Rogers Communications reports second quarter 2015 results
Delivered Revenue Growth of 6% and Increased Adjusted Operating Profit Growth to 2%
Strengthened Postpaid Wireless and Internet Subscriber Metrics
Delivered a Number of Key Customer Experience Improvements and Successfully Delivered Year One of Our National NHL Licensing Agreement
Completed Acquisitions of Shaw's AWS Spectrum Licences and 100% Ownership of Mobilicity
TORONTO, July 23, 2015 /CNW/ - Rogers Communications Inc., a leading diversified Canadian communications and media company, today announced its unaudited financial and operating results for the second quarter ended June 30, 2015.
Consolidated Financial Highlights | |||
Three months ended June 30 | |||
(In millions of Canadian dollars, except per share amounts, unaudited) | 2015 | 2014 | |
Operating revenue | 3,403 | 3,212 | |
As adjusted 1: | |||
Operating profit | 1,337 | 1,313 | |
Net income | 412 | 432 | |
Basic earnings per share | $ 0.80 | $ 0.84 | |
Diluted earnings per share | $ 0.80 | $ 0.84 | |
Net income | 363 | 405 | |
Basic earnings per share | $ 0.70 | $ 0.79 | |
Diluted earnings per share | $ 0.70 | $ 0.76 | |
Free cash flow 1 | 476 | 436 | |
Cash provided by operating activities | 1,114 | 1,202 |
1 | Adjusted amounts and free cash flow are non-GAAP measures and should not be considered as a substitute or alternative for GAAP measures. These are not defined terms under IFRS and do not have standard meanings, so may not be a reliable way to compare us to other companies. See "Non-GAAP Measures" for information about these measures, including how we calculate them. |
"We grew both the top and adjusted operating profit lines in the quarter while showing improvement in our Wireless and Internet subscriber metrics," said Guy Laurence, President and Chief Executive Officer of Rogers Communications Inc. "In addition, we completed a series of strategic transactions to further enhance our spectrum position, delivered a successful first year of our exclusive national NHL rights agreement, and continued to implement key customer experience improvements. Our Rogers 3.0 plan continues to gain traction, our financials are trending in the right direction, and we're entering the back half of the year with key regulatory decisions behind us."
Key Financial Highlights
Higher operating revenue
- Consolidated revenue increased 6% this quarter, reflecting revenue growth of 6% in Wireless and 23% in Media, with stable revenue in Cable and Business Solutions. Wireless revenue increased as a result of greater smartphone sales, higher network revenue from the continued growth in data use by our subscriber base, as well as the adoption of higher ARPU and ARPA generating Rogers Share Everything plans. Cable revenue was stable as continued Internet revenue growth was offset by modest revenue declines in Television and Phone. Excluding the effect of a CRTC decision earlier in the year mandating that telecommunications providers could no longer require customers to provide a minimum of 30 days' notice when canceling services, Cable operating revenue would have increased by $4 million this quarter. Media revenue increased as a result of the NHL licensing agreement together with growth at Sportsnet, the Toronto Blue Jays, and Next Issue Canada, partially offset by continued softness in conventional broadcast TV and print advertising.
- Activated approximately 682,000 wireless smartphones this quarter, of which 33% were new subscribers, with higher-value smartphone customers representing 83% of Wireless postpaid subscribers as at June 30, 2015.
Higher adjusted operating profit
- The 2% increase in consolidated adjusted operating profit this quarter reflected stable adjusted operating profit in Wireless and an increase in Media of 67% ($36 million) partially offset by decreases in Cable of 2% and in Business Solutions of 4%. The increase in Wireless network revenues was partially offset by higher net costs associated with the increased volume of subsidized smartphones sold primarily as a result of the industry-wide transition from three to two-year contracts in early June 2015. Cable results were impacted by investments in programming and customer value enhancements, as well as the CRTC decision discussed above and losses associated with competitive intensity. Media's results improved as a result of increased advertising revenues from our NHL licensing agreement, together with the revenue changes discussed above, and production cost savings in the broadcast and print areas.
- Consolidated adjusted operating profit margin decreased by 160 basis points to 39.3% this quarter with margins of 49.3% in Wireless and 47.6% in Cable.
- The 5% decrease in adjusted net income and 10% decrease in net income were primarily a result of a 6% increase in depreciation and amortization and a 7% increase in income taxes, partially offset by the 2% increase in consolidated adjusted operating profit.
Cash flow and available liquidity
- Generated $476 million of consolidated free cash flow this quarter, an increase of 9% from the same quarter last year, primarily as a result of higher adjusted operating profit, lower cash income taxes paid, and lower interest on borrowings, partially offset by higher additions to property, plant and equipment. Cash provided by operating activities was $1,114 million this quarter.
- Maintained $1.9 billion of liquidity available under our bank credit facilities as at June 30, 2015.
- Returned $248 million of cash to shareholders through the payment of our quarterly cash dividend, which the Rogers Board of Directors increased by 5% to $0.48 per share in January 2015.
- Increased the full year 2015 guidance range for free cash flow by $175 million from the range initially issued on January 29, 2015. This upward adjustment to our free cash flow guidance primarily reflects the value of tax loss carry forwards acquired as part of the Mobilicity transaction that closed on July 2, 2015. We expect to utilize these loss carry forwards in 2015.
Strategic Highlights
Overhaul the customer experience
- Introduced a simplified customer bill for Rogers services, making it easier for customers to understand their spending and addressing the number one reason customers call Rogers with questions. The new format makes usage details easier to understand, while creating a new layout and interactive graphical features so customers can more easily see how we calculated their bill. Our new bill is less complicated, is available across multiple platforms, and is an important step in our ongoing commitment to continuous improvement for our customers' experiences.
- Expanded Roam Like Home to over 35 European countries, further simplifying how our Wireless consumers use the Internet, make calls, and send texts and emails with their Rogers Share Everything plan when traveling outside of Canada. Customers can access their identical Canadian plan features while in Europe as well as in the US, all at a reasonable and clear cost.
- Expanded our online customer self-service offerings to make interacting with Rogers even easier. This includes improved search and navigation capabilities, accelerated response times, and the expansion of our online Community Forums with a new look and feel. We have also improved the 'MyRogers' customer self-serve portal to enhance usability and optimize the site for mobile devices.
- Increased the speed and responsiveness of our Rogers.com and Fido.ca websites. In addition, we launched new, easier-to-navigate homepages and mobile-friendly product landing and promotion pages to provide customers with an improved digital experience.
- Enhanced and simplified our customer-facing Integrated Voice Response (IVR) system along with our technical support transfer process to minimize the customers' time from when they dial Rogers to when they talk to a live agent.
- Closed the purchase of an investment of a 50% interest in Glentel Inc., previously Canada's largest independent wireless retail distribution network with almost 360 Canadian retail outlets. Glentel will continue to be run by an independent management team.
- Launched our Retail Academy, a program to further enhance how we serve and support our customers in our branded retail stores. In addition, we started re-branding our footprint of national retail stores and refreshing certain locations to a new design concept, which includes a connected Home Zone lounge where customers can experience Rogers IGNITE Internet bundles and Smart Home Monitoring.
Focus on innovation and network leadership
- Announced the strategic acquisition of wireless provider Mobilicity and completed the transaction to acquire Shaw Communication's AWS-1 spectrum licences. We added 20MHz of contiguous AWS-1 spectrum adjacent to our existing 20MHz of AWS-1 holdings across all of British Columbia and Alberta, and in July added 10MHz of contiguous AWS-1 spectrum across Southern Ontario, the largest population centre in the country. We also divested certain non-contiguous AWS-1 spectrum licences to WIND Mobile Corp.
- Augmented our already extensive 2500MHz spectrum holdings during the recent 2500MHz spectrum auction. We successfully executed a tactical fill-in and top-up strategy to acquire nearly our entire allowable spectrum at an average cost of $0.10/MHz/pop, lower than other auction participants. We now hold 40MHz of contiguous, paired 2500MHz spectrum across nearly all of Canada, as well as an additional 20MHz of unpaired 2500MHz spectrum in many key population areas.
- Announced broad industry support for Suretap, an innovative mobile digital payment solution pioneered by Rogers. Canada's leading mobile carriers have rallied behind the Rogers-developed solution to drive adoption and provide banks and merchants with an easier, more cost-effective way to deliver the value of mobile payments to their customers.
- Applauded the CRTC's partnership with SamKnows, a global leader in Internet performance measurement, to launch an independent testing program designed to give Canadians an objective assessment of their Internet provider's performance. Rogers has been conducting independent testing with SamKnows since 2013, proving each time that we consistently delivered on advertised Internet speed and reliability.
- First in Canada to launch Voice over LTE (VoLTE) technology, giving our Wireless customers across the country access to higher-quality high-definition voice and video calls, faster call setup and connection times, and the ability to simultaneously place calls, browse the web, and stream video at considerably greater LTE speeds.
- Extended Rogers Smart Home Monitoring services to Calgary and Edmonton, allowing residents to remotely connect to, protect, and manage their homes using their mobile devices or laptops.
- Introduced complimentary high-speed Wi-Fi service throughout the Rogers Centre, our multi-purpose event venue and home to the Toronto Blue Jays, in yet another example of Rogers' commitment to deliver the best-connected experience to Canadians.
Deliver compelling content everywhere
- Sportsnet was the #1 most-watched televised sports brand in Canada, as verified by data collected by Numeris between May 2014 and May 2015. Following a year of double-digit audience growth and record-setting ratings, for the first time in its 17-year history, more Canadians tuned in to Sportsnet channels than to the competition.
- Successfully and profitably completed the first year of our exclusive 12-year national NHL licensing agreement while bringing the NHL to more Canadians than ever before. We provided Canadians with new ways to experience games, through NHL GameCentre Live and NHL GamePlus, and on multiple platforms such as their computer, mobile phone, or tablet. We announced Rogers Hometown Hockey will be returning for a second season and will roll into 24 new Canadian communities during the 2015-2016 NHL season with even more hockey festivities and entertainment.
- Announced a five-year renewal agreement through 2020 as the title sponsor for the Rogers Cup professional tennis tournament, with Sportsnet garnering coverage rights for a comprehensive suite of televised, online, mobile, and multimedia platforms. The Rogers Cup is a renowned international professional tennis tournament and supports a key pillar in our strategy of delivering world-class content and experiences to Canadians.
- Introduced Fido Pulse wireless plans, delivering more value by including a 24-month subscription to Spotify Premium, one of the world's most innovative music streaming services, and original exclusive DAILY VICE, an edgy, ground-breaking news app.
- Announced that availability of the popular shomi video streaming service will be expanded throughout Canada later this summer. shomi offers numerous exclusive series and expert-recommended collections, including programming for kids and families, not offered on other services. shomi is accessible on the platforms Canadians want in addition to their TVs, including tablets, mobile, online, Xbox 360, Apple TV, and Chromecast.
- Expanded Next Issue Canada (the North American digital magazine newsstand) for French-speaking and bilingual Canadians by adding 20 Québec-based French magazines, including Châtelaine, L'actualité, LOULOU, Sélection du Reader's Digest, and Ricardo, to the more than 150 Canadian and US English magazines already on offer.
Drive growth in the business market
- Recognized, along with AT&T, Verizon, and Vodafone, as a world leader in the machine-to-machine (M2M) retail space by prominent global market research firm Research and Markets. Rogers is a Canadian leader in M2M and this recognition affirms that our in-market solutions for business are world class.
- Expanded our third Toronto data centre, doubling our available floor space capacity. This next-generation data centre is 'Uptime Certified Tier III' for design and construction, providing customers with best-in-class uptime guarantees for their mission-critical applications.
- Introduced Rogers Voice with Skype for Business, a cloud-based tool that lets businesses experience the commercial version of Skype with enhanced features and better communication with their teams, partners, and customers.
Invest in and develop our people
- Recognized again as a Top Employer for Young People by the editors of Canada's Top 100 Employers in May 2015.
- Named one of Canada's Greenest Employers for 2015 by the editors of Canada's Top 100 Employers in April 2015, an award that recognizes employers with innovative environmental programs and earth-friendly policies that actively involve their employees.
- Named one of the 50 Best Corporate Citizens in Canada by Corporate Knights in June 2015, an award that recognizes employers that incorporate social, economic, and ecological benefits and costs in their normal course of business.
Be a strong Canadian growth company
- Appointed Rick Brace as President, Media Business Unit effective August 10, 2015. Mr. Brace brings more than 35 years of operational experience within the sports and media industries, including a number of senior leadership positions. He will oversee Rogers' $1.8 billion annual Media sales portfolio, including Sportsnet, sports investments including the Toronto Blue Jays, the NHL, and MLSE, its broadcast business, publishing brands, and The Shopping Channel.
About non-GAAP measures
This earnings release contains non-GAAP measures such as adjusted operating profit, adjusted operating profit margin, adjusted net income, free cash flow, adjusted net debt, adjusted net debt to adjusted operating profit, and adjusted basic and diluted earnings per share. These are non-GAAP measures and should not be considered as a substitute or alternative for GAAP measures. These are not defined terms under International Financial Reporting Standards (IFRS), and do not have standard meanings, so may not be a reliable way to compare us to other companies. See "Non-GAAP Measures" for information about these measures, including how we calculate them.
This earnings release contains important information about our business and our performance in the three and six months ended June 30, 2015, as well as forward-looking information about future periods.
This earnings release should be read in conjunction with our Second Quarter 2015 MD&A, our Second Quarter 2015 Interim Condensed Consolidated Financial Statements and Notes, which have been prepared in accordance with International Accounting Standard 34, Interim Financial Reporting, as issued by the International Accounting Standards Board (IASB), our 2014 Annual MD&A, our 2014 Audited Consolidated Financial Statements and Notes thereto, which have been prepared in accordance with IFRS as issued by the IASB, and our other recent filings with Canadian and US securities regulatory authorities, which are available on SEDAR at sedar.com or EDGAR at sec.gov, respectively.
For more information about Rogers, including product and service offerings, competitive market and industry trends, and our overarching strategy, see "Understanding Our Business", "Our Strategy", and "Capability to Deliver Results" in our 2014 Annual MD&A. For our key performance drivers and objectives, see "Key Performance Drivers and Highlights" in our 2014 Annual MD&A and the section "Key Highlights" on pages 2 to 5 of our Second Quarter 2015 earnings release for our second quarter 2015 key achievements.
All dollar amounts are in Canadian dollars unless otherwise stated. All percentage changes are calculated using the rounded numbers as they appear in the tables. This earnings release is current as at July 22, 2015 and was approved by the Audit Committee of our Board of Directors on that date. This earnings release includes forward-looking statements and assumptions. See "About Forward-Looking Information" for more information.
We, us, our, Rogers, Rogers Communications, and the Company refer to Rogers Communications Inc. and its subsidiaries. RCI refers to the legal entity Rogers Communications Inc., not including its subsidiaries. RCI also holds interests in various investments and ventures.
We are publicly traded on the Toronto Stock Exchange (TSX: RCI.A and RCI.B) and on the New York Stock Exchange (NYSE: RCI).
In this earnings release, this quarter refers to the three months ended June 30, 2015 and year to date refers to the six months ended June 30, 2015. All results commentary is compared to the equivalent periods in 2014 or as at December 31, 2014, as applicable, unless otherwise indicated.
Summary of Consolidated Financial Results | |||||||
Three months ended June 30 | Six months ended June 30 | ||||||
(In millions of dollars, except margins and per share amounts) | 2015 | 2014 | % Chg | 2015 | 2014 | % Chg | |
Operating revenue | |||||||
Wireless | 1,903 | 1,800 | 6 | 3,697 | 3,527 | 5 | |
Cable | 869 | 872 | - | 1,739 | 1,732 | - | |
Business Solutions | 94 | 95 | (1) | 188 | 189 | (1) | |
Media | 582 | 475 | 23 | 1,046 | 842 | 24 | |
Corporate items and intercompany eliminations | (45) | (30) | 50 | (92) | (58) | 59 | |
Operating revenue | 3,403 | 3,212 | 6 | 6,578 | 6,232 | 6 | |
Adjusted operating profit | |||||||
Wireless | 841 | 843 | - | 1,606 | 1,633 | (2) | |
Cable | 414 | 423 | (2) | 816 | 832 | (2) | |
Business Solutions | 27 | 28 | (4) | 55 | 56 | (2) | |
Media | 90 | 54 | 67 | 58 | 30 | 93 | |
Corporate items and intercompany eliminations | (35) | (35) | - | (74) | (77) | (4) | |
Adjusted operating profit 1 | 1,337 | 1,313 | 2 | 2,461 | 2,474 | (1) | |
Adjusted operating profit margin 1 | 39.3% | 40.9% | (1.6 pts) | 37.4% | 39.7% | (2.3 pts) | |
Net income | 363 | 405 | (10) | 618 | 712 | (13) | |
Diluted earnings per share | $ 0.70 | $ 0.76 | (8) | $ 1.19 | $ 1.33 | (11) | |
Adjusted net income 1 | 412 | 432 | (5) | 687 | 772 | (11) | |
Adjusted diluted earnings per share 1 | $ 0.80 | $ 0.84 | (5) | $ 1.33 | $ 1.49 | (11) | |
Additions to property, plant and equipment | 621 | 576 | 8 | 1,096 | 1,064 | 3 | |
Free cash flow 1 | 476 | 436 | 9 | 742 | 792 | (6) | |
Cash provided by operating activities | 1,114 | 1,202 | (7) | 1,341 | 1,610 | (17) | |
1 | Adjusted operating profit, adjusted operating profit margin, adjusted net income, adjusted diluted earnings per share, and free cash flow are non-GAAP measures and should not be considered as a substitute or alternative for GAAP measures. These are not defined terms under IFRS and do not have standard meanings, so may not be a reliable way to compare us to other companies. See "Non-GAAP Measures" for information about these measures, including how we calculate them. |
Key Changes in Financial Results Compared to 2014
Operating revenue
Wireless network revenue increased this quarter and year to date as a result of the continued adoption of higher ARPU and ARPA generating Rogers Share Everything plans and the continued growth in usage of wireless data, partially offset by a continued decline in roaming revenue as a result of our newly-introduced roaming plans.
Cable operating revenue was stable this quarter and year to date as Internet revenue growth and the impact and timing of pricing changes across most product types were offset by TV and Phone subscriber losses over the past year. The implementation of a Canadian Radio-television and Telecommunications Commission (CRTC) decision, effective January 23, 2015, mandating that telecommunications providers could no longer require customers to provide a minimum of 30 days' notice when canceling services, caused a $7 million decrease in Cable revenue this quarter. Excluding the effect of the CRTC decision, Cable operating revenue would have increased by $4 million this quarter.
Business Solutions operating revenue was stable this quarter and year to date as the continued growth in on-net next generation services, including our data centre businesses, was offset by the continued planned reduction in lower-margin, off-net legacy services revenue.
Media operating revenue increased this quarter and year to date primarily as a result of revenue generated by our exclusive National Hockey League (NHL) licensing agreement together with growth at Sportsnet, the Toronto Blue Jays, and Next Issue Canada, partially offset by continued softness in conventional broadcast TV and print advertising.
Adjusted operating profit
Wireless adjusted operating profit was stable this quarter as the impact of the network revenue growth described above and cost reductions was offset by higher costs associated with the increased volume of subsidized smartphones sold. Wireless adjusted operating profit decreased modestly year to date as a result of the significantly higher volume of subsidized smartphones sold during the first quarter as we proactively early-upgraded existing customers prior to the final expiration of three-year service contracts in early June 2015.
Cable adjusted operating profit decreased this quarter and year to date as a result of investments in programming and customer value enhancements and the revenue changes discussed above.
Business Solutions adjusted operating profit decreased marginally this quarter and year to date as a result of the continued decline in off-net legacy services, partially offset by the continued growth in on-net and near-net next generation businesses and productivity improvements.
Media adjusted operating profit increased this quarter and year to date primarily as a result of the NHL licensing agreement, together with growth in subscription revenue and greater programming and production cost savings in the broadcast and print areas.
Results of our Business Segments
WIRELESS
Wireless Financial Results | |||||||
Three months ended June 30 | Six months ended June 30 | ||||||
(In millions of dollars, except margins) | 2015 | 2014 | % Chg | 2015 | 2014 | % Chg | |
Operating revenue | |||||||
Network revenue | 1,707 | 1,674 | 2 | 3,379 | 3,310 | 2 | |
Equipment sales | 196 | 126 | 56 | 318 | 217 | 47 | |
Operating revenue | 1,903 | 1,800 | 6 | 3,697 | 3,527 | 5 | |
Operating expenses | |||||||
Cost of equipment 1 | (423) | (333) | 27 | (816) | (630) | 30 | |
Other operating expenses | (639) | (624) | 2 | (1,275) | (1,264) | 1 | |
(1,062) | (957) | 11 | (2,091) | (1,894) | 10 | ||
Adjusted operating profit | 841 | 843 | - | 1,606 | 1,633 | (2) | |
Adjusted operating profit margin as a % of network revenue |
49.3% |
50.4% |
(1.1 pts) |
47.5% |
49.3% |
(1.8 pts) |
|
Additions to property, plant and equipment | 256 | 254 | 1 | 436 | 435 | - | |
1 | Includes the cost of equipment sales and direct channel subsidies. | ||||||
Wireless Subscriber Results 1 | |||||||
Three months ended June 30 | Six months ended June 30 | ||||||
(In thousands, except churn, ARPU, and ARPA) | 2015 | 2014 | Chg | 2015 | 2014 | Chg | |
Postpaid | |||||||
Gross additions | 313 | 312 | 1 | 590 | 605 | (15) | |
Net additions (losses) | 24 | 38 | (14) | (2) | 40 | (42) | |
Total postpaid subscribers 2,3 | 8,163 | 8,114 | 49 | 8,163 | 8,114 | 49 | |
Churn (monthly) | 1.19% | 1.13% | 0.06 pts | 1.22% | 1.17% | 0.05 pts | |
ARPU (monthly) | $ 67.24 | $ 66.40 | $ 0.84 | $ 66.73 | $ 65.79 | $ 0.94 | |
ARPA (monthly) | $ 110.14 | $ 105.55 | $ 4.59 | $ 108.79 | $ 104.32 | $ 4.47 | |
Prepaid | |||||||
Gross additions | 154 | 128 | 26 | 280 | 204 | 76 | |
Net additions (losses) | 8 | (31) | 39 | (29) | (104) | 75 | |
Total prepaid subscribers 3 | 1,348 | 1,325 | 23 | 1,348 | 1,325 | 23 | |
Churn (monthly) | 3.63% | 3.92% | (0.29 pts) | 3.81% | 3.73% | 0.08 pts | |
Blended ARPU | $ 60.01 | $ 59.18 | $ 0.83 | $ 59.38 | $ 58.39 | $ 0.99 | |
1 | Subscriber counts, subscriber churn, ARPU, and ARPA are key performance indicators. See "Key Performance Indicators". | ||||||
2 | Effective January 1, 2015 and on a prospective basis, our Wireless postpaid subscriber results included Wireless Home Phone subscribers resulting in a base adjustment of approximately 92,000 cumulative subscribers. Excluding the impact of the Wireless Home Phone subscribers, postpaid ARPU would have increased by 3% or $1.73 this quarter and 3% or $1.67 year to date. Blended ARPU would have increased by 3% or $1.52 this quarter and 3% or $1.54 year to date. |
||||||
3 | As at end of period. |
Network revenue
The 2% increase in network revenue this quarter and year to date was a result of:
- continued adoption of the customer-friendly Rogers Share Everything plans, which generate higher ARPU and ARPA, bundle in certain calling features and long distance, grant the ability to pool data usage with other devices on the same account, and entice customers with access to our other products, such as Roam Like Home and Rogers NHL GameCentre LIVE; partially offset by
- a 14% decrease in roaming revenue this quarter and a 16% decrease in roaming revenue year to date as a result of roaming plans, including the introduction of Roam Like Home in both the US and Europe, which simplify the customer experience, provide greater customer value, and are increasing roaming usage.
Excluding roaming revenue, Wireless:
- network revenue would have increased by 3% this quarter and 4% year to date;
- postpaid ARPU would have increased by 3% this quarter and year to date; and
- ARPA would have increased by 6% this quarter and year to date.
The 1% increase in postpaid ARPU this quarter and year to date was a result of increased network revenue and wireless data usage. The 4% increase in postpaid ARPA this quarter and year to date was a result of the continued adoption of Rogers Share Everything plans relative to the number of subscriber accounts as customers are increasingly utilizing the advantages of accessing their shareable plans with multiple devices on the same account.
The modest increase in postpaid subscriber churn and lower net additions to our postpaid subscriber base this quarter and year to date compared to the prior year were expected in the short-term as a result of:
- our strategic focus on optimizing subscriber value;
- a focus on migrating existing customers to current pricing plans;
- adjustments to the required rate plans for subsidized premium device eligibility; and
- the impact of the industry's "double cohort".
The "double cohort" refers to the greater-than-usual number of subscriber contracts that ended as both three-year and two-year contracts expired near the same time. The final expiration of remaining three-year contracts for consumers occurred in early June 2015.
We activated and upgraded approximately 682,000 smartphones for new and existing subscribers this quarter, a 16% increase compared to approximately 588,000 in the same period last year. This increase in smartphone activations was primarily a result of a greater number of hardware upgrades by existing subscribers and drove much of the 11% increase in retention spending discussed below.
The percentage of subscribers with smartphones was 83% of our total postpaid subscriber base as at June 30, 2015. In our experience, smartphone subscribers typically:
- generate significantly higher ARPU; and
- are less likely to churn than customers on less-advanced devices.
Equipment sales
The 56% increase in revenue from equipment sales this quarter and 47% increase year to date were a result of:
- increased device upgrades by existing subscribers;
- a shift in the sales mix to smartphones, which included a higher proportion of iPhone devices;
- changes in equipment sales prices; and
- the impact of the industry's "double cohort".
Operating expenses
The 27% increase in the cost of equipment sales this quarter and 30% increase year to date were a result of:
- a shift in the product mix of device sales towards higher-cost smartphones; and
- increased equipment sales volumes surrounding the industry's "double cohort", resulting in 14% more upgrades this quarter and 16% more upgrades year to date, compared to the same periods in the prior year. The majority of the upgrades were higher-cost smartphones including 19% more iPhones this quarter and 32% more iPhones year to date, compared to the same periods in the prior year.
There was more upgrade activity in the first quarter relative to the second quarter this year as we took initiative to early-upgrade more subscribers in the first quarter, prior to the expiration of their service contracts. This resulted in a sequentially smaller increase in the cost of equipment sales in the second quarter of 2015 compared to the first quarter of 2015.
Total customer retention spending (primarily consisting of subsidies on handset upgrades) was 11% higher this quarter and 23% higher year to date with more existing subscribers upgrading their hardware this quarter combined with the shift in product mix as described above. The lower sequential change in customer retention spending this quarter compared to the first quarter of 2015 was primarily a result of a lower average subsidy cost per upgrade.
Other operating expenses (excluding retention spending) increased this quarter and year to date as a result of higher service and roaming costs, partially offset by improvements in cost management and efficiency gains.
Adjusted operating profit
The stable adjusted operating profit this quarter and 2% decrease year to date were a result of the revenue and expense changes discussed above.
Other Wireless developments
Investment in Glentel
In May 2015, we completed our purchase of 50% of the common shares of Glentel Inc. (Glentel) from BCE Inc. (BCE) for cash consideration of $473 million. The investment is now jointly owned with BCE. Glentel is a large, multicarrier mobile phone retailer with several hundred Canadian wireless retail distribution outlets, as well as operations in the US and Australia. Our investment in Glentel is accounted for as a joint venture using the equity method.
Acquisition of Mobilicity
On July 2, 2015, we completed the acquisition of 100% of the outstanding common shares of Data & Audio-Visual Enterprises Wireless Inc. (Mobilicity) for cash consideration of approximately $440 million, subject to customary closing adjustments. Assets acquired include tax losses valued at approximately $175 million. Mobilicity provides wireless telecommunication services to Canadians in Toronto, Ottawa, Calgary, Edmonton, and Vancouver, has approximately 150,000 subscribers, and owns AWS-1 spectrum licences across Canada.
Subsequent to the acquisition of Mobilicity, Rogers and Wind Mobile Corp. (WIND) undertook an AWS-1 spectrum licence asset exchange in Southern Ontario to create an additional 10MHz of contiguous, paired AWS-1 spectrum for Rogers. In addition, Rogers transferred certain non-contiguous AWS-1 spectrum licences to WIND in British Columbia, Alberta, and various regions in Ontario for nominal cash proceeds.
Spectrum Licence Acquisitions
In April 2015, we participated in the 2500 MHz spectrum licence auction in Canada. We were awarded 41 spectrum licences consisting of 20 MHz blocks of contiguous, paired spectrum in Canada's major geographic markets. We recognized the spectrum licences as intangible assets of $27 million, which includes $3 million of directly attributable costs. We now hold approximately 40MHz of contiguous 2500MHz spectrum across Canada, as well as an additional 20MHz of unpaired 2500MHz spectrum in many key population areas.
In June 2015, we obtained AWS-1 spectrum licences in British Columbia and Alberta from Shaw Communications Inc. (Shaw) after exercising a previously acquired option and paying the final $100 million installment. We recognized the spectrum licences as intangible assets of $351 million, which includes $1 million of directly attributable costs. The spectrum licenses will provide us with an additional 20MHz of contiguous spectrum in British Columbia and Alberta. Subsequent to exercising the option, certain non-contiguous spectrum licences acquired from Shaw were transferred to WIND for nominal cash proceeds.
CABLE
Cable Financial Results | |||||||
Three months ended June 30 | Six months ended June 30 | ||||||
(In millions of dollars, except margins) | 2015 1 | 2014 | % Chg | 2015 1 | 2014 | % Chg | |
Operating revenue | |||||||
Internet | 327 | 312 | 5 | 651 | 617 | 6 | |
Television | 425 | 437 | (3) | 851 | 868 | (2) | |
Phone | 115 | 121 | (5) | 233 | 242 | (4) | |
Service revenue | 867 | 870 | - | 1,735 | 1,727 | - | |
Equipment sales | 2 | 2 | - | 4 | 5 | (20) | |
Operating revenue | 869 | 872 | - | 1,739 | 1,732 | - | |
Operating expenses | |||||||
Cost of equipment | (1) | (1) | - | (2) | (3) | (33) | |
Other operating expenses | (454) | (448) | 1 | (921) | (897) | 3 | |
(455) | (449) | 1 | (923) | (900) | 3 | ||
Adjusted operating profit | 414 | 423 | (2) | 816 | 832 | (2) | |
Adjusted operating profit margin | 47.6% | 48.5% | (0.9 pts) | 46.9% | 48.0% | (1.1 pts) | |
Additions to property, plant and equipment | 254 | 239 | 6 | 478 | 490 | (2) | |
1 | The operating results of Source Cable Ltd. (Source Cable) are included in the Cable results of operations from the date of acquisition on November 4, 2014. | ||||||
Cable Subscriber Results 1 | |||||||
Three months ended June 30 | Six months ended June 30 | ||||||
(In thousands) | 2015 | 2014 | Chg | 2015 | 2014 | Chg | |
Internet | |||||||
Net additions (losses) | 4 | 2 | 2 | (3) | 22 | (25) | |
Total Internet subscribers 2,3 | 2,008 | 1,983 | 25 | 2,008 | 1,983 | 25 | |
Television | |||||||
Net losses | (32) | (33) | 1 | (73) | (53) | (20) | |
Total television subscribers 2,3 | 1,951 | 2,074 | (123) | 1,951 | 2,074 | (123) | |
Phone | |||||||
Net (losses) additions | (11) | 1 | (12) | (31) | 11 | (42) | |
Total phone subscribers 2,3 | 1,119 | 1,164 | (45) | 1,119 | 1,164 | (45) | |
Cable homes passed 2,3 | 4,106 | 4,004 | 102 | 4,106 | 4,004 | 102 | |
Total service units 4 | |||||||
Net losses | (39) | (30) | (9) | (107) | (20) | (87) | |
Total service units 2,3 | 5,078 | 5,221 | (143) | 5,078 | 5,221 | (143) | |
1 | Subscriber counts are key performance indicators. See "Key Performance Indicators". | ||||||
2 | On November 4, 2014, we acquired approximately 16,000 Internet subscribers, 16,000 Television subscribers and 11,000 Phone subscribers from our acquisition of Source Cable. The acquisition also increased homes passed by 26,000. |
||||||
3 | As at end of period. | ||||||
4 | Includes Internet, Television, and Phone subscribers. |
Operating revenue
Cable revenue was stable this quarter and year to date primarily as a result of:
- the movement of Internet customers to higher speed and usage tiers, combined with a higher subscriber base for our Internet products; and
- the impact and timing of pricing changes implemented over the past year; offset by
- Television and Phone subscriber losses over the past year; and
- the effect of a recent CRTC service cancellation notification policy change.
The implementation of a CRTC decision mandating that, effective January 23, 2015, telecommunications providers could no longer require customers to provide a minimum of 30 days' notice when canceling services contributed a $7 million decrease in Cable revenue this quarter and a $10 million decrease year to date. Excluding the effect of the CRTC decision, Cable operating revenue would have increased by $4 million this quarter and $17 million year to date compared to the same periods in the prior year.
Internet revenue
The 5% increase in Internet revenue this quarter and 6% increase year to date were a result of:
- general movement of customers to higher speed and usage tiers;
- a larger Internet subscriber base;
- the impact and timing of changes in Internet service pricing; and
- the launch of our new IGNITE broadband Internet-based bundled offerings that provide subscribers with better choice on usage and incorporate value-added content; partially offset by
- declines in Internet overage revenues as portions of the subscriber base move to higher-value unlimited usage plans.
Television revenue
The 3% decrease in Television revenue this quarter and 2% decrease year to date were a result of:
- the decline in Television subscribers over the past year primarily associated with heightened pay TV competition; partially offset by
- the impact and timing of pricing changes implemented over the past year; and
- higher pay-per-view revenue.
The digital cable subscriber base represented 90% of our total Television subscriber base as at June 30, 2015, compared to 86% in the same period last year. We expect to complete our ongoing analog-to-digital network transition by early 2016.
Phone revenue
The 5% decrease in Phone revenue this quarter and 4% decrease year to date were a result of:
- a decreased subscriber base; and
- increased promotional bundling pricing activity; partially offset by
- the impact and timing of pricing changes implemented over the past year.
Operating expenses
The 1% increase in operating expenses this quarter and 3% increase year to date were a result of:
- higher investments in programming and customer value enhancements; partially offset by
- various cost efficiency and productivity initiatives.
Adjusted operating profit
The 2% decrease in adjusted operating profit this quarter and year to date was a result of the revenue and expense changes discussed above.
BUSINESS SOLUTIONS
Business Solutions Financial Results | |||||||
Three months ended June 30 | Six months ended June 30 | ||||||
(In millions of dollars, except margins) | 2015 | 2014 | % Chg | 2015 | 2014 | % Chg | |
Operating revenue | |||||||
Next generation | 73 | 67 | 9 | 143 | 131 | 9 | |
Legacy | 20 | 27 | (26) | 43 | 56 | (23) | |
Service revenue | 93 | 94 | (1) | 186 | 187 | (1) | |
Equipment sales | 1 | 1 | - | 2 | 2 | - | |
Operating revenue | 94 | 95 | (1) | 188 | 189 | (1) | |
Operating expenses | (67) | (67) | - | (133) | (133) | - | |
Adjusted operating profit | 27 | 28 | (4) | 55 | 56 | (2) | |
Adjusted operating profit margin | 28.7% | 29.5% | (0.8 pts) | 29.3% | 29.6% | (0.3 pts) | |
Additions to property, plant and equipment | 48 | 39 | 23 | 81 | 65 | 25 |
Operating revenue
The 1% decrease in service revenue this quarter and year to date was a result of:
- the continuing decline in the legacy off-net voice and data business, a trend we expect to continue as we focus the business on on-net and near-net opportunities and customers move to more advanced and cost-effective IP-based services and solutions; partially offset by
- continuing execution of our plan to grow higher-margin on-net and near-net next generation IP-based services revenue; and
- higher revenue from data centre operations, which is a component of our next generation IP-based services revenue.
Next generation services, which include our data centre operations, represented 78% (2014 - 71%) of total service revenue in the quarter and 77% (2014 - 70%) of total service revenue year to date.
Operating expenses
The stable results this quarter and year to date in operating expenses were a result of:
- lower legacy service costs related to planned lower usage volumes and customer levels; and
- ongoing initiatives to reduce costs and increase productivity; offset by
- higher on-net next generation service costs associated with higher volumes.
Adjusted operating profit
The 4% decrease in adjusted operating profit this quarter and 2% decrease year to date were a result of the revenue and expense changes discussed above.
MEDIA
Media Financial Results | ||||||
Three months ended June 30 | Six months ended June 30 | |||||
(In millions of dollars, except margins) | 2015 | 2014 | % Chg | 2015 | 2014 | % Chg |
Operating revenue | 582 | 475 | 23 | 1,046 | 842 | 24 |
Operating expenses | (492) | (421) | 17 | (988) | (812) | 22 |
Adjusted operating profit | 90 | 54 | 67 | 58 | 30 | 93 |
Adjusted operating profit margin | 15.5% | 11.4% | 4.1 pts | 5.5% | 3.6% | 1.9 pts |
Additions to property, plant and equipment | 11 | 29 | (62) | 20 | 43 | (53) |
Operating revenue
The 23% increase in operating revenue this quarter and 24% increase year to date were a result of:
- revenue generated by our national NHL licensing agreement that became effective for the 2014-2015 season, which included playoff games this quarter that commanded a premium in advertising revenue;
- higher subscription revenue generated by our Sportsnet properties; and
- higher Toronto Blue Jays and Next Issue Canada revenue; partially offset by
- continued softness in conventional broadcast TV and print advertising.
Operating expenses
The 17% increase in operating expenses this quarter and 22% increase year to date were a result of:
- higher programming and production costs as a result of the increased number of NHL hockey games associated with the national and regional NHL licensing agreements, though a seasonally smaller portion of NHL games are played and broadcast in the second versus the first quarter; partially offset by
- lower conventional broadcast TV programming costs;
- lower publishing costs; and
- operating efficiencies across various Media divisions.
Adjusted operating profit
The 67% increase in adjusted operating profit this quarter and 93% increase year to date reflect the revenue and expense changes described above. Media adjusted operating profit increased this quarter in line with our expectations primarily as a result of the NHL playoff season impact, which saw seasonally higher advertising revenue per game without a corresponding increase in the programming costs per game, combined with the revenue and expense changes discussed above.
ADDITIONS TO PROPERTY, PLANT AND EQUIPMENT
Three months ended June 30 | Six months ended June 30 | ||||||
(In millions of dollars, except capital intensity) | 2015 | 2014 | % Chg | 2015 | 2014 | % Chg | |
Additions to property, plant and equipment | |||||||
Wireless | 256 | 254 | 1 | 436 | 435 | - | |
Cable | 254 | 239 | 6 | 478 | 490 | (2) | |
Business Solutions | 48 | 39 | 23 | 81 | 65 | 25 | |
Media | 11 | 29 | (62) | 20 | 43 | (53) | |
Corporate | 52 | 15 | n/m | 81 | 31 | 161 | |
Total additions to property, plant and equipment 2 | 621 | 576 | 8 | 1,096 | 1,064 | 3 | |
Capital intensity 1 | 18.2% | 17.9% | 0.3 pts | 16.7% | 17.1% | (0.4 pts) | |
1 Capital intensity is a key performance indicator. See "Key Performance Indicators". | |||||||
2 Additions to property, plant and equipment do not include expenditures on spectrum licences. | |||||||
n/m - not meaningful |
Wireless
The increase in additions to property, plant and equipment in Wireless this quarter and year to date was a result of LTE network investments and site build activity to further enhance network coverage and quality, and the continued deployment of our 700 MHz spectrum. Deployment of the LTE network has reached approximately 88% of Canada's population as at June 30, 2015.
Cable
The increase in additions to property, plant and equipment in Cable this quarter was a result of greater investment in network and information technology infrastructure, partially offset by lower purchases of our next generation NextBox digital set-top boxes compared to the same quarter last year. The decrease in additions to property, plant and equipment in Cable year to date is affected by lower purchases of our digital set-top boxes over the first half of the year compared to the same period last year.
We also made investments this quarter to improve the capacity of our Internet platform, further improve the reliability and quality of the network, and continue the development of our next generation IP-based video service.
Business Solutions
The increase in additions to property, plant and equipment in Business Solutions this quarter and year to date was a result of data centre investments and network expansion to reach additional customers and sites.
Media
The decrease in additions to property, plant and equipment in Media this quarter and year to date was a result of greater prior year investments made to our digital, IT infrastructure, and broadcast facilities.
Corporate
The increase in additions to property, plant and equipment in Corporate this quarter and year to date was a result of higher spending on premise improvements at our various offices.
Capital Intensity
Capital intensity increased this quarter and decreased year to date as a result of changes in additions to property, plant and equipment as described above, as well as the increases in revenue described previously in this earnings release.
Financial Guidance
We are increasing the guidance for full year 2015 consolidated free cash flow1 from the original range as provided on January 29, 2015 of $1,350 million to $1,500 million by an additional $175 million to $1,525 million to $1,675 million. This upward adjustment to our free cash flow guidance is primarily reflective of the value of tax loss carry forwards acquired as part of the Mobilicity transaction that we expect to fully utilize during 2015. There are no changes at this time to the consolidated guidance ranges for adjusted operating profit or additions to property, plant and equipment, which were both also provided on January 29, 2015. See "About Forward-Looking Information" in this earnings release and in our 2014 Annual MD&A.
1 Free cash flow is a non-GAAP measure and should not be considered a substitute or alternative for GAAP measures. It is not a defined term under IFRS and does not have a standard meaning, so may not be a reliable way to compare us to other companies. See "Non-GAAP Measures" for information about this measure, including how we calculate it.
Key Performance Indicators
We measure the success of our strategy using a number of key performance indicators that are defined and discussed in our 2014 Annual MD&A and this earnings release. We believe these key performance indicators allow us to appropriately measure our performance against our operating strategy as well as against the results of our peers and competitors. The following key performance indicators are not measurements in accordance with IFRS and should not be considered as an alternative to net income or any other measure of performance under IFRS. They include:
- Subscriber counts;
- Subscriber churn;
- Average revenue per user (ARPU);
- Average revenue per account (ARPA); and
- Capital intensity.
Average revenue per account - Wireless
Average revenue per account (ARPA) helps us identify trends and measure our success in attracting and retaining multiple-device accounts. A single Wireless postpaid account typically provides subscribers with the advantage of allowing for the pooling of plan attributes across multiple devices and on a single bill. Each Wireless postpaid account is represented by an identifiable billing account number. A single Wireless postpaid account may include more than one identifiable telephone number and receive monthly Wireless services for a variety of connected devices including smartphones, basic phones, tablets, and other devices. Wireless postpaid accounts under our various brand names are considered separate accounts. We calculate Wireless ARPA by dividing total Wireless postpaid network revenue (monthly) by the average number of Wireless postpaid accounts for the same time period.
Non-GAAP Measures
We use the following non-GAAP measures. These are reviewed regularly by management and our Board of Directors in assessing our performance and making decisions regarding the ongoing operations of our business and its ability to generate cash flows. Some or all of these measures may also be used by investors, lending institutions, and credit rating agencies as an indicator of our operating performance, our ability to incur and service debt, and as a measurement to value companies in the telecommunications sector. These are not recognized measures under GAAP and do not have standard meanings under IFRS, so they may not be a reliable way to compare us to other companies.
Non-GAAP measure |
Why we use it | How we calculate it | Most comparable IFRS financial measure |
Adjusted operating profit and related margin |
|
Adjusted operating profit: Net income add back (deduct) income taxes, other expense (income), finance costs, depreciation and amortization, impairment of assets, stock-based compensation, and restructuring, acquisition and other. Adjusted operating profit margin: Adjusted operating profit divided by Operating revenue (network revenue for Wireless). |
Net income |
Adjusted net income Adjusted basic and diluted earnings per share |
|
Net income add back (deduct) stock-based compensation, restructuring, acquisition and other, impairment of assets, gains on sale of investments, losses on repayment of long-term debt, and income tax adjustments on these items, including adjustments as a result of legislative changes. |
Net income Basic and diluted earnings per share |
Free cash flow |
|
Adjusted operating profit minus additions to property, plant and equipment, interest on borrowings net of capitalized interest, and cash income taxes. |
Cash provided by operating activities |
Adjusted net debt |
|
Total long-term debt plus current portion of long-term debt, deferred transaction costs and discounts, net debt derivative assets or liabilities, bank advances, and short-term borrowings minus cash and cash equivalents. |
Long-term debt |
Adjusted net debt to adjusted operating profit |
|
Adjusted net debt (defined above) divided by 12 months trailing adjusted operating profit (defined above). |
Long-term debt divided by net income |
Reconciliation of adjusted operating profit | |||||
Three months ended June 30 | Six months ended June 30 | ||||
(In millions of dollars) | 2015 | 2014 | 2015 | 2014 | |
Net income | 363 | 405 | 618 | 712 | |
Add (deduct): | |||||
Income taxes | 148 | 138 | 230 | 244 | |
Other expense (income) | 26 | 9 | 23 | (1) | |
Finance costs | 182 | 188 | 392 | 413 | |
Restructuring, acquisition and other | 42 | 30 | 51 | 39 | |
Depreciation and amortization | 562 | 532 | 1,121 | 1,051 | |
Stock-based compensation | 14 | 11 | 26 | 16 | |
Adjusted operating profit | 1,337 | 1,313 | 2,461 | 2,474 | |
Reconciliation of adjusted net income | |||||
Three months ended June 30 | Six months ended June 30 | ||||
(In millions of dollars) | 2015 | 2014 | 2015 | 2014 | |
Net income | 363 | 405 | 618 | 712 | |
Add (deduct): | |||||
Stock-based compensation | 14 | 11 | 26 | 16 | |
Restructuring, acquisition and other | 42 | 30 | 51 | 39 | |
Loss on repayment of long-term debt | - | - | 7 | 29 | |
Income tax impact of above items | (13) | (14) | (21) | (24) | |
Income tax adjustment, legislative tax change | 6 | - | 6 | - | |
Adjusted net income | 412 | 432 | 687 | 772 | |
Reconciliation of adjusted earnings per share | |||||
(In millions of dollars, except per share amounts; | Three months ended June 30 | Six months ended June 30 | |||
number of shares outstanding in millions) | 2015 | 2014 | 2015 | 2014 | |
Adjusted basic earnings per share: | |||||
Adjusted net income | 412 | 432 | 687 | 772 | |
Divided by: Weighted average number of shares outstanding | 515 | 515 | 515 | 515 | |
Adjusted basic earnings per share | 0.80 | 0.84 | 1.33 | 1.50 | |
Adjusted diluted earnings per share: | |||||
Adjusted net income | 412 | 432 | 687 | 772 | |
Divided by: Diluted weighted average number of shares outstanding | 516 | 517 | 517 | 517 | |
Adjusted diluted earnings per share | 0.80 | 0.84 | 1.33 | 1.49 | |
Reconciliation of free cash flow | |||||
Three months ended June 30 | Six months ended June 30 | ||||
(In millions of dollars) | 2015 | 2014 | 2015 | 2014 | |
Cash provided by operating activities | 1,114 | 1,202 | 1,341 | 1,610 | |
Add (deduct): | |||||
Additions to property, plant and equipment | (621) | (576) | (1,096) | (1,064) | |
Interest on borrowings, net of capitalized interest | (179) | (189) | (367) | (372) | |
Restructuring, acquisition and other | 42 | 30 | 51 | 39 | |
Interest paid | 141 | 151 | 404 | 387 | |
Change in non-cash working capital | 44 | (144) | 394 | 165 | |
Other adjustments | (65) | (38) | 15 | 27 | |
Free cash flow | 476 | 436 | 742 | 792 | |
Reconciliation of adjusted net debt and adjusted net debt / adjusted operating profit | |||||
As at June 30 |
As at December 31 |
||||
(In millions of dollars) | 2015 | 2014 | |||
Current portion of long-term debt | 1,000 | 963 | |||
Long-term debt | 14,889 | 13,824 | |||
Deferred transaction costs and discounts | 106 | 108 | |||
15,995 | 14,895 | ||||
Add (deduct): | |||||
Net debt derivative assets | (1,115) | (846) | |||
Short-term borrowings | 1,017 | 842 | |||
Cash and cash equivalents | (7) | (176) | |||
Adjusted net debt | 15,890 | 14,715 | |||
As at June 30 |
As at December 31 |
||||
(In millions of dollars, except ratios) | 2015 | 2014 | |||
Adjusted net debt / adjusted operating profit | |||||
Adjusted net debt | 15,890 | 14,715 | |||
Divided by: trailing 12 month adjusted operating profit | 5,006 | 5,019 | |||
Adjusted net debt / adjusted operating profit | 3.2 | 2.9 |
Rogers Communications Inc. | |||||
Interim Condensed Consolidated Statements of Income | |||||
(In millions of Canadian dollars, except per share amounts, unaudited) | |||||
Three months ended June 30 | Six months ended June 30 | ||||
2015 | 2014 | 2015 | 2014 | ||
Operating revenue | 3,403 | 3,212 | 6,578 | 6,232 | |
Operating expenses: | |||||
Operating costs | 2,080 | 1,910 | 4,143 | 3,774 | |
Depreciation and amortization | 562 | 532 | 1,121 | 1,051 | |
Restructuring, acquisition and other | 42 | 30 | 51 | 39 | |
Finance costs | 182 | 188 | 392 | 413 | |
Other expense (income) | 26 | 9 | 23 | (1) | |
Income before income taxes | 511 | 543 | 848 | 956 | |
Income taxes | 148 | 138 | 230 | 244 | |
Net income for the period | 363 | 405 | 618 | 712 | |
Earnings per share: | |||||
Basic | $ 0.70 | $ 0.79 | $ 1.20 | $ 1.38 | |
Diluted | $ 0.70 | $ 0.76 | $ 1.19 | $ 1.33 | |
Rogers Communications Inc. | |||||
Interim Condensed Consolidated Statements of Financial Position | |||||
(In millions of Canadian dollars, unaudited) | |||||
As at June 30 |
As at December 31 |
||||
2015 | 2014 | ||||
Assets | |||||
Current assets: | |||||
Cash and cash equivalents | 7 | 176 | |||
Accounts receivable | 1,562 | 1,591 | |||
Inventories | 283 | 251 | |||
Other current assets | 265 | 191 | |||
Current portion of derivative instruments | 118 | 136 | |||
Total current assets | 2,235 | 2,345 | |||
Property, plant and equipment | 10,709 | 10,655 | |||
Intangible assets | 6,843 | 6,588 | |||
Investments | 2,395 | 1,898 | |||
Derivative instruments | 1,106 | 788 | |||
Other long-term assets | 207 | 356 | |||
Deferred tax assets | 9 | 9 | |||
Goodwill | 3,882 | 3,883 | |||
Total assets | 27,386 | 26,522 | |||
Liabilities and shareholders' equity | |||||
Current liabilities: | |||||
Short-term borrowings | 1,017 | 842 | |||
Accounts payable and accrued liabilities | 2,153 | 2,578 | |||
Income tax payable | 54 | 47 | |||
Current portion of provisions | 4 | 7 | |||
Unearned revenue | 426 | 443 | |||
Current portion of long-term debt | 1,000 | 963 | |||
Current portion of derivative instruments | 47 | 40 | |||
Total current liabilities | 4,701 | 4,920 | |||
Provisions | 52 | 55 | |||
Long-term debt | 14,889 | 13,824 | |||
Derivative instruments | 35 | 11 | |||
Other long-term liabilities | 497 | 462 | |||
Deferred tax liabilities | 1,744 | 1,769 | |||
Total liabilities | 21,918 | 21,041 | |||
Shareholders' equity | 5,468 | 5,481 | |||
Total liabilities and shareholders' equity | 27,386 | 26,522 |
Rogers Communications Inc. | ||||||
Interim Condensed Consolidated Statements of Cash Flows | ||||||
(In millions of Canadian dollars, unaudited) | ||||||
Three months ended June 30 | Six months ended June 30 | |||||
2015 | 2014 | 2015 | 2014 | |||
Operating activities: | ||||||
Net income for the period | 363 | 405 | 618 | 712 | ||
Adjustments to reconcile net income to cash provided by operating activities: | ||||||
Depreciation and amortization | 562 | 532 | 1,121 | 1,051 | ||
Program rights amortization | 21 | 16 | 43 | 32 | ||
Finance costs | 182 | 188 | 392 | 413 | ||
Income taxes | 148 | 138 | 230 | 244 | ||
Stock-based compensation | 14 | 11 | 26 | 16 | ||
Post-employment benefits contributions, net of expense | 24 | 18 | (71) | (67) | ||
Other | 46 | 13 | 36 | 7 | ||
1,360 | 1,321 | 2,395 | 2,408 | |||
Change in non-cash operating working capital items | (44) | 144 | (394) | (165) | ||
1,316 | 1,465 | 2,001 | 2,243 | |||
Income taxes paid | (61) | (112) | (256) | (246) | ||
Interest paid | (141) | (151) | (404) | (387) | ||
Cash provided by operating activities | 1,114 | 1,202 | 1,341 | 1,610 | ||
Investing activities: | ||||||
Additions to property, plant and equipment | (621) | (576) | (1,096) | (1,064) | ||
Changes in non-cash working capital related to property, plant and equipment | (46) | (72) | (138) | (89) | ||
Additions to program rights | (6) | (15) | (18) | (22) | ||
Acquisitions and other strategic transactions, net of cash acquired | (601) | (2,643) | (601) | (3,301) | ||
Other | (22) | 12 | (34) | 9 | ||
Cash used in investing activities | (1,296) | (3,294) | (1,887) | (4,467) | ||
Financing activities: | ||||||
Proceeds received on short-term borrowings | 38 | 196 | 246 | 196 | ||
Repayment of short-term borrowings | (56) | (38) | (71) | (38) | ||
Issuance of long-term debt | 1,792 | 500 | 3,450 | 2,582 | ||
Repayment of long-term debt | (1,310) | (500) | (2,919) | (1,721) | ||
Proceeds on settlement of cross-currency interest rate exchange agreements and forward contracts | - | - | 1,059 | 2,150 | ||
Payments on settlement of cross-currency interest rate exchange agreements and forward contracts | - | - | (905) | (2,115) | ||
Transaction costs incurred | - | (3) | - | (30) | ||
Dividends paid | (248) | (235) | (483) | (459) | ||
Cash provided by (used in) financing activities | 216 | (80) | 377 | 565 | ||
Change in cash and cash equivalents | 34 | (2,172) | (169) | (2,292) | ||
(Bank advances) cash and cash equivalents, beginning of period | (27) | 2,181 | 176 | 2,301 | ||
Cash and cash equivalents, end of period | 7 | 9 | 7 | 9 |
About Forward-Looking Information
This earnings release includes "forward-looking information" within the meaning of applicable securities laws, and assumptions about, among other things, our business, operations, and financial performance and condition approved by our management on the date of this earnings release. This forward-looking information and these assumptions include, but are not limited to, statements about our objectives and strategies to achieve those objectives, and about our beliefs, plans, expectations, anticipations, estimates, or intentions.
Forward-looking information and statements
- typically include words like could, expect, may, anticipate, assume, believe, intend, estimate, plan, project, guidance, outlook, and similar expressions, although not all forward-looking information and statements include them;
- include conclusions, forecasts, and projections that are based on our current objectives and strategies and on estimates, expectations, assumptions, and other factors, most of which are confidential and proprietary and that we believe to be reasonable at the time they were applied but may prove to be incorrect; and
- were approved by our management on the date of this earnings release.
Our forward-looking information and statements include forecasts and projections related to the following items, among others:
- revenue
- adjusted operating profit
- additions to property, plant and equipment
- cash income tax payments
- free cash flow
- dividend payments
- expected growth in subscribers and the services to which they subscribe
- the cost of acquiring subscribers and deployment of new services
- continued cost reductions and efficiency improvements
- the growth of new products and services
- all other statements that are not historical facts.
We base our conclusions, forecasts, and projections on the following factors, among others:
- general economic and industry growth rates
- currency exchange rates and interest rates
- product pricing levels and competitive intensity
- subscriber growth
- pricing, usage and churn rates
- changes in government regulation
- technology deployment
- availability of devices
- timing of new product launches
- content and equipment costs
- the integration of acquisitions
- industry structure and stability.
Except as otherwise indicated, this earnings release and our forward-looking statements do not reflect the potential impact of any non-recurring or other special items or of any dispositions, monetizations, mergers, acquisitions, other business combinations, or other transactions that may be considered, announced or may occur after the date the statement containing the forward-looking information is made.
Risks and uncertainties
Actual events and results can be substantially different from what is expressed or implied by forward-looking information as a result of risks, uncertainties, and other factors, many of which are beyond our control, including but not limited to:
- new interpretations and new accounting standards from accounting standards bodies
- regulatory changes
- technological change
- economic conditions
- unanticipated changes in content or equipment costs
- changing conditions in the entertainment, information, and communications industries
- the integration of acquisitions
- litigation and tax matters
- the level of competitive intensity
- the emergence of new opportunities.
These factors can also affect our objectives, strategies, and intentions. Many of these factors are beyond our control or our current expectations or knowledge. Should one or more of these risks, uncertainties, or other factors materialize, our objectives, strategies, or intentions change, or any other factors or assumptions underlying the forward-looking information prove incorrect, our actual results and our plans could vary significantly from what we currently foresee.
Accordingly, we warn investors to exercise caution when considering statements containing forward-looking information and caution them that it would be unreasonable to rely on such statements as creating legal rights regarding our future results or plans. We are under no obligation (and we expressly disclaim any such obligation) to update or alter any statements containing forward-looking information or the factors or assumptions underlying them, whether as a result of new information, future events, or otherwise, except as required by law. All of the forward-looking information in this earnings release is qualified by the cautionary statements herein.
Before making an investment decision
Before making any investment decisions and for a detailed discussion of the risks, uncertainties, and environment associated with our business, fully review the sections of our Second Quarter 2015 MD&A entitled "Updates to Risks and Uncertainties" and "Regulatory Developments" and fully review the sections in our 2014 Annual MD&A entitled "Regulation in Our Industry" and "Governance and Risk Management", as well as our various other filings with Canadian and US securities regulators, which can be found at sedar.com and sec.gov, respectively.
About Rogers
Rogers Communications is a leading diversified public Canadian communications and media company. We are Canada's largest provider of wireless communications services and one of Canada's leading providers of cable television, high-speed Internet and telephony services to consumers and businesses. Through Rogers Media, we are engaged in radio and television broadcasting, televised shopping, magazines and trade publications, sports entertainment, and digital media. Our stock is publicly traded on the Toronto Stock Exchange (TSX: RCI.A and RCI.B) and on the New York Stock Exchange (NYSE: RCI). For further information about the Rogers group of companies, please visit rogers.com.
Information on or connected to our website is not part of or incorporated into this earnings release.
Quarterly Investment Community Teleconference
The second quarter 2015 results teleconference with the investment community will be held on:
- July 23, 2015
- 7:30 a.m. Eastern Time
- webcast available at rogers.com/webcast
- Media are welcome to participate on a listen-only basis
A rebroadcast will be available at rogers.com/investors on the Events and Presentations page for at least two weeks following the teleconference. Additionally, investors should note that from time to time, Rogers' management presents at brokerage-sponsored investor conferences. Most often, but not always, these conferences are webcast by the hosting brokerage firm, and when they are webcast, links are made available on Rogers' website at rogers.com/events and are placed there generally at least two days before the conference.
For More Information
You can find additional information relating to us on our website (rogers.com/investors), on SEDAR (sedar.com), on EDGAR (sec.gov), or by e-mailing your request to [email protected]. Information on or connected to these and other websites referenced in this earnings release is not part of, or incorporated into, this earnings release.
You can also go to rogers.com/investors for information about our governance practices, corporate social responsibility reporting, a glossary of communications and media industry terms, and additional information about our business.
SOURCE Rogers Communications Inc.
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Investment community contacts
Bruce M. Mann
416.935.3532
[email protected]
Dan R. Coombes
416.935.3550
[email protected]
Bruce Watson
416.935.3582
[email protected]
Media contact
Terrie Tweddle
416.935.4727
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