TELUS CORPORATION
CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
MARCH 31, 2018
condensed interim consolidated statements of income and other comprehensive income | (unaudited) |
|
|
|
| Three months |
| ||||
Periods ended March 31 (millions except per share amounts) |
| Note |
| 2018 |
| 2017 |
| ||
|
|
|
| (Note 2(c)) |
| (adjusted – |
| ||
OPERATING REVENUES |
|
|
|
|
|
|
| ||
Service |
|
|
| $ | 2,886 |
| $ | 2,762 |
|
Equipment |
|
|
| 465 |
| 408 |
| ||
Revenues arising from contracts with customers |
| 6 |
| 3,351 |
| 3,170 |
| ||
Other operating income |
| 7 |
| 26 |
| 13 |
| ||
|
|
|
| 3,377 |
| 3,183 |
| ||
OPERATING EXPENSES |
|
|
|
|
|
|
| ||
Goods and services purchased |
|
|
| 1,408 |
| 1,324 |
| ||
Employee benefits expense |
| 8 |
| 700 |
| 624 |
| ||
Depreciation |
| 17 |
| 411 |
| 402 |
| ||
Amortization of intangible assets |
| 18 |
| 139 |
| 130 |
| ||
|
|
|
| 2,658 |
| 2,480 |
| ||
OPERATING INCOME |
|
|
| 719 |
| 703 |
| ||
Financing costs |
| 9 |
| 156 |
| 138 |
| ||
INCOME BEFORE INCOME TAXES |
|
|
| 563 |
| 565 |
| ||
Income taxes |
| 10 |
| 151 |
| 143 |
| ||
NET INCOME |
|
|
| 412 |
| 422 |
| ||
OTHER COMPREHENSIVE INCOME |
| 11 |
|
|
|
|
| ||
Items that may subsequently be reclassified to income |
|
|
|
|
|
|
| ||
Change in unrealized fair value of derivatives designated as cash flow hedges |
|
|
| (7 | ) | (9 | ) | ||
Foreign currency translation adjustment arising from translating financial statements of foreign operations |
|
|
| (4 | ) | 3 |
| ||
|
|
|
| (11 | ) | (6 | ) | ||
Items never subsequently reclassified to income |
|
|
|
|
|
|
| ||
Change in measurement of investment financial assets |
|
|
| — |
| (2 | ) | ||
Employee defined benefit plan re-measurements |
|
|
| (43 | ) | 68 |
| ||
|
|
|
| (43 | ) | 66 |
| ||
|
|
|
| (54 | ) | 60 |
| ||
COMPREHENSIVE INCOME |
|
|
| $ | 358 |
| $ | 482 |
|
NET INCOME ATTRIBUTABLE TO: |
|
|
|
|
|
|
| ||
Common Shares |
|
|
| $ | 410 |
| $ | 414 |
|
Non-controlling interests |
|
|
| 2 |
| 8 |
| ||
|
|
|
| $ | 412 |
| $ | 422 |
|
COMPREHENSIVE INCOME ATTRIBUTABLE TO: |
|
|
|
|
|
|
| ||
Common Shares |
|
|
| $ | 357 |
| $ | 472 |
|
Non-controlling interests |
|
|
| 1 |
| 10 |
| ||
|
|
|
| $ | 358 |
| $ | 482 |
|
NET INCOME PER COMMON SHARE |
| 12 |
|
|
|
|
| ||
Basic |
|
|
| $ | 0.69 |
| $ | 0.70 |
|
Diluted |
|
|
| $ | 0.69 |
| $ | 0.70 |
|
|
|
|
|
|
|
|
| ||
TOTAL WEIGHTED AVERAGE COMMON SHARES OUTSTANDING |
|
|
|
|
|
|
| ||
Basic |
|
|
| 595 |
| 591 |
| ||
Diluted |
|
|
| 595 |
| 591 |
|
The accompanying notes are an integral part of these condensed interim consolidated financial statements.
condensed interim consolidated statements of financial position | (unaudited) |
As at (millions) |
| Note |
| March 31, |
| December 31, |
| January 1, |
| |||
|
|
|
|
|
| (adjusted – |
| (Note 2(c)) |
| |||
ASSETS |
|
|
|
|
|
|
|
|
| |||
Current assets |
|
|
|
|
|
|
|
|
| |||
Cash and temporary investments, net |
|
|
| $ | 415 |
| $ | 509 |
| $ | 432 |
|
Accounts receivable |
| 6(b) |
| 1,449 |
| 1,614 |
| 1,462 |
| |||
Income and other taxes receivable |
|
|
| 15 |
| 96 |
| 9 |
| |||
Inventories |
| 1(b) |
| 347 |
| 380 |
| 320 |
| |||
Contract assets |
| 6(c) |
| 757 |
| 757 |
| 700 |
| |||
Prepaid expenses |
| 20 |
| 614 |
| 493 |
| 443 |
| |||
Current derivative assets |
| 4(e) |
| 26 |
| 18 |
| 11 |
| |||
|
|
|
| 3,623 |
| 3,867 |
| 3,377 |
| |||
Non-current assets |
|
|
|
|
|
|
|
|
| |||
Property, plant and equipment, net |
| 17 |
| 11,482 |
| 11,368 |
| 10,464 |
| |||
Intangible assets, net |
| 18 |
| 10,754 |
| 10,658 |
| 10,364 |
| |||
Goodwill, net |
| 18 |
| 4,569 |
| 4,236 |
| 3,787 |
| |||
Contract assets |
| 6(c) |
| 377 |
| 396 |
| 352 |
| |||
Other long-term assets |
| 20 |
| 480 |
| 528 |
| 733 |
| |||
|
|
|
| 27,662 |
| 27,186 |
| 25,700 |
| |||
|
|
|
| $ | 31,285 |
| $ | 31,053 |
| $ | 29,077 |
|
|
|
|
|
|
|
|
|
|
| |||
LIABILITIES AND OWNERS’ EQUITY |
|
|
|
|
|
|
|
|
| |||
Current liabilities |
|
|
|
|
|
|
|
|
| |||
Short-term borrowings |
| 22 |
| $ | 100 |
| $ | 100 |
| $ | 100 |
|
Accounts payable and accrued liabilities |
| 23 |
| 2,054 |
| 2,460 |
| 2,330 |
| |||
Income and other taxes payable |
|
|
| 38 |
| 34 |
| 37 |
| |||
Dividends payable |
| 13 |
| 299 |
| 299 |
| 284 |
| |||
Advance billings and customer deposits |
| 24 |
| 624 |
| 632 |
| 584 |
| |||
Provisions |
| 25 |
| 69 |
| 78 |
| 124 |
| |||
Current maturities of long-term debt |
| 26 |
| 852 |
| 1,404 |
| 1,327 |
| |||
Current derivative liabilities |
| 4(e) |
| 6 |
| 33 |
| 12 |
| |||
|
|
|
| 4,042 |
| 5,040 |
| 4,798 |
| |||
Non-current liabilities |
|
|
|
|
|
|
|
|
| |||
Provisions |
| 25 |
| 726 |
| 511 |
| 395 |
| |||
Long-term debt |
| 26 |
| 13,138 |
| 12,256 |
| 11,604 |
| |||
Other long-term liabilities |
| 27 |
| 873 |
| 847 |
| 736 |
| |||
Deferred income taxes |
|
|
| 2,926 |
| 2,941 |
| 2,511 |
| |||
|
|
|
| 17,663 |
| 16,555 |
| 15,246 |
| |||
Liabilities |
|
|
| 21,705 |
| 21,595 |
| 20,044 |
| |||
Owners’ equity |
|
|
|
|
|
|
|
|
| |||
Common equity |
| 28 |
| 9,508 |
| 9,416 |
| 9,014 |
| |||
Non-controlling interests |
|
|
| 72 |
| 42 |
| 19 |
| |||
|
|
|
| 9,580 |
| 9,458 |
| 9,033 |
| |||
|
|
|
| $ | 31,285 |
| $ | 31,053 |
| $ | 29,077 |
|
|
|
|
|
|
|
|
|
|
| |||
Contingent Liabilities |
| 29 |
|
|
|
|
|
|
|
The accompanying notes are an integral part of these condensed interim consolidated financial statements.
condensed interim consolidated statements of changes in owners’ equity | (unaudited) |
|
|
|
| Common equity |
|
|
|
|
| |||||||||||||||||
|
|
|
| Equity contributed |
|
|
| Accumulated |
|
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| |||||||||||
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|
|
| Common Shares (Note 28) |
|
|
|
|
| other |
|
|
| Non- |
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| |||||||||
(millions) |
| Note |
| Number |
| Share |
| Contributed |
| Retained |
| comprehensive |
| Total |
| controlling |
| Total |
| |||||||
Balance as at January 1, 2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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| |||||||
As previously reported |
|
|
| 590 |
| $ | 5,029 |
| $ | 372 |
| $ | 2,474 |
| $ | 42 |
| $ | 7,917 |
| $ | 19 |
| $ | 7,936 |
|
IFRS 9, Financial Instruments transitional amount |
| 2(a), 11 |
| — |
| — |
| — |
| 3 |
| (3 | ) | — |
| — |
| — |
| |||||||
IFRS 15, Revenue from Contracts with Customers transitional amount |
| 2(c) |
| — |
| — |
| — |
| 1,097 |
| — |
| 1,097 |
| — |
| 1,097 |
| |||||||
As adjusted |
|
|
| 590 |
| 5,029 |
| 372 |
| 3,574 |
| 39 |
| 9,014 |
| 19 |
| 9,033 |
| |||||||
Net income |
| 2(c) |
| — |
| — |
| — |
| 414 |
| — |
| 414 |
| 8 |
| 422 |
| |||||||
Other comprehensive income |
| 11 |
| — |
| — |
| — |
| 68 |
| (10 | ) | 58 |
| 2 |
| 60 |
| |||||||
Dividends |
| 13 |
| — |
| — |
| — |
| (283 | ) | — |
| (283 | ) | — |
| (283 | ) | |||||||
Share option award net-equity settlement feature |
| 14(d) |
| 1 |
| 1 |
| (1 | ) | — |
| — |
| — |
| — |
| — |
| |||||||
Change in ownership interests of subsidiary |
|
|
| — |
| — |
| (3 | ) | — |
| — |
| (3 | ) | 1 |
| (2 | ) | |||||||
Balance as at March 31, 2017 |
|
|
| 591 |
| $ | 5,030 |
| $ | 368 |
| $ | 3,773 |
| $ | 29 |
| $ | 9,200 |
| $ | 30 |
| $ | 9,230 |
|
Balance as at January 1, 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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| |||||||
As previously reported |
|
|
| 595 |
| $ | 5,205 |
| $ | 370 |
| $ | 2,595 |
| $ | 51 |
| $ | 8,221 |
| $ | 42 |
| $ | 8,263 |
|
IFRS 9, Financial Instruments transitional amount |
| 2(a), 11 |
| — |
| — |
| — |
| 4 |
| (4 | ) | — |
| — |
| — |
| |||||||
IFRS 15, Revenue from Contracts with Customers transitional amount |
| 2(c) |
| — |
| — |
| — |
| 1,195 |
| — |
| 1,195 |
| — |
| 1,195 |
| |||||||
As adjusted |
|
|
| 595 |
| 5,205 |
| 370 |
| 3,794 |
| 47 |
| 9,416 |
| 42 |
| 9,458 |
| |||||||
Net income |
|
|
| — |
| — |
| — |
| 410 |
| — |
| 410 |
| 2 |
| 412 |
| |||||||
Other comprehensive income |
| 11 |
| — |
| — |
| — |
| (43 | ) | (10 | ) | (53 | ) | (1 | ) | (54 | ) | |||||||
Dividends |
| 13 |
| — |
| — |
| — |
| (299 | ) | — |
| (299 | ) | — |
| (299 | ) | |||||||
Dividends reinvested and optional cash payments |
| 13(b), 14(c) |
| — |
| 20 |
| — |
| — |
| — |
| 20 |
| — |
| 20 |
| |||||||
Share option award net-equity settlement feature |
| 14(d) |
| — |
| 1 |
| (1 | ) | — |
| — |
| — |
| — |
| — |
| |||||||
Change in ownership interests of subsidiary |
| 31(a) |
| — |
| — |
| 14 |
| — |
| — |
| 14 |
| 29 |
| 43 |
| |||||||
Balance as at March 31, 2018 |
|
|
| 595 |
| $ | 5,226 |
| $ | 383 |
| $ | 3,862 |
| $ | 37 |
| $ | 9,508 |
| $ | 72 |
| $ | 9,580 |
|
The accompanying notes are an integral part of these condensed interim consolidated financial statements.
condensed interim consolidated statements of cash flows | (unaudited) |
|
|
|
| Three months |
| ||||
Periods ended March 31 (millions) |
| Note |
| 2018 |
| 2017 |
| ||
|
|
|
|
|
| (adjusted – |
| ||
OPERATING ACTIVITIES |
|
|
|
|
|
|
| ||
Net income |
|
|
| $ | 412 |
| $ | 422 |
|
Adjustments to reconcile net income to cash provided by operating activities: |
|
|
|
|
|
|
| ||
Depreciation and amortization |
|
|
| 550 |
| 532 |
| ||
Deferred income taxes |
| 10 |
| 7 |
| 86 |
| ||
Share-based compensation expense, net |
| 14(a) |
| 18 |
| 16 |
| ||
Net employee defined benefit plans expense |
| 15(a) |
| 25 |
| 21 |
| ||
Employer contributions to employee defined benefit plans |
|
|
| (21 | ) | (22 | ) | ||
Non-current contract assets |
|
|
| 19 |
| 3 |
| ||
Other |
|
|
| 4 |
| (12 | ) | ||
Net change in non-cash operating working capital |
| 31(a) |
| (176 | ) | (337 | ) | ||
Cash provided by operating activities |
|
|
| 838 |
| 709 |
| ||
INVESTING ACTIVITIES |
|
|
|
|
|
|
| ||
Cash payments for capital assets, excluding spectrum licences |
| 31(a) |
| (738 | ) | (796 | ) | ||
Cash payments for acquisitions, net |
| 18(b) |
| (204 | ) | (12 | ) | ||
Real estate joint ventures advances |
| 21(c) |
| (6 | ) | (5 | ) | ||
Real estate joint venture receipts |
| 21(c) |
| 1 |
| 3 |
| ||
Proceeds on disposition |
|
|
| 15 |
| 3 |
| ||
Other |
|
|
| — |
| (15 | ) | ||
Cash used by investing activities |
|
|
| (932 | ) | (822 | ) | ||
FINANCING ACTIVITIES |
| 31(b) |
|
|
|
|
| ||
Dividends paid to holders of Common Shares |
| 13(a) |
| (279 | ) | (284 | ) | ||
Repayment of short-term borrowings |
|
|
| (6 | ) | — |
| ||
Long-term debt issued |
| 26 |
| 2,161 |
| 2,518 |
| ||
Redemptions and repayment of long-term debt |
| 26 |
| (1,895 | ) | (1,749 | ) | ||
Issue of shares by subsidiary to non-controlling interests |
| 31(a) |
| 24 |
| — |
| ||
Other |
|
|
| (5 | ) | (10 | ) | ||
Cash provided (used) by financing activities |
|
|
| — |
| 475 |
| ||
CASH POSITION |
|
|
|
|
|
|
| ||
Increase (decrease) in cash and temporary investments, net |
|
|
| (94 | ) | 362 |
| ||
Cash and temporary investments, net, beginning of period |
|
|
| 509 |
| 432 |
| ||
Cash and temporary investments, net, end of period |
|
|
| $ | 415 |
| $ | 794 |
|
SUPPLEMENTAL DISCLOSURE OF OPERATING CASH FLOWS |
|
|
|
|
|
|
| ||
Interest paid |
|
|
| $ | (150 | ) | $ | (142 | ) |
Interest received |
|
|
| $ | 2 |
| $ | — |
|
Income taxes paid, net |
|
|
| $ | (56 | ) | $ | (146 | ) |
The accompanying notes are an integral part of these condensed interim consolidated financial statements.
notes to condensed interim consolidated financial statements | (unaudited) |
MARCH 31, 2018
TELUS Corporation is one of Canada’s largest telecommunications companies, providing a wide range of telecommunications services and products, including wireless and wireline voice and data. Data services include: Internet protocol; television; hosting, managed information technology and cloud-based services; healthcare solutions; business process outsourcing; and home security.
TELUS Corporation was incorporated under the Company Act (British Columbia) on October 26, 1998, under the name BCT.TELUS Communications Inc. (BCT). On January 31, 1999, pursuant to a court-approved plan of arrangement under the Canada Business Corporations Act among BCT, BC TELECOM Inc. and the former Alberta-based TELUS Corporation (TC), BCT acquired all of the shares of BC TELECOM Inc. and TC in exchange for Common Shares and Non-Voting Shares of BCT, and BC TELECOM Inc. was dissolved. On May 3, 2000, BCT changed its name to TELUS Corporation and in February 2005, TELUS Corporation transitioned under the Business Corporations Act (British Columbia), successor to the Company Act (British Columbia). TELUS Corporation maintains its registered office at Floor 7, 510 West Georgia Street, Vancouver, British Columbia, V6B 0M3.
The terms “TELUS”, “we”, “us”, “our” or “ourselves” are used to refer to TELUS Corporation and, where the context of the narrative permits or requires, its subsidiaries.
Notes to condensed interim consolidated financial statements |
| Page |
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General application |
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1. Condensed interim consolidated financial statements |
| 6 |
|
2. Accounting policy developments |
| 7 |
|
3. Capital structure financial policies |
| 14 |
|
4. Financial instruments |
| 16 |
|
Consolidated results of operations focused |
|
|
|
5. Segment information |
| 22 |
|
6. Revenue from contracts with customers |
| 24 |
|
7. Other operating income |
| 25 |
|
8. Employee benefits expense |
| 26 |
|
9. Financing costs |
| 26 |
|
10. Income taxes |
| 27 |
|
11. Other comprehensive income |
| 28 |
|
12. Per share amounts |
| 29 |
|
13. Dividends per share |
| 29 |
|
14. Share-based compensation |
| 29 |
|
15. Employee future benefits |
| 32 |
|
16. Restructuring and other costs |
| 32 |
|
Consolidated financial position focused |
|
|
|
17. Property, plant and equipment |
| 33 |
|
18. Intangible assets and goodwill |
| 34 |
|
19. Leases |
| 37 |
|
20. Other long-term assets |
| 38 |
|
21. Real estate joint ventures |
| 38 |
|
22. Short-term borrowings |
| 40 |
|
23. Accounts payable and accrued liabilities |
| 41 |
|
24. Advance billings and customer deposits |
| 41 |
|
25. Provisions |
| 42 |
|
26. Long-term debt |
| 43 |
|
27. Other long-term liabilities |
| 45 |
|
28. Common Share capital |
| 46 |
|
29. Contingent liabilities |
| 46 |
|
Other |
|
|
|
30. Related party transactions |
| 48 |
|
31. Additional statement of cash flow information |
| 49 |
|
1 condensed interim consolidated financial statements
(a) Basis of presentation
The notes presented in our condensed interim consolidated financial statements include only significant events and transactions and are not fully inclusive of all matters normally disclosed in our annual audited financial statements; thus, our interim consolidated financial statements are referred to as condensed. Our condensed interim consolidated financial statements should be read in conjunction with our audited consolidated financial statements for the year ended December 31, 2017.
Our condensed interim consolidated financial statements are expressed in Canadian dollars and follow the same accounting policies and methods of their application as set out in our consolidated financial statements for the year ended December 31, 2017, other than as set out in Notes 2, 6, 8, 20 and 24. The generally accepted accounting principles that we use are International Financial Reporting Standards as issued by the International Accounting Standards Board (IFRS-IASB) and Canadian generally accepted accounting principles. Our condensed interim consolidated financial statements comply with International Accounting Standard 34, Interim Financial Reporting and reflect all adjustments (which are of a normal recurring nature) that are, in our opinion, necessary for a fair statement of the results for the interim periods presented.
Our condensed interim consolidated financial statements for the three-month period ended March 31, 2018, were authorized by our Board of Directors for issue on May 10, 2018.
notes to condensed interim consolidated financial statements | (unaudited) |
(b) Inventories
Our inventories primarily consist of wireless handsets, parts and accessories (totalling $281 million (December 31, 2017 — totalling $322 million (adjusted — Note 2(c)); January 1, 2017 — $268 million (Note 2(c))) and communications equipment held for resale. Costs of goods sold for the three-month period ended March 31, 2018, totalled $467 million (2017 — $408 million).
2 accounting policy developments
(a) Initial application of standards, interpretations and amendments to standards and interpretations in the reporting period
· Amendments to standards arising from Annual Improvements to IFRSs 2015-2017 Cycle were required to be applied for years beginning on or after January 1, 2019; such application has had no effect on our financial performance or disclosure.
· Amendments to standards arising from Annual Improvements to IFRSs 2014-2016 Cycle were required to be applied for years beginning on or after January 1, 2017 (for IFRS 12, Disclosure of Interests in Other Entities), and January 1, 2018 (for the balance of the amendments); such application has had no effect on our financial performance or disclosure.
· IFRS 9, Financial Instruments, is required to be applied for years beginning on or after January 1, 2018, with retrospective application. The new standard includes a model for the classification and measurement of financial instruments, a single forward-looking “expected loss” impairment model and a reformed approach to hedge accounting. Our financial performance is currently not materially affected by the retrospective application of the standard, nor is our financial position, as set out in (c) following.
The original measurement category and carrying amount of portfolio investments (see Note 20) determined in accordance with IAS 39, Financial Instruments: Recognition and Measurement of our investments, as set out in Note 20, and the measurement category and carrying amount determined under the new standard are as follows:
As at (millions) |
| December 31, 2017 |
| January 1, 2017 |
| ||||||||||||||
|
| As previously |
| IFRS 9 |
| As currently |
| As previously |
| IFRS 9 |
| As currently |
| ||||||
Classified as |
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| ||||||
Available-for-sale financial assets |
| $ | 41 |
| $ | (41 | ) | $ | — |
| $ | 62 |
| $ | (62 | ) | $ | — |
|
Fair value through net income 1 |
| — |
| 20 |
| 20 |
| — |
| 41 |
| 41 |
| ||||||
Fair value through other comprehensive income |
| — |
| 21 |
| 21 |
| — |
| 21 |
| 21 |
| ||||||
|
| $ | 41 |
| $ | — |
| $ | 41 |
| $ | 62 |
| $ | — |
| $ | 62 |
|
(1) Arising from the classification of investments as accounted for at fair value through net income under the new standard, as at December 31, 2017, $4 (January 1, 2017 – $3), net of income tax effects of $1 (January 1, 2017 – $1), has been adjusted to retained earnings from accumulated other comprehensive income.
· IFRS 15, Revenue from Contracts with Customers, is required to be applied for years beginning on or after January 1, 2018. The International Accounting Standards Board and the Financial Accounting Standards Board of the United States worked on this joint project to clarify the principles for the recognition of revenue. The new standard was released in May 2014 and supersedes existing standards and interpretations including IAS 18, Revenue. We have applied the standard retrospectively to prior reporting periods, subject to permitted and elected practical expedients.
The effects of the new standard and the materiality of those effects will vary by industry and entity; the effects on us of our retrospective application are set out in (c) following. Like many other telecommunications companies, we are materially affected by its application, primarily in respect of the timing of revenue recognition, the classification of revenue, the capitalization of costs of obtaining a contract with a customer and the capitalization of the costs of contract fulfilment (as defined by the new standard).
Revenue — timing of recognition; classification
The timing of revenue recognition and the classification of our revenues as either service revenues or equipment revenues are affected, since the allocation of consideration in multiple element arrangements (solutions for our customers that may involve deliveries of multiple services and products that occur at different points in time and/or over different periods of time) is no longer affected by the limitation cap methodology previously required by generally accepted accounting principles.
notes to condensed interim consolidated financial statements | (unaudited) |
The effects of the timing of revenue recognition and the classification of revenue are most pronounced in our wireless results. Although the measurement of the total revenue recognized over the life of a contract is largely unaffected by the new standard, the prohibition of the use of the limitation cap methodology accelerates the recognition of total contract revenue, relative to both the associated cash inflows from customers and our previous practice (using the limitation cap methodology). The acceleration of the recognition of contract revenue relative to the associated cash inflows also results in the recognition of an amount reflecting the resulting difference as a contract asset. Although the underlying transaction economics do not differ, during periods of sustained growth in the number of wireless subscriber connection additions, assuming comparable contract-lifetime per unit cash inflows, revenues would appear to be greater than under the previous practice (using the limitation cap methodology). Wireline results arising from transactions that include the initial provision of subsidized equipment or promotional pricing plans will be similarly affected.
We have retrospectively applied the new standard, such application having been subject to associated decisions in respect of transitional provisions and permitted practical expedients. The contract asset initially recorded upon transition to the new standard represents revenues that will not be, and have not been, reflected, at any time, in our periodic results of operations, but would have been if not for transitioning to the new standard; the effect of this “pulling forward” of revenues is expected to be somewhat muted by the composite ongoing inception, maturation and expiration of millions of multi-year contracts with our customers.
Costs of contract acquisition; costs of contract fulfilment — timing of recognition
Similarly, the measurement of the total costs of contract acquisition and contract fulfilment over the life of a contract is unaffected by the new standard, but the timing of recognition is. The new standard results in our costs of contract acquisition and contract fulfilment, to the extent that they are material, being capitalized and subsequently recognized as an expense over the life of a contract on a rational, systematic basis consistent with the pattern of the transfer of goods or services to which the asset relates. Although the underlying transaction economics would not differ, during periods of sustained growth in the number of customer connection additions, assuming comparable per unit costs of contract acquisition and contract fulfilment, absolute profitability measures would appear to be greater than under the previous practice (immediate expensing of such costs).
Implementation
Our operations and associated systems are complex and our accounting for millions of multi-year contracts with our customers was affected. Significantly, in order to effect the associated accounting, incremental compilation of historical data was necessary for the millions of already existing multi-year contracts with our customers that were in-scope for purposes of transitioning to the new standard.
After a multi-year expenditure of time and effort, we developed the necessary accounting policies, estimates, judgments and processes necessary to transition to the new standard. Upon completion of the implementation of these items, including implementation of the critical incremental requirements of our information technology systems, we completed the incremental compilation of historical data, as well as the accounting for that data, all of which is necessary to transition to the new standard.
We are using the following practical expedients provided for in, and transitioning to, the new standard:
· No restatement for contracts which were completed as at January 1, 2017, or earlier.
· No restatement for contracts which were modified prior to January 1, 2017. The aggregate effect of all such modifications will be reflected when identifying satisfied and unsatisfied performance obligations and the transaction prices to be allocated thereto and when determining the transaction prices.
· No disclosure of the aggregate transaction prices allocated to remaining unfulfilled, or partially unfulfilled, performance obligations for all periods ending prior to January 1, 2018.
(b) Standards, interpretations and amendments to standards not yet effective and not yet applied
· In January 2016, the International Accounting Standards Board released IFRS 16, Leases, which is required to be applied for years beginning on or after January 1, 2019, and which supersedes IAS 17, Leases. We are currently assessing the impacts and transition provisions of the new standard. The International Accounting Standards Board and the Financial Accounting Standards Board of the United States worked together to modify the accounting for leases, generally by eliminating lessees’ classification of leases as either operating leases or finance leases and, for IFRS-IASB, introducing a single lessee accounting model.
notes to condensed interim consolidated financial statements | (unaudited) |
The most significant effect of the new standard will be the lessee’s recognition of the initial present value of unavoidable future lease payments as lease assets and lease liabilities on the statement of financial position, including those for most leases that would currently be accounted for as operating leases. Both leases with durations of 12 months or less and leases for low-value assets may be exempted.
The measurement of the total lease expense over the term of a lease will be unaffected by the new standard. However, the new standard will result in the timing of lease expense recognition being accelerated for leases which would currently be accounted for as operating leases; the International Accounting Standards Board expects that this effect may be muted by a lessee having a portfolio of leases with varying maturities and lengths of term, and we expect that we will be similarly affected. The presentation on the statement of income and other comprehensive income required by the new standard will result in most non-executory lease expenses being presented as depreciation of right-of-use lease assets and financing costs arising from lease liabilities, rather than as a part of goods and services purchased; reported operating income would thus be higher under the new standard.
Relative to the results of applying the current standard, although actual cash flows will be unaffected, the lessee’s statement of cash flows will reflect increases in cash flows from operating activities offset equally by decreases in cash flows from financing activities. This is the result of the payments of the “principal” component of leases that would currently be accounted for as operating leases being presented as a cash flow use within financing activities under the new standard.
We are currently assessing the impacts and transition provisions of the new standard; however, we are currently considering applying the standard retrospectively with the cumulative effect of initially applying the new standard recognized at the date of initial application, January 1, 2019, subject to permitted and elected practical expedients; such method of application would not result in retrospective adjustment of amounts reported for fiscal periods prior to fiscal 2019. Our current estimate of the time and effort necessary to develop and implement the accounting policies, estimates and processes (including incremental requirements of our information technology systems) we will need to have in place in order to comply with the new standard extends into the latter half of 2018. We expect that our Consolidated statement of financial position will be materially affected, as will those financial metrics related to both debt and results of operations; however, at this time it is not possible to make reasonable quantitative estimates of the effects of the new standard.
Implementation
As a transitional practical expedient permitted by the new standard, we do not expect to reassess whether contracts are, or contain, leases as at January 1, 2019, using the criteria of the new standard; as at January 1, 2019, only contracts that were previously identified as leases applying IAS 17, Leases and IFRIC 4, Determining whether an Arrangement contains a Lease, will be a part of the transition to the new standard. Only contracts entered into (or changed) after January 1, 2019, will be assessed for being, or containing, leases applying the criteria of the new standard.
notes to condensed interim consolidated financial statements | (unaudited) |
(c) Impacts of application of new standards in fiscal 2018
IFRS 15, Revenue from Contracts with Customers affected our Consolidated statements of income and other comprehensive income as follows:
Three-month periods ended March 31 (millions |
| 2018 |
| 2017 |
| ||||||||||||||
|
| Excluding |
| IFRS 15 |
| As currently |
| Excluding |
| IFRS 15 |
| As currently |
| ||||||
Operating revenues |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Service |
| $ | 3,192 |
| $ | (306 | ) | $ | 2,886 |
| $ | 3,027 |
| $ | (265 | ) | $ | 2,762 |
|
Equipment |
| 177 |
| 288 |
| 465 |
| 158 |
| 250 |
| 408 |
| ||||||
Revenues arising from contracts with customers |
| 3,369 |
| (18 | ) | 3,351 |
| 3,185 |
| (15 | ) | 3,170 |
| ||||||
Other operating income 1 |
| 26 |
| — |
| 26 |
| 13 |
| — |
| 13 |
| ||||||
|
| 3,395 |
| (18 | ) | 3,377 |
| 3,198 |
| (15 | ) | 3,183 |
| ||||||
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Goods and services purchased |
| 1,406 |
| 2 |
| 1,408 |
| 1,313 |
| 11 |
| 1,324 |
| ||||||
Employee benefits expense |
| 702 |
| (2 | ) | 700 |
| 624 |
| — |
| 624 |
| ||||||
Depreciation |
| 411 |
| — |
| 411 |
| 402 |
| — |
| 402 |
| ||||||
Amortization of intangible assets |
| 139 |
| — |
| 139 |
| 130 |
| — |
| 130 |
| ||||||
|
| 2,658 |
| — |
| 2,658 |
| 2,469 |
| 11 |
| 2,480 |
| ||||||
Operating income |
| 737 |
| (18 | ) | 719 |
| 729 |
| (26 | ) | 703 |
| ||||||
Financing costs |
| 156 |
| — |
| 156 |
| 138 |
| — |
| 138 |
| ||||||
Income before income taxes |
| 581 |
| (18 | ) | 563 |
| 591 |
| (26 | ) | 565 |
| ||||||
Income taxes |
| 156 |
| (5 | ) | 151 |
| 150 |
| (7 | ) | 143 |
| ||||||
Net income |
| 425 |
| (13 | ) | 412 |
| 441 |
| (19 | ) | 422 |
| ||||||
Other comprehensive income 1 |
| (54 | ) | — |
| (54 | ) | 60 |
| — |
| 60 |
| ||||||
Comprehensive income 1 |
| $ | 371 |
| $ | (13 | ) | $ | 358 |
| $ | 501 |
| $ | (19 | ) | $ | 482 |
|
Net income attributable to: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Common Shares |
| $ | 423 |
| $ | (13 | ) | $ | 410 |
| $ | 433 |
| $ | (19 | ) | $ | 414 |
|
Non-controlling interest |
| 2 |
| — |
| 2 |
| 8 |
| — |
| 8 |
| ||||||
|
| $ | 425 |
| $ | (13 | ) | $ | 412 |
| $ | 441 |
| $ | (19 | ) | $ | 422 |
|
Comprehensive income attributable to: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Common Shares |
| $ | 370 |
| $ | (13 | ) | $ | 357 |
| $ | 491 |
| $ | (19 | ) | $ | 472 |
|
Non-controlling interest |
| 1 |
| — |
| 1 |
| 10 |
| — |
| 10 |
| ||||||
|
| $ | 371 |
| $ | (13 | ) | $ | 358 |
| $ | 501 |
| $ | (19 | ) | $ | 482 |
|
Net income per Common Share |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Basic |
| $ | 0.71 |
| $ | (0.02 | ) | $ | 0.69 |
| $ | 0.73 |
| $ | (0.03 | ) | $ | 0.70 |
|
Diluted |
| $ | 0.71 |
| $ | (0.02 | ) | $ | 0.69 |
| $ | 0.73 |
| $ | (0.03 | ) | $ | 0.70 |
|
(1) For the three-month period ended March 31, 2017, other operating income and the change in measurement of investment financial assets included within other comprehensive income was unchanged from the designation of financial assets as being accounted for either at fair value through net income or at fair value through other comprehensive income. Such designation of financial assets is required due to the retrospective implementation of IFRS 9, Financial Instruments.
notes to condensed interim consolidated financial statements | (unaudited) |
The effects of the transition to IFRS 15 on the line items in the preceding table are set out below:
|
| Amount of IFRS 15 effect (increase (decrease) in millions except per share amounts) |
| ||||||||||||||||
|
| Allocation of transaction price (affecting timing of revenue recognition) |
|
|
|
|
| ||||||||||||
|
|
|
|
|
| Costs incurred to obtain or fulfill a contract with a customer |
| ||||||||||||
|
|
|
|
|
|
|
|
|
| Total |
| ||||||||
Three-month periods ended March 31 |
| 2018 |
| 2017 |
| 2018 |
| 2017 |
| 2018 |
| 2017 |
| ||||||
Operating revenues |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Service |
| $ | (306 | ) | $ | (265 | ) | $ | — |
| $ | — |
| $ | (306 | ) | $ | (265 | ) |
Equipment |
| $ | 288 |
| $ | 250 |
| $ | — |
| $ | — |
| $ | 288 |
| $ | 250 |
|
Goods and services purchased |
| $ | 5 |
| $ | 7 |
| $ | (3 | ) | $ | 4 |
| $ | 2 |
| $ | 11 |
|
Employee benefits expense |
| $ | — |
| $ | — |
| $ | (2 | ) | $ | — |
| $ | (2 | ) | $ | — |
|
Income taxes |
| $ | (6 | ) | $ | (5 | ) | $ | 1 |
| $ | (2 | ) | $ | (5 | ) | $ | (7 | ) |
Net income attributable to: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Common Shares |
| $ | (17 | ) | $ | (17 | ) | $ | 4 |
| $ | (2 | ) | $ | (13 | ) | $ | (19 | ) |
Net income per Common Share |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Basic |
| $ | (0.03 | ) | $ | (0.03 | ) | $ | 0.01 |
| $ | — |
| $ | (0.02 | ) | $ | (0.03 | ) |
Diluted |
| $ | (0.03 | ) | $ | (0.03 | ) | $ | 0.01 |
| $ | — |
| $ | (0.02 | ) | $ | (0.03 | ) |
Previously, costs incurred to obtain or fulfill a contract with a customer were expensed as incurred. The new standard requires that such costs be capitalized and subsequently recognized as an expense over the life of the contract on a rational, systematic basis consistent with the pattern of the transfer of goods or services to which the asset relates.
This has the effect of reducing the costs recognized in the period arising from contracts with customers entered into during the period, offset by the amortization of capitalized costs arising from contracts with customers entered into in previous periods.
Previously, a “limitation cap” constrained the recognition of revenue in a multiple element arrangement to an amount that was not contingent upon either delivering additional items or meeting other specified performance conditions. The new standard requires that amounts contingently billable and collectible in the future are to be recognized currently as revenue to the extent we have currently satisfied our performance obligations to the customer; this is the new standard’s most significant effect on us.
For a contract with a customer, this has the effect of allocating more of the consideration to equipment revenue, which is recognized at the inception of the contract, and less to future service revenue.
notes to condensed interim consolidated financial statements | (unaudited) |
IFRS 15, Revenue from Contracts with Customers affected our Consolidated statements of financial positon as follows:
As at (millions) |
| March 31, 2018 |
| December 31, 2017 1 |
| January 1, 2017 |
| |||||||||||||||||||||
|
| Excluding effects |
| IFRS 15 |
| As currently |
| Excluding effects |
| IFRS 15 |
| As currently |
| Excluding effects |
| IFRS 15 |
| As currently |
| |||||||||
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Current assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Cash and temporary investments, net |
| $ | 415 |
| $ | — |
| $ | 415 |
| $ | 509 |
| $ | — |
| $ | 509 |
| $ | 432 |
| $ | — |
| $ | 432 |
|
Accounts receivable |
| 1,457 |
| (8 | ) | 1,449 |
| 1,623 |
| (9 | ) | 1,614 |
| 1,471 |
| (9 | ) | 1,462 |
| |||||||||
Income and other taxes receivable |
| 15 |
| — |
| 15 |
| 96 |
| — |
| 96 |
| 9 |
| — |
| 9 |
| |||||||||
Inventories |
| 345 |
| 2 |
| 347 |
| 378 |
| 2 |
| 380 |
| 318 |
| 2 |
| 320 |
| |||||||||
Contract assets |
| — |
| 757 |
| 757 |
| — |
| 757 |
| 757 |
| — |
| 700 |
| 700 |
| |||||||||
Prepaid expenses |
| 377 |
| 237 |
| 614 |
| 260 |
| 233 |
| 493 |
| 233 |
| 210 |
| 443 |
| |||||||||
Current derivative assets |
| 26 |
| — |
| 26 |
| 18 |
| — |
| 18 |
| 11 |
| — |
| 11 |
| |||||||||
|
| 2,635 |
| 988 |
| 3,623 |
| 2,884 |
| 983 |
| 3,867 |
| 2,474 |
| 903 |
| 3,377 |
| |||||||||
Non-current assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Property, plant and equipment, net |
| 11,482 |
| — |
| 11,482 |
| 11,368 |
| — |
| 11,368 |
| 10,464 |
| — |
| 10,464 |
| |||||||||
Intangible assets, net |
| 10,754 |
| — |
| 10,754 |
| 10,658 |
| — |
| 10,658 |
| 10,364 |
| — |
| 10,364 |
| |||||||||
Goodwill, net |
| 4,569 |
| — |
| 4,569 |
| 4,236 |
| — |
| 4,236 |
| 3,787 |
| — |
| 3,787 |
| |||||||||
Contract assets |
| — |
| 377 |
| 377 |
| — |
| 396 |
| 396 |
| — |
| 352 |
| 352 |
| |||||||||
Other long-term assets |
| 372 |
| 108 |
| 480 |
| 421 |
| 107 |
| 528 |
| 640 |
| 93 |
| 733 |
| |||||||||
|
| 27,177 |
| 485 |
| 27,662 |
| 26,683 |
| 503 |
| 27,186 |
| 25,255 |
| 445 |
| 25,700 |
| |||||||||
|
| $ | 29,812 |
| $ | 1,473 |
| $ | 31,285 |
| $ | 29,567 |
| $ | 1,486 |
| $ | 31,053 |
| $ | 27,729 |
| $ | 1,348 |
| $ | 29,077 |
|
LIABILITIES AND OWNERS’ EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Current liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Short-term borrowings |
| $ | 100 |
| $ | — |
| $ | 100 |
| $ | 100 |
| $ | — |
| $ | 100 |
| $ | 100 |
| $ | — |
| $ | 100 |
|
Accounts payable and accrued liabilities |
| 2,054 |
| — |
| 2,054 |
| 2,460 |
| — |
| 2,460 |
| 2,330 |
| — |
| 2,330 |
| |||||||||
Income and other taxes payable |
| 38 |
| — |
| 38 |
| 34 |
| — |
| 34 |
| 37 |
| — |
| 37 |
| |||||||||
Dividends payable |
| 299 |
| — |
| 299 |
| 299 |
| — |
| 299 |
| 284 |
| — |
| 284 |
| |||||||||
Advance billings and customer deposits |
| 769 |
| (145 | ) | 624 |
| 782 |
| (150 | ) | 632 |
| 737 |
| (153 | ) | 584 |
| |||||||||
Provisions |
| 69 |
| — |
| 69 |
| 78 |
| — |
| 78 |
| 124 |
| — |
| 124 |
| |||||||||
Current maturities of long-term debt |
| 852 |
| — |
| 852 |
| 1,404 |
| — |
| 1,404 |
| 1,327 |
| — |
| 1,327 |
| |||||||||
Current derivative liabilities |
| 6 |
| — |
| 6 |
| 33 |
| — |
| 33 |
| 12 |
| — |
| 12 |
| |||||||||
|
| 4,187 |
| (145 | ) | 4,042 |
| 5,190 |
| (150 | ) | 5,040 |
| 4,951 |
| (153 | ) | 4,798 |
| |||||||||
Non-current liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Provisions |
| 726 |
| — |
| 726 |
| 511 |
| — |
| 511 |
| 395 |
| — |
| 395 |
| |||||||||
Long-term debt |
| 13,138 |
| — |
| 13,138 |
| 12,256 |
| — |
| 12,256 |
| 11,604 |
| — |
| 11,604 |
| |||||||||
Other long-term liabilities |
| 873 |
| — |
| 873 |
| 847 |
| — |
| 847 |
| 736 |
| — |
| 736 |
| |||||||||
Deferred income taxes |
| 2,490 |
| 436 |
| 2,926 |
| 2,500 |
| 441 |
| 2,941 |
| 2,107 |
| 404 |
| 2,511 |
| |||||||||
|
| 17,227 |
| 436 |
| 17,663 |
| 16,114 |
| 441 |
| 16,555 |
| 14,842 |
| 404 |
| 15,246 |
| |||||||||
Liabilities |
| 21,414 |
| 291 |
| 21,705 |
| 21,304 |
| 291 |
| 21,595 |
| 19,793 |
| 251 |
| 20,044 |
| |||||||||
Owners’ equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Common equity |
| 8,326 |
| 1,182 |
| 9,508 |
| 8,221 |
| 1,195 |
| 9,416 |
| 7,917 |
| 1,097 |
| 9,014 |
| |||||||||
Non-controlling interests |
| 72 |
| — |
| 72 |
| 42 |
| — |
| 42 |
| 19 |
| — |
| 19 |
| |||||||||
|
| 8,398 |
| 1,182 |
| 9,580 |
| 8,263 |
| 1,195 |
| 9,458 |
| 7,936 |
| 1,097 |
| 9,033 |
| |||||||||
|
| $ | 29,812 |
| $ | 1,473 |
| $ | 31,285 |
| $ | 29,567 |
| $ | 1,486 |
| $ | 31,053 |
| $ | 27,729 |
| $ | 1,348 |
| $ | 29,077 |
|
(1) Goodwill and non-current provisions have been adjusted as set out in Note 18(c).
notes to condensed interim consolidated financial statements | (unaudited) |
The effects of the transition to IFRS 15 on the line items in the preceding table are set out below:
|
| Amount of IFRS 15 effect (increase (decrease) in millions) |
| |||||||||||||||||||||||||
|
| Allocation of transaction price (affecting timing of revenue recognition) |
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
|
|
|
|
|
|
|
| Amounts incurred to obtain or fulfill a contract with a customer |
| |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total |
| |||||||||||||
As at |
| Mar. 31, |
| Dec. 31, |
| Jan. 1, |
| Mar. 31, |
| Dec. 31, |
| Jan. 1, |
| Mar. 31, |
| Dec. 31, |
| Jan. 1, |
| |||||||||
Current assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Accounts receivable |
| $ | (8 | ) | $ | (9 | ) | $ | (9 | ) | $ | — |
| $ | — |
| $ | — |
| $ | (8 | ) | $ | (9 | ) | $ | (9 | ) |
Inventories |
| $ | 2 |
| $ | 2 |
| $ | 2 |
| $ | — |
| $ | — |
| $ | — |
| $ | 2 |
| $ | 2 |
| $ | 2 |
|
Contract assets, net |
| $ | 757 |
| $ | 757 |
| $ | 700 |
| $ | — |
| $ | — |
| $ | — |
| $ | 757 |
| $ | 757 |
| $ | 700 |
|
Prepaid expenses and other |
| $ | — |
| $ | — |
| $ | — |
| $ | 237 |
| $ | 233 |
| $ | 210 |
| $ | 237 |
| $ | 233 |
| $ | 210 |
|
Non-current assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Contract assets, net |
| $ | 377 |
| $ | 396 |
| $ | 352 |
| $ | — |
| $ | — |
| $ | — |
| $ | 377 |
| $ | 396 |
| $ | 352 |
|
Other long-term assets |
| $ | — |
| $ | — |
| $ | — |
| $ | 108 |
| $ | 107 |
| $ | 93 |
| $ | 108 |
| $ | 107 |
| $ | 93 |
|
Advance billings and customer deposits |
| $ | (145 | ) | $ | (150 | ) | $ | (153 | ) | $ | — |
| $ | — |
| $ | — |
| $ | (145 | ) | $ | (150 | ) | $ | (153 | ) |
Deferred income taxes |
| $ | 343 |
| $ | 349 |
| $ | 322 |
| $ | 93 |
| $ | 92 |
| $ | 82 |
| $ | 436 |
| $ | 441 |
| $ | 404 |
|
Retained earnings |
| $ | 930 |
| $ | 947 |
| $ | 876 |
| $ | 252 |
| $ | 248 |
| $ | 221 |
| $ | 1,182 |
| $ | 1,195 |
| $ | 1,097 |
|
Previously, costs incurred to obtain or fulfill a contract with a customer were expensed as incurred. The new standard requires that such costs be capitalized and subsequently recognized as an expense over the life of the contract on a rational, systematic basis consistent with the pattern of the transfer of goods or services to which the asset relates.
Increases in the amount of costs capitalized in the period arising from contracts with customers entered into during the period are offset by the amortization of capitalized costs arising from contracts with customers entered into in previous periods.
Previously, a “limitation cap” constrained the recognition of revenue in a multiple element arrangement to an amount that was not contingent upon either delivering additional items or meeting other specified performance conditions. The new standard requires that amounts contingently billable and collectible in the future are to be recognized currently as revenue to the extent we have currently satisfied our performance obligations to the customer; this is the new standard’s most significant effect on us.
The difference between the revenue recognized currently and the amount currently collected/collectible is recognized on the statement of financial position as a contract asset.
The contract asset recorded at January 1, 2017, represents revenues that will not be, and have not been, reflected at any time in our periodic results of operations, but would have been if not for transitioning to the new standard; the effect of this “pulling forward” of revenues is expected to be somewhat muted by the composite ongoing inception, maturation and expiration of millions of multi-year contracts with our customers.
IFRS 15, Revenue from Contracts with Customers affected our Consolidated statements of cash flows as follows:
Three-month periods ended March 31 (millions |
| 2018 |
| 2017 |
| ||||||||||||||
|
| Excluding |
| IFRS 15 |
| As currently |
| Excluding |
| IFRS 15 |
| As currently |
| ||||||
OPERATING ACTIVITIES |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Net income 1 |
| $ | 425 |
| $ | (13 | ) | $ | 412 |
| $ | 441 |
| $ | (19 | ) | $ | 422 |
|
Adjustments to reconcile net income to cash provided by operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Depreciation and amortization |
| 550 |
| — |
| 550 |
| 532 |
| — |
| 532 |
| ||||||
Deferred income taxes |
| 12 |
| (5 | ) | 7 |
| 93 |
| (7 | ) | 86 |
| ||||||
Share-based compensation expense, net |
| 18 |
| — |
| 18 |
| 16 |
| — |
| 16 |
| ||||||
Net employee defined benefit plans expense |
| 25 |
| — |
| 25 |
| 21 |
| — |
| 21 |
| ||||||
Employer contributions to employee defined benefit plans |
| (21 | ) | — |
| (21 | ) | (22 | ) | — |
| (22 | ) | ||||||
Non-current contract assets |
| — |
| 19 |
| 19 |
| — |
| 3 |
| 3 |
| ||||||
Other 1 |
| 5 |
| (1 | ) | 4 |
| (19 | ) | 7 |
| (12 | ) | ||||||
Net change in non-cash operating working capital |
| (176 | ) | — |
| (176 | ) | (353 | ) | 16 |
| (337 | ) | ||||||
Cash provided by operating activities |
| $ | 838 |
| $ | — |
| $ | 838 |
| $ | 709 |
| $ | — |
| $ | 709 |
|
(1) For the three-month period ended March 31, 2017, net income and other reflect no change arising from the designation of financial assets as being accounted for either at fair value through net income or at fair value through other comprehensive income. Such designation of financial assets is required due to the retrospective implementation of IFRS 9, Financial Instruments.
notes to condensed interim consolidated financial statements | (unaudited) |
3 capital structure financial policies
General
Our objective when managing capital is to maintain a flexible capital structure that optimizes the cost and availability of capital at acceptable risk.
In the management of capital and in its definition, we include common equity (excluding accumulated other comprehensive income), long-term debt (including long-term credit facilities, commercial paper backstopped by long-term credit facilities and any hedging assets or liabilities associated with long-term debt items, net of amounts recognized in accumulated other comprehensive income), cash and temporary investments, and short-term borrowings arising from securitized trade receivables.
We manage our capital structure and make adjustments to it in light of changes in economic conditions and the risk characteristics of our business. In order to maintain or adjust our capital structure, we may adjust the amount of dividends paid to holders of Common Shares, purchase Common Shares for cancellation pursuant to normal course issuer bids, issue new shares, issue new debt, issue new debt to replace existing debt with different characteristics and/or increase or decrease the amount of trade receivables sold to an arm’s-length securitization trust.
During 2018, our financial objectives, which are reviewed annually, were unchanged from 2017. We believe that our financial objectives are supportive of our long-term strategy.
We monitor capital utilizing a number of measures, including: net debt to earnings before interest, income taxes, depreciation and amortization (EBITDA*) — excluding restructuring and other costs ratio; coverage ratios; and dividend payout ratios. Through the course of fiscal 2018, we will monitor these measures excluding the effects of implementing IFRS 9 and IFRS 15 (see Note 2(a)).
Debt and coverage ratios
Net debt to EBITDA — excluding restructuring and other costs is calculated as net debt at the end of the period divided by 12-month trailing EBITDA — excluding restructuring and other costs. This measure, historically, is substantially similar to the leverage ratio covenant in our credit facilities. Net debt and EBITDA — excluding restructuring and other costs are measures that do not have any standardized meanings prescribed by IFRS-IASB and are therefore unlikely to be comparable to similar measures presented by other companies. The calculation of these measures is as set out in the following table. Net debt is one component of a ratio used to determine compliance with debt covenants.
|
|
|
| 2018 |
| 2017 |
| |||||
As at, or for the 12-month periods ended, March 31 ($ in millions) |
| Objective |
| As currently |
| Excluding effects of implementing |
| |||||
Components of debt and coverage ratios |
|
|
|
|
|
|
|
|
| |||
Net debt 2 |
|
|
| $ | 13,785 |
| $ | 13,785 |
| $ | 13,054 |
|
EBITDA — excluding restructuring and other costs 3 |
|
|
| $ | 5,091 |
| $ | 4,973 |
| $ | 4,785 |
|
Net interest cost 4 |
|
|
| $ | 582 |
| $ | 582 |
| $ | 564 |
|
Debt ratio |
|
|
|
|
|
|
|
|
| |||
Net debt to EBITDA — excluding restructuring and other costs |
| 2.00 – 2.50 5 |
| 2.71 |
| 2.77 |
| 2.73 |
| |||
Coverage ratios |
|
|
|
|
|
|
|
|
| |||
Earnings coverage 6 |
|
|
| 4.8 |
| 4.5 |
| 4.1 |
| |||
EBITDA — excluding restructuring and other costs interest coverage 7 |
|
|
| 8.8 |
| 8.5 |
| 8.5 |
|
(1) We have not recast comparative amounts for purposes of managing capital; as set out in Note 2(a), a practical expedient that we are using in transitioning to IFRS 15 is that we are not recasting for contracts that were completed as at January 1, 2017, or earlier. Accordingly, amounts prior to fiscal 2017 included in the comparative 12-month period ended March 31, 2017, have not been prepared on a basis including IFRS 9 and IFRS 15. For purposes of assessing results compared to the prior period, we have excluded the effects of implementing IFRS 9 and IFRS 15 from our fiscal 2018 results.
* EBITDA does not have any standardized meaning prescribed by IFRS-IASB and is therefore unlikely to be comparable to similar measures presented by other issuers; we define EBITDA as operating revenues less goods and services purchased and employee benefits expense. We have issued guidance on, and report, EBITDA because it is a key measure that management uses to evaluate the performance of our business, and it is also utilized in measuring compliance with certain debt covenants.
notes to condensed interim consolidated financial statements | (unaudited) |
(2) Net debt is calculated as follows:
As at March 31 |
| Note |
| 2018 |
| 2017 |
| ||
Long-term debt |
| 26 |
| $ | 13,990 |
| $ | 13,677 |
|
Debt issuance costs netted against long-term debt |
|
|
| 75 |
| 75 |
| ||
Derivative (assets) liabilities, net |
|
|
| 59 |
| 38 |
| ||
Accumulated other comprehensive income amounts arising from financial instruments used to manage interest rate and currency risks associated with U.S. dollar-denominated long-term debt (excluding tax effects) |
|
|
| (24 | ) | (42 | ) | ||
Cash and temporary investments, net |
|
|
| (415 | ) | (794 | ) | ||
Short-term borrowings |
| 22 |
| 100 |
| 100 |
| ||
Net debt |
|
|
| $ | 13,785 |
| $ | 13,054 |
|
(3) EBITDA — excluding restructuring and other costs is calculated as follows:
|
| As currently reported |
| Excluding effects of implementing |
| ||||||||||||||
|
| EBITDA |
| Restructuring |
| EBITDA – |
| EBITDA |
| Restructuring |
| EBITDA – |
| ||||||
|
| (adjusted – |
|
|
|
|
|
|
|
|
|
|
| ||||||
Add |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Three-month period ended March 31, 2018 |
| $ | 1,269 |
| $ | 34 |
| $ | 1,303 |
| $ | 1,287 |
| $ | 38 |
| $ | 1,325 |
|
Year ended December 31, 2017 |
| 4,910 |
| 117 |
| 5,027 |
| 4,774 |
| 139 |
| 4,913 |
| ||||||
Deduct |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Three-month period ended March 31, 2017 |
| (1,235 | ) | (4 | ) | (1,239 | ) | (1,261 | ) | (4 | ) | (1,265 | ) | ||||||
|
| $ | 4,944 |
| $ | 147 |
| $ | 5,091 |
| $ | 4,800 |
| $ | 173 |
| $ | 4,973 |
|
(4) Net interest cost is defined as financing costs, excluding employee defined benefit plans net interest, recoveries on long-term debt prepayment premium and repayment of debt, calculated on a 12-month trailing basis (expenses recorded for long-term debt prepayment premium, if any, are included in net interest cost).
(5) Our long-term objective range for this ratio is 2.00 — 2.50 times. The ratio as at March 31, 2018, is outside the long-term objective range. We may permit, and have permitted, this ratio to go outside the objective range (for long-term investment opportunities), but will endeavour to return this ratio to within the objective range in the medium term, as we believe that this range is supportive of our long-term strategy. We are in compliance with our credit facilities leverage ratio covenant, which states that we may not permit our net debt to operating cash flow ratio to exceed 4.00:1.00 (see Note 26(d)); the calculation of the debt ratio is substantially similar to the calculation of the leverage ratio covenant in our credit facilities.
(6) Earnings coverage is defined as net income before borrowing costs and income tax expense, divided by borrowing costs (interest on long-term debt; interest on short-term borrowings and other; long-term debt prepayment premium), and adding back capitalized interest.
(7) EBITDA — excluding restructuring and other costs interest coverage is defined as EBITDA — excluding restructuring and other costs, divided by net interest cost. This measure is substantially similar to the coverage ratio covenant in our credit facilities.
Excluding the effects of implementing IFRS 9 and IFRS 15, net debt to EBITDA — excluding restructuring and other costs was 2.77 times as at March 31, 2018, up from 2.73 times one year earlier. The increase in net debt exceeded the growth in EBITDA — excluding restructuring and other costs. Excluding the effects of implementing IFRS 9 and IFRS 15, the earnings coverage ratio for the twelve-month period ended March 31, 2018, was 4.5 times, up from 4.1 times one year earlier. Higher borrowing costs reduced the ratio by 0.1 and an increase in income before borrowing costs and income taxes increased the ratio by 0.5. Excluding the effects of implementing IFRS 9 and IFRS 15, the EBITDA — excluding restructuring and other costs interest coverage ratio for the twelve-month period ended March 31, 2018, was 8.5 times, unchanged from one year earlier. Growth in EBITDA — excluding restructuring and other costs increased the ratio by 0.3, while an increase in net interest costs reduced the ratio by 0.3.
Dividend payout ratio
The dividend payout ratio presented is a historical measure calculated as the sum of the last four quarterly dividends declared per Common Share, as recorded in the financial statements, divided by the sum of basic earnings per share for the most recent four quarters for interim reporting periods (divided by annual basic earnings per share if the reported amount is in respect of a fiscal year). The dividend payout ratio of adjusted net earnings presented, also a historical measure, differs in that it excludes the gain on exchange of wireless spectrum licences, net gains and equity income from real estate joint ventures, provisions related to business combinations, immediately vesting transformative compensation expense, long-term debt prepayment premium and income tax-related adjustments.
|
|
|
| 2018 |
| 2017 |
| ||
For the 12-month periods ended March 31 ($ in millions) |
| Objective |
| As currently |
| Excluding effects of implementing |
| ||
Dividend payout ratio |
| 65%–75% 1 |
| 76 | % | 82 | % | 87 | % |
Dividend payout ratio of adjusted net earnings |
|
|
| 76 | % | 82 | % | 76 | % |
notes to condensed interim consolidated financial statements | (unaudited) |
(1) Our objective range for the dividend payout ratio is 65%—75% of sustainable earnings on a prospective basis; we currently expect that we will be within our target guideline on a prospective basis within the medium term. Adjusted net earnings attributable to Common Shares is calculated as follows:
|
| 2018 |
| 2017 |
| |||||
12-month periods ended March 31 |
| As currently |
| Excluding effects of implementing |
| |||||
|
| (adjusted – |
|
|
|
|
| |||
Net income attributable to Common Shares |
| $ | 1,555 |
| $ | 1,450 |
| $ | 1,278 |
|
Gain and net equity income related to real estate redevelopment project, after income taxes |
| (1 | ) | (1 | ) | (16 | ) | |||
Business acquisition-related provisions, after income taxes |
| (22 | ) | (22 | ) | 11 |
| |||
Income tax-related adjustments |
| 21 |
| 21 |
| (18 | ) | |||
Gain on exchange of wireless spectrum licences, after income taxes |
| — |
| — |
| (13 | ) | |||
Immediately vesting transformative compensation expense, after income taxes |
| — |
| — |
| 224 |
| |||
Adjusted net earnings attributable to Common Shares |
| $ | 1,553 |
| $ | 1,448 |
| $ | 1,466 |
|
4 financial instruments
(a) Risks — overview
Our financial instruments, and the nature of certain risks to which they may be subject, are as set out in the following table.
|
| Risks |
| ||||||||
|
|
|
|
|
| Market risks |
| ||||
Financial instrument |
| Credit |
| Liquidity |
| Currency |
| Interest rate |
| Other price |
|
Measured at amortized cost |
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable |
| X |
|
|
| X |
|
|
|
|
|
Contract assets |
| X |
|
|
|
|
|
|
|
|
|
Construction credit facilities advances to real estate joint venture |
|
|
|
|
|
|
| X |
|
|
|
Short-term obligations |
|
|
| X |
| X |
| X |
|
|
|
Accounts payable |
|
|
| X |
| X |
|
|
|
|
|
Provisions (including restructuring accounts payable) |
|
|
| X |
| X |
|
|
| X |
|
Long-term debt |
|
|
| X |
| X |
| X |
|
|
|
Measured at fair value |
|
|
|
|
|
|
|
|
|
|
|
Cash and temporary investments |
| X |
|
|
| X |
| X |
|
|
|
Long-term investments (not subject to significant influence) 1 |
|
|
|
|
| X |
|
|
| X |
|
Foreign exchange derivatives 2 |
| X |
| X |
| X |
|
|
|
|
|
Share-based compensation derivatives 2 |
| X |
| X |
|
|
|
|
| X |
|
(1) Long-term investments over which we do not have significant influence are measured at fair value if those fair values can be reliably measured.
(2) Use of derivative financial instruments is subject to a policy which requires that no derivative transaction is to be entered into for the purpose of establishing a speculative or leveraged position (the corollary being that all derivative transactions are to be entered into for risk management purposes only) and sets criteria for the creditworthiness of the transaction counterparties.
Derivative financial instruments
We apply hedge accounting to financial instruments used to establish hedge accounting relationships for U.S. dollar-denominated transactions and to fix the cost of some share-based compensation. We believe that our use of derivative financial instruments for hedging or arbitrage assists us in managing our financing costs and/or lessening the uncertainty associated with our financing or other business activities. Uncertainty associated with currency risk and other price risk is lessened through our use of foreign exchange derivatives and share-based compensation derivatives that effectively swap currency exchange rates and share prices from floating rates and prices to fixed rates and prices. When entering into derivative financial instrument contracts, we seek to align the cash flow timing of the hedging items with that of the hedged items. The effects of the risk management strategy and its application are set out in (f) following.
notes to condensed interim consolidated financial statements | (unaudited) |
(b) Credit risk
Excluding credit risk, if any, arising from currency swaps settled on a gross basis, the best representation of our maximum exposure (excluding income tax effects) to credit risk, which is a worst-case scenario and does not reflect results we expect, is set out in the following table:
As at (millions) |
| March 31, |
| December 31, |
| January 1, |
| |||
|
|
|
| (adjusted – |
| (Note 2(c)) |
| |||
Cash and temporary investments, net |
| $ | 415 |
| $ | 509 |
| $ | 432 |
|
Accounts receivable |
| 1,449 |
| 1,614 |
| 1,462 |
| |||
Contract assets |
| 1,134 |
| 1,153 |
| 1,052 |
| |||
Derivative assets |
| 29 |
| 24 |
| 17 |
| |||
|
| $ | 3,027 |
| $ | 3,300 |
| $ | 2,963 |
|
Cash and temporary investments, net
Credit risk associated with cash and temporary investments is managed by ensuring that these financial assets are placed with: governments; major financial institutions that have been accorded strong investment grade ratings by a primary rating agency; and/or other creditworthy counterparties. An ongoing review evaluates changes in the status of counterparties.
Accounts receivable
Credit risk associated with accounts receivable is inherently managed by the size and diversity of our large customer base, which includes substantially all consumer and business sectors in Canada. We follow a program of credit evaluations of customers and limit the amount of credit extended when deemed necessary.
As at March 31, 2018, the weighted average age of customer accounts receivable was 28 days (December 31, 2017 — 26 days; January 1, 2017 — 26 days) and the weighted average age of past-due customer accounts receivable was 59 days (December 31, 2017 — 60 days; January 1, 2017 — 61 days). Accounts are considered past-due (in default) when the customers have failed to make the contractually required payments when due, which is generally within 30 days of the billing date. Any late payment charges are levied at an industry-based market or negotiated rate on outstanding non-current customer account balances.
As at (millions) |
| March 31, 2018 |
| December 31, 2017 |
| January 1, 2017 |
| |||||||||||||||||||||
|
| Gross |
| Allowance |
| Net 1 |
| Gross |
| Allowance |
| Net 1 |
| Gross |
| Allowance |
| Net 1 |
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
| (adjusted – |
|
|
|
|
| (Note 2(c)) |
| |||||||||
Customer accounts receivable, net of allowance for doubtful accounts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Less than 30 days past billing date |
| $ | 791 |
| $ | (10 | ) | $ | 781 |
| $ | 900 |
| $ | (5 | ) | $ | 895 |
| $ | 899 |
| $ | (11 | ) | $ | 888 |
|
30-60 days past billing date |
| 234 |
| (9 | ) | 225 |
| 185 |
| (8 | ) | 177 |
| 185 |
| (9 | ) | 176 |
| |||||||||
61-90 days past billing date |
| 71 |
| (8 | ) | 63 |
| 60 |
| (8 | ) | 52 |
| 44 |
| (9 | ) | 35 |
| |||||||||
More than 90 days past billing date |
| 68 |
| (20 | ) | 48 |
| 67 |
| (22 | ) | 45 |
| 80 |
| (25 | ) | 55 |
| |||||||||
|
| $ | 1,164 |
| $ | (47 | ) | $ | 1,117 |
| $ | 1,212 |
| $ | (43 | ) | $ | 1,169 |
| $ | 1,208 |
| $ | (54 | ) | $ | 1,154 |
|
(1) Net amounts represent customer accounts receivable for which an allowance had not been made as at the dates of the Consolidated statements of financial position.
We maintain allowances for lifetime expected credit losses related to doubtful accounts. Current economic conditions (including forward-looking macroeconomic data), historical information (including credit agency reports, if available), reasons for the accounts being past due and line of business from which the customer accounts receivable arose are all considered when determining whether to make allowances for past-due accounts. The same factors are considered when determining whether to write off amounts charged to the allowance for doubtful accounts against the customer accounts receivable; written off amounts charged to the customer accounts receivable allowance for doubtful accounts but were still subject to enforcement activity as at March 31, 2018, were $341 million (December 31, 2017 — $298 million; January 1, 2017 — $231 million). The doubtful accounts expense is calculated on a specific-identification basis for customer accounts receivable above a specific balance threshold and on a statistically derived allowance basis for the remainder. No customer accounts receivable are written off directly to the doubtful accounts expense.
notes to condensed interim consolidated financial statements | (unaudited) |
The following table presents a summary of the activity related to our allowance for doubtful accounts.
|
| Three months |
| ||||
Periods ended March 31 (millions) |
| 2018 |
| 2017 |
| ||
Balance, beginning of period |
| $ | 43 |
| $ | 54 |
|
Additions (doubtful accounts expense) |
| 16 |
| 17 |
| ||
Accounts written off, net of recoveries |
| (14 | ) | (21 | ) | ||
Other |
| 2 |
| — |
| ||
Balance, end of period |
| $ | 47 |
| $ | 50 |
|
Contract assets
Credit risk associated with contract assets is inherently managed by the size and diversity of our large customer base, which includes substantially all consumer and business sectors in Canada. We follow a program of credit evaluations of customers and limit the amount of credit extended when deemed necessary.
As at (millions) |
| March 31, 2018 |
| December 31, 2017 |
| January 1, 2017 |
| |||||||||||||||||||||
|
| Gross |
| Allowance |
| Net |
| Gross |
| Allowance |
| Net |
| Gross |
| Allowance |
| Net |
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
| (Note 2(c)) |
|
|
|
|
| (Note 2(c)) |
| |||||||||
Contract assets, net of impairment allowance |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
To be billed and thus reclassified to accounts receivable during: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
The 12-month period ending one year hence |
| $ | 954 |
| $ | (52 | ) | $ | 902 |
| $ | 958 |
| $ | (51 | ) | $ | 907 |
| $ | 901 |
| $ | (48 | ) | $ | 853 |
|
The 12-month period ending two years hence |
| 387 |
| (21 | ) | 366 |
| 407 |
| (22 | ) | 385 |
| 359 |
| (21 | ) | 338 |
| |||||||||
Thereafter |
| 12 |
| (1 | ) | 11 |
| 11 |
| — |
| 11 |
| 15 |
| (1 | ) | 14 |
| |||||||||
|
| $ | 1,353 |
| $ | (74 | ) | $ | 1,279 |
| $ | 1,376 |
| $ | (73 | ) | $ | 1,303 |
| $ | 1,275 |
| $ | (70 | ) | $ | 1,205 |
|
We maintain allowances for lifetime expected credit losses related to contract assets. Current economic conditions, historical information (including credit agency reports, if available), the line of business from which the contract asset arose are all considered when determining impairment allowances. The same factors are considered when determining whether to write off amounts charged to the impairment allowance for contract assets against contract assets
The following table presents a summary of the activity related to our contract asset impairment allowance.
|
| Three-month periods ended |
| Year ended |
| |||||
(millions) |
| 2018 |
| 2017 |
| 2017 |
| |||
Balance, beginning of period |
| $ | 73 |
| $ | — |
| $ | — |
|
Transitional amount |
| — |
| 70 |
| 70 |
| |||
Adjusted opening balance |
| 73 |
| 70 |
| 70 |
| |||
Additions (doubtful accounts expense) |
| 12 |
| 11 |
| 39 |
| |||
Other |
| (11 | ) | (8 | ) | (36 | ) | |||
Balance, end of period |
| $ | 74 |
| $ | 73 |
| $ | 73 |
|
Derivative assets (and derivative liabilities)
Counterparties to our share-based compensation cash-settled equity forward agreements and foreign exchange derivatives are major financial institutions that have been accorded investment grade ratings by a primary credit rating agency. The total dollar amount of credit exposure under contracts with any one financial institution is limited and counterparties’ credit ratings are monitored. We do not give or receive collateral on swap agreements and hedging items due to our credit rating and those of our counterparties. While we are exposed to the risk of potential credit losses due to the possible non-performance of our counterparties, we consider this risk remote. Our derivative liabilities do not have credit risk-related contingent features.
(c) Liquidity risk
As a component of our capital structure financial policies, discussed further in Note 3, we manage liquidity risk by:
· maintaining a daily cash pooling process that enables us to manage our available liquidity and our liquidity requirements according to our actual needs;
· maintaining an agreement to sell trade receivables to an arm’s-length securitization trust and bilateral bank facilities (Note 22), maintaining a commercial paper program (Note 26(c)) and maintain syndicated credit facilities (Note 26(d),(e));
notes to condensed interim consolidated financial statements | (unaudited) |
· maintaining an in-effect shelf prospectus (our shelf prospectus that was in effect as at March, 31, 2018, expired in April 2018; we intend to file a new shelf prospectus during the three-month period ending June 30, 2018);
· continuously monitoring forecast and actual cash flows; and
· managing maturity profiles of financial assets and financial liabilities.
Our debt maturities in future years are as disclosed in Note 26(f). As at March 31, 2018, we could offer $0.5 billion of debt or equity securities pursuant to a shelf prospectus that was in effect until April 2018 (December 31, 2017 — $1.2 billion pursuant to a shelf prospectus that was in effect until April 2018); we intend to file a new shelf prospectus during the three-month period ending June 30, 2018. We believe that our investment grade credit ratings contribute to reasonable access to capital markets.
We closely match the contractual maturities of our derivative financial liabilities with those of the risk exposures they are being used to manage.
The expected maturities of our undiscounted financial liabilities do not differ significantly from the contractual maturities, other than as noted below. The contractual maturities of our undiscounted financial liabilities, including interest thereon (where applicable), are set out in the following tables:
|
| Non-derivative |
| Derivative |
|
|
| |||||||||||||||||||||
|
| Non-interest |
|
|
| Construction |
| Composite long-term debt |
|
|
|
|
|
|
| |||||||||||||
|
| bearing |
|
|
| credit facilities |
| Long-term |
| Currency swap agreement |
| Currency swap agreement |
|
|
| |||||||||||||
|
| financial |
| Short-term |
| commitment 2 |
| debt 1 |
| amounts to be exchanged 3 |
| amounts to be exchanged |
|
|
| |||||||||||||
As at March 31, 2018 (millions) |
| liabilities |
| borrowings 1 |
| (Note 21) |
| (Note 26) |
| (Receive) |
| Pay |
| (Receive) |
| Pay |
| Total |
| |||||||||
2018 |
| $ | 1,749 |
| $ | 102 |
| $ | 61 |
| $ | 1,256 |
| $ | (870 | ) | $ | 864 |
| $ | (429 | ) | $ | 426 |
| $ | 3,159 |
|
2019 |
| 100 |
| — |
| — |
| 1,567 |
| (46 | ) | 46 |
| (120 | ) | 117 |
| 1,664 |
| |||||||||
2020 |
| 225 |
| — |
| — |
| 1,516 |
| (46 | ) | 46 |
| — |
| — |
| 1,741 |
| |||||||||
2021 |
| 119 |
| — |
| — |
| 1,516 |
| (46 | ) | 46 |
| — |
| — |
| 1,635 |
| |||||||||
2022 |
| 18 |
| — |
| — |
| 2,045 |
| (46 | ) | 46 |
| — |
| — |
| 2,063 |
| |||||||||
Thereafter |
| 4 |
| — |
| — |
| 12,526 |
| (1,635 | ) | 1,679 |
| — |
| — |
| 12,574 |
| |||||||||
Total |
| $ | 2,215 |
| $ | 102 |
| $ | 61 |
| $ | 20,426 |
| $ | (2,689 | ) | $ | 2,727 |
| $ | (549 | ) | $ | 543 |
| $ | 22,836 |
|
|
|
|
|
|
|
|
| Total (Note 26(f)) |
| $ | 20,464 |
|
|
|
|
|
|
|
(1) Cash outflows in respect of interest payments on our short-term borrowings, commercial paper and amounts drawn under our credit facilities (if any) have been calculated based upon the interest rates in effect as at March 31, 2018.
(2) The drawdowns on the construction credit facilities are expected to occur as construction progresses through 2019.
(3) The amounts included in undiscounted non-derivative long-term debt in respect of U.S. dollar-denominated long-term debt, and the corresponding amounts in the long-term debt currency swaps receive column, have been determined based upon the currency exchange rates in effect as at March 31, 2018. The hedged U.S. dollar-denominated long-term debt contractual amounts at maturity, in effect, are reflected in the long-term debt currency swaps pay column as gross cash flows are exchanged pursuant to the currency swap agreements.
|
| Non-derivative |
| Derivative |
|
|
| |||||||||||||||||||||
|
| Non-interest |
|
|
| Construction |
| Composite long-term debt |
|
|
|
|
|
|
| |||||||||||||
|
| bearing |
|
|
| credit facilities |
| Long-term |
| Currency swap agreement |
| Currency swap agreement |
|
|
| |||||||||||||
As at December 31, 2017 |
| financial |
| Short-term |
| commitment 2 |
| debt 1 |
| amounts to be exchanged 3 |
| amounts to be exchanged |
|
|
| |||||||||||||
(millions) |
| liabilities |
| borrowings 1 |
| (Note 21) |
| (Note 26) |
| (Receive) |
| Pay |
| (Receive) |
| Pay |
| Total |
| |||||||||
2018 |
| $ | 2,232 |
| $ | 103 |
| $ | 67 |
| $ | 1,928 |
| $ | (1,188 | ) | $ | 1,206 |
| $ | (545 | ) | $ | 557 |
| $ | 4,360 |
|
2019 |
| 40 |
| — |
| — |
| 1,531 |
| (44 | ) | 46 |
| — |
| — |
| 1,573 |
| |||||||||
2020 |
| 19 |
| — |
| — |
| 1,480 |
| (44 | ) | 46 |
| — |
| — |
| 1,501 |
| |||||||||
2021 |
| 95 |
| — |
| — |
| 1,480 |
| (44 | ) | 46 |
| — |
| — |
| 1,577 |
| |||||||||
2022 |
| 18 |
| — |
| — |
| 1,913 |
| (44 | ) | 46 |
| — |
| — |
| 1,933 |
| |||||||||
Thereafter |
| 16 |
| — |
| — |
| 11,430 |
| (1,591 | ) | 1,679 |
| — |
| — |
| 11,534 |
| |||||||||
Total |
| $ | 2,420 |
| $ | 103 |
| $ | 67 |
| $ | 19,762 |
| $ | (2,955 | ) | $ | 3,069 |
| $ | (545 | ) | $ | 557 |
| $ | 22,478 |
|
|
|
|
|
|
|
|
| Total |
|
|
| $ | 19,876 |
|
|
|
|
|
|
|
(1) Cash outflows in respect of interest payments on our short-term borrowings, commercial paper and amounts drawn under our credit facilities (if any) have been calculated based upon the interest rates in effect as at December 31, 2017
(2) The drawdowns on the construction credit facilities are expected to occur as construction progresses through 2019.
(3) The amounts included in undiscounted non-derivative long-term debt in respect of U.S. dollar-denominated long-term debt, and the corresponding amounts in the long-term debt currency swaps receive column, have been determined based upon the currency exchange rates in effect as at December 31, 2017. The hedged U.S. dollar-denominated long-term debt contractual amounts at maturity, in effect, are reflected in the long-term debt currency swaps pay column as gross cash flows are exchanged pursuant to the currency swap agreements.
(d) Market risks
Net income and other comprehensive income for the three-month periods ended March 31, 2018 and 2017, could have varied if the Canadian dollar: U.S. dollar exchange rate and our Common Share price varied by reasonably possible amounts from their actual statement of financial position date amounts.
The sensitivity analysis of our exposure to currency risk at the reporting date has been determined based upon a hypothetical change taking place at the relevant statement of financial position date. The U.S. dollar-denominated
notes to condensed interim consolidated financial statements | (unaudited) |
balances and derivative financial instrument notional amounts as at the statement of financial position dates have been used in the calculations.
The sensitivity analysis of our exposure to other price risk arising from share-based compensation at the reporting date has been determined based upon a hypothetical change taking place at the relevant statement of financial position date. The relevant notional number of Common Shares at the statement of financial position date, which includes those in the cash-settled equity swap agreements, has been used in the calculations.
Income tax expense, which is reflected net in the sensitivity analysis, reflects the applicable statutory income tax rates for the reporting periods.
Three-month periods ended March 31 |
| Net income |
| Other comprehensive income |
| Comprehensive income |
| ||||||||||||
(increase (decrease) in millions) |
| 2018 |
| 2017 |
| 2018 |
| 2017 |
| 2018 |
| 2017 |
| ||||||
Reasonably possible changes in market risks 1 |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
10% change in C$: US$ exchange rate |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Canadian dollar appreciates |
| $ | — |
| $ | — |
| $ | (4 | ) | $ | (13 | ) | $ | (4 | ) | $ | (13 | ) |
Canadian dollar depreciates |
| $ | — |
| $ | — |
| $ | 4 |
| $ | 18 |
| $ | 4 |
| $ | 18 |
|
25% 2 change in Common Share price 3 |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Price increases |
| $ | (12 | ) | $ | (9 | ) | $ | 22 |
| $ | 23 |
| $ | 10 |
| $ | 14 |
|
Price decreases |
| $ | 14 |
| $ | 7 |
| $ | (22 | ) | $ | (23 | ) | $ | (8 | ) | $ | (16 | ) |
(1) These sensitivities are hypothetical and should be used with caution. Changes in net income and/or other comprehensive income generally cannot be extrapolated because the relationship of the change in assumption to the change in net income and/or other comprehensive income may not be linear. In this table, the effect of a variation in a particular assumption on the amount of net income and/or other comprehensive income is calculated without changing any other factors; in reality, changes in one factor may result in changes in another, which might magnify or counteract the sensitivities.
The sensitivity analysis assumes that we would realize the changes in exchange rates; in reality, the competitive marketplace in which we operate would have an effect on this assumption.
No consideration has been made for a difference in the notional number of Common Shares associated with share-based compensation awards made during the reporting period that may have arisen due to a difference in the Common Share price.
(2) To facilitate ongoing comparison of sensitivities, a constant variance of approximate magnitude has been used. Reflecting a three-month data period and calculated on a monthly basis, the volatility of our Common Share price as at March 31, 2018, was 4.7% (2017 – 3.8%).
(3) The hypothetical effects of changes in the price of our Common Shares are restricted to those which would arise from our share-based compensation awards that are accounted for as liability instruments and the associated cash-settled equity swap agreements.
(e) Fair values
General
The carrying values of cash and temporary investments, accounts receivable, short-term obligations, short-term borrowings, accounts payable and certain provisions (including restructuring provisions) approximate their fair values due to the immediate or short-term maturity of these financial instruments. The fair values are determined directly by reference to quoted market prices in active markets.
The fair values of our investment financial assets are based on quoted market prices in active markets or other clear and objective evidence of fair value.
The fair value of our long-term debt is based on quoted market prices in active markets.
The fair values of the derivative financial instruments we use to manage our exposure to currency risk are estimated based on quoted market prices in active markets for the same or similar financial instruments or on the current rates offered to us for financial instruments of the same maturity, as well as discounted future cash flows determined using current rates for similar financial instruments of similar maturities subject to similar risks (such fair value estimates being largely based on the Canadian dollar: U.S. dollar forward exchange rate as at the statement of financial position dates).
The fair values of the derivative financial instruments we use to manage our exposure to increases in compensation costs arising from certain forms of share-based compensation are based on fair value estimates of the related cash-settled equity forward agreements provided by the counterparty to the transactions (such fair value estimates being largely based on our Common Share price as at the statement of financial position dates).
notes to condensed interim consolidated financial statements | (unaudited) |
Derivative
The derivative financial instruments that we measure at fair value on a recurring basis subsequent to initial recognition are set out in the following table.
As at (millions) |
| March 31, 2018 |
| December 31, 2017 |
| ||||||||||||||||||
|
| Designation |
| Maximum |
| Notional |
| Fair value 1 and |
| Price or |
| Maximum |
| Notional |
| Fair value 1 and |
| Price or |
| ||||
Current Assets 2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Derivatives used to manage |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Currency risks arising from U.S. dollar-denominated purchases |
| HFH 3 |
| 2019 |
| $ | 333 |
| $ | 9 |
| US$1.00: C$1.25 |
| 2018 |
| $ | 110 |
| $ | 2 |
| US$1.00: C$1.24 |
|
Currency risks arising from U.S. dollar revenues |
| HFT 4 |
| 2019 |
| $ | 4 |
| — |
| US$1.00: C$1.29 |
| 2018 |
| $ | 71 |
| 1 |
| US$1.00: C$1.25 |
| ||
Changes in share-based compensation costs (Note 14(b)) |
| HFH 3 |
| 2018 |
| $ | 76 |
| 10 |
| $ 41.08 |
| 2018 |
| $ | 73 |
| 14 |
| $40.91 |
| ||
Currency risks arising from U.S. dollar-denominated long-term debt (Note 26(b)-(c)) |
| HFH 3 |
| 2018 |
| $ | 472 |
| 7 |
| US$1.00: C$1.27 |
| 2018 |
| $ | 124 |
| 1 |
| US$1.00: C$1.24 |
| ||
|
|
|
|
|
|
|
| $ | 26 |
|
|
|
|
|
|
| $ | 18 |
|
|
| ||
Other Long-Term Assets 1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Derivatives used to manage |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Changes in share-based compensation costs (Note 14(b)) |
| HFH 3 |
| 2019 |
| $ | 65 |
| $ | 3 |
| $ 45.53 |
| 2019 |
| $ | 63 |
| $ | 6 |
| $ 45.46 |
|
Current Liabilities 1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Derivatives used to manage |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Currency risks arising from U.S. dollar-denominated purchases |
| HFH 3 |
| 2019 |
| $ | 131 |
| $ | 4 |
| US$1.00: C$1.33 |
| 2018 |
| $ | 376 |
| $ | 14 |
| US$1.00: C$1.30 |
|
Currency risks arising from U.S. dollar revenues |
| HFT 4 |
| 2019 |
| $ | 74 |
| 1 |
| US$1.00: C$1.29 |
| — |
| $ | — |
| — |
| — |
| ||
Currency risks arising from U.S. dollar-denominated long-term debt (Note 26(b)-(c)) |
| HFH 3 |
| 2018 |
| $ | 368 |
| 1 |
| US$1.00: C$1.29 |
| 2018 |
| $ | 1,036 |
| 18 |
| US$1.00: C$1.28 |
| ||
Interest rate risk associated with planned refinancing of debt maturing |
| HFH 3 |
| — |
| $ | — |
| — |
| — |
| 2018 |
| $ | 300 |
| 1 |
| 2.14%, GOC 10-year term |
| ||
|
|
|
|
|
|
|
| $ | 6 |
|
|
|
|
|
|
| $ | 33 |
|
|
| ||
Other Long-Term Liabilities 1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Derivatives used to manage |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Changes in share-based compensation costs (Note 14(b)) |
| HFH 3 |
| 2020 |
| $ | 67 |
| $ | — |
| $ 48.71 |
| — |
| $ | — |
| $ | — |
| $ — |
|
Currency risks arising from U.S. dollar-denominated long-term debt (Note 26(b)-(c)) |
| HFH 3 |
| 2027 |
| $ | 1,887 |
| 65 |
| US$1.00: C$1.32 |
| 2027 |
| $ | 1,910 |
| 76 |
| US$1.00: C$1.32 |
| ||
|
|
|
|
|
|
|
| $ | 65 |
|
|
|
|
|
|
| $ | 76 |
|
|
|
(1) Fair value measured at reporting date using significant other observable inputs (Level 2).
(2) Derivative financial assets and liabilities are not set off.
(3) Designated as held for hedging (HFH) upon initial recognition (cash flow hedging item); hedge accounting is applied.
Unless otherwise noted, hedge ratio is 1:1 and is established by assessing the degree of matching between the notional amounts of hedging items and the notional amounts of the associated hedged items.
(4) Designated as held for trading (HFT), and classified as fair value through net income, upon initial recognition; hedge accounting is not applied.
Non-derivative
Our long-term debt, which is measured at amortized cost, and the fair value thereof, are set out in the following table.
As at (millions) |
| March 31, 2018 |
| December 31, 2017 |
| ||||||||
|
| Carrying |
| Fair value |
| Carrying |
| Fair value |
| ||||
Long-term debt (Note 26) |
| $ | 13,990 |
| $ | 14,480 |
| $ | 13,660 |
| $ | 14,255 |
|
notes to condensed interim consolidated financial statements | (unaudited) |
(f) Recognition of derivative gains and losses
The following table sets out the gains and losses, excluding income tax effects, arising from derivative instruments that are classified as cash flow hedging items and their location within the Consolidated statements of income and other comprehensive income.
Credit risk associated with such derivative instruments, as discussed further in (b), would be the primary source of hedge ineffectiveness. There was no ineffective portion of derivative instruments classified as cash flow hedging items for the periods presented.
|
|
|
| Amount of gain (loss) |
| Gain (loss) reclassified from other comprehensive |
| ||||||||||
|
|
|
| (effective portion) (Note 11) |
|
|
| Amount |
| ||||||||
Three-month periods ended March 31 (millions) |
| Note |
| 2018 |
| 2017 |
| Location |
| 2018 |
| 2017 |
| ||||
Derivatives used to manage currency risks |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Arising from U.S. dollar-denominated purchases |
|
|
| $ | 13 |
| $ | (2 | ) | Goods and services purchased |
| $ | (5 | ) | $ | 1 |
|
Arising from U.S. dollar-denominated long-term debt |
| 26(b)-(c) |
| 43 |
| (19 | ) | Financing costs |
| 67 |
| (11 | ) | ||||
|
|
|
| 56 |
| (21 | ) |
|
| 62 |
| (10 | ) | ||||
Derivatives used to manage other price risk |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Changes in share-based compensation costs |
| 14(b) |
| (9 | ) | — |
| Employee benefits expense |
| (3 | ) | 1 |
| ||||
|
|
|
| $ | 47 |
| $ | (21 | ) |
|
| $ | 59 |
| $ | (9 | ) |
The following table sets out the gains and losses arising from derivative instruments that are classified as held for trading and that are not designated as being in a hedging relationship, and their location within the Consolidated statements of income and other comprehensive income.
|
|
|
| Gain (loss) recognized in |
| ||||
|
|
|
| Three months |
| ||||
Periods ended March 31 (millions) |
| Location |
| 2018 |
| 2017 |
| ||
Derivatives used to manage currency risks |
| Financing costs |
| $ | (1 | ) | $ | 2 |
|
5 segment information
General
Operating segments are components of an entity that engage in business activities from which they earn revenues and incur expenses (including revenues and expenses related to transactions with the other component(s)), the operations for which can be clearly distinguished and for which the operating results are regularly reviewed by a chief operating decision-maker to make resource allocation decisions and to assess performance.
A significant judgment we make is in respect of distinguishing between our wireless and wireline operations and cash flows (and this extends to allocations of both direct and indirect expenses and of capital expenditures). The clarity of such distinction has been increasingly affected by the convergence and integration of our wireless and wireline telecommunications infrastructure and technology. The continued build-out of our technology-agnostic fibre-optic infrastructure, in combination with converged edge technology, has significantly affected this judgment, as has the commercialization of fixed-wireless telecommunications solutions for customers and the consolidation of our non-customer facing operations. As a result, it has become increasingly impractical and difficult to objectively and clearly distinguish between our wireless and wireline operations and cash flows.
As we do not currently aggregate operating segments, our reportable segments as at March 31, 2018, are also wireless and wireline. The wireless segment includes network revenues and equipment sales arising from mobile technologies. The wireline segment includes data revenues (which include Internet protocol; television; hosting, managed information technology and cloud-based services; customer care and business services outsourcing (formerly business process outsourcing); certain healthcare solutions; and home security), voice and other telecommunications services revenues (excluding wireless arising from mobile technologies), and equipment sales. Segmentation has been based on similarities in technology (mobile versus fixed), the technical expertise required to deliver the service and products, customer characteristics, the distribution channels used and regulatory treatment. Intersegment sales are recorded at the exchange value, which is the amount agreed to by the parties.
notes to condensed interim consolidated financial statements | (unaudited) |
The segment information regularly reported to our Chief Executive Officer (our chief operating decision-maker), and the reconciliations thereof to our products and services view of revenues, revenues and income before income taxes, are set out in the following table.
Three-month periods ended |
| Wireless |
| Wireline |
| Eliminations |
| Consolidated |
| ||||||||||||||||
March 31 (millions) |
| 2018 |
| 2017 |
| 2018 |
| 2017 |
| 2018 |
| 2017 |
| 2018 |
| 2017 |
| ||||||||
|
|
|
| (adjusted – |
|
|
| (adjusted – |
|
|
|
|
|
|
| (adjusted – |
| ||||||||
Operating revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
External revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Service |
| $ | 1,479 |
| $ | 1,421 |
| $ | 1,407 |
| $ | 1,341 |
| $ | — |
| $ | — |
| $ | 2,886 |
| $ | 2,762 |
|
Equipment |
| 404 |
| 349 |
| 61 |
| 59 |
| — |
| — |
| 465 |
| 408 |
| ||||||||
Revenues arising from contracts with customers |
| 1,883 |
| 1,770 |
| 1,468 |
| 1,400 |
| — |
| — |
| 3,351 |
| 3,170 |
| ||||||||
Other operating income |
| 7 |
| 2 |
| 19 |
| 11 |
| — |
| — |
| 26 |
| 13 |
| ||||||||
|
| 1,890 |
| 1,772 |
| 1,487 |
| 1,411 |
| — |
| — |
| 3,377 |
| 3,183 |
| ||||||||
Intersegment revenues |
| 11 |
| 11 |
| 52 |
| 52 |
| (63 | ) | (63 | ) | — |
| — |
| ||||||||
|
| $ | 1,901 |
| $ | 1,783 |
| $ | 1,539 |
| $ | 1,463 |
| $ | (63 | ) | $ | (63 | ) | $ | 3,377 |
| $ | 3,183 |
|
EBITDA 1 |
| $ | 836 |
| $ | 797 |
| $ | 433 |
| $ | 438 |
| $ | — |
| $ | — |
| $ | 1,269 |
| $ | 1,235 |
|
CAPEX 2 |
| $ | 182 |
| $ | 249 |
| $ | 468 |
| $ | 475 |
| $ | — |
| $ | — |
| $ | 650 |
| $ | 724 |
|
|
|
|
|
|
|
|
|
|
| Operating revenues — external (above) |
| $ | 3,377 |
| $ | 3,183 |
| ||||||||
|
|
|
|
|
|
|
|
|
| Goods and services purchased |
| 1,408 |
| 1,324 |
| ||||||||||
|
|
|
|
|
|
|
|
|
| Employee benefits expense |
| 700 |
| 624 |
| ||||||||||
|
|
|
|
|
|
|
|
|
| EBITDA (above) |
| 1,269 |
| 1,235 |
| ||||||||||
|
|
|
|
|
|
|
|
|
| Depreciation |
| 411 |
| 402 |
| ||||||||||
|
|
|
|
|
|
|
|
|
| Amortization |
| 139 |
| 130 |
| ||||||||||
|
|
|
|
|
|
|
|
|
| Operating income |
| 719 |
| 703 |
| ||||||||||
|
|
|
|
|
|
|
|
|
| Financing costs |
| 156 |
| 138 |
| ||||||||||
|
|
|
|
|
|
|
|
|
| Income before income taxes |
| $ | 563 |
| $ | 565 |
|
(1) Earnings before interest, income taxes, depreciation and amortization (EBITDA) does not have any standardized meaning prescribed by IFRS-IASB and is therefore unlikely to be comparable to similar measures presented by other issuers; we define EBITDA as operating revenues less goods and services purchased and employee benefits expense. We have issued guidance on, and report, EBITDA because it is a key measure that management uses to evaluate the performance of our business, and it is also utilized in measuring compliance with certain debt covenants.
(2) Total capital expenditures (CAPEX); see Note 31(a) for a reconciliation of capital expenditures to cash payments for capital assets reported in the Consolidated statements of cash flows.
notes to condensed interim consolidated financial statements | (unaudited) |
6 revenue from contracts with customers
(a) Revenues
In the determination of the minimum transaction prices in contracts with customers, amounts are allocated to fulfilling, or completion of fulfilling, future contracted performance obligations. Largely, these unfulfilled, or partially unfulfilled, future contracted performance obligations are in respect of services to be provided over the duration of the contract. The following table sets out our aggregate estimated minimum transaction prices allocated to remaining unfulfilled, or partially unfulfilled, future contracted performance obligations and the timing of when we might expect to recognize the associated revenues; actual amounts could differ from these estimates due to a variety of factors including the unpredictable nature of: customer behaviour, industry regulation; the economic environments in which we operate; and competitor behaviour.
As at (millions) |
| March 31, 2018 |
| December 31, |
| ||
Estimated minimum transaction price allocated to remaining unfulfilled, or partially unfulfilled, performance obligations to be recognized as revenue in a future period 1, 2 |
|
|
|
|
| ||
During the 12-month period ending one year hence |
| $ | 2,069 |
| $ | 2,075 |
|
During the 12-month period ending two years hence |
| 833 |
| 856 |
| ||
Thereafter |
| 23 |
| 24 |
| ||
|
| $ | 2,925 |
| $ | 2,955 |
|
(1) Excludes constrained variable consideration amounts, amounts arising from contracts originally expected to have a duration of one year or less and, as a permitted practical expedient, amounts arising from contracts that are not affected by revenue recognition timing differences arising from transaction price allocation or in which we may recognize and bill revenue in an amount that corresponds directly with our completed performance obligations.
(2) IFRS-IASB requires the explanation of when we expect to recognize as revenue the amounts disclosed as the estimated minimum transaction price allocated to remaining unfulfilled, or partially unfulfilled, performance obligations. The estimated amounts disclosed are based upon contractual terms and maturities. Actual minimum transaction price revenues recognized, and the timing thereof, will differ from these estimates primarily due to the frequency with which the actual durations of contracts with customers do not match their contractual maturities.
Incremental accounting policy disclosure due to initial application of IFRS 15 (see Note 2)
We use the following revenue accounting practical expedients provided for in IFRS 15, Revenue from Contracts with Customers:
· No adjustment of the contracted amount of consideration for the effects of financing components when at the inception of the contract we expect that the effect of the financing component is not significant at the individual contract level.
· No deferral of contract acquisition costs when the amortization period for such costs would be one year or less.
· When estimating minimum transaction prices allocated to remaining unfulfilled, or partially unfulfilled, performance obligations, exclusion of amounts arising from contracts originally expected to have a duration of one year or less as well as amounts arising from contracts in which we may recognize and bill revenue in an amount that corresponds directly with our completed performance obligations.
(b) Accounts receivable
As at (millions) |
| Note |
| March 31, |
| December 31, |
| January 1, |
| |||
Customer accounts receivable |
|
|
|
|
|
|
|
|
| |||
As reported |
|
|
| $ | 1,164 |
| $ | 1,221 |
| $ | 1,217 |
|
Transitional amount |
| 2(c) |
| — |
| (9 | ) | (9 | ) | |||
As adjusted |
|
|
| 1,164 |
| 1,212 |
| 1,208 |
| |||
Accrued receivables — customer |
|
|
| 171 |
| 143 |
| 131 |
| |||
Allowance for doubtful accounts |
| 4(b) |
| (47 | ) | (43 | ) | (54 | ) | |||
|
|
|
| 1,288 |
| 1,312 |
| 1,285 |
| |||
Accrued receivables — other |
|
|
| 161 |
| 302 |
| 177 |
| |||
|
|
|
| $ | 1,449 |
| $ | 1,614 |
| $ | 1,462 |
|
notes to condensed interim consolidated financial statements | (unaudited) |
(c) Contract assets
|
|
|
| Three-month periods ended |
| Year ended |
| |||||
(millions) |
| Note |
| 2018 |
| 2017 |
| 2017 |
| |||
Balance, beginning of period |
|
|
| $ | 1,303 |
| $ | — |
| $ | — |
|
Transitional amount |
| 2(c) |
| — |
| 1,205 |
| 1,205 |
| |||
Adjusted opening balance |
|
|
| 1,303 |
| 1,205 |
| 1,205 |
| |||
Net additions arising from operations |
|
|
| 281 |
| 256 |
| 1,270 |
| |||
Amounts billed in period and thus reclassified to accounts receivable 1 |
|
|
| (304 | ) | (274 | ) | (1,166 | ) | |||
Change in impairment allowance, net |
| 4(b) |
| (1 | ) | (3 | ) | (3 | ) | |||
Other |
|
|
| — |
| — |
| (3 | ) | |||
Balance, end of period |
|
|
| $ | 1,279 |
| $ | 1,184 |
| $ | 1,303 |
|
To be billed and thus reclassified to accounts receivable during: |
|
|
|
|
|
|
|
|
| |||
The 12-month period ending one year hence |
|
|
| $ | 902 |
| $ | 834 |
| $ | 907 |
|
The 12-month period ending two years hence |
|
|
| 366 |
| 336 |
| 385 |
| |||
Thereafter |
|
|
| 11 |
| 14 |
| 11 |
| |||
Balance, end of period |
|
|
| $ | 1,279 |
| $ | 1,184 |
| $ | 1,303 |
|
Reconciliation of contract assets presented in the consolidated statement of financial position — current |
|
|
|
|
|
|
|
|
| |||
Gross contract assets |
|
|
| $ | 902 |
| $ | 834 |
| $ | 907 |
|
Reclassification to contract liabilities for contracts with contract assets less than contract liabilities |
| 24 |
| (5 | ) | (4 | ) | (4 | ) | |||
Reclassification from contract liabilities for contracts with contract liabilities less than contract assets |
| 24 |
| (140 | ) | (144 | ) | (146 | ) | |||
|
|
|
| $ | 757 |
| $ | 686 |
| $ | 757 |
|
(1) For the three-month period ending March 31, 2018, amounts billed in the period for our wireless segment and reclassified to accounts receivable were $280 (2017 – $250; year ended December 31, 2017 – $1,060).
Incremental accounting policy disclosure due to initial application of IFRS 15 (see Note 2)
Contract assets
Many of our multiple element arrangements arise from bundling the sale of equipment (e.g. a wireless handset) with a contracted service period. Although the customer receives the equipment at contract inception and the revenue from the associated completed performance obligation is recognized at that time, the customer’s payment for the equipment will effectively be received rateably over the contracted service period to the extent it is not received as a lump-sum amount at contract inception. The difference between the equipment revenue recognized and the associated amount cumulatively billed to the customer is recognized on the consolidated statements of financial position as a contract asset.
Contract assets may also arise in instances where we give consideration to a customer.
· Some forms of consideration given to a customer, effectively at contract inception, such as rebates (including prepaid non-bank cards) and/or equipment, are considered performance obligations in a multiple element arrangement. Although the performance obligation is satisfied at contract inception, the customer’s payment associated with the performance obligation will effectively be received rateably over the associated contracted service period. The difference between revenue arising from the satisfied performance obligation and the associated amount cumulatively reflected in the billings to the customer is recognized on the consolidated statements of financial position as a contract asset.
· Other forms of consideration given to a customer effectively provided at contract inception or over a period of time, such as discounts (including prepaid bank cards), may result in us receiving no identifiable, separable benefit and are not considered performance obligations. Such consideration is recognized as a reduction of revenue rateably over the term of the contract. The difference between the consideration provided and the associated amount recognized as a reduction of revenue is recognized on the consolidated statements of financial position as a contract asset.
7 other operating income
|
|
|
| Three months |
| ||||
Periods ended March 31 (millions) |
| Note |
| 2018 |
| 2017 |
| ||
Government assistance, including deferral account amortization |
|
|
| $ | 6 |
| $ | 7 |
|
Investment income, gain (loss) on disposal of assets and other |
|
|
| 19 |
| 6 |
| ||
Interest income |
| 21(c) |
| 1 |
| — |
| ||
|
|
|
| $ | 26 |
| $ | 13 |
|
notes to condensed interim consolidated financial statements | (unaudited) |
8 employee benefits expense
|
|
|
| Three months |
| ||||
Periods ended March 31(millions) |
| Note |
| 2018 |
| 2017 |
| ||
|
|
|
|
|
| (adjusted – |
| ||
Employee benefits expense — gross |
|
|
|
|
|
|
| ||
Wages and salaries |
|
|
| $ | 683 |
| $ | 634 |
|
Share-based compensation |
| 14 |
| 27 |
| 25 |
| ||
Pensions — defined benefit |
| 15(a) |
| 25 |
| 21 |
| ||
Pensions — defined contribution |
| 15(b) |
| 24 |
| 23 |
| ||
Restructuring costs |
| 16(a) |
| 28 |
| — |
| ||
Other |
|
|
| 40 |
| 40 |
| ||
|
|
|
| 827 |
| 743 |
| ||
Capitalized internal labour costs, net |
|
|
|
|
|
|
| ||
Contract acquisition costs |
| 20 |
|
|
|
|
| ||
Capitalized |
|
|
| (14 | ) | (11 | ) | ||
Amortized |
|
|
| 12 |
| 12 |
| ||
Contract fulfilment costs |
| 20 |
|
|
|
|
| ||
Capitalized |
|
|
| (1 | ) | (1 | ) | ||
Amortized |
|
|
| 1 |
| — |
| ||
Property, plant and equipment |
|
|
| (84 | ) | (80 | ) | ||
Intangible assets subject to amortization |
|
|
| (41 | ) | (39 | ) | ||
|
|
|
| (127 | ) | (119 | ) | ||
|
|
|
| $ | 700 |
| $ | 624 |
|
Incremental accounting policy disclosure due to initial application of IFRS 15 (see Note 2)
Judgments — revenue
In respect of revenue-generating transactions, we must make judgments that affect the timing of the recognition of revenue and some associated expenses.
· We compensate third-party re-sellers and our employees for generating revenues, and we must exercise judgment as to whether such sales-based compensation amounts are costs incurred to obtain contracts with customers that should be capitalized (see Note 20). We believe that compensation amounts tangentially attributable to obtaining a contract with the customer, because the amount of such compensation could be affected in ways other than by simply obtaining that contract, should be expensed as incurred; compensation amounts directly attributable to obtaining a contract with a customer should be capitalized and subsequently amortized on a systematic basis consistent with the satisfaction of our associated performance obligations.
Judgment must also be exercised in the capitalization of costs incurred to fulfill revenue generating contracts with customers. Such fulfilment costs are those incurred to set-up, activate or otherwise implement services involving access to, or usage of, our telecommunications infrastructure that would not otherwise be capitalized as property, plant and equipment and intangible assets (see Note 20).
9 financing costs
|
|
|
| Three months |
| ||||
Periods ended March 31 (millions) |
| Note |
| 2018 |
| 2017 |
| ||
Interest expense |
|
|
|
|
|
|
| ||
Interest on long-term debt |
|
|
| $ | 144 |
| $ | 138 |
|
Interest on short-term borrowings and other |
|
|
| 2 |
| 1 |
| ||
Interest accretion on provisions |
| 25 |
| 4 |
| 3 |
| ||
|
|
|
| 150 |
| 142 |
| ||
Employee defined benefit plans net interest |
| 15(a) |
| 4 |
| 1 |
| ||
Foreign exchange |
|
|
| 4 |
| (5 | ) | ||
|
|
|
| 158 |
| 138 |
| ||
Interest income |
|
|
| (2 | ) | — |
| ||
|
|
|
| $ | 156 |
| $ | 138 |
|
notes to condensed interim consolidated financial statements | (unaudited) |
10 income taxes
|
| Three months |
| ||||
Periods ended March 31 (millions) |
| 2018 |
| 2017 |
| ||
|
|
|
| (adjusted – |
| ||
Current income tax expense |
|
|
|
|
| ||
For the current reporting period |
| $ | 144 |
| $ | 63 |
|
Adjustments recognized in the current period for income taxes of prior periods |
| — |
| (6 | ) | ||
|
| 144 |
| 57 |
| ||
Deferred income tax expense (recovery) |
|
|
|
|
| ||
Arising from the origination and reversal of temporary differences |
| 7 |
| 80 |
| ||
Adjustments recognized in the current period for income taxes of prior periods |
| — |
| 6 |
| ||
|
| 7 |
| 86 |
| ||
|
| $ | 151 |
| $ | 143 |
|
Our income tax expense and effective income tax rate differ from those calculated by applying the applicable statutory rates for the following reasons:
Three-month periods ended March 31 ($ in millions) |
| 2018 |
| 2017 |
| ||||||
|
|
|
|
|
| (adjusted – Note 2(c)) |
| ||||
Income taxes computed at applicable statutory rates |
| $ | 152 |
| 27.0 | % | $ | 150 |
| 26.5 | % |
Other |
| (1 | ) | (0.2 | ) | (7 | ) | (1.2 | ) | ||
Income tax expense per Consolidated statements of income and other comprehensive income |
| $ | 151 |
| 26.8 | % | $ | 143 |
| 25.3 | % |
notes to condensed interim consolidated financial statements | (unaudited) |
11 other comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Items that may subsequently be reclassified to income |
| Item never |
|
|
| Item never |
|
|
| ||||||||||||||||||||||||||
|
| Change in unrealized fair value of derivatives designated as cash flow hedges in current period (Note 4(f)) |
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
|
| Derivatives used to manage currency risks |
| Derivatives used to manage other price risk |
|
|
| Cumulative |
| Change in |
|
|
|
|
|
|
| ||||||||||||||||||||
(millions) |
| Gains |
| Prior period |
| Total |
| Gains |
| Prior period |
| Total |
| Total |
| foreign |
| measurement |
| Accumulated |
| Employee |
| Other |
| ||||||||||||
Accumulated balance as at January 1, 2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
As previously reported |
|
|
|
|
| $ | (22 | ) |
|
|
|
| $ | 2 |
| $ | (20 | ) | $ | 48 |
| $ | 16 |
| $ | 44 |
|
|
|
|
| ||||||
IFRS 9, Financial Instruments transitional amount (Note 2(a)) |
|
|
|
|
| — |
|
|
|
|
| — |
| — |
| — |
| (3 | ) | (3 | ) |
|
|
|
| ||||||||||||
As adjusted |
|
|
|
|
| (22 | ) |
|
|
|
| 2 |
| (20 | ) | 48 |
| 13 |
| 41 |
|
|
|
|
| ||||||||||||
Other comprehensive income (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Amount arising |
| $ | (21 | ) | $ | 10 |
|
| (11 | ) | $ | — |
| $ | (1 | ) |
| (1 | ) |
| (12 | ) |
| 3 |
|
| (2 | ) |
| (11 | ) | $ | 92 |
| $ | 81 |
|
Income taxes |
| $ | (4 | ) | $ | 1 |
| (3 | ) | $ | — |
| $ | — |
| — |
| (3 | ) | — |
| — |
| (3 | ) | 24 |
| 21 |
| ||||||||
Net |
|
|
|
|
| (8 | ) |
|
|
|
| (1 | ) | (9 | ) | 3 |
| (2 | ) | (8 | ) | $ | 68 |
| $ | 60 |
| ||||||||||
Accumulated balance as at March 31, 2017 |
|
|
|
|
| $ | (30 | ) |
|
|
|
| $ | 1 |
| $ | (29 | ) | $ | 51 |
| $ | 11 |
| $ | 33 |
|
|
|
|
| ||||||
Accumulated balance as at January 1, 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
As previously reported |
|
|
|
|
| $ | (9 | ) |
|
|
|
| $ | 8 |
| $ | (1 | ) | $ | 53 |
| $ | 5 |
| $ | 57 |
|
|
|
|
| ||||||
IFRS 9, Financial Instruments transitional amount (Note 2(a)) |
|
|
|
|
| — |
|
|
|
|
| — |
| — |
| — |
| (4 | ) | (4 | ) |
|
|
|
| ||||||||||||
As adjusted |
|
|
|
|
| (9 | ) |
|
|
|
| 8 |
| (1 | ) | 53 |
| 1 |
| 53 |
|
|
|
|
| ||||||||||||
Other comprehensive income (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Amount arising |
| $ | 56 |
| $ | (62 | ) | (6 | ) | $ | (9 | ) | $ | 3 |
| (6 | ) | (12 | ) | (4 | ) | — |
| (16 | ) | $ | (62 | ) | $ | (78 | ) | ||||||
Income taxes |
| $ | 10 |
| $ | (13 | ) | (3 | ) | $ | (3 | ) | $ | 1 |
| (2 | ) | (5 | ) | — |
| — |
| (5 | ) | (19 | ) | (24 | ) | ||||||||
Net |
|
|
|
|
| (3 | ) |
|
|
|
| (4 | ) | (7 | ) | (4 | ) | — |
| (11 | ) | $ | (43 | ) | $ | (54 | ) | ||||||||||
Accumulated balance as at March 31, 2018 |
|
|
|
|
| $ | (12 | ) |
|
|
|
| $ | 4 |
| $ | (8 | ) | $ | 49 |
| $ | 1 |
| $ | 42 |
|
|
|
|
| ||||||
Attributable to: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Common Shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| $ | 37 |
|
|
|
|
| |||||||||||
Non-controlling interests |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 5 |
|
|
|
|
| ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| $ | 42 |
|
|
|
|
|
notes to condensed interim consolidated financial statements | (unaudited) |
12 per share amounts
Basic net income per Common Share is calculated by dividing net income attributable to Common Shares by the total weighted average number of Common Shares outstanding during the period. Diluted net income per Common Share is calculated to give effect to share option awards and restricted stock units.
The following table presents the reconciliations of the denominators of the basic and diluted per share computations. Net income was equal to diluted net income for all periods presented.
|
| Three months |
| ||
Periods ended March 31 (millions) |
| 2018 |
| 2017 |
|
Basic total weighted average number of Common Shares outstanding |
| 595 |
| 591 |
|
Effect of dilutive securities |
|
|
|
|
|
Share option awards |
| — |
| — |
|
Diluted total weighted average number of Common Shares outstanding |
| 595 |
| 591 |
|
For the three-month periods ended March 31, 2018 and 2017, no outstanding TELUS Corporation share option awards were excluded in the computation of diluted net income per Common Share.
13 dividends per share
(a) Dividends declared
Three-month periods ended |
| 2018 |
| 2017 |
| ||||||||||||||||
|
| Declared |
| Paid to |
|
|
| Declared |
| Paid to |
|
|
| ||||||||
Common Share dividends |
| Effective |
| Per share |
| shareholders |
| Total |
| Effective |
| Per share |
| shareholders |
| Total |
| ||||
Quarter 1 dividend |
| Mar. 9, 2018 |
| $ | 0.5050 |
| Apr. 2, 2018 |
| $ | 299 |
| Mar. 10, 2017 |
| $ | 0.4800 |
| Apr. 3, 2017 |
| $ | 283 |
|
On May 9, 2018, the Board of Directors declared a quarterly dividend of $0.5250 per share on our issued and outstanding Common Shares payable on July 3, 2018, to holders of record at the close of business on June 8, 2018. The final amount of the dividend payment depends upon the number of Common Shares issued and outstanding at the close of business on June 8, 2018.
(b) Dividend Reinvestment and Share Purchase Plan
We have a Dividend Reinvestment and Share Purchase Plan under which eligible holders of Common Shares may acquire additional Common Shares by reinvesting dividends and by making additional optional cash payments to the trustee. In respect of Common Shares whose eligible shareholders have elected to participate in the plan, dividends declared during the three-month period ended March 31, 2018, $13 million (2017 – $15 million) were to be reinvested in Common Shares acquired by the trustee from Treasury, with no discount applicable.
14 share-based compensation
(a) Details of share-based compensation expense
Reflected in the Consolidated statements of income and other comprehensive income as Employee benefits expense and in the Consolidated statements of cash flows are the following share-based compensation amounts:
Three-month periods ended March 31 (millions) |
|
|
| 2018 |
| 2017 |
| ||||||||||||||
|
| Note |
| Employee |
| Associated |
| Statement |
| Employee |
| Associated |
| Statement |
| ||||||
Restricted stock units |
| (b) |
| $ | 18 |
| $ | — |
| $ | 18 |
| $ | 16 |
| $ | — |
| $ | 16 |
|
Employee share purchase plan |
| (c) |
| 9 |
| (9 | ) | — |
| 9 |
| (9 | ) | — |
| ||||||
|
|
|
| $ | 27 |
| $ | (9 | ) | $ | 18 |
| $ | 25 |
| $ | (9 | ) | $ | 16 |
|
For the three-month period ended March 31, 2018, the associated operating cash outflows in respect of restricted stock units were net of cash inflows arising from the cash-settled equity swap agreements of $2 million (2017 – $2 million). For the three-month period ended March 31, 2018, the income tax benefit arising from share-based compensation was $7 million (2017 – $7 million).
notes to condensed interim consolidated financial statements | (unaudited) |
(b) Restricted stock units
TELUS Corporation restricted stock units
We also award restricted stock units that largely have the same features as our general restricted stock units, but have a variable payout (0% – 200%) that depends upon the achievement of our total customer connections performance condition (with a weighting of 25%) and the total shareholder return on our Common Shares relative to an international peer group of telecommunications companies (with a weighting of 75%). The grant-date fair value of the notional subset of our restricted stock units affected by the total customer connections performance condition equals the fair market value of the corresponding Common Shares at the grant date, and thus the notional subset has been included in the presentation of our restricted stock units with only service conditions. The recurring estimate, which reflects a variable payout, of the fair value of the notional subset of our restricted stock units affected by the relative total shareholder return performance condition is determined using a Monte Carlo simulation.
The following table presents a summary of outstanding TELUS Corporation non-vested restricted stock units.
Number of non-vested restricted stock units as at |
| March 31, |
| December 31, |
|
Restricted stock units without market performance conditions |
|
|
|
|
|
Restricted stock units with only service conditions |
| 4,835,889 |
| 3,327,464 |
|
Notional subset affected by total customer connections performance condition |
| 227,999 |
| 154,452 |
|
|
| 5,063,888 |
| 3,481,916 |
|
Restricted stock units with market performance conditions |
|
|
|
|
|
Notional subset affected by relative total shareholder return performance condition |
| 683,997 |
| 463,357 |
|
|
| 5,747,885 |
| 3,945,273 |
|
The following table presents a summary of the activity related to TELUS Corporation restricted stock units without market performance conditions.
Period ended March 31, 2018 |
| Three months |
| |||||
|
| Number of restricted |
| Weighted |
| |||
|
| Non-vested |
| Vested |
| fair value |
| |
Outstanding, beginning of period |
|
|
|
|
|
|
| |
Non-vested |
| 3,481,916 |
| — |
| $ | 41.87 |
|
Vested |
| — |
| 32,848 |
| $ | 41.00 |
|
Issued |
|
|
|
|
|
|
| |
Initial award |
| 1,616,557 |
| — |
| $ | 45.69 |
|
In lieu of dividends |
| 37,058 |
| 91 |
| $ | 47.20 |
|
Vested |
| (12,482 | ) | 12,482 |
| $ | 41.69 |
|
Settled in cash |
| — |
| (37,067 | ) | $ | 41.30 |
|
Forfeited and cancelled |
| (59,161 | ) | — |
| $ | 39.86 |
|
Outstanding, end of period |
|
|
|
|
|
|
| |
Non-vested |
| 5,063,888 |
| — |
| $ | 43.09 |
|
Vested |
| — |
| 8,354 |
| $ | 40.71 |
|
(1) Excluding the notional subset of restricted stock units affected by the relative total shareholder return performance condition.
With respect to certain issuances of TELUS Corporation restricted stock units, we have entered into cash-settled equity forward agreements that fix our cost; that information, as well as a schedule of non-vested TELUS Corporation restricted stock units outstanding as at March 31, 2018, is set out in the following table.
Vesting in years ending December 31 |
| Number of |
| Our fixed cost |
| Number of |
| Total number of |
| |
2018 |
| 1,845,970 |
| $ | 41.08 |
| 27,704 |
| 1,873,674 |
|
2019 |
| 1,439,418 |
| $ | 45.53 |
| 288,721 |
| 1,728,139 |
|
2020 |
| 1,369,272 |
| $ | 48.71 |
| 308,497 |
| 1,677,769 |
|
|
| 4,654,660 |
|
|
| 624,922 |
| 5,279,582 |
|
(1) Excluding the notional subset of restricted stock units affected by the relative total shareholder return performance condition vesting in years ending December 31, 2018 and 2019.
TELUS International (Cda) Inc. restricted stock units
We also award restricted stock units that largely have the same features as the TELUS Corporation restricted stock units, but have a variable payout (0% – 150%) that depends upon the achievement of TELUS International (Cda) Inc. financial performance and non-market quality-of-service performance conditions.
notes to condensed interim consolidated financial statements | (unaudited) |
The following table presents a summary of the activity related to TELUS International (Cda) Inc. restricted stock units.
Period ended March 31, 2018 |
| Three months |
| ||||||||
|
| US$ denominated |
| Canadian $ denominated |
| ||||||
|
| Number of |
| Weighted |
| Number of |
| Weighted |
| ||
Outstanding, beginning of period |
|
|
|
|
|
|
|
|
| ||
Non-vested |
| 374,786 |
| US$ | 24.45 |
| — |
| $ | — |
|
Vested |
| — |
| US$ | — |
| 32,299 |
| $ | 21.36 |
|
Issued - initial award |
| 2,622 |
| US$ | 27.70 |
| — |
| $ | — |
|
Forfeited and cancelled |
| (1,350 | ) | US$ | 24.10 |
| — |
| $ | — |
|
Outstanding, end of period |
|
|
|
|
|
|
|
|
|
| |
Non-vested |
| 376,058 |
| US$ | 24.50 |
| — |
| $ | — |
|
Vested |
| — |
| US$ | — |
| 32,299 |
| $ | 21.36 |
|
(c) Employee share purchase plan
We have an employee share purchase plan under which eligible employees up to a certain job classification can purchase our Common Shares through regular payroll deductions. In respect of Common Shares held within employee share purchase plan, Common Share dividends declared during the three-month period ended March 31, 2018, of $8 million (2017 – $7 million) were to be reinvested in Common Shares acquired by the trustee from Treasury, with no discount applicable.
(d) Share option awards
TELUS Corporation share options
The following table presents a summary of the activity related to the TELUS Corporation share option plan.
Period ended March 31, 2018 |
| Three months |
| |||
|
| Number of |
| Weighted |
| |
Outstanding, beginning of period |
| 740,471 |
| $ | 26.99 |
|
Exercised 1 |
| (278,319 | ) | $ | 23.71 |
|
Forfeited |
| (378 | ) | $ | 29.19 |
|
Expired |
| (9,733 | ) | $ | 23.24 |
|
Outstanding, end of period 2 |
| 452,041 |
| $ | 29.08 |
|
(1) The total intrinsic value of share option awards exercised for the three-month period ended March 31, 2018, was $6 million (reflecting a weighted average price at the dates of exercise of $45.68 per share). The difference between the number of share options exercised and the number of Common Shares issued (as reflected in the Consolidated statements of changes in owners’ equity) is the effect of our choosing to settle share option award exercises using the net-equity settlement feature.
(2) All outstanding TELUS Corporation share options are vested, their range of prices is $24.47 – $31.69 per share and their weighted average remaining contractual life is 1.1 years.
TELUS International (Cda) Inc. share options
Employees may receive equity share options (equity-settled) to purchase TELUS International (Cda) Inc. common shares at a price equal to, or a multiple of, the fair market value at the time of grant and/or phantom share options (cash-settled) that provide them with exposure to TELUS International (Cda) Inc. common share price appreciation. Share option awards granted under the plan may be exercised over specific periods not to exceed ten years from the time of grant. All equity share option awards and most phantom share option awards have a variable payout (0% – 100%) that depends upon the achievement of TELUS International (Cda) Inc. financial performance and non-market quality-of-service performance conditions.
The following table presents a summary of the activity related to the TELUS International (Cda) Inc. share option plan.
Three-month period ended March 31 |
| 2018 |
| ||||||||
|
| US$ denominated |
| Canadian $ denominated |
| ||||||
|
| Number of |
| Weighted |
| Number of |
| Share option |
| ||
Outstanding, beginning |
| 748,626 |
| US$ | 30.12 |
| 53,832 |
| $ | 21.36 |
|
Forfeited |
| (1,172 | ) | US$ | 27.70 |
| — |
| $ | — |
|
Outstanding, end of period |
| 747,454 |
| US$ | 30.12 |
| 53,832 |
| $ | 21.36 |
|
(1) The range of share option prices is US$21.90 – US$40.26 per TELUS International (Cda) Inc. equity share and the weighted average remaining contractual life is 8.8 years.
(2) The weighted average remaining contractual life is 8.3 years.
notes to condensed interim consolidated financial statements | (unaudited) |
15 employee future benefits
(a) Defined benefit pension plans — details
Our defined benefit pension plan expense (recovery) was as follows:
Three-month periods ended March 31 |
| 2018 |
| 2017 |
| ||||||||||||||||||||
|
| Employee |
|
|
| Other |
|
|
| Employee |
|
|
| Other |
|
|
| ||||||||
|
| benefits |
| Financing |
| comp. |
|
|
| benefits |
| Financing |
| comp. |
|
|
| ||||||||
|
| expense |
| costs |
| income |
|
|
| expense |
| costs |
| income |
|
|
| ||||||||
Recognized in |
| (Note 8) |
| (Note 9) |
| (Note 11) |
| Total |
| (Note 8) |
| (Note 9) |
| (Note 11) |
| Total |
| ||||||||
Current service cost |
| $ | 22 |
| $ | — |
| $ | — |
| $ | 22 |
| $ | 19 |
| $ | — |
| $ | — |
| $ | 19 |
|
Past service costs |
| 1 |
| — |
| — |
| 1 |
| — |
| — |
| — |
| — |
| ||||||||
Net interest; return on plan assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Interest expense arising from defined benefit obligations accrued |
| — |
| 79 |
| — |
| 79 |
| — |
| 83 |
| — |
| 83 |
| ||||||||
Return, including interest income, on plan assets 1 |
| — |
| (76 | ) | 62 |
| (14 | ) | — |
| (83 | ) | (134 | ) | (217 | ) | ||||||||
Interest effect on asset ceiling limit |
| — |
| 1 |
| — |
| 1 |
| — |
| 1 |
| — |
| 1 |
| ||||||||
|
| — |
| 4 |
| 62 |
| 66 |
| — |
| 1 |
| (134 | ) | (133 | ) | ||||||||
Administrative fees |
| 2 |
| — |
| — |
| 2 |
| 2 |
| — |
| — |
| 2 |
| ||||||||
Changes in the effect of limiting net defined benefit assets to the asset ceiling |
| — |
| — |
| — |
| — |
| — |
| — |
| 42 |
| 42 |
| ||||||||
|
| $ | 25 |
| $ | 4 |
| $ | 62 |
| $ | 91 |
| $ | 21 |
| $ | 1 |
| $ | (92 | ) | $ | (70 | ) |
(1) The interest income on the plan assets portion of the employee defined benefit plans net interest amount included in Financing costs reflects a rate of return on plan assets equal to the discount rate used in determining the defined benefit obligations accrued.
(b) Defined contribution plans — expense
Our total defined contribution pension plan costs recognized were as follows:
|
| Three months |
| ||||
Periods ended March 31 (millions) |
| 2018 |
| 2017 |
| ||
Union pension plan and public service pension plan contributions |
| $ | 6 |
| $ | 6 |
|
Other defined contribution pension plans |
| 18 |
| 17 |
| ||
|
| $ | 24 |
| $ | 23 |
|
16 restructuring and other costs
(a) Details of restructuring and other costs
With the objective of reducing ongoing costs, we incur associated incremental, non-recurring restructuring costs, as discussed further in (b) following. We may also incur atypical charges when undertaking: major or transformational changes to our business or operating models; or post-acquisition business integration. We also include incremental external costs incurred in connection with business acquisition or disposition activity, as well as litigation costs, in the context of significant losses or settlements, in other costs.
Restructuring and other costs are presented in the Consolidated statements of income and other comprehensive income, as set out in the following table:
|
| Restructuring (b) |
| Other (c) |
| Total |
| ||||||||||||
Periods ended March 31 (millions) |
| 2018 |
| 2017 |
| 2018 |
| 2017 |
| 2018 |
| 2017 |
| ||||||
THREE-MONTHS |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Goods and services purchased |
| $ | 4 |
| $ | 4 |
| $ | 1 |
| $ | — |
| $ | 5 |
| $ | 4 |
|
Employee benefits expense |
| 28 |
| — |
| 1 |
| — |
| 29 |
| — |
| ||||||
|
| $ | 32 |
| $ | 4 |
| $ | 2 |
| $ | — |
| $ | 34 |
| $ | 4 |
|
(b) Restructuring provisions
Employee-related provisions and other provisions, as presented in Note 25, include amounts in respect of restructuring activities. In 2018, restructuring activities included ongoing and incremental efficiency initiatives, including personnel-related costs and rationalization of real estate. These initiatives were intended to improve our long-term operating productivity and competitiveness.
notes to condensed interim consolidated financial statements | (unaudited) |
(c) Other
During the three-month period ended March 31, 2018, incremental external costs were incurred in connection with business acquisition activity. In connection with business acquisitions, non-recurring atypical business integration expenditures that would be considered neither restructuring costs nor part of the fair value of the net assets acquired have been included in other costs.
17 property, plant and equipment
(millions) |
| Note |
| Network |
| Buildings and |
| Other |
| Land |
| Assets under |
| Total |
| ||||||
At cost |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
As at January 1, 2018 |
|
|
| $ | 28,724 |
| $ | 3,077 |
| $ | 1,095 |
| $ | 48 |
| $ | 655 |
| $ | 33,599 |
|
Additions |
|
|
| 237 |
| 4 |
| 7 |
| — |
| 273 |
| 521 |
| ||||||
Additions arising from business acquisitions |
| 18(b) |
| — |
| 1 |
| 6 |
| — |
| — |
| 7 |
| ||||||
Dispositions, retirements and other |
|
|
| (328 | ) | (7 | ) | 18 |
| — |
| — |
| (317 | ) | ||||||
Assets under construction put into service |
|
|
| 287 |
| 28 |
| 14 |
| — |
| (329 | ) | — |
| ||||||
As at March 31, 2018 |
|
|
| $ | 28,920 |
| $ | 3,103 |
| $ | 1,140 |
| $ | 48 |
| $ | 599 |
| $ | 33,810 |
|
Accumulated depreciation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
As at January 1, 2018 |
|
|
| $ | 19,638 |
| $ | 1,884 |
| $ | 709 |
| $ | — |
| $ | — |
| $ | 22,231 |
|
Depreciation |
|
|
| 354 |
| 27 |
| 30 |
| — |
| — |
| 411 |
| ||||||
Dispositions, retirements and other |
|
|
| (325 | ) | (9 | ) | 20 |
| — |
| — |
| (314 | ) | ||||||
As at March 31, 2018 |
|
|
| $ | 19,667 |
| $ | 1,902 |
| $ | 759 |
| $ | — |
| $ | — |
| $ | 22,328 |
|
Net book value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
As at December 31, 2017 |
|
|
| $ | 9,086 |
| $ | 1,193 |
| $ | 386 |
| $ | 48 |
| $ | 655 |
| $ | 11,368 |
|
As at March 31, 2018 |
|
|
| $ | 9,253 |
| $ | 1,201 |
| $ | 381 |
| $ | 48 |
| $ | 599 |
| $ | 11,482 |
|
As at March 31, 2018, our contractual commitments for the acquisition of property, plant and equipment totalled $179 million over a period ending December 31, 2022 (December 31, 2017 – $184 million over a period ending December 31, 2020).
notes to condensed interim consolidated financial statements | (unaudited) |
18 intangible assets and goodwill
(a) Intangible assets and goodwill, net
|
| Intangible assets subject to amortization |
| Intangible |
|
|
|
|
|
|
| |||||||||||||||||
(millions) |
| Customer contracts, |
| Software |
| Access to |
| Assets |
| Total |
| Spectrum |
| Total |
| Goodwill 1 |
| Total |
| |||||||||
At cost |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
As at January 1, 2018 |
| $ | 558 |
| $ | 4,667 |
| $ | 97 |
| $ | 344 |
| $ | 5,666 |
| $ | 8,693 |
| $ | 14,359 |
| $ | 4,600 |
| $ | 18,959 |
|
Additions |
| — |
| 17 |
| 1 |
| 119 |
| 137 |
| — |
| 137 |
| — |
| 137 |
| |||||||||
Additions arising from business acquisitions (b) |
| 100 |
| 3 |
| — |
| — |
| 103 |
| — |
| 103 |
| 316 |
| 419 |
| |||||||||
Dispositions, retirements and other |
| (138 | ) | (34 | ) | 1 |
|
|
| (171 | ) | — |
| (171 | ) | — |
| (171 | ) | |||||||||
Assets under construction put into service |
| — |
| 213 |
| 1 |
| (214 | ) | — |
| — |
| — |
| — |
| — |
| |||||||||
Net foreign exchange differences |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| 17 |
| 17 |
| |||||||||
As at March 31, 2018 |
| $ | 520 |
| $ | 4,866 |
| $ | 100 |
| $ | 249 |
| $ | 5,735 |
| $ | 8,693 |
| $ | 14,428 |
| $ | 4,933 |
| $ | 19,361 |
|
Accumulated amortization |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
As at January 1, 2018 |
| $ | 310 |
| $ | 3,330 |
| $ | 61 |
| $ | — |
| $ | 3,701 |
| $ | — |
| $ | 3,701 |
| $ | 364 |
| $ | 4,065 |
|
Amortization |
| 7 |
| 131 |
| 1 |
| — |
| 139 |
| — |
| 139 |
| — |
| 139 |
| |||||||||
Dispositions, retirements and other |
| (131 | ) | (35 | ) | — |
| — |
| (166 | ) | — |
| (166 | ) | — |
| (166 | ) | |||||||||
As at March 31, 2018 |
| $ | 186 |
| $ | 3,426 |
| $ | 62 |
| $ | — |
| $ | 3,674 |
| $ | — |
| $ | 3,674 |
| $ | 364 |
| $ | 4,038 |
|
Net book value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
As at December 31, 2017 |
| $ | 248 |
| $ | 1,337 |
| $ | 36 |
| $ | 344 |
| $ | 1,965 |
| $ | 8,693 |
| $ | 10,658 |
| $ | 4,236 |
| $ | 14,894 |
|
As at March 31, 2018 |
| $ | 334 |
| $ | 1,440 |
| $ | 38 |
| $ | 249 |
| $ | 2,061 |
| $ | 8,693 |
| $ | 10,754 |
| $ | 4,569 |
| $ | 15,323 |
|
(1) Accumulated amortization of goodwill is amortization recorded prior to 2002; there are no accumulated impairment losses in the accumulated amortization of goodwill. The opening balance for goodwill has been adjusted as set out in (c).
As at March 31, 2018, our contractual commitments for the acquisition of intangible assets totalled $41 million over a period ending December 31, 2020 (December 31, 2017 — $36 million over a period ending December 31, 2020).
(b) Business acquisitions
AlarmForce Industries
On January 4, 2018, we acquired the customers, assets and operations of AlarmForce Industries Inc. in British Columbia, Alberta and Saskatchewan; the primary reason for which is to leverage our telecommunications infrastructure and expertise to continue to enhance connected home, business, security and health services for our customers.
The primary factor that contributed to the recognition of goodwill was the earnings capacity of the acquired business in excess of the net tangible and intangible assets acquired (such excess arising from the acquired workforce and the benefits of acquiring an established business). The amount assigned to goodwill is not expected to be deductible for income tax purposes.
Xavient Information Systems
On February 6, 2018, through our TELUS International (Cda) Inc. subsidiary, we acquired 65% of Xavient Information Systems, a group of information technology consulting and software services companies with facilities in the United States and India. The investment was made with a view to enhancing our ability to provide complex and higher-value information technology services, improving
notes to condensed interim consolidated financial statements | (unaudited) |
our related sales and solutioning capabilities and acquiring multi-site redundancy in support of other facilities.
In respect of the 65% acquired business, we concurrently provided a written put option to the remaining selling shareholders; the written put option for the remaining 35% of the economic interest would become exercisable no later than December 31, 2020. The acquisition-date fair value of the puttable shares held by the non-controlling shareholders has been recorded as a provision (see Note 25). Also concurrent with our acquisition of the initial 65% interest, the non-controlling shareholders provided us with a purchased call option, which substantially mirrors the written put option.
The primary factor that contributed to the recognition of goodwill was the earnings capacity of the acquired business in excess of the net tangible and intangible assets acquired (such excess arising from the acquired workforce and the benefits of acquiring an established business). Not all of the amount assigned to goodwill is expected to be deductible for income tax purposes.
Individually immaterial transactions
During the three-month period ended March 31, 2018, we acquired 100% ownership of businesses complementary to our existing lines of business. The primary factor that gave rise to the recognition of goodwill was the earnings capacity of the acquired businesses in excess of net tangible and intangible assets acquired (such excess arising from: the low level of tangible assets relative to the earnings capacities of the businesses). A portion of the amount assigned to goodwill may be deductible for income tax purposes.
notes to condensed interim consolidated financial statements | (unaudited) |
Acquisition-date fair values
The preliminary acquisition-date fair values assigned to the assets acquired and liabilities assumed are set out in the following table:
|
| Preliminary purchase price allocated |
| ||||||||||
As at acquisition-date fair values ($ in millions) |
| AlarmForce |
| Xavient |
| Individually |
| Total |
| ||||
Assets |
|
|
|
|
|
|
|
|
| ||||
Current assets |
|
|
|
|
|
|
|
|
| ||||
Cash |
| $ | — |
| $ | 4 |
| $ | — |
| $ | 4 |
|
Accounts receivable 3 |
| — |
| 35 |
| — |
| 35 |
| ||||
Other |
| 1 |
| 2 |
| — |
| 3 |
| ||||
|
| 1 |
| 41 |
| — |
| 42 |
| ||||
Non-current assets |
|
|
|
|
|
|
|
|
| ||||
Property, plant and equipment |
|
|
|
|
|
|
|
|
| ||||
Buildings and leasehold improvements |
| — |
| 1 |
| — |
| 1 |
| ||||
Other |
| 1 |
| 5 |
| — |
| 6 |
| ||||
Intangible assets subject to amortization 4 |
|
|
|
|
|
|
|
|
| ||||
Customer contracts, related customer relationships and leasehold interests |
| 13 |
| 81 |
| 6 |
| 100 |
| ||||
Software |
| — |
| — |
| 3 |
| 3 |
| ||||
Other |
| — |
| 6 |
| — |
| 6 |
| ||||
|
| 14 |
| 93 |
| 9 |
| 116 |
| ||||
Total identifiable assets acquired |
| 15 |
| 134 |
| 9 |
| 158 |
| ||||
Liabilities |
|
|
|
|
|
|
|
|
| ||||
Current liabilities |
|
|
|
|
|
|
|
|
| ||||
Short-term borrowings |
| — |
| 6 |
| — |
| 6 |
| ||||
Accounts payable and accrued liabilities |
| — |
| 23 |
| — |
| 23 |
| ||||
Advance billings and customer deposits |
| 1 |
| — |
| — |
| 1 |
| ||||
|
| 1 |
| 29 |
| — |
| 30 |
| ||||
Non-current liabilities |
|
|
|
|
|
|
|
|
| ||||
Other long-term liabilities |
| — |
| 2 |
| — |
| 2 |
| ||||
Deferred income taxes |
| 1 |
| — |
| — |
| 1 |
| ||||
|
| 1 |
| 2 |
| — |
| 3 |
| ||||
Total liabilities assumed |
| 2 |
| 31 |
| — |
| 33 |
| ||||
Net identifiable assets acquired |
| 13 |
| 103 |
| 9 |
| 125 |
| ||||
Goodwill |
| 55 |
| 250 |
| 11 |
| 316 |
| ||||
Net assets acquired |
| $ | 68 |
| $ | 353 |
| $ | 20 |
| $ | 441 |
|
Acquisition effected by way of: |
|
|
|
|
|
|
|
|
| ||||
Cash consideration |
| $ | 68 |
| $ | 125 |
| $ | 13 |
| $ | 206 |
|
Accounts payable and accrued liabilities |
| — |
| 14 |
| 3 |
| 17 |
| ||||
Provisions |
| — |
| 195 |
| 4 |
| 199 |
| ||||
Issuance of shares by a subsidiary to a non-controlling interest |
| — |
| 19 |
| — |
| 19 |
| ||||
|
| $ | 68 |
| $ | 353 |
| $ | 20 |
| $ | 441 |
|
(1) The purchase price allocation, specifically in respect of customer contracts, related customer relationships and leasehold interests, had not been finalized as of the date of issuance of these condensed interim consolidated financial statements. As is customary in a business acquisition transaction, until the time of acquisition of control, we did not have full access to the relevant portions of AlarmForce Industries’ books and records. Upon having sufficient time to review AlarmForce Industries’ books and records, as well as obtaining new and additional information about the related facts and circumstances as of the acquisition date, we will adjust the provisional amounts for identifiable assets acquired and liabilities assumed and thus finalize our purchase price allocation.
(2) The purchase price allocation, primarily in respect of customer contracts, related customer relationships and leasehold interests and deferred income taxes, had not been finalized as of the date of issuance of these condensed interim consolidated financial statements. As is customary in a business acquisition transaction, until the time of acquisition of control, we did not have full access to Xavient Information Systems’ books and records. Upon having sufficient time to review Xavient Information Systems’ books and records, we expect to finalize our purchase price allocation.
(3) The fair value of the accounts receivable is equal to the gross contractual amounts receivable and reflects the best estimates at the acquisition date of the contractual cash flows expected to be collected.
(4) Customer contracts and customer relationships (including those related to customer contracts) are expected to be amortized over periods of 5 to 8 years; software is expected to be amortized over a period of 5 years.
Pro forma disclosures
The following pro forma supplemental information represents certain results of operations as if the business acquisitions noted above had been completed at the beginning of the fiscal 2018 year.
notes to condensed interim consolidated financial statements | (unaudited) |
|
| Three months |
| ||||
Period ended March 31, 2018 (millions except per share amounts) |
| As reported 1 |
| Pro forma 2 |
| ||
Operating revenues |
| $ | 3,377 |
| $ | 3,389 |
|
Net income |
| $ | 412 |
| $ | 411 |
|
Net income per Common Share |
|
|
|
|
| ||
Basic |
| $ | 0.69 |
| $ | 0.69 |
|
Diluted |
| $ | 0.69 |
| $ | 0.69 |
|
(1) Operating revenues and net income for the three-month period ended March 31, 2018, include: $4 and $NIL, respectively, in respect of AlarmForce Industries; and $26 and $1, respectively, in respect of Xavient Information Systems.
(2) Pro forma amounts for the three-month period ended March 31, 2018, reflect the acquired businesses. The results of the acquired businesses have been included in our Consolidated Statements of Income and Other Comprehensive Income effective the dates of acquisition.
The pro forma supplemental information is based on estimates and assumptions which are believed to be reasonable. The pro forma supplemental information is not necessarily indicative of our consolidated financial results in future periods or the results that actually would have been realized had the business acquisitions been completed at the beginning of the periods presented. The pro forma supplemental information includes incremental property, plant and equipment depreciation, intangible asset amortization, financing and other charges as a result of the acquisitions, net of the related tax effects.
(c) Business acquisition — prior period
On August 31, 2017, we acquired 55% of Voxpro Limited, a business process outsourcing and contact centre services company with facilities in Ireland, the United States and Romania. As at December 31, 2017, the purchase price allocation had not been finalized. During the three-month period ended March 31, 2018, the preliminary acquisition date values assigned to goodwill and provisions were finalized and each increased by $19 million and, as required by IFRS-IASB, comparative amounts have been adjusted so as to reflect such increase effective the acquisition date.
19 leases
We occupy leased premises in various locations and have the right of use of land, buildings and equipment under operating leases. For the three-month periods ended March 31, 2018, real estate and vehicle operating lease expenses, which are net of the amortization of deferred gains on the sale-leaseback of buildings and the occupancy costs associated with leased real estate, were $48 million (2017 — $48 million); occupancy costs associated with leased real estate totalled $34 million (2017 — $32 million).
See Note 2(b) for details of significant changes to IFRS-IASB which are not yet effective and have not yet been applied, but which will significantly affect the timing of the recognition of operating lease expenses and their recognition in the Consolidated statement of financial position, as well as their classification in the Consolidated statement of income and other comprehensive income and the Consolidated statement of cash flows.
notes to condensed interim consolidated financial statements | (unaudited) |
20 other long-term assets
As at (millions) |
| Note |
| March 31, |
| December 31, |
| January 1, |
| |||
|
|
|
|
|
| (adjusted – |
| (Note 2(c)) |
| |||
Pension assets |
|
|
| $ | 98 |
| $ | 156 |
| $ | 358 |
|
Costs incurred to obtain or fulfill a contract with a customer |
|
|
| 108 |
| 107 |
| 93 |
| |||
Portfolio investments 1 |
|
|
| 37 |
| 41 |
| 62 |
| |||
Prepaid maintenance |
|
|
| 61 |
| 57 |
| 62 |
| |||
Real estate joint venture advances |
| 21(c) |
| 53 |
| 47 |
| 21 |
| |||
Real estate joint ventures |
| 21(c) |
| 15 |
| 15 |
| 30 |
| |||
Other |
|
|
| 108 |
| 105 |
| 107 |
| |||
|
|
|
| $ | 480 |
| $ | 528 |
| $ | 733 |
|
(1) Fair value measured at reporting date using significant other observable inputs (Level 2).
Incremental accounting policy disclosure due to initial application of IFRS 15 (see Note 2)
Costs of contract acquisition (typically commissions) and contract fulfilment costs are capitalized and recognized as an expense, generally, over the life of the contract on a rational, systematic basis consistent with the pattern of the transfer of goods or services to which the asset relates. The amortization of such costs is included in the Consolidated statements of income and other comprehensive income as a component of Goods and services purchased, with the exception of amounts paid to our employees, which is included as Employee benefits expense.
The costs incurred to obtain and fulfill contracts with customers are set out in the following table:
|
| Three-month periods ended March 31 |
|
|
|
|
|
|
| |||||||||||||||||||
(millions) |
| 2018 |
| 2017 |
| Year ended December 31, 2017 |
| |||||||||||||||||||||
|
| Costs incurred to |
|
|
| Costs incurred to |
|
|
| Costs incurred to |
|
|
| |||||||||||||||
|
| Obtain |
| Fulfill |
| Total |
| Obtain |
| Fulfill |
| Total |
| Obtain |
| Fulfill |
| Total |
| |||||||||
Balance, beginning of period |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
As previously reported |
| $ | 329 |
| $ | 11 |
| $ | 340 |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
|
Transitional amount |
| — |
| — |
| — |
| 295 |
| 8 |
| 303 |
| 295 |
| 8 |
| 303 |
| |||||||||
As adjusted |
| 329 |
| 11 |
| 340 |
| 295 |
| 8 |
| 303 |
| 295 |
| 8 |
| 303 |
| |||||||||
Addition |
| 74 |
| 2 |
| 76 |
| 60 |
| 1 |
| 61 |
| 304 |
| 4 |
| 308 |
| |||||||||
Amortization |
| (69 | ) | (2 | ) | (71 | ) | (65 | ) | — |
| (65 | ) | (270 | ) | (1 | ) | (271 | ) | |||||||||
Balance, end of period |
| $ | 334 |
| $ | 11 |
| $ | 345 |
| $ | 290 |
| $ | 9 |
| $ | 299 |
| $ | 329 |
| $ | 11 |
| $ | 340 |
|
Current 1 |
| $ | 234 |
| $ | 3 |
| $ | 237 |
| $ | 211 |
| $ | 2 |
| $ | 213 |
| $ | 230 |
| $ | 3 |
| $ | 233 |
|
Non-current |
| 100 |
| 8 |
| 108 |
| 79 |
| 7 |
| 86 |
| 99 |
| 8 |
| 107 |
| |||||||||
|
| $ | 334 |
| $ | 11 |
| $ | 345 |
| $ | 290 |
| $ | 9 |
| $ | 299 |
| $ | 329 |
| $ | 11 |
| $ | 340 |
|
(1) Presented on the Consolidated statements of financial position in prepaid expenses.
21 real estate joint ventures
(a) General
In 2011, we partnered, as equals, with an arm’s-length party in a residential condominium, retail and commercial real estate redevelopment project, TELUS Garden, in Vancouver, British Columbia. TELUS is a tenant in TELUS Garden, which is now our global headquarters. The new-build office tower received 2009 Leadership in Energy and Environmental Design (LEED) Platinum certification, and the neighbouring new-build residential condominium tower was built to the LEED Gold standard.
In 2013, we partnered, as equals, with two arm’s-length parties (one of which is our TELUS Garden partner) in a residential, retail and commercial real estate redevelopment project, TELUS Sky, in Calgary, Alberta. The new-build tower, scheduled for completion in 2019, is to be built to the LEED Platinum standard.
notes to condensed interim consolidated financial statements | (unaudited) |
(b) Real estate joint ventures — summarized financial information
As at (millions) |
| March 31, |
| December 31, |
| ||
ASSETS |
|
|
|
|
| ||
Current assets |
|
|
|
|
| ||
Cash and temporary investments, net |
| $ | 18 |
| $ | 20 |
|
Escrowed deposits for tenant inducements and liens |
| 1 |
| 1 |
| ||
Other |
| 5 |
| 4 |
| ||
|
| 24 |
| 25 |
| ||
Non-current assets |
|
|
|
|
| ||
Property under development — Investment property |
| 215 |
| 194 |
| ||
Investment property |
| 220 |
| 221 |
| ||
Other |
| 34 |
| 35 |
| ||
|
| 469 |
| 450 |
| ||
|
| $ | 493 |
| $ | 475 |
|
LIABILITIES AND OWNERS’ EQUITY |
|
|
|
|
| ||
Current liabilities |
|
|
|
|
| ||
Accounts payable and accrued liabilities |
| $ | 13 |
| $ | 13 |
|
Current portion of 3.7% mortgage and senior secured 3.4% bonds |
| 5 |
| 5 |
| ||
Construction holdback liabilities |
| 11 |
| 10 |
| ||
|
| 29 |
| 28 |
| ||
Non-current liabilities |
|
|
|
|
| ||
Construction credit facilities |
| 159 |
| 141 |
| ||
3.7% mortgage due September 2024 |
| 27 |
| 27 |
| ||
Senior secured 3.4% bonds due July 2025 |
| 207 |
| 208 |
| ||
|
| 393 |
| 376 |
| ||
Liabilities |
| 422 |
| 404 |
| ||
Owners’ equity |
|
|
|
|
| ||
TELUS 1 |
| 29 |
| 29 |
| ||
Other partners |
| 42 |
| 42 |
| ||
|
| 71 |
| 71 |
| ||
|
| $ | 493 |
| $ | 475 |
|
(1) The equity amounts recorded by the real estate joint ventures differ from those recorded by us by the amount of the deferred gains on our real estate contributed and the valuation provision we have recorded in excess of that recorded by the real estate joint venture.
|
| Three months |
| ||||
Periods ended March 31 (millions) |
| 2018 |
| 2017 |
| ||
Revenue |
|
|
|
|
| ||
From investment property |
| $ | 8 |
| $ | 9 |
|
From sale of residential condominiums |
| $ | — |
| $ | 2 |
|
Depreciation and amortization |
| $ | 2 |
| $ | 2 |
|
Interest expense 1 |
| $ | 2 |
| $ | 2 |
|
Net income and comprehensive income 2 |
| $ | 1 |
| $ | 2 |
|
(1) During the three-month period ended March 31, 2018, the real estate joint ventures capitalized $2 (2017 — $1) of financing costs.
(2) As the real estate joint ventures are partnerships, no provision for income taxes of the partners is made in determining the real estate joint ventures’ net income and comprehensive income.
notes to condensed interim consolidated financial statements | (unaudited) |
(c) Our real estate joint ventures activity
Our real estate joint ventures investment activity is set out in the following table.
Three-month periods ended March 31 (millions) |
| 2018 |
| 2017 |
| ||||||||||||||
|
| Loans and |
| Equity 2 |
| Total |
| Loans and |
| Equity 2 |
| Total |
| ||||||
Related to real estate joint ventures’ statements of income and other comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Comprehensive income attributable to us 3 |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | 1 |
| $ | 1 |
|
Related to real estate joint ventures’ statements of financial position |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Items not affecting currently reported cash flows |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Construction credit facilities financing costs charged by us and other (Note 6) |
| 1 |
| — |
| 1 |
| — |
| — |
| — |
| ||||||
Cash flows in the current reporting period |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Construction credit facilities |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Amounts advanced |
| 6 |
| — |
| 6 |
| 5 |
| — |
| 5 |
| ||||||
Financing costs paid to us |
| (1 | ) | — |
| (1 | ) | — |
| — |
| — |
| ||||||
Funds repaid to us and earnings distributed |
| — |
| — |
| — |
| — |
| (3 | ) | (3 | ) | ||||||
Net increase (decrease) |
| 6 |
| — |
| 6 |
| 5 |
| (2 | ) | 3 |
| ||||||
Real estate joint ventures carrying amounts |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Balance, beginning of period |
| 47 |
| 15 |
| 62 |
| 21 |
| 30 |
| 51 |
| ||||||
Balance, end of period |
| $ | 53 |
| $ | 15 |
| $ | 68 |
| $ | 26 |
| $ | 28 |
| $ | 54 |
|
(1) Loans and receivables are included in our Consolidated statements of financial position as Real estate joint venture advances and are comprised of advances under construction credit facilities (see (d)).
(2) We account for our interests in the real estate joint ventures using the equity method of accounting.
(3) As the real estate joint ventures are partnerships, no provision for income taxes of the partners is made in determining the real estate joint ventures’ net income and comprehensive income; provision for income taxes is made in determining the comprehensive income attributable to us.
During the three-month period ended March 31, 2018, the TELUS Garden real estate joint venture recognized $3 million (2017 — $3 million) of revenue from our TELUS Garden office tenancy; of this amount, one-half is due to our economic interest in the real estate joint venture and one-half is due to our partner’s economic interest in the real estate joint venture.
(d) Commitments and contingent liabilities
Construction commitments
The TELUS Sky real estate joint venture is expected to spend a total of approximately $400 million on the construction of a mixed-use tower. As at March 31, 2018, the real estate joint venture’s construction-related contractual commitments were approximately $62 million through to 2019 (December 31, 2017 — $82 million through to 2019).
Construction credit facilities
The TELUS Sky real estate joint venture has a credit agreement with three Canadian financial institutions (as 66-2/3% lender) and TELUS Corporation (as 33-1/3% lender) to provide $342 million of construction financing for the project. The construction credit facilities contain customary real estate construction financing representations, warranties and covenants and are secured by demand debentures constituting first fixed and floating charge mortgages over the underlying real estate assets. The construction credit facilities are available by way of bankers’ acceptance or prime loan and bear interest at rates in line with similar construction financing facilities.
As at (millions) |
| Note |
| March 31, |
| December 31, |
| ||
Construction credit facilities commitment — TELUS Corporation |
|
|
|
|
|
|
| ||
Undrawn |
| 4(c) |
| $ | 61 |
| $ | 67 |
|
Advances |
|
|
| 53 |
| 47 |
| ||
|
|
|
| 114 |
| 114 |
| ||
Construction credit facilities commitment — other |
|
|
| 228 |
| 228 |
| ||
|
|
|
| $ | 342 |
| $ | 342 |
|
22 short-term borrowings
On July 26, 2002, one of our subsidiaries, TELUS Communications Inc., entered into an agreement with an arm’s-length securitization trust associated with a major Schedule I bank under which it is able to sell an interest in certain trade receivables up to a maximum of $500 million (December 31, 2017 — $500 million). This revolving-period securitization agreement term ends December 31, 2018, and it requires minimum cash proceeds of $100 million from monthly sales of
notes to condensed interim consolidated financial statements |
| (unaudited) |
interests in certain trade receivables. TELUS Communications Inc. is required to maintain a credit rating of at least BB (December 31, 2017 – BB) from Dominion Bond Rating Service or the securitization trust may require the sale program to be wound down prior to the end of the term.
When we sell our trade receivables, we retain reserve accounts, which are retained interests in the securitized trade receivables, and servicing rights. As at March 31, 2018, we had sold to the trust (but continued to recognize) trade receivables of $121 million (December 31, 2017 – $119 million). Short-term borrowings of $100 million (December 31, 2017 – $100 million) are comprised of amounts advanced to us by the arm’s-length securitization trust pursuant to the sale of trade receivables.
The balance of short-term borrowings (if any) are comprised of amounts drawn on our bilateral bank facilities.
23 accounts payable and accrued liabilities
As at (millions) |
| March 31, |
| December 31, |
| ||
Accrued liabilities |
| $ | 969 |
| $ | 1,066 |
|
Payroll and other employee related liabilities |
| 264 |
| 403 |
| ||
Restricted stock units liability |
| 67 |
| 66 |
| ||
|
| 1,300 |
| 1,535 |
| ||
Trade accounts payable |
| 543 |
| 717 |
| ||
Interest payable |
| 137 |
| 147 |
| ||
Other |
| 74 |
| 61 |
| ||
|
| $ | 2,054 |
| $ | 2,460 |
|
24 advance billings and customer deposits
As at (millions) |
| March 31, |
| December 31, |
| January 1, |
| |||
|
|
|
| (adjusted – |
| (Note 2(c)) |
| |||
Advance billings |
| $ | 513 |
| $ | 506 |
| $ | 456 |
|
Deferred customer activation and connection fees |
| 12 |
| 13 |
| 17 |
| |||
Customer deposits |
| 21 |
| 21 |
| 15 |
| |||
Regulatory deferral accounts |
| 1 |
| 1 |
| 8 |
| |||
Contract liabilities |
| 547 |
| 541 |
| 496 |
| |||
Other |
| 77 |
| 91 |
| 88 |
| |||
|
| $ | 624 |
| $ | 632 |
| $ | 584 |
|
Incremental accounting policy disclosure due to initial application of IFRS 15 (see Note 2)
Contract liabilities
Advance billings are recorded when billing occurs prior to provision of the associated service; such advance billings are recognized as revenue in the period in which the services and/or equipment are provided. Similarly, and as appropriate, upfront customer activation and connection fees are deferred and recognized over the average expected term of the customer relationship.
Contract liabilities represent our future performance obligations to customers in respect of services and/or equipment and for which we have received the consideration from the customer or for which the amount is due from the customer. Our contract liability balances, and the changes in those balances, are set out in the following table:
notes to condensed interim consolidated financial statements |
| (unaudited) |
|
|
|
| Three-month periods ended |
| Year ended |
| |||||
(millions) |
| Note |
| 2018 |
| 2017 |
| 2017 |
| |||
Balance, beginning of period |
|
|
| $ | 780 |
| $ | 732 |
| $ | 732 |
|
Revenue deferred in previous period and recognized in current period |
|
|
| (689 | ) | (670 | ) | (670 | ) | |||
Net additions arising from operations |
|
|
| 696 |
| 717 |
| 718 |
| |||
Regulatory deferral account drawdown |
|
|
| — |
| (2 | ) | (7 | ) | |||
Additions arising from business combinations |
|
|
| 1 |
| — |
| 7 |
| |||
Balance, end of period |
|
|
| $ | 788 |
| $ | 777 |
| $ | 780 |
|
Current |
|
|
| $ | 692 |
| $ | 694 |
| $ | 691 |
|
Non-current |
| 27 |
|
|
|
|
|
|
| |||
Deferred revenues |
|
|
| 78 |
| 61 |
| 71 |
| |||
Deferred customer activation and connection fees |
|
|
| 18 |
| 22 |
| 18 |
| |||
|
|
|
| $ | 788 |
| $ | 777 |
| $ | 780 |
|
Reconciliation of contract liabilities presented in the consolidated statement of financial position — current |
|
|
|
|
|
|
|
|
| |||
Gross contract liabilities |
|
|
| $ | 692 |
| $ | 694 |
| $ | 691 |
|
Reclassification to contract assets for contracts with contract liabilities less than contract assets |
|
|
| (140 | ) | (144 | ) | (146 | ) | |||
Reclassification from contract assets for contracts with contract assets less than contract liabilities |
|
|
| (5 | ) | (4 | ) | (4 | ) | |||
|
|
|
| $ | 547 |
| $ | 546 |
| $ | 541 |
|
25 provisions
(millions) |
| Asset |
| Employee |
| Written put |
| Other |
| Total |
| |||||
As at January 1, 2018 |
| $ | 351 |
| $ | 36 |
| $ | 82 |
| $ | 120 |
| $ | 589 |
|
Additions |
| — |
| 31 |
| 199 |
| 2 |
| 232 |
| |||||
Reversal |
| — |
| — |
| — |
| (1 | ) | (1 | ) | |||||
Use |
| (1 | ) | (28 | ) | — |
| (14 | ) | (43 | ) | |||||
Interest effect |
| 3 |
| — |
| 1 |
| — |
| 4 |
| |||||
Effects of foreign exchange, net |
| — |
| — |
| 14 |
| — |
| 14 |
| |||||
As at March 31, 2018 |
| $ | 353 |
| $ | 39 |
| $ | 296 |
| $ | 107 |
| $ | 795 |
|
Current |
| $ | 5 |
| $ | 35 |
| $ | — |
| $ | 29 |
| $ | 69 |
|
Non-current |
| 348 |
| 4 |
| 296 |
| 78 |
| 726 |
| |||||
As at March 31, 2018 |
| $ | 353 |
| $ | 39 |
| $ | 296 |
| $ | 107 |
| $ | 795 |
|
(1) The opening balance for written put options has been adjusted as set out in Note 18(c).
Asset retirement obligation
We establish provisions for liabilities associated with the retirement of property, plant and equipment when those obligations result from the acquisition, construction, development and/or normal operation of the assets. We expect that the cash outflows in respect of the balance accrued as at the financial statement date will occur proximate to the dates these assets are retired.
Employee related
The employee related provisions are largely in respect of restructuring activities (as discussed further in Note 16(b)). The timing of the cash outflows in respect of the balance accrued as at the financial statement date is substantially short-term in nature.
Written put options
In connection with certain business acquisitions, we have established provisions for written put options in respect of non-controlling interests. Provisions for written put options are determined based on net present values of estimated future earnings results and require key economic assumptions about the future. No cash outflows for the written put options are expected prior to their initial exercisability in 2020.
Other
The provisions for other include: legal claims; non-employee related restructuring activities; and contract termination costs and onerous contracts related to business acquisitions. Other than as set out following, we expect that the cash outflows in respect of the balance accrued as at the financial statement date will occur over an indeterminate multi-year period.
notes to condensed interim consolidated financial statements |
| (unaudited) |
As discussed further in Note 29, we are involved in a number of legal claims and we are aware of certain other possible legal claims. In respect of legal claims, we establish provisions, when warranted, after taking into account legal assessments, information presently available, and the expected availability of recourse. The timing of cash outflows associated with legal claims cannot be reasonably determined.
In connection with business acquisitions, we have established provisions for contingent consideration, contract termination costs and onerous contracts acquired. In respect of contract termination costs and onerous contracts acquired, cash outflows are expected to occur through mid-2018.
26 long-term debt
(a) Details of long-term debt
As at (millions) |
| Note |
| March 31, |
| December 31, |
| ||
TELUS Corporation notes |
| (b) |
| $ | 12,094 |
| $ | 11,561 |
|
TELUS Corporation commercial paper |
| (c) |
| 843 |
| 1,140 |
| ||
TELUS Communications Inc. debentures |
|
|
| 620 |
| 620 |
| ||
TELUS International (Cda) Inc. credit facility |
| (e) |
| 433 |
| 339 |
| ||
Long-term debt |
|
|
| $ | 13,990 |
| $ | 13,660 |
|
Current |
|
|
| $ | 852 |
| $ | 1,404 |
|
Non-current |
|
|
| 13,138 |
| 12,256 |
| ||
Long-term debt |
|
|
| $ | 13,990 |
| $ | 13,660 |
|
(b) TELUS Corporation notes
The notes are senior, unsecured and unsubordinated obligations and rank equally in right of payment with all of our existing and future unsecured, unsubordinated obligations, are senior in right of payment to all of our existing and future subordinated indebtedness, and are effectively subordinated to all existing and future obligations of, or guaranteed by, our subsidiaries. The indentures governing the notes contain certain covenants which, among other things, place limitations on our ability and the ability of certain of our subsidiaries to: grant security in respect of indebtedness; enter into sale-leaseback transactions; and incur new indebtedness.
|
|
|
|
|
|
|
|
|
| Principal face amount |
| Redemption present |
| ||||||
Series 1 |
| Issued |
| Maturity |
| Issue |
| Effective |
| Originally |
| Outstanding at |
| Basis |
| Cessation |
| ||
5.05% Notes, Series CG |
| December 2009 |
| December 2019 |
| $ | 994.19 |
| 5.13 | % | $1.0 billion |
| $1.0 billion |
| 45.5 3 |
| N/A |
| |
5.05% Notes, Series CH |
| July 2010 |
| July 2020 |
| $ | 997.44 |
| 5.08 | % | $1.0 billion |
| $1.0 billion |
| 47 3 |
| N/A |
| |
3.35% Notes, Series CJ |
| December 2012 |
| March 2023 |
| $ | 998.83 |
| 3.36 | % | $500 million |
| $500 million |
| 40 4 |
| Dec. 15, 2022 |
| |
3.35% Notes, Series CK |
| April 2013 |
| April 2024 |
| $ | 994.35 |
| 3.41 | % | $1.1 billion |
| $1.1 billion |
| 36 4 |
| Jan. 2, 2024 |
| |
4.40% Notes, Series CL |
| April 2013 |
| April 2043 |
| $ | 997.68 |
| 4.41 | % | $600 million |
| $600 million |
| 47 4 |
| Oct. 1, 2042 |
| |
3.60% Notes, Series CM |
| November 2013 |
| January 2021 |
| $ | 997.15 |
| 3.65 | % | $400 million |
| $400 million |
| 35 4 |
| N/A |
| |
5.15% Notes, Series CN |
| November 2013 |
| November 2043 |
| $ | 995.00 |
| 5.18 | % | $400 million |
| $400 million |
| 50 4 |
| May 26, 2043 |
| |
3.20% Notes, Series CO |
| April 2014 |
| April 2021 |
| $ | 997.39 |
| 3.24 | % | $500 million |
| $500 million |
| 30 4 |
| Mar. 5, 2021 |
| |
4.85% Notes, Series CP |
| Multiple 5 |
| April 2044 |
| $ | 987.91 | 5 | 4.93 | %5 | $500 million 5 |
| $900 million 5 |
| 46 4 |
| Oct. 5, 2043 |
| |
3.75% Notes, Series CQ |
| September 2014 |
| January 2025 |
| $ | 997.75 |
| 3.78 | % | $800 million |
| $800 million |
| 38.5 4 |
| Oct. 17, 2024 |
| |
4.75% Notes, Series CR |
| September 2014 |
| January 2045 |
| $ | 992.91 |
| 4.80 | % | $400 million |
| $400 million |
| 51.5 4 |
| July 17, 2044 |
| |
1.50% Notes, Series CS |
| March 2015 |
| March 2018 |
| $ | 999.62 |
| 1.51 | % | $250 million |
| $NIL |
| N/A 6 |
| N/A |
| |
2.35% Notes, Series CT |
| March 2015 |
| March 2022 |
| $ | 997.31 |
| 2.39 | % | $1.0 billion |
| $1.0 billion |
| 35.5 4 |
| Feb. 28, 2022 |
| |
4.40% Notes, Series CU |
| March 2015 |
| January 2046 |
| $ | 999.72 |
| 4.40 | % | $500 million |
| $500 million |
| 60.5 4 |
| July 29, 2045 |
| |
3.75% Notes, Series CV |
| December 2015 |
| March 2026 |
| $ | 992.14 |
| 3.84 | % | $600 million |
| $600 million |
| 53.5 4 |
| Dec. 10, 2025 |
| |
2.80% U.S. Dollar Notes 7 |
| September 2016 |
| February 2027 |
| US$ | 991.89 |
| 2.89 | % | US$600 million |
| US$600 million |
| 20 8 |
| Nov. 16, 2026 |
| |
3.70% U.S. Dollar Notes 9 |
| March 2017 |
| September 2027 |
| US$ | 998.95 |
| 3.71 | % | US$500 million |
| US$500 million |
| 20 8 |
| June 15, 2027 |
| |
4.70% Notes, Series CW |
| Multiple 10 |
| March 2048 |
| $ | 998.06 | 10 | 4.71 | %10 | $325 million |
| $475 million |
| 58.5 4 |
| Sept. 6, 2047 |
| |
3.625% Notes, Series CX |
| February 2018 |
| February 2028 |
| $ | 989.49 |
| 3.75 | % | $600 million |
| $600 million |
| 37 4 |
| Dec. 1, 2027 |
| |
(1) Interest is payable semi-annually. The notes requires us to make an offer to repurchase the notes at a price equal to 101% of their principal amount plus accrued and unpaid interest to the date of repurchase upon the occurrence of a change in control triggering event, as defined in the supplemental trust indenture.
(2) The effective interest rate is that which the notes would yield to an initial debt holder if held to maturity.
(3) The notes are redeemable at our option, in whole at any time, or in part from time to time, on not fewer than 30 and not more than 60 days’ prior notice. The redemption price is equal to the greater of (i) the present value of the notes discounted at the Government of Canada yield plus the redemption present value spread, or (ii) 100% of the principal amount thereof. In addition, accrued and unpaid interest, if any, will be paid to the date fixed for redemption.
(4) At any time prior to the respective maturity dates set out in the table, the notes are redeemable at our option, in whole at any time, or in part from time to time, on not fewer than 30 and not more than 60 days’ prior notice. The redemption price is equal to the greater of (i) the present value of the notes discounted at
notes to condensed interim consolidated financial statements |
| (unaudited) |
the Government of Canada yield plus the redemption present value spread calculated over the period to maturity, other than in the case of the Series CT, Series CU, Series CW and Series CX notes, where it is calculated over the period to the redemption present value spread cessation date, or (ii) 100% of the principal amount thereof. In addition, accrued and unpaid interest, if any, will be paid to the date fixed for redemption. On or after the respective redemption present value spread cessation dates set out in the table, the notes are redeemable at our option, in whole but not in part, on not fewer than 30 and not more than 60 days’ prior notice, at redemption prices equal to 100% of the principal amount thereof.
(5) $500 million of 4.85% Notes, Series CP were issued in April 2014 at an issue price of $998.74 and an effective interest rate of 4.86%. This series of notes was reopened in December 2015 and a further $400 million of notes were issued at an issue price of $974.38 and an effective interest rate of 5.02%.
(6) The notes were not redeemable at our option, other than in the event of certain changes in tax laws.
(7) We have entered into a foreign exchange derivative (a cross currency interest rate exchange agreement) which effectively converted the principal payments and interest obligations to Canadian dollar obligations with a fixed interest rate of 2.95% and an issued and outstanding amount of $792 million (reflecting a fixed exchange rate of $1.3205).
(8) At any time prior to the respective maturity dates set out in the table, the notes are redeemable at our option, in whole at any time, or in part from time to time, on not fewer than 30 and not more than 60 days’ prior notice. The redemption price is equal to the greater of (i) the present value of the notes discounted at the U.S. Adjusted Treasury Rate plus the redemption present value spread calculated over the period to the redemption present value spread cessation date, or (ii) 100% of the principal amount thereof. In addition, accrued and unpaid interest, if any, will be paid to the date fixed for redemption. On or after the respective redemption present value spread cessation dates set out in the table, the notes are redeemable at our option, in whole but not in part, on not fewer than 30 and not more than 60 days’ prior notice, at redemption prices equal to 100% of the principal amounts thereof.
(9) We have entered into a foreign exchange derivative (a cross currency interest rate exchange agreement) which effectively converted the principal payments and interest obligations to Canadian dollar obligations with a fixed interest rate of 3.41% and an issued and outstanding amount of $667 million (reflecting a fixed exchange rate of $1.3348).
(10) $325 million of 4.70%, Series CW were issued in March 2017 at an issue price of $990.65 and an effective interest rate of 4.76%. This series of notes was reopened in February 2018 and a further $150 million of notes were issued at a price of $1,014.11 and an effective interest rate of 4.61%.
(c) TELUS Corporation commercial paper
TELUS Corporation has an unsecured commercial paper program, which is backstopped by our $2.25 billion syndicated credit facility (see (d)) and is to be used for general corporate purposes, including capital expenditures and investments. This program enables us to issue commercial paper, subject to conditions related to debt ratings, up to a maximum aggregate amount at any one time of $1.4 billion (December 31, 2017 – $1.4 billion). Foreign currency forward contracts are used to manage currency risk arising from issuing commercial paper denominated in U.S. dollars. Commercial paper debt is due within one year and is classified as a current portion of long-term debt, as the amounts are fully supported, and we expect that they will continue to be supported, by the revolving credit facility, which has no repayment requirements within the next year. As at March 31, 2018, we had $843 million of commercial paper outstanding, all of which was denominated in U.S. dollars (US$654 million), with an effective weighted average interest rate of 2.42%, maturing through July 2018.
(d) TELUS Corporation credit facility
As at March 31, 2018, TELUS Corporation had an unsecured revolving $2.25 billion bank credit facility, expiring on May 31, 2021, with a syndicate of financial institutions, which is to be used for general corporate purposes, including the backstopping of commercial paper. Subsequent to March 31, 2018, the credit facility was renewed at $2.25 billion with an expiry date of May 31, 2023.
TELUS Corporation’s credit facility bears interest at prime rate, U.S. Dollar Base Rate, a bankers’ acceptance rate or London interbank offered rate (LIBOR) (all such terms as used or defined in the credit facility), plus applicable margins. The credit facility contains customary representations, warranties and covenants, including two financial quarter-end ratio tests. These tests are that our net debt to operating cash flow ratio must not exceed 4.00:1.00 and our operating cash flow to interest expense ratio must not be less than 2.00:1.00, all as defined under the credit facility.
Continued access to TELUS Corporation’s credit facility is not contingent on TELUS Corporation maintaining a specific credit rating.
As at (millions) |
| March 31, |
| December 31, |
| ||
Net available |
| $ | 1,407 |
| $ | 1,110 |
|
Backstop of commercial paper |
| 843 |
| 1,140 |
| ||
Gross available |
| $ | 2,250 |
| $ | 2,250 |
|
We had $231 million of letters of credit outstanding as at March 31, 2018 (December 31, 2017 — $224 million), issued under various uncommitted facilities; such letter of credit facilities are in addition to the ability to provide letters of credit pursuant to our committed bank credit facility.
(e) TELUS International (Cda) Inc. credit facility
As at March 31, 2018, TELUS International (Cda) Inc. had a bank credit facility, secured by its assets, expiring on December 20, 2022, with a syndicate of financial institutions. The credit facility is comprised of a US$350 million (December 31, 2017 — US$350 million) revolving component and an amortizing US$120 million (December 31, 2017 — US$120 million) term loan
notes to condensed interim consolidated financial statements |
| (unaudited) |
component. The credit facility is non-recourse to TELUS Corporation. As at March 31, 2018, $441 million ($433 million net of unamortized issue costs) was outstanding, all of which was denominated in U.S. dollars (US$342 million), with a weighted average interest rate of 3.87%.
As at (millions) |
| March 31, 2018 |
| December 31, 2017 |
| ||||||||||||||
|
| Revolving |
| Term loan |
| Total |
| Revolving |
| Term loan |
| Total |
| ||||||
Available |
| US$ | 125 |
| US$ | N/A |
| US$ | 125 |
| US$ | 193 |
| US$ | N/A |
| US$ | 193 |
|
Outstanding |
|
| 225 |
|
| 117 |
|
| 342 |
|
| 157 |
|
| 119 |
|
| 276 |
|
|
| US$ | 350 |
| US$ | 117 |
| US$ | 467 |
| US$ | 350 |
| US$ | 119 |
| US$ | 469 |
|
TELUS International (Cda) Inc.’s credit facility bears interest at prime rate, U.S. Dollar Base Rate, a bankers’ acceptance rate or London interbank offered rate (LIBOR) (all such terms as used or defined in the credit facility), plus applicable margins. The credit facility contains customary representations, warranties and covenants, including two financial quarter-end ratio tests. These tests are that TELUS International (Cda) Inc.’s net debt to operating cash flow ratio must not exceed 3.25:1.00 and its operating cash flow to debt service (interest and scheduled principal repayment) ratio must not be less than 1.50:1.00, all as defined in the credit facility.
The term loan is subject to an amortization schedule which requires that 5% of the principal advanced be repaid each year of the term of the agreement, with the balance due at maturity.
(f) Long-term debt maturities
Anticipated requirements to meet long-term debt repayments, calculated upon such long-term debts owing as at March 31, 2018, for each of the next five fiscal years are as follows:
Long-term debt denominated in |
| Cdn. dollars |
| U.S. dollars |
|
|
| ||||||||||||
|
|
|
|
|
| Derivative liability |
|
|
|
|
| ||||||||
Years ending December 31 (millions) |
| Debt |
| Debt |
| (Receive) 1 |
| Pay |
| Total |
| Total |
| ||||||
2018 (balance of year) |
| $ | — |
| $ | 849 |
| $ | (843 | ) | $ | 840 |
| $ | 846 |
| $ | 846 |
|
2019 |
| 1,000 |
| 8 |
| — |
| — |
| 8 |
| 1,008 |
| ||||||
2020 |
| 1,000 |
| 8 |
| — |
| — |
| 8 |
| 1,008 |
| ||||||
2021 |
| 1,075 |
| 8 |
| — |
| — |
| 8 |
| 1,083 |
| ||||||
2022 |
| 1,249 |
| 412 |
| — |
| — |
| 412 |
| 1,661 |
| ||||||
Thereafter |
| 7,075 |
| 1,418 |
| (1,418 | ) | 1,460 |
| 1,460 |
| 8,535 |
| ||||||
Future cash outflows in respect of long-term debt principal repayments |
| 11,399 |
| 2,703 |
| (2,261 | ) | 2,300 |
| 2,742 |
| 14,141 |
| ||||||
Future cash outflows in respect of associated interest and like carrying costs 2 |
| 5,821 |
| 503 |
| (428 | ) | 427 |
| 502 |
| 6,323 |
| ||||||
Undiscounted contractual maturities (Note 4(c)) |
| $ | 17,220 |
| $ | 3,206 |
| $ | (2,689 | ) | $ | 2,727 |
| $ | 3,244 |
| $ | 20,464 |
|
(1) Where applicable, principal-related cash flows reflect foreign exchange rates at March 31, 2018.
(2) Future cash outflows in respect of associated interest and like carrying costs for commercial paper and amounts drawn under our credit facilities (if any) have been calculated based upon the rates in effect at March 31, 2018.
27 other long-term liabilities
As at (millions) |
| Note |
| March 31, |
| December 31, |
| ||
Contract liabilities |
| 24 |
| $ | 78 |
| $ | 71 |
|
Other |
|
|
| 10 |
| 10 |
| ||
Deferred revenues |
|
|
| 88 |
| 81 |
| ||
Pension and other post-retirement liabilities |
|
|
| 548 |
| 537 |
| ||
Restricted stock unit and deferred share unit liabilities |
|
|
| 82 |
| 68 |
| ||
Derivative liabilities |
|
|
| 65 |
| 76 |
| ||
Other |
|
|
| 72 |
| 67 |
| ||
|
|
|
| 855 |
| 829 |
| ||
Deferred customer activation and connection fees |
| 24 |
| 18 |
| 18 |
| ||
|
|
|
| $ | 873 |
| $ | 847 |
|
notes to condensed interim consolidated financial statements |
| (unaudited) |
28 Common Share capital
General
Our authorized share capital is as follows:
As at |
| March 31, |
| December 31, |
|
First Preferred Shares |
| 1 billion |
| 1 billion |
|
Second Preferred Shares |
| 1 billion |
| 1 billion |
|
Common Shares |
| 2 billion |
| 2 billion |
|
Only holders of Common Shares may vote at our general meetings, with each holder of Common Shares entitled to one vote per Common Share held at all such meetings so long as not less than 66-2/3% of the issued and outstanding Common Shares are owned by Canadians. With respect to priority in payment of dividends and in the distribution of assets in the event of our liquidation, dissolution or winding-up, whether voluntary or involuntary, or any other distribution of our assets among our shareholders for the purpose of winding up our affairs, preferences are as follows: First Preferred Shares; Second Preferred Shares; and finally Common Shares.
As at March 31, 2018, approximately 47 million Common Shares were reserved for issuance, from Treasury, under a share option plan (see Note 14(d)).
29 contingent liabilities
Claims and lawsuits
General
A number of claims and lawsuits (including class actions and intellectual property infringement claims) seeking damages and other relief are pending against us and, in some cases, numerous other wireless carriers and telecommunications service providers. As well, we have received notice of, or are aware of, certain possible claims (including intellectual property infringement claims) against us.
It is not currently possible for us to predict the outcome of such claims, possible claims and lawsuits due to various factors, including: the preliminary nature of some claims; uncertain damage theories and demands; an incomplete factual record; uncertainty concerning legal theories and procedures and their resolution by the courts, at both the trial and the appeal levels; and the unpredictable nature of opposing parties and their demands.
However, subject to the foregoing limitations, management is of the opinion, based upon legal assessments and information presently available, that it is unlikely that any liability, to the extent not provided for through insurance or otherwise, would have a material effect on our financial position and the results of our operations, including cash flows, with the exception of the items enumerated following.
Certified class actions
Certified class actions against us include the following:
Per minute billing class action
In 2008 a class action was brought in Ontario against us alleging breach of contract, breach of the Ontario Consumer Protection Act, breach of the Competition Act and unjust enrichment, in connection with our practice of “rounding up” wireless airtime to the nearest minute and charging for the full minute. The action sought certification of a national class. In November 2014, an Ontario class only was certified by the Ontario Superior Court of Justice in relation to the breach of contract, breach of Consumer Protection Act, and unjust enrichment claims; all appeals of the certification decision have now been exhausted. At the same time, the Ontario Superior Court of Justice declined to stay the claims of our business customers notwithstanding an arbitration clause in our customer service agreements with those customers. This latter decision was appealed and on May 31, 2017, the Ontario Court of Appeal dismissed our appeal. The Supreme Court of Canada has granted us leave to appeal this decision.
Call set-up time class actions
In 2005 a class action was brought against us in British Columbia alleging that we have engaged in deceptive trade practices in charging for incoming calls from the moment the caller connects to the network, and not from the moment the incoming call is connected to the recipient. In 2011, the Supreme Court of Canada upheld a stay of all of
notes to condensed interim consolidated financial statements | (unaudited) |
the causes of action advanced by the plaintiff in this class action, with one exception, based on the arbitration clause that was included in our customer service agreements. The sole exception was the cause of action based on deceptive or unconscionable practices under the British Columbia Business Practices and Consumer Protection Act, which the Supreme Court of Canada declined to stay. In January 2016, the British Columbia Supreme Court certified this class action in relation to the claim under the Business Practices and Consumer Protection Act. The class is limited to residents of British Columbia who contracted wireless services with us in the period from January 21, 1999, to April 2010. We have appealed the certification decision and the appeal hearing is expected to occur in September 2018. A companion class action was brought against us in Alberta at the same time as the British Columbia class action. The Alberta class action duplicates the allegations in the British Columbia action, but has not proceeded to date and is not certified.
Uncertified class actions
Uncertified class actions against us include:
9-1-1 class actions
In 2008 a class action was brought in Saskatchewan against us and other Canadian telecommunications carriers alleging that, among other matters, we failed to provide proper notice of 9-1-1 charges to the public, have been deceitfully passing them off as government charges, and have charged 9-1-1 fees to customers who reside in areas where 9-1-1 service is not available. The plaintiffs advance causes of action in breach of contract, misrepresentation and false advertising and seek certification of a national class. A virtually identical class action was filed in Alberta at the same time, but the Alberta Court of Queen’s Bench declared that class action expired against us as of 2009. No steps have been taken in this proceeding since 2016.
Electromagnetic field radiation class actions
In 2013 a class action was brought in British Columbia against us, other telecommunications carriers, and cellular telephone manufacturers alleging that prolonged usage of cellular telephones causes adverse health effects. The British Columbia class action alleges: strict liability; negligence; failure to warn; breach of warranty; breach of competition, consumer protection and trade practices legislation; negligent misrepresentation, breach of a duty not to market the products in question; and waiver of tort. Certification of a national class is sought. No steps have been taken in this proceeding since 2014. In 2015 a class action was brought in Quebec against us, other telecommunications carriers, and various other defendants alleging that electromagnetic field radiation causes adverse health effects, contravenes the Quebec Environmental Quality Act, creates a nuisance, and constitutes an abuse of right pursuant to the Quebec Civil Code. The authorization hearing for this matter is expected to occur in May 2018.
Public Mobile class actions
In 2014 class actions were brought against us in Quebec and Ontario on behalf of Public Mobile’s customers, alleging that changes to the technology, services and rate plans made by us contravene our statutory and common law obligations. In particular, the Quebec action alleges that our actions constitute a breach of the Quebec Consumer Protection Act, the Quebec Civil Code, and the Ontario Consumer Protection Act. It has not yet proceeded to an authorization hearing. The Ontario class action alleges negligence, breach of express and implied warranty, breach of the Competition Act, unjust enrichment, and waiver of tort. No steps have been taken in this proceeding since it was filed and served.
Handset subsidy class action
In 2016 a class action was brought in Quebec against us and other telecommunications carriers alleging that we breached the Quebec Consumer Protection Act and the Civil Code of Quebec by making false or misleading representations relating to the handset subsidy provided to our wireless customers, and by charging our wireless customers inflated rate plan prices and termination fees higher than those permitted under the Act. This action has not yet proceeded to an authorization hearing.
Intellectual property infringement claims
Claims and possible claims received by us include:
4G LTE network patent infringement claim
A patent infringement claim was filed in Ontario in 2016 alleging that communications between devices, including cellular telephones, and base stations on our 4G LTE network infringe three third-party patents. This matter is set to be tried in the fourth quarter of 2019.
notes to condensed interim consolidated financial statements | (unaudited) |
Summary
We believe that we have good defences to the above matters. Should the ultimate resolution of these matters differ from management’s assessments and assumptions, a material adjustment to our financial position and the results of our operations, including cash flows, could result. Management’s assessments and assumptions include that reliable estimates of any such exposure cannot be made considering the continued uncertainty about: the nature of the damages that may be sought by the plaintiffs; the causes of action that are being, or may ultimately be, pursued; and, in the case of the uncertified class actions, the causes of action that may ultimately be certified.
30 related party transactions
(a) Transactions with key management personnel
Our key management personnel have authority and responsibility for overseeing, planning, directing and controlling our activities and consist of our Board of Directors and our Executive Leadership Team.
Total compensation expense for key management personnel, and the composition thereof, is as follows:
|
| Three months |
| ||||
Periods ended March 31 (millions) |
| 2018 |
| 2017 |
| ||
Short-term benefits |
| $ | 3 |
| $ | 3 |
|
Post-employment pension 1 and other benefits |
| 1 |
| 1 |
| ||
Share-based compensation 2 |
| 3 |
| 4 |
| ||
|
| $ | 7 |
| $ | 8 |
|
(1) Our Executive Leadership Team members are members of our Pension Plan for Management and Professional Employees of TELUS Corporation and non-registered, non-contributory supplementary defined benefit pension plans.
(2) For the three-month period ended March 31, 2018, share-based compensation expense is net of $(1) (2017 — $NIL) of the effects of derivatives used to manage share-based compensation costs (Note 14(b)).
As disclosed in Note 14, we made initial awards of share-based compensation in 2018 and 2017, including, as set out in the following table, to our key management personnel. As most of these awards are cliff-vesting or graded-vesting and have multi-year requisite service periods, the expense will be recognized ratably over a period of years and thus only a portion of the 2018 and 2017 initial awards are included in the amounts in the table above.
Three-month periods ended March 31 |
| 2018 |
| 2017 |
| ||||||||||||
($ in millions) |
| Number of |
| Notional |
| Grant-date |
| Number of |
| Notional |
| Grant-date |
| ||||
Awarded in period |
| 608,849 |
| $ | 28 |
| $ | 36 |
| 686,595 |
| $ | 30 |
| $ | 30 |
|
(1) Notional value is determined by multiplying the Common Share price at the time of award by the number of units awarded. The grant-date fair value differs from the notional value because the fair values of some awards have been determined using a Monte Carlo simulation (see Note 14(b)).
The liability amounts accrued for share-based compensation awards to key management personnel are as follows:
As at (millions) |
| March 31, |
| December 31, |
| ||
Restricted stock units |
| $ | 42 |
| $ | 40 |
|
Deferred share units 1 |
| 23 |
| 24 |
| ||
|
| $ | 65 |
| $ | 64 |
|
(1) Our Directors’ Deferred Share Unit Plan provides that, in addition to his or her annual equity grant of deferred share units, a director may elect to receive his or her annual retainer and meeting fees in deferred share units, Common Shares or cash. Deferred share units entitle directors to a specified number of, or a cash payment based on the value of, our Common Shares. Deferred share units are paid out when a director ceases to be a director, for any reason, at a time elected by the director in accordance with the Directors’ Deferred Share Unit Plan; during the three-month period ended March 31, 2018, $NIL (2017 — $2) was paid out.
Employment agreements with members of the Executive Leadership Team typically provide for severance payments if an executive’s employment is terminated without cause: generally 18–24 months of base salary, benefits and accrual of pension service in lieu of notice and 50% of base salary in lieu of an annual cash bonus. In the event of a change in control, Executive Leadership Team members are not entitled to treatment any different than that given to our other employees with respect to non-vested share-based compensation.
(b) Transactions with defined benefit pension plans
During the three-month period ended March 31, 2018, we provided management and administrative services to our defined benefit pension plans; the charges for these services were on a cost recovery basis and amounted to $1 million (2017 — $2 million).
notes to condensed interim consolidated financial statements | (unaudited) |
(c) Transactions with real estate joint ventures
During the three-month periods ended March 31, 2018 and 2017, we had transactions with the real estate joint ventures, which are related parties, as set out in Note 21.
31 additional statement of cash flow information
(a) Statements of cash flows — operating activities, investing activities and financing activities
|
|
|
| Three months |
| ||||
Periods ended March 31 (millions) |
| Note |
| 2018 |
| 2017 |
| ||
|
|
|
|
|
| (adjusted — |
| ||
OPERATING ACTIVITIES |
|
|
|
|
|
|
| ||
Net change in non-cash operating working capital |
|
|
|
|
|
|
| ||
Accounts receivable |
|
|
| $ | 203 |
| $ | 62 |
|
Inventories |
|
|
| 33 |
| (9 | ) | ||
Contract assets |
|
|
| — |
| 14 |
| ||
Prepaid expenses |
|
|
| (121 | ) | (123 | ) | ||
Accounts payable and accrued liabilities |
|
|
| (358 | ) | (181 | ) | ||
Income and other taxes receivable and payable, net |
|
|
| 85 |
| (92 | ) | ||
Advance billings and customer deposits |
|
|
| (9 | ) | 43 |
| ||
Provisions |
|
|
| (9 | ) | (51 | ) | ||
|
|
|
| $ | (176 | ) | $ | (337 | ) |
INVESTING ACTIVITIES |
|
|
|
|
|
|
| ||
Cash payments for capital assets |
|
|
|
|
|
|
| ||
Capital asset additions |
|
|
|
|
|
|
| ||
Gross capital expenditures |
|
|
|
|
|
|
| ||
Property, plant and equipment |
| 17 |
| $ | (521 | ) | $ | (572 | ) |
Intangible assets |
| 18 |
| (137 | ) | (154 | ) | ||
|
|
|
| (658 | ) | (726 | ) | ||
Additions arising from non-monetary transactions |
|
|
| 8 |
| 2 |
| ||
Capital expenditures |
|
|
| (650 | ) | (724 | ) | ||
Change in associated non-cash investing working capital |
|
|
| (88 | ) | (72 | ) | ||
|
|
|
| $ | (738 | ) | $ | (796 | ) |
FINANCING ACTIVITIES |
|
|
|
|
|
|
| ||
Issue of shares by subsidiary to non-controlling interests |
|
|
|
|
|
|
| ||
Issue of shares |
|
|
| $ | 43 |
| $ | 1 |
|
Non-monetary issue of shares in business combination |
| 18(b) |
| (19 | ) | — |
| ||
Cash proceeds on share issuance |
|
|
| 24 |
| 1 |
| ||
Transaction costs |
|
|
| — |
| (1 | ) | ||
|
|
|
| $ | 24 |
| $ | — |
|
notes to condensed interim consolidated financial statements | (unaudited) |
(b) Changes in liabilities arising from financing activities
|
|
|
| Statement of cash flows |
| Non-cash changes |
|
|
| ||||||||||
(millions) |
| Beginning |
| Issued or |
| Redemptions, |
| Foreign |
| Other |
| End of |
| ||||||
THREE-MONTH PERIOD ENDED MARCH 31, 2017 |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Dividends paid to holders of Common Shares |
| $ | 284 |
| $ | — |
| $ | (284 | ) | $ | — |
| $ | 283 |
| $ | 283 |
|
Short-term borrowings |
| $ | 100 |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | 100 |
|
Long-term debt |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
TELUS Corporation notes |
| $ | 11,367 |
| $ | 990 |
| $ | (700 | ) | $ | (8 | ) | $ | (11 | ) | $ | 11,638 |
|
TELUS Corporation commercial paper |
| 613 |
| 1,528 |
| (1,016 | ) | (3 | ) | — |
| 1,122 |
| ||||||
TELUS Communications Inc. debentures |
| 619 |
| — |
| — |
| — |
| — |
| 619 |
| ||||||
TELUS International (Cda) Inc. credit facility |
| 332 |
| — |
| (31 | ) | (3 | ) | — |
| 298 |
| ||||||
Derivatives used to manage currency risks arising from U.S. dollar denominated long-term debt — liability (asset) |
| 20 |
| 1,016 |
| (1,018 | ) | 11 |
| 9 |
| 38 |
| ||||||
|
| 12,951 |
| 3,534 |
| (2,765 | ) | (3 | ) | (2 | ) | 13,715 |
| ||||||
To eliminate effect of gross settlement of derivatives used to manage currency risks arising from U.S. dollar denominated long-term debt |
| — |
| (1,016 | ) | 1,016 |
| — |
| — |
| — |
| ||||||
|
| $ | 12,951 |
| $ | 2,518 |
| $ | (1,749 | ) | $ | (3 | ) | $ | (2 | ) | $ | 13,715 |
|
THREE-MONTH PERIOD ENDED MARCH 31, 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Dividends paid to holders of Common Shares |
| $ | 299 |
| $ | — |
| $ | (299 | ) | $ | — |
| $ | 299 |
| $ | 299 |
|
Dividends reinvested in shares from Treasury |
| — |
| — |
| 20 |
| — |
| (20 | ) | — |
| ||||||
|
| $ | 299 |
| $ | — |
| $ | (279 | ) | $ | — |
| $ | 279 |
| $ | 299 |
|
Short-term borrowings |
| $ | 100 |
| $ | — |
| $ | (6 | ) | $ | — |
| $ | 6 |
| $ | 100 |
|
Long-term debt |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
TELUS Corporation notes |
| $ | 11,561 |
| $ | 750 |
| $ | (250 | ) | $ | 38 |
| $ | (5 | ) | $ | 12,094 |
|
TELUS Corporation commercial paper |
| 1,140 |
| 1,314 |
| (1,644 | ) | 33 |
| — |
| 843 |
| ||||||
TELUS Communications Inc. debentures |
| 620 |
| — |
| — |
| — |
| — |
| 620 |
| ||||||
TELUS International (Cda) Inc. credit facility |
| 339 |
| 97 |
| (11 | ) | 10 |
| (2 | ) | 433 |
| ||||||
Derivatives used to manage currency risks arising from U.S. dollar denominated long-term debt — liability |
| 93 |
| 1,644 |
| (1,634 | ) | (71 | ) | 27 |
| 59 |
| ||||||
|
| 13,753 |
| 3,805 |
| (3,539 | ) | 10 |
| 20 |
| 14,049 |
| ||||||
To eliminate effect of gross settlement of derivatives used to manage currency risks arising from U.S. dollar denominated long-term debt |
| — |
| (1,644 | ) | 1,644 |
| — |
| — |
| — |
| ||||||
|
| $ | 13,753 |
| $ | 2,161 |
| $ | (1,895 | ) | $ | 10 |
| $ | 20 |
| $ | 14,049 |
|