TORONTO, July 27 /CNW/ -- Adjusted Operating Profit up 11% as
Revenue Grows 5% to $3.0 Billion; Revenue Increases Combine with
Cost Efficiencies to Drive Margin Expansion at each of Wireless,
Cable and Media; Wireless Data Revenue Growth Continues Strong at
39%, while Cable Total Service Units grow 25,000 More Than Second
Quarter 2009; Growth Across Media's Portfolio Leads to 8% Revenue
Increase which Combine with Cost Efficiencies to Drive 78% Adjusted
Operating Profit Growth; Consolidated Second Quarter Free Cash Flow
up 20%, Adjusted Net Income up 13%, and Adjusted Earnings Per Share
up 23% TORONTO, July 27 /CNW/ - Rogers Communications Inc. today
announced the filing of its consolidated financial and operating
results for the three and six months ended June 30, 2010. Financial
highlights are as follows(1):
-------------------------------------------------------------------------
Three months ended Six months ended (In millions of June 30, June
30, dollars, except per
--------------------------------------------------- share amounts)
2010 2009 % Chg 2010 2009 % Chg
-------------------------------------------------------------------------
Operating revenue $ 3,029 $ 2,891 5 $ 5,916 $ 5,638 5 Operating
profit 1,182 1,033 14 2,304 2,115 9 Net income 451 374 21 831 683
22 Basic and diluted net income per share $ 0.78 $ 0.59 32 $ 1.42 $
1.08 31 As adjusted: Operating profit $ 1,200 $ 1,083 11 $ 2,363 $
2,088 13 Net income 464 412 13 872 668 31 Basic and diluted net
income per share $ 0.80 $ 0.65 23 $ 1.49 $ 1.06 41
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(1) For a detailed discussion of our financial and operating
metrics and results, please review our 2009 Annual Report together
with our second quarter 2010 MD&A and our second quarter 2010
Unaudited Interim Consolidated Financial Statements and Notes
thereto which can be found at www.rogers.com and on SEDAR at
www.sedar.com or on EDGAR at www.sec.gov. "Our results for the
second quarter of 2010 demonstrate continued revenue and subscriber
growth combined with healthy operating leverage resulting from
efficiency gains across the business," said Nadir Mohamed,
President and Chief Executive Officer of Rogers Communications. "As
a result, we expanded margins in all three segments and delivered
double digit growth in adjusted operating profit, free cash flow
and earnings per share." Highlights of the second quarter of 2010
include the following: - Generated consolidated quarterly revenue
growth of 5%, with Wireless network growth of 7%, and growth of 4%
in Cable Operations and 8% in Media. Wireless, Cable Operations and
Media adjusted operating profit increased by 10%, 4%, and 78%
respectively. Revenue growth and cost reduction initiatives
combined to drive the adjusted operating profit margin up to 39.6%
from 37.5% year-over-year on a consolidated basis, with Wireless
network margins increasing to 49.9% from 48.5%, Cable Operations
margins increasing to 43.4% from 43.1%, and Media margins
increasing to 16.7% from 10.1% year-over-year. - Wireless network
revenue growth was fuelled by data revenue growth of 39% and net
subscriber additions of 119,000. Wireless data revenue now
comprises 27% of Wireless network revenue and was helped by the
activation and upgrade of approximately 385,000 additional
smartphone devices during the quarter, predominantly BlackBerry,
iPhone and Android devices, of which approximately 35% were for
subscribers new to Wireless. This resulted in subscribers with
smartphones, who generate ARPU nearly twice that of voice only
subscribers, representing 35% of the overall postpaid subscriber
base as at June 30, 2010, up from 25% as at June 30, 2009. - Grew
total service units (television, Internet and telephony
subscribers) at Cable by more than 25,000 versus the second quarter
2009, with Internet subscriber penetration now at 72% of television
subscribers and residential voice-over-cable telephony penetration
at 42% of television subscribers. - Wireless announced that it
would offer Apple's iPhone 4, and also began offering prepaid
wireless service plans for Apple's recently introduced touchscreen
tablet computer, the iPad, for customers who want to take their
movies, TV shows, music, games and reading with them. - We unveiled
the Rogers Handset Protection Guarantee program for wireless
customers. The program, a first from a Canadian wireless service
provider, provides a simple and cost effective replacement service
for customers whose devices have been lost, stolen or broken. -
Launched Rogers' Extreme Text Messaging service, a North American
first, allowing wireless customers to personalize their texting
experience with signatures, distribution lists, blocking and
forwarding, making the texting experience as easy and feature rich
as email. - Announced the introduction of a new wireless brand
called chatr, the first in the prepaid unlimited talk and text
category to offer customers the reach and reliability of a proven
network. chatr will offer unlimited voice and text plans within
defined urban chatr zones, and be supported by extensive retail
distribution. The introduction of chatr rounds out Rogers' existing
multi-brand approach to targeting distinct market segments. - Cable
announced the official launch of its innovative Rogers On Demand
Online distribution platform, Canada's one-stop web destination for
on-demand access to a vast video library that features prime time,
daytime and specialty TV, movies, news, sports, and music content.
- Media strengthened its radio presence in Edmonton, Alberta with
the agreement to acquire BOUNCE (CHBN-FM), one of Edmonton's top
hit music stations, and in London, Ontario with the agreement to
acquire BOB-FM (CHST-FM), a continual ratings leader in that
market. These transactions are subject to CRTC approval, and are
expected to close in the second half of 2010. - Together with
Canucks Sports and Entertainment, we announced a 10-year strategic
alliance giving Rogers the arena naming and telecommunications
sponsorship rights. The Vancouver stadium that is home to the NHL's
Canucks will now be known as Rogers Arena. - Generated consolidated
free cash flow (adjusted operating profit less property, plant and
equipment expenditures and interest) of $591 million, a 20%
increase from second quarter 2009, while adjusted net income grew
by 13%. On a per share basis, free cash flow increased by 30% and
adjusted earnings per share increased by 23% reflecting share
buybacks over the past year which decreased the base of outstanding
shares. - We repurchased 9.0 million RCI Class B Non-Voting shares
for $328 million during the quarter under our $1.5 billion share
buyback authorization, and paid dividends on our common shares
totalling $188 million. This summary of our second quarter 2010
earnings ("earnings release"), which is current as of July 26,
2010, should be read in conjunction with our second quarter 2010
MD&A, our second quarter 2010 Interim Unaudited Consolidated
Financial Statements and Notes thereto, our 2009 Annual MD&A
and our 2009 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 25 of our 2009
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, 2009. In this earnings
release, the terms "we", "us", "our", "Rogers" and "the Company"
refer to Rogers Communications Inc. and our subsidiaries,
"Wireless", "Cable" and "Media". SUMMARIZED CONSOLIDATED FINANCIAL
RESULTS
-------------------------------------------------------------------------
Three months ended Six months ended (In millions of June 30, June
30, dollars, except per
--------------------------------------------------- share amounts)
2010 2009 % Chg 2010 2009 % Chg
-------------------------------------------------------------------------
Operating revenue Wireless $ 1,700 $ 1,616 5 $ 3,362 $ 3,160 6
Cable Cable Operations 790 763 4 1,579 1,506 5 RBS 140 125 12 273
253 8 Rogers Retail 86 90 (4) 175 192 (9) Corporate items and
eliminations (12) (6) 100 (26) (11) 136
--------------------------------------------------- 1,004 972 3
2,001 1,940 3 Media 396 366 8 697 650 7 Corporate items and
eliminations (71) (63) 13 (144) (112) 29
--------------------------------------------------- Total 3,029
2,891 5 5,916 5,638 5
---------------------------------------------------
--------------------------------------------------- Adjusted
operating profit (loss) Wireless 815 742 10 1,647 1,452 13 Cable
Cable Operations 343 329 4 683 637 7 RBS 9 7 29 17 22 (23) Rogers
Retail (8) (4) 100 (12) (3) n/m
--------------------------------------------------- 344 332 4 688
656 5 Media 66 37 78 74 27 174 Corporate items and eliminations
(25) (28) (11) (46) (47) (2)
--------------------------------------------------- Adjusted
operating profit 1,200 1,083 11 2,363 2,088 13 Stock-based
compensation recovery (expense) (10) (13) (23) (34) 68 n/m
Integration and restructuring expenses (8) (37) (78) (10) (41) (76)
Other items, net - - n/m (15) - n/m
--------------------------------------------------- Operating
profit 1,182 1,033 14 2,304 2,115 9 Other income and expense, net
731 659 11 1,473 1,432 3
--------------------------------------------------- Net income $
451 $ 374 21 $ 831 $ 683 22
---------------------------------------------------
--------------------------------------------------- Basic and
diluted net income per share $ 0.78 $ 0.59 32 $ 1.42 $ 1.08 31 As
adjusted: Net income $ 464 $ 412 13 $ 872 $ 668 31 Basic and
diluted net income per share $ 0.80 $ 0.65 23 $ 1.49 $ 1.06 41
Additions to property, plant and equipment ("PP&E") Wireless $
206 $ 204 1 $ 405 $ 378 7 Cable Cable Operations 159 156 2 277 260
7 RBS 8 9 (11) 14 17 (18) Rogers Retail 3 3 - 4 6 (33)
--------------------------------------------------- 170 168 1 295
283 4 Media 9 16 (44) 14 30 (53) Corporate 54 46 17 91 102 (11)
--------------------------------------------------- Total $ 439 $
434 1 $ 805 $ 793 2
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SEGMENT REVIEW WIRELESS -------- Summarized Wireless Financial
Results
-------------------------------------------------------------------------
Three months ended Six months ended (In millions of June 30, June
30, dollars, except
--------------------------------------------------- margin) 2010
2009 % Chg 2010 2009 % Chg
-------------------------------------------------------------------------
Operating revenue Postpaid $ 1,559 $ 1,456 7 $ 3,074 $ 2,862 7
Prepaid 74 73 1 140 140 -
--------------------------------------------------- Network revenue
1,633 1,529 7 3,214 3,002 7 Equipment sales 67 87 (23) 148 158 (6)
--------------------------------------------------- Total operating
revenue 1,700 1,616 5 3,362 3,160 6
--------------------------------------------------- Operating
expenses before the undernoted Cost of equipment sales 243 254 (4)
480 479 - Sales and marketing expenses 152 149 2 263 289 (9)
Operating, general and administrative expenses 490 471 4 972 940 3
--------------------------------------------------- 885 874 1 1,715
1,708 - ---------------------------------------------------
Adjusted operating profit 815 742 10 1,647 1,452 13 Stock-based
compensation recovery (expense) (2) (2) - (7) 8 n/m Integration and
restructuring expenses - (9) n/m (1) (9) (89) Other items, net - -
n/m (10) - n/m ---------------------------------------------------
Operating profit $ 813 $ 731 11 $ 1,629 $ 1,451 12
---------------------------------------------------
--------------------------------------------------- Adjusted
operating profit margin as % of network revenue 49.9% 48.5% 51.2%
48.4% Additions to PP&E $ 206 $ 204 1 $ 405 $ 378 7
-------------------------------------------------------------------------
Summarized Wireless Subscriber Results
-------------------------------------------------------------------------
(Subscriber statistics in Three months ended Six months ended
thousands, except June 30, June 30, ARPU, churn and
------------------------------------------------------ usage) 2010
2009 Chg 2010 2009 Chg
-------------------------------------------------------------------------
Postpaid Gross additions 321 347 (26) 599 662 (63) Net additions 98
148 (50) 145 252 (107) Total postpaid retail subscribers 7,124
6,702 422 7,124 6,702 422 Average monthly revenue per user ("ARPU")
$ 73.54 $ 73.24 $ 0.30 $ 72.83 $ 72.69 $ 0.14 Average monthly
minutes of usage 577 604 (27) 567 587 (20) Monthly churn 1.06%
1.00% 0.06% 1.08% 1.05% 0.03% Prepaid Gross additions 165 135 30
293 265 28 Net additions (losses) 21 (6) 27 (13) (38) 25 Total
prepaid retail subscribers 1,502 1,454 48 1,502 1,454 48 ARPU $
16.61 $ 16.77 $(0.16) $ 15.64 $ 15.92 $(0.28) Average monthly
minutes of usage 112 124 (12) 109 120 (11) Monthly churn 3.26%
3.24% 0.02% 3.43% 3.44% (0.01%) Total Postpaid and Prepaid Gross
additions 486 482 4 892 927 (35) Net additions 119 142 (23) 132 214
(82) Total postpaid and prepaid retail subscribers 8,626 8,156 470
8,626 8,156 470 Monthly churn 1.44% 1.41% 0.03% 1.49% 1.48% 0.01%
Blended ARPU $ 63.66 $ 63.09 $ 0.57 $ 62.82 $ 62.32 $ 0.50 Blended
average monthly minutes of usage 495 516 (21) 485 500 (15)
-------------------------------------------------------------------------
Wireless Subscribers and Network Revenue The year-over-year
decrease in net subscriber additions for the quarter primarily
reflects a combination of an increased level of competitive
intensity, a significantly higher than usual market share of
subscriber additions by Wireless in the prior year period, and a
slowing of consumer iPhone purchases in advance of the availability
of the new iPhone 4 during the third quarter of 2010. Wireless
began offering prepaid wireless service plans for Apple's recently
introduced touchscreen tablet computer, the iPad, during the
quarter and this contributed to the increase in prepaid subscribers
versus the prior year period. The increase in network revenue for
the three and six months ended June 30, 2010, compared to the
corresponding periods of 2009, was driven predominantly by the
continued growth of Wireless' postpaid subscriber base and the
continued adoption of wireless data services. Year-over-year,
blended ARPU increased by 0.9%, which reflects higher wireless
data, feature and long-distance revenues, partially offset by
declines in roaming and out-of-plan usage revenues reflecting a
combination of economic softness, the creation over the past year
of voice and data roaming value plans for frequent travelers, and
general competitive intensity. For both the three and six months
ended June 30, 2010, wireless data revenue increased by
approximately 39% over the corresponding periods of 2009, to $436
million and $851 million, respectively. This growth in wireless
data revenue reflects the continued penetration and growing usage
of smartphone and wireless laptop devices which are driving
increased usage of e-mail, wireless Internet access, text messaging
and other wireless data services. For both the three and six months
ended June 30, 2010, data revenue represented approximately 27% of
total network revenue, compared to approximately 20% in the
corresponding periods of 2009. Wireless activated and upgraded
approximately 385,000 smartphone devices, predominately iPhone,
BlackBerry and Android devices, of which approximately 35% were for
subscribers new to Wireless, during the three months ended June 30,
2010. This resulted in subscribers with smartphones representing
35% of the overall postpaid subscriber base as at June 30, 2010,
compared to 25% as at June 30, 2009. These subscribers have
committed to new multi-year-term contracts, and generate ARPU
nearly twice that of voice only subscribers. Wireless' success in
maintaining the low level of postpaid churn reflects targeted
customer retention programs and continued enhancements in network
coverage and quality. Wireless Equipment Sales The year-over-year
decrease in the equipment sales component of revenue, including
activation fees and net of equipment subsidies, for the three and
six months ended June 30, 2010, versus the corresponding periods of
2009, reflects fluctuations in the mix, volumes, and subsidy levels
associated with device sales to new and upgrading subscribers.
Wireless Operating Expenses
-------------------------------------------------------------------------
Three months ended Six months ended June 30, June 30, (In millions
of --------------------------------------------------- dollars)
2010 2009 % Chg 2010 2009 % Chg
-------------------------------------------------------------------------
Operating expenses Cost of equipment sales $ 243 $ 254 (4) $ 480 $
479 - Sales and marketing expenses 152 149 2 263 289 (9) Operating,
general and administrative expenses 490 471 4 972 940 3
--------------------------------------------------- Operating
expenses before the undernoted 885 874 1 1,715 1,708 - Stock-based
compensation expense (recovery) 2 2 - 7 (8) n/m Integration and
restructuring expenses - 9 n/m 1 9 (89) Other items, net - - n/m 10
- n/m --------------------------------------------------- Total
operating expenses $ 887 $ 885 - $ 1,733 $ 1,709 1
-------------------------------------------------------------------------
The decrease in cost of equipment sales for the three months ended
June 30, 2010, compared to the corresponding period of 2009, was
primarily the result of the timing of hardware shipments versus the
prior period, offset by a higher average cost of more sophisticated
devices. These factors also contributed to the relatively steady
level of cost of equipment sales for the six months ended June 30,
2010, compared to the corresponding period of 2009. Sales and
marketing expenses increased slightly for the three months ended
June 30, 2010, compared to the corresponding period of 2009, due to
modest increased spending on advertising and promotion costs for
new marketing campaigns, offset by savings resulting from cost
reduction initiatives. Sales and marketing expenses decreased 9%
for the six months ended June 30, 2010, compared to the
corresponding period of 2009, due to lower sales volumes as well as
savings resulting from cost reduction initiatives. The
year-over-year increase in operating, general and administrative
expenses for the second quarter, excluding retention spending
discussed below, was driven by a combination of growth in the
Wireless postpaid subscriber base offset by savings related to
operating and scale efficiencies across various functions. Total
retention spending, including subsidies on handset upgrades, was
$170 million and $325 million in the three and six months ended
June 30, 2010, respectively, compared to $144 million and $287
million in the corresponding periods of 2009. The retention
spending for the three and six months ended June 30, 2010 increased
compared to the corresponding periods of 2009 as a result of a
higher volume of upgrade activity by existing subscribers and an
increased mix of more sophisticated devices, versus the prior
periods. Wireless Adjusted Operating Profit The 10% year-over-year
increase in adjusted operating profit and the adjusted operating
profit margin of 49.9% on network revenue (which excludes equipment
sales revenue) for the three months ended June 30, 2010 primarily
reflects the increase in network revenue offset by the increase in
the total operating expenses discussed above. Wireless Additions to
Property, Plant and Equipment ("PP&E") Wireless additions to
PP&E are classified into the following categories:
-------------------------------------------------------------------------
Three months ended Six months ended June 30, June 30, (In millions
of --------------------------------------------------- dollars)
2010 2009 % Chg 2010 2009 % Chg
-------------------------------------------------------------------------
Additions to PP&E Capacity $ 96 $ 119 (19) $ 224 $ 209 7
Quality 73 49 49 116 99 17 Network - other 7 5 40 13 19 (32)
Information technology and other 30 31 (3) 52 51 2
--------------------------------------------------- Total additions
to PP&E $ 206 $ 204 1 $ 405 $ 378 7
-------------------------------------------------------------------------
Wireless PP&E additions reflect spending on network capacity,
such as radio channel additions, network core improvements and
network enhancing features, including the deployment of our HSPA+
network. Quality related PP&E is associated with upgrades to
the network to enable higher throughput speeds, in addition to
improved network access associated activities such as site build
programs, and network sectorization work. In addition, Quality
includes test and monitoring equipment and operating support system
activities. Investments in Network - other are associated with
network reliability and renewal initiatives, infrastructure
upgrades, and new product platforms. Information technology and
other wireless specific system initiatives included billing and
back-office system upgrades, and other facilities and equipment
spending. Spending for the three months ended June 30, 2010 related
to the Quality PP&E increased by 49% over the second quarter of
2009 due to increased new cell-site build activity.
Quarter-over-quarter Capacity PP&E was lower by 19%, as a
result of decreased spending on switching/radio network controller
equipment and transmission augmentation projects. Network - other
spending increased 40% over the second quarter of 2009 due to new
product initiatives, such as the development of a pre-paid rocket
stick and subscriber day passes for U.S. and international roaming.
Other Wireless Developments Wireless announced the introduction of
a new wireless brand called chatr. This new wireless brand will
focus on the growing urban zone based unlimited talk and text
category. On July 9, 2010, Wireless reached an agreement to acquire
the assets of Cityfone Telecommunications Inc. ("Cityfone") for
cash consideration of $24 million. Cityfone is a leading
independent Canadian Mobile Virtual Network Operator that resells
Wireless' post paid wireless voice and data services to subscribers
through private label programs with major Canadian brands. CABLE
----- Summarized Cable Financial Results
-------------------------------------------------------------------------
Three months ended Six months ended (In millions of June 30, June
30, dollars, except
--------------------------------------------------- margin) 2010
2009 % Chg 2010 2009 % Chg
-------------------------------------------------------------------------
Operating revenue Cable Operations $ 790 $ 763 4 $ 1,579 $ 1,506 5
RBS 140 125 12 273 253 8 Rogers Retail 86 90 (4) 175 192 (9)
Intercompany eliminations (12) (6) 100 (26) (11) 136
--------------------------------------------------- Total operating
revenue 1,004 972 3 2,001 1,940 3
--------------------------------------------------- Adjusted
operating profit (loss) before the undernoted Cable Operations 343
329 4 683 637 7 RBS 9 7 29 17 22 (23) Rogers Retail (8) (4) 100
(12) (3) n/m ---------------------------------------------------
Adjusted operating profit 344 332 4 688 656 5 Stock-based
compensation recovery (expense) (2) (4) (50) (5) 21 n/m Integration
and restructuring expenses (7) (7) - (8) (11) (27) Other items, net
- - n/m (5) - n/m
--------------------------------------------------- Operating
profit $ 335 $ 321 4 $ 670 $ 666 1
---------------------------------------------------
--------------------------------------------------- Adjusted
operating profit (loss) margin Cable Operations 43.4% 43.1% 43.3%
42.3% RBS 6.4% 5.6% 6.2% 8.7% Rogers Retail (9.3%) (4.4%) (6.9%)
(1.6%) Additions to PP&E Cable Operations $ 159 $ 156 2 $ 277 $
260 7 RBS 8 9 (11) 14 17 (18) Rogers Retail 3 3 - 4 6 (33)
--------------------------------------------------- Total additions
to PP&E $ 170 $ 168 1 $ 295 $ 283 4
-------------------------------------------------------------------------
The following segment discussions provide a detailed discussion of
the Cable operating results. CABLE OPERATIONS Summarized Financial
Results
-------------------------------------------------------------------------
Three months ended Six months ended (In millions of June 30, June
30, dollars, except
--------------------------------------------------- margin) 2010
2009 % Chg 2010 2009 % Chg
-------------------------------------------------------------------------
Operating revenue Core Cable $ 448 $ 440 2 $ 905 $ 868 4 Internet
214 195 10 418 381 10 Rogers Home Phone 128 128 - 256 257 -
--------------------------------------------------- Total Cable
Operations operating revenue 790 763 4 1,579 1,506 5
--------------------------------------------------- Operating
expenses before the undernoted Sales and marketing expenses 58 64
(9) 110 119 (8) Operating, general and administrative expenses 389
370 5 786 750 5 ---------------------------------------------------
447 434 3 896 869 3
--------------------------------------------------- Adjusted
operating profit 343 329 4 683 637 7 Stock-based compensation
recovery (expense) (2) (4) (50) (5) 19 n/m Integration and
restructuring expenses (1) (6) (83) (1) (7) (86) Other items, net -
- n/m (7) - n/m ---------------------------------------------------
Operating profit $ 340 $ 319 7 $ 670 $ 649 3
---------------------------------------------------
--------------------------------------------------- Adjusted
operating profit margin 43.4% 43.1% 43.3% 42.3%
-------------------------------------------------------------------------
Summarized Subscriber Results
-------------------------------------------------------------------------
Three months ended Six months ended (Subscriber June 30, June 30,
statistics in ---------------------------------------------------
thousands) 2010 2009 Chg 2010 2009 Chg
-------------------------------------------------------------------------
Cable homes passed 3,661 3,577 84 3,661 3,577 84 Television Net
additions (losses) - (19) 19 1 (27) 28 Total television subscribers
2,296 2,292 4 2,296 2,292 4 Digital cable Households, net additions
11 8 3 37 43 (6) Total households 1,701 1,593 108 1,701 1,593 108
Cable high-speed Internet Net additions (losses) 7 (4) 11 24 7 17
Total cable high- speed Internet subscribers 1,643 1,578 65 1,643
1,578 65 Cable telephony lines Net additions and migrations 16 21
(5) 38 38 - Total cable telephony lines 975 878 97 975 878 97 Total
cable service units Net additions (losses) 23 (2) 25 63 18 45 Total
cable service units 4,914 4,748 166 4,914 4,748 166
-------------------------------------------------------------------------
Circuit-switched lines Net losses and migrations (11) (27) 16 (27)
(50) 23 Total circuit- switched lines 97 165 (68) 97 165 (68)
-------------------------------------------------------------------------
Core Cable Revenue The increase in Core Cable revenue for the three
and six months ended June 30, 2010, compared to the corresponding
periods of 2009, reflects the continued increasing penetration of
our digital cable product offerings. The temporary slowdown in the
year-over-year growth rate of Core Cable revenue from the first
quarter to the second quarter of 2010 reflects the timing of annual
pricing changes, which took place in March 2009 and July 2010.
Cable continues to lead the Canadian cable industry in digital
cable penetration. The digital cable subscriber base grew by 7%
from June 30, 2009 to June 30, 2010, to 74% of television
households passed by our cable networks, compared to 70% as at June
30, 2009. Increased demand from subscribers for the larger
selection of digital content, video on demand, HDTV and personal
video recorder ("PVR") equipment continues to drive the growth in
the digital subscriber base. Cable Internet Revenue The
year-over-year increase in Internet revenues for the three and six
months ended June 30, 2010, primarily reflects the increase in the
Internet subscriber base, combined with Internet services price
changes made in March 2010 and increased promotional programs. With
the high-speed Internet base at approximately 1.6 million
subscribers, Internet penetration is approximately 45% of the homes
passed by our cable networks and 72% of our television subscriber
base, at June 30, 2010. Rogers Home Phone Revenue Rogers Home Phone
revenue for the three and six months ended June 30, 2010, reflects
the year-over-year growth in the cable telephony customer base with
a corresponding cable telephony revenue growth of approximately 9%
for the quarter, offset by the ongoing decline of the legacy
circuit-switched telephony and long-distance only customer bases.
The lower net additions of cable telephony lines in the second
quarter of 2010 versus the corresponding period of 2009 are
primarily the result of fewer customer migrations from
circuit-switch to cable telephony. Cable telephony lines in service
grew 11% from June 30, 2009 to June 30, 2010. At June 30, 2010,
cable telephony lines represented 27% of the homes passed by our
cable networks and 42% of television subscribers. Cable continues
to focus principally on growing its on-net cable telephony line
base. As part of this on-net focus, Cable continues to
significantly de-emphasize sales of the circuit-switched product.
Of the 16,000 net line additions to cable telephony during the
second quarter of 2010, approximately 1,000 were migrations of
lines from our legacy circuit-switched platform to our cable
telephony platform. Because of the strategic decision in early 2008
to de-emphasize sales of the circuit-switched telephony product
outside of the cable footprint, Cable expects that circuit-switched
net line losses will continue as that base of subscribers continues
to contract over time. Excluding the impact of the shrinking
circuit-switched telephony business, the year-over-year revenue
growth for Rogers Home Phone and Cable Operations for the second
quarter ended June 30, 2010 would have been 9% and 5%,
respectively. Cable Operations Operating Expenses The increase in
Cable Operations' operating expenses for the three and six months
ended June 30, 2010, compared to the corresponding periods of 2009,
was primarily driven by higher costs associated with programming
and other content, network operations, and increases in information
technology costs, offset by cost reductions and efficiency
initiatives across various functions. Cable Operations continues to
focus on implementing a program of permanent cost reduction and
efficiency improvement initiatives to control the overall growth in
operating expenses. Cable Operations Adjusted Operating Profit The
year-over-year growth in adjusted operating profit was primarily
the result of the revenue growth and cost changes described above.
As a result, Cable Operations adjusted operating profit margins
increased to 43.4% and 43.3%, respectively, for the three and six
months ended June 30, 2010, compared to 43.1% and 42.3%,
respectively, in the corresponding periods of 2009. ROGERS BUSINESS
SOLUTIONS Summarized Financial Results
-------------------------------------------------------------------------
Three months ended Six months ended (In millions of June 30, June
30, dollars, except
--------------------------------------------------- margin) 2010
2009 % Chg 2010 2009 % Chg
-------------------------------------------------------------------------
RBS operating revenue $ 140 $ 125 12 $ 273 $ 253 8
--------------------------------------------------- Operating
expenses before the undernoted Sales and marketing expenses 10 6 67
22 12 83 Operating, general and administrative expenses 121 112 8
234 219 7 --------------------------------------------------- 131
118 11 256 231 11
--------------------------------------------------- Adjusted
operating profit 9 7 29 17 22 (23) Stock-based compensation
recovery - - n/m - 1 n/m Integration and restructuring expenses (2)
(1) 100 (3) (1) 200
--------------------------------------------------- Operating
profit $ 7 $ 6 17 $ 14 $ 22 (36)
---------------------------------------------------
--------------------------------------------------- Adjusted
operating profit margin 6.4% 5.6% 6.2% 8.7%
-------------------------------------------------------------------------
Summarized Subscriber Results
-------------------------------------------------------------------------
Three months ended Six months ended (Subscriber June 30, June 30,
statistics in ---------------------------------------------------
thousands) 2010 2009 Chg 2010 2009 Chg
-------------------------------------------------------------------------
Local line equivalents Total local line equivalents 156 187 (31)
156 187 (31) Broadband data circuits Total broadband data circuits
35 37 (2) 35 37 (2)
-------------------------------------------------------------------------
RBS Revenue The increase in RBS revenues reflects the increase in
long-distance revenue, which includes higher volumes by both
carrier and internal customers, and the acquisition of Blink,
partially offset by the ongoing decline in the legacy portions of
the business. RBS is focused on leveraging on-net revenue
opportunities utilizing Cable's existing network facilities as well
as maintaining its existing medium enterprise customer base while
growing the carrier business. Excluding the acquisition of Blink,
revenue growth for the three months ended June 30, 2010 would have
been 8%. For the three and six months ended June 30, 2010,
long-distance revenue increased, which was partially offset by a
decline in RBS legacy data and local revenues, compared to the
corresponding periods of 2009. RBS Operating Expenses Operating,
general and administrative expenses increased for the three and six
months ended June 30, 2010, compared to the corresponding periods
of 2009. An increase in long-distance costs due to higher call
volumes and country mix resulted in higher operating costs which
were partially offset by lower data and local carrier charges.
Sales and marketing expenses increased for the three and six months
ended June 30, 2010, compared to the corresponding periods of 2009,
and reflect increased marketing within the medium and large
enterprise and carrier segments associated with RBS' launch of a
new suite of Ethernet services. The increase also reflects the
organizational changes to support an increase in the sales and
marketing effort. RBS Adjusted Operating Profit The changes in
revenues and operating expenses described above resulted in an
adjusted operating profit margin of 6.4% and 6.2%, respectively,
for the three and six months ended June 30, 2010, compared to 5.6%
and 8.7%, respectively, in the corresponding periods of the prior
year. Excluding the acquisition of Blink, adjusted operating profit
for the three months ended June 30, 2010 would have been
approximately $7 million. ROGERS RETAIL Summarized Financial
Results
-------------------------------------------------------------------------
Three months ended Six months ended (In millions of June 30, June
30, dollars, except
--------------------------------------------------- margin) 2010
2009 % Chg 2010 2009 % Chg
-------------------------------------------------------------------------
Operating revenue Wireless and Cable sales 49 46 7 97 95 2 Video
rental and sales 37 44 (16) 78 97 (20)
--------------------------------------------------- Total Rogers
Retail operating revenue 86 90 (4) 175 192 (9)
--------------------------------------------------- Operating
expenses before the undernoted 94 94 - 187 195 (4)
--------------------------------------------------- Adjusted
operating (loss) (8) (4) 100 (12) (3) n/m Stock-based compensation
recovery - - n/m - 1 n/m Integration and restructuring expenses (4)
- n/m (4) (3) 33 Other items, net - - n/m 2 - n/m
--------------------------------------------------- Operating loss
$ (12) $ (4) 200 $ (14) $ (5) 180
---------------------------------------------------
--------------------------------------------------- Adjusted
operating (loss) margin (9.3%) (4.4%) (6.9%) (1.6%)
-------------------------------------------------------------------------
Rogers Retail Revenue The decrease in Rogers Retail revenue for the
three and six months ended June 30, 2010, compared to the
corresponding periods of 2009, was the result of a continued
decline in video rental and sales activities partially offset by
higher sales of wireless and other communications products versus
the prior year period. Early in 2010, Rogers began an initiative to
more deeply integrate its wireless, cable and video rental
distribution channels to better respond to changing customer needs
and preferences. As a result of this integration, certain
facilities and stores associated principally with the video rental
portion of Rogers Retail will be closed. Rogers Retail Adjusted
Operating Loss The adjusted operating loss at Rogers Retail
increased for the three and six months ended June 30, 2010,
compared to the corresponding periods of 2009, reflecting the
trends noted above. 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 premise equipment ("CPE"), which includes
the equipment for digital set-top terminals, Internet modems and
associated installation costs; - Scalable infrastructure, which
includes non-CPE costs to meet business growth and to provide
service enhancements, including many of the costs to-date of the
cable telephony initiative; - Line extensions, which includes
network costs to enter new service areas; - Upgrades and rebuild,
which includes the costs to modify or replace existing coaxial
cable, fibre-optic equipment and network electronics; and - Support
capital, which includes the costs associated with the purchase,
replacement or enhancement of non-network assets. Summarized Cable
PP&E Additions
-------------------------------------------------------------------------
Three months ended Six months ended June 30, June 30, (In millions
of --------------------------------------------------- dollars)
2010 2009 % Chg 2010 2009 % Chg
-------------------------------------------------------------------------
Additions to PP&E Customer premise equipment $ 66 $ 45 47 $ 112
$ 78 44 Scalable infrastructure 47 69 (32) 87 104 (16) Line
extensions 12 10 20 20 18 11 Upgrades and rebuild 5 5 - 8 10 (20)
Support capital 29 27 7 50 50 -
--------------------------------------------------- Total Cable
Operations 159 156 2 277 260 7 RBS 8 9 (11) 14 17 (18) Rogers
Retail 3 3 - 4 6 (33)
--------------------------------------------------- $ 170 $ 168 1 $
295 $ 283 4
-------------------------------------------------------------------------
Additions to Cable PP&E include continued investments in the
cable network to enhance customer experience through increased
speed and performance of our Internet service and capacity
enhancements to our digital network to allow for incremental HD and
On-Demand services to be added. The increase in Cable Operations
PP&E for the three and six months ended June 30, 2010 compared
to the corresponding periods of 2009 resulted primarily from higher
CPE spending offset by lower scaleable infrastructure expenditures
due to the completion of certain projects associated with our
Internet and digital cable platforms. The higher CPE spending
corresponds with higher levels of cable service unit net additions
versus the corresponding prior year periods. The RBS PP&E
additions for the three and six months ended June 30, 2010
decreased slightly compared to the corresponding periods of 2009
and reflects the timing of expenditures on customer networks and
support capital. Rogers Retail PP&E additions are attributable
to improvements made to certain retail locations. MEDIA -----
Summarized Media Financial Results
-------------------------------------------------------------------------
Three months ended Six months ended (In millions of June 30, June
30, dollars, except
--------------------------------------------------- margin) 2010
2009 % Chg 2010 2009 % Chg
-------------------------------------------------------------------------
Operating revenue $ 396 $ 366 8 $ 697 $ 650 7
--------------------------------------------------- Operating
expenses before the undernoted 330 329 - 623 623 -
--------------------------------------------------- Adjusted
operating profit 66 37 78 74 27 174 Stock-based compensation
recovery (expense) (2) (2) - (6) 14 n/m Integration and
restructuring expenses (1) (21) (95) (1) (21) (95)
--------------------------------------------------- Operating
profit $ 63 $ 14 n/m $ 67 $ 20 n/m
---------------------------------------------------
--------------------------------------------------- Adjusted
operating profit margin 16.7% 10.1% 10.6% 4.2% Additions to
property, plant and equipment $ 9 $ 16 (44) $ 14 $ 30 (53)
-------------------------------------------------------------------------
Media Revenue The increase in Media's revenue for the three and six
months ended June 30, 2010, compared to the corresponding periods
of 2009, reflects improvements in Media's prime time TV ratings,
increased subscriber fees, improvements in the advertising market
and in consumer discretionary spending, which together are
favorably impacting Television, Sportsnet, Radio and The Shopping
Channel revenues. Publishing is also beginning to experience
positive growth in advertising revenues for the first time in
several quarters, while Sports Entertainment reported modest
revenue declines associated with fluctuations in attendance levels.
Media Operating Expenses Media's operating expenses for the three
and six months ended June 30, 2010 were flat compared to the
corresponding periods of 2009. While focused cost reduction
programs across all of Media's divisions over the past year have
resulted in reduced operating expenses, these savings were offset
by cost of goods sold increases at The Shopping Channel associated
with higher sales volumes and certain planned increases in
programming costs at Television and Sportsnet. Media Adjusted
Operating Profit The increase in Media's adjusted operating profit
for the three and six months ended June 30, 2010, compared to the
corresponding periods of 2009, primarily reflects the revenue and
expense changes discussed above and resultant operating leverage
which caused operating profit and margins to both increase
significantly. Media Additions to PP&E Media's PP&E
additions in the three and six months ended June 30, 2010 declined
from the corresponding periods of 2009 due to the completion of
Television's new Ontario broadcasting facility in 2009 combined
with numerous cost containment initiatives across Media's
divisions. Other Media Developments In June 2010, Media reached an
agreement to acquire London, Ontario FM radio station BOB-FM
(CHST-FM) and Edmonton, Alberta FM radio station BOUNCE (CHBN-FM).
These transactions are subject to CRTC approval and expected to
close in the second half of 2010. 2010 FINANCIAL AND OPERATING
GUIDANCE At this point in the year we have no specific revisions to
the 2010 annual financial and operating guidance ranges which we
provided on February 17, 2010. Rogers Communications Inc. Unaudited
Interim Consolidated Statements of Income (In millions of dollars,
except per share amounts)
-------------------------------------------------------------------------
Three months ended Six months ended June 30, June 30, 2010 2009
2010 2009
-------------------------------------------------------------------------
Operating revenue $ 3,029 $ 2,891 $ 5,916 $ 5,638 Operating
expenses: Cost of sales 319 328 622 638 Sales and marketing 303 296
555 577 Operating, general and administrative 1,217 1,197 2,425
2,267 Integration and restructuring 8 37 10 41 Depreciation and
amortization 406 446 814 890
-------------------------------------------------------------------------
Operating income 776 587 1,490 1,225 Interest on long-term debt
(170) (156) (338) (308) Debt issuance costs - (5) - (5) Foreign
exchange gain (loss) (19) 80 (7) 51 Change in fair value of
derivative instruments 32 (11) 19 (1) Other income, net 5 4 4 6
-------------------------------------------------------------------------
Income before income taxes 624 499 1,168 968
-------------------------------------------------------------------------
Income tax expense: Current 105 (1) 219 (1) Future 68 126 118 286
-----------------------------------------------------------------------
173 125 337 285
-------------------------------------------------------------------------
Net income for the period $ 451 $ 374 $ 831 $ 683
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Basic and diluted net income per share $ 0.78 $ 0.59 $ 1.42 $ 1.08
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Rogers Communications Inc. Unaudited Interim Consolidated Balance
Sheets (In millions of dollars)
-------------------------------------------------------------------------
June 30, December 31, 2010 2009
-------------------------------------------------------------------------
Assets Current assets: Cash and cash equivalents $ 122 $ 383
Accounts receivable 1,252 1,310 Other current assets 428 338
Current portion of derivative instruments 5 4 Future income tax
assets 141 220
-----------------------------------------------------------------------
1,948 2,255 Property, plant and equipment 8,239 8,197 Goodwill
3,085 3,018 Intangible assets 2,673 2,643 Investments 555 547
Derivative instruments 225 78 Other long-term assets 286 280
-------------------------------------------------------------------------
$ 17,011 $ 17,018
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Liabilities and Shareholders' Equity Current liabilities: Accounts
payable and accrued liabilities $ 1,947 $ 2,175 Income taxes
payable 415 208 Current portion of long-term debt 522 1 Current
portion of derivative instruments 321 80 Unearned revenue 290 284
-----------------------------------------------------------------------
3,495 2,748 Long-term debt 8,014 8,463 Derivative instruments 646
1,004 Other long-term liabilities 123 133 Future income tax
liabilities 487 397
-------------------------------------------------------------------------
12,765 12,745 Shareholders' equity 4,246 4,273
-------------------------------------------------------------------------
$ 17,011 $ 17,018
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Rogers Communications Inc. Unaudited Interim Consolidated
Statements of Cash Flows (In millions of dollars)
-------------------------------------------------------------------------
Three months ended Six months ended June 30, June 30, 2010 2009
2010 2009
-------------------------------------------------------------------------
Cash provided by (used in): Operating activities: Net income for
the period $ 451 $ 374 $ 831 $ 683 Adjustments to reconcile net
income to cash flows from operating activities: Depreciation and
amortization 406 446 814 890 Program rights and Rogers Retail
rental amortization 56 37 105 77 Future income taxes 68 126 118 286
Unrealized foreign exchange loss (gain) 17 (74) 5 (47) Change in
fair value of derivative instruments (32) 11 (19) 1 Pension
contributions, net of expense (7) (14) (17) (19) Stock-based
compensation expense (recovery) 10 13 34 (68) Amortization on fair
value increment of long-term debt (1) (2) (3) (3) Other (2) 1 1 -
-----------------------------------------------------------------------
966 918 1,869 1,800 Change in non-cash operating working capital
items 13 (42) (37) (236)
-----------------------------------------------------------------------
979 876 1,832 1,564
-------------------------------------------------------------------------
Investing activities: Additions to property, plant and equipment
("PP&E") (439) (434) (805) (793) Change in non-cash working
capital items related to PP&E 19 8 (70) (123) Acquisitions, net
of cash and cash equivalents acquired (2) (11) (132) (11)
Acquisition of spectrum licences (20) (15) (30) (15) Additions to
program rights (39) (48) (85) (92) Other 14 (4) 21 (5)
-----------------------------------------------------------------------
(467) (504) (1,101) (1,039)
-------------------------------------------------------------------------
Financing activities: Issuance of long-term debt 50 1,460 50 1,825
Repayment of long-term debt (50) (975) (50) (1,410) Repayment of
capital lease (1) - (1) - Repurchase of Class B Non-Voting shares
(328) (509) (630) (509) Proceeds received on exercise of stock
options 1 - 2 - Dividends paid (188) (184) (363) (343)
-----------------------------------------------------------------------
(516) (208) (992) (437)
-------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents (4) 164 (261) 88
Cash and cash equivalents (deficiency), beginning of period 126
(95) 383 (19)
-------------------------------------------------------------------------
Cash and cash equivalents, end of period $ 122 $ 69 $ 122 $ 69
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Supplemental cash flow information: Income taxes paid $ 5 $ - $ 12
$ - Interest paid 193 154 339 307
-------------------------------------------------------------------------
-------------------------------------------------------------------------
The change in non-cash operating working capital items is as
follows: Decrease (increase) in accounts receivable $ (87) $ (24) $
58 $ 222 Decrease (increase) in other assets (13) 63 (131) (11)
Increase (decrease) in accounts payable and accrued liabilities 23
(55) (177) (487) Increase in income taxes payable 100 - 207 -
Increase (decrease) in unearned revenue (10) (26) 6 40
-------------------------------------------------------------------------
$ 13 $ (42) $ (37) $ (236)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
This earnings release should be read in conjunction with our 2009
Annual Report, our second quarter 2010 MD&A and our second
quarter 2010 Unaudited Interim Consolidated Financial Statements
and Notes thereto that can be found at www.rogers.com and on SEDAR
at www.sedar.com or on EDGAR at www.sec.gov. Caution Regarding
Forward-Looking Statements, Risks and Assumptions This earnings
release includes forward-looking statements and assumptions
concerning our business, its operations and its financial
performance and condition approved by management on the date of
this earnings release. These forward-looking statements and
assumptions include, but are not limited to, statements with
respect to our objectives and strategies to achieve those
objectives, statements with respect to our beliefs, plans,
expectations, anticipations, estimates or intentions, including
guidance and forecasts relating to revenue, adjusted operating
profit, PP&E expenditures, free cash flow, expected growth in
subscribers and the services to which they subscribe, the cost of
acquiring subscribers and the deployment of new services and all
other statements that are not historical facts. Such
forward-looking statements are based on current objectives,
strategies, expectations and assumptions, most of which are
confidential and proprietary, that we believe to be reasonable at
the time including, but not limited to, general economic and
industry growth rates, currency exchange rates, product pricing
levels and competitive intensity, subscriber growth and usage
rates, changes in government regulation, technology deployment,
device availability, the timing of new product launches, content
and equipment costs, the integration of acquisitions, and industry
structure and stability. Except as otherwise indicated, this
earnings release and our forward-looking statements do not reflect
the potential impact of any non-recurring or other special items or
of any dispositions, monetizations, mergers, acquisitions, other
business combinations or other transactions that may be considered
or announced or may occur after the date of the financial
information contained herein. We caution that all forward-looking
information, including any statement regarding our current
intentions, is inherently subject to change and uncertainty and
that actual results may differ materially from the assumptions,
estimates or expectations reflected in the forward-looking
information. A number of factors could cause actual results to
differ materially from those in the forward-looking statements or
could cause our current objectives and strategies to change,
including but not limited to economic conditions, technological
change, the integration of acquisitions, unanticipated changes in
content or equipment costs, changing conditions in the
entertainment, information and communications industries,
regulatory changes, litigation and tax matters, the level of
competitive intensity and the emergence of new opportunities, many
of which are beyond our control and current expectation or
knowledge. Therefore, should one or more of these risks
materialize, should our objectives or strategies change, or should
any other factors underlying the forward-looking statements prove
incorrect, actual results and our plans may vary significantly from
what we currently foresee. Accordingly, we warn investors to
exercise caution when considering any such forward-looking
information herein and that it would be unreasonable to rely on
such statements as creating any legal rights regarding our future
results or plans. We are under no obligation (and we expressly
disclaim any such obligation) to update or alter any
forward-looking statements or assumptions whether as a result of
new information, future events or otherwise, except as required by
law. Before making any investment decisions and for a detailed
discussion of the risks, uncertainties and environment associated
with our business, fully review the sections of our second quarter
2010 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 2009 Annual MD&A. About Rogers Communications Inc.
Rogers Communications is a diversified Canadian communications and
media company. We are Canada's largest provider of wireless voice
and data communications services and one of Canada's leading
providers of cable television, high-speed Internet and telephony
services. Through Rogers Media we are engaged in radio and
television broadcasting, televised shopping, magazines and trade
publications, 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 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 rogers.com/webcast beginning at 8:30 a.m. ET today,
July 27, 2010. A rebroadcast of this teleconference will be
available on the Webcast Archive page of the Investor Relations
section of rogers.com for a period of at least two weeks following
the conference call. 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: Wireless, Cable and
Corporate: Terrie Tweddle, 416.935.4727,
terrie.tweddle@rci.rogers.com; Media and Regulatory: Jan Innes,
416.935.3525, jan.innes@rci.rogers.com
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