Rogers Reports First Quarter 2011 Financial and Operating Results
First Quarter Revenue Increases 4% to $3.0 Billion, Adjusted Earnings
Per Share up 13% to $0.76, $597 Million of Free Cash Flow Generated;
Wireless Adds 45,000 Net New Postpaid Subscribers, Adds Record Number of
New Smartphone Customers, While Wireless Data Revenue Growth Strong at
30% and Margins at 49%;
Cable Operations Adjusted Operating Profit Increases 12% Driving Margins
to 47% on Continued Subscriber Growth and Cost Efficiencies;
Media Revenue up by 17% as Revenue Increased In All of Media’s
$464 Million of Cash Returned to Rogers Shareholders in Dividends and
TORONTO, April 26 /PRNewswire-FirstCall/ – Rogers Communications Inc. today announced its
consolidated financial and operating results for the three months ended
March 31, 2011 and 2010, in accordance with the newly adopted
International Financial Reporting Standards (“IFRS”).
Financial highlights are as follows ((1)):
Three months ended March 31, (In millions 2011 2010 % Chg of dollars, except per share amounts) Operating $ 2,987 $ 2,876 revenue 4 Adjusted 1,160 1,159 operating - profit 423 397 Adjusted net $ 0.76 $ 0.67 7 income 13 Adjusted basic and diluted earnings per share
(1) This summary of our first quarter 2011 results should be read in conjunction with our first quarter 2011 MD&A, our first quarter 2011 Interim Unaudited Consolidated Financial Statements and Notes thereto, our 2010 Annual Report all of which are incorporated by reference in this news release. The financial information presented herein has been prepared on the basis of International Financial Reporting Standards ("IFRS") for interim financial statements and is expressed in Canadian dollars.
“The first quarter results represent a healthy start to 2011 for
Rogers,” said Nadir Mohamed, President and Chief Executive Officer of
Rogers Communications Inc. “We’ve maintained solid top line growth
rates as a result of continued investments in our customer
relationships, networks and products supported by a sharp focus on
wireless data and subscriber retention initiatives. While at the same
time, our successful focus on managing costs has enabled continued
strong margins and the generation of substantial free cash flow.”
Highlights of the first quarter of 2011 include the following:
-- Generated consolidated quarterly revenue growth of 4%, with Wireless network revenue growth of 3%, Cable Operations revenue growth of 3%, and Media revenue growth of 17%, versus the same quarter last year. While Cable Operations adjusted operating profit increased by 12%, this was offset by a 5% decline at Wireless primarily reflecting costs associated with the significant year-over-year increase in smartphone activations and a decline at Media due to increased sports programming costs. -- Wireless data revenue growth accelerated to 30% and net postpaid subscriber additions totalled 45,000, helping drive wireless data revenue to now comprise 34% of Wireless network revenue. During the quarter, Wireless activated and upgraded 534,000 additional smartphones, of which approximately 36% were for subscribers new to Wireless, compared to 348,000 in the prior year quarter. This represents the largest single quarterly addition of new smartphone subscribers. This resulted in subscribers with smartphones, who typically generate ARPU nearly twice that of voice only subscribers, representing 45% of the overall postpaid subscriber base as at March 31, 2011, up from 33% as at March 31, 2010. -- Wireless launched Canada's first business-class Wi-Fi voice service for smartphones to help business customers save time and money. The service allows businesses to place mobile calls from their smartphones over their office Wi-Fi network that do not count towards monthly voice plan minutes. -- Wireless announced the geographic expansion of its next generation high-speed wireless network by 150 times to cover 96 per cent of the Manitoba population, bringing download speeds of up to 21 megabits per second and even greater device selection. -- Cable deployed its highly popular SpeedBoost technology for high-speed Internet subscribers which detects when there's available bandwidth on the network and automatically delivers a temporary burst of speed for the first 10 MB of a download or stream which loads content faster and delivers a superior online experience. -- Rogers closed the acquisition of Atria Networks, one of Ontario's largest fibre-optic networks, which augments Rogers Business Solutions' enterprise offerings by further enhancing its ability to deliver on-net data centric services within and adjacent to Cable's footprint. -- Rogers Sportsnet and Tennis Canada announced a multi-year agreement to broadcast the Rogers Cup that will also allow Sportsnet to broadcast over 20 top tier ATP World Tour Tournaments. Sportsnet also announced a multi-year agreement to broadcast highly popular Ultimate Fighting Championship (UFC) events in Canada. -- Generated $597 million of consolidated free cash flow in the quarter, defined as adjusted operating profit less PP&E expenditures, interest on long-term debt and cash income taxes, down modestly from $619 million in the first quarter of 2010 reflecting steady levels of adjusted operating profit being offset by a moderately increased level of PP&E expenditures. Free cash flow per share increased by 3% over the same period reflecting accretion from share buybacks which have decreased the base of outstanding shares. -- Refinanced higher cost 2012 debt maturities with the March 2011 issuance of $1,450 million of 5.34% Senior Notes due 2021 and $400 million of 6.56% Senior Notes due 2041. -- Increased our annualized dividend rate by 11% to $1.42 per share in February 2011, and immediately declared a quarterly dividend of $0.355 a share on each of our outstanding shares at the new, higher rate. -- Announced a share buyback authorization of up to $1.5 billion of Rogers' Class B Non-Voting shares on the open market over the coming year. Under this renewed buyback authorization, we repurchased 9 million RCI Class B Non-Voting shares for $285 million during the quarter.
This earnings release, which is current as of April 26, 2011, is a
summary of our first quarter 2011 results and should be read in
conjunction with our first quarter 2011 MD&A, our first quarter 2011
Interim Unaudited Consolidated Financial Statements and Notes thereto,
our 2010 Annual MD&A and our 2010 Annual Audited Consolidated Financial
Statements and Notes thereto and other recent securities filings
available on rogers.com or sedar.com.
The financial information presented herein has been prepared on the
basis of International Financial Reporting Standards (“IFRS”) for
interim financial statements and is expressed in Canadian dollars
unless otherwise stated.
The amounts in this earnings release, our MD&A and our interim financial
statements for the three months ended March 31, 2010 have been restated
to reflect our adoption of IFRS, with effect from January 1, 2010.
Periods prior to January 1, 2010 have not been restated and are
prepared in accordance with Canadian GAAP. Please refer to Note 3 of
our First Quarter 2011 Interim Unaudited Consolidated Financial
Statements for a summary of the differences between our financial
statements previously prepared under Canadian GAAP and to those under
IFRS for the three months ended March 31, 2010 and for the year ended
December 31, 2010.
Concurrent with the impact of the transition to IFRS, we made certain
changes to our reportable segments. Commencing January 1, 2011, the
results of the former Rogers Retail segment are reported as follows:
the results of the Video retailing portion are now presented as a
separate operating sub-segment under the Cable segment, and the
portions related to retail distribution of cable and wireless products
and services are now included in the results of operations of Cable
Operations and Wireless, respectively. In addition, certain
intercompany transactions between the Company’s Rogers Business
Solutions (“RBS”) segment and other operating segments, which were
previously recorded as revenue in RBS and operating expenses in the
other operating segments, are now recorded as cost recoveries in RBS
beginning January 1, 2011. While there is no change to the consolidated
results of the Company or to the adjusted operating profit of RBS, as a
result of this second change, the reported revenue of RBS is lower as
intercompany sales are no longer included. Comparative figures for 2010
have been reclassified to conform to the current year’s presentation of
both changes discussed above.
As this earnings release includes forward-looking statements and
assumptions, readers should carefully review the sections of this
earnings release entitled “Caution Regarding Forward-Looking
Statements, Risks and Assumptions”.
In this earnings release, the terms “we”, “us”, “our”, “Rogers” and “the
Company” refer to Rogers Communications Inc. and our subsidiaries,
“Wireless”, “Cable”, and “Media”.
SUMMARIZED CONSOLIDATED FINANCIAL RESULTS
Three months ended March 31, (In millions of 2011 2010 % Chg dollars, except per share amounts) Operating revenue Wireless $ 1,721 $ 1,662 Cable 4 Cable 813 790 Operations 116 111 3 RBS 24 Video 41 5 (41) 953 942 1 Media 339 290 17 Corporate (26) 44 items and (18) eliminations Total 2,987 2,876 4 Adjusted operating profit (loss) Wireless 790 829 Cable (5) Cable 382 340 12 Operations 26 n/m RBS 8 n/m Video (7) (2) 401 346 16 Media (10) n/m Corporate (21) 5 items and - eliminations (21) Adjusted 1,160 1,159 operating profit - Stock-based (69) compensation (8) (26) expense Integration, (11) n/m restructuring (2) and acquisition expenses Other items, net n/m - (15) Operating profit 1,141 1,116 2 Other income and 806 748 expense, net 8 Net income $ 335 $ 368 (9) Basic and $ 0.60 $ 0.62 diluted earnings (3) per share As adjusted: Net income $ 423 $ 397 Basic and $ 0.76 $ 0.67 7 diluted 13 earnings per share Additions to PP&E Wireless $ 218 $ 199 10 Cable Cable 150 118 27 Operations 11 83 RBS 6 n/m Video - 1 161 125 29 Media 100 Corporate 8 4 (78) 8 37 Total $ 395 $ 365 8
Summarized Wireless Financial Results
Three months ended March 31, (In millions 2011 2010 % Chg of dollars, except margin) Operating revenue Postpaid $ 1,544 $ 1,504 Prepaid 71 3 66 8 Network 1,615 revenue 106 1,570 3 Equipment sales 92 15 Total 1,721 operating 1,662 4 revenue Operating expenses before the undernoted Cost of 302 equipment 629 237 27 sales Other 596 6 operating expenses 931 833 12 Adjusted 790 operating 829 (5) profit Stock-based compensation (1) (5) (80) expense Integration, n/m restructuring - (1) and acquisition expenses Other items, n/m net - (10) Operating $ 789 $ 813 profit (3) Adjusted 48.9% 52.8% operating (7) profit margin as % of network revenue Additions to $ 218 $ 199 PP&E 10 Data revenue $ 542 $ 416 included in 30 network revenue
Summarized Wireless Subscriber Results
Three months ended March 31, (Subscriber 2011 2010 Chg statistics in thousands, except ARPU, churn and usage) Postpaid Gross additions Net additions 316 278 38 Total postpaid retail 45 47 (2) subscribers Monthly churn 7,370 7,026 344 Average monthly 1.23% 1.10% 0.13% revenue per $ 70.18 $ 71.62 $ (1.44) user ("ARPU") Prepaid Gross additions Net losses 181 128 53 Total prepaid retail (10) (34) 24 subscribers Monthly churn 1,642 1,481 161 ARPU 3.85% 3.59% 0.26% $ 14.32 $ 14.70 $ (0.38) Total Gross additions Net additions 497 406 91 Total postpaid and prepaid 35 13 22 retail subscribers 9,012 8,507 505 Monthly churn 1.71% 1.54% 0.17% Blended ARPU $ 59.91 $ 61.59 $ (1.68) Blended average monthly minutes 450 476 (26) of usage
Wireless Subscribers and Network Revenue
The year-over-year increase in total net subscriber additions for the
quarter reflects relatively steady level of postpaid net additions
combined with incremental prepaid sales activity from Wireless’ launch
of its urban zone-based unlimited voice and text service, chatr.
The increase in network revenue for the three months ended March 31,
2011, compared to the corresponding period of 2010, was driven
predominantly by the continued growth of Wireless’ postpaid subscriber
base and the continued adoption of wireless data services.
For the three months ended March 31, 2011, wireless data revenue
increased by approximately 30% from the corresponding period of 2010,
to $542 million. This growth in wireless data revenue reflects the
continued penetration and growing usage of smartphone and wireless
laptop devices which are driving increased usage of e-mail, wireless
Internet access, text messaging and other wireless data services. For
the three months ended March 31, 2011, data revenue represented
approximately 34% of total network revenue, compared to approximately
26% in the corresponding period of 2010.
For the three months ended March 31, 2011, Wireless activated and
upgraded approximately 534,000 smartphones, compared to approximately
348,000 smartphones in the first quarter of 2010. These smartphones
were predominately iPhone, BlackBerry and Android devices, of which
approximately 36% were for subscribers new to Wireless, during the
three months ended March 31, 2011. This resulted in subscribers with
smartphones representing 45% of the overall postpaid subscriber base as
at March 31, 2011, compared to 33% as at March 31, 2010. These
subscribers generally commit to new multi-year-term contracts, and
typically generate ARPU nearly twice that of voice only subscribers.
This is the largest number of new smartphone customer additions that
Wireless has ever reported in a quarter.
Year-over-year blended ARPU decreased by 2.7%, which reflects declines
in roaming, long-distance, out-of-plan usage and network access fee
revenues, offset by higher wireless data and feature revenues. These
decreases are primarily due to the creation of voice and data roaming
value plans for frequent travelers over the past year and general
Wireless Equipment Sales
The year-over-year increase for the three months ended March 31, 2011 in
revenue from equipment sales, including activation fees and net of
equipment subsidies, versus the corresponding period of 2010, reflects
an increase in the number of smartphone activations.
Wireless Operating Expenses
Three months ended March 31, (In millions 2011 2010 % Chg of dollars) Operating expenses Cost of $ 302 $ 237 equipment 629 596 27 sales Other 6 operating expenses Operating 931 833 expenses 12 before the undernoted Stock-based 1 compensation 5 (80) expense Integration, n/m restructuring - 1 and acquisition expenses Other items, n/m net - 10 Total $ 932 $ 849 operating 10 expenses
The $65 million increase in cost of equipment sales for the three months
ended March 31, 2011, compared to the corresponding period of 2010, was
primarily the result of an increase in gross additions versus the prior
period and a continued increase in the mix of smartphones for both new
and upgrading subscribers. This was the single largest factor driving
the year-over-year increase in expenses, and Wireless views these costs
as net present value positive investments in the acquisition and
retention of higher ARPU, in that they reflect lower churning customers
who are on term contracts.
The year-over-year increase in other operating expenses for the three
months ended March 31, 2011, excluding retention spending discussed
below, was driven by increased spending on advertising and promotion
costs for new marketing campaigns, higher data activations, and higher
sales costs associated with both volumes and mix, which were offset by
savings resulting from cost reduction initiatives and scale
efficiencies across various functions.
Total retention spending, including subsidies on handset upgrades, was
$183 million in the three months ended March 31, 2011, compared to $150
million in the corresponding period of 2010. The significant increase
is a result of a higher mix of smartphone upgrades by existing
subscribers, versus the corresponding period in 2010.
Wireless Adjusted Operating Profit
The 5% year-over-year decrease in adjusted operating profit and the
48.9% adjusted operating profit margin on network revenue (which
excludes equipment sales revenue) for the three months ended March 31,
2011 primarily reflect the increase in the total operating expenses
discussed above, driven heavily by the high level of smartphone
activations and upgrades and related level of subsidy spending,
partially offset by the increase in network revenue.
Wireless Additions to PP&E
Wireless additions to PP&E are classified into the following categories:
Three months ended March 31, (In millions 2011 2010 % Chg of dollars) Additions to PP&E Capacity $ 128 $ 128 Quality - Network - 34 43 (21) other 83 Information 11 6 105 technology and other 45 22 Total $ 218 $ 199 10 additions to PP&E
Wireless PP&E additions for the three months ended March 31, 2011
reflect spending on network capacity, such as radio channel additions,
network core improvements and network enhancing features, including the
continued deployment of our HSPA+ network. Quality-related additions to
PP&E are associated with upgrades to the network to enable higher
throughput speeds in addition to improved network access associated
activities, such as site build programs and network sectorization work.
Moreover, Quality includes test and monitoring equipment and operating
support system activities. Investments in Network – other are
associated with network reliability and renewal initiatives,
infrastructure upgrades and new product platforms. Information
technology and other wireless specific system initiatives include
billing and back-office system upgrades, and other facilities and
The increase in Wireless PP&E additions for the three months ending
March 31, 2011 is largely due to the increase in Information technology
and other which was driven primarily by Wireless’ share of an
enterprise data warehouse project and a new enterprise-wide billing
Summarized Cable Financial Results
Three months ended March 31, (In millions 2011 2010 % Chg of dollars, except margin) Operating revenue Cable $ 813 $ 790 Operations 116 111 3 RBS 24 Video 41 5 (41) Total 953 942 operating 1 revenue Adjusted operating profit (loss) before the undernoted Cable 382 340 Operations 26 12 RBS 8 n/m Video (7) n/m (2) Adjusted 401 346 operating 16 profit Stock-based compensation (1) (3) (67) expense Integration, n/m restructuring (8) (1) and acquisition expenses Other items, n/m net - (5) Operating $ 392 $ 337 profit 16 Adjusted operating profit (loss) margin Cable 47.0% 43.0% Operations 22.4% 7.2% RBS (29.2%) (4.9%) Video Additions to PP&E Cable $ 150 $ 118 Operations 11 27 RBS 6 Video - 83 1 n/m Total $ 161 $ 125 additions to 29 PP&E
The following segment discussions provide a detailed discussion of the
Cable operating results.
Summarized Financial Results
Three months ended March 31, (In millions 2011 2010 % Chg of dollars, except margin) Operating revenue Cable $ 468 $ 458 $ 2 Television 224 Internet 121 204 10 Home Phone 128 (5) Total Cable 813 Operations 790 3 operating revenue Operating expenses before the undernoted Cost of equipment 6 14 (57) sales 425 Other 436 (3) operating expenses 431 450 (4) Adjusted 382 operating 340 12 profit Stock-based (1) compensation (3) (67) expense Other items, - n/m net (7) Operating $ 381 $ 330 $ 15 profit Adjusted 47.0% 43.0% operating profit margin
Summarized Subscriber Results
Three months ended March 31, (Subscriber 2011 2010 Chg statistics in thousands) Cable homes passed 3,734 3,646 88 Television Net additions (losses) (8) 1 (9) Total television 2,303 2,296 subscribers 7 Digital cable Households, net additions 5 26 (21) Total digital 1,743 1,689 cable households 54 Cable high-speed Internet Net additions Total cable 8 17 (9) high-speed 1,698 1,636 Internet 62 subscribers Cable telephony lines Net additions and migrations 7 22 (15) Total cable 1,014 959 telephony lines 55 Total cable service units Net additions Total cable 7 40 (33) service units 5,015 4,891 124 Circuit-switched lines Net losses and migrations to (6) (16) 10 cable telephony 108 platform 28 (80) Total circuit-switched lines
Cable Television Revenue
The increase in Cable Television revenue for the three months ended
March 31, 2011, compared to the corresponding period of 2010, reflects
the continued increase in penetration of our digital cable product
offerings and pricing changes. The slowdown in the year-over-year
growth rate of Cable Television revenue from the fourth quarter of 2010
to the first quarter of 2011 partially reflects on-going targeted
bundling and retention initiatives to transition portions of the
subscriber base to term contracts and a lower number of subsidized
digital box sales.
Cable continues to lead the Canadian cable industry in digital cable
penetration. The digital cable subscriber base grew by 3% and
represented 76% of television subscriber base as at March 31, 2011,
compared to 74% as at March 31, 2010. Increased demand from subscribers
for the larger selection of digital content, video on-demand, HDTV and
personal video recorder (“PVR”) equipment continues to contribute to
the growth in the digital subscriber base and cable television revenue.
Cable Internet Revenue
The year-over-year increase in Internet revenue for the three months
ended March 31, 2011 primarily reflects the increase in the Internet
subscriber base, combined with Internet services price changes made in
July 2010 and the timing and mix of promotional programs.
With the high-speed Internet base at approximately 1.7 million
subscribers, Internet penetration is approximately 45% of the homes
passed by our cable networks and 74% of our television subscriber base,
as at March 31, 2011.
Home Phone Revenue
Home Phone revenue for the three months ended March 31, 2011, reflects
the year-over-year growth in the cable telephony customer base with a
corresponding cable telephony revenue growth of approximately 5%,
offset by the ongoing decline of the legacy circuit-switched telephony
base. This decline of the legacy circuit-switched telephony base was
80,000 compared to the base as at March 31, 2010. During the three
months ended March 31, 2011, approximately 12,000 circuit-switched
lines were migrated, of which 9,000 were migrated to a third-party
reseller, and the remaining 3,000 were migrated to RBS. The lower net
additions of cable telephony lines in the three months ended March 31,
2011, versus the corresponding period of 2010, are the result of lower
sales and increased competition.
Cable telephony lines in service grew 6% from March 31, 2010 to March
31, 2011. At March 31, 2011, cable telephony lines represented 27% of
the homes passed by our cable networks and 44% of television
Cable continues to focus principally on growing its on-net cable
telephony line base. Therefore, it continues its strategy to
de-emphasize the off-net circuit-switched telephony business where
services cannot be provided fully over Rogers’ own network facilities.
During the third quarter of 2010, Cable announced that it was divesting
most of the assets related to the remaining circuit-switched telephony
operations. Under this arrangement, most of its co-location sites and
related equipment were sold. In addition, the sale involved residential
circuit-switched lines, with the customers served by these facilities
being migrated to a third party reseller starting late in the third
quarter of 2010 and continuing over the first half of 2011.
Approximately 42,000 of these subscribers have been migrated, leaving
approximately 28,000 lines which will be migrated during the second
quarter of 2011. For the three months ended March 31, 2011 the revenue
reported by Cable Operations associated with the residential
circuit-switched telephony business being divested totalled
approximately $7 million.
Excluding the impact of the declining circuit-switched telephony
business that Cable is in the process of divesting, the year-over-year
revenue growth for Home Phone and for Cable Operations overall for the
three months ended March 31, 2011 would have been 5% and 5%,
Cable Operations Operating Expenses
The decrease in Cable Operations’ operating expenses for the three
months ended March 31, 2011, compared to the corresponding period of
2010, was primarily due to lower equipment sales and cost reduction and
efficiency initiatives across various functions. Cable Operations
continues to focus on implementing a program of permanent cost
reduction and efficiency improvement initiatives to control the overall
growth in operating expenses.
Cable Operations Adjusted Operating Profit
The year-over-year growth in adjusted operating profit was primarily the
result of the revenue growth and cost changes described above. As a
result, Cable Operations’ adjusted operating profit margins increased
to 47.0% for the three months ended March 31, 2011, compared to 43.0%
in the corresponding period of 2010.
ROGERS BUSINESS SOLUTIONS
Summarized Financial Results
Three months ended March 31, (In millions 2011 2010 % Chg of dollars, except margin) Operating $ 116 $ 111 revenue 5 Operating (13) expenses 90 103 before the undernoted Adjusted n/m operating 26 8 profit Integration, restructuring (1) (1) - and acquisition expenses Operating $ $ n/m profit 25 7 Adjusted 22.4% 7.2% operating profit margin
Summarized Subscriber Results
Three months ended March 31, (Subscriber 2011 2010 Chg statistics in thousands) Local line equivalents Total local line 143 162 (19) equivalents Broadband data circuits Total 53 broadband 33 20 data circuits
RBS revenues include external revenues only and any intercompany
revenues are treated as cost recoveries in our current presentation.Â
Previously, intercompany revenues were included in RBS revenues.Â
Comparative futures for 2010 have been reclassified to conform to the
current year’s presentation.
The increase in RBS revenues primarily reflects the acquisition of
Atria, partially offset by the ongoing decline in the legacy portions
of the business. RBS is focused on leveraging on-net and near-net
revenue opportunities utilizing both the acquired Atria network and
Cable’s existing network facilities to expand offerings to the
medium-sized enterprise customer base. For the three months ended March
31, 2011, the acquisition of Atria contributed revenue of $20 million,
principally in the areas of data and Internet, which was partially
offset by a decline in long-distance revenue and a decline in local
revenues, compared to the corresponding period of 2010.
RBS Operating Expenses
Operating expenses decreased for the three months ended March 31, 2011,
compared to the corresponding period of 2010 and reflects the decrease
in long-distance costs due to lower volumes and country mix, lower
sales and marketing within the medium and large enterprise and carrier
segments, and operating efficiencies with the integration of Blink and
RBS Adjusted Operating Profit
The year-over-year growth in adjusted operating profit reflects the
acquisition of the higher margin Atria and Blink data businesses and
the RBS focus on growing its on-net data revenue which has more than
offset the declines in the lower margin voice business. Cost reductions
and efficiency initiatives across various functions have also
contributed to higher operating profit in the quarter. For the three
months ended March 31, 2011, Atria contributed adjusted operating
profit of $13 million. RBS adjusted operating profit margins increased
to 22.4% for the three months ended March 31, 2011, compared to 7.2% in
the corresponding period of 2010.
Summarized Financial ResultsÂ
Three months ended March 31, (In millions 2011 2010 % Chg of dollars, except margin) Operating $ 24 $ 41 revenue (41) Operating 31 43 expenses (28) before the undernoted Adjusted n/m operating (7) (2) loss Integration, n/m restructuring (7) - and acquisition expenses Other items, n/m net - 2 Operating $ (14) $ - n/m loss Adjusted (29.2%) (4.9%) operating loss margin
The results of the Video segment include our video and game sale and
rental business. Previously, the Rogers Retail segment also included
the retail distribution of cable and wireless products and services.
The business related to retail distribution of cable and wireless
products and services are now included in the results of operations of
Cable Operations and Wireless, respectively. Comparative figures for
2010 have been reclassified to conform to the current year’s
The decrease in Video revenue for the three months ended March 31, 2011,
compared to the corresponding period of 2010, was the result of a
continued decline in video rental and sales activity much of which is
associated with the closure of 74 low margin store locations.
Video Adjusted Operating Loss
The adjusted operating loss at Video increased for the three months
ended March 31, 2011, compared to the corresponding period of 2010,
reflecting the trends noted above.
Cable Additions to PP&E
Cable additions to PP&E are classified into the following categories:
Three months ended March 31, (In millions of 2011 2010 % Chg dollars) Additions to PP&E Customer $ 46 $ 46 premise 60 - equipment 40 50 Scalable 9 13 infrastructure 8 (67) Line 1 62 extensions 34 3 Upgrades and rebuild 21 Support capital Total Cable 150 118 27 Operations RBS 11 83 6 Video n/m - 1 $ 161 $ 125 29
The Cable Operations segment categorizes its PP&E expenditures according
to a standardized set of reporting categories that were developed and
agreed to by the U.S. cable television industry and that facilitate
comparisons of additions to PP&E between different cable companies.
Under these industry definitions, Cable Operations additions to PP&E
are classified into the following five categories:
-- Customer premise equipment ("CPE"), which includes the equipment for digital set-top terminals, Internet modems and associated installation costs; -- Scalable infrastructure, which includes non-CPE costs to meet business growth and to provide service enhancements, including many of the costs to date of the cable telephony initiative; -- Line extensions, which includes network costs to enter new service areas; -- Upgrades and rebuild, which includes the costs to modify or replace existing coaxial cable, fibre-optic equipment and network electronics; and -- Support capital, which includes the costs associated with the purchase, replacement or enhancement of non-network assets.
Additions to Cable PP&E include continued investments in the cable
network to enhance the customer experience through increased speed and
performance of our Internet service and capacity enhancements to our
digital network to allow for incremental HD and On-Demand services to
The increase in Cable Operations PP&E for the three months ended March
31, 2011, compared to the corresponding period of 2010 resulted
primarily from higher Scalable infrastructure and Support capital
expenditures due to projects associated with increasing capacity on our
Video platform and quality related investments on our Voice platform.
The increases in RBS PP&E additions for the three months ended March 31,
2011 reflect the timing of expenditures on customer networks and
Summarized Media Financial Results
Three months ended March 31, (In millions 2011 2010 % Chg of dollars, except margin) Operating $ 339 $ 290 revenue 17 Operating 285 expenses 349 22 before the undernoted Adjusted n/m operating (10) 5 profit (loss) Stock-based compensation (2) (4) (50) expense Integration, n/m restructuring (3) - and acquisition expenses Operating $ $ 1 n/m profit (loss) (15) Adjusted (2.9%) 1.7% operating profit (loss) margin Additions to $ $ 4 PP&E 8 100
The 17% increase in Media’s revenue for the three months ended March 31,
2011, compared to the corresponding period of 2010, was mainly the
result of new subscriber fees generated from Sportsnet ONE and
increases in advertising sales. Overall, all divisions within Media
experienced a growth in revenue for the three months ended March 31,
2011, compared to the corresponding period of 2010.
Media Operating Expenses
Media’s operating expenses for the three months ended March 31, 2011
increased, compared to the corresponding period of 2010, due primarily
to planned increases in Television programming costs, principally in
the area of sports content. In the first quarter, Media broadcasts a
seasonally high and growing amount of relatively expensive NHL and NBA
programming. Those expenses moderate during the off-season quarters
while subscriber fees stay relatively constant thus contributing to
increasing margins in those quarters.
Media Adjusted Operating Profit (Loss)
The first quarter is historically the seasonally weakest margin quarter
for Media. The decrease in Media’s adjusted operating profit for the
three months ended March 31, 2011, compared to the corresponding period
of 2010, primarily reflects the revenue and expense changes discussed
above. The acquisition of BV! Media contributed approximately $4
million of revenue and $2 million of expenses during the quarter.
Media Additions to PP&E
Media’s PP&E additions during the three months ended March 31, 2011
increased from the corresponding period in 2010 due primarily to
Television broadcast equipment additions related to the CRTC mandated
digital transition and facilities upgrades at The Shopping Channel.
Other Media Developments
On January 31, 2011, we closed agreements to acquire BOUNCE (CHBN-FM) in
Edmonton, Alberta and BOB-FM (CHST-FM) in London, Ontario.
2011 FINANCIAL AND OPERATING GUIDANCE
We have no specific revisions to the 2011 annual guidance ranges which
we provided on February 16, 2011. See the section entitled “Caution
Regarding Forward-Looking Statements, Risks and Assumptions” below.
Rogers Communications Inc.
Unaudited Interim Consolidated Statements of Income
(In millions of dollars, except per share amounts)
Three months ended March 31, 2011 2010 Operating revenue $ 2,987 $ 2,876 Operating expenses: Operating costs 1,835 1,758 Integration, restructuring and 11 2 acquisition costs 418 406 Depreciation and amortization Operating income 723 710 Finance costs (268) (183) Other income (expense), net 2 (2) Share of the income of associates and joint ventures 3 4 accounted for using the equity method, net of tax Income before income taxes 460 529 Income tax expense (recovery): Current 145 114 Deferred (20) 47 125 161 Net income for the period $ 335 $ 368 Earnings per share: Basic $ 0.60 $ 0.62 Diluted 0.60 0.62
Rogers Communications Inc.
Unaudited Interim Consolidated Balance Sheets
(In millions of dollars)
March 31, December January 1, 2011 31, 2010 2010 Assets Current assets: Cash and $ $ $ cash equivalents Accounts receivable - - 378 Other 1,405 1,498 1,305 current 462 364 338 assets - 1 4 Current portion of derivative instruments 1,867 1,863 2,025 Property, plant and equipment Goodwill 8,598 8,437 8,136 Intangible 3,282 3,108 3,011 assets 2,728 2,514 2,540 Investments 946 878 699 Derivative 3 6 78 instruments 169 175 152 Other 57 52 84 long-term assets Deferred tax assets $ 17,650 $ 17,033 $ 16,725 Liabilities and Shareholders' Equity Current liabilities: Bank $ $ $ advances Accounts payable and accrued liabilities Income tax payable 49 45 - Current 1,735 2,133 2,066 portion of 520 376 208 provisions 19 21 14 Current - - 1 portion of 56 67 80 long-term 363 329 335 debt Current portion of derivative instruments Unearned revenue 2,742 2,971 2,704 Provisions Long-term debt 62 62 58 Derivative 9,726 8,654 8,396 instruments 642 840 1,004 Other 216 229 177 long-term 567 517 230 liabilities Deferred tax liabilities 13,955 13,273 12,569 Shareholders' 3,695 3,760 4,156 equity $ 17,650 $ 17,033 $ 16,725
Rogers Communications Inc.
Unaudited Interim Consolidated Statements of Cash Flows
(In millions of dollars)
Three months ended March 31, 2011 2010 Cash provided by (used in): Operating activities: Net income $ 335 $ 368 Adjustments to reconcile net income to net cash flows from operating activities: Depreciation and amortization Program rights and Video rental amortization Finance costs 418 406 Current income tax expense 51 49 Deferred taxes 268 183 Pension contributions, net 145 114 of expense (20) 47 Stock-based compensation (2) (12) expense 8 26 Amortization of fair value - (2) increment on long-term debt (3) (4) Share of the income of 4 4 associates and joint ventures accounted for using the equity method, net of tax Other 1,204 1,179 Change in non-cash operating (240) (183) working capital items 964 996 Income taxes paid (3) (7) Interest paid (222) (146) 739 843 Investing activities: Additions to property, plant (395) (365) and equipment ("PP&E") (128) (89) Change in non-cash working (504) (130) capital items related to (31) (46) PP&E (3) 8 Acquisitions, net of cash and cash equivalents acquired Additions to program rights Other (1,061) (622) Financing activities: Issuance of long-term debt 3,015 - Repayment of long-term debt (1,817) - Premium on repayment of (76) - long-term debt Payment on settlement of (1,208) - cross-currency interest rate exchange 878 - agreement and forward (10) - contacts (285) (302) Proceeds on settlement of - 1 cross-currency interest rate (179) (175) exchange agreement and forward contacts Financing costs incurred Repurchase of Class B Non-Voting shares Proceeds received on exercise of stock options Dividends paid 318 (476) Decrease in cash and cash (4) (255) equivalents (bank advances) Cash and cash equivalents (bank (45) 378 advances), beginning of period Cash and cash equivalents (bank $ (49) $ 123 advances), end of period The change in non-cash operating working capital items is as follows: Decrease in accounts $ 102 $ 141 receivable (109) (118) Increase in other assets (259) (225) Decrease in accounts payable 3 - and accrued liabilities 23 19 Increase in income tax payable Increase in unearned revenue $ 240 $ (183)
Caution Regarding Forward-Looking Statements, Risks and Assumptions
This earnings release includes forward-looking statements and
assumptions concerning our business, its operations and its financial
performance and condition approved by management on the date of this
earnings release. These forward-looking statements and assumptions
include, but are not limited to, statements with respect to our
objectives and strategies to achieve those objectives, statements with
respect to our beliefs, plans, expectations, anticipations, estimates
or intentions, including guidance and forecasts relating to revenue,
adjusted operating profit, PP&E expenditures, free cash flow, dividend
payments, expected growth in subscribers and the services to which they
subscribe, the cost of acquiring subscribers and the deployment of new
services, the currently estimated financial impacts of converting to
IFRS accounting standards, and all other statements that are not
historical facts. Such forward-looking statements are based on current
objectives, strategies, expectations and assumptions, most of which are
confidential and proprietary, that we believe to be reasonable at the
time including, but not limited to, general economic and industry
growth rates, currency exchange rates, product pricing levels and
competitive intensity, subscriber growth and usage rates, changes in
government regulation, technology deployment, device availability, the
timing of new product launches, content and equipment costs, the
integration of acquisitions, industry structure and stability, and
current guidance from accounting standard bodies with respect to the
conversion to IFRS accounting standards.
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 or announced or may occur
after the date of the financial information contained herein.
We caution that all forward-looking information, including any statement
regarding our current intentions, is inherently subject to change and
uncertainty and that actual results may differ materially from the
assumptions, estimates or expectations reflected in the forward-looking
information. A number of factors could cause actual results to differ
materially from those in the forward-looking statements or could cause
our current objectives and strategies to change, including but not
limited to new interpretations from accounting standards bodies,
economic conditions, technological change, the integration of
acquisitions, unanticipated changes in content or equipment costs,
changing conditions in the entertainment, information and
communications industries, regulatory changes, litigation and tax
matters, the level of competitive intensity and the emergence of new
opportunities, many of which are beyond our control and current
expectation or knowledge. Therefore, should one or more of these risks
materialize, should our objectives or strategies change, or should any
other factors underlying the forward-looking statements prove
incorrect, actual results and our plans may vary significantly from
what we currently foresee. Accordingly, we warn investors to exercise
caution when considering any such forward-looking information herein
and that it would be unreasonable to rely on such statements as
creating any 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 forward-looking statements or assumptions whether
as a result of new information, future events or otherwise, except as
required by law.
Before making any investment decisions and for a detailed discussion of
the risks, uncertainties and environment associated with our business,
fully review the sections entitled “Risks and Uncertainties Affecting
our Businesses” and “Government Regulation and Regulatory Developments”
in our 2010 Annual MD&A. Our annual and quarterly reports can be found
online at rogers.com, sedar.com and sec.gov or are available directly from Rogers.
About Rogers Communications Inc.
Rogers Communications is a diversified Canadian communications and media
company. We are Canada’s largest provider of wireless voice and data
communications services and one of Canada’s leading providers of cable
television, high-speed Internet and telephony services. Through Rogers
Media we are engaged in radio and television broadcasting, televised
shopping, magazines and trade publications, sports entertainment, and
digital media. We are 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
Quarterly Investment Community Conference Call
As previously announced by press release, a live webcast of our
quarterly results conference call with the investment community will be
broadcast via the Internet at rogers.com/webcast beginning at 5:00 p.m. ET today, April 26, 2011. A rebroadcast of this
teleconference will be available on the Webcast Archive page of the
Investor Relations section of rogers.com for a period of at least two
weeks following the conference call.
SOURCE Rogers Communications Inc.