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: May 2004 | 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) 397-7000
(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
|
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
|
|
Only the BCE Inc. Management's Discussion and Analysis for the quarter ended March 31, 2004 and the BCE Inc. unaudited interim consolidated financial statements for the quarter ended March 31, 2004, included on pages 2 to 31 and 32 to 38, respectively, of the BCE Inc. 2004 First Quarter Shareholder Report filed with this Form 6-K, and the document entitled "Reconciliation of Canadian Generally Accepted Accounting Principles ("GAAP") to United States GAAP" filed with this Form 6-K as Appendix A, are incorporated by reference in the registration statements filed by BCE Inc. with the Securities and Exchange Commission on Form F-10 (Registration No. 333-97069), 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.
News
Release |
For immediate release
(All figures are in Cdn$,
unless otherwise indicated)
BELL
CANADA ENTERPRISES REPORTS FIRST QUARTER RESULTS
|
Wireless net activations: 92,000 |
|
DSL net activations: 115,000 |
|
Video net activations : 16,000 |
|
Net debt down by $430 million |
Montréal (Québec),
May 5, 2004 For the first quarter of 2004, BCE Inc. (TSX, NYSE:
BCE) reported revenue of $4.70 billion, up 0.4% and EBITDA(1) of
$1.85 billion, up 4.1% when compared to the same period last year. Operating
income increased by 3.8% to reach $1.0 billion and earnings per share were $0.51,
an increase of $0.01. Not including the foreign exchange gain recorded in the
first quarter, 2003, EPS increased by $0.04 or 8.5%. During the first quarter,
BCE generated free cash flow(2) of $234 million, up 11%.
We are pleased with the solid progress the company has made in the first quarter, said Michael Sabia, President and CEO of Bell Canada Enterprises. We had an outstanding performance in our Wireless business with strong revenue and subscriber growth in both our Business and Consumer groups. Our DSL and video gains were also solid and were beginning to see positive signs of improvement from the initiatives we have taken to bolster the performance of our Small and Medium Business (SMB) and Enterprise groups.
Wireless
Our Wireless business reported 92,000 new customers, a 31% increase
in the net activations compared to the same period last year. It successfully
lowered its post-paid churn to 1.1%, an improvement of 0.2 percentage points,
through customer care initiatives and sustained marketing efforts. As a result,
the total wireless subscriber base increased 13.5% compared to the first quarter,
2003, driving an increase of 18% in wireless revenues. Increases in usage, wireless
long distance and data services also contributed to the revenue growth.
DSL
Bell increased its Sympatico DSL High-Speed Internet subscriber base
by 32% compared to the first quarter, 2003 to reach 1.6 million subscribers.
This drove higher Internet revenues of 18%. Net DSL additions of 115,000 in
this quarter represent the strongest quarterly increase since 2001. The subscriptions
to value-added services, such as Desktop Anti-Virus and Desktop Firewall, were
up by more than 200%.
-2-
A
Focus on Profitability
With a sustained
focus on productivity measures, which included more profitable contracts in
our Enterprise and Wholesale groups, EBITDA grew by 4.1%. EBITDA margin improved
1.4 percentage points over the same period last year to 39.3 %. This on-going
financial discipline across our businesses yielded an 11% free cash flow increase
and a $430 million net debt reduction.
These are critically important accomplishments as we continue our drive for profitable growth, Mr. Sabia said. A continued steady focus on the fundamentals innovation, simplicity, efficiency and financial discipline is our key to success in an IP world.
Continued
Strong Performance in Consumer Segment
Bells consumer segment revenues increased to $1.8 billion, a jump
of 5.6% over the same period last year, due to growth in Wireless, DSL and Video.
Video subscribers increased by 16,000 and revenues were up 17%. Bell doubled
the speed of its high-speed service for 75% of its customers to three megabits
per second at no cost to them. And the company extended the availability
of its high-speed service to 80% of customers in Quebec and Ontario and to 66%
of Atlantic Canadians.
Bell will soon launch a new generation Sympatico portal with Microsoft. The new portal will focus on simplicity and add value for customers by offering enhanced home page customization, advanced messaging, superior security and exclusive portal content. The portal, combined with Bells new Wireless Home Networking service, will give Bell customers access to unique content anywhere, anytime.
High speed Internet is our conduit into the broadband home and the pipeline our customers will use to access the world of Internet Protocol services, said Mr. Sabia. For those two reasons its critical for Bell to lead in this area. We are using our Sympatico portal to draw in even more high-speed subscribers by turning it into a one-stop shop for all their on-line needs.
Customers enjoying the benefits of the Bundle from Bell reached 130,000. Over 40% of the nearly 70,000 new customers in the first quarter have signed up for at least one new service.
Improved
Results in Business Segment
Business segment revenues grew 1.1% to reach $1.4 billion. This was largely
due to higher wireless revenues, IP services revenues, terminal equipment sales
and teleconferencing growth. Partially offsetting these increases were lower
data and long distance revenues. Data revenues were also affected by the anticipated
decrease in revenues from Bell Wests SuperNet contract in Alberta, which
is in its last year. Overall, however, there was strengthening in the Business
segment results compared to previous quarters.
Changes in Bells SMB group are simplifying operations and shortening turnaround times. For example, we have shortened provisioning times for business high-speed Internet service and the installation of Private Branch Exchange (PBX) telephone systems. This means the customer is up and running far sooner than before. For us, it means an earlier start to the revenue flow.
3
Bells large Enterprise customer group is leading the charge in the companys transformation to an IP-based communications company. IP based revenues grew by 35% in the quarter and 30% of data revenues are now on the IP platform.
The early adoption of our IP solutions by our major business customers is central to the successful migration of all our customers onto our IP platform, said Mr. Sabia. IP migration plans for most of the customers in the Enterprise group are being developed to ensure this momentum continues.
HIGHLIGHTS
(Q1 2004 vs. Q1 2003, unless otherwise indicated)
Revenues
by segment(3)
Effective January 1, 2004, BCE began to report its results under five segments:
Consumer, Business, Aliant, Other Bell Canada, which consists of all of Bell
Canadas other businesses, and Other BCE, which consists of BCEs
other businesses, which include Bell Globemedia, BCE Emergis, Telesat and CGI.
These segments reflect the operational structure of BCE, which was realigned
on June 1, 2003 to focus on the various markets in which the company operates.
(Cdn$
millions) |
||||||
|
First
quarter |
|||||
For the period ended March 31 | 2004
|
2003
|
||||
|
Revenue | |||||
Consumer(4) | 1,825
|
1,729
|
|||
Business(5) | 1,435
|
1,419
|
|||
Aliant(6) | 504
|
501
|
|||
Other Bell Canada(7) | 474 |
552
|
|||
Inter-segment eliminations |
(132 |
) | (118 |
) | |
|
|||||
Total Bell Canada revenue | 4,106 |
4,083 |
|||
|
|||||
Other BCE(8) |
727 |
722
|
|||
Inter-segment eliminations | (136 |
) | (129 |
) | |
|
|||||
Total BCE revenue | 4,697
|
4,676 |
|||
|
Consumer
| The
key growth areas (Wireless, DSL High-Speed Internet and Video services)
drove the 5.6% increase in Consumer revenues. |
| Increased
subscribers contributed to the growth in consumer wireless and video revenues. |
| Data
revenue growth was driven by an increase in the consumer High Speed Internet
customer base. |
| Subscriptions
to Sympaticos value-added services, such as Desktop Anti-Virus and
Desktop Firewall, increased by 60,000 to reach 347,000 by the end of the
quarter. |
| Long
distance revenues declined mainly as a result of lower volume in conversation
minutes. |
4
Business
| Business
revenues increased by 1.1%. Higher wireless, IP based revenues, equipment
sales and teleconferencing revenues more than offset lower data and long
distance revenues. |
| Business
wireless revenues were driven by subscriber growth. |
| Data
revenues declined due to the market weakness in this sector and the anticipated
lower revenues from the SuperNet project in Alberta, which is in its last
year. |
| Long
distance revenues declined reflecting continued pressure on pricing and
a slight decline in the volume of conversation minutes. |
Aliant
| Aliant segment revenues increased $3 million or 0.6%. |
| Aliants wireless revenues grew 18%, driven by a 10% increase in wireless customers and higher ARPU. |
| Aliants data revenues were up due mainly to increased high-speed Internet subscribers. |
| Long distance revenues declined due to competitive pressures. |
Other Bell Canada
| Other
Bell Canada revenues decreased by $78 million or 14%, as a result of lower
long distance and data revenues in Bells Wholesale business. |
| Wholesale
long distance revenues were affected by competitive pricing pressures
and the exit in 2003 from certain low margin contracts and promotional
offers for international switched minutes. |
|
The Wholesale data revenue decrease reflected the continued softness in
underlying demand from wholesale customers and competitive pricing pressures.
|
Other BCE
| Revenues
from BCEs other businesses increased by 0.7%, mainly as a result
of Bell Globemedia and Telesat. |
| Bell
Globemedias revenues were up 2.1% mainly as a result of a 10% increase
in television advertising revenues and a 4% increase in print advertising
revenues. |
|
Telesats revenues increased by 6.3% as a result of higher satellite
services and international consulting revenues. |
|
BCE Emergis revenues decreased 11% due to lower inter-company revenue
with Bell Canada and from planned reductions in non-core revenues. |
5
Revenues
and key metrics by product line
Bell Canadas consolidated revenues and key metrics by product
line is provided below for further insight into managements view of the
financial results of the company.
(Cdn$
millions) |
||||||
|
First
quarter |
|||||
For the period ended March 31 | 2004
|
2003
|
||||
|
|
||||||
Revenue | ||||||
Local and access | 1,379
|
1,386
|
||||
Long distance | 606
|
686
|
||||
Wireless | 651
|
551
|
||||
Data | 892
|
920
|
||||
Video | 207
|
177
|
||||
Terminal sales & other | 371
|
363 |
||||
|
||||||
Total Bell Canada revenue | 4,106
|
4,083
|
||||
|
Wireline (local and access
and long-distance)
| Residential and business local access lines declined by 1.0% and primarily reflected losses to competition. Local and access revenues were 0.5% lower compared to the first quarter of 2003. |
| Long distance revenues decreased by 12% due to continued competitive pressures. |
Wireless
|
Wireless
revenues were up 18% due to strong growth in subscribers and increases
in usage and long distance and data services. |
|
The
cellular and PCS subscriber base increased by 13.5% or 536,000 compared
to the first quarter of 2003 to reach 4,504,000 at March 31. |
|
Cellular
and PCS net additions totaled 92,000 in the first quarter. |
|
The
more profitable wireless postpaid net additions were at 69,000 or 75%
of the total net activations. Postpaid customers totaled 3,422,000 as
at March 31. |
|
Total
postpaid wireless churn was at 1.1%, down from 1.3% last year, and continued
to reflect our priority on customer service. Blended churn was industry-leading
at 1.3%, down from 1.4% last year. |
|
Virgin
Mobile and Bell Mobility have team-up to offer next generation wireless
services to younger Canadian consumers. This new service will be rolled-out
later this year. |
Data
| Data
revenues decreased by 3.0%. Competitive pricing and volume pressures were
partially offset by the 18% increase in revenues from Sympatico High-Speed
Internet. |
| Data
revenues were also negatively impacted by the anticipated decreased revenues
from Bell Wests build-out of the SuperNet in Alberta, which is in
its last year. |
|
High-Speed Internet (DSL) subscribers increased by 115,000 in the quarter
to reach 1,597,000 by March 31, an increase of 32% compared to last year.
|
| High-Speed
and dial-up Internet subscribers reached 2,433,000 as at March 31. |
6
Video Services
| A
6.5% increase in the subscriber base compared to the first quarter of
2003 and higher pricing contributed to a 17% improvement in revenues. |
| Net
additions were 16,000 in the quarter. Total subscribers reached 1,403,000
as at March 31. |
EBITDA
| Total
BCE EBITDA increased by 4.1% to $1.85 billion largely as a result of the
improved profitability in the Consumer, Business and Aliant segments and
because of cost control initiatives throughout the company. |
| As
a percentage of revenues (EBITDA margin), BCEs EBITDA was at 39.3%
compared to 37.9% for the same period last year, a 1.4% percentage points
increase. |
| Bells
EBITDA margin was at 42.7% in the first quarter of 2003 compared to 41.5%
for the same period last year. There was notable margin improvement in
the Consumer and Business segments, through the continued focus on productivity
and a greater emphasis on more profitable contracts within the wholesale
market. |
Operating income and EPS
(Cdn$
millions, except per share amounts) |
||||||
|
First
quarter |
|||||
For the period ended March 31 | 2004
|
2003
|
||||
|
Operating Income | ||||||
Consumer | 526
|
493
|
||||
Business | 241
|
190
|
||||
Aliant | 82
|
81
|
||||
Other Bell Canada | 111
|
162 |
||||
|
||||||
Total Bell Canada Operating Income | 960
|
926
|
||||
Other BCE | 46
|
43 |
||||
|
Total BCE Operating Income | 1,006
|
969 |
||||
Other Income | 34
|
51
|
||||
Interest Expense | (248 |
) |
(278 |
) |
||
Income Taxes | (269 |
) |
(240 |
)
|
||
Non-controlling interest | (44 |
) |
(38 |
) |
||
Discontinued operations | 9
|
9
|
||||
Dividends on preferred shares | (18 |
)
|
(15 |
) |
||
Premium
on redemption of preferred shares
|
|
(7 |
) |
|||
|
||||||
Net earnings applicable to common shares | 470
|
451
|
||||
Net earnings per common share | 0.51
|
0.50 |
||||
|
| Operating
income increased by 3.8% mainly as a result of the increase in revenues
and productivity gains. Operating income was negatively affected by higher
amortization expenses and net benefit plans cost.
|
| Operating
income for the Consumer segment grew 6.7%. The increase in revenues combined
with lower settlement expenses and increased productivity more than offset
a higher amortization expense and net benefit plans cost. |
7
| Operating
Income for the Business segment increased by 27% due to the increase in
revenues combined with lower operating expenses from increased productivity
and the exit from non-profitable contracts within the Enterprise market.
There was a higher net benefits plans cost. |
| Operating
Income at Aliant remained relatively flat. |
| Operating
Income for the Other Bell Canada segment decreased by 31.5% as a result
of lower demand and re-pricing impacts in the more competitive wholesale
environment. |
|
Earnings per share increased by $0.01. Increased operating income and
lower interest expense due to lower average debt levels compared to 2003
were partly offset by higher foreign exchange gains realized in 2003.
Not including these gains, EPS increased by $0.04. |
Capital Efficiency/Cash Flow
| BCEs
first quarter 2004 capital expenditures as a percentage of revenues (CAPEX
intensity) were 14.6%, compared to the 12.7% reported last year. |
| Bells
CAPEX intensity for the first quarter was 14.4%, compared to 13.1% in
the first quarter of 2003. The higher spending mainly related to Bells
DSL footprint expansion and infrastructure that improved productivity.
|
| For
the first quarter, cash from operating activities of $1.2 billion increased
by $86 million compared to last year. |
| Free
cash flow (after dividend payments, capital expenditures and other investing
activities) of $234 million for the first quarter of 2004 improved by
11% from the $211 million reported for the same period last year. This
resulted from increased cash from operations and insurance proceeds received
by Telesat. |
|
Overall net debt levels were reduced by $430 million since the beginning
of the year. BCEs net debt to capitalization ratio improved to 42.7%
at March 31, 2004 from 43.8% at December 31, 2003. This reflected managements
success in driving free cash flow generation and the receipt of $285 million
for the sale of BCE Emergis U.S. Health business. |
OUTLOOK
BCE confirmed its annual full year 2004 financial guidance of:
|
revenue growth comparable to 2003 growth |
|
mid-to-high single-digit growth in earnings per share (before net investment gains/losses, impairment or restructuring charges) |
|
free cash flow(2) of approximately $1 billion, mainly from recurring sources, and |
|
Bell Canada capital intensity of 17% to 18%. |
BELL CANADA STATUTORY
RESULTS
Bell Canada statutory includes Bell Canada, and Bell
Canadas interests in Aliant, Bell ExpressVu (at 52%), and other Canadian
telcos.
Bell Canadas reported statutory revenue was $4.1 billion in the first quarter of 2004, up 0.6% compared to the same period last year. Net earnings applicable to common shares were $548 million in the first quarter of 2004, compared to $495 million for the same period last year.
8
ABOUT BCE
Bell Canada Enterprises is Canadas largest communications company. Through its 26 million customer connections, BCE provides the most comprehensive and innovative suite of communication services to residential and business customers in Canada. Under the Bell brand, the companys services include local, long distance and wireless phone services, high speed and wireless Internet access, IP-broadband services, value-added business solutions and direct-to-home satellite and VDSL television services. Other BCE businesses include Canadas premier media company, Bell Globemedia, BCE Emergis, a leading North American eBusiness company, and Telesat, a pioneer and world leader in satellite operations and systems management. BCE shares are listed in Canada, the United States and Europe.
30
BCE 2004 First Quarter Financial Information:
BCEs 2004 First Quarter Shareholder Report (which contains BCEs 2004 first quarter MD&A and unaudited consolidated financial statements) and other relevant financial materials are available at www.bce.ca/en/investors, under Investor Briefcase. BCEs 2004 First Quarter Shareholder Report is also available on the Web site maintained by the Canadian securities regulators at www.sedar.com. It is also available upon request from BCEs Investor Relations Department (e-mail: investor.relations@bce.ca, tel.: 1 800 339-6353; fax: (514) 786-3970).
BCEs 2004 First Quarter Shareholder Report will be sent to BCEs shareholders who have requested to receive it on or about May 11, 2004.
Call with Financial Analysts:
BCE will hold a teleconference/Webcast (audio only) for financial analysts to discuss its first quarter results on Wednesday, May 5, 2004 at 8:00 AM (Eastern). The media is welcome to participate on a listen only basis. Michael Sabia, President and Chief Executive Officer, and Siim Vanaselja, Chief Financial Officer, will be present for the teleconference.
Interested participants are asked to dial (416) 406-6419 between 7:50 AM and 7:58 AM. If you are disconnected from the call, simply redial the number. If you need assistance during the teleconference, you can reach the operator by pressing 0". This teleconference will also be Webcast live (audio only) on our Web site at www.bce.ca.
Call with the Media:
BCE will hold a teleconference / Webcast (audio only) for media to discuss its first quarter results on Wednesday, May 5, 2004 at 1:00 PM (Eastern). Michael Sabia will be present for this teleconference.
Interested participants are asked to dial 1 800 387-6216 between 12:50 PM and 12:58 PM. If you are disconnected from the call, simply redial the number. If you need assistance
9
during the teleconference, you can reach the operator by pressing 0". This teleconference will also be Webcast live (audio only) on our Web site at www.bce.ca.
CAUTION
CONCERNING FORWARD-LOOKING STATEMENTS
Certain statements made in this press release, including, but
not limited to, the statements appearing under the Outlook section,
and other statements that are not historical facts, are forward-looking and
are subject to important risks, uncertainties and assumptions. The results or
events predicted in these forward-looking statements may differ materially from
actual results or events. These statements do not reflect the potential impact
of any non-recurring items or of any dispositions, monetizations, mergers, acquisitions,
other business combinations or other transactions that may be announced or that
may occur after the date hereof.
Other factors that could cause results or events to differ materially from current expectations include, among other things: the ability of our strategies and plans to produce the expected benefits and growth prospects, including targets for revenue, earnings per share, free cash flow and capital intensity; the impact on our financial results of the migration of our multiple service-specific networks to a single IP-based network; the ability to increase the number of customers who buy multiple products; the ability to implement the significant changes in processes, in how we approach our markets, and in products and services, required by our strategic direction; general economic and market conditions and the level of consumer confidence and spending, and the demand for, and prices of, our products and services; the intensity of competitive activity from both traditional and new competitors, Canadian or foreign, including cross-platform competition, which is anticipated to increase following the introduction of new technologies such as Voice over Internet Protocol (VoIP), and its resulting impact on the ability to retain existing, and attract, new customers, and on pricing strategies and financial results; the ability to improve productivity and contain capital intensity while maintaining quality of services; the ability to anticipate, and respond to, changes in technology, industry standards and client needs and migrate to and deploy new technologies, including VoIP, and offer new products and services rapidly and achieve market acceptance thereof; the availability and cost of capital required to implement our financing plans and fund capital and other expenditures; the ability to retain major customers; the ability to find suitable companies to acquire or to partner with; the impact of pending or future litigation and of adverse changes in laws or regulations, including tax laws, or of adverse regulatory initiatives or proceedings, including decisions by the CRTC affecting our ability to compete effectively; the risk of low returns on pension plan assets; the availability of, and ability to retain, key personnel; the ability to manage effectively labor relations and negotiate satisfactory labor agreements while avoiding work stoppage; events affecting the functionality of our networks or of the networks of other telecommunications carriers on which we rely to provide our services; and stock market volatility.
For additional information with respect to certain of these and other factors, refer to BCE Inc.s 2004 First Quarter Shareholder Report dated May 4, 2004 filed by BCE Inc. with the U.S. Securities and Exchange Commission, under Form 6-K, and with the Canadian securities commissions. The forward-looking statements contained in this press release represent our expectations as of May 5, 2004 and, accordingly, are subject to change after such date. However, we disclaim any intention and assume no obligation to update any forwardlooking statements, whether as a result of new information or otherwise.
For further information:
Nick
Kaminaris Communications (514) 786-3908 Web site: www.bce.ca |
Sophie
Argiriou Investor Relations (514) 786-8145 |
(1) | 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 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 charges. 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
charges because they are transitional in nature. EBITDA |
10
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.
The table below is a reconciliation of EBITDA to operating income on a
consolidated basis: |
|
||||
Q1
2004 |
Q1
2003 |
|||
|
||||
EBITDA | 1,845 |
1,773 |
||
Amortization expense | (775 |
) |
(762 |
) |
Net benefit plans cost | (63 |
) | (42 |
) |
Restructuring and other charges | (1 |
) | 0
|
|
|
||||
Operating income |
1,006 |
969 |
||
|
(2) |
We define free cash flow as cash from operating activities after capital
expenditures, total dividends and other investing activities. 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 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. The following
is a reconciliation of free cash flow to cash from operating activities
on a consolidated basis: |
|
||||
(in $ millions) | Q1
2004 |
Q1
2003 |
||
|
||||
Cash from operating activities | 1,243
|
1,157
|
||
Capital expenditures |
(688 |
) | (594 |
) |
Other investing activities | 20
|
(40 |
) | |
Preferred dividends | (22 |
) | (11 |
) |
Dividends paid by subsidiaries to non-controlling interest | (42 |
) | (44 |
) |
|
||||
Free cash flow from operations, before common dividends |
511 |
468
|
||
Common dividends | (277 |
) | (257 |
) |
|
||||
Free cash flow from operations, after common dividends | 234
|
211 |
||
|
For 2004, we expect to generate approximately $1 billion in free cash flow. This amount reflects expected cash from operating activities of approximately $5.5 billion less capital expenditures, total dividends and other investing activities.
(3) | BCEs
reporting structure is organized by the major customer segments it serves,
and reflects how it classifies its operations for planning and measuring
performance. |
(4) |
The Consumer segment provides local telephone, long distance, wireless,
Internet access, video and other services to Bell Canadas residential
customers mainly in Ontario and Québec. It includes Bell Canadas
consumer wireline, wireless and Internet access business and Bell ExpressVus
video services. |
(5) | The
Business segment provides local telephone, long distance, wireless, data
and other services to Bell Canadas small and medium-sized businesses
(SMB) and large enterprise customers in Ontario and Québec as well
as SMB and large enterprise customers in Western Canada through Bell West.
|
(6) | The
Aliant segment provides local telephone, long distance, wireless, data,
including Internet services and other services to residential and business
customers in Atlantic Canada. |
(7) | The
Other Bell Canada segment includes Bell Canadas wholesale business,
and the financial results of Télébec, Northern Telephone
and Northwestel. Telebec, Northern Telephone and Northwestel provide telecommunications
services to less-populated areas in Ontario, Québec and Canadas
northern territories. |
(8) |
The Other BCE segment includes the financial results of our media, satellite,
information technology and e-business activities as well as the costs
incurred by our corporate office. This segment includes Bell Globemedia,
Telesat, CGI, BCE Emergis and our corporate office. |
CONTENTS | ||
MD&A | 2 | |
3 | ||
|
||
4 | ||
|
||
7 | ||
|
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15 | ||
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18 | ||
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31 | ||
Consolidated Financial Statements | 32 | |
Notes to Consolidated Financial Statements | 35 |
Managements Discussion and Analysis 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 (Q1) ended March 31, 2004 and 2003. 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 in Risks that could affect our business. |
||
In this MD&A, we, us, our and BCE mean BCE Inc., its
subsidiaries and joint ventures.
A statement we make is forward-looking when it uses what we know today
to make a statement about the future. |
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 charges.
|
2 2004 Quarterly Report Bell Canada Enterprises
Q1 2004 | Q1 2003 | |||||
EBITDA | 1,845 | 1,773 | ||||
Amortization expense | (775 | ) | (762 | ) | ||
Net benefit plans cost | (63 | ) | (42 | ) | ||
Restructuring and other charges | (1 | ) | | |||
Operating income | 1,006 | 969 | ||||
|
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.
|
BCE is Canadas
largest communications company. Starting in the first quarter of 2004,
we report our results of operations under five segments: Consumer,
Business, Aliant, Other Bell Canada and Other BCE. |
||
Video
services are television services provided to customers through our direct-to-home
(DTH) satellites or by very high-speed digital subscriber line (VDSL)
equipment.
|
3 2004 Quarterly Report Bell Canada Enterprises
The
Other BCE segment includes the financial results of our other media,
satellite, information technology (IT) and e-business activities as
well as the costs incurred by our corporate office. This segment includes
Bell Globemedia Inc. (Bell Globemedia), Telesat Canada (Telesat), CGI
Group Inc. (CGI) and BCE Emergis Inc. (BCE Emergis).
|
This
section reviews the key measures we use to assess our performance and
how our consolidated results in Q1 2004 compare to our consolidated
results in Q1 2003. |
The
Quarter at a Glance Overall,
this quarter we continued solid progress in many areas of our business.
Once again wireless delivered leading performance and we continued our
momentum in winning the broadband home with high-speed Internet and video
service subscriber growth. These subscriber gains led to strong revenue
growth in the Consumer segment. |
||||
Connec- tions |
Q1 2004 |
31 Mar. 04 | |||
(in thousands) | Net Adds | Connec- tions |
|||
|
|||||
Wireless | 92 | 4,504 | |||
DSL | 115 | 1,597 | |||
ExpressVu | 16 | 1,403 | |||
NAS | (34 | ) | 13,017 | ||
|
|
CUSTOMER CONNECTIONS We continued to grow our non-traditional businesses with solid customer wins, particularly in wireless and high-speed Internet, while in the traditional wireline areas of our business we saw similar rates of NAS decline as experienced in previous quarters.
OPERATING REVENUES Revenues for the first quarter of 2004 were $4,697 million, a 0.4% increase compared to the same period last year. This increase reflected strong growth in wireless revenues in both the Consumer and Business segments along with growth in consumer Internet access and video services. The Consumer segment grew by 5.6% while the Business segment grew by 1.1%. Aliant segment revenues were slightly up with growth this quarter of 0.6%, as were the Other BCE segment revenues with growth of 0.7%, reflecting revenue increases at Bell Globemedia and Telesat which more than offset revenue declines at BCE Emergis. Largely offsetting these increases were revenue declines of 14.1% from the Other Bell Canada segment as a result of declines in our wholesale business. |
|
4 2004 Quarterly Report Bell Canada Enterprises
OPERATING INCOME AND EBITDA Our operating income
this quarter was $1,006 million, reflecting growth of $37 million,
or 3.8%, over the same period last year. Our continued progress in simplifying
our business, through the roll-out of productivity initiatives, translated
to reduced costs despite volume increases. Our improved margins were partly
offset by higher amortization expense and a higher net benefits plan cost
compared to the same period last year. NET EARNINGS / EARNINGS PER SHARE Net earnings applicable
to common shares for Q1 2004 were $470 million, or $0.51 per
common share, compared to net earnings of $451 million, or $0.50 per common
share for the same period last year reflecting an increase of $0.01 per
common share. CAPITAL EXPENDITURES Capital expenditures
were $688 million in the first quarter, or 14.6% of revenues, up
from $594 million, or 12.7% of revenues, for the same period last
year. This increase reflects higher spending earlier in the year to drive
DSL footprint expansion, productivity and the Telesat satellite build. CASH FROM OPERATING ACTIVITIES AND FREE CASH FLOW Cash from operating
activities for Q1 2004 was $1,243 million, an increase of $86 million
compared to the same period last year, reflecting stronger operating performance
and improved working capital management in the first quarter of 2004,
partly offset by tax refunds of $237 million received in Q1 2003. |
||
ROE
(return on common shareholders equity) is calculated as net earnings
applicable to common shares as a percentage of average common shareholders
equity.
|
5 2004 Quarterly Report Bell Canada Enterprises
Our net debt to total capitalization
ratio improved to 42.7% at the end of the quarter from 43.8% at December 31, 2003,
reflecting a net debt reduction of $430 million resulting from the
generation of positive free cash flow and the net cash proceeds from the
sale of BCE Emergis U.S. health operations. This was partly offset
by payments of $81 million relating to business acquisitions and $39 million
relating to the settlement of maturing forward contracts on long-term debt.
EXECUTING ON OUR PRIORITIES Setting the Standard
in Internet Protocol (IP)
Our second objective is to have 90% of customers able to access a full suite of IP services by the end of 2006.
Simplicity and Service
As part of our strategy to become the Technology Advisor to SMB customers, we launched Productivity Pak, a self-serve bundle of tools that enable SMB customers to more easily access and share information, both in the office and on the road. In SMB, we also made progress in simplifying the customer |
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6 2004 Quarterly Report Bell Canada Enterprises
experience
by significantly reducing the provisioning cycle times on business DSL
high-speed Internet service by over 80% and on PBX sales by over 40%.
These improvements clearly benefit customers but they also improve our
order-to-cash interval and take significant levels of cost out of these
provisioning processes. |
||
|
|
Financial Results Analysis | |||||||
This
section provides detailed information and analysis about our performance
in Q1 2004 compared to Q1 2003. It focuses on our consolidated
operating results and provides financial information for each of our segments. |
||||||||
OPERATING REVENUES | ||||||||
Q1 2004 | Q1 2003 | % change | ||||||
Consumer | 1,825 | 1,729 | 5.6% | |||||
Business | 1,435 | 1,419 | 1.1% | |||||
Aliant | 504 | 501 | 0.6% | |||||
Other Bell Canada | 474 | 552 | (14.1% | ) | ||||
Inter-segment eliminations | (132 | ) | (118 | ) | (11.9% | ) | ||
Bell Canada | 4,106 | 4,083 | 0.6% | |||||
Other BCE | 727 | 722 | 0.7% | |||||
Inter-segment eliminations | (136 | ) | (129 | ) | (5.4% | ) | ||
Total operating revenues | 4,697 | 4,676 | 0.4% | |||||
|
BY SEGMENT Consumer Wireless Video |
|
7 2004 Quarterly Report Bell Canada Enterprises
|
ARPS per month for video services
increased by $4 to $48 for the first quarter compared to the same period
last year resulting mainly from the $2.99 system access charge for all
customers effective April 28, 2003, the $2 to $3 rate increase on
specific programming packages introduced on February 1, 2003 and
higher package penetration, partly offset by lower pay-per-view revenues. Data Wireline Bundles |
|
Business |
8 2004 Quarterly Report Bell Canada Enterprises
Revenues from enterprise customers
increased this quarter, driven by wireless revenue growth and higher voice
terminal equipment sales, partly offset by lower long distance revenues
due to competitive pressures. Enterprise data revenues were essentially
flat overall, although there were strong increases in our IP service revenues.
We estimate that IP services now represent over 30% of our enterprise data
revenues. On February 2, 2004, we announced our Global IP suite of network services, including the Global IP VPN service, which extends the IP networks of our enterprise customers to over 50 countries. Bell Canada partnered with Infonet Services to deliver this suite of services outside of Canada. There was also significant progress made for enterprise customers in expanding our portfolio of value-added service (VAS) offerings in the areas of security risk management, contact centers, wireless data and business networking solutions. On March 10, 2004, we signed an agreement with inCode Telecom Group Inc., a wireless technology consulting firm, to jointly build and strengthen our wireless data business. Revenues from our SMB customers also increased this quarter due to wireless revenue growth and a slight improvement in legacy voice. Teleconferencing revenue growth also contributed to the increase. As part of our strategy to become the Technology Advisor to SMB customers, we launched Productivity Pak, a self-serve bundle of tools that enables SMB customers to more easily access and share information, both in the office and on the road, without having to hire IT staff to support the back office. This offering integrates Microsoft Outlook and Windows XP software into service bundles that include e-mail, automated anti-spam and content filtering, scheduling, storage sharing, and contact and task management. Bell West continued to grow its customer base leading to local and access and long distance revenue growth. Data revenues declined, however, as a result of lower GOA construction revenues. In 2001, we were awarded a contract by the GOA to build a next generation network (Supernet) to bring high-speed Internet and broadband capabilities to rural communities in Alberta. We are now in the last year of this contract. |
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Aliant |
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9 2004 Quarterly Report Bell Canada Enterprises
|
exchanges
from facilities based competitors, resellers and wireless providers. We
believe that there is sufficient competition in the residential local communication
services market to justify forbearance for the residential wireline local
services in the specified exchanges. Other
Bell Canada |
|
Forbearance |
Other BCE | ||||||
Q1
2004 |
Q1
2003 |
%
change |
||||
Bell Globemedia | 342 |
335 |
2.1% |
|||
Telesat | 84 |
79 |
6.3% |
|||
CGI | 220 |
219 |
0.5% |
|||
BCE Emergis | 70 |
79 |
(11.4% |
) | ||
Other | 11 |
10 |
10.0% |
|||
Other BCE revenues | 727 |
722 |
0.7% |
|||
Revenues
from our Other BCE segment for the first quarter of the year were $727 million
or 0.7% higher than Q1 2003. This increase reflects higher revenues
at Bell Globemedia and Telesat partly offset by revenue decreases at BCE
Emergis. BY BELL CANADAS PRODUCT LINES The following table shows Bell Canadas consolidated revenues by product line. In addition to discussing our financial results by business segment, we believe that a separate discussion of Bell Canadas consolidated revenues by product line provides further insight into managements view of our financial results. |
||
Q1
2004 |
Q1
2003 |
%
change |
||||
Local and access | 1,379 |
1,386 |
(0.5% |
) | ||
Long distance | 606 |
686 |
(11.7% |
) | ||
Wireless | 651 |
551 |
18.1% |
|||
Data | 892 |
920 |
(3.0% |
) | ||
Video | 207 |
177 |
16.9% |
|||
Terminal sales and other | 371 |
363 |
2.2% |
|||
Total Bell Canada | 4,106 |
4,083 |
0.6% |
|||
10 2004 Quarterly Report Bell Canada Enterprises
|
Local
and Access Long Distance Wireless Data Video |
|
11 2004 Quarterly Report Bell Canada Enterprises
|
Terminal
Sales and Other OPERATING INCOME |
|||||
|
||||||
Q1 2004 | Q1 2003 | % change | ||||
|
||||||
Consumer | 526 | 493 | 6.7% | |||
Business | 241 | 190 | 26.8% | |||
Aliant | 82 | 81 | 1.2% | |||
Other Bell Canada | 111 | 162 | (31.5% | ) | ||
|
||||||
Bell Canada | 960 | 926 | 3.7% | |||
Other BCE | 46 | 43 | 7.0% | |||
|
||||||
Total operating income | 1,006 | 969 | 3.8% | |||
|
|
Total operating income
for the quarter was $1,006 million, $37 million or 3.8% higher
compared to the same period last year. The increase reflected slightly
higher revenues and lower operating expenses partly offset by higher amortization
expense and a higher net benefit plans cost compared to the same period
last year. BY SEGMENT Consumer |
|
12 2004 Quarterly Report Bell Canada Enterprises
|
The impact of higher margins was partly offset by higher amortization expense and a higher net benefit plans cost compared to the same quarter last year. Business Aliant |
|
Other
Bell Canada Other BCE |
||||||||
Operating income for the Other BCE segment this quarter was $46 million, or 7% higher than Q1 2003. This increase reflects higher operating income at Bell Globemedia and a lower level of operating losses at BCE Emergis. |
13 2004 Quarterly Report Bell Canada Enterprises
OTHER ITEMS The table below reconciles operating income to net earnings applicable to common shares. |
||||||||
Q1 2004 | Q1 2003 | % change | ||||||
|
||||||||
Operating income | 1,006 | 969 | 3.8% | |||||
Other income | 34 | 51 | (33.3% | ) | ||||
Interest expense | (248 | ) | (278 | ) | 10.8% | |||
Pre-tax earnings | 792 | 742 | 6.7% | |||||
Income taxes | (269 | ) | (240 | ) | (12.1% | ) | ||
Non-controlling interest | (44 | ) | (38 | ) | (15.8% | ) | ||
Earnings from continuing operations | 479 | 464 | 3.2% | |||||
Discontinued operations | 9 | 9 | | |||||
Net earnings | 488 | 473 | 3.2% | |||||
Dividends on preferred shares | (18 | ) | (15 | ) | (20.0% | ) | ||
Premium on redemption of preferred shares | | (7 | ) | 100.0% | ||||
Net earnings applicable to common shares | 470 | 451 | 4.2% | |||||
EPS | 0.51 | 0.50 | 2.0% | |||||
Other income declined
33% or $17 million to $34 million in Q1 2004, compared
to Q1 2003. The decline was mainly due to lower foreign exchange
gains. INTEREST EXPENSE Interest expense declined 10.8% or $30 million to $248 million in Q1 2004, compared to Q1 2003. This reflected the $1.8 billion of debt repayments (net of issues) in 2003 and the refinancing of some of our debt at lower interest rates. INCOME TAXES Income taxes increased 12.1% or $29 million to $269 million in Q1 2004, compared to Q1 2003. The increase was mainly from higher pre-tax earnings, partly offset by the reduction in the statutory income tax rate to 34.3% in 2004 from 35.4% in 2003. |
14 2004 Quarterly Report Bell Canada Enterprises
|
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. | CAPITAL STRUCTURE |
|||||
Q1 2004 | Q4 2003 | |||||
Debt due within one year | 1,171 | 1,537 | ||||
Long-term debt | 13,126 | 12,393 | ||||
Less: Cash and cash equivalents | (1,511 | ) | (714 | ) | ||
Total net debt | 12,786 | 13,216 | ||||
Non-controlling interest | 3,385 | 3,403 | ||||
Total shareholders equity | 13,792 | 13,573 | ||||
Total capitalization | 29,963 | 30,192 | ||||
Net debt to capitalization | 42.7 | % | 43.8% | |||
Outstanding share data (in millions) | ||||||
Common shares at end of period |
924.2 | 924.0 | ||||
Stock options at end of period |
30.6 | 25.8 | ||||
Restricted share units at end of period |
1.8 | | ||||
Our
net debt to capitalization ratio was 42.7% at the end of Q1 2004,
an improvement from 43.8% at the end of Q4 2003. This reflected improvements
in net debt and total shareholders’ equity. CHANGE IN COMPENSATION STRATEGY FOR 2004 AND IN THE FUTURE Starting in 2004,
the executive compensation policy has been redesigned to ensure close
alignment and support with the company’s new direction and strategic
objectives. Fundamentally, the new executive compensation policy is designed
to drive a shift in culture toward greater individual accountability and
higher levels of performance.
|
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|
15 2004 Quarterly Report Bell Canada Enterprises
SUMMARY OF CASH FLOWS | ||||||
Q1 2004 | Q1 2003 | |||||
|
||||||
Cash from operating activities |
1,243 | 1,157 | ||||
Capital expenditures |
(688 | ) | (594 | ) | ||
Other investing activities |
20 | (40 | ) | |||
Preferred dividends |
(22 | ) | (11 | ) | ||
Dividends paid by subsidiaries to non-controlling interest |
(42 | ) | (44 | ) | ||
Free cash flow from operations, before common dividends |
511 | 468 | ||||
Common dividends |
(277 | ) | (257 | ) | ||
Free cash flow from operations, after common dividends |
234 | 211 | ||||
Business acquisitions |
(81 | ) | (63 | ) | ||
Business dispositions |
16 | | ||||
Change in investments accounted for under the cost and equity methods |
6 | 7 | ||||
Net issuance of equity instruments |
4 | 158 | ||||
Net issuance of debt instruments |
406 | 1,313 | ||||
Financing activities of subsidiaries with third parties |
(36 | ) | 54 | |||
Cash provided by discontinued operations |
288 | 4 | ||||
Other |
(48 | ) | (2 | ) | ||
Net increase in cash and cash equivalents |
789 | 1,682 | ||||
CASH FROM OPERATING ACTIVITIES Cash from operating activities increased 7.4% or $86 million to $1,243 million in Q1 2004, compared to Q1 2003. This was a result of:
partly offset by:
CAPITAL EXPENDITURES We have rigorous programs
in place to manage capital spending prudently. We continue to make investments
to expand and update our networks and to meet customer demand. Capital
expenditures were $688 million in the first quarter, or 14.6% of
revenues, up from $594 million, or 12.7% of revenues, for the same
period last year. This increase reflects higher spending earlier in the
year to drive DSL footprint expansion, productivity and the Telesat satellite
build. OTHER INVESTING ACTIVITIES Cash from other investing activities of $20 million in 2004 included $43 million of insurance proceeds that Telesat received for a malfunction on the Anik F1 satellite. COMMON DIVIDENDS We paid a dividend
of $0.30 per common share in Q1 2004. This was the same as the dividend
we paid in Q1 2003. |
16 2004 Quarterly Report Bell Canada Enterprises
BUSINESS
ACQUISITIONS We invested $81 million in business acquisitions in Q1 2004. This consisted mainly of:
We invested $63 million in business acquisitions in Q1 2003. This consisted mainly of our proportionate share of the cash paid for CGIs acquisition of Cognicase Inc. EQUITY INSTRUMENTS In Q1 2003, BCE Inc. issued 20 million Series AC preferred shares for $510 million and redeemed 14 million Series U preferred shares for $357 million, which included a $7 million premium on redemption. DEBT INSTRUMENTS We issued $1.3 billion
of debt in Q1 2004 and repaid $939 million of existing debt.
The excess cash raised of $406 million, mainly at Bell Canada,
along with existing cash on hand of $714 million at the end of 2003,
free cash flow of $234 million generated in Q1 2004 and net
cash proceeds of $285 million on the sale of BCE Emergis
U.S. health operations, contributed to the cash on hand of $1.5 billion
at March 31, 2004. This cash on hand is expected to be used
primarily to repay maturing debt during the remainder of 2004 and
to finance the purchase of MTSs 40% interest in Bell West. CASH RELATING TO DISCONTINUED OPERATIONS Cash provided by discontinued operations was $288 million in Q1 2004. This consisted mainly of net cash proceeds of $285 million on the sale of BCE Emergis U.S. health operations. CREDIT RATINGS Our key credit ratings at May 4, 2004 remain unchanged from those listed in the BCE 2003 MD&A. LIQUIDITY Our ability to generate
cash in the short term and in the long term, when needed, and to provide
for planned growth and to fund development activities, depends on our
sources of liquidity and on our cash requirements. RECENT DEVELOPMENTS IN LEGAL PROCEEDINGS This section provides a description of recent material developments in certain of the legal proceedings involving BCE described in the BCE 2003 AIF. |
||
17 2004 Quarterly Report Bell Canada Enterprises
TELEGLOBE
RELATED LAWSUITS Kroll
Restructuring Lawsuit Risks That Could Affect Our Business This section describes
general risks that could affect all BCE group companies and specific risks
that could affect BCE Inc. and certain of the other BCE group companies. RISKS THAT COULD AFFECT ALL BCE GROUP COMPANIES STRATEGIES AND PLANS We plan to achieve our business objectives through various strategies and plans. For Bell Canada, Aliant and their respective telecommunications subsidiaries (collectively, the Bell Canada companies), the strategy is to lead change in the industry and set the standard for IP-based communications while continuing to deliver on our goals of innovation, simplicity and service, and efficiency. The key elements of the strategies and plans of the Bell Canada companies include:
Our strategic direction involves significant changes in processes, in how we approach our markets, and in products and services. These changes will require a shift in employee skills. |
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|
18 2004 Quarterly Report Bell Canada Enterprises
The strategies and plans outlined
above will require capital expenditures for their implementation. The
timing and quantity of the returns from these investments are uncertain.
At this time, we cannot determine the effect that moving to a single IP-based
network could have on our results of operations. ECONOMIC AND MARKET CONDITIONS Our business is affected
by general economic conditions, consumer confidence and spending, and
the demand for, and the prices of, our products and services. When there
is a decline in economic growth, and in retail and commercial activity,
there tends to be a lower demand for our products and services. During
these periods, customers may delay buying our products and services, or
reduce or discontinue using them. INCREASING COMPETITION We face intense competition
from traditional competitors, as well as from new entrants to the markets
we operate in. We compete not only with other telecommunications, media,
television, satellite, information technology and e-commerce service providers,
but also with other businesses and industries. These include cable, software
and Internet companies, a variety of companies that offer network services,
such as providers of business information systems and system integrators,
and other companies that deal with, or have access to, customers through
various communications networks. |
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|
19 2004 Quarterly Report Bell Canada Enterprises
Competition from foreign competitors
could increase through the provision of advanced applications and related
services delivered over IP, limiting the Bell Canada companies to the
provision of IP access services only.
Wireline and Long Distance Internet Access Wireless |
||
|
20 2004 Quarterly Report Bell Canada Enterprises
Video Bell ExpressVu competes directly with another direct-to-home (DTH) satellite television provider and with cable companies across Canada. These cable companies have recently upgraded their networks, operational systems and services, which could improve their competitiveness. This could materially and negatively affect the financial performance of Bell ExpressVu. IMPROVING PRODUCTIVITY AND CONTAINING CAPITAL INTENSITY We continue to implement
several productivity improvements while containing our capital intensity.
There could be a material and negative effect on our profitability if
we do not continue to successfully implement these productivity improvements
and manage capital intensity while maintaining the quality of our service.
For example, we must reduce the price of certain services offered by the
Bell Canada companies, that are subject to regulatory price caps,
each year between 2002 and 2006. In addition, to remain competitive
in some business data services that are not regulated, we have reduced
our prices and may have to continue doing so in the future. The profits
of the Bell Canada companies will decline if they cannot lower their
expenses at the same rate. There could also be a material and negative
effect on our profitability if market factors or other regulatory actions
result in lower revenues and we cannot reduce our expenses at the same
rate. ANTICIPATING TECHNOLOGICAL CHANGE We operate in markets
that are experiencing constant technological change, evolving industry
standards, changing client needs, frequent new product and service introductions,
and short product life cycles.
As
part of this move, the Bell Canada companies also plan to discontinue
certain services that are based on circuit-based infrastructure. This
is a necessary component of increasing capital and operating efficiencies.
In some cases, this could be delayed or prevented by customers or regulatory
actions. If the Bell Canada companies cannot discontinue these services
as planned, they will not be able to achieve improvements as expected. |
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|
21 2004 Quarterly Report Bell Canada Enterprises
LIQUIDITY
Our ability to generate
cash and to maintain capacity to meet our financial obligations and provide
for planned growth depends on our cash requirements and on our sources
of liquidity.
Financing
through equity offerings would dilute the holdings of existing equity
investors. An increased level of debt financing could lower our credit
ratings, increase our borrowing costs and give us less flexibility to
take advantage of business opportunities.
Any of these possibilities could have a material and negative effect on our cash flow from operations and growth prospects in the long term. RELIANCE ON MAJOR CUSTOMERS An important amount of revenue earned by BCE group companies, including Bell Canada, comes from a small number of major customers. If they lose contracts with such major customers and cannot replace them, it could have a material and negative effect on their results. |
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|
22 2004 Quarterly Report Bell Canada Enterprises
MAKING
ACQUISITIONS Our growth strategy includes making strategic acquisitions and entering into joint ventures. There is no assurance that we will find suitable companies to acquire or to partner with or that we will have the financial resources needed to complete any acquisition or to enter into any joint venture. There could also be difficulties in integrating the operations of acquired companies with our existing operations or in operating joint ventures. LITIGATION, REGULATORY MATTERS AND CHANGES IN LAWS Pending or future litigation,
regulatory initiatives or regulatory proceedings could have a material
and negative effect on our businesses, operating results and financial
condition. Changes in laws or regulations or in how they are interpreted,
and the adoption of new laws or regulations, including changes in, or
the adoption of, new tax laws that result in higher tax rates or new taxes,
could also materially and negatively affect us. Any claim by a third party,
with or without merit, that a significant part of our business infringes
on its intellectual property could also materially and negatively affect
us.
Please
see Recent Developments in Legal Proceedings in
this MD&A for a description of recent material developments, since
the BCE 2003 AIF, in the principal legal proceedings involving us. FUNDING AND CONTROL OF SUBSIDIARIES BCE Inc. is currently
funding, directly or indirectly, and may continue to fund, the operating
losses of some of its subsidiaries in the future, but it is under no obligation
to continue doing so. If BCE Inc. decides to stop funding any of
its subsidiaries and that subsidiary does not have other sources of funding,
this would have a material and negative effect on the subsidiarys
results of operations and financial condition and on the value of its
securities. PENSION FUND CONTRIBUTIONS Most of our pension plans had pension fund surpluses as of our most recent actuarial valuations. As a result, we have not had to make regular contributions to the pension funds in the past few years. |
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|
23 2004 Quarterly Report Bell Canada Enterprises
The decline in the capital
markets in 2001 and 2002, combined with historically low interest rates,
has significantly reduced the pension fund surpluses and negatively affected
our net earnings. RETAINING EMPLOYEES Our success depends in large part on our ability to attract and retain key employees. The loss of key people, if it happens, could materially hurt our businesses and operating results. RENEGOTIATING LABOUR AGREEMENTS Approximately 45% of our employees are represented by unions and are covered by collective agreements. The following material collective agreements have expired:
The following material collective agreements will expire in 2004:
Renegotiating collective agreements could result in higher labour costs and work disruptions, including work stoppages or work slowdowns. Difficulties in renegotiations or other labour unrest could significantly hurt our businesses, operating results and financial condition. EVENTS AFFECTING OUR NETWORKS Network failures could
materially hurt our business, including our customer relationships and
operating results. Our operations depend on how well we protect our networks,
our equipment, our applications and the information stored in our data
centres against damage from fire, natural disaster, power loss, hacking,
computer viruses, disabling devices, acts of war or terrorism, and other
events. Any of these events could cause our operations to be shut down
indefinitely. |
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|
24 2004 Quarterly Report Bell Canada Enterprises
RISKS THAT COULD AFFECT BCE INC. HOLDING COMPANY STRUCTURE BCE Inc. is a holding company. That means it does not carry on any significant operations and has no major sources of income or assets of its own, other than the interests it has in its subsidiaries, joint ventures and significantly influenced companies. BCE Inc.’s cash flow and its ability to service its debt and to pay dividends on its shares all depend on dividends or other distributions it receives from its subsidiaries, joint ventures and significantly influenced companies and, in particular, from Bell Canada. BCE Inc.’s subsidiaries, joint ventures and significantly influenced companies are separate legal entities. They do not have to pay dividends or make any other distributions to BCE Inc. STOCK MARKET VOLATILITY The stock markets have experienced significant volatility over the last few years, which has affected the market price and trading volumes of the shares of many telecommunications companies, in particular. Differences between BCE Inc.’s actual or anticipated financial results and the published expectations of financial analysts may also contribute to volatility in BCE Inc.’s common shares. A major decline in the capital markets in general, or an adjustment in the market price or trading volumes of BCE Inc.’s common shares or other securities, may materially and negatively impact our ability to raise capital, issue debt, retain employees or make future strategic acquisitions or joint ventures. RISKS THAT COULD AFFECT CERTAIN BCE GROUP COMPANIES BELL CANADA COMPANIES Changes to Wireline
Regulations Second Price Cap
decision
The
CRTC also established a deferral account and, on March 24, 2004,
initiated a public proceeding inviting proposals on the disposition of
the amounts accumulated in the accounts of the incumbent telephone companies
during the first two years of the price cap period. There is a risk that
the account could be used in a way that could have a negative financial
effect on the Bell Canada companies. |
||
|
25 2004 Quarterly Report Bell Canada Enterprises
On December 2, 2003, Bell Canada
filed an application with the CRTC asking for approval to use some of
the funds in its deferral account to expand its broadband services to
certain areas. The CRTC has indicated that this application will be considered
as part of the public proceeding in 2004. Decision on incumbent
affiliates
On
September 23, 2003, the CRTC issued a decision that requires Bell Canada
and its carrier affiliates to include a detailed description of the bundled
services they provide to customers when they file tariffs with the CRTC.
The customers name will be kept confidential, but the pricing and
service arrangements it has with the Bell Canada companies will be
available on the public record. Allstream and Call-Net
application concerning customer-specific arrangements Public notice on
changes to minimum prices |
||
|
26 2004 Quarterly Report Bell Canada Enterprises
The CRTC is also seeking comments
on proposed pricing restrictions on volume or term contracts for retail
tariffed services. It is too early to determine if the proposals will be
implemented as proposed. If they are, the Bell Canada companies will
be required to increase the minimum prices they charge for regulated services.
This would limit their ability to compete. Bell Canada provided its
comments to the CRTC on January 30, 2004.
Application seeking consistent regulation Licences and Changes
to Wireless Regulation |
||
|
27 2004 Quarterly Report Bell Canada Enterprises
involvement
in the approval process, there is a risk that it could significantly slow
the expansion of wireless networks in Canada. This could have a material
and negative effect on the operations of the Bell Canada companies.
The final report is expected in June 2004.
Increased Accidents From Using Cellphones Health Concerns
About Radio Frequency Emissions BELL EXPRESSVU Bell ExpressVu currently
uses two satellites, Nimiq 1 and Nimiq 2, for its video services. Telesat
operates these satellites. Satellites are subject to significant risks.
Any loss, failure, manufacturing defects, damage or destruction of these
satellites, or of Bell ExpressVus terrestrial broadcasting infrastructure,
could have a material and negative effect on Bell ExpressVus results
of operations and financial condition. Please see Risks that could
affect certain BCE group companies Telesat for more
information on the risks concerning Telesats satellites. |
||
|
28 2004 Quarterly Report Bell Canada Enterprises
BELL GLOBEMEDIA Dependence on Advertising
Increasing Fragmentation
in Television Markets Revenues From Distributing
Television Services Increased Competition
for Fewer Print Customers Broadcast Licences
TELESAT Launch and In-Orbit
Risks |
||
|
29 2004 Quarterly Report Bell Canada Enterprises
Anik F1 and Anik F1R Anik F2 Nimiq 1 and Nimiq
2 CGI Long Sales Cycle
for Major Outsourcing Contracts |
||
|
30 2004 Quarterly Report Bell Canada Enterprises
Foreign
Currency Risks CGIs increased international business volume could expose CGI to greater foreign currency exchange risks, which could adversely impact its operating results. CGI has a hedging strategy in place to protect itself, to the extent possible, against foreign currency exposure. BCE EMERGIS Adoption of e-Business
Other Risks
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. |
||
|
31 2004 Quarterly Report Bell Canada Enterprises
Consolidated
Financial Statements |
||
|
Consolidated Statements of Operations | ||||||
For the three months ended March 31 (in $ millions, except share amounts) (unaudited) |
2004 | 2003 | ||||
Operating revenues | 4,697 | 4,676 | ||||
Operating expenses |
(2,852 | ) | (2,903 | ) | ||
Amortization expense |
(775 | ) | (762 | ) | ||
Net benefit plans cost (Note 4) |
(63 | ) | (42 | ) | ||
Restructuring and other charges |
(1 | ) | | |||
Total operating expenses |
(3,691 | ) | (3,707 | ) | ||
Operating income |
1,006 | 969 | ||||
Other income |
34 | 51 | ||||
Interest expense |
(248 | ) | (278 | ) | ||
Earnings from continuing operations before income taxes and non-controlling interest |
||||||
792 | 742 | |||||
Income taxes |
(269 | ) | (240 | ) | ||
Non-controlling interest |
(44 | ) | (38 | ) | ||
Earnings from continuing operations |
479 | 464 | ||||
Discontinued operations |
9 | 9 | ||||
Net earnings |
488 | 473 | ||||
Dividends on preferred shares |
(18 | ) | (15 | ) | ||
Premium on redemption of preferred shares |
| (7 | ) | |||
Net earnings applicable to common shares |
470 | 451 | ||||
Net earnings per common share basic |
||||||
Continuing operations |
0.50 | 0.48 | ||||
Discontinued operations |
0.01 | 0.02 | ||||
Net earnings |
0.51 | 0.50 | ||||
Net earnings per common share diluted |
||||||
Continuing operations |
0.50 | 0.48 | ||||
Discontinued operations |
0.01 | 0.02 | ||||
Net earnings |
0.51 | 0.50 | ||||
Dividends per common share |
0.30 | 0.30 | ||||
Average number of common shares outstanding basic (millions) |
924.1 | 917.1 | ||||
Consolidated Statements of Deficit |
|||||||
|
|||||||
For the three months ended March 31 (in $ millions) (unaudited) |
2004 | 2003 |
|||||
|
|||||||
Balance at beginning of period, as previously reported |
(5,830 | ) | (6,435 | ) | |||
Accounting policy change for asset retirement obligations (Note 1) |
(7 | ) | (7 | ) | |||
|
|||||||
Balance at beginning of period, as restated |
(5,837 | ) | (6,442 | ) | |||
Net earnings |
488 | 473 | |||||
Dividends |
Preferred shares | (18 | ) | (15 | ) | ||
Common shares | (277 | ) | (275 | ) | |||
|
|||||||
(295 | ) | (290 | ) | ||||
Premium on redemption of preferred shares |
| (7 | ) | ||||
Other |
(1 | ) | 1 | ||||
|
|||||||
Balance at end of period |
(5,645 | ) | (6,265 | ) | |||
|
32 2004 Quarterly Report Bell Canada Enterprises
Consolidated Balance Sheets | ||||||
March 31 | December 31 | |||||
(in $ millions) (unaudited) | 2004 | 2003 | ||||
ASSETS | ||||||
Current assets | ||||||
Cash and cash equivalents (1) |
1,511 | 714 | ||||
Accounts receivable |
2,283 | 2,077 | ||||
Other current assets |
882 | 745 | ||||
Current assets of discontinued operations |
| 45 | ||||
Total current assets |
4,676 | 3,581 | ||||
Capital assets |
20,932 | 21,195 | ||||
Other long-term assets |
3,559 | 3,550 | ||||
Indefinite-life intangible assets |
2,910 | 2,910 | ||||
Goodwill |
7,875 | 7,825 | ||||
Non-current assets of discontinued operations |
55 | 276 | ||||
Total assets |
40,007 | 39,337 | ||||
LIABILITIES |
||||||
Current liabilities |
||||||
Accounts payable and accrued liabilities |
3,759 | 3,691 | ||||
Debt due within one year |
1,171 | 1,537 | ||||
Current liabilities of discontinued operations |
| 27 | ||||
Total current liabilities |
4,930 | 5,255 | ||||
Long-term debt |
13,126 | 12,393 | ||||
Other long-term liabilities |
4,774 | 4,713 | ||||
Total liabilities |
22,830 | 22,361 | ||||
Non-controlling interest |
3,385 | 3,403 | ||||
SHAREHOLDERS EQUITY |
||||||
Preferred shares |
1,670 | 1,670 | ||||
Common shareholders equity |
||||||
Common shares |
16,753 | 16,749 | ||||
Contributed surplus |
1,045 | 1,037 | ||||
Deficit |
(5,645 | ) | (5,837 | ) | ||
Currency translation adjustment |
(31 | ) | (46 | ) | ||
Total common shareholders equity |
12,122 | 11,903 | ||||
Total shareholders equity |
13,792 | 13,573 | ||||
Total liabilities and shareholders equity |
40,007 | 39,337 | ||||
(1) Cash and cash equivalents of $1,511 million at March 31, 2004 included $66 million of restricted cash. This amount represented a private placement by BCE Inc. in CGI Group Inc. (CGI) of approximately 8.3 million subscription receipts which were automatically exchanged for CGI Class A subordinate shares in May 4, 2004. |
33 2004 Quarterly Report Bell Canada Enterprises
Consolidated Statements of Cash Flows |
||||||
For the three months ended March 31 (in $ millions) (unaudited) |
2004 | 2003 | ||||
Cash flows from operating activities |
||||||
Earnings from continuing operations |
479 | 464 | ||||
Adjustments to reconcile earnings from continuing operations to cash flows from operating activities: |
||||||
Amortization expense |
775 | 762 | ||||
Net benefit plans cost |
63 | 42 | ||||
Future income taxes |
61 | (20 | ) | |||
Non-controlling interest |
44 | 38 | ||||
Contributions to employee pension plans |
(29 | ) | (6 | ) | ||
Other employee future benefit plan payments |
(24 | ) | (21 | ) | ||
Other |
40 | 44 | ||||
Changes in non-cash working capital |
(166 | ) | (146 | ) | ||
1,243 | 1,157 | |||||
Cash flows from investing activities |
||||||
Capital expenditures |
(688 | ) | (594 | ) | ||
Business acquisitions |
(81 | ) | (63 | ) | ||
Business dispositions |
16 | | ||||
Decrease in investments accounted for under the cost and equity methods |
6 | 7 | ||||
Other |
20 | (40 | ) | |||
|
(727 | ) | (690 | ) | ||
Cash flows from financing activities |
||||||
Increase (decrease) in notes payable and bank advances |
19 | (113 | ) | |||
Issue of long-term debt |
1,326 | 1,792 | ||||
Repayment of long-term debt |
(939 | ) | (366 | ) | ||
Issue of common shares |
4 | 5 | ||||
Issue of preferred shares |
| 510 | ||||
Redemption of preferred shares |
| (357 | ) | |||
Issue of equity securities by subsidiaries to non-controlling interest |
7 | 73 | ||||
Redemption of equity securities by subsidiaries from non-controlling interest |
(43 | ) | (19 | ) | ||
Cash dividends paid on common and preferred shares |
(299 | ) | (268 | ) | ||
Cash dividends paid by subsidiaries to non-controlling interest |
(42 | ) | (44 | ) | ||
Other |
(48 | ) | (2 | ) | ||
(15 | ) | 1,211 | ||||
Cash provided by continuing operations |
501 | 1,678 | ||||
Cash provided by discontinued operations |
288 | 4 | ||||
Net increase in cash and cash equivalents |
789 | 1,682 | ||||
Cash and cash equivalents at beginning of period |
722 | 306 | ||||
Cash and cash equivalents at end of period |
1,511 | 1,988 | ||||
Consists of: |
||||||
Cash and cash equivalents of continuing operations |
1,511 | 1,941 | ||||
Cash and cash equivalents of discontinued operations |
| 47 | ||||
Total | 1,511 | 1,988 | ||||
34 2004 Quarterly Report Bell Canada Enterprises
|
Notes to Consolidated Financial Statements | |
The
interim consolidated financial statements should be read in conjunction
with the annual consolidated financial statements for the year ended December
31, 2003, on pages 64 to 101 of BCE Inc.s 2003 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, 2003, except as noted below. Change in accounting
policy
Comparative figures Stock-based compensation
plans NOTE 2. SEGMENTED INFORMATION Starting in the first quarter
of 2004, we report our results of operations under five segments:
Consumer, Business, Aliant, Other Bell Canada and Other
BCE. Our reporting structure reflects how we manage our business and
how we classify our operations for planning and measuring performance. |
35 2004 Quarterly Report Bell Canada Enterprises
NOTE 2. SEGMENTED INFORMATION (continued) |
|||||||
|
|||||||
For the three months ended March 31 |
2004 | 2003 |
|
||||
|
|||||||
Operating revenues | |||||||
Consumer | External | 1,807 | 1,712 | ||||
Inter-segment | 18 | 17 | |||||
|
|||||||
1,825 | 1,729 | ||||||
|
|||||||
Business | External | 1,360 | 1,360 | ||||
Inter-segment | 75 | 61 | |||||
|
|||||||
1,435 | 1,419 | ||||||
|
|||||||
Aliant | External | 464 | 464 | ||||
Inter-segment | 40 | 37 | |||||
|
|||||||
504 | 501 | ||||||
|
|||||||
Other Bell Canada | External | 438 | 520 | ||||
Inter-segment | 36 | 32 | |||||
|
|||||||
474 | 552 | ||||||
|
|||||||
Inter-segment eliminations | (132 | ) | (118 | ) | |||
|
|||||||
Bell Canada | 4,106 | 4,083 | |||||
|
|||||||
Other BCE | External | 628 | 622 | ||||
Inter-segment | 99 | 100 | |||||
|
|||||||
727 | 722 | ||||||
|
|||||||
Inter-segment eliminations | (136 | ) | (129 | ) | |||
|
|||||||
Total operating revenues | 4,697 | 4,676 | |||||
|
|||||||
Operating Income | |||||||
Consumer | 526 | 493 | |||||
Business | 241 | 190 | |||||
Aliant | 82 | 81 | |||||
Other Bell Canada | 111 | 162 | |||||
|
|||||||
Bell Canada | 960 | 926 | |||||
Other BCE | 46 | 43 | |||||
|
|||||||
Total operating income | 1,006 | 969 | |||||
Other income | 34 | 51 | |||||
Interest expense | (248 | ) | (278 | ) | |||
Income taxes | (269 | ) | (240 | ) | |||
Non-controlling interest | (44 | ) | (38 | ) | |||
|
|||||||
Earnings from continuing operations | 479 | 464 | |||||
|
36 2004 Quarterly Report Bell Canada Enterprises
NOTE 3. STOCK-BASED COMPENSATION PLANS RSUs BCE Inc. stock
options |
||||||
|
||||||
Number of shares |
Weighted average exercise price ($) |
|||||
|
||||||
Outstanding, January 1, 2004 | 24,795,545 | $32 | ||||
Granted | 5,394,776 | $30 | ||||
Exercised | (217,491 | ) | $15 | |||
Expired/forfeited | (307,413 | ) | $33 | |||
|
||||||
Outstanding, March 31, 2004 | 29,665,417 | $32 | ||||
|
||||||
Exercisable, March 31, 2004 | 13,849,767 | $34 | ||||
|
||||||
Teleglobe
stock options The table below is a summary of the status of Teleglobe’s stock option programs. |
|
||||||
Number
of BCE Inc. shares |
Weighted average exercise price ($) |
|||||
|
||||||
Outstanding, January 1, 2004 | 955,175 | $21 | ||||
Exercised | (23,572 | ) | $16 | |||
|
||||||
Outstanding and exercisable, March 31, 2004 | 931,603 | $22 | ||||
|
||||||
Assumptions
used in stock-option pricing model |
For the three months ended March 31 |
2004 | 2003 | ||||
Compensation cost (in $ millions) | 8 | 8 | ||||
Number of stock options granted | 5,394,776 | 5,351,051 | ||||
Weighted average fair value per option granted ($) | 3 | 6 | ||||
Assumptions | ||||||
Dividend yield |
4.0% | 3.6% | ||||
Expected volatility |
27% | 30% | ||||
Risk-free interest rate |
3.1% | 4.1% | ||||
Expected life (years) |
3.5 | 4.5 | ||||
37 2004 Quarterly Report Bell Canada Enterprises
NOTE 4. EMPLOYEE BENEFIT PLANS The table below shows the components of net benefit plans cost. |
||||||||||
Pension benefits |
Other benefits |
|||||||||
For the three months ended March 31 |
2004 | 2003 | 2004 | 2003 | ||||||
Current service cost |
60 | 56 | 8 | 8 | ||||||
Interest cost on accrued benefit obligation |
201 | 188 | 26 | 26 | ||||||
Expected return on plan assets |
(237 | ) | (235 | ) | (2 | ) | (2 | ) | ||
Amortization of past service costs |
2 | 2 | | | ||||||
Amortization of net actuarial losses |
8 | 6 | | | ||||||
Amortization of transitional (asset) obligation |
(11 | ) | (11 | ) | 7 | 7 | ||||
Increase (decrease) in valuation allowance |
1 | (3 | ) | | | |||||
Net benefit plans cost |
24 | 3 | 39 | 39 | ||||||
The table below shows the amounts we contributed to the pension benefit plans and the payments made to beneficiaries under other employee future benefit plans. |
Pension benefits | Other benefits | |||||||||
For the three months ended March 31 | 2004 | 2003 | 2004 | 2003 | ||||||
Aliant | 19 | 3 | 1 | 1 | ||||||
Bell Canada | 5 | 1 | 23 | 20 | ||||||
Bell Globemedia | 3 | 1 | | | ||||||
BCE Inc. | 2 | 1 | | | ||||||
Total | 29 | 6 | 24 | 21 | ||||||
38 2004 Quarterly Report Bell Canada Enterprises
BCE
Inc. Communications |
This document has been filed by BCE Inc. with Canadian securities commissions and the U.S. Securities and Exchange Commission. It can also be found on BCE Inc.s Web site at www.bce.ca or is available upon request from: Investor Relations |
For further information concerning the Dividend Reinvestment and Stock Purchase Plan (DRP), direct deposit of dividend payments, the elimination of multiple mailings or the receipt of quarterly reports, please contact: Computershare Trust |
|||
PRINTED IN CANADA 04-05 BCE-1E |
For further information,
contact
BCE Investor Relations
Sophie Argiriou | 514-786-8145 |
sophie.argiriou@bell.ca |
George Walker | 514-870-2488 |
george.walker@bell.ca |
Roland Ribotti | 514-870-9034 |
roland.ribotti@bell.ca |
BCE
Consolidated(1)
Consolidated
Operational Data
Q1
|
Q1 |
||||||||||
($ millions, except per share amounts) | 2004 |
2003 |
$
change |
%
change |
|||||||
|
|||||||||||
Operating revenues |
4,697 |
4,676 |
21 |
0.4% |
|||||||
Operating expenses |
(2,852 |
) |
(2,903 |
)
|
51
|
1.8% |
|||||
|
|||||||||||
EBITDA(2) | 1,845
|
1,773 |
72 |
4.1% |
|||||||
EBITDA margin | 39.3% |
37.9% |
1.4 pts. |
||||||||
Amortization expense |
(775 |
) |
(762 |
)
|
(13 |
)
|
(1.7% |
) |
|||
Net benefit plans cost |
(63 |
)
|
(42 |
)
|
(21 |
) |
(50.0% |
) |
|||
Restructuring and other charges |
(1 |
) |
- |
(1 |
)
|
n.m. |
|||||
|
|||||||||||
Operating income |
1,006 |
969 |
37 |
3.8% |
|||||||
Other income |
34 |
51 |
(17 |
)
|
(33.3% |
) |
|||||
Interest expense |
(248 |
) |
(278 |
)
|
30
|
10.8%
|
|||||
|
|||||||||||
Earnings from continuing operations before | |||||||||||
income taxes and non-controlling interest |
792 |
742 |
50 |
6.7% |
|||||||
Income taxes |
(269 |
) |
(240 |
) |
(29 |
)
|
(12.1% |
)
|
|||
Non-controlling interest |
(44 |
) |
(38 |
) |
(6) |
(15.8% |
)
|
||||
|
|||||||||||
Earnings from continuing operations |
479 |
464 |
15 |
3.2% |
|||||||
Discontinued operations |
9 |
9 |
- |
0.0% |
|||||||
|
|||||||||||
Net earnings |
488 |
473 |
15 |
3.2% |
|||||||
Dividends on preferred shares |
(18 |
) |
(15 |
) |
(3 |
) |
(20.0% |
) |
|||
Premium on redemption of preferred shares |
- |
(7 |
) |
7 |
n.m. |
||||||
|
|||||||||||
Net earnings applicable to common shares |
470 |
451 |
19 |
4.2% |
|||||||
|
|||||||||||
Net earnings per common share - basic | |||||||||||
Continuing operations | $ |
0.50 |
$ |
0.48 |
$ |
0.02 |
4.2% |
||||
Discontinued operations | $ |
0.01 |
$ |
0.02
|
$ |
(0.01 |
) |
(50.0% |
) |
||
Net earnings | $ |
0.51 |
$ |
0.50
|
$ |
0.01 |
2.0% |
||||
Net earnings per common share - diluted | |||||||||||
Continuing operations | $ |
0.50 |
$ |
0.48 |
$ |
0.02 |
4.2% |
||||
Discontinued operations | $ |
0.01 |
$ |
0.02 |
$ |
(0.01 |
)
|
(50.0% |
) |
||
Net earnings | $ |
0.51 |
$ |
0.50
|
$ |
0.01 |
2.0% |
||||
Dividends per common share | $ |
0.30 |
$ |
0.30
|
$ |
- |
0.0% |
||||
Average number of common shares outstanding basic (millions) | 924.1
|
917.1 |
|||||||||
|
The following items are included in net earnings: | ||||||||||
Net gains on sale of investments and dilution gains | ||||||||||
Continuing operations | -
|
- |
||||||||
Discontinued operations | 6
|
-
|
||||||||
|
||||||||||
Total | 6 |
-
|
||||||||
Impact on net earnings per share | $ |
0.01 |
$ | -
|
||||||
n.m. : not meaningful
BCE Inc. Supplementary Financial Information - First Quarter 2004 Page 2
BCE Consolidated(1)
Consolidated
Operational Data Historical Trend
Total |
||||||||||||||||||
($ millions, except per share amounts) | Q1
04 |
2003 |
Q4
03 |
Q3
03 |
Q2
03 |
Q1
03 |
||||||||||||
|
||||||||||||||||||
Operating revenues |
4,697 |
18,972 |
4,875 |
4,688 |
4,733 |
4,676 |
||||||||||||
Operating expenses |
(2,852 |
) |
(11,546 |
) |
(3,021 |
) |
(2,789 |
) |
(2,833 |
) |
(2,903 |
) |
||||||
|
|
|
||||||||||||||||
EBITDA(2) | 1,845
|
7,426 |
1,854 |
1,899 |
1,900 |
1,773 |
||||||||||||
EBITDA margin | 39.3% |
39.1% |
38.0% |
40.5% |
40.1% |
37.9% |
||||||||||||
Amortization expense |
(775 |
) |
(3,147 |
) |
(786 |
) |
(813 |
) |
(786 |
) |
(762 |
) |
||||||
Net benefit plans cost |
(63 |
)
|
(175 |
) |
(46 |
) |
(44 |
) |
(43 |
) |
(42 |
) |
||||||
Restructuring and other charges |
(1 |
) |
(52 |
) |
(51 |
) |
(1 |
) |
- |
- |
||||||||
|
|
|
||||||||||||||||
Operating income |
1,006 |
4,052 |
971 |
1,041 |
1,071 |
969 |
||||||||||||
Other income |
34 |
213 |
136 |
19 |
7 |
51 |
||||||||||||
Interest expense |
(248 |
) |
(1,093 |
) |
(263 |
) |
(267 |
) |
(285 |
) |
(278 |
) |
||||||
|
|
|
||||||||||||||||
Earnings from continuing operations before | ||||||||||||||||||
income taxes and non-controlling interest |
792 |
3,172 |
844 |
793 |
793 |
742 |
||||||||||||
Income taxes |
(269 |
) |
(1,136 |
) |
(340 |
) |
(285) |
(271 |
) |
(240 |
) |
|||||||
Non-controlling interest |
(44 |
) |
(191 |
) |
(46 |
) |
(50 |
) |
(57 |
) |
(38 |
) |
||||||
|
|
|
||||||||||||||||
Earnings from continuing operations |
479 |
1,845 |
458 |
458 |
465 |
464 |
||||||||||||
Discontinued operations |
9 |
(30 |
) |
(58 |
) |
6 |
13 |
9 |
||||||||||
|
|
|
||||||||||||||||
Net earnings |
488 |
1,815 |
400 |
464 |
478 |
473 |
||||||||||||
Dividends on preferred shares |
(18 |
) |
(64 |
) |
(14 |
) |
(18 |
) |
(17 |
) |
(15 |
) |
||||||
Premium on redemption of preferred shares |
- |
(7 |
) |
- |
- |
- |
(7 |
) |
||||||||||
|
|
|||||||||||||||||
Net earnings applicable to common shares | 470 |
1,744 |
386 |
446 |
461 |
451 |
||||||||||||
|
|
|
||||||||||||||||
Net earnings per common share - basic | ||||||||||||||||||
Continuing operations | $ |
0.50 |
$ |
1.93 |
$ |
0.48 |
$ |
0.48 |
$ |
0.49 |
$ |
0.48 |
||||||
Discontinued operations | $ |
0.01 |
$ |
(0.03 |
) |
$ |
(0.07 |
) |
$ |
0.01 |
$ |
0.01 |
$ |
0.02 |
||||
Net earnings | $ |
0.51 |
$ |
1.90 |
$ |
0.41 |
$ |
0.49 |
$ |
0.50 |
$ |
0.50 |
||||||
Net earnings per common share - diluted | ||||||||||||||||||
Continuing operations | $ |
0.50 |
$ |
1.92 |
$ |
0.48 |
$ |
0.47 |
$ |
0.49 |
$ |
0.48 |
||||||
Discontinued operations | $ |
0.01 |
$ |
(0.03 |
) |
$ |
(0.07 |
) |
$ |
0.01 |
$ |
0.01 |
$ |
0.02 |
||||
Net earnings | $ |
0.51 |
$ |
1.89 |
$ |
0.41 |
$ |
0.48 |
$ |
0.50 |
$ |
0.50 |
||||||
Dividends per common share | $ |
0.30 |
$ |
1.20 |
$ |
0.30 |
$ |
0.30 |
$ |
0.30 |
$ |
0.30 |
||||||
Average number of common shares outstanding - basic (millions) | 924.1
|
920.3 |
923.4 |
921.5 |
919.3 |
917.1 |
||||||||||||
|
|
|
|
|
|
||||||||||||||||
The following items are included in net earnings: | ||||||||||||||||||
Net gains on sale of investments and dilution gains | ||||||||||||||||||
Continuing operations | -
|
84 |
84 |
- |
- |
- |
||||||||||||
Discontinued operations | 6
|
(65 |
) |
(73 |
) | 8 |
- |
- |
||||||||||
Restructuring and other charges |
-
|
(24 |
) |
(30 |
) | 6 |
- |
- |
||||||||||
|
|
|
||||||||||||||||
Total | 6 |
(5 |
) |
(19 |
) | 14 |
- |
- |
||||||||||
Impact on net earnings per share | $ |
0.01 |
$ |
- |
$ |
(0.01 |
) | $ |
0.01 |
$ |
- |
$ |
- |
|||||
|
|
|
BCE Inc. Supplementary Financial Information - First Quarter 2004 Page 3
BCE
Consolidated(1)
Segmented Data
Q1
|
Q1 |
|||||||||||
($ millions, except where otherwise indicated) | 2004 |
2003 |
$
change |
%
change |
||||||||
Revenues | ||||||||||||
Consumer | 1,825
|
1,729
|
96
|
5.6%
|
||||||||
Business | 1,435
|
1,419 |
16 |
1.1% |
||||||||
Aliant |
504 |
501 |
3 |
0.6% |
||||||||
Other Bell Canada |
474 |
552 |
(78 |
)
|
(14.1% |
)
|
||||||
Inter-segment eliminations | (132 |
)
|
(118 |
)
|
(14 |
)
|
(11.9% |
) |
||||
|
|
|||||||||||
Total Bell Canada | 4,106
|
4,083
|
23 |
0.6% |
||||||||
Other BCE | ||||||||||||
Bell Globemedia | 342
|
335 |
7 |
2.1%
|
||||||||
Advertising | 249 |
235 |
14
|
6.0%
|
||||||||
Subscriber | 74
|
74 |
- |
0.0%
|
||||||||
Production and Sundry |
19 |
26 |
(7 |
) |
(26.9% |
)
|
||||||
Telesat |
84 |
79 |
5 |
6.3% |
||||||||
CGI |
220 |
219 |
1
|
0.5%
|
||||||||
BCE Emergis |
70 |
79 |
(9 |
)
|
(11.4% |
) |
||||||
Other | 11 |
10 |
1
|
10.0%
|
||||||||
|
|
|||||||||||
Total Other BCE | 727
|
722 |
5 |
0.7% |
||||||||
Inter-segment eliminations |
(136 |
)
|
(129 |
)
|
(7 |
)
|
(5.4% |
) |
||||
Total revenues | 4,697
|
4,676
|
21 |
0.4%
|
||||||||
Operating income | ||||||||||||
Consumer |
526 |
493 |
33 |
6.7%
|
||||||||
Business |
241 |
190 |
51 |
26.8%
|
||||||||
Aliant |
82 |
81 |
1 |
1.2% |
||||||||
Other Bell Canada |
111 |
162 |
(51 |
) |
(31.5% |
)
|
||||||
Total Bell Canada |
960 |
926 |
34 |
3.7%
|
||||||||
Other BCE | ||||||||||||
Bell Globemedia | 40
|
19 |
21 |
n.m.
|
||||||||
Telesat |
31 |
32 |
(1 |
)
|
(3.1% |
)
|
||||||
CGI |
21 |
22 |
(1 |
)
|
(4.5% |
)
|
||||||
BCE Emergis |
(5 |
) |
(12 |
) |
7 |
58.3% |
||||||
Other |
(41 |
) |
(18 |
) |
(23 |
)
|
n.m. |
|||||
|
|
|||||||||||
Total Other BCE |
46 |
43 |
3
|
7.0%
|
||||||||
|
|
|||||||||||
Total Operating income |
1,006 |
969 |
37 |
3.8% |
||||||||
|
|
|||||||||||
Capital expenditures(3) | ||||||||||||
Consumer |
262 |
208 |
(54 |
) |
(26.0%
|
) |
||||||
Business |
197 |
193 |
(4 |
) |
(2.1% |
) |
||||||
Aliant |
85 |
71 |
(14 |
) |
(19.7% |
) |
||||||
Other Bell Canada |
46 |
62 |
16 |
25.8% |
||||||||
|
|
|||||||||||
Total Bell Canada |
590 |
534 |
(56 |
) |
(10.5% |
) |
||||||
Other BCE | ||||||||||||
Telesat |
65 |
36 |
(29 |
) |
(80.6% |
) |
||||||
Other |
33 |
24 |
(9 |
) |
(37.5% |
) |
||||||
|
|
|||||||||||
Total capital expenditures |
688 |
594 |
(94 |
) |
(15.8%) |
|||||||
|
|
BCE Inc. Supplementary Financial Information - First Quarter 2004 Page 4
BCE Consolidated(1)
Segmented Data Historical Trend
Total |
||||||||||||
($ millions, except where otherwise indicated) | Q1
04 |
2003 |
Q4
03 |
Q3
03 |
Q2
03 |
Q1
03 |
||||||
|
|
|
||||||||||
Revenues | ||||||||||||
Consumer | 1,825
|
7,203 |
1,868 |
1,838 |
1,768 |
1,729 |
||||||
Business |
1,435 |
5,839 |
1,516 |
1,440 |
1,464
|
1,419 |
||||||
Aliant |
504 |
2,059
|
527 |
514 |
517 |
501 |
||||||
Other Bell Canada |
474 |
2,003 |
468 |
478 |
505 |
552 |
||||||
Inter-segment eliminations |
(132 |
)
|
(490 |
) |
(133 |
) |
(115 |
) |
(124 |
) |
(118 |
) |
|
|
|
|
|
|
|||||||
Total Bell Canada |
4,106 |
16,614 |
4,246
|
4,155
|
4,130 |
4,083 |
||||||
Other BCE |
||||||||||||
Bell Globemedia |
342 |
1,363
|
375 |
296 |
357 |
335 |
||||||
Advertising |
249 |
978 |
283 |
201 |
259 |
235 |
||||||
Subscriber |
74 |
291 |
69 |
73 |
75
|
74
|
||||||
Production and Sundry |
19 |
94 |
23
|
22
|
23 |
26 |
||||||
Telesat |
84 |
345 |
99 |
84 |
83 |
79 |
||||||
CGI |
220 |
849 |
211 |
205 |
214 |
219
|
||||||
BCE Emergis |
70 |
316 |
77 |
78 |
82 |
79 |
||||||
Other | 11 |
51 |
15 |
13 |
13
|
10 |
||||||
|
|
|
||||||||||
Total Other BCE |
727 |
2,924 |
777 |
676 |
749 |
722 |
||||||
Inter-segment eliminations |
(136 |
)
|
(566 |
) |
(148 |
) |
(143 |
) |
(146 |
)
|
(129 |
) |
|
|
|
||||||||||
Total revenues |
4,697 |
18,972 |
4,875 |
4,688 |
4,733 |
4,676
|
||||||
|
|
|
||||||||||
Operating income | ||||||||||||
Consumer |
526 |
1,985 |
471 |
552 |
469
|
493
|
||||||
Business |
241 |
785 |
199 |
193
|
203 |
190 |
||||||
Aliant |
82 |
415 |
108 |
104 |
122 |
81 |
||||||
Other Bell Canada |
111 |
651 |
152 |
163 |
174 |
162 |
||||||
|
|
|
||||||||||
Total Bell Canada | 960
|
3,836
|
930 |
1,012
|
968
|
926 |
||||||
Other BCE | ||||||||||||
Bell Globemedia |
40 |
167
|
66 |
20 |
62
|
19
|
||||||
Telesat | 31
|
124 |
33 |
28
|
31 |
32 |
||||||
CGI |
21 |
91
|
22
|
23
|
24
|
22
|
||||||
BCE Emergis |
(5 |
) |
(69 |
) |
(42 |
) |
(8 |
) |
(7 |
) |
(12 |
) |
Other | (41 |
) |
(97 |
) |
(38 |
) |
(34 |
) |
(7 |
)
|
(18 |
)
|
|
|
|
||||||||||
Total Other BCE | 46
|
216 |
41 |
29
|
103
|
43 |
||||||
|
|
|
||||||||||
Total Operating Income | 1,006
|
4,052 |
971
|
1,041
|
1,071
|
969 |
||||||
|
|
|
||||||||||
Capital expenditures(3) | ||||||||||||
Consumer | 262
|
1,287
|
485
|
307 |
287 |
208
|
||||||
Business | 197 |
936 |
286 |
228 |
229 |
193 |
||||||
Aliant | 85 |
333 |
97 |
92 |
73 |
71
|
||||||
Other Bell Canada | 46 |
336 |
123 |
81 |
70 |
62
|
||||||
Total Bell Canada | 590 |
2,892 |
991
|
708
|
659 |
534 |
||||||
Other BCE | ||||||||||||
Telesat |
65 |
159 |
43 |
64 |
16
|
36
|
||||||
Other |
33 |
128 |
49 |
22
|
33 |
24 |
||||||
|
|
|
||||||||||
Total capital expenditures | 688 |
3,179 |
1,083
|
794 |
708 |
594 |
||||||
|
|
|
BCE Inc. Supplementary Financial Information - First Quarter 2004 Page 5
BCE
Consolidated
Consolidated Balance Sheet Data
March
31 |
December
31 |
||||
($ millions, except where otherwise indicated) | 2004 |
2003 |
|||
|
|
||||
ASSETS | |||||
Current assets | |||||
Cash and cash equivalents | 1,511
|
714
|
|||
Accounts receivable | 2,283
|
2,077 |
|||
Other current assets | 882
|
745 |
|||
Current assets of discontinued operations | - |
45
|
|||
Total current assets |
4,676 |
3,581
|
|||
Capital assets | 20,932
|
21,195
|
|||
Other long-term assets |
3,559 |
3,550
|
|||
Indefinite-life intangible assets |
2,910 |
2,910
|
|||
Goodwill |
7,875 |
7,825 |
|||
Non-current assets of discontinued operations |
55 |
276
|
|||
Total assets | 40,007
|
39,337
|
|||
|
|||||
LIABILITIES | |||||
Current liabilities |
|||||
Accounts payable and accrued liabilities | 3,759
|
3,691
|
|||
Debt due within one year | 1,171
|
1,537
|
|||
Current liabilities of discontinued operations | - |
27
|
|||
Total current liabilities |
4,930 |
5,255
|
|||
Long-term debt | 13,126
|
12,393
|
|||
Other long-term liabilities | 4,774
|
4,713
|
|||
Total liabilities |
22,830 |
22,361
|
|||
Non-controlling interest |
3,385 |
3,403 |
|||
SHAREHOLDERS EQUITY | |||||
Preferred shares |
1,670 |
1,670
|
|||
Common shareholders equity | |||||
Common shares | 16,753
|
16,749
|
|||
Contributed surplus | 1,045 |
1,037 |
|||
Deficit |
(5,645 |
) | (5,837 |
) | |
Currency translation adjustment |
(31 |
) |
(46 |
) | |
Total common shareholders equity |
12,122 |
11,903
|
|||
Total shareholders equity | 13,792
|
13,573 |
|||
Total liabilities and shareholders equity | 40,007 |
39,337 |
|||
|
|
||||
Number of common shares outstanding | 924.2 |
924.0 |
|||
|
|
Key ratios | ||
Net debt : Total Capitalization | 42.7%
|
43.8% |
Net debt : Trailing 12 month EBITDA |
1.71 |
1.78 |
EBITDA : Interest (trailing 12 month) |
7.05 |
6.79
|
BCE Inc. Supplementary Financial Information - First Quarter 2004 Page 6
BCE
Consolidated
Consolidated
Cash Flow Data
Q1 |
Q1 |
||||||||
($ millions, except where otherwise indicated) | 2004 |
2003 |
$
change |
||||||
|
|
||||||||
Cash flows from operating activities | |||||||||
Earnings from continuing operations | 479 |
464 |
15 |
||||||
Adjustments
to reconcile earnings from continuing operations to cash flows from operating activities: |
|||||||||
Amortization expense |
775 |
762 |
13 |
||||||
Net benefit plans cost |
63 |
42
|
21 |
||||||
Future income taxes | 61
|
(20 |
) |
81 |
|||||
Non-controlling interest | 44 |
38 |
6 |
||||||
Contributions to employee benefit plans and other benefit plan payments | (53 |
)
|
(27 |
)
|
(26 |
) |
|||
Other |
40 |
44
|
(4 |
)
|
|||||
Change in non-cash working capital | (166 |
) |
(146 |
) |
(20 |
)
|
|||
|
|
|
|||||||
1,243 |
1,157 |
86 |
|||||||
|
|
||||||||
Capital expenditures | (688 |
) |
(594 |
) |
(94 |
) |
|||
Other investing items | 20
|
(40 |
) |
60 |
|||||
Cash preferred dividends and cash dividends paid by subsidiaries | |||||||||
to non-controlling interest | (64 |
) |
(55 |
) |
(9 |
) |
|||
|
|
||||||||
Free Cash Flow from operations, before common dividends(2) | 511
|
468
|
43 |
||||||
Cash common dividends | (277 |
) |
(257 |
) |
(20 |
) |
|||
Free Cash Flow from operations, after common dividends(2) | 234
|
211
|
23 |
||||||
Business acquisitions | (81 |
) |
(63 |
) |
(18 |
) |
|||
Business dispositions | 16 |
- |
16 |
||||||
Decrease in investments accounted for under the cost and equity methods | 6
|
7
|
(1 |
) |
|||||
Free Cash Flow after investments and divestitures | 175
|
155
|
20 |
||||||
Other financing activities | |||||||||
Increase (decrease) in notes payable and bank advances | 19
|
(113 |
)
|
132 |
|||||
Issue of long-term debt | 1,326
|
1,792
|
(466 |
) |
|||||
Repayment of long-term debt | (939 |
)
|
(366 |
)
|
(573 |
) |
|||
Issue of common shares | 4
|
5
|
(1 |
) |
|||||
Issue of preferred shares | - |
510
|
(510 |
) |
|||||
Redemption of preferred shares | - |
(357 |
) |
357
|
|||||
Issue of equity securities by subsidiaries to non-controlling interest | 7
|
73
|
(66 |
) |
|||||
Redemption of equity securities by subsidiaries from non-controlling interest | (43 |
)
|
(19 |
) |
(24 |
) |
|||
Other | (48 |
) |
(2 |
) |
(46 |
) |
|||
|
|
|
|||||||
326
|
1,523 |
(1,197 |
) |
||||||
|
|
||||||||
Cash provided by continuing operations |
501 |
1,678 |
(1,177 |
) |
|||||
Cash provided by discontinued operations | 288
|
4
|
284
|
||||||
Net increase in cash and cash equivalents | 789
|
1,682
|
(893 |
) |
|||||
Cash and cash equivalents at beginning of period |
722 |
306
|
416
|
||||||
Cash and cash equivalents at end of period | 1,511 |
1,988
|
(477 |
) |
|||||
Consists of: |
|
|
|
||||||
Cash and cash equivalents of continuing operations | 1,511
|
1,941
|
(430 |
) |
|||||
Cash and cash equivalents of discontinued operations | - |
47
|
(47 |
) |
|||||
|
|
|
|||||||
Total | 1,511
|
1,988 |
(477 |
) |
|||||
|
|||||||||
Other information | |||||||||
Capital expenditures as a percentage of revenues | 14.6%
|
12.7% |
(1.9)
pts |
||||||
Cash flow per share(4) | $
|
0.60
|
$
|
0.61
|
$
|
(0.01 |
) |
||
Annualized cash flow yield(5) | 8.0% |
7.6%
|
0.4
pts |
||||||
Common dividend payout | 58.9% |
57.0%
|
1.9
pts |
||||||
|
BCE Inc. Supplementary Financial Information - First Quarter 2004 Page 7
BCE
Consolidated
Consolidated
Cash Flow Data Historical Trend
($ millions, except where otherwise indicated) | Q1
04 |
Total
2003 |
Q4
03 |
Q3
03 |
Q2
03 |
Q1
03 |
||||||||
|
|
|
||||||||||||
Cash flows from operating activities | ||||||||||||||
Earnings from continuing operations | 479 |
1,845
|
458 |
458 |
465 |
464 |
||||||||
Adjustments
to reconcile earnings from continuing operations to cash flows from operating activities: |
||||||||||||||
Amortization expense | 775 |
3,147 |
786 |
813 |
786
|
762 |
||||||||
Net benefit plans cost | 63 |
175 |
46 |
44 |
43 |
42 |
||||||||
Restructuring and other charges (non-cash portion) | - |
44 |
49 |
(5 |
) |
- |
- |
|||||||
Net gains on investments | - |
(76 |
) |
(101 |
) |
25
|
-
|
-
|
||||||
Future income taxes | 61 |
433 |
217 |
134 |
102 |
(20 |
)
|
|||||||
Non-controlling interest | 44 |
191 |
46 |
50 |
57 |
38 |
||||||||
Contributions
to employee benefit plans and other benefit plan payments |
(53 |
)
|
(247 |
) |
(110 |
) |
(68 |
) |
(42 |
) |
(27
|
)
|
||
Other | 40 |
(90 |
) |
(31 |
) |
(12 |
) |
(91 |
) |
44
|
||||
Change in non-cash working capital | (166 |
) |
593 |
250 |
429 |
60 |
(146 |
) |
||||||
|
|
|
||||||||||||
1,243 |
6,015 |
1,610 |
1,868 |
1,380
|
1,157
|
|||||||||
|
|
|
||||||||||||
Capital expenditures | (688 |
) |
(3,179 |
) |
(1,083 |
) |
(794 |
)
|
(708 |
)
|
(594 |
) |
||
Other investing items | 20 |
64 |
(7 |
) |
156 |
(45 |
) |
(40 |
) |
|||||
Cash preferred dividends and cash dividends paid by subsidiaries to non-controlling interest | (64 |
) |
(245 |
) |
(69 |
) |
(52 |
) |
(69 |
) |
(55 |
) |
||
|
|
|
||||||||||||
Free Cash Flow from operations, before common dividends (2) | 511 |
2,655 |
451 |
1,178
|
558 |
468 |
||||||||
Cash common dividends |
(277 |
)
|
(1,029 |
) |
(259 |
)
|
(259 |
)
|
(254 |
) |
(257 |
)
|
||
|
|
|
||||||||||||
Free Cash Flow from operations, after common dividends (2) |
234
|
1,626 |
192 |
919 |
304 |
211 |
||||||||
Business acquisitions |
(81 |
) |
(119 |
)
|
(42 |
)
|
(7 |
) |
(7 |
) |
(63 |
) |
||
Business dispositions | 16 |
55 |
- |
55 |
- |
- |
||||||||
Decrease (increase) in investments accounted for under the cost and equity methods | 6 |
164 |
151 |
7
|
(1 |
)
|
7 |
|||||||
|
|
|
|
|
||||||||||
Free Cash Flow after investments and divestitures | 175 |
1,726
|
301 |
974 |
296 |
155 |
||||||||
|
|
|
|
|
||||||||||
Other financing activities | ||||||||||||||
Increase (decrease) in notes payable and bank advances | 19 |
(295 |
) |
(53 |
) |
(73 |
) |
(56 |
) |
(113 |
) |
|||
Issue of long-term debt | 1,326 |
1,986 |
105 |
17 |
72 |
1,792 |
||||||||
Repayment of long-term debt |
(939 |
) |
(3,515 |
) |
(1,538 |
) |
(147 |
) |
(1,464 |
)
|
(366 |
) |
||
Issue of common shares | 4 |
19 |
5 |
5 |
4
|
5 |
||||||||
Issue of preferred shares |
- |
510 |
- |
- |
- |
510 |
||||||||
Redemption of preferred shares | - |
(357 |
) |
- |
- |
- |
(357 |
) |
||||||
Issue of equity securities and convertible debentures by subsidiaries to non-controlling interest | 7 |
130 |
19 |
24 |
14 |
73 |
||||||||
Redemption of equity securities by subsidiaries from non-controlling interest |
(43 |
) |
(108 |
) |
(34 |
) |
(39 |
) |
(16 |
) |
(19 |
) |
||
Other | (48 |
) |
(44 |
) |
(42 |
) |
56 |
(56 |
) |
(2 |
) |
|||
|
|
|
|
|
||||||||||
326 |
(1,674 |
) |
(1,538 |
) |
(157 |
)
|
(1,502 |
)
|
1,523 |
|||||
|
|
|
||||||||||||
Cash provided by (used in) continuing operations | 501 |
52 |
(1,237 |
) |
817 |
(1,206 |
)
|
1,678 |
||||||
Cash provided by discontinued operations | 288 |
364 |
342 |
4 |
14 |
4 |
||||||||
|
|
|
|
|
||||||||||
Net increase (decrease) in cash and cash equivalents | 789 |
416 |
(895 |
)
|
821 |
(1,192 |
)
|
1,682 |
||||||
Cash and cash equivalents at beginning of period | 722 |
306 |
1,617 |
796 |
1,988 |
306 |
||||||||
|
|
|
|
|
||||||||||
Cash and cash equivalents at end of period | 1,511
|
722 |
722 |
1,617 |
796 |
1,988 |
||||||||
|
|
|
|
|
||||||||||
Consists of: | ||||||||||||||
Cash
and cash equivalents of continuing operations |
1,511
|
714 |
714 |
1,552
|
735 |
1,941 |
||||||||
Cash
and cash equivalents of discontinued operations |
- |
8 |
8 |
65 |
61 |
47 |
||||||||
|
|
|
|
|
||||||||||
Total | 1,511
|
722 |
722 |
1,617
|
796 |
1,988 |
||||||||
|
|
|
||||||||||||
Other information | ||||||||||||||
Capital expenditures as a percentage of revenues | 14.6% |
16.8%
|
22.2%
|
16.9%
|
15.0% |
12.7% |
||||||||
Cash flow per share (4) | $ 0.60 |
|
$ 3.08 |
$ 0.57 |
$ 1.17 |
$ 0.73 |
|
$ 0.61
|
||||||
Annualized cash flow yield (5) |
8.0% |
9.9% |
6.8% |
17.6% |
8.0% |
7.6% |
||||||||
Common dividend payout | 58.9% |
59.0% |
67.1% |
58.1% |
55.1%
|
57.0% |
BCE Inc. Supplementary
Financial Information - First Quarter 2004 Page
8
Proportionate
Net Debt, Preferreds and EBITDA
BCE Corporate and Bell Canada Net debt and preferreds | |||||||||||||
At
March 31, 2004 |
Bell
Canada (excl. Aliant) |
Aliant |
Bell Canada Statutory |
Inter- company eliminations |
Total
Bell Canada |
BCE
Inc. Corporate |
|||||||
Bank
indebtedness / (cash and cash equivalents) |
(789 |
) |
(323 |
) |
(1,112 |
)
|
142 |
(970 |
)
|
(66 |
) | ||
Long-term
debt |
9,443
|
888 |
10,331 |
(383 |
) |
9,948 |
2,000 |
||||||
Debt
due within one year |
1,000
|
111
|
1,111
|
(41 |
)
|
1,070 |
- |
||||||
Long-term
note receivable from BCH |
(498 |
) |
- |
(498 |
)
|
498 |
- |
- |
|||||
PPA
fair value increment(6) |
- |
- |
- |
- |
132 |
- |
|||||||
Net
debt |
9,156 |
676 |
9,832
|
216 |
10,180 |
1,934 |
|||||||
Preferred
shares - Bell Canada (7) |
1,100 |
- |
1,100 |
-
|
1,100 |
-
|
|||||||
Preferred
shares - Aliant (7) |
- |
172 |
172 |
- |
172 |
-
|
|||||||
Perpetual
Preferred shares - BCE |
- |
- |
- |
- |
- |
1,670
|
|||||||
Nortel
common shares at market |
- |
- |
- |
- |
- |
(109 |
) |
||||||
Net debt and preferreds | 10,256
|
848 |
11,104
|
216 |
11,452 |
3,495 |
|||||||
Proportionate net debt and preferreds, Trailing EBITDA | |||||||||||||||||||||||||
For
the quarter ended March 31 , 2004 ($ millions, except where otherwise indicated) |
%
owned by BCE |
Proportionate net debt and preferreds |
TOTAL
EBITDA
|
PROPORTIONATE
EBITDA
|
|||||||||||||||||||||
|
|
||||||||||||||||||||||||
Q1
04 |
Q4
03 |
Q3
03 |
Q2
03 |
Trailing |
Q1
04 |
Q4
03 |
Q3
03 |
Q2
03 |
Trailing |
||||||||||||||||
Bell Canada (excluding Aliant) | 100 |
% |
10,604* |
1,549 |
1,514 |
1,584 |
1,527 |
6,174 |
1,549 |
1,514 |
1,584 |
1,527 |
6,174 |
||||||||||||
Aliant | 53.5 |
% |
454 |
206 |
217 |
233 |
233 |
889 |
110 |
116 |
125 |
125 |
476 |
||||||||||||
|
|
|
|||||||||||||||||||||||
Total Bell Canada Consolidated | 11,058 |
1,755 |
1,731 |
1,817 |
1,760 |
7,063 |
1,659 |
1,630 |
1,709 |
1,652 |
6,650 |
||||||||||||||
Other BCE | |||||||||||||||||||||||||
Bell Globemedia | 68.5 |
% |
429 |
56 |
83 |
36 |
77 |
252 |
34 |
50 |
18 |
45 |
147 |
||||||||||||
Telesat | 100 |
% |
392 |
54 |
55 |
51 |
50 |
210 |
54 |
55 |
51 |
50 |
210 |
||||||||||||
CGI | 29.8 |
% |
38 |
31 |
33 |
32 |
35 |
131 |
31 |
33 |
32 |
35 |
131 |
||||||||||||
BCE Emergis | 63.8 |
% |
(221 |
) |
1 |
6 |
4 |
5 |
16
|
1 |
4 |
3 |
3 |
11 |
|||||||||||
Corporate and other | 100 |
% |
3,508 |
(32 |
) |
(35 |
) |
(22 |
) |
(9 |
) |
(98 |
) |
(32 |
) |
(35 |
) |
(22 |
) |
(9 |
) |
(98 |
) |
||
|
|
|
|||||||||||||||||||||||
Total Other BCE | 100 |
% |
4,146 |
110 |
142 |
101 |
158 |
511 |
88 |
107 |
82 |
124 |
401 |
||||||||||||
Inter-segment eliminations | (20 |
) |
(19 |
) |
(19 |
) |
(18 |
) |
(76 |
) |
(20 |
) |
(19 |
)
|
(19 |
) |
(18 |
) |
(76 |
) |
|||||
|
|
|
|||||||||||||||||||||||
Total | 15,204 |
1,845 |
1,854 |
1,899 |
1,900 |
7,498 |
1,727 |
1,718 |
1,772
|
1,758 |
6,975 |
||||||||||||||
|
|
|
* Calculated the following
way: Bell Canada (excl. Aliant) net debt and preferred of $10,256 million plus
$216 million of inter-company eliminations plus $132 million PPA fair value
increment.
BCE inc. Supplementary Financial Information - First Quarter 2004 Page 9
Bell Canada
Consolidated (1)
Operational
Data
($ millions, except where otherwise indicated) | Q1 2004 |
Q1 2003 |
$
change |
%
change |
||||
|
|
|
||||||
Revenues | ||||||||
Local and access | 1,379
|
1,386 |
(7) |
(0.5%) |
||||
Long distance | 606 |
686 |
(80) |
(11.7%) |
||||
Wireless | 651 |
551 |
100 |
18.1%
|
||||
Data | 892 |
920 |
(28) |
(3.0%)
|
||||
Video | 207 |
177 |
30 |
16.9%
|
||||
Terminal sales and other | 371 |
363 |
8
|
2.2%
|
||||
|
|
|
||||||
Total operating revenues | 4,106
|
4,083
|
23 |
0.6% |
||||
Operating expenses |
(2,351) |
(2,390) |
39 |
1.6% |
||||
|
|
|
||||||
EBITDA | 1,755 |
1,693 |
62 |
3.7% |
||||
EBITDA margin (%) |
42.7% |
41.5% |
1.2 pts |
|||||
Amortization expense |
(732) |
(723) |
(9) |
(1.2%) |
||||
Net benefit plans cost |
(60) |
(44)
|
(16) |
(36.4%) |
||||
Restructuring and other charges |
(3) |
- |
(3) |
n.m. |
||||
|
|
|
||||||
Operating income | 960 |
926 |
34 |
3.7% |
||||
|
|
|
||||||
Other information | ||||||||
Cash flow information | ||||||||
Free Cash Flow (FCF) | ||||||||
Cash from operating activities |
1,195 |
862 |
333 |
38.6% |
||||
Capital expenditures |
(590) |
(534) |
(56) |
(10.5%) |
||||
Dividends and distributions |
(503) |
(389) |
(114) |
(29.3%)
|
||||
Interest on equity-settled notes | -
|
(23)
|
23 |
n.m |
||||
Other investing items | (7) |
(3) |
(4) |
n.m
|
||||
Total | 95 |
(87) |
182 |
n.m
|
||||
Capital expenditures as a percentage of revenues (%) | 14.4% |
13.1%
|
(1.3
pts) |
|||||
Balance Sheet Information | March
31 |
December
31 |
||||||
Capital Structure | 2004 |
2003 |
||||||
Net Debt | ||||||||
Long-term debt | 10,331
|
10,024 |
||||||
Debt due within one year |
1,111 |
1,165
|
||||||
Less: Cash and cash equivalents |
(1,112) |
(398) |
||||||
Total Net Debt | 10,330
|
10,791 |
||||||
Non-controlling interest |
1,608 |
1,627 |
||||||
Total shareholders' equity | 9,682
|
9,520 |
||||||
Total Capitalization | 21,620 |
21,938 |
||||||
Net Debt: Total Capitalization | 47.8% |
49.2% |
||||||
Net Debt: EBITDA | 1.46
|
1.54 |
||||||
EBITDA : Interest |
7.66 |
7.41 |
||||||
BCE Inc. Supplementary Financial Information - First Quarter 2004 Page 10
Bell Canada
Consolidated
(1)
Operational Data Historical Trend
($ millions, except where otherwise indicated) | Q1
04 |
Total |
Q4
03 |
Q3
03 |
Q2
03 |
Q1
03 |
|||||||
|
|
|
|||||||||||
Revenues | |||||||||||||
Local and access | 1,379 |
5,601 |
1,401 |
1,410 |
1,404 |
1,386 |
|||||||
Long distance | 606 |
2,544
|
602 |
641 |
615 |
686 |
|||||||
Wireless | 651 |
2,461
|
658 |
645 |
607 |
551 |
|||||||
Data | 892 |
3,717
|
955 |
906 |
936 |
920 |
|||||||
Video | 207 |
759 |
200 |
192 |
190 |
177 |
|||||||
Terminal sales and other | 371 |
1,532
|
430 |
361 |
378 |
363 |
|||||||
|
|
|
|||||||||||
Total revenues | 4,106 |
16,614 |
4,246 |
4,155 |
4,130 |
4,083 |
|||||||
Operating expenses | (2,351 |
) |
(9,613 |
)
|
(2,515 |
) |
(2,338 |
) |
(2,370 |
) |
(2,390 |
) |
|
EBITDA | 1,755 |
7,001 |
1,731 |
1,817 |
1,760 |
1,693 |
|||||||
EBITDA margin (%) |
42.7% |
42.1% |
40.8% |
43.7%
|
42.6%
|
41.5%
|
|||||||
|
|
|
|||||||||||
Amortization expense |
(732 |
) |
(2,970 |
) |
(742 |
) |
(758 |
) |
(747 |
) |
(723 |
)
|
|
Net benefit plans cost |
(60 |
)
|
(181 |
) |
(46 |
) |
(46 |
)
|
(45 |
)
|
(44 |
) |
|
Restructuring and other charges |
(3 |
) |
(14 |
) |
(13 |
)
|
(1 |
)
|
- |
- |
|||
|
|
|
|||||||||||
Operating income | 960 |
3,836
|
930 |
1,012 |
968 |
926
|
|||||||
|
|
|
|||||||||||
Other information | |||||||||||||
Cash flow information | |||||||||||||
Free Cash Flow (FCF) | |||||||||||||
Cash from operating activities | 1,195 |
5,366 |
1,547 |
1,728
|
1,229 |
862 |
|||||||
Capital expenditures | (590 |
) |
(2,892 |
)
|
(991 |
) |
(708 |
) |
(659 |
) |
(534 |
) |
|
Dividends and distributions |
(503 |
) |
(2,081 |
) |
(523 |
)
|
(465 |
) |
(704 |
) |
(389 |
) |
|
Interest on equity-settled notes |
- |
(47 |
)
|
- |
- |
(24 |
) |
(23 |
)
|
||||
Other investing items | (7 |
)
|
47 |
3 |
52 |
(5 |
)
|
(3 |
) |
||||
|
|
|
|||||||||||
Total | 95 |
393 |
36 |
607 |
(163 |
) |
(87 |
) |
|||||
|
|
|
|||||||||||
Capital expenditures as a percentage of revenues (%) | 14.4% |
17.4% |
23.3% |
17.0% |
16.0% |
13.1% |
BCE Inc. Supplementary Financial Information - First Quarter 2004 Page 11
Bell Canada
Consolidated
Statistical Data
Q1
2003 |
Q1 2004 |
%
change |
||||
|
||||||
Wireline | ||||||
Local | ||||||
Network access services (k) | ||||||
Residential |
8,476 |
8,566 |
(1.1%) |
|||
Business | 4,541
|
4,577 |
(0.8%) |
|||
|
|
|||||
Total | 13,017
|
13,143 |
(1.0%) |
|||
Long Distance (LD) |
||||||
Conversation minutes (M) | 4,578
|
4,872
|
(6.0%) |
|||
Average revenue per minute ($) |
0.120 |
0.124 |
(3.2%) |
|||
Data | ||||||
Equivalent access lines (8) (k) - Ontario and Quebec | ||||||
Digital equivalent access lines | 3,983 |
3,704 |
7.5% |
|||
Broadband equivalent access lines |
16,465 |
13,808
|
19.2% |
|||
Internet subscribers (9) (k) | ||||||
DSL High Speed Internet net activations (k) | 115 |
96 |
19.8% |
|||
DSL High Speed Internet subscribers (k) | 1,597
|
1,206 |
32.4% |
|||
Dial-up Internet subscribers (k) | 836 |
940 |
(11.1%) |
|||
|
|
|
||||
2,433 |
2,146 |
13.4% |
||||
Wireless | ||||||
Cellular & PCS Net activations (k) | ||||||
Pre-paid | 23 |
18 |
27.8%
|
|||
Post-paid | 69 |
52 |
32.7%
|
|||
|
|
|||||
92 |
70 |
31.4% |
||||
Cellular & PCS subscribers (k) | ||||||
Pre-paid | 1,082
|
976 |
10.9%
|
|||
Post-paid |
3,422 |
2,992 |
14.4% |
|||
|
|
|||||
4,504 |
3,968 |
13.5% |
||||
Average revenue per unit ($/month) | 47 |
45 |
4.4% |
|||
Pre-paid | 11 |
11 |
0.0% |
|||
Post-paid | 59 |
56 |
5.4% |
|||
Churn (%) (average per month) | 1.3%
|
1.4% |
0.1 pts |
|||
Pre-paid |
1.7% |
1.9%
|
0.2
pts |
|||
Post-paid | 1.1%
|
1.3% |
0.2 pts |
|||
Usage per subscriber (min/month) | 223 |
203 |
9.9% |
|||
Cost of acquisition (10) ($/sub) | 455 |
387 |
(17.6%) |
|||
Wireless EBITDA | 262 |
219 |
19.6% |
|||
Wireless EBITDA margin (11) | 39.6% |
38.4% |
1.2
pts |
|||
Wireless capital expenditures | 65 |
70 |
(7.1%) |
|||
Paging subscribers (k) | 493 |
606 |
(18.6%) |
|||
Paging average revenue per unit ($/month) | 10 |
10 |
0.0% |
|||
Video (DTH and VDSL) | ||||||
Total subscribers (k) | 1,403
|
1,317 |
6.5% |
|||
Net subscriber activations (k) | 16 |
13 |
23.1%
|
|||
Average revenue per subscriber ($/month) | 48 |
44 |
9.1% |
|||
Cost of acquisition ($/sub) | 661 |
493 |
(34.1%) |
|||
Video EBITDA |
1 |
(6) |
n.m. |
|||
Churn (%) (average per month) | 0.9%
|
1.0% |
0.1 pts |
|||
BCE Inc. Supplementary Financial Information - First Quarter 2004 Page 12
Bell
Canada Consolidated
Statistical Data - Historical Trend
Q1
04 |
Total 2003 |
Q4
03 |
Q3
03 |
Q2
03 |
Q1
03 |
|||||||
|
|
|
||||||||||
Wireline | ||||||||||||
Local | ||||||||||||
Network access services (k) | ||||||||||||
Residential | 8,476 |
8,511
|
8,539 |
8,504
|
8,566 |
|||||||
Business | 4,541
|
4,540 |
4,549 |
4,564 |
4,577 |
|||||||
|
||||||||||||
Total | 13,017 |
13,051 |
13,088 |
13,068 |
13,143 |
|||||||
Long Distance (LD) |
||||||||||||
Conversation minutes (M) | 4,578
|
19,132 |
4,685 |
4,664 |
4,911 |
4,872 |
||||||
Average revenue per minute ($) | 0.120
|
0.124
|
0.122
|
0.128 |
0.120
|
0.124
|
||||||
Data | ||||||||||||
Equivalent access lines (8) (k) - Ontario and Quebec | ||||||||||||
Digital equivalent access lines | 3,983
|
3,867
|
3,771
|
3,708
|
3,704
|
|||||||
Broadband equivalent access lines | 16,465 |
16,651
|
15,393 |
14,658
|
13,808 |
|||||||
Internet subscribers (9) (k) | ||||||||||||
DSL High Speed Internet net activations (k) | 115
|
372 |
91 |
104 |
81 |
96 |
||||||
DSL High Speed Internet subscribers (k) | 1,597 |
1,482 |
1,391 |
1,287
|
1,206 |
|||||||
Dial-up Internet subscribers (k) | 836
|
869
|
892
|
911
|
940
|
|||||||
|
|
|||||||||||
2,433
|
2,351 |
2,283 |
2,198
|
2,146 |
||||||||
Wireless | ||||||||||||
Cellular & PCS Net activations (k) | ||||||||||||
Pre-paid | 23
|
101 |
33 |
23 |
27 |
18 |
||||||
Post-paid | 69 |
413 |
156 |
101 |
104 |
52 |
||||||
|
|
|||||||||||
92 |
514 |
189 |
124 |
131 |
70 |
|||||||
Cellular & PCS subscribers (k) | ||||||||||||
Pre-paid |
1,082 |
1,059
|
1,026 |
1,003
|
976 |
|||||||
Post-paid | 3,422
|
3,353 |
3,197
|
3,096
|
2,992
|
|||||||
|
||||||||||||
4,504
|
4,412
|
4,223
|
4,099 |
3,968 |
||||||||
Average revenue per unit ($/month) | 47
|
48 |
50 |
50 |
48 |
45 |
||||||
Pre-paid | 11 |
12 |
12 |
13 |
12 |
11 |
||||||
Post-paid | 59 |
60 |
62 |
62 |
60 |
56 |
||||||
Churn (%) (average per month) | 1.3%
|
1.4%
|
1.4% |
1.4%
|
1.4%
|
1.4% |
||||||
Pre-paid | 1.7%
|
1.9%
|
1.8%
|
1.8%
|
1.9% |
1.9%
|
||||||
Post-paid | 1.1%
|
1.3%
|
1.2%
|
1.3%
|
1.3%
|
1.3% |
||||||
Usage per subscriber (min/month) | 223
|
228 |
240 |
231 |
237 |
203 |
||||||
Cost of acquisition (10) ($/sub) | 455
|
426 |
445 |
425 |
435 |
387 |
||||||
Wireless EBITDA | 262
|
918 |
229 |
251 |
219 |
219 |
||||||
Wireless EBITDA margin (11) | 39.6%
|
36.3%
|
34.0%
|
38.0%
|
35.3%
|
38.4% |
||||||
Wireless capital expenditures | 65
|
408 |
169 |
88 |
81 |
70 |
||||||
Paging subscribers (k) | 493
|
524 |
549 |
581 |
606 |
|||||||
Paging average revenue per unit ($/month) | 10
|
10 |
10 |
10 |
10 |
10 |
||||||
Video (DTH and VDSL) | ||||||||||||
Total subscribers (k) | 1,403
|
1,387
|
1,352 |
1,335
|
1,317 |
|||||||
Net subscriber activations (k) | 16
|
83 |
35 |
17 |
18 |
13 |
||||||
Average revenue per subscriber ($/month) | 48
|
46 |
48 |
47 |
47 |
44 |
||||||
Cost of acquisition ($/sub) | 661
|
532 |
581 |
507 |
533 |
493 |
||||||
Video EBITDA | 1
|
(45) |
(21)
|
(9) |
(9) |
(6) |
||||||
Churn (%) (average per month) | 0.9%
|
1.1%
|
1.0%
|
1.4%
|
1.1%
|
1.0% |
||||||
Accompanying Notes
(1) |
We have reclassified some of the figures for the comparative period
to make them consistent with the current period's 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 charges. |
|
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 charges. 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 charges 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. |
|
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 issuers. 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. |
|
(3) |
Total Wireless capital expenditures are included in the Consumer segment. |
(4) | Cash
flow per share is calculated as follows: |
Cash
flow from operations less capital expenditures |
|
Average
number of common shares outstanding during the period |
|
(5) |
Annualized cash flow yield is calculated as follows: |
Free
cash flow before common dividends |
|
Number
of common shares outstanding at end of period multiplied by share price
at end of period |
BCE Inc. Supplementary Financial Information - First Quarter 2004 Page 14
Accompanying Notes (continued)
(6) | 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 ($9 million in Q1 2004) over the remaining terms of the related long-term debt. |
(7) | At the BCE Consolidated level, 3rd Party Preferred Shares reflected in the financial statements of subsidiaries are included in non-controlling interest on the balance sheet. |
(8) | Digital equivalent access lines are derived by converting low capacity data lines (DS-3 and lower) to the equivalent number of voice grade access lines. Broadband equivalent access lines are derived by converting high capacity data lines (higher than DS-3) to the equivalent number of voice grade access lines. |
Conversion
factors |
|
DS-0 | 1
|
Basic ISDN | 2
|
Primary ISDN | 23
|
DS-1, DEA | 24
|
DS-3 | 672 |
OC-3 | 2,016
|
OC-12 | 8,064
|
OC-48 | 32,256
|
OC-192 | 129,024 |
10 Base T | 155
|
100 Base T | 1,554
|
Gigabit E | 15,554 |
(9) |
DSL High Speed Internet subscribers include consumer, business and wholesale.
Dial-up Internet subscribers include consumer and business. |
(10) | Includes
allocation of selling costs from Bell Canada and excludes costs of migrating
from analog to digital. Cost of Acquisition (COA) per subscriber is reflected
on a consolidated basis. |
(11) | Wireless
EBITDA margins are calculated based on total Wireless operating revenues
(i.e. external revenues as shown on pages 10 and 11 plus inter-company
revenues). |
BCE Inc. Supplementary Financial Information - First Quarter 2004 Page 15
Appendix A Reconciliation of Canadian Generally Accepted Accounting Principles | |
(GAAP) to United States GAAP |
We have prepared the interim consolidated financial statements according to Canadian GAAP. The tables that follow are a reconciliation of significant differences relating to the statement of operations and total shareholders equity reported according to Canadian GAAP and United States GAAP.
STATEMENTS OF OPERATIONS
For the
three months ended March 31 ($ million, except share amounts) (unaudited) |
2004
|
2003 |
|||
Canadian GAAP - Earnings from continuing operations | 479 |
464 |
|||
Adjustments | |||||
Deferred costs (a) |
4 |
4
|
|||
Employee future benefits (b) | (20 |
) |
(32 |
) |
|
Derivative instruments (j) | |
(15 |
)
|
||
Other | 1
|
2 |
|||
United States GAAP Earnings from continuing operations | 464 |
423 |
|||
Discontinued operations United States GAAP |
9 |
9 |
|||
United States GAAP Net earnings | 473 |
432 |
|||
Dividends on preferred shares (j) | (24 |
) | (15 |
) | |
Premium on redemption of preferred shares | |
(7 |
) | ||
United States GAAP- Net earnings applicable to common shares | 449 |
410 |
|||
Other comprehensive earnings items | |||||
Change in currency translation adjustment | 15 |
(28 |
) | ||
Change in unrealized gain on investments (h) | 18 |
3 |
|||
Comprehensive earnings | 482 |
385 |
|||
Net earnings per common share basic | |||||
Continuing operations | 0.48
|
0.44 |
|||
Discontinued operations and change in accounting policy |
0.01 |
0.01 |
|||
Net earnings | 0.49
|
0.45 |
|||
Net earnings per common share diluted | |||||
Continuing operations | 0.47
|
0.44
|
|||
Discontinued operations and change in accounting policy |
0.01 |
0.01 |
|||
Net earnings | 0.48
|
0.45
|
|||
Dividends per common share | 0.30
|
0.30
|
|||
Average number of common shares | |||||
outstanding (millions) | 924.1
|
917.1
|
|||
Appendix A Reconciliation of Canadian Generally Accepted Accounting Principles | |
(GAAP) to United States GAAP |
STATEMENTS OF ACCUMULATED OTHER COMPREHENSIVE LOSS
($ millions) (unaudited) | March
31
2004 |
December
31 2003 |
||
Currency translation adjustment | (31 |
) | (46 |
) |
Unrealized gain on investments (h) | 34
|
16
|
||
Additional minimum pension liability (b) |
(121 |
) |
(121 |
) |
Accumulated Other Comprehensive loss | (118 |
) |
(151 |
) |
|
RECONCILIATION OF TOTAL SHAREHOLDERS EQUITY
($ millions) (unaudited) | March
31
2004 |
December
31 2003 |
|||
Canadian GAAP | 13,792
|
13,573 |
|||
Adjustments | |||||
Deferred costs (a) | (71 |
) | (77 |
) | |
Employee future benefits (b) |
(296 |
) | (260 |
) | |
Gain on disposal of investments and on reduction of ownership in subsidiary companies (c) | 163 |
163 |
|||
Other | 13 |
17 |
|||
Tax effect of the above adjustments (f) | 19 |
8 |
|||
Non-controlling interest effect of the above adjustments (g) | 90 |
88 |
|||
Unrealized gain on investments (h) | 34 |
16 |
|||
United States GAAP | 13,744 |
13,528 |
|||
(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) Future
benefits for employees
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. The United States regulators have recently interpreted this to be a difference between Canadian and United States GAAP.
The table below shows the components of the net benefit plans cost before taxes and non-controlling interest under United States GAAP:
For the three months ended March 31 | Pension
benefits |
Other
benefits |
||||||
2004 |
2003 |
2004 |
2003 |
|||||
Current service cost | 60 |
56 |
8 |
8 |
||||
Interest cost on accrued benefit obligation | 201 |
188 |
26 |
26 |
||||
Expected return on plan assets | (228 |
) | (219 |
) | (2 |
) | (2 |
) |
Amortization of past service costs | 2 |
2 |
|
|
||||
Amortization of net actuarial losses | 37 |
43 |
|
|
||||
Amortization of transitional (asset) obligation | (11) |
(11) |
7 |
7 |
||||
|
||||||||
Net benefit plans cost | 61 |
59 |
39
|
39 |
||||
2
Appendix A Reconciliation of Canadian Generally Accepted Accounting Principles | |
(GAAP) to United States GAAP |
Under United States GAAP, an additional minimum liability is recorded for the excess of the unfunded accumulated benefit obligation over the recorded pension benefits liability. An offsetting intangible asset equal to the unrecognized prior service costs is recorded. Any difference is recorded as a reduction in accumulated other comprehensive income.
(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,
will 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 investment in CGI using
the proportionate consolidation method. Effective July 2003, as a result of
the new agreement with CGI, we present CGI as an equity investment under United
States GAAP. Our proportionate share of CGIs operating results for the
three months ended March 31, 2004 were:
|
operating revenues of $220 million, of which $36 million was with subsidiaries of BCE Inc. |
|
operating expenses of $189 million, of which $6 million was to subsidiaries
of BCE Inc. |
|
amortization expense of $10 million |
|
interest expense of $1 million |
|
other income of $1 million |
|
income tax expense of $8 million. |
(e) Interest
expense
Under Canadian
GAAP, convertible debentures are separated into a debt component and an equity
component. Over time, the debt component is increased to reach its original
face value at maturity by recognizing an accretion expense as part of interest
expense. Under United States GAAP, convertible debentures that do not have certain
characteristics are recorded as long-term debt and no accretion expense is recognized.
(f) Income
taxes
The income tax adjustment reflects the impact on income taxes of all of the
United States GAAP adjustments that we describe above. 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 income tax rates of enacted tax law can be used under United States GAAP |
(h) Change
in unrealized gain 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.
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 estimated fair value of each option grant on the date of the grant using the Black- Scholes pricing model.
For the three months ended March 31 (unaudited) | 2004 |
2003 |
|||
Net earnings, as reported | 473 |
432 |
|||
Compensation cost included in net earnings | 10 |
8 |
|||
Total compensation cost | (12 |
) | (14 |
) | |
Pro forma net earnings | 471 |
426 |
|||
Pro forma net earnings per common share basic | 0.48
|
0.44
|
|||
Pro forma net earnings per common share diluted | 0.48
|
0.44
|
|||
Assumptions used in Black-Scholes | |||||
option pricing model for BCE options granted: | |||||
Dividend yield | 4.0%
|
3.6% |
|||
Expected volatility | 27%
|
30%
|
|||
Risk-free interest rate |
3.1% |
4.1%
|
|||
Expected life (years) | 3.5
|
4.5
|
|||
Weighted average fair value of options granted ($) | 3
|
6
|
|||
4
Appendix A Reconciliation of Canadian Generally Accepted Accounting Principles | |
(GAAP) to United States GAAP |
(j) Accounting for derivative instruments and hedging activities (SFAS 133)
On January 1, 2001, we adopted SFAS 133, Accounting for Derivatives Instruments
and Hedging Activities, as amended by SFAS 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 United States GAAP purposes.
5
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 March
31, 2004; |
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: May 4, 2004 | 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 March
31, 2004; |
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: May 4, 2004 | 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) Michael T. Boychuk | |
|
|
Michael T. Boychuk | |
Senior Vice-President and Treasurer | |
Date: May 5, 2004 |