-
Q4 2012
-
Q4 results in line with expectations
-
Continued strong FibreOPTM growth with 20,200 new FibreOP Internet customers and 17,400 new FibreOP TV customers
-
$100 million in lump sum contributions to defined benefit (DB) plans
-
2012 full-year results
-
FibreOP customers more than double
-
Residential net NAS declines improve by 13 per cent over 2011
-
Revenue decline improves to 0.5 per cent from 1.2 per cent in 2011
-
EBITDA decline improves to 1.5 percent from 3.6 per cent in 2011
-
Free cash flow before lump sum DB contributions of $547 million
-
Dividend payout ratio of 82 per cent within long-term target of 75-85
per cent of free cash flow
-
All 2012 guidance targets met
-
2013 outlook
-
Continued improvement in revenue and EBITDA trends expected
-
FTTH expected to pass 800,000 premises by end of 2013
-
Cash taxes expected to be less than $50 million
-
Free cash flow expected to be $500 - $560 million
-
Dividend expected to continue at $1.90 per share
This news release contains forward-looking statements. For a description
of the related risk factors and assumptions, please see the section
entitled "Forward-looking Information" later in this release.
HALIFAX, Feb. 5, 2013 /CNW/ - Bell Aliant Inc. (TSX: BA) today reported financial results for the fourth quarter of
2012 for Bell Aliant Inc. (Bell Aliant) and Bell Aliant Regional
Communications Inc. (Bell Aliant GP), and announced its 2013 financial
guidance.
"2012 was another year of strong execution for us," said Karen Sheriff,
president and chief executive officer, Bell Aliant. "Our focus has been
on expanding our fibre-to-the-home (FTTH) coverage to provide our
leading edge FibreOP Internet and TV service to our customers and we are seeing the
benefits. In our FTTH markets we are now experiencing revenue and
EBITDA growth, with growing TV and Internet revenues more than
offsetting declines in our traditional voice revenues. Continuing to
grow our FibreOP customer base is the key to securing a strong future for our company
and 2012 was a year of great FTTH results for us.
"Our FibreOP services are now available to over 650,000 premises in our territories,
with over 110,000 customers now subscribing. Our FTTH expansion will
continue in 2013, as we expect to reach approximately 800,000 premises
with FTTH by the end of the year. This will let us manage the build in
an operationally efficient way while focusing on our priority of adding
new customers. We are on a solid path to returning to revenue growth in
the coming years, as the bulk of our FTTH network build will be behind
us.
"We also see growth opportunities with the expansion of our Next
Generation Networks for our business customers, and with our newly
announced NextGen Home Security service, which is a natural extension
of our ability to leverage our broadband expertise and leadership
position to serve the whole home.
"And importantly, we continued to make great headway in managing costs
in 2012. Despite the incremental costs associated with acquiring and
supporting new FibreOP customers, year-over-year operating expenses were held close to flat.
Continuously finding better ways to do things has become ingrained in
our business, and we keep finding ways to reduce traditional operating
costs to help finance our growth initiatives.
"The optimism I felt coming into 2012 has grown," continued Ms. Sheriff.
"Our financial trends improved in 2012 from 2011 and I fully expect
2013 to be an even better year on our path to overall revenue and
EBITDA growth."
Continued strong free cash flow has allowed Bell Aliant to expand its
FTTH network while maintaining a dividend payout ratio within its
long-term targeted range of 75-85 per cent of free cash flow. Bell
Aliant used its excess free cash flow in 2012 to make lump sum
contributions to its defined benefit pension plans in the fourth
quarter.
"Our pension assets earned an overall return of over nine per cent in
2012, an impressive accomplishment in this persistent low interest rate
environment," said Glen LeBlanc, executive vice-president and chief
financial officer. "This strong performance along with $100 million in
lump sum contributions to our defined benefit plans that we made in the
fourth quarter, will put more assets to work in our pension plans and
further de-risk our pension funding obligations going forward.
"This tax-deductible pension contribution and other tax planning
measures have put us in a position where we expect to pay relatively
low cash taxes again in 2013. Accordingly, we expect our 2013 dividend
payout ratio to remain within our long-term targeted range of 75-85 per
cent of free cash flow even as we further expand our FTTH coverage.
"Our outlook for the business and our demonstrated ability to execute
gives us confidence that we can continue to provide our current solid
dividend to our shareholders as we make these important investments
that will make us even stronger for the future," concluded Mr. LeBlanc.
Fourth quarter 2012 highlights1
Bell Aliant Inc. reported net earnings of $329 million for the full year
2012, up $6 million from 2011. Earnings per share and adjusted earnings
per share for the year were $1.43 and $1.71 respectively, compared to
$1.41 and $1.70 in 2011. The timing of restructuring charges incurred
year-over-year resulted in fourth quarter 2012 earnings of $70 million
compared to $80 million in the same quarter of 2011, following
year-over-year earnings growth of $17 million in the third quarter of
2012.
Fourth quarter and full year financial highlights of Bell Aliant GP are
summarized as follows:
(In millions of dollars)
(unaudited)
|
Q4 2012
|
Q4 2011
|
Change
|
Full year
2012
|
Full year
2011
|
Change
|
|
Operating Revenue
|
$695
|
$701
|
(0.8%)
|
$2,762
|
$2,775
|
(0.5%)
|
|
EBITDA (1) |
317
|
324
|
(2.4%)
|
1,307
|
1,327
|
(1.5%)
|
|
Capital Expenditures (1) |
134
|
137
|
(2.0%)
|
592
|
573
|
3.4%
|
|
Free Cash Flow (1) (2) |
189
|
168
|
12.7%
|
547
|
557
|
(1.7%)
|
(1) EBITDA, free cash flow and adjusted earnings per share are non-IFRS
measures. Refer to the "Non-IFRS financial measures" section of Bell
Aliant GP's Q4 2012 Management's Discussion and Analysis (MD&A) for
details
(2) Free cash flow excludes lump sum contributions to defined benefit
plans of $100 million in Q4 2012, $115 million in Q4 2011, $100 million
for the full year 2012 and $315 million for the full year 2011.
Operating revenues in the fourth quarter of 2012 were $695 million, down
$6 million (0.8 per cent) from the same quarter in 2011. Growth in
Internet, TV, and wireless revenues largely offset declines in local,
long distance and other revenues. Operating expenses in the fourth
quarter of 2012 were up $2 million from the same quarter in 2011,
mainly driven by growth in sales support and TV content costs from a
growing FibreOP customer base, which were largely offset by productivity savings, and a
one-time curtailment gain on post-employment benefits in the fourth
quarter of 2011 that did not recur in the fourth quarter of 2012. As a
result, EBITDA declined $7 million (2.4 per cent) in the fourth quarter
of 2012 compared to the same quarter in 2011.
Capital expenditures in the fourth quarter of 2012 were $134 million,
down $3 million (2.0 per cent) from the same quarter a year earlier,
with the costs of higher FibreOP customer connections offset by lower FTTH footprint expansion and lower
legacy capital spending. In the fourth quarter of 2012 FibreOP Internet and TV customer net additions increased by 7,100 and 6,200 respectively, up
more than 50 per cent compared to the same quarter in 2011. Bell Aliant
passed an additional 35,000 homes and businesses with FTTH in the
fourth quarter of 2012, compared to 60,000 incremental premises in the
fourth quarter of 2011. Total FTTH coverage reached over 656,000
premises at the end of December 2012.
Free cash flow excluding lump sum contributions to defined benefit plans
was $189 million in the fourth quarter of 2012, up $21 million (12.7
per cent) from the same quarter a year earlier. The increase was
primarily a result of higher cash from changes in working capital in
the fourth quarter of 2012 compared to the fourth quarter of 2011.
In the fourth quarter of 2012, Bell Aliant made lump sum contributions
of $100 million to its defined benefit plans, compared to $115 million
in the same quarter of 2011. The 2012 contributions were largely funded
by excess free cash flow generated by the business and will improve the
funded status of the plans in this challenging low interest rate
environment, thereby reducing expected pension funding contributions
going forward. The contributions are also tax deductible, helping to
reduce expected taxes payable for 2013.
Revenue details
Total data revenue including Internet and TV increased $18 million (7.7
per cent) in the fourth quarter of 2012 compared to the same period in
2011.
Internet revenue increased $7 million (5.5 per cent) with residential
high-speed average revenue per customer (ARPC) in the fourth quarter of
2012 up 4.2 per cent from the same quarter a year earlier. Selected
pricing action, and customer movement to premium services, including FibreOP, drove the increase. FibreOP Internet customers grew by 20,200, bringing total FibreOP Internet customers to 112,200 at the end of December 2012. FibreOP Internet additions include existing Bell Aliant customers migrating
from DSL and fibre-to-the-node (FTTN) networks to the upgraded service.
These migrations do not contribute to overall high-speed customer
growth but increasingly contribute to improved customer retention and
growth in overall customer ARPC. Overall net high-speed Internet
customer additions were 4,800 in the fourth quarter of 2012, up from
3,400 in the same quarter of 2011, bringing total high-speed Internet
customers to 918,400 at the end of December 2012, up 2.6 per cent from
a year earlier.
IPTV revenue grew $10 million in the fourth quarter of 2012 compared to
the fourth quarter of 2011 with total IPTV customers of 123,000 at the
end of December 2012. FibreOP TV customers grew by 17,400 in the quarter to reach 96,800, a portion
of which were migrations from Bell Aliant's FTTN TV service. Overall
net IPTV customer additions were 15,600 in the fourth quarter of 2012,
compared to 8,900 a year earlier.
Local service and long distance revenues declined $15 million (4.8 per
cent) and $10 million (11.6 per cent), respectively, in the fourth
quarter of 2012 compared to the same quarter in 2011, driven by NAS
declines of 5.2 per cent. Residential net NAS declines of 33,800 in the
fourth quarter of 2012 improved by 1,600 from the same quarter in 2011
with improved residential customer activations, winbacks and retention
in FibreOP markets. Business net NAS declines of 10,600 increased by 2,200 from the
same quarter a year earlier, mainly as a result of increased customer
migration to IP-based technologies which reduce NAS counts but retain
the business customer.
Wireless revenues were up $4 million (15.9 per cent) in the fourth
quarter of 2012 compared to the same quarter in 2011, driven by 5.5 per
cent customer growth and 9.4 per cent wireless ARPC growth compared to
a year ago.
Other revenues were down $2 million (4.7 per cent) in the fourth quarter
of 2012 compared to the same quarter in 2011, mainly as a result of a
decline in rental and other revenues, which was slightly offset by
growth in product sales.
2013 Guidance
Bell Aliant's 2013 financial guidance is as follows:
|
2012 Results
|
2013 Guidance
|
|
Operating Revenues
|
$2,762 million
|
$2,730 million to $2,810 million
|
|
EBITDA(1) |
$1,307 million
|
$1,275 million to $1,325 million
|
|
Capital Expenditures
|
$592 million
|
$525 million to $575 million
|
|
Free Cash Flow(1) |
$547 million (2) |
$500 million to $560 million
|
|
Adjusted earnings per share(1) |
$1.63 (3) |
$1.45 to $1.75
|
(1) EBITDA, free cash flow and adjusted earnings per share are non-IFRS
measures. Refer to the "Non-IFRS financial measures" section of Bell
Aliant GP's Q4 2012 Management's Discussion and Analysis (MD&A) for
details
(2) Excludes $100 million lump sum contributions to defined benefit pension
plans made in 2012
(3) Adjusted earnings per share reflects the required adoption of amendments
to International Accounting Standard 19 (IAS19) - Employee Benefits
effective January 1, 2013; 2012 adjusted earnings per share has been
restated to be comparable to 2013 guidance
Operating revenues in 2013 are expected to be between $2,730 million and
$2,810 million compared to $2,762 million in 2012. Strong growth in
Internet and TV revenues as a result of FTTH expansion are expected to
offset decreases in traditional voice revenues arising from competitive
activity and technology substitution. Operating expenses are expected
to increase slightly in 2013 compared to 2012. Savings from
productivity initiatives are expected to largely offset cost increases
from normal inflationary pressures and FibreOP rollout costs. However, pension current service costs included in
EBITDA are expected to increase as a result of lower discount rates.
EBITDA in 2013 is expected to be between $1,275 million and $1,325
million, compared to 2012 EBITDA of $1,307 million.
Capital expenditures in 2013 are expected to be between $525 million and
$575 million, compared to $592 million in 2012. Smaller FTTH footprint
expansion, improved productivity in FibreOP connection costs, and non-recurrence of start-up costs incurred in 2012
for expansion outside of Atlantic Canada are expected to offset
increases from higher new FibreOP customer connections in 2013 compared to 2012.
Free cash flow is expected to be between $500 million and $560 million
in 2013, compared to $547 million in 2012, excluding lump sum
contributions to defined benefit pension plans. This reflects an
expectation that capital expenditures in 2013 will be lower than 2012
and that cash income taxes will be higher in 2013 than in 2012, but
less than $50 million in total and still not reaching a full year of
normal income tax payments which would be in the range of $125 million
to $145 million.
Adjusted earnings per share in 2013 reflecting adoption of revised
accounting standards for employee benefits in 2013 is expected to be
between $1.45 and $1.75, compared to restated adjusted earnings per
share of $1.63 in 2012. Higher non-cash net benefit plan expenses
arising from lower discount rates at year-end 2012 are expected to
contribute to lower net earnings in 2013 compared to 2012.
Declared Dividends
Bell Aliant declared a quarterly dividend of $0.475 per common share,
payable on March 28, 2013 to shareholders of record at the close of
business on March 15, 2013.
Bell Aliant Preferred Equity Inc. declared a dividend on its Series A
Preferred Shares of $0.303125 per share and a dividend on its Series C
Preferred Shares of $0.284375 per share, each to be paid on March 28,
2013 to shareholders of record at the close of business on March 15,
2013.
Unless otherwise stated, dividends paid by Bell Aliant and Bell Aliant
Preferred Equity Inc. to Canadian residents are "eligible dividends" as
defined by the Canadian Income Tax Act and corresponding provincial
legislation.
Additional Information
More information on Bell Aliant's and Bell Aliant GP's fourth quarter
2012 results and 2013 guidance can be found in Bell Aliant's fourth
quarter 2012 supplementary information package and Bell Aliant GP's
fourth quarter 2012 MD&A, available at www.bellaliant.ca/investors and on SEDAR at www.sedar.com .
Analyst conference call
A conference call with the financial community is scheduled for February
5, 2013 at 8 a.m. (Eastern). The dial-in numbers are 866-226-1792 and
416-340-2216 for Toronto area participants. Media are invited to attend
in listen-only mode. A replay of the session can be heard until March
5, 2013. To access the replay, dial 800-408-3053 or 905-694-9451 and
enter the passcode 3266319#.
A live audio webcast of the conference call can be accessed on www.bellaliant.ca under the Investor Relations section. A replay of the conference call
will be available on the website for one year.
Notes
The information contained in this news release is unaudited.
|
(1)
|
Bell Aliant derives virtually all of its income from its ownership in
Bell Aliant GP. Bell Aliant GP's results consolidate the results of
Bell Aliant Regional Communications, Limited Partnership; Télébec,
Limited Partnership; NorthernTel, Limited Partnership; and Bell Aliant
Preferred Equity Inc.
|
|
|
|
|
(2)
|
Percentage changes quoted in this release related to dollar values are
based on amounts rounded to the nearest hundred-thousand, consistent
with disclosure in Bell Aliant's supplementary information package and
Bell Aliant GP's MD&A for the fourth quarter of 2012. Dollar values
quoted in this release are rounded to the nearest million unless
otherwise stated. Customer metrics are rounded to the nearest hundred
unless otherwise stated.
|
|
|
|
(3)
|
Definitions of non-IFRS measures:
|
|
|
|
|
a.
|
EBITDA: Bell Aliant defines EBITDA as operating revenue less operating
expenses (operating income) before interest, income taxes, depreciation
and amortization expense, severance and other charges.
|
|
|
|
|
|
b.
|
Free cash flow: Bell Aliant defines free cash flow as cash generated from operating
activities less capital expenditures. Free cash flow includes the
operations of Bell Aliant and Bell Aliant GP on a combined basis.
|
|
|
|
|
|
|
c.
|
Adjusted earnings per share: Bell Aliant defines adjusted earnings per share as fully diluted
earnings per share adjusted for the per share effect of purchase price
allocation amortization (PPA) net of income taxes.
|
For a reconciliation of these non-IFRS measures to the most closely
comparable IFRS measures, please refer to Bell Aliant GP's MD&A for the
fourth quarter of 2012 available at www.bellaliant.ca/investors and www.sedar.com .
Forward-looking Information
This news release contains forward-looking statements concerning
anticipated future events, results, circumstances or expectations, in
particular statements concerning fibre-to-the-home expansion plans,
2013 financial guidance and future dividend payments. Unless otherwise
indicated, such forward-looking statements describe management's
expectations at February 5, 2013. These statements are based on
management's beliefs regarding future events, many of which, by their
nature, are inherently uncertain and beyond management's control. These
statements are not guarantees of future performance and are subject to
assumptions which may prove to be inaccurate and numerous risks and
uncertainties which are difficult to predict.
Key Assumptions
Several assumptions were made in the preparation of Bell Aliant's 2013
financial guidance and in making forward-looking statements in this
news release. For 2013, Bell Aliant expects:
|
|
Market Assumptions
|
| |
|
|
|
a)
|
|
Competition in both business and consumer markets will continue to be
intense;
|
| |
|
|
|
b)
|
|
Wireless substitution for voice services will increase in Bell Aliant
markets but will continue to lag other regions of Canada;
|
| |
|
|
| |
|
Operational Assumptions
|
| |
|
|
|
c)
|
|
NAS declines will improve somewhat from those experienced in 2012;
|
| |
|
|
|
d)
|
|
High-speed Internet subscriber net additions will grow somewhat from
those experienced in 2012;
|
| |
|
|
|
e)
|
|
IPTV subscriber net additions will grow somewhat from those experienced
in 2012;
|
| |
|
|
|
f)
|
|
Bell Aliant will continue to invest in FTTH technology to pass
approximately 800,000 homes and businesses by the end of 2013, which
should result in higher total residential ARPC and significant TV
subscriber and revenue growth;
|
| |
|
|
|
g)
|
|
Cost reductions will continue in 2013, largely offsetting cost increases
associated with the rollout of FTTH and normal inflationary pressure.
Continued growth in TV customers will result in increased cost of goods
sold (COGS) from TV content costs, slightly increasing overall
expenses;
|
| |
|
|
| |
|
Financial Assumptions
|
| |
|
|
|
h)
|
|
Net benefit plans cost will be reported implementing the amendments to
IAS 19 in 2013. The applicable discount rate for 2013 expense based on
year-end 2012 is 4.4 per cent compared to 5.2 percent for 2012 expense.
Pension current service costs included in EBITDA in 2013 will be
between $60 million and $70 million compared to $57 million in 2012.
Below EBITDA net benefit finance costs will be between $30 million and
$35 million in 2013, using the 4.4 per cent rate for both the return on
plan assets and the discount rate on liabilities compared to a restated
$23 million net benefit finance expense in 2012;
|
| |
|
|
|
i)
|
|
Substantially all of the 2013 pension deficit funding requirements will
be met by drawing down voluntary lump sum contributions to defined
benefit pension plans made in prior periods or through use of letters
of credit; cash funding for deficit reduction in 2013 will be in the
range of nil to $10 million. Cash funding for current service costs and
other net benefit plans in 2013 will be between $60 million and $70
million, compared to $64 million in 2012;
|
| |
|
|
|
j)
|
|
Net interest paid will be between $155 million and $165 million in 2013
compared to $155 million in 2012;
|
| |
|
|
|
k)
|
|
Taxable income will be subject to a blended federal and provincial
corporate income tax rate of 28 per cent in 2013, with a 2013 income
tax expense of approximately $120 million to $140 million compared to
$132 million in 2012. The utilization of accumulated tax-loss carry
forwards will result in cash taxes of less than $50 million being paid
in 2013 compared to $9 million in 2012;
|
| |
|
|
|
l)
|
|
Productivity initiatives will result in a use of cash for severance,
benefits and real estate rationalization costs of between $10 million
and $15 million in 2013 compared to $26 million in 2012;
|
| |
|
|
|
m)
|
|
Bell Aliant's depreciation and amortization expense for 2013 will be
$620 million to $640 million compared to $645 million in 2012.
Amortization of PPA adjustments, of $80 million, or approximately $0.26
per share after-tax will be excluded from adjusted earnings per share
calculations, compared to $88 million or $0.28 per share in 2012;
|
| |
|
|
|
n)
|
|
Preferred share dividends will be $28 million; and
|
| |
|
|
|
o)
|
|
The annual common share dividend will continue to be $1.90 per share.
|
Bell Aliant encourages investors to review the risk factors section
below, and related disclosures, for a discussion of the various factors
that could cause actual results to differ from what is currently
expected.
Risk Factors
There are many factors that could cause results or events to differ
materially from current expectations. The most significant factors that
Bell Aliant has identified that may affect Bell Aliant's results or
events in 2013 include but are not limited to: increasing competition;
management's ability to achieve strategies and plans, including
expansion of the fibre-to-the-home (FTTH) network, growing the customer
base, and managing the cost structure; general economic conditions;
pension valuation and investment risk; reliance on systems; changing
technology; demand for our products and services; our business
relationship with BCE Inc. (BCE) and Bell Canada; changing regulations;
dependence on key suppliers; maintenance of credit ratings; leverage
and restrictive covenants; BCE's governance rights; reliance on key
personnel and labour relations, including the requirement for effective
business continuity planning and the ability to attract and retain new
employees; legal contingencies and changes in laws, including laws
pertaining to privacy and security of customer information; and tax
related risks. Some of these risk factors are largely beyond Bell
Aliant's control. For additional information on material factors and
assumptions used to develop forward-looking information and risk
factors that could cause actual results to differ materially from
forward-looking information, see also the "Risk management" section of
Bell Aliant Inc.'s MD&A for the year ended December 31, 2011, and the
"Assumptions made in the preparation of forward-looking information"
and "Risks that could affect our business and results" sections of Bell
Aliant Regional Communications Inc.'s MD&A for the year ended December
31, 2011, as updated by its 2012 quarterly MD&As, as well as the "Risk
Factors" sections of Bell Aliant Inc.'s and Bell Aliant Regional
Communication Inc.'s 2011 Annual Information Forms. These documents are
available at www.bellaliant.ca and www.sedar.com .
Should any risk factor affect Bell Aliant in an unexpected manner, or
should assumptions underlying the forward-looking statements prove
incorrect, the actual results or events may differ materially from the
results or events predicted. Unless otherwise indicated,
forward-looking information does not take into account the effect that
transactions, or non-recurring or other special items, announced or
occurring after this information is provided may have on the business.
All of the forward-looking information reflected in this press release
and the documents referred to within it are qualified by these
cautionary statements. There can be no assurance that the results or
developments anticipated by Bell Aliant will be realized or, even if
substantially realized, that they will have the expected consequences
for Bell Aliant.
Except as may be required by Canadian securities laws, Bell Aliant
disclaims any intention and assumes no obligation to update or revise
any forward-looking information, even if new information becomes
available, as a result of future events or for any other reason.
Readers should not place undue reliance on any forward-looking
information. Forward-looking information is provided for the purpose of
providing information about management's current expectations and plans
relating to fiscal 2013 or other future periods. Readers are cautioned
that such information may not be appropriate for other purposes.
About Bell Aliant
Bell Aliant (TSX: BA) is one of North America's largest regional
communications providers and the first company in Canada to cover an
entire city with fibre-to-the-home (FTTH) technology with its FibreOP services. Through its operating entities it serves customers in six
Canadian provinces with innovative information, communication and
technology services including voice, data, Internet, video and
value-added business solutions. Bell Aliant's employees deliver the
highest quality customer service, choice and convenience.
SOURCE: BELL ALIANT INC.
