Emergis Reports Fourth 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. -- 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 :EME n. 1. An uncle. ) - Q4 revenue at $45.6 M, up 6% from Q4 2003 core revenue - Q4 EBITDA excluding restructuring charges at $5.9 M, up 11% from Q4 2003 - New restructuring initiative undertaken in quarter positions Company for 2005 - Signed contracts with Desjardins Group, Fiserv Lending Solutions and MAXIMUS Canada Emergis Inc. (TSX:EME) today announced its unaudited financial results for the three-month period ended December December: see month. 31, 2004. Revenue for the quarter was $45.6 million compared to $68.0 million ($43.1 million excluding non-core revenue) in the fourth quarter of 2003.Non-core operations1 ceased as of June June: see month. 30, 2004. Excluding one-time one-time adj. 1. or one·time a. Occurring or undertaken only once: a one-time winner in 1995. b. items, 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 2 was $5.9 million compared to $5.3 million in the fourth quarter last year, and the 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 was $(4.9) million ($(0.05) per share) compared to a net loss of $(3.9) million ($(0.04) per share) in 2003. One-time items consisted of 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. totalling $21.4 million taken during the current quarter and charges of $38.2 million taken in the corresponding quarter of 2003.Reported total net loss for the quarter was reduced to $(22.9) million ($(0.22) per share) compared to $(113.7) million ($(1.10) per share) in 2003.Per-share data is on a 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. basis. "Our results for this quarter reflect continued growth 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 operations and improved results in eFinance," said Francois Cote, President 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 Emergis."The new streamlining initiative we undertook in November November: see month. responded to an anticipated decline in revenue in certain areas of eFinance in 2005, and should allow us to meet our EBITDA target for the year." "We met our revenue target for 2004, coming in near the midpoint mid·point n. 1. Mathematics The point of a line segment or curvilinear arc that divides it into two parts of the same length. 2. A position midway between two extremes. of the range," Cote added."In 2005, our focus is clearly on growing the business, both organically and through acquisitions, and on positioning the company to take advantage of market expansion in the eHealth area." 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 have been 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 has been included as a single line item above net income, and both revenue and EBITDA exclude their contribution. The contribution of discontinued operations to fourth quarter 2004 results was $3.4 million.
Revenue summary for the quarter
Three-month periods ended December 31, 2004, September 30, 2004 and
December 31, 2003, in millions of Canadian dollars:
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Q4 2004 Q3 2004 Q4 2003
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eFinance 25.6 29.5 28.0
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eHealth 20.0 18.8 15.1
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Total core revenue 45.6 48.3 43.1
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Non-core - - 24.9
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Total revenue 45.6 48.3 68.0
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- eFinance revenue decreased on a year-over-year basis and
sequentially mainly due to lower implementation fees relating to
the Company's eLending-U.S. platform, the expiry of certain
contracts for messaging and eInvoicing, and to lower professional
services fees associated with the Visa Commerce initiative. These
decreases were partly offset by transition service revenue
associated with the sale of eSecurity and webdoxs operations.
- eHealth revenue increased 32% on a year-over-year basis mainly due
to acquisitions in the pharmacy back-office area, and 6%
sequentially due to higher revenue in the claims processing area.
- Recurring revenue represented 87% of core revenue compared to 79%
in the fourth quarter of 2003 and 82% in the third quarter of 2004.
EBITDA summary for the quarter
Three-month periods ended December 31, 2004, September 30, 2004 and
December 31, 2003, in millions of Canadian dollars:
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Q4 2004 Q3 2004 Q4 2003
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eFinance 3.2 3.0 (3.1)
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eHealth 2.7 2.5 4.0
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Non-core - - 4.4
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Restructuring and other (21.4) (1.2) (38.2)
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Total EBITDA (15.5) 4.3 (32.9)
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- eFinance contributed $3.2 million to EBITDA in the quarter (13% of
eFinance revenue) compared to $3.0 million in the third quarter of
2004 and to an EBITDA loss of $(3.1) million in the fourth quarter
last year. The sequential quarterly and year-over-year
improvements reflect the Company's continued focus on improving the
profitability of eFinance.
- eHealth EBITDA was $2.7 million (14% of eHealth revenue) compared
to $2.5 million (13%) in the third quarter and $4.0 million (26%)
in the fourth quarter of 2003. The year-over-year decrease was due
to certain one-time items and to the absorption of additional
operations costs.
- During the first quarter of 2004, $6.3 million of a provision taken
in 2003 for restructuring and other charges was reversed due to the
postponement of certain restructuring activities beyond the end of
the first quarter. Of this amount, some $2.4 million of
restructuring and other charges were taken in the second quarter of
2004, $1.2 million in the third quarter and $2.7 million in the
current quarter. As a result, the total impact of the reversal and
the subsequent charges in 2004 is nil.
- As previously announced, Emergis also undertook in the fourth
quarter a new streamlining initiative in response to an anticipated
decline in revenue in certain areas of eFinance in 2005. The
initiative, which is reflected in an additional restructuring
charge of $18.7 million in the current quarter, should allow the
Company to meet its 2005 EBITDA target. The charge reflects mainly
a reduction in headcount and a rationalization of facilities.
Details are provided in the notes to the interim consolidated
financial statements.
Financial highlights for the twelve months
Twelve-month periods ended December 31, 2004 and 2003, in millions of
Canadian dollars:
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Revenue EBITDA
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12 months 12 months 12 months 12 months
2004 2003 2004 2003
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eFinance 108.0 118.4 10.2 (12.6)
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eHealth 70.9 56.9 9.9 8.5
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Total core 178.9 175.3 20.1 (4.1)
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Non-core 39.6 108.7 11.4 17.8
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Restructuring and
other - - (18.7) (38.2)
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Total 218.5 284.0 12.8 (24.5)
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- eFinance revenue decreased mainly due to the expiry of certain
point-of sale, messaging, reseller and eInvoicing contracts, and to
lower implementation revenue associated with the eLending-U.S.
platform. These decreases were partly offset by transition service
revenue associated with the sale of eSecurity and webdoxs
operations. eFinance EBITDA increased by $22.8 million due to the
impact of continuing cost reductions and to a contract settlement
of $9.1 million received in the second quarter of 2004.
- eHealth revenue grew by 25% compared to 2003 as a result of
acquisitions and growth in claims processing activities, and
generated a margin of 14% of eHealth revenue.
- Total revenue generated in 2004 was $218.5 million, within the
guidance range of $210 million to $230 million. Revenue decreased
from 2003 due to a lower contribution from non-core operations,
which ceased as of June 30, 2004.
- Total EBITDA in 2004 before one-time items was $17.7 million,
coming in ahead of the 2003 level of $13.7 million. The year-over-
year improvement was mainly due to a significantly higher
contribution from eFinance, partly offset by a lower contribution
from non-core activities. Reported EBITDA improved from a loss in
2003 mainly due to the impact of cost reductions in core
operations, contract settlements of $13.8 million received in 2004
and to lower restructuring and other charges. Excluding the
restructuring charge associated with the new streamlining
initiative, EBITDA came in at $31.5 million, above the target level
of $24 to $28 million for 2004.
- Net loss from continuing operations before one-time items was
$(20.5) million compared to a loss of $(18.1) million in 2003. On
a per fully diluted share basis, the loss was $(0.20) compared to
$(0.18). Reported net loss from continuing operations was $(72.0)
million ($(0.70) per share) compared to $(60.6) million ($(0.59)
per share) in 2003. The 2004 target range for loss per share from
continuing operations was $(0.60) to $(0.52). Excluding the impact
of the new restructuring initiative, the loss per share came in at
the high end of the target range at $(0.52).
- Reported total net loss was $(61.7) million ($(0.60) per share)
compared to a net loss of $(96.8) million ($(0.94) per share) in
2003. The smaller net loss in 2004 related principally to a higher
contribution from discontinued operations.
- One-time items included contract settlements, restructuring and
other charges and a related reversal, and gains on sale, in the
periods in which they were recorded.
Financial position at December 31, 2004 Cash on hand at quarter-end was $204.8 million, down from $238.5 million at September September: see month. 30, 2004, reflecting mainly the repayment Repayment The act of paying back a debt. Notes: Everyone has to repay their debts eventually. See also: Debt, Defeasance, Loan of $30.1 million in promissory notes 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. issued to 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 . 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 $8.9 million. Operating Highlights eFinance eLending-Canada - In November, Emergis announced the signing of a new five-year, $2.6 million agreement with the Desjardins Group The Desjardins Group (or Mouvement des caisses Desjardins in French) is the largest association of credit unions in North America. It was founded in 1900 in Lévis, Québec by Alphonse Desjardins. to extend the electronic connection and residential mortgage instruction management services that it has been offering to the caisses in 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. since 2002 to the commercial and industrial sectors.Starting in the spring of 2005, the Emergis(R) e-Lending Definitions of eLending Interchange An interchange is a location where two things meet, usually perform some kind of exchange, and possibly go on their ways again. It is most commonly used in four contexts:
eLending-U.S. - In December, Fiserv  This article or section is written like an .Please help [ rewrite this article] from a neutral point of view. Mark blatant advertising for , using . Lending Solutions selected Emergis' Vendor Services Exchange (VSE See DOS/VSE. VSE - Virtual Storage Extended ) as a key technology component in delivering its new Electronic Partner Connection, an electronic network that will provide mortgage originators with a single online point of entry for the order and delivery of any Fiserv mortgage-related service.Under the three-year, multi-million dollar agreement, Emergis will provide a private-labeled, managed technology solution.With VSE, Fiserv's Electronic Partner Connection will allow all of its lending services to work together seamlessly and efficiently to offer an end-to-end solution (jargon) end-to-end solution - (E2ES) A term that suggests that the supplier of an application program or system will provide all the hardware and/or software components and resouces to meet the customer's requirement and no other supplier need be involved. Compare: turn-key solution. to mortgage lenders. VSE is a workflow The automatic routing of documents to the users responsible for working on them. Workflow is concerned with providing the information required to support each step of the business cycle. management service that transmits loan data and documents between mortgage originators and settlement service providers in real-time 1. real-time - Describes an application which requires a program to respond to stimuli within some small upper limit of response time (typically milli- or microseconds). Process control at a chemical plant is the classic example. . It is part of the Emergis eLending platform, an extensive set of Web-based services designed for paperless loan fulfillment ful·fill also ful·fil tr.v. ful·filled, ful·fill·ing, ful·fills also ful·fils 1. To bring into actuality; effect: fulfilled their promises. 2. , closing and storage that can be used individually or as an end-to-end solution.The closing and storage functions of the platform are expected to go into production next month. Visa Commerce - Emergis is working with Visa to expand their relationship with new payment-related opportunities.During 2004, the Visa Commerce platform processed some US$4 billion in electronic payment transactions worldwide. The Company is also assisting Visa in the global implementation of the solution to its Member banks. eInvoicing - As previously announced, Emergis has responded to less-than-expected market demand for electronic invoice An itemized statement or written account of goods sent to a purchaser or consignee by a vendor that indicates the quantity and price of each piece of merchandise shipped. A consular invoice is one used in foreign trade. presentment presentment: see indictment. and payment solutions (EIPP EIPP Electronic Invoice Payment and Presentment EIPP Electronic Invoice Presentment and Payment ) by limiting the 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" development of its eInvoicing solution and centralizing cen·tral·ize v. cen·tral·ized, cen·tral·iz·ing, cen·tral·iz·es v.tr. 1. To draw into or toward a center; consolidate. 2. service delivery functions in Montreal.These moves are consistent with the Company's objective to move its U.S. businesses towards profitability.Weak demand experienced by Emergis in its direct sales efforts for eInvoicing has also been felt by its bank distribution partners.During the fourth quarter Emergis reached an agreement with Bank of America
Bank of America (NYSE: BAC TYO: 8648 ) is the largest commercial bank in the United States in terms of deposits, and the largest company of its kind in the world. estimated at $4.2 million 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. their agreements for EIPP and to provide for transition services in 2005. In addition, the Company's distribution agreements with JPMorgan Chase JPMorgan Chase (NYSE: JPM TYO: 8634 ) is one of the oldest financial services firms in the world. The company, headquartered in New York City, is one of the leaders in investment banking, financial services, asset and wealth management and private equity. With assets of $1. Bank will 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. in 2005. eHealth Medical Claims Processing - In November, Emergis joined an industry consortium, led by MAXIMUS Maximus is a name formed from the Latin term for "greatest" or "largest." It is therefore also a common noun, and may refer to any of the following: People in the Ancient World Politicians to develop a new electronic service delivery model for the province's Medical Services Plan.The public health care sector represents a significant market for Emergis, and contract wins, such as this one, strengthen its position as the Company pursues opportunities with other provincial Provincial has several meanings and may refer to:
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 fourth 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 1 800 387-6216, 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 416 405-9328.The fourth quarter 2004 news release and supplemental information package are posted on www.emergis.com. An 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 3120872#.An 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 Emergis Emergis powers business interactions, developing and managing solutions that automate To turn a set of manual steps into an operation that goes by itself. See automation. transactions and the secure exchange of information.With expertise in electronic health-related claims processing and management systems, payment enablement, and loan processing, Emergis delivers solutions in Canada to the top six banks, leading health insurance companies, government agencies and some 2,000 pharmacies This article is a list of major pharmacies (also known as chemists and drugstores) by country. Australia Pharmacies in Australia are mostly independently-owned by pharmacists, often operated as franchises of retail brands offered by the three major , and to large enterprises in the U.S. The Company's shares (TSX: EME) 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 news 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 See e-business. , 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 of control following the divestiture The breakup of AT&T. By federal court order, AT&T divested itself on January 1, 1984 of its 23 operating companies, which became known as the Regional Bell Operating Companies (RBOCs). by BCE BCE abbr. 1. Bachelor of Chemical Engineering 2. Bachelor of Civil Engineering BCE Abbreviation for before the Common Era. Inc. of its holdings in Emergis, 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 Emergis Inc.'s Annual Report (Management Discussion and Analysis) and the Emergis Inc. Annual Information Form (Risks and Uncertainties) filed with the 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. securities commissions. THE FORWARD-LOOKING STATEMENTS CONTAINED IN THIS PRESS RELEASE REPRESENT THE EXPECTATIONS OF EMERGIS AND ITS SUBSIDIARIES AS AT FEBRUARY February: see month. 2, 2005 AND, ACCORDINGLY, ARE SUBJECT TO CHANGE AFTER SUCH DATE. HOWEVER, EMERGIS 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 (1) Non-core operations included the distribution agreement with Bell Canada for legacy products and other non-core and exited products. (2) 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 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). as "Earnings before under-noted items" in the financial statements.
Consolidated Statements of Earnings
(millions of For the For the
Canadian dollars, three month three month For For
except income period period the year the year
(loss) per share ended ended ended ended
and number of December 31, December 31, December 31, December 31,
shares) 2004 2003 2004 2003
(unaudited) (unaudited) (unaudited) (audited)
Revenue 45,6 68,0 218,5 284,0
Direct costs 9,2 17,0 52,9 79,8
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Gross margin 36,4 51,0 165,6 204,2
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Contract
settlements (note 9) - - 13,8
Expenses
Operations 12,3 20,6 64,2 87,2
Sales and marketing 5,1 5,8 23,6 30,5
Research and
development, net
(note 17) 6,9 10,1 34,1 36,0
General and
administrative 6,2 9,2 26,0 36,8
Restructuring and
other charges
(note 12) 21,4 38,2 18,7 38,2
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51,9 83,9 166,6 228,7
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(Loss) earnings before
under noted items (15,5) (32,9) 12,8 (24,5)
Depreciation 3,5 3,6 12,9 14,4
Amortization of
intangibles 3,8 4,4 16,1 20,6
Interest income (0,8) (4,3) (10,6) (17,5)
Interest on long-term
debt 0,3 0,8 2,4 3,9
Gain on sale of assets
(notes 6 and 7) - - (12,2) -
Loss on foreign exchange 5,4 - 4,5 0,9
Other - (0,5) (0,1) (0,6)
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Loss from continuing
operations before
income taxes (27,7) (36,9) (0,2) (46,2)
Income taxes
Current 0,3 0,7 1,9 2,9
Future (note 16) (1,7) 8,8 69,9 11,5
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(1,4) 9,5 71,8 14,4
Loss from continuing
operations (26,3) (46,4) (72,0) (60,6)
Net (loss) income from
discontinued
operations -
net of income
taxes (note 10) 3,4 (67,3) 10,3 (36,2)
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Net loss (22,9) (113,7) (61,7) (96,8)
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Basic and diluted loss
per share ($) from
continuing operations (0,25) (0,45) (0,70) (0,59)
Basic and diluted
(loss) income per
share ($) from
discontinued
operations 0,03 (0,65) 0,10 (0,35)
Basic and diluted loss
per share ($) (0,22) (1,10) (0,60) (0,94)
Weighted average
number of shares
outstanding used
in computing
basic and diluted
loss per share 103 472 432 103 216 784 103 351 096 102 464 835
The accompanying notes are an integral part of the Interim
Consolidated Financial Statements.
Consolidated Statements of Deficit
For the year For the year
ended ended
(millions of Canadian dollars) December 31, 2004 December 31, 2003
(unaudited) (audited)
Deficit - beginning of year (1 176,9) (1 080,1)
Net loss (61,7) (96,8)
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Deficit - end of year (1 238,6) (1 176,9)
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The accompanying notes are an integral part of the Interim
Consolidated Financial Statements.
Consolidated Balance Sheets
As at As at
December 31, December 31,
(millions of Canadian dollars) 2004 2003
(unaudited) (audited)
ASSETS
Current
Cash and cash equivalents 204,8 128,6
Accounts receivable 19,4 25,4
Future income taxes 0,2 -
Other current assets (note 17 and 18) 16,8 31,1
Current assets held for sale (note 10) - 272,7
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241,2 457,8
Fixed assets 25,6 26,1
Intangible assets 31,3 24,2
Goodwill 46,6 38,6
Future income taxes - 77,3
Other long-term assets 7,3 3,6
Long-term assets held for sale (note 10) - 13,1
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352,0 640,7
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LIABILITIES
Current
Accounts payable and accrued liabilities 94,2 144,9
Deferred revenue 7,7 27,9
Deferred credits 3,9 8,9
Current portion of long-term debt 8,3 17,4
Current liabilities related to assets held
for sale (note 10) - 7,7
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114,1 206,8
Deferred credits and other 5,9 6,9
Future income taxes 2,1 -
Long-term debt 8,9 11,7
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131,0 225,4
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SHAREHOLDERS' EQUITY
Capital stock (note 13) - 1 546,7
Contributed surplus (note 13) 1 465,1 76,8
Deferred stock-based compensation (note 2) (0,9) -
Deficit (1 238,6) (1 176,9)
Foreign currency translation adjustment (4,6) (31,3)
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221,0 415,3
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352,0 640,7
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The accompanying notes are an integral part of the Interim
Consolidated Financial Statements.
Consolidated Statements of Cash Flows
For the For the
three month three month For For
period period the year the year
ended ended ended ended
(millions of December 31, December 31, December 31, December 31,
Canadian dollars 2004 2003 2004 2003
(unaudited) (unaudited) (unaudited) (audited)
Operating activities
Net loss from
continuing
operations (26,3) (46,4) (72,0) (60,6)
Depreciation and
amortization 7,3 8,0 29,0 35,0
Gain on sale
of assets - - (12,2) -
Future income taxes (1,7) 8,8 69,9 11,5
Non-cash foreign
exchange loss 3,4 - 4,4 -
Non-cash portion of
restructuring and
other charges 1,9 16,1 1,9 16,5
Non-cash stock based
compensation (note 2) 0,1 0,4 0,5 0,4
Deferred stock-based
compensation (0,9) - (0,9) -
Other 0,3 (0,4) 0,5 (3,1)
Changes in working
capital 21,2 26,1 (41,5) 52,8
---------------------------------------------------------------------
Cash flows from (used
for) operating
activities 5,3 12,6 (20,4) 52,5
---------------------------------------------------------------------
Investing activities
Additions to fixed
and intangible assets (3,1) (2,1) (13,8) (8,2)
Acquisitions (note 11) (1,3) - (23,9) (2,6)
Cash acquired on
acquisition of
businesses - - 0,3 -
Proceeds on sale of
businesses 0,8 - 327,4 -
---------------------------------------------------------------------
Cash flows (used for)
from investing
activities (3,6) (2,1) 290,0 (10,8)
---------------------------------------------------------------------
Financing activities
Repayment of long-term
debt (32,9) (6,2) (49,2) (40,7)
Issue of long term debt - - 1,1 -
Issue (reduction) of
common shares 0,1 - (148,8) -
---------------------------------------------------------------------
Cash flows used for
financing activities (32,8) (6,2) (196,9) (40,7)
---------------------------------------------------------------------
Foreign exchange loss
on cash held in
foreign currencies (2,6) (2,5) (9,0) (6,2)
Cash flows (used for)
from continuing
operations (33,7) 1,8 63,7 (5,2)
Cash flows from
discontinued
operations (note 10) - 8,7 3,7 35,6
Cash and cash equivalents
(Decrease) increase (33,7) 10,5 67,4 30,4
Balance, beginning of
period 238,5 126,9 137,4 107,0
---------------------------------------------------------------------
Balance, end of
period (1) 204,8 137,4 204,8 137,4
---------------------------------------------------------------------
Supplemental disclosure
of cash flow
information
Interest paid 0,8 0,8 3,1 3,4
Income taxes paid 0,1 0,3 1,8 1,2
(1) Includes the following:
Cash and cash equivalents
related to:
Continuing operations 204,8 128,6 204,8 128,6
Discontinued
operations (note 10) - 8,8 - 8,8
---------------------------------------------------------------------
204,8 137,4 204,8 137,4
Non-cash investing and
financing activities
Additions to fixed and
intangible assets
financed 2,9 4,1 6,3 13,4
The accompanying notes are an integral part of the Interim
Consolidated Financial Statements.
NOTES TO 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 As at December 31, 2004 (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 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. On December 1, 2004, the Company changed its name from BCE Emergis Inc. to Emergis, Inc. The change was made in the context of the divestiture by BCE Inc. of its interest in the Company. 1. Summary of significant accounting policies Basis of presentation The consolidated financial statements of 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 .
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. provisions in Section 3061, Property, plant and equipment. Effective January January: see month. 1, 2004, the Company adopted the standard requiring the recognition of an impairment loss for a long-lived asset to be held and used when events or changes in circumstances CIRCUMSTANCES, evidence. The particulars which accompany a fact. 2. The facts proved are either possible or impossible, ordinary and probable, or extraordinary and improbable, recent or ancient; they may have happened near us, or afar off; they are public or cause its carrying value Carrying Value Also know as "book value," it is a company's total assets minus intangible assets and liabilities, such as debt. Notes: This is different than market value, as it can be higher or lower depending on the circumstances. to exceed the total undiscounted cash flows expected from its use and eventual disposition 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. Hedging hedging, in commerce, method by which traders use two counterbalancing investment strategies so as to minimize any losses caused by price fluctuations. It is generally used by traders on the commodities market. relationships Effective January 1, 2004 the Company adopted Accounting Guideline guideline Medtalk A series of recommendations by a body of experts in a particular discipline. See Cancer screening guidelines, Cardiac profile guidelines, Gatekeeper guidelines, Harvard guidelines, Transfusion guidelines. 13 (AcG-13), Hedging relationships. This guideline establishes the following criteria criteria (krītēr´ē  ),n. for the application of hedge accounting Why is hedge accounting necessary? Many financial institutions and corporate businesses (entities) use derivative financial instruments to hedge their exposure to different risks (eg interest rate risk, foreign exchange risk, commodity risk, etc). in a hedging transaction: - the nature of the specific risk exposures being hedged hedge n. 1. A row of closely planted shrubs or low-growing trees forming a fence or boundary. 2. A line of people or objects forming a barrier: a hedge of spectators along the sidewalk. in accordance with the risk management objective and strategy must be identified at the inception INCEPTION. The commencement; the beginning. In making a will, for example, the writing is its inception. 3 Co. 31 b; Plowd. 343. Vide Consummation; Progression. 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 derivative: see calculus. derivative In mathematics, a fundamental concept of differential calculus representing the instantaneous rate of change of a function. 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 attributable emanating from or pertaining to attribute. attributable proportion see attributable risk (below). attributable risk to the risk being hedged, both at the inception and throughout the term of the hedging relationship. Disclosure required by this new accounting guideline has been provided in note 18 to 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 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 adopt the prospective application of the fair value based method for measuring the compensation cost of employee stock options granted in 2003 and beyond. 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 13 was 2,938,531 as at December 31, 2004. On July 2, 2004, following the $1.45 special cash distribution on June 30, 2004, the Company reduced the exercise price for all outstanding options by $1.47. The table below shows the assumptions used to determine stock-based compensation expense using the Black-Scholes option-pricing model Black-Scholes option-pricing model A model for pricing call options based on arbitrage arguments. Uses the stock price, the exercise price, the risk-free interest rate, the time to expiration, and the expected standard deviation of the stock return. .
For the three-month period For the year
ended December 31 ended December 31
2004 2003 2004 2003
---------------------------------------------------------------------
---------------------------------------------------------------------
Compensation expense
($ millions) $0.1 $0.4 $0.5 $0.4
Weighted-average grant
date fair value ($) (1) $1.80 $3.28 $2.86 $4.16
----------------------------------------
Weighted average assumptions
----------------------------------------
Dividend yield 0.0% 0.0% 0.0% 0.0%
Expected volatility 60.0% 75.0% 60.0% 75.0%
Risk-free interest rate 3.76% 3.71% 3.46% 3.88%
Expected life (years) 4 4 4 4
(1): Unadjusted for the reduction of $1.47 in the exercise price as of July 2, 2004 for all options granted prior to July 2, 2004. The weighted-average fair value of the reduction of $1.47 amounted to $0.27 for the 965,044 options granted since January 1, 2003 and still outstanding as of July 2, 2004. The following pro forma As a matter of form or for the sake of form. Used to describe accounting, financial, and other statements or conclusions based upon assumed or anticipated facts. The phrase pro forma disclosure outlines the impact had the Company used the fair value based method of accounting for awards granted in 2002 to determine the compensation cost for the Company's stock-based employee compensation plans:
For the three-month period For the year
ended December 31 ended December 31
2004 2003 2004 2003
---------------------------------------------------------------------
Net loss, as reported (22.9) (113.7) (61.7) (96.8)
Adjustment to net income (loss) (0.6) (1.8) 0.8 (7.0)
Pro forma net loss (23.5) (115.5) (60.9) (103.8)
Pro forma basic and diluted
loss per share ($) (0.23) (1.12) (0.59) (1.01)
On September 10, 2004, the Board of Directors adopted a restricted share rights plan for selected key executives. The share right represents a right to receive a fully paid common share of the Company once a vesting Vesting The process by which employees accrue non-forfeitable rights over employer contributions that are made to the employee's qualified retirement plan account. Notes: condition pertaining per·tain intr.v. per·tained, per·tain·ing, per·tains 1. To have reference; relate: evidence that pertains to the accident. 2. to that share is fulfilled ful·fill also ful·fil tr.v. ful·filled, ful·fill·ing, ful·fills also ful·fils 1. To bring into actuality; effect: fulfilled their promises. 2. , The vesting condition is the participant's continuous employment at Emergis for a period of three years starting from the date of the share right award. Under the terms of this plan, the Company has funded the purchase of 254,000 Emergis shares which are held in trust to be released to certain key executives upon fulfilment ful·fill also ful·fil tr.v. ful·filled, ful·fill·ing, ful·fills also ful·fils 1. To bring into actuality; effect: fulfilled their promises. 2. of the vesting condition. The Company recorded a compensation expense of $0.1 for the three-month period ended December 31, 2004, and the related deferred stock-based compensation amount of $0.9 million included in shareholders' equity Shareholders' Equity A firms' total assets minus its total liabilities. Equivalently, it is share capital plus retained earnings minus treasury shares. Shareholders' equity is the amount by which a company is financed through common and preferred shares. . 3. Net income per share The reconciliation of diluted loss from continuing operations per share for the three-month period and year ended December 31, 2004 is presented below:
For the three-month period
ended December 31, 2004
Number
Net loss of shares Per share
(numerator) (denominator) amount
($)
---------------------------------------------------------------------
---------------------------------------------------------------------
Net loss from continuing
operations attributable to
common shareholders (26.3) 103,472,432 (0.25)
For the year
ended December 31, 2004
Number
Net loss of shares Per share
(numerator) (denominator) amount
($)
---------------------------------------------------------------------
---------------------------------------------------------------------
Net loss from continuing
operations attributable to
common shareholders (72.0) 103,351,096 (0.70)
The following securities were excluded from the calculation of diluted net earnings per share since the Company reported a net loss or a loss from continuing operations for all the periods shown below and the average market value of the underlying shares were less than the exercise price of the securities:
For the three-month For the three-month
period ended period ended
(number of shares) December 31, 2004 December 31, 2003
------------------------------------------------------------------
------------------------------------------------------------------
Options 2,938,531 6,045,842
Common shares to be issued
related to acquisitions - 1,792,364
Warrants 9,284 300,000
For the year ended For the year ended
(number of shares) December 31, 2004 December 31, 2003
------------------------------------------------------------------
------------------------------------------------------------------
Options 2,938,531 6,045,842
Common shares to be issued
related to acquisitions - 1,762,364
Warrants 9,284 300,000
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 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. For the three-months ended June 30, 2004, this gain was reduced by $6.5 million as a result of working capital and disposal cost adjustments related to the sale. As a final adjustment to the working capital calculation, the Company recorded in the three-month period ended September 30, 2004 an additional loss on sale of $2.8 million. At the end of fiscal 2004, the Company finalized See finalization. its calculation of the gain or loss on the sale of US Health resulting in a gain of $3.4 million relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc foreign exchange. The total loss on the sale of US Health operations for the year ended December 31, 2004 amounted to $4.2 million.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 (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. These options remained in BCE Emergis Corporation at closing, but the sale agreement includes a 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 the Company's former subsidiary, BCE Emergis Corporation, and the grantors of these options. The purchase price was 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 was payable by the Company or receivable by the Company on a dollar-for-dollar basis. In the three-month period ended June 30, 2004, the Company recorded working capital and disposal cost adjustments of $6.5 million and a final working capital adjustment of $2.8 million in the three-month period ended September 30, 2004, 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$2.0 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 ended 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. . This indemnification has been reflected in Note 19 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$14.5 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 up to March 2011 totalling $10.9 million. 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 three-month period ended June 30, 2004, 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 The point where a line, channel or circuit ends. See SCSI termination and hybrid. 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 three-month period ended June 30, 2004, the Company recorded a gain on the sale of 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 three-month period ended June 30, 2004, the Company recorded a gain on sale of $1.3 million which is included in income from continuing operations. 8. Sale of webdoxs operations On July 7, 2004 the Company sold its webdoxs operations for a total consideration of $14.5 million, resulting in a nil gain on sale. The Company received $8.0 million at closing and $1.5 million in December 2004. The remaining amounts are receivable in two instalments of $2.5 million in December 2007 and 2008. These remaining balances are included in long term other assets other assets Assets of relatively small value. For financial reporting purposes, firms frequently combine small assets into a single category rather than listing each item separately. and bear interest at prime plus 1%. 9. 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 related to the settlement of the contract, with the balance related to outstanding commissions receivable and repayment of 2004 legal costs incurred by the Company, was recorded in the three-month period ended June 30, 2004. 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 three-month period ended June 30, 2004. 10. 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 segment. 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 segment. 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
December 31, 2004
US
Health eSecurity webdoxs Total
---------------------------------------------------------------------
Revenue - - - -
Direct costs - - - -
Gross margin - - - -
---------------------------------------------------------------------
Expenses
Operations - - - -
Sales and marketing - - - -
Research and development, net - - - -
General and administrative - - - -
---------------------------------------------------------------------
- - - -
---------------------------------------------------------------------
Earnings (loss) before under noted
items - - - -
Depreciation - - - -
Amortization of intangible assets - - - -
Write-down related to assets held
for sale - - - -
Interest on long-term debt - - - -
Gain on sale of assets held for sale (3.4) - - (3.4)
Other - - - -
---------------------------------------------------------------------
(Loss) income before income taxes 3.4 - - 3.4
Income taxes (recovery)
Current - - - -
Future - - - -
---------------------------------------------------------------------
- - - -
(Loss) income from discontinued
operations 3.4 - - 3.4
For the three-month period ended
December 31, 2003
US
Health eSecurity webdoxs Total
---------------------------------------------------------------------
Revenue 36.5 8.0 1.2 45.7
Direct costs 3.9 0.7 0.4 5.0
---------------------------------------------------------------------
Gross margin 32.6 7.3 0.8 40.7
---------------------------------------------------------------------
Expenses
Operations 13.9 2.1 0.4 16.4
Sales and marketing 1.8 0.4 0.5 2.7
Research and development, net 1.5 1.1 0.5 3.1
General and administrative 2.8 - - 2.8
---------------------------------------------------------------------
20.0 3.6 1.4 25.0
Earnings (loss) before under noted
items 12.6 3.7 (0.6) 15.7
Depreciation 0.8 0.9 0.1 1.8
Amortization of intangible assets 0.6 0.3 1.5 2.4
Write-down related to assets held
for sale 77.3 - - 77.3
Interest on long-term debt 0.2 - - 0.2
Gain on sale of assets held for sale - - - -
Other (0.3) - - (0.3)
---------------------------------------------------------------------
(Loss) income before income taxes (66.0) 2.5 (2.2) (65.7)
Income taxes (recovery)
Current (0.1) - - (0.1)
Future 0.8 0.9 - 1.7
---------------------------------------------------------------------
0.7 0.9 - 1.6
(Loss) income from discontinued
operations (66.7) 1.6 (2.2) (67.3)
For the year ended
December 31, 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
Write-down related to assets held
for sale - - - -
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 4.2 (15.4) - (11.2)
Other - - - -
---------------------------------------------------------------------
(Loss) income before income taxes 0.2 17.9 (2.1) 16.0
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 0.6 11.8 (2.1) 10.3
For the year ended
December 31, 2003
US
Health eSecurity webdoxs Total
---------------------------------------------------------------------
Revenue 162.6 29.2 3.2 195.0
Direct costs 16.4 2.6 1.4 20.4
---------------------------------------------------------------------
Gross margin 146.2 26.6 1.8 174.6
---------------------------------------------------------------------
Expenses
Operations 62.1 7.1 1.8 71.0
Sales and marketing 7.9 1.6 2.1 11.6
Research and development, net 6.7 4.9 1.9 13.5
General and administrative 12.8 - - 12.8
---------------------------------------------------------------------
89.5 13.6 5.8 108.9
---------------------------------------------------------------------
Earnings (loss) before under noted
items 56.7 13.0 (4.0) 65.7
Depreciation 3.9 3.4 0.2 7.5
Amortization of intangible assets 2.3 1.2 6.2 9.7
Write-down related to assets held
for sale 77.3 - - 77.3
Interest income (0.1) - - (0.1)
Interest on long-term debt 0.2 - - 0.2
Gain on sale of other assets (1.2) - - (1.2)
Loss (gain) on sale of assets held
for sale - - - -
Other (0.4) - - (0.4)
---------------------------------------------------------------------
(Loss) income before income taxes (25.3) 8.4 (10.4) (27.3)
Income taxes (recovery)
Current 3.7 - - 3.7
Future 2.3 2.9 - 5.2
---------------------------------------------------------------------
6.0 2.9 - 8.9
Income (loss) from discontinued
operations (31.3) 5.5 (10.4) (36.2)
The cash flows from discontinued operations presented in the accompanying interim consolidated statements of cash flows, were as follows:
For the three-month period For the year
ended December 31 ended December 31
2004 2003 2004 2003
---------------------------------------------------------------------
Operating activities - 11.4 7.1 45.3
Investing activities - (1.4) (1.8) (4.1)
Financing activities - (0.9) (1.7) (3.2)
Foreign exchange gain (loss)
on cash held in foreign
currencies - (0.4) 0.1 (2.4)
---------------------------------------------------------------------
Cash flows from discontinued
operations - 8.7 3.7 35.6
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The assets and liabilities have been segregated in the accompanying interim 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. and are reported as current and 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. "Assets held for sale" and current "Liabilities related to assets held for sale". The assets and related liabilities held for sale were as follows:
As at As at
December 31 December 31
2004 2003
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ASSETS
Current
Cash and cash equivalents - 8.8
Accounts receivable - 28.5
Future income taxes - 36.6
Fixed assets - 14.0
Intangible assets - 4.8
Goodwill - 154.7
Other current assets - 52.1
Less: write-down related to assets held for sale - (26.8)
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- 272.7
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Intangible assets 13.1
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- 285.8
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LIABILITIES
Current
Accounts payable and accrued liabilities - 6.4
Deferred revenue - 0.8
Current portion of long-term debt - 0.5
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- 7.7
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SHAREHOLDERS' EQUITY
Capital Stock (a) - 10.1
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- 10.1
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(a) As a result of the Company's sale of its US Health Operations, the final instalment INSTALMENT, contracts. A part of a debt due by contract, and agreed to be paid at a time different from that fixed for the, payment of the other part. For example, if I engage to pay you one thousand dollars, in two payments, one on the first clay of January, and the other on the first 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. 11.Acquisitions (In millions of Canadian dollars except share data) (unaudited)
The company acquired the following companies over the course of the
year ended December 31, 2004.
Q1 Data
Ware Gestion Systems /
Solutions Infopharm TriComp AH
Corporation Inc. Systems Computer
Ltd. Systems
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Total purchase price
allocated as follows:
Current assets 0.7 3.0 1.2 -
Fixed assets 0.1 1.8 0.1 0.1
Intangible assets - 0.3 0.6 -
Current liabilities (0.3) (0.8) (0.6) -
Deferred revenues (0.3) (1.7) (0.5) (0.1)
Long-term liabilities (1.7) (1.1) (0.3) -
Allocation of excess of
purchase price:
Acquired technologies 6.8 - - -
Customer relationships - 6.5 1.6 1.4
Goodwill - 6.2 2.8 -
----------------------------------------
Cost of acquisition 5.3 14.2 4.9 1.4
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 Transaction Costs Costs incurred when buying or selling securities. These include brokers' commissions and spreads (the difference between the price the dealer paid for a security and the price they can sell it). 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 payor (payer) n. The one who must make payment on a promissory note. organizations. Gestion InfoPharm Inc. On March 19, 2004, the Company acquired all the issued and outstanding shares of Gestion InfoPharm Inc. for an initial cash consideration of $12.4 million, not including a working capital adjustment of $0.2 million received in October October: see month. 2004 and a holdback hold·back n. 1. a. The act of holding back. b. Something held back. 2. A device that retains or restrains. 3. 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 dispensary: see clinic. and point-of-sales software solutions customized for pharmacies 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. QS1 Data Systems Ltd. /AH Computer Systems (1988) Ltd. On October 26, 2004, the Company purchased certain assets and assumed certain liabilities of QS/1 Data Systems QS/1 Data Systems is a division of the J M Smith Corporation, a company founded in 1944 with a current revenue of $2 billion. In 1977, the company recognized healthcare professionals' need for specific software and hardware packages designed to help provide more efficient and Ltd. and AH Computer Systems (1988) Ltd. for cash consideration of $1.3 million. The company also incurred transaction costs in the amount of $0.1 million in connection with this acquisition, relating mostly to professional fees. QS/1 Data Systems and AH Computer Systems provide 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. management software systems and related services to pharmacies in Canada. All of the above acquisitions were accounted for using the purchase method. The results of operations have been included in the Company's results since their respective dates of acquisition. The 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 of purchase price to the acquired technologies and customer relationships is being amortized over a five-year period. 12. 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 On November 1, 2004 the Board of Directors authorized au·thor·ize tr.v. au·thor·ized, au·thor·iz·ing, au·thor·iz·es 1. To grant authority or power to. 2. To give permission for; sanction: the Company to proceed with a 2004 restructuring plan involving principally a reduction of 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 rationalization rationalization, in psychology: see defense mechanism. of facilities, which was designed to continue the streamlining of the Company's organizational structure This article has no lead section.To comply with Wikipedia's lead section guidelines, one should be written. to ensure that costs remain in line with revenue. A restructuring charge of $18.7 million was recorded in the fourth quarter of 2004. The charge included cash restructuring charges totalling $17.6 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 of $10.8 million and facilities-related costs of $6.8 million and non-cash asset write-downs of $1.1 million. During the three-month period ended December 31, 2004, the Company disbursed $3.4 million related to employee severance and other related costs. The balance of the related 2004 restructuring provision as at December 31, 2004 was $14.2 million and is included in accounts payable and accrued liabilities Accrued liabilities are liabilities which have occurred, but have not been paid or logged under accounts payable during an accounting period; in other words, obligations for goods and services provided to a company for which invoices have not yet been received. . 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 2003 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 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 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 related costs by $6.3 million for the three-month period ended March 31, 2004. The Company continued the execution of its restructuring program and recorded $2.4 million, $1.2 million and $2.7 million during the three-month periods ended June 30, 2004, and September 30, 2004 and December 31, 2004, respectively, related to employee severance and other related costs. The balance of the 2002 and 2003 restructuring provisions as at December 31, 2003 was $31.1 million. During the first quarter of 2004 the Company reduced the restructuring charge by $6.3 million and disbursed $6.1 million relating to employee severance and other employee costs. During the second, third and fourth quarters of 2004, the Company increased the restructuring charges by $2.4 million, $1.2 million and $2.7 million, respectively, and disbursed $6.3 million, $5.3 million and $6.0 million, respectively, relating to employee severance and other related costs. The balance of the related restructuring provisions as at December 31, 2004 was $7.4 million. An amount of $4.5 million is included in accounts payable and accrued liabilities and $2.9 million is included in long-term deferred credits and other. 13. Equity components The stated capital stated capital See legal capital. stock as at December 31, 2004 is detailed as follows:
Not Options
Issued issued issued
Number and and not as part of
of fully fully acquisition
shares paid paid TOTAL
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Balance at January
1, 2004 103,216,870 1,533.0 11.6 2.1 1,546.7
Issue of common
shares (a) 19,642 - - - -
Issue of common
shares (b) 265,721 1.2 - - 1.2
Issue of common
shares (C) - - (11.6) - (11.6)
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Special cash
distribution
(d) - (150.0) - - (150.0)
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Reduction of
stated
capital (e) - (1,210.0) - - (1,210.0)
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Reduction of
stated capital
(f) - (175.8) - - ( 175.8)
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Impact of the
exercise of
options issued
as part of the
acquisition of
Emergis
Technologies - 1.6 - (2.1) (0.5)
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Balance at
December 31,
2004 103,502,233 - - - -
Contributed surplus $
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Balance at January 1, 2004 76.8
Amount related to the AHC acquisition (C) 1.5
Reduction of stated capital (e) 1,210.0
Reduction of stated capital (f) 175.8
Amount related to stock based compensation (g) 0.5
Impact of the exercise of options issued as part
of the acquisition of Emergis Technologies 0.5
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Balance at December 31, 2004 1,465.1
(a) 19,642 stock options were exercised to purchase 19,642 common shares for cash consideration of $14 thousand. (b) 265,721 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 ex·tin·guish tr.v. ex·tin·guished, ex·tin·guish·ing, ex·tin·guish·es 1. To put out (a fire, for example); quench. 2. To put an end to (hopes, for example); destroy. See Synonyms at abolish. 3. the remaining amount payable of $10.1 million under the fourth instalment of the purchase price for 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 share value in the first quarter 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) On December 1, 2004, the Company reduced, for the third time, its stated capital for its common shares to an amount of $1.00 in the aggregate, resulting in a reduction of stated capital of $175.8 million. This amount was attributed to contributed surplus. (g) During the year the Company expensed $0.5 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 $105.23 per share and expiry dates up to 2010 2,938,531 Warrants: From time to time, the Company enters into formal business arrangements for the use and distribution of certain technology solutions with strategic partners. Under the terms of such arrangements, the partners may acquire warrants to purchase shares of the Company. The following table summarizes warrant activity:
Number of Number of Exercise price
warrants warrants of warrants
outstanding exercisable exercisable
(1) (1) ($)
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Outstanding - January 1,
2004 650,000 300,000 47.24
Expired (300,000)
Outstanding - December 31,
2004 350,000 9,284 5.78
(1) Warrants are convertible into common shares of the Company on a 1:1 basis. The warrants expire on December 31, 2006. No amount has been recorded in the financial statements as a result of these arrangements. 14. 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 2001 and subsequently 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: in June 2004, as well as other non-core and exited products. The Company has restated comparative results to reflect this change. The other non-allocated amounts represent the non-allocated restructuring and other charges. 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 December 31
eFinance eHealth Non-core
segment segment segment
2004 2003 2004 2003 2004 2003
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Revenues 25.6 28.0 20.0 15.1 - 24.9
Direct costs 3.5 4.0 5.7 3.3 - 9.7
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Gross margin 22.1 24.0 14.3 11.8 - 15.2
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EBITDA (1) 3.2 (3.1) 2.7 4.0 - 4.4
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Goodwill as at
December 31 14.0 14.9 32.6 23.7 - -
For the three-month period ended December 31
Other non-allocated Total
2004 2003 2004 2003
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Revenues - - 45.6 68.0
Direct costs - - 9.2 17.0
Gross margin - - 36.4 51.0
EBITDA (1) (21.4) (38.2) (15.5) (32.9)
Goodwill as at December 31 - - 46.6 38.6
For the year ended December 31
eFinance eHealth Non-core
segment segment segment
2004 2003 2004 2003 2004 2003
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Revenues 108.0 118.4 70.9 56.9 39.6 108.7
Direct costs 19.0 22.8 18.0 14.5 15.9 42.5
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Gross margin 89.0 95.6 52.9 42.4 23.7 66.2
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EBITDA (1) 10.2 (12.6) 9.9 8.5 11.4 17.8
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Goodwill as at
December 31 14.0 14.9 32.6 23.7 - -
For the year ended December 31
Other non-allocated Total
2004 2003 2004 2003
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Revenues - - 218.5 284.0
Direct costs - - 52.9 79.8
Gross margin - - 165.6 204.2
EBITDA (1) (18.7) (38.2) 12.8 (24.5)
Goodwill as at December 31 - - 46.6 38.6
(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 segments share in the use of its capital asset infrastructure. As a result, the Company does not disclose a measure of total assets by segments. 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 year
period ended ended
December 31 December 31
Revenue ($) 2004 2003 2004 2003
---------------------------------------------------------------------
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Canada 39.2 56.5 180.3 234.7
United States 6.4 11.5 38.2 49.3
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Total 45.6 68.0 218.5 284.0
15. Related party information On June 16, 2004 BCE Inc. completed the sale of its ownership interest in the Company. As a result, BCE Inc. and its subsidiaries are no longer related parties to the Company. The following transactions occurred in the normal course of operations with BCE Inc., the former parent company, and other companies in the BCE group subject to common control during the respective periods and were measured at the exchange value, which is the amount established and agreed to by the related parties:
For the three-month For the year
period ended ended
December 31 December 31
2004 2003 2004 2003
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Revenue ($) (a) - 21.9 25.9 91.4
---------------------------------------------------------------------
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Direct costs - 14.7 22.4 63.9
Expenses - 12.5 18.3 53.7
Interest income - 4.1 6.4 16.0
(a) Includes services for resale resale n. selling again, particularly at retail. In many states a "resale license" or "resale number" is required so that the state can monitor the collection of sales tax on retail sales. RESALE. to third parties and for internal use. As part of the extended exclusive distribution agreement signed in 2001 with Bell Canada and subsequently terminated in June 2004, the Company derived de·rive v. de·rived, de·riv·ing, de·rives v.tr. 1. To obtain or receive from a source. 2. 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 directly from Bell Canada in the amount of nil ($10.0 million) and $7.6 million ($41.2 million) for the three-month period and year ended December 31, 2004 (2003), respectively. Under the distribution agreement the amount derived from other customers with Bell Canada acting as a distribution agent is nil ($13.5 million) and $24.3 million ($57.4 million) for the three-month period and year ended December 31, 2004 (2003) and are excluded from the related party amount. Included in direct costs and expenses is nil ($19.6 million) and $26.4 million ($82.3 million) for the three-month period and year ended December 31, 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 group subject to common control until June 16, 2004:
As at December As at December
31, 2004 31, 2003
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Accounts receivable - 10.1
Other current assets - 16.0
Accounts payable and accrued liabilities - 58.5
Deferred revenue - 5.0
Tax loss monetization Monetization The securitization of the gross revenues of a contract. structure As part of a tax loss consolidation arrangement, which was terminated on May 31, 2004, the Company recorded interest income of nil ($14.1 million) and $21.7 million ($52.2 million) for the three-month period and year ended December 31, 2004 (2003). The Company also incurred interest expense of nil ($9.7 million) and $15.3 million ($36.2 million) for the three-month period and year ended December 31, 2004 (2003). For income tax purposes, the nil ($14.1 million) and $21.7 million ($52.2 million) in interest income for the three-month period and year ended December 31, 2004 (2003) increase the taxable income Under the federal tax law, gross income reduced by adjustments and allowable deductions. It is the income against which tax rates are applied to compute an individual or entity's tax liability. The essence of taxable income is the accrual of some gain, profit, or benefit to a taxpayer. of the Company and accelerate the use of the Company's tax attributes resulting in nil ($4.6 million) and $7.5 million ($16.6 million) reductions in future income tax assets in Canada for the three-month period and year ended December 31, 2004 (2003), respectively. The net interest amounts of nil ($4.4 million) and $6.4 million ($16.0 million) for the three-month period and year ended December 31, 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 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. . 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 Per annum Yearly. 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 its 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. 16. Income taxes During the three-month period ended June 30, 2004 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 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 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. 17. Government assistance During the three-month period ended June 30, 2004 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 relating to the period from June 23, 2003 to June 30, 2004. During the three-month periods ended September 30, 2004 and December 31, 2004, the Company recorded $0.4 million and nil, respectively, related to this investment tax credit. 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 Quebec based 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 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 amount has been recorded as a reduction of 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. 18. Derivative 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 December 31, 2004 - currency forward contracts relating mainly to a net investment in a foreign subsidiary At December 31, 2004, principal amounts to be received under currency contracts are $30.3 million, whereas principal amounts to be paid under these contracts are US$25.0 million. The carrying value of all financial instruments approximates fair value other than the financial instrument related to the options currently held in a public company by the Company's former subsidiary, BCE Emergis Corporation, which are carried at a cost of approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $10.0 million and for which the fair market value currently is non-determinable because these options are currently the subject of a dispute between the Company's former subsidiary, BCE Emergis Corporation and the grantors of these options. 19. Guarantees In the context of business dispositions or the sale of assets, the Company may from time to time agree to compensate the purchaser for costs and losses incurred as a result of various events, including breaches of representations and warranties, 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. against the 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. , valuation differences, 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 indemnification will generally be limited by the agreement. The maximum potential exposure, under these guarantees represented a cumulative amount of approximately $157.7 million as at December 31, 2004, except for tax liabilities and certain other representations for which the agreements do not specify a maximum amount. However, based on the Company's experience, the Company believes that any potential payment will not be significant. The Company's representations and warranties exist for a period ending no later than December 31, 2005 except for tax and certain other representations which are in force until the expiry of the applicable statute of limitations and for an amount of $0.3 million which exist for a period ending no later than May 28, 2007. No amount has been 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. in the consolidated balance sheet relating to this type of indemnification or guarantee at December 31, 2004. Historically, the Company has not made any significant payments under these indemnifications or guarantees. In addition, the Company provides indemnification agreements to counterparties in transactions such as the sale of services, purchase and licenses. These indemnification agreements require the Company to compensate the counterparties for costs incurred as a result of litigation claims or statutory sanctions Sanctions is the plural of sanction. Depending on context, a sanction can be either a punishment or a permission. The word is a contronym. Sanctions involving countries: The other participant, including intermediaries, in a swap or contract. as a consequence of the agreement. The term of these indemnification agreements will vary based upon the contract. The nature of the indemnification agreements prevent the Company from making a reasonable estimate of the maximum potential amounts that the Company could be required to pay the counterparties. The amounts are dependent upon the outcome of future contingent 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. No amount has been accrued in the consolidated balance sheet relating to this type of indemnification or guarantee at December 31, 2004. Historically, the Company has not made any significant payments under such indemnification agreements. EMERGIS INC. (TSX:EME) |
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