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Rogers Communications Inc$48.22$.35.73%

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 Rogers Communications Reports Fourth Quarter and Full-Year 2018 Results; Announces 2019 Financial Guidance
   Thursday, January 24, 2019 7:00:00 AM ET
  • Delivered solid fourth quarter results; grew revenue and adjusted EBITDA by 6%
    • Grew Wireless revenue by 8% and adjusted EBITDA by 7%
    • Delivered Q4 Wireless postpaid net additions of 112,000 and churn of 1.23%, our best Q4 performance in 9 years
    • Increased Wireless blended ABPU by 3%; increased blended ARPU by 2%
    • Grew Cable revenue by 1% and adjusted EBITDA by 3% driven by growth in Internet
  • Delivered strong 2018 results; grew total revenue by 5% and adjusted EBITDA by 9%
    • Delivered Wireless adjusted EBITDA growth of 10% and churn improvement of 10 basis points
    • Increased Wireless postpaid net additions growth by 99,000 and delivered 4% blended ABPU growth
    • Achieved strong Cable results led by Internet revenue growth of 7% and net additions growth of 14,000
    • Increased adjusted EBITDA margin by 130 basis points due to our steady focus on cost management
  • Released strong financial guidance for full-year 2019
    • Released revenue growth range of 3% to 5%; adjusted EBITDA growth of 7% to 9%
    • Projected capital expenditures of $2.85 billion to $3.05 billion
  • Announced annualized dividend rate increase of 4.2% to $2.00 per share

TORONTO, Jan. 24, 2019 (GLOBE NEWSWIRE) -- Rogers Communications Inc. today announced its unaudited financial and operating results for the fourth quarter ended December 31, 2018.



Consolidated Financial Highlights

 Three months ended December 31 Twelve months ended December 31 
(In millions of Canadian dollars, except per share amounts, unaudited)2018 2017
(restated) 1
 % Chg 2018 2017
(restated) 1
 % Chg 
       
Total revenue3,938 3,731 6 15,096 14,369 5 
Total service revenue 23,276 3,164 4 12,974 12,550 3 
Adjusted EBITDA 31,521 1,436 6 5,983 5,502 9 
Net income502 499 1 2,059 1,845 12 
Adjusted net income 3585 525 11 2,241 1,902 18 
       
Diluted earnings per share$0.97 $0.97  $3.99 $3.57 12 
Adjusted diluted earnings per share 3$1.13 $1.02 11 $4.34 $3.68 18 
       
Cash provided by operating activities1,051 1,142 (8)4,288 3,938 9 
Free cash flow 3275 230 20 1,771 1,685 5 

2017 reported figures have been restated applying the new revenue recognition standard, IFRS 15. See "Critical Accounting Policies and Estimates".
As defined. See "Key Performance Indicators".
As defined. See "Non-GAAP Measures". These measures should not be considered substitutes or alternatives for GAAP measures. These are not defined terms under IFRS and do not have standard meanings, so may not be a reliable way to compare us to other companies.

“We delivered strong financial and operating results in the fourth quarter and terrific results for the full year,” said Joe Natale, President and CEO. “We delivered on all of our key financial commitments and released a strong outlook for 2019. Overall, we have good momentum and we continue to make meaningful and substantial headway on our key strategic priorities, including our relentless focus on our customers, our well-timed investments in our networks, and our steadfast commitment to deliver strong shareholder value.”

Quarterly Financial Highlights

Higher revenue
Total revenue increased 6% this quarter, largely driven by Wireless service revenue growth of 5%. Growth in Wireless was a result of our balanced approach to continue monetizing the increasing demand for data along with a disciplined approach around subscriber base management. Wireless equipment revenue grew 17% this quarter driven by an increase in sales of higher value devices and increased hardware upgrades.

Cable revenue increased 1% this quarter as Internet revenue growth of 6% continued to drive the Cable segment. This quarter, we had net additions of 25,000 for Internet.

Media revenue increased 3% this quarter primarily as a result of higher advertising and sports-related revenue.

Higher adjusted EBITDA and margins
This quarter, adjusted EBITDA increased 6% with a margin expansion of 10 basis points. This increase was driven by Wireless adjusted EBITDA growth of 7%, as a result of strong growth in Wireless revenue, partially offset by investments in our frontline employees, which led to a margin of 41.7%, down 50 basis points from last year.

Cable adjusted EBITDA increased 3% this quarter primarily from the ongoing product mix shift to higher-margin Internet services and various cost efficiencies achieved. This gave rise to a margin of 49.4% this quarter, up 80 basis points from last year.

Media adjusted EBITDA increased 8% this quarter primarily as a result of increased revenue, resulting in a margin of 7.4%, up 40 basis points from last year.

Higher net income and adjusted net income
Net income and adjusted net income increased this quarter by 1% and 11%, respectively, as a result of higher adjusted EBITDA, partially offset by higher depreciation and amortization.

Substantial cash flow affords financial flexibility and supports network evolution
We continued to generate substantial cash flow from operating activities of $1,051 million this quarter and free cash flow of $275 million. Cash flow from operating activities decreased by 8% as a result of a higher net investment in working capital items and higher interest paid. Free cash flow increased by 20% as a result of higher adjusted EBITDA.

Our solid financial results enabled us to continue to make investments in our network, strengthen our balance sheet and liquidity, and still return substantial dividends to shareholders. We paid $247 million in dividends this quarter and announced a 4.2% increase to our annualized dividend rate, bringing our annual declared dividend to $2.00 per share. We ended the fourth quarter with a debt leverage ratio of 2.5, down from 2.7 at the end of 2017.

Strategic Highlights

Our six company priorities guide our work and decision-making as we further improve our operational execution and make well-timed investments to grow our core businesses and deliver increased shareholder value. Below are some highlights for 2018.

Create best-in-class customer experiences by putting our customers first in everything we do

  • Delivered a 10 basis point improvement in Wireless postpaid churn.
  • Improved customer self-serve and grew customer digital adoption.

Invest in our networks and technology to deliver leading performance and reliability

  • Improved our wireless network performance in our top 6 markets.
  • Signed a three-year partnership with the University of British Columbia to create Canada's first real-world 5G hub.
  • Received the 2018 Speedtest® Award for Canada's Fastest Internet from Ookla®.

Deliver innovative solutions and compelling content that our customers will love

  • Introduced Ignite TV across our Ontario cable footprint.
  • Invested $679 million during the 2018 broadcast year to create and produce Canadian content.
  • Celebrated 50 years of local programming through Rogers TV.

Drive profitable growth in all the markets we serve

  • Achieved 2018 guidance targets, and raised adjusted EBITDA guidance in the third quarter.
  • Grew total revenue by 5% and adjusted EBITDA by 9%.
  • Delivered total shareholder return of 12.5%, 21 points above the TSX Composite Index.

Develop our people and a high performance culture

  • Achieved a best-in-class employee engagement score of 82%.
  • Recognized by Mediacorp Canada as one of Canada’s Top 100 Employers in November 2018 and as a Top Employer for Young People in February 2018.
  • Achieved female representation of 30% for executive positions of Vice-President and above.

Be a strong, socially responsible leader in our communities across Canada

  • Contributed approximately $60 million through cash and in-kind investments to help our communities thrive.
  • Provided 313 students with Ted Rogers Scholarships and awarded 105 community grants in 2018.
  • Expanded our Connected for Success affordable Internet program to 300 non-profit housing providers.

Achieved 2018 Guidance

The following table outlines guidance ranges that we had previously provided and our actual results and achievements for the selected full-year 2018 financial metrics.

 20172018
2018 
(In millions of dollars, except percentages)(restated)Guidance RangesActualAchievement
        
Consolidated Guidance 1       
Revenue14,369Increase of 3%to5%15,096 5.1%Y
Adjusted EBITDA 25,502Increase of 7%to9%5,983 8.7%Y
Capital expenditures 32,4362,650to2,850 2,790 n/mY
Free cash flow 21,685Increase of 5%to7%1,771 5.1%Y

n/m - not meaningful

1 This table outlines guidance ranges for selected full-year 2018 consolidated financial metrics provided in our January 25, 2018 earnings release and subsequently updated on October 19, 2018. Guidance ranges presented as percentages reflect percentage increases over 2017 actual results.
2 Adjusted EBITDA and free cash flow are non-GAAP measures and should not be considered substitutes or alternatives for GAAP measures. These are not defined terms under IFRS and do not have standard meanings, so may not be a reliable way to compare us to other companies. See "Non-GAAP Measures" for information about these measures, including how we calculate them.
3 Includes additions to property, plant and equipment net of proceeds on disposition, but does not include expenditures for spectrum licences.

2019 Outlook

For the full-year 2019, we expect steady growth in revenue and adjusted EBITDA to drive higher free cash flow, despite higher projected capital expenditures. In 2019, we expect to have the financial flexibility to maintain our network advantages, to further reduce debt, and to continue to return cash to shareholders.

 2018 
(In millions of dollars, except percentages)Actual2019 Guidance Ranges 1
     
Consolidated Guidance    
Revenue15,096 Increase of 3% to5%
Adjusted EBITDA 2, 35,983 Increase of 7% to9%
Capital expenditures 42,790 2,850 to3,050 
Free cash flow 2, 3, 52,134 Increase of 200 to300 

1 Guidance ranges presented as percentages reflect percentage increases over full-year 2018 results. 2019 amounts for purposes of assessing our performance against guidance will be calculated in accordance with accounting policies after adopting IFRS 16, Leases (IFRS 16) on January 1, 2019. See "Critical Accounting Polices and Estimates" for more information.
2 Adjusted EBITDA and free cash flow are non-GAAP measures and should not be considered substitutes or alternatives for GAAP measures. These are not defined terms under IFRS and do not have standard meanings, so may not be a reliable way to compare us to other companies. See "Non-GAAP Measures" for information about these measures, including how we calculate them.
3 We will record the initial impacts of adopting IFRS 16 in our opening balance sheet effective January 1, 2019. The ongoing impacts will be addressed in our results prospectively from that date. Our 2018 results will not be restated such that our 2019 guidance ranges for adjusted EBITDA and free cash flow include the effect of our adoption of IFRS 16. Were we to adopt IFRS 16 on a retrospective basis, 2018 adjusted EBITDA and free cash flow would each have been $174 million higher.
4 Includes additions to property, plant and equipment net of proceeds on disposition, but does not include expenditures for spectrum licences.
5 Effective January 1, 2019, we will amend our definition of free cash flow. Free cash flow presented above reflects this change. See "Managing our Liquidity and Financial Resources" for more information, including a reconciliation of the impact of this change on full-year 2018 free cash flow.

The above table outlines guidance ranges for selected full-year 2019 consolidated financial metrics. These ranges take into consideration our current outlook, our 2018 results, and the estimated effect of our adoption of IFRS 16 on January 1, 2019 on a cumulative catch-up basis and not retrospectively. The purpose of the financial outlook is to assist investors, shareholders, and others in understanding certain financial metrics relating to expected 2019 financial results for evaluating the performance of our business. This information may not be appropriate for other purposes. Information about our guidance, including the various assumptions underlying it, is forward-looking and should be read in conjunction with "About Forward-Looking Information" (including the material assumptions listed under the heading "Key assumptions underlying our 2019 guidance") and the related disclosure and information about various economic, competitive, and regulatory assumptions, factors, and risks that may cause our actual future financial and operating results to differ from what we currently expect.

We provide annual guidance ranges on a consolidated full-year basis that are consistent with annual full-year Board of Directors-approved plans. Any updates to our full-year financial guidance over the course of the year would only be made to the consolidated guidance ranges that appear above.

About Rogers

Rogers is a leading diversified Canadian communications and media company. We are Canada's largest provider of wireless communications services and one of Canada's leading providers of cable television, high-speed Internet, information technology, and telephony services to consumers and businesses. Through Rogers Media, we are engaged in radio and television broadcasting, sports, televised and online shopping, magazines, and digital media. Our shares are publicly traded on the Toronto Stock Exchange (TSX: RCI.A and RCI.B) and on the New York Stock Exchange (NYSE: RCI).

Investment community contactMedia contact
  
Paul CarpinoTerrie Tweddle
647.435.6470647.501.8346
paul.carpino@rci.rogers.com terrie.tweddle@rci.rogers.com

Quarterly Investment Community Teleconference

Our fourth quarter 2018 results teleconference with the investment community will be held on:

  • January 24, 2019
  • 8:00 a.m. Eastern Time
  • webcast available at investors.rogers.com
  • media are welcome to participate on a listen-only basis

A rebroadcast will be available at investors.rogers.com for at least two weeks following the teleconference. Additionally, investors should note that from time to time, Rogers' management presents at brokerage-sponsored investor conferences. Most often, but not always, these conferences are webcast by the hosting brokerage firm, and when they are webcast, links are made available on Rogers' website at investors.rogers.com .

For More Information

You can find more information relating to us on our website (investors.rogers.com ), on SEDAR (sedar.com ), and on EDGAR (sec.gov ), or you can e-mail us at investor.relations@rci.rogers.com . Information on or connected to these and any other websites referenced in this earnings release is not part of, or incorporated into, this earnings release.

You can also go to investors.rogers.com for information about our governance practices, corporate social responsibility reporting, a glossary of communications and media industry terms, and additional information about our business.

About this Earnings Release

This earnings release contains important information about our business and our performance for the three and twelve months ended December 31, 2018, as well as forward-looking information about future periods. This earnings release should be used as preparation for reading our forthcoming Management's Discussion and Analysis (MD&A) and Audited Consolidated Financial Statements for the year ended December 31, 2018, which we intend to file with securities regulators in Canada and the US in the coming weeks. These statements will be made available on the investors.rogers.com , sedar.com , and sec.gov websites or mailed upon request.

The financial information contained in this earnings release is prepared using International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board. This earnings release should be read in conjunction with our 2017 Annual MD&A, our 2017 Audited Consolidated Financial Statements, our 2018 First, Second, and Third Quarter MD&A and Interim Condensed Consolidated Financial Statements, and our other recent filings with Canadian and US securities regulatory authorities, which are available on SEDAR at sedar.com or EDGAR at sec.gov , respectively.

We, us, our, Rogers, Rogers Communications, and the Company refer to Rogers Communications Inc. and its subsidiaries. RCI refers to the legal entity Rogers Communications Inc., not including its subsidiaries. Rogers also holds interests in various investments and ventures.

All dollar amounts are in Canadian dollars unless otherwise stated and are unaudited. All percentage changes are calculated using the rounded numbers as they appear in the tables. Information is current as at January 24, 2019 and was approved by RCI's Board of Directors (the Board). This earnings release includes forward-looking statements and assumptions. See "About Forward-Looking Information" for more information.

In this earnings release, this quarter, the quarter, or the fourth quarter refer to the three months ended December 31, 2018, first quarter refers to the three months ended March 31, 2018, second quarter refers to the three months ended June 30, 2018, third quarter refers to the three months ended September 30, 2018, and year to date or full-year refer to the twelve months ended December 31, 2018. All results commentary is compared to the equivalent periods in 2017 or as at December 31, 2017, as applicable, unless otherwise indicated.

Reportable segments
We report our results of operations in three reportable segments. Each segment and the nature of its business is as follows:

SegmentPrincipal activities
WirelessWireless telecommunications operations for Canadian consumers and businesses.
CableCable telecommunications operations, including Internet, television, telephony (phone), and smart home monitoring services for Canadian consumers and businesses, and network connectivity through our fibre network and data centre assets to support a range of voice, data, networking, hosting, and cloud-based services for the enterprise, public sector, and carrier wholesale markets.

MediaA diversified portfolio of media properties, including sports media and entertainment, television and radio broadcasting, specialty channels, multi-platform shopping, digital media, and publishing.

Wireless and Cable are operated by our wholly-owned subsidiary, Rogers Communications Canada Inc. (RCCI), and certain of our other wholly-owned subsidiaries. Media is operated by our wholly-owned subsidiary, Rogers Media Inc., and its subsidiaries.

Effective January 1, 2018, we redefined our reportable segments as a result of technological evolution and the increased overlap between the various product offerings within our legacy Cable and legacy Business Solutions reportable segments, as well as how we allocate resources amongst, and the general management of, our reportable segments. The results of our legacy Cable segment, legacy Business Solutions segment, and our Smart Home Monitoring products are presented within a redefined Cable segment. Financial results related to our Smart Home Monitoring products were previously reported within Corporate items and intercompany eliminations. We have retrospectively amended our 2017 comparative segment results to account for this redefinition.

Additionally, effective January 1, 2018, we commenced using adjusted EBITDA as the key measure of profit for the purpose of assessing performance for each segment and to make decisions about the allocation of resources. This measure replaced our previous adjusted operating profit non-GAAP measure. We believe adjusted EBITDA more fully reflects segment and consolidated profitability. The difference between adjusted operating profit and adjusted EBITDA is that adjusted EBITDA includes stock-based compensation expense. Use of this measure changed our definition of free cash flow. Adjusted EBITDA and free cash flow are non-GAAP measures and should not be considered substitutes or alternatives for GAAP measures. These are not defined terms under IFRS and do not have standard meanings, so may not be a reliable way to compare us to other companies. See "Non-GAAP Measures" for information about these measures, including how we calculate them.

Summary of Consolidated Financial Results

 Three months ended December 31 Twelve months ended December 31 
(In millions of dollars, except margins and per share amounts)2018
 2017
(restated) 1
 % Chg 2018
 2017
(restated) 1
 % Chg 
       
Revenue      
Wireless2,464 2,288 8 9,200 8,569 7 
Cable 2989 981 1 3,932 3,894 1 
Media540 526 3 2,168 2,153 1 
Corporate items and intercompany eliminations 2(55)(64)(14)(204)(247)(17)
Revenue3,938 3,731 6 15,096 14,369 5 
Total service revenue 33,276 3,164 4 12,974 12,550 3 
       
Adjusted EBITDA 4      
Wireless1,028 965 7 4,090 3,726 10 
Cable 2489 477 3 1,874 1,819 3 
Media40 37 8 196 127 54 
Corporate items and intercompany eliminations 2(36)(43)(16)(177)(170)4 
Adjusted EBITDA1,521 1,436 6 5,983 5,502 9 
       
Adjusted EBITDA margin 438.6 %38.5 %0.1pts39.6 %38.3 %1.3pts
       
Net income502 499 1 2,059 1,845 12 
Basic earnings per share$0.97 $0.97  $4.00 $3.58 12 
Diluted earnings per share$0.97 $0.97  $3.99 $3.57 12 
       
Adjusted net income 4585 525 11 2,241 1,902 18 
Adjusted basic earnings per share 4$1.14 $1.02 12 $4.35 $3.69 18 
Adjusted diluted earnings per share 4$1.13 $1.02 11 $4.34 $3.68 18 
       
Capital expenditures828 841 (2)2,790 2,436 15 
Cash provided by operating activities1,051 1,142 (8)4,288 3,938 9 
Free cash flow 4275 230 20 1,771 1,685 5 

2017 reported figures have been restated applying IFRS 15. See "Critical Accounting Policies and Estimates".
These figures have been retrospectively amended as a result of our reportable segment realignment. See "Reportable Segments".
As defined. See "Key Performance Indicators".
Adjusted EBITDA, adjusted EBITDA margin, adjusted net income, adjusted basic and diluted earnings per share, and free cash flow are non-GAAP measures and should not be considered substitutes or alternatives for GAAP measures. These are not defined terms under IFRS and do not have standard meanings, so may not be a reliable way to compare us to other companies. See "Non-GAAP Measures" for information about these measures, including how we calculate them.?

Results of our Reportable Segments

WIRELESS

Wireless Financial Results

 Three months ended December 31 Twelve months ended December 31 
(In millions of dollars, except margins)2018
 2017
(restated) 1
 % Chg 2018
 2017
(restated) 1
 % Chg 
       
Revenue      
Service revenue1,806 1,724 5 7,091 6,765 5 
Equipment revenue658 564 17 2,109 1,804 17 
Revenue2,464 2,288 8 9,200 8,569 7 
       
Operating expenses      
Cost of equipment695 622 12 2,264 2,002 13 
Other operating expenses 2741 701 6 2,846 2,841  
Operating expenses1,436 1,323 9 5,110 4,843 6 
       
Adjusted EBITDA1,028 965 7 4,090 3,726 10 
       
Adjusted EBITDA margin41.7 %42.2 %(0.5pts)44.5 %43.5 %1.0pts
Capital expenditures
309 269 15 1,086 806 35 

1 2017 reported figures have been restated applying IFRS 15. See "Critical Accounting Policies and Estimates".
Other operating expenses for 2017 have been retrospectively amended to include stock-based compensation. See "Reportable Segments".

Wireless Subscriber Results 1

 Three months ended December 31 Twelve months ended December 31 
(In thousands, except churn, blended ABPU, and blended ARPU)2018
 2017 Chg 2018
 2017 Chg 
       
Postpaid      
Gross additions448 456 (8)1,632 1,599 33 
Net additions112 72 40 453 354 99 
Total postpaid subscribers 29,157 8,704 453 9,157 8,704 453 
Churn (monthly)1.23 %1.48 %(0.25pts)1.10 %1.20 %(0.10pts)
Prepaid      
Gross additions157 165 (8)751 782 (31)
Net (losses) additions(139)(8)(131)(152)61 (213)
Total prepaid subscribers 21,626 1,778 (152)1,626 1,778 (152)
Churn (monthly)5.85 %3.22 %2.63pts4.38 %3.48 %0.90pts
Blended ABPU (monthly)$65.12 $63.46 $1.66 $64.74 $62.31 $2.43 
Blended ARPU (monthly) 3$55.91 $54.95 $0.96 $55.64 $54.23 $1.41 

Subscriber counts, subscriber churn, blended ABPU, and blended ARPU are key performance indicators. Effective January 1, 2018, in conjunction with our transition to IFRS 15, we commenced reporting blended ABPU as a new key performance indicator. See "Key Performance Indicators".
As at end of period.
3 Blended ARPU has been restated for 2017 using revenue recognition policies in accordance with IFRS 15.

Service revenue
The 5% increase in service revenue this quarter was a result of:

  • 2% increase in blended ARPU this quarter, primarily due to the increased mix of subscribers on higher-rate plans from our various brands; and
  • a larger postpaid subscriber base.

The 3% increase in blended ABPU this quarter was a result of the increased service revenue as described above.

Gross postpaid subscriber additions this quarter were 448,000. We believe the marginal decrease in this figure from the same period last year was a result of a highly competitive market this quarter along with our disciplined approach around subscriber base management. We believe the higher postpaid net additions and lower postpaid churn this quarter were a result of our strategic focus on enhancing the customer experience by improving our customer service and continually increasing the quality of our network.

Equipment revenue
The 17% increase in equipment revenue this quarter was a result of:

  • an increase in sales of higher-value devices; and
  • an increase in device upgrades by existing subscribers.

Operating expenses
Cost of equipment

The 12% increase in the cost of equipment this quarter was a result of:

  • a shift in the product mix of device sales towards higher-cost smartphones; and
  • the increase in device upgrades by existing subscribers.

Other operating expenses

The 6% increase in other operating expenses this quarter was primarily a result of investments in frontline employees.

Adjusted EBITDA
The 7% increase in adjusted EBITDA this quarter was a result of the revenue and expense changes discussed above.

CABLE

Cable Financial Results

 Three months ended December 31 Twelve months ended December 31 
(In millions of dollars, except margins)2018
 2017
(restated) 1
 % Chg 2018
 2017
(restated) 1
 % Chg 
       
Revenue      
Internet536 508 6 2,114 1,967 7 
Television363 372 (2)1,442 1,501 (4)
Phone86 98 (12)363 411 (12)
Service revenue985 978 1 3,919 3,879 1 
Equipment revenue4 3 33 13 15 (13)
Revenue989 981 1 3,932 3,894 1 
       
Operating expenses      
Cost of equipment6 5 20 21 20 5 
Other operating expenses 2494 499 (1)2,037 2,055 (1)
Operating expenses500 504 (1)2,058 2,075 (1)
       
Adjusted EBITDA489 477 3 1,874 1,819 3 
       
Adjusted EBITDA margin49.4 %48.6 %0.8pts47.7 %46.7 %1.0pts
Capital expenditures

422 430 (2)1,429 1,334 7 

1 Effective January 1, 2018 and on a retrospective basis, we realigned our reportable segments and related financial results. See "Reportable Segments".
2 Other operating expenses for 2017 have been retrospectively amended to include stock-based compensation. See "Reportable Segments".

Cable Subscriber Results 1

 Three months ended December 31 Twelve months ended December 31 
(In thousands)2018
 2017
(restated)
 Chg 2018
 2017
(restated)
 Chg 
       
Internet 2      
Net additions25 20 5 109 95 14 
Total Internet subscribers 32,430 2,321 109 2,430 2,321 109 
Television      
Net losses(16)(13)(3)(55)(80)25 
Total Television subscribers 31,685 1,740 (55)1,685 1,740 (55)
Phone      
Net (losses) additions(4)9 (13)8 14 (6)
Total Phone subscribers 31,116 1,108 8 1,116 1,108 8 
       
Homes passed 34,361 4,307 54 4,361 4,307 54 
Total service units 4      
Net additions5 16 (11)62 29 33 
Total service units 35,231 5,169 62 5,231 5,169 62 

Subscriber counts are key performance indicators. See "Key Performance Indicators".
Effective January 1, 2018, and on a retrospective basis, our Internet subscriber results include Smart Home Monitoring subscribers.
As at end of period.
Includes Internet, Television, and Phone.

Revenue
The 1% increase in revenue this quarter was a result of:

  • the movement of Internet customers to higher speed and usage tiers;
  • the impact of service pricing changes; and
  • a larger Internet subscriber base; partially offset by
  • promotional pricing provided to subscribers; and
  • a lower subscriber base for our Television products.

Internet revenue
The 6% increase in Internet revenue this quarter was a result of:

  • general movement of customers to higher speed and usage tiers of our Internet offerings;
  • the impact of Internet service pricing changes; and
  • a larger Internet subscriber base; partially offset by
  • promotional pricing provided to subscribers.

Television revenue
The 2% decrease in Television revenue this quarter was a result of:

  • the decline in Television subscribers over the past year; partially offset by
  • the impact of Television service pricing changes, net of promotional pricing provided to subscribers.

Phone revenue
The 12% decrease in Phone revenue this quarter was a result of promotional pricing provided to subscribers.

Operating expenses
The 1% decrease in operating expenses this quarter was a result of various cost efficiencies and productivity initiatives.

Adjusted EBITDA
The 3% increase in adjusted EBITDA this quarter was a result of the revenue and expense changes discussed above.

MEDIA

Media Financial Results

 Three months ended December 31 Twelve months ended December 31 
(In millions of dollars, except margins)2018
 2017 % Chg 2018
 2017 % Chg 
       
Revenue540 526 3 2,168 2,153 1 
Operating expenses 1500 489 2 1,972 2,026 (3)
       
Adjusted EBITDA40 37 8 196 127 54 
       
Adjusted EBITDA margin7.4 %7.0 %0.4pts9.0 %5.9 %3.1pts
Capital expenditures
43 39 10 90 83 8 

1 Operating expenses for 2017 have been retrospectively amended to include stock-based compensation. See "Reportable Segments".

Revenue
The 3% increase in revenue this quarter was a result of:

  • higher advertising revenue; and
  • higher sports-related revenue.

Operating expenses
The 2% increase in operating expenses this quarter was a result of:

  • higher programming costs; partially offset by
  • various cost efficiencies and productivity initiatives across the divisions.

Adjusted EBITDA
The 8% increase in adjusted EBITDA this quarter was a result of the revenue and expense changes discussed above.

CAPITAL EXPENDITURES

 Three months ended December 31 Twelve months ended December 31 
(In millions of dollars, except capital intensity)2018
 2017
(restated) 1
 % Chg 2018
 2017
(restated) 1
 % Chg 
       
Capital expenditures 2      
Wireless309 269 15 1,086 806 35 
Cable422 430 (2)1,429 1,334 7 
Media43 39 10 90 83 8 
Corporate59 103 (43)210 287 (27)
       
Capital expenditures before proceeds on disposition833 841 (1)2,815 2,510 12 
Proceeds on disposition(5) n/m (25)(74)(66)
       
Capital expenditures 2828 841 (2)2,790 2,436 15 
       
Capital intensity 321.0 %22.5 %(1.5pts)18.5 %17.0 %1.5pts

Effective January 1, 2018 and on a retrospective basis, we realigned our reportable segments and related financial results. As a result, certain figures have been amended for comparative purposes. See "Reportable Segments".
Includes additions to property, plant and equipment net of proceeds on disposition, but does not include expenditures for spectrum licences.
As defined. See "Key Performance Indicators".

Wireless
The increase in capital expenditures in Wireless this quarter was a result of investments made to upgrade our wireless network to continue delivering reliable performance for our customers. We have continued augmenting our existing LTE network with 4.5G technology investments that are also 5G-ready.

Cable
The decrease in capital expenditures in Cable this quarter was a result of lower investments in information technology, partially offset by greater investments in customer premise equipment. We also continued upgrading our hybrid fibre-coaxial infrastructure with additional fibre deployments and further DOCSIS technology enhancements. These deployments and enhancements will lower the number of homes passed per node and incorporate the latest technologies to help deliver more bandwidth and an even more reliable customer experience.

Media
The increase in capital expenditures in Media this quarter was a result of higher investments in the Rogers Centre, partially offset by lower investments in our broadcast infrastructure.

Corporate
The decrease in capital expenditures in Corporate this quarter was a result of higher investments in information technology in 2017.

Capital intensity
Capital intensity decreased this quarter as a result of lower capital expenditures, as discussed above, and higher total revenue.

Review of Consolidated Performance

This section discusses our consolidated net income and other income and expenses that do not form part of the segment discussions above.

 Three months ended December 31 Twelve months ended December 31 
(In millions of dollars)2018
 2017
(restated) 1
 % Chg 2018
 2017
(restated) 1
 % Chg 
       
Adjusted EBITDA 21,521 1,436 6 5,983 5,502 9 
Deduct (add):      
Depreciation and amortization564 531 6 2,211 2,142 3 
Gain on disposition of property, plant and equipment   (16)(49)(67)
Restructuring, acquisition and other94 31 n/m 210 152 38 
Finance costs205 184 11 793 746 6 
Other (income) expense(26)3 n/m (32)(19)68 
Income tax expense182 188 (3)758 685 11 
       
Net income502 499 1 2,059 1,845 12 

2017 reported figures have been restated applying IFRS 15. See "Critical Accounting Policies and Estimates".
Adjusted EBITDA is a non-GAAP measure and should not be considered a substitute or alternative for GAAP measures. It is not a defined term under IFRS and does not have a standard meaning, so may not be a reliable way to compare us to other companies. See "Non-GAAP Measures" for information about this measure, including how we calculate it.

Depreciation and amortization

 Three months ended December 31 Twelve months ended December 31 
(In millions of dollars)2018
 2017 % Chg 2018
 2017 % Chg 
       
Depreciation557 518 8 2,174 2,087 4 
Amortization7 13 (46)37 55 (33)
       
Total depreciation and amortization564 531 6 2,211 2,142 3 

Total depreciation and amortization increased this quarter primarily as a result of higher capital expenditures this year. See "Capital Expenditures" for more information.

Restructuring, acquisition and other
This quarter, we incurred $94 million (2017 - $31 million) in restructuring, acquisition and other expenses. These costs were primarily a result of certain sports-related contract termination costs and severance costs associated with the targeted restructuring of our employee base.

Finance costs

 Three months ended December 31 Twelve months ended December 31 
(In millions of dollars)2018
 2017 % Chg 2018
 2017 % Chg 
       
Interest on borrowings 1173 184 (6)709 740 (4)
Interest on post-employment benefits liability4 3 33 14 12 17 
Loss on repayment of long-term debt   28  n/m 
Loss (gain) on foreign exchange90 8 n/m 136 (107)n/m 
Change in fair value of derivative instruments(63)(10)n/m (95)99 n/m 
Capitalized interest(5)(5) (20)(18)11 
Other6 4 50 21 20 5 
       
Total finance costs205 184 11 793 746 6 

Interest on borrowings includes interest on short-term borrowings and on long-term debt.

Bond forwards
During the quarter, we determined that we would no longer be able to exercise certain ten-year bond forward derivatives within the originally designated time frame. Consequently, we discontinued hedge accounting on those bond forward derivatives and reclassified a $21 million loss from the hedging reserve within shareholders' equity to finance costs (recorded in "change in fair value of derivative instruments"). We subsequently extended the bond forwards to January 31, 2019, with the ability to extend them further, and redesignated them as effective hedges.

Income tax expense

 Three months ended December 31 Twelve months ended December 31 
(In millions of dollars, except tax rates)2018
 2017
(restated) 1
 2018
 2017
(restated) 1
 
     
Statutory income tax rate26.7 %26.7 %26.7 %26.7 %
Income before income tax expense684 687 2,817 2,530 
Computed income tax expense183 184 752 676 
Increase (decrease) in income tax expense resulting from:    
Non-deductible stock-based compensation3  5 9 
Non-(taxable) deductible portion of equity (income) losses(3)2 1  
Non-deductible loss on FVTOCI investments   7 
Income tax adjustment, legislative tax change 2  2 
Non-taxable portion of capital gains  (9)(10)
Other items(1) 9 1 
     
Total income tax expense182 188 758 685 
     
Effective income tax rate26.6 %27.4 %26.9 %27.1 %
Cash income taxes paid54 76 370 475 

1 2017 reported figures have been restated applying IFRS 15. See "Critical Accounting Policies and Estimates".

The payment of cash income taxes was lower this quarter based on the timing of installment payments.

Net income

 Three months ended December 31 Twelve months ended December 31 
(In millions of dollars, except per share amounts) 2018
 2017
(restated) 1
 % Chg  2018
 2017
(restated) 1
 % Chg 
       
Net income502 499 1 2,059 1,845 12 
Basic earnings per share$0.97 $0.97  $4.00 $3.58 12 
Diluted earnings per share$0.97 $0.97  $3.99 $3.57 12 

1 2017 reported figures have been restated applying IFRS 15. See "Critical Accounting Policies and Estimates".

Adjusted net income
We calculate adjusted net income from adjusted EBITDA as follows:

 Three months ended December 31 Twelve months ended December 31 
(In millions of dollars, except per share amounts)2018 2017
(restated) 1
 % Chg 2018 2017
(restated) 1
 % Chg 
       
Adjusted EBITDA 21,521 1,436 6 5,983 5,502 9 
Deduct:      
Depreciation and amortization564 531 6 2,211 2,142 3 
Finance costs 3184 184  744 746  
Other (income) expense 4(26)3 n/m (32)1 n/m 
Income tax expense 5214 193 11 819 711 15 
       
Adjusted net income 2585 525 11 2,241 1,902 18 
       
Adjusted basic earnings per share 2$1.14 $1.02 12 $4.35 $3.69 18 
Adjusted diluted earnings per share 2$1.13 $1.02 11 $4.34 $3.68 18 

1  2017 reported figures have been restated applying IFRS 15. See "Critical Accounting Policies and Estimates".
Adjusted EBITDA, adjusted net income, and adjusted basic and diluted earnings per share are non-GAAP measures and should not be considered substitutes or alternatives for GAAP measures. These are not defined terms under IFRS and do not have standard meanings, so may not be a reliable way to compare us to other companies. See "Non-GAAP Measures" for information about these measures, including how we calculate them.
Finance costs exclude a $21 million loss on discontinuation of hedge accounting on certain bond forwards for the three and twelve months ended December 31, 2018 (2017 - nil) and a $28 million loss on repayment of long-term debt for the twelve months ended December 31, 2018 (2017 - nil).
4 Other income for the twelve months ended December 31, 2017 excludes a $20 million provision reversal on the wind down of shomi.
Income tax expense excludes a $32 million recovery (2017 - $7 million recovery) for the three months ended December 31, 2018 and a $61 million recovery (2017 - $28 million recovery) for the twelve months ended December 31, 2018 related to the income tax impact for adjusted items. For the three and twelve months ended December 31, 2017, income tax expense also excludes expenses as a result of legislative tax changes of $2 million.

Managing our Liquidity and Financial Resources

Operating, investing, and financing activities

 Three months ended December 31 Twelve months ended December 31 
(In millions of dollars)2018
 2017
 (restated) 1
 2018
 2017
 (restated) 1
 
     
Cash provided by operating activities before changes in non-cash working capital items, income taxes paid, and interest paid1,298 1,360 5,498 5,312 
Change in non-cash operating working capital items(42)(17)(114)(164)
Cash provided by operating activities before income taxes paid and interest paid1,256 1,343 5,384 5,148 
Income taxes paid(54)(76)(370)(475)
Interest paid(151)(125)(726)(735)
     
Cash provided by operating activities1,051 1,142 4,288 3,938 
     
Investing activities:    
Capital expenditures(828)(841)(2,790)(2,436)
Additions to program rights(26)(21)(54)(59)
Changes in non-cash working capital related to property, plant and equipment and intangible assets107 101 (125)109 
Acquisitions and other strategic transactions, net of cash acquired   (184)
Other9 21 25 (60)
     
Cash used in investing activities(738)(740)(2,944)(2,630)
     
Financing activities:    
Net proceeds received (repayments) on short-term borrowings256 (163)508 858 
Net repayment of long-term debt (3)(823)(1,034)
Net proceeds (payments) on settlement of debt derivatives and forward contracts26 40 388 (79)
Transaction costs incurred  (18) 
Dividends paid(247)(247)(988)(988)
     
Cash provided by (used in) financing activities35 (373)(933)(1,243)
     
Change in cash and cash equivalents348 29 411 65 
Cash and cash equivalents (bank advances), beginning of period57 (35)(6)(71)
     
Cash and cash equivalents (bank advances), end of period405 (6)405 (6)

1 2017 reported figures have been restated applying IFRS 15. See "Critical Accounting Policies and Estimates".

Operating activities
The 8% decrease in cash provided by operating activities this quarter was a result of a higher net investment in working capital items and higher interest paid, partially offset by lower income taxes paid.

Investing activities
Capital expenditures
During the quarter, we incurred $828 million on capital expenditures, before changes in non-cash working capital items, which was lower than the same period in 2017. See "Capital Expenditures" for more information.

Financing activities
During the quarter, we received net amounts of $282 million (2017 - repaid net amounts of $126 million) on our short-term borrowings, long-term debt, and related derivatives. See "Financial Risk Management" for more information on the cash flows relating to our derivative instruments.

Short-term borrowings
Our short-term borrowings consist of amounts outstanding under our accounts receivable securitization program and under our US dollar-denominated commercial paper (US CP) program. Below is a summary of our short-term borrowings as at December 31, 2018 and December 31, 2017.

 As at
December 31
 As at
December 31
 
(In millions of dollars)2018
 2017 
   
Accounts receivable securitization program650 650 
US commercial paper program1,605 935 
   
Total short-term borrowings2,255 1,585 

The tables below summarize the activity relating to our short-term borrowings for the three and twelve months ended December 31, 2018 and 2017.

  Three months ended
December 31, 2018
  Twelve months ended
December 31, 2018
 
 Notional Exchange Notional Notional Exchange Notional 
(In millions of dollars, except exchange rates)(US$) rate (Cdn$) (US$) rate (Cdn$) 
       
Proceeds received from US commercial paper3,826 1.31 5,026 15,262 1.29 19,752 
Repayment of US commercial paper(3,626)1.32 (4,770)(14,858)1.30 (19,244)
Net proceeds received from US commercial paper  256   508 
       
Proceeds received from accounts receivable securitization     225 
Repayment of accounts receivable securitization     (225)
Net proceeds received from accounts receivable securitization      
       
Net proceeds received on short-term borrowings  256   508 


  Three months ended
December 31, 2017
  Twelve months ended
December 31, 2017
 
 Notional Exchange Notional Notional Exchange Notional 
(In millions of dollars, except exchange rates)(US$) rate (Cdn$) (US$) rate (Cdn$) 
       
Proceeds received from US commercial paper2,142 1.27 2,731 8,267 1.30 10,712 
Repayment of US commercial paper(1,958)1.28 (2,504)(7,530)1.29 (9,704)
Net proceeds received from US commercial paper  227   1,008 
       
Proceeds received from accounts receivable securitization     530 
Repayment of accounts receivable securitization  (390)  (680)
Net repayment of accounts receivable securitization  (390)  (150)
       
Net (repayment of) proceeds received on short-term borrowings  (163)  858 

Concurrent with our US CP issuances, we entered into debt derivatives to hedge the foreign currency risk associated with the principal and interest components of the borrowings under our US CP program. See "Financial Risk Management" for more information.

Long-term debt
Our long-term debt consists of amounts outstanding under our bank credit facilities and letter of credit facilities and the senior notes and debentures we have issued. The tables below summarize the activity relating to our long-term debt for the three and twelve months ended December 31, 2018 and 2017.

  Three months ended
December 31, 2018
  Twelve months ended
December 31, 2018
 
(In millions of dollars, except exchange rates)Notional Exchange Notional Notional Exchange Notional 
(US$) rate (Cdn$) (US$) rate (Cdn$) 
       
Credit facility borrowings (US$)   125 1.26 157 
Credit facility repayments (US$)   (125)1.26 (157)
Net borrowings under credit facilities      
       
Senior note issuances (US$)   750 1.25 938 
Senior note repayments (US$)   (1,400)1.26 (1,761)
Net repayment of senior notes     (823)
       
Net repayment of long-term debt     (823)


  Three months ended
December 31, 2017
  Twelve months ended
December 31, 2017
 
(In millions of dollars, except exchange rates)Notional Exchange Notional Notional Exchange Notional 
(US$) rate (Cdn$) (US$) rate (Cdn$) 
       
Credit facility borrowings (Cdn$)     1,730 
Credit facility borrowings (US$)100 1.25 125 960 1.32 1,269 
Total credit facility borrowings  125   2,999 
       
Credit facility repayments (Cdn$)     (1,830)
Credit facility repayments (US$)(100)1.28 (128)(1,110)1.31 (1,453)
Total credit facility repayments  (128)  (3,283)
       
Net repayments under credit facilities  (3)  (284)
       
Senior note repayments (Cdn$)     (750)
       
Net repayment of long-term debt  (3)  (1,034)


 Three months ended December 31 Twelve months ended December 31 
(In millions of dollars)2018
 2017 2018
 2017 
     
Long-term debt net of transaction costs, beginning of period13,865 14,402 14,448 16,080 
Net repayment of long-term debt (3)(823)(1,034)
Loss (gain) on foreign exchange422 47 672 (608)
Deferred transaction costs incurred  (18)(3)
Amortization of deferred transaction costs3 2 11 13 
     
Long-term debt net of transaction costs, end of period14,290 14,448 14,290 14,448 

Dividends
Below is a summary of the dividends we declared and paid on our outstanding RCI Class A Voting common shares (Class A Shares) and RCI Class B Non-Voting common shares (Class B Non-Voting Shares) in 2018 and 2017. On January 24, 2019, we announced a 4.2% increase in the annualized dividend rate to $2.00 per Class A Voting Share and Class B Non-Voting Share, to be paid in quarterly installments of $0.50 per share.

Declaration dateRecord datePayment dateDividend per
share (dollars)
Dividends paid
(in millions of dollars)
     
January 25, 2018March 12, 2018April 3, 20180.48247
April 19, 2018June 11, 2018July 3, 20180.48247
August 15, 2018
September 14, 2018
October 3, 2018
0.48247
October 19, 2018December 11, 2018January 3, 20190.48247
     
January 26, 2017March 13, 2017April 3, 20170.48247
April 18, 2017June 12, 2017July 4, 20170.48247
August 17, 2017September 15, 2017October 3, 20170.48247
October 19, 2017December 11, 2017January 2, 20180.48247

Free cash flow

 Three months ended December 31 Twelve months ended December 31 
(In millions of dollars)2018
 2017
(restated) 1
 % Chg 2018
 2017
(restated) 1
 % Chg 
       
Adjusted EBITDA 21,521 1,436 6 5,983 5,502 9 
Deduct:      
Capital expenditures 3828 841 (2)2,790 2,436 15 
Interest on borrowings, net of capitalized interest168 179 (6)689 722 (5)
Net change in contract asset and deferred commission cost asset balances196 110 78 363 184 97 
Cash income taxes 454 76 (29)370 475 (22)
       
Free cash flow 2275 230 20 1,771 1,685 5 

1  2017 reported figures have been restated applying IFRS 15. See "Critical Accounting Policies and Estimates".
Adjusted EBITDA and free cash flow are non-GAAP measures and should not be considered substitutes or alternatives for GAAP measures. These are not defined terms under IFRS and do not have standard meanings, so may not be a reliable way to compare us to other companies. See "Non-GAAP Measures" for information about these measures, including how we calculate them.
Includes additions to property, plant and equipment net of proceeds on disposition, but does not include expenditures for spectrum licences.
Cash income taxes are net of refunds received.

Free cash flow increased this quarter primarily as a result of higher adjusted EBITDA and lower cash income taxes.

Effective January 1, 2019, we will redefine free cash flow such that we will no longer adjust for the "net change in contract asset and deferred commission cost asset balances" as outlined in the table below. We will redefine free cash flow to simplify this measure and we believe removing it will make us more comparable within our industry. This item was added on a transitional basis following our adoption of IFRS 15 to help stakeholders understand the impact this standard had on our results. The below table shows the effect this change will have on our free cash flow for the three and twelve months ended December 31, 2018 and 2017.

 Three months ended December 31 Twelve months ended December 31 
(In millions of dollars)2018
 2017 % Chg 2018
 2017 % Chg 
       
Free cash flow as reported 1275 230 20 1,771 1,685 5 
Add:      
Net change in contract asset and deferred commission cost asset balances196 110 78 363 184 97 
       
Free cash flow (redefined) 1471 340 39 2,134 1,869 14 

Free cash flow is a non-GAAP measure and should not be considered a substitute or alternative for GAAP measures. This is not a defined term under IFRS and does not have a standard meaning, so may not be a reliable way to compare us to other companies. See "Non-GAAP Measures" for information about this measure, including how we calculate it.

Financial Condition

Below is a summary of our total available liquidity under our cash and cash equivalents, bank credit facilities, letter of credit facilities, and short-term borrowings as at December 31, 2018 and December 31, 2017.

As at December 31, 2018 
(In millions of dollars)Total available Letters of credit Letters of credit US CP program Net available 
      
Bank credit facilities:     
Revolving3,200  9 1,605 1,586 
Outstanding letters of credit982  982   
Total bank credit facilities4,182  991 1,605 1,586 
Accounts receivable securitization1,050 650   400 
Cash and cash equivalents405    405 
      
Total5,637 650 991 1,605 2,391 


As at December 31, 2017 
(In millions of dollars)Total available Drawn Letters of credit Letters of credit Net available 
      
Bank credit facilities:     
Revolving3,200  9 935 2,256 
Outstanding letters of credit87  87   
Bank advances 6   (6)
Total bank credit facilities3,287 6 96 935 2,250 
Accounts receivable securitization1,050 650   400 
      
Total4,337 656 96 935 2,650 

In addition to the sources of available liquidity noted above, we held $1,051 million of marketable securities in publicly traded companies as at December 31, 2018 (December 31, 2017 - $1,465 million).

Weighted average cost of borrowings
Our weighted average cost of borrowings was 4.45% as at December 31, 2018 (December 31, 2017 - 4.70%) and our weighted average term to maturity was 10.7 years (December 31, 2017 - 9.9 years).

Credit ratings
Below is a summary of the credit ratings on RCI's outstanding senior notes and debentures (long-term) and US CP (short-term) as at December 31, 2018.

IssuanceStandard & Poor'sMoody'sFitch
Corporate credit issuer default rating 1BBB+ with a stable outlookBaa1 with a stable outlookBBB+ with a stable outlook
Senior unsecured debt 1BBB+ with a stable outlookBaa1 with a stable outlookBBB+ with a stable outlook
US commercial paper 1A-2P-2N/A 2

Unchanged in the quarter.
We did not seek a rating from Fitch for our short-term obligations in 2018.

Adjusted net debt and debt leverage ratio
We use adjusted net debt and debt leverage ratio to conduct valuation-related analysis and make capital structure-related decisions. Adjusted net debt includes long-term debt, net debt derivative assets or liabilities, short-term borrowings, and cash and cash equivalents or bank advances.

 As at
December 31
 As at
December 31
 
(In millions of dollars, except ratios)2018
 2017
(restated) 1
 
   
Long-term debt 214,404 14,555 
Net debt derivative assets valued without any adjustment for credit risk 3(1,448)(1,146)
Short-term borrowings2,255 1,585 
(Cash and cash equivalents) bank advances(405)6 
   
Adjusted net debt 414,806 15,000 
Divided by: trailing 12-month adjusted EBITDA 45,983 5,502 
   
Debt leverage ratio 42.5 2.7 

2017 reported figures have been restated applying IFRS 15. See "Critical Accounting Policies and Estimates".
Includes current and long-term portion of long-term debt before deferred transaction costs and discounts. See "Reconciliation of adjusted net debt" in "Non-GAAP Measures" for the calculation of this amount.
For purposes of calculating adjusted net debt and debt leverage ratio, we believe including debt derivatives valued without adjustment for credit risk is commonly used to evaluate debt leverage and for market valuation and transactional purposes.
Adjusted net debt, adjusted EBITDA, and debt leverage ratio are non-GAAP measures and should not be considered substitutes or alternatives for GAAP measures. These are not defined terms under IFRS and do not have standard meanings, so may not be a reliable way to compare us to other companies. See "Non-GAAP Measures" for information about these measures, including how we calculate them.

Normal course issuer bid
In April 2018, the TSX accepted a notice of our intention to commence a normal course issuer bid (NCIB) that allows us to purchase, during the twelve-month period beginning April 24, 2018 and ending April 23, 2019, the lesser of 35.8 million Class B Non-Voting Shares and that number of Class B Non-Voting Shares that can be purchased under the NCIB for an aggregate purchase price of $500 million. Rogers security holders may obtain a copy of this notice, without charge, by contacting us. We have not repurchased any shares under our NCIB this quarter or this year.

Outstanding common shares

 As at
December 31
 As at
December 31
 
 2018
 2017 
   
Common shares outstanding 1  
Class A Voting111,155,637 112,407,192 
Class B Non-Voting403,657,038 402,403,433 
   
Total common shares514,812,675 514,810,625 
   
Options to purchase Class B Non-Voting Shares  
Outstanding options2,719,612 2,637,890 
Outstanding options exercisable1,059,590 924,562 

Holders of our Class B Non-Voting Shares are entitled to receive notice of and to attend shareholder meetings; however, they are not entitled to vote at these meetings except as required by law or stipulated by stock exchanges. If an offer is made to purchase outstanding Class A Shares, there is no requirement under applicable law or our constating documents that an offer be made for the outstanding Class B Non-Voting Shares, and there is no other protection available to shareholders under our constating documents. If an offer is made to purchase both classes of shares, the offer for the Class A Shares may be made on different terms than the offer to the holders of Class B Non-Voting Shares.

Financial Risk Management

This section should be read in conjunction with "Financial Risk Management" in our 2017 Annual MD&A. We use derivative instruments to manage financial risks related to our business activities. We only use derivatives to manage risk and not for speculative purposes. We also manage our exposure to both fixed and fluctuating interest rates and had fixed the interest rate on 85.3% of our outstanding debt, including short-term borrowings, as at December 31, 2018 (December 31, 2017 - 89.5%).

Debt derivatives
We use cross-currency interest exchange agreements (debt derivatives) to manage risks from fluctuations in foreign exchange rates associated with our US dollar-denominated senior notes and debentures, credit facility borrowings, and US dollar-denominated commercial paper borrowings. We designate the debt derivatives related to our senior notes and debentures as hedges for accounting purposes against the foreign exchange risk associated with specific debt instruments. Debt derivatives related to our credit facility and US CP borrowings have not been designated as hedges for accounting purposes.

Below is a summary of the debt derivatives we entered into and settled related to our credit facility borrowings and US CP program during the three and twelve months ended December 31, 2018 and 2017.

  Three months ended
December 31, 2018
  Twelve months ended
December 31, 2018
 
(In millions of dollars, except exchange rates)Notional
 (US$)
 Exchange
rate
Notional
(Cdn$)
 Notional
(US$)
 Exchange
rate
 Notional
(Cdn$)
 
       
Credit facilities      
Debt derivatives entered   125 1.26 157 
Debt derivatives settled   125 1.26 157 
Net cash paid     (1)
       
US commercial paper program      
Debt derivatives entered3,826 1.31 5,025 15,262 1.29 19,751 
Debt derivatives settled3,620 1.31 4,735 14,833 1.29 19,148 
Net cash received  26   63 


  Three months ended December 31, 2017  Twelve months ended December 31, 2017 
(In millions of dollars, except exchange rates)Notional
 (US$)
 Exchange
rate
 Notional
(Cdn$)
 Notional
(US$)
 Exchange
rate
 Notional
(Cdn$)
 
       
Credit facilities      
Debt derivatives entered100 1.25 125 1,610 1.32 2,126 
Debt derivatives settled100 1.25 125 1,760 1.32 2,327 
Net cash received (paid)  4   (17)
       
US commercial paper program      
Debt derivatives entered2,140 1.28 2,732 8,266 1.30 10,711 
Debt derivatives settled1,955 1.28 2,500 7,521 1.29 9,692 
Net cash received (paid)  36   (62)

As at December 31, 2018, we had nil and US$1,178 million notional amount of debt derivatives outstanding relating to our credit facility borrowings and US CP program (December 31, 2017 - nil and US$746 million), respectively.

See "Mark-to-market value" for more information about our debt derivatives.

Senior notes
We did not enter into or settle any debt derivatives related to senior notes during the quarter. See "Mark-to-market value" for more information about our debt derivatives.

Bond forwards
We did not enter into or settle any bond forwards during the three or twelve months ended December 31, 2018 and 2017.

During the quarter, we determined that we would no longer be able to exercise certain ten-year bond forwards within the originally designated time frame. Consequently, we discontinued hedge accounting on those bond forwards and reclassified a $21 million loss from the hedging reserve within shareholders' equity to finance costs. We subsequently extended the bond forwards to January 31, 2019, with the ability to extend them further, and redesignated them as effective hedges.

See "Mark-to-market value" for more information about our bond forwards.

Expenditure derivatives
Below is a summary of the expenditure derivatives we entered into and settled during the three and twelve months ended December 31, 2018 and 2017.

  Three months ended
December 31, 2018
  Twelve months ended
December 31, 2018
 
(In millions of dollars, except exchange rates)Notional
(US$)
 Exchange
rate
Notional
(Cdn$)
 Notional
(US$)
 Exchange
rate
 Notional
(Cdn$)
 
       
Expenditure derivatives entered   720 1.24 896 
Expenditure derivatives settled210 1.30 274 840 1.30 1,093 


  Three months ended
December 31, 2017
  Twelve months ended
December 31, 2017
 
(In millions of dollars, except exchange rates)Notional
(US$)
 Exchange
rate
 Notional
(Cdn$)
 Notional
(US$)
 Exchange
rate
 Notional
(Cdn$)
 
       
Expenditure derivatives entered   840 1.27 1,070 
Expenditure derivatives settled225 1.33 300 930 1.33 1,240 

As at December 31, 2018, we had US$1,080 million notional amount of expenditure derivatives outstanding (December 31, 2017 - US$1,200 million) with terms to maturity ranging from January 2019 to December 2020 (December 31, 2017 - January 2018 to December 2019), at an average rate of $1.24/US$ (December 31, 2017 - $1.28/US$).

See "Mark-to-market value" for more information about our expenditure derivatives.

Equity derivatives
As at December 31, 2018, we had equity derivatives outstanding for 5.0 million (December 31, 2017 - 5.4 million) Class B Non-Voting Shares with a weighted average price of $51.54 (December 31, 2017 - $51.44).

We did not enter into or settle any equity derivatives during the quarter. See "Mark-to-market value" for more information about our equity derivatives.

Mark-to-market value
We record our derivatives using an estimated credit-adjusted, mark-to-market valuation, calculated in accordance with IFRS.

 As at December 31, 2018 
(In millions of dollars, except exchange rates)Notional
amount
(US$)
 Exchange
rate
 Notional
amount
(Cdn$)
 Fair value
(Cdn$)
 
Debt derivatives accounted for as cash flow hedges:    
As assets5,500 1.1243 6,184 1,354 
As liabilities550 1.3389 736 (22)
Short-term debt derivatives not accounted for as hedges:    
As assets1,178 1.3276 1,564 41 
Net mark-to-market debt derivative asset   1,373 
Bond forwards accounted for as cash flow hedges:    
As liabilities  900 (87)
Expenditure derivatives accounted for as cash flow hedges:    
As assets1,080 1.2413 1,341 122 
Equity derivatives not accounted for as hedges:    
As assets  258 92 
     
Net mark-to-market asset   1,500 


 As at December 31, 2017 
(In millions of dollars, except exchange rates)Notional
amount
(US$)
 Exchange
rate
 Notional
amount
(Cdn$)
 Fair value
(Cdn$)
 
Debt derivatives accounted for as cash flow hedges:    
As assets5,200 1.0401 5,409 1,301 
As liabilities1,500 1.3388 2,008 (149)
Short-term debt derivatives not accounted for as hedges:    
As liabilities746 1.2869 960 (23)
Net mark-to-market debt derivative asset   1,129 
Bond forwards accounted for as cash flow hedges:    
As liabilities  900 (64)
Expenditure derivatives accounted for as cash flow hedges:    
As assets240 1.2239 294 5 
As liabilities960 1.2953 1,243 (44)
Net mark-to-market expenditure derivative liability   (39)
Equity derivatives not accounted for as hedges:    
As assets  276 68 
     
Net mark-to-market asset   1,094 

Critical Accounting Policies and Estimates

IFRS 15, Revenue from contracts with customers
We adopted IFRS 15, Revenue from contracts with customers (IFRS 15), on January 1, 2018. IFRS 15 supersedes previous accounting standards for revenue, including IAS 18, Revenue (IAS 18) and IFRIC 13, Customer loyalty programmes (IFRIC 13).

The application of this new standard has significant impacts on our reported Wireless results, specifically with regards to the timing of recognition and classification of revenue, and the treatment of costs incurred in acquiring customer contracts. The timing of recognition and classification of revenue is affected because, at contract inception, IFRS 15 requires the estimation of total consideration over the contract term and the allocation of that consideration to all performance obligations in the contract based on their relative stand-alone selling prices. This affects our Wireless arrangements that bundle equipment and service together into monthly service fees, which results in an increase to equipment revenue recognized at contract inception and a decrease to service revenue recognized over the course of the contracts as the device subsidy recovery component of our revenue is largely removed from our service revenue. The application of IFRS 15 does not affect our cash flows from operations or the methods and underlying economics through which we transact with our customers.

We have retrospectively applied IFRS 15 to all contracts that were not complete on the date of initial application. We have made a policy choice to restate each prior period presented and have recognized the cumulative effect of initially applying IFRS 15 as an adjustment to the opening balance of equity as at January 1, 2017, subject to certain practical expedients we adopted. We have separately provided supplementary financial information at investors.rogers.com that provides our results under the prior accounting basis.

Effect of transition to IFRS 15
Below is a summary of the IFRS 15 adjustments on our key financial information for the three and twelve months ended December 31, 2017, all of which pertain to our Wireless segment.

 Three months ended December 31, 2017 Twelve months ended December 31, 2017 
(In millions of dollars)As previously
reported 1
 Adjustments Restated As previously
reported 1
 Adjustments Restated 
         
Consolidated      
Total revenue3,632 99 3,731 14,143 226 14,369 
Total service revenue 23,430 (266)3,164 13,560 (1,010)12,550 
Adjusted EBITDA 31,326 110 1,436 5,318 184 5,502 
       
Net income419 80 499 1,711 134 1,845 
Adjusted net income 3445 80 525 1,768 134 1,902 
       
Wireless      
Service revenue1,990 (266)1,724 7,775 (1,010)6,765 
Equipment revenue199 365 564 568 1,236 1,804 
       
Operating expenses 41,334 (11)1,323 4,801 42 4,843 
       
Adjusted EBITDA855 110 965 3,542 184 3,726 

1 Amounts calculated on a basis consistent with our previous revenue recognition accounting policies prior to adopting IFRS 15. Certain amounts presented under prior accounting basis have been retrospectively amended as a result of our use of adjusted EBITDA in 2018.
As defined. See "Key Performance Indicators".
Adjusted EBITDA and adjusted net income are non-GAAP measures and should not be considered substitutes or alternatives for GAAP measures. These are not defined terms under IFRS and do not have standard meanings, so may not be a reliable way to compare us to other companies. See "Non-GAAP Measures" for information about these measures, including how we calculate them.
4 Operating expenses have been retrospectively amended to include stock-based compensation. See "Reportable Segments".

Below is a summary of the IFRS 15 adjustments on certain key financial metrics from our Consolidated Statements of Financial Position as at January 1, 2017 and December 31, 2017.

 As at January 1, 2017 As at December 31, 2017 
(in millions of dollars)As previously
reported
 Adjustments Restated As previously
reported
 Adjustments Restated 
       
Consolidated      
Total assets28,342 1,469 29,811 28,863 1,627 30,490 
Total liabilities23,073 454 23,527 22,516 478 22,994 
Shareholders' equity5,269 1,015 6,284 6,347 1,149 7,496 

The application of IFRS 15 did not affect our cash flow totals from operating, investing, or financing activities.

IFRS 16, Leases (IFRS 16)
Effective January 1, 2019, we will adopt IFRS 16. Our first quarter 2019 interim financial statements will be our first financial statements issued in accordance with IFRS 16. IFRS 16 supersedes the current accounting standards for leases, including IAS 17, Leases (IAS 17) and IFRIC 4, Determining Whether an Arrangement Contains a Lease (IFRIC 4).

IFRS 16 introduces a single accounting model for lessees unless the underlying asset is of low value. A lessee will be required to recognize, on its statement of financial position, a right-of-use asset, representing its right to use the underlying leased asset, and a lease liability, representing its obligation to make lease payments. As a result of adopting IFRS 16, we will recognize a significant increase to both assets and liabilities on our Consolidated Statements of Financial Position, as well as a decrease to operating costs (and therefore an increase to adjusted EBITDA) to remove lease rent, an increase to depreciation and amortization (due to depreciation of the right-of-use asset), and an increase to finance costs (due to accretion of the lease liability). The accounting treatment for lessors will remain largely the same as under IAS 17.

We will adopt IFRS 16 with the cumulative effect of initial application recognized as an adjustment to retained earnings within shareholders' equity on January 1, 2019. We will not restate comparatives for 2018.

Key Performance Indicators

We measure the success of our strategy using a number of key performance indicators that are defined and discussed in our 2017 Annual MD&A and this earnings release. We believe these key performance indicators allow us to appropriately measure our performance against our operating strategy and against the results of our peers and competitors. The following key performance indicators are not measurements in accordance with IFRS and should not be considered alternatives to net income or any other measure of performance under IFRS. They include:

  • subscriber counts;
    • Wireless;
    • Cable; and
    • homes passed (Cable);
  • subscriber churn (churn);
  • blended average billings per user (ABPU);
  • blended average revenue per user (ARPU);
  • capital intensity; and
  • total service revenue.

Non-GAAP Measures

We use the following non-GAAP measures. These are reviewed regularly by management and the Board in assessing our performance and making decisions regarding the ongoing operations of our business and its ability to generate cash flows. Some or all of these measures may also be used by investors, lending institutions, and credit rating agencies as indicators of our operating performance, of our ability to incur and service debt, and as measurements to value companies in the telecommunications sector. These are not recognized measures under GAAP and do not have standard meanings under IFRS, so may not be reliable ways to compare us to other companies.


Non-GAAP measure
Why we use it

How we calculate it
Most
comparable
IFRS financial
measure
Adjusted EBITDA

 
Adjusted EBITDA margin
? To evaluate the performance of our businesses, and when making decisions about the ongoing operations of the business and our ability to generate cash flows.Adjusted EBITDA:
Net income
add (deduct)
income tax expense (recovery); finance costs; depreciation and amortization; other expense (income); restructuring, acquisition and other; and loss (gain) on disposition of property, plant and equipment.

Adjusted EBITDA margin:
Adjusted EBITDA
divided by
revenue.
Net income
? We believe that certain investors and analysts use adjusted EBITDA to measure our ability to service debt and to meet other payment obligations.
? We also use it as one component in determining short-term incentive compensation for all management employees.
Adjusted net
income

 
Adjusted basic
and diluted
earnings per
share
? To assess the performance of our businesses before the effects of the noted items, because they affect the comparability of our financial results and could potentially distort the analysis of trends in business performance. Excluding these items does not imply that they are non-recurring.Adjusted net income:
Net income
add (deduct)
restructuring, acquisition and other; loss (recovery) on sale or wind down of investments; loss (gain) on disposition of property, plant and equipment; (gain) on acquisitions; loss on non-controlling interest purchase obligations; loss on repayment of long-term debt; loss on bond forward derivatives; and income tax adjustments on these items, including adjustments as a result of legislative changes.

Adjusted basic and diluted earnings per share:
Adjusted net income and adjusted net income including the dilutive effect of stock-based compensation
divided by
basic and diluted weighted average shares outstanding.
Net income
 

Basic and
diluted
earnings per
share
Free cash flow 1? To show how much cash we have available to repay debt and reinvest in our company, which is an important indicator of our financial strength and performance.Adjusted EBITDA
deduct
capital expenditures; interest on borrowings net of capitalized interest; net change in contract asset and deferred commission cost asset balances; and cash income taxes.

Cash provided
by operating
activities
? We believe that some investors and analysts use free cash flow to value a business and its underlying assets.
Adjusted net
debt
? To conduct valuation-related analysis and make decisions about capital structure.Total long-term debt
add (deduct)
current portion of long-term debt; deferred transaction costs and discounts; net debt derivative (assets) liabilities; credit risk adjustment related to net debt derivatives; bank advances (cash and cash equivalents); and short-term borrowings.
Long-term
debt
? We believe this helps investors and analysts analyze our enterprise and equity value and assess our leverage.
Debt leverage ratio? To conduct valuation-related analysis and make decisions about capital structure.Adjusted net debt (defined above)
divided by
12-month trailing adjusted EBITDA (defined above).
Long-term debt
divided by net
income
? We believe this helps investors and analysts analyze our enterprise and equity value and assess our leverage.

1 Effective January 1, 2019, we will redefine free cash flow such that we will no longer adjust for the "net change in contract asset and deferred commission cost asset balances". We will redefine free cash flow to simplify this measure and we believe removing it will make us more comparable within our industry. 

Reconciliation of adjusted EBITDA

 Three months ended December 31 Twelve months ended December 31 
(In millions of dollars)2018
 2017 
(restated) 1
 2018
 2017
(restated) 1
 
     
Net income502 499 2,059 1,845 
Add:    
Income tax expense182 188 758 685 
Finance costs205 184 793 746 
Depreciation and amortization564 531 2,211 2,142 
     
EBITDA1,453 1,402 5,821 5,418 
Add (deduct):    
Other (income) expense(26)3 (32)(19)
Restructuring, acquisition and other94 31 210 152 
Gain on disposition of property, plant and equipment  (16)(49)
     
Adjusted EBITDA1,521 1,436 5,983 5,502 

2017 reported figures have been restated applying IFRS 15. See "Critical Accounting Policies and Estimates".

Reconciliation of adjusted EBITDA margin

 Three months ended December 31 Twelve months ended December 31 
(In millions of dollars, except margins)2018
 2017 
(restated) 1
 2018
 2017
(restated) 1
 
     
Adjusted EBITDA1,521 1,436 5,983 5,502 
Divided by: total revenue3,938 3,731 15,096 14,369 
     
Adjusted EBITDA margin38.6 %38.5 %39.6 %38.3 %

2017 reported figures have been restated applying IFRS 15. See "Critical Accounting Policies and Estimates".

Reconciliation of adjusted net income

 Three months ended December 31 Twelve months ended December 31 
(In millions of dollars)2018
 2017
(restated) 1
 2018
 2017
(restated) 1
 
     
Net income502 499 2,059 1,845 
Add (deduct):    
Restructuring, acquisition and other94 31 210 152 
Loss on bond forward derivatives21  21  
Loss on repayment of long-term debt  28  
Gain on disposition of property, plant and equipment  (16)(49)
Recovery on wind down of shomi   (20)
Income tax impact of above items(32)(7)(61)(28)
Income tax adjustment, legislative tax change 2  2 
     
Adjusted net income585 525 2,241 1,902 

2017 reported figures have been restated applying IFRS 15. See "Critical Accounting Policies and Estimates".

Reconciliation of adjusted earnings per share

 Three months ended December 31 Twelve months ended December 31 
(In millions of dollars, except per share amounts; number of shares outstanding in millions)2018
 2017
(restated) 1
 2018
2017
(restated) 1
 
     
Adjusted basic earnings per share:    
Adjusted net income585 525 2,241 1,902 
Divided by:    
Weighted average number of shares outstanding515 515 515 515 
     
Adjusted basic earnings per share$1.14 $1.02 $4.35 $3.69 
     
Adjusted diluted earnings per share:    
Diluted adjusted net income585 523 2,239 1,901 
Divided by:    
Diluted weighted average number of shares outstanding517 517 516 517 
     
Adjusted diluted earnings per share$1.13 $1.02 $4.34 $3.68 

2017 reported figures have been restated applying IFRS 15. See "Critical Accounting Policies and Estimates".

Reconciliation of free cash flow

 Three months ended December 31 Twelve months ended December 31 
(In millions of dollars)2018
 2017 2018
 2017 
     
Cash provided by operating activities1,051 1,142 4,288 3,938 
Add (deduct):    
Capital expenditures(828)(841)(2,790)(2,436)
Interest on borrowings, net of capitalized interest(168)(179)(689)(722)
Restructuring, acquisition and other94 31 210 152 
Interest paid151 125 726 735 
Program rights amortization(19)(15)(58)(64)
Change in non-cash operating working capital items42 17 114 164 
Other adjustments(48)(50)(30)(82)
     
Free cash flow275 230 1,771 1,685 
Net change in contract asset and deferred commission cost asset balances 1 196 110
 363 184 
     
Free cash flow (with respect to "2019 Outlook")471 340 2,134 1,869 

1 Includes "net change in contract asset balances" and the net change in deferred commission cost asset balances in "other" in operating activities on the Interim Condensed Consolidated Statements of Cash Flows.

Reconciliation of adjusted net debt and debt leverage ratio

 As at
December 31
 As at
December 31
 
(In millions of dollars)2018
 2017 
   
Current portion of long-term debt900 1,756 
Long-term debt13,390 12,692 
Deferred transaction costs and discounts114 107 
 14,404 14,555 
Add (deduct):  
Net debt derivative assets(1,373)(1,129)
Credit risk adjustment related to net debt derivative assets(75)(17)
Short-term borrowings2,255 1,585 
(Cash and cash equivalents) bank advances(405)6 
   
Adjusted net debt14,806 15,000 


 As at
December 31
 As at
December 31
 
(In millions of dollars, except ratios)2018
 2017
(restated) 1
 
   
Adjusted net debt14,806 15,000 
Divided by: trailing 12-month adjusted EBITDA5,983 5,502 
   
Debt leverage ratio2.5 2.7 

2017 reported figures have been restated applying IFRS 15. See "Critical Accounting Policies and Estimates".

Other Information

Consolidated financial results - quarterly summary
Below is a summary of our consolidated results for the past eight quarters.

  2018
  2017 1
(In millions of dollars, except per share amounts)Q4
 Q3 Q2 Q1  Q4Q3 Q2 Q1 
Revenue         
Wireless2,464 2,331 2,214 2,191  2,288 2,203 2,076 2,002 
Cable 2989 983 991 969  981 977 976 960 
Media540 488 608 532  526 516 637 474 
Corporate items and intercompany eliminations 2(55)(33)(57)(59) (64)(50)(69)(64)
Total revenue3,938 3,769 3,756 3,633  3,731 3,646 3,620 3,372 
Total service revenue 33,276 3,271 3,300 3,127  3,164 3,196 3,221 2,969 
          
Adjusted EBITDA 4         
Wireless1,028 1,099 1,029 934  965 1,017 915 829 
Cable 2489 490 462 433  477 471 455 416 
Media40 73 60 23  37 61 59 (30)
Corporate items and intercompany eliminations 2(36)(42)(47)(52) (43)(46)(40)(41)
Adjusted EBITDA1,521 1,620 1,504 1,338  1,436 1,503 1,389 1,174 
Deduct (add):         
Depreciation and amortization564 558 545 544  531 531 535 545 
Gain on disposition of property, plant and equipment (5) (11)   (49) 
Restructuring, acquisition and other94 47 26 43  31 59 34 28 
Finance costs205 176 193 219  184 183 189 190 
Other (income) expense(26)15 2 (23) 3 20 (31)(11)
Net income before income tax expense684 829 738 566  687 710 711 422 
Income tax expense182 235 200 141  188 202 183 112 
Net income502 594 538 425  499 508 528 310 
          
Earnings per share:         
Basic$0.97 $1.15 $1.04 $0.83  $0.97 $0.99 $1.03 $0.60 
Diluted$0.97 $1.15 $1.04 $0.80  $0.97 $0.98 $1.02 $0.60 
          
Net income502 594 538 425  499 508 528 310 
Add (deduct):         
Restructuring, acquisition and other94 47 26 43  31 59 34 28 
Loss on bond forward derivatives21         
Loss on repayment of long-term debt   28      
Recovery on wind down of shomi       (20) 
Gain on disposition of property, plant and equipment (5) (11)   (49) 
Income tax impact of above items(32)(11)(10)(8) (7)(16)3 (8)
Income tax adjustment, legislative tax change     2    
Adjusted net income 4585 625 554 477  525 551 496 330 
          
Adjusted earnings per share 4:         
Basic$1.14 $1.21 $1.08 $0.93  $1.02 $1.07 $0.96 $0.64 
Diluted$1.13 $1.21 $1.07 $0.90  $1.02 $1.07 $0.96 $0.64 
          
Capital expenditures828 700 657 605  841 658 451 486 
Cash provided by operating activities1,051 1,304 1,048 885  1,142 1,377 823 596 
Free cash flow 4275 550 562 384  230 523 607 325 

2017 reported figures have been restated applying IFRS 15. See "Critical Accounting Policies and Estimates".
These figures have been retrospectively amended as a result of our reportable segment realignment. See "Reportable Segments".
As defined. See "Key Performance Indicators".
Adjusted EBITDA, adjusted net income, adjusted basic and diluted earnings per share, and free cash flow are non-GAAP measures and should not be considered substitutes or alternatives for GAAP measures. These are not defined terms under IFRS and do not have standard meanings, so may not be a reliable way to compare us to other companies. See "Non-GAAP Measures" for information about these measures, including how we calculate them.

Supplementary Information

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

 Three months ended December 31 Twelve months ended December 31 
  2018
  2017  2018
  2017 
   (restated)   (restated) 
     
Revenue3,938 3,731 15,096 14,369 
     
Operating expenses:    
Operating costs2,417 2,295 9,113 8,867 
Depreciation and amortization564 531 2,211 2,142 
Gain on disposition of property, plant and equipment  (16)(49)
Restructuring, acquisition and other94 31 210 152 
Finance costs205 184 793 746 
Other (income) expense(26)3 (32)(19)
     
Income before income tax expense684 687 2,817 2,530 
Income tax expense182 188 758 685 
     
Net income for the period502 499 2,059 1,845 
     
Earnings per share:    
Basic$0.97 $0.97 $4.00 $3.58 
Diluted$0.97 $0.97 $3.99 $3.57 

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

 As at
December 31
 As at
December 31
 As at
January 1
 
 2018
 2017 2017 
   (restated) (restated) 
    
Assets   
Current assets:   
Cash and cash equivalents405   
Accounts receivable2,259 2,035 1,944 
Inventories466 435 452 
Current portion of contract assets1,052 820 723 
Other current assets436 414 417 
Current portion of derivative instruments270 421 91 
Total current assets4,888 4,125 3,627 
    
Property, plant and equipment11,780 11,143 10,749 
Intangible assets7,205 7,244 7,130 
Investments2,134 2,561 2,174 
Derivative instruments1,339 953 1,708 
Contract assets535 413 354 
Other long-term assets132 143 156 
Deferred tax assets 3 8 
Goodwill3,905 3,905 3,905 
    
Total assets31,918 30,490 29,811 
    
Liabilities and shareholders’ equity   
Current liabilities:   
Bank advances 6 71 
Short-term borrowings2,255 1,585 800 
Accounts payable and accrued liabilities3,052 2,931 2,783 
Income tax payable177 62 186 
Other current liabilities132 132 285 
Contract liabilities233 278 302 
Current portion of long-term debt900 1,756 750 
Current portion of derivative instruments87 133 22 
Total current liabilities6,836 6,883 5,199 
    
Provisions35 35 33 
Long-term debt13,390 12,692 15,330 
Derivative instruments22 147 118 
Other long-term liabilities546 613 562 
Deferred tax liabilities2,910 2,624 2,285 
Total liabilities23,739 22,994 23,527 
    
Shareholders’ equity8,179 7,496 6,284 
    
Total liabilities and shareholders’ equity31,918 30,490 29,811 

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

 Three months ended December 31 Twelve months ended December 31 
 2018
 2017 2018
 2017 
   (restated)   (restated) 
Operating activities:    
Net income for the period502 499 2,059 1,845 
Adjustments to reconcile net income to cash provided by operating activities:    
Depreciation and amortization564 531 2,211 2,142 
Program rights amortization19 15 58 64 
Finance costs205 184 793 746 
Income tax expense182 188 758 685 
Post-employment benefits contributions, net of expense(6)28 (44)4 
Gain on disposition of property, plant and equipment  (16)(49)
Recovery on wind down of shomi   (20)
Net change in contract asset balances(186)(95)(354)(156)
Other18 10 33 51 
Cash provided by operating activities before changes in non-cash working capital items, income taxes paid, and interest paid1,298 1,360 5,498 5,312 
Change in non-cash operating working capital items(42)(17)(114)(164)
Cash provided by operating activities before income taxes paid and interest paid1,256 1,343 5,384 5,148 
Income taxes paid(54)(76)(370)(475)
Interest paid(151)(125)(726)(735)
     
Cash provided by operating activities1,051 1,142 4,288 3,938 
     
Investing activities:    
Capital expenditures(828)(841)(2,790)(2,436)
Additions to program rights(26)(21)(54)(59)
Changes in non-cash working capital related to property, plant and equipment and intangible assets107 101 (125)109 
Acquisitions and other strategic transactions, net of cash acquired   (184)
Other9 21 25 (60)
     
Cash used in investing activities(738)(740)(2,944)(2,630)
     
Financing activities:    
Net proceeds received (repayments) on short-term borrowings256 (163)508 858 
Net repayment of long-term debt (3)(823)(1,034)
Net proceeds (payments) on settlement of debt derivatives and forward contracts26 40 388 (79)
Transaction costs incurred  (18) 
Dividends paid(247)(247)(988)(988)
     
Cash provided by (used in) financing activities35 (373)(933)(1,243)
     
Change in cash and cash equivalents348 29 411 65 
Cash and cash equivalents (bank advances), beginning of period57 (35)(6)(71)
     
Cash and cash equivalents (bank advances), end of period405 (6)405 (6)

Investments

 As at
December 31
 As at
December 31
 
(In millions of dollars)2018
 2017 
   
Investments in:  
Publicly traded companies1,051 1,465 
Private companies145 167 
Investments, measured at fair value through other comprehensive income1,196 1,632 
Investments, associates and joint ventures938 929 
   
Total investments2,134 2,561 

Long-term debt

   Principal
amount
 Interest
rate
 As at
December 31
 As at
December 31
 
(In millions of dollars, except interest rates)Due date   2018
 2017 
       
Senior notes2018US1,400 6.800% 1,756 
Senior notes2019 400 2.800%400 400 
Senior notes2019 500 5.380%500 500 
Senior notes2020 900 4.700%900 900 
Senior notes2021 1,450 5.340%1,450 1,450 
Senior notes2022 600 4.000%600 600 
Senior notes2023US500 3.000%682 627 
Senior notes2023US850 4.100%1,160 1,066 
Senior notes2024 600 4.000%600 600 
Senior notes2025US700 3.625%955 878 
Senior notes2026US500 2.900%682 627 
Senior debentures 12032US200 8.750%273 251 
Senior notes2038US350 7.500%478 439 
Senior notes2039 500 6.680%500 500 
Senior notes2040 800 6.110%800 800 
Senior notes2041 400 6.560%400 400 
Senior notes2043US500 4.500%682 627 
Senior notes2043US650 5.450%887 816 
Senior notes2044US1,050 5.000%1,433 1,318 
Senior notes2048US750 4.300%1,022  
     14,404 14,555 
Deferred transaction costs and discounts    (114)(107)
Less current portion    (900)(1,756)
       
Total long-term debt    13,390 12,692 

Senior debentures originally issued by Rogers Cable Inc. which are unsecured obligations of RCI and for which RCCI was an unsecured guarantor as at December 31, 2018 and December 31, 2017.

About Forward-Looking Information

This earnings release includes "forward-looking information" and "forward-looking statements" within the meaning of applicable securities laws (collectively, "forward-looking information"), and assumptions about, among other things, our business, operations, and financial performance and condition approved by our management on the date of this earnings release. This forward-looking information and these assumptions include, but are not limited to, statements about our objectives and strategies to achieve those objectives, and about our beliefs, plans, expectations, anticipations, estimates, or intentions.

Forward-looking information:

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

Our forward-looking information includes forecasts and projections related to the following items, some of which are non-GAAP measures (see "Non-GAAP Measures"), among others:

  • revenue;
  • total service revenue;
  • adjusted EBITDA;
  • capital expenditures;
  • cash income tax payments;
  • free cash flow;
  • dividend payments;
  • the growth of new products and services;
  • expected growth in subscribers and the services to which they subscribe;
  • the cost of acquiring and retaining subscribers and deployment of new services;
  • continued cost reductions and efficiency improvements;
  • traction against our debt leverage ratio; and
  • all other statements that are not historical facts.

Specific forward-looking information included or incorporated in this document includes, but is not limited to, our information and statements under "2019 Outlook" relating to our 2019 consolidated guidance on revenue, adjusted EBITDA, capital expenditures, and free cash flow. All other statements that are not historical facts are forward-looking statements.

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

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

Except as otherwise indicated, this earnings release and our forward-looking information do not reflect the potential impact of any non-recurring or other special items or of any dispositions, monetizations, mergers, acquisitions, other business combinations, or other transactions that may be considered or announced or may occur after the date on which the statement containing the forward-looking information is made.

Risks and uncertainties
Actual events and results can be substantially different from what is expressed or implied by forward-looking information as a result of risks, uncertainties, and other factors, many of which are beyond our control, including, but not limited to:

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

These factors can also affect our objectives, strategies, and intentions. Many of these factors are beyond our control or our current expectations or knowledge. Should one or more of these risks, uncertainties, or other factors materialize, our objectives, strategies, or intentions change, or any other factors or assumptions underlying the forward-looking information prove incorrect, our actual results and our plans could vary significantly from what we currently foresee.

Accordingly, we warn investors to exercise caution when considering statements containing forward-looking information and caution them that it would be unreasonable to rely on such statements as creating legal rights regarding our future results or plans. We are under no obligation (and we expressly disclaim any such obligation) to update or alter any statements containing forward-looking information or the factors or assumptions underlying them, whether as a result of new information, future events, or otherwise, except as required by law. All of the forward-looking information in this earnings release is qualified by the cautionary statements herein.

Key assumptions underlying our full-year 2019 guidance
Our 2019 guidance ranges above are based on many assumptions including, but not limited to, the following material assumptions:

  • continued increase in competitive intensity in all segments in which we operate;
  • a substantial portion of our 2019 US dollar-denominated expenditures is hedged at an average exchange rate of $1.25/US$;
  • key interest rates remain relatively stable throughout 2019;
  • no significant additional legal or regulatory developments, shifts in economic conditions, or macro changes in the competitive environment affecting our business activities. We note that regulatory decisions issued during 2019 could materially alter underlying assumptions around our 2019 Wireless, Cable, and/or Media results in the current and future years, the impacts of which are currently unknown and not factored into our guidance;
  • Wireless customers continue to adopt, and upgrade to, higher-value smartphones and select higher data usage packages at similar rates in 2019 compared to 2018 and a similar proportion of customers remain on term contracts;
  • overall wireless market penetration in Canada grows in 2019 at a similar rate as in 2018;
  • our relative market share in Wireless and Cable is not negatively impacted by changing competitive dynamics;
  • continued subscriber growth in Wireless and Internet; stable Television subscribers; and a decline in our Phone subscriber base;
  • in Media, continued growth in sports and declines in certain traditional media businesses; and
  • with respect to the increase in capital expenditures:
    • we continue to invest appropriately to ensure we have competitive wireless and cable networks through (i) building a 4.5G to 5G wireless network and (ii) upgrading our hybrid fibre-coaxial network to lower the number of homes passed per node, utilize the latest technologies, and deliver an even more reliable customer experience; and
    • we continue to make expenditures related to our Connected Home roadmap in 2019.

Before making an investment decision
Before making any investment decisions and for a detailed discussion of the risks, uncertainties, and environment associated with our business, fully review the sections in our 2017 Annual MD&A entitled "Regulation in Our Industry" and "Governance and Risk Management", as well as our various other filings with Canadian and US securities regulators, which can be found at sedar.com and sec.gov , respectively. Information on or connected to our website is not part of or incorporated into this earnings release.

Source: Rogers Communications, Inc.


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