UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 ________________________________________________

FORM 6-K
 ________________________________________________
Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16
under the Securities Exchange Act of 1934
 ________________________________________________
For the month of July, 2020
Commission File Number 001-10805
 ________________________________________________
ROGERS COMMUNICATIONS INC.
(Translation of registrant’s name into English)
 ________________________________________________
333 Bloor Street East
10th Floor
Toronto, Ontario M4W 1G9
Canada
(Address of principal executive offices)
________________________________________________
 
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:
Form 20-F  o             Form 40-F  þ
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):
Yes  o             No  þ
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):
Yes  o             No  þ
 




Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
 
ROGERS COMMUNICATIONS INC.
 
 
 
 
By:
 
/s/ Anthony Staffieri
 
 
 
Name: Anthony Staffieri
 
 
 
Title: Chief Financial Officer
Date: July 22, 2020




Exhibit Index
 
Exhibit Number
  
Description of Document
99.1
  
Management's Discussion and Analysis of Rogers Communications Inc. for the second quarter ended June 30, 2020
99.2
 
Interim Condensed Consolidated Financial Statements of Rogers Communications Inc. for the second quarter ended June 30, 2020
99.3
 
Earnings Release of Rogers Communications Inc. for the second quarter ended June 30, 2020



Exhibit 99.1
MANAGEMENT'S DISCUSSION AND ANALYSIS

This Management's Discussion and Analysis (MD&A) contains important information about our business and our performance for the three and six months ended June 30, 2020, as well as forward-looking information about future periods. This MD&A should be read in conjunction with our Second Quarter 2020 Interim Condensed Consolidated Financial Statements and notes thereto, which have been prepared in accordance with International Accounting Standard 34, Interim Financial Reporting, as issued by the International Accounting Standards Board (IASB); our 2019 Annual MD&A; our 2019 Annual Audited Consolidated Financial Statements and notes thereto, which have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the IASB; and our other recent filings with Canadian and US securities regulatory authorities, including our Annual Information Form, which are available on SEDAR at sedar.com or EDGAR at sec.gov, respectively.

Effective January 1, 2020, we updated our Cable segment financial and key performance indicator disclosures such that we began presenting Cable average revenue per account (ARPA), customer relationships, and market penetration. We also amended our subscriber reporting to report Internet and Ignite TV™ subscribers, removing legacy Television subscribers and Phone subscribers. In addition to the changes to our key performance indicators, we no longer report revenue by our Cable sub-products (i.e. Internet, Television, and Phone) and instead, we present a single "service revenue" amount. These changes are a result of the way in which we manage our business due to the ongoing convergence of the technology used to deliver Internet and television services and represent the key metrics against which we will measure growth in our Cable segment. See "Results of Our Reportable Segments - Cable" and "Key Performance Indicators" for more information.

For more information about Rogers, including product and service offerings, competitive market and industry trends, our overarching strategy, key performance drivers, and objectives, see "Understanding Our Business", "Our Strategy, Key Performance Drivers, and Strategic Highlights", and "Capability to Deliver Results" in our 2019 Annual MD&A.

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 in this MD&A 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. This MD&A is current as at July 21, 2020 and was approved by RCI's Board of Directors (the Board) on that date. This MD&A includes forward-looking statements and assumptions. See "About Forward-Looking Information" for more information.

We are publicly traded on the Toronto Stock Exchange (TSX: RCI.A and RCI.B) and on the New York Stock Exchange (NYSE: RCI).

In this MD&A, this quarter, the quarter, or second quarter refer to the three months ended June 30, 2020, the first quarter refers to the three months ended March 31, 2020, and year to date refers to the six months ended June 30, 2020 unless the context indicates otherwise. All results commentary is compared to the equivalent period in 2019 or as at December 31, 2019, as applicable, unless otherwise indicated.

™ Rogers and related marks are trademarks of Rogers Communications Inc. or an affiliate, used under licence. All other brand names, logos, and marks are trademarks and/or copyright of their respective owners. ©2020 Rogers Communications


Rogers Communications Inc.
1
Second Quarter 2020



Reportable segments
We report our results of operations in three reportable segments. Each segment and the nature of its business is as follows:
Segment
Principal activities
Wireless
Wireless telecommunications operations for Canadian consumers and businesses.
Cable
Cable 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 business, public sector, and carrier wholesale markets.
Media
A diversified portfolio of media properties, including sports media and entertainment, television and radio broadcasting, specialty channels, multi-platform shopping, and digital media.

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.

Where to find it
Operating Environment and Strategic Highlights
 
Commitments and Contractual Obligations
Quarterly Financial Highlights
 
Regulatory Developments
Summary of Consolidated Financial Results
 
Updates to Risks and Uncertainties
Results of our Reportable Segments
 
Critical Accounting Policies and Estimates
Review of Consolidated Performance
 
Managing our Liquidity and Financial Resources
 
Non-GAAP Measures and Related Performance
Overview of Financial Position
 
 
Measures
Financial Condition
 
Financial Risk Management
 

Operating Environment and Strategic Highlights

The COVID-19 pandemic (COVID-19) continues to significantly impact Canadians and economies around the world. As an essential service provider during this time, it is of utmost importance to ensure our customers remain connected to the people in their lives and that our customers and employees remain safe. In March, we took swift action to ensure our customers and employees remain safe and healthy during the pandemic, including temporarily closing the majority of our retail stores across Canada and enabling most of our employees to work from home. We also took steps to ensure our customers could stay connected to the world around them, such as providing additional free services (including a rotating selection of premium television channels) and waiving certain fees (including pay-per-use international roaming fees and long distance voice calling fees), and that our networks remain operational, including adding capacity and managing traffic.

This quarter, we also implemented compensation- and health and safety-related programs to help our employees get through this challenging time, including ensuring a minimum compensation level even when employees were unable to work and premium pay in certain areas of our business during this exceptional time. We also launched several community-focused activities and events, and as provinces relaxed certain public health restrictions, we began reopening certain retail stores where we could appropriately implement public health requirements. Meanwhile, we began preparing for the return of live sports, which were suspended in March. While COVID-19 continues to have a significant worldwide impact, we remain confident we have the right team, a strong balance sheet, and world-class networks that will allow us to get through the pandemic having maintained our long-term focus on growth and doing the right thing for our customers.

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.

Create best-in-class customer experiences by putting our customers first in everything we do
•
Increased digital adoption; decreased calls to our customer care agents by over 20%.
•
Moved to 100% Canadian-based customer care agents as part of a multi-year plan to improve the customer experience and do the right thing for Canada.

Rogers Communications Inc.
2
Second Quarter 2020



•
Launched Blitzz, a remote visual assistance tool, with our technical support team to enable prompt virtual assistance and reduce the need to deploy field technicians for installation and service calls.

Invest in our networks and technology to deliver leading performance and reliability
•
Recently awarded best wireless network in Canada for the second year in a row by umlaut, the global leader in mobile network benchmarking.
•
In April, ranked number one in the Canada Wireless Network Quality Study by J.D. Power in the West and Ontario.
•
Partnered with the University of British Columbia and the City of Kelowna to launch Canada’s first 5G pilot of smart city transportation technology in the downtown core of Kelowna.
•
Established the Rogers Internet of Things Chair with the University of Calgary to advance innovative Internet of Things research.
•
Continued to add capacity and manage traffic to ensure customers remained connected during the COVID-19 pandemic.

Deliver innovative solutions and compelling content that our customers will love
•
Leveraged our media assets to drive meaningful change and advance inclusion and diversity, including a primetime special Ending Racism: What Will it Take?, virtual Speakers Corner™, a new digital series LIVE: #Cityline Real on Race, and a new Sportsnet interview series Top of HER Game™.
•
Announced Citytv’s 2020/2021 primetime schedule featuring four new shows and 21 returning series, building on a 37% increase of primetime viewership on Citytv™ between March and May from last year.
•
Provided free access for our TV customers to a rotation selection of channels throughout the quarter through to June 30.

Drive profitable growth in all the markets we serve
•
Ended the quarter with a strong balance sheet with available liquidity of $5.4 billion, including $1.8 billion of cash, an increase of $2.9 billion from December 31, 2019.
•
Decreased capital intensity by 1.9 percentage points through careful capital expenditure management.
•
Maintained our focus on long-term strategic growth despite the short-term economic downturn.

Develop our people and a high performance culture
•
Achieved an all-time high score of 93% for employee pride in a company-wide pulse survey during the COVID-19 pandemic, six points above best-in-class.
•
Launched the National Wellness Fund for our employees, providing increased benefits for mental health, access to virtual health care, financial well-being support, and access to Helm Life Online Activities to support parents with young children at home. This was funded through temporary reductions in executive and Board compensation.
•
Recognized Pride Month and National Indigenous Peoples’ Day with virtual events to promote inclusiveness across the company.
•
Implemented a permanent work-from-home model for our Ottawa customer care team and launched virtual leadership training for all frontline teams as part of the work-from-home program during the COVID-19 pandemic.

Be a strong, socially responsible leader in our communities across Canada
•
Launched the Step Up to the Plate program with Jays Care Foundation to fill 390,000 hampers of food housed at Rogers Centre™ and distribute eight million meals in support of Food Banks Canada.
•
Raised approximately $1 million through the Hearts and Smiles campaign in support of The Frontline Fund to help Canada’s frontline health care workers during the COVID-19 pandemic.
•
Provided devices and free wireless plans to participating women’s shelters across Canada.
•
Partnered with Pflag Canada through our Fido™ brand to provide tablets and free wireless plans to their chapters across Canada, in addition to a donation of $150,000.
•
Awarded the Ted Rogers Scholarship to over 400 young people to pursue post-secondary education.


Rogers Communications Inc.
3
Second Quarter 2020



Quarterly Financial Highlights

Our solid financial position enables us to prioritize the actions we need to take as a result of COVID-19, continue to make high priority investments in our network, and ensure customers stay connected during this critical time.

Substantial cash flow and available liquidity
This quarter, we continued to generate substantial cash flow from operating activities of $1,429 million, up 35%, and free cash flow of $468 million, down 23%. Furthermore, as at June 30, 2020, we had $5.4 billion of available liquidity, including $1.8 billion in cash and cash equivalents and a combined $3.6 billion available under our bank credit facility and accounts receivable securitization program, and investment-grade credit ratings with a stable outlook.

We also returned substantial cash to shareholders through the payment of $252 million in dividends this quarter and we declared a $0.50 per share dividend on July 21, 2020.

Revenue
Total revenue decreased by 17% this quarter, largely driven by 13% and 17% decreases in Wireless service and equipment revenue, respectively, and a 50% decrease in Media revenue.

The Wireless service revenue decrease was mainly a result of lower roaming revenue due to global travel restrictions during the COVID-19 pandemic, and lower overage revenue, primarily as a result of the continued adoption of our Rogers Infinite™ unlimited data plans. Wireless equipment revenue decreased as a result of lower gross additions and device upgrades by existing subscribers during the pandemic.

Media revenue decreased by 50% primarily as a result of lower advertising revenue due to softness in the market and lower sports revenue, including at the Toronto Blue Jays™, as no professional sports were played this quarter due to the COVID-19 pandemic.

Cable revenue decreased by 3% this quarter primarily as a result of declines in our legacy television and home phone subscriber bases, partially offset by growth in our Ignite TV and Internet subscriber bases.

Adjusted EBITDA and margins
Consolidated adjusted EBITDA decreased 21% this quarter and our adjusted EBITDA margin was down 230 basis points.

Wireless adjusted EBITDA decreased by 19%, primarily as a result of lower revenue and higher bad debt expense due to economic conditions during the COVID-19 pandemic, partially offset by lower net cost of equipment. This gave rise to a margin of 47.5%, down 280 basis points from last year.

Media adjusted EBITDA decreased by 149%, or $107 million, this quarter primarily as a result of the lower revenue, as discussed above, partially offset by lower programming and sports costs associated with the suspension of major sports leagues.

Cable adjusted EBITDA decreased by 5% this quarter, primarily as a result of lower service revenue and higher bad debt expense due to the economic conditions during the COVID-19 pandemic. This gave rise to a margin of 47.0% this quarter, down 90 basis points from last year.

Net income and adjusted net income
Net income and adjusted net income both decreased this quarter by 53% and 48%, respectively, primarily as a result of the decrease in adjusted EBITDA.

Financial guidance
Due to the continued uncertainty surrounding the duration and potential outcomes of the COVID-19 pandemic, we are unable at this time to predict the overall impact on our operations and financial results, but the impact to date has been material. It is not possible at this time to reliably estimate our financial results for the remainder of the year. We will therefore not provide updated financial guidance until such a time as we can make a reasonable estimate of our total service revenue, adjusted EBITDA, capital expenditures, and free cash flow for the year. Although COVID-19 has adversely impacted total service revenue and adjusted EBITDA in the short-term, strong free cash flow remains a priority for us this year. See "Updates to Risks and Uncertainties" and "About Forward-Looking Information" for more information on COVID-19, including the impacts it has had and may have on our business and the actions we are taking in response.


Rogers Communications Inc.
4
Second Quarter 2020



Summary of Consolidated Financial Results
  
Three months ended June 30
 
 
Six months ended June 30
 
(In millions of dollars, except margins and per share amounts)
2020

2019

% Chg

 
2020

2019

% Chg

 
 
 
 
 
 
 
 
Revenue
 
 
 
 
 
 
 
Wireless
1,934

2,244

(14
)
 
4,011

4,433

(10
)
Cable
966

997

(3
)
 
1,939

1,973

(2
)
Media
296

591

(50
)
 
708

1,059

(33
)
Corporate items and intercompany eliminations
(41
)
(52
)
(21
)
 
(87
)
(98
)
(11
)
Revenue
3,155

3,780

(17
)
 
6,571

7,367

(11
)
Total service revenue 1
2,797

3,345

(16
)
 
5,846

6,488

(10
)
 
 
 
 
 
 
 
 
Adjusted EBITDA 2
 
 
 
 
 
 
 
Wireless
918

1,128

(19
)
 
1,944

2,143

(9
)
Cable
454

478

(5
)
 
907

923

(2
)
Media
(35
)
72

(149
)
 
(120
)
(12
)
n/m
Corporate items and intercompany eliminations
(43
)
(43
)
—

 
(102
)
(84
)
21

Adjusted EBITDA 2
1,294

1,635

(21
)
 
2,629

2,970

(11
)
Adjusted EBITDA margin 2
41.0
 %
43.3
%
(2.3
 pts)
 
40.0
%
40.3
%
(0.3
 pts)
 
 
 
 
 
 
 
 
Net income
279

591

(53
)
 
631

982

(36
)
Basic earnings per share

$0.55


$1.15

(52
)
 

$1.25


$1.91

(35
)
Diluted earnings per share

$0.54


$1.15

(53
)
 

$1.21


$1.90

(36
)
 
 
 
 
 
 
 
 
Adjusted net income 2
310

597

(48
)
 
677

1,002

(32
)
Adjusted basic earnings per share 2

$0.61


$1.17

(48
)
 

$1.34


$1.95

(31
)
Adjusted diluted earnings per share 2

$0.60


$1.16

(48
)
 

$1.30


$1.94

(33
)
 
 
 
 
 
 
 
 
Capital expenditures
559

742

(25
)
 
1,152

1,359

(15
)
Cash provided by operating activities
1,429

1,057

35

 
2,388

2,055

16

Free cash flow 2
468

609

(23
)
 
930

1,014

(8
)
n/m - not meaningful
1 As defined. See "Key Performance Indicators".
2 
Adjusted EBITDA, adjusted net income, 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 and Related Performance Measures" for information about these measures, including how we calculate them and the ratios in which they are used.


Rogers Communications Inc.
5
Second Quarter 2020



Results of our Reportable Segments

WIRELESS

Wireless Financial Results
  
Three months ended June 30
 
 
Six months ended June 30
 
(In millions of dollars, except margins)
2020

2019

% Chg

 
2020

2019

% Chg

 
 
 
 
 
 
 
 
Revenue
 
 
 
 
 
 
 
Service revenue
1,578

1,813

(13
)
 
3,290

3,560

(8
)
Equipment revenue
356

431

(17
)
 
721

873

(17
)
Revenue
1,934

2,244

(14
)
 
4,011

4,433

(10
)
 
 
 
 
 
 
 
 
Operating expenses
 
 
 
 
 
 
 
Cost of equipment
337

467

(28
)
 
711

968

(27
)
Other operating expenses
679

649

5

 
1,356

1,322

3

Operating expenses
1,016

1,116

(9
)
 
2,067

2,290

(10
)
 
 
 
 
 
 
 
 
Adjusted EBITDA
918

1,128

(19
)
 
1,944

2,143

(9
)
 
 
 
 
 
 
 
 
Adjusted EBITDA margin
47.5
%
50.3
%
(2.8
 pts)
 
48.5
%
48.3
%
0.2
 pts
Capital expenditures
254

390

(35
)
 
535

672

(20
)

Wireless Subscriber Results 1 
  
Three months ended June 30
 
 
Six months ended June 30
 
(In thousands, except churn, blended ABPU, and blended ARPU)
2020

2019

Chg

 
2020

2019

Chg

 
 
 
 
 
 
 
 
Postpaid
 
 
 
 
 
 
 
Gross additions
216

351

(135
)
 
473

646

(173
)
Net (losses) additions
(1
)
77

(78
)
 
(7
)
100

(107
)
Total postpaid subscribers 2
9,431

9,257

174

 
9,431

9,257

174

Churn (monthly)
0.77
%
0.99
%
(0.22
 pts)
 
0.85
%
0.99
%
(0.14
 pts)
Prepaid
 
 
 
 
 
 
 
Gross additions
119

199

(80
)
 
260

370

(110
)
Net (losses) additions
(66
)
8

(74
)
 
(132
)
(48
)
(84
)
Total prepaid subscribers 2
1,270

1,451

(181
)
 
1,270

1,451

(181
)
Churn (monthly)
4.73
%
4.43
%
0.30
 pts
 
4.86
%
4.57
%
0.29
 pts
Blended ABPU (monthly)

$61.57

$67.16

($5.59
)
 

$63.37

$65.81

($2.44
)
Blended ARPU (monthly)

$49.09

$56.73

($7.64
)
 

$50.98

$55.36

($4.38
)
1 
Subscriber counts, subscriber churn, blended ABPU, and blended ARPU are key performance indicators. See "Key Performance Indicators".
2 
As at end of period.

Service revenue
The 13% decreases in service revenue and blended ARPU this quarter and 8% decreases year to date were each a result of:
•
lower roaming revenue, due to global travel restrictions during COVID-19 and waiving fees until April 30, 2020;
•
a decrease in overage revenue as a result of strong customer adoption of our Rogers Infinite unlimited data plans and lower wireless data usage as customers spent more time at home on WiFi;
•
a decrease in certain fees, partially from waivers provided to customers during the COVID-19 pandemic, starting in March through June 30, 2020; and
•
fewer net additions for both postpaid and prepaid services given the slow market and as most of our stores were closed due to COVID-19.

The 8% decrease in blended ABPU this quarter and 4% decrease year to date were primarily a result of the declines in roaming, overage, and other fee revenue due to the impacts of COVID-19, partially offset by an ongoing shift in subscribers financing their new device purchases.


Rogers Communications Inc.
6
Second Quarter 2020



The decrease in postpaid gross additions, the postpaid net losses, and the lower postpaid churn this quarter and year to date were all a result of the impacts of COVID-19, with store closures and overall lower market activity by Canadians.

Equipment revenue
The 17% decreases in equipment revenue this quarter and year to date were a result of:
•
lower gross additions and device upgrades by existing customers, in part due to the COVID-19 pandemic; partially offset by
•
a shift in the product mix of device sales towards higher-value devices; and
•
lower promotional activity in consideration of changing economic conditions.

Operating expenses
Cost of equipment
The 28% decrease in the cost of equipment this quarter and 27% decrease year to date were a result of:
•
lower gross additions and device upgrades by existing customers, in part due to the COVID-19 pandemic; partially offset by
•
a shift in the product mix of device sales towards higher-value devices.

Other operating expenses
The 5% increase in other operating expenses this quarter and 3% increase year to date were primarily a result of:
•
higher bad debt expense due to changing economic conditions during the COVID-19 pandemic; partially offset by
•
lower commissions based on lower volumes and lower frontline staff costs.

Adjusted EBITDA
The 19% decrease in adjusted EBITDA this quarter and 9% decrease year to date were a result of the revenue and expense changes discussed above.


Rogers Communications Inc.
7
Second Quarter 2020



CABLE

Cable Financial Results
  
Three months ended June 30
 
 
Six months ended June 30
 
(In millions of dollars, except margins)
2020

2019

% Chg

 
2020

2019

% Chg

 
 
 
 
 
 
 
 
Service revenue
964

993

(3
)
 
1,935

1,967

(2
)
Equipment revenue
2

4

(50
)
 
4

6

(33
)
Revenue
966

997

(3
)
 
1,939

1,973

(2
)
 
 
 
 
 
 
 
 
Operating expenses
512

519

(1
)
 
1,032

1,050

(2
)
 
 
 
 
 
 
 
 
Adjusted EBITDA
454

478

(5
)
 
907

923

(2
)
 
 
 
 
 
 
 
 
Adjusted EBITDA margin
47.0
%
47.9
%
(0.9
 pts)
 
46.8
%
46.8
%
—

Capital expenditures
245

285

(14
)
 
496

574

(14
)

Cable Subscriber Results 1 
  
Three months ended June 30
 
 
Six months ended June 30
 
(In thousands, except ARPA and penetration)
2020

2019

Chg

 
2020

2019

Chg

 
 
 
 
 
 
 
 
Internet
 
 
 
 
 
 
 
Net additions
5

22

(17
)
 
22

36

(14
)
Total Internet subscribers 2
2,556

2,466

90

 
2,556

2,466

90

Ignite TV
 
 
 
 
 
 
 
Net additions
18

66

(48
)
 
109

113

(4
)
Total Ignite TV subscribers 2
435

155

280

 
435

155

280

 
 
 
 
 
 
 
 
Homes passed 2
4,517

4,412

105

 
4,517

4,412

105

Customer relationships
 
 
 
 
 
 
 
Net losses
(7
)
—

(7
)
 
(5
)
(1
)
(4
)
Total customer relationships 2
2,505

2,488

17

 
2,505

2,488

17

ARPA (monthly)
$128.12

$133.24

($5.12
)
 
$128.53

$131.89

($3.36
)
 
 
 
 
 
 
 
 
Penetration 2
55.5
%
56.4
%
(0.9
 pts)
 
55.5
%
56.4
%
(0.9
 pts)
1 
Subscriber results are key performance indicators. See "Key Performance Indicators".
2 
As at end of period.

Revenue
The 3% decrease in revenue this quarter and 2% decrease year to date were a result of:
•
a 4% decrease this quarter and a 3% year to date decrease in ARPA as a result of bundled pricing constructs that provide home phone for a lower incremental cost and waiving certain fees and the programs implemented to help customers during the COVID-19 pandemic, partially offset by the impact of Internet service pricing changes in 2019; partially offset by
•
the increase in total customer relationships over the past year, due to growth in our Internet and Ignite TV subscriber bases, partially offset by declines in our legacy television and home phone subscriber bases; and
•
the movement of Internet customers to higher speed and usage tiers in our Ignite Internet™ offerings.

We remain focused on our Connected Home roadmap, driven by our Ignite TV product. We are very pleased with the performance over the past year, during which we have achieved an over 275% increase in our subscriber base. We look forward to the next steps on our roadmap, including adding more apps and content to Ignite TV and launching more new products to help keep our customers connected.

Operating expenses
The 1% decrease in operating expenses this quarter and 2% decrease year to date were a result of:
•
lower employee costs due to fewer subscriber additions and increased self-installation and other cost efficiencies; partially offset by
•
higher bad debt expense due to changing economic conditions during the COVID-19 pandemic.

Rogers Communications Inc.
8
Second Quarter 2020




Adjusted EBITDA
The 5% decrease in adjusted EBITDA this quarter and 2% decrease year to date were a result of the revenue and expense changes discussed above.


Rogers Communications Inc.
9
Second Quarter 2020



MEDIA

Media Financial Results
  
Three months ended June 30
 
 
Six months ended June 30
 
(In millions of dollars, except margins)
2020

2019

% Chg

 
2020

2019

% Chg

 
 
 
 
 
 
 
 
Revenue
296

591

(50
)
 
708

1,059

(33
)
Operating expenses
331

519

(36
)
 
828

1,071

(23
)
 
 
 
 
 
 
 
 
Adjusted EBITDA
(35
)
72

(149
)
 
(120
)
(12
)
n/m

 
 
 
 
 
 
 
 
Adjusted EBITDA margin
(11.8
)%
12.2
%
(24.0
 pts)
 
(16.9
)%
(1.1
)%
(15.8
 pts)
Capital expenditures
13

17

(24
)
 
25

39

(36
)

Our Media results this quarter and year to date have been significantly affected by the COVID-19 pandemic and reflect the continued suspension of all major sports leagues. Additionally, our Media segment is affected by seasonal fluctuations, some of which relate to the typical amount of consumer activity and its impact on advertising and related retail cycles.

Revenue
The 50% decrease in revenue this quarter and 33% decrease year to date were a result of:
•
lower advertising revenue as a result of softness in the advertising market due to COVID-19; and
•
lower sports revenue, including at the Toronto Blue Jays, primarily as a result of the suspension of major sports leagues due to COVID-19.

Operating expenses
The 36% decrease in operating expenses this quarter and 23% decrease year to date were a result of:
•
lower sports-related costs, including lower programming costs and Toronto Blue Jays player payroll and game-day costs as a result of the suspension of major sports leagues; and
•
lower general operating costs as a result of reduced operating activity and cost efficiencies.

Adjusted EBITDA
The decreases in adjusted EBITDA this quarter and year to date were a result of the revenue and expense changes discussed above.


Rogers Communications Inc.
10
Second Quarter 2020



CAPITAL EXPENDITURES
  
Three months ended June 30
 
 
Six months ended June 30
 
(In millions of dollars, except capital intensity)
2020

2019

% Chg

 
2020

2019

% Chg

 
 
 
 
 
 
 
 
Wireless
254

390

(35
)
 
535

672

(20
)
Cable
245

285

(14
)
 
496

574

(14
)
Media
13

17

(24
)
 
25

39

(36
)
Corporate
47

50

(6
)
 
96

74

30

 
 
 
 
 
 
 
 
Capital expenditures 1
559

742

(25
)
 
1,152

1,359

(15
)
 
 
 
 
 
 
 
 
Capital intensity 2
17.7
%
19.6
%
(1.9
 pts)
 
17.5
%
18.4
%
(0.9
 pts)
1 
Includes additions to property, plant and equipment net of proceeds on disposition, but does not include expenditures for spectrum licences or additions to right-of-use assets.
2 
As defined. See "Key Performance Indicators".

As a result of COVID-19, consolidated capital expenditures have declined by 25% this quarter and 15% for the year to date. Most of this decline has been a result of fewer installations, deferrals of projects that have been delayed as a result of the pandemic, and lower costs associated with the introduction of self-install in our Cable business. Despite the overall decline, we continue to invest to support our long-term strategy, including expansion of our 5G network and our Connected Home roadmap.

Wireless
Capital expenditures in Wireless this quarter and year to date were lower than in 2019 and reflect continued investments in our networks. We continued augmenting our existing LTE network with 4.5G technology investments that are also 5G-ready and we continued to work on our 5G deployments in the 600 MHz band and other bands.

Cable
The decreases in capital expenditures in Cable this quarter and year to date were a result of lower purchases of customer premise equipment (CPE) and lower installation activity during the COVID-19 pandemic. While we continue to work towards our ongoing goal of recognizing capital efficiencies and improving our capital intensity, we have continued upgrading our network infrastructure with additional fibre deployments, including increasing our fibre-to-the-home and fibre-to-the-curb distribution. These upgrades 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 as we progress in our Connected Home roadmap.

Media
The decreases in capital expenditures in Media this quarter and year to date were primarily a result of higher prior year stadium investments at the Toronto Blue Jays, partially offset by an increase in current year IT infrastructure expenditures.

Corporate
Corporate capital expenditures this quarter were consistent. For the year to date, the increase was primarily a result of increased overall IT infrastructure investments.

Capital intensity
Capital intensity decreased this quarter and year to date as a result of lower capital expenditures partially offset by lower revenue, as discussed above.


Rogers Communications Inc.
11
Second Quarter 2020



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 June 30
 
 
Six months ended June 30
 
(In millions of dollars)
2020

2019

% Chg

 
2020

2019

% Chg

 
 
 
 
 
 
 
 
Adjusted EBITDA 1
1,294

1,635

(21
)
 
2,629

2,970

(11
)
Deduct (add):
 
 


 
 
 
 
Depreciation and amortization
650

614

6

 
1,289

1,223

5

Restructuring, acquisition and other
42

39

8

 
63

59

7

Finance costs
214

206

4

 
434

395

10

Other expense (income)
7

(1
)
n/m

 
(7
)
(14
)
(50
)
Income tax expense
102

186

(45
)
 
219

325

(33
)
 
 
 
 
 
 
 
 
Net income
279

591

(53
)
 
631

982

(36
)
1 
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 and Related Performance Measures" for information about this measure, including how we calculate it.

Depreciation and amortization
  
Three months ended June 30
 
 
Six months ended June 30
 
(In millions of dollars)
2020

2019

% Chg

 
2020

2019

% Chg

 
 
 
 
 
 
 
 
Depreciation of property, plant and equipment
594

567

5

 
1,182

1,131

5

Depreciation of right-of-use assets
54

42

29

 
102

83

23

Amortization
2

5

(60
)
 
5

9

(44
)
 
 
 
 
 
 
 
 
Total depreciation and amortization
650

614

6

 
1,289

1,223

5


Total depreciation and amortization increased this quarter and year to date primarily as a result of higher capital expenditures and new lease arrangements over the past several years. See "Capital Expenditures" for more information.

Restructuring, acquisition and other
This quarter and year to date, we incurred $42 million and $63 million (2019 - $39 million and $59 million), respectively, in restructuring, acquisition and other expenses. In 2020, these were primarily incremental and temporary employee compensation costs incurred in response to the COVID-19 pandemic. In 2019, these costs were primarily severance costs associated with the targeted restructuring of our employee base and contract termination and other costs.

Finance costs
  
Three months ended June 30
 
 
Six months ended June 30
(In millions of dollars)
2020

2019

% Chg

 
2020

2019

% Chg
 
 
 
 
 
 
 
 
Interest on borrowings 1
197

187

5

 
389

360

8
Interest on lease liabilities
18

15

20

 
35

29

21
Interest on post-employment benefits liability
4

3

33

 
7

6

17
(Gain) loss on foreign exchange
(23
)
(27
)
(15
)
 
109

(72
)
n/m
Change in fair value of derivative instruments
17

29

(41
)
 
(109
)
73

n/m
Capitalized interest
(5
)
(4
)
25

 
(10
)
(9
)
11
Other
6

3

100

 
13

8

63
 
 
 
 
 
 
 
 
Total finance costs
214

206

4

 
434

395

10
1 Interest on borrowings includes interest on short-term borrowings and on long-term debt.


Rogers Communications Inc.
12
Second Quarter 2020



The 4% increase in finance costs this quarter and 10% increase year to date were primarily a result of higher interest on borrowings, caused by:
•
higher outstanding debt as a result of our debt issuances over the past year; partially offset by
•
a lower weighted average cost of borrowing on our outstanding debt.

Income tax expense
  
Three months ended June 30
 
 
Six months ended June 30
 
(In millions of dollars, except tax rates)
2020

2019

 
2020

2019

 
 
 
 
 
 
Statutory income tax rate
26.6
%
26.7
%
 
26.6
%
26.7
%
Income before income tax expense
381

777

 
850

1,307

Computed income tax expense
101

207

 
226

349

(Decrease) increase in income tax expense resulting from:
 
 
 
 
 
Non-(taxable) deductible stock-based compensation
(1
)
—

 
(3
)
1

Non-deductible portion of equity losses
3

2

 
2

1

Income tax adjustment, legislative tax change
—

(23
)
 
—

(23
)
Other items
(1
)
—

 
(6
)
(3
)
 
 
 
 
 
 
Total income tax expense
102

186

 
219

325

 
 
 
 
 
 
Effective income tax rate
26.8
%
23.9
%
 
25.8
%
24.9
%
Cash income taxes paid
75

101

 
168

246


The effective income tax rate for the quarter approximated the statutory income tax rate. The effective income tax rate for the year to date was lower than the statutory income tax rate primarily as a result of various non-taxable items.

Cash income taxes decreased this quarter and year to date as a result of the timing of installment payments.

Net income
  
Three months ended June 30
 
 
Six months ended June 30
 
(In millions of dollars, except per share amounts)
2020

2019

% Chg

 
2020

2019

% Chg

 
 
 
 
 
 
 
 
Net income
279

591

(53
)
 
631

982

(36
)
Basic earnings per share

$0.55


$1.15

(52
)
 

$1.25


$1.91

(35
)
Diluted earnings per share

$0.54


$1.15

(53
)
 

$1.21


$1.90

(36
)


Rogers Communications Inc.
13
Second Quarter 2020



Adjusted net income
We calculate adjusted net income from adjusted EBITDA as follows:
  
Three months ended June 30
 
 
Six months ended June 30
 
(In millions of dollars, except per share amounts)
2020

2019

% Chg

 
2020

2019

% Chg

 
 
 
 
 
 
 
 
Adjusted EBITDA 1
1,294

1,635

(21
)
 
2,629

2,970

(11
)
Deduct:
 
 
 
 
 
 
 
Depreciation and amortization
650

614

6

 
1,289

1,223

5

Finance costs
214

206

4

 
434

395

10

Other expense (income)
7

(1
)
n/m

 
(7
)
(14
)
(50
)
Income tax expense 2
113

219

(48
)
 
236

364

(35
)
 
 
 
 
 
 
 
 
Adjusted net income 1
310

597

(48
)
 
677

1,002

(32
)
 
 
 
 
 
 
 
 
Adjusted basic earnings per share 1

$0.61


$1.17

(48
)
 

$1.34


$1.95

(31
)
Adjusted diluted earnings per share 1

$0.60


$1.16

(48
)
 

$1.30


$1.94

(33
)
1 
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 and Related Performance Measures" for information about these measures, including how we calculate them and the ratios in which they are used.
2 
Income tax expense excludes recoveries of $11 million and $17 million (2019 - recoveries of $10 million and $16 million) for the three and six months ended June 30, 2020, related to the income tax impact for adjusted items. Income tax expense also excludes a $23 million recovery as a result of legislative tax changes for the three and six months ended June 30, 2019.


Rogers Communications Inc.
14
Second Quarter 2020



Managing our Liquidity and Financial Resources

Operating, investing, and financing activities
  
Three months ended June 30
 
 
Six months ended June 30
 
(In millions of dollars)
2020

2019

 
2020

2019

 
 
 
 
 
 
Cash provided by operating activities before changes in non-cash working capital items, income taxes paid, and interest paid
1,347

1,506

 
2,785

2,882

Change in non-cash operating working capital items
355

(209
)
 
169

(222
)
Cash provided by operating activities before income taxes paid and interest paid
1,702

1,297

 
2,954

2,660

Income taxes paid
(75
)
(101
)
 
(168
)
(246
)
Interest paid
(198
)
(139
)
 
(398
)
(359
)
 
 
 
 
 
 
Cash provided by operating activities
1,429

1,057

 
2,388

2,055

 
 
 
 
 
 
Investing activities:
 
 
 
 
 
Capital expenditures
(559
)
(742
)

(1,152
)
(1,359
)
Additions to program rights
(7
)
(7
)
 
(22
)
(14
)
Changes in non-cash working capital related to capital expenditures and intangible assets
(25
)
26

 
(154
)
(81
)
Acquisitions and other strategic transactions, net of cash acquired
—

(1,731
)
 
—

(1,731
)
Other
(9
)
(7
)
 
(28
)
(10
)
 
 
 
 
 
 
Cash used in investing activities
(600
)
(2,461
)
 
(1,356
)
(3,195
)
 
 
 
 
 
 
Financing activities:
 
 
 
 
 
Net repayments of short-term borrowings
(310
)
(642
)
 
(1,727
)
(212
)
Net (repayment) issuance of long-term debt
(345
)
2,676

 
2,540

2,276

Net (payments) proceeds on settlement of debt derivatives and forward contracts
(10
)
(93
)
 
80

(104
)
Principal payments of lease liabilities
(48
)
(38
)
 
(98
)
(79
)
Transaction costs incurred
(5
)
(33
)
 
(21
)
(33
)
Repurchase of Class B Non-Voting Shares
—

(69
)
 
—

(205
)
Dividends paid
(252
)
(257
)
 
(505
)
(504
)
 
 
 
 
 
 
Cash (used in) provided by financing activities
(970
)
1,544

 
269

1,139

 
 
 
 
 
 
Change in cash and cash equivalents
(141
)
140

 
1,301

(1
)
Cash and cash equivalents, beginning of period
1,936

264

 
494

405

 
 
 
 
 
 
Cash and cash equivalents, end of period
1,795

404

 
1,795

404


Operating activities
The 35% increase in cash provided by operating activities this quarter and 16% increase year to date were a result of higher funding provided by non-cash working capital items, partially offset by higher interest paid.

Investing activities
Capital expenditures
During the quarter and year to date, we incurred $559 million and $1,152 million, respectively, on capital expenditures, before changes in non-cash working capital items. See "Capital Expenditures" for more information.

Financing activities
During the quarter and year to date, we paid net amounts of $670 million and received $872 million (2019 - received $1,908 million and $1,927 million), respectively, on our short-term borrowings, long-term debt, and related derivatives, net of transaction costs paid. See "Financial Risk Management" for more information on the cash flows relating to our derivative instruments.


Rogers Communications Inc.
15
Second Quarter 2020



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 June 30, 2020 and December 31, 2019.
 
As at
June 30

As at
December 31

(In millions of dollars)
2020

2019

 
 
 
Accounts receivable securitization program
650

650

US commercial paper program
—

1,588

 
 
 
Total short-term borrowings
650

2,238


The tables below summarize the activity relating to our short-term borrowings for the three and six months ended June 30, 2020 and 2019.


Three months ended June 30, 2020
 


Six months ended June 30, 2020
 
(In millions of dollars, except exchange rates)
Notional
(US$)

Exchange
rate

Notional
(Cdn$)

 
Notional
(US$)

Exchange
rate

Notional
(Cdn$)

 
 
 
 
 
 
 
 
Proceeds received from US commercial paper
189

1.413

267

 
2,867

1.333

3,823

Repayment of US commercial paper
(412
)
1.400

(577
)
 
(4,097
)
1.355

(5,550
)
Net repayment of US commercial paper
 


(310
)
 
 
 
(1,727
)
 
 
 
 
 
 
 
 
Net repayment of short-term borrowings
 
 
(310
)
 
 
 
(1,727
)
 
 
Three months ended June 30, 2019
 
 
 
Six months ended June 30, 2019
 
(In millions of dollars, except exchange rates)
Notional
(US$)

Exchange
rate

Notional
(Cdn$)

 
Notional
(US$)

Exchange
rate

Notional
(Cdn$)

 
 
 
 
 
 
 
 
Proceeds received from US commercial paper
2,960

1.342

3,972

 
6,818

1.335

9,104

Repayment of US commercial paper
(3,440
)
1.340

(4,611
)
 
(6,985
)
1.333

(9,313
)
Net repayment of US commercial paper
 
 
(639
)
 
 
 
(209
)
 
 
 
 
 
 
 
 
Proceeds received from credit facilities
420

1.336

561

 
420

1.336

561

Repayment of credit facilities
(420
)
1.343

(564
)
 
(420
)
1.343

(564
)
Net repayment of credit facilities
 
 
(3
)
 
 
 
(3
)
 
 
 
 
 
 
 
 
Net repayment of short-term borrowings
 
 
(642
)
 
 
 
(212
)

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. See "Financial Risk Management" for more information.


Rogers Communications Inc.
16
Second Quarter 2020



Long-term debt
Our long-term debt consists of amounts outstanding under our bank 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 six months ended June 30, 2020 and 2019.
 
 
Three months ended June 30, 2020
 
 
 
Six months ended June 30, 2020
 
(In millions of dollars, except exchange rates)
Notional
(US$)

Exchange
rate

Notional
(Cdn$)

 
Notional
(US$)

Exchange
rate

Notional
(Cdn$)

 
 
 
 
 
 
 
 
Credit facility borrowings (US$)
—

—

—

 
970

1.428

1,385

Credit facility repayments (US$)
(970
)
1.406

(1,364
)
 
(970
)
1.406

(1,364
)
 
 
 
 
 
 
 
 
Net (repayments) borrowings under credit facilities
 
 
(1,364
)
 
 
 
21

 
 
 
 
 
 
 
 
Senior note issuances (Cdn$)




—

 




1,500

Senior note issuances (US$)
750

1.359

1,019

 
750

1.359

1,019

 
 
 
 
 
 
 
 
Net issuance of senior notes
 
 
1,019

 
 
 
2,519

 
 
 
 
 
 
 
 
Net (repayment) issuance of long-term debt
 
 
(345
)
 
 
 
2,540

 
 
Three months ended June 30, 2019
 
 
 
Six months ended June 30, 2019
 
(In millions of dollars, except exchange rates)
Notional
(US$)

Exchange
rate

Notional
(Cdn$)

 
Notional
(US$)

Exchange
rate

Notional
(Cdn$)

 
 
 
 
 
 
 
 
Senior note issuances (Cdn$)
 
 
1,000

 
 
 
1,000

Senior note issuances (US$)
1,250

1.341

1,676

 
1,250

1.341

1,676

Total senior note issuances
 
 
2,676

 
 
 
2,676

 
 
 
 
 
 
 
 
Senior note repayments (Cdn$)
 
 
—

 
 
 
(400
)
 
 
 
 
 
 
 
 
Net issuance of senior notes
 
 
2,676

 
 
 
2,276

 
 
 
 
 
 
 
 
Net issuance of long-term debt
 
 
2,676

 
 
 
2,276

 
Three months ended June 30
 
 
Six months ended June 30
 
(In millions of dollars)
2020

2019

 
2020

2019

 
 
 
 
 
 
Long-term debt net of transaction costs, beginning of period
19,825

13,724

 
15,967

14,290

Net (repayment) issuance of long-term debt
(345
)
2,676

 
2,540

2,276

(Gain) loss on foreign exchange
(470
)
(207
)
 
516

(376
)
Deferred transaction costs incurred
(5
)
(33
)
 
(21
)
(33
)
Amortization of deferred transaction costs
3

3

 
6

6

 
 
 
 
 
 
Long-term debt net of transaction costs, end of period
19,008

16,163

 
19,008

16,163


Issuance of senior notes and related debt derivatives
This quarter, we issued US$750 million floating rate senior notes due 2022 at a rate of the three-month LIBOR plus 0.60% per annum. Concurrent with the issuances, we entered into debt derivatives to convert all interest and principal payment obligations for the US$-denominated senior notes to Canadian dollars and convert the floating rate to a fixed rate of 0.955% until maturity. As a result, we received net proceeds of $1.0 billion from the issuances. See "Financial Risk Management" for more information on our derivatives.

In March 2020, we issued $1.5 billion senior notes due 2027 at a rate of 3.65%.

In April 2019, we issued $1 billion senior notes due 2029 at a rate of 3.25% and US$1.25 billion senior notes due 2049 at a rate of 4.35%. Concurrent with the issuances, we exercised our outstanding bond forwards and entered into debt derivatives to convert all interest and principal payment obligations for the US$-denominated senior notes to Canadian dollars. As a result, we received net proceeds of $2.7 billion from the issuances.

Rogers Communications Inc.
17
Second Quarter 2020



Repayment of senior notes and related derivative settlements
We did not repay any senior notes or settle any related debt derivatives this quarter or year to date. In March 2019, we repaid the entire outstanding principal amount of our $400 million 2.8% senior notes at maturity. There were no derivatives associated with these senior notes.

Repurchase of Class B Non-Voting Shares
We did not repurchase any RCI Class B Non-Voting common shares (Class B Non-Voting Shares) this quarter or year to date. During the three months ended June 30, 2019, we repurchased for cancellation 734,257 Class B Non-Voting Shares under our normal course issuer bid (NCIB) programs for a purchase price of $50 million and paid the final $19 million relating to our first quarter repurchases. During the six months ended June 30, 2019, we repurchased for cancellation 2,898,370 Class B Non-Voting Shares under our NCIB programs for a total purchase price of $205 million. See "Financial Condition" for more information.

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 Class B Non-Voting Shares in 2020 and 2019. On July 21, 2020, the Board of Directors declared a dividend of $0.50 per Class A Share and Class B Non-Voting Share to be paid on October 1, 2020 to shareholders of record on September 9, 2020.
Declaration date
Record date
Payment date
Dividend per
share (dollars)

Dividends paid
(in millions of dollars)

 
 
 
 
 
January 22, 2020
March 10, 2020
April 1, 2020
0.50

252

April 21, 2020
June 10, 2020
July 2, 2020
0.50

252

 
 
 
 
 
January 24, 2019
March 12, 2019
April 1, 2019
0.50

257

April 18, 2019
June 10, 2019
July 2, 2019
0.50

256

June 5, 2019
September 9, 2019
October 1, 2019
0.50

256

October 23, 2019
December 11, 2019
January 2, 2020
0.50

253


Free cash flow
  
Three months ended June 30
 
 
Six months ended June 30
 
(In millions of dollars)
2020

2019

% Chg

 
2020

2019

% Chg

 
 
 
 
 
 
 
 
Adjusted EBITDA 1
1,294

1,635

(21
)
 
2,629

2,970

(11
)
Deduct:
 
 
 
 
 
 
 
Capital expenditures 2
559

742

(25
)
 
1,152

1,359

(15
)
Interest on borrowings, net of capitalized interest
192

183

5

 
379

351

8

Cash income taxes 3
75

101

(26
)
 
168

246

(32
)
 
 
 
 
 
 
 


Free cash flow 1
468

609

(23
)
 
930

1,014

(8
)
1 
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 and Related Performance Measures" for information about these measures, including how we calculate them and the ratios in which they are used.
2 
Includes additions to property, plant and equipment net of proceeds on disposition, but does not include expenditures for spectrum licences or additions to right-of-use assets.
3 
Cash income taxes are net of refunds received.

Free cash flow decreased this quarter and year to date as a result of lower adjusted EBITDA and higher interest on borrowings, partially offset by lower capital expenditures and lower cash income taxes.


Rogers Communications Inc.
18
Second Quarter 2020



Overview of Financial Position

Consolidated statements of financial position
 
As at

As at

 
 
 
 
June 30

December 31

 
 
 
(In millions of dollars)
2020

2019

$ Chg

% Chg

Explanation of significant changes
 
 
 
 
 
 
Assets
 
 
 
 
 
Current assets:
 
 
 
 
 
Cash and cash equivalents
1,795

494

1,301

n/m

See "Managing our Liquidity and Financial Resources".
Accounts receivable
1,621

2,304

(683
)
(30
)
Primarily reflects decreases in revenue due to the effects of COVID-19 and the increase in allowance for doubtful accounts due to the changing economic conditions during COVID-19.
Inventories
319

460

(141
)
(31
)
Reflects a decrease in Wireless handset inventories.
Current portion of contract assets
910

1,234

(324
)
(26
)
Reflects our transition of consumer offerings to device financing agreements.
Other current assets
855

524

331

63

Primarily reflects an increase in financing receivables.
Current portion of derivative instruments
94

101

(7
)
(7
)
n/m
Total current assets
5,594

5,117

477

9

 
 
 
 
 
 
 
Property, plant and equipment
14,048

13,934

114

1

Primarily reflects capital expenditures and additions to right-of-use assets, partially offset by depreciation expense.
Intangible assets
8,883

8,905

(22
)
—

n/m
Investments
2,520

2,830

(310
)
(11
)
Primarily reflects fair value decreases for certain publicly traded investments.
Derivative instruments
2,771

1,478

1,293

87

Primarily reflects changes in market values of certain debt derivatives as a result of changes in the Canadian and US interest rate environments and the depreciation of the Cdn$ relative to the US$. See "Financial Risk Management".
Contract assets
252

557

(305
)
(55
)
Reflects our transition of consumer offerings to device financing agreements.
Other long-term assets
534

275

259

94

Reflects an increase in financing receivables.
Goodwill
3,935

3,923

12

—

n/m
 
 
 
 
 
 
Total assets
38,537

37,019

1,518

4

 
 
 
 
 
 
 
Liabilities and shareholders' equity
 
 


 
Current liabilities:
 

 
 
 
Short-term borrowings
650

2,238

(1,588
)
(71
)
Reflects a decrease in borrowings under our US CP program.
Accounts payable and accrued liabilities
2,340

3,033

(693
)
(23
)
Reflects reduced spending as a result of the effects of COVID-19, and business seasonality.
Income tax payable
299

48

251

n/m

Reflects the excess of current income tax expense over tax installments paid.
Other current liabilities
103

141

(38
)
(27
)
n/m
Contract liabilities
297

224

73

33

Primarily reflects an increase in contract liabilities related to device financing contracts.
Current portion of long-term debt
1,450

—

1,450

—

Reflects the reclassification to current of our $1,450 million senior notes due March 2021.
Current portion of lease liabilities
271

230

41

18

Reflects liabilities related to new leases entered.
Current portion of derivative instruments
9

50

(41
)
(82
)
Primarily reflects the settlement of certain debt derivatives related to our US CP borrowings. See "Financial Risk Management".
Total current liabilities
5,419

5,964

(545
)
(9
)
 
 
 


 
 
 
Provisions
36

36

—

—

n/m
Long-term debt
17,558

15,967

1,591

10

Reflects the issuance of $1.5 billion of senior notes due March 2027, the issuance of US$750 million of senior notes due March 2022, and changes as a result of the depreciation of the Cdn$ relative to the US$, partially offset by the reclassification to current of our $1,450 million senior notes. See "Managing our Liquidity and Financial Resources".
Derivative instruments
12

90

(78
)
(87
)
Primarily reflects changes in market values of certain debt derivatives as a result of changes in the Canadian and US interest rate environments and the depreciation of the Cdn$ relative to the US$. See "Financial Risk Management".
Lease liabilities
1,574

1,495

79

5

Reflects liabilities related to new leases entered.
Other long-term liabilities
567

614

(47
)
(8
)
n/m
Deferred tax liabilities
3,398

3,437

(39
)
(1
)
n/m
Total liabilities
28,564

27,603

961

3

 
 
 
 
 
 
 
Shareholders' equity
9,973

9,416

557

6

Reflects changes in retained earnings and equity reserves.
 
 
 
 
 
 
Total liabilities and shareholders' equity
38,537

37,019

1,518

4

 

Rogers Communications Inc.
19
Second Quarter 2020



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 June 30, 2020 and December 31, 2019.
As at June 30, 2020
Total available

Drawn

Letters of credit

Net available

(In millions of dollars)
 
 
 
 
 
Bank credit facilities:
 
 
 
 
Revolving
3,200

—

8

3,192

Outstanding letters of credit
101

—

101

—

Total bank credit facilities
3,301

—

109

3,192

Accounts receivable securitization
1,050

650

—

400

Cash and cash equivalents
1,795

—

—

1,795

 
 
 
 


Total
6,146

650

109

5,387

As at December 31, 2019
Total available

Drawn

Letters of credit

US CP program 1

Net available

(In millions of dollars)
 
 
 
 
 
 
Bank credit facilities:
 
 
 
 
 
Revolving
3,200

—

8

1,593

1,599

Outstanding letters of credit
101

—

101

—

—

Total bank credit facilities
3,301

—

109

1,593

1,599

Accounts receivable securitization
1,050

650

—

—

400

Cash and cash equivalents
494

—

—

—

494

 
 
 
 
 
 
Total
4,845

650

109

1,593

2,493

1 
The US CP program amounts are gross of the discount on issuance.

In addition to the sources of available liquidity noted above, we held $1,529 million of marketable securities in publicly traded companies as at June 30, 2020 (December 31, 2019 - $1,831 million).

Weighted average cost of borrowings
Our weighted average cost of borrowings was 4.23% as at June 30, 2020 (December 31, 2019 - 4.30%) and our weighted average term to maturity was 13.6 years (December 31, 2019 - 14.1 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 June 30, 2020.
Issuance
Standard & Poor's
Moody's
Fitch
Corporate credit issuer default rating 1
BBB+ with a stable outlook
Baa1 with a stable outlook
BBB+ with a stable outlook
Senior unsecured debt 1
BBB+ with a stable outlook
Baa1 with a stable outlook
BBB+ with a stable outlook
US commercial paper 1
A-2
P-2
N/A 2
1 
Unchanged in the quarter.
2 
We have not sought a rating from Fitch for our short-term obligations.


Rogers Communications Inc.
20
Second Quarter 2020



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, lease liabilities, and cash and cash equivalents or bank advances.
 
As at
June 30

As at
December 31

(In millions of dollars, except ratios)
2020

2019

 
 
 
Long-term debt 1
19,186

16,130

Net debt derivative assets valued without any adjustment for credit risk 2
(2,960
)
(1,414
)
Short-term borrowings
650

2,238

Lease liabilities
1,845

1,725

Cash and cash equivalents
(1,795
)
(494
)
 
 
 
Adjusted net debt 3
16,926

18,185

Divided by: trailing 12-month adjusted EBITDA 3
5,871

6,212

 
 
 
Debt leverage ratio 3
2.9

2.9

1 
Includes current and long-term portion of long-term debt before deferred transaction costs and discounts. See "Reconciliation of adjusted net debt and debt leverage ratio" in "Non-GAAP Measures and Related Performance Measures" for the calculation of this amount.
2 
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.
3 
Adjusted net debt and adjusted EBITDA 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 and Related Performance Measures" for information about these measures, including how we calculate them and the ratios in which they are used.

Normal course issuer bid
In April 2020, the TSX accepted a notice of our intention to commence a NCIB program that allows us to purchase, between April 24, 2020 and April 23, 2021, the lesser of 34.9 million Class B Non-Voting Shares and that number of Class B Non-Voting Shares that can be purchased for an aggregate purchase price of $500 million (2020 NCIB). Rogers security holders may obtain a copy of this notice, without charge, by contacting us.

In April 2019, we commenced a NCIB program that allowed us to purchase, between April 24, 2019 and April 23, 2020, the lesser of 35.7 million Class B Non-Voting Shares and that number of Class B Non-Voting Shares that can be purchased for an aggregate purchase price of $500 million (2019 NCIB).

During the three and six months ended June 30, 2020, we did not repurchase any Class B Non-Voting Shares. During the three months ended June 30, 2019, we repurchased for cancellation 734,257 Class B Non-Voting Shares for $50 million. During the three months ended March 31, 2019, we repurchased for cancellation 2,164,113 Class B Non-Voting Shares for $155 million, $19 million of which was paid in early April 2019.

Outstanding common shares
 
As at
June 30

As at 
December 31 

  
2020

2019

 
 
 
Common shares outstanding 1
 
 
Class A Voting Shares
111,154,811

111,154,811

Class B Non-Voting Shares
393,770,507

393,770,507

 
 
 
Total common shares
504,925,318

504,925,318

 
 
 
Options to purchase Class B Non-Voting Shares
 
 
Outstanding options
4,726,634

3,154,795

Outstanding options exercisable
1,426,207

993,645

1 
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.


Rogers Communications Inc.
21
Second Quarter 2020



Financial Risk Management

This section should be read in conjunction with "Financial Risk Management" in our 2019 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 96.5% of our outstanding debt, including short-term borrowings, as at June 30, 2020 (December 31, 2019 - 87.2%).

Debt derivatives
We use cross-currency interest rate agreements (debt derivatives) to manage risks from fluctuations in foreign exchange rates and interest rates associated with our US dollar-denominated senior notes and debentures, lease liabilities, credit facility borrowings, and US dollar-denominated commercial paper borrowings. We designate the debt derivatives related to our senior notes and debentures and lease liabilities 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.

Credit facilities and US CP
Below is a summary of the debt derivatives we entered and settled related to our credit facilities and US CP program during the three and six months ended June 30, 2020 and 2019.
 
 
Three months ended June 30, 2020
 
 
 
Six months ended June 30, 2020
 
(In millions of dollars, except exchange rates)
Notional
 (US$)

Exchange rate

Notional
(Cdn$)

 
Notional
(US$)

Exchange
rate

Notional
(Cdn$)

 
 
 
 
 
 
 
 
Credit facilities
 
 
 
 
 
 
 
Debt derivatives entered
—

—

—

 
970

1.428

1,385

Debt derivatives settled
970

1.406

1,364

 
970

1.406

1,364

Net cash paid
 
 
(21
)
 
 
 
(21
)
 
 
 
 
 
 
 
 
US commercial paper program
 
 
 
 
 
 
 
Debt derivatives entered
190

1.405

267

 
2,868

1.333

3,823

Debt derivatives settled
411

1.375

565

 
4,089

1.330

5,438

Net cash received
 
 
11

 
 
 
101

 
 
Three months ended June 30, 2019
 
 
 
Six months ended June 30, 2019
 
(In millions of dollars, except exchange rates)
Notional
 (US$)

Exchange rate

Notional
(Cdn$)

 
Notional
(US$)

Exchange
rate

Notional
(Cdn$)

 
 
 
 
 
 
 
 
Credit facilities
 
 
 
 
 
 
 
Debt derivatives entered
420

1.336

561

 
420

1.336

561

Debt derivatives settled
420

1.343

564

 
420

1.343

564

Net cash received
 
 
3

 
 
 
3

 
 
 
 
 
 
 
 
US commercial paper program
 
 
 
 
 
 
 
Debt derivatives entered
2,960

1.342

3,972

 
6,818

1.335

9,104

Debt derivatives settled
3,433

1.336

4,586

 
6,969

1.333

9,287

Net cash received
 
 
15

 
 
 
4


As at June 30, 2020, we had nil and nil notional amount of debt derivatives outstanding relating to our credit facility borrowings and US CP program (December 31, 2019 - nil and US$1,226 million), respectively.


Rogers Communications Inc.
22
Second Quarter 2020



Senior notes
Below is a summary of the debt derivatives into which we entered related to senior notes during the three and six months ended June 30, 2020 and 2019.
(In millions of dollars, except interest rates)
 
 
 
 
 
US$
 
Hedging effect
Effective date
Principal/Notional amount (US$)

Maturity date
Coupon rate

 
Fixed hedged (Cdn$) interest rate 1

Equivalent (Cdn$)

 
 
 
 
 
 
 
2020 issuances
 
 
 
 
 
 
June 22, 2020
750

2022
USD LIBOR + 0.60%

 
0.955
%
1,019

 
 
 
 
 
 
 
2019 issuances
 
 
 
 
 
 
April 30, 2019
1,250

2049
4.350
%
 
4.173
%
1,676

1 
Converting from a fixed US$ coupon rate to a weighted average Cdn$ fixed rate.

As at June 30, 2020, we had US$9,050 million (December 31, 2019 - US$8,300 million) in US dollar-denominated senior notes and debentures, of which all of the associated foreign exchange and interest rate risk had been hedged using debt derivatives.

Lease liabilities
Below is a summary of the debt derivatives we entered and settled related to our outstanding lease liabilities for the three and six months ended June 30, 2020. We did not enter or settle any debt derivatives related to our outstanding lease liabilities in 2019.
 
Three months ended June 30, 2020
 
 
Six months ended June 30, 2020
 
(In millions of dollars, except exchange rates)
Notional
(US$)

Exchange rate

Notional
(Cdn$)

 
Notional
(US$)

Exchange
rate

Notional
(Cdn$)

 
 
 
 
 
 
 
 
Debt derivatives entered
49

1.367

67

 
90

1.400

126

Debt derivatives settled
10

1.300

13

 
16

1.313

21


As at June 30, 2020, we had US$144 million notional amount of debt derivatives outstanding relating to our outstanding lease liabilities (December 31, 2019 - US$70 million) with terms to maturity ranging from July 2020 to June 2023 (December 31, 2019 - January 2020 to December 2022), at an average rate of $1.366/US$ (December 31, 2019 - $1.318/US$).

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

Expenditure derivatives
We use foreign currency forward contracts (expenditure derivatives) to manage the foreign exchange risk in our operations, designating them as hedges for accounting purposes for certain of our forecast operational and capital expenditures.

Below is a summary of the expenditure derivatives we entered and settled during the three and six months ended June 30, 2020 and 2019.
 
Three months ended June 30, 2020
 
 
Six months ended June 30, 2020
 
(In millions of dollars, except exchange rates)
Notional
(US$)

Exchange rate

Notional
(Cdn$)

 
Notional
(US$)

Exchange
rate

Notional
(Cdn$)

 
 
 
 
 
 
 
 
Expenditure derivatives entered
744

1.376

1,024

 
1,086

1.365

1,482

Expenditure derivatives settled
255

1.302

332

 
480

1.300

624

 
Three months ended June 30, 2019
 
 
Six months ended June 30, 2019
 
(In millions of dollars, except exchange rates)
Notional
(US$)

Exchange rate

Notional
(Cdn$)

 
Notional
(US$)

Exchange
rate

Notional
(Cdn$)

 
 
 
 
 
 
 
 
Expenditure derivatives entered
540

1.330

718

 
780

1.322

1,031

Expenditure derivatives settled
240

1.254

301

 
450

1.249

562



Rogers Communications Inc.
23
Second Quarter 2020



As at June 30, 2020, we had US$1,596 million notional amount of expenditure derivatives outstanding (December 31, 2019 - US$990 million) with terms to maturity ranging from July 2020 to December 2022 (December 31, 2019 - January 2020 to December 2021), at an average rate of $1.344/US$ (December 31, 2019 - $1.300/US$).

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

Equity derivatives
We use total return swaps (equity derivatives) to hedge the market price appreciation risk of the Class B Non-Voting Shares granted under our stock-based compensation programs. The equity derivatives have not been designated as hedges for accounting purposes.

As at June 30, 2020, we had equity derivatives outstanding for 4.6 million (December 31, 2019 - 4.3 million) Class B Non-Voting Shares with a weighted average price of $51.82 (December 31, 2019 - $51.76).

We did not settle any equity derivatives this quarter. This year, we settled 0.5 million (2019 - 0.7 million) equity derivatives at a weighted average price of $54.16 (2019 - $71.66) for net payments of $1 million (2019 - net proceeds of $16 million). At the same time, we entered into 0.5 million equity derivatives at a weighted average price of $54.16 under substantially the same terms and conditions with revised expiry dates to April 2021 (from April 2020).

We did not enter into any equity derivatives this quarter. This year, we entered into 0.3 million equity derivatives (2019 - nil) with a weighted average price of $56.08 (2019 - nil).

Additionally, we executed extension agreements for the remainder of our equity derivative contracts under substantially the same commitment terms and conditions with revised expiry dates to March 2021 and April 2021.

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 June 30, 2020
 
(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 assets
9,107

1.2076

10,998

2,811

As liabilities
86

1.3980

120

(3
)
Net mark-to-market debt derivative asset
 
 
 
2,808

Expenditure derivatives accounted for as cash flow hedges:
 
 
 
 
As assets
852

1.3106

1,117

40

As liabilities
744

1.3815

1,028

(17
)
Net mark-to-market expenditure derivative asset
 
 
 
23

Equity derivatives not accounted for as hedges:
 
 
 
 
As assets
—

—

193

14

As liabilities
—

—

45

(1
)
Net mark-to-market equity derivative asset
 
 
 
13

 
 
 
 
 
Net mark-to-market asset
 
 
 
2,844


Rogers Communications Inc.
24
Second Quarter 2020



 
As at December 31, 2019
 
(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 assets
5,800

1.1357

6,587

1,508

As liabilities
2,570

1.3263

3,409

(96
)
Short-term debt derivatives not accounted for as hedges:
 
 
 
 
As liabilities
1,223

1.3227

1,618

(29
)
Net mark-to-market debt derivative asset
 
 
 
1,383

Expenditure derivatives accounted for as cash flow hedges:
 
 
 
 
As assets
270

1.2391

335

16

As liabilities
720

1.3228

952

(15
)
Net mark-to-market expenditure derivative asset
 
 
 
1

Equity derivatives not accounted for as hedges:
 
 
 
 
As assets
—

—

223

55

 
 
 
 
 
Net mark-to-market asset
 
 
 
1,439


Commitments and Contractual Obligations

See our 2019 Annual MD&A for a summary of our obligations under firm contractual arrangements, including commitments for future payments under long-term debt arrangements and lease arrangements. These are also discussed in notes 17, 21, and 28 of our 2019 Annual Audited Consolidated Financial Statements.

Except where otherwise disclosed in this MD&A, there have been no material changes to our material contractual obligations, as identified in our 2019 Annual MD&A, since December 31, 2019.

Regulatory Developments

See our 2019 Annual MD&A for a discussion of the significant regulations that affected our operations as at March 5, 2020. The following are the significant regulatory developments since that date.

CRTC review of mobile wireless services
On February 28, 2019, through Telecom Notice of Consultation CRTC 2019-57, Review of mobile wireless services, the Canadian Radio-television and Telecommunications Commission (CRTC) initiated its five-year review to examine the state of the mobile wireless market and to determine whether further action is required to improve choice and affordability for Canadians. After extensive written submissions were filed in 2019, a two-week oral hearing began on February 18, 2020. Final written submissions were filed on July 15, 2020; a final decision from the CRTC will follow. Any adverse decision regarding the items being reviewed in the proceeding could have a material, adverse effect on our financial results and future investments.

Wholesale Internet costing and pricing
On August 15, 2019, in Telecom Order CRTC 2019-288, Follow-up to Telecom Orders 2016-396 and 2016-448 - Final rates for aggregated wholesale high-speed access services (Order), the CRTC set final rates for facilities-based carriers' wholesale HSA, including Rogers' third-party Internet access (TPIA) service. On September 13, 2019, Rogers, in conjunction with the other large Canadian cable companies, filed a motion for Leave to Appeal pursuant to Section 64(1) of the Telecommunications Act with the Federal Court of Appeal (Court) and an associated motion for an interlocutory Stay of the CRTC Order. On November 22, 2019, the Court granted Leave to Appeal and an interlocutory Stay of the CRTC Order. The hearing was held on June 25 and 26, 2020. See "Updates to Risks and Uncertainties" for more information.

CRTC review of wholesale wireline telecommunications services
On September 20, 2016, the CRTC released Telecom Decision CRTC 2016-379, Follow-up to Telecom Regulatory Policy 2015-326 - Implementation of a disaggregated wholesale high-speed access service, including over fibre-to-the-premises access facilities, addressing the technical implementation of new, disaggregated, high-speed access TPIA, a service that will provide access to fibre-to-the-premises (FTTP) facilities as ordered in the CRTC's July 22, 2015 ruling. The decision is consistent with the positions submitted by Rogers in our filings. A decision on final rates was anticipated in 2020 but was temporarily suspended on June 11, 2020 by CRTC Telecom Notice of Consultation 2020-187, Call for comments - Appropriate network configuration for disaggregated wholesale high-speed access services.

Rogers Communications Inc.
25
Second Quarter 2020



3500 MHz spectrum licence band
On June 6, 2019, Innovation, Science and Economic Development Canada (ISED Canada) released its Decision on its Consultation on Revisions to the 3500 MHz Band to Accommodate Flexible Use and Preliminary Consultation on Changes to the 3800 MHz Band. The Decision determined that ISED Canada will issue flexible use licences in a 200 MHz frequency range from 3450-3650 MHz. ISED Canada had anticipated that an auction of the 3500 MHz spectrum not retained by existing licensees would occur in the second half of 2020. On June 5, 2020, the auction was postponed until June 2021.

Updates to Risks and Uncertainties

See our 2019 Annual MD&A for a discussion of the principal risks and uncertainties that could have a material adverse effect on our business and financial results as at March 5, 2020, which should be reviewed in conjunction with this MD&A. The following factors may contribute to those risks and uncertainties.

Outbreak of COVID-19 and related pandemic
On March 11, 2020, the World Health Organization recognized the outbreak of COVID-19 as a pandemic and we have been closely monitoring related developments. As the COVID-19 pandemic continues to significantly impact the well-being of individuals and the Canadian and global economies, we have invoked our business continuity plans and implemented a specific response plan to continue providing our essential services and support to our customers and communities while safeguarding the health and safety of the public and our employees.

We are focused on operating and maintaining our wireless and cable networks, including adding capacity and managing traffic where needed, our media operations, and the key business operations required to ensure service continuity for customers. We have implemented alternative working arrangements for employees while we review and follow directions from the government to ensure the safety of our team and implement necessary safeguards to accommodate a gradual approach in reopening our sites to employees. On March 16, 2020 and until June 30, 2020, we announced a series of measures to help our customers, including the temporary waiving of certain fees and providing access to a rotating selection of television channels and content, as we continually seek new ways to support our customers.

Public and private sector regulations, policies, and other measures aimed at reducing the transmission of COVID-19 include the imposition of business closures, travel restrictions, the promotion of social distancing, and the adoption of work-from-home and online education by companies, schools, and institutions. These measures are impacting how customers use our networks, products, and services, the manner or extent to which we can offer certain products and services (including the suspension of major sports leagues), and the ability of certain suppliers and vendors to provide products and services to us.

This quarter, we introduced several additional programs to help employees manage through the COVID-19 public health crisis and provide support and services to our customers and audiences. After temporarily closing most of our retail locations nationally, with a limited number of stores remaining open to continue providing our essential services to customers, we have begun a steady and phased approach to reopening our retail locations across Canada, following the public health guidelines of their respective provinces.

We remain in close contact with government officials at all levels, suppliers, partners, and key business customers, and our pandemic response plans are continually evolving.

The full extent and impact of the COVID-19 pandemic is unknown. Potential adverse impacts of the COVID-19 pandemic include, but are not limited to:
•
the risk of a material reduction in demand for our products and services due to businesses closing or downsizing, job losses and associated financial hardship or, more generally, a declining level of retail activity, which may lead to a decline in revenue as a result of:
•
lower Wireless subscriber activity, including lower equipment revenue;
•
the continued suspension of major sports leagues and associated programming;
•
services provided to our customers at no cost, such as long distance calling, roaming, and free television channels;
•
lower roaming and overage revenue as customers are unable or unwilling to travel and increasingly stay home; and
•
customers downgrading or cancelling their services;
•
an increase in delinquent or unpaid bills, which may lead to increased bad debt expense;
•
issues delivering certain products and services, or maintaining or upgrading our networks, due to store closures and supply chain disruptions;


Rogers Communications Inc.
26
Second Quarter 2020



•
additional capital expenditures to maintain or expand our networks in order to accommodate substantially increased network usage; and
•
higher costs for new capital.

While we expect certain cost savings to offset some of the lower revenue, such as lower equipment costs or lower sports programming costs, we also cannot predict the extent to which they would be offset or the extent to which they would materialize.

Due to the uncertainty surrounding the duration and potential outcomes of the COVID-19 pandemic, including the results of measures taken to slow the spread and the broader impact COVID-19 may have on the Canadian and global economies or financial markets, we are unable at this time to predict the overall impact on our operations, liquidity, financial condition, or results; however, it has had, and may continue to have a material, adverse impact on our results. Any future epidemic, pandemic, or other public health crisis that occurs in the future may pose similar risks to us.

Wholesale Internet costing and pricing
In August 2019, in Telecom Order CRTC 2019-288, Follow-up to Telecom Orders 2016-396 and 2016-448 - Final rates for aggregated wholesale high-speed access services (Order), the CRTC set final rates for facilities-based carriers' wholesale high-speed access services, including Rogers' TPIA service. The Order set final rates for Rogers that are significantly lower than the interim rates that were previously billed and it further determined that these final rates will apply retroactively to March 31, 2016.

We do not believe the final rates set by the CRTC are just and reasonable as required by the Telecommunications Act as we believe they are below cost. On September 13, 2019, Rogers, in conjunction with the other large Canadian cable companies (Cable Carriers), filed a motion for Leave to Appeal pursuant to Section 64(1) of the Telecommunications Act with the Federal Court of Appeal (Court) and an associated motion for an interlocutory Stay of the CRTC Order. On September 27, 2019, the Court granted an Interim Stay suspending the Order until the Court rules on the Cable Carriers’ motion for an interlocutory Stay of the CRTC’s Order pending the Court’s determination of the Cable Carriers’ motion for Leave to Appeal. On November 22, 2019, the Court granted Leave to Appeal and an interlocutory Stay of the CRTC Order. The appeal was heard in June 2020.

Due to the Court’s granting of an interlocutory Stay and Leave to Appeal, and the significant uncertainty surrounding both the outcome and the amount, if any, we could ultimately have to repay to the resellers, we have not recorded a liability for this contingency at this time. The CRTC’s order as drafted would have resulted in a refund of amounts previously billed to the resellers of approximately $180 million, representing the impact on a retroactive basis from March 31, 2016 to June 30, 2020. We estimate the ongoing impact would be between $10 and $15 million per quarter.

Outcome of proceedings
The outcome of all the proceedings and claims against us, including the matter described above, is subject to future resolution that includes the uncertainties of litigation. It is not possible for us to predict the result or magnitude of the claims due to the various factors and uncertainties involved in the legal process. Based on information currently known to us, we believe it is not probable that the ultimate resolution of any of these proceedings and claims, individually or in total, will have a material adverse effect on our business, financial results, or financial condition. If it becomes probable that we will be held liable for claims against us, we will recognize a provision during the period in which the change in probability occurs, which could be material to our Consolidated Statements of Income or Consolidated Statements of Financial Position.

Critical Accounting Policies and Estimates

See our 2019 Annual MD&A and our 2019 Annual Audited Consolidated Financial Statements and notes thereto for a discussion of the accounting policies and estimates that are critical to the understanding of our business operations and the results of our operations.

New accounting pronouncements adopted in 2020
We adopted the following accounting standards and amendments that were effective for our interim and annual consolidated financial statements commencing January 1, 2020. These changes did not have a material impact on our financial results and are not expected to have a material impact in the future.
•
Changes to the Conceptual Framework, seeking to provide improvements to concepts surrounding various financial reporting considerations and existing IFRS standards.
•
Amendments to IAS 1, Presentation of Financial Statements and IAS 8, Accounting Policies, Changes in Accounting Estimates and Errors, clarifying the definition of "material".

Rogers Communications Inc.
27
Second Quarter 2020



•
Amendments to IFRS 9, Financial Instruments (IFRS 9), IAS 39, Financial Instruments: Recognition and Measurement (IAS 39), and IFRS 7, Financial Instruments: Disclosures (IFRS 7), Interest Rate Benchmark Reform, detailing the fundamental reform of major interest rate benchmarks being undertaken globally to replace or redefine Inter-Bank Offered Rates (IBORs) with alternative nearly risk-free benchmark rates (referred to as "IBOR reform"). There is significant uncertainty over the timing of when the replacements for IBORs will be effective and what those replacements will be. We will actively monitor the IBOR reform and consider circumstances as we renew or enter into new financial instrument contracts.

Recent accounting pronouncements not yet adopted
The IASB has issued the following new standard that will become effective in a future year and is not expected to have an impact on our consolidated financial statements in future periods.
•
IFRS 17, Insurance Contracts, a replacement of IFRS 4, Insurance Contracts, that aims to provide consistency in the application of accounting for insurance contracts.

Transactions with related parties
We have entered into business transactions with Transcontinental Inc., a company that provides us with printing services. Isabelle Marcoux, C.M., is chair of the board of Transcontinental Inc. and a Director of RCI.

We recognize these transactions at the amounts agreed to by the related parties, which are also reviewed by the Audit and Risk Committee. The amounts owing for these services are unsecured, interest-free, and due for payment in cash within one month of the date of the transaction. Below is a summary of the related party activity for the business transactions described above.
  
Three months ended June 30
 
 
Six months ended June 30
 
(In millions of dollars)
2020

2019

 
2020

2019

 
 
 
 
 
 
Printing services
—

3

 
1

4


We have also entered into certain transactions with our controlling shareholder and companies it controls. These transactions are subject to formal agreements approved by the Audit and Risk Committee. Total amounts paid to these related parties generally reflect the charges to Rogers for occasional business use of aircraft, net of other administrative services, and were less than $1 million for the three and six months ended June 30, 2020 and 2019.

Controls and procedures
There have been no changes in our internal controls over financial reporting this quarter that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

Seasonality
Our operating results generally vary from quarter to quarter as a result of changes in general economic conditions and seasonal fluctuations, among other things, in each of our reportable segments. This means our results in one quarter are not necessarily indicative of how we will perform in a future quarter. Wireless, Cable, and Media each have unique seasonal aspects to, and certain other historical trends in, their businesses. For specific discussions of the seasonal trends affecting our reportable segments, refer to our 2019 Annual MD&A.

Estimation Uncertainty
On March 11, 2020, the World Health Organization recognized the outbreak of COVID-19 as a pandemic and we have been closely monitoring related developments and the impact on our business. Due to the uncertainty surrounding the duration and potential outcomes of the COVID-19 pandemic, and the unpredictable and continuously changing impacts and related government responses, there is more uncertainty associated with our assumptions, expectations, and estimates. We believe the most significantly affected estimates are related to our expected credit losses and allowance for doubtful accounts and as a result, we have recognized an incremental $90 million in bad debt expense on our accounts receivable, financing receivables, and contract assets based on changing economic conditions.


Rogers Communications Inc.
28
Second Quarter 2020



Key Performance Indicators

We measure the success of our strategy using a number of key performance indicators that are defined and discussed in our 2019 Annual MD&A and this MD&A. 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);
•
Wireless subscriber churn (churn);
•
Wireless blended average billings per user (ABPU);

 
•
Wireless blended average revenue per user
(ARPU);
•
Cable average revenue per account (ARPA);
•
Cable customer relationships;
•
Cable market penetration (penetration);
•
capital intensity; and
•
total service revenue.

Effective January 1, 2020, we updated the key performance indicators we present for our Cable segment to align our external reporting with the focus of our internal business strategy as a result of the convergence of technologies used to deliver Internet and television services, including the continued adoption of Ignite TV. We have begun disclosing Cable average revenue per account (ARPA), customer relationships, and market penetration as defined below. Additionally, we have amended the definition of our subscriber counts for Television to include only Ignite TV and renamed the metric accordingly as a result of shifting our product offering to focus on IPTV. Finally, we have ceased reporting Phone subscribers and total service units as our Phone product is increasingly being bundled with our Internet and Television products for a very low incremental cost. These changes have been made to align our external disclosure with the focus of the business and our strategy. Our updated definitions are as follows:

SUBSCRIBER COUNTS
Subscriber count (Cable)
•
Cable Ignite TV and Internet subscribers are represented by a dwelling unit.
•
When there is more than one unit in a single dwelling, such as an apartment building, each tenant with cable service is counted as an individual subscriber, whether the service is invoiced separately or included in the tenant's rent. Institutional units, such as hospitals or hotels, are each considered one subscriber.
•
Cable Ignite TV and Internet subscribers include only those subscribers who have service installed and operating, and who are being billed accordingly.
•
Subscriber counts exclude certain business services delivered over our fibre network and data centre infrastructure, and circuit-switched local and long distance voice services and legacy data services where access is delivered using leased third-party network elements and tariffed ILEC services.

CUSTOMER RELATIONSHIPS
Customer relationships are represented by dwelling units where at least one of our Cable services (i.e. Internet, legacy television or Ignite TV, and/or home phone) are installed and operating, and the service or services are billed accordingly. When there is more than one unit in one dwelling, such as an apartment building, each tenant with at least one of our Cable services is counted as an individual customer relationship, whether the service is invoiced separately or included in the tenant's rent. Institutional units, like hospitals or hotels, are each considered one customer relationship.

AVERAGE REVENUE PER ACCOUNT (CABLE)
Average revenue per account (ARPA) measures total average spending by a single customer account on Cable products. We use it to identify trends and measure our success in attracting and retaining multiple-service accounts. We calculate ARPA by dividing Cable service revenue by the average total number of customer relationships for the same period.

MARKET PENETRATION
Market penetration (penetration) measures our success at attracting new households to our brands and products within our network footprint. Market penetration is calculated by dividing customer relationships by homes passed. An increasing market penetration rate reflects more new customer relationships than new homes passed.


Rogers Communications Inc.
29
Second Quarter 2020



Non-GAAP Measures and Related Performance Measures

We use the following non-GAAP measures and related performance 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 or related performance 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
●
 
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; 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; current portion of lease liabilities; lease liabilities; 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.


Rogers Communications Inc.
30
Second Quarter 2020



Reconciliation of adjusted EBITDA
  
Three months ended June 30
 
 
Six months ended June 30
 
(In millions of dollars)
2020

2019

 
2020

2019

 
 
 
 
 
 
Net income
279

591

 
631

982

Add:
 
 
 
 
 
Income tax expense
102

186

 
219

325

Finance costs
214

206

 
434

395

Depreciation and amortization
650

614

 
1,289

1,223

 
 
 
 
 
 
EBITDA
1,245

1,597

 
2,573

2,925

Add (deduct):
 
 
 
 
 
Other expense (income)
7

(1
)
 
(7
)
(14
)
Restructuring, acquisition and other
42

39

 
63

59

 
 
 
 
 
 
Adjusted EBITDA
1,294

1,635

 
2,629

2,970


Reconciliation of adjusted EBITDA margin
  
Three months ended June 30
 
 
Six months ended June 30
 
(In millions of dollars, except margins)
2020

2019

 
2020

2019

 
 
 
 
 
 
Adjusted EBITDA
1,294

1,635

 
2,629

2,970

Divided by: total revenue
3,155

3,780

 
6,571

7,367

 
 
 
 
 
 
Adjusted EBITDA margin
41.0
%
43.3
%
 
40.0
%
40.3
%

Reconciliation of adjusted net income
  
Three months ended June 30
 
 
Six months ended June 30
 
(In millions of dollars)
2020

2019

 
2020

2019

 
 
 
 
 
 
Net income
279

591

 
631

982

Add (deduct):
 
 
 
 
 
Restructuring, acquisition and other
42

39

 
63

59

Income tax impact of above items
(11
)
(10
)
 
(17
)
(16
)
Income tax adjustment, legislative tax change
—

(23
)
 
—

(23
)
 
 
 
 
 
 
Adjusted net income
310

597

 
677

1,002



Rogers Communications Inc.
31
Second Quarter 2020



Reconciliation of adjusted earnings per share
 
Three months ended June 30
 
 
Six months ended June 30
 
(In millions of dollars, except per share amounts; number of shares outstanding in millions)
2020

2019

 
2020

2019

 
 
 
 
 
 
Adjusted basic earnings per share:
 
 
 
 
 
Adjusted net income
310

597

 
677

1,002

Divided by:
 
 
 
 
 
Weighted average number of shares outstanding
505

512

 
505

513

 
 
 
 




Adjusted basic earnings per share

$0.61


$1.17

 

$1.34


$1.95

 
 
 
 
 
 
Adjusted diluted earnings per share:
 
 
 
 
 
Diluted adjusted net income
304

595

 
660

1,001

Divided by:
 
 
 
 
 
Diluted weighted average number of shares outstanding
506

514

 
506

515

 
 
 
 
 
 
Adjusted diluted earnings per share

$0.60


$1.16

 

$1.30


$1.94


Reconciliation of free cash flow
  
Three months ended June 30
 
 
Six months ended June 30
 
(In millions of dollars)
2020

2019

 
2020

2019

 
 
 
 
 
 
Cash provided by operating activities
1,429

1,057

 
2,388

2,055

Add (deduct):
 
 
 
 
 
Capital expenditures
(559
)
(742
)
 
(1,152
)
(1,359
)
Interest on borrowings, net of capitalized interest
(192
)
(183
)
 
(379
)
(351
)
Interest paid
198

139

 
398

359

Restructuring, acquisition and other
42

39

 
63

59

Program rights amortization
(16
)
(22
)
 
(38
)
(41
)
Net change in contract asset balances
(390
)
20

 
(716
)
29

Net change in financing receivable balances
291

—

 
550

—

Change in non-cash operating working capital items
(355
)
209

 
(169
)
222

Other adjustments
20

92

 
(15
)
41

 




 




Free cash flow
468

609

 
930

1,014



Rogers Communications Inc.
32
Second Quarter 2020



Reconciliation of adjusted net debt and debt leverage ratio
 
As at
June 30

As at
December 31

(In millions of dollars)
2020

2019

 
 
 
Current portion of long-term debt
1,450

—

Long-term debt
17,558

15,967

Deferred transaction costs and discounts
178

163

 
19,186

16,130

Add (deduct):
 
 
Net debt derivative assets
(2,808
)
(1,383
)
Credit risk adjustment related to net debt derivative assets
(152
)
(31
)
Short-term borrowings
650

2,238

Current portion of lease liabilities
271

230

Lease liabilities
1,574

1,495

Cash and cash equivalents
(1,795
)
(494
)
 
 
 
Adjusted net debt
16,926

18,185

 
As at
June 30

As at
December 31

(In millions of dollars, except ratios)
2020

2019

 
 
 
Adjusted net debt
16,926

18,185

Divided by: trailing 12-month adjusted EBITDA
5,871

6,212

 
 
 
Debt leverage ratio
2.9

2.9



Rogers Communications Inc.
33
Second Quarter 2020



Other Information

Consolidated financial results - quarterly summary
Below is a summary of our consolidated results for the past eight quarters.
  
2020
 
2019
 
2018 1
(In millions of dollars, except per share amounts)
Q2

Q1

 
Q4

Q3

Q2

Q1

 
Q4

Q3

Revenue
 
 
 
 
 
 
 
 
 
 
Wireless
1,934

2,077

 
2,493

2,324

2,244

2,189

 
2,464

2,331

Cable
966

973

 
987

994

997

976

 
989

983

Media
296

412

 
530

483

591

468

 
540

488

Corporate items and intercompany eliminations
(41
)
(46
)
 
(58
)
(47
)
(52
)
(46
)
 
(55
)
(33
)
Total revenue
3,155

3,416

 
3,952

3,754

3,780

3,587

 
3,938

3,769

Total service revenue 2
2,797

3,049

 
3,244

3,233

3,345

3,143

 
3,276

3,271

 
 
 
 
 
 
 
 
 

 
Adjusted EBITDA 3
 
 
 
 
 
 
 
 

 
Wireless
918

1,026

 
1,064

1,138

1,128

1,015

 
1,028

1,099

Cable
454

453

 
497

499

478

445

 
489

490

Media
(35
)
(85
)
 
22

130

72

(84
)
 
40

73

Corporate items and intercompany eliminations
(43
)
(59
)
 
(53
)
(55
)
(43
)
(41
)
 
(36
)
(42
)
Adjusted EBITDA
1,294

1,335

 
1,530

1,712

1,635

1,335

 
1,521

1,620

Deduct (add):
 
 
 
 
 
 
 
 

 
Depreciation and amortization
650

639

 
638

627

614

609

 
564

558

Gain on disposition of property, plant and equipment
—

—

 
—

—

—

—

 
—

(5
)
Restructuring, acquisition and other
42

21

 
38

42

39

20

 
94

47

Finance costs
214

220

 
230

215

206

189

 
205

176

Other expense (income)
7

(14
)
 
(12
)
16

(1
)
(13
)
 
(26
)
15

Net income before income tax expense
381

469

 
636

812

777

530

 
684

829

Income tax expense
102

117

 
168

219

186

139

 
182

235

Net income
279

352

 
468

593

591

391

 
502

594

 
 
 
 
 
 
 
 
 

 
Earnings per share:
 
 
 
 
 
 
 
 

 
Basic
$0.55


$0.70

 

$0.92


$1.16


$1.15


$0.76

 

$0.97


$1.15

Diluted
$0.54


$0.68

 

$0.92


$1.14


$1.15


$0.76

 

$0.97


$1.15

 
 
 
 
 
 
 
 
 


 
Net income
279

352

 
468

593

591

391

 
502

594

Add (deduct):
 
 
 
 
 
 
 
 

 
Restructuring, acquisition and other
42

21

 
38

42

39

20

 
94

47

Loss on bond forward derivatives
—

—

 
—

—

—

—

 
21

—

Loss on repayment of long-term debt
—

—

 
19

—

—

—

 
—

—

Gain on disposition of property, plant and equipment
—

—

 
—

—

—

—

 
—

(5
)
Income tax impact of above items
(11
)
(6
)
 
(14
)
(13
)
(10
)
(6
)
 
(32
)
(11
)
Income tax adjustment, legislative tax change
—

—

 
—

—

(23
)
—

 
—

—

Adjusted net income 3
310

367

 
511

622

597

405

 
585

625

 
 
 
 
 
 
 
 
 

 
Adjusted earnings per share 3:
 
 
 
 
 
 
 
 

 
Basic
$0.61


$0.73

 

$1.00


$1.22


$1.17


$0.79

 

$1.14


$1.21

Diluted
$0.60


$0.71

 

$1.00


$1.19


$1.16


$0.78

 

$1.13


$1.21

 
 
 
 
 
 
 
 
 


 
Capital expenditures
559

593

 
791

657

742

617

 
828

700

Cash provided by operating activities
1,429

959

 
1,166

1,305

1,057

998

 
1,051

1,304

Free cash flow 3
468

462

 
497

767

609

405

 
471

627

1 
2018 reported figures have not been restated applying IFRS 16. See our 2019 Annual MD&A for more information.
2 
As defined. See "Key Performance Indicators".
3  
Adjusted EBITDA, adjusted net income, 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 and Related Performance Measures" for information about these measures, including how we calculate them and the ratios in which they are used.


Rogers Communications Inc.
34
Second Quarter 2020



Summary of financial information of long-term debt guarantor
Our outstanding public debt, amounts drawn on our $3.3 billion bank credit and letter of credit facilities, and derivatives are unsecured obligations of RCI, as obligor, and RCCI, as either co-obligor or guarantor, as applicable.

The selected unaudited consolidating summary financial information for RCI for the periods identified below, presented with a separate column for: (i) RCI, (ii) RCCI, (iii) our non-guarantor subsidiaries on a combined basis, (iv) consolidating adjustments, and (v) the total consolidated amounts, is set forth as follows:
Three months ended June 30
RCI 1,2
RCCI 1,2
    Non-guarantor    
     subsidiaries 1,2
    Consolidating    
     adjustments 1,2    
Total
(unaudited)
(In millions of dollars)
2020

2019

2020

2019

2020

2019

2020

2019

2020

2019

Selected Statements of Income data measure:
 
 
 
 
 
 
 
 
 
 
Revenue
—

—

2,887

3,224

314

610

(46
)
(54
)
3,155

3,780

Net income (loss)
279

591

251

485

(21
)
65

(230
)
(550
)
279

591

Six months ended June 30
RCI 1,2
RCCI 1,2
    Non-guarantor    
     subsidiaries 1,2
    Consolidating    
     adjustments 1,2    
Total
(unaudited)
(In millions of dollars)
2020

2019

2020

2019

2020

2019

2020

2019

2020

2019

Selected Statements of Income data measure:
 
 
 
 
 
 
 
 
 
 
Revenue
—

—

5,920

6,372

748

1,098

(97
)
(103
)
6,571

7,367

Net income (loss)
631

982

598

861

54

19

(652
)
(880
)
631

982

As at period end
RCI 1,2
RCCI 1,2
    Non-guarantor    
     subsidiaries  1,2
    Consolidating    
     adjustments  1,2    
Total
(unaudited)
(In millions of dollars)
Jun. 30
2020

Dec. 31 2019

Jun. 30
2020

Dec. 31 2019

Jun. 30
2020

Dec. 31 2019

Jun. 30
2020

Dec. 31 2019

Jun. 30
2020

Dec. 31 2019

Selected Statements of Financial Position data measure:
 
 
 
 
 
 
 
 
 
 
Current assets
26,287

26,571

25,283

24,447

9,682

10,552

(55,658
)
(56,453
)
5,594

5,117

Non-current assets
31,791

30,048

24,540

26,342

3,758

3,710

(27,146
)
(28,198
)
32,943

31,902

Current liabilities
25,732

26,550

27,705

29,201

9,254

8,278

(57,272
)
(58,065
)
5,419

5,964

Non-current liabilities
19,584

17,869

4,795

4,938

139

138

(1,373
)
(1,306
)
23,145

21,639

1 
For the purposes of this table, investments in subsidiary companies are accounted for by the equity method.
2 
Amounts recorded in current liabilities and non-current liabilities for RCCI do not include any obligations arising as a result of being a guarantor or co-obligor, as the case may be, under any of RCI's long-term debt.


Rogers Communications Inc.
35
Second Quarter 2020



About Forward-Looking Information

This MD&A 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 MD&A. 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 MD&A.

Our forward-looking information includes forecasts and projections related to the following items, some of which are non-GAAP measures (see "Non-GAAP Measures and Related Performance 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;
•
statements relating to plans we have implemented in response to the COVID-19 pandemic and its impact on us; and
•
all other statements that are not historical facts.

Our conclusions, forecasts, and projections are based 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;
•
industry structure and stability; and
•
the impact of the COVID-19 pandemic on our operations, liquidity, financial condition, or results.

Except as otherwise indicated, this MD&A 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, geopolitical, and other conditions affecting commercial activity;
•
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;
•
external threats, such as epidemics, pandemics, and other public health crises, natural disasters, or cyberattacks, among others; 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.

Rogers Communications Inc.
36
Second Quarter 2020




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 MD&A is qualified by the cautionary statements herein.

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, its operations, and its financial performance and condition, fully review the sections of this MD&A entitled "Updates to Risks and Uncertainties" and "Regulatory Developments" and fully review the sections in our 2019 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 sedar.com, sec.gov, our website, or any other website referenced in this document is not part of or incorporated into this MD&A.

# # #

Rogers Communications Inc.
37
Second Quarter 2020



Exhibit 99.2
rogerslogoa12.jpg




Rogers Communications Inc.



INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Three and six months ended June 30, 2020 and 2019


















Rogers Communications Inc.
1
Second Quarter 2020


Rogers Communications Inc.
Interim Condensed Consolidated Statements of Income
(In millions of Canadian dollars, except per share amounts, unaudited)
  
  
Three months ended June 30
 
 
Six months ended June 30
 
  
Note

2020

2019

 
2020

2019

 
 
 
 
 
 
 
Revenue
4

3,155

3,780

 
6,571

7,367

 
 
 
 
 


Operating expenses:
 
 
 
 


Operating costs
5

1,861

2,145

 
3,942

4,397

Depreciation and amortization
 
650

614

 
1,289

1,223

Restructuring, acquisition and other
6

42

39

 
63

59

Finance costs
7

214

206

 
434

395

Other expense (income)
8

7

(1
)
 
(7
)
(14
)
 
 
 
 
 
 
 
Income before income tax expense
 
381

777

 
850

1,307

Income tax expense
 
102

186

 
219

325

 
 
 
 
 




Net income for the period
 
279

591

 
631

982

 
 
 
 
 
 
 
Earnings per share:
 
 
 
 
 
 
Basic
9

$0.55
$1.15
 
$1.25
$1.91
Diluted
9

$0.54
$1.15
 
$1.21
$1.90
The accompanying notes are an integral part of the interim condensed consolidated financial statements.


Rogers Communications Inc.
2
Second Quarter 2020


Rogers Communications Inc.
Interim Condensed Consolidated Statements of Comprehensive Income
(In millions of Canadian dollars, unaudited)
  
Three months ended June 30
 
 
Six months ended June 30
 
  
2020

2019

 
2020

2019

 
 
 
 
 
 
Net income for the period
279

591

 
631

982

 
 
 
 
 
 
Other comprehensive (loss) income:
 
 
 
 
 
 
 
 
 
 
 
Items that will not be reclassified to income:
 
 
 
 
 
Equity investments measured at fair value through other comprehensive income (FVTOCI):
 
 
 
 
 
(Decrease) increase in fair value
(17
)
124

 
(305
)
436

Related income tax recovery (expense)
2

(16
)
 
40

(60
)
 
 
 
 
 
 
Equity investments measured at FVTOCI
(15
)
108

 
(265
)
376

 
 
 
 
 
 
Items that may subsequently be reclassified to income:
 
 
 
 
 
Cash flow hedging derivative instruments:
 
 
 
 
 
Unrealized (loss) gain in fair value of derivative instruments
(761
)
4

 
1,487

(334
)
Reclassification to net income of loss (gain) on debt derivatives
465

207

 
(535
)
376

Reclassification to net income or property, plant and equipment of gain on expenditure derivatives
(16
)
(18
)
 
(36
)
(34
)
Reclassification to net income for accrued interest
(16
)
(12
)
 
(29
)
(24
)
Related income tax recovery (expense)
97

(24
)
 
(194
)
40

 
 
 
 
 
 
Cash flow hedging derivative instruments
(231
)
157

 
693

24

 
 
 
 
 
 
Share of other comprehensive (loss) income of equity-accounted investments, net of tax
(6
)
(3
)
 
3

(6
)
 
 
 
 
 
 
Other comprehensive (loss) income for the period
(252
)
262

 
431

394

 
 
 
 
 
 
Comprehensive income for the period
27

853

 
1,062

1,376

The accompanying notes are an integral part of the interim condensed consolidated financial statements.
 

Rogers Communications Inc.
3
Second Quarter 2020


Rogers Communications Inc.
Interim Condensed Consolidated Statements of Financial Position
(In millions of Canadian dollars, unaudited)
 
 
As at
June 30

As at
December 31

  
Note

2020

2019

 
 
 
 
 
 
 
 
Assets
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
 
1,795

494

Accounts receivable
 
1,621

2,304

Inventories
 
319

460

Current portion of contract assets
 
910

1,234

Other current assets
 
855

524

Current portion of derivative instruments
10

94

101

Total current assets
 
5,594

5,117

 
 
 
 
Property, plant and equipment
 
14,048

13,934

Intangible assets
 
8,883

8,905

Investments
11

2,520

2,830

Derivative instruments
10

2,771

1,478

Contract assets
 
252

557

Other long-term assets
 
534

275

Goodwill
 
3,935

3,923

 
 
 
 
Total assets
 
38,537

37,019

 
 
 
 
Liabilities and shareholders' equity
 
 
 
Current liabilities:
 
 
 
Short-term borrowings
12

650

2,238

Accounts payable and accrued liabilities
 
2,340

3,033

Income tax payable
 
299

48

Other current liabilities
 
103

141

Contract liabilities
 
297

224

Current portion of long-term debt
13

1,450

—

Current portion of lease liabilities
14

271

230

Current portion of derivative instruments
10

9

50

Total current liabilities
 
5,419

5,964

 
 


 
Provisions
 
36

36

Long-term debt
13

17,558

15,967

Derivative instruments
10

12

90

Lease liabilities
14

1,574

1,495

Other long-term liabilities
 
567

614

Deferred tax liabilities
 
3,398

3,437

Total liabilities
 
28,564

27,603

 
 


 
Shareholders' equity
15

9,973

9,416

 
 


 
Total liabilities and shareholders' equity
 
38,537

37,019

 
 
 
 
Subsequent event
15

 
 
Contingent liabilities
18

 
 
The accompanying notes are an integral part of the interim condensed consolidated financial statements.


Rogers Communications Inc.
4
Second Quarter 2020


Rogers Communications Inc.
Interim Condensed Consolidated Statements of Changes in Shareholders' Equity
(In millions of Canadian dollars, except number of shares, unaudited)
 
Class A
Voting Shares
Class B
Non-Voting Shares
 
 
 
 
 
Six months ended June 30, 2020
Amount

Number
of shares
(000s)

Amount

Number
of shares
(000s)

Retained
earnings

FVTOCI investment reserve

Hedging
reserve

Equity
investment reserve

Total
shareholders'
equity

Balances, January 1, 2020
71

111,154

397

393,771

7,419

1,265

263

1

9,416

Net income for the period
—

—

—

—

631

—

—

—

631

 
 
 
 
 
 
 
 
 
 
Other comprehensive income (loss):
 
 
 
 
 
 
 
 
 
FVTOCI investments, net of tax
—

—

—

—

—

(265
)
—

—

(265
)
Derivative instruments accounted for as hedges, net of tax
—

—

—

—

—

—

693

—

693

Share of equity-accounted investments, net of tax
—

—

—

—

—

—

—

3

3

Total other comprehensive income (loss)
—

—

—

—

—

(265
)
693

3

431

Comprehensive income for the period
—

—

—

—

631

(265
)
693

3

1,062

 
 
 
 
 
 
 
 
 
 
Reclassification to retained earnings for disposition of FVTOCI investments
—

—

—

—

4

(4
)
—

—

—

 
 
 
 
 
 
 
 
 
 
Transactions with shareholders recorded directly in equity:
 
 
 
 
 
 
 
 
 
Dividends declared
—

—

—

—

(505
)
—

—

—

(505
)
Total transactions with shareholders
—

—

—

—

(505
)
—

—

—

(505
)
 
 
 
 
 
 
 
 
 
 
Balances, June 30, 2020
71

111,154

397

393,771

7,549

996

956

4

9,973

 
Class A
Voting Shares
Class B
Non-Voting Shares
 
 
 
 
 
Six months ended June 30, 2019
Amount

Number
of shares
(000s)

Amount

Number
of shares
(000s)

Retained
earnings

FVTOCI investment reserve

Hedging
reserve

Equity
investment
reserve

Total
shareholders'
equity

Balances, January 1, 2019
71

111,155

406

403,657

7,159

636

(125
)
9

8,156

Net income for the period
—

—

—

—

982

—

—

—

982

 
 
 
 
 
 
 
 
 
 
Other comprehensive income (loss):
 
 
 
 
 
 
 
 
 
FVTOCI investments, net of tax
—

—

—

—

—

376

—

—

376

Derivative instruments accounted for as hedges, net of tax
—

—

—

—

—

—

24

—

24

Share of equity-accounted investments, net of tax
—

—

—

—

—

—

—

(6
)
(6
)
Total other comprehensive income (loss)
—

—

—

—

—

376

24

(6
)
394

Comprehensive income for the period
—

—

—

—

982

376

24

(6
)
1,376

 
 
 
 
 
 
 
 
 
 
Reclassification to retained earnings for disposition of FVTOCI investments
—

—

—

—

13

(13
)
—

—

—

 
 
 
 
 
 
 
 
 
 
Transactions with shareholders recorded directly in equity:
 
 
 
 
 
 
 
 
 
Repurchase of Class B Non-Voting Shares
—

—

(3
)
(2,898
)
(202
)
—

—

—

(205
)
Dividends declared
—

—

—

—

(513
)
—

—

—

(513
)
Share class exchange
—

(1
)
—

1

—

—

—

—

—

Total transactions with shareholders
—

(1
)
(3
)
(2,897
)
(715
)
—

—

—

(718
)
 
 
 
 
 
 
 
 
 
 
Balances, June 30, 2019
71

111,154

403

400,760

7,439

999

(101
)
3

8,814

The accompanying notes are an integral part of the interim condensed consolidated financial statements.


Rogers Communications Inc.
5
Second Quarter 2020


Rogers Communications Inc.
Interim Condensed Consolidated Statements of Cash Flows
(In millions of Canadian dollars, unaudited)
  
  
Three months ended June 30
 
 
Six months ended June 30
 
  
Note

2020

2019

 
2020

2019

Operating activities:
 
 
 
 
 
 
Net income for the period
 
279

591

 
631

982

Adjustments to reconcile net income to cash provided by operating activities:
 
 
 
 


Depreciation and amortization
 
650

614

 
1,289

1,223

Program rights amortization
 
16

22

 
38

41

Finance costs
7

214

206

 
434

395

Income tax expense
 
102

186

 
219

325

Post-employment benefits contributions, net of expense
 
(80
)
(123
)
 
(68
)
(115
)
Net change in contract asset balances
 
390

(20
)
 
716

(29
)
Net change in financing receivable balances
4

(291
)
—

 
(550
)
—

Other
 
67

30

 
76

60

Cash provided by operating activities before changes in non-cash working capital items, income taxes paid, and interest paid
 
1,347

1,506

 
2,785

2,882

Change in non-cash operating working capital items
19

355

(209
)
 
169

(222
)
Cash provided by operating activities before income taxes paid and interest paid
 
1,702

1,297

 
2,954

2,660

Income taxes paid
 
(75
)
(101
)
 
(168
)
(246
)
Interest paid
 
(198
)
(139
)
 
(398
)
(359
)
 
 
 
 
 
 
 
Cash provided by operating activities
 
1,429

1,057

 
2,388

2,055

 
 
 
 
 
 
 
Investing activities:
 
 
 
 
 
 
Capital expenditures
 
(559
)
(742
)
 
(1,152
)
(1,359
)
Additions to program rights
 
(7
)
(7
)
 
(22
)
(14
)
Changes in non-cash working capital related to capital expenditures and intangible assets
 
(25
)
26

 
(154
)
(81
)
Acquisitions and other strategic transactions, net of cash acquired
11

—

(1,731
)
 
—

(1,731
)
Other
 
(9
)
(7
)
 
(28
)
(10
)
 
 
 
 
 
 
 
Cash used in investing activities
 
(600
)
(2,461
)
 
(1,356
)
(3,195
)
 
 
 
 
 
 
 
Financing activities:
 
 
 
 
 
 
Net repayment of short-term borrowings
12

(310
)
(642
)
 
(1,727
)
(212
)
Net (repayment) issuance of long-term debt
13

(345
)
2,676

 
2,540

2,276

Net (payments) proceeds on settlement of debt derivatives and forward contracts
10

(10
)
(93
)
 
80

(104
)
Principal payments of lease liabilities
14

(48
)
(38
)
 
(98
)
(79
)
Transaction costs incurred
13

(5
)
(33
)
 
(21
)
(33
)
Repurchase of Class B Non-Voting Shares
15

—

(69
)
 
—

(205
)
Dividends paid
 
(252
)
(257
)
 
(505
)
(504
)
 
 
 
 
 
 
 
Cash (used in) provided by financing activities
 
(970
)
1,544

 
269

1,139

 
 
 
 
 
 
 
Change in cash and cash equivalents
 
(141
)
140

 
1,301

(1
)
Cash and cash equivalents, beginning of period
 
1,936

264

 
494

405

 
 
 
 
 
 
 
Cash and cash equivalents, end of period
 
1,795

404

 
1,795

404

The accompanying notes are an integral part of the interim condensed consolidated financial statements.


Rogers Communications Inc.
6
Second Quarter 2020


Notes to the Interim Condensed Consolidated Financial Statements (unaudited)


NOTE 1: NATURE OF THE BUSINESS

Rogers Communications Inc. is a diversified Canadian communications and media company. Substantially all of our operations and sales are in Canada. RCI is incorporated in Canada and its registered office is located at 333 Bloor Street East, Toronto, Ontario, M4W 1G9. RCI's shares are publicly traded on the Toronto Stock Exchange (TSX: RCI.A and RCI.B) and on the New York Stock Exchange (NYSE: RCI).

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.

We report our results of operations in three reportable segments. Each segment and the nature of its business is as follows:
Segment
Principal activities
Wireless
Wireless telecommunications operations for Canadian consumers and businesses.
Cable
Cable 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 business, public sector, and carrier wholesale markets.
Media
A diversified portfolio of media properties, including sports media and entertainment, television and radio broadcasting, specialty channels, multi-platform shopping, and digital media.

During the six months ended June 30, 2020, Wireless and Cable were operated by our wholly owned subsidiary, Rogers Communications Canada Inc. (RCCI), and certain other wholly owned subsidiaries. Media was operated by our wholly owned subsidiary, Rogers Media Inc., and its subsidiaries.

Our operating results are subject to seasonal fluctuations that materially impact quarter-to-quarter operating results and thus, one quarter's operating results are not necessarily indicative of a subsequent quarter's operating results. These fluctuations are described in note 1 to our annual audited consolidated financial statements for the year ended December 31, 2019 (2019 financial statements).

Statement of Compliance
We prepared our interim condensed consolidated financial statements for the three and six months ended June 30, 2020 (second quarter 2020 interim financial statements) in accordance with International Accounting Standard 34, Interim Financial Reporting, as issued by the International Accounting Standards Board (IASB), following the same accounting policies and methods of application as those disclosed in our 2019 financial statements with the exception of new accounting policies that were adopted on January 1, 2020 as described in note 2. These second quarter 2020 interim financial statements were approved by RCI's Board of Directors (the Board) on July 21, 2020.

NOTE 2: SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation
The notes presented in these second quarter 2020 interim financial statements include only significant transactions and changes occurring for the six months since our year-end of December 31, 2019 and do not include all disclosures required by International Financial Reporting Standards (IFRS) as issued by the IASB for annual financial statements. These second quarter 2020 interim financial statements should be read in conjunction with the 2019 financial statements.

All dollar amounts are in Canadian dollars unless otherwise stated.

Estimation Uncertainty
On March 11, 2020, the World Health Organization recognized the outbreak of COVID-19 as a pandemic and we have been closely monitoring related developments and the impact on our business. Due to the uncertainty surrounding the duration and potential outcomes of the COVID-19 pandemic, and the unpredictable and continuously changing impacts and related government responses, there is more uncertainty associated with our assumptions, expectations, and estimates. We believe the most significantly affected estimates are related to our expected credit losses and allowance for doubtful accounts and as a result, we have recognized an incremental $90 million in bad debt expense on our accounts receivable, financing receivables, and contract assets based on changing economic conditions.

Rogers Communications Inc.
7
Second Quarter 2020


Notes to the Interim Condensed Consolidated Financial Statements (unaudited)

New Accounting Pronouncements Adopted in 2020
We adopted the following accounting standards and amendments that were effective for our interim and annual consolidated financial statements commencing January 1, 2020. These changes did not have a material impact on our financial results and are not expected to have a material impact in the future.
•
Changes to the Conceptual Framework, seeking to provide improvements to concepts surrounding various financial reporting considerations and existing IFRS standards.
•
Amendments to IAS 1, Presentation of Financial Statements and IAS 8, Accounting Policies, Changes in Accounting Estimates and Errors, clarifying the definition of "material".
•
Amendments to IFRS 9, Financial Instruments (IFRS 9), IAS 39, Financial Instruments: Recognition and Measurement (IAS 39), and IFRS 7, Financial Instruments: Disclosures (IFRS 7), Interest Rate Benchmark Reform, detailing the fundamental reform of major interest rate benchmarks being undertaken globally to replace or redefine Inter-Bank Offered Rates (IBORs) with alternative nearly risk-free benchmark rates (referred to as "IBOR reform"). There is significant uncertainty over the timing of when the replacements for IBORs will be effective and what those replacements will be. We will actively monitor the IBOR reform and consider circumstances as we renew or enter into new financial instrument contracts.

Recent Accounting Pronouncements Not Yet Adopted
The IASB has issued the following new standard that will become effective in a future year and is not expected to have an impact on our consolidated financial statements in future periods.
•
IFRS 17, Insurance Contracts, a replacement of IFRS 4, Insurance Contracts, that aims to provide consistency in the application of accounting for insurance contracts.

NOTE 3: SEGMENTED INFORMATION

Our reportable segments are Wireless, Cable, and Media. All three segments operate substantially in Canada. Corporate items and eliminations include our interests in businesses that are not reportable operating segments, corporate administrative functions, and eliminations of inter-segment revenues and costs. We follow the same accounting policies for our segments as those described in note 2 of our 2019 financial statements. Segment results include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. We account for transactions between reportable segments in the same way we account for transactions with external parties, however eliminate them on consolidation.

The Chief Executive Officer and Chief Financial Officer of RCI are, collectively, our chief operating decision maker and regularly review our operations and performance by segment. They review adjusted EBITDA as the key measure of profit for the purpose of assessing performance of each segment and to make decisions about the allocation of resources. Adjusted EBITDA is defined as income before depreciation and amortization; (gain) loss on disposition of property, plant and equipment; restructuring, acquisition and other; finance costs; other (income) expense; and income tax expense.

Information by Segment
Three months ended June 30, 2020
Note

Wireless

Cable

Media

Corporate
items and
eliminations

Consolidated
totals

(In millions of dollars)
 
 
 
 
 
 
 
Revenue
4

1,934

966

296

(41
)
3,155

 
 
 
 
 
 
 
Operating costs
5

1,016

512

331

2

1,861

 
 
 
 
 
 
 
Adjusted EBITDA
 
918

454

(35
)
(43
)
1,294

 
 
 
 
 
 
 
Depreciation and amortization
 
 
 
 
 
650

Restructuring, acquisition and other
6

 
 
 
 
42

Finance costs
7

 
 
 
 
214

Other expense
8

 
 
 
 
7

 
 
 
 
 
 
 
Income before income taxes
 
 
 
 
 
381


Rogers Communications Inc.
8
Second Quarter 2020


Notes to the Interim Condensed Consolidated Financial Statements (unaudited)

Three months ended June 30, 2019
Note

Wireless

Cable

Media

Corporate
items and
eliminations

Consolidated
totals

(In millions of dollars)
 
 
 
 
 
 
 
Revenue
4

2,244

997

591

(52
)
3,780

 
 
 
 
 
 
 
Operating costs
5

1,116

519

519

(9
)
2,145

 
 
 
 
 
 
 
Adjusted EBITDA
 
1,128

478

72

(43
)
1,635

 
 
 
 
 
 
 
Depreciation and amortization
 
 
 
 
 
614

Restructuring, acquisition and other
6

 
 
 
 
39

Finance costs
7

 
 
 
 
206

Other income
8

 
 
 
 
(1
)
 
 
 
 
 
 
 
Income before income taxes
 
 
 
 
 
777

Six months ended June 30, 2020
Note

Wireless

Cable

Media

Corporate
items and
eliminations

Consolidated
totals

(In millions of dollars)
 
 
 
 
 
 
 
Revenue
4

4,011

1,939

708

(87
)
6,571

 
 
 
 
 
 
 
Operating costs
5

2,067

1,032

828

15

3,942

 
 
 
 
 
 
 
Adjusted EBITDA
 
1,944

907

(120
)
(102
)
2,629

 
 
 
 
 
 
 
Depreciation and amortization
 
 
 
 
 
1,289

Restructuring, acquisition and other
6

 
 
 
 
63

Finance costs
7

 
 
 
 
434

Other income
8

 
 
 
 
(7
)
 
 
 
 
 
 
 
Income before income taxes
 
 
 
 
 
850

Six months ended June 30, 2019
Note

Wireless

Cable

Media

Corporate
items and
eliminations

Consolidated
totals

(In millions of dollars)
 
 
 
 
 
 
 
Revenue
4

4,433

1,973

1,059

(98
)
7,367

 
 
 
 
 
 
 
Operating costs
5

2,290

1,050

1,071

(14
)
4,397

 
 
 
 
 
 
 
Adjusted EBITDA
 
2,143

923

(12
)
(84
)
2,970

 
 
 
 
 
 
 
Depreciation and amortization
 
 
 
 
 
1,223

Restructuring, acquisition and other
6

 
 
 
 
59

Finance costs
7

 
 
 
 
395

Other income
8

 
 
 
 
(14
)
 
 
 
 
 
 
 
Income before income taxes
 
 
 
 
 
1,307



Rogers Communications Inc.
9
Second Quarter 2020


Notes to the Interim Condensed Consolidated Financial Statements (unaudited)

NOTE 4: REVENUE

Disaggregation of Revenue
 
Three months ended June 30
 
 
Six months ended June 30
 
(In millions of dollars)
2020

2019

 
2020

2019

 
 
 
 
 
 
Wireless
 
 
 
 
 
Service revenue
1,578

1,813

 
3,290

3,560

Equipment revenue
356

431

 
721

873

 
 
 
 
 
 
Total Wireless
1,934

2,244

 
4,011

4,433

 
 
 
 
 
 
Cable
 
 
 
 
 
Service revenue
964

993

 
1,935

1,967

Equipment revenue
2

4

 
4

6

 
 
 
 
 
 
Total Cable
966

997

 
1,939

1,973

 
 
 
 
 
 
Total Media
296

591

 
708

1,059

 
 
 
 
 
 
Corporate items and intercompany eliminations
(41
)
(52
)
 
(87
)
(98
)
 
 
 
 
 
 
Total revenue
3,155

3,780

 
6,571

7,367


Financing Receivables
Financing receivables represent amounts owed to us under device or accessory financing agreements that have not yet been billed. Our financing receivable balances are included in "other current assets" (when they expect to be billed and collected within twelve months) and "other long-term assets" on our interim condensed consolidated statements of financial position. Below is a breakdown of the financing receivable balances.
 
As at
June 30

As at
December 31

(In millions of dollars)
2020

2019

 
 
 
Current financing receivables
373

72

Long-term financing receivables
289

40

 
 
 
Total financing receivables
662

112


NOTE 5: OPERATING COSTS
  
Three months ended June 30
 
 
Six months ended June 30
 
(In millions of dollars)
2020

2019

 
2020

2019

 
 
 
 
 
 
Cost of equipment sales
339

473

 
717

979

Merchandise for resale
62

53

 
116

109

Other external purchases
1,017

1,096

 
2,149

2,243

Employee salaries, benefits, and stock-based compensation
443

523

 
960

1,066

 
 
 
 
 
 
Total operating costs
1,861

2,145

 
3,942

4,397


NOTE 6: RESTRUCTURING, ACQUISITION AND OTHER

During the three and six months ended June 30, 2020, we incurred $42 million and $63 million (2019 - $39 million and $59 million), respectively, in restructuring, acquisition and other expenses. In 2020, these were primarily incremental and temporary employee compensation costs incurred in response to the COVID-19 pandemic. In 2019, these costs were primarily severance costs associated with the targeted restructuring of our employee base and contract termination and other costs.


Rogers Communications Inc.
10
Second Quarter 2020


Notes to the Interim Condensed Consolidated Financial Statements (unaudited)

NOTE 7: FINANCE COSTS
  
 
Three months ended June 30
 
 
Six months ended June 30
 
(In millions of dollars)
Note
2020

2019

 
2020

2019

 
 
 
 
 
 
 
Interest on borrowings 1
 
197

187

 
389

360

Interest on lease liabilities
14
18

15

 
35

29

Interest on post-employment benefits liability
 
4

3

 
7

6

(Gain) loss on foreign exchange
 
(23
)
(27
)
 
109

(72
)
Change in fair value of derivative instruments
 
17

29

 
(109
)
73

Capitalized interest
 
(5
)
(4
)
 
(10
)
(9
)
Other
 
6

3

 
13

8

 
 
 
 
 
 
 
Total finance costs
 
214

206

 
434

395

1 
Interest on borrowings includes interest on short-term borrowings and on long-term debt.

NOTE 8: OTHER EXPENSE (INCOME)
  
Three months ended June 30
 
 
Six months ended June 30
 
(In millions of dollars)
2020

2019

 
2020

2019

 
 
 
 
 
 
Losses from associates and joint ventures
15

9

 
12

3

Other investment income
(8
)
(10
)
 
(19
)
(17
)
 
 
 
 
 
 
Total other expense (income)
7

(1
)
 
(7
)
(14
)

NOTE 9: EARNINGS PER SHARE
  
Three months ended June 30
 
 
Six months ended June 30
 
(In millions of dollars, except per share amounts)
2020

2019

 
2020

2019

 
 
 
 
 
 
Numerator (basic) - Net income for the period
279

591

 
631

982

 
 
 
 
 
 
Denominator - Number of shares (in millions):
 
 
 
 
 
Weighted average number of shares outstanding - basic
505

512

 
505

513

Effect of dilutive securities (in millions):
 
 
 
 
 
Employee stock options and restricted share units
1

2

 
1

2

 
 
 
 
 
 
Weighted average number of shares outstanding - diluted
506

514

 
506

515

 
 
 
 
 
 
Earnings per share:
 
 
 
 
 
Basic

$0.55

$1.15
 
$1.25
$1.91
Diluted

$0.54

$1.15
 
$1.21
$1.90

For the three and six months ended June 30, 2020 and 2019, accounting for outstanding share-based payments using the equity-settled method for stock-based compensation was determined to be more dilutive than using the cash-settled method. As a result, net income for the three and six months ended June 30, 2020 was reduced by $6 million and $17 million (2019 - $2 million and $1 million), respectively, in the diluted earnings per share calculation.

A total of 3,895,948 and 3,182,842 options were out of the money for the three and six months ended June 30, 2020 (2019 - 1,040,170 and 1,040,170), respectively. These options were excluded from the calculation of the effect of dilutive securities because they were anti-dilutive.


Rogers Communications Inc.
11
Second Quarter 2020


Notes to the Interim Condensed Consolidated Financial Statements (unaudited)

NOTE 10: FINANCIAL INSTRUMENTS

Derivative Instruments
We use derivative instruments to manage financial risks related to our business activities. These include debt derivatives, expenditure derivatives, and equity derivatives. We only use derivatives to manage risk and not for speculative purposes.

All of our currently outstanding debt derivatives related to our senior notes, senior debentures, and lease liabilities and expenditure derivatives have been designated as hedges for accounting purposes.

Debt derivatives
We use cross-currency interest rate agreements (debt derivatives) to manage risks from fluctuations in foreign exchange rates and interest rates associated with our US dollar-denominated senior notes and debentures, lease liabilities, credit facility borrowings, and US dollar-denominated commercial paper (US CP) borrowings (see note 12). We designate the debt derivatives related to our senior notes and debentures and lease liabilities 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.

The tables below summarize the debt derivatives we entered into and settled related to our credit facility borrowings and US CP program during the three and six months ended June 30, 2020 and 2019.


Three months ended June 30, 2020
 


Six months ended June 30, 2020
 
(In millions of dollars, except exchange rates)
Notional
 (US$)

Exchange rate

Notional (Cdn$)

 
Notional
(US$)

Exchange
rate

Notional
(Cdn$)

 
 
 
 
 
 
 
 
Credit facilities
 
 
 
 
 
 
 
Debt derivatives entered
—

—

—

 
970

1.428

1,385

Debt derivatives settled
970

1.406

1,364

 
970

1.406

1,364

Net cash paid
 
 
(21
)
 
 
 
(21
)
 
 
 
 
 
 
 
 
US commercial paper program
 
 
 
 
 
 
 
Debt derivatives entered
190

1.405

267

 
2,868

1.333

3,823

Debt derivatives settled
411

1.375

565

 
4,089

1.330

5,438

Net cash received
 
 
11

 
 
 
101



Three months ended June 30, 2019
 


Six months ended June 30, 2019
 
(In millions of dollars, except exchange rates)
Notional
 (US$)

Exchange rate

Notional
(Cdn$)

 
Notional
(US$)

Exchange
rate

Notional
(Cdn$)

 
 
 
 
 
 
 
 
Credit facilities
 
 
 
 
 
 
 
Debt derivatives entered
420

1.336

561

 
420

1.336

561

Debt derivatives settled
420

1.343

564

 
420

1.343

564

Net cash received
 
 
3

 
 
 
3

 
 
 
 
 
 
 
 
US commercial paper program
 
 
 
 
 
 
 
Debt derivatives entered
2,960

1.342

3,972

 
6,818

1.335

9,104

Debt derivatives settled
3,433

1.336

4,586

 
6,969

1.333

9,287

Net cash received
 
 
15

 
 
 
4


As at June 30, 2020, we had nil and nil notional amount of debt derivatives outstanding relating to our credit facility borrowings and US CP program (December 31, 2019 - nil and US$1,226 million), respectively.


Rogers Communications Inc.
12
Second Quarter 2020


Notes to the Interim Condensed Consolidated Financial Statements (unaudited)

Senior notes
Below is a summary of the debt derivatives into which we entered related to senior notes during the six months ended June 30, 2020 and 2019.
(In millions of dollars, except interest rates)
 
 
 
 
 
US$
 
Hedging effect
Effective date
Principal/Notional amount (US$)

Maturity date
Coupon rate

 
Fixed hedged (Cdn$) interest rate 1

Equivalent (Cdn$)

 
 
 
 
 
 
 
2020 issuances
 
 
 
 
 
 
June 22, 2020
750

2022
USD LIBOR + 0.60%

 
0.955
%
1,019

 
 
 
 
 
 
 
2019 issuances
 
 
 
 
 
 
April 30, 2019
1,250

2049
4.350
%
 
4.173
%
1,676

1 
Converting from a fixed US$ coupon rate to a weighted average Cdn$ fixed rate.

As at June 30, 2020, we had US$9,050 million (December 31, 2019 - US$8,300 million) in US dollar-denominated senior notes and debentures, of which all of the associated foreign exchange risk had been hedged using debt derivatives.

Lease liabilities
Below is a summary of the debt derivatives into which we entered related to our outstanding lease liabilities for the three and six months ended June 30, 2020. We did not enter or settle any debt derivatives related to our outstanding lease liabilities in 2019.
 
 
Three months ended June 30, 2020
 
 
 
Six months ended June 30, 2020
 
(In millions of dollars, except exchange rates)
Notional
(US$)

Exchange rate

Notional
(Cdn$)

 
Notional
(US$)

Exchange
rate

Notional
(Cdn$)

 
 
 
 
 
 
 
 
Debt derivatives entered
49

1.367

67

 
90

1.400

126

Debt derivatives settled
10

1.300

13

 
16

1.313

21


As at June 30, 2020, we had US$144 million notional amount of debt derivatives outstanding relating to our outstanding lease liabilities (December 31, 2019 - US$70 million) with terms to maturity ranging from July 2020 to June 2023 (December 31, 2019 - January 2020 to December 2022), at an average rate of $1.366/US$ (December 31, 2019 - $1.318/US$).

Expenditure derivatives
We use foreign currency forward contracts (expenditure derivatives) to manage the foreign exchange risk in our operations, designating them as hedges for accounting purposes for certain of our forecast operational and capital expenditures.

The tables below summarize the expenditure derivatives we entered into and settled during the three and six months ended June 30, 2020 and 2019.


Three months ended June 30, 2020
 


Six months ended June 30, 2020
 
(In millions of dollars, except exchange rates)
Notional (US$)

Exchange rate

Notional (Cdn$)

 
Notional
(US$)

Exchange
rate

Notional
(Cdn$)

 
 
 
 
 
 
 
 
Expenditure derivatives entered
744

1.376

1,024

 
1,086

1.365

1,482

Expenditure derivatives settled
255

1.302

332

 
480

1.300

624



Three months ended June 30, 2019
 


Six months ended June 30, 2019
 
(In millions of dollars, except exchange rates)
Notional (US$)

Exchange rate

Notional (Cdn$)

 
Notional
(US$)

Exchange
rate

Notional
(Cdn$)

 
 
 
 
 
 
 
 
Expenditure derivatives entered
540

1.330

718

 
780

1.322

1,031

Expenditure derivatives settled
240

1.254

301

 
450

1.249

562



Rogers Communications Inc.
13
Second Quarter 2020


Notes to the Interim Condensed Consolidated Financial Statements (unaudited)

As at June 30, 2020, we had US$1,596 million notional amount of expenditure derivatives outstanding (December 31, 2019 - US$990 million) with terms to maturity ranging from July 2020 to December 2022 (December 31, 2019 - January 2020 to December 2021), at an average rate of $1.344/US$ (December 31, 2019 - $1.300/US$).

Equity derivatives
We use total return swaps (equity derivatives) to hedge the market price appreciation risk of the RCI Class B Non-Voting common shares (Class B Non-Voting Shares) granted under our stock-based compensation programs. The equity derivatives have not been designated as hedges for accounting purposes.

As at June 30, 2020, we had equity derivatives outstanding for 4.6 million (December 31, 2019 - 4.3 million) Class B Non-Voting Shares with a weighted average price of $51.82 (December 31, 2019 - $51.76).

We did not settle any equity derivatives during the three months ended June 30, 2020 or 2019. During the six months ended June 30, 2020, we settled 0.5 million (2019 - 0.7 million) equity derivatives at a weighted average price of $54.16 (2019 - $71.66) for net payments of $1 million (2019 - net proceeds of $16 million). At the same time, we entered into 0.5 million equity derivatives at a weighted average price of $54.16 under substantially the same terms and conditions with revised expiry dates to April 2021 (from April 2020).

We did not enter into any equity derivatives during the three months ended June 30, 2020 or 2019. During the six months ended June 30, 2020, we entered into 0.3 million equity derivatives (2019 - nil) with a weighted average price of $56.08 (2019 - nil).

Additionally, we executed extension agreements for the remainder of our equity derivative contracts under substantially the same commitment terms and conditions with revised expiry dates to March 2021 and April 2021.

Fair Values of Financial Instruments
The carrying value of cash and cash equivalents, accounts receivable, bank advances, short-term borrowings, and accounts payable and accrued liabilities approximate their fair values because of the short-term nature of these financial instruments. The carrying value of our lease liabilities approximates their fair value because the discount rate used to calculate them approximates our current borrowing rate. The carrying values of our financing receivables also approximate their fair values based on our recognition of an expected credit loss allowance.

We determine the fair value of each of our publicly traded investments using quoted market values. We determine the fair value of our private investments by using implied valuations from follow-on financing rounds, third-party sale negotiations, or using market-based approaches. These are applied appropriately to each investment depending on its future operating and profitability prospects.

The fair values of each of our public debt instruments are based on the period-end estimated market yields, or period-end trading values, where available. We determine the fair values of our debt derivatives and expenditure derivatives using an estimated credit-adjusted mark-to-market valuation by discounting cash flows to the measurement date. In the case of debt derivatives and expenditure derivatives in an asset position, the credit spread for the financial institution counterparty is added to the risk-free discount rate to determine the estimated credit-adjusted value for each derivative. For those debt derivatives and expenditure derivatives in a liability position, our credit spread is added to the risk-free discount rate for each derivative.

The fair values of our equity derivatives are based on the quoted market value of Class B Non-Voting Shares.

Our disclosure of the three-level fair value hierarchy reflects the significance of the inputs used in measuring fair value:
•
financial assets and financial liabilities in Level 1 are valued by referring to quoted prices in active markets for identical assets and liabilities;
•
financial assets and financial liabilities in Level 2 are valued using inputs based on observable market data, either directly or indirectly, other than the quoted prices; and
•
Level 3 valuations are based on inputs that are not based on observable market data.

There were no material financial instruments categorized in Level 3 as at June 30, 2020 or December 31, 2019 and there were no transfers between Level 1, Level 2, or Level 3 during the three or six months ended June 30, 2020 or 2019.

Rogers Communications Inc.
14
Second Quarter 2020


Notes to the Interim Condensed Consolidated Financial Statements (unaudited)

Below is a summary of our financial instruments carried at fair value as at June 30, 2020 and December 31, 2019.
  
Carrying value
 
Fair value (Level 1)
 
Fair value (Level 2)
 
 
As at
June 30

As at
Dec. 31

As at
June 30

As at
Dec. 31

As at
June 30

As at
Dec. 31

(In millions of dollars)
2020

2019

2020

2019

2020

2019

 
 
 
 
 
 
 
Financial assets
 
 
 
 
 
 
Investments, measured at fair value:
 
 
 
 
 
 
Investments in publicly traded companies
1,529

1,831

1,529

1,831

—

—

Derivatives:
 
 
 
 
 
 
Debt derivatives accounted for as cash flow hedges
2,811

1,508

—

—

2,811

1,508

Expenditure derivatives accounted for as cash flow hedges
40

16

—

—

40

16

Equity derivatives not accounted for as hedges
14

55

—

—

14

55

 
 
 
 
 
 
 
Total financial assets
4,394

3,410

1,529

1,831

2,865

1,579

 
 
 
 
 
 
 
Financial liabilities
 
 
 
 
 
 
Derivatives:
 
 
 
 
 
 
Debt derivatives accounted for as cash flow hedges
3

96

—

—

3

96

Debt derivatives not accounted for as hedges
—

29

—

—

—

29

Expenditure derivatives accounted for as cash flow hedges
17

15

—

—

17

15

Equity derivatives not accounted as cash flow hedges
1

—

—

—

1

—

 
 
 
 
 
 
 
Total financial liabilities
21

140

—

—

21

140


Below is a summary of the fair value of our long-term debt as at June 30, 2020 and December 31, 2019.
  
As at June 30, 2020
 
As at December 31, 2019
 
(In millions of dollars)
Carrying amount

Fair value 1

Carrying amount

Fair value 1

 
 
 
 
 
Long-term debt (including current portion)
19,008

22,639

15,967

18,354

1 
Long-term debt (including current portion) is measured at Level 2 in the three-level fair value hierarchy.

NOTE 11: INVESTMENTS
 
As at
June 30

As at
December 31

(In millions of dollars)
2020

2019

 
 
 
Investments in:
 
 
Publicly traded companies
1,529

1,831

Private companies
97

107

Investments, measured at FVTOCI
1,626

1,938

Investments, associates and joint ventures
894

892

 
 
 
Total investments
2,520

2,830



Rogers Communications Inc.
15
Second Quarter 2020


Notes to the Interim Condensed Consolidated Financial Statements (unaudited)

NOTE 12: SHORT-TERM BORROWINGS

Below is a summary of our short-term borrowings as at June 30, 2020 and December 31, 2019.
 
As at
June 30

As at
December 31

(In millions of dollars)
2020

2019

 
 
 
Accounts receivable securitization program
650

650

US commercial paper program
—

1,588

 
 
 
Total short-term borrowings
650

2,238


The tables below summarize the activity relating to our short-term borrowings for the three and six months ended June 30, 2020 and 2019.


Three months ended June 30, 2020
 


Six months ended June 30, 2020
 
 
Notional

Exchange

Notional

 
Notional

Exchange

Notional

(In millions of dollars, except exchange rates)
(US$)

rate

(Cdn$)

 
(US$)

rate

(Cdn$)

 
 
 
 
 
 
 
 
Proceeds received from US commercial paper
189

1.413

267

 
2,867

1.333

3,823

Repayment of US commercial paper
(412
)
1.400

(577
)
 
(4,097
)
1.355

(5,550
)
Net repayment of US commercial paper
 


(310
)
 
 


(1,727
)
 
 
 
 
 
 
 
 
Net repayment of short-term borrowings
 
 
(310
)
 
 
 
(1,727
)


Three months ended June 30, 2019
 


Six months ended June 30, 2019
 
 
Notional

Exchange

Notional

 
Notional

Exchange

Notional

(In millions of dollars, except exchange rates)
(US$)

rate

(Cdn$)

 
(US$)

rate

(Cdn$)

 
 
 
 
 
 
 
 
Proceeds received from US commercial paper
2,960

1.342

3,972

 
6,818

1.335

9,104

Repayment of US commercial paper
(3,440
)
1.340

(4,611
)
 
(6,985
)
1.333

(9,313
)
Net repayment of US commercial paper




(639
)
 




(209
)
 
 
 
 
 
 
 
 
Proceeds received from credit facilities
420

1.336

561

 
420

1.336

561

Repayment of credit facilities
(420
)
1.343

(564
)
 
(420
)
1.343

(564
)
Net repayment of credit facilities
 
 
(3
)
 
 
 
(3
)
 
 
 
 
 
 
 
 
Net repayment of short-term borrowings
 
 
(642
)
 
 
 
(212
)

Accounts Receivable Securitization Program
Below is a summary of our accounts receivable securitization program as at June 30, 2020 and December 31, 2019.
 
As at
June 30

As at
December 31

(In millions of dollars)
2020

2019

 
 
 
Trade accounts receivable sold to buyer as security
1,002

1,359

Short-term borrowings from buyer
(650
)
(650
)
 
 
 
Overcollateralization
352

709


There was no net activity related to our accounts receivable securitization program for the three and six months ended June 30, 2020 and 2019.


Rogers Communications Inc.
16
Second Quarter 2020


Notes to the Interim Condensed Consolidated Financial Statements (unaudited)

US Commercial Paper Program
The tables below summarize the activity relating to our US CP program for the three and six months ended June 30, 2020 and 2019.


Three months ended June 30, 2020
 


Six months ended June 30, 2020
 
 
Notional

Exchange

Notional

 
Notional

Exchange

Notional

(In millions of dollars, except exchange rates)
(US$)

rate

(Cdn$)

 
(US$)

rate

(Cdn$)

 
 
 
 
 
 
 
 
US commercial paper program, beginning of period
223

1.417

316

 
1,223

1.298

1,588

Net repayment of US commercial paper
(223
)
1.390

(310
)
 
(1,230
)
1.404

(1,727
)
Discounts on issuance 1
—

—

—

 
7

1.429

10

(Gain) loss on foreign exchange 1
 
 
(6
)
 
 
 
129

 
 
 
 
 
 
 
 
US commercial paper program, end of period
—

—

—

 
—

—

—

1 Included in finance costs.


Three months ended June 30, 2019
 


Six months ended June 30, 2019
 
 
Notional

Exchange

Notional

 
Notional

Exchange

Notional

(In millions of dollars, except exchange rates)
(US$)

rate

(Cdn$)

 
(US$)

rate

(Cdn$)

 
 
 
 
 
 
 
 
US commercial paper program, beginning of period
1,495

1.336

1,998

 
1,178

1.362

1,605

Net repayment of US commercial paper
(480
)
1.331

(639
)
 
(167
)
1.251

(209
)
Discounts on issuance 1
8

1.500

12

 
12

1.500

18

Gain on foreign exchange 1
 
 
(32
)
 
 
 
(75
)
 
 
 
 
 
 
 
 
US commercial paper program, end of period
1,023

1.309

1,339

 
1,023

1.309

1,339

1 Included in finance costs.

Concurrent with the commercial paper issuances, we entered into debt derivatives to hedge the foreign currency risk associated with the principal and interest components of the borrowings under the US CP program (see note 10). We have not designated these debt derivatives as hedges for accounting purposes.


Rogers Communications Inc.
17
Second Quarter 2020


Notes to the Interim Condensed Consolidated Financial Statements (unaudited)

NOTE 13: LONG-TERM DEBT
 
 
 
Principal
amount

Interest
rate

As at
June 30

As at
December 31

(In millions of dollars, except interest rates)
Due date
  
2020

2019

 
 
 
 
 
 
 
Senior notes
2021
 
1,450

5.340
%
1,450

1,450

Senior notes
2022
 
600

4.000
%
600

600

Senior notes
2022
US
750

Floating

1,022

—

Senior notes
2023
US
500

3.000
%
681

649

Senior notes
2023
US
850

4.100
%
1,158

1,104

Senior notes
2024
 
600

4.000
%
600

600

Senior notes
2025
US
700

3.625
%
954

909

Senior notes
2026
US
500

2.900
%
681

649

Senior notes
2027
 
1,500

3.650
%
1,500

—

Senior notes
2029
 
1,000

3.250
%
1,000

1,000

Senior debentures 1
2032
US
200

8.750
%
273

260

Senior notes
2038
US
350

7.500
%
477

455

Senior notes
2039
 
500

6.680
%
500

500

Senior notes
2040
 
800

6.110
%
800

800

Senior notes
2041
 
400

6.560
%
400

400

Senior notes
2043
US
500

4.500
%
681

649

Senior notes
2043
US
650

5.450
%
886

844

Senior notes
2044
US
1,050

5.000
%
1,432

1,365

Senior notes
2048
US
750

4.300
%
1,022

973

Senior notes
2049
US
1,250

4.350
%
1,705

1,624

Senior notes
2049
US
1,000

3.700
%
1,364

1,299

 
 
 
 
 
19,186

16,130

Deferred transaction costs and discounts
 
 
 
 
(178
)
(163
)
Less current portion
 
 
 
 
(1,450
)
—

 
 
 
 
 
 
 
Total long-term debt
 
 
 
 
17,558

15,967

1 
Senior debentures originally issued by Rogers Cable Inc. which are unsecured obligations of RCI and for which RCCI was an unsecured guarantor as at June 30, 2020 and December 31, 2019.


Rogers Communications Inc.
18
Second Quarter 2020


Notes to the Interim Condensed Consolidated Financial Statements (unaudited)

The tables below summarize the activity relating to our long-term debt for the three and six months ended June 30, 2020 and 2019.
 
 
Three months ended June 30, 2020
 
 
 
Six months ended June 30, 2020
 
(In millions of dollars, except exchange rates)
Notional

Exchange

Notional

 
Notional

Exchange

Notional

(US$)

rate

(Cdn$)

 
(US$)

rate

(Cdn$)

 
 
 
 
 
 
 
 
Credit facility borrowings (US$)
—

—

—

 
970

1.428

1,385

Credit facility repayments (US$)
(970
)
1.406

(1,364
)
 
(970
)
1.406

(1,364
)
 
 
 
 
 
 
 
 
Net (repayments) borrowings under credit facilities
 
 
(1,364
)
 
 
 
21

 
 
 
 
 
 
 
 
Senior note issuances (Cdn$)
 
 
—

 
 
 
1,500

Senior note issuances (US$)
750

1.359

1,019

 
750

1.359

1,019

Total issuance of senior notes
 
 
1,019

 
 
 
2,519

 
 
 
 
 
 
 
 
Net (repayment) issuance of long-term debt
 
 
(345
)
 
 
 
2,540

 
 
Three months ended June 30, 2019
 
 
 
Six months ended June 30, 2019
 
(In millions of dollars, except exchange rates)
Notional

Exchange

Notional

 
Notional

Exchange

Notional

(US$)

rate

(Cdn$)

 
(US$)

rate

(Cdn$)

 
 
 
 
 
 
 
 
Senior notes issuances (Cdn$)
 
 
1,000

 
 
 
1,000

Senior note issuances (US$)
1,250

1.341

1,676

 
1,250

1.341

1,676

Total issuances of senior notes
 
 
2,676

 
 
 
2,676

 
 
 
 
 
 
 
 
Senior note repayments (Cdn$)
 
 
—

 
 
 
(400
)
 
 
 
 
 
 
 
 
Net issuance of senior notes
 
 
2,676

 
 
 
2,276

 
 
 
 
 
 
 
 
Net issuance of long-term debt
 
 
2,676

 
 
 
2,276

 
Three months ended June 30
 
 
Six months ended June 30
 
(In millions of dollars)
2020

2019

 
2020

2019

 
 
 
 
 
 
Long-term debt net of transaction costs, beginning of period
19,825

13,724

 
15,967

14,290

Net (repayment) issuance of long-term debt
(345
)
2,676

 
2,540

2,276

(Gain) loss on foreign exchange
(470
)
(207
)
 
516

(376
)
Deferred transaction costs incurred
(5
)
(33
)
 
(21
)
(33
)
Amortization of deferred transaction costs
3

3

 
6

6

 
 
 
 
 
 
Long-term debt net of transaction costs, end of period
19,008

16,163

 
19,008

16,163


Senior Notes
Issuance of senior notes and related derivatives
In June 2020, we issued US$750 million floating rate senior notes due 2022 at a rate of three-month LIBOR plus 0.60% per annum. Concurrent with the issuance, we entered into debt derivatives to convert all interest and principal payment obligations to Canadian dollars and convert our floating rate to a fixed rate of 0.955% until maturity. As a result, we received net proceeds of $1.0 billion from the issuances.

In March 2020, we issued $1.5 billion senior notes due 2027 at a rate of 3.65%.

In April 2019, we issued $1 billion senior notes due 2029 at a rate of 3.25% and US$1.25 billion senior notes due 2049 at a rate of 4.35%. Concurrent with the issuances, we exercised our outstanding bond forwards and entered into debt derivatives to convert all interest and principal payment obligations on the US$-denominated senior notes to Canadian dollars. We received net proceeds of $2.7 billion from the issuances.

Rogers Communications Inc.
19
Second Quarter 2020


Notes to the Interim Condensed Consolidated Financial Statements (unaudited)

Repayment of senior notes and related derivative settlements
We did not repay any senior notes or settle any related debt derivatives during the three or six months ended June 30, 2020. In March 2019, we repaid the entire outstanding principal amount of our $400 million 2.8% senior notes at maturity.

NOTE 14: LEASES

Below is a summary of the activity related to our lease liabilities for the three and six months ended June 30, 2020 and 2019.
 
Three months ended June 30
 
 
Six months ended June 30
 
(In millions of dollars)
2020

2019

 
2020

2019

 
 
 
 
 
 
Lease liabilities, beginning of period
1,810

1,558

 
1,725

1,545

Net additions
82

82

 
216

134

Interest on lease liabilities
18

15

 
35

29

Interest payments on lease liabilities
(16
)
(11
)
 
(33
)
(21
)
Principal payments of lease liabilities
(48
)
(38
)
 
(98
)
(79
)
Other
(1
)
2

 
—

—

 
 
 
 
 
 
Lease liabilities, end of period
1,845

1,608

 
1,845

1,608


NOTE 15: SHAREHOLDERS' EQUITY

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 Class B Non-Voting Shares in 2020 and 2019.
Date declared
Date paid
Dividend per share (dollars)  

 
 
 
January 22, 2020
April 1, 2020
0.50

April 21, 2020
July 2, 2020
0.50

 
 
 
January 24, 2019
April 1, 2019
0.50

April 18, 2019
July 2, 2019
0.50

June 5, 2019
October 1, 2019
0.50

October 23, 2019
January 2, 2020
0.50

 
 
2.00


On July 21, 2020, the Board of Directors declared a dividend of $0.50 per Class A Share and Class B Non-Voting Share to be paid on October 1, 2020 to shareholders of record on September 9, 2020.

The holders of Class A Shares are entitled to receive dividends at the rate of up to five cents per share but only after dividends at the rate of five cents per share have been paid or set aside on the Class B Non-Voting Shares. Class A Shares and Class B Non-Voting Shares therefore participate equally in dividends above five cents per share.

Normal Course Issuer Bid
In April 2020, the TSX accepted a notice of our intention to commence a normal course issuer bid (NCIB) program that allows us to purchase, between April 24, 2020 and April 23, 2021, the lesser of 34.9 million Class B Non-Voting Shares and that number of Class B Non-Voting Shares that can be purchased for an aggregate purchase price of $500 million (2020 NCIB). Rogers security holders may obtain a copy of this notice, without charge, by contacting us.

In April 2019, we commenced a NCIB program that allowed us to purchase, between April 24, 2019 and April 23, 2020, the lesser of 35.7 million Class B Non-Voting Shares and that number of Class B Non-Voting Shares that can be purchased for an aggregate purchase price of $500 million (2019 NCIB).

During the three and six months ended June 30, 2020, we did not repurchase any Class B Non-Voting Shares. During the three months ended June 30, 2019, we repurchased for cancellation 734,257 Class B Non-Voting Shares for $50 million. During the three months ended March 31, 2019, we repurchased for cancellation 2,164,113 Class B Non-Voting Shares for $155 million, $19 million of which was paid in early April 2019.

Rogers Communications Inc.
20
Second Quarter 2020


Notes to the Interim Condensed Consolidated Financial Statements (unaudited)



Rogers Communications Inc.
21
Second Quarter 2020


Notes to the Interim Condensed Consolidated Financial Statements (unaudited)

NOTE 16: STOCK-BASED COMPENSATION

Below is a summary of our stock-based compensation expense, which is included in employee salaries, benefits, and stock-based compensation, for the three and six months ended June 30, 2020 and 2019.
  
Three months ended June 30
 
 
Six months ended June 30
 
(In millions of dollars)
2020

2019

 
2020

2019

 
 
 
 
 
 
Stock options
(3
)
—

 
(10
)
5

Restricted share units
8

11

 
16

27

Deferred share units
(5
)
—

 
(13
)
9

Equity derivative effect, net of interest receipt
19

5

 
44

(8
)
 
 
 
 
 
 
Total stock-based compensation expense
19

16

 
37

33


As at June 30, 2020, we had a total liability recognized at its fair value of $177 million (December 31, 2019 - $220 million) related to stock-based compensation, including stock options, restricted share units (RSUs), and deferred share units (DSUs).

During the three and six months ended June 30, 2020, we paid $7 million and $36 million (2019 - $5 million and $69 million), respectively, to holders of stock options, RSUs, and DSUs upon exercise using the cash settlement feature.

Stock Options
Summary of stock options
The tables below summarize the activity related to stock option plans, including performance options, for the three and six months ended June 30, 2020 and 2019.
  
Three months ended June 30, 2020
 
 
Six months ended June 30, 2020
(In number of units, except prices)
Number of options

Weighted average
exercise price

 
Number of options

Weighted average
exercise price
 
 
 
 
 
 
Outstanding, beginning of period
4,726,634

$62.10
 
3,154,795

$61.82
Granted
—

—

 
1,598,590

$62.56
Exercised
—

—

 
(17,230
)
$54.80
Forfeited
—

—

 
(9,521
)
$58.45
 
 
 
 
 
 
Outstanding, end of period
4,726,634

$62.10
 
4,726,634

$62.10
 
 
 
 
 
 
Exercisable, end of period
1,426,207

$56.48
 
1,426,207

$56.48
  
Three months ended June 30, 2019
 
 
Six months ended June 30, 2019
(In number of units, except prices)
Number of options

Weighted average
exercise price

 
Number of options

Weighted average
exercise price
 
 
 
 
 
 
Outstanding, beginning of period
3,087,432

$61.39
 
2,719,612

$53.22
Granted
—

—

 
1,040,170

$73.00
Exercised
(14,665
)
$51.98
 
(687,015
)
$46.41
 
 
 
 



Outstanding, end of period
3,072,767

$61.43
 
3,072,767

$61.43
 
 
 
 



Exercisable, end of period
1,012,894

$52.06
 
1,012,894

$52.06

We did not grant any performance stock options during the three and six months ended June 30, 2020 or 2019.

Unrecognized stock-based compensation expense related to stock option plans was $5 million as at June 30, 2020 (December 31, 2019 - $6 million) and will be recognized in net income over the next four years as the options vest.


Rogers Communications Inc.
22
Second Quarter 2020


Notes to the Interim Condensed Consolidated Financial Statements (unaudited)

Restricted Share Units
Summary of RSUs
Below is a summary of the activity related to RSUs outstanding, including performance RSUs, for the three and six months ended June 30, 2020 and 2019.
  
Three months ended June 30
 
 
Six months ended June 30
 
(In number of units)
2020

2019

 
2020

2019

 
 
 
 
 
 
Outstanding, beginning of period
2,882,983

2,424,981

 
2,472,774

2,218,925

Granted and reinvested dividends
56,704

49,221

 
926,494

778,199

Exercised
(106,194
)
(23,073
)
 
(526,411
)
(520,482
)
Forfeited
(34,304
)
(51,080
)
 
(73,668
)
(76,593
)
 
 
 
 
 
 
Outstanding, end of period
2,799,189

2,400,049

 
2,799,189

2,400,049


Included in the above table are grants of 8,606 and 208,604 performance RSUs to certain key executives during the three and six months ended June 30, 2020 (2019 - 3,289 and 154,830), respectively.

Unrecognized stock-based compensation expense related to these RSUs was $63 million as at June 30, 2020 (December 31, 2019 - $56 million) and will be recognized in net income over the next three years as the RSUs vest.

Deferred Share Unit Plan
Summary of DSUs
Below is a summary of the activity related to DSUs outstanding, including performance DSUs, for the three and six months ended June 30, 2020 and 2019.
  
Three months ended June 30
 
 
Six months ended June 30
 
(In number of units)
2020

2019

 
2020

2019

 
 
 
 
 
 
Outstanding, beginning of period
1,658,154

1,890,385

 
1,741,884

2,004,440

Granted and reinvested dividends
24,982

22,576

 
43,406

59,444

Exercised
(12,387
)
(41,718
)
 
(105,064
)
(184,347
)
Forfeited
—

(3,468
)
 
(9,477
)
(11,762
)
 
 
 
 
 
 
Outstanding, end of period
1,670,749

1,867,775

 
1,670,749

1,867,775


Included in the above table are grants of 1,958 and 6,358 performance DSUs to certain key executives during the three and six months ended June 30, 2020 (2019 - 2,041 and 25,097), respectively.

Unrecognized stock-based compensation expense related to these DSUs as at June 30, 2020 was nil (December 31, 2019 - $1 million) and will be recognized in net income over the next three years as the executive DSUs vest. All other DSUs are fully vested.

NOTE 17: RELATED PARTY TRANSACTIONS

Controlling Shareholder
We enter into certain transactions with private companies controlled by the controlling shareholder of RCI, the Rogers Control Trust. These transactions were recognized at the amount agreed to by the related parties and are subject to the terms and conditions of formal agreements approved by the Audit and Risk Committee. The totals received or paid during the three and six months ended June 30, 2020 and 2019 were less than $1 million, respectively.

Transactions with Related Parties
We have entered into business transactions with Transcontinental Inc., a company that provides us with printing services. Isabelle Marcoux, C.M., is chair of the board of Transcontinental Inc. and a Director of RCI.

We recognize these transactions at the amounts agreed to by the related parties, which are also reviewed by the Audit and Risk Committee. The amounts owing for these services are unsecured, interest-free, and due for payment in cash within one month of the date of the transaction. Below is a summary of the related party activity for the business transactions described above.
  
Three months ended June 30
 
 
Six months ended June 30
 
(In millions of dollars)
2020

2019

 
2020

2019

 
 
 
 
 
 
Printing services
—

3

 
1

4


NOTE 18: CONTINGENT LIABILITIES

Wholesale Internet Costing and Pricing
In August 2019, in Telecom Order CRTC 2019-288, Follow-up to Telecom Orders 2016-396 and 2016-448 - Final rates for aggregated wholesale high-speed access services (Order), the Canadian Radio-television and Telecommunications Commission (CRTC) set final rates for facilities-based carriers' wholesale high-speed access services, including Rogers' third-party Internet access (TPIA) service. The Order set final rates for Rogers that are significantly lower than the interim rates that were previously billed and it further determined that these final rates will apply retroactively to March 31, 2016.

We do not believe the final rates set by the CRTC are just and reasonable as required by the Telecommunications Act as we believe they are below cost. On September 13, 2019, Rogers, in conjunction with the other large Canadian cable companies (Cable Carriers), filed a motion for Leave to Appeal pursuant to Section 64(1) of the Telecommunications Act with the Federal Court of Appeal (Court) and an associated motion for an interlocutory Stay of the CRTC Order. On September 27, 2019, the Court granted an Interim Stay suspending the Order until the Court rules on the Cable Carriers’ motion for an interlocutory Stay of the CRTC’s Order pending the Court’s determination of the Cable Carriers’ motion for Leave to Appeal. On November 22, 2019, the Court granted Leave to Appeal and an interlocutory Stay of the CRTC Order. The appeal was heard in June 2020.

Due to the Court’s granting of an interlocutory Stay and Leave to Appeal, and the significant uncertainty surrounding both the outcome and the amount, if any, we could ultimately have to repay to the resellers, we have not recorded a liability for this contingency at this time. The CRTC’s order as drafted would have resulted in a refund of amounts previously billed to the resellers of approximately $180 million, representing the impact on a retroactive basis from March 31, 2016 to June 30, 2020. We estimate the ongoing impact would be between $10 and $15 million per quarter.

Outcome of Proceedings
The outcome of all the proceedings and claims against us, including the matter described above, is subject to future resolution that includes the uncertainties of litigation. It is not possible for us to predict the result or magnitude of the claims due to the various factors and uncertainties involved in the legal process. Based on information currently known to us, we believe it is not probable that the ultimate resolution of any of these proceedings and claims, individually or in total, will have a material adverse effect on our business, financial results, or financial condition. If it becomes probable that we will be held liable for claims against us, we will recognize a provision during the period in which the change in probability occurs, which could be material to our Consolidated Statements of Income or Consolidated Statements of Financial Position.

NOTE 19: SUPPLEMENTAL CASH FLOW INFORMATION

Change in Non-Cash Operating Working Capital Items
  
Three months ended June 30
 
 
Six months ended June 30
 
(In millions of dollars)
2020

2019

 
2020

2019

 
 
 
 
 
 
Accounts receivable
360

(104
)
 
626

(29
)
Inventories
105

2

 
141

7

Other current assets
(4
)
2

 
(69
)
(43
)
Accounts payable and accrued liabilities
(77
)
(28
)
 
(516
)
(133
)
Contract and other liabilities
(29
)
(81
)
 
(13
)
(24
)
 
 
 
 
 
 
Total change in non-cash operating working capital items
355

(209
)
 
169

(222
)


Rogers Communications Inc.
23
Second Quarter 2020


rogerslogoa12.jpg
Exhibit 99.3
ROGERS COMMUNICATIONS REPORTS SECOND QUARTER 2020 RESULTS
•
World-class networks and a strong balance sheet position Rogers Communications well as Canadians move through COVID-19 phases
•
Awarded best wireless network in Canada for second year in a row by umlaut; ranked number one in the Canada Wireless Network Quality Study by J.D. Power in the West and Ontario
•
Liquidity position of $5.4 billion; free cash flow of $468 million, including increased bad debt provision of $90 million
•
Rogers Infinite™ unlimited data plans now at approximately 1.9 million total subscribers, up 36% in 2020
•
Monthly postpaid churn of 0.77%
•
Wireless results reflect full quarter impact of COVID-19 economic shutdown
•
Postpaid subscribers flat; majority of retail locations remained closed
•
Service revenue down 13%, adjusted EBITDA down 19%
•
Cable results include 5,000 net new Internet subscribers and 18,000 net new Ignite TV™ subscribers despite significantly reduced consumer activity
•
Revenue down 3%, adjusted EBITDA down 5%
•
Media results reflect continued suspension of live professional sports broadcasting
•
Paid $252 million in dividends and declared a quarterly dividend of $0.50 per share

TORONTO (July 22, 2020) - Rogers Communications Inc. today announced its unaudited financial and operating results for the second quarter ended June 30, 2020.

Consolidated Financial Highlights
  
Three months ended June 30
 
 
Six months ended June 30
 
(In millions of Canadian dollars, except per share amounts, unaudited)
2020

2019

% Chg

 
2020

2019

% Chg

 
 
 
 
 
 
 
 
Total revenue
3,155

3,780

(17
)
 
6,571

7,367

(11
)
Total service revenue 1
2,797

3,345

(16
)
 
5,846

6,488

(10
)
Adjusted EBITDA 2
1,294

1,635

(21
)
 
2,629

2,970

(11
)
Net income
279

591

(53
)
 
631

982

(36
)
Adjusted net income 2
310

597

(48
)
 
677

1,002

(32
)
 
 
 
 
 
 
 
 
Diluted earnings per share

$0.54


$1.15

(53
)
 

$1.21


$1.90

(36
)
Adjusted diluted earnings per share 2

$0.60


$1.16

(48
)
 

$1.30


$1.94

(33
)
 
 
 
 
 
 
 
 
Cash provided by operating activities
1,429

1,057

35

 
2,388

2,055

16

Free cash flow 2
468

609

(23
)
 
930

1,014

(8
)
1 
As defined. See "Key Performance Indicators".
2 
As defined. See "Non-GAAP Measures and Related Performance 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.

"As we expected, our second quarter results reflect the economic pressures we saw in our business as Canadians adapted to the challenges of COVID-19. As Canada’s business environment slowly improves, we will rely on our strong balance sheet, world-class networks, and leading market share position to support long-term growth and drive shareholder value," said Joe Natale, President and CEO. "We remain steadfast in our focus on maintaining our solid financial position, advancing our strategic priorities and investments, and delivering value to shareholders. Our priorities in the second half of the year are to drive the competitive benefits and efficiencies from the customer-first and digital initiatives we have accelerated during the pandemic, and to resume growth across our businesses as more of the Canadian economy opens up."


Rogers Communications Inc.
1
Second Quarter 2020

Operating Environment and Strategic Highlights

The COVID-19 pandemic (COVID-19) continues to significantly impact Canadians and economies around the world. As an essential service provider during this time, it is of utmost importance to ensure our customers remain connected to the people in their lives and that our customers and employees remain safe. In March, we took swift action to ensure our customers and employees remain safe and healthy during the pandemic, including temporarily closing the majority of our retail stores across Canada and enabling most of our employees to work from home. We also took steps to ensure our customers could stay connected to the world around them, such as providing additional free services (including a rotating selection of premium television channels) and waiving certain fees (including pay-per-use international roaming fees and long distance voice calling fees), and that our networks remain operational, including adding capacity and managing traffic.

This quarter, we also implemented compensation- and health and safety-related programs to help our employees get through this challenging time, including ensuring a minimum compensation level even when employees were unable to work and premium pay in certain areas of our business during this exceptional time. We also launched several community-focused activities and events, and as provinces relaxed certain public health restrictions, we began reopening certain retail stores where we could appropriately implement public health requirements. Meanwhile, we began preparing for the return of live sports, which were suspended in March. While COVID-19 continues to have a significant worldwide impact, we remain confident we have the right team, a strong balance sheet, and world-class networks that will allow us to get through the pandemic having maintained our long-term focus on growth and doing the right thing for our customers.

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.

Create best-in-class customer experiences by putting our customers first in everything we do
•
Increased digital adoption; decreased calls to our customer care agents by over 20%.
•
Moved to 100% Canadian-based customer care agents as part of a multi-year plan to improve the customer experience and do the right thing for Canada.
•
Launched Blitzz, a remote visual assistance tool, with our technical support team to enable prompt virtual assistance and reduce the need to deploy field technicians for installation and service calls.

Invest in our networks and technology to deliver leading performance and reliability
•
Recently awarded best wireless network in Canada for the second year in a row by umlaut, the global leader in mobile network benchmarking.
•
In April, ranked number one in the Canada Wireless Network Quality Study by J.D. Power in the West and Ontario.
•
Partnered with the University of British Columbia and the City of Kelowna to launch Canada’s first 5G pilot of smart city transportation technology in the downtown core of Kelowna.
•
Established the Rogers Internet of Things Chair with the University of Calgary to advance innovative Internet of Things research.
•
Continued to add capacity and manage traffic to ensure customers remained connected during the COVID-19 pandemic.

Deliver innovative solutions and compelling content that our customers will love
•
Leveraged our media assets to drive meaningful change and advance inclusion and diversity, including a primetime special Ending Racism: What Will it Take?, virtual Speakers Corner™, a new digital series LIVE: #Cityline Real on Race, and a new Sportsnet interview series Top of HER Game™.
•
Announced Citytv’s 2020/2021 primetime schedule featuring four new shows and 21 returning series, building on a 37% increase of primetime viewership on Citytv™ between March and May from last year.
•
Provided free access for our TV customers to a rotation selection of channels throughout the quarter through to June 30.

Drive profitable growth in all the markets we serve
•
Ended the quarter with a strong balance sheet with available liquidity of $5.4 billion, including $1.8 billion of cash, an increase of $2.9 billion from December 31, 2019.
•
Decreased capital intensity by 1.9 percentage points through careful capital expenditure management.
•
Maintained our focus on long-term strategic growth despite the short-term economic downturn.

Rogers Communications Inc.
2
Second Quarter 2020

Develop our people and a high performance culture
•
Achieved an all-time high score of 93% for employee pride in a company-wide pulse survey during the COVID-19 pandemic, six points above best-in-class.
•
Launched the National Wellness Fund for our employees, providing increased benefits for mental health, access to virtual health care, financial well-being support, and access to Helm Life Online Activities to support parents with young children at home. This was funded through temporary reductions in executive and Board compensation.
•
Recognized Pride Month and National Indigenous Peoples’ Day with virtual events to promote inclusiveness across the company.
•
Implemented a permanent work-from-home model for our Ottawa customer care team and launched virtual leadership training for all frontline teams as part of the work-from-home program during the COVID-19 pandemic.

Be a strong, socially responsible leader in our communities across Canada
•
Launched the Step Up to the Plate program with Jays Care Foundation to fill 390,000 hampers of food housed at Rogers Centre™ and distribute eight million meals in support of Food Banks Canada.
•
Raised approximately $1 million through the Hearts and Smiles campaign in support of The Frontline Fund to help Canada’s frontline health care workers during the COVID-19 pandemic.
•
Provided devices and free wireless plans to participating women’s shelters across Canada.
•
Partnered with Pflag Canada through our Fido™ brand to provide tablets and free wireless plans to their chapters across Canada, in addition to a donation of $150,000.
•
Awarded the Ted Rogers Scholarship to over 400 young people to pursue post-secondary education.


Rogers Communications Inc.
3
Second Quarter 2020

Quarterly Financial Highlights

Our solid financial position enables us to prioritize the actions we need to take as a result of COVID-19, continue to make high priority investments in our network, and ensure customers stay connected during this critical time.

Substantial cash flow and available liquidity
This quarter, we continued to generate substantial cash flow from operating activities of $1,429 million, up 35%, and free cash flow of $468 million, down 23%. Furthermore, as at June 30, 2020, we had $5.4 billion of available liquidity, including $1.8 billion in cash and cash equivalents and a combined $3.6 billion available under our bank credit facility and accounts receivable securitization program, and investment-grade credit ratings with a stable outlook.

We also returned substantial cash to shareholders through the payment of $252 million in dividends this quarter and we declared a $0.50 per share dividend on July 21, 2020.

Revenue
Total revenue decreased by 17% this quarter, largely driven by 13% and 17% decreases in Wireless service and equipment revenue, respectively, and a 50% decrease in Media revenue.

The Wireless service revenue decrease was mainly a result of lower roaming revenue due to global travel restrictions during the COVID-19 pandemic, and lower overage revenue, primarily as a result of the continued adoption of our Rogers Infinite unlimited data plans. Wireless equipment revenue decreased as a result of lower gross additions and device upgrades by existing subscribers during the pandemic.

Media revenue decreased by 50% primarily as a result of lower advertising revenue due to softness in the market and lower sports revenue, including at the Toronto Blue Jays™, as no professional sports were played this quarter due to the COVID-19 pandemic.

Cable revenue decreased by 3% this quarter primarily as a result of declines in our legacy television and home phone subscriber bases, partially offset by growth in our Ignite TV and Internet subscriber bases.

Adjusted EBITDA and margins
Consolidated adjusted EBITDA decreased 21% this quarter and our adjusted EBITDA margin was down 230 basis points.

Wireless adjusted EBITDA decreased by 19%, primarily as a result of lower revenue and higher bad debt expense due to economic conditions during the COVID-19 pandemic, partially offset by lower net cost of equipment. This gave rise to a margin of 47.5%, down 280 basis points from last year.

Media adjusted EBITDA decreased by 149%, or $107 million, this quarter primarily as a result of the lower revenue, as discussed above, partially offset by lower programming and sports costs associated with the suspension of major sports leagues.

Cable adjusted EBITDA decreased by 5% this quarter, primarily as a result of lower service revenue and higher bad debt expense due to the economic conditions during the COVID-19 pandemic. This gave rise to a margin of 47.0% this quarter, down 90 basis points from last year.

Net income and adjusted net income
Net income and adjusted net income both decreased this quarter by 53% and 48%, respectively, primarily as a result of the decrease in adjusted EBITDA.

Financial guidance
Due to the continued uncertainty surrounding the duration and potential outcomes of the COVID-19 pandemic, we are unable at this time to predict the overall impact on our operations and financial results, but the impact to date has been material. It is not possible at this time to reliably estimate our financial results for the remainder of the year. We will therefore not provide updated financial guidance until such a time as we can make a reasonable estimate of our total service revenue, adjusted EBITDA, capital expenditures, and free cash flow for the year. Although COVID-19 has adversely impacted total service revenue and adjusted EBITDA in the short-term, strong free cash flow remains a priority for us this year. See "Updates to Risks and Uncertainties" and "About Forward-Looking Information" for more information on COVID-19, including the impacts it has had and may have on our business and the actions we are taking in response.


Rogers Communications Inc.
4
Second Quarter 2020

About Rogers

Rogers is a proud Canadian company dedicated to making more possible for Canadians each and every day. Our founder, Ted Rogers, purchased his first radio station, CHFI, in 1960. We have grown to become a leading technology and media company that strives to provide the very best in wireless, residential, sports, and media to Canadians and Canadian businesses. 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 contact
Media contact
 
 
Paul Carpino
Sarah Schmidt
647.435.6470
647.643.6397
paul.carpino@rci.rogers.com
sarah.schmidt@rci.rogers.com

Quarterly Investment Community Teleconference

Our second quarter 2020 results teleconference with the investment community will be held on:
•
July 22, 2020
•
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.


Rogers Communications Inc.
5
Second Quarter 2020

About this Earnings Release

This earnings release contains important information about our business and our performance for the three and six months ended June 30, 2020, as well as forward-looking information about future periods. This earnings release should be read in conjunction with our Second Quarter 2020 MD&A; our Second Quarter 2020 Interim Condensed Consolidated Financial Statements and notes thereto, which have been prepared in accordance with International Accounting Standard 34, Interim Financial Reporting, as issued by the International Accounting Standards Board (IASB); our 2019 Annual MD&A; our 2019 Annual Audited Consolidated Financial Statements and notes thereto, which have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the IASB; and our other recent filings with Canadian and US securities regulatory authorities, including our Annual Information Form, which are available on SEDAR at sedar.com or EDGAR at sec.gov, respectively.

Effective January 1, 2020, we updated our Cable segment financial and key performance indicator disclosures such that we began presenting Cable average revenue per account (ARPA), customer relationships, and market penetration. We also amended our subscriber reporting to report Internet and Ignite TV subscribers, removing legacy Television subscribers and Phone subscribers. In addition to the changes to our key performance indicators, we no longer report revenue by our Cable sub-products (i.e. Internet, Television, and Phone) and instead, we present a single "service revenue" amount. These changes are a result of the way in which we manage our business due to the ongoing convergence of the technology used to deliver Internet and television services and represent the key metrics against which we will measure growth in our Cable segment. See "Results of Our Reportable Segments - Cable" and "Key Performance Indicators" for more information.

For more information about Rogers, including product and service offerings, competitive market and industry trends, our overarching strategy, key performance drivers, and objectives, see "Understanding Our Business", "Our Strategy, Key Performance Drivers, and Strategic Highlights", and "Capability to Deliver Results" in our 2019 Annual MD&A.

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 July 21, 2020 and was approved by RCI's Board of Directors (the Board) on that date. This earnings release includes forward-looking statements and assumptions. See "About Forward-Looking Information" for more information.

We are publicly traded on the Toronto Stock Exchange (TSX: RCI.A and RCI.B) and on the New York Stock Exchange (NYSE: RCI).

In this earnings release, this quarter, the quarter, or second quarter refer to the three months ended June 30, 2020, the first quarter refers to the three months ended March 31, 2020, and year to date refers to the six months ended June 30, 2020 unless the context indicates otherwise. All results commentary is compared to the equivalent period in 2019 or as at December 31, 2019, as applicable, unless otherwise indicated.

™Rogers and related marks are trademarks of Rogers Communications Inc. or an affiliate, used under licence. All other brand names, logos, and marks are trademarks and/or copyright of their respective owners. ©2020 Rogers Communications


Rogers Communications Inc.
6
Second Quarter 2020

Reportable segments
We report our results of operations in three reportable segments. Each segment and the nature of its business is as follows:
Segment
Principal activities
Wireless
Wireless telecommunications operations for Canadian consumers and businesses.
Cable
Cable 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 business, public sector, and carrier wholesale markets.
Media
A diversified portfolio of media properties, including sports media and entertainment, television and radio broadcasting, specialty channels, multi-platform shopping, and digital media.

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.


Rogers Communications Inc.
7
Second Quarter 2020

Summary of Consolidated Financial Results
  
Three months ended June 30
 
 
Six months ended June 30
 
(In millions of dollars, except margins and per share amounts)
2020

2019

% Chg

 
2020

2019

% Chg

 
 
 
 
 
 
 
 
Revenue
 
 
 
 
 
 
 
Wireless
1,934

2,244

(14
)
 
4,011

4,433

(10
)
Cable
966

997

(3
)
 
1,939

1,973

(2
)
Media
296

591

(50
)
 
708

1,059

(33
)
Corporate items and intercompany eliminations
(41
)
(52
)
(21
)
 
(87
)
(98
)
(11
)
Revenue
3,155

3,780

(17
)
 
6,571

7,367

(11
)
Total service revenue 1
2,797

3,345

(16
)
 
5,846

6,488

(10
)
 
 
 
 
 
 
 
 
Adjusted EBITDA 2
 
 
 
 
 
 
 
Wireless
918

1,128

(19
)
 
1,944

2,143

(9
)
Cable
454

478

(5
)
 
907

923

(2
)
Media
(35
)
72

(149
)
 
(120
)
(12
)
n/m
Corporate items and intercompany eliminations
(43
)
(43
)
—

 
(102
)
(84
)
21

Adjusted EBITDA 2
1,294

1,635

(21
)
 
2,629

2,970

(11
)
Adjusted EBITDA margin 2
41.0
 %
43.3
%
(2.3
 pts)
 
40.0
%
40.3
%
(0.3
 pts)
 
 
 
 
 
 
 
 
Net income
279

591

(53
)
 
631

982

(36
)
Basic earnings per share

$0.55


$1.15

(52
)
 

$1.25


$1.91

(35
)
Diluted earnings per share

$0.54


$1.15

(53
)
 

$1.21


$1.90

(36
)
 
 
 
 
 
 
 
 
Adjusted net income 2
310

597

(48
)
 
677

1,002

(32
)
Adjusted basic earnings per share 2

$0.61


$1.17

(48
)
 

$1.34


$1.95

(31
)
Adjusted diluted earnings per share 2

$0.60


$1.16

(48
)
 

$1.30


$1.94

(33
)
 
 
 
 
 
 
 
 
Capital expenditures
559

742

(25
)
 
1,152

1,359

(15
)
Cash provided by operating activities
1,429

1,057

35

 
2,388

2,055

16

Free cash flow 2
468

609

(23
)
 
930

1,014

(8
)
n/m - not meaningful
1 As defined. See "Key Performance Indicators".
2 
Adjusted EBITDA, adjusted net income, 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 and Related Performance Measures" for information about these measures, including how we calculate them and the ratios in which they are used.


Rogers Communications Inc.
8
Second Quarter 2020

Results of our Reportable Segments

WIRELESS

Wireless Financial Results
  
Three months ended June 30
 
 
Six months ended June 30
 
(In millions of dollars, except margins)
2020

2019

% Chg

 
2020

2019

% Chg

 
 
 
 
 
 
 
 
Revenue
 
 
 
 
 
 
 
Service revenue
1,578

1,813

(13
)
 
3,290

3,560

(8
)
Equipment revenue
356

431

(17
)
 
721

873

(17
)
Revenue
1,934

2,244

(14
)
 
4,011

4,433

(10
)
 
 
 
 
 
 
 
 
Operating expenses
 
 
 
 
 
 
 
Cost of equipment
337

467

(28
)
 
711

968

(27
)
Other operating expenses
679

649

5

 
1,356

1,322

3

Operating expenses
1,016

1,116

(9
)
 
2,067

2,290

(10
)
 
 
 
 
 
 
 
 
Adjusted EBITDA
918

1,128

(19
)
 
1,944

2,143

(9
)
 
 
 
 
 
 
 
 
Adjusted EBITDA margin
47.5
%
50.3
%
(2.8
 pts)
 
48.5
%
48.3
%
0.2
 pts
Capital expenditures
254

390

(35
)
 
535

672

(20
)

Wireless Subscriber Results 1 
  
Three months ended June 30
 
 
Six months ended June 30
 
(In thousands, except churn, blended ABPU, and blended ARPU)
2020

2019

Chg

 
2020

2019

Chg

 
 
 
 
 
 
 
 
Postpaid
 
 
 
 
 
 
 
Gross additions
216

351

(135
)
 
473

646

(173
)
Net (losses) additions
(1
)
77

(78
)
 
(7
)
100

(107
)
Total postpaid subscribers 2
9,431

9,257

174

 
9,431

9,257

174

Churn (monthly)
0.77
%
0.99
%
(0.22
 pts)
 
0.85
%
0.99
%
(0.14
 pts)
Prepaid
 
 
 
 
 
 
 
Gross additions
119

199

(80
)
 
260

370

(110
)
Net (losses) additions
(66
)
8

(74
)
 
(132
)
(48
)
(84
)
Total prepaid subscribers 2
1,270

1,451

(181
)
 
1,270

1,451

(181
)
Churn (monthly)
4.73
%
4.43
%
0.30
 pts
 
4.86
%
4.57
%
0.29
 pts
Blended ABPU (monthly)

$61.57

$67.16

($5.59
)
 

$63.37

$65.81

($2.44
)
Blended ARPU (monthly)

$49.09

$56.73

($7.64
)
 

$50.98

$55.36

($4.38
)
1 
Subscriber counts, subscriber churn, blended ABPU, and blended ARPU are key performance indicators. See "Key Performance Indicators".
2 
As at end of period.

Service revenue
The 13% decreases in service revenue and blended ARPU this quarter and 8% decreases year to date were each a result of:
•
lower roaming revenue, due to global travel restrictions during COVID-19 and waiving fees until April 30, 2020;
•
a decrease in overage revenue as a result of strong customer adoption of our Rogers Infinite unlimited data plans and lower wireless data usage as customers spent more time at home on WiFi;
•
a decrease in certain fees, partially from waivers provided to customers during the COVID-19 pandemic, starting in March through June 30, 2020; and
•
fewer net additions for both postpaid and prepaid services given the slow market and as most of our stores were closed due to COVID-19.

The 8% decrease in blended ABPU this quarter and 4% decrease year to date were primarily a result of the declines in roaming, overage, and other fee revenue due to the impacts of COVID-19, partially offset by an ongoing shift in subscribers financing their new device purchases.


Rogers Communications Inc.
9
Second Quarter 2020

The decrease in postpaid gross additions, the postpaid net losses, and the lower postpaid churn this quarter and year to date were all a result of the impacts of COVID-19, with store closures and overall lower market activity by Canadians.

Equipment revenue
The 17% decreases in equipment revenue this quarter and year to date were a result of:
•
lower gross additions and device upgrades by existing customers, in part due to the COVID-19 pandemic; partially offset by
•
a shift in the product mix of device sales towards higher-value devices; and
•
lower promotional activity in consideration of changing economic conditions.

Operating expenses
Cost of equipment
The 28% decrease in the cost of equipment this quarter and 27% decrease year to date were a result of:
•
lower gross additions and device upgrades by existing customers, in part due to the COVID-19 pandemic; partially offset by
•
a shift in the product mix of device sales towards higher-value devices.

Other operating expenses
The 5% increase in other operating expenses this quarter and 3% increase year to date were primarily a result of:
•
higher bad debt expense due to changing economic conditions during the COVID-19 pandemic; partially offset by
•
lower commissions based on lower volumes and lower frontline staff costs.

Adjusted EBITDA
The 19% decrease in adjusted EBITDA this quarter and 9% decrease year to date were a result of the revenue and expense changes discussed above.


Rogers Communications Inc.
10
Second Quarter 2020

CABLE

Cable Financial Results
  
Three months ended June 30
 
 
Six months ended June 30
 
(In millions of dollars, except margins)
2020

2019

% Chg

 
2020

2019

% Chg

 
 
 
 
 
 
 
 
Service revenue
964

993

(3
)
 
1,935

1,967

(2
)
Equipment revenue
2

4

(50
)
 
4

6

(33
)
Revenue
966

997

(3
)
 
1,939

1,973

(2
)
 
 
 
 
 
 
 
 
Operating expenses
512

519

(1
)
 
1,032

1,050

(2
)
 
 
 
 
 
 
 
 
Adjusted EBITDA
454

478

(5
)
 
907

923

(2
)
 
 
 
 
 
 
 
 
Adjusted EBITDA margin
47.0
%
47.9
%
(0.9
 pts)
 
46.8
%
46.8
%
—

Capital expenditures
245

285

(14
)
 
496

574

(14
)

Cable Subscriber Results 1 
  
Three months ended June 30
 
 
Six months ended June 30
 
(In thousands, except ARPA and penetration)
2020

2019

Chg

 
2020

2019

Chg

 
 
 
 
 
 
 
 
Internet
 
 
 
 
 
 
 
Net additions
5

22

(17
)
 
22

36

(14
)
Total Internet subscribers 2
2,556

2,466

90

 
2,556

2,466

90

Ignite TV
 
 
 
 
 
 
 
Net additions
18

66

(48
)
 
109

113

(4
)
Total Ignite TV subscribers 2
435

155

280

 
435

155

280

 
 
 
 
 
 
 
 
Homes passed 2
4,517

4,412

105

 
4,517

4,412

105

Customer relationships
 
 
 
 
 
 
 
Net losses
(7
)
—

(7
)
 
(5
)
(1
)
(4
)
Total customer relationships 2
2,505

2,488

17

 
2,505

2,488

17

ARPA (monthly)
$128.12

$133.24

($5.12
)
 
$128.53

$131.89

($3.36
)
 
 
 
 
 
 
 
 
Penetration 2
55.5
%
56.4
%
(0.9
 pts)
 
55.5
%
56.4
%
(0.9
 pts)
1 
Subscriber results are key performance indicators. See "Key Performance Indicators".
2 
As at end of period.

Revenue
The 3% decrease in revenue this quarter and 2% decrease year to date were a result of:
•
a 4% decrease this quarter and a 3% year to date decrease in ARPA as a result of bundled pricing constructs that provide home phone for a lower incremental cost and waiving certain fees and the programs implemented to help customers during the COVID-19 pandemic, partially offset by the impact of Internet service pricing changes in 2019; partially offset by
•
the increase in total customer relationships over the past year, due to growth in our Internet and Ignite TV subscriber bases, partially offset by declines in our legacy television and home phone subscriber bases; and
•
the movement of Internet customers to higher speed and usage tiers in our Ignite Internet™ offerings.

We remain focused on our Connected Home roadmap, driven by our Ignite TV product. We are very pleased with the performance over the past year, during which we have achieved an over 275% increase in our subscriber base. We look forward to the next steps on our roadmap, including adding more apps and content to Ignite TV and launching more new products to help keep our customers connected.

Operating expenses
The 1% decrease in operating expenses this quarter and 2% decrease year to date were a result of:
•
lower employee costs due to fewer subscriber additions and increased self-installation and other cost efficiencies; partially offset by
•
higher bad debt expense due to changing economic conditions during the COVID-19 pandemic.

Rogers Communications Inc.
11
Second Quarter 2020


Adjusted EBITDA
The 5% decrease in adjusted EBITDA this quarter and 2% decrease year to date were a result of the revenue and expense changes discussed above.


Rogers Communications Inc.
12
Second Quarter 2020

MEDIA

Media Financial Results
  
Three months ended June 30
 
 
Six months ended June 30
 
(In millions of dollars, except margins)
2020

2019

% Chg

 
2020

2019

% Chg

 
 
 
 
 
 
 
 
Revenue
296

591

(50
)
 
708

1,059

(33
)
Operating expenses
331

519

(36
)
 
828

1,071

(23
)
 
 
 
 
 
 
 
 
Adjusted EBITDA
(35
)
72

(149
)
 
(120
)
(12
)
n/m

 
 
 
 
 
 
 
 
Adjusted EBITDA margin
(11.8
)%
12.2
%
(24.0
 pts)
 
(16.9
)%
(1.1
)%
(15.8
 pts)
Capital expenditures
13

17

(24
)
 
25

39

(36
)

Our Media results this quarter and year to date have been significantly affected by the COVID-19 pandemic and reflect the continued suspension of all major sports leagues. Additionally, our Media segment is affected by seasonal fluctuations, some of which relate to the typical amount of consumer activity and its impact on advertising and related retail cycles.

Revenue
The 50% decrease in revenue this quarter and 33% decrease year to date were a result of:
•
lower advertising revenue as a result of softness in the advertising market due to COVID-19; and
•
lower sports revenue, including at the Toronto Blue Jays, primarily as a result of the suspension of major sports leagues due to COVID-19.

Operating expenses
The 36% decrease in operating expenses this quarter and 23% decrease year to date were a result of:
•
lower sports-related costs, including lower programming costs and Toronto Blue Jays player payroll and game-day costs as a result of the suspension of major sports leagues; and
•
lower general operating costs as a result of reduced operating activity and cost efficiencies.

Adjusted EBITDA
The decreases in adjusted EBITDA this quarter and year to date were a result of the revenue and expense changes discussed above.


Rogers Communications Inc.
13
Second Quarter 2020

CAPITAL EXPENDITURES
  
Three months ended June 30
 
 
Six months ended June 30
 
(In millions of dollars, except capital intensity)
2020

2019

% Chg

 
2020

2019

% Chg

 
 
 
 
 
 
 
 
Wireless
254

390

(35
)
 
535

672

(20
)
Cable
245

285

(14
)
 
496

574

(14
)
Media
13

17

(24
)
 
25

39

(36
)
Corporate
47

50

(6
)
 
96

74

30

 
 
 
 
 
 
 
 
Capital expenditures 1
559

742

(25
)
 
1,152

1,359

(15
)
 
 
 
 
 
 
 
 
Capital intensity 2
17.7
%
19.6
%
(1.9
 pts)
 
17.5
%
18.4
%
(0.9
 pts)
1 
Includes additions to property, plant and equipment net of proceeds on disposition, but does not include expenditures for spectrum licences or additions to right-of-use assets.
2 
As defined. See "Key Performance Indicators".

As a result of COVID-19, consolidated capital expenditures have declined by 25% this quarter and 15% for the year to date. Most of this decline has been a result of fewer installations, deferrals of projects that have been delayed as a result of the pandemic, and lower costs associated with the introduction of self-install in our Cable business. Despite the overall decline, we continue to invest to support our long-term strategy, including expansion of our 5G network and our Connected Home roadmap.

Wireless
Capital expenditures in Wireless this quarter and year to date were lower than in 2019 and reflect continued investments in our networks. We continued augmenting our existing LTE network with 4.5G technology investments that are also 5G-ready and we continued to work on our 5G deployments in the 600 MHz band and other bands.

Cable
The decreases in capital expenditures in Cable this quarter and year to date were a result of lower purchases of customer premise equipment (CPE) and lower installation activity during the COVID-19 pandemic. While we continue to work towards our ongoing goal of recognizing capital efficiencies and improving our capital intensity, we have continued upgrading our network infrastructure with additional fibre deployments, including increasing our fibre-to-the-home and fibre-to-the-curb distribution. These upgrades 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 as we progress in our Connected Home roadmap.

Media
The decreases in capital expenditures in Media this quarter and year to date were primarily a result of higher prior year stadium investments at the Toronto Blue Jays, partially offset by an increase in current year IT infrastructure expenditures.

Corporate
Corporate capital expenditures this quarter were consistent. For the year to date, the increase was primarily a result of increased overall IT infrastructure investments.

Capital intensity
Capital intensity decreased this quarter and year to date as a result of lower capital expenditures partially offset by lower revenue, as discussed above.


Rogers Communications Inc.
14
Second Quarter 2020

Regulatory Developments

See our 2019 Annual MD&A for a discussion of the significant regulations that affected our operations as at March 5, 2020. The following are the significant regulatory developments since that date.

CRTC review of mobile wireless services
On February 28, 2019, through Telecom Notice of Consultation CRTC 2019-57, Review of mobile wireless services, the Canadian Radio-television and Telecommunications Commission (CRTC) initiated its five-year review to examine the state of the mobile wireless market and to determine whether further action is required to improve choice and affordability for Canadians. After extensive written submissions were filed in 2019, a two-week oral hearing began on February 18, 2020. Final written submissions were filed on July 15, 2020; a final decision from the CRTC will follow. Any adverse decision regarding the items being reviewed in the proceeding could have a material, adverse effect on our financial results and future investments.

Wholesale Internet costing and pricing
On August 15, 2019, in Telecom Order CRTC 2019-288, Follow-up to Telecom Orders 2016-396 and 2016-448 - Final rates for aggregated wholesale high-speed access services (Order), the CRTC set final rates for facilities-based carriers' wholesale HSA, including Rogers' third-party Internet access (TPIA) service. On September 13, 2019, Rogers, in conjunction with the other large Canadian cable companies, filed a motion for Leave to Appeal pursuant to Section 64(1) of the Telecommunications Act with the Federal Court of Appeal (Court) and an associated motion for an interlocutory Stay of the CRTC Order. On November 22, 2019, the Court granted Leave to Appeal and an interlocutory Stay of the CRTC Order. The hearing was held on June 25 and 26, 2020. See "Updates to Risks and Uncertainties" for more information.

CRTC review of wholesale wireline telecommunications services
On September 20, 2016, the CRTC released Telecom Decision CRTC 2016-379, Follow-up to Telecom Regulatory Policy 2015-326 - Implementation of a disaggregated wholesale high-speed access service, including over fibre-to-the-premises access facilities, addressing the technical implementation of new, disaggregated, high-speed access TPIA, a service that will provide access to fibre-to-the-premises (FTTP) facilities as ordered in the CRTC's July 22, 2015 ruling. The decision is consistent with the positions submitted by Rogers in our filings. A decision on final rates was anticipated in 2020 but was temporarily suspended on June 11, 2020 by CRTC Telecom Notice of Consultation 2020-187, Call for comments - Appropriate network configuration for disaggregated wholesale high-speed access services.

3500 MHz spectrum licence band
On June 6, 2019, Innovation, Science and Economic Development Canada (ISED Canada) released its Decision on its Consultation on Revisions to the 3500 MHz Band to Accommodate Flexible Use and Preliminary Consultation on Changes to the 3800 MHz Band. The Decision determined that ISED Canada will issue flexible use licences in a 200 MHz frequency range from 3450-3650 MHz. ISED Canada had anticipated that an auction of the 3500 MHz spectrum not retained by existing licensees would occur in the second half of 2020. On June 5, 2020, the auction was postponed until June 2021.

Updates to Risks and Uncertainties

See our 2019 Annual MD&A for a discussion of the principal risks and uncertainties that could have a material adverse effect on our business and financial results as at March 5, 2020, which should be reviewed in conjunction with this earnings release. The following factors may contribute to those risks and uncertainties.

Outbreak of COVID-19 and related pandemic
On March 11, 2020, the World Health Organization recognized the outbreak of COVID-19 as a pandemic and we have been closely monitoring related developments. As the COVID-19 pandemic continues to significantly impact the well-being of individuals and the Canadian and global economies, we have invoked our business continuity plans and implemented a specific response plan to continue providing our essential services and support to our customers and communities while safeguarding the health and safety of the public and our employees.

We are focused on operating and maintaining our wireless and cable networks, including adding capacity and managing traffic where needed, our media operations, and the key business operations required to ensure service continuity for customers. We have implemented alternative working arrangements for employees while we review and follow directions from the government to ensure the safety of our team and implement necessary safeguards to accommodate a gradual approach in reopening our sites to employees. On March 16, 2020 and until June 30, 2020, we announced a series of measures to help our customers, including the temporary waiving of certain fees and providing access to a rotating selection of television channels and content, as we continually seek new ways to support our customers.


Rogers Communications Inc.
15
Second Quarter 2020

Public and private sector regulations, policies, and other measures aimed at reducing the transmission of COVID-19 include the imposition of business closures, travel restrictions, the promotion of social distancing, and the adoption of work-from-home and online education by companies, schools, and institutions. These measures are impacting how customers use our networks, products, and services, the manner or extent to which we can offer certain products and services (including the suspension of major sports leagues), and the ability of certain suppliers and vendors to provide products and services to us.

This quarter, we introduced several additional programs to help employees manage through the COVID-19 public health crisis and provide support and services to our customers and audiences. After temporarily closing most of our retail locations nationally, with a limited number of stores remaining open to continue providing our essential services to customers, we have begun a steady and phased approach to reopening our retail locations across Canada, following the public health guidelines of their respective provinces.

We remain in close contact with government officials at all levels, suppliers, partners, and key business customers, and our pandemic response plans are continually evolving.

The full extent and impact of the COVID-19 pandemic is unknown. Potential adverse impacts of the COVID-19 pandemic include, but are not limited to:
•
the risk of a material reduction in demand for our products and services due to businesses closing or downsizing, job losses and associated financial hardship or, more generally, a declining level of retail activity, which may lead to a decline in revenue as a result of:
•
lower Wireless subscriber activity, including lower equipment revenue;
•
the continued suspension of major sports leagues and associated programming;
•
services provided to our customers at no cost, such as long distance calling, roaming, and free television channels;
•
lower roaming and overage revenue as customers are unable or unwilling to travel and increasingly stay home; and
•
customers downgrading or cancelling their services;
•
an increase in delinquent or unpaid bills, which may lead to increased bad debt expense;
•
issues delivering certain products and services, or maintaining or upgrading our networks, due to store closures and supply chain disruptions;
•
additional capital expenditures to maintain or expand our networks in order to accommodate substantially increased network usage; and
•
higher costs for new capital.

While we expect certain cost savings to offset some of the lower revenue, such as lower equipment costs or lower sports programming costs, we also cannot predict the extent to which they would be offset or the extent to which they would materialize.

Due to the uncertainty surrounding the duration and potential outcomes of the COVID-19 pandemic, including the results of measures taken to slow the spread and the broader impact COVID-19 may have on the Canadian and global economies or financial markets, we are unable at this time to predict the overall impact on our operations, liquidity, financial condition, or results; however, it has had, and may continue to have a material, adverse impact on our results. Any future epidemic, pandemic, or other public health crisis that occurs in the future may pose similar risks to us.

Wholesale Internet costing and pricing
In August 2019, in Telecom Order CRTC 2019-288, Follow-up to Telecom Orders 2016-396 and 2016-448 - Final rates for aggregated wholesale high-speed access services (Order), the CRTC set final rates for facilities-based carriers' wholesale high-speed access services, including Rogers' TPIA service. The Order set final rates for Rogers that are significantly lower than the interim rates that were previously billed and it further determined that these final rates will apply retroactively to March 31, 2016.

We do not believe the final rates set by the CRTC are just and reasonable as required by the Telecommunications Act as we believe they are below cost. On September 13, 2019, Rogers, in conjunction with the other large Canadian cable companies (Cable Carriers), filed a motion for Leave to Appeal pursuant to Section 64(1) of the Telecommunications Act with the Federal Court of Appeal (Court) and an associated motion for an interlocutory Stay of the CRTC Order. On September 27, 2019, the Court granted an Interim Stay suspending the Order until the Court rules on the Cable Carriers’ motion for an interlocutory Stay of the CRTC’s Order pending the Court’s determination of the Cable Carriers’ motion for Leave to Appeal. On November 22, 2019, the Court granted Leave to Appeal and an interlocutory Stay of the CRTC Order. The appeal was heard in June 2020.


Rogers Communications Inc.
16
Second Quarter 2020

Due to the Court’s granting of an interlocutory Stay and Leave to Appeal, and the significant uncertainty surrounding both the outcome and the amount, if any, we could ultimately have to repay to the resellers, we have not recorded a liability for this contingency at this time. The CRTC’s order as drafted would have resulted in a refund of amounts previously billed to the resellers of approximately $180 million, representing the impact on a retroactive basis from March 31, 2016 to June 30, 2020. We estimate the ongoing impact would be between $10 and $15 million per quarter.

Outcome of proceedings
The outcome of all the proceedings and claims against us, including the matter described above, is subject to future resolution that includes the uncertainties of litigation. It is not possible for us to predict the result or magnitude of the claims due to the various factors and uncertainties involved in the legal process. Based on information currently known to us, we believe it is not probable that the ultimate resolution of any of these proceedings and claims, individually or in total, will have a material adverse effect on our business, financial results, or financial condition. If it becomes probable that we will be held liable for claims against us, we will recognize a provision during the period in which the change in probability occurs, which could be material to our Consolidated Statements of Income or Consolidated Statements of Financial Position.

Key Performance Indicators

We measure the success of our strategy using a number of key performance indicators that are defined and discussed in our 2019 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);
•
Wireless subscriber churn (churn);
•
Wireless blended average billings per user (ABPU);

 
•
Wireless blended average revenue per user
(ARPU);
•
Cable average revenue per account (ARPA);
•
Cable customer relationships;
•
Cable market penetration (penetration);
•
capital intensity; and
•
total service revenue.

Effective January 1, 2020, we updated the key performance indicators we present for our Cable segment to align our external reporting with the focus of our internal business strategy as a result of the convergence of technologies used to deliver Internet and television services, including the continued adoption of Ignite TV. We have begun disclosing Cable average revenue per account (ARPA), customer relationships, and market penetration as defined below. Additionally, we have amended the definition of our subscriber counts for Television to include only Ignite TV and renamed the metric accordingly as a result of shifting our product offering to focus on IPTV. Finally, we have ceased reporting Phone subscribers and total service units as our Phone product is increasingly being bundled with our Internet and Television products for a very low incremental cost. These changes have been made to align our external disclosure with the focus of the business and our strategy. Our updated definitions are as follows:

SUBSCRIBER COUNTS
Subscriber count (Cable)
•
Cable Ignite TV and Internet subscribers are represented by a dwelling unit.
•
When there is more than one unit in a single dwelling, such as an apartment building, each tenant with cable service is counted as an individual subscriber, whether the service is invoiced separately or included in the tenant's rent. Institutional units, such as hospitals or hotels, are each considered one subscriber.
•
Cable Ignite TV and Internet subscribers include only those subscribers who have service installed and operating, and who are being billed accordingly.
•
Subscriber counts exclude certain business services delivered over our fibre network and data centre infrastructure, and circuit-switched local and long distance voice services and legacy data services where access is delivered using leased third-party network elements and tariffed ILEC services.

CUSTOMER RELATIONSHIPS
Customer relationships are represented by dwelling units where at least one of our Cable services (i.e. Internet, legacy television or Ignite TV, and/or home phone) are installed and operating, and the service or services are billed accordingly. When there is more than one unit in one dwelling, such as an apartment building, each tenant with at least one of our Cable services is counted as an individual customer relationship, whether the service is invoiced separately or included in the tenant's rent. Institutional units, like hospitals or hotels, are each considered one customer relationship.


Rogers Communications Inc.
17
Second Quarter 2020

AVERAGE REVENUE PER ACCOUNT (CABLE)
Average revenue per account (ARPA) measures total average spending by a single customer account on Cable products. We use it to identify trends and measure our success in attracting and retaining multiple-service accounts. We calculate ARPA by dividing Cable service revenue by the average total number of customer relationships for the same period.

MARKET PENETRATION
Market penetration (penetration) measures our success at attracting new households to our brands and products within our network footprint. Market penetration is calculated by dividing customer relationships by homes passed. An increasing market penetration rate reflects more new customer relationships than new homes passed.


Rogers Communications Inc.
18
Second Quarter 2020

Non-GAAP Measures and Related Performance Measures

We use the following non-GAAP measures and related performance 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 or related performance 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
●
 
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; 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; current portion of lease liabilities; lease liabilities; 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.


Rogers Communications Inc.
19
Second Quarter 2020

Reconciliation of adjusted EBITDA
  
Three months ended June 30
 
 
Six months ended June 30
 
(In millions of dollars)
2020

2019

 
2020

2019

 
 
 
 
 
 
Net income
279

591

 
631

982

Add:
 
 
 
 
 
Income tax expense
102

186

 
219

325

Finance costs
214

206

 
434

395

Depreciation and amortization
650

614

 
1,289

1,223

 
 
 
 
 
 
EBITDA
1,245

1,597

 
2,573

2,925

Add (deduct):
 
 
 
 
 
Other income
7

(1
)
 
(7
)
(14
)
Restructuring, acquisition and other
42

39

 
63

59

 
 
 
 
 
 
Adjusted EBITDA
1,294

1,635

 
2,629

2,970


Reconciliation of adjusted EBITDA margin
  
Three months ended June 30
 
 
Six months ended June 30
 
(In millions of dollars, except margins)
2020

2019

 
2020

2019

 
 
 
 
 
 
Adjusted EBITDA
1,294

1,635

 
2,629

2,970

Divided by: total revenue
3,155

3,780

 
6,571

7,367

 
 
 
 
 
 
Adjusted EBITDA margin
41.0
%
43.3
%
 
40.0
%
40.3
%

Reconciliation of adjusted net income
  
Three months ended June 30
 
 
Six months ended June 30
 
(In millions of dollars)
2020

2019

 
2020

2019

 
 
 
 
 
 
Net income
279

591

 
631

982

Add (deduct):
 
 
 
 
 
Restructuring, acquisition and other
42

39

 
63

59

Income tax impact of above items
(11
)
(10
)
 
(17
)
(16
)
Income tax adjustment, legislative tax change
—

(23
)
 
—

(23
)
 
 
 
 
 
 
Adjusted net income
310

597

 
677

1,002



Rogers Communications Inc.
20
Second Quarter 2020

Reconciliation of adjusted earnings per share
 
Three months ended June 30
 
 
Six months ended June 30
 
(In millions of dollars, except per share amounts; number of shares outstanding in millions)
2020

2019

 
2020

2019

 
 
 
 
 
 
Adjusted basic earnings per share:
 
 
 
 
 
Adjusted net income
310

597

 
677

1,002

Divided by:
 
 
 
 
 
Weighted average number of shares outstanding
505

512

 
505

513

 
 
 
 
 
 
Adjusted basic earnings per share

$0.61


$1.17

 

$1.34


$1.95

 
 
 
 
 
 
Adjusted diluted earnings per share:
 
 
 
 
 
Diluted adjusted net income
304

595

 
660

1,001

Divided by:
 
 
 
 
 
Diluted weighted average number of shares outstanding
506

514

 
506

515

 
 
 
 
 
 
Adjusted diluted earnings per share

$0.60


$1.16

 

$1.30


$1.94


Reconciliation of free cash flow
  
Three months ended June 30
 
 
Six months ended June 30
 
(In millions of dollars)
2020

2019

 
2020

2019

 
 
 
 
 
 
Cash provided by operating activities
1,429

1,057

 
2,388

2,055

Add (deduct):
 
 
 
 
 
Capital expenditures
(559
)
(742
)
 
(1,152
)
(1,359
)
Interest on borrowings, net of capitalized interest
(192
)
(183
)
 
(379
)
(351
)
Interest paid
198

139

 
398

359

Restructuring, acquisition and other
42

39

 
63

59

Program rights amortization
(16
)
(22
)
 
(38
)
(41
)
Net change in contract asset balances
(390
)
20

 
(716
)
29

Net change in financing receivable balances
291

—

 
550

—

Change in non-cash operating working capital items
(355
)
209

 
(169
)
222

Other adjustments
20

92

 
(15
)
41

 
 
 
 
 
 
Free cash flow
468

609

 
930

1,014



Rogers Communications Inc.
21
Second Quarter 2020

Reconciliation of adjusted net debt and debt leverage ratio
 
As at
June 30

As at
December 31

(In millions of dollars)
2020

2019

 
 
 
Current portion of long-term debt
1,450

—

Long-term debt
17,558

15,967

Deferred transaction costs and discounts
178

163

 
19,186

16,130

Add (deduct):
 
 
Net debt derivative assets
(2,808
)
(1,383
)
Credit risk adjustment related to net debt derivative assets
(152
)
(31
)
Short-term borrowings
650

2,238

Current portion of lease liabilities
271

230

Lease liabilities
1,574

1,495

Cash and cash equivalents
(1,795
)
(494
)
 
 
 
Adjusted net debt
16,926

18,185

 
As at
June 30

As at
December 31

(In millions of dollars, except ratios)
2020

2019

 
 
 
Adjusted net debt
16,926

18,185

Divided by: trailing 12-month adjusted EBITDA
5,871

6,212

 
 
 
Debt leverage ratio
2.9

2.9



Rogers Communications Inc.
22
Second Quarter 2020

Rogers Communications Inc.
Interim Condensed Consolidated Statements of Income
(In millions of dollars, except per share amounts, unaudited)
  
Three months ended June 30
 
 
Six months ended June 30
 
  
2020

2019

 
2020

2019

 
 
 
 
 
 
Revenue
3,155

3,780

 
6,571

7,367

 
 
 
 
 
 
Operating expenses:
 
 
 
 
 
Operating costs
1,861

2,145

 
3,942

4,397

Depreciation and amortization
650

614

 
1,289

1,223

Restructuring, acquisition and other
42

39

 
63

59

Finance costs
214

206

 
434

395

Other expense (income)
7

(1
)
 
(7
)
(14
)
 
 
 
 
 
 
Income before income tax expense
381

777

 
850

1,307

Income tax expense
102

186

 
219

325

 
 
 
 
 
 
Net income for the period
279

591

 
631

982

 
 
 
 
 
 
Earnings per share:
 
 
 
 
 
Basic
$0.55
$1.15
 
$1.25
$1.91
Diluted
$0.54
$1.15
 
$1.21
$1.90


Rogers Communications Inc.
23
Second Quarter 2020

Rogers Communications Inc.
Interim Condensed Consolidated Statements of Financial Position
(In millions of dollars, unaudited)
 
As at
June 30

As at
December 31

  
2020

2019

 
 
 
Assets
 
 
Current assets:
 
 
Cash and cash equivalents
1,795

494

Accounts receivable
1,621

2,304

Inventories
319

460

Current portion of contract assets
910

1,234

Other current assets
855

524

Current portion of derivative instruments
94

101

Total current assets
5,594

5,117

 
 
 
Property, plant and equipment
14,048

13,934

Intangible assets
8,883

8,905

Investments
2,520

2,830

Derivative instruments
2,771

1,478

Contract assets
252

557

Other long-term assets
534

275

Goodwill
3,935

3,923

 
 
 
Total assets
38,537

37,019

 
 
 
Liabilities and shareholders' equity
 
 
Current liabilities:
 
 
Short-term borrowings
650

2,238

Accounts payable and accrued liabilities
2,340

3,033

Income tax payable
299

48

Other current liabilities
103

141

Contract liabilities
297

224

Current portion of long-term debt
1,450

—

Current portion of lease liabilities
271

230

Current portion of derivative instruments
9

50

Total current liabilities
5,419

5,964

 
 
 
Provisions
36

36

Long-term debt
17,558

15,967

Derivative instruments
12

90

Lease liabilities
1,574

1,495

Other long-term liabilities
567

614

Deferred tax liabilities
3,398

3,437

Total liabilities
28,564

27,603

 
 
 
Shareholders' equity
9,973

9,416

 
 
 
Total liabilities and shareholders' equity
38,537

37,019



Rogers Communications Inc.
24
Second Quarter 2020

Rogers Communications Inc.
Interim Condensed Consolidated Statements of Cash Flows
(In millions of dollars, unaudited)
  
Three months ended June 30
 
 
Six months ended June 30
 
  
2020

2019

 
2020

2019

Operating activities:
 
 
 
 
 
Net income for the period
279

591

 
631

982

Adjustments to reconcile net income to cash provided by operating activities:
 
 
 


Depreciation and amortization
650

614

 
1,289

1,223

Program rights amortization
16

22

 
38

41

Finance costs
214

206

 
434

395

Income tax expense
102

186

 
219

325

Post-employment benefits contributions, net of expense
(80
)
(123
)
 
(68
)
(115
)
Net change in contract asset balances
390

(20
)
 
716

(29
)
Net change in financing receivable balances
(291
)
—

 
(550
)
—

Other
67

30

 
76

60

Cash provided by operating activities before changes in non-cash working capital items, income taxes paid, and interest paid
1,347

1,506

 
2,785

2,882

Change in non-cash operating working capital items
355

(209
)
 
169

(222
)
Cash provided by operating activities before income taxes paid and interest paid
1,702

1,297

 
2,954

2,660

Income taxes paid
(75
)
(101
)
 
(168
)
(246
)
Interest paid
(198
)
(139
)
 
(398
)
(359
)
 
 
 
 
 
 
Cash provided by operating activities
1,429

1,057

 
2,388

2,055

 
 
 
 
 
 
Investing activities:
 
 
 
 
 
Capital expenditures
(559
)
(742
)
 
(1,152
)
(1,359
)
Additions to program rights
(7
)
(7
)
 
(22
)
(14
)
Changes in non-cash working capital related to capital expenditures and intangible assets
(25
)
26

 
(154
)
(81
)
Acquisitions and other strategic transactions, net of cash acquired
—

(1,731
)
 
—

(1,731
)
Other
(9
)
(7
)
 
(28
)
(10
)
 
 
 
 
 
 
Cash used in investing activities
(600
)
(2,461
)
 
(1,356
)
(3,195
)
 
 
 
 
 
 
Financing activities:
 
 
 
 
 
Net repayment of short-term borrowings
(310
)
(642
)
 
(1,727
)
(212
)
Net (repayment) issuance of long-term debt
(345
)
2,676

 
2,540

2,276

Net (payments) proceeds on settlement of debt derivatives and forward contracts
(10
)
(93
)
 
80

(104
)
Principal payments of lease liabilities
(48
)
(38
)
 
(98
)
(79
)
Transaction costs incurred
(5
)
(33
)
 
(21
)
(33
)
Repurchase of Class B Non-Voting Shares
—

(69
)
 
—

(205
)
Dividends paid
(252
)
(257
)
 
(505
)
(504
)
 
 
 
 
 
 
Cash (used in) provided by financing activities
(970
)
1,544

 
269

1,139

 
 
 
 
 
 
Change in cash and cash equivalents
(141
)
140

 
1,301

(1
)
Cash and cash equivalents, beginning of period
1,936

264

 
494

405

 
 
 
 
 
 
Cash and cash equivalents, end of period
1,795

404

 
1,795

404



Rogers Communications Inc.
25
Second Quarter 2020

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
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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;
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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
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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 and Related Performance Measures"), among others:
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revenue;
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total service revenue;
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adjusted EBITDA;
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capital expenditures;
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cash income tax payments;
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free cash flow;
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dividend payments;
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the growth of new products and services;
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expected growth in subscribers and the services to which they subscribe;
 
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the cost of acquiring and retaining subscribers and deployment of new services;
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continued cost reductions and efficiency improvements;
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traction against our debt leverage ratio;
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statements relating to plans we have implemented in response to the COVID-19 pandemic and its impact on us; and
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all other statements that are not historical facts.

Our conclusions, forecasts, and projections are based on the following factors, among others:
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general economic and industry growth rates;
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currency exchange rates and interest rates;
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product pricing levels and competitive intensity;
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subscriber growth;
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pricing, usage, and churn rates;
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changes in government regulation;
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technology deployment;
 
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availability of devices;
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timing of new product launches;
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content and equipment costs;
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the integration of acquisitions;
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industry structure and stability; and
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the impact of the COVID-19 pandemic on our operations, liquidity, financial condition, or results.

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:
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regulatory changes;
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technological changes;
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economic, geopolitical, and other conditions affecting commercial activity;
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unanticipated changes in content or equipment costs;
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changing conditions in the entertainment, information, and communications industries;
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the integration of acquisitions;
 
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litigation and tax matters;
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the level of competitive intensity;
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the emergence of new opportunities;
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external threats, such as epidemics, pandemics, and other public health crises, natural disasters, or cyberattacks, among others; and
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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.

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Second Quarter 2020

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.

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, its operations, and its financial performance and condition, fully review the sections of this earnings release entitled "Updates to Risks and Uncertainties" and "Regulatory Developments" and fully review the sections in our 2019 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 sedar.com, sec.gov, our website, or any other website referenced in this document is not part of or incorporated into this earnings release.

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Rogers Communications Inc.
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Second Quarter 2020