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43
RO GER S CO MMU NIC AT ION S IN C . 20 0 6 ANN UA L RE POR T
MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Media Operating Expenses
Operating expenses for 2006
increased by $90 million from
2005. The increase in Media
operat i n g e x p e n ses a r e
primarily due to higher base-
ball player payroll at Sports
Entertainment, increased pro-
gramming costs at Sportsnet
associated with World Cup
Soccer and the return of NHL
hockey after a lock-out during
the 2005 season, as well as costs
associated with Publishing’s
launch of the Canadian edition
of Hello! and Chocolat maga-
zines. Also, OMNI’s acquisition
of OMNI BC and launch of OMNI
Manitoba, the consolidation
of The Biography Channel Canada and G4TechTV Canada, as well
as Radio’s launch of three maritime stations in the fourth quarter of
2005 led to increased costs. Higher sales volumes resulted in higher
cost of sales at The Shopping Channel. These cost increases were par-
tially offset by lower general and administrative costs.
Media Operating Profit
Operating profit for 2006
increased $23 million over
2005, and the operating profit
margin was 12.5% compared
to 11.7% in 2005. The changes
discussed above drove the year-
over-year increases in Media’s
operating profit, as well as the
corresponding increase in oper-
ating profit margins.
Additions to Media PP&E
Total additions to Media’s PP&E
in 2006 were $48 million, com-
pared to $40 million in 2005.
The increase in 2006 was pri-
marily due to enhancements
and renovations at the Rogers Centre sports and entertainment
venue in Toronto.
3 CONSOLIDATE D LI QUIDITY AND FIN ANCING
LIQUIDIT Y AND CAPITAL RESOURCES
Operations
For 2006, cash generated from operations before changes in non-
cash operating items, which is calculated by adjusting to remove the
effect of all non-cash items from net income, increased to $2,386 mil-
lion from $1,551 million in 2005. The $835 million increase is primarily
the result of the increase in operating profit of $731 million and the
decrease in interest expense of $79 million.
Taking into account the
changes in non-cash working
capital items for the year
ended December 31, 2006, cash
generated from operations
was $2,461 million, compared
to $1,253 million in 2005.
The cash flow generated from
operations of $2,461 million,
together with the following
items, resulted in total net funds
of approximately $2,537 mil-
lion raised in the year ended
December 31, 2006:
• Receipt of $74 million from
the issuance of Class B Non-
Voting shares under the exercise of employee stock options; and
• Addition of $2 million of cash on hand as a result of acquisitions.
Net funds used during 2006 totalled approximately $2,452 million,
the details of which include:
• Additions to PP&E of $1,578 million, net of $134 million related
changes in non-cash working capital;
• $160 million for the repayment at maturity of Wireless’ $160 mil-
lion 10.5% Senior Secured Notes;
• An aggregate net repayment of $452 million of outstanding
advances under our bank credit facilities;
• $75 million for the repayment at maturity of RCI’s 10.50% Senior
Notes;
• $26 million to fund the redemption of our U.S. $22 million remain-
ing outstanding amount of RCI’s (via RTHI, formerly Call-Net
Enterprises Inc.) 10.625% Senior Secured Notes due 2008;
• An aggregate $25 million net repayment of mortgage and capital
leases;
• The payment of an aggregate $20 million on termination of cross-
currency interest rate exchange agreements;
• The payment of dividends of $47 million on our Class A Voting and
Class B Non-Voting shares;
• Additions to program rights of $32 million; and
• Other acquisitions and net investments of $37 million, including
the final phase of an acquisition of certain CLEC assets.
Taking into account the $104 million cash deficiency at the beginning
of the year, the cash deficiency at December 31, 2006 was $19 million.
Financing
Our long-term debt is described in Note 15 to the 2006 Audited
Consolidated Financial Statements.
During 2006, the following financing activities took place. An aggre-
gate $738 million of debt was repaid consisting of: $452 million of
outstanding advances under our bank credit facilities; $160 million
aggregate principal amount at maturity on June 1, 2006 of Wireless’
10.50% Senior Secured Notes due 2006; $75 million aggregate princi-
pal amount at maturity on February 14, 2006 of RCI’s 10.50% Senior
Notes due 2006; $26 million (U.S. $22 million) aggregate principal
200620052004
$1,210$1,097$957
MEDIA
REVENUE
(In millions of dollars)
200620052004
$151$128$115
MEDIA
OPERATING PROFIT
(In millions of dollars)
200620052004
$2,386$1,551$1,305
CONSOLIDATED CASH FLOW
FROM OPERATIONS
(In millions of dollars)