Consolidated Revenue Grows 14% to $2.6 Billion, Adjusted Operating Profit
Increases 21% to $984 Million, and Net Income Increases 102% to $344
Million;
Wireless Postpaid Net Subscriber Additions Grow to 97,000, with ARPU up 7%
and Churn Down to 1.10%;
Cable Drives Continued Strong Net Additions of Revenue Generating Units and
Crosses the One-Million Subscriber Mark for Home Telephone Customers as
Margins Expand
Wireless Announced It Will Bring the iPhone to Canada Later This Year
TORONTO, April 29 /PRNewswire-FirstCall/ - Rogers Communications Inc.
today announced its consolidated financial and operating results for the
three months ended March 31, 2008.
Financial highlights are as follows:
-------------------------------------------------------------------------
Three months ended March 31,
(In millions of dollars, ------------------------------
except per share amounts) 2008 2007 % Chg
-------------------------------------------------------------------------
Operating revenue $ 2,609 $ 2,298 14
Operating profit(1) 1,095 798 37
Net income 344 170 102
Net income per share:
Basic $ 0.54 $ 0.27 100
Diluted 0.54 0.26 108
As adjusted:(2)
Operating profit $ 984 $ 814 21
Net income 270 186 45
Net income per share:
Basic $ 0.42 $ 0.29 45
Diluted 0.42 0.29 45
-------------------------------------------------------------------------
(1) Operating profit should not be considered as a substitute or
alternative for operating income or net income, in each case
determined in accordance with Canadian generally accepted accounting
principles ("GAAP"). See the "Reconciliation of Net Income to
Operating Profit and Adjusted Operating Profit" section for a
reconciliation of operating profit and adjusted operating profit to
operating income and net income under Canadian GAAP and the "Key
Performance Indicators and Non-GAAP Measures" section.
(2) For details on the determination of the 'as adjusted' amounts, which
are non-GAAP measures, see the "Supplementary Information" and the
"Key Performance Indicators and Non-GAAP Measures" sections. The 'as
adjusted' amounts presented above are reviewed regularly by
management and our Board of Directors in assessing our performance
and in making decisions regarding the ongoing operations of the
business and the ability to generate cash flows. The 'as adjusted'
amounts exclude (i) stock-based compensation (recovery) expense; (ii)
integration and restructuring expenses; and (iii) in respect of net
income and net income per share, the related income tax impact of the
above amounts.
Highlights of the first quarter of 2008 include the following:
- Generated continued strong double-digit growth in quarterly revenue
and adjusted operating profit of 14% and 21%, respectively, while net
income increased 102% to $344 million (or by 45% to $270 million on
an adjusted basis) and adjusted operating profit less interest
expense and PP&E additions rose 94% to $525 million.
- Wireless subscriber postpaid net additions were 97,000, while
postpaid subscriber monthly churn was reduced to 1.10% from 1.17% in
the first quarter of 2007. Wireless postpaid monthly ARPU (average
revenue per user) increased 7% year-over-year to $72.39 driven in
part by the 47% growth in data revenue to $206 million, or 15.1% of
network revenue.
- Fido announced that four years after its launch, Fido Rewards is now
the most successful wireless membership rewards program in North
America having surpassed the one million membership milestone.
- Wireless announced it had reached an agreement with Apple to bring
the iPhone to Canada later this year. Information regarding device
availability and service plans will be announced at a later date.
- Cable ended the quarter with 702,000 residential voice-over-cable
telephony subscriber lines, reflecting net additions of 46,000 lines
for the quarter, of which approximately 3,000 were migrations from
the circuit-switched platform. Early in the first quarter, Cable
added its one-millionth Rogers Home Phone customer, including voice-
over-cable and circuit-switched lines.
- Cable's Internet subscriber base grew by 41,000 in the quarter to
1,510,000, and digital cable households increased by 49,000 to reach
1,402,000. During the quarter, Cable increased the speeds for its
Internet access services, and also implemented monthly usage
allowances and monitoring tools, while usage-based billing on a per
gigabyte basis for very heavy usage customers is phased in.
- Cable announced that it had entered into an agreement to acquire
Aurora Cable TV Limited ("Aurora Cable"). This transaction has not
yet closed pending Canadian Radio-television and Telecommunications
Commission ("CRTC") approval, which is expected in 2008. Aurora Cable
provides cable television, Internet and telephony services in the
Town of Aurora and the community of Oak Ridges, in Richmond Hill,
Ontario.
- Availability of the Rogers Portable Internet service was expanded to
now include more than 150 urban and rural communities across Canada.
With this most recent expansion, the Inukshuk joint venture's network
has become the second largest broadband fixed wireless network in the
world.
- Media announced an arrangement with the Buffalo Bills that will see
the team play eight NFL games at the 54,000 seat Rogers Centre over
the next five years. Indications of interest for ticket purchases for
the eight game series has already greatly exceeded the available
seating capacity.
- Media also announced that the CRTC has approved the acquisition of
Vancouver's ethnic television station, Channel m. Channel m will
become a Rogers OMNI TV property joining OMNI.1 and OMNI.2 in Ontario
and, beginning in the fall of 2008, the newly licenced OMNI TV
channels launching in Calgary and Edmonton. The transaction is
expected to close on April 30, 2008.
- Rogers' Board of Directors approved an increase in the annual
dividend from $0.50 to $1.00 per share to be paid in quarterly
amounts of $0.25 per share effective with the quarterly dividend
which was declared on February 21, 2008. At the same time, Rogers
also filed a Normal Course Issuer Bid ("NCIB") which authorizes us to
repurchase up to the lesser of 15 million of its Class B Non-Voting
shares and that number of Class B Non-Voting shares that can be
purchased under the NCIB for an aggregate purchase price of
$300 million.
"This was a robust start to 2008 both operationally and financially for
which I'm thankful to our loyal customers and our thousands of hard working
employees," said Ted Rogers, President and CEO of Rogers Communications
Inc. "While many challenges lie ahead in the coming quarters, we are well
on track to deliver another year of strong growth in both subscribers and
profitability. Our focus as 2008 continues to unfold remains solidly upon
disciplined execution, excellence in customer service and unparalleled
innovation that adds value to our customers' lives."
MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE THREE MONTHS ENDED MARCH 31, 2008
This management's discussion and analysis ("MD&A"), which is current as
of April 28, 2008, should be read in conjunction with our 2007 Annual MD&A
and our 2007 Annual Audited Consolidated Financial Statements and Notes
thereto. The financial information presented herein has been prepared on
the basis of Canadian generally accepted accounting principles ("GAAP") for
interim financial statements and is expressed in Canadian dollars. Please
refer to Note 26 to our 2007 Annual Audited Consolidated Financial
Statements for a summary of the differences between Canadian GAAP and
United States ("U.S.") GAAP for the year ended December 31, 2007.
In this MD&A, the terms "we", "us", "our", "Rogers" and "the Company"
refer to Rogers Communications Inc. and our subsidiaries, which are
reported in the following segments:
- "Wireless", which refers to our wireless communications operations,
including Rogers Wireless Partnership ("RWP") and Fido Solutions
Inc.;
- "Cable" (formerly "Cable and Telecom"), which refers to our wholly
owned cable television subsidiaries, including Rogers Cable
Communications Inc. ("RCCI"); and
- "Media", which refers to our wholly owned subsidiary Rogers Media
Inc. and its subsidiaries, including Rogers Broadcasting, which owns
a group of 52 radio stations, the CityTV television network, the
Rogers Sportsnet television network, The Shopping Channel, the OMNI
television stations, and Canadian specialty channels including
Biography and G4TechTV; Rogers Publishing, which publishes
approximately 70 magazines and trade journals; and Rogers Sports
Entertainment, which owns the Toronto Blue Jays Baseball Club ("Blue
Jays") and the Rogers Centre. Media also holds ownership interests in
entities involved in specialty television content, television
production and broadcast sales.
"RCI" refers to the legal entity Rogers Communications Inc. excluding
our subsidiaries.
Throughout this MD&A, percentage changes are calculated using numbers
rounded to which they appear.
SUMMARIZED CONSOLIDATED FINANCIAL RESULTS
-------------------------------------------------------------------------
Three months ended March 31,
(In millions of dollars, ------------------------------
except per share amounts) 2008 2007 % Chg
-------------------------------------------------------------------------
Operating revenue
Wireless $ 1,431 $ 1,231 16
Cable
Cable Operations 695 620 12
RBS 133 145 (8)
Rogers Retail 100 91 10
Corporate items and eliminations (3) (1) n/m
------------------------------
925 855 8
Media 307 266 15
Corporate items and eliminations (54) (54) -
------------------------------
Total 2,609 2,298 14
------------------------------
------------------------------
Adjusted operating profit (loss)(1)
Wireless 705 581 21
Cable
Cable Operations 283 234 21
RBS 17 (7) n/m
Rogers Retail 3 1 200
------------------------------
303 228 33
Media 2 19 (89)
Corporate items and eliminations (26) (14) 86
------------------------------
Adjusted operating profit(1) 984 814 21
Stock-based compensation recovery (expense)(2) 116 (15) n/m
Integration and restructuring expenses(3) (5) (1) n/m
------------------------------
Operating profit(1) 1,095 798 37
Other income and expense, net(4) 751 628 20
------------------------------
Net income $ 344 $ 170 102
------------------------------
------------------------------
Net income per share:
Basic $ 0.54 $ 0.27 100
Diluted 0.54 0.26 108
As adjusted:(1)
Net income $ 270 $ 186 45
Net income per share:
Basic $ 0.42 $ 0.29 45
Diluted 0.42 0.29 45
Additions to property, plant and
equipment ("PP&E")(1)
Wireless $ 163 $ 232 (30)
Cable
Cable Operations 121 125 (3)
RBS 4 23 (83)
Rogers Retail 3 3 -
------------------------------
128 151 (15)
Media 21 7 200
Corporate 9 4 125
------------------------------
Total $ 321 $ 394 (19)
-------------------------------------------------------------------------
(1) As defined. See the "Supplementary Information" and the "Key
Performance Indicators and Non-GAAP Measures" sections.
(2) See the section entitled "Stock-based Compensation".
(3) Costs incurred relate to the integration of Call-Net Enterprises Inc.
("Call-Net"), the restructuring of Rogers Business Solutions and the
closure of certain Rogers Retail stores.
(4) See the "Reconciliation of Net Income to Operating Profit and
Adjusted Operating Profit for the Period" section for details of
these amounts.
n/m: not meaningful.
For discussions of the results of operations of each of these segments,
refer to the respective segment sections of this MD&A.
Reconciliation of Net Income to Operating Profit and Adjusted Operating
Profit for the Period
The items listed below represent the consolidated income and expense
amounts that are required to reconcile net income as defined under Canadian
GAAP to the non-GAAP measures operating profit and adjusted operating
profit for the period. See the "Supplementary Information" section for a
full reconciliation to adjusted operating profit, adjusted net income, and
adjusted net income per share. For details of these amounts on a
segment-by-segment basis and for an understanding of intersegment
eliminations on consolidation, the following section should be read in
conjunction with Note 2 to the Interim Consolidated Financial Statements
entitled "Segmented Information".
-------------------------------------------------------------------------
Three months ended March 31,
------------------------------
(In millions of dollars) 2008 2007 % Chg
-------------------------------------------------------------------------
Net income $ 344 $ 170 102
Income tax expense 170 86 98
Other income, net (8) (1) n/m
Change in the fair value of
derivative instruments 4 4 -
Foreign exchange loss (gain) 7 (10) n/m
Interest on long-term debt 138 149 (7)
------------------------------
Operating income 655 398 65
Depreciation and amortization 440 400 10
------------------------------
Operating profit 1,095 798 37
Stock-based compensation (recovery) expense (116) 15 n/m
Integration and restructuring expenses 5 1 n/m
------------------------------
Adjusted operating profit $ 984 $ 814 21
-------------------------------------------------------------------------
Net Income and Net Income Per Share
We recorded net income of $344 million for the three months ended March
31, 2008, or basic and diluted earnings per share of $0.54, compared to net
income of $170 million or basic earnings per share of $0.27 (diluted -
$0.26) in the corresponding period in 2007.
Income Tax Expense
Due to our non-capital loss carryforwards, our income tax expense for
the three months ended March 31, 2008, and 2007, substantially represents
non-cash income taxes. Our effective tax rate for the three months ended
March 31, 2008, was 33.1%, which was not materially different than the 2008
statutory tax rate of 32.7%. The effective tax rate for the three months
ended March 31, 2007, was 33.6%. The effective rate was less than the 2007
statutory rate of 35.8% primarily due to realized capital gains, only 50%
of which are subject to income tax.
Foreign Exchange Loss (Gain)
During the three months ended March 31, 2008, the Canadian dollar
weakened by 3.98 cents versus the U.S. dollar. This resulted in a foreign
exchange loss of $7 million during the three months ended March 31, 2008.
During the corresponding period of 2007, the Canadian dollar strengthened
by 1.24 cents versus the U.S. dollar. This resulted in a foreign exchange
gain of $10 million during the three months ended March 31, 2007 related to
the U.S. dollar-denominated long-term debt not hedged for accounting
purposes.
Interest on Long-Term Debt
Interest expense decreased by $11 million, for the three months ended
March 31, 2008 compared to the corresponding period in 2007. The decrease
in interest expense is primarily due to the $433 million decrease in
long-term debt at March 31, 2008 compared to March 31, 2007, including the
impact of cross-currency interest rate exchange agreements.
This decrease in debt was largely the result of the May 2007 redemption
of Wireless' US$550 million Floating Rate Senior Notes due 2010 and the
June 2007 redemption of Wireless' US$155 million 9.75% Senior Debentures
due 2016. These repayments were partially offset by the $393 million net
increase in bank debt as at March 31, 2008 compared to March 31, 2007.
Operating Income
The 65% increase in our operating income, for the three months ended
March 31, 2008, compared to the corresponding period of the prior year, to
$655 million from $398 million, is due to the growth in revenue of $311
million exceeding the growth in operating expenses of $54 million. See the
section entitled "Segment Review" for a detailed discussion of respective
segment results.
Depreciation and Amortization Expense
The increase in depreciation and amortization expense for the three
months ended March 31, 2008, compared to the corresponding period of the
prior year, reflects an increase in depreciation of PP&E, partially offset
by a decrease in amortization of intangible assets related to certain
fully-amortized intangible assets from the acquisition of Fido in 2004.
Stock-based Compensation
On May 28, 2007, our stock option plans were amended to attach cash
settled share appreciation rights ("SARs") to all new and previously
granted options. As a result, all outstanding stock options are now
classified as liabilities and are carried at their intrinsic value, as
adjusted for vesting, measured as the difference between the current stock
price and the option exercise price. The intrinsic value of the liability
is marked to market each period and is amortized to expense over the period
in which the related services are rendered, which is usually the graded
vesting period, or, as applicable, over the period to the date an employee
is eligible to retire, whichever is shorter.
A summary of stock-based compensation (recovery) expense is as follows:
-------------------------------
Stock-based Compensation
(Recovery) Expense Included in
Operating, General and
Administrative Expenses
-------------------------------------------------------------------------
Three months ended March 31,
-------------------------------
(In millions of dollars) 2008 2007
-------------------------------------------------------------------------
Wireless $ (10) $ 3
Cable (33) 3
Media (20) 2
Corporate (53) 7
-------------------------------
$ (116) $ 15
-------------------------------------------------------------------------
At March 31, 2008, we have a liability of $359 million related to
stock-based compensation recorded at its intrinsic value, including stock
options, restricted share units and deferred share units. In the three
months ended March 31, 2008, $21 million was paid to option holders upon
exercise of options using the SAR feature, including stock options and
restricted share units.
Adjusted Operating Profit
For the three months ended March 31, 2008, adjusted operating profit
increased to $984 million, from $814 million in the corresponding period of
the prior year. Wireless and Cable both contributed to the increase in
adjusted operating profit, partially offset by a decline in adjusted
operating profit in Media. Refer to the individual segment discussions for
details of the respective changes in adjusted operating profit. Relative to
operating profit, adjusted operating profit for the three months ended
March 31, 2008 and 2007, respectively, excludes: (i) stock-based
compensation (recovery) expense of $(116) million and $15 million; and (ii)
integration and restructuring expenses of $5 million and $1 million.
For details on the determination of adjusted operating profit, which is
a non-GAAP measure, see the "Supplementary Information" and the "Key
Performance Indicators and Non-GAAP Measures" sections.
SEGMENT REVIEW
WIRELESS
--------
Summarized Wireless Financial Results
-------------------------------------------------------------------------
Three months ended March 31,
------------------------------
(In millions of dollars, except margin) 2008 2007 % Chg
-------------------------------------------------------------------------
Operating revenue
Postpaid $ 1,294 $ 1,104 17
Prepaid 66 61 8
One-way messaging 3 4 (25)
------------------------------
Network revenue 1,363 1,169 17
Equipment sales 68 62 10
------------------------------
Total operating revenue 1,431 1,231 16
------------------------------
Operating expenses before the undernoted
Cost of equipment sales 145 144 1
Sales and marketing expenses 140 140 -
Operating, general and administrative
expenses 441 366 20
------------------------------
726 650 12
------------------------------
Adjusted operating profit(1)(2) 705 581 21
Stock-based compensation recovery
(expense)(3) 10 (3) n/m
------------------------------
Operating profit(1) $ 715 $ 578 24
------------------------------
------------------------------
Adjusted operating profit margin as %
of network revenue(1) 51.7% 49.7%
Additions to PP&E(1) $ 163 $ 232 (30)
-------------------------------------------------------------------------
(1) As defined. See the "Key Performance Indicators and Non-GAAP
Measures" and the "Supplementary Information" sections.
(2) Adjusted operating profit includes a loss of $4 million and
$7 million related to the Inukshuk wireless broadband initiative for
the three months ended March 31, 2008 and 2007, respectively.
(3) See the section entitled "Stock-based Compensation".
Summarized Wireless Subscriber Results
-------------------------------------------------------------------------
Three months ended March 31,
(Subscriber statistics in thousands, ------------------------------
except ARPU, churn and usage) 2008 2007 Chg
-------------------------------------------------------------------------
Postpaid
Gross additions 293 285 8
Net additions 97 95 2
Total postpaid retail subscribers 6,011 5,493 518
Average monthly revenue per user
("ARPU")(1) $ 72.39 $ 67.64 $ 4.75
Average monthly usage (minutes) 570 534 36
Monthly churn 1.10% 1.17% (0.07%)
Prepaid
Gross additions 133 144 (11)
Net losses (29) (9) (20)
Total prepaid retail subscribers 1,395 1,371 24
ARPU(1) $ 15.70 $ 14.76 $ 0.94
Monthly churn 3.81% 3.69% 0.12%
-------------------------------------------------------------------------
(1) As defined. See the "Key Performance Indicators and Non-GAAP
Measures" section. As calculated in the "Supplementary Information"
section.
Wireless Network Revenue
The increase in network revenue for the three months ended March 31,
2008, compared to the corresponding period of the prior year, was driven
principally by the continued growth of Wireless' postpaid subscriber base
and improvements in postpaid ARPU. The year-over-year increase in postpaid
ARPU reflects the impact of higher wireless data revenue, as well as
increased long-distance, add-on features and roaming revenue. Wireless has
experienced growth in roaming revenues from subscribers using services
outside of Canada as well as growth in inbound roaming revenues from
visitors to Canada.
Prepaid revenue increased as a result of both improved ARPU and a
larger subscriber base. The year-over-year improvement in prepaid ARPU is a
result of both increased data usage and more attractive prepaid offerings
aimed at the higher-value section of the prepaid market.
Wireless' success in the continued reduction in postpaid churn reflects
targeted customer retention activities, commitment to customer care and
improvements in network coverage and quality.
The combination of modestly lower gross additions due to competitive
offerings and the pattern of seasonally higher first quarter prepaid churn
drove the increased level of prepaid net subscriber losses.
For the three months ended March 31, 2008, wireless data revenue
increased by 47% over the corresponding period of 2007, to $206 million.
This increase in data revenue reflects the continued growth of text and
multimedia messaging services, wireless Internet access, BlackBerry and
other PDA devices, downloadable ring tones, music and games, and other
wireless data services. For the three months ended March 31, 2008, data
revenue represented approximately 15.1% of total network revenue, compared
to 12.3% in the corresponding period of 2007.
Wireless Equipment Sales
The year-over-year increase in revenue from equipment sales, including
activation fees and net of equipment subsidies, reflects an increased
volume of handset upgrades associated with the growing subscriber base.
Wireless Operating Expenses
-------------------------------------------------------------------------
Three months ended March 31,
(In millions of dollars, ------------------------------
except per subscriber statistics) 2008 2007 % Chg
-------------------------------------------------------------------------
Operating expenses
Cost of equipment sales $ 145 $ 144 1
Sales and marketing expenses 140 140 -
Operating, general and administrative
expenses 441 366 20
-------------------------------
Operating expenses before the undernoted 726 650 12
Stock-based compensation (recovery)
expense(1) (10) 3 n/m
-------------------------------
Total operating expenses $ 716 $ 653 10
-------------------------------
-------------------------------
Average monthly operating expense per
subscriber before sales and marketing
expenses(2) $ 21.51 $ 20.20 6
Sales and marketing costs per gross
subscriber addition(2) $ 410 $ 386 6
-------------------------------------------------------------------------
(1) See the section entitled "Stock-based Compensation".
(2) As defined. See the "Key Performance Indicator and Non-GAAP
Measures" section. As calculated in the "Supplementary Information"
section. Average monthly operating expense per subscriber before
sales and marketing expenses excludes stock-based compensation
(recovery) expense.
Cost of equipment sales remained consistent in the three months ended
March 31, 2008, compared to the corresponding period of the prior year.
Sales and marketing expenses for the three months ended March 31, 2008
remained consistent with the corresponding period of the prior year, while
the increase in sales and marketing costs per gross subscriber addition
reflects an increase in acquisition-related equipment costs driven by
higher cost devices associated with a greater proportion of higher value
customers which added both voice and data service plans.
Growth in the Wireless subscriber base drove increases in operating,
general and administrative expenses in the three months ended March 31,
2008, compared to the corresponding period of 2007. These increases were
reflected in higher costs to support increased usage of data and roaming
services and increases in network operating expenses to accommodate the
larger subscriber base. Customer care and information technology costs also
increased as a result of the complexity of supporting more sophisticated
services and devices. These costs were partially offset by savings related
to operating and scale efficiencies across various functions.
Total retention spending, including subsidies on handset upgrades, has
decreased to $94 million in the three months ended March 31, 2008, compared
to $99 million in the corresponding period of the prior year. Retention
spending was higher in the three months ended March 31, 2007 due to the
transition of customers to Wireless' more advanced GSM services from our
older generation Time Division Multiple Access ("TDMA") network, which was
decommissioned in May 2007, and the introduction of Wireless Number
Portability ("WNP") in March 2007.
Wireless Adjusted Operating Profit
The strong year-over-year growth in adjusted operating profit was the
result of the significant growth in network revenue. As a result, Wireless'
adjusted operating profit margin on network revenue (which excludes
equipment sales revenue) increased to 51.7% for the three months ended
March 31, 2008, compared to 49.7% in the corresponding period of 2007.
Wireless Additions to Property, Plant and Equipment
Wireless additions to PP&E are classified into the following categories:
-------------------------------------------------------------------------
Three months ended March 31,
------------------------------
(In millions of dollars) 2008 2007 % Chg
-------------------------------------------------------------------------
Additions to PP&E
HSPA ("High-Speed Packet Access") $ 62 $ 149 (58)
Network - capacity 41 41 -
Network - other 37 16 131
Information and technology and other 22 21 5
Inukshuk 1 5 (80)
------------------------------
Total additions to PP&E $ 163 $ 232 (30)
-------------------------------------------------------------------------
Additions to Wireless PP&E reflect spending on GSM network capacity,
such as radio channel additions and network enhancing features. Additions
to PP&E associated with the deployment of HSPA were mainly for the
continued roll-out to markets across Canada and the upgrade to faster
network throughput speeds. Other network-related PP&E additions included
national site build activities, additional spending on test and monitoring
equipment, network sectorization work, operating support system activities
and new product platforms. Other initiatives include billing and back
office system upgrades, and other facilities and equipment spending.
CABLE
-----
Summarized Cable Financial Results
-------------------------------------------------------------------------
Three months ended March 31,
------------------------------
(In millions of dollars, except margin) 2008(1) 2007 % Chg
-------------------------------------------------------------------------
Operating revenue
Cable Operations(2) $ 695 $ 620 12
RBS 133 145 (8)
Rogers Retail 100 91 10
Intercompany eliminations (3) (1) n/m
------------------------------
Total operating revenue 925 855 8
------------------------------
Operating profit (loss) before the undernoted
Cable Operations(2) 283 234 21
RBS 17 (7) n/m
Rogers Retail 3 1 200
------------------------------
Adjusted operating profit(3) 303 228 33
Stock-based compensation recovery (expense)(4) 33 (3) n/m
Integration and restructuring expenses(5) (5) (1) n/m
------------------------------
Operating profit(3) $ 331 $ 224 48
------------------------------
------------------------------
Adjusted operating profit (loss) margin(3)
Cable Operations(2) 40.7% 37.7%
RBS 12.8% (4.8%)
Rogers Retail 3.0% 1.1%
Additions to PP&E(3)
Cable Operations(2) $ 121 $ 125 (3)
RBS 4 23 (83)
Rogers Retail 3 3 -
------------------------------
Total additions to PP&E $ 128 $ 151 (15)
-------------------------------------------------------------------------
(1) The operating results of Futureway Communications Inc. ("Futureway")
are included in Cable's results of operations from the date of
acquisition on June 22, 2007.
(2) Cable Operations segment includes Core Cable services, Internet
services and Rogers Home Phone services.
(3) As defined. See the "Key Performance Indicators and Non-GAAP
Measures" and "Supplementary Information" sections.
(4) See the section entitled "Stock-based Compensation".
(5) Costs incurred relate to the integration of Call-Net, the
restructuring of RBS and the closure of certain Rogers Retail stores.
The following segment discussions provide a detailed discussion of the
Cable operating results.
CABLE OPERATIONS
Summarized Financial Results
-------------------------------------------------------------------------
Three months ended March 31,
------------------------------
(In millions of dollars, except margin) 2008 2007 % Chg
-------------------------------------------------------------------------
Operating revenue
Core Cable $ 403 $ 373 8
Internet 166 143 16
Rogers Home Phone 126 104 21
------------------------------
Total Cable Operations operating revenue 695 620 12
------------------------------
Operating expenses before the undernoted
Sales and marketing expenses 64 61 5
Operating, general and administrative
expenses 348 325 7
------------------------------
412 386 7
------------------------------
Adjusted operating profit(1) 283 234 21
Stock-based compensation recovery
(expense)(2) 31 (3) n/m
Integration expenses(3) - (1) n/m
------------------------------
Operating profit(1) $ 314 $ 230 37
------------------------------
------------------------------
Adjusted operating profit margin(1) 40.7% 37.7%
-------------------------------------------------------------------------
(1) As defined. See the "Key Performance Indicators and Non-GAAP
Measures" and "Supplementary Information" sections.
(2) See the section entitled "Stock-based Compensation".
(3) Costs incurred relate to the integration of Call-Net.
Summarized Subscriber Results
-------------------------------------------------------------------------
Three months ended March 31,
(Subscriber statistics in thousands, ------------------------------
except ARPU) 2008 2007 Chg
-------------------------------------------------------------------------
Cable homes passed 3,597 3,494 103
Basic Cable
Net additions(1) - 1 (1)
Total Basic Cable subscribers 2,295 2,278 17
Core Cable ARPU(2) $ 58.50 $ 54.56 $ 3.94
High-speed Internet
Net additions 41 42 (1)
Total Internet subscribers (residential)(3) 1,510 1,339 171
Internet ARPU(2) $ 37.07 $ 35.75 $ 1.32
Digital Cable
Terminals, net additions 103 120 (17)
Terminals in service 1,974 1,617 357
Households, net additions 49 70 (21)
Households 1,402 1,204 198
Cable telephony subscriber lines
Net additions and migrations(4) 46 75 (29)
Total Cable telephony subscriber lines 702 441 261
Circuit-switched subscriber lines
Net losses and migrations(4) (14) (16) 2
Total circuit-switched subscriber lines 320 333 (13)
Total Rogers Home Phone subscriber lines
Net additions 32 59 (27)
Total Rogers Home Phone subscriber lines 1,022 774 248
RGUs(5)
Net additions 122 172 (50)
Total revenue generating units 6,229 5,595 634
-------------------------------------------------------------------------
(1) Basic cable net additions for the three months ended March 31, 2008
reflect the impact of the conversion of a large municipal housing
authority's cable TV arrangement with Rogers from a bulk to an
individual tenant pay basis, which had the impact of reducing basic
cable subscribers by approximately 5,000.
(2) As defined. See the "Key Performance Indicators and Non-GAAP
Measures" and "Supplementary Information" sections.
(3) During the first quarter of 2008, a change in subscriber reporting
resulted in the reclassification of approximately 4,000 high-speed
Internet subscribers from RBS' broadband data circuits to Cable
Operations' high-speed Internet subscriber base. These subscribers
are not included in net additions for the three months ended
March 31, 2008.
(4) Includes approximately 3,000 and 18,000 migrations from circuit-
switched to cable telephony for the three months ended March 31,
2008, and 2007, respectively.
(5) RGUs are comprised of basic cable subscribers, digital cable
households, residential high-speed Internet subscribers and Rogers
Home Phone subscribers.
Core Cable Revenue
The increase in Core Cable revenue for the three months ended March 31,
2008, compared to the corresponding period of the prior year, reflects a
combination of the growing penetration of our digital cable products and
the impact of price increases.
Basic cable net additions for the three months ended March 31, 2008
reflect the impact of the conversion of a large municipal housing
authority's cable TV arrangement with Rogers from a bulk to an individual
tenant pay basis, which had the impact of reducing basic cable subscribers
by approximately 5,000.
The digital cable subscriber base grew by 16% from March 31, 2007 to
March 31, 2008. Digital penetration now represents 61% of basic cable
households. Strong demand for high definition ("HD") and personal video
recorder ("PVR") digital set-top box equipment combined with the success of
Cable's "triple play" marketing campaign, which package cable television,
high-speed Internet and Rogers Home Phone services, contributed to the
growth in the digital subscriber base of 49,000 households in the three
months ended March 31, 2008.
Internet (Residential) Revenue
The increase in Internet revenues for the three months ended March 31,
2008 from the corresponding period in 2007 reflects the 13% year-over-year
increase in the number of Internet subscribers combined with price
increases to our Internet offerings, partially offset by a shift in
proportion of total subscribers on lower priced service tiers.
With the high-speed Internet subscriber base now at approximately 1.5
million, Internet penetration is 66% of basic cable households, and 42% of
homes passed by our network.
Rogers Home Phone Revenue
The growth in Rogers Home Phone revenue for the three months ended
March 31, 2008 compared to the corresponding period in 2007 is the result
of the addition of 46,000 Rogers Home Phone voice-over-cable telephony
service lines in the three months ended March 31, 2008. Partially
offsetting the increase in voice-over-cable telephony lines is a decline in
the number of legacy circuit-switched local lines of 14,000 for the three
months ended March 31, 2008, of which 3,000 represented migrations from the
circuit-switched to cable telephony platform. The Rogers Home Phone
subscriber base grew by 32% from March 31, 2007 to March 31, 2008.
Cable Operations Operating Expenses
Cable Operations sales and marketing expenses held relatively steady
for the three months ended March 31, 2008, compared to the corresponding
period of 2007, while the increases in operating, general and
administrative costs for the three months ended March 31, 2008 compared to
the corresponding period of 2007 were primarily driven by increases in
digital cable, Internet and Rogers Home Phone subscriber bases, resulting
in higher costs associated with programming content, customer care,
technical service and network operations. This increase was partially
offset by $13 million of costs savings related to the elimination of CRTC
Part II fees and a renegotiated services agreement with Yahoo! Inc. which
became effective on January 1, 2008.
Cable Operations Adjusted Operating Profit
The year-over-year growth in adjusted operating profit was primarily
the result of growth in revenue and subscribers, combined with reduced
costs associated with Internet services and regulatory fees. As a result,
Cable Operations adjusted operating profit margins increased to 40.7% for
the three months ended March 31, 2008, compared to 37.7% in the
corresponding period in 2007.
Cable Operations' base of circuit-switched local telephony customers,
which was acquired in July 2005 through the acquisition of Call-Net, is
generally less capital intensive than its on-net cable telephony business
but also generates lower margins. As a result, the inclusion of the
circuit-switched local telephony business, which includes approximately
320,000 customers which have not been migrated to our cable network, with
Cable Operations' telephony business, has a dilutive impact on operating
profit margins.
ROGERS BUSINESS SOLUTIONS
Summarized Financial Results
-------------------------------------------------------------------------
Three months ended March 31,
------------------------------
(In millions of dollars, except margin) 2008 2007 % Chg
-------------------------------------------------------------------------
RBS operating revenue $ 133 $ 145 (8)
------------------------------
Operating expenses before the undernoted
Sales and marketing expenses 7 21 (67)
Operating, general and
administrative expenses 109 131 (17)
------------------------------
116 152 (24)
------------------------------
Adjusted operating profit (loss)(1) 17 (7) n/m
Stock-based compensation recovery(2) 1 - n/m
Integration and restructuring expenses(3) (1) - n/m
------------------------------
Operating profit (loss)(1) $ 17 $ (7) n/m
------------------------------
------------------------------
Adjusted operating profit margin(1) 12.8% (4.8%)
-------------------------------------------------------------------------
(1) As defined. See the "Key Performance Indicators and Non-GAAP
Measures" and "Supplementary Information" sections.
(2) See the section entitled "Stock-based Compensation".
(3) Costs incurred relate to the integration of Call-Net and the
restructuring of Rogers Business Solutions.
Summarized Subscriber Results
-------------------------------------------------------------------------
Three months ended March 31,
------------------------------
(Subscriber statistics in thousands) 2008 2007 Chg
-------------------------------------------------------------------------
Local line equivalents(1) 222 209 13
Broadband data circuits(2) 31 32 (1)
-------------------------------------------------------------------------
(1) Local line equivalents include individual voice lines plus Primary
Rate Interfaces ("PRIs") at a factor of 23 voice lines each.
(2) Broadband data circuits are those customer locations accessed by data
networking technologies including DOCSIS, DSL, E10/100/1000, OC 3/12
and DS 1/3.
RBS Revenue
The decrease in RBS revenues reflects Rogers' refocusing of its
business services telephony activities on the smaller end of the business
market and within our cable territory. As such, RBS has and will continue
to experience a decline in certain less profitable off-net services which
it was not able to cost effectively provision over its own facilities. This
strategy is designed to increase the margins of the RBS segment. This shift
has resulted in a decline in long-distance and data (including hardware
sales) revenues partially offset by an increase in local service revenues.
RBS Operating Expenses
Carrier charges, included in operating, general and administrative
expenses, decreased by $13 million for the three months ended March 31,
2008, due to the decrease in revenue and product mix changes. Carrier
charges represented approximately 55% of revenue in the three months ended
March 31, 2008, compared to 59% of revenue in the corresponding period of
2007.
The decreases in other operating, general and administrative expenses
for the three months ended March 31, 2008 compared to the corresponding
period of the prior year are primarily related to the decreases in revenue
and the resulting lower information technology and provisioning costs
combined with certain non-recurring expense adjustments which totalled $4
million. The reduction in sales and marketing expenses for the three months
ended March 31, 2008, compared to the corresponding period of the prior
year, reflects streamlining initiatives, including headcount reductions,
associated with the refocusing of RBS' business as discussed above.
RBS Adjusted Operating Profit
The changes described above resulted in RBS adjusted operating profit
of $17 million for the three months ended March 31, 2008, compared to an
adjusted operating loss of $7 million in the corresponding period of 2007.
ROGERS RETAIL
Summarized Financial Results
-------------------------------------------------------------------------
Three months ended March 31,
------------------------------
(In millions of dollars) 2008 2007 % Chg
-------------------------------------------------------------------------
Rogers Retail operating revenue $ 100 $ 91 10
------------------------------
Operating expenses 97 90 8
------------------------------
Adjusted operating profit(1) 3 1 n/m
Stock-based compensation recovery(2) 1 - n/m
Restructuring expenses(3) (4) - n/m
------------------------------
Operating profit(1) $ - $ 1 (100)
------------------------------
------------------------------
Adjusted operating profit (loss) margin(1) 3.0% 1.1%
-------------------------------------------------------------------------
(1) As defined. See the "Key Performance Indicators and Non-GAAP
Measures" and "Supplementary Information" sections.
(2) See the section entitled "Stock-based Compensation".
(3) Costs related to the closure of certain Rogers Retail stores.
Rogers Retail Revenue
The increase in Rogers Retail revenue of $9 million for the three
months ended March 31, 2008, compared to the corresponding period of 2007
was the result of increased sales of wireless products and services, while
video rental and sales revenues remained essentially the same compared to
the corresponding period of the prior year with an ongoing shift within the
video category from DVD rentals to DVD sales.
Rogers Retail Adjusted Operating Profit
Rogers Retail recorded an adjusted operating profit of $3 million for
the three months ended March 31, 2008, compared to an adjusted operating
profit of $1 million in the corresponding period of the prior year, which
is the result of increased sales of wireless products and services and
decreased sales and marketing expenses.
Restructuring Expenses
In the three months ended March 31, 2008, Rogers Retail recorded a
charge of $4 million related to the closure of 18 underperforming video
store locations, primarily located in the province of Ontario.
CABLE ADDITIONS TO PP&E
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 which 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 premises equipment ("CPE"), which includes the equipment for
digital set-top terminals, Internet modems and the 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.
Summarized Cable PP&E Additions
-------------------------------------------------------------------------
Three months ended March 31,
------------------------------
(In millions of dollars) 2008 2007 % Chg
-------------------------------------------------------------------------
Additions to PP&E
Customer premises equipment $ 46 $ 66 (30)
Scalable infrastructure 35 22 59
Line extensions 9 13 (31)
Upgrades and rebuild 3 4 (25)
Support capital 28 20 40
------------------------------
Total Cable Operations 121 125 (3)
RBS 4 23 (83)
Rogers Retail 3 3 -
------------------------------
$ 128 $ 151 (15)
-------------------------------------------------------------------------
Cable Operations PP&E additions are primarily attributable to increased
spending on support capital and scalable infrastructure related to network
capacity and information technology infrastructure, resulting from a larger
subscriber base. Spending on customer premise equipment has decreased in
the three months ended March 31, 2008, compared to the corresponding period
of the prior year, due to lower gross additions of high-speed Internet
customers and digital terminals.
The reduction in RBS PP&E additions for the three months ended March
31, 2008 compared to the corresponding period of the prior year reflects
the refocusing of RBS's business as discussed above.
Rogers Retail PP&E additions are attributable to improvements made to
certain retail stores.
MEDIA
Summarized Media Financial Results
-------------------------------------------------------------------------
Three months ended March 31,
------------------------------
(In millions of dollars, except margin) 2008(1) 2007 % Chg
-------------------------------------------------------------------------
Operating revenue $ 307 $ 266 15
------------------------------
Operating expenses before the undernoted 305 247 23
------------------------------
Adjusted operating profit(2) 2 19 (89)
Stock-based compensation recovery
(expense)(3) 20 (2) n/m
------------------------------
Operating profit(2) $ 22 $ 17 29
------------------------------
------------------------------
Adjusted operating profit margin(2) 0.7% 7.1%
Additions to property, plant and
equipment(2) $ 21 $ 7 200
-------------------------------------------------------------------------
(1) The operating results of Citytv are included in Media's results of
operations from the date of acquisition on October 31, 2007.
(2) As defined. See the "Key Performance Indicators and Non-GAAP
Measures" section.
(3) See the section entitled "Stock-based Compensation".
Media Revenue
The increase in Media revenue for the three months ended March 31,
2008, over the corresponding period in 2007, primarily reflects the
acquisition of Citytv, which closed on October 31, 2007, and contributed
$34 million to revenue in the quarter, or approximately 70% of the total
year-over-year increase. In addition, Media's OMNI television, Radio and
Sportsnet businesses each experienced organic revenue growth compared to
the first quarter of 2007. These increases were partially offset by softer
advertising revenue at Publishing, modestly lower sales of electronic goods
and home furnishing products at The Shopping Channel, and the timing of
revenue sharing payments from Major League Baseball ("MLB") at Sports
Entertainment.
Media Operating Expenses
The increase in Media operating expenses for the three months ended
March 31, 2008, compared to the corresponding period in 2007, primarily
reflects the combination of $36 million of operating costs relating to the
acquired Citytv business and the expensing of $9 million of a $16 million
contract termination fee at Sports Entertainment relating to a change in
concession vendors at Rogers Centre. In addition, Sportsnet's expenses were
negatively impacted by an increase in NHL game telecasts and HD programming
costs.
Media Adjusted Operating Profit
The year-over-year decrease in Media's adjusted operating profit for
the three months ended March 31, 2008, compared to the corresponding period
of the prior year, primarily reflects the above noted contract termination
fee, combined with the timing of MLB revenue sharing payments, results of
recently acquired operations of Citytv, programming cost increases at
Sportsnet, and revenue softness at Publishing and The Shopping Channel.
Media Additions to PP&E
The majority of Media's PP&E additions in the three months ended March
31, 2008, reflect building improvements related to the relocation of Rogers
Sportsnet production facilities and the acquisition of certain assets
valued at approximately $7 million, as part of the above noted termination
of a concession services agreement at Rogers Centre.
CONSOLIDATED LIQUIDITY AND CAPITAL RESOURCES
Operations
For the three months ended March 31, 2008, cash generated from
operations before changes in non-cash operating items, which is calculated
by removing the effect of all non-cash items from net income, increased to
$869 million from $683 million in the corresponding period of 2007. The
$186 million increase is primarily the result of a $170 million increase in
adjusted operating profit and an $11 million decrease in interest expense.
Taking into account the changes in non-cash working capital items for
the three months ended March 31, 2008, cash generated from operations was
$699 million, compared to $415 million in the corresponding period of 2007.
Net funds used during the three months ended March 31, 2008 totalled
approximately $705 million, the details of which include the following:
- additions to PP&E of $403 million, including $82 million of related
changes in non-cash working capital;
- net repayments under our bank credit facility aggregating
$165 million;
- the payment of quarterly dividends of $80 million on our Class A
Voting and Class B Non-Voting shares;
- additions to program rights of $36 million; and
- acquisitions and other net investments aggregating $21 million,
including a $16 million deposit paid in relation to the agreement to
acquire Aurora Cable, $4 million related to the acquisition of CIKZ-
FM Kitchener and $3 million related to the acquisition of Citytv.
Taking into account the cash deficiency of $61 million at the beginning
of the period and the fund uses described above, the cash deficiency at
March 31, 2008 was $67 million.
Financing
Our long-term debt instruments are described in Note 15 to the 2007
Annual Audited Consolidated Financial Statements and Note 5 to the
Unaudited Interim Consolidated Financial Statements for the three months
ended March 31, 2008.
As mentioned above, during the three months ended March 31, 2008, an
aggregate $165 million net repayment was made under our bank credit
facility.
In January 2008, Rogers filed a NCIB which authorizes us to repurchase
up to the lesser of 15 million of our Class B Non-Voting shares and that
number of Class B Non-Voting shares that can be purchased under the NCIB
for an aggregate purchase price of $300 million. During the three months
ended March 31, 2008, no shares were repurchased pursuant to the NCIB.
We will participate in the auction of wireless spectrum licences that
will take place commencing May 27, 2008 and, as such, have arranged for the
issuance of standby letters of credit pursuant to the terms and conditions
of the auction. The letters of credit aggregate $534 million, and expire on
August 29, 2008.
Interest Rate and Foreign Exchange Management
Economic Hedge Analysis
For the purposes of our discussion on the hedged portion of long-term
debt, we have used non-GAAP measures in that we include all cross-currency
interest rate exchange agreements (whether or not they qualify as hedges
for accounting purposes) since all such agreements are used for
risk-management purposes only and are designated as a hedge of specific
debt instruments for economic purposes. As a result, the Canadian dollar
equivalent of U.S. dollar-denominated long-term debt reflects the
contracted foreign exchange rate for all of our cross-currency interest
rate exchange agreements regardless of qualifications for accounting
purposes as a hedge.
During the three months ended March 31, 2008, there was no change in
our U.S. dollar-denominated debt or in our cross-currency interest rate
exchange agreements. On March 31, 2008 all of our U.S. dollar-denominated
debt was hedged on an economic basis and on an accounting basis.
Consolidated Hedged Position
-------------------------------------------------------------------------
(In millions of dollars, March 31, December 31,
except percentages) 2008 2007
-------------------------------------------------------------------------
U.S. dollar-denominated long-term debt US $ 4,190 US $ 4,190
Hedged with cross-currency interest rate
exchange agreements US $ 4,190 US $ 4,190
Hedged exchange rate 1.3313 1.3313
Percent hedged 100.0%(1) 100.0%
-------------------------------------------------------------------------
Amount of long-term debt(2) at fixed rates:
Total long-term debt Cdn $ 7,290 Cdn $ 7,454
Total long-term debt at fixed rates Cdn $ 6,215 Cdn $ 6,214
Percent of long-term debt fixed 85.3% 83.4%
-------------------------------------------------------------------------
Weighted average interest rate on
long-term debt 7.43% 7.53%
-------------------------------------------------------------------------
(1) Pursuant to the requirements for hedge accounting under Canadian
Institute of Chartered Accountants ("CICA") Handbook Section 3865,
Hedges, on March 31, 2008, RCI accounted for 100% of its cross-
currency interest rate exchange agreements as hedges against
designated U.S. dollar-denominated debt.
(2) Long-term debt includes the effect of the cross-currency interest
rate exchange agreements.
Composition of Fair Market Value Liability for Derivative Instruments
-------------------------------------------------------------------------
March 31, December 31,
(In millions of dollars) 2008 2007
-------------------------------------------------------------------------
Foreign exchange related $ 1,584 $ 1,719
Interest related 36 85
-------------------------
Total carrying value $ 1,620 $ 1,804
-------------------------------------------------------------------------
Outstanding Share Data
Set out below is our outstanding share data as at March 31, 2008. For
additional information, refer to Note 19 to our 2007 Annual Audited
Consolidated Financial Statements and to the Unaudited Interim Consolidated
Financial Statements for the three months ended March 31, 2008.
-------------------------------------------------------------------------
March 31, 2008
-------------------------------------------------------------------------
Common Shares(1)
Class A Voting 112,462,014
Class B Non-Voting 527,062,209
-------------------------------------------------------------------------
Options to purchase Class B Non-Voting shares
Outstanding options 17,393,719
Outstanding options exercisable 12,213,390
-------------------------------------------------------------------------
(1) Holders of our Class B Non-Voting shares are entitled to receive
notice of and to attend meetings of our shareholders, but, except as
required by law or as stipulated by stock exchanges, are not entitled
to vote at such meetings. If an offer is made to purchase outstanding
Class A Voting shares, there is no requirement under applicable law
or RCI's constating documents that an offer be made for the
outstanding Class B Non-Voting shares and there is no other
protection available to shareholders under RCI's constating
documents. If an offer is made to purchase both Class A Voting shares
and Class B Non-Voting shares, the offer for the Class A Voting
shares may be made on different terms than the offer to the holders
of Class B Non-Voting shares.
Dividends and Other Payments on Equity Securities
On November 1, 2007, we declared a quarterly dividend of $0.125 per
share, adjusted for a two-for-one stock split, on each of the outstanding
Class A Voting and Class B Non-Voting shares. This quarterly dividend
totalling $80 million was paid on January 2, 2008 to shareholders of record
on December 12, 2007.
On January 7, 2008, our Board of Directors approved an increase in the
annual dividend from $0.50 to $1.00 per Class A Voting and Class B
Non-Voting share effective with the next quarterly dividend. The new annual
dividend of $1.00 per share is paid in quarterly amounts of $0.25 per each
outstanding Class A Voting and Class B Non-Voting share. Such quarterly
dividends are only payable as and when declared by our Board of Directors
and there is no entitlement to any dividend prior thereto.
On February 21, 2008, we declared a quarterly dividend at the increased
quarterly rate of $0.25 per share on each of the outstanding Class B
Non-Voting shares and Class A Voting shares. This quarterly dividend
totalling $160 million was paid on April 1, 2008 to shareholders of record
on March 6, 2008.
COMMITMENTS AND CONTRACTUAL OBLIGATIONS
Our material obligations under firm contractual arrangements, including
commitments for future payments under long-term debt arrangements, capital
lease obligations and operating lease arrangements, are summarized in our
2007 Annual MD&A, and are further discussed in Notes 15, 23 and 24 of our
2007 Annual Audited Consolidated Financial Statements. There have been no
significant changes to these material contractual obligations since
December 31, 2007, except as follows:
- The Blue Jays signed two players to multi-year contracts totalling
$80 million, ranging from four to six years;
- The Buffalo Bills will play a series of ten games over a five-year
period at the Rogers Centre in Toronto, beginning in August 2008,
resulting in a commitment of $78 million of payments scheduled from
2008 through 2012; and
- Changes to our bank credit facility balance previously discussed in
the "Consolidated Liquidity and Capital Resources" section.
GOVERNMENT REGULATION AND REGULATORY DEVELOPMENTS
The significant government regulations which impact our operations are
summarized in our 2007 Annual MD&A. The significant changes to those
regulations since December 31, 2007, are as follows:
Advanced Wireless Services ("AWS") Spectrum Auction
On February 27, 2008, Industry Canada issued Responses to Questions for
Clarification on the AWS Policy and Licencing Frameworks, which answered
questions about the AWS spectrum auction and about tower sharing and
roaming obligations of licencees. This was followed on February 29, 2008 by
conditions of licence which will impose those obligations on wireless
carriers. The documents clarified that roaming must provide connectivity
for digital voice and data services regardless of the spectrum band or
underlying technology used. The policy does not require a host network
carrier to provide a roamer with a service which that carrier does not
provide to its own subscribers, nor to provide a roamer a service, or level
of service, which the roamer's network carrier does not provide. The policy
also does not require seamless communications hand-off between home and
host networks.
Canadian Television Fund
On February 4, 2008, the CRTC held a hearing to examine the Canadian
Television Fund. On February 14, 2008, Order in Council, P.C. 2008-289 was
issued pursuant to Section 15 of the Broadcasting Act. The Order in Council
requests that the CRTC make the recommendations, based on its findings from
the February 4, 2008 hearing, to the federal government. The federal
government will then decide what, if any, action to take. We expect the
CRTC to issue its report by the end of May, 2008.
Channel m Television
On March 31, 2008, the CRTC issued Broadcasting Decision CRTC 2008-82
approving our acquisition of the Channel m television station in Vancouver.
Essential Facilities
On March 3, 2008, the CRTC released Telecom Decision CRTC 2008-17;
Review of Regulatory Framework for Wholesale Services and Definition of
Essential Service, completing the process initiated on November 9, 2006 by
Telecom Public Notice CRTC 2006-14. The CRTC noted that the new framework
was developed with a view to ensuring that existing and new competitors
continue to have access to the services they need to compete, while at the
same time providing incentives for innovation and investments in competing
networks. The CRTC identified a number of high-speed wholesale services
that should no longer be mandated. These non-essential services will be
deregulated over the next three to five years to ensure a smooth transition
to a reliance on market forces. Most low-speed services will continue to be
mandated. Consequently, we will continue to gain regulated access to the
incumbent local exchange carriers' facilities and services for its wireline
business and residential circuit-switched and data services at current
rates. The decision allows us to continue to pursue our competitive
position in the telephony market while reconfiguring its facilities over a
reasonable timeframe as certain services become deregulated. On April 1,
2008 an application for leave to appeal the decision to the Federal Court
of Appeal was filed by Bell Canada and other carriers. We will oppose the
leave application.
Commercial Radio Copyright Tariffs
On February 22, 2008, the Copyright Board reaffirmed the rates it set
in 2005 for fees payable to the Society of Composers, Authors and Music
Publishers of Canada ("SOCAN") and Neighbouring Rights Collective of Canada
("NRCC") for use of music from 2003 to 2007, in February 2008. In its
reaffirmation of the SOCAN-NRCC decision the Copyright Board also granted
the Canadian Association of Broadcasters' request for a consolidated tariff
proceeding, which would set an overall valuation for the use of music by
commercial radio, which would then be divided amongst the collectives.
UPDATES TO RISKS AND UNCERTAINTIES
Our significant risks and uncertainties are summarized in our 2007
Annual MD&A, which was current as of February 20, 2008. There were no
significant changes since then to those risks and uncertainties.
KEY PERFORMANCE INDICATORS AND NON-GAAP MEASURES
We measure the success of our strategies using a number of key
performance indicators that are defined and discussed in our 2007 Annual
MD&A. These key performance indicators are not measurements under Canadian
or U.S. GAAP, but we believe they allow us to appropriately measure our
performance against our operating strategy as well as against the results
of our peers and competitors. They include:
- Revenue, network revenue and ARPU;
- Subscriber counts and subscriber churn;
- Operating expenses and average monthly operating expense per wireless
subscriber;
- Sales and marketing costs (or cost of acquisition) per subscriber;
- Adjusted operating profit;
- Adjusted operating profit margin; and
- Additions to PP&E.
See the "Supplementary Information" section for calculations of the
Non-GAAP measures.
RELATED PARTY ARRANGEMENTS
We have entered into certain transactions with companies, the partners
or senior officers of which are or have been Directors of our Company
and/or its subsidiary companies. During the three months ended March 31,
2008 and 2007, total amounts paid to these related parties, directly or
indirectly, were less than $0.5 million, respectively.
We have entered into certain transactions with our controlling
shareholder and companies controlled by the controlling shareholder. These
transactions are subject to formal agreements approved by the Audit
Committee. Total amounts received from these related parties, during the
three months ended March 31, 2008 and 2007, were less than $0.5 million,
respectively.
These transactions are recorded at the exchange amount, being the
amount agreed to by the related parties and are reviewed by the Audit
Committee.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
In our 2007 Annual Audited Consolidated Financial Statements and Notes
thereto, as well as in our 2007 Annual MD&A, we have identified the
accounting policies and estimates that are critical to the understanding of
our business operations and our results of operations. For the three months
ended March 31, 2008, there are no changes to the critical accounting
policies and estimates of Wireless, Cable and Media from those found in our
2007 Annual MD&A.
NEW ACCOUNTING STANDARDS
Capital Disclosures
Effective January 1, 2008, we adopted the new recommendations of the
Canadian Institute of Chartered Accountants ("CICA") Handbook Section 1535,
Capital Disclosures ("CICA 1535"). CICA 1535 requires that an entity
disclose information that enables users of its financial statements to
evaluate an entity's objectives, policies and processes for managing
capital, including disclosures of any externally imposed capital
requirements and the consequences for non-compliance. These new disclosures
are included in Note 9 to the Unaudited Interim Consolidated Financial
Statements for the three months ended March 31, 2008 and 2007.
Financial Instruments
Effective January 1, 2008, we adopted the new recommendations of CICA
Handbook Section 3862, Financial Instruments - Disclosures ("CICA 3862"),
and Handbook Section 3863, Financial Instruments - Presentation ("CICA
3863").
CICA 3862 requires entities to provide disclosures in their financial
statements that enables users to evaluate the significance of financial
instruments on the entity's financial position and its performance and the
nature and extent of risks arising from financial instruments to which the
entity is exposed during the period and at the balance sheet date, and how
the entity manages those risks.
CICA 3863 establish standards for presentation of financial instruments
and non-financial derivatives. It deals with the classification of
financial instruments, from the perspective of the issuer, between
liabilities and equities, the classification of related interest,
dividends, gains and losses, and circumstances in which financial assets
and financial liabilities are offset.
The adoption of these standards did not have any impact on the
classification and measurement of our financial instruments. The new
disclosures pursuant to these new Handbook Sections are included in Note 10
to the Unaudited Interim Consolidated Financial Statements for the three
months ended March 31, 2008 and 2007.
SEASONALITY
Our operating results are subject to seasonal fluctuations that
materially impact quarter-to-quarter operating results, and thus one
quarter's operating results are not necessarily indicative of a subsequent
quarter's operating results.
Each of Wireless, Cable and Media has unique seasonal aspects to their
businesses. For specific discussions of the seasonal trends affecting the
Wireless, Cable and Media segments, please refer to our 2007 Annual MD&A.
2008 GUIDANCE
At this early point in the year we have no specific revisions to the
2008 annual financial and operating guidance ranges which we provided on
January 7, 2008. See the section entitled "Caution Regarding
Forward-Looking Statements, Risks and Assumptions" below.
SUPPLEMENTARY INFORMATION
Calculations of Wireless Non-GAAP Measures
-------------------------------------------------------------------------
Three months ended
(In millions of dollars, subscribers in thousands, March 31,
except ARPU figures and operating profit margin) 2008 2007
-------------------------------------------------------------------------
Postpaid ARPU (monthly)
Postpaid (voice and data) revenue $ 1,294 $ 1,104
Divided by: average postpaid wireless voice
and data subscribers 5,958 5,440
Divided by: 3 months for the quarter 3 3
------------------------
$ 72.39 $ 67.64
-------------------------------------------------------------------------
Prepaid ARPU (monthly)
Prepaid (voice and data) revenue $ 66 $ 61
Divided by: average prepaid subscribers 1,401 1,377
Divided by: 3 months for the quarter 3 3
------------------------
$ 15.70 $ 14.76
-------------------------------------------------------------------------
Cost of acquisition per gross addition
Total sales and marketing expenses $ 140 $ 140
Equipment margin loss (acquisition related) 35 27
------------------------
$ 175 $ 167
------------------------
------------------------
Divided by: total gross wireless additions
(postpaid, prepaid and one-way messaging) 427 432
------------------------
$ 410 $ 386
-------------------------------------------------------------------------
Operating expense per average subscriber (monthly)
Operating, general and administrative expenses $ 441 $ 366
Equipment margin loss (retention related) 42 55
------------------------
$ 483 $ 421
------------------------
------------------------
Divided by: average total wireless subscribers 7,486 6,951
Divided by: 3 months for the quarter 3 3
------------------------
$ 21.51 $ 20.20
-------------------------------------------------------------------------
Equipment margin loss
Equipment sales $ 68 $ 62
Cost of equipment sales (145) (144)
------------------------
$ (77) $ (82)
------------------------
------------------------
Acquisition related $ (35) $ (27)
Retention related (42) (55)
------------------------
$ (77) $ (82)
------------------------
------------------------
-------------------------------------------------------------------------
Adjusted operating profit margin
Adjusted operating profit $ 705 $ 581
Divided by network revenue 1,363 1,169
------------------------
Adjusted operating profit margin 51.7% 49.7%
-------------------------------------------------------------------------
SUPPLEMENTARY INFORMATION
Calculations of Cable Non-GAAP Measures
-------------------------------------------------------------------------
Three months ended
(In millions of dollars, subscribers in thousands, March 31,
except ARPU figures and operating profit margin) 2008 2007
-------------------------------------------------------------------------
Core Cable ARPU
Core Cable revenue $ 403 $ 373
Divided by: average basic cable subscribers 2,296 2,279
Divided by: 3 months for the quarter 3 3
------------------------
$ 58.50 $ 54.56
-------------------------------------------------------------------------
Internet ARPU
Internet revenue $ 166 $ 143
Divided by: average Internet (residential)
subscribers 1,493 1,333
Divided by: 3 months for the quarter 3 3
------------------------
$ 37.07 $ 35.75
-------------------------------------------------------------------------
Cable Operations adjusted operating profit margin:
Adjusted operating profit $ 283 $ 234
Divided by revenue 695 620
------------------------
Cable Operations adjusted operating profit margin 40.7% 37.7%
-------------------------------------------------------------------------
RBS adjusted operating profit (loss) margin:
Adjusted operating profit (loss) $ 17 $ (7)
Divided by revenue 133 145
------------------------
RBS adjusted operating profit (loss) margin 12.8% (4.8%)
-------------------------------------------------------------------------
SUPPLEMENTARY INFORMATION
Calculation of Adjusted Operating Profit, Net Income and
Earnings Per Share
-------------------------------------------------------------------------
Three months ended
(In millions of dollars, number of March 31,
shares outstanding in millions) 2008 2007
-------------------------------------------------------------------------
Operating profit $ 1,095 $ 798
Add (deduct):
Stock-based compensation (recovery) expense (116) 15
Integration and restructuring expenses
Cable 5 1
------------------------
Adjusted operating profit $ 984 $ 814
------------------------
------------------------
Net income $ 344 $ 170
Add (deduct):
Stock-based compensation (recovery) expense (116) 15
Integration and restructuring expenses
Cable 5 1
Income tax impact 37 -
------------------------
Adjusted net income $ 270 $ 186
------------------------
------------------------
Basic earnings per share:
Adjusted net income $ 270 $ 186
Divided by: weighted average number
of shares outstanding 639 637
------------------------
Adjusted basic earnings per share $ 0.42 $ 0.29
------------------------
------------------------
Diluted earnings per share:
Adjusted net income $ 270 $ 186
Divided by: diluted weighted average number
of shares outstanding 639 648
------------------------
Adjusted diluted earnings per share $ 0.42 $ 0.29
-------------------------------------------------------------------------
SUPPLEMENTARY INFORMATION
Rogers Communications Inc.
2008 2007
----------------------------- -------------------------------------------
(In millions of
dollars, except
per share amounts) Q1 Q1 Q2 Q3 Q4
----------------------------- -------------------------------------------
Income Statement
Operating revenue
Wireless $ 1,431 $ 1,231 $ 1,364 $ 1,442 $ 1,466
Cable 925 855 881 899 923
Media 307 266 348 339 364
Corporate and
eliminations (54) (54) (66) (69) (66)
----------------------------- -------------------------------------------
2,609 2,298 2,527 2,611 2,687
----------------------------- -------------------------------------------
Operating profit
before the
undernoted
Wireless 705 581 664 686 658
Cable 303 228 243 265 265
Media 2 19 45 46 63
Corporate and
eliminations (26) (14) (22) (13) (29)
----------------------------- -------------------------------------------
984 814 930 984 957
Stock option plan
amendment(1) - (452) - -
Stock-based
compensation
recovery
(expense)(1) 116 (15) (32) (11) (4)
Integration and
restructuring
expenses(2) (5) (1) (15) (5) (17)
Adjustment for
CRTC Part II
fees decision(3) - - - 18 -
Contract
renegotiation
fee(4) - - - - (52)
----------------------------- -------------------------------------------
Operating profit(5) 1,095 798 431 986 884
Depreciation and
amortization 440 400 398 397 408
----------------------------- -------------------------------------------
Operating income 655 398 33 589 476
Interest on
long-term debt (138) (149) (152) (140) (138)
Other income
(expense) (3) 7 (24) (14) -
Income tax reduction
(expense) (170) (86) 87 (166) (84)
----------------------------- -------------------------------------------
Net income (loss)
for the period $ 344 $ 170 $ (56) $ 269 $ 254
----------------------------- -------------------------------------------
----------------------------- -------------------------------------------
Net income (loss)
per share:
Basic $ 0.54 $ 0.27 $ (0.09) $ 0.42 $ 0.40
Diluted $ 0.54 $ 0.26 $ (0.09) $ 0.42 $ 0.40
Additions to
PP&E(5) $ 321 $ 394 $ 381 $ 397 $ 624
----------------------------- -------------------------------------------
ADD: /FIRST AND FINAL ADD - TO236 - Rogers Communications Inc./
2006
------------------ --------------------------------
(In millions of
dollars, except
per share amounts) Q1 Q2 Q3
------------------ --------------------------------
Income Statement
Operating revenue
Wireless $ 1,005 $ 1,094 $ 1,224
Cable 772 787 800
Media 240 334 319
Corporate and
eliminations (33) (36) (38)
------------------ --------------------------------
1,984 2,179 2,305
------------------ --------------------------------
Operating profit
before the
undernoted
Wireless 412 490 564
Cable 222 237 219
Media 14 53 41
Corporate and
eliminations (30) (24) (24)
------------------ --------------------------------
618 756 800
Stock option plan
amendment(1) - - -
Stock-based
compensation
recovery
(expense)(1) (13) (10) (14)
Integration and
restructuring
expenses(2) (11) (2) (1)
Adjustment for
CRTC Part II
fees decision(3) - - -
Contract
renegotiation
fee(4) - - -
------------------ --------------------------------
Operating profit(5) 594 744 785
Depreciation and
amortization 386 395 408
------------------ --------------------------------
Operating income 208 349 377
Interest on
long-term debt (161) (155) (153)
Other income
(expense) 1 17 6
Income tax reduction
(expense) (35) 68 (76)
------------------ --------------------------------
Net income (loss)
for the period $ 13 $ 279 $ 154
------------------ --------------------------------
------------------ --------------------------------
Net income (loss)
per share:
Basic $ 0.02 $ 0.44 $ 0.25
Diluted $ 0.02 $ 0.44 $ 0.24
Additions to
PP&E(5) $ 340 $ 403 $ 415
------------------ --------------------------------
(1) See section entitled "Stock-based Compensation".
(2) Costs incurred relate to the integration of Fido, Call-Net, the
restructuring of Rogers Business Solutions, and the closure of
certain Rogers Retail stores.
(3) Relates to an adjustment of CRTC Part II fees related to prior
periods as a result of a notice from the CRTC that the Part II fees
due in November 2007 will not be collected by the CRTC. This
adjustment was applicable to the third quarter of 2007 and does not
impact the full year 2007.
(4) One-time charge resulting from the renegotiation of an Internet-
related services agreement with Yahoo!.
(5) As defined. See the "Key Performance Indicators and Non-GAAP
Measures" section.
SUPPLEMENTARY INFORMATION
Rogers Communications Inc. Adjusted Quarterly Summary(1)
2008 2007
----------------------------- -------------------------------------------
(In millions of
dollars, except
per share amounts) Q1 Q1 Q2 Q3 Q4
----------------------------- -------------------------------------------
Income Statement
Operating revenue
Wireless $ 1,431 $ 1,231 $ 1,364 $ 1,442 $ 1,466
Cable 925 855 881 899 923
Media 307 266 348 339 364
Corporate and
eliminations (54) (54) (66) (69) (66)
----------------------------- -------------------------------------------
2,609 2,298 2,527 2,611 2,687
----------------------------- -------------------------------------------
Adjusted operating
profit(2)
Wireless 705 581 664 686 658
Cable 303 228 243 265 265
Media 2 19 45 46 63
Corporate and
eliminations (26) (14) (22) (13) (29)
----------------------------- -------------------------------------------
984 814 930 984 957
Depreciation and
amortization 440 400 398 397 408
----------------------------- -------------------------------------------
Adjusted operating
income 544 414 532 587 549
Interest on
long-term debt (138) (149) (152) (140) (138)
Other income
(expense) (3) 7 23 (14) -
Income tax reduction
(expense) (133) (86) (104) (165) (109)
----------------------------- -------------------------------------------
Adjusted net income
for the period $ 270 $ 186 $ 299 $ 268 $ 302
----------------------------- -------------------------------------------
----------------------------- -------------------------------------------
Adjusted net income
per share:
Basic $ 0.42 $ 0.29 $ 0.47 $ 0.42 $ 0.47
Diluted $ 0.42 $ 0.29 $ 0.47 $ 0.41 $ 0.47
Additions to
PP&E(2) $ 321 $ 394 $ 381 $ 397 $ 624
----------------------------- -------------------------------------------
2006
------------------ --------------------------------
(In millions of
dollars, except
per share amounts) Q1 Q2 Q3
------------------ --------------------------------
Income Statement
Operating revenue
Wireless $ 1,005 $ 1,094 $ 1,224
Cable 772 787 800
Media 240 334 319
Corporate and
eliminations (33) (36) (38)
------------------ --------------------------------
1,984 2,179 2,305
------------------ --------------------------------
Adjusted operating
profit(2)
Wireless 412 490 564
Cable 222 237 219
Media 14 53 41
Corporate and
eliminations (30) (24) (24)
------------------ --------------------------------
618 756 800
Depreciation and
amortization 386 395 408
------------------ --------------------------------
Adjusted operating
income 232 361 392
Interest on
long-term debt (161) (155) (153)
Other income
(expense) 1 17 6
Income tax reduction
(expense) (39) 67 (76)
------------------ --------------------------------
Adjusted net income
for the period $ 33 $ 290 $ 169
------------------ --------------------------------
------------------ --------------------------------
Adjusted net income
per share:
Basic $ 0.05 $ 0.46 $ 0.27
Diluted $ 0.05 $ 0.45 $ 0.27
Additions to
PP&E(2) $ 340 $ 403 $ 415
------------------ --------------------------------
(1) This quarterly summary has been adjusted to exclude the impact of the
adoption of a cash settlement feature for employee stock options,
stock-based compensation (recovery) expense, integration and
restructuring expenses, an adjustment to CRTC Part II fees related to
prior periods, a one-time charge related to the renegotiation of an
Internet-related services agreement, losses on repayment of
long-term debt and the income tax impact related to the above items.
See the "Key Performance Indicators and Non-GAAP Measures" section.
The adjustment related to Part II CRTC fees is applicable to the
third quarter of 2007 and does not impact the full year 2007.
(2) As defined. See the "Key Performance Indicators and Non-GAAP
Measures" section.
Rogers Communications Inc.
Unaudited Interim Consolidated Statements of Income
(In millions of dollars, except per share amounts)
-------------------------------------------------------------------------
Three Months Ended
March 31,
2008 2007
-------------------------------------------------------------------------
Operating revenue $ 2,609 $ 2,298
Operating expenses:
Cost of sales 228 218
Sales and marketing 299 305
Operating, general and administrative 982 976
Integration and restructuring 5 1
Depreciation and amortization 440 400
-------------------------------------------------------------------------
Operating income 655 398
Interest on long-term debt (138) (149)
-------------------------------------------------------------------------
517 249
Foreign exchange gain (loss) (7) 10
Change in fair value of derivative instruments (4) (4)
Other income 8 1
-------------------------------------------------------------------------
Income before income taxes 514 256
-------------------------------------------------------------------------
Income tax expense:
Current 2 -
Future 168 86
-----------------------------------------------------------------------
170 86
-------------------------------------------------------------------------
Net income for the period $ 344 $ 170
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Net income per share:
Basic $ 0.54 $ 0.27
Diluted 0.54 0.26
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Rogers Communications Inc.
Unaudited Interim Consolidated Balance Sheets
(In millions of dollars)
-------------------------------------------------------------------------
March 31, December 31,
(In millions of dollars) 2008 2007
-------------------------------------------------------------------------
Assets
Current assets
Accounts receivable $ 1,131 $ 1,245
Other current assets 384 304
Future income tax assets 397 594
-----------------------------------------------------------------------
1,912 2,143
Property, plant and equipment 7,242 7,289
Goodwill 3,030 3,027
Intangible assets 2,030 2,086
Investments 370 485
Deferred charges 105 111
Other long-term assets 204 184
-------------------------------------------------------------------------
$ 14,893 $ 15,325
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Liabilities and Shareholders' Equity
Current liabilities
Bank advances, arising from outstanding
cheques $ 67 $ 61
Accounts payable and accrued liabilities 1,920 2,260
Current portion of long-term debt 1 1
Current portion of derivative instruments 161 195
Unearned revenue 252 225
-----------------------------------------------------------------------
2,401 2,742
Long-term debt 6,033 6,032
Derivative instruments 1,459 1,609
Other long-term liabilities 205 214
Future income tax liabilities 89 104
-------------------------------------------------------------------------
10,187 10,701
Shareholders' equity 4,706 4,624
-------------------------------------------------------------------------
$ 14,893 $ 15,325
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Rogers Communications Inc.
Unaudited Interim Consolidated Statements of Shareholders' Equity
(In millions of dollars)
Three months ended March 31, 2008
-------------------------------------------------------------------------
Class A Class B
Voting shares Non-Voting shares
----------------------- ----------------------
Number of Number of
Amount shares Amount shares
-------------------------------------------------------------------------
(000s) (000s)
Balances, January 1, 2008 $ 72 112,462 $ 471 527,005
Net income for the period - - - -
Shares issued on exercise
of stock options - - 3 57
Dividends declared - - - -
Other comprehensive loss - - - -
-------------------------------------------------------------------------
Balances, March 31, 2008 $ 72 112,462 $ 474 527,062
-------------------------------------------------------------------------
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Accumulated
other
compre- Total
hensive share-
Contributed Retained income holders'
surplus earnings (loss) equity
-------------------------------------------------------------------------
Balances, January 1, 2008 $ 3,689 $ 342 $ 50 $ 4,624
Net income for the period - 344 - 344
Shares issued on exercise
of stock options - - - 3
Dividends declared - (159) - (159)
Other comprehensive loss - - (106) (106)
-------------------------------------------------------------------------
Balances, March 31, 2008 $ 3,689 $ 527 $ (56) $ 4,706
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Three months ended March 31, 2007
-------------------------------------------------------------------------
Class A Class B
Voting shares Non-Voting shares
----------------------- ----------------------
Number of Number of
Amount shares Amount shares
-------------------------------------------------------------------------
(000s) (000s)
Balances, January 1, 2007 $ 72 112,468 $ 425 523,232
Net income for the period - - - -
Shares issued on exercise
of stock options - - 18 1,964
Stock-based compensation - - - -
Dividends declared - - - -
Other comprehensive income - - - -
-------------------------------------------------------------------------
Balances, March 31, 2007 $ 72 112,468 $ 443 525,196
-------------------------------------------------------------------------
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Accumulated
other
compre- Total
Retained hensive share-
Contributed earnings income holders'
surplus (deficit) (loss) equity
-------------------------------------------------------------------------
Balances, January 1, 2007 $ 3,736 $ (30) $ (214) $ 3,989
Net income for the period - 170 - 170
Shares issued on exercise
of stock options (4) - - 14
Stock-based compensation 8 - - 8
Dividends declared - (25) - (25)
Other comprehensive income - - 123 123
-------------------------------------------------------------------------
Balances, March 31, 2007 $ 3,740 $ 115 $ (91) $ 4,279
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Rogers Communications Inc.
Unaudited Interim Consolidated Statements of Comprehensive Income
(In millions of dollars)
-------------------------------------------------------------------------
Three months ended
March 31,
2008 2007
-------------------------------------------------------------------------
Net income for the period $ 344 $ 170
Other comprehensive income (loss):
Change in fair value of available-for-sale
investments:
Increase (decrease) in fair value (111) 90
Change in fair value of cash flow hedging
derivative instruments:
Decrease (increase) in fair value 151 (21)
Reclassification to net income of foreign
exchange loss (gain) (167) 52
Reclassification to net income of accrued
interest 35 20
---------------------------------------------------------------------
19 51
Related income taxes (14) (18)
-----------------------------------------------------------------------
(106) 123
-------------------------------------------------------------------------
Total comprehensive income $ 238 $ 293
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Rogers Communications Inc.
Unaudited Interim Consolidated Statements of Cash Flows
(In millions of dollars)
-------------------------------------------------------------------------
Three months ended
March 31,
2008 2007
-------------------------------------------------------------------------
Cash provided by (used in):
Operating activities:
Net income for the period $ 344 $ 170
Adjustments to reconcile net income to cash
flows from operating activities:
Depreciation and amortization 440 400
Program rights and Rogers Retail rental
amortization 35 19
Future income taxes 168 86
Unrealized foreign exchange gain - (8)
Change in fair value of derivative instruments 4 4
Stock-based compensation expense (recovery) (116) 15
Amortization on fair value increment of
long-term debt (1) (2)
Other (5) (1)
-----------------------------------------------------------------------
869 683
Change in non-cash operating working capital items (170) (268)
-----------------------------------------------------------------------
699 415
-------------------------------------------------------------------------
Investing activities:
Additions to property, plant and equipment
("PP&E") (321) (394)
Change in non-cash working capital items
related to PP&E (82) (88)
Acquisitions, net of cash and cash
equivalents acquired (7) (43)
Additions to program rights (36) (14)
Deposits paid on acquisition (16) -
Other 2 6
-----------------------------------------------------------------------
(460) (533)
-------------------------------------------------------------------------
Financing activities:
Issuance of long-term debt 250 768
Repayment of long-term debt (415) (697)
Issuance of capital stock on exercise
of stock options - 14
Dividends paid on Class A Voting and Class B
Non-Voting shares (80) (25)
-----------------------------------------------------------------------
(245) 60
-------------------------------------------------------------------------
Decrease in cash and cash equivalents (6) (58)
Cash deficiency, beginning of period (61) (19)
-------------------------------------------------------------------------
Cash deficiency, end of period $ (67) $ (77)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Supplemental cash flow information:
Income taxes paid $ - $ 1
Interest paid 104 127
-------------------------------------------------------------------------
-------------------------------------------------------------------------
The change in non-cash operating working
capital items is as follows:
Decrease in accounts receivable $ 118 $ 147
Increase in other assets (90) (117)
Decrease in accounts payable and accrued
liabilities (225) (321)
Increase in unearned revenue 27 23
-------------------------------------------------------------------------
$ (170) $ (268)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Cash and cash equivalents (deficiency) are defined as cash and
short-term deposits which have an original maturity of less than 90 days,
less bank advances.
The preceding MD&A and financial statements should be read in
conjunction with the first quarter 2008 Notes to the Unaudited Interim
Consolidated Financial Statements that can be found at http://www.rogers.com and
on SEDAR at http://www.sedar.com or on EDGAR at http://www.sec.gov.
Caution Regarding Forward-Looking Statements, Risks and Assumptions
This MD&A includes forward-looking statements and assumptions
concerning the future performance of our business, its operations and its
financial performance and condition approved by management on the date of
this MD&A. These forward-looking statements and assumptions include, but
are not limited to, statements with respect to our objectives and
strategies to achieve those objectives, as well as statements with respect
to our beliefs, plans, expectations, anticipations, estimates or
intentions, as well as to guidance relating to revenue, adjusted operating
profit, PP&E expenditures, free cash flow, expected growth in subscribers,
the deployment of new services and all other statements that are not
historical facts. Such forward-looking statements are based on current
expectations and various factors and assumptions applied 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, and industry structure and stability.
Except as otherwise indicated, this MD&A does 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 announced or may occur after the date of the
financial information contained herein.
We caution that all forward-looking information is inherently uncertain
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, including but not limited to
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, and the level of competitive
intensity, many of which are beyond our control. Therefore, should one or
more of these risks materialize, or should assumptions underlying the
forward-looking statements prove incorrect, actual results may vary
significantly from what we currently foresee. Accordingly, we warn
investors to exercise caution when considering any such forward-looking
information herein and to not place undue reliance on such statements and
assumptions. 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 of this MD&A entitled "Updates to Risks and
Uncertainties" and "Government Regulation and Regulatory Developments", and
also the sections entitled "Risks and Uncertainties Affecting our
Businesses" and "Government Regulation and Regulatory Developments" in our
2007 Annual MD&A.
Additional Information
Additional information relating to us, including our 2007 Annual Report
and 2007 Annual Information Form, may be found on SEDAR at http://www.sedar.com or
on EDGAR at http://www.sec.gov.
About the Company
We are a diversified Canadian communications and media company. We are
engaged in wireless voice and data communications services through
Wireless, Canada's largest wireless provider and the operator of the
country's only national Global System for Mobile Communications ("GSM")
based network. Through Cable we are one of Canada's largest providers of
cable television services as well as high-speed Internet access and
telephony services. Through Media, we are engaged in radio and television
broadcasting, televised shopping, magazines and trade publications, and
sports entertainment. 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 http://www.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 http://www.rogers.com/webcast beginning at 12:00
p.m. ET today, April 29, 2008. A rebroadcast of this call will be available
on the Webcast Archive page of the Investor Relations section of
http://www.rogers.com for a period of at least two weeks following the conference
call.
SOURCE Rogers Communications Inc.
 back to top
CONTACT:
Investment Community Contacts: Bruce M. Mann,
(416) 935-3532, bruce.mann@rci.rogers.com; Dan Coombes, (416)
935-3550, dan.coombes@rci.rogers.com; Media Contacts: Corporate
and Media - Jan Innes, (416) 935-3525, jan.innes@rci.rogers.com;
Wireless and Cable - Taanta Gupta, (416) 935-4727,
taanta.gupta@rci.rogers.com/ /FIRST AND FINAL ADD TO FOLLOW
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