Rogers Communications Reports Fourth Quarter 2012 Results PR Newswire TORONTO, Feb. 14, 2013 Revenues Growth Accelerates to 3% with Growth in All Segments; Customer Base Grows with 58,000 Postpaid Net Subscriber Additions in Wireless and 7,000 Total Service Units in Cable; Adjusted Operating Profit Grows 7% and Earnings Per Share Up 33% Reflecting Top Line Growth and Continued Cost Efficiency Improvements; Annualized Dividend Rate Increases 10% to $1.74 Per Share TORONTO, Feb. 14, 2013 /PRNewswire/ - Rogers Communications Inc., one of Canada's leading diversified communications and media companies, today announced its unaudited consolidated financial and operating results for the three months ended December 31, 2012, in accordance with International Financial Reporting Standards ("IFRS"). Financial highlights from continuing operations are as follows^(1): Three months ended December 31, (In millions of 2012 2011 % Chg dollars, except per share amounts) Operating revenue $ 3,261 $ 3,155 3 As adjusted: Operating profit 1,176 1,101 7 Net income 455 350 30 Earnings per 0.88 33 share 0.66 Diluted earnings 33 per share 0.88 0.66 Pre-tax free cash flow 296 2 289 ^(1) This summary of our fourth quarter 2012 results should be read in conjunction with our fourth quarter 2012 earnings release, our 2011 Annual MD&A, our 2011 Annual Audited Consolidated Financial Statements and Notes thereto, and our 2012 quarterly interim financial statements, all of which are incorporated by reference in this news release. The financial information presented herein has been prepared on the basis of International Financial Reporting Standards ("IFRS") for interim financial statements and is expressed in Canadian dollars. "We exited 2012 with accelerating growth across our asset mix and with continued improvements in the strength of our key metrics," said Nadir Mohamed, President and Chief Executive Officer of Rogers Communications Inc. "It was a record quarter for smartphone sales in our Wireless business where data revenue growth continues to accelerate. Our Cable division executed well with strong Internet growth and industry-leading margins, and our Media business continued to improve and grow. Importantly, we achieved or exceeded all of our full year financial guidance metrics and are well positioned for 2013." Highlights of the fourth quarter of 2012 include the following: Top Line Growth Accelerated *Consolidated revenue growth of 3% was driven by Wireless network revenue growth of 4%, Wireless equipment revenue growth of 13%, Cable revenue growth of 2%, and Media revenue growth of 1%, partially offset by declines at Rogers Business Solutions compared to the same quarter last year. *Wireless data revenue grew by 21% which, combined with a continued slowing in the rate of decline of voice ARPU, helped drive a 2.8% increase in blended ARPU. Wireless data revenue now comprises 42% of Wireless network revenue. Wireless activated and upgraded 940,000 smartphones, of which approximately 29% were for subscribers new to Wireless. This is the highest number of smartphone activations and upgrades in Rogers' history and resulted in subscribers with smartphones now representing 69% of the overall postpaid subscribers. Wireless also recorded a continued reduction in postpaid churn on a year-over-year basis. Continued Cost Efficiency Gains Drive Profit Growth and Margin Expansion *Consolidated adjusted operating profit increased by 7% with a 3% increase at Wireless, a 4% increase at Cable, a 35% increase at RBS, and a 70% increase at Media compared to the same quarter last year. The increase in Media adjusted operating profit was largely driven by lower programming costs associated with the recently concluded NHL player lockout in addition to cost efficiencies. *Consolidated margins of 36.1% were up 117 basis points, driven by strong adjusted operating profit margins of 40.2% and 49.4% at Wireless and Cable, respectively, reflecting revenue growth combined with solid execution against cost reduction and simplification efforts. Adjusted net income improved 30% from the same quarter last year and adjusted diluted earnings per share of $0.88 was up 22 cents or 33% year-over-year. Continued to Enhance our Leading Networks to Monetize Rapid Data Growth *Expanded Canada's first wireless Long-Term Evolution ("LTE") 4G broadband network to now cover approximately 60% of the Canadian population, and Rogers currently offers the largest selection of LTE devices of any carrier in Canada. LTE is a next generation wireless technology that enables unparalleled connectivity, capable of speeds that are about four times faster than HSPA+ with peak potential download rates of up to 150 Megabits per second ("Mbps"). *Cable continued to increase the Internet speeds available to its customers, boosting the "Ultimate tier" download speed from 75 Mbps to 150 Mbps across approximately 90% of its footprint. Cable continues to make significant network investments to deliver the fastest Internet speeds available to the most homes. *Subsequent to the end of the fourth quarter of 2012, on January 14, 2013, we announced a multipart strategic transaction with Shaw Communications ("Shaw") to acquire Shaw's cable system in Hamilton, Ontario and secure an option to purchase Shaw's Advanced Wireless Services ("AWS") spectrum holdings in 2014. We will also sell to Shaw our one-third interest in specialty channel TVtropolis and enter into negotiations with Shaw for the provision of certain services in Western Canada. Rogers' net cash investment is expected to total approximately $700 million if all aspects of the transaction are approved. Customer Experience Further Enriched *Wireless and Canadian Imperial Bank of Commerce announced the completion of the first point-of-sale mobile credit card transaction in Canada using the secure SIM card inside an NFC-enabled smartphone. This historic first mobile transaction - enabled by Rogers' innovative network platform -- has put Canada on the world stage as a global leader in mobile commerce. Rogers is the Canadian leader in driving the capabilities and adoption of mobile commerce. *Cable further enhanced its NextBox 2.0 platform with the new Rogers Anyplace TV Home Edition application for tablets and smartphones. The new application makes it possible to use advanced search, a virtual remote control, live stream news, sports and entertainment, and remotely manage and set PVR content, all on a tablet from a single app. Rogers is the first Canadian telecommunications company to offer an integrated remote personal video recorder ("PVR") management and live TV streaming experience on tablets. Media Boosts Growth Consistent with Sports and Local Content Focus *Media closed the acquisition of theScore Television Network and related television assets into a trust pending final approval from the Canadian Radio-television Telecommunications Commission ("CRTC"). theScore is a national specialty TV service providing sports news, information, highlights and live event programming, and is Canada's third largest specialty TV sports channel with 6.6 million subscribers. The acquisition builds on Rogers' rich history in sports broadcasting and reinforces its commitment to delivering premium sports content to its audiences on their platform of choice. Subject to final regulatory approval, anticipated in the first half of fiscal 2013, the network will be rebranded under the Sportsnet umbrella. *In December 2012, Media received approval from the CRTC to acquire CJNT-TV Montreal ("Metro14 Montreal"). The transaction closed in early February 2013 and the station was re-launched as City Montreal in this key Quebec market. With the acquisitions and agreements put in place during 2012, City's reach has increased by more than 20% to over 80% of Canadian households. *The Toronto Blue Jays made several off-season all-star calibre player acquisitions and a series of other moves which provide the team with significantly enhanced depth.The 2012 season demonstrated a renewed appetite for baseball in the City of Toronto, which was apparent in the growth of ticket and merchandise sales, as well as audience viewing. The growing revenue enabled these additional investments which are consistent with Rogers Media's sports-focused strategy to significantly improve game attendance, merchandising and Sportsnet ratings. Balance Sheet Strength Further Reinforced with Continued Healthy Cash Flow Generation, Increased Liquidity and Lower Cost of Borrowing *Generated $296 million of consolidated pre-tax free cash flow in the quarter, an increase of 2% compared to the fourth quarter of 2011, reflecting increased adjusted operating profit, which was partially offset by an increased level of PP&E expenditures. Pre-tax free cash flow per share increased by 6% over the same period last year. *Entered into an accounts receivable securitization program, further supplementing our liquidity and sources of funding by up to $900 million. The program was established in December 2012 and the initial funding was received on January 14, 2013. *The overall cost of debt has declined to 6.06% from 6.22% at December 31, 2011, and is expected to further decrease in 2013. Cash Returned to Shareholders Set to Grow with Announcement of Further Dividend Increase *In February 2013, the Board of Directors (the "Board") approved an increase of 10% in the annualized dividend rate from $1.58 to $1.74 per Class A Voting and Class B Non-Voting share, effective immediately, to be paid in quarterly amounts of $0.435. In addition, it has approved a renewed share buyback program for the repurchase of up to $500 million of RCI shares on the open market during the next twelve months. This summary of our fourth quarter 2012 earnings release should be read in conjunction with our fourth quarter 2012 earnings release, our 2011 Annual MD&A and our 2011 Audited Annual Consolidated Financial Statements and Notes thereto, as well as our 2012 quarterly interim financial statements and our other recent filings with securities regulatory authorities which are available on SEDAR at sedar.com or EDGAR at sec.gov. The financial information presented herein has been prepared on the basis of IFRS for interim financial statements and is expressed in Canadian dollars unless otherwise stated. As this summary of our earnings release includes forward-looking statements and assumptions, readers should carefully review the section of this release entitled "Caution Regarding Forward-Looking Statements, Risks and Assumptions". In this summary of our earnings release, the terms "we", "us", "our", "Rogers", "Rogers Communications" and "the Company" refer to Rogers Communications Inc. and our subsidiaries: Wireless, Cable, Business Solutions ("RBS") and Media. SUMMARIZED CONSOLIDATED FINANCIAL RESULTS (Unaudited) Three months ended December Twelve months ended December 31, 31, (In millions of 2012 2011 % Chg 2012 2011 % Chg dollars, except per share amounts) Operating revenue Wireless $ 1,920 $ 5 $ 7,280 $ 7,138 2 1,826 Cable 852 838 2 3,358 3,309 1 RBS 88 93 (5) 351 405 (13) Media 434 428 1 1,620 1,611 1 Corporate (33) (30) 10 (123) (117) 5 items and intercompany eliminations Total operating 3,261 3,155 3 12,486 12,346 1 revenue Adjusted operating profit Wireless 687 670 3 3,063 3,036 1 Cable 421 403 4 1,605 1,549 4 RBS 27 20 35 89 86 3 Media 75 44 70 190 180 6 Corporate (34) (36) (6) (113) (112) 1 items and intercompany eliminations Adjusted 1,176 1,101 7 4,834 4,739 2 operating profit Depreciation and (453) (454) - (1,819) (1,743) 4 amortization Finance costs (176) (158) 11 (664) (639) 4 excluding loss on repayment of long-term debt Other income 4 (6) n/m 15 1 n/m (expense), net Share of the income of associates and joint ventures excluding gain on spectrum distribution 4 3 33 2 7 (71) Adjusted net 555 486 14 2,368 2,365 - income before income taxes Adjusted income (100) (136) (26) (580) (629) (8) tax expense Adjusted net $ 455 $ 350 30 $ 1,788 $ 1,736 3 income Adjusted basic $ 0.88 $ 0.66 33 $ 3.45 $ 3.20 8 earnings per share Adjusted diluted 0.88 0.66 33 3.43 3.17 8 earnings per share Adjusted $ 1,176 $ 1,101 7 $ 4,834 $ 4,739 2 operating profit Stock-based (57) (34) 68 (77) (64) 20 compensation expense Integration, (10) (20) (50) (92) (56) 64 restructuring and acquisition expenses Operating profit 1,109 1,047 6 4,665 4,608 1 Depreciation and (453) (454) - (1,819) (1,743) 4 amortization Impairment of (80) - n/m (80) - n/m assets Operating income 576 593 (3) 2,766 2,865 (3) Finance costs (176) (158) 11 (664) (738) (10) Share of the 237 3 n/m 235 7 n/m income of associates and joint ventures Income before 641 432 48 2,352 2,135 10 income taxes Income tax (112) 15 (620) (545) 14 expense (97) Net income from 529 335 58 1,732 1,590 9 continuing operations Loss from - n/m (32) (27) 19 discontinued (8) operations Net income $ 529 $ 327 62 $ 1,700 $ 1,563 9 Basic earnings $ 1.03 $ 0.63 63 $ 3.34 $ 2.93 14 per share - continuing operations Diluted earnings 1.02 0.63 62 3.32 2.91 14 per share - continuing operations Basic earnings 1.03 0.61 69 3.28 2.88 14 per share Diluted earnings 1.02 0.61 67 3.26 2.86 14 per share Total additions $ 707 $ 653 8 $ 2,142 $ 2,127 1 to PP&E Pre-tax free 296 289 2 2,029 1,973 3 cash flow After-tax free 39 207 (81) 1,649 1,874 (12) cash flow SEGMENT REVIEW WIRELESS Summarized Wireless Financial Results Three months ended December 31, Twelve months ended December 31, (In 2012 2011 % Chg 2012 2011 % Chg millions of dollars, except margin) Operating revenue Network $ $ $ $ revenue 1,711 1,641 4 6,719 6,601 2 Equipment 209 13 sales 185 561 537 4 Total 5 operating 1,920 1,826 7,280 7,138 2 revenue Operating expenses Cost of 20 11 equipment (558) (465) (1,585) (1,425) Other (2) operating (675) (691) (2,632) (2,677) (2) expenses 7 (1,233) (1,156) (4,217) (4,102) 3 Adjusted $ $ 3 $ $ operating 687 670 3,063 3,036 1 profit Adjusted operating profit margin as % of network revenue 40.2% 40.8% 45.6% 46.0% Additions $ $ 11 $ $ to PP&E 386 347 1,123 1,192 (6) Data revenue included in network revenue $ 727 $ 600 21 $ 2,722 $ 2,325 17 Data 42% 37% 41% 35% revenue as a % of network revenue Summarized Wireless Subscriber Results (Subscriber Three months ended December 31, Twelve months ended December 31, statistics in thousands, except ARPU 2012 2011 Chg 2012 2011 Chg and churn) Postpaid Gross 377 additions 387 10 1,457 1,449 8 Net 42 additions 58 16 268 269 (1) Total 7,574 postpaid 7,846 272 7,846 7,574 272 subscribers Monthly 1.40% 1.49% (0.09) pts 1.29% 1.32% (0.03) pts churn Monthly $ 69.75 $ 68.63 $ 1.12 $ $ 70.26 $ (0.96) average 69.30 revenue per user ("ARPU") Prepaid Gross 191 additions 131 (60) 627 845 (218) Net additions (53) 5 (58) (170) 109 (279) (losses) Total 1,591 1,761 prepaid (170) 1,591 1,761 (170) subscribers Monthly 3.77% 3.51% 0.26 pts 3.98% 3.64% 0.34 pts churn ARPU $ 15.83 $ 16.85 $ $ $ 16.02 $ (0.18) (1.02) 15.84 Blended ARPU $ 60.48 $ 58.82 $ 1.66 $ $ 60.20 $ (0.41) 59.79 Data ARPU 25.72 21.51 4.21 24.22 21.21 3.01 Voice ARPU 34.76 37.31 (3.42) (2.55) 35.57 38.99 Wireless Subscribers and Network Revenue For the three months ended December 31, 2012, Wireless activated and upgraded approximately 940,000 smartphones, compared to approximately 791,000 in the fourth quarter of 2011. This is the highest number of smartphone activations and upgrades in any quarter in Rogers' history. The smartphones activated and upgraded during the quarter were predominantly iPhone, Android, Windows Mobile and BlackBerry devices, of which approximately 29% were for subscribers new to Wireless. The overall addition of smartphones increased the percentage of subscribers with smartphones to 69% of Wireless' total postpaid subscriber base at December 31, 2012, compared to 56% as at December 31, 2011. These subscribers generally commit to multi-year term contracts and typically generate significantly higher ARPU. The increase in wireless network revenue for the three months ended December 31, 2012, compared to the corresponding period of 2011, reflects the continued growth of Wireless' postpaid subscriber base and the increased adoption and usage of wireless data services. In keeping with our strategy, Wireless launched new simplified data-centric price plans this quarter, which will improve the customer experience and the efficiency of our sales and service functions. Wireless has driven year-over-year reductions in postpaid churn in each of the last three consecutive quarters through our continued focus on customer retention and our strategies to strengthen customer experience. For the three months ended December 31, 2012, wireless data revenue increased to $727 million, a 21% increase from the corresponding period of 2011. This growth in wireless data revenue reflects the continued penetration and growing usage of smartphones, tablet devices and wireless laptops, which drive increased usage of e-mail, wireless Internet access, text messaging, data roaming, and other wireless data services. For the three months ended December 31, 2012, wireless data revenue represented approximately 42% of total network revenue, compared to approximately 37% in the corresponding period of 2011. The 2.8% year-over-year increase in blended ARPU for the quarter ended December 31, 2012, compared to the corresponding period of 2011, primarily reflects the growth in wireless data revenue, partially offset by another quarter of sequentially moderating declines in wireless voice revenues. The wireless data component of blended ARPU increased by 19.6%, partially offset by a 6.8% decline in the wireless voice component as a result of the heightened level of competitive intensity in the wireless voice service market. Wireless Equipment Sales The increase in revenue from equipment sales for the three months ended December 31, 2012, compared to the corresponding period of 2011, primarily reflects the increase in hardware upgrades by existing subscribers, combined with an increase in the mix of smartphones activated towards higher value devices versus the prior year. Wireless Operating Expenses The increase in cost of equipment for the three months ended December 31, 2012, compared to the corresponding period of 2011, was primarily the result of the increased number of smartphone sales to new customers and upgrades for existing customers. During the three months ended December 31, 2012, we activated and upgraded 33% more iPhones and 19% more smartphones overall than in the same period last year. Total retention spending, including subsidies on handset upgrades, was $320 million in the three months ended December 31, 2012, compared to $251 million in the corresponding period of 2011. The increase primarily reflects a higher number of hardware upgrades by existing subscribers than during the same period last year combined with a shift in the mix of smartphones activated towards higher value devices. The year-over-year decrease in other operating expenses for the three months ended December 31, 2012, excluding retention spending discussed above, was driven by efficiency gains resulting from cost management and productivity initiatives across various functions. Rogers continues to focus on implementing a program of cost reduction and efficiency improvement initiatives to manage the overall level of operating expenses. Wireless Adjusted Operating Profit The 3% year-over-year increase in adjusted operating profit and the 40.2% adjusted operating profit margin on network revenue (which excludes equipment sales revenue) for the three months ended December 31, 2012 primarily reflects the growth of network revenue in the period, coupled with cost management and efficiency improvements as discussed above. CABLE Summarized Financial Results Three months ended December 31, Twelve months ended December 31, (In millions of 2012 2011 % Chg 2012 2011 % Chg dollars, except margin) Operating revenue Cable $ 462 $ 473 $ 1,868 $ 1,878 Television (2) (1) Internet 263 11 238 998 926 8 Home Phone 122 118 3 477 478 - Service 847 829 revenue 2 3,343 3,282 2 Equipment (44) (44) sales 5 9 15 27 Total Cable 852 838 2 operating 3,358 3,309 1 revenue Operating expenses Cost of (31) equipment (6) (10) (40) (20) (29) Other (425) (1,733) - operating (425) - (1,731) expenses (435) - (431) (1) (1,753) (1,760) Adjusted $ 421 $ 403 $ 1,605 $ 1,549 operating 4 4 profit Adjusted 49.4% 48.1% 47.8% 46.8% operating profit margin Additions to $ 259 $ 231 12 $ 832 $ 11 PP&E 748 Summarized Subscriber Results Three months ended December 31, Twelve months ended December 31, (Subscriber 2012 2011 Chg 2012 2011 Chg statistics in thousands) Cable homes 3,810 3,754 passed 56 3,810 3,754 56 Television Net losses (25) (6) (19) (83) (14) (69) Total 2,214 2,297 television (83) 2,214 2,297 (83) subscribers Digital cable Households, net (6) 10 (16) (7) 39 (46) additions (losses) Total 1,768 1,777 digital (9) 1,768 1,777 (9) cable households Cable high-speed Internet Net additions 22 25 (3) 73 83 (10) Total cable 1,864 1,793 high-speed 71 1,864 1,793 71 Internet subscribers Cable telephony lines Net additions and 10 8 2 23 45 (22) migrations Total cable 1,074 1,052 telephony 22 1,074 1,052 22 lines Total cable service units Net additions 7 27 (20) 13 114 (101) Total cable 5,152 5,142 service units 10 5,152 5,142 10 Cable Television Revenue Cable Television revenue decreased for the three months ended December 31, 2012, compared to the corresponding period of 2011, mainly from the 4% year-over-year decline in basic television customers combined with the impact of promotional and retention pricing activity associated with heightened IPTV competitive activity, partially offset by pricing changes made in March 2012. Our digital cable subscriber base represents 80% of our total television subscriber base as at December 31, 2012, compared to 77% as at December 31, 2011. A larger selection of digital content, video on-demand, HDTV and PVR equipment continues to contribute to the increasing penetration of the digital subscriber base as a percentage of our total television subscriber base. In the first quarter of 2012, Cable began an initiative to convert many of the remaining analog cable customer outlets onto its digital cable platform. This migration, which will continue during 2013, will enable the reclamation of significant amounts of network capacity and reduce network operating and maintenance costs going forward. The migration entails incremental PP&E and operating costs as each of the remaining analog homes are fitted with digital converters and various analog filtering equipment is removed. Internet Revenue The year-over-year increase in Internet revenue for the three months ended December 31, 2012 reflects the increase in our Internet subscriber base, combined with a general movement to higher end speed and usage tiers combined with Internet service pricing changes made during the previous twelve months. With our high-speed Internet customer base at 1.9 million subscribers, Internet penetration is approximately 49% of the homes passed by our cable network and 84% of our television subscriber base as at December 31, 2012, compared to Internet penetration of approximately 48% of the homes passed by our cable network and 78% of our television subscriber base as at December 31, 2011. Cable Internet and Home Phone subscribers and revenue include an increasing number of small business customers, which generally have fewer than 24 phone lines, that Cable has attached to its network in addition to the residences traditionally passed by Cable's network. Home Phone Revenue The increase in Home Phone revenues for the three months ended December 31, 2012, compared to the corresponding period of 2011, reflects the increase in the customer base. Home Phone lines in service grew 2% from December 31, 2011 to December 31, 2012 and now represent 28% of the homes passed by our cable network and 49% of television subscribers, compared to 28% of the homes passed by our cable network and 46% of television subscribers at December 31, 2011. Cable Operating Expenses Cable's operating expenses remained flat for the three months ended December 31, 2012, compared to the corresponding period of 2011, due to cost reductions and efficiency initiatives across various functions and lower new subscriber additions, partially offset by incremental retention costs and costs associated with the analog to digital conversion discussed above. Cable continues to focus on implementing a program of cost reduction and efficiency improvement initiatives to manage the overall level of operating expenses. Cable Adjusted Operating Profit The year-over-year increase in adjusted operating profit for the three months ended December 31, 2012, compared to the corresponding period of 2011, was driven by the revenue increases resulting in expanded adjusted operating profit margin of 49.4% for the three months ended December 31, 2012, compared to 48.1% in the corresponding period of 2011. ROGERS BUSINESS SOLUTIONS Summarized Financial Results Three months ended December 31, Twelve months ended December 31, (In millions 2012 2011 % Chg 2012 2011 % Chg of dollars, except margin) Operating revenue Next $ 43 $ 34 $ 162 $ 128 generation 26 27 Legacy 57 43 (25) 183 271 (32) Service 399 revenue 86 91 (5) 345 (14) Equipment sales 2 2 - 6 6 - Total RBS 351 405 operating 88 93 (5) (13) revenue Operating (18) expenses (61) (73) (16) (262) (319) Adjusted $ 27 $ 20 $ $ 86 operating 35 89 3 profit Adjusted 30.7% 21.5% 25.4% 21.2% operating profit margin Additions to $ 16 $ 13 $ $ 55 PP&E 23 61 11 RBS Revenue The decrease in RBS revenue for the three months ended December 31, 2012, compared to the corresponding period of 2011, primarily reflects the planned decline in certain categories of our lower margin and primarily off-net legacy business, offset by the growth in our next generation IP and other on-net services business. RBS' focus is primarily on IP-based services and increasingly on leveraging higher margin on-net and near-net revenue opportunities, utilizing existing network facilities to expand offerings to the medium-sized enterprise, public sector and carrier markets. Revenue from the declining lower margin off-net legacy business generally includes long-distance, local and certain legacy data services. In contrast, revenue from the higher margin next generation business continues to grow, due to growth in customers and additional services sold to existing customers, and now represents 50% of total RBS service revenue. RBS Operating Expenses Operating expenses decreased for the three months ended December 31, 2012, compared to the corresponding period in 2011. This reflects a planned decrease in the legacy service-related costs due to lower volumes and customer levels, as well as ongoing initiatives to improve costs and productivity. RBS has continued to focus on implementing a program of permanent cost reduction and efficiency improvement initiatives to control the overall growth in operating expenses. RBS Adjusted Operating Profit The year-over-year increase in adjusted operating profit for the three months ended December 31, 2012, compared to the corresponding period in 2011, reflects cost efficiencies which more than offset the declines in revenue, and resulted in the increase of RBS' adjusted operating profit margin to 30.7% from 21.5%. Margin increases also reflect the increasing share of the RBS business derived from higher margin next generation services, which is consistent with RBS' strategy. MEDIA Summarized Media Financial Results Three months ended December 31, Twelve months ended December 31, (In 2012 2011 % Chg 2012 2011 % Chg millions of dollars, except margin) Operating $ $ $ $ revenue 434 428 1 1,620 1,611 1 Operating (359) expenses (384) (7) (1,430) (1,431) - Adjusted $ $ $ $ operating 75 44 70 190 180 6 profit Adjusted 17.3% 10.3% 11.7% 11.2% operating profit margin Additions $ $ $ $ to PP&E 23 31 (26) 55 61 (10) Media Revenue Media revenue has increased 1% for the three months ended December 31, 2012 from the corresponding period of 2011, primarily driven by revenue growth on our Sports properties. Subscription revenue increased by 17%, due to the strength of the Sportsnet franchise and overall distribution growth on our other specialty channels. In addition, revenue in Sports Entertainment grew 44% as a result of increased revenue related to the baseball franchise and successful events at the Rogers Centre. These increases were partially offset by a continued soft advertising market across most industry sectors in the face of economic softness that created ongoing volatility in advertising revenue. The softness in the advertising market was intensified in this quarter by the advertising declines associated with the recently concluded NHL player lockout. Excluding the impact of the NHL player lockout, total Media revenues would have grown at a faster rate than 1% as reported. Media Operating Expenses The decrease in Media's operating expenses for the three months ended December 31, 2012, compared to the corresponding period of 2011, is primarily due to cost containment efforts and lower sports programming costs associated with the NHL player lockout as no NHL games were produced or aired in 2012 relating to the 2012-2013 season. Media Adjusted Operating Profit The increase in Media's adjusted operating profit for the three months ended December 31, 2012, compared to the corresponding period of 2011, primarily reflects the revenue and expense changes discussed above, including an estimated $30 million net positive impact from the NHL player lockout. Other Media Developments In October 2012, Media completed the purchase of 100% of the outstanding shares of Score Media Inc. for $167 million. The shares of Score Media were transferred to an interim CRTC-approved trust which is responsible for the independent management of the business in the normal course of operations until CRTC final approval is obtained, at which point control over the Score Media business will transfer to Rogers. Score Media owns theScore Television Network, a national specialty TV service providing sports news, information, highlights and live event programming across Canada. Upon final regulatory approval, which is anticipated in the first half of 2013, Rogers will wholly own and control theScore Television Network and its related television assets and expects to rebrand the service under the Sportsnet brand. In December 2012, Media received approval from the CRTC to acquire Metro14 Montreal. The transaction closed in early February 2013 and the station was re-launched as City Montreal in this key Quebec market. With the acquisitions and agreements put in place during 2012, City's reach has increased by more than 20% to over 80% of Canadian households. The Toronto Blue Jays made several off-season all-star calibre player acquisitions and a series of other moves which provide the team with significantly enhanced depth.The 2012 season demonstrated a renewed appetite for baseball in the City of Toronto, which was apparent in the growth of ticket and merchandise sales, as well as audience viewing. The growing revenue enables these additional investments which are consistent with Rogers Media's sports-focused strategy to significantly improve game attendance, merchandising and Sportsnet ratings. ADDITIONS TO PP&E The additions to PP&E for the three and twelve months ended December 31, 2012 are described below: Three months ended December 31, Twelve months ended December 31, (In 2012 2011 % Chg 2012 2011 % Chg millions of dollars) Additions to PP&E Wireless $ 386 $ 347 11 $ 1,123 $ 1,192 (6) Cable 259 231 12 832 748 11 RBS 11 16 13 23 61 55 Media 23 31 (26) 55 61 (10) Corporate 23 31 (26) 71 71 - Total $ 707 $ 653 $ 2,142 $ 2,127 additions 8 1 to PP&E Wireless Additions to PP&E Wireless additions to PP&E increased by $39 million for the three months ended Decmeber 31, 2012 compared to the corresponding period in 2011. This was attributable to the continued deployment of our LTE network, upgrades to the network to improve the LTE and HSPA+ user experience and initiatives to improve network reliability and service platforms. Cable Additions to PP&E Cable additions to PP&E increased by $28 million for the three months ended December 31, 2012 compared to the corresponding period in 2011. This was driven by continued investments in the cable network to enhance the customer experience through increased speed and performance of our Internet service and capacity enhancements to our digital network to allow for incremental HD and on-demand services to be added. Higher analog to digital subscriber migration activity and investments in customer premise equipment due to the continued roll out of Next Box 2.0 set-top boxes also contributed to the increase in additions to PP&E. RBS Additions to PP&E The increase in RBS PP&E additions for the three months ended December 31, 2012, compared to the corresponding period of 2011, resulted from the timing of expenditures on customer specific network expansions and support capital. Media Additions to PP&E Media's PP&E additions during the three months ended December 31, 2012 reflect expenditures on digital and broadcast systems, as well as planned upgrades for Sports Entertainment facilities. 2013 FINANCIAL TARGETS The following table outlines guidance ranges and assumptions for selected full year 2013 financial metrics. This information is forward-looking and should be read in conjunction with the section "Caution Regarding Forward-Looking Statements, Risks and Assumptions" and the related disclosures, for the various economic, competitive, and regulatory assumptions and factors that could cause actual future financial and operating results to differ from those currently expected. Full Year 2013 Guidance 2012 2013 (In millions of dollars) Actual Guidance Consolidated Guidance Adjusted operating $ 4,834 $4,865 to $5,050 profit^(1)(6) Additions to 2,142 2,150 to 2,250 PP&E^(2) Pre-tax free cash 2,029 2,030 to 2,090 flow^(3)(6) Cash income taxes 380 to 650 700 Supplemental Details^(4) 2012 2013 (In millions of dollars) Actual Range Wireless Network revenue $ 6,719 $6,790 to $6,960 Adjusted operating 3,063 3,095 to 3,245 profit^(1) Cable Revenue^(5)(6) $ 3,358 $3,390 to $3,470 Adjusted operating 1,605 1,625 to 1,675 profit^(1)(6) Media Revenue^(6) $ 1,620 $1,690 to $1,750 Adjusted operating 190 to profit^(1)(6) 170 195 (1) Excludes (i) stock-based compensation expense; and (ii) integration, restructuring and acquisition expenses. (2) Includes additions to Wireless, Cable, Media, RBS and Corporate PP&E expenditures. (3) Pre-tax free cash flow is defined as adjusted operating profit less PP&E expenditures and interest on long-term debt (net of capitalization), and is not a defined term under IFRS. (4) This supplemental detail does not represent part of our formal 2013 guidance and is provided for informative purposes only. Any update over the course of 2013 would only be made to the consolidated level guidance ranges provided above. (5) Includes Cable Television, high-speed Internet and telephony services. (6) Assumes Mountain Cable and theScore close mid-year 2013. Rogers Communications Inc. Unaudited Consolidated Statements of Income (In millions of Canadian dollars, except per share amounts) Three months ended Twelve months ended December 31, December 31, 2012 2011 2012 2011 Operating revenue $ 3,261 $ 3,155 $ 12,486 $ 12,346 Operating expenses: Operating costs 2,142 2,088 7,682 7,729 Integration, restructuring and 10 20 56 acquisition costs 92 Depreciation and 453 454 1,743 amortization 1,819 Impairment of 80 assets - 80 - Operating income 576 593 2,865 2,766 Finance costs (176) (158) (664) (738) Other income 4 (expense), net (6) 15 1 Share of the income of 237 associates and joint 3 235 7 ventures Income before income 641 432 2,135 taxes 2,352 Income tax expense 112 97 545 620 Net for the period $ 529 $ 335 $ $ 1,590 from continuing 1,732 operations Loss from discontinued operations, net of tax - (8) (32) (27) Net income $ 529 $ 327 $ $ 1,563 1,700 Earnings per share - basic: Earnings per share 1.03 fromcontinuing $ $ 0.63 $ 3.34 $ 2.93 operations Loss per share fromdiscontinued (0.02) (0.06) (0.05) operations - Earnings per share $ 1.03 0.61 $ $ 2.88 3.28 Earnings per share - diluted: Earnings per share 1.02 fromcontinuing $ $ 0.63 $ 3.32 $ 2.91 operations Loss per share fromdiscontinued (0.02) (0.06) (0.05) operations - Earnings per share $ 1.02 $ 0.61 $ $ 3.26 $ 2.86 Rogers Communications Inc. Unaudited Consolidated Statements of Financial Position (In millions of Canadian dollars) December 31, December 31, 2012 2011 Assets Current assets: Cash and cash $ 213 $ - equivalents Accounts receivable 1,536 1,574 Other current assets 464 322 Current portion of 8 16 derivative instruments 2,221 1,912 Property, plant and 9,576 9,114 equipment Goodwill 3,215 3,280 Intangible assets 2,951 2,721 Investments 1,484 1,107 Derivative instruments 42 64 Other long-term assets 98 134 Deferred tax assets 31 30 $ 19,618 $ 18,362 Liabilities and Shareholders' Equity Current liabilities: Bank advances $ - $ 57 Accounts payable and 2,135 2,085 accrued liabilities Income tax payable 24 - Current portion of 7 35 provisions Current portion of 348 - long-term debt Current portion of 144 37 derivative instruments Unearned revenue 344 335 3,002 2,549 Provisions 31 38 Long-term debt 10,441 10,034 Derivative instruments 417 503 Other long-term 458 276 liabilities Deferred tax liabilities 1,501 1,390 15,850 14,790 Shareholders' equity 3,768 3,572 $ 19,618 $ 18,362 Rogers Communications Inc. Unaudited Consolidated Statements of Cash Flows (In millions of Canadian dollars) Three months ended Twelve months ended December 31, December 31, 2012 2011 2012 2011 Cash provided by (used in): Operating activities: Net income for $ 529 $ 327 $ 1,700 $ 1,563 the period Adjustments to reconcile net income to net cash flows from operating activities: Depreciation 453 454 1,819 1,743 and amortization Impairment of 80 80 assets - - Program rights 13 23 73 83 amortization Finance costs 176 158 664 738 Income tax 112 95 610 535 expense Pension (36) (41) contributions, (7) (3) net of expense Settlement of 11 pension - - - obligations Stock-based 57 34 77 64 compensation expense Share of the (237) (3) (235) income of (7) associates and joint ventures Other (18) (23) 9 9 1,158 1,094 4,729 4,698 Change in (108) 99 (248) (169) non-cash operating working capital items 1,050 1,193 4,481 4,529 Income taxes paid (257) (82) (380) (99) Interest paid (125) (86) (680) (639) 668 1,025 3,421 3,791 Investing activities: Additions to (707) (653) (2,142) (2,127) property, plant and equipment ("PP&E") Change in non-cash 185 32 136 (89) working capital items related to PP&E Acquisitions, net (532) of cash and cash - - - equivalents acquired Investments (167) (707) - - Additions to (23) (90) (56) program rights (6) Other (31) (27) 2 1 (710) (626) (2,834) (2,831) Financing activities: Issuance of 450 2,090 4,100 long-term debt - Repayment of (320) (1,240) (2,802) long-term debt - Premium on (76) repayment of - - - long-term debt Payment on (1,208) settlement of - - - cross-currency interest rate exchange agreements and forward contracts Proceeds on 878 settlement of - - - cross-currency interest rate exchange agreements and forward contracts Transaction costs (14) (10) incurred related - - to long-term debt Repurchase of (374) (350) (1,099) Class B - Non-Voting shares Proceeds received on exercise of - 2 - 3 stock options Dividends paid (204) (190) (803) (758) (204) (432) (317) (972) Change in cash and (246) (33) 270 (12) cash equivalents Cash and cash 459 (24) (57) (45) equivalents, beginning of period Cash and cash $ 213 $ (57) $ 213 $ (57) equivalents, end of period The change in non-cash operating workingcapital items is as follows: Accounts $ (101) $ (117) $ 15 $ (86) receivable Other current (51) 57 (131) (33) assets Accounts payable 10 153 (140) (46) and accrued liabilities Unearned revenue 34 6 8 (4) $ (108) $ 99 $ (248) (169) Audited Full Year 2012 Financial Statements In the next few weeks, we intend to file with securities regulators in Canada and the U.S. our Audited Annual Consolidated Financial Statements and Notes thereto for the year ended December 31, 2012 and MD&A in respect of such annual financial statements. Notification of such filings will be made by a press release and such statements will be made available on the rogers.com/investors, sedar.com and sec.gov websites or upon request. Caution Regarding Forward-Looking Statements, Risks and Assumptions This summary of our earnings release includes "forward-looking information" within the meaning of applicable securities laws and assumptions concerning, among other things our business, its operations and its financial performance and condition approved by management on the date of this earnings release. This forward-looking information and these assumptions include, but are not limited to, statements with respect to our objectives and strategies to achieve those objectives, as well as statements with respect to our beliefs, plans, expectations, anticipations, estimates or intentions. This forward-looking information also includes, but is not limited to, guidance and forecasts relating to revenue, adjusted operating profit, property plant and equipment expenditures, cash income tax payments, free cash flow, dividend payments, expected growth in subscribers and the services to which they subscribe, the cost of acquiring subscribers and the deployment of new services, and all other statements that are not historical facts. The words "could", "expect", "may", "anticipate", "assume", "believe", "intend", "estimate", "plan", "project", "guidance", and similar expressions are intended to identify statements containing forward-looking information, although not all forward-looking statements include such words. Conclusions, forecasts and projections set out in forward-looking information are based on our current objectives and strategies and on estimates and other factors and expectations and assumptions, most of which are confidential and proprietary, that we believe to be reasonable at the time applied, but may prove to be incorrect, including, but not limited to: general economic and industry growth rates, currency exchange rates, product pricing levels and competitive intensity, subscriber growth, usage and churn rates, changes in government regulation, technology deployment, device availability, the timing of new product launches, content and equipment costs, the integration of acquisitions, industry structure and stability. Except as otherwise indicated, this earnings release and our forward-looking statements do not reflect the potential impact of any non-recurring or other special items or of any dispositions, monetizations, mergers, acquisitions, other business combinations or other transactions that may be considered or announced or may occur after the date the statement containing the forward-looking information is made. We caution that all forward-looking information, including any statement regarding our current objectives, strategies and intentions and any factor, assumptions, estimate or expectation underlying the forward-looking information, is inherently subject to change and uncertainty and that actual results may differ materially from those expressed or implied by the forward-looking information. A number of risks, uncertainties and other factors could cause actual results and events to differ materially from those expressed or implied in the forward-looking information or could cause our current objectives, strategies and intentions to change, including but not limited to: new interpretations and new accounting standards from accounting standards bodies, economic conditions, technological change, the integration of acquisitions, unanticipated changes in content or equipment costs, changing conditions in the entertainment, information and communications industries, regulatory changes, litigation and tax matters, the level of competitive intensity and the emergence of new opportunities. Many of these factors are beyond our control and current expectation 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 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 any investment decisions and for a detailed discussion of the risks, uncertainties and environment associated with our business, fully review the "Government Regulation and Regulatory Developments" section of our 2011 Annual MD&A, including the section "Risks and Uncertainties Affecting Our Businesses". Our annual and quarterly reports can be found online at rogers.com/investors, sedar.com and sec.gov or are available directly from Rogers. About Rogers Communications Inc. Rogers Communications is a 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. Through Rogers Media, we are engaged in radio and television broadcasting, televised shopping, magazines and trade publications, sports entertainment, and digital media. We are publicly traded on the Toronto Stock Exchange (TSX: RCI.A and RCI.B) and on the New York Stock Exchange (NYSE: RCI). For further information about the Rogers group of companies, please visit rogers.com. Quarterly Investment Community Conference Call As previously announced by press release, a live webcast of our quarterly results teleconference with the investment community will be broadcast via the Internet at rogers.com/webcast beginning at 8:30 a.m. ET today, February 15, 2013. A rebroadcast of this teleconference will be available on the Events and Presentations page of Rogers' Investor Relations website, rogers.com/investors, for a period of at least two weeks following the teleconference. SOURCE Rogers Communications Inc. Contact: Investment Community Contacts Bruce M. Mann, 416.935.3532,email@example.com Dan R. Coombes, 416.935.3550,firstname.lastname@example.org Media Contact Terrie Tweddle, 416.935.4727,email@example.com
Rogers Communications Reports Fourth Quarter 2012 Results
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