FORM 6-K

 

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16
of the Securities Exchange Act of 1934

 

 

For the month of August 2016
Commission File Number 000-24876

 

TELUS CORPORATION

(Translation of registrant’s name into English)

 

 

23rd Floor, 510 West Georgia Street
Vancouver, British Columbia V6B 0M3
Canada
(Address of principal executive offices)

 

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:

 

Form 20-F o                           Form 40-F x

 

Indicate by check mark whether the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1).

 

Yes o                            No x

 

Indicate by check mark whether the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7).

 

Yes o       No x

 

Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

 

Yes o       No x

 

If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82-   .

 

 

 

Incorporation by Reference

 

This report on Form 6-K and the exhibits hereto are specifically incorporated by reference into the registration statement on Form F-10 (File No. 333-161320) and registration statement on Form F-3 (File No. 333-162944) of TELUS Corporation.

 

2

 

Signatures

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

	TELUS CORPORATION
	By:	/s/ Monique Mercier
		Name:	Monique Mercier
		Title:	EVP - Chief Legal Officer and
			Corporate Secretary

 

Date: August 5, 2016

 

3

 

Exhibit Index

 

Exhibit Number		Description of Document
99.1		Consolidated Financial Statements
99.2		Management’s Discussion and Analysis

 

4

Exhibit 99.1

 

 

TELUS CORPORATION

 

CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

 

(UNAUDITED)

 

JUNE 30, 2016

 

 

condensed interim consolidated statements of income and other comprehensive income

(unaudited)

 

				Three months						Six months
Periods ended June 30 (millions except per share amounts)		Note		2016			2015			2016			2015
OPERATING REVENUES
Service				$	2,952		$	2,884		$	5,876		$	5,713
Equipment				164			208			336			390
Revenues arising from contracts with customers				3,116			3,092			6,212			6,103
Other operating income		6		32			10			44			27
				3,148			3,102			6,256			6,130
OPERATING EXPENSES
Goods and services purchased				1,331			1,372			2,631			2,656
Employee benefits expense		7		628			649			1,296			1,258
Depreciation		16		385			361			770			708
Amortization of intangible assets		17		114			103			229			212
				2,458			2,485			4,926			4,834
OPERATING INCOME				690			617			1,330			1,296
Financing costs		8		134			110			257			227
INCOME BEFORE INCOME TAXES				556			507			1,073			1,069
Income taxes		9		140			166			279			313
NET INCOME				416			341			794			756
OTHER COMPREHENSIVE INCOME		10
Items that may subsequently be reclassified to income
Change in unrealized fair value of derivatives designated as cash flow hedges				1			2			(9		)	(2		)
Foreign currency translation adjustment arising from translating financial statements of foreign operations				6			(5		)	2			5
Change in unrealized fair value of available-for-sale financial assets				(3		)	—			(3		)	(3		)
				4			(3		)	(10		)	—
Item never subsequently reclassified to income
Employee defined benefit plan re-measurements				94			(122		)	17			115
				98			(125		)	7			115
COMPREHENSIVE INCOME				$	514		$	216		$	801		$	871
NET INCOME ATTRIBUTABLE TO:
Common Shares				$	416		$	341		$	794		$	756
Non-controlling interest				—			—			—			—
				$	416		$	341		$	794		$	756
COMPREHENSIVE INCOME ATTRIBUTABLE TO:
Common Shares				$	510		$	216		$	797		$	871
Non-controlling interest				4			—			4			—
				$	514		$	216		$	801		$	871
NET INCOME PER COMMON SHARE		11
Basic				$	0.70		$	0.56		$	1.34		$	1.25
Diluted				$	0.70		$	0.56		$	1.34		$	1.24
TOTAL WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Basic				593			605			593			606
Diluted				594			606			594			608

 

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

 

 

2

 

condensed interim consolidated statements of financial position

(unaudited)

 

As at (millions)		Note		June 30,  2016			December 31,  2015
ASSETS
Current assets
Cash and temporary investments, net				$	428		$	223
Accounts receivable		25(a)		1,317			1,428
Income and other taxes receivable				21			1
Inventories		25(a)		351			360
Prepaid expenses				359			213
Real estate joint venture advances		18(c)		41			66
Current derivative assets		4(d)		11			40
				2,528			2,331
Non-current assets
Property, plant and equipment, net		16		10,043			9,736
Intangible assets, net		17		10,250			9,985
Goodwill, net		17		3,761			3,761
Other long-term assets		25(a)		630			593
				24,684			24,075
				$	27,212		$	26,406
LIABILITIES AND OWNERS’ EQUITY
Current liabilities
Short-term borrowings		19		$	103		$	100
Accounts payable and accrued liabilities		25(a)		1,983			1,990
Income and other taxes payable				28			108
Dividends payable		12		274			263
Advance billings and customer deposits		25(a)		749			760
Provisions		20		170			197
Current maturities of long-term debt		21		1,688			856
Current derivative liabilities		4(d)		20			2
				5,015			4,276
Non-current liabilities
Provisions		20		418			433
Long-term debt		21		10,834			11,182
Other long-term liabilities		25(a)		709			688
Deferred income taxes				2,155			2,155
				14,116			14,458
Liabilities				19,131			18,734
Owners’ equity
Common equity		22		8,073			7,672
Non-controlling interest				8			—
				8,081			7,672
				$	27,212		$	26,406
Commitments and Contingent Liabilities		23

 

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

 

 

3

 

condensed interim consolidated statements of changes in owners’ equity

(unaudited)

 

				Common equity
				Equity contributed											Accumulated
				Common Shares (Note 22)											other						Non-
(millions)		Note		Number  of shares		Share  capital			Contributed surplus			Retained  earnings			comprehensive  income			Total			controlling interest			Total
Balance as at January 1, 2015				609		$	5,175		$	141		$	2,100		$	38		$	7,454
Net income				—		—			—			756			—			756
Other comprehensive income		10		—		—			—			115			—			115
Dividends		12		—		—			—			(496		)	—			(496		)
Share option award expense		13(a)		—		—			1			—			—			1
Share option award net-equity settlement feature		13(d)		—		4			(4		)	—			—			—
Normal course issuer bid purchase of Common Shares				(7	)	(60		)	—			(231		)	—			(291		)
Liability for automatic share purchase plan commitment pursuant to normal course issuer bids for Common Shares		22(b)
Reversal of opening liability				—		15			—			60			—			75
Recognition of closing liability				—		(16		)	—			(64		)	—			(80		)
Balance as at June 30, 2015				602		$	5,118		$	138		$	2,240		$	38		$	7,534
Balance as at January 1, 2016				594		$	5,050		$	135		$	2,428		$	59		$	7,672		$	—		$	7,672
Net income				—		—			—			794			—			794			—			794
Other comprehensive income		10		—		—			—			17			(14		)	3			4			7
Dividends		12		—		—			—			(535		)	—			(535		)	—			(535		)
Share option award net-equity settlement feature		13(d)		—		1			(1		)	—			—			—			—			—
Normal course issuer bid purchase of Common Shares				(2	)	(25		)	—			(86		)	—			(111		)	—			(111		)
Liability for automatic share purchase plan commitment pursuant to normal course issuer bids for Common Shares		22(b)
Reversal of opening liability				—		14			—			46			—			60			—			60
Recognition of closing liability				—		(10		)	—			(40		)	—			(50		)	—			(50		)
Change in ownership interests of subsidiary		1(b), 25(c)		—		—			240			—			—			240			4			244
Balance as at June 30, 2016				592		$	5,030		$	374		$	2,624		$	45		$	8,073		$	8		$	8,081

 

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

 

 

4

 

condensed interim consolidated statements of cash flows

(unaudited)

 

				Three months						Six months
Periods ended June 30 (millions)		Note		2016			2015			2016			2015
OPERATING ACTIVITIES
Net income				$	416		$	341		$	794		$	756
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization				499			464			999			920
Deferred income taxes		9		32			119			1			46
Share-based compensation expense, net		13(a)		22			25			38			2
Net employee defined benefit plans expense		14(a)		22			26			44			54
Employer contributions to employee defined benefit plans				(14		)	(21		)	(39		)	(48		)
Other				(17		)	18			(13		)	14
Net change in non-cash operating working capital		25(b)		(68		)	(29		)	(369		)	(83		)
Cash provided by operating activities				892			943			1,455			1,661
INVESTING ACTIVITIES
Cash payments for capital assets, excluding spectrum licences		25(b)		(614		)	(674		)	(1,260		)	(1,287		)
Cash payments for spectrum licences				(145		)	(1,688		)	(145		)	(1,990		)
Real estate joint ventures advances and contributions		18(c)		(11		)	(16		)	(23		)	(24		)
Real estate joint venture receipts		18(c)		41			1			41			2
Other				(6		)	—			(8		)	(4		)
Cash used by investing activities				(735		)	(2,377		)	(1,395		)	(3,303		)
FINANCING ACTIVITIES		25(c)
Dividends paid to holders of Common Shares		12(a)		(261		)	(243		)	(524		)	(487		)
Purchase of Common Shares for cancellation		22(b)		(61		)	(106		)	(121		)	(262		)
Issuance and repayment of short-term borrowings		19		3			400			3			400
Long-term debt issued		21		2,041			447			3,287			3,294
Redemptions and repayment of long-term debt		21		(2,212		)	(566		)	(2,783		)	(1,277		)
Issue of shares by subsidiary to non-controlling interest		1(b)		292			—			292			—
Other				(9		)	—			(9		)	(9		)
Cash provided (used) by financing activities				(207		)	(68		)	145			1,659
CASH POSITION
Increase (decrease) in cash and temporary investments, net				(50		)	(1,502		)	205			17
Cash and temporary investments, net, beginning of period				478			1,579			223			60
Cash and temporary investments, net, end of period				$	428		$	77		$	428		$	77
SUPPLEMENTAL DISCLOSURE OF OPERATING CASH FLOWS
Interest paid				$	(132	)	$	(129	)	$	(255	)	$	(214	)
Interest received				$	1		$	3		$	1		$	3
Income taxes paid, net				$	(150	)	$	(63	)	$	(423	)	$	(178	)

 

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

 

 

5

 

notes to condensed interim consolidated financial statements

(unaudited)

 

JUNE 30, 2016

 

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; and business process outsourcing.

 

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
General application
1.	Condensed interim consolidated financial statements		6
2.	Accounting policy developments		7
3.	Capital structure financial policies		8
4.	Financial instruments		10
Consolidated results of operations focused
5.	Segmented information		15
6.	Other operating income		17
7.	Employee benefits expense		17
8.	Financing costs		17
9.	Income taxes		18
10.	Other comprehensive income		18
11.	Per share amounts		19
12.	Dividends per share		20
13.	Share-based compensation		20
14.	Employee future benefits		23
15.	Restructuring and other costs		24
Consolidated financial position focused
16.	Property, plant and equipment		25
17.	Intangible assets and goodwill		25
18.	Real estate joint ventures		26
19.	Short-term borrowings		29
20.	Provisions		29
21.	Long-term debt		30
22.	Common Share capital		32
23.	Commitments and contingent liabilities		33
Other
24.	Related party transactions		35
25.	Additional financial information		37

 

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, 2015.

 

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, 2015, other than as set out in Note 2. 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 six-month period ended June 30, 2016, were authorized by our Board of Directors for issue on August 5, 2016.

 

(b)         Consolidation

 

Our consolidated financial statements include our accounts and the accounts of all of our subsidiaries, the principal one of which is TELUS Communications Inc. in which we have a 100% equity interest. Currently, through a 100% equity interest in each of the TELUS Communications Company partnership and the TELE-MOBILE COMPANY partnership, TELUS Communications Inc. includes substantially all of our wireless and wireline segments’ operations.

 

 

6

 

notes to condensed interim consolidated financial statements

(unaudited)

 

Our financing arrangements and those of our wholly-owned subsidiaries do not impose restrictions on inter-corporate dividends.

 

On a continuing basis, we review our corporate organization and effect changes as appropriate so as to enhance the value of TELUS Corporation. This process can, and does, affect which of our subsidiaries are considered principal subsidiaries at any particular point in time.

 

During the three-month period ended June 30, 2016, a change in ownership interests occurred in respect of our TELUS International (Cda) Inc. subsidiary, which encompasses our TELUS International operations, due to it issuing shares to Baring Private Equity Asia for approximately $299 million, exclusive of net transaction costs. We continue to control and consolidate the subsidiary and the shares issued are accounted for as a 35% non-controlling interest. An amount equal to 35% of the net book value of the subsidiary has been credited to non-controlling interest in the unaudited condensed interim statement of changes in owners’ equity and the net balance of proceeds has been credited to contributed surplus. In connection with the transaction, we have also arranged bank financing in the subsidiary company, as set out in Note 21(e).

 

2                 accounting policy developments

 

(a)         Initial application of standards, interpretations and amendments to standards and interpretations in the reporting period

 

In January 2016, the International Accounting Standards Board released Amendments to IAS 7, Statement of Cash Flows as a part of their Disclosure Initiative. The amendments are required to be applied for years beginning on or after January 1, 2017, however we have currently applied them, as set out in Note 25(c), and such application had no effect on our financial performance or disclosure.

 

Annual Improvements to IFRSs 2012-2014 Cycle are required to be applied for years beginning on or after January 1, 2016, and such application had no effect on our financial performance or disclosure.

 

(b)         Standards, interpretations and amendments to standards not yet effective and not yet applied

 

·                  IFRS 9, Financial Instruments, is required to be applied for years beginning on or after January 1, 2018. The new standard includes a model for classification and measurement, a single forward-looking “expected loss” impairment model and a reformed approach to hedge accounting. Based upon current facts and circumstances, we do not expect to be materially affected by the application of the standard and we are currently determining which date we will select for initial compliance if earlier than the required compliance date.

 

·                  IFRS 15, Revenue from Contracts with Customers, is required to be applied for years beginning on or after January 1, 2018, such date reflecting the one-year deferral approved by the International Accounting Standards Board on July 22, 2015. 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. In April 2016, the International Accounting Standards Board issued Clarifications to IFRS 15, Revenue from Contracts with Customers, clarifying application of some of the more complex aspects of the standard. We are currently assessing the impacts and transition provisions of the new standard.

 

The effects of the new standard and the materiality of those effects will vary by industry and entity. Like many other telecommunications companies, we currently expect to be 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 possibly the capitalization of the costs of contract fulfilment (as defined by the new standard). The timing of revenue recognition and the classification of our revenues as either service revenues or equipment revenues will be 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) will no longer be affected by the current limitation cap methodology.

 

The effects of the timing of revenue recognition and the classification of revenue are expected to be most pronounced in our wireless segment. Although the measurement of the total revenue recognized over the life of a contract will be largely unaffected by the new standard, the prohibition of the use of the limitation cap methodology will accelerate the recognition of total contract revenue, relative to both the associated cash inflows from customers and our current practice (using the limitation cap methodology). The acceleration of the recognition of contract revenue relative to the associated cash inflows will also result in the recognition of an amount reflecting the resulting difference as an asset. Although the underlying transaction economics would not differ, during periods of sustained growth in the number of wireless subscriber connection additions, assuming comparable contract-lifetime per unit

 

 

7

 

notes to condensed interim consolidated financial statements

(unaudited)

 

cash inflows, revenues would appear to be greater than under current practice (using the limitation cap methodology). Wireline segment results arising from transactions that include the initial provision of subsidized hardware or promotional pricing plans will be similarly affected.

 

Similarly, the measurement of the total costs of contract acquisition and contract fulfilment over the life of a contract will be unaffected by the new standard, but timing of recognition will be. The new standard will result in our wireless and wireline segments’ 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 current practice of immediately expensing such costs.

 

Our operations and associated systems are complex and our accounting for millions of multi-year contracts with our customers will be affected. Significantly, in order to effect the associated accounting, incremental compilation of historical data will be necessary for the millions of already existing multi-year contracts with our customers that are expected to be in-scope for purposes of transitioning to the new standard. Our current estimate of the time and effort necessary to develop and implement the accounting policies, estimates, judgments 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 mid-2017. As a result, at this time, it is not possible to make reasonable quantitative estimates of the effects of the new standard.

 

·                  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; earlier application is allowed, but not before the application of IFRS 15, Revenue from Contracts with Customers. 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.

 

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 for most leases which would be currently accounted for as operating leases. Leases with durations of 12 months or less and leases for low-value assets are both 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 be currently 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. The presentation on the statement of income and other comprehensive income required by the new standard will result in most lease expenses being presented as amortization of lease assets and financing costs arising from lease liabilities rather than as being a part of goods and services purchased.

 

Relative to the results of applying the current standard, although the actual cash flows will be unaffected, the lessee’s statement of cash flows will reflect increased operating activity cash flows equally offset by decreased financing activity cash flows due to the payment of the “principal” component of leases, which would be currently 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, but we expect that our consolidated statement of financial position will be materially affected, as will be debt-related and operation-related financial metrics. At this time it is not possible to make reasonable quantitative estimates of the effects of the new standard.

 

3                 capital structure financial policies

 

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.

 

 

8

 

notes to condensed interim consolidated financial statements

(unaudited)

 

We manage our capital structure and make adjustments to it in light of changes in economic conditions and the risk characteristics of our telecommunications infrastructure. 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.

 

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; and dividend payout 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, EBITDA — excluding restructuring and other costs and adjusted net earnings 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.

 

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, long-term debt prepayment premium and income tax-related adjustments.

 

During 2016, our financial objectives, which are reviewed annually and which were unchanged from 2015 other than for a revision to our debt ratio long-term objective, included maintaining the financial objectives set out in the following table. We believe that our financial objectives are supportive of our long-term strategy.

 

As at, or for the12-month periods ended, June 30 ($ in millions)		Objective		2016			2015
Components of debt and coverage ratios
Net debt 1				$	12,257		$	11,795
EBITDA — excluding restructuring and other costs 2				$	4,596		$	4,414
Net interest cost 3				$	525		$	460
Debt ratio
Net debt to EBITDA — excluding restructuring and other costs		2.00 – 2.50 4		2.67			2.67
Coverage ratios
Earnings coverage 5				4.6			5.1
EBITDA — excluding restructuring and other costs interest coverage 6				8.8			9.6
Other measures
Dividend payout ratio of adjusted net earnings 7				75		%	68		%
Dividend payout ratio		65%–75% 8		74		%	69		%

 

(1)         Net debt is calculated as follows:

 

As at June 30		Note		2016			2015
Long-term debt		21		$	12,522		$	11,323
Debt issuance costs netted against long-term debt				59			49
Derivative liabilities, net				1			—
Cash and temporary investments, net				(428		)	(77		)
Short-term borrowings		19		103			500
Net debt				$	12,257		$	11,795

 

(2)         EBITDA — excluding restructuring and other costs is calculated as follows:

 

		EBITDA (Note 5)			Restructuring and other costs (Note 15)			EBITDA — excluding restructuring and other costs
Add
Six-month period ended June 30, 2016		$	2,329		$	71		$	2,400
Year ended December 31, 2015		4,262			226			4,488
Deduct
Six-month period ended June 30, 2015		(2,216		)	(76		)	(2,292		)
EBITDA — excluding restructuring and other costs		$	4,375		$	221		$	4,596

 

* 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.

 

 

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