News Releases

Rogers Communications Reports Fourth Quarter 2016 Results

Jan 26, 2017

  • Rogers closes 2016 with continued strong revenue growth and solid flow through to adjusted operating profit and free cash flow:
    • Total service revenue and adjusted operating profit both up 3%
    • Wireless service revenue growth of 6% and adjusted operating profit growth of 5%
    • Wireless postpaid net additions of 93,000, up 62,000 year on year, with steady churn of 1.35% year on year
    • Cable revenue up slightly and adjusted operating profit growth of 2% as higher-margin Internet represents a greater proportion of total Cable revenue
    • Positive Cable total service unit net additions for the second quarter in a row, driven by Internet net additions of 30,000, up 14,000 year on year
  • Achieved 2016 growth targets and announced a stronger growth profile for 2017 guidance
  • Announced a long-term agreement with Comcast to bring X1 IPTV to our customers, expected in early 2018; net income impacted by a $484 million charge due to discontinued investment in our own IPTV product
  • Over 45% of Rogers' residential Internet base is on speeds of 100 Mbps or higher and Ignite Gigabit Internet service is now available to our entire footprint of over 4 million homes

TORONTO, Jan. 26, 2017 /CNW/ - Rogers Communications Inc. today announced its unaudited financial and operating results for the fourth quarter ended December 31, 2016.

Consolidated Financial Highlights

       
 

Three months ended December 31

 

Twelve months ended December 31

(In millions of Canadian dollars, except per share
amounts, unaudited)

2016

2015

% Chg

 

2016

2015

% Chg

               

Total revenue

3,510

3,452

2

 

13,702

13,414

2

Adjusted operating profit 1

1,259

1,226

3

 

5,092

5,032

1

Net income (loss) 2

(9)

299

n/m

 

835

1,342

(38)

Adjusted net income 1,2

382

331

15

 

1,481

1,479

               

Basic earnings (loss) per share 2

($0.02)

$0.58

n/m

 

$1.62

$2.61

(38)

Adjusted basic earnings per share 1,2

$0.74

$0.64

16

 

$2.88

$2.87

               

Cash provided by operating activities

1,053

950

11

 

3,957

3,747

6

Free cash flow 1

392

274

43

 

1,705

1,676

2

1

Adjusted operating profit, adjusted net income, adjusted basic earnings per share, and free cash flow are non-GAAP measures and should not be considered substitutes or alternatives for GAAP measures. These are not defined terms under IFRS and do not have standard meanings, so may not be a reliable way to compare us to other companies. See "Non-GAAP Measures" for information about these measures, including how we calculate them.

2

As a result of the IFRS Interpretations Committee's agenda decision relating to IAS 12 Income Taxes, certain amounts have been retrospectively amended. See "Accounting Changes" for more information.

 

"We ended 2016 with continued momentum and strong operating performance in the fourth quarter. We maintained robust Wireless revenue growth, underpinned by strong subscriber metrics, and translated this to healthy adjusted operating profit. Internet results showed sustained strength as Rogers offers customers the fastest widely available Internet speeds in our marketplace," said Alan Horn, Chairman and Interim President and CEO. "Our momentum to date as well as our commitment to further improve the customer experience, and enhance our execution, position us well to achieve our stronger growth targets for 2017."

Key Financial Highlights

Higher revenue
Revenue increased 2% this quarter, largely driven by Wireless service revenue growth of 6%.

Wireless service revenue increased primarily as a result of a larger subscriber base and the continued adoption of higher-value Share Everything plans and the increase in data usage on these plans.

Cable revenue increased marginally as strong Internet revenue growth of 9% was largely offset by the decline in Television and Phone revenue. We continue to see an ongoing shift in product mix to higher-margin Internet services. Excluding the impact of lower wholesale Internet revenue as a result of the CRTC decision that reduced interim access service rates, Cable and Internet revenue would have increased by 2% and 12%, respectively.

Media revenue decreased as a result of fewer postseason Toronto Blue Jays games compared to last year, lower overall advertising revenue, and lower circulation revenue within publishing, partially offset by higher sales at The Shopping Channel (TSC).

Higher adjusted operating profit
Higher adjusted operating profit this quarter reflects an increase in Wireless adjusted operating profit due to the strong flow through of top line growth described above and improved Cable performance due to the shift in product mix to higher-margin Internet services. Excluding the impact from the CRTC decision to reduce wholesale Internet interim access service rates described above, Cable adjusted operating profit growth would have been 5%.

Net loss and higher adjusted net income
We recorded a net loss of $9 million this quarter, primarily as a result of the $484 million impairment and other charges we recognized related to the discontinued investment in our Internet Protocol Television (IPTV) product. See "Review of Consolidated Performance" for more information. Adjusted net income increased this quarter as a result of higher adjusted operating profit, lower depreciation and amortization, and lower finance costs, partially offset by higher income tax expense.

Substantial free cash flow affords financial flexibility
This quarter, we continued to generate substantial cash flow from operating activities and free cash flow of $1,053 million and $392 million, respectively. Free cash flow was higher this quarter as a result of increased adjusted operating profit and lower additions to property, plant and equipment, partially offset by higher cash income taxes.

We ended the fourth quarter with an adjusted net debt / adjusted operating profit ratio of 3.0. Strong operating cash flow allowed us to repay a net amount of more than $300 million of debt in the quarter. See "Managing our Liquidity and Financial Resources" for more information.

Our solid financial results enabled us to reduce outstanding debt, continue to make investments in our network, and still return substantial dividends to shareholders. We paid $247 million in dividends this quarter.

Achieved 2016 Guidance

The following table outlines guidance ranges that we had previously provided and our actual results and shows 100% achievement for the selected full-year 2016 financial metrics:

         

(In millions of dollars, except percentages)

2015

Actual

2016

Guidance Ranges

2016

Actual

Achievement

               

Consolidated Guidance 1

             
 

Revenue

13,414

Increase of 1%

to

3%

13,702

2.1%

 

Adjusted operating profit 2

5,032

Increase of 1%

to

3%

5,092

1.2%

 

Additions to property, plant and equipment 3

2,440

2,300

to

2,400

2,352

n/m

 

Free cash flow 2

1,676

Increase of 1%

to

3%

1,705

1.7%

                   

Missed x

   

Achieved √

       
 

1

The above table outlines guidance ranges for selected full-year 2016 consolidated financial metrics provided in our January 27, 2016 earnings release. Guidance ranges presented as percentages reflect percentage increases over 2015 actual results.

2

Adjusted operating profit and free cash flow are non-GAAP measures and should not be considered substitutes or alternatives for GAAP measures. These are not defined terms under IFRS and do not have standard meanings, so may not be a reliable way to compare us to other companies. See "Non-GAAP Measures" for information about these measures, including how we calculate them.

3

Includes additions to property, plant and equipment for the Wireless, Cable, Business Solutions, Media, and Corporate segments and does not include expenditures on spectrum licences.

 

2017 Outlook

As noted in the guidance ranges in the table below, we anticipate an even stronger growth profile in 2017. We expect to have the financial flexibility to maintain our network advantages, continue reducing debt, and return cash to shareholders.

     
 

2016

Actual

2017 Guidance

  Ranges 1

(In millions of dollars, except percentages)

     

Consolidated Guidance

   
 

Revenue

13,702

Increase of 3%

 to

5%

 

Adjusted operating profit 2

5,092

Increase of 2%

 to

4%

 

Additions to property, plant and equipment, net 3

2,352

2,250

 to

2,350

 

Free cash flow 2

1,705

Increase of 2%

 to

4%

           

1

Guidance ranges presented as percentages reflect percentage increases over full-year 2016 actual results.

2

Adjusted operating profit and free cash flow are non-GAAP measures and should not be considered substitutes or alternatives for GAAP measures. These are not defined terms under IFRS and do not have standard meanings, so may not be a reliable way to compare us to other companies. See "Non-GAAP Measures" for information about these measures, including how we calculate them.

3  

Includes additions to property, plant and equipment for the Wireless, Cable, Business Solutions, Media, and Corporate segments net of proceeds on disposition, but does not include expenditures for spectrum licences.

 

The above table outlines guidance ranges for selected full-year 2017 consolidated financial metrics. These ranges take into consideration our current outlook and our actual results for 2016. The purpose of the financial outlook is to assist investors, shareholders, and others in understanding certain financial metrics relating to expected 2017 financial results for evaluating the performance of our business. This information may not be appropriate for other purposes. Information about our guidance, including the various assumptions underlying it, is forward-looking and should be read in conjunction with "About Forward-Looking Information" and the related disclosure and information about various economic, competitive, and regulatory assumptions, factors, and risks that may cause our actual future financial and operating results to differ from what we currently expect.

We provide annual guidance ranges on a consolidated full-year basis, which are consistent with annual full-year Board-approved plans. Any updates to our full-year financial guidance over the course of the year would only be made to the consolidated guidance ranges that appear above.

About Rogers

Rogers is a leading diversified Canadian communications and media company that's working to deliver a great experience to our customers every day. We are Canada's largest provider of wireless communications services and one of Canada's leading providers of cable television, high-speed Internet, information technology, and telephony services to consumers and businesses. Through Rogers Media, we are engaged in radio and television broadcasting, sports, televised and online shopping, magazines, and digital media. Our shares are publicly traded on the Toronto Stock Exchange (TSX: RCI.A and RCI.B) and on the New York Stock Exchange (NYSE: RCI).

Quarterly Investment Community Teleconference

Our fourth quarter 2016 results teleconference with the investment community will be held on:

  • January 26, 2017
  • 8:00 a.m. Eastern Time
  • webcast available at rogers.com/webcast
  • media are welcome to participate on a listen-only basis

A rebroadcast will be available at rogers.com/investors on the Events and Presentations page for at least two weeks following the teleconference. Additionally, investors should note that from time to time, Rogers' management presents at brokerage-sponsored investor conferences. Most often, but not always, these conferences are webcast by the hosting brokerage firm, and when they are webcast, links are made available on Rogers' website at rogers.com/events and are generally placed there at least two days before the conference.

For More Information
You can find more information relating to us on our website (rogers.com/investors), on SEDAR (sedar.com), and on EDGAR (sec.gov), or you can e-mail us at investor.relations@rci.rogers.com. Information on or connected to these and any other websites referenced in this earnings release is not part of, or incorporated into, this earnings release.

You can also go to rogers.com/investors for information about our governance practices, corporate social responsibility reporting, a glossary of communications and media industry terms, and additional information about our business.

About this Earnings Release

This earnings release contains important information about our business and our performance for the three and twelve months ended December 31, 2016, as well as forward-looking information about future periods. This earnings release should be used as preparation for reading our forthcoming Management's Discussion and Analysis (MD&A) and Audited Consolidated Financial Statements for the year ended December 31, 2016, which we intend to file with securities regulators in Canada and the US in the next few weeks. These statements will be made available on the rogers.com/investors, sedar.com, and sec.gov websites or mailed upon request.

The financial information contained in this earnings release is prepared using International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board. This earnings release should be read in conjunction with our 2015 Annual MD&A and our 2015 Audited Consolidated Financial Statements, our 2016 First, Second, and Third Quarter MD&A and Interim Condensed Consolidated Financial Statements, and our other recent filings with Canadian and US securities regulatory authorities, which are available on SEDAR at sedar.com or EDGAR at sec.gov, respectively.

All dollar amounts are in Canadian dollars unless otherwise stated and are unaudited. All percentage changes are calculated using the rounded numbers as they appear in the tables. Information is current as at January 25, 2017 and was approved by our Board of Directors (Board). This earnings release includes forward-looking statements and assumptions. See "About Forward-Looking Information" for more information.

We, us, our, Rogers, Rogers Communications, and the Company refer to Rogers Communications Inc. and its subsidiaries. RCI refers to the legal entity Rogers Communications Inc., not including its subsidiaries. Rogers also holds interests in various investments and ventures.

In this earnings release, this quarter refers to the three months ended December 31, 2016 and year to date or full-year refer to the twelve months ended December 31, 2016. All results commentary is compared to the equivalent periods in 2015 or as at December 31, 2015, as applicable, unless otherwise indicated.

Reporting Segments
We report our results of operations in four reporting segments. Each segment and the nature of its business is as follows:

   

Segment

Principal activities

Wireless

Wireless telecommunications operations for Canadian consumers and businesses.

Cable

Cable telecommunications operations, including Internet, television, and telephony (phone) services for Canadian consumers and businesses.

Business Solutions

Network connectivity through our fibre network and data centre assets to support a range of voice, data, networking, hosting, and cloud-based services for the enterprise, public sector, and carrier wholesale markets.

Media

A diversified portfolio of media properties, including sports media and entertainment, television and radio broadcasting, specialty channels, multi-platform shopping, publishing, and digital media.

 

Wireless, Cable, and Business Solutions are operated by our wholly-owned subsidiary, Rogers Communications Canada Inc. (RCCI), and certain of our other wholly-owned subsidiaries. Media is operated by our wholly-owned subsidiary, Rogers Media Inc., and its subsidiaries.

Strategic Update

Rogers' strategy is designed to re-accelerate revenue growth in a sustainable way and translate this revenue growth into strong margins, adjusted operating profit, free cash flow, an increasing return on assets, and returns to shareholders.

Our fourth quarter and full-year 2016 results reflect solid execution of our strategy and the value inherent in our unique asset portfolio, including our best-in-class wireless and cable networks.

In 2017, we plan to further enhance our financial flexibility and execution, as well as capture cost and productivity improvements we see throughout our business. We believe this will position us well to translate our revenue growth into increased profitability and free cash flow.

Improving the Customer Experience
Our priority is to offer the products and services our customers want and need for the best experience. With that in mind, we launched a number of tools and offerings in 2016 with a focus on becoming a leader in self-serve options. For instance, we expanded worry-free wireless roaming, simplified mobile-first billing, and introduced a tool that allows families to manage their wireless data usage in real time. In 2015, we were the first telecommunications company in the world to launch customer care via Facebook Messenger, and this year, we were among the first globally to launch on Twitter. Our latest example of a self-serve option was the launch of Rogers EnRoute in the fourth quarter. This tool allows customers to track on their phone when a technician will arrive for an installation or service call. Our approach is resonating with customers, as we saw 42% more self-service transactions on the Rogers brand this quarter year on year and 56% more for the full-year 2016.

We look forward to doing more for our customers in 2017, including offering more self-serve options and new ways to interact with us digitally.

Maintaining Leadership and Momentum in Wireless
Despite an intense competitive backdrop, our fourth quarter results built on the strong momentum we have seen over the past year and we closed 2016 with the best Wireless service revenue growth and subscriber performance in many years. These results reflected a strong translation to adjusted operating profit, with fourth quarter growth of 5%. Fourth quarter Wireless service revenue growth of 6% was the highest since 2010 and postpaid net additions of 93,000 were the highest of any fourth quarter since 2009. On an annual basis, Wireless service revenue growth of 5% was the highest since 2009 and postpaid net additions of 286,000, up 180,000, were the highest since 2010.

Postpaid Wireless churn remained stable year on year in the fourth quarter and decreased four basis points in 2016 for the lowest postpaid churn rate since 2010. We will strive to make further improvements to churn going forward with our focus on further improving the customer experience.

We continued to make investments to enhance wireless network coverage and the quality of our network. Deployment of our prime 700 MHz LTE network has reached about 91% of Canada's population at the end of 2016. Deployment of our overall LTE network has reached about 95% of Canada's population at year-end.

Improving Cable on the Strength of Internet and our Partnership with Comcast
Subscriber trends have been improving in our Cable segment on the popularity of Ignite Internet, as Rogers offers the fastest widely available Internet speeds in our marketplace. For the second quarter in a row, we reported positive Cable total service unit net additions, driven by Internet net additions of 30,000, up 14,000 year on year.

Our Cable product mix continued to shift to higher-margin Internet services, driving overall Cable adjusted operating profit growth of 2% in the fourth quarter. We generated Internet revenue growth of 9% this quarter and double-digit Internet revenue growth of 11% in 2016. Excluding the impact of lower wholesale revenue as a result of the CRTC's decision to reduce interim access service rates, Cable revenue and adjusted operating profit growth this quarter were 2% and 5%, respectively. Similarly, Internet revenue growth increases to double-digit growth of 12% from 9% in the quarter, excluding this same impact.

Approximately 46% of our residential Internet base is on plans of 100 megabits per second or higher. We now offer Ignite Gigabit Internet service to our entire Cable footprint of over four million homes. Our hybrid fibre-coaxial cable network allows us to make incremental success-based investments as the demand for greater speed and capacity grows. We believe this positions us well to earn attractive returns on investment for our shareholders.

Late in 2016, Rogers announced a long-term agreement with Comcast Corporation (Comcast) to bring our customers a best-in-class TV product and expect to deploy Comcast's X1 IP-based video platform in early 2018. We are moving to this hosted platform to ensure we will have access to the scale and technical roadmap needed to meet the ongoing pace of IPTV innovation. Customers will benefit from Comcast's substantial research and development investments and their continuing commitment to innovation. Comcast attributes the transformative X1 platform to improving Xfinity TV subscriber performance, reducing churn, and increasing engagement for customers.

Our adoption of the X1 platform not only includes access to the most advanced IPTV solution, but also to Comcast's state-of-the-art customer premise equipment, including advanced DOCSIS 3.1 Wi-Fi gateways, Wi-Fi extenders, and wireless set-top boxes as well as the ability to send video to other third party companion devices (such as tablets and smartphones).

By mid-2017, Rogers plans to bring its customers the new advanced DOCSIS 3.1 Wi-Fi gateway, which is capable of delivering up to nine gigabits per second over Wi-Fi within the home, supports voice, home monitoring, and automation applications, and can act as the core in-home gateway for video and data applications. Throughout 2017, we also intend to provide our customers with further enhancements to our existing TV platform, including more 4K content.

First on the innovation roadmap, we intend to adopt Comcast's new Digital Home solution. This whole-home networking solution will provide customers with a simple, fast, and intuitive way to control and manage their connected devices. The cloud-based platform will link to the new DOCSIS 3.1 Wi-Fi gateway devices to deliver fast, reliable connectivity in the home and will allow people to easily add or pause devices, pair Wi-Fi extenders that boost signal strength, and use voice controls to see who is on the network, all in a safe and secure manner. This should help support the broader adoption of connected devices and the Internet of Things (IoT).

The all-IP combination of voice, data, video, smart home monitoring, and IoT using a combination of the most extensive DOCSIS 3.1-based, gigabit-capable network in Canada, along with Rogers and Comcast technology, will provide our customers with a best-in-class next generation residential service suite in Canada.

Media Focused on Sports
Media remains focused on our strong portfolio of live sports entertainment, including our ownership of the Toronto Blue Jays, our exclusive NHL agreement, and our joint venture interest in MLSE. For the second year in a row, Sportsnet was the number-one sports media brand in Canada and the gap has widened. Sportsnet plans to deliver more than 100 live sporting events in 4K in 2017. Consumer interest in 4K TV continues to grow as evidenced by leading manufacturer expectations for 4K TV sales to top 50% of all TV sales in 2017. To achieve the high quality 4K resolution, significantly higher bandwidths are required. With more 4K television sets and video streaming devices in the home, the high bit rate requirement further emphasizes the speed and capacity advantages of Rogers' hybrid fibre-coaxial cable network over the legacy networks of our telecommunication competitors.

In the fourth quarter of 2016, we committed to accelerating our shift from print to digital media in order to keep pace with changing audience demands. Since then, we have been realigning resources and developing the roadmap that will drive innovation and new content ideas while increasing digital audiences and revenue. A particular focus in 2017 will be the launch of some new initiatives that will help solidify our position in the digital space.

Corporate Developments
We intend to hire Joseph Natale as President and CEO effective July 2017. Alan Horn is currently acting as our Interim President and CEO.

Summary of Consolidated Financial Results

       
 

Three months ended December 31

 

Twelve months ended December 31

(In millions of dollars, except margins and per share amounts)

2016

 

2015

 

% Chg

 

2016

 

2015

 

% Chg

               

Revenue

             
 

Wireless

2,058

 

1,981

 

4

 

7,916

 

7,651

 

3

 

Cable

858

 

855

 

 

3,449

 

3,465

 

 

Business Solutions

96

 

95

 

1

 

384

 

377

 

2

 

Media

550

 

560

 

(2)

 

2,146

 

2,079

 

3

 

Corporate items and intercompany eliminations

(52)

 

(39)

 

33

 

(193)

 

(158)

 

22

Revenue

3,510

 

3,452

 

2

 

13,702

 

13,414

 

2

               

Adjusted operating profit

             
 

Wireless

792

 

754

 

5

 

3,285

 

3,239

 

1

 

Cable

435

 

426

 

2

 

1,674

 

1,658

 

1

 

Business Solutions

30

 

30

 

 

123

 

116

 

6

 

Media

49

 

56

 

(13)

 

169

 

172

 

(2)

 

Corporate items and intercompany eliminations

(47)

 

(40)

 

18

 

(159)

 

(153)

 

4

Adjusted operating profit 1

1,259

 

1,226

 

3

 

5,092

 

5,032

 

1

               

Adjusted operating profit margin 1

35.9%

 

35.5%

 

0.4pts

 

37.2%

 

37.5%

 

(0.3pts)

               

Net (loss) income 2

(9)

 

299

 

n/m

 

835

 

1,342

 

(38)

Basic (loss) earnings per share 2

($0.02)

 

$0.58

 

n/m

 

$1.62

 

$2.61

 

(38)

Diluted (loss) earnings per share 2

($0.04)

 

$0.58

 

n/m

 

$1.62

 

$2.60

 

(38)

               

Adjusted net income 1,2

382

 

331

 

15

 

1,481

 

1,479

 

Adjusted basic earnings per share 1,2

$0.74

 

$0.64

 

16

 

$2.88

 

$2.87

 

Adjusted diluted earnings per share 1,2

$0.74

 

$0.64

 

16

 

$2.86

 

$2.86

 

               

Additions to property, plant and equipment

604

 

773

 

(22)

 

2,352

 

2,440

 

(4)

Cash provided by operating activities

1,053

 

950

 

11

 

3,957

 

3,747

 

6

Free cash flow 1

392

 

274

 

43

 

1,705

 

1,676

 

2

Total service revenue 3

3,306

 

3,214

 

3

 

13,027

 

12,649

 

3

n/m - not meaningful

Adjusted operating profit, adjusted operating profit margin, adjusted net income, adjusted basic and diluted earnings per share, and free cash flow are non-GAAP measures and should not be considered substitutes or alternatives for GAAP measures. These are not defined terms under IFRS and do not have standard meanings, so may not be a reliable way to compare us to other companies. See "Non-GAAP Measures" for information about these measures, including how we calculate them.

As a result of the IFRS Interpretations Committee's agenda decision relating to IAS 12 Income Taxes, certain amounts have been retrospectively amended. See "Accounting Changes" for more information.

As defined. See "Key Performance Indicators".

 

Results of our Reporting Segments

WIRELESS

Wireless Financial Results

     
 

Three months ended December 31

 

Twelve months ended December 31

(In millions of dollars, except margins)

2016

 

2015 1

 

% Chg

   

2016

 

2015 1

 

% Chg

 
               

Revenue

             
 

Service revenue

1,858

 

1,747

 

6

   

7,258

 

6,902

 

5

 
 

Equipment revenue

200

 

234

 

(15)

   

658

 

749

 

(12)

 

Revenue

2,058

 

1,981

 

4

   

7,916

 

7,651

 

3

 
               

Operating expenses

             
 

Cost of equipment

584

 

569

 

3

   

1,947

 

1,845

 

6

 
 

Other operating expenses

682

 

658

 

4

   

2,684

 

2,567

 

5

 

Operating expenses

1,266

 

1,227

 

3

   

4,631

 

4,412

 

5

 
               

Adjusted operating profit

792

 

754

 

5

   

3,285

 

3,239

 

1

 
               

Adjusted operating profit margin as a % of service revenue

42.6%

 

43.2%

 

(0.6 pts)

   

45.3%

 

46.9%

 

(1.6 pts)

 

Additions to property, plant and equipment

153

 

235

 

(35)

   

702

 

866

 

(19)

 

The operating results of Mobilicity are included in the Wireless results of operations from the date of acquisition on July 2, 2015.

 

Wireless Subscriber Results 1

     
 

Three months ended December 31

 

Twelve months ended December 31

(In thousands, except churn, postpaid ARPA, and blended ARPU)

2016

 

2015

 

Chg

   

2016

 

2015

 

Chg

 
               

Postpaid

             
 

Gross additions

436

 

365

 

71

   

1,521

 

1,354

 

167

 
 

Net additions

93

 

31

 

62

   

286

 

106

 

180

 
 

Total postpaid subscribers 2

8,557

 

8,271

 

286

   

8,557

 

8,271

 

286

 
 

Churn (monthly)

1.35%

 

1.35%

 

   

1.23%

 

1.27%

 

(0.04 pts)

 
 

ARPA (monthly)

$119.90

 

$112.07

 

$7.83

   

$117.37

 

$110.74

 

$6.63

 

Prepaid

             
 

Gross additions

172

 

179

 

(7)

   

761

 

677

 

84

 
 

Net additions

38

 

27

 

11

   

111

 

75

 

36

 
 

Total prepaid subscribers 2,3

1,717

 

1,606

 

111

   

1,717

 

1,606

 

111

 
 

Churn (monthly)

2.62%

 

3.17%

 

(0.55 pts)

   

3.32%

 

3.45%

 

(0.13 pts)

 

Blended ARPU (monthly)

$60.72

 

$59.16

 

$1.56

   

$60.42

 

$59.71

 

$0.71

 

Subscriber counts, subscriber churn, postpaid ARPA, and blended ARPU are key performance indicators. See "Key Performance Indicators".

As at end of period.

On July 2, 2015, we acquired approximately 154,000 Wireless prepaid subscribers as a result of our acquisition of Mobilicity, which are not included in the 2015 net additions above.

 

Service revenue
The 6% increase in service revenue this quarter was a result of:

 

The 7% increase in postpaid ARPA this quarter was the result of the continued adoption of Rogers Share Everything plans relative to the number of subscriber accounts as customers have increasingly utilized the advantages of premium offerings and access their shareable plans with multiple devices on the same account.

The 3% increase in blended ARPU this quarter was a result of:

 

We believe the increases in gross and net additions to our postpaid subscriber base and the stable postpaid churn this quarter were results of our strategic focus on enhancing the customer experience by providing higher-value offerings, such as our Share Everything plans, improving our customer service, and continually increasing the quality of our network.

Equipment revenue
The 15% decrease in equipment revenue this quarter was a result of:

 

Operating expenses
Cost of equipment
The 3% increase in the cost of equipment this quarter was a result of:

 

Other operating expenses

The 4% increase in other operating expenses this quarter was a result of:

 

Adjusted operating profit
The 5% increase in adjusted operating profit this quarter was a result of the revenue and expense changes discussed above.

CABLE

Cable Financial Results

     
 

Three months ended December 31

 

Twelve months ended December 31

(In millions of dollars, except margins)

2016

 

2015

 

% Chg

   

2016

 

2015

 

% Chg

 
               

Revenue

             
 

Internet

378

 

348

 

9

   

1,495

 

1,343

 

11

 
 

Television

386

 

403

 

(4)

   

1,562

 

1,669

 

(6)

 
 

Phone

93

 

102

 

(9)

   

386

 

445

 

(13)

 
 

Service revenue

857

 

853

 

   

3,443

 

3,457

 

 
 

Equipment revenue

1

 

2

 

(50)

   

6

 

8

 

(25)

 

Revenue

858

 

855

 

   

3,449

 

3,465

 

 
               

Operating expenses

             
 

Cost of equipment

1

 

2

 

(50)

   

3

 

4

 

(25)

 
 

Other operating expenses

422

 

427

 

(1)

   

1,772

 

1,803

 

(2)

 

Operating expenses

423

 

429

 

(1)

   

1,775

 

1,807

 

(2)

 
               

Adjusted operating profit

435

 

426

 

2

   

1,674

 

1,658

 

1

 
               

Adjusted operating profit margin

50.7%

 

49.8%

 

0.9 pts

   

48.5%

 

47.8%

 

0.7 pts

 

Additions to property, plant and equipment

284

 

308

 

(8)

   

1,085

 

1,030

 

5

 

 

Cable Subscriber Results 1

     
 

Three months ended December 31

 

Twelve months ended December 31

(In thousands)

2016

 

2015

 

Chg

   

2016

 

2015

 

Chg

 
               

Internet

             
 

Net additions

30

 

16

 

14

   

97

 

37

 

60

 
 

Total Internet subscribers 2

2,145

 

2,048

 

97

   

2,145

 

2,048

 

97

 

Television

             
 

Net losses

(13)

 

(24)

 

11

   

(76)

 

(128)

 

52

 
 

Total television subscribers 2

1,820

 

1,896

 

(76)

   

1,820

 

1,896

 

(76)

 

Phone

             
 

Net additions (losses)

4

 

(15)

 

19

   

4

 

(60)

 

64

 
 

Total phone subscribers 2

1,094

 

1,090

 

4

   

1,094

 

1,090

 

4

 
               

Cable homes passed 2

4,241

 

4,153

 

88

   

4,241

 

4,153

 

88

 

Total service units 3

             
 

Net additions (losses)

21

 

(23)

 

44

   

25

 

(151)

 

176

 
 

Total service units 2

5,059

 

5,034

 

25

   

5,059

 

5,034

 

25

 

Subscriber counts are key performance indicators. See "Key Performance Indicators".

As at end of period.

Includes Internet, Television, and Phone subscribers.

 

Revenue
The marginal increase in revenue this quarter was a result of:

 

Internet revenue
The 9% increase in Internet revenue this quarter was a result of:

 

Television revenue
The 4% decrease in Television revenue this quarter was a result of:

 

Phone revenue
The 9% decrease in Phone revenue this quarter was a result of:

 

Operating expenses
The 1% decrease in operating expenses this quarter was a result of:

 

Adjusted operating profit
The 2% increase in adjusted operating profit this quarter was a result of the revenue and expense changes discussed above.

BUSINESS SOLUTIONS

Business Solutions Financial Results

     
 

Three months ended December 31

 

Twelve months ended December 31

(In millions of dollars, except margins)

2016

 

2015 1

 

% Chg

   

2016

 

2015 1

 

% Chg

 
               

Revenue

             
 

Next generation

77

 

74

 

4

   

307

 

288

 

7

 
 

Legacy

17

 

20

 

(15)

   

71

 

85

 

(16)

 
 

Service revenue

94

 

94

 

   

378

 

373

 

1

 
 

Equipment revenue

2

 

1

 

100

   

6

 

4

 

50

 

Revenue

96

 

95

 

1

   

384

 

377

 

2

 
               

Operating expenses

66

 

65

 

2

   

261

 

261

 

 
               

Adjusted operating profit

30

 

30

 

   

123

 

116

 

6

 
               

Adjusted operating profit margin

31.3%

 

31.6%

 

(0.3 pts)

   

32.0%

 

30.8%

 

1.2 pts

 

Additions to property, plant and equipment

37

 

65

 

(43)

   

146

 

187

 

(22)

 

The operating results of Internetworking Atlantic Inc. are included in the Business Solutions results of operations from the date of acquisition on November 30, 2015.

 

Revenue
The stable service revenue this quarter was a result of the continued execution of our plan to grow higher-margin, next generation on-net and near-net IP-based services revenue, offset by the continued decline in our legacy and off-net voice business. We expect this trend to continue as we focus on migrating customers to more advanced, cost-effective IP-based services and solutions.

Next generation services, which include our data centre operations, represented 82% of total service revenue in the quarter (2015 - 79%).

Operating expenses
Operating expenses this quarter were in line with fourth quarter operating expenses of 2015.

Adjusted operating profit
Adjusted operating profit was stable this quarter as a result of the marginal increases in revenue and operating expenses this quarter.

MEDIA

Media Financial Results

     
 

Three months ended December 31

 

Twelve months ended December 31

(In millions of dollars, except margins)

2016

 

2015

 

% Chg

   

2016

 

2015

 

% Chg

 
               

Revenue

550

 

560

 

(2)

   

2,146

 

2,079

 

3

 

Operating expenses

501

 

504

 

(1)

   

1,977

 

1,907

 

4

 
               

Adjusted operating profit

49

 

56

 

(13)

   

169

 

172

 

(2)

 
               

Adjusted operating profit margin

8.9%

 

10.0%

 

(1.1 pts)

   

7.9%

 

8.3%

 

(0.4 pts)

 

Additions to property, plant and equipment

19

 

28

 

(32)

   

62

 

60

 

3

 

 

Revenue
The 2% decrease in revenue this quarter was a result of:

 

Operating expenses
The 1% decrease in operating expenses this quarter was a result of:

 

Adjusted operating profit
The 13% decrease in adjusted operating profit this quarter was primarily a result of the revenue and expense changes discussed above.

ADDITIONS TO PROPERTY, PLANT AND EQUIPMENT

     
 

Three months ended December 31

 

Twelve months ended December 31

(In millions of dollars, except capital intensity)

2016

 

2015

 

% Chg

   

2016

 

2015

 

% Chg

 
               

Additions to property, plant and equipment

             
 

Wireless

153

 

235

 

(35)

   

702

 

866

 

(19)

 
 

Cable

284

 

308

 

(8)

   

1,085

 

1,030

 

5

 
 

Business Solutions

37

 

65

 

(43)

   

146

 

187

 

(22)

 
 

Media

19

 

28

 

(32)

   

62

 

60

 

3

 
 

Corporate

111

 

137

 

(19)

   

357

 

297

 

20

 
               

Total additions to property, plant and equipment 1

604

 

773

 

(22)

   

2,352

 

2,440

 

(4)

 
               

Capital intensity 2

17.2%

 

22.4%

 

(5.2 pts)

   

17.2%

 

18.2%

 

(1.0 pts)

 

Additions to property, plant and equipment do not include expenditures for spectrum licences.

As defined. See "Key Performance Indicators".

 

Wireless
The decrease in additions to property, plant and equipment in Wireless this quarter was primarily a result of higher LTE network investments incurred in the fourth quarter of 2015 relative to 2016 to enhance network coverage and the quality of our network. Deployment of our 700 MHz LTE network has reached 91% of Canada's population as at December 31, 2016 (December 31, 2015 - 78%). The 700 MHz LTE network offers improved signal quality in basements, elevators, and buildings with thick concrete walls. Deployment of our overall LTE network has reached approximately 95% of Canada's population as at December 31, 2016 (December 31, 2015 - 93%).

Cable
The decrease in additions to property, plant and equipment in Cable this quarter was primarily a result of higher investment in information technology infrastructure incurred in the fourth quarter of 2015 relative to 2016 to improve the capacity of our Internet platform to deliver gigabit Internet speeds. We believe this has allowed us to keep ahead of customer data demands, which allowed us to deliver Ignite Gigabit Internet across our Cable footprint by the end of 2016.

Business Solutions
The decrease in additions to property, plant and equipment in Business Solutions this quarter was a result of higher investments in our data centres in the fourth quarter of 2015 relative to 2016.

Media
The decrease in additions to property, plant and equipment in Media this quarter was a result of higher investments incurred in the fourth quarter of 2015 relative to 2016 for conventional television, digital assets, and at TSC.

Corporate
The decrease in additions to property, plant and equipment in Corporate this quarter was a result of higher investments incurred in the fourth quarter of 2015 relative to 2016 in relation to premise improvements at our various offices, as well as higher information technology investments.

Capital intensity
Capital intensity decreased this quarter as a result of lower additions to property, plant and equipment in all our segments as discussed above, partially offset by higher revenue.

Review of Consolidated Performance

This section discusses our consolidated net income and other expenses that do not form part of the segment discussions above.

     
 

Three months ended December 31

 

Twelve months ended December 31

(In millions of dollars)

2016

 

2015

 

% Chg

   

2016

 

2015

 

% Chg

 
               

Adjusted operating profit 1

1,259

 

1,226

 

3

   

5,092

 

5,032

 

1

 

Deduct (add):

             
 

Stock-based compensation

16

 

16

 

   

61

 

55

 

11

 
 

Depreciation and amortization

555

 

580

 

(4)

   

2,276

 

2,277

 

 
 

Impairment of assets and related onerous contract charges

484

 

 

n/m

   

484

 

 

n/m

 
 

Restructuring, acquisition and other

34

 

23

 

48

   

160

 

111

 

44

 
 

Finance costs

188

 

192

 

(2)

   

761

 

774

 

(2)

 
 

Other (income) expense 2

(4)

 

4

 

n/m

   

191

 

(4)

 

n/m

 
 

Income tax (recovery) expense 2

(5)

 

112

 

n/m

   

324

 

477

 

(32)

 
               

Net (loss) income 2

(9)

 

299

 

n/m

   

835

 

1,342

 

(38)

 

Adjusted operating profit is a non-GAAP measure and should not be considered a substitute or alternative for GAAP measures. It is not a defined term under IFRS and does not have a standard meaning, so may not be a reliable way to compare us to other companies. See "Non-GAAP Measures" for information about this measure, including how we calculate it.

As a result of the IFRS Interpretations Committee's agenda decision relating to IAS 12 Income Taxes, certain amounts have been retrospectively amended.  See "Accounting Changes" for more information.

 

Stock-based compensation
Our stock-based compensation, which includes stock options (with stock appreciation rights), restricted share units, and deferred share units, is generally driven by:

     
 

Three months ended December 31

 

Twelve months ended December 31

(In millions of dollars)

2016

 

2015

   

2016

 

2015

 
           

Impact of vesting

19

 

14

   

70

 

57

 

Impact of change in price

(22)

 

14

   

24

 

20

 

Equity derivatives, net of interest receipt

19

 

(12)

   

(33)

 

(22)

 
           

Total stock-based compensation

16

 

16

   

61

 

55

 

 

Depreciation and amortization

     
 

Three months ended December 31

 

Twelve months ended December 31

(In millions of dollars)

2016

 

2015

 

% Chg

   

2016

 

2015

 

% Chg

 
               

Depreciation

538

 

541

 

(1)

   

2,183

 

2,117

 

3

 

Amortization

17

 

39

 

(56)

   

93

 

160

 

(42)

 
               

Total depreciation and amortization

555

 

580

 

(4)

   

2,276

 

2,277

 

 

 

Total depreciation and amortization decreased this quarter as a result of the effect of ceasing amortization on certain brand name assets in 2016.

Impairment of assets and related onerous contract charges
During the quarter, we recorded a total charge of $484 million for asset impairment and onerous contracts related to our decision to discontinue developing our IPTV product as a result of our decision to develop a long-term relationship with Comcast and deploy their X1 IP-based video platform. See "Strategic Update" for more information. The onerous contracts charges primarily relate to the remaining contractual liabilities for the development of our IPTV product based on our best estimate of the expected future costs.

Restructuring, acquisition and other
This quarter, we incurred $34 million (2015 - $23 million) in restructuring, acquisition and other expenses. The costs this quarter were primarily a result of severance costs associated with the targeted restructuring of our employee base and costs related to integrating certain businesses.

Finance costs

     
 

Three months ended December 31

 

Twelve months ended December 31

(In millions of dollars)

2016

 

2015

 

% Chg

   

2016

 

2015

 

% Chg

 
               

Interest on borrowings 1

185

 

190

 

(3)

   

758

 

761

 

 

Interest on post-employment benefits liability

2

 

3

 

(33)

   

9

 

11

 

(18)

 

Loss on repayment of long-term debt

 

 

   

 

7

 

(100)

 

Loss on foreign exchange

32

 

2

 

n/m

   

13

 

11

 

18

 

Change in fair value of derivatives

(34)

 

(1)

 

n/m

   

(16)

 

3

 

n/m

 

Capitalized interest

(3)

 

(5)

 

(40)

   

(18)

 

(29)

 

(38)

 

Other

6

 

3

 

100

   

15

 

10

 

50

 
               

Total finance costs

188

 

192

 

(2)

   

761

 

774

 

(2)

 

Interest on borrowings includes interest on long-term debt and on short-term borrowings associated with our accounts receivable securitization program.

 

Interest on borrowings
Interest on borrowings decreased this quarter as a result of a decrease in the principal of our outstanding debt and lower interest rates on our bank credit facilities. See "Managing our Liquidity and Financial Resources" and "Financial Condition" for more information about our debt and related finance costs.

Income tax (recovery) expense 1

     
 

Three months ended December 31

 

Twelve months ended December 31

(In millions of dollars, except tax rates)

2016

2015

 

2016

2015

           

Statutory income tax rate

26.6

%

26.5

%

 

26.6

%

26.5

%

(Loss) income before income tax (recovery) expense

(14)

 

411

   

1,159

 

1,819

 

Computed income tax (recovery) expense

(4)

 

109

   

308

 

482

 

Increase (decrease) in income tax (recovery) expense resulting from:

         
 

Non-(taxable) deductible stock-based compensation

(2)

 

3

   

5

 

5

 
 

Non-deductible (taxable) portion of equity losses

2

 

(2)

   

18

 

11

 
 

Income tax adjustment, legislative tax change

 

   

3

 

6

 
 

Non-taxable gain on acquisition

 

   

 

(20)

 
 

Non-taxable portion of capital gain

 

   

(7)

 

 
 

Other items

(1)

 

2

   

(3)

 

(7)

 
           

Total income tax (recovery) expense

(5)

 

112

   

324

 

477

 
           

Effective income tax rate

35.7

%

27.3

%

 

28.0

%

26.2

%

Cash income taxes paid (received)

81

 

(6)

   

295

 

184

 

1 As a result of the IFRS Interpretations Committee's agenda decision relating to IAS 12 Income Taxes, certain amounts have been retrospectively amended. See "Accounting Changes" for more information.

 

Cash income taxes paid increased this quarter as a result of applying non-capital losses from the Mobilicity transaction to offset our 2015 tax liability.

Net (loss) income 1

               
 

Three months ended December 31

 

Twelve months ended December 31

(In millions of dollars, except per share amounts)

2016

2015

% Chg

 

2016

2015

% Chg

               

Net (loss) income

(9)

299

n/m

 

835

1,342

(38)

Basic (loss) earnings per share

($0.02)

$0.58

n/m

 

$1.62

$2.61

(38)

Diluted (loss) earnings per share

($0.04)

$0.58

n/m

 

$1.62

$2.60

(38)

               

As a result of the IFRS Interpretations Committee's agenda decision relating to IAS 12 Income Taxes, certain amounts have been retrospectively amended. See "Accounting Changes" for more information.

 

Adjusted net income
We calculate adjusted net income from adjusted operating profit as follows:

     
 

Three months ended December 31

 

Twelve months ended December 31

(In millions of dollars, except per share amounts)

2016

 

2015

 

% Chg

   

2016

 

2015

 

% Chg

 
               

Adjusted operating profit 1

1,259

 

1,226

 

3

   

5,092

 

5,032

 

1

 

Deduct:

             
 

Depreciation and amortization

555

 

580

 

(4)

   

2,276

 

2,277

 

 
 

Finance costs 2

188

 

192

 

(2)

   

761

 

767

 

(1)

 
 

Other (income) expense 3,4

(4)

 

4

 

n/m

   

40

 

(2)

 

n/m

 
 

Income tax expense 4,5

138

 

119

 

16

   

534

 

511

 

5

 
               

Adjusted net income 1,4

382

 

331

 

15

   

1,481

 

1,479

 

 
               

Adjusted basic earnings per share 1,4

$0.74

 

$0.64

 

16

   

$2.88

 

$2.87

 

 

Adjusted diluted earnings per share 1,4

$0.74

 

$0.64

 

16

   

$2.86

 

$2.86

 

 

Adjusted operating profit, adjusted net income, and adjusted basic and diluted earnings per share are non-GAAP measures and should not be considered substitutes or alternatives for GAAP measures. These are not defined terms under IFRS and do not have standard meanings, so may not be a reliable way to compare us to other companies. See "Non-GAAP Measures" for information about these measures, including how we calculate them.

Finance costs exclude a $7 million loss on repayment of long-term debt for the twelve months ended December 31, 2015.

Other expense for the twelve months ended December 31, 2016 excludes an $11 million net loss on divestitures pertaining to investments and a $140 million loss on the wind down of our shomi joint venture. Other income for the twelve months ended December 31, 2015 excludes a $74 million gain on acquisition of Mobilicity and a $72 million loss related to our share of an obligation to purchase at fair value the non-controlling interest in one of our joint ventures.

As a result of the IFRS Interpretations Committee's agenda decision relating to IAS 12 Income Taxes, certain amounts have been retrospectively amended. See "Accounting Changes" for more information.

Income tax expense excludes a $143 million recovery (2015 - $7 million recovery) for the quarter and a $213 million recovery (2015 - $40 million recovery) for the year to date related to the income tax impact for adjusted items. Income tax expense also excludes expenses as a result of legislative tax changes of $3 million (2015 - $6 million) for the year to date.

 

Managing our Liquidity and Financial Resources

Operating, investing, and financing activities

     
 

Three months ended December 31

 

Twelve months ended December 31

(In millions of dollars)

2016

 

2015

   

2016

 

2015

 
           

Cash provided by operating activities before changes in non-cash
working capital items, income taxes paid, and interest paid

1,276

 

1,264

   

4,994

 

5,004

 
 

Change in non-cash operating working capital items

(18)

 

(187)

   

14

 

(302)

 

Cash provided by operating activities before income taxes paid
and interest paid

1,258

 

1,077

   

5,008

 

4,702

 
 

Income taxes (paid) received

(81)

 

6

   

(295)

 

(184)

 
 

Interest paid

(124)

 

(133)

   

(756)

 

(771)

 
           

Cash provided by operating activities

1,053

 

950

   

3,957

 

3,747

 
           

Investing activities:

         
 

Additions to property, plant and equipment

(604)

 

(773)

   

(2,352)

 

(2,440)

 
 

Additions to program rights

(3)

 

(27)

   

(46)

 

(64)

 
 

Changes in non-cash working capital related to property, plant and
equipment and intangible assets

44

 

167

   

(103)

 

(116)

 
 

Acquisitions and other strategic transactions, net of cash acquired

 

(5)

   

 

(1,077)

 
 

Other

49

 

(32)

   

45

 

(70)

 
           

Cash used in investing activities

(514)

 

(670)

   

(2,456)

 

(3,767)

 
           

Financing activities:

                 
 

Net repayments on short-term borrowings

(250)

 

(59)

   

 

(42)

 
 

Net (repayment) issuance of long-term debt

(57)

 

82

   

(538)

 

754

 
 

Net (payments) proceeds on settlement of debt derivatives and
forward contracts

(28)

 

(25)

   

(45)

 

129

 
 

Transaction costs incurred

(17)

 

(9)

   

(17)

 

(9)

 
 

Dividends paid

(247)

 

(247)

   

(988)

 

(977)

 
 

Other

 

   

5

 

 
           

Cash used in financing activities

(599)

 

(258)

   

(1,583)

 

(145)

 
           

Change in cash and cash equivalents

(60)

 

22

   

(82)

 

(165)

 

(Bank advances) cash and cash equivalents, beginning of period

(11)

 

(11)

   

11

 

176

 
           

(Bank advances) cash and cash equivalents, end of period

(71)

 

11

   

(71)

 

11

 

 

Operating activities
The 11% increase in cash provided by operating activities this quarter was primarily a result of a lower net investment in non-cash working capital, partially offset by higher cash income taxes as a result of the timing of installment payments.

Investing activities

Additions to property, plant and equipment
We spent $604 million this quarter on additions to property, plant and equipment before changes in non-cash working capital items, which was lower than the same period in 2015. See "Additions to Property, Plant and Equipment" for more information.

Financing activities

Accounts receivable securitization
Below is a summary of the activity relating to our accounts receivable securitization program for the quarter and year to date:

       
 

Three months ended December 31

 

Twelve months ended December 31

(In millions of dollars)

2016

 

2015

   

2016

 

2015

 
           

Short-term borrowings

                 
 

Proceeds received on short-term borrowings

 

22

   

295

 

294

 
 

Repayment of short-term borrowings

(250)

 

(81)

   

(295)

 

(336)

 
           

Net (repayments) proceeds received on short-term borrowings

(250)

 

(59)

   

 

(42)

 

 

As at December 31, 2016, our total funding under the securitization program was $800 million (December 31, 2015 - $800 million).

In July 2016, we amended the terms of the accounts receivable securitization program to, among other things, extend the expiry date from January 1, 2018 to January 1, 2019.

Bank and letter of credit facilities
Below is a summary of the activity relating to our revolving and non-revolving bank credit facilities for the quarter and year to date:

     
 

Three months ended
December 31, 2016

 

Twelve months ended
December 31, 2016

 

Notional

 

Exchange

 

Notional

 

Notional

 

Exchange

 

Notional

(In millions of dollars, except exchange rates)

(US$)

 

rate

 

(Cdn$)

 

(US$)

 

rate

 

(Cdn$)

             

Issuance of US dollar long-term debt

303

 

1.31

 

398

 

2,188

 

1.31

 

2,877

Issuance of Canadian dollar long-term debt

   

325

     

1,140

             

Total long-term debt issued

   

723

     

4,017

             

Repayment of US dollar long-term debt

(914)

 

1.34

 

(1,226)

 

(2,038)

 

1.32

 

(2,686)

Repayment of Canadian dollar long-term debt

   

(225)

     

(1,540)

             

Total long-term debt repaid

   

(1,451)

     

(4,226)

             
 

Three months ended
December 31, 2015

 

Twelve months ended
December 31, 2015

 

Notional

 

Exchange

 

Notional

 

Notional

 

Exchange

 

Notional

(In millions of dollars, except exchange rates)

(US$)

 

rate

 

(Cdn$)

 

(US$)

 

rate

 

(Cdn$)

                     

Issuance of Canadian dollar long-term debt

       

1,190

         

6,025

                     

Repayment of Canadian dollar long-term debt

       

(2,440)

         

(5,525)

 

As at December 31, 2016, we had $301 million ($100 million and US$150 million) of borrowings outstanding under our revolving and non-revolving credit facilities (December 31, 2015 - $500 million). Certain funds were borrowed in US dollars to take advantage of a favourable interest rate spread; we have entered into debt derivatives related to these borrowings to convert all the interest and principal payment obligations to Canadian dollars. See "Financial Risk Management" for more information.

As at December 31, 2016, we had available liquidity under our bank credit facilities of $2.4 billion, as illustrated below. Each of these facilities is unsecured and guaranteed by RCCI and ranks equally with all of our senior notes and debentures.

         
   

As at
December 31

 

As at

December 31

(In millions of dollars)

 

2016

 

2015

       

Total revolving & non-revolving credit and letter of credit facilities

 

2,860

 

3,567

Add (deduct):

       
 

Outstanding letters of credit

 

(68)

 

(68)

 

Borrowings

 

(301)

 

(500)

 

Bank advances

 

(71)

 

       

Available liquidity - bank credit facilities

 

2,420

 

2,999

 

Effective April 1, 2016, we amended our $2.5 billion revolving credit facility to, among other things, extend the maturity date from July 2019 to September 2020. At the same time, we also amended the $1.0 billion non-revolving credit facility to, among other things, extend the maturity date from April 2017 to April 2018. As a result of repayments made during the quarter, we reduced the amount of borrowings available under our non-revolving credit facility from $1.0 billion to $301 million.

Senior notes
The table below provides a summary of the issuance of our senior notes for the three months ended December 31, 2016 and 2015.

     

(In millions of dollars, except interest rates and discounts)

   

Date Issued

   

Principal
amount

 

Due date

Interest rate

 

Discount/
premium at
issuance

 

Total gross
proceeds 1
(Cdn$)

 

Transaction
costs and
discounts 2
(Cdn$)

                 

2016 issuances

                       
 

November 4, 2016

 

US

500

 

2026

2.900

%

98.354

%

671

 

17

                 

2015 issuances

                       
 

December 8, 2015

 

US

700

 

2025

3.625

%

99.252

%

937

   
 

December 8, 2015

 

US

300

 

2044

5.000

%

101.700

%

401

   
                 

Total for 2015

           

1,338

 

13

Gross proceeds before transaction costs and discounts.

Transaction costs and discounts are included as deferred transaction costs and discounts in the carrying value of the long-term debt, and recognized in net income using the effective interest method.

 

Concurrent with the 2016 and 2015 issuances, we entered into debt derivatives to hedge the foreign currency risk associated with the principal and interest components of the US dollar-denominated senior notes.

The tables below provide a summary of the repayment of our senior notes for the three and twelve months ended December 31, 2016 and 2015.

         
   

Three months ended
December 31, 2016

 

Twelve months ended
December 31, 2016

(In millions of dollars)

Maturity date

 

Notional
amount (US$)

 

Notional
amount (Cdn$)

 

Notional
amount (US$)

 

Notional
amount (Cdn$)

           

May 26, 2016

 

 

 

 

1,000

                 
   

Three months ended
December 31, 2015

 

Twelve months ended
December 31, 2015

(In millions of dollars)

Maturity date

 

Notional
amount (US$)

 

Notional
amount (Cdn$)

 

Notional
amount (US$)

 

Notional
amount (Cdn$)

           

March 15, 2015

 

 

 

550

 

702

March 15, 2015

 

 

 

280

 

357

           

Total

 

 

 

830

 

1,059

 

Dividends
The table below shows when dividends were declared and paid on both classes of our shares.

               

Declaration date

 

Record date

 

Payment date

Dividend per

share (dollars)

 

Dividends paid

(in millions of dollars)

             

January 27, 2016

 

March 13, 2016

 

April 1, 2016

0.48

 

247

April 18, 2016

 

June 12, 2016

 

July 4, 2016

0.48

 

247

August 11, 2016

 

September 11, 2016

 

October 3, 2016

0.48

 

247

October 20, 2016

 

December 12, 2016

 

January 3, 2017

0.48

 

247

             

January 28, 2015

 

March 13, 2015

 

April 1, 2015

0.48

 

248

April 21, 2015

 

June 12, 2015

 

July 2, 2015

0.48

 

247

August 13, 2015

 

September 11, 2015

 

October 1, 2015

0.48

 

247

October 22, 2015

 

December 11, 2015

 

January 4, 2016

0.48

 

247

 

Free cash flow

       
 

Three months ended December 31

 

Twelve months ended December 31

(In millions of dollars)

2016

 

2015

 

% Chg

   

2016

 

2015

 

% Chg

 
               

Adjusted operating profit 1

1,259

 

1,226

 

3

   

5,092

 

5,032

 

1

 

Deduct (add):

                         
 

Additions to property, plant and equipment 2

604

 

773

 

(22)

   

2,352

 

2,440

 

(4)

 
 

Interest on borrowings, net of capitalized interest

182

 

185

 

(2)

   

740

 

732

 

1

 
 

Cash income taxes 3

81

 

(6)

 

n/m

   

295

 

184

 

60

 
               

Free cash flow 1

392

 

274

 

43

   

1,705

 

1,676

 

2

 

Adjusted operating profit and free cash flow are non-GAAP measures and should not be considered substitutes or alternatives for GAAP measures. These are not defined terms under IFRS and do not have standard meanings, so may not be a reliable way to compare us to other companies. See "Non-GAAP Measures" for information about these measures, including how we calculate them.

Additions to property, plant and equipment do not include expenditures for spectrum licences.

Cash income taxes are net of refunds received.

 

The 43% increase in free cash flow this quarter was a result of higher adjusted operating profit and lower additions to property, plant and equipment, partially offset by higher cash income taxes as a result of applying non-capital losses from the Mobilicity transaction during the same period in 2015.

Financial Condition

         
   

As at
December 31

 

As at
December 31

(In millions of dollars)

 

2016

 

2015

       

Cash and cash equivalents

 

 

11

Bank credit facilities

 

2,420

 

3,000

Accounts receivable securitization program

 

250

 

250

       

Total available liquidity

 

2,670

 

3,261

 

In addition to the sources of available liquidity noted above, we held $1,047 million of marketable securities in publicly traded companies as at December 31, 2016 (December 31, 2015 - $966 million).

Our borrowings had a weighted average cost of financing of 4.72% as at December 31, 2016 (December 31, 2015 - 4.82%) and a weighted average term to maturity of 10.6 years (December 31, 2015 - 10.8 years). This comparative decline in our weighted average interest rate reflects the combined effects of:

 

As at December 31, 2016, the credit ratings on RCI's outstanding senior notes and debentures were as follows:

 

Financial Risk Management

This section should be read in conjunction with "Financial Risk Management" in our 2015 Annual MD&A. We use derivative instruments to manage financial risks related to our business activities. We only use derivatives to manage risk and not for speculative purposes. We also manage our exposure to both fixed and fluctuating interest rates and had fixed the interest rate on 91.2% of our outstanding debt, including short-term borrowings, as at December 31, 2016 (December 31, 2015 - 90.3%).

Debt derivatives
We entered into the following new debt derivatives during the three and twelve months ended December 31, 2016 and 2015 in conjunction with the issuance of our senior notes:

     

(In millions of dollars, except for coupon and interest rates)

   
   

US$

 

Hedging effect

Effective date

Principal/notional
amount (US$)

 

Maturity date

Coupon rate

   

Fixed hedged Cdn$
interest rate 1

 

Equivalent Cdn$

             

2016 issuances

                 
 

November 4, 2016

500

 

2026

2.900

%

 

2.834

%

671

             

2015 issuances

                 
 

December 8, 2015

700

 

2025

3.625

%

 

3.566

%

937

 

December 8, 2015

300

 

2044

5.000

%

 

5.145

%

401

             

Total for 2015

1,000

         

1,338

1 Converting from a fixed US$ coupon rate to a weighted average Cdn$ fixed rate.

 

During the quarter, we entered into debt derivatives related to our credit facility borrowings as a result of a favourable interest rate spread obtained from borrowing funds in US dollars. We used these derivatives to offset the foreign exchange and interest rate risk on our US dollar-denominated credit facility borrowings. As a result of the short-term nature of these debt derivatives related to our credit facility borrowings, we have not designated them as hedges for accounting purposes.

This quarter and year to date, we entered into and settled debt derivatives related to our credit facility borrowings as follows:

       
 

Three months ended
December 31, 2016

   

Twelve months ended
December 31, 2016

(In millions of dollars, except exchange rates)

Notional

 (US$)

 

Exchange
rate

 

Notional
(Cdn$)

   

Notional

(US$)

 

Exchange
rate

 

Notional
(Cdn$)

               

Debt derivatives entered

1,947

 

1.33

 

2,583

   

8,683

 

1.31

 

11,360

Debt derivatives settled

2,558

 

1.32

 

3,385

   

8,533

 

1.31

 

11,159

               

Net cash received

   

25

       

8

 

We did not enter into any debt derivatives related to our credit facility borrowings during the three and twelve months ended December 31, 2015. See "Mark-to-market value" for more information about our debt derivatives.

Bond forwards
We did not enter into any new bond forwards this quarter.

On November 4, 2016, we exercised a $500 million notional bond forward due January 4, 2017 in relation to the issuance of the US$500 million senior notes due 2026 and paid $53 million to settle the derivative. The amount paid represents the fair value of the bond forward at the time of settlement and will be recycled into finance costs from the hedging reserve using the effective interest rate method over the life of the US$500 million senior notes due 2026.

See "Mark-to-market value" for more information about our bond forwards.

Expenditure derivatives
As at December 31, 2016, our outstanding expenditure derivatives had terms to maturity ranging from January 2017 to December 2018 at an average exchange rate of $1.32/US$ (December 31, 2015 - January 2016 to December 2017 at an average exchange rate of $1.24/US$). Our outstanding expenditure derivatives maturing in 2017 are hedged at an average exchange rate of $1.33/US$.

Below is a summary of the activity relating to our expenditure derivatives for the quarter and year to date.

     
 

Three months ended
December 31, 2016

 

Twelve months ended
December 31, 2016

(In millions of dollars, except exchange rates)

Notional
(US$)

 

Exchange
rate

 

Notional
(Cdn$)

 

Notional
(US$)

 

Exchange
rate

 

Notional
(Cdn$)

             

Expenditure derivatives entered

240

 

1.32

 

316

 

990

 

1.33

 

1,318

Expenditure derivatives settled

210

 

1.21

 

255

 

840

 

1.22

 

1,025

     
 

Three months ended
December 31, 2015

 

Twelve months ended
December 31, 2015

(In millions of dollars, except exchange rates)

Notional
(US$)

 

Exchange
rate

 

Notional
(Cdn$)

 

Notional
(US$)

 

Exchange
rate

 

Notional
(Cdn$)

             

Expenditure derivatives entered

300

 

1.30

 

390

 

990

 

1.28

 

1,266

Expenditure derivatives settled

225

 

1.12

 

252

 

810

 

1.11

 

902

 

See "Mark-to-market value" for more information about our expenditure derivatives.

Equity derivatives
As at December 31, 2016, we had equity derivatives for 5.4 million (December 31, 2015 - 5.7 million) RCI Class B shares with a weighted average price of $50.30 (December 31, 2015 - $50.37).

In August 2016, we settled 0.3 million equity derivatives at a weighted average price of $58.16 as a result of a reduction in the number of share-based compensation units outstanding.

In April 2016, we executed extension agreements for each of our equity derivative contracts under substantially the same terms and conditions with revised expiry dates to April 2017 (from April 2016).

See "Mark-to-market value" for more information about our equity derivatives.

Mark-to-market value
We record our derivatives using an estimated credit-adjusted, mark-to-market valuation, calculated in accordance with IFRS.

   
 

As at December 31, 2016

(In millions of dollars, except exchange rates)

Notional

amount

(US$)

 

Exchange

rate

 

Notional

amount

(Cdn$)

 

Fair value

(Cdn$)

Debt derivatives accounted for as cash flow hedges:

             
 

As assets

5,200

 

1.0401

 

5,409

 

1,751

 

As liabilities                                              

1,500

 

1.3388

 

2,008

 

(68)

Short-term debt derivatives not accounted for as hedges:

             
 

As liabilities

150

 

1.3407

 

201

 

Net mark-to-market debt derivative asset

     

1,683

Bond forwards accounted for as cash flow hedges:

             
 

As liabilities

       

900

 

(51)

Expenditure derivatives accounted for as cash flow hedges:

             
 

As assets

990

 

1.2967

 

1,284

 

40

 

As liabilities

300

 

1.4129

 

424

 

(21)

Net mark-to-market expenditure derivative asset

     

19

Equity derivatives not accounted for as hedges:

             
 

As assets

       

270

 

8

Net mark-to-market asset

     

1,659

   
 

As at December 31, 2015

(In millions of dollars, except exchange rates)

Notional

amount

(US$)

 

Exchange

rate

 

Notional

amount

(Cdn$)

 

Fair value

(Cdn$)

Debt derivatives accounted for as cash flow hedges:

             
 

As assets

5,900

 

1.0755

 

6,345

 

2,032

 

As liabilities

300

 

1.3367

 

401

 

(4)

Net mark-to-market debt derivative asset

     

2,028

Bond forwards accounted for as cash flow hedges:

             
 

As liabilities

 

 

1,400

 

(91)

Expenditure derivatives accounted for as cash flow hedges:

             
 

As assets

1,140

 

1.2410

 

1,415

 

158

Equity derivatives not accounted for as hedges:

             
 

As liabilities

 

 

286

 

(15)

Net mark-to-market asset

     

2,080

 

Adjusted net debt and adjusted net debt / adjusted operating profit
We use adjusted net debt and adjusted net debt / adjusted operating profit to conduct valuation-related analysis and make capital structure-related decisions. Adjusted net debt includes long-term debt, net debt derivative assets or liabilities, short-term borrowings, and cash and cash equivalents or bank advances.

         
   

As at
December 31

 

As at

December 31

(In millions of dollars, except ratios)

 

2016

 

2015

       

Long-term debt 1

 

16,197

 

16,981

Net debt derivative assets valued without any adjustment for credit risk

 

(1,740)

 

(2,180)

Short-term borrowings

 

800

 

800

Bank advances (cash and cash equivalents)

 

71

 

(11)

       

Adjusted net debt 2

 

15,328

 

15,590

       

Adjusted net debt / adjusted operating profit 2,3

 

3.0

 

3.1

Includes current and long-term portion of long-term debt before deferred transaction costs and discounts. See "Reconciliation of adjusted net debt" in the section "Non-GAAP Measures" for the calculation of this amount.

 

Adjusted net debt and adjusted net debt / adjusted operating profit are non-GAAP measures and should not be considered substitutes or alternatives for GAAP measures. These are not defined terms under IFRS and do not have standard meanings, so may not be a reliable way to compare us to other companies. See "Non-GAAP Measures" for information about these measures, including how we calculate them.

Adjusted net debt / adjusted operating profit is measured using adjusted operating profit for the last twelve consecutive months.

 

In addition to the cash and cash equivalents as at December 31, 2016 and December 31, 2015 noted above, we held $1,047 million of marketable securities in publicly traded companies (December 31, 2015 - $966 million).

Our adjusted net debt decreased by $0.3 billion from December 31, 2015 primarily as a result of a decrease in our outstanding long-term debt, partially offset by a reduction in the fair value of our net debt derivative asset.

Outstanding common shares

           
     

As at
December 31

 

As at

December 31

     

2016

 

2015

         

Common shares outstanding 1

         
 

Class A Voting

   

112,411,992

 

112,438,692

 

Class B Non-Voting

   

402,396,133

 

402,307,976

         

Total common shares

   

514,808,125

 

514,746,668

         

Options to purchase Class B Non-Voting shares

         
 

Outstanding options

   

3,732,524

 

4,873,940

 

Outstanding options exercisable

   

1,770,784

 

2,457,005

Holders of our Class B Non-Voting shares are entitled to receive notice of and to attend shareholder meetings; however, they are not entitled to vote at these meetings except as required by law or stipulated by stock exchanges. If an offer is made to purchase outstanding Class A Voting shares, there is no requirement under applicable law or our 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 our constating documents. If an offer is made to purchase both classes of shares, the offer for the Class A Voting shares may be made on different terms than the offer for the Class B Non-Voting shares.

 

Accounting Changes

We adopted the following amendments to accounting standards that were effective for our interim and annual consolidated financial statements commencing January 1, 2016. These changes did not have a material impact on our financial results.

 

In addition, following the November 2016 publication of the IFRS Interpretations Committee's agenda decision addressing the expected manner of recovery of intangible assets with indefinite useful lives for the purposes of measuring deferred tax, we have retrospectively changed our related accounting policy. The IFRS Interpretations Committee observed that in applying International Accounting Standard 12, an entity determines its expected manner of recovery of the carrying amount of the intangible asset with an indefinite useful life, and reflects the tax consequences that follow from that expected manner of recovery. Previously, we measured deferred taxes on temporary differences arising from the portion of indefinite-life intangible assets with no initial associated underlying tax basis using a capital gains tax rate based upon the notion that recovery would result solely from sales of the assets.  Consequently, we have adopted an accounting policy to measure deferred taxes on temporary differences arising from indefinite-life intangible assets based upon the tax consequences that follow from the expected manner of recovery of the assets.

This accounting policy has been applied in preparing this earnings release as at and for the year ended December 31, 2016 and the comparative information presented as at and for the three and twelve months ended December 31, 2015. The adjustment to previously reported amounts as a result of the change in the accounting policy are stated below.

Adjustments to Consolidated Statements of Income for the year ended December 31, 2015

             

(In millions of dollars, except per share amounts)

 

Previously reported
for the year ended
December 31, 2015

 

Adjustments

 

Amended for the year ended
December 31, 2015

         

Other (income) expense

 

(32)

 

28

 

(4)

Income tax expense

 

466

 

11

 

477

Net income

 

1,381

 

(39)

 

1,342

         

Earnings per share

           
 

Basic

 

$2.68

 

($0.07)

 

$2.61

 

Diluted                                         

 

$2.67

 

($0.07)

 

$2.60

 

Adjustments to Consolidated Statements of Income for the quarter ended March 31, 2016

           

(In millions of dollars, except per share amounts)

Previously reported
for the quarter ended
March 31, 2016

 

Adjustments

 

Amended for the quarter ended
March 31, 2016

       

Income tax expense

61

 

18

 

79

Net income

248

 

(18)

 

230

       

Earnings per share

         
 

Basic                                       

$0.48

 

($0.03)

 

$0.45

 

Diluted

$0.48

 

($0.04)

 

$0.44

 

Adjustments to the Consolidated Statements of Financial Position as at January 1, 2015

       

(In millions of dollars)

Previously reported as at
January 1, 2015

 

Adjustments

 

Amended as at
January 1, 2015

       

Goodwill 1

3,883

 

14

 

3,897

Total assets 1

26,522

 

14

 

26,536

       

Deferred tax liabilities

1,769

 

84

 

1,853

Shareholders' equity

5,481

 

(70)

 

5,411

Total liabilities and shareholders' equity

26,522

 

14

 

26,536

1 The adjustment relating to total assets and goodwill was recognized entirely within our Media reportable segment.

 

Adjustments to the Consolidated Statements of Financial Position as at December 31, 2015

               

(In millions of dollars)

Previously reported as at
December 31, 2015

 

Adjustments as at
January 1, 2015

 

Adjustments
for the year ended
 December 31, 2015

 

Amended as at 
December 31, 2015

         

Goodwill 1

3,891

 

14

 

 

3,905

Total assets 1

29,175

 

14

 

 

29,189

         

Deferred tax liabilities

1,943

 

84

 

39

 

2,066

Shareholders' equity

5,745

 

(70)

 

(39)

 

5,636

Total liabilities and shareholders' equity

29,175

 

14

 

 

29,189

1 The adjustment relating to total assets and goodwill was recognized entirely within our Media reportable segment.

 

Key Performance Indicators

We measure the success of our strategy using a number of key performance indicators that are defined and discussed in our 2015 Annual MD&A and this earnings release. We believe these key performance indicators allow us to appropriately measure our performance against our operating strategy as well as against the results of our peers and competitors. The following key performance indicators are not measurements in accordance with IFRS and should not be considered an alternative to net income or any other measure of performance under IFRS. They include:

 

Total service revenue
Commencing in the fourth quarter of 2016, we began disclosing total service revenue as one of our key performance indicators. We use total service revenue to measure our core business performance from the provision of services to our customers separate from revenue from the sale of equipment we have acquired from device manufacturers and resold. Included in this metric is our retail revenue from TSC and the Toronto Blue Jays, which are also core to our business. We calculate total service revenue by subtracting equipment revenue in Wireless, Cable, Business Solutions, and Corporate from total revenue.

       
 

Three months ended December 31

 

Twelve months ended December 31

(In millions of dollars)

2016

 

2015

 

2016

 

2015

         

Total revenue

3,510

 

3,452

 

13,702

 

13,414

Deduct:

             
 

Wireless equipment revenue

200

 

234

 

658

 

749

 

Cable equipment revenue

1

 

2

 

6

 

8

 

Business Solutions equipment revenue

2

 

1

 

6

 

4

 

Corporate equipment revenue

1

 

1

 

5

 

4

         

Total service revenue

3,306

 

3,214

 

13,027

 

12,649

 

Non-GAAP Measures

We use the following non-GAAP measures. These are reviewed regularly by management and our Board in assessing our performance and making decisions regarding the ongoing operations of our business and its ability to generate cash flows. Some or all of these measures may also be used by investors, lending institutions, and credit rating agencies as indicators of our operating performance, of our ability to incur and service debt, and as measurements to value companies in the telecommunications sector. These are not recognized measures under GAAP and do not have standard meanings under IFRS, so may not be reliable ways to compare us to other companies.

       


Non-GAAP measure


Why we use it


How we calculate it

Most
comparable IFRS financial
measure

Adjusted

operating profit

 

 

Adjusted

operating profit

margin

To evaluate the performance of our businesses,
and when making decisions about the ongoing
operations of the business and our ability to
generate cash flows.

Adjusted operating profit:

Net income

add (deduct)

income tax expense (recovery), other expense
(income), finance costs, restructuring, acquisition
and other, depreciation and amortization,
stock-based compensation, and impairment of
assets and related onerous contract charges.

 

Adjusted operating profit margin:

Adjusted operating profit

divided by

revenue (service revenue for Wireless).

Net income

We believe that certain investors and analysts
use adjusted operating profit to measure our
ability to service debt and to meet other
payment obligations.

We also use it as one component in determining
short-term incentive compensation for all
management employees.

Adjusted net

income

 

Adjusted basic

and diluted

earnings per

share

To assess the performance of our businesses
before the effects of the noted items, because
they affect the comparability of our financial
results and could potentially distort the analysis
of trends in business performance. Excluding
these items does not imply that they are
non-recurring.

Adjusted net income:

Net income

add (deduct)

stock-based compensation, restructuring,
acquisition and other, impairment of assets
and related onerous contract charges, loss (gain)
on sale or wind down of investments, (gain) on
acquisitions, loss on non-controlling interest
purchase obligations, loss on repayment of
long-term debt, and income tax adjustments
on these items, including adjustments as a
result of legislative changes.

 

Adjusted basic and diluted earnings per share:

Adjusted net income

divided by

basic and diluted weighted average shares
outstanding.

Net income

 

Basic and

diluted

earnings per

share

Free cash flow

To show how much cash we have available to
repay debt and reinvest in our company, which is
an important indicator of our financial strength
and performance.

Adjusted operating profit

deduct

additions to property, plant and equipment net
of proceeds on disposition, interest on
borrowings net of capitalized interest, and
cash income taxes.

Cash provided

by operating

activities

We believe that some investors and analysts
use free cash flow to value a business and its
underlying assets.

Adjusted net

debt

To conduct valuation-related analysis and make
decisions about capital structure.

Total long-term debt

add (deduct)

current portion of long-term debt, deferred
transaction costs and discounts, net debt
derivative (assets) liabilities, credit risk
adjustment related to net debt derivatives,
bank advances (cash and cash equivalents),
and short-term borrowings.

Long-term debt

We believe this helps investors and analysts
analyze our enterprise and equity value and
assess our leverage.

Adjusted net

debt / adjusted

operating profit

To conduct valuation-related analysis and make
decisions about capital structure.

Adjusted net debt (defined above)

divided by

12-month trailing adjusted operating profit
(defined above).

Long-term debt

divided by net

income

We believe this helps investors and analysts
analyze our enterprise and equity value and
assess our leverage.

 

Reconciliation of adjusted operating profit

       
 

Three months ended December 31

 

Twelve months ended December 31

(In millions of dollars)

2016

 

2015

 

2016

 

2015

         

Net (loss) income 1

(9)

 

299

 

835

 

1,342

Add (deduct):

             
 

Income tax (recovery) expense 1

(5)

 

112

 

324

 

477

 

Other (income) expense 1

(4)

 

4

 

191

 

(4)

 

Finance costs

188

 

192

 

761

 

774

 

Restructuring, acquisition and other

34

 

23

 

160

 

111

 

Depreciation and amortization

555

 

580

 

2,276

 

2,277

 

Impairment of assets and related onerous contract charges

484

 

 

484

 

 

Stock-based compensation

16

 

16

 

61

 

55

         

Adjusted operating profit

1,259

 

1,226

 

5,092

 

5,032

As a result of the IFRS Interpretations Committee's agenda decision relating to IAS 12 Income Taxes, certain amounts have been retrospectively amended. See "Accounting Changes" for more information.

 

Reconciliation of adjusted operating profit margin

         
   

Three months ended December 31

 

Twelve months ended December 31

(In millions of dollars, except percentages)

 

2016

 

2015

   

2016

 

2015

 
             

Adjusted operating profit margin:

                   
 

Adjusted operating profit

 

1,259

 

1,226

   

5,092

 

5,032

 
 

Divided by: total revenue

 

3,510

 

3,452

   

13,702

 

13,414

 
             

Adjusted operating profit margin

 

35.9

%

35.5

%

 

37.2

%

37.5

%

 

Reconciliation of adjusted net income

       
 

Three months ended December 31

 

Twelve months ended December 31

(In millions of dollars)

2016

 

2015

 

2016

 

2015

           

Net (loss) income 1

(9)

 

299

 

835

 

1,342

Add (deduct):

             
 

Stock-based compensation

16

 

16

 

61

 

55

 

Restructuring, acquisition and other

34

 

23

 

160

 

111

 

Loss on repayment of long-term debt

 

 

 

7

 

Net loss on divestitures pertaining to investments

 

 

11

 

 

Gain on acquisition of Mobilicity 1

 

 

 

(74)

 

Loss on non-controlling interest purchase obligation

 

 

 

72

 

Loss on wind down of shomi

 

 

140

 

 

Impairment of assets and related onerous contract charges

484

 

 

484

 

 

Income tax impact of above items

(143)

 

(7)

 

(213)

 

(40)

 

Income tax adjustment, legislative tax change

 

 

3

 

6

         

Adjusted net income 1

382

 

331

 

1,481

 

1,479

As a result of the IFRS Interpretations Committee's agenda decision relating to IAS 12 Income Taxes, certain amounts have been retrospectively amended. See "Accounting Changes" for more information.

 

Reconciliation of adjusted earnings per share

       

(In millions of dollars, except per share amounts; number
of shares outstanding in millions)

Three months ended December 31

 

Twelve months ended December 31

2016

 

2015

 

2016

 

2015

               

Adjusted basic earnings per share:

             
 

Adjusted net income 1

382

 

331

 

1,481

 

1,479

 

Divided by:

             
   

Weighted average number of shares outstanding

515

 

515

 

515

 

515

               

Adjusted basic earnings per share

$0.74

 

$0.64

 

$2.88

 

$2.87

               

Adjusted diluted earnings per share:

           
 

Adjusted net income 1

382

 

331

 

1,481

 

1,479

 

Divided by:

             
   

Diluted weighted average number of shares outstanding

517

 

517

 

517

 

517

               

Adjusted diluted earnings per share 1

$0.74

 

$0.64

 

$2.86

 

$2.86

As a result of the IFRS Interpretations Committee's agenda decision relating to IAS 12 Income Taxes, certain amounts have been retrospectively amended. See "Accounting Changes" for more information.

 

Reconciliation of free cash flow

       
 

Three months ended December 31

 

Twelve months ended December 31

(In millions of dollars)

2016

 

2015

 

2016

 

2015

         

Cash provided by operating activities

1,053

 

950

 

3,957

 

3,747

Add (deduct):

             
 

Additions to property, plant and equipment

(604)

 

(773)

 

(2,352)

 

(2,440)

 

Interest on borrowings, net of capitalized interest

(182)

 

(185)

 

(740)

 

(732)

 

Restructuring, acquisition and other

34

 

23

 

160

 

111

 

Interest paid

124

 

133

 

756

 

771

 

Change in non-cash working capital

18

 

187

 

(14)

 

302

 

Other adjustments

(51)

 

(61)

 

(62)

 

(83)

         

Free cash flow

392

 

274

 

1,705

 

1,676

 

Reconciliation of adjusted net debt and adjusted net debt / adjusted operating profit

         
   

As at
December 31

 

As at

December 31

(In millions of dollars)

 

2016

 

2015

       

Current portion of long-term debt

 

750

 

1,000

Long-term debt

 

15,330

 

15,870

Deferred transaction costs and discounts

 

117

 

111

   

16,197

 

16,981

Add (deduct):

       
 

Net debt derivative assets

 

(1,683)

 

(2,028)

 

Credit risk adjustment related to net debt derivative assets

 

(57)

 

(152)

 

Short-term borrowings

 

800

 

800

 

Bank advances (cash and cash equivalents)

 

71

 

(11)

       

Adjusted net debt

 

15,328

 

15,590

         
   

As at
December 31

 

As at

December 31

(In millions of dollars, except ratios)

 

2016

 

2015

       

Adjusted net debt / adjusted operating profit

       
 

Adjusted net debt

 

15,328

 

15,590

 

Divided by: trailing 12-month adjusted operating profit

 

5,092

 

5,032

       

Adjusted net debt / adjusted operating profit

 

3.0

 

3.1

 

Other Information

Consolidated financial results - quarterly summary

The table below shows our consolidated results for the past eight quarters.

         
 

2016

 

2015

(In millions of dollars, except per share amounts)

Full Year

 

Q4

 

Q3

 

Q2

 

Q1

 

Full Year

 

Q4

 

Q3

 

Q2

 

Q1

Revenue

                                     
 

Wireless

7,916

 

2,058

 

2,037

 

1,931

 

1,890

 

7,651

 

1,981

 

1,973

 

1,903

 

1,794

 

Cable

3,449

 

858

 

865

 

870

 

856

 

3,465

 

855

 

871

 

869

 

870

 

Business Solutions

384

 

96

 

95

 

97

 

96

 

377

 

95

 

94

 

94

 

94

 

Media

2,146

 

550

 

533

 

615

 

448

 

2,079

 

560

 

473

 

582

 

464

 

Corporate items and intercompany eliminations

(193)

 

(52)

 

(38)

 

(58)

 

(45)

 

(158)

 

(39)

 

(27)

 

(45)

 

(47)

Total revenue

13,702

 

3,510

 

3,492

 

3,455

 

3,245

 

13,414

 

3,452

 

3,384

 

3,403

 

3,175

                     

Adjusted operating profit (loss)

                                     
 

Wireless

3,285

 

792

 

884

 

846

 

763

 

3,239

 

754

 

879

 

841

 

765

 

Cable

1,674

 

435

 

431

 

415

 

393

 

1,658

 

426

 

416

 

414

 

402

 

Business Solutions

123

 

30

 

31

 

31

 

31

 

116

 

30

 

31

 

27

 

28

 

Media

169

 

49

 

79

 

90

 

(49)

 

172

 

56

 

58

 

90

 

(32)

 

Corporate items and intercompany eliminations

(159)

 

(47)

 

(40)

 

(35)

 

(37)

 

(153)

 

(40)

 

(39)

 

(35)

 

(39)

Adjusted operating profit 1

5,092

 

1,259

 

1,385

 

1,347

 

1,101

 

5,032

 

1,226

 

1,345

 

1,337

 

1,124

Deduct (add):

                                     
 

Stock-based compensation

61

 

16

 

18

 

15

 

12

 

55

 

16

 

13

 

14

 

12

 

Depreciation and amortization

2,276

 

555

 

575

 

572

 

574

 

2,277

 

580

 

576

 

562

 

559

 

Impairment of assets and related onerous contract charges

484

 

484

 

 

 

 

 

 

 

 

 

Restructuring, acquisition and other

160

 

34

 

55

 

27

 

44

 

111

 

23

 

37

 

42

 

9

 

Finance costs

761

 

188

 

188

 

189

 

196

 

774

 

192

 

190

 

182

 

210

 

Other expense (income) 2

191

 

(4)

 

220

 

9

 

(34)

 

(4)

 

4

 

(31)

 

26

 

(3)

Net income (loss) before income tax expense (recovery) 2

1,159

 

(14)

 

329

 

535

 

309

 

1,819

 

411

 

560

 

511

 

337

 

Income tax expense (recovery) 2

324

 

(5)

 

109

 

141

 

79

 

477

 

112

 

135

 

148

 

82

Net income (loss) 2

835

 

(9)

 

220

 

394

 

230

 

1,342

 

299

 

425

 

363

 

255

                     

Earnings (loss) per share 2:

                                     
 

Basic

$1.62

 

($0.02)

 

$0.43

 

$0.77

 

$0.45

 

$2.61

 

$0.58

 

$0.83

 

$0.70

 

$0.50

 

Diluted

$1.62

 

($0.04)

 

$0.43

 

$0.76

 

$0.44

 

$2.60

 

$0.58

 

$0.82

 

$0.70

 

$0.48

                     

Net income (loss) 2

835

 

(9)

 

220

 

394

 

230

 

1,342

 

299

 

425

 

363

 

255

Add (deduct):

                                     
 

Stock-based compensation

61

 

16

 

18

 

15

 

12

 

55

 

16

 

13

 

14

 

12

 

Restructuring, acquisition and other

160

 

34

 

55

 

27

 

44

 

111

 

23

 

37

 

42

 

9

 

Gain on acquisition of Mobilicity 2

 

 

 

 

 

(74)

 

 

(74)

 

 

 

Loss on non-controlling interest purchase obligation

 

 

 

 

 

72

 

 

72

 

 

 

Loss on repayment of long-term debt

 

 

 

 

 

7

 

 

 

 

7

 

Loss on wind down of shomi

140

 

 

140

 

 

 

 

 

 

 

 

Net loss (gain) on divestitures pertaining to investments

11

 

 

50

 

 

(39)

 

 

 

 

 

 

Impairment of assets and related onerous contract charges

484

 

484

 

 

 

 

 

 

 

 

 

Income tax impact of above items 2

(213)

 

(143)

 

(56)

 

(9)

 

(5)

 

(40)

 

(7)

 

(12)

 

(13)

 

(8)

 

Income tax adjustment, legislative tax change

3

 

 

 

 

3

 

6

 

 

 

6

 

Adjusted net income 1,2

1,481

 

382

 

427

 

427

 

245

 

1,479

 

331

 

461

 

412

 

275

                     

Adjusted earnings per share 1,2:

                                     
 

Basic

$2.88

 

$0.74

 

$0.83

 

$0.83

 

$0.48

 

$2.87

 

$0.64

 

$0.90

 

$0.80

 

$0.53

 

Diluted

$2.86

 

$0.74

 

$0.83

 

$0.83

 

$0.47

 

$2.86

 

$0.64

 

$0.89

 

$0.80

 

$0.53

                     

Additions to property, plant and equipment

2,352

 

604

 

549

 

647

 

552

 

2,440

 

773

 

571

 

621

 

475

Cash provided by operating activities

3,957

 

1,053

 

1,185

 

1,121

 

598

 

3,747

 

950

 

1,456

 

1,114

 

227

Free cash flow 1

1,705

 

392

 

598

 

495

 

220

 

1,676

 

274

 

660

 

476

 

266

Total service revenue 3

13,027

 

3,306

 

3,328

 

3,308

 

3,085

 

12,649

 

3,214

 

3,183

 

3,204

 

3,048

Adjusted operating profit, adjusted net income, adjusted basic and diluted earnings per share, and free cash flow are non-GAAP measures and should not be considered substitutes or alternatives for GAAP measures. These are not defined terms under IFRS and do not have standard meanings, so may not be a reliable way to compare us to other companies. See "Non-GAAP Measures" for information about these measures, including how we calculate them.

As a result of the IFRS Interpretations Committee's agenda decision relating to IAS 12 Income Taxes, certain amounts have been retrospectively amended. See "Accounting Changes" for more information.

As defined. See "Key Performance Indicators".

 

Supplementary Information

Rogers Communications Inc.
Interim Condensed Consolidated Statements of Income
(In millions of Canadian dollars, except per share amounts, unaudited)

         
   

Three months ended
December 31

 

Twelve months ended
December 31

   

2016

 

2015

 

2016

 

2015

           

Revenue

 

3,510

 

3,452

 

13,702

 

13,414

           

Operating expenses:

               
 

Operating costs

 

2,267

 

2,242

 

8,671

 

8,437

 

Depreciation and amortization

 

555

 

580

 

2,276

 

2,277

 

Impairment of assets and related
onerous contract charges

 

484

 

 

484

 

 

Restructuring, acquisition and other

 

34

 

23

 

160

 

111

Finance costs

 

188

 

192

 

761

 

774

Other (income) expense 1

 

(4)

 

4

 

191

 

(4)

           

(Loss) income before income tax (recovery) expense 1

 

(14)

 

411

 

1,159

 

1,819

Income tax (recovery) expense 1

 

(5)

 

112

 

324

 

477

           

Net (loss) income 1

 

(9)

 

299

 

835

 

1,342

           

(Loss) earnings per share 1:

               
 

Basic

 

($0.02)

 

$0.58

 

$1.62

 

$2.61

 

Diluted

 

($0.04)

 

$0.58

 

$1.62

 

$2.60

As a result of the IFRS Interpretations Committee's agenda decision relating to IAS 12 Income Taxes, certain amounts have been retrospectively amended. See "Accounting Changes" for more information.

 

Rogers Communications Inc.
Interim Condensed Consolidated Statements of Financial Position
(In millions of Canadian dollars, unaudited)

             
       

As at
December 31

 

As at
December 31

       

2016

 

2015

           

Assets

         

Current assets:

           
 

Cash and cash equivalents

     

 

11

 

Accounts receivable

     

1,949

 

1,792

 

Inventories

     

315

 

318

 

Other current assets

     

215

 

303

 

Current portion of derivative instruments

     

91

 

198

Total current assets

     

2,570

 

2,622

           

Property, plant and equipment

     

10,749

 

10,997

Intangible assets

     

7,130

 

7,243

Investments

     

2,174

 

2,271

Derivative instruments

     

1,708

 

1,992

Other long-term assets

     

98

 

150

Deferred tax assets

     

8

 

9

Goodwill 1

     

3,905

 

3,905

           

Total assets 1

     

28,342

 

29,189

           

Liabilities and shareholders' equity

         

Current liabilities:

           
 

Bank advances

     

71

 

 

Short-term borrowings

     

800

 

800

 

Accounts payable and accrued liabilities

     

2,783

 

2,708

 

Income tax payable

     

186

 

96

 

Current portion of provisions

     

134

 

10

 

Unearned revenue

     

367

 

388

 

Current portion of long-term debt

     

750

 

1,000

 

Current portion of derivative instruments

     

22

 

15

Total current liabilities

     

5,113

 

5,017

           

Provisions

     

33

 

50

Long-term debt

     

15,330

 

15,870

Derivative instruments

     

118

 

95

Other long-term liabilities

     

562

 

455

Deferred tax liabilities 1

     

1,917

 

2,066

Total liabilities 1

     

23,073

 

23,553

           

Shareholders' equity 1

     

5,269

 

5,636

           

Total liabilities and shareholders' equity 1

     

28,342

 

29,189

As a result of the IFRS Interpretations Committee's agenda decision relating to IAS 12 Income Taxes, certain amounts have been retrospectively amended. See "Accounting Changes" for more information.

 

 

Rogers Communications Inc.
Interim Condensed Consolidated Statements of Cash Flows
(In millions of Canadian dollars, unaudited)

       
 

Three months ended December 31

 

Twelve months ended December 31

 

2016

 

2015

 

2016

 

2015

Operating activities:

             
 

Net (loss) income for the period 1

(9)

 

299

 

835

 

1,342

 

Adjustments to reconcile net (loss) income to cash provided by
operating activities:

             
   

Depreciation and amortization

555

 

580

 

2,276

 

2,277

   

Program rights amortization

17

 

21

 

71

 

87

   

Finance costs

188

 

192

 

761

 

774

   

Income tax (recovery) expense 1

(5)

 

112

 

324

 

477

   

Stock-based compensation

16

 

16

 

61

 

55

   

Post-employment benefits contributions, net of expense

28

 

31

 

(3)

 

(16)

   

Net loss on divestitures pertaining to investments

 

 

11

 

   

Loss on wind down of shomi

 

 

140

 

   

Impairment of assets and related onerous contract charges

484

 

 

484

 

   

Gain on acquisition of Mobilicity 1

 

 

 

(74)

   

Other

2

 

13

 

34

 

82

 

Cash provided by operating activities before changes in non-cash
working capital items, income taxes paid, and interest paid

1,276

 

1,264

 

4,994

 

5,004

 

Change in non-cash operating working capital items

(18)

 

(187)

 

14

 

(302)

 

Cash provided by operating activities before income taxes paid
and interest paid

1,258

 

1,077

 

5,008

 

4,702

 

Income taxes (paid) received

(81)

 

6

 

(295)

 

(184)

 

Interest paid

(124)

 

(133)

 

(756)

 

(771)

           

Cash provided by operating activities

1,053

 

950

 

3,957

 

3,747

           

Investing activities:

             
 

Additions to property, plant and equipment

(604)

 

(773)

 

(2,352)

 

(2,440)

 

Additions to program rights

(3)

 

(27)

 

(46)

 

(64)

 

Changes in non-cash working capital related to property, plant and
equipment and intangible assets

44

 

167

 

(103)

 

(116)

 

Acquisitions and other strategic transactions, net of cash acquired

 

(5)

 

 

(1,077)

 

Other

49

 

(32)

 

45

 

(70)

           

Cash used in investing activities

(514)

 

(670)

 

(2,456)

 

(3,767)

           

Financing activities:

             
 

Net repayment on short-term borrowings

(250)

 

(59)

 

 

(42)

 

Net (repayment) issuance of long-term debt

(57)

 

82

 

(538)

 

754

 

Net (payment) proceeds on settlement of debt derivatives and
forward contracts

(28)

 

(25)

 

(45)

 

129

 

Transaction costs incurred

(17)

 

(9)

 

(17)

 

(9)

 

Dividends paid

(247)

 

(247)

 

(988)

 

(977)

 

Other

 

 

5

 

           

Cash used in financing activities

(599)

 

(258)

 

(1,583)

 

(145)

           

Change in cash and cash equivalents

(60)

 

22

 

(82)

 

(165)

(Bank advances) cash and cash equivalents, beginning of period

(11)

 

(11)

 

11

 

176

           

(Bank advances) cash and cash equivalents, end of period

(71)

 

11

 

(71)

 

11

As a result of the IFRS Interpretations Committee's agenda decision relating to IAS 12 Income Taxes, certain amounts have been retrospectively amended. See "Accounting Changes" for more information.

 

Investments

             
       

As at
December 31

 

As at

December 31

(In millions of dollars)

     

2016

 

2015

           

Investments in:

           
 

Publicly traded companies

     

1,047

 

966

 

Private companies

     

169

 

212

Investments, available-for-sale

     

1,216

 

1,178

Investments, associates and joint ventures

     

958

 

1,093

           

Total investments

     

2,174

 

2,271

 

Long-Term Debt

               
     

Principal

amount

 

Interest

rate

As at
December 31

As at
December 31

(In millions of dollars, except interest rates)

Due date

 

2016

2015

             

Bank credit facilities

     

Floating

100

500

Bank credit facilities

 

US

150

 

Floating

201

Senior notes

2016

 

1,000

 

5.800

%

1,000

Senior notes

2017

 

500

 

3.000

%

500

500

Senior notes

2017

 

250

 

Floating

250

250

Senior notes

2018

US

1,400

 

6.800

%

1,880

1,938

Senior notes

2019

 

400

 

2.800

%

400

400

Senior notes

2019

 

500

 

5.380

%

500

500

Senior notes

2020

 

900

 

4.700

%

900

900

Senior notes

2021

 

1,450

 

5.340

%

1,450

1,450

Senior notes

2022

 

600

 

4.000

%

600

600

Senior notes

2023

US

500

 

3.000

%

671

692

Senior notes

2023

US

850

 

4.100

%

1,141

1,176

Senior notes

2024

 

600

 

4.000

%

600

600

Senior notes

2025

US

700

 

3.625

%

940

969

Senior notes

2026

US

500

 

2.900

%

671

Senior debentures 1

2032

US

200

 

8.750

%

269

277

Senior notes

2038

US

350

 

7.500

%

470

484

Senior notes

2039

 

500

 

6.680

%

500

500

Senior notes

2040

 

800

 

6.110

%

800

800

Senior notes

2041

 

400

 

6.560

%

400

400

Senior notes

2043

US

500

 

4.500

%

671

692

Senior notes

2043

US

650

 

5.450

%

873

900

Senior notes

2044

US

1,050

 

5.000

%

1,410

1,453

         

16,197

16,981

Deferred transaction costs and discounts

       

(117)

(111)

Less current portion

       

(750)

(1,000)

             

Total long-term debt

       

15,330

15,870

Senior debentures originally issued by Rogers Cable Inc. which are unsecured obligations of RCI and for which RCCI was an unsecured guarantor as at December 31, 2016 and for which Rogers Communications Partnership was an unsecured guarantor as at December 31, 2015.

 

About Forward-Looking Information

This earnings release includes "forward-looking information" and "forward-looking statements" within the meaning of applicable securities laws (collectively, "forward-looking information"), and assumptions about, among other things, our business, operations, and financial performance and condition approved by our management on the date of this earnings release. This forward-looking information and these assumptions include, but are not limited to, statements about our objectives and strategies to achieve those objectives, and about our beliefs, plans, expectations, anticipations, estimates, or intentions.

Forward-looking information

 

Our forward-looking information includes forecasts and projections related to the following items, some of which are non-GAAP measures (see "Non-GAAP Measures"), among others:

 

Specific forward-looking information included or incorporated in this document include, but is not limited to, our information and statements under "2017 Outlook" relating to our 2017 consolidated guidance on revenue, adjusted operating profit, additions to property, plant and equipment, and free cash flow. All other statements that are not historical facts are forward-looking statements.

We base our conclusions, forecasts, and projections on the following factors, among others:

 

Except as otherwise indicated, this earnings release and our forward-looking information do not reflect the potential impact of any non-recurring or other special items or of any dispositions, monetizations, mergers, acquisitions, other business combinations, or other transactions that may be considered or announced or may occur after the date on which the statement containing the forward-looking information is made.

Risks and uncertainties
Actual events and results can be substantially different from what is expressed or implied by forward-looking information as a result of risks, uncertainties, and other factors, many of which are beyond our control, including, but not limited to:

 

These factors can also affect our objectives, strategies, and intentions. Many of these factors are beyond our control or our current expectations or knowledge. Should one or more of these risks, uncertainties, or other factors materialize, our objectives, strategies, or intentions change, or any other factors or assumptions underlying the forward-looking information prove incorrect, our actual results and our plans could vary significantly from what we currently foresee.

Accordingly, we warn investors to exercise caution when considering statements containing forward-looking information and caution them that it would be unreasonable to rely on such statements as creating legal rights regarding our future results or plans. We are under no obligation (and we expressly disclaim any such obligation) to update or alter any statements containing forward-looking information or the factors or assumptions underlying them, whether as a result of new information, future events, or otherwise, except as required by law. All of the forward-looking information in this earnings release is qualified by the cautionary statements herein.

Key assumptions underlying our 2017 guidance
Our 2017 guidance ranges under "2017 Outlook" are based on many assumptions including, but not limited to, the following material assumptions:

 

Before making an investment decision
Before making any investment decisions and for a detailed discussion of the risks, uncertainties, and environment associated with our business, fully review the sections in our 2015 Annual MD&A entitled "Regulation in Our Industry" and "Governance and Risk Management", as well as our various other filings with Canadian and US securities regulators, which can be found at sedar.com and sec.gov, respectively. Information on or connected to our website is not part of or incorporated into this earnings release.

SOURCE Rogers Communications Canada Inc. - English

 

To view this news release in HTML formatting, please use the following URL: http://www.newswire.ca/en/releases/archive/January2017/26/c8309.html

For further information: Investment community contact, Amy Schwalm, 416.704.9057, amy.schwalm@rci.rogers.com; Media contact, Terrie Tweddle, 416.935.4727, terrie.tweddle@rci.rogers.com


print email rss