BCI Announces Third Quarter 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. -- BCI BCI Bat Conservation International BCI Brain-Computer Interface BCI Business Continuity Institute BCI Business Cycle Indicators BCI Banco de Credito e Inversiones (Chilean bank) BCI Bell Canada International (NEX NEX abbr. Navy exchange BOARD:BI.H) - As a result of the adoption on July July: see month. 17, 2002 of BCI's Plan of Arrangement, BCI's unaudited interim consolidated financial statements Consolidated Financial Statements The combined financial statements of a parent company and its subsidiaries. Notes: Because consolidated financial statements present an aggregated look at the financial position of a parent and its subsidiaries, they enable you to gauge for the third quarter of 2005 reflect only the activities of BCI as a holding company. Such unaudited interim consolidated financial statements are attached hereto here·to adv. To this document, matter, or proposition. hereto Adverb Formal or law to this place, matter, or document Adv. 1. and readers are encouraged to refer to them for additional details. Third Quarter Results Net loss for the third quarter of 2005 was $24.1 million, as a result of income tax expense of $24.0 million recorded in connection with the Corporation's tax loss monetization Monetization The securitization of the gross revenues of a contract. plan (the "Loss Monetization Plan"). Pursuant to the Loss Monetization Plan, the Corporation expects to receive a compensatory cash payment from BCE BCE abbr. 1. Bachelor of Chemical Engineering 2. Bachelor of Civil Engineering BCE Abbreviation for before the Common Era. Inc. ("BCE") in the first quarter of 2007 of $62.475 million. This amount had previously been recorded as an income tax recovery on the Corporation's consolidated statement of operations See Income statement. as well as a future income asset on the consolidated balance sheet 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. . The full amount of the future income tax asset has now been realized in the consolidated financial statements as the related income tax expense has been fully incurred. When the cash is received from BCE, it will be recorded as a contribution of capital. During the third quarter, the Corporation recorded administrative expenses totaling $1.5 million comprised of employee and office costs of $0.6 million; legal, tax and auditor auditor n. an accountant who conducts an audit to verify the accuracy of the financial records and accounting practices of a business or government. A proper audit will point out deficiencies in accounting and other financial operations. fees of $0.2 million; and other administrative expenses of $0.7 million. Other administrative expenses of $0.7 million includes the net cost of $0.6 million associated with lawsuits dismissed by the Ontario Superior Court of Justice The Superior Court of Justice for Ontario, Canada is the successor to the former Ontario Court of Justice (General Division), and was created on April 19 1999. Its predecessor, the Ontario Court (General Division) was the result of the 1990 merger and discontinuance of the previous (the "Court") during the third quarter of 2005, partially offset by an insurance recovery of $0.3 million received during the third quarter of 2005 in connection with a lawsuit lawsuit: see procedure; tort. by certain former common shareholders that was dismissed by the Supreme Court of Canada The Supreme Court of Canada (French: Cour suprême du Canada) is the highest court of Canada and is the final court of appeal in the Canadian justice system.[1] in March 2005. Net interest income of $1.2 million was recorded in the quarter. BCI's shareholders' equity Shareholders' Equity A firms' total assets minus its total liabilities. Equivalently, it is share capital plus retained earnings minus treasury shares. Shareholders' equity is the amount by which a company is financed through common and preferred shares. decreased by $24.1 million in the quarter to reach $215.4 million at September September: see month. 30, 2005. BCI's cash and cash equivalents together with temporary investments and interest receivable thereon there·on adv. 1. On or upon this, that, or it. 2. Archaic Following that immediately; thereupon. Adv. 1. thereon - on that; "text and commentary thereon" on it, on that as at September 30, 2005 were $223.7 million, substantially the same as at June June: see month. 30, 2005. Administrative expenses were approximately equal to interest income and foreign exchange gains and other income recorded in the quarter. 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. were $15.0 million at the end of the third quarter of 2005, down $0.2 million from June 30, 2005 mainly as a result of the payment of certain accrued expenses Accrued Expense An accounting expense recognized in the books before it is paid for. It is a liability, usually current. These expenses are typically periodic and documented upon a company's balance sheet due to the high probability of collection. in the third quarter of 2005. Litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. Update On September 6, 2005, the Ontario Superior Court of Justice dismissed two actions that had been brought against the Corporation by former holders of 6.75% and 6.50% convertible 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. subordinated debentures subordinated debenture An unsecured bond with a claim to assets that is subordinate to all existing and future debt. Thus, in the event that the issuer encounters financial difficulties and must be liquidated, all other claims must be satisfied before (the "Debenture debenture (dəbĕn`chər), document acknowledging indebtedness. In Great Britain a debenture is practically the same as a bond, and debenture stock is similar to preferred stock. Actions"). No appeal of these actions is available to the plaintiffs and they are effectively dismissed. On September 23, 2005, the Quebec Superior Court Quebec Superior Court is the highest trial Court in the Province of Quebec, Canada. It consists of 144 judges who are appointed by the federal government following the recommendation of the Premier of Quebec. rendered its decision in a lawsuit filed by a former employee of the Corporation and awarded the employee an amount of approximately $44 thousand. An estimated amount of the Corporation's exposure to this claim had previously been expensed. On October October: see month. 21, 2005, the plaintiff in this action filed an appeal with the Quebec Court of Appeal The Court of Appeal of Quebec (in French: la Cour d'appel du Québec) is the highest judicial court in Quebec, Canada. It hears cases in Quebec City and Montreal. The quorum of the Court of Appeal of Quebec is three judges. seeking to have the amount awarded to him increased by an amount that the Corporation estimates to be less than $500 thousand, calculated on a present value basis.In a cross appeal which the Corporation intends to file in early November November: see month. 2005, BCI will seek to have the original damage assessment of approximately $44 thousand reversed and will also contest the plaintiff's argument that the amount originally awarded should be further increased.A decision in this matter is expected no sooner than the second quarter of 2007. Plan of Arrangement and Shareholder Distribution Update Following the dismissal of the Debenture Actions, the Corporation expects to be in a position to make an initial distribution to shareholders during the second quarter of 2006, pending receipt of tax clearance certificates and subject to completion of the Claims Procedure described below. The Corporation is not currently in a position to estimate the amount of the initial distribution. In connection with preparations for an initial distribution, on October 18, 2005 the Court approved a Claims Procedure for BCI. The Claims Procedure establishes a process by which all claims against BCI will be identified within a specified period. This is the second Claims Procedure for the Corporation (the first procedure occurred during 2003) and, except as provided in the Claims Procedure, will only cover claims arising between June 1, 2003 and October 18, 2005. The claims identification period will continue until November 30, 2005, during which time any person believing they have a claim against BCI that arose between June 1, 2003 and October 18, 2005 must submit the appropriate forms or be forever barred from making such claims in the future against BCI. Following the period for the identification of claims, the Claims Procedure specifies a process for the determination and resolution of identified claims. This process will be administered by Ernst & Young Inc., the Monitor under BCI's Plan of Arrangement, and, in the event of a disputed claim, may also require the intervention A procedure used in a lawsuit by which the court allows a third person who was not originally a party to the suit to become a party, by joining with either the plaintiff or the defendant. of the Court. In the event the intervention of the Court is required, delays for completion of the Claims Procedure could be longer than currently expected. Complete information relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc the Claims Procedure is provided in the October 18, 2005 Court order, which is available on our website at www.bci.ca. Estimated Future Net Assets Net assets The difference between total assets on the one hand and current liabilities and noncapitalized long-term liabilities on the other hand. net assets See owners' equity. Estimated future net assets of BCI at June 30, 2007 (the earliest date by which the Corporation believes it can make a final distribution to shareholders) are $279.3 million ($6.98 per share), prior to any shareholder distribution. The difference between shareholders' equity on the consolidated balance sheet at September 30, 2005 and the estimated future net assets at June 30, 2007 is the inclusion in estimated future net assets of the realized amount of the benefit expected to be received pursuant to the Monetization Plan of $62.5 million, the expected gain The expected gain (or expected return) is the weighted-average most likely outcome in gambling, probability theory, economics or finance. Discrete scenarios In gambling and probability theory, there is usually a discrete set of possible outcomes. on the Canbras investment of $5 million, partially offset by the deduction deduction, in logic, form of inference such that the conclusion must be true if the premises are true. For example, if we know that all men have two legs and that John is a man, it is then logical to deduce that John has two legs. of estimated future net costs from October 1, 2005 to June 30, 2007. The future net costs estimated at approximately $3.6 million are comprised of administrative expenses of approximately $12.3 million partially offset by interest income of approximately $8.7 million. The expected gain on the Canbras investment of approximately $5 million represents the excess over current 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. that BCI expects to receive on its investment in Canbras. The future net costs exclude amounts that may be required to settle material contingencies Contingencies (ISSN 1048-9851) is the bimonthly magazine of the American Academy of Actuaries, providing a large and diverse readership with general interest and technical articles on a wide range of issues related to the actuarial profession. . To the extent BCI remains in operation beyond June 30, 2007, interest income thereafter may not be sufficient to cover 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. estimated at approximately $1.5 million per quarter. The extent of 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. would be dependent on a number of factors, including the level of interest rates and BCI's cash balances at the time. The currently estimated future net assets of BCI at June 30, 2007 of $279.3 million have not changed from the estimate of future net assets prepared on July 29, 2005, in connection with BCI's second quarter 2005 results. BCI is operating under a court supervised su·per·vise tr.v. su·per·vised, su·per·vis·ing, su·per·vis·es To have the charge and direction of; superintend. [Middle English *supervisen, from Medieval Latin Plan of Arrangement, pursuant to which BCI intends to monetize Monetize 1. To convert into money. 2. To convert from securities into currency that can be used to purchase goods and services. Notes: For example, you'll often hear Internet marketers talk about "monetizing website visitors. its assets in an orderly orderly /or·der·ly/ (or´der-le) an attendant in a hospital who works under the direction of a nurse. or·der·ly n. An attendant in a hospital. fashion and resolve outstanding claims against it in an expeditious ex·pe·di·tious adj. Acting or done with speed and efficiency. See Synonyms at fast1. ex manner with the ultimate objective of distributing the net proceeds Net Proceeds The amount received after all costs are deducted from the sale of a piece of property or security. Notes: In the case of an investor selling a security, net proceeds represent the proceeds from the sale minus any trading costs (i.e. commissions). to its shareholders and dissolving dis·solve v. dis·solved, dis·solv·ing, dis·solves v.tr. 1. To cause to pass into solution: dissolve salt in water. 2. the company. BCI is listed on the NEX Exchange under the symbol BI.H. Visit our Web site at www.bci.ca. Certain statements made in this press release describing BCI's intentions, expectations or predictions 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 and uncertainties. The results or events predicted in these statements may differ materially from actual results or events. For additional information with respect to risk factors relevant to BCI, see the 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 included in BCI's Interim Report for the Second Quarter of 2005. BCI disclaims any intention or obligation to update or revise any 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. , whether as a result of new information, future events or otherwise.
Bell Canada International Inc.
Consolidated Balance Sheets
(In thousands of Canadian dollars)
Unaudited
As at As at
September December 31,
2005 2004
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Current assets
Cash and cash equivalents $10,862 $1,047
Temporary investments (Note 3) 211,955 220,561
Interest receivable on cash
equivalents and temporary investments 852 2,380
Investment in Canbras (Note 4) 6,257 6,257
Prepaid expenses and other
current assets 482 1,082
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230,408 231,327
Future income tax assets (Note 6) - 62,000
$230,408 $293,327
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Current liabilities
Accounts payable and accrued liabilities $15,025 $15,895
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Contingencies (Note 7)
Shareholder's equity
Stated capital (Note 5) 10,000 10,000
Contributed surplus 1,941,560 1,941,560
Deficit (1,736,177) (1,674,128)
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215,383 277,432
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$230,408 $293,327
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Bell Canada International Inc.
Consolidated Statements of Operations (Unaudited)
(In thousands of Canadian dollars except per share amounts)
Three Months Nine Months
ended ended
September 30 September 30
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---------------------------------------------------------------------
2005 2004 2005 2004
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Interest on
long-term debt $- $(4,537) $- $(13,780)
Employee and
office costs (608) (733) (1,849) (2,633)
Legal, tax and
auditor fees (196) (781) (733) (1,954)
Other administrative
expenses (692) (268) (1,206) (982)
Interest income,
net (Note 6) 1,199 1,996 3,612 6,432
Gain on disposal of
investment (Note 4) - 2,644 - 2,644
Other income (losses) 164 (32) 127 (79)
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Net (loss) earnings
before income taxes (133) (1,711) (49) (10,352)
Income tax provision
(Note 6) (23,990) - (62,000) -
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Net loss $(24,123) (1,711) $(62,049) $(10,352)
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Net loss
applicable to
common shares
- basic and
diluted $(24,123) $(1,711) $(62,049) $(10,352)
Net loss per common
share - basic and
diluted (Note 5) $(0.60) $(0.04) $(1.55) $(0.26)
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Bell Canada International Inc.
Consolidated Statements of Deficit (Unaudited)
(In thousands of Canadian dollars)
Three Months Nine Months
ended ended
September 30 September 30
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2005 2004 2005 2004
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Deficit,
beginning
of period $(1,712,054) $(1,734,550) $(1,674,128) $(1,725,909)
Net loss (24,123) (1,711) (62,049) (10,352)
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Deficit, end
of period $(1,736,177) $(1,736,261) $(1,736,177) $(1,736,261)
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Bell Canada International Inc.
Consolidated Statements of Cash Flows (Unaudited)
(In thousands of Canadian dollars)
Three Months ended Nine Months ended
September 30, September 30,
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2005 2004 2005 2004
Operations
Net loss $(24,123) $(1,711) $(62,049) $(10,352)
Items not
affecting cash 23,990
Future income tax - - 62,000 -
(Gain) on
investments - (2,644) - (2,644)
Foreign exchange
(gains) losses (23) (1) (5) 20
Amortization of
deferred financing
costs - 223 - 683
Amortization of
premium on temporary
investments - - - 35
Changes in working
capital items (350) (5,186) 1,233 (565)
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-
Cash (used in)
provided by
operations (506) (9,319) 1,179 (12,823)
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-
Investing activities -
(Increase) decrease
in temporary
investments (143,338) (134,907) 8,606 164,728
Proceeds from
Axtel Disposition - 2,644 - 2,644
Initial distribution
from Canbras - 8,743 - 8,743
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Cash (used in)
provided by
investing
activities (143,338) (123,520) 8,606 176,115
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Financing Activities
Repayment of
long-term debt - (160,000) - (160,000)
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Cash used in
financing
activities - (160,000) - (160,000)
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Foreign exchange
(gain) loss on
cash held
inforeign
currencies 35 (59) 30 (5)
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Net (decrease)
increase
in cash and cash
equivalents (143,809) (292,898) 9,815 3,287
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Cash and cash
equivalents,
beginning of
period 154,671 297,593 1,047 1,408
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Cash and cash
equivalents,
end of period $10,862 $4,695 $10,862 $4,695
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See Note 8 for supplementary cash flow information
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 International Inc. Notes to the Consolidated Financial Statements (unaudited) (all tabular tab·u·lar adj. 1. Having a plane surface; flat. 2. Organized as a table or list. 3. Calculated by means of a table. tabular resembling a table. amounts are in thousands 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 , unless otherwise noted and except per share amount) 1. Description of business and basis of presentation The unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements for the year ended December December: see month. 31, 2004 as set out in Bell Canada International Inc.'s ("BCI" or the "Corporation") 2004 Annual Report, 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 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 in Canada ("GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). "). 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. terms used herein, and not otherwise defined, have the meanings defined in the 2004 Annual Report. Bell Canada International Inc. is operating under a Plan of Arrangement (the "Plan of Arrangement") approved by the Ontario Superior Court of Justice (the "Court"), pursuant to which BCI intends to monetize its assets in an orderly fashion and resolve outstanding claims against it in an expeditious manner with the ultimate objective of distributing the net proceeds to its shareholders and dissolving the Corporation. Accordingly, these financial statements have been prepared on a basis which in the opinion of management provides useful and relevant information to users of BCI's financial statements. The consolidated balance sheet at September 30, 2005 reflects BCI's 75.6% interest in Canbras Communications Corp. ("Canbras") as an investment recorded at the lower of carrying value and net realizable value Net realizable value (NRV) is a commonly used method of evaluating an asset's worth in the field of inventory accounting. NRV is part of GAAP rules that apply to valuing inventory, so as to not overstate or understate the value of inventory goods. . BCI's 49.9% interest in Genesis Telecom S.A. ("Genesis") which was previously written off, was disposed dis·pose v. dis·posed, dis·pos·ing, dis·pos·es v.tr. 1. To place or set in a particular order; arrange. 2. of on July 7, 2005 for a nominal amount. Since July 1, 2002, the consolidated statements of earnings and cash flows have reflected only the activities of BCI as a holding company. 2. Summary of significant accounting policies In the opinion of the management of BCI, the unaudited interim consolidated financial statements have been prepared on a basis consistent with the annual audited consolidated financial statements. The unaudited interim consolidated financial statements contain all adjustments necessary for a fair presentation of the financial position as at September 30, 2005 and the results of operations and cash flows for the three and nine months ended September 30, 2005 and 2004, respectively. Cash and Cash Equivalents Cash and cash equivalents represent cash and highly-liquid short-term debt Short-term debt Debt obligations, recorded as current liabilities, requiring payment within the year. investments with an initial maturity of three months or less at the date of acquisition. Temporary Investments Temporary investments consist of debt investments with an initial maturity greater than three months but less than twelve months at the date of acquisition which the Corporation intends to hold to maturity. Temporary investments are carried at cost with discounts or premiums arising on purchase amortized to maturity. Use of Estimates The preparation of financial statements in conformity with 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. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities and expenses and the disclosure of contingent assets Contingent Asset An asset in which the possibility of ownership depends solely upon future events uncontrollable by the company. Notes: An example might be a settlement from a lawsuit. See also: Asset, Balance Sheet, Contingent Liability, Liability and liabilities. Actual results could differ from those estimates. The significant estimates made are for the net realizable value of the Corporation's investment in Canbras, the future income tax assets and provisions for claims. Financial Instruments Effective January 1, 2005, the Corporation adopted the 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. Section 3860 "Financial Instruments - Disclosure and Presentation" of 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. . The amended standards change 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. Some of these financial instruments were previously classified as equities. Because BCI does not have any instruments with these characteristics, adopting this section on January 1, 2005 did not affect the unaudited interim consolidated financial statements of the Corporation. For a complete description of the Corporation's significant accounting policies, refer to BCI's financial statements for the year ended December 31, 2004. 3. Temporary investments As at September 30, 2005, the Corporation held investment grade commercial paper in the amount of $211,955,000. The commercial paper matures at varying dates to February 1, 2006. The effective yields on the commercial paper range from 2.41% to 2.89%. At September 30, 2005 the estimated fair value of the commercial paper amounted to $212,807,000. 4. Investment The Corporation's 75.6% economic interest in Canbras is recorded at the lower of carrying value of $6.3 million and estimated net realizable value of $11.3 million (as detailed below). On October 8, 2003, Canbras announced that it had entered into agreements to sell all its operations which sale was completed on December 24, 2003, (the "Canbras Sale"). Canbras received gross proceeds of $32,600,000, comprised of $22,168,000 in cash and a one-year 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. (the "Note") bearing interest at 10% in the original principal amount of $10,432,000 and subject to reduction in the event 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 obligations of Canbras arose under the terms of the sale transaction. On December 21, 2004, Canbras provided details of claims made against it under the Canbras Sale amounting to R$58 million (C$30 million).Canbras' potential exposure to such claims was limited to the amount of the Note together with accrued interest Accrued Interest The interest that has accumulated on a bond since the last interest payment up to but not including the settlement date. There are two methods for calculating accrued interest: 1) 360-day year method, used for corporate and municipal bonds. thereon. Canbras believed that less than R$2 million (C$1 million) of the total amount claimed of R$58 million were potentially subject to indemnification under the Canbras Sale. On July 21, 2005, Canbras announced that it had accepted a payment of $9,500,000 in full settlement of the Note and received a release from all present and future indemnification claims in connection with the Canbras Sale. On October 26, 2005, Canbras released its third quarter 2005 financial results and disclosed that it now believes it will distribute an aggregate amount of $15.4 million to its shareholders in one or more instalments and be in a position to make a final distribution no earlier than June 30, 2007. On this basis, BCI expects to realize approximately $11.3 million from its interest in Canbras.
5. Stated capital
a) Common shares as at September 30, 2005
Number of Stated
Shares Capital
---------------------------------------------------------------------
Balance, December 31, 2004 40,000,000 $ 10,000
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Balance, September 30, 2005
40,000,000 $ 10,000
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b) Stock Options
At September 30, 2005, 5,169 stock options were outstanding and
exercisable. The stock options are exercisable on a one-for-one basis
for common shares of the Corporation. The total stock options
outstanding have exercise prices ranging from $2,213 to $5,037 per
share over a remaining contract life of between 1 to 5 years. There
have been no options granted by the Corporation since July 25,
2000.
c) Earnings (Loss) Per Share
Tree months Nine months
ended ended
September 30, September 30,
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2005 2004 2005 2004
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Numerator:
Net loss applicable
to common shares
- basic and
diluted $(24,123) $ (1,711) $(62,049) $10,352)
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Denominator
(in thousands):
Weighted-average
number of shares
- basic and diluted 40,000 40,000 40,000 40,000
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Basic and diluted
loss per share $(0.60) $(0.04) $(1.55) $(0.26)
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The Corporation excluded potential common share equivalents from the
computation of diluted loss per share computed above, as they were
anti-dilutive.
6. Income taxes At December 31, 2004, the Corporation had for Canadian purposes non-capital tax losses carried forward amounting to approximately $440,722,000, expiring ex·pire v. ex·pired, ex·pir·ing, ex·pires v.intr. 1. To come to an end; terminate: My membership in the club has expired. 2. at various dates to the year 2014. In addition, the Corporation had Canadian capital Noun 1. Canadian capital - the capital of Canada (located in southeastern Ontario across the Ottawa river from Quebec) capital of Canada, Ottawa Ontario - a prosperous and industrialized province in central Canada losses amounting to approximately $279,782,000 that can be carried forward indefinitely in·def·i·nite adj. Not definite, especially: a. Unclear; vague. b. Lacking precise limits: an indefinite leave of absence. c. . On August 4, 2004, the Corporation announced that it had entered into an agreement to monetize a portion of its non-capital tax losses (the "Loss Monetization Plan"). As further announced on March 21, 2005, the Loss Monetization Plan was expected to result in a compensatory cash payment to BCI of approximately $62,000,000, and this amount was recorded as a future income tax asset in the Corporation's financial statements for 2004. The Loss Monetization Plan, which is the subject of an advance income tax ruling received from the Canada Revenue Agency The Canada Revenue Agency (CRA) administers:
In connection with the Loss Monetization Plan, BCI had requested that the CRA audit BCI's income tax returns for years up to December 31, 2004 for the purpose of making a final determination of BCI's losses. While the Corporation's income tax returns were filed using tax positions that were believed at the time to be appropriate, following the completion of the CRA audit, the Loss Monetization Plan was implemented on April 15, 2005 based on the monetization of $297,500,000 of losses and a compensatory payment of $62,475,000. Accordingly, in the second quarter of 2005, an additional amount of income tax recovery of $475,000 was recorded. To effect the implementation, the Corporation entered into agreements with BCE and Bell Canada pursuant to which a wholly-owned subsidiary of BCI ("BCI Subco") 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. (the "BCI Subco Preferred Shares") to a wholly-owned subsidiary of Bell Canada ("Bell Subco") in exchange for cash of $17 billion. BCI Subco then lent $17 billion to BCI on the basis of an interest free note from BCI (the "BCI Note") and BCI lent $17 billion to Bell Subco on the basis of a subordinated note from Bell Subco (the "Bell Subco Note"). All of the foregoing transactions occurred on April 15, 2005. The BCI Subco Preferred Shares were non-participating, non-voting, 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 and paid dividends at a per annum Per annum Yearly. rate of 5.12%. The Bell Subco Note bore interest at a rate of 5.11% per annum, was unsecured and was payable on demand and could be repaid at anytime. The BCI Subco Preferred Shares could be repaid by delivering to Bell Subco the BCI Note. Furthermore, the Bell Subco Note could be redeemed re·deem tr.v. re·deemed, re·deem·ing, re·deems 1. To recover ownership of by paying a specified sum. 2. To pay off (a promissory note, for example). 3. by delivering to BCI the BCI Note. On August 17, 2005, the parties availed themselves of these rights of set off such that the BCI Subco Preferred Shares, the BCI Note and the Bell Subco Note were retired on such date. The consolidated statements of operations for the third quarter reflect preferred dividends preferred dividend n. a payment of a corporation's profits to holders of preferred shares of stock. (See: preferred stock) on the BCI Subco Preferred Shares of $114,464,000 ($298,082,000 for the first nine months of 2005) and interest income on the Bell Subco Note of $114,240,000 ($297,500,000, for the first nine months of 2005) on a net basis (included in the interest income line). The Corporation recorded income tax expense of $23,990,000 in the third quarter of 2005 ($62,475,000 in the first nine months of 2005) based on the amount of interest income earned during the period. While discussions are ongoing with certain government officials and also with BCE that could result in an increase in the compensatory payment under the Loss Monetization Plan, it is unlikely that any such increase will occur. 7. Contingencies The Corporation has not accrued ac·crue v. ac·crued, ac·cru·ing, ac·crues v.intr. 1. To come to one as a gain, addition, or increment: interest accruing in my savings account. 2. any material amounts with respect to the following contingencies:
a) A former employee of a BCI subsidiary has filed a claim against
BCI and two of its affiliates totaling $5.5 million and alleging
failure to honour a promise of employment. BCI believes that
this claim is without merit and is vigorously defending its
position.
On September 23, 2005, the Quebec Superior Court rendered its
decision in a lawsuit filed by a former employee of BCI and
awarded the employee an amount of approximately $44 thousand.
An estimated amount of BCI's exposure to this claim had
previously been expensed. On October 21, 2005, the plaintiff
in this action filed an appeal with the Quebec Court of Appeal
seeking to have the amount awarded to him increased by an amount
that the Corporation estimates to be less than $500 thousand,
calculated on a present value basis. In a cross appeal which
the Corporation intends to file in early November 2005, BCI will
seek to have the original damage assessment of approximately
$44 thousand reversed and will also contest the plaintiff's
argument that the amount originally awarded should be further
increased. A decision in this matter is expected no sooner than
the second quarter of 2007.
b) Communicacion Celular S.A. - Comcel S.A. ("Comcel") is currently
involved in litigation before the Superintendent of Industry and
Commerce ("SIC") in Colombia wherein plaintiffs are claiming
damages of approximately US$70 million relating to the provision
by Comcel of long-distance services through voice-over internet
protocol ("VOIP") between December 1998 and September 1999.
During the fourth quarter of 2003, Comcel's attempt to have the
SIC's initial finding that it improperly provided services
appealed to a judicial tribunal was dismissed and the action has
returned to a damages determination phase before the SIC.
Comcel's Colombian counsel believes that the damage allegations
will be subject to defenses on the merits and that substantially
all of the claims lack a sufficient evidentiary basis.
BCI had agreed to indemnify Comcel and its affiliates for the
initial US$5 million of damages and for any damages Comcel may
suffer in excess of US$7.5 million. Comcel is responsible for
any damages incurred in excess of US$5 million and up to US$7.5
million. However, in connection with BCI's first claims
identification process which occured in 2003, Comcel did not
file a claim with BCI's court-appointed Monitor with respect to
the Comcel VOIP indemnity. As a result, pursuant to the order
of the Court approving the first claims identification process,
Comcel is now barred from asserting any claim against BCI in
connection with this lawsuit. However, BCI understands that
Comcel may dispute that its claim is so barred and there can
be no assurance that if the order of the Court were to be
appealed that such appeal would be denied.
The following two former contingencies were dismissed by the Court on
September 2, 2005, and as all related appeal periods have expired,
they are effectively dismissed. The related cost to BCI of
approximately $3.2 million, was charged to income in the period, net
of insurance proceeds of $2.6 million.
On April 29, 2002, BCI announced that a lawsuit had been filed
with the Court by certain former holders of BCI's $250 million
6.75% convertible unsecured subordinated debentures, (the "6.75%
Debenture Class Action"). The plaintiffs sought damages from
BCI, BCE and certain current and former members of BCI's Board
of Directors, for up to an amount of $250 million plus $5
million in costs in connection with the settlement, on February
15, 2002, of the debentures through the issuance of common
shares, in accordance with BCI's recapitalization plan completed
on February 15, 2002.
In August 2003, La Caisse de depot et placement du Quebec (CDP)
filed a proof of claim with the Monitor and a Notice of Action
in the Court in connection with CDP's former holdings of a
portion of BCI's 6.5% convertible unsecured subordinated
debentures (the "CDP Action"). CDP was seeking up to $110
million in damages, together with interest and costs, against
BCI, BCE and certain current and former members of BCI's board
of directors. The CDP Action contained allegations that were
substantially similar to those contained in the 6.75% Debenture
Class Action.
8. Supplementary cash flow information
Three months ended Nine months ended
September 30, September 30,
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2005 2004 2005 2004
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Interest paid $ - $ 8,800 $ - $ 17,600
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9. Comparative figures Certain comparative figures have been reclassified in order to conform with the presentation adopted in 2005. Bell Canada International Inc. (NEX BOARD:BI.H) |
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