92% 3.39% 3.98%
Expected life (years) 4 4 4 4
Weighted-average grant date
fair value ($) $2.62 $4.39 $3.10 $4.40
The following pro forma disclosure outlines the impact had the
Company used the fair value based method of accounting for awards
granted in 2002 to determine the compensation cost for the Company's
stock-based employee compensation plans:
For the three-month For the six-month
period ended period ended
June 30 June 30
2004 2003 2004 2003
---------------------------------------------------------------------
Net (loss) income, as reported
($ millions) (37.2) 5.9 (37.3) 10.7
Adjustment to net (loss) income
($ millions) (1.2) (1.8) (2.6) (3.6)
Pro forma net (loss) income
($ millions) (38.4) 4.1 (39.9) 7.1
Pro forma basic and diluted
(loss) income per share ($) (0.37) 0.04 (0.39) 0.07
3. Net income per share
The reconciliation of diluted income (loss) per share for the three
and six-month periods ended June 30, 2004 (2003) is presented below:
For the three-month period
ended June 30, 2004
Net loss Number of
($millions) shares Per share
(numerator) (denominator) amount ($)
---------------------------------------------------------------------
Net loss attributable to
common shareholders 37.2 103,310,217 0.36
Dilutive options 1,307
---------------------------------------------------------------------
Net loss attributable to
common shareholders and
assumed conversions 37.2 103,311,524 0.36
For the six-month period
ended June 30, 2004
Net loss Number of
($millions) shares Per share
(numerator) (denominator) amount ($)
---------------------------------------------------------------------
Net loss attributable to
common shareholders 37.3 103,271,366 0.36
Dilutive options 16,186
---------------------------------------------------------------------
Net loss attributable to
common shareholders and
assumed conversions 37.3 103,287,552 0.36
For the three-month period
ended June 30, 2003
Net income Number of
($millions) shares Per share
(numerator) (denominator) amount ($)
---------------------------------------------------------------------
Net income attributable
to common shareholders 5.9 101,978,223 0.06
---------------------------------------------------------------------
Dilutive options 59,300
Dilutive common shares to
be issued related to
acquisitions 2,797,612
---------------------------------------------------------------------
Net income attributable
to common shareholders
and assumed conversions 5.9 104,835,135 0.06
For the six-month period
ended June 30, 2003
Net income Number of
($millions) shares Per share
(numerator) (denominator) amount ($)
---------------------------------------------------------------------
Net income attributable
to common shareholders 10.7 101,943,164 0.10
Dilutive options 74,440
Dilutive common shares to
be issued related to
acquisitions 2,797,612
---------------------------------------------------------------------
Net income attributable
to common shareholders
and assumed conversions 10.7 104,815,216 0.10
The following securities were excluded from the calculation of
diluted earnings per share since the average market value of the
underlying shares were less than the exercise price of the
securities:
For the For the For the For the
three-month three-month six-month six-month
period period period period
ended ended ended ended
June 30, June 30, June 30, June 30,
(number of shares) 2004 2003 2004 2003
---------------------------------------------------------------------
---------------------------------------------------------------------
Options 4,214,097 6,146,838 4,199,218 6,131,698
Warrants 650,000 650,000 650,000 650,000
4. Sale of US Health operations In December 2003, as a result of the Board of Director's approval of the Company's plan to sell its US Health operations, the Company wrote down the value of long-term assets Long-Term Assets 1. Reported on the balance sheet, it's the value of a company's property, equipment and other capital assets, less depreciation. 2. A stock, bond or other asset that you plan on holding in your portfolio for a lengthy period of time. associated with its these operations by $77.3 million. For the three-months ended March 31, 2004, the Company recorded a gain on the sale of the US Health operations of $1.7 million, which was included in the net income from discontinued operations. In the current period, this gain was reduced by $6.5 million as a result of working capital and disposal cost adjustments related to the sale. The details of the sale are as follows: (a) Sale of care management segment of US Health On March 2, 2004, the Company completed the sale of 100% of the issued and outstanding shares of National Health Services health services Managed care The benefits covered under a health contract (NHS NHS abbr. National Health Service NHS (in Britain) National Health Service ), 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, for a total cash consideration of US$10 million. (b) Sale of preferred provider organization pre·ferred provider organization n. Abbr. PPO A medical insurance plan in which members receive more coverage if they choose health care providers approved by or affiliated with the plan. (PPO PPO abbr. preferred provider organization PPO Managed care Preferred provider organization, see there Infectious disease Pleuropneumonia-like organism, see there ) segment of US Health On December 31, 2003, the Company reached an agreement to sell the PPO operations component of its US Health operations for a total consideration of US$213 million, subject to certain closing adjustments. The sale of the PPO operations was completed on March 4, 2004 and involved the sale of the issued and outstanding shares of BCE Emergis Corporation, a wholly owned subsidiary of the Company. BCE Emergis Corporation carried on the PPO operations of the Company and also held options to purchase shares of a publicly traded company. While these options were excluded from the sale, they were not being transferred out of BCE Emergis Corporation at closing. The purchase price is subject to adjustments following the calculation, within 120 days from the closing date, of the amount of the working capital of the PPO operations as of the closing date: any shortfall Shortfall The amount by which the capital required to fulfill a financial obligation exceeds available capital. Notes: Shortfall risk is often combated with an efficient hedging strategy created by a fund, group, institution, or individual. from or excess from US$19.0 million will be paid by the Company or received by the Company on a dollar-for-dollar basis. In the current period, the Company recorded working capital and disposal cost adjustments of $6.5 million which have been included in income from discontinued operations. The Company has provided 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 to the buyer in the stock purchase agreement regarding the business operations Business operations are those activities involved in the running of a business for the purpose of producing value for the stakeholders. Compare business processes. The outcome of business operations is the harvesting of value from assets of BCE Emergis Corporation which covers principally any breach of representations and warranties warranties, n.pl the details of a contract; considered less important than the conditions. Whereas the penalty for breach of conditions is the termination of the contract, the penalty for breach of warranties is payment of damages to the innocent party. and any covenants in excess of US$2 million to a maximum of US$53.3 million, except for tax liabilities and certain other representations for which there is no deductible That which may be taken away or subtracted. In taxation, an item that may be subtracted from gross income or adjusted gross income in determining taxable income (e.g., interest expenses, charitable contributions, certain taxes). and no maximum amount. The Company's representations and warranties exist for a period of no later than 18 months or 30 days after the issuance of the audited financial statements of BCE Emergis Corporation for the year ending December 31, 2004, except for tax and certain other representations which are in force until the expiry of the applicable statute of limitations A type of federal or state law that restricts the time within which legal proceedings may be brought. Statutes of limitations, which date back to early Roman Law, are a fundamental part of European and U.S. law. . These indemnification amounts have been included in Note 20 to the consolidated financial statements. Following the completion of the sale, a subsidiary of the Company became the primary lessee One who rents real property or Personal Property from another. A lessee of land is a tenant. Cross-references Landlord and Tenant. lessee n. the person renting property under a written lease from the owner (lessor). under a lease which represents an obligation of US$18.3 million over the lease term. The Company has sublet sub·let tr.v. sub·let, sub·let·ting, sub·lets 1. To rent (property one holds by lease) to another. 2. To subcontract (work). n. , to third parties, a portion of this lease for periods of 3 months, 6 months, and 60 months. The remaining portion is currently being used for continuing operations. 5. Sale of eSecurity operations On June 30, 2004, the Company sold its eSecurity operations for proceeds of $30.3 million, subject to certain closing adjustments. During the current period, the Company recorded a gain on sale of the eSecurity operations of $15.4 million, which is included in income from discontinued operations. 6. Sale of intangible assets 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. On June 30, 2004, in conjunction with the early termination of the extended exclusive distribution agreement signed in 2001 with Bell Canada, the Company sold the intangible assets used to service this product for proceeds of $10.3 million. During the current period, the Company recorded a gain on the sale these assets in the amount of $10.3 million which is included in income from continuing operations. 7. Sale of BCE Emergis Systems Inc. On May 28, 2004, the Company completed the sale of 100% of the issued and outstanding shares of BCE Emergis Systems Inc., a wholly owned US subsidiary of the Company, which carried on the legacy messaging and translation services as part of the messaging and collaboration Working together on a project. See collaborative software. operations, for a total cash consideration of US$0.8 million ($1.3 million). During the current period, the Company recorded a gain on sale of $1.3 million which is included in income from continuing operations. 8. Contract settlements On April 13, 2004 the Company received US$8.8 million ($11.5 million) in settlement of a dispute relating to a distribution agreement with a technology provider in connection with a product that the Company no longer markets. An amount of $9.1 million was related to the settlement of the contract, with the balance related to outstanding commissions receivable and repayment Repayment The act of paying back a debt. Notes: Everyone has to repay their debts eventually. See also: Debt, Defeasance, Loan of 2004 legal costs incurred by the Company. On May 6, 2004 the Company entered into an agreement with Bell Canada for the early termination of the extended exclusive distribution agreement signed in 2001. An amount of $4.7 million related to the settlement of the contract was recorded in the current period. 9. Bankers' acceptances A bankers' acceptance, or BA, is a time draft drawn on and accepted by a bank. Before acceptance, the draft is not an obligation of the bank; it is merely an order by the drawer to the bank to pay a specified sum of money on a specified date to a named person or to the On June 30, 2004 the Company entered into an agreement with its banker BANKER, com. law. A banker is one engaged in the business of receiving other persons money in deposit, to be returned on demand discounting other persons' notes, and issuing his own for circulation. One who performs the business usually transacted by a bank. for 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. borrowings of $150.0 million CAD CAD: see computer-aided design. (Computer-Aided Design) Using computers to design products. CAD systems are high-speed workstations or desktop computers with CAD software. through the issuance of bankers' acceptances. The bankers' acceptances are secured by cash balances currently being held by a foreign subsidiary of the Company bearing interest at a rate of 2.55%, and mature on July 30, 2004. These funds were used to pay the Special cash distribution on June 30, 2004 to shareholders of record on June 25, 2004. The Company has the legal right to offset the bankers' acceptances with its cash balances and intends to do so. As a result, the short-term borrowings and cash and cash equivalents have been presented on a net basis. 10. Promissory note promissory note, unconditional written promise to pay a certain sum of money at a definite time to bearer or to a specified person on his order. Promissory notes are generally used as evidence of debt. On June 30, 2004, in conjunction with the early termination of the extended exclusive distribution agreement signed in 2001 with Bell Canada, the Company has issued a promissory note to Bell Canada in the amount of $25.0 million. This promissory note bears no interest until maturity, which is to be no later than October October: see month. 1, 2004. Thereafter, the promissory note will bear interest at a rate of 10% per annum Per annum Yearly. commencing on the maturity date or, in the event of default, the default date. This amount was previously 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. . 11. Discontinued operations and assets held for sale On December 31, 2003, the Board of Directors approved the Company's plan to sell its US Health operations. The US Health operations included the preferred provider organization (PPO) segment and the care management segment which were part of the eHealth Solutions business unit. The Company completed the sale of the PPO segment and the care management segment of its US Health operations in March 2004. Additionally, on June 30, 2004, the Company completed the sale of its eSecurity operations and on July 7, 2004 the Company completed the sale of the webdoxs operations. The eSecurity and webdoxs operations were originally part of the eFinance business unit. Accordingly, the results of operations, cash flows and financial position of the US Health, eSecurity, and webdoxs operations have been segregated in the accompanying ac·com·pa·ny v. ac·com·pa·nied, ac·com·pa·ny·ing, ac·com·pa·nies v.tr. 1. To be or go with as a companion. 2. interim consolidated financial statements, and are reported as discontinued operations as a single line item in the interim consolidated financial statements.
The results of discontinued operations presented in the accompanying
interim consolidated statements of earnings, were as follows:
For the three-month period ended
June 30, 2004
US Health eSecurity webdoxs TOTAL
---------------------------------------------------------------------
---------------------------------------------------------------------
Revenue - 8.6 0.7 9.3
Direct costs - 1.1 0.5 1.6
---------------------------------------------------------------------
Gross margin - 7.5 0.2 7.7
---------------------------------------------------------------------
Expenses
Operations - 2.2 0.5 2.7
Sales and marketing - 0.6 0.3 0.9
Research and development, net - 1.9 0.1 2.0
General and administrative - 0.1 - 0.1
---------------------------------------------------------------------
- 4.8 0.9 5.7
---------------------------------------------------------------------
Earnings (loss) before
under noted items - 2.7 (0.7) 2.0
Depreciation - 1.0 0.1 1.1
Amortization of intangible
assets - 0.4 0.6 1.0
Interest income - - - -
Gain on sale of other assets - - - -
Loss (gain) on sale of assets
held for sale 6.5 (15.4) - (8.9)
Other - - - -
---------------------------------------------------------------------
(Loss) income before income
taxes (6.5) 16.7 (1.4) 8.8
Income taxes
Current - - - -
Future - 5.7 - 5.7
---------------------------------------------------------------------
- 5.7 - 5.7
(Loss) income from discontinued
operations (6.5) 11.0 (1.4) 3.1
For the three-month period ended
June 30, 2003
US Health eSecurity webdoxs TOTAL
---------------------------------------------------------------------
---------------------------------------------------------------------
Revenue 41.8 7.0 0.6 49.4
Direct costs 4.2 0.9 0.3 5.4
---------------------------------------------------------------------
Gross margin 37.6 6.1 0.3 44.0
---------------------------------------------------------------------
Expenses
Operations 15.4 1.9 0.5 17.8
Sales and marketing 1.8 0.4 0.5 2.7
Research and development, net 1.5 0.7 0.5 2.7
General and administrative 3.5 - - 3.5
---------------------------------------------------------------------
22.2 3.0 1.5 26.7
---------------------------------------------------------------------
Earnings (loss) before
under noted items 15.4 3.1 (1.2) 17.3
Depreciation 1.2 0.8 0.1 2.1
Amortization of intangible
assets 0.6 0.3 1.5 2.4
Interest income (0.1) - - (0.1)
Gain on sale of other assets (1.2) - - (1.2)
Loss (gain) on sale of
assets held for sale - - - -
Other 0.2 - - -
---------------------------------------------------------------------
(Loss) income before
income taxes 14.7 2.0 (2.8) 13.9
Income taxes
Current 0.5 - - 0.5
Future 1.2 0.7 - 1.9
---------------------------------------------------------------------
1.7 0.7 - 2.4
(Loss) income from
discontinued operations 13.0 1.3 (2.8) 11.5
For the six-month period ended
June 30, 2004
US Health eSecurity webdoxs TOTAL
---------------------------------------------------------------------
---------------------------------------------------------------------
Revenue 25.4 16.1 1.4 42.9
Direct costs 3.0 2.0 0.9 5.9
---------------------------------------------------------------------
Gross margin 22.4 14.1 0.5 37.0
---------------------------------------------------------------------
Expenses
Operations 10.8 4.5 0.9 16.2
Sales and marketing 1.5 1.4 0.6 3.5
Research and development, net 1.3 3.0 (0.2) 4.1
General and administrative 3.6 0.1 - 3.7
---------------------------------------------------------------------
17.2 9.0 1.3 27.5
---------------------------------------------------------------------
Earnings (loss) before
under noted items 5.2 5.1 (0.8) 9.5
Depreciation 0.4 1.9 0.2 2.5
Amortization of intangible
assets 0.3 0.7 1.1 2.1
Interest income - - - -
Interest on long-term debt 0.1 - - 0.1
Gain on sale of other assets - - - -
Loss (gain) on sale of
assets held for sale 4.8 (15.4) - (10.6)
Other - - - -
---------------------------------------------------------------------
(Loss) income before
income taxes (0.4) 17.9 (2.1) 15.4
Income taxes (recovery)
Current 0.1 - - 0.1
Future (0.5) 6.1 - 5.6
---------------------------------------------------------------------
(0.4) 6.1 - 5.7
Income (loss) from
discontinued operations - 11.8 (2.1) 9.7
For the six-month period ended
June 30, 2003
US Health eSecurity webdoxs TOTAL
---------------------------------------------------------------------
---------------------------------------------------------------------
Revenue 86.9 13.5 1.3 101.7
Direct costs 8.2 1.5 0.6 10.3
---------------------------------------------------------------------
Gross margin 78.7 12.0 0.7 91.4
---------------------------------------------------------------------
Expenses
Operations 33.0 2.9 1.0 36.9
Sales and marketing 4.2 0.6 1.1 5.9
Research and development, net 3.6 2.2 1.0 6.8
General and administrative 7.7 - - 7.7
---------------------------------------------------------------------
48.5 5.7 3.1 57.3
---------------------------------------------------------------------
Earnings (loss) before
under noted items 30.2 6.3 (2.4) 34.1
Depreciation 2.4 1.6 0.1 4.1
Amortization of intangible
assets 1.2 0.6 3.1 4.9
Interest income (0.1) - - (0.1)
Interest on long-term debt 0.1 - - 0.1
Gain on sale of other assets (1.2) - - (1.2)
Loss (gain) on sale of
assets held for sale - - - -
Other (0.2) - - (0.2)
---------------------------------------------------------------------
(Loss) income before
income taxes 28.0 4.1 (5.6) 26.5
Income taxes (recovery)
Current 0.9 - - 0.9
Future 1.2 1.4 - 2.6
---------------------------------------------------------------------
2.1 1.4 - 3.5
Income (loss) from
discontinued operations 25.9 2.7 (5.6) 23.0
The cash flows from discontinued operations presented in the
accompanying interim consolidated statements of cash flows, were as
follows:
For the three-month For the six-month
period ended period ended
June 30 June 30
2004 2003 2004 2003
---------------------------------------------------------------------
Operating activities 0.9 14.5 6.1 31.4
Investing activities - 0.5 (1.8) 0.1
Financing activities (0.9) (0.9) (1.7) (1.6)
Foreign exchange gain (loss)
on cash held in foreign
currencies - (1.4) 0.1 (2.2)
---------------------------------------------------------------------
Cash flows from discontinued
operations - 12.7 2.7 27.7
---------------------------------------------------------------------
The assets and liabilities have been segregated in the accompanying
interim consolidated balance sheets and are reported as current and
long-term "Assets held for sale" and current and long-term
"Liabilities related to assets held for sale".
The assets and related liabilities held for sale were as follows:
As at As at
June 30 December 31
2004 2003
---------------------------------------------------------------------
---------------------------------------------------------------------
ASSETS
Current
Cash and cash equivalents - 8.8
Accounts receivable - 28.5
Future income taxes - 36.6
Fixed assets - 14.0
Intangible assets 12.1 17.9
Goodwill - 154.7
Other current assets - 52.1
Less: write-down related to assets
held for sale - (26.8)
---------------------------------------------------------------------
12.1 285.8
---------------------------------------------------------------------
LIABILITIES
Current
Accounts payable and accrued liabilities - 6.4
Deferred revenue - 0.8
Current portion of long-term debt - 0.5
---------------------------------------------------------------------
- 7.7
---------------------------------------------------------------------
SHAREHOLDERS' EQUITY
Capital Stock (a) - 10.1
---------------------------------------------------------------------
- 10.1
---------------------------------------------------------------------
(a) As a result of the Company's sale of its US Health Operations,
the final instalment of $10.1 million payable in June 2004
relating to its acquisition of Associates for HealthCare in June
2001 was no longer an obligation of the Company.
12. Acquisitions
WARE Solutions Corporation
On January 15, 2004, the Company acquired all the issued and
outstanding shares of WARE Solutions Corporation for cash
consideration of $5.0 million. The Company also incurred transaction
costs in the amount of $0.3 million in connection with the
acquisition, relating mostly to professional fees. WARE Solutions
Corporation offers web-based practice management software to health
care providers, as well as claims processing and adjudication systems
to payor organizations. The transaction was accounted for using the
purchase method.
The results of operations of WARE Solutions Corporation have been
included in the Company's results since January 15, 2004, the date of
acquisition.
The total purchase price of the acquisition was $5.3 million and was
preliminarily allocated as follows:
Purchase price allocation $
----------------------------------------------------------
----------------------------------------------------------
Current assets 0.7
Fixed assets 0.1
Current liabilities (0.3)
Deferred revenues (0.3)
Long-term liabilities (1.7)
Allocation of excess of purchase price:
Acquired technologies 6.8
----------------------------------------------------------
----------------------------------------------------------
Cost of acquisition 5.3
The Company expects to finalize the purchase price allocation during
2004.
Gestion InfoPharm Inc.
On March 19, 2004, the Company acquired all the issued and
outstanding shares of Gestion InfoPharm Inc. for cash consideration
of $12.4 million and a holdback of $1.5 million payable in March
2005. The Company also incurred transaction costs in the amount of
$0.5 million in connection with the acquisition, relating mostly to
professional fees. Gestion InfoPharm specializes in the design,
development and marketing of dispensary and point-of-sales software
solutions customized for pharmacies. The transaction was accounted
for using the purchase method.
The results of operations of Gestion InfoPharm have been included in
the Company's results since March 19, 2004, the date of acquisition.
The total purchase price of the acquisition was $14.4 million and was
preliminarily allocated as follows:
Purchase price allocation $
--------------------------------------------------------------
--------------------------------------------------------------
Current assets 3.5
Fixed assets 1.8
Intangible assets 0.3
Current liabilities (1.2)
Deferred revenue (1.6)
Long-term liabilities (1.1)
Allocation of excess of purchase price:
Customer relationship 6.5
Goodwill 6.2
--------------------------------------------------------------
--------------------------------------------------------------
Cost of acquisition 14.4
The Company expects to finalize the purchase price allocation during
2004.
Tri-Comp Systems Ltd.
On March 22, 2004, the Company acquired all the issued and
outstanding shares of Tri-Comp Systems Ltd. for cash consideration of
$4.5 million. The Company also incurred transaction costs in the
amount of $0.4 million in connection with the acquisition, relating
mostly to professional fees. Tri-Comp Systems provides management
software and point of sale systems to pharmacies. The transaction was
accounted for using the purchase method.
The results of operations of Tri-Comp Systems have been included in
the Company's results since March 1, 2004, the effective date of the
acquisition.
The total purchase price of the acquisition was $4.9 million and was
preliminarily allocated as follows:
Purchase price allocation $
--------------------------------------------------------------
--------------------------------------------------------------
Current assets 1.2
Fixed assets 0.1
Intangible assets 0.6
Current liabilities (0.6)
Deferred revenue (0.5)
Long-term liabilities (0.3)
Allocation of excess of purchase price
Customer relationship 1.6
Goodwill 2.8
--------------------------------------------------------------
--------------------------------------------------------------
Cost of acquisition 4.9
The Company expects to finalize fi·nal·ize tr.v. fi·nal·ized, fi·nal·iz·ing, fi·nal·iz·es To put into final form; complete or conclude: "They have jointly agreed ... the purchase price allocation The apportionment or designation of an item for a specific purpose or to a particular place. In the law of trusts, the allocation of cash dividends earned by a stock that makes up the principal of a trust for a beneficiary usually means that the dividends will be treated as during 2004. 13. Restructuring and other charges In December 2003, the Board of Directors approved the Company's plan to sell its US Health operations. As a result of this approval, the Company developed a restructuring program to 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. its organizational structure  This article has no lead section.To comply with Wikipedia's lead section guidelines, one should be written. and rationalize ra·tion·al·ize v. 1. To make rational. 2. To devise self-satisfying but false or inconsistent reasons for one's behavior, especially as an unconscious defense mechanism through which irrational acts or feelings are made to appear its overhead in order to align align (  līn),v to move the teeth into their proper positions to conform to the line of occlusion. its cost structure with core revenue going forward. This 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 of $38.2 million for the year ended December 31, 2003. The charge included cash restructuring charges totalling $22.1 million for 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, and asset write-downs totalling $16.1 million. During the three-month period ended March 31, 2004 the Company completed the sale of its US Health operations and consequently experienced delays in executing the restructuring program developed in 2003. As a result, the Company reduced the restructuring charge relating to employee severance and other employee related costs by $6.3 million for the three-month period ended March 31, 2004. During the current period the Company continued the execution of its restructuring program and recorded $2.4 million related to employee severance and other related costs. The balance of the restructuring provision as at December 31, 2003 was $20.8 million. During the first quarter of 2004 the Company reduced the restructuring charge by $6.3 million and disbursed $3.6 million relating to employee severance and other employee costs. During the current period the Company increased the restructuring charge by $2.4 million and disbursed $5.8 million relating to employee severance and other employee costs. As at June 30, 2004, the unpaid restructuring payable balance was $7.5 million and is included in accounts payable and accrued liabilities.
14. Equity components
The stated capital stock as at June 30, 2004 is detailed as follows:
Number of Issued and Not issued Options TOTAL
shares fully paid and not issued as
$ fully paid part of
acquisition $
$
---------------------------------------------------------------------
---------------------------------------------------------------------
Balance at
January 1,
2004 103,216,870 1,533.0 11.6 2.1 1,546.7
Issue of common
shares (a) 19,067 - - - -
Issue of common
shares (b) 118,356 0.7 - - 0.7
Issue of common
shares (C) - - (11.6) - (11.6)
---------------------------------------------------------------------
Special cash
distribution (d) - (150.0) - - (150.0)
---------------------------------------------------------------------
Reduction of
stated capital (e) - (1,210.0) - -(1,210.0)
---------------------------------------------------------------------
Impact of the
exercise of
options issued as
part of the
acquisition of BCE
Emergis
Technologies - 1.6 - (2.1) (0.5)
---------------------------------------------------------------------
---------------------------------------------------------------------
Balance at
June 30,
2004 103,354,293 175.3 - - 175.3
Contributed surplus $
---------------------------------------------------------------------
---------------------------------------------------------------------
Balance at January 1, 2004 76.8
Amount related to the AHC acquisition (C) 1.5
Reduction of stated capital (e) 1,210.0
Amount related to stock based compensation (f) 0.4
Impact of the exercise of options issued as part
of the acquisition of BCE Emergis Technologies 0.5
---------------------------------------------------------------------
---------------------------------------------------------------------
Balance at June 30, 2004 1,289.2
(a) 19,067 stock options were exercised to purchase 19,067 common
shares for cash consideration of $14 thousand.
(b) 118,356 treasury common shares were issued to the Company's
employees as part of an employee share purchase plan.
(c) In the first quarter the Company paid US$0.8 million
($1.1 million) representing the final payment of the third
instalment and extinguished the remaining amount payable of $10.1
million under the fourth instalment of the acquisition of
Associates for HealthCare of June 2001 as this was no longer an
obligation of the Company following the sale of the US Health
operations. An amount of $1.5 million representing the
differential between the current share value and the estimated
share value at June 28, 2001 was attributed to contributed
surplus.
(d) On June 30, 2004 the Company paid a special cash distribution of
$150 million, representing a reduction in the stated capital of
common shares, to shareholders of record on June 25, 2004.
(e) On June 30, 2004, the Company also completed a second reduction
of the stated capital of common shares in the amount of $1.21
billion. This amount was attributed to contributed surplus.
(f) During the year the Company expensed $0.4 million relating to
stock options (note 2). This amount was attributed to contributed
surplus.
Stock option plans Options
---------------------------------------------------------------------
Stock option plans for common shares at prices ranging
from $0.44 to $117.00 per share and expiry dates up to
2011 4,215,404
Warrants: From time to time, the Company enters into formal business arrangements for the use and distribution of certain technology solutions with strategic partners. Under the terms of such arrangements, the partners may acquire warrants to purchase shares of the Company.
The following table summarizes warrant activity:
Number of Number of Exercise price
warrants warrants of warrants
outstanding(1) exercisable(1) exercisable($)
---------------------------------------------------------------------
Outstanding -
January 1, 2004
and June 30, 2004 650,000 300,000 47.24
(1) Warrants are convertible into common shares of the Company on a
1:1 basis.
The non-exercised warrants will become exercisable upon the attainment of certain contractual arrangements and the exercise price will be determined at that time. The warrants 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. 15. Operating segment information In December 2003, the Board of Directors approved the Company's plan to sell its US Health operations. Additionally, in June 2004 and July 2004, the Company completed the sale of its eSecurity and webdoxs operations, respectively. Accordingly, the Company has classified the US Health, eSecurity, and webdoxs operations as discontinued operations. The US Health operations were originally part of the eHealth segment and the eSecurity and webdoxs operations were originally part of the eFinance segment. Additionally, as of January 1, 2004 the Company modified mod·i·fy v. mod·i·fied, mod·i·fy·ing, mod·i·fies v.tr. 1. To change in form or character; alter. 2. its corporate structure to separately disclose non-core operations which were originally included in the eFinance and eHealth segments. The non-core operations include the three-year distribution agreement with Bell Canada for legacy products extended in September September: see month. 2001 and subsequently terminated in June 2004, as well as other non-core and exited products. The Company has restated comparative results to reflect this change. The following table shows the activities of each of the segments excluding the US Health, eSecurity, and webdoxs operations:
For the three-month period ended June 30 ($)
eFinance eHealth Non-core
segment segment segment
2004 2003 2004 2003 2004 2003
---------------------------------------------------------------------
---------------------------------------------------------------------
Revenues 26.5 31.6 17.7 14.8 18.3 28.2
Direct costs 4.5 7.3 3.9 3.5 8.0 11.0
---------------------------------------------------------------------
Gross margin 22.0 24.3 13.8 11.3 10.3 17.2
---------------------------------------------------------------------
EBITDA (1) 9.8 (2.9) 3.1 1.3 7.0 4.2
---------------------------------------------------------------------
---------------------------------------------------------------------
Goodwill as at
June 30 15.4 15.6 32.7 23.7 - -
For the three-month period ended June 30 ($)
Other non-allocated Total
2004 2003 2004 2003
---------------------------------------------------------------------
---------------------------------------------------------------------
Revenues - - 62.5 74.6
Direct costs - - 16.4 21.8
---------------------------------------------------------------------
Gross margin - - 46.1 52.8
---------------------------------------------------------------------
EBITDA (1) (2.4) - 17.5 2.6
---------------------------------------------------------------------
Goodwill as at June 30 - - 48.1 39.3
For the six-month period ended June 30 ($)
eFinance eHealth Non-core
segment segment segment
2004 2003 2004 2003 2004 2003
---------------------------------------------------------------------
---------------------------------------------------------------------
Revenues 52.9 59.9 32.1 28.7 39.6 57.8
Direct costs 8.8 12.5 7.3 7.5 15.9 22.4
---------------------------------------------------------------------
Gross margin 44.1 47.4 24.8 21.2 23.7 35.4
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EBITDA (1) 4.0 (8.1) 4.7 3.0 11.4 9.2
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Goodwill as at
June 30 15.4 15.6 32.7 23.7 - -
For the six-month period ended June 30 ($)
Other non-allocated Total
2004 2003 2004 2003
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Revenues - - 124.6 146.4
Direct costs - - 32.0 42.4
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Gross margin - - 92.6 104.0
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EBITDA (1) 3.9 - 24.0 4.1
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Goodwill as at
June 30 - - 48.1 39.3
(1) The term EBITDA (earnings before interest, taxes, depreciation and amortization Earnings before interest, taxes, depreciation and amortization (EBITDA) is a non-GAAP metric that can be used to evaluate a company's profitability.
pertaining to data that have been submitted to standardization procedures. standardized morbidity rate see morbidity rate. standardized mortality rate see mortality rate. meaning prescribed pre·scribe v. pre·scribed, pre·scrib·ing, pre·scribes v.tr. 1. To set down as a rule or guide; enjoin. See Synonyms at dictate. 2. To order the use of (a medicine or other treatment). by Canadian 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 companies. The Company defines it as earnings before depreciation, amortization of intangible assets, interest, loss or gain on foreign exchange, other income and expenses, and income taxes. EBITDA is presented on a basis that is consistent from period to period and agrees, on a consolidated basis, with the amount disclosed as "Earnings before under noted items" in the financial statements. 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 decision-making, n the process of coming to a conclusion or making a judgment. decision-making, evidence-based, n a type of informal decision-making that combines clinical expertise, patient concerns, and evidence gathered from purposes. Geographic geographic /geo·graph·ic/ (je?o-graf´ik) in pathology, of or referring to a pattern that is well demarcated, resembling outlines on a map. geographic pertaining to geography. information The following table sets out certain geographical ge·o·graph·ic also ge·o·graph·i·cal adj. 1. Of or relating to geography. 2. Concerning the topography of a specific region. ge information relative to the Company excluding the US Health, eSecurity, and webdoxs operations:
For the three-month For the six-month
period ended period ended
June 30 June 30
Revenue ($) 2004 2003 2004 2003
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Canada 52.0 60.5 102.7 120.9
United States 10.5 14.1 21.9 25.5
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Total 62.5 74.6 124.6 146.4
16. Related party information On June 16, 2004 BCE Inc. completed the sale of its ownership interest in the Company. As a result, BCE Inc. and its subsidiaries are no longer related parties to the Company. The following transactions occurred in the normal course of operations with BCE Inc., the former 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-month For the six-month
period ended period ended
June 30 June 30
$ $
2004 2003 2004 2003
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Revenue (a) 9.1 25.6 25.9 50.0
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Direct costs 9.1 16.7 22.4 33.3
Expenses 7.0 13.9 18.3 28.3
Interest income 2.6 4.2 6.4 7.3
(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 and subsequently terminated in June 2004, the Company derives revenue from Bell Canada (included in the related party amount) and directly from other customers with Bell Canada acting as a distribution agent (excluded from the related party amount). Included in related party revenue is the amount derived de·rive v. de·rived, de·riv·ing, de·rives v.tr. 1. To obtain or receive from a source. 2. directly from Bell Canada in the amount of $1.9 million ($12.8 million) and $7.6 million ($24.4 million) for the three and six-month periods ended June 30, 2004 (2003), respectively. Under the distribution agreement the amount derived from other customers with Bell Canada acting as a distribution agent is $9.9 million ($12.3 million) and $24.3 ($26.5 million) for the three and six-month periods ended June 30, 2004 (2003) and are excluded from the related party amount. Included in direct costs and expenses is $9.7 million ($20.9 million) and $26.4 million ($42.5 million) for the three and six- month periods ended June 30, 2004 (2003) related to the extended service agreement signed with BCE Nexxia in 2001 and subsequently terminated in June 2004, which includes costs related to the agency revenue. The balance sheet includes the following balances with BCE Inc. and other companies in the BCE group4 as a related party: As at June 30, 2004 As at December 31, 2003 -------------------------------------------------------------------- Accounts receivable - 10.1 Other current assets - 16.0 Accounts payable and accrued liabilities - 58.5 Deferred revenue - 5.0 Tax loss monetization structure As part of a tax loss consolidation arrangement, which was terminated on May 31, 2004, the Company recorded interest income of $8.7 million ($13.9 million) and $21.7 million ($24.1 million) for the three and six-month periods ended June 30, 2004 (2003). The Company also incurred interest expense of $6.2 million ($9.7 million) and $15.4 million ($16.8 million) for the three and six-month periods ended June 30, 2004 (2003). For income tax purposes, the $8.7 million ($13.9 million) and $21.7 million ($24.1 million) in interest income for the three and six-month periods ended June 30, 2004 (2003) increase the taxable income of the Company and accelerate the use of the Company's tax attributes resulting in $3.0 million ($4.3 million) and $7.5 million ($7.4 million) reductions in future income tax assets in Canada for the three and six-month periods ended June 30, 2004 (2003), respectively. The net interest amounts of $2.5 million ($4.2 million) and $6.3 ($7.3 million) for the three and six-month periods ended June 30, 2004 (2003) have been recorded as interest income. 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 Subordinated A claim ranked lower in priority than other claims. Common stock claims are always subordinated to debt. demand loan bearing interest at a rate of 5.235% since January 1, 2004. The loan was 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, was payable on demand and was repayable re·pay v. re·paid , re·pay·ing, re·pays v.tr. 1. To pay back: repaid a debt. 2. at any time. A wholly owned subsidiary of the Company had 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 were 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. The dividend rate was 3.697% per annum since January 1, 2004. The interest rate on the loan to Bell Canada and the dividend rate on the preferred shares were reset at the beginning of each year. The wholly owned subsidiary had 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 was payable on demand and was repayable at any time. The Company then repaid the temporary loan of $1.0 billion to its banker. Either party was entitled en·ti·tle tr.v. en·ti·tled, en·ti·tling, en·ti·tles 1. To give a name or title to. 2. To furnish with a right or claim to something: to terminate these agreements at any time. In addition, the arrangement was to be terminated in the event BCE was no longer the controlling shareholder of the Company. This arrangement was, therefore, terminated on May 31, 2004 as a result of BCE's decision to sell their ownership interest in the Company. The Company had the legal right to offset the demand loan receivable from Bell Canada against the preferred shares issued to Bell Canada. This arrangement was terminated through the exercise of legal rights of offset on May 31, 2004. 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. 17. Income taxes During the current period the Company recorded a valuation allowance of $56.0 million against the future income tax assets of its continuing Canadian operations. This valuation allowance was required due to the Company's assessment that the future income tax assets are no longer "more likely than not" to be realized given the uncertainty surrounding the Company's ability to generate sufficient taxable income after the termination of the tax loss monetization arrangement between the Company and Bell Canada on May 31, 2004. 18. Government assistance During the period the Company became eligible to receive a retroactive Having reference to things that happened in the past, prior to the occurrence of the act in question. A retroactive or retrospective law is one that takes away or impairs vested rights acquired under existing laws, creates new obligations, imposes new duties, or attaches a tax credit in the amount of $1.8 million from Investissement Quebec Quebec, city, Canada Quebec, Fr. Québec, city (1991 pop. 167,517), provincial capital, S Que., Canada, at the confluence of the St. Lawrence and St. Charles rivers. representing the period of June 27, 2003 to June 30, 2004. This credit is with respect to the relocation RELOCATION, Scotch law, contracts. To let again to renew a lease, is called a relocation. 2. When a tenant holds over after the expiration of his lease, with the consent of his landlord, this will amount to a relocation. of the Company's corporate head office to the Carrefour de la Nouvelle Technologie in Longueuil, Quebec This article is about the central municipality of Longueuil. For the agglomeration city, see Urban agglomeration of Longueuil. Longueuil (English pronunciation [lɑŋˈgɔɪ] . This credit reduces salaries for full-time full-time adj. Employed for or involving a standard number of hours of working time: a full-time administrative assistant. full employees performing specified spec·i·fy tr.v. spec·i·fied, spec·i·fy·ing, spec·i·fies 1. To state explicitly or in detail: specified the amount needed. 2. To include in a specification. 3. , qualifying activities. This amount has been recorded as a reduction in research and development expenses in the statement of earnings and has been classified under 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. 19. Derivative derivative: see calculus. derivative In mathematics, a fundamental concept of differential calculus representing the instantaneous rate of change of a function. financial instruments The Company periodically uses derivative instruments Derivative instruments Contracts such as options and futures whose price is derived from the price of an underlying financial asset. to manage its exposure to foreign currency risk. The Company does not use derivative instruments for speculative Speculative Securities that involve a high level of risk. speculative Of or relating to an asset or a group of assets with uncertain returns. The greater the degree of uncertainty the more speculative the asset. purposes. The Company does not trade actively in derivative instruments, and therefore, is not exposed to any significant liquidity risks relating to them. The following derivative instruments were outstanding at June 30, 2004 --currency forward contracts relating mainly to a net investment in a foreign subsidiary At June 30, 2004, principal amounts to be received under currency contracts are $268.5 million, whereas principal amounts to be paid under these contracts are US$200.0 million. The carrying value of all financial instruments approximates fair value other than the financial instrument related to the options held in a public company by our former U.S. Health subsidiary which are carried at a cost of approximately $10.0 million and for which the fair value currently is non-determinable. 20. 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 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 rights infringement, valuation differences, claims that may arise while providing services, or as a result of third party claims 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 dis·pose v. dis·posed, dis·pos·ing, dis·pos·es v.tr. 1. To place or set in a particular order; arrange. 2. 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 indemnifications will generally be limited by the agreement. The maximum potential exposure, under these guarantees represented a cumulative amount of approximately $203.0 million as at June 30, 2004, except for guarantees relating to tax liabilities and certain other representations for which there is no maximum amount. However, based on the Company's risk assessment, the Company believes that any potential payment should not be significant. In the context of the sale of services and licenses, the Company typically agrees to compensate the counterparty Counterparty The other participant, including intermediaries, in a swap or contract. for costs incurred as a result of third party claims or damages that may be suffered by the counterparty as a consequence of breach of the agreement. The term of these indemnification agreements vary depending upon the agreement. The nature of such indemnification agreements prevent the Company from making a reasonable estimate of the maximum potential amounts that the Company could be required to pay to the counterparties. The amounts are dependent upon the outcome of future contingent Fortuitous; dependent upon the possible occurrence of a future event, the existence of which is not assured. The word contingent denotes that there is no present interest or right but only a conditional one which will become effective upon the happening of the 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. 21. Subsequent event On July 7, 2004 the Company sold its webdoxs operations for a total consideration of $14.5 million. This disposition will be recorded in the third quarter of 2004. Management's discussion and analysis Management's discussion and analysis (MD&A) A report from management to shareholders that accompanies the firm's financial statements in the annual report. It explains the period's financial results and enables management to discuss topics that may not be apparent in the financial of financial condition and results of operations for the three months and six months ended June 30, 2004 Management's discussion and analysis (MD&A) provides a review of the performance of our Company and should be read in conjunction with the unaudited Consolidated financial statements and notes thereto for the second quarter of 2004 and 2003, with the MD&A in the 2003 Annual Report including the section on risks and uncertainties, with the audited Consolidated financial statements for 2003 and notes thereto in the 2003 Annual Report and on SEDAR SEDAR System for Electronic Document Analysis and Retrieval SEDAR Southeast Data, Assessment, and Review at www.sedar.com. The risk factors set out in the MD&A in our 2003 Annual Report filed with Canadian regulatory authorities Noun 1. regulatory authority - a governmental agency that regulates businesses in the public interest regulatory agency administrative body, administrative unit - a unit with administrative responsibilities are herein incorporated by reference and remain substantially unchanged. We prepare our financial statements in accordance with Canadian generally accepted accounting principles. All dollar figures are in Canadian dollars unless otherwise indicated. Where we say "we", "us", "our" or the "Company" we mean BCE Emergis Inc. and its subsidiaries. CAUTION REGARDING FORWARD-LOOKING STATEMENTS Certain statements made in this MD&A, elsewhere in the 2003 Annual Report, in various filings with Canadian regulators, in reports to shareholders and in other communications, are forward-looking within the meaning of certain securities laws, and are subject to important risks, uncertainties and assumptions. These forward-looking statements include, among others, statements with respect to our objectives and the strategies to achieve those objectives, as well as statements with respect to our beliefs, plans, expectations, anticipations Anticipations is the magazine of the Young Fabians, the under-31 section of the Fabian Society. The magazine was founded in 1996, however the group only produced one edition. , estimates and, intentions. The words "may", "could", "should", "would", "suspect", "outlook", "believe", "anticipate", "estimate", "expect", "intend", "plan", "target" and similar words and expressions are used to identify forward-looking statements. The forward-looking statements in this MD&A, describe our expectations as of July 27, 2004. Certain statements made in this MD&A are forward-looking and are subject to important risks, uncertainties and assumptions. The results or events predicted in these forward-looking statements may differ materially from actual results or events. These statements do not reflect the potential impact of any non-recurring items or of any dispositions, monetizations, mergers, acquisitions, other business combinations or other transactions that may be announced or that may occur after the date hereof. Other factors that could cause results or events to differ materially from current expectations include, among other things: general economic factors, adoption of eBusiness, adoption rate of our solutions by customers, response to industry's rapid pace of change, competition, operating results, success of U.S.-based operations, the change in control following the exchange of BCE Inc.'s subscription receipts for common shares, integration of past acquisitions, failure or material change in our strategic relationships, including our relationship with Bell Canada, exposure under contract indemnities, defects in software or failures in the processing of transactions, security and privacy breaches, key personnel, protection of intellectual property, intellectual property infringement claims, integrity of public key cryptography technology, and industry and government regulation. We caution that the foregoing list of important factors is not exhaustive. When relying on our forward-looking statements to make decisions, investors and others should carefully consider the foregoing factors and other uncertainties and potential events. We do not undertake to update any forward-looking statements, whether written or oral, that may be made from time to time by us, or on our behalf. Non-GAAP Financial Measures EBITDA: The term EBITDA (earnings before interest, taxes, depreciation and amortization) does not have any standardized meaning prescribed by Canadian Generally Accepted Accounting Principles and therefore may not be comparable to similar measures presented by other issuers. We define it as earnings before depreciation, amortization of intangible assets, interest, loss or gain on foreign exchange, other income and expenses, and income taxes. EBITDA is presented on a basis that is consistent from period to period. We believe EBITDA to be an important measuring tool, as it allows us to assess the operating performance of our on-going businesses without the impact of depreciation and amortization expenses. We exclude depreciation and amortization expenses because their level depends substantially on the accounting methods and assumptions that companies use, as well as non-operating factors such as the historical cost of capital assets capital assets n. equipment, property, and funds owned by a business. (See: capital, capital account) . EBITDA allows us to compare our operating performance on a consistent basis. Certain investors and analysts use EBITDA in measuring a company's ability to service debt, meet other payment obligations, as well as in valuations. The following table reconciles EBITDA excluding restructuring and other charges to income (loss) from continuing operations before income taxes:
Three months Six months
Period ended June 30 Period ended June 30
($ millions) 2004 2003 2004 2003
---------------------------------------------------------------------
EBITDA excluding
restructuring and
other charges 19.9 2.6 20.1 4.1
Restructuring and
other charges (reversal) 2.4 - (3.9) -
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EBITDA(1) 17.5 2.6 24.0 4.1
Depreciation 3.5 3.3 5.9 7.0
Amortization of
intangible assets 4.6 5.6 8.7 11.1
Interest income (3.6) (4.7) (8.8) (8.4)
Interest on long-term debt 0.6 1.2 1.2 2.2
Gain on the sale of assets (11.6) - (12.1) -
Loss on foreign exchange - 0.7 3.5 0.7
Other income - (0.1) - -
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Income (loss) from
continuing operations
before income taxes 24.0 (3.4) 25.6 (8.5)
(1) It agrees, on a consolidated basis, with the amount disclosed
as "Earnings before under-noted items" in the financial statements.
NET LOSS FROM CONTINUING OPERATIONS EXCLUDING RESTRUCTURING AND OTHER
CHARGES: The following table reconciles our net (loss) income from
continuing operations excluding restructuring and other charges, to
our net loss:
Three months Six months
Period ended June 30 Period ended June 30
($ millions) 2004 2003 2004 2003
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Net income (loss)
from continuing
operations excluding
restructuring and
other charges and
write-down on future
income tax assets 18.1 (5.6) 5.1 (12.3)
Restructuring and
other charges (2.4) - 3.9 -
Write-down of future
income tax assets (56.0) - (56.0) -
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Net (loss) from
continuing operations (40.3) (5.6) (47.0) (12.3)
OVERVIEW Consolidated statements of earnings Three months ended June 30, 2004 compared with the three months ended June 30, 2003 --Total revenue was $62.5 million in 2004 compared to $74.6 million in 2003 (5% decrease in core revenue and a 35% decrease in non-core revenue) --Total core revenue was $44.2 million in 2004 compared to $46.4 million in 2003 (4% increase in core recurring revenue and 33% decrease in core non-recurring revenue) --eHealth business segment revenues totalled $17.7 million in 2004 compared to $14.8 million in 2003 --eFinance business segment revenues totalled $26.5 million in 2004 compared to $31.6 million in 2003 --17% of total revenue was U.S.-sourced in 2004 compared to 19% in 2003 --Contract settlements of $13.8 million in 2004 --EBITDA, excluding restructuring and other charges, was $19.9 million in 2004 compared to $2.6 million in 2003 --Write-down of $56.0 million of future income tax assets in 2004 --Net loss from continuing operations was $(40.3) million or $(0.39) per share in 2004 compared to $(5.6) million or $(0.05) per share in 2003 --Net income from continuing operations, excluding the restructuring and other charges and the write-down of future income tax assets was $18.1 million or $0.18 per share in 2004 compared to a loss of $(5.6) million or $(0.05) per share in 2003 --Net income from discontinued operations decreased to $3.1 million from $11.5 million in 2003 --Net loss of $(37.2) million or $(0.36) per share compared to net income of $5.9 million or $0.06 per share in 2003. Six months ended June 30, 2004 compared with the six months ended June 30, 2003 --Total revenue was $124.6 million in 2004 compared to $146.4 million in 2003 (4% decrease in core revenue and 31% decrease in non-core revenue) --Total core revenue totalled $85.0 million in 2004 compared to $88.6 million in 2003 (virtually stable in core recurring revenue and 17% decrease in core non-recurring revenue) --eHealth business segment revenue totalled $32.1 million in 2004 compared to $28.7 million in 2003 --eFinance business segment revenue totalled $52.9 million in 2004 compared to $59.9 million in 2003 --18% of total revenue was U.S.-sourced in 2004 compared to 17% in 2003 --Contract settlements of $13.8 million in 2004 --Net loss on foreign exchange of $3.5 million in 2004 --EBITDA was $24.0 million in 2004 compared to $4.1 million in 2003 --EBITDA, excluding the reversal of restructuring and other charges, was $20.1 million in 2004 compared to $4.1 million in 2003 --Write-down of $56.0 million of future income tax assets in 2004 --Net loss from continuing operations was $(47.0) million or $(0.46) per share in 2004 compared to $(12.3) million or $(0.12) per share in 2003 --Net income from continuing operations, excluding the reversal in restructuring and other charges and the write-down of future income tax assets is $5.1 million or $0.05 per share in 2004 compared to a loss of $(12.3) million or $(0.12) per share in 2003 --Net income from discontinued operations decreased to $9.7 million in 2004 from $23.0 million in 2003 --Net loss of $(37.3) million or $(0.36) per share in 2004 compared to net income of $10.7 million or $0.10 per share in 2003. Consolidated balance sheets consolidated balance sheet A balance sheet in which assets and liabilities of a parent company and its controlled subsidiaries are combined, thereby presenting balance sheet items for the parent and its subsidiaries as if they were a single firm. June 30, 2004 compared with December 31, 2003 --Cash and temporary cash investments increased by $113.8 million --We received proceeds of $45.3 million from Bell Canada for the sale of our eSecurity operations, the remaining intellectual property related to the Bell legacy contract(1), and early termination of the Bell legacy contract. This amount was partly offset by $20.0 million for the payment of a portion of our payable under the extended service agreement with BCE Nexxia signed in 2001 and also terminated on June 30, 2004, and $4.4 million for settlement of our trade operations and payables Payables Related: Accounts payable with Bell Canada, for 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). of $20.6 million. --$35.9 million increase in foreign currency translation adjustment derived mainly from the sale of our U.S. eHealth operations --Stated capital reduction of $150.0 million for a special distribution to shareholders, followed by another capital reduction of $1.21 billion which increased contributed surplus. Consolidated statements of cash flows Three months ended June 30, 2004 compared with the three months ended June 30, 2003 --Cash flows used for operating activities increased by $7.8 million for the three months ended June 30, 2004, compared with the three months ended June 30, 2003 --Cash flows used for continuing operations decreased by $116.3 million for the three months ended June 30, 2004, compared with the three months ended June 30, 2003. Six months ended June 30, 2004 compared with the six months ended June 30, 2003 --Cash flows used for operating activities increased by $16.9 million for the six months ended June 30, 2004, compared with the six months ended June 30, 2003 --Cash flows from continuing operations increased by $134.1 million for the six months ended June 30, 2004, compared with the six months ended June 30, 2003. (1) The three-year distribution agreement with Bell Canada for legacy products extended in September 2001 Operating highlights Secondary offering of BCE Emergis shares, sale of the security business and related agreements - On May 6, 2004, BCE Inc. announced its decision to sell its ownership position in BCE Emergis through a public offering of subscription receipts to a syndicate Syndicate organized crime unit throughout major cities of the United States. [Am. Hist.: NCE, 2018] See : Gangsterism of underwriters. The subscription receipts were to be exchanged for common shares of BCE Emergis upon confirmation by the Board of Directors of the Company of the declaration of a special distribution of $1.45 per common share of BCE Emergis. On June 16, 2004, we held a special shareholders' meeting shareholders' meeting n. a meeting, usually annual, of all shareholders of a corporation (although in large corporations only a small percentage attend) to elect the Board of Directors and hear reports on the company's business situation. and the shareholders approved by 99.9% a reduction in stated capital of $150.0 million to allow for the declaration of the special distribution. Following this meeting, the subscription receipts were automatically exchanged into common shares of BCE Emergis. On June 30, 2004, we paid the special distribution. As a result of this transaction, as of June 16, 2004, BCE Emergis was no longer related to BCE Inc. and its subsidiaries and, accordingly, we lost the benefit of the tax loss monetization arrangement between Bell Canada and BCE Emergis which was terminated on May 31, 2004. As a consequence, we wrote down $56.0 million of the future income tax assets in the second quarter. As a result of the sale by BCE Inc. of its ownership position in BCE Emergis, we also no longer benefit from various shared costs as members of the BCE group. In addition, certain of our customer and supplier agreements contain change of control clauses, although, to date, we are unaware of any customers and suppliers which have terminated (or indicated their intention to terminate) their agreements with the Company for that reason. We continue to monitor the effect of the sale on our 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. relationships with these customers and suppliers and our future prospects. In connection with the sale by BCE Inc. of its ownership position in BCE Emergis, Bell Canada agreed to acquire our eSecurity operations. On June 30, 2004, we completed the sale of these operations for a total consideration of $30.3 million, subject to certain closing adjustments. The eSecurity business operations for the current quarter and six-month period have been treated 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 the comparative figures have been restated. During the current period, we recorded a gain on sale of the eSecurity operations of $15.4 million, which is included in the net income from discontinued operations. As part of the sale by BCE Inc. of its ownership interest in BCE Emergis, we also agreed to terminate the Bell legacy contract and related agreements with Bell Canada and sell to Bell Canada the remaining intellectual property connected thereto for $10.3 million which we recorded as a gain on sale. On June 30, 2004, we also received $4.7 million as a break-up break-up noun 1. separation, split, divorce, breakdown, ending, parting, breaking, splitting, wind-up, rift, disintegration, dissolution, termination noun 2. fee for the early termination of that contract. This break-up fee is included as a contract settlement on the income statement. Bell Canada and its subsidiaries are and will continue to be important customers of BCE Emergis. To better define our on-going relationship, BCE Emergis and Bell Canada have entered into a five-year reciprocal commercial agreement whereby BCE Emergis will be the preferred supplier for the provision of eFinance and eHealth services to Bell Canada and its subsidiaries, both for internal use and for resale. In turn, Bell Canada will be the preferred supplier of telecommunications and other services comprised in Bell Canada's suite of enterprise products and services to BCE Emergis, both for internal use and for resale. Settlement of a dispute - On April 13, 2004, we received US$8.8 million (C$11.5 million) as settlement of a dispute relating to a distribution agreement with a technology provider in connection with a product that we no longer market. Of this amount, $0.6 million represented commissions due on past services which have been included in revenue. The remaining amount, less legal fees incurred in 2004 related to the settlement, is presented as a contract settlement on the income statement for the current period in the amount of $9.1 million. Sale of U.S. Health operations - The sale agreements for both our preferred provider organization (PPO) and our care management operations have price adjustment clauses related to the level of working capital at closing of both transactions. As at June 30, 2004, we had completed the working capital calculation for the care management business, which resulted in no further adjustment to the sale price. For our PPO operations, the calculation has not yet been finalized See finalization. . However, as at June 30, 2004, we determined a potential downward adjustment of $3.1 million. We expect to finalize the working capital calculation in the third quarter of 2004. During the second quarter, we incurred additional disposal costs of $3.4 million relating to the sale of U.S. Health. These adjustments are reported as a loss on disposition of discontinued operations. Our PPO operations were carried out by a wholly owned subsidiary, BCE Emergis Corporation, which also holds options to purchase shares of a publicly traded company. These options remained in BCE Emergis Corporation at closing but there is a sale price adjustment associated with the exercise of the options or the purchase of these options by a third party. These options are currently the subject of a dispute between BCE Emergis Corporation and the grantors of these options. Sale of BCE Emergis Systems, Inc. - On May 28, 2004, the Company completed the sale of BCE Emergis Systems Inc., a U.S. wholly owned subsidiary, which carried on legacy messaging and translation services, as part of the messaging and collaboration operations, a total cash consideration of US$0.8 million ($1.3 million). During the current period the Company recorded a gain on the sale of $1.3 million, which is included in income from continuing operations. Sale of webdoxs operations - On July 7, 2004, we sold our webdoxs bill presentment service to EPO EPO see erythropoietin. EPO Erythropoietin, see there Inc., a subsidiary of Canada Post Canada Post Corporation (French: Société canadienne des postes) is a Canadian postal service operated as a crown corporation. The successor to the Post Office Department of the Government of Canada, Canada Post was created on October 16, 1981 by the Corporation, for a total consideration of $14.5 million. We received $8.0 million of the total purchase price of $14.5 million at closing. The remaining amounts are payable in three instalments: $1.5 million on December 31, 2004, $2.5 million on December 31, 2007, and $2.5 million on December 31, 2008. The remaining balance bears interest at prime plus 1%. We have reclassified the webdoxs operations as a discontinued operation for the current quarter, as well as for preceding periods. The webdoxs operations generated a net loss of $1.4 million in the current quarter. As part of the transaction, e-route (a subsidiary of BCE Emergis) has assigned as·sign tr.v. as·signed, as·sign·ing, as·signs 1. To set apart for a particular purpose; designate: assigned a day for the inspection. 2. and amended a·mend v. a·mend·ed, a·mend·ing, a·mends v.tr. 1. To change for the better; improve: amended the earlier proposal so as to make it more comprehensive. 2. its services agreement with Emergis to EPO Inc. We will continue to provide services under that agreement to EPO Inc. at the fees set forth in the agreement to support the webdoxs operations for a maximum of eighteen months after closing. Certain webdoxs assets related to the operations will be transferred to EPO Inc. at the end of the service agreement. Restructuring and other charges On December 31, 2003, we undertook a streamlining program of our operations. As at March 31, 2004, we had an unpaid restructuring balance of $10.9 million. During the second quarter of 2004, we increased the charge by $2.4 million and paid $5.8 million of these charges. As at June 30, 2004, the unpaid restructuring charges represented $7.5 million, which are included in accounts payable and accrued liabilities. This amount partially offset the reversal of $6.3 million taken in the first quarter of 2004. It is expected that other charges will be incurred in the third quarter, which will offset the remaining reversal of the restructuring and other charges. REVENUE Total revenue definition Total revenue, includes core revenue by customer segment and non-core revenue. Non-core revenue includes the Bell legacy contract(1), which was terminated on June 30, 2004, and revenue from other non-core and exited products. Additionally, as of January 1, 2004, we modified our reporting to separately disclose non-core operations, which were originally included in the eFinance and eHealth segments. We have restated comparative results to reflect this change. Starting on January 1, 2004, all new contracts with governments entered into directly or through a distribution channel are included in the eHealth segment. Total revenue Three months ended June 30, 2004 compared with the three months ended June 30, 2003
2004
Non-
($ millions) Recurring recurring Total % of total
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Core eHealth 17.4 0.3 17.7 28
Core eFinance 19.6 6.9 26.5 43
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Total core revenue 37.0 7.2 44.2 71
Non-core revenue 18.0 0.3 18.3 29
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Total revenue 55.0 7.5 62.5 100
2003
Non-
($ millions) Recurring recurring Total % of total
------------------------------------------------------------------
Core eHealth 14.1 0.7 14.8 20
Core eFinance 21.5 10.1 31.6 42
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Total core revenue 35.6 10.8 46.4 62
Non-core revenue 27.2 1.0 28.2 38
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Total revenue 62.8 11.8 74.6 100
Total revenue for the three months ended June 30, 2004 decreased to $62.5 million from $74.6 million last year as a result of a decrease of $9.9 million in non-core revenue and a $2.2 million decrease in core revenue. Total core revenue decreased to $44.2 million from $46.4 million last year mainly due to the expiry of a point of sale agreement and a reseller An organization that sells hardware and software to the general public. Resellers purchase products from software publishers and hardware manufacturers. agreement with Bell Canada and to lower non-recurring revenue derived from lower implementation fees in our U.S. eLending operations, partly mitigated mit·i·gate v. mit·i·gat·ed, mit·i·gat·ing, mit·i·gates v.tr. To moderate (a quality or condition) in force or intensity; alleviate. See Synonyms at relieve. v.intr. To become milder. by the revenue from new acquisitions in our eHealth business. Non-core revenue of $18.3 million included $17.6 million in revenue from the Bell legacy contract, which decreased by $7.5 million from the prior period due to the fixed revenue reductions in the contract. As at June 30, 2004, we agreed to terminate that contract and received $4.7 million in break-up fee. This fee is presented as contract settlement below the gross margin line on the income statement. Revenue from other non-core and exited products decreased $2.4 million from the prior period reflecting the sale in June 2003 of our care management business in Canada. (1) The three-year distribution agreement with Bell Canada for legacy products extended in September 2001 Recurring / non-recurring core revenue Recurring revenue for the current period totalled $37.0 million (84% of core revenue) compared with $35.6 million (77% of core revenue) in 2003, reflecting a $1.4 million increase related to an increase of eHealth revenue, partly offset by the expiry of a 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 contract and a reseller agreement with Bell Canada. Non-recurring revenue amounted to $7.2 million (16% of core revenue) compared with $10.8 million (23% of core revenue) during the same period last year, representing a decrease of $3.6 million. Revenue from the implementation of mortgage lenders and service vendors in our eLending business in the U.S. were the major contributors to non-recurring revenue in the second quarter 2004, which was less than for the same period in 2003. Related party revenue and expenses As at June 16, 2004, BCE Inc. was no longer our controlling shareholder. Therefore, all transactions with BCE Inc. and its subsidiaries are no longer considered related party transactions. For the period from April 1, 2004 to June 16, 2004, we were related to BCE Inc. and its subsidiaries, and related party revenue totalled $9.1 million compared to $25.6 million for a full three-month period last year. This decrease is mainly due to the fixed revenue reduction related to the Bell legacy contract, as well as to lower revenue resulting from the expiry of a contract related to our point of sale solutions with Bell Canada and a reseller agreement with Bell Canada. Related party direct costs for the second quarter of 2004 totalled $9.1 million compared to $16.7 million in 2003. The decrease of $7.6 million was due directly to a decrease in revenue from the Bell legacy contract. Other related party expenses decreased by $6.9 million, from $13.9 million in 2003 to $7.0 million in 2004, also due to the Bell legacy contract. Following the decision by BCE Inc. to sell its ownership position in BCE Emergis, we agreed with Bell Canada to unwind Unwind 1. The closure of an investment position. 2. The reconciliation of an error previously unseen by a brokerage house. Notes: 1. Sometimes referred to as closing out a position. as of May 31, 2004 a tax loss monetization structure in place between the two companies. For the first two months of the current quarter, the tax monetization structure with Bell Canada generated net interest income of $2.5 million and a provision (deferred) for income taxes in the amount of $3.0 million, for a net impact of $0.4 million on net income. Further details of this structure are included in Note 16 to the Interim consolidated financial statements. Core revenue by customer segment eFinance This segment's revenue decreased $5.1 million to $26.5 million (60% of core revenue) from $31.6 million (68% of core revenue) for the same quarter last year. Core recurring revenue amounted to $19.6 million for the current quarter compared with $21.5 million in 2003, a decrease of $1.9 million mainly due to the impact of the expiry of a point-of-sale contract and a reseller agreement with Bell Canada which represented a decrease in revenue of approximately $2.8 million. In addition, revenue from our Canadian eInvoicing business decreased by $0.8 million partly offset by $1.2 million from higher transaction levels from our Canadian electronic payment solutions. However, revenue from our Canadian eLending real estate solution increased by $0.5 million which was offset by a decrease in revenue from our legacy U.S. eLending solution due to a migration of customers to our newer U.S. e-Lending Definitions of eLending solution. Core non-recurring revenue decreased from $10.1 million in 2003 to $6.9 million in 2004. The majority of revenue in both periods represented professional service fees generated by our eLending business in the U.S. which were lower in 2004 compared to 2003. Lower professional fees from ePayment Solutions also contributed to the decrease. eHealth This unit generated core revenue of $17.7 million (40% of core revenue) during the current period compared with $14.8 million (32% of core revenue) for the same period in 2003. Core recurring revenue increased to $17.4 million from $14.1 million in the same quarter last year, mainly due to the new contribution from acquisitions made in 2004. We experienced a higher volume of claims processed which revenue was offset by a lower level of drug card production and other eHealth related revenue. Core non-recurring revenue decreased to $0.3 million from $0.7 million due to revenue from the sale of a license in 2003 which was not present in 2004. Total revenue Six Months ended June 30, 2004 compared with the six months ended June 30, 2003
2004
Non-
($ millions) Recurring recurring Total % of total
------------------------------------------------------------------
Core eHealth 31.4 0.7 32.1 26
Core eFinance 37.5 15.4 52.9 42
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Total core revenue 68.9 16.1 85.0 68
Non-core revenue 38.7 0.9 39.6 32
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Total revenue 107.6 17.0 124.6 100
2003
Non-
($ millions) Recurring recurring Total % of total
------------------------------------------------------------------
Core eHealth 27.2 1.5 28.7 20
Core eFinance 42.0 17.9 59.9 41
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Total core revenue 69.2 19.4 88.6 61
Non-core revenue 55.9 1.9 57.8 39
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Total revenue 0 125.1 21.3 146.4 100
Total revenue for the six months ended June 30, 2004 decreased to $124.6 million from $146.4 million last year as a result of an $18.2 million decrease in non-core revenue and a $3.6 million decrease in core revenue. Total core revenue decreased to $85.0 million from $88.6 million last year mainly due to the expiry of a point of sale contract with Bell Canada and a reseller agreement with Bell Canada, as well as to lower non-recurring implementation fees from our e-Lending business in the U.S. These decreases were partly offset by the contributions from 2004 acquisitions in the eHealth segment. Non-core revenue of $39.6 million included $37.7 million in revenue from the Bell legacy contract, which decreased by $13.2 million from the prior period due to fixed revenue reductions in the contract. The balance of non-core revenue, which included $1.9 million in other non-core exited products, was down $5.0 million from the prior period reflecting the sale in June 2003 of our care management business in Canada. Recurring / non-recurring core revenue Recurring revenue for the current period totalled $68.9 million (81% of core revenue) compared with $69.2 million (78% of core revenue) in 2003, due to the impact of the expiry of point-of-sale contract with Bell Canada and a reseller agreement with Bell Canada, partly offset by an increase in eHealth revenue. Non-recurring revenue amounted to $16.1 million (19% of core revenue) compared with $19.4 million (22% of core revenue) during the same period last year. Revenue from the implementation of mortgage lenders and service vendors in our eLending business in the U.S. was the major contributor to non-recurring revenue in the second quarter 2004, as well as in 2003. Lower implementation revenue, lower professional fees from the WSIB WSIB Workplace Safety and Insurance Board WSIB Washington State Investment Board initiative and lower revenue from ePayment services contributed to the decrease. Related party revenue and expenses For the period of January 1, 2004 to June 16, 2004, we were related to BCE Inc. and its subsidiaries. Related party revenue during this period totalled $25.9 million compared to $50.0 million for a full six-month period last year. This decrease is mainly due to the fixed revenue reduction from the Bell legacy contract, as well as to lower revenue resulting from the expiry of a point-of-sale contract with Bell Canada and a reseller agreement with Bell Canada. Related party direct costs for the second quarter of 2004 totalled $22.4 million compared to $33.3 million. The decrease of $10.9 million was directly due to a decrease in revenue from the Bell legacy contract. Other related party expenses decreased by $10.0 million, from $28.3 million in 2003 to $18.3 million in 2004, also due to the Bell legacy contract. For the first five months of the current period, the tax monetization structure with Bell Canada generated net interest income of $6.3 million and a provision (deferred) for income taxes in the amount of $7.5 million, for a net impact of $1.1 million on net income. Further details of this structure are included in Note 16 to the Interim consolidated financial statements. Core revenue by customer segment eFinance This segment's revenue decreased to $52.9 million (62% of core revenue) from $59.9 million (68% of core revenue) for the same quarter last year, representing a decrease of $7.0 million. Core recurring revenue amounted to $37.5 million for the six-month period compared with $42.0 million in 2003. The decrease of $4.5 million was mainly due to the $5.2 million impact of the expiry of contracts related to point of sale with Bell Canada, messaging and collaboration solutions and a reseller agreement with Bell Canada. In addition, our Canadian eInvoicing business decreased by $1.6 million. These decreases were partly offset by higher contributions of approximately $1.5 million from our cash management and Canadian electronic payment solutions. Our revenue from our Canadian eLending-real estate solution grew by $0.8 million due to a higher level of transactions which was offset by a decrease in revenue from our legacy U.S. eLending solution due to a migration of customers to our newer U.S. eLending solution. Core non-recurring revenue decreased from $17.9 million in 2003 to $15.4 million in 2004. The majority of revenue in both periods represented professional services (job) professional services - A department of a supplier providing consultancy and programming manpower for the supplier's products. fees generated by our eLending business in the U.S. The decrease was mainly due to lower professional fees from the eLending business, Visa and eInvoicing solutions. We expect another slight decrease in implementation revenues in the second half of 2004. Increases in revenue from our eLending business going forward, will need to come from transaction revenues, which will be contingent on Adj. 1. contingent on - determined by conditions or circumstances that follow; "arms sales contingent on the approval of congress" contingent upon, dependant on, dependant upon, dependent on, dependent upon, depending on, contingent adoption and on our on-going relationship with Freddie Mac Freddie Mac: see Federal Home Loan Mortgage Corporation. . eHealth This unit generated core revenue of $32.1 million (38% of core revenue) during the current period compared with $28.7 million (32% of core revenue) for the same period in 2003. Core recurring revenue increased to $31.4 million from $27.2 million in the same period last year due mainly to the contribution from acquisitions completed in 2004, and to a higher volume of transactions from 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. Workplace Safety and Insurance Board (WSIB) initiative. However, our volume of drug claims processing increased over the last six months of 2004 compared with the same period in 2003, but was mainly offset by the lower level of drug card production in 2004 compared to 2003. Core non-recurring revenue decreased $0.7 million from $1.5 million mainly due to lower professional fees generated by our initiative for the WSIB and to revenue from the sale of a license in 2003 which was not present in 2004. COSTS AND EXPENSES Direct costs, gross margin and EBITDA Three months ended June 30, 2004 compared with the three months ended June 30, 2003
Other non-
eFinance eHealth Non-core allocated Total
($ millions) 2004 2003 2004 2003 2004 2003 2004 2003 2004 2003
---------------------------------------------------------------------
Revenues 26.5 31.6 17.7 14.8 18.3 28.2 - - 62.5 74.6
Direct costs 4.5 7.3 3.9 3.5 8.0 11.0 - - 16.4 21.8
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Gross margin 22.0 24.3 13.8 11.3 10.3 17.2 - - 46.1 52.8
Contract
settlements 9.1 - - - 4.7 - - - 13.8 -
EBITDA 9.8 (2.9) 3.1 1.3 7.0 4.2 (2.4) - 17.5 2.6
eFinance - Direct costs decreased in 2004 due to a lower level of eLending integration costs. The reduction in the gross margin in 2004 was due to the expiry of contracts in the point of sale area. EBITDA increased due to the impact of the contract settlement and 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. efforts in 2004. eHealth - The increase in direct costs was due to a higher level of revenue in the current quarter. The increase in the segment's EBITDA was the result of acquisitions in the first quarter of 2004. Non-core - Direct costs decreased in line with the decrease in revenue. EBITDA increased due to the break-up fee received upon the termination of the Bell legacy contract. Total - EBITDA increased by $14.9 million in 2004 due to the contract settlements of $13.8 million, and to a $3.5 million improvement from continuing operations, excluding restructuring and other charges of $2.4 million. Six months ended June 30, 2004 compared with the six months ended June 30, 2003
Other non-
eFinance eHealth Non-core allocated Total
($ millions) 2004 2003 2004 2003 2004 2003 2004 2003 2004 2003
---------------------------------------------------------------------
Revenues 52.9 59.9 32.1 28.7 39.6 57.8 - - 124.6 146.4
Direct costs 8.8 12.5 7.3 7.5 15.9 22.4 - - 32.0 42.4
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Gross margin 44.1 47.4 24.8 21.2 23.7 35.4 - - 92.6 104.0
Contract
settlements 9.1 - - - 4.7 - - - 13.8 -
EBITDA 4.0 (8.1) 4.7 3.0 11.4 9.2 3.9 - 24.0 4.1
eFinance - Direct costs decreased in 2004 due mainly to a reversal of certain telecom expenses from preceding years and a lower level of revenue. The reduction in the gross margin in 2004 was due to the expiry of contracts in the point of sale services network area. EBITDA increased due to the contract settlement related to the settlement of a dispute and cost containment efforts in the first quarter of 2004. eHealth - Direct costs were virtually stable. The increase in the segment's EBITDA was the result of the previous quarter's acquisitions recorded at the end of the first quarter. Non-core - Direct costs decreased in line with the decrease in revenue. The EBITDA increased mainly as a result of the break-up fee mentioned above. Total - EBITDA increased by $19.9 million in 2004 due to contract settlements of $13.8 million, and to a $2.2 million improvement of our continuing operations excluding the reversal of restructuring and other charges of $3.9 million. Expenses Three months and six months ended June 30, 2004 compared with the three months and six months ended June 30, 2003
Three- month period ended June 30
2004 2003
$ millions % of revenue $ millions % of revenue
---------------------------------------------------------------------
Operations 20.4 33 23.7 32
Sales & Marketing 6.4 10 9.4 13
Research & Development 7.6 12 7.0 9
General Administrative 5.6 9 10.1 13
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Total expenses before: 40.0 64 50.2 67
Restructuring and
other charges 2.4 - - -
---------------------------------------------------------------------
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Total expenses 42.4 - 50.2 -
Headcount (end of
period) 1,106 2,026
Six-month period ended June 30
2004 2003
$ millions % of revenue $ millions % of revenue
---------------------------------------------------------------------
Operations 40.5 32 47.4 32
Sales & Marketing 13.1 11 18.1 12
Research & Development 19.2 15 17.2 12
General Administrative 13.5 11 17.2 12
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Total expenses before: 86.3 69 99.9 68
Restructuring and
other charges (3.9) - - -
---------------------------------------------------------------------
---------------------------------------------------------------------
Total expenses 82.4 - 99.9 -
Headcount (end of
period) 1,106 2,026
Three months ended June 30, 2004 compared with the three months ended June 30, 2003 Overall expenses (excluding restructuring and other charges) decreased by $10.2 million or 20% compared with the same period in 2003. The dollar and percentage decreases relate mostly to the reduction in headcount head count or head·count n. 1. The act of counting people in a particular group. 2. The number of people counted in this way. Noun 1. and employee-related expenses associated with the restructuring and cost-cutting initiatives undertaken in the first quarter of 2004. In addition, 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. decreased in line with the fixed revenue reduction related to the Bell legacy contract. Sales and marketing expenses were adjusted to reflect the revenue reduction expected in 2004 compared to 2003. Research and development expenses increased due to the decreased development funding following the renegotiation of our agreement with Freddie Mac in September 2003. This increase was offset in the current quarter by a retroactive tax credit from Investissement Quebec (Carrefour de la Nouvelle Technologie) as at June 30, 2003. Further details are included in note 18 to the Interim consolidated financial statements. The decrease in general and administrative expenses related to higher professional fees associated with various corporate activities in 2003 and higher bad debt expense in 2003. Six months ended June 30, 2004 compared with the six months ended June 30, 2003 Overall expenses (excluding restructuring and other charges) decreased by $13.6 million or 14% compared with the same period in 2003. The dollar and percentage decreases relate mostly to the reduction in headcount and employee-related expenses associated with the restructuring and cost-cutting initiatives undertaken in the latter part of the current quarter. In addition, operating expenses decreased in line with the fixed revenue reduction of the Bell legacy contract. Sales and marketing expenses were adjusted to reflect the reduction in revenue expected in 2004 compared to 2003. Research and development expenses increased in 2004, due to the same factors described in the second quarter of 2004. The increase in general and administrative expenses related to higher professional fees associated with various corporate activities and higher bad debt expense in 2003. Restructuring and other charges The streamlining of our organization associated with the restructuring and other charges recorded at the end of 2003, took place mainly in the second half of the first quarter in 2004. While a significant portion of the restructuring plan had been completed by the end of the first quarter, we will continue to incur To become subject to and liable for; to have liabilities imposed by act or operation of law. Expenses are incurred, for example, when the legal obligation to pay them arises. An individual incurs a liability when a money judgment is rendered against him or her by a court. costs over this fiscal year to offset the $6.3 million reversal taken in the first quarter of 2004. For the second quarter, we incurred costs of $2.4 million. Depreciation Three months ended June 30 Six months ended June 30 ($ millions) 2004 2003 2004 2003 --------------------------------------------------------------------- Depreciation 3.5 3.3 5.9 7.0 The increase in depreciation for the current period is the result of fixed assets fixed assets npl → activo sg fijo fixed assets npl → immobilisations fpl fixed assets fix npl → acquired through the new acquisitions in the eHealth business. For the six months ended June 30, 2004, the decrease was the result of the review of the useful lives of certain assets undertaken in January 2003. Amortization of intangible assets Three months ended June 30 Six months ended June 30 ($ millions) 2004 2003 2004 2003 --------------------------------------------------------------------- Amortization of intangible assets 4.6 5.6 8.7 11.1 Amortization of intangibles decreased in the current period and for the first six months of 2004, mainly as a result of the write-down of intangible assets included in the restructuring and other charges recorded at the end of 2003. Interest Interest income for the three-month period ended June 30, 2004 decreased by $1.1 million compared to the same period in 2003 mainly due to the termination of the tax loss monetization structure described in Note 16 to the Interim consolidated financial statements. For the first six months of 2004, interest income increased by $0.4 million due to higher interest rates and cash on hand. The tax loss monetization structure was not present for the entire first quarter of 2003, nor was it present for the entire second quarter of 2004. Loss on foreign exchange For the three-month period ended June 30, 2004, the loss on foreign exchange decreased by $0.7 million as a result of lower level of foreign currency transactions. For the six-month period ended June 30, 2004, the loss on foreign exchange increased by $2.8 million mainly due to the impact of currency forward contracts to maintain the value of our foreign investments, which generated an accounting loss of $5.0 million in the first quarter, mitigated by a gain of $1.5 million realized in foreign exchange related to our operations in the first quarter. Income taxes Income tax expense was $64.3 million for the three-month period ended June 30, 2004, compared with $2.2 million for the same period in 2003. The increase in the income tax expense is mainly attributable attributable emanating from or pertaining to attribute. attributable proportion see attributable risk (below). attributable risk to the valuation allowance of $56.0 million recorded against the future income tax assets of our continuing Canadian operations. This valuation allowance was taken as a result of the Company's assessment that the future income tax assets are no longer "more likely than not" realizable given the uncertainty surrounding its ability to generate sufficient taxable income as a result of the termination on May 31, 2004 of the tax loss monetization arrangement between BCE Emergis and Bell Canada. Also contributing to the increase in income tax expense is a higher net income before tax for the three-month period ended June 30, 2004, compared to the same period in 2003. For the six-month period ended on June 30, 2004, the income tax expense was $72.6 million compared with $3.8 million for the same period in 2003. The increase in income tax expense was mainly due to the reasons indicated above. Discontinued operations and assets held for sale Three months ended June 30, 2004 compared with the three months ended June 30, 2003 Revenue for the three months ended June 30, 2004 from discontinued operations decreased by $40.1 million, to $9.3 million from $49.4 million in the same period last year. The $40.1 million decrease resulted mainly from the sale of the U.S. Health operations in the first quarter of 2004. EBITDA decreased by $15.3 million to $2.0 million this quarter from $17.3 million for the same period last year due to the non-contribution of the U.S. Health business in the current quarter. Completion of the sale of our eSecurity operations generated a net gain on assets held for sale of $15.4 million. This sale price is subject to a subsequent adjustment. As a result of this gain, net income for the eSecurity operations totalled $11.0 million for 2004 compared to $1.3 million in 2003. With respect to the sale of the PPO component of our U.S. Health operations, we are in the process of finalizing sale price adjustments, which will be completed in the third quarter. As at June 30, 2004, we estimated a downward adjustment of $3.1 million. We also incurred $3.4 million of additional disposal costs in the second quarter following the closing of the sale. For the webdoxs operations, the net loss totalled $1.4 million in 2004, compared to a loss of $2.8 million in 2003. The sale of webdoxs will be recorded in the third quarter of 2004. Six months ended June 30, 2004 compared with the six months ended June 30, 2003 Revenue from the first six months ending June 30, 2004, from the discontinued operations decreased by $58.8 million to $42.9 million from $101.7 million for the same period last year, due mainly to the closing of the sale of U.S. Health representing only two months of operations in 2004, which also impacted the EBITDA contribution in 2004. The EBITDA contribution decreased by $24.6 million to $9.5 million compared to $34.1 million for the same period last year. For the first six-month period of 2004, the loss on the sale of the U.S. Health operations amounted to $(4.8) million, while the sale of eSecurity generated a $15.4 million gain. Net income from our discontinued operations totalled $9.7 million in 2004 compared to $23.0 million in 2003 as a result of the preceding elements. Net income (Loss) Net loss for the three months ended June 30, 2004, was $37.2 million ($(0.36) per share), a decrease of $43.1 million compared with net income of $5.9 million ($0.06 per share) in the second quarter of 2003. The decrease was due to a $62.1 million increase in income taxes which was mitigated by a $17.3 million increase in EBITDA before $2.4 million of restructuring and other charges; reduction in amortization of intangible assets totalling $1.0 million; a $1.1 million decrease in interest income; a gain on sale of assets of $11.6 million; a decrease of $0.7 million in loss on foreign exchange and other; and, a $8.4 million decrease in earnings' contribution from discontinued operations. Net loss for the six months ended June 30, 2004, was $37.3 million ($(0.36) per share), a decrease of $48.0 million compared with net income of $10.7 million ($0.10 per share) in the first six months of 2003. The decrease was due to a $68.8 million increase in income taxes which was mitigated by a $16.0 million increase in EBITDA before a net reversal of $3.9 million in restructuring and other charges; reductions in depreciation expense and amortization of intangible assets totalling $3.5 million; a $0.4 million increase in interest income; a gain on sale of assets of $12.1 million; an increase of $2.8 million in loss on foreign exchange; and, a $13.3 million decrease in earnings' contribution from discontinued operations. Liquidity and capital resources As of June 30, 2004, cash and temporary investments were $242.4 million, an increase of $113.8 million over December 31, 2003. Working capital was $159.8 million, a decrease of $91.2 million compared to December 31, 2003, mainly as a result of the $150.0 million special distribution and the net proceeds of $45.0 million for the sale of our eSecurity operations, the intellectual property related to the Bell legacy contract.
Three months Six months
ended June 30 ended June 30
($ millions) 2004 2003 2004 2003
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Cash flows used for
operating activities (16.2) (8.4) (30.3) (13.4)
Cash flows from (used for)
investing activities 33.3 (1.2) 290.3 (4.0)
Cash flows used for
financing activities (157.7) (5.7) (161.8) (11.1)
Other 7.6 (1.4) 4.1 (3.3)
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Increase (decrease) in
continuing cash position (133.0) (16.7) 102.3 (31.8)
Cash flow from
discontinued operations - 12.7 2.7 27.7
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Increase (decrease) in
cash position (133.0) (4.0) 105.0 (4.1)
Three months ended June 30, 2004 compared to the three months ended June 30, 2003 Compared to the corresponding period last year, cash flows used for operating activities increased by $7.8 million mainly due to the payment of a portion of our payables to BCE Inc. and its subsidiaries in the second quarter of 2004 following the sale of our eSecurity operations and the termination of the Bell legacy contract and the decrease of the deferred revenue, partly offset by the increase of EBITDA generated this quarter. Cash flows from investing activities were $33.3 million due to the receipt of net proceeds from the sale of our eSecurity operations, the intellectual property related to the Bell legacy contract and the adjustment to the sale price for U.S. health totalling $34.8 million. Other items effecting cash flows from investing activities include, $1.7 million in addition to capital assets and $0.2 million of cash from acquired businesses. . During the corresponding quarter last year, $1.2 million were used for investing activities related to additions to capital assets. Cash flows used for financing activities were $157.7 million compared to $5.7 million for the corresponding quarter of 2003. The $152.0 million increase was mainly due to the $150.0 million special distribution to our shareholders paid on June 30, 2004, a repayment of long-term debt of $8.2 million less $0.5 million received from the issuance of common shares during the second quarter of 2004. In the second quarter of 2003, we used $5.7 million for the repayment of long-term debt. The foreign exchange gain on cash held in foreign currencies increased our cash position by $7.6 million compared to a loss on foreign exchange of $1.4 million for the same period last year. The increase was due to the strengthening of the US dollar during the second quarter. Six months ended June 30, 2004 compared to the six months ended June 30, 2003 Compared to the corresponding period last year, cash flows used for operating activities increased by $16.9 million mainly due to the payment of a portion of our payables to related parties in the first six months of 2004 and the decrease of the deferred revenue, partly offset by the increase of EBITDA generated in the second quarter of 2004. Cash flows from investing activities were $290.3 million due to the receipt of proceeds from the sale of our U.S. Health operations, eSecurity operations and the intellectual property related to the Bell legacy contract totalling $320.2 million, net of $22.0 million disbursed for the acquisitions of WARE Solutions, Tri-Comp Systems Ltd. and Gestion InfoPharm Inc., and additions to capital assets in the amount of $8.2 million related to our services. During the corresponding period last year, $4.0 million were used for investing activities related to additions to capital assets. Cash flows used for financing activities were $161.8 million compared to $11.1 million for the corresponding quarter of 2003. The $150.7 million increase was mainly due to the $150.0 million special distribution to our shareholders and the remaining amount for the repayment of debt. In the first six months of 2003, we used $11.1 million for the repayment of long-term debt. The foreign exchange gain on cash held in foreign currencies increased our cash position by $4.1 million compared to a loss of $3.3 million for the same period last year. Financial instruments As at June 30, 2004, we held currency forward contracts totalling US$200.0 million, of which US$25.0 million will terminate on October 29, 2004 and US$175.0 million which was extended until July 30 2004. We disbursed a total of $2.9 million as a result of the rate differential due to several contract renewals. This amount, which will be recuperated on July 30, 2004, was booked in the second quarter as a foreign currency translation adjustment. Respectively, these contracts will convert U.S. dollars into Canadian dollars at the rate of C$1.34634 and C$1.3212. As at June 30, 2004, the principal amounts to be received under these contracts were approximately $264.0 million. The carrying value of all of our financial instruments approximates their fair value other than the financial instrument related to the options held by our former U.S. Health subsidiary in a public company which are carried at a cost of approximately $10.0 million and for which the fair value currently is non-determinable. Off-balance sheet arrangements The tax loss monetization arrangement with Bell Canada was unwound un·wound v. Past tense and past participle of unwind. unwound unwind on May 31, 2004. In connection with the unwinding of this arrangement, a wholly owned subsidiary repurchased the $1 billion preferred shares issued to Bell Canada in exchange for the $1 billion loan receivable from BCE Emergis (the "BCE Emergis loan"). Immediately thereafter, the $1 billion subordinated demand loan advanced to Bell Canada in 2003 and the BCE Emergis loan were paid in full by way of set-off A demand made by the defendant against the plaintiff that is based on some transaction or occurrence other than the one that gave the plaintiff grounds to sue. The set-off is available to defendants in civil lawsuits. . On June 30, 2004, we borrowed $150.0 million through the issuance of bankers' acceptances to fund the special cash distribution. The Bankers' acceptances carry a rate of interest of 2.55% and mature on July 30, 2004. It is expected that the loan will be 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. until August 30, 2004 at which time sufficient cash currently invested in a foreign subsidiary will become available to repay Banker's acceptances Banker's Acceptance A short-term credit investment created by a non-financial firm and guaranteed by a bank. Notes: Acceptances are traded at a discount from face value on the secondary market. . We have the legal right to offset the Bankers' acceptances against our cash balances and intend to exercise that right. For reporting purposes we have offset the Bankers' acceptances against our cash and cash equivalents. Related party transactions As at June 30, 2004, the balance sheets in our Interim consolidated financial statements do not include any balances due by or from related parties, since as of June 16, 2004 BCE Emergis was no longer subject to control by BCE Inc. As at December 31, 2003, the balance sheet included related parties line items as follow: accounts receivable accounts receivable n. the amounts of money due or owed to a business or professional by customers or clients. Generally, accounts receivable refers to the total amount due and is considered in calculating the value of a business or the business' problems in paying of $10.1 million; other current assets of $16.0 million; accounts payable and accrued liabilities of $58.5 million; and $5.0 million in deferred revenue. Outstanding shares As at July 19, 2004, we had 103,354,293 outstanding common shares. FUTURE ACCOUNTING CHANGE The CICA recently issued revisions to Section 3860 of the CICA Handbook, Financial instruments - Disclosure and presentation. The Section now clarifies the accounting for certain financial instruments that have liability and equity characteristics. It requires instruments that meet specific criteria to be classified as liabilities on the balance sheet. Many of these financial instruments were previously classified as equity. These revisions will come into effect January 1, 2005. Management is currently evaluating the impact of these revisions on the Consolidated financial statements. OUTLOOK We generated positive EBITDA and a significant net loss in the first six months of 2004. The net loss of $37.2 million resulted mainly from a one-time write-down of future income tax assets of $56.0 million due to the termination of the tax loss monetization arrangement with Bell Canada following the change of control, whereas our EBITDA of $17.5 million was favourably Adv. 1. favourably - showing approval; "he reviewed the play favorably" favorably favourably U.S. favorably adverb 1. impacted by the one-time contract settlements. For the balance of the year, our overall revenue will be affected by the termination of the Bell legacy contract, which generated $17.6 million in the second quarter of 2004. Our EBITDA on a sequential basis will also be impacted by the termination of the Bell legacy contract but we expect growth in EBITDA from core operations compared to 2003. In addition, EBITDA for the second half of 2004 is not expected to benefit from contract settlements. As mentioned elsewhere, the Company expects to take restructuring and other charges of some $3.9 million which are expected to bring EBITDA at, or marginally mar·gin·al adj. 1. Of, relating to, located at, or constituting a margin, a border, or an edge: the marginal strip of beach; a marginal issue that had no bearing on the election results. 2. above, breakeven breakeven 1. The level of output or sales necessary to cover fixed expenses. Companies in industries that have high fixed costs and, consequently, high breakevens, such as automobile and steel manufacturing, are likely to exhibit large fluctuations . We will continue to pursue our objectives of operational excellence and execution, cost control, core revenue growth and our on-going review of our services, - all of which should help to strengthen our position in our markets. In addition, we will continue to pursue acquisitions in eHealth and eFinance in order to increase our market share and presence and to leverage our technology platforms. We expect to continue financing our capital expenditures and discharging our liabilities through funds on hand, internally generated funds and available credit facilities credit facilities npl → facilidades fpl de crédito credit facilities npl → facilités fpl de paiement credit facilities . |
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