Rogers Communications Inc.
Rogers Communications Inc.
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Rogers Communications Inc. (ticker: RCI.B.TO, exchange: Toronto Stock Exchange (.TO)) News Release - 20-Apr-1999

Rogers Announces First Quarter 1999 Results

TORONTO, April 20 /CNW/ - ROGERS COMMUNICATIONS INC. (RCI) today announced its consolidated financial results for the first quarter ended March 31, 1999.

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

Three Months Ended March 31

1999 1998 Percent Change
Revenue $709,298 $677,860 4.6%
Operating income before depreciation and amortization 199,094 192,219 3.6%
Net income (loss) 46,946 (18,864) NA
Net income (loss) per share 23 cents (15 cents) NA

Commenting on the Company's results, RCI's President and CEO, Edward S. (Ted) Rogers said, "I am pleased with the excellent progress the RCI group made in the first quarter. Cablesystems reported another quarter of strong revenue growth and operating margins, while Rogers@Home customers continue to sign up at the rate of over 2,000 per week. Media continues to benefit from strong advertising markets, launched several new magazines, and acquired CISS-FM in Toronto, subject to CRTC approval. Wireless added almost four times as many customers in the first quarter of 1999 as it did in the first quarter of the prior year and reported increased operating income despite essentially flat revenue growth. The focus is now clearly on sales and revenue growth at Wireless. With some of the lowest operating costs in the industry, Wireless is well positioned to turn revenue growth into operating income growth."

"Subsequent to the end of the first quarter, we also announced some significant changes to the structure of the senior management team at RCI. In particular, John H. Tory has been appointed to the position of President and Chief Executive Officer of Rogers Cablesystems Ltd., and Tony Viner becomes President and Chief Executive Officer of Rogers Media Inc. Both of these appointments will strengthen Rogers Communications Inc."

CONSOLIDATED RESULTS -
FIRST QUARTER 1999 VS. 1998


During the first quarter of 1999, consolidated revenue was $709.3 million, an increase of $31.4 million or 4.6% from $677.9 million in the first quarter of the prior year. This year-over-year increase is due to a 10.5% increase in Cablesystems' revenue and an 18.5% increase in Media revenue, partially offset by the exclusion of the results of Telecom which was sold in June 1998. Consolidated operating income before depreciation and amortization was $199.1 million, an increase of $6.9 million or 3.6% from $192.2 million in the first quarter of the prior year.

Excluding the results of Rogers Telecom (which were included in the 1998 results but not in the 1999 result) RCI had consolidated revenue growth of $47.0 million, or 7.1% and consolidated operating income before depreciation and amortization growth of $12.9 million, or 6.9% compared to the first quarter of the prior year.

Fixed Charges

Depreciation and amortization was $140.7 million, an increase of $6.1 million, or 4.5% from $134.6 million in the first quarter of 1998. Interest expense was $123.9 million, a decrease of $6.9 million or 5.2% from $130.8 million in the first quarter of 1998, primarily due to lower average debt balances.

Net Income and Loss

RCI recorded net income of $46.9 million, or 23 cents per share (after preferred dividends) compared to a loss of $18.9 million, or 15 cents per share (after preferred dividends) in the first quarter of the prior year. Excluding non-operating gains in both periods, RCI recorded a loss of $69.2 million, or 42 cents per share (after preferred dividends) compared to a loss of $59.7 million, or 38 cents per share (after preferred dividends) in the first quarter of the prior year.

Wireless

Wireless' revenue was $296.2 million, down $0.8 million or 0.3% from $297.1 million in the first quarter of the prior year. The decline in revenue was due to a decline in equipment sales and paging revenue, partially offset by a small increase in cellular revenue. Operating income before depreciation and amortization was $94.2 million, up $5.7 million or 6.3% from $88.5 million in the first quarter of the prior year.

Average monthly cellular revenue per customer was $47.08, down $6.26 or 11.7% from $53.34 in the first quarter of the prior year, in part due to the impact of pre-paid services. Average monthly usage during the period was 184 minutes, down 6.6% from 197 minutes in the first quarter of the prior year.

Monthly cellular operating expenses before sales and marketing costs on a per customer basis, were $15.89, a decline of $2.81 or 15.0% from $18.70 in the first quarter of the prior year. This decrease in monthly operating cost per customer is due to substantially lower operating costs related to fraud and bad debt expense.

Sales and marketing costs (including migration costs) measured on a per gross addition basis were $504, a decrease of $306 or 37.8% from $810 in the first quarter of the prior year. The decreased cost per gross addition is the result of strong sales in the quarter, including prepaid cellular, which has essentially no variable acquisition cost, an overall reduction of hardware subsidies and reduced advertising versus the prior years first quarter.

Wireless added 62,600 cellular customers (net of disconnects) in the first quarter, compared to 12,800 in the first quarter of the prior year. At March 31, 1999, Wireless had a total of 1,800,300 cellular customers, of which approximately 600,000 were on Digital PCS, representing approximately 33% of the total cellular customer base, and 145,000 were on the prepaid cellular service, ``Pay As You Go''. In the quarter, prepaid service accounted for 16.6% of the gross subscriber additions and 39.3% of the net subscriber additions.

The average monthly disconnect or ``churn'' rate for cellular was 1.74%, down slightly from the 1.79% reported in the first quarter of the prior year.

The cumulative number of paging and data customers at March 31, 1999, was 259,700, a decline of 100 in the quarter. The average monthly churn rate for paging and data was 2.95% as compared to 3.39% in the first quarter of the prior year.

Cablesystems

Cablesystems revenue was $274.6 million, an increase of $26.2 million, or 10.5% from $248.4 million reported in the first quarter of the prior year. Operating income before depreciation and amortization was $98.7 million, an increase of $4.9 million or 5.2% from $93.8 million in the first quarter of the prior year.

The gain in Cablesystems revenue primarily 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. Prior to the first quarter of 1999, the results of the Rogers@Home division were deferred due to the early stage of its development.

At March 31, 1999, approximately 87.7% of basic cable service customers also subscribed to tier (formerly called ``Cable Plus'') services, the same level as at March 31, 1998. The tier penetration breakdown at March 31, 1999 is as follows: 13.0% subscribed to tier I (formerly Cable Plus Original and Select), 23.0% subscribed to tier II (formerly Cable Plus Combo), and 51.7% subscribed to tier III (formerly Cable Plus Ultimate). At March 31, 1998 the tier penetration breakdown between tiers I, II, and III was 18.7%, 39.8%, and 29.2% respectively. At March 31, 1999, Cablesystems had 2,236,600 basic cable customers, a decline of only 700 from December 31, 1998.

Video Stores reported revenue of $43.0 million, an increase of $5.1 million or 13.3% from $37.9 million reported in the first quarter of the prior year, primarily due to the increase in the number of stores and the revenue sharing arrangements now in place with six major U.S. film studios. Video Stores opened three stores and closed two in the quarter, ending the quarter with a total of 213 stores, as compared to 196 stores at March 31, 1998.

Cablesystems continues to report solid operating margins in its core cable TV business, with margins of 43.0% in both the first quarter of 1999 and 1998. During the first quarter, Cablesystems added 21,800 Rogers@Home customers, ending the quarter with 76,000 customers. At March 31, 1999, Cablesystems was able to market its high-speed Internet access service to approximately 2.3 million homes, or approximately 84% of Cablesystems' 2.8 million homes passed.

Media

Media reported revenue of $138.5 million, an increase of $21.7 million or 18.5% from $116.8 million in the first quarter of the prior year. Operating income before depreciation and amortization was $11.8 million, an increase of $2.9 million or 33.6% from $8.9 million in the first quarter of the prioryear.

Radio and television broadcasting results continued to be strong, with substantial gains in operating income in Radio, at the Shopping Channel, and at CFMT-TV in Toronto. During the quarter, Media reached an agreement to acquire CISS-FM in Toronto, subject to the approval of the CRTC. Through a Local Management Agreement, Media has taken over the day to day operation of CISS-FM. This represents the second acquisition relating to Media's strategy of taking advantage of changes in the regulations, which now allow multiple licence ownership in major Canadian markets. Publishing operating income declined in the quarter despite a 7.3% increase in revenue compared to the first quarter of the prior year. This is largely attributable to investments that were made in the quarter to strengthen existing franchises and launch new publications. Chatelaine magazine was relaunched in the quarter and the re-invigorated product has received favourable reviews from readers and advertisers. Revenues from Media's on-line media properties increased by 83% compared to the first quarter of the prior year and pageviews and traffic continue to build on the existing stable of businesses. The company concluded the termination of its licence agreement with Yahoo! Inc. in the quarter and received a payment of US$18 million as a result of this termination, which was reported in other income.

Liquidity and Capital Resources

Cash flow from operating activities increased to $106.8 million from $65.9 million in the first quarter of the prior year. RCI's operating cash flow shortfall (defined as cash flow from operating activities after working capital, capital expenditures, and preferred share dividends) was $155.5 million in the first quarter of 1999. At March 31, 1999, RCI's total long-term debt was $5.287 billion, an increase of $33.3 million from $5.254 billion at December 31, 1998. RCI's capital expenditures were $163.6 million, compared to $134.1 million in the first quarter of the prior year. During the first quarter, RCI sold shares of At Home Corporation and of Bid.com for a gain on sale of approximately $89 million. In addition, RCI purchased CISS-FM (subject to CRTC approval) and made an additional investment in CTV SportsNet. Rogers Communications Inc. (Toronto: RCI.A and RCI.B; NYSE: RG) is Canada's national communications company engaged in cellular, Digital PCS, paging and data 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, tele-shopping, 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
March 31
  1999
(Unaudited)
1998
(Unaudited)
Revenue
Wireless $ 296,225 $ 297,063
Cablesystems 274,607 248,419
Telecom - 15,547
Media 138,466 116,831

$ 709,298 $ 677,860
Operating income before depreciation and amortization:
Wireless $ 94,151 $ 88,542
Cablesystems 98,712 93,830
Telecom - 6,013
Corporate (5,599) (5,021)

199,094 192,219
 
Depreciation and amortization 140,739 134,619
 
Operating income 58,355 57,600
Interest expense (123,910) (130,766)
Gain on sale of assets and other investments 89,181 43,199
Investment and other income 32,127 2,399
 
Income (loss) before income taxes 55,753 (27,568)
Income taxes (8,807) 8,704
 
Net income (loss) for the period $ 46,946 $(18,864)
 
Earnings (loss) per share
Basic
Net income (loss) for the period $ 0.23 $ (0.15)
Fully Diluted
Net income (loss) for the period $ 0.20 *
Average Class A and Class B
Shares outstanding for the period (thousands) 178,663 178,226

* Fully diluted earnings per share are not disclosed for 1998, as they are anti-dilutive.

 

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

Three Months Ended
March 31
  1999
(Unaudited)
1998
(Unaudited)
Cash flows from operating activities:
Net income (loss) for the period $ 46,946 $(18,864)
Adjustments to reconcile net income (loss) to net cash flow:
Depreciation and amortization 140,739 134,619
Deferred income tax expense (reduction) 6,660 (11,820)
Accrued interest due on repayment of certain notes 2,132 4,454
Gain on sale of assets and other investments (89,181) (43,199)
Share of income of associated companies, net (1,055) (172)
Dividends from associated companies 517 848

106,758 65,866
Changes in:
Accounts Receivable 14,400 42,862
Accounts payable, accrued liabilities and unearned revenue (57,486) (45,531)
Deferred charges and other assets (49,701) (30,018)
  13,971 33,179
Cash flows from financing activities:
Issue of long-term debt, net 66,903 40,379
Financing costs incurred - (371)
Issue of capital stock 2,220 -
Dividends on preferred shares (5,844) (7,248)
  63,279 32,760
Cash flows from investing activities:
Additions to fixed assets (163,604) (134,107)
Proceeds on sale of assets and other investments 89,440 93,057
Other investments (39,586) 11,147
  (113,750) (29,903)
Increase (decrease) in cash and cash equivalents (36,500) 36,036
Cash and cash equivalents, beginning of period (1,383) (11,299)
 
Cash and cash equivalents, end of period $ (37,883) $ 24,737
Cash and cash equivalents are defined as cash and short-term deposits less operating bank loans and bank advances.

 

Rogers Communications Inc.
Segmented Information

Three months ended March 31, 1999
(in thousands of dollars)
  Wireless Cable Media Corporate
items and
eliminations
Consolidated
Totals
(Unaudited)
Revenue $296,225 $274,607 $138,466 - $709,298
Operating, general and administrative expenses 202,074 175,895 126,636 5,599 510,204
Operating income (loss) before the undernoted: 94,151 98,712 11,830 (5,599) 199,094
Management fees 2,463 5,524 2,107 (10,094) -
Depreciation and amortization 68,499 62,281 4,117 5,842 140,739
Operating income 23,189 30,907 5,606 (1,347) 58,355
Interest Expense:
Third party 41,821 50,626 318 31,145 123,910
Intercompany 4,607 15,307 597 (20,511) -
 
Gain on sale of assets and investments - (88,469) (712) - (89,181)
Other items, net 13 (1,354) (26,998) (3,788) (32,127)
Income tax expense (recovery) 1,132 774 (2,763) 9,664 8,807
Net Income (loss) for the period $(24,384) $54,023 $35,164 $(17,857) $46,946
Capital expenditures $88,839 $72,897 $1,810 $58 $163,604
Identifiable assets $2,051,091 $2,656,766 $408,992 $1,338,601 $6,455,450

Rogers Communications Inc.
Segmented Information

Three months ended March 31, 1999
(in thousands of dollars)
  Wireless Cable Media Corporate
items and
eliminations
Consolidated
Totals
(Unaudited)
Revenue $297,063 $248,419 $116,831 $15,547 $677,860
Operating, general and administrative expenses 208,521 154,589 107,976 14,555 485,641
Operating income before the undernoted: 88,542 93,830 8,855 992 192,219
Management fees 2,380 4,994 1,773 (9,147) -
Depreciation and amortization 62,508 57,552 3,730 10,829 134,619
Operating income 23,654 31,284 3,352 (690) 57,600
Interest Expense: 39,100 57,309 - 34,357 130,766
  3,103 (5,567) 4,616 (2,152) -
Gain on sale of assets and investments - (10,175) (33,024) - (43,199)
Other items, net 18 (109) 2,316 (4,624) (2,399)
Income tax expense (recovery) 1,132 (13,984) 795 3,353 (8,704)
Net Income (loss) for the period $(19,699) $3,810 $28,649 $(31,624) $(18,864)
Capital expenditures $65,080 $48,714 $2,026 $18,287 $134,107

Balance Sheets
(in thousands of dollars)
  March 31, 1999
(Unaudited)
December 31, 1998
(Unaudited)
Assets
Fixed assets $ 3,275,622 $ 3,234,634
Subscribers and licences 1,337,007 1,342,360
Goodwill 189,693 190,514
Investments 721,485 674,615
Accounts receivable 286,281 300,681
Deferred charges 286,281 300,681
Other assets 392,121 436,314
  $ 6,455,450 $ 6,384,853
Liabilities and Shareholders' Equity (Deficiency)
Liabilities:
Long-term debt $ 5,287,375 $ 5,254,044
Bank advances 37,883 1,383
Accounts payable and accrued liabilities 884,015 957,796
Unearned revenue 116,995 100,718
Deferred income taxes 119,115 112,437
  6,445,383 6,426,378
Shareholders' equity (deficiency) 10,067 (41,525)
  $ 6,455,450 $ 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