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Article Excerpt
The following release revises and replaces TO041 sent at 7:54e.
Consolidated Revenue Grows 15% to $2.35 Billion and Consolidated Operating Profit Increases 33% to $784 Million Driving Operating Profit Margin up 460 Basis Points;
Wireless Postpaid ARPU Grows 5.3% and Postpaid Churn Falls to 1.3%, Cable and Telecom Residential and Business Local Telephony Lines Reach 823,100, and Solid Growth in Cable and High-Speed Internet Subscribers Continues;
Two-For-One Stock Split and 113% Dividend Increase Announced
TORONTO, Oct. 31 /PRNewswire-FirstCall/ -- Rogers Communications Inc. today announced its consolidated financial and operating results for the three and nine months ended September 30, 2006.
Financial highlights (in millions of dollars, except per share amounts) are as follows: ------------------------------------------------------------------------- Three months ended Nine months ended September 30, September 30, ----------------------------------------------------------- (In millions of dollars) 2006 2005 % Chg 2006 2005 % Chg ------------------------------------------------------------------------- Operating revenue $2,347.3 $2,047.1 14.7 $6,615.3 $5,362.0 23.4 Operating profit(1) 784.3 589.4 33.1 2,122.7 1,630.1 30.2 Net income 154.0 48.9 n/m 446.3 22.1 n/m Earnings per share - basic 0.49 0.17 188.2 1.41 0.08 n/m - diluted 0.48 0.16 200.0 1.39 0.08 n/m ------------------------------------------------------------------------- (1) Operating profit should not be considered as a substitute or alternative for operating income or net income, in each case determined in accordance with 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. Highlights of the third quarter of 2006 include the following: - Operating revenue increased 14.7% for the quarter, with all three of our operating units delivering solid double-digit growth, including 18.4% growth at Rogers Wireless ("Wireless"), 10.2% growth at Rogers Cable and Telecom ("Cable and Telecom") and 12.2% growth at Rogers Media ("Media"). - Consolidated quarterly operating profit grew 33.1% year-over-year, driven by growth at all three operating segments including 47.0% growth at Wireless, 9.5% growth at Cable and Telecom and 17.1% growth at Media. - Strong subscriber growth continued at Wireless, with quarterly net postpaid additions of 171,200 and net prepaid additions of 31,800. - Wireless postpaid subscriber monthly churn was 1.30% versus 1.50% in the third quarter of 2005, while postpaid monthly ARPU (average revenue per subscriber) increased 5.3% in the quarter to $70.37. The ARPU increase reflects a 47.9% lift in data revenues, which represented 10.5% of total wireless network revenue in the quarter, as well as continued growth in roaming and other optional voice services. - Cable and Telecom ended the quarter with more than 270,800 residential voice-over-cable telephony subscriber lines, with net additions of 106,100 cable telephony subscriber lines for the quarter (of which approximately 14,400 were migrations from the circuit-switched platform). The Rogers Home Phone ("RHP") cable telephony service is now available to approximately 90% of Rogers' cable homes passed. 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 823,100. - Cable and Internet reported basic cable subscriber gains of 12,600 versus an increase of approximately 900 in the third quarter of 2005 (after adjusting for the impact in 2005 of a change in our subscriber deactivation policy). Digital cable households increased by 62,200 in the quarter to reach a total of 1,064,400, while residential high-speed Internet subscribers grew by 51,800 in the quarter to a total of 1,250,000. Video-on-demand continues as a core differentiator for Rogers Cable, with quarterly pay-on-demand views increasing by 19.2% year-over-year to 1,721,000 from the third quarter of 2005. - We entered into a multi-year agreement with Maple Leaf Sports and Entertainment ("MLSE") that will see Rogers become a lead sponsor and the preferred supplier of all communications services to the Toronto Maple Leafs, Toronto Raptors and Air Canada Centre. - Subsequent to the end of the quarter, the Board of Directors announced a proposal which will have the effect of a two-for-one split of the Rogers Communications Inc. Class A Voting and Class B Non-Voting shares following a special shareholder meeting which has been called for December 15, 2006. It is expected that shareholders of record as of the close of business December 29, 2006 will receive one additional share of the relevant class for each share held upon distribution of the additional shares on or about January 5, 2007. - Subsequent to the end of the quarter, the Board of Directors also announced an increase in the annual dividend from C$0.15 to C$0.32 per Class A Voting and Class B Non-Voting share (on a pre split basis) effective immediately, and modified Rogers' dividend distribution policy to now make dividend distributions on a quarterly basis instead of semi-annually. At the same time, the Board declared the first quarterly dividend of C$0.08 cents per share (on a pre split basis) to be paid on January 2, 2007 to shareholders of record on December 20, 2006.
"The strength of Rogers' brand and innovative product sets, combined with our focused and disciplined approach to our markets, produced another strong quarter of double-digit revenue and operating profit growth," said Ted Rogers, President and CEO of Rogers Communications Inc. "While we have much work and investment in front of us and competition continues to be intense, the solid operating results from our businesses are combining to drive increasing levels of cash flow, and are positioning us increasingly well for continued success."
MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2006
This management's discussion and analysis ("MD&A") should be read in conjunction with our 2005 Annual MD&A and our 2005 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 23 to our 2005 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, 2005. This MD&A is current as of October 30, 2006.
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. RCI acquired Call-Net Enterprises Inc. on July 1, 2005 and subsequently changed its name to Rogers Telecom Holdings Inc. ("RTHI"). The results of RTHI and RTHI's operating subsidiaries ("Telecom") are consolidated effective as of the July 1, 2005 acquisition date. On January 9, 2006, RCI's ownership interest in Telecom was transferred to Rogers Cable Inc. from RTHI. Beginning with the first quarter of 2006, the Cable and Telecom operating unit reports its results according to the following segments: Cable and Internet; Rogers Home Phone (voice-over-cable telephony subscribers from Cable and residential circuit-switched telephony customers from Telecom); Rogers Business Solutions (business telephony and data subscribers primarily from Telecom); and Video store operations. Comparative figures have been reclassified to conform to this new segment reporting. - "Media", which refers to our wholly owned subsidiary Rogers Media Inc. and its subsidiaries including Rogers Broadcasting, which owns Rogers Sportsnet, the Radio stations, OMNI television 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.
SUMMARY CONSOLIDATED FINANCIAL RESULTS ------------------------------------------------------------------------- Three months ended Nine months ended September 30, September 30, ----------------------------------------------------------- (In millions of dollars, except per share amounts) 2006 2005(4) % Chg 2006 2005(4) % Chg ------------------------------------------------------------------------- Operating revenue Wireless $1,265.7 $1,068.9 18.4 $3,468.1 $2,908.1 19.3 Cable and Telecom Cable and Internet 488.5 436.0 12.0 1,439.5 1,282.8 12.2 Rogers Home Phone 90.8 74.7 21.6 257.0 74.7 n/m Rogers Business Solutions 148.5 139.0 6.8 441.0 141.2 n/m Video stores 72.8 77.1 (5.6) 226.0 235.5 (4.0) Corporate items and elimi- nations (1.1) (1.1) - (3.1) (3.1) - ----------------------------------------------------------- 799.5 725.7 10.2 2,360.4 1,731.1 36.4 Media 319.3 284.5 12.2 893.3 797.2 12.1 Corporate items and elimi- nations (37.2) (32.0) 16.3 (106.5) (74.4) 43.1 ----------------------------------------------------------- Total 2,347.3 2,047.1 14.7 6,615.3 5,362.0 23.4 Operating expenses, including integration and Video store closure expenses Wireless 705.0 687.4 2.6 2,015.5 1,863.5 8.2 Cable and Telecom Cable and Internet 279.4 258.2 8.2 824.8 756.2 9.1 Rogers Home Phone 93.7 70.9 32.2 250.4 70.9 n/m Rogers Business Solutions 142.1 127.4 11.5 404.4 136.0 197.4 Video stores 70.4 72.9 (3.4) 220.4 221.4 (0.5) Integration costs 1.4 2.3 (39.1) 5.8 2.3 152.2 Corporate items and elimi- nations (1.1) (1.1) - (3.1) (3.1) - ----------------------------------------------------------- 585.9 530.6 10.4 1,702.7 1,183.7 43.8 Media 280.3 251.2 11.6 789.2 708.4 11.4 Corporate items and elimi- nations (8.2) (11.5) (28.7) (14.8) (23.7) (37.6) ----------------------------------------------------------- Total 1,563.0 1,457.7 7.2 4,492.6 3,731.9 20.4 Operating profit, after integration and Video store closure expenses(1) Wireless 560.7 381.5 47.0 1,452.6 1,044.6 39.1 Cable and Telecom Cable and Internet 209.1 177.8 17.6 614.7 526.6 16.7 Rogers Home Phone (2.9) 3.8 n/m 6.6 3.8 73.7 Rogers Business Solutions 6.4 11.6 (44.8) 36.6 5.2 n/m Video stores 2.4 4.2 (42.9) 5.6 14.1 (60.3) Integration costs (1.4) (2.3) (39.1) (5.8) (2.3) 152.2 ----------------------------------------------------------- 213.6 195.1 9.5 657.7 547.4 20.1 Media 39.0 33.3 17.1 104.1 88.8 17.2 Corporate items and elimi- nations (29.0) (20.5) 41.5 (91.7) (50.7) 80.9 ----------------------------------------------------------- Total 784.3 589.4 33.1 2,122.7 1,630.1 30.2 ----------------------------------------------------------- Other income and expense, net(2) 630.3 540.5 16.6 1,676.4 1,608.0 4.3 ----------------------------------------------------------- Net income $ 154.0 $ 48.9 n/m $ 446.3 $ 22.1 n/m ----------------------------------------------------------- Earnings per share - basic $ 0.49 $ 0.17 188.2 $ 1.41 $ 0.08 n/m - diluted 0.48 0.16 200.0 1.39 0.08 n/m Additions to PP&E(1) Wireless $ 161.5 $ 106.8 51.2 $ 483.4 $ 379.8 27.3 Cable and Telecom Cable and Internet 114.8 134.8 (14.8) 303.5 355.1 (14.5) Rogers Home Phone 62.6 29.7 110.8 121.7 94.3 29.1 Rogers Business Solutions 26.3 38.4 (31.5) 50.1 43.2 16.0 Video stores 3.0 2.9 3.4 5.4 10.7 (49.5) ----------------------------------------------------------- 206.7 205.8 0.4 480.7 503.3 (4.5) Media 7.1 5.6 26.8 32.5 28.0 16.1 Corporate(3) 39.9 0.4 n/m 161.3 12.7 n/m ----------------------------------------------------------- Total $ 415.2 $ 318.6 30.3 $1,157.9 $ 923.8 25.3 ----------------------------------------------------------- ------------------------------------------------------------------------- (1) As defined. See the "Key Performance Indicators and Non-GAAP Measures" section. Operating profit includes integration costs and Video store closure expenses of $(0.4) million and $13.7 million for the three and nine months ended September 30, 2006, respectively. (2) See the "Reconciliation of Operating Profit to Net Income for the Period" section for details of these amounts. (3) Corporate additions to PP&E for the nine months ended September 30, 2006 includes $104.8 million for RCI's purchase of real estate in Brampton. In addition, during the three and nine months ended September 30, 2006, RCI's improvements related to the Brampton real estate totalled $9.4 million and $16.5 million, respectively. (4) 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 10 to the Interim Consolidated Financial Statements entitled "Segmented Information".
------------------------------------------------------------------------- Three Months Ended Nine Months Ended September 30, September 30, ----------------------------------------------------------- (In millions of dollars) 2006 2005 % Chg 2006 2005 % Chg ------------------------------------------------------------------------- Operating profit(1) $ 784.3 $ 589.4 33.1 $2,122.7 $1,630.1 30.2 Depreciation and amortization (408.2) (377.0) 8.3 (1,189.0) (1,077.4) 10.4 ----------------------------------------------------------- Operating income 376.1 212.4 77.1 933.7 552.7 68.9 Interest expense on long-term debt (152.8) (178.8) (14.5) (469.1) (543.9) (13.8) Foreign exchange gain (loss) (0.1) 63.3 n/m 40.9 39.1 4.6 Change in the fair value of derivative instruments 1.3 (42.3) n/m (28.4) (27.0) 5.2 Other income (expense), net 5.7 (3.1) n/m 12.3 11.1 10.8 Income tax expense (76.2) (2.6) n/m (43.1) (9.9) n/m ----------------------------------------------------------- Net income $ 154.0 $ 48.9 n/m $ 446.3 $ 22.1 n/m ----------------------------------------------------------- ------------------------------------------------------------------------- (1) As defined. See the...
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