News release via Canada NewsWire, Toronto 416-863-9350
Attention Business/Financial Editors:
Rogers Reports Strong First Quarter 2007 Financial and Operating
Results
- Consolidated Revenue Grows 15.8% to $2.3 Billion and Consolidated
Operating Profit Increases 34.3% to $798 Million;
Wireless Postpaid ARPU Grows 8.7% Year-Over-Year, Postpaid Churn Falls
to under 1.2% and Postpaid Subscriber Net Additions Grow 5.5%, while
Quarterly Net Additions of Basic Cable, Digital Cable, High-Speed
Internet and Cable Telephony Subscribers all Increase versus First
Quarter 2006;
TORONTO, May 1 /CNW/ - Rogers Communications Inc. today announced its
consolidated financial and operating results for the three months ended
March 31, 2007.
Financial highlights are as follows:
<<
-------------------------------------------------------------------------
Three months ended March 31,
(In millions of dollars, except ------------------------------
per share amounts) 2007 2006 % Chg
-------------------------------------------------------------------------
Operating revenue(1) $ 2,298 $ 1,984 15.8
Operating profit(2) 798 594 34.3
Net income 170 13 n/m
Net income per share:
Basic $ 0.27 $ 0.02 n/m
Diluted 0.26 0.02 n/m
-------------------------------------------------------------------------
(1) Certain prior year amounts related to equipment sales and cost of
equipment sales have been reclassified. Refer to the section
entitled "Reclassification of Wireless Equipment Sales and Cost of
Sales" in our 2006 Annual MD&A for further details.
(2) Operating profit should not be considered as a substitute or
alternative for operating income or net income, in each case
determined in accordance with generally accepted accounting
principles ("GAAP"). See the "Reconciliation of Operating Profit to
Net Income for the Period" section for a reconciliation of operating
profit to operating income and net income under GAAP and the "Key
Performance Indicators and Non-GAAP Measures" section.
n/m: not meaningful
Highlights of the first quarter of 2007 include the following:
- Operating revenue increased 15.8% for the quarter, with all three of
our operating units delivering solid double digit growth.
- Strong subscriber growth continued at Wireless, with quarterly net
postpaid additions of 94,500 compared to 89,600 in the first quarter
of 2006.
- Wireless postpaid subscriber monthly churn was 1.17% versus 1.47% in
the first quarter of 2006, while postpaid monthly ARPU (average
revenue per user) increased 8.7% year-over-year to $67.64. The ARPU
increase reflects a 45.9% lift in data revenues, which represented
12.3% of total wireless network revenue in the quarter.
- Cable Operations ended the quarter with more than 440,000 residential
voice-over-cable telephony subscriber lines, with net additions of
74,600 cable telephony subscriber lines for the quarter (of which
approximately 18,400 were migrations from the circuit-switched
platform). The combined number of local telephony lines on both the
cable telephony and circuit-switched platforms from Rogers Home Phone
and Rogers Business Solutions reached 982,100.
- Digital cable households increased by 69,600 in the quarter to reach
a total of 1,203,600, while residential high-speed Internet
subscribers grew by 42,100 in the quarter to a total of 1,338,700.
- Wireless number portability ("WNP") was introduced in Canada on
March 14, 2007 and consumers in Canada have been able to change
carriers while keeping their cellular phone number since that date.
Rogers' processes and systems were well-prepared for this complicated
transition and we are committed to assuring that WNP is a seamless
experience for customers in this new and more open wireless
marketplace.
- Wireless launched the Rogers VISION suite of services on its new High
Speed Downlink Packet Access ("HSDPA") 3G wireless network, the
fastest wireless network in Canada, including the first wireless
video calling service in North America. This powerful 3G technology
significantly improves data download speeds on wireless devices,
providing a user experience similar to broadband hi-speed wireline
services.
- Wireless announced that it would turn down its earlier generation
TDMA and analogue networks effective May 31, 2007 and move the
remaining customers on these networks onto its advanced GSM network.
The program has been successful to date, with the majority of
subscribers already having chosen to transition to Rogers' more
advanced GSM service, enabling them to enjoy the benefits of being on
Canada's most reliable network.
- Introduced the 'My Home Connections' plan that lets Rogers Home Phone
("RHP") customers make Canadian long distance calls from their home
phone to any RHP, Wireless, or Fido number, at no additional charge,
and also the 'My Home Circle' program, which expands the Wireless
local calling circle for couples and families to now also include
their RHP number.
- Repaid $450 million aggregate principal amount of Cable and Telecom's
7.60% Senior Secured Second Priority Notes due 2007 at maturity
during the quarter and issued a notice to redeem all of Wireless'
US$550 million principal amount of Floating Rate Senior Secured Notes
due 2010 on May 3, 2007 at the stipulated redemption price of 102%
plus accrued interest to the date of redemption.
- Achieved investment grade credit status following the upgrade of
Rogers' corporate debt ratings by credit rating agencies Fitch and
Moody's during the quarter, followed by a similar upgrade to
investment grade by Standard & Poor's in April 2007.
- On April 9, 2007, Media announced its plans to acquire ten Canadian
conventional and specialty television services from CTVglobemedia
Inc., subject to various regulatory approvals, in an all cash
transaction valued at $138 million. Media also closed its previously
announced acquisition of five Alberta radio stations during the
quarter.
>>
"This was another solid quarter across the board for Rogers and a strong
start to 2007 both operationally and financially," 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 revenues and operating profit. Our focus as 2007 unfolds remains
disciplined execution of our strategy of profitable growth while continuing to
deploy innovative products and services to add value to our customers' lives."
MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE THREE MONTHS ENDED MARCH 31, 2007
This management's discussion and analysis ("MD&A") should be read in
conjunction with our 2006 Annual MD&A and our 2006 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 2006 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, 2006. This MD&A is current as of May 1, 2007.
In this MD&A, the terms "we", "us", "our", and "the Company" refer to
Rogers Communications Inc. and our subsidiaries, which are reported in the
following segments:
<<
- "Wireless", which refers to our wholly owned subsidiary Rogers
Wireless Communications Inc. and its subsidiaries, including
Rogers Wireless Inc. ("RWI") and its subsidiaries;
- "Cable and Telecom", which refers to our wholly owned subsidiary
Rogers Cable Inc. and its subsidiaries. In January 2007, we
completed a previously announced internal reorganization whereby
the Cable and Internet and Rogers Home Phone segments were
combined into one segment known as Cable Operations. As a result,
beginning with the results for the three months ended March 31,
2007, the Cable and Telecom operating segment is comprised of the
following segments: Cable Operations, Rogers Business Solutions
and Rogers Retail. Comparative figures have been reclassified to
reflect this new segmented reporting;
- "Media", which refers to our wholly owned subsidiary Rogers Media
Inc. and its subsidiaries including Rogers Broadcasting, which
owns Rogers Sportsnet, Radio stations, OMNI television, The
Biography Channel Canada, G4TechTV Canada and The Shopping
Channel; Rogers Publishing; and Rogers Sports Entertainment, which
owns the Toronto Blue Jays and the Rogers Centre. In addition,
Media holds ownership interests in entities involved in specialty
TV content, TV 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 the decimal to which they appear.
SUMMARIZED CONSOLIDATED FINANCIAL RESULTS
-------------------------------------------------------------------------
Three months ended March 31,
(In millions of dollars, except ------------------------------
per share amounts) 2007 2006 % Chg
-------------------------------------------------------------------------
Operating revenue
Wireless (1) $ 1,231 $ 1,005 22.5
Cable and Telecom
Cable Operations 620 543 14.2
Rogers Business Solutions 145 149 (2.7)
Rogers Retail 91 81 12.3
Corporate items and eliminations (1) (1) -
------------------------------
855 772 10.8
Media 266 240 10.8
Corporate items and eliminations (54) (33) 63.6
------------------------------
Total 2,298 1,984 15.8
Operating profit, after integration and
Rogers Retail store closure expenses(2)
Wireless(1) 578 405 42.7
Cable and Telecom
Cable Operations 231 201 14.9
Rogers Business Solutions (7) 13 n/m
Rogers Retail 1 1 -
Integration costs (1) (3) (66.7)
------------------------------
224 212 5.7
Media 17 13 30.8
Corporate items and eliminations (21) (36) (41.7)
------------------------------
Total 798 594 34.3
------------------------------
Other income and expense, net(3) 628 581 8.1
------------------------------
Net income $ 170 $ 13 n/m
------------------------------
Net income per share(5):
Basic $ 0.27 $ 0.02 n/m
Diluted 0.26 0.02 n/m
Additions to PP&E(2)
Wireless $ 232 $ 115 101.7
Cable and Telecom
Cable Operations 125 103 21.4
Rogers Business Solutions 23 8 187.5
Rogers Retail 3 1 200.0
------------------------------
151 112 34.8
Media 7 9 (22.2)
Corporate(4) 4 104 (96.2)
------------------------------
Total $ 394 $ 340 15.9
------------------------------
-------------------------------------------------------------------------
(1) Certain prior year amounts related to equipment sales and cost of
equipment sales have been reclassified. Refer to the section entitled
"Reclassification of Wireless Equipment Sales and Cost of Sales" in
our 2006 Annual MD&A for further details.
(2) As defined. See the "Key Performance Indicators and Non-GAAP
Measures" section. Operating profit includes Rogers Retail store
closure expenses of $5 million for the three months ended March 31,
2006.
(3) See the "Reconciliation of Operating Profit to Net Income for the
Period" section for details of these amounts.
(4) Corporate additions to PP&E for the three months ended March 31, 2006
includes $100 million for RCI's purchase of real estate in Brampton,
Ontario.
(5) Certain prior year amounts have been reclassified to conform to the
current year presentation.
>>
For discussions of the results of operations of each of these segments,
refer to the respective segment sections of this MD&A.
Reconciliation of Operating Profit to Net Income for the Period
The items listed below represent the consolidated income and expense
amounts that are required to reconcile operating profit to the net income for
the period as defined under Canadian GAAP. 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) 2007 2006 % Chg
-------------------------------------------------------------------------
Operating profit(1) $ 798 $ 594 34.3
Depreciation and amortization (400) (386) 3.6
------------------------------
Operating income 398 208 91.3
Interest expense on long-term debt (149) (161) (7.5)
Foreign exchange gain (loss) 10 (4) n/m
Change in the fair value of derivative
instruments (4) 3 n/m
Other income 1 2 (50.0)
Income tax expense (86) (35) 145.7
------------------------------
Net income $ 170 $ 13 n/m
------------------------------
-------------------------------------------------------------------------
(1) As defined. See the "Key Performance Indicators and Non-GAAP
Measures" section.
>>
Depreciation and Amortization Expense
The increases in depreciation and amortization expense for the three
months ended March 31, 2007 as compared to the corresponding period in 2006
primarily reflect an increase in additions to property, plant and equipment.
Operating Income
The growth in our consolidated operating income for the three months
ended March 31, 2007 as compared to the corresponding period in 2006 results
from the higher operating profit across all of our operating units. See the
section entitled "Operating Unit Review" for a detailed discussion of
operating unit results.
Interest on Long-Term Debt
The $12 million reduction in interest expense to $149 million for the
three months ended March 31, 2007 compared to the corresponding period in 2006
is primarily due to the decrease in debt as at March 31, 2007, compared to
March 31, 2006, of $614 million, including the impact of cross-currency
interest rate exchange agreements. This decrease in debt was largely the
result of the repayment at maturity in February 2007 of Cable and Telecom's
$450 million 7.60% Senior Secured Second Priority Notes, the repayment in
June 2006 of Wireless' $160 million 10.5% Senior Secured Notes and Wireless'
July 2006 repayment of a mortgage in the amount of $22 million.
Foreign Exchange Gain (Loss)
During the three months ended March 31, 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 U.S. dollar-denominated long-term debt not hedged for accounting
purposes. During the corresponding period of 2006 we incurred a foreign
exchange loss of $4 million related to long-term debt not hedged for
accounting purposes given a 0.29 cent decrease in the Canadian dollar in this
period.
Change in Fair Value of Derivative Instruments
The changes in fair value of the derivative instruments in the three
months ended March 31, 2007 were primarily the result of the changes in the
Canadian dollar relative to that of the U.S. dollar as described above and the
resulting change in fair value of our cross-currency interest rate exchange
agreements not accounted for as hedges.
Income Taxes
Our effective tax rate for the three months ended March 31, 2007 was
33.6%. The effective tax rate was less than the 2007 statutory tax rate of
35.8% due primarily to realized capital gains, only 50% of which are subject
to income tax. The effective tax rate for the three months ended March 31,
2006 was 72.9%. The effective rate was greater than the 2006 statutory rate of
36.1% due primarily to an increase in the valuation allowance recorded in
respect of non-capital losses generated during the period.
We recorded net future income tax expense for the three months ended
March 31, 2007 of $86 million. Future income tax expense resulted primarily
from the utilization of non-capital loss carryforwards, the benefit of which
had previously been recognized.
In 2000, we received a $241 million payment (the "Termination Payment")
from Le Group Videotron Ltee ("Videotron") in respect of the termination of a
merger agreement between us and Videotron. The Canada Revenue Agency ("CRA")
disagreed with our tax filing position in respect of the Termination Payment
and in May 2006, issued a Notice of Reassessment which would result in
additional income tax and related interest of approximately $62 million. RCI
and the CRA signed a settlement agreement later in 2006 with respect to this
matter. Under the terms of the settlement agreement, the income tax losses
carried forward were to be reduced by $67 million. Accordingly, a future
income tax charge of $25 million was recorded in 2006. In April 2007, a
dispute arose with the CRA regarding the implementation of the settlement
agreement. We are currently in discussions with the CRA regarding this matter
and no adjustments to the previously recorded amounts have been reflected in
the unaudited interim consolidated financial statements at March 31, 2007.
Net Income and Earnings Per Share
As a result of the changes discussed above, we recorded net income of
$170 million for the three months ended March 31, 2007 or basic earnings per
share of $0.27 (diluted - $0.26), compared to net income of $13 million or
basic and diluted earnings per share of $0.02 in the corresponding period in
2006.
OPERATING UNIT REVIEW
WIRELESS
--------
Summarized Wireless Financial Results
<<
-------------------------------------------------------------------------
Three months ended March 31,
------------------------------
(In millions of dollars, except margin) 2007 2006 % Chg
-------------------------------------------------------------------------
Operating revenue
Postpaid $ 1,104 $ 907 21.7
Prepaid 61 47 29.8
One-way messaging 4 3 33.3
------------------------------
Network revenue 1,169 957 22.2
Equipment sales(1) 62 48 29.2
------------------------------
Total operating revenue 1,231 1,005 22.5
------------------------------
Operating expenses
Cost of equipment sales(1) 144 148 (2.7)
Sales and marketing expenses 140 128 9.4
Operating, general and administrative
expenses 369 324 13.9
------------------------------
Total operating expenses 653 600 8.8
------------------------------
Operating profit(2)(3) $ 578 $ 405 42.7
------------------------------
Operating profit margin as % of
network revenue(3) 49.4% 42.3%
Additions to property, plant and equipment
("PP&E")(2)(3) $ 232 $ 115 101.7
-------------------------------------------------------------------------
(1) Certain prior year amounts related to equipment sales and cost of
equipment sales have been reclassified. Refer to the section entitled
"Reclassification of Wireless Equipment Sales and Cost of Sales" in
our 2006 Annual MD&A for further details.
(2) Operating profit includes a loss of $7 million and $3 million related
to the Inukshuk wireless broadband initiative for the three months
ended March 31, 2007 and 2006, respectively.
(3) As defined. See the "Key Performance Indicators and Non-GAAP
Measures" and "Supplementary Information" sections.
Summarized Wireless Subscriber Results
-------------------------------------------------------------------------
(Subscriber statistics in Three months ended March 31,
thousands, except ARPU, ----------------------------------------
churn and usage) 2007 2006 Chg % Chg
-------------------------------------------------------------------------
Postpaid
Gross additions 285.2 303.6 (18.4) (6.1)
Net additions 94.5 89.6 4.9 5.5
Total postpaid retail
subscribers 5,492.7 4,907.8 584.9 11.9
Average monthly revenue per
user ("ARPU")(1) $ 67.64 $ 62.20 $ 5.44 8.7
Average monthly usage (minutes) 534 521 13 2.5
Monthly churn 1.17% 1.47% (0.30%) (20.4)
Prepaid
Gross additions 144.2 126.5 17.7 14.0
Net losses (8.7) (40.9) 32.2 (78.7)
Total prepaid retail
subscribers 1,371.4 1,308.9 62.5 4.8
ARPU(1) $ 14.76 $ 11.68 $ 3.08 26.4
Monthly churn 3.69% 4.18% (0.49%) (11.7)
-------------------------------------------------------------------------
(1) As defined. See the "Key Performance Indicators and Non-GAAP
Measures" section. As calculated in the "Supplementary Information"
section.
>>
Wireless Network Revenue
The increases in network revenue for the three months ended March 31,
2007 compared to the prior year period was driven by the continued growth of
Wireless' postpaid subscriber base and improvements in postpaid average
monthly revenue per user ("ARPU"). The year-over-year increase in postpaid
ARPU reflects the impact of higher data revenue.
Wireless' success in the continued reduction in postpaid churn largely
reflects proactive and targeted customer retention activities as well as the
increased network density and coverage quality resulting from the completion
of the integration of the Fido GSM network in mid-2005. Prepaid churn and net
losses have improved over 2006 due to marketing changes and investments in
retention programs.
Prepaid revenue increased significantly as a result of increased ARPU.
This year-over-year improvement is a result of recent changes in Wireless'
prepaid offering, including unlimited evenings and weekend plans and increased
data usage.
During the three months ended March 31, 2007, wireless data revenue
increased by 45.9% over the corresponding period in 2006 and totalled
$144 million. This increase in data revenue reflects the continued rapid
growth of text and multimedia messaging services, wireless Internet access,
BlackBerry devices, downloadable ring tones, music and games, and other
wireless data services and applications. For the first quarter of 2007, data
revenue represented approximately 12.3% of total network revenue compared to
10.3% in the corresponding period last year.
Wireless Equipment Sales
The year-over-year increase in revenue from equipment sales, including
activation fees and net of equipment subsidies, reflects the increased volume
of handset upgrades associated with subscriber retention programs combined
with the generally higher prices of handsets and devices.
Wireless Operating Expenses
<<
-------------------------------------------------------------------------
Three months ended March 31,
(In millions of dollars, except per ------------------------------
subscriber statistics) 2007 2006 % Chg
-------------------------------------------------------------------------
Operating expenses
Cost of equipment sales(1) $ 144 $ 148 (2.7)
Sales and marketing expenses 140 128 9.4
Operating, general and administrative
expenses 369 324 13.9
------------------------------
Total operating expenses 653 600 8.8
Average monthly operating expense per
subscriber before sales and marketing
expenses(2) $ 20.33 $ 19.62 3.6
Sales and marketing costs per gross
subscriber addition(2) $ 386 $ 410 (5.9)
-------------------------------------------------------------------------
(1) Certain prior year amounts related to equipment sales and cost of
equipment sales have been reclassified. Refer to the section entitled
"Reclassification of Wireless Equipment Sales and Cost of Sales" in
our 2006 Annual MD&A for further details.
(2) As defined. See the "Key Performance Indicator and Non-GAAP Measures"
section. As calculated in the "Supplementary Information" section.
>>
Cost of equipment sales remained relatively unchanged for the three
months ended March 31, 2007 compared to the corresponding period of the prior
year. This is a result of slightly lower gross additions and handset subsidies
offset by higher retention activity.
The increase in sales and marketing expenses for the three months ended
March 31, 2007 compared to the corresponding period of the prior year was
primarily related to marketing efforts targeted at acquiring higher postpaid
value customers on longer term contracts, as well as marketing related to the
Rogers VISION suite of services including the unveiling of wireless video
calling that turns a mobile handset into a webcam for face-to-face calling.
Wireless is the first and only wireless carrier in North America to offer
video calling. The Rogers VISION suite of services operates on Rogers' new
High Speed Downlink Packet Access ("HSDPA") network, the fastest wireless
network in Canada. This powerful 3G technology significantly improves download
speeds on wireless devices, providing a user experience similar to broadband
hi-speed wireline services.
The increased operating, general and administrative expenses were
primarily due to increases in retention spending, and costs to support data
and roaming services, partially offset by savings related to operating and
scale efficiencies across various functions.
Total retention spending, including subsidies on handset upgrades, has
increased to $99 million in the three months ended March 31, 2007 compared to
$78 million in the corresponding period of the prior year due to a larger
subscriber base which resulted in higher volumes of handset upgrades.
Retention spending also increased due to the transition of customers to
Wireless' more advanced GSM service from our older generation TDMA and analog
networks which will be turned down in May 2007. Retention spending, on both an
absolute and a per subscriber basis, is expected to grow as wireless market
penetration in Canada deepens. (See the section entitled "Caution Regarding
Forward-Looking Statements" below.)
The increase in average monthly operating expense per subscriber,
excluding sales and marketing expenses is primarily due to the increase in
retention spending, and costs to support data and roaming services.
Wireless Operating Profit
The strong year-over-year growth in operating profit was the result of
the significant growth in network revenue. As a result, Wireless' operating
profit margins increased to 49.4% for the three months ended March 31, 2007
compared to 42.3% in the corresponding period in 2006.
The operating loss related to the fixed wireless initiative, which
includes the Inukshuk joint venture, and our internal spending on the
initiative, is included in Wireless' operating profit. During the three months
ended March 31, 2007, the fixed wireless initiative recorded an operating loss
of $7 million, compared to an operating loss of $3 million for the three
months ended March 31, 2006.
Wireless Additions to Property, Plant and Equipment
Wireless additions to property, plant and equipment ("PP&E") are
classified into the following categories:
<<
-------------------------------------------------------------------------
Three months ended March 31,
------------------------------
(In millions of dollars) 2007 2006 % Chg
-------------------------------------------------------------------------
Additions to PP&E
Network - capacity $ 41 $ 38 7.9
Network - other 16 7 128.6
HSDPA 149 16 n/m
Information and technology and other 21 17 23.5
Inukshuk 5 37 (86.5)
------------------------------
Total additions to PP&E 232 115 101.7
-------------------------------------------------------------------------
>>
The $232 million of additions to PP&E for the three months ended
March 31, 2007 reflect spending on network capacity and technology
enhancements. The year-over-year increase in additions to PP&E relates
primarily to the deployment of Wireless' next generation HSDPA network to
major markets in Ontario, Quebec, B.C and Alberta.
Other network-related additions to PP&E in the three months ended
March 31, 2007 primarily reflect capacity expansion of the GSM/GPRS network,
and technical upgrade projects, consisting primarily of new cell site build
and operational support systems. Other additions to PP&E reflect information
technology initiatives such as office system upgrades and other facilities and
equipment.
Additions to PP&E during the three months ended March 31, 2007 also
include $5 million of expenditures related to the Inukshuk wireless broadband
initiative. This significant reduction from $37 million in the corresponding
period of the prior year is a result of start-up costs incurred in 2006 for
new systems to deploy infrastructure in the largest Canadian geographic
markets.
CABLE AND TELECOM
-----------------
Reorganization of Cable and Telecom Group
Effective January 2007, the Rogers Retail segment acquired the assets of
approximately 170 Wireless retail locations. The combined operations are
reported in the Rogers Retail segment.
In January 2007, we completed a previously announced internal
reorganization whereby the Cable and Internet and Rogers Home Phone segments
were combined into one segment known as Cable Operations. As a result,
beginning with the results for the three months ended March 31, 2007, the
Cable and Telecom operating segment is comprised of the following segments:
Cable Operations, Rogers Business Solutions and Rogers Retail. Comparative
figures have been reclassified to reflect this new segmented reporting.
<<
Summarized Cable and Telecom Financial Results
-------------------------------------------------------------------------
Three months ended March 31,
------------------------------
(In millions of dollars, except margin) 2007 2006(5) % Chg
-------------------------------------------------------------------------
Operating revenue
Cable Operations $ 620 $ 543 14.2
Rogers Business Solutions 145 149 (2.7)
Rogers Retail 91 81 12.3
Intercompany eliminations (1) (1) -
------------------------------
Total operating revenue 855 772 10.8
Operating profit(1)
Cable Operations(2) 231 201 14.9
Rogers Business Solutions (7) 13 n/m
Rogers Retail(3) 1 1 -
Integration costs(4) (1) (3) (66.7)
------------------------------
Total operating profit 224 212 5.7
Operating profit margin(1)
Cable Operations(2) 37.3% 37.0%
Rogers Business Solutions (4.8%) 8.7%
Rogers Retail(3) 1.1% 1.2%
Additions to PP&E(1)
Cable Operations(2) 125 103 21.4
Rogers Business Solutions 23 8 187.5
Rogers Retail 3 1 200.0
------------------------------
Total additions to PP&E 151 112 34.8
-------------------------------------------------------------------------
(1) As defined. See the "Key Performance Indicators and Non-GAAP
Measures" and "Supplementary Information" sections.
(2) Cable Operations segment includes Core Cable services, Internet
services and Rogers Home Phone services.
(3) Rogers Retail operating expenses for the three months ended March 31,
2006 include a charge of $5 million related to the closure of 21
stores.
(4) Costs incurred relate to the integration of the operations of Call-
Net Enterprises Inc.
(5) Certain prior year amounts have been reclassified to conform to the
current year presentation.
Total operating revenue for the three months ended March 31, 2007
increased $83 million or 10.8% from the corresponding period in 2006, and
total operating profit for the three months ended March 31, 2007 increased $12
million, or 5.7%, to $224 million from the corresponding period last year. See
the following segment discussions for a detailed discussion of operating
results.
CABLE OPERATIONS
Summarized Financial Results
-------------------------------------------------------------------------
Three months ended March 31,
------------------------------
(In millions of dollars, except margin) 2007 2006(2) % Chg
-------------------------------------------------------------------------
Operating revenue
Core Cable $ 373 $ 342 9.1
Internet 143 122 17.2
Rogers Home Phone 104 79 31.6
------------------------------
Total Cable Operations operating revenue 620 543 14.2
Operating expenses
Sales and marketing expenses 61 47 29.8
Operating, general and
administrative expenses 328 295 11.2
------------------------------
Total Cable Operations operating expenses 389 342 13.7
------------------------------
Cable Operations operating profit(1) 231 201 14.9
Cable Operations operating
profit margin(1) 37.3% 37.0%
-------------------------------------------------------------------------
(1) As defined. See the "Key Performance Indicators and Non-GAAP
Measures" and "Supplementary Information" sections.
(2) Certain prior year amounts have been reclassified to conform with the
current year presentation.
Summarized Subscriber Results
-------------------------------------------------------------------------
Three months ended March 31,
(Subscriber statistics ------------------------------
in thousands, except ARPU) 2007 2006 Chg
-------------------------------------------------------------------------
Cable homes passed 3,493.6 3,403.8 89.8
Basic Cable
Net additions (losses) 0.9 (3.6) 4.5
Total Basic Cable subscribers 2,278.0 2,260.2 17.8
Core Cable ARPU(1) $ 54.56 $ 50.47 $ 4.09
Internet
Net additions 42.1 40.3 1.8
Total internet subscribers
(residential) 1,338.7 1,176.5 162.2
Internet ARPU(1) $ 35.75 $ 34.77 $ 0.98
Digital
Terminals, net additions 119.6 83.1 36.5
Terminals in service 1,617.0 1,222.7 394.3
Households, net additions 69.6 50.0 19.6
Households 1,203.6 963.3 240.3
Cable telephony subscriber lines
Net additions(2) 74.6 48.7 25.9
Total Cable telephony subscriber lines 440.5 96.7 343.8
Circuit-switched subscriber lines
Net additions (losses and migrations)(2) (16.3) 11.4 (27.7)
Total Circuit-switched subscriber lines 333.1 402.0 (68.9)
Total Rogers Home Phone subscriber lines
Net additions 58.3 60.1 (1.8)
Total Rogers Home subscriber lines 773.6 498.7 274.9
Revenue generating units(3)
Net additions 170.9 146.8 24.1
Total revenue generating units 5,593.9 4,898.7 695.2
-------------------------------------------------------------------------
(1) As defined. See the "Key Performance Indicators and Non-GAAP
Measures" and "Supplementary Information" sections.
(2) Includes approximately 18,400 migrations from circuit-switched to
cable telephony for the three months ended March 31, 2007.
(3) Revenue generating units (RGUs) are comprised of basic cable
subscribers, digital cable households, residential high-speed cable
Internet subscribers and residential telephony subscribers.
>>
Core Cable Revenue
The increases in Core Cable revenue for the three months ended March 31,
2007 reflect price increases, the growth in basic subscribers and the growing
penetration of our digital products. The price increases on service offerings,
effective March 2006 and March 2007, contributed to Core Cable revenue growth
by approximately $14 million for the three months ended March 31, 2007. The
remaining increase in revenue of approximately $17 million for the three
months ended March 31, 2007 is primarily related to the impact of the growth
in basic and digital subscribers.
The digital subscriber base has grown by 24.9% from the corresponding
period of 2006. This represents a 52.8% penetration of basic cable customers.
Strong demand for high definition and personal video recorder digital
equipment combined with Cable & Telecom's Personal TV marketing campaign were
contributors to the growth in Cable & Telecom's digital subscriber base of
69,600 households in the three months ended March 31, 2007.
Internet (Residential) Revenue
The increase in Internet revenues for the three months ended March 31,
2007 from the corresponding period in 2006 primarily reflects the 13.8% year-
over-year increase in the number of Internet subscribers and certain price
increases for Cable & Telecom's Internet offerings. The price increases on
Cable & Telecom's Internet offerings, effective March 2006 and March 2007,
contributed to the Internet revenue growth by approximately $8 million for the
three months ended March 31, 2007. The remaining increase in revenue of
approximately $13 million for the three months ended March 31, 2007 is largely
the result of the impact of the growth in subscribers. The average monthly
revenue per Internet subscriber has increased in the quarter compared to the
corresponding period in 2006 given the price increases and partially offset
with the change in product mix to more Lite and Ultra-Lite subscribers.
With the Internet subscriber base now at approximately 1.3 million,
Internet penetration is 58.8% of basic cable households, and 38.3% of homes
passed by our cable networks.
Rogers Home Phone Revenue
The growth in Rogers Home Phone revenue for the three months ended March
31, 2007 compared to the corresponding period in 2006 is mainly a result of
incremental revenues from Rogers Home Phone voice-over-cable telephony
service, which added almost 75,000 net new lines in the three month period
ended March 31, 2007. Partially offsetting the increase in voice-over-cable
telephony lines is a decline in the number of circuit-switched local lines of
16,300 for the three months ended March 31, 2007. During the quarter, there
were 18,400 migrations from circuit-switched lines to cable telephony lines
within Cable & Telecom's cable territory.
The overall net growth in the Rogers Home Phone subscriber base
contributed to incremental local service revenues of approximately $26 million
for the three months ended March 31, 2007 over the corresponding period in
2006.
The growth of the Rogers Home Phone service revenue was partially offset
by a decline of approximately $3 million in long distance revenues for the
three months ended March 31, 2007 compared to the corresponding period in
2006, reflecting ongoing declines in long distance only customers, pricing and
usage.
Cable Operations Operating Expenses
The increase in Cable Operations sales and marketing expenses of $14
million for the three months ended March 31, 2007 compared to the
corresponding period of 2006 reflects the significant growth and expansion of
the cable telephony service as well as the timing of promotional activities.
The increases in operating, general and administrative costs for the three
months ended March 31, 2007 compared to the corresponding period of 2006 were
driven by the increases in digital cable, Internet and Rogers Home Phone
subscriber bases, resulting in higher costs associated with programming
content, customer care, technical service, network operations and
administration associated with the support of the larger subscriber bases.
Cable Operations Operating Profit
The Cable Operations operating profit for the three months ended
March 31, 2007 increased by 14.9% from the corresponding period in 2006,
reflecting the growth in revenue which outpaced the growth in operating
expenses.
<<
ROGERS BUSINESS SOLUTIONS
Summarized Financial Results
-------------------------------------------------------------------------
Three months ended March 31,
----------------------------
(In millions of dollars, except margin) 2007 2006 % Chg
-------------------------------------------------------------------------
Rogers Business Solutions operating revenue $ 145 $ 149 (2.7)
Operating expenses
Sales and marketing expenses 21 16 31.3
Operating, general and administrative
expenses 131 120 9.2
----------------------------
Total Rogers Business Solutions operating
expenses 152 136 11.8
----------------------------
Rogers Business Solutions operating profit(1) (7) 13 n/m
Rogers Business Solutions operating
profit margin(1) (4.8%) 8.7%
-------------------------------------------------------------------------
(1) As defined. See the "Key Performance Indicators and Non-GAAP
Measures" and "Supplementary Information" sections.
Summarized Subscriber Results
-------------------------------------------------------------------------
Three months ended March 31,
------------------------------
(Subscriber statistics in thousands) 2007 2006 Chg
-------------------------------------------------------------------------
Local line equivalents(1)
Net additions 3.6 7.9 (4.3)
Total local line equivalents 208.5 179.5 29.0
Broadband data circuits(2)
Net additions 0.7 1.9 (1.2)
Total broadband data circuits(3) 31.7 23.4 8.3
-------------------------------------------------------------------------
(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.
(3) Certain prior year amounts have been reclassified to conform to the
current year presentation.
>>
Rogers Business Solutions Revenue
The decrease in Rogers Business Solutions revenues reflects a decline in
long distance and data revenues partially offset with growth in local service
revenue. During the three months ended March 31, 2007, long distance and data
revenues (including hardware sales) declined by $5 million and $3 million,
respectively, compared to the corresponding period of 2006. Local service
revenue grew by $4 million during the three months ended March 31, 2007
compared to the corresponding period of 2006.
Rogers Business Solutions ended the quarter with 208,500 local line
equivalents and 31,700 broadband data circuits in service at March 31, 2007,
representing year-over-year growth rates of 16.2% and 35.5%, respectively. Net
additions for both local and data for this quarter were not as strong as the
corresponding period of 2006 due to higher disconnects.
The decrease in long distance revenue resulted from the decline in the
average revenue per minute by 7.3% this quarter versus the same period last
year. Total minutes were relatively consistent versus the same period last
year, however a higher mix of North American minutes versus international
minutes resulted in a decrease in long distance revenue. The increase in
minutes resulting from the sale of long distance minutes to Wireless and the
increase in minutes sold to retail customers was offset by a decline in
minutes sold to wholesale customers. The decline in the data revenue is a
result of the decline in hardware sales compared to the corresponding quarter
in 2006.
Rogers Business Solutions Expenses
Carrier charges, which are included in operating, general and
administrative expenses, increased by $2 million for the three months ended
March 31, 2007. Carrier charges represent approximately 59.0% of revenue in
the three months ended March 31, 2007, compared to 56.6% of revenue in the
corresponding period of 2006.
Sales and marketing expenses increased by $5 million in the current
period compared to the same period last year due to current year initiatives
targeting the small and medium business markets.
The increase in other operating, general and administrative expenses of
$11 million for the three months ended March 31, 2007 compared to same period
last year are a result of the severance of certain executives in the quarter
related to the realignment of Rogers Business Solutions within the Cable
organization, increased support costs related to assets acquired from Bell/GT
in December 2006 and an increase in overall network maintenance costs.
Rogers Business Solutions Operating Profit
Given the decline in revenue and the increase in costs, Rogers Business
Solutions operating loss was $7 million for the three months ended March 31,
2007, compared to an operating profit of $13 million in the corresponding
period of 2006.
<<
ROGERS RETAIL
Summarized Financial Results
-------------------------------------------------------------------------
Three months ended March 31,
------------------------------
(In millions of dollars, except margin) 2007 2006 % Chg
-------------------------------------------------------------------------
Rogers Retail operating revenue $ 91 $ 81 12.3
Operating expenses
Cost of sales $ 42 $ 38 10.5
Sales and marketing expenses 43 31 38.7
Operating, general and administrative
expenses(1) 5 11 (54.5)
------------------------------
Total Rogers Retail operating expenses 90 80 12.5
------------------------------
Rogers Retail operating profit(2) 1 1 -
Rogers Retail operating profit margin(2) 1.1% 1.2%
-------------------------------------------------------------------------
(1) Operating, general and administrative expenses for the three months
ended March 31, 2006 include $5 million of costs related to the
closure of 21 stores.
(2) As defined. See the "Key Performance Indicators and Non-GAAP
Measures" and "Supplementary Information" sections.
>>
Rogers Retail Revenue
In January 2007, Rogers Retail acquired approximately 170 Wireless-owned
retail locations. This segment provides our customers with a direct retail
channel featuring all of our wireless and cable products and services.
The increase in Rogers Retail revenue of $10 million for the three months
ended March 31, 2007 compared to the same period in 2006 was the result of the
acquisition of 170 Wireless-owned retail stores in January 2007 partially
offset by a decline in video rental and sales revenues of $1 million resulting
from lower transactions and customer visits.
Rogers Retail Operating Profit
The Rogers Retail operating profit of $1 million in the current period is
consistent with the corresponding period in 2006 as increased revenue was
offset by higher sales and marketing expenses.
CABLE AND TELECOM ADDITIONS TO PP&E
The nature of the cable television business is such that the
construction, rebuild and expansion of a cable system are highly capital-
intensive. The Cable Operations segment categorizes its additions to property,
plant and equipment ("PP&E") 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;
- Upgrade 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 and Telecom PP&E Additions
-------------------------------------------------------------------------
Three months ended March 31,
------------------------------
(In millions of dollars) 2007 2006(3) % Chg
-------------------------------------------------------------------------
Additions to PP&E
Customer premise equipment $ 66 $ 52 26.9
Scaleable infrastructure 22 17 29.4
Line extensions 13 16 (18.8)
Upgrades and rebuild 4 1 n/m
Support capital 20 17 17.6
------------------------------
Total Cable Operations(1) 125 103 21.4
Rogers Business Solutions(2) 23 8 187.5
Rogers Retail stores 3 1 200.0
------------------------------
151 112 34.8
-------------------------------------------------------------------------
(1) Included in Cable Operations PP&E additions is integration expenses
related to the integration of Call-Net of $2 million and $5 million
for the three months ended March 31, 2006 and 2007, respectively.
(2) Included in Rogers Business Solutions PP&E additions is integration
expenses related to the integration of Call-Net of $1 million and
$1 million for the three months ended March 31, 2006 and 2007,
respectively.
(3) Certain prior year amounts have been reclassified to conform with the
current year presentation.
The increase in Cable Operations PP&E additions is primarily attributable
to higher spending on customer premises equipment related to higher subscriber
additions on voice-over-cable telephony service and the increase in digital
boxes placed into service this quarter over the corresponding period last
year. The increase in the Rogers Business Solutions additions to PP&E is
mainly due to increased spending for network capacity.
MEDIA
-----
Summarized Media Financial Results
-------------------------------------------------------------------------
Three months ended March 31,
------------------------------
(In millions of dollars, except margin) 2007 2006 % Chg
-------------------------------------------------------------------------
Operating revenue $ 266 $ 240 10.8
Operating expenses 249 227 9.7
------------------------------
Operating profit $ 17 $ 13 30.8
Operating profit margin(1) 6.4% 5.4%
Additions to property,
plant and equipment(1) $ 7 $ 9 (22.2)
-------------------------------------------------------------------------
(1) As defined. See the "Key Performance Indicators and Non-GAAP
Measures" section.
>>
Media Revenue
The increase in Media revenue for the three months ended March 31, 2007
over the corresponding period in 2006 reflects growth across all of Media's
divisions as well as the impact of new initiatives. Publishing revenue was
positively impacted by the launch of Chocolat and the Canadian edition of
Hello! in the third quarter of 2006. Revenues also increased due to the
acquisition of five new radio stations in Alberta in January 2007 and a higher
subscriber base at Sportsnet. The Shopping Channel continued to generate
increased consumer demand for products. Sports Entertainment revenue grew
through higher spring training revenue and more events at the Rogers Centre.
The consolidation of the Biography Channel and G4TechTV as a result of
increased ownership in the second quarter of 2006 also contributed to the
increase in revenue.
Media Operating Expenses
The increase in Media operating expenses for the three months ended
March 31, 2007 compared to the corresponding period in 2006 is primarily due
to costs associated with the launch of new magazines in the third quarter of
2006, the five new radio stations and the consolidation of the Biography
Channel and G4TechTV. Cost increases were partially offset by lower general
and administrative costs across all divisions.
Media Operating Profit
The changes discussed above drove the year-over-year increase in Media's
operating profit for the three months ended March 31, 2007 from the
corresponding period in 2006, as well as the corresponding increase in
operating margins.
Media Additions to PP&E
The majority of Media's PP&E additions in the three months ended
March 31, 2007 reflect renovations and enhancements to the Rogers Centre and
building improvements related to the planned relocation of Rogers Sportsnet.
CONSOLIDATED LIQUIDITY AND CAPITAL RESOURCES
Operations
For the three months ended March 31, 2007, 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 $683 million
from $460 million in the corresponding period of 2006. The $223 million
increase is primarily the result of a $204 million increase in operating
profit and a $12 million decrease in interest expense.
Taking into account the changes in non-cash working capital items for the
three months ended March 31, 2007, cash generated from operations was
$415 million, compared to $547 million in the corresponding period of 2006.
The cash flow generated from operations of $415 million, together with
$522 million aggregate net advances drawn under our bank credit facilities and
the receipt of $14 million from the issuance of Class B Non-Voting shares
under the exercise of employee stock options, resulted in total net funds of
approximately $951 million raised in the three months ended March 31, 2007.
Net funds used during the three months ended March 31, 2007 totalled
approximately $1,009 million, the details of which include the following:
<<
- additions to PP&E of $482 million, including $88 million of related
changes in non-cash working capital;
- the repayment at maturity of Cable and Telecom's $450 million Senior
Secured Second Priority Notes due 2007 in February;
- the payment of quarterly dividends of $25 million on our Class A
Voting and Class B Non-Voting shares;
- other net acquisitions and investments of $37 million, including the
acquisition of five radio stations in Alberta;
- additions to program rights of $14 million; and
- the net repayment of $1 million of capital leases.
>>
Taking into account the cash deficiency of $19 million at the beginning
of the period and the fund uses described above, the cash deficiency at
March 31, 2007 was $77 million.
Financing
Our long-term debt instruments are described in Note 15 to the 2006
Annual Audited Consolidated Financial Statements and Note 6 to the Unaudited
Interim Consolidated Financial Statements for the three months ended March 31,
2007.
As mentioned above, during the three months ended March 31, 2007, an
aggregate $451 million debt was repaid, comprised of $450 million aggregate
principal amount at maturity of Cable and Telecom's 7.60% Senior Secured
Second Priority Notes due 2007 and $1 million net repayment of capital leases.
In addition, during the three months ended March 31, 2007, $522 million
aggregate net advances were drawn down under our bank credit facilities. On
April 3, 2007, Wireless issued a notice to redeem, on May 3, 2007, all of its
US$550 million Floating Rate Senior Secured Notes due 2010 at the stipulated
redemption price of 102% plus accrued interest to the date of redemption.
Credit Ratings Upgrades
In February 2007, Fitch Ratings increased the issuer default ratings for
RCI, Wireless and Cable and Telecom to BBB- (from BB) and increased the senior
secured debt ratings for Wireless and Cable and Telecom to BBB- (from BB+),
while the senior subordinated debt rating for Wireless was affirmed at BB.
In March 2007, Moody's Investors Service upgraded the senior secured debt
ratings for Wireless and Cable and Telecom to Baa3 (from Ba1) and upgraded the
senior subordinated debt rating of Wireless to Ba1 (from Ba2).
In April 2007, Standard & Poor's Ratings Services raised its long term
corporate credit ratings for RCI, Wireless and Cable and Telecom to BBB- (from
BB+), raised the senior secured debt ratings for Wireless and Cable and
Telecom to BBB- (from BB+) and raised the senior subordinated debt rating for
Wireless to BB+ (from BB-).
As a result, the senior secured debt of Wireless and Cable and Telecom is
now rated investment grade by each of Fitch, Moody's and Standard & Poor's.
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, 2007, there was no change in our
U.S. dollar-denominated debt or in our cross-currency interest rate exchange
agreements. On March 31, 2007 the amount of our U.S. dollar-denominated debt
hedged on an economic basis was 91.4% and on an accounting basis was 85.6%.
<<
-------------------------------------------------------------------------
(In millions of dollars, March 31, December 31,
except percentages) 2007 2006
-------------------------------------------------------------------------
U.S. dollar-denominated long-term debt US $ 4,895 US $ 4,895
Hedged with cross-currency interest rate
exchange agreements US $ 4,475 US $ 4,475
Hedged exchange rate 1.3229 1.3229
Percent hedged 91.4%(1) 91.4%
-------------------------------------------------------------------------
Amount of long-term debt(2) at fixed rates:
Total long-term debt Cdn $ 7,723 Cdn $ 7,658
Total long-term debt at fixed rates Cdn $ 6,398 Cdn $ 6,851
Percent of long-term debt fixed 82.8% 89.5%
-------------------------------------------------------------------------
Weighted average interest rate on
long-term debt 7.83% 7.98%
-------------------------------------------------------------------------
(1) Pursuant to the requirements for hedge accounting under Canadian
Institute of Chartered Accountants ("CICA") Handbook Section 3865,
Hedges, on March 31, 2007, RCI accounted for 93.6% of its cross-
currency interest rate exchange agreements as hedges against
designated U.S. dollar-denominated debt. As a result, 85.6% of
consolidated U.S. dollar-denominated debt is hedged for accounting
purposes versus 91.4% on an economic basis.
(2) Long-term debt includes the effect of the cross-currency interest
rate exchange agreements.
Outstanding Share Data
Set out below is our outstanding share data as at March 31, 2007. For
additional information, refer to Note 20 to our 2006 Annual Audited
Consolidated Financial Statements and Note 8 to the Unaudited Interim
Consolidated Financial Statements for the three months ended March 31, 2007.
-------------------------------------------------------------------------
Common Shares(1)
-------------------------------------------------------------------------
Class A Voting 112,467,614
-------------------------------------------------------------------------
Class B Non-Voting 525,195,979
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Options to Purchase Class B Non-Voting Shares
-------------------------------------------------------------------------
Outstanding Options 19,528,417
-------------------------------------------------------------------------
Outstanding Options Exercisable 12,842,273
-------------------------------------------------------------------------
(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 October 30, 2006, we declared a quarterly dividend of $0.04 per share
on each of our outstanding Class B Non-Voting shares and Class A Voting
shares, which was paid on January 2, 2007 to shareholders of record on
December 20, 2006.
On February 15, 2007, we declared a quarterly dividend of $0.04 per share
on each of our outstanding Class B Non-Voting shares and Class A Voting
shares. This quarterly dividend totalling $25 million was paid on April 2,
2007 to shareholders of record on March 15, 2007.
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 2006
Annual MD&A, and are further discussed in Notes 15, 23 and 24 of our 2006
Annual Audited Consolidated Financial Statements. There are no significant
changes to our material contractual obligations since December 31, 2006.
GOVERNMENT REGULATION AND REGULATORY DEVELOPMENTS
The significant government regulations which impact our operations are
summarized in our 2006 Annual MD&A. The significant changes to those
regulations since December 31, 2006, are as follows:
Local Telephone Forbearance
On April 4th, 2007, the Federal Cabinet overturned the CRTC's 2006 Local
Forbearance Decision. Effective April 4th, 2007, the CRTC rules on winback
(which prohibited the incumbent phone companies from contacting customers for
three months after they chose an alternate telephone provider) and promotions
(which imposed competitive safeguards for temporary pricing changes) were
removed. In addition, the incumbent phone companies will be able to apply for
deregulation by simply showing that they compete with a wireline facilities-
based provider and a wireless facilities provider in a telephone exchange. As
long as the competitive wireline facilities provider's service is available to
75% of the subscribers in an exchange and the incumbents meet quality of
service tests (which were reduced by the Cabinet), the incumbents will be
deregulated within 120 days of application to the CRTC.
Diversity of Ownership
In light of recent acquisition announcements in the Canadian broadcasting
industry, the CRTC has launched a public proceeding in which it will review
its approach to ownership consolidation and the availability of a diversity of
voices in the broadcasting system. As part of its in-depth study, the CRTC
will examine issues such as common ownership; concentration of ownership;
horizontal and vertical integration; the benefits policy; licence trafficking;
as well as the CRTC's relationship with the Competition Bureau. Written
comments are to be provided by July 18, 2007, with a public hearing scheduled
for Fall 2007. The CRTC's objective is to establish clearly articulated policy
guidelines going forward. As a result, major transactions (and their stated
divestitures) that have already been announced will be examined within the
context of the rules already in force when the transactions were announced.
Their consideration will not be delayed by the CRTC's diversity of voices
hearing, and will instead be heard and processed in a timely manner.
UPDATES TO RISKS AND UNCERTAINTIES
Our significant risks and uncertainties are summarized in our 2006 Annual
MD&A. There were no significant changes to those risks and uncertainties since
December 31, 2006.
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 2006 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 (primarily network revenue at Wireless) and average monthly
revenue per subscriber ("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,
- Operating profit,
- Operating profit margin, and
- Additions to PP&E.
>>
See "Supplementary Information" section for calculations of the Non-GAAP
measures.
RELATED PARTY ARRANGEMENTS
We have entered into certain transactions in the normal course of
business with certain broadcasters in which we have an equity interest as
detailed below:
<<
-------------------------------------------------------------------------
Three months ended March 31,
------------------------------
(In millions of dollars) 2007 2006 % Chg
-------------------------------------------------------------------------
Fees paid to broadcasters accounted
for by the equity method(1) $ 4 $ 5 (20.0)
-------------------------------------------------------------------------
(1) Fees paid to a number of Canadian pay, specialty and digital
specialty channels including Viewer's Choice Canada, TV Tropolis
(formerly Prime), Outdoor Life Network, G4TechTV, and The Biography
Channel. On June 12, 2006, we increased our ownership of Biography
Canada and G4TechTV Canada to 100% and 66 2/3%, respectively.
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 our
subsidiary companies. During the three months ended March 31, 2007 and 2006,
total amounts paid by us to these related parties are as follows:
-------------------------------------------------------------------------
Three months ended March 31,
------------------------------
(In millions of dollars) 2007 2006 % Chg
-------------------------------------------------------------------------
Legal services and commissions paid on
premiums for insurance coverage $ - $ 1 -
-------------------------------------------------------------------------
>>
Fees charged to our controlling shareholder for the personal use of our
corporate aircraft and for other administrative services are subject to formal
agreement and are representative of market rates for the provision of similar
services. For the three months ended March 31, 2007 and 2006, the net fees
charged to our controlling shareholder for personal use of the aircraft and
other administrative services were less than $0.5 million.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
In our 2006 Annual Audited Consolidated Financial Statements and Notes
thereto, as well as in our 2006 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,
2007, there are no changes to the critical accounting policies and estimates
of Wireless, Cable and Telecom and Media from those found in our 2006 Annual
MD&A.
NEW ACCOUNTING STANDARDS
Financial Instruments
In 2005, the CICA issued Handbook Section 3855, Financial Instruments -
Recognition and Measurement, Handbook Section 1530, Comprehensive Income,
Handbook Section 3251, Equity, and Handbook Section 3865, Hedges. The new
standards are effective for our interim and annual financial statements
commencing January 1, 2007.
A new statement entitled "Unaudited Interim Consolidated Statement of
Comprehensive Income" was added to our financial statements and includes net
income as well as other comprehensive income. Accumulated other comprehensive
income forms part of shareholders' equity.
Under these standards, all of our financial assets are classified as
available-for-sale or loans and receivables. Available-for-sale investments
are carried at fair value on the balance sheet, with changes in fair value
recorded in other comprehensive income. Loans and receivables and all
financial liabilities are carried at amortized cost using the effective
interest method. Upon adoption, we determined that none of our financial
assets are classified as held-for-trading or held-to-maturity and none of our
financial liabilities are classified as held-for-trading. The impact of the
classification provisions of the new standards on January 1, 2007 was an
adjustment of $213 million to bring the carrying value of available-for-sale
investments to fair value, with a corresponding increase in opening
accumulated other comprehensive income of $211 million, net of income taxes of
$2 million. For the three months ended March 31, 2007, the impact of the
classification provisions of the new standards was an increase in the carrying
value of available-for-sale investments of $91 million, with a corresponding
increase in other comprehensive income of $90 million, net of income taxes of
$1 million.
All derivatives, including embedded derivatives that must be separately
accounted for, are measured at fair value, with changes in fair value recorded
in the statements of income unless they are effective cash flow hedging
instruments. The changes in fair value of cash flow hedging derivatives are
recorded in other comprehensive income, to the extent effective, until the
variability of cash flows relating to the hedged asset or liability is
recognized in the statements of income. Any hedge ineffectiveness is
recognized in net income immediately. The impact of remeasuring hedging
derivatives on the unaudited interim consolidated financial statements on
January 1, 2007 was an increase in derivative instruments of $561 million.
This also resulted in a decrease in opening accumulated other comprehensive
income of $425 million, net of income taxes of $136 million, and an increase
in opening deficit of $8 million, net of income taxes of $2 million,
representing the ineffective portion of hedging relationships. The impact of
remeasuring hedging derivatives on the unaudited interim consolidated
financial statements for the three months ended March 31, 2007 was a decrease
in other comprehensive income of $19 million, net of income taxes, and a
decrease in net income of $1 million related to hedge ineffectiveness.
In addition, $52 million representing the foreign exchange loss on the
notional amounts of the hedging derivatives was reclassified out of other
comprehensive income and recognized in the unaudited interim consolidated
statement of income. This amount offsets the foreign exchange gain recognized
in the unaudited interim consolidated statement of income related to the
carrying value of the U.S. dollar denominated debt.
As a result of the application of these standards, we have separated the
early repayment option on one of our debt instruments and have recorded the
fair value of $19 million related to this embedded derivative on the unaudited
interim balance sheet on January 1, 2007, with a corresponding increase in
retained earnings of $13 million, net of income taxes of $6 million. The
change in the fair value of this embedded derivative for the three months
ended March 31, 2007 was not significant.
There are no significant non-financial derivatives that require separate
fair value recognition on the unaudited interim consolidated balance sheet on
the transition date and at March 31, 2007.
In addition, the unamortized deferred transitional gain of $54 million
was eliminated upon adoption, the impact of which was a decrease to opening
deficit of $37 million, net of income taxes of approximately $17 million.
Effective January 1, 2007, we record all transaction costs for financial
assets and financial liabilities in income as incurred. We had previously
deferred these costs and amortized them over the term of the related debt. The
carrying value of transaction costs at December 31, 2006 of $39 million, net
of income taxes of $20 million, was charged to opening deficit on transition
on January 1, 2007.
In 2006, the CICA issued Handbook Section 3862, Financial Instruments -
Disclosures, and Handbook Section 3863, Financial Instruments - Presentation.
These new standards will become effective for the Company beginning January 1,
2008. We are currently assessing the impact of these two new standards.
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 Telecom, and Media has unique seasonal
aspects to their businesses. For specific discussions of the seasonal trends
affecting the Wireless, Cable and Telecom, and Media operating units, please
refer to our 2006 Annual MD&A.
2007 GUIDANCE
We currently have a generally positive bias towards achieving or
exceeding the higher ends of certain of our 2007 financial and operating
metric guidance ranges, although at this early point in the year we have no
specific revisions to the 2007 annual financial and operating guidance ranges
which we provided coincident with our fourth quarter 2006 results on
February 15, 2007. (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) 2007 2006
-------------------------------------------------------------------------
Postpaid ARPU (monthly)
Postpaid (voice and data) revenue $ 1,104 $ 907
Divided by: Average postpaid wireless voice
and data subscribers 5,440.4 4,859.2
Divided by: 3 months 3 3
------------------------
$ 67.64 $ 62.20
-------------------------------------------------------------------------
Prepaid ARPU (monthly)
Prepaid (voice and data) revenue $ 61 $ 47
Divided by: Average prepaid subscribers 1,377.2 1,328.6
Divided by: 3 months 3 3
------------------------
$ 14.76 $ 11.68
-------------------------------------------------------------------------
Cost of acquisition per gross addition
Total sales and marketing expenses $ 140 $ 128
Equipment margin loss (acquisition related) 27 50
------------------------
$ 167 $ 178
------------------------
------------------------
Divided by: total gross wireless additions
(postpaid, prepaid, and one-way messaging) 432.1 433.9
------------------------
$ 386 $ 410
-------------------------------------------------------------------------
Operating expense per average subscriber (monthly)
Operating, general and administrative expenses $ 369 $ 324
Equipment margin loss (retention related) 55 50
------------------------
$ 424 $ 374
------------------------
------------------------
Divided by: Average total wireless subscribers 6,951.3 6,349.5
Divided by: 3 months 3 3
------------------------
$ 20.33 $ 19.62
-------------------------------------------------------------------------
Equipment margin loss
Equipment sales $ 62 $ 48
Cost of equipment sales (144) (148)
------------------------
$ (82) $ (100)
------------------------
------------------------
Acquisition related $ (27) $ (50)
Retention related (55) (50)
------------------------
$ (82) $ (100)
------------------------
------------------------
-------------------------------------------------------------------------
Operating Profit Margin
Operating Profit $ 578 $ 405
Divided by Network Revenue 1,169 957
------------------------
Operating Profit Margin 49.4% 42.3%
-------------------------------------------------------------------------
SUPPLEMENTARY INFORMATION
Calculations of Cable and Telecom Non-GAAP Measures
-------------------------------------------------------------------------
Three months ended
(In millions of dollars, subscribers in thousands, March 31,
except ARPU figures and operating profit margin) 2007 2006
-------------------------------------------------------------------------
Core Cable ARPU
Core Cable revenue $ 373 $ 342
Divided by: Average basic cable subscribers 2,278.8 2,261.7
Divided by: 3 months 3 3
------------------------
$ 54.56 $ 50.47
-------------------------------------------------------------------------
Internet ARPU
Internet revenue $ 143 $ 121
Divided by: Average Internet (residential)
subscribers 1,333.3 1,157.6
Divided by: 3 months 3 3
------------------------
$ 35.75 $ 34.77
-------------------------------------------------------------------------
Cable Operations:
Operating Profit (before management fees) $ 231 $ 201
Divided by Revenue 620 543
------------------------
Cable and Internet Operating Profit Margin 37.3% 37.0%
-------------------------------------------------------------------------
Rogers Business Solutions:
Operating (Loss) Profit
(before management fees) $ (7) $ 13
Divided by Revenue 145 149
------------------------
Rogers Business Solutions Operating Profit Margin (4.8%) 8.7%
-------------------------------------------------------------------------
Rogers Retail Stores:
Operating Profit(1) $ 1 $ 1
Divided by Revenue 91 81
------------------------
Rogers Retail Stores Operating Profit Margin 1.1% 1.2%
-------------------------------------------------------------------------
(1) Rogers Retail operating profit in the three months ended March 31,
2006 includes $5 million of costs related to the closure of 21
stores.
SUPPLEMENTARY INFORMATION
Rogers Communications Inc.
Historical Quarterly Summary(1)
2007 2006
----------------------------- -------------------------------------------
(In millions of
dollars, except
per share amounts) Q1 Q1 Q2 Q3 Q4
----------------------------- -------------------------------------------
Income Statement
Operating Revenue
Wireless(3) $ 1,231 $ 1,005 $ 1,094 $ 1,224 $ 1,257
Cable and Telecom 855 772 787 800 842
Media 266 240 334 319 317
Corporate and
eliminations (54) (33) (36) (38) (46)
----------------------------- -------------------------------------------
2,298 1,984 2,179 2,305 2,370
----------------------------- -------------------------------------------
----------------------------- -------------------------------------------
Operating profit(2)
Wireless 578 405 486 561 517
Cable and Telecom 224 212 233 214 231
Media 17 13 52 39 47
Corporate (21) (36) (27) (29) (43)
----------------------------- -------------------------------------------
798 594 744 785 752
Depreciation and
amortization 400 386 395 408 395
----------------------------- -------------------------------------------
Operating income 398 208 349 377 357
Interest on
long-term debt (149) (161) (155) (153) (151)
Other income (expense) 7 1 17 6 (17)
Income tax reduction
(expense) (86) (35) 68 (76) (13)
----------------------------- -------------------------------------------
Net income (loss)
for the period $ 170 $ 13 $ 279 $ 154 $ 176
----------------------------- -------------------------------------------
----------------------------- -------------------------------------------
Net income (loss)
per share(4):
- basic $ 0.27 $ 0.02 $ 0.44 $ 0.25 $ 0.28
- diluted $ 0.26 $ 0.02 $ 0.44 $ 0.24 $ 0.27
Additions to
property, plant
and equipment(2) $ 394 $ 340 $ 403 $ 415 $ 554
-------------------------------------------------------------------------
2005
-------------------------------------------------------------------------
(In millions of
dollars, except
per share amounts) Q1 Q2 Q3 Q4
-------------------------------------------------------------------------
Income Statement
Operating Revenue
Wireless(3) $ 851 $ 933 $ 1,026 $ 1,050
Cable and Telecom 505 500 726 761
Media 219 293 285 300
Corporate and
eliminations (17) (25) (33) (40)
-------------------------------------------------------------------------
1,558 1,701 2,004 2,071
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Operating profit(2)
Wireless 298 364 383 292
Cable and Telecom 181 172 195 217
Media 12 44 33 39
Corporate (15) (15) (22) (34)
-------------------------------------------------------------------------
476 565 589 514
Depreciation and
amortization 344 362 379 404
-------------------------------------------------------------------------
Operating income 132 203 210 110
Interest on
long-term debt (183) (177) (176) (163)
Other income (expense) 8 (3) 18 (22)
Income tax reduction
(expense) (3) (4) (3) 8
-------------------------------------------------------------------------
Net income (loss)
for the period $ (46) $ 19 $ 49 $ (67)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Net income (loss)
per share(4):
- basic $ (0.09) $ 0.04 $ 0.08 $ (0.11)
- diluted $ (0.09) $ 0.04 $ 0.08 $ (0.11)
Additions to
property, plant
and equipment(2) $ 260 $ 345 $ 319 $ 431
-------------------------------------------------------------------------
(1) Certain prior year numbers have been reclassified to conform to the
current year presentation as described in Note 1 to the Unaudited
Interim Consolidated Financial Statements.
(2) As defined. See the "Key Performance Indicators and Non-GAAP
Measures" section.
(3) Certain prior year amounts related to equipment sales and cost of
equipment sales have been reclassified. Refer to the section entitled
"Reclassification of Wireless Equipment Sales and Cost of Sales" in
our 2006 Annual MD&A for further details.
(4) Prior period per share amounts have been retroactively adjusted to
reflect a two-for-one split of the Company's Class A Voting and Class
B Non-voting shares on December 29, 2006.
>>
Unaudited Interim Consolidated Financial Statements of
ROGERS COMMUNICATIONS INC.
Three months ended March 31, 2007 and 2006
ROGERS COMMUNICATIONS INC.
Unaudited Interim Consolidated Statements of Income
(In millions of dollars, except per share amounts)
-------------------------------------------------------------------------
Three months ended
March 31,
2007 2006
-------------------------------------------------------------------------
(Restated
- note 1)
Operating revenue $ 2,298 $ 1,984
Operating expenses:
Cost of sales 218 232
Sales and marketing 305 272
Operating, general and administrative 976 875
Integration and store closure expenses 1 11
Depreciation and amortization 400 386
-------------------------------------------------------------------------
Operating income 398 208
Interest on long-term debt (149) (161)
-------------------------------------------------------------------------
249 47
Foreign exchange gain (loss) 10 (4)
Change in fair value of derivative instruments (4) 3
Other income 1 2
-------------------------------------------------------------------------
Income before income taxes 256 48
-------------------------------------------------------------------------
Income tax expense:
Current - 3
Future 86 32
-----------------------------------------------------------------------
86 35
-------------------------------------------------------------------------
Net income for the period $ 170 $ 13
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Net income per share (note 5):
Basic $ 0.27 $ 0.02
Diluted 0.26 0.02
-------------------------------------------------------------------------
-------------------------------------------------------------------------
See accompanying notes to unaudited interim consolidated financial
statements.
ROGERS COMMUNICATIONS INC.
Unaudited Interim Consolidated Balance Sheets
(In millions of dollars)
-------------------------------------------------------------------------
March 31, December 31,
2007 2006
-------------------------------------------------------------------------
Assets
Current assets:
Accounts receivable $ 945 $ 1,077
Other current assets 371 270
Future income tax assets 270 387
-----------------------------------------------------------------------
1,586 1,734
Property, plant and equipment 6,815 6,732
Goodwill (note 3) 2,797 2,779
Intangible assets (notes 3 and 4) 2,108 2,152
Investments 444 139
Deferred charges 60 118
Future income tax assets 444 299
Other long-term assets 168 152
-------------------------------------------------------------------------
$ 14,422 $ 14,105
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Liabilities and Shareholders' Equity
Current liabilities:
Bank advances, arising from outstanding
cheques $ 77 $ 19
Accounts payable and accrued liabilities 1,382 1,792
Current portion of long-term debt (note 6) 635 451
Current portion of derivative instruments (note 1) 10 7
Unearned revenue 250 227
-----------------------------------------------------------------------
2,354 2,496
Long-term debt (note 6) 6,362 6,537
Derivative instruments (note 1) 1,288 769
Other long-term liabilities 139 103
-------------------------------------------------------------------------
10,143 9,905
Shareholders' equity (note 8) 4,279 4,200
-------------------------------------------------------------------------
$ 14,422 $ 14,105
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Contingencies (note 10)
Subsequent events (notes 6 and 11)
See accompanying notes to unaudited interim consolidated financial
statements.
ROGERS COMMUNICATIONS INC.
Unaudited Interim Consolidated Statements of Retained Earnings (Deficit)
(In millions of dollars)
-------------------------------------------------------------------------
Three months ended
March 31,
2007 2006
-------------------------------------------------------------------------
(Restated
- note 1)
Deficit, beginning of period:
As previously reported $ (33) $ (606)
Change in accounting policy related to
financial instruments (note 1) 3 -
-----------------------------------------------------------------------
As restated (30) (606)
Net income for the period 170 13
Dividends on Class A Voting shares and Class B
Non-Voting shares (25) -
-------------------------------------------------------------------------
Retained earnings (deficit), end of period $ 115 $ (593)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
See accompanying notes to unaudited interim consolidated financial
statements.
ROGERS COMMUNICATIONS INC.
Unaudited Interim Consolidated Statement of Comprehensive Income
(In millions of dollars)
-------------------------------------------------------------------------
Three months
ended
March 31,
2007
-------------------------------------------------------------------------
Comprehensive income (note 1):
Net income for the period $ 170
Other comprehensive income, net of income taxes:
Change in fair value of derivative instruments 33
Increase in fair value of available-for-sale investments 90
-----------------------------------------------------------------------
123
-------------------------------------------------------------------------
Total comprehensive income $ 293
-------------------------------------------------------------------------
-------------------------------------------------------------------------
See accompanying notes to unaudited interim consolidated financial
statements.
ROGERS COMMUNICATIONS INC.
Unaudited Interim Consolidated Statements of Cash Flows
(In millions of dollars)
-------------------------------------------------------------------------
Three months ended
March 31,
2007 2006
-------------------------------------------------------------------------
(Restated
- note 1)
Cash provided by (used in):
Operating activities:
Net income for the period $ 170 $ 13
Adjustments to reconcile net income to
cash flows from operating activities:
Depreciation and amortization 400 386
Program rights and Rogers Retail rental
depreciation 19 18
Future income taxes 86 32
Unrealized foreign exchange loss (gain) (8) 1
Change in fair value of derivative instruments 4 (3)
Stock-based compensation expense 15 13
Amortization on fair value increment of
long-term debt (2) (3)
Other (1) 3
-----------------------------------------------------------------------
683 460
Change in non-cash operating working capital items (268) 87
-----------------------------------------------------------------------
415 547
-------------------------------------------------------------------------
Financing activities:
Issuance of long-term debt 768 1,759
Repayment of long-term debt (697) (1,831)
Issuance of capital stock on exercise of
stock options 14 13
Dividends paid on Class A Voting and Class B
Non-Voting shares (25) (23)
-----------------------------------------------------------------------
60 (82)
-------------------------------------------------------------------------
Investing activities:
Additions to property, plant and equipment (394) (340)
Change in non-cash working capital items
related to property, plant and equipment (88) (49)
Acquisitions (43) -
Additions to program rights (14) (8)
Other 6 (6)
-----------------------------------------------------------------------
(533) (403)
-------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents (58) 62
Cash deficiency, beginning of period (19) (104)
-------------------------------------------------------------------------
Cash deficiency, end of period $ (77) $ (42)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Supplemental cash flow information:
Income taxes paid $ 1 $ 5
Interest paid 127 133
-------------------------------------------------------------------------
-------------------------------------------------------------------------
The change in non-cash operating working
capital items is as follows:
Decrease in accounts receivable $ 147 $ 82
Increase (decrease) in accounts payable and
accrued liabilities (321) 15
Increase in unearned revenue 23 47
Increase in other assets (117) (57)
-------------------------------------------------------------------------
$ (268) $ 87
-------------------------------------------------------------------------
-------------------------------------------------------------------------
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.
See accompanying notes to unaudited interim consolidated financial
statements.
ROGERS COMMUNICATIONS INC.
Notes to Unaudited Interim Consolidated Financial Statements
(Tabular amounts in millions of dollars, except per share amounts)
Three months ended March 31, 2007 and 2006
-------------------------------------------------------------------------
1. Basis of presentation and accounting policies:
These unaudited interim consolidated financial statements include the
accounts of Rogers Communications Inc. and its subsidiaries
(collectively "Rogers" or the "Company"). The notes presented in
these unaudited interim consolidated financial statements include
only significant changes and transactions occurring since the
Company's last year end, and are not fully inclusive of all
disclosures required by Canadian generally accepted accounting
principles for annual financial statements. They should be read in
conjunction with the audited consolidated financial statements,
including the notes thereto, for the year ended December 31, 2006
(the "2006 financial statements"). The Company's 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.
These unaudited interim consolidated financial statements follow the
same accounting policies and methods of application as the 2006
financial statements except for the changes in segment reporting as
described in note 2 and the adoption of new accounting policies
described below.
(a) Financial instruments:
In 2005, The Canadian Institute of Chartered Accountants ("CICA")
issued Handbook Section 3855, Financial Instruments - Recognition
and Measurement, Handbook Section 1530, Comprehensive Income,
Handbook Section 3251, Equity, and Handbook Section 3865, Hedges.
The new standards are effective for the Company's interim and
annual financial statements commencing January 1, 2007.
A new statement entitled "Unaudited Interim Consolidated
Statement of Comprehensive Income" was added to the Company's
financial statements and includes net income as well as other
comprehensive income. Accumulated other comprehensive income
forms part of shareholders' equity.
Under these standards, all of the Company's financial assets are
classified as available-for-sale or loans and receivables.
Available-for-sale investments are carried at fair value on the
balance sheet, with changes in fair value recorded in other
comprehensive income. Loans and receivables and all financial
liabilities are carried at amortized cost using the effective
interest method. Upon adoption, the Company determined that none
of its financial assets are classified as held-for-trading or
held-to-maturity and none of its financial liabilities are
classified as held-for-trading. The impact of the classification
provisions of the new standards on January 1, 2007 was an
adjustment of $213 million to bring the carrying value of
available-for-sale investments to fair value, with a
corresponding increase in opening accumulated other comprehensive
income of $211 million, net of income taxes of $2 million. For
the three months ended March 31, 2007, the impact of the
classification provisions of the new standards was an increase in
the carrying value of available-for-sale investments of
$91 million, with a corresponding increase in other comprehensive
income of $90 million, net of income taxes of $1 million.
All derivatives, including embedded derivatives that must be
separately accounted for, are measured at fair value, with
changes in fair value recorded in the statements of income unless
they are effective cash flow hedging instruments. The changes in
fair value of cash flow hedging derivatives are recorded in other
comprehensive income, to the extent effective, until the
variability of cash flows relating to the hedged asset or
liability is recognized in the statements of income. Any hedge
ineffectiveness is recognized in net income immediately. The
impact of remeasuring hedging derivatives on the unaudited
interim consolidated financial statements on January 1, 2007 was
an increase in derivative instruments of $561 million. This also
resulted in a decrease in opening accumulated other comprehensive
income of $425 million, net of income taxes of $136 million, and
an increase in opening deficit of $8 million, net of income taxes
of $2 million, representing the ineffective portion of hedging
relationships. The impact of remeasuring hedging derivatives on
the unaudited interim consolidated financial statements for the
three months ended March 31, 2007 was a decrease in other
comprehensive income of $19 million, net of income taxes, and a
decrease in net income of $1 million related to hedge
ineffectiveness.
In addition, $52 million representing the foreign exchange loss
on the notional amounts of the hedging derivatives was
reclassified out of other comprehensive income and recognized in
the unaudited interim consolidated statement of income. This
amount offsets the foreign exchange gain recognized in the
unaudited interim consolidated statement of income related to the
carrying value of the U.S. dollar denominated debt.
As a result of the application of these standards, the Company
has separated the early repayment option on one of the Company's
debt instruments and has recorded the fair value of $19 million
related to this embedded derivative on the unaudited interim
balance sheet on January 1, 2007, with a corresponding increase
in retained earnings of $13 million, net of income taxes of
$6 million. The change in the fair value of this embedded
derivative for the three months ended March 31, 2007 was not
significant.
There are no significant non-financial derivatives that require
separate fair value recognition on the unaudited interim
consolidated balance sheet on the transition date and at
March 31, 2007.
In addition, the unamortized deferred transitional gain of
$54 million was eliminated upon adoption, the impact of which was
a decrease to opening deficit of $37 million, net of income taxes
of $17 million.
Effective January 1, 2007, the Company records all transaction
costs for financial assets and financial liabilities in income as
incurred. The Company had previously deferred these costs and
amortized them over the term of the related debt. The carrying
value of transaction costs at December 31, 2006 of $39 million,
net of income taxes of $20 million, was charged to opening
deficit on transition on January 1, 2007.
In 2006, the CICA issued Handbook Section 3862, Financial
Instruments - Disclosures, and Handbook Section 3863, Financial
Instruments - Presentation. These new standards will become
effective for the Company beginning January 1, 2008. The Company
is currently assessing the impact of these two new standards.
(b) Restatement and reclassification of comparative figures:
During 2006, the Company determined that certain transactions
related to the sale of wireless equipment were historically
recorded as cost of equipment sales rather than as a reduction of
equipment revenue. The Company determined these transactions
should be reflected as a reduction of equipment revenue and has
reclassified prior year figures to reflect this accounting,
resulting in a reduction of $47 million in both revenue and cost
of sales in the three months ended March 31, 2006. As a result of
this reclassification, there was no change to previously reported
net income (loss), operating income, reported cash flows or the
amounts recorded in the unaudited interim consolidated balance
sheets.
Applicable share and per share amounts have been retroactively
adjusted to reflect a two-for-one split of the Company's Class A
Voting and Class B Non-Voting shares in December 2006.
Certain of the prior period's comparative figures have been
reclassified to conform to the current period's presentation.
2. Segmented information:
In late December 2006 and during the first quarter of 2007, certain
real estate properties and related leases were transferred to Rogers
Communications Inc. from its subsidiaries. This transfer of real
estate is not anticipated to have a material impact on the future
results of the operating segments.
Effective January 2007, the Rogers Retail segment of the Company
acquired the assets of approximately 170 Wireless retail locations.
The combined operations continue to be in the Rogers Retail segment
of the Company.
In January 2007, the Company completed a previously announced
internal reorganization whereby the Cable and Internet and Rogers
Home Phone segments were combined into one segment known as Cable
Operations. As a result, beginning with the results for the three
months ended March 31, 2007, the Cable and Telecom operating segment
is comprised of the following segments: Cable Operations, Rogers
Business Solutions and Rogers Retail. Comparative figures have been
reclassified to reflect this new segmented reporting.
Beginning January 1, 2007, subsidiaries will no longer pay management
fees to Rogers Communications Inc.
All of the Company's reportable segments are substantially in Canada.
Information by reportable segment is as follows:
-------------------------------------------------------------------------
Three months ended March 31, 2007
-------------------------------------------------------
Corporate
items and Consol-
Cable and elimin- idated
Wireless Telecom Media ations Totals
-------------------------------------------------------------------------
Operating revenue $ 1,231 $ 855 $ 266 $ (54) $ 2,298
Cost of sales 144 42 46 (14) 218
Sales and marketing 140 125 54 (14) 305
Operating, general
and administrative 369 463 149 (5) 976
Integration and
store closure
expenses - 1 - - 1
-------------------------------------------------------------------------
578 224 17 (21) 798
Management fees
(recovery) - - - - -
Depreciation and
amortization 150 177 12 61 400
-------------------------------------------------------------------------
Operating income
(loss) 428 47 5 (82) 398
Interest:
Long-term debt
and other (101) (47) (3) 2 (149)
Intercompany - (14) - 14 -
Foreign exchange
gain (loss) 9 1 1 (1) 10
Change in fair
value of
derivative
instruments (3) (1) - - (4)
Other income
(expense) (1) (1) 1 2 1
Income tax
reduction
(expense) (105) 2 (3) 20 (86)
-------------------------------------------------------------------------
Net income (loss)
for the period $ 227 $ (13) $ 1 $ (45) $ 170
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Additions to
property, plant
and equipment $ 232 $ 151 $ 7 $ 4 $ 394
-------------------------------------------------------------------------
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Three months ended March 31, 2006
-------------------------------------------------------
Corporate
items and Consol-
Cable and elimin- idated
Wireless Telecom Media ations Totals
-------------------------------------------------------------------------
(Restated
- note 1)
Operating revenue $ 1,005 $ 772 $ 240 $ (33) $ 1,984
Cost of sales 148 38 46 - 232
Sales and marketing 128 94 48 2 272
Operating, general
and administrative 321 420 133 1 875
Integration and
store closure
expenses 3 8 - - 11
-------------------------------------------------------------------------
405 212 13 (36) 594
Management fees
(recovery) 3 15 4 (22) -
Depreciation and
amortization 146 160 12 68 386
-------------------------------------------------------------------------
Operating income
(loss) 256 37 (3) (82) 208
Interest:
Long-term debt
and other (102) (59) (3) 3 (161)
Intercompany 39 (8) - (31) -
Foreign exchange
gain (loss) (1) (3) - - (4)
Change in fair
value of
derivative
instruments 3 - - - 3
Other income
(expense) - - - 2 2
Income tax
reduction
(expense) (50) (1) (2) 18 (35)
-------------------------------------------------------------------------
Net income (loss)
for the period $ 145 $ (34) $ (8) $ (90) $ 13
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Additions to
property, plant
and equipment $ 115 $ 112 $ 9 $ 104 $ 340
-------------------------------------------------------------------------
-------------------------------------------------------------------------
In addition, Cable and Telecom consists of the following reportable
segments:
-------------------------------------------------------------------------
Three months ended March 31, 2007
-------------------------------------------------------
Corporate
Rogers items and Total
Cable Business Rogers elimin- Cable and
Operations Solutions Retail ations Telecom
-------------------------------------------------------------------------
Operating revenue $ 620 $ 145 $ 91 $ (1) $ 855
Cost of sales - - 42 - 42
Sales and marketing 61 21 43 - 125
Operating, general
and administrative 328 131 5 (1) 463
Integration and
store closure
expenses - - - 1 1
-------------------------------------------------------------------------
$ 231 $ (7) $ 1 $ (1) $ 224
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Additions to
property, plant,
and equipment $ 125 $ 23 $ 3 $ - $ 151
-------------------------------------------------------------------------
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Three months ended March 31, 2006
-------------------------------------------------------
Corporate
Rogers items and Total
Cable Business Rogers elimin- Cable and
Operations Solutions Retail ations Telecom
-------------------------------------------------------------------------
Operating revenue $ 543 $ 149 $ 81 $ (1) $ 772
Cost of sales - - 38 - 38
Sales and marketing 47 16 31 - 94
Operating, general
and administrative 295 120 6 (1) 420
Integration and
store closure
expenses - - 5 3 8
-------------------------------------------------------------------------
$ 201 $ 13 $ 1 $ (3) $ 212
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Additions to
property, plant,
and equipment $ 103 $ 8 $ 1 $ - $ 112
-------------------------------------------------------------------------
-------------------------------------------------------------------------
3. Business combinations:
On January 1, 2007, the Company acquired five Alberta radio stations
for cash consideration of $43 million including acquisition costs.
The stations are located in Edmonton, Fort McMurray and Grande
Prairie, Alberta. The acquisition was accounted for using the
purchase method with $11 million allocated to broadcast licences
acquired and $18 million allocated to goodwill. The purchase price
allocation is preliminary pending finalization of valuations of the
net identifiable assets acquired.
4. Investment in joint ventures:
On March 26, 2007, the Company contributed its 2.3 GHz and 3.5 GHz
spectrum licences with a carrying value of $11 million to a 50% owned
joint venture for non-cash consideration of $58 million. Accordingly,
the carrying value of spectrum licences has been reduced by
$5 million. A deferred gain of $24 million, being the portion of the
excess of fair value over carrying value related to the other non-
related venturer's interest in the spectrum licenses contributed by
the Company, was recorded on contribution of these spectrum licences.
This deferred gain is recorded in other long-term liabilities and
will be amortized to income on a basis consistent with the period
over which revenue is expected to be earned from the spectrum
licences. In addition to a cash contribution of $8 million, the other
venturer also contributed its 2.3 GHz and 3.5 GHz spectrum licences
valued at $50 million to the joint venture. The Company recorded an
increase in spectrum licences and cash of $25 million and $4 million,
respectively, related to its proportionate share of the contribution
by the other venturer.
5. Net income per share:
---------------------------------------------------------------------
Three months ended
March 31,
2007 2006
---------------------------------------------------------------------
Numerator:
Net income for the period, basic and
diluted $ 170 $ 13
---------------------------------------------------------------------
---------------------------------------------------------------------
Denominator (in millions):
Weighted average number of shares
outstanding - basic 637 629
Effect of dilutive securities:
Employee stock options 11 12
---------------------------------------------------------------------
Weighted average number of shares
outstanding - diluted 648 641
---------------------------------------------------------------------
---------------------------------------------------------------------
Net income per share:
Basic $ 0.27 $ 0.02
Diluted 0.26 0.02
---------------------------------------------------------------------
---------------------------------------------------------------------
There are 1.8 million options that are anti-dilutive and, therefore,
excluded from the calculation of diluted net income per share for the
three months ended March 31, 2007 (2006 - nil).
6. Long-term debt:
-------------------------------------------------------------------------
Due Principal Interest March 31, December
date amount rate 2007 31, 2006
-------------------------------------------------------------------------
Wireless:
Bank credit facility Floating $ 385 $ -
Floating Rate Senior
Secured Notes 2010 $U.S. 550 Floating 634 641
Senior Secured Notes 2011 U.S. 490 9.625% 565 571
Senior Secured Notes 2011 460 7.625% 460 460
Senior Secured Notes 2012 U.S. 470 7.25% 542 548
Senior Secured Notes 2014 U.S. 750 6.375% 865 874
Senior Secured Notes 2015 U.S. 550 7.50% 634 641
Senior Secured
Debentures 2016 U.S. 155 9.75% 179 181
Senior Subordinated
Notes 2012 U.S. 400 8.00% 461 466
Fair value increment
arising from purchase
accounting 34 36
-----------------------------------------------------------------------
4,759 4,418
-------------------------------------------------------------------------
Cable:
Senior Secured Second
Priority Notes 2007 450 7.60% - 450
Senior Secured Second
Priority Notes 2011 175 7.25% 175 175
Senior Secured Second
Priority Notes 2012 U.S. 350 7.875% 404 408
Senior Secured Second
Priority Notes 2013 U.S. 350 6.25% 404 408
Senior Secured Second
Priority Notes 2014 U.S. 350 5.50% 404 408
Senior Secured Second
Priority Notes 2015 U.S. 280 6.75% 322 326
Senior Secured Second
Priority Debentures 2032 U.S. 200 8.75% 230 233
-----------------------------------------------------------------------
1,939 2,408
-------------------------------------------------------------------------
Media:
Bank credit facility Floating 297 160
-------------------------------------------------------------------------
Capital leases and other Various 2 2
-------------------------------------------------------------------------
6,997 6,988
Less current portion 635 451
-------------------------------------------------------------------------
$ 6,362 $ 6,537
-------------------------------------------------------------------------
-------------------------------------------------------------------------
On February 6, 2007, the Company repaid at maturity, the aggregate
principal amount outstanding of Cable's $450 million 7.60% Senior
Secured Second Priority Notes.
On April 3, 2007, the Company announced that it issued a notice to
redeem, on May 3, 2007, all of the Wireless U.S. $550 million
principal amount of Floating Rate Senior Secured Notes due 2010 at
the stipulated redemption price of 102% plus accrued interest to the
date of redemption. As a result, these Floating Rate Senior Secured
Notes are classified within the current portion of long-term debt as
at March 31, 2007.
7. Pensions:
During the three months ended March 31, 2007, the Company recorded
pension expense in the amount of $6 million (2006 - $9 million). In
addition, the expense related to unfunded supplemental executive
retirement plans for the three months ended March 31, 2007 was
$1 million (2006 - $1 million). 8. Shareholders' equity:
---------------------------------------------------------------------
Class A Voting Class B Non-Voting
shares shares
-------------- ------------------
Number Number
Amount of shares Amount of shares
---------------------------------------------------------------------
(000s) (000s)
Balances, beginning
of period:
As previously reported $ 72 112,468 $ 425 523,232
Change in accounting
policy related to
financial instruments
(note 1) - - - -
-------------------------------------------------------------------
As restated 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, end of period $ 72 112,468 $ 443 525,196
---------------------------------------------------------------------
---------------------------------------------------------------------
---------------------------------------------------------------------
Accumu-
lated
other
compre- Total
Retained hensive share-
Contributed earnings income holders'
surplus (deficit) (loss) equity
---------------------------------------------------------------------
Balances, beginning
of period:
As previously reported $ 3,736 $ (33) $ - $ 4,200
Change in accounting
policy related to
financial instruments
(note 1) - 3 (214) (211)
-------------------------------------------------------------------
As restated 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, end of period $ 3,740 $ 115 $ (91) $ 4,279
---------------------------------------------------------------------
---------------------------------------------------------------------
During the three months ended March 31, 2007, the Company recorded
stock-based compensation expense of $15 million (2006 - $13 million)
related to stock option grants to employees; an amendment to the
option plans in the first quarter of 2006; performance option grants
to certain key employees; restricted share unit grants to employees;
and director share unit grants to directors.
During the three months ended March 31, 2007, the Company granted
1,795,798 (2006 - 1,982,620) stock options to employees, including
stock options and performance options.
The weighted average estimated fair value at the date of the grant
for stock options granted during the three months ended March 31,
2007 was $13.62 (2006 - $10.55) per share.
The weighted average exercise price of stock options granted during
the three months ended March 31, 2007 was $38.86 (2006 - $22.61) per
share.
The fair values of options granted or amended during the three months
ended March 31, 2007 and 2006 were based on the following
assumptions:
---------------------------------------------------------------------
Three months ended March 31,
2007 2006
---------------------------------------------------------------------
Risk-free interest rate 3.92 - 4.00% 4.05 - 4.11%
Dividend yield 0.42 - 0.43% 0.33%
Volatility factor of the
future expected market
prices of Class B
Non-Voting shares 34.47% - 36.55% 37.49% - 42.30%
Weighted average
expected life of
the options 4.7 years - 6.0 years 4.9 years - 5.6 years
---------------------------------------------------------------------
---------------------------------------------------------------------
During the three months ended March 31, 2007, 204,220 restricted
share units were issued to employees of the Company (2006 - 393,164).
As at March 31, 2007, 1,241,888 (December 31, 2006 - 1,037,668)
restricted share units were outstanding. These restricted share units
vest at the end of three years from the grant date.
All prior period numbers of options, restricted share units and
directors' deferred share units as well as exercise prices and fair
values per individual award have been retroactively adjusted to
reflect the two-for-one stock split in December 2006.
9. Related party transactions:
During the three months ended March 31, 2007 and 2006, the Company
entered into certain transactions in the normal course of business
with certain broadcasters in which the Company has an equity interest
as follows:
---------------------------------------------------------------------
Three months ended
March 31,
2007 2006
---------------------------------------------------------------------
Fees paid to broadcasters accounted for
by the equity method $ 4 $ 5
---------------------------------------------------------------------
---------------------------------------------------------------------
The fees above were paid to a number of Canadian pay, specialty and
digital specialty channels including Viewer's Choice Canada, Prime,
Outdoor Life Network, G4TechTV and Biography Channel. On June 12,
2006, the Company increased its ownership in Biography Canada and
G4TechTV Canada to 100% and 66-2/3%, respectively.
The Company has entered into certain transactions with companies, the
partners or senior officers of which are or have been directors of
the Company and/or its subsidiary companies. During the three months
ended March 31, 2007 and 2006, total amounts paid by the Company to
these related parties are as follows:
---------------------------------------------------------------------
Three months ended
March 31,
2007 2006
---------------------------------------------------------------------
Legal services and commissions paid on
premiums for insurance coverage $ - $ 1
---------------------------------------------------------------------
---------------------------------------------------------------------
Fees charged to the Company's controlling shareholder for the
personal use of corporate aircraft and for other administrative
services are subject to a formal agreement and are representative of
market rates for the provision of similar services. For the three
months ended March 31, 2007 and 2006, the net fees charged to the
Company's controlling shareholder for personal use of the aircraft
and other administrative services were less than $0.5 million.
10. Contingencies:
On August 9, 2004, a proceeding under the Class Actions Act
(Saskatchewan) was brought against providers of wireless
communications in Canada, including the Company. The proceeding
involves allegations by wireless customers of breach of contract,
misrepresentation, false advertising and unjust enrichment arising
out of the charging of system access fees. The plaintiffs are seeking
unquantified damages from the defendant wireless communications
service providers. In July 2006, the Saskatchewan court denied the
plaintiffs' application to have the proceeding certified as a class
action. However, the court granted leave to the plaintiffs to renew
their applications in order to address the requirements of the
Saskatchewan class proceedings legislation. Similar proceedings have
also been brought against the Company and other providers of wireless
communications in most of Canada. The Company has not recorded a
liability for this contingency since the likelihood and amount of any
potential loss cannot be reasonably estimated.
In 2000, the Company received a $241 million payment (the
"Termination Payment") from Le Group Videotron Ltee ("Videotron") in
respect of the termination of a merger agreement between the Company
and Videotron. The Canada Revenue Agency ("CRA") disagreed with the
Company's tax filing position in respect of the Termination Payment
and in May 2006, issued a Notice of Reassessment which would result
in additional income tax and related interest of approximately
$62 million. The Company and the CRA signed a settlement agreement
later in 2006 with respect to this matter. Under the terms of the
settlement agreement, the income tax losses carried forward by the
Company were to be reduced by $67 million. Accordingly, a future
income tax charge of $25 million was recorded in 2006. In April 2007,
a dispute arose with the CRA regarding the implementation of the
settlement agreement. The Company is currently in discussions with
the CRA regarding this matter and no adjustments to the previously
recorded amounts have been reflected in the unaudited interim
consolidated financial statements as at March 31, 2007.
11. Subsequent event:
On April 9, 2007, the Company announced its plans to acquire
certain Canadian conventional and specialty television services
from CTVglobemedia Inc. ("CTVgm") for cash consideration of
$138 million. This acquisition is subject to Canadian Radio-
television and Telecommunications Commission ("CRTC") and
Competitive Bureau approval. The agreement is also subject to
CRTC approval of CTVgm's acquisition of CHUM Limited, which
included a commitment to divest these assets.
>>
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. These forward-looking statements 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. Statements
containing expressions such as "could", "expect", "may", "anticipate",
"assume", "believe", "intend", "esti mate", "plan", "guidance", and similar
expressions generally constitute forward-looking statements. These forward-
looking statements also include, but are not limited to, guidance relating to
revenue, operating profit and property, plant and equipment expenditures,
expected growth in subscribers, the deployment of new services, integration
costs, and all other statements that are not historical facts. Such forward-
looking statements are based on current expectations and various factors and
assumptions applied which we believe to be reasonable at the time, including
but not limited to general economic and industry growth rates, currency
exchange rates, product and service pricing levels and competitive intensity,
subscriber growth and usage rates, technology deployment, 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 risk
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, the failure to achieve
anticipated results from synergy initiatives, unanticipated changes in content
or equipment costs, changing conditions in the entertainment, information and
communications industries, regulatory changes, changes in law, litigation, tax
matters, employee relations, pension issues and the level of competitive
intensity amongst major competitors, 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 section of this MD&A entitled "Updates to Risks and Uncertainties"
in this Interim Quarterly MD&A, and also the sections entitled "Risks and
Uncertainties Affecting our Businesses" and "Government Regulation and
Regulatory Developments" in our 2006 Annual MD&A.
Additional Information
Additional information relating to us, including our Annual Information
Form, and discussions of our most recent quarterly results, may be found on
SEDAR at www.sedar.com or on EDGAR at www.sec.gov. Separate annual and
quarterly financial results for Wireless and Cable and Telecom are also filed
and are available on SEDAR and EDGAR.
About the Company
We are a diversified public 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 Global System for Mobile Communications ("GSM") based network. Through
Cable and Telecom we are one of Canada's largest providers of cable
television, cable telephony and high-speed Internet access, and are also a
national, full-service, facilities-based telecommunications alternative to the
traditional telephone companies. 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") (RG).
For further information about the Rogers group of companies, please visit
www.rogers.com. Separate annual and quarterly financial results for Rogers
Wireless Inc. and Rogers Cable Inc. are also filed and are available on SEDAR
and EDGAR.
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 www.rogers.com/webcast beginning at 5:00 p.m. ET today, May 1,
2007. A rebroadcast of this call will be available on the Webcast Archive page
of the Investor Relations section of www.rogers.com for a period of at least
two weeks following the conference call.
%SEDAR: 00003765E %CIK: 0000733099
/For further information: Investment Community Contacts: Bruce M. Mann,
(416) 935-3532, bruce.mann(at)rci.rogers.com; Dan Coombes, (416) 935-3550,
dan.coombes(at)rci.rogers.com; Media Contacts: Corporate and Media - Jan
Innes, (416) 935-3525, jan.innes(at)rci.rogers.com; Wireless, Cable and
Telecom - Taanta Gupta, (416) 935-4727, taanta.gupta(at)rci.rogers.com/
(RCI.A. RCI.B. RG)
CO: Rogers Communications Inc.; ROGERS WIRELESS INC.; ROGERS CABLE INC.
CNW 16:23e 01-MAY-07
