Counsel Corporation

Counsel Corporation

March 30, 2005 08:30 ET

Counsel Corporation Announces 2004 Year End Results




MARCH 30, 2005 - 08:30 ET

Counsel Corporation Announces 2004 Year End Results

TORONTO, ONTARIO--(CCNMatthews - March 30, 2005) - Counsel Corporation
(TSX:CXS), a diversified company with two major operating segments:
communications in the US through Acceris Communications Inc. ("Acceris")
and real estate in Canada through Counsel Real Estate, today reported
its financial results for the year ended December 31, 2004. All amounts
are stated in US dollars.

For the year ended December 31, 2004, consolidated revenues decreased
12% to $158.9 million from $180.7 million in 2003. The decrease in
revenue is attributable to subscriber attrition and lower average
revenue per minute in the Company's communications business.

The Company incurred a loss from continuing operations of $4.5 million,
or a loss of $0.09 per share, basic and diluted, for the year ended
December 31, 2004, compared with a loss of $21.4 million, or a loss of
$0.93 per share, basic and diluted, for the year ended December 31,
2003. Including discontinued operations, the Company had net income of
$1.4 million or $0.03 per share, basic and diluted, for 2004 compared to
a loss of $22.3 million, or $0.97 per share, basic and diluted, in the
year of 2003.

Highlights of 2004:


- Acceris reduced its loss from continuing operations in 2004 compared
to 2003 through integration initiatives. Acceris' operations during 2004
were negatively impacted by the decision, in mid 2004, to halt
geographic expansion of its local dial tone offering as a direct result
of regulatory uncertainty in the domestic US markets. In 2005, Acceris
suspended efforts to acquire new local dial tone customers, but will
continue to service its existing local customers. Acceris may re-enter
the market when it can enter into acceptable wholesale agreements.

- Acceris' ongoing operating losses were funded in 2004 by Counsel
Corporation under its Keep Well agreement, from the proceeds on the sale
of shares held in Buyers United Inc. and from the issuance of a $5
million convertible three-year term note. Acceris will require
additional funding in 2005 to continue to execute on its business plan.
Counsel's Keep Well with Acceris expires on June 30, 2005 and is not
expected to be extended beyond its current maturity.

- Significant structural changes continue to occur in both the
International and US telecommunications markets. Based on the extent and
the pace of these changes, Acceris has concluded that it must have scale
in order to effectively compete and that it should consider
opportunities to merge or dispose of its telecommunications operations.

- Acceris was granted a patent by the State Intellectual Property Office
of the People's Republic of China for its proprietary technology that
enables Voice over Internet Protocol ("VoIP") communications. Acceris'
international patent portfolio and pending applications are founded on
what Acceris believes to be seminal patents in VoIP (US Patent no.
6243373 and US Patent no. 6438124).

- Using its patented technology and platform, Acceris launched an
enhanced services product that includes features such as
find-me/follow-me, on-the-fly conferencing, unified voicemail and
message distribution. Acceris plans to expand its offerings and utilize
its patented technology to offer a competitive VoIP solution to the

- Acceris initiated litigation to protect its VoIP patent rights while,
at the same time, pursuing a licensing program for its intellectual

Real Estate

- Counsel Real Estate acquired a 50% interest in a shopping centre in
Welland, Ontario with gross leaseable area of approximately 170,000
square feet. The purchase price was $2.8 million which was funded by a
$2.1 million advance on a first mortgage secured by the property.

- The combination of high occupancy rates, low interest rates, and
reduced investment in equities following the stock market declines in
recent years has created a strong demand for real estate properties.
Given the favourable real estate climate that exists in Canada today,
Counsel Real Estate is currently reviewing its strategic options for
maximizing shareholder value with this portfolio.


- Counsel completed the sale of its five retirement centres in Ontario
and British Columbia for approximately $22 million, realizing a gain of
$4.6 million.

- Counsel completed the sale of two of its three nursing homes in Texas
for approximately $2.8 million, realizing a gain of $1.3 million, and
recorded a write-down on its third Texas home of $859,000.

- Counsel assessed the recoverability of certain loans and portfolio
investments and concluded that a charge of $5.4 million was appropriate
based on changed conditions.

- Income tax legislation was passed in a foreign jurisdiction that
confirmed the release of a material future income tax obligation. In the
fourth quarter of 2004, the Company recorded a reduction in its future
income tax liabilities of approximately $25 million, primarily as a
result of this legislation being passed.

- Counsel determined that the benefits of continued listing and
registration in the United States did not justify the cost of
maintaining its registration and in February 2005 Counsel terminated its
common stock registration in the United States. Counsel now trades
exclusively on The Toronto Stock Exchange.

"Our telecommunications business has been negatively impacted by
regulatory uncertainty in the US and continued deregulation globally.
The new business model for telecommunications requires greater scale
than Acceris has. As such, Acceris is considering opportunities to merge
or dispose of its telecommunications business and recently entered into
a letter of intent to sell its traditional long distance telephone
business. Acceris will retain its patent portfolio and focus its
resources on deriving value from its significant investment in VoIP
technology. In our real estate business, market dynamics have increased
the value of our existing portfolio. Despite the challenges of the last
few years, we feel positive about our future. We believe we will return
to the success that Counsel has achieved during our 25+ year history,"
said Allan Silber, Chairman and CEO of Counsel.

About Counsel Corporation

Counsel Corporation (TSX:CXS) is a diversified company with operations
in three specific sectors: communications, real estate and long-term
care. Counsel's communications platform is focused on building upon its
existing communications investment, Acceris Communications Inc.
(OTCBB:ACRS), through organic growth and by acquiring additional
customer revenues. Counsel's real estate platform has a focused strategy
of investing in and developing income producing commercial properties,
primarily retail shopping centers. Counsel's long-term care business
includes the operations of seven nursing homes, which were previously
reflected in discontinued operations. For further information, visit
Counsel's website at

Forward-Looking Statements

The statements made in this release that are not historical facts
contain forward-looking information that involves risks and
uncertainties. All statements, other than statements of historical
facts, which address Counsel Corporation's expectations, should be
considered as forward-looking statements. Such statements are based on
knowledge of the environment in which they currently operate, but
because of the factors herein listed, as well as other factors beyond
their control, actual results may differ materially from the
expectations expressed in the forward-looking statements. Important
factors that may cause actual results to differ from anticipated results
include, but are not limited to, obtaining necessary approvals and other
risks detailed from time to time in the Company's securities and other
regulatory filings.

Counsel Corporation
Condensed Consolidated Statements of Operations
For the year ended December 31
(in thousands of US Dollars, except per share amounts)

2004 2003
$ $
Telecommunication services 110,922 133,748
Communication technology licensing 540 2,164
Income producing properties 9,433 7,799
Long-term care 38,046 36,945
158,941 180,656

Operating costs and expenses
Telecommunication costs (exclusive of
depreciation and amortization shown below 60,067 86,006
Income producing properties (exclusive of
depreciation and amortization shown below) 5,059 3,872
Long term care (exclusive of depreciation
and amortization shown below) 38,480 36,580
Selling, general and administrative 60,497 61,503
Provision for doubtful accounts 5,229 5,438
Depreciation and amortization 10,417 9,854
179,749 203,253

Operating loss before undernoted items (20,808) (22,597)

Gains and other income
Gain on sale of short-term investments 1,485 5,218
Other 971 3,657

Impairments and other losses
Write-down of short-term investments (532) (139)
Write-down of portfolio investments (2,545) (650)
Other (2,807) (1,025)

Loss before the undernoted (24,236) (15,536)

Interest income 448 620
Interest expense (6,135) (3,501)
Loss before income taxes, non-controlling
interest and discontinued operations (29,923) (18,417)

Provision for income taxes 25,519 (2,937)
Non-controlling interest (81) -
Loss from continuing operations (4,485) (21,354)

Income (loss) from discontinued operations 5,877 (906)

Net income (loss) 1,392 (22,260)

Basic and diluted net income (loss) per share:
Continuing operations (0.09) (0.93)
Discontinued operations 0.12 (0.04)

Basic and diluted net income (loss) per share 0.03 (0.97)

Weighted average number of common shares
outstanding (in thousands) - basic and diluted 48,312 25,596

The notes contained in the Company's audited consolidated financial
statements are an integral part of these condensed consolidated
financial statements.

Counsel Corporation
Condensed Consolidated Balance Sheets
(in thousands of US Dollars)

December 31 December 31
2004 2003
$ $


Current assets
Cash and cash equivalents 7,694 17,844
Short-term investments (market value
$4,041; 2003-$4,525) 3,757 2,381
Accounts receivable (net of allowance for
doubtful accounts of $2,328; 2003-$1,881) 14,099 19,125
Loans receivable - 2,773
Prepaid expenses and deposits 2,287 3,738
Assets of discontinued operations 83 185
27,920 46,046

Long-term assets
Income producing properties 53,380 42,225
Properties under development 7,603 7,600
Loans receivable 2,231 5,847
Portfolio investments 2,150 4,745
Property, plant and equipment, net 4,264 7,787
Intangible assets, net 4,189 8,546
Goodwill 947 947
Other assets 1,862 896
Assets of discontinued operations - 18,950

104,546 143,589


Current liabilities
Revolving credit facility 4,725 12,127
Accounts payable and accrued liabilities 42,994 41,833
Unearned revenue 959 4,154
Current portion of mortgages and loans payable 8,946 4,377
Current portion of capital leases 1,441 2,715
Future income tax liabilities - 1,110
Income tax payable 444 524
Liabilities of discontinued operations - 1,141
59,509 67,981

Long-term liabilities
Mortgages and loans payable 30,783 24,057
Capital leases - 1,631
Convertible preferred shares 12,300 11,200
Future income tax liabilities 14,664 37,934
Liabilities of discontinued operations - 13,870
117,256 156,673

Non-controlling interest 1,871 1,066

Shareholders' equity (deficiency) (14,581) (14,150)
104,546 143,589

The notes contained in the Company's audited consolidated financial
statements are an integral part of these condensed consolidated
financial statements.


Contact Information

    Counsel Corporation
    Gary Clifford
    Chief Financial Officer
    (416) 866-8170
    Counsel Corporation
    Stephen Weintraub
    Executive Vice President & Secretary
    (416) 866-3058