SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
Pursuant to Rule
13a-16 or 15d-16 under
the Securities Exchange Act of 1934
For the month of: August 2005 | Commission
File Number: 1-8481 |
BCE
Inc.
(Translation of Registrants name into English)
1000,
rue de La Gauchetière Ouest, Bureau 3700, Montréal, Québec
H3B 4Y7, (514) 870-8777
(Address of principal executive offices)
Indicate by check mark whether the Registrant files or will file annual reports under cover of Form 20-F or Form 40-F.
Form 20-F | Form 40-F | X
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Indicate by check mark whether the Registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes | No | X
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Only the BCE Inc. Management's Discussion and Analysis dated August 2, 2005 and the BCE Inc. 2005 Second Quarter unaudited interim consolidated financial statements for the period ended June 30, 2005, included on pages 6 to 34 and 35 to 43, respectively, of the BCE Inc. 2005 Second Quarter Shareholder Report filed with this Form 6-K are incorporated by reference in the registration statements filed by BCE Inc. with the Securities and Exchange Commission on Form F-3 (Registration No. 333-12130), Form S-8 (Registration No. 333-12780), Form S-8 (Registration No. 333-12802) and Form S-8 (Registration No. 333-12804). Except for the foregoing, no other document or portion of document filed with this Form 6-K is incorporated by reference in BCE Inc.s registration statements. Notwithstanding any reference to BCEs Web site on the World Wide Web in the documents attached hereto, the information contained in BCEs site or any other site on the World Wide Web referred to in BCEs site is not a part of this Form 6-K and, therefore, is not filed with the Securities and Exchange Commission.
The
Quarter at a Glance
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The
Quarter at a Glance
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In the second quarter,
we achieved strong gains in our wireless, video and high-speed Internet
subscriber bases, which help lay an important foundation for the future
profitable growth of these businesses. In addition, our Business segment
continued to make steady progress on its overall Information and Communications
Technology (ICT), or value-added services (VAS), strategy by leading the
company in the shift towards new growth services. In Q2, growth revenues
accounted for 44% of total revenues at Bell Canada, which is in line
with our target of 45% by the end of 2005. |
Customer Connections | ||||||
Q2 2005 | 30-JUN-05 | |||||
CONNECTIONS | NET | CONNEC- | ||||
(IN THOUSANDS) | ACTIVATIONS | TIONS | ||||
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Wireless | 146 | 5,108 | ||||
High-Speed Internet | 92 | 2,028 | ||||
Video | 63 | 1,595 | ||||
NAS | (145 | ) | 12,700 | |||
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(1) |
EBITDA, free cash flow and net earnings excluding the impact of restructuring and other items and net gains on investments do not have any standardized meaning prescribed by Canadian generally accepted accounting principles (GAAP) and are therefore unlikely to be comparable to similar measures presented by other companies. For more details on these measures, including a reconciliation to the most comparable GAAP measure, please refer to the section entitled Non-GAAP Financial Measures contained in BCE Inc.s 2005 Second Quarter MD&A dated August 2, 2005. |
2 Bell Canada Enterprises 2005 Quarterly Report
Operating Revenues
Our revenues increased by 4.2% year-over-year to reach $4,980 million in the quarter. This growth reflected improved revenue performance across most of our segments. At Bell Canada, revenues were driven primarily by the Consumer segment due to growth in wireless, video and Internet access services, as well as from continuing solid results within the Business segment attributable to focused execution of our Virtual Chief Information Officer (VCIO), VAS and IP strategies and the contribution from recent acquisitions, all of which have positively impacted data revenue growth. This was offset partially by lower Aliant segment revenues due mainly to lower directory revenues. Overall revenue performance was further enhanced by double-digit growth at Telesat and CGI, and high single-digit growth at Bell Globemedia. Operating Income and EBITDA(1) We
achieved operating income of $1,100 million, down 0.5% or $5 million,
compared with the same period last year. Despite higher revenues and cost
savings from Galileo, the year-over-year decline was the result of an
increase in the cost of acquiring a substantially higher number of subscribers
in wireless and video, some margin pressure from the continuing transformation
of our product mix towards growth services, and by higher net benefit
plans cost and amortization expense. Similarly, Bell Canadas
operating income in the quarter declined by $36 million, or 3.5%,
to $981 million from $1,017 million in Q2 2004. |
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(1) |
EBITDA, free cash flow and net earnings excluding the impact of restructuring and other items and net gains on investments do not have any standardized meaning prescribed by Canadian generally accepted accounting principles (GAAP) and are therefore unlikely to be comparable to similar measures presented by other companies. For more details on these measures, including a reconciliation to the most comparable GAAP measure, please refer to the section entitled Non-GAAP Financial Measures contained in BCE Inc.s 2005 Second Quarter MD&A dated August 2, 2005. |
3 Bell Canada Enterprises 2005 Quarterly Report
The Quarter at a Glance
Net Earnings / Earnings Per Share
Net earnings applicable to common shares for Q2 2005 were $563 million, or $0.61 per common share, up 1.6% from net earnings of $554 million, or $0.60 per common share, for the same period last year. Included in second-quarter earnings this year were $25 million of net gains on investments and restructuring and other items, composed primarily of a dilution gain relating to our interest in Terre Star, a mobile satellite services company. This compared with net gains of $47 million in Q2 2004. Excluding the impact of these items, net earnings of $538 million, or $0.58 per common share, were up $31 million, or $0.03 per share, representing an increase of 5.5% per share over last year(1). This improvement can be largely attributed to higher EBITDA and net income tax savings resulting from a loss monetization program based on an agreement entered into by Bell Canada and Bell Canada International Inc. in August 2004, offset partly by a significant increase in net benefit plans cost and higher amortization expense. Capital Expenditures Capital expenditures were $914 million this quarter, or 10.7% higher than the same period last year. As a percentage of revenues, capital expenditures increased this quarter to 18.4% from 17.3% last year, reflecting an acceleration in our spending program. This year-over-year increase related to an expansion of our fiber-to-the-node (FTTN) footprint to deliver higher-speed broadband access, information technology (IT) efficiency projects to deliver cost savings, as well as a return to more normal spending levels at Aliant after its labour disruption in 2004. Cash from operating activities and free cash flow(1)
Cash from operating activities in the second quarter was $1,450 million, representing a 29% or $326 million improvement over Q2 2004. This increase was mainly due to:
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(1) |
EBITDA, free cash flow and net earnings excluding the impact of restructuring and other items and net gains on investments do not have any standardized meaning prescribed by Canadian generally accepted accounting principles (GAAP) and are therefore unlikely to be comparable to similar measures presented by other companies. For more details on these measures, including a reconciliation to the most comparable GAAP measure, please refer to the section entitled Non-GAAP Financial Measures contained in BCE Inc.’s 2005 Second Quarter MD&A dated August 2, 2005. |
4 Bell Canada Enterprises 2005 Quarterly Report
On a year-to-date basis, cash from operating activities was relatively flat at $2,389 million, compared with $2,384 million for the first six months of 2004. This resulted mainly from an improvement in cash earnings and accounts receivable collections, offset substantially by a number of impacts, which more than offset our growth in EBITDA and lower interest payments. These impacts were:
Our free cash flow this quarter was $138 million, up from free cash flow of $64 million in the second quarter of last year. The increase was attributable to higher cash from operating activities, offset partially by a number of anticipated items, including:
In the first six months of 2005, free cash flow was negative $24 million down from free cash flow of $320 million in the same period last year. |
5 Bell Canada Enterprises 2005 Quarterly Report
Managements Discussion and Analysis
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In
this MD&A, we, us, our
and BCE
mean BCE Inc., its
subsidiaries and joint ventures. |
This managements discussion and analysis of financial condition and results of operations (MD&A) comments on BCEs operations, performance and financial condition for the three months (Q2) and six months (YTD) ended June 30, 2005 and 2004. About Forward-Looking Statements Securities laws encourage companies
to disclose forward-looking information so that investors can get a better
understanding of the companys future prospects and make informed
investment decisions.
Risks that could cause our actual results to materially differ from our current expectations are discussed throughout this MD&A and, in particular, in Risks That Could Affect Our Business. EBITDA The term EBITDA does not have any
standardized meaning prescribed by Canadian generally accepted accounting
principles (GAAP). It is therefore unlikely to be comparable to similar
measures presented by other companies. EBITDA is presented on a consistent
basis from period to period. |
6 Bell Canada Enterprises 2005 Quarterly Report
The
most comparable Canadian GAAP financial measure is operating income. The
tables below are reconciliations of EBITDA to operating income on a consolidated
basis for BCE and Bell Canada. |
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YTD | YTD | ||||||||
BCE |
Q2 2005 | Q2 2004 | 2005 | 2004 | ||||||
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EBITDA |
2,001 | 1,953 | 3,939 | 3,797 | ||||||
Amortization expense |
(792 | ) | (769 | ) | (1,565 | ) | (1,536 | ) | ||
Net benefit plans cost |
(104 | ) | (65 | ) | (207 | ) | (128 | ) | ||
Restructuring and other items |
(5 | ) | (14 | ) | (1 | ) | (17 | ) | ||
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Operating income |
1,100 | 1,105 | 2,166 | 2,116 | ||||||
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YTD | YTD | ||||||||
BELL CANADA |
Q2 2005 | Q2 2004 | 2005 | 2004 | ||||||
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EBITDA |
1,839 | 1,821 | 3,654 | 3,576 | ||||||
Amortization expense |
(746 | ) | (733 | ) | (1,478 | ) |
(1,465 | ) | ||
Net benefit plans cost |
(107 | ) | (58 | ) | (213 | ) | (118 | ) | ||
Restructuring and other items |
(5 | ) | (13 | ) | | (16 | ) | |||
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Operating income |
981 | 1,017 | 1,963 | 1,977 | ||||||
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Operating Income Before Restructuring and Other Items The
term operating income before restructuring and other items does not have
any standardized meaning prescribed by Canadian GAAP. It is therefore
unlikely to be comparable to similar measures presented by other companies. |
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YTD | YTD | ||||||||
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Q2 2005 | Q2 2004 | 2005 | 2004 | ||||||
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Operating income |
1,100 | 1,105 | 2,166 | 2,116 | ||||||
Restructuring and other items |
5 | 14 | 1 | 17 | ||||||
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Operating income before restructuring and other items |
1,105 | 1,119 | 2,167 | 2,133 | ||||||
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Net Earnings Before Restructuring and Other Items and Net Gains on Investments The term net earnings before restructuring
and other items and net gains on investments does not have any standardized
meaning prescribed by Canadian GAAP. It is therefore unlikely to be comparable
to similar measures presented by other companies. |
|
Q2 2005 | Q2 2004 | YTD 2005 | YTD 2004 | ||||||||||||||
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PER | PER | PER | PER | ||||||||||||||
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TOTAL | SHARE | TOTAL | SHARE | TOTAL | SHARE | TOTAL | SHARE | ||||||||||
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Net earnings applicable to common shares |
563 | 0.61 | 554 | 0.60 | 1,037 | 1.12 | 1,024 | 1.11 | ||||||||||
Restructuring and other items |
3 | | (16 | ) | (0.02 | ) | 1 | | (15 | ) | (0.02 | ) | ||||||
Net gains on investments |
(28 | ) | (0.03 | ) | (31 | ) | (0.03 | ) | (28 | ) | (0.03 | ) | (38 | ) | (0.04 | ) | ||
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Net earnings before restructuring and other items and net gains on investments |
538 | 0.58 | 507 | 0.55 | 1,010 | 1.09 | 971 | 1.05 |
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7 Bell Canada Enterprises 2005 Quarterly Report
Managements Discussion and Analysis
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Free
Cash Flow |
Free
Cash Flow The
term free cash flow does not have any standardized meaning prescribed
by Canadian GAAP. It is therefore unlikely to be comparable to similar
measures presented by other companies. Free cash flow is presented on
a consistent basis from period to period. |
|
YTD | YTD | ||||||||
|
Q2 2005 | Q2 2004 | 2005 | 2004 | ||||||
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Cash from operating activities |
1,450 | 1,124 | 2,389 | 2,384 | ||||||
Capital expenditures |
(914 | ) | (826 |
) |
(1,651 |
) | (1,507 | ) | ||
Total dividends paid |
(387 | ) | (350 | ) | (736 | ) | (692 | ) | ||
Other investing activities |
(11 | ) | 116 | (26 | ) | 135 | ||||
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Free cash flow |
138 | 64 | (24 | ) | 320 | |||||
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Our strategy is to deliver unrivalled integrated communication services to customers and to take a leadership position in setting the standard in Internet Protocol (IP). During the quarter, we made significant progress on each of our three key strategic priorities. 1) Delivering an enhanced customer experience while significantly lowering costs (our Galileo program) In our Consumer segment:
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8 Bell Canada Enterprises 2005 Quarterly Report
Overall, our various Galileo initiatives led to cost reductions this quarter of $122 million, bringing total savings for the first six months of 2005 to approximately $242 million, which keeps us on track to achieve our target run-rate savings of $500-$600 million for 2005. These savings have come primarily from:
2) Deliver abundant bandwidth to enable next-generation services We continued our
fiber-to-the-node (FTTN) rollout by deploying another 593 neighbourhood
nodes, raising the total number of nodes served to 1,355. Our objective
is to deploy 2,000 nodes by the end of 2005. 3) Create next-generation services to drive future growth Our Consumer segment:
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9 Bell Canada Enterprises 2005 Quarterly Report
Managements Discussion and Analysis
|
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Our small and medium-sized businesses (SMB) unit:
Government of Alberta Agreement In June 2005, Bell Canada and the Government of Alberta (GOA) entered into a new agreement whereby completion of the construction of a next-generation network (SuperNet) and service acceptance by the GOA is scheduled for September 2005. Under the terms of the agreement, Bell Canada assumes ownership of the Extended Area Network (EAN) and provides rights of use to the GOA under indefeasible right-of-use agreements. The SuperNet, which will provide high-speed Internet and broadband capabilities, is comprised of a Base Area Network (BAN), covering 27 of Albertas largest communities, and the EAN, reaching over 400 communities in rural Alberta. In conjunction with this agreement, Bell Canada also entered into a new revenue sharing agreement with the GOA and Axia NetMedia Corporation, the access manager for SuperNet. The new agreements replace the initial contracts entered into in 2001. Labour agreements On July 18, 2005,
Bell Canada reached a new four-year agreement with approximately
10,000 clerical and associated employees represented by the Canadian
Telecommunications Employees Association (CTEA). |
10 Bell Canada Enterprises 2005 Quarterly Report
Quarterly
Financial Information The
table below shows selected consolidated financial data for the eight most
recently completed quarters. This information has been prepared on the
same basis as the annual consolidated financial statements, but is unaudited. |
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2005 |
2004 |
2003 |
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Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | Q4 | Q3 | ||||||||||
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Operating revenues |
4,980 | 4,859 | 4,986 | 4,778 | 4,779 | 4,638 | 4,815 | 4,624 | ||||||||||
EBITDA |
2,001 | 1,938 | 1,831 | 1,936 | 1,953 | 1,844 | 1,847 | 1,895 | ||||||||||
Amortization expense |
(792 | ) | (773 | ) | (803 | ) | (769 | ) | (769 | ) | (767 | ) | (775 | ) | (801 | ) | ||
Net benefit plans cost |
(104 | ) | (103 | ) | (67 | ) | (61 | ) | (65 | ) | (63 | ) | (46 | ) | (44 | ) | ||
Restructuring and other items |
(5 | ) | 4 | (126 | ) | (1,081 | ) | (14 | ) | (3 | ) | (13 | ) | (1 | ) | |||
|
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Operating income |
1,100 | 1,066 | 835 | 25 | 1,105 | 1,011 | 1,013 | 1,049 | ||||||||||
Earnings from continuing operations |
581 | 492 | 367 | 102 | 544 | 485 | 486 | 453 | ||||||||||
Discontinued operations |
| (1 | ) | (2 | ) | (2 | ) | 27 | 3 | (86 | ) | 11 | ||||||
Extraordinary gain |
| | 69 | | | | | | ||||||||||
Net earnings |
581 | 491 | 434 | 100 | 571 | 488 | 400 | 464 | ||||||||||
Net earnings applicable to common shares |
563 | 474 | 417 | 82 | 554 | 470 | 386 | 446 | ||||||||||
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Included in net earnings: |
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Net gains on investments |
||||||||||||||||||
Continuing operations |
28 | 1 | 64 | 325 | | | 84 | | ||||||||||
Discontinued operations |
| (1 | ) | (2 | ) | (2 | ) | 31 | 7 | (94 | ) | 8 | ||||||
Restructuring and other items |
(3 | ) | 2 | (62 | ) | (725 | ) | 16 | (1 | ) | (9 | ) | 6 | |||||
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Net earnings per common share |
||||||||||||||||||
Continuing operations basic |
0.61 | 0.51 | 0.38 | 0.09 | 0.57 | 0.51 | 0.50 | 0.48 | ||||||||||
Continuing operations diluted |
0.61 | 0.51 | 0.38 | 0.09 | 0.57 | 0.51 | 0.50 | 0.47 | ||||||||||
Net earnings basic |
0.61 | 0.51 | 0.45 | 0.09 | 0.60 | 0.51 | 0.41 | 0.49 | ||||||||||
Net earnings diluted |
0.61 | 0.51 | 0.45 | 0.09 | 0.60 | 0.51 | 0.41 | 0.48 | ||||||||||
Average number of common shares outstanding (millions) |
926.6 | 926.2 | 925.3 | 924.6 | 924.3 | 924.1 | 923.4 | 921.5 | ||||||||||
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11 Bell Canada Enterprises 2005 Quarterly Report
Managements
Discussion and Analysis
|
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Financial
Results Analysis This section provides detailed information and analysis about our performance in Q2 2005 and YTD 2005 compared with Q2 2004 and YTD 2004. It focuses on our consolidated operating results and provides financial information for each of our operating segments. |
Consolidated
Analysis |
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Q2 2005 | Q2 2004 | % CHANGE | YTD 2005 | YTD 2004 | % CHANGE | ||||||||
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Operating revenues |
4,980 | 4,779 | 4.2% | 9,839 | 9,417 | 4.5% | ||||||||
Operating expenses |
(2,979 | ) | (2,826 | ) | (5.4% | ) | (5,900 | ) | (5,620 | ) | (5.0% | ) | ||
|
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EBITDA |
2,001 | 1,953 | 2.5% | 3,939 | 3,797 | 3.7% | ||||||||
Amortization expense |
(792 | ) | (769 | ) | (3.0% | ) | (1,565 | ) | (1,536 | ) | (1.9% | ) | ||
Net benefit plans cost |
(104 | ) | (65 | ) | (60.0% | ) | (207 | ) | (128 | ) | (61.7% | ) | ||
Restructuring and other items |
(5 | ) | (14 | ) | 64.3% | (1 | ) | (17 | ) | 94.1% | ||||
|
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Operating income |
1,100 | 1,105 | (0.5% | ) | 2,166 | 2,116 | 2.4% | |||||||
Other income |
24 | 24 | 0.0% | 31 | 60 | (48.3% | ) | |||||||
Interest expense |
(247 | ) | (253 | ) | 2.4% | (494 | ) | (505 | ) | 2.2% | ||||
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Pre-tax earnings from continuing operations |
877 | 876 | 0.1% | 1,703 | 1,671 | 1.9% | ||||||||
Income taxes |
(223 | ) | (293 | ) | 23.9% | (494 | ) | (555 | ) | 11.0% | ||||
Non-controlling interest |
(73 | ) | (39 | ) | (87.2% | ) | (136 | ) | (87 | ) | (56.3% | ) | ||
|
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Earnings from continuing operations |
581 | 544 | 6.8% | 1,073 | 1,029 | 4.3% | ||||||||
Discontinued operations |
| 27 | (100.0% | ) | (1 | ) | 30 | (103.3% | ) | |||||
|
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Net earnings |
581 | 571 | 1.8% | 1,072 | 1,059 | 1.2% | ||||||||
Dividends on preferred shares |
(18 | ) | (17 | ) | (5.9% | ) | (35 | ) | (35 | ) | 0.0% | |||
|
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Net earnings applicable to common shares |
563 | 554 | 1.6% | 1,037 | 1,024 | 1.3% | ||||||||
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EPS |
0.61 | 0.60 | 1.7% | 1.12 | 1.11 | 0.9% | ||||||||
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Our revenues increased by 4.2% in the second quarter to $4,980 million and by 4.5% to $9,839 million on a year-to-date basis. The growth delivered this quarter reflected improved revenue performance across all of our segments except Aliant. At Bell Canada this was driven primarily by higher Consumer revenues attributable to stronger growth in wireless, video and Internet access services, as well as from continuing solid results within the Business segment, due to focused execution of our Virtual Chief Information Officer (VCIO), VAS and IP strategies and recent acquisitions, which has increased data revenues. Although our second quarter revenue growth was tempered slightly by Aliants performance, due to lower directory revenues, on a year-to-date basis Aliant contributed positively to our overall revenue growth. The Other BCE segment also contributed significantly to higher revenues, with double-digit growth at Telesat Canada (Telesat) and CGI Group Inc. (CGI) and high single-digit growth at Bell Globemedia Inc. (Bell Globemedia). Operating income |
12 Bell Canada Enterprises 2005 Quarterly Report
We
achieved operating income of $1,100 million, down 0.5% or $5 million
compared with the same period last year. Despite higher revenues and cost
savings from our Galileo program and prudent expense management at Aliant,
the year-over-year decline was driven mainly by increased acquisition
costs brought about by substantially stronger subscriber growth in wireless,
video and high-speed Internet services, as well as by higher net benefit
plans cost and amortization expense. For the first half of 2005,
however, operating income increased 2.4% to $2,166 million, compared
with the same six months last year. Stronger revenue growth, particularly
at Bell Globemedia, Telesat and CGI, more than offset higher subscriber
acquisition costs, higher wireless bad debt expense in Q1 stemming from
billing delays associated with our billing system conversion last year,
and increases in net benefit plans cost and amortization expense.
Our EBITDA for the
second quarter and first half of 2005 was $2,001 million and
$3,939 million, respectively, corresponding to increases of 2.5%
and 3.7%, compared with the same periods last year, reflecting increases
in all segments. Similarly, Bell Canada EBITDA increased by 1.0%
versus Q2 2004 to reach $1,839 million in the quarter, while
on a year-to-date basis EBITDA was up 2.2% to $3,654 million, reflecting
revenue improvements in wireless and video, offset by lower local and
access and data revenues within our wholesale operations. |
13 Bell Canada Enterprises 2005 Quarterly Report
|
Managements Discussion and Analysis Amortization expenseAmortization expense of $792 million in Q2 2005 and $1,565 million on a year-to-date basis in 2005 represent increases of 3.0% and 1.9%, respectively, compared to the same periods last year. This was a result of an increase in our capital asset base from capital spending that continues to be higher than asset retirements. Net benefit plans costThe net benefit plans cost of $104 million in Q2 2005 and $207 million on a year-to-date basis in 2005 represent increases of 60% and 62%, respectively, compared to the same periods last year. The increases resulted mainly from:
Restructuring and other items We recorded restructuring
and other items of $5 million in Q2 2005 and $1 million
on a year-to-date basis in 2005, which consisted of charges of $5 million
in Q2 2005 and $26 million on a year-to-date basis in 2005.
These charges were mainly for relocating employees and closing real estate
facilities that are no longer needed because of the reduction in the workforce
from the 2004 employee departure program. This was partly offset
by a $25 million credit in Q1 2005 for the reversal of restructuring
provisions that were no longer necessary, since the actual payments made
to employees were lower than estimated.
Net earnings / Earnings per Share (EPS) Net earnings applicable
to common shares for Q2 2005 were $563 million, or $0.61 per
common share, 1.6% higher than net earnings of $554 million, or $0.60
per common share, for the same period last year. Included in the second
quarter earnings this year were $25 million of net gains on investments
and restructuring and other items, composed primarily of a dilution gain
relating to our interest in TerreStar Networks Inc., a mobile satellite
services company, compared with $47 million in Q2 2004. Excluding
the impact of these items, net earnings of $538 million, or $0.58
per common share, were up $31 million, or $0.03 per share, representing
an increase of 5.5% over last year. |
14 Bell Canada Enterprises 2005 Quarterly Report
Segmented
Analysis
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|
Q2 2005 | Q2 2004 | % CHANGE | YTD 2005 | YTD 2004 | % CHANGE | ||||||||
|
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Operating revenues |
||||||||||||||
Consumer |
1,890 | 1,858 | 1.7% | 3,746 | 3,683 | 1.7% | ||||||||
Business |
1,499 | 1,441 | 4.0% | 2,977 | 2,876 | 3.5% | ||||||||
Aliant |
518 | 526 | (1.5% | ) | 1,042 | 1,030 | 1.2% | |||||||
Other Bell Canada |
485 | 468 | 3.6% | 964 | 942 | 2.3% | ||||||||
Inter-segment eliminations |
(134 | ) | (121 | ) | (10.7% | ) | (262 | ) | (253 | ) | (3.6% | ) | ||
|
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Total Bell Canada |
4,258 | 4,172 | 2.1% | 8,467 | 8,278 | 2.3% | ||||||||
Other BCE |
835 | 722 | 15.7% | 1,583 | 1,373 | 15.3% | ||||||||
Inter-segment eliminations |
(113 | ) | (115 | ) | 1.7% | (211 | ) | (234 | ) | 9.8% | ||||
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Total operating revenues |
4,980 | 4,779 | 4.2% | 9,839 | 9,417 | 4.5% | ||||||||
|
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Operating income |
||||||||||||||
Consumer |
552 | 560 | (1.4% | ) | 1,078 | 1,086 | (0.7% | ) | ||||||
Business |
221 | 227 | (2.6% | ) | 461 | 468 | (1.5% | ) | ||||||
Aliant |
99 | 92 | 7.6% | 186 | 174 | 6.9% | ||||||||
Other Bell Canada |
109 | 138 | (21.0% | ) | 238 | 249 | (4.4 | %) | ||||||
|
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Total Bell Canada |
981 | 1,017 | (3.5% | ) | 1,963 | 1,977 | (0.7% | ) | ||||||
Other BCE |
119 | 88 | 35.2% | 203 | 139 | 46.0% | ||||||||
|
||||||||||||||
Total operating income |
1,100 | 1,105 | (0.5% | ) | 2,166 | 2,116 | 2.4% | |||||||
|
||||||||||||||
|
||||||||||||||
Consumer revenues grew by 1.7% both this quarter and year-to-date to $1,890 million and $3,746 million, respectively, reflecting continued strength in our growth businesses driven by substantial increases in our wireless, video and high-speed Internet subscriber bases. Growth in these product lines more than offset declines in long distance and local and access revenues. Wireless Consumer wireless
revenues increased year-over-year both this quarter and year-to-date,
mainly as a result of a higher average number of customers compared with
last year. Consumer wireless revenue growth regained momentum this quarter
fuelled by subscriber growth and new rate plans. In addition, the billing
and retention credits issued in Q1 to compensate customers for billing
errors and delays that occurred following implementation of the new billing
platform have now returned to normal levels.
|
15 Bell Canada Enterprises 2005 Quarterly Report
Managements
Discussion and Analysis Video
Our video revenues
grew by 11.8% this quarter to $236 million from $211 million
last year, as a result of a higher average number of subscribers and slightly
higher average revenue per user (ARPU). Similarly, on a year-to-date basis,
our video revenues grew by 9.3% to $457 million. Data Consumer data revenues
grew this quarter and year-to-date driven by growth of 24% in our High-Speed
Internet subscriber base and an increase in revenues from our Sympatico.MSN.ca
web portal and Bell Sympatico value-added services (VAS). |
16 Bell Canada Enterprises 2005 Quarterly Report
Wireline Local and access
revenues declined this quarter and year-to-date compared with the same
periods last year due mainly to NAS declines (leading to both lower NAS
revenues and related SmartTouch feature revenues), partly offset by higher
revenues from wireline maintenance plans. NAS decreased both this quarter
and year-to-date as a result of losses to competitive local exchange carriers
(CLECs), cable telephony offerings, VoIP providers, continued pressure
from growth in high-speed Internet access which reduces the need for second
telephone lines, and customers substituting wireline with wireless telephone
service. The rate of year-over-year NAS losses increased this quarter
as a competitor expanded the footprint of its low-priced cable telephony
offering in certain of our Québec markets. Consumer operating income The Consumer segment achieved operating income of $552 million this quarter and $1,078 million year-to-date, representing decreases of 1.4% and 0.7%, respectively, compared with the same periods last year. Solid revenue growth and savings from cost-reduction initiatives, which contributed significantly to EBITDA performance in 2005, were more than offset by higher acquisition costs from wireless and video subscriber growth and year-over-year increases in net benefit plans cost and amortization expense. Wireless bad debt expense, which negatively impacted results in Q1, returned to normal levels in Q2. Business revenues Business segment revenues for the three and six months ended June 30, 2005 were $1,499 million and $2,977 million, respectively, representing increases of 4.0% and 3.5% compared with the same periods one year earlier. Increases in data and wireless revenues were partially offset by declines in local and access, long distance and terminal sales and other revenues. Enterprise Revenues from enterprise
customers increased this quarter and on a year-to-date basis, as increases
in data and wireless more than offset declines in local and access, long
distance and terminal sales and other revenues. |
17 Bell Canada Enterprises 2005 Quarterly Report
Managements Discussion and Analysis The
trend towards IP continued throughout the quarter with 17 new customers
implementing IP Virtual Private Networks (IPVPN), including the Jean Coutu Group,
the City of Toronto, PepsiCo Canada, and Gowling Lafleur Henderson
LLP. This brought the total number of customers implementing IPVPN networks
as of the end of Q2 2005 to 111. SMB Revenues from SMB customers increased this quarter and on a year-to-date basis as increases in data, wireless and terminal sales and other revenues more than compensated for the decreases in long distance and local and access revenues. Data revenue growth was fuelled by acceleration in DSL high-speed Internet access service connections and continued strong VAS sales stemming from the successful execution of our VCIO strategy, despite a highly competitive market environment. Subscriptions to VAS increased by an additional 12,000 subscribers, bringing the total number at the end of the quarter to 106,000. The recent business acquisitions of Nexxlink Technologies Inc. (Nexxlink) and CSB, combined with improved rates of growth from Accutel Conferencing Systems Inc. (Accutel) and Charon Systems Inc. (Charon) acquired in 2004, contributed significantly to this quarters growth in data, terminal sales and other revenue. Long distance revenues decreased, due mainly to a combination of volume and competitive pricing pressures, and our weakening pay-phone business resulting from wireless and Internet substitution. Similarly, local and access revenues were also lower due to pressure from our declining payphone business and lower wireline access installation fees due to the Entourage labour dispute, which was settled in July. Bell West Bell West continued to grow its Enterprise and SMB customer bases, resulting in a larger volume of customer premise equipment (CPE) sales, which translated directly into higher terminal sales and other revenue for both the second quarter and first half of 2005. Local and access and long distance revenues also increased this quarter and year-to-date due to expansion of the customer base. However, data revenues decreased, reflecting lower construction revenue in 2005 compared with last year from a contract to build a next-generation network for the GOA. Group Telecom In November 2004, we acquired the Canadian operations of 360networks Corporation, including GT Group Telecom Inc., (collectively 360networks) as well as certain U.S. network assets. This acquisition increased our customer base and gave us an extensive fibre network across major cities in Western Canada. The Business segment now reflects the retail portion of this acquisition, operating in Western Canada as the Group Telecom unit within Bell Canada. Business operating income Business segment operating income for the second quarter and first half of 2005 decreased by 2.6% and 1.5%, respectively, to $221 million and $461 million, as a result of higher net benefits plans cost and amortization expense, which more than offset EBITDA improvements stemming from solid revenue growth and the impact of cost savings initiatives. |
18 Bell Canada Enterprises 2005 Quarterly Report
In
the Enterprise unit, operating income increased this quarter and year-to-date,
reflecting revenue growth and cost-saving initiatives, which were partially
offset by the higher amortization expense and net benefit plans cost. Aliant revenues
Aliant segment revenues
of $518 million for the second quarter decreased by 1.5% compared
with the same period last year. Continued strong growth in wireless and
Internet services partially offset declines in other areas due to regulatory
restrictions, the impacts of competition, and lower directory advertising
revenues. However, on a year-to-date basis, revenues were $1,042 million,
or 1.2% higher than the same period last year, due to stronger product
sales in Q1. |
19 Bell Canada Enterprises 2005 Quarterly Report
Managements Discussion and Analysis Aliant operating incomeAliants operating income was $99 million in the second quarter and $186 million year-to-date, reflecting an increase of $7 million, or 7.6%, and $12 million, or 6.9%, respectively, compared with the same periods last year. The full impact of growth and recovery from the 2004 labour disruption was partially offset by the impact of the CDN decision and an increase in pension and other post-employment benefits costs. Operating expense increases required to drive revenue growth are being contained by sound expense management, including the cost savings from Aliants 2004 voluntary early retirement incentive program. Other Bell Canada revenuesOther Bell Canada segment revenues of $485 million for Q2 2005 and $964 million for the first two quarters of this year, reflected increases of $17 million, or 3.6%, and $22 million, or 2.3%, respectively, compared with the same periods last year. These improvements were due mainly to higher revenues at our wholesale unit, resulting from the acquisition of the wholesale portion of 360networks in the fourth quarter of last year and a favourable ruling by the CRTC with respect to subsidies for serving high cost areas at Télébec Limited Partnership (Télébec) in Q1. This was partly offset by lower revenues of $15.9 million in Q2 and $25.8 million year-to-date that resulted from the CDN decision, and continued pressure on data revenues due to competitive pricing and customers migrating services to their own network facilities. The increase in the second quarter also reflected the favourable impact on revenues from the early termination of a cross-border facilities contract. Other Bell Canada operating income Operating income for the Other Bell Canada segment was $109 million this quarter, down 21% from Q2 2004, while on a year-to-date basis operating income was down 4.4% to $238 million when compared with the same period last year. The declines resulted mainly from incremental salaries and higher cost of goods sold associated with the wholesale operations of 360networks that was acquired in Q4 2004, the impact of the CDN decision, and a slight increase in operating expenses at Télébec and NorthernTel Limited Partnership (NorthernTel). These impacts were partially offset by various cost saving initiatives and improvement in bad debt expense. In addition, the year-to-date decrease was positively impacted in Q1 2005 by a $25 million credit for the reversal of restructuring provisions that were no longer necessary since the actual payments were lower than expected, which offset a $24 million charge for relocating employees and closing real estate facilities following our employee departure program. Other BCE Revenues The Other BCE segment
revenues grew by 15.7% this quarter to $835 million and by 15.3%
to 1,583 million on a year-to-date basis, compared with the same
periods in 2004. In each case, the increase reflected higher revenues
at Bell Globemedia, Telesat and CGI. |
|
Q2 2005 | Q2 2004 | % CHANGE | YTD 2005 | YTD 2004 | % CHANGE | ||||||||
|
||||||||||||||
Bell Globemedia |
399 | 371 | 7.5% | 755 | 713 | 5.9% | ||||||||
Telesat |
137 | 85 | 61.2% | 245 | 169 | 45.0% | ||||||||
CGI |
275 | 248 | 10.9% | 548 | 462 | 18.6% | ||||||||
Other |
24 | 18 | 33.3% | 35 | 29 | 20.7% | ||||||||
|
||||||||||||||
Other BCE revenues |
835 | 722 | 15.7% | 1,583 | 1,373 | 15.3% | ||||||||
|
||||||||||||||
|
20 Bell Canada Enterprises 2005 Quarterly Report
Bell Globemedias
revenues for the quarter were $399 million, up 7.5% from Q2 of
last year. On a year-to-date basis, Bell Globemedias revenues
grew 5.9% to $755 million. Television advertising revenues grew by
10.4% this quarter and by 8.2% on a year-to-date basis, reflecting the
strength of CTVs schedule, which included 18 of the top 20 regularly
scheduled programs from September 2004 to early July 2005. CTVs
telecast of the Live8 concert was one of the biggest television events
in CTV history, reaching 10.5 million viewers, or approximately one
in three Canadians. Strong growth in advertising revenues in conventional
and specialty television helped to offset the loss of advertising from
hockey broadcasts on our sports specialty channels TSN and RDS. Other BCE operating income Operating income
for the Other BCE segment grew by 35% this quarter to $119 million
and by 46% to $203 million on a year-to-date basis, reflecting growth
in operating income at Bell Globemedia and Telesat. This was partly
offset by operating income declines at CGI. |
21 Bell Canada Enterprises 2005 Quarterly Report
Managements Discussion and Analysis Product Line
Analysis |
||||||||||||||
|
Q2 2005 | Q2 2004 | % CHANGE | YTD 2005 | YTD 2004 | % CHANGE | ||||||||
|
||||||||||||||
Local and access |
1,368 | 1,401 | (2.4% | ) | 2,736 | 2,780 | (1.6% | ) | ||||||
Long distance |
518 | 572 | (9.4% | ) | 1,056 | 1,178 | (10.4% | ) | ||||||
Wireless |
771 | 698 | 10.5% | 1,484 | 1,349 | 10.0% | ||||||||
Data |
966 | 870 | 11.0% | 1,917 | 1,762 | 8.8% | ||||||||
Video |
236 | 211 | 11.8% | 457 | 418 | 9.3% | ||||||||
Terminal sales and other |
399 | 420 | (5.0% | ) | 817 | 791 | 3.3% | |||||||
|
||||||||||||||
Total Bell Canada |
4,258 | 4,172 | 2.1% | 8,467 | 8,278 | 2.3% | ||||||||
|
||||||||||||||
|
||||||||||||||
Local
and access revenues of $1,368 million for the quarter and $2,736 million
year-to-date, decreased by 2.4% and 1.6%, respectively, compared with
the same periods in 2004 mainly as a result of lower network access
services (NAS) and lower SmartTouch feature revenues, partly offset by
gains from wireline insurance and maintenance plans.
Long distance revenues
were $518 million for the quarter and $1,056 million for the
first six months of 2005, reflecting year-over-year decreases of
9.4% and 10.4%, respectively, compared with the same periods in 2004.
Lower long distance revenues affected all our Bell Canada related
segments, particularly our Consumer and Business segments. |
22 Bell Canada Enterprises 2005 Quarterly Report
Wireless
Wireless service
revenues grew 10.5% this quarter and 10.0% year-to-date to $771 million
and $1,484 million, respectively, compared with the same periods
last year. In each case, the year-over-year improvement was driven by
subscriber growth of 11.1%. Blended ARPU remained stable on both a quarterly
and year-to-date basis at $50 and $48 per month, respectively. |
|
Q2 2005 | Q2 2004 | % CHANGE | YTD 2005 | YTD 2004 | % CHANGE | ||||||||
|
||||||||||||||
ARPU ($/month) |
50 | 50 | | 48 | 48 | | ||||||||
Postpaid |
61 | 62 | (1.6% | ) | 59 | 60 | (1.7% | ) | ||||||
Prepaid |
16 | 11 | 45.5% | 13 | 11 | 18.2% | ||||||||
Cellular & PCS Gross |
||||||||||||||
Activations (k) |
380 | 269 | 41.2% | 657 | 530 | 24.0% | ||||||||
Postpaid |
280 | 205 | 36.6% | 473 | 409 | 15.6% | ||||||||
Prepaid |
100 | 63 | 58.7% | 184 | 121 | 52.1% | ||||||||
Churn (average per month) |
1.6% | 1.3% | (0.3 | ) pts | 1.6% | 1.3% | (0.3 | ) pts | ||||||
Postpaid |
1.4% | 1.1% | (0.3 | ) pts | 1.5% | 1.1% | (0.4 | ) pts | ||||||
Prepaid |
2.1% | 1.9% | (0.2 | ) pts | 2.0% | 1.8% | (0.2 | ) pts | ||||||
Cellular & PCS Net |
||||||||||||||
Activations (k) (1) |
146 | 95 | 53.7% | 183 | 187 | (2.1% | ) | |||||||
Postpaid (1) |
117 | 78 | 50.0% | 112 | 147 | (23.8% | ) | |||||||
Prepaid (1) |
29 | 17 | 70.6% | 71 | 40 | 77.5% | ||||||||
Cellular & PCS |
||||||||||||||
Subscribers (k) |
5,108 | 4,599 | 11.1% | 5,108 | 4,599 | 11.1% | ||||||||
Postpaid |
3,836 | 3,500 | 9.6% | 3,836 | 3,500 | 9.6% | ||||||||
Prepaid |
1,272 | 1,099 | 15.7% | 1,272 | 1,099 | 15.7% | ||||||||
|
||||||||||||||
|
(1) |
We added 82,000 new customers in Q1 2005 (40,000 postpaid customers and 42,000 prepaid customers) and cancelled 45,000 non-paying postpaid customer accounts. |
23 Bell Canada Enterprises 2005 Quarterly Report
Managements Discussion and Analysis and the effects
of a new tiered prepaid pricing structure introduced last February designed
to stimulate usage by charging customers $0.30 per minute for the first
two minutes with the remainder of the call at $0.05 per minute. During
the quarter, 80% of net additions were on postpaid rate plans. On a year-to-date
basis, our 183,000 net additions were 2.1% lower than the same period
last year as the strong growth experienced in Q2 was more than offset
by the cancellation of 45,000 non-paying customer accounts in Q1
related to our billing system migration and our limited number of postpaid
promotions in the early part of the year. On a year-to-date basis, 61%
of net additions were on postpaid rate plans.
Our data revenues
increased by 11.0% this quarter and by 8.8% on a year-to-date basis to
$966 million and $1,917 million, respectively, compared with
the same periods last year. In each case, the improvement was a result
of growth in high-speed Internet, VAS, and IP-based services, which more
than offset declines from lower construction revenues from the GOA contract,
legacy data revenues, price competition and lower revenues stemming from
the CDN decision totalling $16.3 million in Q2 and $27.7 million
year-to-date. Our growth in VAS was due partly to the business acquisitions
completed over the last twelve months. This quarters results also
reflected the one-time benefit of the early termination of a cross-border
facilities contract. |
24 Bell Canada Enterprises 2005 Quarterly Report
net
additions both this quarter and year-to-date were driven by the introduction
of our Basic Lite service in the Ontario market, as well as by footprint
expansion, focused selling efforts, and improved retention strategies.
The introduction of lower-priced, high-speed services that are geared
towards the price sensitive segments of the market (such as our Basic
Lite service) has expanded the overall high-speed market, stimulating
high-speed service growth and accelerating the rate of erosion of dial-up
Internet services. Our high-speed Internet access footprint in Ontario
and Québec reached 84% of homes and business lines passed at the
end of the second quarter, compared with 81% at the same time last year. See discussion under Consumer Segment. Terminal sales and other Terminal
sales and other revenues decreased by 5.0% this quarter to $399 million,
reflecting lower equipment sales to Enterprise customers and the impact
of consumer promotions on wireless handset revenues. Other income Other income amounted
to $24 million in both Q2 2005 and Q2 2004. In Q2 2005,
the increase in net gains on investments and lower foreign exchange losses
were offset by a $20 million charge relating to the tax loss monetization
program between Bell Canada and BCI (see Related
Party Transactions)
and lower income from cost and equity investments. Other income of $31 million
in the first six months of 2005 was $29 million lower than the
same period in 2004. The $20 million charge relating to the
loss monetization program between Bell Canada and BCI and lower income
from cost and equity investments were partly offset by the increase in
net gains on investments. Interest expense of $247 million in Q2 2005 and $494 million on a year-to-date basis in 2005 represents declines of 2.4% and 2.2%, respectively, compared to the same periods last year. This was a result of lower average debt levels, mainly from the net debt repayments made in the last twelve months, and from lower average interest rates from the refinancing of debt at lower rates. Income taxesIncome taxes of $223 million in Q2 2005 and $494 million on a year-to-date basis in 2005 declined 24% and 11.0%, respectively, compared to the same periods last year. The declines were primarily from $60 million of savings resulting from the loss monetization program between Bell Canada and BCI (see Related Party Transactions). Non-controlling interestNon-controlling interest of $73 million in Q2 2005 and $136 million on a year-to-date basis in 2005 represent increases of 87% and 56%, respectively, compared to the same periods last year. The increases were a result of:
|
25 Bell Canada Enterprises 2005 Quarterly Report
Managements
Discussion and Analysis
|
||||||
Financial
and Capital Management This section tells you how we manage our cash and capital resources to carry out our strategy and deliver financial results. It provides an analysis of our financial condition, cash flows and liquidity on a consolidated basis. |
Discontinued
operations Discontinued operations of $27 million in Q2 2004 and $30 million on a year-to-date basis in 2004 consist mainly of a $26 million net gain on the sale of our 64% interest in Emergis Inc. (Emergis). Financial and Capital Management Capital Structure |
|||||
|
Q2 2005 | Q4 2004 | ||||
|
||||||
Debt due within one year |
1,497 | 1,276 | ||||
Long-term debt |
12,480 | 11,809 | ||||
Less: Cash and cash equivalents |
(380 | ) | (380 | ) | ||
|
||||||
Total net debt |
13,597 | 12,705 | ||||
Non-controlling interest |
2,905 | 2,908 | ||||
Total shareholders equity |
14,478 | 14,024 | ||||
|
||||||
Total capitalization |
30,980 | 29,637 | ||||
|
||||||
Net debt to capitalization |
43.9% | 42.9% | ||||
|
||||||
Outstanding share data (in millions) |
||||||
Common shares |
926.7 | 925.9 | ||||
Stock options |
27.8 | 28.5 | ||||
|
||||||
|
||||||
|
Cash
Flows The
table below is a summary of the flow of cash into and out of BCE. |
||||||||||
|
YTD | YTD | ||||||||
|
Q2 2005 | Q2 2004 | 2005 | 2004 | ||||||
|
||||||||||
Cash from operating activities |
1,450 | 1,124 | 2,389 | 2,384 | ||||||
Capital expenditures |
(914 | ) | (826 | ) |
(1,651 | ) |
(1,507 | ) | ||
Other investing activities |
(11 | ) | 116 | (26 | ) | 135 | ||||
Cash dividends paid on common shares |
(305 | ) | (277 | ) | (583 | ) | (554 | ) | ||
Cash dividends paid on preferred shares |
(22 | ) | (21 | ) | (43 | ) | (43 | ) | ||
Cash dividends paid by subsidiaries to non-controlling interest |
(60 | ) | (52 | ) | (110 | ) | (95 | ) | ||
|
||||||||||
Free cash flow |
138 | 64 | (24 | ) | 320 | |||||
|
||||||||||
Business acquisitions |
(35 | ) | (247 | ) | (118 | ) | (306 | ) | ||
Business dispositions |
| | | 16 | ||||||
Increase in cost and equity investments |
(13 | ) | (8 | ) | (141 | ) | (8 | ) | ||
Decrease in cost and equity investments |
5 | | 7 | 6 | ||||||
Net issuance of equity instruments |
4 | 4 | 13 | 8 | ||||||
Net issuance (repayment) of debt instruments |
(200 | ) | (713 | ) | 346 | (302 | ) | |||
Financing activities of subsidiaries with third parties |
(21 | ) | (12 | ) | (38 | ) | (47 | ) | ||
Other financing activities |
(25 | ) | 32 | (55 | ) | (16 | ) | |||
Cash provided by (used in) discontinued operations |
1 | (54 | ) | 10 | 184 | |||||
|
||||||||||
Net decrease in cash and cash equivalents |
(146 | ) | (934 | ) | | (145 | ) | |||
|
||||||||||
|
26 Bell Canada Enterprises 2005 Quarterly Report
|
Free
cash flow Our free cash flow this quarter was $138 million, up from free cash flow of $64 million in the second quarter of last year mainly due to:
These were partly offset by a number of anticipated items, which included:
Free cash flow was negative $24 million in the first six months of 2005, down from free cash flow of $320 million in the same period in 2004. Year-to-date free cash flow was impacted further by:
Cash from operating activities Cash from operating activities increased 29% or $326 million to $1,450 million in Q2 2005, compared to Q2 2004. This was mainly a result of:
On a year-to-date basis, cash from operating activities was flat at $2,389 million in the first six months of 2005 compared to $2,384 million for the same period last year. This was mainly a result of improvements in cash earnings and accounts receivable collections as explained above, which were substantially offset by:
Capital expenditures were $914 million in Q2 2005, or 18.4% of revenues. This was 10.7% higher than the capital expenditures of $826 million, or 17.3% of revenues, in Q2 2004. On a year-to-date basis, capital expenditures were $1,651 million in the first six months of 2005, or 16.8% of revenues. This was 9.6% higher than the capital expenditures of $1,507 million, or 16.0% of revenues, in the same period last year. The increases reflect the strategic investments in the Consumer segment, which include the FTTN rollout, VDSL deployment, IPTV platform, the acquisition of spectrum licences, and a return to more normal spending levels at Aliant after its labour disruption in 2004. Other investing activities Cash
from other investing activities decreased by $127 million in Q2 2005,
compared to Q2 2004, and by $161 million in the first six months
of 2005, compared to the same period last year. In 2004, cash
from other investing activities included insurance proceeds that Telesat
received for a malfunction on the Anik F1 satellite, amounting to
$136 million in Q2 2004 and $179 million in the first six
months of 2004. |
27 Bell Canada Enterprises 2005 Quarterly Report
Managements Discussion and Analysis Cash dividends paid on common shares We paid a dividend
of $0.33 per common share in Q2 2005, which is $0.03 more than the
dividend we paid in Q2 2004. On a year-to-date basis, we paid $0.63
per common share in the first six months of 2005, compared to $0.60
per common share in the same period in 2004. We invested $35 million
in business acquisitions in Q2 2005 and $118 million in the
first six months of 2005. This consisted mainly of Bell Canadas
acquisition of Nexxlink for $74 million and a number of other businesses.
Increase in cost and equity investments In Q1 2005, Bell Canada invested US$100 million for an approximate 12% interest in Clearwire Corporation, a privately-held company that offers advanced IP-based wireless broadband communications services. Bell Canada is now Clearwires exclusive strategic partner in the U.S. and preferred provider beyond North America of VoIP and other value-added IP services and applications. Debt instruments We repaid $200 million
of debt, net of issues, in Q2 2005. The repayments included $600 million
in debentures at Bell Canada and a $35 million reduction in
Bell Globemedias borrowings under its credit facilities. The
issuances consisted mainly of $150 million in medium-term notes at
Aliant and increased borrowings in notes payable and bank advances of
$341 million, mainly at Bell Canada. |
28 Bell Canada Enterprises 2005 Quarterly Report
Cash relating to discontinued operations Cash provided by discontinued operations was $184 million in the first six months of 2004. This consisted mainly of net cash proceeds of $315 million from the sale of Emergis Inc. (Emergis) and $285 million from the sale of Emergis U.S. health operations and $96 million of cash generated from Emergis operations. This was partly offset by the deconsolidation of Emergis cash on hand of $512 million at December 31, 2003. Credit Ratings The table below
lists our key credit ratings at August 2, 2005. On May 4, 2005,
S&P(1)
and DBRS(2) confirmed
their ratings for BCE Inc. and Bell Canada, but revised their
respective outlooks from stable to negative. On May 16, 2005,
Moodys(3)
confirmed
its ratings for BCE Inc. and Bell Canada, but revised its outlook
from stable to negative. |
|||||||||||||
|
BCE INC. | BELL CANADA | |||||||||||
|
S&P | DBRS | MOODYS | S&P | DBRS | MOODYS | |||||||
|
|||||||||||||
Commercial paper |
A-1 (mid) | R-1 (low) / stable | P-2 / stable | A-1 (mid) | R-1 (mid) / negative | P-2 / stable | |||||||
Extendable commercial notes |
A-1 (mid) | R-1 (low) / stable | | A-1 (mid) | R-1 (mid) / negative | | |||||||
Long-term debt |
A- / negative | A / negative | Baa1 / negative | A / negative | A (high) / negative | A3 / negative | |||||||
Preferred shares |
P-2 (high) | Pfd-2 / negative | | P-2 (high) | Pfd-2 (high) / negative | | |||||||
|
|||||||||||||
|
|||||||||||||
(1)
Standard & Poors, a division of The McGraw Hill Companies, Inc. Related Party Transaction BCI loss utilization transaction On April 15, 2005,
3787915 Canada Inc., a wholly-owned subsidiary of Bell Canada,
acquired $17 billion in preferred shares from 3787923 Canada Inc.,
a wholly-owned subsidiary of BCI. 3787923 Canada Inc. used the proceeds
to advance $17 billion to BCI through a subordinated interest-free
loan. BCI then advanced $17 billion to 3787915 Canada Inc. by
way of a subordinated interest-bearing demand loan, the funds being used
to repay a daylight loan granted to 3787915 Canada Inc. to make the
initial preferred share investment.
|
29 Bell Canada Enterprises 2005 Quarterly Report
Managements
Discussion and Analysis
|
||
Recent
Developments in Legal Proceedings |
Liquidity
Our sources of liquidity and cash requirements remain substantially unchanged from those described in the BCE 2004 MD&A. Commitment under the deferral account The deferral account resulted from the CRTCs second price cap decision of May 2002, which requires us to fund initiatives such as service improvements, reduced customer rates and/or customer rebates. We estimate our commitment under the deferral account to be approximately $163 million at June 30, 2005 and anticipate that it will be reduced to approximately $130 million by December 31, 2005, primarily due to the impact of the CDN decision. We expect to clear most of this amount in 2006 by implementing the initiatives that are approved by the CRTC for this purpose. Recent Developments in Legal Proceedings Lawsuits related to Teleglobe Inc. (Teleglobe) Teleglobe Lending Syndicate Lawsuit As indicated in the BCE 2004 AIF and in the BCE 2005 First Quarter MD&A, a lawsuit was filed in the Ontario Superior Court of Justice on July 12, 2002 against BCE Inc. by certain of the members of the Teleglobe and Teleglobe Holdings (U.S.) Corporation lending syndicate. As anticipated, BNP Paribas (Canada), which had advanced approximately US$50 million to Teleglobe, filed a notice of discontinuance with the Court on May 3, 2005 and is therefore no longer a plaintiff in this action. Following such discontinuance, the damages sought by the remaining plaintiffs amount to approximately US$1.04 billion (down from approximately US$1.09 billion), plus interest and costs, representing approximately 83% (down from approximately 87%) of the US$1.25 billion that the members of the lending syndicate advanced to Teleglobe and Teleglobe Holdings (U.S.) Corporation. Risks That Could Affect Our Business A risk is the possibility
that an event might happen in the future that could have a negative effect
on the financial condition, results of operations or business of one or
more BCE group companies. Part of managing our business is to understand
what these potential risks could be and to minimize them where we can.
|
30 Bell Canada Enterprises 2005 Quarterly Report
Risks
That Could Affect Our Business
Please see
Recent Developments in Legal
Proceedings, at pages 22
and 23 of the BCE 2005 First Quarter MD&A, and in this MD&A,
for a description of recent developments, since the BCE 2004 AIF,
in the principal legal proceedings involving us. |
Updates to the Description of Risks The following are updates to the description of risks contained in the section entitled Risks That Could Affect Our Business set out on pages 32 to 41 of the BCE 2004 AIF as updated at pages 23 to 26 in the BCE 2005 First Quarter MD&A. For ease of reference, the updates to the description of risks below have been presented under the same headings and in the same order contained in the section entitled Risks That Could Affect Our Business set out in the BCE 2004 AIF. Risks that could affect all BCE group companies Pension fund contributions We have not had
to make regular contributions to our pension funds in the past few years
as most of our pension plans had pension fund surpluses. However, the
decline in the capital markets in 2001 and 2002, combined with historically
low interest rates and early retirement programs offered to employees,
have significantly reduced the pension fund surpluses. This has negatively
affected our net earnings and liquidity. In conformity with our most recent
actuarial valuations, we expect to contribute approximately $200 million
to our defined benefit pension plans in 2005.
These factors could require us to increase future contributions to our defined benefit pension plans and therefore could have a material and negative effect on our liquidity and results of operations after 2005. |
31 Bell Canada Enterprises 2005 Quarterly Report
Managements Discussion and Analysis Renegotiating labour agreements The collective agreement
between the Canadian Telecommunications Employees Association (CTEA)
and Bell Canada, representing approximately 10,000 clerical
and associated employees, expired on May 31, 2005. A memorandum
of agreement between Bell Canada and the CTEA was signed on June 8, 2005,
was submitted to a vote and was ratified by 64.5% of CTEA members who
voted. A new four-year collective agreement was signed on July 18, 2005. Software and system upgrades As indicated in the BCE 2004 AIF and in the BCE 2005 First Quarter MD&A, many aspects of the BCE group companies businesses including, but not limited to, customer billing, depend to a large extent on various IT systems and software, which must be improved and upgraded on a regular basis and replaced from time to time. For example, last year, Bell Mobility migrated its wireless customers to a new billing platform which provided additional features and functionality and which also enabled the consolidation of wireless into a single bill. As we addressed accounts receivable concerns related to this billing system migration in the first quarter of 2005, we cancelled a number of postpaid subscriber accounts which were in default of our credit policy, but to whom we had granted payment extensions or term payment options as a result of billing delays, and we increased our allowance for doubtful accounts. Although we believe that the adjustments made to our postpaid subscriber base in the first quarter of 2005 reflect non-paying subscriber accounts relating to our billing conversion, there is a risk that there could be additional cancellations of postpaid subscriber accounts, leading to a possible increase in churn and wireless bad debt expense. Risks that could affect certain BCE group companies Bell Canada companiesChanges to Wireline Regulation Second Price
Cap decision Competitor Digital
Network Service |
32 Bell Canada Enterprises 2005 Quarterly Report
Retail
Quality of Service Indicators Application Seeking
Consistent Regulation and Regulatory Framework for VoIP |
33 Bell Canada Enterprises 2005 Quarterly Report
Managements Discussion and Analysis VoIP services and
thereby remove inequities in the regulatory framework for VoIP services
applicable to the incumbent telephone companies, including the requirement
to file and obtain approval of tariffs, and the application of the bundling
rules, promotions restrictions and winback rules. Telesat We have prepared
our consolidated financial statements according to Canadian GAAP. See
Note 1 to the consolidated financial statements for more information
about the accounting principles we used to prepare our financial statements. |
34 Bell Canada Enterprises 2005 Quarterly Report
Consolidated
Statements of Operations
|
||||||||||
FOR THE PERIOD ENDED JUNE 30 |
THREE MONTHS |
SIX MONTHS |
||||||||
(in $ millions, except share amounts) (unaudited) |
2005 | 2004 | 2005 | 2004 | ||||||
|
||||||||||
Operating revenues |
4,980 | 4,779 | 9,839 | 9,417 | ||||||
|
||||||||||
Operating expenses |
(2,979 | ) | (2,826 | ) | (5,900 | ) | (5,620 | ) | ||
Amortization expense |
(792 | ) | (769 | ) | (1,565 | ) | (1,536 | ) | ||
Net benefit plans cost (Note 4) |
(104 | ) | (65 | ) | (207 | ) | (128 | ) | ||
Restructuring and other items (Note 5) |
(5 | ) | (14 | ) | (1 | ) | (17 | ) | ||
|
||||||||||
Total operating expenses |
(3,880 | ) | (3,674 | ) | (7,673 | ) | (7,301 | ) | ||
|
||||||||||
Operating income |
1,100 | 1,105 | 2,166 | 2,116 | ||||||
Other income |
24 | 24 | 31 | 60 | ||||||
Interest expense |
(247 | ) | (253 | ) | (494 | ) | (505 | ) | ||
|
||||||||||
Pre-tax earnings from continuing operations |
877 | 876 | 1,703 | 1,671 | ||||||
Income taxes (Note 6) |
(223 | ) | (293 | ) | (494 | ) | (555 | ) | ||
Non-controlling interest |
(73 | ) | (39 | ) | (136 | ) | (87 | ) | ||
|
||||||||||
Earnings from continuing operations |
581 | 544 | 1,073 | 1,029 | ||||||
Discontinued operations |
| 27 | (1 | ) | 30 | |||||
|
||||||||||
Net earnings |
581 | 571 | 1,072 | 1,059 | ||||||
Dividends on preferred shares |
(18 | ) | (17 | ) | (35 | ) | (35 | ) | ||
|
||||||||||
Net earnings applicable to common shares |
563 | 554 | 1,037 | 1,024 | ||||||
|
||||||||||
Net earnings per common share basic |
||||||||||
Continuing operations |
0.61 | 0.57 | 1.12 | 1.08 | ||||||
Discontinued operations |
| 0.03 | | 0.03 | ||||||
Net earnings |
0.61 | 0.60 | 1.12 | 1.11 | ||||||
Net earnings per common share diluted |
||||||||||
Continuing operations |
0.61 | 0.57 | 1.12 | 1.08 | ||||||
Discontinued operations |
| 0.03 | | 0.03 | ||||||
Net earnings |
0.61 | 0.60 | 1.12 | 1.11 | ||||||
Dividends per common share |
0.33 | 0.30 | 0.66 | 0.60 | ||||||
Average number of common shares outstanding basic (millions) |
926.6 | 924.3 | 926.4 | 924.2 | ||||||
|
||||||||||
|
Consolidated
Statements of Deficit
|
||||||||||
FOR THE PERIOD ENDED JUNE 30 |
THREE MONTHS |
SIX MONTHS |
||||||||
(in $ millions) (unaudited) |
2005 | 2004 | 2005 | 2004 | ||||||
|
||||||||||
Balance at beginning of period, as previously reported |
(5,264 | ) | (5,645 | ) | (5,424 | ) | (5,837 | ) | ||
Accounting policy change (Note 1) |
| (8 | ) | (8 | ) | (8 | ) | |||
|
||||||||||
Balance at beginning of period, as restated |
(5,264 | ) | (5,653 | ) | (5,432 | ) | (5,845 | ) | ||
Net earnings |
581 | 571 | 1,072 | 1,059 | ||||||
Dividends declared on preferred shares |
(18 | ) | (17 | ) | (35 | ) | (35 | ) | ||
Dividends declared on common shares |
(306 | ) | (278 | ) | (612 | ) | (555 | ) | ||
Other |
2 | 1 | 2 | | ||||||
|
||||||||||
Balance at end of period |
(5,005 | ) | (5,376 | ) | (5,005 | ) | (5,376 | ) | ||
|
||||||||||
|
35 Bell Canada Enterprises 2005 Quarterly Report
Consolidated Balance Sheets
|
||||||
|
JUNE 30, | DECEMBER 31, | ||||
(in $ millions) (unaudited) |
2005 | 2004 | ||||
|
||||||
|
||||||
Assets |
||||||
Current assets |
||||||
Cash and cash equivalents |
380 | 380 | ||||
Accounts receivable |
1,874 | 2,096 | ||||
Other current assets |
1,228 | 1,212 | ||||
|
||||||
Total current assets |
3,482 | 3,688 | ||||
Capital assets |
22,050 | 21,398 | ||||
Other long-term assets |
2,690 | 2,656 | ||||
Indefinite-life intangible assets |
2,973 | 2,916 | ||||
Goodwill |
8,528 | 8,413 | ||||
Non-current assets of discontinued operations |
82 | 50 | ||||
|
||||||
Total assets |
39,805 | 39,121 | ||||
|
||||||
|
||||||
Liabilities |
||||||
Current liabilities |
||||||
Accounts payable and accrued liabilities |
3,328 | 3,692 | ||||
Interest payable |
189 | 183 | ||||
Dividends payable |
325 | 297 | ||||
Debt due within one year |
1,497 | 1,276 | ||||
|
||||||
Total current liabilities |
5,339 | 5,448 | ||||
Long-term debt |
12,480 | 11,809 | ||||
Other long-term liabilities |
4,603 | 4,932 | ||||
|
||||||
Total liabilities |
22,422 | 22,189 | ||||
|
||||||
Non-controlling interest |
2,905 | 2,908 | ||||
|
||||||
|
||||||
Shareholders equity |
||||||
Preferred shares |
1,670 | 1,670 | ||||
|
||||||
Common shareholders equity |
||||||
Common shares |
16,794 | 16,781 | ||||
Contributed surplus |
1,071 | 1,061 | ||||
Deficit |
(5,005 | ) | (5,432 | ) | ||
Currency translation adjustment |
(52 | ) | (56 | ) | ||
|
||||||
Total common shareholders equity |
12,808 | 12,354 | ||||
|
||||||
Total shareholders equity |
14,478 | 14,024 | ||||
|
||||||
Total liabilities and shareholders equity |
39,805 | 39,121 | ||||
|
||||||
|
36 Bell Canada Enterprises 2005 Quarterly Report
Consolidated Statements of Cash Flows
|
||||||||||
FOR THE PERIOD ENDED JUNE 30 |
THREE MONTHS |
SIX MONTHS |
||||||||
(in $ millions) (unaudited) |
2005 | 2004 | 2005 | 2004 | ||||||
|
||||||||||
Cash flows from operating activities |
||||||||||
Earnings from continuing operations |
581 | 544 | 1,073 | 1,029 | ||||||
Adjustments to reconcile earnings from continuing operations to cash flows from operating activities: |
||||||||||
Amortization expense |
792 | 769 | 1,565 | 1,536 | ||||||
Net benefit plans cost |
104 | 65 | 207 | 128 | ||||||
Restructuring and other items |
5 | 14 | 1 | 17 | ||||||
Net gains on investments |
(32 | ) | (1 | ) | (34 | ) | (6 | ) | ||
Future income taxes |
65 | 33 | 174 | 87 | ||||||
Non-controlling interest |
73 | 39 | 136 | 87 | ||||||
Contributions to employee pension plans |
(34 | ) | (27 | ) | (128 | ) | (56 | ) | ||
Other employee future benefit plan payments |
(22 | ) | (22 | ) | (45 | ) | (46 | ) | ||
Payments of restructuring and other items |
(28 | ) | (8 | ) | (129 | ) | (27 | ) | ||
Operating assets and liabilities |
(54 | ) | (282 | ) | (431 | ) | (365 | ) | ||
|
||||||||||
Cash flows from operating activities |
1,450 | 1,124 | 2,389 | 2,384 | ||||||
|
||||||||||
Cash flows from investing activities |
||||||||||
Capital expenditures |
(914 | ) | (826 | ) | (1,651 | ) | (1,507 | ) | ||
Business acquisitions |
(35 | ) | (247 | ) | (118 | ) | (306 | ) | ||
Business dispositions |
| | | 16 | ||||||
Increase in cost and equity investments |
(13 | ) | (8 | ) | (141 | ) | (8 | ) | ||
Decrease in cost and equity investments |
5 | | 7 | 6 | ||||||
Other investing activities |
(11 | ) | 116 | (26 | ) | 135 | ||||
|
||||||||||
Cash flows used in investing activities |
(968 | ) | (965 | ) | (1,929 | ) | (1,664 | ) | ||
|
||||||||||
Cash flows from financing activities |
||||||||||
Increase (decrease) in notes payable and bank advances |
341 | (69 | ) | 186 | (50 | ) | ||||
Issue of long-term debt |
206 | 74 | 991 | 1,400 | ||||||
Repayment of long-term debt |
(747 | ) | (718 | ) | (831 | ) | (1,652 | ) | ||
Issue of common shares |
4 | 4 | 13 | 8 | ||||||
Issue of equity securities by subsidiaries to non-controlling interest |
| | | 7 | ||||||
Redemption of equity securities by subsidiaries from non-controlling interest |
(21 | ) | (12 | ) | (38 | ) | (54 | ) | ||
Cash dividends paid on common shares |
(305 | ) | (277 | ) | (583 | ) | (554 | ) | ||
Cash dividends paid on preferred shares |
(22 | ) | (21 | ) | (43 | ) | (43 | ) | ||
Cash dividends paid by subsidiaries to non-controlling interest |
(60 | ) | (52 | ) | (110 | ) | (95 | ) | ||
Other financing activities |
(25 | ) | 32 | (55 | ) | (16 | ) | |||
|
||||||||||
Cash flows used in financing activities |
(629 | ) | (1,039 | ) | (470 | ) | (1,049 | ) | ||
|
||||||||||
Cash used in continuing operations |
(147 | ) | (880 | ) | (10 | ) | (329 | ) | ||
Cash provided by (used in) discontinued operations |
1 | (54 | ) | 10 | 184 | |||||
|
||||||||||
Net decrease in cash and cash equivalents |
(146 | ) | (934 | ) | | (145 | ) | |||
Cash and cash equivalents at beginning of period |
526 | 1,511 | 380 | 722 | ||||||
|
||||||||||
Cash and cash equivalents at end of period |
380 | 577 | 380 | 577 | ||||||
|
||||||||||
|
37 Bell Canada Enterprises 2005 Quarterly Report
Notes to Consolidated Financial Statements
|
||
The
interim consolidated financial statements should be read in conjunction
with BCE Inc.s annual consolidated financial statements for
the year ended December 31, 2004, on pages 82 to 121 of BCE Inc.s 2004
annual report. |
Note 1: Significant accounting policies We have prepared the consolidated financial statements in accordance with Canadian generally accepted accounting principles (GAAP) using the same basis of presentation and accounting policies as outlined in Note 1 to the annual consolidated financial statements for the year ended December 31, 2004, except as noted below. Comparative figuresWe have reclassified some of the figures for the comparative periods in the consolidated financial statements to make them consistent with the presentation for the current period. We have restated financial information for previous periods to reflect:
Change in accounting policy Effective January 1, 2005, we defer and amortize revenues and expenses from Aliants directory business over the period of circulation, which is usually 12 months. Prior to January 1, 2005, we recognized revenues and expenses from Aliants directory business on the publication date. The impact on our consolidated statements of operations for the three months and six months ended June 30, 2005 and the comparative periods was negligible. We did not restate the statements of operations for prior periods. At December 31, 2004, the restatement of the balance sheet resulted in:
|
38 Bell Canada Enterprises 2005 Quarterly Report
Note 2: Segmented information The table below
is a summary of financial information by segment. |
|||||||||||
THREE MONTHS |
SIX MONTHS |
||||||||||
FOR THE PERIOD ENDED JUNE 30 | 2005 | 2004 | 2005 | 2004 | |||||||
|
|||||||||||
Operating revenues | |||||||||||
Consumer | External | 1,879 | 1,846 | 3,718 | 3,659 | ||||||
Inter-segment | 11 | 12 | 28 | 24 | |||||||
|
|||||||||||
1,890 | 1,858 | 3,746 | 3,683 | ||||||||
|
|||||||||||
Business | External | 1,456 | 1,385 | 2,890 | 2,739 | ||||||
Inter-segment | 43 | 56 | 87 | 137 | |||||||
|
|||||||||||
1,499 | 1,441 | 2,977 | 2,876 | ||||||||
|
|||||||||||
Aliant | External | 484 | 490 | 972 | 954 | ||||||
Inter-segment | 34 | 36 | 70 | 76 | |||||||
|
|||||||||||
518 | 526 | 1,042 | 1,030 | ||||||||
|
|||||||||||
Other Bell Canada | External | 424 | 421 | 858 | 859 | ||||||
Inter-segment | 61 | 47 | 106 | 83 | |||||||
|
|||||||||||
485 | 468 | 964 | 942 | ||||||||
|
|||||||||||
Inter-segment eliminations Bell Canada | (134 | ) | (121 | ) | (262 | ) | (253 | ) | |||
|
|||||||||||
Bell Canada | 4,258 | 4,172 | 8,467 | 8,278 | |||||||
|
|||||||||||
Other BCE | External | 737 | 637 | 1,401 | 1,206 | ||||||
Inter-segment | 98 | 85 | 182 | 167 | |||||||
|
|||||||||||
835 | 722 | 1,583 | 1,373 | ||||||||
|
|||||||||||
Inter-segment eliminations Other | (113 | ) | (115 | ) | (211 | ) | (234 | ) | |||
|
|||||||||||
Total operating revenues | 4,980 | 4,779 | 9,839 | 9,417 | |||||||
|
|||||||||||
Operating income | |||||||||||
Consumer | 552 | 560 | 1,078 | 1,086 | |||||||
Business | 221 | 227 | 461 | 468 | |||||||
Aliant | 99 | 92 | 186 | 174 | |||||||
Other Bell Canada | 109 | 138 | 238 | 249 | |||||||
|
|||||||||||
Bell Canada | 981 | 1,017 | 1,963 | 1,977 | |||||||
Other BCE | 119 | 88 | 203 | 139 | |||||||
|
|||||||||||
Total operating income | 1,100 | 1,105 | 2,166 | 2,116 | |||||||
Other income | 24 | 24 | 31 | 60 | |||||||
Interest expense | (247 | ) | (253 | ) | (494 | ) | (505 | ) | |||
Income taxes | (223 | ) | (293 | ) | (494 | ) | (555 | ) | |||
Non-controlling interest | (73 | ) | (39 | ) | (136 | ) | (87 | ) | |||
|
|||||||||||
Earnings from continuing operations | 581 | 544 | 1,073 | 1,029 | |||||||
|
|||||||||||
|
39 Bell Canada Enterprises 2005 Quarterly Report
Notes
to Consolidated Financial Statements
|
||
The consolidated statements of operations include the results of acquired businesses from the date they were acquired. | Note 3: Business acquisitions During the first
six months of 2005, we made a number of business acquisitions which
included 100% of the outstanding common shares of Nexxlink Technologies Inc.,
a provider of integrated IT solutions, and certain other providers of
value-added and security services.
|
|
||||
Consideration received: | ||||
Non-cash working capital | (15 | ) | ||
Capital assets | 95 | |||
Other long-term assets | 3 | |||
Indefinite-life intangible assets | 20 | |||
Goodwill | 97 | |||
Long-term debt | (61 | ) | ||
Other long-term liabilities | (16 | ) | ||
|
||||
123 | ||||
Cash and cash equivalents at acquisition | 14 | |||
|
||||
Net assets acquired | 137 | |||
|
||||
Consideration given: | ||||
Cash | 127 | |||
Acquisition costs | 5 | |||
Non-cash | 5 | |||
|
||||
137 | ||||
|
|
|||
|
|
Note 4: Employee benefit plans The table below
shows the components of the net benefit plans cost. |
||||||||||||||||||
|
THREE MONTHS | SIX MONTHS |
||||||||||||||||
|
PENSION BENEFITS |
OTHER BENEFITS | PENSION BENEFITS | OTHER BENEFITS | ||||||||||||||
FOR THE PERIOD ENDED JUNE 30 |
2005 | 2004 | 2005 | 2004 | 2005 | 2004 | 2005 | 2004 | ||||||||||
|
||||||||||||||||||
Current service cost |
61 | 64 | 8 | 8 | 121 | 124 | 17 | 16 | ||||||||||
Interest cost on accrued benefit obligation |
219 | 202 | 28 | 26 | 438 | 403 | 55 | 52 | ||||||||||
Expected return on plan assets |
(237 | ) | (240 | ) | (3 | ) | (3 | ) | (474 | ) | (477 | ) | (5 | ) | (5 | ) | ||
Amortization of past service costs |
3 | 3 | 1 | | 5 | 5 | 1 | | ||||||||||
Amortization of net actuarial losses |
25 | 8 | | | 51 | 16 | | | ||||||||||
Amortization of transitional (asset) obligation |
(2 | ) | (11 | ) | 7 | 8 | (3 | ) | (22 | ) | 13 | 15 | ||||||
Increase (decrease) in valuation allowance |
(6 | ) | | | | (12 | ) | 1 | | | ||||||||
|
||||||||||||||||||
Net benefit plans cost |
63 | 26 | 41 | 39 | 126 | 50 | 81 | 78 | ||||||||||
|
||||||||||||||||||
Comprised of: |
||||||||||||||||||
Defined benefit plans cost |
58 | 21 | 41 | 39 | 114 | 42 | 81 | 78 | ||||||||||
Defined contribution plans cost |
5 | 5 | | | 12 | 8 | | | ||||||||||
|
||||||||||||||||||
|
40 Bell Canada Enterprises 2005 Quarterly Report
The
table below shows the amounts we contributed to the defined benefit and
defined contribution plans and the payments made to beneficiaries under
other employee future benefit plans. |
||||||||||||||||||
|
THREE MONTHS | SIX MONTHS |
||||||||||||||||
|
PENSION BENEFITS | OTHER BENEFITS | PENSION BENEFITS | OTHER BENEFITS | ||||||||||||||
FOR THE PERIOD ENDED JUNE 30 |
2005 | 2004 | 2005 | 2004 | 2005 | 2004 | 2005 | 2004 | ||||||||||
|
||||||||||||||||||
Aliant |
20 | 19 | 2 | 1 | 101 | 38 | 3 | 2 | ||||||||||
Bell Canada |
7 | 4 | 20 | 21 | 14 | 9 | 42 | 44 | ||||||||||
Bell Globemedia |
5 | 2 | | | 9 | 5 | | | ||||||||||
BCE Inc. |
2 | 2 | | | 4 | 4 | | | ||||||||||
|
||||||||||||||||||
Total |
34 | 27 | 22 | 22 | 128 | 56 | 45 | 46 | ||||||||||
|
||||||||||||||||||
Comprised of: |
||||||||||||||||||
Contributions to defined benefit plans |
30 | 22 | 22 | 22 | 121 | 48 | 45 | 46 | ||||||||||
Contributions to defined contribution plans |
4 | 5 | | | 7 | 8 | | | ||||||||||
|
||||||||||||||||||
|
Note 5: Restructuring and other items Employee departure programs The table below
provides an update on the liability relating to the employee departure
programs which were implemented in 2004. |
||||||||
|
CONSO- | |||||||
|
BELL CANADA | ALIANT | LIDATED | |||||
|
||||||||
Balance in accounts payable and accrued liabilities at December 31, 2004 |
120 | 67 | 187 | |||||
Less: |
||||||||
Cash payments |
(50 | ) | (43 | ) | (93 | ) | ||
Reversal of excess provision |
(25 | ) | | (25 | ) | |||
|
||||||||
Balance in accounts payable and accrued liabilities at June 30, 2005 |
45 | 24 | 69 | |||||
|
||||||||
|
||||||||
|
41 Bell Canada Enterprises 2005 Quarterly Report
Notes
to Consolidated Financial Statements
|
||
Note 6: Income taxes Bell Canada International Inc. (BCI) loss utilization transaction On April 15, 2005,
3787915 Canada Inc., a wholly-owned subsidiary of Bell Canada,
acquired $17 billion in preferred shares from 3787923 Canada Inc.,
a wholly-owned subsidiary of BCI. 3787923 Canada Inc. used the proceeds
to advance $17 billion to BCI through a subordinated interest-free
loan. BCI then advanced $17 billion to 3787915 Canada Inc. by
way of a subordinated interest-bearing demand loan, the funds being used
to repay a daylight loan granted to 3787915 Canada Inc. to make the
initial preferred share investment.
|
Restricted share units (RSUs) The table below
is a summary of the status of RSUs. |
||||
NUMBER OF | ||||
RSUs | ||||
|
||||
Outstanding, January 1, 2005 | 1,996,522 | |||
Granted | 483,227 | |||
Dividends credited | 46,397 | |||
Expired/forfeited | (66,871 | ) | ||
|
||||
Outstanding, June 30, 2005 | 2,459,275 | |||
|
||||
Vested, June 30, 2005 | | |||
|
||||
|
||||
For the three months and six months ended June 30, 2005, we recorded compensation expense for RSUs of $3 million and $12 million, respectively. For the three months and six months ended June 30, 2004, we recorded compensation expense for RSUs of $6 million and $10 million, respectively. |
42 Bell Canada Enterprises 2005 Quarterly Report
BCE Inc. stock options The table below
is a summary of the status of BCE Inc.s stock option programs. |
||||||
WEIGHTED | ||||||
AVERAGE | ||||||
NUMBER | EXERCISE | |||||
OF SHARES | PRICE | |||||
|
||||||
Outstanding, January 1, 2005 | 28,481,679 | $32 | ||||
Granted | 713,224 | $29 | ||||
Exercised | (787,046 | ) | $17 | |||
Expired/forfeited | (640,792 | ) | $34 | |||
|
||||||
Outstanding, June 30, 2005 | 27,767,065 | $32 | ||||
|
||||||
Exercisable, June 30, 2005 | 17,082,799 | $34 | ||||
|
||||||
|
Assumptions used in stock option pricing model The table below
shows the assumptions used to determine the stock-based compensation expense
using the Black-Scholes option pricing model. |
||||||||||
|
THREE MONTHS | SIX MONTHS | ||||||||
FOR THE PERIOD ENDED JUNE 30 |
2005 | 2004 | 2005 | 2004 | ||||||
|
||||||||||
Compensation expense ($ millions) |
5 | 6 | 11 | 14 | ||||||
Number of stock options granted |
235,700 | 55,000 | 713,224 | 5,449,776 | ||||||
Weighted average fair value per option granted ($) |
4 | 3 | 3 | 6 | ||||||
Weighted average assumptions |
||||||||||
Dividend yield |
4.5% | 4.3% | 4.5% | 4.0% | ||||||
Expected volatility |
19% | 26% | 23% | 27% | ||||||
Risk-free interest rate |
3.6% | 3.3% | 3.4% | 3.1% | ||||||
Expected life (years) |
3.5 | 3.5 | 3.5 | 3.5 | ||||||
|
||||||||||
|
Note 8: Commitments and contingencies Teleglobe Lending Syndicate Lawsuit As indicated in Note 24 to BCEs audited Consolidated Financial Statements for the year ended December 31, 2004, a lawsuit was filed in the Ontario Superior Court of Justice on July 12, 2002 against BCE Inc. by certain of the members of the Teleglobe and Teleglobe Holdings (U.S.) Corporation lending syndicate. BNP Paribas (Canada), which had advanced approximately US$50 million to Teleglobe, filed a notice of discontinuance with the Court on May 3, 2005 and is therefore no longer a plaintiff in this action. Following such discontinuance, the damages sought by the remaining plaintiffs amount to approximately US$1.04 billion (down from approximately US$1.09 billion), plus interest and costs, representing approximately 83% (down from approximately 87%) of the US$1.25 billion that the members of the lending syndicate advanced to Teleglobe and Teleglobe Holdings (U.S.) Corporation. |
43 Bell Canada Enterprises 2005 Quarterly Report
|
|
BCE Inc. e-mail: bcecomms@bce.ca tel: 1 888 932-6666 fax: (514) 870-4385 This document
has been filed by BCE Inc. with Investor Relations For further information
concerning the Dividend Computershare
Trust PRINTED IN CANADA |
BCE Investor Relations | ||
Thane Fotopoulos | 514-870-4619 | thane.fotopoulos@bell.ca |
Vincent Surette | 514-870-4613 | vincent.surette@bell.ca |
BCE Consolidated(1)
Consolidated Operational Data
($
millions, except per share amounts) |
Q2 2005 |
|
Q2 2004 |
|
$
change |
|
%
change |
|
|
YTD June 2005 |
|
YTD June 2004 |
|
|
$
change |
|
%
change |
|
||||||
|
|
|
|
|||||||||||||||||||||
Operating revenues | 4,980 |
|
4,779 |
|
201 |
|
4.2% |
|
9,839 |
|
9,417 |
|
|
422 |
|
4.5% |
||||||||
Operating expenses | (2,979 |
) |
(2,826 |
) |
(153 |
) |
(5.4% |
) |
|
(5,900 |
) |
(5,620 |
) |
|
(280 |
) |
(5.0% |
)
|
||||||
|
|
|
|
|||||||||||||||||||||
EBITDA(2) | 2,001 |
|
1,953 |
|
48 |
|
2.5% |
|
|
3,939 |
|
3,797 |
|
|
142 |
|
3.7% |
|
||||||
EBITDA margin(3) | 40.2% |
|
40.9% |
(0.7)
pts |
40.0% |
40.3% |
(0.3)
pts |
|
||||||||||||||||
Amortization expense | (792 |
) |
(769 |
) |
(23 |
) |
(3.0% |
) |
|
(1,565 |
) |
(1,536 |
) |
|
(29 |
) |
(1.9% |
)
|
||||||
Net benefit plans cost | (104 |
) |
|
(65 |
)
|
|
(39 |
) |
(60.0% |
)
|
|
(207 |
) |
(128 |
) |
|
(79 |
) |
(61.7% |
)
|
||||
Restructuring and other items | (5 |
) |
|
(14 |
) |
|
9 |
64.3% |
|
|
(1 |
) |
(17 |
) |
|
16 |
94.1%.
|
|
||||||
|
|
|
|
|||||||||||||||||||||
Operating income | 1,100 |
|
1,105 |
|
(5 |
) |
(0.5% |
) |
|
2,166 |
|
2,116 |
|
|
50 |
|
2.4% |
|
||||||
Other income | 24 |
|
24 |
|
- |
|
0.0% |
|
|
31 |
|
60 |
|
|
(29 |
) |
(48.3% |
) |
||||||
Interest expense | (247 |
) |
|
(253 |
) |
|
6 |
|
2.4% |
|
|
(494 |
) |
(505 |
) |
|
11 |
|
2.2% |
|
||||
|
|
|
|
|||||||||||||||||||||
Pre-tax earnings from continuing operations | 877 |
|
876 |
|
1 |
|
0.1% |
|
|
1,703 |
|
1,671 |
|
|
32 |
|
1.9% |
|
||||||
Income taxes | (223 |
) |
|
(293 |
)
|
|
70 |
23.9% |
|
(494 |
)
|
(555 |
)
|
|
61 |
11.0% |
||||||||
Non-controlling interest | (73 |
) |
|
(39 |
)
|
|
(34 |
) |
(87.2% |
) |
|
(136 |
) |
(87 |
) |
|
(49 |
) |
(56.3% |
) |
||||
|
|
|
|
|||||||||||||||||||||
Earnings from continuing operations | 581 |
|
544 |
|
37 |
|
6.8% |
|
|
1,073 |
|
1,029 |
|
|
44 |
|
4.3% |
|
||||||
Discontinued operations | - |
|
27 |
|
(27 |
) |
n.m. |
|
|
(1 |
) |
30 |
|
|
(31 |
) |
n.m. |
|
||||||
|
|
|
|
|||||||||||||||||||||
Net earnings | 581 |
|
571 |
|
10 |
|
1.8% |
|
|
1,072 |
|
1,059 |
|
|
13 |
|
1.2% |
|
||||||
Dividends on preferred shares | (18 |
) |
|
(17 |
) |
|
(1 |
) |
(5.9% |
) |
|
(35 |
) |
(35 |
) |
|
- |
0.0% |
||||||
|
|
|
|
|||||||||||||||||||||
Net earnings applicable to common shares | 563 |
|
554 |
|
9 |
|
1.6% |
|
|
1,037 |
|
1,024 |
|
|
13 |
|
1.3% |
|
||||||
|
|
|
|
|||||||||||||||||||||
Net earnings per common share - basic | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Continuing operations | $ |
0.61 |
$
|
0.57 |
$ |
0.04 |
7.0%
|
$ |
1.12 |
$ |
1.08 |
$
|
0.04 |
3.7%
|
||||||||||
Discontinued operations | $ |
- |
$ |
0.03 |
$
|
(0.03 |
) |
n.m.
|
$ |
- |
$ |
0.03 |
$
|
(0.03 |
) |
n.m. |
||||||||
Net earnings | $ |
0.61 |
$
|
0.60
|
$
|
0.01 |
1.7%
|
$ |
1.12 |
$ |
1.11 |
$
|
0.01 |
0.9%
|
||||||||||
Net earnings per common share - diluted | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Continuing operations | $ |
0.61 |
$
|
0.57 |
$ |
0.04 |
7.0%
|
$ |
1.12 |
$ |
1.08 |
$ |
0.04 |
3.7% |
||||||||||
Discontinued operations | $ |
- |
$ |
0.03 |
$
|
(0.03 |
) |
n.m. |
$ |
- |
$ |
0.03 |
$
|
(0.03 |
) |
n.m. |
||||||||
Net earnings | $ |
0.61 |
$ |
0.60
|
$ |
0.01 |
1.7%
|
$ |
1.12 |
$ |
1.11 |
$
|
0.01 |
0.9%
|
||||||||||
Dividends per common share | $ |
0.33 |
$ |
0.30
|
$
|
0.03 |
10.0% |
$ |
0.66 |
$ |
0.60
|
$ |
0.06 |
10.0%
|
||||||||||
Average number of common shares outstanding - basic (millions) | 926.6 |
924.3 |
926.4 |
924.2 |
||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||
The following items are included in net earnings: | ||||||||||||||||||||||||
Net gains (losses) on investments | ||||||||||||||||||||||||
Continuing operations | 28 |
- |
29 |
- |
||||||||||||||||||||
Discontinuing operations | - |
31 |
(1 |
) |
38 |
|||||||||||||||||||
Restructuring and other items | (3 |
) |
16 |
(1 |
) |
15 |
||||||||||||||||||
|
|
|||||||||||||||||||||||
Total | 25 |
47 |
27 |
53 |
||||||||||||||||||||
Impact on net earnings per share | $ |
0.03 |
$
|
0.05 |
$ |
0.03 |
$ |
0.06 |
||||||||||||||||
|
|
|||||||||||||||||||||||
EPS before net gains (losses) on investments and restructuring and other items(2) | $ |
0.58 |
$
|
0.55 |
$ | 0.03 |
|
5.5% |
$ |
1.09 |
$ |
1.05 |
$ | 0.04 |
|
3.8% |
||||||||
|
n.m. : not meaningful
BCE Inc. Supplementary Financial Information - Second Quarter 2005 Page 2
BCE Consolidated(1)
Consolidated Operational Data -
Historical Trend
($ millions, except per share amounts) | YTD |
Q2 05 |
Q1
05 |
Total 2004 |
Q4
04 |
Q3
04 |
Q2
04 |
Q1
04 |
||||||||||||||||||
|
|
|
|
|||||||||||||||||||||||
Operating revenues | 9,839 |
4,980 |
4,859 |
19,181 |
4,986 |
4,778 |
4,779 |
4,638 |
||||||||||||||||||
Operating expenses | (5,900 |
)
|
(2,979 |
) |
(2,921 |
) |
(11,617 |
) |
(3,155 |
) |
(2,842 |
)
|
(2,826 |
) |
(2,794 |
) |
||||||||||
|
|
|
|
|||||||||||||||||||||||
EBITDA(2) | 3,939 |
2,001 |
1,938 |
7,564 |
1,831 |
1,936 |
1,953 |
1,844 |
||||||||||||||||||
EBITDA margin(3) | 40.0% |
40.2% |
39.9%
|
39.4% |
36.7% |
40.5% |
40.9%
|
39.8%
|
||||||||||||||||||
Amortization expense | (1,565 |
) |
(792 |
)
|
(773 |
)
|
(3,108 |
)
|
(803 |
)
|
(769 |
) |
(769 |
) |
(767 |
)
|
||||||||||
Net benefit plans cost | (207 |
) |
(104 |
) |
(103 |
) |
(256 |
) |
(67 |
) |
(61 |
)
|
(65 |
)
|
(63 |
)
|
||||||||||
Restructuring and other items | (1 |
) |
(5 |
) |
4 |
(1,224 |
)
|
(126 |
) |
(1,081 |
) |
(14 |
) |
(3 |
) |
|||||||||||
|
|
|
|
|||||||||||||||||||||||
Operating income | 2,166 |
1,100 |
1,066 |
2,976 |
835 |
25
|
1,105 |
1,011 |
||||||||||||||||||
Other income | 31 |
24 |
7 |
411 |
18 |
333 |
24
|
36 |
||||||||||||||||||
Interest expense | (494 |
) |
(247 |
)
|
(247 |
) |
(1,005 |
)
|
(247 |
) |
(253 |
) |
(253 |
) |
(252 |
) |
||||||||||
|
|
|
|
|||||||||||||||||||||||
Pre-tax earnings from continuing operations | 1,703 |
877 |
826 |
2,382 |
606 |
105 |
876 |
795 |
||||||||||||||||||
Income taxes | (494 |
)
|
(223 |
) |
(271 |
)
|
(710 |
) |
(199 |
) |
44 |
(293 |
)
|
(262 |
) |
|||||||||||
Non-controlling interest | (136 |
) |
(73 |
)
|
(63 |
) |
(174 |
) |
(40 |
) |
(47 |
)
|
(39 |
)
|
(48 |
)
|
||||||||||
|
|
|
|
|||||||||||||||||||||||
Earnings from continuing operations | 1,073 |
581 |
492 |
1,498 |
367 |
102 |
544 |
485 |
||||||||||||||||||
Discontinued operations | (1 |
) |
- |
(1 |
) |
26 |
(2 |
) |
(2 |
) |
27 |
3 |
||||||||||||||
|
|
|
|
|||||||||||||||||||||||
Net earnings before extraordinary gain | 1,072 |
581 |
491 |
1,524 |
365 |
100 |
571 |
488 |
||||||||||||||||||
Extraordinary gain | - |
|
- |
|
- |
69 |
69 |
- |
- |
- |
||||||||||||||||
|
|
|
|
|||||||||||||||||||||||
Net earnings | 1,072 |
581 |
491 |
1,593 |
434 |
100 |
571 |
488 |
||||||||||||||||||
Dividends on preferred shares | (35 |
) |
(18 |
) |
(17 |
) |
(70 |
) |
(17 |
) |
(18 |
) |
(17 |
) |
(18 |
) |
||||||||||
|
|
|
|
|||||||||||||||||||||||
Net earnings applicable to common shares | 1,037 |
563 |
474 |
1,523 |
417 |
82 |
554 |
470 |
||||||||||||||||||
|
|
|
|
|||||||||||||||||||||||
Net earnings per common share - basic | ||||||||||||||||||||||||||
Continuing operations | $ |
1.12 |
$ |
0.61 |
$ |
0.51
|
$ |
1.55 |
$ |
0.38 |
$ |
0.09 |
$ |
0.57 |
$ |
0.51 |
||||||||||
Discontinued operations | $ |
- |
$ |
- |
$
|
-
|
$ |
0.03 |
$ |
- |
$
|
- |
$
|
0.03 |
$ |
- |
||||||||||
Extraordinary gain | $ |
- |
$ |
- |
$ |
- |
$ |
0.07 |
$ |
0.07 |
$ |
- |
$ |
- |
$ |
- |
||||||||||
Net earnings | $ |
1.12 |
$ |
0.61 |
$
|
0.51
|
$
|
1.65 |
$ |
0.45 |
$
|
0.09
|
$ |
0.60 |
$ |
0.51 |
||||||||||
Net earnings per common share - diluted | ||||||||||||||||||||||||||
Continuing operations | $ |
1.12 |
$ |
0.61 |
$
|
0.51 |
$
|
1.55
|
$
|
0.38 |
$ |
0.09 |
$ |
0.57 |
$ |
0.51 |
||||||||||
Discontinued operations | $ |
- |
$ |
- |
$
|
- |
$ |
0.03 |
$ |
- |
$ |
- |
$ |
0.03 |
$ |
- |
||||||||||
Extraordinary gain | $ |
- |
$ |
- |
$
|
- |
$
|
0.07 |
$
|
0.07 |
$ |
- |
$
|
- |
$ |
- |
||||||||||
Net earnings | $ |
1.12 |
$ |
0.61 |
$ |
0.51 |
$ |
1.65 |
$ |
0.45 |
$
|
0.09 |
$ |
0.60 |
$ |
0.51 |
||||||||||
Dividends per common share | $ |
0.66 |
$ |
0.33 |
$ |
0.33 |
$ |
1.20 |
$ |
0.30 |
$ |
0.30 |
$ |
0.30 |
$ |
0.30 |
||||||||||
Average number of common shares outstanding - basic (millions) | 926.4 |
926.6 |
926.2 |
924.6 |
925.3 |
924.6 |
924.3 |
924.1 |
||||||||||||||||||
|
|
|
|
|||||||||||||||||||||||
|
|
|
|
|||||||||||||||||||||||
The following items are included in net earnings: | ||||||||||||||||||||||||||
Net gains (losses) on investments | ||||||||||||||||||||||||||
Continuing operations | 29 |
28 |
1 |
389 |
64 |
325 |
- |
- |
||||||||||||||||||
Discontinued operations | (1 |
) | - |
(1 |
) | 34 |
(2)
|
(2) |
31 |
7 |
||||||||||||||||
Restructuring and other items | (1 |
) | (3 |
) | 2 |
(772) |
(62) |
(725) |
16 |
(1) |
||||||||||||||||
|
|
|
|
|||||||||||||||||||||||
Total | 27 |
25 |
2 |
(349) |
- |
(402) |
47 |
6 |
||||||||||||||||||
Impact on net earnings per share | $ |
0.03 |
$ |
0.03 |
$ |
- |
$ |
(0.37) |
$ |
- |
$ |
(0.43) |
$ |
0.05 |
$ |
0.01
|
||||||||||
|
|
|
|
|||||||||||||||||||||||
EPS before net gains (losses) on investments and restructuring and other items(2) | $ |
1.09 |
$ |
0.58 |
$ |
0.51 |
$ |
2.02 |
$
|
0.45 |
$ |
0.52 |
$
|
0.55 |
$ |
0.50 |
||||||||||
BCE Inc. Supplementary Financial Information - Second Quarter 2005 Page 3
BCE Consolidated(1)
Segmented Data
($ millions, except where otherwise indicated) |
Q2 2005 |
Q2 2004 |
$ change |
% change |
YTD 2005 |
YTD |
$ change |
% change |
|||||||||
|
|
|
|
||||||||||||||
Revenues | |||||||||||||||||
Consumer | 1,890 |
1,858 |
32 |
1.7% |
3,746 |
3,683 |
63 |
1.7% |
|||||||||
Business | 1,499 |
1,441 |
58 |
4.0% |
2,977 |
2,876 |
101 |
3.5% |
|||||||||
Aliant | 518 |
526 |
(8 |
) |
(1.5% |
) |
1,042 |
1,030 |
12 |
1.2%
|
|||||||
Other Bell Canada | 485 |
468 |
17 |
3.6% |
964 |
942 |
22 |
2.3% |
|||||||||
Inter-segment eliminations | (134 |
)
|
(121 |
)
|
(13 |
) |
(10.7% |
) |
(262 |
) |
(253 |
) |
(9 |
) |
(3.6% |
) |
|
|
|
|
|
||||||||||||||
Total Bell Canada | 4,258 |
4,172 |
86 |
2.1% |
8,467 |
8,278 |
189 |
2.3%
|
|||||||||
Other BCE | |||||||||||||||||
Bell Globemedia | 399 |
371 |
28 |
7.5% |
755 |
713 |
42 |
5.9% |
|||||||||
Advertising | 300 |
277 |
23 |
8.3% |
561 |
526 |
35 |
6.7% |
|||||||||
Subscriber | 78 |
74 |
4 |
5.4% |
155 |
148 |
7 |
4.7% |
|||||||||
Production and Sundry | 21 |
20 |
1 |
5.0% |
39 |
39 |
- |
0.0% |
|||||||||
Telesat | 137 |
85 |
52
|
61.2% |
245 |
169 |
76 |
45.0% |
|||||||||
CGI | 275 |
248 |
27 |
10.9% |
548 |
462 |
86 |
18.6% |
|||||||||
Other | 24 |
18 |
6 |
33.3% |
35 |
29 |
6
|
20.7% |
|||||||||
|
|
|
|
||||||||||||||
Total Other BCE | 835 |
722 |
113 |
15.7% |
1,583 |
1,373 |
210 |
15.3%
|
|||||||||
Inter-segment eliminations | (113 |
)
|
(115 |
) |
2 |
1.7%
|
(211 |
) |
(234 |
) |
23 |
9.8% |
|||||
|
|
|
|
||||||||||||||
Total revenues | 4,980 |
4,779 |
201 |
4.2% |
9,839 |
9,417 |
422 |
4.5% |
|||||||||
|
|
|
|
||||||||||||||
|
|
|
|
||||||||||||||
Operating income | |||||||||||||||||
Consumer | 552 |
560 |
(8 |
) |
(1.4% |
) |
1,078 |
1,086 |
(8 |
) |
(0.7% |
) |
|||||
Business | 221 |
227 |
(6 |
) |
(2.6% |
) |
461 |
468 |
(7 |
) |
(1.5% |
) |
|||||
Aliant | 99 |
92 |
7 |
7.6% |
186 |
174 |
12 |
6.9% |
|||||||||
Other Bell Canada | 109 |
138 |
(29 |
) |
(21.0% |
) |
238 |
249 |
(11 |
) |
(4.4% |
) |
|||||
|
|
|
|
||||||||||||||
Total Bell Canada | 981 |
1,017 |
(36 |
) |
(3.5% |
) |
1,963 |
1,977 |
(14 |
) |
(0.7% |
) |
|||||
Other BCE | |||||||||||||||||
Bell Globemedia | 95 |
74 |
21 |
28.4% |
159 |
114 |
45 |
39.5% |
|||||||||
Telesat | 43 |
34 |
9 |
26.5% |
80 |
65 |
15 |
23.1% |
|||||||||
CGI | 20 |
25 |
(5 |
) |
(20.0% |
) |
45 |
46 |
(1 |
) |
(2.2% |
) |
|||||
Other | (39 |
) |
(45 |
) |
6 |
13.3%. |
(81 |
) |
(86 |
) |
5 |
5.8%. |
|||||
|
|
|
|
||||||||||||||
Total Other BCE | 119 |
88 |
31 |
35.2% |
203 |
139 |
64 |
46.0% |
|||||||||
|
|
|
|
||||||||||||||
Total operating income | 1,100 |
1,105 |
(5 |
) |
(0.5% |
) |
2,166 |
2,116 |
50 |
2.4% |
|||||||
|
|
|
|
||||||||||||||
|
|
|
|
||||||||||||||
Capital expenditures(4) | |||||||||||||||||
Consumer | 394 |
331 |
(63 |
) |
(19.0% |
) |
735 |
576 |
(159 |
)
|
(27.6% |
) |
|||||
Business | 246 |
281 |
35 |
12.5% |
442 |
495 |
53 |
10.7% |
|||||||||
Aliant | 104 |
45 |
(59 |
) |
n.m. |
186 |
130 |
(56 |
)
|
(43.1% |
) |
||||||
Other Bell Canada | 103 |
58 |
(45 |
) |
(77.6% |
) |
150 |
104 |
(46 |
)
|
(44.2% |
) |
|||||
|
|
|
|
||||||||||||||
Total Bell Canada | 847 |
715 |
(132 |
) |
(18.5% |
) |
1,513 |
1,305 |
(208 |
) |
(15.9% |
) |
|||||
Other BCE | |||||||||||||||||
Telesat | 53 |
88 |
35 |
39.8% |
107 |
153 |
46 |
30.1%. |
|||||||||
Other | 14 |
23 |
9 |
39.1% |
31 |
49 |
18 |
36.7% |
|||||||||
|
|
|
|
||||||||||||||
Total capital expenditures | 914 |
826 |
(88 |
) |
(10.7% |
) |
1,651 |
1,507 |
(144 |
) |
(9.6% |
) |
|||||
|
|
|
|
||||||||||||||
|
|
|
|
BCE Inc. Supplementary Financial Information - Second Quarter 2005 Page 4
BCE Consolidated(1)
Segmented Data
Historical Trend
($ millions, except where otherwise indicated) | YTD 2005 |
Q2 05 |
Q1
05 |
Total 2004 |
Q4
04 |
Q3
04 |
Q2
04 |
Q1
04 |
|||||||||
|
|
|
|
||||||||||||||
Revenues | |||||||||||||||||
Consumer | 3,746 |
1,890 |
1,856 |
7,502 |
1,911 |
1,908 |
1,858 |
1,825 |
|||||||||
Business | 2,977 |
1,499 |
1,478 |
5,851 |
1,535 |
1,440 |
1,441 |
1,435 |
|||||||||
Aliant | 1,042 |
518 |
524 |
2,033 |
506 |
497 |
526 |
504 |
|||||||||
Other Bell Canada | 964 |
485 |
479 |
1,939 |
511 |
486 |
468 |
474 |
|||||||||
Inter-segment eliminations | (262 |
) |
(134 |
) |
(128 |
) |
(538 |
) |
(160 |
) |
(125 |
) |
(121 |
) |
(132 |
) |
|
|
|
|
|
||||||||||||||
Total Bell Canada | 8,467 |
4,258 |
4,209 |
16,787 |
4,303 |
4,206 |
4,172 |
4,106 |
|||||||||
Other BCE | |||||||||||||||||
Bell Globemedia | 755 |
399 |
356 |
1,420 |
405 |
302 |
371 |
342 |
|||||||||
Advertising | 561 |
300 |
261 |
1,041 |
306 |
209 |
277 |
249 |
|||||||||
Subscriber | 155 |
78 |
77 |
298 |
77 |
73
|
74 |
74 |
|||||||||
Production and Sundry | 39 |
21 |
18 |
81 |
22 |
20 |
20 |
19 |
|||||||||
Telesat | 245 |
137 |
108 |
362 |
102 |
91 |
85 |
84 |
|||||||||
CGI | 548 |
275 |
273 |
1,007 |
271 |
274 |
248 |
214 |
|||||||||
Other | 35 |
24 |
11 |
60 |
19 |
12 |
18 |
11 |
|||||||||
|
|
|
|
||||||||||||||
Total Other BCE | 1,583 |
835 |
748 |
2,849 |
797 |
679 |
722 |
651 |
|||||||||
Inter-segment eliminations | (211 |
) |
(113 |
) |
(98 |
) |
(455 |
) |
(114 |
) |
(107 |
) |
(115 |
) |
(119 |
) |
|
|
|
|
|
||||||||||||||
Total revenues | 9,839 |
4,980 |
4,859 |
19,181 |
4,986 |
4,778 |
4,779 |
4,638 |
|||||||||
|
|
|
|
||||||||||||||
|
|
|
|
||||||||||||||
Operating income |
|||||||||||||||||
Consumer | 1,078 |
552 |
526
|
2,119
|
464 |
569 |
560 |
526 |
|||||||||
Business | 461 |
221 |
240 |
896 |
183 |
245 |
227 |
241
|
|||||||||
Aliant | 186 |
99 |
87 |
268 |
23 |
71 |
92
|
82 |
|||||||||
Other Bell Canada | 238 |
109 |
129 |
(588 |
) |
61 |
(898 |
) |
138 |
111 |
|||||||
|
|
|
|
||||||||||||||
Total Bell Canada | 1,963 |
981 |
982 |
2,695 |
731 |
(13 |
) |
1,017 |
960 |
||||||||
Other BCE | |||||||||||||||||
Bell Globemedia | 159 |
95 |
64 |
240 |
103 |
23 |
74 |
40 |
|||||||||
Telesat | 80 |
43 |
37 |
141 |
37 |
39 |
34 |
31 |
|||||||||
CGI | 45 |
20 |
25 |
94 |
24 |
24 |
25 |
21 |
|||||||||
Other | (81 |
)
|
(39 |
) |
(42 |
) |
(194 |
) |
(60 |
) |
(48 |
) |
(45 |
) |
(41 |
) |
|
|
|
|
|
||||||||||||||
Total Other BCE | 203 |
119 |
84 |
281 |
104 |
38 |
88 |
51 |
|||||||||
|
|
|
|
||||||||||||||
Total operating income | 2,166 |
1,100 |
1,066 |
2,976 |
835 |
25 |
1,105 |
1,011 |
|||||||||
|
|
|
|
||||||||||||||
|
|
|
|
||||||||||||||
Capital expenditures (4) | |||||||||||||||||
Consumer | 735 |
394 |
341 |
1,371 |
418 |
377
|
331 |
245 |
|||||||||
Business | 442 |
246 |
196 |
1,008 |
330 |
183 |
281 |
214 |
|||||||||
Aliant | 186 |
104 |
82 |
295 |
114 |
51 |
45 |
85 |
|||||||||
Other Bell Canada | 150 |
103 |
47 |
352 |
123
|
125 |
58 |
46 |
|||||||||
|
|
|
|
||||||||||||||
Total Bell Canada | 1,513 |
847 |
666 |
3,026 |
985 |
736 |
715 |
590 |
|||||||||
Other BCE | |||||||||||||||||
Telesat | 107 |
53 |
54 |
257 |
40 |
64
|
88 |
65 |
|||||||||
Other | 31 |
14 |
17
|
81 |
21 |
11 |
23 |
26 |
|||||||||
|
|
|
|
||||||||||||||
Total capital expenditures | 1,651 |
914 |
737 |
3,364 |
1,046
|
811 |
826
|
681 |
|||||||||
|
|
|
|
||||||||||||||
|
|
|
|
BCE Inc. Supplementary Financial Information - Second Quarter 2005 Page 5
BCE Consolidated(1)
Consolidated Balance Sheet Data
($ millions, except where otherwise indicated) | June 30 2005 |
March
31 2005 |
December
31 2004 |
|||
|
|
|
||||
ASSETS | ||||||
Current assets | ||||||
Cash and cash equivalents | 380 |
526 |
380 |
|||
Accounts receivable | 1,874 |
2,074 |
2,096 |
|||
Other current assets | 1,228 |
1,364 |
1,212 |
|||
|
|
|
||||
Total current assets | 3,482 |
3,964 |
3,688 |
|||
Capital assets | 22,050 |
21,376 |
21,398 |
|||
Other long-term assets | 2,690 |
2,747 |
2,656 |
|||
Indefinite-life intangible assets | 2,973 |
2,951 |
2,916 |
|||
Goodwill | 8,528 |
8,482 |
8,413 |
|||
Non-current assets of discontinued operations | 82 |
50 |
50 |
|||
|
|
|
||||
Total assets | 39,805 |
39,570 |
39,121 |
|||
|
||||||
LIABILITIES | ||||||
Current liabilities | ||||||
Accounts payable and accrued liabilities | 3,328 |
3,313 |
3,692 |
|||
Interest payable | 189 |
283 |
183 |
|||
Dividends payable | 325 |
325 |
297 |
|||
Debt due within one year | 1,497 |
1,428 |
1,276 |
|||
|
|
|
||||
Total current liabilities | 5,339 |
5,349 |
5,448 |
|||
Long-term debt | 12,480 |
12,280 |
11,809 |
|||
Other long-term liabilities | 4,603 |
4,819 |
4,932 |
|||
|
|
|
||||
Total liabilities | 22,422 |
22,448 |
22,189 |
|||
|
|
|
||||
Non-controlling interest | 2,905 |
2,914
|
2,908 |
|||
|
|
|
||||
SHAREHOLDERS' EQUITY | ||||||
Preferred shares | 1,670 |
1,670
|
1,670 |
|||
|
|
|
||||
Common shareholders' equity | ||||||
Common shares | 16,794 |
16,790 |
16,781 |
|||
Contributed surplus | 1,071 |
1,065
|
1,061 |
|||
Deficit | (5,005 |
)
|
(5,264 |
)
|
(5,432 |
) |
Currency translation adjustment | (52 |
)
|
(53 |
) |
(56 |
) |
|
|
|
||||
Total common shareholders' equity | 12,808 |
12,538 |
12,354 |
|||
|
|
|
||||
Total shareholders' equity | 14,478 |
14,208 |
14,024 |
|||
|
|
|
||||
Total liabilities and shareholders' equity | 39,805 |
39,570 |
39,121 |
|||
|
|
|
||||
Number of common shares outstanding | 926.7 |
926.4 |
925.9 |
|||
|
|
|
||||
Total Net Debt | 13,597 |
13,182 |
12,705 |
|||
Total Capitalization | 30,980 |
30,304 |
29,637 |
|||
|
||||||
Key ratios | ||||||
Net debt : Total Capitalization | 43.9% |
43.5%
|
42.9% |
|||
Net debt : Trailing 12 month EBITDA | 1.76 |
1.72 |
1.68 |
|||
EBITDA : Interest (trailing 12 month) | 7.75 |
7.66 |
7.53 |
|||
|
BCE Inc. Supplementary Financial Information - Second Quarter 2005 Page 6
BCE Consolidated
Consolidated Cash Flow Data
($
millions, except where otherwise indicated) |
Q2 2005 |
Q2 2004 |
$
change |
YTD June 2005 |
YTD June 2004 |
$
change |
|||||||||||||
|
|
|
|
||||||||||||||||
Cash
flows from operating activities |
|||||||||||||||||||
Earnings from continuing operations
|
581 |
544 |
37 |
1,073 |
1,029 |
44 |
|||||||||||||
Adjustments to reconcile earnings from
continuing operations to cash flows from operating activities: |
|||||||||||||||||||
Amortization
expense |
792 |
769 |
23 |
1,565 |
1,536 |
29 |
|||||||||||||
Net benefit
plans cost |
104 |
65 |
39 |
207 |
128 |
79 |
|||||||||||||
Restructuring
and other items |
5 |
14 |
(9 |
) |
1 |
17 |
(16 |
) |
|||||||||||
Net gains on
investments |
(32 |
) |
(1 |
) |
(31 |
) |
(34 |
) |
(6 |
) |
(28 |
) |
|||||||
Future
income taxes |
65 |
33 |
32 |
174 |
87 |
87 |
|||||||||||||
Non-controlling
interest |
73 |
39 |
34 |
136 |
87 |
49 |
|||||||||||||
Contributions
to employee pension plans |
(34 |
) |
(27 |
) |
(7 |
) |
(128 |
)
|
(56 |
) |
(72 |
) |
|||||||
Other employee
future benefit plan payments |
(22 |
) |
(22 |
) |
- |
(45 |
)
|
(46 |
) |
1 |
|||||||||
Payments
of restructuring and other items |
(28 |
)
|
(8 |
) |
(20 |
) |
(129 |
)
|
(27 |
) |
(102 |
) |
|||||||
Operating
assets and liabilities |
(54 |
) |
(282 |
)
|
228 |
(431 |
) |
(365 |
)
|
(66 |
)
|
||||||||
|
|
|
|
||||||||||||||||
1,450 |
1,124 |
326 |
2,389 |
2,384 |
5 |
||||||||||||||
|
|
|
|
||||||||||||||||
Capital expenditures |
(914 |
)
|
(826 |
) |
(88 |
)
|
(1,651 |
)
|
(1,507 |
) |
(144 |
)
|
|||||||
Other investing activities |
(11 |
) |
116 |
(127 |
) |
(26 |
) |
135 |
(161 |
) |
|||||||||
Cash dividends paid on preferred shares |
(22 |
)
|
(21 |
) |
(1 |
) |
(43 |
)
|
(43 |
) |
- |
||||||||
Cash dividends paid by subsidiaries
to non-controlling interest |
(60 |
)
|
(52 |
)
|
(8 |
) |
(110 |
)
|
(95 |
) |
(15 |
)
|
|||||||
|
|
|
|
||||||||||||||||
Free Cash Flow from operations, before common dividends(2)
|
443 |
341 |
102 |
559 |
874 |
(315 |
)
|
||||||||||||
Cash dividends paid on common shares |
(305 |
)
|
(277 |
)
|
(28 |
) |
(583 |
)
|
(554 |
) |
(29 |
) |
|||||||
|
|
|
|
||||||||||||||||
Free Cash Flow from operations, after common dividends(2)
|
138 |
64 |
74 |
(24 |
) |
320 |
(344 |
)
|
|||||||||||
Business acquisitions |
(35 |
) |
(247 |
) |
212 |
(118 |
) |
(306 |
)
|
188 |
|||||||||
Business dispositions |
- |
- |
- |
- |
16 |
(16 |
) |
||||||||||||
Increase in cost and equity investments |
(13 |
) |
(8 |
) |
(5 |
) |
(141 |
)
|
(8 |
) |
(133 |
) |
|||||||
Decrease in cost and equity investments |
5 |
|
- |
5 |
7 |
|
6 |
1 |
|||||||||||
|
|
|
|
||||||||||||||||
Free Cash Flow after investments and divestitures |
95 |
|
(191 |
) |
286 |
(276 |
)
|
28 |
(304 |
)
|
|||||||||
|
|
|
|
||||||||||||||||
Other financing activities |
|||||||||||||||||||
Increase (decrease) in notes payable
and bank advances |
341 |
|
(69 |
) |
410 |
186 |
|
(50 |
) |
236 |
|||||||||
Issue of long-term debt |
206 |
74 |
132
|
991 |
1,400 |
(409 |
) |
||||||||||||
Repayment of long-term debt |
(747 |
) |
(718 |
) |
(29 |
) |
(831 |
) |
(1,652 |
) |
821 |
||||||||
Issue of common shares |
4 |
4
|
- |
13 |
8 |
5 |
|||||||||||||
Issue of equity securities by subsidiaries
to non-controlling interest |
- |
- |
- |
- |
7 |
(7 |
) |
||||||||||||
Redemption of equity securities by
subsidiaries from non-controlling interest |
(21 |
) |
(12 |
) |
(9 |
) |
(38 |
) |
(54 |
) |
16 |
||||||||
Other financing activities |
(25 |
) |
32 |
(57 |
) |
(55 |
) |
(16 |
) |
(39 |
) |
||||||||
|
|
|
|
||||||||||||||||
(242 |
) |
(689 |
) |
447 |
266 |
|
(357 |
) |
623 |
||||||||||
|
|
|
|
||||||||||||||||
Cash
used in continuing operations |
(147 |
) |
(880 |
) |
733 |
(10 |
) |
(329 |
) |
319 |
|||||||||
Cash
provided by (used in) discontinued operations |
1 |
|
(54 |
) |
55 |
10 |
184 |
(174 |
) |
||||||||||
|
|
|
|
||||||||||||||||
Net
increase (decrease) in cash and cash equivalents |
(146 |
) |
(934 |
) |
788 |
- |
|
(145 |
) |
145 |
|||||||||
Cash
and cash equivalents at beginning of period |
526 |
1,511 |
(985 |
) |
380 |
722 |
(342 |
) |
|||||||||||
|
|
|
|
||||||||||||||||
Cash and cash equivalents at end of period |
380 |
577 |
(197 |
) |
380 |
577 |
(197 |
) |
|||||||||||
|
|
|
|
||||||||||||||||
|
|||||||||||||||||||
Other information
|
|||||||||||||||||||
Capital
expenditures as a percentage of revenues |
18.4% |
17.3% |
(1.1)
pts |
16.8% |
16.0% |
(0.8)
pts |
|||||||||||||
Cash
flow per share(5) |
$ |
0.58 |
$
|
0.32 |
$ |
0.26 |
$ |
0.80 |
$
|
0.95 |
$
|
(0.15 |
) |
||||||
Annualized cash flow yield(6) |
6.6% |
5.5%
|
1.1
pts |
4.2% |
7.1% |
(2.9)
pts |
|||||||||||||
Common
dividend payout |
54.2% |
50.0% |
4.2
pts |
56.2% |
54.1% |
2.1
pts |
|||||||||||||
|
BCE Inc. Supplementary Financial Information - Second Quarter 2005 Page 7
BCE
Consolidated
Consolidated
Cash Flow Data Historical Trend
($ millions, except where otherwise indicated) | YTD 2005 |
Q2
05 |
Q1
05 |
Total
2004 |
Q4
04 |
Q3
04 |
Q2
04 |
Q1
04 |
||||||||||
|
|
|
||||||||||||||||
Cash flows from operating activities | 1,073 |
581 |
492 |
1,498 |
367 |
102 |
544 |
485 |
||||||||||
Earnings from continuing operations | ||||||||||||||||||
Adjustments
to reconcile earnings from continuing operations to cash flows from operating activities: |
||||||||||||||||||
Amortization expense | 1,565
|
792 |
773 |
3,108
|
803 |
769 |
769 |
767 |
||||||||||
Net benefit plans cost | 207
|
104 |
103 |
256 |
67 |
61 |
65 |
63 |
||||||||||
Restructuring
and other items |
1
|
5 |
(4 |
) |
1,224
|
126 |
1,081 |
14 |
3 |
|||||||||
Net (gains) losses on investments | (34 |
)
|
(32 |
)
|
(2 |
)
|
(319 |
)
|
12 |
(325 |
)
|
(1 |
)
|
(5 |
)
|
|||
Future income taxes | 174
|
65 |
109 |
(34 |
)
|
62 |
(183 |
) |
33 |
54 |
||||||||
Non-controlling interest | 136
|
73 |
63 |
174 |
40 |
47 |
39 |
48 |
||||||||||
Contributions
to employee pension plans |
(128 |
) |
(34 |
) |
(94 |
) |
(112 |
) |
(24 |
) |
(32 |
) |
(27 |
) |
(29 |
) |
||
Other employee future benefit plan payments | (45 |
) |
(22 |
) |
(23 |
) |
(81 |
) |
(22 |
) |
(13 |
) |
(22 |
) |
(24 |
) |
||
Payments of restructuring and other items | (129 |
) |
(28 |
) |
(101 |
) |
(253 |
) |
(214 |
) |
(12 |
) |
(8 |
) |
(19 |
) |
||
Operating assets and liabilities | (431 |
) |
(54 |
) |
(377 |
) |
58 |
90 |
333
|
(282 |
) |
(83 |
) |
|||||
|
|
|
|
|||||||||||||||
2,389
|
1,450
|
939
|
5,519 |
1,307 |
1,828 |
1,124
|
1,260 |
|||||||||||
|
|
|
||||||||||||||||
Capital expenditures | (1,651 |
) |
(914 |
) |
(737 |
) |
(3,364 |
) |
(1,046 |
) |
(811 |
) |
(826 |
) |
(681 |
) |
||
Other investing activities | (26 |
) |
(11 |
) |
(15 |
) |
124 |
(9 |
) |
(2 |
) |
116 |
19 |
|||||
Cash dividends paid on preferred shares | (43 |
) |
(22 |
) |
(21 |
) |
(85 |
) |
(21 |
) |
(21 |
) |
(21 |
) |
(22 |
) |
||
Cash dividends paid by subsidiaries to non-controlling interest | (110 |
) |
(60 |
) |
(50 |
) |
(188 |
) |
(49 |
) |
(44 |
) |
(52 |
) |
(43 |
) |
||
|
|
|
||||||||||||||||
Free Cash Flow from operations, before common dividends (2) | 559
|
443 |
116 |
2,006
|
182 |
950 |
341 |
533 |
||||||||||
Cash dividends paid on common shares | (583 |
) |
(305 |
) |
(278 |
) |
(1,108 |
) |
(277 |
) |
(277 |
) |
(277 |
) |
(277 |
) |
||
|
|
|
|
|||||||||||||||
Free Cash Flow from operations, after common dividends (2) |
(24 |
) |
138 |
(162 |
) |
898 |
(95 |
) |
673 |
64 |
256 |
|||||||
Business acquisitions | (118 |
) |
(35 |
) |
(83 |
) |
(1,299 |
) |
(347 |
) |
(646 |
) |
(247 |
) |
(59 |
) |
||
Business dispositions | -
|
- |
- |
20 |
- |
4 |
- |
16 |
||||||||||
Increase in cost and equity investments | (141 |
) |
(13 |
) |
(128 |
) |
(58 |
) |
(38 |
) |
(12 |
) |
(8 |
) |
- |
|||
Decrease in cost and equity investments | 7
|
5 |
2 |
713 |
- |
707 |
- |
6 |
||||||||||
|
|
|
|
|||||||||||||||
Free Cash Flow after investments and divestitures | (276 |
) |
95 |
(371 |
) |
274 |
(480 |
) |
726 |
(191 |
) |
219 |
||||||
|
|
|
|
|||||||||||||||
Other financing activities | ||||||||||||||||||
Increase (decrease) in notes payable and bank advances | 186
|
341 |
(155 |
) |
130 |
7 |
173 |
(69 |
) |
19 |
||||||||
Issue of long-term debt | 991
|
206 |
785 |
1,521 |
111 |
10 |
74 |
1,326 |
||||||||||
Repayment of long-term debt | (831 |
) |
(747 |
) |
(84 |
) |
(2,391 |
) |
(641 |
) |
(98 |
) |
(718 |
) |
(934 |
) |
||
Issue of common shares | 13
|
4 |
9 |
32 |
16 |
8 |
4 |
4 |
||||||||||
Issue of
equity securities and convertible debentures by subsidiaries to non-controlling interest |
-
|
- |
- |
8 |
1 |
- |
- |
7 |
||||||||||
Redemption of equity securities by subsidiaries from non-controlling interest | (38 |
) |
(21 |
) |
(17 |
) |
(58 |
) |
- |
(4 |
) |
(12 |
) |
(42 |
) |
|||
Other financing activities | (55 |
) |
(25 |
) |
(30 |
) |
(51 |
) |
(17 |
) |
(18 |
) |
32 |
(48 |
) |
|||
|
|
|
|
|||||||||||||||
266
|
(242 |
) |
508 |
(809 |
) |
(523 |
) |
71 |
(689 |
) |
332 |
|||||||
|
|
|
||||||||||||||||
Cash provided by (used in) continuing operations | (10 |
) |
(147 |
) |
137 |
(535 |
) |
(1,003 |
) |
797 |
(880 |
) |
551 |
|||||
Cash provided by (used in) discontinued operations | 10
|
1 |
9 |
193 |
(3 |
) |
12 |
(54 |
) |
238 |
||||||||
|
|
|
|
|||||||||||||||
Net increase (decrease) in cash and cash equivalents | -
|
(146 |
) |
146 |
(342 |
) |
(1,006 |
) |
809 |
(934 |
) |
789 |
||||||
Cash and cash equivalents at beginning of period | 380
|
526 |
380 |
722 |
1,386
|
577 |
1,511
|
722 |
||||||||||
|
|
|
|
|||||||||||||||
Cash and cash equivalents at end of period | 380
|
380 |
526 |
380 |
380 |
1,386
|
577 |
1,511 |
||||||||||
|
|
|
|
|||||||||||||||
Consists of: | ||||||||||||||||||
Cash
and cash equivalents of continuing operations |
380
|
380 |
526 |
380 |
380 |
1,386
|
577 |
1,135 |
||||||||||
Cash
and cash equivalents of discontinued operations |
- |
- |
- |
- |
- |
- |
- |
376 |
||||||||||
|
|
|
|
|||||||||||||||
Total | 380
|
380 |
526 |
380 |
380 |
1,386 |
577 |
1,511 |
||||||||||
|
|
|
||||||||||||||||
Other Information | ||||||||||||||||||
Capital expenditures as a percentage of revenues | 16.8 |
% |
18.4 |
%
|
15.2 |
% |
17.5 |
%
|
21.0 |
%
|
17.0 |
% |
17.3 |
% |
14.7 |
%
|
||
Cash flow per share (5) | $
0.80 |
$
0.58 |
$
0.22 |
$
2.33 |
$
0.28 |
$
1.10 |
$
0.32 |
$
0.63 |
||||||||||
Annualized cash flow yield (6) | 4.2 |
% |
6.6 |
% |
1.7 |
%
|
7.5 |
% |
2.7 |
% |
15.1 |
% |
5.5
|
%
|
8.4 |
%
|
||
Common dividend payout | 56.2 |
%
|
54.2 |
% |
58.6 |
% |
72.8 |
% |
66.4 |
%
|
337.8 |
% |
50.0 |
% |
58.9 |
% |
BCE Inc. Supplementary Financial Information - Second Quarter 2005 Page 8
Proportionate Net Debt, Preferreds and EBITDA
BCE Corporate and Bell Canada Net debt and preferreds | |||||||||||||
At
June 30, 2005 |
Bell
Canada (excl. Aliant) |
Aliant |
Bell Canada Statutory |
Inter- company eliminations |
Total
Bell Canada |
BCE
Inc. Corporate |
|||||||
Cash
and cash equivalents |
150
|
(319 |
) |
(169 |
) |
(169 |
) |
3
|
|||||
Long-term
debt |
9,131
|
892
|
10,023 |
(360 |
) |
9,663
|
2,000 |
||||||
Debt
due within one year |
1,344
|
156 |
1,500 |
(232 |
) |
1,268 |
- |
||||||
Long-term
note receivable from BCH |
(498 |
) |
- |
(498 |
) |
498 |
- |
- |
|||||
PPA
fair value increment(7) |
107 |
- |
|||||||||||
Net
debt |
10,127
|
729 |
10,856
|
(94 |
)
|
10,869 |
2,003 |
||||||
Preferred
shares - Bell Canada (8) |
1,100
|
1,100
|
1,100 |
- |
|||||||||
Preferred
shares - Aliant (8) |
172 |
172 |
172 |
- |
|||||||||
Perpetual
Preferred shares - BCE |
- |
- |
- |
- |
1,670 |
||||||||
Nortel
common shares at market |
- |
- |
- |
- |
(47 |
) |
|||||||
Net debt and preferreds | 11,227
|
901 |
12,128
|
(94 |
)
|
12,141 |
3,626 |
||||||
Proportionate net debt and preferreds, Trailing EBITDA | |||||||||||||||||||||||||
For
the quarter ended June 30, 2005 ($ millions, except where otherwise indicated) |
%
owned by BCE |
Proportionate net debt and preferreds |
TOTAL
EBITDA
|
PROPORTIONATE
EBITDA
|
|||||||||||||||||||||
|
|
||||||||||||||||||||||||
Q2
05 |
Q1
05 |
Q4
04 |
Q3
04 |
Trailing |
Q2
05 |
Q1
05 |
Q4
04 |
Q3
04 |
Trailing |
||||||||||||||||
Bell Canada (excluding Aliant) | 100%
|
11,240 |
A |
1,618 |
1,605 |
1,469 |
1,669
|
6,361 |
1,618
|
1,605 |
1,469 |
1,669 |
6,361 |
||||||||||||
Aliant | 53.0%
|
477 |
221 |
210 |
210 |
187 |
828 |
117 |
112 |
112 |
99 |
440 |
|||||||||||||
|
|
|
|||||||||||||||||||||||
Total Bell Canada Consolidated | 11,717 |
1,839
|
1,815 |
1,679
|
1,856
|
7,189 |
1,735
|
1,717 |
1,581 |
1,768
|
6,801 |
||||||||||||||
OtherBCE | |||||||||||||||||||||||||
Bell Globemedia | 68.5%
|
350 |
114 |
83 |
124 |
43 |
364 |
68 |
49 |
73 |
22 |
212 |
|||||||||||||
Telesat | 100%
|
245 |
71 |
63 |
60 |
60 |
254 |
71 |
63 |
60 |
60 |
254 |
|||||||||||||
CGI | 29.5%
|
29 |
B |
37 |
37 |
40 |
38 |
152 |
37 |
37 |
40 |
38 |
152 |
||||||||||||
Corporate and other | 100%
|
3,619 |
(39 |
)
|
(37 |
) |
(47 |
)
|
(35 |
) |
(158 |
) |
(39 |
) |
(37 |
) |
(47 |
) |
(35 |
) |
(158 |
) |
|||
|
|
|
|||||||||||||||||||||||
Total Other BCE | 4,243
|
183 |
146 |
177 |
106 |
612 |
137 |
112 |
126 |
85 |
460 |
||||||||||||||
Inter-segment eliminations | (21 |
) |
(23 |
) |
(25 |
) |
(26 |
) |
(95 |
) |
(21 |
)
|
(23 |
) |
(25 |
) |
(26 |
) |
(95 |
) |
|||||
|
|
||||||||||||||||||||||||
Total | 15,960
|
2,001 |
1,938 |
1,831 |
1,936 |
7,706
|
1,851 |
1,806 |
1,682 |
1,827
|
7,166 |
||||||||||||||
|
|
|
A Bell Canada
(excl. Aliant) net debt and preferred of $11,227 million less $94 million
of inter-company eliminations plus $107 million upon consolidation (PPA fair
value increment).
B CGI
is proportionately consolidated
BCE Inc. Supplementary Financial Information - Second Quarter 2005 Page 9
($
millions, except where otherwise indicated) |
Q2 2005 |
Q2 2004 |
$ change |
%
change |
YTD June 2005 |
YTD June 2004 |
$ change |
%
change |
||||||||||||
|
|
|||||||||||||||||||
Revenues | ||||||||||||||||||||
Local and access | 1,368
|
1,401
|
(33 |
)
|
(2.4%) |
2,736
|
2,780
|
(44 |
)
|
(1.6%)
|
||||||||||
Long distance | 518
|
572 |
(54 |
)
|
(9.4%) |
1,056
|
1,178
|
(122 |
)
|
(10.4%) |
||||||||||
Wireless | 771
|
698 |
73 |
10.5% |
1,484 |
1,349 |
135 |
10.0% |
||||||||||||
Data | 966
|
870 |
96 |
11.0% |
1,917 |
1,762
|
155 |
8.8% |
||||||||||||
Video | 236
|
211 |
25 |
11.8%
|
457 |
418 |
39 |
9.3% |
||||||||||||
Terminal sales and other | 399
|
420 |
(21 |
) |
(5.0%)
|
817 |
791 |
26 |
3.3% |
|||||||||||
|
|
|
|
|
||||||||||||||||
Total operating revenues | 4,258
|
4,172
|
86 |
2.1% |
8,467 |
8,278 |
189 |
2.3% |
||||||||||||
Operating expenses | (2,419 |
)
|
(2,351 |
)
|
(68 |
)
|
(2.9%)
|
(4,813 |
)
|
(4,702 |
) |
(111 |
) |
(2.4%) |
||||||
|
|
|
|
|||||||||||||||||
EBITDA | 1,839
|
1,821
|
18 |
1.0% |
3,654
|
3,576 |
78 |
2.2% |
||||||||||||
|
|
|
|
|||||||||||||||||
EBITDA margin (%) | 43.2% |
43.6% |
(0.4)
pts |
43.2% |
43.2% |
0.0 pts |
||||||||||||||
|
|
|
||||||||||||||||||
Amortization expense | (746 |
)
|
(733 |
)
|
(13 |
)
|
(1.8%)
|
(1,478 |
)
|
(1,465 |
)
|
(13 |
)
|
(0.9%) |
||||||
Net benefit plans cost | (107 |
)
|
(58 |
)
|
(49 |
)
|
(84.5%) |
(213 |
)
|
(118 |
)
|
(95 |
)
|
(80.5%) |
||||||
Restructuring and other items | (5 |
)
|
(13 |
)
|
8 |
n.m. |
- |
(16 |
)
|
16 |
n.m. |
|||||||||
|
|
|
|
|||||||||||||||||
Operating income | 981
|
1,017
|
(36 |
)
|
(3.5%)
|
1,963
|
1,977 |
(14 |
)
|
(0.7%) |
||||||||||
Other income | 13
|
19 |
(6 |
)
|
(31.6%) |
24 |
49 |
(25 |
)
|
(51.0%) |
||||||||||
Interest expense | (206 |
)
|
(216 |
)
|
10 |
4.6%
|
(412 |
)
|
(436 |
)
|
24 |
5.5% |
||||||||
|
|
|
||||||||||||||||||
Pre-tax earnings | 788
|
820 |
(32 |
)
|
(3.9%)
|
1,575
|
1,590
|
(15 |
)
|
(0.9%)
|
||||||||||
Income taxes | (178 |
)
|
(245 |
)
|
67 |
27.3%
|
(407 |
)
|
(441 |
)
|
34 |
7.7% |
||||||||
Non-controlling interest | (17 |
)
|
9 |
(26 |
)
|
n.m.
|
(33 |
)
|
(1 |
)
|
(32 |
)
|
n.m. |
|||||||
|
|
|
|
|||||||||||||||||
Net Earnings | 593
|
584 |
9 |
1.5% |
1,135 |
1,148 |
(13 |
)
|
(1.1%) |
|||||||||||
Dividends on preferred shares | (13 |
) |
(17 |
) |
4 |
23.5%
|
(27 |
)
|
- |
(33 |
) |
6
|
18.2%
|
|||||||
|
|
|
|
|||||||||||||||||
Net earnings applicable to common shares | 580
|
567 |
13 |
2.3%
|
1,108
|
1,115 |
(7 |
)
|
(0.6%) |
|||||||||||
|
|
|||||||||||||||||||
|
||||||||||||||||||||
Other information | ||||||||||||||||||||
Cash flow information | ||||||||||||||||||||
Free Cash Flow (FCF) | ||||||||||||||||||||
Cash from operating activities | 1,467
|
1,089 |
378 |
34.7% |
2,327
|
2,284
|
43
|
1.9% |
||||||||||||
Capital expenditures | (847 |
)
|
(715 |
)
|
(132 |
)
|
(18.5%)
|
(1,513 |
)
|
(1,305 |
)
|
(208 |
)
|
(15.9%) |
||||||
Dividends and distributions | (453 |
)
|
(437 |
)
|
(16 |
)
|
(3.7%) |
(875 |
)
|
(940 |
)
|
65 |
6.9% |
|||||||
Other investing items | 4
|
(1 |
)
|
5 |
n.m.
|
- |
(8 |
)
|
8 |
n.m. |
||||||||||
|
||||||||||||||||||||
Total | 171
|
(64 |
)
|
235 |
n.m. |
(61 |
)
|
31 |
(92 |
)
|
n.m. |
|||||||||
Capital expenditures as a percentage of revenues (%) | 19.9 |
% |
17.1 |
%
|
(2.8)
pts |
17.9 |
% |
15.8 |
% |
(2.1)
pts |
||||||||||
Balance Sheet Information | June
30 |
Dec.
31 |
||||||||||||||||||
2005 |
2004 |
|||||||||||||||||||
Net Debt | ||||||||||||||||||||
Long-term debt | 10,023
|
9,166 |
||||||||||||||||||
Debt due within one year | 1,500
|
1,352 |
||||||||||||||||||
Less: Cash and cash equivalents | (169 |
) |
(32 |
) |
||||||||||||||||
Total Net Debt | 11,354
|
10,486 |
||||||||||||||||||
Non-controlling interest | 1,162
|
1,229 |
||||||||||||||||||
Total shareholders' equity | 9,957
|
9,670 |
||||||||||||||||||
Total Capitalization | 22,473
|
21,385 |
||||||||||||||||||
Net Debt: Total Capitalization | 50.5%
|
49.0% |
||||||||||||||||||
Net Debt: Trailing 12 month EBITDA | 1.58
|
1.47 |
||||||||||||||||||
EBITDA : Interest (trailing 12 month) | 8.57
|
8.24 |
||||||||||||||||||
Bell
Canada Consolidated (1)
Operational Data - Historical Trend
($ millions, except where otherwise indicated) | YTD
2005 |
Q2
05
|
Q1
05
|
Total
2004 |
Q4
04
|
Q3
04
|
Q2
04
|
Q1
04
|
||||||||||||
|
|
|
|
|||||||||||||||||
Revenues | ||||||||||||||||||||
Local and access | 2,736
|
1,368
|
1,368
|
5,572 |
1,397 |
1,395
|
1,401
|
1,379 |
||||||||||||
Long distance | 1,056
|
518 |
538 |
2,327
|
560 |
589 |
572 |
606 |
||||||||||||
Wireless | 1,484
|
771 |
713 |
2,818
|
742 |
727 |
698 |
651 |
||||||||||||
Data | 1,917
|
966 |
951 |
3,640 |
963 |
915 |
870 |
892 |
||||||||||||
Video | 457
|
236 |
221 |
850 |
219 |
213 |
211 |
207 |
||||||||||||
Terminal sales and other | 817
|
399 |
418 |
1,580
|
422 |
367 |
420 |
371 |
||||||||||||
|
|
|
|
|||||||||||||||||
Total operating revenues | 8,467
|
4,258
|
4,209
|
16,787 |
4,303
|
4,206
|
4,172
|
4,106 |
||||||||||||
Operating expenses | (4,813 |
) |
(2,419 |
) |
(2,394 |
) |
(9,676 |
) |
(2,624 |
) |
(2,350 |
) |
(2,351 |
) |
(2,351) |
|||||
|
|
|
|
|||||||||||||||||
EBITDA | 3,654
|
1,839
|
1,815
|
7,111
|
1,679
|
1,856
|
1,821 |
1,755 |
||||||||||||
EBITDA margin (%) | 43.2 |
%
|
43.2 |
%
|
43.1 |
%
|
42.4 |
%
|
39.0 |
%
|
44.1 |
%
|
43.6 |
%
|
42.7% |
|||||
Amortization expense | (1,478 |
)
|
(746 |
)
|
(732 |
)
|
(2,962 |
)
|
(763 |
)
|
(734 |
)
|
(733 |
)
|
(732) |
|||||
Net benefit plans cost | (213 |
)
|
(107 |
)
|
(106 |
)
|
(235 |
)
|
(62 |
)
|
(55 |
)
|
(58 |
)
|
(60) |
|||||
Restructuring and other items | -
|
(5 |
)
|
5
|
(1,219 |
)
|
(123 |
)
|
(1,080 |
)
|
(13 |
)
|
(3) |
|||||||
|
|
|
|
|||||||||||||||||
Operating income (loss) | 1,963
|
981 |
982 |
2,695
|
731 |
(13 |
) |
1,017
|
960 |
|||||||||||
Other income | 24
|
13 |
11 |
183 |
20 |
114 |
19 |
30 |
||||||||||||
Interest expense | (412 |
) |
(206 |
) |
(206 |
) |
(863 |
) |
(212 |
) |
(215 |
) |
(216 |
) |
(220) |
|||||
|
|
|
|
|||||||||||||||||
Pre-tax earnings (loss) | 1,575
|
788 |
787 |
2,015
|
539 |
(114 |
)
|
820 |
770 |
|||||||||||
Income taxes | (407 |
)
|
(178 |
)
|
(229 |
)
|
(506 |
)
|
(140 |
)
|
75 |
(245 |
)
|
(196)
|
||||||
Non-controlling interest | (33 |
)
|
(17 |
)
|
(16 |
)
|
9 |
8 |
2 |
9 |
(10) |
|||||||||
|
|
|
|
|||||||||||||||||
Net earnings (loss) before extraordinary gain | 1,135
|
593 |
542 |
1,518
|
407 |
(37)
|
584 |
564 |
||||||||||||
Extraordinary gain | - |
- |
- |
69 |
69 |
- |
- |
- |
||||||||||||
|
|
|
|
|||||||||||||||||
Net earnings | 1,135
|
593 |
542 |
1,587
|
476 |
(37 |
)
|
584 |
564 |
|||||||||||
Dividends on preferred shares | (27 |
)
|
(13 |
)
|
(14 |
)
|
(60 |
)
|
(11 |
)
|
(16 |
)
|
(17 |
)
|
(16) |
|||||
|
|
|
|
|||||||||||||||||
Net earnings applicable to common shares | 1,108
|
580 |
528 |
1,527
|
465
|
(53 |
)
|
567 |
548 |
|||||||||||
|
|
|
|
|||||||||||||||||
|
||||||||||||||||||||
Other information | ||||||||||||||||||||
Cash flow information | ||||||||||||||||||||
Free Cash Flow (FCF) | ||||||||||||||||||||
Cash from operating activities | 2,327
|
1,467
|
860 |
5,333
|
1,293
|
1,756
|
1,089 |
1,195 |
||||||||||||
Capital expenditures | (1,513 |
) |
(847 |
) |
(666 |
) |
(3,026 |
) |
(985 |
) |
(736 |
) |
(715 |
) |
(590) |
|||||
Dividends and distributions | (875 |
) |
(453 |
) |
(422 |
) |
(1,736 |
) |
(351 |
) |
(445 |
) |
(437 |
) |
(503) |
|||||
Other investing items | -
|
4 |
(4 |
) |
(15 |
) |
(8 |
) |
1 |
(1 |
) |
(7) |
||||||||
|
|
|
|
|||||||||||||||||
Total | (61 |
) |
171 |
(232 |
) |
556 |
(51 |
) |
576 |
(64 |
) |
95 |
||||||||
|
|
|
|
|||||||||||||||||
Capital expenditures as a percentage of revenues (%) | 17.9 |
% |
19.9 |
% |
15.8 |
% |
18.0 |
% |
22.9 |
% |
17.5 |
% |
17.1 |
% |
14.4% |
|||||
Balance Sheet Information | June
30
|
March
31
|
Dec.
31
|
|||||||||||||||||
2005
|
2005
|
2004
|
||||||||||||||||||
|
|
|||||||||||||||||||
Net Debt | ||||||||||||||||||||
Long-term debt | 10,023
|
9,657 |
9,166
|
|||||||||||||||||
Debt due within one year | 1,500
|
1,634 |
1,352 |
|||||||||||||||||
Less: Cash and cash equivalents | (169 |
)
|
(308 |
)
|
(32 |
)
|
||||||||||||||
|
||||||||||||||||||||
Total Net Debt | 11,354
|
10,983
|
10,486 |
|||||||||||||||||
Non-controlling interest | 1,162
|
1,202
|
1,229 |
|||||||||||||||||
Total shareholders' equity | 9,957
|
9,796
|
9,670 |
|||||||||||||||||
|
|
|||||||||||||||||||
Total Capitalization | 22,473
|
21,981 |
21,385 |
|||||||||||||||||
|
|
|||||||||||||||||||
Net Debt: Total Capitalization | 50.5%
|
50.0% |
49.0% |
|||||||||||||||||
Net Debt : Trailing 12 month EBITDA | 1.58
|
1.53
|
1.47 |
|||||||||||||||||
EBITDA : Interest (trailing 12 month) | 8.57
|
8.45
|
8.24 |
BCE Inc. Supplementary Financial Information - Second Quarter 2005 Page 11
Bell
Canada Consolidated
(1)
Statistical Data
Q2 2005
|
Q2
2004
|
%
change
|
YTD
June 2005 |
YTD
June 2004 |
%
change |
||||||||
|
|
|
|
||||||||||
Wireline | |||||||||||||
Local | |||||||||||||
Network access services (k) | |||||||||||||
Residential | 8,189
|
8,390 |
(2.4%) |
8,189
|
8,390 |
(2.4%) |
|||||||
Business | 4,511
|
4,548 |
(0.8%) |
4,511 |
4,548
|
(0.8%) |
|||||||
|
|
|
|
|
|
||||||||
Total | 12,700
|
12,938
|
(1.8%) |
12,700
|
12,938
|
(1.8%)
|
|||||||
SmartTouch feature revenues ($M) | 225
|
235 |
(4.3%) |
452 |
472 |
(4.2%) |
|||||||
Long Distance (LD) | |||||||||||||
Conversation minutes (M) | 4,667
|
4,498
|
3.8% |
9,255
|
9,076
|
2.0% |
|||||||
Average revenue per minute ($) | 0.101
|
0.118
|
(14.4%) |
0.104
|
0.119
|
(12.6%) |
|||||||
|
|||||||||||||
Data | |||||||||||||
Equivalent access lines (9) (k) - Ontario and Quebec | |||||||||||||
Digital equivalent access lines (k) | 4,634
|
4,083
|
13.5% |
4,634
|
4,083
|
13.5% |
|||||||
Internet subscribers (10) (k) | |||||||||||||
High Speed Internet net activations (k) | 92
|
65 |
41.5% |
220 |
175 |
25.7% |
|||||||
High Speed Internet subscribers (k) | 2,028
|
1,633
|
24.2% |
2,028 |
1,633
|
24.2% |
|||||||
Dial-up Internet subscribers (k) | 666
|
807 |
(17.5%) |
666 |
807 |
(17.5%) |
|||||||
|
|
|
|
|
|||||||||
2,694
|
2,440 |
10.4% |
2,694 |
2,440 |
10.4% |
||||||||
|
|||||||||||||
Wireless | |||||||||||||
Cellular & PCS net activations (k) | |||||||||||||
Pre-paid | 29
|
17 |
70.6% |
71 |
40 |
77.5% |
|||||||
Post-paid | 117
|
78 |
50.0% |
112 |
147 |
(23.8%) |
|||||||
|
|
|
|
||||||||||
146
|
95 |
53.7% |
183 |
187 |
(2.1%)
|
||||||||
Cellular & PCS subscribers (k) | |||||||||||||
Pre-paid | 1,272
|
1,099
|
15.7% |
1,272
|
1,099
|
15.7% |
|||||||
Post-paid | 3,836
|
3,500
|
9.6% |
3,836 |
3,500
|
9.6%
|
|||||||
5,108
|
4,599
|
11.1% |
5,108
|
4,599
|
11.1% |
||||||||
Average revenue per unit (ARPU) ($/month) | 50
|
50 |
0.0% |
48 |
48 |
0.0% |
|||||||
Pre-paid | 16
|
11 |
45.5% |
13 |
11 |
18.2% |
|||||||
Post-paid | 61
|
62 |
(1.6%) |
59 |
60 |
(1.7%) |
|||||||
Churn (%) (average per month) | 1.6 |
% |
1.3 |
% |
(0.3)
pts |
1.6 |
%
|
1.3 |
% |
(0.3)
pts |
|||
Pre-paid | 2.1 |
% |
1.9 |
% |
(0.2)
pts |
2.0 |
% |
1.8 |
% |
(0.2)
pts |
|||
Post-paid | 1.4 |
% |
1.1 |
% |
(0.3)
pts |
1.5 |
% |
1.1 |
% |
(0.4)
pts |
|||
Usage per subscriber (min/month) | 262
|
257 |
1.9% |
247 |
241 |
2.5% |
|||||||
Cost of acquisition (COA) (11) ($/sub) | 401
|
413 |
2.9% |
389 |
434 |
10.4% |
|||||||
Wireless EBITDA ($ millions) | 333
|
317 |
5.0% |
633 |
579 |
9.3% |
|||||||
Wireless EBITDA margin (12) | 42.4 |
% |
44.9 |
% |
(2.5)
pts |
41.9 |
% |
42.3 |
% |
(0.4)
pts |
|||
Wireless capital expenditures ($ millions) | 118
|
77 |
(53.2%) |
182 |
142 |
(28.2%) |
|||||||
Wireless capital expenditures as a percentage of revenue | 15.3 |
% |
11.0 |
% |
(4.3)
pts |
12.2 |
% |
10.5 |
%
|
(1.7)
pts |
|||
Paging subscribers (k) | 385
|
469 |
(17.9%) |
385 |
469 |
(17.9%) |
|||||||
Paging average revenue per unit ($/month) | 10
|
10 |
0.0% |
12 |
10 |
20.0% |
|||||||
|
|||||||||||||
Video (DTH and VDSL) | |||||||||||||
Total subscribers (k) | 1,595
|
1,427
|
11.8%
|
1,595
|
1,427
|
11.8% |
|||||||
Net subscriber activations (k) | 63
|
24 |
162.5% |
92 |
40 |
130% |
|||||||
ARPU ($/month) | 50
|
49 |
2.0% |
49 |
49 |
0.0%
|
|||||||
COA ($/sub) | 462
|
570 |
18.9% |
466 |
610 |
23.6% |
|||||||
Video EBITDA ($ millions) | 6
|
- |
n.m
|
10 |
1 |
n.m
|
|||||||
Churn (%) (average per month) | 0.9 |
% |
1.0 |
% |
0.1
pts |
0.8 |
%
|
1.0 |
% |
0.2
pts |
|||
|
BCE Inc Supplementary Financial Information - Second Quarter 2005 Page 12
Bell
Canada Consolidated
(1)
Statistical Data Historical Trend
YTD
2005 |
Q2
05
|
Q1
05
|
Total
2004
|
Q4
04
|
Q3
04
|
Q2
04
|
Q1
04
|
||||||||||
|
|
|
|||||||||||||||
Wireline | |||||||||||||||||
Local | |||||||||||||||||
Network access services (k) | |||||||||||||||||
Residential | 8,189 |
8,332 |
8,392 |
8,427 |
8,390 |
8,476 |
|||||||||||
Business | 4,511 |
4,513 |
4,513 |
4,535 |
4,548 |
4,541 |
|||||||||||
|
|
||||||||||||||||
Total | 2,700 |
12,845 |
12,905 |
12,962 |
12,938 |
13,017 |
|||||||||||
SmartTouch feature revenues (SM) | 452
|
225 |
227 |
939 |
233 |
234 |
235 |
237 |
|||||||||
Long Distance (LD) | |||||||||||||||||
Conversation minutes (M) | 9,255
|
4,667
|
4,588
|
18,070 |
4,559 |
4,435 |
4,498
|
4,578 |
|||||||||
Average revenue per minute ($) | 0.104
|
0.101 |
0.107
|
0.117 |
0.109 |
0.120
|
0.118 |
0.120 |
|||||||||
Data | |||||||||||||||||
Equivalent access lines (9) (k) - Ontario and Quebec | |||||||||||||||||
Digital equivalent access lines (k) | 4,634 |
4,469 |
4,335 |
4,197 |
4,083
|
3,983 |
|||||||||||
Internet subscribers (10) (k) | |||||||||||||||||
High Speed Internet net activations (k) | 220
|
92 |
128 |
350 |
91 |
84 |
65 |
110 |
|||||||||
High Speed Internet subscribers (k) | 2,028
|
1,936 |
1,808 |
1,717 |
1,633 |
1,568 |
|||||||||||
Dial-up Internet subscribers (k) | 666 |
696 |
743 |
775 |
807 |
836 |
|||||||||||
|
|
||||||||||||||||
2,694 |
2,632 |
2,551 |
2,492 |
2,440
|
2,404 |
||||||||||||
Wireless | |||||||||||||||||
Cellular & PCS net activations (k) | |||||||||||||||||
Pre-paid | 71
|
29 |
42 |
142 |
88 |
14 |
17 |
23 |
|||||||||
Post-paid | 112
|
117 |
(5 |
)
|
371 |
129 |
95 |
78 |
69 |
||||||||
|
|
|
|
||||||||||||||
183
|
146 |
37 |
513 |
217 |
109 |
95 |
92 |
||||||||||
Cellular & PCS subscribers (k) | |||||||||||||||||
Pre-paid | 1,272
|
1,243 |
1,201 |
1,113 |
1,099
|
1,082 |
|||||||||||
Post-paid | 3,836
|
3,719 |
3,724 |
3,595
|
3,500 |
3,422 |
|||||||||||
|
|
||||||||||||||||
5,108
|
4,962 |
4,925
|
4,708
|
4,599 |
4,504 |
||||||||||||
Average revenue per unit (ARPU) ($/month) | 48
|
50 |
46 |
49 |
50 |
50 |
50 |
47 |
|||||||||
Pre-paid | 13
|
16 |
11 |
12 |
13 |
12 |
11 |
11 |
|||||||||
Post-paid | 59
|
61 |
57 |
61 |
61 |
63 |
62 |
59 |
|||||||||
Churn (%) (average per month) | 1.6 |
% |
1.6 |
% |
1.6 |
% |
1.3 |
% |
1.4 |
% |
1.2 |
% |
1.3 |
% |
1.3 |
% |
|
Pre-paid | 2.0 |
% |
2.1 |
% |
1.8 |
% |
1.9 |
% |
1.9 |
% |
1.9 |
% |
1.9 |
% |
1.7 |
% |
|
Post-paid | 1.5 |
% |
1.4 |
% |
1.6 |
% |
1.1 |
% |
1.2 |
% |
1.0 |
% |
1.1 |
% |
1.1 |
% |
|
Usage per subscriber (min/month) | 247
|
262 |
232 |
248 |
252 |
258 |
257 |
224 |
|||||||||
Cost of acquisition (COA)(11) ($/sub) | 389
|
401 |
373 |
411 |
402 |
381 |
413 |
455 |
|||||||||
Wireless EBITDA ($ millions) | 633
|
333 |
300 |
1,187
|
274 |
334 |
317 |
262 |
|||||||||
Wireless EBITDA margin (12) | 41.9 |
% |
42.4 |
% |
41.4 |
% |
41.5 |
% |
36.2 |
% |
45.4 |
% |
44.9 |
% |
39.6 |
% |
|
Wireless capital expenditures ($ millions) | 182
|
118 |
64 |
362 |
125 |
95 |
77 |
65 |
|||||||||
Wireless capital expenditures as a percentage of revenue | 12.2 |
% |
15.3 |
% |
9.0 |
% |
12.8 |
% |
16.8 |
% |
13.1 |
% |
11.0 |
% |
10.0 |
% |
|
Paging subscribers (k) | 385 |
404 |
427 |
449 |
469 |
493 |
|||||||||||
Paging average revenue per unit ($/month) | 12
|
10 |
15 |
10 |
9 |
10 |
10 |
10 |
|||||||||
|
|||||||||||||||||
Video (DTH and VDSL) | |||||||||||||||||
Total subscribers (k) | 1,595
|
1,532 |
1,503 |
1,460 |
1,427 |
1,403 |
|||||||||||
Net subscriber activations (k) | 92
|
63 |
29 |
116 |
43 |
33 |
24 |
16 |
|||||||||
ARPU ($/month) | 49
|
50 |
48 |
49 |
49 |
48 |
49 |
48 |
|||||||||
COA ($/sub) | 466
|
462 |
473 |
571 |
537 |
548 |
570 |
661 |
|||||||||
Video EBITDA ($ millions) | 10
|
6 |
4 |
(19 |
)
|
(4 |
)
|
(16 |
) |
- |
1 |
||||||
Churn (%) (average per month) | 0.8 |
% |
0.9 |
% |
0.8 |
% |
1.0 |
% |
0.8 |
% |
1.1 |
% |
1.0 |
% |
0.9 |
% |
|
BCE Inc. Supplementary Financial Information - Second Quarter 2005 Page 13
Accompanying
Notes |
(1) | We have reclassified some of the figures for the comparative period to make them consistent with the current periods presentation. |
(2) | Non-GAAP Financial Measures |
EBITDA The term, EBITDA (earnings before interest, taxes, depreciation and amortization), does not have any standardized meaning prescribed by Canadian generally accepted accounting principles (GAAP). It is therefore unlikely to be comparable to similar measures presented by other companies. EBITDA is presented on a consistent basis from period to period. |
|
We
define EBITDA as operating revenues less operating expenses, which means
it represents operating income before amortization expense, net benefit
plans cost, and restructuring and other items. |
|
We
use EBITDA, among other measures, to assess the operating performance
of our ongoing businesses without the effects of amortization expense,
net benefit plans cost, and restructuring and other items. We exclude
amortization expense and net benefit plans cost because they largely depend
on the accounting methods and assumptions a company uses, as well as non-operating
factors, such as the historical cost of capital assets and the fund performance
of a companys pension plans. We exclude restructuring and other
items because they are transitional in nature. |
|
EBITDA
allows us to compare our operating performance on a consistent basis.
We believe that certain investors and analysts use EBITDA to measure a
companys ability to service debt and to meet other payment obligations,
or as a common valuation measurement in the telecommunications industry.
|
|
EBITDA
should not be confused with net cash flows from operating activities.
The most comparable Canadian GAAP financial measure is operating income.
|
|
EPS
before net gains (losses) on investments and restructuring and other items The term, EPS (earnings per share) before net gains (losses) on investments and restructuring and other items, does not have any standardized meaning prescribed by GAAP. It is therefore unlikely to be comparable to similar measures presented by other companies. |
|
We
use EPS before net gains (losses) on investments and restructuring and
other items, among other measures, to assess the operating performance
of our ongoing businesses without the effects of after-tax restructuring
and other items and net gains on investments. We exclude these items because
they affect the comparability of our financial results and could potentially
distort the analysis of trends in business performance. The exclusion
of these items does not imply they are necessarily non-recurring. |
|
The most comparable Canadian GAAP financial measure is EPS. | |
FREE
CASH FLOW The term, free cash flow, does not have any standardized meaning prescribed by Canadian GAAP. It is therefore unlikely to be comparable to similar measures presented by other companies. Free cash flow is presented on a consistent basis from period to period. |
|
We
define free cash flow as cash from operating activities after capital
expenditures, total dividends and other investing activities. |
|
We
consider free cash flow to be an important indicator of the financial
strength and performance of our business because it shows how much cash
is available to repay debt and to reinvest in our company. We believe
that certain investors and analysts use free cash flow when valuing a
business and its underlying assets. |
|
The most comparable Canadian GAAP financial measure is cash from operating activities. |
BCE Inc. Supplementary Financial Information - Second Quarter 2005 Page 14
Accompanying
Notes (continued) |
(3) | EBITDA margin is calculated as follows: |
EBITDA | |
Operating revenues | |
(4) | Effective
Q2 2005 the total Wireless capital expenditures are segregated between
the Consumer and Business segments. Prior quarters have been restated
accordingly. |
(5) | Cash flow per share is calculated as follows: |
Cash flow from operations less capital expenditures | |
Average number of common shares outstanding during the period | |
(6) | Annualized cash flow yield is calculated as follows: |
Free cash flow from operations before common dividends | |
Number of common shares outstanding at end of period multiplied by share price at end of period | |
Note: to annualize, multiply the most recent quarter's resultant by 4. | |
(7) | Reflects
an increase in the total Bell Canada debt as a result of the completion
of the purchase price allocation (PPA) relating to the repurchase of SBCs
20% interest in Bell Canada, which resulted in an increase in long-term
debt of $165 million. This increase in long-term debt will be applied
against interest expense ($3 million in Q2 2005) over the remaining terms
of the related long-term debt. |
(8) | At
the BCE Consolidated level, Third Party Preferred Shares reflected in
the financial statements of subsidiaries are included in non-controlling
interest on the balance sheet. |
(9) | Digital
equivalent access lines are derived by converting low capacity data lines
(DS-3 and lower) to the equivalent number of voice grade access lines.
Broadband equivalent access lines are derived by converting high capacity
data lines (higher than DS-3) to the equivalent number of voice grade
access lines. |
Conversion
factors |
|
DS-0
|
1 |
Basic
ISDN |
2 |
Primary
ISDN |
23 |
DS-1,
DEA |
24 |
DS-3
|
672 |
OC-3
|
2,016 |
OC-12
|
8,064 |
OC-48
|
32,256 |
OC-192
|
129,024 |
10
Base T |
155 |
100
Base T |
1,554 |
Gigabit E | 15,554 |
(10) |
High Speed Internet subscribers include Consumer, Business and Wholesale.
Dial-up Internet subscribers include Consumer and Business. |
BCE Inc. Supplementary Financial Information - Second Quarter 2005 Page 15
Accompanying
Notes (continued) |
(11) | Includes
allocation of selling costs from Bell Canada and excludes costs of migrating
from analog to digital. Cost of Acquisition (COA) per subscriber is reflected
on a consolidated basis. |
(12) | Wireless
EBITDA margins are calculated based on total Wireless operating revenues
(i.e. external revenues as shown on pages 10 and 11 plus inter-company
revenues). |
BCE Inc. Supplementary Financial Information - Second Quarter 2005 Page 16
Appendix A Reconciliation of Canadian Generally Accepted Accounting Principles | |
(GAAP) to United States GAAP | |
We
have prepared the interim consolidated financial statements according
to Canadian GAAP. The tables below are a reconciliation of significant
differences relating to the statement of operations and total shareholders
equity reported according to Canadian GAAP and United States GAAP. |
RECONCILATION OF NET EARNINGS
|
||||||||||||
Three months |
Six
months |
|||||||||||
For the period ended June 30 |
|
|
||||||||||
($ million, except share amounts) (unaudited) | 2005 |
2004 |
2005
|
2004
|
||||||||
|
||||||||||||
Canadian GAAP - Earnings from continuing operations | 581 |
544 |
1,073 |
1,029 |
||||||||
Adjustments | ||||||||||||
Deferred costs (a) | 1 |
2
|
3 |
6 |
||||||||
Employee future benefits (b) | (12 |
) | (21 |
) | (24 |
) | (41 |
) | ||||
|
|
|
|
|||||||||
United States GAAP - Earnings from continuing operations | 570 |
525 |
1,052 |
994 |
||||||||
Discontinued operations - United States GAAP (h) | - |
84 |
(1 |
) | 88 |
|||||||
|
|
|
|
|||||||||
United States GAAP - Net earnings | 570 |
609 |
1,051 |
1,082 |
||||||||
Dividends on preferred shares (i) | (21 |
) | (22 |
) | (42 |
) | (46 |
) | ||||
|
|
|
|
|||||||||
United States GAAP - Net earnings applicable to common shares | 549
|
587
|
1,009
|
1,036
|
||||||||
|
||||||||||||
Other comprehensive earnings items | ||||||||||||
Change in currency translation adjustment | 1 |
- |
4
|
15 |
||||||||
Change in unrealized gain (loss) on investments (g) | 89 |
195 |
81
|
213
|
||||||||
|
|
|
|
|||||||||
Comprehensive earnings |
639 |
782
|
1,094
|
1,264
|
||||||||
|
||||||||||||
Net earnings per common share - basic | ||||||||||||
Continuing operations | 0.59 |
0.54 |
1.09
|
1.02 |
||||||||
Discontinued operations |
0.00 |
0.10 |
0.00 |
0.11 |
||||||||
Net earnings | 0.59 |
0.64 |
1.09
|
1.13
|
||||||||
Net earnings per common share - diluted | ||||||||||||
Continuing operations | 0.59 |
0.54 |
1.09 |
1.02 |
||||||||
Discontinued operations | 0.00 |
0.09 |
0.00 |
0.09 |
||||||||
Net earnings | 0.59
|
0.63 |
1.09 |
1.11 |
||||||||
Dividends per common share |
0.33 |
0.30 |
0.66
|
0.60
|
||||||||
Average number of common shares | ||||||||||||
outstanding (millions) | 926.6 |
924.3
|
926.4
|
924.2
|
||||||||
|
Appendix A Reconciliation of Canadian Generally Accepted Accounting Principles | |
(GAAP) to United States GAAP |
STATEMENTS OF ACCUMULATED OTHER COMPREHENSIVE LOSS
|
||||||
June
30 |
December
31 |
|||||
($ millions) (unaudited) | 2005
|
2004
|
||||
|
||||||
Currency translation adjustment | (52 |
) | (56 |
) | ||
Unrealized gain (loss) on investments (g) | 85
|
4 |
||||
Additional minimum liability for pensions (b) | (193 |
) | (193 |
) | ||
|
||||||
Accumulated Other Comprehensive loss | (160 |
) |
(245 |
) | ||
|
RECONCILIATION OF TOTAL SHAREHOLDERS EQUITY
|
||||||
($ millions) (unaudited) | June
30 |
December
31 |
||||
2005 |
2004 |
|||||
|
||||||
Canadian GAAP | 14,478 |
14,024 |
||||
Adjustments | ||||||
Deferred costs (a) | (62 |
) | (67 |
) | ||
Employee future benefits (b) | (592 |
) | (543 |
) | ||
Gain on disposal of investments and on reduction | ||||||
of ownership in subsidiary companies (c) | 163 |
163 |
||||
Other | 103
|
114 |
||||
Tax effect of the above adjustments (e) | 103 |
81 |
||||
Non-controlling interest effect of the above adjustments (f) |
100 |
95
|
||||
Unrealized gain (loss) on investments (g) |
85 |
4
|
||||
|
||||||
United States GAAP | 14,378
|
13,871
|
||||
|
DESCRIPTION OF UNITED STATES GAAP ADJUSTMENTS
(a) Deferred
costs
Under Canadian GAAP, certain expenses can be deferred and amortized if they
meet certain criteria. Under United States GAAP, these costs are expensed as
incurred.
(b) Employee
future benefits
The accounting for future benefits for employees under Canadian GAAP and
United States GAAP is essentially the same, except for the recognition of certain
unrealized gains and losses.
Canadian GAAP requires companies to recognize a pension valuation allowance for any excess of the accrued benefit asset over the expected future benefit. Changes in the pension valuation allowance are recognized in the consolidated statement of operations. United States GAAP does not specifically address pension valuation allowances. United States regulators have interpreted this to be a difference between Canadian and United States GAAP.
2
Appendix A Reconciliation of Canadian Generally Accepted Accounting Principles | |
(GAAP) to United States GAAP |
(c) Gains
or losses on investments
Under Canadian GAAP and United States GAAP, gains or losses on investments
are calculated in a similar manner. Differences in Canadian GAAP and United
States GAAP, however, may cause the underlying carrying value of the investment
to be different. This will cause the resulting gain or loss to be different.
(d) Equity
income
Under Canadian GAAP, we account for our joint venture investments, which
are mainly comprised of CGI Group Inc., using the proportionate consolidation
method. Under United States GAAP, we account for our joint venture investments
using the equity method. There is no impact on net earnings.
Our proportionate share of our joint ventures operating results was as follows:
|
||||||||||||
Three
months |
Six
months |
|||||||||||
For the period ended June 30 | |
|
||||||||||
($ millions) (unaudited) | 2005 |
2004 |
2005 |
2004 |
||||||||
|
||||||||||||
Operating revenues | ||||||||||||
External | 233 |
209 |
472 |
388 |
||||||||
Inter-segment | 44 |
38
|
79
|
74 |
||||||||
|
|
|
|
|||||||||
Total revenues | 277 |
247 |
551 |
462 |
||||||||
Operating expenses | |
|
|
|
||||||||
External | (236 |
) | (202 |
) | (464 |
) | (380 |
) | ||||
Inter-segment | (11 |
) | (8 |
) | (24 |
) | (14 |
) | ||||
|
|
|
|
|||||||||
Total | (247 |
) | (210 |
) | (488 |
) | (394 |
) | ||||
Amortization expense | (17 |
) |
(12 |
) | (31 |
) |
(22 |
) | ||||
|
|
|
|
|||||||||
Total operating expenses | (264 |
) | (222 |
) |
(519 |
) | (416 |
) | ||||
|
|
|
|
|||||||||
Operating income | 13 |
25 |
32 |
46 |
||||||||
Other income (expense) | 5 |
1
|
5
|
2 |
||||||||
Interest expense | (2 |
) | (1 |
) | (4 |
) | (2
|
) | ||||
|
|
|
|
|||||||||
Earnings from continuing operations before income taxes |
16 |
25 |
33 |
46 |
||||||||
Income taxes |
(5 |
) | (9 |
) |
(13 |
) |
(17 |
) | ||||
|
|
|
|
|||||||||
Earnings from continuing operations | 11
|
16 |
20
|
29 |
||||||||
Discontinued operations | -
|
3 |
(1 |
) | 3 |
|||||||
|
|
|
|
|||||||||
Net earnings |
11 |
19 |
19
|
32 |
||||||||
|
(e) Income taxes
The income tax
adjustment represents the impact the United States GAAP adjustments that we
describe above have on income taxes. The accounting for income taxes under Canadian
GAAP and United States GAAP is essentially the same, except that:
| income
tax rates of enacted or substantively enacted tax law are used to calculate
future income tax assets and
liabilities under Canadian GAAP |
| only enacted income tax rates are used under United States GAAP. |
(f) Non-controlling
interest
The non-controlling interest adjustment represents the impact the United
States GAAP adjustments that we describe above have on non-controlling interest.
(g) Change
in unrealized gain (loss) on investments
Our portfolio
investments are recorded at cost under Canadian GAAP. They would be classified
as available-for-sale under United States GAAP and would be carried
at fair value, with any unrealized gains or losses included in other comprehensive
loss, net of tax.
(h) Discontinued
operations
Differences between
Canadian GAAP and United States GAAP will cause the historical carrying values
of the net assets of discontinued operations to be different.
3
Appendix A Reconciliation of Canadian Generally Accepted Accounting Principles | |
(GAAP) to United States GAAP |
(i) Accounting
for stock-based compensation
In December 2002, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 148, Accounting for
Stock-Based Compensation Transition and Disclosure. It applies to
fiscal years ending after December 15, 2002. It amends the transitional provisions
of SFAS No. 123 for companies that choose to recognize stock-based compensation
under the fair value-based method of SFAS No. 123, instead of choosing to continue
following the intrinsic value method of Accounting Principles Board Opinion
(APB) No. 25.
We adopted the fair value-based method of accounting on a prospective basis, effective January 1, 2002.
Under SFAS No. 123, however, we are required to make pro forma disclosures of net earnings, and basic and diluted earnings per share, assuming that the fair value-based method of accounting had been applied from the date that SFAS No. 123 was adopted.
The table below shows the stock-based compensation expense and pro forma net earnings using the Black-Scholes pricing model.
Three
months |
Six
months |
|||||||||||
|
|
|||||||||||
For the period ended June 30 (unaudited) | 2005 |
2004 |
2005 |
2004 |
||||||||
|
||||||||||||
Net earnings, as reported | 570
|
609 |
1,051 |
1,082 |
||||||||
Compensation cost included in net earnings | 4
|
14 |
19
|
24 |
||||||||
Total compensation cost | (4 |
) | (17 |
) |
(20 |
) | (29 |
) | ||||
|
|
|
|
|||||||||
Pro forma net earnings | 570 |
606 |
1,050 |
1,077
|
||||||||
Pro forma net earnings per common share - basic | 0.59 |
0.63 |
1.09 |
1.11 |
||||||||
Pro forma net earnings per common share - diluted | 0.59 |
0.63
|
1.09 |
1.11 |
||||||||
|
(j) Accounting for derivative
instruments and hedging activities (SFAS No. 133)
On January 1, 2001, we adopted SFAS No. 133, Accounting for Derivatives
Instruments and Hedging Activities, as amended by SFAS No. 138. Under this
standard, all derivatives must be recorded on the balance sheet at fair value
under United States GAAP. In addition, certain economic hedging strategies,
such as using dividend rate swaps to hedge preferred share dividends and hedging
SCPs, no longer qualify for hedge accounting under United States GAAP.
The change in the fair value of derivative contracts that no longer qualify for hedge accounting under United States GAAP is reported in net earnings.
We elected to settle the dividend rate swaps used to hedge $510 million of BCE Inc. Series AA preferred shares and $510 million of BCE Inc. Series AC preferred shares in the third quarter of 2003. These dividend rate swaps in effect converted the fixed-rate dividends on these preferred shares to floating-rate dividends. They were to mature in 2007. As a result of the early settlement, we received total proceeds of $83 million in cash. After the settlement, all of our derivative contracts qualify for hedge accounting.
Under Canadian GAAP, the proceeds are being deferred and amortized against the dividends on these preferred shares over the remaining original terms of the swaps. Under United States GAAP, these dividend rate swaps did not qualify for hedge accounting and were recorded on the balance sheet at fair value. As a result, the amortization of the deferred gain under Canadian GAAP is reversed for purposes of United States GAAP.
4
Certification
of Interim Filings
during Transition Period
I, Michael J. Sabia, President and Chief Executive Officer of BCE Inc., certify that:
1. | I
have reviewed the interim filings (as this term is defined in Multilateral
Instrument 52-109 Certification of Disclosure in Issuers' Annual and Interim
Filings) of BCE Inc. (the issuer) for the interim period ending June 30,
2005; |
2. | Based
on my knowledge, the interim filings do not contain any untrue statement
of a material fact or omit to state a material fact required to be stated
or that is necessary to make a statement not misleading in light of the
circumstances under which it was made, with respect to the period covered
by the interim filings; and |
3. | Based
on my knowledge, the interim financial statements together with the other
financial information included in the interim filings fairly present in
all material respects the financial condition, results of operations and
cash flows of the issuer, as of the date and for the periods presented
in the interim filings. |
Dated: August 3, 2005 | By: |
(signed) Michael J. Sabia |
Michael J. Sabia President and Chief Executive Officer BCE Inc. |
Certification
of Interim Filings
during Transition Period
I, Siim A. Vanaselja, Chief Financial Officer of BCE Inc., certify that:
1. |
I have reviewed the interim filings (as this term is defined in Multilateral
Instrument 52-109 Certification of Disclosure in Issuers' Annual and Interim
Filings) of BCE Inc. (the issuer) for the interim period ending June 30,
2005; |
2. |
Based on my knowledge, the interim filings do not contain any untrue statement
of a material fact or omit to state a material fact required to be stated
or that is necessary to make a statement not misleading in light of the
circumstances under which it was made, with respect to the period covered
by the interim filings; and |
3. |
Based on my knowledge, the interim financial statements together with
the other financial information included in the interim filings fairly
present in all material respects the financial condition, results of operations
and cash flows of the issuer, as of the date and for the periods presented
in the interim filings. |
Dated: August 3, 2005 | By: |
(signed) Siim A. Vanaselja |
Siim A. Vanaselja Chief Financial Officer BCE Inc. |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
BCE Inc. | |
(signed) Siim A. Vanaselja | |
|
|
Siim A. Vanaselja | |
Chief Financial Officer | |
Date: August 3, 2005 |