Readers are referred to the Forward-looking Information and Non-GAAP
Financial Measures sections at the end of this release.
MONTREAL, May 11 /CNW Telbec/ - Power Corporation of Canada's operating
earnings for the three-month period ended March 31, 2006 were $254 million or
$0.54 per share, compared with $231 million or $0.50 per share in the
corresponding period of 2005. This represents a 7.6% increase on a per share
basis.
Growth in operating earnings reflects primarily an increase of 6.7% in
the contribution from the Corporation's subsidiaries, as well as higher
investment income in 2005
Other income was nil in 2006, compared with $1 million in the first
quarter of 2005.
As a result, net earnings for the period were $254 million or $0.54 per
share, compared with $232 million or $0.50 per share in the first quarter of
2005.
RESULTS OF POWER FINANCIAL CORPORATION
--------------------------------------
Power Financial Corporation's operating earnings for the three-month
period ended March 31, 2006 were $408 million or $0.56 per share, compared
with $381 million or $0.52 per share in the corresponding period in 2005. This
represents a 6.3% increase on a per share basis.
Growth in operating earnings reflects an increase of 6.8% in the
contribution from the Power Financial's subsidiaries and affiliate.
Other income was nil in 2006, compared with a charge of $2 million in the
first quarter in 2005.
Net earnings, including other income, for the three-month period ended
March 31, 2006 were $408 million or $0.56 per share, compared with
$379 million or $0.52 per share in the first quarter of 2005.
DIVIDENDS ON PREFERRED SHARES
-----------------------------
The Board of Directors today declared quarterly dividends on the
Corporation's preferred shares, as follows:
<<
-------------------------------------------------------------------------
Type of shares Record Date Payment Date Amount
-------------------------------------------------------------------------
1986 Series June 23, 2006 July 15, 2006 To be determined
In accordance with
the articles of
the Corporation
-------------------------------------------------------------------------
Series A June 23, 2006 July 15, 2006 35 cents
-------------------------------------------------------------------------
Series B June 23, 2006 July 15, 2006 33.4375 cents
-------------------------------------------------------------------------
Series C June 23, 2006 July 15, 2006 36.25 cents
-------------------------------------------------------------------------
Series D June 23, 2006 July 15, 2006 31.25 cents
-------------------------------------------------------------------------
DIVIDENDS ON PARTICIPATING SHARES
---------------------------------
The Board of Directors also declared a dividend of 19.75 cents on the
Participating Preferred and Subordinate Voting Shares of the Corporation,
payable June 30, 2006 to shareholders of record June 9, 2006. This represents
an increase of 2.875 cents or 17% over the previous quarter dividend of
16.875 cents.
Forward-looking Information
---------------------------
Certain statements in this, other than statements of historical fact, are
forward-looking statements based on certain assumptions and reflect Power's or
its subsidiaries' and affiliates' current expectations. These statements may
include without limitation, statements regarding the operations, business,
financial condition, priorities, ongoing objectives, strategies and outlook of
Power or its subsidiaries and affiliates for the current fiscal year and
subsequent periods. Forward-looking statements include statements that are
predictive in nature, depend upon or refer to future events or conditions, or
include words such as "expects", "anticipates", "plans", "believes",
"estimates", "intends", "targets", "projects", "forecasts" or negative
versions thereof and other similar expressions, or future or conditional verbs
such as "may", "will", "should", "would" and "could".
This information is based upon certain material factors or assumptions
that were applied in drawing a conclusion or making a forecast or projection
as reflected in the forward-looking statements, including the perception of
historical trends, current conditions and expected future developments as well
as other factors that are believed to be appropriate in the circumstances.
Actual results could differ materially from those projected and should
not be relied upon as a prediction of future events. By its nature, this
information is subject to inherent risks and uncertainties that may be general
or specific. A variety of material factors, many of which are beyond Power's
or its subsidiaries' and affiliates' control, affect the operations,
performance and results of Power or its subsidiaries and affiliates and their
business, and could cause actual results to differ materially from current
expectations of estimated or anticipated events or results. These factors
include but are not limited to: the impact or unanticipated impact of general
economic, political and market factors in North America and internationally,
interest and foreign exchange rates, global equity and capital markets,
management of market liquidity and funding risks, changes in accounting
policies and methods used to report financial condition, including
uncertainties associated with critical accounting assumptions and estimates,
the effect of applying future accounting changes, business competition,
technological change, changes in government regulation and legislation,
changes in tax laws, unexpected judicial or regulatory proceedings,
catastrophic events, Power's or its subsidiaries' or affiliates' ability to
complete strategic transactions and integrate acquisitions and Power's or its
subsidiaries' and its affiliates' success in anticipating and managing the
foregoing risks.
The reader is cautioned that the foregoing list of factors is not
exhaustive of the factors that may affect any of Power's or its subsidiaries'
and affiliates' forward-looking statements. The reader is also cautioned to
consider these and other factors carefully and not to put undue reliance on
forward-looking statements.
Other than as specifically required by law, Power undertakes no
obligation to update any forward-looking statement to reflect events or
circumstances after the date on which such statement is made, or to reflect
the occurrence of unanticipated events, whether as a result of new
information, future events or results otherwise.
Additional information about the risks and uncertainties of Power's
business is provided in its disclosure materials, including its most recent
Management's Discussion and Analysis and Annual Information Form, filed with
the securities regulatory authorities in Canada, available at www.sedar.com.
Non-GAAP Financial Measures
---------------------------
In analysing the financial results of the Corporation and consistent with
the presentation in previous years, net earnings are subdivided into the
following components:
- operating earnings; and
- other sources of earnings, including what is referred to in this
section as "other income.
Management has used these performance measures for many years in its
presentation and analysis of the financial performance of Power Financial, and
believes that they provide additional meaningful information to readers in
their analysis of the results of the Corporation.
"Operating earnings" excludes the after-tax impact of any item that
management considers to be of a non-recurring nature or that could make the
period-over-period comparison of results form operations less meaningful. In
particular, Power Financial's operating earnings in 2005 are based on Lifeco's
earnings before the impact of restructuring charges (which is a non-GAAP
operating measure), as presented by this company.
Operating earnings and operating earnings per share are non-GAAP
financial measures that do not have a standard meaning and may not be
comparable to similar measures used by other entities.
Attachments: Financial Information (unaudited)
Power Corporation of Canada
CONSOLIDATED BALANCE SHEETS
-------------------------------------------------------------------------
March 31, December 31,
2006 2005
(in millions of dollars) (unaudited)
-------------------------------------------------------------------------
Assets
Cash and cash equivalents 4,719 5,332
-------------------------------------------------------------------------
Investments
Shares 4,985 4,867
Bonds 59,481 59,298
Mortgages and other loans 15,378 15,118
Loans to policyholders 6,735 6,646
Real estate 1,841 1,844
-------------------------------------------------------------------------
88,420 87,773
Funds held by ceding insurers 2,504 2,556
Investment in affiliates, at equity 1,600 1,554
Intangible assets 2,419 2,419
Goodwill 8,272 8,264
Future income taxes 442 476
Other assets 4,681 4,625
-------------------------------------------------------------------------
113,057 112,999
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Liabilities
Policy liabilities
Actuarial liabilities 71,611 71,263
Other 4,020 3,787
Deposits and certificates 708 693
Funds held under reinsurance contracts 4,009 4,325
Debentures and other borrowings (Note 2) 3,278 3,427
Preferred shares of subsidiaries 1,656 1,656
Capital trust securities and debentures (Note 3) 648 648
Future income taxes 894 865
Other liabilities 8,274 8,836
-------------------------------------------------------------------------
95,098 95,500
-------------------------------------------------------------------------
Non-controlling interests 10,477 10,240
-------------------------------------------------------------------------
Shareholders' Equity
Stated capital (Note 4)
Non-participating shares 795 795
Participating shares 428 417
Contributed surplus 42 37
Retained earnings 6,646 6,478
Foreign currency translation adjustments (429) (468)
-------------------------------------------------------------------------
7,482 7,259
-------------------------------------------------------------------------
113,057 112,999
-------------------------------------------------------------------------
-------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF EARNINGS
-------------------------------------------------------------------------
Three months ended March 31 2006 2005
(unaudited) (in millions of dollars, except per
share amounts)
-------------------------------------------------------------------------
Revenues
Premium income 3,700 4,528
Net investment income 1,386 1,341
Fees and media income 1,330 1,226
-------------------------------------------------------------------------
6,416 7,095
-------------------------------------------------------------------------
Expenses
Paid or credited to policyholders and
beneficiaries including policyholder dividends
and experience refunds 4,001 4,816
Commissions 537 498
Operating expenses 904 897
Financing charges (Note 5) 82 86
-------------------------------------------------------------------------
5,524 6,297
-------------------------------------------------------------------------
892 798
Share of earnings of affiliates 7 8
Other income (charges), net (Note 6) - (4)
-------------------------------------------------------------------------
Earnings before income taxes and non-controlling
interests 899 802
Income taxes 257 221
Non-controlling interests 388 349
-------------------------------------------------------------------------
Net earnings 254 232
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Earnings per participating share (Note 7)
Basic 0.54 0.50
-------------------------------------------------------------------------
Diluted 0.54 0.50
-------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
-------------------------------------------------------------------------
Three months ended March 31
(unaudited) (in millions of dollars) 2006 2005
-------------------------------------------------------------------------
Retained earnings, beginning of year 6,478 5,761
Add
Net earnings 254 232
-------------------------------------------------------------------------
6,732 5,993
-------------------------------------------------------------------------
Deduct
Dividends
Non-participating shares 10 7
Participating shares 76 64
-------------------------------------------------------------------------
86 71
-------------------------------------------------------------------------
Retained earnings, end of period 6,646 5,922
-------------------------------------------------------------------------
-------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------------------------------------------
Three months ended March 31 2006 2005
(unaudited) (in millions of dollars)
-------------------------------------------------------------------------
Operating activities
Net earnings 254 232
Non-cash charges (credits)
Increase (decrease) in policy liabilities 129 879
Decrease (increase) in funds held by ceding
insurers 52 128
Increase (decrease) in funds held under
reinsurance contracts (78) 2
Amortization and depreciation 27 29
Future income taxes 78 151
Non-controlling interests 388 349
Other (196) (23)
Change in non-cash working capital (716) (673)
-------------------------------------------------------------------------
(62) 1,074
-------------------------------------------------------------------------
Financing activities
Dividends paid
By subsidiaries to non-controlling interests (170) (147)
Non-participating shares (10) (7)
Participating shares (76) (64)
-------------------------------------------------------------------------
(256) (218)
Issue of subordinated voting shares 11 17
Issue of common shares by subsidiaries 18 13
Repurchase of common shares by subsidiaries (22) (17)
Repayment of debentures and other borrowings (150) (36)
Other 7 30
-------------------------------------------------------------------------
(392) (211)
-------------------------------------------------------------------------
Investment activities
Bond sales and maturities 8,016 9,223
Mortgage loan repayments 438 842
Sales of shares 361 279
Real estate sales 119 36
Proceeds from securitizations 86 49
Change in loans to policyholders (87) (37)
Change in repurchase agreements 114 112
Investment in bonds (7,977) (9,528)
Investment in mortgage loans (786) (1,104)
Investment in shares (400) (451)
Investment in real estate (72) (52)
Other (1) (41)
-------------------------------------------------------------------------
(189) (672)
-------------------------------------------------------------------------
Effect of changes in exchange rates on cash and
cash equivalents 30 (26)
Increase (decrease) in cash and cash equivalents (613) 165
Cash and cash equivalents, beginning of period 5,332 4,142
-------------------------------------------------------------------------
Cash and cash equivalents, end of period 4,719 4,307
-------------------------------------------------------------------------
-------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) MARCH 31, 2006
ALL TABULAR AMOUNTS ARE IN MILLIONS OF CANADIAN DOLLARS UNLESS
OTHERWISE NOTED.
NOTE 1 SIGNIFICANT ACCOUNTING POLICIES
The interim unaudited consolidated financial statements of Power
Corporation of Canada at March 31, 2006 have been prepared in accordance
with generally accepted accounting principles in Canada (GAAP). These
interim unaudited consolidated financial statements should be read in
conjunction with the audited consolidated financial statements and notes
thereto in the Corporation's annual report dated December 31, 2005. These
interim unaudited consolidated financial statements do not include all
disclosures required for annual financial statements.
The interim unaudited consolidated statements have been prepared using
the same accounting policies described in Note 1 of the Corporation's
consolidated financial statements for the year ended December 31, 2005.
COMPARATIVE FIGURES
Certain of the 2005 amounts presented for comparative purposes have been
reclassified to conform with the presentation adopted in the current
year.
NOTE 2 DEBENTURES AND OTHER BORROWINGS
-------------------------------------------------------------------------
March 31, December 31,
2006 2005
-------------------------------------------------------------------------
Power Financial Corporation
7.65% debentures, repaid January 5, 2006 - 150
6.90% debentures, due March 11, 2033 250 250
IGM Financial Inc.
6.75% debentures 2001 Series, due May 9, 2011 450 450
6.58% debentures 2003 Series, due March 7, 2018 150 150
6.65% debentures 1997 Series, due
December 13, 2027 125 125
7.45% debentures 2001 Series, due May 9, 2031 150 150
7.00% debentures 2002 Series, due
December 31, 2032 175 175
7.11% debentures 2003 Series, due March 7, 2033 150 150
Great-West Lifeco Inc.
Subordinated debentures due September 19, 2011
bearing a fixed rate of 8% until 2006 and,
thereafter, at a rate equal to the Canadian 90-
day Bankers' Acceptance rate plus 1%, unsecured 254 256
Subordinated debentures due December 11, 2013
bearing a fixed rate of 5.80% until 2008 and,
thereafter, at a rate equal to the Canadian 90-
day Bankers' Acceptance rate plus 1%, unsecured 205 206
6.75% debentures due August 10, 2015, unsecured 200 200
6.14% debentures due March 21, 2018, unsecured 200 200
6.40% subordinated debentures due December 11,
2028, unsecured 101 101
6.74% debentures due November 24, 2031, unsecured 200 200
6.67% debentures due March 21, 2033, unsecured 400 400
6.625% deferrable debentures due November 15,
2034, unsecured (US$175 million) 209 205
Other notes payable with interest rate of 8.0% 9 9
Other
Term loan at prime plus a premium varying
between 1.0% and 1.5% or Banker's
Acceptance plus a premium varying between 2.0%
and 2.5% due May 13, 2013 50 50
-------------------------------------------------------------------------
3,278 3,427
-------------------------------------------------------------------------
-------------------------------------------------------------------------
NOTE 3 CAPITAL TRUST SECURITIES AND DEBENTURES
-------------------------------------------------------------------------
March 31, December 31,
2006 2005
-------------------------------------------------------------------------
Capital trust debentures
5.995% senior debentures due December 31, 2052,
unsecured (GWLCT) 350 350
6.679% senior debentures due June 30, 2052,
unsecured (CLCT) 300 300
7.529% senior debentures due June 30, 2052,
unsecured (CLCT) 150 150
-------------------------------------------------------------------------
800 800
Acquisition related fair market value adjustment 33 34
Capital trust securities held by consolidated group
as temporary investments (185) (186)
-------------------------------------------------------------------------
648 648
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Great-West Life Capital Trust (GWLCT), a trust established by The Great-
West Life Assurance Company (Great-West Life), had issued $350 million of
capital trust securities, the proceeds of which were used by GWLCT to
purchase Great-West Life senior debentures in the amount of $350 million,
and Canada Life Capital Trust (CLCT), a trust established by The Canada
Life Assurance Company (Canada Life), had issued $450 million of capital
trust securities, the proceeds of which were used by CLCT to purchase
Canada Life senior debentures in the amount of $450 million.
NOTE 4 CAPITAL STOCK AND STOCK OPTION PLAN
STATED CAPITAL
-------------------------------------------------------------------------
March 31, December 31,
2006 2005
-------------------------------------------------------------------------
Non-participating shares
Cumulative Redeemable First Preferred Shares, 1986
Series
Authorized - Unlimited number of shares
Issued - 899,878 shares 45 45
Series A First Preferred Shares
Authorized and issued - 6,000,000 shares 150 150
Series B First Preferred Shares
Authorized and issued - 8,000,000 shares 200 200
Series C First Preferred Shares
Authorized and issued - 6,000,000 shares 150 150
Series D First Preferred Shares
Authorized and issued - 10,000,000 shares 250 250
-------------------------------------------------------------------------
795 795
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Participating shares
Participating Preferred Shares
Authorized - Unlimited number of shares
Issued - 48,854,772 shares 27 27
Subordinate Voting Shares
Authorized - Unlimited number of shares
Issued - 401,549,709 (2005 - 400,264,694) shares 401 390
-------------------------------------------------------------------------
428 417
-------------------------------------------------------------------------
-------------------------------------------------------------------------
STOCK-BASED COMPENSATION
During the first quarter of 2006, no options were granted under the
Corporation's stock option plan (1,192,500 options in the first quarter
of 2005). The fair value of these options was estimated using the Black-
Scholes option-pricing model with the following assumptions:
-------------------------------------------------------------------------
Three months ended March 31 2006 2005
-------------------------------------------------------------------------
Dividend yield - 2%
Expected volatility - 24%
Risk-free interest rate - 4%
Expected life (years) - 7
Fair value per option granted ($/option) - $8.64
-------------------------------------------------------------------------
Stock options were granted by subsidiaries. For the three months ended
March 31, 2006, compensation expense relating to the stock options
granted by the Corporation and its subsidiaries amounted to $7 million
($6 million in 2005).
Options were outstanding at March 31, 2006 to purchase, until
November 30, 2015, 11,909,195 subordinate voting shares at various prices
from $11.3625 to $32.025. During the three months ended March 31, 2006,
1,285,015 subordinate voting shares (2,954,945 in 2005) were issued under
the Corporation's plan for an aggregate consideration of $11 million
($17 million in 2005).
NOTE 5 FINANCING CHARGES
Financing charges include interest on debentures and other borrowings,
together with distributions and interest on capital trust securities and
debentures, and dividends on preferred shares classified as liabilities.
-------------------------------------------------------------------------
Three months ended March 31 2006 2005
-------------------------------------------------------------------------
Interest on debentures and other borrowings 54 58
Preferred share dividends 19 19
Interest on capital trust debentures 12 12
Distributions on capital trust securities held by
consolidated group as temporary investments (3) (3)
-------------------------------------------------------------------------
82 86
-------------------------------------------------------------------------
-------------------------------------------------------------------------
NOTE 6 OTHER INCOME (CHARGES), NET
-------------------------------------------------------------------------
Three months ended March 31 2006 2005
-------------------------------------------------------------------------
Share of Pargesa's non-operating earnings - 1
Restructuring costs - Lifeco - (7)
Other - 2
-------------------------------------------------------------------------
- (4)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
NOTE 7 EARNINGS PER SHARE
The following is a reconciliation of the numerators and the denominators
of the basic and diluted earnings per participating share computations:
-------------------------------------------------------------------------
Three months ended March 31 2006 2005
-------------------------------------------------------------------------
Net earnings 254 232
Dividends on non-participating shares (10) (7)
-------------------------------------------------------------------------
Net earnings available to participating
shareholders 244 225
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Weighted number of participating shares outstanding
(millions)
- Basic 449.6 446.1
Exercise of stock options 11.9 14.3
Shares assumed to be repurchased with proceeds from
exercise of stock options (6.7) (7.5)
-------------------------------------------------------------------------
Weighted number of participating shares outstanding
(millions)
- Diluted 454.8 452.9
-------------------------------------------------------------------------
-------------------------------------------------------------------------
NOTE 8 PENSION PLANS AND OTHER POST-RETIREMENT BENEFITS
The total benefit costs included in operating expenses are as follows:
-------------------------------------------------------------------------
Three months ended March 31 2006 2005
-------------------------------------------------------------------------
Pension plans 24 21
Other post-retirement benefits 9 12
-------------------------------------------------------------------------
33 33
-------------------------------------------------------------------------
-------------------------------------------------------------------------
NOTE 9 SECURITIZATIONS
During the first quarter of 2006, IGM Financial Inc. (IGM) securitized
$86.1 million (2005 - $49.0 million) of residential mortgages through
sales to commercial paper conduits that in turn issued securities to
investors and received net cash proceeds of $85.6 million (2005 -
$48.7 million). IGM's retained interest in the securitized loans was
valued at $1.5 million (2005 - $1.4 million). A pre-tax gain on sale of
$0.3 million (2005 - $0.8 million) was recognized and reported in Net
investment income in the Consolidated Statements of Earnings.
NOTE 10 SEGMENTED INFORMATION
Information on Profit Measure
-------------------------------------------------------------------------
Three months ended March 31, Par-
2006 Lifeco IGM jointco Other Total
-------------------------------------------------------------------------
Revenues
Premium income 3,700 - 3,700
Net investment income 1,323 57 6 1,386
Fees and media income 652 589 89 1,330
-------------------------------------------------------------------------
5,675 646 - 95 6,416
-------------------------------------------------------------------------
Expenses
Insurance claims 4,001 - 4,001
Commissions 342 202 (7) 537
Operating expenses 626 149 129 904
Financing charges 47 22 13 82
-------------------------------------------------------------------------
5,016 373 - 135 5,524
-------------------------------------------------------------------------
659 273 - (40) 892
Share of earnings of affiliates - - 10 (3) 7
Other income (charges) - net - - - - -
-------------------------------------------------------------------------
Earnings before the following 659 273 10 (43) 899
Income taxes 169 87 - 1 257
Non-controlling interests 282 118 3 (15) 388
-------------------------------------------------------------------------
Contribution to consolidated
net earnings 208 68 7 (29) 254
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Information on Profit Measure
-------------------------------------------------------------------------
Three months ended March 31, Par-
2005 Lifeco IGM jointco Other Total
-------------------------------------------------------------------------
Revenues
Premium income 4,528 - 4,528
Net investment income 1,292 50 (1) 1,341
Fees and media income 614 523 89 1,226
-------------------------------------------------------------------------
6,434 573 - 88 7,095
-------------------------------------------------------------------------
Expenses
Insurance claims 4,816 - 4,816
Commissions 329 176 (7) 498
Operating expenses 630 143 124 897
Financing charges 48 22 16 86
-------------------------------------------------------------------------
5,823 341 - 133 6,297
-------------------------------------------------------------------------
611 232 - (45) 798
Share of earnings of affiliates - - 11 (3) 8
Other income (charges)- net (7) - 1 2 (4)
-------------------------------------------------------------------------
Earnings before the following 604 232 12 (46) 802
Income taxes 149 71 1 221
Non-controlling interests 259 101 4 (15) 349
-------------------------------------------------------------------------
Contribution to consolidated
net earnings 196 60 8 (32) 232
-------------------------------------------------------------------------
-------------------------------------------------------------------------
NOTE 11 SUBSEQUENT EVENTS
On March 30, 2006, Lifeco entered into an agreement with a syndicate of
underwriters under which the underwriters have agreed to buy
12,000,000 4.50% Non-cumulative First Preferred Shares Series I from
Lifeco for sale to the public at a price of $25 per Preferred Share,
representing an aggregate issue amount of $300 million. The offering
closed April 12, 2006.
On April 24, 2006, Crown Life Insurance Company (Crown Life) served
notice, pursuant to the terms of the 1999 acquisition of the majority of
the insurance operations of Crown Life by Canada Life, commencing a
process under which Canada Life may be required to acquire the common
shares of Crown Life. This transaction is not expected to have a material
effect on the consolidated financial position of the Corporation.
>>
