Rogers Communications Inc. (ticker: RCI.B.TO, exchange: Toronto Stock Exchange (.TO))
News Release -
18-Oct-2001
Rogers Communications Reports Third Quarter 2001 Results
TORONTO, Oct. 18 /PRNewswire/ - ROGERS COMMUNICATIONS INC. ("RCI" or the
"Company") today announced its consolidated financial and operating results
for the third quarter ended September 30, 2001.
Financial highlights, which are in thousands of Canadian dollars (except
per share amounts), are as follows:
-------------------------------------
Three Months Ended September 30, 2001 2000 % Change
-----------------------------------------------------------------------
Revenue $951,783 $877,721 8.4%
Operating income (1) 257,770 243,204 6.0%
Net income (loss) (57,817) 156,864 -
Income (loss) per share (37 cents) 70 cents -
Loss (excl. non-operating gains) $(91,517) $(20,587) -
Loss per share (excl.
non-operating gains) (53 cents) (17 cents) -
Capital expenditures $328,403 $333,755 (1.6%)
-----------------------------------------------------------------------
-------------------------------------
Nine Months Ended September 30, 2001 2000 % Change
-----------------------------------------------------------------------
Revenue $2,789,796 $2,557,087 9.1%
Operating income (1) 711,747 694,233 2.5%
Net income (loss) (258,063) 162,552 -
Income (loss) per share $(1.52) 64 cents -
Loss (excl. non-operating gains) $(273,130) $(71,378) -
Loss per share (excl.
non-operating gains) $(1.59) (51 cents) -
Capital expenditures $1,015,646 $803,285 26.4%
----------------------------------------------------------------------
(1) Defined as operating income before integration costs on cable
systems exchange (in 2001 results) and depreciation and
amortization.
In addition, operating highlights in the quarter included:
-
All operating divisions continued the trend of revenue growth in the
quarter versus prior year with 10.5% growth at Cable, 8.0% growth at
Wireless and 4.7% growth at Media.
-
Consolidated operating income grew at 6.0% year-over-year, with Cable
and Media both achieving double-digit growth in the quarter.
-
Wireless completed the installation of its GSM-GPRS integrated voice
and data wireless network in 25 of the largest markets in Canada
including Toronto, Montreal, Vancouver, Calgary, Winnipeg and Halifax
covering more than two-thirds of the Canadian population. The network
is currently in operational readiness testing with over 1,000 active
users in various markets.
-
Cable achieved year-over-year subscriber growth of 109.7% for digital
cable and 40.7% for high speed Internet access subscribers in the
quarter.
-
Cable executed one of the single largest launches of new digital
television channels in cable industry history. Approximately 50 new
channels were launched onto Cable's network for access by Rogers
digital cable customers in the highly clustered Ontario market.
Similar lineups were also launched in New Brunswick and Newfoundland.
Rogers Digital Cable now offers its customers more channels and more
choice than its competitors.
-
Media launched The Biography Channel, MSNBC, and TechTV into the
Canadian market.
-
Cable accelerated ongoing plans and activities involving the
repatriation of certain functions performed by @Home Corporation
for Cable's high-speed Internet access offering.
-
The Company announced two significant acquisitions during the quarter.
RCI announced it will acquire majority ownership and control of
SportsNet and Media announced it will acquire 13 Ontario radio
stations, including The Fan590 sports station. Both acquisitions are
subject to regulatory approval. Media also sold Bowdens Media
Monitoring Limited for approximately $40 million, recording a gain of
approximately $33.4 million before taxes in the third quarter.
"We are encouraged by the continued strong growth in each of the
operating divisions, especially in this challenging economic climate," said
RCI President and CEO, Edward S. (Ted) Rogers. "Cable again achieved double-
digit quarterly revenue growth and, more importantly, operating income growth
in excess of revenue growth. Media's results were also strong, delivering
healthy year-over-year operating income growth for its advertising supported
stations and publications in the face of an already slowing economy that
rapidly decelerated following the events of September 11th. Wireless delivered
year-over-year high single digit top line growth, and, under the leadership of
Nadir Mohamed, Wireless' new CEO, is making progress towards overcoming
several operational challenges."
"These operating results should not however overshadow the significant
strategic accomplishments during the quarter which will serve to strengthen
our position and results into the future," said Rogers. "These include the
successful deployment of a next generation GSM-GPRS network at Wireless, the
significant launch of digital offerings at Cable, and the strengthening of our
core assets at Media with the acquisition of key radio properties and control
of Sportsnet."
CONSOLIDATED RESULTS - THIRD QUARTER AND YEAR-TO-DATE
Three Months Ended Nine Months Ended
September 30, September 30,
(In millions -------------------------------------------------------
of dollars) 2001 2000 Chg % Chg 2001 2000 Chg % Chg
-------------------------------------------------------------------------
Revenue
Wireless 426.1 394.6 31.5 8.0 1,214.4 1,121.8 92.6 8.3
Cable 360.6 326.2 34.4 10.5 1,061.2 954.1 107.1 11.2
Media 164.2 156.9 7.3 4.7 509.5 481.2 28.3 5.9
Corporate
Items and
Eliminations 0.9 - 0.9 - 4.9 - 4.7 -
-------------------------------------------------------------------------
Consolidated
Revenue 951.8 877.7 74.1 8.4 2,789.8 2,557.1 232.7 9.1
-------------------------------------------------------------------------
Three Months Ended Nine Months Ended
September 30, September 30,
(In millions -------------------------------------------------------
of dollars) 2001 2000 Chg % Chg 2001 2000 Chg % Chg
-------------------------------------------------------------------------
Operating
Income (1)
-----------
Wireless 123.8 122.3 1.5 1.3 320.5 338.5 (18.0) (5.3)
Cable 130.3 117.1 3.2 11.2 384.1 338.4 45.7 13.5
Media 12.4 10.0 2.4 24.0 42.9 41.6 1.3 3.2
Corporate
Items and
Eliminations (8.7) (6.2) (2.5) (41.4) (35.7) (24.3) (11.4) (46.7)
-------------------------------------------------------------------------
Consolidated
Operating
Income(1) 257.8 243.2 14.6 6.0 711.8 694.2 17.6 2.5
-------------------------------------------------------------------------
(1) Defined as operating income before integration costs on
cablesystems exchange (in 2001 results) and depreciation and
amortization
The trend in revenue growth continued, increasing 8.4% over the third
quarter of 2000 with each division contributing increases at levels similar to
the growth in the first two quarters of this year.
Consolidated operating income before integration costs on cable systems
exchange, depreciation and amortization ("operating income") for the third
quarter was $257.8 million, an increase of $14.6 million or 6.0% from $243.2
million in the prior year. For the nine month period, operating income
increased to $711.7 million from $694.2 million in the same period of the
prior year.
In the quarter, each division produced year-over-year operating income
growth with Cable at 11.2%, Media at 24.0% and Wireless at 1.2%.
Fixed Charges
Three Months Ended Nine Months Ended
September 30, September 30,
(In millions -------------------------------------------------------
of dollars) 2001 2000 Chg % Chg 2001 2000 Chg % Chg
-------------------------------------------------------------------------
Depreciation and
amortization 223.1 186.6 36.5 19.6 667.9 528.4 139.5 26.4
Interest expense 108.4 87.8 20.6 23.4 310.4 270.9 39.5 14.6
Increased depreciation and amortization expense was primarily due to the
capital spending at the Cable and Wireless companies and the resulting higher
fixed asset levels, as well as a reduction in the assumed life of certain of
the Company's wireless network assets, effective January 1, 2001.
Interest expense was partially offset by interest income on significant
cash balances. Interest income is recorded as part of Investment and other
income (loss).
Net Income/Loss
Three Months Ended Nine Months Ended
September 30, September 30,
(In millions ----------------------------------------------------------
of dollars,
except per
share data) 2001 2000 Chg % Chg 2001 2000 Chg % Chg
-------------------------------------------------------------------------
Net income
(loss) (57.8) 156.9 (214.7) - (258.1) 162.6 (420.7) -
Net income
(loss) per
share (37 70 $(1.07) - $(1.52) 64 $(2.16) -
cents) cents cents
Loss (excl.
non-operating
gains) (91.5) (20.6) (70.9) - (273.1) (71.4) (201.7) -
Loss per share
(excl. non-
operating
gains) (53 (17 (36 - $(1.59) (51 $(1.08) -
cents) cents) cents) cents)
RCI recorded a loss of $57.8 million, or 37 cents per share (after
distributions on convertible preferred securities) compared to income of
$156.9 million, or 70 cents per share (after distributions on convertible
preferred securities) in the third quarter of the prior year. Excluding non-
operating gains in both periods, RCI recorded a loss of $91.5 million or
53 cents per share (after distributions on convertible preferred securities)
compared to a loss of $20.6 million or 17 cents per share (after distributions
on convertible preferred securities) in the third quarter of the prior year.
Staffing
At September 30, 2001, Rogers had approximately 13,300 employees, an
increase of 600 employees from 12,700 employees reported at December 31, 2000,
due primarily to the acquisition of Cable Atlantic and increases in Customer
Care headcount, offset partially by the sale of Bowdens.
Wireless
(Subscriber
statistics in
thousands except
ARPU and usage, Three Months Ended Nine Months Ended
revenue in September 30, September 30,
millions of --------------------------------------------------------
dollars) 2001 2000 Chg % Chg 2001 2000 Chg % Chg
-------------------------------------------------------------------------
Total - Postpaid
and Prepaid
----------------
Wireless voice
services
revenue 365.6 330.5 35.1 10.6 1,037.8 934.7 103.1 11.0
Gross
additions 318.2 248.2 70.0 28.2 847.0 702.6 144.4 20.6
Net additions 113.5 66.0 47.5 72.0 297.8 214.2 83.6 39.0
Subscribers 2,811.7 2,367.2 444.5 18.8
ARPU (blended)
(1) 44.26 47.25 (2.99) (6.3) 43.50 46.11 (2.61) (5.7)
Postpaid
Gross
additions 197.1 186.8 10.3 5.5 535.7 517.5 18.2 3.5
Net additions 55.4 49.8 5.6 11.2 135.9 136.9 (1.0) (0.7)
Subscribers 2,183.1 1,998.2 184.9 9.3
ARPU 53.57 53.91 (0.34) (0.6) 52.08 52.49 (0.41) (0.8)
Average monthly
usage (minutes) 313 278 35 12.6 297 258 39 15.1
Churn 2.20 2.32 (0.12) (5.2) 2.18 2.21 (0.03) (1.4)
Prepaid
Gross
additions 121.1 61.5 59.6 97.2 311.3 185.1 126.2 68.2
Net additions 58.1 16.2 41.9 258.6 161.9 77.3 84.6 109.4
Subscribers 628.6 369.0 259.6 70.3
ARPU (1) 10.67 10.53 0.14 1.3 10.02 9.00 1.02 11.3
Churn 3.57 4.25 (0.68) (16.0) 3.13 3.63 (0.5)(13.8)
(1) Prepaid ARPU calculated on wholesale price of prepaid cards.
Wireless voice services revenue growth of $35.1 million was driven by an
18.1% increase in the average number of wireless voice subscribers and a
$12.3M increase in contribution revenues collected in the form of a system
access fee, partially offset by a decline in blended ARPU compared to the
third quarter of the prior year. For the quarter, the higher system access fee
had the effect of improving monthly blended voice ARPU by approximately $1.48.
Total gross voice subscriber additions of 318,200 in the quarter
represented an increase of 28.2% over the third quarter of the prior year.
Total net subscriber additions were 113,500 in the third quarter, an increase
of 72.0% over the third quarter of the prior year.
Postpaid subscriber additions in the quarter represented 61.9% of the
total gross additions and 48.8% of the total net additions. Year-to-date,
postpaid subscriber additions accounted for 63.3% of the total gross additions
and 45.6% of the total net additions. The balance of gross and net additions
for the quarter and for the year-to-date was on prepaid service. The total
number of voice subscribers on digital service was approximately 1,960,000, or
69.7% of the total wireless voice subscriber base.
Postpaid monthly ARPU was $53.57, down $0.34 or 0.6% versus the prior
year's third quarter. Prepaid monthly ARPU, calculated on wholesale price of
prepaid cards, was $10.67, up $0.14 or 1.3% versus the prior year's third
quarter. Blended voice monthly ARPU (prepaid and postpaid) was $44.26, down
$2.99 or 6.3% from $47.25 in the third quarter of 2000. The decline in ARPU
was primarily due to an increase in the proportion of subscribers on prepaid
service. Prepaid subscribers accounted for 22.4% of the total wireless voice
subscriber base at September 30, 2001 compared to 15.6% at September 30, 2000.
Average monthly postpaid wireless voice subscriber churn of 2.20%,
improved from 2.32% in the third quarter of the prior year but increased
slightly from 2.10% in the second quarter of 2001. Churn reduction will
continue to be a top priority.
Equipment Sales, Messaging and Data Services
Three Months Ended Nine Months Ended
September 30, September 30,
(In millions -------------------------------------------------------
of dollars) 2001 2000 Chg % Chg 2001 2000 Chg % Chg
-------------------------------------------------------------------------
Equipment
revenue 46.7 48.7 (2.0) (4.1) 133.6 141.7 (8.1) (5.7)
Messaging and
data services
revenue 13.8 15.4 (1.6) (10.4) 43.0 45.4 (2.4) (5.3)
Revenue from Other Operations (including equipment sales, and messaging
and data services) was $60.5 million, a decrease of $3.6 million, or 5.6% from
the third quarter of the prior year.
Revenue from equipment sales was $46.7 million, a decrease of $2.0
million from the third quarter of the prior year. The decline in equipment
sales, as compared to the same quarter in the prior year, is primarily
attributable to reductions in equipment prices.
Messaging and data services revenue decreased to $13.8 million from $15.4
million in the third quarter of the prior year due to declines in one-way
paging revenue.
Messaging and Data Subscribers
Three Months Ended Nine Months Ended
(In thousands, September 30, September 30.
except churn -------------------------------------------------------
and ARPU) 2001 2000 Chg % Chg 2001 2000 Chg % Chg
-------------------------------------------------------------------------
Gross
additions 36.6 35.3 1.3 3.7 103.4 113.6 (10.2) (9.0)
Net additions (7.0) (3.1) (3.9) - (20.8) (8.3) (12.5) -
Subscribers 423.2 443.7 (20.5) (4.6)
Average monthly
churn 3.40% 2.87% (0.53) (18.5) 3.20% 3.02% 0.18 6.0
ARPU - Paging 8.86 11.11 (2.25) (20.3) 9.64 11.01 (1.37)(12.4)
ARPU - Data
and two-way
messaging 28.49 21.84 6.65 30.4 27.39 19.09 8.3 43.5
Total messaging and data subscribers decreased by 7,000 in the third
quarter, compared to a decline of 3,100 in the prior year's third quarter. Two-
way messaging subscribers totalled 26,100 as at September 30, 2001,
substantially higher than the 12,300 total as at September 30, 2000.
Operating Expenses
(In millions of Three Months Ended Nine Months Ended
dollars, except September 30, September 30,
per subscriber -------------------------------------------------------
statistics) 2001 2000 Chg % Chg 2001 2000 Chg % Chg
-------------------------------------------------------------------------
Operating
expenses before
sales and
marketing 136.2 115.2 21.0 18.2 400.7 326.0 74.7 22.9
Sales and
marketing
expenses 119.3 108.5 10.8 10.0 359.6 315.6 44.0 13.9
Average monthly
operating
expenses
before sales
and marketing
costs per
subscriber 14.28 13.83 0.45 3.3 14.45 13.41 1.04 7.7
Total gross
additions
(Wireless voice,
Messaging and
data) 354.8 283.5 71.3 25.2 950.4 816.1 134.3 16.5
Sales and
marketing cost
per gross
addition 336 383 (47) (12.3) 378 387 (9) (2.3)
Sales and
marketing cost
per gross
addition
excluding
retention costs 277 303 (26) (8.3) 295 303 (8) (2.6)
Total operating expenses before sales and marketing costs were $136.2
million, an increase of $21.0 million or 18.2% from $115.2 million in the
third quarter of 2000. Revenue-based contribution expense of $11.7 million is
the largest single driver of the year-over-year increase. This is due to
legislated changes from the Canadian Radio-television and Telecommunications
Commission (CRTC). The increased revenue-based contribution expense was passed
through to customers in the form of an increased system access fee beginning
in February 2001. Customer Care expenses per subscriber increased year-over-
year primarily as a result of higher incoming call volumes associated with the
Company's ongoing stabilization of its new customer care and billing system
and related processes.
Sales and marketing costs were $119.3 million, an increase of $10.8
million or 10.0% from $108.5 million in the third quarter of 2000. This
increase is attributed to the 28.2% increase in total Wireless gross
additions. Sales and marketing cost per wireless gross addition, including
retention costs, was $336 compared to $383 in the third quarter of 2000.
Excluding retention related costs, sales and marketing cost per wireless gross
addition was $277, down 8.6% from $303 in the third quarter of the prior year.
This decline is attributable to the higher percentage of prepaid gross
additions in the current year as compared to the same quarter in the prior
year plus the fact fixed sales and marketing costs are spread out over a
greater number of additions due to strong sales this quarter.
Capital Expenditures
Three Months Ended Nine Months Ended
September 30, September 30,
(In millions -------------------------------------------------------
of dollars) 2001 2000 Chg % Chg 2001 2000 Chg % Chg
-------------------------------------------------------------------------
Capital
expenditures
(excluding
spectrum licence
costs(x)) 150.1 152.4 (2.3) (1.5) 528.0 362.3 165.7 45.7
(2) (x) Spectrum licences across Canada for the deployment of next
generation wireless services were acquired in February 2001 at a
total cost of $396.8 million.
Capital expenditures totalled $150.1 million, a decrease of $2.3 million
from the third quarter of 2000. Network related expenditures were $114.0
million, of which 49.3% related to the rollout of the GSM-GPRS network
overlay, and the remainder for capacity and technical spending. The Company
added 47 new cell sites to its cellular network in the quarter bringing the
total to 2,034. The remaining capital expenditures of $36.1 million related to
mostly information technology initiatives and expansion of the Company's call
centres and other facilities.
Cable
Three Months Ended Nine Months Ended
(In millions September 30, September 30,
of dollars, -------------------------------------------------------
except margin) 2001 2000 Chg % Chg 2001 2000 Chg % Chg
-------------------------------------------------------------------------
Core Cable
Revenue 261.8 246.4 15.4 6.3 781.7 731.9 50.0 6.8
High Speed
Internet
Revenue 43.5 30.8 12.7 41.2 118.9 79.4 39.5 49.7
Video Stores
Revenue 55.3 49.0 6.3 12.9 160.3 142.8 17.5 12.3
Total Cable
Revenue 360.6 326.2 34.4 10.5 1,061.1 954.1 107.0 11.2
Operating
income (1) 130.3 117.1 13.2 11.3 384.1 338.4 45.7 13.5
Core Cable
Operating
margin 42.0% 41.5% 0.5 - 42.3% 41.5% 0.8 -
High Speed
Operating
margin 35.0% 34.0% 1.0 - 35.1% 31.7% 3.4 -
Total Operating
margin 36.1% 35.9% 0.2 - 36.2% 35.5% 0.7 -
(1) defined as operating income before integration costs on cablesystems
exchange (in 2001 results) and depreciation and amortization
Cable revenue increased $34.4 million or 10.5% for the quarter and $107.0
million or 11.2% on a year-to-date basis. The integration of Cable Atlantic
contributed approximately $10.0 million of the revenue increase in the
quarter, growth of high speed Internet services contributed $11.0 million, and
the remainder was driven by growth at the Cable and Video Store divisions.
Increased digital penetration, rate increases and the acquisition of
Cable Atlantic contributed to the growth in Core Cable revenue of $15.4
million for the quarter and $50.0 million year-to-date.
High speed Internet revenue increased $12.7 million or 41.2% for the
quarter and $39.5 million or 49.7% year-to-date as a result of the 40.7%
increase in the subscriber base versus the prior year and the inclusion of
Cable Atlantic.
Video stores revenue increased $6.3 million or 12.9% in the quarter and
$17.5 million or 12.3% year-to-date. This revenue was earned in the Company's
254 stores which have grown from the opening years level of 241 as well as
higher average spending per customer visit in the current year. Same store
revenues have increased 4.2% in the current year.
Operating income before depreciation, amortization and integration costs
on cablesystems exchange, increased $13.2 million or 11.3% in the quarter and
$45.7 million or 13.5% for the year-to-date. Cable Atlantic contributed
operating income of approximately $3.9 million of the increase in the third
quarter and $10.4 million on a year-to-date basis.
Operating margins in the quarter continue to show improvement year-over-
year reflecting management's continued commitment to aggressively pursue
operational efficiencies where possible.
Three Months Ended Nine Months Ended
(Subscriber September 30, September 30,
statistics -------------------------------------------------------
in thousands) 2001 2000 Chg % Chg 2001 2000 Chg % Chg
-------------------------------------------------------------------------
Basic cable
subscribers 2,276.8 2,228.7 48.1 2.2
Basic cable,
net additions (2.7) (4.5) 1.8 (40.0) (14.3) (7.6) (6.7) 88.2
High Speed Internet
subscribers 422.6 300.4 122.2 40.7
High Speed Internet,
net additions 43.9 34.6 9.3 26.9 103.9 114.7 (10.8) (9.4)
Digital boxes
in service 286.5 139.6 146.9 105.2
Digital boxes,
net additions 47.3 28.2 20.2 71.6 83.3 86.0 (2.7) (3.1)
Digital
households 247.0 116.0 131.0 112.9
Digital
households,
net additions 43.2 24.8 18.4 74.2 74.9 70.8 4.1 5.8
VIP Customers 475.1 477.0 (1.9) (0.4)
VIP Customers,
net additions 29.0 14.1 14.9 105.7 115.7 88.4 27.3 30.9
Basic cable subscriber losses of 2,700 were well below the losses
experienced in the third quarter of 2000 and were much improved from the
losses experienced in the second quarter of this year.
At September 30, 2001, 84.7% of basic cable service customers also
subscribed to tier services, compared to 85.4% at September 30, 2000. Tier III
is currently available only in Ontario where the penetration levels have grown
to 63.2% at September 30, 2001 up from the 61.1% September 30, 2000. Cable
ended the quarter with 475,100 VIP customers.
Cable added 43,900 net High Speed Internet subscribers, 19,300 more than
were added in third quarter of the prior year. At September 30, 2001, Cable
was able to market its high-speed Internet access services to approximately
84% of homes passed (93% excluding New Brunswick and Newfoundland).
The launch of up to 52 new digital channels in the quarter resulted in
record additions of digital set-top boxes. During the quarter Cable placed an
additional 48,400 digital set-top devices in service, ending the third quarter
with 286,500 devices in 247,000 households.
Operating Expenses
Three Months Ended Nine Months Ended
September 30, September 30,
(In millions -------------------------------------------------------
of dollars) 2001 2000 Chg % Chg 2001 2000 Chg % Chg
-------------------------------------------------------------------------
Cable operating
expenses 230.3 209.1 21.2 10.2 677.1 615.7 61.4 10.0
Operating expenses increased by $21.2 million over the same quarter last
year due to $6.0 million of Cable Atlantic expenses, $6.8 million of High
Speed expenses (primarily related to growth in subscriber base), $6.1 million
of additional video store expenses (primarily related to additional stores),
and the remainder of the increase due primarily to the growth of core cable
operations Customer Care activities.
Capital Expenditures
Three Months Ended Nine Months Ended
September 30, September 30,
(In millions -------------------------------------------------------
of dollars) 2001 2000 Chg % Chg 2001 2000 Chg % Chg
-------------------------------------------------------------------------
Capital
Expenditures 173.1 171.8 1.3 0.8 475.7 415.6 60.1 14.5
Network related expenditures in the quarter were $104.0 million. This is
increased over the third quarter of 2000 due to an increase in spending
related to the implementation of DOCSIS, high speed Internet related network
expansion, and ongoing 750Mhz/860Mhz network upgrade and expansion projects.
Included in the balance of the capital expenditures were the costs of
purchasing and installing cable modems and digital set top boxes.
Media
Three Months Ended Nine Months Ended
September 30, September 30,
(In millions -------------------------------------------------------
of dollars) 2001 2000 Chg % Chg 2001 2000 Chg % Chg
-------------------------------------------------------------------------
Revenue
Radio 38.1 34.3 3.8 11.1 107.2 99.9 7.3 7.3
CFMT 12.1 11.1 1.0 9.0 37.9 37.0 0.9 2.4
The Shopping
Channel 43.5 41.4 2.1 5.1 137.7 127.5 10.2 8.0
Publishing 68.1 68.4 (0.3) (0.4) 219.1 212.6 6.5 3.1
IMedia 2.4 1.7 0.7 41.2 7.6 4.2 3.4 81.0
----- ----- ----- ----- ----- ----- ---- ----
Total Media
Revenue 164.2 156.9 7.3 4.7 509.5 481.2 28.3 5.9
Three Months Ended Nine Months Ended
September 30, September 30,
(In millions -------------------------------------------------------
of dollars) 2001 2000 Chg % Chg 2001 2000 Chg % Chg
-------------------------------------------------------------------------
Operating income
Radio 10.4 8.9 1.5 16.9 26.9 24.5 2.4 9.8
CFMT 2.1 1.5 0.6 40.0 8.5 7.3 1.2 16.4
The Shopping
Channel 2.5 3.2 (0.7) (21.9) 10.0 11.3 (1.3)(11.5)
Publishing 2.8 3.0 (0.2) (6.7) 16.6 16.1 0.5 3.1
iMedia (3.0) (4.4) 1.4 31.8 (12.3) (12.0) (0.3) (3.3)
Corporate (2.4) (2.2) (0.2) (9.1) (6.8) (5.6) (1.2)(21.4)
----- ----- ----- ----- ------ ------ ---- -----
Total Media
Operating
Income 12.4 10.0 2.4 24.0 42.9 41.6 1.3 3.2
All divisions with the exception of publishing reported revenue growth in
the quarter. Revenue at the Media division was $164.2 million in the quarter,
a 4.7% increase, and $509.5 million year-to-date, a 5.9% increase.
Radio revenue increased $3.8 million, or 11.1% in the quarter and $7.3
million, or 7.3% year-to-date. Most markets produced year over year increases
with the strongest showings in the Calgary and Vancouver markets. During the
quarter, Media completed the AM to FM conversion of three stations in the
Fraser Valley, B.C., launching these stations under the 'Star FM' brand.
Radio operating income increased $1.5 million or 16.9% for the quarter
and $2.4 million or 9.8% year-to-date versus the prior year periods. The Radio
group has focused intently on cost controls in light of the slowdown in the
advertising market.
CFMT-TV ("CFMT"), Media's multilingual television station, reported a
revenue increase of 9.0% in the third quarter versus the prior year period,
bringing the year-to-date increase up to 2.4%.
CFMT's operating income in the quarter was $2.1 million, an increase of
$0.6 million or 40.0%, and $8.5 million year-to-date, up $1.2 million or
16.4%. The increase in operating income in the quarter reflects the impact of
focused cost control measures and benefits from cost sharing of our CFMT
facilities with our newly launched digital channels.
The Shopping Channel revenue increased $2.1 million, or 5.1%, in the
quarter and $10.1 million, or 8.0% year-to-date. Sales at the Shopping Channel
in the last half of September were dramatically impacted by the U.S. terrorist
attacks that drove a decline in viewers. Sales have since returned to near
normal levels. The Shopping Channel continues to expand items shipped through
its off-air distribution channels. Non-broadcast channels produced 19.2% of
tSc's revenue, compared to 11.7% in the third quarter of 2000. The Shopping
Channel's operating income for the quarter is down 0.7% versus the prior
year's period, due mainly to higher on-air distribution costs.
Revenue at the Publishing division decreased by $0.3 million or 0.4% for
the quarter and $6.5 million or 3.1% year-to-date. Advertising and circulation
revenues in the quarter, driven by a strong performance from our Women's
publication, increased by approximately 4.3% over the prior year. These
increases were offset by declining revenues in the Medical Education Network
and the sale of Bowdens Media Monitoring in the quarter. Publishing sales have
been negatively impacted by the overall slowing in the economy, and more
recently, by the U.S. terrorist attacks.
Operating income at publishing in the quarter decreased marginally by
$0.2 million or 6.7% from the third quarter of the prior year due primarily to
declining margins related to decreased revenue from the Medical Education
Network. Year-to-date, operating income increased marginally, by $0.5 million
or 3.1%, over the same period for the prior year.
iMedia restructured its operations in the first half of 2001 with the
objective of focusing on its core Internet properties. Restructuring costs of
$3.0 million are reflected in year-to-date results. The results for the
quarter reflect the benefits of this restructuring with a 41.2% improvement in
revenues as compared to the prior year and a reduction in operating loses of
31.8%.
Other Income (Expense) Items
The Company sold certain non-core assets in the quarter including its
media monitoring business for $40.3 million, which generated a gain of $33.4
million before taxes. The Company also sold 365,000 common shares of Liberate
Technologies Inc. for $7.1 million in the quarter, which resulted in a gain of
$4.5 million before income taxes.
Investment and other income (loss) for the quarter includes equity losses
for the Toronto Blue Jays of $31.7 million and costs associated with the offer
to privatize the Wireless subsidiary of $4.3 million. This is partially offset
by interest income on cash balances.
Risks and Uncertainties
The following items serve as an update to the risks and uncertainties
facing Rogers Communications as identified in the 2000 Annual Report:
Effective January 1, 2001, the CRTC implemented the new revenue-based
contribution scheme that requires contribution payments to be made by all
telecommunications carriers at a rate of 4.5% of adjusted revenues. This rate
was confirmed in an order released on October 1, 2001 and is expected to
decrease for 2002. There remain some ongoing disputes between the CRTC and the
carriers, including the Company, regarding allowable deductions from
contribution eligible revenue. These disputes are not expected to be resolved
until the fourth quarter of 2001.
As at the December 31, 2000, the CRTC had initiated a proceeding to
consider the appropriate terms and conditions, including rates of access to
municipal property in the City of Vancouver. The CRTC announced their decision
on January 25, 2001. The decision was generally favourable to carriers and
distribution undertakings. The Municipalities have sought and received leave
to appeal the CRTC decision on payments for municipal rights of way in
Vancouver. Cable requires access to support structures (poles and conduits)
and municipal rights of way in order to deploy its facilities. In September
1999, the CRTC granted cable operators the right to access municipal electric
poles on the same terms and conditions as are set out in the individual
expired agreements, and at a fixed rate of $16 per pole per year. The
municipal hydroelectric companies launched an appeal of the CRTC's decision in
the Federal Court of Appeal. This court challenge sought to remove the ability
of the CRTC to regulate access to hydroelectric poles, which could lead to
higher rates for pole access. The Federal Court of Appeal recently released
its decision in the case involving hydro poles. The court ruled that section
43(5) of the Telecommunications Act does not give the CRTC any power to set
rates regarding hydro poles, and that it only applies to cable and telephone
poles. This decision may mean that no agency regulates hydro pole rates in
Ontario. The Company, through the Canadian Cable Television Association is
seeking leave to appeal the decision to the Supreme Court of Canada. The
Ontario Energy Board may also have jurisdiction to set rates. In the short
term, the Company may be subject to rate increases from some hydro companies.
Some agreements contain clauses requiring retroactive payments in the event
that a higher final rate is set or agreed to.
The CRTC has issued a call for applications for an ethnic television
station in Vancouver and Rogers Broadcasting has filed such an application. A
hearing with the CRTC is scheduled for October 15th, 2001.The CRTC has also
issued a call for television stations in the Toronto, Hamilton and Kitchener
markets. Rogers has filed an application for a Toronto television license. A
hearing with the CRTC is scheduled for December 3rd, 2001.
A provider of certain functionality for the Company's high speed Internet
access service, @Home Corporation, entered protection under Chapter 11 of
the U.S. bankruptcy laws in September 2001. The Company has accelerated its
plans to migrate the provision of these service elements internally and has
reached an interim agreement for the continuation of service with @Home
Corporation. The Company expects that it will incur capital expenditures
associated with this initiative during the fourth quarter of 2001 that were
previously planned for future periods.
Liquidity and Capital Resources
Cash flow from operating activities, after changes in working capital,
decreased to $200.0 million from $408.5 million in the third quarter of the
prior year primarily due to the proceeds received in third quarter of the
prior year upon the termination of the proposed acquisition of Videotron.
RCI's operating cash flow shortfall (defined as cash flow from operating
activities after working capital, capital expenditures and distributions on
convertible preferred securities) was $136.7 million in the third quarter of
2001 compared to a surplus of $66.5 million in the third quarter of 2000, also
impacted by the prior year proceeds received upon termination of the proposed
acquisition of Videotron.
At September 30, 2001, RCI's total long-term debt net of cash was $4.7
billion, an increase of over $1.0 billion from $3.7 billion at December 31,
2000. The change in long-term debt, net of cash, reflects the issuance of
US$500 million Senior Secured Notes (C$770.4 million) issued earlier this year
by Wireless and the drawdown of an aggregate $592 million of bank debt by
Cable and Media, offset by a net increase in cash of approximately $350
million. The net increase in cash reflects the repayment of all intercompany
debt owing by Wireless, Cable and Media to RCI.
Financing
During the third quarter, Media entered into a $500 million revolving
bank credit facility, of which approximately $285 million was utilized during
the quarter to repay intercompany borrowings. This bank credit facility has a
five year term with no scheduled reductions prior to maturity in September
2006.
About the Company: Rogers Communications Inc. (TSE: RCI.A and RCI.B;
NYSE: RG) is Canada's national communications company engaged in cable
television, high-speed Internet access and video retailing through Rogers
Cable Inc., cellular, digital PCS, paging and data communications through
Rogers AT&T Wireless, and in radio and television broadcasting, tele-shopping,
publishing and new media businesses through Rogers Media Inc.
(see attached financial tables and notes to financial tables)
Rogers Communications Inc.
--------------------------
Consolidated Statements of Income
---------------------------------
Three Months Ended Nine Months Ended
(in thousands of dollars September 30, September 30,
except per share data) 2001 2000 2001 2000
--------------------------------- ----------- ----------- ------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Revenue $ 951,783 $ 877,721 $ 2,789,796 $ 2,557,087
Operating, general
and administrative
expenses 694,013 634,517 2,078,049 1,862,854
--------------------------------- ----------- ----------- ------------
Operating income
before
the following: 257,770 243,204 711,747 694,233
Integration costs
on cablesystems
exchange 500 - 16,462 -
Depreciation and
amortization 223,113 186,586 667,854 528,438
--------------------------------- ----------- ----------- ------------
Operating
income (loss) 34,157 56,618 27,431 165,795
Interest on
long-term debt (108,391) (87,839) (310,447) (270,874)
--------------------------------- ----------- ----------- ------------
(74,234) (31,221) (283,016) (105,079)
Gain on sale of
subsidiary, net 33,391 - 33,391 -
Gain on sale of
assets and other
investments 4,488 19,688 6,873 98,279
Proceeds received on
termination of
merger
agreement, net - 222,456 - 222,456
Investment and other
income (loss) (32,457) 557 (56,934) (3,676)
--------------------------------- ----------- ----------- ------------
Income (loss) before
income taxes and
non-controlling
interest (68,812) 211,480 (299,686) 211,980
--------------------------------- ----------- ----------- ------------
Income taxes
Current 4,121 1,864 10,784 7,535
Future (1,354) 53,480 6,424 48,376
--------------------------------- ----------- ----------- ------------
2,767 55,344 17,208 55,911
--------------------------------- ----------- ----------- ------------
Loss before
non-controlling
interest (71,579) 156,136 (316,894) 156,069
Non-controlling
interest 13,762 728 58,831 6,483
--------------------------------- ----------- ----------- ------------
Net income (loss)
for the period $ (57,817) $ 156,864 $ (258,063) $ 162,552
--------------------------------- ----------- ----------- ------------
Earnings per share
Basic $ (0.37) $ 0.70 $ (1.52) $ 0.64
Fully diluted $ (0.37) $ 0.59 $ (1.52) $ 0.55
Average Class A
and Class B
Shares outstanding
for the period
(thousands)
Basic 208,349 203,680
Fully diluted 216,015 246,501
--------------------------------- ----------- ----------- ------------
See accompanying Notes to Consolidated Financial Statements.
Rogers Communications Inc.
Consolidated Statements of Cash Flows
Three Months Ended Nine Months Ended
(in thousands of September 30, September 30,
dollars) 2001 2000 2001 2000
---------------------------------- ------------ ------------ ------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Cash provided by
(used in):
Operating activities:
Net income for the
period $ (57,817) $ 156,864 $ (258,063) $ 162,552
Adjustments to
reconcile net
income to net cash
flows from
operating activities:
Depreciation and
amortization 223,113 186,586 667,854 528,438
Future income
taxes (1,354) 53,480 6,424 48,376
Non-controlling
interest (13,762) (728) (58,831) (6,483)
Gain on sale of
subsidiary, net (33,391) - (33,391) -
Gain on sale of
assets and other
investments (4,488) (19,688) (6,873) (98,279)
Share of loss
(income) of
associated
companies, net 31,334 (366) 63,635 2,612
Accrued interest
due on repayment
of certain notes 2,516 2,289 7,398 6,702
Dividends from
associated
companies 627 272 1,691 1,094
---------------------------------- ------------ ------------ ------------
146,778 378,709 389,844 645,012
Change in:
Accounts receivable (20,296) (46,221) 67,891 (38,975)
Accounts payable and
accrued liabilities
and unearned
revenue 99,065 87,980 (758) 14,509
Deferred charges and
other assets (25,597) (11,985) (83,202) (26,825)
---------------------------------- ------------ ------------ ------------
199,950 408,483 373,775 593,721
---------------------------------- ------------ ------------ ------------
Financing activities:
Issue of long-term
debt, net 597,098 (567,069) 1,294,067 (161)
Financing costs
incurred (7,025) - (26,210) -
Funds received from
non-controlling
shareholders - - 167,302 -
Issue of preferred
shares and warrants - 925,265 - 925,265
Issue of capital
stock 1,285 528 12,420 12,939
Dividends on
preferred shares
and distribution on
convertible preferred
securities (8,250) (8,250) (24,764) (24,750)
---------------------------------- ------------ ------------ ------------
583,108 350,474 1,422,815 913,293
---------------------------------- ------------ ------------ ------------
Investing activities:
Additions to fixed
assets (328,403) (333,755) (1,015,646) (803,285)
Acquisition of
Spectrum licences - - (396,824) -
Proceeds on sale of
subsidiary, net 40,325 - 40,325 -
Proceeds on sale of
assets and other
investments 7,069 19,688 11,327 119,661
Investment in Cogeco
Inc. and Cogeco Cable
Inc. - - - (307,985)
Acquisitions of
subsidiary companies,
net of cash acquired - - (18,320) -
Other investments (27,855) (54,421) (67,632) (165,508)
---------------------------------- ------------ ------------ ------------
(308,864) (368,488) (1,446,770) (1,157,117)
---------------------------------- ------------ ------------ ------------
Increase in cash
and cash equivalents 474,194 390,469 349,820 349,897
Cash and cash
equivalents (deficiency),
beginning of period 174,777 (26,635) 299,151 13,937
---------------------------------- ------------ ------------ ------------
Cash and cash
equivalents, end of
period $ 648,971 $ 363,834 $ 648,971 $ 363,834
---------------------------------- ------------ ------------ ------------
---------------------------------- ------------ ------------ ------------
Supplemental cash
flow information:
Income taxes paid $ 2,953 $ 4,892 $ 12,547 $ 14,699
Interest paid 89,770 84,656 290,179 252,231
---------------------------------- ------------ ------------ ------------
---------------------------------- ------------ ------------ ------------
Cash and cash equivalents (deficiency) are defined as cash and short-term
deposits, which have an original maturity of less than 90 days, less bank
advances.
See accompanying Notes to Consolidated Financial Statements.
Rogers Communications Inc.
Consolidated Balance Sheets
September 30, December 31,
(in thousands of dollars) 2001 2000
------------------------------------------------------------ ------------
(Unaudited) (Audited)
Assets
Fixed assets $ 4,530,902 $ 4,047,329
Goodwill, subscribers and licences 1,959,370 1,573,923
Investments 1,078,047 972,648
Cash and cash equivalents 648,971 299,151
Accounts receivable 433,993 501,553
Deferred charges 290,459 235,824
Other assets 286,450 235,867
------------------------------------------------------------ ------------
$ 9,228,192 $ 7,866,295
------------------------------------------------------------ ------------
------------------------------------------------------------ ------------
Liabilities and Shareholders' Equity
Liabilities
Long-term debt $ 5,396,423 $ 3,957,662
Accounts payable and accrued liabilities 1,017,885 1,127,996
Unearned revenue 92,173 104,467
Future income taxes 120,683 145,560
------------------------------------------------------------ ------------
6,627,164 5,335,685
Non-controlling interest 257,444 114,432
Shareholders' equity 2,343,584 2,416,178
------------------------------------------------------------ ------------
$ 9,228,192 $ 7,866,295
------------------------------------------------------------ ------------
------------------------------------------------------------ ------------
Rogers Communications Inc.
Consolidated Statements of Deficit
September 30, December 31,
(in thousands of dollars) 2001 2000
------------------------------------------------------------ ------------
(Unaudited) (Audited)
Deficit, beginning of the period $ (63,041) $ (160,510)
Net income (loss) (258,063) 141,442
Dividends on Series B and Series E Preferred
shares, and on the Class A Voting and Class B
Non-Voting shares (14) (10,200)
Distribution on Convertible Preferred Securities,
net of income tax recovery of $10,791
(2000 - $14,388) (13,959) (18,612)
Dividends accreted on Preferred Securities,
net of income tax recovery of $23,369
(2000 - $11,721) (30,229) (15,161)
------------------------------------------------------------ ------------
Deficit, end of the period $ (365,306) $ (63,041)
------------------------------------------------------------ ------------
------------------------------------------------------------ ------------
See accompanying Notes to Consolidated Financial Statements.
Rogers Communications Inc.
--------------------------
Notes to Consolidated Financial Statements
------------------------------------------
Nine Months Ended September 30, 2001
1. Significant accounting policies
The interim consolidated financial statements include the accounts of
Rogers Communications Inc. ("RCI") and its subsidiary companies
(collectively the "Company"). These interim financial statements should
be read in conjunction with the most recently prepared annual financial
statements.
These interim consolidated financial statements follow the same
accounting policies and methods of application as the most recent annual
statements except as follows;
i. Effective January 1, 2001, the Company changed the estimated useful
lives of certain network equipment that will result in an increase
in depreciation expense of approximately $25 million for fiscal
2001. The impact of this change for the three and nine months ended
September 30, 2001, was to increase depreciation expense by $6.5
million and $18.8 million respectively.
ii. Effective January 1, 2001, the Company adopted the "Earnings per
Share" standards issued by the Canadian Institute of Chartered
Accountants. The standard requires the use of the treasury stock
method for calculating fully diluted earnings per share consistent
with United States Generally Accepted Accounting Principles.
iii. Effective April 1, 2001, the Company reached an agreement with
Rogers Telecommunications Limited (RTL), a company controlled by the
controlling shareholder of the Company, under which RTL invested $30
million of voting preferred shares into an RCI Subsidiary that will
own the Toronto Blue Jays. These preferred shares gave RTL
sufficient voting rights to control the Blue Jays operations. As a
result, the Company no longer consolidates the results of the Blue
Jays but rather accounts for the results on an equity basis. RCI
will continue to own 80% of the common equity of the Toronto Blue
Jays and will have the right exercisable at any time, to purchase
the preferred shares at their issue price. In addition, RCI and RTL
have agreed that for the first three years, the dividends on the
preferred shares may be satisfied in kind, by RCI transferring an
agreed amount of tax deductions to RTL.
2. Acquisitions and Divestitures
i. On February 7, 2001, the Company acquired the shares of Cable
Atlantic Inc., which had cable television systems serving
approximately 75,600 basic subscribers in Newfoundland. The Company
paid cash of $16,300,000, net of cash acquired, and issued 4,170,330
Class B Non-Voting shares. The purchase price is subject to certain
working capital and valuation changes. Additional RCI Class B Non-
voting shares may be required to be issued to the vendor contingent
upon the quoted market value of shares not reaching a weighted
average price of $48 for any 28 day consecutive period within two
years of the closing date. The contracted transactional value of the
Company's Class B Non-Voting shares at $36.40, fell to $27.40 by
February 7, 2001 leaving a potential contingent payment of $11.60
per Class B Non-Voting share, representing the difference between
$48 and the contracted transactional value of $36.40. Total
consideration for this acquisition has been recorded at $39.00 per
Class B Non-Voting representing the market valuation of $27.40 at
date of acquisition and the $11.60 potential shortfall.
Consideration may be payable in the future through the issuance of
Class B Non-Voting shares, to a maximum of $48,400,000, contingent
on the quoted market value of the Class B Non-Voting shares of the
Company.
ii. In association with participation by Rogers Wireless Communications
Inc. ("Wireless") in the Industry Canada PCS Spectrum Auction, the
Company subscribed to approximately 60.4% of Wireless' $422.6
million Class B Restricted Voting Shares rights offer for $255.3
million with non-controlling interest shareholders funding $167.3
million. This transaction increased the Company's ownership to
52.47% contributing an additional amount of $35.9 million to
goodwill and minority interest.
iii. The Company also purchased the assets of Advisor Forum, a group of
trade shows that operate within the Canadian financial advisors
market for net cash consideration of $2.0 million.
Details of net assets acquired, at fair value, and the consideration
given are as follows:
September 30, December 31,
(in thousands of dollars) 2001 2000
------------------------------------------------------------ ------------
Fixed assets $ 42,498 $ 3,468
Investments acquired - 11,899
Goodwill 256,018 148,784
Other intangible assets - 119,926
Other assets 10,546 14,689
------------------------------------------------------------ ------------
309,062 298,766
Accounts payable, accrued liabilities, debt
assumed and non-controlling interest 128,099 89,488
------------------------------------------------------------ ------------
Total consideration $ 180,963 $ 209,278
------------------------------------------------------------ ------------
------------------------------------------------------------ ------------
Consideration comprised of:
Cash $ 18,320 $ 209,278
Class B Non-Voting shares 162,643 -
------------------------------------------------------------ ------------
$ 180,963 $ 209,278
------------------------------------------------------------ ------------
b. Divestitures
In September, 2001, the Company sold the assets of its media monitoring
business, Bowdens Media Monitoring Limited, for cash proceeds of
$40,325,000, which resulted in a gain on sale of $33,391,000 before
income taxes.
c. Privatization of Wireless Subsidiary
In June 2001, the Company proposed to take its Wireless subsidiary
private by acquiring all of the outstanding Class B Restricted Voting
shares (the "Wireless Class B shares") of Wireless owned by the public in
consideration of 1.1 Class B Non-Voting shares of the Company for each
Wireless Class B share held. On September 11, 2001, the minority public
shareholders voted against the proposed transaction thus terminating the
offer. The Company expensed in Other Income and Expenses during the
quarter the costs associated with the rejected privatization offer,
consisting primarily of legal, advisory and printing costs, which
totalled approximately $4,300,000.
3. Goodwill, spectrum licences and other intangible assets
September 30, December 31,
(in thousands of dollars) 2001 2000
------------------------------------------------------------ ------------
Goodwill $ 1,924,826 $ 1,767,971
Spectrum licences 396,824 -
Intangible assets - 119,926
------------------------------------------------------------ ------------
$ 2,321,650 $ 1,887,897
Less accumulated amortization 362,280 313,974
------------------------------------------------------------ ------------
$ 1,959,370 $ 1,573,923
------------------------------------------------------------ ------------
Wireless participated in the Industry Canada PCS Spectrum Auction that
was completed on February 1, 2001. Wireless purchased a total of 23
spectrum licences, in 12 of 14 regions in Canada, providing the
utilization of 10MHz of spectrum for each licence in the 1.9GHz for a
total of $396,824,000 including incremental costs related to preparation
and participation in the auction. The spectrum will facilitate the
additional capacity of existing wireless voice communications services
and the introduction of new wireless data communication services. Each
spectrum licence has a term of 10 years and a high expectation of renewal
for a further ten-year term unless a breach of licence condition has
occurred, a fundamental re-allocation of spectrum to a new service is
required, or an overriding policy need arises.
The change in the accounting treatment for the Blue Jays from
consolidation to equity accounting as outlined in Note 1 (iii) resulted
in $217,553,000 for goodwill and other intangibles along with other
assets and liabilities being removed from the Company's balance sheet as
at April 1, 2001 and the investment in the Toronto Blue Jays being
recorded as an investment, at equity (Note 5).
4. Investments
(in thousands of dollars,
except share amounts) Number Description
-------------------------------------------------------------------------
Investments, recorded at cost
(A) Publicly traded companies
AT&T Canada 25,002,100 Class B Deposit Receipts
Cogeco Cable Inc.
("Cogeco Cable") 4,253,800 Subordinate Voting Common
Cogeco Inc. ("Cogeco") 2,724,800 Subordinate Voting Common
Liberate Technologies, Inc.
("Liberate") 906,888 Common
200,000 Warrants
Terayon Communications
Systems, Inc. ("Terayon") 3,087,618 Common
Astral Communications Inc. 141,300 Class B Subordinate Voting
Bid.com International Inc.
("Bid.com") 202,300 Common
At Home Corporation 5,674,125 Warrants - vested
595,429 Warrants - not vested
Other
-------------------------------------------------------------------------
(B) Private technology companies
Futureway Communications,Inc. 6,117,648 Series 2 units
Other
(C) Other
Investments, accounted for by
the equity method
Toronto Blue Jays
CTV SportsNet
Other
-------------------------------------------------------------------------
(in thousands of dollars, Market September December
except share amounts) Value 30, 2001 31, 2000
-------------------------------------------------------------- ----------
Investments, recorded at cost
(A) Publicly traded companies
AT&T Canada 1,143,846 $ 450,104 $ 450,104
Cogeco Cable Inc. ("Cogeco Cable") 104,814 187,167 187,167
Cogeco Inc. ("Cogeco") 58,638 120,818 120,818
Liberate Technologies, Inc.
("Liberate") 14,262 14,353 20,938
966 - -
Terayon Communications Systems,
Inc. ("Terayon") 35,054 - -
Astral Communications Inc. 8,478 1,697 1,697
Bid.com International Inc. ("Bid.com") 79 264 255
At Home Corporation - - -
- - -
Other 15,015 15,852 32,537
-------------------------------------------------------------- ----------
1,381,152 790,255 813,516
(B) Private technology companies
Futureway Communications,Inc. 26,173 26,161
Other 47,833 42,450
(C) Other 7,695 40,403
Investments, accounted for by
the equity method
Toronto Blue Jays 155,817 -
CTV SportsNet 35,411 37,781
Other 14,863 12,337
-------------------------------------------------------------- ----------
$1,078,047 $ 972,648
-------------------------------------------------------------- ----------
During the nine months ended September 30, 2001, the Company sold 630,000
common shares of Liberate for proceeds of $11,327,000 resulting in a gain
on sale of $6,873,000 before income taxes.
5. Long-term debt
Interest September 30, December 31,
(in thousands of dollars) Rate 2001 2000
----------------------------------------------------------- -------------
(A) Corporate:
(i) Convertible
Debentures, due 2005 5-3/4% $ 306,434 $ 283,924
(ii) Senior Notes, due 2006 9-1/8% 86,281 81,975
(iii) Senior Notes, due 2006 10-1/2% 75,000 75,000
(iv) Senior Notes, due 2007 8-7/8% 304,487 292,245
(v) Senior Notes, due 2007 8-3/4% 165,000 165,000
(B) Wireless:
(i) Bank loan Floating - -
(ii) Senior Secured Notes,
due 2006 10-1/2% 160,000 160,000
(iii) Senior Secured Notes,
due 2007 8.30% 278,940 272,162
(iii) Senior Secured Notes,
due 2011 9-5/8% 770,400 -
(iv) Senior Secured Debentures,
due 2008 9-3/8% 433,121 433,121
(v) Senior Secured Debentures,
due 2016 9-3.4% 230,127 222,005
(vi) Senior Subordinated Notes,
due 2007 8.80% 339,485 322,543
(C) Cable:
(i) Bank loan Floating 339,000 -
(ii) Senior Secured Second
Priority Notes,
due 2002 9-5/8% 116,389 116,389
(iii) Senior Secured Note
due 2002 Floating 300,000 300,000
(iv) Senior Secured Second
Priority Notes,
due 2005 10% 412,784 412,146
(v) Senior Secured
Second Priority
Debentures, due 2007 10% 146,223 146,223
(vi) Senior Secured
Second Priority
Debentures, due 2012 10-1/8% 172,867 172,867
(vii) Senior Secured
Second Priority
Debentures, due 2014 9.65% 300,000 300,000
(viii) Senior Subordinated
Debentures, due 2015 11% 164,865 164,264
(D) Media:
Bank loan Floating 253,300 -
(E) Obligations under mortgages
and capital leases Various 41,720 37,798
----------------------------------------------------------- -------------
$ 5,396,423 $ 3,957,662
----------------------------------------------------------- -------------
----------------------------------------------------------- -------------
In May 2001, the Company issued US$500 million of Senior Secured Notes
maturing on May 1, 2011. These notes are redeemable in whole or in
part, at the option of the Company, at anytime, subject to a
prepayment premium. Interest is payable semi-annually on November 1st
and May 1st.
The Company entered into an agreement to amend the Wireless bank
credit facility. Among other things, the amended bank credit facility
provides Wireless with a revolving credit facility of $700 million
with no reduction until April 30, 2006 and a final maturity on
April 30, 2008.
Effective June 2001, the Company entered into an agreement to extend
the maturity date of Cable's $300 million Senior Secured Note due
2002.
The Company entered into a new Media bank credit facility. The new
bank credit facility provides Media with a revolving credit facility
of $500 million, with no scheduled reductions until maturity on
September 30, 2006.
6. Shareholders' Equity
(in thousands of dollars, September 30, December 31,
except share amounts) 2001 2000
----------------------------------------------------------- -------------
Capital stock issued, at stated value:
Preferred shares:
Held by subsidiary companies
105,500 Series XXIII $ 105,500 $ 105,500
- Series XXVI (2000 -253,500) - 253,500
150,000 Series XXVII 150,000 150,000
30,000 Series XXIX 30,000 30,000
818,300 Series XXX 10,000 10,000
300,000 Series XXXI 300,000 300,000
300,000 Series XXXII 300,000 300,000
Held by members of the
Company's share purchase plans:
137,106 Series B (2000 - 160,221) 1,728 2,019
153,361 Series C (2000 - 170,852) 2,622 2,922
Common shares:
56,240,494 Class A Voting shares 72,320 72,320
153,223,929 Class B Non-Voting shares
(December 31, 2000 - 147,856,858) 248,955 240,235
----------------------------------------------------------- -------------
1,221,125 1,466,496
Deduct:
Amounts receivable from
employees under certain
share purchase plans, including $1,179
from officers (December 31, 2000 - $1,754) 3,304 4,249
Preferred shares of the Company
held by subsidiary companies 895,500 1,149,000
----------------------------------------------------------- -------------
Total capital stock 322,321 313,247
Convertible preferred securities 576,000 576,000
Warrants to purchase Class B Non-Voting shares 24,000 24,000
Preferred securities 1,005,745 952,147
Contributed surplus 780,824 613,825
Deficit (365,306) (63,041)
----------------------------------------------------------- -------------
$ 2,343,584 $ 2,416,178
----------------------------------------------------------- -------------
----------------------------------------------------------- -------------
During 2001, the Company completed the following stock transactions:
a) 253,300 Series XXVI Preferred Shares were redeemed from a subsidiary
company for $253,500,000 and cancelled;
b) 23,115 Series B and 17,491 Series E Convertible Preferred shares with
a value of $590,000 were converted into 40,606 Class B Non-Voting
shares;
c) 4,170,330 Class B Non-Voting shares with a stated value of $6,776,000
were issued as partial consideration for the acquisition of Cable
Atlantic Inc.;
d) 923,834 Class B Non-Voting shares were issued to employees upon the
exercise of options for cash of $6,720,516; and
e) 232,301 Class B Non-Voting shares were issued to employees pursuant to
Employee Share Purchase Plan for cash of $6,775,869.
As a result of the above transactions, $166,999,000 of the issued amounts
related to the Class B Non-Voting shares was recorded in contributed
surplus.
7. Segmented Information
For the nine months ended September 30, 2001
Corporate
(in thousands Items and Consolidated
of dollars) Wireless Cable Media Eliminations Totals
-------------------------------------------------------------------------
(Unaudited)
Revenue $1,214,381 $1,061,192 $ 509,473 $ 4,750 $2,789,796
Operating,
general and
administrative
expenses 893,924 677,123 466,583 40,419 2,078,049
-------------------------------------------------------------------------
Operating
income
(loss) before
the undernoted: 320,457 384,069 42,890 (35,669) 711,747
Management fees 8,013 21,330 7,714 (37,057) -
Integration
costs on
cablesystem
exchange - 16,462 - - 16,462
Depreciation and
amortization 290,696 316,984 27,731 32,443 667,854
-------------------------------------------------------------------------
Operating income 21,748 29,293 7,445 (31,055) 27,431
Interest Expense
Third party 140,688 122,372 1,570 45,817 310,447
Intercompany 13,517 (16,556) (12,168) 15,207 -
Gain on sale of
subsidiary,
assets
and investments - - (33,391) (6,873) (40,264)
Investment
and other
income (loss) (2,320) (733) 11,853 48,134 56,934
Income tax
expense
(recovery) 5,369 3,747 677 7,415 17,208
Non-controlling
interest - - - (58,831) (58,831)
-------------------------------------------------------------------------
Net Income
(loss) for
the period $ (135,506) $ (79,537) $ 38,904 $ (81,924) $ (258,063)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Capital
expenditures,
net $ 528,031 $ 475,712 $ 14,065 $ (2,162) $1,015,646
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Identifiable
assets $3,190,661 $3,465,169 $ 670,533 $1,901,829 $9,228,192
-------------------------------------------------------------------------
-------------------------------------------------------------------------
For the nine months ended September 30, 2000
Corporate
(in thousands Items and Consolidated
of dollars) Wireless Cable Media Eliminations Totals
-------------------------------------------------------------------------
(Unaudited)
Revenue $1,121,806 $ 954,087 $ 481,194 $ - $2,557,087
Operating,
general and
administrative
expenses 783,273 615,651 439,624 24,306 1,862,854
-------------------------------------------------------------------------
Operating
income (loss)
before the
undernoted: 338,533 338,436 41,570 (24,306) 694,233
Management fees 7,781 19,175 7,289 (34,245) -
Depreciation
and
amortization 244,189 251,120 20,907 12,222 528,438
-------------------------------------------------------------------------
Operating
income 86,563 68,141 13,374 (2,283) 165,795
Interest Expense
Third party 95,539 119,894 1,107 54,334 270,874
Intercompany 697 1,562 8,352 (10,611) -
Gain on sale of
assets and
investments - (22,479) (1,292) (74,508) (98,279)
Proceeds
received
on termination
of merger
agreement, net - - - (222,456) (222,456)
Investment
and other
income (loss) 285 2,849 3,592 (3,050) 3,676
Income tax
expense
(recovery) 3,392 (30,420) 528 82,411 55,911
Non-controlling
interest - - - (6,483) (6,483)
-------------------------------------------------------------------------
Net Income
(loss) for
the period $ (13,350) $ (3,265) $ 1,087 $ 178,080 $ 162,552
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Capital
expenditures,
net $ 362,260 $ 415,559 $ 24,494 $ 972 $ 803,285
-------------------------------------------------------------------------
-------------------------------------------------------------------------
For the three months ended September 30, 2001
Corporate
(in thousands Items and Consolidated
of dollars) Wireless Cable Media Eliminations Totals
-------------------------------------------------------------------------
(Unaudited)
Revenue $ 426,109 $ 360,645 $ 164,225 $ 804 $ 951,783
Operating,
general and
administrative
expenses 302,266 230,368 151,843 9,536 694,013
-------------------------------------------------------------------------
Operating
income
(loss) before
the
undernoted: 123,843 130,277 12,382 (8,732) 257,770
Management fees 2,671 7,250 2,466 (12,387) -
Integration
costs on
cablesystem
exchange - 500 - - 500
Depreciation
and
amortization 98,541 109,893 8,921 5,758 223,113
-------------------------------------------------------------------------
Operating
income 22,631 12,634 995 (2,103) 34,157
Interest Expense
Third party 51,235 41,239 2,017 13,900 108,391
Intercompany - (3,946) (549) 4,495 -
Gain on sale of
subsidiary,
assets and
investments - - (33,391) (4,488) (37,879)
Investment and
other income
(loss) (1,385) 607 (291) 33,526 32,457
Income tax
expense
(recovery) 1,737 1,472 141 (583) 2,767
Non-controlling
interest - - - (13,762) (13,762)
-------------------------------------------------------------------------
Net Income
(loss) for
the period $ (28,956) $ (26,738) $ 33,068 $ (35,191) $ (57,817)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Capital
expenditures,
net $ 150,088 $ 173,047 $ 4,813 $ 455 $ 328,403
-------------------------------------------------------------------------
-------------------------------------------------------------------------
For the three months ended September 30, 2000
Corporate
(in thousands Items and Consolidated
of dollars) Wireless Cable Media Eliminations Totals
-------------------------------------------------------------------------
(Unaudited)
Revenue $ 394,631 $ 326,244 $ 156,846 $ - $ 877,721
Operating,
general and
administrative
expenses 272,366 209,111 146,863 6,177 634,517
-------------------------------------------------------------------------
Operating
income (loss)
before the
undernoted: 122,265 117,133 9,983 (6,177) 243,204
Management fees 2,594 6,559 2,371 (11,524) -
Depreciation and
amortization 86,384 88,459 7,427 4,316 186,586
-------------------------------------------------------------------------
Operating
income 33,287 22,115 185 1,031 56,618
Interest Expense
Third party 32,904 39,837 318 14,780 87,839
Intercompany 697 2,103 3,515 (6,315) -
Gain on sale of
assets and
investments - (19,688) - - (19,688)
Proceeds received
on termination
of merger
agreement, net - - - (222,456) (222,456)
Investment and
other income
(loss) 54 1,172 780 (2,563) (557)
Income tax
expense
(recovery) 1,132 (11,042) (792) 66,046 55,344
Non-controlling
interest - - - (728) (728)
-------------------------------------------------------------------------
Net Income
(loss) for
the period $ (1,500) $ 9,733 $ (3,636) $ 152,267 $ 156,864
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Capital
expenditures,
net $ 152,372 $ 171,782 $ 9,010 $ 591 $ 333,755
-------------------------------------------------------------------------
-------------------------------------------------------------------------
8. Commitments
The Company has entered into an agreement to purchase a 40% interest
and control of CTV SportsNet ("SportsNet") from CTV Inc. ("CTV") for
$123,400,000 in cash, plus the assumption of CTV's share of
shareholder loans of approximately $13.0 million. The Company will
also exercise an earlier acquired option for 10.01% of the voting
shares of SportsNet at a nominal value, to bring the ownership
interest of SportsNet to 80%. Fox SportsNet Canada will continue to
retain 20% of the voting shares of SportsNet. The agreement has
received Canadian Radio-television and Telecommunications Commission
("CRTC") approval and Competition Bureau clearance.
The Company has also agreed to purchase 13 radio stations in Ontario
from Telemedia for approximately $100,000,000, including one AM Sports
station ("the FAN") in Toronto, one AM and two FM stations in each of
Sudbury, North Bay and Sault Ste. Marie, two FM stations in Timmins
and one FM station in Orillia. Telemedia Radio Inc. ("Telemedia") had
recently purchased these stations from Standard Radio Inc.
("Standard"). The transaction between Telemedia and Standard and with
Telemedia and the Company are each subject to CRTC approval.
The Company has also signed an agreement to sell its Alaska
cablesystems to General Communications, Inc. for US $19,000,000
pending regulatory approval. The Alaska cablesystems serve 7,300
customers in the communities of Palmer and Wasilla with more than
10,000 homes passed. General Communications, Inc. has agreed to pay US
$2,600 per basic cable subscriber, subject to certain adjustments. The
transaction is expected to result in a gain before taxes of
approximately US $10,000,000.
9. Contingent liabilities
There exist certain legal actions against the Company, none of which
is expected to have a material adverse effect on the consolidated
financial position of the Company.
This news release may include certain forward-looking statements that
involve risks and uncertainties. The Company cautions that actual future
performance will be affected by a number of factors, including
technological change, regulatory change, and competitive factors many of
which are beyond the Company's control. Therefore future events and
results may vary substantially from what the Company currently foresees.
Additional information identifying risks and uncertainties is contained
in the Company's most recent Annual Information Form filed with the
Ontario Securities Commission.
A live and fully accessible Webcast of the quarterly results conference
call with the investment community will be broadcast via the Internet at
http://www.rogers.com/webcast beginning 10:00 a.m. ET. October 18, 2001.
A re-broadcast of this call will be available on the Webcast Archive page
of the Investor Info section of http://www.rogers.com.
SOURCE Rogers Communications Inc.
CONTACT: Bruce M. Mann, Rogers Communications Inc.,
Phone: (416) 935-3532, bmann2@rci.rogers.com; Eric Wright, Rogers
Communications Inc., Phone: (416) 935-3550, ewright@rci.rogers.com;
Archived images on this organization are available through CNW E-Pix at
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Rogers Communications Inc.
