Rogers 2009 Annual Report Download - page 30

34 ROGERS COMMUNICATIONS INC. 2009 ANNUAL REPORT
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OPERATING HIGHLIGHTS FOR THE YEAR ENDED
DECEMBER 31, 2009
• Grew cable telephony lines by 97,000, high-speed Internet sub-
scribers by 48,000, and digital cable households by 114,000, while
television subscribers declined by 24,000 in the year.
• Operating,generalandadministrativeexpenses,whichinclude
all other expenses incurred to operate the business on a day-to-
day basis and to service subscriber relationships, including:
• the monthly contracted payments for the acquisition of
programming paid directly to the programming suppliers,
copyright collec tives and the Canadian Programming
Production Funds;
• Internet interconnectivity and usage charges and the cost of
operating Cable’s Internet service;
• intercarrier payments for interconnect to the local access and
long-distance carriers related to cable and circuit-switched
telephony service;
• technical service expenses, which include the costs of
operating and maintaining cable networks as well as certain
customer service activities, such as installations and repair;
• customer care expenses, which include the costs associated
with customer order-taking and billing inquiries;
• community television expenses, which consist of the costs to
operate a series of local community-based television stations
per regulatory requirements in Cable’s licenced systems;
• othergeneralandadministrativeexpenses;and
• expenses related to the corporate management of the Rogers
Retail stores;
• Cost of Rogers Retail sales, which is composed of store
merchandise and depreciation related to the acquisition of DVD
and game rental assets.
In the cable industry in Canada, the demand for services, particularly
Internet, digital television and cable telephony services, continues
to grow and the variable costs associated with this growth, such
as commissions for subscriber activations, as well as the fixed costs
of acquiring new subscribers, are significant. As such, fluctuations
in the number of activations of new subscribers from period-to-
period result in fluctuations in sales, marketing and field services
expenses.
Summarized Cable Financial Results
Years ended December 31,
(In millions of dollars, except margin) 2009 2008(1) %Chg
Operating revenue
Cable Operations(2) $ 3,074 $ 2,878 7
RBS 503 526 (4)
Rogers Retail 399 417 (4)
Intercompany eliminations (28) (12) 133
Total operating revenue 3,948 3,809 4
Adjusted operating profit (loss) before the undernoted
Cable Operations(2) 1,298 1,171 11
RBS 35 59 (41)
Rogers Retail (9) 3 n/m
Adjusted operating profit(3) 1,324 1,233 7
Stock-based compensation recovery(4) 12 32 (63)
Settlement of pension obligations(5) (11) – n/m
Integration and restructuring expenses(6) (46) (20) 130
Adjustment for CRTC Part II fees decision(7) 46 (25) n/m
Operating profit(3) $ 1,325 $ 1,220 9
Adjusted operating profit (loss) margin(3)
Cable Operations(2) 42.2% 40.7%
RBS 7.0% 11.2%
Rogers Retail (2.3%) 0.7%
Additions to PP&E(3)
Cable Operations(2) $ 642 $ 829 (23)
RBS 37 36 3
Rogers Retail 14 21 (33)
Total additions to PP&E $ 693 $ 886 (22)
(1) The operating results of Aurora Cable are included in Cable’s results of operations from the date of acquisition on June 12, 2008.
(2) Cable Operations segment includes Core Cable services, Internet services and Rogers Home Phone services.
(3) As defined. See the sections entitled “Key Performance Indicators and Non-GAAP Measures” and “Supplementary Information: Non-GAAP Calculations”.
(4) See the section entitled “Stock-based Compensation”.
(5) Relates to the settlement of pension obligations for all employees in the pension plans who had retired as of January 1, 2009 as a result of annuity purchases by the Company’s pension plans.
(6) For the year ended December 31, 2009, costs incurred relate to combining the Cable and Wireless businesses into a communications organization and to severances and restructuring expenses
related to the outsourcing of certain information technology functions, the integration of Futureway Communications Inc. (“Futureway”) and Aurora Cable TV Limited (“Aurora Cable”); and
the closure of certain Rogers Retail stores. For the year ended December 31, 2008, costs incurred relate to severances resulting from the restructuring of our employee base to improve our cost
structure in light of the declining economic conditions, the integration of Call-Net, Futureway and Aurora Cable, the restructuring of RBS, and the closure of certain Rogers Retail stores.
(7) Relates to an adjustment for CRTC Part II fees related to prior periods. See the section entitled “Government Regulation and Regulatory Developments”.