Rogers Communications Inc.
Rogers Communications Inc.
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Rogers Communications Inc. (ticker: RCI.B.TO, exchange: Toronto Stock Exchange (.TO)) News Release - 22-Jul-1999

Rogers Announces Second Quarter 1999 Results

TORONTO, July 22 /CNW/ - ROGERS COMMUNICATIONS INC. (RCI) today announced its consolidated financial results for the second quarter ended June 30, 1999.

Financial highlights, which are in thousands of Canadian dollars (except per share data), are as follows:

Three Months Ended June 30

1999 1998 Percent Change
Revenue $754,497 $715,800 5.4%
Operating income before depreciation and amortization 229,567 231,017 (0.6%)
Net income 40,646 663,347 NA
Net income per share $0.19 $3.68 NA
Loss, excluding non-operating gains (26,273) (44,045) NA
Loss per share, excluding non-operating gains $(0.18) $(0.29) NA

Six Months Ended June 30

1999 1998 Percent Change
Revenue $1,462,795 $1,393,660 5.0%
Operating income before depreciation and amortization 428,661 423,236 1.3%
Net income 87,592 644,483 NA
Net income per share $0.42 $3.53 NA
Loss, excluding non-operating gains (95,468) (103,771) NA
Loss per share, excluding non-operating gains $(0.59) $(0.66) NA

Commenting on the Company's results, RCI's President and CEO, Edward S. (Ted) Rogers said, "I am pleased with the operating performance of Rogers in the second quarter. Wireless has reported accelerating subscriber growth rates and improving fundamentals for several quarters, and is now beginning to show its growth potential. Media's operating performance in the quarter was slightly weaker than the extremely strong results this division has reported for the last several quarters, but continues to nurture its growth opportunities, such as its New Media division, its expanding Radio broadcasting division and The Shopping Channel."

"The second quarter and the weeks following the close of the period were particularly exciting at Cablesystems. Rogers@Home crossed the 100,000 customer mark, the VIP Cable offer continues to exceed our expectations, and on July 12th Rogers signed an agreement with Microsoft Corporation to use its software in the digital set top devices. The combination of Microsoft's expertise, Rogers' advanced broadband networks and the $600 million investment Microsoft is making in Rogers Communications will assist us in providing our customers with earlier access to a broader range of advanced Internet and interactive television services."

CONSOLIDATED RESULTS -
SECOND QUARTER 1999 VS. 1998


During the second quarter of 1999, consolidated revenue was $754.5 million, an increase of $38.7 million or 5.4% from $715.8 million in the second quarter of 1998. Excluding the results of Rogers Telecom (which were included in the 1998 results but not in the 1999 results) RCI had consolidated revenue growth of $54.3 million, or 7.7%. This increase is due to a 6.2% increase in revenue at Wireless and a 9.8% increase in revenue at Cablesystems, and a 7.5% increase in revenue at Media.

Consolidated operating income before depreciation and amortization was $229.6 million, down marginally from $231.0 million in the second quarter of the prior year. Excluding the results of Rogers Telecom, RCI had consolidated operating income before depreciation and amortization growth of $5.2 million, or 2.3% compared to the second quarter of the prior year.

Fixed Charges

Depreciation and amortization was $145.3 million, approximately the same as in the second quarter of 1998. Interest expense was $118.2 million, a decrease of $18.6 million or 13.7% from $136.8 million in the second quarter of 1998, primarily due to lower average debt balances.

Net Income and Loss

RCI recorded net income of $40.6 million, or $0.19 per share (after preferred dividends) compared to net income of $663.3 million, or $3.68 per share (after preferred dividends) in the second quarter of the prior year. Excluding non-operating gains in both periods, RCI recorded a loss of $26.3 million, or 18 cents per share (after preferred dividends) compared to a loss of $44.0 million, or 29 cents per share (after preferred dividends) in the second quarter of the prior year.

Wireless

Wireless' revenue was $325.1 million, an increase of $18.9 or 6.2% from $306.2 million in the second quarter of the prior year. Operating income before depreciation and amortization was $108.3 million, up $2.9 million or 2.8% from $105.4 million in the second quarter of the prior year.

Wireless added 187,100 gross cellular customers in the second quarter, an increase of 74,300 or 65.9% from the second quarter of the prior year. The average monthly disconnect or "churn" rate was 1.54%, versus 1.87% in the second quarter of 1998. At June 30, 1999 Wireless had a total of 1,909,700 cellular customers, an increase of 109,500 in the quarter. At the end of the second quarter, approximately 690,000 customers were on Digital PCS representing approximately 36% of Wireless' total subscriber base, and 181,400 were on the prepaid cellular service, "Pay As You Go."

Average monthly revenue per unit, or ARPU, was $49, down $7 or 12.2% from $56 in the second quarter of 1998. Average monthly usage was 223 minutes, up from 213 minutes in the second quarter of the prior year.

Gross paging and data activations were 32,300, up 8,900 or 38.0%, compared to the second quarter of the prior year. At June 30, 1999, Wireless had a total of 270,500 paging and data customers, an increase of 10,800 since March 31, 1999. The average monthly churn rate for paging was 2.72%, versus 3.23% in the second quarter of 1998.

Cablesystems

Cablesystems revenue was $279.1 million, an increase of $24.9 million, or 9.8% from $254.2 million reported in the second quarter of the prior year. Operating income before depreciation and amortization was $103.3 million, an increase of $3.1 million or 3.0% from $100.2 million in the second quarter of the prior year.

The gain in Cablesystems revenue reflects higher revenue in core cable TV operations. The revenue increase in core cable TV operations is due primarily to improved penetration of the higher revenue tier III service and the effect of tier and basic rate increases in March 1998 and 1999 respectively. Cablesystems revenue also increased due to increases in Video Store revenue and the inclusion of revenue from Rogers@Home service. The results of the Rogers@Home division were deferred due to the early stage of its development in prior years.

At June 30, 1999 approximately 87.0% of basic cable service customers also subscribed to tier services. The tier penetration breakdown at June 30th, 1999 is as follows: 12.3% subscribed to tier I, 20.8% subscribed to tier II, and 54.0% subscribed to tier III. At June 30, 1998 the tier penetration breakdown between tiers I, II and III was 17.2%, 32.9% and 37.1% respectively. At June 30, 1999, Cablesystems had 2,225,200 basic cable customers, a decline of approximately 11,400 in the quarter, compared to a decline of 11,600 in the second quarter of the prior year. The Company believes these customer figures compare favorably considering the level of competition now in the market. At June 30th, 1999 Cablesystems had approximately 167,000 VIP Cable customers.

Cablesystems continues to report solid operating profit and margins in its core cable TV business. In the second quarter the core cable TV operating profit was up 5.4% and the operating margin was 44.8%, compared to 45.3% in the second quarter of the prior year.

During the second quarter, Cablesystems added approximately 24,500 Rogers@Home customers, ending the quarter with 100,500 customers. At June 30, 1999, Cablesystems was able to market its high-speed Internet access service to approximately 2.5 million homes.

Video Stores reported revenue of $37.6 million, an increase of $3.1 million or 8.8% from $34.5 million reported in the second quarter of the prior year. This increase is primarily due to the increase in the number of stores and improvements in same store rental revenue. Video Stores ended the quarter with a total of 216 stores, as compared to 201 stores at June 30, 1998.

Media

Media reported revenue of $150.3 million, an increase of $10.4 million or 7.5% from $139.9 million in the second quarter of 1998. Operating income before depreciation and amortization was $21.9 million, a decrease of $3.0 million or 11.9% from $24.9 million in the second quarter of the prior year.

Publishing revenue and operating income declined compared to the second quarter of the prior year, reflecting competitive advertising markets for many consumer titles. During the second quarter, the Canadian and United States governments reached an agreement to allow foreign publishers access to the Canadian advertising market under certain conditions and with some restrictions. While this agreement was not supported by the Company or the Canadian magazine publishing industry, Rogers is confident that, with its market-leading titles, Publishing is well positioned to implement strategies that will enable it to prosper in the potentially more competitive environment.

Radio and Television Broadcasting revenue increased over the second quarter of the prior year driven by strong growth at CFMT-TV. CFMT-TV is benefiting from strong ratings in an equally strong advertising market, as well as tightly controlled costs. Revenue growth continues at The Shopping Channel, with revenue up 31.6% compared to the second quarter of 1998, primarily driven by significant increases in unit volume.

Liquidity and Capital Resources

Cash flow from operating activities increased to $111.3 million from $50.2 million in the second quarter of 1998. RCI's operating cash flow shortfall (defined as cash flow from operating activities after working capital, capital expenditures and preferred share dividends) was $83.3 million in the second quarter of 1999.

At June 30, 1999, RCI's total long-term debt (net of cash) was $5.069 billion, a decline of $185.0 million from the levels reported at December 31, 1998. RCI's capital expenditures for the quarter were $177.4 million net of a $4.6 million sale of real estate assets, compared to $169.0 million in the second quarter of the prior year.

As a result of an RCI notice of redemption dated April 23, 1999, during the second quarter Cdn$198.7 million of RCI's 7.5% Convertible Subordinate Debentures were converted into approximately 9.6 million Class B Non-Voting Shares and the remaining $0.7 million of Convertible Debentures were redeemed by RCI for cash.

During the second quarter, RCI sold shares of At Home Corporation and Bid.com for a gain on sale of approximately $67.0 million.

CONSOLIDATED RESULTS - SIX MONTHS 1999 VS. SIX MONTHS 1998

In the first half of the year, consolidated revenue was $1,463.8 million, an increase of $70.1 million or 5.0% from $1,393.7 million in the prior year period. Consolidated operating income before depreciation and amortization was $428.7 million, an increase of $5.5 million or 1.3% from $423.2 million in the first half of 1998.

RCI's reported net income of $87.6 million in the first half of 1999, or 42 cents per share (after preferred dividends), compared to net income of $664.5 million, or $3.53 per share (after preferred dividends) in the first six months of the prior year. Excluding non-recurring items, RCI reported a loss of $95.5 million in the first half of 1999, or 59 cents per share (after preferred dividends) compared to a loss of $103.8 million, or 66 cents per share (after preferred dividends) in the first six months of the prior year.

Year 2000 Readiness

In 1997, Rogers instituted a multi-phase programme to address all known issues of year 2000 readiness in recognition of the potential material impact on its ability to conduct business. This programme reports to Ronan McGrath, President, Rogers Shared Services and Chief Information Officer. Status is reported bi-weekly to a senior management Steering Committee, with regular updates to the Audit Committee of the Board of Directors.

Rogers substantially completed its year 2000 remediation activities at the end of 1998. At the beginning of July 1999, Rogers had completed 97% of the project milestones for this critical remediation and implementation phase of the year 2000 programme. Some minor effort is planned through to August 1999 to complete implementation of certain compliant solutions.

In the final phase of the year 2000 programme, Rogers will maintain its year 2000 ready status through implementation of "clean management" or change control processes that ensure year 2000 ready systems remain compliant throughout the year. This final phase of the programme also included the development of detailed contingency and business continuity plans. Validation of these contingency and business continuity plans is under way with a targeted completion of October 1999. Sufficient qualified personnel are available to complete the year 2000 programme.

Rogers expenditures for its year 2000 readiness programme were approximately $23 million in 1998 and $7 million through June 1999, bringing cumulative expenditures to approximately $37 million since 1997, compared to a total programme budget of $57 million extending into the year 2000. These expenditures are to be capitalized to the extent that they enhance the capabilities and useful life of the underlying systems. The funds required are provided through Rogers' cashflow and lines of credit. No material non-year 2000 projects have been cancelled, deferred or accelerated as a result of the year 2000 effort.

Rogers is also implementing an upgraded internal personal computer platform that will encompass a year 2000 ready solution for the desktop. This implementation is underway and on target to be completed in July 1999.

Rogers' progress to date, and plans for 1999, indicate that Rogers is well positioned internally to be year 2000 ready in advance of December 31, 1999. The impact of the year 2000 issue on Rogers depends on the year 2000 readiness of third parties such as vendors, suppliers, customers, financial institutions and government agencies worldwide.

At this time, Rogers cannot determine the potential impact caused by third party infrastructure issues which may include lost revenue and an erosion of its customer base. Rogers' final phase of contingency planning includes addressing this third party impact on its operations. Because of the uncertainty surrounding the year 2000 readiness of third parties and not withstanding the steps taken by Rogers, there cannot be total assurance that uncertainties with the year 2000 issue will not materially and adversely affect Rogers' business operations and its customers.

Rogers provides a monthly update of its year 2000 programme status and progress on its Internet Web site www.rogers.com.

About Rogers

Rogers Communications Inc. (Toronto: RCI.A and RCI.B; NYSE:RG) is Canada's national communications company engaged in cellular and Digital PCS communications through its 81% owned subsidiary Cantel Mobile Communications Inc., in cable television, high-speed Internet access, and video retailing through its wholly-owned subsidiary Rogers Cablesystems Limited, and in radio and television broadcasting, publishing and new media businesses through its wholly-owned subsidiary Rogers Media Inc.

(see attached financial tables)

Consolidated Statements of Income
(in thousands of dollars except per share data)

Three Months Ended
June 30
Six Months Ended
June 30
  1999
(Unaudited)
1998
(Unaudited)
1999
(Unaudited)
1998
(Unaudited)
Revenue
Wireless $ 325,114 $ 306,167 $ 621,339 $ 603,230
Cablesystems 279,061 254,255 553,668 502,644
Media 150,322 139,852 288,788 256,683
Telecom - 15,556 - 31,103

$ 754,497 $ 715,800 $ 1,463,795 $ 1,393,660
Operating income before depreciation and amortization:
Wireless $ 108,342 $ 105,427 $ 202,493 $ 193,969
Cablesystems 103,266 100,211 201,978 194,041
Media 21,898 24,867 33,728 33,722
Telecom - 6,646 - 12,659
Corporate (3,939) (6,134) (9,538) (11,155)

229,567 231,017 428,661 423,236
 
Depreciation and amortization 145,285 142,172 286,024 279,791
 
Operating income 84,282 85,845 142,637 143,445
Interest expense (118,159) (136,843) (242,069) (267,609)
Gain on sale of assets and other investments 66,989 23,799 156,170 64,661
Investment and other income 953 2,444 33,080 7,180
 
Income before income taxes 34,065 657,138 89,818 629,570
Income taxes
(recovery)
6,581 6,209 (2,226) 14,913
 
Net income for the period $ 40,646 $ 663,347 $ 87,592 $644,483
 
Earnings per share
Basic
Net income for the period $ 0.19 $ 3.68 $ 0.42 $ 3.53
Fully Diluted
Net income for the period $ 0.18 $ 3.11 $ 0.39 $ 3.02
Weighted Average Class A and Class B
Shares outstanding for the period (thousands) 181,302 178,542 181,302 178,542

 

Consolidated Statements of Cash Flows
(in thousands of dollars except per share data)

Three Months Ended
June 30
Six Months Ended
June 30
  1999
(Unaudited)
1998
(Unaudited)
1999
(Unaudited)
1998
(Unaudited)
Cash flows from operating activities:
Net income for the period $ 40,646 $ 663,347 $ 87,592 $ 644,483
Adjustments to reconcile net income to net cash flow:
Depreciation and amortization 145,285 145,172 286,024 279,791
Deferred income tax reduction (9,216) (9,032) (2,556) (20,852)
Accrued interest due (paid) on repayment of certain notes 2,112 (43,925) 4,244 (39,471)
Gain on sale of assets and other investments (66,989) (727,363) (156,170) (768,225)
Share of income of associated companies, net (704) 56 (1,759) (116)
Dividends from associated companies 190 247 707 1,095

111,324 50,173 218,082 118,376
Changes in:
Accounts Receivable 3,109 2,531 17,509 45,393
Accounts payable, accrued liabilities and unearned revenue (31,914) (36,795) (89,400) (82,326)
Deferred charges and other assets 17,330 6,211 (32,371) (26,144)
  99,849 22,120 113,820 55,299
Cash flows from financing activities:
Issue (repayment) of long-term debt, net 39,317 (393,373) 106,220 (352,994)
Financing costs incurred - - - (371)
Issue of capital stock, net 1,075 246 3,295 246
Dividends on preferred shares (5,720) (7,389) (11,564) (14,637)
  34,672 (400,516) 97,951 (367,756)
Cash flows from investing activities:
Additions to fixed assets (177,383) (169,017) (340,987) (303,124)
Proceeds on sale of assets and other investments 67,758 44,307 157,198 137,364
Other investments (14,591) 985 (54,177) 12,132
  (124,216) 476,275 (237,966) 446,372
Increase (decrease) in cash and cash equivalents 10,305 97,879 (26,195) 133,915
Cash and cash equivalents, beginning of period (37,883) 24,737 (1,383) (11,299)
 
Cash and cash equivalents, end of period $ (27,578) $ 122,616 $ (27,578) $ 122,616
Cash and cash equivalents are defined as cash and short-term deposits less operating bank loans and bank advances.

 

Rogers Communications Inc.
Segmented Information

Six months ended June 30, 1999
(in thousands of dollars)
  Wireless Cable Media Corporate
items and
eliminations
Consolidated
Totals
(Unaudited)
Revenue $621,339 $553,668 $288,788 - $1,463,795
Operating, general and administrative expenses 418,846 351,690 255,060 9,538 1,035,134
Operating income (loss) before the undernoted: 202,493 201,978 33,728 (9,538) 428,661
Management fees 4,926 11,167 4,418 (20,511) -
Depreciation and amortization 139,803 126,873 8,238 11,110 286,024
Operating income 57,764 63,938 21,072 (137) 142,637
Interest Expense:
Third party 84,140 100,854 396 56,679 242,069
Intercompany 9,053 32,457 1,537 (43,047) -
 
Gain on sale of assets and investments - (88,469) (15,535) (52,166) (156,170)
Other items, net (95) (162) (27,128) (5,695) (33,080)
Income tax expense (recovery) 2,264 1,664 (1,912) 210 2,226
Net Income (loss) for the period $(37,598) $17,594 $63,714 $43,882 $87,592
Capital expenditures, net $169,495 $171,762 $4,043 $(4,313) $340,987
Identifiable assets $2,028,317 $2,672,172 $419,165 $1,323,497 $6,443,151

Rogers Communications Inc.
Segmented Information

Six months ended June 30, 1998
(in thousands of dollars)
  Wireless Cable Media Corporate
items and
eliminations
Consolidated
Totals
(Unaudited)
Revenue $603,230 $502,644 $256,683 $31,103 $1,393,660
Operating, general and administrative expenses 409,261 308,603 222,961 29,599 970,424
Operating income before the undernoted: 193,969 194,041 33,722 1,504 423,236
Management fees 4,760 9,985 3,882 (18,627) -
Depreciation and amortization 127,646 121,984 7,401 22,760 279,791
Operating income 61,563 62,072 22,439 (2,629) 143,445
Interest Expense:
Third party 82,800 115,459 27 69,323 267,609
Intercompany 5,944 (9,663) 9,325 (5,606) -
 
Gain on sale of assets and investments - (34,522) (30,139) (703,564) (768,225)
Other items, net 545 1,895 339 11,712 14,491
Income tax expense (recovery) 2,264 (17,569) 1,375 (983) (14,913)
Net Income (loss) for the period $(29,990) $6,472 $41,512 $626,489 $644,483
Capital expenditures, net $146,538 $114,606 $3,839 $38,141 $303,124

Rogers Communications Inc.
Segmented Information

Three months ended June 30, 1999
(in thousands of dollars)
  Wireless Cable Media Corporate
items and
eliminations
Consolidated
Totals
(Unaudited)
Revenue $325,114 $279,061 $150,322 - $754,497
Operating, general and administrative expenses 216,772 175,795 128,424 3,939 524,930
Operating income (loss) before the undernoted: 108,342 103,266 21,898 (3,939) 229,567
Management fees 2,463 5,643 2,311 (10,417) -
Depreciation and amortization 71,304 64,592 4,121 5,268 145,285
Operating income 34,575 33,031 15,466 1,210 84,282
Interest Expense:
Third party 42,319 50,228 78 25,534 118,159
Intercompany 4,446 17,150 940 (22,536) -
 
Gain on sale of assets and investments - - (14,823) (52,166) (66,989)
Other items, net (108) 1,192 (130) (1,907) (953)
Income tax expense (recovery) 1,132 890 851 (9,454) (6,581)
Net Income (loss) for the period $(13,214) $(36,429) $28,550 $61,739 $40,646
Capital expenditures, net $80,656 $98,865 $2,233 $(4,371) $177,383

Rogers Communications Inc.
Segmented Information

Three months ended June 30, 1998
(in thousands of dollars)
  Wireless Cable Media Corporate
items and
eliminations
Consolidated
Totals
(Unaudited)
Revenue $306,167 $254,225 $139,852 $15,556 $715,800
Operating, general and administrative expenses 200,740 154,014 114,985 15,044 484,783
Operating income before the undernoted: 105,427 100,211 24,867 512 231,017
Management fees 2,380 4,991 2,109 (9,480) -
Depreciation and amortization 65,138 64,432 3,671 11,931 145,172
Operating income 37,909 30,788 19,087 (1,939) 85,845
Interest Expense:
Third party 43,700 58,150 27 34,966 136,843
Intercompany 2,841 (4,096) 4,709 (3,454) -
 
Gain on sale of assets and investments - (24,347) 548 (703,564) (727,363)
Other items, net 527 2,004 360 16,336 19,227
Income tax expense (recovery) 1,132 (3,585) 580 (4,336) (6,209)
Net Income (loss) for the period $(10,291) $2,662 $12,863 $658,113 $663,347
Capital expenditures, net $81,458 $65,892 $1,813 $19,854 $169,017

Balance Sheets
(in thousands of dollars)
  June 30, 1999
(Unaudited)
December 31, 1998
(Unaudited)
Assets
Fixed assets $ 3,311,552 $ 3,234,634
Subscribers and licences 1,332,052 1,342,360
Goodwill 196,627 190,514
Investments 748,775 674,615
Accounts receivable 283,932 300,681
Deferred charges 325,923 436,314
Other assets 244,920 205,735
  $ 6,443,151 $ 6,384,853
Liabilities and Shareholders' Equity (Deficiency)
Liabilities:
Long-term debt $ 5,069,057 $ 5,254,044
Bank advances 27,578 1,383
Accounts payable and accrued liabilities 860,341 957,796
Unearned revenue 115,008 100,718
Deferred income taxes 109,937 112,437
  6,181,921 6,426,378
Shareholders' equity (deficiency) 261,230 (41,525)
  $ 6,443,151 $ 6,384,853

 
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.

For more information contact:
David A. Robinson
Vice President, Financial Planning and Investor Relations
Rogers Communications Inc.
Phone: (416) 935-3550
Fax: (416) 935-3597
Richard J. Harvey
Director, Investor Relations
Rogers Communications Inc.
Phone: (416) 935-3552
Fax: (416) 935-3597