Counsel Corporation
TSX : CXS

Counsel Corporation

August 12, 2005 09:00 ET

Counsel Corporation Announces 2005 Second Quarter Results

TORONTO, ONTARIO--(CCNMatthews - Aug. 12, 2005) - Counsel Corporation (TSX:CXS) today reported its financial results for the three and six months ended June 30, 2005. All amounts are stated in US dollars.

For the second quarter ended June 30, 2005, the Company's consolidated revenue from continuing operations was $33.1 million, a decrease of 13% from $38.0 million in the same period in 2004.The decrease in revenue is attributable to both subscriber attrition and lower average revenue per minute of the Company's communications business.

The Company incurred a loss from continuing operations of $6.1 million, or $0.13 per share, basic and diluted, in the three months ended June 30, 2005, compared with a loss of $9.7 million, or $0.20 per share, in the three months ended June 30, 2004. Including discontinued operations, the Company incurred a net loss of $6.0 million or $0.13 per share, basic and diluted, for the three months ended June 30, 2005, compared with a net loss of $4.9 million, or $0.10 per share, for the three months ended June 30, 2004.

For the six months ended June 30, 2005, consolidated revenues decreased 18% to $67.8 million from $82.7 million in the same period last year. The net loss was $13.9 million or $0.30 per share, basic and diluted, for the first six months of 2005 compared to $7.5 million, or $0.15 per share, basic and diluted, in the first six months of 2004.

Recent significant events:

- On August 5, 2005, the shareholders of Acceris Communications Inc., a 92% owned subsidiary of Counsel, approved the change of the name of the company to C2 Global Technologies Inc. ("C2").

- On May 19, 2005, C2 entered into an agreement to sell substantially all of the assets and to transfer certain liabilities of its Telecommunications business to Acceris Management and Acquisition LLC, an arm's length Minnesota limited liability company, which is a wholly-owned subsidiary of North Central Equity LLC. The transaction is expected to close during the third quarter of 2005. The sale of C2's telecommunications business will allow management of C2 to focus on the growing Voice over Internet Protocol ("VoIP") market.

- On July 19, 2005, Counsel entered into an agreement to sell seven of its eight income producing properties, including its 13 acres of vacant land, to Huntingdon Real Estate Investment Trust. The sale of these properties is expected to close during the third quarter of 2005, subject to due diligence and satisfaction of certain conditions normal in this type of transaction. The completion of the sale will result in the realization of a substantial return on the Company's investment in these properties.

"Counsel will continue to focus on value creation opportunities in real estate and on maximizing the value of C2's VoIP patents," said Allan Silber, Chairman and CEO of Counsel.

About Counsel Corporation

Counsel Corporation (TSX: CXS) is a diversified company focused on the acquisition of businesses in diverse industry sectors and at various stages of their business life cycles. Its goal for acquired businesses is to create value within these businesses and to realize on the value creation at the appropriate time. Counsel presently holds assets in three specific sectors: communications in the United States and real estate and long-term care in Canada. For further information, visit Counsel's website at www.counselcorp.com.

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 Counsel Corporation currently operates, but because of the factors herein listed, as well as other factors beyond Counsel Corporation's 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
Consolidated Statements of Operations
(Unaudited)

(in thousands of US Dollars, except per share amounts)

Three months ended Six months ended
June 30 June 30
2005 2004 2005 2004
$ $ $ $
------------------- -----------------
Revised Revised
Revenues
Telecommunication
services 21,240 26,419 43,492 59,473
Communication technology
licensing - 90 - 540
Income producing
properties 2,632 2,181 5,402 4,451
Long-term care 9,216 9,303 18,873 18,273
------------------- -----------------
33,088 37,993 67,767 82,737
------------------- -----------------

Operating costs
and expenses
Telecommunication costs
(exclusive of
depreciation and
amortization
shown below) 13,366 15,477 27,096 32,112
Income producing
properties (exclusive
of depreciation and
amortization
shown below) 1,358 1,256 2,856 2,522
Long-term care (exclusive
of depreciation and
amortization
shown below) 8,579 8,454 17,647 16,964
Selling, general and
administrative 11,913 15,628 24,661 31,649
Provision for doubtful
accounts 609 1,740 1,664 2,967
Depreciation and
amortization 1,922 2,564 4,201 5,174
------------------- -----------------

37,747 45,119 78,125 91,388
------------------- -----------------

Operating loss before
undernoted items (4,659) (7,126) (10,358) (8,651)


Gains and other income
Gain on sale of short-term
investments - 668 453 1,238
Other - - - 767

Impairments and other
losses
Write-down of short-term
investments - (431) - (502)
Write-down of portfolio
investments - - (500) -
Other - (376) - (413)
------------------- -----------------

Loss before the
undernoted (4,659) (7,265) (10,405) (7,561)


Interest income 17 125 130 191
Interest expense (2,162) (2,144) (4,288) (4,379)
------------------- -----------------

Loss before income taxes,
non-controlling interest
and discontinued
operations (6,804) (9,284) (14,563) (11,749)

Provision for income
taxes 726 (359) 582 (786)
Non-controlling interest (19) (33) (38) (43)
------------------- -----------------

Loss from continuing
operations (6,097) (9,676) (14,019) (12,578)


Income from discontinued
operations 71 4,727 100 5,109
------------------- -----------------

Net loss (6,026) (4,949) (13,919) (7,469)
------------------- -----------------
------------------- -----------------

Basic and diluted net
income (loss) per share:
Continuing operations (0.13) (0.20) (0.30) (0.26)
Discontinued operations 0.00 0.10 0.00 0.11
------------------- -----------------
------------------- -----------------

Basic and diluted
net loss per share (0.13) (0.10) (0.30) (0.15)
------------------- -----------------
------------------- -----------------

Weighted average number
of common shares
outstanding (in
thousands)
- basic and diluted 47,797 48,587 47,797 48,587


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


June 30, December 31,
2005 2004
$ $
------------------------------
Revised


Assets

Current assets
Cash and cash equivalents 6,139 7,694
Short-term investments
(market value $6; 2004 - $4,041) 6 3,757
Accounts receivable
(net of allowance for doubtful
accounts of $2,265; 2004 - $2,328) 12,426 14,099
Loans receivable 378 -
Prepaid expenses and deposits 2,262 2,287
Assets of discontinued operations 42 83
------------------------------
21,253 27,920

Long-term assets
Income producing properties 56,490 53,380
Properties under development 3,897 7,603
Property, plant and equipment, net 13,789 16,537
Loans receivable - 100
Portfolio investments 1,650 2,150
Intangible assets, net 2,779 4,189
Goodwill 947 947
Other assets 1,626 1,981
------------------------------

102,431 114,807
------------------------------

Liabilities

Current liabilities
Revolving credit facility 2,944 4,725
Accounts payable and accrued
liabilities 40,846 42,923
Unearned revenue 745 959
Current portion of mortgages
and loans payable 20,311 9,830
Current portion of capital leases 487 1,441
Income tax payable 80 444
------------------------------
65,413 60,322

Long-term liabilities
Mortgages and loans payable 59,005 62,376
Convertible preferred shares 13,021 12,300
Future income tax liabilities 13,885 14,664
------------------------------
151,324 149,662

Non-controlling interest 1,875 1,871

Contingencies and guarantees

Shareholders' equity (deficiency) (50,768) (36,726)
------------------------------
102,431 114,807
------------------------------
------------------------------


Contact Information

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