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capital structure financial policies (Tables)
 6 Months Ended
Jun. 30, 2020
capital structure financial policies  
Disclosure of financial objectives that support the entity's long-term strategy

 

 

 

 

 

 

 

 

 

 

 

 

As at, or for the 12-month periods ended, June 30 ($ in millions)

    

Objective

    

2020

    

2019

Components of debt and coverage ratios

 

 

 

 

 

 

  

 

 

  

Net debt 1

 

 

 

 

 

$

17,664

 

$

16,602

EBITDA – excluding restructuring and other costs 2

 

 

 

 

 

$

5,769

 

$

5,649

Net interest cost 3

 

 

 

 

 

$

797

 

$

706

Debt ratio

 

 

 

 

 

 

 

 

 

 

Net debt to EBITDA – excluding restructuring and other costs

 
2.20

–  
2.70

4

 

3.06

 

 

2.94

Coverage ratios

 

 

 

 

 

 

 

 

 

 

Earnings coverage 5

 

 

 

 

 

 

3.6

 

 

4.2

EBITDA – excluding restructuring and other costs interest coverage 6

 

 

 

 

 

 

7.2

 

 

8.0

 

(1)

Net debt and total capitalization are calculated as follows:

 

 

 

 

 

 

 

 

 

 

As at June 30

    

Note

    

2020

    

2019

Long-term debt

 

26

 

$

18,518

 

$

16,579

Debt issuance costs netted against long-term debt

 

  

 

 

96

 

 

105

Derivative (assets) liabilities, net

 

  

 

 

(392)

 

 

92

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

 

  

 

 

313

 

 

(57)

Cash and temporary investments, net

 

  

 

 

(971)

 

 

(217)

Short-term borrowings

 

22

 

 

100

 

 

100

Net debt

 

  

 

 

17,664

 

 

16,602

Common equity

 

 

 

 

12,046

 

 

10,504

Less: accumulated other comprehensive income included in common equity above

 

 

 

 

(283)

 

 

17

Total capitalization

 

 

 

$

29,427

 

$

27,123

 

(2)

EBITDA – excluding restructuring and other costs is calculated as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EBITDA —

 

 

 

 

 

Restructuring

 

excluding

 

 

EBITDA

 

and other costs

 

restructuring

 

 

(Note 5)

 

(Note 16)

 

and other costs

Add

 

 

 

 

 

 

 

 

 

Six-month period ended June 30, 2020

 

$

2,768

 

$

130

 

$

2,898

Year ended December 31, 2019

 

 

5,554

 

 

134

 

 

5,688

Deduct

 

 

 

 

 

 

 

 

 

Six-month period ended June 30, 2019

 

 

(2,752)

 

 

(65)

 

 

(2,817)

EBITDA – excluding restructuring and other costs

 

$

5,570

 

$

199

 

$

5,769

 

(3)

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) (see Note 9).

(4)

Our long-term objective range for this ratio is 2.20 – 2.70 times. The ratio as at June 30, 2020, 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 we will endeavour to return this ratio to within the objective range in the medium term (following upcoming spectrum auctions), as we believe that this range is supportive of our long-term strategy. We are in compliance with the leverage ratio covenant in our credit facilities, 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.

(5)

Earnings coverage is defined by Canadian Securities Administrators National Instrument 41-101 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 , all such amounts excluding amounts attributable to non-controlling interests.

(6)

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.
Disclosure of the dividend payout ratio

 

 

 

 

 

 

 

 

 

For the 12-month periods ended June 30

    

Objective

    

2020

    

2019

 

Determined using management measures

 

 

 

 

 

 

 

Dividend payout ratio – net of dividend reinvestment plan effects

 

60%–75% 1

 

61

%  

133

%

Determined using most comparable IFRS-IASB measures

 

 

 

 

 

 

 

Ratio of dividends declared to cash provided by operating activities less capital expenditures (excluding spectrum licences)

 

  

 

84

%  

122

%

(1)

Our objective range for the dividend payout ratio is 60%-75% of free cash flow on a prospective basis.

 

 

 

 

 

 

 

 

12-month periods ended June 30 (millions)

    

2020

    

2019

Dividends declared

 

$

1,433

 

$

1,307

Amount of dividends declared reinvested in Common Shares

 

 

(516)

 

 

(90)

Dividends declared, net of dividend reinvestment plan effects

 

$

917

 

$

1,217

 

 

 

* Free cash flow 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 free cash flow as EBITDA (operating revenues less goods and services purchased and employee benefits expense) excluding certain working capital changes (such as trade receivables and trade payables), proceeds from divested assets and other sources and uses of cash, as found in the consolidated statements of cash flows. We have issued guidance on, and report, free cash flow because it is a key measure that management, and investors, use to evaluate the performance of our business.

Our calculation of free cash flow, and the reconciliation to cash provided by operating activities, is as follows:

 

 

 

 

 

 

 

 

 

 

12-month periods ended June 30 (millions)

    

Note

    

2020

    

2019

EBITDA

 

 5

 

$

5,570

 

$

5,336

Deduct non-cash gains from sale of property, plant and equipment

 

  

 

 

(13)

 

 

(43)

Restructuring and other costs, net of disbursements

 

  

 

 

22

 

 

43

Effects of contract asset, acquisition and fulfilment and TELUS Easy Payment device financing

 

  

 

 

43

 

 

(172)

Effects of lease principal

 

31(b)

 

 

(346)

 

 

(152)

Leases accounted for as finance leases prior to adoption of IFRS 16

 

  

 

 

136

 

 

26

Deduct non-recurring gains and equity income related to real estate joint ventures

 

21(b)

 

 

 —

 

 

(171)

Donation to TELUS Friendly Future Foundation in Common Shares

 

  

 

 

 —

 

 

100

Items from consolidated statements of cash flows:

 

  

 

 

  

 

 

 

Share-based compensation, net

 

14

 

 

23

 

 

 2

Net employee defined benefit plans expense

 

15

 

 
91

 

 

85

Employer contributions to employee defined benefit plans

 

  

 

 

(40)

 

 

(46)

Interest paid

 

  

 

 

(764)

 

 

(654)

Interest received

 

  

 

 

 8

 

 

 9

Capital expenditures (excluding spectrum licences)

 

 5

 

 

  (2,911)

 

 

  (2,889)

Free cash flow before income taxes

 

 

 

 

1,819

 

 

1,474

Income taxes paid, net of refunds

 

  

 

 

(308)

 

 

(562)

Free cash flow

 

  

 

 

1,511

 

 

912

Add (deduct):

 

  

 

 

  

 

 

  

Capital expenditures (excluding spectrum licences)

 

 5

 

 

  2,911

 

 

2,889

Adjustments to reconcile to Cash provided by operating activities

 

  

 

 

194

 

 

163

Cash provided by operating activities

 

  

 

$

4,616

 

$

3,964