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49
Rogers Communications Inc. 2004 Annual Report
As a result of the financing activity during the year, including changes in cross-currency interest rate exchange agreements, RCI’s
consolidated hedged position, on an economic basis, changed during the year as noted below.
(In millions of dollars) December 31,2004 December 31,2003
U.S. dollar-denominated long-term debt US $ 5,517.6 US $ 2,868.3
Hedged with cross-currency interest rate exchange agreements US $ 5,135.3 US $ 1,943.4
Hedged exchange Rate 1.3211 1.4647
Percent hedged 93.1%167.8%
Effect of cross-currency interest rate exchange agreements:
Converted US $ principal of US $ 550.0 US $0.0
at US $ floating rate of LIBOR plus 3.13%
for all-in rate of 5.53%
to Cdn $ floating at bankers acceptance plus 3.42%
for all-in rate of 6.06%
on Cdn $ principal of Cdn $ 652.7 Cdn $0.0
Converted US $ principal of US $ 4,533.4 US $ 1,558.4
at US $ fixed rate of 7.54% 8.82%
to Cdn $ fixed rate of 8.35% 9.70%
on Cdn $ principal of Cdn $ 6,064.2 Cdn $ 2,346.0
Converted US $ principal of US $ 51.8 US $ 385.0
at US $ fixed rate of 9.38% 9.38%
to Cdn $ floating at bankers acceptance plus 2.67% 2.35%
for all-in rate of 5.30% 5.11%
on Cdn $ principal of Cdn $ 67.4 Cdn $ 500.5
Amount of long-term debt2at fixed rates:
Total long-term debt3Cdn $ 8,598.6 Cdn $ 5,305.0
Total long-term debt at fixed rates3Cdn $ 7,878.5 Cdn $ 4,560.6
Percent of long-term debt fixed 91.6% 86.0%
Weighted average interest rate on long-term debt 8.10% 8.48%
1 Pursuant to the requirements for hedge accounting under AcG-13, on December 31, 2004, RCI accounted for 87.1% of its cross-currency interest rate
exchange agreements as hedges against designated U.S. dollar-denominated debt. As a result, 81.1% of consolidated U.S. dollar-denominated debt is
hedged for accounting purposes versus 93.1% on an economic basis.
2 Long-term debt includes the effect of the cross-currency interest rate exchange agreements.
3 On an accounting basis, at December 31, 2004, total long-term debt was $8,050.4 million (2003-$4,970.2 million) and total long–term debt at fixed rates was
$7,388.4 million (2003-$4,732.7 million).
We use derivative financial instruments to manage our risks from fluctuations in foreign exchange and interest rates. These instruments
include interest rate and cross-currency interest rate exchange agreements, foreign exchange forward contracts and, from time-to-
time, foreign exchange option agreements. All such agreements are used for risk management purposes only and are designated as a
hedge of specific debt instruments for economic purposes. In order to minimize the risk of counterparty default under these agreements,
we assess the creditworthiness of these counterparties. At December 31, 2004, all of our counterparties to these agreements were
financial institutions with a Standard & Poor’s rating (or other equivalent) ranging from A+ to AA.
Because our operating income is almost exclusively denominated in Canadian dollars, the incurrence of U.S. dollar-denominated
debt has caused significant foreign exchange exposure. We will continue to monitor our hedged position on an economic basis with
respect to interest rate and foreign exchange fluctuations and, depending upon market conditions and other factors, may adjust our
hedged position with respect to foreign exchange fluctuations or interest rates in the future by unwinding certain existing positions
and/or by entering into new cross-currency interest rate exchange agreements or by using other instruments.
Certain of our U.S. dollar denominated long-term debt instruments are not hedged for accounting purposes. Changes in the for-
eign exchange rate would impact the Canadian dollar carrying value, in accordance with GAAP, of this unhedged long-term debt, as
well as our interest expense and earnings per share on a full-year basis, as follows:
Cdn $
Change in Cdn $ Change in
(In millions of dollars, except per share data) Carrying Value of Change in Annual Earnings
Change in Cdn $ versus US $ Long-Term Debt1Interest Expense Per Share2
$0.01 $ 10.4 $ 0.3 $ 0.039
0.03 31.3 0.9 0.117
0.05 52.2 1.5 0.195
0.10 104.4 2.9 0.390
1 Canadian equivalent of unhedged U.S. debt, on a GAAP basis, if U.S. dollar costs an additional Canadian cent.
2 Assume no income tax effect. Based upon the number of shares outstanding at December 31, 2004.
At December 31, 2004, interest expense would have increased by $6.6 million if there was a 1% increase in the interest rates on the
portion of our long-term debt that is not at fixed interest rates.