Rogers 2009 Annual Report Download - page 35

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ROGERS COMMUNICATIONS INC. 2009 ANNUAL REPORT 39
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(1) As defined. See the sections entitled “Key Performance Indicators and Non-GAAP Measures” and “Supplementary Information: Non-GAAP Calculations”.
(2) See the section entitled “Stock-based Compensation”.
(3) 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.
(4) For the year ended December 31, 2009, costs incurred relate to i) severances resulting from the targeted restructuring of our employee base to combine the Cable and Wireless businesses into
a communications organization; and ii) the closure of certain Rogers Retail stores. For the year ended December 31, 2008, costs incurred relate to i) severances resulting from the restructuring
of our employee base to improve our cost structure in light of the current economic conditions; and ii) the closure of certain Rogers Retail stores.
RBS Revenue
The decrease in RBS revenues reflects an ongoing decline in
the legacy portion of RBS’ business partially offset by an increase
in long-distance revenue. RBS is focused on leveraging on-net
revenue opportunities utilizing Cable’s existing network facilities
as well as maintaining its existing medium enterprise customer
base while growing the carrier portion of its business. RBS
continues to work to manage the profitability of existing enterprise
customers. For 2009, RBS long-distance revenues increased
$21 million and local and data revenues decreased by $21 million
and $23 million respectively.
RBS Operating Expenses
Operating, general and administrative expenses were relatively
unchanged for 2009, compared to 2008. An increase in long-
distance costs due to higher call volumes and country mix resulted
in higher operating costs which were offset by lower data and local
carriers charges.
Sales and marketing expenses were relatively unchanged year-over-
year and reflect cost control initiatives and targeted marketing
within the medium and large enterprise and carrier segments.
RBS Adjusted Operating Profit
RBS adjusted operating profit has declined year over year compared
to 2008 due to the decrease in revenues as RBS transitions away from
its legacy data and local revenues. As RBS is focusing its attention
on growing future revenue streams from on-net IP technologies
in voice and data it is investing in incremental operating costs to
support that growth and therefore offsetting the cost declines
from the legacy side of the business.
ROGERS RETAIL
Summarized Financial Results
Years ended December 31,
(In millions of dollars, except margin) 2009 2008 %Chg
Rogers Retail operating revenue $ 399 $ 417 (4)
Operating expenses before the undernoted 408 414 (1)
Adjusted operating (loss) profit(1) (9) 3 n/m
Stock-based compensation recovery(2) 1 1 -
Settlement of pension obligations(3) (1) - n/m
Integration and restructuring expenses(4) (12) (5) 140
Operating loss(1) $ (21) $ (1) n/m
Adjusted operating (loss) profit margin(1) (2.3%) 0.7%
Rogers Retail Revenue
The decrease in Rogers Retail revenue for 2009, compared to
2008, was the result of the continued decline in video rental and
sales combined with a lower volume of certain wireless product
upgrades in 2009 by existing Wireless customers, partially offset by
strong sales of Cable’s products.
Rogers Retail Adjusted Operating (Loss) Profit
Adjusted operating (loss) profit at Rogers Retail decreased for 2009,
compared to 2008, reflecting the trends noted above.
CABLE ADDITIONS TO PP&E
The Cable Operations segment categorizes its PP&E expenditures
according to a standardized set of reporting categories that were
developed and agreed to by the U.S. cable television industry
and which facilitate comparisons of additions to PP&E between
different cable companies. Under these industry definitions, Cable
Operations additions to PP&E are classified into the following five
categories:
• Customer premise equipment (“CPE”), which includes the
equipment for digital set-top terminals, Internet modems and
associated installation costs;
• Scalableinfrastructure, whichincludesnon-CPEcoststomeet
business growth and to provide service enhancements, including
many of the costs to-date of the cable telephony initiative;
• Line extensions, which includes network costs to enter new
service areas;
• Upgrades and rebuild, which includes the costs to modify
or replace existing co-axial cable, fibre-optic equipment and
network electronics; and
• Support capital,which includes the costsassociatedwith the
purchase, replacement or enhancement of non-network assets.
Business Solutions 5%
Retail 2%
Cable Operations 93%
CABLE ADDITIONS TO PP&E
(%)