Rogers Communications Reports First Quarter 2016 Results

  • Rogers 3.0 plan delivers solid financial and operating metrics for the first quarter 2016
    • Continued operating revenue growth of 2% driven by growth of 5% in Wireless
    • Wireless postpaid net additions of 14,000, an improvement of 40,000 year on year
    • Improved Wireless postpaid churn for the second quarter in a row; a 7 basis point improvement year on year
    • ARPA up 4% with strong growth in Share Everything plan adoption; now 38% of our postpaid base
    • Cable Internet net additions of 16,000, an improvement of 23,000 year on year; continued double digit Internet operating revenue growth, up 11%
  • Delivering on the "need for speed"; on track to roll out 1 Gig speeds to our entire footprint by the end of 2016, well ahead of our competitors
  • Customer complaints down 65% for the Rogers brand as most recently reported by the Commissioner for Complaints for Telecommunications Services (CCTS); the biggest improvement amongst our key competitors

TORONTO, April 18, 2016 /CNW/ - Rogers Communications Inc., a leading diversified Canadian communications and media company, today announced its unaudited financial and operating results for the first quarter ended March 31, 2016.

Consolidated Financial Highlights





Three months ended March 31

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

2016

2015




Operating revenue

3,245

3,175

As adjusted 1:




Operating profit

1,101

1,124


Net income

263

275


Basic earnings per share

$ 0.51

$ 0.53




Net income

248

255

Basic earnings per share

$ 0.48

$ 0.50




Free cash flow 1

220

266

Cash provided by operating activities

598

227



1

Adjusted amounts and free cash flow are non-GAAP measures and should not be considered as a

substitute or alternative 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.



"We posted our best first-quarter Wireless postpaid churn in over five years thanks to the quality of our networks, the value of our offerings, and our improvements to the customer experience," said Guy Laurence, President and Chief Executive Officer. "Overall, we delivered another quarter of revenue growth, along with continued improvements in key subscriber metrics, despite an intensely competitive quarter. With momentum in Wireless, continued growth in Internet, and a clear path forward for our TV and media businesses, we're well positioned to achieve our 2016 financial guidance."

Key Financial Highlights

Higher operating revenue
Consolidated revenue increased 2% this quarter, reflecting revenue growth of 5% in Wireless and 2% in Business Solutions, and decreases of 2% in Cable and 3% in Media. Wireless revenue increased as a result of higher network revenue from a higher subscriber base and the continued adoption of higher-postpaid-ARPA-generating Rogers Share Everything plans and increased device revenue. Cable revenue decreased due to the continued decline in Television and Phone revenue, partially offset by continued Internet revenue growth. Media revenue decreased primarily due to continued softness in conventional broadcast television, radio, and print advertising, partially offset by growth in sports-related revenue.

Lower adjusted operating profit
Lower consolidated adjusted operating profit this quarter largely reflects an increase in Media adjusted operating loss, as our traditional media businesses are facing pressures from the changing advertising landscape. We announced some job cuts this quarter affecting conventional TV, radio, publishing, and some back-office positions in order to help address these pressures.

Lower net income and adjusted net income
Adjusted net income decreased this quarter primarily as a result of higher depreciation and amortization and lower adjusted operating profit, partially offset by lower income taxes. Net income this quarter was also impacted by higher restructuring costs.

Substantial free cash flow affords financial flexibility
In the first quarter, we continued to generate substantial cash flow from operating activities and free cash flow of $598 million and $220 million, respectively. Lower free cash flow relates to the timing of network investments and cash tax payments. We are on track to deliver on our guidance targets for additions to property, plant and equipment and free cash flow for 2016.

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

Rogers 3.0

Our Rogers 3.0 plan is a multi-year plan intended to:

  • re-accelerate revenue growth in a sustainable way; and
  • continue our track record of translating revenue into strong margins and free cash flow, a solid return on assets, and ultimately increasing returns to shareholders.

There are a number of opportunities we expect will help drive improved performance, including:

  • further improving the customer experience;
  • maintaining leadership and momentum in Wireless;
  • strengthening our Cable offerings; and
  • driving growth in the business market.

Improving the Customer Experience
Rogers again showed the biggest improvement amongst our key competitors in reducing the number of customer complaints, as reported by the CCTS in its 2015-16 mid-year report for the six-month period ended January 31, 2016. Complaints pertaining to the Rogers brand dropped dramatically by 65% and customer complaints overall decreased 54%.

Roaming-related complaints from Rogers customers to the CCTS are expected to decrease by 90% this year from the 2012-13 results. Rogers changed how customers roam by introducing Roam Like Home in late 2014, a service that lets them use their monthly plan to access the Internet, make calls, and send texts and emails when they travel, just as they would at home.

We believe our improvements to the customer experience are a key driver in lowering Wireless postpaid churn. This quarter, we reported postpaid churn of 1.17%, a year on year improvement of 7 basis points and our lowest churn in the past seven quarters, as well as our best first quarter result since 2010. Despite heightened competitive activity, and the impact of the "double cohort", we have posted two consecutive quarters of improved churn.

Maintaining Leadership and Momentum in Wireless
Our compelling value propositions and content, improving customer experience, and best-in-class network have continued to attract and retain higher-value customers. We reported 14,000 Wireless net postpaid additions this quarter, an improvement of 40,000 year on year. Against a backdrop of continued competitive intensity, we spent more this quarter to get the high-value customers we want to help drive further improvements in churn and lifetime value.

We continue to expect lower overall additions to property, plant and equipment in 2016 following our acquisitions and deployment of premium spectrum in 2015. We also expect improvements from leveraging better supplier pricing, in part due to our unique strategic partnership with Vodafone Group Plc in Canada.

Strengthening Our Cable Offerings
IGNITE Internet
Our Cable product mix continues to shift to higher margin Internet services. We expect to deliver gigabit Internet speeds to our entire cable footprint of over four million homes by the end of 2016 at an incremental in-year capital cost of less than $50 per home. We will increase capacity as the demand for speed grows with further annual success-based capital investments, positioning us well to earn attractive returns on investment for our shareholders.

Television offerings
We believe consumer interest in 4K TV will continue to grow. By the end of 2016, we expect to deliver over 500 hours of 4K content, including over 100 live sporting events. We also continued to deliver upgrades on our legacy TV user interface this quarter, launched two new Sportsnet 4K companion channels, delivered the inaugural 4K broadcast of a Major League Baseball game with the Toronto Blue Jays home opener, and expect to launch an Internet Protocol Television (IPTV) product by the end of the year.

Driving Growth in the Business Market
We believe Rogers is currently under-indexed in this growing market. This quarter, we introduced Internet of Things as a Service. Our managed service will help customers take advantage of this transformative technology while keeping their focus on running their business. We will continue to roll out a series of "leapfrog" technologies, such as this one, to customers in the months ahead. It will take time to educate and penetrate the market on these new offerings, but we look forward to the contribution from this longer-term growth opportunity.

About non-GAAP measures
This earnings release contains non-GAAP measures such as adjusted operating profit, adjusted operating profit margin, adjusted net income, free cash flow, adjusted net debt, adjusted net debt / adjusted operating profit, and adjusted basic and diluted earnings per share. These are non-GAAP measures and should not be considered as a substitute or alternative for GAAP measures. These are not defined terms under International Financial Reporting Standards (IFRS), and do not have standard meanings, so may not be a reliable way to compare us to other companies. See "Non-GAAP Measures" in this earnings release for information about these measures, including how we calculate them.

About Rogers

Rogers Communications is a leading diversified public Canadian communications and media company. We are Canada's largest provider of wireless communications services and one of Canada's leading providers of cable television, high-speed Internet, and telephony services to consumers and businesses. Through Rogers Media, we are engaged in radio and television broadcasting, televised shopping, magazines and trade publications, sports entertainment, and digital media. Our stock is publicly traded on the Toronto Stock Exchange (TSX: RCI.A and RCI.B) and on the New York Stock Exchange (NYSE: RCI). For further information about the Rogers group of companies, please visit rogers.com.

Information on or connected to our website is not part of or incorporated into this earnings release.

Quarterly Investment Community Teleconference

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

  • April 18, 2016
  • 4:30 p.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 placed there generally 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.

This earnings release contains important information about our business and our performance for the three months ended March 31, 2016, as well as forward-looking information about future periods.

This earnings release should be read in conjunction with our First Quarter 2016 MD&A; our First Quarter 2016 Interim Condensed Consolidated Financial Statements and notes thereto, which have been prepared in accordance with International Accounting Standard 34, Interim Financial Reporting, as issued by the International Accounting Standards Board (IASB); our 2015 Annual MD&A; our 2015 Audited Consolidated Financial Statements and notes thereto, which have been prepared in accordance with IFRS as issued by the IASB; 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.

For more information about Rogers, including product and service offerings, competitive market and industry trends, and our overarching strategy, see "Understanding Our Business", "Our Strategy", and "Capability to Deliver Results" in our 2015 Annual MD&A. For our key performance drivers and objectives, see "Key Performance Drivers and Strategic Highlights" in our 2015 Annual MD&A and "Key Financial Highlights" and "Rogers 3.0" on pages 2 to 4 of our First Quarter 2016 earnings release.

All dollar amounts are in Canadian dollars unless otherwise stated. All percentage changes are calculated using the rounded numbers as they appear in the tables. This earnings release is current as at April 18, 2016 and was approved by the Audit and Risk Committee of our Board of Directors (the Board) on that date. 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. RCI also holds interests in various investments and ventures.

We are publicly traded on the Toronto Stock Exchange (TSX: RCI.A and RCI.B) and on the New York Stock Exchange (NYSE: RCI).

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

Summary of Consolidated Financial Results





Three months ended March 31

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

2016

2015

% Chg





Operating revenue





Wireless

1,890

1,794

5


Cable

856

870

(2)


Business Solutions

96

94

2


Media

448

464

(3)


Corporate items and intercompany eliminations

(45)

(47)

(4)

Operating revenue

3,245

3,175

2





Adjusted operating profit (loss)





Wireless

763

765

-


Cable

393

402

(2)


Business Solutions

31

28

11


Media

(49)

(32)

53


Corporate items and intercompany eliminations

(37)

(39)

(5)

Adjusted operating profit 1

1,101

1,124

(2)





Adjusted operating profit margin 1

33.9%

35.4%

(1.5 pts)





Net income

248

255

(3)

Basic earnings per share

$ 0.48

$ 0.50

(4)





Adjusted net income 1

263

275

(4)

Adjusted basic earnings per share 1

$ 0.51

$ 0.53

(4)





Additions to property, plant and equipment

552

475

16

Free cash flow 1

220

266

(17)

Cash provided by operating activities

598

227

163

Adjusted operating profit, adjusted operating profit margin, adjusted net income, adjusted basic

earnings per share, and free cash flow are non-GAAP measures and should not be considered

as a substitute or alternative 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.



Key Changes in Financial Results Compared to 2015

Operating revenue
Wireless network revenue increased this quarter as a result of a higher subscriber base and the continued adoption of higher-postpaid-ARPA-generating Rogers Share Everything plans.

Cable operating revenue decreased this quarter due to TV and Phone subscriber losses over the past year, partially offset by Internet subscriber growth, movement of Internet subscribers to higher speed and usage tiers, and the impact of pricing changes across most product types.

Business Solutions operating revenue increased this quarter as the growth in on-net next generation services, including our data centre businesses more than offset the continued planned reduction in lower-margin, off-net legacy revenue.

Media operating revenue decreased this quarter primarily as a result of lower advertising revenue in conventional broadcast television, publishing, and radio, partially offset by growth of sports-related revenue.

Adjusted operating profit
Wireless adjusted operating profit was stable this quarter as the network revenue growth described above was offset by higher costs associated with increased volumes of subsidized smartphones.

Cable adjusted operating profit decreased this quarter as a result of lower operating revenue as described above, partially offset by various cost efficiency and productivity initiatives.

Business Solutions adjusted operating profit increased this quarter as a result of higher operating revenue and lower service costs.

Media adjusted operating loss increased this quarter primarily as a result of lower revenue as described above.

Results of our Reporting Segments

WIRELESS


Wireless Financial Results





Three months ended March 31

(In millions of dollars, except margins)

2016 1

2015

% Chg





Operating revenue





Network revenue

1,734

1,672

4


Equipment sales

156

122

28

Operating revenue

1,890

1,794

5





Operating expenses





Cost of equipment

460

393

17


Other operating expenses

667

636

5

Operating expenses

1,127

1,029

10





Adjusted operating profit

763

765

-





Adjusted operating profit margin as a % of network revenue

44.0%

45.8%

(1.8 pts)

Additions to property, plant and equipment

181

180

1





1

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 March 31

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

2016

2015

Chg





Postpaid





Gross additions

304

277

27


Net additions (losses)

14

(26)

40


Total postpaid subscribers 2

8,285

8,139

146


Churn (monthly)

1.17%

1.24%

(0.07 pts)


ARPA (monthly)

$ 112.23

$ 107.47

$ 4.76

Prepaid





Gross additions

157

126

31


Net losses

(19)

(37)

18


Total prepaid subscribers 2,3

1,587

1,340

247


Churn (monthly)

3.65%

3.99%

(0.34 pts)

Blended ARPU (monthly)

$ 58.54

$ 58.75

($ 0.21)


1

Subscriber counts, subscriber churn, postpaid ARPA, and blended ARPU are key performance indicators.

See "Key Performance Indicators".

2

As at end of period.

3

On July 2, 2015, we acquired approximately 154,000 Wireless prepaid subscribers as a result of our

acquisition of Mobilicity.



Network revenue
The 4% increase in network revenue this quarter was a result of:

  • a larger postpaid and prepaid subscriber base, partly as a result of the acquisition of Mobilicity prepaid subscribers in the third quarter of 2015; and
  • the continued adoption of customer-friendly Rogers Share Everything plans, which generate higher postpaid ARPA, bundle in various calling features and long distance, provide the ability to pool data usage across multiple devices, and grant access to our other offerings, such as Roam Like Home, Rogers NHL GameCentre LIVE, Spotify, shomi, and Texture by Next Issue.

The 4% increase in postpaid ARPA this quarter was a 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 marginal decrease in blended ARPU this quarter was a result of:

  • the impact of expanding our lower-blended-ARPU-generating prepaid subscriber base relative to our total subscriber base as a result of our acquisition of Mobilicity and the general increase in prepaid net additions over the past year; partially offset by
  • increased network revenue as discussed above.

Excluding the impact of the addition of Mobilicity, blended ARPU would have increased by 1% this quarter.

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

Equipment sales
The 28% increase in revenue from equipment sales this quarter was a result of:

  • a greater number of device purchases, primarily as a result of our higher gross additions; and
  • increases in equipment sales prices; partially offset by
  • a 2% decrease in device upgrades by existing subscribers.

Operating expenses
The 17% increase in the cost of equipment this quarter was a result of:

  • a shift in the product mix of device sales and upgrades towards higher-cost smartphones; and
  • increased equipment sales volumes primarily from our higher gross additions; partially offset by
  • the decrease in device upgrades by existing subscribers, discussed above.

The 5% increase in other operating expenses this quarter was a result of:

  • higher service costs;
  • higher incremental costs as a result of our acquisition of Mobilicity; and
  • higher advertising costs; partially offset by
  • lower commissions resulting from improvements in our sales channels.

Adjusted operating profit
The stable adjusted operating profit this quarter was a result of the revenue and expenses changes discussed above.

CABLE

Cable Financial Results




Three months ended March 31

(In millions of dollars, except margins)

2016

2015

% Chg





Operating revenue





Internet

360

324

11


Television

395

426

(7)


Phone

99

118

(16)


Service revenue

854

868

(2)


Equipment sales

2

2

-

Operating revenue

856

870

(2)





Operating expenses





Cost of equipment

1

1

-


Other operating expenses

462

467

(1)

Operating expenses

463

468

(1)





Adjusted operating profit

393

402

(2)





Adjusted operating profit margin

45.9%

46.2%

(0.3 pts)

Additions to property, plant and equipment

246

224

10





Cable Subscriber Results 1




Three months ended March 31

(In thousands)

2016

2015

Chg





Internet





Net additions (losses)

16

(7)

23


Total Internet subscribers 2

2,064

2,004

60

Television





Net losses

(26)

(41)

15


Total Television subscribers2

1,870

1,983

(113)

Phone





Net losses

(10)

(20)

10


Total Phone subscribers 2

1,080

1,130

(50)





Homes passed 2

4,153

4,085

68

Total service units3





Net losses

(20)

(68)

48


Total service units 2

5,014

5,117

(103)






1

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

2

As at end of period.

3

Includes Internet, Television, and Phone subscribers.



Operating revenue
The 2% decrease in operating revenue this quarter was primarily a result of:

  • Television and Phone subscriber losses over the past year; partially offset by
  • the movement of Internet subscribers to higher speed and usage tiers;
  • a higher subscriber base for our Internet products; and
  • the impact of pricing changes implemented over the past year. 

Internet revenue
The 11% increase in Internet revenue this quarter was a result of:

  • general movement of customers to higher speed and usage tiers of our IGNITE broadband Internet offerings;
  • a larger Internet subscriber base; and
  • the impact of changes in Internet service pricing; partially offset by
  • a decline in additional usage-based revenue as portions of the subscriber base move to the higher-value, unlimited usage plans.

Television revenue
The 7% decrease in Television revenue this quarter was a result of:

  • the decline in Television subscribers over the past year primarily associated with the changing television consumption environment; and
  • more promotional pricing provided to subscribers; partially offset by
  • the impact of Television service pricing changes implemented over the past year.

Phone revenue
The 16% decrease in Phone revenue this quarter was a result of:

  • the impact of pricing packages, primarily related to IGNITE multi-product bundles; and
  • a smaller subscriber base.

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

  • relative shifts in product mix to higher-margin Internet from conventional Television broadcasting; and
  • various cost efficiency and productivity initiatives; partially offset by
  • increased advertising, which was partly related to our launch of 4K TV.

Adjusted operating profit
The 2% decrease 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 March 31

(In millions of dollars, except margins)

2016 1

2015

% Chg





Operating revenue





Next generation

75

70

7


Legacy

20

23

(13)


Service revenue

95

93

2


Equipment sales

1

1

-

Operating revenue

96

94

2





Operating expenses

65

66

(2)





Adjusted operating profit

31

28

11





Adjusted operating profit margin

32.3%

29.8%

2.5 pts

Additions to property, plant and equipment

38

33

15





1

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.



Operating revenue
The 2% increase in 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; partially offset by.
  • the continued decline in our legacy and off-net voice business, a trend we expect to continue as we focus the business on next generation on-net and near-net opportunities and customers move to more advanced and cost-effective IP-based services and solutions.

Next generation services, which include our data centre operations, represented 79% (2015 - 75%) of total service revenue in the quarter.

Operating expenses
The 2% decrease in operating expenses this quarter was a result of lower service costs.

Adjusted operating profit
The 11% increase in adjusted operating profit this quarter was a result of the revenue and expense changes discussed above.

MEDIA

Media Financial Results



Three months ended March 31

(In millions of dollars, except margins)

2016

2015

% Chg





Operating revenue

448

464

(3)

Operating expenses

497

496

-





Adjusted operating loss

(49)

(32)

53





Adjusted operating loss margin

(10.9%)

(6.9%)

(4.0 pts)

Additions to property, plant and equipment

18

9

100





Operating revenue
The 3% decrease in operating revenue this quarter was a result of:

  • lower advertising revenues across publishing, radio, and broadcast TV; partially offset by
  • higher sports-related revenue.

Operating expenses
The stable operating expenses this quarter were a result of:

  • higher sports-related costs; offset by
  • lower conventional broadcast TV programming costs;
  • lower publishing costs; and
  • the commencement of cost savings resulting from previously announced job cuts.

Adjusted operating loss
The 53% increase in adjusted operating loss this quarter was a result of the revenue and expense changes described above.

ADDITIONS TO PROPERTY, PLANT AND EQUIPMENT



Three months ended March 31

(In millions of dollars, except capital intensity)

2016

2015

% Chg


Additions to property, plant and equipment





Wireless

181

180

1


Cable

246

224

10


Business Solutions

38

33

15


Media

18

9

100


Corporate

69

29

138


Total additions to property, plant and equipment 1

552

475

16


Capital intensity 2

17.0%

15.0%

2.0 pts


1

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

2

Capital intensity is a key performance indicator. See "Key Performance Indicators".



Wireless
The marginal increase in additions to property, plant and equipment in Wireless this quarter was a result of higher network-related costs to increase the quality and capacity of our network. The deployment of our 700 MHz LTE network has reached 83% of Canada's population as at March 31, 2016 (December 31, 2015 - 78%). The 700 MHz LTE network offers improved signal quality in basements, elevators, and buildings with thick concrete walls. Our deployment of our overall LTE network has reached approximately 93% of Canada's population as at March 31, 2016.

Cable
The increase in additions to property, plant and equipment in Cable this quarter was a result of greater network investment in infrastructure to further improve the reliability and quality of our network and to improve the capacity of our Internet platform to deliver gigabit Internet speeds across our Cable footprint by the end of the year. We also continued our investment in the development of our next-generation IP-based video service and digital television guides. This was partially offset by lower customer premise equipment expenditures.

Business Solutions
The increase in additions to property, plant and equipment in Business Solutions this quarter was a result of continued investments in data centres, network expansion to reach additional customers and sites, and the development of new IP-based products.

Media
The increase in additions to property, plant and equipment in Media this quarter reflects greater current year investments made to our digital platforms and broadcast facilities.

Corporate
The increase in additions to property, plant and equipment in Corporate this quarter was a result of higher spending on premise improvements at our various offices as well as higher information technology costs.

Capital Intensity
Capital intensity increased this quarter as a result of higher additions to property, plant and equipment due to the timing of investments in our network as described above relative to the increase in operating revenue described previously.

Financial Guidance

There are no changes at this time to the consolidated guidance ranges for operating revenue, adjusted operating profit, free cash flow, or additions to property, plant and equipment, which were provided on January 27, 2016. See "About Forward-Looking Information" in this earnings release and in our 2015 Annual MD&A. Adjusted operating profit and free cash flow are non-GAAP measures and should not be considered a substitute or alternative for GAAP measures. They 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.

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 as an alternative to net income or any other measure of performance under IFRS. They include:

  • Subscriber counts;
  • Subscriber churn;
  • Postpaid average revenue per account (ARPA);
  • Blended average revenue per user (ARPU); and
  • Capital intensity.

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 a reliable way 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.
  • 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 operating profit:

Net income

add (deduct)

income taxes, other expense (income), finance costs, restructuring, acquisition and other, depreciation and amortization, stock-based compensation, and impairment of assets.

Adjusted operating profit margin:

Adjusted operating profit

divided by

Operating revenue (network revenue for Wireless)

Net income

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 they are non-recurring.

Adjusted net income:

Net income

add (deduct)

stock-based compensation, restructuring, acquisition and other, impairment of assets, (gain) on sale 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.
  • We believe that some investors and analysts use free cash flow to value a business and its underlying assets.

Adjusted operating profit

deduct

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

Cash provided by operating activities

Adjusted net debt

  • To conduct valuation-related analysis and make decisions about capital structure.
  • We believe this helps investors and analysts analyze our enterprise and equity value and assess our leverage.

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

Adjusted net debt / adjusted operating profit

  • To conduct valuation-related analysis and make decisions about capital structure.
  • We believe this helps investors and analysts analyze our enterprise and equity value and assess our leverage.

Adjusted net debt (defined above)

divided by

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

Long-term debt divided by net income

Reconciliation of adjusted operating profit



Three months ended March 31

(In millions of dollars)

2016

2015




Net income

248

255

Add (deduct):




Income taxes

61

82


Other income

(34)

(3)


Finance costs

196

210


Restructuring, acquisition and other

44

9


Depreciation and amortization

574

559


Stock-based compensation

12

12




Adjusted operating profit

1,101

1,124







Reconciliation of adjusted net income





Three months ended March 31

(In millions of dollars)

2016

2015




Net income

248

255

Add (deduct):




Stock-based compensation

12

12


Restructuring, acquisition and other

44

9


Loss on repayment of long-term debt

-

7


Gain on sale of investment

(39)

-


Income tax impact of above items

(5)

(8)


Income tax impact, legislative tax changes

3

-




Adjusted net income

263

275







Reconciliation of adjusted earnings per share


(In millions of dollars, except per share amounts;

Three months ended March 31

number of shares outstanding in millions)

2016

2015




Adjusted basic earnings per share:




Adjusted net income

263

275


Divided by: weighted average number of shares outstanding

515

515




Adjusted basic earnings per share

$ 0.51

$ 0.53




Adjusted diluted earnings per share:




Adjusted net income

263

275


Divided by: diluted weighted average number of shares outstanding

517

517







Adjusted diluted earnings per share

$ 0.51

$ 0.53






Reconciliation of free cash flow



Three months ended March 31

(In millions of dollars)

2016

2015




Cash provided by operating activities

598

227

Add (deduct):




Additions to property, plant and equipment

(552)

(475)


Interest on borrowings, net of capitalized interest

(192)

(188)


Restructuring, acquisition and other

44

9


Interest paid

238

263


Change in non-cash working capital

120

350


Other adjustments

(36)

80




Free cash flow

220

266







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




As at
March 31

As at
December 31

(In millions of dollars)

2016

2015




Current portion of long-term debt

1,250

1,000

Long-term debt

15,188

15,870

Deferred transaction costs and discounts

107

111


16,545

16,981

Add (deduct):




Net debt derivative assets

(1,503)

(2,028)


Credit risk adjustment related to net debt derivatives

(94)

(152)


Short-term borrowings

1,005

800


Bank advances (cash and cash equivalents)

72

(11)




Adjusted net debt

16,025

15,590








As at
March 31

As at
December 31

(In millions of dollars, except ratios)

2016

2015




Adjusted net debt / adjusted operating profit




Adjusted net debt

16,025

15,590


Divided by: trailing 12-month adjusted operating profit

5,009

5,032

Adjusted net debt / adjusted operating profit

3.2

3.1




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




Three months ended March 31


2016

2015




Operating revenue

3,245

3,175




Operating expenses:




Operating costs

2,156

2,063


Depreciation and amortization

574

559


Restructuring, acquisition and other

44

9

Finance costs

196

210

Other income

(34)

(3)




Income before income taxes

309

337

Income taxes

61

82




Net income for the period

248

255




Earnings per share:




Basic

$ 0.48

$ 0.50


Diluted

$ 0.48

$ 0.48





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






As at
March 31

As at
December 31


2016

2015




Assets



Current assets:




Cash and cash equivalents

-

11


Accounts receivable

1,792

1,792


Inventories

320

318


Other current assets

429

303


Current portion of derivative instruments

116

198

Total current assets

2,657

2,622




Property, plant and equipment

10,999

10,997

Intangible assets

7,206

7,243

Investments

2,381

2,271

Derivative instruments

1,536

1,992

Other long-term assets

124

150

Deferred tax assets

9

9

Goodwill

3,891

3,891




Total assets

28,803

29,175




Liabilities and shareholders' equity



Current liabilities:




Bank advances

72

-


Short-term borrowings

1,005

800


Accounts payable and accrued liabilities

2,479

2,708


Income tax payable

118

96


Current portion of provisions

27

10


Unearned revenue

441

388


Current portion of long-term debt

1,250

1,000


Current portion of derivative instruments

65

15

Total current liabilities

5,457

5,017




Provisions

31

50

Long-term debt

15,188

15,870

Derivative instruments

195

95

Other long-term liabilities

445

455

Deferred tax liabilities

1,782

1,943

Total liabilities

23,098

23,430




Shareholders' equity

5,705

5,745




Total liabilities and shareholders' equity

28,803

29,175




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




Three months ended March 31


2016

2015

Operating activities:




Net income for the period

248

255


Adjustments to reconcile net income to cash provided by operating activities:





Depreciation and amortization

574

559



Program rights amortization

21

22



Finance costs

196

210



Income taxes

61

82



Stock-based compensation

12

12



Post-employment benefits contributions, net of expense

10

(95)



Gain on sale of investment

(39)

-



Other

10

(10)


Cash provided by operating activities before changes in non-cash working capital items,

  income taxes paid, and interest paid

1,093

1,035


Change in non-cash operating working capital items

(120)

(350)


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

973

685


Income taxes paid

(137)

(195)


Interest paid

(238)

(263)




Cash provided by operating activities

598

227




Investing activities:




Additions to property, plant and equipment

(552)

(475)


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

(137)

(92)


Additions to program rights

(10)

(12)


Other

(40)

(12)




Cash used in investing activities

(739)

(591)




Financing activities:




Proceeds received on short-term borrowings

250

208


Repayment of short-term borrowings

(45)

(15)


Issuance of long-term debt

688

1,658


Repayment of long-term debt

(569)

(1,609)


Proceeds on settlement of debt derivatives and forward contracts

455

1,059


Payments on settlement of debt derivatives and forward contracts

(474)

(905)


Dividends paid

(247)

(235)




Cash provided by financing activities

58

161




Change in cash and cash equivalents

(83)

(203)

Cash and cash equivalents, beginning of period

11

176




Bank advances, end of period

(72)

(27)




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

  • typically includes words like could, expect, may, anticipate, assume, believe, intend, estimate, plan, project, guidance, outlook, and similar expressions, although not all forward-looking information includes them;
  • includes conclusions, forecasts, and projections that are based on our current objectives and strategies and on estimates, expectations, assumptions, and other factors, most of which are confidential and proprietary and that we believe to have been reasonable at the time they were applied but may prove to be incorrect; and
  • was approved by our management on the date of this earnings release.

Our forward-looking information includes forecasts and projections related to the following items, among others:

  • operating revenue;
  • adjusted operating profit;
  • additions to property, plant and equipment;
  • cash income tax payments;
  • free cash flow;
  • dividend payments;
  • the growth of new products and services;
  • expected growth in subscribers and the services to which they subscribe;
  • the cost of acquiring subscribers and deployment of new services;
  • continued cost reductions and efficiency improvements; and
  • all other statements that are not historical facts.

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

  • general economic and industry growth rates;
  • currency exchange rates and interest rates;
  • product pricing levels and competitive intensity;
  • subscriber growth;
  • pricing, usage and churn rates;
  • changes in government regulation;
  • technology deployment;
  • availability of devices;
  • timing of new product launches;
  • content and equipment costs;
  • the integration of acquisitions; and
  • industry structure and stability.

Except as otherwise indicated, this earnings release and our forward-looking 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, announced or may occur after the date 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:

  • regulatory changes;
  • technological change;
  • economic conditions;
  • unanticipated changes in content or equipment costs;
  • changing conditions in the entertainment, information, and communications industries;
  • the integration of acquisitions;
  • litigation and tax matters;
  • the level of competitive intensity;
  • the emergence of new opportunities; and
  • new interpretations and new accounting standards from accounting standards bodies.

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.

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 of our First Quarter 2016 MD&A entitled "Updates to Risks and Uncertainties" and "Regulatory Developments" and 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.

SOURCE Rogers Communications Canada Inc. - English

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

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