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Bell Aliant reports fourth quarter 2010 results and announces 2011 financial guidance

^{Published on 2011-02-08 14:35:22 - Market Wire}
 

 ------------------------------------------------------------------------- (In millions of dollars) Q4 Q4 Percentage 2010 2009 Percentage (unaudited) 2010 2009 Change Change ------------------------------------------------------------------------- Operating Revenue $709 $719 (1.4%) $2,785 $2,870 (3.0%) ------------------------------------------------------------------------- EBITDA 359 365 (1.7%) 1,430 1,458 (1.9%) ------------------------------------------------------------------------- Capital Expenditures (Capex) 162 120 35.0% 494 462 6.8% ------------------------------------------------------------------------- Capex excluding Pole Transaction 105 120 (12.5%) 437 462 (5.5%) ------------------------------------------------------------------------- Distributable Cash (DC) 140 183 (23.1%) 711 773 (8.1%) ------------------------------------------------------------------------- DC excluding Pole Transaction 198 183 8.2% 768 773 (0.8%) ------------------------------------------------------------------------- 

 ------------------------------------------------------------------------- 2010 2011 IFRS Restated Guidance Results* ------------------------------------------------------------------------- Operating Revenues $2,807 million $2,650 million - $2,750 million ------------------------------------------------------------------------- EBITDA before pension expense $1,430 million $1,360 million- $1,400 million ------------------------------------------------------------------------- EBITDA after pension expense $1,377 million $1,300 million - $1,340 million ------------------------------------------------------------------------- Capital Expenditures $494 million $520 million - $560 million ------------------------------------------------------------------------- Free Cash Flow $531 million $525 million - $575 million(xx) ------------------------------------------------------------------------- Earnings per share before not meaningful $1.60 - $1.80 purchase price allocation amortizations ------------------------------------------------------------------------- * 2010 IFRS restated results are unaudited (xx) Excludes voluntary pension contribution 

 (1) The Fund derived virtually all of its income from its indirect ownership in Bell Aliant Holdings LP. Bell Aliant Holdings LP's results combine the results of Bell Aliant Regional Communications, Limited Partnership (Bell Aliant LP), Télébec, Limited Partnership (Télébec) and NorthernTel, Limited Partnership (NorthernTel). (2) Under the corporate structure Bell Aliant Inc. will derive virtually all of its income from its ownership in Bell Aliant Regional Communications Inc. (Bell Aliant GP), the successor corporation to Bell Aliant Holdings LP. (3) Definitions a. EBITDA: Bell Aliant Holdings LP defined EBITDA, a non-GAAP measure, as operating revenue less expenses (earnings) before interest, income taxes, depreciation and amortization expense, net benefit plans cost, and restructuring and other charges. For a reconciliation of EBITDA to the most closely comparable GAAP measure, please refer to Bell Aliant Holdings LP's MD&A for the fourth quarter of 2010. Beginning in 2011, Bell Aliant defines EBITDA as operating revenue less expenses (earnings) before interest, income taxes, depreciation and amortization expense, restructuring and other charges. Bell Aliant defines EBITDA margin as EBITDA as a percentage of operating revenue. b. Capital Intensity: Bell Aliant defines capital intensity as capital expenditures as a percentage of operating revenue. c. Distributable Cash: The Fund defined distributable cash, a non- GAAP measure, as cash from operating activities of continuing and discontinued operations of Bell Aliant Holdings LP and of the Fund, plus operating items funded through cash reserves or borrowings, such as working capital, pension deficit funding, restructuring and other charges and cash capital taxes in excess of normalized levels, plus amounts for current income tax provisions plus other elements of working capital changes that do not affect cash flow, less capital expenditures. For a reconciliation of distributable cash to the most closely comparable GAAP measure, please refer to Bell Aliant Holdings LP's MD&A for the fourth quarter of 2010. d. Free Cash Flow: Bell Aliant defines free cash flow, a non-GAAP measure, as cash generated from operating activities less capital expenditures. For a reconciliation of free cash flow to the most closely comparable GAAP measure, please refer to Bell Aliant Holdings LP's MD&A for the fourth quarter of 2010. e. Earnings per share before purchase price allocation (PPA) amortizations: Bell Aliant defines earnings per share before purchase price amortizations, a non-GAAP measure, as basic earnings per share adjusted for the after-tax per share impact of amortizing PPA amounts, which represent the adjustments to historical cost of tangible and intangible assets acquired in business combinations. (4) Percentage changes quoted in this release related to dollar values are based on amounts rounded to the nearest hundred-thousand, consistent with disclosure in the Fund's supplementary information package and Bell Aliant Holdings LP's MD&A for the fourth quarter of 2010. Dollar values quoted in this release are rounded to the nearest million unless otherwise stated. 

 a) Competition in both business and consumer markets will continue to be intense with the cable telephony competitive footprint growing from its current level of 69 percent to reach a peak of 75 - 80 per cent over the next several years; b) Wireless substitution for voice services will increase in Bell Aliant territories but will continue to lag other regions of Canada; Operational Assumptions c) NAS declines will be similar to those experienced in 2010; d) High-speed Internet subscriber net additions will be similar to those experienced in 2010; e) Bell Aliant will invest $350 million in fibre-to-the-home between 2011 and 2012 to pass over 430,000 homes and businesses by the end of 2011 and over 600,000 by the end of 2012, which should result in higher total residential ARPC and significant TV subscriber and revenue growth; f) Data revenue will decline at a similar rate as 2010 due to price pressures and competitive losses; g) Cost reductions will continue in 2011 but at a lower rate than that achieved in recent years; Financial Assumptions h) Bell Aliant will issue preferred shares and use the proceeds to fund a voluntary pension contribution of $200 million and reduce debt; i) Net benefit plans cost (pension expense) using IFRS in 2011 will be $60-65 million based on a discount rate of 5.3% and a long-term rate of return on plan assets of 6.1%, up from a comparable 2010 IFRS restated pension expense of $53 million; j) Pension current service cost funding will be $65-$75 million, compared to $69 million in 2010. Required pension deficit funding will be $100- $120 million, compared to $86 million in 2010. In addition to the $200 million voluntary pension contribution, Bell Aliant will contribute $25-$50 million of regular cash pension deficit funding, which approximates expected going concern funding requirements for 2011; k) Taxable income is expected to be subject to blended federal and provincial corporate income tax rates of 29 per cent in 2011, dropping to 27 per cent by 2013 with a 2011 income tax provision of approximately $130 - $140 million. The utilization of accumulated tax- loss carryforwards will result in minimal cash taxes being paid in 2011 and 2012; l) Bell Aliant's depreciation and amortization expense for 2011 will be $625-640 million, including approximately $145-$150 million of amortization of intangibles; m) Dividends paid by Bell Aliant are expected to qualify as eligible dividends entitling Canadian resident individuals who receive them to the enhanced dividend gross-up and tax credit mechanism that will reduce the income tax otherwise payable.