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
Divisions;
$464 Million of Cash Returned to Rogers Shareholders in Dividends and
Share Buybacks
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
SEGMENT REVIEW
WIRELESS
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
competitive intensity.
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
equipment spending.
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
system.
CABLE
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.
CABLE OPERATIONSÂ
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
subscribers.
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%,
respectively.
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 Revenue
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
Atria.
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.
Â
VIDEO
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
presentation.
Video Revenue
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
be added.
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
support capital.
MEDIA
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
Media Revenue
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
visit rogers.com.
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.
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SOURCE Rogers Communications Inc.
